G.R. No. 187824 / G.R. No. 188265, November 17, 2010
FILINVEST DEVELOPMENT CORPORATION, Petitioner, vs. GOLDEN HAVEN MEMORIAL PARK, INC., Respondent. (and the consolidated case)

FACTS

The heirs of a property covered by TCT 67462 RT-1 partitioned the land. Golden Haven Memorial Park, Inc. (GHM) entered into agreements to sell with several heirs for Lots 1, 2, 6, and 12 in March and July 1989, paying the first installments. On August 4, 1989, GHM annotated a Notice of Adverse Claim on the mother title. Subsequently, Filinvest Development Corporation (Filinvest) purchased the same lots from the same heirs via deeds of absolute sale dated September to December 1989. Upon application for registration, Filinvest learned from the Register of Deeds that another co-owner’s duplicate certificate was held by a sister company of GHM, which had purchased another lot.
GHM filed a complaint for annulment of the deeds of sale in favor of Filinvest. The Regional Trial Court upheld GHM’s contracts and nullified Filinvest’s purchases. The Court of Appeals partially modified this, validating GHM’s contract for Lot 6 but declaring its contracts for Lots 1, 2, and 12 void while upholding Filinvest’s purchase of those three lots. Both parties elevated the case to the Supreme Court.

ISSUE

The core issue is whether the contracts to sell executed in favor of GHM are valid and enforceable against the subsequent sales to Filinvest.

RULING

The Supreme Court ruled in favor of GHM, reinstating the RTC decision with modification. The Court held that Filinvest was not a purchaser in good faith. The general rule that a buyer of registered land need only rely on the title is conditioned on the absence of any known adverse claim. Here, Filinvest was on constructive notice of GHM’s interest due to the Notice of Adverse Claim annotated on the mother title on August 4, 1989, before Filinvest’s purchases. This annotation served as a warning to the whole world that a third party claimed an interest in the property under that title.
The Court rejected Filinvest’s contention that the notice only pertained to Lot 6. The annotation on the mother title constituted a warning that put Filinvest upon inquiry regarding transactions involving other lots under the same title. Furthermore, Filinvest’s own discovery that a co-owner’s duplicate was in the possession of GHM’s sister company reinforced the need for a more diligent investigation, which Filinvest failed to undertake. Consequently, Filinvest cannot claim the status of a buyer in good faith. The Court upheld the validity of GHM’s contracts to sell. However, it deleted the award of exemplary damages for lack of basis, as no moral damages were proven, while attorney’s fees were sustained.