G.R. No. 201044 - Jorgenetics Swine Improvement Corp. vs. Thick and Thin Agri-Products, Inc.

Felix Otadora was the registered owner of a 273,796-square meter parcel of land in Ormoc City, documented under Original Certificate of Title (OCT) No. 26026.
Upon his death in 1940, he was survived by his wife, Leona Garbo, and their children (Vitaliana, Maxima, and Agaton); one son, Sergio, had predeceased him.

Between 1946 and 1947, Leona and the children sold various portions of Lot 8734, leaving behind a segregated parcel known as Lot 8734-B-5, covering 51,019 square meters.
On March 21, 1962, the Otadora siblings, along with Sergio’s son Antonio, executed a deed of extrajudicial partition and confirmation of sales, whereby each received a one-fourth undivided share in the remaining property.
On the same day, Vitaliana and Agaton sold an undivided portion of 18,626 square meters in Lot 8734-B-5 to the petitioners through a deed of sale executed in the presence of Antonio and a witness, Eulogio Simon.
The deed stipulated immediate transfer of possession and ownership from the date of execution.

The extrajudicial partition was annotated on OCT No. 26026 on March 26, 1962 (Entry No. 10897), leading to the cancellation of OCT No. 26026 and its replacement by Transfer Certificate of Title (TCT) No. 4026, which was further superseded by TCT No. 4029.
Notably, the sale to the petitioners was inscribed at the back of TCT No. 4029 as Entry No. 10903 on March 29, 1962, although their names did not appear as registered owners thereafter.

On October 11, 1962, Antonio sold his one-fourth share to his cousin, Macario Bensig, who subsequently ceded half of his share (equivalent to one-eighth of the entire lot) to Visitacion Otadora and Sinforoso Andrin via a deed of quitclaim dated February 12, 1963.
As a result, TCT No. 4029 was cancelled on February 15, 1963 and replaced by TCT No. 4484, which listed Agaton, Vitaliana, Maxima, Macario, and the spouses Visitacion and Sinforoso Andrin as owners.
Although a memorandum of encumbrances (Entry No. 10903) was noted on TCT No. 4484 regarding the sale to petitioners, the petitioners’ names did not appear among the titled owners.

Agaton sold his one-fourth share to his daughter Carmen on February 12, 1970.
Vitaliana re-sold her one-fourth share to her sister Maxima on January 28, 1971.
Four days later, Maxima sold her one-half share to her sons, Dionisio and Macario Bensig, who had their portions registered as Lot 8734-B-5-D (TCT No. 9096 covering 5,508 square meters) and Lot 8734-B-5-C (TCT No. 9094 covering 26,378 square meters).

On September 8, 1971, separate titles (TCT Nos. 9129 and 9130) were issued to the Andrin spouses and the Masias spouses, respectively, for other portions of Lot 8734-B-5, further complicating the title situation.
A protest was filed by petitioners with the Register of Deeds upon discovery of these new titles, but the request for annotation of their sale was ignored.

On July 10, 1972, Carmen and Luis Masias sold Lot No. 8734-B-5-A to H. Serafica & Sons Corporation, which encountered registration issues because of the earlier annotation that showed a sale in favor of the petitioners.
The corporation initiated criminal charges (estafa) against the vendors, although the complaint did not succeed.
Consequently, on December 8, 1973, the petitioners filed a complaint for quieting of title, annulment of deeds, cancellation of titles, partition, and recovery of ownership with damages.

The trial court ruled on June 20, 1994 that the annotation of the sale on TCT No. 4484 was null and void due to non-compliance with Section 55 of the Land Registration Act (Act No. 496), specifically the failure to surrender the owner’s duplicate certificate of title.
The appellate court affirmed the lower court’s ruling but cancelled the award of damages initially given to H. Serafica & Sons Corporation.
The petitioners contested various findings on appeal, arguing the improper handling of title annotations, the validity and priority of subsequent sales, and the legality of their own possession.

The Supreme Court held that while the registration defect (non-production of the owner’s duplicate) rendered the annotation of the sale ineffective for constructive notice, it did not invalidate the petitioners’ claim since the vendors subsequently sold the same property to persons with which there existed privity.
The Court emphasized that registration serves to notify third persons, and privies (those with direct relationships to the parties) are not bound by such defects.
Ultimately, the petitioners’ sale to them must be respected, with the property being partitioned from the shares of Agaton and Vitaliana (or their successors).
The damages awarded to H. Serafica & Sons Corporation, based on its status as an innocent purchaser for value, were upheld.

Was the annotation of the deed of sale in favor of the petitioners on TCT No. 4029 effectuated in accordance with the legal requirement (i.e., presentation of the owner’s duplicate certificate of title)?
Did the cancellation of OCT No. 26026 and subsequent issues with TCT Nos. 4026 and 4029 affect the binding nature of the sale?

Between the original sale to petitioners and the subsequent sales by Agaton and Vitaliana (to Carmen and Maxima), which transaction should prevail?
Can the subsequent sales be considered valid when they were executed by vendors who had already sold the property to the petitioners?

Does the petitioners’ immediate possession of a portion (12,000 square meters) of the 18,626 square meters sold to them confer them with valid ownership rights, notwithstanding the lack of proper annotation?

Is H. Serafica & Sons Corporation entitled to claim damages despite its reliance on an apparently unencumbered TCT, given the prior conflicting transactions?
Was the corporation negligent in verifying the chain of title, thereby affecting its status as an innocent purchaser?

How should the court address the multiplicity of titles and partition the undivided Lot 8734-B-5 among the petitioners and other co-owners?
Should the award of damages and the loss of rights by private respondents for double selling be balanced by the equitable partition of the property?