G.R. No. 161925 ; November 25, 2009
SPOUSES EXEQUIEL LOPEZ and EUSEBIA LOPEZ, Petitioners, vs. SPOUSES EDUARDO LOPEZ and MARCELINA R. LOPEZ, Respondents.

FACTS

Respondents, spouses Eduardo and Marcelina Lopez, owned and occupied an 80-square-meter residential lot in Bulacan since 1977, acquired via donation from its previous declarants. In 1992, they discovered that Victor Villadares had obtained a free patent and an Original Certificate of Title (OCT) in 1978 for an 885-sq-m parcel that included their lot. Villadares subdivided the land and sold a 273-sq-m portion (Lot 9954-B) to petitioners, spouses Exequiel and Eusebia Lopez, who were issued TCT No. T-5066. Respondents filed an action for reconveyance, nullity of sale, cancellation of titles, and damages against Villadares and the petitioners, asserting their ownership.
The Regional Trial Court ruled for the respondents, declaring the deed of sale null, ordering reconveyance, and cancelling the titles. It found petitioners were not buyers in good faith, noting the sale appeared to be an afterthought. The Court of Appeals affirmed, holding that registration cannot shield fraud and that petitioners were not innocent purchasers for value, as respondents’ ownership was admitted during pre-trial and they were in possession paying taxes.

ISSUE

Whether the Court of Appeals erred in affirming the cancellation of the petitioners’ title and ordering the reconveyance of the 80-sq-m lot to the respondents.

RULING

The Supreme Court partially granted the petition. It upheld the CA’s finding that an action for reconveyance was proper, as it is a remedy for a rightful owner whose land was erroneously registered under another’s name. The Court affirmed that respondents, through their long possession and tax declarations, had a better right to the 80-sq-m portion. Petitioners could not be considered innocent purchasers for value because they were aware of respondents’ claim; petitioner Eusebia had even filed a protest against Villadares’s application, and their subsequent purchase was essentially a compromise to settle that conflict.
However, the Court modified the ruling regarding the validity of the deed of sale and the extent of cancellation. It declared the Deed of Absolute Sale between Villadares and petitioners valid, as it was supported by consideration and served to resolve their ownership dispute. The trial court’s order for blanket cancellation of TCT Nos. T-5065 and T-5066 was overly broad, as respondents’ claim was only for 80 sq m embedded within the larger parcels. Thus, the Court ordered a survey of Lots 9954-A and 9954-B to segregate the respondents’ 80-sq-m portion, after which corresponding titles should be issued to all parties, thereby protecting the petitioners’ title to the remainder of the land they rightfully acquired from Villadares.