GR L 68741; (January, 1988) (Digest)
G.R. No. L-68741. January 28, 1988.
NATIONAL GRAINS AUTHORITY, plaintiff-appellee, vs. INTERMEDIATE APPELLATE COURT, MELECIO MAGCAMIT, NENA COSICO and EMELITA MAGCAMIT, defendants-appellants.
FACTS
The spouses Paulino Vivas and Engracia Lizardo sold a parcel of land to the Magcamit spouses and Emelita Magcamit (private respondents) through a “Kasulatan Ng Bilihang Mabiling Muli” on December 2, 1971. This was later made absolute by a “Kasulatan Ng Bilihan Tuluyan” on January 31, 1972, with a balance of P40,000.00 payable upon issuance of the certificate of title. The private respondents remained in possession. Unknown to them, an Original Certificate of Title (OCT) was issued to the Vivas spouses on February 26, 1975. The Vivas spouses then executed a Special Power of Attorney authorizing Irenea Ramirez to mortgage the property with the National Grains Authority (NGA, petitioner). The mortgage was foreclosed, and the NGA acquired the property at auction, subsequently obtaining a Transfer Certificate of Title.
Upon learning of these events, the private respondents offered to pay the NGA the P40,000.00 balance, but the NGA refused. The private respondents then filed a complaint seeking to be declared owners or, alternatively, for reconveyance. The trial court ruled in favor of the NGA, declaring it the lawful owner. The Intermediate Appellate Court reversed, ordering the NGA to execute a deed of reconveyance to the private respondents.
ISSUE
Whether the National Grains Authority, as a mortgagee and subsequent purchaser at the foreclosure sale, is an innocent purchaser for value whose Torrens title prevails over the prior unregistered absolute sale in favor of the private respondents.
RULING
The Supreme Court reversed the decision of the Intermediate Appellate Court and reinstated the trial court’s judgment. The Court held that the NGA is an innocent purchaser for value. The property was registered under the Torrens system, and OCT No. T-1728 was issued in the names of the Vivas spouses without any annotation of the prior sale to the private respondents. When the NGA accepted the mortgage, it had the right to rely solely on the face of the clean certificate of title. It was not required to investigate beyond what the title indicated. The law protects innocent third parties, like the NGA, who acquire rights over property in reliance on a Torrens certificate. The doctrine of indefeasibility of a Torrens title shields such purchasers. Consequently, the NGA’s title became indefeasible. The fraud, if any, was committed by the Vivas spouses against the private respondents, but the NGA, not being privy to that transaction, cannot be made to suffer. As an innocent purchaser for value, the NGA has no obligation to reconvey the property. The remedy of the private respondents lies in an action for damages against the Vivas spouses, not against the NGA.