Filipinas Eslon Manufacturing Corp. vs. Heirs of Basilio Llanes

An action for quieting of title that seeks to nullify a certificate of title casting a cloud on the plaintiff's own title constitutes a direct attack, not a prohibited collateral attack, because demonstrating the invalidity of the competing deed or title is central, imperative, and essential to the action itself. Where the challenged decree is non-existent, no separate action for annulment of judgment is required, and a private registered owner has personality to institute the complaint because the property remains private and does not revert to the public domain.

FEMCO is a manufacturer of "eslon pipes and accessories" whose plant is located on a 50,528-square-meter lot in Barrio Sta. Felomina, Iligan City, covered by TCT No. T-17460 (a.f.). The Heirs of Basilio Llanes claim ownership over Lot 1911 and adjacent lots on the basis of OCT No. 0-1040 (a.f.), allegedly issued pursuant to Decree No. N-182390 dated April 17, 1968, supposedly rendered by Judge Teodulo Tandayag of the then Court of First Instance of Lanao del Norte. Multiple respondents — including Philippine Amanah Bank, various spouses, and individuals — derived their transfer certificates of title from this OCT. The dispute arose when the Heirs of Llanes asserted that FEMCO's plant site encroached upon their titled property, prompting FEMCO to investigate the cadastral records and ultimately file a complaint for quieting of title.

FEMCO is a manufacturer of "eslon pipes and accessories" whose manufacturing plant is located within a 50,528-square-meter parcel of land known as Lot B-2, covered by TCT No. T-17460 (a.f.), situated in Barrio Sta. Felomina, Iligan City. On February 2, 1994, Atty. Alfredo Busico, counsel for the Heirs of Basilio Llanes, wrote to FEMCO's management informing them that its plant site may have encroached into his clients' properties — Lot 1911-B-4, Lot 1911-B-3, and Lot 1911-J — covered by TCT Nos. T-29,635 (a.f.), T-31,994 (a.f.), and T-21573 (a.f.), respectively. Atty. Gerardo Padilla, FEMCO's counsel, replied on February 16, 1994, stating that his client's property was covered by a valid certificate of title and that, upon inquiry with the Register of Deeds of Iligan City, he discovered that Lot 1911 was titled in the name of Basilio Llanes under OCT No. 0-1040 (a.f.) based on Decree No. N-182390 dated April 17, 1968, allegedly issued by Judge Teodulo Tandayag of the CFI of Lanao del Norte. However, the cadastral records showed that only Pio Echaves and Pedro Q. Solosa filed answers or claims for Lot 1911, that Basilio Llanes never filed an answer or claim, and that Lot 1911 had not been decreed in the name of any person. Atty. Padilla concluded that OCT No. 0-1040 (a.f.) was spurious.

No further communication ensued until March 14, 1995, when FEMCO received a letter dated February 23, 1995 from Atty. Dulcesimo Tampus, apparently the new counsel for the Heirs of Basilio Llanes, informing FEMCO that it had erroneously fenced a portion of about 16,629 square meters of his clients' lot and demanding removal of the fence and payment of ₱2,000.00 as rental fee. Two days later, Atty. Padilla reiterated his position that the cadastral records confirmed Lot 1911 had not been adjudicated in favor of Basilio Llanes and that the Heirs' title was fake. To forestall further interference with its property rights, FEMCO filed a Complaint for quieting of title and damages on September 1, 1995 before the RTC of Lanao del Norte, docketed as Civil Case No. 3337.

FEMCO asserted that it was the registered owner of the 50,528-square-meter lot under TCT No. T-17460 (a.f.), that it had constructed its manufacturing plant thereon, and that OCT No. 0-1040 (a.f.) and all transfer certificates of title emanating therefrom were invalid, voidable, or unenforceable and prejudicial to FEMCO's title. The Heirs of Basilio Llanes denied the material allegations, contending that OCT No. 0-1040 (a.f.) was valid by virtue of the CFI decision dated April 17, 1968, that Lot 1911 had been in the actual physical possession of Basilio Llanes, and that FEMCO was illegally occupying 16,629 square meters of Lot 1911. They further claimed that FEMCO's TCT No. T-17460 was the one that was invalid because it was based on a non-existing homestead application.

On September 30, 1998, the RTC rendered judgment in favor of FEMCO. The RTC found the evidence indubitable that no decision was signed or rendered by Judge Tandayag adjudicating Lot 1911 in favor of Basilio Llanes on April 17, 1968. The RTC noted the absence of a cadastral answer from Basilio Llanes, the testimony of Atty. Macaraya that cadastral records showed Lot 1911 had not been adjudicated to any person, and the certification of Mrs. Ma. Geronima G. Perez, Branch Clerk of Court from 1981 to 1989, that she never issued the supposed certified true copy of the decision held by respondents. The RTC declared OCT No. 0-1040 (a.f.) and Decree No. N-182390 null and void ab initio, declared all derivative TCTs invalid, directed the Register of Deeds to cancel them, and declared FEMCO entitled to ownership and possession of the land covered by TCT No. T-17460 (a.f.), including the 16,629 square meters claimed by the Heirs of Llanes and the 947.64 square meters claimed by PAB. Several respondents appealed, but the appeals of the Heirs of Llanes and the Seveses were dismissed by the CA for failure to file their Appellants' Brief, rendering the RTC decision final as to them. The CA then resolved only the appeals of PAB, Monera, and Edilberto, and on August 23, 2010, reversed the RTC decision on three grounds, prompting the instant petition.

• Verification and Certification of Non-Forum Shopping: Petitioner maintained that the Secretary's Certificate dated November 9, 2010, attached to the Petition, expressly authorized Calvin H. Tabora to sign the Verification and Certification of Non-Forum Shopping on behalf of FEMCO, thereby refuting respondent PAB's claim that Tabora lacked authority.
• Direct Attack, Not Collateral Attack: Petitioner contended that its Complaint for Quieting of Title was not a prohibited collateral attack on the respondents' certificates of title, because the nullification of OCT No. 0-1040 (a.f.) was central, imperative, and essential to the action — the very purpose of the complaint was to remove the cloud cast on FEMCO's own title by the spurious OCT.
• Non-Existent Decree: Petitioner argued that no separate action for annulment of judgment before the CA was necessary because Decree No. N-182390 was non-existent to begin with, as conclusively found by the RTC; the RTC did not nullify an existing judgment but declared that no judgment had ever been rendered.
• Personality to Sue: Petitioner asserted that it had personality to institute the complaint because it was the registered private owner of the subject property under TCT No. T-17460 (a.f.), and the granting of the complaint would not revert the property to the public domain but merely confirm FEMCO's existing ownership.

• Defect in Verification: Respondent PAB argued that there was no showing that Calvin H. Tabora, FEMCO's Vice President for Manufacturing, was clothed with special authority to sign the verification and certification of non-forum shopping on behalf of the corporation, his position not ipso facto conferring such authority.
• Prohibited Collateral Attack: Respondents contended, as upheld by the CA, that FEMCO's Complaint for Quieting of Title was actually an indirect or collateral attack on OCT No. 0-1040 (a.f.) and derivative titles, because the relief sought was the nullification of those titles, which is improper in an action for quieting of title.
• Wrong Remedy — Interference with Co-Equal Court Judgment: Respondents maintained that since OCT No. 0-1040 (a.f.) was sourced from Decree No. N-182390 supposedly issued by the CFI of Lanao del Norte, an action for quieting of title was not the appropriate remedy, as it would require modification or interference with the judgment of a co-equal court.
• Lack of Personality to Sue: Respondents argued that if FEMCO's prayer were granted, Lot 1911 would revert to the government, and therefore only the government, through the Solicitor General, could institute a reversion case.

• Verification and Non-Forum Shopping: Whether the Petition suffered from a defect in the verification and certification of non-forum shopping due to lack of authority of the signatory.
• Collateral Attack: Whether FEMCO's Complaint for Quieting of Title constituted a prohibited collateral attack on a certificate of title.
• Annulment of Judgment: Whether FEMCO resorted to a wrong remedy because the action would require modification or interference with the judgment or order of another co-equal court.
• Personality to Sue: Whether FEMCO had no personality to institute the Complaint for Quieting of Title because the granting of its prayer would revert the property to the government.

• Verification and Non-Forum Shopping: No. The Secretary's Certificate dated November 9, 2010 expressly authorized Calvin H. Tabora to sign the verification and certification of non-forum shopping on behalf of FEMCO.
• Collateral Attack: No. Raising the invalidity of a certificate of title in an action for quieting of title is a direct attack, not a prohibited collateral attack, because showing the invalidity of the deed casting a cloud on one's title is central and essential to the action.
• Annulment of Judgment: No. The doctrine requiring a separate action for annulment of a co-equal court's judgment does not apply where the challenged decree is non-existent; the RTC did not nullify an existing judgment but found that no judgment was ever rendered.
• Personality to Sue: No. FEMCO, as the registered private owner of the subject property, was the proper party to institute the action; granting the complaint did not revert the property to the public domain because FEMCO's title was valid and the property remained private.

• Verification and Non-Forum Shopping: Under Section 5, Rule 7 of the Rules of Court, the certification of non-forum shopping must be executed by the plaintiff or principal party; in the case of corporations, a specifically authorized individual may sign on behalf of the corporate entity. A simple perusal of the Petition revealed a Secretary's Certificate dated November 9, 2010 stating that Calvin H. Tabora was "authorized to sign the Verification and Certification of Non-Forum Shopping of the above petition." Respondent PAB's allegation was therefore patently without merit.

• Collateral Attack: An attack on a title is deemed direct 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 indirect or collateral when, in an action to obtain a different relief, an attack on the judgment is made merely as an incident thereof. An action for quieting of title, governed by the second paragraph of Section 1, Rule 63, requires two indispensable requisites: (1) the plaintiff has a legal or equitable title to or interest in the real property, and (2) the deed, claim, encumbrance, or proceeding casting a cloud on the title must be shown to be invalid or inoperative despite its prima facie appearance of validity. FEMCO's Complaint alleged and the RTC found that both requisites were satisfied: FEMCO had legal title under TCT No. T-17460 (a.f.), and OCT No. 0-1040 (a.f.) based on Decree No. N-182390 was invalid. Because the nullification of the competing title is at the very heart of a quieting-of-title action, the attack is direct, not collateral. The Court relied on Oño vs. Lim, Roman Catholic Archbishop of San Fernando vs. Soriano, Jr., and Guntalilib vs. Dela Cruz, all of which held that challenging a certificate of title within a quieting-of-title action is a direct attack. The CA's reliance on Foster-Gallego vs. Sps. Galang was misplaced because that case involved a mere answer-in-intervention, not a complaint. Leyson vs. Sps. Bontuyan further clarified that an action attacking a certificate of title as void may be an original action or a counterclaim in a quieting-of-title case.

• Annulment of Judgment: The CA correctly stated that the CA, not the RTC, has exclusive jurisdiction over actions for annulment of trial court decisions, and that a trial court has no authority to annul the final judgment of a co-equal court. However, this doctrine does not apply because an action to annul and enjoin enforcement of a judgment presupposes that the challenged judgment exists. Here, the RTC conclusively found — through cadastral records, the certification of Atty. Joel Macaraya (Clerk of Court of the then CFI of Lanao del Norte), and the certification of Mrs. Ma. Geronima G. Perez (Branch Clerk of Court from 1981 to 1989) — that no decision was ever signed or rendered by Judge Tandayag adjudicating Lot 1911 in favor of Basilio Llanes on April 17, 1968. The RTC did not invalidate or nullify Decree No. N-182390; it found that the decree does not exist at all. Factual findings of the trial court, including its calibration of witness testimonies and assessment of probative weight, are given high respect if not conclusive effect, absent any showing that it ignored, misconstrued, misunderstood, or misinterpreted cogent facts and circumstances of substance.

• Personality to Sue: An action for reversion involves property alleged to be of State ownership, aimed at reverting it to the public domain. Jurisprudence holds that the State, represented by the Solicitor General, is not the real party-in-interest where there is no reversion to the public domain; the State is not the proper party to bring a suit for reconveyance of private property. In this case, FEMCO was the registered private owner of the subject property under TCT No. T-17460 (a.f.), and the RTC found no evidence that OCT No. RP-62(21), from which FEMCO's title derived, was invalidly issued. Granting the complaint did not revert the property to public land; it merely confirmed FEMCO's undisturbed status as owner. FEMCO was therefore the proper party to institute the action.

• Direct vs. Collateral Attack on a Certificate of Title — An attack on a title is direct when the objective is to annul or set aside the judgment pursuant to which the title was decreed, or to enjoin its enforcement. 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. A certificate of title is not subject to collateral attack under Section 48 of PD No. 1529, but raising the invalidity of a certificate of title in an action for quieting of title — where the nullification of the competing title is central, imperative, and essential to removing the cloud on the plaintiff's own title — constitutes a direct attack, not a prohibited collateral attack.

• Requisites for an Action for Quieting of Title — Two indispensable requisites must concur: (1) the plaintiff or complainant has a legal or an equitable title to or interest in the real property subject of the action; and (2) the deed, claim, encumbrance, or proceeding claimed to be casting a cloud on his title must be shown to be in fact invalid or inoperative despite its prima facie appearance of validity or legal efficacy. Both requisites were found by the RTC to be satisfied in FEMCO's case.

• Non-Existent Judgment Requires No Annulment — The doctrine that only the CA has jurisdiction to annul judgments of co-equal trial courts presupposes that the challenged judgment exists. Where the trial court finds that no judgment or decree was ever rendered, there is nothing to annul; the trial court's declaration of non-existence is not equivalent to nullifying an existing judgment.

• Reversion vs. Reconveyance of Private Property — A reversion case involves property of State ownership aimed at reverting it to the public domain, and only the government through the Solicitor General may institute such action. Where the disputed property is private and the plaintiff is its registered owner, the action is not a reversion case, and the plaintiff is the real party-in-interest.

• "Hence, raising the invalidity of a certificate of title in an action for quieting of title 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 cloud on his title. In other words, at the heart of the Complaint for Quieting of Title instituted by petitioner FEMCO is the nullification of OCT No. 0-1040 in order to remove the cloud besetting its own title. This is manifestly a direct attack." — This passage articulates the ratio decidendi on the central issue: that challenging a competing title within a quieting-of-title action is a direct attack because the nullification is essential to the action itself.

• "An action to annul and enjoin the enforcement of the judgment presupposes that the challenged judgment exists to begin with. In the instant case, there is no final judgment that must be subjected to an action for annulment with the CA because, as indisputably found by the RTC, Decree No. N-182390 supposedly issued by the then CFI of Lanao del Norte and signed by Hon. Teodulo Tandayag is non-existent to begin with." — This passage defines the doctrinal limitation on annulment-of-judgment actions: the remedy presupposes an existing judgment, and a finding of non-existence is not equivalent to nullification.

• "There is no merit to the contention that only the State may bring an action for reconveyance with respect to property proven to be private property. The State, represented by the Solicitor General, is not the real party-in-interest; inasmuch as there was no reversion of the disputed property to the public domain, the State is not the proper party to bring a suit for reconveyance of a private property." — This passage clarifies the distinction between reversion (involving public land) and reconveyance (involving private property), and identifies the proper party for each.

• Oño vs. Lim, 628 Phil. 418 (2010) — Followed. The Court held that an action for quieting of title does not constitute a prohibited collateral attack on a certificate of title where the nullification of the title is the object of the action. The Court quoted this case at length in support of its ruling that FEMCO's complaint was a direct attack.
• Roman Catholic Archbishop of San Fernando vs. Soriano, Jr., 671 Phil. 308 (2011) — Followed. The Court held that a complaint questioning the genuineness of an OCT in a quieting-of-title action is a direct attack on the title, not a collateral attack.
• Guntalilib vs. Dela Cruz, 789 Phil. 287 (2016) — Followed. The Court held that the underlying objectives in quieting-of-title and annulment-of-title cases are essentially the same — adjudication of ownership and nullification of a questioned certificate of title — and that quieting of title may be subsumed in an annulment case.
• Leyson vs. Sps. Bontuyan, 492 Phil. 238 (2005) — Followed. The Court held that an action attacking a certificate of title as void may be an original action or a counterclaim in a quieting-of-title case, and that requiring a party to institute separate cancellation proceedings where all essential facts are already before the court would be pointlessly circuitous.
• Foster-Gallego vs. Sps. Galang, 479 Phil. 148 (2004) — Distinguished. The CA relied on this case, but the Supreme Court found the reliance misplaced because that case involved the raising of nullity of a TCT in a mere answer-in-intervention, not in the complaint itself.
• Heirs of Santiago vs. Heirs of Santiago, 452 Phil. 238 (2003) — Followed. The Court cited this case for the proposition that the State is not the real party-in-interest in a reconveyance action involving private property, and that only reversion cases involving public land require the Solicitor General.

• Section 48, Presidential Decree No. 1529 (Property Registration Decree) — Provides that a certificate of title shall not be subject to collateral attack and cannot be altered, modified, or cancelled except in a direct proceeding in accordance with law. The Court applied this provision by holding that FEMCO's action was a direct, not collateral, attack, and therefore did not violate Section 48.
• Section 1, Rule 63, Rules of Court — Governs the action for quieting of title or removal of cloud over title. The Court applied the two indispensable requisites under this provision: (1) legal or equitable title or interest in the real property, and (2) the instrument or proceeding casting a cloud must be shown to be invalid or inoperative despite its prima facie appearance of validity.
• Section 5, Rule 7, Rules of Court — Requires that the certification of non-forum shopping be executed by the plaintiff or principal party, and that in the case of corporations, a specifically authorized individual may sign on behalf of the corporate entity. The Court found compliance through the Secretary's Certificate dated November 9, 2010.
• Section 1(e), Rule 50, 1997 Rules of Civil Procedure — Authorizes dismissal of an appeal for failure to file the Appellants' Brief. The CA invoked this provision to dismiss the appeals of the Heirs of Basilio Llanes and the Seveses.

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