468 Phil. 201
CARPIO MORALES, J.:
Entry No. 36645;The Liwanag group moved to intervene in Civil Case No. 1376-M which was granted by the trial court on March 4, 1961.
Kind: Notice of Lis Pendens;
Executed in favor of: Valentina Bernardo Vda. de Aquino;
Conditions: A complaint has been filed in Court (Civil Case No.
1376, Court of First Instance of Bulacan), affecting the
parcel of land herein described and now pending;
Date of the Instrument: Oct. 9, 1956;
Date of Inscription: Oct. 9, 1956 at 9:40 a.m.
The Liwanag group subsequently filed on November 21, 1968 a Manifestation stating that the “confession of judgment [contained in the partly quoted Manifestation of the Fabellas] appears to have been executed under oath by defendants alone and does not show whether the same was prepared and filed with the assistance and/or consent of their counsel as the latter has no signature thereon,” hence, its [Liwanag group] filing of a Manifestation “in order to insure whether the confession of judgment was prepared and filed [by the Fabellas] knowing the full meaning of the same, to afford the intervenor [Liwanag group] opportunity to amend [its] pleadings in accordance therewith; and to determine whether [the Fabellas] may be proceeded against for violation of the provisions of the Revised Penal Code.”
2. x x x x
3. That however, in fairness to the plaintiff, herein defendants confirm plaintiffs testimony to the effect, among others, that the true intention and real agreement between her and herein defendants with respect to the property in litigation has always been one of mortgage to secure the payment of the original consolidated loan of P16,500.00 pesos extended by the defendants ESPERANZA VDA. DE FABELLA to the plaintiff and her deceased husband ROMAN AQUINO, but not a sale of said property to defendant JUAN FABELLA;
4. x x x x
5. That with plaintiffs case already rested and on the basis of the foregoing manifestation and confession of judgment, herein defendants respectfully submit this case for decision. x x x. (Emphasis and underscoring supplied)
After the case was ordered dismissed for failure of the parties and their counsels to appear and before the Court adjourned its session, Atty. Arsenio L. Cabrera came in to move for a reconsideration of the order of dismissal. Considering this has been pending for twenty (20) years and the Court is now busy trying other cases, the Court believes that the movant should better be given ten (10) days from today to submit his written motion for reconsideration stating therein the history of the case and the reason why the order of dismissal should be set aside. A copy of such motion should be furnished the defendants who shall have five (5) days from receipt of a copy thereof to reply thereto, if they so desire and thereafter, the motion for reconsideration shall be submitted for resolution. (Emphasis supplied)It appears, however, that no written motion for reconsideration was ever filed by Valentina’s counsel.
This is to certify that the Order issued by this Court on November 13, 1976 [dismissing] Civil Case No. 1376-M, entitled VALENTINA BERNARDO DE AQUINO, Versus ESPERANZA VDA. DE FABELLA. et al., SATURNINO LIWANAG, et al., Intervenors, is already final and executory.On the basis of the above-mentioned certification, the following entry was annotated on TCT No. T-17592:
Issued upon request of Rosie D. Liwanag of 1167 Antipolo cor. J.A. Santos, Tondo, Manila for all legal intents and purposes. (Emphasis and underscoring supplied)
Entry No. 3629 (M). Kind: Order of the Court of First Instance of Bulacan, Branch I, dismissing Civil Case No. 1376-M, VALENTINA BERNARDO DE AQUINO versus ESPERANZA VDA. DE FABELLA, Defendants, for failure to prosecute, which Order has become final and executory as per Certificate of the Deputy Clerk of Court dated January 27, 1977, copies of which are on file with this Office. Date of Instrument: November 13, 1976; Date of Inscription: January 27, 1977 at 10:40 a.m.On June 1, 1978, the Registry of Deeds of Meycauayan, Bulacan issued the following certification:
This is to certify that according to the records available in this Office, the original of Transfer Certificate of Title No. T-17592 (T-2942 (m), Bulacan Registry, (Meycauayan Branch), is complete and intact; and that there are no liens and/or encumbrance appearing at the time of the issuance of this certificate.On August 10, 1978, the Liwanag group executed a Deed of Absolute Sale covering the land in favor of petitioners.
Issued at the request of Mr. Domingo Liwanag, of Tondo Manila, who paid the certification fee of P3.00 under O.R. No. 0923146, issued on June 1, 1978. (Emphasis and underscoring supplied)
The motion was denied by Order of June 7, 1983.
x x x
7. That, the apparent reason as to why Atty. Arsenio M. Cabrera, counsel for plaintiff Valentina B. Vda. de Aquino, was not so able to file his promised Motion to Set Aside Order of Dismissal, was that plaintiff had already died as evidenced by her Certificate of Death, certifying that she died on AUGUST 24, 1972, EXHIBIT “A” of Motion for Substitution of plaintiff, and for which reasons, she was unable to appear anymore on November 13, 1976 when so called for conference by then Honorable Fidel L. Purisima, on which date the above-entitled case was ordered dismissed for failure to prosecute;
8. That, plaintiffs now most respectfully submit that the then plaintiff Valentina B. de Aquino had already prosecuted her case, duly submitted and closed her case and it was then for the defendants and intervenors to present their evidence, which by reason of technicalities of the law and dilatory tactics resorted to by said defendants and intervenors, the above-entitled case had up to the present remained pending;
9. That, it is further respectfully submitted that Sec. 6 of Rule 22 of the Rules of Court refers to annual conference on pending cases, and with due respect to this Honorable Court, the said conference is a matter of an administrative ways and means in order to justifiable termination of all cases pending before courts of justice and does not become a ground for dismissal of any case on the basis of parties’ and counsels’ non-appearance in said conference. x x x” (Emphasis and underscoring supplied)
First for reconsideration is the issue of whether the dismissal done in open court by then Judge Purisima has ever become final. Nowhere in the record does it show that the motion for its reconsideration interposed immediately after the dismissal has been resolved. It is true that counsel for the plaintiffs failed to file within the extended time the formal motion as required by then Judge Purisima in his order, but after a scrutinizing second look at the circumstances, the court now believes that such failure should not be held to have resulted in the cancellation or withdrawal of the standing verbal motion. A careful perusal of said order reveals that it was not meant to disregard the oral motion but to afford the then presiding judge, who was still unfamiliar with the progress of the case, the opportunity to be better apprised of its history and development. Proof enough that the judge needed a briefing is the fact that he dismissed the case “for failure to prosecute” when the voluminous record shows that there had already been several incidents, and in fact, trial, particularly the presentation of evidence by the plaintiff, and the confession of judgment by the defendant, had taken place before he became a judge of this court. In fact, the record reveals that the plaintiff has submitted an unusual bulk of documentary evidence consisting of thirty-nine (39) exhibits (“A” to “Z” to “AA-1”). (Emphasis and underscoring supplied)On the merits of respondents-heirs of Valentina’s Motion for Reconsideration of the November 13, 1976 Order of dismissal, the trial court held:
And now to the merits of the oft-repeated verbal motion for reconsideration. With respect to the question of whether it is in order for the substituting plaintiffs to suffer dismissal of their case by the mere tardiness of their counsel at the conference set on November 13, 1976, it should be emphasized that this conference was called under Section 6 of Rule 22 of the Rules of Court, which reads:The trial court thus disposed:
Sec. 6. Annual Conference on pending cases. —At the end of one year from the day the trial proper has commenced, and every year thereafter, if the trial has not been terminated, the judge shall call the parties and their counsel to a conference to devise ways and means of terminating the trial. A statement of the result of the conference, signed by the judge and counsel, shall be attached to the record, showing the reason why the trial has not terminated, number and names of witnesses yet to be presented by the parties; any facts stipulated during the conference; the efforts exerted to settle the case and similar matters. Copy of the statement shall be furnished the Supreme Court and the Secretary of Justice within ten (10) days after such conference.
WHEREFORE, the Court hereby renders judgment as follows:There appears to have been no appeal taken from the above-said judgment.
1) Declaring the Contract of Deed of Sale dated November 11, 1954, executed by the spouses Roman Aquino and Valentina Bernardo in favor of Juan Fabella over the property covered by Original Certificate of Title No. 6, Registry of Deeds of Bulacan, as an equitable mortgage;
2) Ordering the Register of Deeds of Malolos, Bulacan, to annul and cancel Transfer Certificate of Title No. 15770 in the name of Juan Fabella, and Transfer Certificate of Title No. 17592 in the names of Saturnino D. Liwanag, Domingo D. Liwanag, Raymundo D. Liwanag, and Rosie D. Liwanag, over the property subject matter of this case, and to issue the corresponding title thereon in the names of Spouses Roman Aquino and Valentina Bernardo;
3) Ordering the spouses Roman Aquino and Valentina Bernardo to pay the amount of P40,000.00 to the intervenors as reimbursement of the purchase price of the land subject thereof, with legal interest of 12% per annum from October 1956 until paid, the amount of P12,000.00 as moral and exemplary damages, and P15,000.00 as attorney’s fees, plus expenses of litigation. (Emphasis and underscoring supplied)
x x x xPetitioners also filed their own motion to dismiss, alleging that they are innocent purchasers for value, it having sufficed that a certificate of title on its face is free from all liens and encumbrances, valid and on file with the Register of Deeds at the time of purchase; and that they had been paying the real property taxes thereon under color of a valid title for more than ten (10) years and, therefore, they are deemed to have acquired the land by ordinary prescription, hence the complaint in Civil Case No. 534-M-92 had long prescribed under Article 1134 of the Civil Code.
The resolution of this Court to decide this case is not based merely on the desire to give the parties their just due and put an end to a protracted litigation. Rather, it finds support under the assumption that the confession of judgment made by the defendant and concurred in by the plaintiffs and the intervenors with their corresponding rights and obligations is in the form of a compromise agreement.
x x x x
Defendants (Esperanza Vda. de Fabella, et al.) admit the claim of plaintiffs that the contested document was in fact a mortgage and not a sale, and his liability to the intervenors (Saturnino D. Liwanag, et al.). Plaintiffs, in exchange for having the title of the property reverted to them, will assume the liabilities of defendants to intervenors and also waived their claim for damages. On reimbursement of the purchase price, damages and attorney’s fees without presenting evidences, but will return the title to the plaintiffs. Although no direct confrontation or meeting was held among the parties, it is evident and apparent that there is an agreement to settle the dispute in court. A confession of judgment which is intended to put an end to a litigation is in the nature of a compromise. (Republic vs. Gacuy, L-21416, Dec. 31, 1965). CONTRACT OR AGREEMENT, THEREFORE, IS PRESUMED TO HAVE BEEN ENTERED INTO. (Underlining in the original)
In respondents-heirs of Valentina’s opposition to the Liwanag group’s motion to dismiss, they contended that there was no identity of cause of action between Civil Case No. 1376-M and Civil Case No. 534-M-92 as the former involved a reformation of contract while the latter involved the cancellation of title of petitioners due to fraud and bad faith; and that the Liwanag group should not be given the “courtesy” of a liberal interpretation of the Rules since they are the ones to be blamed for this second action as they, in bad faith, sold the land.
Finding petitioners to be buyers in good faith and for value, and the cause of action for damages against the Liwanag group to have prescribed, the trial court, by Decision of June 25, 1996, dismissed the complaint “including the counterclaims of both sets of defendants for damages and attorney’s fees which are considered as mere natural consequences of a legitimate litigation not tainted with malice.”
1. Whether or not the Order of the Court dismissing Civil Case No. 1376-[M] for failure to prosecute, dated November 13, 1976, was ever entered in the Judgment Book pursuant to Sec. 9 of Rule 136 of the Rules of Court:
2. Whether or not the certification issued by [Spl. Deputy Clerk] Serafin Santos that the Order of Dismissal of Civil Case No. 1376-[M] had become final and executory was valid;
3. Whether or not the plaintiffs have been in open, adverse, continuous possession and occupation in the concept of owners of the property subject matter of the instant case since the time of Roman Aquino up to the present;
4. Whether or not the defendants Dimaculangans, et al., are buyers in good faith and for value;
5. Whether or not moral and exemplary damages as well as attorney’s fees may be awarded to the prevailing party. (Underscoring supplied)
As the Court has found and still finds clear from the evidence presented, it was the group of the sellers, the defendant Liwanags, who defrauded the plaintiffs and apparently misled defendant Dimaculangans. et al., as their innocent buyers, into believing that the case against them by plaintiffs had indeed been already terminated for good, as attested to by the certification of the finality of the dismissal order. The truth, however, and these defendant Dimaculangans knew about it all along, is that they had no right to sell the property to anyone, because the court then trying plaintiffs’ complaint against them had already declared that plaintiffs had a better right to the property in question.The trial court accordingly disposed as follows:
WHEREFORE, conformably with all the foregoing, the Decision of the Court dated June 25, 1996, is hereby partially reconsidered and modified with the judgment ordering defendants Saturnino D. Liwanag, Domingo D. Liwanag, Raymundo D. Liwanag, Rosie D Liwanag. and/or their respective lawful heirs in case of death, to pay, jointly and severally, the herein plaintiffs the amount of P5,000,000.00 as damages[,] including actual, moral, exemplary, and attorney’s fees.Respondents-heirs of Valentina and the Liwanag group appealed to the Court of Appeals.
The dismissal of the case against defendant Dimaculangans, et al.. including the counterclaims, remains, still without pronouncement as to costs. (Underscoring supplied)
WHEREFORE, premises considered, the Decision dated June 25, 1996 as modified by the Order dated August 20, 1997 is further MODIFIED. Transfer Certificate of Title No. T-1702 -P(M) issued in the names of Sps. Leonardo and Luz Dimaculangan, Sps. Norberto and Milagros Villaluna, Rosauro Hernandez and Sps. Florentino and Lolita Reyes, Jr.. is hereby declared NULL and VOID, and the Register of Deeds of Bulacan is ORDERED to issue a new Transfer Certificate of Title to Royal Moluccan Realty Holdings, Inc.. The award of P5,000,000.00 as damages and attorney’s fees being excessive is likewise reduced to P50,000.00. Costs against the LIWANAG GROUP.Hence, the present petition by petitioners Dimaculangan et al. raising the following issues:
A. WHETHER OR NOT THE COURT OF APPEALS RADICALLY DEPARTED FROM JURISPRUDENCE IN HOLDING THAT PETITIONERS ARE INNOCENT PURCHASERS FOR VALUE OF THE SUBJECT PROPERTY[;]In holding that petitioners were not innocent purchasers for value, the Court of Appeals rationalized:
B. WHETHER OR NOT THE COURT OF APPEALS ACTED CONTRARY TO LAW AND JURISPRUDENCE IN REJECTING THE PETITIONERS’ ARGUMENT OF PRESCRIPTION AND LACHES[; and]
C. WHETHER OR NOT THE COURT OF APPEALS ACTED CONTRARY TO LAW, JURISPRUDENCE AND DEVIATED FROM ACCEPTED STANDARDS IN APPLYING THE DOCTRINE OF CONCLUSIVENESS OF JUDGMENT TO PETITIONERS DESPITE THEIR BEING INNOCENT PURCHASERS FOR VALUE.
In the case at bar, it is undisputed that defendant-appellee Florentino C. Reyes, Jr., one of the co-owners of the lot subject of this case, the others being Spouses Leonardo P. Dimaculangan x x x , was the lawyer and broker in the negotiations for the purchase of the lot from appellees LIWANAG GROUP. As broker and agent of the LIWANAG GROUP and as lawyer, consultant and broker of Leonardo Dimaculangan, et al., it cannot be doubted that Atty. Reyes was very much aware of Civil Case No. 1376-M involving the same land subject of the negotiations between the LIWANAG GROUP and the DIMACULANGAN GROUP, to wit:Petitioners contend that there is nothing in the testimony of Atty. Reyes, or any other witness, to support the conclusion of the Court of Appeals that Atty. Reyes acted as counsel for the petitioners and/or for the Liwanag group in the negotiations for the purchase of the land, for while he testified that he was the only lawyer in the group, it does not follow that he acted as lawyer in the consummation of the sale.
x x x
From the foregoing admissions of Florentino C. Reyes, Jr., it can be inferred that he went over the records of Civil Case No. 1376-M. Presumably, he read and went over the major pleadings of the parties, the orders in said Civil case No. 1376-M and the transcripts and minutes of the proceedings. And, assuming that Atty. Reyes did not go over the case records of Civil Case No. 1376-M by reason of the November 13, 1976 Order of Dismissal, such failure or refusal to verify the actual status of the case when such knowledge of the dismissal order should put him to possible defects of the title of the LIWANAGs will not make him and the rest of the DIMACULANGAN GROUP innocent purchasers in good faith if afterwards it turns out that such title is actually defective. The purchasers, DIMACULANGAN GROUP, by the carry over of the notice of lis pendens from TCT No. 15770 registered in the name of Juan Fabella and Esperanza to the title of LIWANAGs should have been put on guard of the legality and validity of the title of the LIWANAGs since the case dates back to the title of the predecessors-in-interest of the LIWANAGs and therefore, the title of the LIWANAGs were issued even during the pendency of Civil Case No. 1376-M.
Moreover, as lawyer and as broker of the proposed seller and the proposed buyer, Atty. Reyes should have conducted a thorough research and investigation of the title and rights of LIWANAG. More so that the order of dismissal was made under Rule 22 which is not a judgment on the merits. Well-established is the rule that a purchaser who has knowledge of the facts should put him into inquiry and investigation as to possible defects of the title of the vendor and fails to make such inquiry and investigation cannot claim that he is purchaser in good faith. Knowledge of prior transfer of registered property by a subsequent purchaser makes him a purchaser in bad faith and his knowledge of such transfer vitiates his title acquired by virtue of the later instrument of conveyance which was registered in the Registry of Property. (Citations omitted)
Well settled is the rule that all persons dealing with property covered by Torrens certificate of title are not required to go beyond what appears on the face of the title. When there is nothing on the certificate of title to indicate any cloud or vice in the ownership of the property, or any encumbrance therein, the purchaser is not required to explore further than what the Torrens title upon its face indicates in quest for any hidden defect or inchoate right that may subsequently defeat his right thereto. (Underscoring supplied)In the present case, although at the time of purchase by petitioners, the notice of lis pendens annotated on the Liwanag groups title was already cancelled by a subsequent annotation, they were put ‘on notice of a litigation involving the land as the title of the Liwanag group bore the said annotations as in fact they even imposed as a condition before purchasing the property the cancellation thereof.
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, and relying on the belief that there was no defect in the title of the vendor, purchases the property without making any further investigation, he cannot claim that he is a purchaser in good faith for value.In ruling out prescription of respondents-heirs of Valentina’s cause of action, the Court of Appeals declared:
As discussed earlier, the date of registration of the title to the names of the DIMACULANGAN GROUP on August 11, 1978 cannot be the date when the ten (10) year prescription should be reckoned because on that date, Civil Case No. 1376-M was still pending as per the Ligot-Telan Order. Moreover, it was only on October 4, 1989 when Civil Case No. 1376-M was finally decided by Judge Valentin Cruz in their favor and that the instant suit was filed on August 14, 1992 or only three (3) years since then. Therefore, in view of such fact, the present case has not yet prescribed in the same manner that the principle of laches cannot also be applied, for it was only when they tried to execute the final judgment in Civil Case No. 1376-M that they discovered that the property was already sold to the DIMACULANGAN GROUP.Petitioners submit that the above ruling is contrary to Section 52 of PD 1529 which reads:
The provision therefore that an action for reconveyance of real property resulting from fraud prescribes in four (4) years from the discovery of fraud or that an action based on implied constructive trust prescribes in ten (10) years cannot be applied in the case at bar based on attendant circumstances above stated. (Underscoring supplied)
SECTION 52. Constructive notice upon registration. - Every conveyance, mortgage, lease, lien, attachment, order, judgment, instrument or entry affecting registered land shall, if registered, filed or entered in the office of the Register of Deeds for the province or city where the land to which it relates lies, be constructive notice to all persons from the time of such registering, filing or entering,Petitioners argue that if the action for reconveyance is based on fraud, it prescribes in four (4) years from discovery thereof, and if it is based on the existence of a constructive trust, it prescribes in ten (10) years from the date of its creation. In both cases, petitioners continue, discovery of fraud and the creation of the trust are deemed to have taken place at the time of registration, they citing Buenaventura v. Court of Appeals  and Millena v. Court of Appeals.  They conclude that as the instant case was filed by respondents-heirs of Valentina on August 14, 1992 or fourteen (14) years after the title of petitioners were registered, the action had already prescribed.