GR 158682; (January, 2005) (Digest)
G.R. No. 158682 ; January 31, 2005
SPOUSES BIENVENIDO R. MACADANGDANG and VIRGINIA C. MACADANGDANG, petitioners vs. SPOUSES RAMON MARTINEZ and GLORIA F. MARTINEZ, respondents.
FACTS
Petitioners, the Macadangdang spouses, entered into a contract to purchase a house and lot from Emma Omalin on installment basis starting December 1986. They made substantial payments totaling ₱270,000 and took possession of the property. A deed of absolute sale was executed in their favor on January 29, 1988, but they withheld the final ₱110,000 balance because Omalin failed to deliver the title. It was later discovered that Omalin had mortgaged the same property to respondents, the Martinez spouses, on March 5, 1987, for ₱200,000. The Martinez spouses, presented with a clean title and insurance policy by a broker, accepted the mortgage, and it was duly annotated on the certificate of title. Omalin subsequently defaulted on the mortgage interest payments.
ISSUE
Whether the rights of the respondents, as registered mortgagees, prevail over the earlier but unregistered rights of the petitioners as buyers.
RULING
Yes. The Supreme Court affirmed the Court of Appeals’ decision, ruling in favor of the Martinez spouses. The core legal principle applied is the operative act of registration under the Torrens system, as codified in Sections 51 and 52 of P.D. No. 1529 (Property Registration Decree). The Court emphasized that for registered land, a registered transaction prevails over a prior unregistered right. The act of registration is the operative act that binds the land concerning third persons.
While the Macadangdangs had a prior contract of sale and even took possession, their interest was not registered. In contrast, the mortgage in favor of the Martinez spouses was duly registered and annotated on the title. The Martinez spouses were found to be mortgagees in good faith, as they relied on the clean certificate of title presented to them. Consequently, their registered lien attached to the property and created a superior right. The sale to the Macadangdangs was declared valid but subject to the existing mortgage. The Court upheld the Martinez spouses’ right to foreclose should the obligation not be paid, protecting the integrity of the Torrens system which relies on the certificate of title as a mirror of the land’s condition. The petitioners’ remedy lies against the vendor, Omalin, for the damages incurred.