STILIANOPOULOS vs. RD OF LEGASPI

  

SPOUSES JOSE MANUEL AND MARIA ESPERANZA RIDRUEJO STILIANOPOULOS, Petitioners, v.

THE REGISTER OF DEEDS FOR LEGAZPI CITY AND THE NATIONAL TREASURER, Respondents.

G.R. No. 224678 | July 3, 2018

 

FACTS

Spouses Jose Manuel and Maria Esperanza Ridruejo Stilianopoulos (Petitioners) alleged that they own a property known as Lot No. 1320, covered by TCT No. 13450 in the name of Jose Manuel, who is a resident of Spain and without any administrator of said property in the Philippines. On October 9, 1995, Jose Fernando Anduiza caused the cancellation of the said TCT and the issuance of TCT No. 42486 in his name.

Subsequently, Anduiza mortgaged Lot No. 1320 to Rowena Hua-Amurao (Rowena). As a result of Anduiza's default, Rowena foreclosed the mortgage, and consequently, caused the cancellation of TCT No. 42486 and issuance of TCT No. 52392 in her name on July 19, 2001. On April 15, 2008, Rowena then sold Lot No. 1320 to the Co Group, resulting in the cancellation of TCT No. 52392 and issuance of TCT No. 59654 in the latter's name.

According to petitioners, their discovery of the aforesaid transactions only on January 28, 2008 prompted them to file a complaint for recovery of title on May 2, 2008. However, such complaint was dismissed for petitioners' failure to allege the assessed value of Lot No. 1320. Thus, they filed the subject complaint on March 18, 2009, praying that: (a) TCT Nos. 42486, 52392, and 59654 in the respective names of Anduiza, Rowena, and the Co Group be annulled; (b) all defendants be held solidarily liable to pay petitioners damages and attorney's fees; and (c) the RD-Legazpi and the National Treasurer, through the Assurance Fund, be ordered to pay petitioners' claims should the defendants be unable to pay the same in whole or in part. In support of their complaint, petitioners claimed that they were deprived of the possession and ownership of Lot No. 1320 without negligence on their part and through fraud, and in consequence of errors, omissions, mistakes, or misfeasance of officials and employees of RD-Legazpi.

In their defense, Spouses Amurao and the Co Group both maintained that they purchased Lot No. 1320 in good faith and for value, and that petitioners' cause of action has already prescribed, considering that they only had ten (10) years from the issuance of TCT No. 42486 in the name of Anduiza on October 9, 1995 within which to file a complaint for recovery of possession.

For their part, the RD-Legazpi and the National Treasurer also invoked the defense of prescription, arguing that the right to bring an action against the Assurance Fund must be brought within six (6) years from the time the cause of action occurred, or in this case, on October 9, 1995 when Anduiza caused the cancellation of petitioners' TCT over Lot No. 1320. Notably, Anduiza did not file any responsive pleading despite due notice.

The RTC decided the following: (a) dismissed the case against Spouses Amurao and the Co Group as they were shown to be purchasers in good faith and for value; (b) found Anduiza guilty of fraud in causing the cancellation of petitioners' TCT over Lot No. 1320, and thus, ordered him to pay petitioners the amount of P5,782,500.00 representing the market value of Lot No. 1320, as well as P10,000.00 as exemplary damages; and (c) held the National Treasurer, as custodian of the Assurance Fund, subsidiarily liable to Anduiza's monetary liability should the latter be unable to fully pay the same.

The CA reversed and set aside the RTC's ruling insofar as the National Treasurer's subsidiary liability was concerned. It held that petitioners only had six (6) years from the time Anduiza caused the cancellation of TCT No. 13450 on October 9, 1995, or until October 9, 2001, within which to claim compensation from the Assurance Fund. Since petitioners only filed their claim on March 18, 2009, their claim against the Assurance Fund is already barred by prescription.

ISSUE: Whether or not the petitioners' claim against the Assurance Fund has already been barred by prescription.

 

RULING:

No, the petitioners' claim against the Assurance Fund is not yet barred by prescription.

I. Nature and Purpose of the Assurance Fund

The Assurance Fund is a long-standing feature of our property registration system which is intended "to relieve innocent persons from the harshness of the doctrine that a certificate is conclusive evidence of an indefeasible title to land.

In Register of Deeds of Negros Occidental v. Anglo Sr., the Court held that "based solely on Section 95 of Presidential Decree No. 1529, the following conditions must be met:

1.       First, the individual must sustain loss or damage, or the individual is deprived of land or any estate or interest.

2.       Second, the individual must not be negligent.

3.       Third, the loss, damage, or deprivation is the consequence of either (a)fraudulent registration under the Torrens system after the land's original registration, or (b) any error, omission, mistake, or misdescription in any certificate of title or in any entry or memorandum in the registration book.

4.       Fourth, the individual must be barred or otherwise precluded under the provision of any law from bringing an action for the recovery of such land or the estate or interest therein."⁵⁷

Additionally, the Court holds herein that an action against the Assurance Fund on the ground of "fraudulent registration under the Torrens system after the land's original registration" may be brought only after the claimant's property is registered in the name of an innocent purchaser for value. This is because it is only after the registration of the innocent purchaser for value's title (and not the usurper's title which constitutes a breach of trust) can it be said that the claimant effectively "sustains loss or damage, or is deprived of land or any estate or interest therein in consequence of the bringing of the land under the operation of the Torrens system." The registration of the innocent purchaser for value's title is therefore a condition sine qua non in order to properly claim against the Assurance Fund.

II. Prescriptive Period of an Action against Assurance Fund

Section 97 of PD 1529 states:

If there are defendants other than the National Treasurer and the Register of Deeds and judgment is entered for the plaintiff and against the National Treasury, the Register of Deeds and any of the other defendants, execution shall first issue against such defendants other than the National Treasurer and the Register of Deeds. If the execution is returned unsatisfied in whole or in part, and the officer returning the same certificates that the amount due cannot be collected from the land or personal property of such other defendants, only then shall the court, upon proper showing, order the amount of the execution and costs, or so much thereof as remains unpaid, to be paid by the National Treasurer out of the Assurance Fund. In an action under this Decree, the plaintiff cannot recover as compensation more than the fair market value of the land at the time he suffered the loss, damage, or deprivation thereof. (Emphasis supplied)

Based on the afore-cited provision, it is apparent that a prior declaration of insolvency or inability to recover from the usurper is not actually required before the claimant may file an action against the Assurance Fund. Whether or not funds are to be paid out of the Assurance Fund is a matter to be determined and resolved at the execution stage of the proceedings. Clearly, this should be the proper treatment of the insolvency requirement, contrary to the insinuation made in previous cases on the subject.

Another important provision in Chapter VII of PD 1529 is Section 102:

Section 102. Limitation of Action. – Any action for compensation against the Assurance Fund by reason of any loss, damage or deprivation of land or any interest therein shall be instituted within a period of six years from the time the right to bring such action first occurred: Provided, That the right of action herein provided shall survive to the legal representative of the person sustaining loss or damage, unless barred in his lifetime; and Provided, further, That if at the time such right of action first accrued the person entitled to bring such action was a minor or insane or imprisoned, or otherwise under legal disability, such person or anyone claiming from, by or under him may bring the proper action at any time within two years after such disability has been removed, notwithstanding the expiration of the original period of six years first above provided. (Emphasis supplied)

Jurisprudence has yet to interpret the meaning of the phrase "from the time the right to bring such action first occurred''; hence, the need to clarify the same.

The general rule is that "a right of action accrues only from the moment the right to commence the action comes into existence, and prescription begins to run from that time x x x." However, in cases involving fraud, the common acceptation is that the period of prescription runs from the discovery of the fraud. Under the old Code of Civil Procedure, an action for relief on the ground of fraud prescribes in four years, "but the right of action in such case shall not be deemed to have accrued until the discovery of the fraud." Meanwhile, under prevailing case law, "[w]hen an action for reconveyance is based on fraud, it must be filed within four (4) years from discovery of the fraud, and such discovery is deemed to have taken place from the issuance of the original certificate of title. x x x The rule is that the registration of an instrument in the Office of the RD constitutes constructive notice to the whole world and therefore the discovery of the fraud is deemed to have taken place at the time of registration."

However, in actions for compensation against the Assurance Fund grounded on fraud, registration of the innocent purchaser for value's title should only be considered as a condition sine qua non to file such an action and not as a form of constructive notice for the purpose of reckoning prescription. This is because the concept of registration as a form of constructive notice is essentially premised on the policy of protecting the innocent purchaser for value's title, which consideration does not, however, obtain in Assurance Fund cases. As earlier intimated, an action against the Assurance Fund operates as form of relief in favor of the original property owner who had been deprived of his land by virtue of the operation of the Torrens registration system. It does not, in any way, affect the rights of the innocent purchaser for value who had apparently obtained the property from a usurper but nonetheless, stands secure because of the indefeasibility of his Torrens certificate of title. The underlying rationale for the constructive notice rule – given that it is meant to protect the interest of the innocent purchaser for value and not the original title holder/claimant – is therefore absent in Assurance Fund cases. Accordingly, it should not be applied, especially since its application with respect to reckoning prescription would actually defeat the Assurance Fund's laudable purpose.

As such, prescription, for purposes of determining the right to bring an action against the Assurance Fund, should be reckoned from the moment the innocent purchaser for value registers his or her title and upon actual knowledge thereof of the original title holder/claimant.

In this case, it has been established that petitioners are residents of Spain and designated no administrator over their property, i.e., Lot No. 1320, in the Philippines. They remain in possession of the owner's duplicate copy of TCT No. 13450 in their names,⁷¹ the surrender of which was necessary in order to effect a valid transfer of title to another person through a voluntary instrument.⁷² As the records show, not only did Anduiza, the usurper, forge a deed of sale purportedly transferring petitioners' property in his favor,⁷³ they were also not required by the RD-Legazpi or through a court order to surrender possession of their owner's duplicate certificate of title for the proper entry of a new certificate of title⁷⁴ in Anduiza's favor. Neither was the issuance of TCT No. 42486 in the name of Anduiza recorded/registered in the Primary Entry Book, nor was a copy of the deed of sale in his favor kept on file with the RD-Legazpi.⁷⁵ Consequently, petitioners were not in any way negligent as they, in fact, had the right to rely on their owner's duplicate certificate of title and the concomitant protection afforded thereto by the Torrens system, unless a better right, i.e., in favor of an innocent purchaser for value, intervenes.⁷⁶ As it turned out, Anduiza mortgaged Lot No. 1320 to Spouses Amurao, particularly Rowena. As a result of Anduiza's default, Rowena foreclosed the mortgage, and consequently, caused the cancellation of TCT No. 42486 and issuance of TCT No. 52392 in her name on July 19, 2001.⁷⁷ Spouses Amurao and later, the Co group, in whose favor the subject lot was sold – by virtue of the final judgment of the RTC – were conclusively deemed as innocent purchasers for value. Their status as such had therefore been settled and hence, cannot be revisited.

In this regard, the RTC held that the Assurance Fund would be subsidiarily liable to petitioners, should the judgment debt be left unsatisfied from the land or personal property of Anduiza. If the constructive notice rule were to be applied, then petitioners' claim against the Assurance Fund filed on March 18, 2009 would be barred, considering the lapse of more than six (6) years from the registration of Spouses Amurao's title over the subject lot on July 19, 2001.

However, as earlier explained, the constructive notice rule holds no application insofar as reckoning the prescriptive period for Assurance Fund cases. Instead, the six (6)-year prescriptive period under Section 102 of PD 1529 should be counted from January 28, 2008, or the date when petitioners discovered the anomalous transactions over their property, which included the registration of Rowena's title over the same. Thus, when they filed their complaint on March 18, 2009, petitioners' claim against the Assurance Fund has not yet prescribed.

 

WHEREFORE, the petition is GRANTED. The Decision dated March 16, 2016 and the Resolution dated May 19, 2016 of the Court of Appeals in CA-G.R. CV No. 104207 are hereby REVERSED and SET ASIDE. The Decision dated August 19, 2013 and the Order dated April 30, 2014 of the Regional Trial Court of Legazpi City, Albay, Branch 2 (RTC), are hereby REINSTATED in tot o . Accordingly, the RTC is hereby DIRECTED to conduct execution proceedings with reasonable dispatch.