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SPS. JOSE MANUEL v. REGISTER OF DEEDS FOR LEGAZPI CITY

FACTS:

The petitioners in this case claimed ownership of Lot No. 1320, which was evidenced by TCT No. 13450. Respondent Anduiza caused the cancellation of TCT No. 13450 and obtained TCT No. 42486 in his name. Anduiza then mortgaged the property to respondent Hua-Amurao, who eventually foreclosed the mortgage and obtained TCT No. 52392. Hua-Amurao sold the property to the Co Group, resulting in the cancellation of TCT No. 52392 and issuance of TCT No. 59654. The petitioners discovered these transactions in 2008 and filed a complaint in 2009. The RTC held Anduiza liable for fraud, ordered him to pay damages, and held the National Treasurer subsidiarily liable. The Court of Appeals partially reversed the RTC's decision and ruled that the petitioners' claim against the Assurance Fund is already barred by prescription.

The Co Group filed a complaint against Anduiza, the RD of Legazpi City, and the National Treasurer seeking the nullification of the cancellation of the TCT and the award of damages. The RTC ruled in favor of the petitioners and held Anduiza liable for fraud. The RTC also held that the RD-Legazpi and the National Treasurer could be held subsidiarily liable. Both parties filed motions for reconsideration, but these were denied. Only the appeal of the RD-Legazpi and the National Treasurer challenging their subsidiary liability was elevated to the CA.

The CA reversed the RTC's ruling regarding the National Treasurer's subsidiary liability, stating that the petitioners' claim against the Assurance Fund was already barred by prescription. The Co Group filed a motion for reconsideration, which was denied. The petitioners then filed a petition before the Supreme Court challenging the CA's ruling. The issue for resolution is whether the CA was correct in ruling that the Co Group's claim against the Assurance Fund is already barred by prescription.

The Supreme Court ruled in favor of the petitioners and clarified that a Torrens certificate of title is indefeasible and binding unless nullified through a court proceeding. The Assurance Fund was created to provide compensation to those who lost their property due to registration laws. The claim against the Assurance Fund is not barred by prescription.

The court further explained the conditions that must be met for an individual to be entitled to compensation from the Assurance Fund. The loss, damage, or deprivation must be a consequence of fraudulent registration or any error, omission, mistake, or misdescription in the certificate of title or registration book. If the property has been further registered in the name of an innocent purchaser for value, then the loss, damage, or deprivation may be compensable. The court emphasized that these facts need to be alleged in the complaint.

Therefore, in order for the claimant to bring an action to nullify the registration of the land, they must establish that the land has been fraudulently registered and that an innocent purchaser for value now holds the registration.

ISSUES:

  1. Whether the plaintiff must allege in the complaint that he is a registered innocent purchaser in order to claim indemnity from the Assurance Fund.

  2. Whether an action against the Assurance Fund can only be brought after the claimant's property is registered in the name of an innocent purchaser for value.

  3. What is the prescriptive period for filing an action for compensation against the Assurance Fund.

  4. Whether a prior declaration of insolvency or inability to recover from the usurper is required before filing an action against the Assurance Fund.

  5. How should the six-year prescriptive period for filing an action for compensation against the Assurance Fund be computed?

  6. Whether or not the constructive notice rule on registration should be applied to title holders who have been unjustly deprived of their land without their negligence.

  7. Whether the prescriptive period for filing a claim against the Assurance Fund should be reckoned from the date of registration of the usurper's title.

  8. Whether the claim of the petitioners against the Assurance Fund has prescribed.

    • What is the issue raised in this case?
    • Is there any other issue relevant to the case?

RULING:

  1. The plaintiff must allege in the complaint that he is a registered innocent purchaser in order to claim indemnity from the Assurance Fund. The fact of the sale and registration are not sufficient to imply that the plaintiff is an innocent purchaser. (G.R. No. L-79510)

  2. An action against the Assurance Fund can only be brought after the claimant's property is registered in the name of an innocent purchaser for value. The registration of the innocent purchaser for value's title is a necessary requirement in order to properly claim against the Assurance Fund. (G.R. No. L-79510)

  3. The prescriptive period for filing an action for compensation against the Assurance Fund is not specified in the text provided.

  4. A prior declaration of insolvency or inability to recover from the usurper is not required before filing an action against the Assurance Fund. The determination of whether funds should be paid out of the Assurance Fund is made at the execution stage of the proceedings, after the execution against the defendants other than the National Treasurer and the Register of Deeds has been returned unsatisfied in whole or in part.

  5. The six-year prescriptive period for filing an action for compensation against the Assurance Fund is computed from the time the right to bring such action first occurred.

  6. The constructive notice rule on registration should not be made to apply to title holders who have been unjustly deprived of their land without their negligence. 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 their title and upon actual knowledge thereof of the original title holder/claimant. The registration of the innocent purchaser for value's title is a prerequisite for a claim against the Assurance Fund on the ground of fraud to proceed, while actual knowledge of the registration is tantamount to the discovery of the fraud.

  7. The prescriptive period for filing a claim 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. The registration of the property in the name of an innocent purchaser for value is integral in every action against the Assurance Fund on the ground of "fraudulent registration under the Torrens system after the land's original registration." The claimant suffers loss, damage, or deprivation of land at this point, for which the State may be made accountable.

  8. The claim of the petitioners against the Assurance Fund has not yet prescribed. The six-year prescriptive period under Section 102 of PD 1529 should be counted from the date when the petitioners discovered the anomalous transactions over their property, including the registration of the usurper's title. Thus, when they filed their complaint, which is within the six-year period, their claim against the Assurance Fund has not yet prescribed.

    • What is the ruling of the Supreme Court on the main issue?
    • What is the ruling of the Supreme Court on any other relevant issue in the case?

PRINCIPLES:

  • In an action for compensation against the Assurance Fund, the plaintiff must allege that he is a registered innocent purchaser in order to claim indemnity. (G.R. No. L-79510)

  • The registration of the claimant's property in the name of an innocent purchaser for value is necessary before an action can be brought against the Assurance Fund. (G.R. No. L-79510)

  • The prescriptive period for filing an action for compensation against the Assurance Fund is not specified in the text provided.

  • Whether or not funds are to be paid out of the Assurance Fund is determined at the execution stage of the proceedings, with no requirement of prior declaration of insolvency or inability to recover from the usurper.

  • The six-year prescriptive period for filing an action for compensation against the Assurance Fund is computed from the time the right to bring such action first occurred.

  • The intent of the Assurance Fund is to indemnify the innocent original title holder for their property loss, which loss is attributable to the acts of a usurper and the operation of the Torrens System of registration.

  • The constructive notice rule should not be applied to title holders who have been unjustly deprived of their land without negligence.

  • 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 their title and upon actual knowledge thereof of the original title holder/claimant.

  • The principle of conclusiveness of prior adjudications applies to all bodies upon which judicial powers had been conferred.

  • The constructive notice rule does not apply in determining the prescriptive period for Assurance Fund cases.

  • The prescriptive period for filing a claim against the Assurance Fund is 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.

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