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FIRST DIVISION

[G.R. NO. 142938 : August 28, 2007]

MIGUEL INGUSAN, Petitioner, v. HEIRS OF AURELIANO I. REYES, represented by CORAZON REYES-REGUYAL and ARTEMIO S. REYES,^* Respondents.

D E C I S I O N

CORONA, J.:

This is a Petition for Review on Certiorari ¹ of a decision² and resolution³ of the Court of Appeals (CA) dated January 21, 2000 and April 10, 2000, respectively, in CA-G.R. CV No. 56105 which modified the decision⁴ dated April 17, 1997⁵ of the Regional Trial Court (RTC) of Cabanatuan City, Nueva Ecija, Branch 25 in Civil Case No. 2145-A1.

This case involves a 1,254 sq. m. residential land located in Poblacion, San Leonardo, Nueva Ecija⁶ originally owned by Leocadio Ingusan who was unmarried and childless when he died in 1932. His heirs were his two brothers and a sister, namely, Antonio, Macaria and Juan.⁷ Antonio died and was succeeded by his son Ignacio who also later died and was succeeded by his son, petitioner Miguel Ingusan.⁸ Macaria also died and was succeeded by her child, Aureliano I. Reyes, Sr. (father of respondents Artemio Reyes, Corazon Reyes-Reguyal, Elsa Reyes, Estrella Reyes-Razon, Aureliano Reyes, Jr., Ester Reyes, Reynaldo Reyes and Leonardo Reyes).⁹ Thus, petitioner is the grandnephew of Leocadio and Aureliano, Sr. was the latter's nephew.¹⁰

After the death of Leocadio, Aureliano, Sr. was designated by the heirs as administrator of the land.¹¹ In 1972, while in possession of the land and in breach of trust, he applied for and was granted a free patent over it.¹² As a result, he was issued OCT No. P-6176 in 1973.¹³

In 1976, petitioner filed an accion reivindicatoria against Aureliano, Sr. and his wife Jacoba Solomon seeking the recovery of Lot 120-A with an area of 502 sq. m. which was part of the land at issue here.¹⁴ But the case was dismissed because petitioner did not pursue it.

Also in 1976, Aureliano, Sr. executed a special power of attorney (SPA) in favor of his son Artemio authorizing him to mortgage the land in question to any bank. Using that SPA, Artemio mortgaged the land to secure a loan of P10,000 from the Philippine National Bank (PNB).¹⁵

In 1983, Aureliano, Sr. died intestate. He was survived by his children, the respondents.¹⁶

In 1986, petitioner paid the PNB loan. The mortgage over the land was released and the owner's duplicate copy of OCT No. P-6176 was given to him.¹⁷

On June 19, 1988, respondents and petitioner entered into a Kasulatan ng Paghahati-hati Na May Bilihan wherein they adjudicated unto themselves the land in question and then sold it to their co-heirs, as follows: (a) to petitioner, 1,171 sq. m. and (b) to respondent Estrella, 83 sq. m. This deed was notarized but not registered.¹⁸

On January 8, 1990, respondent Corazon, despite signing the Kasulatan, executed an affidavit of loss, stating that she could not find the owner's duplicate copy of OCT No. P-6176. This was registered and annotated on the original copy of said title.¹⁹

Subsequently, the following documents appeared purportedly with the following dates:

a) April 23, 1994²⁰ - notarized deed of donation of titled property supposedly executed by the spouses Aureliano, Sr. and Jacoba,²¹ whereby said spouses donated 297 sq. m. of the subject land to respondent Artemio and the remaining 957 sq. m. to petitioner;

b) September 5, 1994 - cancellation of affidavit of loss supposedly executed by respondent Corazon stating that the annotation of the affidavit of loss on the title should be canceled and the petition for a new title was no longer necessary because she had already found the missing owner's duplicate copy of OCT No. P-6176;

c) September 27, 1994 - agreement of subdivision with sale purportedly executed by respondent Artemio and petitioner, with the consent of their wives. Pursuant to this document, the land was subdivided into Lot 120-A with an area of 297 sq. m. corresponding to the share of Artemio and Lot 120-B with an area of 957 sq. m. which was the share of petitioner. The document also indicated that Artemio sold Lot 120-A to one Florentina Fernandez.²²

When respondent Corazon learned about the cancellation of the annotation of her affidavit of loss, she executed an affidavit of adverse claim on January 17, 1995 stating that the cancellation of affidavit of loss and the agreement of subdivision with sale were both spurious and the signatures appearing thereon were forgeries. This affidavit of adverse claim was not registered.²³

On April 17, 1995, petitioner brought the owner's duplicate copy of OCT No. P-6176, the cancellation of affidavit of loss, deed of donation of titled property and agreement of subdivision with sale to the Registry of Deeds for registration. Consequently, the following took place on that same day:

1. Corazon's annotated affidavit of loss was canceled;

2. by virtue of Aureliano, Sr. and Jacoba's deed of donation of titled property to Artemio and petitioner, OCT No. P-6176 was canceled and in lieu thereof, TCT No. NT-241155 in the name of petitioner and TCT No. NT-241156 in the name of respondent Artemio were issued and

3. by virtue of the agreement of subdivision with sale, TCT Nos. NT-241155 and NT-241156 were canceled and TCT Nos. NT-239747 and NT-239748 were issued in the names of petitioner and Florentina Fernandez, respectively.²⁴

On June 27, 1995, petitioner took possession of his portion and built his house thereon.²⁵

On July 4, 1995, respondents filed an action for cancellation, annulment and surrender of titles with damages against petitioner and Florentina Fernandez in the RTC of Cabanatuan City, Nueva Ecija, Branch 25. In their complaint, they alleged the following, among others: they inherited the land in question from their father, Aureliano, Sr.; petitioner caused the preparation of the spurious deed of donation of titled property, cancellation of affidavit of loss, agreement of subdivision with sale and forged the signatures appearing thereon except his (petitioner's) own and, in conspiracy with Fernandez, fraudulently registered said documents which resulted in the cancellation of OCT No. P-6176 and the eventual issuance to them of TCT Nos. NT-239747 and NT-239748. They prayed that these titles be declared null and void and that petitioner and Fernandez be ordered to surrender the land and pay damages to them.²⁶

In his defense, petitioner alleged that respondents' father, Aureliano, Sr., fraudulently secured a free patent in his name over the land using a fictitious affidavit dated April 10, 1970 purportedly executed by Leocadio selling to him the land in question and, as a result, OCT No. P-6176 was issued to him; that it was respondent Artemio who proposed to petitioner the scheme of partition that would assure the latter of his share with the condition, however, that he (Artemio) would get a portion of 297 sq. m. (which included the share of respondent Estrella of 83 sq. m.) because he had already earlier sold it to Fernandez and in fact had already been partially paid P60,000 for it; that to implement this scheme, respondent Artemio caused the execution of several documents namely: (1) deed of donation of titled property; (2) agreement of subdivision with sale and (3) cancellation of affidavit of loss and that, thereafter, he instructed petitioner to present the said documents to the Registry of Deeds of Nueva Ecija for registration.²⁷

On October 26, 1995, respondents moved that Fernandez be dropped as defendant because she was no longer contesting their claim and in fact had surrendered to them her owner's duplicate copy of TCT No.NT-239748. Thus, she was excluded from the suit.²⁸

In a decision dated April 17, 1997, the RTC dismissed the case and declared OCT No. P-6176 as well as the subsequent certificates of title (TCT Nos. NT-239747 and NT-239748), the deed of donation of titled property, agreement of subdivision with sale and cancellation of affidavit of loss as null and void. It held that the aforementioned documents were spurious since the signatures were falsified by respondent Artemio.

Furthermore, having found that OCT No. P-6176 was issued on the basis of a document falsified by Aureliano, Sr., the RTC ordered the reversion of the land to its status before the OCT was issued.

Finally, it held that petitioner, being an innocent victim, was entitled to damages.²⁹

On appeal, the CA modified the RTC decision. It ruled that only TCT Nos. NT-241155, NT-241156, NT-239747 and NT-239748 were null and void. Their source, OCT No. P-6176, remained valid because it had already become indefeasible and could no longer be attacked collaterally. It also found that petitioner schemed with Artemio in defrauding their co-heirs and was therefore in pari delicto. Consequently, neither party was entitled to claim damages from the other.³⁰ Petitioner's motion for reconsideration was denied.

Hence this petition raising the following issues:

1) whether OCT No. P-6176 was valid or invalid, and

2) whether or not petitioner is entitled to damages.

There is no doubt that the deed of donation of titled property, cancellation of affidavit of loss and agreement of subdivision with sale, being falsified documents, were null and void. It follows that TCT Nos. NT-241155, NT-241156, NT-239747 and NT-239748 which were issued by virtue of these spurious documents were likewise null and void. Neither side disputes these findings and conclusions.

The question is whether the source of these titles, OCT No. P-6176, was valid. Petitioner argues that it should be invalidated because it was issued based on a fictitious affidavit purportedly executed in 1970 by Leocadio (who died in 1932) wherein the latter supposedly sold the land to Aureliano, Sr. According to petitioner, Aureliano, Sr. used this to fraudulently and in breach of trust secure a free patent over the land in his name.

We agree with the CA that OCT No. P-6176 remains valid. The issue of the validity of title (e.g. whether or not it was issued fraudulently or in breach of trust) can only be assailed in an action expressly instituted for that purpose.³¹ A certificate of title cannot be attacked collaterally. Section 48 of PD 1529³² states:

SEC. 48. Certificate not subject to collateral attack. ― A certificate of title shall not be subject to collateral attack. It cannot be altered, modified, or canceled except in a direct proceeding in accordance with law.

The rationale behind the Torrens System is that the public should be able to rely on a registered title. The Torrens System was adopted in this country because it was believed to be the most effective measure to guarantee the integrity of land titles and to protect their indefeasibility once the claim of ownership is established and recognized. In Fil-estate Management, Inc. v. Trono,³³ we explained:

It has been invariably stated that the real purpose of the Torrens System is to quiet title to land and to stop forever any question as to its legality. Once a title is registered, the owner may rest secure, without the necessity of waiting in the portals of the court, or sitting on the "mirador su casa" to avoid the possibility of losing his land.³⁴

Petitioner merely invoked the invalidity of OCT No. P-6176 as an affirmative defense in his answer and prayed for the declaration of its nullity. Such a defense partook of the nature of a collateral attack against a certificate of title.³⁵

Moreover, OCT No. P-6176 which was registered under the Torrens System on the basis of a free patent became indefeasible and incontrovertible after the lapse of one year as provided in Section 32 of PD 1529:

Sec. 32. Review of decree of registration; Innocent purchaser for value. ― The decree of registration shall not be reopened or revised by reason of absence, minority, or other disability of any person adversely affected thereby, nor by any proceeding in any court for reversing judgment, subject, however, to the right of any person, including the government and the branches thereof, deprived of land or of any estate or interest therein by such adjudication or confirmation of title obtained by actual fraud, to file in the proper Court of First Instance a petition for reopening and review of the decree of registration not later than one year from and after the date of the entry of such decree of registration, but in no case shall such petition be entertained by the court where an innocent purchaser for value has acquired the land or an interest therein whose rights may be prejudiced. Whenever the phrase "innocent purchaser for value" or an equivalent phrase occurs in this Decree, it shall be deemed to include an innocent lessee, mortgagee, or other encumbrancer for value.

Upon the expiration of said period of one year, the decree of registration and the certificate of title issued shall become incontrovertible. Any person aggrieved by such decree of registration in any case may pursue his remedy by action for damages against the applicant or any other person responsible for the fraud. (Emphasis supplied)cralawlibrary

Indeed, both the RTC and CA found that Aureliano, Sr. fraudulently and in breach of trust secured OCT No. P-6176 in his name. Unfortunately, petitioner chose not to pursue a direct proceeding to have this certificate of title annulled. In 1976, he filed an accion reivindicatoria³⁶ against the spouses Aureliano, Sr. and Jacoba questioning the validity of OCT No. P-6176 and seeking to recover a portion of the land (specifically, Lot 120-A with an area of 502 sq. m.) but he voluntarily withdrew the case.³⁷ Now, the title has undeniably become incontrovertible since it was issued in 1973 or more than 30 years ago.³⁸

We now proceed to the issue of whether petitioner is entitled to damages. The RTC held that he is entitled to moral damages (P50,000), exemplary damages (P30,000) and attorney's fees (P20,000) because he was not aware that the documents were falsified and he was merely instructed by respondent Artemio to have them registered. The CA shared the finding of the RTC that it was respondent Artemio who masterminded the preparation and use of the spurious documents.³⁹ Nevertheless, it did not find petitioner an innocent victim who was merely dragged into litigation:

...[Petitioner] was far from innocent. [Respondent Artemio] and [petitioner] signed the bogus "Deed of Donation of Titled Property" and the fraudulently baseless "Agreement of Subdivision with Sale." It was [petitioner] who personally submitted all the bogus documents with the Registry of Deeds of Nueva Ecija. He stood to benefit from the registration of said fake documents. It was he who received the titles issued in consequence of said fraudulent registration. In the natural course of things and in the ordinary experience of man, the conclusion is inevitable that [he] knew [about] the spurious nature of said documents but he made use of them because of the benefit which he would derive therefrom. In short, [petitioner] confabulated with [respondent Artemio] in defrauding all their co-heirs of their shares in said property.⁴⁰

We agree. Petitioner was not in good faith when he registered the fake documents.

Good faith is ordinarily used to describe that state of mind denoting "honesty of intention, and freedom from knowledge of circumstances which ought to put the holder upon inquiry; an honest intention to abstain from taking any unconscientious advantage of another, even through technicalities of law, together with absence of all information, notice, or benefit or belief of facts which render the transaction unconscientious."⁴¹

Petitioner claims that he was not aware of the contents of the falsified documents and their legal consequences because of his low level of intelligence and educational attainment. But from his own narration, it is clear that he was aware of the fraudulent scheme conceived by respondent Artemio:

[Respondent Artemio] approached [petitioner] and propose[d] a [scheme] of partition that [would] assure [petitioner] of getting his share including that which he and his predecessor-in-interest have purchased from the other heirs of the late LEOCADIO INGUSAN, but with the condition that in implementing the document known as PAGHAHATI-HATI NA MAY BILIHAN, the corresponding shares of ESTRELLA RAZON will go to him [respondent Artemio who] has agreed to have it sold in favor of one FLORENTINA FERNANDEZ for P120,000.00, partial payment of which has already been received by [respondent Artemio], which negotiation of SALE and the payment made by FLORENTINA FERNANDEZ was acknowledged to be true. Without much ado, a survey of Lot No. 120 was conducted by one Restituto Hechenova upon instruction of [respondent Artemio], partitioning the land into two (2), one share goes to [petitioner] with an area of 957 square meters and the other with an area of 297 square meters in the name of [respondent Artemio], the latter share was to be sold in favor of Florentina Fernandez. To have this IMPLEMENTED, incidental documentation must be made thus; A DEED OF DONATION OF REAL PROPERTY allegedly executed by Sps. Aureliano Reyes and JACOBA SOLOMON; SUBDIVISION AGREEMENT WITH SALE by and between [petitioner] and [respondent Artemio] as alleged DONEES and SALE in the same document in favor of Florentina Fernandez, making in the process [petitioner] presentor of all these questioned documents, adding among others an AFFIDAVIT OF LOSS of Original Certificate of Title No. P-6176 allegedly falsified by [petitioner] of the signature of [respondent] CORAZON REYES REGUYAL.⁴²

Petitioner does not deny that he signed the fictitious deed of donation of titled property and the agreement of subdivision with sale. Even if he reached only grade 3, he could not have feigned ignorance of the net effect of these documents, which was to exclude the other heirs of the spouses and the original owner Leocadio from inheriting the property and, in the process, acquiring a big chunk of the property at their expense. The cancellation of respondent Corazon's affidavit of loss of the owner's duplicate copy of OCT No. P-6176 also removed all obstacles to the registration of the title covering his portion of the lot. In short, by registering the spurious documents, he had everything to gain.

Although it was respondent Artemio, an educated individual, who engineered the whole scheme and prepared the fraudulent documents, still petitioner cannot deny that he was a willing co-conspirator in a plan that he knew was going to benefit him handsomely.

As a result, there is no basis for the award of damages to petitioner. Coming to the court with unclean hands, he cannot obtain relief. Neither does he fall under any of the provisions for the entitlement to damages.

Respondents presented an additional issue involving the recovery of possession of the subject land. They contend that petitioner, his heirs and relatives illegally occupied it and constructed houses thereon.⁴³ However, it is well-settled that a party who has not appealed cannot obtain from the appellate court any affirmative relief other than those obtained from the lower court whose decision is brought up on appeal.⁴⁴ While there are exceptions to this rule, such as if they involve (1) errors affecting the lower court's jurisdiction over the subject matter; (2) plain errors not specified and (3) clerical errors, none applies here.⁴⁵

Lastly, we note that petitioner entered into certain agreements with respondents to ensure that he would obtain a portion of the subject land. He not only paid the loan of respondent Artemio to PNB in order to release the mortgage over the land but also bought from respondents 1,171 sq. m. (almost 94% of the 1,254 sq. m. lot) under the Kasulatan ng Paghahati-hati Na May Bilihan. These are undisputed facts. Ultimately, however, he failed to get his portion of the property. Although petitioner did not demand the return of the amounts he paid, we deem it just and equitable to direct respondents to reimburse him for these.

Article 1236 of the Civil Code provides:

Art. 1236. The creditor is not bound to accept payment or performance by a third person who has no interest in the fulfillment of the obligation, unless there is a stipulation to the contrary.

Whoever pays for another may demand from the debtor what he has paid, except that if he paid without the knowledge or against the will of the debtor, he can recover only insofar as the payment has been beneficial to the debtor. (emphasis ours)

Respondent Artemio was the debtor in this case, PNB the creditor and petitioner the third person who paid the obligation of the debtor. The amount petitioner may recover will depend on whether Artemio knew or approved of such payment.chanrobles virtual law library

Petitioner should also be able recover the amount (if any) he paid to respondents under the Kasulatan since this agreement was never implemented. Otherwise, it will result in the unjust enrichment of respondents at the expense of petitioner, a situation covered by Art. 22 of the Civil Code:

Every person who through an act of performance by another, or any other means, acquires or comes into possession of something at the expense of the latter without just or legal ground, shall return the same to him.

Petitioner is not entitled to legal interest since he never made a demand for it.

WHEREFORE, the petition is hereby DENIED. However, respondents are ordered to return to petitioner the amounts he paid to the Philippine National Bank and under the Kasulatan ng Paghahati-hati Na May Bilihan. The court a quo is directed to determine the exact amount due to petitioner. The January 21, 2000 decision and April 10, 2000 resolution of the Court of Appeals in CA-G.R. CV No. 56105 are AFFIRMED.

Costs against petitioner.

SO ORDERED.

Endnotes:

^* The Court of Appeals was originally impleaded as respondent. However, it was excluded pursuant to Rule 45, Section 4 of the Rules of Court.

¹ Under Rule 45 of the Rules of Court.

² Penned by Associate Justice Hilarion L. Aquino (retired) and concurred in by Associate Justices Buenaventura J. Guerrero (retired) and Elvi John S. Asuncion (dismissed from the service) of the Eighth Division of the Court of Appeals; rollo, pp. 29-37.

³ No copy of this resolution was submitted to the Court.

⁴ Penned by Judge Johnson L. Ballutay; rollo, p. 93.

⁵ Id., p. 33.

⁶ Lot 126, Cad. 342-D; id., p. 29.

⁷ Id.

⁸ His two sisters, Eladia and Arcadia died with no heirs; id., p. 62.

⁹ Id.

¹⁰ Id.

¹¹ Id., p. 30.

¹² The free patent was issued on May 17, 1972; id., p. 35.

¹³ The title was issued on February 29, 1973; id.

¹⁴ Civil Case No. 927 in the Court of First Instance of Nueva Ecija, Branch IV; id., p. 63.

¹⁵ Id., p. 30.

¹⁶ Id.

¹⁷ Id.

¹⁸ Id. According to petitioner, this document was not implemented; id., p. 63.

¹⁹ Id. Why she did this considering that she had divested herself of her interest in the land under the Kasulatan ng Paghahati-hati Na May Bilihan was never explained.

²⁰ The year "1982" was superimposed on the typewritten year of 1994; id., p. 34.

²¹ The signatures of petitioner and respondent Artemio also appeared thereon, presumably as donees; id., p. 31.

²² Id., pp. 30-31.

²³ Id., p. 31.

²⁴ Id.

²⁵ Id.

²⁶ Id., p. 32.

²⁷ Id., pp. 32-33.

²⁸ In an order dated November 9, 1995 of the RTC; id., p. 33.

²⁹ Id., pp. 33-34. The dispositive portion stated:

"PREMISES CONSIDERED, judgment is hereby rendered as follows:

1. Dismissing the [respondents'] complaint;

2. Declaring OCT No. P-6176 as well as the subsequent certificates of Title (TCT Nos. NT-239747 and NT-239748) all of the Registry of Deeds of the Province of Nueva Ecija and the Deed of Donation, Subdivision Agreement and Cancellation of Affidavit of Loss as null and void, and ordering the reversion of Lot 120, Cad-120-C Case 1 of San Leonardo Cadastre to the status before OCT P-6176 of the Registry of Deeds of Nueva Ecija.

3. Ordering the [respondents] to pay the costs of the suit.

As regards the counterclaim of [petitioner], there is a preponderance of evidence that supports the same, hence the Court hereby orders the [respondents] to jointly and severally pay [petitioner] the [sums] of P50,000.00 as moral damages, P30,000.00 as exemplary damages and P20,000.00 as attorney's fees.

SO ORDERED."

³⁰ Id., pp. 34-36.

³¹ Caraan v. Court of Appeals, G.R. No. 140752, 11 November 2005, 474 SCRA 534, 550, citing Apostol v. Court of Appeals, G.R. No. 125375, 17 June 2004, 432 SCRA 351, 359.

³² Property Registration Decree.

³³ G.R. No. 130871, 17 February 2006, 482 SCRA 578.

³⁴ Id., p. 585, citing Domingo v. Santos, et al. v. Santos, et al., 55 Phil. 361 (1930).

³⁵ Ugale v. Gorospe, G.R. No. 149516, 11 September 2006, 501 SCRA 376, 386, citations omitted; in Heirs of Enrique Diaz v. Virata, we discussed the distinction as to when an action is a direct attack and when is it collateral:

An action is deemed an attack on a title when the object of the action or proceeding is to nullify the title, and thus challenge the judgment pursuant to which the title was decreed. The attack is direct when the object of the action is to annul or set aside such judgment, or enjoin its enforcement. On the other hand, the attack is indirect or collateral when, in an action to obtain a different relief, an attack on the judgment is nevertheless made as an incident thereof. (G.R. No. 162037, 7 August 2006, 498 SCRA 141, 164-165, citing Sarmiento v. Court of Appeals, G.R. No. 152627, 16 September 2005, 470 SCRA 99, 107-108.)

³⁶ Docketed as Civil Case No. 927 in the former Court of First Instance of Gapan, Nueva Ecija; id., pp. 30, 105.

³⁷ Id., p. 63. He admitted that this was due to the promise of the spouses Aureliano, Sr. and Jacoba that they would give back the land to him after five years; id., p. 32.

³⁸ An action for reconveyance based on fraud prescribes in four years while an action for reconveyance based on implied trust prescribes in ten years; Bejoc v. Cabreros, G.R. No. 145849, 22 July 2005, 464 SCRA 78, 88.

³⁹ The RTC and CA relied on the following facts: 1) respondent Artemio was a law graduate and a former chief of police of San Leonardo, Nueva Ecija whereas petitioner merely reached grade 3 of elementary education; 2) respondent Artemio actually received P60,000 from Florentina Fernandez as partial payment for the 297-sq. m. portion he allotted for himself which he sold to her and 3) he refused to give specimens of his signature to the National Bureau of Investigation for its report; id., p. 102.

⁴⁰ Id., p. 36.

⁴¹ Bercero v. Capitol Development Corporation, G.R. No. 154765, 29 March 2007, citation omitted.

⁴² Rollo, p. 64.

⁴³ Id., p. 131.

⁴⁴ Real v. Belo, G.R. No. 146224, 26 January 2007, citing Tangalin v. Court of Appeals, 422 Phil. 358, 364 (2001); Rural Bank of Sta. Maria, Pangasinan v. Court of Appeals, 373 Phil. 27, 45 (1999).

⁴⁵ Id., citing Santos v. Court of Appeals, G.R. No. 100963, April 6, 1993, 221 SCRA 42, 46.