Categories: Practical Law

Dealings with unregistered lands

While transactions affecting unregistered lands covered by an unrecorded contract might be valid and binding on the parties themselves, the same cannot bind third parties

Published in Daily Tribune on June 2, 2022
by: Mary Jasmin Zennaia M. Balasolla

Is it enough to merely execute a deed of sale covering an unregistered parcel of land in order to bind third persons? The Supreme Court answered this question in the negative in the case of spouses Dadizon v. Court of Appeals [G.R. 159116, (30 September 2009)] where it emphasized that, while transactions affecting unregistered lands covered by an unrecorded contract might be valid and binding on the parties themselves, the same cannot bind third parties. In the case of third parties, it is necessary for the contract to be registered.

Sec. 113 of Presidential Decree (PD) 1529, also known as the Property Registration Decree, provides that “no deed, conveyance, mortgage, lease, or other voluntary instrument affecting land not registered under the Torrens system shall be valid, except as between the parties thereto, unless such instrument shall have been recorded in the manner herein prescribed in the office of the Register of Deeds for the province or city where the land lies.” This provision contemplates only instruments created by agreement of the parties and does not include conveyances made by ministerial officers, such as sheriff’s deeds.

Since PD 1529 has discontinued the system of registration under the Spanish Mortgage Law, all lands recorded under the said system which are not yet covered by Torrens titles are considered as unregistered lands. Nevertheless, the same Decree also provides that all unregistered lands may be registered pursuant to Section 113 of PD 1529, to the effect that an instrument conveying unregistered real estates should affect only the parties thereto, unless the deed or instrument is registered in accordance with the same section.

It is jurisprudentially settled, however, that the “registration of instruments must be done in the proper registry in order to affect and bind the land.” Prior to PD 1529, Act 496 (or the Land Registration Act) governed the recording of transactions involving lands with a Torrens title. On the other hand, Act 3344, as amended, governed the recording of transactions over unregistered real estate without prejudice to a third party with a better right.

Accordingly, if a parcel of land covered by a Torrens title is sold, but the sale is registered under Act 3344, the sale is not considered registered and the registration of the deed does not operate as constructive notice to the whole world. [Mactan-Cebu International Airport Authority v. Tirol (G.R. 171535, 5 June 2009)].

It must be noted that registration is not a requirement for the validity of the contract between the parties because the purpose of registration is merely to notify other persons that are not parties to a contract that a transaction involving the property has been entered into. [Gutierrez v. Mendoza-Plaza, G.R. 185477, (4 December 2009)].

The only exception to this rule on constructive exists in favor of “a third party with a better right” as provided in Section 194, as amended by Act 3344, and in paragraph (b) of Section 113 of PD 1529. Who is “a third party with better right” under these provisions is defined in Sales v. Court of Appeals (G.R. 40145, 29 July 1992) as one who has acquired other titles independently of the unregistered deed such as title by prescription.

Thus, registration under Act 3344, unlike under Act 496 (now PD 1529), does not afford full protection as it must yield to a prior and valid title, even if unregistered. Future purchasers of unregistered land must therefore ascertain for themselves whether the seller is still the owner of the property at the time of the transaction and the most practical way of ascertaining such fact is to proceed to the land to find the persons in actual possession thereof and ask them in what capacity they possess and occupy the land. [Spouses Pulido v. Court of Appeals, G.R. 109244, (29 December 1995)].

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Mary Jasmin Zennaia M. Balasolla is an Associate Lawyer at Aranas Cruz Araneta Parker & Faustino Law Offices. She graduated cum laude at the University of Santo Tomas with a degree in AB Legal Management, then obtained her Juris Doctor degree in San Beda College Alabang School of Law. Her practice areas include taxation, criminal, corporate and family law.

Mary Jasmin Zennaia Balasolla