SPOUSES DANILO AND ALBERTA DOMINGO, AND EDUARDO QUITEVES, PETITIONERS, VS. GUILLERMO REED, RESPONDENT.

Domingo versus Reed

The Case

This is a petition for review on certiorari brought by the spouses Danilo and Alberta Domingo and by Eduardo Quiteves against Guillermo Reed. The action began as a complaint for reconveyance of registered conjugal land in Pasig, which Guillermo Reed filed after discovering that his wife, Lolita Reed, from whom he was estranged, had sold portions of their conjugal property to the petitioners. The case matters because it fixes the standard for an innocent purchaser for value of registered land: the Torrens certificate protects the buyer who inquires no further, but not the buyer who shuts his eyes to facts that should put a prudent person on guard.

Procedural History

Guillermo Reed filed the complaint for reconveyance before the Regional Trial Court of Pasig City against Lolita Reed, the spouses Ardaniel and Natividad Villanera, the spouses Danilo and Alberta Domingo, Eduardo Quiteves, and the Register of Deeds of Pasig. After trial on the merits, the trial court rendered judgment in favor of the Villanera spouses, the Domingo spouses, Eduardo Quiteves, and the Register of Deeds, and dismissed the complaint for lack of merit.

Guillermo Reed appealed to the Court of Appeals. The appellate court reversed and set aside the trial court's decision. It declared the deeds of sale executed by Lolita Reed in favor of the Domingo spouses and Eduardo Quiteves null and void, ordered the Register of Deeds of Pasig City to cancel the certificates of title issued in their names, and ordered the reinstatement of the original certificate in the name of Lolita Reed, married to Guillermo Reed, insofar as it covered the portions sold. It also held that the Villanera spouses had not been validly served with summons, so that the trial court never acquired jurisdiction over their persons. The Court of Appeals denied the petitioners' motion for reconsideration.

The petitioners then came to the Supreme Court by a petition for review on certiorari under Rule 45, seeking to reverse the decision and the resolution of the Court of Appeals. Lolita Reed later filed a petition in intervention before the Supreme Court.

Facts

Guillermo Reed worked overseas from 1978 to 1986 and came home only for short vacations. He purchased on installment from the Government Service Insurance System a 166 square meter property at Mangahan, Pasig. Because he was abroad, his wife Lolita paid the consideration. On July 9, 1986, a certificate of title covering the property was issued in the name of Lolita Reed, married to Guillermo Reed. Guillermo allowed his brother Dominador and the latter's wife Luz to stay in the house on the property.

In December 1991, Dominador and Luz were summoned to the barangay over an ejectment complaint filed by Eduardo Quiteves, who claimed to own the lot. Guillermo accompanied them and there met Eduardo Quiteves and Alberta Domingo, both claiming ownership. Guillermo denied having sold the property. He verified the records with the Register of Deeds of Pasig and discovered that his title had been cancelled. He obtained copies of a special power of attorney dated July 8, 1986, purportedly executed by him authorizing Lolita to sell; a deed of sale dated July 14, 1986 in favor of Danilo Domingo, married to Alberta Domingo, covering 41.50 square meters; a deed of sale dated July 22, 1987 in favor of Natividad Villanera covering 41.50 square meters; a deed of sale dated January 10, 1989 in favor of Eduardo Quiteves covering 86 square meters; and the transfer certificates of title issued to the buyers.

On March 8, 1994, Guillermo filed the complaint for reconveyance. He alleged that the special power of attorney was a forgery, that he never signed it nor appeared before the notary public because he was abroad, and that the buyers were in bad faith because they knew he was working abroad and estranged from Lolita. The petitioners answered that the sales were valid, that Guillermo had given his written consent, that he had admitted signing the special power of attorney before the barangay chairman, and that they were buyers in good faith and for value who could rely on the presumption of regularity of a notarized document.

Issues

• Whether or not the case for reconveyance can prosper despite the trial court's failure to acquire jurisdiction over the person of Lolita Reed, an alleged indispensable party.
• Whether or not the special power of attorney relied upon by the petitioners is authentic.
• Whether or not Lolita Reed's sale of the conjugal property without her husband's consent was justified.
• Whether or not the petitioners are buyers in good faith and for value.

Applicable Provisions

Rule 14, Section 20 of the Rules of Court, on voluntary appearance, provides:

The defendant's voluntary appearance in the action shall be equivalent to service of summons.

The Court uses this rule to hold that Lolita Reed's filing of a petition in intervention cured any defect in the acquisition of jurisdiction over her person.

Ruling

On the procedural issue, the Court held that it need not decide whether Lolita is an indispensable party. Although she was never served with summons, she voluntarily appeared before the Supreme Court when she filed her petition in intervention. Under the Rules of Court, voluntary appearance is equivalent to service of summons. She never questioned the Court's jurisdiction over her, and her participation binds her to the outcome. The Court also found no need to remand the case, since it could rule on the merits on the evidence already on record.

On the authenticity of the special power of attorney, the Court agreed with the Court of Appeals that it was a forgery. Lolita herself admitted that she merely sent an already typewritten document to her husband in the Middle East and that it was returned already signed by him; she never saw him sign it. The notary public's acknowledgment stated that only Lolita appeared before him, although a special power of attorney requires both principal and agent. The Clerk of Court of the Regional Trial Court of Pasig certified that the document recorded in the notarial report was not the same special power of attorney submitted to the court. Guillermo consistently denied signing it, and the barangay minutes containing his alleged admission were not credible. The Court added that the document was dated July 8, 1986, one day before the certificate of title it purported to cover was even issued. No expert testimony on forgery was necessary, because the surrounding circumstances already destroyed the presumption of regularity of a public document.

On the justification for the sale, the Court held that Lolita's rights over the conjugal property were merely inchoate before liquidation, and that she offered no proof that the proceeds were used for the support of the family. The Civil Code provisions she invoked concern what the conjugal partnership is liable for; they do not determine whether a contract entered into by one spouse validly binds the conjugal partnership.

On good faith, the Court ruled that the petitioners were not innocent purchasers for value. An innocent purchaser for value is one who buys the property of another without notice of another's right or interest, and who pays a full and fair price before receiving notice of that claim. Good faith implies freedom from knowledge of circumstances that ought to put a prudent person on inquiry. While buyers of registered land need not look beyond the Torrens certificate, they cannot close their eyes to known facts that should put a reasonable person on guard. The Domingo spouses knew the property belonged to the conjugal partnership, knew the spouses were separated, and knew Guillermo was in Saudi Arabia; the deed itself sold only Lolita's share, yet no special power of attorney was shown to them, and they relied on her verbal claim of authority. Eduardo Quiteves, though close to Guillermo, never verified the authority of Lolita, and the acknowledgment showed that only she appeared before the notary. Their refusal to face the possibility of a defect deprived them of the protection of the law.

Doctrine

First, a defendant's voluntary appearance in an action is equivalent to service of summons, and cures any defect in the acquisition of jurisdiction over the person.

Second, notarization is not an empty, meaningless, or routinary act. It converts a private document into a public instrument, but the presumption of regularity may be rebutted by evidence, and no expert testimony on forgery is required where the surrounding circumstances already cast serious doubt on the document's genuineness.

Third, one spouse cannot unilaterally bind the conjugal partnership. Before liquidation, the spouse's rights over conjugal property are merely inchoate, and the provisions on what the conjugal partnership is liable for do not validate a contract entered into by one spouse without the other's consent.

Fourth, 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 such notice. Buyers of registered land need not inquire beyond the Torrens certificate, but they cannot close their eyes to known facts that should put a prudent person on guard. A buyer who fails to investigate when suspicion is aroused is not a purchaser in good faith and does not merit the protection of the law.

Disposition

The Supreme Court denied the petition and the petition in intervention, thereby affirming the Court of Appeals: the deeds of sale in favor of the Domingo spouses and Eduardo Quiteves were void, their certificates of title were cancelled, and the original title in the name of Lolita Reed, married to Guillermo Reed, was reinstated as to the portions sold.

Remember This

Memorize the line: buyers of registered land need not look beyond the Torrens certificate, but they cannot close their eyes to known facts that should put a prudent person on guard. Examiners use this case to test the limits of the innocent purchaser for value doctrine and the effect of voluntary appearance on jurisdiction over the person.