Naawan Community Rural Bank vs. Court of Appeals

Naawan Community Rural Bank vs.
Court of Appeals
January 13, 2003 | Corona, J. | Delivery of the thing sold
PETITIONER: Naawan Community Rural Bank, Inc.

RESPONDENTS: CA and Spouses Alfredo and Annabelle Lumo
SUMMARY:
Facts: Comaya (original owner) sold a house and lot to respondents. However,
it was discovered that it was mortgaged to a certain Galupo. They still
continued with the sale. However, again, upon requesting for the issuance of a
tax declaration, respondents discovered that it was named after the petitioner.
The petitioner was the mortgagee of Comaya but then the latter failed to pay
his loan resulting to the foreclosure of the land. Petitioner filed an ejectment
case against the respondents but the latter filed a petition for quieting of title.
Petitioner contest that the sheriff’s deed of final conveyance must prosper as a
superior right over the subject property.
Ruling: The petitioner is wrong. It invoked Article 1544 of the Civil Code;
however, the application of the said provision is only applicable when the
execution sale of real estate is registered under Act 496. The respondents are
deemed by the Court as purchasers in good faith.
DOCTRINE: In order to invoke Article 1544 of the Civil Code to this situation, it
is important that its registration referred to land not within the Torrens System
but under Act 3344.
FACTS:
1. On April 30, 1988, Guillermo Comayas (Comayas) offered to sell a house and lot
at Piniktan Camaman-an, Cagayan de Oro City to herein respondents-spouses
Alfredo and Annabelle Lumo.
a. Respondent-spouses inquired to the Register of Deeds Cagayon de Oro
City regarding the status of the title and found out that it was mortgaged
for P8,000 to Mrs. Galupo (Galupo) and the Certificate of Title was in her
possession.
b. Respondent-spouses ordered Comayas to redeem the property. They
gave him P10,000 for the redemption.
2. Before the release of the adverse claim (May 17, 1998), respondent-spouses and
Comayas executed a deed of absolute sale to the subject property. It was sold
for P125,000 but the deed of sale reflected only the amount of P30,000.
3. On May 30, 1998, a release of adverse claim of Galupo was annotated on the
TCT covering the subject property.
4. On June 9, 1988, a deed of absolute sale was registered and issued in favor of
respondent-spouses.
5. When they requested for the issuance of a new tax declaration certificate,
respondent-spouses were surprised to learn that it was already declared in the
name of Naawan Community Rural Bank, Inc. (petitioner).
a. This is because on February 7, 1983, Comayas obtained P15,000 loan
from petitioner using the subject property as a security to it.
i. When the subject property was used as a security, it was still
unregistered and tax-declared in the name of Sergio Balibay
(Balibay).
ii. Balibay executed a special power of attorney authorizing Comayas
to borrow money and used the subject property as a security. Upon
the registration of the land (registration of Deed of Real Estate
Mortgage and Special Power of Attorney), it was registered to the
Province of Misamis Oriental and not to Cagayan de Oro City
because at that time, there was not Register of Deeds for Cagayan
de Oro City until 1985.
b. Comayas failed to pay the real estate mortgage against petitioner resulting
to the property to be foreclosed and was further awarded to petitioner in
the amount of P16,031.35.
i. April 17, 1984 – the subject property was registered in the Register
of Deeds of Cagayan de Oro City.
ii. July 23, 1984 – a transfer certificate of title was entered in the
name of Comayas.
iii. September 5, 1986 – the period of redemption of the
foreclosed subject property lapsed; therefore, the MTCC
Deputy Sheriff issued to deliver to petitioner bank the sheriff’s
deed of final conveyance. The deed is also registered in the
RD od CDO.
c. Petitioner bank instituted an action for ejectment against Comayas before
the MTCC. The Court decided in petitioner’s favor as well to the RTC.
Upon the issuance of the order of a writ of execution of its judgment, it
was discovered that Comayas was no longer occupant of the said
property but respondent-spouses.
6. Upon knowing the ejectment case filed against them, respondent-spouses filed
an action for quieting of title. The RTC ruled that respondent-spouses are
purchasers for value and in good faith. They are also deemed as the absolute
owners and possessors of the subject property.
ISSUE:
1. Whether or not sheriff's deed of final conveyance was duly executed and
registered in the register of deeds of cagayan de oro city on december 2, 1986;
2. Whether or not respondent-spouses are buyers in good faith.
HELD:
1. No.
Petitioner bank invoked Article 1544 of the Civil Code, specifically:
". . . . Should it be immovable property, the ownership shall belong to the person
acquiring it who in good faith first recorded it in the Registry of Property."
However, when a person claims to have superior rights on the ground that he derived
his title from a sheriff’s sale registered in the Registry of Property, the provision above
shall only be applied when the execution sale of real estate is registered under Act 496.
In application to the case at hand, the subject property was still untitled when it was in
the possession of the petitioner bank. At the time, the respondent-spouses purchased
the subject property, it was already registered under the Torrens System.
Additional: It must be noted that the execution and delivery of the sheriff’s deed of final
conveyance on September 5, 1986 was already covered by the Land Registration Act,
but as early as April 16, 1984, the Original Certificate of Title was entered into the RD of
CDO. From April 17, 1984, the subject property was under the operation of the Torrens
System.
The priority in time principle under the Torrens System is not applicable to the case at
hand because e its registration referred to land not within the Torrens System but under
Act 3344.
2. Yes.
Respondent-spouses exercised the required diligence in ascertaining the legal condition
of the subject property through their act of inquiring with the Registry of Deeds and the
Bureau of Lands. They were not aware of any liens, encumbrances or adverse claim
except of Galupo. Private respondents did not go beyond the certificate of title because
if they did, the efficacy and conclusiveness of the Torrens Certificate of Title would be
nugatory.

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Naawan Community Rural Bank vs.

PETITIONER: Naawan Community Rural Bank, Inc.

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