Badges of fraud

A Torrens Title can only be cancelled, altered, or modified in a direct proceeding in accordance with law (Section 48, PD 1529). It can not be the subject of a collateral attack in another action or proceedings. This case explains what constitutes a collateral attack on the Title.

The case involved the Maysilo Estate in Malabon, Rizal with an area of 871,982 square meters which was expropriated by the Government for resale to its occupants by virtue of a decision that became final on May 14, 1954.

The Government through its instrumentality the then People’s Homesite and Housing Corporation (PHHC) however failed to implement the said decision. So on October 30, 1960, the occupants and tenants of the estate already filed before the then Court of First Instance (CFI) a complaint for specific performance to compel PHHC to sell to them their respective occupied portions of the estate (Case No. C-760).

On April 29, 1961 the owner of a University (GAUF) intervened in said case (C-760) on the basis of a “Kasunduan” wherein 52 tenants of the property conveyed to it their priority rights to purchase portions of the estate with a total area of 507,736 square meters.

So on November 28, 1961, a compromise agreement based on the “Kasunduan” was submitted and approved by the CFI in a partial decision rendered in accordance therewith. The compromise agreement included lots 75 and 54 awarded in favor of Mang Gorio and which GAUF was also able to register in its name under TCT C-24153.

Subsequently however, in other civil cases Nos. 17347 and 1764, the CFI declared the compromise agreement entered into by and between GAUF and the tenants dated November 28, 1961, as well as the partial decision rendered in accordance therewith null and void and of no force and effect since the agreement was found to be a forgery. Such ruling was appealed to the Court of Appeals (CA) which affirmed the decisions rendered in Case No. 17347 and 17364.

So on August 29, 1986 the lower court in Case No. C-760 issued the joint order declaring the transfer of lots 75 and 54 from Mang Gorio to GAUF or their successors-in-interest as rescinded, to cancel TCT No. 24153 in the name of GAUF and to issue a new TCT in the name of Mang Gorio or his heirs. Thus by virtue of the order of execution of said court on December 23, 1988, TCT No. 24153 in the name of GAUF was cancelled and TCT No. 174672 for lot 75 and TCT No. 174671 for lot 54 were issued to Mang Gorio as rightful owner thereof.

On January 14, 1991, GAUF filed with the CA a petition for annulment of the joint order dated August 29, 1986 and the order of execution dated December 23, 1988. GAUF contended that said orders constituted a collateral attack on its TCT No. 25143 because they were issued in connection with Civil Case No C-760, a suit for specific performance and not a direct proceeding for the cancellation of title. The lower court therefore has no jurisdiction to issue said orders as they are in violation of PD 1529 Section 48, GAUF argued. Was GAUF correct?

No. An action or proceeding is deemed a direct attack on a title when its object is to nullify the title and thus challenge the judgment pursuant to which the title was decreed. On the other hand it is indirect or collateral when, in an action or proceeding to obtain a different relief, an attack on the judgment is nevertheless made as an incident thereof.

Here while it may be true that Civil Case C-760 was originally an action for specific performance and damages, nonetheless the case cannot constitute a collateral attack on GAUF’s title because it was GAUF no less which sought to intervene in said case claiming that it has rights and interests on the subject matter being litigated therein. GAUF voluntarily submitted the “Kasunduan” in Case C-760 which in turn became the basis of the compromise agreement and the partial decision enabling it to get the title. As it were therefore, the validity of GAUF’s title was an issue litigated in Case C-760 on account of the presentation therein of the “Kasunduan” which was the springboard of its title. The rule that a title issued under the Torrens system is presumed valid and hence, is the best proof of ownership does not apply where the very certificate itself is faulty as to its purported origin as in the present case.

The presumption of authenticity and regularity in the issuance of GAUF’s title has been overcome and overturned by the decisions in Cases 17347 and 17364 nullifying the “Kasunduan” and compromise agreement and partial decision issued in accordance therewith from whence said title sprung. So said title can never be indefeasible as its issuance was replete with badges of fraud and irregularities that rendered the same nugatory. The indefeasibility of title does not attach to titles secured by fraud and misrepresentation. Under these circumstances, it was as if no title was ever issued to GAUF and therefore this is hardly the occasion to talk of collateral attack against a title (Gregorio Araneta University Foundation vs. RTC of Caloocan et. al. G.R. 139672, March 4, 2009).

Note: Books containing compilation of my articles on Labor Law and Criminal Law (Vols. I and II) are now available. Call tel. 7249445.

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