Ltd-cases-vi.pdf

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. 163566

February 19, 2008

RAYMUNDO and PERLA DE GUZMAN, petitioners, vs. PRAXIDES J. AGBAGALA, respondent. DECISION CORONA, J.: This is a petition for review on certiorari1 of a decision2 and resolution3 of the Court of Appeals (CA) dated October 14, 2003 and April 20, 2004, respectively, in CA-G.R. CV No. 55238 which affirmed the decision of the Regional Trial Court (RTC), Lingayen, Pangasinan, Branch 37 dated May 30, 1996 in Civil Case No. 16516. The spouses Elias P. Javier and Maria Sison died on May 8, 1942 and July 1936, respectively, both in Lingayen, Pangasinan. They were survived by their six children, namely: Conrado Javier, respondent Praxides Javier Agbagala, Nicasio Javier, Carmen Javier, Encarnacion Javier Ongnoy4 and Juana Javier. They left 13 parcels of land which their children inherited and divided among themselves in a public document of extrajudicial partition dated June 29, 1948. Five of the parcels of land5 were inherited by Carmen. On February 25, 1984, she died single, without any compulsory heir and survived only by her sisters Encarnacion, respondent Praxides, Juana and brother Nicasio.6 According to respondent and her daughter, Milagros Agbagala Gutierrez, one afternoon sometime in mid-1987, a certain Rosing Cruz went to their house to borrow P30,000 from Milagros. Rosing offered as collateral a document which turned out to be a deed of donation dated January 25, 1977 purportedly signed by Carmen in favor of her niece Madelene Javier Cruz, daughter of Juana and sister-in-law of Rosing. Milagros told her (Rosing) that she had no money to lend. Thereafter, Milagros, upon the request of respondent, went to the Register of Deeds in Lingayen, Pangasinan to verify the existence of such donation. She found out that it was indeed duly registered. It was the first time respondent came to know of such donation and the transfer of Carmen's properties to their niece Madelene.7 According to Madelene, she lived in her Aunt Carmen's house8 and had been her companion since she was four years old. She transferred to Manila only when she graduated in 1970. On January 25, 1977, Carmen executed the deed of donation in her favor. She was present when all the signatories thereon, including the notary public, signed the document. From that time on, she received the rentals of the properties covered by the donation. Carmen even informed her tenants that Madelene would inherit the properties upon her death.9

On November 18, 1987,10 respondent filed civil case no. 16516 against Madelene praying that the deed of donation be nullified, as well as the subsequent transfers to other parties of the properties covered by the spurious donation.11 An amended complaint was filed on September 15, 198812 to include the transferees13 of the properties including petitioner spouses Raymundo and Perla de Guzman, who were the transferees of the land located at Tampac, Aguilar, Pangasinan.14 Respondent claimed that the deed of donation was fake. This was confirmed by the handwriting expert of the National Bureau of Investigation, Rogelio G. Azores,15 who examined the document and compared it with several documents bearing the signature of Carmen. He found that the purported signature of the late Carmen on the deed of donation was forged.16 Petitioners filed their answer dated November 28, 1989.17 They claimed that they applied for a free patent over the subject area on August 10, 1987 and on November 26, 1987, they were issued free patent no. 165790.18 On December 11, 1987, Original Certificate of Title (OCT) No. P-30187 was registered in their name. During the trial, they also presented a tax declaration and realty tax receipts from 1985 to 1990 issued to them.19 In a decision dated May 30, 1996, the RTC declared the deed of donation in favor of Madelene null and void ab initio, canceled the deeds of sale executed by Madelene in favor of the defendants,20 declared null and void OCT No. P-30187 in the name of petitioners and directed all the defendants to jointly and severally pay respondent P6,000 as attorney's fees and litigation expenses and each of the defendants to pay respondent P1,000 as nominal damages. It further ruled that the properties subject of the annulled documents should revert back to the intestate estate of Carmen.21 In a decision promulgated on October 14, 2003, the CA affirmed the decision of the RTC. It denied reconsideration in a resolution promulgated on April 20, 2004. Hence this petition raising the lone issue of whether OCT No. P-30187 was correctly nullified considering that it cannot be the subject of collateral attack under Section 48 of PD 1529.22 Petitioners argue that at the time of the filing of the amended complaint on September 15, 1988, OCT No. P-30187 had already been issued in their name. Thus this certificate of title can only be nullified in an action directly attacking its validity. Respondent counters that at the time the amended complaint was filed, OCT No. P-30187 (which was issued on December 11, 1987) was not yet indefeasible since less than one year had lapsed. Furthermore, she asserts that the doctrine of indefeasibility does not apply if the free patent is null and void ab initio. We agree with respondent. Sections 32 and 48 of PD 1529 state: Sec. 32. Review of decree of registration; Innocent purchaser for value. ― The decree of registration shall not be reopened or revised by reason of absence, minority, or other

disability of any person adversely affected thereby, nor by any proceeding in any court for reversing judgment, subject, however, to the right of any person, including the government and the branches thereof, deprived of land or of any estate or interest therein by such adjudication or confirmation of title obtained by actual fraud, to file in the proper [court] a petition for reopening and review of the decree of registration not later than one year from and after the date of the entry of such decree of registration, but in no case shall such petition be entertained by the court where an innocent purchaser for value has acquired the land or an interest therein whose rights may be prejudiced. Whenever the phrase "innocent purchaser for value" or an equivalent phrase occurs in this Decree, it shall be deemed to include an innocent lessee, mortgagee, or other encumbrancer for value. Upon the expiration of said period of one year, the decree of registration and the certificate of title issued shall become incontrovertible. Any person aggrieved by such decree of registration in any case may pursue his remedy by action for damages against the applicant or any other person responsible for the fraud. xxx

xxx

xxx

SEC. 48. Certificate not subject to collateral attack. ― A certificate of title shall not be subject to collateral attack. It cannot be altered, modified, or canceled except in a direct proceeding in accordance with law. (Emphasis supplied) Indeed, a decree of registration or patent and the certificate of title issued pursuant thereto may be attacked on the ground of falsification or fraud within one year from the date of their issuance. Such an attack must be direct and not by a collateral proceeding.23 The rationale is this: xxx [The] public should be able to rely on a registered title. The Torrens System was adopted in this country because it was believed to be the most effective measure to guarantee the integrity of land titles and to protect their indefeasibility once the claim of ownership is established and recognized.24 An action is deemed an attack on a title when the object of the action or proceeding is to nullify the title and thus challenge the judgment pursuant to which the title was decreed. The attack is direct when the object of the action is to annul or set aside such judgment, or enjoin its enforcement. On the other hand, the attack is indirect or collateral when, in an action to obtain a different relief, an attack on the judgment is nevertheless made as an incident thereof.25 In the present case, the attack on OCT No. P-30187 was merely collateral because the action was principally for the declaration of nullity of the deed of donation and the other deeds of conveyance which followed. However, the principle of indefeasibility does not apply when the patent and the title based thereon are null and void. An action to declare the nullity of a void title does not prescribe and is susceptible to direct, as well as to collateral, attack.26 OCT No. P-30187 was registered on the basis of a free patent which the RTC ruled was issued by the Director of Lands without authority.27 The petitioners falsely claimed that the land was public land when in fact it was not as

it was private land previously owned by Carmen who inherited it from her parents. This finding was affirmed by the CA. There is no reason to reverse it.28 The settled rule is that a free patent issued over a private land is null and void, and produces no legal effects whatsoever. Private ownership of land ― as when there is a prima facie proof of ownership like a duly registered possessory information or a clear showing of open, continuous, exclusive, and notorious possession, by present or previous occupants ― is not affected by the issuance of a free patent over the same land, because the Public Land law applies only to lands of the public domain. The Director of Lands has no authority to grant free patent to lands that have ceased to be public in character and have passed to private ownership. Consequently, a certificate of title issued pursuant to a homestead patent partakes of the nature of a certificate issued in a judicial proceeding only if the land covered by it is really a part of the disposable land of the public domain.29 Since the Director of Lands has no authority to grant a free patent over privately owned land, any title issued pursuant thereto is null and void.30 Therefore, although OCT No. P-30187 was merely collaterally attacked, it was still correctly nullified because the free patent on which it was based was null and void ab initio. WHEREFORE, the petition is hereby DENIED. The October 14, 2003 decision and April 20, 2004 resolution of the Court of Appeals in CA-G.R. CV No. 55238 are AFFIRMED. Costs against petitioners. SO ORDERED.

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. 175485

July 27, 2011

CASIMIRO DEVELOPMENT CORPORATION, Petitioner, vs. RENATO L. MATEO, Respondent.

In due course, the property now covered by OCT No. 6386 was used as collateral to secure a succession of loans. The first loan was obtained from Bacoor Rural Bank (Bacoor Bank). To repay the loan to Bacoor Bank and secure the release of the mortgage, Laura borrowed funds from Parmenas Perez (Perez), who, however, required that the title be meanwhile transferred to his name. Thus, OCT No. 6386 was cancelled and Transfer Certificate of Title (TCT) No. 438959 was issued in the name of Perez. Subsequently, Laura recovered the property by repaying the obligation with the proceeds of another loan obtained from Rodolfo Pe (Pe), resulting in the cancellation of TCT No. 438595, and in the issuance of TCT No. S-91595 in Laura’s name. She later executed a deed of sale in favor of Pe, leading to the issuance of TCT No. S-91738 in the name of Pe, who in turn constituted a mortgage on the property in favor of China Banking Corporation (China Bank) as security for a loan. In the end, China Bank foreclosed the mortgage, and consolidated its ownership of the property in 1985 after Pe failed to redeem. Thus, TCT No. (99527) T-11749-A was issued in the name of China Bank.

DECISION BERSAMIN, J.: The focus of this appeal is the faith that should be accorded to the Torrens title that the seller holds at the time of the sale.

In 1988, CDC and China Bank negotiated and eventually came to terms on the purchase of the property, with China Bank executing a deed of conditional sale for the purpose. On March 4, 1993, CDC and China Bank executed a deed of absolute sale over the property. Resultantly, on March 29, 1993, CDC was issued TCT No. T-34640 in its own name. In the meanwhile, on February 28, 1991, Felicidad died intestate.

1

In its decision promulgated on August 31, 2006, the Court of Appeals (CA) declared that the respondent and his three brothers were the rightful owners of the land in litis, and directed the Office of the Register of Deeds of Las Piñas City to cancel the transfer certificate of title (TCT) registered under the name of petitioner Casimiro Development Corporation (CDC) and to issue in its place another TCT in favor of the respondent and his three brothers. Thereby, the CA reversed the judgment of the Regional Trial Court (RTC) rendered on May 9, 2000 (dismissing the respondent’s complaint for quieting of title and reconveyance upon a finding that CDC had been a buyer in good faith of the land in litis and that the respondent’s suit had already been time-barred).

On June 6, 1991, CDC brought an action for unlawful detainer in the Metropolitan Trial Court (MeTC) in Las Piñas City against the respondent’s siblings, namely: Cesar, Candido, Jr., and Leonardo, and the other occupants of the property. Therein, the defendants maintained that the MeTC did not have jurisdiction over the action because the land was classified as agricultural; that the jurisdiction belonged to the Department of Agrarian Reform Adjudication Board (DARAB); that they had been in continuous and open possession of the land even before World War II and had presumed themselves entitled to a government grant of the land; and that CDC’s title was invalid, considering that the land had been registered before its being declared alienable.3

Aggrieved, CDC brought its petition for review on certiorari. On October 19, 1992, the MeTC ruled in favor of CDC, viz: Antecedents The subject of this case is a registered parcel of land (property) with an area of 6,693 square meters, more or less, located in Barrio Pulang Lupa, Las Piñas City, that was originally owned by Isaias Lara,2 the respondent’s maternal grandfather. Upon the death of Isaias Lara in 1930, the property passed on to his children, namely: Miguela, Perfecta and Felicidad, and a grandson, Rosauro (son of Perfecta who had predeceased Isaias in 1920). In 1962, the co-heirs effected the transfer of the full and exclusive ownership to Felicidad (whose married surname was Lara-Mateo) under an agreement denominated as Pagaayos Na Gawa Sa Labas Ng Hukuman. Felicidad Lara-Mateo had five children, namely: Laura, respondent Renato, Cesar, Candido, Jr. and Leonardo. With the agreement of the entire Lara-Mateo family, a deed of sale covering the property was executed in favor of Laura, who, in 1967, applied for land registration. After the application was granted, Original Certificate of Title (OCT) No. 6386 was issued in Laura’s sole name.

The Court, after careful consideration of the facts and the laws applicable to this case[,] hereby resolves: 1. On the issue of jurisdiction. The defendants alleged that the land in question is an agricultural land by presenting a Tax Declaration Certificate classifying the land as "FISHPOND." The classification of the land in a tax declaration certificate as a "fishpond" merely refers to the use of the land in question for the purpose of real property taxation. This alone would not be sufficient to bring the land in question under the operation of the Comprehensive Agrarian Reform Law. 2. On the issue of open and adverse possession by the defendants.

It should be noted that the subject land is covered by a Transfer Certificate of Title in the name of plaintiffs’ predecessor-in-interest China Banking Corporation. Certificates of Title under the Torrens System is indefeasible and imprescriptible. As between two persons claiming possession, one having a [T]orrens title and the other has none, the former has a better right. 3. On the issue of the nullity of the Certificate of Title. The defense of the defendants that the subject property was a forest land when the same was originally registered in 1967 and hence, the registration is void[,] is not for this Court to decide[,] for lack of jurisdiction. The certificate of title over the property must be respected by this Court until it has been nullified by a competent Court. WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff[,] ordering the defendants 1. [sic] and all persons claiming right[s] under it to vacate the subject premises located at Pulang Lupa I, Las Piñas, Metro Manila and surrender the possession of the same to herein plaintiff;

The decision in G.R. No. 128392 became final. Nonetheless, on June 29, 1994, the respondent brought an action for quieting of title, reconveyance of four-fifths of the land, and damages against CDC and Laura in the RTC in Las Piñas City entitled Renato L. Mateo v. Casimiro Development Corporation and Laura Mateo de Castro. In paragraph 4 of his complaint, he stated that he was "bringing this action to quiet title on behalf of himself and of his three (3) brothers – Cesar, Leonardo, and Candido, Jr., all surnamed MATEO – in his capacity as one of the co-owners of a parcel of land situated at Barrio Pulang Lupa, Municipality of Las Piñas, Metro Manila." On May 9, 2001, the RTC held in favor of CDC, disposing: WHEREFORE, and by strong preponderance of evidence, judgment is hereby rendered in favor of the defendant Casimiro Development Corporation and against the plaintiff Renato L. Mateo by (1) Dismissing the complaint, and upholding the validity and indefeasibility of Transfer Certificate of Title No. T-34640 in the name of Casimiro Development Corporation; (2) Ordering the plaintiff Renato Mateo to pay defendant Casimiro Development Corporation the sum of [a] ₱200,000.00 as compensatory damages; [b] ₱200,000.00 as attorney’s fees; and [c] to pay the costs. SO ORDERED.8

2. to pay the plaintiff reasonable compensation for the use and occupation of the subject premises hereby fixed at (₱100.00) one hundred pesos a month starting November 22, 1990 (the time when the demand letter to vacate was given) until defendants actually vacate the property;

On appeal (C.A.-G.R. CV No. 71696), the CA promulgated its decision on August 31, 2006, reversing the RTC and declaring CDC to be not a buyer in good faith due to its being charged with notice of the defects and flaws of the title at the time it acquired the property from China Bank, and decreeing:

No pronouncement as to costs and attorney’s fees. SO ORDERED.

4

The decision of the MeTC was assailed in the RTC via petition for certiorari and prohibition. The RTC resolved against CDC, and held that the MeTC had acted without jurisdiction because the land, being a fishpond, was agricultural; hence, the dispute was within the exclusive jurisdiction of the DARAB pursuant to Republic Act No. 6657 (Comprehensive Agrarian Reform Law of 1988).5 CDC appealed to the CA, which, on January 25, 1996, found in favor of CDC, declaring that the MeTC had jurisdiction. As a result, the CA reinstated the decision of the MeTC.6 On appeal (G.R. No. 128392), the Court affirmed the CA’s decision in favor of CDC, ruling thusly: WHEREFORE, the petition is DENIED and the Court of Appeals’ Decision and Resolution in CAG.R. SP No. 34039, dated January 25, 1996 and February 21, 1997 respectively, are AFFIRMED. No costs.

WHEREFORE, the Decision dated May 9, 2001 of Branch 225, Regional Trial Court, Las Piñas City in Civil Case No. 94-2045 is hereby REVERSED and SET ASIDE and a new one rendered: (1) Declaring appellant Renato Mateo and his brothers and co-owners Cesar, Candido, Jr., and Leonardo, all surnamed Mateo as well as his sister, Laura Mateo de Castro as the rightful owners of the parcel of land, subject of this case; and (2) Ordering the Register of Deeds of Las Piñas City, Metro-Manila to cancel Transfer Certificate of Title No. T-34640 under the name of appellee Casimiro Development Corporation, and that a new one be issued in favor of the appellant and his co-heirs and siblings, mentioned above as co-owners pro indiviso of the said parcel. (3) No pronouncement as to cost. SO ORDERED.9 The CA denied CDC’s motion for reconsideration.

SO ORDERED.7 Hence, this appeal, in which CDC urges that the CA committed serious errors of law, 10 as follows:

(A) xxx in failing to rule that the decree of registration over the Subject Property is incontrovertible and no longer open to review or attack after the lapse of one (1) year from entry of such decree of registration in favor of Laura Mateo de Castro.

Torrens certificate and to dispense, as a rule, with the necessity of inquiring further. The Torrens system gives the registered owner complete peace of mind, in order that he will be secured in his ownership as long as he has not voluntarily disposed of any right over the covered land.12

(B) xxx in failing to rule that the present action is likewise barred by res judicata.

The Government has adopted the Torrens system due to its being the most effective measure to guarantee the integrity of land titles and to protect their indefeasibility once the claim of ownership is established and recognized. If a person purchases a piece of land on the assurance that the seller’s title thereto is valid, he should not run the risk of being told later that his acquisition was ineffectual after all, which will not only be unfair to him as the purchaser, but will also erode public confidence in the system and will force land transactions to be attended by complicated and not necessarily conclusive investigations and proof of ownership. The further consequence will be that land conflicts can be even more abrasive, if not even violent. The Government, recognizing the worthy purposes of the Torrens system, should be the first to accept the validity of titles issued thereunder once the conditions laid down by the law are satisfied.13

(C) xxx in failing to rule that the instant action for quieting of title and reconveyance under PD No. 1529 cannot prosper because the Subject Property had already been conveyed and transferred to third parties who claimed adverse title for themselves. (D) xxx in failing to rule that the action of respondent for "quieting of title, reconveyance and damages" is barred by laches. (E) xxx in ruling that the Subject Property must be reconveyed to respondent because petitioner Casimiro Development Corporation is not a "purchaser in good faith." CDC argues that it was a buyer in good faith; and that the CA did not rule on matters that fortified its title in the property, namely: (a) the incontrovertibility of the title of Laura; (b) the action being barred by laches and res judicata; and (c) the property having been conveyed to third parties who had then claimed adverse title. The respondent counters that CDC acquired the property from China Bank in bad faith, because it had actual knowledge of the possession of the property by the respondent and his siblings; that CDC did not actually accept delivery of the possession of the property from China Bank; and that CDC ignored the failure of China Bank to warrant its title. Ruling We grant the petition. 1. Indefeasibility of title in the name of Laura As basis for recovering the possession of the property, the respondent has assailed the title of Laura.

Yet, registration under the Torrens system, not being a mode of acquiring ownership, does not create or vest title.14The Torrens certificate of title is merely an evidence of ownership or title in the particular property described therein.15 In that sense, the issuance of the certificate of title to a particular person does not preclude the possibility that persons not named in the certificate may be co-owners of the real property therein described with the person named therein, or that the registered owner may be holding the property in trust for another person.16 Nonetheless, it is essential that title registered under the Torrens system becomes indefeasible and incontrovertible.17 The land in question has been covered by a Torrens certificate of title (OCT No. 6386 in the name of Laura, and its derivative certificates) before CDC became the registered owner by purchase from China Bank. In all that time, neither the respondent nor his siblings opposed the transactions causing the various transfers. In fact, the respondent admitted in his complaint that the registration of the land in the name of Laura alone had been with the knowledge and upon the agreement of the entire Lara-Mateo family. It is unthinkable, therefore, that the respondent, fully aware of the exclusive registration in her sister Laura’s name, allowed more than 20 years to pass before asserting his claim of ownership for the first time through this case in mid-1994. Making it worse for him is that he did so only after CDC had commenced the ejectment case against his own siblings.

We cannot sustain the respondent.

Worthy of mention is that Candido, Jr., Leonardo, and Cesar’s defense in the ejectment case brought by CDC against them was not predicated on a claim of their ownership of the property, but on their being agricultural lessees or tenants of CDC. Even that defense was ultimately rejected by this Court by observing in G.R. No. 128392 as follows:

There is no doubt that the land in question, although once a part of the public domain, has already been placed under the Torrens system of land registration. The Government is required under the Torrens system of registration to issue an official certificate of title to attest to the fact that the person named in the certificate is the owner of the property therein described, subject to such liens and encumbrances as thereon noted or what the law warrants or reserves.11 The objective is to obviate possible conflicts of title by giving the public the right to rely upon the face of the

With regard to the first element, the petitioners have tried to prove that they are tenants or agricultural lessees of the respondent corporation, CDC, by showing that the land was originally owned by their grandfather, Isaias Lara, who gave them permission to work the land, and that CDC is merely a successor-in-interest of their grandfather. It must be noted that the petitioners failed to adequately prove their grandfather’s ownership of the land. They merely showed six tax declarations. It has been held by this Court that, as against a transfer certificate of title, tax

declarations or receipts are not adequate proofs of ownership. Granting arguendo that the land was really owned by the petitioners’ grandfather, petitioners did not even attempt to show how the land went from the patrimony of their grandfather to that of CDC. Furthermore, petitioners did not prove, but relied on mere allegation, that they indeed had an agreement with their grandfather to use the land. As for the third element, there is apparently no consent between the parties. Petitioners were unable to show any proof of consent from CDC to work the land. For the sake of argument, if petitioners were able to prove that their grandfather owned the land, they nonetheless failed to show any proof of consent from their grandfather to work the land. Since the third element was not proven, the fourth element cannot be present since there can be no purpose to a relationship to which the parties have not consented.18 The respondent’s attack against the title of CDC is likewise anchored on his assertion that the only purpose for having OCT No. 6386 issued in the sole name of Laura was for Laura to hold the title in trust for their mother. This assertion cannot stand, however, inasmuch as Laura’s title had long ago become indefeasible. Moreover, the respondent’s suit is exposed as being, in reality, a collateral attack on the title in the name of Laura, and for that reason should not prosper. Registration of land under the Torrens System, aside from perfecting the title and rendering it indefeasible after the lapse of the period allowed by law, also renders the title immune from collateral attack.19 A collateral attack occurs when, in another action to obtain a different relief and as an incident of the present action, an attack is made against the judgment granting the title. This manner of attack is to be distinguished from a direct attack against a judgment granting the title, through an action whose main objective is to annul, set aside, or enjoin the enforcement of such judgment if not yet implemented, or to seek recovery if the property titled under the judgment had been disposed of.20 2. CDC was an innocent purchaser for value The CA found that CDC acquired the property in bad faith because CDC had knowledge of defects in the title of China Bank, including the adverse possession of the respondent’s siblings and the supposed failure of China Bank to warrant its title by inserting an as-is, where-is clause in its contract of sale with CDC. The CA plainly erred in so finding against CDC. To start with, one who deals with property registered under the Torrens system need not go beyond the certificate of title, but only has to rely on the certificate of title.21 He is charged with notice only of such burdens and claims as are annotated on the title. 22 The pertinent law on the matter of burdens and claims is Section 44 of the Property Registration Decree,23 which provides: Section 44. Statutory liens affecting title. — Every registered owner receiving a certificate of title in pursuance of a decree of registration, and every subsequent purchaser of registered land taking a

certificate of title for value and in good faith, shall hold the same free from all encumbrances except those noted on said certificate and any of the following encumbrances which may be subsisting, namely: First. Liens, claims or rights arising or existing under the laws and Constitution of the Philippines which are not by law required to appear of record in the Registry of Deeds in order to be valid against subsequent purchasers or encumbrances of record. Second. Unpaid real estate taxes levied and assessed within two years immediately preceding the acquisition of any right over the land by an innocent purchaser for value, without prejudice to the right of the government to collect taxes payable before that period from the delinquent taxpayer alone. Third. Any public highway or private way established or recognized by law, or any government irrigation canal or lateral thereof, if the certificate of title does not state that the boundaries of such highway or irrigation canal or lateral thereof have been determined. Fourth. Any disposition of the property or limitation on the use thereof by virtue of, or pursuant to, Presidential Decree No. 27 or any other law or regulations on agrarian reform. In short, considering that China Bank’s TCT No. 99527 was a clean title, that is, it was free from any lien or encumbrance, CDC had the right to rely, when it purchased the property, solely upon the face of the certificate of title in the name of China Bank.24 The CA’s ascribing of bad faith to CDC based on its knowledge of the adverse possession of the respondent’s siblings at the time it acquired the property from China Bank was absolutely unfounded and unwarranted. That possession did not translate to an adverse claim of ownership that should have put CDC on actual notice of a defect or flaw in the China Bank’s title, for the respondent’s siblings themselves, far from asserting ownership in their own right, even characterized their possession only as that of mere agricultural tenants. Under no law was possession grounded on tenancy a status that might create a defect or inflict a flaw in the title of the owner. Consequently, due to his own admission in his complaint that the respondent’s own possession was not any different from that of his siblings, there was really nothing – factually or legally speaking – that ought to have alerted CDC or, for that matter, China Bank and its predecessors-in-interest, about any defect or flaw in the title. The vendee’s notice of a defect or flaw in the title of the vendor, in order for it to amount to bad faith, should encompass facts and circumstances that would impel a reasonably cautious person to make further inquiry into the vendor’s title,25 or facts and circumstances that would induce a reasonably prudent man to inquire into the status of the title of the property in litigation. 26 In other words, the presence of anything that excites or arouses suspicion should then prompt the vendee to look beyond the certificate and to investigate the title of the vendor appearing on the face of said certificate.27 And, secondly, the CA grossly erred in construing the as-is, where-is clause contained in the deed of sale between CDC (as vendee) and China Bank (as vendor) as proof or manifestation of any bad faith on the part of CDC. On the contrary, the as-is, where-is clause did not affect the title of

China Bank because it related only to the physical condition of the property upon its purchase by CDC. The clause only placed on CDC the burden of having the occupants removed from the property. In a sale made on an as-is, where-is basis, the buyer agrees to take possession of the things sold "in the condition where they are found and from the place where they are located," because the phrase as-is, where-is pertains solely "to the physical condition of the thing sold, not to its legal situation" and is "merely descriptive of the state of the thing sold" without altering the seller’s responsibility to deliver the property sold to the buyer.28 What the foregoing circumstances ineluctably indicate is that CDC, having paid the full and fair price of the land, was an innocent purchaser for value, for, according to Sandoval v. Court of Appeals:29 A purchaser in good faith is one who buys property of another, without notice that some other person has a right to, or interest in, such property and pays a full and fair price for the same, at the time of such purchase, or before he has notice of the claim or interest of some other persons in the property. He buys the property with the belief that the person from whom he receives the thing was the owner and could convey title to the property. A purchaser cannot close his eyes to facts which should put a reasonable man on his guard and still claim he acted in good faith. WHEREFORE, we grant the petition for review on certiorari; set aside the decision of the Court of Appeals in CA-GR. CV No. 71696; dismiss the complaint in Civil Case No. 94-2045; and declare Transfer Certificate of Title No. T-34640 in the name of Casimiro Development Corporation valid and subsisting. The respondent shall pay the costs of suit. SO ORDERED.

Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No. 204369

Absolute Sale dated November 3, 1979 allegedly executed by Locsin with the Registry of Deeds; 2. Bolos later sold the subject lot to Bernardo Hizon (Bernardo) for PhP 1.5 million, but it was titled under Carlos Hizon’s (Carlos’) name on August 12, 1999. Carlos is Bernardo’s son;

September 17, 2014

ENRIQUETA M. LOCSIN, Petitioner, vs. BERNARDO HIZON, CARLOS HIZON, SPS. JOSE MANUEL & LOURDES GUEVARA, Respondents. DECISION VELASCO, JR., J.: Nature of the Case Before Us is a Petition for Review on Certiorari under Rule 45 assailing the Decision 1 and Resolution of the Court of Appeals (CA), dated June 6, 2012 and October 30, 2012, respectively, in CA-G.R. CV No. 96659 entitled Enriqueta M Locsin v. Marylou Bolos, et al. In reversing the ruling of the trial court, the CA held that respondents are innocent purchasers in good faith and for value of the subject property. The Facts Petitioner Enriqueta M. Locsin (Locsin) was the registered owner of a 760-sq.m. lot covered by Transfer Certificate of Title (TCT) No. 235094, located at 49 Don Vicente St., Don Antonio Heights Subdivision, Brgy. Holy Spirit, Capitol, Quezon City. In 1992, she filed an ejectment case, Civil Case No. 38-6633,2 against one Billy Aceron (Aceron) before the Metropolitan Trial Court, Branch 3 8 in Quezon City (MTC) to recover possession over the land in issue. Eventually, the two entered into a compromise agreement, which the MTC approved on August 6, 1993.3

3. On October 1, 1999, Bernardo, claiming to be the owner of the property, filed a Motion for Issuance of Writ of Execution for the enforcement of the court-approved compromise agreement in Civil Case No. 38-6633; 4. The property was already occupied and was, in fact, up for sale. On May 9, 2002, Locsin, through counsel, sent Carlos a letter requesting the return of the property since her signature in the purported deed of sale in favor of Bolos was a forgery. In a letter-reply dated May 20, 2002, Carlos denied Locsin’s request, claiming that he was unaware of any defect or flaw in Bolos’ title and he is, thus, an innocent purchaser for value and good faith. On June 13, 2002,4 Bernardo met with Locsin’s counsel and discussed the possibility of a compromise. He ended the meeting with a promise to come up with a win-win situation for his son and Locsin, a promise which turned out to be deceitful, for, on July 15, 2002, Locsin learned that Carlos had already sold the property for PhP 1.5 million to his sister and her husband, herein respondents Lourdes and Jose Manuel Guevara (spouses Guevara), respectively, who, as early as May 24, 2002, had a new certificate of title, TCT No. N-237083, issued in their names. The spouses Guevara then immediately mortgaged the said property to secure a PhP 2.5 million loan/credit facility with Damar Credit Corporation (DCC). It was against the foregoing backdrop of events that Locsin filed an action for reconveyance, annulment ofTCT No. N-237083, the cancellation of the mortgage lien annotated thereon, and damages, against Bolos, Bernardo, Carlos, the Sps. Guevara, DCC, and the Register of Deeds, Quezon City, docketed as Civil Case No. Q-02-47925, which was tried by the Regional Trial Court, Branch 77 in Quezon City (RTC). The charges against DCC, however, weredropped on joint motion ofthe parties. This is in view of the cancellation of the mortgage for failure of the spouses Guevara to avail of the loan/credit facility DCC extended in their favor.5 Ruling of the Trial Court

Locsin later went to the United States without knowing whether Aceron has complied with his part of the bargain under the compromise agreement. In spite of her absence, however, she continued to pay the real property taxes on the subject lot. In 1994, after discovering thather copy of TCT No. 235094 was missing, Locsin filed a petition for administrative reconstruction in order to secure a new one, TCT No. RT-97467. Sometime in early 2002, she then requested her counsel to check the status of the subject lot. It was then that they discovered the following: 1. One Marylou Bolos (Bolos) had TCT No. RT-97467 cancelled on February 11, 1999, and then secured a new one, TCT No. N-200074, in her favor by registering a Deed of

On November 19, 2010, the RTC rendered a Decision6 dismissing the complaint and finding for respondents,as defendants thereat, holding that: (a) there is insufficient evidence to showthat Locsin’s signature in the Deed of Absolute Sale between her and Bolos is a forgery; (b) the questioned deed is a public document, having been notarized; thus, it has, in its favor, the presumption of regularity; (c) Locsin cannot simply rely on the apparent difference of the signatures in the deed and in the documents presented by her to prove her allegation of forgery; (d) the transfers of title from Bolos to Carlos and from Carlos to the spouses Guevara are valid and regular; (e) Bernardo, Carlos, and the spouses Guevara are all buyers in good faith. Aggrieved, petitioner appealed the case to the CA. Ruling of the Court of Appeals

The CA, in its assailed Decision, ruled that it was erroneous for the RTC to hold that Locsin failed to prove that her signature was forged. In its appreciation of the evidence, the CA found that, indeed, Locsin’s signature in the Deed of Absolute Sale in favor of Bolos differs from her signatures in the other documents offered as evidence. The CA, however, affirmed the RTC’s finding that herein respondents are innocent purchasers for value. Citing Casimiro Development Corp. v. Renato L. Mateo,7 the appellate court held that respondents, having dealt with property registered under the Torrens System, need not go beyond the certificate of title, but only has to rely on the said certificate. Moreover, as the CA added, any notice of defect or flaw in the title of the vendor should encompass facts and circumstances that would impel a reasonably prudent man to inquire into the status of the title of the property in order to amount to bad faith. Accordingly, the CA ruled that Locsin can no longer recover the subject lot. 8 Hence, the insant petition.

The Court’s Ruling The petition is meritorious. Procedural issue As a general rule, only questions of law may be raised in a petition for review on certiorari. 13 This Court is not a trier offacts; and in the exercise of the power of review, we do not normally undertake the re-examination of the evidence presented by the contending parties during the trial of the case.14 This rule, however, admits of exceptions.For one, the findings of fact of the CA will not bind the parties in cases where the inference made on the evidence is mistaken, as here.15 That being said, we now proceed to the core of the controversy. Precautionary measures for buyers of real property

Arguments Petitioner Locsin insists that Bernardo was well aware, at the time he purchased the subject property, of a possible defect in Bolos’ title since he knew that another person, Aceron, was then occupying the lot in issue.9 As a matter of fact, Bernardo even moved for the execution of the compromise agreement between Locsin and Aceron inCivil Case No. 38-6633 in order to enforce to oust Aceron of his possession over the property.10 Thus, petitioner maintains that Bernardo, knowing as he did the incidents involving the subject property,should have acted as a reasonably diligent buyer in verifying the authenticity of Bolos’title instead of closing his eyes to the possibility of a defecttherein. Essentially, petitioner argues that Bernardo’s stubborn refusal to make an inquiry beyond the face of Bolos’ title is indicative of his lack of prudence in protecting himself from possible defects or flaws therein, and consequently bars him from interposing the protection accorded toan innocent purchaser for value. As regards Carlos and the Sps. Guevara’s admissions and testimonies, petitioner points out that when these are placed side-by-side with the concurrent circumstances in the case, it is readily revealed that the transfer from the former to the latter was only simulated and intended to keep the property out of petitioner’s reach. For their part, respondents maintain that they had the right to rely solely upon the face of Bolos’ clean title, considering that it was free from any lien or encumbrance. They are not even required, so they claim, to check on the validity of the sale from which they derived their title. 11 Too, respondents claim that their knowledge of Aceron’s possession cannot be the basis for an allegation of bad faith, for the property was purchased on an "asis where-is" basis. The Issue Considering that the finding of the CAthat Locsin’s signature in the Deed of Absolute Sale in favor of Bolos was indeed bogus commands itself for concurrence, the resolution of the present petition lies on this singular issue––whether or not respondents are innocent purchasers for value.12

An innocent purchaser for value is one who buys the property of another without notice that some other person has a right to or interest in it, and who pays a full and fair price atthe time of the purchase or before receiving any notice of another person’s claim.16 As such, a defective title–– or one the procurement of which is tainted with fraud and misrepresentation––may be the source of a completely legal and valid title, provided that the buyer is an innocent third person who, in good faith, relied on the correctness of the certificate of title, or an innocent purchaser for value. 17 Complementing this is the mirror doctrine which echoes the doctrinal rule that every person dealing with registered land may safely rely on the correctness of the certificate of title issued therefor and is in no way obliged to go beyond the certificate to determine the condition of the property.18 The recognized exceptions to this rule are stated as follows: [A] person dealing with registeredland has a right to rely on the Torrens certificate of title and to dispense with the need of inquiring further except when the party has actual knowledge of facts and circumstances that would impel a reasonably cautious man to make such inquiry or when the purchaser has knowledge of a defect or the lack of title in his vendor or of sufficient facts to induce a reasonably prudent man to inquire into the status of the title of the property in litigation. 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 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 and, hence, does not merit the protection of the law.19 (emphasis added) Thus, in Domingo Realty, Inc. v. CA,20 we emphasized the need for prospective parties to a contract involving titled lands to exercise the diligence of a reasonably prudent person in ensuring the legality of the title, and the accuracy of the metes and bounds of the lot embraced therein, by undertaking precautionary measures, such as: 1. Verifying the origin, history, authenticity, and validity of the title with the Office of the Register of Deeds and the Land Registration Authority;

2. Engaging the services of a competent and reliable geodetic engineer to verify the boundary,metes, and bounds of the lot subject of said title based on the technical description in the said title and the approved survey plan in the Land Management Bureau; 3. Conducting an actual ocular inspection of the lot; 4. Inquiring from the owners and possessors of adjoining lots with respect to the true and legal ownership of the lot in question; 5. Putting up of signs that said lot is being purchased, leased, or encumbered; and 6. Undertaking such other measures to make the general public aware that said lot will be subject to alienation, lease, or encumbrance by the parties. In the case at bar, Bolos’ certificate of title was concededly free from liens and encumbrances on its face. However, the failure of Carlos and the spouses Guevara to exercise the necessary level ofcaution in light of the factual milieu surrounding the sequence of transfers from Bolos to respondents bars the application of the mirror doctrine and inspires the Court’s concurrence withpetitioner’s proposition. Carlos is not an innocent purchaser for value Foremost, the Court is of the view that Bernardo negotiated with Bolos for the property as Carlos’ agent. This is bolstered by the fact that he was the one who arranged for the saleand eventual registration of the property in Carlos’ favor. Carlos testified during the May 27, 2009 hearing: 21 Q: Are you privy with the negotiations between your father, Mr. Bernardo Hizon, and your codefendant, Marylou Bolos, the alleged seller? A: No, Ma’am.

Consistent with the rule that the principal is chargeable and bound by the knowledge of, or notice to, his agent received in that capacity,22 any information available and known to Bernardo is deemed similarly available and known to Carlos, including the following: 1. Bernardo knew that Bolos, from whom he purchased the subject property, never acquired possession over the lot. As a matter of fact, in his March 11, 2009 direct testimony,23 Bernardo admitted having knowledge of Aceron’s lot possession as well as the compromise agreement between petitioner and Aceron. 2. Bolos’ purported Deed of Sale was executed on November 3, 1979 but the ejectment case commenced by Locsin against Aceron was in 1992, or thirteen (13)years after the property was supposedly transferred to Bolos. 3. The August 6, 1993 Judgment,24 issued by the MTC on the compromise agreement between Locsin and Aceron, clearly stated therein that "[o]n August 2, 1993,the parties [Aceron and Locsin] submitted to [the MTC] for approval a Compromise Agreement dated July 28, 1993." It further indicated that "[Aceron] acknowledges [Locsin’s] right of possessionto [the subject property], being the registered owner thereof." Having knowledge of the foregoing facts, Bernardo and Carlos, to our mind, should have been impelled to investigate the reason behind the arrangement. They should have been pressed to inquire into the status of the title of the property in litigation in order to protect Carlos’ interest. It should have struck them as odd that it was Locsin, not Bolos, who sought the recovery of possession by commencing an ejectment case against Aceron, and even entered into a compromiseagreement with the latter years afterthe purported sale in Bolos’ favor. Instead, Bernardo and Carlos took inconsistent positions when they argued for the validity of the transfer of the property in favor of Bolos, but in the same breath prayed for the enforcement of the compromise agreement entered into by Locsin. At this point it is well to emphasize that entering into a compromise agreement is an act of strict dominion.25 If Bolos already acquired ownership of the property as early as 1979, it should have been her who entered into a compromise agreement with Aceron in 1993, not her predecessor-ininterest, Locsin, who, theoretically, had already divested herself of ownership thereof.

Q: Do you remember having signed a Deed of Absolute Sale, dated August 12, 1999? The spouses Guevara are not innocent purchasers for value A: Yes, Ma’am. Q: And, at that time that you have signed the Deed, was Marylou Bolos present? A: No, Ma’am. Q: Who negotiated and arranged for the sale of the property between Marylou Bolos and you? A: It was my father. (emphasis ours)

As regards the transfer of the property from Carlos to the spouses Guevara, We find the existence of the sale highly suspicious. For one, there is a dearth of evidence to support the respondent spouses’ position that the sale was a bona fide transaction. Evenif we repeatedly sift through the evidence on record, still we cannot findany document, contract, or deed evidencing the sale in favor of the spouses Guevara. The same goes for the purported payment of the purchase price of the property in the amount of PhP 1.5 million in favor of Carlos. As a matter of fact, the only documentary evidence that they presented were as follows: 1. Deed of Sale between Locsin and Bolos;

2. TCT No. 200074 issued in Bolos’ name; 3. TCT No. N-205332 in Carlos’ name; 4. TCT No. N-237083 in the nameof the Sps. Guevara. To bridge the gap in their documentary evidence, respondents proffer their own testimonies explaining the circumstances surrounding the alleged sale.26 However, basic is the rule that bare and self-serving allegations, unsubstantiated by evidence, are not equivalent to proof under the Rules.27 As such, we cannot give credence to their representations that the sale between them actually transpired. Furthermore, and noticeably enough,the transfer from Carlos to the spouses Guevara was effected only fifteen(15) days after Locsin demanded the surrender of the property fromCarlos. Reviewing the timeline: May 9, 2002: Locsin’s counsel sent a letter to Carlos, requesting that he return the property to Locsin since the latter’s signature in the purported deed of sale between her and Bolos was a forgery. May 20, 2002:Carlos’ counsel replied to Locsin’s May 9, 2002 letter, claiming that Carlos was unaware of any defect or flaw in Bolos’ title, making him an innocent purchaserof the subject property. May 24, 2002: The Sps. Guevara allegedly purchased the property from Carlos. When Bernardo met with Locsin’scounsel on June 13, 2002, and personally made a commitment to comeup with a win-win situation for his son and Locsin, he knew fully well, too,that the property had already been purportedly transferred to his daughter and son-in-law, the spouses Guevara, for he, no less, facilitated the same. This, to us, isglaring evidence of bad faith and an apparent intention to mislead Locsin into believing that she could no longer recover the subject property. Also, the fact that Lourdes Guevara and Carlos are siblings, and that Carlos’ agent in his dealings concerning the property is his own father, renders incredible the argument thatLourdes had no knowledge whatsoever of Locsin’s claim of ownership atthe time of the purported sale. Indeed, the fact that the spouses Guevara never intended to be the owner in good faith and for value of the lot is further made manifest by their lack of interest in protecting themselvesin the case. It does not even appear in their testimonies that they, at the very least, intended to vigilantly protect their claim over the property and prevent Locsin take it away from them. What they did was to simply appoint Bernardo as their attorney-in-fact to handle the situation and never bothered acquainting themselves with the developments in the case.28 To be sure, respondent Jose Manuel Guevara was not even presented asa witness in the case. There is also strong reason to believethat even the mortgage in favor of DCC was a mere ploy tomake it appear that the Sps. Guevara exercised acts of dominion over the subject property. This

is so considering the proximity between the property’s registration in their names and its being subjected to the mortgage. Most telling is that the credit line secured by the mortgage was never used by the spouses, resulting in the mortgage’s cancellation and the exclusion of DCC as a party in Civil Case No. Q-02-47925.1âwphi1 These circumstances, taken altogether, strongly indicate that Carlos and the spouses Guevara failed to exercise the necessary level of caution expected of a bona fide buyer and even performed acts that are highly suspect. Consequently, this Court could not give respondents the protection accorded to innocent purchasers in good faith and for value. Locsin is entitled to nominal damages We now delve into petitioner’s prayer for exemplary damages, attorney’s fees, and costs of suit. Here, the Court notes that petitioner failed to specifically pray that moral damages be awarded. Additionally, she never invoked any of the grounds that would have warranted the award of moral damages. As can be gleaned from the records, lacking from her testimony is any claim that she suffered any form of physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation, or any other similar circumstance.29 Thus, we are constrained to refrain from awarding moral damages in favor of petitioner. In the same vein, exemplary damages cannot be awarded in favor of petitioner. Well-settled that this species of damages is allowed only in addition to moral damages such that no exemplary damages can be awarded unless the claimant first establishes his clear right to moral damages.30 Consequently, despite our finding that respondents acted in a fraudulent manner, petitioner’s claim for exemplary damages is unavailing at this point. Nevertheless, we find an award for nominal damages to be in order. Under prevailing jurisprudence, nominal damages are "recoverable where a legal right is technically violated and must be vindicated against an invasion that has produced no actual present loss of any kind or where there has been a breach of contract and no substantial injury or actual damages whatsoever have been or can be shown."31 As expounded in Almeda v. Cariño,32 a violation of the plaintiff’s right, even if only technical, is sufficient to support an award of nominal damages. So long as there is a showing of a violation of the right of the plaintiff, as herein petitioner, an award of nominal damages is proper.33 In the case at bar, this Court recognizes that petitioner was unduly deprived of her ownership rights overthe property, and was compelled to litigate for its recovery, for almost ten (10) years. Clearly, this could have entitled her to actual or compensatory damages had she quantified and proved, during trial, the amounts which could have accrued in her favor, including commercial fruits such as reasonable rent covering the pendency of the case. Nonetheless, petitioner’s failure to prove actual or compensatory damages does not erase the fact that her property rights were unlawfully invaded by respondents, entitling her to nominal damages. As to the amount to be awarded, it bears stressing that the same is addressed to the sound discretion ofthe court, taking into account the relevant circumstances. 34 Considering the length of time petitioner was deprived of her property and the bad faith attending respondents’ actuations in

the extant case, we find the amount of seventy-five thousand pesos (PhP 75,000) as sufficient nominal damages. Moreover, respondents should be held jointly and severally liable for the said amount, attorney’s fees in the amount of an additional seventy-fivethousand pesos (PhP 75,000), and the costs of the suit. WHEREFORE, in light of the foregoing, the Petition is hereby GRANTED. The assailed Decision of the Court of Appeals dated June 6, 2012 in CA-G.R. CV No. 96659 affirming the Decision of the Regional Trial Court, Branch 77, Quezon City, in Civil Case No. Q-02-47925; as well as its Resolution dated October 30, 2012, denying reconsideration thereof, are hereby REVERSED and SET ASIDE. TCT No. N-200074 in the name of Marylou Bolos, and the titles descending therefrom, namely, TCT Nos. N-205332 and N-237083 in the name of Carlos Hizon, and the Spouses Jose Manuel & Lourdes Guevara, respectively, are hereby declared NULL and VOID. Respondents and all other persons acting under their authority are hereby DIRECTED to surrender possession of the subject property in favor of petitioner. Respondents Bernardo Hizon, Carlos Hizon, and the spouses Jose Manuel and Lourdes Guevara shall jointly and severally pay petitioner PhP 75,000 as nominal damages, PhP 75,000 as attorney's fees, and costs of suit. The Register of Deeds of Quezon City is hereby ORDERED to (1) cancel TCT No. N-237083; (2) reinstate TCT No. RT-97467; and (3) reissue TCT No. RT-97467 in favor of petitioner, without requiring from petitioner payment for any and all expenses in performing the three acts. SO ORDERED.

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. 205867

February 23, 2015

MARIFLOR T. HORTIZUELA, represented by JOVIER TAGUFA, Petitioner, vs. GREGORIA TAGUFA, ROBERTO TAGUFA and ROGELIO LUMABAN, Respondents. DECISION MENDOZA, J.: This is a petition for review on certiorari under Rule 45 of the Rules of Court assailing the September 13, 2012 Decision1 and the January 25, 2013 Resolution 2 of the Court of Appeals (CA) in CA-G.R. SP No. 122648 which reversed and set aside the July 1, 2011 Decision 3 of the Regional Trial Court, Branch 22, Cabagan, Isabela (RTC), in an action for reconveyance and recovery of possession. The Facts: The undisputed facts were succinctly summarized in the August 31, 2010 Decision4 of the 3rd Municipal Circuit Trial Court, Tumauini-Delfin Albano, Tumauini, Isabela (MCTC) before which a complaint5 for Reconveyance and Recovery of Possession with Damages was filed by petitioner Mariflor Tagufa Hortizuela (Hortizuela)represented by Jovier Tagufa against respondents Gregoria Tagufa, Roberto Tagufa and Rogelio Lumaban (respondents). As quoted by the CA, said undisputed facts are:

xxx who, in turn, sold it back to Runsted Tagufa, husband of defendant Gregoria Tagufa, on April 4, 2002 xxx using the fund sent by plaintiff Hortizuela who was in America and with the agreement that Runsted will reconvey the said property to her sister when demanded. However, plaintiff discovered that the same unregistered property was titled in the name of Gregoria Tagufa under OCT No. P-84609 of the Registry of Deeds of Isabela xxx. Investigating further, plaintiff discovered that Gregoria Tagufa was able to title the said property by virtue of a free patent application before the Department of Environment and Natural Resources (DENR) and the execution of a Deed of Extrajudicial Settlement of the Estate of the late Spouses Leandro Tagufa and Remedios Talosig dated May 9,2003 xxx. Plaintiff now seeks to recover possession of the said property which is presently occupied by Gregoria Tagufa and her co-defendants and have the same be reconveyed unto them.6 In its Order, dated May 5, 2010,the MCTC granted the motion to declare defendants in default and allowed Hortizuela to present her evidence ex parte. Thereafter, on August 31, 2010, the MCTC dismissed the complaint for lack of merit ruling that "in the judicious analysis by this court, plaintiffs have resorted to a wrong cause of action."7 Not in conformity, Hortizuela appealed to the RTC. In its July 1, 2011 Decision, the RTC reversed the MCTC ruling. The decretal portion of the RTC decision reads as follows: WHEREFORE, premises considered, the appeal is hereby granted and the Decision dated August 31, 2010, is hereby REVERSED and judgment is hereby rendered as follows: 1. Ordering the defendant Gregorio Tagufa to reconvey to the plaintiff Mariflor Tagufa Hortizuela the land described in paragraph 4 of the complaint; 2. Ordering the defendants to vacate the same land and to surrender the peaceful possession thereof to the plaintiff; 3. Ordering the defendants to pay to the plaintiff the following amounts, jointly and severally: a) Fifty Thousand (₱50,000.00) Pesos as Moral Damages;

Gleaned from the joint testimonies of R[u]nsted Tagufa xxx and Jovier Tagufa xxx are the following facts: The property involved in this case is a parcel of land located at District IV, Tumauini, Isabela containing an area of 539 square meters, more or less, and covered by OCT No. P-84609 of the Registry of Deeds of Isabela. By virtue of the special power of attorney xxx executed by Mariflor Tagufa Hortizuela, Jovier Tagufa instituted this case against herein defendants praying for the peaceful surrender of the above-described property unto them and further ordering defendant Gregoria Tagufa to reconvey in plaintiff’s favor the same property which was titled under her name via fraud. Before it was titled in the name of Defendant Tagufa, said property was originally owned by plaintiff’s parents, Spouses Epifanio Tagufa and Godofreda Jimenez. Although untitled, the spouses mortgaged the property with the Development Bank of the Philippines (DBP, for brevity). For failure to redeem the property, DBP foreclosed the same and sold it to Atty. Romulo Marquez

b) Twenty Thousand (₱20,000.00) Pesos as Attorney’s Fees. SO DECIDED.8 Respondents filed a motion for reconsideration, but it was denied by the RTC. The reversal being unacceptable to them, respondents filed a petition for review before the CA questioning the RTC decision. This time, the case was disposed in their favor. According to the CA, although Hortizuela filed with the MCTC a complaint for reconveyance and recovery of possession of the subject lot, she was also questioning the validity of the Torrens title, Original Certificate of Title (OCT)No. P-846609.9 The CA pointed out that this was in contravention of Section 48 of Presidential Decree (P.D.)No. 1529 which provides:

Sec. 48. Certificate not subject to collateral attack.- A certificate of title shall not be subject to collateral attack. It cannot be altered, modified, or cancelled except in a direct proceeding in accordance with law

recovery of possession was that she failed to avail of the remedy provided under Section 38 13 of Act 496 within the prescribed period of one (1) year, counted from the issuance of the free patent by the government.

It cited the well-settled rule that a Torrens title could not be collaterally attacked; that the issue of whether or not the title was fraudulently issued, could only be raised in an action expressly instituted for that purpose; and that an action for reconveyance and recovery of possession was not the direct action contemplated by law.10 Hence, the dispositive portion of the CA decision reads in this wise:

Finally, granting that the title over the property would be nullified and the property be reconveyed to Hortizuela, still the latter would be ineligible to own the same pursuant to Batas Pambansa (B.P.) Blg. 223 which requires, among others, that an applicant for a free patent must be a Filipino citizen. Hortizuela, by her own admission, is an American citizen who has been residing in Las Vegas, Nevada.

WHEREFORE, premises considered, the Decision dated July 1, 2011 rendered by the Regional Trial Court of Cabagan, Isabela, is hereby REVERSED and SET ASIDE. The present Complaint for reconveyance and recovery of possession with damages is DISMISSED.

The Court’s Ruling

SO ORDERED.11 Hortizuela filed a motion for reconsideration, but it was denied in a Resolution, 12 dated January 25, 2013. Hence, this petition. ISSUE WHETHER OR NOT AN ACTIONFOR RECONVEYANCE AND RECOVERY OF POSSESSION CONSTITUTES AN INDIRECT OR COLLATERAL ATTACK ON THE VALIDITY OF THE SUBJECT CERTIFICATE OF TITLE WHICH IS PROSCRIBED BY LAW. Hortizuela claims that respondent Gregoria Tagufa (Gregoria),being the wife of Runsted, was certainly aware that the subject land was actually sold by Atty. Romulo Marquez (Atty. Marquez) to her (Hortizuela). Runsted, only acted as attorney-in-fact in the sale transaction. Thus, the action for reconveyance was not a collateral attack on the said title because Hortizuela was not seeking the nullification of the title, but rather the reconveyance of the property, covered by the said title, which Gregoria was holding in trust for her benefit as the real owner. Gregoria should, therefore, reconvey the property and its title to her, being the rightful owner. Position of Respondents Respondents counter that although Hortizuela’s complaint was denominated as one for reconveyance and recovery of possession, its main objective was to nullify the title held by Gregoria over the subject property. For said reason, the complaint would amount to a collateral attack on the title which was proscribed under the principle of indefeasibility of a Torrens title. To rule that the action for reconveyance was not a collateral one would result in the nullity of the decree of registration. Another argument that respondents want this Court to consider in resolving the subject petition is the fact that the overriding reason why Hortizuela chose to file a complaint for reconveyance and

The Court finds the petition meritorious. The Court is not unmindful of the principle of indefeasibility of a Torrens title and Section 48 of P.D. No. 1528 where it is provided that a certificate of title shall not be subject to collateral attack.14 A Torrens title cannot be altered, modified or cancelled except in a direct proceeding in accordance with law. When the Court says direct attack, it means that the object of an action is to annul or set aside such judgment, or enjoin its enforcement. On the other hand, the attack is indirect or collateral when, in an action to obtain a different relief, an attack on the judgment or proceeding is nevertheless made as an incident thereof.15 In its decision, the MCTC wrote: Obviously, the bone of contention in this case are the deed of sale by and between Romulo Marquez and Runsted Tagufa, the estranged husband of defendant Gregoria Tagufa, and OCT No. P-84609 registered in the name of Gregoria Tagufa who, according to the plaintiff, fraudulently caused the titling of the same. In their lamentations, plaintiff pointed out the following indicia of fraud committed by GregoriaTagufa that would allegedly justify reconveyance: First, Gregoria Tagufa made it appear in the extrajudicial settlement of the estate of spouses Leandro Tagufa and Remedios Talosig that she is an heir when, in truth, she is only a grand daughter-in-law, Second, she already knew when she applied for free patent that plaintiff was already the owner of the land she was applying for; Third, she already knew that when she applied for free patent that plaintiff’s parents were not anymore the owners of the land as the same was mortgaged with the DBP; and Fourth, defendant has never been in actual possession of the property when she applied for it. All in all, plaintiff argued, Gregoria Tagufa never acquired any valid right or legal title over the property.

Studying the merits of this case and removing all its superfluities, plaintiffs plainly question the title generated in the name of defendant Gregoria Tagufa having been obtained by fraud and misrepresentation. However, in the judicious analysis by this court, plaintiffs have resorted to a wrong cause of action.16

The Court is not unaware of the rule that a fraudulently acquired free patent may only be assailed by the government in an action for reversion pursuant to Section 101 of the Public Land Act. 21 In Sherwill Development Corporation v. Sitio Sto. Niño Residents Association, Inc.,22 this Court pointed out that:

From the foregoing, it can be deduced that the MCTC was convinced that fraud was attendant in the registration of the land but was not convinced that reconveyance was an accepted remedy. Contrary to the pronouncements of the MCTC and the CA, however, the complaint of Hortizuela was not a collateral attack on the title warranting dismissal. As a matter of fact, an action for reconveyance is a recognized remedy, an action in personam, available to a person whose property has been wrongfully registered under the Torrens system in another’s name. In an action for reconveyance, the decree is not sought to be set aside. It does not seek to set aside the decree but, respecting it as incontrovertible and no longer open to review, seeks to transfer or reconvey the land from the registered owner to the rightful owner. Reconveyance is always available as long as the property has not passed to an innocent third person for value.17 There is no quibble that a certificate of title, like in the case at bench, can only be questioned through a direct proceeding. The MCTC and the CA, however, failed to take into account that in a complaint for reconveyance, the decree of registration is respected as incontrovertible and is not being questioned. What is being sought is the transfer of the property wrongfully or erroneously registered in another's name to its rightful owner or to the one with a better right. If the registration of the land is fraudulent, the person in whose name the land is registered holds it as a mere trustee, and the real owner is entitled to file an action for reconveyance of the property.18

x x x It is to the public interest that one who succeeds in fraudulently acquiring title to a public land should not be allowed to benefit therefrom, and the State should, therefore, have an even existing authority, thru its duly-authorized officers, to inquire into the circumstances surrounding the issuance of any such title, to the end that the Republic, thru the Solicitor General or any other officer who may be authorized by law, may file the corresponding action for the reversion of the land involved to the public domain, subject thereafter to disposal to other qualified persons in accordance with law. In other words, the indefeasibility of a title over land previously public is not a bar to an investigation by the Director of Lands as to how such title has been acquired, if the purpose of such investigation is to determine whether or not fraud had been committed in securing such title in order that the appropriate action for reversion may be filed by the Government.23

The fact that Gregoria was able to secure a title in her name does not operate to vest ownership upon her of the subject land. "Registration of a piece of land under the Torrens System does not create or vest title, because it is not a mode of acquiring ownership. A certificate of title is merely an evidence of ownership or title over the particular property described therein. It cannot be used to protect a usurper from the true owner; nor can it be used as a shield for the commission of fraud; neither does it permit one to enrich himself at the expense of others. Its issuance in favor of a particular person does not foreclose the possibility that the real property may be co-owned with persons not named in the certificate, or that it may be held in trust for another person by the registered owner."19

An action for reconveyance is proper The foregoing rule is, however, not without exception. A recognized exception is that situation where plaintiff-claimant seeks direct reconveyance from defendant of publicland unlawfully and in breach of trust titled by him, on the principle of enforcement of a constructive trust. This was the ruling in Larzano v. Tabayag, Jr.,24 where it was written: A private individual may bring an action for reconveyance of a parcel of land even if the title thereof was issued through a free patent since such action does not aim or purport to re-open the registration proceeding and set aside the decree of registration, but only to show that the person who secured the registration of the questioned property is not the real owner thereof. In Roco, et al. v. Gimeda, we stated that if a patent had already been issued through fraud or mistake and has been registered, the remedy of a party who has been injured by the fraudulent registration is an action for reconveyance, thus:

Furthermore, respondents’ argument that the overriding reason why Hortizuela chose to file a complaint for reconveyance and recovery of possession was that she failed to avail of the remedy provided under Section 38 of Act 496 within the prescribed period of one (1) year, counted from the issuance of the patent by the government, is weak. As was similarly held in Cervantes v. CA,20 with the land obtained by respondent Gregoria through fraudulent machinations by means of which a free patent and a title were issued in her name, she was deemed to have held it in trust for the benefit of Hortizuela who was prejudiced by her actions. Article 1456 provides: ARTICLE 1456. If property is acquired through mistake or fraud, the person obtaining it is, by force of law, considered a trustee of an implied trust for the benefit of the person from whom the property comes.

It is to be noted that the petition does not seek for a reconsideration of the granting of the patent or of the decree issued in the registration proceeding. The purpose is not to annul the title but to have it conveyed to plaintiffs. Fraudulent statements were made in the application for the patent and no notice thereof was given to plaintiffs, nor knowledge of the petition known to the actual possessors and occupants of the property. The action is one based on fraud and under the law, it can be instituted within four years from the discovery of the fraud. (Art. 1146, Civil Code, as based on Section 3, paragraph 43 of Act No. 190.) It is to be noted that as the patent here has already been issued, the land has the character of registered property in accordance with the provisions of Section 122 of Act No. 496, as amended by Act No. 2332, and the remedy of the party who has been injured by the fraudulent registration is an action for reconveyance. (Director of Lands vs. Registered of Deeds, 92 Phil., 826; 49 Off. Gaz. [3] 935; Section 55 of Act No. 496.)

The remedy of reconveyance, based on Section 53 of P.D. No. 1529 and Article 1456, prescribes in ten (10) years from the issuance of the Torrens title over the property.

In the same vein, in Quiñiano, et al. v. Court of Appeals, et al., we stressed that:

The controlling legal norm was set forth in succinct language by Justice Tuason in a 1953 decision, Director of Lands v. Register of Deeds of Rizal. Thus: "The sole remedy of the land owner whose property has been wrongfully or erroneously registered in another's name is, after one year from the date of the decree, not to set aside the decree, as was done in the instant case, but, respecting the decree as incontrovertible and no longer open to review, to bring an ordinary action in the ordinary court of justice for reconveyance or, if the property has passed into the hands of an innocent purchaser for value, for damages." Such a doctrine goes back to the 1919 landmark decision of Cabanos v. Register of Deeds of Laguna. If it were otherwise the institution of registration would, to quote from Justice Torres, serve "as a protecting mantle to cover and shelter bad faith ...." In the language of the then Justice, later Chief Justice, Bengzon: "A different view would encourage fraud and permit one person unjustly to enrich himself at the expense of another." It would indeed be a signal failing of any legal system if under the circumstances disclosed, the aggrieved party is considered as having lost his right to a property to which he is entitled. It is one thing to protect an innocent third party; it is entirely a different matter, and one devoid of justification, if [deceit] would be rewarded by allowing the perpetrator to enjoy the fruits of his nefarious deed. As clearly revealed by the undeviating line of decisions coming from this Court, such an undesirable eventuality is precisely sought to be guarded against. So it has been before; so it should continue to be. (Citations omitted) In this case, in filing the complaint for reconveyance and recovery of possession, Hortizuela was not seeking a reconsideration of the granting of the patent or the decree issued in the registration proceedings. What she was seeking was the reconveyance of the subject property on account of the fraud committed by respondent Gregoria. An action for reconveyance is a legal and equitable remedy granted to the rightful landowner, whose land was wrongfully or erroneously registered in the name of another, to compel the registered owner to transfer or reconvey the land to him.25 Thus, the RTC did not err in upholding the right of Hortizuela to ask for the reconveyance of the subject property. To hold otherwise would be to make the Torrens system a shield for the commission of fraud. To reiterate, The fact that petitioner was able to secure a title in her name did not operate to vest ownership upon her of the subject land.1âwphi1 Registration of a piece of land under the Torrens System does not create or vest title, because it is not a mode of acquiring ownership. A certificate of title is merely an evidence of ownership or title over the particular property described therein. It cannot be used to protect a usurper from the true owner; nor can it be used as a shield for the commission of fraud; neither does it permit one to enrich himself at the expense of others. Its issuance in favor of a particular person does not foreclose the possibility that the real property may be co-owned with persons not named in the certificate, or that it may be held in trust for another person by the registered owner.26 Finally, respondents' supposition that Hortizuela was ineligible to own the subject property pursuant to B.P. Blg. 223 because she was no longer a Filipino citizen cannot be considered for having been raised only for the first time on appeal. It must be noted that points of law, theories, issues, and arguments not brought to the attention of the trial court ought not to be considered by a reviewing court, as these cannot be raised for the first time on appeal. 27 The reason therefor is due process. WHEREFORE, the petition is GRANTED. The September 13, 2012 Decision and the January 25, 2013 Resolution of the Court of Appeals in CA-G.R. SP No. 122648 are hereby REVERSED and

SET ASIDE. The July 1, 2011 Decision of the Regional Trial Court, Branch 22, Cabagan, Isabela, is hereby RE INST A TED. SO ORDERED.