G.R. No. 120122 - Cruz vs. Court of Appeals

Case Summary (G.R. No. 120122)

Facts: Transfer, Encumbrance, and Redemption

In 1977 petitioner and Suzara lived together as husband and wife without marriage. In September 1982 petitioner executed a deed of absolute sale of the subject lot in favor of Suzara, statedly “solely out of love and affection” and without monetary consideration. Suzara registered the document, used the property as collateral for a P350,000 bank loan, and defaulted, resulting in foreclosure. Petitioner paid P40,638.88 to restructure the loan and extend redemption for two years; before expiration Suzara redeemed the property without her knowledge and thereafter avoided her inquiries.

Facts: Adverse Claim, Subsequent Sale, and Litigation

To protect her interest petitioner filed an Affidavit of Adverse Claim with the Register of Deeds, asserting the 1982 sale was null for lack of consideration and as contrary to law and public policy. On 22 February 1990 she filed suit for quieting of title, declaration of nullity of documents, and damages against Suzara, seeking injunctive relief. While litigation was pending, Suzara executed a notarized deed of sale on 22 December 1989 (acknowledged before a notary) conveying the property to Vizconde; the Register of Deeds later manifested that Suzara had sold the property to Vizconde and that Vizconde was registered owner under TCT No. 295388.

Procedural History in Trial Court and Court of Appeals

The trial court issued a temporary restraining order (22 Mar 1990). Petitioner filed an ex parte motion to admit an amended complaint adding Vizconde; the Register of Deeds reported the intervening sale to Vizconde. Vizconde answered asserting he was a purchaser for value in good faith, that the sale to him predated petitioner’s Affidavit of Adverse Claim, and pleaded laches, estoppel and prescription. On 24 May 1993 the Regional Trial Court dismissed petitioner’s complaint, holding the 1982 sale valid (consideration characterized as “love, affection and accommodation”) and finding Vizconde an innocent purchaser for value. The Court of Appeals affirmed that judgment.

Issues Presented to the Supreme Court

Petitioner challenged the lower courts’ rulings, contending: (1) the 1982 sale to Suzara was void because petitioner and Suzara were common-law husband and wife and Art. 1490 prohibits sale between spouses; (2) the purported consideration of “love, affection and accommodation” was not valid consideration; (3) the illegality of the sale could not be waived or ratified and thus Suzara’s subsequent sale to Vizconde was void and Vizconde was in bad faith; and (4) a second deed dated 5 February 1990 (registered 6 March 1990) was executed to evade penalties, which, petitioner argued, should render the subsequent transfer null.

Legal Principles Applied: Torrens System and Indefeasibility

The Court reiterated Torrens system principles: the purpose of registration is to quiet title and prevent collateral attack on registered titles except for claims noted on the certificate at registration or arising thereafter and recorded. Every registered owner and every subsequent purchaser for value in good faith holds the title free from encumbrances except those noted in the certificate. Courts will not order outright cancellation of a certificate when innocent third parties have relied on its correctness, as such cancellation would undermine public confidence in Torrens titles. A purchaser in good faith is one who buys without notice of another’s right and pays a full and fair price before acquiring such notice. Section 39, Act No. 496, and cited precedents support protection of innocent purchasers who rely on an apparently valid certificate.

Application of Law to the Facts

Both lower courts found, and the Supreme Court accepted as binding factual findings, that at the time Suzara executed the deed to Vizconde (22 December 1989) Suzara appeared as registered owner on the certificate of title and nothing on the face of t

Case Syllabus (G.R. No. 120122)

Case Caption, Citation and Decision Date

Reported as 346 Phil. 506, First Division, G.R. No. 120122, decided November 6, 1997.
Party caption as appearing in the source: Gloria R. Cruz, petitioner, versus Court of Appeals, Romy V. Suzara and Manuel R. Vizconde, respondents.
Decision authored by Justice Bellosillo. Concurrences by Davide, Jr. (Chairman), Vitug, and Kapunan, JJ.

Factual Background — Ownership and Domestic Relationship

Gloria R. Cruz was the registered owner of Lot 10, Block 565, PSD-38911, with an area of 747.7 square meters, including improvements thereon, located at 22 Bituan St., Barangay Doña Imelda, Quezon City, covered by Transfer Certificate of Title (TCT) No. 242553 in her name.
In 1977, petitioner Gloria R. Cruz and respondent Romeo V. Suzara lived together as husband and wife without benefit of marriage (a common-law husband-and-wife relationship, as later found by the trial court and Court of Appeals).
In September 1982, solely out of "love and affection" for Suzara, petitioner executed a deed of absolute sale over Lot 10 in favor of Suzara, purportedly without any monetary consideration.
After registration of that instrument in Suzara’s name, he used the property as collateral for a bank loan in the amount of P350,000.00.
Suzara subsequently failed to pay the bank loan; after four years the mortgage was foreclosed.
Petitioner paid the bank P40,638.88 to restructure the loan, resulting in an extension of the redemption period for the mortgage to two years.
Without petitioner’s knowledge and before the expiration of that extended period, Suzara redeemed the property.
Upon unsuccessful attempts to communicate with Suzara, petitioner filed an Affidavit of Adverse Claim with the Register of Deeds of Quezon City asserting that her 1982 sale to Suzara was null and void for lack of consideration and as contrary to law and public policy.

Transactional Events — Subsequent Transfers, Registrations and Dates

A sale from Suzara to respondent Manuel R. Vizconde was executed on 22 December 1989 (acknowledged before a notary public), evidenced by a deed of absolute sale; when the sale to Vizconde was executed, Suzara appeared as the registered owner in the certificate of title.
Petitioner filed an adverse claim with the Register of Deeds on 22 January 1990 (after the December 22, 1989 sale to Vizconde).
Petitioner filed a complaint with the Regional Trial Court (RTC) of Manila on 22 February 1990 for quieting of title, declaration of nullity of documents and damages, with a prayer for writ of preliminary injunction.
On 22 March 1990, the trial court issued a temporary restraining order enjoining respondent Suzara, his agents, and any persons acting on his behalf from disposing of and/or encumbering the litigated property until further orders.
On 3 April 1990 (subject to a noted date discrepancy described below), petitioner filed an ex parte motion to admit an amended complaint impleading respondent Vizconde as an additional defendant and praying that the Register of Deeds of Quezon City be ordered to annotate her notice of lis pendens on Suzara’s title; the trial court admitted the amended complaint and ordered the Register of Deeds to show cause why it was refusing to annotate the lis pendens.
On 22 May 1990, the Register of Deeds manifested that the property had been sold by Suzara to Vizconde, who was already the registered owner, and that since Vizconde was not impleaded the notice of lis pendens could not be annotated on his title until the requirements of law were met and the annotation judicially ordered.
Respondent Vizconde answered on 24 September 1990 alleging, among others, that he was a purchaser for value in good faith, that there was no privity of contract between him and petitioner, that the sale between him and Suzara was executed on 22 December 1989 (long before petitioner’s Affidavit of Adverse Claim), and that the action was barred by laches, estoppel and prescription.
Petitioner alleged, additionally, that a second deed of sale dated 5 February 1990 (registered 6 March 1990) substituted the December sale to avoid fines and penalties for late registration; petitioner admitted, however, that the actual sale occurred on 22 December 1989.

Procedural History — Trial Court and Court of Appeals Rulings

On 24 May 1993, the Regional Trial Court rendered a decision dismissing petitioner’s complaint and also dismissing counterclaims and the cross-claim of respondent Vizconde.
The trial court found the sale between petitioner and Suzara valid, accepting "love, affection and accommodation" as the consideration for that sale.
The trial court further found respondent Vizconde to be an innocent purchaser for value because at the time he purchased the property he was unaware of petitioner’s adverse claim.
The Court of Appeals affirmed the trial court’s decision on appeal.
Petitioner then sought review on certiorari before the Supreme Court, challenging the validity of the sale between her and Suzara and the characterization of Vizconde as an innocent purchaser for value i