LABEARBCO vs. Babao

A regional agrarian reform adjudicator gravely abuses its discretion — and acts without jurisdiction — when it orders the cancellation of derivative Torrens titles of persons who were not parties to the original proceeding in which the annulment of an extrajudicial settlement was decreed, as such an order constitutes a collateral attack on the titles and deprives the title holders of due process.

Manuel P. Babao was the registered owner of two parcels of land in Lapuy, Tigatto, Davao City, covered by TCT No. T-1460 and TCT No. T-561, with areas of 413,439 and 210,025 square meters, respectively. He died on July 10, 1984, and the properties were transferred to his wife, Rosa Ong Chua, and daughter, Enrica O. Babao. In 1989, the DAR notified Chua of impending CARP coverage. Chua obtained a 10-year deferment that was to expire on June 15, 1998. Chua died intestate on June 10, 1996, leaving Enrica as the sole heir. Upon the deferment’s expiry, the DAR sent separate Notices of Coverage to Enrica over each parcel. On March 3, 1999, Enrica executed a Deed of Extrajudicial Settlement of the Estate of Manuel, adjudicating and distributing the subject properties to herself and her children.

• Nature: The case concerns the propriety of the RARAD’s orders consolidating two DARAB cases and directing the cancellation of derivative Torrens titles belonging to persons who were not parties to the original suit that annulled an extrajudicial settlement of estate.

• The 2003 DARAB Case: In DARAB Case No. XI-1783-DC-2003, the DAR sought the annulment of the Deed of Extrajudicial Settlement executed by Enrica, arguing it was intended to circumvent CARP coverage. The PARAD ruled in favor of the DAR on September 5, 2003, declaring the deed null and void, ordering reinstatement of the original certificates of title in the name of Manuel P. Babao, and directing cancellation of all derivative titles. No appeal was taken; the decision attained finality.

• Execution Hurdles: When the DAR moved for execution, the Register of Deeds could not comply due to uncertainty regarding the derivative titles to be cancelled. The PARAD thereafter denied a motion for an alias writ, holding that the derivative titles stood in the names of persons who had not been impleaded and that their cancellation required a direct proceeding.

• The 2008 DARAB Case and the Assailed RARAD Orders: In response, the DAR initiated DARAB Case No. XI-2057-DC-2008 against Enrica et al., several individuals holding derivative titles (Jaime Babado, Gunie B. Cornelio, Gloriosa Vicera, Gerino Macrohon, Manuel Co, Jesus Enrie Co, Lorenzo T. Ng), and the Register of Deeds. The complaint sought the cancellation of the derivative titles. On January 12, 2011, the RARAD issued an Order consolidating the 2003 and 2008 cases and directing implementation of the September 5, 2003 Decision. This order in effect declared the derivative titles of the newly impleaded respondents null and void without a trial on the merits. When Enrica et al. attempted to appeal, the RARAD denied the Notice of Appeal on February 14, 2011 for non-compliance with the DARAB Rules of Procedure requiring service upon the DARAB, and subsequently denied their Omnibus Motion for reconsideration on March 22, 2011.

• CA Petition for Certiorari: Enrica et al. filed a Rule 65 petition with the Court of Appeals, arguing that the RARAD had acted without or in excess of jurisdiction. The CA annulled all three orders, finding that the RARAD had treated the 2008 case as a mere motion to execute the 2003 Decision without giving the newly impleaded respondents an opportunity to be heard, and that it had assumed jurisdiction over an action that constituted a collateral attack on Torrens titles.

• Procedural Ground for Denial of Appeal: Petitioner maintained that the RARAD did not gravely abuse its discretion in denying respondents’ Notice of Appeal because the denial was warranted under Rule XIV, Section 1 of the 2003 DARAB Rules of Procedure, which requires that copies of the notice be furnished to the DARAB.

• Scope of Certiorari: Petitioner asserted that the CA erred in setting aside the January 12, 2011 Order because that Order was not specifically assailed in the Petition for Certiorari.

• Lack of Jurisdiction and Grave Abuse of Discretion: Respondents substantially reiterated the CA’s findings and argued that the RARAD acted without jurisdiction and with grave abuse of discretion when it ordered the cancellation of derivative titles held by persons not parties to the 2003 case, thereby depriving them of due process and collaterally attacking their Torrens titles.

• Cancellation of Derivative Titles: Whether the RARAD gravely abused its discretion, amounting to lack of jurisdiction, when it ordered the consolidation of cases and directed implementation of the September 5, 2003 PARAD Decision, thereby canceling the derivative titles of respondents who were not impleaded in the earlier case.

• Denial of Appeal: Whether the RARAD gravely abused its discretion in denying respondents’ Notice of Appeal for failure to furnish copies to the DARAB as required by the DARAB Rules of Procedure.

• Cancellation of Derivative Titles: The RARAD’s January 12, 2011 Order was issued with grave abuse of discretion. By consolidating the two cases and directing implementation of the 2003 Decision, the RARAD effectively cancelled the derivative titles of persons who had not been impleaded in the 2003 case, without giving them an opportunity to be heard. This violated the settled principle that no person may be prejudiced by a ruling rendered in an action or proceeding to which they were not a party, as enunciated in Green Acres Holdings, Inc. v. Cabral. The order also constituted a collateral attack on Torrens titles. Certificates of title cannot be altered, modified, or cancelled except in a direct proceeding instituted for that purpose, as distinguished in Hortizuela v. Tagufa. The 2003 case sought annulment of an extrajudicial settlement, not cancellation of titles held by third parties; thus, using that judgment to cancel those titles without a new, direct action was a collateral attack. Because the RARAD lacked jurisdiction to entertain an action that collaterally attacked certificates of title, all proceedings in DARAB Case No. XI-2057-DC-2008 were void.

• Denial of Appeal: The denial of the Notice of Appeal, while predicated on a procedural rule, was part of the same fatally flawed proceeding. The CA correctly set aside all three assailed orders because the fundamental defect — lack of jurisdiction and denial of due process — tainted the entire proceeding from the January 12, 2011 consolidation order onward. No separate adjudication on the procedural correctness of the appeal denial was necessary.

• Due Process and Strangers to a Judgment — A person cannot be prejudiced by a ruling rendered in an action or proceeding in which they were not made a party. A judgment is binding only upon the parties properly impleaded. Strangers to a case are not bound by any judgment rendered, and a writ of execution can be issued only against a party, not against one who did not have their day in court. The Court applied this doctrine to invalidate the RARAD’s order that cancelled titles of persons not impleaded in the original case.

• Collateral Attack on Torrens Title — Under Section 48 of Presidential Decree No. 1528, a certificate of title shall not be subject to collateral attack. A direct attack is one where the object of the action is to annul or set aside the judgment or enjoin its enforcement; an indirect or collateral attack occurs when, in an action seeking a different relief, an attack on the judgment or proceeding is made as an incident thereof. The Court found that the RARAD’s order, which was rendered in a case for annulment of an extrajudicial settlement, had the practical effect of annulling titles of third parties — a quintessential collateral attack.

• “No [person] shall be affected by any proceeding to which he is a stranger, and strangers to a case are not bound by any judgment rendered by the court. In the same manner, a writ of execution can be issued only against a party and not against one who did not have [their] day in court. Only real parties in interest in an action are bound by the judgment therein and by writs of execution issued pursuant thereto.” (Quoting Green Acres Holdings, Inc. v. Cabral) — This passage encapsulates the due process underpinning of the ruling that the RARAD could not bind non-parties.

• “When the Court says direct attack, it means that the object of an action is to annul or set aside such judgment, or enjoin its enforcement. On the other hand, the attack is indirect or collateral when, in an action to obtain a different relief, an attack on the judgment or proceeding is nevertheless made as an incident thereof.” (Quoting Hortizuela v. Tagufa) — This distinction was central to the finding that the RARAD’s order constituted a prohibited collateral attack.

• Pascual v. Burgos, et al., 776 Phil. 167 (2016) — Cited for the definition of grave abuse of discretion: a capricious and whimsical exercise of judgment equivalent to lack of jurisdiction.
• Green Acres Holdings, Inc. v. Cabral, 710 Phil. 235 (2013) — Followed as controlling authority for the principle that a judgment binds only the parties impleaded and cannot prejudice strangers.
• Hortizuela v. Tagufa, 754 Phil. 499 (2015) — Followed for the doctrine distinguishing direct from collateral attack on Torrens titles.

• Section 48, Presidential Decree No. 1528 (Property Registration Decree) — Provides that a certificate of title shall not be subject to collateral attack; it can only be altered, modified or cancelled in a direct proceeding. Applied to invalidate the RARAD’s order, which cancelled derivative titles as an incident of enforcing a judgment that did not directly seek such cancellation against the title holders.
• Rule XIV, Section 1, 2003 DARAB Rules of Procedure — Requires that a notice of appeal be furnished to the DARAB. Invoked by petitioner to justify the procedural denial of the appeal, though ultimately subsumed by the substantive jurisdictional defect.

Hernando (Acting Chairperson), Zalameda, and Marquez, JJ., concurred. Gesmundo, C.J. (Chairperson), was on official leave.