G.R. No. 165644 February 28, 2006
MANUEL B. ALORIA (represented by his attorney-in-fact, BERNARDINO B. ALORIA) Petitioner, vs. ESTRELLITA B. CLEMENTE, Respondent.

FACTS

Petitioner Manuel Aloria, a U.S. resident, discovered during a 2000 visit that his property in Caloocan City had been transferred to respondent Estrellita Clemente. The transfer was based on a notarized Deed of Absolute Sale dated April 18, 2000, purportedly executed by him. Aloria filed a complaint for annulment, claiming the deed was falsified as he was abroad and could not have signed it. Clemente, in her defense, claimed she purchased the property in good faith from Aloria’s parents-in-law, the Diego spouses, who were in possession of the owner’s duplicate certificate of title and a prior 1994 deed of sale from Aloria. She asserted she introduced substantial improvements worth approximately ₱800,000.
The Regional Trial Court (RTC) declared the 2000 deed and Clemente’s title void, finding her not an innocent purchaser for value. However, applying equity, it ordered Aloria to reimburse Clemente ₱400,000 for half the value of the improvements to prevent unjust enrichment. The Court of Appeals reversed, finding Aloria failed to sufficiently prove his absence from the Philippines during the execution of the 1994 and 2000 deeds. It held that Clemente was a purchaser in good faith and a builder in good faith entitled to full reimbursement.

ISSUE

Whether the Court of Appeals erred in reversing the RTC’s findings and in declaring respondent a purchaser and builder in good faith.

RULING

Yes. The Supreme Court reversed the Court of Appeals and reinstated the RTC decision with modification. The legal logic centered on the burden of proof and the requirements for good faith. Aloria successfully discharged his burden by presenting his Affidavit and an Affidavit of General Denial, which were public documents entitled to prima facie weight. His claim of forgery was substantiated, and Clemente failed to present clear evidence that Aloria was in the Philippines when the deeds were executed. The Court emphasized that forgery cannot be presumed and must be proven, which Aloria did.
Crucially, Clemente could not be considered a purchaser in good faith. A purchaser cannot rely on the mere possession of a certificate of title by the seller but must verify the seller’s capacity and title. The Diego spouses were not the registered owners, and Clemente’s failure to investigate this fatal defect negated good faith. Consequently, she was also not a builder in good faith, as good faith requires a belief of ownership, which she lacked. However, applying the principle of unjust enrichment, the Court upheld the RTC’s equitable solution but modified it. Since Clemente was not in good faith, she was only entitled to reimbursement under Article 546 of the Civil Code, which grants a right of retention until reimbursement. The Court ordered Aloria to reimburse the ₱400,000 as determined by the RTC, or else Clemente could remove the improvements.