Legal Issues with Selling Land Without Title in One's Name

I. Introduction

In the Philippines, a substantial portion of land remains unregistered under the Torrens system. Many parcels are held through tax declarations, unnotarized or notarized deeds of sale, possession alone, or a chain of unregistered transfers. The practice of selling land without a Transfer Certificate of Title (TCT) or Original Certificate of Title (OCT) in the seller’s name is extremely common, especially in rural areas, but it is fraught with legal risks for both seller and buyer.

This article exhaustively discusses the validity of such sales, the rights transferred (or not transferred), the remedies of the parties, the criminal and civil liabilities involved, relevant jurisprudence, and practical consequences under Philippine law.

II. The Two Parallel Systems of Land Registration in the Philippines

1. Torrens System (Presidential Decree No. 1529)
   Governs registered land. Ownership is evidenced by a TCT/OCT. The title is indefeasible and imprescriptible once registered, except on grounds provided by law (fraud, etc., within one year from issuance, or longer in certain cases).

2. Unregistered Land (Act No. 3344, as amended)
   Instruments affecting unregistered land (deeds of sale, mortgages, leases >1 year) may be recorded in the Registry of Deeds under the old system of registration of transactions. Registration under Act 3344 serves only as notice to third persons and does not confer Torrens title. Ownership remains vulnerable to better rights.

Land that has never been brought under the Torrens system falls under this regime until original registration is obtained.

III. Legal Nature of the Sale When the Seller Has No Title in His Name

A. The Contract of Sale Is Valid Between the Parties (Article 1458, Civil Code)

The contract is perfected from the meeting of minds and consummated upon delivery (Article 1475). Ownership passes to the buyer upon actual or constructive delivery (Article 1496), even if the seller was not the registered owner, provided the seller had the right to transfer ownership (jus disponendi).

If the seller truly owned the property (e.g., through acquisitive prescription or inheritance) but simply never registered it, the buyer acquires ownership upon delivery, subject to the same defects (unregistered status).

B. The Buyer Acquires Only Whatever Right the Seller Had (Nemo Dat Quod Non Habet)

If the seller had no transmissible right (e.g., mere tax payer, intruder, or agent without authority), the buyer acquires nothing. The sale is valid as a contract, but the obligation to transfer ownership cannot be fulfilled.

C. The Sale Is Not Void, But It May Be Unenforceable or Rescissible

• Valid inter partes if there was consent, object, and cause.
• Unenforceable under the Statute of Frauds if not in writing (Article 1403(2)(e)).
• Rescissible if the seller acted in bad faith or the buyer was in legal lesion (rarely applied in land sales).

IV. Consequences for the Buyer

1. No Torrens Title Can Be Issued in the Buyer’s Name Directly
   The Land Registration Authority (LRA) will not issue a TCT based solely on a deed of sale from a non-title holder. Original registration (judicial or administrative) is required.

2. Buyer’s Title Remains Vulnerable Indefinitely

   • Any person with better right (true owner, heirs, government, long-time possessor) can eject the buyer via accion publiciana or accion reivindicatoria.
   • Prescription does not run against registered land, but it can run against unregistered land (30 years extraordinary, 10 years ordinary with just title and good faith).

3. Double Sale Scenario (Article 1544, Civil Code)
   If the same parcel is sold twice:

   • First buyer who registers under Act 3344 (unregistered land) or obtains Torrens title prevails over the second buyer.
   • If neither registers under Torrens, the first in possession in good faith wins.
   • If both in possession, the first in time wins.

   A buyer from a non-title holder is almost always at a disadvantage against a subsequent buyer who manages to secure original registration.

4. Difficulty in Obtaining Financing
   Banks will not accept untitled land or land with only tax declaration as collateral.

5. Inheritance Problems
   Upon the buyer’s death, heirs will face extreme difficulty partitioning or titling the land.

V. Criminal Liability of the Seller

1. Estafa Through Deceit (Article 315(2)(a), Revised Penal Code)
   Most common charge when the seller represents himself as owner (or able to deliver title) knowing he cannot. Elements:

   • False pretense or fraudulent representation
   • Made prior to or simultaneous with the fraud
   • Victim induced to part with money/property
   • Damage caused

   Penalty: Prisión correccional maximum to prisión mayor minimum (up to 6 years) + fine, escalating with amount.

   Jurisprudence (People v. Menil, G.R. No. 115054-66, 2000) holds that mere failure to transfer title does not constitute estafa if there was no fraudulent intent at the time of sale. But misrepresentation that “I am the owner and will deliver clean title” is usually sufficient.

2. Estafa by Postdating Check or Issuing Bad Check (Article 315(2)(d))
   If payment was by check and the seller knew he had no right.

3. Other Deceits (Article 318, RPC)
   Lesser penalty when damage is minimal.

4. Falsification
   If the seller fabricates tax declarations, affidavits of ownership, or fake titles.

VI. Civil Remedies of the Buyer

1. Specific Performance + Damages
   If the seller can still procure title (e.g., the land belongs to his parents and he can execute extrajudicial settlement), the buyer may compel him to do so (Ten Forty Realty v. Lorenzana, G.R. No. 135990, April 3, 2002 – 30-day period to deliver title, else rescission).

2. Rescission + Damages (Article 1191, Civil Code)
   The most common remedy when title cannot be delivered. Buyer recovers purchase price + interest + consequential damages (improvements, taxes paid, lost opportunities).

3. Accion Publiciana or Reivindicatoria
   If the buyer has been in possession and a third party claims better right.

4. Unjust Enrichment (Article 22, Civil Code)
   Recovery of improvements or taxes paid.

5. Damages for Bad Faith
   Moral and exemplary damages if seller knowingly defrauded the buyer (very common award: ₱50,000–₱300,000 moral damages).

VII. Landmark Cases

• Heirs of Susana De Guzman v. CA (G.R. No. 119994, June 21, 2004)
  Tax declaration + deed of sale do not constitute just title for ordinary prescription.

• Ten Forty Realty and Development Corp. v. Lorenzana (G.R. No. 135990, April 3, 2002)
  Seller who receives full payment but fails to deliver title within reasonable time may be ordered to return the money with 6% legal interest, plus damages.

• Spouses Hanopol v. Shoemaker (G.R. No. 135774, April 9, 2003)
  Continuous payment of realty taxes + deed of sale do not prove ownership; they are merely indicia of possession.

• Director of Lands v. IAC (G.R. No. 73002, December 29, 1986)
  Possession since time immemorial + tax payments may be sufficient for original registration, but not automatically.

• People v. Reyes (G.R. No. 133647, February 5, 2002)
  Conviction for estafa upheld when seller executed deed of sale over land he knew belonged to another.

VIII. Practical Realities and Prevalence

Despite the risks, millions of hectares are transacted this way. Buyers often accept the risk because titled land is expensive and scarce. Many eventually succeed in obtaining original registration after decades of possession and payment of taxes, especially if the land is classified A&D (alienable and disposable).

However, the Supreme Court has repeatedly warned that “buyers of unregistered land do so at their peril.”

IX. How to Legally Sell or Buy Untitled Land (Risk Mitigation)

For sellers:

• Disclose fully that the land is untitled.
• Execute a Deed of Absolute Sale with clear undertaking regarding possession and tax payments.
• Ideally, initiate original registration proceedings before or simultaneously with the sale.

For buyers:

• Conduct thorough due diligence: trace possession back at least 30 years.
• Secure DENR certification that the land is A&D and not forest/timber/civil reservation.
• Obtain affidavits of adjoining owners, barangay certification of possession.
• Register the deed under Act 3344 immediately.
• File for original registration (judicial under PD 1529 or administrative under RA 10023 for residential land) as soon as possible.

X. Conclusion

Selling land without a title in one’s name is not ipso facto illegal, but it is highly perilous. The buyer acquires only the seller’s precarious right of possession, not an indefeasible Torrens title. The seller exposes himself to civil rescission and criminal prosecution for estafa if he misrepresents his capacity to deliver clean title.

In Philippine jurisprudence and practice, the rule is clear: the safest, and legally preferred, mode of transferring real property is through registered titles under the Torrens system. Any deviation from this standard invites litigation, financial loss, and decades of uncertainty. Buyers must exercise extraordinary diligence; sellers must act with utmost good faith. Failure to do so almost invariably ends in court.