A purchaser of registered land taking a certificate of title for value and in good faith shall hold the same free from all encumbrances except those noted in said certificate (Sec. 44, Property Registration Decree). In other words, a prospective buyer needs to examine only the four corners of the certificate of title as he is not bound by encumbrances not noted in the certificate. This is known as the mirror doctrine or the mirror principle. The certificate of title is considered as the mirror which reflects all encumbrances or claims binding the registered land.
However, in the case of Manalese v. Ferreras, G.R. No. 254046, 25 November 2024, the Supreme Court held that a buyer of registered land must examine not only the certificate of title but also the records of the register of deeds. The Court invoked the constructive notice rule in Section 52 of the Property Registration Decree. The Court stated that pursuant to such rule, a purchaser is charged with notice of instruments and encumbrances which although not appearing in the certificate have been duly recorded in the registry. In other words, the certificate of title is not the complete mirror; it is the certificate together with the records of the registry which is the complete mirror.
The facts of the case are as follows:
1. The spouses Ferreras owned two parcels of land covered by certificates of title in their names. The spouses died and the administrator of their estate took possession of the Ferreras’ duplicate certificates of title.
2. Falsely claiming that the Ferreras duplicate titles were lost, Pinpin filed petitions for the issuance of replacement duplicate titles. She submitted false affidavits of loss in support of her petitions. One of the affidavits of loss was executed not by any of the registered owners but by a certain M___ Ferreras whose connection or relation to the spouses Ferreras was not indicated. The court rendered decisions granting Pinpin’s petitions and ordering the issuance of replacement duplicate titles. The affidavits of loss and the court decisions were annotated on the replacement duplicate titles.
3. Pinpin presented to the register of deeds forged deeds of sale over the subject properties purportedly executed by the spouses Ferreras in her favor. Pinpin was thus able to obtain new certificates of title under her name. The Court noted that the annotations regarding the affidavits of loss and the court decisions for the issuance of replacement duplicate titles were not carried over to the Pinpin titles.
4. Pinpin then sold the properties to the spouses Manalese, who relied upon the “clean” duplicate certificates of title in the name of Pinpin. Further reassuring the Manaleses was the fact that Pinpin was in possession of the properties. Thus, new certificates of title were issued in the Manaleses’ name. All the while, the original owner’s duplicate certificates of title in the name of the spouses Ferreras remained in the possession of the administrator of the Ferreras estate.
5. The administrator subsequently filed an action for the nullification and cancellation of the Manaleses’ certificates of title. In their answer, the Manaleses raised the defense that they were innocent purchasers for value.
The ultimate issue is whether the certificates of titles in the name of the spouses Manalese should be nullified and cancelled. The Court answered in the affirmative.
In my view, the primary rule underpinning the Court’s nullification of the Manalese titles is Section 53 of the Property Registration Decree. Said section provides that “[a]fter the entry of the decree of registration on the original petition or application, any subsequent registration procured by the presentation of a forged … deed or other instrument shall be null and void.” In fine, a forged deed cannot be the root of a valid certificate of title. It does not matter if the transferee is an innocent purchaser for value; he cannot claim any superior right against the true owner by virtue of a forged deed of sale. A void certificate of title is not a mirror but a mirage.
Nor may the exceptional chain of title doctrine come to the succor of the spouses Manalese. No chain was established because the original owner’s duplicate title remained in the hands of the administrator of the Ferreras estate, and thus no negligence could be imputed to the estate (see Torres v. Court of Appeals, 264 Phil. 1062 [1990]).
Hence, even if one were to assume that the spouses Manalese were innocent purchasers for value, the certificates of title in their names would still be void and should be cancelled since they emanated from a forged deed of sale.
Notwithstanding that Section 53 by itself was decisive of the case, the Court proceeded to address the issue of whether the spouses Manalese were innocent purchasers for value. In so doing, the Court redefined the mirror doctrine, a key feature of the Torrens system of land registration.
The Court stated that under the mirror doctrine, a person dealing with registered land must extend his inquiry beyond the four corners of the certificate of title; he must also inspect the records of the registry of deeds. The court anchored its novel restatement of the doctrine on Section 52 of the Property Registration Decree which provides for the constructive notice rule:
“SEC. 52. Constructive notice upon registration. – Every conveyance, mortgage, lease, lien, attachment, order, judgment, instrument or entry affecting registered land shall, if registered, filed or entered in the office of the Register of Deeds for the province or city where the land to which it relates lies, be constructive notice to all persons from the time of such registering, filing or entering.”
The Court stated that the Manaleses were deemed to have constructive notice of the registered affidavits of loss and the court decisions for the issuance of replacement duplicate certificates of title. Hence, the Manaleses were charged with notice of the suspicious affidavit executed not by the registered owner but by a certain M____ Ferreras whose connection to the spouses Ferreras was never indicated.
The Court also stated that the Manaleses were charged with notice of the deed of sale from the Ferreras to Pinpin showing a suspiciously marked disparity in the purchase price as compared with the sale from Pinpin to the Manaleses. The Court thus held that the Manaleses were not innocent purchasers for value because they had constructive notice of the defects or suspicious circumstances appearing in the registry.
The restatement of the mirror doctrine in Manalese created quite a stir in the legal community and in the real estate industry. The Supreme Court’s press release on Manalese was headlined “SC: Land Buyers Must Check Both Title and Registry of Deeds Records.” Many were worried that the addition of another layer of inquiry would make title verification more difficult and costly thereby impeding or hindering real estate transactions. Many were of the view that requiring a prospective buyer to wade through and pore over the records of the registry would be a virtual title traceback, the very process sought to be eliminated by the Torrens system.
It is opined that the Manalese holding that a land buyer must check both the certificate of title and the Registry of Deeds Records should not be read as a reset of the mirror doctrine. The doctrine that a purchaser is not charged with notice of encumbrances and instruments not noted in the certificate of title, which is codified in Section 44 of the Property Registration Decree and entrenched in jurisprudence, remains to be the general rule. To say otherwise would run counter to Section 4(3), Art. VIII of the Constitution which provides that “no doctrine or principle of law laid down by the court in a decision rendered en banc or in division may be modified or reversed except by the court sitting en banc.”
The constructive notice rule in Section 52 of the Property Registration Decree should be read in relation to Section 44 which covers the specific situation of a purchaser dealing with registered land. A perusal of the two sections would show that a prospective buyer is charged with notice of registered instruments and encumbrances only if they are required to be noted on the certificate of title subject of inquiry.
The redefined mirror doctrine that a buyer of registered land is charged with notice of instruments or encumbrances which were recorded in the registry but not noted in the certificate of title would apply only in three exceptional situations. These exceptions can be accommodated under existing jurisprudence.
1. The first exception is when the prospective buyer is aware of or has actual notice of suspicious circumstances which would warrant further investigation on his part (Peralta v. Heirs of Abalon, 737 Phil. 310 [2014]). The prospective buyer should then undertake a further inquiry into the records of the registry because he is charged with notice of such records. The reason is that such a buyer is not an innocent purchaser for value and is not entitled to the protection of Section 44.
In Manalese, the Court found that the Spouses Manelese failed to undertake further investigation despite multiple warning signs, including the significant undervaluation of the purchase price in the deed of sale to the Manaleses from a purported ₱3.3 million to a paltry ₱750,000. These red flags should have impelled the Manaleses to undertake further investigation including an examination of the registry records. The Manaleses were thus charged with notice of the recorded deed of sale from the Ferreras to Pinpin which showed a suspiciously marked disparity in the purchase price as compared with that of the sale from Pinpin to the Manaleses.
2. The second exception is where an encumbrance or instrument which is required to be registered as well as noted on the certificate of title is in fact not so noted. The purchaser, whether or not he is aware of or has actual notice of suspicious circumstances, is charged with notice of the registered instrument or encumbrance even if the same is not noted in the certificate of title.
In this situation, the registration of the encumbrance or instrument already serves as constructive notice thereof to a prospective buyer. The reason is that under Section 56 of the Property Registration Decree, an instrument shall be regarded as registered from the time they are noted in the primary entry book.
Illustrative is the case of Caviles v. Bautista, 24 November 1999. J obtained a writ of attachment over parcel of registered land owned by D. J presented the writ of attachment for registration with the register of deeds. The register of deeds entered the writ in the primary entry book but failed to annotate it on the certificate of title. X, who was interested in the land, examined the certificate of title on file with the register. Not finding any encumbrance noted on the certificate of title, X bought the land from D. Later, J who won his suit against D, claims that he has a better right over the land.
The Court held that J has the better right over the land. The registration of an attachment over a parcel of land in the primary entry book alone is a sufficient registration. Thus, X is deemed to have had constructive notice of the attachment in favor of J.
The second exception applies only when the encumbrance or instrument is required to be annotated on the certificate of title subject of inquiry. It would not be fair to charge a purchaser with constructive notice of an encumbrance or instrument which in the first place is not even required to be noted on the certificate of title.
The second exception was also applied in Manalese, the Court holding that the spouses Manalese were deemed to have constructive notice of the suspicious affidavit of loss executed by M____ Ferreras. The Court stated that the entries regarding the affidavit of loss and the issuance of replacement duplicates should have been carried over to the Pinpin titles.
It is submitted that the second exception is not applicable because an affidavit of loss and the court order for the issuance of the replacement duplicate title are not required to be carried over to a subsequent certificate of title. It would thus not be fair to charge a person with constructive notice of an instrument which is not required to be annotated on the certificate of title subject of inquiry.
The Court cited Section 59 of the Property Registration Decree in support of its view that the inscriptions regarding the affidavit of loss should have been carried over to the Pinpin titles. Section 59 reads as follows:
“SEC. 59. Carry over of encumbrances. – If, at the time of any transfer, subsisting encumbrances or annotations appear in the registration book, they shall be carried over and stated in the new certificate or certificates; except so far as they may be simultaneously released or discharged.”
A perusal of Section 59 shows that what are required to be carried over to subsequent titles are encumbrances. The rationale for Section 59 is that encumbrances bind the land and follow the land whoever its owner may be. An affidavit of loss is not an encumbrance because it does not constitute a lien or burden on the property nor is it something which is “released or discharged.”
3. The third exception is when the buyer/mortgagee is a banking institution or an entity engaged in the real estate or financing business from whom a higher degree of diligence in dealing with registered land is expected and who thus should not confine its examination to the certificate of title (Dueñas v. Metro Bank, G.R. No. 209463, 29 November 2022; Adriano v. Pangilinan, 373 SCRA 544 [2002]; see also the separate concurring opinion in Manalese of Justice Henri Jean Paul B. Inting).
To summarize:
1. The present version of the mirror doctrine, in which a prospective buyer of registered land needs to examine only the certificate of title for any encumbrance which would bind the land, remains to be the general rule.
2. The redefined mirror doctrine under Manalese, in which a purchaser would be bound by registered instruments and encumbrances even if not noted in the certificate of title, would apply only in three exceptional situations:
a) The purchaser is aware of or has actual notice of suspicious circumstances which would warrant further investigation on his part. Such purchaser is deemed to have constructive notice of registered instruments or encumbrances even if not noted in the certificate of title.
b) An encumbrance or instrument which is required to be registered as well as noted on the certificate of title subject of inquiry is in fact not so noted. In such a case, the purchaser, whether or not he is aware of or has actual notice of suspicious circumstances, is deemed to have notice of the registered instrument or encumbrance even if the same is not noted in the certificate of title.
c) The buyer/mortgagee is a banking institution or an entity engaged in the real estate or financing business from whom a higher degree of diligence is expected, thus necessitating an examination beyond the four corners of the certificate of title.
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