CIVIL LAW > XIII. LAND TITLES AND DEEDS > H. ASSURANCE FUND > 1. NATURE OF ASSURANCE FUND

The Assurance Fund, established under the Torrens system of land registration in the Philippines, is a statutory mechanism designed to provide compensation to individuals who, without negligence on their part, sustain loss or damage due to errors, fraud, or mismanagement in the registration process. The assurance fund is integral to maintaining public confidence in the land registration system and ensures equitable remedies for aggrieved parties.

1. LEGAL BASIS

The creation, purpose, and governance of the Assurance Fund are primarily governed by the following laws and legal provisions:

Presidential Decree No. 1529 (Property Registration Decree): This codifies laws relating to land registration and explicitly provides for the establishment and administration of the Assurance Fund.
Section 95, P.D. No. 1529: Directly discusses the Assurance Fund, its purpose, and the process for claiming compensation.

2. NATURE AND PURPOSE

The Assurance Fund is:

Statutory in Nature: It is mandated by law as an integral part of the Torrens system, ensuring accountability in the registration process.
Compensatory: It is not punitive but rather remedial, offering financial recompense for losses suffered by individuals.
Subsidiary: Recourse to the Assurance Fund is allowed only when other legal remedies, such as recovery against the party responsible for the fraud or mistake, have been exhausted.

The principal objectives of the Assurance Fund are:

To indemnify individuals who lose land or property due to fraud or error during registration.
To enhance trust in the land registration system by providing a safety net for innocent parties.

3. SOURCES OF THE FUND

The Assurance Fund is maintained through:

Registration Fees: Collected from transactions involving the registration of titles and other documents with the Registry of Deeds.
Penalties and Fines: Levied in connection with violations of registration laws or fraudulent activities.

The fund is held in trust by the government, typically managed by the National Treasury, and is not subject to general appropriations or allocations for non-registration-related purposes.

4. CLAIMANTS AND COVERAGE

a. Eligible Claimants

Individuals or entities who suffer loss or damage because:
1. They were deprived of land or property due to fraudulent registration or cancellation of their legitimate title.
2. Errors or omissions were committed by the Registrar of Deeds in the performance of their duties.
3. Other unforeseen defects in the registration process caused harm without contributory negligence on the part of the claimant.

b. Excluded Claimants

Individuals who:
1. Contributed to their own loss through negligence, bad faith, or participation in fraud.
2. Are claiming losses that arose from private disputes unrelated to registration errors or fraud.

c. Scope of Compensation

The Assurance Fund covers:
1. The fair market value of the property lost.
2. Reasonable expenses incurred by the claimant in pursuing legal remedies.
It does not cover punitive damages, lost profits, or other incidental claims.

5. PROCEDURE FOR CLAIMS

The process for making a claim against the Assurance Fund is outlined in Section 96 of P.D. No. 1529:

Filing a Complaint: The claimant must file a complaint in the proper Regional Trial Court sitting as a land registration court.
Proof of Exhaustion of Remedies: The claimant must demonstrate that:
- They pursued all available legal remedies against the party directly responsible for the fraud or error.
- They were unable to recover their loss through such remedies.
Judicial Determination:
- The court determines whether the claimant is entitled to compensation.
- The court may order payment from the Assurance Fund upon finding sufficient evidence.
Payment: Payment is made through the Treasurer of the Philippines upon the finality of the court’s judgment.

6. LIMITATIONS ON CLAIMS

Claims against the Assurance Fund are subject to specific limitations:

Prescription Period: Claims must be filed within a reasonable period, generally within ten (10) years from the time the loss or damage occurred, unless otherwise specified.
Burden of Proof: The claimant bears the burden of proving that the loss or damage was due to fraud, error, or negligence in the registration process.

7. JURISPRUDENCE

Philippine jurisprudence provides significant guidance on the operation of the Assurance Fund:

Government of the Philippines v. Abadilla (G.R. No. 94732, 1993): This case clarified that the Assurance Fund serves as a remedy of last resort and must not be accessed unless other avenues for redress have been exhausted.
Tayag v. Republic (G.R. No. 41644, 1988): The Court emphasized the fiduciary nature of the Assurance Fund and its primary role in protecting innocent parties.
Republic v. Salvador (G.R. No. 170504, 2011): This case affirmed that claims must be directly linked to fraudulent registration or Registrar of Deeds' errors.

8. RELEVANCE IN THE TORRENS SYSTEM

The Assurance Fund is a cornerstone of the Torrens system, ensuring that the system fulfills its dual purposes of:

Guaranteeing the indefeasibility of registered titles.
Providing recourse to those adversely affected by errors or fraud.

It balances the system's emphasis on the conclusiveness of certificates of title with equitable safeguards for affected parties.

9. CONCLUSION

The Assurance Fund exemplifies the Torrens system's commitment to both the stability of property transactions and the protection of individual rights. By providing a reliable remedy for innocent victims, it promotes fairness and strengthens public trust in the land registration process. However, it also underscores the importance of vigilance and due diligence in property dealings to prevent the need for reliance on this subsidiary remedy.