G.R. No. 177187 ; April 7, 2009
SPS. JUANITO R. VILLAMIL and LYDIA M. VILLAMIL, represented herein by their Attorney-in-Fact/Son WINFRED M. VILLAMIL, Petitioners, vs. LAZARO CRUZ VILLAROSA, Respondent.

FACTS

Petitioners Spouses Juanito and Lydia Villamil were the registered owners of a parcel of land in Quezon City covered by TCT No. 223611. In 1987, they discovered a house being constructed on their lot by respondent Lazaro Cruz Villarosa. Upon verification with the Register of Deeds, they found that their title had been cancelled based on a forged Deed of Sale dated July 16, 1979, purportedly executed by them in favor of a Cipriano Paterno, leading to the issuance of TCT No. 351553 in Paterno’s name. Paterno then executed a Deed of Assignment in favor of Spouses Mateo and Purificacion Tolentino, resulting in TCT No. 351673. Subsequently, the Spouses Tolentino sold the property to Villarosa via a Deed of Absolute Sale, and TCT No. 354675 was issued in his name. Petitioners filed a complaint for annulment of title, alleging the Deed of Sale to Paterno was falsified, Paterno was fictitious, and the Spouses Tolentino had no right to sell. The Regional Trial Court (RTC) declared all subsequent titles (Paterno’s, Tolentinos’, and Villarosa’s) null and void, ordered the cancellation of Villarosa’s title, and reinstated the Villamils’ ownership, finding Villarosa a purchaser in bad faith. The Court of Appeals reversed the RTC regarding Villarosa, declaring his title valid and finding him a purchaser in good faith and for value, while affirming the nullity of the titles of Paterno and the Spouses Tolentino. Petitioners elevated the case, contesting only the validity of Villarosa’s title.

ISSUE

Whether or not respondent Lazaro Cruz Villarosa is a purchaser in good faith and for value, such that his title (TCT No. 354675) over the subject property remains valid despite the forged deed in the chain of title.

RULING

No, the Supreme Court ruled that respondent Villarosa is NOT a purchaser in good faith and for value. The Court reversed the decision of the Court of Appeals and reinstated the RTC decision declaring Villarosa’s title null and void. The Court found that Villarosa failed to discharge the burden of proving his good faith. The circumstances surrounding his purchase were sufficient to put a prudent person on inquiry. He bought the property at a significantly low price (₱276,000.00) considering it included a house, and he was aware the sellers (Spouses Tolentino) acquired it via a Deed of Assignment, not a sale, which is unusual and should have prompted further investigation into the nature of their ownership. Most importantly, the Deed of Absolute Sale between the Tolentinos and Villarosa was notarized by a lawyer who was not duly commissioned as a notary public for that year, rendering the document defective and invalid. This defect was within Villarosa’s knowledge or should have been discovered with ordinary diligence, negating any claim of good faith. Consequently, Villarosa could not be considered an innocent purchaser for value, and his title, derived from a void deed, is also void. The Supreme Court ordered the cancellation of TCT No. 354675 and the reinstatement of the Villamils’ original title.