The Supreme Court ruled that a title obtained through a falsified deed is void, reaffirming the importance of due diligence in property transactions. This decision safeguards landowners from losing their property due to fraudulent sales and emphasizes the principle that a forged document cannot be the basis of a valid title. It serves as a reminder that those dealing with real estate must exercise caution and verify the authenticity of all documents to protect their interests.

Forged Sales and Faulty Titles: Can a Realty Company Claim Innocence?

This case revolves around a parcel of land in Cagayan originally owned by Tranquilino Agbayani. While residing in America, Tranquilino discovered that Lupa Realty Holding Corporation had registered the property under its name, based on a Deed of Absolute Sale (DAS) purportedly executed by him. Tranquilino denied executing the deed, claiming forgery, and filed a complaint seeking the cancellation of Lupa Realty’s title and the reinstatement of his own. The legal battle that ensued questioned the validity of the title transfer and whether Lupa Realty could claim protection as an innocent purchaser for value (IPV).

The dispute involves multiple transactions, including a prior sale from Tranquilino to his brother Nonito, and then from Nonito to Moriel Urdas, before the final sale to Lupa Realty. Lupa Realty argued that it had acquired the property in good faith, relying on these prior transactions. The Regional Trial Court (RTC) ruled in favor of Tranquilino, finding the deeds of sale to be falsified, but the Court of Appeals (CA) reversed this decision, stating that Tranquilino had failed to prove forgery. The Supreme Court, however, sided with Tranquilino, meticulously examining the evidence and legal principles involved.

The Supreme Court’s decision hinged on several key points. First, the Court found that the 1997 DAS between Tranquilino and Lupa Realty was indeed a sham or spurious document. The Court noted the document’s identical notarial details with another deed, the incorrect title information it contained, and the fact that Tranquilino was in the U.S.A. when it was purportedly executed. Building on this, the Court quoted People v. Sendaydiego, stating that:

“[I]f a person had in his possession a falsified document and he made use of it (uttered it), taking advantage of it and profiting therefrom, the presumption is that he is the material author of the falsification.”

Further, the Court emphasized that the falsified 1997 DAS was the operative act that cancelled Tranquilino’s original certificate of title and issued a new one in Lupa Realty’s name. Given the falsification, the Court applied Article 1409(2) of the Civil Code, which states that:

“[C]ontracts which are absolutely simulated or fictitious are inexistent and void from the beginning.”

The Court also cited Section 53 of Presidential Decree No. (PD) 1529, the Property Registration Decree, which states that “any subsequent registration procured by the presentation of a forged duplicate certificate of title, or a forged deed or other instrument, shall be null and void.” Thus, the registration of the 1997 DAS was deemed null and void, rendering Lupa Realty’s title also null and void.

A crucial aspect of the case was the validity of the prior sale from Tranquilino to his brother Nonito. The Court gave weight to the judicial admission made by Nonito’s counsel during pre-trial proceedings that there was no such sale. This admission, coupled with Nonito’s own testimony, was deemed conclusive. This judicial admission dispensed with the need for further proof, as specified in Section 4, Rule 129 of the Rules of Court:

“[A]n admission, verbal or written, made by a party in the course of the proceedings in the same case, does not require proof. The admission may be contradicted only by showing that it was made through palpable mistake or that no such admission was made.”

Because the 1992 DAS was determined to be void, the subsequent sales to Moriel and then to Lupa Realty were also invalid. Given this finding, the Court rejected Lupa Realty’s claim as an innocent purchaser for value. It pointed out that Lupa Realty, being in the real estate business, should have exercised due diligence in verifying the authenticity of the documents and should not have relied entirely on Moriel and his mother for the title transfer. The Court emphasized that Lupa Realty acted in bad faith by allowing the falsified 1997 DAS to be used for the cancellation of Tranquilino’s title.

The CA argued that Tranquilino’s action constituted a collateral attack on a Torrens title, which is prohibited. However, the Supreme Court clarified that Tranquilino’s complaint was a direct attack. His complaint sought the cancellation of Lupa Realty’s title, as well as the revival and reinstatement of his own original certificate of title.

FAQs

What was the key issue in this case?	The central issue was whether Lupa Realty’s title, obtained through a deed later found to be falsified, was valid and whether Lupa Realty could be considered an innocent purchaser for value.
What is a Deed of Absolute Sale (DAS)?	A DAS is a legal document that transfers ownership of a property from a seller to a buyer. It specifies the terms of the sale, including the purchase price and the date of transfer.
What does it mean to be an innocent purchaser for value (IPV)?	An IPV is a buyer who purchases property in good faith, for a fair price, and without any knowledge of defects in the seller’s title. IPVs are generally protected by law.
What is a judicial admission?	A judicial admission is a statement made by a party or their attorney during legal proceedings that concedes a certain fact. This admission eliminates the need for further proof regarding that fact.
What is a collateral attack on a Torrens title?	A collateral attack on a Torrens title is an attempt to challenge the validity of a title in a lawsuit that has a different primary purpose. Philippine law prohibits such attacks.
Why did the Supreme Court rule against Lupa Realty?	The Court found that the 1997 DAS, which Lupa Realty used to register the property, was a falsified document. It also ruled that Lupa Realty could not be considered an IPV due to its failure to exercise due diligence.
What is the significance of this ruling?	The ruling reinforces the principle that a forged document cannot be the basis of a valid title. It also underscores the importance of due diligence in real estate transactions.
What is the Property Registration Decree (PD 1529)?	PD 1529 governs land registration in the Philippines, outlining the procedures for registering property and establishing the Torrens system. Section 53 specifically addresses the effect of forged documents on title registration.

This case serves as a critical reminder of the importance of verifying the authenticity of documents and exercising due diligence in property transactions. The Supreme Court’s decision reinforces the protection afforded to landowners against fraudulent transfers and highlights the consequences of relying on falsified documents.

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: TRANQUILINO AGBAYANI v. LUPA REALTY HOLDING CORPORATION, G.R. No. 201193, June 10, 2019