G.R. No. 211253 , February 10, 2021
CELEDENIO C. DEMEGILLO, PETITIONER, VS. ARTURO S. LUMAMPAO, MARIA LUZ FANCOBILA, CONCEPCION L. DEMAVIVAS, AND IMELDA L. BABAAN, RESPONDENTS. [G.R. No. 211259] CONCEPCION L. DEMAVIVAS PETITIONER, VS. CELEDENIO C. DEMEGILLO RESPONDENT.

FACTS

The case originated from a complaint for accion publiciana filed by respondents (Concepcion L. Demavivas, Arturo S. Lumampao, Luz L. Fancobila, and Imelda L. Babaan) against petitioner Celedonio C. Demegillo over a parcel of land (Lot 3106). Respondents are the children of Adolfo Lumampao and were issued a Certificate of Land Ownership Award (CLOA) No. 00029958, which was later registered as Original Certificate of Title (OCT) No. D-4960 in their names, covering the entire 95,689 square meters of Lot 3106. They alleged that Demegillo entered and tilled a 3-hectare portion of the land before their father’s death in 1992 and refused to vacate despite demands.
Demegillo claimed lawful ownership and possession of a 3-hectare portion since 1974. He presented a September 15, 1977 written agreement subdividing Lot 3106 among himself, Adolfo, and a certain Nicolas Vapor, with each getting three hectares. He also presented a March 23, 1980 notarized agreement where Vapor sold his share to Adolfo, which Demegillo claimed fraudulently included his own share. Demegillo protested Adolfo’s homestead application, but the DAR granted the CLOA to respondents. Demegillo filed a DARAB case for cancellation of the CLOA, which was dismissed by the PARAD on November 24, 2008, ruling Demegillo lacked legal personality as a mere applicant and not a grantee.
The Regional Trial Court (RTC) ruled in favor of Demegillo, declaring him the lawful possessor since 1974, finding the CLOA and OCT erroneously included his share due to fraud, and ordering the cancellation of OCT No. D-4960 and issuance of separate titles. The RTC treated Demegillo’s Answer with Counterclaim as an action for reconveyance.
The Court of Appeals (CA) reversed the RTC, declaring respondents the absolute owners of the entire Lot 3106 and ordering Demegillo to vacate. The CA held that respondents’ title, issued under the Torrens system, had become incontrovertible and was not subject to collateral attack. It agreed with the PARAD that Demegillo, as a mere homestead applicant, lacked the legal personality to challenge the title.

ISSUE

The primary issue is whether the Court of Appeals erred in reversing the RTC’s decision and in holding that Demegillo’s counterclaim for reconveyance based on fraud was a collateral attack on respondents’ Torrens title, and that Demegillo lacked legal personality to challenge the title.

RULING

The Supreme Court REVERSED the Court of Appeals’ Decision and REINSTATED the Regional Trial Court’s Judgment with MODIFICATION, deleting the award of damages.
The Supreme Court ruled that:
1. Demegillo’s counterclaim in his Answer constituted a direct attack on respondents’ title. A counterclaim is a complaint by the defendant against the plaintiff and is a direct, not collateral, attack on a certificate of title. The RTC correctly treated it as an action for reconveyance based on fraud.
2. An action for reconveyance based on fraud is a recognized remedy against a registered owner who obtained title through fraudulent means. Such an action does not aim to nullify the title but to compel the holder to transfer the property wrongfully registered. The one-year period for review of a decree of registration does not apply when the action is based on fraud.
3. Demegillo had the legal personality to file the counterclaim for reconveyance. He was a real party-in-interest as his claim of ownership and possession since 1974, supported by the 1977 agreement, showed he stood to be injured by the judgment. A homestead applicant or a possessor with a claim of right has the requisite interest to bring such an action against the registered owner.
4. The issuance of the CLOA and OCT did not automatically bar Demegillo’s claim. The Torrens system does not permit fraud. A title derived from a fraudulently obtained free patent or homestead patent does not become indefeasible. The State’s grant of title to one applicant does not preclude a judicial determination of a better right of another claimant.
5. The PARAD Decision in the DARAB case did not constitute res judicata. The causes of action and reliefs sought in the DARAB case (cancellation of CLOA) and the civil case (accion publiciana and reconveyance) were different. Furthermore, the PARAD’s findings were not binding on the RTC as the DARAB’s jurisdiction is limited to agrarian disputes, and the core issue of ownership based on fraud was within the RTC’s exclusive jurisdiction.