ADORACION ROSALES RUFLOE, ALFREDO RUFLOE AND RODRIGO RUFLOE, PETITIONERS, VS. LEONARDA BURGOS, ANITA BURGOS, ANGELITO BURGOS, AMY BURGOS, ELVIRA DELOS REYES AND JULIAN C. TUBIG,…

Rufloe versus Burgos

The Case

This is a petition for review of a Court of Appeals decision that had declared the Burgos family innocent purchasers for value of a parcel of registered land in Muntinlupa. The Rufloes — the widow Adoracion and her children Alfredo and Rodrigo — sued to declare void the contracts that had transferred their family property to Elvira Delos Reyes and then onward to the Burgos siblings and their aunt Leonarda, and to cancel the transfer certificates of title that grew out of a forged deed of sale. The case matters because it is the Supreme Court's clean statement of the limits of the Torrens system's protection: a forged deed conveys nothing, and the buyer who ignores an annotated adverse claim, pending litigation, and occupants in possession is not an innocent purchaser for value.

Procedural History

The Rufloes first sued Delos Reyes for damages before the Regional Trial Court of Pasay City, which declared the deed of sale in her favor falsified and forged, and that decision became final and executory. The Rufloes then filed the present action for declaration of nullity of contract, cancellation of transfer certificates of title, and damages before the Regional Trial Court of Muntinlupa, which ruled in their favor, found the respondents not innocent purchasers for value, found the sale to Leonarda simulated, and ordered the Register of Deeds to reinstate the Rufloes' title and cancel the subsequent titles. The Burgos respondents appealed to the Court of Appeals, which reversed the trial court and declared them purchasers in good faith and for value. The Rufloes moved for reconsideration, which was denied, and they came to the Supreme Court by petition for review under Rule 45.

Facts

Adoracion Rufloe and her husband Angel acquired a 371-square meter parcel of land in Barangay Bagbagan, Muntinlupa, covered by a transfer certificate of title. Angel died in 1974. In 1978, Elvira Delos Reyes forged the signatures of Adoracion and Angel on a deed of sale dated September 8, 1978, making it appear that the spouses had sold her the land, and on that basis she obtained a title in her own name.

In November 1979 the Rufloes sued Delos Reyes for damages in Pasay City, alleging the deed was falsified because Angel had died four years before the supposed sale, and they caused a notice of adverse claim to be annotated on Delos Reyes's title on November 5, 1979. While that case was pending, on December 4, 1984, Delos Reyes sold the property to the Burgos siblings — Anita, Angelina, Angelito and Amy — through their father Amado, who bought it through a real estate broker and never dealt personally with Delos Reyes. A new title was issued in the siblings' names. On December 12, 1985 the siblings sold the same property to their aunt Leonarda Burgos, but that sale was never registered, no title was issued to her, the property remained in the siblings' names, and the siblings continued paying the real estate taxes.

On February 6, 1989 the Pasay court declared the deed of sale to Delos Reyes falsified and forged and ruled that she acquired no ownership, and that decision became final. The Rufloes then filed this action in Muntinlupa in February 1990. The respondents answered that they had bought in good faith on the strength of a clean title shown to them, and that they were innocent purchasers for value.

Issues

• Whether or not the sale of the property by Delos Reyes to the Burgos siblings, and the subsequent sale by the siblings to Leonarda, were valid and binding.
• Whether or not the respondents were innocent purchasers in good faith and for value despite the forged deed of sale of their transferor Delos Reyes.

Applicable Provisions

The decision applies the principle of the Civil Code that no one can give what one does not have, expressed in the maxim nemo dat quod non habet, which means that a seller transfers only what he owns:

One can sell only what one owns or is authorized to sell, and the buyer can acquire no more right than what the seller can transfer legally.

This is the provision that voids the forged sale and every transfer that followed from it.

The decision also quotes the settled exception to the rule that a buyer may rely on the Torrens certificate of title:

... a person dealing with registered land has a right to rely on the Torrens certificate of title and to dispense with the need of inquiring further except when the party has actual knowledge of facts and circumstances that would impel a reasonably cautious man to make such inquiry or when the purchaser has knowledge of a defect or the lack of title in his vendor or of sufficient facts to induce a reasonably prudent man to inquire into the status of the title of the property in litigation.

This is the yardstick against which the Burgos siblings and Leonarda are measured, and it is why their claim of good faith fails.

Ruling

On the first issue, the Court held that the validity of the deed between the Rufloes and Delos Reyes had already been settled with finality in the Pasay case, which declared the signatures forged. A forged deed is null and void and conveys no title. Applying nemo dat quod non habet, Delos Reyes acquired no right she could pass to the Burgos siblings, and all subsequent transactions — including the sale by the siblings to Leonarda — are likewise void.

On the second issue, the Court held that the respondents were not innocent purchasers for value. An innocent purchaser for value is one who buys the property of another without notice that some other person has a right to or interest in it, and who pays a full and fair price at the time of the purchase or before receiving notice of another person's claim. The burden of proving that status lies on the one who asserts it, and it cannot be discharged by mere invocation of the ordinary presumption of good faith.

The Court found the circumstances showed an absolute lack of good faith. The notice of adverse claim had been annotated on Delos Reyes's title as early as November 1979, and the Burgos siblings bought anyway. When they bought in December 1984, the Rufloes' civil case for damages and a criminal case for estafa against Delos Reyes were both pending, which should have alerted them. Delos Reyes was not in possession; Amado bought through a broker, never verified the title with the Register of Deeds, and relied only on the title shown to him. A buyer of land in the possession of a person other than the seller must investigate the rights of those in possession, or he cannot be regarded as a buyer in good faith. Leonarda, too, should have investigated the Rufloes' possession. The Court also affirmed the trial court's finding that the sale to Leonarda was simulated — it was never registered, the sellers continued paying the taxes, and Leonarda never exercised the attributes of ownership — a scheme to make her appear an innocent purchaser and cleanse a title that began in forgery. The defense of indefeasibility of a Torrens title does not extend to a transferee who takes with notice of a flaw in his transferor's title.

Doctrine

• A forged deed of sale is null and void and conveys no title; under nemo dat quod non habet, no one can give what one does not have, and every subsequent transfer is likewise void.
• A forged deed can be the root of a valid title only when an innocent purchaser for value intervenes.
• An innocent purchaser for value is one who buys without notice of another's right or interest and pays a full and fair price before receiving notice of another's claim; the burden of proving that status rests on the one asserting it and is not met by merely invoking the presumption of good faith.
• The rule allowing reliance on the Torrens certificate admits an exception: one who has actual knowledge of facts that would impel a reasonably cautious man to inquire, or knowledge of a defect in the vendor's title, must look beyond the certificate; one who falls within the exception is neither an innocent purchaser for value nor a purchaser in good faith.
• A buyer of land in the possession of a person other than the seller must investigate the rights of those in possession, or he cannot be a buyer in good faith.
• The indefeasibility of a Torrens title does not protect a transferee who takes with notice of a flaw in the transferor's title, for the law cannot be used as a shield for fraud.

Disposition

The petition was granted; the Court of Appeals decision and resolution were reversed and set aside, and the trial court decision was revived, except that the award of actual damages was deleted, with the property restored to the Rufloes.

Remember This

Memorize the line: a forged deed conveys no title, and a forged deed can be the root of a valid title only when an innocent purchaser for value intervenes. Examiners use this case to test the exception to the Torrens rule — the buyer who ignores an annotated adverse claim, pending litigation, and occupants in possession is not a purchaser in good faith.