TORRENS SYSTEM Principle

G.R. No. 176043; January 15, 2014 (2D)

SPOUSES BERNADETTE and RODULFO VILBAR
vs. ANGELITO L. OPINION

FACTS
This is the case of conflicting claims over two parcels of land in a subdivision more
particularly designated as Lots 20 and 21.

The first claimant here is the Spouses Vilbar who bought said lots under contracts to sell with the
subdivision developer Dulos Realty and Development Corporation (or Dulos Realty for Brevity)
sometime in July 1979.
Spouses Vilbar took possession of Lot 20 (B) in the concept of owners and
exercised acts of ownership (or occupied the same), with the permission of Dulos
Realty after making an advance payment thereon.
Later on, in 1981 Spouses Vilbar also took possession of Lot 21 and obtained tax
declarations thereon in their name and paid its realty taxes. Subsequently, they
mortgaged Lot 21 to a bank and used the proceeds of the loan to pay in full the
purchase price of Lot 20

Upon full payment of the purchase price for Lot 20, Dulos Realty executed a duly notarized Deed
of Absolute Sale in favor of the spouses and delivered to them the owners duplicate copy of the
TCT (No. S-39849). However, they were not able to register and transfer the title in their name
because the developer allegedly failed to have the lot formally subdivided despite its commitment
to do so, until its President, Juan B. Dulos (Juan), died without the subdivision being
accomplished. But eventually she was able to obtain title (TCT No. 36777) although she only
presented the contract to sell.

But it turned out that said lots were among those levied upon by (a certain) Gorospe, Sr., the
former Board Chairman and CEO of Dulos Realty by virtue of a Court judgment he obtained for
recovery of benefits, privileges and various allowances that said developer failed to pay him as
Chairman.
These lots were sold at public auction with Gorospe emerging as highest bidder
for which TCT Nos. 44797 (Lot 20) and 44796 (Lot 21) were issued in his name.
Subsequently, he mortgaged said lots to herein respondent, Opinion, and when
Gorospe defaulted in paying Opinion the obligation secured by said mortgage,
the lots were awarded to him at an Extra-Judicial Foreclosure Sale.

When the Sps. Vilbar learned about such titles, they filed a complaint in the Regional Trial Court
against Opinion claiming the latter is a buyer in bad faith because Gorospes titles from which
Opinion derived the titles were acquired in bad faith.
The spouses pointed out that as an officer of Dulos Realty, Gorospe should have
known that the subject lots were already sold to them. To prove the spouses
claim, they presented (1) the copies of the contracts to sell on the two lots; (2)
the Deed of Absolute Sale over Lot 20; (3) the Real Estate Mortgage Agreement
with the bank over Lot 21; (4) original Official Receipts issued by SLR for
installment payments of the purchase price of the lots; (5) owners duplicate
copy of TCT No. 36777 in her name; and, (6) tax declarations and receipts.

On one hand, respondent Opinion alleged that he is a buyer in good faith because before
entering into the mortgage agreement with Gorospe, he had verified with the Registry of Deeds
that there were no annotations or encumbrances registered in the titles of Lots 20 and 21.
Further, he was assured by Gorospe that the spouses were merely tenants of the lots and not the
owners.

RTC ruled in favor of Opinion declaring him to have better right over Lots 20 and 21.
Deed of Absolute Sale over Lot 20 was never annotated in the transfer cert of
title.
TCTs in the hands of respondent were the ones which cancelled the titles of
Dulos Realty over the lots and not the TCT presented by the spouses Vilbar.
Issuance of TCT No. 36777 (TCT respecting LOT 21) was questionable because
there was no proof that the purchase price was already paid since only the
Contract to Sell was available.
Registry of Deeds of Pasay itself certified that the TCT respecting Lot 21 is
presumed not to be validly issued.
Herein petitioners only had an inchoate right over the property, said the
RTC. This decision was affirmed by the Court of Appeals (CA).
ISSUE: Were the RTC and CA correct?
HELD: YES. The evidence proves that respondent Opinion lawfully acquired his title over the lots.
Gorospe, Sr. cannot be considered to be in bad faith because he was not the one who executed and
signed the Deed of Absolute Sale in favor of petitioners. Bad faith cannot be presumed and there was no
clear and convincing proof that Gorospe had knowledge of such transaction.
A review of the documents presented by the Spouses in support of their claim of ownership, the SC
reached a conclusion same with that of as that of the RTC. With regard to Lot 20, spouses Vilbar brag of
a Deed of Absolute Sale executed by Dulos Realty in their favor and aver that they have the owners copy
of TCT No. S-39849 and are presently enjoying actual possession of said property. However, these are
not sufficient proofs of ownership. For some unknown reasons, the spouses Vilbar did not cause the
transfer of the certificate title in their name, or at the very least, annotate or register such sale in the
original title in the name of Dulos Realty. This, sadly, proved fatal to their cause. Time and time again,
this Court has ruled that "(1) a certificate of title serves as evidence of an indefeasible and
incontrovertible title to the property in favor of the person whose name appears
therein." Having no certificate of title issued in their names, spouses Vilbar have no indefeasible and
incontrovertible title over Lot 20 to support their claim. Further, it is an established rule that (2)
"registration is the operative act which gives validity to the transfer or creates a lien upon
the land." (3) "Any buyer or mortgagee of realty covered by a Torrens certificate of title x x
x is charged with notice only of such burdens and claims as are annotated on the
title." Failing to annotate the deed for the eventual transfer of title over Lot 20 in their names, the
spouses Vilbar cannot claim a greater right over Opinion, who acquired the property with clean title in
good faith and registered the same in his name by going through the legally required procedure.
Petition denied; Decision of the CA affirming the ruling of the RTC affirmed.