The Supreme Court has affirmed that a forged deed cannot transfer ownership of a property, even if a title has been issued based on that forged document. This means that if someone’s land title is based on a fake deed, the original owner still maintains ownership, and the fraudulent title can be canceled. This ruling underscores the importance of verifying the authenticity of documents when purchasing property.

Buyer Beware: Unmasking Fraudulent Land Deals

This case revolves around a disputed property in Caloocan City. Pedro Lagrosa, the registered owner of the land, discovered that a new title had been issued to Victorino Sarili based on a falsified deed of sale allegedly signed by Lagrosa and his wife. The Sarilis claimed they purchased the property from a certain Ramon Rodriguez, who presented a special power of attorney (SPA). However, Lagrosa denied ever executing the SPA or the deed of sale, leading to a legal battle over the rightful ownership of the land.

The core legal question is whether the Sarilis could claim ownership of the property despite the forged documents. The Regional Trial Court (RTC) initially ruled in favor of the Sarilis, but the Court of Appeals (CA) reversed this decision, finding that the signatures on the deed of sale and the SPA were indeed forged. The Supreme Court (SC) then took up the case to determine the validity of the land transfer.

The Supreme Court emphasized the principle that even if a certificate of title is obtained through fraud, it can become the source of a valid title in the hands of an innocent purchaser for value. However, this protection only applies if the buyer acted in good faith and relied on the correctness of the title without any knowledge of defects or encumbrances. The Court cited Cabuhat v. CA, stating:

even if the procurement of a certificate of title was tainted with fraud and misrepresentation, such defective title may be the source of a completely legal and valid title in the hands of an innocent purchaser for value.

However, the Court also noted that a higher standard of diligence is required when a buyer purchases land from someone who is not the registered owner. In such cases, the buyer must investigate beyond the title itself to ascertain the seller’s authority and the circumstances surrounding the sale. The Court referenced Bautista v. CA, emphasizing that a buyer “is expected to examine not only the certificate of title but all factual circumstances necessary for him to determine if there are any flaws in the title of the transferor.”

In this case, the Sarilis purchased the property from Ramon Rodriguez, who claimed to represent Lagrosa through a special power of attorney. However, the SPA itself had irregularities, as it did not include Lagrosa’s community tax certificate (CTC) number. The Court noted that under Section 163(a) of Republic Act No. 7160, also known as the “Local Government Code of 1991,” a notary public must require an individual to exhibit their community tax certificate when acknowledging a document.

The absence of the CTC number should have put the Sarilis on notice and prompted them to conduct further investigation into the authenticity of the SPA. Since they failed to do so, the Court held that they could not be considered innocent purchasers for value. The Court cited Sps. Bautista v. Silva:

If the proof of capacity consists of a special power of attorney duly notarized, mere inspection of the face of such public document already constitutes sufficient inquiry. If no such special power of attorney is provided or there is one but there appears to be flaws in its notarial acknowledgment, mere inspection of the document will not do; the buyer must show that his investigation went beyond the document and into the circumstances of its execution.

The Court also addressed the validity of the SPA itself. Because of the defective notarization, the SPA was treated as a private document, requiring proof of its due execution and authenticity. The Court found that the Sarilis failed to sufficiently establish the authenticity of Lagrosa’s signature on the SPA. The signature on the SPA was different from Lagrosa’s genuine signature, and Lagrosa testified that he and his wife had been living in the USA since 1968 and could not have signed the document. The court also highlighted that Article 1874 of the Civil Code states that the authority of an agent to sell land must be in writing, otherwise, the sale is void.

Given the forged deed of sale and the invalid SPA, the Supreme Court concluded that no valid title had been transferred to the Sarilis. Consequently, the Court upheld the CA’s decision to cancel the title issued to the Sarilis and reinstate Lagrosa’s original title. The Court emphasized that “when the instrument presented is forged, even if accompanied by the owner’s duplicate certificate of title, the registered owner does not thereby lose his title, and neither does the assignee in the forged deed acquire any right or title to the property.” The Supreme Court cited Bernales v. Heirs of Julian Sambaan to solidify its decision.

The Court also affirmed the award of moral damages, attorney’s fees, and litigation expenses to Lagrosa, as he had suffered serious anxiety and had to engage legal services to protect his property rights. However, the Court remanded the case to the lower court to determine the rights and obligations of the parties concerning the house that the Sarilis had built on the property in bad faith.

FAQs

What was the key issue in this case?	The key issue was whether the Sarilis could claim ownership of the property based on a forged deed of sale and a special power of attorney of questionable validity. The court needed to determine if a buyer can claim ownership based on documents that turn out to be fraudulent.
What is an ‘innocent purchaser for value’?	An innocent purchaser for value is someone who buys property without knowledge of any defects in the seller’s title, paying a fair price for it. Such a purchaser is generally protected by law, but only if they act in good faith and conduct due diligence.
What is a Special Power of Attorney (SPA)?	A Special Power of Attorney (SPA) is a legal document authorizing a person (the agent) to act on behalf of another person (the principal) in specific matters. For the sale of land, the Civil Code requires that the agent’s authority be in writing, and the SPA must be valid and authentic.
Why was the absence of the Community Tax Certificate (CTC) significant?	The absence of the CTC number on the SPA’s notarial acknowledgment raised doubts about its authenticity, as it indicated a failure to comply with notarial requirements. This should have prompted the Sarilis to conduct a more thorough investigation.
What happens when a property is built in bad faith on someone else’s land?	According to the Civil Code, a builder in bad faith loses the building without right to indemnity. The landowner can demand demolition or compel the builder to pay for the land, and is also entitled to damages.
What does ‘due diligence’ mean in property purchases?	Due diligence refers to the reasonable steps a buyer should take to verify the seller’s title and authority to sell the property. This includes examining the certificate of title, investigating any red flags, and confirming the seller’s identity and legal capacity.
Can a forged deed transfer ownership of land?	No, a forged deed cannot transfer ownership of land. Even if a title is issued based on a forged document, the original owner retains their title, and the fraudulent title can be canceled.
What was the role of Ramon Rodriguez in this case?	Ramon Rodriguez was the person who sold the property to the Sarilis, claiming to act as Pedro Lagrosa’s agent through a Special Power of Attorney (SPA). However, the SPA was found to be of questionable validity.
What is the implication of this ruling for property buyers?	The ruling emphasizes the importance of conducting thorough due diligence when purchasing property, especially when dealing with someone who is not the registered owner. Buyers must verify the authenticity of documents and the seller’s authority to sell.

This case serves as a reminder of the importance of conducting thorough due diligence when purchasing property. Verifying the authenticity of documents and the seller’s authority is crucial to avoid becoming a victim of fraud. The Supreme Court’s decision reinforces the protection afforded to registered landowners and the need for caution in property transactions.

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: HEIRS OF VICTORINO SARILI VS. PEDRO F. LAGROSA, G.R. No. 193517, January 15, 2014