Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No.

142313 March 1, 2001

SPOUSES MANUEL CHU, SR. and CATALINA B. CHU, h! "or#!r $%&$ ' % !d &( THEANL)N B. CHU, THEAN CHING LEE B. CHU, THEAN LEE*N B. CHU and MARTIN LA*RENCE B. CHU, h! +a !r r!,r!$!n !d &( h'$ #o h!r and -%ard'an ad +' !#, ,! ' 'on!r CATALINA B. CHU, petitioners, vs. BENEL.A ESTATE .E/ELOPMENT CORPORATION, respondent. .E LEON, 0R., J.1 efore us is a petition for revie! on certiorari of the Decision" and Resolution# of the Court of $ppeals,% dated Nove&ber #', "''' and March "(, #))), respectivel*, !hich reversed the Order( dated March %), "''+ of the Re,ional -rial Court of Pa&pan,a, ranch .#, den*in, respondent/s &otion to dis&iss as !ell as the Order den*in, respondent/s &otion for reconsideration, dated Ma* #0, "''+. -he petitioners spouses Manuel Chu, Sr. and Catalina Chu 1the for&er substituted b* -heanl*n Chu, -hean Chin, 2ee Chu, -hean 2ee!n Chu, and Martin 2a!rence Chu3 !ere the re,istered o!ners of five 1.3 parcels of land situated in arrio Sa,uin, San 4ernando, Pa&pan,a, covered and described in -ransfer Certificate of -itle Nos. "'+(5)6R, "'+(5"6R, "'+(5#6R, "'+(5%6R and "''..06R of the Re,istr* of Deeds of the province of Pa&pan,a. On Septe&ber %), "'+0, the petitioners e7ecuted a deed of sale !ith assu&ption of &ort,a,e in favor of -rinidad N. Cunanan in consideration of P.,"0",)').)). $lthou,h Cunanan has actuall* an unpaid balance of P#,.0",)').)), it !as &ade to appear in the deed of sale that the total consideration had been full* paid to enable Cunanan to have the parcels of land re,istered in her na&e so that she could &ort,a,e the sa&e to secure a loan and thereupon pa* fro& the proceeds of the loan the said balance of P#,.0",)').)). -heir a,ree&ent, ho!ever, !as that the o!nership of the properties shall re&ain !ith the petitioners until full pa*&ent of the balance of the total purchase price. -rinidad N. Cunanan !as thus able to cause the cancellation of the said titles re,istered in the na&e of the petitioners spouses Manuel Chu, Sr. and Catalina Chu and in lieu thereof the

issuance of -C-s No. #%'#5+6R, No. #%'%506R, No. #%'#5'6R, No. #%'#556R, and No. #%'#+)6R !hich are all re,istered in her na&e. Cunanan failed to pa* the balance of the total purchase price to the petitioners. 8ithout the 9no!led,e of the petitioners, Cunanan sold the three 1%3 parcels of land to Cool -o!n Realt* and Develop&ent Corporation, and the t!o 1#3 other parcels of land sub:ect of the instant case and covered b* -C- Nos. #%'#506R and #%'#556R to the spouses $&ado and ;loria Carlos. -he spouses Carlos, in turn, sold these t!o 1#3 properties to the respondent enelda Estate Develop&ent Corporation. Petitioners co&&enced Civil Case No. ;6"'%0 before the Re,ional -rial Court of Pa&pan,a a,ainst -rinidad N. Cunanan, Cool -o!n Realt* and Develop&ent Corporation and the Re,ister of Deeds of Pa&pan,a. -he petitioners a&ended their co&plaint to include respondent enelda Estate Develop&ent Corporation as a defendant, alle,in,, insofar as the latter is concerned that< "%. -hat in order to cause financial da&a,e and irreparable in:ur* to the ori,inal plaintiffs, defendant -rinidad N. Cunanan !ithout an* la!ful ri,ht and authorit* !hatsoever sold the re&ainin, t!o 1#3 parcels of land involved in this case previousl* covered b* -ransfer Certificates of -itle Nos. #%'#506R and #%'#556R re,istered in her na&e 1for&erl* e&braced b* -ransfer Certificates of -itles Nos. "'+(5"6R and "'+(5#6R in the na&es of the ori,inal plaintiffs3 in favor of the spouses $M$DO E. C$R2OS and ;2ORI$ $. C$R2OS, !ho li9e defendant Cool -o!n Realt* and Develop&ent Corporation are not also bu*ers for value and in ,ood faith of the sub:ect t!o 1#3 parcels of land as sho!n b* -ransfer Certificates of -itles Nos. #(5)#06R and #(0'(56R both of the Re,ister of Deeds of Pa&pan,a, !hose 7ero7 copies are hereto attached respectivel* as $nne7es =;=, =;6"=, =;6#=, =>=, and =>6"= hereof . "(. -hat li9e!ise in order to cause further financial da&a,e and pre:udice to the plaintiffs, the spouses $M$DO E. C$R2OS $ND ;2ORI$ $. C$R2OS, !ho have never ac?uired valid titles over the t!o 1#3 parcels of land previousl* e&braced b* -ransfer Certificates of -itles Nos. #(5)#06R and #(0'(56R both of the Re,istr* of Deeds of Pa&pan,a re,istered in their na&es referred to in the i&&ediatel* precedin, para,raph sold the sa&e t!o 1#3 parcels of land on Nove&ber "%, "''. in favor of defendant ENE2D$ ES-$-E DEVE2OPMEN- CORPOR$-ION as sho!n b* the correspondin, Deed of $bsolute Sale, !hose 7ero7 cop* is hereto attached as $nne7es =I= and =I6#= hereof .

".. -hat in vie! of the fact that the o!nership of the five 1.3 parcels of land in issue in this case le,all* re&ains !ith the plaintiffs, the deed of conve*ances e7ecuted b* defendant -rinidad N. Cunanan relative to the sub:ect five 1.3 parcels of land in liti,ation in favor of defendant Cool -o!n Realt* @ Develop&ent Corporation and in favor of the spouses $&ado 2. Carlos and ;loria $. Carlos and the deed of absolute sale dated Nove&ber "%e "''. e7ecuted b* the spouses $&ado E. Carlos and ;loria $. Carlos on lot (##(6$6# of the subdivision plan previousl* covered b* -ransfer Certificate of -itle No. #(0'(56R and 2ot (##(6$6% of the subdivision plan for&erl* e&braced b* -ransfer Certificate of -itle No. #(5)#06R both of the Re,istr* of Deeds of Pa&pan,a in favor of defendant ENE2D$ ES-$-E DEVE2OPMEN- CORPOR$-ION, !hich are a&on, the five 1.3 parcels of land involved in this case are all null and void, conse?uentl* the said deed of conve*ances did not vest valid title of o!nership over the said five 1.3 parcels of land in controvers* in favor of defendant COO2 -O8N RE$2-A DEVE2OPMEN- CORPOR$-ION and ENE2D$ ES-$-E DEVE2OPMEN- CORPOR$-ION because defendant -rinidad N. Cunanan, !ho has never been an o!ner of an* of the five 1.3 parcels of land in dispute cannot validl* and le,all* transfer the o!nership thereof in favor of an* person !ho&soever. "0. -hat despite de&ands &ade b* the plaintiffs to the defendants, the latter un:ustifiabl* failed and refused as the* still fail and refuse to reconve* the five 1.3 parcels of land to the said plaintiffs.. -he respondent filed its ans!er !ith a &otion to dis&iss on the ,round, a&on, others, that the a&ended co&plaint states no cause of action a,ainst herein respondent. It alle,ed that respondent corporation, throu,h its officers, acted in ,ood faith in bu*in, the properties inas&uch as it e7erted all efforts to verif* the authenticit* of the titles and that no defect !as found therein. $fter the petitioner filed an opposition to the &otion to dis&iss, the trial court rendered a decision den*in, the &otion to dis&iss. -he respondent filed a petition for certiorari under Rule 0. of the Rules of Court before the Court of $ppeals alle,in, that the trial court co&&itted ,rave abuse of discretion in den*in, its &otion to dis&iss the a&ended co&plaint. -he Court of $ppeals reversed the order of the trial court and dis&issed the case as a,ainst herein respondent on the ,round of lac9 of cause of action and for failure of the petitioners to include the spouses Carlos as indispensable parties in the co&plaint.

Petitioner raises the follo!in, assi,n&ents of error< I 8I-> $22 DBE RESPEC- -O ->IS >ONOR$ 2E COBR- C CON-R$RA -O I-S CONC2BSION IN I-S DECISION SOB;>- -O E SE- $SIDE, PE-I-IONERS/ $MENDED COMP2$IN- D$-ED DBNE ', "''5 S-$-ES $ V$2ID C$BSE O4 $C-ION $;$INS- RESPONDENENE2D$ ES-$-E DEVE2OPMEN- CORPOR$-ION. II 8I-> $22 DBE RESPEC- -O ->IS >ONOR$ 2E COBR- C ->E SPOBSES $M$DO E. C$R2OS $ND ;2ORI$ $. C$R2OS $RE NORE$2 $ND INDISPENS$ 2E P$R-IES IN ->E C$SE $- ENC>. III I- IS RESPEC-4B22A SB MI--ED C ->$- ->E $VERMEN-S M$DE IN ->$- DEED O4 $ SO2B-E S$2E, 8>OSE EEROE COPA IS $--$C>ED $S $NNEEES ="= $ND ="6#= O4 ->E $MENDED COMP2$IN- INVO2VED IN ->IS C$SE -O ->E E44EC- ->$- ->E SPOBSES $M$DO E. C$R2OS $ND ;2ORI$ $. C$R2OS 8$RR$N-ED =V$2ID -I-2ES -O $ND POSSESSION O4 ->E PROPER-IES SO2D $ND CONVEAED= $ND ->$- ->EIR -I-2ES ->ERE-O $RE = 4REE $ND C2E$R O4 $22 2IENS $ND ENCBM R$NCES O4 $NA FIND 8>$-SOEVER= C$NNO- E V$2ID2A CONSIDERED IN DE-ERMININ; 8>E->ER OR NOPE-I-IONERS/ $MENDED COMP2$IN- D$-ED DBNE ', "''5 S-$-ES $ V$2ID C$BSE O4 $C-ION $;$INS- RESPONDEN-. IV I- IS RESPEC-4B22A SB MI--ED ->$- ->E SPOBSES $M$DO E. C$R2OS $ND ;2ORI$ $. C$R2OS C$NNO- -R$NS4ER V$2ID -I-2E -O ->E -8O 1#3 P$RCE2S O4 2$ND INVO2VED IN ->IS PE-I-ION 8>IC> ->EA ->EMSE2VES DO NO- >$VE. V I- IS RESPEC-4B22A SB MI--ED ->$- ->E EE-R$ORDIN$RA 8RI- O4 CER-IOR$RI IS NO- $V$I2$ 2E -O C>$22EN;E ->E $SS$I2ED ORDERS O4 M$RC> %), "''+ $ND M$A #0, "''+ 8>IC> $RE O-> IN-ER2OCB-ORA IN C>$R$C-ER.

$ cause of action is defined as an act or o&ission b* !hich a part* violates a ri,ht of another.0 -he test of the sufficienc* of the facts found in a petition as constitutin, a cause of action is !hether or not, ad&ittin, the facts alle,ed, the court can render a valid :ud,&ent upon the sa&e in accordance !ith the pra*er thereof.5 In land title cases, this Court has ti&e and a,ain held that a person dealin, !ith re,istered land &a* safel* rel* on the correctness of the certificate of title issued therefor and the la! !ill in no !a* obli,e hi& to ,o behind the certificate to deter&ine the condition of the propert*.+ -his person is considered in la! as an innocent purchaser for value !ho is defined as one !ho bu*s the propert* of another, !ithout notice that so&e other person has a ri,ht or interest in such propert* and pa*s a full price for the sa&e, at the ti&e of such purchase or before he has notice of the clai&s or interest of so&e other person in the propert*.' In this connection, Section .% of Presidential Decree No. ".#', other!ise 9no!n as the Propert* Re,istration Decree, provides that< Presentation of o!ner/s duplicate upon entr* of ne! certificates. C No voluntar* instru&ent shall be re,istered b* the Re,ister of Deeds, unless the o!ner/s duplicate certificate is presented !ith such instru&ent, e7cept in cases e7pressl* provided for in this Decree or upon order of the court, for cause sho!n. -he production of the o!ner/s duplicate certificate, !henever an* voluntar* instru&ent is presented for re,istration, shall be conclusive authorit* fro& the re,istered o!ner to the Re,ister of Deeds to enter a ne! certificate or to &a9e a &e&orandu& of re,istration in accordance !ith such instru&ent, and the new certificate or memorandum shall be binding upon the registered owner and upon all persons claiming under him, in favor of every purchaser for value and in good faith. GItalic SuppliedH 777 777 777

-hus, a title procured throu,h fraud and &isrepresentation can still be the source of a co&pletel* le,al and valid title if the sa&e is in the hands of an innocent purchaser for value.") In a case for annul&ent of title, therefore, the co&plaint &ust alle,e that the purchaser !as a!are of the defect in the title so that the cause of action a,ainst hi& !ill be sufficient. 4ailure to do so, as in the case at bar, is fatal for the reason that the court cannot render a valid :ud,&ent a,ainst the purchaser !ho is presu&ed to be in ,ood faith in ac?uirin, the said propert*. 4ailure to prove, &uch less i&pute, bad

faith on said purchaser !ho has ac?uired a title in his favor !ould &a9e it i&possible for the court to render a valid :ud,&ent thereon due to the indefeasibilit* and conclusiveness of his title. 8e find that the Court of $ppeals did not err in dis&issin, the a&ended co&plaint insofar as the respondent is concerned. -he a&ended co&plaint and the anne7es thereto did not alle,e bad faith on the part of the respondent corporation. In fact, respondent/s clai& that it bou,ht the t!o 1#3 parcels of land in ,ood faith are supported b* the $nne7es ="= and ="6#= 1Deeds of $bsolute Sale3 attached to petitioner/s a&ended co&plaint. -hese deeds e7ecuted b* the spouses Carlos in favor of herein private respondent state that the spouses Carlos !arranted =valid title1s3 to and possession of the properties sold and conve*ed,= and further&ore declare that their titles thereto are =free and clear of all liens and encu&brances of an* 9ind !hatsoever.="" -here is no !a* for the trial court to render :ud,&ent a,ainst herein respondent !hose title to the sub:ect parcels of land re&ains indefeasible and conclusive, there bein, no alle,ation in the a&ended co&plaint that it alle,edl* ac?uired the said properties in bad faith. Petitioners contend that since the ,round of respondent/s &otion to dis&iss is lac9 of cause of action, the alle,ations in the a&ended co&plaint are h*potheticall* assu&ed to be true or ad&itted, and conse?uentl* the respondent/s clai& of ,ood faith is defeated b* its 9no!led,e of the alle,edl* ad&itted facts in the a&ended co&plaint re,ardin, the fraudulent circu&stances involvin, the passin, of the titles. 8e find that the technical or assu&ed ad&ission on the part of respondent, in such an event, does not defeat its status as an innocent purchaser for value. -he defense of ,ood faith of respondent is valid for the reason that such &ental disposition !as present at the ti&e it purchased those t!o 1#3 parcels of land fro& the Carlos spouses up to the ti&e the correspondin, t!o 1#3 transfer certificates of title thereto !ere issued in its favor. 8hat is i&portant is that !hen respondent bou,ht the sub:ect properties, it !as not a!are of an* defect in the coverin, certificates of title thereto at the ti&e of such purchase. -here is no alle,ation to the contrar* in the a&ended co&plaint. -herefore, the title of respondent, bein, that of an innocent purchaser for value, re&ains valid. * allo!in, the cancellation of their certificates of title and the issuance of ne! ones in lieu thereof in the na&e of -rinidad N. Cunanan despite alle,ed non6pa*&ent of the full purchase price for their sub:ect t!o 1#3 parcels of land, the petitioners too9 the ris9 of losin, their titles on the said properties inas&uch as the sub:ect deed of sale !ith assu&ption of &ort,a,e constitutes their consent and

announce&ent to the !hole !orld that Cunanan !as indeed the le,al o!ner of the properties b* virtue of the said deed !hich is a public docu&ent. Petitioners/ reliance on Mathay v. Court of Appeals"# !hich held that =No one can transfer a ,reater ri,ht to another than he hi&self has= is not applicable to the instant case for the reason that the said le,al &a7i&, accordin, to the sa&e case, onl* holds true if the sa&e land had alread* been re,istered and an earlier certificate for the sa&e is in e7istence. In the case at bar, the petitioners no lon,er have an* title to the sub:ect t!o 1#3 parcels of land inas&uch as petitioners spouses Manuel Chu, Sr. and Catalina . Chu, as sellers, have consented to the cancellation of their certificates of title in favor of Cunanan, as bu*er. -hus, the conclusiveness of respondent/s certificates of title is bindin, on the !hole !orld includin, the petitioners. Petitioners also clai& that since the orders of the trial court den*in, their &otion to dis&iss are &erel* interlocutor*, the sa&e cannot be the sub:ect of a petition for certiorari. >o!ever, as correctl* pointed out b* the respondent, the rule ad&its of an e7ception. -hus, !here the denial of the &otion to dis&iss b* the trial court !as tainted !ith ,rave abuse of discretion a&ountin, to lac9 or e7cess of :urisdiction, as in the case at bar, the a,,rieved part* &a* assail the order of denial on certiorari. $ !ide breadth of discretion is ,ranted in certiorari proceedin,s in the interest of substantial :ustice and to prevent a substantial !ron,."% -he appellate court therefore !as correct in entertainin, the petition for the reason that the trial court co&&itted a ,rave abuse of discretion !hen it refused to dis&iss the case as a,ainst herein respondent, despite the obvious insufficienc* of the a&ended co&plaint a,ainst the respondent. -o i&plead the herein respondent in the case at bar, absent an alle,ation of bad faith on its part, is to under&ine a !ell6settled rule protectin, innocent purchasers for value and the indefeasibilit* and conclusiveness of certificates of title issued under the -orrens S*ste&. In vie! of the fore,oin,, there is no need to discuss the assi,n&ent of error as to !hether the spouses $&ado E. Carlos and ;loria $. Carlos 1sellers of the sub:ect titled parcels of land to respondent3 are real and indispensable parties in the case at bar. 8>ERE4ORE, the petition is DENIED for lac9 of cause of action. 8ith costs a,ainst the petitioners. SO ORDERED. Bellosillo, Mendoza, uisumbing and Buena, !! ., concur.