Gregorio Araneta University Foundation vs. Heirs of Gregorio Bajamonde

A certificate of title derived from a void compromise agreement, which was the very basis for its issuance, is itself void and can be cancelled in the same proceeding where the nullity of its source was established; this does not constitute a prohibited collateral attack under the Property Registration Decree.

The Gonzales Estate was expropriated by the government for resale to its occupants. Tenants, including Gregorio Bajamonde, filed a complaint (Civil Case No. C-760) to compel the government to sell them the land. GAUF intervened, claiming rights via a "Kasunduan" (agreement) with some tenants. A compromise agreement based on this was approved by the court, awarding Lots 54 and 75 to Bajamonde but purportedly conveyed to GAUF. This compromise was later declared a forgery and nullified in separate proceedings (Civil Cases Nos. 17347 & 17364).

• Filed in the Court of First Instance (now RTC) of Rizal (Civil Case No. C-760).
• The RTC issued a Joint Order (Aug. 29, 1986) and an Order (Dec. 23, 1988) cancelling GAUF's title (TCT No. C-24153) and ordering new titles for the Heirs of Bajamonde.
• GAUF's petitions challenging these orders were dismissed by the CA (CA-G.R. SP No. 14839) and the SC (G.R. No. 89969).
• GAUF later filed a Petition for Annulment of the 1986 and 1988 Orders with the CA (CA-G.R. SP No. 23872).
• The CA denied the petition. GAUF appealed via a Petition for Review (Rule 45) to the SC.

• The Gonzales Estate was expropriated for resale to tenant-occupants.
• In Civil Case No. C-760 (tenants' suit for specific performance), GAUF intervened based on a "Kasunduan" with tenants.
• A compromise agreement was approved, but was later declared a forgery and nullified in separate cases (Civil Cases Nos. 17347 & 17364), a decision affirmed by the CA.
• Relying on the nullified compromise, GAUF secured TCT No. C-24153 over Lots 54 and 75.
• In Civil Case No. C-760, the Heirs of Bajamonde moved to cancel GAUF's title. The RTC granted the motion, ordering cancellation and issuance of new titles to the heirs.
• GAUF's attempts to stop execution failed, and the title was cancelled. The heirs later sold a portion to Remington Realty.
• GAUF filed a petition for annulment of the cancellation orders, arguing they were a collateral attack on its title.

• The RTC orders directing cancellation of TCT No. C-24153 constituted a collateral attack on its title, prohibited by Section 48 of P.D. No. 1529.
• The RTC lacked jurisdiction to cancel its title in Civil Case No. C-760, which was a specific performance suit, not a direct proceeding for cancellation.
• The CA erred in applying res judicata based on the earlier nullity cases.
• A void judgment may be assailed at any time.

• GAUF's title was void ab initio because it was based on a compromise agreement judicially declared to be a forgery.
• The cancellation was not a collateral attack but a direct consequence of the nullification of the title's source within the same case (Civil Case No. C-760) where GAUF itself had intervened.
• The issues were barred by prior final judgments and the principle of judicial stability.

• Procedural Issues: Whether the CA correctly denied GAUF's petition for annulment of judgment.
• Substantive Issues: Whether the RTC's orders cancelling GAUF's title constituted a prohibited collateral attack on a Torrens title under Section 48 of P.D. No. 1529.

• Procedural: The SC affirmed the CA. The grounds for annulment of judgment (lack of jurisdiction or extrinsic fraud) were not present. The RTC had jurisdiction, and GAUF's proper remedy was a timely appeal, which it failed to pursue.
• Substantive: The SC ruled no collateral attack occurred. The cancellation was a direct proceeding because:
  1. GAUF's title originated from the compromise agreement submitted in Civil Case No. C-760.
  2. That compromise was declared null and void for forgery in final judgments.
  3. A title secured by fraud and irregularity does not become indefeasible.
  4. Therefore, the title was void, and its cancellation in the same case where its invalidity was established was a direct, not collateral, attack.

• Collateral vs. Direct Attack on a Title — An attack is direct when the action's object is to annul the judgment upon which the title is based. It is collateral when the annulment is merely an incident in an action for a different relief. The SC held this was a direct attack because the title's very foundation (the compromise) was the central issue in the case.
• Indefeasibility of a Torrens Title — The indefeasibility of a title does not attach to titles secured by fraud and misrepresentation. A title that is void from its inception can be cancelled.

• "The rule that a title issued under the Torrens System is presumed valid and, hence, is the best proof of ownership does not apply where the very certificate itself is faulty as to its purported origin."
• "With the reality that the presumption of authenticity and regularity enjoyed by the petitioner's title has been overcome and overturned by the aforementioned decisions nullifying the aforesaid Compromise Agreement from whence the petitioner's title sprung, that title can never be indefeasible as its issuance was replete with badges of fraud and irregularities that rendered the same nugatory."

• Mallilin, Jr. v. Castillo — Cited to define the distinction between direct and collateral attacks on a title.
• Dolfo v. Register of Deeds for the Province of Cavite — Cited for the principle that the presumption of title validity does not apply when the title's origin is faulty.
• Baguio v. Republic — Cited for the rule that indefeasibility does not apply to titles secured by fraud.
• Lapulapu Development & Housing Corp. v. Risos — Cited for the principle that if a court has jurisdiction over the subject matter and the parties, its rulings are mere errors of judgment reviewable by appeal.

• 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.
• Rule 47, Revised Rules of Civil Procedure — Governs annulment of judgments, which is allowed only on the grounds of extrinsic fraud and lack of jurisdiction.