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JURISPRUDENCE

(On the elements / circumstances of a buyer in good faith of a real property)

1. Bautista v. Silva [G.R. No. 157434, 19 September 2006]

A buyer for value in good faith is one who buys property of another, without notice
that some other person has a right to, or interest in, such property and pays full and fair
price for the same, at the time of such purchase, or before he has notice of the claim or
interest of some other persons in the property. He buys the property with the well- founded
belief that the person from whom he receives the thing had title to the property and capacity
to convey it.

To prove good faith, a buyer of registered and titled land need only show that
he relied on the face of the title to the property. He need not prove that he made further
inquiry for he is not obliged to explore beyond the four corners of the title. Such degree of
proof of good faith, however, is sufficient only when the following conditions concur: first,
the seller is the registered owner of the land; second, the latter is in possession thereof;
and third, at the time of the sale, the buyer was not aware of any claim or interest of
some other person in the property, or of any defect or restriction in the title of the
seller or in his capacity to convey title to the property.

Absent one or two of the foregoing conditions, then the law itself puts the buyer on
notice and obliges the latter to exercise a higher degree of diligence by scrutinizing the
certificate of title and examining all factual circumstances in order to determine the seller’s
title and capacity to transfer any interest in the property. Under such circumstance, it was
no longer sufficient for said buyer to merely show that he had relied on the face of the title;
he must now also show that he had exercised reasonable precaution by inquiring beyond
the title. Failure to exercise such degree of precaution makes him a buyer in bad faith.
(emphasis supplied)

2. Spouses Yu v. Pacleb [G.R. No. 172172, 24 February 2009]

The law protects to a greater degree a purchaser who buys from the registered owner
himself. Corollarily, it requires a higher degree of prudence from one who buys from a
person who is not the registered owner, although the land object of the transaction is
registered. While one who buys from the registered owner does not need to look behind
the certificate of title, one who buys from one who is not the registered owner is expected
to examine not only the certificate of title but all factual circumstances necessary for him
to determine if there are any flaws in the title of the transferor, or in his capacity to transfer
the land.

This Court has consistently applied the stricter rule when it comes to deciding the
issue of good faith of one who buys from one who is not the registered owner, but who
exhibits a certificate of title.

3. Uy v. Fule [G.R. No. 164961, 30 June 2014]


An examination of the deed of sale executed between Isabel Ronda, et al. and the
petitioner respecting the portions covered by TCT No. 31120 and TCT No. 31121 indicates
that the TCTs were issued only on August 17, 1998 but the deed of sale was executed on
July 31, 1998. While it is true, as the petitioner argues, that succession occurs from the
moment of death of the decedent pursuant to Article 777 of the Civil Code, his argument
did not extend to whether or not he was a buyer in good faith, but only to whether or not,
if at all, Isabel Ronda, et al., as the heirs of Mariano Ronda, held the right to transfer
ownership over their predecessor’s property. The argument did not also address whether
or not the transfer to the petitioner was valid.

Evidently, the petitioner entered into the deed of sale without having been able to
inspect TCT No. 31120 and TCT No. 31121 by virtue of such TCTs being not yet in
existence at that time. If at all, it was OCT No. 9852 and OCT No. 9853 that were available
at the time of the execution of the deed of sale, and such OCTs were presumably inspected
by petitioner before he signed the deed of sale. It is notable that said OCTs categorically
stated that they were entered pursuant to an emancipation patent of the Ministry of Agrarian
Reform pursuant to the Operation Land Transfer (OLT) Program of the government.
Furthermore, said OCTs plainly recited the following prohibition: "…it shall not be
transferred except by hereditary succession or to the Government in accordance with the
provisions of Presidential Decree No. 27, Code of Agrarian Reforms of the Philippines and
other existing laws and regulations…."

The foregoing circumstances negated the third element of good faith cited in
Bautista v. Silva, i.e., that "at the time of sale, the buyer was not aware of any claim or
interest of some other person in the property, or of any defect or restriction in the title of
the seller or in his capacity to convey title to the property." As we have ruled in Bautista v.
Silva, the absence of the third condition put the petitioner on notice and obliged him to
exercise a higher degree of diligence by scrutinizing the certificates of title and examining
all factual circumstances in order to determine the seller’s title and capacity to transfer any
interest in the lots. Consequently, it is not sufficient for him to insist that he relied on
the face of the certificates of title, for he must further show that he exercised
reasonable precaution by inquiring beyond the certificates of title. Failure to exercise
such degree of precaution rendered him a buyer in bad faith. "It is a well-settled rule
that a purchaser cannot close his eyes to facts which should put a reasonable man upon his
guard, and then claim that he acted in good faith under the belief that there was no defect
in the title of the vendor."

The petitioner was not an innocent purchaser for value; hence, he cannot be
awarded the disputed land. (emphasis supplied)

4. Calma v. Lachica, Jr. [G.R. No. 222031, 22 November 2017]

The Torrens system was adopted to "obviate possible conflicts of title by giving the
public the right to rely upon the face of the Torrens certificate and to dispense, as a rule,
with the necessity of inquiring further." From this sprung 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. To be sure, this Court is not unaware of the
recognized exceptions to this rule, to wit: (1.) when the party has actual knowledge of facts
and circumstances that would impel a reasonably cautious man to make further inquiry;
(2.) when the buyer has knowledge of a defect or the lack of title in his vendor; or (3.) when
the buyer/mortgagee is a bank or an institution of similar nature as they are enjoined to
exert a higher degree of diligence, care, and prudence than individuals in handling real
estate transactions.

Complementing this doctrinal rule is the concept of an innocent purchaser for value,
which refers to someone who buys the property of another without notice that some other
person has a right to or interest in it, and who pays in full and fair the price at the time of
the purchase or without receiving any notice of another person's claim.

Section 44 of Presidential Decree No. 1529 or the Property Registration Decree


recognizes innocent purchasers for value and their right to rely on a clean title:

Section 44. Statutory liens affecting title. - Every registered owner


receiving certificate of title in pursuance of a decree of registration, and
every subsequent purchaser of registered land taking a certificate of title for
value and good faith, shall hold the same free from all encumbrances except
those noted in said certificate and any of the following encumbrances which
may be subsisting, namely:

First. Liens, claims or rights arising or existing under the laws and
Constitution of the Philippines which are not by law required to appear of
record in the Registry of Deeds in order to be valid against subsequent
purchasers or encumbrances of record.

Second. Unpaid real estate taxes levied and assessed within two years
immediately preceding the acquisition of any right over the land by an
innocent purchaser for value, without prejudice to the right of the
government to collect taxes payable before that period from the delinquent
taxpayer alone.

Third. Any public highway or private way established or recognized by law,


or any government irrigation canal or lateral thereof, if the certificate of title
does not state that the boundaries of such highway or irrigation canal or
lateral thereof have been determined.

Fourth. Any disposition of the property or limitation on the use thereof by


virtue of, or pursuant to, Presidential Decree No. 27 or any other law or
regulations on agrarian reform. (emphasis supplied)
5. Spouse Stilianopoulos v Register of Deeds Legazpi [G.R. No. 224678. 03 July 2018]

It is a fundamental principle that "a Torrens certificate of Title is indefeasible and


binding upon the whole world unless it is nullified by a court of competent jurisdiction x x
x in a direct proceeding for cancellation of title." "The purpose of adopting a Torrens
System in our jurisdiction is to guarantee the integrity of land titles and to protect their
indefeasibility once the claim of ownership is established and recognized. This is to avoid
any possible conflicts of title that may arise by giving the public the right to rely upon the
face of the Torrens title and dispense with the need of inquiring further as to the ownership
of the property."

As a corollary, "every person dealing with registered land may safely rely on the
correctness of the certificate of title issued therefor and the law will in no way oblige him
to go behind the certificate to determine the condition of the property. When a certificate
of title is clean and free from any encumbrance, potential purchasers have every right to
rely on such certificate. Individuals who rely on a clean certificate of title in making
the decision to purchase the real property are often referred to as 'innocent
purchasers for value' and 'in good faith."' "Where innocent third persons, relying on
the correctness of the certificate of title thus issued, acquire rights over the property[,]
the court cannot disregard such rights and order the total cancellation of the
certificate. The effect of such an outright cancellation would be to impair public
confidence in the certificate of title, for everyone dealing with property registered under
the Torrens system would have to inquire in every instance whether the title has been
regularly or irregularly issued."

The rationale for the rule on innocent purchasers for value "is the public's interest
in sustaining 'the indefeasibility of a certificate of title, as evidence of the lawful ownership
of the land or of any encumbrance' on it." Notably, the term "innocent purchaser for value"
may also refer to an innocent mortgagee who had no knowledge of any defects in the title
of the mortgagor of the property, such as in this case. (emphasis in the original)

6. Spouses Navarro and Sindao v. Go [ G.R. No. 187288, 09 August 2010]

A person dealing with registered land may safely rely on the correctness of its
certificate of title and the law will not oblige him to go beyond what appears on the face
thereof to determine the condition of the property.

The indefeasibility of the Torrens title should not, however, be used as a means to
perpetuate fraud against the rightful owner of real property.

A person is considered an innocent purchaser in good faith when he buys the


property of another, without notice that some other person has a right or an interest in such
property, and pays a full price for the same at the time of such purchase, or before he has
notice of the claims or interest of some other person in the property.
7. Sps. Peralta v. Heirs of Abalon [G.R. No. 183448, 30 June 2014]

Jurisprudence has defined an innocent purchaser for value as one who buys the
property of another without notice that some other person has a right to or interest therein
and who then pays a full and fair price for it at the time of the purchase or before receiving
a notice of the claim or interest of some other persons in the property. Buyers in good faith
buy a property with the belief that the person from whom they receive the thing is the
owner who can convey title to the property. Such buyers do not close their eyes to facts
that should put a reasonable person on guard and still claim that they are acting in good
faith. (emphasis supplied)

8. Leong v. See [G.R. No. 194077, 03 December 2014]

An innocent purchaser for value refers to someone 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." One claiming to be an innocent purchaser for value has the burden of
proving such status.

The protection of innocent purchasers in good faith for value grounds on the social
interest embedded in the legal concept granting indefeasibility of titles. Between the third
party and the owner, the latter would be more familiar with the history and status of the
titled property. Consequently, an owner would incur less costs to discover alleged
invalidities relating to the property compared to a third party. Such costs are, thus, better
borne by the owner to mitigate costs for the economy, lessen delays in transactions, and
achieve a less optimal welfare level for the entire society.

9. Locsin v. Hizon [G.R. No. 204369, 17 September 2014]

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. The recognized exceptions to this rule are stated
as follows:
[A] person dealing with registered land has a right to rely on the Torrens certificate
of title and to dispense with the need of inquiring further except when the party has actual
knowledge of facts and circumstances that would impel a reasonably cautious man to make
such inquiry or when the purchaser has knowledge of a defect or the lack of title in his
vendor or of sufficient facts to induce a reasonably prudent man to inquire into the status
of the title of the property in litigation. The presence of anything which excites or arouses
suspicion should then prompt the vendee to look beyond the certificate and investigate the
title of the vendor appearing on the face of said certificate. One who falls within the
exception can neither be denominated an innocent purchaser for value nor a purchaser in
good faith and, hence, does not merit the protection of the law. (emphasis added)

10. Nobleza v. Nuega [G.R. No. 193038, 11 March 2015]

An innocent purchaser for value is one who buys the property of another, without
notice that some other person has a right or interest in the property, for which a full and
fair price is paid by the buyer at the time of the purchase or before receipt of any notice of
claims or interest of some other person in the property. It is the party who claims to be an
innocent purchaser for value who has the burden of proving such assertion, and it is not
enough to invoke the ordinary presumption of good faith. To successfully invoke and
be considered as a buyer in good faith, the presumption is that first and foremost, the
"buyer in good faith" must have shown prudence and due diligence in the exercise of
his/her rights. It presupposes that the buyer did everything that an ordinary person would
do for the protection and defense of his/her rights and interests against prejudicial or
injurious concerns when placed in such a situation. The prudence required of a buyer in
good faith is not that of a person with training in law, but rather that of an average
man who 'weighs facts and circumstances without resorting to the calibration of our
technical rules of evidence of which his knowledge is nil.' A buyer in good faith does
his homework and verifies that the particulars are in order — such as the title, the parties,
the mode of transfer and the provisions in the deed/contract of sale, to name a few. To be
more specific, such prudence can be shown by making an ocular inspection of the property,
checking the title/ownership with the proper Register of Deeds alongside the payment of
taxes therefor, or inquiring into the minutiae such as the parameters or lot area, the type of
ownership, and the capacity of the seller to dispose of the property, which capacity
necessarily includes an inquiry into the civil status of the seller to ensure that if married,
marital consent is secured when necessary. In fine, for a purchaser of a property in the
possession of another to be in good faith, he must exercise due diligence, conduct an
investigation, and weigh the surrounding facts and circumstances like what any prudent
man in a similar situation would do. (emphasis supplied)

11. Dy v. Aldea [ G.R. No. 219500, 09 August 2017]

The real purpose of the Torrens system of registration is to quiet title to land and to
put a stop to any question of legality of the title except claims which have been recorded
in the certificate of title at the time of registration or which may arise subsequent thereto.
As a consequence, the mirror doctrine provides 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.

Every registered owner and every subsequent purchaser for value in good faith
holds the title to the property free from all encumbrances except those noted in the
certificate. 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.

12. Sps. Chua v. Msgr. Soriano [G.R. No. 150066, 13 April 2007]

A purchaser in good faith is one who buys property without notice that some other
person has a right to or interest in such property and pays its fair price before he has notice
of the adverse claims and interest of another person in the same property. The honesty of
intention which constitutes good faith implies a freedom from knowledge of circumstances
which ought to put a person on inquiry. As the Court enunciated in Lim v. Chuatoco:

x x x good faith consists in the possessor’s belief that the person


from whom he received the thing was the owner of the same and could
convey his title. Good faith, while it is always to be presumed in the absence
of proof to the contrary, requires a well-founded belief that the person from
whom title was received was himself the owner of the land, with the right
to convey it. There is good faith where there is an honest intention to abstain
from taking any unconscientious advantage from another. Otherwise stated,
good faith is the opposite of fraud and it refers to the state of mind which is
manifested by the acts of the individual concerned.

Consistently, this Court has ruled that every person dealing with registered land
may safely rely on the correctness of the certificate of title issued therefor and the law will
in no way oblige him to go beyond the certificate to determine the condition of the property.
Where there is nothing in the certificate of title to indicate any cloud or vice in the
ownership of the property, or any encumbrance thereon, the purchaser is not required to
explore further than what the Torrens Title upon its face indicates in quest for any hidden
defects or inchoate right that may subsequently defeat his right thereto.

However, when a person who deals with registered land through someone who is
not the registered owner, he is expected to look behind the certificate of title and examine
all the factual circumstances, in order to determine if the vendor has the capacity to transfer
any interest in the land. He has the duty to ascertain the identity of the person with whom
he is dealing and the latter’s legal authority to convey.

The law "requires a higher degree of prudence from one who buys from a person
who is not the registered owner, although the land object of the transaction is registered.
While one who buys from the registered owner does not need to look behind the certificate
of title, one who buys from one who is not the registered owner is expected to examine not
only the certificate of title but all factual circumstances necessary for him to determine if
there are any flaws in the title of the transferor, or in his capacity to transfer the land."

The strength of buyer’s inquiry on the seller’s capacity or legal authority to sell
depends on the proof of capacity of the seller. If the proof of capacity consists of a special
power of attorney duly notarized, mere inspection of the face of such public document
already constitutes sufficient inquiry. If no such special power of attorney is provided or
there is one but there appear flaws in its notarial acknowledgment, mere inspection of the
document will not do; the buyer must show that his investigation went beyond the
document and into the circumstances of its execution.