The Supreme Court has ruled that a forged deed can, under certain circumstances, become the root of a valid title, especially in the hands of an innocent purchaser for value. This decision underscores the importance of the Torrens system in ensuring the integrity and conclusiveness of land titles, while also highlighting the responsibilities of those dealing with registered land to exercise due diligence. The ruling balances the protection of innocent parties with the need to prevent fraud and uphold the rights of true landowners, providing clarity on the limits and safeguards of the Torrens system.

Can a Forged Signature on a Land Sale Lead to Valid Ownership?

This case revolves around a parcel of land originally owned by Bernardina Abalon. A Deed of Absolute Sale, later alleged to be forged, transferred the land to Restituto Rellama. Rellama then subdivided the property and sold portions to Spouses Dominador and Ofelia Peralta, and Marissa, Leonil, and Arnel Andal. The heirs of Bernardina Abalon challenged these subsequent transfers, claiming the initial sale to Rellama was fraudulent, thus invalidating all subsequent transactions. The central legal question is whether the Andals and Spouses Peralta could claim valid ownership as innocent purchasers for value, despite the alleged forgery in the original transfer of title.

The Regional Trial Court (RTC) initially ruled in favor of the Abalon heirs, ordering the restoration of the original certificate of title in Bernardina Abalon’s name and the cancellation of titles issued to Spouses Peralta and the Andals. The RTC emphasized that only a photocopy of the alleged deed of sale between Rellama and Abalon was presented for registration. However, the Court of Appeals (CA) reversed this decision, finding that while the sale between Abalon and Rellama was indeed marred by fraud, the Andals were innocent purchasers for value and thus entitled to the protection of the law. The CA, however, found Spouses Peralta to be buyers in bad faith, as they relied on a mere photocopy of the title when purchasing the property.

The Supreme Court (SC) denied both petitions, affirming the CA’s decision. The SC reiterated the purpose of the Torrens system, which is to quiet title to land and put a stop forever to any question as to the legality of the title. The Torrens system aims to provide assurance and reliability in land transactions, allowing the public to rely on the face of a certificate of title without needing to inquire further, except when there is actual knowledge of facts that should prompt a reasonable person to investigate.

The SC emphasized that while the Torrens system guarantees the integrity of land titles, it cannot be used to perpetrate fraud against the real owner. The system merely confirms ownership and does not create it. Therefore, it cannot be used to divest lawful owners of their title for the purpose of transferring it to someone who has not acquired it by legal means. The court noted the well-established principle that a person dealing with registered land need not go beyond the face of the title and is only charged with notice of the burdens and claims annotated on the title.

However, the SC also acknowledged exceptions to this rule. As stated in Clemente v. Razo, a buyer is obligated to look beyond the certificate when they have actual knowledge of facts and circumstances that would impel a reasonably cautious man to make such inquiry. The presence of anything that excites or arouses suspicion should prompt the vendee to investigate the title of the vendor appearing on the face of the certificate. One who falls within the exception cannot be considered an innocent purchaser for value. In such cases, the question of whether one is a buyer in good faith or can be considered an innocent purchaser for value becomes critical.

An innocent purchaser for value is defined as someone who buys property without notice that another person has a right to or interest therein and who pays a full and fair price at the time of the purchase or before receiving notice of another’s claim. Such buyers believe the person from whom they receive the property is the owner who can convey title, and they do not ignore facts that should put a reasonable person on guard. Section 55 of the Land Registration Act provides protection to such purchasers, allowing them to retain the land and validating their title.

In this case, the SC agreed with the CA that the Andals were buyers in good faith. Despite the fraudulent sale between Abalon and Rellama, the Andals had no knowledge of these circumstances when they purchased the property. The certificate of title had already been transferred to Rellama, and there was nothing to indicate any cloud or defect in his ownership. Therefore, the Andals were entitled to rely on the face of the title.

The Abalons argued that Torres v. Court of Appeals should apply, where the Court ruled that a forged instrument cannot become the root of a valid title if the original owner still holds a valid certificate of title. However, the SC distinguished the present case from Torres, noting that in Torres, the original owner had annotated an adverse claim on the title procured by the forger *before* the execution sale, which put the mortgagee on notice. In contrast, when Rellama sold the properties to the Andals, his title was clean, with no annotations indicating any defects.

The Court highlighted that the established rule is that a forged deed is generally null and cannot convey title, but there is an exception when titles are registered from the forger to an innocent purchaser for value. This requires a complete chain of registered titles, where all transfers from the original rightful owner to the innocent holder must be duly registered, and the title must be properly issued to the transferee. This principle was also discussed in Fule v. Legare:

Although the deed of sale in favor of John W. Legare was fraudulent, the fact remains that he was able to secure a registered title to the house and lot. It was this title which he subsequently conveyed to the herein petitioners. We have indeed ruled that a forged or fraudulent deed is a nullity and conveys no title (Director of Lands vs. Addison, 49 Phil., 19). However, we have also laid down the doctrine that there are instances when such a fraudulent document may become the root of a valid title. One such instance is where the certificate of title was already transferred from the name of the true owner to the forger, and while it remained that way, the land was subsequently sold to an innocent purchaser. For then, the vendee had the right to rely upon what appeared in the certificate (Inquimboy vs. Cruz, G.R. No. L-13953, July 28, 1960).

In contrast, the SC upheld the CA’s ruling that Spouses Peralta were buyers in bad faith. The CA found that Spouses Peralta relied on a mere photocopy of the title provided by Rellama, which should have raised suspicion about the validity of his ownership. The SC emphasized that questions of fact are not reviewable in petitions for review on certiorari under Rule 45, and the determination of whether one is a buyer in good faith is a factual issue. The SC agreed with the CA’s assessment that Spouses Peralta’s reliance on a photocopy indicated a lack of due diligence.

Regarding the legal standing of the Abalons to file the case, the SC agreed with the CA that they were legal heirs of Bernardina Abalon, who had no issue during her marriage. The SC clarified that while the donation mortis causa was invalid due to the absence of a will, the Abalons acquired the property by virtue of succession, not by ordinary acquisitive prescription, as titled property is not subject to acquisitive prescription.

FAQs

What was the key issue in this case?	The central issue was whether a forged deed could become the root of a valid title in the hands of an innocent purchaser for value, despite the true owner’s possession of the genuine title.
What is an innocent purchaser for value?	An innocent purchaser for value is someone who buys property without notice of another person’s rights or interests and pays a full and fair price for it. They believe they are dealing with the rightful owner.
What did the Court rule regarding the Andals?	The Court ruled that the Andals were innocent purchasers for value because they had no knowledge of the fraudulent circumstances surrounding the initial transfer of title. They were entitled to rely on the face of the title presented to them.
Why were Spouses Peralta considered buyers in bad faith?	Spouses Peralta were considered buyers in bad faith because they relied on a mere photocopy of the title when purchasing the property. This should have raised suspicions and prompted further investigation.
What is the Torrens system?	The Torrens system is a land registration system designed to guarantee the integrity of land titles and prevent disputes by providing a conclusive record of ownership. It aims to quiet title to land.
Can a forged deed ever convey valid title?	Yes, under certain circumstances. If the certificate of title has already been transferred to the forger and the land is subsequently sold to an innocent purchaser for value, the innocent purchaser may acquire valid title.
What is the significance of Section 55 of the Land Registration Act?	Section 55 protects innocent purchasers for value by allowing them to retain the land they bought, even if there was fraud in a prior transaction. However, a complete chain of registered titles is needed.
What was the basis for the Abalon heirs’ claim to the land?	The Abalon heirs claimed the land through succession as the legal heirs of Bernardina Abalon, who had no issue during her marriage. They argued that the initial sale to Rellama was fraudulent.

This case illustrates the complexities of land ownership and the importance of due diligence in property transactions. It reinforces the protection afforded to innocent purchasers under the Torrens system while clarifying the limits of this protection when there are circumstances that should raise a buyer’s suspicion. The ruling underscores the need for a careful balance between upholding the integrity of land titles and preventing fraud.

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: Spouses Peralta vs. Heirs of Abalon, G.R. No. 183448, June 30, 2014