Supreme Court Clarified the Diligence Required in Dealing with Reconstituted Titles

On 25 November 2024, the Supreme Court (“SC”) released the case of Spouses Manalese v. Spouses Ferreras, clarifying the diligence required in dealing with reconstituted titles.

In this case, the petitioners consisting of Spouses Manalese and their son Aries (“Petitioners”) filed a petition before the SC arguing that they are the rightful owners of two (2) parcels of land given that they purchased these for value from a certain Carina Pinpin (“Pinpin”). They claim that they are innocent purchasers for value, as they did not notice any defects or irregularities upon inspection of Pinpin’s titles to the land. The respondent, consisting of the estate of Spouses Ferreras (“estate”) and the estate’s Special Administrator Danilo S. Ferreras (“Danilo”), argues that the Petitioners are not the owners given that it would have been impossible for the Spouses Ferreras (“Sps. Ferreras”) to have sold their properties to Pinpin (and thereafter to the petitioners) as the sale happened years after each of their deaths. Furthermore, no sale concerning the owner’s duplicate copies of the titles of Sps. Ferrerass properties could have been made by Pinpin given that the titles were in the possession of Danilo. It was also argued that the owner’s duplicate copies, which were allegedly used in the sale between Sps. Ferreras and Pinpin and were purportedly obtained by a certain Zenaida Ferreras who filed before a Regional Trial Court an affidavit of loss and thereafter obtained replacement owner’s duplicate copies, were fraudulently procured by Pinpin. The Regional Trial Court of Angeles City (“RTC Angeles City”) ruled against Petitioners on the premise that their titles were null and void and the estate was still the owner of the properties. 

The SC affirmed the lower court’s ruling, stating that the Petitioners could not be considered as innocent purchasers for value for having relied alone on the certificates of title provided by Pinpin. The SC focused on the fact that there were a lot of discrepancies surrounding the Transfer Certificate of Titles that Pinpin used in her sale to the Petitioners that should have compelled the latter to make further inquiries. Such discrepancies include the fact that certain annotations were missing on the titles that Pinpin has which were present in the titles of Sps. Ferreras (such titles had annotations indicating that a certain Zenaida Ferreras, the relationship between that person and the Sps. Ferreras being unknown, filed an affidavit of loss and the court ruling in favor of the release of a replacement title). There were other anomalies as well, such as the huge difference between the price Pinpin allegedly paid as compared to the price paid by the Petitioners, the undervaluation of the purchase price of the property, and that the properties were subjected to a series of almost-simultaneous transactions, among others. 

The SC held that reconstituted titles have a similar nature with replacement titles, and therefore by extension the diligence required when entering into transactions with the former is the same diligence required by the latter which, according to jurisprudence requires the parties to be extra-careful, with an inquiry before the Register of Deeds being one of the duties of a purchaser. Further, the SC clarified that a person dealing with registered land is not excused from not inquiring into the registrations made in relation thereto because such person is constructively notified thereof.

Finally, and in order to guide prospective purchasers of property, the SC stated that while the determination of good faith is essentially a factual issue and the specific circumstances of each case very, it proposes another approach which involves the scrutiny of, firstly, intrinsic evidence – those which are borne by the register and the certificate of title, and secondly, extrinsic evidence – those circumstances outside of the register and the certificate of title. With respect to intrinsic evidence, knowledge or awareness thereof on the part of a prospective party to a contract involving titled property is immaterial pursuant to the constructive notice rule. Regarding extrinsic evidence, there must be actual knowledge and/or the failure to observe the diligence required of a reasonably prudent person in ascertaining such evidence. 

As the petitioners failed to make proper inquiries despite the many irregularities that could have been discovered if they checked the register or by diligently investigating the matters outside such records, then clearly, the defense of being innocent purchasers of value cannot be availed of by them.