G.R. No. L-7748 August 27, 1956
ROBERTO BARRETO, plaintiff-appellant, vs. TOMASA AREVALO, ET AL., defendants-appellees.

FACTS

Plaintiff Roberto Barretto filed an action to annul a title issued to defendants Nicanor Padilla and Ambrosio Padilla over a residential lot in Sampaloc, Manila, and to have a title issued in his name, with damages for rentals, or alternatively, to recover P49,000 as the property’s value. Barretto alleged he bought the property from defendant Tomasa Arevalo on January 10, 1945, for P12,000, assumed an existing mortgage of P30,000, and leased it back to Arevalo with an option to repurchase. These contracts were registered on January 11, 1945. On July 22, 1946, Arevalo sold the same property to the Padillas for P25,000. A prior Supreme Court decision in an action by Arevalo against Barretto had declared the transaction between them a sale with right to repurchase, redeemable for P16,000, which Arevalo failed to exercise, leading to consolidation of Barretto’s ownership. The Padillas registered their deed of sale and obtained a new certificate of title. The trial court found the Padillas purchased in good faith without knowledge of the prior sale, held Barretto’s attempted registration ineffective against the Padillas’ registered title, dismissed the suit, and awarded the Padillas P100,000 in moral damages. Barretto appealed.

ISSUE

The main issues were: (1) whether the trial court erred in excluding evidence of Barretto’s prior deed and related documents; (2) whether it erred in excluding evidence of the property’s value; (3) whether the Padillas had knowledge of the prior sale; (4) whether Barretto’s registration prevailed over the Padillas’; (5) whether the dismissal as to Arevalo was proper; and (6) whether the award of moral damages was justified.

RULING

The Supreme Court affirmed the dismissal of Barretto’s action but reversed the award of moral damages. It held: (1) The trial court erred in excluding Barretto’s documents (deed of sale, lease, promissory note, Supreme Court decision) as they were material and admissible against the Padillas as successors-in-interest of Arevalo, regardless of the good faith defense. (2) The trial court erred in excluding evidence of the property’s value, as it was relevant to Barretto’s alternative claim for its value. (3) The trial court’s finding that the Padillas had no knowledge of the prior sale was supported by credible evidence, overcoming Barretto’s weak evidence to the contrary. (4) Barretto’s registration was incomplete and ineffective against the Padillas’ registered title because Barretto did not surrender the owner’s certificate of title for annotation, as required for voluntary registration under the Land Registration Act; thus, the Padillas’ subsequent registration and issuance of a new title conveyed ownership. (5) The dismissal as to Arevalo was proper as she was a formal party, Barretto did not seek a default declaration, and any claim against her was barred by res judicata from the prior Supreme Court case. (6) The award of P100,000 moral damages was unjustified; Barretto’s action was not wrongful as he had a valid deed and the right to litigate the issue of the Padillas’ knowledge, and no proof showed malicious prosecution or complicity in perjury. Costs were imposed on Barretto.