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.,
NACHU
RA,
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 Estebanthe fourth
being Aristedess grandfather. Upon Linos death, his four sons
inherited the property and divided it among themselves. But by 1966,
Estebans 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 Courts 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 OSGs 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 petitioners
position. Absent a legislative amendment, the rule
would be, adopting the OSGs 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 Courts 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 Courts 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 Codeordinary
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 requisitesgood 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 persons 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 evidencethe Tax
Declarations they presented in particularis 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 todays 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.

Ones sense of security over land rights infuses into every
aspect of well-being not only of that individual, but also to the
persons 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
petitioners 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
respondents 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 respondents 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 RTCs August
27, 2004 Decision. In its July 31, 2008 Decision,
[6]
the CA found no
merit in the petitioners 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
applicants 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 ESRDCs 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-appellants
contentions that the court a quo erred in
considering the tax declarations as evidence of
ESRDCs possession of the subject land as the
latters 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 ones 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 ones 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 respondents
sole witness, Vicente Oco, can hardly be considered a credible and
competent witness as he is the respondents liaison officer and he is
not related in any way to the respondents 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 Courts 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
respondents 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
respondents name for the years 1991, 1992 and
1994.

Pursuant to Agapita Claudels 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 its 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 Ocos 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 Tans Tax
Declarations, there were fifty-seven (57) coconut trees in Area B in
1973, 1974, 1980, 1989 and 1990.
[18]


A reading of the CAs July 31, 2008 Decision shows that it
affirmed the grant of the respondents 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 respondents 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
Claudels 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 respondents lone witness that the
respondents 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.
Raon,
[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
declarants 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 respondents claim of ownership will not prosper on the
basis of the tax declarations alone. In Cequea 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 respondents 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 petitioners right to
the registration of title in her favor.
[34]



Fourth, Vicente Ocos 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 respondents 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
respondents 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 respondents application was filed after
only four years from the time the subject property may be
considered patrimonial by reason of the DARs 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 respondents 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, and
PERALTA, 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 Ricaredos 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 formers 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
attorneys 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 Ricaredos 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 RTCs 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.
Pulumbarits 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 I ssues

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 Decision
1
of the
Court of Appeals (CA) in CA-G.R. CV No. 73287, which
affirmed in toto the October 12, 2001 Decision
2
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 Order
7
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
Report
8
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 Application
10
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 x
11

On March 27, 2000, the MTC issued an Order
12
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, 2001
15
and until finally, to June
15, 2001.
16

On July 20, 2001, the Republic of the Philippines, the LLDA
filed its Opposition
17
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
Memorandum
18
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 Peoples 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 fathers 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 peaceful
35
and none of the
former owners claims any right against it;
36
neither 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
habitable
40
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 Appeals
50
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.
52
It
noted that the testimonies of the applicants 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 Appellees Brief
54
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 section
55
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 applicants 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 assessors 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 COURTS 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 Engineers Survey Report
58
and the
Laguna de Bay Shoreland Survey
59
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 Engineers
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. Petitioners 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 Manifestation
62
with this
Court, appending thereto the report
63
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 respondents 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.
73
Actual
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 fathers 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 ones
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 ones 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
Sobrepea, co-owner of the subject property, who testified on the
possession of the applicant-appellees 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 Surveyors 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. Sheriffs 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 courts decision to the Court of Appeals. On
20 December 2000, the Court of Appeals dismissed
petitioners appeal.
Hence, this petition.
The Regional Trial Courts 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 courts ruling and
dismissed petitioners 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 Sobrepea was
not the sole basis for the trial courts finding that Manna
Propertiess 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 Failed
to Comply with the J urisdictional
Requirements 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 Sufficiently
Established Possession of the Land
For 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 Sobrepea
(Manuel),
[16]
transferees 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 transferees affidavit,
which was dated 1955. Manna Properties reliance on
Manuels 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,




- versus -




HAPPY GLEN LOOP HOMEOWNERS
ASSOCIATION, INC.,
Respondent.

G. R. No. 189755

Present:

CARPIO, J., Chairperson,
BRION,
PEREZ,
SERENO, and
REYES, JJ.

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),
petitioners 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 petitioners 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
complainants 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 complainants 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
attorneys fees and the amount of 20,000.00 as
damages in favor of the complainants 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 Marcelos 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
Subdivisions 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 attorneys fees and damages in favor of
respondent.
[21]

Aggrieved, petitioner filed the instant Petition before this
Court.
The Courts Ruling
We affirm the ruling of the appellate court.
I
The HLURB has exclusive jurisdiction
over 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 Marcelos 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
Liwagand 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 developers alleged sale of the lot where the
communitys 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. 957s
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]

II
An 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 petitioners 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.
III
Lot 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.


IV
The 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
petitioners late husband was contrary to law. Hence, we find no
reversible error in the appellate courts Decision upholding the
HLURB Arbiters 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 petitioners husband. As there
is no attack direct or collateral against the title, petitioners
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 transferees 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 Certiorari
1
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 owners 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 Order
8
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, Servandos sister; the subject lots were
inherited by Basilia, Servando, and their other siblings from
their parents Martin and Mauricia Accibal; upon her mothers
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 Glorias portion therein; the inclusion of
Glorias 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 Glorias 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
Glorias 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
Glorias Complaint in Intervention is tantamount to a collateral
attack against a TCT. In rejecting Glorias 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 attorneys 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 attorneys fees. In an Order,
13
dated 27 October
1992, the RTC granted ERDCs 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 [Republics] 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, intervenors 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 attorneys 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
attorneys 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 Contempt
20
against 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 Intervene
25
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 Doa 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 Doa 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 attorneys fees. The RTC, in an Order
27
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 Estates] 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 courts 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 Appeal
28
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 injunction
30
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 courts 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 Republics Petition for Certiorari and Mandamus,
ruling in this wise
We rule for [Republic]. Respondent Courts 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
[Republics] stipulation of facts, marking of exhibits, alleged
admission of Exhibit 6 which contains [BPCs] 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 [Republics]
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
owners 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 Certiorari
35
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, Servandos 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 Servandos 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. Servandos
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
nave 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
Servandos heirs, the BPC counsel neither represented them
nor included them in the Answer he filed on behalf of BPC,
thus, Servandos heirs were declared in default by the RTC.
Because of the extrinsic fraud perpetrated upon them and their
excusable negligence, Servandos heirs should be granted a
new trial, otherwise, they would be deprived of their
constitutional right to due process of law. According to
Servandos 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
Republics predecessor-in-interest, were of doubtful origin; and
the Republics 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 Courts 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 Servandos heirs?
BPC, the intervenors Abesamis, Nicolas-Agbulos, spouses
Santiago, and Servandos heirs derived their title to the subject
lots from Servandos 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 Servandos 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 Servandos 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. Pea (Atty. Pea) was
forged. No less than Atty. Pea 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 PEA. If ever there is no 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. Pea 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. Pea
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. Pea 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. Pea 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. Peas 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
Servandos 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
Servandos 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 Courts 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 Servandos 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 Servandos 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.
Servandos 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 owners
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 owners duplicate copies.
In addition, without the original copies and owners 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 Servandos 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 BPCs 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 partys 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 Servandos 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.
Servandos 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
Republics petition for cancellation of title. Nothing was heard
from Servandos 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 Servandos 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 Servandos 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 Republics petition for
cancellation of title. It is also contrary to common human
experience that Servandos 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 Servandos 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
Servandos 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 conclusion
71
made by the
Court of Appeals on Servandos 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, plaintiffs 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 Servandos 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 Republics;
(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 Republics 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 owners duplicate of a Torrens certificate of title if
it is shown that the existing owners 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 Decision
1
of the Court of
Appeals
2
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, Rizal
4
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 Owners 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, 1990
6
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 suit
7
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 owners 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 (petitioners 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 owners
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
owners 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 owners duplicate
certificates of title in lieu of lost ones?
(2) Did the respondent trial court have jurisdiction to order the
issuance of the new owners duplicate certificates?
(3) Was the reconstitution of the said owners duplicate certificates
of title obtained through fraud?
The First Issue:
Law Governing Issuance of
Lost Owners 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 owners 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 owners 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: J urisdiction
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 owners duplicate certificates of
title were in the possession of Dy Quim Pong, the petitioners
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 Owners 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 owners duplicate certificates of
title.
Section 109 of said law provides, inter alia, that due
notice under oath of the loss or theft of the owners 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 owners 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 RTCs 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 Gaws 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 Gaws 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-corporations
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 Gaws 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 owners 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 owners 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, 1962or
eight (8) years after the defaultthe 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, Eduardos
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 Eduardos 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 owners 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 owners duplicate
certificate of the OCT, earlier surrendered as a
consequence of the mortgage. Transacting with RBSPs
manager, Jose Salazar (Salazar), the Cruzes sought to
borrow the owners 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 owners duplicate certificate outside
the bank premises when the latter showed
the Kasulatan.
[15]
The Cruzes returned the owners
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 owners duplicate certificate from Salazar. The
Cruzes informed him that the presentation of the
owners 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
owners 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 owners duplicate
certificate.

After the Cruzes presented the owners 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 attorneys
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 owners 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 RBSPs 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 banks
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 banks 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 owners 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 Eduardos 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 owners 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
Eduardos 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 owners
duplicate upon entry of new certificate. No
voluntary instrument shall be registered by
the Register of Deeds, unless the owners
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 owners
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 owners
duplicate certificate earlier deposited by Banaag,
Eduardos 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 owners 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 owners duplicate certificate. Despite
the apparent irregularity in allowing the Cruzes to get
hold of the owners 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 owners 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 owners
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 owners 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 banks 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 owners 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
mortgagors 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 owners 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 banks 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 banks 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 banks
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
owners 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 owners 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 mortgagors
right to rely on the banks observance of the highest
diligence in the conduct of its business. The act of RBSP
of entrusting to respondents the owners 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 banks 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. ULEP
Administrator
This 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.