Allegations of bad faith in annulment of title

In Mahilum v. Spouses Ilano (G.R. No. 197923, June 22, 2015), the Supreme Court held that the Court of Appeals (CA) failed to consider that title to the property remained in petitioner's name; TCT 85533 was never cancelled and no new title was issued in respondents' name. As a matter of fact, what they did when petitioner annotated her affidavit of loss upon TCT 85533 was to cause the annotation of an "affidavit of non-loss" afterward.

Since a new title was never issued in respondents' favor and, instead, title remained in petitioner's name, the former never came within the coverage and protection of the Torrens system, where the issue of good or bad faith becomes relevant. Since respondents never acquired a new certificate of title in their name, the issue of their good or bad faith which is central in an annulment of title case is of no consequence; petitioner's case is for annulment of the Agreement and Deed of Absolute Sale, and not one to annul title since the certificate of title is still in her name. The jurisprudential bases for the CA's pronouncement that there is a failure to state a cause of action if there is no allegation in the complaint that respondents were purchasers in bad faith - Castillo v. Heirs of Vicente Madrigal[1] and Heirs of Julian Tiro v. Philippine Estates Corporation[2] - involved complaints for annulment of new titles issued to the buyers; they cannot apply to petitioner's case where title remains in her name.

[1] Castillo v. Heirs of Vicente Madrigal, G.R. No. 62650, June 27, 1991.
[2] Heirs of Julian Tiro v. Philippine Estates Corporation, 585 Phil. 306 (2008).

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