Case Digest: National Grains Authority vs. Intermediate Appellate Court, No. L-68741. January 28, 1988.

CASE TITLE: National Grains Authority vs. Intermediate Appellate Court
GR No/ Date:  No. L-68741. January 28, 1988.
PONENTE: Paras, J.
CASE WITH THE SC: Petition for Review
PROCEDURAL ANTECEDENTS: CFI - Complaint to be Declared Owners or Reconveyance  IAC - Appeal
FACTS: On December 2, 1971, Paulino Vivas and Engracia Lizards sold a 105,710 sqm land in Victoria, Laguna, to Melencio Magcamit, Nena Cosico, and Amelita Magcamit for P30,000.00, with a right to repurchase. On January 31, 1972, the sale was made absolute for P90,000.00. The P50,000.00 paid immediately and the balance of P40,000.00 is to be paid upon issuance of the certificate of title.  The buyers took possession of the property. On February 26, 1975, an Original Certificate of Title No. T-1728 was issued to the Vivas spouses without the buyers' knowledge.  On April 30, 1975, the Vivas spouses executed a Special Power of Attorney to Irenea Ramirez to mortgage the property with the National Grains Authority (NGA). On May 2, 1974, NGA requested the Provincial Sheriff for extrajudicial foreclosure of the mortgage due to unpaid indebtedness of P63,948.80.  On June 28, 1974, the public auction was held resulting to NGA being the highest bidder and obtaining a Certificate of Sale. On July 10, 1974, NGA sold the property to itself and obtained TCT No. T-75171. It was only in July 1974, when the buyers learned of this and offered to pay NGA the P40,000.00 balance, but NGA refused. On July 31, 1974, the buyers' counsel demanded the Vivas spouses comply with the absolute deed of sale terms and reiterated the offer to pay NGA. NGA informed the buyers' counsel it was now the property owner and had no intention of selling. NGA requested the buyers to vacate the property, but they refused.  NGA's filed an ejectment suit. MTC-Laguna: Dismissed the ejectment suit. On June 4, 1975, the buyers filed a complaint seeking to be declared owners and remain in possession, or for NGA to reconvey the property. CFI: Ruled in favor of NGA, declaring it the lawful owner and ordering the buyers to vacate. IAC: Reversed the decision on January 31, 1984, ordering NGA to reconvey the property and the Vivas spouses to pay NGA P78,375.00 within thirty days.
ISSUES: Whether violation of the terms of the agreement between the spouses Vivas and Lizardo, the sellers, and private respondents, the buyers, to deliver the certificate of title to the latter, upon its issuance, constitutes a breach of trust sufficient to defeat the title and right acquired by petitioner NGA, an innocent purchaser for value. NO
ARGUMENTS/LEGAL BASES
PETITIONER	RESPONDENTS
NGA maintained that it was never a privy to any transaction and claimed it was a purchaser in good faith and for value of the property and that the title was indefeasible, asserting the buyers' action was prescribed.	-
PREVAILING PARTY:  NGA
It is undisputed that: there are two deeds of sale of the same land in favor of private respondents, namely:  the conditional sale with right to repurchase or the 'Kasulatan Ng Bilihang Mabibiling Muli" which was registered under Act 3344 and the deed of absolute sale or "Kasulatan ng Bilihang Tuluyan" which was not registered; the condition that the Certificate of Title will be delivered to the buyers upon its issuance and upon payment of the balance of P40,000.00 is contained in the deed of absolute sale; and  the land in question at the time of the execution of both sales was not yet covered by the Torrens System of registration. It is axiomatic, that while the registration of the conditional sale with right of repurchase may be binding on third persons, it is by provision of law "understood to be without prejudice to third party who has better right" (Section 194 of the Administrative Code, as amended by Act No. 3344). In this case, it will be noted that the third party NGA, is a registered owner under the Torrens System and has obviously a better right than private respondents and that the deed of absolute sale with the suspensive condition is not registered and is necessarily binding only on the spouses Vivas and Lizardo and private respondents. In their complaint at the Regional Trial Court, private respondents prayed among others, for two alternative reliefs, such as: to be declared the owners of the property in question or  to order the declared owner to reconvey or transfer the ownership of the property in their favor. Private respondents claim a better right to the property in question by virtue of the Conditional Sale, later changed to a deed of Absolute Sale which although unregistered under the Torrens System allegedly transferred to them the ownership and the possession of the property in question. In fact, they argue that they have been and are still in possession of the same openly, continuously, publicly under a claim of ownership adverse to all other claims since the purchase on December 2, 1971. It is stressed that not until the month of July, 1974 did the plaintiff learn that a title had been issued covering the property in question. Time and time again, this Court has ruled that the proceedings for the registration of title to land under the Torrens System is an action in rem not in personam, hence, personal notice to all claimants of the res is not necessary in order that the court may have jurisdiction to deal with and dispose of the res. Neither may lack of such personal notice vitiate or invalidate the decree or title issued in a registration proceeding, for the State, as sovereign over the land situated within it, may provide for the adjudication of title in a proceeding in rem or one in the nature of or akin a to proceeding in rem which shall be binding upon all persons, known or unknown  It is thus evident that respondents' right over the property was barred by res judicata when the decree of registration was issued to spouses Vivas and Lizards. It does not matter that they may have had some right even the right of ownership, BEFORE the grant of the Torrens Title. Thus, under Section 44 of P.D. 1529, every registered owner receiving a certificate of title in pursuance of a decree of registration, and every subsequent purchaser of registered land taking a certificate of title for value and in good faith, shall hold the same free from all encumbrances except those noted on the certificate and any of the encumbrances which may be subsisting, and enumerated in the law. Under said provision, claims and liens of whatever character, except those mentioned by law as existing, against the land prior to the issuance of certificate of title, are cut off by such certificate if not noted thereon, and the certificate so issued binds the whole world, including the government  If the purchaser is the only party who appears in the deeds and the registration of titles in the property registry, no one except such purchaser may be deemed by law to be the owner of the properties in question. Moreover, no title to registered land in derogation to that of the registered owner shall be acquired by prescription or adverse possession,  It does not appear that private respondents' claim falls under any of the exceptions provided for under Section 44 of P.D. 1529 which can be enforced against petitioner herein. Thus, it has been invariably restated by this Court, that "The real purpose of the Torrens System is to quiet title to land and to stop forever any question as to its legality. "Once a title is registered, the owner may rest secure, without the necessity of waiting in the portals of the court, or sitting on the "mirador su casato," avoid the possibility of losing his land." "An indirect or collateral attack on a Torrens Title is not allowed." The only exception to this rule is where a person obtains a certificate of title to a land belonging to another and he has full knowledge of the rights of the true owner. He is then considered as guilty of fraud and he may be compelled to transfer the land to the defrauded owner so long as the property has not passed to the hands of an innocent purchaser for value. It will be noted that the spouses Vivas and Lizardo never committed any fraud in procuring the registration of the property in question. On the contrary, their application for registration which resulted in the issuance of OCT No. 1728 was with complete knowledge and implied authority of private respondents who retained a portion of the consideration until the issuance to said spouses of a certificate of title applied for under the Torrens Act and the corresponding delivery of said title to them.  The question therefore, is not about the validity of OCT No. 1728 but in the breach of contract between private respondents and the Vivas spouses. Petitioner NGA was never a privy to this transaction. Neither was it shown that it had any knowledge at the time of the execution of the mortgage, of the existence of the suspensive condition in the deed of absolute sale much less of its violation. Nothing appeared to excite suspicion. The Special Power of Attorney was regular on its face; the OCT was in the name of the mortgagor and the NGA was the highest bidder in the public auction. Unquestionably, therefore, the NGA is an innocent purchaser for value, first as an innocent mortgagee under Section 32 of P.D. 1529 and later as innocent purchaser for value in the public auction sale. Private respondents claim that NGA did not even field any representative to the land which was not even in the possession of the supposed mortgagors, nor present any witness to prove its allegations in the ANSWER nor submit its DEED OF MORTGAGE to show its being a mortgages in good faith and for value. Such contention is, however, untenable. Well settled is the rule that all persons dealing with property covered by a torrens certificate of title are not required to go beyond what appears on the face of the title. When there is nothing on the certificate of title to indicate any cloud or vice in the ownership of the property, or any encumbrance thereon, the purchaser is not required to explore further than what the torrens title upon its face indicates in quest for any hidden defect or inchoate right that may subsequently defeat his right thereto. More specifically, the Court has ruled that a bank is not required before accepting a mortgage to make an investigation of the title of the property being given as security, and where innocent third persons like mortgagee relying on the certificate of title acquire rights over the property, their rights cannot be disregarded. Under the circumstances, the Regional Trial Court could not have erred in ruling that plaintiffs (private respondents herein) complaint insofar as it prays that they be declared owners of the land in question can not prosper in view of the doctrine of indefeasibility of title under the Torrens System, because it is an established principle that a petition for review of the decree of registration will not prosper even if filed within one year from the entry of the decree if the title has passed into the hands of an innocent purchaser for value (Pres. Decree No. 1529, Sec. 32). The setting aside of the decree of registration issued in land registration proceedings is operative only between the parties to the fraud and the parties defrauded and their privies, but not against acquirers in good faith and for value and the successors in interest of the latter; as to them the decree shall remain in full force and effect forever. Assuming, therefore, that there was fraud committed by the sellers against the buyers in the instant case, petitioner NGA who was not privy therein cannot be made to suffer the consequences thereof. As correctly declared by the trial court, the National Grains Authority is the lawful owner of the property in question by virtue of its indefeasible title. As to private respondents' alternative prayer that the declared owner be ordered to reconvey or transfer the ownership of the property in their favor, it is clear that there is absolutely no reason why petitioner, an innocent purchaser for value, should reconvey the land to the private respondents. PREMISES CONSIDERED, the decision of the Court of Appeals is REVERSED and SET ASIDE, and the decision of the Court of First Instance of Laguna and San Pablo City, now Regional Trial Court, is REINSTATED. SO ORDERED.