HEIRS OF MARIO MALABANAN,             G.R. No. 179987                     Petitioner,                                                                         Present:                                                                                                                                         PUNO, C.J.,                                                                       QUISUMBING,                                                                        YNARES-SANTIAGO,                                                                       CARPIO,                   -  versus  -                                   AUSTRIA-MARTINEZ,                                                                       CORONA,                                                                       CARPIO MORALES,                                                                       TINGA,

              CHICO-NAZARIO,                    

              VELASCO, JR.,

    NACHURA,

                                                                       LEONARDO DE CASTRO,                                                                       BRION,  REPUBLIC OF THE PHILIPPINES,             PERALTA, and

Respondent.                                BERSAMIN, JJ.                                                                               Promulgated:                                                                    April 29, 2009 x--------------------------------------------------------------------------- x  D E C I S I O N TINGA, J.: 

                   One main reason why the informal sector has not become formal is that from Indonesia to Brazil, 90 percent of the informal lands are not titled and registered. This is a generalized phenomenon in the so-called Third World. And it has many consequences.  xxx 

The question is: How is it that so many governments, from Suharto's in Indonesia to Fujimori's in Peru, have wanted to title these people and have not been able to do so effectively? One reason is that none of the state systems in Asia or Latin America can gather proof of informal titles. In Peru, the informals have means of proving property ownership to each other which are not the same means developed by the Spanish legal system. The informals have their own papers, their own forms of agreements, and their own systems of registration, all of which are very clearly stated in the maps which they use for their own informal business transactions.

If you take a walk through the countryside, from Indonesia to Peru, and you walk by field after field--in each field a different dog is going to bark at you. Even dogs know what private property is all about. The only one who does not know it is the government. The issue is that there exists a "common law" and an "informal law" which the Latin American formal legal system does not know how to recognize.

- Hernando De Soto[1]

 

This decision inevitably affects all untitled lands currently in

possession of persons and entities other than the Philippine

government. The petition, while unremarkable as to the facts, was

accepted by the Court en banc in order to provide definitive clarity to

the applicability and scope of original registration proceedings under

Sections 14(1) and 14(2) of the Property Registration Decree. In

doing so, the Court confronts not only the relevant provisions of the

Public Land Act and the Civil Code, but also the reality on the

ground. The countrywide phenomenon of untitled lands, as well as

the problem of informal settlement it has spawned, has unfortunately

been treated with benign neglect. Yet our current laws are hemmed

in by their own circumscriptions in addressing the phenomenon.

Still, the duty on our part is primarily to decide cases before us in

accord with the Constitution and the legal principles that have

developed our public land law, though our social obligations

dissuade us from casting a blind eye on the endemic problems. I. 

          On 20 February 1998, Mario Malabanan filed an application

for land registration covering a parcel of land identified as Lot 9864-

A, Cad-452-D, Silang Cadastre,[2] situated in Barangay Tibig, Silang

Cavite, and consisting of 71,324 square meters. Malabanan claimed

that he had purchased the property from Eduardo Velazco,[3]and that

he and his predecessors-in-interest had been in open, notorious, and

continuous adverse and peaceful possession of the land for more than

thirty (30) years.

 

          The application was raffled to the Regional Trial Court of

(RTC) Cavite-Tagaytay City, Branch 18. The Office of the Solicitor

General (OSG) duly designated the Assistant Provincial Prosecutor

of Cavite, Jose Velazco, Jr., to appear on behalf of the State.[4] Apart

from presenting documentary evidence, Malabanan himself and his

witness, Aristedes Velazco, testified at the hearing. Velazco testified

that the property was originally belonged to a twenty-two hectare

property owned by his great-grandfather, Lino Velazco. Lino had

four sons– Benedicto, Gregorio, Eduardo and Esteban–the fourth

being Aristedes’s grandfather. Upon Lino’s death, his four sons

inherited the property and divided it among themselves. But by 1966,

Esteban’s wife, Magdalena, had become the administrator of all the

properties inherited by the Velazco sons from their father, Lino.

After the death of Esteban and Magdalena, their son Virgilio

succeeded them in administering the properties, including Lot9864-

A, which originally belonged to his uncle, Eduardo Velazco. It was

this property that was sold by Eduardo Velazco to Malabanan.[5]

 

Assistant Provincial Prosecutor Jose Velazco, Jr. did not

cross-examine Aristedes Velazco. He further manifested that he

“also [knew] the property and I affirm the truth of the testimony

given by Mr. Velazco.”[6] The Republic of the Philippines likewise

did not present any evidence to controvert the application.

 

Among the evidence presented by Malabanan during trial

was a Certification dated 11 June 2001, issued by the Community

Environment & Natural Resources Office, Department of

Environment and Natural Resources (CENRO-DENR), which stated

that the subject property was “verified to be within the Alienable or

Disposable land per Land Classification Map No. 3013 established

under Project No. 20-A and approved as such under FAO 4-1656 on

March 15, 1982.”[7]

 

On 3 December 2002, the RTC rendered judgment in favor

of Malabanan, the dispositive portion of which reads:

 WHEREFORE, this Court hereby approves

this application for registration and thus places under the operation of Act 141, Act 496 and/or P.D. 1529, otherwise known as Property Registration Law, the lands described in Plan Csd-04-0173123-D, Lot

9864-A and containing an area of Seventy One Thousand Three Hundred Twenty Four (71,324) Square Meters, as supported by its technical description now forming part of the record of this case, in addition to other proofs adduced in the name of MARIO MALABANAN, who is of legal age, Filipino, widower, and with residence at Munting Ilog, Silang, Cavite.

 Once this Decision becomes final and

executory, the corresponding decree of registration shall forthwith issue.

 SO ORDERED. 

 

The Republic interposed an appeal to the Court of Appeals,

arguing that Malabanan had failed to prove that the property

belonged to the alienable and disposable land of the public domain,

and that the RTC had erred in finding that he had been in possession

of the property in the manner and for the length of time required by

law for confirmation of imperfect title.

 

On 23 February 2007, the Court of Appeals rendered a

Decision[8] reversing the RTC and dismissing the application of

Malabanan. The appellate court held that under Section 14(1) of the

Property Registration Decree any period of possession prior to the

classification of the lots as alienable and disposable was

inconsequential and should be excluded from the computation of the

period of possession. Thus, the appellate court noted that since the

CENRO-DENR certification had verified that the property was

declared alienable   and   disposable   only  on  15  March  1982,  the

Velazcos’ possession prior to that date could not be factored in the

computation of the period of possession. This interpretation of the

Court of Appeals of Section 14(1) of the Property Registration

Decree was based on the Court’s ruling in Republic v. Herbieto.[9]

 

Malabanan died while the case was pending with the Court

of Appeals;[10] hence, it was his heirs who appealed the decision of

the appellate court. Petitioners, before this Court, rely on our ruling

in Republic v. Naguit,[11] which was handed down just four months

prior to Herbieto. Petitioners suggest that the discussion

inHerbieto cited by the Court of Appeals is actually obiter

dictum since the Metropolitan Trial Court therein which had directed

the registration of the property had no jurisdiction in the first place

since the requisite notice of hearing was published only after the

hearing had already begun. Naguit, petitioners argue, remains the

controlling doctrine, especially when the property in question is

agricultural land. Therefore, with respect to agricultural lands, any

possession prior to the declaration of the alienable property as

disposable may be counted in reckoning the period of possession to

perfect title under the Public Land Act and the Property Registration

Decree.

 

 

 

The petition was referred to the Court en banc,[12] and on 11

November 2008, the case was heard on oral arguments. The Court

formulated the principal issues for the oral arguments, to wit:

 1.         In order that an alienable and

disposable land of the public domain may be registered under Section 14(1) of Presidential Decree No. 1529, otherwise known as the Property Registration Decree, should the land be classified as alienable and disposable as of June 12, 1945 or is it sufficient that such classification occur at any time prior to the filing of the applicant for registration provided that it is established that the applicant has been in open, continuous, exclusive and notorious possession of the land under a bona fide claim of ownership since June 12, 1945 or earlier?

 2.         For purposes of Section 14(2) of the

Property Registration Decree may a parcel of land classified as alienable and disposable be deemed private land and therefore susceptible to acquisition by prescription in accordance with the Civil Code?

 

3.         May a parcel of land established as agricultural in character either because of its use or because its slope is below that of forest lands be registrable under Section 14(2) of the Property Registration Decree in relation to the provisions of the Civil Code on acquisitive prescription?

 4.         Are petitioners entitled to the

registration of the subject land in their names under Section 14(1) or Section 14(2) of the Property Registration Decree or both?[13]

 

Based on these issues, the parties formulated their respective

positions.

 

With respect to Section 14(1), petitioners reiterate that the

analysis of the Court in Naguit is the correct interpretation of the

provision. The seemingly contradictory pronouncement in Herbieto,

it is submitted, should be considered obiter dictum, since the land

registration proceedings therein was void ab initio due to lack of

publication of the notice of initial hearing. Petitioners further point

out that in Republic v. Bibonia,[14]  promulgated in June of 2007, the

Court applied Naguitand adopted the same observation that the

preferred interpretation by the OSG of Section 14(1) was patently

absurd. For its part, the OSG remains insistent that for Section 14(1)

to apply, the land should have been classified as alienable and

disposable as of 12 June 1945. Apart from Herbieto, the OSG also

cites the subsequent rulings in Buenaventura v. Republic,[15] Fieldman Agricultural Trading v. Republic[16] and Republic v.

Imperial Credit Corporation,[17] as well as the earlier case

of Director of Lands v. Court of Appeals.[18]

 

With respect to Section 14(2), petitioners submit that open,

continuous, exclusive and notorious possession of an alienable land

of the public domain for more than 30 years ipso jure converts the

land into private property, thus placing it under the coverage of

Section 14(2). According to them, it would not matter whether the

land sought to be registered was previously classified as agricultural

land of the public domain so long as, at the time of the application,

the property had already been “converted” into private property

through prescription. To bolster their argument, petitioners cite

extensively from our 2008 ruling in Republic v. T.A.N. Properties.[19]

 

 

The arguments submitted by the OSG with respect to Section

14(2) are more extensive. The OSG notes that under Article 1113 of

the Civil Code, the acquisitive prescription of properties of the State

refers to “patrimonial property,” while Section 14(2) speaks of

“private lands.” It observes that the Court has yet to decide a case

that presented Section 14(2) as a ground for application for

registration, and that the 30-year possession period refers to the

period of possession under Section 48(b) of the Public Land Act, and

not the concept of prescription under the Civil Code. The OSG

further submits that, assuming that the 30-year prescriptive period

can run against public lands, said period should be reckoned from the

time the public land was declared alienable and disposable.

 

Both sides likewise offer special arguments with respect to

the particular factual circumstances surrounding the subject property

and the ownership thereof.

 

II.

 

          First, we discuss Section 14(1) of the Property Registration

Decree. For a full understanding of the provision, reference has to be

made to the Public Land Act.

 

A.

 

Commonwealth Act No. 141, also known as the Public Land

Act, has, since its enactment, governed the classification and

disposition of lands of the public domain. The President is

authorized, from time to time, to classify the lands of the public

domain into alienable and disposable, timber, or mineral lands.[20]  Alienable and disposable lands of the public domain are further

classified according to their uses into (a) agricultural; (b) residential,

commercial, industrial, or for similar productive purposes; (c)

educational, charitable, or other similar purposes; or (d) reservations

for town sites and for public and quasi-public uses.[21]

 

May a private person validly seek the registration in his/her

name of alienable and disposable lands of the public domain?

Section 11 of the Public Land Act acknowledges that public lands

suitable for agricultural purposes may be disposed of “by

confirmation of imperfect or incomplete titles” through “judicial

legalization.”[22] Section 48(b) of the Public Land Act, as amended by

P.D. No. 1073, supplies the details and unmistakably grants that

right, subject to the requisites stated therein:

 Sec. 48. The following described citizens

of the Philippines, occupying lands of the public domain or claiming to own any such land or an

interest therein, but whose titles have not been perfected or completed, may apply to the Court of First Instance of the province where the land is located for confirmation of their claims and the issuance of a certificate of title therefor, under the Land Registration Act, to wit:

 xxx                   

 (b)        Those who by themselves or

through their predecessors in interest have been in open, continuous, exclusive, and notorious possession and occupation of alienable and disposable lands of the public domain, under a bona fide claim of acquisition of ownership, since June 12, 1945, or earlier, immediately preceding the filing of the application for confirmation of title except when prevented by war or force majeure. These shall be conclusively presumed to have performed all the conditions essential to a Government grant and shall be entitled to a certificate of title under the provisions of this chapter.

 

 

          Section 48(b) of Com. Act No. 141 received its present

wording in 1977 when the law was amended by P.D. No. 1073. Two

significant amendments were introduced by P.D. No. 1073. First, the

term “agricultural lands” was changed to “alienable and disposable

lands of the public domain.” The OSG submits that this amendment

restricted the scope of the lands that may be registered. [23] This is not

actually the case. Under Section 9 of the Public Land Act,

“agricultural lands” are a mere subset of “lands of the public domain

alienable or open to disposition.” Evidently, alienable and disposable

lands of the public domain are a larger class than only “agricultural

lands.”

 

          Second, the length of the requisite possession was changed

from possession for “thirty (30) years immediately preceding the

filing of the application” to possession “since June 12, 1945 or

earlier.” The Court in Naguit explained:

 When the Public Land Act was first

promulgated in 1936, the period of possession deemed necessary to vest the right to register their title to agricultural lands of the public domain commenced from July 26, 1894. However, this period was amended by R.A. No. 1942, which provided that the bona fide claim of ownership must have been for at least thirty (30) years. Then in 1977, Section 48(b) of the Public Land Act was again amended, this time by P.D. No. 1073, which pegged the reckoning date at  June 12, 1945. xxx

 

 

          It bears further observation that Section 48(b) of Com. Act No,

141 is virtually the same as Section 14(1) of the Property Registration

Decree. Said Decree codified the various laws relative to the

registration of property, including lands of the public domain. It is

Section 14(1) that operationalizes the registration of such lands of the

public domain. The provision reads:  SECTION 14. Who may apply.— The

following persons may file in the proper Court of First Instance an application for registration of title to land, whether personally or through their duly authorized representatives:

 (1)      those who by themselves or

through their predecessors-in-interest have been in open, continuous, exclusive and notorious possession and occupation of alienable and disposable lands of the public domain under a bona fide claim of ownership since June 12, 1945, or earlier.

 

 

Notwithstanding the passage of the Property Registration

Decree and the inclusion of Section 14(1) therein, the Public Land

Act has remained in effect. Both laws commonly refer to persons or

their predecessors-in-interest who “have been in open, continuous,

exclusive and notorious possession and occupation of alienable and

disposable lands of the public domain under a bona fide claim of

ownership since June 12, 1945, or earlier.” That circumstance may

have led to the impression that one or the other is a redundancy, or

that Section 48(b) of the Public Land Act has somehow been repealed

or mooted. That is not the case.

 

The opening clauses of Section 48 of the Public Land Act

and Section 14 of the Property Registration Decree warrant

comparison:

 Sec. 48 [of the Public Land Act]. The

following described citizens of the Philippines, occupying lands of the public domain or claiming to own any such land or an interest therein, but whose titles have not been perfected or completed, may apply to the Court of First Instance of the province where the land is located for confirmation of their claims and the issuance of a certificate of title therefor, under the Land Registration Act, to wit: xxx

 Sec. 14 [of the Property Registration

Decree]. Who may apply.— The following persons may file in the proper Court of First Instance an application for registration of title to land, whether personally or through their duly authorized representatives:

 xxx

 

It is clear that Section 48 of the Public Land Act is more

descriptive of the nature of the right enjoyed by the possessor than

Section 14 of the Property Registration Decree, which seems to

presume the pre-existence of the right, rather than establishing the

right itself for the first time. It is proper to assert that it is the Public

Land Act, as amended by P.D. No. 1073 effective 25 January 1977,

that has primarily established the right of a Filipino citizen who has

been “in open, continuous, exclusive, and notorious possession and

occupation of alienable and disposable lands of the public domain,

under a bona fide claim of acquisition of ownership, since June 12,

1945” to perfect or complete his title by applying with the proper

court for the confirmation of his ownership claim and the issuance of

the corresponding certificate of title.

  

Section 48 can be viewed in conjunction with the afore-

quoted Section 11 of the Public Land Act, which provides that public

lands suitable for agricultural purposes may be disposed of by

confirmation of imperfect or incomplete titles, and given the notion

that both provisions declare that it is indeed the Public Land Act that

primarily establishes the substantive ownership of the possessor who

has been in possession of the property since 12 June 1945. In turn,

Section 14(a) of the Property Registration Decree recognizes the

substantive right granted under Section 48(b) of the Public Land Act,

as well provides the corresponding original registration procedure for

the judicial confirmation of an imperfect or incomplete title.

 

          There is another limitation to the right granted under Section

48(b). Section 47 of the Public Land Act limits the period within

which one may exercise the right to seek registration under Section

48. The provision has been amended several times, most recently by

Rep. Act No. 9176 in 2002.  It currently reads thus:

 Section 47. The persons specified in the next

following section are hereby granted time, not to extend beyond December 31, 2020 within which to avail of the benefits of this Chapter: Provided, That this period shall apply only where the area applied for does not exceed twelve (12) hectares: Provided, further, That the several periods of time designated by the President in accordance with Section Forty-Five of this Act shall apply also to the lands comprised in the provisions of this Chapter, but this Section shall not be construed as prohibiting any said persons from acting under this Chapter at any time prior to the period fixed by the President.[24]

 

          Accordingly under the current state of the law, the substantive

right granted under Section 48(b) may be availed of only until 31

December 2020.

 

B.

 

Despite the clear text of Section 48(b) of the Public Land

Act, as amended and Section 14(a) of the Property Registration

Decree, the OSG has adopted the position that for one to acquire the

right to seek registration of an alienable and disposable land of the

public domain, it is not enough that the applicant and his/her

predecessors-in-interest be in possession under a bona fide claim of

ownership since 12 June 1945; the alienable and disposable character

of the property must have been declared also as of 12 June 1945.

Following the OSG’s approach,  all lands certified as alienable and

disposable after 12 June 1945 cannot be registered either under

Section 14(1) of the Property Registration Decree or Section 48(b) of

the Public Land Act as amended. The absurdity of such an

implication was discussed inNaguit.

 Petitioner suggests an interpretation that the

alienable and disposable character of the land should have already been established since June 12, 1945 or

earlier. This is not borne out by the plain meaning of Section 14(1). “Since June 12, 1945,” as used in the provision, qualifies its antecedent phrase “under a bonafide claim of ownership.” Generally speaking, qualifying words restrict or modify only the words or phrases  to  which  they  are  immediately associated, and not those distantly or remotely located.[25] Ad proximum antecedents fiat relation nisi impediatur sentencia.                         Besides, we are mindful of the absurdity that would result if we adopt petitioner’s position. Absent a legislative amendment, the rule would be, adopting the OSG’s view, that all lands of the public domain which were not declared alienable or disposable before June 12, 1945 would not be susceptible to original registration, no matter the length of unchallenged possession by the occupant. Such interpretation renders paragraph (1) of Section 14 virtually inoperative and even precludes the government from giving it effect even as it decides to reclassify public agricultural lands as alienable and disposable.  The unreasonableness of the situation would even be aggravated considering that before June 12, 1945, the Philippines was not yet even considered an independent state. 

 

Accordingly, the Court in Naguit explained:

 [T]he more reasonable interpretation of

Section 14(1) is that it merely requires the property sought to be registered as already alienable and disposable at the time the application for registration of title is filed. If the State, at the time the application is made, has not yet deemed it proper to release the

property for alienation or disposition, the presumption is that the government is still reserving the right to utilize the property; hence, the need to preserve its ownership in the State irrespective of the length of adverse possession even if in good faith. However, if the property has already been classified as alienable and disposable, as it is in this case, then there is already an intention on the part of the State to abdicate its exclusive prerogative over the property.

  

The Court declares that the correct interpretation of Section

14(1) is that which was adopted in Naguit. The contrary

pronouncement in Herbieto, as pointed out in Naguit, absurdly limits

the application of the provision to the point of virtual inutility since it

would only cover lands actually declared alienable and disposable

prior to 12 June 1945, even if the current possessor is able to

establish open, continuous, exclusive and notorious possession under

a bona fide claim of ownership long before that date.

 

Moreover, the Naguit interpretation allows more possessors

under a bona fide claim of ownership to avail of judicial

confirmation of their imperfect titles than what would be feasible

under Herbieto. This balancing fact is significant, especially

considering our forthcoming discussion on the scope and reach of

Section 14(2) of the Property Registration Decree.

 

Petitioners make the salient observation that the

contradictory passages from Herbieto are obiter dicta since the land

registration proceedings therein is void ab initio in the first place due

to lack of the requisite publication of the notice of initial hearing.

There is no need to explicitly overturn Herbieto, as it suffices that

the Court’s acknowledgment that the particular line of argument used

therein concerning Section 14(1) is indeed obiter.

It may be noted that in the subsequent case of Buenaventura,[26] the Court, citing Herbieto, again stated that “[a]ny period of

possession prior to the date when the [s]ubject [property was]

classified as alienable and disposable is inconsequential and should

be excluded from the computation of the period of possession…”

That statement, in the context of Section 14(1), is certainly

erroneous. Nonetheless, the passage as cited in Buenaventura should

again be considered as obiter. The application therein was ultimately

granted, citing Section 14(2). The evidence submitted by petitioners

therein did not establish any mode of possession on their part prior to

1948, thereby precluding the application of Section 14(1). It is not

even apparent from the decision whether petitioners therein had

claimed entitlement to original registration following Section 14(1),

their position being that they had been in exclusive possession under

a bona fide claim of ownership for over fifty (50) years, but  not

before 12 June 1945.

Thus, neither Herbieto nor its principal discipular

ruling Buenaventura has any precedental value with respect to

Section 14(1). On the other hand, the ratio ofNaguit is embedded in

Section 14(1), since it precisely involved situation wherein the

applicant had been in exclusive possession under a bona fide claim

of ownership prior to 12 June 1945. The Court’s interpretation of

Section 14(1) therein was decisive to the resolution of the case. Any

doubt as to which between Naguit orHerbieto provides the final

word of the Court on Section 14(1) is now settled in favor of Naguit.

 

          We noted in Naguit that it should be distinguished

from Bracewell v. Court of Appeals[27] since in the latter, the

application for registration had been filedbefore the land was

declared alienable or disposable. The dissent though

pronounces Bracewell as the better rule between the two. Yet two

years after Bracewell, itsponente, the esteemed Justice Consuelo

Ynares-Santiago, penned the ruling in Republic v. Ceniza,[28] which

involved a claim of possession that extended back to 1927 over a

public domain land that was declared alienable and disposable only

in 1980. Ceniza cited Bracewell, quoted extensively from it, and

following the mindset of the dissent, the attempt at registration

in Ceniza should have failed. Not so.

 To prove that the land subject of an

application for registration is alienable, an applicant must establish the existence of a positive act of the government such as a presidential proclamation or an executive order; an administrative action; investigation reports of Bureau of Lands investigators; and a legislative act or a statute.

 In this case, private respondents presented a

certification dated November 25, 1994, issued by Eduardo M. Inting, the Community Environment and Natural Resources Officer in the Department of Environment and Natural Resources Office in Cebu City, stating that the lots involved were "found to be within the alienable and disposable (sic) Block-I, Land Classification Project No. 32-A, per map 2962 4-I555 dated December 9, 1980." This is sufficient evidence to show the real character of the land subject of private respondents’ application. Further, the certification enjoys a presumption of regularity in the absence of contradictory evidence, which is true in this case. Worth noting also was the observation of the Court of Appeals stating that:

 [n]o opposition was filed by

the Bureaus of Lands and Forestry to contest the application of appellees on the ground that the property still forms part of the public domain. Nor is there any

showing that the lots in question are forestal land.... Thus, while the Court of Appeals erred in

ruling that mere possession of public land for the period required by law would entitle its occupant to a confirmation of imperfect title, it did not err in ruling in favor of private respondents as far as the first requirement in Section 48(b) of the Public Land Act is concerned, for they were able to overcome the burden of proving the alienability of the land subject of their application.

 As correctly found by the Court of Appeals,

private respondents were able to prove their open, continuous, exclusive and notorious possession of the subject land even before the year 1927. As a rule, we are bound by the factual findings of the Court of Appeals. Although there are exceptions, petitioner did not show that this is one of them.[29]

         

 

          Why did the Court in Ceniza, through the same eminent

member who authored Bracewell, sanction the registration under

Section 48(b) of public domain lands declared alienable or

disposable thirty-five (35) years and 180 days after 12 June 1945?

The telling difference is that in Ceniza, the application for

registration was filed nearly six (6) years after the land had been

declared alienable or disposable, while in Bracewell, the application

was filed nine (9) years before the land was declared alienable or

disposable. That crucial difference was also stressed in Naguit to

contradistinguish it from Bracewell, a difference which the dissent

seeks to belittle.

 

III.

 

          We next ascertain the correct framework of analysis with

respect to Section 14(2). The provision reads:

   SECTION 14. Who may apply. — The

following persons may file in the proper Court of First Instance an application for registration of title to land, whether personally or through their duly authorized representatives:

 xxx

 (2)      Those who have acquired

ownership over private lands by prescription under the provisions of existing laws.

  

The Court in Naguit offered the following discussion

concerning Section 14(2), which we did even then recognize, and still

do, to be  an obiter dictum, but we nonetheless refer to it as material

for further discussion, thus: 

Did the enactment of the Property Registration Decree and the amendatory P.D. No. 1073 preclude the application for registration of alienable lands of the public domain, possession over which commenced only after June 12, 1945? It did not, considering Section 14(2) of the Property Registration Decree, which governs and authorizes the application of “those who have acquired ownership of private lands by prescription under the provisions of existing laws.”

 Prescription is one of the modes of acquiring

ownership under the Civil Code.[[30]] There is a consistent jurisprudential rule that properties classified as alienable public land may be converted into private property by reason of open, continuous and exclusive possession of at least thirty (30) years.[[31]] With such conversion, such property may now fall within the contemplation of “private lands” under Section 14(2), and thus susceptible to registration by those who have acquired ownership through prescription. Thus, even if possession of the alienable public land commenced on a date later than June 12, 1945, and such possession being been open, continuous and exclusive, then the possessor may have the right to register the land by virtue of Section 14(2) of the Property Registration Decree.

 

          Naguit did not involve the application of Section 14(2), unlike

in this case where petitioners have based their registration bid

primarily on that provision, and where the evidence definitively

establishes their claim of possession only as far back as 1948. It is in

this case that we can properly appreciate the nuances of the

provision.

 

A.

 

          The obiter in Naguit cited the Civil Code provisions on

prescription as the possible basis for application for original

registration under Section 14(2). Specifically, it is Article 1113

which provides legal foundation for the application. It reads:

 All things which are within the commerce of

men are susceptible of prescription, unless otherwise provided. Property of the State or any of its subdivisions not patrimonial in character shall not be the object of prescription.

 

 

          It is clear under the Civil Code that where lands of the public

domain are patrimonial in character, they are susceptible to

acquisitive prescription. On the other hand, among the public domain

lands that are not susceptible to acquisitive prescription are timber

lands and mineral lands. The Constitution itself proscribes private

ownership of timber or mineral lands.

 

There are in fact several provisions in the Civil Code

concerning the acquisition of real property through prescription.

Ownership of real property may be acquired by ordinary prescription

of ten (10) years,[32] or through extraordinary prescription of thirty

(30) years.[33] Ordinary acquisitive prescription requires possession in

good faith,[34]  as well as just title.[35]

 

When Section 14(2) of the Property Registration Decree

explicitly provides that persons “who have acquired ownership over

private lands by prescription under the provisions of existing laws,” it

unmistakably refers to the Civil Code as a valid basis for the

registration of lands. The Civil Code is the only existing law that

specifically allows the acquisition by prescription of private lands,

including patrimonial property belonging to the State. Thus, the

critical question that needs affirmation is whether Section 14(2) does

encompass original registration proceedings over patrimonial

property of the State, which a private person has acquired through

prescription.

 

The Naguit obiter had adverted to a frequently reiterated

jurisprudence holding that properties classified as alienable public

land may be converted into private property by reason of open,

continuous and exclusive possession of at least thirty (30) years.[36] Yet if we ascertain the source of the “thirty-year” period,

additional complexities relating to Section 14(2) and to how exactly it

operates would emerge. For there are in fact two distinct origins of

the thirty (30)-year rule.

 

The first source is Rep. Act No. 1942, enacted in 1957,

which amended Section 48(b) of the Public Land Act by granting the

right to seek original registration of alienable public lands through

possession in the concept of an owner for at least thirty years.

 The following-described citizens of the

Philippines, occupying lands of the public domain or claiming to own any such lands or an interest therein, but whose titles have not been perfected or completed, may apply to the Court of First Instance of the province where the land is located for confirmation of their claims and the issuance of a certificate of title therefor, under the Land Registration Act, to wit:

 x x x           x x x           x x x 

(b) Those who by themselves or through their predecessors in interest have been in open, continuous, exclusive and notorious possession and occupation of agricultural lands of the public domain, under a bona fide claim of acquisition of ownership, for at least thirty years immediately preceding the filing of the application for confirmation of title, except when prevented by war or force majeure. These shall be conclusively presumed to have performed all the conditions essential to a Government grant and shall be entitled to a certificate of title under the provisions of this Chapter. (emphasis supplied)[37]

 

 

This provision was repealed in 1977 with the enactment of

P.D. 1073, which made the date 12 June 1945 the reckoning point for

the first time. Nonetheless, applications for registration filed prior to

1977 could have invoked the 30-year rule introduced by Rep. Act No.

1942.

 

The second source is Section 14(2) of P.D. 1529 itself, at

least by implication, as it applies the rules on prescription under the

Civil Code, particularly Article 1113 in relation to Article 1137. Note

that there are two kinds of prescription under the Civil Code–ordinary

acquisitive prescription and extraordinary acquisitive prescription,

which, under Article 1137, is completed “through uninterrupted

adverse possession… for thirty years, without need of title or of good

faith.”

 

Obviously, the first source of the thirty (30)-year period

rule, Rep. Act No. 1942, became unavailable after 1977. At present,

the only legal basis for the thirty (30)-year period is the law on

prescription under the Civil Code, as mandated under Section 14(2).

However, there is a material difference between how the thirty (30)-

year rule operated under Rep. Act No. 1942 and how it did under the

Civil Code.

 

Section 48(b) of the Public Land Act, as amended by Rep.

Act No. 1942, did not refer to or call into application the Civil Code

provisions on prescription. It merely set forth a requisite thirty-year

possession period immediately preceding the application for

confirmation of title, without any qualification as to whether the

property should be declared alienable at the beginning of, and

continue as such, throughout the entire thirty-(30) years. There is

neither statutory nor jurisprudential basis to assert Rep. Act No. 1942

had mandated such a requirement,[38] similar to our earlier finding

with respect to the present language of Section 48(b), which now

sets12 June 1945 as the point of reference.  

 

Then, with the repeal of Rep. Act No. 1942, the thirty-year

possession period as basis for original registration became Section

14(2) of the Property Registration Decree, which entitled those “who

have acquired ownership over private lands by prescription under the

provisions of existing laws” to apply for original registration. Again,

the thirty-year period is derived from the rule on extraordinary

prescription under Article 1137 of the Civil Code. At the same time,

Section 14(2) puts into operation the entire regime of prescription

under the Civil Code, a fact which does not hold true with respect to

Section 14(1).

 

B.

 

Unlike Section 14(1), Section 14(2) explicitly refers to the

principles on prescription under existing laws. Accordingly, we are

impelled to apply the civil law concept of prescription, as set forth in

the Civil Code, in our interpretation of Section 14(2). There is no

similar demand on our part in the case of Section 14(1).

 

The critical qualification under Article 1113 of the Civil

Code is thus: “[p]roperty of the State or any of its subdivisions not

patrimonial in character shall not be the object of prescription.” The

identification what consists of patrimonial property is provided by

Articles 420 and 421, which we quote in full:

 Art. 420. The following things are property of public dominion:

 (1) Those intended for public use, such as roads, canals, rivers, torrents, ports and bridges constructed by the State, banks, shores, roadsteads, and others of similar character; (2) Those which belong to the State, without being for public use, and are intended for some public service or for the development of the national wealth.

 Art. 421. All other property of the State, which

is not of the character stated in the preceding article, is patrimonial property

 

          It is clear that property of public dominion, which generally

includes property belonging to the State, cannot be the object of

prescription or, indeed, be subject of the commerce of man.[39] Lands

of the public domain, whether declared alienable and disposable or

not, are property of public dominion and thus insusceptible to

acquisition by prescription.

 

          Let us now explore the effects under the Civil Code of a

declaration by the President or any duly authorized government

officer of alienability and disposability of lands of the public domain.

Would such lands so declared alienable and disposable be converted,

under the Civil Code, from property of the public dominion into

patrimonial property? After all, by connotative definition, alienable

and disposable lands may be the object of the commerce of man;

Article 1113 provides that all things within the commerce of man are

susceptible to prescription; and the same provision further provides

that patrimonial property of the State may be acquired by

prescription.

 

Nonetheless, Article 422 of the Civil Code states that

“[p]roperty of public dominion, when no longer intended for public

use or for public service, shall form part of the patrimonial property

of the State.”  It is this provision that controls how public dominion

property may be converted into patrimonial property susceptible to

acquisition by prescription. After all, Article 420 (2) makes clear that

those property “which belong to the State, without being for public

use, and are intended for some public service or for the development

of the national wealth” are public dominion property. For as long as

the property belongs to the State, although already classified as

alienable or disposable, it remains property of the public dominion if

when it is “intended for some public service or for the development

of the national wealth”.

 

Accordingly, there must be an express declaration by the

State that the public dominion property is no longer intended for

public service or the development of the national wealth or that

the property has been converted into patrimonial. Without such

express declaration, the property, even if classified as alienable

or disposable, remains property of the public dominion,

pursuant to Article 420(2), and thus incapable of acquisition by

prescription. It is only when such alienable and disposable lands

are expressly declared by the State to be no longer intended for

public service or for the development of the national wealth that

the period of acquisitive prescription can begin to run. Such

declaration shall be in the form of a law duly enacted by

Congress or a Presidential Proclamation in cases where the

President is duly authorized by law.

 

It is comprehensible with ease that this reading of Section

14(2) of the Property Registration Decree limits its scope and reach

and thus affects the registrability even of lands already declared

alienable and disposable to the detriment of the bona fide possessors

or occupants claiming title to the lands. Yet this interpretation is in

accord with the Regalian doctrine and its concomitant assumption

that all lands owned by the State, although declared alienable or

disposable, remain as such and ought to be used only by the

Government.

 

Recourse does not lie with this Court in the matter. The duty

of the Court is to apply the Constitution and the laws in accordance

with their language and intent. The remedy is to change the law,

which is the province of the legislative branch. Congress can very

well be entreated to amend Section 14(2) of the Property

Registration Decree and pertinent provisions of the Civil Code to

liberalize the requirements for judicial confirmation of imperfect or

incomplete titles.

 

The operation of the foregoing interpretation can be

illustrated by an actual example. Republic Act No. 7227, entitled

“An Act Accelerating The Conversion Of Military Reservations Into

Other Productive Uses, etc.,” is more commonly known as the

BCDA law.  Section 2 of the law authorizes the sale of certain

military reservations and portions of military camps in Metro

Manila, including Fort Bonifacio and Villamor Air Base.  For

purposes of effecting the sale of the military camps, the law

mandates the President to transfer such military lands to the Bases

Conversion Development Authority (BCDA)[40] which in turn is

authorized to own, hold and/or administer them.[41] The President is

authorized to sell portions of the military camps, in whole or in part.[42] Accordingly, the BCDA law itself declares that the  military lands

subject thereof are “alienable and disposable pursuant to the

provisions of existing laws and regulations governing sales of

government properties.”[43]

 

From the moment the BCDA law was enacted the subject

military lands have become alienable and disposable. However, said

lands did not become patrimonial, as the BCDA law itself expressly

makes the reservation that these lands are to be sold in order to raise

funds for the conversion of the former American bases

at Clarkand Subic.[44] Such purpose can be tied to either “public

service” or “the development of national wealth” under Article

420(2). Thus, at that time, the lands remained property of the public

dominion under Article 420(2), notwithstanding their status as

alienable and disposable. It is upon their sale as authorized under the

BCDA law to a private person or entity that such lands become

private property and cease to be property of the public dominion.

 

         

C.

 

Should public domain lands become patrimonial because

they are declared as such in a duly enacted law or duly promulgated

proclamation that they are no longer intended for public service or

for the development of the national wealth, would the period of

possession prior to the conversion of such public dominion into

patrimonial be reckoned in counting the prescriptive period in favor

of the possessors? We rule in the negative.

 

          The limitation imposed by Article 1113 dissuades us from

ruling that the period of possession before the public domain land

becomes patrimonial may be counted for the purpose of completing

the prescriptive period. Possession of public dominion property

before it becomes patrimonial cannot be the object of prescription

according to the Civil Code. As the application for registration under

Section 14(2) falls wholly within the framework of prescription

under the Civil Code, there is no way that possession during the time

that the land was still classified as public dominion property can be

counted to meet the requisites of acquisitive prescription and justify

registration.

 

Are we being inconsistent in applying divergent rules for

Section 14(1) and Section 14(2)? There is no inconsistency. Section

14(1) mandates registration on the basis of possession, while

Section 14(2) entitles registration on the basis

of prescription .  Registration under Section 14(1) is extended

under the aegis of the Property Registration Decree and the

Public Land Act while registration under Section 14(2) is made

available both by the Property Registration Decree and the Civil

Code.

 

          In the same manner, we can distinguish between the thirty-

year period under Section 48(b) of the Public Land Act, as amended

by Rep. Act No. 1472, and the thirty-year period available through

Section 14(2) of the Property Registration Decree in relation to

Article 1137 of the Civil Code. The period under the former

speaks of a thirty-year period of possession ,   while the period

under the latter concerns a thirty-year period of extraordinary

prescription. Registration under Section 48(b) of the Public Land

Act as amended by Rep. Act No. 1472 is based on thirty years of

possession alone without regard to the Civil Code, while the

registration under Section 14(2) of the Property Registration

Decree is founded on extraordinary prescription under the Civil

Code.

 

          It may be asked why the principles of prescription under the

Civil Code should not apply as well to Section 14(1).

Notwithstanding the vaunted status of the Civil Code, it ultimately is

just one of numerous statutes, neither superior nor inferior to other

statutes such as the Property Registration Decree. The legislative

branch is not bound to adhere to the framework set forth by the Civil

Code when it enacts subsequent legislation. Section 14(2) manifests

a clear intent to interrelate the registration allowed under that

provision with the Civil Code, but no such intent exists with respect

to Section 14(1).

 

IV.

 

          One of the keys to understanding the framework we set forth

today is seeing how our land registration procedures correlate with

our law on prescription, which, under the Civil Code, is one of the

modes for acquiring ownership over property.

 

          The Civil Code makes it clear that patrimonial property of the

State may be acquired by private persons through prescription. This

is brought about by Article 1113, which states that “[a]ll things

which are within the commerce of man are susceptible to

prescription,” and that [p]roperty of the State or any of its

subdivisions not patrimonial in character shall not be the object of

prescription.”

 

          There are two modes of prescription through which

immovables may be acquired under the Civil Code. The first is

ordinary acquisitive prescription, which, under Article 1117, requires

possession in good faith and with just title; and, under Article 1134,

is completed through possession of ten (10) years. There is nothing

in the Civil Code that bars a person from acquiring patrimonial

property of the State through ordinary acquisitive prescription, nor is

there any apparent reason to impose such a rule. At the same time,

there are indispensable requisites–good faith and just title. The

ascertainment of good faith involves the application of Articles 526,

527, and 528, as well as Article 1127 of the Civil Code,[45] provisions

that more or less speak for themselves.

 

On the other hand, the concept of just title requires some

clarification.  Under Article 1129, there is just title for the purposes

of prescription “when the adverse claimant came into possession of

the property through one of the modes recognized by law for the

acquisition of ownership or other real rights, but the grantor was not

the owner or could not transmit any right.” Dr. Tolentino explains:

 Just title is an act which has for its purpose

the transmission of ownership, and which would have actually transferred ownership if the grantor had been the owner. This vice or defect is the one cured by prescription. Examples: sale with delivery, exchange, donation, succession, and dacion in payment.[46]

         

          The OSG submits that the requirement of just title necessarily

precludes the applicability of ordinary acquisitive prescription to

patrimonial property. The major premise for the argument is that “the

State, as the owner and grantor, could not transmit ownership to the

possessor before the completion of the required period of

possession.”[47] It is evident that the OSG erred when it assumed that

the grantor referred to in Article 1129 is the State. The grantor is the

one from whom the person invoking ordinary acquisitive

prescription derived the title, whether by sale, exchange, donation,

succession or any other mode of the acquisition of ownership or

other real rights.

 

Earlier, we made it clear that, whether under ordinary

prescription or extraordinary prescription, the period of possession

preceding the classification of public dominion lands as patrimonial

cannot be counted for the purpose of computing prescription. But

after the property has been become patrimonial, the period of

prescription begins to run in favor of the possessor. Once the

requisite period has been completed, two legal events ensue: (1) the

patrimonial property is ipso jureconverted into private land; and (2)

the person in possession for the periods prescribed under the Civil

Code acquires ownership of the property by operation of the Civil

Code.

 

It is evident that once the possessor automatically becomes

the owner of the converted patrimonial property, the ideal next step

is the registration of the property under the Torrens system. It should

be remembered that registration of property is not a mode of

acquisition of ownership, but merely a mode of confirmation of

ownership.[48]

 

Looking back at the registration regime prior to the adoption

of the Property Registration Decree in 1977, it is apparent that the

registration system then did not fully accommodate the acquisition of

ownership of patrimonial property under the Civil Code. What the

system accommodated was the confirmation of imperfect title

brought about by the completion of a period of possession ordained

under the Public Land Act (either 30 years following Rep. Act No.

1942, or since 12 June 1945following P.D. No. 1073).

 

The Land Registration Act[49] was noticeably silent on the

requisites for alienable public lands acquired through ordinary

prescription under the Civil Code, though it arguably did not

preclude such registration.[50] Still, the gap was lamentable,

considering that the Civil Code, by itself, establishes ownership over

the patrimonial property of persons who have completed the

prescriptive periods ordained therein. The gap was finally closed

with the adoption of the Property Registration Decree in 1977, with

Section 14(2) thereof expressly authorizing original registration in

favor of persons who have acquired ownership over private lands by

prescription under the provisions of existing laws, that is, the Civil

Code as of now.

 

V.

 

          We synthesize the doctrines laid down in this case, as follows:

 

          (1) In connection with Section 14(1) of the Property

Registration Decree, Section 48(b) of the Public Land Act recognizes

and confirms that “those who by themselves or through their

predecessors in interest have been in open, continuous, exclusive,

and notorious possession and occupation of alienable and disposable

lands of the public domain, under a bona fide claim of acquisition of

ownership, since June 12, 1945” have acquired ownership of, and

registrable title to, such lands based on the length and quality of their

possession.

 

(a)      Since Section 48(b) merely requires

possession since 12 June 1945 and does not require that the

lands should have been alienable and disposable during the

entire period of possession, the possessor is entitled to secure

judicial confirmation of his title thereto as soon as it is

declared alienable and disposable, subject to the timeframe

imposed by Section 47 of the Public Land Act.[51]

 

(b)     The right to register granted under Section

48(b) of the Public Land Act is further confirmed by Section

14(1) of the Property Registration Decree.

 

          (2) In complying with Section 14(2) of the Property

Registration Decree, consider that under the Civil Code, prescription

is recognized as a mode of acquiring ownership of patrimonial

property. However, public domain lands become only patrimonial

property not only with a declaration that these are alienable or

disposable. There must also be an express government manifestation

that the property is already patrimonial or no longer retained for

public service or the development of national wealth, under Article

422 of the Civil Code. And only when the property has become

patrimonial can the prescriptive period for the acquisition of property

of the public dominion begin to run.

 

(a)      Patrimonial property is private property of the

government.  The person acquires ownership of patrimonial

property by prescription under the Civil Code is entitled to

secure registration thereof under Section 14(2) of the

Property Registration Decree.

 

(b)     There are two kinds of prescription by which

patrimonial property may be acquired, one ordinary and

other extraordinary. Under ordinary acquisitive prescription,

a person acquires ownership of a patrimonial property

through possession for at least ten (10) years, in good faith

and with just title. Under extraordinary acquisitive

prescription, a person’s uninterrupted adverse possession of

patrimonial property for at least thirty (30) years, regardless

of good faith or just title, ripens into ownership.

 

B.

 

          We now apply the above-stated doctrines to the case at bar.

 

          It is clear that the evidence of petitioners is insufficient to

establish that Malabanan has acquired ownership over the subject

property under Section 48(b) of the Public Land Act. There is no

substantive evidence to establish that Malabanan or petitioners as his

predecessors-in-interest have been in possession of the property

since 12 June 1945 or earlier. The earliest that petitioners can date

back their possession, according to their own evidence—the Tax

Declarations they presented in particular—is to the year 1948. Thus,

they cannot avail themselves of registration under Section 14(1) of

the Property Registration Decree.

 

 

          Neither can petitioners properly invoke Section 14(2) as basis

for registration. While the subject property was declared as alienable

or disposable in 1982, there is no competent evidence that is no

longer intended for public use service or for the development of the

national evidence, conformably with Article 422 of the Civil Code.

The classification of the subject property as alienable and disposable

land of the public domain does not change its status as property of

the public dominion under Article 420(2) of the Civil Code.  Thus, it

is insusceptible to acquisition by prescription.

 

VI.

 

A final word. The Court is comfortable with the correctness

of the legal doctrines established in this decision. Nonetheless,

discomfiture over the implications of today’s ruling cannot be

discounted. For, every untitled property that is occupied in the

country will be affected by this ruling. The social implications

cannot be dismissed lightly, and the Court would be abdicating its

social responsibility to the Filipino people if we simply levied the

law without comment.

 

          The informal settlement of public lands, whether declared

alienable or not, is a phenomenon tied to long-standing habit and

cultural acquiescence, and is common among the so-called “Third

World” countries. This paradigm powerfully evokes the disconnect

between a legal system and the reality on the ground. The law so far

has been unable to bridge that gap. Alternative means of acquisition

of these public  domain  lands,  such  as  through  homestead  or free

patent, have

 

proven unattractive due to limitations imposed on the grantee in the

encumbrance or alienation of said properties.[52] Judicial confirmation

of imperfect title has emerged as the most viable, if not the most

attractive means to regularize the informal settlement of alienable or

disposable lands of the public domain, yet even that system, as

revealed in this decision, has considerable limits.

 

          There are millions upon millions of Filipinos who have

individually or exclusively held residential lands on which they have

lived and raised their families.  Many more have tilled and made

productive idle lands of the State with their hands. They have been

regarded for generation by their families and their communities as

common law owners.  There is much to be said about the virtues of

according them legitimate states. Yet such virtues are not for the

Court to translate into positive law, as the law itself considered such

lands as property of the public dominion.  It could only be up to

Congress to set forth a new phase of land reform to sensibly

regularize and formalize the settlement of such lands which in legal

theory are lands of the public domain before the problem becomes

insoluble. This could be accomplished, to cite two examples, by

liberalizing the standards for judicial confirmation of imperfect title,

or amending the Civil Code itself to ease the requisites for the

conversion of public dominion property into patrimonial.

 

One’s sense of security over land rights infuses into every

aspect of well-being not only of that individual, but also to the

person’s family. Once that sense of security is deprived, life and

livelihood are put on stasis. It is for the political branches to bring

welcome closure to the long pestering problem.

 

          WHEREFORE, the Petition is DENIED. The Decision of the

Court of Appeals dated 23 February 2007 and Resolution dated 2

October 2007 areAFFIRMED. No pronouncement as to costs.

 

          SO ORDERED.

 REPUBLIC OF THE PHILIPPINES,

Petitioner,

G.R. No. 186961

Present:

CARPIO, J.,

         Chairperson,

- versus -

EAST SILVERLANE REALTY

DEVELOPMENT CORPORATION,

Respondent.

VILLARAMA, JR.,

PEREZ,

SERENO, and

REYES, JJ.

 

Promulgated:

 

February 20, 2012

 

 x----------------------------------------------------------------------------------------

x

 

DECISION

REYES, J.:

This Court is urged to review and set aside the July 31, 2008 

Decision[1] and   February   20,   2009   Resolution[2] of   the   Court   of 

Appeals (CA) in CA-G.R. CV No. 00143. In its July 31, 2008 Decision, 

the CA affirmed the August 27, 2004 Decision of the Regional Trial 

Court   (RTC),  Branch  40  of   Cagayan  De  Oro  City.   The  dispositive 

portion thereof states:

 

            WHEREFORE, premises foregoing, the instant appeal   is  hereby DISMISSED for   lack of merit.  The assailed   Decision   dated   August   27,   2004   is hereby AFFIRMED in toto.

 

            SO ORDERED.[3]

 

 

          In   its   February   20,   2009   Resolution,   the   CA   denied   the 

petitioner’s August 29, 2008 Motion for Reconsideration.[4]

 

The Factual Antecedents

          The   respondent   filed  with   the   RTC   an   application   for   land 

registration,   covering   a   parcel   of   land   identified   as   Lot   9039  of 

Cagayan   Cadastre,   situated   in El   Salvador,  Misamis  Oriental   and 

with an area of 9,794 square meters. The respondent purchased the 

portion of the subject property consisting of 4,708 square meters 

(Area A) from Francisca Oco pursuant to a Deed of Absolute Sale 

dated November 27, 1990 and the remaining portion consisting of 

5,086 square meters (Area B) from Rosario U. Tan Lim, Nemesia Tan 

and Mariano U.  Tan pursuant  to a Deed of Partial  Partition with 

Deed of Absolute Sale dated April 11, 1991. It was claimed that the 

respondent’s predecessors-in-interest had been in open, notorious, 

continuous and exclusive possession of the subject property since 

June 12, 1945.

 

After hearing the same on the merits,   the RTC  issued on 

August 27, 2004 a Decision, granting the respondent’s petition for 

registration of the land in question, thus:

 

ACCORDINGLY,   finding   the   application meritorious,   and   pursuant   to   applicable   law   and jurisprudence   on   the   matter,   particularly   the provisions   of   P.D.   1529,   judgment   is   hereby rendered granting the instant application. The Land Registration Authority is hereby ordered to issue a decree   in   the   name   of   the   applicant EAST SILVERLANE   REALTY   DEVELOPMENT CORPORATION covering   the   parcel   of land, Lot 9039,   Cad  237,   having  an   area  of   9,794 

square   meters   covered   by   the   two   (2)   tax declarations subject of this petition. Based on the decree,   the   Register   of   Deeds   for the Province of Misamis Oriental is hereby directed to issue an original certificate of title in the name of the  applicant  covering   the   land  subject  matter  of this application.[5]

 

 

          On appeal by the petitioner, the CA affirmed the RTC’s August 

27, 2004 Decision. In its July 31, 2008 Decision,[6] the CA found no 

merit in the petitioner’s appeal, holding that:

 

It   is  a   settled   rule   that  an  application  for land registration must conform to three requisites: (1)   the   land   is   alienable   public   land;   (2)   the applicant’s   open,   continuous,   exclusive   and notorious possession and occupation thereof must be   since   June   12,   1945,   or   earlier;   and   (3)   it   is a bona fide claim of ownership.

 

            In the case at bench, petitioner-appellee has met   all   the   requirements.   Anent   the   first requirement,   both   the   report   and   certification issued   by   the   Department   of   Environment   and 

Natural  Resources   (DENR)   shows   that   the   subject land was within the alienable and disposable zone classified under BF Project [N]o. 8 Blk.  I,  L.C. Map [N]o. 585 and was released and certified as such on December 31, 1925.

 

            Indubitably, both the DENR certification and report   constitute   a   positive   government   act,   an administrative action, validly classifying the land in question. It is a settled rule that the classification or re-classification   of   public   lands   into   alienable   or disposable,   mineral   or   forest   land   is   now   a prerogative   of   the   Executive   Department   of   the government. Accordingly, the certification enjoys a presumption   of   regularity   in   the   absence   of contradictory evidence. As it is, the said certification remains uncontested and even oppositor-appellant Republic   itself   did   not   present   any   evidence   to refute the contents of the said certification. Thus, the   alienable   and   disposable   character   of   the subject land certified as such as early as December 31,   1925   has   been   clearly   established   by   the evidence of the petitioner-appellee.

 

Anent the second and third requirements, the   applicant   is   required   to   prove   his   open, continuous, exclusive and notorious possession and 

occupation   of   the   subject   land   under   a bona fide claim   of   ownership   either   since   time immemorial or since June 12, 1945.

 

x x x x

 

In   the   case   at   bench,   ESRDC   tacked   its possession and occupation over the subject land to that  of   its  predecessors-in-interest.  Copies  of   the tax   declarations   and   real   property   historical ownership   pertaining   thereto   were   presented   in court. A perusal of the records shows that in 1948, a portion of the subject land was declared under the name   of   Agapito   Claudel.   Subsequently,   in   1957 until 1991 the same was declared under the name of Francisca Oco. Thereafter, the same was declared under   the   name   of   ESRDC.   A   certification   was likewise   issued   by   the   Provincial   Assessor   of Misamis   Oriental   that   previous   tax   declarations pertaining  to  the  said portion under  the name of Agapita Claudel could no longer be located as the files were deemed lost or destroyed before World War II.

 

On the other hand, the remaining portion of the said land was previously declared in 1948 under 

the name of Jacinto Tan Lay Cho. Subsequently, in 1969 until 1990, the same was declared under the name   of   Jacinto   Tan.   Thereafter,   the   same   was declared under the name of ESRDC. A certification was likewise issued by the Provincial Assessor that the   files   of   previous   tax   declarations   under   the name of Jacinto Tan Lay Cho were deemed lost or destroyed again before World War II.

 

In 1991 or upon ESRDC’s acquisition of the subject property, the latter took possession thereto. Albeit it has presently leased the said land to Asia Brewery,   Inc.,   where   the   latter   built   its   brewery plant,   nonetheless,   ESRDC   has   its   branch   office located at the plant compound of Asia Brewery, Inc.

 

Corollarily,   oppositor-appellant’s contentions   that   the   court a   quo erred   in considering   the   tax   declarations   as   evidence   of ESRDC’s   possession   of   the   subject   land   as   the latter’s predecessors-in-interest declared the same sporadically, is untenable.

 

It   is   a   settled   rule   that   albeit   tax declarations and realty tax payment of property are not conclusive evidence of ownership, nevertheless, 

they   are   good indicia of   the   possession   in   the concept of owner for no one in his right mind would be  paying   taxes   for   a  property   that   is  not   in  his actual   or   at   least   constructive   possession.   They constitute at least proof that the holder has a claim of title over the property. The voluntary declaration of   a   piece   of   property   for   taxation   purposes manifests not only one’s sincere and honest desire to obtain title  to the property  and announces his adverse   claim   against   the   State   and   all   other interested   parties,   but   also   the   intention   to contribute   needed   revenues   to   the   Government. Such   an   act   strengthens   one’s bona   fideclaim   of acquisition of ownership.

 

Finally, it bears stressing that the pieces of evidence   submitted   by   petitioner-appellee   are incontrovertible.   Not   one,   not   even   oppositor-appellant   Republic,   presented   any   countervailing evidence to contradict the claims of the petitioners that they are in possession of the subject property and   their   possession   of   the   same   is   open, continuous   and   exclusive   in   the   concept   of   an owner for over 30 years.

 

Verily,   from  1948  when   the   subject   land was declared for taxation purposes until ESRDC filed 

an application for land registration in 1995, ESRDC have been in possession over the subject land in the concept of an owner tacking its possession to that its   predecessors-in-interest   for   forty   seven   (47) years   already.   Thus,   ESRDC   was   able   to   prove sufficiently   that   it   has   been   in   possession  of   the subject   property   for  more   than   30   years,   which possession   is   characterized   as   open,   continuous, exclusive,   and   notorious   in   the   concept   of   an owner.[7] (citations omitted)

 

 

 

The   petitioner   assails   the   foregoing,   alleging   that   the 

respondent   failed   to   prove   that   its   predecessors-in-interest 

possessed the subject property in the manner and for the length of 

time required under Section 48 (b) of Commonwealth Act No. 141, 

otherwise known as the “Public Land Act” (PLA), and Section 14 of 

Presidential  Decree  No.  1529,  otherwise  known as   the  “Property 

Registration Decree” (P.D. No. 1529). According to the petitioner, 

the respondent did not present a credible and competent witness to 

testify   on   the   specific   acts   of   ownership   performed   by   its 

predecessors-in-interest on the subject property. The respondent’s 

sole witness, Vicente Oco, can hardly be considered a credible and 

competent witness as he is the respondent’s liaison officer and he is 

not related in any way to the respondent’s predecessors-in-interest. 

That coconut trees were planted on the subject property only shows 

casual or occasional cultivation and does not qualify as possession 

under a claim of ownership.

 

Issue

This Court is confronted with the sole issue of whether the 

respondent has proven itself entitled to the benefits of the PLA and 

P.D. No. 1529 on confirmation of imperfect or incomplete titles.

 

Our Ruling

          This Court resolves to GRANT the petition.

 

          Preliminarily,  with   respect   to   the   infirmity   suffered  by   this 

petition from the standpoint of Rule 45, this Court agrees with the 

respondent that the issue of whether the respondent had presented 

sufficient proof of the required possession under a bona fide claim 

of ownership raises a question of fact, considering that it invites an 

evaluation of the evidentiary record.[8]  However, that a petition for 

review should be confined to questions of law and that this Court is 

not a trier of facts and bound by the factual findings of the CA are 

not without exceptions. Among these exceptions, which obtain in 

this   case,   are:   (a)  when   the   judgment  of   the  CA   is   based  on   a 

misapprehension of facts or (b) when its findings are not sustained 

by the evidence on record.

 

          This Court’s review of the records of this case reveals that the 

evidence submitted by the respondent fell short of proving that it 

has  acquired  an   imperfect  title  over   the   subject  property  under 

Section   48   (b)   of   the   PLA.   The   respondent   cannot   register   the 

subject property in its name on the basis of either Section 14 (1) or 

Section   14   (2)   of   P.D.  No.   1529.   It  was   not   established  by   the 

required   quantum   of   evidence   that   the   respondent   and   its 

predecessors-in-interest  had  been   in   open,   continuous,   exclusive 

and notorious possession of the subject property for the prescribed 

statutory period.

 

          The PLA governs the classification and disposition of lands of 

the public domain. Under Section 11 thereof, one of the modes of 

disposing   public   lands   suitable   for   agricultural   purposes   is   by 

“confirmation   of   imperfect   or   incomplete   titles”.[9] On   the   other 

hand, Section 48 provides the grant to the qualified possessor of an 

alienable and disposable public land. Thus:

 

SEC.   48.   The   following-described   citizens   of   the Philippines, occupying lands of the public domain or claiming   to   own   any   such   lands   or   an   interest therein, but whose titles have not been perfected or   completed,   may   apply   to   the   Court   of   First Instance of the province where the land is located for confirmation of their claims and the issuance of a   certificate   of   title   therefor,   under   the   Land Registration Act, to wit:

 

(a)   Those   who   prior   to   the   transfer   of sovereignty   from Spain  to  the  United  States have applied for the purchase, composition or other form of  grant  of   lands  of   the  public  domain under  the laws   and   royal   decrees   then   in   force   and   have instituted   and   prosecuted   the   proceedings   in connection   therewith,   but   have   with   or   without default upon their part, or for any other cause, not received title therefor, if such applicants or grantees and their  heirs  have occupied  and cultivated  said lands   continuously   since   the   filing   of   their applications.

 

(b)   Those  who  by   themselves   or   through their  predecessors   in   interest  have been  in  open, continuous, exclusive, and notorious possession and occupation   of   agricultural   lands   of   the   public domain,  under a bona fide claim of acquisition or ownership,   for   at   least   thirty   years   immediately preceding   the   filing   of   the   application   for confirmation of title except when prevented by war or   force   majeure.   These   shall   be   conclusively presumed   to   have   performed   all   the   conditions essential   to   a   Government   grant   and   shall   be entitled to a certificate of title under the provisions of this chapter.

 

(c)   Members   of   the   national   cultural minorities   who   by   themselves   or   through   their predecessors-in-interest   have   been   in   open, continuous, exclusive and notorious possession and occupation of lands of the public domain suitable to agriculture,   whether   disposable   or   not,   under   a bona fide claim of ownership for at least 30 years shall be entitled to the rights granted in sub-section (b) hereof.

 

 

          Presidential   Decree   No.   1073   (P.D.   No.   1073),   which   was 

issued on January 25,  1977,  deleted subsection (a) and amended 

subsection (b) as follows:

 

SECTION  4.   The  provisions   of   Section  48   (b)   and Section 48 (c),  Chapter VIII  of the Public Land Act are   hereby   amended   in   the   sense   that   these provisions   shall   apply   only   to   alienable   and disposable lands of the public domain which have been in open, continuous, exclusive and notorious possession   and  occupation   by   the   applicant   thru himself or thru his predecessor-in-interest under a bona fide claim of ownership since June 12, 1945.

 

 

            Notably, the first PLA, or Act No. 926, required a possession 

and occupation for a period of ten (10) years prior to the effectivity 

of  Act  No.  2096 on   July  26,  1904 or  on  July  26,  1894.  This  was 

adopted in the PLA until it was amended by Republic Act No. 1942 

on June 22, 1957, which provided for a period of thirty (30) years. It 

was only with the enactment of P.D. No. 1073 on January 25, 1977 

that   it   was   required   that   possession   and   occupation   should 

commence on June 12, 1945.

 

P.D. No. 1529, which was enacted on June 11, 1978,

codified all the laws relative to the registration of property. Section

14 thereof partially provides:

 Section 14. Who may apply. The following

persons may file in the proper Court of First Instance an application for registration of title to land, whether personally or through their duly authorized representatives:

 (1) Those who by themselves or through

their predecessors-in-interest have been in open, continuous, exclusive and notorious possession and occupation of alienable and disposable lands of the public domain under a bona fide claim of ownership since June 12, 1945, or earlier.

 (2) Those who have acquired ownership of

private lands by prescription under the provision of existing laws.

 (3) Those who have acquired ownership of

private lands or abandoned river beds by right of accession or accretion under the existing laws.

 (4) Those who have acquired ownership of

land in any other manner provided for by law.  

Section   14   (1)   and   Section   14   (2)   are   clearly   different. 

Section 14 (1) covers “alienable and disposable land” while Section 

14 (2) covers “private property”. As this Court categorically stated 

in Heirs   of   Malabanan   v.   Republic   of   the   Philippines,[10] the 

distinction between the two provisions lies with the inapplicability 

of prescription to alienable and disposable lands. Specifically:

 

At the same time, Section 14 (2) puts into operation the entire regime of  prescription under the Civil Code, a fact which does not hold true with respect to Section 14 (1).[11]

 

 

          Property   is   either   part   of   the   public   domain   or   privately 

owned.[12] Under   Article   420   of   the   Civil   Code,   the   following 

properties are of public dominion:

 

(a)                Those   intended   for  public   use, such   as   roads,   canals,   rivers,   torrents,   ports   and bridges   constructed   by   the   State,   banks,   shores, roadsteads and others of similar character;

 

(b)               Those which belong to the State, without being for public use, and are intended for some public service or for the development of the national wealth.

 

 

All   other   properties   of   the   State,   which   is   not   of   the 

character   mentioned   in   Article   420   is   patrimonial   property,[13] hence, susceptible to acquisitive prescription.[14]

 

In Heirs of Malabanan, this Court ruled that possession and 

occupation   of   an   alienable   and   disposable   public   land   for   the 

periods provided under the Civil Code do not automatically convert 

said  property   into  private  property  or   release   it   from the  public 

domain. There must be an express declaration that the property is 

no longer  intended for public  service or development of  national 

wealth.  Without   such   express   declaration,   the  property,   even   if 

classified as alienable or disposable, remains property of the State, 

and thus, may not be acquired by prescription.

 

Nonetheless,  Article 422 of   the  Civil  Code states that “[p]roperty of public dominion, when no longer intended for public use or for public service, shall form part of the patrimonial  property of the State.”  It is this provision that controls how public dominion   property   may   be   converted   into patrimonial  property  susceptible   to  acquisition by prescription.  After  all,  Article 420  (2)  makes  clear 

that   those   property   “which   belong   to   the   State, without being for public use, and are intended for some public service or for the development of the national wealth” are public dominion property. For as long as the property belongs to the State, although already classified as alienable or disposable, it remains property of the public dominion if when it is “intended for some public service or for the development of the national wealth”. (emphasis supplied)

 

Accordingly, there must be an express declaration by the State that the public dominion property is no longer intended for public service or the development of the national wealth or that the property has been converted into patrimonial. Without such express declaration, the property, even if classified as alienable or disposable, remains property of the public dominion, pursuant to Article 420(2), and thus incapable of acquisition by prescription. It is only when such alienable and disposable lands are expressly declared by the State to be no longer intended for public service or for the development of the national wealth that the period of acquisitive prescription can begin to run. Such declaration shall be in the form of a law duly enacted by Congress or a Presidential Proclamation in cases where the President is duly authorized by law.[15]

 

 

In other words, for one to invoke the provisions of Section 

14  (2)  and set  up acquisitive  prescription  against   the  State,   it   is 

primordial   that  the status of  the property  as patrimonial  be first 

established.  Furthermore,  the period of possession preceding the 

classification of the property as patrimonial cannot be considered in 

determining the completion of the prescriptive period.

 

To   prove   that   its   predecessors-in-interest   were   in 

possession of the subject property on or prior to June 12, 1945 or 

had   completed   the   prescriptive   period   of   thirty   (30)   years,   the 

respondent submitted the following tax declarations:

 

a)                 Tax Declaration  in the name of 

Agapita Claudel for the year 1948;

 

b)                Tax Declarations in the name of 

Francisca Oco for the years 1957, 1963, 1969, 1973, 

1974, 1980, 1987, 1989 and 1991;

 

c)                 Tax   Declarations   in   the 

respondent’s  name  for   the  years  1991,  1992 and 

1994;

 

d)                Tax Declarations in the name of 

Jacinto Tan Lay Cho for the years 1948 and 1952;

 

e)                 Tax Declarations in the name of 

Jacinto Tan for the years 1969, 1973,  1974, 1980, 

1989 and 1990; and

 

f)                  Tax   Declarations   in   the 

respondent’s  name  for   the  years  1991,  1992 and 

1994.

 

Pursuant to Agapita Claudel’s  1948 Tax Declaration, there 

were nineteen (19) coconut and ten (10) banana trees planted on 

Area A. The coconut trees were supposedly four years old, hence, 

the reasonable presumption that she had been in possession even 

before June 12, 1945.[16]

 

The   respondent   also   offered   the   following   testimony   of 

Vicente Oco:

 

“Q – Mr. Witness, If you know about what period your predecessor has started to possess this land subject matter of this application?

 

A   –   Per   my   personal   knowledge,   it   was before the second world war but the Municipality of El Salvador was created on June 15, 1948 by virtue of RA 268 and it’s started to officially function only on August 2, 1948[.]

 

Q   –   From   whom   did   you   acquire   this information?

 

A –  From the  seller  and  the  adjoining   lot owners.”[17]

 

 

To prove that its predecessors-in-interest exercised acts of 

dominion over the subject property,  the respondent claimed that 

per Francisca Oco’s Tax Declarations, the following improvements 

were   introduced   in  Area  A:  nineteen   (19)   coconut  and   ten   (10) 

banana trees in Area A in 1957 and 1963; thirty-three (33) coconut 

trees   in  1969  and  1973;   thirty-three   (33)   coconut   trees,  one   (1) 

mango tree and three (3) seguidillas vines in 1974; thirty-three (33) 

coconut trees in 1980; eighty-seven (87) coconut trees in 1987; and 

fifteen   (15)   coconut   trees   in   1989.   Per   Jacinto   Tan’s   Tax 

Declarations, there were fifty-seven (57) coconut trees in Area B in 

1973, 1974, 1980, 1989 and 1990.[18]

 

A reading of the CA’s July 31, 2008 Decision shows that it 

affirmed   the   grant   of   the   respondent’s   application   given   its 

supposed compliance with Section 14 (2) of P.D. No. 1529. It ruled 

that   based   on   the   evidence   submitted,   the   respondent   is   not 

qualified to register the subject property in its name under Section 

14   (1)   as   the   possession   and   occupation   of   its   predecessors-in-

interest commenced after June 12,  1945. Nonetheless,  as the CA 

ruled,   the   respondent   acquired   title   to   the   subject   property   by 

prescription   as   its   predecessors-in-interest   had   possessed   the 

subject   property   for   more   than   thirty   (30)   years. 

Citing Buenaventura  v.  Republic  of   the  Philippines,[19] the  CA  held 

that even if possession commenced after June 12, 1945, registration 

is still possible under Section 14 (2) and possession in the concept of 

an  owner  effectively  converts  an  alienable  and disposable  public 

land into private property.

 

This Court, however, disagrees on the conclusion arrived at 

by   the  CA.  On   the  premise   that   the  application   for   registration, 

which  was  filed   in  1995,   is  based  on  Section  14   (2),   it  was  not 

proven   that   the   respondent  and   its  predecessors-in-interest  had 

been in possession of the subject property in the manner prescribed 

by law and for the period necessary before acquisitive prescription 

may apply.

 

While the subject  land was supposedly declared alienable 

and   disposable   on   December   31,   1925   per   the   April   18,   1997 

Certification and July 1, 1997 Report of the Community Environment 

and   Natural   Resources   Office   (CENRO),[20] the   Department   of 

Agrarian   Reform   (DAR)   converted   the   same   from   agricultural   to 

industrial only on October 16, 1990.[21] Also, it was only in 2000 that 

the Municipality of El Salvador passed a Zoning Ordinance, including 

the subject property in the industrial zone.[22] Therefore, it was only 

in 1990 that  the subject  property had been declared patrimonial 

and it is only then that the prescriptive period began to run. The 

respondent   cannot   benefit   from   the   alleged   possession   of   its 

predecessors-in-interest   because   prior   to   the  withdrawal   of   the 

subject property from the public domain, it may not be acquired by 

prescription.

 

On the premise that  the application of  the respondent   is 

predicated on Section 14 (1), the same would likewise not prosper. 

As shown by the tax declarations of the respondent’s predecessors-

in-interest,   the   earliest   that   the   respondent   can   trace   back   the 

possession   of   its   predecessors-in-interest   is   in   1948.   That   there 

were   four-year  old  coconut   trees   in  Area A  as   stated  in  Agapita 

Claudel’s  1948 Tax Declaration cannot be considered a “well-nigh 

controvertible evidence” that she was in possession prior to June 

12,   1945  without   any   evidence   that   she   planted   and   cultivated 

them. In the case of Jacinto Tan Lay Cho, the earliest tax declaration 

in his name is dated 1948 and there is no evidence that he occupied 

and possessed Area B on or prior to June 12, 1945. Furthermore, 

the   testimony   of   the   respondent’s   lone   witness   that   the 

respondent’s predecessors-in-interest were already in possession of 

the subject property as of June 12, 1945 lacks probative value for 

being hearsay.

 

It  is  explicit  under Section 14 (1) that the possession and 

occupation required to acquire an imperfect title over an alienable 

and  disposable  public   land  must  be  “open,  continuous,  exclusive 

and   notorious”   in   character.   In 

Republic of the Philippines v. Alconaba,[23] this Court explained that 

the   intent   behind   the   use   of   “possession”   in   conjunction   with 

“occupation”   is   to 

emphasize the need for actual and not just constructive or fictional 

possession.

 

The   law   speaks   of possession   and occupation. Since these words are separated by the conjunction and,   the  clear   intention  of   the   law  is not   to   make   one   synonymous   with   the   other. Possession   is  broader   than  occupation  because   it includes constructive possession. When, therefore, the   law   adds   the   word occupation,   it   seeks   to delimit the all encompassing effect of constructive possession.  Taken  together  with   the  words  open, continuous,   exclusive   and   notorious,   the word occupation serves to highlight the fact that for an applicant to qualify, his possession must not be a mere fiction. Actual possession of a land consists in the  manifestation  of   acts   of   dominion  over   it   of such a nature as a  party  would naturally  exercise over his own property.[24] (citations omitted)

 

 

On the other hand, Section 14 (2) is silent as to the required 

nature of possession and occupation, thus, requiring a reference to 

the relevant provisions of the Civil Code on prescription. And under 

Article 1118 thereof, possession for purposes of prescription must 

be   “in   the   concept   of   an   owner,   public,   peaceful   and 

uninterrupted”.   In Heirs of Marcelina Arzadon-Crisologo v.  Rañon,[25] this Court expounded on the nature of possession required for 

purposes of prescription:

 

It is concerned with lapse of time in the manner and under conditions laid down by law, namely, that the possession should be in the concept of an owner, public,   peaceful,   uninterrupted   and adverse. Possession   is   open   when   it   is   patent, visible, apparent,  notorious and not clandestine. It is   continuous  when  uninterrupted,   unbroken   and not  intermittent  or occasional; exclusive when the adverse   possessor   can   show   exclusive   dominion over the land and an appropriation of it to his own use   and   benefit; and   notorious   when   it   is   so conspicuous that it is generally known and talked of by   the   public   or   the   people   in   the neighborhood. The party who asserts ownership by adverse possession must prove the presence of the essential   elements   of   acquisitive   prescription.[26] (citations omitted)

 

 

          This Court is not satisfied with the evidence presented by the 

respondent   to   prove   compliance   with   the   possession   required 

either under Section 14 (1) or Section 14 (2).

 

First, the twelve (12) Tax Declarations covering Area A and 

the   eleven   (11)   Tax  Declarations   covering  Area   B   for   a   claimed 

possession  of  more  than   forty-six   (46)  years   (1948-1994)  do  not 

qualify as competent evidence of actual possession and occupation. 

As this Court ruled in Wee v. Republic of the Philippines:[27]

 

 

It bears stressing that petitioner presented only five tax  declarations   (for   the   years  1957,  1961,  1967, 1980   and   1985)   for   a   claimed   possession   and occupation of more than 45 years (1945-1993). This type of intermittent and sporadic assertion of alleged ownership does not prove open, continuous, exclusive and notorious possession and occupation. In   any   event,   in   the   absence   of other competent evidence, tax declarations do not conclusively   establish   either   possession   or 

declarant’s right to registration of title.[28] (emphasis supplied and citation omitted)

 

 

The   phrase   “adverse,   continuous,   open,   public,   and   in 

concept   of   owner,”   by   which   the   respondent   describes   its 

possession and that of its predecessors-in-interest is a conclusion of 

law. The burden of proof is on the respondent to prove by clear, 

positive and convincing evidence that the alleged possession of its 

predecessors-in-interest was of the nature and duration required by 

law.[29] It   is   therefore   inconsequential   if   the   petitioner   failed   to 

present   evidence   that   would   controvert   the   allegations   of   the 

respondent. A person who seeks the registration of title to a piece 

of land on the basis of possession by himself and his predecessors-

in-interest   must   prove   his   claim   by   clear   and   convincing 

evidence, i.e.,   he   must   prove   his 

title   and   should   not   rely   on   the   absence   or   weakness   of   the 

evidence of the oppositors.[30]

 

The respondent’s claim of ownership will not prosper on the 

basis  of   the   tax  declarations  alone.   In Cequeña  v.  Bolante,[31] this 

Court ruled that it is only when these tax declarations are coupled 

with   proof   of   actual   possession   of   the   property   that   they  may 

become   the   basis   of   a   claim  of   ownership.[32] In   the   absence  of 

actual public and adverse possession, the declaration of the land for 

tax purposes does not prove ownership.[33]

 

Second, that   the  nineteen   (19)   coconut   trees   supposedly 

found on Area A were four years old at the time Agapita Claudel 

filed a Tax Declaration in 1948 will not suffice as evidence that her 

possession commenced prior to June 12, 1945,  in the absence of 

evidence   that   she   planted   and   cultivated   them.   Alternatively, 

assuming that Agapita Claudel planted and maintained these trees, 

such can only be considered “casual cultivation” considering the size 

of Area A. On the other hand, that Jacinto Tan Lay Cho possessed 

Area B  in the concept  of an owner on or prior to June 12,  1945 

cannot be assumed from his 1948 Tax Declaration.

 

Third, that plants were on the subject property without any 

evidence that it was the respondent’s predecessors-in-interest who 

planted them and that  actual  cultivation or harvesting was made 

does not constitute “well-nigh incontrovertible evidence” of actual 

possession and occupation. As this Court ruled in Wee:

 

We are, therefore, constrained to conclude that the mere existence of an unspecified number 

of   coffee   plants, sans any   evidence   as   to   who planted   them,  when   they  were  planted,  whether cultivation or harvesting was made or what other acts of occupation and ownership were undertaken, is not sufficient to demonstrate petitioner’s right to the registration of title in her favor.[34]

 

 

Fourth,   Vicente   Oco’s   testimony   deserves   scant 

consideration and will not supplement the inherent inadequacy of 

the tax declarations. Apart from being self-serving, it is undoubtedly 

hearsay.   Vicente   Oco   lacks 

personal knowledge as to when the predecessors-in-interest of the 

respondent  started to occupy the  subject  property  and admitted 

that his testimony was based on what he allegedly gathered from 

the   respondent’s   predecessors-in-interest   and   the   owners   of 

adjoining   lot.  Moreover,  Vicente  Oco  did  not   testify   as   to  what 

specific   acts   of   dominion   or   ownership  were  performed   by   the 

respondent’s  predecessors-in-interest   and   if   indeed   they  did.  He 

merely made a general claim that they came into possession before 

World War  II,  which  is  a  mere conclusion of   law and not factual 

proof  of possession,  and therefore unavailing and cannot suffice.[35] Evidence   of   this   nature   should   have   been   received   with 

suspicion, if not dismissed as tenuous and unreliable.

 

Finally,   that   the   respondent’s   application  was   filed   after 

only   four   years   from   the   time   the   subject   property   may   be 

considered patrimonial  by reason of  the DAR’s  October 26,  1990 

Order   shows   lack   of   possession   whether   for   ordinary   or 

extraordinary prescriptive period. The principle enunciated in Heirs 

of Malabanancited above was reiterated and applied in Republic of 

the Philippines v. Rizalvo:[36]

 

On this basis, respondent would have been eligible for application for registration because his claim of ownership and possession over the subject property even exceeds thirty (30) years. However, it is   jurisprudentially   clear   that   the   thirty   (30)-year period   of   prescription   for   purposes   of   acquiring ownership   and   registration   of   public   land   under Section 14 (2) of P.D. No. 1529 only begins from the moment the State expressly declares that the public dominion   property   is   no   longer   intended for   public   service   or   the   development   of   the national   wealth   or   that   the   property   has   been converted into patrimonial.[37]

 

 

WHEREFORE,   premises   considered,   the   instant   petition 

is GRANTED.   The   July   31,   2008  Decision   and   February   20,   2009 

Resolution   of   the   Court   of   Appeals   in   CA-G.R.   CV   No.   00143 

are REVERSED and 

SET ASIDE and the respondent’s application for registration of title 

over Lot 9039   of   Cagayan   Cadastre   is   hereby DENIED for   lack   of 

merit.

 

SO ORDERED.

D.B.T. MAR-BAY CONSTRUCTION, INCORPORATED,

Petitioner,  

         - versus -   RICAREDO PANES, ANGELITO PANES, SALVADOR CEA, ABOGADO MAUTIN, DONARDO PACLIBAR, ZOSIMO PERALTA and HILARION MANONGDO,

Respondents.

G.R. No. 167232

 Present: YNARES-SANTIAGO, J.,   Chairperson,CHICO-NAZARIO,VELASCO, JR.,NACHURA, andPERALTA, JJ.  Promulgated: July 31, 2009

 x------------------------------------------------------------------------------------x  DECISION NACHURA, J.:           Before this Court is a Petition[1] for Review on Certiorari under

Rule 45 of the Rules of Civil Procedure, assailing the Court of

Appeals (CA) Decision[2] dated October 25, 2004 which reversed and

set aside the Order[3] of the Regional Trial Court (RTC) of Quezon

City, Branch 216, dated November 8, 2001.

The Facts

 

         Subject of this controversy is a parcel of land identified as Lot

Plan Psu-123169,[4] containing an area of Two Hundred Forty

Thousand, One Hundred Forty-Six (240,146) square meters, and

situated at Barangay (Brgy.) Pasong Putik, Novaliches, Quezon

City (subject property). The property is included in Transfer

Certificate of Title (TCT) No. 200519,[5] entered on July 19, 1974

and issued in favor of B.C. Regalado & Co. (B.C. Regalado).  It was

conveyed by B.C. Regalado to petitioner D.B.T. Mar-Bay

Construction, Inc. (DBT) through a dacion en pago[6] for services

rendered by the latter to the former.

 

         On June 24, 1992, respondents Ricaredo P. Panes (Ricaredo),

his son Angelito P. Panes (Angelito), Salvador Cea, Abogado

Mautin, Donardo Paclibar, Zosimo P. Peralta, and Hilarion

Manongdo (herein collectively referred to as respondents) filed a

Complaint[7] for “Quieting of Title with Cancellation of TCT No.

200519 and all Titles derived thereat (sic), Damages, with Petition

for the Issuance of Injunction with Prayer for the Issuance of

Restraining Order Ex-Parte, Etc.” against B.C. Regalado, Mar-Bay

Realty, Inc., Spouses Gereno Brioso and Criselda M. Brioso,

Spouses Ciriaco and Nellie Mariano, Avelino C. Perdido and

Florentina Allado, Eufrocina A. Maborang and Fe Maborang,

Spouses Jaime and Rosario Tabangcura,  Spouses Oscar Ikalina and

the Register of Deeds (RD) of Quezon City. Subsequently,

respondents filed an Amended Complaint[8] and a Second Amended

Complaint[9] particularly impleading DBT as one of the defendants.

         In the Complaints, Ricaredo alleged that he is the lawful owner

and claimant of the subject property which he had declared for

taxation purposes in his name, and assessed in the amount

of P2,602,190.00 by the City Assessor of Quezon City as of the year

1985.  Respondents alleged that per Certification[10] of the

Department of Environment and Natural Resources  (DENR)

National Capital Region (NCR) dated May 7, 1992, Lot Plan Psu-

123169 was verified to be correct and on file in said office, and

approved on July 23, 1948.

 

         Respondents also claimed that Ricaredo, his immediate family

members, and the other respondents had been, and still are, in actual

possession of the portions of the subject property, and their

possession preceded the Second World War.  To perfect his title in

accordance with Act No. 496 (The Land Registration Act) as

amended by Presidential Decree (P.D.) No. 1529 (The Property

Registration Decree), Ricaredo filed with the RTC of Quezon City,

Branch 82 a case docketed as LRC Case No. Q-91-011, with LRC

Rec. No. N-62563.[11]

 

         Respondents averred that in the process of complying with the

publication requirements for the Notice of Initial Hearing with the

Land Registration Authority (LRA), it was discovered by the

Mapping Services of the LRA that there existed an overlapping of

portions of the land subject of Ricaredo’s application, with the

subdivision plan of B.C. Regalado.  The said portion had, by then,

already been conveyed by B.C. Regalado to DBT.

 

         Ricaredo asseverated that upon verification with the LRA, he

found that the subdivision plan of B.C. Regalado was deliberately

drawn to cover portions of the subject property. Respondents

claimed that the title used by B.C. Regalado in the preparation of the

subdivision plan did not actually cover the subject property.  They

asserted that from the records of B.C. Regalado, they gathered that

TCT Nos. 211081,[12] 211095[13] and 211132,[14] which allegedly

included portions of the subject property, were derived from TCT

No. 200519.  However, TCT No. 200519 only covered Lot 503 of

the Tala Estate with an area of Twenty-Two Thousand Six Hundred

Fifteen (22,615) square meters, and was different from those

mentioned in TCT Nos. 211081, 211095 and 211132.  According to

respondents, an examination of TCT No. 200519 would show that it

was derived from TCT Nos. 14814,[15] 14827,[16] 14815[17] and T-28.

 

         In essence, respondents alleged that B.C. Regalado and DBT

used the derivative titles which covered properties located far

from Pasong Putik, Novaliches,Quezon City where the subject

property is located, and B.C. Regalado and DBT then offered the

same for sale to the public. Respondents thus submitted that B.C

Regalado and DBT through their deliberate scheme, in collusion

with others, used (LRC) Pcs-18345 as shown in the consolidation-

subdivision plan to include the subject property covered by Lot Plan

Psu-123169.

 

         In his Answer[18] dated July 24, 1992, the RD of Quezon City

interposed the defense that at the time of registration, he found all

documents to be in order.   Subsequently, on December 5, 1994, in

his Motion[19]   for Leave to Admit Amended Answer, with the

Amended Answer attached, he admitted that he committed a grave

mistake when he earlier said that TCT No. 200519 covered only one

lot, i.e. Lot 503.  He averred that upon careful examination, he

discovered that TCT No. 200519 is composed of 17 pages, and

actually covered 54 lots, namely: Lots 503, 506, 507, 508, 509, 582,

586, 655, 659, 686, 434, 495, 497, 299, 498, 499, 500, 501, 502, 493,

692, 776, 496, 785, 777, 786, 780, 783, 505, 654, 660, 661, 663, 664,

665, 668, 693, 694, 713, 716, 781, 779, 784, 782, 787, 893, 1115,

1114, 778, 669 and 788, all of the Tala Estate. Other lots included

therein are Lot 890-B of Psd 36854, Lot 2 of (LRC) Pcs 12892

and Lot 3 of (LRC) Pcs 12892. Thus, respondents' allegation that

Lots 661, 664, 665, 693 and 694 of the Tala Estate were not included

in TCT No. 200519 was not true.

 

         On December 28, 1993, then defendants Spouses Jaime and

Rosario Tabangcura (Spouses Tabangcura) filed their Answer[20] with

Counterclaim, claiming that they were buyers in good faith and for

value when they bought a house and lot covered by TCT No. 211095

from B.C. Regalado, the latter being a subdivision developer and

registered owner thereof, on June 30, 1986. When respondent

Abogado Mautin entered and occupied the property, Spouses

Tabangcura filed a case for Recovery of Property before the

RTC, Quezon City, Branch 97 which rendered a decision[21] in their

favor.

 

         On its part, DBT, traversing the complaint, alleged that it is the

legitimate owner and occupant of the subject property pursuant to

a dacion en pago executed by B.C. Regalado in the former’s favor;

that respondents were not real parties-in-interests because Ricaredo

was a mere claimant whose rights over the property had yet to be

determined by the RTC where he filed his

application  for  registration;  that the other respondents did not

allege  matters  or  invoke  rights  which  would  entitle them  to   the 

 relief

 

prayed for in their complaint; that the complaint was premature; and

that the action inflicted a chilling effect on the lot buyers of DBT.[22]

                                           

The  RTC's Rulings

 

         On June 15, 2000, the RTC through Judge Marciano I. Bacalla

(Judge Bacalla), rendered a Decision[23] in favor of the respondents.

The RTC held that the testimony of Ricaredo that he occupied the

subject property since 1936 when he was only 16 years old had not

been rebutted; that Ricaredo's occupation and cultivation of the

subject property for more than thirty (30) years in the concept of an

owner vested in him equitable ownership over the same by virtue of

an approved plan, Psu 123169; that the subject property was declared

under the name of Ricaredo for taxation purposes;[24] and that the

subject property per survey should not have been included in TCT

No. 200519, registered in the name of B.C. Regalado and ceded to

DBT.  The RTC further held that Spouses Tabangcura failed to

present satisfactory evidence to prove their claim. Thus, the RTC

disposed of the case in this wise: 

            WHEREFORE, in view of the foregoing considerations, judgment is hereby rendered declaring Certificate of Title No. 200519 and all titles derived thereat as null and void insofar as the same embrace the land covered by Plan PSU-123169 with an area of 240,146 square meters in the name of Ricaredo Panes; ordering defendant DBT Marbay Realty, Inc. to pay plaintiff Ricaredo Panes the sum of TWENTY THOUSAND (P20,000) pesos as attorney’s fees plus costs of suit.             SO ORDERED.                                                 

 

         On September 12, 2000, DBT filed a Motion[25] for

Reconsideration, based on the grounds of prescription and laches.

DBT also disputed Ricaredo’s claim of open, adverse, and

continuous possession of the subject property for more than thirty

(30) years, and asserted that the subject property could not be

acquired by prescription or adverse possession because it is covered

by TCT No. 200519.

 

         While the said Motion for Reconsideration was pending, Judge

Bacalla passed away.

 

         Meanwhile, on January 2, 2001, a Motion[26] for Intervention

and a Complaint in Intervention were filed by Atty. Andres B.

Pulumbarit (Atty. Pulumbarit), representing the Don Pedro/Don Jose

de Ocampo Estate.  The intervenor alleged that the subject property

formed part of the vast tract of land with an area of 117,000

hectares, covered by Original Certificate of Title (OCT) No. 779

issued by the Honorable Norberto Romualdez on March 14, 1913

under Decree No. 10139, which belongs to the Estate of Don

Pedro/Don Jose de Ocampo.  Thus, the Complaint[27] in Intervention

prayed that the RTC’s Decision be reconsidered; that the legitimacy

and superiority of OCT 779 be upheld; and that the subject property

be declared as belonging to the Estate of Don Pedro/Don Jose de

Ocampo.

 

         In its Order[28] dated March 13, 2001, the RTC, through Acting

Judge   Modesto C. Juanson (Judge Juanson), denied Atty.

Pulumbarit’s Motion for Intervention because a judgment had

already been rendered pursuant to Section 2,[29] Rule 19 of the 1997

Rules of Civil Procedure.

 

         On April 10, 2001, the RTC issued an Order[30] stating that

there appeared to be a need for a clarificatory hearing before it could

act on DBT's Motion for Reconsideration.   Thus, a hearing was held

on May 17, 2001. Thereafter, supplemental memoranda were

required of the parties.[31]  Both parties complied.[32]However, having

found that the original copy of TCT No. 200519 was not submitted

to it for comparison with the photocopy thereof on file, the RTC

directed DBT to present the original or certified true copy of the

TCT on August 21, 2001.[33]  Respondents moved to reconsider the

said directive[34] but the same was denied.[35]  DBT, on the other

hand, manifested that a copy of TCT No. 200519, consisting of 17

pages, had already been admitted in evidence; and that because of

the fire in the Office of the RD in Quezon City sometime in 1988,

DBT, despite diligent effort, could not secure an original or certified

true copy of said TCT. Instead, DBT submitted a certified true copy

of Consolidated Subdivision Plan Pcs 18345.[36]

 

         On November 8, 2001, the RTC, through Judge Juanson,

issued an Order[37] reversing the earlier RTC Decision and

dismissing the Complaint for lack of merit. The RTC held that

prescription does not run against registered land; hence, a title once

registered cannot be defeated even by adverse, open or notorious

possession. Moreover, the RTC opined that even if the subject

property could be acquired by prescription, respondents' action was

already barred by prescription and/or laches because they never

asserted their rights when B.C. Regalado registered the subject

property in 1974; and later developed, subdivided and sold the same

to individual lot buyers.

         On December 18, 2001, respondents filed a Motion for

Reconsideration[38] which the RTC denied in its Order[39] dated June

17, 2002. Aggrieved, respondents appealed to the CA.[40]

                                          

The CA's Ruling

 

         On October 25, 2004, the CA reversed and set aside the RTC

Orders dated November 8, 2001 and June 17, 2002 and reinstated the

RTC Decision dated June 15, 2000. The CA held that the properties

described and included in TCT No. 200519 are located in San

Francisco del Monte, San Juan del Monte, Rizal and Cubao,Quezon

City while the subject property is located in Brgy. Pasong Putik,

Novaliches, Quezon City. Furthermore, the CA held that Engr.

Vertudazo's testimony that there is a gap of around 1,250 meters

between Lot 503 and Psu 123169 was not disproved or refuted. The

CA found that Judge Juanson committed a procedural infraction

when he entertained issues and admitted evidence presented by DBT

in its Motion for Reconsideration which were never raised in the

pleadings and proceedings prior to the rendition of the RTC

Decision. The CA opined that DBT's claims of laches and

prescription clearly appeared to be an afterthought. Lastly, the CA

held that DBT's Motion for Reconsideration was not based on

grounds enumerated in the Rules of Procedure.[41]

 

         Petitioner filed a Motion for Reconsideration,[42] which was,

however, denied by the CA in its Resolution[43] dated February 22,

2005.

 

 

         Hence, this Petition.

 

The Issues

 

         Petitioner raises the following as grounds for this Petition:I. 

PETITIONER'S FAILURE TO ALLEGE PRESCRIPTION IN ITS ANSWER IS NOT A WAIVER OF SUCH DEFENSE. II. IT IS NOT ERRONEOUS TO REQUIRE THE PRODUCTION OF A CERTIFIED TRUE COPY OF TCT NO. 200519 AFTER THE DECISION ON THE MERITS HAS BEEN RENDERED BUT BEFORE IT BECAME FINAL. III. A REGISTERED LAND CAN NOT BE ACQUIRED BY ACQUISITIVE PRESCRIPTION. IV. 

THE TESTIMONY OF ENGR. VERTUDAZO ON THE BASIS OF THE TECHNICAL DESCRIPTION OF LOT 503 IN AN INCOMPLETE DOCUMENT IS UNRELIABLE. V. MR. PANES HAS NEVER BEEN IN OPEN, ADVERSE AND CONTINUOUS POSSESSION OF THE SUBJECT PROPERTY FOR MORE THAN THIRTY (30) YEARS.[44]

  

         Distilled from the petition and the responsive pleadings, and

culled from the arguments of the parties, the issues may be reduced

to two questions, namely:

 

         1)  Did the RTC err in upholding DBT's defenses of

prescription and laches as raised in the latter's Motion for

Reconsideration?

         2)   Which between DBT and the respondents have a better

right over the subject property?

 

Our Ruling

 

         We answer the first question in the affirmative. 

         It is true that in Dino v. Court of Appeals[45] we ruled: 

         (T)rial courts have authority and discretion to dismiss an action on the ground of prescription when the parties' pleadings or other facts on record show it to be indeed time-barred; (Francisco v. Robles, Feb. 15, 1954; Sison v. McQuaid, 50 O.G. 97; Bambao v. Lednicky, Jan. 28, 1961; Cordova v. Cordova, Jan. 14, 1958; Convets, Inc. v. NDC, Feb. 28, 1958; 32 SCRA 529; Sinaon v. Sorongan, 136 SCRA 408); and it may do so on the basis of a motion to dismiss (Sec. 1, [f] Rule 16, Rules of Court), or an answer which sets up such ground as an affirmative defense (Sec. 5, Rule 16), or even if the ground is alleged after judgment on the merits, as in a motion for reconsideration (Ferrer v. Ericta, 84 SCRA 705); or even if the defense has not been asserted at all, as where no statement thereof is found in the pleadings (Garcia v. Mathis, 100 SCRA 250; PNB v. Pacific Commission House, 27 SCRA 766; Chua Lamco v. Dioso, et al., 97 Phil. 821); or where a defendant has been declared in default (PNB v. Perez; 16 SCRA 270). What is essential only, to repeat, is that the facts demonstrating the lapse of the prescriptive period be otherwise sufficiently and satisfactorily apparent on the record; either in the averments of the plaintiff's complaint, or otherwise established by the evidence. (Emphasis supplied)

  

         Indeed, one of the inherent powers of courts is to amend and

control its processes so as to make them conformable to law and

justice. This includes the right to reverse itself, especially when in its

opinion it has committed an error or mistake in judgment, and

adherence to its decision would cause injustice. [46]      Thus, the RTC

in its Order dated November 8, 2001 could validly entertain the

defenses of prescription and laches in DBT's motion for

reconsideration.

          However, the conclusion reached by the RTC in its assailed

Order was erroneous. The RTC failed to consider that the action filed

before it was not simply for reconveyance but an action for quieting

of title which is imprescriptible.

 

         Verily, an action for reconveyance can be barred by

prescription. When an action for reconveyance is based on fraud, it

must be filed within four (4) years from discovery of the fraud, and

such discovery is deemed to have taken place from the issuance of

the original certificate of title. On the other hand, an action for

reconveyance based on an implied or constructive trust prescribes in

ten (10) years from the date of the issuance of the original certificate

of title or transfer certificate of title. The rule is that the registration

of an instrument in the Office of the RD constitutes constructive

notice to the whole world and therefore the discovery of the fraud is

deemed to have taken place at the time of registration.[47]

 

         However, the prescriptive period applies only if there is an

actual need to reconvey the property as when the plaintiff is not in

possession of the property.  If the plaintiff, as the real owner of the

property also remains in possession of the property, the prescriptive

period to recover title and possession of the property does not run

against him. In such a case, an action for reconveyance, if

nonetheless filed, would be in the nature of a suit for quieting of title,

an action that is imprescriptible.[48]  Thus, in  Vda. de Gualberto v.

Go,[49] this Court held:

 [A]n action for reconveyance of a parcel of land based on implied or constructive trust prescribes in ten years, the point of reference being the date of registration of the deed or the date of the issuance of the certificate of title over the property, but this rule applies only when the plaintiff or the person enforcing the trust is not in possession of the property, since if a person claiming to be the owner thereof is in actual possession of the property, as the defendants are in the instant case, the right to seek reconveyance, which in effect seeks to quiet title to the property, does not prescribe. The reason for this is that one who is in actual possession of a piece of land claiming to be the owner thereof may wait until his possession is disturbed or his title is attacked before taking steps to vindicate his right, the reason for the rule being, that his undisturbed possession gives him a continuing right to seek the aid of a court of equity to ascertain and determine the nature of the adverse claim of a third party and its effect on his own title, which right can be claimed only by one who is in possession.

          Insofar as Ricaredo and his son, Angelito, are concerned, they

established in their testimonies that, for some time, they possessed

the subject property and that Angelito bought a house within the

subject property in 1987.[50] Thus, the respondents are proper parties

to bring an action for quieting of title because persons having legal,

as well as equitable, title to or interest in a real property may bring

such action, and “title” here does not necessarily denote a certificate

of title issued in favor of the person filing the suit.[51]

 

         Although prescription and laches are distinct concepts, we have

held, nonetheless, that in some instances, the doctrine of laches is

inapplicable where the action was filed within the prescriptive period

provided by law. Therefore, laches will not apply to this case,

because respondents' possession of the subject property has rendered

their right to bring an action for quieting of title imprescriptible and,

hence, not barred by laches. Moreover, since laches is a creation of

equity, acts or conduct alleged to constitute the same must be

intentional and unequivocal so as to avoid injustice.  Laches will

operate not really to penalize neglect or sleeping on one's rights, but

rather to avoid recognizing a right when to do so would result in a

clearly inequitable situation.[52]

 

         Albeit the conclusion of the RTC in its Order dated November

8, 2001, which dismissed respondents' complaint on grounds of

prescription and laches, may have been erroneous, we, nevertheless,

resolve the second question in favor of DBT.

 

         It is a well-entrenched rule in this jurisdiction that no title to

registered land in derogation of the rights of the registered owner

shall be acquired by prescription or adverse possession.[53]

 

         Article 1126[54] of the Civil Code in connection with Section

46[55] of Act No. 496 (The Land Registration Act), as amended by

Section 47[56] of P.D. No. 1529 (The Property Registration Decree),

clearly supports this rule. Prescription is unavailing not only against

the registered owner but also against his hereditary successors.

Possession is a mere consequence of ownership where land has been

registered under the Torrens system, the efficacy and integrity of

which must be protected. Prescription is rightly regarded as a statute

of repose whose objective is to suppress fraudulent and stale claims

from springing up at great distances of time and surprising the parties

or their representatives when the facts have become obscure from the

lapse of time or the defective memory or death or removal of

witnesses.[57]

                        

 

         Thus, respondents' claim of acquisitive prescription over the

subject property is baseless. Under Article 1126 of the Civil Code,

acquisitive prescription of ownership of lands registered under the

Land Registration Act shall be governed by special laws.

Correlatively, Act No. 496, as amended by PD No. 1529, provides

that no title to registered land in derogation of that of the registered

owner shall be acquired by adverse possession.  Consequently, in the

instant case, proof of possession by the respondents is immaterial

and inconsequential.[58]

 

           Moreover, it may be stressed that there was no ample proof

that DBT participated in the alleged fraud. While factual issues are

admittedly not within the province of this Court, as it is not a trier of

facts and is not required to re-examine or contrast the oral and

documentary evidence anew, we have the authority to review and, in

proper cases, reverse the factual findings of lower courts when the

findings of fact of the trial court are in conflict with those of the

appellate court.[59]  In this regard, we reviewed the records of this case

and found no clear evidence that DBT participated in the fraudulent

scheme.  In Republic v. Court of Appeals,[60]  this Court gave due

importance to the fact that the private respondent therein did not

participate in the fraud averred. We accord the same benefit to DBT

in this case. To add, DBT is an innocent purchaser for value and

good faith which, through  a dacion en pago duly  entered  into

with  B.C. Regalado, acquired

ownership over the subject property, and whose rights must be

protected under Section 32[61] of P.D. No. 1529.

         Dacion en pago is the delivery and transmission of ownership

of a thing by the debtor to the creditor as an accepted equivalent of

the performance of the obligation. It is a special mode of payment

where the debtor offers another thing to the creditor, who accepts it

as an equivalent of the payment of an outstanding debt. In its modern

concept, what actually takes place in dacion en pago is an objective

novation of the obligation where the thing offered as an accepted

equivalent of the performance of an obligation is considered as the

object of the contract of sale, while the debt is considered as the

purchase price.[62]

 

         It must also be noted that portions of the subject property had

already been sold to third persons who, like DBT, are innocent

purchasers in good faith and for value, relying on the certificates of

title shown to them, and who had no knowledge of any defect in the

title of the vendor, or of facts sufficient to induce a reasonably

prudent man to inquire into the status of the subject property. [63] To

disregard these circumstances simply on the basis of alleged

continuous and adverse possession of respondents would not only be

inimical to the rights of the aforementioned titleholders, but would

ultimately wreak havoc on the stability of the Torrens system of

registration.

 

         A final note.

 

         While the Torrens system is not a mode of acquiring title, but

merely a system of registration of titles to lands, justice and equity

demand that the titleholder should not be made to bear the

unfavorable effect of the mistake or negligence of the State's agents,

in the absence of proof of his complicity in a fraud or of manifest

damage to third persons. The real purpose of the Torrens system is to

quiet title to land and put a stop forever to any question as to the

legality of the title, except claims that were noted in the certificate at

the time of the registration or that may arise subsequent thereto.

Otherwise, the integrity of the Torrens system would forever be

sullied by the ineptitude and inefficiency of land registration

officials, who are ordinarily presumed to have regularly performed

their duties.[64] Thus, where innocent third persons, relying on the

correctness of the certificate of title thus issued, acquire rights over

the property, the court cannot disregard those rights and order the

cancellation of the certificate. The effect of such outright

cancellation will be to impair public confidence in the certificate of

title. The sanctity of the Torrens system must be preserved;

otherwise, everyone dealing with the property registered under the

system will have to inquire in every instance on whether the title had

been regularly or irregularly issued, contrary to the evident purpose

of the law. Every person dealing with the registered land may safely

rely on the correctness of the certificate of title issued therefor, and

the law will in no way oblige him to go behind the certificate to

determine the condition of the property.[65]

          WHEREFORE, the instant Petition is GRANTED and the

assailed Court of Appeals Decision dated October 25, 2004 is

hereby REVERSED and SET ASIDE.  A new judgment is hereby

entered DISMISSING the Complaint filed by the respondents for

lack of merit.

 

         SO ORDERED.

REPUBLIC OF THE PHILIPPINES, Petitioner, vs.CANDY MAKER, INC., as represented by its President, ONG YEE SEE,* Respondent

D E C I S I O N

CALLEJO, SR., J.:

At bar is a Petition for Review under Rule 45 of the Rules of Court seeking to set aside the May 21, 2004 Decision1 of the Court of Appeals (CA) in CA-G.R. CV No. 73287, which affirmed in toto the October 12, 2001 Decision2 of the Municipal Trial Court (MTC) of Taytay, Rizal in Land Registration Case No. 99-0031 declaring respondent the owner of the parcels of land designated as Lots 3138-A and 3138-B in Plan CSD. 04-018302, Cainta-Taytay Cadastre.

Sometime in 1998, Candy Maker, Inc. decided to purchase Lot No. 3138 Cad. 688 of the Cainta-Taytay Cadastre, a parcel of land located below the reglementary lake elevation of 12.50 meters, about 900 meters away from the Laguna de Bay, and bounded on the southwest by the Manggahan Floodway, and on the southeast by a legal easement.

On April 1, 1998, Geodetic Engineer Potenciano H. Fernandez, prepared and signed a Subdivision Plan of the property for Apolonio Cruz. The property was subdivided into two lots: Lot No. 3138-A with an area of 10,971 square meters, and Lot No. 3138-B with an area of 239 square meters.3 The technical description of Lot No. 3138 was also prepared by Fernandez, and was approved by the Regional Technical Director of the Bureau of Lands on April 14, 1998.4

On April 29, 1999, Antonio, Eladia, and Felisa, all surnamed Cruz, executed a Deed of Absolute Sale in favor of Candy

Maker, Inc.5 The buyer declared Lot No. 3138 for taxation purposes in 1999 under Tax Declaration Nos. 004-18929, 004-18930 and 004-18931.6

On June 16, 1999, Candy Maker, Inc., as applicant, filed an application with the MTC of Taytay, Rizal, for the registration of its alleged title over Lot No. 3138-A and Lot No. 3138-B under Presidential Decree (P.D.) No. 1529.

Acting thereon, the MTC issued an Order7 on June 18, 1999 directing the applicant to cause the publication of the notice of initial hearing and for the Deputy Sheriff to post the same. The Administrator of the Land Registration Authority (LRA) and the Directors of the Land Management Bureau (LMB) and Forest Management Bureau (FMB) were also instructed to submit their respective reports on the status of the parcels of land before the initial hearing scheduled on October 29, 1999.

The Community Environment and Natural Resources Officer (CENRO) of Antipolo City filed on August 18, 1999 his Report8 declaring that "[t]he land falls within the Alienable and Disposable Zone, under Land Classification Project No. 5-A, per L.C. Map No. 639 certified released on March 11, 1927" and that the property is the subject of CENRO Case No. 520(97) entitled Perpetua San Jose v. Almario Cruz. On the other hand, the LRA, in its September 21, 1999 Report,9 recommended the exclusion of Lot No. 3138-B on the ground that it is a legal easement and intended for public use, hence, inalienable and indisposable.

On September 30, 1999, the Laguna Lake Development Authority (LLDA) approved Resolution No. 113, Series of 1993, providing that untitled shoreland areas may be leased subject to conditions enumerated therein.

The applicant filed its Amended Application10 on December 15, 1999 for the confirmation of its alleged title on Lot No. 3138, alleging therein that:

1. x x x the applicant is the President of CANDYMAKER[,] INC. and registered owner of a parcel of land located at Panghulo Brgy. San Juan, Taytay, Rizal with an area of TEN THOUSAND NINE HUNDRED SEVENTY ONE (10,971) square meters and as fully described and bounded under Lot 3138-A plan CSD-04-018302[,] copy of which and the corresponding technical descriptions are hereto attached to form parts hereof;

x x x x

8. That for Lot 3138-A the applicant hereby prays for the benefit granted under the Land Registration Act and/or under the benefits provided for by P.D. No. 1529, as applicant and their predecessors-in-interest have been in open, public, continuous, and peaceful occupation and possession of the said land since time immemorial in [the] concept of true owners and [adverse] to the whole world; x x x11

On March 27, 2000, the MTC issued an Order12 admitting the Amended Application and resetting the initial hearing to June 23, 2000. However, upon the requests of the LRA for the timely publication of the Notice of Initial Hearing in the Official Gazette,13 the court moved the hearing date to September 22, 2000,14 then on January 26, 200115 and until finally, to June 15, 2001.16

On July 20, 2001, the Republic of the Philippines, the LLDA filed its Opposition17 to the Amended Application in which it alleged that the lot subject of the application for registration may not be alienated and disposed since it is considered part of the Laguna Lake bed, a public land within its jurisdiction

pursuant to Republic Act (R.A.) No. 4850, as amended. According to the LLDA, the projection of Lot No. 3138-A, Cad-688-D Csd-04-018302 in its topographic map based on the Memorandum18 of Engineer Christopher Pedrezuela of the Engineering and Construction Division of the LLDA indicated that it is "located below the reglementary lake elevation of 12.50 meters referred to datum 10.00 meters below mean lower water" and under Section 41(11) of R.A. No. 4850, the property is a public land which forms part of the bed of the Laguna Lake. This Memorandum was appended to the application.

At the hearing conducted on August 31, 2001, the applicant marked in evidence the complementary copies of the Official Gazette and the People’s Tonight as Exhibits "E-1" and "F-1," respectively.19

Except as to the LLDA and the Office of the Solicitor General (OSG), which was represented by the duly deputized provincial prosecutor,20 the court, upon motion of the applicant, issued an Order of general default.21

The applicant presented as witnesses its Treasurer, Fernando Co Siy, and Antonio Cruz, one of the vendees.

Cruz testified that his grandparents owned the property,22 and after their demise, his parents, the spouses Apolonio Cruz and Aquilina Atanacio Cruz, inherited the lot;23 he and his father had cultivated the property since 1937, planting palay during the rainy season and vegetables during the dry season; his father paid the realty taxes on the property,24 and he (Cruz) continued paying the taxes after his father’s death.25 Cruz insisted that he was the rightful claimant and owner of the property.

Sometime in the 1980s, Apolonio Cruz executed an extrajudicial deed of partition in which the property was adjudicated to Antonio Cruz and his sisters, Felisa and Eladia, to the exclusion of their five (5) other siblings who were given other properties as their shares.26 He did not know why his ancestors failed to have the property titled under the Torrens system of registration.27 He left the Philippines and stayed in Saudi Arabia from 1973 to 1983.28 Aside from this, he hired the services of an "upahan" to cultivate the property.29 The property is about 3 kilometers from the Laguna de Bay, and is usually flooded when it rains.30

Fernando Co Siy testified that the applicant acquired Lot No. 3138 from siblings Antonio, Eladia and Felisa,31 who had possessed it since 1945;32 that after paying the real estate taxes due thereon,33 it caused the survey of the lot;34 that possession thereof has been peaceful35 and none of the former owners claims any right against it;36neither the applicant nor its predecessors-in-interest received information from any government agency that the lot is a public land;37 the subject lot is 3 kms. away from Laguna de Bay,38 above its elevation and that of the nearby road;39 the property is habitable40 and was utilized as a riceland at the time it was sold by the former owners;41 and that he was aware that a legal easement is affecting the lot and is willing to annotate it in the land title.42

On cross-examination by the LLDA counsel, Siy admitted that his knowledge as to the distance of the lot with respect to the Laguna de Bay came from "somebody residing in Taytay" and also from an adjacent owner of the lot;43 that the lot is submerged in water since there is no land fill yet;44 and that no improvements had been introduced to the property.45

The LLDA moved for a joint ocular inspection of the parcels of land in order to determine its exact elevation.46 On September

14, 2001, a Survey Team of the Engineering and Construction Division of the LLDA, composed of Ramon D. Magalonga, Virgilio M. Polanco, and Renato Q. Medenilla, conducted an actual ground survey of the property. The team used a total station and digital survey instrument to measure the elevation of the ground in reference to the elevation of the lake water. A representative of the applicant witnessed the survey. The team found that the lot is below the prescribed elevation of 12.50 m. and thus part of the bed of the lake; as such, it could not be titled to the applicant. The team also reported that the property is adjacent to the highway from the Manggahan Floodway to Angono, Rizal. The LLDA moved that the application be withdrawn, appending thereto a copy of the Survey Report.47

The LLDA did not offer any testimonial and documentary evidence and agreed to submit the case for decision based on its Opposition.

On October 12, 2001, the MTC rendered a Decision granting the application for registration over the lots. The dispositive portion of the decision reads:

WHEREFORE, premises considered[,] the court hereby rendered judgment confirming title of the applicants over the real property denominated as Lot 3138-A Csd-04-018302 of Cad-688-D Cainta-Taytay Cadastre; Lot 3138-B Csd-04-018302 of Cad 688-D Cainta-Taytay Cadastre.48

On appeal to the CA, the petitioner contended that the MTC did not acquire jurisdiction over the application for registration since the actual copies of the Official Gazette (O.G.) where the notice of hearing was published were not adduced in evidence; the applicant likewise failed to establish exclusive ownership over the subject property in the manner prescribed by law. The petitioner argued further that the requirements of Section 23, par. 1 of P.D. No. 1529, 49 as amended, are

mandatory and jurisdictional, and that failure to observe such requirements has a fatal effect on the whole proceedings. Citing Republic of the Philippines v. Court of Appeals50 and Register of Deeds of Malabon v. RTC, Malabon, MM, Br. 170,51 the Republic averred that a mere certificate of publication is inadequate proof of the jurisdictional fact of publication because the actual copies of the O.G. must be presented at the initial hearing of the case. Moreover, witnesses were not presented to prove specific acts to show that the applicant and his predecessors-in-interest have been in exclusive, open, continuous, and adverse possession of the subject lots in the concept of the owner since June 12, 1945 or earlier, in accordance with Sec. 14, par. 1 of P.D. No. 1529.52It noted that the testimonies of the applicant’s witnesses are more of conclusions of law rather than factual evidence of ownership. Other than the general statement that they planted rice and vegetables on the subject lots, their possession could properly be characterized as mere casual cultivation since they failed to account for its exclusive utilization since 1945 or earlier. After stressing that tax declarations are not conclusive proof of ownership, it concluded that the subject lots rightfully belong to the State under the Regalian doctrine.53

The applicant averred in its Appellee’s Brief54 that it had marked in evidence the actual copy of the O.G. where the notice of initial hearing was published; in fact, the MTC Decision stated that the copy of the O.G. containing the notice was referred to as Exhibit "E-1." Moreover, Sec. 14, par. 1 of P.D. 1529 is inapplicable since it speaks of possession and occupation of alienable and disposable lands of the public domain. Instead, par. 4 of the same section55 should govern because the subject parcels of land are lands of private ownership, having being acquired through purchase from its predecessors-in-interest, who, in turn, inherited the same from their parents. It pointed out that there were no adverse claims of interest or right by other private persons and even

government agencies like the Province of Rizal. Lastly, while tax declarations and tax receipts do not constitute evidence of ownership, they are nonetheless prima facie evidence of possession.

On May 21, 2004, the appellate court rendered judgment which dismissed the appeal and affirmed in toto the Decision of the MTC,56 holding that the copy of the O.G., where the notice was published, was marked as Exhibit "E-1" during the initial hearing. On the issue of ownership over the subject lots, the CA upheld the applicant’s claim that the parcels of land were alienable and not part of the public domain, and that it had adduced preponderant evidence to prove that its predecessors had been tilling the land since 1937, during which palay and vegetables were planted. In fact, before the lots were purchased, the applicant verified their ownership with the assessor’s office, and thereafter caused the property to be surveyed; after the lots were acquired in 1999 and a survey was caused by the applicant, no adverse claims were filed by third persons. Further, the CA ruled that tax declarations or tax receipts are good indicia of possession in the concept of the owner, which constitute at least positive and strong indication that the taxpayer concerned has made a claim either to the title or to the possession of the property.

The Republic, now petitioner, filed the instant Petition for Review on the following issues:

A.

WHETHER THE LAND IN QUESTION MAYBE THE SUBJECT OF REGISTRATION.

B.

WHETHER THE COURT A QUO ACQUIRED JURISDICTION OVER THE RES CONSIDERING ITS INALIENABLE CHARACTER.

C.

WHETHER THE COURT OF APPEALS ERRED IN AFFIRMING THE TRIAL COURT’S FINDING THAT RESPONDENT COMPLIED WITH THE LEGAL REQUIREMENTS ON POSSESSION AS MANDATED BY SECTION 14 OF P.D. NO. 1529.57

Petitioner asserts that the Engineer’s Survey Report58 and the Laguna de Bay Shoreland Survey59 both show that Lot No. 3138-A is located below the reglementary lake elevation, hence, forms part of the Laguna Lake bed. It insists that the property belongs to the public domain as classified under Article 502 of the Civil Code.60 Citing the ruling of this Court in Bernardo v. Tiamson,61 petitioner avers that the subject lot is incapable of private appropriation since it is a public land owned by the State under the Regalian doctrine. On this premise, petitioner avers that the MTC did not acquire jurisdiction over the subject matter, and as a consequence, its decision is null and void.

Petitioner maintains that respondent failed to present incontrovertible evidence to warrant the registration of the property in its name as owner. The testimonies of the two witnesses only proved that the possession of the land may be characterized as mere casual cultivation; they failed to prove that its predecessors occupied the land openly, continuously, exclusively, notoriously and adversely in the concept of owner since June 12, 1945 or earlier.

On the other hand, respondent argues that the Engineer’s Survey Report and the Laguna de Bay Shoreland Survey have

no probative value because they were neither offered nor admitted in evidence by the MTC. It points out that petitioner failed to invoke these reports in the appellate court.

It was only when the petition was filed with this Court that the respondent learned of its existence. Petitioner’s reliance on the reports/survey is merely an afterthought. The case of Bernardo v. Tiamson is irrelevant because the factual issues are different from those of this case.

On April 28, 2005, respondent filed a Manifestation62 with this Court, appending thereto the report63 conducted by the survey team of the LLDA Engineering and Construction Division on April 12, 2005. It stated that the 10,971 sq m property subject of the case is below the 12.5 elevation, and that the profile distance of the property from the actual lake waters is about 900 m. to 1 km.

The issues in this case are the following: (1) whether the MTC had jurisdiction over the amended application; (2) whether the property subject of the amended application is alienable and disposable property of the State, and, if so, (3) whether respondent adduced the requisite quantum of evidence to prove its ownership over the property under Section 14 of P.D. 1529.

The petition is meritorious.

On the first issue, we find and so rule that the MTC acquired jurisdiction over respondent’s application for registration since a copy of the O.G. containing the notice of hearing was marked and adduced in evidence as Exhibit "E-1." The representative of the OSG was present during the hearing and interposed his objection thereto.

On the second and third issues, we find and so rule that the property subject of this application was alienable and disposable public agricultural land until July 18, 1966. However, respondent failed to prove that it possesses registerable title over the property.

Section 48(b) of Commonwealth Act No. 141, as amended by R.A. No. 1942, reads:

Section 48. The following described citizens of the Philippines, occupying lands of the public domain or claiming to own any such lands or an interest therein, but whose titles have not been perfected or completed, nay apply to the Court of First Instance of the province where the land is located for confirmation of their claims and the issuance of a certificate of title therefor, under the Land Registration Act, to wit:

(b) Those who by themselves or through their predecessors in-interest have been in open, continuous, exclusive, and notorious possession and occupation of agricultural lands of the public domain, under a bona fide claim of acquisition of ownership, for at least thirty years immediately preceding the filing of the application for confirmation of title except when prevented by war or force majeure. These shall be conclusively presumed to have performed all the conditions essential to a Government grant and shall be entitled to a certificate of title under the provisions of this chapter.

This provision was further amended by P.D. No. 1073 by substituting the phrase "for at least thirty years" with "since June 12, 1945;" thus:

Sec. 4. The provisions of Section 48(b) and Section 48(c), Chapter VIII, of the Public Land Act are hereby amended in the sense that these provisions shall apply only to alienable and disposable lands of the public domain which have been in

open, continuous, exclusive and notorious possession, and occupation by the applicant himself or through his predecessor-in-interest, under a bona fide claim of acquisition of ownership, since June 12, 1945.

Section 14(1) of P.D. No. 1529, otherwise known as the Property Registration Decree, provides:

SEC. 14. Who may apply. —The following persons may file in the proper Court of First Instance [now Regional Trial Court] an application for registration of title to land, whether personally or through their duly authorized representatives:

(1) Those who by themselves or through their predecessors-in-interest have been in open, continuous, exclusive and notorious possession and occupation of alienable and disposable lands of the public domain under a bona fide claim of ownership since June 12, 1945, or earlier (emphasis supplied).

Applicants for confirmation of imperfect title must, therefore, prove the following: (a) that the land forms part of the disposable and alienable agricultural lands of the public domain; and (b) that they have been in open, continuous, exclusive, and notorious possession and occupation of the same under a bona fide claim of ownership either since time immemorial or since June 12, 1945.64

Under the Regalian doctrine, all lands not otherwise appearing to be clearly within private ownership are presumed to belong to the State. The presumption is that lands of whatever classification belong to the State.65 Unless public land is shown to have been reclassified as alienable or disposable to a private person by the State, it remains part of the inalienable public domain. Property of the public domain is beyond the commerce of man and not susceptible of private appropriation

and acquisitive prescription. Occupation thereof in the concept of owner no matter how long cannot ripen into ownership and be registered as a title.66 The statute of limitations with regard to public agricultural lands does not operate against the State unless the occupant proves possession and occupation of the same after a claim of ownership for the required number of years to constitute a grant from the State.67

No public land can be acquired by private persons without any grant from the government, whether express or implied. It is indispensable that there be a showing of a title from the State.68 The rationale for the period "since time immemorial or since June 12, 1945" lies in the presumption that the land applied for pertains to the State, and that the occupants or possessor claim an interest thereon only by virtue of their imperfect title as continuous, open and notorious possession.

A possessor of real property may acquire ownership thereof through acquisitive prescription. In Alba Vda. de Raz v. Court of Appeals,69 the Court declared that:

x x x [W]hile Art. 1134 of the Civil Code provides that ‘(o)wnership and other real rights over immovable property are acquired by ordinary prescription through possession of ten years,’ this provision of law must be read in conjunction with Art. 1117 of the same Code. This article states that ‘x x x (o)rdinary acquisitive prescription of things requires possession in good faith and with just title for the time fixed by law.’ Hence, a prescriptive title to real estate is not acquired by mere possession thereof under claim of ownership for a period of ten years unless such possession was acquired con justo titulo y buena fe (with color of title and good faith). The good faith of the possessor consists in the reasonable belief that the person from whom he received the thing was the owner thereof, and could transmit his ownership. For purposes of prescription, there is just title when the adverse claimant came

into possession of the property through one of the recognized modes of acquisition of ownership or other real rights but the grantor was not the owner or could not transmit any right.70

To prove that the land subject of an application for registration is alienable, an applicant must conclusively establish the existence of a positive act of the government such as a presidential proclamation or an executive order, or administrative action, investigation reports of the Bureau of Lands investigator or a legislative act or statute.71 Until then, the rules on confirmation of imperfect title do not apply. A certification of the Community Environment and Natural Resources Officer in the Department of Environment and Natural Resources stating that the land subject of an application is found to be within the alienable and disposable site per a land classification project map is sufficient evidence to show the real character of the land subject of the application.72

The applicant is burdened to offer proof of specific acts of ownership to substantiate the claim over the land.73Actual possession consists in the manifestation of acts of dominion over it of such a nature as a party would actually exercise over his own property.74 A mere casual cultivation of portions of the land by the claimant does not constitute sufficient basis for a claim of ownership; such possession is not exclusive and notorious as to give rise to a presumptive grant from the State.75

In this case, the evidence on record shows that the property is alienable agricultural land. Romeo Cadano of the Community Environment and Natural Resources Office, Antipolo Rizal, certified that the property "falls within the Alienable and Disposable zone, under Land Classification Project No. 5-A, per L.C. Map No. 639 certified released on March 11, 1927."76 However, under R.A. No. 4850 which was approved

on July 18, 1966, lands located at and below the maximum lake level of elevation of the Laguna de Bay are public lands which form part of the bed of said lake. Such lands denominated as lakeshore areas are linear strips of open space designed to separate incompatible element or uses, or to control pollution/nuisance, and for identifying and defining development areas or zone. Such areas of the lake with an approximate total area of 14,000 hectares form a strip of the lakebed along its shores alternately submerged or exposed by the annual rising and lowering of the lake water. They have environmental ecological significance and actual potential economic benefits.

Under Section 1 of the law, the national policy of the State is to promote and accelerate the development and balanced growth of the Laguna Lake area and the surrounding provinces, cities and towns within the context of the national and regional plans and policies for social and economic development and to carry out the development of the Laguna Lake region with due regard and adequate provisions for environmental management and control, preservation of the quality of human life and ecological systems, and the prevention of undue ecological disturbances, deterioration and pollution.

The rapid expansion of Metropolitan Manila, the suburbs and the lakeshore town of Laguna de Bay, combined with current and prospective uses of the lake for municipal-industrial water supply, irrigation, fisheries, and the like, created deep concern on the part of the Government and the general public over the environmental impact of such development, on the water quality and ecology of the lake and its related river systems. The inflow of polluted water from the Pasig River, industrial, domestic and agricultural wastes from developed areas around the lake and the increasing urbanization have induced the deterioration of the lake, and that water quality studies have shown that the lake will deteriorate further if steps are not

taken to check the same. The floods in the Metropolitan Manila area and the lakeshore towns are also influenced by the hydraulic system of the Laguna de Bay, and any scheme of controlling the floods will necessarily involve the lake and its river systems.

This prompted then President Ferdinand E. Marcos to issue on October 17, 1978 P.D. 813 amending Rep. Act No. 4850. Under Section 6 of the law, the LLDA is empowered to issue such rules and regulations as may be necessary to effectively carry out the policies and programs therein provided including the policies and projects of the LLDA, subject to the approval of the National Economic Development Authority.

In 1996, the Board of Directors of LLDA approved Resolution No. 113, series of 1996 relating to the Environmental Uses Fee Systems and Approval of the Work and Financial Plan for its operationalization in the Laguna de Bay Basin. Section 5 of the Resolution provides that the LLDA as a matter of policy is to maintain all shoreland areas lying below elevation 12.50 meters as buffer zone in consonance with the LLDA policies, plans programs for the improvement of the water quality and pollution and conservation of the water resources of the Laguna de Bay.

As gleaned from the Survey Report of Magalonga, Polanco and Medenilla of the LLDA based on the ocular inspection dated September 14, 2001 as well as the Memorandum of Engineer Christopher Pedrezuela, the property is located below the reglementary level of 12.50 m.; hence, part of the bed of the Laguna de Bay, and, as such, is public land. Although the Report and Memorandum were not offered as evidence in the MTC, the respondent admitted in its Manifestation in this Court that the property is situated below the 12.50 elevation based on the survey of Magalonga, Polanco and Medenilla, the same survey team who conducted

an ocular inspection of the property on April 12, 2005, which thus confirmed the September 14, 2001 survey report. This is a judicial admission in the course of judicial proceedings which is binding on it.77

Under R.A. No. 4850 and the issuances of LLDA, registerable rights acquired by occupants before the effectivity of the law are recognized. However, the respondent failed to adduce proof that its predecessors-in-interest had acquired registerable title over the property before July 18, 1966:

First. Cruz failed to prove how his parents acquired ownership of the property, and even failed to mention the names of his grandparents. He likewise failed to present his father’s death certificate to support his claim that the latter died in 1980. There is likewise no evidence when his mother died.

Second. Cruz also failed to adduce in evidence the extrajudicial partition allegedly executed by his parents in 1980 where the property was supposedly deeded to him and his sisters, Felisa and Eladia, to the exclusion of their five siblings.

Third. Cruz claimed that he and his parents cultivated the property and planted palay and vegetables, and that they had been paying the realty taxes over the property before his parents died. However, no tax declarations under the names of the spouses Apolonio Cruz and/or Eladia Cruz and his siblings were presented, or realty tax receipts evidencing payment of such taxes. Indeed, while tax receipts and tax payment receipts themselves do not convincingly prove title to the land,78 these are good indicia of possession in the concept of an owner, for no one in his right mind would pay taxes for a property that is not in his actual or, at

least, constructive possession.79 While tax receipts and declarations are not incontrovertible evidence of ownership, they constitute, at the least, proof that the holder has a claim of title over the property, particularly when accompanied by proof of actual possession of property.80 The voluntary declaration of a piece of property for taxation purposes not only manifests one’s sincere and honest desire to obtain title to the property, but also announces an adverse claim against the State and all other interested parties with an intention to contribute needed revenues to the government. Such an act strengthens one’s bona fide claim of acquisition of ownership.81

Fourth. When he testified on October 5, 2001, Antonio Cruz declared that he was "74 years old."82 He must have been born in 1927, and was thus merely 10 years old in 1937. It is incredible that, at that age, he was already cultivating the property with his father. Moreover, no evidence was presented to prove how many cavans of palay were planted on the property, as well as the extent of such cultivation, in order to support the claim of possession with a bona fide claim of ownership.

Fifth. Cruz testified that he hired a worker "upahan" to help him cultivate the property. He, however, failed to state the name of the worker or to even present him as witness for the respondent.

IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The decision of the Court of Appeals in CA-G.R. CV No. 73278 is SET ASIDE. The Municipal Trial Court of Taytay, Rizal is DIRECTED to dismiss the application for registration of respondent Candymaker, Inc. in Land Registration Case No. 99-0031. No costs.

SO ORDERED.

REPUBLIC OF THE PHILIPPINES, petitioner, vs. MANNA PROPERTIES, INC., Represented by its President, JOSE TANYAO, respondent.

D E C I S I O N

CARPIO, J.:

The Case

This is a petition for review[1] seeking to set aside the Court of Appeals’ Decision[2] dated 20 December 2000. The Court of Appeals affirmed the Decision of the Regional Trial Court, Branch 26, San Fernando, La Union (“trial court”) dated 21 February 1996 in Land Registration Case No. N-2352 (“LRC No. N-2352”) approving the application of respondent Manna Properties, Inc. (“Manna Properties”) for the registration in its name of a parcel of land located in Barangay Pagdaraoan, San Fernando, La Union.

Antecedent Facts

As culled by the Court of Appeals from the evidence, the facts of the case are as follows:

On September 29, 1994, applicant-appellee filed an Application for the registration of title of two (2) parcels of land, specifically:

a) Lot No. 9515, Cad. 539-D of As-013314-001434; and

b) Lot No. 1006, Cad. 539-D of As-013314-001434, located in Barangay Pagdaraoan, San Fernando, La Union measuring around 1,480 square meters.

Initial hearing was set on February 16, 1995 by the court a quo.

Copies of the application, postal money orders for publication purposes and record were forwarded to the Land Registration Authority by the Court a quo on October 7, 1994.

However, per Report dated November 21, 1994 of the Land Registration Authority, the full names and complete postal addresses of all adjoining lot owners were not stated for notification purposes.  As a result thereto, per Order dated December 5, 1994, the applicant was directed to submit the names and complete postal addresses of the adjoining owners of Lots 9514 and 9516.  On December 14, 1994, the applicant filed its compliance, which was forwarded to the Land Registration Authority on December 22, 1994 together with the notice of the Initial Hearing, which was reset to April 13, 1995.

On January 31, 1995, the Land Registration Authority requested for the resetting of the initial hearing since April 13, 1995 fell on Holy Thursday, a non-working day to a date consistent with LRC Circular No. 353 or ninety (90) days from date of the Order to allow reasonable time for possible mail delays and to enable them to cause the timely publication of the notice in the Official Gazette.

The initial hearing was, accordingly, reset to April 20, 1995 by the court a quo.

On March 14, 1995, the court a quo received a letter dated March 6, 1995 from the LRA with the information that the notice can no longer be published in the Official Gazette for lack of material time since the National Printing Office required submission of the printing materials 75 days before the date of the hearing.  It was again

requested that the initial hearing be moved to a date consistent with LRC Circular No. 353.

Per Order dated March 15, 1995, the initial hearing was reset to July 18, 1995.

The Opposition to the application stated, among others, that the applicant is a private corporation disqualified under the new Philippine Constitution to hold alienable lands of public domain.

Per Certificate of Publication issued by the LRA and the National Printing Office, the Notice of Initial Hearing was published in the June 12, 1995 issue of the Official Gazette officially released on June 19, 1995.  The same notice was published in the July 12, 1995 issue of the The Ilocos Herald.

Applicant-appellee presented its president Jose [Tanyao], who testified on the acquisition of the subject property as well as Manuel Sobrepeña, co-owner of the subject property, who testified on the possession of the applicant-appellee’s predecessors-in-interest.

The [documentary] evidence presented were:

1.      Plan AS-013314-001434 of Lots No. 9515 and 1006;

2.      Technical Description of Lot No. 9515;3.      Technical Description of Lot No. 1006;4.      Certificate in lieu of Lost Surveyor’s Certificate;5.      Certificate of Latest Assessment;6.      Notice of Initial Hearing;7.      Certificate of Publication of the Notice of Initial

Hearing by the LRA;8.      Certificate of Publication of the Notice of Initial

Hearing by the National Printing Office;

9.      Certificate of Publication of the Notice of Initial Hearing by the Circulation Manager of the Ilocos Herald;

10.    Clipping of the Notice of Initial Hearing;11.    Whole Issue of the Ilocos Herald dated July 12,

1995;12.    Page 3 of Ilocos Herald dated January 12, 1995;13.    Sheriff’s Return of Posting;14.    Certificate of Notification of all adjoining

owners of the Notice of Initial Hearing on July 18, 1995.

Thereafter, the court a quo rendered a Decision dated February 21, 1996 granting the application. (sic)[3]

The Office of the Solicitor General, appearing on behalf of petitioner Republic of the Philippines (“petitioner”), promptly appealed the trial court’s decision to the Court of Appeals.  On 20 December 2000, the Court of Appeals dismissed petitioner’s appeal.

Hence, this petition.

The Regional Trial Court’s Ruling

The trial court found that Manna Properties has substantiated by clear and competent evidence all its allegations in the application for original land registration. The Land Registration Authority (“LRA”) did not present any evidence in opposition to the application.  The trial court ruled in this wise:

WHEREFORE, premises considered, the Court hereby approves the application, and orders that the parcels of land identified as Lots 9515 and 1006 of Cad. 5[3]9-D San Fernando Cadastre with a total

area of One Thousand Four Hundred Eighty (1,480) square meters, situated in Barangay Pagdaraoan, San Fernando, La Union and embraced in Plan AS-1331434 (Exh. “A” and the technical description described in Exhibit “B” and “B-1”) shall be registered in accordance with Presidential Decree   No. 1529, otherwise known as the Property Registration Decree in the name of the applicant Manna Properties, Inc., represented by its President Jose [Tanyao], Filipino citizen, of legal age, married to Marry [Tanyao] with residence and postal address at Jackivi Enterprises, Pagdaraoan, San Fernando, La Union, pursuant to the provisions of Presidential Decree No. 1529.[4]

The Court of Appeals’ Ruling

The Court of Appeals upheld the trial court’s ruling and dismissed petitioner’s argument that the applicant failed to comply with the jurisdictional requirements of Presidential Decree No. 1529[5] (“PD 1529”).  The Court of Appeals pointed out that the 90-day period for setting the initial hearing under Section 23 of PD 1529 is merely directory and that it is the publication of the notice of hearing itself that confers jurisdiction.  The Court of Appeals stated that the records of the case reveal that the testimony of Manuel Sobrepeña was not the sole basis for the trial court’s finding that Manna Properties’s predecessors-in-interest had been in possession of the land in question as early as 1953. The Court of Appeals added that while tax declarations are not conclusive proof of ownership, they are “the best indicia” of possession.

The Issues

Petitioner raises the following issues for resolution:

1.      WHETHER MANNA PROPERTIES FAILED TO COMPLY WITH THE JURISDICTIONAL REQUIREMENTS FOR ORIGINAL REGISTRATION; and

2.      WHETHER MANNA PROPERTIES HAS SUFFICIENTLY PROVEN POSSESSION OF THE PROPERTY FOR THE REQUISITE PERIOD.

The Ruling of the Court

On Whether Manna Properties Failedto Comply with the JurisdictionalRequirements for Original Registration

Petitioner contends that PD 1529 sets a 90-day maximum period between the court order setting the initial hearing date and the hearing itself. Petitioner points out that in this case, the trial court issued the order setting the date of the initial hearing on 15 March 1995, but the trial court set the hearing date itself on 18 July 1995. Considering that there are 125 days in between the two dates, petitioner argues that the trial court exceeded the 90-day period set by PD 1529. Thus, petitioner concludes “the applicant [Manna Properties] failed to comply with the jurisdictional requirements for original registration.”

The petitioner is mistaken.

The pertinent portion of Section 23 of PD 1529 reads:

Sec. 23. Notice of initial hearing, publication etc. – The court shall, within five days from filing of the application, issue an order setting

the date and hour of initial hearing which shall not be earlier than forty-five days nor later than ninety days from the date of the order.

xxx

The duty and the power to set the hearing date lies with the land registration court. After an applicant has filed his application, the law requires the issuance of a court order setting the initial hearing date. The notice of initial hearing is a court document. The notice of initial hearing is signed by the judge and copy of the notice is mailed by the clerk of court to the LRA. This involves a process to which the party applicant absolutely has no participation.

Petitioner is correct that in land registration cases, the applicant must strictly comply with the jurisdictional requirements. In this case, the applicant complied with the jurisdictional requirements.

The facts reveal that Manna Properties was not at fault why the hearing date was set beyond the 90-day maximum period. The records show that the Docket Division of the LRA repeatedly requested the trial court to reset the initial hearing date because of printing problems with the National Printing Office, which could affect the timely publication of the notice of hearing in the Official Gazette.  Indeed, nothing in the records indicates that Manna Properties failed to perform the acts required of it by law.

We have held that “a party to an action has no control over the Administrator or the Clerk of Court acting as a land court; he has no right to meddle unduly with the business of such official in the performance of his duties.”[6] A party cannot intervene in matters within the exclusive power of the trial court.  No fault is attributable to such party if the trial court errs on matters within its sole power.  It is unfair to punish an applicant for an act or omission over which the applicant has

neither responsibility nor control, especially if the applicant has complied with all the requirements of the law.

Petitioner limited itself to assailing the lapse of time between the issuance of the order setting the date of initial hearing and the date of the initial hearing itself. Petitioner does not raise any other issue with respect to the sufficiency of the application. Petitioner does not also question the sufficiency of the publication of the required notice of hearing. Consequently, petitioner does not dispute the real jurisdictional issue involved in land registration cases — compliance with the publication requirement under PD 1529. As the records show, the notice of hearing was published both in the Official Gazette and a newspaper of general circulation well ahead of the date of hearing.  This complies with the legal requirement of serving the entire world with sufficient notice of the registration proceedings.

On Whether Manna Properties SufficientlyEstablished Possession of the LandFor the Period Required by Law

Petitioner asserts that Manna Properties has failed to prove its possession of the land for the period of time required by law.  Petitioner alleges that the trial court and the Court of Appeals based their findings solely on their evaluation of the tax declarations presented by Manna Properties.

The jurisdiction of this Court under Rule 45 of the 1997 Rules of Civil Procedure is limited to the review and revision of errors of law.[7] This Court is not bound to analyze and weigh evidence already considered in prior proceedings. Absent any of the established grounds for exception, this Court is bound by the findings of fact of the trial and appellate courts.

The issue of whether Manna Properties has presented sufficient proof of the required possession, under a bona fide claim of ownership, raises a question of fact.[8] It invites an evaluation of the evidentiary record. Petitioner invites us to re-evaluate the evidence and substitute our judgment for that of the trial and appellate courts. Generally, Rule 45 does not allow this.  Matters of proof and evidence are beyond the power of this Court to review under a Rule 45 petition, except in the presence of some meritorious circumstances.[9] We find one such circumstance in this case. The evidence on record does not support the conclusions of both the trial court and the Court of Appeals.

Petitioner claimed in its opposition to the application of Manna Properties that, as a private corporation, Manna Properties is disqualified from holding alienable lands of the public domain, except by lease. Petitioner cites the constitutional prohibition in Section 3 of Article XII in the 1987 Constitution. Petitioner also claims that the land in question is still part of the public domain.

On the other hand, Manna Properties claims that it has established that the land in question has been in the open and exclusive possession of its predecessors-in-interest since the 1940s. Thus, the land was already private land when Manna Properties acquired it from its predecessors-in-interest.

The governing law is Commonwealth Act No. 141 (“CA 141”) otherwise known as the “Public Land Act.” Section 48(b) of the said law, as amended by Presidential Decree No. 1073, provides:

(b) Those who by themselves or through their predecessors-in-interest have been in open, continuous, exclusive, and notorious possession and occupation of agricultural lands of the public domain, under abona fide claim of acquisition of ownership, since June 12, 1945 or earlier, immediately preceding the filing of the application for confirmation of title except when prevented by war or force

majeure. These shall be conclusively presumed to have performed all the conditions essential to a Government grant and shall be entitled to a certificate of title under the provisions of this chapter.  (Emphasis supplied)

Lands that fall under Section 48 of CA 141 are effectively segregated from the public domain by virtue of acquisitive prescription. We have held that open, exclusive and undisputed possession of alienable public land for the period prescribed by CA 141 ipso jure converts such land into private land.[10] Judicial confirmation in such cases is only a formality that merely confirms the earlier conversion of the land into private land, the conversion having occurred in law from the moment the required period of possession became complete.[11]

Under CA 141, the reckoning point is June 12, 1945.  If the predecessors-in-interest of Manna Properties have been in possession of the land in question since this date, or earlier, Manna Properties may rightfully apply for confirmation of title to the land.  Following our ruling in Director of Lands v. IAC,[12] Manna Properties, a private corporation, may apply for judicial confirmation of the land without need of a separate confirmation proceeding for its predecessors-in-interest first.

We rule, however, that the land in question has not become private land and remains part of the public domain.

Under the Regalian doctrine, the State is the source of any asserted right to ownership of land. This is premised on the basic doctrine that all lands not otherwise appearing to be clearly within private ownership are presumed to belong to the State.[13] Any applicant for confirmation of imperfect title bears the burden of proving that he is qualified to have the land titled in his name.[14] Although Section 48 of CA 141 gives rise to a right that is only subject to formal recognition, it is still incumbent upon any claimant to first prove open, continuous and adverse possession for the requisite period of time.[15] It is

only when the applicant complies with this condition that he may invoke the rights given by CA 141.

The evidence submitted by Manna Properties to prove the required length of possession consists of the testimony of one of its predecessors-in-interest, Manuel Sobrepeña (“Manuel”),[16] transferee’s affidavits, and several tax declarations covering the land in question.

We have ruled that while a tax declaration by itself is not sufficient to prove ownership, it may serve as sufficient basis for inferring possession.[17] However, the tax declarations presented by Manna Properties do not serve to prove their cause. Although Manna Properties claimed during trial that they were presenting the tax declaration proving possession since 12 June 1945,[18] a scrutiny of the tax declaration reveals that it is not the tax declaration Manna Properties claimed it to be. Exhibit Q-16 was in fact a substitute tax declaration allegedly issued on 28 November 1950.  The annotation at the back of this tax declaration indicates that it was issued to replace the 1945 tax declaration covering the land in question. A substitute is not enough.

The 1945 tax declaration must be presented considering that the date, 12 June 1945, is material to this case.  CA 141 specifically fixes the date to 12 June 1945 or earlier.  A tax declaration simply stating that it replaces a previous tax declaration issued in 1945 does not meet this standard.  It is unascertainable whether the 1945 tax declaration was issued on, before or after 12 June 1945.  Tax declarations are issued any time of the year.  A tax declaration issued in 1945 may have been issued in December 1945.  Unless the date and month of issuance in 1945 is stated, compliance with the reckoning date in CA 141 cannot be established.

There is another reason why the application for registration of Manna Properties must fail. The tax declaration allegedly executed in 1950 and marked as Exhibit Q-16 bears

several irregularities. A small annotation found at the bottom of the back page of Exhibit Q-16 states it cancels a previous tax declaration. Beyond stating that the cancelled tax declaration was issued in 1945, Exhibit Q-16 does not provide any of the required information that will enable this Court or any interested party to check whether the original 1945 tax declaration ever existed.19 The blanks left by Exhibit Q-16 render any attempt to trace the original tax declaration futile. Moreover, on its face Exhibit Q-16 lacks any indication that it is only a substitute or reconstituted tax declaration. The net effect is an attempt to pass off Exhibit Q-16 as the original tax declaration.

The form used to prepare the tax declaration marked as Exhibit Q-16 states that it was “FILED UNDER SECTION 202 OF R.A. 7160.” Republic Act No. 7160 is the Local Government Code of 1991. The sworn undertaking by the Deputy Assessor who allegedly prepared the tax declaration reads, “Subscribed and sworn before me this 28 (sic) day of Nov. 1950…” This means that the tax declaration was issued more than forty (40) years before the form used came into existence. Manna Properties gave no explanation why its tax declaration used a form that did not exist at the time of the alleged issuance of the tax declaration.  The totality of these circumstances leads this Court to conclude that Exhibit Q-16 was fabricated for the sole purpose of making it appear that Manna Properties’ predecessors-in-interest have been in possession of the land in question since 12 June 1945.

The earliest of the “un-cancelled” tax declarations presented by Manna Properties is dated 1950.  This is clearly insufficient to prove possession of the land since 12 June 1945.  The same can be said of the transferee’s affidavit, which was dated 1955. Manna Properties’ reliance on Manuel’s testimony is similarly misplaced. Not only is such evidence insufficient and self-serving on its own but, Manuel

did not also specifically testify that he, or his parents or predecessors-in-interest were in possession of the land since 12 June 1945 or earlier.  The only clear assertion of possession made by Manuel was that his family used to plant rice on that piece of land.20

Other than the mentioned pieces of evidence, Manna Properties did not present sufficient proof that its predecessors-in-interest have been in open, continuous and adverse possession of the land in question since 12 June 1945. At best, Manna Properties can only prove possession since 1952.  Manna Properties relied on shaky secondary evidence like the testimony of Manuel and substitute tax declarations. We have previously cautioned against the reliance on such secondary evidence in cases involving the confirmation of an imperfect title over public land.21 Manna Properties’ evidence hardly constitutes the “well-nigh incontrovertible” evidence necessary to acquire title through adverse occupation under CA 141.22

WHEREFORE, we GRANT the instant petition. We REVERSE the Decision of the Court of Appeals dated 20 December 2000 in CA-G.R. CV No. 52562.  The Application for Registration filed by Manna Properties, Inc. over Lots No. 9515 and 1006 of Cad. 539-D, with a total area of One Thousand Four Hundred Eighty (1,480) square meters situated in Barangay Pagdaraoan, San Fernando, La Union, is DENIED.

SO ORDERED.

EMETERIA LIWAG,                                         Petitioner,    

G. R. No. 189755 Present: CARPIO, J., Chairperson,BRION,

               - versus -    HAPPY GLEN LOOP HOMEOWNERS ASSOCIATION, INC.,                                     Respondent.            

PEREZ,SERENO, andREYES,  Promulgated: July 4, 2012

x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x

D E C I S I O N

SERENO, J.: 

This Rule 45 Petition assails the Decision[1] and

Resolution[2] of the Court of Appeals (CA) in CA-GR SP No.

100454. The CA affirmed with modification the Decision[3] and

Order[4] of the Office of the President (O.P.) in OP Case No. 05-G-

224, which had set aside the Decision[5] of the Board of

Commissioners of the Housing and Land Use Regulatory Board

(HLURB) in HLURB Case No. REM-A-041210-0261 and affirmed

the Decision[6] of the Housing and Land Use Arbiter in HLURB Case

No. REM-030904-12609.

The controversy stems from a water facility in Happy Glen

Loop Subdivision (the Subdivision), which is situated in Deparo,

Caloocan City.

         Sometime in 1978, F.G.R. Sales, the original developer of

Happy Glen Loop, obtained a loan from Ernesto Marcelo (Marcelo),

the owner of T.P. Marcelo Realty Corporation. To settle its debt after

failing to pay its obligation, F.G.R. Sales assigned to Marcelo all its

rights over several parcels of land in the Subdivision, as well as

receivables from the lots already sold.[7]

As the successor-in-interest of the original

developer, Marcelo represented to subdivision lot buyers, the

National Housing Authority (NHA) and the Human Settlement

Regulatory Commission (HSRC) that a water facility was available

in the Subdivision.[8]

         For almost 30 years, the residents of the Subdivision relied on

this facility as their only source of water.[9] This fact was

acknowledged by Marcelo and Hermogenes Liwag (Hermogenes),

petitioner’s late husband who was then the president of respondent

Happy Glen Loop Homeowners Association (Association).[10]

         Sometime in September 1995, Marcelo sold Lot 11, Block No.

5 to Hermogenes. As a result, Transfer Certificate of Title (TCT) No.

C-350099

was issued to him. When Hermogenes died in 2003, petitioner

Emeteria P. Liwag subsequently wrote a letter to respondent

Association, demanding the removal of the overhead water tank from

the subject parcel of land.[11]

         Refusing to comply with petitioner’s demand, respondent

Association filed before the HLURB an action for specific

performance; confirmation, maintenance and donation of water

facilities; annulment of sale; and cancellation of TCT No. 350099

against T.P. Marcelo Realty Corporation (the owner and developer of

the Subdivision), petitioner Emeteria, and the other surviving heirs of

Hermogenes.

         After the parties submitted their respective position papers,

Housing and Land Use Arbiter Joselito Melchor (Arbiter Melchor)

ruled in favor of the Association. He invalidated the transfer of the

parcel of land in favor of Hermogenes in a Decision dated 5 October

2004, the dispositive portion of which reads:[12]

         WHEREFORE, premises considered, judgment is hereby

rendered as follows: 1.      Confirming the existence of an easement for

water system/facility or open space on Lot 11, Block 5 of TCT No. C-350099 wherein the deep well and overhead tank are situated, 

2.      Making the Temporary Restraining Order dated 01 April 2004 permanent so as to allow the continuous use and maintenance of the said water facility, i.e., deep well and over head water tank, on the subject lot, by the complainant’s members and residents of the subject project, and restraining all the respondents from committing the acts complained of and as described in the complaint,

 3.      Declaring as void ab initio the deed of sale

dated 26 February 2001, involving Lot 11, Block 5 in favor of spouses Liwag, and TCT No. C-350099 in the name of same respondents without prejudice to complainant’s right to institute a criminal action in coordination with the prosecuting arms of the government against respondents Marcelo and Liwag, and furthermore, with recourse by Liwag against T.P. and/or Marcelo to ask for replacement for controverted lot with a new one within the subject project; and

 4.      Ordering respondents, jointly and severally, to

pay complainant the amount of ₱10,000.00 as attorney’s fees and the amount of ₱20,000.00 as damages in favor of the complainant’s members.

 

SO ORDERED.

         On appeal before the HLURB Board of Commissioners, the

Board found that Lot 11, Block 5 was not an open space. Moreover,

it ruled that Marcelo had complied with the requirements of

Presidential Decree No. (P.D.) 1216 with the donation of 9,047

square meters of open space and road lots. It further stated that there

was no proof that Marcelo or the original subdivision owner or

developer had at any time represented that Lot 11, Block 5 was an

open space. It therefore concluded that the use of the lot as site of the

water tank was merely tolerated.[13]

Respondent Association interposed an appeal to the OP,

which set aside the Decision of the HLURB Board of

Commissioners and affirmed that of the Housing and Land Use

Arbiter.[14]

The OP ruled that Lot 11, Block 5 was an open space,

because it was the site of the water installation of the Subdivision,

per Marcelo’s official representation on file with the HLURB

National Capital Region Field Office. The OP further ruled that the

open space required under P.D. 957 excluded road lots; and, thus, the

Subdivision’s open space was still short of that required by law.

Finally, it ruled that petitioner Liwag was aware of the

representations made by Marcelo and his predecessors-in-interest,

because he had acknowledged the existence of a water installation

system as per his Affidavit of 10 August 1982.[15]

Petitioner Liwag unsuccessfully moved for reconsideration,[16] then filed a Rule 43 Petition for Review before the CA.[17]

The CA affirmed that the HLURB possessed jurisdiction to

invalidate the sale of the subject parcel of land to Hermogenes and to

invalidate the issuance of TCT No. C-350099 pursuant thereto.[18] The appellate court agreed with the OP that an easement for water

facility existed on the subject parcel of land and formed part of the

open space required to be reserved by the subdivision developer

under P.D. 957.[19] However, it ruled that Arbiter Melchor should not

have recommended the filing of a criminal action against petitioner,

as she was not involved in the development of the Subdivision or the

sale of its lots to buyers.[20] The CA likewise deleted the award of

attorney’s fees and damages in favor of respondent.[21]

Aggrieved, petitioner filed the instant Petition before this

Court.

The Court’s Ruling

         We affirm the ruling of the appellate court.

IThe HLURB has exclusive jurisdictionover the case at bar

The jurisdiction of the HLURB is outlined in P.D. 1344,

“Empowering the National Housing Authority to Issue Writ of

Execution in the Enforcement of its Decision under Presidential

Decree No. 957,” viz:

Sec. 1. In the exercise of its functions to regulate real estate trade and business and in addition to its powers provided for in Presidential Decree No. 957, the National Housing Authority shall have the exclusive jurisdiction to hear and decide cases of the following nature.

  A.                Unsound real estate business practices;

 B.                Claims involving refund and any other

claims filed by subdivision lot or condominium unit buyer against the project owner, developer, dealer, broker or salesman; and

 

C.                Cases involving specific performance of contractual and statutory obligations filed by buyers of subdivision lots or condominium units against the owner, developer, broker or salesman.

When respondent Association filed its Complaint before the

HLURB, it alleged that Marcelo’s sale of Lot 11, Block 5 to

Hermogenes was done in violation of P.D. 957 in the following

manner:

12. Through fraudulent acts and connivance of [T.P. and Ernesto Marcelo] and the late Liwag and without the knowledge and consent of the complainants all in violation of P.D. 957 and its implementing regulations, respondents T.P. and Ernesto Marcelo transferred the same lot where the deep well is located which is covered by TCT No. C-41785 in favor of spousesHermogenes Liwag and Emeteria Liwag to the great damage and prejudice of complainants x x x.[22] (Empasis in the original)

We find that this statement sufficiently alleges that the

subdivision owner and developer fraudulently sold to Hermogenes

the lot where the water facility was located. Subdivisions are

mandated to maintain and provide adequate water facilities for their

communities.[23] Without a provision for an alternative water source,

the subdivision developer’s alleged sale of the lot where the

community’s sole water source was located constituted a violation of

this obligation. Thus, this allegation makes out a case for an unsound

real estate business practice of the subdivision owner and developer.

Clearly, the case at bar falls within the exclusive jurisdiction of the

HLURB.

It is worthy to note that the HLURB has exclusive

jurisdiction over complaints arising from contracts between the

subdivision developer and the lot buyer, or those aimed at

compelling the subdivision developer to comply with its contractual

and statutory obligations to make the Subdivision a better place to

live in.[24] This interpretation is in line with one of P.D. 957’s

“Whereas clauses,” which provides:

WHEREAS, numerous reports reveal that many real estate subdivision owners, developers, operators, and/or sellers have reneged on their representations and obligations to provide and maintain properly subdivision roads, drainage, sewerage, water systems, lighting systems, and other similar basic requirements, thus endangering the health and safety of home and lot buyers. x x x.

P.D. 957 was promulgated to closely regulate real estate

subdivision and condominium businesses.[25] Its provisions were

intended to encompass all questions regarding subdivisions and

condominiums.[26] The decree aimed to provide for an appropriate

government agency, the HLURB, to which aggrieved parties in

transactions involving subdivisions and condominiums may take

recourse.[27]

IIAn easement for water facility exists on Lot 11, Block 5 of Happy Glen Loop Subdivision

Easements or servitudes are encumbrances imposed upon an

immovable for the benefit of another immovable belonging to a

different owner,[28] for the benefit of a community, [29] or for the

benefit of one or more persons to whom the encumbered estate does

not belong.[30]

The law provides that easements may be continuous or

discontinuous and apparent or non-apparent. The pertinent

provisions of the Civil Code are quoted below:

Art. 615. Easements may be continuous or discontinuous, apparent or non-apparent. Continuous easements are those the use of which is or may be incessant, without the intervention of any act of man.

 Discontinuous easements are those which are used at intervals and depend upon the acts of man. Apparent easements are those which are made known and are continually kept in view by external signs that reveal the use and enjoyment of the same. Non-apparent easements are those which show no external indication of their existence.

In this case, the water facility is an encumbrance on Lot 11,

Block 5 of the Subdivision for the benefit of the community. It is

continuous and apparent, because it is used incessantly without

human intervention, and because it is continually kept in view by the

overhead water tank, which reveals its use to the public.

Contrary to petitioner’s contention that the existence of the

water tank on Lot 11, Block 5 is merely tolerated, we find that the

easement of water facility has been voluntarily established either by

Marcelo, the Subdivision owner and developer; or by F.G.R. Sales,

his predecessor-in-interest and the original developer of the

Subdivision. For more than 30 years, the facility was continuously

used as the residents’ sole source of water. [31] The Civil Code

provides that continuous and apparent easements are acquired either

by virtue of a title or by prescription of 10 years.[32] It is therefore

clear that an easement of water facility has already been acquired

through prescription.

IIILot 11, Block 5 of Happy Glen Loop Subdivision forms part of its open space

         The term “open space” is defined in P.D. 1216 as “an area

reserved exclusively for parks, playgrounds, recreational uses,

schools, roads, places of worship, hospitals, health

centers, barangay centers and other similar facilities and amenities.[33]

The decree makes no specific mention of areas reserved for

water facilities. Therefore, we resort to statutory construction to

determine whether these areas fall under “other similar facilities and

amenities.”

The basic statutory construction principle of ejusdem

generis states that where a general word or phrase follows an

enumeration of particular and specific words of the same class, the

general word or phrase is to be construed to include – or to be

restricted to – things akin to or resembling, or of the same kind or

class as, those specifically mentioned.[34]

Applying this principle to the afore-quoted Section 1 of P.D.

1216, we find that the enumeration refers to areas reserved for the

common welfare of the community. Thus, the phrase “other similar

facilities and amenities” should be interpreted in like manner.

Here, the water facility was undoubtedly established for the

benefit of the community. Water is a basic need in human

settlements,[35] without which the community would not survive. We

therefore rule that, based on the principle of ejusdem generis and

taking into consideration the intention of the law to create and

maintain a healthy environment in human settlements,[36] the location

of the water facility in the Subdivision must form part of the area

reserved for open space.

 

 

IVThe subject parcel of land is beyond the commerce of man and its sale is prohibited under the law

The law expressly provides that open spaces in subdivisions

are reserved for public use and are beyond the commerce of man.[37] As such, these open spaces are not susceptible of private

ownership and appropriation. We therefore rule that the sale of the

subject parcel of land by the subdivision owner or developer to

petitioner’s late husband was contrary to law. Hence, we find no

reversible error in the appellate court’s Decision upholding the

HLURB Arbiter’s annulment of the Deed of Sale.

Petitioner attempts to argue in favor of the validity of the

sale of the subject parcel of land by invoking the principle of

indefeasibility of title and by arguing that this action constitutes a

collateral attack against her title, an act proscribed by the Property

Registration Decree.

Petitioner is mistaken on both counts.

First, the rule that a collateral attack against a Torrens title is

prohibited by law[38] finds no application to this case.

There is an attack on the title when the object of an action is

to nullify a Torrens title, thus challenging the judgment or

proceeding pursuant to which the title was decreed. [39] In the present

case, this action is not an attack against the validity of the Torrens

title, because it does not question the judgment or proceeding that led

to the issuance of the title. Rather, this action questions the validity

of the transfer of land from Marcelo to petitioner’s husband. As there

is no attack – direct or collateral – against the title, petitioner’s

argument holds no water.

Second, the principle of indefeasibility of title is not

absolute, and there are well-defined exceptions to this rule.[40] In Aqualab Philippines, Inc. v. Heirs of Pagobo,[41] we ruled that

this defense does not extend to a transferee who takes the title with

knowledge of a defect in that of the transferee’s predecessor-in-

interest.

In this case, Spouses Liwag were aware of the existence of

the easement of water facility when Marcelo sold Lot 11, Block 5 to

them. Hermogenes even executed an Affidavit dated 10 August 1982

attesting to the sufficiency of the water supply coming from an

electrically operated water pump in the Subdivision.[42] It is

undisputed that the water facility in question was their only water

source during that time. As residents of the Subdivision, they had

even benefited for almost 30 years from its existence. Therefore,

petitioner cannot be shielded by the principle of indefeasibility and

conclusiveness of title, as she was not an innocent purchaser in good

faith and for value.

From the discussion above, we therefore conclude that the

appellate court committed no reversible error in the assailed Decision

and accordingly affirm it in toto.

WHEREFORE, premises considered, the instant Petition

for Review is DENIED, and the assailed Decision and Resolution of

the Court of Appeals in CA-GR SP No. 100454 are

hereby AFFIRMED.

SO ORDERED.

G.R. No. 133110             March 28, 2007

BARSTOWE PHILIPPINES CORPORATION, Petitioner, vs.REPUBLIC OF THE PHILIPPINES, Respondent.

D E C I S I O N

CHICO-NAZARIO, J.:

Before this Court is a Petition for Review on Certiorari1 under Rule 45 of the Rules of Court seeking the reversal and setting aside the Decision,2 dated 8 August 1997, and Resolution,3 dated 18 March 1998, of the Court of Appeals in CA-G.R. CV No. 47522, which in turn, reversed and set aside the Decision,4 dated 22 December 1992, of the Quezon City Regional Trial Court (RTC), Branch 80 in Civil Case No. Q-92-11806.

Antecedent Facts

This case involves the conflicting titles to the same parcels of land (subject lots) of petitioner Barstowe Philippines Corporation (BPC) and the respondent Republic of the Philippines (Republic). The subject lots have a total area of 111,447 square meters, and are situated along the northeastern perimeter boundary of the National Government Center in Payatas, Quezon City.

BPC traces its titles to the subject lots back to Servando Accibal (Servando) who was supposedly issued on 24 July 1974, at 3:20 p.m., Transfer Certificates of Title (TCTs) No. 200629 and 200630 over the subject lots. TCTs No. 200629 and 200630 were purportedly signed by Nestor N. Pena, Deputy Register of Deeds of Quezon City. On 10 June 1988, Servando executed a Deed of Absolute Sale of the subject lots to his son Antonio Accibal (Antonio), with the concurrence of his other heirs. Despite his prior sale of the subject lots to Antonio, Servando, by virtue of a Deed of Conveyance, dated 8 February 1989, transferred/conveyed the subject lots to BPC in exchange for subscription of 51% of the capital stock of BPC, such subscription supposedly amounting toP6,000,000.00.5 About a year after the death of Servando on 3 October 1989, particularly on 10 October 1990, Antonio executed another Deed of Conveyance of the subject lots in favor of BPC in exchange for subscription of 2,450 shares of its capital stock, with an alleged total value of P49,000,000.00.6 Due to the fire that gutted the Office of the Quezon City Register of Deeds on 11 June 1988 and destroyed many certificates of title kept therein, Antonio sought the administrative reconstitution of the original copies and owner’s duplicate copies of TCTs No. 200629 and 200630 with the Land Registration Authority (LRA). On 12 December 1990, the LRA issued TCTs No.RT-23687 and RT-23688 (reconstituting TCTs No. 200629 and 200630,

respectively), which were transmitted to the Quezon City Register of Deeds and signed by Deputy Register of Deeds Edgardo Castro on 19 February 1991. Also on 19 February 1991, TCTs No. RT-23687 and RT-23688 were cancelled and in lieu thereof, TCTs No. 30829, 30830, 30831, and 30832 in the name of BPC were issued. BPC then acquired from the Housing and Land Use Regulatory Board (HLURB) a permit to develop the subject lots into a residential subdivision. Subsequently, BPC entered into Joint Venture Agreements with other corporations for the development of the subject lots into a subdivision called Parthenon Hills.

Meanwhile, according to the Republic, prior to 14 November 1979, the subject lots were owned by First Philippine Holdings Corporation (FPHC). As evidence of its title to the subject lots, FPHC was issued TCT No. 257672, on an undetermined date, and TCT No. 275201, on 20 January 1981. Pursuant to a Deed of Sale, dated 14 November 1979, FPHC sold one of the subject lots, covered by TCT No. 257672, to the Republic for P2,757,360.00. Thus, on 22 January 1981, TCT No. 257672 was cancelled and TCT No. 275443 was issued in place thereof in the name of the Republic. FPHC executed another Deed of Sale on 25 March 1982 in which it sold the remainder of the subject lots, covered by TCT No. 275201, to the Republic for P9,575,920.00. On 31 May 1982, TCT No. 275201 was cancelled and was replaced by TCT No. 288417 issued in the name of the Republic. Because of the 11 June 1988 fire which razed the Quezon City Office of the Register of Deeds and destroyed the original copies of TCTs No. 275443 and 288417, the Republic applied for administrative reconstitution of the same with the LRA. It was then that the Republic came to know that another party had applied for reconstitution of TCTs No. 200629 and 200630 which also covered the subject lots. This prompted the Republic to file before the RTC on 26 March 1992 a petition for

cancellation of title against Antonio, Servando, and BPC, docketed as Civil Case No. Q-92-11806.

Civil Case No. Q-92-11806

Counsel for Antonio and the late Servando filed two successive Motions for extension of time to file the proper pleading, dated 17 June 1992 and 1 July 1992, but despite the grant thereof by the RTC,7 no such responsive pleading on behalf of Antonio and the late Servando was ever filed. Hence, on 31 July 1992, the RTC issued an Order8 declaring Antonio and the late Servando in default.

In another Order,9 also dated 31 July 1992, the RTC, upon the motion of BPC, allowed the latter to continue with the development of the subject lots. It concluded that –

Considering the plight of [BPC] and the possible irreparable damage that may be caused against the residents in the surrounding developed subdivision, even as said corporation is possessed of a good title, the court in the exercise of its discretion grants the motion. More importantly, consideration of equity demands that the titled owner [BPC] herein must be able to exercise all its dominical right bloosoming [sic] forth from its ownership of the land in suit.

WHEREFORE, under cool reflection and prescinding from the foregoing, the motion is hereby granted. [BPC] is hereby permitted and allowed to continue with the improvement and development of the controverted property into a residential subdivision.10

On 12 October 1992, the Republic filed with the Quezon City Register of Deeds a Notice of Lis Pendensrequesting the recording of the pendency of Civil Case No. Q-92-11806 on TCTs No. 30830, 30831, and 30832, all in the name of BPC.

While Civil Case No. Q-92-11806 was still pending before the RTC, there were two intervenors.

Gloria Accibal Rettoriano (Gloria) filed with the RTC a Motion for Intervention, with a Complaint in Intervention, both dated 1 September 1992. Gloria alleged that she was the only child of Basilia Accibal, Servando’s sister; the subject lots were inherited by Basilia, Servando, and their other siblings from their parents Martin and Mauricia Accibal; upon her mother’s death, Gloria inherited and came into possession of a portion of the subject lots with an area of about 2.5 hectares; Gloria had been possessing, cultivating and improving her portion of the subject lots for the last 30 years; Servando, through fraudulent means, was able to secure TCTs over all the subject lots, including Gloria’s portion therein; the inclusion of Gloria’s portion in the TCTs of Servando and, later, in those of BPC, was done through fraud and gross bad faith; and unless the TCTs of Servando and BPC are declared null and void, Gloria will be deprived of her property without due process and just compensation. BPC opposed Gloria’s intervention in Civil Case No. Q-92-11806 considering that she had already instituted Civil Case No. Q-91-10933 before the RTC, Quezon City, Branch 76, seeking the annulment of TCTs No. 30830, 30831, and 30832 of BPC based on the very same grounds she raised in her present Complaint in Intervention; on 11 February 1992, Gloria entered into a Compromise Agreement with BPC in which she waived and renounced any and all claims whatsoever which she may have over the titles of BPC in consideration of the payment by the latter ofP2,000,000.00; the RTC, Branch 76, after finding that the said Compromise Agreement was not contrary to law, morals, good customs, public order or public policy, approved the same, thus putting an end to Civil Case No. Q-91-10933;11 Gloria’s cause of action to intervene in Civil Case No. Q-92-11806 was already barred by prior judgment in Civil Case No. Q-91-10933 and Gloria’s Complaint in Intervention is tantamount to a collateral

attack against a TCT. In rejecting Gloria’s intervention in Civil Case No. Q-92-11806, the RTC found as follows –

The motion for intervention must be denied and the complaint in intervention therein attached must be rejected.

For one thing, herein movant Gloria Accibal Rettoriano, was the plaintiff in the first case (RTC Br. 76 No. Q-91-10933) and with "eyes wide open" she entered into a compromise agreement with [BPC], which was the basis of the 26 February 1992 decision rendered therein and it being based on a compromise agreement, said decision became immediately final and executory.

Whether or not the decision rendered in the first case was satisfied is of no moment in the present case, as herein movant intervenor has all the remedies to protect her rights therein.

For another, movant intervenor Gloria Accibal Rettoriano, from her complaint in intervention would ask for the cancellation of the titles issued to their [sic] relative Servando Accibal and those titles duly issued and registered in the name of [BPC]. Certainly, this can not be done, as it constitutes a collateral attack on the questioned titles which the law and settled jurisprudence do not allow. Perforce, a separate action against the questioned titles is the remedy available for intervenor Gloria A. Retoriano [sic].

Accordingly, the Court finds the opposition of [BPC] to be impressed with merit and the motion for intervention does not inspire confidence.

WHEREFORE, the subject motion for intervention is denied and the complaint in intervention attached thereto must be rejected.12

Another intervenor in Civil Case No. Q-92-11806 was EL-VI Realty and Development Corporation (ERDC) which filed with the RTC a Motion for Leave to Intervene, dated 1 September 1992. Subsequently, it filed an Answer in Intervention, dated 15 September 1992, in which, it alleged that it acquired interest in the subject lots after having entered into a Joint Venture Agreement dated 16 January 1992, with BPC, for the development of the subject lots into a residential subdivision; the action initiated by the Republic for the cancellation of the TCTs of BPC was already barred by laches and estoppel because of the recognition accorded upon the said TCTs by the instrumentalities of the Republic, particularly the Register of Deeds and the HLURB, on which the ERDC relied in all good faith when it entered into the Joint Venture Agreement with BPC; the Republic is liable to ERDC for moral damages and attorney’s fees; should the RTC find the TCTs of BPC infirm, rendering the Joint Venture Agreement between ERDC and BPC of no force and effect, then BPC should be held liable to ERDC, being an innocent third party, for reimbursement of all expenses incurred by the latter in the development of the subject lots; and should the RTC find that the TCTs of BPC are spurious, then it should be declared in bad faith when it entered into the Joint Venture Agreement with ERDC, for which it should be liable for exemplary damages and attorney’s fees. In an Order,13 dated 27 October 1992, the RTC granted ERDC’s Motion to Intervene and admitted its Answer in Intervention.

After all the parties had submitted their respective Pre-Trial Briefs,14 and upon motion by the BPC,15 the RTC decided the case on 22 December 1992 on summary judgment.16 Although it found both the Republic and the BPC as buyers in good faith, it held that the titles of BPC should prevail. It ratiocinated thus –

3. To the third issue, we rule that the title of [BPC] must prevail over that of the [Republic].

There is no dispute that the titles of the First Philippine Holdings Corporation, predecessor-in-interest of [Republic] were either issued in the year 1979 and 1981 (Exh. "A" and "B"). On the other hand, there is likewise no dispute that the titles of defaulted defendant Servando Accibal, and predecessor-in-interest of [BPC], were both issued and registered much earlier on July 24, 1974 (Exhs. "F" and "G", pp. 210-213, record) and/or a difference of 5 or 6 years in point of time.

MORE, Servando Accibal, the predecessor-in-interest of [BPC] has been in the actual and peaceful physical possession of the lots in suit before he sold them to [BPC] on February 08, 1991. Upon registration of the same on February 19, 1991, [BPC], after having subdivided the land into four (4) smaller lots was issued on 19 February TCT Nos. 30829, 30830, 30831, and 30832 (Exhs. 1, 2, 3 and 4).

It is true [Republic] acquired the land in suit on November 14, 1979 and for which TCT Nos. 275443 and 288417 were issued in the years 1979 and 1981, but [Republic] never took assertive steps to take actual possession of the land sold to it by the First Philippine Holdings Corporation. It is even of grave doubt that the latter took actual possession of the land before the land in suit was sold to the [Republic]. So much so, that the area had been occupied by several squatters, one of them is Servando Accibal who by the way, was able to have the land in suit titled in his name as early as July 24, 1974, under TCT Nos. 200629 and 200630 of the land records of Quezon City. Further, [Republic] and its predecessor-in-interest were not able to discover the overlapping of their titles by the titles of Servando Accibal for a period of eighteen (18) long years starting from July 24, 1974 to about June 10, 1992 when the

LRA during a reconstitution of the titles of [Republic] was initiated, as evidenced by a report of reconstituting officer Benjamin A. Flestado of that office (Exh. "H", pp. 214-258, record).

Simply stated, [Republic] may be guilty of LACHES.

x x x x

Perforce, the claim of [Republic] which was probably originally VALID became a STALE claim as the years went by. Verily, the titles of [Republic] must be cancelled and the titles of [BPC] must be upheld and declared as good and valid titles and [BPC] is entitled to all the rights bloosoming [sic] fourth from its dominical right of ownership.

More importantly, the predecessor-in-interest of [BPC] had been long in the actual and physical possession of the lands in suit, while that of the predecessor-in-interest of [Republic] was not in the actual possession of the land before the sale to [Republic]. On the other hand, [BPC] immediately after the sale in its favor took actual, physical and peaceful possession of the land in suit to the exclusion of all others. It has no knowledge, actual or constructive that said parcels of land were sold to the [Republic]. When it registered the sale, there was no inscription in the Land Registry that the same parcels of land were earlier sold to the [Republic]. Hence, there was and is – a continuing good faith on the part of [BPC]. (Article 1544, NCC; Cruz vs Cabana, 129 SCRA 656).

In the same Decision, the RTC found certain irregularities in TCTs No. 200629 and 200630 in the name of Servando and that the said TCTs should be cancelled, without prejudice to the rights and interests of BPC. The RTC discussed the matter in this wise –

We shall now dwell on the validity of the titles – TCT Nos. 200629 and 200630, issued in the name of Servando Accibal on July 24, 1974 by the Register of Deeds of Quezon City. The LRA report dated 10 June 1992 (Exh. H, pp. 214-258, record) is competent proof that indeed said titles must be cancelled. In short, the LRA found after due investigation that the said titles of Servando Accibal were issued with certain irregularities. It recommended the cancellation therefore, of TCT Nos. 200629 and 200630, to which the court concurs, as said report must be accorded due respect and in the absence of fraud or irregularities that attended the investigation, which the Court finds none, the same must be persuasive, if not conclusive. Moreover, herein defendant Servando Accibal because of his failure to answer, despite extension of time given him, failed to file his answer. Upon motion of [Republic’s] counsel, he was declared as in default and since then, he never asked the court to lift and set aside the default order. There is no way, his title must be cancelled. For one thing, he was not able to present evidence to controvert the recommendation of LRA to cancel his titles. For another, Servando Accibal is deemed to have impliedly admitted the irregularities that attended the issuance of his aforestated titles.

However, the cancellation of the titles of Servando Accibal, would not affect the rights and interests of [BPC] as the latter is declared to be a purchaser in good faith and for value. MORE, under the circumstances of the case, and even when the titles of Servando Accibal are cancelled, the titles of [BPC] are still good and indefeasible titles, as it is settled rule that good titles may be sustained even when the seller has spurious titles.

As for the intervention of ERDC, the RTC addressed the same as follows –

Finally, we shall next discuss the claim of intervenor EL-VI Realty and Development Corporation. A close reading from the Joint Venture Agreement dated January 16, 1992, shows that in case of litigation, intervenor Realty Corporation shall have the right to suspend all development activities and the development period of 5 years shall automatically be suspended until such time as the said case is finally settled/decided (Exh. "5" and Annex "A" answer in intervention pp. 109-114). Upon the signing of the said agreement the amount of P1,500,000.00 was received by [BPC] as advance payment of the 50-50 sharing basis in the sales proceeds. During the pre-trial conference, herein intervenor tried to enforce a supplemental agreement dated October 15, 1992, by filing a motion for a writ of preliminary injunction with prayer for the issuance of a restraining order. Resolution of the same was held in abeyance to await the decision to be rendered, after [BPC] assured intervenor herein that it will abide by and strictly comply with its commitments arising from the aforesaid agreement, after proper accounting is made therefore. Herein intervenor admits that another financier-developer has entered the area due to the delay of the project caused by the filing of the present case.

MORE, due to the filing of the present case, herein intervenor was reluctant to further finance the project because of its big exposure already made. Hence, intervenor’s works and other activities in the area was suspended in accordance with their Joint Venture Agreement.

Perforce, there is compelling necessity for a proper accounting, more particularly its substantial exposure to the project, on a quantum meruit basis, in fairness to all concerned and involved parties in the project, including but not limited to the present contractor-developer of the area.

Finally, the RTC concluded that –

A FORTIORARI, the environmental setting and factual scenario of the case, in relation to its legal ambience will show that the great preponderance of evidence lies in favor of [BPC]. (Section 01, Rule 133, Revised Rules of Court), and the motion for summary judgment is granted. The hearing as to damages, including attorney’s fees shall be scheduled soonest possible.

WHEREFORE, under cool reflection and prescinding from the foregoing, judgment is rendered as follows:

1. Ordering the Register of Deeds of Quezon City to cancel Transfer Certificates of Title No. 275443 and 288417 issued in the name of the [Republic] covering the lots in suit. However, [Republic] being a purchaser in good faith, and based on considerations of equity and justice Barstowe Philippine[s] Corporation is ordered to re-imburse and pay [Republic], the sum of P12,333,280.00 representing the purchase price from the vendor, First Philippine Holdings Corporation soonest possible;

2. Ordering the Register of Deeds of Quezon City to officially and finally cancel from his records, Transfer Certificates of Title Nos. 200629 and 200630 issued in the name of Servando Accibal, on July 24, 1974, covering the same lots in suit (Exh. "F" and "G", pp. 210-213, record).

3. Declaring herein defendant Barstowe Philippines Corporation as the absolute owner in fee simple title over the lots in suit, as evidenced by Transfer Certificates of Title Nos. 30829, 30830, 30831 and 30832 of the land records of Quezon City, all issued on February 19, 1991 and the said titles are further more declared valid, existing and indefeasible titles of [BPC]

and as such is entitled to all the dominical rights bloosoming [sic] forth from its ownership over the lots in suit.

4. Ordering [BPC] to abide by and strictly comply with the terms and conditions of the supplemental Agreement entered into by it with herein intervenor EL-VI Realty and Development Corporation dated October 15, 1992, after proper accounting is made;

5. Perforce, the Register of Deeds of Quezon City is likewise ordered to cancel any and all encumbrances annotated on said titles of defendant corporation including, but not limited to the lis pendens notice filed by the [Republic], if any;

6. The hearing as to damages, including the claim for attorney’s fees shall be scheduled soonest.

7. Considering the admissions and agreements of the parties during the pre-trial conference, which are considered judicial admissions, this decision acquires the nature of one based on a compromise agreement. Perforce, the Court declares this decision to be immediately final and executory.

8. No pronouncement as to costs.

Despite the promulgation of the foregoing Decision by the RTC on 22 December 1992, the proceedings in Q-92-11806 were still far from over; significant developments still took place thereafter.

ERDC sought the execution of paragraph 4 of the dispositive portion of the RTC Decision dated 22 December 1992. In an Order,17 dated 13 January 1993, the RTC issued a writ of

execution in favor of ERDC, and a notice of levy on execution was accordingly made on the subject lots. In a dialogue held between the counsels for BPC and ERDC in the chamber of the RTC Judge on 26 February 1993, an amicable settlement was reached whereby BPC agreed to settle the claim of ERDC in the form of developed subdivision lots in Parthenon Hills, subject to proper accounting.18 BPC offered to ERDC 40 developed subdivision lots in Parthenon Hills, valued at P18,543,000.00, representing 65% of the total claims (prior to proper accounting) of ERDC, which amounted to P28,787,306.32. However, ERDC refused the offer of BPC and demanded that it be paid the total amount of its claims. It also brought to the attention of the RTC that, in violation of their Joint Venture Agreement, BPC contracted another realty developer for the development of Parthenon Hills. Thus, ERDC opposed the lifting of the notice of levy on execution on the subject lots for the protection of its interests. In an Order,19 dated 17 March 1993, the RTC found that BPC already substantially complied with the terms of its agreement with ERDC and that the rights and interests of the latter were well-protected and safeguarded. In the same Order, the RTC lifted and set aside the notice of levy on execution on the subject lots. However, on 20 April 1993, ERDC filed a Motion for Contempt20against BPC and informed the RTC that BPC, fraudulently, maliciously, and in bad faith, already sold 36 of the 40 subdivision lots it earlier offered to ERDC by accepting downpayments thereon of only 30% of the selling price. Upon further investigation, it discovered that of the four remaining lots, two were vacant while the other two were reserved. ERDC subsequently filed two other motions: (1) A Motion,21 dated 29 April 1993, to set for trial the claim of ERDC for damages. Said motion was granted, and the RTC set the hearing on 16 September 1993, at 8:30 a.m.,22 but upon the motion of the counsel for BPC, the hearing was reset to 7 October 1993;23 and (2) A Motion,24 dated 6 September 1993, for the issuance of a partial writ of execution for the undisputed

amount ofP18,543,000.00, representing 65% of the total claims of ERDC. Unfortunately, the records no longer show the succeeding incidents concerning these motions.

In a Motion for Leave to Intervene25 dated 8 March 1993, and the attached Complaint in Intervention,26 dated 10 March 1993, Kadakilaan Estate expressed its intent to intervene in Civil Case No. Q-92-11806. It anchored its claims on the contention that the subject lots were already registered as private property under the Spanish Mortgage Law since 18 May 1891, and under the Torrens System of Registration since 31 August 1907, by the predecessors-in-interest of Kadakilaan Estate. The subject lots were supposedly included in a vast track of land covered by Titulo de la Propiedad de Terrenos No. 01-4 in the name of Doña Petra Rodriguez, who transferred the same to her son, Don Gonzalo Yanesa y Rodriguez. Kadakilaan Estate came into ownership and possession of the vast track of land, including the subject lots, by virtue of its successive sales from Don Gonzalo Yanesa yRodriguez to Doña Lourdez Rodriguez Yanesa, and from the latter to Kadakilaan Estate. Kadakilaan Estate further alleged that the Original Certificate of Title (OCT) No. 333, from which the TCTs of both BPC and the Republic were ultimately derived, was null and void ab initio, and that the TCTs of BPC and the Republic were spurious and likewise null and void ab initio, and without any probative value. Kadakilaan Estate prayed for judgment declaring it the owner of the subject lots; directing the other parties to respect its ownership, possession, rights and interests over the subject lots; and ordering the other parties to pay just compensation, damages, and attorney’s fees. The RTC, in an Order27 dated 27 April 1993, denied the Motion for Leave to Intervene and rejected the Complaint in Intervention of Kadakilaan Estate for the following reasons –

New intervenor Kadakilaan Estate alleges that the titles of the [Republic] and [Antonio, Servando, and BPC] are all falsified,

spurious in origin and null and void ab initio, as the property in question were already registered as private properties of [Kadakilaan Estate’s] predecessors-in-interest, under Spanish Mortgage law since May 18, 1891, and under the Torrens System, Act No. 496, as amended, in Titulo dela propriedad de Terrenos No. 01-4.

If this is clearly so, then [Kadakilaan Estate] is attacking the validity of the titles of [Republic] and [Antonio, Servando, and BPC] in this case. It is settled rule that titles registered under the Torrens System cannot be the subject of a collateral attack. Perforce, the remedy of [Kadakilaan Estate] is to file a separate action. For, if the intervention is allowed at this late stage of the proceedings, then it will cause unnecessary delay in the soonest termination of this case.

MORE, the law and the rules as well as jurisprudence on the matter, will only allow in the court’s discretion, intervention, before or during the trial. Certainly NOT after the trial and with more reason intervention may no longer be allowed after the decision has been rendered as in the present case.

In the meantime, on 4 January 1993, the Republic filed a Notice of Appeal28 of the RTC Decision, dated 22 December 1992. The RTC, in an Order,29 dated 16 February 1993, denied the same. It reasoned that –

Considering these judicial dimensions and acquiescence of the [Republic] in open court during the hearings held and during the pre-trial conference, the court in its dispositive portion of the questioned decision, declared it to be a judgment based on a compromise agreement which by operation of law becomes immediately executory.

It is unfortunate that despite the above declarations of the court [Republic] failed to ask for a clarification of the said declarations, by way of a motion for reconsideration of the decision based on fraud, mistake or duress mandated by the rules.

The notice of appeal must be denied due course.

x x x x

WHEREFORE, prescinding from the foregoing, the notice of appeal filed by plaintiff is rejected and denied due course.

From the foregoing RTC Order, the Republic filed with the Court of Appeals a Petition for Certiorari and Mandamus (with Urgent Prayer for Temporary Restraining Order and/or Writ of Preliminary Injunction), docketed as CA-G.R. SP No. 30647. The Republic primarily questioned the denial of its Notice of Appeal by the RTC in its Order, dated 16 February 1993, on the basis that the RTC Decision of 22 December 1992 constitutes a compromise agreement, and is immediately final and executory. The Court of Appeals issued a writ of preliminary injunction30 enjoining the RTC from implementing and enforcing its Order, dated 16 February 1993, during the pendency of CA-G.R. SP No. 30647 or until otherwise directed by the appellate court. Apparently, from the denial by the RTC of its Motion for Leave to Intervene and the rejection of its Complaint in Intervention in Civil Case No. Q-92-11806, the Kadakilaan Estate again filed a Motion for Leave to Intervene in CA-G.R. SP No. 30647, which in a Resolution,31 dated 13 September 1993, the Court of Appeals also denied on the following grounds –

We find the stance of [Republic] and [BPC] well-grounded. Not only is [Kadakilaan Estate] precluded by estoppel from filing the present motion, after failing to challenge before this Court

or the Supreme Court the trial court’s denial of subject motion for intervention, on April 27, 1993; it is too late for [Kadakilaan Estate] to come in at this stage of the present litigation. Furthermore, as aptly put by the [Republic] the alleged rights [Kadakilaan Estate] seeks to protect here can be amply protected in an appropriate action [Kadakilaan Estate] may later bring.

In a Decision,32 dated 29 June 1994, the Court of Appeals granted the Republic’s Petition for Certiorari and Mandamus, ruling in this wise –

We rule for [Republic]. Respondent Court’s conclusion lost sight of the nature of a compromise agreement, and the circumstances under which a judgment based on a compromise may be rendered.

x x x x

Guided by the aforecited law and jurisprudence in point, it can be safely concluded that neither mere silence or acquiescence by the [Republic] in open court during the hearing nor [Republic’s] stipulation of facts, marking of exhibits, alleged admission of Exhibit 6 which contains [BPC’s] offer of compromise during the pre-trial, be properly considered as a compromise agreement. Had the parties really intended to enter into a compromise to end their case, they could have executed and submitted a compromise agreement for the approval of the trial court. But no such step was taken.

x x x x

Records readily show that due to lack of an amicable settlement or any compromise agreement, the respondent judge directed the parties to present their documentary exhibits so as to facilitate the trial; no longer for the purpose of

settling the case. Evidently, there was no explicit agreement nor any reciprocal concession between the parties with an end in view of terminating the litigation. Absence of these essential elements of a compromise inevitably results in the absence of a valid compromise agreement. (Merced vs. Roman Catholic Archbishop, L-24614, August 17, 1967, 20 SCRA 1077). Consequently, the opinion of respondent Judge that his December 22, 1992 Decision had the nature of a judgment based on compromise, cannot be upheld.

So also, the doctrine relied on by respondents that a compromise agreement constitutes the law between the parties and a judgment based thereon is immediately final, executory and not appealable, is inapplicable under the premises.

x x x x

WHEREFORE, the petition is GRANTED; the questioned order dated 16 February 1993 is SET ASIDE; and respondent court is hereby ordered to give due course to [Republic’s] Notice of Appeal in Civil Case No. Q-92-11806. Costs against [BPC].

This Court, in its Resolution, dated 6 February 1995, issued in G.R. No. 117969, in effect, sustained the afore-mentioned Decision of the Court of Appeals.

CA-G.R. CV No. 47522

Finally, the Republic was allowed to appeal the RTC Decision, dated 22 December 1992, in Civil Case No. Q-92-11806, to the Court of Appeals, where it was docketed as CA-G.R. CV No. 47522. In a Decision,33 dated 8 August 1997, the Court of Appeals found in favor of the Republic, and disposed thus –

WHEREFORE, premises considered, plaintiff-appellant Republic of the Philippines’ appeal is GRANTED. Except for paragraph 2 of the dispositive portion of the decision appealed from declaring TCT Nos. 200629 and 200630 in the name of Servando Accibal null and void and ordering the Register of Deeds of Quezon City to cancel said TCT Nos. 200629 and 200630, the appealed decision is REVERSED and SET ASIDE and a new one entered:

(a) declaring and affirming the validity of TCT Nos. 288417 and 275443 of the Registry of Deeds of Quezon City in the name of appellant Republic of the Philippines and that appellant Republic has indefeasible title to the property covered thereby;

(b) declaring TCT Nos. 30829, 30830, 30831 and 30832 also of the Registry of Deeds of Quezon City in the name of Barstowe Philippines Corporation null and void and ordering the Register of Deeds of Quezon City to cancel said titles;

(c) ordering Barstowe Philippines Corporation to surrender to the Register of Deeds of Quezon City the owner’s duplicate certificates of title of TCT Nos. 30829, 30830, 30831 and 30832 for cancellation;

(d) enjoining defendant-appellee Barstowe Philippines Corporation and intervenor EL-VI Realty Development Corporation from exercising any act of ownership or possession of the land in question; and

(e) remanding the case to the court of origin for further proceedings for determination of the crossclaim of intervenor EL-VI Realty and Development Corporation against defendant-appellee Barstowe Philippines Corporation.

There is no pronouncement as to costs.

The Motion for Reconsideration filed by BPC was denied by the Court of Appeals in a Resolution,34 dated 18 March 1998.

G.R. No. 133110

Aggrieved, BPC came before this Court via a Petition for Review on Certiorari35 under Rule 45 of the Rules of Court, dated 28 April 1998, raising the sole issue of who between BPC and the Republic has a better title over the subject lots. BPC prays that this Court rule in its favor, and reverse and set aside the Court of Appeals Decision, dated 8 August 1997, in CA-G.R. CV No. 47522, based on the following grounds –

THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ERROR IN NOT CONSIDERING THE GOOD FAITH OF [BPC] THOUGH IT WAS ADMITTED BY [REPUBLIC] DURING THE PRE-TRIAL CONFERENCE.

THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ERROR IN UPHOLDING THE VALIDITY OF THE TITLE OF [REPUBLIC] OVER THAT OF [BPC.]

THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ERROR IN ORDERING [BPC] TO SURRENDER ITS TITLE TO THE REGISTER OF DEEDS FOR CANCELLATION[.]

THE HONORABLE COURT OF APPEALS ERRED IN ENJOINING [BPC] FROM EXERCISING ACTS OF OWNERSHIP OVER THE SUBJECT PARCEL OF LAND[.]

THE HONORABLE COURT OF APPEALES [sic] ERRED IN APPLYING THE CALALANG CASE (231 SCRA 88) AS IT IS NOT APPLICABLE TO THE CASE AT BAR[.]

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN NOT FINDING [REPUBLIC] GUILTY OF ESTOPPEL BY LACHES[.]

After the Republic filed its Comment, dated 29 October 1998, several parties again sought to intervene in the case.

Winnie U. Nicolas (Nicolas), through her sister and attorney-in-fact, Ditas Felicitas Nicolas-Agbulos (Nicolas-Agbulos), and Edgardo Q. Abesamis (Abesamis), filed their respective Petitions for Intervention, dated 22 October 1998 and 9 December 1998, respectively.

Nicolas-Agbulos invokes the provisions of the Rules of Court on the joinder of indispensable parties and necessary parties for the complete determination of all possible issues, not only between the parties themselves but also as regards to other persons who may be affected by the judgment. Nicolas-Agbulos contends that she was a buyer in good faith of Lots No. 27 and 28, Block 13, of Parthenon Hills, covered by TCTs No. 76497 and 76498, respectively, of the Quezon City Register of Deeds, derived from TCTs No. 30830, 30831, and 30832 in the name of BPC. Nicolas-Agbulos had already partially paid BPC for Lots No. 27 and 28 in the amount ofP1,500,000.00, and the balance of P800,000.00 was already deposited in a trust account in the name of BPC with the Far East Bank and Trust Company (FEBTC). She bought Lots No. 27 and 28 after relying on the face of the TCTs of BPC which were intact and subsisting in the records of the Quezon City Register of Deeds, and on the authority granted to BPC by several government agencies, such as the HLURB, LRA, and the Register of Deeds, for the subdivision, development, and sale of the subject lots to private individuals. She only came to know, through her sister and attorney-in-fact, Nicolas-Agbulos, that the TCTs of BPC covering the subject lots, which comprised the Parthenon Hills, were being assailed in Civil

Case No. Q-92-11806 pending before the RTC. Nicolas’ inquiry on the matter was answered by BPC with an assurance that despite the "bad publicity," Parthenon Hills was an on-going project and that she should continue paying her installments. Acting cautiously, Nicolas-Agbulos decided that instead of paying the balance of the purchase price for Lots No. 27 and 28 directly to BPC, she would open a trust account with FEBTC in the name of BPC where she would deposit Nicolas-Agbulos’ succeeding installment payments. Nicolas-Agbulos was compelled to intervene in the instant case because BPC made no mention of the fact that it had already sold numerous subdivision lots in Parthenon Hills to innocent purchasers for value, either through absolute or installment sales. She thus sought a ruling upholding the title of BPC, and recognizing and protecting the rights of Nicolas as an innocent purchaser for value of Lots No. 27 and 28.36

Abesamis seeks to intervene in the present case as an indispensable party since no complete and conclusive determination can be had therein, which shall be legally binding and effective on Abesamis, unless he be allowed to intervene. Abesamis claims to have acquired by purchase Lot No. 16, Block 4, of Parthenon Hills, for the purchase price of P720,000.00, and evidenced by a Deed of Absolute Sale dated 9 June 1993. BPC processed and secured TCT No. 92270 covering Lot No. 16 in Abesamis’ name. He only learned that the subject lots comprising the Parthenon Hills, including his Lot No. 16, was mired in controversy, when he attended an emergency meeting of the Homeowners’ Association of Parthenon Hills. He asserts that, being a bona fidepurchaser and holder of a legitimate and indefeasible title to Lot No. 16, he had valid and enforceable rights against both BPC and the Republic.37

A third Petition in Intervention, dated 8 February 1999, was filed by spouses Jacinto H. Santiago, Jr. and Arlene C.

Santiago (spouses Santiago). The spouses Santiago aver that, doing business as ACS Trading, they entered into a supply agreement with Proven International Development Corporation (PIDC), which had a construction contract with BPC, for the development of Parthenon Hills. The spouses Santiago agreed to accept lots in Parthenon Hills as payment for the construction materials they supplied BPC since the latter showed them clean TCTs to the subject lots, and HLURB licenses and permits to develop Parthenon Hills. In payment for the construction materials delivered, and financial assistance and various other professional services rendered by the spouses Santiago to BPC, the latter initially executed in their favor 15 Deeds of Assignment for 15 subdivision lots in Parthenon Hills. The TCTs for the 15 subdivision lots were transferred in the name of the spouses Santiago free from any lien or encumbrance. The spouses Santiago mortgaged 13 of the subdivision lots with the Planters Development Bank and sold the remaining two to different buyers. Thereafter, BPC again executed in favor of the spouses Santigao 71 Deeds of Assignment over 71 subdivision lots in Parthenon Hills. When the spouses Santiago attempted to transfer the TCTs covering the 71 subdivision lots to their names, they discovered that the TCTs of BPC already bore the annotation of the notice of lis pendens. The Quezon City Register of Deeds cancelled the TCTs of BPC covering the 71 subdivision lots and issued new ones in the names of the spouses Santiago, still bearing the annotation of the notice of lis pendens. The spouses Santiago claim that they were unable to intervene earlier in this case because of the pendency of the case filed by BPC against them, docketed as Civil Case No. 93-18231, with the Quezon City RTC, Branch 84, for the annulment of the last 71 Deeds of Assignment. This case had since been dismissed. The spouses Santiago invoke that they have sufficient interest in the present case which would necessarily be affected by the resolution/decision thereof, and they must necessarily intervene herein to protect their interest. The spouses

Santiago pray for this Court to declare the assignment to them by BPC of the subdivision lots as valid, and to direct both BPC and the Republic to recognize and respect their rights and interest.38

BPC supports the intervention in the case by Nicolas-Agbulos and Abesamis. It explains that its failure to mention that it has already practically sold all the subdivision lots in Parthenon Hills was not by design, but by mere oversight.39 However, BPC opposes the intervention of the spouses Santiago claiming that the latter are not indispensable parties to the case; they acquired their TCTs through fraudulent means; and Civil Case No. 93-18231 which it instituted against the spouses Santiago was dismissed by the Quezon City RTC, Branch 84, without prejudice. According to BPC, the supply agreement for construction materials was between the spouses Santiago and PIDC, so that it could not be enforced against BPC. This issue, as well as the validity of the 71 Deeds of Assignment over 71 subdivision lots supposedly executed by BPC in favor of the spouses Santiago, requires the holding of a trial, not a mere intervention.40

The Republic opposed all efforts of other parties to intervene in the case. The legal interests of Nicolas-Agbulos, Abesamis, and the spouses Santiago are totally dependent on the alleged right of ownership of BPC, and the issues they raised are similar to those raised by BPC. The fact that Nicolas-Agbulos and Abesamis are purchasers in good faith will not render their titles valid and indefeasible. The titles of Servando from whom BPC acquired its titles and from whom, in turn, Nicolas-Agbulos and Abesamis, derived their titles, were found to be spurious; and the spring cannot rise higher than its source.41

In the interim, BPC filed its Reply dated 22 January 1999, to the Comment of the Republic.

This Court, in a Resolution, dated 22 March 1999, granted the motion of the Republic for the issuance of a temporary restraining order enjoining BPC from selling the remaining unsold portions of the subject lots and from allowing buyers to enter and occupy portions thereof.42

Thereafter, BPC,43 the Republic,44 spouses Santiago,45 Abesamis,46 and Nicolas-Agbulos,47 filed their respective Memoranda.

However, even before the case could be submitted for decision, Servando’s heirs, namely Virgilio V. Accibal (Virgilio), Virginia A. Macabudbod (Virginia), and Antonio, filed an Urgent Ex Parte Motion to Defer Resolution of the same. Soon after, they filed a Petition for New Trial, dated 23 May 2001.48 Although Servando’s heirs concede that the period allowed for the filing of a motion to set aside the judgment and grant a new trial under Rule 37, Section 1 of the Rules of Court, had already lapsed, on grounds of justice and equity, they still move that this Court grant their Petition. Servando’s heirs were allegedly prevented from participating in Civil Case No. Q-92-11806 before the RTC by the fraudulent misrepresentations of Rev. Father Antonio O. Ipo (Ipo), BPC President, together with the BPC counsel, who convinced the naïve Antonio that there was no need to worry about the case filed by the Republic against them and to hire another counsel as the BPC counsel shall represent all of them. Unknown to Servando’s heirs, the BPC counsel neither represented them nor included them in the Answer he filed on behalf of BPC, thus, Servando’s heirs were declared in default by the RTC. Because of the extrinsic fraud perpetrated upon them and their excusable negligence, Servando’s heirs should be granted a new trial, otherwise, they would be deprived of their constitutional right to due process of law. According to Servando’s heirs, neither BPC nor the Republic was a purchaser in good faith who acquired clean titles to the subject

lots. The BPC President Ipo, hoodwinked Antonio into agreeing to convey the subject lots to BPC in exchange for 51% of its capital stock. However, despite acquiring titles to the subject lots, BPC failed to transfer the promised 51% of its capital stock. On the other hand, the TCTs of FPHC, the Republic’s predecessor-in-interest, were of doubtful origin; and the Republic’s acquisition of the subject lots from FPHC was anomalous in the sense that it purchased the said property through ordinary sale when it could have easily expropriated the same.

Without formally intervening in the case at bar, Sariling Sikap Pabahay (SSP), through its President, Elias V. Esraita, submitted to this Court a letter,49 dated 26 August 2002, together with other documents to disprove the validity of the titles of Servando and his heirs to the subject lots. SSP is a cooperative formed by the urban poor to help secure for its members award from the government of titles to the portions of the subject lots which they are presently occupying. It presented the affidavit of a certain Edith C. Mantaring,50 who attests that the Accibals are still misrepresenting themselves as owners of the subject lots and fraudulently selling portions thereof to unsuspecting buyers.

This Court’s Ruling

Ultimately, this Court is called upon to determine which party now has superior title to the subject lots: the Republic, BPC, the intervenors Abesamis, Nicolas-Agbulos, and spouses Santiago, or Servando’s heirs?

BPC, the intervenors Abesamis, Nicolas-Agbulos, spouses Santiago, and Servando’s heirs derived their title to the subject lots from Servando’s TCTs No. 200629 and 200630. This Court then is compelled to look into the validity, authenticity, and existence of these two TCTs.

It is alleged by BPC and Servando’s heirs that Servando was issued TCTs No. 200629 and 200630 on 24 July 1974. However, there is an absolute dearth of information and proof as to how Servando acquired ownership and came into possession of the subject lots.

An investigation conducted by the LRA revealed even more irregularities which raised serious doubts as to the validity and authenticity of TCTs No. 200629 and 200630. The LRA Report, dated 10 June 1992, submitted by Investigator Benjamin A. Flestado (Flestado), found the said certificates of titles spurious after a very detailed and exhaustive analysis of the evidence available.

First, it should be noted that despite letters sent by Investigator Flestado to BPC President Ipo, Servando, and Antonio, requesting copies of documents to support the issuance of TCTs No. 200629 and 200630, they failed to file a reply and furnish him with the documents requested. A certain Atty. Justino Z. Benito (Atty. Benito) appeared before Investigator Flestado claiming to be the counsel for BPC and promising to contact Servando’s heirs. Yet, even by the time the LRA Report was finalized on 10 June 1992, Atty. Benito still failed to submit the documents requested. Instead, he wrote letters insisting that TCTs No. 200629 and 200630 be returned to the Quezon City Register of Deeds since these certificates "were detached and transferred to [your LRA central] office for no cogent reason or purpose;" and his client, BPC, "is a transferee in good faith and for value, and its titles unchallenged."

Second, although the 109-D forms on which TCTs No. 200629 and 200630 were printed appeared to be genuine, and determined to have been issued to the Quezon City Register of Deeds on 5 July 1974, the signature therein of the Quezon City Register of Deeds Atty. Nestor N. Peña (Atty. Peña) was

forged. No less than Atty. Peña himself refuted that the signatures on TCTs No. 200629 and 200630 were his. In his sworn statement, he noted –

A. At a glance, I am definitely sure that the signatures appearing here are not mine. My attention is invited on the loop, on the starting point of the signature. The loop should be sharp on the last portion of my signature. The portion going-up starts from a point and is also sharp because that represents hypen [sic] on letter ‘n’. I notice in these titles my surname is typed as ‘PENA’ and not ‘PEÑA’. If ever there is no ‘ñ’ in the typewriter, I used to add hypen [sic] over the letter ‘n’. Besides, my position here is indicated as Deputy Register of Deeds. I never signed titles as Deputy Register of Deeds, during my time; and if ever a title was presented indicating my position as Deputy Register of Deeds, I would erase the word ‘Deputy’. Moreso, the pen used here was a sign-pen. I never used a signpen, as shown in the other 5 titles I identified earlier.

His employment records revealed that Atty. Peña was appointed as the Quezon City Register of Deeds on 27 May 1968, and served as such until his retirement in August of 1980, so that at the time when he supposedly signed TCTs No. 200629 and 200630 on 24 July 1974, he was the Quezon City Register of Deeds, not the Deputy Register of Deeds.

Third, even the then incumbent Quezon City Register of Deeds Samuel Cleofe (RD Cleofe) and Deputy Register of Deeds Edgardo Castro (DRD Castro) believed that TCTs No. 200629 and 200630 were spurious. According to RD Cleofe, the size of the area covered by the TCTs made him highly suspicious of the same. In Quezon City, only a few people own big tracts of land, namely, the Aranetas, Tuazons, etc. Commonly, ordinary individuals own only 300 to 2,000 square meters of land. Both RD Cleofe and DRD Castro identified differences in the signatures and designation of Atty. Peña

appearing on the questionable TCTs No. 200629 and 200630 compared to those on five other admittedly authentic TCTs.51.

Fourth, the National Bureau of Investigation (NBI), upon request of Investigator Flestado, conducted an examination and issued Questioned Documents Report No. 636-991, dated 31 March 1992, wherein it noted significant differences in the handwriting characteristics between the standard/sample signatures of Atty. Peña and those appearing on TCTs No. 200629 and 200630, i.e., in the manner of execution, direction/movement of strokes, and other identifying details. The NBI concluded that "[t]he questioned and the standard/sample signatures of ‘[N]estor N. Peña’ were NOT WRITTEN by one and the same person."

Finally, Investigator Flestado made inquiries with the Land Management Bureau (LMB) regarding the consolidation-subdivision plan Pcs-2480 and plan Psu-32606 of Lots 34 and 40 (the subject lots) as described in TCTs No. 200629 and 200630. LMB Geodetic Surveys Division Chief Privadi J.G. Dalire, in a letter, dated 29 November 1991, informed Investigator Flestado that LMB had no records of Pcs-2480, while the original copy of Psu-32606 is no longer available as it had been badly damaged. Thus, there was no record in the LMB that Lots 34 and 40, Psu-32606, were in fact consolidated and then subdivided into Lots 3, 4, 5, and 6 pursuant to plan Pcs-2480, as mentioned in TCTs No. 200629 and 200630.

To rebut the foregoing findings of LRA Investigator Flestado, BPC presented, in support of the authenticity and validity of TCTs No. 200629 and 200630, the LRA Resolution,52 dated 4 November 1991, in Consulta No. 1957, and NBI Questioned Documents Report No. 585-891,53 dated 2 September 1991. A careful study of the said documents does little to support the position of BPC.

The LRA Resolution in Consulta No. 1957 merely allowed the registration of the rescission of a Joint Venture Agreement on TCTs No. 200629 and 200630 despite the initial adverse finding that the said certificates were of doubtful authenticity. It did not make any categorical finding as to the authenticity or validity of the TCTs. In fact, the last paragraph of the said Resolution elucidated that –

This resolution, however, should be understood to be limited to the issue of registrability of the instrument sought to be registered and is without prejudice to any action, if warranted, that may be filed in court assailing the validity or authenticity of the certificate of titles. (Emphasis supplied.)

The NBI Questioned Documents Report No. 585-891 was even in accordance with the finding in the LRA Report that the 109-D forms on which TCTs No. 200629 and 200630 were printed seemed to be genuine. The NBI concluded that the words "109-D" and the serial numbers printed on the forms were not altered. The NBI did a very limited examination of the genuineness of the forms on which TCTs No. 200629 and 200630 were printed, but it did not look into the authenticity of Atty. Peña’s signature (which was the subject of NBI Questioned Documents Report No. 636-991, dated 31 March 1992, mentioned in the LRA Report) or the accuracy of the entries made therein.

The LRA Report, dated 10 June 1992, of Investigator Flestado was submitted as evidence before the RTC. It must be emphasized that the LRA Report was extensive and thorough. Its findings are sufficiently supported by independent and reliable proof. The BPC failed to present evidence to refute the same. The LRA Report deserves great weight sufficient to overcome the presumption that TCTs No. 200629 and 200630 were genuine, authentic, and indefeasible.54

It having been established that TCTs No. 200629 and 200630 were forged and spurious, their reconstitution was also attended with grave irregularities. Once more, this Court relies on the findings in the LRA Report, dated 10 June 1992, of Investigator Flestado. Quezon City RD Cleofe; the unnamed Chief of the LRA Micrographics and Computer Division; and Records Officer Viterbo Cahilig of the Quezon City Register of Deeds, all confirmed that there were no records of any applications for reconstitution of TCTs No. 200629 and 200630 in the name of Servando. It would seem that an LRA employee, Cartographer Rovil Ruiz (Ruiz), made it appear that there were applications for reconstitution of TCTs No. 200629 and 200630 filed, and which were included in Folder 1614. When Folder 1614 was inspected, TCTs No. 200629 and 200630 were not included in its table of contents; and although the said folder did have 44 missing pages, the missing pages pertain to the supporting documents of other TCTs, and there was no showing that TCTs No. 200629 and 200630 and the applications for reconstitution thereof were among these missing pages. Ruiz undertook by himself the computation of the tie-lines of the subject lots as described in TCTs No. 200629 and 200630, the plotting, and examination of the titles. The LRA Report thus recommended that Ruiz be administratively charged for grave misconduct, it appearing that he was the one who facilitated the administrative reconstitution of TCTs No. 200629 and 200630.

In contrast, the Republic was able to supply Investigator Flestado with the documents supporting the transfer of the titles to the subject lots from FPHC to the Republic, among which were the TCTs of FPHC, the Deeds of Sale executed by FPHC to the Republic, notice to the real property owners within 300-meter radius from the area, receipts for payment of registration fees, and payment order for the documentary stamp tax on the sales. TCTs No. 275443 and 288417 in the name of the Republic were included in LRA Folder No. 1976-

B, together with other certificates of title in the name of the Republic. One of the applications filed by the Republic was docketed as Application for Reconstitution No. 41869. The Chief of the LRA Micrographics and Computer Division confirmed that the applications for reconstitution of TCTs No. 275443 and 288417 by the Republic were recorded in the computerized Administrative Reconstitution System.

BPC was unable to attack the authenticity and validity of the titles of the Republic to the subject lots, and could only interpose the defense that it was a buyer in good faith. Only Servando’s heirs, in their Petition for New Trial, attempted to raise doubts as to the titles of the Republic to the subject lots by averring that the transfer thereof from FPHC to the Republic was highly irregular because the latter could have acquired the property by expropriation. Such an averment is totally baseless. Expropriation as the means by which the State can acquire private property is always the remedy of last resort. Expropriation lies only when it is made necessary by the opposition of the owner of the property to the sale or by the lack of any agreement as to the price.55 There being, in the present case, valid and subsisting contracts between the FPHC, the previous owner, and the Republic, the buyer, for the purchase of the subject lots at an agreed price, there was no reason for the expropriation.

In consideration of all the foregoing findings, it is indubitable that TCTs No. 275443 and 288417 of the Republic covering the subject lots are authentic and valid, while TCTs No. 200629 and 200630 of Servando covering the same property are not.

However, BPC maintains that it was a purchaser in good faith, for value and without any inkling about any flaw from Servando’s titles. It points out that it purchased the subject lots from Servando on 8 February 1989 and registered the same

on 19 February 1991, way before the titles of Servando were declared null by the RTC on 22 December 1992. BPC relies on this Court’s ruling in Tenio-Obsequio v. Court of Appeals,56 to wit –

Under Section 55 of the Land Registration Act, as amended by Section 53 of Presidential Decree No. 1529, an original owner of registered land may seek the annulment of a transfer thereof on the ground of fraud. However, such a remedy is without prejudice to the rights of any innocent holder for value with a certificate of title.

A purchaser in good faith and for value is one who buys the property of another, without notice that some other person has a right to or interest in such property, and pays a full and fair price for the same at the time of such purchase or before he has notice of the claim or interest of some other person in the property. In consonance with this accepted legal definition, petitioner Consorcia Tenio-Obsequio is a purchaser in good faith. There is no showing whatsoever nor even an allegation that herein petitioner had any participation, voluntarily or otherwise, in the alleged forgery.

x x x x

The main purpose of the Torrens system is to avoid possible conflicts of title to real estate and to facilitate transactions relative thereto by giving the public the right to rely upon the face of a Torrens certificate of title and to dispense with the need of inquiring further, except when the party concerned has actual knowledge of facts and circumstances that should impel a reasonable cautious man to make such further inquiry. Where innocent third persons, relying on the correctness of the certificate of title thus issued, acquire rights over the property, the court cannot disregard such rights and order the total cancellation of the certificate. The effect of such an

outright cancellation would be to impair public confidence in the certificate of title, for everyone dealing with property registered under the Torrens system would have to inquire in every instance as to whether the title has been regularly or irregularly issued by the court. Every person dealing with registered land may safely rely on the correctness of the certificate of title issued therefor and the law will in no way oblige him to go beyond the certificate to determine the condition of the property.

x x x x

It has been consistently ruled that a forged deed can legally be the root of a valid title when an innocent purchaser for value intervenes. A deed of sale executed by an impostor without the authority of the owner of the land sold is a nullity, and registration will not validate what otherwise is an invalid document. However, 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, the vendee had the right to rely upon what appeared in the certificate and, in the absence of anything to excite suspicion, was under no obligation to look beyond the certificate and investigate the title of the vendor appearing on the face of said certificate.

Now the question is whether BPC qualifies as an innocent purchaser for value which acquired valid titles to the subject lots, despite the fact that the titles of its predecessor-in-interest were found to be forged and spurious.

This Court finds in the negative.

Foremost is the fact that there seem to be two documents by which titles to the subject lots were transferred from the Accibals to BPC: (1) A Deed of Conveyance, dated 8 February

1989, executed by Servando in favor of BPC, transferring to the latter titles to the subject lots in exchange for 51% of its capital stock; and (2) A Deed of Conveyance, dated 10 October 1990, executed by Antonio in favor of BPC, transferring to the latter the very same property in exchange for 2,450 shares in BPC. It should be noted that even prior to these Deeds of Conveyance, Servando already transferred the subject lots by way of a Deed of Absolute Sale, dated 10 June 1988, in favor of his son Antonio, with the concurrence of his other heirs. Thus, by the time Servando executed the Deed of Conveyance over the subject lots in favor of BPC on 8 February 1989, he no longer had any right to the said property, having sold the same to Antonio. It was probably to rectify this mistake that a second Deed of Conveyance was executed by Antonio on 10 October 1990. Comparing all these transfer documents, the LRA Report, dated 10 June 1992, prepared by Investigator Flestado noted that Servando’s Tax Account Number (TAN) in the Deed of Conveyance, dated 8 February 1989, which he executed over the subject lots in favor of BPC, was "A2140-M1746-A-1;" while in the Deed of Sale, dated 10 June 1988, which he executed over the subject lots in favor of Antonio, his TAN was "4110-241-R." Moreover, despite being executed a year apart, Servando had the same residence certificate (No. 5901393, issued at Quezon City, on 6 April 1988) appearing in both documents.

Furthermore, BPC cannot really claim that it was a purchaser in good faith which relied upon the face of Servando’s titles. It should be recalled that the Quezon City Register of Deeds caught fire on 11 June 1988. Presumably, the original copies of TCTs No. 200629 and 200630 were burnt in the said fire. Servando’s heirs sought the administrative reconstitution of of TCTs No. 200629 and 200630 only in December 1990. The two Deeds of Conveyance over the subject lots were executed in favor of BPC by Servando and Antonio on 8 February 1989 and 10 October 1990, respectively, both prior to the

administrative reconstitution of TCTs No. 200629 and 200630. If BPC bought the subject lots after TCTs No. 200629 and 200630 were destroyed when the Quezon City Register of Deeds burned down, but before the said certificates were reconstituted, then on the face of what titles did BPC rely on before deciding to proceed with the purchase of the subject lots? There was no showing that there were surviving owner’s duplicate copies of TCTs No. 200629 and 200630, or even if there were, without the original copies of the said TCTs which were stored in the Quezon City Register of Deeds and purportedly destroyed in the fire, there would have been no way for BPC to have verified the owner’s duplicate copies.

In addition, without the original copies and owner’s duplicate copies of TCTs No. 200629 and 200630, BPC had to rely on the reconstituted certificates, issued on 12 December 1990, bearing the following numbers: TCTs No. RT-23687 (for TCT No. 200629) and RT-23688 (for TCT No. 200630). Under section 7 of Republic Act No. 26,57"Reconstituted titles shall have the same validity and legal effect as the originals thereof" unless the reconstitution was made extrajudicially.58 In this case, TCTs No. 200629 and 200630 were reconstituted administratively, hence, extrajudicially. In contrast to the judicial reconstitution of a lost certificate of title which is in rem, the administrative reconstitution is essentially ex-parte and without notice.59 The reconstituted certificates of title do not share the same indefeasible character of the original certificates of title for the following reason –

x x x The nature of a reconstituted Transfer Certificate Of Title of registered land is similar to that of a second Owner's Duplicate Transfer Certificate Of Title. Both are issued, after the proper proceedings, on the representation of the registered owner that the original of the said TCT or the original of the Owner's Duplicate TCT, respectively, was lost and could not be located or found despite diligent efforts exerted for that

purpose. Both, therefore, are subsequent copies of the originals thereof. A cursory examination of these subsequent copies would show that they are not the originals. Anyone dealing with such copies are put on notice of such fact and thus warned to be extra-careful. x x x.60

The fact that the TCTs were reconstituted should have alerted BPC and its officers to conduct an inquiry or investigation as might be necessary to acquaint themselves with the defects in the titles of Servando.61

What is more, BPC again invokes LRA Resolution, dated 4 November 1991, in Consulta No. 1957, and NBI Questioned Documents Report No. 585-891, dated 2 September 1991 as proof that it did inquire or investigate into the validity and authenticity of Servando’s titles. But again, it should be noted that these documents were issued after BPC already acquired the subject lots from Servando and Antonio.

Lastly, there are serious doubts that BPC acquired the subject lots for value. The Republic bought the subject lots from FPHC for the combined price of P12,333,280.00. BPC, on the other hand, supposedly acquired the subject lots from Servando on 8 February 1989 in exchange for 51% of the capital stock of BPC, with a subscription value of P6,000,000.00. In the LRA Report, dated 10 June 1992, Investigator Flestado pointed out that in the Articles of Incorporation, dated 16 January 1989, of BPC, submitted to the Securities and Exchange Commission (SEC) on 20 January 1989, BPC had an authorized capital stock of only P1,000,000.00, which was divided into 10,000 shares, with a par value of P100.00 each; and the amount of capital stock actually subscribed was P250,000.00. Therefore, in 1989, fifty-one percent of the capital stock of BPC would be 5,100 shares, with an aggregate value of only P510,000.00. BPC is not saved by the second Deed of Conveyance, executed more than a year later by Antonio, again transferring

to BPC the subject lots in exchange for 2,450 shares in the latter, with the alleged value of P49,000.000.00. Unless BPC is able to present proof that it applied for, and the SEC approved, a substantial increase in its capital stock, then this Court can only assume that its capital stock remained the same as the year before, 2,450 shares in BPC, with a par value of P100.00 each, amount only to P245,000.00. This Court cannot find a plausible explanation for the discrepancy in the value of 2,450 shares of BPC between theP245,000.00 it has hereby computed and the P49,000,000.00 claimed by BPC.

For the above-stated reasons, this Court cannot declare BPC an innocent purchaser for value, and it acquired no better titles to the subject lots than its predecessors-in-interest, Servando and Antonio.

At this point, it would seem that the Republic does hold better titles to the subject lots. Nonetheless, another level of transactions involving the subject lots was brought by intervenors to the attention of this Court.

From the reconstituted TCTs No. RT-23687 (200629) and RT- 23688 (200630) in the name of Servando, BPC derived and was issued by the Quezon City Register of Deeds new certificates, TCTs No. 30829, 30830, 30831 and 30832, in its own name. It was able to secure the necessary licenses and permits from the appropriate government agencies to subdivide, develop, and sell the subject lots as Parthenon Hills. The Parthenon Hills project was openly advertised and marketed, and a substantial portion of the subject lots was already sold by BPC to the public.

Except for the spouses Santiago, BPC recognizes that the intervenors, Nicolas-Agbulos and Abesamis, together with other legitimate homeowners in Parthenon Hills, acquired from BPC titles to their respective subdivided lots in good faith and

for value. Even the Republic could not refute that the individuals who acquired lots in Parthenon Hills from BPC were purchasers in good faith and for value. It insists, however, that these buyers could not acquire better titles to the property than its predecessors-in-interest – BPC, Servando, and Antonio – since the spring cannot rise higher than its source. The law must protect and prefer the lawful holder of registered title over the transferee of a vendor bereft of any transmissible rights.62

It is true that the general rule is that a forged deed is a nullity and conveys no title.63 A forged deed may be defined as an instrument which purports to have been executed by the person or persons whose signatures appear thereon, but which, in fact, was not executed, and the signatures thereon had been merely imitated so as to give them the deceptive appearance of genuineness.64 In the case at bar, it was not any of the deeds of transfer or conveyance of the subject lots which was forged, but TCTs No. 200629 and 200630 themselves. The forged TCTs, nevertheless, just as a forged deed, can make it appear that one had title, right, or interest to the land, when in truth, he had none, to the deprivation of the rightful owner. It has been recognized that while a forged instrument is null and void and of no effect as between the parties, it may nevertheless be the root of a good title; so that the title of a registered owner who has taken it bona fide and for value, is not affected by reason of his claiming through someone, that the registration was void because it had been procured by the presentation of a forged instrument.65

The forged TCTs No. 200629 and 200630 were later administratively reconstituted, and although an investigation would show that their reconstitution was also attended with irregularities, TCTs No. RT-23687 (200629) and RT-23688 (200630) appear, on either face, to have been duly approved by the LRA and issued by the Quezon City Register of Deeds.

With the cancellation of the reconstituted TCTs and the issuance of new ones, TCTs No. 30829, 30830, 30831, and 30832, in the name of BPC, any trace of forgery or irregularity as to BPC’s titles was eliminated. TCTs No. 30829, 30830, 30831, and 30832 were clean, at least, until the annotation therein of the notice of lis pendens of the Republic on 21 October 1992. It is a settled doctrine that one who deals with property registered under the Torrens system need not go beyond the same, but only has to rely on the certificates of title. He is charged with notice only of such burdens and claims as are annotated on the certificates.66 Herein intervenors, Nicolas-Agbulos and Abesamis, before purchasing subdivision lots in Parthenon Hills, looked into the TCTs of BPC and found nothing on the face thereof to raise doubts or suspicions as to their validity and authenticity. Besides, BPC was the holder of licenses and permits to subdivide, develop, and sell the subject lots as Parthenon Hills, issued by the appropriate government agencies, primarily HLURB.

This is definitely a situation which constitutes an exception to the general rule that estoppel cannot lie against the government. The Republic v. Court of Appeals,67 provides an illuminating discourse on when such an exception applies, thus –

Is the immunity of the government from laches and estoppel absolute? May it still recover the ownership of lots sold in good faith by a private developer to innocent purchasers for value, notwithstanding its approval of the subdivision plan and its issuance of separate individual certificates of title thereto?

x x x x

The general rule is that the State cannot be put in estoppel by the mistakes or errors of its officials or agents. However, like all general rules, this is also subject to exceptions, viz:

"Estoppels against the public are little favored. They should not be invoked except in rare and unusual circumstances, and may not be invoked where they would operate to defeat the effective operation of a policy adopted to protect the public. They must be applied with circumspection and should be applied only in those special cases where the interests of justice clearly require it. Nevertheless, the government must not be allowed to deal dishonorably or capriciously with its citizens, and must not play an ignoble part or do a shabby thing; and subject to limitations x x x the doctrine of equitable estoppel may be invoked against public authorities as well as against private individuals."

x x x x

Significantly, the other private respondents – Spouses Santos, Spouses Calaguian, Dela Fuente and Madaya – bought such "expanded" lots in good faith, relying on the clean certificates of St. Jude, which had no notice of any flaw in them either. It is only fair and reasonable to apply the equitable principle of estoppel by laches against the government to avoid an injustice to the innocent purchasers for value.

Likewise time-settled is the doctrine that where innocent third persons, relying on the correctness of the certificate of title, acquire rights over the property, courts cannot disregard such rights and order the cancellation of the certificate. Such cancellation would impair public confidence in the certificate of title, for everyone dealing with property registered under the Torrens system would have to inquire in every instance whether the title has been regularly issued or not. This would be contrary to the very purpose of the law, which is to stabilize

land titles. Verily, all persons dealing with registered land may safely rely on the correctness of the certificate of title issued therefor, and the law or the courts do not oblige, them to go behind the certificate in order to investigate again the true condition of the property. They are only charged with notice of the lions and encumbrances on the property that are noted on the certificate.

When private respondents-purchasers bought their lots from St. Jude, they did not have to go behind the titles thereto to verify their contents or search for hidden defects or inchoate rights that could defeat their rights to said lots. Although they were bound by liens and encumbrances annotated on the titles, private respondents purchasers could not have had notice of defects that only an inquiry beyond the face of the titles could have satisfied. The rationale for this presumption has been stated thus:

"The main purpose of the Torrens System is to avoid possible conflicts of title to real estate and to facilitate transactions, relative thereto by giving the public the right to rely upon the face of a Torrens Certificate of Title and to dispense with the need of inquiring further, except when the party concerned had actual knowledge of facts and circumstances that should impel a reasonably cautious man to make such further inquiry (Pascua v. Capuyoc, 77 SCRA 78). Thus, where innocent third persons relying on the correctness of the certificate thus issued, acquire rights over the property, the court cannot disregard such rights (Director of Land v. Abache, et al., 73 Phil. 606)."

In another case, this Court further said:

"The Torrens System was adopted in this country because it was believed to be the most effective measure to guarantee the integrity of land titles and to protect their indefeasibility

once the claim of ownership is established and recognized. If a person purchases a piece of land on the assurance that the seller's title thereto is valid, he should not run the risk of being told later that his acquisition was ineffectual after all. This would not only be unfair to him. What is worse is that if this were permitted, public confidence in the system would be eroded and land transactions would have to be attended by complicated and not necessarily conclusive investigations and proof of ownership. The further consequence would be that land conflicts could be even more abrasive, if not even violent. The Government, recognizing the worthy purposes of the Torrens System, should be the first to accept the validity of titles issued thereunder once the conditions laid down by the law are satisfied. [Italics supplied.]

Petitioner never presented proof that the private respondents who had bought their lots from St. Jude were buyers in bad faith. Consequently, their claim of good faith prevails. A purchaser good faith and for value is one who buys the property of another without notice that some other person has a right to or an interest in such property; and who pays a full and fair price for the same at the time of such purchase or before he or she has notice of the claims or interest of some other person. Good faith is the honest intention to abstain from taking any unconscientious advantage of another.

It also bears to emphasize that the subject lots covered by TCTs No. 30829, 30830, 30831, and 30832 were already subdivided, and new TCTs were issued in the names of the buyers of each subdivision lot. To order the cancellation of all these derivative titles and the return of the subdivision lots to the Republic shall irrefragably be unjust to the innocent purchasers for value and shall wreak havoc on the Torrens System.

Anyway, the Republic is not without recourse. It can claim damages from BPC, found herein not to be a buyer of the subject lots in good faith. For its loss of portions of the subdivision lots to innocent purchasers from BPC, the Republic may recover from BPC the purchase price it paid to FPHC corresponding to such subdivision lots, with interest at 6% per annum from 26 March 1992 (the date when the Republic instituted its petition for the cancellation of the TCTs of Servando, Antonio, and BPC) until finality of this Decision, and 12% per annum thereafter until fully paid.68

Although this Court allowed in the case at bar the intervention of Nicolas-Agbulos and Abesamis, and recognized their title to their respective subdivision lots in Parthenon Hills as purchasers in good faith and for value from BPC, it could not do the same for the spouses Santiago, for the reason that BPC contested their claim that they had acquired titles to the subdivision lots in Parthenon Hills in good faith and for value, and further asserted that the spouses Santiago acquired the said subdivision lots by fraudulent means. The allegations by the spouses Santiago of good faith, on one hand, and by BPC of fraud, on the other, in the acquisition by the spouses Santiago of the subdivision lots in question, are factual matters, best proven and established before the RTC, which could receive evidence in support of each party’s position during trial. Should the RTC find that the spouses Santiago have indeed acquired the subdivision lots in good faith and for value, then their titles thereto shall, likewise, be valid and indefeasible even against that of the Republic. However, in a contrary case, should the RTC find that the spouses Santiago acquired the subdivision lots by fraud, then titles thereto return to BPC.

Though estoppel by laches may lie against the Republic when titles to the subdivision lots are already in the names of the respective innocent purchasers for value from BPC, it may not

be used by BPC to defeat the titles of the Republic as regards the subdivision lots which remain unsold and the titles to which are still in the name of BPC. It must be recalled that BPC is not a purchaser in good faith. Estoppel, being an equitable principle, may only be invoked by one who comes to court with clean hands.69

Pertinent provisions of the New Civil Code concerning builders in bad faith provide that –

ART. 449. He who builds, plants, or sows in bad faith on the land of another, loses what is built, planted or sown without right to indemnity.

ART. 450. The owner of the land on which anything has been built, planted or sown in bad faith may demand the demolition of the work, or that the planting or sowing be removed, in order to replace things in their former condition at the expense of the person who built, planted or sowed; or he may compel the builder or planter to pay the price of the land, and the sower the proper rent.

ART. 451. In cases of the two preceding articles, the landowner is entitled to damages from the builder, planter or sower.

ART. 452. The builder, planter or sower in bad faith is entitled to reimbursement for the necessary expenses of preservation of the land.

Hence, as far as the subdivision lots still in the name of BPC are concerned, the Republic has the option to either (1) recover the said lots and demand that BPC demolish whatever improvements it has made therein, to return the lots to their former condition, at the expense of BPC; or (2) compel BPC to pay the price of the land. The choice can only be made by the

Republic, as the rightful owner of the said subject lots. Should the Republic choose the first option, BPC is under the obligation to return the possession of the subdivision lots to the Republic and surrender its corresponding TCTs for cancellation and issuance of new ones in the name of the Republic. Should the Republic select the second option, then BPC shall pay the Republic the purchase price that the latter had paid to FPHC corresponding to such subdivision lots, with interest at 6% per annum from 26 March 1992 until finality of this Decision, and 12% per annum thereafter until fully paid. In either option, the Republic may claim damages from BPC, while BPC cannot seek indemnity from the Republic for any improvements made on the subdivision lots, except if these constitute as necessary expenses for the preservation of the land, for which it shall still be entitled to reimbursement.

As for the Petition for New Trial filed by Servando’s heirs, this Court dismisses the same for lack of legal basis. Section 1, Rule 37 of the Rules of Court reads –

SECTION 1. Grounds of and period for filing motion for new trial or reconsideration. – Within the period for taking an appeal, the aggrieved party may move the trial court to set aside the judgment or final order and grant a new trial for one or more of the following causes materially affecting the substantial rights of the said party:

(a) Fraud, accident, mistake or excusable negligence which ordinary prudence could not have guarded against and by reason of which such aggrieved party has probably been impaired in his rights; or

(b) Newly discovered evidence, which he could not, with reasonable diligence, have discovered and produced at the trial, and which if presented would probably alter the result.

Servando’s heirs themselves admit that the period allowed for the filing of a motion to set aside the judgment and grant a new trial under the afore-quoted provision had already lapsed, but they still pray that this Court give due course to their Petition on the grounds of justice and equity.

In Malipol v. Lim Tan,70 this Court ruled that –

It is within the sound discretion of the court to set aside an order of default and to permit a defendant to file his answer and to be heard on the merits even after the reglementary period for the filing of the answer has expired, but it is not error, or an abuse of discretion, on the part of the court to refuse to set aside its order of default and to refuse to accept the answer where it finds no justifiable reason for the delay in the filing of the answer. In the motions for reconsideration of an order of default, the moving parry has the burden of showing such diligence as would justify his being excused from not filing the answer within the reglementary period as provided by the Rules of Court, otherwise these guidelines for an orderly and expeditious procedure would be rendered meaningless. Unless it is shown clearly that a party has justifiable reason for the delay, the court will not ordinarily exercise its discretion in his favor.

In the present case, the late Servando and Antonio were already declared in default by the RTC on 31 July 1992, after their supposed counsel failed to file an answer to the Republic’s petition for cancellation of title. Nothing was heard from Servando’s heirs even after the promulgation of the RTC Decision on 22 December 1992, and the Court of Appeals Decision, dated 8 August 1997, until they filed their Petition for New Trial, dated 23 May 2001, before this Court, or nine years from the date they were declared in default.

According to Servando’s heirs, due to the extrinsic fraud committed by the President and counsel of BPC, they were prevented from participating in the proceedings before the trial court. They allegedly relied on the assurance of the President and counsel of BPC that the latter shall also represent them and their interests in the subject lots in the case.

This allegation of fraud by Servando’s heirs has no leg to stand on. It should be recalled that the late Servando and Antonio were represented by a counsel at the beginning of the proceedings before the RTC. Their counsel even submitted two consecutive motions for extension of time to file the appropriate pleadings. There was no explanation provided as to why, despite the grant of said motions, the counsel still failed to file an answer to the Republic’s petition for cancellation of title. It is also contrary to common human experience that Servando’s heirs, by the mere assurance of the President and counsel of BPC, adopted a totally hands-off attitude in a case where they supposedly have substantial interest. There is no showing during the nine years when they were not participating in the court proceedings, that they, at least, inquired into or followed-up on the status of the case with BPC. Such blind trust in the President and counsel of BPC is surely difficult to comprehend, especially if this Court takes into account the contention of Servando’s heirs that BPC failed to deliver the shares of stock in exchange for the subject lots. What is apparent to this Court is not the alleged fraud committed by BPC but, rather, the inexcusable negligence of Servando’s heirs when it came to protecting their titles, rights, and interests to the subject lots, if indeed, there were still any.

Worth reproducing herein, is the conclusion71 made by the Court of Appeals on Servando’s titles –

On the strength of the LRA report, Exhibit H (Record, pp. 214-258), the court a quo found TCT Nos. 200629 and 200630, in

the name of Servando Accibal and from which the titles of defendant-appellee Barstowe Philippines Corporation were derived, spurious, and ordered the Register of Deeds of Quezon City "to officially and finally cancel (said titles) from his records…" (Par. 2, dispositive portion, Decision, p. 16; Rollo, p. 71). As explained by the court a quo:

"We shall now dwell on the validity of the titles, – TCT Nos. 200629 and 200630, issued in the name of Servando Accibal on July 24, 2974 by the Register of Deeds of Quezon City. The LRA Report dated 10 June 1992 (Exh. H, pp. 214-258, record) is competent proof that indeed said titles must be cancelled. In short, the LRA found after due investigation that the said titles of Servando Accibal were issued with certain irregularties (sic). It recommended the cancellation therefore, of TCT Nos. 200629 and 200630, to which the court concurs, as said report must be accorded due respect and in the absence of fraud or irregularties (sic) that attended the investigation, which the Court finds none, the same must be persuasive, if not conclusive. Moreover, herein defendant Servando Accibal because of his failure to answer, despite extension of time given him, plaintiff’s counsel, he was declared as in default since then, he never asked the court to lift and set aside the default order. There is no way, his title may be cancelled. For one thing, he was not able to present evidence to controvert the recommendation of the LRA to cancel his titles. For another, Servando Accibal is deemed to have impliedly admitted the irregularties (sic) that attended the issuance of his aforestated titles." (Decision, pp. 14-15; Rollo, pp. 69-70)

This portion of the decision ordering the cancellation of TCT Nos. 200629 and 200630 in the name of Servando Accibal was not appealed nor assigned as a counter-assigment of error in the brief of Barstowe Philippines Corporation; hence, is now final.

Thus, the findings of this Court as to the rights of the parties involved in the present case are summarized as follows –

(1) The certificates of title acquired by Servando over the subject lots were forged and spurious, and such finding made by both the RTC and Court of Appeals is already final and binding on Servando’s heirs;

(2) BPC did not acquire the subject lots in good faith and for value, and its certificates of title cannot defeat those of the Republic’s;

(3) As between BPC and the Republic, the latter has better titles to the subject lots being the purchaser thereof in good faith and for value from FPHC;

(4) However, considering that the subject lots had already been subdivided and the certificates of title had been issued for each subdivision lot, which were derived from the certificates of title of BPC, it is more practical, convenient, and in consonance with the stability of the Torrens System that the certificates of title of BPC and its derivative certificates be maintained, while those of the Republic’s be cancelled;

(5) Estoppel lies against the Republic for granting BPC governmental permits and licenses to subdivide, develop, and sell to the public the subject lots as Parthenon Hills. Relying on the face of the certificates of title of BPC and the licenses and permits issued to BPC by government agencies, innocent individuals, including intervenors Nicolas-Agbulos and Abesamis, purchased subdivision lots in good faith and for value;

(6) The claims of the intervenor spouses Santiago that they acquired portions of the subject lots in good faith

and for value still need to be proven during trial before the court a quo. Unlike the claims of intervenors Nicolas-Agbulos and Abesamis, which BPC admitted, the claims of the spouses Santiago were opposed by BPC on the ground of fraud;

(7) Certificates of title over portions of the subject lots, acquired by purchasers in good faith and for value, from BPC, are valid and indefeasible, even as against the certificates of title of the Republic. The Republic, however, is entitled to recover from BPC the purchase price the Republic paid to FPHC for the said portions, plus appropriate interests; and

(8) As portions of the subject lots are still unsold and their corresponding certificates of title remain in the name of BPC, the Republic may exercise two options: (a) It may recover the said portions and demand that BPC demolish whatever improvements it has made therein, so as to return the said portions to their former condition, at the expense of BPC. In such a case, certificates of title of BPC over the said portions shall be cancelled and new ones issued in the name of the Republic; or (b) It may surrender the said portions to BPC and just compel BPC to reimburse the Republic for the purchase price the Republic paid to FPHC for the said portions, plus appropriate interest.

WHEREFORE, premises considered, the instant Petition is hereby PARTLY GRANTED. The Decision, dated 8 August 1997, of the Court of Appeals in CA-G.R. CV No. 47522 is hereby REVERSED and SET ASIDE and a new one is hereby entered, as follows:

(1) In view of the finding that the Transfer Certificates of Title No. 200629 and 200630 in the name of

Servando Accibal are forged and spurious, the Quezon City Register of Deeds is ORDERED to officially and finally cancel the same from his records;

(2) In view of the finding that the respondent Republic of the Philippines was a purchaser in good faith of the subject lots from Philippine First Holdings Corporation, but also taking into consideration the functioning and stability of the Torrens System, as well as the superior rights of subsequent purchasers in good faith and for value of portions of the subject lots – subdivided, developed, and sold as Parthenon Hills – from petitioner Barstowe Philippines Corporation –

(a) The Quezon City Register of Deeds is ORDERED to cancel Transfer Certificates of Title No. 275443 and 288417 in the name of respondent Republic of the Philippines;

(b) The respondent Republic of the Philippines is ORDERED to respect and recognize the certificates of title to the subject portions of land in the name of purchasers of good faith and for value from petitioner Republic of the Philippines;

(c) Petitioner Barstowe Philippines Corporation is ORDERED to pay respondent Republic of the Philippines for the purchase price the latter paid to First Philippine Holdings Corporation corresponding to the portions of the subject lots which are already covered by certificates of title in the name of purchasers in good faith and for value from petitioner Barstowe Philippines Corporation, plus appropriate interest;

(d) The respondent Republic of the Philippines is ORDERED to choose one of the options available to it as regards the portions of the subject lots which remain unsold and covered by certificates of title in the name of petitioner Barstowe Philippines Corporation, either (i) To recover the said portions and demand that petitioner Barstowe Philippines Corporation demolish whatever improvements it has made therein, so as to return the said portions to their former condition, at the expense of the latter, or (ii) To surrender the said portions to petitioner Barstowe Philippines Corporation and compel the latter to reimburse the respondent Republic of the Philippines for the purchase price it had paid to First Philippine Holdings Corporation for the said portions, plus appropriate interest. Regardless of the option chosen by the respondent Republic of the Philippines, it is ORDERED to reimburse petitioner Barstowe Philippines Corporation for any necessary expenses incurred by the latter for the said portions;

(2) In view of the finding that petitioner Barstowe Philippines Corporation is not a purchaser and builder in good faith, and depending on the option chosen by respondent Republic of the Philippines concerning the portions of the subject lots which remain unsold and covered by certificates of title in the name of petitioner Barstowe Philippines Corporation, as enumerated in paragraph 2(d) hereof –

(a) In case the respondent Republic of the Philippines chooses the option under paragraph 2(d)(i) hereof, petitioner Barstowe Philippines Corporation is ORDERED to demolish whatever improvements it has

made on the said portions, so as to return the same to their former condition, at its own expense. The Quezon City Register of Deeds is also ORDERED to cancel the certificates of title of petitioner Barstowe Philippines Corporation over the said portions and to issue in lieu thereof certificates of title in the name of respondent Republic of the Philippines;

(b) In case the respondent Republic of the Philippines chooses the option under paragraph 2(d)(ii) hereof, petitioner Barstowe Philippines Corporation is ORDERED to reimburse the petitioner Republic of the Philippines for the purchase price it had paid to First Philippine Holdings Corporation for the said portions, plus appropriate interest;

(c) Petitioner Barstowe Philippines Corporaton is ORDERED to pay appropriate damages to respondent Republic of the Philippines as may be determined by the trial court;

(3) In view of the finding that intervenors Winnie U. Nicolas-Agbulos and Edgardo Q. Abesamis are purchasers in good faith and for value of portions of the subject lots – subdivided, developed, and sold as Parthenon Hills – from petitioner Barstowe Philippines Corporation, it is DECLARED that their certificates of title are valid and indefeasible as to all parties;

(4) In view of the finding that the Petition for New Trial filed by the heirs of Servando Accibal, namely, Virgilio V. Accibal, Virginia A. Macabudbud, and Antonio V. Accibal, lacks merit, the said Petition is DISMISSED; and

(5) The case is REMANDED to the court of origin for determination of the following –

(a) The validity of the claims, and identification of the purchasers, in good faith and for value, of portions of the subject lots from petitioner Barstowe Philippines Corporation, other than intervenors Winnie U. Nicolas-Agbulos and Edgardo Q. Abesamis, whose titles are to be declared valid and indefeasible;

(b) The identification of the portions of the subject lots in the possession and names of purchasers in good faith and for value and those which remain with petitioner Barstowe Philippines Corporation;

(c) The computation of the amount of the purchase price which respondent Republic of the Philippines may recover from petitioner Barstowe Philippines Corporation in consideration of the preceding paragraphs hereof;

(d) The types and computation of the damages recoverable by the parties; and

(e) The computation and award of the cross-claim of EL-VI Realty and Development Corporation against petitioner Barstowe Philippines Corporation.

SO ORDERED.

NEW DURAWOOD CO., INC., petitioner, vs. COURT OF APPEALS, HON. FELIX S. CABALLES, as Judge, RTC of Antipolo, Rizal, Branch 71, WILSON M. GAW, ORLANDO S. BONGAT, DURAWOOD CONSTRUCTION AND LUMBER SUPPLY CO., INC., respondents.

D E C I S I O N

PANGANIBAN, J.:

The main issue here is: does a court have jurisdiction to issue a new owner’s duplicate of a Torrens certificate of title if it is shown that the existing owner’s copy has not, in fact and in truth, been lost or destroyed? The Court resolved this issue in the negative in this petition for review under Rule 45 of the Rules of Court, of the Decision1 of the Court of Appeals2 promulgated on May 31, 1993 and the subsequent Resolution denying the motion for reconsideration. The said Rulings dismissed the petition in CA-G.R. SP No. 25434 and in effect affirmed the “order”3 of the Regional Trial Court, Branch LXXI, Antipolo, Rizal4 dated April 16, 1991 in LRC Case No. 9 1-924, the dispositive portion of which reads:

“WHEREFORE, premises considered, judgment is hereby rendered:

(a) Declaring the owner’ s duplicate copy of Transfer Certificates of Title Nos. 140486, 156454 and 140485 which were lost, null and void and of no further force and effect and in lieu thereof.

(b) Hereby orders and directs that new copy of the said titles be issued to the petitioner giving them the same faith and credit and carrying over the same terms and conditions appearing on the originals thereof, upon payment of the required fees.

“SO ORDERED.”

By Resolution of the First Division dated November 15, 1995, this case along with several others was transferred to the Third Division. After due consultation and deliberation, the Court assigned the undersigned ponente to write this Decision.

The Facts

On February 14, 1990, a “Petition for Judicial Reconstitution of the Lost Owner’s Duplicate Certificates of TCT Nos. 140486; 156454 and 140485”5. was filed in the Regional Trial Court, Branch LXXI, Antipolo, Rizal by petitioner-corporation, “represented by its Branch Manager, Wilson M. Gaw x x x.” Attached to said petition was an “Affidavit of Loss” dated December 31, 19906 of respondent Orlando S. Bongat, one of the stockholders of petitioner-corporation.

Finding the petition “to be sufficient in form and in substance,” respondent Judge set the case for hearing on March 18, 1991. On April 16, 1991, respondent Judge issued the questioned order.

Sometime in May, 1991, petitioner discovered that the original TCT Nos. N-140485, N-140486 and 156454 on file with the Register of Deeds of Rizal had been cancelled and, in lieu thereof, TCT Nos. 200100, 200101 and 200102 had been issued in the name of respondent Durawood Construction and Lumber Supply, Inc. Surprised by this cancellation, petitioner - after investigation - found out about the reconstitution proceeding in the respondent trial court. So, on July 17, 1991, petitioner filed suit7 in the Court of Appeals docketed as CA-G.R. 25434 praying for the annulment of the assailed order in LRC Case No. 91-924 penned by respondent Judge. It also prayed for the cancellation of the new certificates (TCT Nos. 200100, 200101 and 200102). On May 31, 1993, the respondent Court of Appeals rendered the assailed Decision and on August 30, 1993, the Resolution denying the motion for reconsideration. Hence, the present recourse to the Supreme Court.

The Issues

Petitioner brought up the following ground as basis for its petition:

“The Court of Appeals gravely abused its authority in not declaring the order of respondent Judge Caballes in LRC Case No. 91-924 null and void for want of jurisdiction and in not declaring that the reconstitution of the owner’s duplicate transfer certificates of title Nos. N-140486, N-140485 and 156454 was obtained through fraud.”

Petitioner argues that a reconstitution proceeding is one in rem and thus jurisdiction can be acquired only through publication and notice sent pursuant to Section 13, Republic Act No. 26. It also alleges that fraud is manifest (1) from the insufficient allegations of the petition filed before the trial court, as it (the petition) does not mention the names of adjoining land owners and interested persons, as well as (2) from the affidavit of loss attached to the petition.

In their Comment, private respondents aver that in 1990, these three lots were sold by petitioner to Durawood Construction and Lumber Supply, Inc. but the sale in their favor could not be registered because “the certificates of title x x x were lost.” They also allege that the applicable law is Section 109 of R.A. No. 496, as amended by P.D. 1529, and not Sec. 13 of R.A. No. 26, and that fraud, in order to serve as basis for the annulment of ajudgment “must be extrinsic or collateral in character,” which is not the case in the action before the court a quo. They also fault “(t)he deliberate failure of Dy Quim Pong (petitioner’s board chairman) and his family, who constitute the majority of the stockholders and directors of (herein petitioner-corporation), to disclose the whereabouts (of) there (sic) son, the President and General Manager Francis Dytiongsee x x x” who allegedly executed the deed of sale of the lots and who allegedly claimed that the owner’s copies of the TCTs were lost.

In its Reply, petitioner contends that “the very procedure provided under Sec. 109, P.D. 1529, which they (private respondents) insist is the applicable provision of law in the matter, was not strictly followed x x x.” It also argues that the owner’s duplicate copies of the TCTs were all along in the custody of Dy Quim Pong, whom private respondents should have sued to compel him to surrender the same in order that the alleged deed of sale in favor of private respondent could be registered.

Finally, petitioner claims that respondent Wilson Gaw had no authority to institute the petition for reconstitution in the trial court because “(t)he Court of Appeals itself, in its questioned resolution stated that said board resolution (authorizing Gaw) was passed without the required quorum.”

From the foregoing, the issues may be summed up as follows:

(1) Which law governs the issuance of new owner’s duplicate certificates of title in lieu of lost ones?

(2) Did the respondent trial court have jurisdiction to order the issuance of the new owner’s duplicate certificates?

(3) Was the reconstitution of the said owner’s duplicate certificates of title obtained through fraud?

The First Issue:Law Governing Issuance ofLost Owner’s Duplicate Titles

To resolve this issue, it is necessary to reexamine the following provisions referred to by the parties:

(1) Section 13, Republic Act No. 26:8

“Sec. 13. The court shall cause a notice of the petition, filed under the preceding section, to be published, at the expense of the petitioner, twice in successive issues of the Official Gazette, and to be posted on the main entrance of the provincial building and of the municipal building of the municipality or city in which the land is situated, at least thirty days prior to the date of hearing. The court shall likewise cause a copy of the notice to be sent, by registered mail or otherwise, at the expense of the petitioner, to every person named therein whose address is known, at least thirty days prior to the date of hearing. Said notice shall state, among other things, the number of the lost or destroyed certificate of title, if known, the name of the registered owner, the names of the occupants or persons in. possession of the property, the owners of the adjoining properties and all other interested parties, the location, area and boundaries of the property, and the date on which all persons having any interest therein must appear and file their claim or objections to the petition. The petitioner shall, at the hearing, submit proof of the publication, posting and service of the notice as directed by the court.”

(2) Section 109, P.D. 1529 (amending R.A. 496):

“Sec. 109. Notice and replacement of lost duplicate certificate. - In case of loss or theft of an owner’s duplicate certificate of title, due notice under oath shall be sent by the owner or by someone in his behalf to the Register of Deeds of the province or city where the land lies as soon as the loss or theft is discovered. If a duplicate certificate is lost or destroyed, or cannot be produced by a person applying for the entry of a new certificate to him or for the registration of any instrument, a sworn statement of the fact of such loss or destruction may be filed by the registered owner or other person in interest and registered.

“Upon the petition of the registered owner or other person in interest, the court may, after notice and due hearing, direct the issuance of a new duplicate certificate, which shall contain a memorandum of the fact that it is issued in place of the lost duplicate certificate, but shall

in all respects be entitled to like faith and credit as the original duplicate, and shall thereafter be regarded as such for all purposes of this decree.”

A reading of both provisions clearly shows that Section 109 of P.D. 1529 is the law applicable in petitions for issuance of new owner’s duplicate certificates of title which are lost or stolen or destroyed. On the other hand, R.A. 26 applies only in cases of reconstitution of lost or destroyed original certificates on file with the Register of Deeds. This is expressly provided for under Section 110 of P.D. 1529 as follows:

“Sec. 110. Reconstitution of lost or destroyed original of Torrens title. - Original copies of certificates of title lost or destroyed in the offices of Registers of Deeds as well as liens and encumbrances affecting the lands covered by such titles shall be reconstituted judicially in accordance with the procedure prescribed in Republic Act No. 26 insofar as not inconsistent with this Decree. The procedure relative to administrative reconstitution of lost or destroyed certificate prescribed in said Act may be availed of only in case of substantial loss or destruction of land titles due to fire, flood or other force majeure as determined by the Administrator of the Land Registration Authority: Provided, That the number of certificates of titles lost or damaged should be at least ten percent (10%) of the total number in the possession of the Office of the Register of Deeds: Provided, further, That in no case shall the number of certificates of titles lost or damaged be less than five hundred (500).

“Notice of all hearings of the petition for judicial reconstitution shall be furnished by the Register of Deeds of the place where the land is situated and to the Administrator of the Land Registration Authority. No order or judgment ordering the reconstitution of a certificate of title shall become final until the lapse of fifteen (15) days from receipt by the Register of Deeds and by the Administrator of the Land Registration Authority of a notice of such order or judgment

without any appeal having been filed by any such officials.” (As amended by R.A. 6732; italics supplied)

The Second Issue: Jurisdiction

In Demetriou vs. Court of Appeals, et al., 9 this Court ruled:

“In Serra Serra v. Court Appeals (195 SCRA 482 [1991]), on facts analogous to those involved in this case, this Court already held that if a certificate of title has not been lost but is in fact in the possession of another person, the reconstituted title is void and the court rendering the decision has not acquired jurisdiction. Consequently the decision may be attacked any time.”

In the instant case, the owner’s duplicate certificates of title were in the possession of Dy Quim Pong, the petitioner’s chairman of the board and whose family controls the petitioner-corporation. Since said certificates were not in fact “lost or destroyed,” there was no necessity for the petition filed in the trial court for the “Issuance of New Owner’s Duplicate Certificates of Title x x x.” In fact, the said court never acquired jurisdiction to order the issuance of new certificates. Hence, the newly issued duplicates are themselves null and void.

It is obvious that this lapse happened because private respondents and respondent judge failed to follow the procedure set forth in P.D. No. 1529 which, as already stated, governs the issuance of new owner’s duplicate certificates of title.

Section 109 of said law provides, inter alia, that “due notice under oath” of the loss or theft of the owner’s duplicate “shall be sent by the owner or by someone in his behalf to the Register of Deeds x x x” (italics supplied). In this case, while

an affidavit of loss was attached to the petition in the lower court, no such notice was sent to the Register of Deeds.

Private respondents tried to convince the Court that by their failure to locate Francis Dytiongsee, they had no other recourse but to file a petition for reconstitution. Sec. 107 of P.D. 1529, however, states that the remedy, in case of the refusal or failure of the holder - in this case, the petitioner - to surrender the owner’s duplicate certificate of title, is a “petition in court to compel surrender of the same to the Register of Deeds,” and not a petition for reconstitution.

The Third Issue: Fraud

The respondent Court of Appeals, in its own words, “confine(d) its discussion”10 in the assailed Decision only to the ground of fraud. It ruled that the RTC’s decision could be annulled only where extrinsic or collateral fraud is shown - that is, when the fraudulent acts prevented a party “from exhibiting fully his side of the case x x x.” Hence, petitioner could not claim extrinsic fraud inasmuch as it was duly represented by Gaw in the reconstitution proceeding.

The appellate court explained that while there may not have been a quorum during the board meeting of petitioner-corporation on May 10, 1984 when a resolution authorizing Gaw to sue on its behalf was allegedly passed, this did “not mean however, that New Durawood Co., Inc. cannot be bound by Gaw’s action” because “no howl of protest, complaint or denial came from (said corporation),” and that said corporation in fact had taken advantage of the benefits therefrom. Hence, petitioner is estopped from questioning Gaw’s acts. The appellate Court was of the belief that petitioner-corporation ratified Gaw’ s “authority” by acquiescence to his acts. The

respondent Court thus concluded that petitioner-corporation’s “claim of being a victim of extrinsic fraud is baseless.”

We are appalled by this rather novel interpretation of corporate law. It is clear that, there having been no quorum present during the meeting in question, the board of directors could not have validly given Gaw any express authority to file the petition. Upon the other hand, the doctrine of “apparent authority” cannot apply as to Gaw because, being a mere branch manager, he could not be looked upon as a corporate officer clothed with the implied or “apparent” power to file suit for and in behalf of a corporation.11 Neither will estoppel prevent the corporation from questioning Gaw’s acts. Precisely, these acts were hidden from the company and its top officers. How then can estoppel attach?12

Suffice it to say then, that by his surreptitious filing of the petition for reconstitution without authority - express or implied - of his employer, Gaw enabled respondent corporation to acquire the certificates of title in a manner contrary to law.

In petitions for issuance of new owner’s duplicate copies of Torrens titles, it is essential - as provided under Sec. 109 of P.D. 1529 as amended (supra) - that the trial court take steps to assure itself that the petitioner is the “registered owner or other person in interest.” Otherwise, new owner’s duplicate certificates might be issued in favor of impostors who could fraudulently dispose, hypothecate or otherwise deal in and with real estate in mockery of the Torrens system of titling properties.

Be that as it may, in the case before us, whether Gaw was authorized to file the suit or not is of little significance in finally resolving this case. Jurisdiction is and remains the main issue. Since we already concluded earlier that the trial court did not have jurisdiction, necessarily its judgment must fall.

WHEREFORE, the petition is GRANTED; the assailed decision SET ASIDE and REVERSED; the proceedings in

LRC Case No. 91-924 ANNULLED; and the order issued therein dated April 15, 1991 as well as the reconstituted Transfer Certificates of Title issued pursuant thereto, namely, TCT Nos. 200100, 200101 and 200102 in the name of private respondent declared NULL and VOID. Costs against private respondents.

SO ORDERED.

MANOTOK REALTY, INC., petitioner, vs.THE HON. COURT OF APPEALS and FELIPE CARILLO, respondents.

 

GUTIERREZ, JR., J.:

In this petition for review, the petitioner asks that we reverse the decision of the Court of Appeals, now the Intermediate Appellate Court, which declared respondent Felipe Carillo a builder in good faith with the right to remain in the questioned premises, free of rent, until reimbursed by the petitioner for the necessary and useful expenses introduced on the land.

The dispositive portion of the Court of Appeals' decision reads:

WHEREFORE, the appealed judgment is hereby modified in the sense that the appellant being a builder in good faith is entitled to the right of retention of the lot introduced thereon, and he is not hable to pay rentals for the occupation thereof pending payment of the indemnity for such improvements. In all other respects, the appealed judgment is affirmed, without pronouncement as to costs.

The background facts of the case are found in the decision of the respondent court as follows:

There is no dispute that herein appellee is the registered owner of a parcel of land covered by Tax Declaration Nos. 2455 and 2456 issued by the City Assessor's Office of Manila with a total assessed value of P3,059,180.00 and by TCT 55125 (Exh. A) and TCT No. 76130 of the Register of Deeds of the City of Manila. It acquired the aforementioned property from the Testate Estate of Clara Tambunting de Legarda, being the highest bidder in a sale conducted by the Probate Court (Exhs. C-7 & C-7-A).

After having acquired said property, the appellee subdivided it, but could not take possession thereof because the whole area is occupied by several houses among which is the one belonging to the herein appellant Felipe Carillo, Lot 143, Block 2 of the subdivision plan (Exh. A-4 Carillo).

Demands to vacate and to surrender possession of the property were made by the appellee verbally and by publication (Exhs. D, D-1 & D-2) and by circulars served to the appellant. In spite of such demands, the appellant continued to occupy the disputed lot and refused to surrender possession thereof to the appellee.

On the other hand, appellant's evidence tends to show that he acquired the lot in dispute from a certain Delfin Dayrit on September 25, 1962,

pursuant to a deed of assignment (Exh. 1-Carillo); that Dayrit in turn had acquired the property from the late Carla Tambunting by virtue of a Contract of Sale on Installment Basis (EXIL 2-Carillo); that Dayrit had religiously paid the monthly installments as they fell due, his last payment being on May 25, 1954, in the sum of P200.00, then leaving an unpaid balance of Pl,306.00 when the said parcel was conveyed to defendant Carino, for which receipts were duly issued (Exhs. 3-Carillo to 24-Carillo); that Dayrit could not continue paying the succeeding installments as they fen due because Vicente Legarda, the surviving spouse of Clara Tambunting, refused to receive any payment for the same and that it was only lately, more specifically on September 25, 1962, when Dayrit conveyed the lot to appellant Carillo.

After the petitioner failed in its attempts to take possession of the lot, it filed the reivindicatory action against the respondent.

The trial court decided the case in favor of the petitioner. The dispositive portion of its decision reads:

In Civil Case No. 64578:

(1) Ordering defendant Felipe Carino to vacate and/or surrender possession to plaintiff Manotok Realty Inc. of the parcel of land subject matter of the complaint described in paragraph 2 thereof;

(2) To pay plaintiff the sum of P75.50 per month from January 21, 1961 up to the time he

actually surrenders possession of the said parcel to the plaintiff; and

(3) To pay plaintiff the sum of Pl,000.00 as attorney's fees and to pay costs.

On August 15, 1984, we required the parties to show whether or not the disputed lot falls within the area expropriated under P.D. No. 1669 and P.D. No. 1670. It appears that the expropriated portion of the Tambunting Estate is the area located at the east side adjacent to the Chinese Cemetery. The lot is on the unexpropriated and mainly commercial portion on the west side, across from Rizal Avenue.

In this petition, the petitioner maintains that the appellate court erred in considering the respondent a possessor and builder in good faith. It argues that at the time of the execution of the deed of assignment in favor of the respondent, the land was already registered in its name; and that if the respondent were really acting in good faith, he should have verified from the Register of Deeds of Manila who was the registered owner of the land in question.

We agree.

A possessor in good faith is one who is not aware that there exists in his title or mode of acquisition any flaw which invalidates it. (Caram v. Laureta, 103 SCRA 7, Art. 526, Civil Code). One who acquires real estate with knowledge of a defect or lack of title in his vendor cannot claim that he has acquired title thereto in good faith as against the true owner of the land or of an interest therein; and the same rule must be applied to one who has knowledge of facts which should put a reasonable man upon his guard, and then claims that he acted in good faith under the belief that there was no defect in the

title of the vendor. (See Leung Yee v. FL Strong Machinery Co., 37 Phil. 644).

The records show that when Dayrit executed the deed of' assignment in favor of the respondent, the disputed lot was already registered and titled in the name of the petitioner. Such an act of registration served as a constructive notice to the whole world and the title issued in favor of petitioner made his ownership conclusive upon and against all persons including Dayrit and. herein respondent, although no personal notice was served on either of the latter. (See Garcia v. Bello, 13 SCRA 769; Demontano v. Court of Appeals, 81 SCRA 286). Therefore, the presumption of good faith in favor of the respondent cannot apply because as far as the law is concerned, he had notice of the ownership by the petitioner over said lot. It is also unthinkable that in the big Tambunting Estate beset with one of the most serious squatter problems in Metro Manila, any tenant or prospective buyer would be unaware that the petitioner acquired the estate as highest bidder at the sale ordered by the probate court. Furthermore, the respondent did not even bother to inquire about the certificate of title covering the lot in question to verify who was the real owner thereof, despite the fact that his transferor, Dayrit, never showed him any title thereto; a circumstance which should have put him upon such inquiry or investigation. His failure to exercise that measure of precaution which was reasonably required of a prudent man in order to acquaint him with the defects in the title of his vendor precludes him from claiming possession in good faith.

We agree with the following observations of Justice Guillermo S. Santos in his separate concurring and dissenting opinion:

The issue now is whether appellant may be considered as a possessor in good faith of the property in question. Article 256 of the Civil

Code defines a possessor in good faith as one who is not aware that there exists in his title or mode of acquisition any flaw which invalidates it.

In this case, it was shown that under the contract of sale on installment basis, Delfin Dayrit had only paid a total of P4,917.30, leaving an unpaid balance of P3,860.20 as of August 9, 1954 (Dec. RA p. 43). The said contract specifically provides that ". . . if for some reason or other the purchaser cannot pay a certain installment on the date agreed upon, it is hereby agreed that said purchaser will be given a maximum limit of two months' grace in which to pay his arrears, after which the property will revert to the original owner hereof: the Clara Tambunting Subdivision, No. 50 Reina Regente St., Binondo, Manila, P.I." The subsequent installment after August 9, 1954, not having been paid, the property, therefore, reverted to Clara Tambunting and therefore formed part of her estate, which was subsequently acquired by appellee. Thus, when appellant purchased the parcel of land in question from Dayrit on August 25, 1962—or eight (8) years after the default—the latter had no more right over the same.

It was incumbent on appellant to inquire into the title of his vendor over the property. Had appellant demanded from his vendor, Dayrit, the certificate of his ownership of the property subject of the negotiation, he would have learned that the latter had no right, much less, title over the same because of his default in the

payment of the monthly installments. A purchaser cannot close his eyes to facts which should put a reasonable man upon his guard and then claim that he acted in good faith under the behef that there was no defect in the title of the vendor (Leung Yee v. Strong Machinery Co., 37 Phil. 644). Consequently, appellant cannot be deemed a possessor in good faith and is not, therefore, entitled to reimbursement for the improvements he had introduced in the property in question.

No installments and rentals have been paid for the lot since 1954 or for more than thirty (30) years. While Dayrit transferred to Carillo whatever rights he may have had to the lot and its improvements on September 25, 1962, the claim for back rentals was from March 20, 1959 while the trial court ordered payment as of January 21, 1961 or twenty four (24) years ago. Considering the facts, applicable law, and equities of this case, the decision of the trial court appears to be correct and is, therefore, reinstated.

WHEREFORE, the questioned decision of the Court of Appeals is hereby SET ASIDE and another one is entered AFFIRMING in toto the decision of the Court of First Instance of Manila in Civil Case No. 64578.

SO ORDERED.

HEIRS OF EDUARDO MANLAPAT,       G.R. No.  125585

represented by GLORIA MANLAPAT-                               

BANAAG and LEON M. BANAAG, JR.,                                                                                         Petitioners,                    Present:

 

                                                            PUNO, J.,*

                                   Chairman,

                 -  versus  -                          AUSTRIA-MARTINEZ,

                                                                   Acting Chairman,

                                                            CALLEJO, SR.,

                                                            TINGA,  and

            CHICO-NAZARIO, JJ.

HON. COURT OF APPEALS,                 

RURAL BANK OF SAN PASCUAL,   

INC., and JOSE B. SALAZAR,             

CONSUELO CRUZ and                     Promulgated:

ROSALINA CRUZ-BAUTISTA,            

and the REGISTER OF DEEDS of 

Meycauayan, Bulacan,                       June 8, 2005

                        Respondents.

 

x-------------------------------------------------------------------x

 

D E C I S I O N 

TINGA, J.:

 

 

Before this Court is a Rule 45 petition assailing the Decision[1] dated 29 September 1994 of the Court of Appeals that reversed the Decision[2] dated 30 April 1991 of the Regional Trial Court (RTC) of Bulacan, Branch 6, Malolos. The trial court declared Transfer Certificates of Title (TCTs) No. T-9326-P(M) and No. T-9327-P(M) as void ab initio and ordered the restoration of Original Certificate of Title (OCT) No. P-153(M) in the name of Eduardo Manlapat (Eduardo), petitioners’ predecessor-in-interest.

 

The controversy involves Lot No. 2204, a parcel of land with an area of 1,058 square meters, located at Panghulo, Obando, Bulacan. The property had been originally in the possession of Jose Alvarez, Eduardo’s grandfather, until his demise in 1916. It remained unregistered until 8 October 1976 when OCT No. P-

153(M) was issued in the name of Eduardo pursuant to a free patent issued in Eduardo’s name[3] that was entered in the Registry of Deeds of Meycauayan, Bulacan.[4] The subject  lot   is   adjacent  to  a  fishpond  owned  by  one

 

Ricardo Cruz (Ricardo), predecessor-in-interest of respondents Consuelo Cruz and Rosalina Cruz-Bautista (Cruzes).[5]

 

On 19 December 1954, before the subject lot was titled, Eduardo sold a portion thereof with an area of 553 square meters to Ricardo. The sale is evidenced by a deed of sale entitled “Kasulatan ng Bilihang Tuluyan ng Lupang Walang Titulo (Kasulatan)”[6]which was signed by Eduardo himself as vendor and his wife Engracia Aniceto with a certain Santiago Enriquez signing as witness. The deed was notarized by Notary Public Manolo Cruz.[7] On 4 April 1963, the Kasulatan was registered with the Register of Deeds of Bulacan.[8]

 

On 18 March 1981, another Deed of Sale[9] conveying another portion of the subject lot consisting of 50 square meters as right of way was executed by Eduardo in favor of Ricardo in order to reach the portion covered by the first sale executed in 1954 and to have access to his fishpond from the

provincial road.[10] The deed was signed by Eduardo himself and his wife Engracia Aniceto, together with Eduardo Manlapat, Jr. and Patricio Manlapat. The same was also duly notarized on 18 July 1981 by Notary Public Arsenio Guevarra.[11]

 

In December 1981, Leon Banaag, Jr. (Banaag), as attorney-in-fact of his father-in-law Eduardo, executed a mortgage with the Rural Bank of San Pascual, Obando Branch (RBSP), for P100,000.00 with the subject lot as collateral. Banaag deposited the owner’s duplicate certificate of OCT No. P-153(M) with the bank.

 

On 31 August 1986, Ricardo died without learning of the prior issuance of OCT No. P-153(M) in the name of Eduardo.[12] His heirs, the Cruzes, were not immediately aware of the consummated sale between Eduardo and Ricardo.

 

Eduardo himself died on 4 April 1987. He was survived by his heirs, Engracia Aniceto, his spouse; and children, Patricio, Bonifacio, Eduardo, Corazon,

Anselmo, Teresita and Gloria, all surnamed Manlapat.[13] Neither did the heirs of Eduardo (petitioners) inform the Cruzes of the prior sale in favor of their predecessor-in-interest, Ricardo. Yet subsequently, the Cruzes came to learn about the sale and the issuance of the OCT in the name of Eduardo.

 

Upon learning of their right to the subject lot, the Cruzes immediately tried to confront petitioners on the mortgage and obtain the surrender of the OCT. The Cruzes, however, were thwarted in their bid to see the heirs. On the advice of the Bureau of Lands, NCR Office, they brought the matter to the barangay captain of Barangay Panghulo, Obando, Bulacan. During the hearing, petitioners were informed that the Cruzes had a legal right to the property covered by OCT and needed the OCT for the purpose of securing a separate title to cover the interest of Ricardo. Petitioners, however, were unwilling to surrender the OCT.[14]

 

Having failed to physically obtain the title from petitioners, in July 1989, the Cruzes instead went to RBSP which had custody of the owner’s duplicate

certificate of the OCT, earlier surrendered as a consequence of the mortgage. Transacting with RBSP’s manager, Jose Salazar (Salazar), the Cruzes sought to borrow the owner’s duplicate certificate for the purpose of photocopying the same and thereafter showing a copy thereof to the Register of Deeds. Salazar allowed the Cruzes to bring the owner’s duplicate certificate outside the bank premises when the latter showed the Kasulatan.[15]  The Cruzes returned the owner’s duplicate certificate on the same day after having copied the same. They then brought the copy of the OCT to Register of Deeds Jose Flores (Flores) of Meycauayan and showed the same to him to secure his legal opinion as to how the Cruzes could legally protect their interest in the property and register the same.[16] Flores suggested the preparation of a subdivision plan to be able to segregate the area purchased by Ricardo from Eduardo and have the same covered by a separate title.[17]

 

Thereafter, the Cruzes solicited the opinion of Ricardo Arandilla (Arandilla), Land Registration Officer, Director III, Legal Affairs Department, Land Registration Authority at Quezon City, who agreed with the advice given by Flores.[18] Relying on the

suggestions of Flores and Arandilla, the Cruzes hired two geodetic engineers to prepare the corresponding subdivision plan. The subdivision plan was presented to the Land Management Bureau, Region III, and there it was approved by a certain Mr. Pambid of said office on 21 July 1989.

 

After securing the approval of the subdivision plan, the Cruzes went back to RBSP and again asked for the owner’s duplicate certificate from Salazar. The Cruzes informed him that the presentation of the owner’s duplicate certificate was necessary, per advise of the Register of Deeds, for the cancellation of the OCT  and the issuance in lieu thereof of two separate titles in the names of Ricardo and Eduardo in accordance with the approved subdivision plan.[19] Before giving the owner’s duplicate certificate, Salazar required the Cruzes to see Atty. Renato Santiago (Atty. Santiago), legal counsel of RBSP, to secure from the latter a clearance to borrow the title. Atty. Santiago would give the clearance on the condition that only Cruzes put up a substitute collateral, which they did.[20] As a result, the Cruzes got hold again of the owner’s duplicate certificate.

 

After the Cruzes presented the owner’s duplicate certificate, along with the deeds of sale and the subdivision plan, the Register of Deeds cancelled the OCT and issued in lieu thereof TCT No. T-9326-P(M) covering 603 square meters of Lot No. 2204 in the name of Ricardo and TCT No. T-9327-P(M) covering the remaining 455 square meters in the name of Eduardo.[21]

 

On 9 August 1989, the Cruzes went back to the bank and surrendered to Salazar TCT No. 9327-P(M) in the name of Eduardo and retrieved the title they had earlier given as substitute collateral. After securing the new separate titles, the Cruzes furnished petitioners with a copy of TCT No. 9327-P(M) through the barangay captain and paid the real property tax for 1989.[22]

 

The Cruzes also sent a formal letter to Guillermo Reyes, Jr., Director, Supervision Sector, Department III of the Central Bank of the Philippines, inquiring whether  they committed any violation of existing

bank laws under the circumstances. A certain Zosimo Topacio, Jr. of the Supervision Sector sent a reply letter advising the Cruzes, since the matter is between them and the bank, to get in touch with the bank for the final settlement of the case.[23]

 

In October of 1989, Banaag went to RBSP, intending to tender full payment of the mortgage obligation. It was only then that he learned of the dealings of the Cruzes with the bank which eventually led to the subdivision of the subject lot and the issuance of two separate titles thereon. In exchange for the full payment of the loan, RBSP tried to persuade petitioners to accept TCT No. T-9327-P(M) in the name of Eduardo.[24]

 

As a result, three (3) cases were lodged, later consolidated, with the trial court, all involving the issuance of the TCTs, to wit: 

 

(1) Civil Case No. 650-M-89, for reconveyance with damages filed by the heirs of Eduardo Manlapat against Consuelo Cruz, Rosalina Cruz-Bautista,

Rural Bank of San Pascual, Jose Salazar and Jose Flores, in his capacity as Deputy Registrar, Meycauayan Branch of the Registry of Deeds of Bulacan;

 

(2) Civil Case No. 141-M-90 for damages filed by Jose Salazar against Consuelo Cruz, et. [sic] al.; and

 

(3) Civil Case No. 644-M-89, for declaration of nullity of title with damages filed by Rural Bank of San Pascual, Inc. against the spouses Ricardo Cruz and Consuelo Cruz, et al.[25]

 

After trial of the consolidated cases, the RTC of Malolos rendered a decision in favor of the heirs of Eduardo, the dispositive portion of which reads:

 WHEREFORE, premised from the

foregoing, judgment is hereby rendered:

 

1.–Declaring Transfer Certificates of Title Nos. T-9326-

P(M) and T-9327-P(M) as void ab initio and ordering the Register of Deeds, Meycauayan Branch to cancel said titles and to restore Original Certificate of Title No. P-153(M) in the name of plaintiffs’ predecessor-in-interest Eduardo Manlapat;

 

2.-Ordering the defendants Rural Bank of San Pascual, Jose Salazar, Consuelo Cruz and Rosalina Cruz-Bautista, to pay the plaintiffs Heirs of Eduardo Manlapat, jointly and severally, the following:

 

a)P200,000.00 as moral damages;

b)P50,000.00 as exemplary damages;

c)P20,000.00 as attorney’s fees; and

d)the costs of the suit.

 

3.–Dismissing the counterclaims.

 

SO ORDERED.”[26]

 

 

        The trial court found that petitioners were entitled to the reliefs of reconveyance and damages. On this matter, it ruled that petitioners were bona fide mortgagors of an unclouded title bearing no annotation of any lien and/or encumbrance. This fact, according to the trial court, was confirmed by the bank when it accepted the mortgage unconditionally on 25 November 1981. It found that petitioners were complacent and unperturbed, believing that the title to their property, while serving as security for a loan, was safely vaulted in the impermeable confines of RBSP. To their surprise and prejudice, said title was subdivided into two portions, leaving them a portion of 455 square meters from the original total area of 1,058 square meters, all because of the fraudulent and negligent acts of respondents and RBSP. The trial court ratiocinated that even assuming that a portion of the subject lot was sold by Eduardo to Ricardo, petitioners

were still not privy to the transaction between the bank and the Cruzes which eventually led to the subdivision of the OCT into TCTs No. T-9326-P(M) and No. T-9327-P(M), clearly to the damage and prejudice of petitioners.[27]

 

Concerning the claims for damages, the trial court found the same to be bereft of merit. It ruled that although the act of the Cruzes could be deemed fraudulent, still it would not constitute intrinsic fraud. Salazar, nonetheless, was clearly guilty of negligence in letting the Cruzes borrow the owner’s duplicate certificate of the OCT. Neither the bank nor its manager had business entrusting to strangers titles mortgaged to it by other persons for whatever reason. It was a clear violation of the mortgage and banking laws, the trial court concluded.

 

The trial court also ruled that although Salazar was personally responsible for allowing the title to be borrowed, the bank could not escape liability for it was guilty of contributory negligence. The evidence showed that RBSP’s legal counsel was sought for

advice regarding respondents’ request. This could only mean that RBSP through its lawyer if not through its manager had known in advance of the Cruzes’ intention and still it did nothing to prevent the eventuality. Salazar was not even summarily dismissed by the bank if he was indeed the sole person to blame. Hence, the bank’s claim for damages must necessarily fail.[28]

 

        The trial court granted the prayer for the annulment of the TCTs as a necessary consequence of its declaration that reconveyance was in order. As to Flores, his work being ministerial as Deputy Register of the Bulacan Registry of Deeds, the trial court absolved him of any liability with a stern warning that he should deal with his future transactions more carefully and in the strictest sense as a responsible government official.[29]

 

Aggrieved by the decision of the trial court, RBSP, Salazar and the Cruzes appealed to the Court of Appeals. The appellate court, however, reversed the decision of the RTC. The decretal text of the decision reads:

 THE FOREGOING CONSIDERED, the

appealed decision is hereby reversed and set aside, with costs against the appellees.

 

SO ORDERED.[30]

         

 

The appellate court ruled that petitioners were not bona fide mortgagors since as early as 1954 or before the 1981 mortgage, Eduardo already sold to Ricardo a portion of the subject lot with an area of 553 square meters. This fact, the Court of Appeals noted, is even supported by a document of sale signed by Eduardo Jr. and Engracia Aniceto, the surviving spouse of Eduardo, and registered with the Register of Deeds of Bulacan. The appellate court also found that on 18 March 1981, for the second time, Eduardo sold to Ricardo a separate area containing 50 square meters, as a road right-of-way.[31] Clearly, the OCT was issued only after the first sale. It also noted that the title was given to the Cruzes by RBSP voluntarily, with

knowledge even of the bank’s counsel.[32] Hence, the imposition of damages cannot be justified, the Cruzes themselves being the owners of the property. Certainly, Eduardo misled the bank into accepting the entire area as a collateral since the 603-square meter portion did not anymore belong to him. The appellate court, however, concluded that there was no conspiracy between the bank and Salazar.[33]

 

Hence, this petition for review on certiorari. 

Petitioners ascribe errors to the appellate court by asking the following questions, to wit: (a) can a mortgagor be compelled to receive from the mortgagee a smaller portion of the originally encumbered title partitioned during the subsistence of the mortgage, without the knowledge of, or authority derived from, the registered owner; (b) can the mortgagee question the veracity of the registered title of the mortgagor, as noted in the owner’s duplicate certificate, and thus, deliver the certificate to such third persons, invoking an adverse, prior, and unregistered claim against the registered title of the mortgagor; (c) can an adverse prior claim against a

registered title be noted, registered and entered without a competent court order; and (d) can belief of ownership justify the taking of property without due process of law?[34]

 

The kernel of the controversy boils down to the issue of whether the cancellation of the OCT in the name of the petitioners’ predecessor-in-interest and its splitting  into two separate titles, one for the petitioners and the other for the Cruzes, may be accorded legal recognition given the peculiar factual backdrop of the case. We rule in the affirmative.

 

 

 Private respondents (Cruzes) own

the portion titled in their names

 

Consonant with law and justice, the ultimate denouement of the property dispute lies in the determination of the respective bases of the warring

claims. Here, as in other legal disputes, what is written generally deserves credence.

 

A careful perusal of the evidence on record reveals that the Cruzes have sufficiently proven their claim of ownership over the portion of Lot No. 2204 with an area of 553 square meters. The duly notarized instrument of conveyance was executed in 1954 to which no less than Eduardo was a signatory. The execution of the deed of sale was rendered beyond doubt by Eduardo’s admission in his Sinumpaang Salaysay dated 24 April 1963.[35]  These documents make the affirmance of the right of the Cruzes ineluctable. The apparent irregularity, however, in the obtention of the owner’s duplicate certificate from the bank, later to be presented to the Register of Deeds to secure the issuance of two new TCTs in place of the OCT, is another matter.

 

Petitioners argue that the 1954 deed of sale was not annotated on the OCT which was issued in 1976 in favor of Eduardo; thus, the Cruzes’ claim of ownership based on the sale would not hold water. The Court is not persuaded.

 

Registration is not a requirement for validity of the contract as between the parties, for the effect of registration serves chiefly to bind third persons.[36] The  principal purpose of registration is merely to notify other persons not parties to a contract that a transaction involving the property had been entered into. Where the party has knowledge of a prior existing interest which is unregistered at the time he acquired a right to the same land, his knowledge of that prior unregistered interest has the effect of registration as to him.[37]

 

Further, the heirs of Eduardo cannot be considered third persons for purposes of applying the rule. The conveyance shall not be valid against any person unless registered, except (1) the grantor, (2) his heirs and devisees, and (3) third persons having actual notice or knowledge thereof.[38]  Not only are petitioners the heirs of Eduardo, some of them were actually parties to the Kasulatanexecuted in favor of Ricardo. Thus, the annotation of the adverse claim of the Cruzes on the OCT is no longer required to bind the heirs of Eduardo, petitioners herein.

 

Petitioners had no right to constitute

mortgage over disputed portion

 

The requirements of a valid mortgage are clearly laid down in Article 2085 of the New Civil Code, viz:

 

ART. 2085. The following requisites are essential to the contracts of pledge and mortgage:

 

(1)      That they be constituted to secure the fulfillment of a principal obligation;

(2)      That the pledgor or mortgagor be the absolute owner of the thing pledged or mortgaged;

(3)      That the persons constituting the pledge or mortgage have the free

disposal of their property, and in the absence thereof, that they be legally authorized for the purpose.

 

      Third persons who are not parties to the principal obligation may secure the latter by pledging or mortgaging their own property. (emphasis supplied)

 

 

        For a person to validly constitute a valid mortgage on real estate, he must be the absolute owner thereof as required by Article 2085 of the New Civil Code.[39] The mortgagor must be the owner, otherwise the mortgage is void.[40] In a contract of mortgage, the mortgagor remains to be the owner of the property although the property is subjected to a lien.[41] A mortgage is regarded as nothing more than a mere lien, encumbrance, or security for a debt, and passes no title or estate to the mortgagee and gives

him no right or claim to the possession of the property.[42] In this kind of contract, the property mortgaged is merely delivered to the mortgagee to secure the fulfillment of the principal obligation.[43] Such delivery does not empower the mortgagee to convey any portion thereof in favor of another person as the right to dispose is an attribute of ownership.[44] The right to dispose includes the right to donate, to sell, to pledge or mortgage. Thus, the mortgagee, not being the owner of the property, cannot dispose of the whole or part thereof nor cause the impairment of the security in any manner without violating the foregoing rule.[45] The mortgagee only owns the mortgage credit, not the property itself.[46]

 

Petitioners submit as an issue whether a mortgagor may be compelled to receive from the mortgagee a smaller portion of the lot covered by the originally encumbered title, which lot was  partitioned during the subsistence of the mortgage without the knowledge or authority of the mortgagor as registered owner. This formulation is disingenuous, baselessly assuming, as it does, as an admitted fact that the mortgagor is the owner of the mortgaged property in its entirety. Indeed, it has not become a salient issue

in this case since the mortgagor was not the owner of the entire mortgaged property in the first place.

 

        Issuance of OCT No. P-153(M), improper

 

It is a glaring fact that OCT No. P-153(M) covering the property mortgaged was in the name of Eduardo, without any annotation of any prior disposition or encumbrance.  However, the property was sufficiently shown to be not entirely owned by Eduardo as evidenced by the Kasulatan. Readily apparent upon perusal of the records is that the OCT was issued in 1976, long after theKasulatan was executed way back in 1954. Thus, a portion of the property registered in Eduardo’s name arising from the grant of free patent did not actually belong to him. The utilization of the Torrens system to perpetrate fraud cannot be accorded judicial sanction.

 

Time and again, this Court has ruled that the principle of indefeasibility of a Torrens title does not apply where fraud attended the issuance of the title, as was conclusively established in this case. The

Torrens title does not furnish a shied for fraud.[47]Registration does not vest title. It is not a mode of acquiring ownership but is merely evidence of such title over a particular property. It does not give the holder any better right than what he actually has, especially if the registration was done in bad faith. The effect is that it is as if no registration was made at all.[48] In fact, this Court has ruled that a decree of registration cut off or extinguished a right acquired by a person when such right refers to a lien or encumbrance on the landnot to the right of ownership thereofwhich was not annotated on the certificate of title issued thereon.[49]

 

Issuance of TCT Nos. T-9326-P(M)

and T-9327-P(M), Valid

 

 

The validity of the issuance of two TCTs, one for the portion sold to the predecessor-in-interest of the Cruzes and the other for the portion retained by petitioners, is readily apparent from Section 53 of the

Presidential Decree (P.D.) No. 1529 or the Property Registration Decree. It provides:

 

SEC 53. Presentation of owner’s duplicate upon entry of new certificate. – No voluntary instrument shall be registered by the Register of Deeds, unless the owner’s duplicate certificate is presented with such instrument, except in cases expressly provided for in this Decree or upon order of the court, for cause shown.

 

The production of the owner’s duplicate certificate, whenever any voluntary instrument is presented for registration, shall be conclusive authority from the registered owner to the Register of Deeds to enter a new certificate or to make a memorandum of registration in accordance with such instrument, and the new certificate or memorandum shall be binding upon the registered owner and upon all persons claiming under him, in favor of every purchaser for value and in good faith.

 

In all cases of registration procured by fraud, the owner may pursue all his legal and equitable remedies against the parties to such fraud without prejudice, however, to the rights of any innocent holder 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 instrument, shall be null and void. (emphasis supplied)

 

 

Petitioners argue that the issuance of the TCTs violated the third paragraph of Section 53 of P.D. No. 1529. The argument is baseless. It must be noted that the provision speaks of forged duplicate certificate of title and forged deed or instrument. Neither instance obtains in this case. What the Cruzes presented before the Register of Deeds was the very genuine owner’s duplicate certificate earlier deposited by Banaag, Eduardo’s attorney-in-fact, with RBSP. Likewise, the instruments of conveyance are authentic, not forged. Section 53 has never been clearer on the point that as long as the owner’s duplicate certificate is presented

to the Register of Deeds together with the instrument of conveyance, such presentation serves as conclusive authority to the Register of Deeds to issue a transfer certificate or make a memorandum of registration in accordance with the instrument. 

The records of the case show that despite the efforts made by the Cruzes in persuading the heirs of Eduardo to allow them to secure a separate TCT on the claimed  portion, their ownership being amply evidenced by the Kasulatan and Sinumpaang Salaysaywhere Eduardo himself acknowledged the sales in favor of Ricardo, the heirs adamantly rejected the notion of separate titling. This prompted the Cruzes to approach the bank manager of RBSP for the purpose of protecting their property right. They succeeded in persuading the latter to lend the owner’s duplicate certificate. Despite the apparent irregularity in allowing the Cruzes to get hold of the owner’s duplicate certificate, the bank officers consented to the Cruzes’ plan to register the deeds of sale and secure two new separate titles, without notifying the heirs of Eduardo about it.

 

Further, the law on the matter, specifically P.D. No. 1529, has no explicit requirement as to the manner of acquiring the owner’s duplicate for purposes of issuing a TCT.  This led the Register of Deeds of Meycauayan as well as the Central Bank officer, in rendering an opinion on the legal feasibility of the process resorted to by the Cruzes.  Section 53 of P.D. No. 1529 simply requires the production of the owner’s duplicate certificate, whenever any voluntary instrument is presented for registration, and the same shall be conclusive authority from the registered owner to the Register of Deeds to enter a new certificate or to make a memorandum of registration in accordance with such instrument, and the new certificate or memorandum shall be binding upon the registered owner and upon all persons claiming under him, in favor of every purchaser for value and in good faith.

Quite interesting, however, is the contention of the heirs of Eduardo that the surreptitious lending of the owner’s duplicate certificate constitutes fraud within the ambit of the third paragraph of Section 53 which could nullify the eventual issuance of the TCTs. Yet we cannot subscribe to their position.

 

Impelled by the inaction of the heirs of Eduardo as to their claim, the Cruzes went to the bank where the property was mortgaged. Through its manager and legal officer, they were assured of recovery of the claimed parcel of land since they are the successors-in-interest of the real owner thereof. Relying on the bank officers’ opinion as to the legality of the means sought to be employed by them and the suggestion of the Central Bank officer that the matter could be best settled between them and the bank, the Cruzes pursued the titling of the claimed portion in the name of Ricardo. The Register of Deeds eventually issued the disputed TCTs.

 

The Cruzes resorted to such means to protect their interest in the property that rightfully belongs to them only because of the bank officers’ acquiescence thereto. The Cruzes could not have secured a separate TCT in the name of Ricardo without the bank’s approval. Banks, their business being impressed with public interest, are expected to exercise more care and prudence than private individuals in their dealings, even those involving registered lands.[50] The highest degree of diligence is expected, and

high standards of integrity and performance are even required of it.[51]

 

Indeed, petitioners contend that the mortgagee cannot question the veracity of the registered title of the mortgagor as noted in the owner’s duplicate certificate, and, thus, he cannot deliver the certificate to such third persons invoking an adverse, prior, and unregistered claim against the registered title of the mortgagor. The strength of this argument is diluted by the peculiar factual milieu of the case.

 

A mortgagee can rely on what appears on the certificate of title presented by the mortgagor and an innocent mortgagee is not expected to conduct an exhaustive investigation on the history of the mortgagor’s title. This rule is strictly applied to banking institutions. A mortgagee-bank must exercise due diligence before entering into said contract. Judicial notice is taken of the standard practice for banks, before approving a loan, to send representatives to the premises of the land offered as collateral and to investigate who the real owners thereof are.[52]

 

Banks, indeed, should exercise more care and prudence in dealing even with registered lands, than private individuals, as their business is one affected with public interest. Banks  keep in trust money belonging to their depositors, which they should guard against loss by not committing any act of negligence that amounts to lack of good faith. Absent good faith, banks would be denied the protective mantle of the land registration statute, Act 496, which extends only to purchasers for value and good faith, as well as to mortgagees of the same character and description.[53] Thus, this Court clarified that the rule that persons dealing with registered lands can rely solely on the certificate of title does not apply to banks.[54]

 

Bank Liable for Nominal Damages

 

Of deep concern to this Court, however, is the fact that the bank lent the owner’s duplicate of the OCT to the Cruzes when the latter presented the instruments of conveyance as basis of their claim of ownership over a portion of land covered by the title.

Simple rationalization would dictate that a mortgagee-bank has no right to deliver to any stranger any property entrusted to it other than to those contractually and legally entitled to its possession. Although we cannot dismiss the bank’s acknowledgment of the Cruzes’ claim as legitimized by instruments of conveyance in their possession, we nonetheless cannot sanction how the bank was inveigled to do the bidding of virtual strangers.  Undoubtedly, the bank’s cooperative stance  facilitated the issuance of the TCTs.  To make matters worse, the bank did not even  notify the heirs of Eduardo. The conduct of the bank is as dangerous as it is unthinkably negligent.  However, the aspect does not impair the right of the Cruzes to be recognized as legitimate owners of their portion of the property. 

Undoubtedly, in the absence of the bank’s participation, the Register of Deeds could not have issued the disputed TCTs. We cannot find fault on the part of the Register of Deeds in issuing the TCTs as his authority to issue the same is clearly sanctioned by law. It is thus ministerial on the part of the Register of Deeds to issue TCT if the deed  of  conveyance and the original owner’s duplicate are presented to him as

there appears on      theface of  the  instruments  no  badge  of  irregularity  or

nullity.[55] If there is someone to blame for the shortcut resorted to by the Cruzes, it would be the bank itself whose manager and legal officer  helped the Cruzes to facilitate the issuance of the TCTs. 

The bank should not have allowed complete strangers to take possession of the owner’s duplicate certificate even if the purpose is merely for photocopying for a danger of losing the same is more than imminent. They  should  be  aware of the conclusive presumption in

Section 53. Such act constitutes manifest negligence on the part of the bank which would necessarily hold it liable for damages under Article 1170 and other relevant provisions of the Civil Code.[56]

 

In the absence of evidence, the damages that may be awarded may be in the form of nominal damages. Nominal damages are adjudicated in order that a right of the plaintiff, which has been violated or invaded by the defendant, may be vindicated or recognized, and not for the purpose of indemnifying the plaintiff for any loss suffered by him.[57] This award

rests on the mortgagor’s right to rely on the bank’s observance of the highest diligence in the conduct of its business. The act of RBSP of entrusting to respondents the owner’s duplicate certificate entrusted to it by the mortgagor without even notifying the mortgagor and absent any prior investigation on the veracity of respondents’ claim and

character is a patent failure to foresee the risk created by the act in view of the provisions of Section 53 of P.D. No. 1529. This act runs afoul of every bank’s mandate to observe the highest degree of diligence in dealing with its clients. Moreover, a mortgagor has also the right to be afforded due process before deprivation or diminution of his property is effected as the OCT was still in the name of Eduardo. Notice and hearing are indispensable elements of this right which the bank miserably ignored.

 

Under the circumstances, the Court believes the award of P50,000.00 as nominal damages is appropriate.

 

 

Five-Year Prohibition against alienation

or encumbrance under the Public Land Act

 

 

One vital point.  Apparently glossed over by the courts below and the parties is an aspect which is

essential, spread as it is all over the record and intertwined with the crux of the controversy, relating as it does to the validity of the dispositions of the subject property and the mortgage thereon. Eduardo was issued a title in 1976 on the basis of his free patent application.  Such application  implies the recognition of the public dominion character of the land and, hence, the five (5)-year prohibition imposed by the Public Land Act against alienation or encumbrance of the land covered by a free patent or homestead[58] should have been considered.

 

The deed of sale covering the fifty (50)-square meter right of way executed by Eduardo on 18 March 1981 is obviously covered by the proscription, the free patent having been issued on 8 October 1976. However, petitioners may recover the portion sold since the prohibition was imposed in favor of the free patent holder.  In Philippine National Bank v. De los Reyes,[59] this Court ruled squarely on the point, thus:

           While the law bars recovery in a case where the object of the contract is contrary to law and one or both parties

acted in bad faith, we cannot here apply the doctrine of in pari delicto which admits of an exception, namely, that when the contract is merely prohibited by law, not illegal per se, and the prohibition is designed for the protection of the party seeking to recover, he is entitled to the relief prayed for whenever public policy is enhanced thereby. Under the Public Land Act, the prohibition to alienate is predicated on the fundamental policy of the State to preserve and keep in the family of the homesteader that portion of public land which the State has gratuitously given to him, and recovery is allowed even where the land acquired under the Public Land Act was sold and not merely encumbered, within the prohibited period.[60]

 

 

The sale of the 553 square meter portion is a different story. It was executed in 1954, twenty-two (22) years before the issuance of the patent in 1976.  Apparently, Eduardo disposed of the portion even before he thought of applying for a free patent.  Where the sale or transfer took place before the filing of the free patent application, whether by the vendor or the

vendee, the prohibition should not be applied. In such situation, neither the prohibition nor the rationale therefor which is

to keep in the family of the patentee that portion of the public land which the government has gratuitously given him, by shielding him from the temptation to dispose of his landholding, could be relevant.  Precisely, he had disposed of his rights to the lot even before the government could give the title to him.

 

The mortgage executed in favor of RBSP is also beyond the pale of the prohibition, as it was forged in December 1981 a few months past the period of prohibition.

 

        WHEREFORE, the Decision of the Court of Appeals is AFFIRMED, subject to the modifications herein.  Respondent Rural Bank of San Pascual is hereby ORDERED to PAY petitioners Fifty Thousand Pesos (P50,000.00) by way of nominal damages.  Respondents Consuelo Cruz and Rosalina Cruz-Bautista are hereby DIVESTED of title to, and respondent Register of Deeds of Meycauayan, Bulacan

is accordingly ORDERED to segregate, the portion of fifty (50) square meters of the subject Lot No. 2204, as depicted in the approved plan covering the lot, marked as Exhibit “A”, and to issue a new title covering the said portion in the name of the petitioners at the expense of the petitioners. No costs.

 

SO ORDERED.DURAWOOD CONSTRUCTION AND LUMBER SUPPLY, INC., PETITIONER, VS. CANDICE S. BONA, RESPONDENT.

D E C I S I O N 

LEONARDO-DE CASTRO, J.:

This is a Petition for Review on Certiorari assailing the Decision[1] of the Court of Appeals in CA-G.R. SP No. 94479 dated April 18, 2007 and its Resolution[2] dated September 18, 2007.cralaw 

On June 3, 2004, petitioner Durawood Construction and Lumber Supply, Inc. (Durawood) filed an action for sum of money plus damages with a prayer for the issuance of a writ of preliminary attachment against LBB Construction and Development Corporation (LBB Construction) and its president Leticia Barber (Barber) before the Regional Trial Court (RTC) of Antipolo. In said suit, which was docketed as Civil Case No. 04-7240, Durawood prayed for the sum of P665,385.50 as

payment for construction materials delivered to LBB Construction.

On June 14, 2004, the RTC issued an Order granting Durawood's prayer for the issuance of a writ of attachment.  On June 16, 2004, the corresponding writ was issued.

On June 17, 2004, Sheriff Rolando C. Leyva (Sheriff Leyva) levied on a 344-square meter parcel of land in Richdale Subdivision, Antipolo City covered by Transfer Certificate of Title (TCT) No. R-17571 in the name of LBB Construction.  A Notice of Levy on Attachment was annotated in TCT No. R-17571's Memorandum of Encumbrances on the same day, June 17, 2004.

On July 13, 2004, respondent Candice S. Bona (Candice) filed a Motion seeking leave to intervene in Civil Case No. 04-7240.  Attached to said Motion was Candice's Answer in Intervention, her Third Party Claim addressed to Sheriff Leyva, and a copy of TCT No. R-17571.  Candice claimed therein that she is a co-owner of the property covered by TCT No. R-17571.  She alleged that LBB Construction had sold the property to her and her siblings, Michael Angelo S. Bona, Diane Sheila S. Bona, Glenda May S. Bona and Johann Louie Sebastian S. Bona, through a Deed of Absolute Sale dated June 2, 2004.  Candice asserted that the sale is the subject of Entry No. 30549 dated June 16, 2004 in the books of the Registry of Deeds of Antipolo City, while the levy on attachment is only Entry No. 30590dated June 17, 2004.  What was attached to the Motion was a copy of TCT No. R-17571, and not a title in Candice and her co-owners' names.

On August 11, 2004, the RTC issued an Order granting

Candice's Motion to Intervene.

LBB Construction and Barber filed their Answer in Civil Case No. 04-7240, but failed to attend the scheduled hearings, including the pre-trial.  Consequently, Durawood was allowed to present its evidence ex parte.

On July 21, 2005, the RTC rendered its Decision[3] in Civil Case No. 04-7240 in favor of Durawood. The dispositive portion of the Decision reads:

WHEREFORE, in view of the foregoing consideration, judgment is rendered in favor of the plaintiff and against the defendants, viz:

1. Ordering the defendants to pay plaintiff the sum of Six Hundred Sixty[-]Five Thousand Three Hundred Eighty[-]Five Pesos and Fifty Centavos (P665,385.50) plus two percent (2%) interest per month from May 11, 2004 up to the present;

2. Ordering the defendants to pay plaintiff twenty-five percent (25%) of the amount due to the plaintiff by way of attorney's fees; and

3. To pay the costs of suit.[4]

The Decision became final and executory. On September 12, 2005, Durawood filed a Motion for the Issuance of a Writ of Execution.  On November 15, 2005, the RTC issued a Writ of Execution.  It was when this Writ was about to be enforced that Durawood discovered the cancellation of TCT No. R-17571 and the issuance of TCT No. R-22522 in the name of

Candice and her siblings.

It would appear from the records that on June 16, 2004, the supposed Register of Deeds of Antipolo City, Atty. Randy A. Rutaquio (Atty. Rutaquio), cancelled TCT No. R-17571 and issued TCT No. R-22522 in the name of Candice and her co-owners.  The parties, however, do not dispute that said cancellation of the old TCT and issuance of the new one was antedated, since Atty. Rutaquio was still the Register of Deeds of Malabon on said date.[5] According to a certification of the Land Registration Authority,[6] it was a certain Atty. Edgar D. Santos (Atty. Santos) who was the Acting Register of Deeds of Antipolo City on June 16, 2004.

Durawood filed a Motion to Reinstate Notice of Levy on Attachment in TCT No. R-22522 and Cite Atty. Randy A. Rutaquio for Contempt[7] on the following grounds:

5.  The cancellation of TCT No. R-17571 and the issuance of TCT No. R-22522 was made by Atty. Randy A. Rutaquio who, on June 2004, was not the Register of Deeds of Antipolo City.  As evidence of such fact, plaintiff corporation was issued a certification by LRA Human Resource Management Officer IV Loreto I. Orense that Atty. Edgar D. Santos was the Acting Register of Deeds of Antipolo City from June 1-30, 2004.

6.  While the Deed of Sale annotated in TCT No. R-17571 appears to have been made on June 16, 2004, the fact of its inscription was made after that of the levy on attachment as it obviously appears below and next to it.

7.  The records of this case reveal that in the Third

Party Claim filed by Candice Bona sometime in July 2004, there was never any mention of any recording about a Deed of Absolute Sale in the Memorandum of Encumbrances in TCT No. R-17571.  It is difficult to comprehend that Atty. Hernando U. Salvador, Bona's lawyer, would miss mentioning that a Deed of Absolute Sale was inscribed ahead of the notice of levy on attachment if ever such sale was made on June 16, 2004.

8.  Thus, under the circumstances, plaintiff corporation cannot help speculate that [the] Deed of Sale between LBB Construction and the Bonas was made to appear to have been recorded a day before the attachment.

9.  While the Notice of Levy on Attachment was inscribed in TCT No. R-17571 ahead and before of the Deed of Sale between LBB Construction Co., Inc. and the Bonas, the said notice was not carried over in TCT No. R-22522 despite the fact that there was no order coming from this Honorable Court dissolving the Writ of Preliminary Attachment dated June 16, 2004.

10.  Randy Rutaquio's unauthorized acts of cancelling TCT No. R-17571 and issuing TCT No. R-22522 without inscribing the Notice of Levy on Attachment despite the absence of a court order dissolving the writ of Preliminary Attachment constitute improper conduct tending to directly or indirectly to impede, obstruct or degrade the administration of justice.[8]

Atty. Rutaquio filed a Manifestation alleging that the sale was entered in the Primary Entry Book prior to the Levy on Attachment.  The two transactions were assigned to different examiners and it just so happened that the examiner to whom the levy on

attachment was assigned was able to inscribe the memorandum ahead of the sale, although the inscription of the sale was entered ahead of the levy.  The levy on attachment was not inscribed on TCT No. R-22522 because allegedly the sale should have priority and preference.  The cancellation of TCT No. R-17571 and the issuance of TCT No. R-22522 was already completed when he took over the position of Atty. Santos as Acting Register of Deeds and was therefore already clothed with the authority to issue and sign TCT No. R-22522.

Atty. Rutaquio also submitted a letter dated June 25, 2004 from Atty. Santos to Land Registration Authority (LRA) Administrator Benedicto B. Ulep (Administrator Ulep) consulting the latter as regards the registration of the Deed of Absolute Sale and the Notice of Levy on Attachment.[9] In said letter received by the LRA on July 1, 2004, Atty. Santos stated that he had not acted on the Deed of Absolute Sale since the required registration fees were not paid therefor.[10]  Administrator Ulep was able to reply to said letter on October 6, 2004, when Atty. Rutaquio was already the Acting Register of Deeds.  Administrator Ulep stated that since the Deed of Sale was considered registered on June 16, 2004, the same shall take precedence over the Notice of Levy on Attachment registered on June 17, 2004.[11]

Acting on the Motion to Reinstate Notice of Levy on Attachment in TCT No. R-22522 and Cite Atty. Randy A. Rutaquio for Contempt, the RTC issued an Order[12] dated March 2, 2006, ruling in favor of Durawood.  The RTC gave great weight to the certification by LRA Human Resource Management Officer IV Loreto I. Orense that Atty. Santos was the

Acting Register of Deeds from June 1-30, 2004, and held that this proves the fact that Atty. Santos was the only person authorized to sign and approve all the transactions with the Registry of Deeds of Antipolo City at the time.  Moreover, according to the RTC, the alienation of LBB Construction in favor of the Bonas without leaving sufficient property to pay its obligation is considered by law in fraud of creditor under Articles 1381[13] and 1387[14] of the Civil Code.

The RTC did not rule on Durawood's prayer to cite Atty. Rutaquio for contempt.  The dispositive portion of the March 2, 2006 Order reads:

WHEREFORE, premises considered, the instant motion to reinstate notice of levy on attachment in TCT No. R-22522 now in the name of the intervenors is hereby GRANTED its non-inscription therein having been made without order of this Court.

The Register of Deeds of Antipolo City is directed to reinstate the notice of levy on attachment in TCT No. R-22522 in the names of intervenors immediately upon receipt of this Order.[15]

Candice filed a Motion for Reconsideration of the above Order.  In the meantime, on March 13, 2006, Sheriff Leyva issued a Notice of Sheriff's Sale setting the sale of the property covered by TCT No. R-22522 at public auction on April 11, 2006 at 10:00 a.m., pursuant to the November 15, 2005 Writ of Execution.  Candice filed an Urgent Ex-Parte Motion to Order the Branch Sheriff to Desist from the Sale of Intervenor's Property for Being Premature, which was granted by the RTC in an Order dated March 29, 2006.

On March 8, 2006, the new Acting Register of Deeds Jose S. Loriega, Jr. complied with the March 6, 2006 Order of the RTC by reinstating in TCT No. R-22522 the Notice of Levy on Attachment in favor of Durawood.

On April 7, 2006, the RTC issued an Order denying Candice's Motion for Reconsideration.  In said Order, the RTC highlighted its observation that in TCT No. R-17571, the inscription of the levy on attachment by Atty. Santos dated June 17, 2004 was in page A (the dorsal portion) of the title, while the supposedly earlier inscription of the Deed of Sale by Atty. Rutaquio dated June 16, 2004 was found in page B (a separate page) of the title.  The RTC found this fact, as well as the above-mentioned certification that Atty. Santos was the Acting Register of Deeds of Antipolo City from June 1 to 30, 2004, sufficient proof of the irregularity of the June 16, 2004 inscription of the Deed of Sale.

On April 11, 2006, Sheriff Leyva sold the subject property at public auction for P1,259,727.90 with Durawood being the lone bidder, and issued the corresponding Certificate of Sale. The sale was inscribed in TCT No. R-22522 on the same date.[16]

Candice filed with the Court of Appeals a Petition for Certiorari and Prohibition assailing the March 2, 2006 and April 7, 2006 Orders of the RTC.

On April 18, 2007, the Court of Appeals rendered the assailed Decision in favor of Candice.  According to the Court of Appeals, the sequence of presentation of the entries in the TCT cannot control the determination of the rights of the claimants over a disputed property.  It is the registration in the Primary Entry Book (also referred to in other cases as the day book) that

establishes the order of reception of instruments affecting registered land.  As explained by Atty. Rutaquio, the entry in the day book is only the preliminary step in the registration.  The inscription of the levy on attachment on TCT No. R-17571 (which was made before the inscription of the Deed of Sale on said title) retroacts to the date of entry in the Primary Entry Book, which is June 17, 2004.  However, the inscription of the Deed of Sale on TCT No. R-17571, although made after the inscription of the levy on attachment, retroacts to the earlier date of entry in the Primary Entry Book, which is June 16, 2004.

As regards the issuance by Atty. Rutaquio of TCT No. R-22522 on June 16, 2004 despite the fact that he was not yet the Register of Deeds of Antipolo City at that time, the Court of Appeals held that there was substantial compliance with the National Land Titles and Deeds Registration Administration (NALTDRA; now the Land Registration Authority [LRA]) Circular No. 94 on "Certificates of title and documents left unsigned by former Register of Deeds," which provides:

It has been brought to the attention of this Registration that, in some Registries, there are certificates of title with the full transcriptions and inscriptions, including the volume and page numbers, the title number, the date and the name of the former Register of Deeds, already typewritten thereon but which, for some reasons, cannot anymore be signed by the former official.  In such cases and to resolve this problem, the present Register of Deeds may, without changing or altering the transcriptions and inscriptions, affix his signature below the name of the former Register of Deeds but placing the actual date

and time of signing enclosed in parenthesis below his signature.[17]

The Court of Appeals accepted Atty. Rutaquio's manifestation that he signed TCT No. R-22522 subsequent to June 16, 2004, on a date when he was already the Acting Register of Deeds of Antipolo City.  Since the entry in the Primary Entry Book was made at the time of the incumbency of Atty. Santos, the name of the latter still appears on the document.  According to the Court of Appeals, Candice cannot be made to suffer for the failure of Atty. Rutaquio to affix the date when he signed the document.  Furthermore, a certificate of title, once registered, cannot be impugned, altered, changed, modified, enlarged or diminished except in a direct proceeding permitted by law. Finally, an action for rescission of contracts entered into in fraud of creditors cannot be instituted except when the party suffering damage has no other legal means to obtain reparation for the same.[18]

The dispositive portion of the Decision reads:

WHEREFORE, in view of the foregoing, the assailed Orders of public respondent judge ordering the reinstatement of the subject notice of levy on attachment in TCT No. R-22522 are hereby ANNULLED and SET ASIDE.  As a result thereof, the public auction sale carried out pursuant to said levy is also declared null and void.[19]

Durawood filed a Motion for Reconsideration, but the same was denied by the Court of Appeals in its Resolution dated September 18, 2007.

Durawood filed the instant Petition for Review, with the following Assignment of Errors:

I.

THE COURT OF APPEALS IGNORED THE FACT THAT NON-PAYMENT OF THE REQUIRED REGISTRATION FEES BY CANDICE S. BONA AND HER SIBLINGS DID NOT COMPLETE THE REGISTRATION OF THE DEED OF ABSOLUTE SALE ON JUNE 16, 2004.

II.

THE COURT OF APPEALS GRAVELY ERRED WHEN IT DISREGARDED THE FACT THAT NALTDRA CIRCULAR NO. 94 WAS NOT COMPLIED WITH BY ATTY. RANDY RUTAQUIO.

III.

THE COURT OF APPEALS GRAVELY ERRED WHEN IT FAILED TO CONSIDER THAT THE ENTRIES IN TCT NO. R-17571 (THE PREDECESSOR OF TCT NO. R-22522) ARE EVIDENCES OF THE FACTS STATED THEREIN.

IV.

THE COURT OF APPEALS OVERLOOKED THE FACT THAT THE REAL PROPERTY COVERED BY TCT NO. R-17571 AND SUBSEQUENTLY BY TCT NO. R-22522 HAS ALREADY BEEN ATTACHED BUT WAS UNILATERALLY RELEASED FROM THE COURT'S JURISDICTION BY A USURPER.[20]

All these allegations are specific matters to be resolved by this Court in determining the overriding

issue of the case at bar: whether the Court of Appeals correctly granted Candice's Petition for Certiorariand Prohibition on its finding that the RTC committed grave abuse of discretion in issuing its March 2, 2006 and April 7, 2006 Orders.  In other words, the main issue to be determined by this Court iswhether or not there was grave abuse of discretion in the RTC's order to reinstate the notice of levy on attachment in TCT No. R-22522.  "Grave abuse of discretion" signifies "such capricious and whimsical exercise of judgment that is equivalent to lack of jurisdiction.  The abuse of discretion must be grave as where the power is exercised in an arbitrary or despotic manner by reason of passion or personal hostility, and must be so patent and gross as to amount to an evasion of positive duty or to a virtual refusal to perform the duty enjoined by or to act all in contemplation of law."[21]

The Court of Appeals, in considering the date of entry in the day book of the Registry of Deeds as controlling over the presentation of the entries in TCT No. R-17571, relied on Section 56 of Presidential Decree No. 1529 which provides that:

SEC. 56. Primary Entry Book; fees; certified copies. - Each Register of Deeds shall keep a primary entry book in which, upon payment of the entry fee, he shall enter, in the order of their reception, all instruments including copies of writs and processes filed with him relating to registered land.  He shall, as a preliminary process in registration, note in such book the date, hour and minute of reception of all instruments, in the order in which they were received.  They shall be regarded as registered from the time so noted, and the memorandum of each instrument, when made on the certificate of title to which it refers,

shall bear the same date: Provided, that the national government as well as the provincial and city governments shall be exempt from the payment of such fees in advance in order to be entitled to entry and registration. (Emphasis supplied.)

The consequence of the highlighted portion of the above section is two-fold: (1) in determining the date in which an instrument is considered registered, the reckoning point is the time of the reception of such instrument as noted in the Primary Entry Book; and (2) when the memorandum of the instrument is later made on the certificate of title to which it refers, such memorandum shall bear the same date as that of the reception of the instrument as noted in the Primary Entry Book.  Pursuant to the second consequence stated above, the Court of Appeals held that Atty. Rutaquio correctly placed the date of entry in the Primary Entry Book as the date of the memorandum of the registration of the deed of sale in TCT No. R-17571.

As regards the first consequence, this Court has applied the same in several cases.  Thus, in the old cases of Levin v. Bass,[22] Potenciano v. Dineros,[23] and Development Bank of the Philippines v. Acting Register of Deeds of Nueva Ecija,[24] as well as in the fairly recent cases of Autocorp Group v. Court of Appeals,[25] Armed Forces and Police Mutual Benefit Association, Inc. v. Santiago,[26] andNational Housing Authority v. Basa, Jr.,[27] we upheld the entry of instruments in the Primary Entry Book to be equivalent to registration despite even the failure to annotate said instruments in the corresponding certificates of title.

Based on this alone, it appears that the RTC was in

error when it considered the registration of the Absolute Deed of Sale on June 16, 2004 inferior to the registration of the Notice of Levy on Attachment on June 17, 2004 on the ground that the Attachment was annotated on TCT No. R-17571 earlier than the Deed of Sale.  As discussed in the above-mentioned cases, the annotation in the certificate of title is not determinative of the effectivity of the registration of the subject instrument.

However, a close reading of the above-mentioned cases reveals that for the entry of instruments in the Primary Entry Book to be equivalent to registration, certain requirements have to be met.  Thus, we held in Levin that:

Do the entry in the day book of a deed of sale which was presented and filed together with the owner's duplicate certificate of title with the office of the Registrar of Deeds and full payment of registration fees constitute a complete act of registration which operates to convey and affect the land? In voluntary registration, such as a sale, mortgage, lease and the like, if the owner's duplicate certificate be not surrendered and presented or if no payment of registration fees be made within 15 days, entry in the day book of the deed of sale does not operate to convey and affect the land sold. x x x.[28]

Levin, which was decided in 1952, applied Section 56 of the Land Registration Act[29] which provides:

Sec. 56.  Each register of deeds shall keep an entry book in which, upon payment of the filing fee, he shall enter in the order of their reception all deeds and

other voluntary instruments, and all copies of writs or other process filed with him relating to registered land.  He shall note in such book the year, month, day, hour, and minute of reception of all instruments in the order in which they were received.  They shall be regarded as registered from the time so noted, and the memorandum of each instrument when made on the certificate of title to which it refers shall bear the same date;  Provided, however, That no registration, annotation, or memorandum on a certificate of title shall be made unless the fees prescribed therefor by this Act are paid within fifteen days' time after the date of the registration of the deed, instrument, order or document in the entry book or day book, and in case said fee is not paid within the time above mentioned, such entry shall be null and void: Provided further, That the Insular Government and the provincial and municipal governments need not pay such fees in advance in order to be entitled to entry or registration. (Emphasis supplied.)

This provision is the precursor of the aforequoted Section 56 of Presidential Decree No. 1529, which seems to have dispensed with the provision nullifying the registration if the required fees are not paid:

SEC. 56. Primary Entry Book; fees; certified copies. - Each Register of Deeds shall keep a primary entry book in which, upon payment of the entry fee, he shall enter, in the order of their reception, all instruments including copies of writs and processes filed with him relating to registered land.  He shall, as a preliminary process in registration, note in such book the date, hour and minute of reception of all instruments, in the order in which they were received. They shall be

regarded as registered from the time so noted, and the memorandum of each instrument, when made on the certificate of title to which it refers, shall bear the same date: Provided, that the national government as well as the provincial and city governments shall be exempt from the payment of such fees in advance in order to be entitled to entry and registration.

In Development Bank of the Philippines v. Acting Register of Deeds of Nueva Ecija,[30] this Court applied the provisions of Presidential Decree No. 1529 and modified the doctrine as follows:

Current doctrine thus seems to be that entry alone produces the effect of registration, whether the transaction entered is a voluntary or an involuntary one, so long as the registrant has complied with all that is required of him for purposes of entry and annotation, and nothing more remains to be done but a duty incumbent solely on the register of deeds.[31]

This pronouncement, which was reiterated in National Housing Authority v. Basa, Jr.,[32] shows that for the entry to be considered to have the effect of registration, there is still a need to comply with all that is required for entry and registration, including the payment of the prescribed fees.  Thus, in Autocorp Group v. Court of Appeals,[33] this Court compared the date when the required fees were paid with the therein assailed writ of preliminary injunction:

Petitioners contend that payment of the entry fee is a condition sine qua non before any valid entry can be made in the primary entry book. Allegedly, the Court of Appeals resorted to judicial legislation when it held

that the subsequent payment of the entry fee was curative and a substantial compliance with the law. Petitioners claim that the ruling inDBP vs. Acting Register of Deeds of Nueva Ecija does not apply to this case.  As there was no valid registration, petitioners conclude that the order of the trial court issuing a writ of preliminary injunction was proper, considering the irregularities present in the conduct of the extrajudicial foreclosure x x x.

We find the petition bereft of merit.

First. The objection as to the payment of the requisite fees is unavailing.  There is no question that the fees were paid, albeit belatedly. Respondent bank presented the certificate of sale to the Office of the Register of Deeds of Cebu City for registration onJanuary 21, 1999 at 4:30 p.m. As the cashier had already left, the Office could not receive the payment for entry and registration fees, but still, the certificate of sale was entered in the primary entry book.  The following day, respondent bank paid the requisite entry and registration fees.  Given the peculiar facts of the case, we agree with the Court of Appeals that the payment of respondent bank must be deemed to be substantial compliance with the law; and, the entry of the instrument the day before, should not be invalidated.  In any case, even if we consider the entry to have been made on January 22, the important fact is that the entry in the primary entry book was done prior to the issuance of the writ of injunction [on February 15, 1999; TRO issued on January 25, 1999] by the trial court.[34] (Emphases supplied.)

Records in the case at bar reveal that as of June 25, 2004, the date of the letter of Atty. Santos seeking the

opinion of the LRA as regards the registration of the Deed of Sale and the Notice of Levy on Attachment, the required registration fees for the Deed of Sale has not yet been paid:

25 June 2004 [received by the LRA: July  01, 2004]

HON. BENEDICTO B. ULEPAdministratorThis Authority

Sir:

This has reference to the TCT No. R-17571/T-87 registered under the name of LBB Construction and Development Corporation relative to the Deed of Absolute Sale with Entry No.  30549, which was sought to be registered on 16 June 2004 at 11:20 a.m. (a photocopy of which is hereto attached as Annex "A").

However, on 17 June 2004 at 11:45 a.m. a Notice of Levy on Attachment (a photocopy of which is hereto attached as Annex "B") with Entry No. 30590 was filed and annotated against TCT No. R-17571/T-87.

In view of the foregoing, we are now in a quandary as to what proper steps should be taken. It should be noted further that the required registration fees of the abovementioned sale was not paid the reason for which the same was not immediately acted upon by the undersigned.[35]

Since there was still no compliance of "all that is required x x x for purposes of entry and annotation"[36] of the Deed of Sale as of June 25,

2004, we are constrained to rule that the registration of the Notice of Levy on Attachment on June 17, 2004 should take precedence over the former.  Considering that the Notice of Levy on Attachment was deemed registered earlier than the Deed of Sale, the TCT issued pursuant to the latter should contain the annotation of the Attachment.

In view of the foregoing, we find that the RTC was, in fact, acting properly when it ordered the reinstatement of the Notice of Levy on Attachment in TCT No. R-22522.  Since the RTC cannot be considered as to have acted in grave abuse of its discretion in issuing such Order, the Petition forCertiorari assailing the same should have been dismissed.cralaw 

WHEREFORE, premises considered, the instant Petition for Review on Certiorari is hereby GRANTED.  The Decision of the Court of Appeals in CA-G.R. SP No. 94479 dated April 18, 2007 and its Resolution dated September 18, 2007 are REVERSED and SET ASIDE.

SO ORDERED.