Agbayani vs. Lupa Realty Holding Corporation

A complaint that specifically prays for the nullification and cancellation of a Torrens certificate of title constitutes a direct, not a collateral, attack on that title. A counsels oral statement in open court during pre-trial, deliberately and unequivocally denying the existence of a prior sale, constitutes a binding judicial admission that dispenses with proof of that fact and, where the admission negates the very existence of the contract, voids it as simulated.

Tranquilino Agbayani emigrated to California, USA in April 1989. He left behind a 91,899-square-meter parcel of land in Sinungan, Sta. Ana, Cagayan, covered by Original Certificate of Title No. P-46041 under Free Patent No. 587747 issued in 1979. In April 1999, Tranquilino’s nephew attempted to pay the real property taxes but was told the land was already registered under respondent Lupa Realty Holding Corporation. Inquiry at the Registry of Deeds revealed that TCT No. T-109129 had been issued to Lupa Realty on the strength of a Deed of Absolute Sale dated October 29, 1997, purportedly signed by Tranquilino. Tranquilino disavowed the document and initiated litigation to recover the property.

• Nature of the Action: Tranquilino Agbayani, a Filipino residing in California, USA, filed an action denominated “For: Reivindicacion, Cancellation of Title and Document with Damages” against Lupa Realty Holding Corporation, seeking to void TCT No. T-109129 and restore his original title.
• The Original Title: Tranquilino held OCT No. P-46041 covering a 91,899-square-meter parcel in Barrio Sinungan, Sta. Ana, Cagayan, issued pursuant to Free Patent No. 587747 on June 7, 1979.
• Discovery of the Transfer: In April 1999, Vernold Malapira, Tranquilino’s nephew and attorney-in-fact, attempted to pay real property taxes. The Municipal Treasurer’s Office informed him the land was already registered in Lupa Realty’s name. Verification at the Registry of Deeds in Tuguegarao, Cagayan showed TCT No. T-109129 had been issued to Lupa Realty on the basis of a “Deed Absolute Sale” dated October 29, 1997, purportedly executed by Tranquilino in Lupa Realty’s favor for P425,500.00.
• Tranquilino’s Allegation of Forgery: Tranquilino denied signing the 1997 DAS. He alleged he was already in the United States in 1989 and never returned to the Philippines on the date of execution. He claimed his signature was forged and that he never appeared before the notary public in Cauayan, Isabela.
• Lupa Realty’s Chain of Title Defense: Lupa Realty did not claim to have bought the land directly from Tranquilino. It asserted a series of transactions: (a) a notarized Deed of Absolute Sale dated January 21, 1992 from Tranquilino to his brother Nonito Agbayani; (b) a notarized Deed of Absolute Sale dated May 30, 1997 from Nonito to Moriel Urdas; and (c) a notarized Deed of Absolute Sale dated October 29, 1997 from Moriel to Lupa Realty, surrendering the original of Tranquilino’s OCT. Lupa Realty insisted it relied on these antecedent conveyances and was an innocent purchaser for value.
• The Contested 1997 Deed (Tranquilino to Lupa Realty): This document was used to register the transfer directly from Tranquilino to Lupa Realty. Critical irregularities attended it:
  • It bore the same notarial entries—Doc. No. 47, Page No. 10, Book No. 11, Series of 1997—as the Deed of Absolute Sale from Moriel Urdas to Lupa Realty, although both were purportedly notarized by the same notary public on the same date.
  • The 1997 DAS recited that the property was covered by “Original Certificate of Title No. P-26619 with Homestead Patent No. 119163,” which was not Tranquilino’s title.
  • Lupa Realty’s president, Roberto P. Alingog, was listed as a party with his community tax certificate details, but he did not sign the deed.
  • Lupa Realty did not offer the 1997 DAS as part of its formal documentary exhibits at trial.
  • The 1992 Deed (Tranquilino to Nonito) and the Judicial Admission: At the pre-trial conference on April 22, 2003, Atty. Frederick Aquino, counsel for fourth-party defendant Nonito Agbayani, “denied that Tranquilino Agbayani executed a Deed of Absolute Sale in favor of Nonito Agbayani. According to Atty. Aquino there was no such sale.” This statement was recorded in the Pre-Trial Order. During trial, Nonito himself testified that he had merely borrowed money from Moriel Urdas, had not sold the subject property, and gave a different collateral. Nonito could not explain how Moriel obtained Tranquilino’s OCT.
  • RTC Findings: The trial court found the 1992 DAS falsified, the 1997 DAS also falsified, and Lupa Realty not an innocent purchaser for value. The RTC was “boggled” by the identical notarial details of two supposedly separate deeds and the fact that Lupa Realty, a realty company, entirely left the transfer of title to Moriel Urdas and his mother.

• Spurious 1997 Deed: Petitioner argued that the 1997 DAS in favor of Lupa Realty was falsified. He pointed to his uncontested absence in the United States since April 1989, and to the exact correspondence of its notarial details with those of the Moriel-Lupa Realty deed, demonstrating that one was necessarily simulated.
• Judicial Admission Negating the 1992 Sale: Petitioner maintained that the admission made by Nonito Agbayani’s counsel during pre-trial—that there was no sale between Tranquilino and Nonito—was a binding judicial admission. This dispensed with the need to prove forgery of the 1992 DAS and voided the document as absolutely simulated.
• Direct Attack on Title: Petitioner contended that his complaint, which prayed expressly for cancellation of Lupa Realty’s TCT No. T-109129 and reinstatement of his OCT No. P-46041, met the standard for a direct attack on a Torrens title under Section 48 of P.D. 1529.
• Lupa Realty Not an Innocent Purchaser: Petitioner asserted that Lupa Realty, by the nature of its business, should have exercised a higher degree of diligence and could not claim good faith when the 1997 DAS on file bore obvious facial irregularities.

• Collateral Attack on Torrens Title: Respondent argued that Tranquilino’s action for declaration of nullity of the 1997 DAS was an impermissible collateral attack on a certificate of title, prohibited by Section 48 of P.D. 1529.
• Failure of Proof of Forgery: Respondent contended that Tranquilino failed to discharge the burden of presenting clear, convincing, and expert evidence to overthrow the presumption of regularity attaching to the notarized 1992 Deed of Absolute Sale.
• Valid Chain of Title and Innocent Purchaser Status: Respondent asserted that it derived title through a series of valid notarized conveyances—Tranquilino to Nonito, Nonito to Moriel, Moriel to Lupa Realty—and that it was an innocent purchaser for value who had no part in the allegedly falsified 1997 DAS used in the registration process attributed to Moriel Urdas’ mother.

• Direct Attack on Title: Whether the complaint for cancellation of TCT No. T-109129 and reinstatement of OCT No. P-46041 constituted a direct or a collateral attack on a Torrens title.
• Validity of the 1997 Deed of Sale: Whether the 1997 Deed of Absolute Sale purportedly executed by Tranquilino in favor of Lupa Realty was void, and whether TCT No. T-109129 derived from it was likewise void.
• Judicial Admission on the 1992 Sale: Whether the pre-trial statement of Nonito Agbayani’s counsel that no sale occurred between Tranquilino and Nonito constituted a binding judicial admission rendering the 1992 Deed void.
• Innocent Purchaser for Value: Whether Lupa Realty qualified as an innocent purchaser for value entitled to protection despite the defects in the chain of title and the registration document.

• Direct Attack on Title: The action constituted a direct, rather than a collateral, attack on TCT No. T-109129. A direct attack is one whose object is to annul or set aside the title itself. Tranquilino’s complaint was captioned “Reivindicacion, Cancellation of Title and Document with Damages,” expressly alleged that TCT No. T-109129 was void and should be cancelled, and prayed for that specific relief. The distinction lies in the object of the action, not in the evidence adduced to support it.
• Validity of the 1997 Deed of Sale: The 1997 DAS was void for being an absolutely simulated contract. The presence of identical notarial entries (document number, page number, book number, and series) on two distinct deeds—the 1997 DAS (Tranquilino to Lupa Realty) and the Moriel-to-Lupa Realty deed—was conclusive that one was false. The 1997 DAS additionally referred to a certificate of title (OCT No. P-26619) and a homestead patent that did not belong to Tranquilino. The three requisites of simulation were established: (1) a deliberate declaration contrary to the will of the parties (a sale that did not exist), (2) the appearance of a valid act, and (3) the purpose to deceive third persons. Lupa Realty’s failure to present the 1997 DAS as its own evidence raised the presumption that willfully suppressed evidence would be adverse if produced. Because the deed was absolutely simulated, it was void under Articles 1409(2) and 1346 of the Civil Code. Its registration was likewise void under Section 53 of P.D. 1529, and TCT No. T-109129 was null and void.
• Judicial Admission on the 1992 Sale: The unequivocal statement of Nonito Agbayani’s counsel during pre-trial, memorialized in the Pre-Trial Order, that there was no sale between Tranquilino and Nonito was a judicial admission. The admission removed the fact of a sale from the field of controversy under Section 4, Rule 129 of the Rules of Court, and dispensed with the need for proof. Nonito’s own trial testimony—that he only borrowed money and did not sell the land—confirmed that no palpable mistake attended the admission. With the admission that no sale occurred, the 1992 DAS was also a simulated and void contract. Because Tranquilino never sold to Nonito, Nonito had no title to convey to Moriel Urdas, and Moriel in turn had nothing to convey to Lupa Realty.
• Innocent Purchaser for Value: Lupa Realty could not be deemed an innocent purchaser for value. As a corporation engaged in real estate, it was expected to exercise due diligence in its acquisitions. Its claimed reliance on Moriel Urdas and his mother to secure title, combined with the use of a deed that was patently irregular on its face, negated good faith. The entity that caused the registration of the void 1997 DAS—and profited from it—was presumed the material author of the falsification.

• Direct Attack on a Torrens Title — The attack is direct when the object of the action is to annul or set aside the certificate of title, or enjoin its enforcement. It is indirect or collateral when the attack on the title is made merely as an incident in an action seeking different relief. An action praying for cancellation of a TCT and reinstatement of an earlier OCT constitutes a direct attack within the meaning of Section 48 of P.D. 1529.
• Judicial Admission — A judicial admission is a deliberate, clear, and unequivocal statement made by a party or counsel in the course of judicial proceedings, concerning a concrete fact within the party’s peculiar knowledge. It removes the admitted fact from the field of controversy and dispenses with the need for proof. It may be contradicted only by showing it was made through palpable mistake or that no such admission was made (Section 4, Rule 129, Rules of Court). A counsel’s denial of a sale during pre-trial constitutes such an admission, and if uncorrected, renders the controverted deed void.
• Absolute Simulation of Contracts — A contract is absolutely simulated or fictitious when the parties declare a fictitious intent, deliberately and by agreement, to produce the appearance of a transaction that does not exist or differs from their true agreement. The three requisites are: (1) a deliberate declaration contrary to the will of the parties, (2) agreement of the parties to the apparently valid act, and (3) the purpose to deceive third persons. Such a contract is inexistent and void from the beginning under Articles 1409(2) and 1346 of the Civil Code.
• Registration of Forged or Simulated Deeds — Pursuant to Section 53 of Presidential Decree No. 1529, any registration procured by the presentation of a forged deed or instrument is null and void. Consequently, the certificate of title issued on the basis of such a deed is also null and void.
• Presumption from Suppression of Evidence and Use of Falsified Document — Under Rule 131, Section 3(e), evidence willfully suppressed would be adverse if produced. Further, one who possesses a falsified document, makes use of it (utters it), and profits from it is presumed to be the material author of the falsification.

• “The similarity of its notarial details’ with those of the DAS Moriel-Lupa Realty; … the recital that it pertained to the land covered by ‘Original Certificate of Title No. P-26619 with Homestead Patent No. 119163’ and not to Tranquilino’s OCT No. P-46041 with Free Patent No. 587747; … are strong indications of falsity.” — The Court’s basis for concluding the 1997 DAS was spurious on its face, justifying the nullity of TCT No. T-109129.
• “The admission by Nonito’s counsel during the pre-trial proceedings before the RTC that there was no sale between Tranquilino and Nonito qualifies as a judicial admission because the statement is a deliberate, clear, unequivocal statement of a party’s attorney during judicial proceedings in open court about a concrete or essential fact within that party’s peculiar knowledge.” — The ratio decidendi on why the 1992 DAS was void without needing expert evidence of forgery.
• “The attack is considered direct when the object of an action is to annul or set aside such proceeding, or enjoin its enforcement. Conversely, an attack is indirect or collateral when, in an action to obtain a different relief, an attack on the proceeding is nevertheless made as an incident thereof.” — The governing definition of a direct attack on a Torrens title.
• “Simulation requires the following: (1) A deliberate declaration contrary to the will of the parties; (2) Agreement of the parties to the apparently valid act; and (3) The purpose is to deceive or to hide from third persons although it is not necessary that the purpose be illicit or for purposes of fraud.” — The Court’s restatement of the civil law requisites of simulation.

• Camitan v. Fidelity Investment Corporation, 574 Phil. 672 (2008) — Followed for the binding nature of judicial admissions: statements by counsel during preliminary conference are conclusive and waive the need for evidence.
• Firaza, Sr. v. Spouses Ugay, 708 Phil. 24 (2013) — Cited to define the distinction between a direct and a collateral attack on a Torrens title.
• People v. Sendaydiego, 171 Phil. 114 (1978) — Applied for the rule that a person who possesses and uses a falsified document for profit is presumed its material author.
• Re: Fake Decision Allegedly in G.R. No. 75242, 491 Phil. 539 (2005) — Cited for the principle that simulation of a public document to cause error as to its authenticity constitutes falsification.

• Article 1409(2), Civil Code — Contracts which are absolutely simulated or fictitious are inexistent and void from the beginning. Applied to both the 1992 and 1997 Deeds of Absolute Sale.
• Article 1346, Civil Code — An absolutely simulated or fictitious contract is void. Reinforced the void character of the impugned deeds.
• Section 4, Rule 129, Rules of Court — A judicial admission does not require proof and may be contradicted only by showing palpable mistake. The pre-trial admission by Nonito’s counsel that no sale occurred was governed by this rule.
• Section 48, Presidential Decree No. 1529 — A certificate of title shall not be subject to collateral attack. Tranquilino’s complaint was interpreted as a direct, not collateral, attack under this provision.
• Section 53, Presidential Decree No. 1529 — Any registration procured by the presentation of a forged deed is null and void. The issuance of TCT No. T-109129 was void for this reason.
• Section 3(e), Rule 131, Rules of Court — Evidence willfully suppressed would be adverse if produced. Lupa Realty’s non-presentation of the 1997 DAS as its exhibit triggered this presumption.

Carpio (Chairperson), Perlas-Bernabe, and Lazaro-Javier, JJ. concurred. J. Reyes, Jr. was on leave.

N/A — The decision was unanimous among the participating justices.