What Crimes May Arise During Real Property Purchases?

Introduction

The purchase of real property may involve criminal liability when a party uses fraud, false ownership claims, undisclosed encumbrances, fictitious contracts, or deceit in acquiring land or title. The same transaction may also give rise to civil liability, administrative sanctions, or criminal charges under special laws, depending on the property and the acts performed.

Criminal liability is not established merely because a sale failed, a title was not delivered, or the buyer and seller later disagreed. The prosecution must prove every element of the specific offense beyond reasonable doubt, and the accused is entitled to be informed of the nature and cause of the accusation.

Crimes Most Directly Connected with Real Property Purchases

Estafa by Pretending to Own Real Property

Under Article 316(1) of the Revised Penal Code, a person may be criminally liable when, pretending to be the owner of real property, he or she conveys, sells, encumbers, or mortgages it. The provision is directed at a false representation of ownership followed by an act of ownership that causes prejudice to another.

The elements identified in Dulay, et al. v. People of the Philippines, G.R. Nos. 215132, 215150, and 215166, 1 December 2021, are:

• The property is immovable, such as land or a building;
• The offender is not the owner but represents that he or she is the owner;
• The offender performs an act of ownership, such as selling, leasing, encumbering, or mortgaging the property; and
• The act causes damage or prejudice to the owner or to a third person.

In Facilities, Inc. v. Lopez, G.R. No. 208642, 10 September 2018, the Court recognized that categorical misrepresentations of ownership and good title may support criminal liability when they induce the other party to enter into contracts and suffer loss.

A seller need not necessarily be a complete stranger to the property. Criminal exposure may arise when the seller falsely represents that he or she owns property or possesses good and indefeasible title, despite lacking the ownership or authority represented.

Estafa Involving an Encumbered Property

Article 316(2) of the Revised Penal Code covers a person who, knowing that real property is encumbered, disposes of it even though the encumbrance is not recorded. The offense does not prohibit every sale of an encumbered property. The criminal act lies in the deceitful disposition of the property while representing that it is free from encumbrance.

In Naya v. Abing, et al., G.R. No. 146770, 27 November 2003, the Supreme Court held that the following elements must concur:

• The property disposed of is real property;
• The accused knew that the property was encumbered, whether or not the encumbrance was recorded;
• The accused expressly represented that the property was free from encumbrance; and
• The disposition caused damage to another.

The requirement of an express representation is material. A mere allegation that the accused sold an encumbered property, without alleging and proving that the accused represented it as free from encumbrance, is insufficient for conviction under this provision.

In Tayamen, Jr., et al. v. People of the Philippines, G.R. Nos. 168269-71, 27 January 2021, the Court ruled that the Information must specifically allege the express representation that the property was free from encumbrance. The defect may be raised even on appeal when the Information fails to charge an offense.

Similarly, Estrellado-Mainar v. People of the Philippines, G.R. No. 184320, 17 June 2015, confirms that a person cannot be convicted under Article 316(2) when the Information charges a different form of swindling and does not allege the required representation that the property was unencumbered.

When a Promise to Mortgage Is Not Yet an Encumbrance

A promise to execute a mortgage does not, by itself, create a real encumbrance over property. In United States v. Mendezona, G.R. No. 873, 18 March 1903, the Court distinguished between an agreement or promise to constitute a mortgage and an actual mortgage or legally effective encumbrance.

The failure to perform a promise to mortgage ordinarily gives rise to a civil action for performance or damages. Criminal liability may arise only when deceit existed at the inception of the obligation and the required elements of the offense are established.

Accordingly, a buyer or seller should determine whether the alleged encumbrance was actually constituted under the applicable formalities, rather than relying only on a contractual promise or an uncompleted undertaking.

Fictitious Contracts and Other Forms of Swindling

Article 316 of the Revised Penal Code also penalizes a person who, to the prejudice of another, executes a fictitious contract. It likewise covers the wrongful taking of personal property from its lawful possessor and the acceptance of compensation for services or labor that were not actually performed.

In a real property transaction, a fictitious contract may arise where a party creates or uses a sham deed, agreement, or conveyance to make it appear that a sale, transfer, or payment occurred when it did not. The prosecution must still prove the fictitious nature of the contract, the accused’s participation, intent or knowledge as required by the offense, and the resulting damage.

The statutory penalty stated in Article 316 is arresto mayor in its minimum and medium periods and a fine of not less than the value of the damage caused and not more than three times that value. The exact penalty and fine require checking the current text of the Revised Penal Code and subsequent amendments applicable to the date of the offense.

Double Sale and False Ownership Representations

A double sale may constitute estafa when the seller represents ownership and sells the same property to another person. In People of the Philippine Islands v. Uehara, G.R. No. 42605, 31 December 1935, the Court held that the fact that the land is registered does not, by itself, remove criminal liability for a fraudulent sale.

The land-registration system may affect the civil consequences of competing sales, priority, and registration. It does not authorize a person to use a false ownership representation to obtain money or property from another.

Fraudulent Acquisition of Public Land or Public-Land Rights

Special criminal liability may arise when a person uses deceit or fraud to acquire or attempt to acquire land of the public domain, or any right, title, interest, or property right over it, without possessing the qualifications required by the Public Land Act.

Section 133 of Commonwealth Act No. 141 penalizes the unqualified person and those who aid or abet the fraudulent acquisition. The stated penalty is a fine of not more than five thousand pesos, imprisonment for not more than five years, or both, at the court’s discretion.

The same type of prohibition appears in Section 126 of Act No. 2874, the earlier Public Land Act. Because the applicable statute depends on the date and circumstances of the transaction, counsel should verify the law in force when the alleged conduct occurred. The older statute should not be applied automatically to a later transaction.

Fraudulent Reconstitution of a Certificate of Title

Republic Act No. 6732 penalizes a person who, by fraud, deceit, or other machination, obtains or attempts to obtain a reconstituted title to which the person is not entitled. Section 12 imposes imprisonment of not less than two years but not more than five years, a fine of not less than twenty thousand pesos but not more than two hundred thousand pesos, or both.

A public officer or employee who knowingly approves or assists in securing a reconstitution decision in favor of an unqualified person faces a separate and heavier penalty: imprisonment of not less than five years but not more than ten years, a fine of not less than fifty thousand pesos but not more than one hundred thousand pesos, or both, together with perpetual disqualification from public office.

This offense is distinct from an ordinary dispute over ownership. It concerns fraudulent conduct in obtaining or attempting to obtain a reconstituted certificate of title.

Fraudulent Sale of Registered Land with an Undisclosed Encumbrance

The historical Land Registration Act contained a provision penalizing the sale and conveyance of registered land when the seller knew of an undischarged attachment or other encumbrance that was not noted on the duplicate certificate and failed to inform the buyer before payment of the consideration.

Because the Land Registration Act is an historical enactment, parties must not assume that its former penal provision governs a present transaction. The current law, the date of the alleged act, and any later statute replacing or modifying the provision must be verified before a criminal charge is evaluated.

Possible Related Offenses

A real property transaction may also implicate other offenses when the evidence shows separate criminal acts, such as falsification of public or private documents, use of falsified documents, deceit under Article 315(2)(a) of the Revised Penal Code, or offenses under special laws. The proper charge depends on the specific false statement, document, inducement, timing, damage, and participation proved.

One transaction may produce multiple criminal investigations when different acts protect different legal interests. However, prosecutors must avoid charging an offense whose statutory elements are not supported by the allegations and evidence.

Evidence Needed to Prove Guilt

Evidence should be directed to every element of the offense, not merely to the existence of a failed sale or an unpaid obligation. Depending on the charge, relevant evidence may include:

• The deed of sale, contract to sell, mortgage, lease, or other conveyance;
• The certificate of title and all annotations existing at the relevant time;
• Registry of Deeds certifications and certified copies of title records;
• Written representations concerning ownership, authority, and the absence of encumbrances;
• Proof of payment, receipts, bank records, and delivery of possession;
• Documents showing the actual mortgage, adverse claim, attachment, lien, or competing sale;
• Communications establishing knowledge, intent, participation, or concealment; and
• Evidence of the buyer’s or owner’s actual damage.

Notarization does not conclusively establish that every statement in a document is true. The prosecution must still prove the accused’s participation and guilt beyond reasonable doubt, especially when the parties present conflicting documents and testimony.

Evidence Supporting the Defense

A defense may focus on the absence of one or more required elements. Common issues include the following:

• The accused was the owner or had valid authority to sell;
• The document did not contain an express representation that the property was free from encumbrance;
• The alleged encumbrance was only a promise to mortgage and was never legally constituted;
• The accused lacked knowledge of the alleged encumbrance;
• The Information failed to allege an essential element of the offense;
• No damage or prejudice was proven; or
• The evidence shows a civil breach, mistake, or failure of performance rather than criminal deceit.

For Article 316(2), the absence of an express representation that the property was free from encumbrance may be dispositive. For Article 316(1), the defense should examine whether there was an actual false claim of ownership, an act of ownership, and resulting damage.

Penalties and Bail

The penalties for the offenses discussed above vary according to the statute, date of commission, amendments, and circumstances alleged in the Information. Article 316 generally provides arresto mayor in its minimum and medium periods and a fine based on the damage, while special laws may prescribe separate penalties.

Bail cannot be stated reliably from the offense name alone. The applicable amount is determined under the current Rules of Criminal Procedure, judicial bail guidelines, the imposable penalty, the court’s assessment of the circumstances, and whether the offense is one for which bail is a matter of right or discretion.

For an accurate bail assessment, counsel must first identify the exact charge, the penalty legally applicable at the time of the alleged offense, the stage of the case, the court having jurisdiction, and whether the prosecution seeks a penalty exceeding the statutory threshold relevant to discretionary bail. The search materials supplied for this article do not contain a current bail schedule or a court order fixing bail for a particular case.

Illustrative Scenarios

Scenario One: Seller Conceals a Mortgage

A seller knows that land is mortgaged and executes a deed stating that the property is free from all liens and encumbrances. The buyer pays the price and later discovers the mortgage. If the prosecution proves the property, the seller’s knowledge, the express representation, and damage, Article 316(2) may apply.

Scenario Two: Sale by a Nonowner

A person who is not the registered owner tells a buyer that he or she owns the land, accepts payment, and executes a deed of sale without authority. If the false ownership representation, act of ownership, and damage are proven, the facts may support Article 316(1).

Scenario Three: Unperformed Promise to Mortgage

A borrower promises to mortgage a building but never executes the mortgage and later sells the building. The promise alone does not establish a real encumbrance. Criminal liability requires proof of the elements of a specific offense, including deceit existing when the obligation was undertaken where such deceit is relied upon.

Scenario Four: Defective Information

An Information alleges only that the accused sold property despite an existing encumbrance but does not allege that the accused expressly represented the property as free from encumbrance. Under Tayamen, Jr., et al. v. People of the Philippines and Estrellado-Mainar v. People of the Philippines, conviction under Article 316(2) may not be sustained because an essential element was not charged.

Recommended Steps for Buyers

1. Obtain a recent certified true copy of the title directly from the Registry of Deeds.
2. Check all annotations, including mortgages, adverse claims, attachments, notices of lis pendens, and other liens.
3. Verify the seller’s identity, authority, marital status where relevant, and corporate or agency authority.
4. Require written representations concerning ownership, authority, and encumbrances.
5. Confirm tax declarations, real property tax payments, approved plans, and possession records.
6. Use traceable payment methods and preserve receipts, messages, drafts, and signed documents.
7. Seek legal review before signing when the title contains annotations or when the seller is not the registered owner.

Recommended Steps for Sellers and Brokers

Sellers should disclose known mortgages, liens, adverse claims, litigation, and competing rights. Brokers and agents should avoid repeating ownership or title assurances that they cannot verify.

Every representation in a deed or contract should be accurate and should identify the parties’ actual agreement. A seller who knows of an encumbrance should not describe the property as free from liens, and a broker should not conceal material title information to induce payment.

Conclusion

Criminal liability in a real property purchase depends on the precise act committed and the elements alleged and proven. The principal distinctions are whether the accused falsely represented ownership, knowingly disposed of encumbered property while representing it as free from encumbrance, executed a fictitious contract, fraudulently acquired public land or rights, or obtained a reconstituted title through deceit.

Before filing a complaint or defense, counsel should compare the evidence with each statutory element, examine the Information for sufficiency, establish the source and extent of the alleged damage, and distinguish criminal deceit from a purely civil breach. The exact penalty and bail consequences must be verified against the law and procedural rules applicable at the relevant time.

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