G.R. No. 163109 - Ejera vs. Merto

Florentino W. Leong and Carmelita Leong were the original owners of a property located at No. 539a-541 Z.P. De Guzman Street, Quiapo, Manila.
Elena Leong, the petitioner and Florentino’s sister-in-law, resided on the property for over two decades under a rental-free arrangement, even after the building was razed by fire and makeshift houses were constructed.
Edna C. See, the respondent, is the purchaser of the property and later became embroiled in the ensuing dispute over its ownership and possession.

Florentino and Carmelita, who eventually immigrated to the United States, underwent a marital dissolution in Illinois.
Their marital settlement agreement included a provision whereby Florentino was to convey and quitclaim all his rights, title, and interest in the property to Carmelita.
An intercalated handwritten proviso in the marital settlement agreement indicated that no title conveyance or eviction should occur until Florentino had secured clear title over another property (the Malabon property), with a reserved judicial mechanism if clear title was unobtained.
On November 14, 1996, Carmelita sold the land to Edna. In substituting Florentino’s signature on the deed of absolute sale, a notarized waiver of interest—executed in Illinois on March 11, 1996—was presented by Carmelita. This waiver reiterated Florentino’s quitclaim on his interest in the property.
The transfer of ownership was effectuated by the registration of TCT No. 231105 in Edna See’s name, despite the existence of makeshift houses occupied by the Leong relatives.

Following the sale, Edna See, aware of the presence of makeshift houses on the property, filed a complaint for recovery of possession against Elena and other Leong relatives after demands for vacating the premises went unheeded.
Concurrently, Florentino filed a separate complaint for the declaration of nullity of the sale and title, asserting that the sale was executed without his proper consent and arguing that procedural and substantive defects (including allegations of fraud and non-observance of the marital settlement proviso) rendered the transaction invalid.
The Regional Trial Court issued a decision on July 9, 2008, granting possession and ownership of the land to Edna See and directing the eviction of the Leong relatives, along with coercive monetary penalties against Carmelita Leong.
The Court of Appeals, in its May 19, 2010 decision, affirmed the trial court’s judgment in toto. A subsequent resolution denying reconsideration further reinforced the lower courts’ rulings.
A petition for review was subsequently filed, challenging the decisions primarily on the ground that the principle of indefeasibility of Torrens titles should not apply in cases tainted by fraud, and alleging that the respondent was not a bona fide purchaser.

The Deed of Sale was void since Florentino’s consent did not accompany the transaction, as required under applicable civil and family law provisions regarding conjugal properties and interspousal transactions.
The transaction was marred by fraud and misrepresentation, arguing that Edna See, being aware of the Leong relatives’ occupancy, should have conducted a more thorough investigation and was ultimately negligent in her purchase.
The waiver executed by Florentino was void, contending that a donation or gratuitous transfer between spouses is impermissible.

She acted as an innocent purchaser for value, having paid a full and fair price, and carried out due diligence by verifying the title with the Manila Register of Deeds as well as verifying the notarized waiver presented by Carmelita.
Reliance on the notarial certificate and the clean appearance of the Torrens title were in consonance with established legal presumption and the principle of indefeasibility inherent in the Torrens system.
The allegations of fraud were unsubstantiated and did not vitiate the validity of her title, as even a title procured with defective documents may result in a lawful title in the hands of an innocent purchaser for value.

Whether the respondent, Edna C. See, qualifies as a buyer in good faith for value under the Torrens system.

Determination of her status as an innocent purchaser despite the alleged defects and the presence of the Leong relatives on the property.
Whether her reliance on the certificate of title and the waiver of interest executed by Florentino sufficed to establish due diligence.

Whether the allegations of fraud and misrepresentation regarding the procurement of title, as raised by the petitioners, provide sufficient ground to invalidate the transfer of title under the principle of indefeasibility.