Valid against the whole world

The rule is that in case of double sale of a property, that sale which is registered earlier should prevail. But this is not applied in this case of a rural bank.

The property subject of this case was a parcel of land with a one storey house measuring 340 sq. m. located in a city down south. Originally the land was only covered by a tax declaration in the name of Berto while the house was tax declared in the name of Conrado. On February 7,1983 Conrado obtained a loan of P15,000 from the rural bank (RB) using said property as collateral. Berto gave him a special power of attorney to borrow money from RB and use the subject land as security. The mortgage was registered in the Registry of Deeds of the Province where the city was located since the city itself had no register of deeds yet.

On April 17, 1984, the land was registered and titled in the name of Berto pursuant to the Land Registration Act. Then on July 23, 1984 it was transferred to Conrado who obtained a new TCT over the land registered with the Register of Deeds of the City which was already established separate from the Register of deeds of the Province.

Meantime, Conrado failed to pay his loan with the RB. So the RB foreclosed the mortgage on the property which was sold at public auction with the RB as the highest bidder. A sheriff’s certificate of sale was issued in its favor and registered with the register of deeds of the province on September 5, 1985. The sale was still registered under Act 3344 convering untitled lands obviously because, based on the records in the register of deeds of the province, the land and house were still untitled.

After one year or on September 5,1986 when Conrado failed to redeem the property, the Sheriff already issued a final deed of conveyance in favor of RB. This time the final deed was registered in the register of deeds of the City but still as an untitled land under Act 3344. By virtue of said deed, RB obtained a tax declaration of the house and lot in its name. Thereafter, RB instituted an action for ejectment against Conrado in the MTC. Both the MTC, and the RTC on appeal ruled in favor of RB in a decision dated April 13, 1988.

Notwithstanding said decision,Conrado still offered the land and house for sale to the spouses Luna on April 30,1988, showing to the latter his title. Wanting to buy it, the couple made inquiries at the office of the register of deeds of the city where the title was registered, and with the bureau of lands. They found out that the property was also mortgaged to another person for P8,000. The couple thus asked Conrado to pay the mortgage advancing money for such purpose. And so Conrado executed a Deed of Absolute Sale in favor of the spouses Luna. And on June 9,1988, said Deed of Absolute Sale was registered in the register of deeds of the city and a new title was issued in the name of the couple.

Meantime on January 27, 1989 a writ of execution was already issued by the court against Conrado ejecting him from the premises. However, Conrado was no longer in the property having sold it to the spouses Luna. Alarmed by the prospect of being ejected, the Luna couple filed an action for quieting of title against RB. RB however contended that the earlier registration of the sheriff’s final deed of conveyance in their favor on September 5,1986 under Act 3344 should prevail over the later registration of the spouses Deed of Absolute Sale on June 9, 1988 under the Land Registration Act 496 as amended by PD 1529.

Was RB correct?

No.

The rule invoked by RB applies only if the Sheriff’s final deed of conveyance in their favor was registered under the Land Registration Act (Act 496 as amended by PD 1529). At the time of the execution and delivery of the Sheriff’s deed of final conveyance, the disputed property was already covered by the Land Registration Act and Original Certificate of Title was already issued to Bert on April 17, 1984, later on transferred to Conrado who acquired a TCT on July 23, 1984. Thus from April 17, 1984, the subject property was already under the operation of the Torrens System. Under the said system, registration is the operative act that gives validity to the transfer or creates a lien upon the land. The issuance of the certificate of title had the effect of relieving the land of all claims except those noted thereon. Accordingly, the spouses, in dealing with the subject registered land, were not required by law to go beyond the register to determine the legal condition of the property. They were only charged with notice of such burdens on the property as were noted on the registry books and on the certificate of title. To have required them to do more would have have been to defeat the primary object of the Torrens system which is to make the torrens title indefeasible and valid against the whole world.

Since the couple were innocent purchasers for value and in good faith, they are the true and lawful owners of the disputed property (Naawan Community Rural Bank Inc. vs. Court of Appeals et al. G.R.128573, January 13,2003).

* * *

E-mail us at: [email protected]