This Supreme Court decision emphasizes the importance of due diligence in real estate transactions, particularly when a notice of lis pendens is involved. It clarifies that even with certifications of finality of dismissal, buyers must investigate potential defects in a seller’s title, especially if there’s a known prior litigation. The ruling ultimately protects the rights of original landowners against subsequent purchasers who fail to exercise the required level of care and caution.
Can a ‘Clean’ Title Mask a Fraulent Sale? When Due Diligence Demands More Than a Glance
This case revolves around a parcel of land originally owned by Roman Aquino and his wife, Valentina. In 1954, the Aquinos executed a Deed of Absolute Sale in favor of the spouses Juan and Esperanza Fabella. The Aquinos claimed this was actually a mortgage agreement securing a loan. The Fabellas later sold the land to the Liwanag group. Valentina Aquino filed a complaint for reformation of the deed to a mortgage and the cancellation of the titles, docketed as Civil Case No. 1376-M, with a notice of lis pendens annotated on the Liwanag group’s title. The Fabellas eventually confessed judgment, admitting the true agreement was a mortgage.
Despite this, the Liwanag group offered to sell the property to Leonardo and Luz Dimaculangan, et al. (petitioners), who imposed a condition that the lis pendens be cancelled first. One of the petitioners, lawyer-real estate broker Florentino Reyes, Jr., helped the Liwanag group obtain a certification from a court interpreter stating that the order dismissing Civil Case No. 1376-M was final and executory. Based on this, the lis pendens was removed, and the petitioners purchased the land. Later, the Aquino children (respondents), heirs of Valentina, filed a complaint to revoke and annul the title, arguing that they had been in continuous possession and that the defendants were in bad faith.
The legal question at the heart of the case is whether the petitioners were innocent purchasers for value, and whether the respondents’ action had prescribed. The trial court initially ruled in favor of the petitioners, finding them to be buyers in good faith, but partially reconsidered, ordering the Liwanag group to pay damages. The Court of Appeals reversed, finding the petitioners not to be innocent purchasers and nullifying their title. The Supreme Court agreed with the Court of Appeals.
The Supreme Court emphasized that despite the certification of finality, the petitioners were not innocent purchasers for value. Atty. Reyes, being a lawyer and real estate broker, was expected to exercise a higher degree of diligence. The initial notice of lis pendens should have alerted him to the possibility of defects in the Liwanag group’s title. The Court referenced Egao v. Court of Appeals stating that, “Where a purchaser neglects to make the necessary inquiries and closes his eyes to facts which should put a reasonable man on his guard as to the possibility of the existence of a defect in his vendor’s title…he cannot claim that he is a purchaser in good faith for value.” His failure to conduct a thorough investigation, despite being aware of the prior litigation, negated their claim of good faith.
Regarding prescription, the Supreme Court held that the respondents’ cause of action had not prescribed. Since the notice of lis pendens was carried over to the Liwanag group’s title, the respondents had reason to believe their rights were protected until the final resolution of Civil Case No. 1376-M in 1988. Therefore, filing the action in 1992 was within the prescriptive period. The court emphasized that “the rules on prescription and constructive notice are intended to prevent, not cause, injustice.” To consider the prescriptive period to have run from the registration of petitioners’ title would have resulted in an injustice to respondents.
FAQs
| What is a notice of lis pendens? | It is a notice filed in the registry of deeds to warn all persons that certain property is the subject matter of litigation, and that any interests acquired during the pendency of the suit are subject to its outcome. |
| What does it mean to be an ‘innocent purchaser for value’? | It means buying property without any knowledge or notice of defects in the seller’s title and paying a fair price for it. Such a buyer is generally protected by law. |
| Why were the petitioners not considered innocent purchasers? | Because one of them, Atty. Reyes, had knowledge of the prior litigation (Civil Case No. 1376-M) and the notice of lis pendens. His failure to properly investigate despite this knowledge negated their claim of good faith. |
| What is the significance of a certification of finality of dismissal? | While it usually indicates that a case is closed, it doesn’t relieve a buyer of the duty to investigate potential title defects, especially when there’s a known prior litigation. |
| What is the prescriptive period for actions involving real property? | The prescriptive period varies depending on the cause of action, such as fraud or constructive trust, and the applicable laws, which can prescribe in four to ten years from the time the cause of action accrues. |
| When does the prescriptive period begin if there’s a notice of lis pendens? | If the notice of lis pendens is carried over to a subsequent title, the prescriptive period typically begins only after the final resolution of the litigation and after discovering the actions of the defendants. |
| How did the court determine if the sale was valid? | The court examined whether the buyers were in good faith and if they conducted sufficient due diligence, considering their knowledge of the property’s history and legal issues. |
| What could the petitioners have done differently? | Atty. Reyes should have conducted a more thorough investigation of Civil Case No. 1376-M, despite the certification, and verified the actual status of the land title and potential claims against it. |
This case illustrates that potential buyers must exercise due diligence when purchasing property, especially if there are indications of prior litigation or title defects. A seemingly clean title is not always enough. Failing to investigate thoroughly can result in the loss of the property and significant financial damages.
For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.
Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Spouses Leonardo P. Dimaculangan, et al. v. Virginia Aquino Romasanta, et al., G.R. No. 147029, February 27, 2004
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