EAGLE REALTY CORPORATION v.

REPUBLIC OF THE PHILIPPINES

title or to do any other acts as may be just and equitable.
July 4, 2008 | Nachura, J. | G.R. No. 151424
Recovery from the Assurance Fund
Petitioner’s claim against the Assurance Fund must necessarily fail. Its situation
PETITIONER: EAGLE REALTY CORPORATION does not come within the ambit of the cases protected by the Assurance Fund.
It was not deprived of land in consequence of bringing it under the operation of
RESPONDENT: REPUBLIC OF THE PHILIPPINES the Torrens system through fraud or in consequence of any error, omission,
mistake or misdescription in the certificate of title. It was simply a victim of
SUMMARY: unscrupulous individuals. More importantly, it is a condition sine qua non that
the person who brings the action for damages against the Assurance Fund be
On May 21, 1963, the spouses Casiano de Leon and Maria Socorro de Leon the registered owner and, as the holders of transfer certificates of title, that they
filed with the then Court of First Instance (CFI) of Rizal an application for be innocent purchasers in good faith and for value. And we have already
registration of Lots 1 and 2, Plan Psu-173022-B, located at Barrio San Dionisio, established that petitioner does not qualify as such.
Parañaque, Rizal. Several parties opposed the application, including the Heirs
of Dionisio Toma. CFI then rendered a decision in favor of the De Leon
spouses. The Heirs of Dionisio Tomas appealed the De Leon Decision to the
FACTS:
Intermediate Appellate Court. On March 23, 1984, the appellate court affirmed
the decision. However, there was another court decision adjudicating the
1. On May 21, 1963, the spouses Casiano de Leon and Maria Socorro
disputed property to Martina G. Medina. Medina later exchanged the property
de Leon filed with the then Court of First Instance (CFI) of Rizal an
for a 3,000-hectare parcel of land in Norzagaray, Bulacan owned by Pilarita
application for registration of Lots 1 and 2, Plan Psu-173022-B,
Reyes through a Deed of Exchange dated September 12, 1983. The value of
located at Barrio San Dionisio, Parañaque, Rizal, with an area of
each property was approximately P451,900.00. Reyes then after sold the
57,989 square meters. The case was raffled to Branch II presided
property to the petitioner.
over by Judge Pedro C. Navarro and docketed as LRC Case No. N-
4140. The applicants were represented by Atty. Domicador L. Reyes.
The Republic of the Philippines, represented by the Acting Land Registration
Commissioner, filed a complaint for "Annulment of Judgment and Cancellation
2. Several parties opposed the application, including the Heirs of
of Decree and Titles" against Martina G. Medina, Pilarita Reyes and petitioner
Dionisio Tomas, represented by Atty. Lorenzo Sumulong, and the
Eagle Realty Corporation. The Register of Deeds of Pasay City was impleaded
Carabeo family, represented by Atty. Romulo Bobadilla.
as a nominal party. Medina averred that she purchased the property from
Justino de Leon on March 5, 1973. Justino, in turn, acquired this property from
3. On December 11, 1979, the CFI rendered a decision in favor of
Casiano and Maria de Leon on October 29, 1971 through a Deed of Absolute
Casiano de Leon and his children, namely, Esmeralda, Rosario
Sale. She alleged that she verified the genuineness of this Deed of Absolute
Rodriguez, Bernardita, and Cesario (Maria Socorro having died on
Sale from the Manila CFI Notarial Section and from Casiano de Leon himself.
September 21, 1974). Copies of this decision (De Leon Decision, for
Petitioner on the otherhand averred that it was a buyer in good faith.
brevity) were sent through registered mail to the Land Registration
Commission (LRC), Solicitor General, Atty. Sumulong, and Atty.
DOCTRINE:
Bobadilla.
SEC. 100. Register of Deeds as party in interest. — When it appears that the
4. The Heirs of Dionisio Tomas appealed the De Leon Decision to the
Assurance Fund may be liable for damages that may be incurred due to the
Intermediate Appellate Court. On March 23, 1984, the appellate court
unlawful or erroneous issuance of a certificate of title, the Register of Deeds
affirmed the decision. The Heirs of Tomas elevated the case to this
concerned shall be deemed a proper party in interest who shall, upon the
Court for review, docketed as G.R. No. 66949. On June 25, 1984,
authority of the Commissioner of Land Registration, file the necessary action in
this Court dismissed the petition for having been filed out of time and
court to annul or amend the title.
for lack of merit. This judgment became final and executory on
August 13, 1984.It appears that another decision, similar to the De
The court may order the Register of Deeds to amend or cancel a certificate of
Leon Decision but adjudicating the property to a certain Martina G.
 Medina, alleged intervenor in LRC Case No. N-4140, was
surreptitiously inserted in the records of the LRC. This decision
(Medina Decision, for brevity) was similarly dated December 11,
1979 and purportedly signed by Judge Pedro C. Navarro. Likewise
inserted in the records of the LRC was the Order for the Issuance of
the Decree dated February 14, 1980, also bearing what purports to
be the signature of Judge Pedro C. Navarro, with a Certification
dated February 17, 1980 by Clerk of Court Nicanor G. Salaysay,
attesting that the decision has not been supplemented, amended or
otherwise modified.
5. On May 30, 1983, pursuant to these documents, Hon. Oscar R.
Victoriano, then Acting Land Registration Commissioner, issued
Decree of Registration No. N-188044. In accordance with this
Decree, the Register of Deeds of Pasay City issued OCT No. 129 on
July 7, 1983 in the name of a Martina G. Medina.
6. Medina later exchanged the property for a 3,000-hectare parcel of
land in Norzagaray, Bulacan owned by Pilarita Reyes through a
Deed of Exchange dated September 12, 1983. The value of each
property was approximately P451,900.00. On November 2, 1983,
OCT No. 129 was canceled and Transfer Certificate of Title (TCT)
No. 74216 issued in the name of Reyes. Thereafter, through a Deed
of Sale dated February 22, 1984, Reyes sold the property to
petitioner for P1,200,000.00. On March 1, 1984, TCT No. 74216 was
canceled, and TCT No. 78982 was issued in petitioner’s name.
7. Meanwhile, Cesario de Leon discovered that OCT No. 129 was
issued to Martina G. Medina. The De Leons sent a letter-complaint to
the LRC asking for an investigation on the matter. This was referred
to Atty. Manuel Panis, Chief of the Inspection and Investigation
Division of the LRC. In a report dated July 20, 1984, Atty. Panis
concluded that the Medina Decision and the Order for the Issuance
of Decree dated February 14, 1980 were fake. He then
recommended that the appropriate action be filed for the nullification
of OCT No. 129 and its derivative titles – TCT No. 74216 in the name
of Pilarita Reyes, and TCT No. 78982 in the name of petitioner Eagle
Realty Corporation.
8. Consequently, on September 6, 1984, the Republic of the
Philippines, represented by the Acting Land Registration
Commissioner, filed a complaint for "Annulment of Judgment and
Cancellation of Decree and Titles" against Martina G. Medina,
Pilarita Reyes and petitioner Eagle Realty Corporation. The Register
of Deeds of Pasay City was impleaded as a nominal party.
9. The complaint alleged that the LRC received a copy of the De Leon
Decision but this was surreptitiously substituted with the Medina
Decision, together with the Order for the Issuance of the Decree
dated February 14, 1980, in the LRC records. It further alleged that
the LRC, unaware of any irregularity, issued OCT No. 129 to Martina
Medina on the basis of these fake documents.
10. In her Answer, Medina averred that she purchased the property from
Justino de Leon on March 5, 1973. Justino, in turn, acquired this
property from Casiano and Maria de Leon on October 29, 1971
through a Deed of Absolute Sale. She alleged that she verified the
genuineness of this Deed of Absolute Sale from the Manila CFI
Notarial Section and from Casiano de Leon himself. She immediately
occupied the properties, appointed a caretaker thereof, paid all the
land taxes, and caused the transfer to her name of LRC Survey Plan
No. 13305 covering the property. She claimed that, in 1979, she
learned that this property was the subject of a pending registration
proceeding, commenced by Casiano and Maria de Leon in 1966.
She then filed, on September 28, 1979, a petition for intervention in
said case. This petition for intervention was allegedly granted on
October 4, 1979 by the CFI of Pasig.
11. For its part, petitioner Eagle Realty Corporation alleged, inter alia, as
affirmative defenses, that (a) the Republic of the Philippines is not
the real party-in-interest since the subject property is private, (b) the
one-year prescriptive period within which to seek a review of a
decree of registration has already lapsed, and (c) it is a buyer in
good faith and for value. Petitioner also filed a cross-claim against
Pilarita Reyes to seek reimbursement for the purchase price and the
Register of Deeds to hold the Assurance Fund liable in case Reyes
fails to pay. Later, petitioner filed a third-party complaint against the
National Treasurer of the Philippines, the public officer entrusted with
the payment of claims against the Assurance Fund.
12. Pilarita Reyes interposed the same defenses as the petitioner. She
further claimed that she had no knowledge of any infirmity in
Medina’s title and that she entered into the Deed of Exchange in
good faith and for value. As for the petitioner’s cross-claim, she
averred that she acted in good faith in selling the property to
petitioner.
13. On February 8, 1985, respondents Heirs of Casiano and Maria de
Leon filed a Motion for Leave of Court to Intervene which the trial
court granted. On July 19, 1985, they filed a Complaint-in-
Intervention praying that judgment be rendered "in accordance with
 the prayer alleged in the complaint" and, in addition, order
defendants jointly and severally to pay intervenors actual, moral and
nominal damages, attorney’s fees plus legal interest.
14. RTC: Ruled in favor of the respondents (Heirs of De Leon)
15. CA: Affirmed the RTC. The complaint is actually an action for the
annulment of a certificate of title, not for annulment of judgment as
alleged by petitioner; hence, the RTC properly acquired jurisdiction. It
also upheld the LRC’s personality to institute the complaint based on
Section 100 of Presidential Decree (P.D.) No. 1529 in order to
protect the Assurance Fund from being held accountable by the
private respondents for the erroneous issuance of a certificate of title
to Medina.
ISSUE: Can the petitioner claim from the assurance fund? – NO.
RULING:
RATIO:
Indisputably, the government is charged with the duty to preserve the
integrity of the Torrens System and protect the Assurance Fund. The plaintiff
instituted the complaint precisely to perform this duty. The Complaint seeks
the cancellation of erroneously issued titles to protect the Assurance Fund
from being made liable by the private respondents for damages in case they
fail to recover the property. The public officer specifically tasked to perform
this duty is the Register of Deeds who, under Section 100 of P.D. No. 1529,
is authorized to file an action to annul a certificate of title erroneously or
unlawfully issued, thus:
SEC. 100. Register of Deeds as party in interest. — When it appears that the
Assurance Fund may be liable for damages that may be incurred due to the
unlawful or erroneous issuance of a certificate of title, the Register of Deeds
concerned shall be deemed a proper party in interest who shall, upon the
authority of the Commissioner of Land Registration, file the necessary action
in court to annul or amend the title.
The court may order the Register of Deeds to amend or cancel a certificate
of title or to do any other acts as may be just and equitable.
Under Section 6, P.D. 1529, the Commissioner of Land Registration shall
exercise supervision and control over all Registers of Deeds. It is well
understood that "supervision and control" includes the authority to act directly
whenever a specific function is entrusted by law or regulation to a
subordinate. As the public officer having supervision and control over
Registers of Deeds, the Commissioner of Land Registration therefore also
has the authority to file the action himself.
The LRC is a mere agency of the government, unincorporated, and with no
separate juridical personality from that of the Republic of the Philippines.
Naming the Republic of the Philippines as plaintiff and merely acting as its
representative was not even necessary since the Commissioner of Land
Registration himself, as the superior of and exercising control over the
Register of Deeds, had the authority to file the complaint on his own. Under
Section 1, Rule 3, an entity specifically authorized by law to file the action
may be a party in a civil action.
Likewise, it is not essential that the Republic of the Philippines has
proprietary rights over the property covered by the subject titles as it does not
lay any claim over this property. As previously stated, the complaint merely
seeks the cancellation of erroneously issued titles in order to protect the
Assurance Fund from liability for damages that may be filed by the rightful
owners under Section 95 of P.D. No. 1529.
Moreover, it should be noted that the private respondents also filed a
Complaint-in-Intervention which was granted by the RTC. The complaint in
intervention reiterated the material allegations in the complaint and prayed for
the same reliefs, plus damages. Hence, even if the main action is dismissed
on the ground that the plaintiff had no personality to file the action, the
complaint in intervention will remain. Dismissal of the plaintiff’s action would
not necessarily result in the dismissal of the intervenor’s complaint in
intervention. An intervenor has the right to claim the benefit of the original suit
and to prosecute it to judgment.28 Having been permitted to become a party
in order to better protect his interest, an intervenor is entitled to have the
issues raised between him and the original parties tried and determined.29
Petitioner likewise makes an issue out of the inclusion of the Register of
Deeds as a party-defendant. It contends that it would cause an absurd
situation because the plaintiff and defendant would be represented by the
same counsel. Such contention is not worthy of consideration because the
Register of Deeds was only impleaded as a nominal party for purposes of
enforcement, since he is the public officer charged with the duty of registering
land documents and certificates of title.30
Still on its bid to have the case dismissed, petitioner submits that the action
to cancel OCT No. 129, and its derivative titles, has already prescribed
because under Sec. 32 of P.D. No. 1529, upon the expiration of one year
from the entry of the decree of registration, the certificate of title shall become
incontrovertible. In this case, more than one year has already lapsed since
the entry of the decree of registration on May 30, 1983. Petitioner further
contends that the indefeasibility of a Torrens title binds even the government.
The principle of indefeasibility of a Torrens title does not apply where fraud
attended the issuance of the title. The Torrens title does not furnish a shield
for fraud. As such, a title issued based on void documents may be annulled.
Moreover, elementary is the rule that prescription does not run against the
State and its subdivisions.
As a rule, the Court cannot review the factual findings of the trial court and
the CA in a petition for review on certiorari under Rule 45 of the Rules of
Court. When supported by substantial evidence, findings of fact of the trial
court, as affirmed by the CA, are conclusive and binding on the parties. As
found by both the trial court and the appellate court, Medina never intervened
in the land registration case and the Medina Decision and the Order of
Registration were forged documents. These findings are firmly grounded on
the evidence on record which leaves no room for a review by this Court.
Petitioner is left with no other recourse but to pursue its claim that it is an
innocent purchaser for value, entitled to be protected by law. Petitioner
asserts that a person dealing with registered land may safely rely on the
correctness of the certificate of title and need not go beyond the said title to
determine the condition of the property. It argues that it had no actual
knowledge of any fact that would engender suspicion that the seller’s title is
defective. It could hardly have discovered any defect in OCT No. 129 and
TCT No. 72416 considering that these titles were actually issued by the
Register of Deeds.
Case law has it that he who alleges that he is a purchaser in good faith and
for value of registered land bears the onus of proving such statement. This
burden is not discharged by involving the ordinary presumption of good faith.
Petitioner failed to discharge this burden. In its Answer, petitioner merely
alleged that it is an innocent purchaser for value since it acquired the land
from Pilarita Reyes for P1,200,000.00, without notice of any defect in her title
and after verifying the genuineness of the title in the Register of Deeds of
Pasay City and the LRC. However, petitioner did not present any proof that
would substantiate this allegation nor did it present any evidence to show
that it took other steps to verify the authenticity of its predecessor’s title.
Indeed, the general rule is that a purchaser may rely on what appears on the
face of a certificate of title. He may be considered a purchaser in good faith
even if he simply examines the latest certificate of title. An exception to this
rule is when there exist important facts that would create suspicion in an
otherwise reasonable man (and spur him) to go beyond the present title and
to investigate those that preceded it. The presence of anything which excites
or arouses suspicion should then prompt the vendee to look beyond the
certificate and investigate the title of the vendor as appearing on the face of
said certificate. One who falls within the exception can neither be
denominated an innocent purchaser for value nor a purchaser in good faith,
hence, does not merit the protection of the law.
As correctly observed by the public respondent, the property covered by the
void titles was transferred from Medina to petitioner with unusual haste. Only
8 months lapsed since OCT No. 129 was issued on July 7, 1983 until it was
transferred to petitioner on February 22, 1984. The property was transferred
to petitioner from Reyes only more than five months after she herself
acquired the property. These circumstances, plus the fact that the subject
property is a vast tract of land in a prime location, should have, at the very
least, triggered petitioner’s curiosity.
Moreover, petitioner is a corporation engaged in the real estate business. A
corporation engaged in the buying and selling of real estate is expected to
exercise a higher standard of care and diligence in ascertaining the status
and condition of the property subject of its business transaction. Similar to
investment and financing corporations, it cannot simply rely on an
examination of a Torrens certificate to determine what the subject property,
looks like as its condition is not apparent in the document.
Petitioner’s claim against the Assurance Fund must necessarily fail. Its
situation does not come within the ambit of the cases protected by the
Assurance Fund. It was not deprived of land in consequence of bringing it
under the operation of the Torrens system through fraud or in consequence
of any error, omission, mistake or misdescription in the certificate of title. It
was simply a victim of unscrupulous individuals. More importantly, it is a
condition sine qua non that the person who brings the action for damages
against the Assurance Fund be the registered owner and, as the holders of
transfer certificates of title, that they be innocent purchasers in good faith and
for value. And we have already established that petitioner does not qualify as
such.