ASSURANCE FUND

Section 93. Contribution to Assurance Fund. Upon the entry of a certificate of title in the
name of the registered owner, and also upon the original registration on the certificate of title of a
building or other improvements on the land covered by said certificate, as well as upon the entry
of a certificate pursuant to any subsequent transfer of registered land, there shall be paid to the
Register of Deeds one-fourth of one per cent of the assessed value of the real estate on the basis
of the last assessment for taxation purposes, as contribution to the Assurance Fund. Where the
land involved has not yet been assessed for taxation, its value for purposes of this decree shall be
determined by the sworn declaration of two disinterested persons to the effect that the value
fixed by them is to their knowledge, a fair valuation.
Nothing in this section shall in any way preclude the court from increasing the valuation of the
property should it appear during the hearing that the value stated is too small.

Section 94. Custody and investment of fund. All money received by the Register of Deeds
under the preceding section shall be paid to the National Treasurer. He shall keep this money in
an Assurance Fund which may be invested in the manner and form authorized by law, and shall
report annually to the Commissioner of the Budget the condition and income thereof.
The income of the Assurance Fund shall be added to the principal until said fund amounts to five
hundred thousand pesos, in which event the excess income from investments as well as from the
collections of such fund shall be paid into the National Treasury to the account of the Assurance
Fund.

Section 95. Action for compensation from funds. A person who, without negligence on his
part, sustains loss or damage, or is deprived of land or any estate or interest therein in
consequence of the bringing of the land under the operation of the Torrens system of arising after
original registration of land, through fraud or in consequence of any error, omission, mistake or
misdescription in any certificate of title or in any entry or memorandum in the registration book,
and who by the provisions of this Decree is barred or otherwise precluded under the provision of
any law from bringing an action for the recovery of such land or the estate or interest therein,
may bring an action in any court of competent jurisdiction for the recovery of damages to be paid
out of the Assurance Fund.

CLAIMS AGAINST THE ASSURANCE FUND

Section 95 provides a remedy where a person who sustains loss or damage or is deprived of any
estate or interest in land in consequence of the operations of the Torrens system of registration,
without negligence on his part, may bring an action for the recovery of damages to be paid out of
the Assurance fund.

Public policy demands that those unjustly deprived of their rights over real property by reason of
the operation of our registration laws be afforded remedies

According to the principles of the Torrens system, it is a condition sine que non that the person
who brings an action for damages against the Assurance fund be the registered owner, and as to
holders of transfer certificates of title that they be innocent purchasers in good faith and for
value.

There must also be a showing of loss or damage or deprivation of any land or interest thereon by
the operation of PD1529.

Where plaintiff is solely responsible for the plight in which it finds itself, the Director of Lands
and the National Treasurer are exempt from any liability.

REQUISITES FOR RECOVERY FROM THE ASSURANCE FUND

1. That a person sustains loss or damage, or is deprived of any estate or interest in land.
2. On account of bringing of land under the operations of the Torrens system arising after the
original registration.
3. Through fraud, error, omission, mistake, or misdescription in a certificate of title or entry or
memorandum in the registration,
4. Without negligence on his part
5. And is barred or precluded from bringing an action for the recovery of such land or estate or
interest therein.

RECORDED MORTGAGE IS PROTECTED EVEN IF TITLE IS SUBSEQUENTLY

NULLIFIED

PRESCRIPTIVE PERIOD
Section 102. Limitation of Action. Any action for compensation against the Assurance Fund by
reason of any loss, damage or deprivation of land or any interest therein shall be instituted within
a period of six years from the time the right to bring such action first occurred: Provided, That
the right of action herein provided shall survive to the legal representative of the person
sustaining loss or damage, unless barred in his lifetime; and Provided, further, That if at the time
such right of action first accrued the person entitled to bring such action was a minor or insane or
imprisoned, or otherwise under legal disability, such person or anyone claiming from, by or
under him may bring the proper action at any time within two years after such disability has been
removed, notwithstanding the expiration of the original period of six years first above provided.
The plaintiff has a period of 6 years from the time the right of action accrues within which to
bring an action against the Assurance Fund

Compensation from assurance fund after fraudulent sale of land

By
Persida Acosta
December 16, 2018

Dear PAO,
Jose made it appear in a deed of sale that I sold my land to him in 2000. He registered the deed
in 2002 and a title was issued in his name. Jose mortgaged the property to Fidez and the latter
foreclosed the mortgage because of the former’s non-payment of his loan. Fidez emerged as the
highest bidder when the land was sold in public auction. I discovered these transactions when I
returned to the Philippines in 2016. Someone told me that I cannot recover the property from
Fidez because she is an innocent purchaser, so I have to claim against the assurance fund. But
the action may have already prescribed because more than six years have elapsed from the
registration of the sale to Fidez. Is this correct?
Selina

Dear Selina,
For your information, the remedy of compensation against the assurance fund is found under
Section 95 of Presidential Decree (PD) 1529 otherwise known as the “Property Registration
Decree,” which states:
“A person who, without negligence on his part, sustains loss or damage, or is deprived of land or
any estate or interest therein in consequence of the bringing of the land under the operation of the
Torrens system of arising after original registration of land, through fraud or in consequence of
any error, omission, mistake or misdescription in any certificate of title or in any entry or
memorandum in the registration book, and who by the provisions of this Decree is barred or
otherwise precluded under the provision of any law from bringing an action for the recovery of
such land or the estate or interest therein, may bring an action in any court of competent
jurisdiction for the recovery of damages to be paid out of the Assurance Fund.”
The title of Fidez, who is an innocent purchaser for value, is indefeasible so your legal
remedy is clearly an action for compensation against the assurance fund. This action may
be brought within six (6) years from the time the right to bring such action first occurred
(Section 102, Id.).
In the case of Spouses Stilianopoulos vs Register of Deeds of Legazpi City and the National
Treasurer (GR 224678, July 3, 2018), the Supreme Court, through Associate Justice Estela
Perlas-Bernabe, stated:
“In any event, the reckoning of the six (6)-year period from the time a certificate of title
was issued in favor of the usurper is incorrect doctrine. At the risk of belaboring the point,
the registration of the property in the name of an innocent purchaser for value is integral in every
action against the Assurance Fund on the ground of ‘fraudulent registration under the Torrens
system after the land’s original registration.’ This is because it is only at that moment when the
claimant suffers loss, damage or deprivation of land caused by the operation of the Torrens
system of registration, for which the State may be made accountable. To follow the CA’s (Court
of Appeals’) ruling based on the obiter dictum in Guaranteed Homes Inc. is to recognize that the
right of action against the Assurance Fund arises already at the point when the usurper
fraudulently registers his title. By legal attribution, this latter act is a breach of an implied trust,
which, however, by express provision of Section 101 of PD 1529, does not render the Assurance
Fund liable. Thus, the CA committed reversible error in ruling that the prescriptive period under
Section 102 of PD 1529 for filing a claim against the Assurance Fund should be reckoned from
the registration of the usurper’s title. On the contrary, the period should be reckoned from
the moment the innocent purchaser for value registers his or her title and upon actual
knowledge thereof of the original title holder/claimant. In this light, the claim has yet to
prescribe. Applying the above cited decision in your situation, you may still file a claim
against the assurance fund.”
Based on the decision, the period of six years to file the action for compensation against the
assurance fund should be reckoned from when the sale to Fidez was registered and upon
your actual knowledge of the fraudulent transaction, which was in 2016.
We hope that we were able to answer your queries. Please be reminded that this advice is based
solely on the facts you have narrated and our appreciation of the same. Our opinion may vary
when other facts are changed or elaborated.
Editor’s note: Dear PAO is a daily column of the Public Attorney’s Office. Questions for Chief
Acosta may be sent to [email protected]

EN BANC
[ G.R. No. 224678, July 03, 2018 ]
SPOUSES JOSE MANUEL AND MARIA ESPERANZA RIDRUEJO
STILIANOPOULOS, PETITIONERS, V. THE REGISTER OF DEEDS FOR LEGAZPI
CITY AND THE NATIONAL TREASURER, RESPONDENTS.
DECISION
PERLAS-BERNABE, J.:
Assailed in this petition for review on certiorari[1] are the Decision[2] dated March 16, 2016 and
the Resolution[3] dated May 19, 2016 of the Court of Appeals (CA) in CA-G.R. CV No. 104207,
which partially reversed and set aside the Decision[4] dated August 19, 2013 and the Order[5]
dated April 30, 2014 of the Regional Trial Court of Legazpi City, Albay, Branch 2 (RTC) in
Civil Case No. 10805, and accordingly, held that the claim of petitioners Spouses Jose Manuel
(Jose Manuel) and Maria Esperanza Ridruejo Stilianopoulos (collectively; petitioners) against
the Assurance Fund is already barred by prescription.
The Facts
This case stemmed from a Complaint[6] for Declaration of Nullity of Transfer Certificate of
Title (TCT) No. 42486, Annulment of TCT No. 52392 and TCT No. 59654, and Recovery of
Possession of Lot No. 1320 with Damages (subject complaint) filed by petitioners against
respondents The Register of Deeds for Legazpi City (RD-Legazpi) and The National Treasurer
(National Treasurer), as well as Jose Fernando Anduiza (Anduiza), Spouses Rowena Hua-
Amurao (Rowena) and Edwin Amurao (collectively; Spouses Amurao), and Joseph Funtanares
Co, et al. (the Co Group) before the RTC.

Petitioners alleged that they own a 6,425-square meter property known as Lot No. 1320, as
evidenced by TCT No. 13450[7] in the name of Jose Manuel, who is a resident of Spain and
without any administrator of said property in the Philippines.[8] On October 9, 1995, Anduiza
caused the cancellation of TCT No. 13450 and issuance of TCT No. 42486[9] in his name.[10]

Thereafter, Anduiza mortgaged Lot No. 1320 to Rowena.[11] As a result of Anduiza's default,
Rowena foreclosed the mortgage, and consequently, caused the cancellation of TCT No. 42486
and issuance of TCT No. 52392[12] in her name on July 19, 2001.[13] On April 15, 2008,
Rowena then sold Lot No. 1320 to the Co Group, resulting in the cancellation of TCT No. 52392
and issuance of TCT No. 59654[14] in the latter's name.[15]

According to petitioners, their discovery of the aforesaid transactions only on January 28, 2008
prompted them to file a complaint for recovery of title on May 2, 2008.[16] However, such
complaint was dismissed for petitioners' failure to allege the assessed value of Lot No. 1320.
Thus, they filed the subject complaint on March 18, 2009, praying that: (a) TCT Nos. 42486,
52392, and 59654 in the respective names of Anduiza, Rowena, and the Co Group be annulled;
(b) all defendants be held solidarily liable to pay petitioners damages and attorney's fees; and (c)
the RD-Legazpi and the National Treasurer, through the Assurance Fund, be ordered to pay
petitioners' claims should the defendants be unable to pay the same in whole or in part.[17] In
support of their complaint, petitioners claimed that they were deprived of the possession and
ownership of Lot No. 1320 without negligence on their part and through fraud, and in
consequence of errors, omissions, mistakes, or misfeasance of officials and employees of RD-
Legazpi.[18]

In their defense, Spouses Amurao and the Co Group both maintained that they purchased Lot
No. 1320 in good faith and for value, and that petitioners' cause of action has already prescribed,
considering that they only had ten (10) years from the issuance of TCT No. 42486 in the name of
Anduiza on October 9, 1995 within which to file a complaint for recovery of possession.[19] For
their part,[20] the RD-Legazpi and the National Treasurer also invoked the defense of
prescription, arguing that the right to bring an action against the Assurance Fund must be brought
within six (6) years from the time the cause of action occurred, or in this case, on October 9,
1995 when Anduiza caused the cancellation of petitioners' TCT over Lot No. 1320.[21] Notably,
Anduiza did not file any responsive pleading despite due notice.[22]

The RTC Ruling

In a Decision[23] dated August 19, 2013 the RTC: (a) dismissed the case against Spouses
Amurao and the Co Group as they were shown to be purchasers in good faith and for value; and
(b) found Anduiza guilty of fraud in causing the cancellation of petitioners' TCT over Lot No.
1320, and thus, ordered him to pay petitioners the amount of P5,782,500.00 representing the
market value of Lot No. 1320, as well as P10,000.00 as exemplary damages; and (c) held the
National Treasurer, as custodian of the Assurance Fund, subsidiarily liable to Anduiza's
monetary liability should the latter be unable to fully pay the same.[24]

Prefatorily, the RTC characterized the subject complaint filed on March 18, 2009 as one for
reconveyance based on an implied trust, which is subject to extinctive prescription of ten (10)
years ordinarily counted from the time of the repudiation of the trust, i.e., when Anduiza
registered TCT No. 42486 in his name on October 9, 1995. This notwithstanding, the RTC found
that since: (a) petitioners are residing in Spain; (b) they are in possession of the owner's duplicate
copy of TCT No. 13450 registered in their names; and (c) Anduiza's act of fraudulently
cancelling their title was unknown to – if not effectively concealed from – them, the ten (10)-
year prescriptive period should be reckoned from their actual discovery of the fraud in 2008.[25]
As such, petitioners' complaint for reconveyance – as well as their claim against the Assurance
Fund which has a six (6)-year prescriptive period – has not prescribed.[26]
Anent the merits of the case, the RTC found that Anduiza had indeed acquired title over Lot No.
1320 in bad faith and through fraud – a fact which is further highlighted by his failure to refute
petitioner's allegations against him on account of his omission to file a responsive pleading
despite due notice.[27] This notwithstanding, the RTC held that petitioners could no longer
recover Lot No. 1320 from Spouses Amurao and/or the Co Group as the latter are innocent
purchasers for value and in good faith, absent any evidence to the contrary. As such, it is only
proper that Anduiza be made to pay compensatory damages corresponding to the value of the
loss of property, as well as exemplary damages as stated above.[28]

Finally, the RTC found that Anduiza alone could not have perpetrated the fraud without the
active participation of the RD-Legazpi. It then proceeded to point out that the evidence on record
clearly established the irregularities in the cancellation of petitioners' title and the issuance of
Anduiza's title, all of which cannot be done successfully without the complicity of the RD-
Legazpi. Hence, the Assurance Fund may be held answerable for the monetary awards in favor
of petitioners, should Anduiza be unable to pay the same in whole or in part.[29]

Aggrieved, petitioners moved for reconsideration,[30] while the RD Legazpi and the National
Treasurer moved for a partial reconsideration;[31] both of which were denied in an Order[32]
dated April 30, 2014. Thus, they filed their respective notices of appeal.[33] However, in an
Order[34] dated June 11, 2014, petitioners' notice of appeal was denied due course due to their
failure to pay the appellate docket and other lawful fees.[35] Consequently, the Co Group moved
for a partial entry of judgment,[36] which the RTC granted in an Order[37] dated July 22, 2014.
As such, only the appeal of the RD-Legazpi and the National Treasurer questioning the
subsidiary liability of the Assurance Fund was elevated to the CA.[38]

The CA Ruling

In a Decision[39] dated March 16, 2016, the CA reversed and set aside the RTC's ruling insofar
as the National Treasurer's subsidiary liability was concerned.[40] It held that petitioners only
had six (6) years from the time Anduiza caused the cancellation of TCT No. 13450 on October 9,
1995, or until October 9, 2001, within which to claim compensation from the Assurance Fund.
Since petitioners only filed their claim on March 18, 2009, their claim against the Assurance
Fund is already barred by prescription.[41]

Dissatisfied, petitioners moved for reconsideration,[42] which was, however, denied in a

Resolution[43] dated May 19, 2016; hence, this petition.[44]
The Issue Before the Court

The essential issue for resolution is whether or not the CA correctly held that petitioners'
claim against the Assurance Fund has already been barred by prescription.

The Court's Ruling

The petition is granted.

I. Nature and Purpose of the Assurance Fund

It is a fundamental principle that "a Torrens certificate of Title is indefeasible and binding upon
the whole world unless it is nullified by a court of competent jurisdiction x x x in a direct
proceeding for cancellation of title."[45] "The purpose of adopting a Torrens System in our
jurisdiction is to guarantee the integrity of land titles and to protect their indefeasibility once the
claim of ownership is established and recognized. This is to avoid any possible conflicts of title
that may arise by giving the public the right to rely upon the face of the Torrens title and
dispense with the need of inquiring further as to the ownership of the property."[46]

As a corollary, "every person dealing with registered land may safely rely on the correctness of
the certificate of title issued therefor and the law will in no way oblige him to go behind the
certificate to determine the condition of the property. When a certificate of title is clean and free
from any encumbrance, potential purchasers have every right to rely on such certificate.
Individuals who rely on a clean certificate of title in making the decision to purchase the real
property are often referred to as 'innocent purchasers for value' and 'in good faith."'[47] "Where
innocent third persons, relying on the correctness of the certificate of title thus issued, acquire
rights over the property[,] the court cannot disregard such rights and order the total cancellation
of the certificate. The effect of such an outright cancellation would be to impair public
confidence in the certificate of title, for everyone dealing with property registered under the
Torrens system would have to inquire in every instance whether the title has been regularly or
irregularly issued."[48]

The rationale for the rule on innocent purchasers for value "is the public's interest in sustaining
'the indefeasibility of a certificate of title, as evidence of the lawful ownership of the land or of
any encumbrance' on it."[49] Notably, the term "innocent purchaser for value" may also refer to
an innocent mortgagee who had no knowledge of any defects in the title of the mortgagor of the
property, such as in this case.

However, while "public policy and public order demand x x x that titles over lands under the
Torrens system should be given stability for on it greatly depends the stability of the country's
economy[,] x x x [p]ublic policy also dictates that those unjustly deprived of their rights over real
property by reason of the operation of our registration laws be afforded remedies."[50] Thus, as
early as the 1925 case of Estrellado v. Martinez,[51] it has been discerned that remedies, such as
an action against the Assurance Fund, are available remedies to the unwitting owner:

The authors of the Torrens system x x x wisely included provisions intended to safeguard the
rights of prejudiced parties rightfully entitled to an interest in land but shut off from obtaining
titles thereto [because of the indefeasibility of a Torrens title]. [Therefore,] [a]s suppletory to the
registration of titles, pecuniary compensation by way of damages was provided for in certain
cases for persons who had lost their property. For this purpose, an assurance fund was created. x
x x[52] (Emphasis and underscoring supplied)

The Assurance Fund is a long-standing feature of our property registration system which is
intended "to relieve innocent persons from the harshness of the doctrine that a certificate is
conclusive evidence of an indefeasible title to land x x x."[53] Originally, claims against the
Assurance Fund were governed by Section 101[54] of Act No. 496, otherwise known as the
"Land Registration Act." The language of this provision was substantially carried over to our
present "Property Registration Decree," i.e., Presidential Decree No. (PD) 1529,[55] Section 95
of which reads:

Section 95. Action for compensation from funds. – A person who, without negligence on his
part, sustains loss or damage, or is deprived of land or any estate or interest therein in
consequence of the bringing of the land under the operation of the Torrens system or arising after
original registration of land, through fraud or in consequence of any error, omission, mistake or
misdescription in any certificate of title or in any entry or memorandum in the registration book,
and who by the provisions of this Decree is barred or otherwise precluded under the provision of
any law from bringing an action for the recovery of such land or the estate or interest therein,
may bring an action in any court of competent jurisdiction for the recovery of damages to be paid
out of the Assurance Fund.

In Register of Deeds of Negros Occidental v. Anglo, Sr.[56] (Anglo, Sr.), the Court held that
"[b]ased solely on Section 95 of Presidential Decree No. 1529, the following conditions must be
met: First, the individual must sustain loss or damage, or the individual is deprived of land
or any estate or interest. Second, the individual must not be negligent. Third, the loss,
damage, or deprivation is the consequence of either (a) fraudulent registration under the
Torrens system after the land's original registration, or (b) any error, omission, mistake, or
misdescription in any certificate of title or in any entry or memorandum in the registration
book. [And] [f]ourth, the individual must be barred or otherwise precluded under the
provision of any law from bringing an action for the recovery of such land or the estate or
interest therein."[57]

Anent the first ground (i.e., item [a] of the third condition above), it should be clarified that loss,
damage, or deprivation of land or any estate or interest therein through fraudulent registration
alone is not a valid ground to recover damages against the Assurance Fund. Section 101 of PD
1529 explicitly provides that "[t]he Assurance Fund shall not be liable for any loss, damage or
deprivation caused or occasioned by a breach of trust, whether express, implied or constructive
or by any mistake in the resurvey or subdivision of registered land resulting in the expansion of
area in the certificate of title." It is hornbook doctrine that "[w]hen a party uses fraud or
concealment to obtain a certificate of title of property, a constructive trust is created in favor of
the defrauded party."[58] However, as stated in Section 101 of PD 1529, the inability to recover
from the defrauding party does not make the Assurance Fund liable therefor.

Instead, the loss, damage or deprivation becomes compensable under the Assurance Fund
when the property has been further registered in the name of an innocent purchaser for
value. This is because in this instance, the loss, damage or deprivation are not actually
caused by any breach of trust but rather, by the operation of the Torrens system of
registration which renders indefeasible the title of the innocent purchaser for value. To
note, it has been held that a mortgagee in good faith (such as Rowena) stands as an
innocent mortgagee for value with the rights of an innocent purchaser for value.[59]

In the 1916 case of Dela Cruz v. Fabie,[60] the Court discussed that it is necessary for the
property to have transferred to a registered innocent purchaser – not to a mere registered
purchaser – before recovery from the Assurance Fund may prosper, viz.:

The Attorney-General did not err when he wrote in his brief in the preceding case: "To hold that
the principal may recover damages from the assurance fund on account of such a fraudulent act
as that charged to Vedasto Velazquez in this case would be equivalent to throwing open the door
to fraud, to the great advantage of the registered landowner and his agent and to the ruin and
rapid disappearance of the assurance fund, and the general funds of the Insular Treasury would
become liable for the claims for indemnity in cases where none such was due. This course would
in time wreck the Insular Treasury and enrich designing scoundrels." (Brief, p. 16.)
xxxx

The simple allegation contained in the complaint that Fabie is a registered purchaser is not the
same as that of his being a registered innocent purchaser. The fact of the sale and the fact of the
registration are not sufficient to allow the understanding that it was also admitted in the demurrer
that he was an innocent purchaser.

There is no law or doctrine that authorizes such an interpretation. The plaintiff must set forth in
his complaint all the facts that necessarily conduce toward the result sought by his action. The
action was for the purpose of recovering from the assurance fund indemnity for the damage
suffered by the plaintiff in losing the ownership of his land as a result of the registration obtained
by an innocent holder for value (purchase). It is a necessary requirement of the law that the
registered property shall have been conveyed to an innocent holder for value who shall also have
registered his acquisition. Necessarily the complaint must show these facts as they are required
by the law. x x x[61] (Emphasis and underscoring supplied)

Later, in the 1936 case of La Urbana v. Bernardo,[62] the Court qualified that ''it is a
condition sine qua non that the person who brings an action for damages against the
assurance fund be the registered owner, and, as to holders of transfer certificates of title,
that they be innocent purchasers in good faith and for value."[63]

In sum, the Court herein holds that an action against the Assurance Fund on the ground of
"fraudulent registration under the Torrens system after the land's original registration" may be
brought only after the claimant's property is registered in the name of an innocent purchaser for
value. This is because it is only after the registration of the innocent purchaser for value's title
(and not the usurper's title which constitutes a breach of trust) can it be said that the claimant
effectively "sustains loss or damage, or is deprived of land or any estate or interest therein in
consequence of the bringing of the land under the operation of the Torrens system." The
registration of the innocent purchaser for value's title is therefore a condition sine qua non
in order to properly claim against the Assurance Fund.

II. Action for Compensation Against

the Assurance Fund; Prescriptive Period
An action for compensation against the Assurance Fund is a separate and distinct remedy,
apart from review of decree of registration or reconveyance of title, which can be availed of
when there is an unjust deprivation of property.[64] This is evident from the various
provisions of Chapter VII of PD 1529 which provide for specific parameters that govern
the action.

Among others, Section 95 of PD 1529 cited above states the conditions to claim against the
Assurance Fund. Meanwhile, Section 96 of the same law states against whom the said action
may be filed:

Section 96. Against whom action filed. – If such action is brought to recover for loss or damage
or for deprivation of land or of any estate or interest therein arising wholly through fraud,
negligence, omission, mistake or misfeasance of the court personnel, Register of Deeds, his
deputy, or other employees of the Registry in the performance of their respective duties, the
action shall be brought against the Register of Deeds of the province or city where the land is
situated and the National Treasurer as defendants. But if such action is brought to recover for
loss or damage or for deprivation of land or of any interest therein arising through fraud,
negligence, omission, mistake or misfeasance of person other than court personnel, the Register
of Deeds, his deputy or other employees of the Registry, such action shall be brought against the
Register of Deeds, the National Treasurer and other person or persons, as co-defendants. It shall
be the duty of the Solicitor General in person or by representative to appear and to defend all
such suits with the aid of the fiscal of the province or city where the land lies: Provided,
however, that nothing in this Decree shall be construed to deprive the plaintiff of any right of
action which he may have against any person for such loss or damage or deprivation without
joining the National Treasurer as party defendant. In every action filed against the Assurance
Fund, the court shall consider the report of the Commissioner of Land Registration. (Emphases
and underscoring supplied)

As Section 96 of PD 1529 provides, "if [the] action is brought to recover for loss or damage or
for deprivation of land or of any interest therein arising through fraud, negligence, omission,
mistake or misfeasance of person other than court personnel, the Register of Deeds, his deputy or
other employees of the Registry, such action shall be brought against the Register of Deeds, the
National Treasurer and other person or persons, as co-defendants." The phrase "other person or
persons" would clearly include the usurper who fraudulently registered the property under his
name.

To recover against the Assurance Fund, however, it must appear that the execution against "such
defendants other than the National Treasurer and the Register of Deeds" is "returned unsatisfied
in whole and in part." "[O]nly then shall the court, upon proper showing, order the amount of the
execution and costs, or so much thereof as remains unpaid, to be paid by the National Treasurer
out of the Assurance Fund." Section 97 of PD 1529 states:

Section 97. Judgment, how satisfied. – If there are defendants other than the National Treasurer
and the Register of Deeds and judgment is entered for the plaintiff and against the National
Treasury, the Register of Deeds and any of the other defendants, execution shall first issue
against such defendants other than the National Treasurer and the Register of Deeds. If the
execution is returned unsatisfied in whole or in part, and the officer returning the same
certificates that the amount due cannot be collected from the land or personal property of such
other defendants, only then shall the court, upon proper showing, order the amount of the
execution and costs, or so much thereof as remains unpaid, to be paid by the National Treasurer
out of the Assurance Fund. In an action under this Decree, the plaintiff cannot recover as
compensation more than the fair market value of the land at the time he suffered the loss,
damage, or deprivation thereof. (Emphasis supplied)

Based on the afore-cited provision, it is apparent that a prior declaration of insolvency or

inability to recover from the usurper is not actually required before the claimant may file an
action against the Assurance Fund. Whether or not funds are to be paid out of the Assurance
Fund is a matter to be determined and resolved at the execution stage of the proceedings. Clearly,
this should be the proper treatment of the insolvency requirement, contrary to the insinuation
made in previous cases on the subject.[65]

Another important provision in Chapter VII of PD 1529 is Section 102, which incidentally stands
at the center of the present controversy. This provision sets a six (6)-year prescriptive period
"from the time the right to bring such action first occurred" within which ore may proceed to file
an action for compensation against the Assurance Fund, viz.:

Section 102. Limitation of Action. – Any action for compensation against the Assurance Fund by
reason of any loss, damage or deprivation of land or any interest therein shall be instituted within
a period of six years from the time the right to bring such action first occurred: Provided, That
the right of action herein provided shall survive to the legal representative of the person
sustaining loss or damage, unless barred in his lifetime; and Provided, further, That if at the time
such right of action first accrued the person entitled to bring such action was a minor or insane or
imprisoned, or otherwise under legal disability, such person or anyone claiming from, by or
under him may bring the proper action at any time within two years after such disability has been
removed, notwithstanding the expiration of the original period of six years first above provided.
(Emphasis supplied)
Jurisprudence has yet to interpret the meaning of the phrase "from the time the right to bring
such action first occurred''; hence, the need to clarify the same.

The general rule is that "a right of action accrues only from the moment the right to
commence the action comes into existence, and prescription begins to run from that time x
x x."[66] However, in cases involving fraud, the common acceptation is that the period of
prescription runs from the discovery of the fraud. Under the old Code of Civil Procedure, an
action for relief on the ground of fraud prescribes in four years, "but the right of action in such
case shall not be deemed to have accrued until the discovery of the fraud."[67] Meanwhile, under
prevailing case law, "[w]hen an action for reconveyance is based on fraud, it must be filed within
four (4) years from discovery of the fraud, and such discovery is deemed to have taken place
from the issuance of the original certificate of title. x x x The rule is that the registration of an
instrument in the Office of the RD constitutes constructive notice to the whole world and
therefore the discovery of the fraud is deemed to have taken place at the time of
registration."[68]

However, in actions for compensation against the Assurance Fund grounded on fraud,
registration of the innocent purchaser for value's title should only be considered as a
condition sine qua non to file such an action and not as a form of constructive notice for the
purpose of reckoning prescription. This is because the concept of registration as a form of
constructive notice is essentially premised on the policy of protecting the innocent purchaser for
value's title, which consideration does not, however, obtain in Assurance Fund cases. As earlier
intimated, an action against the Assurance Fund operates as form of relief in favor of the original
property owner who had been deprived of his land by virtue of the operation of the Torrens
registration system. It does not, in any way, affect the rights of the innocent purchaser for value
who had apparently obtained the property from a usurper but nonetheless, stands secure because
of the indefeasibility of his Torrens certificate of title. The underlying rationale for the
constructive notice rule – given that it is meant to protect the interest of the innocent purchaser
for value and not the original title holder/claimant – is therefore absent in Assurance Fund cases.
Accordingly, it should not be applied, especially since its application with respect to reckoning
prescription would actually defeat the Assurance Fund's laudable purpose.

The Assurance Fund was meant as a form of State insurance that allows recompense to an
original title holder who, without any negligence on his part whatsoever, had been
apparently deprived of his land initially by a usurper. The ordinary remedies against the
usurper would have allowed the original title holder to recover his property. However, if the
usurper is able to transfer the same to an innocent purchaser for value and he is unable to
compensate the original title holder for the loss, then the latter is now left without proper
recourse. As exemplified by this case, original title holders are, more often than not,
innocently unaware of the unscrupulous machinations of usurpers and later on, the
registration of an innocent purchaser for value's title. If the constructive notice rule on
registration were to apply in cases involving claims against the Assurance Fund, then original
title holders – who remain in possession of their own duplicate certificates of title, as
petitioners in this case – are in danger of losing their final bastion of recompense on the
ground of prescription, despite the lack of any negligence or fault on their part. Truly, our
lawmakers would not have intended such an unfair situation. As repeatedly stated, the intent of
the Assurance Fund is to indemnify the innocent original title holder for his property loss,
which loss is attributable to not only the acts of a usurper but ultimately the operation of
the Torrens System of registration which, by reasons of public policy, tilts the scales in
favor of innocent purchasers for value.

Thus, as aptly pointed out by Associate Justice Marvic M.V.F. Leonen during the deliberations
on this case, the constructive notice rule on registration should not be made to apply to title
holders who have been unjustly deprived of their land without their negligence. The actual
title holder cannot be deprived of his or her rights twice – first, by fraudulent registration
of the title in the name of the usurper and second, by operation of the constructive notice
rule upon registration of the title in the name of the innocent purchaser for value. As such,
prescription, for purposes of determining the right to bring an action against the Assurance Fund,
should be reckoned from the moment the innocent purchaser for value registers his or her title
and upon actual knowledge thereof of the original title holder/claimant. As above-discussed, the
registration of the innocent purchaser for value's title is a prerequisite for a claim against the
Assurance Fund on the ground of fraud to proceed, while actual knowledge of the registration is
tantamount to the discovery of the fraud. More significantly, this interpretation preserves and
actualizes the intent of the law, and provides some form of justice to innocent original title
holders. In Alonzo v. Intermediate Appellate Court,[69] this Court exhorted that:

[I]n seeking the meaning of the law, the first concern of the judge should be to discover in its
provisions the intent of the lawmaker. Unquestionably, the law should never be interpreted in
such a way as to cause injustice as this is never within the legislative intent. An indispensable
part of that intent, in fact, for we presume the good motives of the legislature, is to render justice.

Thus, we interpret and apply the law not independently of but in consonance with justice.
Law and justice are inseparable, and we must keep them so. x x x[70]

In this case, it has been established that petitioners are residents of Spain and designated no
administrator over their property, i.e., Lot No. 1320, in the Philippines. They remain in
possession of the owner's duplicate copy of TCT No. 13450 in their names,[71] the surrender of
which was necessary in order to effect a valid transfer of title to another person through a
voluntary instrument.[72] As the records show, not only did Anduiza, the usurper, forge a deed
of sale purportedly transferring petitioners' property in his favor,[73] they were also not required
by the RD-Legazpi or through a court order to surrender possession of their owner's duplicate
certificate of title for the proper entry of a new certificate of title[74] in Anduiza's favor. Neither
was the issuance of TCT No. 42486 in the name of Anduiza recorded/registered in the Primary
Entry Book, nor was a copy of the deed of sale in his favor kept on file with the RD-Legazpi.[75]
Consequently, petitioners were not in any way negligent as they, in fact, had the right to rely on
their owner's duplicate certificate of title and the concomitant protection afforded thereto by the
Torrens system, unless a better right, i.e., in favor of an innocent purchaser for value, intervenes.
[76] As it turned out, Anduiza mortgaged Lot No. 1320 to Spouses Amurao, particularly
Rowena. As a result of Anduiza's default, Rowena foreclosed the mortgage, and consequently,
caused the cancellation of TCT No. 42486 and issuance of TCT No. 52392 in her name on July
19, 2001.[77] Spouses Amurao and later, the Co group, in whose favor the subject lot was sold –
by virtue of the final judgment of the RTC – were conclusively deemed as innocent purchasers
for value. Their status as such had therefore been settled and hence, cannot be revisited, lest this
Court deviate from the long-standing principle of immutability of judgments, which states:

A definitive final judgment, however erroneous, is no longer subject to change or revision.

A decision that has acquired finality becomes immutable and unalterable. This quality of
immutability precludes the modification of a final judgment, even if the modification is meant to
correct erroneous conclusions of fact and law. And this postulate holds true whether the
modification is made by the court that rendered it or by the highest court in the land. The orderly
administration of justice requires that, at the risk of occasional errors, the judgments/resolutions
of a court must reach a point of finality set by the law. The noble purpose is to write finis to
dispute once and for all. This is a fundamental principle in our justice system, without
which there would be no end to litigations. Utmost respect and adherence to this principle
must always be maintained by those who exercise the power of adjudication. Any act,
which violates such principle, must immediately be struck down. Indeed, the principle of
conclusiveness of prior adjudications is not confined in its operation to the judgments of
what are ordinarily known as courts, but extends to all bodies upon which judicial powers
had been conferred.[78]

In this regard, the RTC held that the Assurance Fund would be subsidiarily liable to
petitioners, should the judgment debt be left unsatisfied from the land or personal property
of Anduiza. If the constructive notice rule were to be applied, then petitioners' claim against the
Assurance Fund filed on March 18, 2009 would be barred, considering the lapse of more than six
(6) years from the registration of Spouses Amurao's title over the subject lot on July 19, 2001.
However, as earlier explained, the constructive notice rule holds no application insofar as
reckoning the prescriptive period for Assurance Fund cases. Instead, the six (6)-year prescriptive
period under Section 102 of PD 1529 should be counted from January 28, 2008, or the date when
petitioners discovered the anomalous transactions over their property, which included the
registration of Rowena's title over the same. Thus, when they filed their complaint on March 18,
2009, petitioners' claim against the Assurance Fund has not yet prescribed. Accordingly, the CA
erred in ruling otherwise.

To recount, the CA held that prescription under Section 102 of PD 1529 runs from the time of
the registration of the title in favor of the person who caused the fraud, i.e., the usurper.[79] As
basis, the CA relied on the case of Guaranteed Homes, Inc. v. Heirs of Valdez (Guaranteed
Homes, Inc.),[80] wherein the Court made the following statement:

Lastly, respondents' claim against the Assurance Fund also cannot prosper. Section 101 of P.D.
No. 1529 clearly provides that the Assurance Fund shall not be liable for any loss, damage or
deprivation of any right or interest in land which may have been caused by a breach of trust,
whether express, implied or constructive. Even assuming arguendo that they are entitled to claim
against the Assurance Fund, the respondents' claim has already prescribed since any action for
compensation against the Assurance Fund must be brought within a period of six (6) years from
the time the right to bring such action first occurred, which in this case was in 1967.[81]
(Emphasis supplied)

After a careful perusal of the Guaranteed Homes, Inc. case in its entirety, the Court herein
discerns that the foregoing pronouncement on prescription was mere obiter dicta, and hence,
non-binding.[82] Actually, the issue for resolution in that case revolved only around petitioner
Guaranteed Homes, Inc.'s motion to dismiss Pablo Pascua's (respondent's predecessor) complaint
for reconveyance on the ground of failure to state a cause of action. Ultimately, the Court held
that respondent's complaint failed to state a cause of action for the reasons that: (a) the complaint
does not allege any defect in the TCT assailed therein; (b) the transfer document relied upon by
Guaranteed Homes, Inc. (i.e., the Extrajudicial Settlement of a Sole Heir and Confirmation of
Sales) was registered and had an operative effect; and (c) respondent cannot make a case for
quieting of title since their title was cancelled, but added, as an aside, that the claim against the
Assurance Fund would be improper "since the Assurance Fund shall not be liable for any loss,
damage or deprivation of any right or interest in land which may have been caused by a breach
of trust, whether express, implied or constructive", and moreover, "[e]ven assuming arguendo
that they are entitled to claim against the Assurance Fund, the respondents' claim has already
prescribed."[83] Thus, as it was not a pronouncement that was made in relation to the actual
issues involved, the quoted excerpt by the CA from Guaranteed Homes, Inc. is not binding
jurisprudence and hence, would not necessarily apply to this case.

In any event, the reckoning of the six (6)-year period from the time a certificate of title was
issued in favor of the usurper is incorrect doctrine.[84] At the risk of belaboring the point, the
registration of the property in the name of an innocent purchaser for value is integral in every
action against the Assurance Fund on the ground of "fraudulent registration under the Torrens
system after the land's original registration." This is because it is only at that moment when the
claimant suffers loss, damage or deprivation of land caused by the operation of the Torrens
system of registration, for which the State may be made accountable. To follow the CA's ruling
based on the obiter dictum in Guaranteed Homes, Inc. is to recognize that the right of action
against the Assurance Fund arises already at the point when the usurper fraudulently registers his
title. By legal attribution, this latter act is a breach of an implied trust, which, however, by
express provision of Section 101 of PD 1529, does not render the Assurance Fund liable. Thus,
the CA committed reversible error in ruling that the prescriptive period under Section 102 of
PD1529 for filing a claim against the Assurance Fund should be reckoned from the registration
of the usurper's title. On the contrary, the period should be reckoned from the moment the
innocent purchaser for value registers his or her title and upon actual knowledge thereof of
the original title holder/claimant. In this light, the claim has yet to prescribe.

WHEREFORE, the petition is GRANTED. The Decision dated March 16, 2016 and the
Resolution dated May 19, 2016 of the Court of Appeals in CA-G.R. CV No. 104207 are hereby
REVERSED and SET ASIDE. The Decision dated August 19, 2013 and the Order dated April
30, 2014 of the Regional Trial Court of Legazpi City, Albay, Branch 2 (RTC), are hereby
REINSTATED in toto. Accordingly, the RTC is hereby DIRECTED to conduct execution
proceedings with reasonable dispatch.

SO ORDERED.