G.R. No. 56290 January 30, 1995
Government Service Insurance System, petitioner, vs. The Hon. Court of Appeals and Zenaida Manero, represented by her attorney-in-fact, Jose E. Castañeda, respondents.

FACTS

Zenaida Manero purchased a parcel of land from Manolita Suntay on February 7, 1975. At the time of the sale, the Transfer Certificate of Title (TCT No. 33912) was free from any encumbrances, as the mortgage lien in favor of GSIS had been annotated as cancelled. The deed of sale was registered, TCT No. 33912 was cancelled, and a new title (TCT No. 55932) was issued in Manero’s name. Subsequently, GSIS filed an affidavit of adverse claim, which was annotated on Manero’s new title, based on its interest as mortgagee for Suntay’s still-outstanding loan. Manero filed a petition for cancellation of this adverse claim.
During trial, Manero’s attorney-in-fact testified that before the purchase, Suntay assured them the loan had been paid, presenting official receipts. GSIS, however, presented evidence that it discovered anomalies, including a missing title and a forged partial release of mortgage, leading it to file the adverse claim after learning the property had been transferred to Manero.

ISSUE

1. Whether the Court of First Instance, acting as a land registration court, had jurisdiction to order the cancellation of the adverse claim.
2. Whether Zenaida Manero was an innocent purchaser for value and in good faith.
3. Whether the mortgage lien of GSIS had been satisfied.

RULING

The Supreme Court affirmed the Court of Appeals’ decision, denying GSIS’s petition. On jurisdiction, the Court held that while land registration courts generally have limited jurisdiction, they possess the authority to hear and decide petitions for cancellation of adverse claims under Section 112 of the Land Registration Act. The proceedings remain summary, but the court can resolve substantive issues incidental to the cancellation, provided no serious controversy requiring full-blown trial exists. Here, the core issue—the validity of the adverse claim against an innocent purchaser—was properly within the court’s competence to determine.
On good faith, the Court ruled Manero was an innocent purchaser for value. When she bought the property, the title showed the GSIS mortgage lien as cancelled, and she relied on Suntay’s representations and official payment receipts. There was no proof Manero had knowledge of any forgery or flaw in the title. Under the Torrens system, a purchaser dealing with registered land may rely on the face of the certificate of title and is not obliged to look beyond it. The friendship and employment relationship between Manero and Suntay, absent clear evidence of bad faith, do not overcome the presumption of good faith.
Regarding the satisfaction of the mortgage lien, the Court held this matter should be addressed in a proper suit against Suntay, with whom GSIS has privity, not against Manero. The cancellation of the adverse claim on Manero’s title was thus proper.