Due Diligence is Your Shield: Forged Deeds Offer No Protection to Buyers, No Matter How Many Years Pass

TLDR: This Supreme Court case emphasizes that a forged deed of sale is void from the beginning and cannot transfer ownership. Buyers, even those many transactions removed from the forgery, are not protected if they fail to exercise due diligence and ignore red flags. Actions to nullify such void contracts are imprescriptible, meaning there’s no time limit to challenge them.

G.R. No. 121658, March 27, 1998: NESTOR LACSAMANA,* EL DORADO PLANTATION, INC., LBJ DEVELOPMENT CORPORATION AND CONRAD C. LEVISTE, PETITIONERS, VS. COURT OF APPEALS, ESTER GAITOS ROBLES, LEON GAITOS ROBLES AND DULCE CLARA ROBLES, RESPONDENTS.

Introduction

Imagine investing your life savings in a piece of land, only to discover years later that your title is based on a lie – a forged document. This is the nightmare scenario faced by many in real estate transactions, and the Philippine Supreme Court consistently steps in to uphold the sanctity of property rights against fraudulent schemes. The case of Lacsamana v. Court of Appeals vividly illustrates this principle, highlighting the importance of due diligence in property purchases and the enduring power of the law to correct fraudulent conveyances, no matter how much time has passed.

In this case, the heirs of Leon Robles sought to recover their rightful share of land that was fraudulently sold decades prior using a forged Deed of Absolute Sale. The Supreme Court had to decide whether the action to recover the land had prescribed (expired due to time), and crucially, whether LBJ Development Corporation, the current titleholder, could be considered an innocent purchaser for value, thereby shielding their claim from the past fraud.

The Unbreakable Foundation: Void Contracts and Imprescriptibility

Philippine law, particularly the Civil Code, is clear on contracts that are void from the outset. Article 1409 states definitively, “The following contracts are inexistent and void from the beginning:… (7) Those expressly prohibited or declared void by law.” A forged document falls squarely into this category. It is not merely voidable; it is void ab initio – void from the very beginning. This distinction is paramount because it carries significant legal consequences, especially concerning the passage of time.

Article 1410 of the Civil Code reinforces this principle, stating, “The action or defense for the declaration of the inexistence of a contract does not prescribe.” This is the doctrine of imprescriptibility. It means that there is no statute of limitations for filing a case to declare a void contract as such. Time cannot cure a void contract, and this is a cornerstone of property law in the Philippines, designed to protect owners from losing their property due to fundamentally flawed transactions.

In essence, the law recognizes that allowing prescription to validate a void contract, especially one based on forgery, would be to legitimize fraud and undermine the integrity of the Torrens system of land registration, which is intended to provide security and stability in land ownership.

Case Narrative: The Robles Family’s Fight for Justice

The story begins with Leon Robles and his niece, Amparo Robles, co-owning a valuable piece of land in Lipa City. Amparo legally sold her share to El Dorado Corporation. The trouble started after Leon Robles passed away in 1969. A Deed of Absolute Sale, purportedly signed by Leon and his wife Ester in 1971, surfaced, transferring Leon’s share to Nestor Lacsamana. However, Leon had already died two years before this alleged sale. This Deed was registered only in 1980.

Here’s a timeline of the critical events:

1. 1965: Leon and Amparo Robles co-registered owners of the land.
2. April 26, 1965: Amparo sells her share to El Dorado Corporation.
3. September 24, 1969: Leon Robles dies.
4. July 22, 1971: Forged Deed of Absolute Sale purportedly signed by Leon Robles.
5. January 22, 1980: Forged Deed registered, title transferred to Nestor Lacsamana and El Dorado.
6. July 22, 1980: Lacsamana purportedly sells to LBJ Development Corporation.
7. January 26, 1982: LBJ acquires the remaining share from El Dorado, consolidating title.
8. November 11, 1983: Robles heirs file a case for reconveyance and cancellation of titles.

The Robles heirs filed a complaint in 1983 when they discovered the fraudulent transfer, seeking to recover their father’s share. They argued the 1971 Deed was a forgery, making the subsequent transfers void. LBJ Development Corporation, now the sole owner, claimed they were innocent purchasers for value and that the action had prescribed.

The Regional Trial Court (RTC) ruled in favor of the Robles heirs, finding the Deed to be a forgery and LBJ not to be a buyer in good faith. The Court of Appeals (CA) affirmed the RTC’s decision, emphasizing the imprescriptibility of actions to nullify void contracts. The case reached the Supreme Court, where the central questions remained: Had the action prescribed? Was LBJ an innocent purchaser?

Justice Bellosillo, writing for the Supreme Court, stated the core principle clearly: “We affirm the decision of respondent appellate court. On the issue of prescription, we agree that the present action has not yet prescribed because the right to file an action for reconveyance on the ground that the certificate of title was obtained by means of a fictitious deed of sale is virtually an action for the declaration of its nullity, which action does not prescribe.”

Regarding LBJ’s claim of being a buyer in good faith, the Supreme Court was equally decisive. Citing several red flags, the Court highlighted why LBJ could not claim this status: “Given the attendant circumstances, in addition to the defects of the 1971 Deed of Absolute Sale found by the trial court and affirmed by respondent Court of Appeals, petitioner LBJ cannot claim to be a buyer in good faith. But even if we concede that petitioner LBJ was innocent of the fraud perpetrated against private respondents, the records abound with facts which should have impelled it to investigate deeper into the title of Lacsamana…”

The Court pointed out that LBJ’s president should have been curious about how Nestor Lacsamana, introduced by their driver’s nephew, suddenly owned a substantial piece of land. Furthermore, the fact that the Deed was registered eight years after its alleged execution and that the co-owner of the title was LBJ’s sister company, El Dorado, should have prompted further investigation. The Supreme Court upheld the lower courts’ findings, solidifying the Robles heirs’ right to their property.

Real-World Ramifications: Protecting Yourself from Property Fraud

The Lacsamana case serves as a potent reminder of the risks inherent in property transactions and the critical need for buyers to conduct thorough due diligence. It’s not enough to simply rely on a clean title on paper. Potential buyers must be proactive in uncovering any potential flaws or red flags in the chain of ownership.

This ruling reinforces that the concept of a “buyer in good faith” is not a loophole for negligence. Courts will scrutinize whether a buyer genuinely acted with caution and prudence. Ignoring obvious warning signs can be detrimental, regardless of how many subsequent transactions have occurred.

Key Lessons for Property Buyers:

• Verify, Verify, Verify: Don’t just look at the current title. Trace back the history of the title to identify any potential issues or breaks in the chain of ownership.
• Investigate Discrepancies: Be wary of inconsistencies in documents, such as dates, locations, or signatures that seem unusual. Delayed registration of deeds should raise suspicion.
• Know Your Seller: Understand how the seller acquired the property. If the circumstances seem unusual or too good to be true, investigate further.
• Due Diligence is Non-Delegable: While you can hire professionals to assist, the ultimate responsibility for due diligence rests with the buyer.
• Imprescriptibility is Your Friend (If You’re the Rightful Owner): If you are an owner facing a fraudulent claim based on a void contract, remember that your right to challenge it does not expire.

Frequently Asked Questions (FAQs)

Q: What does it mean to be a “buyer in good faith”?

A: A buyer in good faith is someone who purchases property for value, without notice or knowledge of any defects in the seller’s title. They have honestly and reasonably inquired into the seller’s title and believed it to be valid.

Q: What is “due diligence” in property buying?

A: Due diligence is the process of investigation and verification a buyer undertakes to ensure they are making a sound purchase. This includes examining the title, inspecting the property, and inquiring into the seller’s rights and any potential claims against the property.

Q: How far back should I trace the title history when buying property?

A: Ideally, you should trace the title back to the original grant or at least several decades to identify any potential historical issues that could affect the current title.

Q: What are some red flags that should alert a buyer to potential problems?

A: Red flags include: inconsistencies in dates or details in documents, unusually quick or cheap transactions, sellers who are reluctant to provide information, and any cloud or encumbrance annotated on the title.

Q: Is it always necessary to hire a lawyer for property transactions?

A: While not legally mandatory, hiring a real estate lawyer is highly advisable. A lawyer can conduct thorough due diligence, review documents, and advise you on potential risks, providing crucial protection for your investment.

Q: What happens if I unknowingly buy property based on a forged deed?

A: Unfortunately, even if you are unaware of the forgery, you are generally not protected as a buyer in good faith if there were red flags you should have noticed. The rightful owner can recover the property because a forged deed is void and transfers no rights.

Q: If a contract is void, does it matter how many times the property has been sold subsequently?

A: No. Because a void contract is invalid from the beginning, it cannot be the basis for valid subsequent transfers. The principle is that you cannot derive rights from a void source.

ASG Law specializes in Real Estate Law and Property Disputes. Contact us or email hello@asglawpartners.com to schedule a consultation.