Spouses Ricardo Huang and Milagros Huang vs. CA, Judge Pedro N. Laggui and Spouse Sandoval

Dolores Sandoval and Ricardo Huang are brothers and sisters. Sometime in 1965 Dolores Huang wanted to buy 2 lost in Damariñas Village, Makati but was

advice by Milagros Huang, the wife of Ricardo that the policy of the subdivision owner forbade the acquisition of 2 lots by a single individual.

Consequently Dolores purchase Lot 21 and registered it under her name. She also purchased the adjacent Lot 20, but heading to the advice of Milagros, the deed of sale was place in the name of Ricardo and it was also registered under his name.

Dolores constructed a residential house in Lot 21. Ricardo also requested her permission to construct a small residential house on Lot 20, which Dolores agreed as she was paying for the apartment rentals of the Huang spouses.

She also allowed Ricardo to mortgage Lot 20 to the SSS to secure the payment of his loan for 19,200.00 to be spent in putting up the house.

However, Dolores averred that she actually financed the construction of the house, the swimming pool and the fence on the understanding that the Huang spouses would merely hold the title in trust for her beneficial interest.

On March 19, 1968, to protect her rights and interest as the lawful owner of the said lot and its improvements, Dolores requested the Huangs to execute in her favor a deed of absolute sale with assumption of mortgage over the property, in which they obliged.

On March 15, 1980, the Huang spouses leased the house to Deltron-Sprague Electronics Corporation for its executive as official quarters without securing the permission of Dolores.

Dolores tolerated the lease as she did not need it that time, but after sometime, the lessee started prohibiting the Sandoval family from using the swimming pool and the Huang spouse begun challenging the Sandoval’s ownership of the property.

Dolores lodge a complaint before the office of the Barangay Captain praying that the spouses Huang be made to execute the necessary request to the SSS for the approval of the deed of sale with assumption of mortgage, as well as for the release in her favor the owner’s duplicate certificate title in its possessions so the deed could be duly annotated on the title and or a new certificate of title issued under her name. But no amicable settlement was reached, so that the Lupong Tagapamayapa issued a certification that the controversy was ripe for judicial action.

In 1980, Spouses Huang filed a complaint against Spouses Sandoval in the CFI of Rizal, seeking the nullity of the DOS with assumption of mortgage and or quieting the title to Lot 20. They alleged that the Sandovals made them sign blank papers which turned out to be a deed of sale with assumption of mortgage over Lot 20.

On the other hand, in 1981, Dolores paid the balance of Ricardo’s loan to the SSS and requested the release of her TCT and the real estate mortgage, but SSS refused.

She filed a complaint giants the Huang spouses and the SSS praying for the release of the TCT and the release of the real estate mortgage and the ROD of Rizal, to register the dead of sale and issue another TCT in her name.

Both cases were consolidated and jointly tried. The judgment was ruled in favor of the Sandoval spouses.

On the appeal, the CA affirmed the trial court’s decision.

o Spouses Huang asserts that the finding of the CA of a resulting trust or implied trust between them and Dolores is not supported by evidence.

o The DOS with assumption of mortgage has all the elements of an equitable mortgage.o Grating arguendo that a resulting implied trust exists between the parties, its reinforcement

is already barred by prescription. Since the filing of a suit by Dolores in 1981, more than 10 years had already lapsed since the issuance of the TCT in 1967.

ISSUE: WON there exists an implied or resulting trust between Spouse Huang and Spouses Sandoval, and if it exists, its reinforcement is already barred by prescription

HELD:

There is need to define the basic concepts in a trust relationship.

o Trust is a fiduciary relationship with respect to property which involves the existence of equitable duties imposed upon the holder of the title to the property to deal with it for the benefit of another.

o A person who establishes a trust is called the trustor; one in whom confidence is reposed as regards property for the benefit of another person is known as the trustee; and the person for whose benefit the trust has been created is referred to as the beneficiary or cestui que trust.

o Trust is either express or implied. o Express trust is created by the intention of the trustor or of the parties. o Implied trust comes into being by operation of law. o The implied trust is either constructive or resulting trust.o A constructive trust is imposed where a person holding title to property is subject to an

equitable duty to convey it to another on the ground that he would be unjustly enriched if he were permitted to retain it. The duty to convey the property arises because it was acquired through fraud, duress, undue influence or mistake, or through breach of a fiduciary duty, or through the wrongful disposition of another's property.

o On the other hand, a resulting trust arises where a person makes or causes to be made a disposition of property under circumstances which raise an inference that he does not

intend that the person taking or holding the property should have the beneficial interest in the property. It is founded on the presumed intention of the parties, and as a general rule, it arises where, and only where such may be reasonably presumed to be the intention of the parties, as determined from the facts and circumstances existing at the time of the transaction out of which it is sought to be established.

In the present case, Dolores provided the money for the purchase of Lot 20 but the corresponding deed of sale and transfer certificate of title were placed in the name of Ricardo Huang because she was advised that the subdivision owner prohibited the acquisition of two (2) lots by a single individual. Guided by the foregoing definitions, we are in conformity with the common finding of the trial court and respondent court that a resulting trust was created. Ricardo became the trustee of Lot 20 and its improvements for the benefit of Dolores as owner.

The pertinent law is Art. 1448 of the New Civil Code which provides that there is an implied trust when property is sold and the legal estate is granted to one party but the price is paid by another for the purpose of having the beneficial interest for the property. A resulting trust arises because of the presumption that he who pays for a thing intends a beneficial interest therein for himself.

ON THE ISSUE OF PRESCRIPTION:

Petitioners raise the issue of prescription. But the action to compel the trustee to convey the property registered in his name for the benefits of the cestui que trust does not prescribe. If at all, it is only when the trustee repudiates the trust that the period of prescription commences to run.

The prescriptive period is ten (10) years from the repudiation of the trust. It is ten (10) years because just as a resulting trust is an offspring of the law, so is the corresponding obligation to convey the property and the title thereto to the true owner.

In this context, and vis-a-vis prescription, Art. 1144 of the New Civil Code, which is the law applicable, provides: "The following actions must be brought within ten years from the time the right of action accrues: (a) Upon a written contract; (b) Upon an obligation created by law; (c) Upon a judgment."

Thus, the reckoning point is repudiation of the trust by the trustee because from that moment his possession becomes adverse, which in the present case gave rise to a cause of action by Dolores against the Huang spouses. However, before the period of prescription may start, it must be shown that:

a) the trustee has performed unequivocal acts of repudiation amounting to an ouster of the cestui que trust;

b) such positive acts of repudiation have been made known to the cestui que trust; and,c) the evidence thereon is clear and conclusive.

We agree with the trial court that the action filed by Dolores has not prescribed.

o Ricardo has not performed any unequivocal act of repudiation amounting to an ouster of Dolores. The only acts which may be considered as indicative of his intention not to respect the trust anymore were his leasing the house without the prior knowledge of Dolores; his refusal to carry out the demand of Dolores that he must ask the lessees to vacate the house; and, his refusal to give the necessary papers to Dolores to enable her to get the title from the SSS.

o The foregoing acts are not positive acts of repudiation; ando The evidence on such acts is unclear and inconclusive.

But even if the foregoing acts were manifest acts of repudiation made known to Dolores, the fact remains that they were done at the earliest only on 15 March 1980 when Ricardo leased Lot 20 and its improvements to Deltron. Dolores' complaint before the trial court was filed on 19 February 1981, or within the 10-year prescriptive period.

Petitioners are of the mistaken notion that the 10-year prescriptive period is counted from the date of issuance of the Torrens certificate of title. This rule applies only to the remedy of reconveyance which has its basis on Sec. 53, par. 3, P.D. No. 1529, otherwise known as the Property Registration Decree, 34 and Art. 1456 of the Civil Code.

o Reconveyance is available in case of registration of property procured by fraud thereby creating a constructive trust between the parties, a situation which does not obtain in this case.

Petitioners state prefatorily in their petition that this case involves sibling oppression. It does not. Rather, it is a battle between greed and thirst for justice, between a fortunate sister and a less fortunate brother, with the latter taking advantage of the former's bounty.

Land Titles: Sajonas vs. Court of Appeals; July 5, 1996Facts:

The case is for cancellation of the inscription of a Notice of Levy on Execution from a certificate of Title covering a parcel of real property. The inscription was caused to be made by the private respondent on Transfer Certificate of Title No. N-79073 of the Register of Deeds of Marikina, issued in the name of the spouses Uychocde, and was later carried over to and annotated on Transfer Certificate of Title No. N-109417 of the same registry, issued in the name of the spouses Sajonas, who purchased the parcel of land from the Uychocdes, and are now the petitioners in this case.

The subject property was bought by Sajonas spouses on September 1983 and caused the annotation of their adverse claim on August 1984. The Deed of Sale was executed upon the full payment of the purchase price and the same was registered only on August 1985.

Meanwhile, without the petitioners' knowledge, there has been a compromise agreement between the spouses Uychocde and Pilares (Uychocde's judgment creditor), and a notice of levy on execution was issued on February 12, 1985. On February 12, 1985, defendant sheriff Roberto Garcia of Quezon City presented said notice of levy on execution before the Register of Deeds of Marikina and the same was annotated at the back of TCT No. 79073 as Entry No. 123283.

Issue:Which should be preferred between the notice of levy on execution and the deed of absolute sale. The Deed of Absolute Sale was executed on September 4, 1984, but was registered only on August 28, 1985, while the notice of levy on execution was annotated six (6) months prior to the registration of the sale on February 12, 1985.

Decision:The annotation of the adverse claim is equivalent to notice to third persons of the interest of the claimant. The provision of the law (PD 1529) that the adverse claim is only valid for 30 days cannot be upheld. Clearly, the intention of the law is otherwise as may be gleaned on the following discussion:“Sec. 70 Adverse Claim- Whoever claims any part or interest in registered land adverse to the registered owner, arising subsequent to the date of the original registration, may, if no other provision is made in this decree for registering the same, make a statement in writing setting forth fully his alleged right or interest, and how or under whom acquired, a reference to the number of certificate of title of the registered owner, the name of the registered owner, and a description of the land in which the right or interest is claimed.

The statement shall be signed and sworn to, and shall state the adverse claimant’s residence, and a place at which all notices may be served upon him. This statement shall be entitled to registration as an adverse claim on the certificate of title. The adverse claim shall be effective for a period of thirty days from the date of registration. After the lapse of said period, the annotation of adverse claim may be cancelled upon filing of a verified petition therefor by the party in

interest: Provided, however, that after cancellation, no second adverse claim based on the same ground shall be registered by the same claimant.

Before the lapse of thirty days aforesaid, any party in interest may file a petition in the Court of First Instance where the land is situated for the cancellation of the adverse claim, and the court shall grant a speedy hearing upon the question of the validity of such adverse claim, and shall render judgment as may be just and equitable. If the adverse claim is adjudged to be invalid, the registration thereof shall be ordered cancelled. If, in any case, the court, after notice and hearing shall find that the adverse claim thus registered was frivolous, it may fine the claimant in an amount not less than one thousand pesos, nor more than five thousand pesos, in its discretion. Before the lapse of thirty days, the claimant may withdraw his adverse claim by filing with the Register of Deeds a sworn petition to that effect.”

Construing the provision as a whole would reconcile the apparent inconsistency between the portions of the law such that the provision on cancellation of adverse claim by verified petition would serve to qualify the provision on the effectivity period. The law, taken together, simply means that the cancellation of the adverse claim is still necessary to render it ineffective, otherwise, the inscription will remain annotated and shall continue as a lien upon the property. For if the adverse claim has already ceased to be effective upon the lapse of said period, its cancellation is no longer necessary and the process of cancellation would be a useless ceremony.

To interpret the effectivity period of the adverse claim as absolute and without qualification limited to thirty days defeats the very purpose for which the statute provides for the remedy of an inscription of adverse claim, as the annotation of an adverse claim is a measure designed to protect the interest of a person over a piece of real property where the registration of such interest or right is not otherwise provided for by the Land Registration Act or Act 496 (now P.D. 1529 or the Property Registration Decree), and serves as a warning to third parties dealing with said property that someone is claiming an interest or the same or a better right than the registered owner thereof.

Petition was granted. The inscription of the notice of levy on execution on TCT No. N-109417 is ordered CANCELLED.

INVOLUNTARY DEALINGS- Adverse Claim

Section 70. Adverse claim. Whoever claims any part or interest in registered land adverse to the registered owner, arising subsequent to the date of the original registration, may, if no other provision is made in this Decree for registering the same, make a statement in writing setting forth fully his alleged right or interest, and how or under whom acquired, a reference to the number of the certificate of title of the registered owner, the name of the registered owner, and a description of the land in which the right or interest is claimed.

The statement shall be signed and sworn to, and shall state the adverse claimant's residence, and a place at which all notices may be served upon him. This statement shall be entitled to registration as an adverse claim on the certificate of title. The adverse claim shall be effective for a period of thirty days from the date of registration. After the lapse of said period, the annotation of adverse claim may be canceled upon filing of a verified petition therefor by the party in interest: Provided, however, that after cancellation, no second adverse claim based on the same ground shall be registered by the same claimant.

Before the lapse of thirty days aforesaid, any party in interest may file a petition in the Court of First Instance where the land is situated for the cancellation of the adverse claim, and the court shall grant a speedy hearing upon the question of the validity of such adverse claim, and shall render judgment as may be just and equitable. If the adverse claim is adjudged to be invalid, the registration thereof shall be ordered canceled. If, in any case, the court, after notice and hearing, shall find that the adverse claim thus registered was frivolous, it may fine the claimant in an amount not less than one thousand pesos nor more than five thousand pesos, in its discretion. Before the lapse of thirty days, the claimant may withdraw his adverse claim by filing with the Register of Deeds a sworn petition to that effect

ADVERSE CLAIM, PURPOSE> Purpose of annotating the adverse claim on the title of the disputed land is to apprise third persons that there is a controversy over the ownership of the land and to preserve and protect the right of the adverse claimant during the pendency of the controversy

> Notice to third persons that any transaction regarding the disputed land is subject to the outcome of the dispute

> Such is registered by filing a sworn statement with the RD of the province where the property is located, setting forth the basis of the claimed right together with other data pertinent thereto. The registration of an adverse claim is expressly recognized under Section 70. Where the notice of adverse claim is sufficient in law and drawn up in accordance with existing requirements, it becomes the ministerial duty of the RD to register the instrument without unnecessary delay

> While the act of registration is the operative act which conveys or affects the land insofar as third persons are concerned, the subsequent sale of property covered by a certificate of title

CANNOT PREVAIL OVER AN ADVERSE CLAIM, duly sworn to and annotated on the certificate of title previous the sale

> Section 70 is divided into two parts—first refers to the petition of the party who claims any part or interest in the registered land, arising subsequent to the date of the original registration, for the registration of his adverse claim, which is a ministerial function of the Register of Deeds absent any defect on the face of the instrument. The second refers to the petition filed in court by a party in interest for the cancellation of the adverse claim upon showing the same isinvalid.

REGISTRATION OF ADVERSE CLAIM> A lease over a parcel of land for a 10-year period, which could not be registered because the owner’s duplicate of title wasn’t surrendered, could be registered as an adverse claim and the owner couldn’t be compelled to surrender the owner’s duplicate of the title to that adverse claim could be annotated thereon

> If the adverse claim turns out to be invalid, the owner could ask for its cancellation and, if found to be frivolous or vexatious, then costs may be adjudged against the adverse claimant.

> The claim of a person that she has hereditary rights in the land fraudulently registered in his sister’s name, because the land belonged to their mother whose estate is pending settlement in a special proceeding, is registrable as an adverse claim\

> Where a guardianship proceeding is pending in court, it is proper to annotate on the title of the land in question the pendency of such a proceeding by means of a notice of lis pendens for the purpose of alerting anyone who might wish to buy the land that his purchase may be questioned later on. Since an adverse claim and a notice of lis pendens have the same purpose, there would be no need of maintaining the adverse claim. But a notice of levycannot prevail over an existing adverse claim inscribed in the certificate of title

> The annotation of an adverse claim is a measure designed to protect the interest of a person over a piece of real property where the registration of such interest or right isn’t otherwise provided for by PD1529, and serves as a notice and warning to third persons dealing with said property that someone is claiming an interest on the same or a better right than the registered owner thereof

> FOR THE SPECIAL REMEDY OF ADVERSE CLAIM TO BE AVAILED OF, IT MUST BE SHOWN THAT THERE IS NO OTHER PROVISION IN THE LAW FOR REGISTRATION OF THE CLAIMANT’S ALLEGED RIGHT IN THE PROPERTY.

> An adverse claim of ownership over a parcel of land registered under the Torrens system based on prescription and adverse possession cannot be registered as an adverse claim—no title to registered land in derogation of the title of the registered owner shall be acquired by prescription

or adverse possession. Hence, the registration of such adverse claim will serve no useful purpose and cannot validly and legally affect the parcel of land in question.

REQUISITES OF AN ADVERSE CLAIM

1. The adverse claimant must state the following in writinga. His alleged right or interestb. How and under whom such alleged right or interest is acquiredc. The description of the land in which the riht or interest is claimedd. The number of the certificate of title

2. The statement must be signed and sworn to before a notary public or other officer authorized to administer oath

3. The claimant should state his residence or the place to which all notices may be served upon him

REGISTRATION COURT MAY DETERMINE THE VALIDITY OF ADVERSE CLAIM> An adverse claim may be cancelled only after the claim is adjudged invalid and unmeritorious by the court while passing upon a case where the land involved is subject of the interest or right being secured by the adverse claim.

ADVERSE CLAIM NOT IPSO JURE CANCELLED AFTER 30 DAYS; HEARING NECESSARY.> Sajonas v. CA> Register of Deeds cannot unilaterally cancel the adverse claim. There must be a court hearing for the purpose. The reason for this is to afford theadverse claimant an opportunity to be heard, providing a venue where the propriety of his claimed interest can be established or revoked, all for the purpose of determining at least the existence of any encumbrance on the title arising from such adverse claim.

PURCHASER NOT BOUND BY ANY LIEN NOT ENTERED IN THE CERTIFICATE OF TITLE FORECLOSURE SALE RETROACTS TO REGISTRATION OF MORTGAGE> The settled doctrine is that the effects of a foreclosure sale retroact to the date of registration of the mortgage.

> Hence, if the adverse claim is registered only after the annotation of the mortgage at the back of the certificate of title, the adverse claim could not effect the rights of the mortgagee; and the fact that the foreclosure of the mortgage and the consequent public auction sale have been effected long after the annotation of the adverse claim is of no moment, because the foreclosure sale retroacts to the date of registration of the mortgage.

Notes On Voluntary Dealings In Land Titles And Deeds

1. Sale, mortgage, lease, special power of attorney and trusts are examples of voluntary dealings. They are entered voluntarily by the parties. Unlike in involuntary dealings, the owner doesn’t want the transaction to be registered. The owner wouldn’t want his property be subject of an attachment, adverse claim or notice of lis pendens.

2. Registration is the necessary act for the transaction to bind third parties.

3. Actual knowledge is equivalent to registration. Registration is to give notice. If the person knows about the transaction, it is deemed that the transaction has been registered.

4. Registration should be done in the correct registry. If it is a titled property, there is a separate book for titled property. If it is a dealing with unregistered property, there is a different book for unregistered land. If you register in a different book, there is no registration that is valid as against third persons.

5. The constructive notice mentioned in PD1959 is conclusive.

6. There is a distinction with regard voluntary and involuntary dealings with the effectivity of registration. With involuntary dealings, once there is entry in the day book and paid the needed fees and taxes, the RD issues the new title and cancels the old one. Once there is compliance, the transaction is consideredregistered. With voluntary dealings, entry in the day book is insufficient.

7. Mere entry in the day book/primary book is sufficient. It is often times that owners don’t want to surrender their owner’s duplicate.

8. Carry-over of encumbrances. Suppose that you purchase property and there was prior mortgages and notice of lis pendens. These encumbrances will be carried over to the new certificate issued to the buyer.

9. Can you sell only a portion of your property? You can have it annotated. But if the buyer would like a separate title, then he should submit a subdivision plan, there should be a technical description. The old title would be cancelled and a new title issued covering the portion sold.

10. Basically the procedure of registration for voluntary dealings can be categorized into two—if it is an absolute sale or mortgage. If it is a sale, the deed of sale and title should be submitted. There should also be proof of payment of real estate taxes as well as registration fees and documentary stamp taxes. With that, the Registry of Deeds shall make the corresponding entry that will cancel the old certificate of title and issue a new one in favor of the buyer. If itis merely an encumbrance however, the document shall only be presented to the RD, payment of the corresponding amount and the corresponding annotation done by the RD is notice to third persons.

11. If it is judicial foreclosure, you register the order of the court confirming the sale. If it is extrajudicial foreclosure, you register the order of the sheriff.

12. For implied trusts, read the case of Aznar Brothers. It has two kinds—resulting trust and constructive trust. If it is an implied resulting trust, prescriptive period is 10 years from time of repudiation.

13. It is dependent on the facts and circumstances of the case on whether who would have a better right, the owner or the mortgagee. But generally, when it is through a forged deed, then the owner would have a better right over the property. The forged deed is a nullity. On the other hand, when there is chain oftitle, the innocent purchaser in value would have a better right.

14. Doctrine of mortgagee in good faith. If the property is mortgaged to an innocent mortgagee, it is possible that he would have a better right over the property than the real owner.

15. Even if the title is null and void, there is still validity of the mortgage. The mortgagee has a right to rely on the title, provided there is nothing that would arise suspicion on the part of the mortgagee.

SAJONAS VS. CAG.R. No. 102377July 5, 1996

FACTS:

o The Sajonas couple are before us, on a Petition for Review onCertiorari, praying inter alia to set aside the CA’s decision, and to reinstate that of the RTC

o On September 22, 1983, spouses Uychocde agreed to sell a parcel of residential land located in Antipolo, Rizal to the spouses Sajonas on installment basis as evidenced by a Contract to Sell dated September 22, 1983. The property was registered in the names of the Uychocde spouses under TCT No. N-79073 of the Register of Deeds of Marikina, Rizal.

o On August 27, 1984, the Sajonas couple caused the annotation of an adverse claim based on the said Contract to Sell on the title of the subject property, which was inscribed as Entry No. 116017. Upon full payment of the purchase price, the Uychocdes executed a Deed of Sale involving the property in question in favor of the Sajonas couple on September 4, 1984. The deed of absolute sale was registered almost a year after, or on August 28, 1985.

o Meanwhile, it appears that Pilares (defendant-appellant) filed a Civil Case for collection of sum of money against Ernesto Uychocde. On June 1980, a Compromise Agreement was entered into by the parties in the said case under which Uychocde acknowledged his monetary obligation to Pilares amounting to P27,800 and agreed to pay the same in two years. When Uychocde failed to comply with his undertaking in the compromise agreement, Pilares moved for the issuance of a writ of execution to enforce the decision based on the compromise agreement, which the court granted in its order dated August 3, 1982. Accordingly, a writ of execution was issued on August 12, 1982 by the CFI of Quezon City. Pursuant to the order of execution a notice of levy on execution was issued on February 12, 1985. On the same date, defendant sheriff Garcia of Quezon City presented said notice of levy on execution before the Register of Deeds of Marikina and the same was annotated at the back of the TCT of the subject land.

o When the deed of absolute sale dated September 4, 1984 was registered on August 28, 1985, TCT No. N-79073 was cancelled and in lieu thereof, TCT No. N-109417 was issued in the name of the Sajonas couple. The notice of levy on execution annotated by defendant sheriff was carried over to the new title. On October 21, 1985, the Sajonas couple filed a Third Party Claim with the sheriff of Quezon City, hence the auction sale of the subject property did not push through as scheduled.

o On January 1986, the Sajonas spouses demanded the cancellation of the notice of levy on execution upon Pilares, through a letter to their lawyer. Despite said demand, defendant-appellant Pilares refused to cause the cancellation of said annotation. In view thereof, plaintiffs-appellees filed a complaint in the RTC of Rizal, against Pilares, the judgment creditor of the Uychocdes. The trial court rendered its decision in favor of the Sajonas couple, and ordered the cancellation of the Notice of Levy from TCT No. N-109417. The court a quo stated, thus:

…It is a well settled rule in this jurisdiction that actual notice of an adverse claim is equivalent to registration and the subsequent registration of the Notice of Levy could not have any legal effect in

any respect on account of prior inscription of the adverse claim annotated on the title of the Uychocdes.

o On the issue of whether or not plaintiffs (Sajonas) are buyers in good faith of the property of the spouses Uychocde even notwithstanding the claim of the defendant that said sale executed by the spouses was made in fraud of creditors, the Court finds that the evidence in this instance is bare of any indication that said plaintiffs as purchasers had notice beforehand of the claim of the defendant over said property or that the same is involved in a litigation between said spouses and the defendant. Good faith is the opposite of fraud and bad faith, and the existence of any bad faith must be established by competent proof.

o Dissatisfied, Pilares appealed to the CA assigning errors on the part of the lower court. The appellate court reversed the lower court’s decision, and upheld the annotation of the levy on execution on the certificate of title. The respondent appellate court upheld private respondents’ theory when it ruled:

o The above staled conclusion of the lower court is based on the premise that the adverse claim filed by plaintiffs-appellees is still effective despite the lapse of 30 days from the date of registration. However, under the provisions of Section 70 of P.D. 1529, an adverse claim shall be effective only for a period of 30 days from the date of its registration.

Hence this petition.

ISSUE:1. THE LOWER COURT ERRED IN HOLDING THAT THE RULE ON THE 30-DAY PERIOD FOR ADVERSE CLAIM UNDER SECTION 70 OF P.D. NO. 1529 IS ABSOLUTE INASMUCH AS IT FAILED TO READ OR CONSTRUE THE PROVISION IN ITS ENTIRETY AND TO RECONCILE THE APPARENT INCONSISTENCY WITHIN THE PROVISION IN ORDER TO GIVE EFFECT TO IT AS A WHOLE.

HELD: ACCORDINGLY, the assailed decision of the respondent CA dated October 17, 1991 is hereby REVERSED and SET ASIDE. The decision of the RTC finding for the cancellation of the notice of levy on execution from Transfer Certificate of Title No. N-109417 is hereby REINSTATED. The inscription of the notice of levy on execution on TCT No. N-109417 is hereby CANCELLED.

The question may be posed, was the adverse claim inscribed in the TCT still in force when private respondent caused the notice of levy on execution to be registered and annotated in the said title, considering that more than thirty days had already lapsed since it was annotated ? (Pilares argues that the adverse claim ceases to have any legal force and effect (30) days after August 27, 1984 pursuant to Section 70 of P.D. 1529)

In construing the law aforesaid, care should be taken that every part thereof be given effect and a construction that could render a provision inoperative should be avoided, and inconsistent provisions should be reconciled whenever possible as parts of a harmonious whole. For taken in solitude, a word or phrase might easily convey a meaning quite different from the one actually intended and evident when a word or phrase is considered with those with which it is associated. In ascertaining the period of effectivity of an inscription of adverse claim, we must read the law in its entirety. Sentence three, paragraph two of Section 70 of P.D. 1529 provides:

“The adverse claim shall be effective for a period of thirty days from the date of registration.”At first blush, the provision in question would seem to restrict the effectivity of the adverse claim to thirty days. But the above provision cannot and should not be treated separately, but should be read in relation to the sentence following, which reads:

After the lapse of said period, the annotation of adverse claim may be cancelled upon filing of a verified petition therefor by the party in interest.

If the rationale of the law was for the adverse claim to ipso facto lose force and effect after the lapse of thirty days, then it would not have been necessary to include the foregoing caveat to clarify and complete the rule. For then, no adverse claim need be cancelled. If it has been automatically terminated by mere lapse of time, the law would not have required the party in interest to do a useless act. The law, taken together, simply means that thecancellation of the adverse claim is still necessary to render it ineffective, otherwise, the inscription will remain annotated and shall continue as a lien upon the property.

To hold otherwise would be to deprive petitioners of their property, who waited a long time to complete payments on their property, convinced that their interest was amply protected by the inscribed adverse claim.

In sum, the disputed inscription of an adverse claim on the TCT No. N-79073 was still in effect on February 12, 1985 when Quezon City Sheriff Roberto Garcia annotated the notice of levy on execution thereto. Consequently, he is charged with knowledge that the property sought to be levied upon the execution was encumbered by an interest the same as or better than that of the registered owner thereof. Such notice of levy cannot prevail over the existing adverse claim inscribed on the certificate of title in favor of the petitioners

NOTES:

1. Concededly, annotation of an adverse claim is a measure designed to protect the interest of a person over a piece of real property where the registration of such interest or right not otherwise provided for by the Land Registration Act or Act 496 (now P.D. 1529 or the Property Registration Decree), and serves a warning to third parties dealing with said property that someone is claiming an interest on the same or a better right than that of the registered owner thereof. Such notice is registered by filing a sworn statement with the Register of Deeds of the province where the property is located, setting forth the basis of the claimed right together with other dates pertinent thereto.

2. Under the Torrens system, registration is the operative act which gives validity to the transfer or creates a lien upon the land. A person dealing with registered land is not required to go behind the register to determine the condition of the property. He is only charged with notice of the burdens on the property which are noted on the face of the register or certificate of title, but nevertheless he is bound by the liens and encumbrances annotated thereon. One who buys without checking the vendor’s title takes all the risks and losses consequent to such failure

3. A subsequent sale of property covered by a Certificate of Title cannot prevail over an adverse claim, duly sworn to and annotated on the certificate of title previous to the sale.

4. Before the lapse of thirty days, the claimant may withdraw his adverse claim by filing with the Register of Deeds a sworn petition to that effect

5. As to whether or not the petitioners are buyers in good faith of the subject property, the same should be made to rest on the findings of the trial court. As pointedly observed by the appellate court, “there is no question that plaintiffs-appellees were not aware of the pending case filed by Pilares against Uychocde at the time of the sale of the property by the latter in their favor.” This was clearly elicited from the testimony of Conchita Sajonas, wife of plaintiff, during cross-examinationA purchaser in good faith and for value is one who buys property of another without notice that some other person has a right to or interest in such property and pays a full and fair price for the same, at the time of such purchase, or before he has notice of the claims or interest of some other person in the property. Good faith consists in an honest intention to abstain from taking an unconscientious advantage of another, Thus, the claim of the private respondent that the sale executed by the spouses was made in fraud of creditors has no basis in fact, there being no evidence that the petitioners had any knowledge or notice of the debt of the Uychocdes in favor of the private respondent, nor of any claim by the latter over the Uychocdes’ properties or that the same was involved in any litigation between said spouses and the private respondent. While it may be stated that good faith is presumed, conversely, bad faith must be established by competent proof by the party alleging the same. Sans such proof, the petitioners are deemed to be purchasers in good faith, and their interest in the subject property must not be disturbed.

6. At any rate, the Land Registration Act (Property Registration Decree) guarantees to every purchaser of registered land in good faith that they can take and hold the same free from any and all prior claims, liens an encumbrances except those set forth on the Certificate of Title and those expressly mentioned in the ACT as having been reserved against it. Otherwise, the efficacy of the conclusiveness of the Certificate of Title which the Torrens system seeks to insure would be futile and nugatory.