G.R. No. 125607; March 18, 2004
RUFINA C. CAYANA, JOSEFINA C. RABINA, MERCEDES C. DE GUZMAN, and SUSANA C. SAMBALE, petitioners, vs. COURT OF APPEALS, SPS. PASTOR & ROSITA CAYABYAB, SPS. MARCELIANO & ROSALIA CAYABYAB, SPS. RAFAEL & ROSEMARIE CAYABYAB and INSURANCE CORP. OF THE PHILIPPINES, respondents.

FACTS

The petitioners and respondents Pastor and Marceliano Cayabyab are siblings, children of spouses Raymundo and Eulalia Cayabyab. The dispute involves two parcels of land originally owned by the parents. Raymundo, with his wife’s marital consent, sold the properties to his son Pastor via deeds of sale in 1965 and 1976. Titles were issued to Pastor. After Raymundo’s death, Eulalia and her other children filed an action (Civil Case No. 15298) to annul the deeds and titles, alleging forgery. The trial court declared the deeds and Pastor’s titles null and void, a decision which became final and executory.
Subsequently, Pastor mortgaged and then sold the first parcel to Rosafina Reginaldo, who later mortgaged it to Rural Bank of Urbiztondo. The bank foreclosed, acquired the property, and later sold it to respondents Marceliano and Rosalia Cayabyab, who in turn sold it to respondents Rafael and Rosemarie Ramos. Petitioners then filed the present action (Civil Case No. 15937) seeking to annul these subsequent transactions and recover the properties, also invoking a deed of donation from Eulalia in their favor.

ISSUE

Whether the petitioners can recover the first parcel of land from the subsequent transferees (the Rural Bank, Marceliano, and the Ramos spouses) who were not parties to the prior annulment case.

RULING

No. The Supreme Court denied the petition, affirming the Court of Appeals. The core legal principle applied is that a judgment in an action for annulment of title is binding only on the parties thereto and does not extend to transferees who are not parties to the suit. The prior annulment of Pastor’s titles was in personam, effective only against Pastor. The subsequent buyers were not privies to that case.
Critically, the Court found the subsequent buyers to be purchasers in good faith and for value. The Rural Bank of Urbiztondo, as a mortgagee, had the right to rely on the face of the Torrens title (TCT No. 124304) in the name of its mortgagor, Rosafina Reginaldo. The bank was not required to look beyond the title. Marceliano Cayabyab, though a sibling, purchased the property from the bank in a regular foreclosure sale, and there was no evidence he acted in bad faith. The Ramos spouses, as subsequent buyers, were also innocent purchasers for value. The chain of transactions, originating from a void title, was cleansed by the entry of these good faith purchasers. The petitioners’ claim, based on a subsequent deed of donation, could not prevail against the rights of these protected transferees.