G.R. No. 163994 December 16, 2005
EASTWORLD MOTOR INDUSTRIES CORPORATION, Represented by Its President, PETER TY, Petitioner, vs. SKUNAC CORPORATION, Represented by Its Alleged President LARRY LIM; and MIGUEL LIM, Respondents.

FACTS

Miguel Lim, representing himself as president of Skunac Corporation, filed a petition with the Regional Trial Court (RTC) for the issuance of a new owner’s duplicate of Transfer Certificate of Title (TCT) No. 207104, claiming the original was lost. Based on his affidavit of loss and compliance with jurisdictional requirements, the RTC granted the petition and directed the Register of Deeds to issue a new duplicate title. Skunac Corporation, through its actual president Larry Lim, later filed a petition with the Court of Appeals to annul the RTC order, asserting that Miguel Lim fraudulently claimed the title was lost when it was, in fact, in Larry Lim’s custody. The CA granted Skunac’s petition, declared the RTC order null and void for lack of jurisdiction, and ordered the cancellation of the reconstituted title. Eastworld Motor Industries Corporation intervened, claiming it was an innocent purchaser for value, having bought the property from Miguel Lim after the reconstitution.

ISSUE

The primary issue is whether Eastworld can be considered an innocent purchaser for value, thereby protecting its ownership despite the void reconstitution of the title.

RULING

The Supreme Court denied Eastworld’s petition, affirming the CA’s ruling that it was not an innocent purchaser for value. The Court reiterated the established doctrine that a reconstituted certificate of title is void if the owner’s duplicate was not actually lost. While a valid transfer can emanate from a void title if an innocent purchaser for value intervenes, such status requires a factual determination of good faith. The Court found Eastworld lacked the requisite diligence. The reconstituted title presented to it contained an annotation of the affidavit of loss, which should have prompted further inquiry into the title’s history and the seller’s authority. Furthermore, Eastworld verified Miguel Lim’s corporate authority only after the sale was consummated. This failure to exercise due diligence before the transaction negated its claim of good faith. Consequently, the nullification of the reconstituted title prejudiced Eastworld’s rights, and its intervention was correctly dismissed. The Court also clarified that the applicable law for replacing a lost owner’s duplicate is Presidential Decree No. 1529, not Republic Act No. 26 , which governs reconstitution of the original on file with the Register of Deeds.