The Supreme Court ruled that titles obtained through fraudulent means do not gain the protection of the Torrens System, reinforcing the principle that fraud vitiates title. The Gregorio Araneta University Foundation (GAUF) sought to retain titles to land obtained through a compromise agreement later declared void, but the Court sided with the Heirs of Gregorio Bajamonde, affirming their right to reclaim their land. This decision emphasizes that possessing a title does not guarantee ownership if the title’s origin is tainted by fraud or misrepresentation, safeguarding the integrity of land ownership and ensuring justice for those defrauded.

From Compromise to Conflict: Can a Forged Agreement Secure a Land Title?

The dispute originated from the expropriation of the Gonzales or Maysilo estate, where the government was to resell the property to its occupants. GAUF intervened, claiming rights to purchase a large portion of the estate based on an agreement with tenants. This “Kasunduan” allowed GAUF to register Transfer Certificate of Title (TCT) No. C-24153 for Lots 75 and 54. However, this agreement was later declared a forgery in separate civil cases, nullifying GAUF’s claim. The Heirs of Gregorio Bajamonde then sought the cancellation of GAUF’s title, leading to the court orders directing the cancellation of GAUF’s TCT and the issuance of new titles in the name of the Bajamonde heirs.

GAUF argued that the orders canceling its title constituted a collateral attack prohibited by Section 48 of Presidential Decree No. 1529, the Property Registration Decree. According to GAUF, the trial court lacked jurisdiction because the orders were issued in a case for specific performance, not a direct action to cancel a title. To understand this argument, it’s essential to distinguish between direct and collateral attacks on a title. A direct attack is an action specifically aimed at nullifying a title. In contrast, a collateral attack occurs when the validity of a title is questioned in a proceeding seeking a different primary relief.

The Supreme Court disagreed with GAUF’s contention. It explained that the nullity of the “Kasunduan,” the very foundation of GAUF’s title, invalidated the title itself. Because the agreement was fraudulent from the start, the usual presumption of validity for titles issued under the Torrens System did not apply. The court emphasized that the **indefeasibility of a title does not attach to titles secured through fraud and misrepresentation**. This principle underscores the importance of good faith and lawful acquisition in securing property rights.

The Court also addressed the issue of jurisdiction. It noted that GAUF voluntarily submitted itself to the jurisdiction of the trial court when it intervened in the original case, Civil Case No. C-760. By claiming rights and presenting the “Kasunduan,” GAUF effectively made the validity of its title an issue in the case. Consequently, the trial court had the authority to order the cancellation of the title when the underlying agreement was found to be void. Therefore, any errors in judgment should have been raised through a timely appeal, not a separate petition for annulment.

GAUF further argued that the cancellation of the Compromise Agreement should not affect its TCT No. C-24153, because its title was purportedly based on Gregorio Bajamonde’s withdrawal of his complaint in Civil Case No. C-474, an action for annulment of the Compromise Agreement. The court dismissed this argument, reaffirming that the Compromise Agreement was the ultimate source of GAUF’s claim to Lots 54 and 75, so GAUF’s title was always derived from the invalidated agreement. Here are other key rules cited:

Section 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.

Section 2. *Grounds for Annulment*. – The annulment may be based only on grounds of extrinsic fraud and lack of jurisdiction.

Ultimately, the Supreme Court affirmed the Court of Appeals’ decision, reinforcing that orders relating to the August 29, 1986 Joint Order had already been issued by the trial court in its Order of May 27, 1988, which was upheld by the CA in *CA-G.R. SP No. 14839* and ultimately by this Court no less in *G.R. No. 89969*. By denying GAUF’s petition, the Supreme Court upheld the integrity of the Torrens System and the principle that fraud cannot be the basis of a valid title.

FAQs

What was the central legal issue in this case?	The core issue was whether a title obtained through a fraudulent compromise agreement could be considered valid and immune from collateral attack under the Torrens System.
What is a collateral attack on a title?	A collateral attack on a title occurs when the validity of a title is challenged in a legal proceeding where the primary objective is something other than nullifying the title itself.
What is the Torrens System?	The Torrens System is a land registration system that aims to provide certainty and indefeasibility to land ownership by issuing a certificate of title that serves as conclusive evidence of ownership.
Why was GAUF’s title canceled?	GAUF’s title was canceled because it was based on a compromise agreement that was later declared null and void due to forgery, meaning the title’s foundation was invalid.
What is the significance of Presidential Decree No. 1529?	Presidential Decree No. 1529, also known as the Property Registration Decree, governs the registration of land titles in the Philippines and provides the legal framework for the Torrens System.
Can a title obtained through fraud become indefeasible?	No, a title obtained through fraud cannot become indefeasible, as the indefeasibility principle does not protect titles secured by fraudulent means.
What was the original case about?	The original case, Civil Case No. C-760, was initially an action for specific performance and damages related to the resale of expropriated land to its occupants.
What should a person do if they believe their land title was obtained fraudulently by someone else?	A person should seek legal advice immediately and consider filing a direct action to nullify the fraudulent title, presenting evidence of the fraud to the court.

This case clarifies that the protection afforded by the Torrens system does not extend to titles originating from fraudulent activities, reinforcing the principle that honesty and legality are paramount in acquiring and maintaining land ownership. Landowners must ensure all transactions and agreements related to their properties are beyond reproach, as any hint of fraud can jeopardize their claim of ownership.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Gregorio Araneta University Foundation vs. The Regional Trial Court of Kalookan City, G.R. No. 139672, March 04, 2009