Sy vs Capistrano

Facts
Sometime in 1980, Nenita Scott (Scott) approached respondent Nicolas Capistrano, Jr. (Capistrano) and
offered her services to help him sell his 13,785 square meters of land covered by Transfer Certificate of Title
(TCT) No. 76496 of the Register of Deeds of Caloocan City. Capistrano gave her (Scott) a temporary
authority to sell which expired without any sale transaction being made. To his shock, he discovered later
that TCT No. 76496, which was in his name, had already been cancelled on June 24, 1992 and a new one, TCT
No. 249959, issued over the same property on the same date to Josefina A. Jamilar. TCT No. 249959 likewise
had already been cancelled and replaced by three (3) TCTs (Nos. 251524, 251525, and 251526), all in the names
of the Jamilar spouses. TCT Nos. 251524 and 251526 had also been cancelled and replaced by TCT Nos.
262286 and 262287 issued to Nelson Golpeo and John B. Tan, respectively.
Upon further inquiries, Capistrano also discovered the following:
1. The cancellation of his TCT No. 76496 and the issuance of TCT No. 249959 to Jamilar were based
upon two (2) deeds of sale, i.e., a "Deed of Absolute Sale" purportedly executed by him in favor of Scott
on March 9, 1980 and a "Deed of Absolute Sale" allegedly executed by Scott in favor of Jamilar on May 17,
1990.
2. The supposed 1980 sale from him to Scott was for 150,000.00; but despite the lapse of more than 10
years thereafter, the alleged 1990 sale from Scott to Jamilar was also for 150,000.00.
3. Both deeds were presented for registration simultaneously on June 24, 1992.
4. Although the deed in favor of Scott states that it was executed on March 9, 1980, the annotation
thereof at the back of TCT No. 76496 states that the date of the instrument is March 9, 1990.
5. Even if there was no direct sale from Capistrano to Jamilar, the transfer of title was made directly to the
latter. No TCT was issued in favor of Scott.
6. The issuance of TCT No. 249959 in favor of Jamilar was with the help of Joseph Sy, who provided
for (sic) money for the payment of the capital gains tax, documentary stamps, transfer fees and other expenses
of registration of the deeds of sale.
7. On July 8, 1992, an Affidavit of Adverse Claim was annotated at the back of Jamilars TCT No.
249959 at the instance of Sy, Golpeo, and Tan under a Contract to Sell in their favor by the Jamilar
spouses. Said contract was executed sometime in May, 1992 when the title to the property was still in the name
of Capistrano.
8. Around July 28, 1992, upon request of the Jamilar spouses, TCT No. 249959 was cancelled and three
(3) new certificates of title (TCT Nos. 251524, 251525, and 251526) all in the name of Jamilar on the basis
of an alleged subdivision plan (No. Psd-13-011917) without Capistranos knowledge and consent as
registered owner. The notice of adverse claim of Sy, Golpeo, and Tan was carried over to the three new titles.
9. Around August 18, 1992, Sy, Golpeo, and Tan filed Civil Case No. C-15551 against the Jamilars and
another couple, the Giltura spouses, for alleged violations of the Contract to Sell. They caused a notice of
lis pendens to be annotated on the three (3) TCTs in Jamilars name. Said civil case, however, was not
prosecuted.
10. On January 26, 1993, a Deed of Absolute Sale was executed by the Jamilars and the Gilturas, in
favor of Golpeo and Tan. Thus, TCT Nos. 251524 and 251526 were cancelled and TCT Nos. 262286 and
262287 were issued to Golpeo and Tan, respectively. TCT No. 251525 remained in the name of Jamilar.

Thus, the action for reconveyance filed by Capistrano, alleging that his and his wifes signatures on the
purported deed of absolute sale in favor of Scott were forgeries; that the owners duplicate copy of TCT No.
76496 in his name had always been in his possession; and that Scott, the Jamilar spouses, Golpeo, and Tan
were not innocent purchasers for value because they all participated in defrauding him of his property.
Capistrano claimed 1,000,000.00 from all defendants as moral damages, 100,000.00 as exemplary damages;
and 100,000.00 as attorneys fees.

In their Answer with Counterclaim, the Jamilar spouses denied the allegations in the complaint and
claimed that Capistrano had no cause of action against them, as there was no privity of transaction between
them; the issuance of TCT No. 249959 in their names was proper, valid, and legal; and that Capistrano was in
estoppel. By way of counterclaim, they sought 50,000.00 as actual damages, 50,000.00 as moral damages,
50,000.00 as exemplary damages, and 50,000.00 as attorneys fees.

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 In their Answer, Sy, Golpeo, and Tan denied the allegations in the complaint and alleged that Capistrano
had no cause of action against them; that at the time they bought the property from the Jamilars and the
Gilturas as unregistered owners, there was nothing in the certificates of title that would indicate any vice in its
ownership; that a buyer in good faith of a registered realty need not look beyond the Torrens title to search
for any defect; and that they were innocent purchasers of the land for value. As counterclaim, they sought
500,000.00 as moral damages and 50,000.00 as attorneys fees.

RTC Ruling
The trial court decided in favor of Capistrano.

CA Ruling
On appeal, the CA, in its Decision dated July 23, 2002, affirmed the Decision of the trial court with the
modification that the Jamilar spouses were ordered to return to Sy, Golpeo, and Tan the amount of
1,679,260.00 representing their full payment for the property, with legal interest thereon from the date of
the filing of the complaint until full payment.

SC Ruling
Hence, this petition, with petitioners (Sy, Golpeo and Tan) insisting that they were innocent purchasers
for value of the parcels of land covered by TCT Nos. 262286 and 262287. They claim that when they
negotiated with the Jamilars for the purchase of the property, although the title thereto was still in the name of
Capistrano, the documents shown to them the court order directing the issuance of a new owners duplicate
copy of TCT No. 76496, the new owners duplicate copy thereof, the tax declaration, the deed of absolute sale
between Capistrano and Scott, the deed of absolute sale between Scott and Jamilar, and the real estate tax
receipts there was nothing that aroused their suspicion so as to compel them to look beyond the Torrens
title. They asseverated that there was nothing wrong in financing the cancellation of Capistranos title and
the issuance of titles to the Jamilars because the money they spent therefor was considered part of the
purchase price they paid for their property.

On Forgery
The CA was correct in upholding the finding of the trial court that the purported sale of the property
from Capistrano to Scott was a forgery, and resort to a handwriting expert was not even necessary as the
specimen signature submitted by Capistrano during trial showed marked variance from that found in the
deed of absolute sale. The technical procedure utilized by handwriting experts, while usually helpful in the
examination of forged documents, is not mandatory or indispensable to the examination or comparison of
handwritings.
By the same token, we agree with the CA when it held that the deed of sale between Scott and the Jamilars
was also forged, as it noted the stark differences between the signatures of Scott in the deed of sale and those in
her handwritten letters to Capistrano.

On Innocent Purchasers for Value

In finding that the Jamilar spouses were not innocent purchasers for value of the subject property, the CA
properly held that they (Jamilar spouses) should have known that the signatures of Scott and Capistrano
were forgeries due to the patent variance of the signatures in the two deeds of sale shown to them by Scott,
when Scott presented to them the deeds of sale, one allegedly executed by Capistrano in her favor covering his
property; and the other allegedly executed by Scott in favor of Capistrano over her property, the 40,000.00
consideration for which ostensibly constituted her initial and partial payment for the sale of Capistranos
property to her.
[RSPol Note: From the facts, there were alleged sales from Capistrano to Scott, then from Scott to Jamilar
Spouses, and from Jamilar Spouses to petitioners.]
The CA also correctly found the Gilturas not innocent purchasers for value, because they failed to
check the veracity of the allegation of Jamilar that he acquired the property from Capistrano.
In ruling that Sy was not an innocent purchaser for value, we share the observation of the appellate court
that Sy knew that the title to the property was still in the name of Capistrano, but failed to verify the
claim of the Jamilar spouses regarding the transfer of ownership of the property by asking for the copies

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of the deeds of absolute sale between Capistrano and Scott, and between Scott and Jamilar. Sy should have
likewise inquired why the Gilturas had to affix their conformity to the contract to sell by asking for a copy of
the deed of sale between the Jamilars and the Gilturas. Had Sy done so, he would have learned that the Jamilars
claimed that they purchased the property from Capistrano and not from Scott.
We also note, as found by both the trial court and the CA, Tans testimony that he, Golpeo and Sy are
brothers, he and Golpeo having been adopted by Sys father. Tan also testified that he and Golpeo were privy to
the transaction between Sy and the Jamilars and the Gilturas, as shown by their collective act of filing a
complaint for specific performance to enforce the contract to sell.
Also noteworthy and something that would have ordinarily aroused suspicion is the fact that even
before the supposed execution of the deed of sale by Scott in favor of the Jamilars, the latter had already
caused the subdivision of the property into nine (9) lots, with the title to the property still in the name of
Capistrano.
Notable likewise is that the owners duplicate copy of TCT No. 76496 in the name of Capistrano had
always been in his possession since he gave Scott only a photocopy thereof pursuant to the latters
authority to look for a buyer of the property. On the other hand, the Jamilars were able to acquire a new
owners duplicate copy thereof by filing an affidavit of loss and a petition for the issuance of another
owners duplicate copy of TCT No. 76496. The minimum requirement of a good faith buyer is that the
vendee of the real property should at least see the owners duplicate copy of the title. A person who deals
with registered land through someone who is not the registered owner is expected to look beyond the
certificate of title and examine all the factual circumstances thereof 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 latters legal authority to convey.
[RSPol Note: The above statement must refer to the caveat emptor in the syllabus. Applying the rule to the
case, because the petitioners failed to see the owners duplicate copy, to examine all the factual circumstances
and to look beyond the COT since the seller Jamilars during the sale with the petitioners were not the registered
owners of a registered land, the petitioners cannot be considered innocent purchasers for value. Because they are
not innocent purchasers for value, they do not have the right over the subject property of Capistrano. ]
Finally, there is the questionable cancellation of the certificate of title of Capistrano which resulted in the
immediate issuance of a certificate of title in favor of the Jamilar spouses despite the claim that Capistrano sold
his property to Scott and it was Scott who sold the same to the Jamilars.

Domingo Realty vs CA
Facts
On November 19, 1981, petitioner Domingo Realty filed its November 15, 1981 Complaint with the
Pasay City RTC against Antonio M. Acero, who conducted business under the firm name A.M. Acero Trading,
David Victorio, John Doe, and Peter Doe, for recovery of possession of three (3) parcels of land located in
Cupang, Muntinlupa, Metro Manila, covered by (1) Transfer Certificate of Title (TCT) No. (75600)
S-107639-Land Records of Rizal; (2) TCT No. (67006) S-107640-Land Records of Rizal; and (3) TCT No.
(67007) S-107643-Land Records of Rizal (the "subject properties"). The said lots have an aggregate area of
26,705 square meters, more or less, on a portion of which Acero had constructed a factory building for the
manufacture of hollow blocks, as alleged by Domingo Realty.
On January 4, 1982, defendants Acero and Victorio filed their December 21, 1981 Answer to the
Complaint in Civil Case No. 9581-P. Acero alleged that he merely leased the land from his co-defendant
David Victorio, who, in turn, claimed to own the property on which the hollow blocks factory of Acero
stood. In the Answer, Victorio assailed the validity of the TCTs of Domingo Realty, alleging that the said
TCTs emanated from spurious deeds of sale, and claimed that he and his predecessors-in-interest had
been in possession of the property for more than 70 years.
On December 3, 1987, Mariano Yu representing Domingo Realty, Luis Recato Dy6, and Antonio M. Acero,
all assisted by counsels, executed a Compromise Agreement, which contained the following stipulations, to wit:
1. That defendants (Acero) admit and recognize the ownership of the plaintiff (Domingo Realty) over
the property subject of this case, covered by TCT No. S-107639 (75600), S-107643 (67007), and S-107640
(67006) with a total area of 26,705 square meters;

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 2. That defendant Luis Recato Dy admits and recognizes that his title covered by TCT No. 108027 has
been proven not to be genuine and that the area indicated therein is inside the property of the plaintiff;
3. That defendant Acero admits that the property he is presently occupying by way of lease is
encroaching on a portion of the property of the plaintiff and assume[s] and undertakes to vacate, remove
and clear any and all structures erected inside the property of the plaintiff by himself and other third
parties, duly authorized and/or who have an existing agreement with defendant Acero, and shall deliver said
portion of the property of the plaintiff free and clear of any unauthorized structures, shanties, occupants,
squatters or lessees within a period of sixty (60) days from date of signing of this compromise agreement.
Should defendant Acero fail in his obligation to vacate, remove and clear the structures erected inside the
property of the plaintiff within the period of 60 days afore-mentioned, plaintiff shall be entitled to a writ of
execution for the immediate demolition or removal of said structure to fully implement this agreement; and
ejectment of all squatters and occupants and lessees, including the dependents to fully implement this
agreement;
4. That plaintiff admits and recognizes that defendant Luis Recato Dy bought and occupied the
property in good faith and for value whereas defendant Acero leased the portion of said property likewise
in good faith and for value hereby waives absolutely and unconditionally all claims including attorneys fees
against both defendants in all cases pending in any court whether by virtue of any judgment or under the present
complaint and undertake to withdraw and/or move to dismiss the same under the spirit of this agreement.

Acting on the Compromise Agreement, the Pasay City RTC rendered the December 7, 1987 Decision
which adopted the aforequoted six (6) stipulations and approved the Compromise Agreement.
To implement the said Decision, Domingo Realty filed its January 21, 1988 Motion asking the trial court
for permission to conduct a re-survey of the subject properties, which was granted in the January 22, 1988
Order.
On February 2, 1988, respondent Acero filed his January 29, 1988 Motion to Nullify the Compromise
Agreement, claiming that the January 22, 1988 Order authorizing the survey plan of petitioner Domingo
Realty as the basis of a resurvey would violate the Compromise Agreement since the whole area he
occupied would be adjudged as owned by the realty firm.
On March 18, 1988, Acero filed a Motion to Resurvey, whereby it was alleged that the parties agreed to
have the disputed lots re-surveyed by the Bureau of Lands. Thus, the trial court issued the March 21, 1988
Order directing the Director of Lands to conduct a re-survey of the subject properties.
In his June 9, 1989 Report, Elpidio T. De Lara, Chief of the Technical Services Division of the Lands
Management Section of the National Capital Region - Department of Environment and Natural Resources,
submitted to the trial court Verification Survey Plan No. Vs-13-000135. In the said Verification Survey Plan,
petitioners TCTs covered the entire land occupied by the respondents hollow block factory.
On April 10, 1990, petitioner Ayala Steel Manufacturing Co., Inc. (Ayala Steel) filed its March 30, 1990
Motion for Substitution alleging that it had purchased the subject lots, attaching to the motion TCT Nos. 152528,
152529, and 152530 all in its name, as proof of purchase.
[RSPol Note: Ayala sold the lots from Domingo Realty.]
The said motion was opposed by Acero claiming that "this case has already been terminated in accordance
with the compromise agreement of the parties, hence, substitution will no longer be necessary and justified
under the circumstances." The motion was not resolved which explains why both transferor Domingo Realty
and transferee Ayala Steel are co-petitioners in the instant petition.
Acero employed the services of Engr. Eligio L. Cruz who came up with Verification Survey Plan No.
Vs-13-000185. However, when the said Verification Survey Plan was presented to the Bureau of Lands for
approval, it was rejected because Engr. Cruz failed to comply with the requirements of the Bureau.

RTC Ruling
In its January 15, 1992 Order, the trial court approved the issuance of a Writ of Execution to enforce the
December 7, 1987 Decision. On February 3, 1992, respondent Acero subsequently filed a Motion for
Reconsideration of the January 15, 1992 Order arguing that the Order was premature and that Verification
Survey Plan No. Vs-13-000135 violated the Compromise Agreement.
[RSPol Note: The Dec-7 decision refers to the approval of the compromise agreement.]

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 On January 18, 1992, the Pasay City Hall was gutted by fire, destroying the records of the lower
court, including those of this case. Thus, after reconstituting the records, the trial court issued the October 6,
1992 Order, reiterating its January 15, 1992 Order and ordering the issuance of a Writ of Execution.

CA Ruling
The CA set aside the decision of the RTC. In discarding the December 7, 1987 Decision based on the
Compromise Agreement, the appellate court ratiocinated that David Victorio, the alleged lessor of Acero, was
not a party to the Compromise Agreement; thus, there would always remain the probability that he might
eventually resurface and assail the Compromise Agreement, giving rise to another suit. Moreover, the CA
found the Compromise Agreement vague, not having stipulated a mutually agreed upon surveyor, "who
would survey the properties using as a basis, survey plans acceptable to both, and to thereafter submit a report to
the court."
Likewise, the CA sustained Aceros belief that he would only have to vacate a portion of the property he
was presently occupying, which was tantamount to a mistake that served as basis for the nullification of the
Compromise Agreement entered into.

SC Ruling
On the Proper Remedy
The preliminary issue involves the query of what proper remedy is available to a party who believes
that his consent in a compromise agreement was vitiated by mistake upon which a judgment was rendered
by a court of law.
There is no question that a contract where the consent is given through mistake, violence, intimidation,
undue influence, or fraud is voidable under Article 1330 of the Civil Code. If the contract assumes the form of
a Compromise Agreement between the parties in a civil case, then a judgment rendered on the basis of such
covenant is final, unappealable, and immediately executory. If one of the parties claims that his consent was
obtained through fraud, mistake, or duress, he must file a motion with the trial court that approved the
compromise agreement to reconsider the judgment and nullify or set aside said contract on any of the
said grounds for annulment of contract within 15 days from notice of judgment. Under Rule 37, said party
can either file a motion for new trial or reconsideration. A party can file a motion for new trial based on fraud,
accident or mistake, excusable negligence, or newly discovered evidence.
On the other hand, a party may decide to seek the recall or modification of the judgment by means of a
motion for reconsideration on the ground that "the decision or final order is contrary to law" if the consent was
procured through fraud, mistake, or duress. Thus, the motion for a new trial or motion for reconsideration is the
readily available remedy for a party to challenge a judgment if the 15-day period from receipt of judgment for
taking an appeal has not yet expired. This motion is the most plain, speedy, and adequate remedy in law to assail
a judgment based on a compromise agreement which, even if it is immediately executory, can still be annulled
for vices of consent or forgery.
Prior to the effectivity of the 1997 Rules of Civil Procedure on July 1, 1997, an order denying a motion for
new trial or reconsideration was not appealable since the judgment in the case is not yet final. The remedy is to
appeal from the challenged decision and the denial of the motion for reconsideration or new trial is assigned as
an error in the appeal. Under the present [1997] Rules of Civil Procedure, the same rule was maintained that the
order denying said motion is still unappealable and the rule is still to appeal from the judgment and not from the
order rejecting the motion for reconsideration/new trial.
If the 15-day period for taking an appeal has lapsed, then the aggrieved party can avail of Rule 38 by
filing a petition for relief from judgment which should be done within 60 days after the petitioner learns
of the judgment, but not more than six (6) months after such judgment or final order was entered. Prior to
the effectivity of the 1997 Rules of Civil Procedure in 1997, if the court denies the petition under Rule 38, the
remedy is to appeal from the order of denial and not from the judgment since said decision has already become
final and already unappealable. However, in the appeal from said order, the appellant may likewise assail the
judgment. Under the 1997 Rules of Civil Procedure, the aggrieved party can no longer appeal from the order
denying the petition since this is proscribed under Section 1 of Rule 41. The remedy of the party is to file a
special civil action for certiorari under Rule 65 from the order rejecting the petition for relief from judgment.
The records of the case reveal the following:
1. December 3, 1987 the parties signed the Compromise Agreement;

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 2. December 7, 1987 a decision/judgment was rendered based on the December 3, 1987 Compromise
Agreement;
3. February 2, 1988 Acero filed a Motion to Nullify the Compromise Agreement;
4. December 6, 1991 the trial court denied Aceros Motion to Nullify the Compromise Agreement;
5. December 11, 1991 defendant Acero received the December 6, 1991 Order which denied said motion;
6. December 26, 1991 the 15-day period to appeal to the CA expired by the failure of defendant Acero to
file an appeal with said appellate court;
7. January 15, 1992 the trial court issued the Order which granted petitioners motion for the issuance of
a Writ of Execution;
8. October 6, 1992 the trial court reiterated its January 15, 1992 Order directing the issuance of a Writ of
Execution after the records of the case were lost in a fire that gutted the Pasay City Hall;
9. January 12, 1994 the trial court issued the Order which directed the implementation of the Writ of
Execution prayed for by petitioners;
10. February 1, 1994 the trial court issued the Order which denied respondents Motion for
Reconsideration of its January 12, 1994 Order; and
11. April 4, 1994 Acero filed with the CA a petition for certiorari in CA-G.R. SP No. 33407 entitled
Antonio M. Acero v. Domingo Realty, Inc., et al.

In his undated Manifestation, respondent Acero admitted having received a copy of the December 7,
1987 Decision on December 11, 1987. However, it was only on February 2, 1988 when he filed a Motion to
Nullify the Compromise Agreement which was discarded for lack of merit by the trial court on December
6, 1991. If the Motion to Nullify the Compromise Agreement is treated as a motion for reconsideration and/or
for new trial, then Acero should have filed an appeal from the December 7, 1987 Decision and assigned as error
the December 6, 1991 Order denying said motion pursuant to the rules existing prior to the 1997 Rules of Civil
Procedure. He failed to file such appeal but instead filed a petition for certiorari under Rule 65 with the
CA on April 4, 1994. This is prejudicial to respondent Acero as the special civil action of certiorari is not
the proper remedy. If the aggrieved party does not interpose a timely appeal from the adverse decision, a
special civil action for certiorari is not available as a substitute for a lost appeal.
In sum, the petition for certiorari instituted by respondent Acero with the CA is a wrong remedy; a simple
appeal to the CA would have sufficed. Since the certiorari action is an improper legal action, the petition
should have been rejected outright by the CA.
Assuming arguendo that a petition for certiorari with the CA is the appropriate remedy, still, said petition
was filed out of time.
The petition before the CA was filed prior to the effectivity of the 1997 Rules of Court when there was still
no prescribed period within which to file said petition, unlike in the present Section 4 of Rule 65 wherein a
Petition for Certiorari and Mandamus must be filed within 60 days from notice of the judgment, final order, or
resolution appealed from, or of the denial of the petitioners motion for new trial or reconsideration after notice
of judgment.
Before the 1997 Rules of Civil Procedure became effective on July 1, 1997, the yardstick to determine
the timeliness of a petition for certiorari under Rule 65 was the reasonableness of the time that had elapsed
from receipt of notice of the assailed order/s of the trial court up to the filing of the appeal with the CA. In a
number of cases, the Court ruled that reasonable time can be pegged at three (3) months.
In the present case, the Order denying the Motion to Nullify the Compromise Agreement was issued
on December 6, 1991. The petition for certiorari was filed on April 4, 1994. The period of two (2) years and
four (4) months cannot be considered fair and reasonable. With respect to the January 15, 1992 Order
granting the writ of execution and the October 6, 1992 Order directing the issuance of the writ, it is evident that
the petition before the CA was filed more than three (3) months after the receipt by respondent Acero of
said orders and the filing of the petition is likewise unreasonably delayed.

On Victorio not made a Party to the Compromise Agreement

The CA was unable to cite a law or jurisprudence that supports the annulment of a compromise
agreement if one of the parties in a case is not included in the settlement. The only legal effect of the
non-inclusion of a party in a compromise agreement is that said party cannot be bound by the terms of

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the agreement. The Compromise Agreement shall however be "valid and binding as to the parties who signed
thereto."
The issue of ownership between petitioners and David Victorio can be threshed out by the trial court in
Civil Case No. 9581-P. The proper thing to do is to remand the case for continuation of the proceedings
between petitioners and defendant David Victorio but not to annul the partial judgment between
petitioners and respondent Acero which has been pending execution for 20 years.

On the Compromise Agreement

With regard to the third issue, petitioners assail the ruling of the CA that the Compromise Agreement is
vague as there is still a need to determine the exact metes and bounds of the encroachment on the petitioners
lot.
The object of a contract, in order to be considered as "certain," need not specify such object with absolute
certainty. It is enough that the object is determinable in order for it to be considered as "certain." Article
1349 of the Civil Code provides: The object of every contract must be determinate as to its kind. The fact that
the quantity is not determinate shall not be an obstacle to the existence of the contract, provided it is possible to
determine the same, without the need of a new contract between the parties.
In the instant case, the title over the subject property contains a technical description that provides the
metes and bounds of the property of petitioners. Such technical description is the final determinant of the extent
of the property of petitioners. Thus, the area of petitioners property is determinable based on the technical
descriptions contained in the TCTs.
Notably, the determination made by the Bureau of Landsthat Verification Survey Plan No.
Vs-13-000135 is the correct Planis controlling and shall prevail over Verification Survey Plan No.
Vs-13-000185 submitted by Acero. Findings of fact by administrative agencies, having acquired expertise in
their field of specialization, must be given great weight by this Court. Even if the exact area of encroachment is
not specified in the agreement, it can still be determined from the technical description of the title of plaintiff
which defendant Acero admitted to be correct. Thus, the object of the Compromise Agreement is considered
determinate and specific.
Moreover, "vagueness" is defined in Blacks Law Dictionary as: "indefinite, uncertain; not susceptible of
being understood."
A perusal of the entire Compromise Agreement will negate any contention that there is vagueness in its
provisions. It must be remembered that in the interpretation of contracts, an instrument must be construed so as
to give effect to all the provisions of these contracts. Thus, the Compromise Agreement must be considered as a
whole.
Respondent harps on their contention that the term "portion" in paragraph 3 of the Compromise
Agreement refers to the property which they are occupying. Respondents interpretation of paragraph 3 of
the Compromise Agreement is mistaken as it is anchored on his (Aceros) belief that the encroachment on
the property of petitioners is only a portion and not the entire lot he is occupying. This is apparent from his
Supplement to his Petition for Certiorari and Mandamus where he explained: Petitioner [Acero] entered into
this agreement because of his well-founded belief and conviction that a portion of the property he is occupying
encroaches only a portion of the property of private respondent. In fine, only a portion of the property petitioner
is occupying (not all of it) encroaches on a portion of the property of private respondent.
This contention is incorrect. The agreement is clear that respondent Acero admitted that "the property he is
presently occupying by way of lease is encroaching on a portion of the property of the plaintiff." Thus, whether
it is only a portion or the entire lot Acero is leasing that will be affected by the agreement is of no
importance. What controls is the encroachment on the lot of petitioner Domingo Realty regardless of
whether the entire lot or only a portion occupied by Acero will be covered by the encroachment.
While it may be the honest belief of respondent Acero that only a portion of the lot he is occupying
encroaches on the 26,705-square meter lot of petitioner Domingo Realty and later, Ayala Steel, the Court finds
that the true and real agreement between the parties is that any encroachment by respondent Acero on the lot
of petitioners will be surrendered to the latter. This is apparent from the undertaking in paragraph 3 that
defendant Acero "undertakes to vacate, remove and clear any and all structures erected inside the
property of the plaintiff." This prestation results from the admission against the interest of respondent Acero
that he "admits and recognizes the ownership of the plaintiff (Domingo Realty)" over the subject lot. The
controlling word therefore is "encroachment"whether it involves a portion of or the entire lot claimed by

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defendant David Victorio. To reiterate, the word "portion" refers to petitioners lot and not that of Aceros.
Contrary to the disposition of the CA, we rule that the terms of the Compromise Agreement are clear and
leave no doubt upon the intent of the parties that respondent Acero will vacate, remove, and clear any
and all structures erected inside petitioners property, the ownership of which is not denied by him. The
literal meaning of the stipulations in the Compromise Agreement will control under Article 1370 of the Civil
Code. Thus, the alleged vagueness in the object of the agreement cannot be made an excuse for its nullification.
[RSPol Note: In the agreement, it does not state that only a portion of Aceros leased property is inside
Domingos, now Ayalas, property but it states that Aceros leased property is inside a portion of Domingos,
now Ayalas, property. Because it was proven and agreed that Aceros property is inside Domingos property, it
is proper that Acero vacate said portion.]

On Mistake in the Compromise Agreement

Finally, with regard to the fourth issue, petitioners question the finding of the CA that the compromise
judgment can be set aside on the ground of mistake under Article 2038 of the Civil Code, because respondent
Acero gave his consent to the Compromise Agreement in good faith that he would only vacate a portion of his
lot in favor of petitioner Domingo Realty.
Articles 2038 and 1330 of the Civil Code allow a party to a contract, on the ground of mistake, to nullify a
compromise agreement, viz:
Article 2038. A compromise in which there is mistake, fraud, violence, intimidation, undue influence, or
falsity of documents, is subject to the provisions of Article 1330 of this Code.
Article 1330. A contract where the consent is given through mistake, violence, intimidation, undue
influence, or fraud is voidable.
"Mistake" has been defined as a "misunderstanding of the meaning or implication of something" or
"a wrong action or statement proceeding from a faulty judgment x x x."
Article 1333 of the Civil Code of the Philippines however states that "there is no mistake if the party
alleging it knew the doubt, contingency or risk affecting the object of the contract."
Under this provision of law, it is presumed that the parties to a contract know and understand the import of
their agreement. Thus, civil law expert Arturo M. Tolentino opined that:
To invalidate consent, the error must be excusable. It must be real error, and not one that could
have been avoided by the party alleging it. The error must arise from facts unknown to him. He
cannot allege an error which refers to a fact known to him, or which he should have known by
ordinary diligent examination of the facts. An error so patent and obvious that nobody could have
made it, or one which could have been avoided by ordinary prudence, cannot be invoked by the one
who made it in order to annul his contract. A mistake that is caused by manifest negligence cannot
invalidate a juridical act.

Prior to the execution of the Compromise Agreement, respondent Acero was already aware of the
technical description of the titled lots of petitioner Domingo Realty and more so, of the boundaries and area
of the lot he leased from David Victorio. Before consenting to the agreement, he could have simply hired a
geodetic engineer to conduct a verification survey and determine the actual encroachment of the area he was
leasing on the titled lot of petitioner Domingo Realty. Had he undertaken such a precautionary measure, he
would have known that the entire area he was occupying intruded into the titled lot of petitioners and
possibly, he would not have signed the agreement.
Moreover, respondent failed to state in the Compromise Agreement that he intended to vacate only a
portion of the property he was leasing. Such provision being beneficial to respondent, he, in the exercise of
the proper diligence required, should have made sure that such matter was specified in the Compromise
Agreement. Respondent Aceros failure to have the said stipulation incorporated in the Compromise
Agreement is negligence on his part and insufficient to abrogate said agreement.
Courts are not authorized to extricate parties from the necessary consequences of their acts, and the fact
that the contractual stipulations may turn out to be financially disadvantageous will not relieve parties thereto of
their obligations. They cannot now disavow the relationship formed from such agreement due to their supposed
misunderstanding of its terms.

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 The mere fact that the Compromise Agreement favors one party does not render it invalid. We ruled in
Amarante v. Court of Appeals that: Compromises are generally to be favored and cannot be set aside if the
parties acted in good faith and made reciprocal concessions to each other in order to terminate a case. This
holds true even if all the gains appear to be on one side and all the sacrifices on the other.
One final note. While the Court can commiserate with respondent Acero in his sad plight, nonetheless we
have no power to make or alter contracts in order to save him from the adverse stipulations in the Compromise
Agreement. Hopefully this case will serve as a precaution to prospective parties to a contract involving
titled lands for them to exercise the diligence of a reasonably prudent person by undertaking measures to
ensure the legality of the title and the accurate metes and bounds of the lot embraced in the title. It is
advisable that such parties (1) verify the origin, history, authenticity, and validity of the title with the
Office of the Register of Deeds and the Land Registration Authority; (2) engage the services of a
competent and reliable geodetic engineer to verify the boundary, metes, and bounds of the lot subject of
said title based on the technical description in the said title and the approved survey plan in the Land
Management Bureau; (3) conduct an actual ocular inspection of the lot; (4) inquire from the owners and
possessors of adjoining lots with respect to the true and legal ownership of the lot in question; (5) put up
signs that said lot is being purchased, leased, or encumbered; and (6) undertake such other measures to
make the general public aware that said lot will be subject to alienation, lease, or encumbrance by the
parties. Respondent Acero, for all his woes, may have a legal recourse against lessor David Victorio who
inveigled him to lease the lot which turned out to be owned by another.
[RSPol Note: The statement above must refer to the caveat emptor in the syllabus.]

Locsin vs Hizon
Facts
Petitioner Enriqueta M. Locsin (Locsin) was the registered owner of a 760-sq.m. lot covered by
Transfer Certificate of Title (TCT) No. 235094, located at 49 Don Vicente St., Don Antonio Heights
Subdivision, Brgy. Holy Spirit, Capitol, Quezon City. In 1992, she filed an ejectment case, Civil Case No.
38-6633, against one Billy Aceron (Aceron) before the Metropolitan Trial Court, Branch 38 in Quezon City
(MTC) to recover possession over the land in issue. Eventually, the two entered into a compromise
agreement, which the MTC approved on August 6, 1993.
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.
In 1994, after discovering that her copy of TCT No. 235094 was missing, Locsin filed a petition for
administrative reconstruction in order to secure a new one, TCT No. RT-97467. Sometime in early 2002, she
then requested her counsel to check the status of the subject lot. It was then that they discovered the following:
1. One Marylou Bolos (Bolos) had TCT No. RT-97467 cancelled on February 11, 1999, and then
secured a new one, TCT No. N-200074, in her favor by registering a Deed of Absolute Sale dated
November 3, 1979 allegedly executed by Locsin with the Registry of Deeds;
2. Bolos later sold the subject lot to Bernardo Hizon (Bernardo) for PhP 1.5 million, but it was titled
under Carlos Hizons (Carlos) name on August 12, 1999. Carlos is Bernardos son;
3. On October 1, 1999, 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 in Civil Case No. 38-6633;
4. The property was already occupied and was, in fact, up for sale.
On May 9, 2002, 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 Locsins 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. On June 13, 2002, Bernardo met with
Locsins counsel and discussed the possibility of a compromise. He ended the meeting with a promise to come
up with a win-win situation for his son and Locsin, a promise which turned out to be deceitful, for, on July 15,
2002, 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, TCT No. N-237083, issued in their names. The spouses

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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 TCT No. N-237083, 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, docketed as Civil Case No.
Q-02-47925, 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. This is in view of the cancellation of the
mortgage for failure of the spouses Guevara to avail of the loan/credit facility DCC extended in their favor.

RTC Ruling
On November 19, 2010, the RTC rendered a Decision dismissing the complaint and finding for
respondents, as defendants thereat, holding that: (a) there is insufficient evidence to showthat Locsins
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; (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.

CA Ruling
In its appreciation of the evidence, the CA found that, indeed, Locsins 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 RTCs finding that herein respondents are innocent purchasers for value.

SC Ruling
On Precautionary Measures
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 atthe time of the purchase
or before receiving any notice of another persons claim. As such, a defective title or one the procurement
of which is tainted with fraud and misrepresentationmay 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 registeredl and 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.

Thus, in Domingo Realty, Inc. v. CA, we 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 Courts concurrence with petitioners proposition.

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RSPol. EH 406
On Carlos not being an Innocent Purchaser
Carlos is not an innocent purchaser for value. Foremost, the Court is of the view that Bernardo negotiated
with Bolos for the property as Carlos agent. This is bolstered by the fact that he was the one who
arranged for the sale and eventual registration of the property in Carlos favor.
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, including the following:
1. Bernardo knew that Bolos, from whom he purchased the subject property, never acquired possession
over the lot. As a matter of fact, in his March 11, 2009 direct testimony, Bernardo admitted having knowledge
of Acerons lot possession as well as the compromise agreement between petitioner and Aceron.
2. Bolos purported Deed of Sale was executed on November 3, 1979 but the ejectment case commenced
by Locsin against Aceron was in 1992, or thirteen (13) years after the property was supposedly transferred to
Bolos.
3. The August 6, 1993 Judgment, issued by the MTC on the compromise agreement between Locsin and
Aceron, clearly stated therein that "[o]n August 2, 1993,the parties [Aceron and Locsin] submitted to [the MTC]
for approval a Compromise Agreement dated July 28, 1993." It further indicated that "[Aceron] acknowledges
[Locsins] right of possessionto [the subject property], being the registered owner thereof."

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.
At this point it is well to emphasize that entering into a compromise agreement is an act of strict dominion.
If Bolos already acquired ownership of the property as early as 1979, it should have been her who entered
into a compromise agreement with Aceron in 1993, not her predecessor-in-interest, Locsin, who,
theoretically, had already divested herself of ownership thereof.
[RSPol Note: It will be remembered that on August 6, 1993, Locsin filed an ejectment case against Aceron.
If Bolos was the real owner of said property since November 3, 1979 based on the allegedly executed deed of
sale by Locsin, Bolos should have entered into an agreement against Aceron. But the fact that Locsin entered
into an agreement with Aceron in view of the ejectment case, it is clear that Locsin, and not Bolos, owns the
subject property.]

On Guevara Spouses not being Innocent Purchasers

As regards the transfer of the property from Carlos to the spouses Guevara, We find the existence of the
sale highly suspicious. For one, there is a dearth of evidence to support the respondent spouses position that the
sale was a bona fide transaction. Even if we repeatedly sift through the evidence on record, still we cannot find
any document, contract, or deed evidencing the sale in favor of the spouses Guevara. The same goes for the
purported payment of the purchase price of the property in the amount of PhP 1.5 million in favor of
Carlos. As a matter of fact, the only documentary evidence that they presented were as follows:
1. Deed of Sale between Locsin and Bolos;
2. TCT No. 200074 issued in Bolos name;
3. TCT No. N-205332 in Carlos name;
4. TCT No. N-237083 in the nameof the Sps. Guevara.

To bridge the gap in their documentary evidence, respondents proffer their own testimonies explaining the
circumstances surrounding the alleged sale. However, basic is the rule that bare and self-serving allegations,
unsubstantiated by evidence, are not equivalent to proof under the Rules. As such, we cannot give credence to
their representations that the sale between them actually transpired.

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 Furthermore, and noticeably enough, the transfer from Carlos to the spouses Guevara was effected
only fifteen (15) days after Locsin demanded the surrender of the property from Carlos. Reviewing the
timeline:
May 9, 2002: Locsins counsel sent a letter to Carlos, requesting that he return the property to Locsin
since the latters signature in the purported deed of sale between her and Bolos was a forgery.
May 20, 2002: Carlos counsel replied to Locsins May 9, 2002 letter, claiming that Carlos was unaware
of any defect or flaw in Bolos title, making him an innocent purchaserof the subject property.
May 24, 2002: The Sps. Guevara allegedly purchased the property from Carlos.

When Bernardo met with Locsins counsel on June 13, 2002, and personally made a commitment to
come up with a win-win situation for his son and Locsin, he knew fully well, too, that the property had
already been purportedly transferred to his daughter and son-in-law, the spouses Guevara, for he, no less,
facilitated the same. This, to us, isglaring evidence of bad faith and an apparent intention to mislead Locsin
into believing that she could no longer recover the subject property.
[RSPol Note: Bad faith in Bernardo is made manifest when he pretended to meet with Locsins counsel on
June 13, 2002 for an agreement when Bernardo knew that as early as May 24, 2002, the subject lot was already
sold to his daughter and son-in-law.]

Also, the fact that Lourdes Guevara and Carlos are siblings, and that Carlos agent in his dealings
concerning the property is his own father, renders incredible the argument that Lourdes had no knowledge
whatsoever of Locsins claim of ownership atthe time of the purported sale.
[RSPol Note: Lourdes Guevara, being Carlos sister and Bernardos daughter, cannot be said to have no
knowledge of Locsins claim.]

Indeed, the fact that the spouses Guevara never intended to be the owner in good faith and for value of the
lot is further made manifest by their lack of interest in protecting themselvesin the case. It does not even appear
in their testimonies that they, at the very least, intended to vigilantly protect their claim over the property and
prevent Locsin take it away from them. What they (Guevara) did was to simply appoint Bernardo as their
attorney-in-fact to handle the situation and never bothered acquainting themselves with the developments in
the case. To be sure, respondent Jose Manuel Guevara was not even presented asa witness in the case.
There is also strong reason to believe that even the mortgage in favor of DCC was a mere ploy to make it
appear that the Sps. Guevara exercised acts of dominion over the subject property. This is so considering the
proximity between the propertys registration in their names and its being subjected to the mortgage. Most
telling is that the credit line secured by the mortgage was never used by the spouses, resulting in the
mortgages cancellation and the exclusion of DCC as a party in Civil Case No. Q-02-47925.
These circumstances, taken altogether, strongly indicate that Carlos and the spouses Guevara failed to
exercise the necessary level of caution expected of a bona fide buyer and even performed acts that are
highly suspect. Consequently, this Court could not give respondents the protection accorded to innocent
purchasers in good faith and for value.

On Locsin Entitled to Nominal Damages

we find an award for nominal damages to be in order. Under prevailing jurisprudence, nominal damages
are "recoverable where a legal right is technically violated and must be vindicated against an invasion
that has produced no actual present loss of any kind or where there has been a breach of contract and no
substantial injury or actual damages whatsoever have been or can be shown."

Sajonas vs CA
A word or group of words conveys intentions. When used truncatedly, its meaning disappears and breeds
conflict. Thus, it is written -- "By thy words shalt thou be justified, and by thy words shalt thou be condemned."
(Matthew, 12:37)
Facts
On September 22, 1983, the spouses Ernesto Uychocde and Lucita Jarin agreed to sell a parcel of
residential land located in Antipolo, Rizal to the spouses Alfredo Sajonas and Conchita R. Sajonas on

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RSPol. EH 406
installment basis as evidenced by a Contract to Sell dated September 22, 1983. The property was registered
in the names of the Uychocde spouses under TCT No. N-79073 of the Register of Deeds of Marikina, Rizal. On
August 27, 1984, the Sajonas couple caused the annotation of an adverse claim based on the said Contract to
Sell on the title of the subject property, which was inscribed as Entry No. 116017. Upon full payment of the
purchase price, the Uychocdes executed a Deed of Sale involving the property in question in favor of the
Sajonas couple on September 4, 1984. The deed of absolute sale was registered almost a year after, or on
August 28, 1985.
Meanwhile, it appears that Domingo Pilares (defendant-appellant) filed Civil Case No. Q-28850 for
collection of sum of money against Ernesto Uychocde. On June 25, 1980, a Compromise Agreement was
entered into by the parties in the said case under which Ernesto Uychocde acknowledged his monetary
obligation to Domingo Pilares amounting to P27,800 and agreed to pay the same in two years from June 25,
1980. When Uychocde failed to comply with his undertaking in the compromise agreement, defendant-appellant
Pilares moved for the issuance of a writ of execution to enforce the decision based on the compromise
agreement, which the court granted in its order dated August 3, 1982. Accordingly, a writ of execution was
issued on August 12, 1982 by the CFI of Quezon City where the civil case was pending. Pursuant to the order of
execution dated August 3, 1982, a notice of levy on execution was issued on February 12, 1985. On February
12, 1985, defendant sheriff Roberto Garcia of Quezon City presented said notice of levy on execution before the
Register of Deeds of Marikina and the same was annotated at the back of TCT No. 79073 as Entry No. 123283.
When the deed of absolute sale dated September 4, 1984 was registered on August 28, 1985, TCT No.
N-79073 was cancelled and in lieu thereof, TCT No. N-109417 was issued in the name of the Sajonas couple.
The notice of levy on execution annotated by defendant sheriff was carried over to the new title. On
October 21, 1985, the Sajonas couple filed a Third Party Claim with the sheriff of Quezon city, hence the
auction sale of the subject property did not push through as scheduled.
[RSPol Note: Pilares, the creditor of Uychocde, attached the latters property and the same was annotated
on February 12, 1985. On August 28, 1985, the same property was registered in the names of Spouses Sajonas
by virtue of the sale with Uychocde in 1984. However, the levy on attachment was carried over to the new title.]

On January 10, 1986, the Sajonas spouses demanded the cancellation of the notice of levy on execution
upon defendant-appellant Pilares, through a letter to their lawyer, Atty. Melchor Flores. Despite said demand,
defendant-appellant Pilares refused to cause the cancellation of said annotation. In view thereof,
plaintiffs-appellees filed this complaint dated January 11, 1986 on February 5, 1986.

The Sajonases filed their complaint in the Regional Trial Court of Rizal, Branch 71, against Domingo
Pilares, the judgment creditor of the Uychocdes. The relevant portion of the complaint alleges:
That at the time the notice of levy was annotated by the defendant, the Uychocde spouses, debtors of the
defendant, have already transferred, conveyed and assigned all their title, rights and interests to the plaintiffs
and there was no more title, rights or interests therein which the defendant could levy upon;
That the annotation of the levy on execution which was carried over to the title of said plaintiffs is illegal
and invalid and was made in utter bad faith, in view of the existence of the Adverse Claim annotated by the
plaintiffs on the corresponding title of the Uychocde spouses;

Pilares filed his answer with compulsory counterclaim4 on March 8, 1986, raising special and affirmative
defenses, the relevant portions of which are as follows:
That Plaintiff has no cause of action against herein defendants;
That assuming without however admitting that they filed an adverse claim against the property covered by
TCT No. 79073 registered under the name of spouses Ernesto Uychocde on August 27, 1984, the same ceases to
have any legal force and effect (30) days thereafter pursuant to Section 70 of P.D. 1529;
That the Notice of Levy annotated at the back of TCT No. 79073 being effected pursuant to the Writ of
Execution dated August 31, 1982, duly issued by the CFI (now RTC) of Quezon proceeding from a decision
rendered in Civil Case No. 28859 in favor of herein defendant against Ernesto Uychocde, is undoubtedly proper
and appropriate because the property is registered in the name of the judgment debtor and is not among
those exempted from execution;

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RSPol. EH 406
RTC Ruling
The trial court rendered its decision on February 15, 1989.7 It found in favor of the Sajonas couple, and
ordered the cancellation of the Notice of Levy from Transfer Certificate of Title No. N-109417.

CA Ruling
The appellate court reversed the lower court's decision, and upheld the annotation of the levy on execution
on the certificate of title.

SC Ruling
Noting the changes made in the terminology of the provisions of the law, private respondent interpreted
this to mean that a Notice of Adverse Claim remains effective only for a period of 30 days from its
annotation, and does not automatically lose its force afterwards. Private respondent further maintains that
the notice of adverse claim was annotated on August 27, 1984, hence, it will be effective only up to
September 26, 1984, after which it will no longer have any binding force and effect pursuant to Section 70
of P.D. No. 1529. Thus, the sale in favor of the petitioners by the Uychocdes was made in order to defraud their
creditor (Pilares), as the same was executed subsequent to their having defaulted in the payment of their
obligation based on a compromise agreement.
The appellate court relied on the rule of statutory construction that Section 70 is specific and
unambiguous and hence, needs no interpretation nor construction. Perforce, the appellate court stated, the
provision was clear enough to warrant immediate enforcement, and no interpretation was needed to give it force
and effect. A fortiori, an adverse claim shall be effective only for a period of thirty (30) days from the date of its
registration, after which it shall be without force and effect.
Under the Torrens system, registration is the operative act which gives validity to the transfer or
creates a lien upon the land. A person dealing with registered land is not required to go behind the register
to determine the condition of the property. He is only charged with notice of the burdens on the property
which are noted on the face of the register or certificate of title.
Although we have relied on the foregoing rule, in many cases coming before us, the same, however, does
not fit in the case at bar. While it is the act of registration which is the operative act which conveys or affects the
land insofar as third persons are concerned, it is likewise true, that the subsequent sale of property covered by a
Certificate of Title cannot prevail over an adverse claim, duly sworn to and annotated on the certificate of title
previous to the sale. While it is true that under the provisions of the Property Registration Decree, deeds of
conveyance of property registered under the system, or any interest therein only take effect as a conveyance to
bind the land upon its registration, and that a 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, nonetheless, this rule is not absolute. Thus, one who buys from the registered owner need not
have to look behind the certificate of title, he is, nevertheless, bound by the liens and encumbrances
annotated thereon. One who buys without checking the vendor's title takes all the risks and losses
consequent to such failure.
In PNB vs. Court of Appeals, we held that "the subsequent sale of the property to the De Castro spouses
cannot prevail over the adverse claim of Perez, which was inscribed on the bank' s certificate of title on
October 6, 1958. That should have put said spouses on notice, and they can claim no better legal right over and
above that of Perez. The TCT issued in the spouses' names on July, 1959 also carried the said annotation of
adverse claim. Consequently, they are not entitled to any interest on the price they paid for the property.
Then again, in Gardner vs. Court of Appeals, we said that "the statement of respondent court in its
resolution of reversal that 'until the validity of an adverse claim is determined judicially, it cannot be considered
a flaw in the vendor's title' contradicts the very object of adverse claims. As stated earlier, the annotation of an
adverse claim is a measure designed to protect the interest of a person over a piece of real property, and
serves as a notice and warning to third parties dealing with said property that someone is claiming an
interest on the same or has a better right than the registered owner thereof. A subsequent sale cannot
prevail over the adverse claim which was previously annotated in the certificate of title over the property.

The question may be posed, was the adverse claim inscribed in the Transfer Certificate of Title No.
N-109417 still in force when private respondent caused the notice of levy on execution to be registered and
annotated in the said title, considering that more than thirty days had already lapsed since it was annotated?

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 In construing the law, care should be taken that every part thereof be given effect and a construction
that could render a provision inoperative should be avoided, and inconsistent provisions should be
reconciled whenever possible as parts of a harmonious whole. For taken in solitude, a word or phrase
might easily convey a meaning quite different from the one actually intended and evident when a word or
phrase is considered with those with which it is associated." In ascertaining the period of effectivity of an
inscription of adverse claim, we must read the law in its entirety. Sentence three, paragraph two of Section 70 of
P.D. 1529 provides: The adverse claim shall be effective for a period of thirty days from the date of
registration."
At first blush, the provision in question would seem to restrict the effectivity of the adverse claim to thirty
days. But the above provision cannot and should not be treated separately, but should be read in relation to the
sentence following, which reads: After the lapse of said period, the annotation of adverse claim may be
cancelled upon filing of a verified petition therefor by the party in interest.
If the rationale of the law was for the adverse claim to ipso facto lose force and effect after the lapse of
thirty days, then it would not have been necessary to include the foregoing caveat to clarify and complete the
rule. For then, no adverse claim need be cancelled. If it has been automatically terminated by mere lapse of
time, the law would not have required the party in interest to do a useless act.
A statute's clauses and phrases must not be taken separately, but in its relation to the statute's totality. Each
statute must, in fact, be construed as to harmonize it with the pre-existing body of laws. Unless clearly
repugnant, provisions of statutes must be reconciled. The printed pages of the published Act, its history, origin,
and its purposes may be examined by the courts in their construction.
Construing the provision as a whole would reconcile the apparent inconsistency between the portions of
the law such that the provision on cancellation of adverse claim by verified petition would serve to qualify the
provision on the effectivity period. The law, taken together, simply means that the cancellation of the adverse
claim is still necessary to render it ineffective, otherwise, the inscription will remain annotated and shall
continue as a lien upon the property. For if the adverse claim has already ceased to be effective upon the lapse of
said period, its cancellation is no longer necessary and the process of cancellation would be a useless ceremony.
It should be noted that the law employs the phrase "may be cancelled", which obviously indicates, as
inherent in its decision making power, that the court may or not order the cancellation of an adverse
claim, nothwitstanding such provision limiting the effectivity of an adverse claim for thirty days from the date
of registration. The court cannot be bound by such period as it would be inconsistent with the very authority
vested in it. A fortiori, the limitation on the period of effectivity is immaterial in determining the validity or
invalidity of an adverse claim which is the principal issue to be decided in the court hearing. It will therefore
depend upon the evidence at a proper hearing for the court to determine whether it will order the cancellation of
the adverse claim or not.
To interpret the effectivity period of the adverse claim as absolute and without qualification limited to
thirty days defeats the very purpose for which the statute provides for the remedy of an inscription of adverse
claim, as the annotation of an adverse claim is a measure designed to protect the interest of a person over
a piece of real property where the registration of such interest or right is not otherwise provided for by
the Land Registration Act or Act 496 (now P.D. 1529 or the Property Registration Decree), and serves as a
warning to third parties dealing with said property that someone is claiming an interest or the same or a
better right than the registered owner thereof.
The reason why the law provides for a hearing where the validity of the adverse claim is to be threshed out
is to afford the adverse claimant an opportunity to be heard, providing a venue where the propriety of his
claimed interest can be established or revoked, all for the purpose of determining at last the existence of any
encumbrance on the title arising from such adverse claim. This is in line with the provision immediately
following: Provided, however, that after cancellation, no second adverse claim shall be registered by the same
claimant.
Should the adverse claimant fail to sustain his interest in the property, the adverse claimant will be
precluded from registering a second adverse claim based on the same ground.
In sum, the disputed inscription of an adverse claim on the Transfer Certificate of Title No. N-79073
was still in effect on February 12, 1985 when Quezon City Sheriff Roberto Garcia annotated the notice of
levy on execution thereto. Consequently, he (Pilares) is charged with knowledge that the property sought
to be levied upon the execution was encumbered by an interest the same as or better than that of the

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registered owner thereof. Such notice of levy cannot prevail over the existing adverse claim inscribed on
the certificate of title in favor of the petitioners.

On Petitioners as Buyers in Good Faith

As to whether or not the petitioners are buyers in good faith of the subject property, the same should be
made to rest on the findings of the trial court. As pointedly observed by the appellate court, "there is no question
that plaintiffs-appellees were not aware of the pending case filed by Pilares against Uychocde at the time of the
sale of the property by the latter in their favor. This was clearly elicited from the testimony of Conchita Sajonas,
wife of plaintiff, during cross-examination on April 21, 1988."
Good faith consists in an honest intention to abstain from taking an unconscientious advantage of another.
Thus, the claim of the private respondent that the sale executed by the spouses was made in fraud of
creditors has no basis in fact, there being no evidence that the petitioners had any knowledge or notice of
the debt of the Uychocdes in favor of the private respondent, nor of any claim by the latter over the
Uychocdes' properties or that the same was involved in any litigation between said spouses and the private
respondent. While it may be stated that good faith is presumed, conversely, bad faith must be established by
competent proof by the party alleging the same. Sans such proof, the petitioners are deemed to be purchasers in
good faith, and their interest in the subject property must not be disturbed.
At any rate, the Land Registration Act (Property Registration Decree) guarantees to every purchaser
of registered land in good faith that they can take and hold the same free from any and all prior claims,
liens an encumbrances except those set forth on the Certificate of Title and those expressly mentioned in
the ACT as having been reserved against it. Otherwise, the efficacy of the conclusiveness of the Certificate of
Title which the Torrens system seeks to insure would be futile and nugatory.
The inscription of the notice of levy On execution on TCT No. N-109417 is hereby CANCELLED.

Rodriguez vs CA
Facts
The facts show that herein respondent Spouses Antonio and Maridel Calingo (respondents Calingo)
were the registered owners of a house and lot located at No. 7903 Redwood Street, Marcelo Green Village,
Paraaque, Metro Manila. The property was mortgaged to the Development Bank of the Philippines,
which mortgage was later absorbed by the Home Mutual Development Fund (HMDF) or Pag-ibig.
On April 27, 1992, respondents Calingo and respondent Spouses Christopher and Ma. Angelica
Barrameda (respondents Barrameda) entered into a contract of sale with assumption of mortgage where
the former sold to the latter the property in question and the latter assumed to pay the outstanding loan
balance to the Development Bank of the Philippines. Respondents Barrameda issued two checks in the
amounts of P150,000.00 and P528,539.76, for which respondents Calingo issued a receipt dated April 24, 1992.
In a letter dated April 23, 1992, respondent Antonio S. Calingo informed HMDF/Pag-ibig about the sale of
the property with assumption of mortgage. Said letter, however, together with an affidavit by respondents
Calingo, was served upon HMDF/Pag-ibig on October 2, 1992.
On May 29, 1992, respondents Barrameda filed with the Register of Deeds of Paraaque an affidavit
of adverse claim on the property. The adverse claim was inscribed at the back of the certificate of title as
Entry No. 3439.
On June 1, 1992, respondent Ma. Angelica Paez-Barrameda wrote HMDF, Mortgage and Loans Division
informing the office that they have purchased the subject property from the Calingo spouses and that they filed a
notice of adverse claim with the Register of Deeds of Paraaque. They also sought assistance from said office as
regards the procedure for the full settlement of the loan arrearages and the transfer of the property in their names.
Respondents Barrameda moved into the property on June 2, 1992.
On July 13, 1992, a notice of levy with attachment on real property by virtue of a writ of execution
was annotated at the back of the certificate of title of the property in question. The writ of execution was
issued by Judge Salvador Abad Santos, Regional Trial Court of Makati, Branch 65 in connection with Civil
Case No. 88-2159 involving a claim by herein petitioners, Spouses Francisco and Bernardina Rodriguez,
against respondents Calingo. Judge Abad Santos issued the writ in favor of petitioners Rodriguez.

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 On July 21, 1992, petitioners counsel, Atty. Nelson A. Loyola, sent a letter to respondents Barrameda
inquiring about the basis of their occupation of the property in question.
On August 21, 1992, respondents Barrameda remitted to respondents Calingo the amount of P364,992.07
to complete the payment of the agreed purchase price. Respondents Calingo acknowledged receipt of said
amount and waived all their rights to the property in favor of the Barrameda spouses. They also
guaranteed that the property was clear and free from any liens and encumbrances, except the real estate
mortgage assumed by respondents Barrameda.
On October 7, 1992, respondents Barrameda executed a joint affidavit stating that they are the owners of
the property in question by virtue of a deed of sale with assumption of mortgage; that they registered an
affidavit of adverse claim with the Register of Deeds of Paraaque; that the Sheriff of the Regional Trial Court,
Branch 65, Makati, Sheriff Manuel C. Dolor, levied said property despite their adverse claim; and that they have
acquired the property long before the levy was made, and therefore, said levy was illegal. They served a copy of
the affidavit on petitioners counsel, Atty. Loyola, who made a reply thereto on October 15, 1992.
In his letter to Christopher Barrameda dated October 15, 1992, Atty. Loyola pointed out that the alleged
deed of sale with assumption of mortgage was not registered with the Register of Deeds and that the
records of the HMDF show that the property is owned by the Calingo spouses. He urged the Barrameda
spouses to confer with the petitioners to amicably settle the controversy.
On November 9, 1992, respondents Barrameda found a Notice of Sheriffs Sale posted on their front
gate, announcing the auction sale of their house and lot on December 3, 1992 at 10:00 in the morning.
On November 20, 1992, pursuant to Rule 39, Section 17 of the Revised Rules of Court, respondents
Barrameda served a Notice of Third Party Claim upon Sheriff Manuel C. Dolor, accompanied by their affidavit
of title.
On December 2, 1992, respondents Barrameda filed with the Regional Trial Court of Makati a petition for
quieting of title with prayer for preliminary injunction. The petition prayed, among others, that the execution
sale of the property be enjoined, the notice of levy and attachment inscribed on the certificate of title be
cancelled, and that respondents Barrameda be declared the lawful and sole owners of the property in question.

RTC Ruling
The trial court ruled in favor of herein petitioners and dismissed respondents Barramedas petition for
quieting of title. It ruled that the annotation of respondents Barramedas adverse claim at the back of the
certificate of title was insufficient to establish their claim over the property. It said that respondents Barrameda,
as buyers of the property, should have registered the title in their names.

CA Ruling
The court held that the notice of levy could not prevail over respondents Barramedas adverse claim citing
Sanjonas vs CA.

SC Ruling
Respondents Barrameda anchor their claim on the property on the deed of sale with assumption of
mortgage executed by them and respondents Calingo on April 27, 1992. The Property Registration Decree
requires that such document be registered with the Register of Deeds in order to be binding on third
persons.
It is admitted in this case that the deed of sale with assumption of mortgage was not registered, but
instead, respondents Barrameda filed an affidavit of adverse claim with the Register of Deeds. The
question now is whether the adverse claim is sufficient to bind third parties such as herein petitioners.
In L.P. Leviste and Company, Inc. v. Noblejas, we explained when an inscription of an adverse claim is
sufficient to affect third parties: The annotation of an adverse claim is a measure designed to protect the interest
of a person over a piece of real property where the registration of such interest or right is not otherwise
provided for by the Land Registration Act, and serves as a notice and warning to third parties dealing with
said property that someone is claiming an interest on the same or a better right than the registered owner
thereof.
In the case at bar, the reason given for the non-registration of the deed of sale with assumption of
mortgage was that the owners duplicate copy of the certificate of title was in the possession of HMDF. It
was not shown, however, that either respondents Barrameda or respondents Calingo exerted any effort to

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RSPol. EH 406
retrieve the owners duplicate copy from the HMDF for the purpose of registering the deed of sale with
assumption of mortgage. In fact, the parties did not even seek to obtain the consent of, much less inform,
the HMDF of the sale of the property. This, despite the provision in the contract of mortgage prohibiting the
mortgagor (respondents Calingo) from selling or disposing the property without the written consent of the
mortgagee. Respondents Calingo, as party to the contract of mortgage, are charged with the knowledge of such
provision and are bound to comply therewith. Apparently, there was haste in disposing the property that
respondents Calingo informed HMDF of the sale only on October 2, 1992 when they served a copy of
their letter to said office regarding the transfer of the property to respondents Barrameda. There was no
reason for the parties failure to seek the approval of the HMDF to the sale as it appears from the letter of
respondent Angelica Paez-Barrameda to HMDF that they were ready to pay in full the balance of the loan plus
interest. What is more suspect is that the judgment against respondents Calingo ordering them to pay the
petitioners the sum of P1,159,355.90 was rendered on January 28, 1992, before the sale of the property on
April 27, 1992. We also find it unsettling that respondents Barrameda, without any reservation or inquiry,
readily remitted to respondents Calingo the full payment for the property on August 21, 1992 despite
knowledge of the levy on execution over the property in July of the same year. Any prudent buyer of real
property, before parting with his money, is expected to first ensure that the title to the property he is about to
purchase is clear and free from any liabilities and that the sellers have the proper authority to deal on the
property.
Again, we stress that the annotation of an adverse claim is a measure designed to protect the interest
of a person over a piece of property where the registration of such interest or right is not otherwise
provided for by the law on registration of real property. Section 70 of Presidential Decree No. 1529 is clear:
Sec. 70. Adverse claim. Whoever claims any part or interest in registered land adverse to the
registered owner, arising subsequent to the date of the original registration, may, if no other provision
is made in this Decree for registering the same, make a statement in writing setting forth his alleged
right or interest, and how or under whom acquired, a reference to the number of the certificate of title
of the registered owner, the name of the registered owner, and a description of the land in which the
right or interest is claimed. xxx

The deed of sale with assumption of mortgage executed by respondents Calingo and Barrameda is a
registrable instrument. In order to bind third parties, it must be registered with the Office of the Register
of Deeds. It was not shown in this case that there was justifiable reason why the deed could not be
registered. Hence, the remedy of adverse claim cannot substitute for registration.

Golden Haven Memorial Park vs Filinvest

Facts
Petronila Yap (Yap), Victoriano and Policarpio Vivar (the Vivars), Benjamin Cruz (Cruz), Juan
Aquino (Aquino), Gideon Corpuz (Corpuz), and Francisco Sobremesana (Sobremesana), and some other
relatives inherited a parcel of land in Las Pias City covered by Transfer Certificate of Title (TCT) 67462
RT-1. Subsequently, the heirs had the land divided into 13 lots and, in a judicial partition, the court
distributed four of the lots as follows: a) Lots 1 and 12 to Aquino; b) Lot 2 to Corpuz and Sobremesana;
and (c) Lot 6 to Yap, Cruz, and the Vivars. The other lots were distributed to the other heirs.
On March 6, 1989 Yap, acting for herself and for Cruz and the Vivars, executed an agreement to sell
Lot 6 in favor of Golden Haven Memorial Park, Inc. (GHM), payable in three installments. On July 31,
1989 another heir, Aquino, acting for himself and for Corpuz and Sobremesana, also executed an
agreement to sell Lots 1, 2, and 12 in favor of GHM, payable in the same manner. In both instances, GHM
paid the first installment upon execution of the contract.
On August 4, 1989 GHM caused to be annotated a Notice of Adverse Claim on TCT 67462 RT-1. On
September 20, 1989 the sellers of the four lots wrote GHM that they were still working on the titling of the lots
in their names and wanted to know if GHM was still interested in proceeding with their agreements. GHM
replied in the affirmative on September 21, 1989 and said that it was just waiting for the sellers titles so it can
pay the second installments.

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 Sometime in August of 1989, Filinvest Development Corporation (Filinvest) applied for the transfer in its
name of the titles over Lots 2, 4, and 5 but the Las Pias Register of Deeds declined its application. Upon
inquiry, Filinvest learned that Lot 8, a lot belonging to some other heir or heirs and covered by the same
mother title, had been sold to Household Development Corporation (HDC), a sister company of GHM,
and HDC held the owners duplicate copy of that title. Filinvest immediately filed against HDC a petition for
the surrender and cancellation of the co-owners duplicate copy of TCT 67462 RT-1. Filinvest alleged that it
bought Lots 1, 2, 6, and 12 of the property from their respective owners as evidenced by three deeds of absolute
sale in its favor dated September 10, November 18, and December 29, 1989 and that Filinvest was entitled to
the registrations of such sales.
[RSPol Note: GHM bought lots 1, 2, 6 and 12. Filinvest bought lots 1, 2, 6 and 12.]

RTC Ruling
On January 14, 1991 GHM filed against the sellers and Filinvest a complaint for the annulment of the
deeds of sale issued in the latters favor before the Regional Trial Court (RTC) of Las Pias City in Civil Case
91-098. On March 16, 2006 the RTC rendered a decision after trial, declaring the contracts to sell executed
by some of the heirs in GHMs favor valid and enforceable and the sale in favor of Filinvest null and void.
Only Filinvest appealed among the defendants.

CA Ruling
On November 25, 2008 the Court of Appeals (CA) affirmed the RTC decision with respect to the validity
of the contract to sell Lot 6 in GHMs favor. But the CA declared the contracts to sell Lots 1, 2, and 12 in
GHMs favor void and the sale of the same lots in favor of Filinvest valid.

SC Ruling
To prove good faith, the rule is that the buyer of registered land needs only show that he relied on the
title that covers the property. But this is true only when, at the time of the sale, the buyer was unaware of
any adverse claim to the property. Otherwise, the law requires the buyer to exercise a higher degree of
diligence before proceeding with his purchase. He must examine not only the certificate of title, but also the
sellers right and capacity to transfer any interest in the property. In such a situation, the buyer must show
that he exercised reasonable precaution by inquiring beyond the four corners of the title. Failing in these, he
may be deemed a buyer in bad faith.
Here, Filinvest was on notice that GHM had caused to be annotated on TCT 67462 RT-1, the mother
title, as early as August 4, 1989 a notice of adverse claim covering Lot 6. This notwithstanding, Filinvest
still proceeded to buy Lots 1, 2, 6, and 12 on September 10, November 18, and December 29, 1989.
[RSPol Note: On Aug 4, 1989, GHM already made an adverse claim on Lots 1, 2, 6 and 12. However,
Filinvest continued to buy said lots on Sept 10, Nov 18 and Dec 1989 despite knowledge of the adverse claim of
GHM.]

Filinvest of course contends that, although the title carried a notice of adverse claim, that notice was only
with respect to seller Yaps interest in Lot 6 and it did not affect Lots 1, 2, 12, and the remaining interests in Lot
6. The Court disagrees.
The annotation of an adverse claim is intended to protect the claimants interest in the property. The notice
is a warning to third parties dealing with the property that someone claims an interest in it or asserts a better
right than the registered owner. Such notice constitutes, by operation of law, notice to the whole world. Here,
although the notice of adverse claim pertained to only one lot and Filinvest wanted to acquire interest in
some other lots under the same title, the notice served as warning to it that one of the owners was engaged
in double selling.
What is more, upon inquiry with the Register of Deeds of Las Pias, Filinvest also learned that the heirs of
Andres Aldana sold Lot 8 to HDC and turned over the co-owners duplicate copy of TCT 67462 RT-1 to that
company which had since then kept the title. Filinvest (referred to below as FDC) admits this fact in its
petition,7 thus:
Sometime in August 1989, FDC applied with the Register of Deeds of Las Pias for the transfer
and registration of Lots 2, 4, and 5 in its name and surrendered the co-owners duplicate copy of TCT
No. (67462) RT-1 given to it by the Vivar family, but the Register of Deeds of Las Pias City refused

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RSPol. EH 406
 to do the transfer of title in the name of FDC and instead demanded from FDC to surrender as well the
other co-owner's duplicate copy of TCT No. (67462) RT-1 which was issued to the heirs of Andres
Aldana. Upon further inquiry, FDC came to know that the heirs of Andres Aldana sold Lot 8
and delivered their co-owner's duplicate copy of TCT No. (67462) RT-1 to Household
Development Corporation, a sister company of respondent GHMPI. FDC made representations to
Household Development Corporation for the surrender of said co-owner's duplicate copy of TCT No.
(67462) RT-1 to the Register of Deeds of Las Pias City, but Household Development Corporation
refused to do so.

Filinvests knowledge that GHM, a competitor, had bought Lot 6 in which Filinvest was interested,
that GHM had annotated an adverse claim to that Lot 6, and that GHM had physical possession of the
title, should have put Filinvest on its toes regarding the prospects it faced if it bought the other lots
covered by the title in question. Filinvest should have investigated the true status of Lots 1, 2, 6, and 12 by
asking GHM the size and shape of its interest in the lands covered by the same title, especially since both
companies were engaged in the business of developing lands. One who has knowledge of facts which should
have put him upon such inquiry and investigation cannot claim that he has acquired title to the property in good
faith as against the true owner of the land or of an interest in it.
The Court upholds the validity of the contracts between GHM and its sellers. As the trial court aptly
observed, GHM entered into valid contracts with its sellers but the latter simply and knowingly refused
without just cause to honor their obligations. The sellers apparently had a sudden change of heart when
they found out that Filinvest was willing to pay more.
As to the award of exemplary damages, the Court sustains the CA ruling. This species of damages is
allowed only in addition to moral damages such that exemplary damages cannot be awarded unless the claimant
first establishes a clear right to moral damages. Here, since GHM failed to prove that it is entitled to moral
damages, the RTCs award of exemplary damages had no basis. But the grant of attorneys fees is proper. As the
RTC noted, this case has been pending since 1991, or for 19 years now. GHM was forced to litigate and incur
expenses in order to protect its rights and interests.

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