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FILIPINAS ESLON MANUFACTURING CORP. v. HEIRS OF BASILIO LLANES

FACTS:

The case involves a dispute between petitioner Filipinas Eslon Manufacturing Corporation (FEMCO) and respondents Heirs of Basilio Llanes over a piece of land in Iligan City. FEMCO is the registered owner of a 50,528 square-meter land where its manufacturing plant is located. On February 2, 1994, the heirs of Basilio Llanes informed FEMCO that its plant site may have encroached into their properties covered by transfer certificates of title (TCTs). In response, FEMCO claimed that its property is covered by a valid certificate of title and that the TCTs claimed by the heirs are spurious. No further communication between the parties occurred until a new counsel for the heirs sent a demand letter to FEMCO, claiming that a portion of their lot was erroneously fenced by FEMCO. FEMCO, to protect its property rights, filed a complaint for quieting of title and damages against the heirs and other parties before the Regional Trial Court of Lanao Del Norte.

The case also involves a Complaint for Quieting of Title filed by plaintiff-appellee FEMCO against defendants and defendants-appellants Al-Amanah Islamic Bank, Monera M. Lalanto, and Edilberto V. Paza. In its decision, the Court of Appeals (CA) reversed and set aside the lower court's decision and dismissed FEMCO's complaint. The CA based its decision on three reasons. First, the CA held that FEMCO's complaint should be dismissed because it is actually an indirect action for annulment of title, which is considered a collateral attack on a certificate of title. Second, according to the CA, an action for quieting of title is not the appropriate remedy when it would require the modification or interference with the judgment or order of another co-equal court. Lastly, the CA held that FEMCO had no personality to institute the complaint because if their prayer to have Lot 1911 reverted to the government would be granted, only the government, through the Solicitor General, can initiate a reversion case.

The RTC, in its decision, declared the titles held by the respondents as null and void, cancelled all transfer certificates of title derived from OCT No. 0-1040 (a.f.), and granted ownership and possession of the land to petitioner FEMCO. Some of the respondents appealed the decision, but some failed to file an appeal, making the decision final and executory as to them. The CA reversed the RTC decision and ruled in favor of respondents PAB, Monera, and Edilberto. The central issue raised before the Court is whether the CA was correct in its findings regarding FEMCO's complaint for quieting of title.

ISSUES:

  1. Whether the verification and certification of non-forum shopping in the Petition was defective.

  2. Whether an action for quieting of title that involves a challenge to the validity of a certificate of title is a collateral attack.

  3. Whether an action for quieting of title constitutes a collateral attack on a certificate of title.

  4. Whether the objectives of an action for quieting of title and an action for annulment of title are essentially the same.

  5. Whether petitioner FEMCO's Complaint for Quieting of Title constitutes a prohibited collateral attack.

  6. Whether the RTC had the authority to grant petitioner FEMCO's Complaint for Quieting of Title despite the existence of Decree No. N-182390.

  7. Whether petitioner FEMCO has the legal personality to institute the Complaint for Quieting of Title.

  8. Whether or not petitioner FEMCO is the proper party to bring a suit for reconveyance of a private property.

RULING:

  1. The lone procedural issue raised by the respondent regarding the defect in the verification and certification of non-forum shopping was resolved in favor of the petitioner. The Court found that the Vice President for Manufacturing, Calvin H. Tabora, was specifically authorized to sign the verification and certification of non-forum shopping on behalf of the corporation, as stated in the Secretary's Certificate attached to the Petition.

  2. The Court held that an action for quieting of title that involves a challenge to the validity of a certificate of title is not a collateral attack, as erroneously posited by the Court of Appeals. The Court clarified that an action to quiet title or to remove clouds over a title is a special civil action governed by the second paragraph of Section 1, Rule 63 of the Rules of Court. It is not a collateral attack because it is central, imperative, and essential in such an action that the complainant shows the invalidity of the deed which casts a cloud on their title. The Court emphasized that at the heart of the Complaint for Quieting of Title is the nullification of the certificate of title in order to remove the cloud besetting the title of the complainant. Therefore, it is a direct attack.

  3. An action for quieting of title does not constitute a collateral attack on a certificate of title. A certificate of title can only be altered, modified, or cancelled in a direct proceeding in accordance with law. A direct attack on a title is made when the objective is to annul or set aside the judgment pursuant to which the title was decreed. On the other hand, an attack is indirect or collateral when an attack on the judgment is made as an incident in an action to obtain a different relief. In an action for quieting of title, the objective is to remove any cloud, doubt, or uncertainty affecting the title to real property and is not aimed at nullifying the title itself.

  4. The objectives of an action for quieting of title and an action for annulment of title are essentially the same. Both seek to ascertain the ownership of the disputed property and seek the nullification of a certificate of title. While a certificate of title is not subject to collateral attack, the Court held that when the underlying objectives or reliefs sought in both types of cases are essentially the same, an action for quieting of title may also be considered as an action to annul and cancel a certificate of title. However, the action should be denominated as such and the allegations and prayer in the complaint should clearly make out a case for annulment and cancellation of the title.

  5. The CA was mistaken in deeming petitioner FEMCO's Complaint for Quieting of Title a prohibited collateral attack.

  6. The RTC did not invalidate or nullify Decree No. N-182390; it concluded that the decree does not exist at all. Therefore, the RTC had the authority to grant petitioner FEMCO's Complaint for Quieting of Title.

  7. Petitioner FEMCO has the legal personality to institute the Complaint for Quieting of Title because an action for reconveyance is not limited to the State alone.

  8. The Supreme Court held that petitioner FEMCO is the proper party to bring a suit for reconveyance of the private property. The Court emphasized that petitioner FEMCO is the registered private owner of the subject property and there is no evidence on record to substantiate the claim that the title it holds was invalidly issued. Therefore, with the granting of the complaint for quieting of title, the status of petitioner FEMCO as the owner of the land remains undisturbed.

PRINCIPLES:

  • The plaintiff or principal party should execute the certification of non-forum shopping under oath, and in the case of corporations, the signing may be done by specifically authorized individuals. (Section 5, Rule 7, Rules of Court)

  • An action to quiet title or to remove clouds over a title is a special civil action governed by the second paragraph of Section 1, Rule 63 of the Rules of Court. It is a direct attack on the validity of a certificate of title and not a collateral attack. (Oño, et al. v. Lim)

  • A certificate of title cannot be subject to collateral attack and can only be altered, modified, or cancelled in a direct proceeding in accordance with law. (Section 48 of Presidential Decree No. 1529)

  • An action for quieting of title seeks to remove any cloud, doubt, or uncertainty affecting title to real property. It is a remedy for the removal of invalid, ineffective, voidable, or unenforceable instruments, records, claims, encumbrances, or proceedings that may prejudice the title. (Quieting of Title)

  • An action is deemed a direct attack on a title when the objective is to annul or set aside the judgment pursuant to which the title was decreed, or to enjoin its enforcement. It is deemed a collateral attack when an attack on the judgment is made incidentally in an action to obtain a different relief. (Roman Catholic Archbishop of San Fernando v. Soriano, Jr.)

  • An action for quieting of title and an action for annulment of title have essentially the same objectives - adjudication of ownership of the disputed property and nullification of a certificate of title. In some instances, an action for quieting of title may be considered as an attack on the title if it seeks the annulment and cancellation of a certificate of title. (Guntalilib v. Dela Cruz)

  • An action is a collateral attack on a title if its object is to nullify the same.

  • The Court gives high respect, if not conclusive effect, to the factual findings of the trial court.

  • Only the government, through the Office of the Solicitor General, can institute a reversion case. However, the State is not the real party-in-interest in a suit for reconveyance of private property.

  • The registered owner of a private property is the proper party to bring a suit for reconveyance.