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Republic of the Philippines
SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 151424             July 4, 2008

EAGLE REALTY CORPORATION, petitioner,
vs.
REPUBLIC OF THE PHILIPPINES, represented by the Administrator of the Land Registration Authority, NATIONAL TREASURER OF THE PHILIPPINES, HEIRS OF CASIANO DE LEON, MARIA SOCORRO DE LEON, and PILARITA M. REYES, respondents.

D E C I S I O N

NACHURA, J.:

This petition assails the Court of Appeals’ Decision¹ dated January 22, 2001, and Resolution² dated January 8, 2002, which annulled Original Certificate of Title (OCT) No. 129 issued by the Register of Deeds of Pasay City, and its derivative titles, the latest of which is in the name of petitioner.

The antecedents of the case are as follows:

On May 21, 1963, the spouses Casiano de Leon and Maria Socorro de Leon filed with the then Court of First Instance (CFI) of Rizal an application for registration of Lots 1 and 2, Plan Psu-173022-B, located at Barrio San Dionisio, Parañaque, Rizal, with an area of 57,989 square meters. The case was raffled to Branch II presided over by Judge Pedro C. Navarro and docketed as LRC Case No. N-4140. The applicants were represented by Atty. Domicador L. Reyes.

Several parties opposed the application, including the Heirs of Dionisio Tomas, represented by Atty. Lorenzo Sumulong, and the Carabeo family, represented by Atty. Romulo Bobadilla.

On December 11, 1979, the CFI rendered a decision in favor of Casiano de Leon and his children, namely, Esmeralda, Rosario Rodriguez, Bernardita, and Cesario (Maria Socorro having died on September 21, 1974). Copies of this decision (De Leon Decision, for brevity) were sent through registered mail to the Land Registration Commission (LRC), Solicitor General, Atty. Sumulong, and Atty. Bobadilla.³

The Heirs of Dionisio Tomas appealed the De Leon Decision to the Intermediate Appellate Court. On March 23, 1984, the appellate court affirmed the decision. The Heirs of Tomas elevated the case to this Court for review, docketed as G.R. No. 66949. On June 25, 1984, this Court dismissed the petition for having been filed out of time and for lack of merit. This judgment became final and executory on August 13, 1984.⁴

It appears that another decision, similar to the De 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.⁵ 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. ⁶

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.⁷

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.⁸

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.

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.

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.

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.⁹ 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.¹⁰

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.¹¹ 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.¹⁴ 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.¹⁵

On November 17, 1992, the RTC ruled in favor of the private respondents Heirs of De Leon, thus:

From all the foregoing discussion, judgment is hereby rendered as follows:

1. Declaring the decision dated December 11, 1979 and the order for the issuance of decree dated February 14, 1980 in favor of Martina G. Medina purporting to emanate from LRC Case No. N-4140, LRC Record No. N-24165, null and void;

2. Declaring Decree No. N-188044 and Original Certificate of Title No. 129 in the name of Martina G. Medina, and Transfer Certificates of Title Nos. 74216 and 78982 in the name, respectively, of Pilarita M. Reyes and Eagle Realty Corporation, null and void;

3. Ordering Eagle Realty Corporation to surrender the owner’s duplicate copy of Transfer Certificate of Title No. 78982 to the Register of Deeds of Pasay City (or his successor) who is hereby ordered to cancel this owner’s copy and the original copy in his files;

4. Ordering the defendants to desist from exercising or representing acts of possession or ownership over the lots covered by the said titles;

5. Ordering the defendant Martina G. Medina to pay to the INTERVENORS the following amounts:

a. the sum of P500,000.00 as moral damages for the sufferings said INTERVENORS have suffered arising from the submission of the forged decision and order for the issuance of decree to the Land Registration Commission;

b. The sum of P300,000.00 to serve as exemplary damages and thereby discourage the proliferation of similar incidents;

6. Ordering the defendants Martina G. Medina, Pilarita Reyes and Eagle Realty Corporation jointly and severally to pay or reimburse to the INTERVENORS attorney’s fees in the sum of P250,000.00;

7. Ordering Martina G. Medina and Pilarita Reyes, jointly and severally, to refund to Eagle Realty Corporation the following amounts:

a. The sum of P1.2 Million which Eagle Realty Corporation paid to Pilarita Reyes for the property, with interest at the legal rate from February 22, 1984 to the time the same is fully paid;

b. The sum of P250,000.00 by way of reimbursement of attorney’s fees;

c. The attorney’s fees that Eagle Realty Corporation, under paragraph 6 above, may have paid to the INTERVENORS;

8. The counterclaims interposed by the defendants are dismissed;

9. In the event that Eagle Realty Corporation is unable to collect the sum of P1.2 million with legal interest from its co-defendants, the third-party defendant National Treasurer of the Philippines is ordered to pay the said amount.¹⁶

On appeal, the CA, in its Decision dated January 22, 2001, affirmed the RTC Decision with modifications, thus:

Wherefore, premises considered, the appeal is DISMISSED and the Decision, dated November 17, 1992, of the Regional Trial Court of Makati, Branch 142, in Civil Case No. 8400, is AFFIRMED with the following modifications: the liability of defendant-appellant Eagle Realty Corporation for attorney’s fees under paragraph 6 of the dispositive portion is deleted and; paragraph 9 [Id.] is also deleted. Costs against defendants-appellants Medina and Eagle Realty Corporation.

SO ORDERED.¹⁷

The CA held that 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. It dismissed the issue on prescription, ratiocinating that an action to declare the nullity of a void title does not prescribe and, moreover, prescription does not run against the State.¹⁸

According to the CA, the trial court was correct in finding that the Medina Decision and the Order for the Issuance of Decree were both spurious and that petitioner was not an innocent purchaser for value because it failed to make a prior inspection of the subject property which would have revealed that it was being occupied by the private respondents. This omission amounted to a failure to exercise diligence which prevented it from becoming an innocent purchaser for value.¹⁹ Hence, the Assurance Fund cannot be made liable.²⁰

On January 8, 2002, the CA issued a Resolution²¹ denying petitioner’s motion for reconsideration. Petitioner filed this petition for review alleging the following errors:

I.

WITH ALL DUE RESPECT, THE COURT OF APPEALS ERRED IN RULING THAT THE SUBJECT MATTER OR NATURE OF THE ACTION IS NOT ONE FOR ANNULMENT OF JUDGMENT WITHIN THE EXCLUSIVE ORIGINAL JURISDICTION OF THE COURT OF APPEALS AND THAT THE TRIAL COURT ALLEGEDLY PROPERLY ACQUIRED JURISDICTION OVER THE SAME.

II.

WITH ALL DUE RESPECT, THE COURT OF APPEALS ERRED IN RULING THAT THE RESPONDENT REPUBLIC IS A REAL PARTY-IN-INTEREST AND HAS THE PERSONALITY TO FILE THE SUIT BELOW.

III.

WITH ALL DUE RESPECT, THE COURT OF APPEALS ERRED IN RULING THAT THE ONE-YEAR PRESCRIPTIVE PERIOD PROVIDED BY LAW IS NOT APPLICABLE TO THE INSTANT CASE.

IV.

WITH ALL DUE RESPECT, THE COURT OF APPEALS ERRED IN RULING THAT PETITIONER EAGLE REALTY IS NOT AN INNOCENT PURCHASER FOR VALUE OF THE SUBJECT PROPERTY.

V.

WITH ALL DUE RESPECT, THE COURT OF APPEALS COMMITTED A GRAVE AND SERIOUS MISAPPREHENSION OF THE FACTS HEREIN INVOLVED AND MADE MANIFESTLY MISTAKEN, ABSURD OR IMPOSSIBLE INFERENCES:

A.

IN UPHOLDING THE FACTUAL FINDINGS OF THE TRIAL COURT DESPITE THE GLARING EVIDENCE ON RECORD WHICH SHOWS THAT THE DECISION DATED 11 DECEMBER 1979 IN LRC CASE NO. 4140 IN FAVOR OF DEFENDANT-APPELLANT MEDINA IS THE GENUINE DECISION OF JUDGE PEDRO G. NAVARRO.

B.

IN FAILING TO CONSIDER THE DEEDS OF SALE EXECUTED BY CASIANO DE LEON, JUSTINO DE LEON AND MEDINA, AS WELL AS THE PETITION FOR INTERVENTION AND SUBSTITUTION AND THE MEDINA DECISION.

VI.

WITH ALL DUE RESPECT, THE COURT OF APPEALS GRAVELY ERRED IN RULING THAT RESPONDENT NATIONAL TREASURER IS NOT LIABLE TO PETITIONER EAGLE REALTY UNDER THE ASSURANCE FUND.²²

We deny the petition.

Initially, petitioner undertakes to have the case dismissed on the ground of lack of jurisdiction by the RTC over the complaint. It insists that the complaint is an action for annulment of judgment which, under Rule 47 of the Rules of Court is cognizable by the CA.²³

We do not agree. The body of the pleading or complaint determines the nature of an action, not its title or heading.²⁴ This is because the complaint must contain a concise statement of the ultimate facts constituting the plaintiff’s cause of action and specify the relief sought.²⁵ Although denominated as an "Action for Annulment of Judgment and Cancellation of Decree and Titles," the complaint is not an action for annulment of judgment under Rule 47, but a case for cancellation of void titles.

Annulment of judgment is a remedy against a final and executory judgment. Therefore, a necessary allegation in the complaint would be that there was in fact a judgment that has been issued by the trial court, which judgment has become final. Here, the Complaint does not contain any averment to such effect. On the contrary, the Complaint consistently mentions that the Medina Decision, upon which OCT No. 129 was issued, is a fake document. The pertinent portions of the Complaint state:

From the allegations in the Complaint, it is evident that the action is mainly for the declaration of nullity of the certificates of title issued as a result of the fake court decision. This is an action incapable of pecuniary estimation; hence, the RTC properly assumed jurisdiction.

Secondly, petitioner attacks the personality of the Republic of the Philippines, represented by the Commissioner of Land Registration, to file the Complaint. It contends that the CA’s reliance on Section 100 of P.D. 1529 to justify the plaintiff’s personality to file the complaint for cancellation of erroneously or unlawfully issued titles is misplaced as this provision only gives the Register of Deeds the authority to file such action. It is Section 32 of the same law that should apply and this provision clearly requires that the plaintiff must have a dominical right over the property. Petitioner argues that since the subject parcel of land is private property over which the government has no interest, the Republic of the Philippines has no right to file the suit for cancellation of titles.

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:

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.²⁷ 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.³¹ Moreover, elementary is the rule that prescription does not run against the State and its subdivisions.³²

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.³³

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.³⁴ 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.³⁵

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.³⁶

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 title³⁷ 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.³⁸ And we have already established that petitioner does not qualify as such.

WHEREFORE, premises considered, the petition is DENIED. The Court of Appeals’ Decision dated January 22, 2001, and Resolution dated January 8, 2002, are AFFIRMED.

SO ORDERED.

Ynares-Santiago, Chairperson, Austria-Martinez, Chico-Nazario, Reyes, JJ., concur.

Footnotes