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G.R. No.

L-14722

May 25, 1960

IGNACIO MESINA, plaintiff-appellant,


vs.
EULALIA PINEDA VDA. DE SONZA, ET AL., defendants.
EULALIA PINEDA VDA. DE SONZA, defendant-appellee.
Agustin C. Bagasao for appellant.
Luis Manalang and Associates for appellee.
BAUTISTA ANGELO, J.:
Plaintiff brought this action before the Court of First Instance of Nueva Ecija
praying that Original Certificate of Title No. P-1137 of the Register of Deeds of
Nueva Ecija be ordered cancelled and that the registration case pending before
the same court covering the property described therein be given due course and
that defendants be ordered to pay plaintiff P1,000.00 as attorney's fees and
costs.
Defendants filed a motion to dismiss on the ground that plaintiff's action is
already barred by the statute of limitations. The reasons advanced are: the
complaint was filed on March 25, 1958. The decree of registration or issuance of
patent over the property was issued "sometime on September 12, 1953 or
thereabout", while the transfer certificate of title covering the same was issued
on September 16, 1953. The present action which calls for the cancellation of
said decree and title has, therefore, been filed after the elapse of more than four
years, which cannot be done, because the title has already become indefeasible
and incontrovertible. The court sustained this motion and dismissed the
complaint. Hence the present appeal.
Plaintiff claims that he is the owner in fee simple of Lot No. 3259, with
improvements thereon, situated in San Antonio, Nueva Ecija; that he has been
in actual possession thereof since 1914, publicly, openly, peacefully and against
the whole world and up to the present time he is the only one who benefits from
the produce thereof; that said lot is at present the subject of registration
proceedings pending in the same court known as Registration Case No. N-372,
L.R.C. Cad. Record No. N-12238; that sometime in September 12, 1953, the
Director of Lands, without exercising due care, and in spite of his knowledge
that defendants had not complied with the knowledge that defendants had not
complied with the requirements of Commonwealth Act No. 141, issued a
homestead patent in their favor as a consequence of which a certificate of title

was issued in their name by the register of deeds; that said title was procured
by defendants through frauds, deception and misrepresentation since they knew
that the lot belonged to the plaintiff; and that the Director of Lands has no
authority nor jurisdiction to issue a patent covering said land because it is a
private property of plaintiff. For these reasons, plaintiff prays that said decree
and title be cancelled.
Republic Act No. 1942, which took effect on June 22, 1957 (amending Section
48-b of Commonwealth Act 141), 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 a bona
fide claim of acquisition of ownership, for at least thirty years immediately
preceeding 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.
In the case of Susi vs. Razon, et al., 48 Phil., 424, it was observed that where all
the necessary requirements for a grant by the Government are complied with
through actual physical possession openly, continuously, and publicly, with a
right to a certificate of title to said land under the provisions of Chapter VIII of
Act No. 2874, amending Act No. 926 (carried over as Chapter VIII of
Commonwealth Act No. 141), the possessor is deemed to have already acquired
by operation of law not only a right to a grant, but a grant of the Government,
for it is not necessary that a certificate of title be issued in order that said grant
may be sanctioned by the court an application therefor being sufficient under
the provisions of Section 47 of Act No. 2874 (reproduced as Section 50,
Commonwealth Act No. 141). Thus, the following is what this Court said on the
matter:
It clearly appears from the evidence that Valentin Susi has been in
possession of the land in question openly, continuously, adversely and
publicly, personally and through his predecessors, since the year 1880,
that is, for about forty-five years. ... When on August 15, 1914, Angela
Razon applied for the purchase of said land, Valentin Susi had already been
in possession thereof personally and through his predecessors for thirtyforty years. And if it is taken into account that Nemesio Pinlac had already
made said land a fish pond when he sold it on December 13, 1880, it can
hardly be estimated when he began to possess and occupy it, the period of

time being so long that it is beyond the reach of memory. ... In favor of
Valentin Susi, there is, moreover the presumption juris et de
jure established paragraph (b) of section 45 of Act No. 2874, amending Act
No. 926, that all the necessary requirements for a grant by the
Government were complied with, for he has been in actual and physical
possession, personally and through his predecessors, of an agricultural
land of the public domain openly, continuously, exclusively and publicly
since July 26, 1894, with a right to a certificate of title to said land under
the provisions of Chapter VIII of said Act. So that when Angela Razon
applied for the grant in her favor, Valentin Susi had already acquired, by
operation of law, not only a right to grant, but a grant of the Government,
for it is not necessary that certificate of title should be issued in order that
said grant may be sanctioned by the courts, an application therefor is
sufficient, under the provisions of section 47 of Act No. 2874. If by a legal
fiction, Valentin Susi had acquired the land in question by a grant of the
State, it had already ceased to be of the public domain and had become
private property, at least by presumption, of Valentin Susi, beyond the
control, of the Director of Lands. Consequently, in selling the land in
question to Angela Razon, the Director of Lands disposed of a land over
which he had no longer any title or control, and the sale thus made was
void and of no effect, and Angela Razon did not thereby acquire any right.
(Emphasis supplied)
Such is the situation in which the plaintiff claims to be in his complaint. He
alleges that he is the owner in fee simple of the lot in question, with the
improvements thereon, situated in San Antonio, Nueva Ecija, and that he has
been in actual possession thereof since 1914, publicly, openly, peacefully and
against the whole world, and that up to the present time he is the only one who
benefits from the produce thereof. He further claims that said lot is present the
subject of a registration proceeding pending in the same court, known as
Registration Case No. N-372, L.R.C. Cad. Record No. N-12238. If by legal fiction,
as stated in the Susi case, plaintiff is deemed to have acquired the lot by a grant
of the State, it follows that the same had ceased to be part of the public domain
and had become private property and, therefore, is beyond the control of the
Director of Lands. Consequently, the homestead patent and the original
certificate of title covering said lot issued by the Director of Lands in favor of the
defendants can be said to be null and void, for having been issued through
fraud, deceit and misrepresentation.

Considering that this case was dismissed by the trial court merely on a motion
to dismiss on the ground that plaintiff's action is already barred by the statute of
limitations, which apparently is predicated on the theory that a decree of
registration can no longer be impugned on the ground of fraud one year after
the issuance and entry of the decree,1 which theory does not apply here
because the property involved is allegedly private in nature and has ceased to
be part of the public domain, we are of the opinion that the trial court erred in
dismissing the caseoutright without giving plaintiff a chance to prove his claim.
It would have been more proper for the court to deny the motion on the ground
that its object does not appear to be indubitable, rather than to have dismissed
it, as was done by the trial court.
Wherefore, the order appealed from is set aside. The case is remanded to the
trial court for further proceedings. No costs.
G.R. No. 160832

October 27, 2006

THE HEIRS OF EMILIO SANTIOQUE, represented by FELIMON W.


SANTIOQUE, petitioners,
vs.
THE HEIRS OF EMILIO CALMA, CHICO-NAZARIO, JJ. FABIAN CALMA,
AGATONA CALMA, and DEMETRIA CALMA, represented by LOPE AKOL
and LUCIA CALMA-AKOL, and the REGISTER OF DEEDS OF THE
PROVINCE OF TARLAC, respondents.

DECISION

CALLEJO, SR., J.:


This is a petition for review on certiorari of the Decision 1 of the Court of Appeals
(CA) in CA-G.R. CV No. 65352 affirming the Decision 2 of the Regional Trial Court
(RTC) in Civil Case No. 8634, as well as the Resolution dated November 21, 2003
which denied the motion for reconsideration thereof.
On March 31, 1932, the Governor General granted a homestead patent over a
20.9740-hectare parcel of land located in Barrio Tibag, Tarlac, Tarlac. On the
basis of said patent, Original Certificate of Title (OCT) No. 1112 was issued by
the Register of Deeds on April 21, 1932. The title was cancelled by Transfer
Certificate of Title (TCT) No. 13287. On November 27, 1953, TCT No. 13287 was

cancelled by TCT No. 19181 under the names of Agatona Calma, Fabian Calma,
Emilio Calma and Demetria Calma.3 On September 23, 1954, the parties
executed a contract of lease in favor of the Spouses Lope A. Akol, who then
executed an Assignment of Leasehold Rights under the Contract of Lease in
favor of the Rehabilitation Finance Corporation (RFC) on January 26, 1955. 4
In the meantime, Fabian Calma died intestate. A petition for the administration
of his estate was filed in the RTC of Tarlac docketed as Special Proceedings No.
1262. Lucia Calma was appointed as administratrix of the estate. The heirs
executed a Deed of Partition over the property on April 17, 1967. On September
13, 1967,5 TCT No. 19181 was cancelled by TCT No. 71826 in the names of
Agatona Calma, Emilio Calma, Demetria Calma and Fabian Calma.
Meanwhile, in 1967, a 20.564-ha parcel of land located in Tibag, Tarlac and
identified as Lot No. 3844 of Pat-H-132104 - prt. was declared for taxation
purposes under the name of Emilio Santioque (Tax Dec. No. 19675). 6However,
the declaration did not bear the name and signature of the declarant.
On June 3, 1973, Santioque died intestate. His children, Felimon, Rose, Filomena,
Jose, Josefina, Ana, Rufino, and Avelina, all surnamed Santioque, filed on
February 29, 1998, a complaint in the RTC of Tarlac for declaration of nullity of
title, reconveyance, with damages, over a piece of land situated in Tibag, Tarlac
City. The case was docketed as Civil Case No. 8634.
The heirs claimed that on March 31, 1932, Emilio was awarded Homestead
Patent No. 18577 by virtue of Homestead Application No. 132104 over a lot
located in Barrio Tibag, Tarlac City; the said lot was identified as Lot No. 3844 of
the Tarlac Cadastre No. 274, with an area of 20.5464 hectares; OCT No. 1112
was issued to Emilio on April 21, 1932, and from then had enjoyed full
ownership and dominion over the said lot; and prior to his death, Emilio ordered
Felimon to work for the recovery of the said property. 7 They further averred that
when Felimon went to the Register of Deeds of Tarlac for a final verification, he
discovered that the lot covered by OCT No. 1112 was already registered in the
names of Agatona, Fabian, Emilio and Demetria, all surnamed Calma, under TCT
No. 19181 issued on November 27, 1953. It appeared from the said TCT No.
19181 that the title was a transfer from TCT No. 13287. 8
The heirs contended that Emilio was the first registrant of the subject lot and, as
such, was its lawful owner. The land could no longer be the subject matter of
subsequent cadastral proceedings, and any title issued pursuant thereto would
be void. They prayed that judgment be rendered in their favor, as follows:
WHEREFORE, it is most respectfully prayed that after due notice and
hearing, judgment be rendered ordering the nullification of TCT No. 19181
and TCT No. 13287 of the Register of Deeds of Tarlac and upholding and
declaring the existence, legality and validity of the Homestead Patent

bearing No. 18577 and OCT No. 1112 issued in the name of the late Emilio
Santioque and
1. Ordering Defendants to reimburse to the Plaintiffs the income, profits or
benefits unjustly derived by them from TCT No. 19181 and 13287 the
estimation of which is left to the sound discretion of the Honorable Court;
2. Ordering the Defendants to pay to the Plaintiffs the amount
of P50,000.00 as attorneys fees;
3. Cost of suit;
4. Any and all remedies just and equitable under the premises. 9
The heirs of Calma filed a motion to dismiss the complaint alleging that (a) the
action had prescribed and was barred by laches; (b) the claim has been
abandoned, and (c) the complaint stated no cause of action. 10 The court denied
the motion. The heirs of Calma filed their answer, reiterating the grounds and
allegations in their motion to dismiss by way of special and affirmative
defenses.11
During trial, Felimon Santioque testified for the plaintiffs. He admitted that they
had no copy of OCT No. 1112; the Register of Deeds likewise had no record of
the said title, nor TCT No. 13287.12 He discovered from the said office that the
subject lot was covered by TCT No. 19181 with the names of Agatona Calma and
her co-heirs as owners.13 The title was, in turn, cancelled and replaced by TCT
No. 71286 also in the names of Agatona Calma and her co-heirs.
On cross-examination, Felimon declared that his father, Emilio, mentioned the
property to the plaintiffs sometime before he died in 1973. From that time on,
he tried to ascertain the particulars of the property and succeeded in 1990 only
when he went through the records at the Community Environment and Natural
Resources Office (CENRO).14
Felimon declared that, on August 4, 1992, he secured a document from the
Lands Management Bureau (LMB) stating that on March 1 to 6, 1930, a parcel of
land with an area of 209,746 square meters located in Tibag, Tarlac, Tarlac, was
surveyed by W. Santiago and approved on February 27, 1932. 15 However, the
document was not certified by the Chief Geodetic Engineer. Neither did the
plaintiffs present the employee of the Bureau who prepared the document to
testify on its authenticity.
Felimon admitted that Amando Bangayan, Chief, Records Management Division
of the LMB certified that, based on the survey records of Cadastral Survey No.
274 and as indicated in the Area Sheet of Lot 3844, Cad. 274, Emilio Santioque
was the claimant of the lot. However, the Bureau had no available records of
Homestead Application No. 132104 and Homestead Patent No. 18577 dated

March 31, 1932.16 Felino Cortez, Chief, Ordinary and Cadastral Decree Division of
the Land Registration Authority (LRA), certified that after due verification of the
records of the Book of Cadastral Lots, Lot 3844 had been the subject of
Cadastral Case No. 61, LRC Cad. Record No. 1879; the case had been decided
but no final decree of registration had been issued; and the lot was subject to
the annotation "con patent No. 18577 segun report of B.L."17 The Register of
Deeds of Tarlac stated that, on January 25, 1998, despite diligent efforts, he
could not locate TCT No. 13287 and OCT No. 1112 or any other document
leading to the issuance of TCT No. 19181. He explained that in 1987 and 1988,
his office had to be reconstructed, and titles and documents had to be moved
from one place to another.18 The Register of Deeds issued a certification 19 dated
September 10, 1998 stating that despite diligent efforts, he could not locate
OCT No. 1112 or any document showing how it was cancelled. The Records
Officer of the Register of Deeds in Tarlac City also certified that OCT No. 1112
and TCT No. 13287 could not be found despite diligent efforts. 20
After the heirs of Santioque rested their case, the defendants, heirs of Calma,
demurred to plaintiffs evidence and sought its dismissal on the ground that the
latter failed to establish a preponderance of evidence to support their ownership
over the property.21
On August 11, 1999, the trial court issued an Order 22 granting the demurrer and
dismissing the complaint on the ground that plaintiffs failed to establish their
case.
The heirs of Santioque appealed said order to the CA claiming that
I
THE TRIAL COURT ERRED IN HOLDING THAT PLAINTIFFS-APPELLANTS
FAILED TO PROVE THAT ORIGINAL CERTIFICATE OF TITLE NO. 1112 WAS
ISSUED IN THE NAME OF EMILIO SANTIOQUE, THE PLAINTIFFS
PREDECESSOR-IN-INTEREST, DESPITE THE FACT THAT SUFFICIENT,
ADEQUATE AND CONVINCING EVIDENCE HAVE BEEN PRESENTED TO PROVE
THAT SAID OCT 1112 WAS ISSUED IN THE NAME OF EMILIO SANTIOQUE.
II
THE TRIAL COURT ERRED IN RESORTING TO SPECULATIONS, SURMISES AND
CONJECTURES WHEN IT RULED THAT OCT 1112 COULD HAVE BEEN ISSUED
TO ANOTHER PERSON OTHER THAN THE LATE EMILIO SANTIOQUE.
III
THE TRIAL COURT ALSO RESORTED TO SPECULATIONS, SURMISES AND
CONJECTURES WHEN IT HELD THAT THERE WAS NO EVIDENCE TO PROVE
THAT PATENT NO. 18577 WAS ISSUED TO EMILIO SANTIOQUE, THUS

DISREGARDING THE COMPETENT AND SUFFICIENT EVIDENCE ADDUCED BY


PLAINTIFFS-APPELLANTS TO PROVE THAT SAID PATENT WAS ISSUED TO
EMILIO SANTIOQUE.
IV
THE TRIAL COURT ERRED IN HOLDING THAT TCT NO. 19181 ISSUED TO
DEFENDANTS-APPELLEES WAS PRESUMED TO HAVE BEEN ISSUED IN THE
ORDINARY COURSE OF BUSINESS WHEN IN FACT ITS ISSUANCE IS PLAINLY
FRAUDULENT AND EVIDENTLY ANOMALOUS.
V
THE TRIAL COURT ERRED IN SWEEPINGLY CONCLUDING THAT
DEFENDANTS-APPELLEES HAVE ACQUIRED THE SUBJECT PROPERTY BY
ACQUISITIVE PRESCRIPTION AND IN RULING THAT PLAINTIFFS-APPELLANTS
HAVE SLEPT ON THEIR RIGHT FOR MANY YEARS AND THAT THEY HAVE
CONSTRUCTIVE NOTICE OF THE ISSUANCE OF DEFENDANTS-APPELLEES
TITLE, THUS THEY ARE ESTOPPED BY LACHES.
VI
THE TRIAL COURT ERRED IN REFUSING WITHOUT VALID CAUSE TO
ISSUE SUBPOENA DUCES TECUMAND AD TESTIFICANDUM TO THE
REGISTER OF DEEDS OF TARLAC AND THE LAND REGISTRATION AUTHORITY
IN ORDER TO SHED LIGHT ON THE WHEREABOUTS OF OCT 1112 AND THE
ISSUANCE OF TCT NOS. 13287, 19181 AND 71826.23
On August 30, 2000, Felimon Santioque wrote to the Director of the National
Bureau of Investigation (NBI), Federico Opinion, Jr., requesting for his assistance
in "investigating the disappearance" of the copy of the Registrar of Deeds of
Tarlac of OCT No. 1112 and TCT No. 13287.24 Attached to the said letter were the
following certifications and investigation reports of the LRA:
1. Xerox copy of TCT No. 71826 dated September 13, 1967 under the
names of Agatona Calma, Emilio Calma, Dorotea Calma and Lucia Calma. 25
2. Certified xerox copy Tax Declaration No. 22116 in the name of Agatona
Calma, et al;26
3. Certified xerox copy of Tax Declaration No. 39766 in the name of
Agatona Calma, et al;27
4. Certified xerox copy of Tax Declaration No. 35226 in the names of
Agatona Calma, et al;28

5. Certified xerox copy of the Investigation Report of Mr. Felix Cabrera


Investigator, Land Registration Authority, dated September 30, 1999,
finding that there are no documents in the Registry supporting the
cancellation of OCT 1112 and the issuance of TCT Nos. 13287, and that TCT
No. 71826 is irregularly issued inasmuch as no transaction which would
justify its issuance appears in the Primary Entry Book; 29
6. Certification of Mr. Andres B. Obiena, Records Officer I of the Register of
Deeds of Tarlac, Tarlac, dated April 5, 1999, that OCT No. 1112 could not be
located in the archives;30
7. Certification of Mr. Meliton I. Vicente, Jr., Community Environment and
Natural Resources Officer of the DENR, Region III, that Lot No. 3844 is
already covered by Homestead Application No. 132104 with Patent No.
1877 issued to Emilio Santioque on March 31, 1932;31
8. Certified xerox copy of Record Book Page 383 signed by Florida S.
Quiaoit, Records Management Unit, CENRO III-6, Tarlac City, showing that
Emilio Santioque is a claimant of Lot No. 3844 under Homestead
Application No. HA-132104 and Patent No. 1877;32
9. Certified xerox copy of Area Sheet over Lot 3844 prepared for Emilio
Santioque, certified by Emilanda M. David, Record Officer 1, DENRO, San
Fernando, Pampanga dated February 29, 2000;33
10. Certified xerox copy of Case No. 6, Cad Record No. I, showing that
Emilio Santioque was the claimant of Lot No. 3844, under Pat-H-132104
Part.34
The heirs of Santioque did not present the said documents at the trial below but
they included the same in their appellants brief.
Without waiting for the report of the NBI on their request, the heirs of Santioque
filed a motion with the CA for the early resolution of the case. 35 On June 27,
2003, the CA affirmed the appealed decision.36 The appellate court did not give
probative weight to the certifications and other documents submitted by the
heirs of Santioque, as their authenticity had not been established and the
signatories therein were not presented for cross-examination. It noted that none
of the "crucial documents" were presented in the trial court. Assuming that OCT
No. 1112 was indeed issued to Emilio Santioque, the claim of his heirs was
nevertheless barred by laches; the latter must bear the consequences of their
fathers inaction.
The heirs of Santioque filed a motion for reconsideration, which the CA resolved
to deny on November 21, 2003.37

The heirs of Santioque, now petitioners, seek relief from this Court on the
following issues:
I.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN NOT
GIVING CREDENCE TO THE CERTIFICATIONS, DOCUMENTS, RECORDS AND
PICTURES SUBMITTED BY PETITIONER BEFORE THE SAID COURT ON THE
GROUND THAT THEY WERE NOT SUBMITTED IN EVIDENCE AT THE TRIAL
AND THAT THEIR AUTHENTICITY HAS NOT BEEN ESTABLISHED, DESPITE
THE FACT THAT PETITIONERS FAILURE TO SUBMIT THE SAME AS EVIDENCE
BEFORE THE TRIAL COURT AND TO ESTABLISH THEIR AUTHENTICITY WAS
DUE TO THE PREMATURE AND UNJUSTIFIED DISMISSAL OF THEIR
COMPLAINT, WHICH WAS TANTAMOUNT TO DENIAL OF THEIR RIGHT TO BE
HEARD AND TO DUE PROCESS.
II.
THE HONORABLE COURT OF APPEALS ERRED IN NOT HOLDING THAT
DESPITE PETITIONERS FAILURE TO PRESENT THEIR ORIGINAL CERTIFICATE
OF TITLE, OCT NO. 1112, SUFFICIENT AND CONVINCING EVIDENCE WERE
ADDUCED BY PETITIONERS TO PROVE THAT SAID TITLE WAS ISSUED TO
THEIR PREDECESSOR-IN-INTEREST, EMILIO SANTIOQUE. ON THE OTHER
HAND, SINCE PETITIONERS COMPLAINT WAS DISMISSED BY THE TRIAL
COURT ON RESPONDENTS DEMURRER TO EVIDENCE, THE RESPONDENTS
FAILED EITHER (1) TO CONTROVERT THE EVIDENCE ADDUCED BY
PETITIONERS IN SUPPORT OF THEIR CLAIM OVER THE SUBJECT PROPERTY
OR THEIR PRETENSION OF FACTS.
III.
THE HONORABLE COURT OF APPEALS GRAVELY MISAPPREHENDED THE
FACTS OF THE CASE WHEN IT HELD THAT RESPONDENTS ARE IN ACTUAL
POSSESSION OF THE SUBJECT PROPERTY, DESPITE CLEAR ABSENCE OF
EVIDENCE BY RESPONDENTS TO SUPPORT THEIR CLAIM OF POSSESSION
AND AS EVIDENCED BY THE PICTURES SUBMITTED BY PETITIONERS.
IV.
THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT
PETITIONERS DID NOTHING TO RECOVER THEIR CERTIFICATE OF TITLE, OCT
NO. 1112, IN A DIRECT ACTION IF INDEED SAID OCT NO. 1112 WAS ISSUED
TO EMILIO SANTIOQUE AND INVALIDLY CANCELLED AND REPLACED WITH
TCT NO. 13287 IN THE NAME OF RESPONDENTS, AND THAT THE
PETITIONERS SHOULD BEAR THE CONSEQUENCES OF THEIR FATHER EMILIO
SANTIOQUES INACTION, DESPITE THE FACT THAT PETITIONERS HAVE BEEN

VIGILANT OF THEIR RIGHTS AND, HENCE, PRESCRIPTION AND LACHES DO


NOT BAR PETITIONERS COMPLAINT.
V.
WHETHER OR NOT REMAND OF THE INSTANT CASE TO THE LOWER COURT
IS PROPER, INSTEAD OF A DECISION ON THE MERITS.38
Petitioners contend that the appellate court erred in not giving credence to the
certifications, records, documents and pictures they attached to their
appellants brief. They aver that they had not yet discovered the said
documents when they presented their evidence at the trial court; hence, they
could have presented the documents and their affiants during the rebuttal stage
of the proceedings had the trial court not prematurely aborted the proceedings
before it. They insist that they were denied their right to due process when the
trial court granted respondents demurrer to evidence and dismissed the case. 39
Petitioners aver that they have clearly shown and proven their claim over the
property, particularly through Tax Dec. No. 19675 and the contents of the
Record Book. They posit that judicial notice should be taken that tax
declarations are usually issued in the name of the prospective owner upon a
showing of the basis of ownership. On the other hand, respondents have no
factual and evidentiary basis to support their claim over the subject property
since they have not adduced before the trial court any documentary and
testimonial evidence to support ownership of the property. Petitioners further
contend that they have clearly shown, through the pictures they submitted
before the appellate court, that respondents have not been in actual possession
of the property; hence, it cannot be presumed that respondents, as registered
owners, are likewise in possession of the subject property. 40
Petitioners aver that prescription and laches do not bar their complaint since
they have been vigilant in protecting their rights. They contend that Emilio was
old and sickly and died at an old age. Laches presupposes negligence, and
neither Emilio nor his successors were negligent in protecting their rights over
the subject property. It took sometime before they could lodge a complaint
against respondents because they had to make inquiries first and retrieve
documents from different offices to support their claim. 41
For their part, respondents aver that there were no indicia of proof that OCT
No.1112 was really issued to Emilio. The evidence proffered by the petitioners
only tends to prove that Emilio was a mere claimant. It is not incumbent upon
the respondents to present any proof that they are the owners of the subject lot
because the property is registered in their name. The mere fact that the records
are not available would not ipso facto mean that the transactions made
affecting OCT No. 1112 were irregular.42

Respondents further aver that the appellate court was correct in not giving
credence to the documents, which were not submitted during the trial even
though they were obtainable at that time. To allow the introduction of these
documents on appeal would violate the essence of due process as the
respondents would not be able to interpose objections to their admissibility.
Even if these documents were admitted, they would not help petitioners case
since they would still not prove that Emilios claim ripened into full ownership.
Respondents likewise agree with the finding of the appellate court that the
complaint is already barred by prescription and laches. 43
The petition is without merit.
The core issues in this case are: (1) whether the trial court erred in granting the
demurrer to evidence of respondents, and (2) whether petitioners claim is
barred by prescription and laches.
On the first issue, the Court holds that CA ruling which affirmed that of the RTC
granting the demurrer is correct.
Demurrer to evidence authorizes a judgment on the merits of the case without
the defendant having to submit evidence on his part as he would ordinarily have
to do, if it is shown by plaintiffs evidence that the latter is not entitled to the
relief sought. The demurrer, therefore, is an aid or instrument for the
expeditious termination of an action, similar to a motion to dismiss, which a
court or tribunal may either grant or deny. 44
A demurrer to evidence may be issued when, upon the facts and the law, the
plaintiff has shown no right to relief. 45 Where the plaintiffs evidence together
with such inferences and conclusions as may reasonably be drawn therefrom
does not warrant recovery against the defendant, a demurrer to evidence
should be sustained.46 A demurrer to evidence is likewise sustainable when,
admitting every proven fact favorable to the plaintiff and indulging in his favor
all conclusions fairly and reasonably inferable therefrom, the plaintiff has failed
to make out one or more of the material elements of his case, 47 or when there is
no evidence to support an allegation necessary to his claim. 48 It should be
sustained where the plaintiffs evidence is prima facie insufficient for a
recovery.49
Petitioners, as plaintiffs below, were obliged to prove their claim in their
complaint that their father, Emilio, applied for and was granted Homestead
Patent No. 18577, and that OCT No. 1112 was issued by the Register of Deeds in
his name on the basis of said patent. Petitioners had the burden of proof to
present evidence on the fact in issue to establish their claim by their own
evidence required by law.50 More so, where, as in this case, on the face of TCT
No. 19181 under the names of the respondents, it was derived from TCT No.
13287, which in turn cancelled OCT No. 1112 issued on April 21, 1932 on the

basis of a homestead patent. It must be stressed that the original certificate of


title carries a strong presumption that the provisions of law governing the
registration of land have been complied with. The OCT enjoys a presumption of
validity. Once the title is registered, the owners can rest secure on their
ownership and possession.51 Once a homestead patent granted in accordance
with law is registered, the certificate of title issued in virtue of said patent has
the force and effect of a Torrens title issued under the land registration law. 52
In the present case, petitioners failed to prove the material allegations in their
complaint that Emilio Santioque applied for and was granted Patent No. 18577
and that OCT No. 1112 was issued on the basis thereof. We quote with approval
the ruling of the RTC:
The plaintiffs failed to prove that OCT [N]o. 1112 was issued in the name of
Emilio Santioque. It was issued all right, but there is no evidence it was in
the name of Emilio Santioque. OCT [N]o. 1112 could have been in the
name of another person. Exhibit "B" merely shows that Emilio Santioque is
a survey claimant.
Exhibit "A" contradicted all these claims of plaintiffs. It is stated therein
that Lot No. 3844 of Tarlac Cadastre, Cadastral Case [N]o. 61, L.R.C. Record
No. 1879 was previously decided but no final decree of registration has yet
issued thereon. Hence, there was already a decision by the cadastral court.
In whose favor the land was awarded is a mystery up to the date.
There is also no evidence that [P]atent [N]o. 18577 was issued to Emilio
Santioque. In fact, there is no available record to prove that [P]atent [N]o.
18577 was in the name of Emilio Santioque. (Exhibit "B-1") It is safe to
assume that the decision of the cadastral Court awarded the land to a
person who was also the awardee of [P]atent [N]o. 18577, because of the
entry "said lot is subject to annotation quote: "con patent no. 18577 segun
report of the B.L." ", this being the very reason why no decree of
registration was issued pursuant to the cadastral proceeding. 53
Petitioners even failed to present Homestead Application No. 132104 allegedly
filed by Emilio with the Bureau of Lands. In fact, as evidenced by the
Certification of the LMB, it had no record of said application and patent. The
records of the LMB relative to Cadastral Case No. 61 and LRC Cad. Record No.
1879 were, likewise, not presented.
It should be noted that, under Section 14 of Commonwealth Act 141, The Public
Land Act, there are certain requirements that a homestead applicant should
comply with before a patent could be issued to him, thus:
SECTION 14. No certificate shall be given or patent issued for the land
applied for until at least one-fifth of the land has been improved and

cultivated. The period within which the land shall be cultivated shall not be
less than one nor more than five years, from the date of the approval of
the application. The applicant shall, within the said period, notify the
Director of Lands as soon as he is ready to acquire the title. If at the date of
such notice, the applicant shall prove to the satisfaction of the Director of
Lands, that he has resided continuously for at least one year in the
municipality in which the land is located, or in a municipality adjacent to
the same, and has cultivated at least one-fifth of the land continuously
since the approval of the application, and shall make affidavit that no part
of said land has been alienated or encumbered, and that he has complied
with all the requirements of this Act, then, upon the payment of five pesos,
as final fee, he shall be entitled to a patent.
Petitioners failed to present competent and credible evidence that Emilio Calma
complied with the aforesaid requirements before his death.
Petitioners rely on Tax Dec. No. 19675 to substantiate their claim over the
subject property. However, it is axiomatic that tax receipts and tax declarations
of ownership for taxation purposes do not constitute sufficient proof of
ownership. They must be supported by other effective proofs. 54
The appellate court was also correct in not giving credence to the certifications
which petitioners submitted before it on the ground that the said documents
were not presented in the trial court. Petitioners, thus, failed to prove the
authenticity of said documents because they failed to present the government
officials who certified the same.
It is well settled that courts will consider as evidence only that which has been
formally offered,55 otherwise, the opposing party would be denied due process of
law.56 Thus, the Court explained in one case that
A formal offer is necessary since judges are required to base their findings
of fact and judgment onlyand strictlyupon the evidence offered by the
parties at the trial. To allow a party to attach any document to his pleading
and then expect the court to consider it as evidence may draw
unwarranted consequences. The opposing party will be deprived of his
chance to examine the document and object to its admissibility. The
appellate court will have difficulty reviewing documents not previously
scrutinized by the court below.57
Petitioners, however, contend that they could have presented the said
documents during the rebuttal stage of the proceedings before the trial court. It
bears stressing, however, that a plaintiff is bound to introduce all evidence that
supports his case during the presentation of his evidence in chief. 58 A party
holding the affirmative of an issue is bound to present all of the evidence on the
case in chief before the close of the proof, and may not add to it by the device

of rebuttal.59 After the parties have produced their respective direct proofs, they
are allowed to offer rebutting evidence only. 60
Generally, rebuttal evidence is confined to that which explains, disproves, or
counteracts evidence introduced by the adverse party. It is not intended to give
a party an opportunity to tell his story twice or to present evidence that was
proper in the case in chief. 61 However, the court for good reasons, in the
furtherance of justice, may permit them to offer evidence upon their original
case, and its ruling will not be disturbed in the appellate court where no abuse
of discretion appears. This is usually allowed when the evidence is newly
discovered, or where it has been omitted through inadvertence or mistake, or
where the purpose of the evidence is to correct evidence previously offered. 62
It is true that petitioners failed to adduce rebuttal evidence because
respondents filed a Demurrer to Evidence. However, petitioners should have
filed a motion for new trial based on newly-discovered evidence under Rule 37,
Section 2 of the 1997 Rules of Civil Procedure after the trial court granted the
demurrer and dismissed the complaint.
Petitioners aver that the documents they submitted on appeal were not yet
discovered during the presentation of their evidence before the trial
court.63 Assuming this claim to be true, the Court notes however, that
petitioners nevertheless failed to establish that they could not, with reasonable
diligence, have discovered and produced the documents at the trial, and prove
that such documents would probably alter the result, if presented. The
documents belatedly submitted by petitioners on appeal can hardly be
considered "newly discovered" since they are public records. Petitioners could
have earlier secured copies thereof during trial. Moreover, a perusal of these
documents reveals that even if admitted, they would not, in any way, bolster
petitioners case, or remedy the vacuum in their evidence-in-chief.
Further, we agree with the appellate court that petitioners complaint is barred
by prescription and laches. An action for reconveyance prescribes in ten years,
the point of reference being the date of registration of the deed or the date of
issuance of the certificate of title over the property. 64 Even if we reckon the
prescription period from TCT No. 19181 issued on November 27, 1953, the only
title verified to be in the name of respondents, more than ten years have
already elapsed since then until the time the petitioners filed their complaint on
February 29, 1998. An action for reconveyance is imprescriptible only when the
plaintiff is in actual possession of the property. 65 In the present case, there is no
showing that petitioners were in actual possession of the subject property.
In any event, petitioners cause of action is likewise barred by laches. The
essence of laches or "stale demands" is the failure or neglect for an
unreasonable and unexplained length of time to do that which, by exercising
due diligence, could or should have been done earlier, thus giving rise to the

presumption that the party entitled to assert it either has abandoned or


declined to assert it.66 Petitioners right of action had long been barred by laches
during the lifetime of their father, their predecessor in interest; petitioners must
necessarily bear the consequences of their predecessors inaction. We quote,
with approval, the following ruling of the CA:
The trial court further held that "There is also no evidence that patent No.
18577 was issued to Emilio Santioque. In fact, there is no available record
to prove that patent No. 18577 was in the name of Emilio Santioque.
(Exhibit "B-1")." We add that nowhere in the certificates of title presented
by appellants is the source of OCT No. 1112 indicated as Homestead Patent
No. 18577.
Even assuming that appellants constructive notice of another title over Lot
No. 3844 could be reckoned only from 1953 when TCT No. 19181 was
issued to replace TCT No. 13287, still appellants and their predecessors-ininterest waited 45 years before bringing the action below. Meanwhile, Lot
No. 3844 became the subject of various litigations among appellees and
with third parties, as well as several transactions, such as the contract of
lease between Emilio Calmas heirs and spouses Lope A. Akol from 19541964 (Entry No. 46563); the Assignment of Leasehold rights to
Rehabilitation Finance Corporation, 1955 (Entry No. 53205); the
Termination of Lease (Entry No. 1-7584; the Partial Release of Leasehold
(Entry No. 65888). No proof was submitted in the court below to belie the
actual possession of the subject lot by the appellees, who as the registered
owners are also presumed to be in possession of the same.
While the indefeasibility of the Torrens title of appellees can be claimed
only if a previous valid title to the same parcel does not exist (Register of
Deeds vs. Philippine National Bank, 13 SCRA 46), appellants have failed to
establish that OCT No. 1112 was issued in their fathers name and was
later invalidly cancelled in 1947 and replaced with TCT No. 13287. Only in
1998 was an action brought to directly question the validity of TCT No.
13287. The principle of laches has indeed come into play. Laches or stale
demand is based upon grounds of public policy which requires for the
peace of society the discouragement of stale actions, and unlike the
statute of limitations is not a mere question of time but primarily a
question of the inequality or unfairness of permitting a right or claim to be
enforced or asserted (Pangilinan vs. Court of Appeals, 279 SCRA 590).
In Agne vs. Director of Lands, 181 SCRA 793, 809 [1990], it was held that
the failure of the registered owners to assert their claim over the disputed
property for almost thirty (30) years constituted laches.
The question of laches is addressed to the sound discretion of the court.
Laches being an equitable doctrine, its application is controlled by
equitable considerations, although the better rule is that courts under the

principle of equity will not be guided or bound strictly by the statute of


limitations or doctrine of laches when to do so would result in manifest
wrong or injusticed result (Santiago vs. Court of Appeals, 278 SCRA 98).
We are aware of rulings to the effect that even if the defendants have been
in actual possession of the property for more than ten (10) years, the
registered title of plaintiffs over the property cannot be lost by prescription
or laches (Board of Liquidators vs. Roxas, 179 SCRA 809); or that an action
by the registered owner to recover possession based on a Torrens title is
not barred by laches (Dablo vs. Court of Appeals, 226 SCRA 621). However,
the laches committed by the appellants pertained to the establishment of
their very title itself. Only after they have recovered their title could they
then have standing to question the title of the appellants and recover
possession of the subject lot. Besides, it has been held that an action for
reconveyance or quieting of title instituted only after thirty (30) years could
be barred by laches (City Government of Danao vs. Monteverde Consunji,
358 SCRA 107). This being so, all the more should an action to recover title,
filed after 45 years, be barred by laches where the complainants title is
itself clearly doubtful.67
IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for lack of merit.
The Decision and Resolution of the Court of Appeals in CA-G.R. CV No. 65352
are AFFIRMED. Cost against the petitioners.
G.R. No. L-69303

July 23, 1987

HEIRS OF MARIA MARASIGAN, namely, Teofilo, Isabel, Maximina, Anicia,


and Francisco, all surnamed Marasigan, petitioners,
vs.
THE INTERMEDIATE APPELLATE COURT and MARIA
MARRON, respondents.
GUTIERREZ, JR., J.:
Who has a better right to the property in question, the party who bought it with
a notice of lis pendens annotated at the back of her title or the party in whose
favor the notice of lis pendens was made? The appellate court answered this
question in favor of the party who had the notice annotated and who won the
litigation over the property. We affirm.
The disputed property in this case is a residential lot (Lot No. 2-A) covered by
Transfer Certificate of Title No. 100612 issued by the Register of Deeds of the
City of Manila in the name of one Fe Springael-Bazar, married to Felicisimo
Bazar.

The pertinent facts as disclosed by the record are as follows:


On April 24, 1975, Civil Case No. 97479 entitled "Maria Marron v. Felicisimo
Bazar and Fe S. Bazaar" was filed before the then Court of First Instance of
Manila, Branch XIII. The action sought to compel defendants Bazar to execute a
registrable Deed of Absolute Sale of their lot covered by T.C.T. No. 100612 in
favor of Maria Marron.
On January 27, 1976, while Civil Case No. 97479 was still pending, the private
respondent caused the annotation of a notice of lis pendens at the back of T.C.T.
No. 100612.
On February 24, 1976, judgment was rendered in Civil Case No. 97479. The
dispositive portion reads:
WHEREFORE, the Court hereby renders judgment in favor of the plaintiff and
against the defendants as follows:
a) Ordering the defendants Fe Springael Bazar and Felicisimo Bazar as
vendors (1) to execute in favor of the plaintiff Maria Marron as vendee a
Deed of Absolute Sale in a public instrument over the residential lot
covered by Transfer Certificate of Title No. 100612 issued by the Registry of
Deeds of the City of Manila to and in the name of Fe S. Bazar, married to
Felicisimo Bazaar; and (2) to deliver to plaintiff sufficient copies of such
deed of sale, together with the Owner's copy of said Transfer Certificate of
Title No. 100612, in order that the plaintiff can register the Deed of
Absolute Sale with the Registry of Deeds of the City of Manila and secure a
transfer certificate of title for the land in her name.
b) Ordering the defendants to pay to the plaintiff the sum of P500.00
Philippine Currency, as and for attorney's fees; and
c) Ordering the defendants to pay the costs of the suit. (Rollo, p. 15).
The above judgment became final and executory so Maria Marron filed a motion
for execution which was granted. A writ of execution was issued by the court on
July 12, 1976. The spouses Bazar, however, refused to surrender their title to
the property in question and to execute the required deed of sale in Marron's
favor. On November 29, 1978, the lower court finally ordered the Clerk of Court
to execute the deed of sale in behalf of the erring spouses. When the said deed
was presented to the Register of Deeds of Manila for registration, the Deputy

Clerk of Court was advised to secure a court order in order that the new title
issued in the name of herein petitioner Maria Marasigan could be cancelled.
It appears that on December 18, 1974, a deed of absolute sale of Lot 2-A
covered by T.C.T. No. 100612 was executed by Fe S. Bazar in favor of Maria
Marasigan for and in consideration of the sum of Fifteen Thousand Pesos
(P15,000.00). However, it was only on July 5, 1977 that said deed was registered
with the Registry of Deeds of Manila. Consequently, T.C.T. No. 100612 was
cancelled and a new title was issued in Maria Marasigan's name. When the
Register of Deeds of Manila issued Transfer Certificate of Title No. 126056
naming Maria Marasigan as the new owner of Lot 2-A, the notice of lis
pendens caused to be annotated by Marron on the Bazar's title was carried over
on the said new title.
Meanwhile, on May 26, 1977, the Bazaars filed a petition for relief from the
judgment dated February 24, 1976 in Civil Case No. 97479. While their petition
was still pending, they moved to set aside the said judgment on June 22, 1979
on the ground of lack of jurisdiction over their persons.
On the other hand, on February 24, 1979, Marron instituted L.R.C. Case No. 7680
captioned "Maria Marron v. Maria Marasigan" which prayed for a court order
requiring the Register of Deeds of Manila to register the deed of sale executed
by the Deputy Clerk of Court in behalf of the Bazaars pursuant to the order
dated November 29, 1978 of the Court of First Instance, Manila, Branch XIII.
L.R.C. Case No. 7680 was tried by the Court of First Instance of Manila, Branch IV
acting as a land registration court. Said case was dismissed for the following
reason:
... This court acting as a Land Registration Court, with limited and special
jurisdiction cannot act on this petition under summary proceedings but
(sic) should be ventilated before a court of general jurisdiction Branch XIII,
which issued the aforesaid Order dated November 29, 1978, the said
petition is hereby dismissed for lack of jurisdiction without prejudice on the
part of the petitioner to institute the appropriate civil action before the
proper court. ... (Annex "A," p. 4, Rollo, p. 138)
On September 6, 1979, Marron filed another case docketed as Civil Case No.
126378 to have Marasigan's TCT 126056 cancelled conformably to the
procedure outlined in the decision of the above land registration court. On July
30, 1980, the parties submitted said case for decision.

On February 18, 1982, the Court of First Instance of Manila, Branch IV to which
Civil Case No. 126378 was assigned dismissed Marron's complaint for being
premature since the decision rendered by the CFI, Branch XIII in Civil Case No.
97479 had not yet become final and executory considering that it was still the
subject of a petition for relief from judgment.
On appeal, the Intermediate Appellate Court, on August 7, 1984, ruled that
Marron is entitled to the property under litigation by virtue of the notice of lis
pendens annotated at the back of Maria Marasigan's title. The appellate court
further ruled that the decision in Civil Case No. 97479 had become final and
executory because the petition for relief from judgment of the spouses Bazar
was filed out of time. The dispositive portion of the appellate court's decision
reads:
WHEREFORE, the appealed decision is hereby REVERSED and another one
entered
(a) Ordering the Register of Deeds of Manila to cancel T.C.T. No. 126056 in
the name of Maria Marasigan and issue another in the name of Maria
Marron by virtue of the Deed of Sale executed by the Branch Clerk of Court
of Branch XIII;
(b) Ordering the said Register of Deeds, during the pendency of this case,
to refrain from registering any deed of sale pertaining to T.C.T. No. 126056
in the name of Maria Marasigan other than that of the herein plaintiff; and
(c) Ordering the defendant Maria Marasigan to pay attorney's fees in the
amount of P10,000.00. (IAC, Decision. Rollo, pp. 17-18).
Maria Marasigan who died in the course of the proceedings is now represented
by her heirs in the instant petition which assigns the following errors:
I
THAT THE INTERMEDIATE APPELLATE COURT FAILED TO APPREHEND THAT THE
RIGHT OF ACTION OF RESPONDENT MARIA MARRON (AS PLAINTIFF) IN CIVIL
CASE NO. 97479 HAD PRESCRIBED AND SHE INCURRED IN LACHES.
II
THAT THE INTERMEDIATE APPELLATE COURT FAILED TO APPREHEND THAT
RESPONDENT ABANDONED OR WAIVED HER PROPERTY RIGHTS AND EFFECTS

TO/OF THE DECISION IN CIVIL CASE NO. 97479, WHEN SHE FILED CIVIL CASES
NO. 7680 AND 126378, DURING ITS EFFECTIVITY.
III
THAT THE INTERMEDIATE APPELLATE COURT ERRED IN CONCLUDING THAT THE
DECISION IN CIVIL CASE NO. 97479 HAS BECOME FINAL AND EXECUTORY.
IV
THAT THE INTERMEDIATE APPELLATE COURT FAILED TO APPREHEND THE LACK
OF JURISDICTION OF THE TRIAL COURT IN CIVIL CASES NO. 7680 AND 126378
OVER THE PERSONS OF PETITIONERS.
V
THAT THE INTERMEDIATE APPELLATE COURT ERRED IN CONSIDERING THAT THE
TRIAL COURT IN CIVIL CASE NO. 97479 HAS JURISDICTION OVER THE PERSONS
OF DEFENDANTS SPOUSES FELICISIMO BAZAAR AND FE S. BAZAAR.
VI
THAT THE INTERMEDIATE APPELLATE COURT FAILED TO APPREHEND THAT THE
DEED OF ABSOLUTE SALE EXECUTED BY THE DEPUTY CLERK OF COURT, WAS
NOT LEGAL AND VALID AND WITHOUT PROOF AND EFFECT. (Brief for the
appellant, pp. 1 and 2)
We find no merit in the present petition.
There is a clear showing that although the late Maria Marasigan acquired the
property in question from the Bazaars pursuant to a deed of absolute sale on
December 18, 1974 or a little over four months before the filing of Civil Case No.
97479, the transaction became effective as against third persons only on July 5,
1977 when it was registered with the Registry of Deeds of Manila. It is the act of
registration which creates constructive notice to the whole world. Section 51 of
Act 496, as amended by Section 52 of the Property Registration Decree (P.D.
1529) provides:
Sec. 52. Constructive notice upon registration. Every conveyance ...
affecting registered land shall, if registered, filed or entered in the office of
the Register of Deeds for the province or city where the land to which it

relates lies, be constructive notice to all persons from the time of such
registering, filing or entering.
Moreover, there is no question that when the late Maria Marasigan was issued
her transfer certificate of title to the subject property (T.C.T. No. 126056), the
Registrar of Deeds of Manila then carried over to the new title the notice of lis
pendens which the private respondent had caused to be annotated at the back
of the Bazar's title. In case of subsequent sales or transfers, the Registrar of
Deeds is duty bound to carry over the notice of lis pendens on all titles to be
issued. Otherwise, if he cancels any notice of lis pendens in violation of his duty,
he may be held civilly and even criminally liable for any prejudice caused to
innocent third persons (The Director of Lands, et al. v. Reyes, 68 SCRA 177).
A notice of lis pendens means that a certain property is involved in a litigation
and serves as notice to the whole world that one who buys the same does it at
his own risk (Rehabilitation Finance Corporation v. Morales, 101 Phil. 171). It was
also a clear notice to Maria Marasigan that there was a court case affecting her
rights to the property she had purchased.1avvphi1
As earlier stated it was only on July 5, 1977 that the sale between Maria
Marasigan and the Bazaars became effective as against third persons. The
registration of the deed of sale over the subject property was definitely
subsequent to the annotation made on January 27, 1976. Consequently,
Marasigan was bound by the outcome of the litigation against her vendors or
transferors. (See Rivera v. Tirona, et al., 109 Phil. 505).
We reiterate the established rule that:
... the filing of a notice of lis pendens charges all strangers with a notice of
the particular litigation referred to therein and, therefore, any right they
may thereafter acquire on the property is subject to the eventuality of the
suit. The doctrine of lis pendens is founded upon reason of public policy
and necessity, the purpose of which is to keep the subject matter of the
litigation within the power of the Court until the judgment or decree shall
have been entered; otherwise, by successive alienations pending the
litigation, its judgment or decree shall be rendered abortive and impossible
of execution. ... (Laroza v. Guia, 134 SCRA 34 1)
The late Marasigan's transferors did not interpose any appeal from the adverse
judgment dated February 24, 1976 in Civil Case No. 97479. The 30-day period
under the old rule (Rule 41, section 3 of the Revised Rules of court now

amended by Batas Pambansa Bilang 129, section 39) within which the Bazaars
may have taken an appeal started to run from May 12, 1976 when they were
served with a copy of the said decision. On June 11, 1976, the February 24,
1976 decision in Civil Case No. 97479 became final and executory. At this point
after the finality of the said decision, the Bazaars no longer had the right to
alienate the property subject of the litigation. Any transaction effective during
the period of litigation is subject to the risks implicit in the notice of lis
pendensand to the eventual outcome of the litigation.
Moreover, we agree with the finding of the appellate court that the petition for
relief from judgment by the Bazaars dated May 26, 1977 was filed beyond the
two periods provided in Section 3 Rule 38 of the Revised Rules of Court. There
may have been some errors in the computations but the petition itself was out
of time.
Rule 38, Section 3 of said Rules provides, in part, that:
Sec. 3. Time for filing petition. ... A petition provided for in either of the
preceding sections of this rule must be verified, filed within sixty (60) days
after the petitioner learns of the judgment, order or other proceeding to be
set aside, and not more than six (6) months after such judgment or order
was entered or such proceeding was taken. ...
The 60-day period must be reckoned from May 12, 1976 when the Bazaars were
served with a copy of the assailed decision. Therefore, the 60-day period
expired on July 11, 1976. It was only after 379 days or more than 12 months
after they learned of the judgment that the Bazaars filed their petition for relief
from said judgment. (See Domingo v. Dela Cruz, 23 SCRA 1121) The appellate
court computed the 6-month period from the date of the judgment was
rendered. Rule 38 states that the counting should commence from the entry of
the judgment or order. (See Dirige v. Biranya, 17 SCRA 840). A judgment is
entered only after its finality and Civil Case No. 97479 became final on June 11,
1976. Since the records do not bear the exact date the questioned judgment
was entered, the 6-month period can be counted for purposes of our decision
from July 12, 1976 when the writ of execution of the final judgment was issued.
The phrase "or other proceeding" in Section 3 of Rule 38 includes a writ of
execution (Aquino v. Blanco, 79 Phil. 647). The 6-month period from July 12,
1976 lapsed on January 8, 1977. A period of ten (10) months had already lapsed
when the Bazaars filed their petition for relief from judgment on May 26, 1977.
Obviously, the petitioners cannot now question the effects of the final and
executory judgment in Civil Case No. 97479. In the words of Laroza v. Guia

(supra) they cannot render the final judgment abortive and impossible of
execution. The deed of sale executed by the Deputy Clerk of Court on behalf of
the Bazar spouses pursuant to the court's judgment was valid and binding.
The petitioners cannot also raise before us the issues of prescription or laches
and lack of jurisdiction over the persons of the Bazar spouses in Civil Case No.
97479. This cannot be done in this petition which stems from Civil Case No.
126378 in the trial court and AC-G.R. No. 00183 in the appellate court. The
Bazaars were the proper parties who ought to have raised them as defenses
either in a motion to dismiss or in their answer. Since they did not do so, the
same were deemed waived. (See Rule 9, section 2 of the Revised Rules of Court;
MD Transit & Taxi Co., Inc. v. Estrella, 113 SCRA 378; Torreda v. Boncaros, 69
SCRA 247; Visayan Electric Co., Inc. v. Commissioner of Internal Revenue, 39
SCRA 43; Republic v. Mambulao Lumber Company, 6 SCRA 858).
WHEREFORE, in view of all the foregoing, the petition is hereby DISMISSED for
lack of merit. The appellate court's decision is AFFIRMED.
G.R. No. L-14641

November 23, 1960

THE DIRECTOR OF LANDS, petitioner-appellant,


vs.
EUSTAQUIO DE LUNA, ET AL., respondents.,
EUSTAQUIO DE LUNA, respondent-appellee.
Asst. Solicitor General Antonio A. Torres and Solicitor D.L. Quiroz for appellant.
McClure, Salas and Gonzales for appellee.
BARRERA, J.:
On February 19, 1958, petitioner Director of Lands, filed with the Court of First
Instance of Oriental Mindoro a petition alleging, inter alia, that on April 28, 1955,
respondent Eustaquio de Luna filed with his office, an application for free patent
over a parcel of land, designated as Lot No. 4422, Cad. No. 200 Ext., in Naujan,
Oriental Mindoro claiming that he (de Luna) is in actual occupation of said land,
having acquired it from Eusebia and Bernardina Castillo, who had been in
possession and cultivation thereof since 1943; that relying on the statements
made by respondent de Luna in his said application that his occupation of the
land was made prior to July 4, 1945, he (Director) approved it as Free Patent
Application No. V-35154 (E-V-21291),on September 7, 1955 and thereafter gave
it due course; that on October 4, 1955, he issued Free Patent No. V-21168 for

the land, in favor, and in the name of respondent, and the same was
transmitted to the Register of Deeds of Calapan, Oriental Mindoro, who
registered it and issued the corresponding Original Certificate of Title No. P1537, in accordance with Section 122 of Act No. 496; that, subsequently, upon
complaint made by one Igmedio Gaa against said free patent issued to
respondent, he conducted an investigation thereon and, from the result thereof,
it was found that respondent and his alleged predecessors-in-interest, have
never been in occupation of the land covered by the patent and title, but on the
contrary, it is in the actual and exclusive cultivation of said Igmedio Gaa, who
has been in possession thereof since prior to the last war up to the present,
openly, adversely, and in the concept of an owner; that said patent and title
were issued to respondent by virtue of his said application, which was approved
and given due course due to respondent's misinterpretation and false statement
made in said application; and that inasmuch as respondents is not entitled to a
free patent, on account of his failure to fulfill the conditions prescribed by the
Public Land Act, said patent and title issued to him for the land, are null and void
said patent and title issued to respondent.
Respondent, on April 16, 1958, filed a motion to dismiss, on the ground that
petitioner has no legal capacity to sue, the real party in interest being Igmedio
Gaa, whose rights are adversely affected by the issuance of said patent and title
to him (respondent). On June 2, 1958, petitioner filed an opposition to said
motion to dismiss, which opposition was duly answered by respondent on June
30, 1958.
On August 16, 1958, the court dismissed the petition filed, in an order which in
part reads:
The allegations contained in the petition clearly shows that the action for
the reversion of the lot in question to the government is premised on the
ground of false representation. However, action instituted pursuant to Sec.
101 of the Public Land Act must be in the name of the (Commonwealth)
Republic of the Philippines and prosecuted by the Solicitor General. Since
the present petition is instituted in the name of the Director of the Lands, it
stands to reason that the petition is fundamentally defective. Hence, under
Rule 8, the petition should be dismissed, on the ground that the Director of
Lands is not legally authorized to institute the present petition.
On September 3, 1958, petitioner filed a motion for reconsideration of said
order, but the same was denied by the court on September 30, 1958. Hence,
this appeal.

The only issue to be resolved in this appeal is whether petitioner had the
authority to file the petition in question.
It is not disputed that the free patent to the land in question was issued to
respondent on October 4, 1955, on the basis of which Original Certificate of Title
No. P-1537 was, likewise, issued to him, pursuant to Section 122 of the Land
Registration Act.1 Well settled is the rule that once the patent is registered and
the corresponding certificate of title is issued, the land cases to be part of the
public domain and becomes private property over which the Director of Lands
has neither control nor jurisdiction. (Sumail vs. Judge of the Court of First
Instance of Cotabato, et al., 96 Phil., 946; 51 Off. Gaz. [5] 2413; Republic vs.
Heirs of Ciriaco Carle, 105, Phil, 1231).
There is, likewise, no controversy as to the fact that the present action was
instituted by petitioner on February 19, 1958, or more than 2 years after the
issuance of the aforementioned free patent to respondent, or more than 1 year
after the expiration of the 1-year period provided in Section 38 of the Land
Registration Act for review of the certificate of title, on the ground of fraud. A
public land patent when registered in the corresponding register of the deeds
office, is a veritable torrens title(Dagdag vs. Nepomuceno, 105 Phil., 216; 56 Off.
Gaz. [48] 7294) and becomes as indefeasible as a Torrens title (Ramoso vs.
Obligado, 70 Phil., 86), upon the expiration of 1 year from the date of the
issuance thereof (Lucas vs. Durian, G.R. No. L-7886, prom. September 23, 1957).
As such it can no longer be cancelled or annulled. In the Sumail case (supra), we
stated:
We agree with the Director of Lands and trial court that the latter had no
jurisdiction to entertain Civil Case No. 420 2 which was filed for the purpose
of cancelling the Patent issued by the Director of Lands on lot No. 3633,
and, also for the cancellation of the Original Certificate of Title V-23 issued
to Gepuliano on the basis of his free patent. Under section 122 of Act No.
496 known as the Land Registration Act, when any public lands in the
Philippines are alienated, granted, or conveyed to persons or public or
private corporations, the same shall be brought forthwith under the
operation of the said Act and shall become registered lands and that the
instrument of conveyance in the form of the Patent, before its delivery to
the grantee shall become registered therein a certificate of title shall be
issued as in other cases of registered land. That is the reason why an
original certificate of title was issued to Gepuliano sometime in 1950 on
the basis of his free patent issued in 1994.

xxx

xxx

xxx

As already stated, free patent No. 420 was filed in court only on July
21,1952, or almost three years after the issuance of the free patent. It is,
therefore, clear that the trial court no longer had jurisdiction to entertain
the complaint in Civil Case No. 420 for the reasons already stated, but not
as contended by the Director of Lands that it involved public land, over
which he had exclusive and executive control, because once the patent
was granted and the corresponding certificate of title was issued, the land
ceased to be part of the public domain and become private property over
which the Director of Lands has neither control nor jurisdiction.
Notwithstanding the aforementioned doctrine of indefeasibility of a torrens title
after the expiration of the 1-year period provided in Section 38 of the Land
Registration Act, Section 101 of the Public Law 3 provides a remedy whereby
lands of the public domain fraudulently awarded to the applicant maybe
covered or reverted back to its original owner, the Government. Said section
provides that:
Sec. 101. All actions for the reversions to the Government of Lands of the
public domain or improvements thereon shall be instituted by the Solicitor
General or the Officer acting in his stead, in the proper courts in the name
of Republic (Commonwealth) of the Philippines.
It is quiet clear from the provision just quoted that actions for reversions of
public lands fraudulently awarded are to be instituted by the Solicitor General or
the officer acting in his stead, and that the same must be brought in the name
of the Republic of the Philippines. (See Sumail case, supra).
In support of the view that petitioner may bring the present action, he cited
Section 91 of the Public Land Law. Suffice it to say that said provision is only
applicable where the patent or title is sought to be cancelled or annulled, for
having been procured through fraud or misrepresentation, prior to the expiration
of the 1-year period provided in Section 38 of the Land Registration Act, from its
issuance and registration, and not where, as in the instance case, said period
had already elapsed.
However, we note that petitioner's error in this case merely one of form which is
non-prejudicial. In furtherance of justice, and to the end that the real matter in
dispute within the parties may be completely determined in this proceeding
(Sec. 2, Rule 17, Rules of Court), we have decided to remand this case to the

court of origin for further proceedings, allowing petitioner to amend his


pleadings accordingly, in compliance with the requirement of law. Without
pronouncement as to costs. So ordered.
G.R. No. 173365

April 15, 2010

JULIO FLORES (deceased), substituted by his heirs; BENITO FLORES


(deceased), substituted by his heirs; DOLORES FLORES and VIRGINIA
FLORES-DALERE, represented by their Attorney-in-Fact, JIMENA
TOMAS, Petitioners,
vs.
MARCIANO BAGAOISAN, Respondent.
DECISION
NACHURA, J.:
Petitioners seek a review of the March 29, 2006 Decision 1 and the June 20, 2006
Resolution of the Court of Appeals (CA), denying their motion for
reconsideration.
The case involves a 13,552-square meter portion of a parcel of land covered by
Original Certificate of Title (OCT) No. P-118802 in the name of the Heirs of Victor
Flores, namely: Julio, Benito, Dolores, and Virginia, herein petitioners. OCT No. P11880 was issued pursuant to Homestead Patent No. 138892, given on
November 12, 1973. This property is located in the Municipality of Piddig, Ilocos
Norte.
On December 20, 1976, petitioners, together with their mother Luisa Viernes,
executed a Deed of Confirmation and Quitclaim3 in favor of Vicente T. Lazo.
Through this document, petitioners agreed to "sell, cede, convey, grant, and
transfer by way of QUITCLAIM" the subject property to Lazo. Thereafter,
respondent, Marciano Bagaoisan, bought the subject property from Lazo, as
evidenced by a Deed of Absolute Sale dated February 20, 1977. 4
On April 4, 1983, Viernes and petitioner Virginia Flores-Dalere executed a
Palawag A Nasapataan (Affidavit), attesting to the fact that they conveyed to
Lazo the subject property through the Deed of Confirmation and Quitclaim.
Affiants also attested that Lazo and his predecessors-in-interest had been in
possession of the disputed portion since 1940 and that the same was mistakenly
included in the patent application of Victor Flores.

On June 21, 1996, respondent filed an action for ownership, quieting of title,
partition and damages against petitioners, praying that he be declared as the
true owner of the subject property and that the entire property covered by OCT
No. P-11880 be partitioned among them. In the Complaint, respondent asserted
that he was a tenant of Lazo and that he had been working on the subjec0t
property since time immemorial. He said that, since he bought the property in
1977, he possessed the land as owner and paid real property tax thereon. He
claimed that the subject property was erroneously covered by OCT No. P-11880
and that petitioners have previously recognized such fact, considering that they
executed an affidavit acknowledging the erroneous inclusion of the property in
their title. He averred that, lately, petitioners had denied his ownership of the
land and asserted their ownership thereof by working and harvesting the crops
thereon.5
In answer, petitioners stated that they did not relinquish ownership or
possession of the land to Lazo. While admitting that they executed the Deed of
Confirmation and Quitclaim in favor of Lazo, petitioners claimed that they were
misled into signing the same, with Lazo taking advantage of their lack of
education. Petitioners contended that it was too late for respondent to assert
title to the disputed portion because the title covering the same had already
become indefeasible one year after it was issued. 6
On February 3, 2000, the Regional Trial Court rendered a decision, disposing as
follows:
WHEREFORE, in view of the foregoing, judgment is hereby rendered ordering the
defendants, jointly and severally:
1. To recognize plaintiff Marciano Bagaoisan as owner of the 13,552 sq.m.
parcel of land situated in Barrio Maab-abucay (now Estancia) Municipality
of Piddig, Ilocos Norte;
2. To cease and desist from further possession of said parcel of land and to
immediately reconvey the same to plaintiff;
3. To pay said plaintiff such amount as would be the peso equivalent of 100
cavanes of palay per year, for the loss of harvest he incurred in 1994,
1995, 1996, 1997, 1998 and 1999, computed as the price then obtaining in
said years; and
4. To pay plaintiff the amount of P20,000.00 as reasonable attorneys fees.

No pronouncement as to costs.
SO ORDERED.7
On appeal, the CA upheld the validity of the Deed of Confirmation and
Quitclaim. In light of petitioners admission that they signed the deed after it
was read to them, the CA dismissed their assertion that they did not know the
contents of the document. It further declared that the deed merely confirmed
petitioners non-ownership of the subject property and it did not involve an
alienation or encumbrance. Accordingly, it concluded that the five-year
prohibition against alienation of a property awarded through homestead patent
did not apply.
The CA likewise rejected petitioners contention that the action was barred by
prescription or laches. Citing Vital v. Anore, 8 the CA held that where the
registered owner knew that the property described in the patent and the
certificate of title belonged to another, any statute barring an action by the real
owner would not apply, and the true owner might file an action to settle the
issue of ownership.
The dispositive portion of the assailed March 29, 2006 Decision reads:
WHEREFORE, the appeal is hereby DISMISSED for lack of sufficient merit. The
assailed 3 February 2000 decision by the Regional Trial Court, Laoag City, in Civil
Case No. 11048-14 is hereby AFFIRMED.
SO ORDERED.9
The CA likewise denied petitioners motion for reconsideration in its Resolution
dated June 20, 2006.10
Consequently, petitioners filed this petition for review, insisting that the Deed of
Confirmation and Quitclaim is void as its contents were not fully explained to
them, and it violates Section 118 of the Public Land Act (Commonwealth Act No.
141), which prohibits the alienation of lands acquired through a homestead
patent.
The petition is meritorious.
Without going into petitioners allegation that they were unaware of the
contents of the Deed of Confirmation and Quitclaim, we nonetheless hold that
the deed is void for violating the five-year prohibitory period against alienation

of lands acquired through homestead patent as provided under Section 118 of


the Public Land Act, which states:
Sec. 118. Except in favor of the Government or any of its branches, units, or
institutions, lands acquired under free patent or homestead provisions shall not
be subject to encumbrance or alienation from the date of the approval of the
application and for a term of five years from and after the date of issuance of
the patent and grant, nor shall they become liable to the satisfaction of any
debt contracted prior to the expiration of said period, but the improvements or
crops on the land may be mortgaged or pledged to qualified persons,
associations, or corporations.
No alienation, transfer, or conveyance of any homestead after five years and
before twenty-five years after the issuance of title shall be valid without the
approval of the Secretary of Agriculture and Commerce, which approval shall not
be denied except on constitutional and legal grounds.
We do not agree with the CA that the Deed of Confirmation and Quitclaim
merely "confirmed" petitioners non-ownership of the subject property. The deed
uses the words "sell," "cede," "convey," "grant," and "transfer." These words
admit of no other interpretation than that the subject property was indeed being
transferred to Lazo.
The use of the words "confirmation" and "quitclaim" in the title of the document
was an obvious attempt to circumvent the prohibition imposed by law. Labeling
the deed as a confirmation of non-ownership or as a quitclaim of rights would
actually make no difference, as the effect would still be the alienation or
conveyance of the property. The act of conveyance would still fall within the
ambit of the prohibition. To validate such an arrangement would be to throw the
door open to all possible fraudulent subterfuges and schemes that persons
interested in land given to a homesteader may devise to circumvent and defeat
the legal provisions prohibiting their alienation within five years from the
issuance of the patent.11
It bears stressing that the law was enacted to give the homesteader or patentee
every chance to preserve for himself and his family the land that the State had
gratuitously given to him as a reward for his labor in cleaning and cultivating
it.12 Its basic objective, as the Court had occasion to stress, is to promote public
policy, that is to provide home and decent living for destitutes, aimed at
providing a class of independent small landholders which is the bulwark of
peace and order.13 Hence, any act which would have the effect of removing the

property subject of the patent from the hands of a grantee will be struck down
for being violative of the law.
To repeat, the conveyance of a homestead before the expiration of the five-year
prohibitory period following the issuance of the homestead patent is null and
void and cannot be enforced, for it is not within the competence of any citizen to
barter away what public policy by law seeks to preserve. 14 There is, therefore,
no doubt that the Deed of Confirmation and Quitclaim, which was executed
three years after the homestead patent was issued, is void and cannot be
enforced.1avvphi1
Furthermore, respondent failed to present sufficient evidence to surmount the
conclusiveness and indefeasibility of the certificate of title.
An OCT issued on the strength of a homestead patent partakes of the nature of
a certificate issued in a judicial proceeding and becomes indefeasible and
incontrovertible upon the expiration of one year from the date of the
promulgation of the Director of Lands order for the issuance of the
patent.15 After the lapse of such period, the sole remedy of a landowner, whose
property has been wrongfully or erroneously registered in anothers name is to
file an action for reconveyance so long as the property has not passed to an
innocent purchaser for value.16 In order that an action for reconveyance based
on fraud may prosper, it is essential for the party seeking reconveyance to
prove, by clear and convincing evidence, his title to the property and the fact of
fraud.17
Respondent did not allege in his complaint or prove during the trial that fraud
attended the registration of the subject property in petitioners names. In fact,
there was no allegation as to how petitioners were able to secure title to the
property despite the alleged ownership of respondents predecessor.
More importantly, respondent failed to prove that he has title to the subject
property. He merely asserted that his predecessors-in-interest had been in
possession of the property since 1940. The basic presumption is that lands of
whatever classification belong to the State and evidence of a land grant must be
"well-nigh incontrovertible." The Public Land Act requires that the possessor or
his predecessors-in-interest must be in open, continuous, exclusive, and
notorious possession and occupation of the land for at least thirty years. When
these conditions are complied with, the possessor is deemed to have acquired,
by operation of law, a right to a government grant, without the necessity of a
certificate of title being issued. The land ceases to be a part of the public

domain and beyond the authority of the Director of Lands, 18 such that the latter
would have no more right to issue a homestead patent to another person.
Respondent merely established that he had been in possession of the property
and that he had been paying real property taxes thereon since 1977. The only
evidence on record attesting to the fact that respondent and his predecessorsin-interest had been in possession of the property since 1940 was the affidavit
executed by some of petitioners. This, however, would not suffice.
In closing, it would be well to mention that the execution of the Deed of
Confirmation and Quitclaim within the five-year prohibitory period also makes
the homestead patent susceptible to cancellation, and the subject property
being reverted to the public domain.19 It is the Solicitor General, on behalf of the
government, who is by law mandated to institute an action for
reversion.20 Should the Solicitor General decide to file such an action, it is in that
action that petitioners defenses, particularly their alleged lack of knowledge of
the contents of the deed, will have to be resolved.
WHEREFORE, the petition is GRANTED. The March 29, 2006 Decision of the
Court of Appeals and its June 20, 2006 Resolution are REVERSED and SET ASIDE.
The complaint for ownership, quieting of title and damages is DISMISSED,
without prejudice to an action for reversion that the Solicitor General may
decide to file for the State.
G.R. No. 126875

August 26, 1999

HEIRS OF MARIANO, JUAN, TARCELA and JOSEFA, all surnamed


BRUSAS, petitioners,
vs.
COURT OF APPEALS and HEIRS OF SPOUSES INES BRUSAS and CLETO
REBOSA, respondents.
BELLOSILLO, J.:
This is a bitter dispute spanning more than two (2) decades of protracted legal
entanglements and deep-seated enmity among the protagonists, even
descending to their children, each claiming ownership over a 19-hectare land
located in San Francisco, Baao, Camarines Sur. In view of the prolonged
litigation, the original parties have since died and are now substituted by their
heirs.

Petitioners, heirs of Juan, Mariano, Tarcela and Josefa, all surnamed Brusas,
claimed that the disputed property, formerly a public land, was part of the 33hectare land in the actual physical possession of their grandfather Sixto Brusas
since 1924, having inherited the same from their great grandfather Pedro
Brusas. Sometime in 1946 Sixto Brusas caused the property to be surveyed in
the name of his five (5) children, namely, Juan, Ines, Mariano, Tarcela and Josefa.
The survey was approved as Psu-116520.1 As indicated in the survey plan the
property was traversed by the Barit River, and the eastern portion thereof with
an aggregate area of 19.8992 hectares was denominated as Lots 1 and 2, while
the western portion measuring 13.2439 hectares was designated as Lots 3 and
4. In the same year, the property was subdivided among the five (5) children of
Sixto Brusas. The partition was made lengthwise so that each heir would have
access to the river and, as was the custom of the place, the distribution was
made according to their age: the southernmost lot was assigned to Juan being
the eldest, followed successively by Ines, Mariano, Tarcela and Josefa. 2 All of
them purportedly took immediate possession of their respective
shares.1wphi1.nt
On 17 July 1968 Ines Brusas applied for and was granted a free patent over Lots
1 and 2 of Psu-116520 with an aggregate area of 19.8992 hectares for which
OCT No. 23356 was issued in her name. Thus, when Mariano Brusas and Josefa
Brusas filed their sworn statements of landholdings in 1973 they supposedly
discovered that their properties were already titled in the name of their sister
Ines. The discovery triggered a controversy among the Brusas siblings and
earnest efforts to settle the conflict before the barangay officials, the local
police and the PC Provincial Commander proved futile.
Private respondents, heirs of Ines Brusas and Cleto Rebosa, denied on the other
hand that Lots 1 and 2 were owned and possessed by their grandfather Sixto
Brusas during his lifetime. They asserted that Ines Brusas was the absolute
owner having entered the property as early as 1924. Since then Ines Brusas and
her husband Cleto Rebosa were clearing the land on their own by cutting down
trees and removing their roots it being a forested area. In 1957 Ines Brusas
applied for a free patent which was approved and the corresponding certificate
of title issued in 1967.
Sometime in 1974 Ines Brusas filed a complaint for recovery of six (6) hectares
of land alleging that her brothers and sisters forcibly entered and deprived her
of that portion of the property.3 Juan, Josefa, Mariano and Tarcela countered by
instituting in the same court an action for reconveyance imputing fraud,

misrepresentation and bad faith to Ines Brusas in using a forged affidavit to


obtain title over Lots 1 and 2 despite full knowledge that she owned only 1/5
portion thereof.4
After the cases were consolidated trial dragged on for nineteen (19) years. The
lower court finally rendered its decision in 1993 dismissing the complaint filed
by Ines Brusas, declaring Lots 1 and 2 as the pro-indiviso property of the Brusas
siblings, and ordering Ines Brusas to reconvey to her brothers and sisters their
respective shares in the disputed property.
On appeal, however, the Court of Appeals in its Decision of 16 July 1996
reversed and set aside the decision of the trial court thus
WHEREFORE . . . . the appealed decision is REVERSED and SET ASIDE and
another judgment is hereby rendered as follows:
1. In Civil Case No. IR-1058, ordering defendants and/or their successors-ininterest to vacate the land described in paragraph 4 of the complaint
and/or to deliver possession thereof to plaintiffs or their successors-ininterest;
2. Dismissing the complaint for reconveyance and damages in Civil Case
No. IR-1059.
The Court of Appeals ratiocinated
Apart from the self-serving and bare allegations of appellees, no competent
evidence was adduced to substantiate their claim of fraud on the part of
Ines Brusas in her application for a free patent over the land in dispute.
They submitted specimens of their signatures to the NBI office at Naga City
for examination but failed to submit to the court the result thereof. Such
failure indicates either that they did not pursue their request for
examination or that, if they did, the result thereof is adverse to their cause.
It is significant to note that aside from the supposedly falsified affidavit,
Exhibit 4, another affidavit was executed by Ines, together with Tarcela,
Juan and Josefa, all surnamed Brusas, renouncing their rights to Lots 3 and
4 in favor of Mariano Brusas (Exhibit 11). Both appear to have been
notarized by the same Notary Public on April 22, 1960. The existence of the
two affidavits, Exhibits 4 and 11, strongly suggests that the Brusas
recognized Ines Brusas as the sole claimant of Lots 1 and 2 and Mariano
Brusas, the sole claimant of lots 3 and 4.

There is likewise a presumption of regularity in the performance of official


duty. There is no showing that the grant of a free patent in favor of Ines
Brusas was predicated solely on the affidavit of waiver, Exhibit 4, or that
without it her application would not have been given due course.
It must be borne in mind, in this regard, that the land in dispute was
originally a public land. The occupation and cultivation thereof by Sixto
Brusas, the father of Ines, Tarcela, Josefa, Juan and Mariano Brusas, did not
make it a part of his hereditary estate. If he had complied with all the legal
requirements for the grant of a free patent, he could have filed the
corresponding application therefor. But he did not. Hence, he could not
have transmitted ownership thereof to his heirs upon his death (citing
Naval v. Jonsay, 50 O.G. 4792)
Their motion for reconsideration having been denied by the Court of Appeals in
its Resolution of 30 September 1996, petitioners now come to us through this
petition for review.
The pivotal issues to be resolved are: first, who are the rightful owners of the
disputed property is it the heirs of Mariano, Juan, Josefa and Tarcela Brusas,
whose claim of ownership is evidenced by a survey and subdivision plan; or, is it
the heirs of spouses Ines Brusas and Cleto Rebosa, whose claim of ownership
flows from an original certificate of title in the name of their parents, and
covering the litigated property? And second, was there fraud on the part of Ines
Brusas in causing the registration of the disputed land under her name thus
entitling petitioners to the reconveyance of their shares therein?
It is a fundamental principle in land registration that the certificate of title
serves as evidence of an indefeasible and incontrovertible title to the property
in favor of the person whose name appears therein. A title once registered
under the Torrens System cannot be defeated even by adverse, open and
notorious possession; neither can it be defeated by prescription. It is notice to
the whole world and as such all persons are bound by it and no one can plead
ignorance of the registration.5
The real purpose of the Torrens System of land registration is to quiet title to
land and stop forever any question as to its legality. Once a title is registered the
owner may rest secure without the necessity of waiting in the portals of the
court, or sitting on the mirador de su casa, to avoid the possibility of losing his
land.6 Indeed, titles over lands under the Torrens system should be given

stability for on it greatly depends the stability of the country's economy. Interest
reipublicae ut sit finis litium.
This does not mean, however, that the landowner whose property has been
wrongfully or erroneously registered in another's name is without remedy in law.
When a person obtains a certificate of title to a land belonging to another and
he has full knowledge of the rights of the true owner, he is considered guilty of
fraud. He may then be compelled to transfer the land to the defrauded owner so
long as the property has not passed to the hands of an innocent purchaser for
value.7
In the instant case, the litigated property is still registered in the name of Ines
Brusas, so that insofar as procedure is concerned, petitioners were correct in
availing of the remedy of reconveyance. However, an action for reconveyance
presupposes the existence of a defrauded party who is the lawful owner of the
disputed property. It is thus essential for petitioners to prove by clear and
convincing evidence their title to the property, and the fact of fraud committed
by Ines Brusas in registering their property in her name, which they miserably
failed to do.
Primarily, the survey and subdivision plan submitted in evidence by petitioners
are inferior proofs of ownership and cannot prevail against the original
certificate of title in the name of Ines Brusas who remains and is recognized as
the registered owner of the disputed property.
The survey of the land in the name of the five (5) children of Sixto Brusas is only
an indication that each has an interest over the property, but it does not define
the nature and extent of those interests, nor the particular portions of the
property to which those interests appertain. The subdivision plan, on the other
hand, is of doubtful evidentiary value and can hardly be the basis of a claim of
ownership. A careful examination thereof shows that it is nothing but a sketch of
the land purportedly prepared by a private land surveyor. It is not apparent
therein when and where the partition was made, or who caused the property to
be subdivided. Worse, this document was not even signed by any of the parties
to the supposed partition to show their conformity thereto, nor acknowledged in
writing by any of them or their heirs.
Even petitioners' tax declarations and tax receipts are unavailing. It is wellsettled that they are not conclusive evidence of ownership or of the right to
possess land, in the absence of any other strong evidence to support them. 8 The
fact that the disputed property may have been declared for taxation purposes in

the names of the brothers and sisters of Ines Brusas does not necessarily prove
their ownership thereof. The tax receipts and tax declarations are
merely indicia of a claim of ownership.
What perhaps militates heavily against petitioners is the Affidavit (of waiver)
marked Exh. "4" executed sometime in 1960 by Mariano, Tarcela, Juan and
Josefa, whereby they relinquished, ceded and transferred to Ines Brusas their
rights and interests over the controversial property, and recognized her as the
absolute owner thereof, thus
WE, MARIANO BRUSAS, JUAN BRUSAS, TARCELA BRUSAS and JOSEFA
BRUSAS, all of legal age, married except the last who is a widow, residence
(sic) and with postal address at Baao, Camarines Sur, after having been
duly sworn to according to law, state the following, to wit
That we are the brothers and sisters of Ines Brusas, applicant of Free
Patent Application No. 10-4375 covering Lots 1 and 2, Psu-116520, situated
in Baao, Camarines Sur;
That by virtue of this instrument, we relinquish, cede and transfer
whatever rights and interests we might have over Lots 1 and 2, Psu116520 in favor of our sister, Ines Brusas;
That we do not have any opposition to Ines Brusas acquiring title to said
Lots 1 and 2, Psu-116520 by virtue of her Free Patent Application No. 104375;
That we recognize our sister, Ines Brusas as the legal and absolute owner
of Lots 1 and 2, Psu-116520 as covered by her Free Patent Application No.
10-4375;
WHEREFORE, we sign this instrument of our own will and voluntary act and
after the same has been translated in our own native dialect and
understood fully its contents, this April 20, 1960 at Naga City.
(SGD) MARIANO BRUSAS

(SGD) JUAN BRUSAS

(SGD) TARCELA BRUSAS

(SGD) JOSEFA BRUSAS

On the basis of the foregoing reasons alone the instant case should immediately
be dismissed. Having failed to show any valid title to the land involved
petitioners are not the proper parties who can rightfully claim to have been

fraudulently deprived thereof. Nonetheless, for the satisfaction of all and sundry,
we shall proceed to refute their accusation of fraud.
First, Ines Brusas allegedly misrepresented in her application for free patent that
she was the only claimant of the disputed property, without disclosing that her
other brothers and sisters were claiming portions that supposedly belonged to
them. It is worthy to emphasize, to the point of being repetitious, that Juan,
Tarcela, Mariano and Josefa executed an affidavit of waiver recognizing Ines
Brusas as the legal and absolute owner of Lots 1 and 2, and manifesting that
they have no opposition to Ines Brusas' acquiring certificates of title over those
lots. It was on the basis of this affidavit of waiver that Ines stated in her
application for free patent that she was the sole claimant of Lots 1 and 2.
Certainly this is not fraud. At any rate, it appears from the records that Juan,
Tarcela, Mariano and Josefa were notified of the application for free patent of
Ines Brusas and duly afforded the opportunity to object to the registration and
to substantiate their claims, which they failed to do. Hence their opposition was
accordingly disregarded and Ines Brusas' application was given due
course.9 Petitioners cannot thus feign ignorance of the registration. Moreover, it
is significant that petitioners never contested the order of the Bureau of Lands
disregarding their claims, i.e., by filing a motion for reconsideration, or an
appeal, for that purpose. This could only mean that they either agreed with the
order or decided to abandon their claims.
Petitioners next assailed the genuineness of Exh. "4" asserting that the
signatures therein were forged. However, no evidence was adduced by them to
substantiate their allegation. It appears that they submitted for examination by
the NBI eighteen (18) specimen signatures of Juan, Tarcela, Mariano and Josefa.
Unfortunately, no standard signature could be found for the year 1960 when
Exh. "4" was executed.10 Petitioners admitted that they were unable to produce
what was required by the NBI, hence, they "just had to give up." 11
Furthermore, there was another Affidavit (Exh. "11") signed in the same year by
the Brusases, Ines included, recognizing Mariano Brusas as the sole claimant of
Lots 3 and 4 and waiving their interests therein in his favor. This fact all the
more confirms that the affidavit of waiver in favor of Ines Brusas was authentic.
As correctly observed by the appellate court
It is significant to note that aside from the supposedly falsified affidavit,
Exhibit 4, another affidavit, was executed by Ines, together with Tarcela,
Juan and Josefa, all surnamed Brusas, renouncing their rights to Lots 3 and
4 in favor of Mariano Brusas (Exhibit 11). Both appear to have been

notarized by the same Notary Public on April 22, 1960. The existence of the
two affidavits, Exhibits 4 and 11, strongly suggests that the Brusas[es]
recognized Ines Brusas as the sole claimant of Lots 1 and 2 and Mariano
Brusas, the sole claimant of Lots 3 and 4. 12
It is not for private respondents to deny forgery. The burden of proof that the
affidavit of waiver is indeed spurious rests on petitioners. Yet, significantly, even
as they insist on forgery they never really took serious efforts in establishing
such allegation by preponderant evidence. It must be stressed that mere
allegations of fraud are not enough. Intentional acts to deceive and deprive
another of his right, or in some manner injure him, must be specifically alleged
and proved.
The affidavit of waiver in favor of Ines, being a public document duly
acknowledged before a notary public, under his hand and seal, with his
certificate thereto attached, is prima facie evidence of the facts stated
therein.13Petitioners cannot impugn its validity by mere self-serving allegations.
There must be evidence of the clearest and most satisfactory character.
Correlatively, in granting the application of Ines Brusas for free patent, the
Bureau of Lands enjoyed the presumption of regularity in the performance of its
official duties. This presumption has not been rebutted by petitioners as there
was likewise no evidence of any anomaly or irregularity in the proceedings
which led to the registration of the land.
Finally, as we are not trier of facts, we generally rely upon and are bound by the
conclusions of the lower courts, which are better equipped and have better
opportunity to assess the evidence first-hand, including the testimony of
witnesses. We have consistently adhered to the rule that findings of the Court of
Appeals are final and conclusive, and cannot ordinarily be reviewed by this
Court as long as they are based on substantial evidence. Among the exceptions
to this rule are: (a) when the conclusion is grounded entirely on speculations,
surmises or conjectures; (b) when the inference made is manifestly mistaken,
absurd or impossible; (c) where there is grave abuse of discretion; (d) when the
judgment is based on a misapprehension of facts; (e) when the findings of facts
are conflicting; and, (f) when the Court of Appeals, in making its findings, goes
beyond the issues of the case and the same is contrary to the admissions of
both the appellant and appellee. We emphasize that none of these exceptions is
present in this case.
WHEREFORE, the petition is DENIED. The 16 July 1996 Decision of the Court of
Appeals ordering petitioners to vacate the disputed property and restore

respondents in possession thereof, as well as its 30 September 1996 Resolution


denying reconsideration, is AFFIRMED. Costs against petitioners.1wphi1.nt
G.R. No. 158455

June 28, 2005

SHERWILL DEVELOPMENT CORPORATION, petitioner,


vs.
SITIO STO. NIO RESIDENTS ASSOCIATION, INC. and/or NILDA
DEVILLERES, and the LANDS MANAGEMENT BUREAU, respondents.
DECISION
CALLEJO, SR., J.:
This is a petition for review on certiorari assailing the Order1 of the Regional Trial
Court (RTC) of Muntinlupa City, Branch 205, dismissing Civil Action No. 02-237
on the ground of litis pendentia and forum shopping.
Petitioner Sherwill Development Corporation is the registered owner of two
parcels of land in Muntinlupa, Rizal. Lot 88 is covered by Transfer Certificate of
Title (TCT) No. 1319182 consisting of 8,774 square meters, while Lot 86, with an
area of 16,766 square meters, is covered by TCT No. 131919. 3 Both lots form
part of the Muntinlupa Estate, while the titles thereon were issued by the
Registry of Deeds of Rizal on September 24, 1913.
On October 16, 2002, the petitioner filed a Complaint 4 for quieting of title
against respondents Sitio Sto. Nio Residents Association, Inc. (SSNRAI), Nilda
Devilleres, and the Lands Management Bureau (LMB). The petitioner made the
following allegations in its complaint:
6. Since petitioner acquired subject two (2) lots in 1984, it has dutifully
paid realty taxes thereon. A copy of its latest tax-payment receipt is
attached as Annex "E."
7. In the late 1960s and the 1970s, and up to the 1980s, unauthorized
persons, without the prior knowledge and consent of petitioner and/or Mr.
Lipio, by force, stealth and strategy, unlawfully entered and occupied the
lots covered by TCT Nos. 131918 and 131919. Among said unauthorized
persons are members and officers of SSNRAI, Devilleres included;
8. Said LMB Case No. 7-98 is the first step of respondents to disturb and/or
cast clouds on TCT Nos. 131918 and 131919, as in fact they are disturbing

and casting clouds over said titles. From all indications,LMB is set to
recommend to the Philippine Government, [through] the Office of the
Solicitor General (OSG), the "nullification" of TCT Nos. 131918 and 131919
and/or the reversion thereof to the Philippine Government, despite the fact
that the latter, sometime in 1927 or thereabout, sold and/or disposed of
subject lots, then covered by Original Certificate of Title (OCT) No. 684,
pursuant to Act No. 1120 and other pertinent laws. Petitioner is the third or
fourth transferee and buyer in good faith of the lots in question. Certainly,
its titles (TCT Nos. 131918 and 131919) have long become indefeasible
and conclusive, considering that indefeasibility and conclusiveness of titles
accrue one year after the issuance thereof. 5
As part of its prayer for relief, the petitioner prayed that a writ of preliminary
injunction be issued, ordering the LMB to cease and desist from proceeding with
the hearings in LMB Case No. 7-98, a case pending before it where petitioners
titles to the subject lots were being questioned by the respondents SSNRAI and
Nilda Devilleres. Thus:
WHEREFORE, petitioner most respectfully prays for the following:
(a) The immediate issuance of a writ of preliminary injunction against LMB,
ordering it to cease and desist from hearing or continuing its hearing of
LMB Case No. 7-98; thereafter, after due hearing, the issuance of another
order making said injunction permanent; and
(b) The quieting of title of TCT Nos. 131918 and 131919, and the complete
removal of any and all clouds thereon, and the accompanying declaration
that said titles are indefeasible and conclusive against the whole world, as
in fact they are.
Petitioner further prays for other reliefs which this Honorable Court may deem
proper to grant.6
The trial court set the hearing of the prayer of the writ of preliminary injunction
at 8:30 a.m. of November 22, 2002.7 On November 6, 2002, the private
respondents, through counsel, filed a Motion to Dismiss 8 the petition on the
following grounds:
(a) THE PETITION ITSELF IS FATALLY DEFECTIVE AS THE CERTIFICATE OF
NON-FORUM SHOPPING DID NOT SPECIFY AND/OR DISCLOSE THE

PENDENCY OF THE ADMINISTRATIVE CASE, LANDS MANAGEMENT BUREAU


CASE NO. 7-98;
(b) PETITIONER IS GUILTY OF FORUM-SHOPPING; and
(c) THERE IS ANOTHER ACTION PENDING BETWEEN THE PARTIES
INVOLVING THE SAME SUBJECT MATTER AND FOR THE SAME CAUSE.
In its opposition to the motion to dismiss, the petitioner averred that contrary to
the private respondents allegations, it did disclose the pendency of LMB Case
No. 7-98 in paragraph 3 of its petition, to wit:
3. Said LMB Case No. 7-98 was filed on May 5, 1995 and is, at present, being
heard by [the] LMB thru Hearing Officer Rogelio C. Mandar, the same Special
Investigator-Designate who, on Feb. 12, 1998, wrote the LMB Director thru the
Chief, Legal Division, recommending "that an order be issued directing the
Surveys Divisions of this Office or its duly-authorized representatives to conduct
verification and relocation survey" of subject lots. In effect, Atty. Mandar as such
Hearing Officer has already prejudged the case in favor of SSNRAI. A copy of
the petition filed by SSNRAI (minus annexes) is attached as Annex "B," and that
of Atty. Mandars letter consisting of seven (7) pages (minus annexes), as Annex
"C;"9
According to the petitioner, there was no identity of actions and reliefs sought in
the two cases. The petitioner pointed out that in LMB Case No. 7-98, the private
respondents (as the petitioners therein) sought the declaration of the nullity of
the said titles issued in its favor, on their claim that their issuance was "highly
irregular and erroneous," and that the subject properties were not disposed of in
accordance with Act No. 1120, otherwise known as the Friar Lands Act. On the
other hand, in SP Civil Action No. 02-237, the petitioners right of action was
based on the private respondents act of disturbing and casting clouds over TCT
Nos. 131918 and 131919, considering that such titles have long become
indefeasible and conclusive.
The motion to dismiss filed by the private respondents was submitted for
resolution on November 15, 2002.10
In its Order11 dated February 24, 2003, the trial court dismissed the petition on
the grounds of litis pendencia and forum shopping. In so ruling, the trial court
made the following ratiocination:

As alleged in the petition filed with the LMB itself, quoted elsewhere in this
order, and as shown in the copy of said petition attached to this petition, herein
petitioner is respondent therein and herein private respondents are petitioners
there. The element of identity of parties is therefore present. The cause of
action and reliefs sought in the two sets of cases are, likewise, identical. The
ultimate issue involved in both is who between the parties has a better right to
the properties covered by TCT Nos. 131918 and 131919 which are alleged in the
LMB case to originally constitute a portion of the Muntinlupa Friar Lands Estate
titled in the name of the government. As to the third requirement that the result
of the first action is determinative of the second, it is true here inasmuch as the
Lands Management Bureau, public respondent herein before which the case
earlier filed is pending, absorbed the functions and powers of the Bureau of
Lands (abolished by Executive Order No. 131) and is mandated by law to
implement the provisions of the Public Land Act (Com. Act No. 141) which
governs the administration and disposition of lands commonly known as "friar
lands," so an earlier recourse to it would be an exercise of the doctrine of
exhaustion of administrative remedies, regardless of which party is successful.
It is clear from the petition that what the petitioner wants is for this court to
enjoin public respondent from proceeding with the case before it and take over
the same which it cannot and should not do.
WHEREFORE, this case is hereby dismissed on the grounds of litis
pendencia and forum shopping. No cost.
SO ORDERED.12
The petitioner filed a motion for reconsideration, which the trial court denied in
an Order13 dated May 29, 2003.
Hence, the present petition, on the following question of law: whether or not the
grounds of litis pendentia and forum shopping insofar as SP Civil Action No. 02237 is concerned are applicable. The petitioner puts forth the following
arguments:
1. THE GROUNDS OF "LITIS PENDENCIA AND FORUM SHOPPING" RELIED UPON
BY THE COURTA QUO IN DISMISSING SP. CIVIL ACTION NO. 02-237 AND DENYING
PETITIONERS MOTION FOR RECONSIDERATION ARE SHAKY AT BEST. IN FACT,
THEY ARE NON-EXISTENT.14

2. MOREOVER, AS ALREADY RAISED BY PETITIONER IN ITS REPLIES TO


RESPONDENTS COMMENTS ON ITS AFORESAID MOTION FOR
RECONSIDERATION, LMB HAS NO JURISDICTION TO TRY LMB CASE NO. 7-98
INASMUCH AS CASES LIKE THIS FALL UNDER THE EXCLUSIVE ORIGINAL
JURISDICTION OF REGIONAL TRIAL COURTS.15
To bolster its pose that no forum shopping and litis pendentia exist, the
petitioner invokes the ruling of the Court inSilahis International Hotel, Inc. v.
NLRC, et al.,16 averring that when a party does not pursue simultaneous
remedies in fora, there is no forum shopping. The petitioner reiterates that the
issue and the causes of action in LMB Case No. 7-98 and SP Civil Action No. 02237 are different. It points out that it certainly is not "a party against whom an
adverse judgment or order has been rendered in one forum"; neither has it
instituted "two or more actions or proceedings grounded on the same cause."
The petitioner further insists that the LMB has no jurisdiction to try LMB Case
No. 7-98; it is the regional trial courts that have original jurisdiction in such
cases. The petitioner points out that the private respondents failed to file an
action for nullification of TCT Nos. 131918 and 131919 within the one-year
period from the date of issuance of the subject titles and are, therefore, barred
from questioning the said titles. The petitioner further points out that the
certificates of title under the Torrens system of registration cannot be
collaterally attacked. The petitioner concludes that the trial court should not
have dismissed SP Civil Action No. 02-237, but instead should have given it due
course.
The Office of the Solicitor General (OSG), for its part, points out that the parties
in both cases are identical. It further points out that LMB Case No. 7-98 was filed
as early as 1995, and that the petitioner subsequently initiated SP Civil Action
No. 02-237 obviously to preempt the outcome of the case before the Lands
Management Bureau. Hence, the trial court correctly dismissed SP Civil Action
No. 02-237 on the ground of litis pendentia.
The OSG further contends that the determination of whether there was a
violation of the Friar Lands Act, the very issue raised in the two cases, is well
within the authority of the LMB to investigate, it being the agency of the
government charged with administrative control over Friar Land Estates under
Commonwealth Act No. 2550. As such, according to the OSG, the LMB has
primary jurisdiction over the subject matter. The OSG points out that the
petitioners resort to the courts is premature, considering that the LMB has
primary jurisdiction over the matter.

The OSG, likewise, avers that the petitioner is guilty of violating Section 5, Rule
7 of the Rules of Court, on certification against forum shopping. It points out that
the petitioners representative, Roland Leslie V. Lipio, certified under oath that
the petitioner "had no knowledge of any action pending before any tribunal or
agency." It further points out that it cannot be said that the petitioner was
unaware of LMB Case No. 7-98, since it even filed an Answer therein on July 31,
1995. To justify the dismissal of the case, the OSG cites the ruling of the Court
inRepublic v. Carmel Development, Inc.17
The Ruling of the Court
At the outset, the Court notes that the petitioner assails an order of dismissal
issued by the RTC, with direct recourse to this Court. It must be stressed that in
so doing, the petitioner violated an established policy, one that is necessary to
prevent inordinate demands upon the Courts time and attention which are
better devoted to those matters within its exclusive jurisdiction, and to prevent
further overcrowding of the Courts docket. 18 There is, after all, a hierarchy of
courts which is determinative of the venue of appeals. 19 This rule may be
relaxed only for special and important reasons clearly and specifically set out in
the petition.20 The petitioner should thus have filed its petition first before the
Court of Appeals, conformably with this principle of hierarchy of courts. The
Court notes that the petitioner failed to satisfactorily explain its failure to
comply with or its non-observance of judicial hierarchy.
Even upon the merits of the case, the petition at bar is still destined to fail for
the following additional reasons:
First. Contrary to the petitioners contention, at this instance, it is the courts
which should defer the exercise of jurisdiction on the matter. Jurisdiction having
been correctly assumed by the Director of Lands over the parties conflicting
claims, the case should, in accordance with law, remain there for final
adjudication.21 After all, the Director of Lands, who is the officer charged with
carrying out the provisions of the Public Land Act, has control over the survey,
classification, lease, sale or any other form of concession or disposition and
management of the public lands, and his finding and decision as to questions of
fact, when approved by the Secretary of Agriculture and Natural Resources (now
Secretary of Environment and Natural Resources), is conclusive. 22
The power and authority of the Director of Lands were discussed in the recent
case of Republic of the Philippines v. De Guzman.23 According to the Court, the

Director of Lands does not lose authority over the land even upon the issuance
of an original certificate of title over the same. Thus:
The authority of the Director of Lands to investigate conflicts over public
lands is derived from Section 91 of the Public Land Act. In fact, it is not merely
his right but his specific duty to conduct investigations of alleged fraud in
securing patents and the corresponding titles thereto. While title issued on the
basis of a patent is as indefeasible as one judicially secured, such indefeasibility
is not a bar to an investigation by the Director of Lands as to how such title had
been acquired, if the purpose of such investigation is to determine whether or
not fraud had been committed in securing such title, in order that the
appropriate action for reversion may be filed by the Government. 24
As a rule then, courts have no jurisdiction to intrude upon matters properly
falling within the powers of the LMB.25
On the petitioners claim that its titles to the subject lots have been rendered
indefeasible, the pronouncement of the Court in Republic v. Court of Appeals26 is
instructive:
It is true that under Section 122 of the Land Registration Act, a Torrens title
issued on the basis of a free patent or a homestead patent is as indefeasible as
one judicially secured. And in repeated previous decisions of this Court that
indefeasibility has been emphasized by our holding that not even the
Government can file an action for annulment, but at the same time, it has been
made clear that an action for reversion may be instituted by the Solicitor
General, in the name of the Republic of the Philippines. It is also to the public
interest that one who succeeds in fraudulently acquiring title to a public land
should not be allowed to benefit therefrom, and the State should, therefore,
have an even existing authority, thru its duly-authorized officers, to inquire into
the circumstances surrounding the issuance of any such title, to the end that the
Republic, thru the Solicitor General or any other officer who may be authorized
by law, may file the corresponding action for the reversion of the land involved
to the public domain, subject thereafter to disposal to other qualified persons in
accordance with law. In other words, the indefeasibility of a title over land
previously public is not a bar to an investigation by the Director of Lands as to
how such title has been acquired, if the purpose of such investigation is to
determine whether or not fraud had been committed in securing such title in
order that the appropriate action for reversion may be filed by the
Government.27

Second. The OSG correctly invoked the doctrine of primary jurisdiction in this
case. Indeed, the courts cannot and will not resolve a controversy involving a
question which is within the jurisdiction of an administrative tribunal, especially
where the question demands the exercise of sound administrative discretion
requiring the special knowledge, experience and services of the administrative
tribunal to determine technical and intricate matters of fact. 28 The doctrine of
primary jurisdiction applies where a claim is originally cognizable in the courts,
and comes into play whenever enforcement of the claim requires the resolution
of issues which, under a regulatory scheme, have been placed within the special
competence of an administrative body; in such case, the judicial process is
suspended pending referral of such issues to the administrative body for its
view. And in such cases, the court cannot arrogate unto itself the authority to
resolve a controversy, the jurisdiction over which is initially lodged with an
administrative body of special competence, 29 in this case, the LMB.
Third. The trial court correctly ruled that the petitioners action was barred by
the pendency of the proceedings before the LMB. For litis pendencia to lie, the
following requisites must be satisfied:
1. Identity of parties or representation in both cases;
2. Identity of rights asserted and relief prayed for;
3. The relief must be founded on the same facts and the same basis; and
4. Identity of the two preceding particulars should be such that any
judgment, which may be rendered in the other action, will, regardless of
which party is successful, amount to res judicata on the action under
consideration.30
To the Courts mind, these requisites are present in the instant case. For one,
the parties in the LMB case and in SP Civil Action No. 02-237 are the same.
There is, likewise, identity of rights asserted and reliefs prayed for. The petition
filed by the private respondents SSNRAI and its President Devilleres before the
LMB alleged that the lots in question had been the subject of "double titling"; on
the other hand, the petition with prayer for preliminary injunction filed before
the RTC sought the declaration from the court that TCT Nos. 131918 and
131919, in the name of the petitioner, are indefeasible and conclusive as
against the whole world. The resolution of the foregoing issue would likewise
require the presentation of evidence from the parties. Verily, the conclusion in
one proceeding would amount to the adjudication of the merits on the other

that is, a favorable ruling from the LMB would have virtually removed any and
all existing "clouds" from the petitioners titles to the subject property; in the
same vein, a declaration of the indefeasibility of TCT Nos. 131918 and 131919
would preempt any ruling of the LMB on the matter.
Indeed, the underlying principle of litis pendentia is the theory that a party is
not allowed to vex another more than once regarding the same subject matter
and for the same cause of action. This theory is founded on the public policy
that the same subject matter should not be the subject of controversy in court
more than once in order that possible conflicting judgments may be avoided, for
the sake of the stability of the rights and status of persons. 31The RTC of
Muntinlupa City, Branch 205, recognized this doctrine when it dismissed SP Civil
Action No. 02-237 to avoid the possibility of two contradictory decisions on the
question of the validity of the subject titles.
In any case, should the petitioner disagree with the ruling of the LMB, it is not
precluded from taking the matter up to with the courts of law.
Fourth. To determine whether a party violated the rule against forum shopping,
the test applied is whether the elements of litis pendentia are present or
whether a final judgment in one case will amount to res judicata in
another.32 Considering our pronouncement that the requisites of litis
pendentia barred the filing of SP Civil Action No. 02-237, the RTC correctly
dismissed the same on the additional ground of forum shopping.
WHEREFORE, considering the foregoing, the petition is DENIED for lack of
merit. The Order of the Regional Trial Court of Muntinlupa City, Branch 205,
dismissing SP Civil Action No. 02-237 on the ground of litis pendentia and forum
shopping, is AFFIRMED.
G.R. No. 100709 November 14, 1997
REPUBLIC OF THE PHILIPPINES, represented by the DIRECTOR OF
LANDS, petitioner,
vs.
COURT OF APPEALS, JOSEFINA L. MORATO, SPOUSES NENITA CO and
ANTONIO QUILATAN AND THE REGISTER OF DEEDS OF QUEZON
PROVINCE, respondents.

PANGANIBAN, J.:

Will the lease and/or mortgage of a portion of a realty acquired through free
patent constitute sufficient ground for the nullification of such land grant?
Should such property revert to the State once it is invaded by the sea and thus
becomes foreshore land?
The Case
These are the two questions raised in the petition before us assailing the Court
of Appeals' 1 Decision in CA-G.R. CV No. 02667 promulgated on June 13, 1991
which answered the said questions in the negative. 2 Respondent Court's
dismissed 3 petitioner's appeal and affirmed in toto the decision of the Regional
Trial Court 4 of Calauag, Quezon, dated December 28, 1983 in Civil Case No. C608. In turn, the Regional Trial Court's decision dismissed petitioner's complaint
for cancellation of the Torrens Certificate of Title of Respondent Morato and for
reversion of the parcel of land subject thereof of the public domain.
The Facts
The petition of the solicitor general, representing the Republic of the Philippines,
recites the following facts: 5
Sometime in December, 1972, respondent Morato filed a Free Patent
Application No. III-3-8186-B on a parcel of land with an area of 1,265
square meters situated at Pinagtalleran, Calauag, Quezon. On January
16, 1974, the patent was approved and the Register of Deeds of
Quezon at Lucena City issued on February 4, 1974 Original Certificate
of Title No. P-17789. Both the free paten and the title specifically
mandate that the land shall not be alienated nor encumbered within
five years from the date of the issuance of the patent (Sections 118
and 124 of CA No. 141, as amended).
Subsequently, the District Land Officer in Lucena City, acting upon
reports that respondent Morato had encumbered the land in violation
of the condition of the patent, conducted an investigation. Thereafter,
it was established that the subject land is a portion of the Calauag
Bay, five (5) to six (6) feet deep under water during high tide and two
(2) feet deep at low tide, and not suitable to vegetation. Moreover, on
October 24, 1974, a portion of the land was mortgaged by respondent
Morato to respondents Nenita Co and Antonio Quilatan for P10,000.00
(pp. 2, 25, Folder of Exhibits). The spouses Quilatan constructed a
house on the land. Another portion of the land was leased to Perfecto

Advincula on February 2, 1976 at P100.00 a month, where a


warehouse was constructed.
On November 5, 1978, petitioner filed an amended complaint against
respondents Morato, spouses Nenita Co and Antonio Quilatan, and the
Register of Deeds of Quezon for the cancellation of title and reversion
of a parcel of land to the public domain, subject of a free patent in
favor of respondent Morato, on the grounds that the land is a
foreshore land and was mortgaged and leased within the five-year
prohibitory period (p. 46, Records).
After trial, the lower court, on December 28, 1983, rendered a
decision dismissing petitioner's complaint. In finding for private
respondents, the lower court ruled that there was no violation of the
5-year period ban against alienating or encumbering the land,
because the land was merely leased and not alienated. It also found
that the mortgage to Nenita Co and Antonio Quilatan covered only the
improvement and not the land itself.
On appeal, the Court of Appeals affirmed the decision of the trial court.
Thereafter, the Republic of the Philippines filed the present petition. 6
The Issues
Petitioner alleges that the following errors were committed by Respondent
Court: 7
I
Respondent court erred in holding that the patent granted and
certificate of title issued to Respondent Morato cannot be cancelled
and annulled since the certificate of title becomes indefeasible after
one year from the issuance of the title.
II
Respondent Court erred in holding that the questioned land is part of
a disposable public land and not a foreshore land.
The Court's Ruling
The petition is meritorious.

First Issue: Indefeasibility of a Free Patent Title


In resolving the first issue against petitioner, Respondent Court held:

. . . As ruled in Heirs of Gregorio Tengco vs. Heirs of Jose Alivalas, 168


SCRA 198. ". . . The rule is well-settled that an original certificate of
title issued on the strength of a homestead patent partakes of the
nature of a certificate of title issued in a judicial proceeding, as long
as the land disposed of is really part of the disposable land of the
public domain, and becomes indefeasible and incontrovertible upon
the expiration of one year from the date of promulgation of the order
of the Director of Lands for the issuance of the patent. (Republic v.
Heirs of Carle, 105 Phil. 1227 (1959); Ingaran v. Ramelo, 107 Phil. 498
(1960); Lopez v. Padilla, (G.R. No. L-27559, May 18, 1972, 45 SCRA
44). A homestead patent, one registered under the Land Registration
Act, becomes as indefeasible as a Torrens Title. (Pamintuan v. San
Agustin, 43 Phil. 558 (1982); El Hogar Filipino v. Olviga, 60 Phil. 17
(1934); Duran v. Oliva, 113 Phil. 144 (1961); Pajomayo v. Manipon,
G.R. No. L-33676, June 30, 1971, 39 SCRA 676). (p. 203).
Again, in Lopez vs. Court of Appeals, 169 SCRA 271, citing Iglesia ni
Cristo v. Hon. Judge, CFI of Nueva Ecija, Branch I, (123 SCRA 516
(1983) and Pajomayo, et al. v. Manipon, et al. (39 SCRA 676 (1971)
held that once a homestead patent granted in accordance with the
Public Land Act is registered pursuant to Section 122 of Act 496, the
certificate of title issued in virtue of said patent has the force and
effect of a Torrens Title issued under the Land Registration Act.
Indefeasibility of the title, however, may not bar the State, thru the
Solicitor General, from filing an action for reversion, as ruled in Heirs
of Gregorio Tengco v. Heirs of Jose Aliwalas, (supra), as follows:
But, as correctly pointed out by the respondent Court of Appeals, Dr.
Aliwalas' title to the property having become incontrovertible, such
may no longer be collaterally attacked. If indeed there had been any
fraud or misrepresentation in obtaining the title, an action for
reversion instituted by the Solicitor General would be the proper
remedy (Sec. 101, C.A. No. 141; Director of Lands v. Jugado, G.R. No.
L-14702, May 21, 1961, 2 SCRA 32; Lopez v. Padilla, supra). (p. 204).

Petitioner contends that the grant of Free Patent (IV-3) 275 and the subsequent
issuance of Original Certificate of Title No. P-17789 to Respondent Josefina L.
Morato were subject to the conditions provided for in Commonwealth Act (CA)
No. 141. It alleges that on October 24, 1974, or nine (9) months and eight (8)
days after the grant of the patent, mortgaged a portion of the land" to
Respondent Nenita Co, who thereafter constructed a house thereon. Likewise,
on February 2, 1976 and "within the five-year prohibitory period," Respondent
Morato "leased a portion of the land to Perfecto Advincula at a monthly rent of
P100.00 who, shortly thereafter, constructed a house of concrete materials on
the subject land." 9 Further, petitioner argues that the defense of indefeasibility
of title is "inaccurate." The original certificate of title issued to Respondent
Morato "contains the seeds of its own cancellation": such certificate specifically
states on its face that "it is subject to the provisions of Sections 118, 119, 121,
122, 124 of CA No. 141, as amended." 10
Respondent Morato counters by stating that although a "portion of the land was
previously leased," it resulted "from the fact that Perfecto Advincula built a
warehouse in the subject land without [her] prior consent." The mortgage
executed over the improvement "cannot be considered a violation of the said
grant since it can never affect the ownership." 11 She states further:
. . . . the appeal of the petitioner was dismissed not because of the
principle of indefeasibility of title but mainly due to failure of the latter
to support and prove the alleged violations of respondent Morato. The
records of this case will readily show that although petitioner was able
to establish that Morato committed some acts during the prohibitory
period of 5 years, a perusal thereof will also show that what petitioner
was able to prove never constituted a violation of the grant. 12
Respondent-Spouses Quilatan, on the other hand, state that the mortgage
contract they entered into with Respondent Morato "can never be considered as
[an] 'alienation' inasmuch as the ownership over the property remains with the
owner." 13 Besides, it is the director of lands and not the Republic of the
Philippines who is the real party in interest in this case, contrary to the provision
of the Public Land Act which states that actions for reversion should be
instituted by the solicitor general in the name of Republic of the Philippines. 14
We find for petitioner.
Quoted below are relevant sections of Commonwealth Act No. 141, otherwise
known as the Public Land Act:

Sec. 118. Except in favor of the Government or any of its branches,


units or institutions, or legally constituted banking corporations, lands
acquired under free patent or homestead provisions shall not be
subject to encumbrance or alienation from the date of the approval of
the application and for a term of five years from and after the date of
issuance of the patent or grant nor shall they become liable to the
satisfaction of any debt contracted prior to the expiration of said
period; but the improvements or crops on the land may be mortgaged
or pledged to qualified persons, associations, or corporations.
No alienation, transfer, or conveyance of any homestead after five
years and before twenty-five years after issuance of title shall be valid
without the approval of the Secretary of Agriculture and Natural
Resources, which approval shall not be denied except on
constitutional and legal grounds. (As amended by Com. Act No. 456,
approved June 8, 1939.)
xxx xxx xxx
Sec. 121. Except with the consent of the grantee and the approval of
the Secretary of Agriculture and Natural Resources, and solely for
educational, religious, or charitable purposes or for a right of way, no
corporation, association, or partnership may acquire or have any
right, title, interest, or property right whatsoever to any land granted
under the free patent, homestead, or individual sale provisions of this
Act or to any permanent improvement on such land. (As amended by
Com. Act No. 615, approved May 5, 1941)
Sec. 122. No land originally acquired in any manner under the
provisions of this Act, nor any permanent improvement on such land,
shall be encumbered, alienation or transferred, except to persons,
corporations, association, or partnerships who may acquire lands of
the public domain under this Act or to corporations organized in the
Philippines authorized therefore by their charters.
Except in cases of hereditary successions, no land or any portion
thereof originally acquired under the free patent, homestead, or
individual sale provisions of this Act, or any permanent improvement
on such land, shall be transferred or assigned to any individual, nor
shall such land or any permanent improvement thereon be leased to
such individual, when the area of said land, added to that of this own,

shall exceed one hundred and forty-four hectares. Any transfer,


assignment, or lease made in violation hereto shall be null and void.
(As amended by Com Act No. 615, Id.).
xxx xxx xxx
Sec. 124. Any acquisition, conveyance, alienation, transfer, or other
contract made or executed in violation of any of the provisions of
sections one hundred and eighteen, one hundred and twenty, one
hundred and twenty-one, one hundred and twenty-two, and one
hundred and twenty-three of this Actshall be unlawful and null and
void from its execution and shall produce the effect of annulling and
cancelling the grant, title, patent, or permit originally issued,
recognized or confirmed, actually or presumatively, and cause the
reversion of the property and its improvements to the State.
(Emphasis supplied)
The foregoing legal provisions clearly proscribe the encumbrance of a parcel of
land acquired under a free patent or homestead within five years from the grant
of such patent. Furthermore, such encumbrance results in the cancellation of
the grant and the reversion of the land to the public domain. Encumbrance has
been defined as "[a]nything that impairs the use or transfer of property;
anything which constitutes a burden on the title; a burden or charge upon
property; a claim or lien upon property." It may be a "legal claim on an estate for
the discharge of which the estate is liable; and embarrassment of the estate or
property so that it cannot be disposed of without being subject to it; an estate,
interest, or right in lands, diminishing their value to the general owner; a liability
resting upon an estate." 15 Do the contracts of lease and mortgage executed
within five (5) years from the issuance of the patent constitute an
"encumbrance" and violate the terms and conditions of such patent?
Respondent Court answered in the negative: 16
From the evidence adduced by both parties, it has been proved that
the area of the portion of the land, subject matter of the lease
contract (Exh. "B") executed by and between Perfecto Advincula and
Josefina L. Morato is only 10 x 12 square meters, where the total area
of the land granted to Morato is 1,265 square meters. It is clear from
this that the portion of the land leased by Advincula does not
significantly affect Morato's ownership and possession. Above all, the
circumstances under which the lease was executed do not reflect a
voluntary and blatant intent to violate the conditions provided for in

the patent issued in her favor. On the contrary, Morato was compelled
to enter into that contract of lease
out of sympathy and the goodness of her heart to accommodate a
fellow man. . . .
It is indisputable, however, that Respondent Morato cannot fully use or enjoy the
land during the duration of the lease contract. This restriction on the enjoyment
of her property sufficiently meets the definition of an encumbrance under
Section 118 of the Public Land Act, because such contract "impairs the use of
the property" by the grantee. In a contract of lease which is consensual,
bilateral, onerous and commutative, the owner temporarily grants the use of his
or her property to another who undertakes to pay rent therefor. 17 During the
term of the lease, the grantee of the patent cannot enjoy the beneficial use of
the land leased. As already observed, the Public Land Act does not permit a
grantee of a free patent from encumbering any portion of such land. Such
encumbrance is a ground for the nullification of the award.
Morato's resort to equity, i.e. that the lease was executed allegedly out of the
goodness of her heart without any intention of violating the law, cannot help
her. Equity, which has been aptly described as "justice outside legality," is
applied only in the absence of, and never against, statutory law or judicial rules
of procedure. Positive rules prevail over all abstract arguments based on
equity contra legem. 18
Respondents failed to justify their position that the mortgage should not be
considered an encumbrance. Indeed, we do not find any support for such
contention. The questioned mortgage falls squarely within the term
"encumbrance" proscribed by Section 118 of the Public Land Act. 19 Verily, a
mortgage constitutes a legal limitation on the estate, and the foreclosure of
such mortgage would necessarily result in the auction of the property. 20
Even if only part of the property has been sold or alienated within the prohibited
period of five years from the issuance of the patent, such alienation is a
sufficient cause for the reversion of the whole estate to the State. As a condition
for the grant of a free patent to an applicant, the law requires that the land
should not be encumbered, sold or alienated within five years from the issuance
of
the patent. The sale or the alienation of part of the homestead violates that
condition. 21

The prohibition against the encumbrance lease and mortgage included of a


homestead which, by analogy applies to a free patent, is mandated by the
rationale for the grant, viz.: 22
It is well-known that the homestead laws were designed to distribute
disposable agricultural lots of the State to land-destitute citizens for
their home and cultivation. Pursuant to such benevolent intention the
State prohibits the sale or incumbrance of the homestead (Section
116) within five years after the grant of the patent. After that five-year
period the law impliedly permits alienation of the homestead; but in
line with the primordial purpose to favor the homesteader and his
family the statute provides that such alienation or conveyance
(Section 117) shall be subject to the right of repurchase by the
homesteader, his widow or heirs within five years. This section 117 is
undoubtedly a complement of section 116. It aims to preserve and
keep in the family of the homesteader that portion of public land
which the State had gratuitously given to him. It would, therefore, be
in keeping with this fundamental idea to hold, as we hold, that the
right to repurchase exists not only when the original homesteader
makes the conveyance, but also when it is made by his widow or
heirs. This construction is clearly deducible from the terms of the
statute.
By express provision of Section 118 of Commonwealth Act 141 and in conformity
with the policy of the law, any transfer or alienation of a free patent or
homestead within five years from the issuance of the patent is proscribed. Such
transfer nullifies said alienation and constitutes a cause for the reversion of the
property to the State.
The prohibition against any alienation or encumbrance of the land grant is a
proviso attached to the approval of every application. 23 Prior to the fulfillment
of the requirements of law, Respondent Morato had only an inchoate right to the
property; such property remained part of the public domain and, therefore, not
susceptible to alienation or encumbrance. Conversely, when a "homesteader
has complied with all the terms and conditions which entitled him to a patent for
[a] particular tract of public land, he acquires a vested interest therein and has
to be regarded an equitable owner thereof." 24However, for Respondent Morato's
title of ownership over the patented land to be perfected, she should have
complied with the requirements of the law, one of which was to keep the
property for herself and her family within the prescribed period of five (5) years.

Prior to the fulfillment of all requirements of the law, Respondent Morato's title
over the property was incomplete. Accordingly, if the requirements are not
complied with, the State as the grantor could petition for the annulment of the
patent and the cancellation of the title.
Respondent Morato cannot use the doctrine of the indefeasibility of her Torrens
title to bar the state from questioning its transfer or encumbrance. The
certificate of title issued to her clearly stipulated that its award was "subject to
the conditions provided for in Sections 118, 119, 121, 122 and 124 of
Commonwealth Act (CA) No. 141." Because she violated Section 118, the
reversion of the property to the public domain necessarily follows, pursuant to
Section 124.
Second Issue: Foreshore Land
Revert to the Public Domain
There is yet another reason for granting this petition.
Although Respondent Court found that the subject land was foreshore land, it
nevertheless sustained the award thereof to Respondent Morato: 25
First of all, the issue here is whether the land in question, is really part
of the foreshore lands. The Supreme Court defines foreshore land in
the case of Republic vs. Alagad, 169 SCRA 455, 464, as follows:
Otherwise, where the rise in water level is due to, the
"extraordinary" action of nature, rainful, for instance, the
portions inundated thereby are not considered part of the
bed or basin of the body of water in question. It cannot
therefore be said to be foreshore land but land outside of
the public dominion, and land capable of registration as
private property.
A foreshore land, on the other hand has been defined as
follows:
. . . that part of (the land) which is between high
and low water and left dry by the flux and reflux
of the tides . . . . (Republic vs. C.A., Nos. L-43105,
L-43190, August 31, 1984, 131 SCRA 532;
Government vs. Colegio de San Jose, 53 Phil 423)

The strip of land that lies between the high and


low water marks and that is alternatively wet and
dry according to the flow of the tide. (Rep. vs.
CA,supra, 539).
The factual findings of the lower court regarding the nature of the parcel of land
in question reads:
Evidence disclose that the marginal area of the land
radically changed sometime in 1937 up to 1955 due to a
strong earthquake followed by frequent storms eventually
eroding the land. From 1955 to 1968, however, gradual
reclamation was undertaken by the lumber company owned
by the Moratos. Having thus restored the land thru mostly
human hands employed by the lumber company, the area
continued to be utilized by the owner of the sawmill up to
the time of his death in 1965. On or about March 17, 1973,
there again was a strong earthquake unfortunately causing
destruction to hundreds of residential houses fronting the
Calauag Bay including the Santiago Building, a cinema
house constructed of concrete materials. The catastrophe
totally caused the sinking of a concrete bridge at Sumulong
river also in the municipality of Calauag, Quezon.
On November 13, 1977 a typhoon code named "Unding"
wrought havoc as it lashed the main land of Calauag,
Quezon causing again great erosion this time than that
which the area suffered in 1937. The Court noted with the
significance of the newspaper clipping entitled "Baryo ng
Mangingisda Kinain ng Dagat" (Exh. "11").
xxx xxx xxx
Evidently this was the condition of the land when on or
about December 5, 1972 defendant Josefina L. Morato filed
with the Bureau of Lands her free patent application. The
defendant Josefina Morato having taken possession of the
land after the demise of Don Tomas Morato, she introduced
improvement and continued developing the area, planted it
to coconut tree. Having applied for a free patent, defendant
had the land area surveyed and an approved plan (Exh. "9")

based on the cadastral survey as early as 1927 (Exh. "10")


was secured. The area was declared for taxation purposes
in the name of defendant Josefina Morato denominated as
Tax Declaration No. 4115 (Exh. "8") and the corresponding
realty taxes religiously paid as shown by Exh. "8-A"). (pp.
12-14, DECISION).
Being supported by substantial evidence and for failure of the
appellant to show cause which would warrant disturbance, the
aforecited findings of the lower court, must be respected.
Petitioner correctly contends, however, that Private Respondent Morato cannot
own foreshore land:
Through the encroachment or erosion by the ebb and flow of the tide,
a portion of the subject land was invaded by the waves and sea
advances. During high tide, at least half of the land (632.5 square
meters) is 6 feet deep under water and three (3) feet deep during low
tide. The Calauag Bay shore has extended up to a portion of the
questioned land.
While at the time of the grant of free patent to respondent Morato,
the land was not reached by the water, however, due to gradual
sinking of the land caused by natural calamities, the sea advances
had permanently invaded a portion of subject land. As disclosed at
the trial, through the testimony of the court-appointed commissioner,
Engr. Abraham B. Pili, the land was under water during high tide in the
month of August 1978. The water margin covers half of the property,
but during low tide, the water is about a kilometer (TSN, July 19, 1979,
p. 12). Also, in 1974, after the grant of the patent, the land was
covered with vegetation, but it disappeared in 1978 when the land
was reached by the tides (Exh. "E-1", "E-14"). In fact, in its decision
dated December 28, 1983, the lower court observed that the erosion
of the land was caused by natural calamities that struck the place in
1977 (Cf. Decision, pp. 17-18). 26
Respondent-Spouses Quilatan argue, however, that it is "unfair and unjust if
Josefina Morato will be deprived of the whole property just because a portion
thereof was immersed in water for reasons not her own doing." 27

As a general rule, findings of facts of the Court of Appeals are binding and
conclusive upon this Court, unless such factual findings are palpably
unsupported by the evidence on record or unless the judgment itself is based on
a misapprehension of facts. 28 The application for a free patent was made in
1972. From the undisputed factual findings of the Court of Appeals, however,
the land has since become foreshore. Accordingly, it can no longer be subject of
a free patent under the Public Land Act. Government of the Philippine Islands
vs. Cabagis 29 explained the rationale for this proscription:
Article 339, subsection 1, of the Civil Code, reads:
Art. 339. Property of public ownership is
1. That devoted to public use, such as roads, canals, rivers, torrents,
ports and bridges constructed by the State, riverbanks, shores,
roadsteads, and that of a similar character.
xxx xxx xxx
Article 1, case 3, of the law of Waters of August 3, 1866, provides as
follows:
Art. 1. The following are part of the national domain open to public
use.
xxx xxx xxx
3. The Shores. By the shore is understood that space covered and
uncovered by the movement of the tide. Its interior or terrestrial limit
is the line reached by the highest equinoctal tides. Where the tides
are not appreciable, the shore begins on the land side at the line
reached by the sea during ordinary storms or tempests.
In the case of Aragon vs. Insular Government (19 Phil. 223), with
reference to article 339 of the Civil Code just quoted, this Court said:
We should not be understood, by this decision, to hold that in a case
of gradual encroachment or erosion by the ebb and flow of the tide,
private property may not become "property of public ownership." as
defined in article 339 of the code, where it appear that the owner has
to all intents and purposes abandoned it and permitted it to be totally

destroyed, so as to become a part of the "playa" (shore of the sea),


"rada" (roadstead), or the like. . . .
In the Enciclopedia Juridica Espaola, volume XII, page 558, we read
the following:
With relative frequency the opposite phenomenon occurs; that is, the
sea advances and private properties are permanently invaded by the
waves, and in this case they become part of the shore or breach. The
then pass to the public domain, but the owner thus dispossessed does
not retain any right to the natural products resulting from their new
nature; it is a de facto case of eminent domain, and not subject to
indemnity.
In comparison, Article 420 of the Civil Code provides:
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.
When the sea moved towards the estate and the tide invaded it, the invaded
property became foreshore land and passed to the realm of the public domain.
In fact, the Court in Government vs. Cabangis 30 annulled the registration of land
subject of cadastral proceedings when the parcel subsequently became
foreshore land. 31 In another case, the Court voided the registration decree of a
trial court and held that said court had no jurisdiction to award foreshore land to
any private person or entity. 32 The subject land in this case, being foreshore
land, should therefore be returned to the public domain.
WHEREFORE, the petition is GRANTED. This Court hereby REVERSES and SETS
ASIDE the assailed Decision of Respondent Court and ORDERS the
CANCELLATION of Free Patent No. (IV-3) 275 issued to Respondent Morato and
the subsequent Original Certificate of Title No. P-17789. The subject land
therefore REVERTS to the State. No costs.
G.R. No. L-50008 August 31, 1987

PRUDENTIAL BANK, petitioner,


vs.
HONORABLE DOMINGO D. PANIS, Presiding Judge of Branch III, Court of
First Instance of Zambales and Olongapo City; FERNANDO MAGCALE &
TEODULA BALUYUT-MAGCALE, respondents.

PARAS, J.:
This is a petition for review on certiorari of the November 13, 1978 Decision * of
the then Court of First Instance of Zambales and Olongapo City in Civil Case No.
2443-0 entitled "Spouses Fernando A. Magcale and Teodula Baluyut-Magcale vs.
Hon. Ramon Y. Pardo and Prudential Bank" declaring that the deeds of real
estate mortgage executed by respondent spouses in favor of petitioner bank are
null and void.
The undisputed facts of this case by stipulation of the parties are as follows:
... on November 19, 1971, plaintiffs-spouses Fernando A. Magcale and
Teodula Baluyut Magcale secured a loan in the sum of P70,000.00
from the defendant Prudential Bank. To secure payment of this loan,
plaintiffs executed in favor of defendant on the aforesaid date a deed
of Real Estate Mortgage over the following described properties:
l. A 2-STOREY, SEMI-CONCRETE, residential building with warehouse
spaces containing a total floor area of 263 sq. meters, more or less,
generally constructed of mixed hard wood and concrete materials,
under a roofing of cor. g. i. sheets; declared and assessed in the name
of FERNANDO MAGCALE under Tax Declaration No. 21109, issued by
the Assessor of Olongapo City with an assessed value of P35,290.00.
This building is the only improvement of the lot.
2. THE PROPERTY hereby conveyed by way of MORTGAGE includes the
right of occupancy on the lot where the above property is erected,
and more particularly described and bounded, as follows:
A first class residential land Identffied as Lot No. 720, (Ts308, Olongapo Townsite Subdivision) Ardoin Street, East
Bajac-Bajac, Olongapo City, containing an area of 465 sq.
m. more or less, declared and assessed in the name of
FERNANDO MAGCALE under Tax Duration No. 19595 issued

by the Assessor of Olongapo City with an assessed value of


P1,860.00; bounded on the
NORTH: By No. 6, Ardoin Street
SOUTH: By No. 2, Ardoin Street
EAST: By 37 Canda Street, and
WEST: By Ardoin Street.
All corners of the lot marked by conc. cylindrical
monuments of the Bureau of Lands as visible
limits. ( Exhibit "A, " also Exhibit "1" for
defendant).
Apart from the stipulations in the printed portion of the
aforestated deed of mortgage, there appears a rider typed
at the bottom of the reverse side of the document under
the lists of the properties mortgaged which reads, as
follows:
AND IT IS FURTHER AGREED that in the event the
Sales Patent on the lot applied for by the
Mortgagors as herein stated is released or issued
by the Bureau of Lands, the Mortgagors hereby
authorize the Register of Deeds to hold the
Registration of same until this Mortgage is
cancelled, or to annotate this encumbrance on
the Title upon authority from the Secretary of
Agriculture and Natural Resources, which title
with annotation, shall be released in favor of the
herein Mortgage.
From the aforequoted stipulation, it is obvious that the
mortgagee (defendant Prudential Bank) was at the outset
aware of the fact that the mortgagors (plaintiffs) have
already filed a Miscellaneous Sales Application over the lot,
possessory rights over which, were mortgaged to it.

Exhibit "A" (Real Estate Mortgage) was registered under the


Provisions of Act 3344 with the Registry of Deeds of
Zambales on November 23, 1971.
On May 2, 1973, plaintiffs secured an additional loan from
defendant Prudential Bank in the sum of P20,000.00. To
secure payment of this additional loan, plaintiffs executed
in favor of the said defendant another deed of Real Estate
Mortgage over the same properties previously mortgaged in
Exhibit "A." (Exhibit "B;" also Exhibit "2" for defendant). This
second deed of Real Estate Mortgage was likewise
registered with the Registry of Deeds, this time in Olongapo
City, on May 2,1973.
On April 24, 1973, the Secretary of Agriculture issued Miscellaneous
Sales Patent No. 4776 over the parcel of land, possessory rights over
which were mortgaged to defendant Prudential Bank, in favor of
plaintiffs. On the basis of the aforesaid Patent, and upon its
transcription in the Registration Book of the Province of Zambales,
Original Certificate of Title No. P-2554 was issued in the name of
Plaintiff Fernando Magcale, by the Ex-Oficio Register of Deeds of
Zambales, on May 15, 1972.
For failure of plaintiffs to pay their obligation to defendant Bank after
it became due, and upon application of said defendant, the deeds of
Real Estate Mortgage (Exhibits "A" and "B") were extrajudicially
foreclosed. Consequent to the foreclosure was the sale of the
properties therein mortgaged to defendant as the highest bidder in a
public auction sale conducted by the defendant City Sheriff on April
12, 1978 (Exhibit "E"). The auction sale aforesaid was held despite
written request from plaintiffs through counsel dated March 29, 1978,
for the defendant City Sheriff to desist from going with the scheduled
public auction sale (Exhibit "D")." (Decision, Civil Case No. 2443-0,
Rollo, pp. 29-31).
Respondent Court, in a Decision dated November 3, 1978 declared the deeds of
Real Estate Mortgage as null and void (Ibid., p. 35).
On December 14, 1978, petitioner filed a Motion for Reconsideration (Ibid., pp.
41-53), opposed by private respondents on January 5, 1979 (Ibid., pp. 54-62),
and in an Order dated January 10, 1979 (Ibid., p. 63), the Motion for

Reconsideration was denied for lack of merit. Hence, the instant petition (Ibid.,
pp. 5-28).
The first Division of this Court, in a Resolution dated March 9, 1979, resolved to
require the respondents to comment (Ibid., p. 65), which order was complied
with the Resolution dated May 18,1979, (Ibid., p. 100), petitioner filed its Reply
on June 2,1979 (Ibid., pp. 101-112).
Thereafter, in the Resolution dated June 13, 1979, the petition was given due
course and the parties were required to submit simultaneously their respective
memoranda. (Ibid., p. 114).
On July 18, 1979, petitioner filed its Memorandum (Ibid., pp. 116-144), while
private respondents filed their Memorandum on August 1, 1979 (Ibid., pp. 146155).
In a Resolution dated August 10, 1979, this case was considered submitted for
decision (Ibid., P. 158).
In its Memorandum, petitioner raised the following issues:
1. WHETHER OR NOT THE DEEDS OF REAL ESTATE MORTGAGE ARE VALID; AND
2. WHETHER OR NOT THE SUPERVENING ISSUANCE IN FAVOR OF PRIVATE
RESPONDENTS OF MISCELLANEOUS SALES PATENT NO. 4776 ON APRIL 24, 1972
UNDER ACT NO. 730 AND THE COVERING ORIGINAL CERTIFICATE OF TITLE NO. P2554 ON MAY 15,1972 HAVE THE EFFECT OF INVALIDATING THE DEEDS OF REAL
ESTATE MORTGAGE. (Memorandum for Petitioner, Rollo, p. 122).
This petition is impressed with merit.
The pivotal issue in this case is whether or not a valid real estate mortgage can
be constituted on the building erected on the land belonging to another.
The answer is in the affirmative.
In the enumeration of properties under Article 415 of the Civil Code of the
Philippines, this Court ruled that, "it is obvious that the inclusion of "building"
separate and distinct from the land, in said provision of law can only mean that
a building is by itself an immovable property." (Lopez vs. Orosa, Jr., et al., L10817-18, Feb. 28, 1958; Associated Inc. and Surety Co., Inc. vs. Iya, et al., L10837-38, May 30,1958).

Thus, while it is true that a mortgage of land necessarily includes, in the


absence of stipulation of the improvements thereon, buildings, still a building by
itself may be mortgaged apart from the land on which it has been built. Such a
mortgage would be still a real estate mortgage for the building would still be
considered immovable property even if dealt with separately and apart from the
land (Leung Yee vs. Strong Machinery Co., 37 Phil. 644). In the same manner,
this Court has also established that possessory rights over said properties
before title is vested on the grantee, may be validly transferred or conveyed as
in a deed of mortgage (Vda. de Bautista vs. Marcos, 3 SCRA 438 [1961]).
Coming back to the case at bar, the records show, as aforestated that the
original mortgage deed on the 2-storey semi-concrete residential building with
warehouse and on the right of occupancy on the lot where the building was
erected, was executed on November 19, 1971 and registered under the
provisions of Act 3344 with the Register of Deeds of Zambales on November 23,
1971. Miscellaneous Sales Patent No. 4776 on the land was issued on April 24,
1972, on the basis of which OCT No. 2554 was issued in the name of private
respondent Fernando Magcale on May 15, 1972. It is therefore without question
that the original mortgage was executed before the issuance of the final patent
and before the government was divested of its title to the land, an event which
takes effect only on the issuance of the sales patent and its subsequent
registration in the Office of the Register of Deeds (Visayan Realty Inc. vs. Meer,
96 Phil. 515; Director of Lands vs. De Leon, 110 Phil. 28; Director of Lands vs.
Jurado, L-14702, May 23, 1961; Pena "Law on Natural Resources", p. 49). Under
the foregoing considerations, it is evident that the mortgage executed by
private respondent on his own building which was erected on the land belonging
to the government is to all intents and purposes a valid mortgage.
As to restrictions expressly mentioned on the face of respondents' OCT No. P2554, it will be noted that Sections 121, 122 and 124 of the Public Land Act,
refer to land already acquired under the Public Land Act, or any improvement
thereon and therefore have no application to the assailed mortgage in the case
at bar which was executed before such eventuality. Likewise, Section 2 of
Republic Act No. 730, also a restriction appearing on the face of private
respondent's title has likewise no application in the instant case, despite its
reference to encumbrance or alienation before the patent is issued because it
refers specifically to encumbrance or alienation on the land itself and does not
mention anything regarding the improvements existing thereon.

But it is a different matter, as regards the second mortgage executed over the
same properties on May 2, 1973 for an additional loan of P20,000.00 which was
registered with the Registry of Deeds of Olongapo City on the same date.
Relative thereto, it is evident that such mortgage executed after the issuance of
the sales patent and of the Original Certificate of Title, falls squarely under the
prohibitions stated in Sections 121, 122 and 124 of the Public Land Act and
Section 2 of Republic Act 730, and is therefore null and void.
Petitioner points out that private respondents, after physically possessing the
title for five years, voluntarily surrendered the same to the bank in 1977 in order
that the mortgaged may be annotated, without requiring the bank to get the
prior approval of the Ministry of Natural Resources beforehand, thereby
implicitly authorizing Prudential Bank to cause the annotation of said mortgage
on their title.
However, the Court, in recently ruling on violations of Section 124 which refers
to Sections 118, 120, 122 and 123 of Commonwealth Act 141, has held:
... Nonetheless, we apply our earlier rulings because we believe that
as in pari delicto may not be invoked to defeat the policy of the State
neither may the doctrine of estoppel give a validating effect to a void
contract. Indeed, it is generally considered that as between parties to
a contract, validity cannot be given to it by estoppel if it is prohibited
by law or is against public policy (19 Am. Jur. 802). It is not within the
competence of any citizen to barter away what public policy by law
was to preserve (Gonzalo Puyat & Sons, Inc. vs. De los Amas and
Alino supra). ... (Arsenal vs. IAC, 143 SCRA 54 [1986]).
This pronouncement covers only the previous transaction already alluded to and
does not pass upon any new contract between the parties (Ibid), as in the case
at bar. It should not preclude new contracts that may be entered into between
petitioner bank and private respondents that are in accordance with the
requirements of the law. After all, private respondents themselves declare that
they are not denying the legitimacy of their debts and appear to be open to new
negotiations under the law (Comment; Rollo, pp. 95-96). Any new transaction,
however, would be subject to whatever steps the Government may take for the
reversion of the land in its favor.
PREMISES CONSIDERED, the decision of the Court of First Instance of Zambales
& Olongapo City is hereby MODIFIED, declaring that the Deed of Real Estate
Mortgage for P70,000.00 is valid but ruling that the Deed of Real Estate

Mortgage for an additional loan of P20,000.00 is null and void, without prejudice
to any appropriate action the Government may take against private
respondents.
G.R. No. 162218

February 25, 2010

METROPOLITAN BANK AND TRUST COMPANY, Petitioner,


vs.
EDGARDO D. VIRAY, Respondent.
DECISION
CARPIO, J.:
The Case
Before the Court is a petition for review on certiorari 1 assailing the
Decision2 dated 21 August 2003 and Resolution3 dated 13 February 2004 of the
Court of Appeals (CA) in CA-G.R. CV No. 43926, which reversed the
Decision4 dated 21 September 2003 of the Regional Trial Court (RTC) of Cagayan
de Oro City, Misamis Oriental, Branch 23, in Civil Case No. 91-309.
The Facts
On 7 July 1979, Rico Shipping, Inc., represented by its President, Erlinda VirayJarque, together with respondent Edgardo D. Viray (Viray), in their own personal
capacity and as solidary obligors (the three parties collectively known as the
debtors), obtained two separate loans from petitioner Metropolitan Bank and
Trust Company (MBTC) in the total amount of P250,000. The debtors executed a
promissory note promising to pay in four semi-annual installments of P62,500
starting on 23 January 1980, with 15% interest and 2% credit evaluation and
supervision fee per annum. The two loans were subsequently renewed and
secured by one promissory note. Under the note, the debtors made a total
payment of P134,054 leaving a balance of P115,946 which remained unpaid
despite demands by MBTC.
On 5 June 1981, the debtors executed another promissory note and obtained a
loan from MBTC in the amount ofP50,000, payable on 2 November 1981, with
16% interest and 2% credit evaluation and supervision fee per annum. On the
due date, the debtors again failed to pay the loan despite demands to pay by
MBTC.

On 3 September 1981, the debtors obtained a third loan from MBTC in the
amount of P50,000 payable on 14 November 1981, with 16% interest and 2%
credit evaluation and supervision fee per annum. Again, the debtors failed and
refused to pay on due date.
MBTC filed a complaint for sum of money against the debtors with the RTC of
Manila, Branch 4.5 On 28 April 1983, the RTC of Manila rendered a judgment in
favor of MBTC.6 The dispositive portion of the decision states:
WHEREFORE, judgment is hereby rendered ordering defendants to pay jointly
and severally plaintiff the following:
I On the first cause of action:
(a) The sum of P50,000 with interest thereon at the rate of 16% per annum
from date of filing of the complaint until fully paid;
(b) The sum equivalent to 1% per month of the principal obligation as
penalty charge, computed likewise from the filing of the complaint;
II On the second cause of action:
(a) The sum of P50,000 with interest thereon at the rate of 16% per annum
from date of filing of the complaint until fully paid;
(b) The sum equivalent to 1% per month of the principal sum as penalty
charge, computed from date of filing of the complaint;
III On the third cause of action:
(a) The sum of P115,946.00 with interest thereon at the rate of 1% per
annum from date of filing of the complaint until fully paid;
(b) The sum equivalent to 1% per month of the sum of P115,946.00 as
penalty charge, computed from date of filing of the complaint;
IV
(1) The sum of P15,000.00 as attorneys fees; and
(2) To pay the costs of suit.
SO ORDERED.

Meanwhile, on 29 December 1982, the government issued Free Patents in favor


of Viray over three parcels of land (lots) designated as (1) Lot No. 26275, Cad237 with an area of 500 square meters; (2) Lot No. 26276, Cad-237, with an
area of 888 square meters; and (3) Lot No. 26277, Cad-237 with an area of 886
square meters, all situated in Barangay Bulua, Cagayan de Oro City, Misamis
Oriental. Original Certificate of Title (OCT) Nos. P-2324, P-2325 and P-2326 were
issued covering Free Patent Nos. [X-1] 10525, [X-1] 10526 and [X-1] 10527,
respectively.
The OCTs containing the free patents were registered with the Registry of
Deeds of Cagayan de Oro City on 18 January 1983. Written across the face of
the OCTs were the following:
x x x To have and to hold said tract of land, with the appurtenances thereunto of
right belonging unto the said EDGARDO D. VIRAY and to his heirs and assigns
forever, subject to the provisions of Sections 118, 119, 121 as amended by P.D.
No. 763, 122 and 124 of Commonwealth Act No. 141, as amended, which
provide that except in favor of the Government or any of its branches, units or
institutions, the land thereby acquired shall be inalienable and shall not be
subject to encumbrance for a period of five (5) years from the date of this
patent, and shall not be liable for the satisfaction of any debt contracted prior to
the expiration of said period x x x. 7
On 6 March 1984, the RTC of Manila issued a writ of execution over the lots
owned by Viray. On 12 October 1984, pursuant to the writ of execution, the City
Sheriff of Cagayan de Oro sold the lots at public auction in favor of MBTC as the
winning bidder. The next day, the sheriff issued a Certificate of Sale to MBTC. 8
On 23 August 1990, the sheriff executed a Deed of Final Conveyance to MBTC.
The Register of Deeds of Cagayan de Oro City cancelled OCT Nos. P-2324, P2325 and P-2326 and issued in MBTCs name Transfer Certificate of Title (TCT)
Nos. T-59171, T-59172 and T-59173,9 respectively.
On 30 July 1991, Viray filed an action for annulment of sale against the sheriff
and MBTC with the RTC of Cagayan de Oro City, Misamis Oriental, Branch
23.10 Viray sought the declaration of nullity of the execution sale, the sheriffs
certificate of sale, the sheriffs deed of final conveyance and the TCT's issued by
the Register of Deeds.
On 21 September 1993, the RTC of Cagayan de Oro City rendered its decision in
favor of MBTC.11 The dispositive portion states:

Wherefore, based on facts and jurisprudence, the Auction Sale by the Sheriff of
the then lots of plaintiff covered by [free] patents to satisfy the judgment in
favor of Defendant Bank is considered valid. While plaintiff had until April 2,
1991 to redeem the property, the former never attempted to show interest in
redeeming the properties, and therefore such right has prescribed. Defendant
Bank therefore is declared as the lawful transferee of the three (3) lots now
covered by Titles in the name of Defendant Bank.
SO ORDERED.12
Viray filed an appeal with the CA alleging that the RTC of Cagayan de Oro City
committed reversible error in ruling solely on the issue of redemption instead of
the issue of validity of the auction sale, being the lis mota 13 of the action.
The Ruling of the Court of Appeals
On 21 August 2003, the appellate court reversed the decision of the
RTC of Cagayan de Oro City. The CA ruled that the auction sale
conducted by the sheriff was null and void ab initio since the sale was
made during the five-year prohibition period in violation of Section 118
of Commonwealth Act No. 141 (CA 141) or the Public Land Act. The
dispositive portion states:
WHEREFORE, in view of the foregoing considerations, the decision appealed
from is hereby REVERSED, and plaintiff-appellant Edgardo Viray is declared
entitled to the return and possession of the three (3) parcels of land covered by
O.C.T. Nos. P-2324, P-2325 and P-2326, without prejudice to his continuing
obligation to pay the judgment debt, and expenses connected therewith.
Accordingly, the Register of Deeds of Cagayan de Oro City is ordered to cancel
TCT Nos. T-59171, T-59172 and T-59173 in the name of defendant-appellee
Metrobank, and to restore O.C.T. Nos. P-2324, P-2325 and P-2326 in the name of
plaintiff-appellant Edgardo Viray.
No pronouncement as to costs.
SO ORDERED.14
MBTC filed a Motion for Reconsideration which was denied in a Resolution dated
13 February 2004.
Hence, the instant petition.

The Issue
The main issue is whether the auction sale falls within the five-year prohibition
period laid down in Section 118 of CA 141.
The Courts Ruling
The petition lacks merit.
Petitioner MBTC insists that the five-year prohibition period against the
alienation or sale of the property provided in Section 118 of CA 141 does not
apply to an obligation contracted before the grant or issuance of the free patent
or homestead. The alienation or sale stated in the law pertains to voluntary
sales and not to "forced" or execution sales.
Respondent Viray, on the other hand, maintains that the express prohibition in
Section 118 of CA 141 does not qualify or distinguish whether the debt was
contracted prior to the date of the issuance of the free patent or within five
years following the date of such issuance. Further, respondent asserts that
Section 118 of CA 141 absolutely prohibits any and all sales, whether voluntary
or not, of lands acquired under free patent or homestead, made within the fiveyear prohibition period.
Section 118 of CA 141 states:
SECTION 118. Except in favor of the Government or any of its branches, units, or
instruction, lands acquired under free patent or homestead provisions shall not
be subject to encumbrance or alienation from the date of the approval of the
application and for a term of five years from and after the date of issuance of
the patent and grant, nor shall they become liable to the satisfaction of any
debt contracted prior to the expiration of said period, but the improvements or
crops on the land may be mortgaged or pledged to qualified persons,
associations, or corporations.
No alienation, transfer, or conveyance of any homestead after five years and
before twenty-five years after issuance of title shall be valid without the
approval of the Secretary of Agriculture and Natural Resources, which approval
shall not be denied except on constitutional and legal grounds.
The law clearly provides that lands which have been acquired under free patent
or homestead shall not be encumbered or alienated within five years from the

date of issuance of the patent or be liable for the satisfaction of any debt
contracted prior to the expiration of the period.
In the present case, the three loans were obtained on separate dates 7 July
1979, 5 June 1981 and 3 September 1981, or several years before the free
patents on the lots were issued by the government to respondent on 29
December 1982. The RTC of Manila, in a Decision dated 28 April 1983, ruled in
favor of petitioner ordering the debtors, including respondent, to pay jointly and
severally certain amounts of money. The public auction conducted by the sheriff
on the lots owned by respondent occurred on 12 October 1984.
For a period of five years or from 29 December 1982 up to 28 December 1987,
Section 118 of CA 141 provides that the lots comprising the free patents shall
not be made liable for the payment of any debt until the period of five years
expires. In this case, the execution sale of the lots occurred less than two years
after the date of the issuance of the patents. This clearly falls within the fiveyear prohibition period provided in the law, regardless of the dates when the
loans were incurred.
In Artates v. Urbi,15 we held that a civil obligation cannot be enforced against, or
satisfied out of, the sale of the homestead lot acquired by the patentee less
than five years before the obligation accrued even if the sale is involuntary. For
purposes of complying with the law, it is immaterial that the satisfaction of the
debt by the encumbrance or alienation of the land grant was made voluntarily,
as in the case of an ordinary sale, or involuntarily, such as that effected through
levy on the property and consequent sale at public auction. In both instances,
the law would have been violated.1avvphi1
Likewise, in Beach v. Pacific Commercial Company and Sheriff of Nueva
Ecija,16 we held that to subject the land to the satisfaction of debts would violate
Section 116 of Act No. 2874 (now Section 118 of CA 141).
As correctly observed by the CA in the present case:
It is argued by defendant-appellee, however, that the debt referred to in the law
must have been contracted within the five-year prohibitory period; any debt
contracted before or after the five-year prohibitory period is definitely not
covered by the law. This argument is weakest on two points. Firstly, because the
provision of law does not say that the debt referred to therein should be
contracted before the five-year prohibitory period but before the "expiration" of
the five-year prohibitory period. (Defendant-appellee deliberately omitted the

word "expiration" to suit its defense.) This simply means that it is not material
whether the debt is contracted before the five-year prohibitory period; what is
material is that the debt must be contracted before or prior to the expiration of
the five-year prohibitory period from the date of the issuance and approval of
the patent or grant. x x x
And secondly, while it is true that the debt in this case was contracted prior to
the five-year prohibitory period, the same is of no consequence, for as held
in Artates vs. Urbi, supra, such indebtedness has to be reckoned from the date
said obligation was adjudicated and decreed by the court. x x x 17
It must be emphasized that the main purpose in the grant of a free patent or
homestead is to preserve and keep in the family of the homesteader that
portion of public land which the State has given to him so he may have a place
to live with his family and become a happy citizen and a useful member of the
society.18 In Jocson v. Soriano,19 we held that the conservation of a family home
is the purpose of homestead laws. The policy of the state is to foster families as
the foundation of society, and thus promote general welfare. The sentiment of
patriotism and independence, the spirit of free citizenship, the feeling of interest
in public affairs, are cultivated and fostered more readily when the citizen lives
permanently in his own home, with a sense of its protection and durability.
Section 118 of CA 141, therefore, is predicated on public policy. Its violation
gives rise to the cancellation of the grant and the reversion of the land and its
improvements to the government at the instance of the latter. 20 The provision
that "nor shall they become liable to the satisfaction of any debt contracted
prior to the expiration of the five-year period" is mandatory 21 and any sale made
in violation of such provision is void22 and produces no effect whatsoever, just
like what transpired in this case. Clearly, it is not within the competence of any
citizen to barter away what public policy by law seeks to preserve. 23
WHEREFORE, we DENY the petition. We AFFIRM the Decision dated 21 August
2003 and Resolution dated 13 February 2004 of the Court of Appeals in CA-G.R.
CV No. 43926.
G.R. No. L-68109 July 17, 1991
SEVERINO GAYAPANAO, TEODORO GAYAPANAO, LAURO GAYAPANAO,
SALVADOR GAYAPANAO, RAYMUNDA GAYAPANAO-RAMOS, HEIRS OF
ELEUTERIO GAYAPANAO and HEIRS OF ROBERTO
GAYAPANAO, petitioners,

vs.
THE HONORABLE INTERMEDIATE APPELLATE COURT and SIMEONA
GAYAPANAO-NOVENARIO,respondents.

FERNAN, C.J.:p
In this Petition for Review on Certiorari, petitioners Severino Gayapanao and his
siblings question the decision of the then Intermediate Appellate Court (IAC) 1 in
AC-G.R. No. CV-59589, entitled "Severino Gayapanao, et al. vs. Simeona
Gayapanao-Novenario" upholding the validity of the sale of two (2) hectares of
the ten-hectare homestead land by their father in favor of their sister Simeona
Gayapanao-Novenario.
Briefly, the facts of the case as found by the Appellate Court are as
follows: 2
. . . the 2-hectare land subject of this case is part and parcel of a
homestead lot registered in the name of Constantino Gayapanao
under Original Certificate of Title No. 3625 (Exhibits B and 2, Plaintiffs'
Folder of Exhibits, p. 2). The homestead application of the late
Constantino Gayapanao over the said lot was approved on September
7, 1931 (Exhibit C, Ibid., p. 5) and the final order of the Director of
Lands for the issuance of patent was issued on December 10, 1937,
(Exhibit A, Ibid., p. 1). On July 13, 1939, the Homestead Patent Title
was issued in the name of Constantino Gayapanao married to Aurelia
Maamo (Exhibit D, Ibid., p. 2). On November 15, 1938, the late
Constantino Gayapanao executed a private deed entitled Kasulatan
ng Bilihan in favor of Serafin Novenario and his wife, Simeona
Gayapanao over 20,000 square meters of the homestead land (Exhibit
4, Defendants' Folder of Exhibits, p. 8).
Constantino Gayapanao and his wife Aurelia Maamo died intestate on
December 22, 1942 and September 29, 1966, respectively (Record on
Appeal, p. 70) . . .
On January 2, 1974, Severino, Teodoro, Roberto, Salvador, and Lauro, all
surnamed Gayapanao, Raymunda Gayapanao-Ramos and the heirs of Eleuterio
Gayapanao filed before the then Court of First Instance of Oriental Mindoro Civil
Case No. R-317, a Complaint for Partition and Accounting with Prayer for

Appointment of Receiver against their sisters Gloria Gayapanao-Saet and


Simeona Gayapanao-Novenario (private respondent herein) who were then
occupying the subject homestead lot. Both defendants filed their Answer to the
complaint.
On March 11, 1975, the court a quo rendered a decision 3 declaring as null and
void Exhibit 4, the contract of sale between Simeona Gayapanao-Novenario and
her father Constantino Gayapanao for having been executed within the five-year
prohibitory period provided under Section 118 of the Public Land Law, 4 and at
the same time declaring as valid Exhibit 5, the deed of sale executed by Teodoro
Gayapanao in favor of his sister Gloria Gayapanao-Saet covering the former's
hereditary share in the homestead lot. Accordingly, the lower court ruled as
follows: 5
WHEREFORE, in view of the above findings, judgment is hereby
rendered as follows:
A. Adjudicating unto plaintiffs SEVERINO, ROBERTO, SALVADOR,
LAURO, RAYMUNDA and the heirs of ELEUTERIO, all surnamed
Gayapanao and Simeona Gayapanao-Novenario one-ninth 1/9 each of
the intestate estate of the deceased Constantino and Aurelia Maamo
covered in and embraced by Original Certificate of Title No. 3625 and
the remaining two-ninths (2/9) to Gloria Gayapanao-Saet, she having
purchased the one-ninth (1/9) hereditary share of plaintiff Teodoro
Gayapanao;
B. Authorizing the herein parties to agree among themselves to cause
the relocated survey of the entire land in question covered by Original
Certificate of Title No. 3625 so that their respective shares may be
properly delineated;
C. Ordering the parties to submit the necessary project of partition
after the relocation survey has been executed not later than three (3)
months after entry of this judgment in order to terminate tills
proceeding;
D. Declaring as null and void document marked Exhibit "4", the same
having been executed one year prior to the issuance of the patent,
but Exhibit "5" is confirmed and declared valid.
WITHOUT special findings as to costs.

IT IS SO ORDERED.
Simeona Gayapanao-Novenario moved to reconsider, but failed. She then
sought relief before the IAC which, finding the sale in her favor to be perfectly
valid, set aside the decision of the lower court and entered a new one
dismissing the complaint against her. 6
Hence, this appeal filed by Severino Gayapanao, et al. after their motion for
reconsideration was denied 7 by the respondent appellate court.
In upholding the sale of a portion of the homestead lot by Constantino
Gayapanao to his daughter, herein private respondent Simeona GayapanaoNovenario, the respondent court interpreted the prohibition against the
alienation or encumbrance of the homestead land under Section 118 of the
Public Land Law as referring to an alienation or encumbrance in favor of a third
person outside the family circle of the original homesteader. Since, according to
the appellate court, the conveyance involved herein was made in favor of
Simeona Gayapanao-Novenario, who is one of the nine (9) children of the
original homesteader and who is the "continuity of the personality of her father
for all legal intents and purposes," such sale is "not in contravention of the
avowed policy of the State, which is to preserve and keep to the homesteader
and his family the land granted to him by the State." 8
We rule otherwise. The pertinent portion of Section 118 of the Public Land Law
provides: 9
Except in favor of the government or any of its branches, units or
institutions land acquired under free patent or homestead provisions
shall not be subject to encumbrance or alienation from the date of the
approval of the application and for a term of five years from and after
the date of issuance of the patent or grant nor shall they become
liable to the satisfaction of any debt contracted prior to the expiration
of said period, but the improvements or crops on the land may be
mortgaged or pledged to qualified persons, associations or
corporations.
The provision of law which prohibits the sale or encumbrance of the homestead
within five years after the grant is mandatory. From the date of the approval of
the application and for a term of five (5) years from and after the date of
issuance of the patent or grant, lands acquired under free patent or homestead
provisions cannot be subject to encumbrance or alienation, nor shall they

become liable to the satisfaction of any debt contracted prior to the expiration
of said period. The only exception mentioned by the law is the sale or
encumbrance in favor of the government or any of its branches, units or
institutions.
In a number of cases, we have consistently ruled that a sale of homestead
within the five (5) year prohibitive period is void ab initio and the same cannot
be ratified nor can it acquire validity through the passage of time.
In the case of Arsenal vs. IAC,

10

we said:

The above provisions of law are clear and explicit. A contract which
purports to alienate, transfer, convey or encumber any homestead
within the prohibitory period of five (5) years from the date of
issuance of the patent is void from its execution. In a number of
cases, this Court has held that such provision is mandatory (De los
Santos vs. Roman Catholic Church of Midsayap, 94 Phil. 405).
It is dangerous precedent to allow the sale of a homestead during the five-year
prohibition to anyone, even to the homesteader's own son or daughter. As aptly
put by the petitioners, a clever homesteader who wants to circumvent the ban
may simply sell the lot to his descendant and the latter after registering the
same in his name would sell it to a third person. This way, public policy would
not be subserved.
Moreover, the sale to a descendant is not one of the exceptions contemplated
by law. Only the government or any of its branches, units or institutions is given
the right to acquire homestead by purchase at any time and even during the
five-year prohibitory period. To hold valid the sale at bar would be to throw the
door open to schemes and subterfuges which would defeat the law prohibiting
the alienation of homestead within five (5) years from the issuance of the
patent.
The respondent Court cited the case of Lasud v. Lasud, 11 in support of its
decision. Said case is not applicable to the case at bar, considering that the
plaintiff, Sigbe Lasud sold the inherited homestead to his brother Santay Lasud
and the latter's wife twenty-one (21) years after the patent was issued to his
father the homesteader. On the other hand, the questioned conveyance in the
case at bar was done within the five year prohibitory period. Furthermore, what
was involved in the Lasud case is the right of therein plaintiff under Section 119

of the Public Land Law to redeem the portion sold. In contrast, the case at bar
centers on Section 118 of the same law
WHEREFORE, the assailed decision of the then Intermediate Appellate Court,
now Court of Appeals, is REVERSED and SET ASIDE. The decision in Civil Case
No. R-317 of the then Court of First Instance of Oriental Mindoro is REINSTATED.
Costs against private respondent.
G.R. No. 144225

June 17, 2003

SPOUSES GODOFREDO ALFREDO and CARMEN LIMON ALFREDO,


SPOUSES ARNULFO SAVELLANO and EDITHA B. SAVELLANO, DANTON D.
MATAWARAN, SPOUSES DELFIN F. ESPIRITU, JR. and ESTELA S. ESPIRITU
and ELIZABETH TUAZON, Petitioners,
vs.
SPOUSES ARMANDO BORRAS and ADELIA LOBATON
BORRAS, Respondents.
DECISION
CARPIO, J.:
The Case
Before us is a petition for review assailing the Decision 1 of the Court of Appeals
dated 26 November 1999 affirming the decision2 of the Regional Trial Court of
Bataan, Branch 4, in Civil Case No. DH-256-94. Petitioners also question the
Resolution of the Court of Appeals dated 26 July 2000 denying petitioners
motion for reconsideration.
The Antecedent Facts
A parcel of land measuring 81,524 square meters ("Subject Land") in Barrio
Culis, Mabiga, Hermosa, Bataan is the subject of controversy in this case. The
registered owners of the Subject Land were petitioner spouses, Godofredo
Alfredo ("Godofredo") and Carmen Limon Alfredo ("Carmen"). The Subject Land
is covered by Original Certificate of Title No. 284 ("OCT No. 284") issued to
Godofredo and Carmen under Homestead Patent No. V-69196.
On 7 March 1994, the private respondents, spouses Armando Borras
("Armando") and Adelia Lobaton Borras ("Adelia"), filed a complaint for specific

performance against Godofredo and Carmen before the Regional Trial Court of
Bataan, Branch 4. The case was docketed as Civil Case No. DH-256-94.
Armando and Adelia alleged in their complaint that Godofredo and Carmen
mortgaged the Subject Land forP7,000.00 with the Development Bank of the
Philippines ("DBP"). To pay the debt, Carmen and Godofredo sold the Subject
Land to Armando and Adelia for P15,000.00, the buyers to pay the DBP loan and
its accumulated interest, and the balance to be paid in cash to the sellers.
Armando and Adelia gave Godofredo and Carmen the money to pay the loan to
DBP which signed the release of mortgage and returned the owners duplicate
copy of OCT No. 284 to Godofredo and Carmen. Armando and Adelia
subsequently paid the balance of the purchase price of the Subject Land for
which Carmen issued a receipt dated 11 March 1970. Godofredo and Carmen
then delivered to Adelia the owners duplicate copy of OCT No. 284, with the
document of cancellation of mortgage, official receipts of realty tax payments,
and tax declaration in the name of Godofredo. Godofredo and Carmen
introduced Armando and Adelia, as the new owners of the Subject Land, to the
Natanawans, the old tenants of the Subject Land. Armando and Adelia then took
possession of the Subject Land.
In January 1994, Armando and Adelia learned that hired persons had entered
the Subject Land and were cutting trees under instructions of allegedly new
owners of the Subject Land. Subsequently, Armando and Adelia discovered that
Godofredo and Carmen had re-sold portions of the Subject Land to several
persons.
On 8 February 1994, Armando and Adelia filed an adverse claim with the
Register of Deeds of Bataan. Armando and Adelia discovered that Godofredo
and Carmen had secured an owners duplicate copy of OCT No. 284 after filing a
petition in court for the issuance of a new copy. Godofredo and Carmen claimed
in their petition that they lost their owners duplicate copy. Armando and Adelia
wrote Godofredo and Carmen complaining about their acts, but the latter did not
reply. Thus, Armando and Adelia filed a complaint for specific performance.
On 28 March 1994, Armando and Adelia amended their complaint to include the
following persons as additional defendants: the spouses Arnulfo Savellano and
Editha B. Savellano, Danton D. Matawaran, the spouses Delfin F. Espiritu, Jr. and
Estela S. Espiritu, and Elizabeth Tuazon ("Subsequent Buyers"). The Subsequent
Buyers, who are also petitioners in this case, purchased from Godofredo and
Carmen the subdivided portions of the Subject Land. The Register of Deeds of

Bataan issued to the Subsequent Buyers transfer certificates of title to the lots
they purchased.
In their answer, Godofredo and Carmen and the Subsequent Buyers (collectively
"petitioners") argued that the action is unenforceable under the Statute of
Frauds. Petitioners pointed out that there is no written instrument evidencing
the alleged contract of sale over the Subject Land in favor of Armando and
Adelia. Petitioners objected to whatever parole evidence Armando and Adelia
introduced or offered on the alleged sale unless the same was in writing and
subscribed by Godofredo. Petitioners asserted that the Subsequent Buyers were
buyers in good faith and for value. As counterclaim, petitioners sought payment
of attorneys fees and incidental expenses.
Trial then followed. Armando and Adelia presented the following witnesses:
Adelia, Jesus Lobaton, Roberto Lopez, Apolinario Natanawan, Rolando
Natanawan, Tomas Natanawan, and Mildred Lobaton. Petitioners presented two
witnesses, Godofredo and Constancia Calonso.
On 7 June 1996, the trial court rendered its decision in favor of Armando and
Adelia. The dispositive portion of the decision reads:
WHEREFORE, premises considered, judgment is hereby rendered in favor of
plaintiffs, the spouses Adelia Lobaton Borras and Armando F. Borras, and against
the defendant-spouses Godofredo Alfredo and Carmen Limon Alfredo, spouses
Arnulfo Sabellano and Editha B. Sabellano, spouses Delfin F. Espiritu, Jr. and
Estela S. Espiritu, Danton D. Matawaran and Elizabeth Tuazon, as follows:
1. Declaring the Deeds of Absolute Sale of the disputed parcel of land
(covered by OCT No. 284) executed by the spouses Godofredo Alfredo and
Camen Limon Alfredo in favor of spouses Arnulfo Sabellano and Editha B.
Sabellano, spouses Delfin F. Espiritu, Danton D. Matawaran and Elizabeth
Tuazon, as null and void;
2. Declaring the Transfer Certificates of Title Nos. T-163266 and T-163267
in the names of spouses Arnulfo Sabellano and Editha B. Sabellano;
Transfer Certificates of Title Nos. T-163268 and 163272 in the names of
spouses Delfin F. Espiritu, Jr. and Estela S. Espiritu; Transfer Certificates of
Title Nos. T-163269 and T-163271 in the name of Danton D. Matawaran;
and Transfer Certificate of Title No. T-163270 in the name of Elizabeth
Tuazon, as null and void and that the Register of Deeds of Bataan is hereby
ordered to cancel said titles;

3. Ordering the defendant-spouses Godofredo Alfredo and Carmen Limon


Alfredo to execute and deliver a good and valid Deed of Absolute Sale of
the disputed parcel of land (covered by OCT No. 284) in favor of the
spouses Adelia Lobaton Borras and Armando F. Borras within a period of
ten (10) days from the finality of this decision;
4. Ordering defendant-spouses Godofredo Alfredo and Carmen Limon
Alfredo to surrender their owners duplicate copy of OCT No. 284 issued to
them by virtue of the Order dated May 20, 1992 of the Regional Trial Court
of Bataan, Dinalupihan Branch, to the Registry of Deeds of Bataan within
ten (10) days from the finality of this decision, who, in turn, is directed to
cancel the same as there exists in the possession of herein plaintiffs of the
owners duplicate copy of said OCT No. 284 and, to restore and/or reinstate
OCT No. 284 of the Register of Deeds of Bataan to its full force and effect;
5. Ordering the defendant-spouses Godofredo Alfredo and Carmen Limon
Alfredo to restitute and/or return the amount of the respective purchase
prices and/or consideration of sale of the disputed parcels of land they sold
to their co-defendants within ten (10) days from the finality of this decision
with legal interest thereon from date of the sale;
6. Ordering the defendants, jointly and severally, to pay plaintiff-spouses
the sum of P20,000.00 as and for attorneys fees and litigation expenses;
and
7. Ordering defendants to pay the costs of suit.
Defendants counterclaims are hereby dismissed for lack of merit.
SO ORDERED.3
Petitioners appealed to the Court of Appeals.
On 26 November 1999, the Court of Appeals issued its Decision affirming the
decision of the trial court, thus:
WHEREFORE, premises considered, the appealed decision in Civil Case No. DH256-94 is hereby AFFIRMED in its entirety. Treble costs against the defendantsappellants.
SO ORDERED.4

On 26 July 2000, the Court of Appeals denied petitioners motion for


reconsideration.
The Ruling of the Trial Court
The trial court ruled that there was a perfected contract of sale between the
spouses Godofredo and Carmen and the spouses Armando and Adelia. The trial
court found that all the elements of a contract of sale were present in this case.
The object of the sale was specifically identified as the 81,524-square meter lot
in Barrio Culis, Mabigas, Hermosa, Bataan, covered by OCT No. 284 issued by
the Registry of Deeds of Bataan. The purchase price was fixed at P15,000.00,
with the buyers assuming to pay the sellers P7,000.00 DBP mortgage loan
including its accumulated interest. The balance of the purchase price was to be
paid in cash to the sellers. The last payment ofP2,524.00 constituted the full
settlement of the purchase price and this was paid on 11 March 1970 as
evidenced by the receipt issued by Carmen.
The trial court found the following facts as proof of a perfected contract of sale:
(1) Godofredo and Carmen delivered to Armando and Adelia the Subject Land;
(2) Armando and Adelia treated as their own tenants the tenants of Godofredo
and Carmen; (3) Godofredo and Carmen turned over to Armando and Adelia
documents such as the owners duplicate copy of the title of the Subject Land,
tax declaration, and the receipts of realty tax payments in the name of
Godofredo; and (4) the DBP cancelled the mortgage on the Subject Property
upon payment of the loan of Godofredo and Carmen. Moreover, the receipt of
payment issued by Carmen served as an acknowledgment, if not a ratification,
of the verbal sale between the sellers and the buyers. The trial court ruled that
the Statute of Frauds is not applicable because in this case the sale was
perfected.
The trial court concluded that the Subsequent Buyers were not innocent
purchasers. Not one of the Subsequent Buyers testified in court on how they
purchased their respective lots. The Subsequent Buyers totally depended on the
testimony of Constancia Calonso ("Calonso") to explain the subsequent sale.
Calonso, a broker, negotiated with Godofredo and Carmen the sale of the
Subject Land which Godofredo and Carmen subdivided so they could sell anew
portions to the Subsequent Buyers.
Calonso admitted that the Subject Land was adjacent to her own lot. The trial
court pointed out that Calonso did not inquire on the nature of the tenancy of
the Natanawans and on who owned the Subject Land. Instead, she bought out

the tenants for P150,000.00. The buy out was embodied in a Kasunduan.
Apolinario Natanawan ("Apolinario") testified that he and his wife accepted the
money and signed the Kasunduan because Calonso and the Subsequent Buyers
threatened them with forcible ejectment. Calonso brought Apolinario to the
Agrarian Reform Office where he was asked to produce the documents showing
that Adelia is the owner of the Subject Land. Since Apolinario could not produce
the documents, the agrarian officer told him that he would lose the case. Thus,
Apolinario was constrained to sign the Kasunduan and accept the P150,000.00.
Another indication of Calonsos bad faith was her own admission that she saw
an adverse claim on the title of the Subject Land when she registered the deeds
of sale in the names of the Subsequent Buyers. Calonso ignored the adverse
claim and proceeded with the registration of the deeds of sale.
The trial court awarded P20,000.00 as attorneys fees to Armando and Adelia. In
justifying the award of attorneys fees, the trial court invoked Article 2208 (2) of
the Civil Code which allows a court to award attorneys fees, including litigation
expenses, when it is just and equitable to award the same. The trial court ruled
that Armando and Adelia are entitled to attorneys fees since they were
compelled to file this case due to petitioners refusal to heed their just and valid
demand.
The Ruling of the Court of Appeals
The Court of Appeals found the factual findings of the trial court well supported
by the evidence. Based on these findings, the Court of Appeals also concluded
that there was a perfected contract of sale and the Subsequent Buyers were not
innocent purchasers.
The Court of Appeals ruled that the handwritten receipt dated 11 March 1970 is
sufficient proof that Godofredo and Carmen sold the Subject Land to Armando
and Adelia upon payment of the balance of the purchase price. The Court of
Appeals found the recitals in the receipt as "sufficient to serve as the
memorandum or note as a writing under the Statute of Frauds." 5 The Court of
Appeals then reiterated the ruling of the trial court that the Statute of Frauds
does not apply in this case.
The Court of Appeals gave credence to the testimony of a witness of Armando
and Adelia, Mildred Lobaton, who explained why the title to the Subject Land
was not in the name of Armando and Adelia. Lobaton testified that Godofredo
was then busy preparing to leave for Davao. Godofredo promised that he would

sign all the papers once they were ready. Since Armando and Adelia were close
to the family of Carmen, they trusted Godofredo and Carmen to honor their
commitment. Armando and Adelia had no reason to believe that their contract
of sale was not perfected or validly executed considering that they had received
the duplicate copy of OCT No. 284 and other relevant documents. Moreover,
they had taken physical possession of the Subject Land.
The Court of Appeals held that the contract of sale is not void even if only
Carmen signed the receipt dated 11 March 1970. Citing Felipe v. Heirs of
Maximo Aldon,6 the appellate court ruled that a contract of sale made by the
wife without the husbands consent is not void but merely voidable. The Court of
Appeals further declared that the sale in this case binds the conjugal
partnership even if only the wife signed the receipt because the proceeds of the
sale were used for the benefit of the conjugal partnership. The appellate court
based this conclusion on Article 1617 of the Civil Code.
The Subsequent Buyers of the Subject Land cannot claim that they are buyers in
good faith because they had constructive notice of the adverse claim of
Armando and Adelia. Calonso, who brokered the subsequent sale, testified that
when she registered the subsequent deeds of sale, the adverse claim of
Armando and Adelia was already annotated on the title of the Subject Land. The
Court of Appeals believed that the act of Calonso and the Subsequent Buyers in
forcibly ejecting the Natanawans from the Subject Land buttresses the
conclusion that the second sale was tainted with bad faith from the very
beginning.
Finally, the Court of Appeals noted that the issue of prescription was not raised
in the Answer. Nonetheless, the appellate court explained that since this action
is actually based on fraud, the prescriptive period is four years, with the period
starting to run only from the date of the discovery of the fraud. Armando and
Adelia discovered the fraudulent sale of the Subject Land only in January 1994.
Armando and Adelia lost no time in writing a letter to Godofredo and Carmen on
2 February 1994 and filed this case on 7 March 1994. Plainly, Armando and
Adelia did not sleep on their rights or lose their rights by prescription.
The Court of Appeals sustained the award of attorneys fees and imposed treble
costs on petitioners.
The Issues
Petitioners raise the following issues:

I
Whether the alleged sale of the Subject Land in favor of Armando and Adelia is
valid and enforceable, where (1) it was orally entered into and not in writing; (2)
Carmen did not obtain the consent and authority of her husband, Godofredo,
who was the sole owner of the Subject Land in whose name the title thereto
(OCT No. 284) was issued; and (3) it was entered into during the 25-year
prohibitive period for alienating the Subject Land without the approval of the
Secretary of Agriculture and Natural Resources.
II
Whether the action to enforce the alleged oral contract of sale brought after 24
years from its alleged perfection had been barred by prescription and by laches.
III
Whether the deeds of absolute sale and the transfer certificates of title over the
portions of the Subject Land issued to the Subsequent Buyers, innocent
purchasers in good faith and for value whose individual titles to their respective
lots are absolute and indefeasible, are valid.
IV
Whether petitioners are liable to pay Armando and Adelia P20,0000.00 as
attorneys fees and litigation expenses and the treble costs, where the claim of
Armando and Adelia is clearly unfounded and baseless.
V
Whether petitioners are entitled to the counterclaim for attorneys fees and
litigation expenses, where they have sustained such expenses by reason of
institution of a clearly malicious and unfounded action by Armando and Adelia. 8
The Courts Ruling
The petition is without merit.
In a petition for review on certiorari under Rule 45, this Court reviews only errors
of law and not errors of facts.9The factual findings of the appellate court are
generally binding on this Court.10 This applies with greater force when both the
trial court and the Court of Appeals are in complete agreement on their factual
findings.11 In this case, there is no reason to deviate from the findings of the

lower courts. The facts relied upon by the trial and appellate courts are borne
out by the record. We agree with the conclusions drawn by the lower courts
from these facts.
Validity and Enforceability of the Sale
The contract of sale between the spouses Godofredo and Carmen and the
spouses Armando and Adelia was a perfected contract. A contract is perfected
once there is consent of the contracting parties on the object certain and on the
cause of the obligation.12 In the instant case, the object of the sale is the Subject
Land, and the price certain is P15,000.00. The trial and appellate courts found
that there was a meeting of the minds on the sale of the Subject Land and on
the purchase price of P15,000.00. This is a finding of fact that is binding on this
Court. We find no reason to disturb this finding since it is supported by
substantial evidence.
The contract of sale of the Subject Land has also been consummated because
the sellers and buyers have performed their respective obligations under the
contract. In a contract of sale, the seller obligates himself to transfer the
ownership of the determinate thing sold, and to deliver the same, to the buyer
who obligates himself to pay a price certain to the seller. 13 In the instant case,
Godofredo and Carmen delivered the Subject Land to Armando and Adelia,
placing the latter in actual physical possession of the Subject Land. This physical
delivery of the Subject Land also constituted a transfer of ownership of the
Subject Land to Armando and Adelia.14Ownership of the thing sold is transferred
to the vendee upon its actual or constructive delivery. 15 Godofredo and Carmen
also turned over to Armando and Adelia the documents of ownership to the
Subject Land, namely the owners duplicate copy of OCT No. 284, the tax
declaration and the receipts of realty tax payments.
On the other hand, Armando and Adelia paid the full purchase price as
evidenced by the receipt dated 11 March 1970 issued by Carmen. Armando and
Adelia fulfilled their obligation to provide the P7,000.00 to pay the Dir obliagtion
rmen. rchase pricend Adelia . fredo and Carmen do not deny the existence of
the cBP loan of Godofredo and Carmen, and to pay the latter the balance
of P8,000.00 in cash. The P2,524.00 paid under the receipt dated 11 March 1970
was the last installment to settle fully the purchase price. Indeed, upon payment
to DBP of the P7,000.00 and the accumulated interests, the DBP cancelled the
mortgage on the Subject Land and returned the owners duplicate copy of OCT
No. 284 to Godofredo and Carmen.

The trial and appellate courts correctly refused to apply the Statute of Frauds to
this case. The Statute of Frauds16 provides that a contract for the sale of real
property shall be unenforceable unless the contract or some note or
memorandum of the sale is in writing and subscribed by the party charged or
his agent. The existence of the receipt dated 11 March 1970, which is a
memorandum of the sale, removes the transaction from the provisions of the
Statute of Frauds.
The Statute of Frauds applies only to executory contracts and not to contracts
either partially or totally performed. 17 Thus, where one party has performed
ones obligation, oral evidence will be admitted to prove the agreement. 18 In the
instant case, the parties have consummated the sale of the Subject Land, with
both sellers and buyers performing their respective obligations under the
contract of sale. In addition, a contract that violates the Statute of Frauds is
ratified by the acceptance of benefits under the contract. 19 Godofredo and
Carmen benefited from the contract because they paid their DBP loan and
secured the cancellation of their mortgage using the money given by Armando
and Adelia. Godofredo and Carmen also accepted payment of the balance of the
purchase price.
Godofredo and Carmen cannot invoke the Statute of Frauds to deny the
existence of the verbal contract of sale because they have performed their
obligations, and have accepted benefits, under the verbal contract. 20Armando
and Adelia have also performed their obligations under the verbal contract.
Clearly, both the sellers and the buyers have consummated the verbal contract
of sale of the Subject Land. The Statute of Frauds was enacted to prevent
fraud.21 This law cannot be used to advance the very evil the law seeks to
prevent.
Godofredo and Carmen also claim that the sale of the Subject Land to Armando
and Adelia is void on two grounds. First, Carmen sold the Subject Land without
the marital consent of Godofredo. Second, the sale was made during the 25year period that the law prohibits the alienation of land grants without the
approval of the Secretary of Agriculture and Natural Resources.
These arguments are without basis.
The Family Code, which took effect on 3 August 1988, provides that any
alienation or encumbrance made by the husband of the conjugal partnership
property without the consent of the wife is void. However, when the sale is

made before the effectivity of the Family Code, the applicable law is the Civil
Code.22
Article 173 of the Civil Code provides that the disposition of conjugal property
without the wifes consent is not void but merely voidable. Article 173 reads:
The wife may, during the marriage, and within ten years from the transaction
questioned, ask the courts for the annulment of any contract of the husband
entered into without her consent, when such consent is required, or any act or
contract of the husband which tends to defraud her or impair her interest in the
conjugal partnership property. Should the wife fail to exercise this right, she or
her heirs, after the dissolution of the marriage, may demand the value of
property fraudulently alienated by the husband.
In Felipe v. Aldon,23 we applied Article 173 in a case where the wife sold some
parcels of land belonging to the conjugal partnership without the consent of the
husband. We ruled that the contract of sale was voidable subject to annulment
by the husband. Following petitioners argument that Carmen sold the land to
Armando and Adelia without the consent of Carmens husband, the sale would
only be voidable and not void.
However, Godofredo can no longer question the sale. Voidable contracts are
susceptible of ratification.24Godofredo ratified the sale when he introduced
Armando and Adelia to his tenants as the new owners of the Subject Land. The
trial court noted that Godofredo failed to deny categorically on the witness
stand the claim of the complainants witnesses that Godofredo introduced
Armando and Adelia as the new landlords of the tenants. 25 That Godofredo and
Carmen allowed Armando and Adelia to enjoy possession of the Subject Land for
24 years is formidable proof of Godofredos acquiescence to the sale. If the sale
was truly unauthorized, then Godofredo should have filed an action to annul the
sale. He did not. The prescriptive period to annul the sale has long lapsed.
Godofredos conduct belies his claim that his wife sold the Subject Land without
his consent.
Moreover, Godofredo and Carmen used most of the proceeds of the sale to pay
their debt with the DBP. We agree with the Court of Appeals that the sale
redounded to the benefit of the conjugal partnership. Article 161 of the Civil
Code provides that the conjugal partnership shall be liable for debts and
obligations contracted by the wife for the benefit of the conjugal partnership.
Hence, even if Carmen sold the land without the consent of her husband, the
sale still binds the conjugal partnership.

Petitioners contend that Godofredo and Carmen did not deliver the title of the
Subject Land to Armando and Adelia as shown by this portion of Adelias
testimony on cross-examination:
Q -- No title was delivered to you by Godofredo Alfredo?
A -- I got the title from Julie Limon because my sister told me. 26
Petitioners raise this factual issue for the first time. The Court of Appeals could
have passed upon this issue had petitioners raised this earlier. At any rate, the
cited testimony of Adelia does not convincingly prove that Godofredo and
Carmen did not deliver the Subject Land to Armando and Adelia. Adelias cited
testimony must be examined in context not only with her entire testimony but
also with the other circumstances.
Adelia stated during cross-examination that she obtained the title of the Subject
Land from Julie Limon ("Julie"), her classmate in college and the sister of
Carmen. Earlier, Adelias own sister had secured the title from the father of
Carmen. However, Adelias sister, who was about to leave for the United States,
gave the title to Julie because of the absence of the other documents. Adelias
sister told Adelia to secure the title from Julie, and this was how Adelia obtained
the title from Julie.
It is not necessary that the seller himself deliver the title of the property to the
buyer because the thing sold is understood as delivered when it is placed in the
control and possession of the vendee. 27 To repeat, Godofredo and Carmen
themselves introduced the Natanawans, their tenants, to Armando and Adelia as
the new owners of the Subject Land. From then on, Armando and Adelia acted
as the landlords of the Natanawans. Obviously, Godofredo and Carmen
themselves placed control and possession of the Subject Land in the hands of
Armando and Adelia.
Petitioners invoke the absence of approval of the sale by the Secretary of
Agriculture and Natural Resources to nullify the sale. Petitioners never raised
this issue before the trial court or the Court of Appeals. Litigants cannot raise an
issue for the first time on appeal, as this would contravene the basic rules of fair
play, justice and due process.28 However, we will address this new issue to
finally put an end to this case.
The sale of the Subject Land cannot be annulled on the ground that the
Secretary did not approve the sale, which was made within 25 years from the

issuance of the homestead title. Section 118 of the Public Land Act
(Commonwealth Act No. 141) reads as follows:
SEC. 118. Except in favor of the Government or any of its branches, units, or
institutions or legally constituted banking corporation, lands acquired under free
patent or homestead provisions shall not be subject to encumbrance or
alienation from the date of the approval of the application and for a term of five
years from and after the date of the issuance of the patent or grant.
xxx
No alienation, transfer, or conveyance of any homestead after 5 years and
before twenty-five years after the issuance of title shall be valid without the
approval of the Secretary of Agriculture and Commerce, which approval shall not
be denied except on constitutional and legal grounds.
A grantee or homesteader is prohibited from alienating to a private individual a
land grant within five years from the time that the patent or grant is issued. 29 A
violation of this prohibition renders a sale void. 30 This prohibition, however,
expires on the fifth year. From then on until the next 20 years 31 the land grant
may be alienated provided the Secretary of Agriculture and Natural Resources
approves the alienation. The Secretary is required to approve the alienation
unless there are "constitutional and legal grounds" to deny the approval. In this
case, there are no apparent constitutional or legal grounds for the Secretary to
disapprove the sale of the Subject Land.
The failure to secure the approval of the Secretary does not ipso facto make a
sale void.32 The absence of approval by the Secretary does not nullify a sale
made after the expiration of the 5-year period, for in such event the requirement
of Section 118 of the Public Land Act becomes merely directory 33 or a
formality.34 The approval may be secured later, producing the effect of ratifying
and adopting the transaction as if the sale had been previously authorized. 35 As
held in Evangelista v. Montano:36
Section 118 of Commonwealth Act No. 141, as amended, specifically enjoins
that the approval by the Department Secretary "shall not be denied except on
constitutional and legal grounds." There being no allegation that there were
constitutional or legal impediments to the sales, and no pretense that if the
sales had been submitted to the Secretary concerned they would have been
disapproved, approval was a ministerial duty, to be had as a matter of course
and demandable if refused. For this reason, and if necessary, approval may now

be applied for and its effect will be to ratify and adopt the transactions as if they
had been previously authorized. (Emphasis supplied)
Action Not Barred by Prescription and Laches
Petitioners insist that prescription and laches have set in. We disagree.
The Amended Complaint filed by Armando and Adelia with the trial court is
captioned as one for Specific Performance. In reality, the ultimate relief sought
by Armando and Adelia is the reconveyance to them of the Subject Land. An
action for reconveyance is one that seeks to transfer property, wrongfully
registered by another, to its rightful and legal owner. 37 The body of the pleading
or complaint determines the nature of an action, not its title or heading. 38 Thus,
the present action should be treated as one for reconveyance. 39
Article 1456 of the Civil Code provides that a person acquiring property through
fraud becomes by operation of law a trustee of an implied trust for the benefit of
the real owner of the property. The presence of fraud in this case created an
implied trust in favor of Armando and Adelia. This gives Armando and Adelia the
right to seek reconveyance of the property from the Subsequent Buyers. 40
To determine when the prescriptive period commenced in an action for
reconveyance, plaintiffs possession of the disputed property is material. An
action for reconveyance based on an implied trust prescribes in ten years. 41 The
ten-year 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.42 However, 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. 43 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. 44
In this case, the appellate court resolved the issue of prescription by ruling that
the action should prescribe four years from discovery of the fraud. We must
correct this erroneous application of the four-year prescriptive period. In Caro v.
Court of Appeals,45 we explained why an action for reconveyance based on an
implied trust should prescribe in ten years. In that case, the appellate court also
erroneously applied the four-year prescriptive period. We declared in Caro:
We disagree. The case of Liwalug Amerol, et al. v. Molok Bagumbaran, G.R. No.
L-33261, September 30, 1987,154 SCRA 396 illuminated what used to be a gray

area on the prescriptive period for an action to reconvey the title to real
property and, corollarily, its point of reference:
xxx It must be remembered that before August 30, 1950, the date of the
effectivity of the new Civil Code, the old Code of Civil Procedure (Act No. 190)
governed prescription. It provided:
SEC. 43. Other civil actions; how limited.- Civil actions other than for the
recovery of real property can only be brought within the following periods after
the right of action accrues:
xxx

xxx

xxx

3. Within four years: xxx An action for relief on the ground of fraud, but the right
of action in such case shall not be deemed to have accrued until the discovery
of the fraud;
xxx

xxx

xxx

In contrast, under the present Civil Code, we find that just as an implied or
constructive trust is an offspring of the law (Art. 1456, Civil Code), so is the
corresponding obligation to reconvey the property and the title thereto in favor
of the true owner. In this context, and vis-a-vis prescription, Article 1144 of the
Civil Code is applicable.
Article 1144. The following actions must be brought within ten years from the
time the right of action accrues:
(1) Upon a written contract;
(2) Upon an obligation created by law;
(3) Upon a judgment.
xxx

xxx

xxx

(Emphasis supplied).
An action for reconveyance based on an implied or constructive trust
must perforce prescribe in ten years and not otherwise. A long line of
decisions of this Court, and of very recent vintage at that, illustrates this
rule.Undoubtedly, it is now well-settled that an action for reconveyance
based on an implied or constructive trust prescribes in ten years from

the issuance of the Torrens title over the property. The only discordant
note, it seems, is Balbin vs. Medalla which states that the prescriptive period for
a reconveyance action is four years. However, this variance can be explained by
the erroneous reliance on Gerona vs. de Guzman. But in Gerona, the fraud was
discovered on June 25,1948, hence Section 43(3) of Act No. 190, was applied,
the new Civil Code not coming into effect until August 30, 1950 as mentioned
earlier. It must be stressed, at this juncture, that article 1144 and article 1456,
are new provisions. They have no counterparts in the old Civil Code or in the old
Code of Civil Procedure, the latter being then resorted to as legal basis of the
four-year prescriptive period for an action for reconveyance of title of real
property acquired under false pretenses.
An action for reconveyance has its basis in Section 53, paragraph 3 of
Presidential Decree No. 1529, which provides:
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, xxx
This provision should be read in conjunction with Article 1456 of the Civil Code,
which provides:
Article 1456. If property is acquired through mistake or fraud, the person
obtaining it is, by force of law, considered a trustee of an implied trust for the
benefit of the person from whom the property comes.
The law thereby creates the obligation of the trustee to reconvey the property
and the title thereto in favor of the true owner. Correlating Section 53,
paragraph 3 of Presidential Decree No. 1529 and Article 1456 of the Civil Code
with Article 1144(2) of the Civil Code, supra, the prescriptive period for the
reconveyance of fraudulently registered real property is ten (10) years reckoned
from the date of the issuance of the certificate of title xxx (Emphasis supplied) 46
Following Caro, we have consistently held that an action for reconveyance
based on an implied trust prescribes in ten years. 47 We went further by
specifying the reference point of the ten-year prescriptive period as the date of
the registration of the deed or the issuance of the title. 48
Had Armando and Adelia remained in possession of the Subject Land, their
action for reconveyance, in effect an action to quiet title to property, would not

be subject to prescription. Prescription does not run against the plaintiff in


actual possession of the disputed land because such plaintiff has a right to wait
until his possession is disturbed or his title is questioned before initiating an
action to vindicate his right.49 His undisturbed possession gives him the
continuing right to seek the aid of a court of equity to determine the nature of
the adverse claim of a third party and its effect on his title. 50
Armando and Adelia lost possession of the Subject Land when the Subsequent
Buyers forcibly drove away from the Subject Land the Natanawans, the tenants
of Armando and Adelia.51 This created an actual need for Armando and Adelia to
seek reconveyance of the Subject Land. The statute of limitation becomes
relevant in this case. The ten-year prescriptive period started to run from the
date the Subsequent Buyers registered their deeds of sale with the Register of
Deeds.
The Subsequent Buyers bought the subdivided portions of the Subject Land on
22 February 1994, the date of execution of their deeds of sale. The Register of
Deeds issued the transfer certificates of title to the Subsequent Buyers on 24
February 1994. Armando and Adelia filed the Complaint on 7 March 1994.
Clearly, prescription could not have set in since the case was filed at the early
stage of the ten-year prescriptive period.
Neither is the action barred by laches. We have defined laches as the failure or
neglect, for an unreasonable time, to do that which, by the exercise of due
diligence, could or should have been done earlier. 52 It is negligence or omission
to assert a right within a reasonable time, warranting a presumption that the
party entitled to assert it either has abandoned it or declined to assert
it.53 Armando and Adelia discovered in January 1994 the subsequent sale of the
Subject Land and they filed this case on 7 March 1994. Plainly, Armando and
Adelia did not sleep on their rights.
Validity of Subsequent Sale of Portions of the Subject Land
Petitioners maintain that the subsequent sale must be upheld because the
Subsequent Buyers, the co-petitioners of Godofredo and Carmen, purchased and
registered the Subject Land in good faith. Petitioners argue that the testimony of
Calonso, the person who brokered the second sale, should not prejudice the
Subsequent Buyers. There is no evidence that Calonso was the agent of the
Subsequent Buyers and that she communicated to them what she knew about
the adverse claim and the prior sale. Petitioners assert that the adverse claim

registered by Armando and Adelia has no legal basis to render defective the
transfer of title to the Subsequent Buyers.
We are not persuaded. Godofredo and Carmen had already sold the Subject
Land to Armando and Adelia. The settled rule is when ownership or title passes
to the buyer, the seller ceases to have any title to transfer to any third
person.54 If the seller sells the same land to another, the second buyer who has
actual or constructive knowledge of the prior sale cannot be a registrant in good
faith.55 Such second buyer cannot defeat the first buyers title. 56 In case a title is
issued to the second buyer, the first buyer may seek reconveyance of the
property subject of the sale.57
Thus, to merit protection under the second paragraph of Article 1544 58 of the
Civil Code, the second buyer must act in good faith in registering the deed. 59 In
this case, the Subsequent Buyers good faith hinges on whether they had
knowledge of the previous sale. Petitioners do not dispute that Armando and
Adelia registered their adverse claim with the Registry of Deeds of Bataan on 8
February 1994. The Subsequent Buyers purchased their respective lots only on
22 February 1994 as shown by the date of their deeds of sale. Consequently, the
adverse claim registered prior to the second sale charged the Subsequent
Buyers with constructive notice of the defect in the title of the
sellers,60 Godofredo and Carmen.
It is immaterial whether Calonso, the broker of the second sale, communicated
to the Subsequent Buyers the existence of the adverse claim. The registration of
the adverse claim on 8 February 1994 constituted, by operation of law, notice to
the whole world.61 From that date onwards, the Subsequent Buyers were
deemed to have constructive notice of the adverse claim of Armando and
Adelia. When the Subsequent Buyers purchased portions of the Subject Land on
22 February 1994, they already had constructive notice of the adverse claim
registered earlier.62 Thus, the Subsequent Buyers were not buyers in good faith
when they purchased their lots on 22 February 1994. They were also not
registrants in good faith when they registered their deeds of sale with the
Registry of Deeds on 24 February 1994.
The Subsequent Buyers individual titles to their respective lots are not
absolutely indefeasible. The defense of indefeasibility of the Torrens Title does
not extend to a transferee who takes the certificate of title with notice of a flaw
in his title.63 The principle of indefeasibility of title does not apply where fraud
attended the issuance of the titles as in this case. 64

Attorneys Fees and Costs


We sustain the award of attorneys fees. The decision of the court must state
the grounds for the award of attorneys fees. The trial court complied with this
requirement.65 We agree with the trial court that if it were not for petitioners
unjustified refusal to heed the just and valid demands of Armando and Adelia,
the latter would not have been compelled to file this action.
The Court of Appeals echoed the trial courts condemnation of petitioners
fraudulent maneuverings in securing the second sale of the Subject Land to the
Subsequent Buyers. We will also not turn a blind eye on petitioners brazen
tactics. Thus, we uphold the treble costs imposed by the Court of Appeals on
petitioners.
WHEREFORE, the petition is DENIED and the appealed decision is AFFIRMED.
Treble costs against petitioners.
G.R. No. 144225

June 17, 2003

SPOUSES GODOFREDO ALFREDO and CARMEN LIMON ALFREDO,


SPOUSES ARNULFO SAVELLANO and EDITHA B. SAVELLANO, DANTON D.
MATAWARAN, SPOUSES DELFIN F. ESPIRITU, JR. and ESTELA S. ESPIRITU
and ELIZABETH TUAZON, Petitioners,
vs.
SPOUSES ARMANDO BORRAS and ADELIA LOBATON
BORRAS, Respondents.
DECISION
CARPIO, J.:
The Case
Before us is a petition for review assailing the Decision 1 of the Court of Appeals
dated 26 November 1999 affirming the decision2 of the Regional Trial Court of
Bataan, Branch 4, in Civil Case No. DH-256-94. Petitioners also question the
Resolution of the Court of Appeals dated 26 July 2000 denying petitioners
motion for reconsideration.
The Antecedent Facts

A parcel of land measuring 81,524 square meters ("Subject Land") in Barrio


Culis, Mabiga, Hermosa, Bataan is the subject of controversy in this case. The
registered owners of the Subject Land were petitioner spouses, Godofredo
Alfredo ("Godofredo") and Carmen Limon Alfredo ("Carmen"). The Subject Land
is covered by Original Certificate of Title No. 284 ("OCT No. 284") issued to
Godofredo and Carmen under Homestead Patent No. V-69196.
On 7 March 1994, the private respondents, spouses Armando Borras
("Armando") and Adelia Lobaton Borras ("Adelia"), filed a complaint for specific
performance against Godofredo and Carmen before the Regional Trial Court of
Bataan, Branch 4. The case was docketed as Civil Case No. DH-256-94.
Armando and Adelia alleged in their complaint that Godofredo and Carmen
mortgaged the Subject Land forP7,000.00 with the Development Bank of the
Philippines ("DBP"). To pay the debt, Carmen and Godofredo sold the Subject
Land to Armando and Adelia for P15,000.00, the buyers to pay the DBP loan and
its accumulated interest, and the balance to be paid in cash to the sellers.
Armando and Adelia gave Godofredo and Carmen the money to pay the loan to
DBP which signed the release of mortgage and returned the owners duplicate
copy of OCT No. 284 to Godofredo and Carmen. Armando and Adelia
subsequently paid the balance of the purchase price of the Subject Land for
which Carmen issued a receipt dated 11 March 1970. Godofredo and Carmen
then delivered to Adelia the owners duplicate copy of OCT No. 284, with the
document of cancellation of mortgage, official receipts of realty tax payments,
and tax declaration in the name of Godofredo. Godofredo and Carmen
introduced Armando and Adelia, as the new owners of the Subject Land, to the
Natanawans, the old tenants of the Subject Land. Armando and Adelia then took
possession of the Subject Land.
In January 1994, Armando and Adelia learned that hired persons had entered
the Subject Land and were cutting trees under instructions of allegedly new
owners of the Subject Land. Subsequently, Armando and Adelia discovered that
Godofredo and Carmen had re-sold portions of the Subject Land to several
persons.
On 8 February 1994, Armando and Adelia filed an adverse claim with the
Register of Deeds of Bataan. Armando and Adelia discovered that Godofredo
and Carmen had secured an owners duplicate copy of OCT No. 284 after filing a
petition in court for the issuance of a new copy. Godofredo and Carmen claimed
in their petition that they lost their owners duplicate copy. Armando and Adelia

wrote Godofredo and Carmen complaining about their acts, but the latter did not
reply. Thus, Armando and Adelia filed a complaint for specific performance.
On 28 March 1994, Armando and Adelia amended their complaint to include the
following persons as additional defendants: the spouses Arnulfo Savellano and
Editha B. Savellano, Danton D. Matawaran, the spouses Delfin F. Espiritu, Jr. and
Estela S. Espiritu, and Elizabeth Tuazon ("Subsequent Buyers"). The Subsequent
Buyers, who are also petitioners in this case, purchased from Godofredo and
Carmen the subdivided portions of the Subject Land. The Register of Deeds of
Bataan issued to the Subsequent Buyers transfer certificates of title to the lots
they purchased.
In their answer, Godofredo and Carmen and the Subsequent Buyers (collectively
"petitioners") argued that the action is unenforceable under the Statute of
Frauds. Petitioners pointed out that there is no written instrument evidencing
the alleged contract of sale over the Subject Land in favor of Armando and
Adelia. Petitioners objected to whatever parole evidence Armando and Adelia
introduced or offered on the alleged sale unless the same was in writing and
subscribed by Godofredo. Petitioners asserted that the Subsequent Buyers were
buyers in good faith and for value. As counterclaim, petitioners sought payment
of attorneys fees and incidental expenses.
Trial then followed. Armando and Adelia presented the following witnesses:
Adelia, Jesus Lobaton, Roberto Lopez, Apolinario Natanawan, Rolando
Natanawan, Tomas Natanawan, and Mildred Lobaton. Petitioners presented two
witnesses, Godofredo and Constancia Calonso.
On 7 June 1996, the trial court rendered its decision in favor of Armando and
Adelia. The dispositive portion of the decision reads:
WHEREFORE, premises considered, judgment is hereby rendered in favor of
plaintiffs, the spouses Adelia Lobaton Borras and Armando F. Borras, and against
the defendant-spouses Godofredo Alfredo and Carmen Limon Alfredo, spouses
Arnulfo Sabellano and Editha B. Sabellano, spouses Delfin F. Espiritu, Jr. and
Estela S. Espiritu, Danton D. Matawaran and Elizabeth Tuazon, as follows:
1. Declaring the Deeds of Absolute Sale of the disputed parcel of land
(covered by OCT No. 284) executed by the spouses Godofredo Alfredo and
Camen Limon Alfredo in favor of spouses Arnulfo Sabellano and Editha B.
Sabellano, spouses Delfin F. Espiritu, Danton D. Matawaran and Elizabeth
Tuazon, as null and void;

2. Declaring the Transfer Certificates of Title Nos. T-163266 and T-163267


in the names of spouses Arnulfo Sabellano and Editha B. Sabellano;
Transfer Certificates of Title Nos. T-163268 and 163272 in the names of
spouses Delfin F. Espiritu, Jr. and Estela S. Espiritu; Transfer Certificates of
Title Nos. T-163269 and T-163271 in the name of Danton D. Matawaran;
and Transfer Certificate of Title No. T-163270 in the name of Elizabeth
Tuazon, as null and void and that the Register of Deeds of Bataan is hereby
ordered to cancel said titles;
3. Ordering the defendant-spouses Godofredo Alfredo and Carmen Limon
Alfredo to execute and deliver a good and valid Deed of Absolute Sale of
the disputed parcel of land (covered by OCT No. 284) in favor of the
spouses Adelia Lobaton Borras and Armando F. Borras within a period of
ten (10) days from the finality of this decision;
4. Ordering defendant-spouses Godofredo Alfredo and Carmen Limon
Alfredo to surrender their owners duplicate copy of OCT No. 284 issued to
them by virtue of the Order dated May 20, 1992 of the Regional Trial Court
of Bataan, Dinalupihan Branch, to the Registry of Deeds of Bataan within
ten (10) days from the finality of this decision, who, in turn, is directed to
cancel the same as there exists in the possession of herein plaintiffs of the
owners duplicate copy of said OCT No. 284 and, to restore and/or reinstate
OCT No. 284 of the Register of Deeds of Bataan to its full force and effect;
5. Ordering the defendant-spouses Godofredo Alfredo and Carmen Limon
Alfredo to restitute and/or return the amount of the respective purchase
prices and/or consideration of sale of the disputed parcels of land they sold
to their co-defendants within ten (10) days from the finality of this decision
with legal interest thereon from date of the sale;
6. Ordering the defendants, jointly and severally, to pay plaintiff-spouses
the sum of P20,000.00 as and for attorneys fees and litigation expenses;
and
7. Ordering defendants to pay the costs of suit.
Defendants counterclaims are hereby dismissed for lack of merit.
SO ORDERED.3
Petitioners appealed to the Court of Appeals.

On 26 November 1999, the Court of Appeals issued its Decision affirming the
decision of the trial court, thus:
WHEREFORE, premises considered, the appealed decision in Civil Case No. DH256-94 is hereby AFFIRMED in its entirety. Treble costs against the defendantsappellants.
SO ORDERED.4
On 26 July 2000, the Court of Appeals denied petitioners motion for
reconsideration.
The Ruling of the Trial Court
The trial court ruled that there was a perfected contract of sale between the
spouses Godofredo and Carmen and the spouses Armando and Adelia. The trial
court found that all the elements of a contract of sale were present in this case.
The object of the sale was specifically identified as the 81,524-square meter lot
in Barrio Culis, Mabigas, Hermosa, Bataan, covered by OCT No. 284 issued by
the Registry of Deeds of Bataan. The purchase price was fixed at P15,000.00,
with the buyers assuming to pay the sellers P7,000.00 DBP mortgage loan
including its accumulated interest. The balance of the purchase price was to be
paid in cash to the sellers. The last payment ofP2,524.00 constituted the full
settlement of the purchase price and this was paid on 11 March 1970 as
evidenced by the receipt issued by Carmen.
The trial court found the following facts as proof of a perfected contract of sale:
(1) Godofredo and Carmen delivered to Armando and Adelia the Subject Land;
(2) Armando and Adelia treated as their own tenants the tenants of Godofredo
and Carmen; (3) Godofredo and Carmen turned over to Armando and Adelia
documents such as the owners duplicate copy of the title of the Subject Land,
tax declaration, and the receipts of realty tax payments in the name of
Godofredo; and (4) the DBP cancelled the mortgage on the Subject Property
upon payment of the loan of Godofredo and Carmen. Moreover, the receipt of
payment issued by Carmen served as an acknowledgment, if not a ratification,
of the verbal sale between the sellers and the buyers. The trial court ruled that
the Statute of Frauds is not applicable because in this case the sale was
perfected.
The trial court concluded that the Subsequent Buyers were not innocent
purchasers. Not one of the Subsequent Buyers testified in court on how they

purchased their respective lots. The Subsequent Buyers totally depended on the
testimony of Constancia Calonso ("Calonso") to explain the subsequent sale.
Calonso, a broker, negotiated with Godofredo and Carmen the sale of the
Subject Land which Godofredo and Carmen subdivided so they could sell anew
portions to the Subsequent Buyers.
Calonso admitted that the Subject Land was adjacent to her own lot. The trial
court pointed out that Calonso did not inquire on the nature of the tenancy of
the Natanawans and on who owned the Subject Land. Instead, she bought out
the tenants for P150,000.00. The buy out was embodied in a Kasunduan.
Apolinario Natanawan ("Apolinario") testified that he and his wife accepted the
money and signed the Kasunduan because Calonso and the Subsequent Buyers
threatened them with forcible ejectment. Calonso brought Apolinario to the
Agrarian Reform Office where he was asked to produce the documents showing
that Adelia is the owner of the Subject Land. Since Apolinario could not produce
the documents, the agrarian officer told him that he would lose the case. Thus,
Apolinario was constrained to sign the Kasunduan and accept the P150,000.00.
Another indication of Calonsos bad faith was her own admission that she saw
an adverse claim on the title of the Subject Land when she registered the deeds
of sale in the names of the Subsequent Buyers. Calonso ignored the adverse
claim and proceeded with the registration of the deeds of sale.
The trial court awarded P20,000.00 as attorneys fees to Armando and Adelia. In
justifying the award of attorneys fees, the trial court invoked Article 2208 (2) of
the Civil Code which allows a court to award attorneys fees, including litigation
expenses, when it is just and equitable to award the same. The trial court ruled
that Armando and Adelia are entitled to attorneys fees since they were
compelled to file this case due to petitioners refusal to heed their just and valid
demand.
The Ruling of the Court of Appeals
The Court of Appeals found the factual findings of the trial court well supported
by the evidence. Based on these findings, the Court of Appeals also concluded
that there was a perfected contract of sale and the Subsequent Buyers were not
innocent purchasers.
The Court of Appeals ruled that the handwritten receipt dated 11 March 1970 is
sufficient proof that Godofredo and Carmen sold the Subject Land to Armando
and Adelia upon payment of the balance of the purchase price. The Court of

Appeals found the recitals in the receipt as "sufficient to serve as the


memorandum or note as a writing under the Statute of Frauds." 5 The Court of
Appeals then reiterated the ruling of the trial court that the Statute of Frauds
does not apply in this case.
The Court of Appeals gave credence to the testimony of a witness of Armando
and Adelia, Mildred Lobaton, who explained why the title to the Subject Land
was not in the name of Armando and Adelia. Lobaton testified that Godofredo
was then busy preparing to leave for Davao. Godofredo promised that he would
sign all the papers once they were ready. Since Armando and Adelia were close
to the family of Carmen, they trusted Godofredo and Carmen to honor their
commitment. Armando and Adelia had no reason to believe that their contract
of sale was not perfected or validly executed considering that they had received
the duplicate copy of OCT No. 284 and other relevant documents. Moreover,
they had taken physical possession of the Subject Land.
The Court of Appeals held that the contract of sale is not void even if only
Carmen signed the receipt dated 11 March 1970. Citing Felipe v. Heirs of
Maximo Aldon,6 the appellate court ruled that a contract of sale made by the
wife without the husbands consent is not void but merely voidable. The Court of
Appeals further declared that the sale in this case binds the conjugal
partnership even if only the wife signed the receipt because the proceeds of the
sale were used for the benefit of the conjugal partnership. The appellate court
based this conclusion on Article 1617 of the Civil Code.
The Subsequent Buyers of the Subject Land cannot claim that they are buyers in
good faith because they had constructive notice of the adverse claim of
Armando and Adelia. Calonso, who brokered the subsequent sale, testified that
when she registered the subsequent deeds of sale, the adverse claim of
Armando and Adelia was already annotated on the title of the Subject Land. The
Court of Appeals believed that the act of Calonso and the Subsequent Buyers in
forcibly ejecting the Natanawans from the Subject Land buttresses the
conclusion that the second sale was tainted with bad faith from the very
beginning.
Finally, the Court of Appeals noted that the issue of prescription was not raised
in the Answer. Nonetheless, the appellate court explained that since this action
is actually based on fraud, the prescriptive period is four years, with the period
starting to run only from the date of the discovery of the fraud. Armando and
Adelia discovered the fraudulent sale of the Subject Land only in January 1994.
Armando and Adelia lost no time in writing a letter to Godofredo and Carmen on

2 February 1994 and filed this case on 7 March 1994. Plainly, Armando and
Adelia did not sleep on their rights or lose their rights by prescription.
The Court of Appeals sustained the award of attorneys fees and imposed treble
costs on petitioners.
The Issues
Petitioners raise the following issues:
I
Whether the alleged sale of the Subject Land in favor of Armando and Adelia is
valid and enforceable, where (1) it was orally entered into and not in writing; (2)
Carmen did not obtain the consent and authority of her husband, Godofredo,
who was the sole owner of the Subject Land in whose name the title thereto
(OCT No. 284) was issued; and (3) it was entered into during the 25-year
prohibitive period for alienating the Subject Land without the approval of the
Secretary of Agriculture and Natural Resources.
II
Whether the action to enforce the alleged oral contract of sale brought after 24
years from its alleged perfection had been barred by prescription and by laches.
III
Whether the deeds of absolute sale and the transfer certificates of title over the
portions of the Subject Land issued to the Subsequent Buyers, innocent
purchasers in good faith and for value whose individual titles to their respective
lots are absolute and indefeasible, are valid.
IV
Whether petitioners are liable to pay Armando and Adelia P20,0000.00 as
attorneys fees and litigation expenses and the treble costs, where the claim of
Armando and Adelia is clearly unfounded and baseless.
V
Whether petitioners are entitled to the counterclaim for attorneys fees and
litigation expenses, where they have sustained such expenses by reason of
institution of a clearly malicious and unfounded action by Armando and Adelia. 8

The Courts Ruling


The petition is without merit.
In a petition for review on certiorari under Rule 45, this Court reviews only errors
of law and not errors of facts.9The factual findings of the appellate court are
generally binding on this Court.10 This applies with greater force when both the
trial court and the Court of Appeals are in complete agreement on their factual
findings.11 In this case, there is no reason to deviate from the findings of the
lower courts. The facts relied upon by the trial and appellate courts are borne
out by the record. We agree with the conclusions drawn by the lower courts
from these facts.
Validity and Enforceability of the Sale
The contract of sale between the spouses Godofredo and Carmen and the
spouses Armando and Adelia was a perfected contract. A contract is perfected
once there is consent of the contracting parties on the object certain and on the
cause of the obligation.12 In the instant case, the object of the sale is the Subject
Land, and the price certain is P15,000.00. The trial and appellate courts found
that there was a meeting of the minds on the sale of the Subject Land and on
the purchase price of P15,000.00. This is a finding of fact that is binding on this
Court. We find no reason to disturb this finding since it is supported by
substantial evidence.
The contract of sale of the Subject Land has also been consummated because
the sellers and buyers have performed their respective obligations under the
contract. In a contract of sale, the seller obligates himself to transfer the
ownership of the determinate thing sold, and to deliver the same, to the buyer
who obligates himself to pay a price certain to the seller. 13 In the instant case,
Godofredo and Carmen delivered the Subject Land to Armando and Adelia,
placing the latter in actual physical possession of the Subject Land. This physical
delivery of the Subject Land also constituted a transfer of ownership of the
Subject Land to Armando and Adelia.14Ownership of the thing sold is transferred
to the vendee upon its actual or constructive delivery. 15 Godofredo and Carmen
also turned over to Armando and Adelia the documents of ownership to the
Subject Land, namely the owners duplicate copy of OCT No. 284, the tax
declaration and the receipts of realty tax payments.
On the other hand, Armando and Adelia paid the full purchase price as
evidenced by the receipt dated 11 March 1970 issued by Carmen. Armando and

Adelia fulfilled their obligation to provide the P7,000.00 to pay the Dir obliagtion
rmen. rchase pricend Adelia . fredo and Carmen do not deny the existence of
the cBP loan of Godofredo and Carmen, and to pay the latter the balance
of P8,000.00 in cash. The P2,524.00 paid under the receipt dated 11 March 1970
was the last installment to settle fully the purchase price. Indeed, upon payment
to DBP of the P7,000.00 and the accumulated interests, the DBP cancelled the
mortgage on the Subject Land and returned the owners duplicate copy of OCT
No. 284 to Godofredo and Carmen.
The trial and appellate courts correctly refused to apply the Statute of Frauds to
this case. The Statute of Frauds16 provides that a contract for the sale of real
property shall be unenforceable unless the contract or some note or
memorandum of the sale is in writing and subscribed by the party charged or
his agent. The existence of the receipt dated 11 March 1970, which is a
memorandum of the sale, removes the transaction from the provisions of the
Statute of Frauds.
The Statute of Frauds applies only to executory contracts and not to contracts
either partially or totally performed. 17 Thus, where one party has performed
ones obligation, oral evidence will be admitted to prove the agreement. 18 In the
instant case, the parties have consummated the sale of the Subject Land, with
both sellers and buyers performing their respective obligations under the
contract of sale. In addition, a contract that violates the Statute of Frauds is
ratified by the acceptance of benefits under the contract. 19 Godofredo and
Carmen benefited from the contract because they paid their DBP loan and
secured the cancellation of their mortgage using the money given by Armando
and Adelia. Godofredo and Carmen also accepted payment of the balance of the
purchase price.
Godofredo and Carmen cannot invoke the Statute of Frauds to deny the
existence of the verbal contract of sale because they have performed their
obligations, and have accepted benefits, under the verbal contract. 20Armando
and Adelia have also performed their obligations under the verbal contract.
Clearly, both the sellers and the buyers have consummated the verbal contract
of sale of the Subject Land. The Statute of Frauds was enacted to prevent
fraud.21 This law cannot be used to advance the very evil the law seeks to
prevent.
Godofredo and Carmen also claim that the sale of the Subject Land to Armando
and Adelia is void on two grounds. First, Carmen sold the Subject Land without
the marital consent of Godofredo. Second, the sale was made during the 25-

year period that the law prohibits the alienation of land grants without the
approval of the Secretary of Agriculture and Natural Resources.
These arguments are without basis.
The Family Code, which took effect on 3 August 1988, provides that any
alienation or encumbrance made by the husband of the conjugal partnership
property without the consent of the wife is void. However, when the sale is
made before the effectivity of the Family Code, the applicable law is the Civil
Code.22
Article 173 of the Civil Code provides that the disposition of conjugal property
without the wifes consent is not void but merely voidable. Article 173 reads:
The wife may, during the marriage, and within ten years from the transaction
questioned, ask the courts for the annulment of any contract of the husband
entered into without her consent, when such consent is required, or any act or
contract of the husband which tends to defraud her or impair her interest in the
conjugal partnership property. Should the wife fail to exercise this right, she or
her heirs, after the dissolution of the marriage, may demand the value of
property fraudulently alienated by the husband.
In Felipe v. Aldon,23 we applied Article 173 in a case where the wife sold some
parcels of land belonging to the conjugal partnership without the consent of the
husband. We ruled that the contract of sale was voidable subject to annulment
by the husband. Following petitioners argument that Carmen sold the land to
Armando and Adelia without the consent of Carmens husband, the sale would
only be voidable and not void.
However, Godofredo can no longer question the sale. Voidable contracts are
susceptible of ratification.24Godofredo ratified the sale when he introduced
Armando and Adelia to his tenants as the new owners of the Subject Land. The
trial court noted that Godofredo failed to deny categorically on the witness
stand the claim of the complainants witnesses that Godofredo introduced
Armando and Adelia as the new landlords of the tenants. 25 That Godofredo and
Carmen allowed Armando and Adelia to enjoy possession of the Subject Land for
24 years is formidable proof of Godofredos acquiescence to the sale. If the sale
was truly unauthorized, then Godofredo should have filed an action to annul the
sale. He did not. The prescriptive period to annul the sale has long lapsed.
Godofredos conduct belies his claim that his wife sold the Subject Land without
his consent.

Moreover, Godofredo and Carmen used most of the proceeds of the sale to pay
their debt with the DBP. We agree with the Court of Appeals that the sale
redounded to the benefit of the conjugal partnership. Article 161 of the Civil
Code provides that the conjugal partnership shall be liable for debts and
obligations contracted by the wife for the benefit of the conjugal partnership.
Hence, even if Carmen sold the land without the consent of her husband, the
sale still binds the conjugal partnership.
Petitioners contend that Godofredo and Carmen did not deliver the title of the
Subject Land to Armando and Adelia as shown by this portion of Adelias
testimony on cross-examination:
Q -- No title was delivered to you by Godofredo Alfredo?
A -- I got the title from Julie Limon because my sister told me. 26
Petitioners raise this factual issue for the first time. The Court of Appeals could
have passed upon this issue had petitioners raised this earlier. At any rate, the
cited testimony of Adelia does not convincingly prove that Godofredo and
Carmen did not deliver the Subject Land to Armando and Adelia. Adelias cited
testimony must be examined in context not only with her entire testimony but
also with the other circumstances.
Adelia stated during cross-examination that she obtained the title of the Subject
Land from Julie Limon ("Julie"), her classmate in college and the sister of
Carmen. Earlier, Adelias own sister had secured the title from the father of
Carmen. However, Adelias sister, who was about to leave for the United States,
gave the title to Julie because of the absence of the other documents. Adelias
sister told Adelia to secure the title from Julie, and this was how Adelia obtained
the title from Julie.
It is not necessary that the seller himself deliver the title of the property to the
buyer because the thing sold is understood as delivered when it is placed in the
control and possession of the vendee. 27 To repeat, Godofredo and Carmen
themselves introduced the Natanawans, their tenants, to Armando and Adelia as
the new owners of the Subject Land. From then on, Armando and Adelia acted
as the landlords of the Natanawans. Obviously, Godofredo and Carmen
themselves placed control and possession of the Subject Land in the hands of
Armando and Adelia.

Petitioners invoke the absence of approval of the sale by the Secretary of


Agriculture and Natural Resources to nullify the sale. Petitioners never raised
this issue before the trial court or the Court of Appeals. Litigants cannot raise an
issue for the first time on appeal, as this would contravene the basic rules of fair
play, justice and due process.28 However, we will address this new issue to
finally put an end to this case.
The sale of the Subject Land cannot be annulled on the ground that the
Secretary did not approve the sale, which was made within 25 years from the
issuance of the homestead title. Section 118 of the Public Land Act
(Commonwealth Act No. 141) reads as follows:
SEC. 118. Except in favor of the Government or any of its branches, units, or
institutions or legally constituted banking corporation, lands acquired under free
patent or homestead provisions shall not be subject to encumbrance or
alienation from the date of the approval of the application and for a term of five
years from and after the date of the issuance of the patent or grant.
xxx
No alienation, transfer, or conveyance of any homestead after 5 years and
before twenty-five years after the issuance of title shall be valid without the
approval of the Secretary of Agriculture and Commerce, which approval shall not
be denied except on constitutional and legal grounds.
A grantee or homesteader is prohibited from alienating to a private individual a
land grant within five years from the time that the patent or grant is issued. 29 A
violation of this prohibition renders a sale void. 30 This prohibition, however,
expires on the fifth year. From then on until the next 20 years 31 the land grant
may be alienated provided the Secretary of Agriculture and Natural Resources
approves the alienation. The Secretary is required to approve the alienation
unless there are "constitutional and legal grounds" to deny the approval. In this
case, there are no apparent constitutional or legal grounds for the Secretary to
disapprove the sale of the Subject Land.
The failure to secure the approval of the Secretary does not ipso facto make a
sale void.32 The absence of approval by the Secretary does not nullify a sale
made after the expiration of the 5-year period, for in such event the requirement
of Section 118 of the Public Land Act becomes merely directory 33 or a
formality.34 The approval may be secured later, producing the effect of ratifying

and adopting the transaction as if the sale had been previously authorized. 35 As
held in Evangelista v. Montano:36
Section 118 of Commonwealth Act No. 141, as amended, specifically enjoins
that the approval by the Department Secretary "shall not be denied except on
constitutional and legal grounds." There being no allegation that there were
constitutional or legal impediments to the sales, and no pretense that if the
sales had been submitted to the Secretary concerned they would have been
disapproved, approval was a ministerial duty, to be had as a matter of course
and demandable if refused. For this reason, and if necessary, approval may now
be applied for and its effect will be to ratify and adopt the transactions as if they
had been previously authorized. (Emphasis supplied)
Action Not Barred by Prescription and Laches
Petitioners insist that prescription and laches have set in. We disagree.
The Amended Complaint filed by Armando and Adelia with the trial court is
captioned as one for Specific Performance. In reality, the ultimate relief sought
by Armando and Adelia is the reconveyance to them of the Subject Land. An
action for reconveyance is one that seeks to transfer property, wrongfully
registered by another, to its rightful and legal owner. 37 The body of the pleading
or complaint determines the nature of an action, not its title or heading. 38 Thus,
the present action should be treated as one for reconveyance. 39
Article 1456 of the Civil Code provides that a person acquiring property through
fraud becomes by operation of law a trustee of an implied trust for the benefit of
the real owner of the property. The presence of fraud in this case created an
implied trust in favor of Armando and Adelia. This gives Armando and Adelia the
right to seek reconveyance of the property from the Subsequent Buyers. 40
To determine when the prescriptive period commenced in an action for
reconveyance, plaintiffs possession of the disputed property is material. An
action for reconveyance based on an implied trust prescribes in ten years. 41 The
ten-year 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.42 However, 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. 43 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. 44

In this case, the appellate court resolved the issue of prescription by ruling that
the action should prescribe four years from discovery of the fraud. We must
correct this erroneous application of the four-year prescriptive period. In Caro v.
Court of Appeals,45 we explained why an action for reconveyance based on an
implied trust should prescribe in ten years. In that case, the appellate court also
erroneously applied the four-year prescriptive period. We declared in Caro:
We disagree. The case of Liwalug Amerol, et al. v. Molok Bagumbaran, G.R. No.
L-33261, September 30, 1987,154 SCRA 396 illuminated what used to be a gray
area on the prescriptive period for an action to reconvey the title to real
property and, corollarily, its point of reference:
xxx It must be remembered that before August 30, 1950, the date of the
effectivity of the new Civil Code, the old Code of Civil Procedure (Act No. 190)
governed prescription. It provided:
SEC. 43. Other civil actions; how limited.- Civil actions other than for the
recovery of real property can only be brought within the following periods after
the right of action accrues:
xxx

xxx

xxx

3. Within four years: xxx An action for relief on the ground of fraud, but the right
of action in such case shall not be deemed to have accrued until the discovery
of the fraud;
xxx

xxx

xxx

In contrast, under the present Civil Code, we find that just as an implied or
constructive trust is an offspring of the law (Art. 1456, Civil Code), so is the
corresponding obligation to reconvey the property and the title thereto in favor
of the true owner. In this context, and vis-a-vis prescription, Article 1144 of the
Civil Code is applicable.
Article 1144. The following actions must be brought within ten years from the
time the right of action accrues:
(1) Upon a written contract;
(2) Upon an obligation created by law;
(3) Upon a judgment.

xxx

xxx

xxx

(Emphasis supplied).
An action for reconveyance based on an implied or constructive trust
must perforce prescribe in ten years and not otherwise. A long line of
decisions of this Court, and of very recent vintage at that, illustrates this
rule.Undoubtedly, it is now well-settled that an action for reconveyance
based on an implied or constructive trust prescribes in ten years from
the issuance of the Torrens title over the property. The only discordant
note, it seems, is Balbin vs. Medalla which states that the prescriptive period for
a reconveyance action is four years. However, this variance can be explained by
the erroneous reliance on Gerona vs. de Guzman. But in Gerona, the fraud was
discovered on June 25,1948, hence Section 43(3) of Act No. 190, was applied,
the new Civil Code not coming into effect until August 30, 1950 as mentioned
earlier. It must be stressed, at this juncture, that article 1144 and article 1456,
are new provisions. They have no counterparts in the old Civil Code or in the old
Code of Civil Procedure, the latter being then resorted to as legal basis of the
four-year prescriptive period for an action for reconveyance of title of real
property acquired under false pretenses.
An action for reconveyance has its basis in Section 53, paragraph 3 of
Presidential Decree No. 1529, which provides:
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, xxx
This provision should be read in conjunction with Article 1456 of the Civil Code,
which provides:
Article 1456. If property is acquired through mistake or fraud, the person
obtaining it is, by force of law, considered a trustee of an implied trust for the
benefit of the person from whom the property comes.
The law thereby creates the obligation of the trustee to reconvey the property
and the title thereto in favor of the true owner. Correlating Section 53,
paragraph 3 of Presidential Decree No. 1529 and Article 1456 of the Civil Code
with Article 1144(2) of the Civil Code, supra, the prescriptive period for the

reconveyance of fraudulently registered real property is ten (10) years reckoned


from the date of the issuance of the certificate of title xxx (Emphasis supplied) 46
Following Caro, we have consistently held that an action for reconveyance
based on an implied trust prescribes in ten years. 47 We went further by
specifying the reference point of the ten-year prescriptive period as the date of
the registration of the deed or the issuance of the title. 48
Had Armando and Adelia remained in possession of the Subject Land, their
action for reconveyance, in effect an action to quiet title to property, would not
be subject to prescription. Prescription does not run against the plaintiff in
actual possession of the disputed land because such plaintiff has a right to wait
until his possession is disturbed or his title is questioned before initiating an
action to vindicate his right.49 His undisturbed possession gives him the
continuing right to seek the aid of a court of equity to determine the nature of
the adverse claim of a third party and its effect on his title. 50
Armando and Adelia lost possession of the Subject Land when the Subsequent
Buyers forcibly drove away from the Subject Land the Natanawans, the tenants
of Armando and Adelia.51 This created an actual need for Armando and Adelia to
seek reconveyance of the Subject Land. The statute of limitation becomes
relevant in this case. The ten-year prescriptive period started to run from the
date the Subsequent Buyers registered their deeds of sale with the Register of
Deeds.
The Subsequent Buyers bought the subdivided portions of the Subject Land on
22 February 1994, the date of execution of their deeds of sale. The Register of
Deeds issued the transfer certificates of title to the Subsequent Buyers on 24
February 1994. Armando and Adelia filed the Complaint on 7 March 1994.
Clearly, prescription could not have set in since the case was filed at the early
stage of the ten-year prescriptive period.
Neither is the action barred by laches. We have defined laches as the failure or
neglect, for an unreasonable time, to do that which, by the exercise of due
diligence, could or should have been done earlier. 52 It is negligence or omission
to assert a right within a reasonable time, warranting a presumption that the
party entitled to assert it either has abandoned it or declined to assert
it.53 Armando and Adelia discovered in January 1994 the subsequent sale of the
Subject Land and they filed this case on 7 March 1994. Plainly, Armando and
Adelia did not sleep on their rights.

Validity of Subsequent Sale of Portions of the Subject Land


Petitioners maintain that the subsequent sale must be upheld because the
Subsequent Buyers, the co-petitioners of Godofredo and Carmen, purchased and
registered the Subject Land in good faith. Petitioners argue that the testimony of
Calonso, the person who brokered the second sale, should not prejudice the
Subsequent Buyers. There is no evidence that Calonso was the agent of the
Subsequent Buyers and that she communicated to them what she knew about
the adverse claim and the prior sale. Petitioners assert that the adverse claim
registered by Armando and Adelia has no legal basis to render defective the
transfer of title to the Subsequent Buyers.
We are not persuaded. Godofredo and Carmen had already sold the Subject
Land to Armando and Adelia. The settled rule is when ownership or title passes
to the buyer, the seller ceases to have any title to transfer to any third
person.54 If the seller sells the same land to another, the second buyer who has
actual or constructive knowledge of the prior sale cannot be a registrant in good
faith.55 Such second buyer cannot defeat the first buyers title. 56 In case a title is
issued to the second buyer, the first buyer may seek reconveyance of the
property subject of the sale.57
Thus, to merit protection under the second paragraph of Article 1544 58 of the
Civil Code, the second buyer must act in good faith in registering the deed. 59 In
this case, the Subsequent Buyers good faith hinges on whether they had
knowledge of the previous sale. Petitioners do not dispute that Armando and
Adelia registered their adverse claim with the Registry of Deeds of Bataan on 8
February 1994. The Subsequent Buyers purchased their respective lots only on
22 February 1994 as shown by the date of their deeds of sale. Consequently, the
adverse claim registered prior to the second sale charged the Subsequent
Buyers with constructive notice of the defect in the title of the
sellers,60 Godofredo and Carmen.
It is immaterial whether Calonso, the broker of the second sale, communicated
to the Subsequent Buyers the existence of the adverse claim. The registration of
the adverse claim on 8 February 1994 constituted, by operation of law, notice to
the whole world.61 From that date onwards, the Subsequent Buyers were
deemed to have constructive notice of the adverse claim of Armando and
Adelia. When the Subsequent Buyers purchased portions of the Subject Land on
22 February 1994, they already had constructive notice of the adverse claim
registered earlier.62 Thus, the Subsequent Buyers were not buyers in good faith
when they purchased their lots on 22 February 1994. They were also not

registrants in good faith when they registered their deeds of sale with the
Registry of Deeds on 24 February 1994.
The Subsequent Buyers individual titles to their respective lots are not
absolutely indefeasible. The defense of indefeasibility of the Torrens Title does
not extend to a transferee who takes the certificate of title with notice of a flaw
in his title.63 The principle of indefeasibility of title does not apply where fraud
attended the issuance of the titles as in this case. 64
Attorneys Fees and Costs
We sustain the award of attorneys fees. The decision of the court must state
the grounds for the award of attorneys fees. The trial court complied with this
requirement.65 We agree with the trial court that if it were not for petitioners
unjustified refusal to heed the just and valid demands of Armando and Adelia,
the latter would not have been compelled to file this action.
The Court of Appeals echoed the trial courts condemnation of petitioners
fraudulent maneuverings in securing the second sale of the Subject Land to the
Subsequent Buyers. We will also not turn a blind eye on petitioners brazen
tactics. Thus, we uphold the treble costs imposed by the Court of Appeals on
petitioners.
WHEREFORE, the petition is DENIED and the appealed decision is AFFIRMED.
Treble costs against petitioners.
G.R. No. 125585

June 8, 2005

HEIRS OF EDUARDO MANLAPAT, represented by GLORIA MANLAPATBANAAG and LEON M. BANAAG, JR., Petitioners,
vs.
HON. COURT OF APPEALS, RURAL BANK OF SAN PASCUAL, INC., and
JOSE B. SALAZAR, CONSUELO CRUZ and ROSALINA CRUZ-BAUTISTA, and
the REGISTER OF DEEDS of Meycauayan, Bulacan,Respondents.
DECISION
Tinga, J.:
Before this Court is a Rule 45 petition assailing the D E C I S I O N1 dated 29
September 1994 of the Court of Appeals that reversed the D E C I S I O N2 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. P153(M) was issued in the name of Eduardo pursuant to a free patent issued in
Eduardos name3 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 Sale9 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 fatherin-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 BarangayPanghulo, 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. T9327-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-9326P(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. 32Hence,
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 1963.35These 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 Kasulatan executed
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
the Kasulatan 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
theKasulatan and Sinumpaang Salaysay where 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 mortgageebank 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.1avvphi1
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. InPhilippine 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.