Title
Orion Savings Bank vs. Shigekane Suzuki
Case
G.R. No. 205487
Decision Date
Nov 12, 2014
Suzuki purchased a condo and parking slot from Kang, but Orion claimed ownership via Dacion en Pago. SC ruled Suzuki as buyer in good faith, upholding his ownership.
condominium units
parking slots
ownership

Case Summary (G.R. No. 205487)

Factual Background

In August 2003, Shigekane Suzuki, a Japanese national, negotiated with Ms. Helen Soneja to acquire Unit No. 536 (CCT No. 18186) and Parking Slot No. 42 (CCT No. 9118) in Cityland Pioneer, Mandaluyong City, represented to be owned by Yung Sam Kang, a Korean national and SRRV holder. Suzuki paid P100,000 by BPI Check No. 83349 on August 5, 2003 and P2,700,000 by BPI Check No. 83350 on August 21, 2003. A notarized Deed of Absolute Sale dated August 26, 2003 was executed between Suzuki and Kang. Suzuki took possession of the unit and parking slot and commenced renovation.

Title Annotations and Early Disputes

Suzuki discovered that CCT No. 9118 bore no annotations and remained registered to Cityland Pioneer while CCT No. 18186 contained an annotation, Entry No. 73321/C-10186, stating that any conveyance or encumbrance of the title would be subject to approval by the Philippine Retirement Authority (PRA). An earlier mortgage annotation in favor of Orion (Entry No. 66432/C-10186 for P1,000,000.00) had been cancelled by Entry No. 73232/T. No. 10186 on June 16, 2000. Despite these developments, possession of the physical titles was allegedly retained by Orion’s loans officer, Alexander Perez.

Affidavits of Adverse Claim and Orion’s Assertions

To protect his interest, Suzuki filed an Affidavit of Adverse Claim over the condominium title on September 8, 2003, and later annotated an Affidavit of Adverse Claim over the parking slot on October 28, 2003. Orion, through counsel, later advised that a Dacion en Pago dated February 2, 2003 in its favor existed and that Kang had obtained a loan of P1,800,000 which gave rise to that instrument; Orion did not register the Dacion en Pago until October 15, 2003.

Procedural History

Suzuki filed a complaint for specific performance and damages on January 27, 2004 against Kang and Orion. At pre-trial the parties stipulated, inter alia, that Kang was the registered owner on August 26, 2003; that the earlier mortgage in Orion’s favor had been cancelled in 2000; that the alleged Dacion en Pago was not annotated in the CCTs at the time of Suzuki’s purchase; and that Orion paid applicable taxes only on October 15, 2003.

Trial Court Ruling

The Regional Trial Court, Branch 213, Mandaluyong City, rendered judgment on June 29, 2009 in favor of Suzuki, ordering Orion to deliver CCT Nos. 18186 and 9118 to Suzuki. The RTC found Suzuki to be an innocent purchaser for value and held that Orion failed to deliver titles and failed to register or annotate the Dacion en Pago in the land titles when Suzuki bought the properties. The RTC also awarded moral and exemplary damages, attorneys’ fees, litigation expenses, and costs against Orion and Kang, jointly and severally.

Court of Appeals Ruling

The Court of Appeals, in its decision of August 23, 2012, partially granted Orion’s appeal. The CA affirmed Suzuki’s ownership rights and the RTC’s core finding that Suzuki was an innocent purchaser for value, but it deleted the awards for moral damages, exemplary damages, attorneys’ fees, litigation expenses, and costs. The CA explained that the PRA annotation was a warning regarding SRRV implications and did not defeat Suzuki’s claim.

Grounds of the Petition

By a petition under Rule 45, Orion Savings Bank urged reversal on several grounds: that the Deed of Sale in favor of Suzuki was null for lack of spousal consent under Korean law; that Suzuki was not a purchaser in good faith because he failed to inspect the owners’ duplicate copies of the CCTs; that the PRA restriction in Entry No. 73321/C-10186 defeated Suzuki’s claim to good faith; and that Orion exercised due diligence.

Respondent’s Position

In his Comment, Suzuki maintained that the spousal-consent argument was raised belatedly on appeal and therefore not properly before the CA or this Court. He also argued that proof of acquisition during the marital coverture is essential to invoke the presumption of conjugal ownership. Suzuki asserted that he was a purchaser in good faith entitled to protection.

Standard of Review and Scope of Inquiry

The Supreme Court explained that although review under Rule 45 generally precludes reexamination of factual findings, the Court may inquire into conclusions of fact where an inference is manifestly mistaken or other established exceptions obtain. The Court found incongruence between factual findings and legal principles in the lower courts’ rulings and exercised discretion to examine certain factual issues.

Choice of Law and Proof of Foreign Law

The Court reiterated the governing principle that immovable property is subject to the law of the place where it is situated, or lex loci rei sitae. It recognized that property relations between spouses are principally governed by the national law of the spouses and that a party invoking foreign law bears the burden of proving it. The Court applied Rule 132, Sections 24 and 25 in requiring proper attestation and authentication of foreign law. Orion’s reliance on a Certification from the Embassy of the Republic of Korea was held insufficient because it lacked the requisite authentication. Consequently, the Court applied the presumed-identity approach and treated the unproven foreign law as identical to Philippine law.

Spousal Consent and Conjugal Ownership

Under the applicable principles, the mere registration of ownership in the name of one spouse and the statement “Yung Sam Kang married to Hyun Sook Jung” on the CCT were held to be descriptive of Kang’s civil status and not dispositive of conjugal ownership. The Court observed that prior decisions recognizing conjugal ownership despite sole registration relied on proof that the property was in fact conjugal; no such proof existed here. For that reason, the Court declined to invalidate Kang’s conveyance to Suzuki for lack of spousal consent.

The Alleged Dacion en Pago and Article 1544

The Court examined the asserted Dacion en Pago on the premise that Article 1544, New Civil Code governs priority when two or more vendees claim ownership. The Court noted that Article 1544 presupposes the existence of two or more duly executed contracts of sale. The Deed of Sale of August 26, 2003 in favor of Suzuki was admitted into evidence and possession was transferred, which the Court regarded as transferring ownership under Article 1458 and the provisions on delivery in Articles 1496 and 1498.

Orion’s Failure to Prove the Dacion en Pago

The Court found that Orion failed to prove the existence and due execution of the Dacion en Pago it relied upon. The RTC had excluded Exhibit 5 (the Dacion en Pago and submarks) and Exhibit 12 (promissory note) for lack of identification, and Orion did not make a tender of excluded evidence as required under Section 40 of Rule 132. Even if considered, the totality of documentary and testimonial evidence contained material inconsistencies: the promissory note showed a maturity date of August 27, 2003 and a single-payment arrangement, undercutting a claim of default as of February 2003; testimony by Orion’s witness, Perez, was internally inconsistent about whether the P1,800,000 included interest and penalties; no independent mortgage collateralizing the P1,800,000 loan was produced; the dacion was asserted only after Suzuki’s adverse claim; and Orion never asserted dominion or possession of the property after the alleged dacion, which the Court identified as a significant indicium of simulation consistent with Suntay v. CA.

Notarization and Rebuttal of Pres

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