Chapter XXIII - Pena

Chapter XXIII

SYSTEM OF REGISTRATION FOR UNREGISTERED LANDS

1. Scope of this system of registration.

Transactions affecting lands or interests therein not previously registered under the Spanish Mortgage Law or under the Torrens system could be admitted to registration under Section 194 of the Revised Administrative Code, as amended by Act 3344. However, with the promulgation of Presidential Decree No. 892 dated Febru- ary 16, 1976, regardless of whether the land involved is registered under the Spanish Mortgage Law or not, so long as such land has not yet been brought under the operation of the Torrens system, the transaction may be registered now under Act 3344; and for the purposes of the above decree, lands so registered under the Mortgage Law fall under the category of unregistered land. It is to be borne in mind, however, that where land previously registered under the Tor- rens system should have been the object of a transaction and this is recorded under Act 3344, this being not the proper registry therefor, such registration cannot have any binding effect upon third

persons. It should have been done in the proper registry.1

Under Act 3344 registration is purely voluntary, as in fact the Register of Deeds is not authorized to effect any registration thereunder unless the parties concerned shall have agreed to register their transaction and the agreement expressly stated in the document sought to be registered under this system.

On the other hand, by virtue of Presidential Decree No. 266 which implements Presidential Decree No. 27 declaring the entire

1Act 496, Secs. 50 and 51; Soriano v. Heirs of Magali, 118 Phil. 606; P.D. 1629, Sec. 113.

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REGISTRATION OF LAND TITLES AND DEEDS

country as a land reform area and the tenant-farmers deemed owners of certain portions of the land they till, the Department of Agrarian Reform issues from time to time land transfer certicates to preserve the rights of these farmers. Such certicates may not necessarily cover lands registered under the Torrens system. They likewise may involve unregistered lands, in which case it is required that the pertinent land transfer certicates be also recorded in the primary entry book and registration book made and provided for such unregistered lands under Act 3344. With the fulllment of certain obligations im- posed

by the presidential decree upon the tenant-farmers, they will then be given emancipation patents or grants which, when led with the Registry of Deeds, shall constitute conclusive authority for the issuance of Torrens titles in their names without need of the usual formality of a judicial application, publication, and hearing.

2. Efcacy of this system compared with that of others.

Registration under Act No. 3344 differs materially from registration under the Spanish Mortgage Law and under the Land Registration Act. In the Spanish Mortgage Law there is express provision (Article 17) to the effect that titles recorded thereunder cannot be annulled or invalidated by prior unrecorded rights, while the Land Registration Act (No. 496) contains a special disposition that only transactions noted on the certicate of title and entered in the registry books can bind the land. On the other hand, transactions registered under Act No. 3344 cannot defeat a third person with a better right. Of course the law does not dene exactly what may be considered a better right, leaving the matter of its construction to the courts. The main reason for the difference in the operation of Act No. 3344 compared with the other systems of registration lies obviously in the fact that recordings under said Act No. 3344 are not preceded by any investigation, judicial or administrative, as to the validity or efcacy of

the title sought to be recorded.2

2Williams v. Suñer, 49 Phil. 534; Smith Bell v. Register of Deeds, 48 Phil. 656; Pua Hnos. v. Register of Deeds, 50 Phil. 671; San Buenaventura v. Taas, 48 O.G. May 5, 1952, CA.

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3. Registration under Act No. 3344 �— Validity of transaction against third parties.

Between the parties to an unrecorded contract affecting unregistered lands, the transaction is valid provided it is legal. But for the purpose of extending its validity to third persons, it is essential that the document be registered. Thus, it is so provided in the law that �“no instrument or deed establishing, transmitting, acknowledging, modi- fying, or extinguishing rights with respect to real estate not registered under the provisions of Act No. 496, entitled the �‘Land Registration Act, �’ and its amendments, or under the Spanish Mortgage Law, shall be valid, except as between the parties thereto, until such instrument or deed has been registered, in the manner hereinafter prescribed, in the ofce of the Register of Deeds for the province or city where the real estate lies. �” Inferentially, it seems that if the instrument is registered, it will be valid not only as

between the parties thereto but also as against third parties.

Accordingly, it was held that Section 194, Act No. 2711, as amended by Act No. 2837 and later by Act No. 3344, gives no validity to any document or deed of conveyance of property, except as between the parties, until the document or deed is registered in the manner prescribed

by law.3

4. Effect upon third parties limited.

While registration under this system is unquestionably intended to bind third parties by the constructive notice it serves them and the whole world, yet at Limes it fails to accomplish the avowed purpose because of the nugatory provision of the law to the effect that �“any registration made under this section shall be understood to be without prejudice to a third party with a better right. �” While registration purports to validate or legally establish a right against third persons, it nevertheless must have to yield to anyone who may have a better right. Thus, it was held that registration of a deed of mortgage in the unregistered land register is without prejudice to third parties with a better

right.4 By the same token, an earlier instrument (whether it be a sale or a mortgage) prevails over a later instrument and the

3Cordovero v. Villaruz, 46 Phil. 473. 4Rivera v. Moran, 48 Phil. 836.

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registration of any of them is immaterial.5 If that is so, then there would seem to be practically no inducement to registration under this system.

However, according to a more progressive view of the Court of Appeals in a recent decision, the above opinion as expressed in some cases cited are not decisive of the issue raised. What is meant by �“better right �”? Does it include the right acquired by a prior purchaser under the circumstances contemplated in Article 1544 of the New Civil Code? As to whether such purchaser is considered a third party, that does not seem to be clearly dened in Act No. 3344. It is thought then, in which view the writer feels inclined to concur, that �“better right �’�’ should refer to a right which must have been acquired by a third party independently of the unregistered deed, such, for instance, as title by prescription, and that it has no reference to rights acquired under that unregistered deed

itself.6

As the act of registration that operates to convey and affect registered land, a bona de purchaser of a registered land at an execution sale acquires a good title as against a prior transferree, if such transfer was unrecorded. This is in consonance with the provisions of Art. 1544 of the Civil Code also. However, in the case of unregistered land under Act 3344 this rule does not apply because the law itself provides that registration of instruments affecting unregistered lands is �“without prejudice to a third party with a better right �”. Applying Rule 39, Section 35 of the Revised Rules of Court, the Court held that Art. 1544 of the Civil Code cannot be invoked to benet the purchaser at public auction sale though the latter was a buyer in good faith and even registered his right. It was explained that the purchaser at public auction merely steps into the shoe, of the judgment debtor who has already sold his rights prior thereto, hence he has no longer interests in the property that was sold at

public auction.7

5. Sheriff �’s sale registered under this system.

The provisions of Act No. 3344, amending Section 194 of the Administrative Code, are applicable exclusively to instruments re-

5Nisce v. Milo, G.R. No. L-42546, Jan. 17, 1936, Unrep. 62 Phil. 976.

6Arabon v. Apachecha, 57 O.G. 1, p. 71, Jan. 2, 1961, CA; Yante v. Galvez, 61 O.G. 52, p. 8384, Dec. 27, 1865, CA.

7Radiowealth Finance Co. v. Palileo, G.R. 83432, May 20, 1991; 197 SCRA 245.

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sulting from the agreement of the parties; they have no application to the deed of a sheriff conveying to the purchaser unregistered land that has been sold by him

under execution.8

Where the property involved has not been previously registered under the Spanish Mortgage Law or under the torrens system, it serves no useful purpose even if the sheriff �’s deed be registered in the Registry of Deeds, since the provisions of Act No. 3344 do not apply to judicial

sales.9

So also, where the notice to levy on execution described a registered property as unregistered land and was registered uncler Act No. 3344 with the ofce of the

Register of Deeds and where the notice of sale described the property according to the boundaries and area in the tax declaration, all in violation of Section 13 of Rule 39 and of Section 7 (a) of Rule 57 of the Rules of Court, both notices of levy and execution sale are legally ineffective

and cannot bind the property for purposes of execution.10

In any event, to be registrable under Act No. 3344, the instrument must refer only to unregistered land and its own improvements, and not to improvements and buildings on lands registered under the Torrens system or the Spanish Mortgage Law; so that the registration under Act No. 3344 of the writ of attachment on a house erected on registered land is invalid and of no legal or binding

effect on third persons.11

It is to be noted, however, that Act 3344, which was the basis of the foregoing judicial rulings, has been so amended and modied by Section 113, subsection (d), of Presidential Decree No. 1529, approved June 11, 1978, so as to permit the registration of involuntary dealings in unregistered lands. The pertinent provision of the new statute reads as follows:

�“(d) Tax sale, attachment and levy, notice of lis pendens, adverse claim and other instruments in the nature of involuntary dealings with respect to unregistered lands, if made in the

8Williams v. Suñer, 49 Phil. 534.9Laxamana v. Carlos, 57

Phil. 722.10Siari Valley Estates, Inc. v. Lucasan, 109 Phil.

294. 11Salita v. Calleja, 112 Phil. 683.

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form sufcient in law, shall likewise be admissible to record under this section. �’�’

6. Registration creates constructive notice only to future dealers in unregistered land.

While it may be taken for granted that the registration of an involuntary dealing in land, such as a sheriff �’s sale, under Act No. 3344, not being legally required, does not serve a useful purpose in the way of giving an absolute right or title to the registrant, yet it cannot be denied that its registration, if effected, creates a constructive notice just the same, and binds third persons who may subsequently deal with the same property. Thus, in a

certain case decided,12 where A executed a sale under pacto de retro conveying his unregistered land to B, redeemable in ten years, and then B sold the same

property under pacto de retro to C, redeemable in ve years, both sales not being registered, and meanwhile B �’s right was attached and sold at public auction to D, and the sale registered under Act No. 3344, D �’s right was upheld to be superior to other rights subsequently acquired over the same property. It developed in this case that A repurchased the property from B within one year after B �’s right was sold at public auction to D, and B, in turn, repurchased it from C, and once reac- quired by A, it was sold to a third person E. As between the conict- ing rights of D and E, it was held that D �’s right should prevail for the reason that his right being registered under Act No. 3344, A who was bound by the constructive notice created by registration should have repurchased the property from D, the registered purchaser, instead of from B.

In short, registration under Act No. 3344 does not afford full protection, and the title registered in accordance therewith must yield to a prior and valid title, though unregistered, for registration under said Act can only affect rights or interests subsequent to the registration; it

is notice only to future dealers of the land.13

As a matter of precaution, a would be purchaser of unregistered land should ascertain for himself whether the seller is, at the time of the transaction, still the owner of the property, and the most practi-

12Bautista v. Fule, 85 Phil. 391.13Ocuma v. Ocuma, 60 O.G. 31, Aug. 31, 1964, CA.

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cal way of ascertaining such fact is to proceed to the land to nd out the persons in actual possession thereof and to inquire from them in what capacity they possess and occupy the land. The rule that the purchaser is not required to explore further than what the record in the Registry indicates upon its face in quest of any hidden defect or inchoate right which may subsequently defeat his right thereto refers only to property registered under the Torrens system.

7. Priority of registration under the Civil Code not applicable to unregistered land.

In a case where a person claim to have superior proprietary rights over another on the ground that he derived his title from a sheriff �’s sale registered in the Registry of Property, it was held that Article 1473 (now 1544) of the Civil Code, which gives preference to one of two deeds which is rst recorded, is not applicable to an execution sale of real estate not registered under Act No.

496.14 This may be so for the reason that the purchaser under such an execution sale is substituted to and acquires only all the rights, interest, title and claim of the judgment debtor who in equity had nothing left to him after having sold previously the property involved to another person, although this prior sale had not been recorded under Act No. 3344.

It is to be observed that the above ruling resolves a case of an execution sale of real estate not registered under Act 496. But where the problem concerns a voluntary deed of sale or a donation will the same doctrine hold? Of course, a deed of donation executed with all the formalities of the law must have to be regarded as or the same footing as a

deed of sale in the form of a public instrument.15 Con- sidering that registration of a deed of sale in accordance with and under the provisions of Act No. 3344 is, by express provision of the said Act itself, without prejudice to third party with a better right, or that such registration does not prejudice prior rights acquired in good faith but only those acquired subsequent thereto, it was once more afrmed that the registration of deeds contemplated by Article

14Mediante and Garcia v. Rosabal, 73 Phil. 694; Fabian, et al. v. Smith, Bell & Co., 8 Phil. 496; Carumba v. Ct. of App., et al., G.R. No. L-27587, Feb. 28, 1970; 66 O.G. 25, p. 6024, June 22, 1970; 31 SCRA 558.

15Ortiz v. Ct. of Appeals, et al., 97 Phil. 46. 603


1544 of the new Civil Code applies to registration of such deeds of sale or donation involving only real estate

previously registered under Act No. 496.16 In short, the rule of priority in registration does not apply to unregistered land, whether the transaction be voluntary or involuntary.

The vendee of an unregistered land acquires title thereto upon the execution of the public instrument, which constitutes a symbolic tradition of the thing sold, as against a subsequent donee of the same property, notwithstanding the fact that the deed of donation was registered ahead of the deed of sale. Article 1544 of the Civil Code does not apply to a donation or a sale by the

same person to different persons of the same property.17

We are not unmindful of the fact, however, that in spite of the provision of Act No. 3344 that registration thereunder will yield to better right, in a more recent case it was held that where the owner of a parcel of unregistered land sold it to two different persons �— as- suming that both sales

are valid �— the vendee whose deed of sale was rst registered under Act No. 3344 would have a better right, and that the rule of priority under Article 1544 of the Civil Code may not apply where the sale so registered ahead is found to be a forgery, in which case the right of the other

vendee should prevail.18 Besides, in order that said article may be invoked, it is necessary that the conveyance must have been made by a party who has an existing right in the

thing and power to dispose of it.19

8. Mortgage of unregistered lands.

A mortgage of unregistered real property recorded in the registry under Act No. 3344 for instruments of unregistered lands is valid and effective as such mortgage, and the credit secured thereby takes precedence over a judgment lien the execution of which by attachment and a public auction sale was made subsequent to the

registration of the aforesaid mortgage.20 But, even if the mortgage

16Cruz, et al. v. Espino, 56 O.G. 47, Nov. 21, 1960, CA.

17Gundayao v. Gundayao, No. 30678-R, 59 O.G. 51, p. 8797, Dec. 23, 1963, CA.

18Espirut v. Valerio, 119 Phil. 69. 19Manresa 170, 171.20Standard Oil Co. v. Castro, 54 Phil. 716.

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had not been recorded, it would seem that the effect is the same with respect to the parties thereto. Thus, it was held that when dealing with unregistered lands a mortgage is valid between the contracting parties, as it would be even if it had not been recorded. However, if recorded, it would be valid as against everybody except a

third person having a better right.21 Under the old rule a mortgage of registered land was not considered validly constituted unless registered; not even as between the parties. With Article 2125 of the new Civil Code, however, the rule under Act No. 3344 has been made uniform for all cases under the other existing laws; that is, even if the mortgage has not been registered, it nevertheless is a valid mortgage as between the parties.

As afrmed by Section 113 of Presidential Decree No. 1529, such an unrecorded mortgage remains valid as between the parties thereto. Thus, as an encumbrance established by law, it constitutes a right to or interest in the subject property, and accordingly may be enforced

and foreclosed to enable the mortgagee to recover from the proceeds of the foreclosure sale, so long as it does not prejudice any third person with better right. To enforce and foreclose it would not seem to be violative of the provision of Article 2125, par. 2, of the new Civil Code limiting the right of the person in whose favor the law establishes a mortgage only to demand the execution and the record- ing of the document in which the mortgage is formalized. Seemingly the law contemplates a situation where the mortgage instrument was not formally executed, so that where it was already executed in due form the legal limitation would not seem applicable. After all, the foreclosure of such an unrecorded mortgage cannot prejudice the rights of third persons.

9. How registration books are kept for unregistered lands.

The Register of Deeds for each province or city keeps a day book and a register for and a unregistered real estate, in accordance with a form prepared by the Chief of the General Land Registration Ofce (now the Administrator of Land Registration Authority) with the approval of the Secretary of Justice.

21Estate of Mota v. Concepcion, 56 Phil. 712. 605


The day book provides spaces whereon to enter the names of the parties, the nature of the instrument or deed for which registration is requested, the hour and minute, date and month of the year when the instrument was received.

The other register book contains, among other things, the names, age, civil status, and if married, the name of the spouse, and the residences of the parties interested in the contract registered, the character of the contract and its conditions, the nature of each piece of land and its own improvements, its situation, boundaries, area in square meters, whether or not the boundaries of the property are visible on the land by means of monuments or otherwise, and in the afrmative case, in what they consist; the permanent improvements existing on the property, the page number of the assessment of each property in the year when the entry is made, and the assessed value of the property for that year; the notary public or the ofcer who acknowledged, issued, or certied the instrument or deed; the name of the person or persons who, according to the instrument, are in present possession of each property; a note that the land has not been registered, that the parties have agreed to register said instrument under the provision of Act No. 3344, and that the original instrument has been led in the ofce of the Register of Deeds, indicating the le number, and that the duplicate has been delivered to the person concerned; the exact

year, month, day, hour, and minute when the original of the instrument was received for registration, as stated in the day book.

To facilitate a checking of the records, the Registrar also keeps an index system for persons and for estates.

Upon presentation of any instrument or deed relating to unregistered real estate for registration in the ofce of the Registrar, this ofcial ascertains whether the instrument contains all the legal requirements for registration. If found in order, it is registered in the proper books. If found defective, the instrument is refused registration, the Registrar stating in writing his reasons for refusing to record the instrument as requested.

10. Special instance of unregistered land being placed under operation of Torrens system.

By virtue of Presidential Decree No. 266, where land not previously registered under the Torrens system has been granted to a

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tenant-farmer, and the latter has complied with certain obligations prescribed to perfect his title of ownership, he is issued an emancipation patent. This patent, upon being led with the ofce of the Register of Deeds, constitutes a conclusive authority for the entry of an original certicate of title in the name of the grantee based on an approved survey plan, thereby placing automatically the land under the operation of the Torrens system.

Chapter XXIII - Pena

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