Rabaja Ranch v.

AFP Retirement and Separation Benefit System

Facts:

This case involves Rabaja Ranch Development Corporation( domestic corp) and AFP
Retirement Separation Benefits System ( govt corp: manages pension fund), both
claiming they hold TCT ( transfer Certificate of Title) covering the same subject property
identified as Lot 395 @ Brgy Corazon Oriental, Mindoro.

Two certificates of title were issued deriving their respective authorities from 2 different
special patents granted by Government. Over the years, the subject property was sold to
the contending parties who both appear to be buyers in good faith and for value.

Rabajas Contention (1997)

1. filed complaint for quieting of title/ removal of cloud before RTC

2. 1955: Free Patent was issued in the name of Jose Castromero and TCT was issued
covering the subject property.
3. Jose sold it to Sps Veloso and TCT was issued.
4. Sps Veloso sold it to Rabaja for 634K+ on January 17, 1997 and TCT was issued.

AFPs Contention ( 1985)

1. April 1966: Homestead Patent (HP) was issued to a Charles Soguilon.

2. May 1966: HP was registered and OCT was issued covering the subject property.
3. 1982: Charles sold it to JMC Farm Inc, and TCT was issued.
4. 1985: JMC obtained a loan from AFP RSBS for 7 million with real estate
mortgage over parcels of land including the subject property.
5. JMC failed to pay, which led to extrajudicial foreclosure and public sale.
6. AFP RSBS: highest bidder and so TCT was issued.
7. AFP RSBS took possession of the property.

RTC:

1. AFPs title is older than Rabajas.

2. There were infirmities in HP of Charles.
3. There was no record that Charles is a HP applicant or grantee.
4. In 1998: There was a similar HP issued to one Mariano Costales ( Agusan,
Mindanao)
5. Charles HP was fraudulent, and because it is fraudulent it cannot invoke the
protection of Torrens System .

CA:
1. It reversed and set aside RTCs decision.
2. Found that Charles HP was earlier registered than Joses Free Patent.
3. That Joseslept on his rights so, Rabaja had better rights over subject property.
 4. Theres no record that there are 2 HP granted to Charles and that they were one
and the same.
5. CA denied Rabajas Motion for Reconsideration.

Issues:

1. Whether the AFPs title which originated from a fake HP is superior to Rabajas
title which originated from a valid and existing free patent
2. Who between the AFP and Rabaja has better right over the subject property?

Held:

Petition is denied and the assailed CA is affirmed.

The court held that Rabaja did not show that HP issued to C is indeed fake and that he
took part in the alleged fraud in 1966 when C supposedly secured the fake HP (mere
allegations of fraud are not enough: there should be an actual and extrinsic fraud). It also
states that AFP is an innocent purchaser in good faith and for value and that when AFP
was shown a TCT by JMC ( which was free from defect) and could raise a doubt, there
was even a foreclosure sale conducted and AFP as the highest bidder.

Court held that innocent 3rd persons, relying on the correctness of the COT (Certificate of
Title) thus issued, acquire rights over property, Court cant disregard such rights and
order its cancellation for this could impair confidence in COT.

It also added that Torrens Sytem must be preserved.

AFPs TCT, having been derived from HP which was registered under Torrens on May
27, 1996 was vested with habiliments of indefeasibility.

Between 2 buyers of the same immovable property registered under torrens, the law gives
ownership priority to:

1. The 1st registrant in GF

2. 1st possessor in GF
3. buyer who in good faith presents the oldest title.