G.R. No. 143281 ; August 3, 2000
SPOUSES FRANCISCO and AMPARO DE GUZMAN, JR., petitioners, vs. THE NATIONAL TREASURER OF THE REPUBLIC OF THE PHILIPPINES and THE REGISTER OF DEEDS OF MARIKINA CITY, respondents.

FACTS

Petitioners Spouses De Guzman purchased a parcel of land from a couple representing themselves as the registered owners, Urlan and Asuncion Milambiling. The impostors presented the owner’s duplicate certificate of title, enabling the De Guzmans to register the sale and obtain a new Transfer Certificate of Title (TCT) in their names. The true owners, the Milambilings, who were working abroad, subsequently discovered the fraudulent sale. They successfully sued for the declaration of nullity of the sale and the cancellation of the De Guzmans’ title, a decision affirmed by the Court of Appeals and the Supreme Court.
Having lost the property, the De Guzmans filed an action for damages against the Assurance Fund under the Property Registration Decree, impleading the National Treasurer and the Register of Deeds. The Regional Trial Court ruled in their favor, ordering payment from the Fund. The Court of Appeals reversed this decision, prompting the De Guzmans to elevate the case to the Supreme Court.

ISSUE

Whether the petitioners are entitled to compensation from the Assurance Fund for the loss they sustained due to the fraudulent sale.

RULING

No. The Supreme Court affirmed the Court of Appeals’ decision, denying the petition. The legal logic is anchored on the strict requirements for compensation from the Assurance Fund under Section 95 of Presidential Decree No. 1529 (Property Registration Decree). The provision allows recovery only for loss or damage arising (1) from the bringing of land under the Torrens system or after original registration, through fraud, error, omission, mistake, or misdescription in a certificate of title or the register, and (2) where the claimant is barred from recovering the land itself.
The Court held the petitioners’ circumstances did not meet these conditions. First, their loss did not result from any omission, mistake, or malfeasance by the Register of Deeds or court personnel in the performance of their duties. The registration process itself was regular; the fraud was perpetrated by third-party impostors. Second, the petitioners were not deprived of land “as a consequence of the bringing” of the land under the Torrens system. Their deprivation resulted from a subsequent fraudulent transaction, not from an error in the original registration or an official record. Furthermore, the Court found the petitioners negligent for failing to exercise due diligence in verifying the identities of the impostors selling the property.
The Assurance Fund is designed to relieve innocent persons from the conclusive effect of a Torrens title when a loss arises from the operation of the system itself, not from independent acts of fraud by private parties. The petitioners, while victims of fraud, sought the benefits of the Torrens system by registering the deed. Their eventual loss of the property to the true owners does not constitute a loss recoverable from the Fund. Their proper recourse is against the impostors who defrauded them, not against the public assurance.