G.R. No. 85157 - Jao vs. Court of Appeals

On July 30, 1956, petitioners’ predecessors-in-interest, Pedro Ramon Jao and Catalina Jao, executed a deed of absolute sale selling four (4) hectares of property in Novaliches, Caloocan City to spouses Zosimo H. Tan and Elizabeth O. Tan for P1.00 and other valuable considerations.
The deed of sale was registered on July 31, 1956, with the Register of Deeds of Caloocan City, resulting in the issuance of Transfer Certificate of Title (TCT) No. 45783 in the name of the TAN spouses.
Despite the executed sale, JAO maintained that the property was only loaned to TAN to establish a Chinese Temple, with an agreement to return the land if the temple could not be erected within five (5) years.
After the elapsed five-year period and failure of the temple project, JAO demanded the reconveyance of the property from TAN.

A fraud was committed by Segundina Vda. de Tiongson who, falsely representing herself as Elizabeth O. Tan, filed a petition for a new owner’s duplicate of TCT No. 45783.
On February 7, 1964, she obtained a duplicate copy, and on February 10, 1964, executed a false deed of absolute sale in her favor.
The false deed was inscribed on the back of the original TCT, resulting in its cancellation and the issuance of a new TCT No. 3559 in the name of Tiongson.
Subsequently, Tiongson sold the property to spouses Pablo and Laureana Bairan, who after verification with the Register of Deeds, were issued TCT No. 3667.

Civil Case No. 190 – A petition for annulment of titles and revival of the former title was filed by TAN with the Court of First Instance of Rizal against Tiongson and the Bairans, seeking the nullity of TCT No. 3667 and the revival of TCT No. 45783.
Civil Case No. 390 – Filed by JAO to annul the deed of absolute sale between JAO and TAN and to compel reconveyance of the property. Notably, BAIRANs were not included in this complaint even though they had become registered owners on March 4, 1964.
Civil Case No. C-10228 – Filed eighteen years later by petitioners (heirs of JAO) for annulment of title and reconveyance against the Bairans in the Regional Trial Court of Caloocan City.

The trial court in Civil Case No. C-10228 rendered judgment in favor of JAO by declaring the disputed deed null and void and ordering the TAN spouses to execute a deed of reconveyance.
The Court of Appeals affirmed the trial court’s decision on August 27, 1976, and the Supreme Court subsequently denied a petition for review on certiorari, making that denial final and executory on October 7, 1977.
Civil Case No. C-190 was later dismissed since Zosimo Tan was determined to have lost his cause of action against the Bairans.
Separately, Segundina Vda. de Tiongson was prosecuted and convicted for falsification of public document in Criminal Case No. C-566.
On September 30, 1985, the Regional Trial Court in Civil Case No. C-10228 dismissed both the complaint and the defendants’ counterclaim.
The Court of Appeals affirmed the lower court’s judgment on July 14, 1988, and the petitioners’ motion for reconsideration was denied.
Petitioners (heirs of JAO) then instituted the present petition for review on certiorari following the judicial recognition that the title transferred to the Bairans was rooted in fraudulent proceedings.

The Bairans purchased the property after Tiongson’s title (the one derived from fraudulent actions) was seemingly in order according to the records, and they acquired TCT No. 3667.
It was admitted on record that the property belonged to the JAO family, and the Bairans had used that fact to support their motion to dismiss in Civil Case No. C-190.
The entire chain of reconstitution—from the issuance of the lost owner’s duplicate to the false deed and rapid transfer—occurred within an unusually short period, raising serious questions on the validity of the title.

Whether the title derived from a reconstitution process based on fraudulent transactions and misrepresentations—originating from the false deed executed by Segundina Vda. de Tiongson—can serve as a valid basis for the Bairan spouses’ claim to the property.

Does the fact that the Bairans allegedly purchased the property in good faith for value overcome the taint of fraud inherent in the issuance of the new owner’s duplicate?
Can the rights resulting from a reconstituted certificate (issued pursuant to fraudulent proceedings) be recognized, even when procedural irregularities and deceptive practices are evident?