G.R. No. L-8461; March 25, 1914

FACTS:
In 1906, Warner, Barnes & Co., Ltd. owned a tract of land and initiated registration proceedings under the Torrens system (Act No. 496). That same year, the company sold a portion of this land to Salustiano Zubeldia, who took possession, made improvements, and built a stone wall demarcating his lot. However, the company inadvertently failed to exclude this sold portion from the land description in its pending registration case. Consequently, in 1909, the Court of Land Registration issued a decree and title in favor of the company covering the entire original tract, including Zubeldia’s lot.

In July 1911, the company’s agent, G.M. Laing, agreed in writing to sell to Ramon Medina Ong-Quingco the remainder of the land, specifically pointing out the stone wall as the boundary and excluding Zubeldia’s occupied lot. Later, the company’s manager executed a formal deed of sale to Ong-Quingco. By mistake, this deed used the description from the Torrens title, thereby including the Zubeldia lot. A corresponding certificate of title was issued to Ong-Quingco. When Ong-Quingco demanded possession of the Zubeldia lot and was refused, he filed an ejectment suit against Zubeldia’s estate. Warner, Barnes & Co., Ltd. was impleaded as a co-defendant.

ISSUE:
Whether the indefeasibility of a Torrens title bars the reformation of a deed and the correction of the certificate of title, where the inclusion of the disputed property was due to a mutual mistake of fact between the immediate parties to the sale, and the land remains in the hands of the original transferee.

RULING:
No. The judgment of the trial court, which ordered the correction of the deed and title to reflect the true intention of the parties, is affirmed.

The principle of indefeasibility of a Torrens title does not apply under these circumstances. The evidence clearly established that there was a mutual mistake between Warner, Barnes & Co., Ltd. and Ong-Quingco. Their minds had met upon the sale and purchase of only the land adjoining Zubeldia’s lot, as visibly separated by the stone wall. The erroneous description in the deed was an oversight that did not reflect their true agreement.

As between these immediate parties to the contract, and while the property remains in the hands of the original transferee (Ong-Quingco), an action for reformation of the instrument based on mutual mistake is proper. The Torrens system’s protection against adverse claims operates in favor of an innocent purchaser for value. Here, Ong-Quingco was not an innocent purchaser with respect to the Zubeldia lot, as he had full knowledge of the prior sale and visible possession. Since Warner, Barnes & Co., Ltd. is a party to the case and the land has not been conveyed to a third party, the mistake can be judicially corrected. The court properly granted the affirmative relief sought by the defendants to reform the deed and the certificate of title to conform to the actual agreement of the parties.