G.R. No. L-11156 - Carreon vs. Agcaoili

During the marriage of Bonifacio Carreon and Celerina Dauag, a registered parcel of land was acquired.
Following the death of Bonifacio Carreon, his widow, Celerina Dauag, executed on September 24, 1946, an affidavit adjudicating to herself the said land, declaring herself the only heiress of her husband.
Consequently, the original certificates of title were cancelled and a transfer certificate was issued in her name.
An annotation was made on her title indicating that it was subject to a lien under Section 4 of Rule 74 of the Rules of Court.

On September 25, 1946, Celerina borrowed P1,200.00 from the Philippine National Bank, with one-half of the land mortgaged as security; a memorandum of the mortgage was accordingly annotated on her transfer certificate.
After the loan reached maturity, she engaged a broker (a Mr. Pintang) to find a buyer for the land, pricing it at P3,000.00.
Rufo Agcaoili, the eventual buyer, made an initial advance payment of P1,500.00, and the balance was subsequently paid in full on October 13, 1947.
Following the payment, the loan was settled, the mortgage was released, and a deed of absolute sale was executed in favor of Agcaoili; a new transfer certificate was then issued in his name.
Notably, the sale was approved by the Secretary of Agriculture and Natural Resources, as the land had been acquired as a homestead.

On February 19, 1955, the children of Celerina (from her previous marriage to the deceased) initiated legal action against Agcaoili. Their claim was to have the deed of sale set aside as being mere mortgage and to recover one-half pro-indiviso of the land.
Simultaneously, Celerina filed an action for intervention which was eventually dismissed by the trial court.
Defendants (Agcaoili and his representatives) moved for summary judgment, contending that even if the complaint’s facts were admitted, there was no cause of action, and they supported this position with documentary evidence.
The trial court allowed the submission of evidence from both parties, and after careful evaluation, ruled in favor of the defendants on the basis that the claim of the plaintiffs had no legal foundation.

The appellants contended that Agcaoili was a buyer in bad faith.
They argued that a trust relationship existed between Agcaoili and themselves (the children) due to the circumstances surrounding the transaction, thus rendering the action against him imprescriptible.
It was emphasized that Agcaoili’s mere status as a townmate of Celerina did not automatically imply knowledge of her prior marital relations or the existence of her children.

Whether Rufo Agcaoili acquired the land in good faith as a purchaser for value without notice of any legal defects or fraud in the title resulting from Celerina’s affidavit and the subsequent annotations.

Whether the retention of the annotation indicating the title was subject to Section 4 of Rule 74 should affect the validity of Agcaoili’s title, especially considering the two-year limitation period inherent in that provision.

Whether the relationship between Celerina and Agcaoili, merely based on their local acquaintance, was sufficient to establish a trust or fiduciary duty that would require Agcaoili to hold the land for the children of Celerina.
Whether there is clear and sufficient evidence to demonstrate that Agcaoili had actual notice of any fraud or legal infirmity in the title at the time of purchase.