Buyer in Good Faith Only Applies to Registered Land: A Philippine Legal Perspective

When it comes to buying real estate in the Philippines, the term “buyer in good faith” often comes up, especially in land disputes. Many buyers assume that as long as they purchase a property without knowledge of any legal problems or claims, they are automatically protected. However, under Philippine law, this protection only applies if the land is registered under the Torrens system.

Let’s explore what this means and why it’s important.

Understanding “Buyer in Good Faith”

A buyer in good faith is someone who purchases a property:

• For valuable consideration (i.e., they paid for it),

• Without knowledge of any defect or competing claims over the property, and

• After exercising due diligence, such as inspecting the title and property status.

This legal doctrine is intended to protect innocent purchasers who act in good faith and rely on the apparent validity of the title.

But here’s the key limitation: this protection applies only to lands that are registered under the Torrens system.

Registered vs. Unregistered Land

Registered Land

Registered land refers to property with a Certificate of Title issued by the Land Registration Authority (LRA) under the Torrens system. Once registered, the state guarantees the title’s validity. The registered owner is presumed to have a legal and absolute title, and third parties can rely on what appears on the certificate of title.

Thus, a buyer in good faith and for value is protected—even if it turns out later that the seller acquired the land through fraud, as long as the buyer had no notice of any such defect and relied on a clean title.

Unregistered Land

Unregistered land does not have a Torrens title. Instead, ownership is often supported by tax declarations, deeds of sale, or other public documents. These documents do not guarantee ownership, and any buyer is expected to investigate thoroughly, not only the paperwork but also the actual possession and historical claims to the land.

In such cases, the doctrine of buyer in good faith does not apply in the same way. Even if a buyer acts in good faith, they can still lose the property if another person can prove a better or older claim to it. The courts do not recognize the same level of protection for buyers of unregistered land.

Key Supreme Court Rulings

The Philippine Supreme Court has consistently ruled on this principle. For example:

• In Spouses Aquino v. Frondozo (G.R. No. 174632, January 20, 2009), the Court held that a buyer of unregistered land must prove not only good faith but also a clear and superior right to the property. Mere good faith is not enough.

• In Tenio-Obsequio v. Court of Appeals (G.R. No. 107967, March 1, 1994), the Court emphasized that only buyers of registered land are protected when purchasing from someone who appears to have title.

  
  

These rulings reinforce the idea that the law protects buyers only when they rely on an official, government-issued title, not private agreements or tax declarations.

What Should Buyers Do?

If you're looking to buy land in the Philippines, here are some best practices:

1. Always check if the land is titled. Ask for a certified true copy from the Registry of Deeds.

2. Verify the title’s authenticity. Check if there are annotations like mortgages, lis pendens, or adverse claims.

3. Inspect the property personally. Ensure that the person selling it is in possession and has no disputes with neighbors or relatives.

4. Consult a lawyer or broker. Have all documents reviewed before signing or paying.

   
   

Final Thoughts

In Philippine law, "buyer in good faith" is not a magic phrase that guarantees protection. It only provides strong legal shield if the property is registered under the Torrens system. Buyers of unregistered land have a higher burden of proof and much less protection.

If you’re planning to buy real estate, make sure the land is titled and your due diligence is thorough. When it comes to property, peace of mind is worth the paperwork.

Source: Ziggurat Real Estate

Sale of Mortgaged Property to Creditor Per Se Is Not Prohibited

When dealing with mortgaged properties, many people assume that selling such assets to the creditor is legally prohibited. However, this is not necessarily the case. Under the right legal framework, the sale of a mortgaged property to the creditor is allowed, provided that it does not violate laws on foreclosure, dation in payment, or the prohibition against pactum commissorium.

How Mortgages Can Be Paid

A mortgage is a security interest granted over a property to secure the performance of an obligation, typically the repayment of a loan. The debtor can satisfy the mortgage in several ways:

1. Full Payment of the Loan – The most straightforward way to release the mortgage is by repaying the debt in full. Once the debt is fully paid, the creditor must execute a release of mortgage, which should then be registered with the relevant land registry.

2. Foreclosure Sale – If the debtor fails to pay, the creditor may initiate a foreclosure process to sell the property, either through a judicial or extrajudicial foreclosure proceeding. The proceeds from the sale are then used to settle the outstanding debt.

3. Dation in Payment (Dacion en Pago) – Instead of paying in cash, the debtor may transfer ownership of the mortgaged property to the creditor in satisfaction of the debt. This is a voluntary arrangement between both parties and is valid as long as it does not constitute a disguised pactum commissorium.

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Relationship Between Dation in Payment and Pactum Commissorium

Dation in Payment (Dacion en Pago)

Dation in payment occurs when the debtor transfers ownership of the mortgaged property to the creditor in exchange for the extinguishment of the debt. This is a negotiated and consensual agreement between both parties. The key difference between dation in payment and a foreclosure sale is that in dation, the debtor willingly conveys ownership as an alternative means of settling the obligation.

For the dation to be valid, it must be agreed upon by both parties and must not be forced upon the debtor. It is a lawful and commonly used method of settling obligations when cash payment is not feasible.

Pactum Commissorium: The Prohibited Clause

Pactum commissorium, on the other hand, is an illegal provision in a mortgage or pledge that allows the creditor to automatically appropriate the mortgaged property in case of non-payment. This is prohibited because it is considered oppressive and inequitable to the debtor, as it bypasses the due process of foreclosure or voluntary dation.

For a transaction to be considered a prohibited pactum commissorium, two elements must be present:

1. A security arrangement (such as a mortgage or pledge).

2. An automatic transfer clause in favor of the creditor upon default.

Unlike dation in payment, which is voluntarily agreed upon after default, pactum commissorium is a pre-arranged forfeiture mechanism that is deemed invalid under the law.

Conclusion

The sale of a mortgaged property to the creditor is not inherently prohibited. It can be done through legitimate means, such as dation in payment or foreclosure. However, what is illegal is the automatic appropriation of the property by the creditor without due process, as seen in pactum commissorium. Understanding these legal concepts helps ensure that mortgage transactions remain fair and within the bounds of the law.

Source: Ziggurat Real Estate

When are you considered as common partners?

Question: I am still married with my ex husband and now living together with my new partner and we already have a baby, can we be considered as common partners?

In the Philippines, even if you are separated from your husband and living with a new partner, you cannot be legally considered as "common-law partners" because your previous marriage is still valid. Here’s why:

1. Legal Status Under Philippine Law

• Since the Philippines does not have divorce (except for Muslims), you are still legally married to your husband unless:

  • You get an annulment or

  • You file for legal separation (though this does not allow remarriage).

• Because of this, your new relationship is not legally recognized as a common-law partnership under Philippine law.

2. What About "Common-Law" in Practice?

• In practice, some people in the Philippines refer to their live-in partners as common-law spouses, especially if they have a child together.

• However, legally speaking, you are not considered a common-law spouse since you are still married to someone else.

3. Possible Legal Implications

• Bigamy Risk – If you attempt to remarry without an annulment, it could be considered bigamy, a criminal offense.

• Property Issues – Any assets you acquire while still married may still be considered conjugal property with your legal husband.

• Child’s Status – Your baby is considered illegitimate under Philippine law because you are still married to someone else. However, you can legitimize the child if you and your new partner get married after annulment.

What Can You Do?

If you want legal security for your new family, you may want to consider:

✅ Annulment – If your marriage qualifies for annulment, this is the only way you can legally be free.

✅ Legal Documents for Your Child – You can ensure your baby’s birth certificate lists the father’s name and arrange legal recognition.

source: Ziggurat Real Estate