Indefeasibility of Title, Prescription, Prohibition against Collateral Attack

De Guzman v. Agbagala, G.R. No. 163566

FACTS:
On February 17, 1971, Pilar De Guzman and Sps. Gestuvo (petitioners) executed a contract to sell
with Leonida Singh covering two parcels of land in Pasay. It was stipulated that Singh should pay
the P133,640-balance on or before February 17, 1975.

Two days before Feb. 1975, Singh asked the petitioners to provide the statement of account of
the balance due, copies of certificates of land titles, and power of attorney executed by Rolando
Gestuvo in favor of Pilar De Guzman.

However, petitioners refused. Thus, Singh filed a complaint for specific performance with
damages against petitioners in CFI Rizal. Singh alleged that, by refusing to furnish her with copies
of the documents requested, petitioners deliberately intended not to comply with their
obligations under the contract to sell, as a result of which they committed a breach of contract.
And they had also acted unfairly and in manifest bad faith for which they should be held liable
for damages.

Petitioners claimed that the complaint failed to state a cause of action; that the balance due was
already predetermined in the contract; that they have no obligation to furnish Singh with copies
of the documents requested; and that Singh’s failure to pay the balance on the date specified
had caused the contract to expire and become ineffective without necessity of notice or of any
judicial declaration to that effect.

The parties executed a compromise agreement which the Court approved. Under the agreement:

a. Singh would pay P240,000 not later than Dec. 18, 1977. In case of failure to do so, she has until
Jan. 27, 1978 to pay P250,000. This shall be treated as complete and final payment for the
contract to sell.
b. Immediately upon the receipt of the amount, De Guzman undertakes to execute the legal
documents to transfer the lands to Singh.
c. De Guzman would temporarily desist from enforcing their right to the properties until Jan.
27.
d. Should Singh fail to pay either the amounts mentioned, the contract to sell is automatically
rescinded and immediate enforcement of right of possession without need of further notice and
demand.
e. Payment shall take place before Hon. Bautista in the courtroom of CFI Rizal at 10AM,
Jan. 27, 1978 unless payment was earlier made.
On January 28, petitioners filed a motion for the issuance of writ of execution, claiming that
Singh failed to abide by the terms of the compromise agreement. However, the Court denied the
petitioners' motion for execution, and instead directed the petitioners to immediately execute
the necessary documents transferring to Singh the title to the properties. It also ordered the Clerk
of Court to release to the petitioners P250,000.00, which had been deposited by Singh, upon
proper receipt therefor.

Petitioners filed a notice of appeal. Singh filed a motion to dismiss the appeal on the grounds
that: (1) the orders appealed from are inappealable; and (2) that the record on appeal is defective
as it does not contain the material data showing that the appeal was perfected on time. The trial
court dismissed the appeal of petitioners. As a result, petitioners filed a petition for certiorari
with the Court of Appeals to nullify the order of the trial court which dismissed their appeal. The
CA sustained the decision of the trial court. Hence, the present recourse.

ISSUE/S: WoN Singh had substantially complied with the terms and conditions of the
compromise agreement

HELD:
YES. Her failure to deliver to the petitioners the full amount on January 27, 1978 was not her
fault. The blame lies with the petitioners. The record shows that Singh went to the sala of Judge
Bautista on the appointed day to make payment, as agreed upon in their compromise agreement.
But, the petitioners were not there to receive it. Only the petitioners' counsel appeared later,
but, he informed Singh that he had no authority to receive and accept payment. Instead, he
invited Singh and her companions to the house of the petitioners to effect payment. But,
petitioners were not there either. They were informed that de Guzman would arrive late in the
afternoon, possibly at around 4:00 o'clock. Singh was assured, however, that she would be
informed as soon as the petitioners arrived. Singh, in her eagerness to settle her obligation,
consented and waited for the call which did not come and unwittingly let the period lapse.

The next day, January 28, 1978, Singh went to the office of the Clerk of CFI of Rizal, Pasay City
Branch, to deposit the balance. But, it being a Saturday, the cashier was not there to receive it.

So, on the next working day, Monday, January 30, 1978, Singh deposited P30,000.00 with the
cashier of the Office of the Clerk of the Court of First Instance of Rizal, Pasay City Branch, to
complete the payment of the purchase price of P250,000.00.

Since the deposit of the balance of the purchase price was made in good faith and that the failure
of Singh to deposit the purchase price on the date specified was due to the petitioners who also
make no claim that they had sustained damages because of the two days delay, there was
substantial compliance with the terms and conditions of the compromise agreement.

NOTE: No longer includes procedural issues on the appeal

 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.

RENATO C. CORONA
Associate Justice

WE CONCUR:

REYNATO S. PUNO
Chief Justice
Chairperson
 ANGELINA SANDOVAL-GUTIERREZ ADOLFO S. AZCUNA
Associate Justice Associate Justice

TERESITA J. LEONARDO-DE CASTRO

Associate Justice

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the above decision had been reached in
consultation before the case was assigned to the writer of the opinion of the Court's Division.

REYNATO S. PUNO
Chief Justice

Footnotes

1 Under Rule 45 of the Rules of Court.

2Penned by Associate Justice B. A. Adefuin-de la Cruz (retired) and concurred in by Associate Justices Eliezer R. de los
Santos and Jose C. Mendoza of the Ninth Division of the Court of Appeals; rollo, pp. 22-31.

3 No copy of the resolution could be found in the rollo.

4 In the amended complaint dated September 8, 1988, Encarnacion's surname was "Ongpoy." Rollo, p. 72.

5These were covered by tax declaration numbers 1235, 1236, 1244, 48, 3743. The first three were located in Aguilar,
Pangasinan and the last two in Lingayen, Pangasinan; id., p. 69.

6 Id., p. 23.

7 Id.

8 In Avenida Rizal East, Lingayen; id.

9 Id.

10 Id., p. 58.

11 Id., p. 83.

12 Id., p. 11.

13 Mauro Agustin was the transferee of a parcel of residential land situated along Avenida Rizal East, Lingayen,
Pangasinan. Dionisio and Remedios Castro were the transferees of the one-half eastern portion of a low rice land
situated in Pogonboa, Aguilar, Pangasinan and with an area of 9,468 sq. m. Guillermo and Betty de Leon were
 transferees of an irrigated rice land with an area of 4,400 sq. m., more or less, situated at Tampac, Aguilar, Pangasinan
and another irrigated rice land with an area of 5,756 sq. m., more or less, situated in Pogonboa, Aguilar, Pangasinan; id.
p. 24.

14The rollo does not indicate the size of the property transferred to petitioners nor does it contain a copy of the deed of
sale covering said property.

15 Assistant Chief and Handwriting Examiner, Questioned Documents Section; rollo, p. 27.

16 Id., p. 23.

17 Id., p. 87.

18
Id. pp. 29-30.

19 Id., pp. 25, 27-28.

20 Namely the Spouses Agustin, Spouses Castro and Spouses de Leon; id., p. 22.

21 Id., pp. 22-23.

22 Property Registration Decree.

23Borbajo v. Hidden View Homeowners, Inc., G.R. No. 152440, 31 January 2005, 450 SCRA 315, 325; Ybañez v.
Intermediate Appellate Court, G.R. No. 68291, 6 March 1991, 194 SCRA 743, 749.

24 Ingusan v. Heirs of Aureliano I. Reyes, G.R. No. 142938, 28 August 2007.

Heirs of Enrique Diaz v. Virata, G.R. No. 162037, 7 August 2006, 498 SCRA 141, 164-165, citing Sarmiento v. Court of
25

Appeals, G.R. No. 152627, 16 September 2005, 470 SCRA 99, 107-108.

26Ferrer v. Bautista, G.R. No. 46963, 14 March 1994, 231 SCRA 257, 262, citing Agne v. Director of Lands, G.R. Nos.
40399 & 72255, 6 February 1990, 181 SCRA 793, 806-807 and Estoesta, Sr. v. Court of Appeals, G.R. No. 74817, 8
November 1989, 179 SCRA 203.

27 Rollo, pp. 88-90.

28 Moreover, petitioners did not question these findings of fact.

29
Heirs of Simplicio Santiago v. Heirs of Mariano E. Santiago, G.R. No. 151440, 17 June 2003, 404 SCRA 193, 199,
citing Magistrado v. Esplana, G.R. No. 54191, 8 May 1990, 185 SCRA 104, 109.

30Ferrer v. Bautista, supra at note 26, citing Tuason v. Court of Appeals, G.R. Nos. L-48297 and L-48265, 7 January
1987, 147 SCRA 37, 47.

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