MANUEL B. ALORIA (REPRESENTED BY HIS ATTORNEY-IN-FACT, BERNARDINO B. ALORIA) PETITIONER, VS. ESTRELLITA B. CLEMENTE, RESPONDENT.

Aloria versus Clemente

The Case

This is a petition for review brought by Manuel Aloria against Estrellita Clemente, arising from a complaint for annulment of a deed of absolute sale and a transfer certificate of title, reconveyance, damages, and costs. Aloria, a resident of the United States since December 1992, discovered on a visit home in July 2000 that his registered title over a parcel of land and a two-story residential building in Caloocan City had been cancelled and replaced by a title in Clemente's name, on the strength of a notarized deed of sale purportedly signed by him. The case matters because it gathers in one decision the rules on forged deeds and the innocent purchaser for value, the burden of proving good faith, the parol evidence rule and its exception, the imprescriptibility of an action for reconveyance grounded on a fictitious deed, and the reimbursement owed to a possessor in bad faith under the Civil Code.

Procedural History

Aloria, through his brother and attorney-in-fact Bernardino Aloria, filed the complaint before Branch 131 of the Regional Trial Court of Caloocan City against Clemente and the Register of Deeds. The trial court ruled in his favor. It declared the deed of sale dated April 18, 2000 and the transfer certificate of title issued to Clemente null and void, ordered the Register of Deeds to issue a new title in Aloria's name, and awarded moral damages of 100,000 pesos, exemplary damages of 50,000 pesos, attorney's fees of 100,000 pesos, and the costs of suit. It found Clemente not an innocent purchaser for value, but on equity and to prevent unjust enrichment it ordered Aloria to reimburse her 400,000 pesos, representing one half of what she spent on improvements.

Clemente appealed to the Court of Appeals, which reversed the trial court. The appellate court held that Aloria failed to overcome by clear, strong, and convincing evidence the presumption of regularity of the notarized deed, invoked the parol evidence rule, found Clemente a purchaser for value and in good faith, and suggested that any action grounded on fraud in registration should have been brought within one year. Aloria's motion for reconsideration was denied, and he filed the present petition for review before the Supreme Court.

Facts

Manuel Aloria had been a resident of the United States since December 1992. He was the registered owner of a parcel of land and a two-story residential building built on it, covered by a transfer certificate of title in Caloocan City. When he visited the Philippines in July 2000, he learned that his title had been cancelled and that a new title had been issued in the name of Estrellita Clemente on the basis of a notarized deed of absolute sale dated April 18, 2000, purportedly executed by him and by Clemente.

Aloria claimed the deed was falsified, that the signature above his typewritten name was not his, and that he could not have signed it because he was then in the United States. In her answer, Clemente denied any part in the execution of that deed and claimed that the signature above her own printed name was forged. She said she had bought the property instead from Aloria's parents-in-law, Bernardino Diego and Melinda Diego, through a deed of absolute sale dated March 13, 2000. According to her, the Diego spouses held Aloria's owner's duplicate title and a deed of sale dated October 20, 1994 purportedly executed by Aloria and his wife in their favor, and they told her they had not caused the transfer of the title to themselves because they intended to resell the property. It was Bernardino Diego, she said, who brought the documents to the Registry of Deeds and caused the transfer of the title to her name. She took possession and introduced improvements worth approximately 800,000 pesos.

At trial, Bernardino Diego disclaimed the signature attributed to him on the deed of sale in Clemente's favor. The purported witnesses to that deed, including the notary public, were not presented to affirm their presence at its execution.

Issues

• Whether or not there was a valid transfer of the property to Clemente.
• Whether or not Clemente is a purchaser in good faith.

Applicable Provisions

Article 549 of the Civil Code provides:

Article 549. The possessor in bad faith shall reimburse the fruits received and those which the legitimate possessor could have received, and shall have a right only to the expenses mentioned in paragraph 1 of Article 546 and in Article 443. The expenses incurred in improvements for pure luxury or mere pleasure shall not be refunded to the possessor in bad faith; but he may remove the objects for which such expenses have been incurred, provided that the thing suffers no injury thereby, and that the lawful possessor does not prefer to retain them by paying the value they may have at the time he enters into possession.

This governs what Clemente, a possessor in bad faith, may recover for the improvements she introduced.

Paragraph 1 of Article 546 of the Civil Code provides:

Article 546. Necessary expenses shall be refunded to every possessor, but only the possessor in good faith may retain the thing until he has been reimbursed therefor.

This limits her refund to necessary expenses, without any right of retention.

Article 443 of the Civil Code provides:

Article 443. He who receives the fruits has the obligation to pay the expenses made by a third person in their production, gathering, and preservation.

This makes her accountable for fruits received, against which her reimbursable expenses may be set off.

Article 1278 of the Civil Code provides:

Article 1278. Compensation shall take place when two persons, in their own right, are creditors and debtors of each other.

This is the basis for setting off the fruits she received against the expenses she may refund, once the amounts are known.

Ruling

On the first issue, the Court held that there was no valid transfer of the property to Clemente. Comparing Aloria's acknowledged genuine signatures with the questioned signatures on the deeds, the Court found glaring differences with the naked eye, clearly supporting his disclaimer that his signatures were forged. The same comparison between Bernardino Diego's acknowledged genuine signature and the signature on the deed in Clemente's favor revealed stark differences, so her claim that she bought the property from the Diego spouses failed. The Court held that the Court of Appeals misplaced its reliance on the parol evidence rule, because one of the exceptions to that rule is when a party puts in issue in his pleading the validity of the written agreement. It also held that forgery cannot be presumed; it must be proved by clear, positive, and convincing evidence, and whoever alleges it bears the burden. Clemente's bare denial did not overcome the presumption of the genuineness of her own signature, but Aloria presented clear and convincing evidence that the signature attributed to him was forged. The Court further held that the one-year period for reopening a decree of registration did not apply, because the title issued to Clemente was a transfer, not an original, certificate of registration, and that an action for reconveyance on the ground that a certificate of title was obtained by means of a fictitious deed of sale does not prescribe.

On the second issue, the Court held that Clemente was not a purchaser in good faith. An innocent purchaser for value is one who purchases titled land by virtue of a deed executed by the registered owner himself, not by a forged deed. The burden of proving the status of a purchaser in good faith lies on the one who asserts it, and it cannot be discharged by mere invocation of the legal presumption of good faith. Since Bernardino Diego denied his signature on the deed in her favor, and that signature was starkly different from his genuine one, her claim that he signed it in her presence failed, as did her witness's testimony on the same point.

On the reimbursement, the Court held that Clemente, as a possessor in bad faith, may claim only the expenses enumerated in paragraph 1 of Article 546 and in Article 443. Because the evidence did not establish the amount of reimbursable expenses, the Court remanded the case to the trial court to receive evidence for the purpose of determining the amounts due and the rights of the parties under Articles 549, 443, and 546, paragraph 1, for the application of Article 1278.

Doctrine

A forged deed conveys no title, and the registered owner may recover the property by an action for reconveyance, which, being virtually an action for declaration of nullity, does not prescribe. Forgery cannot be presumed; it must be proved by clear, positive, and convincing evidence, and the burden rests on the one who alleges it. The parol evidence rule does not bar evidence where a party puts in issue in his pleading the validity of the written agreement. An innocent purchaser for value is one who buys titled land by a deed executed by the registered owner himself, not by a forged deed, and the burden of proving good faith lies on the one who asserts it, not dischargeable by mere invocation of the presumption. A possessor in bad faith may recover only necessary expenses and those incurred in the production, gathering, and preservation of fruits, and the fruits received may be set off against them under Article 1278.

Disposition

The petition was granted; the decision and resolution of the Court of Appeals were reversed and set aside; the decision of the trial court was affirmed except the portion ordering Aloria to reimburse 400,000 pesos, and the case was remanded to the trial court to determine the amounts due under Articles 549, 443, and 546, paragraph 1, for the application of Article 1278.

Remember This

Memorize the line that a forged deed transfers no title and that an innocent purchaser for value buys only by a deed executed by the registered owner himself. Examiners use this case to test the burden of proving good faith, the exception to the parol evidence rule, the imprescriptibility of reconveyance, and the reimbursement owed to a possessor in bad faith.