G.R. No. 137739 March 26, 2001
Roberto B. Tan, petitioner, vs. Philippine Banking Corp., Helen Leontovich Vda. De Aguinaldo and Registrar of Deeds of Marikina, respondents.

FACTS

Petitioner Roberto Tan purchased a parcel of land from respondent Helen Aguinaldo. The title (TCT No. 294192) was clean, showing no liens or encumbrances. Upon payment, a new title (TCT No. 296945) was issued in Tan’s name. Two months later, Tan learned the property was involved in litigation between Aguinaldo and respondent Philippine Banking Corporation (PBC). PBC had previously foreclosed on a mortgage over several properties, including this lot, securing Aguinaldo’s loans. The Regional Trial Court nullified the foreclosure and ordered the cancellation of PBC’s titles, directing Aguinaldo to pay the bank. This decision was declared final and executory after the court held PBC waived its right to appeal via a joint stipulation. Following the finality, the Register of Deeds cancelled PBC’s titles and issued new ones to Aguinaldo, who then sold a lot to Tan.
PBC filed a certiorari petition with the Court of Appeals (CA) challenging the denial of its appeal. The CA initially granted PBC’s petition, ordering the trial court to give due course to its appeal, but denied PBC’s prayer to reinstate its cancelled titles, stating such a claim against Tan required a separate direct action. However, upon PBC’s motion for reconsideration, the CA issued subsequent resolutions reversing itself and directing the Register of Deeds to reinstate PBC’s cancelled titles, which would effectively cancel Tan’s title.

ISSUE

Whether the Court of Appeals erred in directing the reinstatement of PBC’s cancelled certificates of title, which constitutes a collateral attack on Tan’s title.

RULING

Yes. The Supreme Court reversed the CA’s resolutions and reinstated its original decision. The legal logic is anchored on the fundamental principle of indefeasibility of a Torrens title and the prohibition against collateral attack. Tan acquired his title in good faith and for value, relying on a clean certificate of title in Aguinaldo’s name issued after a court decision had become final and executory. His title, having been regularly issued, is protected by law. A certificate of title cannot be altered, modified, or cancelled in a collateral proceeding; it can only be challenged in a direct action filed for that purpose. The CA’s initial ruling correctly held that PBC’s remedy against Tan was to file a proper direct action, not to seek reinstatement of its own titles through a petition for certiorari primarily directed against the trial court’s orders. The subsequent resolutions ordering the reinstatement of PBC’s titles effectively invalidated Tan’s title without the requisite direct proceeding, constituting an impermissible collateral attack. The Torrens system aims to guarantee land title integrity, and public confidence therein requires protecting innocent purchasers for value.