SECOND DIVISION[G.R. No. 105902. February 9, 2000]SEVERINO BARICUATRO, JR.,petitioner,vs.COURT OF APPEALS, TENTH DIVISION, MARIANO B. NEMENIO AND FELISA V. NEMENIO, CONSTANTINO M. GALEOS AND EUGENIO V. AMORES,respondents.LexjurisD E C I S I O NBUENA,J.:This appeal bycertiorariunder Rule 45 of the Rules of Courtseeks to annul and set aside the decision of the Court of Appeals[1]dated April 30, 1992 in CA-G.R. CV No. 19399, affirming intotothe decision of the Regional Trial Court of Cebu[2]in Civil Case No. R-15442 for quieting of title.The antecedent facts as found by the trial court and adopted by the Court of Appeals are as follows:[3]JurismisOn October 16, 1968, Severino Baricuatro, Jr., now deceased and substituted by his legal heirs, bought two (2) lots on an installment basis from Constantino M. Galeos, one of the private respondents in this petition.[4]The two lots, designated as Lot Nos. 9 and 10, are part of the Victoria Village (presently called Spring Village), a subdivision project in Pakigne, Minglanilla, Cebu.[5]Lot Nos. 9 and 10 were sold on an installment basis for P3,320.00 and P4,515.00, respectively.[6]Petitioner, however, was unable to pay the full amount to respondent Galeos. At the time the original action for quieting of title was filed in the trial court, petitioner had an unpaid balance of P1,000.00 as to Lot No. 9 and P3,020.00 as to Lot No. 10. The titles to the said lots remained in the name of respondent Galeos.[7]As emphasized by the Court of Appeals, the contract of sale involving Lot No. 10 expressly provided that "the parties both agree that a final deed of sale shall be executed, in favor of the buyer upon full and complete payment of the total purchase price agreed upon."[8]After the sale, petitioner introduced certain improvements on the said lots and started to reside therein in 1970.[9]Since then petitioner has been in actual and physical possession of the two (2) lots.[10]However, on December 7, 1968, about two (2) months from the date of the previous sale to petitioner, respondent Galeos sold the entire subdivision, including the two (2) lots, to his co-respondent Eugenio Amores.[11]Subsequently, petitioner was informed by respondent Galeos about the sale to respondent Amores and was advised to pay the balance of the purchase price of the two (2) lots directly to respondent Amores.[12]JjjurisAfter the sale of the entire subdivision to respondent Amores, he allegedly took possession thereof and developed the same for residential purposes.[13]Respondent Amores registered the deed of sale covering the entire subdivision on February 13, 1969,[14]secured the transfer of the title to the same in his name, subdivided the entire land, and acquired individual titles to the subdivided lots in his name, including the title of the two (2) lots.[15]TCT No. 20016 was issued for Lot No. 9 and TCT No. 20017 for Lot No. 10, both in the name of respondent Amores.[16]On December 27, 1974, respondent Amores sold the two (2) lots to the spouses Mariano and Felisa Nemenio, two of the respondents herein.[17]Prior to the sale, however, petitioner was informed through a letter by respondent Amores about the impending sale of the two (2) lots but the former failed to respond.[18]The respondent spouses Nemenio caused the transfer of the titles[19]to the said lots and the issuance of tax declarations in their names. Thereafter, the respondent spouses Nemenio demanded from petitioner to vacate the said lots but the latter refused to do so.Thus, a complaint for quieting of title was filed by the respondent spouses Nemenio against petitioner in the Regional Trial Court of Cebu, Branch V, docketed as Civil Case No. R-15442.[20]Subsequently, respondents Galeos and Amores were impleaded by petitioner as third-party defendants.On November 27, 1986, the trial court rendered a decision,[21]declaring the respondent spouses Nemenio as the owners of Lot Nos. 9 and 10. The dispositive part of the said decision reads:[22]justice"WHEREFORE, judgment is hereby rendered as follows:"1. In the main action:(a) declaring the plaintiffs [spouses Nemenio] owners of Lots (sic) Nos. 9 and 10 and the corresponding titles validly issued to plaintiffs [spouses Nemenio] and binding against the whole world;(b) ordering the defendant [petitioner herein] to surrender to plaintiffs the possession of Lots (sic) Nos. 9 and 10 after the latter indemnify the former the fair value of the improvements introduced on the said lots by defendant [petitioner herein] before he knew of the defects of his title over the lots in question; otherwise, plaintiffs [spouses Nemenio] to sell the said lots to defendants [should read defendant]; in both cases, in case of disagreement as to the value of improvements or value of the said lots, their value to be fix (sic) by the Court;(c) ordering the defendant [petitioner herein] to desist from further asserting his supposed rights to Lots (sic) Nos. 9 and 10;(d) ordering the defendant [petitioner herein] to pay P2,500.00 as attorneys fees and litigation expenses of P1,000.00;(e) dismissing the defendants [petitioner herein] counterclaim, with costs against defendant [petitioner herein];"2. As to the third-party complaint:Jksm (a) ordering the third-party defendant [respondent] Constantino M. Galeos to pay or refund defendant [petitioner] Baricuatro, Jr. the sum of P3,810.00 with legal interest of 6% per annum from the filing of the third-party complaint on February 3, 1977, until the amount is fully paid;(b) dismissing the third-party complaint as against third-party defendant [respondent] Eugenio Amores;(c) dismissing third-party defendants counterclaims, without costs.SO ORDERED."On appeal to the respondent court,[23]petitioner assailed the findings of the trial court that third-party defendant and respondent Amores validly acquired ownership of the two (2) lots and registered the same in good faith,[24]and that respondent spouses Nemenio are purchasers in good faith.[25]Finding no merit in the appellants arguments, the respondent court affirmed intotothe judgment of the trial court in a decision dated April 30, 1992.[26]The respondent court adopted the factual finding of the trial court that when the disputed lots were sold to respondent Amores on December 7, 1968, the latter did not find any improvement on the disputed lots and respondent Galeos title to the same was clean and unencumbered, and that respondent Amores came to know of the sale between respondent Galeos and petitioner only after the sale of the lots to him.[27]Es mOn July 9, 1992, petitioner filed the present Petition for Review onCertiorari, assigning the following errors:[28]I.THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN CONCLUDING THAT THIRD-PARTY DEFENDANT AMORES VALIDLY ACQUIRED OWNERSHIP OF THE TWO (2) LOTS IN QUESTION AND THAT HE WAS IN GOOD FAITH WHEN HE REGISTERED THE SALE OF THE TWO (2) LOTS IN QUESTION IN THE REGISTRY OF PROPERTY;II.THE COURT OF APPEALS GRAVELY ERRED IN CONCLUDING THAT PLAINTIFFS [SPOUSES NEMENIO] WERE PURCHASERS IN GOOD FAITH;III.THE COURT OF APPEALS GRAVELY ERRED IN CONCLUDING THAT ARTICLE 1544 OF THE NEW CIVIL CODE OF THE PHILIPPINES IS APPLICABLE;IV.Es mscTHE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE AWARD OF ATTORNEYS FEES AND EXPENSES OF LITIGATION TO PLAINTIFFS [SPOUSES NEMENIO].Respondent Amores, in his Comment filed on August 31, 1992,[29]on the other hand, argues that the present petition raises only questions of fact,[30]hence, it should be dismissed by this Court.In his Reply dated January 6, 1993,[31]petitioner insists that as an exception to the general rule, "...[the] Supreme Court also ruled that "THE QUESTION AS TO WHETHER OR NOT THE CONCLUSION DRAWN BY THE COURT OF APPEALS FROM PROVEN FACTS IS CORRECT, INVOLVES A QUESTION OF LAW."[32](citation omitted).Petitioner, now substituted by his legal heirs, in his memorandum filed on March 31, 1993, raises questions of fact which were already passed upon both by the Court of Appeals and the trial court[33]and reiterates his contention before the respondent court that respondents Amores and spouses Nemenio are not purchasers in good faith.[34]Furthermore, petitioner argues that the general principles on trust must be applied in this case and not Article 1544 of the New Civil Code.[35]Esmm isOn the other hand, respondent spouses Nemenio, in their memorandum filed on March 16, 1993, assert that the Torrens system of land registration should be upheld by this Court, and that an innocent purchaser for value, relying solely on an unencumbered title, should be protected.[36]Respondent Amores, in his memorandum filed on March 31, 1993, contends that there are no compelling reasons to overturn the findings of fact of the respondent court, and prays for the affirmation of the assailed decision and the dismissal of the instant petition.[37]We find the petition to be impressed with merit.Before addressing the merits of the controversy, we shall first dispose of certain preliminary matters relating to the application of the mode of appeal under Rule 45 of the Rules of Court and the guiding principles in an action for quieting of title.EsmsoAt the outset, it should be noted that the jurisdiction of this Court in a petition for review oncertiorariunder Rule 45 of the Rules of Court is limited to reviewing only errors of law. This Court is not a trier of facts. It is a settled doctrine that findings of fact of the Court of Appeals are binding and conclusive upon this Court.[38]Such factual findings shall not be disturbed, unless: (1) the conclusion is a finding grounded entirely on speculation, surmise and conjecture; (2) the inference made is manifestly mistaken; (3) there is grave abuse of discretion; (4) the judgment is based on a misapprehension of facts; (5) the findings of fact are conflicting; (6) the Court of Appeals went beyond the issues of the case and its findings are contrary to the admissions of both appellant and appellees; (7) the findings of fact of the Court of Appeals are contrary to those of the trial court; (8) said findings of fact are conclusions without citation of specific evidence on which they are based; (9) the facts set forth in the petition as well as in the petitioner's main and reply briefs are not disputed by the respondents; and (10) the findings of fact of the Court of Appeals are premised on the supposed absence of evidence and contradicted by the evidence on record.[39]After a careful scrutiny of the records and the pleadings submitted by the parties, we find exception to the general rule that factual findings by the trial court, especially when affirmed by the appellate court, are binding and conclusive upon this Court and hold that the lower courts misappreciated the evidence proffered. Certain relevant facts were overlooked by the respondent court, which facts, if properly appreciated, would justify a different conclusion from the one reached in the assailed decision.Regarding the nature of the action filed before the trial court, quieting of title is a common law remedy for the removal of any cloud upon or doubt or uncertainty with respect to title to real property.[40]Originating in equity jurisprudence, its purpose is to secure "...an adjudication that a claim of title to or an interest in property, adverse to that of the complainant, is invalid, so that the complainant and those claiming under him may be forever afterward free from any danger of hostile claim."[41]In an action for quieting of title, the competent court is tasked to determine the respective rights of the complainant and other claimants, "...not only to placethings in their proper place, to make the one who has no rights to said immovablerespectandnot disturbthe other, but also for thebenefit of both,so that he who has the right would see everycloudof doubt overthe property dissipated, and he could afterwards without fearintroduce the improvementshe may desire, touse, and even toabusethe property as he deems best (citation omitted)."[42]Such remedy may be availed of under the circumstances enumerated in the Civil Code:Mse sm"ART. 476. Whenever there is a cloud on title to real property or any interest therein, by reason of any instrument, record, claim, encumbrance or proceeding which is apparently valid or effective but is in truth and in fact invalid, ineffective, voidable, or unenforceable, and may be prejudicial to said title, an action may be brought to remove such cloud or to quiet the title.An action may also be brought to prevent a cloud from being cast upon title to real property or any interest therein."With these in mind, we now proceed to resolve the merits of the instant controversy.In this petition, petitioner emphatically contends that respondent Amores, the second buyer, cannot be categorized as a purchaser in good faith, arguing on the basis of the letter which the latter sent to the petitioner, reminding the petitioner of his overdue account and warning him that if he could not come up with the proper solution, it would be his last chance before respondent Amores does other remedies before the law.[43]The respondent court, in its decision dated April 30, 1992, rejected this contention and adopted the finding of the trial court that "...at the time of the sale to [respondent] Amores by the previous registered owner Constantino Galeos sometime in 1968, [respondent] Amores found no improvements established on the land subject of the sale, and [respondent] Galeos title to the lots was clean and unencumbered, and that [respondent] Amores came to know of the sale by installment executed between [respondent] Galeos and [petitioner] Baricuatro only after the sale of said lots to him."[44]The respondent court discarded petitioners argument and ruled that "[t]he fact that [respondent] Amores subsequently tried to collect the balance of the purchase price from [petitioner] Baricuatro as shown by his letter to [petitioner] Baricuatro dated November 10, 1972 does not by itself prove that he was aware of the previous transaction with [petitioner] Baricuatro at the time of the sale to him in 1968, that would place him in the category of a buyer in bad faith."[45]Ex smWe do not agree. Article 1544 of the Civil Code provides:"ART. 1544. If the same thing should have been sold to different vendees, the ownership shall be transferred to the person who may have first taken possession thereof in good faith, if it should be movable property.Should it be immovable property, the ownership shall belong to the person acquiring it whoin good faith first recorded it in the Registry of Property.Should there be no inscription, the ownership shall pertain to the person who in good faith was first in the possession; and, in the absence thereof, to the person who presents the oldest title, provided there is good faith." (Emphasis supplied.)Under article 1544, the ownership of an immovable property shall belong to the purchaser whoin good faithregisters it firstin the registry of property. As we ruled in the case ofUraca vs. Court of Appeals:[46]"xxxxxxxxxKyle...the prior registration of the disputed property by the second buyer does not by itself confer ownership or a better right over the property.Article 1544 requires that such registration must be coupled with good faith. Jurisprudence teaches us that "(t)he governing principle isprimus tempore, potior jure(first in time, stronger in right). Knowledge gained by the first buyer of the second sale cannot defeat the first buyer's rights except where the second buyer registers ingood faiththe second saleaheadof the first, as provided by the Civil Code. Such knowledge of the first buyer does not bar her from availing of her rights under the law, among them, to registerfirsther purchase as against the second buyer. Butin converso, knowledge gained by the second buyer of the first sale defeats his rights even if he is first to register the second sale, since such knowledge taints his prior registration with bad faith.This is the price exacted by Article 1544 of the Civil Code for the second buyer being able to displace the first buyer; that before the second buyer can obtain priority over the first,he must show that he acted in good faith throughout (i.e. in ignorance of the first sale and of the first buyer's rights) from the time of acquisition until the title is transferred to him by registration or failing registration, by delivery of possession.xxx xxx."[47](Emphasis supplied.)"The second buyer must show continuing good faith and innocence or lack of knowledge of the first sale until his contract ripens into full ownership through prior registration as provided by law."[48](Emphasis supplied.)For a second buyer to successfully invoke the protection provided by article 1544 of the Civil Code, he must possess good faith from the time of acquisition of the property until the registration of the deed of conveyance covering the same.KycalrIn the instant case, both lower courts attributed good faith to respondent Amores, the second buyer of the disputed lots, particularly at the consummation of the second sale on December 7, 1968 when respondents Amores and Galeos executed a deed of absolute sale,[49]after observing that respondent Amores "found no improvements established on the land subject of the sale" at the time of the sale in December 1968 and "[respondent] Galeos title to the lots was clean and unencumbered," and that "[respondent] Amores came to know of the sale by installment executed between [respondent] Galeos and [petitioner] Baricuatro only after the sale of said lots to him."[50]Assumingarguendothat respondent Amores was in good faith when he bought the entire subdivision, including the two (2) disputed lots, from respondent Galeos on December 7, 1968, there is no showing in the assailed decision that he continued to act in good faith until the title to the property was transferred to him by registration in the Register of Deeds on February 13, 1969, as required by Article 1544, hence the need for a reevaluation of the factual findings of the respondent court.CalrkyA careful and thorough scrutiny of the records of this case reveals that respondent Amores did not act in good faith when he registered his title to the disputed lots on February 13, 1969. Assuming that respondent Amores was in good faith when he bought the disputed lots on December 7, 1968, however, when he registered his title on February 13, 1969, the preponderance of evidence supports the finding that he already had knowledge of the previous sale of the disputed lots to petitioner. Such knowledge tainted his registration with bad faith. To merit protection under article 1544, the second buyer must act in good faith from the time of the sale until the registration of the same.First, as culled from the records of this case, respondent Galeos disclosed to the trial court that it was his agreement[51]with respondent Amores that those who have obligations with respect to the disputed lots would continue to pay to respondent Amores, thus:[52]"xxx xxxATTY. DOSDOS:Q:Why, at the time of your sale of the Victoria Village to Mr. Amores was Mr. Baricuatro still indebted to you for the two parcels of land?WITNESS [GALEOS]:MesmA:Yes, sir, there was a balance.ATTY. DOSDOS:Q:Now --- COURT: (to witness)Q:How much was the balance?WITNESS [GALEOS]:A:I cannot recall exactly.COURT:Q:Was it your agreement with Mr. Amores that those who have obligations will continue to pay to Mr. Amores, is that part of your agreement?WITNESS [GALEOS]:ScslxA:Yes, sir.COURT: (TO ATTY. DOSDOS)Q:Do you have the agreement between Mr. Amores and Mr. Galeos?ATTY. DOSDOS:A:The document?COURT:Q:Yes?ATTY. MARCOS:A:It is in our possession and we have it marked already your Honor.xxx xxx."[53](Emphasis supplied.)Hence, the inevitable conclusion to be drawn is that respondent Amores had knowledge of the previous sale to petitioner when he entered into a contract of sale with respondent Galeos on December 7, 1968 and cannot therefore be considered as a purchaser in good faith.Slxs cSecond, respondent Amores testified on direct examination, that he first learned of the transaction between respondent Galeos and petitioner in 1972 when respondent Galeos showed him a letter addressed to petitioner (referring to the letter dated October 6, 1972),[54]a copy of which was sent to him.[55]After receiving such information, he wrote petitioner on November 10, 1972 allegedly to verify the truth of the matter.[56]A reading of respondent Galeos letter dated October 6, 1972 and addressed to petitioner, however, readily shows that contrary to his testimony, respondent Amores was not without knowledge of the previous sale to petitioner when he received the said letter. In the said letter, respondent Galeos stated that "...he has been informed that collections effected on the contracts I have assigned to Mr. Eugenio V. Amores has (sic) not been moving for reasons known only to you" and that "[i]t appears on his [respondent Amores] record and confirmed to be correct that all the contracts have gone beyond the limitations and restrictions pertinent thereto."[57]Consistent with our finding that respondent Amores was not without knowledge of the previous sale to petitioner when he acquired and registered the disputed lots, is the tone and contents of respondent Amores letter dated November 10, 1972 and addressed to petitioner, written allegedly to verify the truth about the previous sale from petitioner. As found by respondent court, the said letter obviously shows an intent to collect the balance of the purchase price of the disputed lots from petitioner which presupposes knowledge of the previous sale by respondent Amores. Such an attempt to collect the balance of the purchase price supports our finding that respondent Amores had knowledge of the previous sale when he bought the disputed lots.Thirdand most enlightening is respondent Amores testimony on cross-examination which contradicts his own testimony on direct examination regarding the time when he first learned of the transaction between respondent Galeos and petitioner. According to respondent Amores, he learned of petitioners interest in the disputed lots when he had the subdivision leveled[58]starting in December 1968 until March 1969.[59]Respondent Amores thereafter admitted that in January or February 1969, it was respondent Galeos who told him when they "met at the downtown" that the disputed lots were already sold to petitioner on installment basis.[60]He insisted though that he had no knowledge of the previous sale of the disputed lots to petitioner when he bought the entire subdivision considering that the same had a clean title.[61]slx misLastly, consistent with his testimony that it was his agreement with respondent Amores that those who have obligations with respect to the disputed lots would continue to pay directly to the latter, respondent Galeos testified that upon the sale of the subdivision to respondent Amores, he informed petitioner of the said transaction in order that the latter would continue to pay the balance of the purchase price of the disputed lots directly to respondent Amores.[62]On cross-examination he disclosed that a few days before the actual sale[63]of the entire subdivision to respondent Amores, he first informed petitioner of his decision to sell the said subdivision to respondent Amores and told petitioner to pay the balance of the purchase price to respondent Amores.[64]Having thus found that respondent Amores was not in good faith when he registered the deed of sale covering the disputed lots, we now consider its effect on the rights of respondent spouses Nemenio as subsequent purchasers of the disputed lots.Respondent spouses Nemenio assert that they are purchasers in good faith, claiming that they meticulously examined the title of respondent Amores and "finding the same to be free from any flaws, liens and encumbrances," they "did not hesitate to buy the land."[65]Having allegedly registered the deeds of sale in good faith, they submit that the "one who first registers the document in the Registry of Property has a better right over that sale which is not registered."[66]MissdaaWe disagree. As we have consistently held in a long line of cases, the rights of innocent purchasers for value should prevail.[67]It appears from the records that while respondent spouses Nemenio bought the disputed lots from respondent Amores on December 27, 1974,[68]they registered the deeds of sale only on August 30, 1976.[69]Respondent Mariano Nemenio admitted on cross-examination that the first time he visited petitioners residence was in early 1975, thus:"xxx xxx.ATTY. GONZAGA:Q:The question is when for the first time after you bought the property that you visited the Baricuatros residence?WITNESS (Mariano Nemenio)Sda adscA:The first time it could be I think early 1975. I am not exactly sure as to the exact date, but I used to pass their place when I had the opportunity to pass the property. I always passed with them.ATTY. GONZAGA:Q:How many months after you bought these two (2) lots?WITNESS (Mariano Nemenio)A:I am not sure exactly as to the exact time but it was sometime after I bought the property.ATTY. GONZAGA:Q:About ten (10) months?WITNESS (Mariano Nemenio)A:Ten months after. I am not sure as that was a long time ago.xxx xxx."[70]It may be deduced from the foregoing inquisition that having visited petitioners residence in early 1975, respondent spouses Nemenio cannot claim to be purchasers in good faith when they registered their title to the disputed lots on August 30, 1976. The registration by the respondent spouses Nemenio was done in bad faith, hence, it amounted to no "inscription" at all. As we held in the case ofPhilippine Stock Exchange, Inc. vs. Court of Appeals,[71]"[t]he inscription in the registry, to be effective, must be made in good faith. The defense of indefeasibility of a Torrens Title does not extend to a transferee who takes the certificate of title with notice of a flaw."[72]"[A] holder in bad faith of a certificate of title is not entitled to the protection of the law, for the law cannot be used as a shield for frauds."[73]Rtc sppedWHEREFORE, the decision of the respondent Court of Appeals, dated April 30, 1992, in CA-G.R. CV No. 19399, is REVERSED and judgment is hereby rendered:1)Declaring the petitioner SEVERINO BARICUATRO, JR. as the rightful owner of the disputed lots and ordering him to pay respondent Constantino M. Galeos the unpaid balance of P1,000.00 as to Lot No. 9 and P3,020.00 as to Lot No. 10;2)Declaring the deed of sale dated December 7, 1968 between respondent Constantino M. Galeos and respondent Eugenio V. Amores insofar as Lot 9 and 10 of Spring Village is concerned as null and void, thus, ordering respondent Constantino M. Galeos to reimburse respondent Eugenio V. Amores the value/purchase price the latter paid for Lots 9 and 10 undert the said deed of sale, with legal interest from the date of finality of this decision;Korte3)Declaring the deed of sale dated December 27, 1974 between respondent Eugenio V. Amores and respondent spouses Mariano B. Nemenio and Felisa V. Nemenio as null and void, thus, ordering respondent Eugenio V. Amores to reimburse respondent spouses Mariano B. Nemenio and Felisa V. Nemenio the purchase price they paid by virtue of the said deed of sale, with legal interest from the date of finality of this decision;4)Ordering the Register of Deeds of the province of Cebu to cancel Transfer Certificate of Title Nos. 39002 and 39003 in the name of spouses Mariano B. Nemenio and Felisa V. Nemenio, and Transfer Certificate of Title Nos. 20016 and 20017 in the name of Eugenio V. Amores; and, to issue a new Certificate of Title for Lot No.9 and Lot No. 10 in favor of petitioner Severino Baricuatro, Jr. in lieu of the foregoing certificates of title, upon payment of all lawful fees, charges and taxes;5)Ordering private respondents Mariano and Felisa Nemenio, Constantino M. Galeos and Eugenio V. Amores to pay P5,000.00 as attorneys fees and litigation expenses of P1,000.00.Costs against private respondents.SclawSO ORDERED.
Republic of the PhilippinesSUPREME COURTManilaFIRST DIVISIONG.R. No. L-68741 January 28, 1988NATIONAL GRAINS AUTHORITY,plaintiff-appellee,vs.INTERMEDIATE APPELLATE COURT, MELECIO MAGCAMIT, NENA COSICO and EMELITA MAGCAMIT,defendants-appellants.PARAS,J.:This is a petition for review of the decision of the then Intermediate Appellate Court*(now Court of Appeals) dated January 31, 1984, reversing the decision of the Court of First Instance of Laguna and San Pablo City, 8th Judicial District, Branch III, and of the resolution dated August 28, 1984 denying the motion for reconsideration filed thereof.The undisputed facts of this case as found by the Trial Court and the Intermediate Appellate Court are as follows:On December 2,1971, the spouses Paulino Vivas and Engracia Lizards, as owners of a parcel of land situated in Bo. San Francisco, Victoria, Laguna, comprising more or less 105,710 square meters, sold for P30,000.00 said property in favor of spouses Melencio Magcamit and Nena Cosico, and Amelita Magcamit (herein private respondents) as evidenced by "Kasulatan Ng Bilihang Mabiling Muli." This sale with right to repurchase was recorded in the Office of the Register of Deeds of Laguna on December 6,1971 under Act No. 3344. On January 31,1972 the sale was made absolute by the spouses Vivas and Lizardo in favor of the private respondents for the sum of P90,000.00; P50,000.00 of which was paid upon the execution of the instrument, entitled "Kasulatan Ng Bilihan Tuluyan," after being credited with the P30,000.00 consideration of the "Kasulatan Ng Mabibiling Muli," and the balance of P40,000.00 was to be paid the moment that the certificate of title is issued. From the execution of said Kasulatan, private respondent have remained in peaceful, adverse and open possession of subject property.On February 26, 1975, an Original Certificate of Title No. T-1728 covering the property in question was issued to and in the name of the spouses Vivas and Lizardo without the knowledge of the private respondents and on April 30, 1975, said Spouses executed a Special Power of Attorney in favor of Irenea Ramirez authorizing the latter to mortgage the property with the petitioner, National Grains Authority.On May 2, 1974, the counsel for the petitioner wrote the Provincial Sheriff in Sta. Cruz, Laguna, requesting for the extrajudicial foreclosure of the mortgage executed by Irenea Ramirez on May 18, 1975, covering, among others, the property involved in this case covered by OCT No. T-1728, for unpaid indebtedness in the amount of P63,948.80 in favor of the petitioner.On May 31, 1974, the Provincial Sheriff caused the issuance of the notice of sale of the property in question, scheduling the public auction sale on June 28, 1974. The petitioner was the highest and successful bidder so that a Certificate of Sale was issued in its favor on the same date by the Provincial Sheriff.On July 10, 1974, the petitioner in its capacity as attorney-in-fact of the mortgagor sold the subject real property in favor of itself. By virtue of the deed of absolute sale, TCT No. T-75171 of the Register of Deeds for the Province of Laguna was issued in the name of the petitioner on July 16, 1974. It was only in July 1974, that private respondents learned that a title in the name of the Vivas spouses had been issued covering the property in question and that the same property had been mortgaged in favor of the petitioner. Private respondent Nena Magcamit offered to pay the petitioner NGA the amount of P40,000.00 which is the balance of the amount due the Vivas spouses under the terms of the absolute deed of sale but the petitioner refused to accept the payment. On July 31, 1974, counsel for private respondents made a formal demand on the spouses Vivas and Lizardo to comply with their obligation under the terms of the absolute deed of sale; and soon after reiterated to the NGA, the offer to pay the balance of P40,000.00 due under the absolute deed of sale. On August 13, 1974 petitioner in its reply informed counsel of private respondents that petitioner is now the owner of the property in question and has no intention of disposing of the same.The private respondents, who as previously stated, are in possession of subject property were asked by petitioner to vacate it but the former refused. Petitioner filed a suit for ejectment against private respondents in the Municipal Court of Victoria, Laguna, but the case was dismissed.On June 4, 1975, private respondents filed a complaint before the then Court of First Instance of Laguna and San Pablo City, Branch III, San Pablo City, against the petitioner and the spouses Vivas and Lizardo, praying, among others, that they be declared the owners of the property in question and entitled to continue in possession of the same, and if the petitioner is declared the owner of the said property, then, to order it to reconvey or transfer the ownership to them under such terms and conditions as the court may find just, fair and equitable under the premises. (Record on Appeal, pp. 2-11).In its answer to the complaint, the petitioner (defendant therein) maintained that it was never a privy to any transaction between the private respondents (plaintiffs therein) and the spouses Paulino Vivas and Engracia Lizardo that it is a purchaser in good faith and for value of the property formerly covered by OCT No. 1728; and that the title is now indefeasible, hence, private respondents' cause of action has' already prescribed. (Record on Appeal, pp. 16-22).After due hearing, the trial court**rendered its decision on March 17, 1981, in favor of the petitioner, the dispositive portion of said judgment reading as follows:WHEREFORE, judgment is hereby rendered as follows:(1) declaring defendant National Grains Authority the lawful owner of the property in question by virtue of its indefeasible title to the same;(2) ordering plaintiffs to turn over possession of the land to defendant National Grains Authority;(3) ordering defendants-spouses Paulino Vivas and Engracia Lizardo to pay plaintiffs the sum of P56,000.00 representing the amount paid pursuant to the Kasulatan Ng Bilihang Tuluyan marked Exhibit "3", with legal interest thereon from January 31, 1972 until the amount is paid, to pay an additional amount of P5,000.00 for and as attorney's fees, an additional amount of Pl0,000.00 as moral damages, another amount of P5,000.00 by way of exemplary damages and to pay the costs of this suit. (Rollo, P. 35).The private respondents interposed an appeal from the decision of the trial court to the Intermediate Appellate Court.After proper proceedings, the appellate court rendered its decision on January 31, 1984, reversing and setting aside the decision of the trial court as follows:WHEREFORE, the decision of the lower court is hereby reversed and set aside and another one is rendered ordering the National Grains Authority to execute a deed of reconveyance sufficient in law for purposes of registration and cancellation of transfer Certificate of Title No. T-75171 and the issuance of another title in the names of plaintiff-appellants, and ordering defendants-appellees Paulino Vivas and Engracia Lizardo to pay the National Grains Authority the sum of P78,375.00 (Exh. 3) within thirty (30) days from the receipts of the writ of execution. No damages and costs. (Rollo, p. 19).The petitioner filed a motion for reconsideration of the said decision but the same was denied. (Rollo, p. 26).Hence, this petition.In the resolution of May 20, 1985, the petition was given due course and the parties were required to submit simultaneous memoranda (Rollo, p. 128). The memorandum for the petitioner was filed on July 3, 1985 (Rollo, p. 129) while the memorandum for the private respondents was filed on August 26, 1985 1 Rollo p. 192).The main issue in this case is whether or not violation of the terms of the agreement between the spouses Vivas and Lizardo, the sellers, and private respondents, the buyers, to deliver the certificate of title to the latter, upon its issuance, constitutes a breach of trust sufficient to defeat the title and right acquired by petitioner NGA, an innocent purchaser for value.It is undisputed that: (1) there are two deeds of sale of the same land in favor of private respondents, namely: (a) the conditional sale with right to repurchase or the 'Kasulatan Ng Bilihang Mabibiling Muli" which was registered under Act 3344 and (b) the deed of absolute sale or "Kasulatan ng Bilihang Tuluyan" which was not registered; (2) the condition that the Certificate of Title will be delivered to the buyers upon its issuance and upon payment of the balance of P40,000.00 is contained in the deed of absolute sale; and (3) the land in question at the time of the execution of both sales was not yet covered by the Torrens System of registration.It is axiomatic, that while the registration of the conditional sale with right of repurchase may be binding on third persons, it is by provision of law "understood to be without prejudice to third party who has better right" (Section 194 of the Administrative Code, as amended by Act No. 3344). In this case, it will be noted that the third party NGA, is a registered owner under the Torrens System and has obviously a better right than private respondents and that the deed of absolute sale with the suspensive condition is not registered and is necessarily binding only on the spouses Vivas and Lizardo and private respondents.In their complaint at the Regional Trial Court, private respondents prayed among others, for two alternative reliefs, such as: (a) to be declared the owners of the property in question or (b) to order the declared owner to reconvey or transfer the ownership of the property in their favor.Private respondents claim a better right to the property in question by virtue of the Conditional Sale, later changed to a deed of Absolute Sale which although unregistered under the Torrens System allegedly transferred to them the ownership and the possession of the property in question. In fact, they argue that they have been and are still in possession of the same openly, continuously, publicly under a claim of ownership adverse to all other claims since the purchase on December 2, 1971 (Rollo, p. 165). It is stressed that not until the month of July, 1974 did the plaintiff learn that a title had been issued covering the property in question (Rollo, p. 15).Time and time again, this Court has ruled that the proceedings for the registration of title to land under the Torrens System is an actionin remnotin personam, hence, personal notice to all claimants of the res is not necessary in order that the court may have jurisdiction to deal with and dispose of theres. Neither may lack of such personal notice vitiate or invalidate the decree or title issued in a registration proceeding, for the State, as sovereign over the land situated within it, may provide for the adjudication of title in a proceedingin remor one in the nature of or akin a to proceedingin remwhich shall be binding upon all persons, known or unknown (Moscoso vs. Court of appeals, 128 SCRA 719 [1984], citing: City of Manila vs. Lack, et al., 19 Phil. 324, 337; Roxas vs. Enriquez, 29 Phil. 31; Director of Lands vs. Roman Catholic Archbishop of Manila, 41 Phil. 120; Aguilar vs. Caogdan, 105 Phil. 661). It is thus evident that respondents' right over the property was barred byres judicatawhen the decree of registration was issued to spouses Vivas and Lizards. It does not matter that they may have had some right even the right of ownership, BEFORE the grant of the Torrens Title.Thus, under Section 44 of P.D. 1529, every registered owner receiving a 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 in good faith, shall hold the same free from all encumbrances except those noted on the certificate and any of the encumbrances which may be subsisting, and enumerated in the law. Under said provision, claims and liens of whatever character, except those mentioned by law as existing, against the land prior to the issuance of certificate of title, are cut off by such certificate if not noted thereon, and the certificate so issued binds the whole world, including the government (Aldecoa and Co. vs. Warner Barns & Co., 30 Phil. 209 [1915]; Snyder vs. Fiscal of Cebu and Avila, 42 Phil. 766 [1922]). Under said ruling, if the purchaser is the only party who appears in the deeds and the registration of titles in the property registry, no one except such purchaser may be deemed by law to be the owner of the properties in question (Ibid). Moreover, no title to registered land in derogation to that of the registered owner shall be acquired by prescription or adverse possession (Umbay vs. Alecha, 135 SCRA 427 [1985]).It does not appear that private respondents' claim falls under any of the exceptions provided for under Section 44 of P.D. 1529 which can be enforced against petitioner herein.Thus, it has been invariably restated by this Court, that "The real purpose of the Torrens System is to quiet title to land and to stop forever any question as to its legality. "Once a title is registered, the owner may rest secure, without the necessity of waiting in the portals of the court, or sitting on the "mirador su casato," avoid the possibility of losing his land." "An indirect or collateral attack on a Torrens Title is not allowed (Dominga vs. Santos, 55 Phil. 361; Singian vs. Manila Railroad, 62 Phil. 467)."The only exception to this rule is where a person obtains a certificate of title to a land belonging to another and he has full knowledge of the rights of the true owner. He is then considered as guilty of fraud and he may be compelled to transfer the land to the defrauded owner so long as the propertyhas not passed to the hands of an innocent purchaser for value(Angeles vs. Sania, 66 Phil. 444 [1938], emphasis supplied).It will be noted that the spouses Vivas and Lizardo never committed any fraud in procuring the registration of the property in question. On the contrary, their application for registration which resulted in the issuance of OCT No. 1728 was with complete knowledge and implied authority of private respondents who retained a portion of the consideration until the issuance to said spouses of a certificate of title applied for under the Torrens Act and the corresponding delivery of said title to them. The question therefore, is not about the validity of OCT No. 1728 but in the breach of contract between private respondents and the Vivas spouses. Petitioner NGA was never a privy to this transaction. Neither was it shown that it had any knowledge at the time of the execution of the mortgage, of the existence of the suspensive condition in the deed of absolute sale much less of its violation. Nothing appeared to excite suspicion. The Special Power of Attorney was regular on its face; the OCT was in the name of the mortgagor and the NGA was the highest bidder in the public auction. Unquestionably, therefore, the NGA is an innocent purchaser for value, first as an innocent mortgagee under Section 32 of P.D. 1529 and later as innocent purchaser for value in the public auction sale.Private respondents claim that NGA did not even field any representative to the land which was not even in the possession of the supposed mortgagors, nor present any witness to prove its allegations in the ANSWER nor submit its DEED OF MORTGAGE to show its being a mortgages in good faith and for value (Rollo, p. 110).Such contention is, however, untenable. Well settled is the rule that all persons dealing with property covered by a torrens certificate of title are not required to go beyond what appears on the face of the title. When there is nothing on 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 defect or inchoate right that may subsequently defeat his right thereto (Centeno vs. Court of Appeals, 139 SCRA 545 [1985]).More specifically, the Court has ruled that a bank is not required before accepting a mortgage to make an investigation of the title of the property being given as security (Phil. National Cooperative Bank vs. Carandang Villalon, 139 SCRA 570 [1985]), and where innocent third persons like mortgagee relying on the certificate of title acquire rights over the property, their rights cannot be disregarded (Duran vs. IAC, 138 SCRA 489 [1985]).Under the circumstances, the Regional Trial Court could not have erred in ruling that plaintiffs (private respondents herein) complaint insofar as it prays that they be declared owners of the land in question can not prosper in view of the doctrine of indefeasibility of title under the Torrens System, because it is an established principle that a petition for review of the decree of registration will not prosper even if filed within one year from the entry of the decree if the title has passed into the hands of an innocent purchaser for value (Pres. Decree No. 1529, Sec. 32). The setting aside of the decree of registration issued in land registration proceedings is operative only between the parties to the fraud and the parties defrauded and their privies, but not against acquirers in good faith and for value and the successors in interest of the latter; as to them the decree shall remain in full force and effect forever (Domingo vs. The Mayon Realty Corp. et al., 102 Phil. 32 [19571). Assuming, therefore, that there was fraud committed by the sellers against the buyers in the instant case, petitioner NGA who was not privy therein cannot be made to suffer the consequences thereof As correctly declared by the trial court, the National Grains Authority is the lawful owner of the property in question by virtue of its indefeasible title.As to private respondents' alternative prayer that the declared owner be ordered to reconvey or transfer the ownership of the property in their favor, it is clear that there is absolutely no reason why petitioner, an innocent purchaser for value, should reconvey the land to the private respondents.PREMISES CONSIDERED, the decision of the Court of Appeals is REVERSED and SET ASIDE, and the decision of the Court of First Instance of Laguna and San Pablo City, now Regional Trial Court, is REINSTATED.SO ORDERED.
