Legal Implications of a Forged Deed of Sale

Read also: Basics of land titles, transactions, and real property registration

Under the definition of a contract, it is a meeting of minds between two (2) persons whereby one binds himself with respect to the other, to give something or to render some service (Article 1305 of the New Civil Code). The meeting of the minds between the contracting parties signify the consent to enter into the contract, this can be shown through shaking of the hands or placing one’s signature on the contract when it is produced in writing. However, a problem arises when one of the parties’ signature on the contract was forged. This is common in contracts and deeds involving sale of properties.

General Rule: A Forged Deed Cannot Convey Title

As a rule, it has been consistently held by the Supreme Court that a forged or fraudulent deed is a nullity and conveys no title (Fule vs. Legare ,117 Phil. 367). Moreover, as an added implication, a person who buys from a person who is not the registered owner is not considered as a purchaser in good faith (Director of Lands vs. Addison G.R. No. 23148). Under Section 53 of Presidential Decree No. 1529 or the Property Registration Decree, after the entry of the decree of registration on the original petition or application, any subsequent registration procured by the presentation of a forged duplicate certificate of title, or a forged deed or other instrument, shall be null and void.

Exception to the Rule

As previously mentioned, a forged deed cannot convey title. However, in the case of Spouses Peralta vs. Heirs of Abalon, G.R. No. 183448, June 30, 2014, the Supreme Court through former Chief Justice Maria Lourdes Sereno explained that there are instances when such a fraudulent document may become the root of a valid title. One such instance is where the certificate of title was already transferred from the name of the true owner to the forger, and while it remained that way, the land was subsequently sold to an innocent purchaser. For then, the buyer had the right to rely upon what appeared in the certificate. In the said case, the court elucidated that although the Deed of Sale in favor of a party was fraudulent, the fact remains that the said party was able to secure a registered title to the house and lot. It was this title which he subsequently conveyed to the other party-buyers. Thus, in these cases, although the standing rule is that a forged or fraudulent deed is a nullity and conveys no title, the forged title became the root of a valid title.

The previously cited ruling which have deviated from the original rule that forged deed conveys no title have been consequently adopted, especially in deed of sale involving real properties, because under the Torrens system, registration is the operative act that gives validity to the transfer or creates a lien upon the land (Secs. 50 and 51, Land Registration Act). Consequently, where there was nothing in the certificate of title to indicate any cloud or vice in the ownership of the property, or any encumbrance thereon, the purchaser is not required to explore farther than what the Torrens title upon its face indicates in quest for any hidden defect or inchoate right that may subsequently defeat his right thereto. If the rule were otherwise, the efficacy and conclusiveness of the certificate of title which the Torrens system seeks to insure would entirely be futile and nugatory. (Reynes vs. Barrera, 68 Phil., 656; De Lara and De Guzman vs. Ayroso, 50 O.G. No 10, 4838). The public shall then be denied of its foremost motivation for respecting and observing the Land Registration Act. In the end, the business community stands to be inconvenienced and prejudiced immeasurably (Spouses Peralta vs. Heirs of Abalon).

Furthermore, when the Register of Deeds have issued a certificate of title in the name of the forger and transferred to the third parties, the entire transaction fall under the purview of Article 1434 of the New Civil Code which provides that when a person who is not the owner of a thing sells or alienates and delivers it, and later the seller or grantor acquires title thereto, such title passes by operation of law to the buyer or grantee.

In summary, the ruling in Spouses Peralta vs. Heirs of Abalon is enlightening in case of the established rule on a forged deed is concerned. Generally, a forged deed is null and cannot convey title, the exception thereto, pursuant to Section 55 of the Land Registration Act, denotes the registration of titles from the forger to the innocent purchaser for value. Thus, the qualifying point here is that there must be a complete chain of registered titles. This means that all the transfers starting from the original rightful owner to the innocent holder for value and that includes the transfer to the forger, must be duly registered, and the title must be properly issued to the transferee. The forged instrument eventually became the root of a valid title in the hands of an innocent purchaser for value. The new title under the name of the forger was registered and relied upon by the innocent purchaser for value. Hence, it was clear that there was a complete chain of registered titles.

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Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/0917-5772207.

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