JESSIE GASATAYA, PETITIONER, EDITHA MABASA, RESPONDENT.

Gasataya versus Mabasa

The Case

This is the story of a homestead that slipped away twice. Editha Mabasa sues Jessie Gasataya and his father Sabas Gasataya for reconveyance of three lots in Lala, Lanao del Norte, with damages. She says the Gasatayas promised to pay off her obligation to the Development Bank of the Philippines, then deliberately stopped paying so that the bank would cancel her right to repurchase and put the lots up for auction, where Jessie could buy them cheaply. The case matters because the Supreme Court uses it to fix two rules every reviewee must carry: reconveyance belongs not only to the legal owner but to anyone with a better right, and fraud destroys the presumption of regularity in a public sale and strips the buyer of the protection given to an innocent purchaser for value.

Procedural History

Respondent Editha Mabasa filed a complaint for reconveyance of titles of lands with damages in the Regional Trial Court of Lanao del Norte, Branch 7, against petitioner Jessie Gasataya and his father Sabas Gasataya. The trial court ruled for the respondent. It ordered the petitioner to reconvey the two transfer certificates of title to her upon her tender of thirty seven thousand two hundred pesos, ordered the Registrar of Deeds to cause the transfer and registration of the titles in her name, ordered the Gasatayas to cede physical possession of the lots, and ordered them to pay five thousand pesos in attorney's fees, five thousand pesos in litigation expenses, and the costs.

The Gasatayas appealed to the Court of Appeals, which affirmed the trial court and dismissed the appeal for lack of merit. It held that the Gasatayas failed to controvert the claim that they deliberately defaulted on the assumed obligation so that the petitioner could win the lots at public bidding, and that this was a breach of trust amounting to fraud warranting reconveyance. Jessie Gasataya alone came to the Supreme Court by appeal by certiorari under Rule 45 of the 1997 Rules of Civil Procedure, seeking reversal of the Court of Appeals decision.

Facts

Respondent's father, Buenaventura Mabasa, was granted a homestead patent over Lots 279, 272 and 972 in Lala, Lanao del Norte. He mortgaged the lots to the Development Bank of the Philippines. When he failed to pay, the bank foreclosed and bought the lots at public auction, obtaining titles in its own name. After Buenaventura died, the respondent's siblings authorized her to negotiate the repurchase, and the bank allowed her to reacquire the properties through a deed of conditional sale for twenty five thousand eight hundred seventy five pesos.

The respondent then agreed with Sabas Gasataya that he would assume payment of her obligation to the bank, take possession of the lots for twenty years, and develop them into a fishpond. She received ten thousand pesos in cash, on top of the twenty five thousand pesos he was to pay the bank on her behalf. On his representation that her obligation had already been settled, they executed a deed of sale of fishpond lands with right to repurchase.

Eight years later, the respondent discovered that Sabas Gasataya had stopped paying the bank. The bank revoked her right to repurchase and held another public auction, where the petitioner bid the highest price of twenty seven thousand two hundred pesos and acquired titles in his own name. She then sued for reconveyance, alleging that the Gasatayas deliberately reneged so that her right would be revoked and the petitioner could bid. The Gasatayas claimed the bank had refused their payments, but the trial court found they failed to prove this, and both the trial court and the Court of Appeals found fraud.

Issues

• Whether or not reconveyance may be granted to the respondent even though she is not the legal owner of the disputed lots.
• Whether or not the petitioner's registered titles and his purchase at public auction protect him against the respondent's claim.
• Whether or not the petitioner was an innocent purchaser for value.

Applicable Provisions

Commonwealth Act 141, the Public Land Act, is invoked by the Court for its policy of preserving homesteads to the homesteader and his kin. The Court quotes the Court of Appeals on this point:

Courts should lend a stout shoulder to help keep a homestead in the homesteader's family.

This policy bears on the case because the lots originated as a homestead grant, so the law leans toward giving the homesteader's family every opportunity to recover them.

Ruling

On the first issue, the Court holds that reconveyance is available not only to the legal owner but also to the person with a better right than the person under whose name the property was erroneously registered. The respondent has that better right for two reasons: the deed of conditional sale executed by the bank vested in her the right to repurchase, and that right would have subsisted had the Gasatayas not defrauded her. The factual findings of fraud, affirmed by the Court of Appeals, bind the Court.

On the second issue, the Court rejects the argument that the cancelled conditional sale and the registered titles defeat the claim. The bank revoked the respondent's right precisely because of the deceitful maneuverings of the petitioner and his father, and to sustain the petitioner would be to reward his misdeed. Fraud overthrows the presumption that the public sale was attended with regularity, and the registration did not obliterate the fraud that preceded and facilitated it. The Court states the rule:

Fraud is a ground for reconveyance.

On the third issue, the Court holds that the law protects only an innocent purchaser for value, not one who has knowledge of and participation in the fraud. It defines the protected buyer:

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 that same property, and who pays a full and fair price at the time of the purchase or before receiving any notice of another person's claim.

The petitioner plainly was not such a buyer. Finally, the Court notes the homestead origin of the lots and agrees that courts should lend a stout shoulder to keep a homestead in the homesteader's family.

Doctrine

First, reconveyance is available not only to the legal owner but also to the person with a better right than the registered owner. Second, fraud is a ground for reconveyance, and fraud overthrows the presumption of regularity of a public sale, so a title acquired through such a sale carries no valid title where fraud facilitated it. Third, registration does not cleanse fraud; the Torrens system protects only the innocent purchaser for value, meaning one who buys without notice of another's right or interest and pays a full and fair price. Fourth, under the policy of Commonwealth Act 141, courts lean toward preserving homestead lots to the homesteader and his kin. These rules tie directly to the quoted definition of an innocent purchaser for value and to the quoted rule that fraud is a ground for reconveyance.

Disposition

The Supreme Court affirmed the decision of the Court of Appeals, so the respondent won: the petitioner must reconvey the lots to her upon her tender of the stated amount, with costs against the petitioner.

Remember This

Memorize this line: reconveyance belongs to the person with a better right, and fraud is a ground for reconveyance even against a registered title. Examiners use this case to test the innocent purchaser for value and the homestead policy under the Public Land Act.