LOCSIN V HIZON G.R. No. 204369, September 17, 2014

FACTS Petitioner Enriqueta M. Locsin (Locsin) was the registered owner of a 760-sq.m.lot covered located at Quezon City. She filed an ejectment case against one Billy Aceron (Aceron) before the Metropolitan Trial Court in Quezon City (MTC) to recover possession over the land in issue. Eventually, the two entered into a compromise agreement, which the MTC approved. Locsin later went to the United States without knowing whether Aceron has complied with his part of the bargain under the compromise agreement. In spite of her absence, however, she continued to pay the real property taxes on the subject lot. She discovered that her copy of the title is missing, she filed Locsin filed a petition for administrative reconstruction in order to secure a new one. Sometime in early 2002, she then requested her counsel to check the status of the subject lot. It was then that they discovered that the TCT has been called by another person and secured a new one in her favor by registering a Deed of Absolute Sale allegedly executed by Locsin with the Registry of Deeds. The lot was also sold to one Bernardo Hizon for PhP 1.5 million, but it was titled under his son’s name Carlos Hizon. Bernardo, claiming to be the owner of the property, filed a Motion for Issuance of Writ of Execution for the enforcement of the court-approved compromise agreement between Locsin and Aceron. The property was already occupied and was, in fact, up for sale. Locsin, through counsel, sent Carlos a letter requesting the return of the property since her signature in the purported deed of sale in favor of Bolos was a forgery. In a letter-reply dated May 20, 2002, Carlos denied Locsin’s request, claiming that he was unaware of any defect or flaw in Bolos’ title and he is, thus, an innocent purchaser for value and good faith. Later on, Locsin learned that Carlos had already sold the property for PhP 1.5 million to his sister and her husband, herein respondents Lourdes and Jose Manuel Guevara (spouses Guevara), respectively, who, as early as May 24, 2002, had a new certificate of title issued in their names. The spouses Guevara then immediately mortgaged the said property to secure a PhP 2.5 million loan/credit facility with Damar Credit Corporation (DCC). It was against the foregoing backdrop of events that Locsin filed an action for reconveyance, annulment of Transfer Certificate of Title the cancellation of the mortgage lien annotated thereon, and damages, against Bolos, Bernardo, Carlos, the Sps. Guevara, DCC, and the Register of Deeds, Quezon City which was tried by the Regional Trial Court, Branch 77 in Quezon City (RTC). The charges against DCC, however, were dropped on joint motion of the parties. The RTC rendered a Decision6 dismissing the complaint and finding for respondents, as defendants thereat, holding that: (a) there is insufficient evidence to show that Locsin’s signature in the Deed of Absolute Sale between her and Bolos is a forgery; (b) the questioned deed is a public document, having been notarized; thus, it has, in its favor, the presumption of regularity; (c) Locsin cannot simply rely on the apparent difference of the signatures in the deed and in the documents presented by her to prove her allegation of forgery; (d) the transfers of title from Bolos to Carlos and from Carlos to the spouses Guevara are valid and regular; (e) Bernardo, Carlos, and the spouses Guevara are all buyers in good faith. Aggrieved, petitioner appealed the case to the CA. The CA, in its assailed Decision, ruled that it was erroneous for the RTC to hold that Locsin failed to prove that her signature was forged. In its appreciation of the evidence, the CA found that, indeed, Locsin’s signature in the Deed of Absolute Sale in favor of Bolos differs from her signatures in the other documents offered as evidence. The CA, however, affirmed the RTC’s finding that herein respondents are innocent purchasers for value. the appellate court held that respondents, having dealt with property registered under the Torrens System, need not go beyond the certificate of title, but only has to rely on the said certificate. Moreover, as the CA added, any notice of defect or flaw in the title of the vendor should encompass facts and circumstances that would impel a reasonably prudent man to inquire into the status of the title of the property in order to amount to bad faith. Accordingly, the CA ruled that Locsin can no longer recover the subject lot. Hence, the instant petition. ISSUE Whether or not respondents are innocent purchasers for value RULING An innocent purchaser for value is one who buys the property of another without notice that some other person has a right to or interest in it, and who pays a full and fair price at the time of the purchase or before receiving any notice of another person’s claim. As such, a defective title–– or one the procurement of which is tainted with fraud and misrepresentation––may be the source of a completely legal and valid title, provided that the buyer is an innocent third person who, in good faith, relied on the correctness of the certificate of title, or an innocent purchaser for value. Complementing this is the mirror doctrine which echoes the doctrinal rule that every person dealing with registered land may safely rely on the correctness of the certificate of title issued therefor and is in no way obliged to go beyond the certificate to determine the condition of the property. Court emphasized the need for prospective parties to a contract involving titled lands to exercise the diligence of a reasonably prudent person in ensuring the legality of the title, and the accuracy of the metes and bounds of the lot embraced therein, by undertaking precautionary measures. In the case at bar, Bolos’ certificate of title was concededly free from liens and encumbrances on its face. However, the failure of Carlos and the spouses Guevara to exercise the necessary level of caution in light of the factual milieu surrounding the sequence of transfers from Bolos to respondents bars the application of the mirror doctrine and inspires the Court’s concurrence with petitioner’s proposition. Consistent with the rule that the principal is chargeable and bound by the knowledge of, or notice to, his agent received in that capacity, any information available and known to Bernardo is deemed similarly available and known to Carlos. Having knowledge of the foregoing facts, Bernardo and Carlos, to our mind, should have been impelled to investigate the reason behind the arrangement. They should have been pressed to inquire into the status of the title of the property in litigation in order to protect Carlos’ interest. It should have struck them as odd that it was Locsin, not Bolos, who sought the recovery of possession by commencing an ejectment case against Aceron, and even entered into a compromise agreement with the latter years after the purported sale in Bolos’ favor. Instead, Bernardo and Carlos took inconsistent positions when they argued for the validity of the transfer of the property in favor of Bolos, but in the same breath prayed for the enforcement of the compromise agreement entered into by Locsin. In the case at bar, this Court recognizes that petitioner was unduly deprived of her ownership rights over the property, and was compelled to litigate for its recovery, for almost ten (10) years. Clearly, this could have entitled her to actual or compensatory damages had she quantified and proved, during trial, the amounts which could have accrued in her favor, including commercial fruits such as reasonable rent covering the pendency of the case. Nonetheless, petitioner’s failure to prove actual or compensatory damages does not erase the fact that her property rights were unlawfully invaded by respondents, entitling her to nominal damages.