CONSTANCIO JOAQUIN, PETITIONER, VS. ABUNDIO MADRID, ET AL.

,
RESPONDENTS.

DECISION

LABRADOR, J.:
This is a petition to review the decision of the Court of Appeals against petitioner and in favor of
respondents. The facts found in the appellate court below are as follows:
"The spouses Abundio Madrid and Rosalinda Yu are the owners of a
residential lot at 148 Provincial Road, corner Sto. Sacramento, Makati,
Rizal, covered by Transfer Certificate of Title No. 31379 (for Rizal).
Planning to build a house thereon, the said spouses sought a loan from the
Rehabilitation Finance Corporation, RFC for short, in November, 1953. One
Carmencita de Jesus, godmother of Rosalinda, offered to work for the
shortening of the usually long process before a loan could be granted and
the spouses, accepting the preferred assistance, delivered to her the
Transfer Certificate of Title covering the lot in January, 1954, to be
surrendered to the RFC. Later, the spouses were able to secure a loan of
P4,000.00 from their parents for the construction of their house and they
decided to withdraw the application for a loan they had filed with the RFC.
They so informed Carmencita de Jesus and asked her to retrieve the
Transfer Certificate of Title and return it to them. Shortly thereafter,
Carmencita told them, however, that the RFC employee in charge of
keeping the Transfer Certificate of Title was out on leave. On August, 1954,
one Florentino Calayag showed up in the house of the spouses and asked
for Abundio Madrid and Rosalinda Yu. Rosalinda answered that she was
Rosalinda Yu and Abundio, that he was Abundio Madrid. Calayag would
not believe them. He said that he was looking for Abundio Madrid and
Rosalinda Yu who had executed a deed of mortgage on the lot where the
house they were in then stood, and that the term of the mortgage had
already expired, he added. Abundio and Rosalinda then retorted that they
had not mortgaged their land to anyone. The spouses immediately went to
consult with a lawyer who accompanied them to the Office of the Register
of Deeds of Rizal. They found out then that the land had been mortgaged to
Constancio Joaquin on January 21, 1954 (Exh. B). Thus runs the evidence
of the plaintiffs-appellees.
The appellant admits that Abundio Madrid and Rosalinda Yu, the
registered owners of the mortgaged property, were not those persons who
had signed the deed of mortgage. His version of the case is as follows: In
the month of January, 1954 Carmencita de Jesus saw Florentino Calayag
and asked the latter to find a moneylender who could grant a loan on a
security of real property, showing, at the same time, a Transfer Certificate
of Title in the name of the spouses Abundio Madrid and Rosalinda Yu.
Calayag approached Constancio Joaquin who having funds to spare for the
purpose, visited the land and, finding it well situated, told Calayag to show
to him the prospective borrowers. On the following day, Calayag brought
two women to the law office of Atty. M. S. Calayag and presented them to
Constancio Joaquin as Rosalinda Yu and Carmencita de Jesus. The alleged
Rosalinda Yu claimed to be the owner of the lot with her husband Abundio
Madrid who authorized her to secure a loan on their property, she assured
him, and that Abundio would come when the contract therefor was ready to
sign it with her. Thus, the deed of mortgage Exhibit I was signed by the
persons who posed themselves as Abundio Madrid and Rosalinda Yu on the
following day. The whole amount of the loan was delivered to the supposed
Rosalinda Yu immediately after the registration of the document of
mortgage in the Office of the Register of Deeds of Rizal, according1 to
Florentino Calayag." (Dec. off the Court of Appeals, CA-G. R. No. 16717-R,
prom. Nov. 29, 1957).
The appellate court below further found that the petitioner "visited the
property proposed for mortgage to find out at the same time who was the
real owner thereof. But he contented himself with the information given to
him by the person living then on the land that the owner was a woman
known as "Taba". There ended his inquiry about the identity of the
prospective mortgagors". (Dec. of the Court of Appeals, p. 8). The lower
court based its decision on the case of Lara, et al., vs. Ayroso, 95 Phil., 185,
50 Off. Gaz., (10), 4838, in which we held that as the land mortgaged was
still in the name of the real owner when mortgaged to the mortgagees by an
impostor, the mortgagees were defrauded not because they relied upon
what appeared in a Torrens certificate of title, but because they believed the
words of the impostor; that it was the duty of the mortgagees to ascertain
the identity of the man with whom they were dealing which circumstances
differentiate the case from the previous cases of De la Cruz vs. Fabie, 35,
Phil., 144 and Blondeau, et al., vs. Nano and Vallejo, 61 Phil., 625.
In the first assignment of error it is argued that since par. 2 of Sec. 55 of the
Land Registration Act expressly provides that "in all cases of registration by
fraud the owner may pursue all his legal and equitable remedies against the
parties to the fraud, without prejudice to the rights of any innocent holder
for value of a certificate of title", the second proviso in the same section
"that a registration procured by the presentation of a forged deed shall be
null and void" should be overlooked. There is no merit in this argument,
which would have the effect of deleting the last proviso. This last proviso is
a limitation of the first part of par. 2 in the sense that in order that the
holder of a certificate for value issued by virtue of the registration of a
voluntary instrument may be considered a holder in good faith for value,
the instrument registered should not be forged. When the instrument
presented is forged, even if accompanied by the owner's duplicate
certificate of title, the registered owner does not thereby lose his title, and
neither does the assignee in the forged deed acquire any right or title to the
property.
In the second assignment of error it is further argued that as the petitioner
is an innocent purchaser for value, he should be protected as against the
registered owner because the latter can secure reparation from the
assurance fund. The fact is, however, that petitioner herein is not the
innocent purchaser for value protected by law. The innocent purchaser for
value protected by law is one who purchases a titled land by virtue of a
deed executed by the registered owner himself, not by a forged deed, as the
law expressly states. Such is not the situation of the petitioner, who has
been the victim of impostors pretending to be the registered owners but
who are not said owners.
The next assignment of errors are predicated on the assumption that both
the petitioner and the respondents are guilty of negligence. The giving of
the certificate of title to Carmencita de Jesus is in itself no act of negligence
on the part of respondents; it was perfectly a legitimate act. Delay in
demanding the certificate of title is no act of neglect either, as respondents
have not executed any deed or document authorizing Carmencita de Jesus
to execute deeds for and on their behalf. It was petitioner who was
negligent, as he did not take enough care to see to it that the persons who
executed the deed of mortgage are the real registered owners of the
property. The argument raised by petitioner's counsel that in case of
negligence on the part of both the one who committed a breach of faith is
responsible, is not applicable. Petitioner alone is guilty of neglect, so he
must suffer from it.
Finding no error in the decision of the Court of Appeals, we hereby affirm it
with costs against petitioner. So ordered.
THE TREASURER OF THE PHILIPPINES, petitioner,
vs.
THE COURT OF APPEALS and SPOUSES EDUARDO OCSON and NORA E. OCSON respondents.

CRUZ, J.:

The petitioner asks us to reverse a decision of the respondent court affirming that of the trial court holding the Assurance Fund subsidiarily
liable for damages sustained by the private respondents under the following established facts.

Sometime in 1965, a person Identifying himself as Lawaan Lopez offered to sell to the private respondents a parcel of land located in
Quezon City and consisting of 1,316.8 square meters, which he claimed as his property. His asking price was P85.00 per square meter but
after a month's haggling the parties agreed on the reduced price of P76.00 per square meter. The sale was deferred, however, because the
prospective vendor said his certificate of title had been burned in his house in Divisoria, and he would have to file a petition with the court of
first instance of Quezon City for a duplicate certificate of title. He did so and the petition was granted after hearing without any opposition.
Following the issuance of the new duplicate certificate of title, the said person executed a deed of sale in favor of the private respondents,
who paid him the stipulated purchase price of P98,700.00 in full. The corresponding transfer certificate of title was subsequently issued to
them after cancellation of the duplicate certificate in the name of Lawaan Lopez. 1

Trouble began two years later when another person, this time a woman, appeared and, claiming to be the real Lawaan Lopez, filed a petition
in the court of first instance of Quezon City to declare as null and void the transfer of her land in favor of the private respondents, on the
ground that it had been made by an impostor. After trial, the questioned deed of sale was annulled, (together with the duplicate certificate of
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title issued to the impostor and the transfer certificate of title in the name of the private respondents) and the real owner's duplicate certificate
of title was revalidated. Neither the Solicitor General nor the private respondents appealed the decision, but Lawaan Lopez did so, claiming
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that the defendants should have been required to pay damages to her and the costs. The appeal was dismissed, with the finding by Justices
Jose Leuterio, Magno Gatmaitan and Luis B. Reyes of the Court of Appeals that there was no collusion between the private respondents and
the impostor. 4

Subsequently the private respondents filed a complaint against the impostor Lawaan Lopez and the Treasurer of the Philippines as custodian
of the Assurance Fund for damages sustained by the plaintiffs as above narrated. Both the trial court * ruled the respondent court ** ruled in
their favor, holding the Assurance Fund subsidiarily liable for the sum of P138,264.00 with legal interest from the date of filing of the
complaint, in case the judgment could not be enforced against the other defendant who had been defaulted and could not be located. The 5

petitioner, disclaiming liability, is now before us and prays for relief against the decision of the respondent court which he says is not in
accord with law and jurisprudence.

The applicable law is Section 101 of Act No. 496 (before its revision by P.D. No. 1529) providing as follows:

Sec. 101. Any person who without negligence on his part sustains loss or damage through any omission, mistake or
misfeasance of the clerk, or register of deeds, or of any examiner of titles, or of any deputy or clerk or of the register of
deeds in the performance of their respective duties under the provisions of this Act, and any person who is wrongfully
deprived of any land or any interest therein, without negligence on his part, through the bringing of the same under the
provisions of this Act or by the registration of any other person as owner of such land, or by any mistake, omission, or
misdescription in any certificate or owner's duplicate, or in any entry or memorandum in the register or other official
book, or by any cancellation and who by the provisions of this Act is barred or in any way precluded from bringing an
action for the recovery of such land or interest therein, or claim upon the same, may bring in any court or competent
jurisdiction an action against the Treasurer of the Philippine Archipelago for the recovery of damages to be paid out of
the Assurance Fund.

Commenting on this provision, Commissioner Antonio H. Noblejas, in his book on Land Titles and Deed notes that recovery from the
6

Assurance Fund could be demanded by:

1) Any person who sustains loss or damage under the following conditions:

a) that there was no negligence on his part; and

b) that the loss or damage was sustained through any omission, mistake, or misfeasance of the clerk of
court, or the register of deeds, his deputy or clerk, in the performance of their respective duties under the provisions of
the land Registration Act,' or

2) Any person who has been deprived of any land or any interest therein under the following conditions:

a) that there was no negligence on his part;

 b) that he was deprived as a consequence of the bringing of his land or interest therein under the provisions
of the Property Registration Decree; or by the registration by any other persons as owner of such land; or by mistake,
omission or misdescription in any certificate or owner's duplicate, or in any entry or memorandum in the register or
other official book, or by any cancellation; and

c) that he is barred or in any way precluded from bringing an action for the recovery of such land or interest
therein, or claim upon the same.

A careful reading of the above provision will readily show that the private respondents do not come under either of the two situations above
mentioned.

The first situation is clearly inapplicable as we are not dealing here with any omission, mistake or malfeasance of the clerk of court or of the
register of deeds or his personnel in the performance of their duties.

The second situation is also inapplicable. The strongest obstacle to recovery thereunder is that the private respondents acquired no land or
any interest therein as a result of the invalid sale made to them by the spurious Lawaan Lopez.

The petition correctly points out that such sale conveyed no title or any interest at all to them for the simple reason that the supposed vendor
had no title or interest to transfer. He was not the owner of the land. He had no right thereto he could convey. Manifestly, the deception
imposed upon them by the impostor deprived the private respondents of the money they delivered to him as consideration for the sale. But
there is no question that the subsequent cancellation of the sale did not deprive them of the land subject thereof, or of any interest wherein,
for they never acquired ownership over it in the first place.

The private respondents argue that from the time the new transfer certificate of title was issued in their name on January 28, 1965, until it
was cancelled on October 12, 1967, they were the true and exclusive owners of the disputed property. Hence, the cancellation of their title on
the latter date had the effect of depriving them of the said land and so entitles them now to proceed against the Assurance Fund.

The flaw in this posture is that the real Lawaan Lopez had her own genuine certificate of title all the time and it remained valid despite the
issuance of the new certificate of title in the name of the private respondents. That new certificate, as the trial court correctly declared, was
null and void ab initio, which means that it had no legal effect whatsoever and at any time. The private respondents were not for a single
moment the owner of the property in question and so cannot claim to have been unlawfully deprived thereof when their certificate of title was
found and declared to be a total nullity.

Additionally, the Court observes that the private respondents were not exactly diligent in verifying the credentials of the impostor whom they
had never met before he came to them with his bogus offer. The fact alone that he claimed to have lost his duplicate certificate of title in a
fire, not to mention the amount of the consideration involved, would have put them on their guard and warned them to make a more thorough
investigation of the seller's Identity. They did not. Oddly, they seemed to be satisfied that he had an Ilongo accent to establish his claim to be
the Visayan owner of the property in question. They were apparently not concerned over the curious fact that for his residence certificate B
the supposed owner had paid only P1.00 although the property he was selling was worth to him no less than P98,700.00. Moreover,
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whereas address in that certificate was Mandaluyong, Rizal, whereas the address indicated in the records of the Register of Deeds of the
owner of the land in question was Fara-on Fabrics, Negros Occidental. 8

As for the proceedings for the issuance of a duplicate certificate of title, the private respondents themselves state in their complaint that the
evidence of the petitioner therein was received by the clerk of court only, without any opposition, and his report was thereafter accepted by
the trial judge who thereupon granted the relief sought by the impostor. It is not likely, given the summary nature of these proceedings, that
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the necessary care was taken by the court to establish the real identity of the person who claimed to be the owner of the property in question.

While we may agree that there was no collusion between the parties respondents and the vanished vendor, we are not prepared to rule
under the circumstances of this case that they are entitled to even claim the status of innocent purchasers of the land. On the contrary, we
find that for failure to exercise the necessary diligence in ascertaining the credentials and bona fides of the false Lawaan Lopez, and as a
result of his deception, they never acquired any title to the said land or any interest therein covered by Section 101 of Act No. 496.

As this Court held in La Urbana v. Bernardo 10 "it is a condition sine qua non that the person who brings an action for damages against the
Assurance Fund be the registered owner and as the holders of transfer certificates of title, that they be innocent purchasers in good faith and
for value." Being neither the registered owners nor innocent purchasers, the private respondents are not entitled to recover from the
Assurance Fund.

They are, of course, not entirely without recourse, for they may still proceed against the impostor in a civil action for recovery and damages
or prosecute him under the Revised Penal Code, assuming he can be located and arrested. The problem is that he has completely
disappeared. That difficulty alone, however, should not make the Assurance Fund liable to the private respondents for the serious wrong they
have sustained from the false Lawaan Lopez. The Government — like all governments, and for obvious reasons — is not an insurer of the
unwary citizen's property against the chicanery of scoundrels.

WHEREFORE, the petition is GRANTED. The decision of the respondent court dated January 26, 1976 is set aside, and Civil Case No.
12426 of the then Court of First Instance of Rizal is dismissed. No costs.SO ORDERED.