Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 195825 February 27, 2013

SPOUSES ALFONSO AND MARIA ANGELES CUSI, Petitioners,

vs.
LILIA V. DOMINGO, Respondent.

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

G.R. No. 195871

RAMONA LIZA L. DE VERA, Petitioner,

vs
LILIA V. DOMINGO AND SPOUSES RADELIA AND ALFRED SY, Respondents.

DECISION

BERSAMIN, J.:

Under the Torrens system of land registration, the registered owner of realty cannot be deprived of
her property through fraud, unless a transferee acquires the property as an innocent purchaser for
value. A transferee who acquires the property covered by a reissued owner's copy of the certificate
of title without taking the ordinary precautions of honest persons in doing business and examining
the records of the proper Registry of Deeds, or who fails to pay the full market value of the property
is not considered an innocent purchaser for value.

Under review in these consolidated appeals is the Decision promulgated on July 16, 2010, 1 whereby
the Court of Appeals (CA) in CA-G.R. CV No. 90452 affirmed the revised decision rendered on
March 1, 2007 by the Regional Trial Court in Quezon City (RTC) against the petitioners and their
seller.2

Antecedents

The property in dispute was a vacant unfenced lot situated in White Plains, Quezon City and
covered by Transfer Certificate of Title (TCT) No. N-165606 issued in the name of respondent Lilia V.
Domingo by the Registry of Deeds of Quezon City. It had an area of 658 square meters. 3 In July
1999, Domingo learned that construction activities were being undertaken on her property without
her consent. She soon unearthed the series of anomalous transactions affecting her property.
On July 18, 1997, one Radelia Sy (Sy),4 representing herself as the owner of the property, petitioned
the RTC for the issuance of a new owners copy of Domingos TCT No. N-165606, appending to her
petition a deed of absolute sale dated July 14, 1997 purportedly executed in her favor by
Domingo;5 and an affidavit of loss dated July 17, 1997,6 whereby she claimed that her bag containing
the owners copy of TCT No. N-165606 had been snatched from her on July 13, 1997 while she was
at the SM City in North EDSA, Quezon City. The RTC granted Sys petition on August 26, 1997. 7 The
Registry of Deeds of Quezon City then issued a new owners duplicate copy of TCT No. N-165606,
which was later cancelled by virtue of the deed of absolute sale dated July 14, 1997, and in its stead
the Registry of Deeds of Quezon City issued TCT No. 186142 in Sys name.8

Sy subsequently subdivided the property into two, and sold each half by way of contract to sell to
Spouses Edgardo and Ramona Liza De Vera and to Spouses Alfonso and Maria Angeles Cusi. The
existence of the individual contracts to sell was annotated on the dorsal portion of Sys TCT No.
186142 as Entry No. PE-8907/N-186142,9 stating that the consideration of the sale
was P1,000,000.00 for each set of buyers, or for a total of P2,000,000.00 for the entire property that
had an actual worth of not less than P14,000,000.00. TCT No. 186142 in the name of Sy was then
cancelled by virtue of the deeds of sale executed between Sy and Spouses De Vera, and between
Sy and Spouses Cusi, to whom were respectively issued TCT No. 189568 10 and TCT No.
189569.11 All the while, the transactions between Sy and the De Veras, and between Sy and the
Cusis were unknown to Domingo, whose TCT No. N-165606 remained in her undisturbed
possession.12

It turned out that the construction activities taking place on the property that Domingo learned about
were upon the initiative of the De Veras in the exercise of their dominical and possessory rights.

Domingo commenced this action against Sy and her spouse, the De Veras and the Cusis in the
RTC, the complaint being docketed as Civil Case No. Q-99-39312 and entitled Lilia V. Domingo v.
Spouses Radelia and Alfred Sy, Spouses Alfonso G. and Maria Angeles S. Cusi, Spouses Edgardo
M. and Ramona Liza L. De Vera, BPI Family Savings Bank and The Register of Deeds of Quezon
City, seeking the annulment or cancellation of titles, injunction and damages. Domingo applied for
the issuance of a writ of preliminary prohibitory and mandatory injunction, and a temporary
restraining order (TRO).13 The RTC granted Domingos application for the TRO enjoining the
defendants from proceeding with the construction activities on the property. The RTC later granted
her application for the writ of preliminary injunction.

Ruling of the RTC

On September 30, 2003, the RTC rendered a decision, 14 disposing:

WHEREFORE, in view of all the foregoing judgment is hereby rendered:

(a) declaring the sale between Lilia V. Domingo and Radella Sy void and of (sic) effect;

(b) declaring the Sps. Edgardo and Ramona Liza De Vera and Sps. Alfonso and Maria
Angeles Cusi to be purchasers in good faith and for value;
 (c) lifting the writ of preliminary injunction;

(d) finding defendant Radella Sy liable to the plaintiff Lilia Domingo liable (sic) for damages,
as follows:

1. Fourteen Million Pesos (P14,000,000.00) representing the value of the property

covered by TCT No. 165606 plus legal rate of interest until fully paid;

2. One Million Pesos (P1,000,000.00) representing moral damages;

3. Five Hundred Thousand Pesos (P500,000.00) representing exemplary damages;

4. Five Hundred Thousand Pesos (P500,000.00) representing attorneys fees;

5. Two Hundred Thousand Pesos (P200,000.00) representing litigation expenses;

and

6. Costs of Suit.

IT IS SO ORDERED.

Acting on the motions for reconsideration separately filed by Sy and Domingo, 15 the RTC
reconsidered and set aside its September 30, 2003 decision, and allowed the presentation of
rebuttal and sur-rebuttal evidence.

On March 1, 2007, the RTC rendered a new decision, 16 ruling:

WHEREFORE, in view of the foregoing, Judgment is hereby rendered:

(a) Declaring the sale between Lilia Domingo and Radelia Sy void and of no effect;

(b) Declaring the Sps. Edgardo and Ramona Liza De Vera and Sps. Alfonso and Maria
Angeles Cusi not purchasers in good faith and for value;

(c) TCT Nos. 189568 and 189569 are hereby cancelled and declared Null and Void Ab Initio;

(d) Directing the Register of Deeds of Quezon City to annotate this Order on TCT No.
189568 and 189569;

(e) TCT No. 165606 in the name of Lilia Domingo is hereby revalidated; and,

(f) Finding defendant Radelia Sy liable to the plaintiff Lilia V. Domingo liable (sic) for
damages, as follows:

1. One Million Pesos (P1,000,000.00) representing moral damages;

 2. Five Hundred Thousand Pesos (P500,000.00) representing exemplary damages;

3. Five Hundred Thousand Pesos (P500,000.00) representing attorneys fees;

4. Two Hundred Thousand Pesos (P200,000.00) representing litigation expenses;

and,

5. Costs of suit.

This Decision is without prejudice to whatever civil action for recovery and damages, the defendants
Sps. De Vera and Sps. Cusi may have against defendant Spouses Radelia and Alfred Sy.

SO ORDERED.

Ruling of the CA

On appeal, the assignment of errors each set of appellants made was as follows:

Spouses Cusi

a) THE REGIONAL TRIAL COURT GRAVELY ERRED IN FINDING THAT DEFENDANTS

SPOUSES ALFONSO AND MARIA ANGELES CUSI ARE NOT PURCHASERS IN GOOD
FAITH AND FOR VALUE.

b) THE REGIONAL TRIAL COURT GRAVELY ERRED IN FAILING TO RESOLVE THE

ISSUE OF WHETHER OR NOT CODEFENDANTS SPOUSES RADELIA SY AND ALFRED
SY ARE LIABLE FOR SPOUSES CUSIS CROSS-CLAIM.

c) THE REGIONAL TRIAL COURT ERRED IN FAILING TO AWARD DAMAGES AND

ATTORNEYS FEES TO DEFENDANTS SPOUSES CUSI.17

Spouses Sy

a) THE TRIAL COURT A QUO ERRED IN HOLDING THAT THE SALE BETWEEN LILIA
DOMINGO AND RADELIA SY VOID AND OF NO EFFECT AND WAS PROCURRED (sic)
THROUGH FRAUDULENT MEANS.

b) THAT THE HONORABLE COURT ERRED IN AWARDING ACTUAL MORAL DAMAGES,

EXEMPLARY DAMAGES AND ATTORNEYS FEES AND LITIGATION EXPENSES THE
SAME BEING NULL AND VOID FOR BEING CONTRARY TO LAW.

c) THAT THE SAID DECISION IS CONTRARY TO LAW AND JURISPRUDENCE AND IS

NOT SUPPORTED BY EVIDENCE, AS THE SAME CONTAIN SERIOUS REVERSIBLE
ERRORS WHEN THE COURT A QUO DECLARED THAT TCT NOS. 189568 AND 189569
CANCELLED AND DECLARED NULL AND VOID AB INITIO.
 d) THE INSTANT ASSAILED DECISION OF THE HONORABLE COURT HAVE (sic)
DEPRIVED DEFENDANT[S] SPOUSES SY OF THEIR BASIC CONSTITUTIONAL RIGHT
TO DUE PROCESS OF LAW.18

Spouses De Vera

a) THE LOWER COURT ERRED IN HOLDING THAT THE DE VERA SPOUSES ARE NOT
PURCHASERS IN GOOD FAITH AND NOT ENTITLED TO THE POSSESSION OF THE
PROPERTY COVERED BY TCT NO. N-189568.

b) THE LOWER COURT ALSO ERRED IN NOT AWARDING DEFENDANT-APPELLANT DE

VERA HER COUNTERCLAIMS AGAINST PLAINTIFF-APPELLEE.19

As stated, the CA promulgated its decision on July 16, 2010, affirming the RTC with modification of
the damages to be paid by the Sys to Domingo, viz:

WHEREFORE, premises considered, the instant appeal is denied. Accordingly, the Decision dated
March 1, 2007 of the Regional Trial Court is hereby AFFIRMED with the modification on the award
of damages to be paid by defendants-appellants Spouses Radelia and Alfred Sy in favor of the
plaintiff-appellee Lilia V. Domingo, to wit;

1. P500,000.00 by way of moral damages;

2. P200,000.00 by way of exemplary damages;

3. P100,000.00 as attorneys fees and litigation expenses.

SO ORDERED.20

The CA held that the sale of the property from Domingo to Sy was null and void and conveyed no
title to the latter for being effected by forging the signature of Domingo; that Sy thereby acquired no
right in the property that she could convey to the Cusis and De Veras as her buyers; that although
acknowledging that a purchaser could rely on what appeared on the face of the certificate of title, the
Cusis and De Veras did not have the status of purchasers in good faith and for value by reason of
their being aware of Sys TCT No. 186142 being a reconstituted owners copy, thereby requiring
them to conduct an inquiry or investigation into the status of the title of Sy in the property, and not
simply rely on the face of Sys TCT No. 186142; and that the Cusis and De Veras were also aware of
other facts that should further put them on guard, particularly the several nearly simultaneous
transactions respecting the property, and the undervaluation of the purchase price
from P7,000,000.00/half to only P1,000,000.00/half to enable Sy to pay a lesser capital gains tax.

The CA later on denied the motions for reconsideration. 21

Issues
Hence, this appeal via petitions for review on certiorari by the Cusis (G.R. No. 195825) and Ramona
Liza L. De Vera22 (G.R. No. 195871).

In G.R. No. 195825, the Cusis submit the following issues:23

WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN FINDING THAT

TRANSFER CERTIFICATE OF TITLE NO. 186142 REGISTERED IN THE NAME OF
RADELIA SY IS A RECONSTITUTED TITLE.

II

WHETHER OR NOT THE PETITIONERS ARE BUYERS IN GOOD FAITH AND FOR
VALUE.

III

GRANTING, WITHOUT ADMITTING, THAT THE DECISION OF THE HONORABLE COURT

OF APPEALS IS CORRECT WITH RESPECT TO THE SECOND ISSUE, WHETHER OR
NOT PETITIONERS ARE ENTITLED TO REIMBURSEMENT OF ALL THE PAYMENTS
MADE BY PETITIONERS TO THEIR CODEFENDANTS SPOUSES ALFRED AND RADELIA
SY IN ADDITION TO DAMAGES AND ATTORNEYS FEES.

In G.R. No. 195871, De Vera asserts that the primordial issue is whether or not she was an innocent
purchaser for value and in good faith.

Ruling of the Court

The petitions for review are bereft of merit.

Firstly, now beyond dispute is the nullity of the transfer of Domingos property to Sy because both
lower courts united in so finding. The unanimity in findings of both the RTC and the CA on this all-
important aspect of the case is now conclusive on the Court in view of their consistency thereon as
well as by reason of such findings being fully supported by preponderant evidence. We consider to
be significant that the Sys no longer came to the Court for further review, thereby rendering the
judgment of the CA on the issue of nullity final and immutable as to them.

Secondly, the Cusis and De Vera commonly contend that the CA gravely erred in not considering
them to be purchasers in good faith and for value. They argue that Sys TCT No. 186142 was free of
any liens or encumbrances that could have excited their suspicion; and that they nonetheless even
went beyond the task of examining the face of Sys TCT No. 186142, recounting every single detail
of their quest to ascertain the validity of Sys title, but did not find anything by which to doubt her title.

The Court concurs with the finding by the CA that the Cusis and De Vera were not purchasers for
value and in good faith. The records simply do not support their common contention in that respect.
Under the Torrens system of land registration,24 the State is required to maintain a register of
landholdings that guarantees indefeasible title to those included in the register. The system has been
instituted to combat the problems of uncertainty, complexity and cost associated with old title
systems that depended upon proof of an unbroken chain of title back to a good root of title. The
State issues an official certificate of title to attest to the fact that the person named is the owner of
the property described therein, subject to such liens and encumbrances as thereon noted or what
the law warrants or reserves.25

One of the guiding tenets underlying the Torrens system is the curtain principle, in that one does not
need to go behind the certificate of title because it contains all the information about the title of its
holder. This principle dispenses with the need of proving ownership by long complicated documents
kept by the registered owner, which may be necessary under a private conveyancing system, and
assures that all the necessary information regarding ownership is on the certificate of title.
Consequently, the avowed objective of the Torrens system is to obviate possible conflicts of title by
giving the public the right to rely upon the face of the Torrens certificate and, as a rule, to dispense
with the necessity of inquiring further; on the part of the registered owner, the system gives him
complete peace of mind that he would be secured in his ownership as long as he has not voluntarily
disposed of any right over the covered land.26

The Philippines adopted the Torrens system through Act No. 496,27 also known as the Land
Registration Act, which was approved on November 6, 1902 and took effect on February 1, 1903. In
this jurisdiction, therefore, "a person dealing in registered land has the right to rely on the Torrens
certificate of title and to dispense with the need of inquiring further, except when the party has actual
knowledge of facts and circumstances that would impel a reasonably cautious man to make such
inquiry".28

To obtain a grasp of whether a person has actual knowledge of facts and circumstances that would
impel a reasonably cautious man to make such inquiry, an internal matter, necessitates an analysis
of evidence of a persons conduct.29 That renders the determination of intent as a factual
issue,30 something that the Court does not normally involve itself in because of its not being a trier of
facts. Indeed, as a rule, the review function of the Court is limited to a review of the law involved.

But the Court now delves into the facts relating to the issue of innocence of the petitioners in their
purchase of the property, considering that the RTC, through its original decision, at first regarded
them to have been innocent purchasers who were not aware of any flaw or defect in Sys title based
on the fact that the property had been unfenced and vacant. The RTC also regarded the petitioners
making of reasonable verifications as their exercise of the due diligence required of an ordinary
buyer.31 The RTC later completely turned around through another decision, however, and it was such
decision that the CA affirmed subject to the modifications of the damages granted to Domingo.

There is no question that the petitioners exerted some effort as buyers to determine whether the
property did rightfully belong to Sy. For one, they did not find any encumbrance, like a notice of lis
pendens, being annotated on the TCT of Sy. Nonetheless, their observance of a certain degree of
diligence within the context of the principles underlying the Torrens system
was not their only barometer under the law and jurisprudence by which to gauge the validity of their
acquisition of title. As the purchasers of the property, they also came under the clear obligation to
purchase the property not only in good faith but also for value.

Therein lay the problem. The petitioners were shown to have been deficient in their vigilance as
buyers of the property. It was not enough for them to show that the property was unfenced and
vacant; otherwise, it would be too easy for any registered owner to lose her property, including its
possession, through illegal occupation. Nor was it safe for them to simply rely on the face of Sys
TCT No. 186142 in view of the fact that they were aware that her TCT was derived from a duplicate
owners copy reissued by virtue of the loss of the original duplicate owners copy. That circumstance
should have already alerted them to the need to inquire beyond the face of Sys TCT No. 186142.
There were other circumstances, like the almost simultaneous transactions affecting the property
within a short span of time, as well as the gross undervaluation of the property in the deeds of sale,
ostensibly at the behest of Sy to minimize her liabilities for the capital gains tax, that also excited
suspicion, and required them to be extra-cautious in dealing with Sy on the property.

To the Court, the CAs treatment of Sys TCT No. 186142 as similar to a reconstituted copy of a
Torrens certificate of title was not unwarranted. In doing so, the CA cited the ruling in Barstowe
Philippines Corporation v. Republic,32 where the Court, quoting from precedents, opined that "the
nature of a reconstituted Transfer Certificate of Title of registered land is similar to that of a second
Owners Duplicate Transfer Certificate of Title," in that "both are issued, after the proper
proceedings, on the representation of the registered owner that the original of the said TCT or the
original of the Owners Duplicate TCT, respectively, was lost and could not be located or found
despite diligent efforts exerted for that purpose;"33 and that both were "subsequent copies of the
originals thereof," a fact that a "cursory examination of these subsequent copies would show" and
"put on notice of such fact [anyone dealing with such copies who is] thus warned to be
extracareful."34

Verily, the Court has treated a reissued duplicate owners copy of a TCT as merely a reconstituted
certificate of title. In Garcia v. Court of Appeals,35 a case with striking similarities to this one, an
impostor succeeded in tricking a court of law into granting his petition for the issuance of a duplicate
owners copy of the supposedly lost TCT. The impostor then had the TCT cancelled by presenting a
purported deed of sale between him and the registered owners, both of whom had already been
dead for some time, and another TCT was then issued in the impostors own name. This issuance in
the impostors own name was followed by the issuance of yet another TCT in favor of a third party,
supposedly the buyer of the impostor. In turn, the impostors transferee (already the registered
owner in his own name) mortgaged the property to Spouses Miguel and Adela Lazaro, who then
caused the annotation of the mortgage on the TCT. All the while, the original duplicate owners copy
of the TCT remained in the hands of an heir of the deceased registered owners with his co-heirs
knowledge and consent.

The inevitable litigation ensued, and ultimately ended up with the Court. The Lazaros, as the
1wphi1

mortgagees, claimed good faith, and urged the Court to find in their favor. But the Court rebuffed
their urging, holding instead that they did not deal on the property in good faith because: (a) "the title
of the property mortgaged to the Lazaros was a second owners duplicate TCT, which is, in effect a
reconstituted title. This circumstance should have alerted them to make the necessary investigation,
but they did not;" and (b) their argument, that "because the TCT of the property on which their
mortgage lien was annotated did not contain the annotation: "Reconstituted title," the treatment of
the reissued duplicate owners copy of the TCT as akin to a reconstituted title did not apply, had no
merit considering that: "The nature of a reconstituted Transfer Certificate of Title of registered land is
similar to that of a second Owner's Duplicate Transfer Certificate of Title. Both are issued, after the
proper proceedings, on the representation of the registered owner that the original of the said TCT or
the original of the Owner's Duplicate TCT, respectively, was lost and could not be located or found
despite diligent efforts exerted for that purpose. Both, therefore, are subsequent copies of the
originals thereof. A cursory examination of these subsequent copies would show that they are not
the originals. Anyone dealing with such copies are put on notice of such fact and thus warned to be
extra-careful. This warning the mortgagees Lazaros did not heed, or they just ignored it." 36

The fraud committed in Garcia paralleled the fraud committed here. The registered owner of the
1wphi1

property was Domingo, who remained in the custody of her TCT all along; the impostor was Sy, who
succeeded in obtaining a duplicate owners copy; and the Cusis and the De Veras were similarly
situated as the Spouses Lazaro, the mortgagees in Garcia. The Cusis and the De Veras did not
investigate beyond the face of Sys TCT No. 186142, despite the certificate derived from the
reissued duplicate owners copy being akin to a reconstituted TCT. Thereby, they denied themselves
the innocence and good faith they supposedly clothed themselves with when they dealt with Sy on
the property.

The records also show that the forged deed of sale from Domingo to Sy appeared to be executed on
July 14, 1997; that the affidavit of loss by which Sy would later on support her petition for the
issuance of the duplicate owners copy of Domingos TCT No. 165606 was executed on July 17,
1997, the very same day in which Sy registered the affidavit of loss in the Registry of Deeds of
Quezon City; that Sy filed the petition for the issuance of the duplicate owners copy of Domingos
TCT No. 165606; that the RTC granted her petition on August 26, 1997; and that on October 31,
1997, a real estate mortgage was executed in favor of one Emma Turingan, with the mortgage being
annotated on TCT No. 165606 on November 10, 1997.

Being the buyers of the registered realty, the Cusis and the De Veras were aware of the
aforementioned several almost simultaneous transactions affecting the property. Their awareness, if
it was not actual, was at least presumed, and ought to have put them on their guard, for, as the CA
pointed out, the RTC observed that "[t]hese almost simultaneous transactions, particularly the date
of the alleged loss of the TCT No. 165606 and the purported Deed of Sale, suffice[d] to arouse
suspicion on [the part of] any person dealing with the subject property." 37 Simple prudence would
then have impelled them as honest persons to make deeper inquiries to clear the suspiciousness
haunting Sys title. But they still went on with their respective purchase of the property without
making the deeper inquiries. In that regard, they were not acting in good faith.

Another circumstance indicating that the Cusis and the De Veras were not innocent purchasers for
value was the gross undervaluation of the property in the deeds of sale at the measly price
of P1,000,000.00 for each half when the true market value was then in the aggregate of at
least P14,000,000.00 for the entire property. Even if the undervaluation was to accommodate the
request of Sy to enable her to minimize her liabilities for the capital gains tax, their acquiescence to
the fraud perpetrated against the Government, no less, still rendered them as parties to the
wrongdoing. They were not any less guilty at all. In the ultimate analysis, their supposed passivity
respecting the arrangement to perpetrate the fraud was not even plausible, because they knew as
the buyers that they were not personally liable for the capital gains taxes and thus had nothing to
gain by their acquiescence. There was simply no acceptable reason for them to have acquiesced to
the fraud, or for them not to have rightfully insisted on the declaration of the full value of the realty in
their deeds of sale. By letting their respective deeds of sale reflect the grossly inadequate price, they
should suffer the consequences, including the inference of their bad faith in transacting the sales in
their favor.

De Vera particularly insists that she and her late husband did not have any hand in the
undervaluation; and that Sy, having prepared the deed of sale, should alone be held responsible for
the undervaluation that had inured only to her benefit as the seller. However, such insistence was
rendered of no consequence herein by the fact that neither she nor her late husband had seen fit to
rectify the undervaluation. It is notable that the De Veras were contracting parties who appeared to
have transacted with full freedom from undue influence from Sy or anyone else.

Although the petitioners argue that the actual consideration of the sale was nearly P7,000,000.00 for
each half of the property, the Court rejects their argument as devoid of factual basis, for they did not
adduce evidence of the actual payment of that amount to Sy. Accordingly, the recitals of the deeds of
sale were controlling on the consideration of the sales.

Good faith is the honest intention to abstain from taking unconscientious advantage of another. It
means the "freedom from knowledge and circumstances which ought to put a person on inquiry." 38

Given this notion of good faith, therefore, a purchaser in good faith is one who buys the property of
another without notice that some other person has a right to, or interest in, such property and pays
full and fair price for the same.38 As an examination of the records shows, the petitioners were not
innocent purchasers in good faith and for value. Their failure to investigate Sy's title despite the
nearly simultaneous transactions on the property that ought to have put them on inquiry manifested
their awareness of the flaw in Sy's title. That they did not also appear to have paid the full price for
their share of the property evinced their not having paid true value. 39

Resultantly, the Court affirms the lower courts, and restores to Domingo her rights of dominion over
the propetiy.

WHEREFORE, the Court AFFIRMS the decision of the Court of Appeals promulgated on July 16,
201 0; and ORDERS the petitioners to pay the costs of suit.
 Republic of the Philippines
SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 163566 February 19, 2008

RAYMUNDO and PERLA DE GUZMAN, petitioners,

vs.
PRAXIDES J. AGBAGALA, respondent.

DECISION

CORONA, J.:

This is a petition for review on certiorari1 of a decision2 and resolution3 of the Court of Appeals (CA)
dated October 14, 2003 and April 20, 2004, respectively, in CA-G.R. CV No. 55238 which affirmed
the decision of the Regional Trial Court (RTC), Lingayen, Pangasinan, Branch 37 dated May 30,
1996 in Civil Case No. 16516.

The spouses Elias P. Javier and Maria Sison died on May 8, 1942 and July 1936, respectively, both
in Lingayen, Pangasinan. They were survived by their six children, namely: Conrado Javier,
respondent Praxides Javier Agbagala, Nicasio Javier, Carmen Javier, Encarnacion Javier
Ongnoy4 and Juana Javier. They left 13 parcels of land which their children inherited and divided
among themselves in a public document of extrajudicial partition dated June 29, 1948. Five of the
parcels of land5 were inherited by Carmen. On February 25, 1984, she died single, without any
compulsory heir and survived only by her sisters Encarnacion, respondent Praxides, Juana and
brother Nicasio.6

According to respondent and her daughter, Milagros Agbagala Gutierrez, one afternoon sometime in
mid-1987, a certain Rosing Cruz went to their house to borrow P30,000 from Milagros. Rosing
offered as collateral a document which turned out to be a deed of donation dated January 25, 1977
purportedly signed by Carmen in favor of her niece Madelene Javier Cruz, daughter of Juana and
sister-in-law of Rosing. Milagros told her (Rosing) that she had no money to lend. Thereafter,
Milagros, upon the request of respondent, went to the Register of Deeds in Lingayen, Pangasinan to
verify the existence of such donation. She found out that it was indeed duly registered. It was the
first time respondent came to know of such donation and the transfer of Carmen's properties to their
niece Madelene.7

According to Madelene, she lived in her Aunt Carmen's house8 and had been her companion since
she was four years old. She transferred to Manila only when she graduated in 1970. On January 25,
1977, Carmen executed the deed of donation in her favor. She was present when all the signatories
thereon, including the notary public, signed the document. From that time on, she received the
rentals of the properties covered by the donation. Carmen even informed her tenants that Madelene
would inherit the properties upon her death.9

On November 18, 1987,10 respondent filed civil case no. 16516 against Madelene praying that the
deed of donation be nullified, as well as the subsequent transfers to other parties of the properties
covered by the spurious donation.11 An amended complaint was filed on September 15, 198812 to
include the transferees13 of the properties including petitioner spouses Raymundo and Perla de
Guzman, who were the transferees of the land located at Tampac, Aguilar, Pangasinan. 14

Respondent claimed that the deed of donation was fake. This was confirmed by the handwriting
expert of the National Bureau of Investigation, Rogelio G. Azores,15 who examined the document and
compared it with several documents bearing the signature of Carmen. He found that the purported
signature of the late Carmen on the deed of donation was forged. 16

Petitioners filed their answer dated November 28, 1989. 17 They claimed that they applied for a free
patent over the subject area on August 10, 1987 and on November 26, 1987, they were issued free
patent no. 165790.18 On December 11, 1987, Original Certificate of Title (OCT) No. P-30187 was
registered in their name. During the trial, they also presented a tax declaration and realty tax receipts
from 1985 to 1990 issued to them.19

In a decision dated May 30, 1996, the RTC declared the deed of donation in favor of Madelene null
and void ab initio, canceled the deeds of sale executed by Madelene in favor of the
defendants,20 declared null and void OCT No. P-30187 in the name of petitioners and directed all the
defendants to jointly and severally pay respondent P6,000 as attorney's fees and litigation expenses
and each of the defendants to pay respondent P1,000 as nominal damages. It further ruled that the
properties subject of the annulled documents should revert back to the intestate estate of Carmen. 21

In a decision promulgated on October 14, 2003, the CA affirmed the decision of the RTC. It denied
reconsideration in a resolution promulgated on April 20, 2004.

Hence this petition raising the lone issue of whether OCT No. P-30187 was correctly nullified
considering that it cannot be the subject of collateral attack under Section 48 of PD 1529. 22

Petitioners argue that at the time of the filing of the amended complaint on September 15, 1988,
OCT No. P-30187 had already been issued in their name. Thus this certificate of title can only be
nullified in an action directly attacking its validity.

Respondent counters that at the time the amended complaint was filed, OCT No. P-30187 (which
was issued on December 11, 1987) was not yet indefeasible since less than one year had lapsed.
Furthermore, she asserts that the doctrine of indefeasibility does not apply if the free patent is null
and void ab initio.

We agree with respondent.

Sections 32 and 48 of PD 1529 state:

 Sec. 32. Review of decree of registration; Innocent purchaser for value. The decree of
registration shall not be reopened or revised by reason of absence, minority, or other
disability of any person adversely affected thereby, nor by any proceeding in any court for
reversing judgment, subject, however, to the right of any person, including the government
and the branches thereof, deprived of land or of any estate or interest therein by such
adjudication or confirmation of title obtained by actual fraud, to file in the proper [court] a
petition for reopening and review of the decree of registration not later than one year from
and after the date of the entry of such decree of registration, but in no case shall such
petition be entertained by the court where an innocent purchaser for value has acquired the
land or an interest therein whose rights may be prejudiced. Whenever the phrase "innocent
purchaser for value" or an equivalent phrase occurs in this Decree, it shall be deemed to
include an innocent lessee, mortgagee, or other encumbrancer for value.

Upon the expiration of said period of one year, the decree of registration and the
certificate of title issued shall become incontrovertible. Any person aggrieved by such
decree of registration in any case may pursue his remedy by action for damages against the
applicant or any other person responsible for the fraud.

xxx xxx xxx

SEC. 48. Certificate not subject to collateral attack. A certificate of title shall not be
subject to collateral attack. It cannot be altered, modified, or canceled except in a direct
proceeding in accordance with law. (Emphasis supplied)

Indeed, a decree of registration or patent and the certificate of title issued pursuant thereto may be
attacked on the ground of falsification or fraud within one year from the date of their issuance. Such
an attack must be direct and not by a collateral proceeding.23 The rationale is this:

xxx [The] public should be able to rely on a registered title. The Torrens System was adopted
in this country because it was believed to be the most effective measure to guarantee the
integrity of land titles and to protect their indefeasibility once the claim of ownership is
established and recognized.24

An action is deemed an attack on a title when the object of the action or proceeding is to nullify the
title and thus challenge the judgment pursuant to which the title was decreed. The attack is direct
when the object of the action is to annul or set aside such judgment, or enjoin its enforcement. On
the other hand, the attack is indirect or collateral when, in an action to obtain a different relief, an
attack on the judgment is nevertheless made as an incident thereof.25

In the present case, the attack on OCT No. P-30187 was merely collateral because the action was
principally for the declaration of nullity of the deed of donation and the other deeds of conveyance
which followed.

However, the principle of indefeasibility does not apply when the patent and the title based thereon
are null and void. An action to declare the nullity of a void title does not prescribe and is susceptible
to direct, as well as to collateral, attack.26 OCT No. P-30187 was registered on the basis of a free
patent which the RTC ruled was issued by the Director of Lands without authority.27 The petitioners
falsely claimed that the land was public land when in fact it was not as it was private land previously
owned by Carmen who inherited it from her parents. This finding was affirmed by the CA. There is no
reason to reverse it.28

The settled rule is that a free patent issued over a private land is null and void, and produces
no legal effects whatsoever. Private ownership of land as when there is a prima
facie proof of ownership like a duly registered possessory information or a clear showing of
open, continuous, exclusive, and notorious possession, by present or previous occupants
is not affected by the issuance of a free patent over the same land, because the Public Land
law applies only to lands of the public domain. The Director of Lands has no authority to
grant free patent to lands that have ceased to be public in character and have passed to
private ownership. Consequently, a certificate of title issued pursuant to a homestead patent
partakes of the nature of a certificate issued in a judicial proceeding only if the land covered
by it is really a part of the disposable land of the public domain.29

Since the Director of Lands has no authority to grant a free patent over privately owned land, any
title issued pursuant thereto is null and void.30

Therefore, although OCT No. P-30187 was merely collaterally attacked, it was still correctly nullified
because the free patent on which it was based was null and void ab initio.

WHEREFORE, the petition is hereby DENIED. The October 14, 2003 decision and April 20, 2004
resolution of the Court of Appeals in CA-G.R. CV No. 55238 are AFFIRMED.

Costs against petitioners.

 Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 163566 February 19, 2008

RAYMUNDO and PERLA DE GUZMAN, petitioners,

vs.
PRAXIDES J. AGBAGALA, respondent.

DECISION

CORONA, J.:

This is a petition for review on certiorari1 of a decision2 and resolution3 of the Court of Appeals (CA)
dated October 14, 2003 and April 20, 2004, respectively, in CA-G.R. CV No. 55238 which affirmed
the decision of the Regional Trial Court (RTC), Lingayen, Pangasinan, Branch 37 dated May 30,
1996 in Civil Case No. 16516.

The spouses Elias P. Javier and Maria Sison died on May 8, 1942 and July 1936, respectively, both
in Lingayen, Pangasinan. They were survived by their six children, namely: Conrado Javier,
respondent Praxides Javier Agbagala, Nicasio Javier, Carmen Javier, Encarnacion Javier
Ongnoy4 and Juana Javier. They left 13 parcels of land which their children inherited and divided
among themselves in a public document of extrajudicial partition dated June 29, 1948. Five of the
parcels of land5 were inherited by Carmen. On February 25, 1984, she died single, without any
compulsory heir and survived only by her sisters Encarnacion, respondent Praxides, Juana and
brother Nicasio.6

According to respondent and her daughter, Milagros Agbagala Gutierrez, one afternoon sometime in
mid-1987, a certain Rosing Cruz went to their house to borrow P30,000 from Milagros. Rosing
offered as collateral a document which turned out to be a deed of donation dated January 25, 1977
purportedly signed by Carmen in favor of her niece Madelene Javier Cruz, daughter of Juana and
sister-in-law of Rosing. Milagros told her (Rosing) that she had no money to lend. Thereafter,
Milagros, upon the request of respondent, went to the Register of Deeds in Lingayen, Pangasinan to
verify the existence of such donation. She found out that it was indeed duly registered. It was the
first time respondent came to know of such donation and the transfer of Carmen's properties to their
niece Madelene.7

According to Madelene, she lived in her Aunt Carmen's house8 and had been her companion since
she was four years old. She transferred to Manila only when she graduated in 1970. On January 25,
1977, Carmen executed the deed of donation in her favor. She was present when all the signatories
thereon, including the notary public, signed the document. From that time on, she received the
rentals of the properties covered by the donation. Carmen even informed her tenants that Madelene
would inherit the properties upon her death.9

On November 18, 1987,10 respondent filed civil case no. 16516 against Madelene praying that the
deed of donation be nullified, as well as the subsequent transfers to other parties of the properties
covered by the spurious donation.11 An amended complaint was filed on September 15, 198812 to
include the transferees13 of the properties including petitioner spouses Raymundo and Perla de
Guzman, who were the transferees of the land located at Tampac, Aguilar, Pangasinan. 14

Respondent claimed that the deed of donation was fake. This was confirmed by the handwriting
expert of the National Bureau of Investigation, Rogelio G. Azores,15 who examined the document and
compared it with several documents bearing the signature of Carmen. He found that the purported
signature of the late Carmen on the deed of donation was forged. 16

Petitioners filed their answer dated November 28, 1989. 17 They claimed that they applied for a free
patent over the subject area on August 10, 1987 and on November 26, 1987, they were issued free
patent no. 165790.18 On December 11, 1987, Original Certificate of Title (OCT) No. P-30187 was
registered in their name. During the trial, they also presented a tax declaration and realty tax receipts
from 1985 to 1990 issued to them.19

In a decision dated May 30, 1996, the RTC declared the deed of donation in favor of Madelene null
and void ab initio, canceled the deeds of sale executed by Madelene in favor of the
defendants,20 declared null and void OCT No. P-30187 in the name of petitioners and directed all the
defendants to jointly and severally pay respondent P6,000 as attorney's fees and litigation expenses
and each of the defendants to pay respondent P1,000 as nominal damages. It further ruled that the
properties subject of the annulled documents should revert back to the intestate estate of Carmen. 21
In a decision promulgated on October 14, 2003, the CA affirmed the decision of the RTC. It denied
reconsideration in a resolution promulgated on April 20, 2004.

Hence this petition raising the lone issue of whether OCT No. P-30187 was correctly nullified
considering that it cannot be the subject of collateral attack under Section 48 of PD 1529. 22

Petitioners argue that at the time of the filing of the amended complaint on September 15, 1988,
OCT No. P-30187 had already been issued in their name. Thus this certificate of title can only be
nullified in an action directly attacking its validity.

Respondent counters that at the time the amended complaint was filed, OCT No. P-30187 (which
was issued on December 11, 1987) was not yet indefeasible since less than one year had lapsed.
Furthermore, she asserts that the doctrine of indefeasibility does not apply if the free patent is null
and void ab initio.

We agree with respondent.

Sections 32 and 48 of PD 1529 state:

Sec. 32. Review of decree of registration; Innocent purchaser for value. The decree of
registration shall not be reopened or revised by reason of absence, minority, or other
disability of any person adversely affected thereby, nor by any proceeding in any court for
reversing judgment, subject, however, to the right of any person, including the government
and the branches thereof, deprived of land or of any estate or interest therein by such
adjudication or confirmation of title obtained by actual fraud, to file in the proper [court] a
petition for reopening and review of the decree of registration not later than one year from
and after the date of the entry of such decree of registration, but in no case shall such
petition be entertained by the court where an innocent purchaser for value has acquired the
land or an interest therein whose rights may be prejudiced. Whenever the phrase "innocent
purchaser for value" or an equivalent phrase occurs in this Decree, it shall be deemed to
include an innocent lessee, mortgagee, or other encumbrancer for value.

Upon the expiration of said period of one year, the decree of registration and the
certificate of title issued shall become incontrovertible. Any person aggrieved by such
decree of registration in any case may pursue his remedy by action for damages against the
applicant or any other person responsible for the fraud.

xxx xxx xxx

SEC. 48. Certificate not subject to collateral attack. A certificate of title shall not be
subject to collateral attack. It cannot be altered, modified, or canceled except in a direct
proceeding in accordance with law. (Emphasis supplied)

Indeed, a decree of registration or patent and the certificate of title issued pursuant thereto may be
attacked on the ground of falsification or fraud within one year from the date of their issuance. Such
an attack must be direct and not by a collateral proceeding.23 The rationale is this:
 xxx [The] public should be able to rely on a registered title. The Torrens System was adopted
in this country because it was believed to be the most effective measure to guarantee the
integrity of land titles and to protect their indefeasibility once the claim of ownership is
established and recognized.24

An action is deemed an attack on a title when the object of the action or proceeding is to nullify the
title and thus challenge the judgment pursuant to which the title was decreed. The attack is direct
when the object of the action is to annul or set aside such judgment, or enjoin its enforcement. On
the other hand, the attack is indirect or collateral when, in an action to obtain a different relief, an
attack on the judgment is nevertheless made as an incident thereof.25

In the present case, the attack on OCT No. P-30187 was merely collateral because the action was
principally for the declaration of nullity of the deed of donation and the other deeds of conveyance
which followed.

However, the principle of indefeasibility does not apply when the patent and the title based thereon
are null and void. An action to declare the nullity of a void title does not prescribe and is susceptible
to direct, as well as to collateral, attack.26 OCT No. P-30187 was registered on the basis of a free
patent which the RTC ruled was issued by the Director of Lands without authority.27 The petitioners
falsely claimed that the land was public land when in fact it was not as it was private land previously
owned by Carmen who inherited it from her parents. This finding was affirmed by the CA. There is no
reason to reverse it.28

The settled rule is that a free patent issued over a private land is null and void, and produces
no legal effects whatsoever. Private ownership of land as when there is a prima
facie proof of ownership like a duly registered possessory information or a clear showing of
open, continuous, exclusive, and notorious possession, by present or previous occupants
is not affected by the issuance of a free patent over the same land, because the Public Land
law applies only to lands of the public domain. The Director of Lands has no authority to
grant free patent to lands that have ceased to be public in character and have passed to
private ownership. Consequently, a certificate of title issued pursuant to a homestead patent
partakes of the nature of a certificate issued in a judicial proceeding only if the land covered
by it is really a part of the disposable land of the public domain.29

Since the Director of Lands has no authority to grant a free patent over privately owned land, any
title issued pursuant thereto is null and void.30

Therefore, although OCT No. P-30187 was merely collaterally attacked, it was still correctly nullified
because the free patent on which it was based was null and void ab initio.

WHEREFORE, the petition is hereby DENIED. The October 14, 2003 decision and April 20, 2004
resolution of the Court of Appeals in CA-G.R. CV No. 55238 are AFFIRMED.

Costs against petitioners.

SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
 FIRST DIVISION

G.R. No. 165838 April 3, 2013

NEMESIO FIRAZA, SR., Petitioner,

vs.
SPOUSES CLAUDIO and EUFRECENA UGAY, Respondents.

RESOLUTION

REYES, J.:

Assailed in this petition1 for review on certiorari under Rule 45 of the Rules of Court is the
Decision2 dated January 30, 2004 of the Court of Appeals (CA) in C.A. G.R. SP No. 73495, affirming
the Orders dated August 20, 20013 and July 2, 20024 of the Regional Trial Court (RTC) of Bayugan,
Agusan del Sur, Branch 7, which disallowed petitioner Nemesio Firaza, Sr. (petitioner) from
propounding questions attacking the validity of Spouses Claudio and Eufrecena Ugay's
(respondents) land title during the trial in Civil Case No. 442.

Likewise assailed is the CA Resolution 5 dated September 24, 2004 denying reconsideration.

The Antecedents

Civil Case No. 442 was commenced by a complaint for Quieting of Title filed by the respondents who
alleged that they are the registered owners of Lot No. 2887-A as evidenced by Original Certificate of
Title (OCT) No. P-16080. The complaint prayed for the annulment of Tax Declaration No. C-22-0857
dated February 18, 1993 issued in the name of the petitioner on the ground that it creates a cloud
upon the respondents title.6

In his answer,7 the petitioner set up the affirmative defense that the respondents obtained their title
through fraud and misrepresentation perpetrated during the processing of their Free Patent
Application before the Office of the Community Environment and Natural Resources Officer of
Bayugan, Agusan del Sur. The respondents purportedly connived with Land Management Officer
Lourdes Tadem (Tadem) who favorably recommended their application despite the petitioners prior
claim and continuous possession of the subject lot.

On the basis of the said affirmative defense, the petitioner also filed a counterclaim praying for the:
(1) nullification of OCT No. P-16080; (2) reconveyance to him of the ownership of the subject lot; and
(3) payment of moral and exemplary damages, and attorneys fees.8

The RTC thereafter set the affirmative defense for preliminary hearing as if a motion to dismiss had
been filed pursuant to Section 6, Rule 16 of the Rules of Court.9 The RTC likewise ordered the
parties to submit their respective memorandum to which the respondents duly complied. Instead of
similarly complying, however, the petitioner filed a Motion to Dispense with the Filing of the
Petitioners Memorandum reasoning that his affirmative defense cannot be proven adequately
through a written pleading.10

On October 2, 1998, the RTC issued an Order11 denying the petitioners affirmative defense on the
ground that the same can be better ventilated along with the allegations of the complaint and answer
in a full-blown trial.

Thus, trial on the merits ensued during which Land Management Officer Tadem was presented as a
hostile witness for the respondents. While on direct examination, the petitioners counsel
propounded questions pertaining to the circumstances attending the issuance by Tadem of a
recommendation for the respondents Free Patent Application. Counsel for the respondents objected
to the questioning on the ground that the same constitutes a collateral attack to the respondents
land title. In response, the petitioner argued that the questions are necessary for him to establish his
defenses of fraud and misrepresentation and to substantiate his counterclaim for reconveyance. To
fully thresh out the issue, the RTC required the parties to file, as they did so file, their respective
position papers on whether the petitioners counterclaim constitutes a direct or a collateral attack to
the validity of the respondents title.12

On August 20, 2001, the RTC issued an Order13 disallowing any issue pertaining to the petitioners
counterclaim which in turn was adjudged as a direct attack to the validity of the respondents title,
hence, prohibited, viz:

After an in-depth reading of the facts extant from the records, the Court is of the opinion and so
holds that the Counterclaim is a direct attack on the validity of the title.

Proverbial it is that actions to nullity [sic] Free Patents should be at the behest of the Director of
Lands (Kayaban vs. Republic, 52 SCRA 357).

Along this plain, since the counterclaim is a direct attack on the validity of the title and the proper
agencies, like the Land Management Bureau of the DENR were not included, any issue presented to
prove the illegality of the title, shall not be allowed.

SO ORDERED.14

When his motion for reconsideration was denied by the RTC in an Order 15 dated July 2, 2002, the
petitioner sought recourse with the CA via a special civil action for certiorari.

In its herein assailed Decision16 dated January 30, 2004, the CA affirmed the RTCs judgment albeit
premised on the different finding that the petitioners counterclaim was a collateral attack to the
validity of the respondents title. The CA stated: "[the] petitioners attempt to introduce evidence on
the alleged fraud committed by the respondents in securing their title to the subject land constitutes
a collateral attack on the title which is not allowed by law." 17

The petitioner moved for reconsideration but his motion was denied in the CA Resolution 18 dated
September 24, 2004 hence, the present appeal moored on this legal question:
Whether the petitioners counterclaim constitutes a collateral attack of the respondents land title and
thus bars the former from introducing evidence thereon in the latters civil action for quieting of title?

The Courts Ruling

The appeal is impressed with merit.

Section 48 of Presidential Decree No. 152919 or the Property Registration Decree proscribes a
collateral attack to a certificate of title and allows only a direct attack thereof, viz:

Sec. 48. Certificate not subject to collateral attack. A certificate of title shall not be subject to
collateral attack. It cannot be altered, modified or cancelled except in a direct proceedings in
accordance with law. 1wphi1

In Arangote v. Maglunob,20 the Court, after distinguishing between direct and collateral attack,
classified a counterclaim under former, viz:

The attack is considered direct when the object of an action is to annul or set aside such proceeding,
or enjoin its enforcement. Conversely, an attack is indirect or collateral when, in an action to obtain a
different relief, an attack on the proceeding is nevertheless made as an incident thereof. Such action
to attack a certificate of title may be an original action or a counterclaim, in which a certificate of title
is assailed as void.21 (Citation omitted and emphasis supplied)

In the recent case of Sampaco v. Lantud,22 the Court applied the foregoing distinction and held that a
counterclaim, specifically one for annulment of title and reconveyance based on fraud, is a direct
attack on the Torrens title upon which the complaint for quieting of title is premised. 23 Earlier in,
Development Bank of the Philippines v. CA,24 the Court ruled similarly and explained thus:

Nor is there any obstacle to the determination of the validity of TCT No. 10101. It is true that the
indefeasibility of torrens title cannot be collaterally attacked. In the instant case, the original
complaint is for recovery of possession filed by petitioner against private respondent, not an original
action filed by the latter to question the validity of TCT No. 10101 on which petitioner bases its right.
To rule on the issue of validity in a case for recovery of possession is tantamount to a collateral
attack. However, it should not [b]e overlooked that private respondent filed a counterclaim against
petitioner, claiming ownership over the land and seeking damages. Hence, we could rule on the
question of the validity of TCT No. 10101 for the counterclaim can be considered a direct attack on
the same. x x x.25

The above pronouncements were based on the well-settled principle that a counterclaim is
essentially a complaint filed by the defendant against the plaintiff and stands on the same footing as
an independent action.26

From the foregoing, it is immediately apparent that the courts a quo erred in their conclusions. The 1wphi1

CA erroneously classified the herein counterclaim as a collateral attack. On the other hand, the RTC
correctly adjudged the same as a direct attack to the respondents land title but mistakenly declared
it as a prohibited action.
As clearly pronounced in the above-cited jurisprudence, the petitioners counterclaim is a permissible
direct attack to the validity of respondents torrens title. As such counterclaim, it involves a cause of
action separate from that alleged in the complaint; it has for its purpose the vindication of a right in
as much as the complaint similarly seeks the redress of one.27 As the plaintiff in his own
counterclaim, the petitioner is equally entitled to the opportunity granted the plaintiff in the original
complaint, to establish his cause of action and to prove the right he asserts.

The courts a quo deprived the petitioner of such opportunity when they barred him from propounding
questions relating to the validity of the respondents title; they unjustifiably precluded him from
presenting evidence of fraud and misrepresentation upon which his counterclaim is grounded. The
courts a quo, the RTC especially, should have instead dealt with such issues and allowed the
presentation of the facts and evidence necessary for a complete determination of the controversy.

WHEREFORE, premises considered, the petition is GRANTED. The Decision dated January 30,
2004 of the Court of Appeals in C.A. G.R. SP No. 73495 and the Orders dated August 20, 2001 and
July 2, 2002 of the Regional Trial Court of Bayugan, Agusan del Sur, Branch 7, in Civic Case No.
442 are hereby REVERSED and SET ASIDE. The trial court is ORDERED to proceed with the trial of
Civil Case No. 442 and to allow petitioner Nemesio Firaza, Sr. to propound questions pertaining to'
the validity of Original Certificate of Title No. P-16080 and present such other evidence, testimonial
or documentary, substantiating his counterclaim
 Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 175485 July 27, 2011

CASIMIRO DEVELOPMENT CORPORATION, Petitioner,

vs.
RENATO L. MATEO, Respondent.

DECISION

BERSAMIN, J.:

The focus of this appeal is the faith that should be accorded to the Torrens title that the seller holds
at the time of the sale.

In its decision promulgated on August 31, 2006,1 the Court of Appeals (CA) declared that the
respondent and his three brothers were the rightful owners of the land in litis, and directed the Office
of the Register of Deeds of Las Pias City to cancel the transfer certificate of title (TCT) registered
under the name of petitioner Casimiro Development Corporation (CDC) and to issue in its place
another TCT in favor of the respondent and his three brothers. Thereby, the CA reversed the
judgment of the Regional Trial Court (RTC) rendered on May 9, 2000 (dismissing the respondents
complaint for quieting of title and reconveyance upon a finding that CDC had been a buyer in good
faith of the land in litis and that the respondents suit had already been time-barred).

Aggrieved, CDC brought its petition for review on certiorari.

Antecedents

The subject of this case is a registered parcel of land (property) with an area of 6,693 square meters,
more or less, located in Barrio Pulang Lupa, Las Pias City, that was originally owned by Isaias
Lara,2 the respondents maternal grandfather. Upon the death of Isaias Lara in 1930, the property
passed on to his children, namely: Miguela, Perfecta and Felicidad, and a grandson, Rosauro (son
of Perfecta who had predeceased Isaias in 1920). In 1962, the co-heirs effected the transfer of the
full and exclusive ownership to Felicidad (whose married surname was Lara-Mateo) under an
agreement denominated as Pagaayos Na Gawa Sa Labas Ng Hukuman.

Felicidad Lara-Mateo had five children, namely: Laura, respondent Renato, Cesar, Candido, Jr. and
Leonardo. With the agreement of the entire Lara-Mateo family, a deed of sale covering the property
was executed in favor of Laura, who, in 1967, applied for land registration. After the application was
granted, Original Certificate of Title (OCT) No. 6386 was issued in Lauras sole name.

In due course, the property now covered by OCT No. 6386 was used as collateral to secure a
succession of loans. The first loan was obtained from Bacoor Rural Bank (Bacoor Bank). To repay
the loan to Bacoor Bank and secure the release of the mortgage, Laura borrowed funds from
Parmenas Perez (Perez), who, however, required that the title be meanwhile transferred to his
name. Thus, OCT No. 6386 was cancelled and Transfer Certificate of Title (TCT) No. 438959 was
issued in the name of Perez. Subsequently, Laura recovered the property by repaying the obligation
with the proceeds of another loan obtained from Rodolfo Pe (Pe), resulting in the cancellation of TCT
No. 438595, and in the issuance of TCT No. S-91595 in Lauras name. She later executed a deed of
sale in favor of Pe, leading to the issuance of TCT No. S-91738 in the name of Pe, who in turn
constituted a mortgage on the property in favor of China Banking Corporation (China Bank) as
security for a loan. In the end, China Bank foreclosed the mortgage, and consolidated its ownership
of the property in 1985 after Pe failed to redeem. Thus, TCT No. (99527) T-11749-A was issued in
the name of China Bank.

In 1988, CDC and China Bank negotiated and eventually came to terms on the purchase of the
property, with China Bank executing a deed of conditional sale for the purpose. On March 4, 1993,
CDC and China Bank executed a deed of absolute sale over the property. Resultantly, on March 29,
1993, CDC was issued TCT No. T-34640 in its own name.

In the meanwhile, on February 28, 1991, Felicidad died intestate.

On June 6, 1991, CDC brought an action for unlawful detainer in the Metropolitan Trial Court (MeTC)
in Las Pias City against the respondents siblings, namely: Cesar, Candido, Jr., and Leonardo, and
the other occupants of the property. Therein, the defendants maintained that the MeTC did not have
jurisdiction over the action because the land was classified as agricultural; that the jurisdiction
belonged to the Department of Agrarian Reform Adjudication Board (DARAB); that they had been in
continuous and open possession of the land even before World War II and had presumed
themselves entitled to a government grant of the land; and that CDCs title was invalid, considering
that the land had been registered before its being declared alienable. 3

On October 19, 1992, the MeTC ruled in favor of CDC, viz:

The Court, after careful consideration of the facts and the laws applicable to this case[,] hereby
resolves:

1. On the issue of jurisdiction.

 The defendants alleged that the land in question is an agricultural land by presenting a Tax
Declaration Certificate classifying the land as "FISHPOND." The classification of the land in a
tax declaration certificate as a "fishpond" merely refers to the use of the land in question for
the purpose of real property taxation. This alone would not be sufficient to bring the land in
question under the operation of the Comprehensive Agrarian Reform Law.

2. On the issue of open and adverse possession by the defendants.

It should be noted that the subject land is covered by a Transfer Certificate of Title in the
name of plaintiffs predecessor-in-interest China Banking Corporation. Certificates of Title
under the Torrens System is indefeasible and imprescriptible. As between two persons
claiming possession, one having a [T]orrens title and the other has none, the former has a
better right.

3. On the issue of the nullity of the Certificate of Title.

The defense of the defendants that the subject property was a forest land when the same
was originally registered in 1967 and hence, the registration is void[,] is not for this Court to
decide[,] for lack of jurisdiction. The certificate of title over the property must be respected by
this Court until it has been nullified by a competent Court.

WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff[,] ordering
the defendants

1. [sic] and all persons claiming right[s] under it to vacate the subject premises located at
Pulang Lupa I, Las Pias, Metro Manila and surrender the possession of the same to herein
plaintiff;

2. to pay the plaintiff reasonable compensation for the use and occupation of the subject
premises hereby fixed at (P100.00) one hundred pesos a month starting November 22, 1990
(the time when the demand letter to vacate was given) until defendants actually vacate the
property;

No pronouncement as to costs and attorneys fees.

SO ORDERED.4

The decision of the MeTC was assailed in the RTC via petition for certiorari and prohibition. The
RTC resolved against CDC, and held that the MeTC had acted without jurisdiction because the land,
being a fishpond, was agricultural; hence, the dispute was within the exclusive jurisdiction of the
DARAB pursuant to Republic Act No. 6657 (Comprehensive Agrarian Reform Law of 1988). 5

CDC appealed to the CA, which, on January 25, 1996, found in favor of CDC, declaring that the
MeTC had jurisdiction. As a result, the CA reinstated the decision of the MeTC.6

On appeal (G.R. No. 128392), the Court affirmed the CAs decision in favor of CDC, ruling thusly:
WHEREFORE, the petition is DENIED and the Court of Appeals Decision and Resolution in CA-
G.R. SP No. 34039, dated January 25, 1996 and February 21, 1997 respectively, are AFFIRMED.
No costs.

SO ORDERED.7

The decision in G.R. No. 128392 became final.

Nonetheless, on June 29, 1994, the respondent brought an action for quieting of title, reconveyance
of four-fifths of the land, and damages against CDC and Laura in the RTC in Las Pias City entitled
Renato L. Mateo v. Casimiro Development Corporation and Laura Mateo de Castro. In paragraph 4
of his complaint, he stated that he was "bringing this action to quiet title on behalf of himself and of
his three (3) brothers Cesar, Leonardo, and Candido, Jr., all surnamed MATEO in his capacity as
one of the co-owners of a parcel of land situated at Barrio Pulang Lupa, Municipality of Las Pias,
Metro Manila."

On May 9, 2001, the RTC held in favor of CDC, disposing:

WHEREFORE, and by strong preponderance of evidence, judgment is hereby rendered in favor of

the defendant Casimiro Development Corporation and against the plaintiff Renato L. Mateo by (1)
Dismissing the complaint, and upholding the validity and indefeasibility of Transfer Certificate of Title
No. T-34640 in the name of Casimiro Development Corporation; (2) Ordering the plaintiff Renato
Mateo to pay defendant Casimiro Development Corporation the sum of [a] P200,000.00 as
compensatory damages; [b] P200,000.00 as attorneys fees; and [c] to pay the costs.

SO ORDERED.8

On appeal (C.A.-G.R. CV No. 71696), the CA promulgated its decision on August 31, 2006,
reversing the RTC and declaring CDC to be not a buyer in good faith due to its being charged with
notice of the defects and flaws of the title at the time it acquired the property from China Bank, and
decreeing:

WHEREFORE, the Decision dated May 9, 2001 of Branch 225, Regional Trial Court, Las Pias City
in Civil Case No. 94-2045 is hereby REVERSED and SET ASIDE and a new one rendered:

(1) Declaring appellant Renato Mateo and his brothers and co-owners Cesar, Candido, Jr.,
and Leonardo, all surnamed Mateo as well as his sister, Laura Mateo de Castro as the
rightful owners of the parcel of land, subject of this case; and

(2) Ordering the Register of Deeds of Las Pias City, Metro-Manila to cancel Transfer
Certificate of Title No. T-34640 under the name of appellee Casimiro Development
Corporation, and that a new one be issued in favor of the appellant and his co-heirs and
siblings, mentioned above as co-owners pro indiviso of the said parcel.

(3) No pronouncement as to cost.

SO ORDERED.9

The CA denied CDCs motion for reconsideration.

Hence, this appeal, in which CDC urges that the CA committed serious errors of law,10 as follows:

(A) xxx in failing to rule that the decree of registration over the Subject Property is
incontrovertible and no longer open to review or attack after the lapse of one (1) year from
entry of such decree of registration in favor of Laura Mateo de Castro.

(B) xxx in failing to rule that the present action is likewise barred by res judicata.

(C) xxx in failing to rule that the instant action for quieting of title and reconveyance under PD
No. 1529 cannot prosper because the Subject Property had already been conveyed and
transferred to third parties who claimed adverse title for themselves.

(D) xxx in failing to rule that the action of respondent for "quieting of title, reconveyance and
damages" is barred by laches.

(E) xxx in ruling that the Subject Property must be reconveyed to respondent because
petitioner Casimiro Development Corporation is not a "purchaser in good faith."

CDC argues that it was a buyer in good faith; and that the CA did not rule on matters that fortified its
title in the property, namely: (a) the incontrovertibility of the title of Laura; (b) the action being barred
by laches and res judicata; and (c) the property having been conveyed to third parties who had then
claimed adverse title.

The respondent counters that CDC acquired the property from China Bank in bad faith, because it
had actual knowledge of the possession of the property by the respondent and his siblings; that CDC
did not actually accept delivery of the possession of the property from China Bank; and that CDC
ignored the failure of China Bank to warrant its title.

Ruling

We grant the petition.

1.

Indefeasibility of title in the name of Laura

As basis for recovering the possession of the property, the respondent has assailed the title of
Laura.

We cannot sustain the respondent.

There is no doubt that the land in question, although once a part of the public domain, has already
been placed under the Torrens system of land registration. The Government is required under the
Torrens system of registration to issue an official certificate of title to attest to the fact that the person
named in the certificate is the owner of the property therein described, subject to such liens and
encumbrances as thereon noted or what the law warrants or reserves. 11 The objective is to obviate
possible conflicts of title by giving the public the right to rely upon the face of the Torrens certificate
and to dispense, as a rule, with the necessity of inquiring further. The Torrens system gives the
registered owner complete peace of mind, in order that he will be secured in his ownership as long
as he has not voluntarily disposed of any right over the covered land. 12

The Government has adopted the Torrens system due to its being the most effective measure to
guarantee the integrity of land titles and to protect their indefeasibility once the claim of ownership is
established and recognized. If a person purchases a piece of land on the assurance that the sellers
title thereto is valid, he should not run the risk of being told later that his acquisition was ineffectual
after all, which will not only be unfair to him as the purchaser, but will also erode public confidence in
the system and will force land transactions to be attended by complicated and not necessarily
conclusive investigations and proof of ownership. The further consequence will be that land conflicts
can be even more abrasive, if not even violent. The Government, recognizing the worthy purposes of
the Torrens system, should be the first to accept the validity of titles issued thereunder once the
conditions laid down by the law are satisfied.13

Yet, registration under the Torrens system, not being a mode of acquiring ownership, does not create
or vest title.14 The Torrens certificate of title is merely an evidence of ownership or title in the
particular property described therein.15 In that sense, the issuance of the certificate of title to a
particular person does not preclude the possibility that persons not named in the certificate may be
co-owners of the real property therein described with the person named therein, or that the
registered owner may be holding the property in trust for another person. 16

Nonetheless, it is essential that title registered under the Torrens system becomes indefeasible and
incontrovertible.17

The land in question has been covered by a Torrens certificate of title (OCT No. 6386 in the name of
Laura, and its derivative certificates) before CDC became the registered owner by purchase from
China Bank. In all that time, neither the respondent nor his siblings opposed the transactions
causing the various transfers. In fact, the respondent admitted in his complaint that the registration of
the land in the name of Laura alone had been with the knowledge and upon the agreement of the
entire Lara-Mateo family. It is unthinkable, therefore, that the respondent, fully aware of the exclusive
registration in her sister Lauras name, allowed more than 20 years to pass before asserting his
claim of ownership for the first time through this case in mid-1994. Making it worse for him is that he
did so only after CDC had commenced the ejectment case against his own siblings.

Worthy of mention is that Candido, Jr., Leonardo, and Cesars defense in the ejectment case
brought by CDC against them was not predicated on a claim of their ownership of the property, but
on their being agricultural lessees or tenants of CDC. Even that defense was ultimately rejected by
this Court by observing in G.R. No. 128392 as follows:
With regard to the first element, the petitioners have tried to prove that they are tenants or
agricultural lessees of the respondent corporation, CDC, by showing that the land was originally
owned by their grandfather, Isaias Lara, who gave them permission to work the land, and that CDC
is merely a successor-in-interest of their grandfather. It must be noted that the petitioners failed to
adequately prove their grandfathers ownership of the land. They merely showed six tax
declarations. It has been held by this Court that, as against a transfer certificate of title, tax
declarations or receipts are not adequate proofs of ownership. Granting arguendo that the land was
really owned by the petitioners grandfather, petitioners did not even attempt to show how the land
went from the patrimony of their grandfather to that of CDC. Furthermore, petitioners did not prove,
but relied on mere allegation, that they indeed had an agreement with their grandfather to use the
land.

As for the third element, there is apparently no consent between the parties. Petitioners were unable
to show any proof of consent from CDC to work the land. For the sake of argument, if petitioners
were able to prove that their grandfather owned the land, they nonetheless failed to show any proof
of consent from their grandfather to work the land. Since the third element was not proven, the fourth
element cannot be present since there can be no purpose to a relationship to which the parties have
not consented.18

The respondents attack against the title of CDC is likewise anchored on his assertion that the only
purpose for having OCT No. 6386 issued in the sole name of Laura was for Laura to hold the title in
trust for their mother. This assertion cannot stand, however, inasmuch as Lauras title had long ago
become indefeasible.

Moreover, the respondents suit is exposed as being, in reality, a collateral attack on the title in the
name of Laura, and for that reason should not prosper. Registration of land under the Torrens
System, aside from perfecting the title and rendering it indefeasible after the lapse of the period
allowed by law, also renders the title immune from collateral attack.19 A collateral attack occurs when,
in another action to obtain a different relief and as an incident of the present action, an attack is
made against the judgment granting the title. This manner of attack is to be distinguished from a
direct attack against a judgment granting the title, through an action whose main objective is to
annul, set aside, or enjoin the enforcement of such judgment if not yet implemented, or to seek
recovery if the property titled under the judgment had been disposed of. 20

2.

CDC was an innocent purchaser for value

The CA found that CDC acquired the property in bad faith because CDC had knowledge of defects
in the title of China Bank, including the adverse possession of the respondents siblings and the
supposed failure of China Bank to warrant its title by inserting an as-is, where-is clause in its
contract of sale with CDC.

The CA plainly erred in so finding against CDC.

To start with, one who deals with property registered under the Torrens system need not go beyond
the certificate of title, but only has to rely on the certificate of title.21 He is charged with notice only of
such burdens and claims as are annotated on the title. 22 The pertinent law on the matter of burdens
and claims is Section 44 of the Property Registration Decree,23 which provides:

Section 44. Statutory liens affecting title. Every registered owner receiving a certificate of title in
pursuance of a decree of registration, and every subsequent purchaser of registered land taking a
certificate of title for value and in good faith, shall hold the same free from all encumbrances except
those noted on said certificate and any of the following encumbrances which may be subsisting,
namely:

First. Liens, claims or rights arising or existing under the laws and Constitution of the Philippines
which are not by law required to appear of record in the Registry of Deeds in order to be valid
against subsequent purchasers or encumbrances of record.

Second. Unpaid real estate taxes levied and assessed within two years immediately preceding the
acquisition of any right over the land by an innocent purchaser for value, without prejudice to the
right of the government to collect taxes payable before that period from the delinquent taxpayer
alone.

Third. Any public highway or private way established or recognized by law, or any government
irrigation canal or lateral thereof, if the certificate of title does not state that the boundaries of such
highway or irrigation canal or lateral thereof have been determined.

Fourth. Any disposition of the property or limitation on the use thereof by virtue of, or pursuant to,
Presidential Decree No. 27 or any other law or regulations on agrarian reform.

In short, considering that China Banks TCT No. 99527 was a clean title, that is, it was free from any
lien or encumbrance, CDC had the right to rely, when it purchased the property, solely upon the face
of the certificate of title in the name of China Bank.24

The CAs ascribing of bad faith to CDC based on its knowledge of the adverse possession of the
respondents siblings at the time it acquired the property from China Bank was absolutely unfounded
and unwarranted. That possession did not translate to an adverse claim of ownership that should
have put CDC on actual notice of a defect or flaw in the China Banks title, for the respondents
siblings themselves, far from asserting ownership in their own right, even characterized their
possession only as that of mere agricultural tenants. Under no law was possession grounded on
tenancy a status that might create a defect or inflict a flaw in the title of the owner. Consequently,
due to his own admission in his complaint that the respondents own possession was not any
different from that of his siblings, there was really nothing factually or legally speaking that ought
to have alerted CDC or, for that matter, China Bank and its predecessors-in-interest, about any
defect or flaw in the title.

The vendees notice of a defect or flaw in the title of the vendor, in order for it to amount to bad faith,
should encompass facts and circumstances that would impel a reasonably cautious person to make
further inquiry into the vendors title,25 or facts and circumstances that would induce a reasonably
prudent man to inquire into the status of the title of the property in litigation. 26 In other words, the
presence of anything that excites or arouses suspicion should then prompt the vendee to look
beyond the certificate and to investigate the title of the vendor appearing on the face of said
certificate.27

And, secondly, the CA grossly erred in construing the as-is, where-is clause contained in the deed of
sale between CDC (as vendee) and China Bank (as vendor) as proof or manifestation of any bad
faith on the part of CDC. On the contrary, the as-is, where-is clause did not affect the title of China
Bank because it related only to the physical condition of the property upon its purchase by CDC. The
clause only placed on CDC the burden of having the occupants removed from the property. In a sale
made on an as-is, where-is basis, the buyer agrees to take possession of the things sold "in the
condition where they are found and from the place where they are located," because the phrase as-
is, where-is pertains solely "to the physical condition of the thing sold, not to its legal situation" and is
"merely descriptive of the state of the thing sold" without altering the sellers responsibility to deliver
the property sold to the buyer.28

What the foregoing circumstances ineluctably indicate is that CDC, having paid the full and fair price
of the land, was an innocent purchaser for value, for, according to Sandoval v. Court of Appeals: 29

A purchaser in good faith is one who buys property of another, without notice that some other person
has a right to, or interest in, such property and pays a full and fair price for the same, at the time of
such purchase, or before he has notice of the claim or interest of some other persons in the property.
He buys the property with the belief that the person from whom he receives the thing was the owner
and could convey title to the property. A purchaser cannot close his eyes to facts which should put a
reasonable man on his guard and still claim he acted in good faith.

WHEREFORE, we grant the petition for review on certiorari; set aside the decision of the Court of
Appeals in CA-GR. CV No. 71696; dismiss the complaint in Civil Case No. 94-2045; and declare
Transfer Certificate of Title No. T-34640 in the name of Casimiro Development Corporation valid and
subsisting.

The respondent shall pay the costs of suit.

 Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 163551 July 18, 2011

DATU KIRAM SAMPACO, substituted by HADJI SORAYA S. MACABANDO, Petitioner,

vs.
HADJI SERAD MINGCA LANTUD, Respondent.

DECISION

PERALTA, J.:

This is a petition for review on certiorari of the Court of Appeals Decision dated August 15, 2003 in
CA-G.R. CV No. 63801 and its Resolution dated May 13, 2004, denying petitioners motion for
reconsideration.

The facts, as stated by the Court of Appeals, are as follows:

On September 14, 1984, respondent Hadji Serad Mingca Lantud, the plaintiff in the lower court, filed
an action to quiet title with damages1 with the Regional Trial Court (RTC) of Lanao del Sur, Branch 8,
Marawi City (trial court), against petitioner Datu Kiram Sampaco (deceased), the defendant in the
lower court, who has been substituted by his heirs, represented by Hadji Soraya Sampaco-
Macabando.2

Respondent alleged in his Complaint3 that he is the owner in fee simple of a parcel of residential lot
located at Marinaut, Marawi City, with an area of 897 square meters covered by Original Certificate
of Title (OCT) No. P-658. On August 25, 1984, petitioner Datu Kiram Sampaco, through his daughter
Soraya Sampaco-Macabando with several armed men, forcibly and unlawfully entered his property
and destroyed the nursery buildings, cabbage seedlings and other improvements therein
worth P10,000.00. On August 30, 1984, Barangay Captain Hadji Hassan Abato and his councilmen
prepared and issued a decision4 in writing stating that petitioner Datu Kiram Sampaco is the owner of
the subject parcel of land. Respondent stated that the acts of petitioner and the said decision of the
Barangay Captain may cast a cloud over or otherwise prejudice his title. Respondent stated that he
and his predecessors-in-interest have been in open, public and exclusive possession of the subject
property. He prayed that the acts of petitioner and the decision of Barangay Captain Hadji Hassan
Abato and his councilmen be declared invalid, and that petitioner be ordered to pay respondent
damages in the amount of P10,000.00 and attorneys fees.
In his Answer,5 defendant Datu Kiram Sampaco, petitioner herein, denied the material allegations of
the Complaint. Petitioner asserted that he and his predecessors-in-interest are the ones who had
been in open, public, continuous, and exclusive possession of the property in dispute. Petitioner
alleged that OCT No. P-658 was secured in violation of laws and through fraud, deception and
misrepresentation, considering that the subject parcel of land is a residential lot and the title issued
is a free patent. Moreover, respondent and his predecessors-in-interest had never taken actual
possession or occupied the land under litigation. On the contrary, petitioner has all the evidence of
actual possession and ownership of permanent improvements and other plants on the land in
dispute.

Petitioner filed a counterclaim for actual and moral damages, and attorney's fees for the unfounded
complaint and prayed for its dismissal. He also sought the cancellation of respondents OCT No. P-
658 and the reconveyance of the subject parcel of land.

During the trial, respondent Hadji Lantud testified that he acquired the subject lot from his
grandmother, Intumo Pagsidan, a portion thereof from his grandmothers helper, Totop Malacop,
pursuant to a court decision after litigating with him. 6 Respondent had been residing on the lot for
more than 30 years, applied for a title thereto and was issued OCT No. P-658. 7 He paid the
corresponding real estate taxes for the land.8 He planted assorted trees and plants on the lot like
bananas, jackfruits, coconuts and others.9 He testified that he was not aware of the alleged litigation
over the lot before Barangay Captain Hadji Hassan Abato, although he was furnished a copy of the
decision.10

On the other hand, petitioner Datu Kiram Sampaco testified that the land under litigation is only a
portion of the 1,800 square meters of land that he inherited in 1952 from his father, Datu Sampaco
Gubat.11 Since then, he had been in adverse possession and ownership of the subject lot, cultivating
and planting trees and plants through his caretaker Hadji Mustapha Macawadib. 12 In 1962, he
mortgaged the land (1,800 square meters) with the Development Bank of the Philippines, Ozamis
branch.13 He declared the land (1,800 square meters) for taxation purposes 14 and paid real estate
taxes, and adduced in evidence the latest Tax Receipt No. 1756386 dated September 15,
19[9]3.15 Petitioner presented four corroborating witnesses as regards his possession of the subject
property.

After trial on the merits, the trial court rendered a Decision on March 31, 1999 in favor of petitioner,
the dispositive portion of which reads:

WHEREFORE, premises considered the court is of the opinion and so holds that the preponderance
of evidence is in favor of the defendant and against the plaintiff. Judgment is hereby rendered as
follows:

1. Dismissing plaintiffs complaint for lack of merit;

2. Declaring Original Certificate of Title No. P-658 (Exh. A) null and void and of no legal
effect;
 3. Declaring the defendant the absolute or true owner and possessor of the land in dispute;
and

4. Ordering the plaintiff to pay the defendant the sum of P10,000.00 for attorneys fees
plus P500.00 per appearance.16

The trial court held that the issuance of respondents title, OCT No. P-658, was tainted with fraud
and irregularities and the title is, therefore, spurious; hence, it is null and void, and without any
probative value. The finding of fraud was based on: (1) the Certification issued by Datu Samra
Andam, A/Adm. Assistant II, Natural Resources District No. XII-3, Marawi City, stating that the data
contained in respondents title were verified and had no record in the said office; (2) the said
Certification was not refuted or rebutted by respondent; (3) while free patents are normally issued for
agricultural lands, respondents title is a free patent title issued over a residential land as the lot is
described in the Complaint as a residential lot; and (4) Yusoph Lumampa, an employee of the local
Bureau of Lands, to whom respondent allegedly entrusted the paperwork of the land titling, was not
presented as a witness.

Moreover, the trial court stated that respondent failed to establish with competent and credible
evidence that he was in prior possession of the subject property. No corroborative witness was
presented to further prove his prior possession.

On the other hand, the trial court stated that petitioner offered documentary evidence, consisting of a
contract of real estate mortgage of the subject property, tax declarations, an official tax receipt, and
testimonial evidence to prove that he had been in open, public, continuous, and lawful possession of
the subject property in the concept of owner.

Respondent appealed the decision of the trial court to the Court of Appeals.

On August 15, 2003, the Court of Appeals rendered a Decision reversing the decision of the trial
court, the dispositive portion of which reads:

WHEREFORE:

1. The appeal is granted and the appealed judgment is hereby totally REVERSED.

2. To quiet his title, plaintiff-appelant Hadji Serad Mingca Lantud is confirmed the owner of
the parcel of land covered by Original Certificate of Title No. P-658;

3. The defendant-appellee is ordered to pay P50,000.00 as attorneys fees to the plaintiff-

appellant; and

4. Costs against the defendant-appellee.17

Petitioners motion for reconsideration was denied by the Court of Appeals in its Resolution 18 dated
May 13, 2004.
The Court of Appeals held that there is no controversy that respondent is a holder of a Torrens title;
hence, he is the owner of the subject property. The appellate court stressed that Section 47 19 of the
Land Registration Act (Act No. 496) provides that the certificate of title covering registered land shall
be received as evidence in all courts of the Philippines and shall be conclusive as to all matters
stated therein.

The Court of Appeals stated that the Torrens title has three attributes: (1) a Torrens title is the best
evidence of ownership over registered land and, unless annulled in an appropriate proceeding, the
title is conclusive on the issue of ownership; (2) a Torrens title is incontrovertible and indefeasible
upon the expiration of one year from the date of the entry of the decree of registration; 20 and (3) a
Torrens title is not subject to collateral attack.21

The Court of Appeals held that petitioners counterclaim filed on October 15, 1984 for cancellation of
respondents original certificate of title issued on May 22, 1981 was filed beyond the statutory one-
year period; hence, petitioners title had become indefeasible, and cannot be affected by the
decision made by Barangay Captain Hadji Hassan Abato and his councilmen. Moreover, the
appellate court held that petitioners prayer for the cancellation of respondents title, OCT No. P-658,
through a counterclaim included in his Answer is a collateral attack, which the law does not allow,
citing Cimafranca v. Court of Appeals22 and Natalia Realty Corporation v. Valdez. 23

The allegation of fraud in securing OCT No. P-658 on the ground that the property in dispute is a
residential lot and not subject of a free patent was not given weight by the appellate court as it was
supported only by testimonial evidence that did not show how (by metes and bounds) and why the
property in dispute could not have been the subject of a free patent. The appellate court stated that a
mere preponderance of evidence is not adequate to prove fraud; 24 it must be established by clear
and convincing evidence.

The Court of Appeals also noted that petitioner claimed that the subject property is only part of his
larger property. Although petitioner introduced proof of payment of the real estate taxes of the said
property, as well as a previous mortgage of the property, petitioner did not show that the disputed
property is part of his larger property. Hence, the appellate court stated that under such
circumstances, it cannot rule that petitioner owned the land under litigation, since petitioner failed to
show that it is part of his larger property.

The Court of Appeals did not award actual and moral damages, because respondent failed to prove
the amount of any actual damages sustained, and the instances enumerated under Article 2219 of
the Civil Code warranting the award of moral damages were not present.

However, the Court of Appeals awarded attorney's fees in the amount of P50,000.00, considering
that respondent was forced to incur expenses to protect his right through the action to quiet title.

Petitioner filed this petition raising the following issues:

I
 THE COURT OF APPEALS MISERABLY FAILED TO CONSIDER THE FACT THAT THE
TORRENS TITLE INVOLVED HEREIN WAS ISSUED PURSUANT TO A FREE PATENT
WHICH COULD NOT BE VALIDLY ISSUED OVER A PRIVATE LAND.

II

THE COURT OF APPEALS ERRED IN DISREGARDING THE FACT THAT AS CERTIFIED

TO BY THE BUREAU OF LANDS ITSELF NO SUCH FREE PATENT OVER THE SUBJECT
LAND WAS ISSUED BY IT; HENCE, SAID FREE PATENT IS SPURIOUS.

III

THE COURT OF APPEALS ERRED IN REVERSING THE DECISION OF THE TRIAL

COURT THAT THE SUBJECT LOT HAD LONG BEEN OWNED, POSSESSED AND
CULTIVATED BY THE DEFENDANT (PETITIONER HEREIN) OR HIS PREDECESSORS-
IN-INTEREST SINCE TIME IMMEMORIAL IN THE CONCEPT OF AN OWNER.

IV

THE COURT OF APPEALS ERRED IN RULING THAT THE PETITIONERS

COUNTERCLAIM FOR CANCELLATION OF RESPONDENTS TITLE IS BARRED.

THE COURT OF APPEALS ERRED IN RULING THAT THE COUNTERCLAIM IN THE

INSTANT CASE IS A COLLATERAL ATTACK ON RESPONDENT-PLAINTIFFS TITLE.

VI

THE COURT OF APPEALS ERRED IN DENYING PETITIONERS MOTION FOR

RECONSIDERATION.25

The main issue is whether or not the Court of Appeals erred in sustaining the validity of OCT No. P-
658 and confirming respondent as owner of the property in dispute.

Petitioner contends that the Court of Appeals erred in disregarding the fact that the Torrens title was
issued to respondent by virtue of a free patent covering a residential lot that is private land as it has
been acquired by petitioner through open, public, continuous and lawful possession of the land in the
concept of owner. Petitioner thus prayed for the cancellation of respondents title and the
reconveyance of the subject property. Hence, the Court of Appeals erred in declaring that the subject
lot belongs to respondent.

The contention is without merit.

The Torrens title is conclusive evidence with respect to the ownership of the land described therein,
and other matters which can be litigated and decided in land registration proceedings. 26 Tax
declarations and tax receipts cannot prevail over a certificate of title which is an incontrovertible
proof of ownership.27 An original certificate of title issued by the Register of Deeds under an
administrative proceeding is as indefeasible as a certificate of title issued under judicial
proceedings.28 However, the Court has ruled that indefeasibility of title does not attach to titles
secured by fraud and misrepresentation.29

In this case, petitioner alleged in his Answer to respondents Complaint in the trial court that
respondents title, OCT No. P-658, was secured in violation of the law and through fraud, deception
and misrepresentation, because the subject parcel of land is a residential lot, which cannot be
subject of a free patent, since only agricultural lands are subject of a free patent.

The trial court found that "[t]he lot under litigation as clearly described in the complaint is a
residential lot and a free patent title thereto cannot validly be issued." This finding was one of the
bases for the trial courts declaration that the issuance of OCT was tainted with fraud and
irregularities and is, therefore, spurious; thus, OCT No. P-658 is null and void.

It should be pointed out that the allegation in the Complaint that the land is residential was made
only by respondent, but the true classification of the disputed land as residential was not shown to
have been made by the President, upon recommendation by the Secretary of Environment and
Natural Resources, pursuant to Section 9 of Commonwealth Act No. 141, otherwise known as The
Public Land Act.30 Hence, the trial court erred in concluding that there was fraud in the issuance of
respondents free patent title on the ground that it covered residential land based only on the
Complaint which stated that the property was residential land when it was not shown that it was the
President who classified the disputed property as residential, and OCT No. P-658 itself stated that
the free patent title covered agricultural land. It has been stated that at present, not only agricultural
lands, but also residential lands, have been made available by recent legislation for acquisition by
free patent by any natural born Filipino citizen.31 Nevertheless, the fact is that in this case, the free
patent title was granted over agricultural land as stated in OCT No. P-658.

Moreover, petitioner contends in his petition that the Certification32 dated July 24, 1987 issued by
Datu Samra I. Andam, A/Adm. Assistant II, Natural Resources District No. XII-3, Bureau of Lands,
Marawi City, certifying that the data contained in OCT No. P-658 in respondents name had no
records in the said office, showed that respondents Torrens title was spurious.

The Court holds that the certification, by itself, is insufficient to prove the alleged fraud. Fraud and
misrepresentation, as grounds for cancellation of patent and annulment of title, should never be
presumed, but must be proved by clear and convincing evidence, mere preponderance of evidence
not being adequate.33 Fraud is a question of fact which must be proved.34 The signatory of the
certification, Datu Samra Andam, A/Adm. Assistant II, Natural Resources District No. XII-3, Marawi
City, was not presented in court to testify on the due issuance of the certification, and to testify on the
details of his certification, particularly the reason why the said office had no records of the data
contained in OCT No. P-658 or to testify on the fact of fraud, if any.

Thus, the Court holds that the evidence on record is insufficient to prove that fraud was committed in
the issuance of respondents Torrens title. Hence, respondents Torrens title is a valid evidence of his
ownership of the land in dispute.
On the other hand, petitioner claims ownership of the subject lot, which is merely a portion of a
larger property (1,800 square meters) that he allegedly inherited from his father in 1952, by virtue of
open, public and continuous possession of the land in the concept of owner making it petitioners
private property. Hence, petitioner prays for reconveyance of the said property.

Article 434 of the Civil Code governs an action for reconveyance, thus:

Art. 434. In an action to recover, the property must be identified, and the plaintiff must rely on the
strength of his title and not on the weakness of the defendants claim.

Under Article 434 of the Civil Code, to successfully maintain an action to recover the ownership of a
real property, the person who claims a better right to it must prove two (2) things: first, the identity of
the land claimed; and second, his title thereto.35

In regard to the first requisite, in an accion reinvindicatoria, the person who claims that he has a
better right to the property must first fix the identity of the land he is claiming by describing the
location, area and boundaries thereof.36

In this case, petitioner claims that the property in dispute is part of his larger property. However,
petitioner failed to identify his larger property by providing evidence of the metes and bounds
thereof, so that the same may be compared with the technical description contained in the title of
respondent, which would have shown whether the disputed property really formed part of petitioners
larger property. The appellate court correctly held in its Resolution dated May 13, 2004 that
petitioners claim is solely supported by testimonial evidence, which did not conclusively show the
metes and bounds of petitioners larger property in relation to the metes and bounds of the disputed
property; thus, there is no sufficient evidence on record to support petitioners claim that the disputed
property is part of his larger property.

In regard to the second requisite of title to property, both petitioner and respondent separately claim
that they are entitled to ownership of the property by virtue of open, public, continuous and exclusive
possession of the same in the concept of owner. Petitioner claims that he inherited the subject
property from his father in 1952, while respondent claims that he acquired the property from his
grandmother Intumo Pagsidan, a portion thereof from his grandmothers helper Totop Malacop
pursuant to a court decision after litigating with him. 37 Respondent has OCT No. P-658 to prove his
title to the subject property, while petitioner merely claims that the property is already his private land
by virtue of his open, public, continuous possession of the same in the concept of owner.

The Court holds that petitioner failed to prove the requisites of reconveyance as he failed to prove
the identity of his larger property in relation to the disputed property, and his claim of title by virtue of
open, public and continuous possession of the disputed property in the concept of owner is nebulous
in the light of a similar claim by respondent who holds a free patent title over the subject property. As
stated in Ybaez v. Intermediate Appellate Court,38 it is relatively easy to declare and claim that one
owns and possesses public agricultural land, but it is entirely a different matter to affirmatively
declare and to prove before a court of law that one actually possessed and cultivated the entire area
to the exclusion of other claimants who stand on equal footing under the Public Land Act
(Commonwealth Act No. 141, as amended) as any other pioneering claimants.
Further, petitioner contends that the Court of Appeals erred in ruling that petitioners counterclaim is
time-barred, since the one-year prescriptive period does not apply when the person seeking
annulment of title or reconveyance is in possession of the lot, citing Heirs of Simplicio Santiago v.
Heirs of Mariano E. Santiago.39Petitioner also contends that the Court of Appeals erred in ruling that
the counterclaim in this case is a collateral attack on respondents title,
citing Cimafranca v. Intermediate Appellate Court.40 Petitioner cites the case of Heirs of Simplicio
Santiago v. Heirs of Mariano E. Santiago,41 which held that a counterclaim can be considered a direct
attack on the title.

The Court notes that the case of Cimafranca v. Intermediate Appellate Court,42 cited by the Court of
Appeals to support its ruling that the prayer for the cancellation of respondents title through a
counterclaim included in petitioners Answer is a collateral attack on the said title, is inapplicable to
this case. In Cimafranca, petitioners therein filed a complaint for Partition and Damages, and
respondents therein indirectly attacked the validity of the title involved in their counterclaim. Hence,
the Court ruled that a Torrens title cannot be attacked collaterally, and the issue on its validity can be
raised only in an action expressly instituted for that purpose.

Here, the case cited by petitioner, Heirs of Simplicio Santiago v. Heirs of Mariano E. Santiago,
declared that the one-year prescriptive period does not apply when the party seeking annulment of
title or reconveyance is in possession of the lot, as well as distinguished a collateral attack under
Section 48 of PD No. 1529 from a direct attack, and held that a counterclaim may be considered as
a complaint or an independent action and can be considered a direct attack on the title, thus:

The one-year prescriptive period, however, does not apply when the person seeking annulment of
title or reconveyance is in possession of the lot. This is because the action partakes of a suit to quiet
title which is imprescriptible. In David v. Malay, we held that a person in actual possession of a piece
of land under claim of ownership may wait until his possession is disturbed or his title is attacked
before taking steps to vindicate his right, and his undisturbed possession gives him the continuing
right to seek the aid of a court of equity to ascertain and determine the nature of the adverse claim of
a third party and its effect on his title.

xxxx

Section 48 of P.D. 1529, the Property Registration Decree, provides that a certificate of title shall not
be subject to collateral attack and cannot be altered, modified, or canceled except in a direct
proceeding. An action is an attack on a title when the object of the action is to nullify the title, and
thus challenge the judgment or proceeding pursuant to which the title was decreed. The attack is
direct when the object of an action is to annul or set aside such judgment, or enjoin its enforcement.
On the other hand, the attack is indirect or collateral when, in an action to obtain a different relief, an
attack on the judgment or proceeding is nevertheless made as an incident thereof.

x x x A counterclaim can be considered a direct attack on the title. In Development Bank of the
Philippines v. Court Appeals, we ruled on the validity of a certificate of title despite the fact that the
nullity thereof was raised only as a counterclaim. It was held that a counterclaim is considered a
complaint, only this time, it is the original defendant who becomes the plaintiff. It stands on the
1avvphi1

same footing and is to be tested by the same rules as if it were an independent action. x x x 43
The above ruling of the court on the definition of collateral attack under Section 48 of P.D. No. 1529
was reiterated in Leyson v. Bontuyan,44 Heirs of Enrique Diaz v. Virata,45 Arangote v. Maglunob,46 and
Catores v. Afidchao.47

Based on the foregoing, the Court holds that petitioners counterclaim for cancellation of
respondents title is not a collateral attack, but a direct attack on the Torrens title of petitioner.
However, the counterclaim seeking for the cancellation of title and reconveyance of the subject
property has prescribed as petitioner has not proven actual possession and ownership of the
property due to his failure to prove the identity of his larger property that would show that the
disputed property is a part thereof, and his claim of title to the subject property by virtue of open,
public and continuous possession in the concept of owner is nebulous in the light of a similar claim
by respondent who holds a Torrens title to the subject property.

Respondents original certificate of title was issued on May 22, 1981, while the counterclaim was
filed by petitioner on October 15, 1984, which is clearly beyond the one-year prescriptive period.

In fine, the Court of Appeals did not err in confirming that respondent is the owner of the parcel of
land covered by OCT No. P-658.

WHEREFORE, the petition is DENIED. The Court of Appeals decision dated August 15, 2003, and
its Resolution dated May 13, 2004 in CA-G.R. CV No. 63801, are hereby AFFIRMED.

No costs.
 Republic of the Philippines
SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 150654 December 13, 2007

HEIRS OF ANACLETO B. NIETO, namely, SIXTA P. NIETO, EULALIO P. NIETO, GAUDENCIO P.

NIETO, and CORAZON P. NIETO-IGNACIO, represented by EULALIO P. NIETO, Petitioners,
vs.
MUNICIPALITY OF MEYCAUAYAN, BULACAN, represented by MAYOR EDUARDO
ALARILLA, Respondent.

DECISION

NACHURA, J.:

This is a petition for review on certiorari of the Decision1 of the Court of Appeals, dated October 30,
2001, which dismissed the petition for review of the Decision of the Regional Trial Court (RTC) of
Malolos, Bulacan. The latter dismissed a complaint to recover possession of a registered land on the
ground of prescription and laches.

The antecedents are as follows:

Anacleto Nieto was the registered owner of a parcel of land, consisting of 3,882 square meters,
situated at Poblacion, Meycauayan, Bulacan and covered by TCT No. T-24.055 (M). The property is
being used by respondent, Municipality of Meycauayan, Bulacan, which constructed an extension of
the public market therein.

Upon Anacletos death on July 26, 1993, his wife, Sixta P. Nieto, and their three children, namely,
Eulalio P. Nieto, Gaudencio Nieto and Corazon Nieto-Ignacio, herein petitioners, collated all the
documents pertaining to his estate. When petitioners failed to locate the owners duplicate copy of
TCT No. T-24.055 (M), they filed a petition for the issuance of a second owners copy with the RTC,
Malolos, Bulacan. In that case, petitioners discovered that the missing copy of the title was in the
possession of the respondent. Consequently, petitioners withdrew the petition and demanded from
respondent the return of property and the certificate of title.

On February 23, 1994, petitioners formally demanded from respondent the return of the possession
and full control of the property, and payment of a monthly rent with interest from January 1964.
Respondent did not comply with petitioners demand.2

On December 28, 1994, petitioners filed a complaint3 for recovery of possession and damages
against respondent alleging that the latter was in possession of the owners copy of TCT No. T-
24.055 (M). They averred that, in 1966, respondent occupied the subject property by making it
appear that it would expropriate the same. Respondent then used the land as a public market site
and leased the stalls therein to several persons without paying Anacleto Nieto the value of the land
or rent therefor. Petitioners prayed that respondent be ordered to surrender to them the owners
copy of TCT No. T-24.055 (M), vacate the property, and pay them the rents thereon from 1966 until
the date of the filing of the complaint for the total of P1,716,000.00, and P10,000.00 a month
thereafter, as well as P300,000.00 as moral damages, and P100,000.00 as attorneys fees.

In its Answer,4 respondent alleged that the property was donated to it and that the action was already
time-barred because 32 years had elapsed since it possessed the property.

Respondent and counsel failed to appear during the scheduled pre-trial conference. 5 Upon
petitioners motion, respondent was declared as in default and petitioners were allowed to present
evidence ex parte. Respondent filed a motion for reconsideration which the RTC granted.
Respondent was then allowed to cross-examine petitioners lone witness and present its own
evidence. However, despite notice, respondent failed again to appear during the scheduled hearing.
Hence, the RTC considered respondent to have waived its right to cross-examine petitioners
witness and present its own evidence. The case was then submitted for decision.

On August 1, 1995, the RTC rendered a Decision dismissing the complaint as well as respondents
counterclaims for damages. For lack of proof, the RTC disregarded respondents claim that Anacleto
Nieto donated the property to it in light of the fact that the title remained in the name of Anacleto.
Nonetheless, the RTC did not rule in favor of petitioners because of its finding that the case was
already barred by prescription. It held that the imprescriptibility of actions to recover land covered by
the Torrens System could only be invoked by the registered owner, Anacleto Nieto, and that the
action was also barred by laches.

Petitioners appealed the case to the Court of Appeals (CA). On October 30, 2001, the CA rendered a
Decision dismissing the case for lack of jurisdiction. According to the CA, the petition involved a pure
question of law; hence, petitioners should have filed a petition directly with this Court. 6

Accordingly, petitioners elevated the case to this Court through a petition for review on certiorari,
raising the following issues:

A. Are lands covered by the Torrens System subject to prescription?

B. May the defense of [l]aches be invoked in this specific case?

C. May the defense of imprescriptibility only be invoked by the registered owner to the
exclusion of his legitimate heirs?7

The petition is meritorious.

Respondent argues that the action of petitioner to recover possession of the property is already
barred by prescription.
We do not agree.

An action to recover possession of a registered land never prescribes in view of the provision of
Section 44 of Act No. 496 to the effect that no title to registered land in derogation of that of a
registered owner shall be acquired by prescription or adverse possession. 8 It follows that an action
by the registered owner to recover a real property registered under the Torrens System does not
prescribe.

Despite knowledge of this avowed doctrine, the trial court ruled that petitioners cause of action had
already prescribed on the ground that the imprescriptibility to recover lands registered under the
Torrens System can only be invoked by the person under whose name the land is registered.

Again, we do not agree. It is well settled that the rule on imprescriptibility of registered lands not only
applies to the registered owner but extends to the heirs of the registered owner as well. 9 Recently in
Mateo v. Diaz,10 the Court held that prescription is unavailing not only against the registered owner,
but also against his hereditary successors because the latter step into the shoes of the decedent by
operation of law and are the continuation of the personality of their predecessor-in-interest. Hence,
petitioners, as heirs of Anacleto Nieto, the registered owner, cannot be barred by prescription from
claiming the property.

Aside from finding that petitioners cause of action was barred by prescription, the trial court
reinforced its dismissal of the case by holding that the action was likewise barred by laches.

Laches has been defined as 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. It is
negligence or omission to assert a right within a reasonable time, warranting the presumption that
the party entitled to assert his right has either abandoned or declined to assert it. 11

In a number of cases, the Court has held that an action to recover registered land covered by the
Torrens System may not be barred by laches.12 Laches cannot be set up to resist the enforcement of
an imprescriptible legal right.13 Laches, which is a principle based on equity, may not prevail against
a specific provision of law, because equity, which has been defined as "justice outside legality," is
applied in the absence of and not against statutory law or rules of procedure. 14

In recent cases, 15 however, the Court held that while it is true that a Torrens title is indefeasible and
imprescriptible, the registered landowner may lose his right to recover possession of his registered
property by reason of laches.

Yet, even if we apply the doctrine of laches to registered lands, it would still not bar petitioners claim.
It should be stressed that laches is not concerned only with the mere lapse of time. 16 The following
elements must be present in order to constitute laches:

(1) conduct on the part of the defendant, or of one under whom he claims, giving rise to the
situation of which complaint is made for which the complaint seeks a remedy;
 (2) delay in asserting the complainants rights, the complainant having had knowledge or
notice, of the defendants conduct and having been afforded an opportunity to institute a suit;

(3) lack of knowledge or notice on the part of the defendant that the complainant would
assert the right on which he bases his suit; and

(4) injury or prejudice to the defendant in the event relief is accorded to the complainant, or
the suit is not held to be barred.17

We note that the certificate of title in the name of Anacleto Nieto was found in respondents
possession but there was no evidence that ownership of the property was transferred to the
municipality either through a donation or by expropriation, or that any compensation was paid by
respondent for the use of the property. Anacleto allegedly surrendered the certificate of title to
respondent upon the belief that the property would be expropriated. Absent any showing that this
certificate of title was fraudulently obtained by respondent, it can be presumed that Anacleto
voluntarily delivered the same to respondent. Anacletos delivery of the certificate of title to
respondent could, therefore, be taken to mean acquiescence to respondents plan to expropriate the
property, or a tacit consent to the use of the property pending its expropriation.

This Court has consistently held that those who occupy the land of another at the latters tolerance
or permission, without any contract between them, are necessarily bound by an implied promise that
the occupants will vacate the property upon demand.18 The status of the possessor is analogous to
that of a lessee or tenant whose term of lease has expired but whose occupancy continues by
tolerance of the owner. In such case, the unlawful deprivation or withholding of possession is to be
counted from the date of the demand to vacate.19 Upon the refusal to vacate the property, the
owners cause of action accrues.

In this case, the first element of laches occurred the moment respondent refused to vacate the
property, upon petitioners demand, on February 23, 1994. The filing of the complaint on December
28, 1994, after the lapse of a period of only ten months, cannot be considered as unreasonable
delay amounting to laches.

Moreover, case law teaches that if the claimants possession of the land is merely tolerated by its
lawful owner, the latters right to recover possession is never barred by laches. Even if it be
supposed that petitioners were aware of respondents occupation of the property, and regardless of
the length of that possession, the lawful owners have a right to demand the return of their property at
any time as long as the possession was unauthorized or merely tolerated, if at all. 20

Furthermore, the doctrine of laches cannot be invoked to defeat justice or to perpetrate fraud and
injustice. It is the better rule that courts, under the principle of equity, will not be guided or bound
strictly by the statute of limitations or the doctrine of laches when by doing so, manifest wrong or
injustice would result.21

Finally, we find that the rentals being prayed for by petitioners are reasonable considering the size
and location of the subject property. Accordingly, the award of rentals is warranted.
WHEREFORE, premises considered, the petition is GRANTED. The Decision of the Regional Trial
Court of Malolos, Bulacan, dated August 1, 1995, is REVERSED and SET ASIDE. Respondent is
ORDERED (a) to vacate and surrender peaceful possession of the property to petitioners, or pay the
reasonable value of the property; (b) to pay P1,716,000.00 as reasonable compensation for the use
of the property from 1966 until the filing of the complaint and P10,000.00 monthly rental thereafter
until it vacates the property, with 12% interest from the filing of the complaint until fully paid; and (c)
to return to petitioners the duplicate copy of TCT No. T-24.055 (M).

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 165014 July 31, 2013

HEIRS OF ALEJANDRA DELFIN, namely: LEOPOLDO DELFIN (deceased), represented by his

spouse, LUZ C. DELFIN, and children, LELANE C. DELFIN and ANASTACIA C. DELFIN,
MARCELITO1 DELFIN, FRANCISCO2 DELFIN, APOLLO DELFIN, ABRILES DELFIN, LYDIA D.
DACULAN, OLIVIA D. CABALLERO, ALEJANDRO DELFIN, JULITO DELFIN, and CANDIDO
DELFIN, JR., Petitioners,
vs.
AVELINA RABADON, PACIANO PANOGALING,3 HILARIA RABADON, PABLO BOQUILLA,
CATALINA RABADON, PACIANO RABAYA, FE RABADON, GONZALO DABON, and ROBERTO
RABADON, Respondents.

DECISION

PERLAS-BERNABE, J.:
Assailed in this petition for review on certiorari4 are the Decision5 dated February 28, 2001 and
Resolution6 dated August 2, 2004 of the Court of Appeals (CA) in CA-G.R. CV No. 57723 which
reversed and set aside the Decision7 dated June 27, 1997 of the Regional Trial Court of Cebu City,
Branch 58 (RTC) in Civil Case No. CEB-14801, ordering petitioners to

surrender the ownership and possession of Lot No. 8217, a 4,452 square meter parcel of land
situated in Inawayan, Pardo, Cebu City (subject property), in favor of respondents and to render an
accounting of the fruits received.

The Facts

On October 19, 1993, respondents filed before the RTC an action to recover the ownership and
possession of the subject property from petitioners, seeking as well the payment of damages. Based
on their complaint and the testimonies of their witnesses during trial, respondents alleged that: (a)
the subject property was owned by their predecessor-in-interest, 8 Emiliana Bacalso (Emiliana),
pursuant to Decree No. 98992;9 (b) while the foregoing decree was lost during the last World War, its
existence could still be shown by a certification (LRA certification) issued by the Land Registration
Authority (LRA), and a certified copy from page 19 of the daybook of cadastral lots issued by the
Register of Deeds (RD) of Cebu City (daybook entry);10 (c) after Emilianas death, Genaro Rabadon
took over the possession of the subject property and upon his death, his children, herein
respondents, took over its possession until 1988;11 (d) in 1989, they discovered that the said property
was already in the possession of petitioner Alejandra Delfin (Alejandra) and some of her children and
their families already constructed their houses thereon; 12 and (e) when they confronted Alejandra,
she claimed that petitioners predecessor-in-interest, Remegio Navares (Remegio) previously bought
the said property; however, when they asked to see a copy of the deed of sale, she could not
produce the same.13

For their part, petitioners countered that: (a) they inherited the subject property from their
predecessor-in-interest, Remegio, who bought the foregoing even before the second World War; (b)
the subject property was issued a certificate of title in the name of Remegio, however, the said title
was lost;14 (c) Alejandra inherited the subject property by virtue of an extra-judicial settlement and
after its execution, she and her children, petitioners Leopoldo, Francisco and Marcelito Delfin, took
over the possession of the same;15 and (d) the subject property had been declared by them for
taxation purposes and they paid the corresponding realty taxes due thereon. 16 By way of affirmative
defense, petitioners further contended, inter alia, that respondents demands were already barred by
laches, given that they took about 55 years to file their complaint. 17

The RTC Ruling

In a Decision18 dated June 27, 1997, the RTC ruled that petitioners had the better right to the
ownership and possession of the subject property. It based its conclusion on the fact that the subject
property was declared by petitioners for taxation purposes and that they paid the realty taxes due
thereon. It held that while tax declarations and tax receipts are not incontrovertible evidence of
ownership, they become proof of ownership when accompanied by proof of actual possession such
as petitioners continuous declaration of the subject property for taxation purposes, their payments of
the corresponding taxes, and the construction of their respective houses thereon. It also noted that
Alejandra filed a petition for the reconstitution of Remegios title, i.e., Transfer Certificate of Title
(TCT) No. 20910 in LRC No. 9469 before the Regional Trial Court of Cebu City, Branch 16. 19

On the other hand, the RTC observed that while it is undisputed that the subject property has been
issued Decree No. 98992 and for which an original certificate of title was issued to Emiliana,
respondents have not shown any efforts to locate the said title nor to reconstitute the same. Neither
have they attempted to declare the subject property for taxation purposes nor have they shown any
proof that they paid the realty taxes due thereon, thereby negating their claim of
ownership.20 Moreover, the RTC pronounced that respondents were guilty of laches. 21Aggrieved,
respondents elevated the matter on appeal.

The CA Ruling

In a Decision22 dated February 28, 2001, the CA reversed the RTCs pronouncement, holding that
respondents had the better right of ownership and possession over the subject property. It observed
that, apart from the self-serving testimonies of some of the petitioners, the only evidence adduced by
them in support of their claim are mere copies of tax declarations and tax receipts over the subject
property and a Report dated July 14, 1993 of one Director Silverio G. Perez of the Department of
Registration of the LRA (LRA Report) to the effect that the property in question is covered by TCT
No. 20910. The CA stressed that tax declarations and tax receipts are not conclusive evidence of
ownership or of the right to possess the land when not supported by other evidence of actual
possession which remained wanting in this case. In this relation, it found that the LRA Report could
not qualify as proof of possession since the report failed to mention that the subject property actually
belongs to petitioners predecessor-in-interest. In fact, the LRA Report even affirmed that the subject
property was covered by a decree issued to Emiliana and her husband, Dionisio Rabadon. Further,
when TCT No. 20910 was sought to be reconstituted by Alejandra, one Juanito Montenegro (RD
representative) of the Cebu City RD testified that the said title does not cover the subject property
and that the Cebu City RD has no record available for Lot No. 8217. These findings led to the
dismissal of Alejandras petition for reconstitution and considering these circumstances, the CA
stated that the LRA Report is inferior to the testimony of the RD representative. 23

Also, the CA observed that petitioners offered no credible explanation as to why the subject property
was declared in the name of their predecessor-in-interest, Remegio, and that the tax declarations
were only allowed on the supposition that the subject property was covered by TCT No. 20910 in the
name of Remegio, which entry was, as earlier mentioned, shown to be erroneous. 24 Anent the issue
of prescription, the CA pronounced that petitioners were unable to prove that they have been in
possession of the subject property since 1938. Neither are respondents guilty of laches since there
is no evidence on record which would show that they omitted to assert their claim over the subject
property.25 Respondents were, however, ordered to reimburse petitioners of the taxes paid by them
during the period of their possession, including legal interest. Dissatisfied, petitioners moved for
reconsideration which was denied in a Resolution26 dated August 2, 2004. Hence, the instant
petition.

The Issue Before the Court

The essential issue in this case is whether or not respondents have the better right to the ownership
and possession of the subject property.

The Courts Ruling

The petition is bereft of merit.

At the outset, it bears noting that the Court may proceed to evaluate the evidence on record even on
a Rule 45 petition for review in the event that the findings of the CA are contrary to that of the
RTC,27 as in this case.

After such evaluation, the Court finds that the respondents have shown a better right to the
ownership and possession of the subject property. 1wphi1

As may be gleaned from the records, the probative value of petitioners evidence, which consist of
tax declarations and tax receipts, pales in comparison to that of respondents evidence which
consists of a decree of ownership, i.e., Decree No. 98992, under the name of their predecessor-in-
interest, Emiliana. While the actual copy of the said decree was lost, the existence of the said decree
was actually proven by the LRA certification and the daybook entry. Likewise, the RTC itself
observed that it is undisputable that the subject property has been issued Decree No. 98992, for
which an original certificate of title was issued to Emiliana.28 It is an elemental rule that a decree of
registration bars all claims and rights which arose or may have existed prior to the decree of
registration. By the issuance of the decree, the land is bound and title thereto quieted, subject only to
certain exceptions29 under the property registration decree.30 In the case of Ferrer-Lopez v. CA,31 the
Court ruled that as against an array of proofs consisting of tax declarations and/or tax receipts which
are not conclusive evidence of ownership nor proof of the area covered therein, an original certificate
of title, which indicates true and legal ownership by the registered owners over the disputed
premises, must prevail. Accordingly, respondents Decree No. 98992 for which an original certificate
of title was issued should be accorded greater weight as against the tax declarations and tax
receipts presented by petitioners in this case.

Besides, tax declarations and tax receipts may only become the basis of a claim for ownership when
they are coupled with proof of actual possession of the property.32 In this case, records are bereft of
any showing that petitioners, or any of their predecessors-in-interest, have been in actual
possession of the subject property prior to 1989 as they claim. The tax declarations and tax receipts
are insufficient to prove their proffered theory that their predecessor-in-interest, Remegio, was the
lawful possessor and owner of the foregoing property even before the last World War. In fact,
petitioners altogether failed to prove the legitimacy of Remegio's possession and ownership since
they failed to present the pe1iinent deed of sale or any other evidence of the latter's title. On the
contrary, aside from the LRA certification and daybook entry which prove the existence of Decree
No. 98992, respondents' possession of the subject property prior to petitioners' entry in 1989 was
attested to by one Marcelina Tabora33 who. as the CA notes, appears to be an unbiased witness.34 All
told, by sheer preponderance of evidence, respondents have shown a better right to the ownership
and possession of the subject property and hence, must be awarded the same.
As to the issue of laches, suffice it to state that petitioners were not able to adduce any sufficient
evidence to demonstrate that respondents unduly slept on their rights for an unreasonable length of
time. Quite the contrary, records reveal that respondents and their predecessors-in-interest have
been in possession of the subject property since the 1950's and that they filed their complaint on
October 19, 1993, which is only four years removed from the time petitioners entered the property in
1989.35 As such, laches does not exist.

In view of the pronouncements made herein, the Court deems it unnecessary to delve on the other
ancillary issues in this case.

WHEREFORE, the petition is DENIED. Accordingly, the Decision dated February 28, 2001 and
Resolution dated August 2, 2004 of the Court of Appeals in CA-G.R. CV No. 57723 are hereby
AFFIRMED.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 160895 October 30, 2006

JOSE R. MARTINEZ, petitioner,

vs.
REPUBLIC OF THE PHILIPPINES, respondents.

DECISION

TINGA, J.:

The central issue presented in this Petition for Review is whether an order of general default issued
by a trial court in a land registration case bars the Republic of the Philippines, through the Office of
the Solicitor General, from interposing an appeal from the trial courts subsequent decision in favor
of the applicant.

The antecedent facts follow.

On 24 February 1999, petitioner Jose R. Martinez (Martinez) filed a petition for the registration in his
name of three (3) parcels of land included in the Cortes, Surigao del Sur Cadastre. The lots,
individually identified as Lot No. 464-A, Lot No. 464-B, and Lot No. 370, Cad No. 597, collectively
comprised around 3,700 square meters. Martinez alleged that he had purchased lots in 1952 from
his uncle, whose predecessors-in-interest were traceable up to the 1870s. It was claimed that
Martinez had remained in continuous possession of the lots; that the lots had remained
unencumbered; and that they became private property through prescription pursuant to Section
48(b) of Commonwealth Act No. 141. Martinez further claimed that he had been constrained to
initiate the proceedings because the Director of the Land Management Services had failed to do so
despite the completion of the cadastral survey of Cortes, Surigao del Sur.1

The case was docketed as Land Registration Case No. N-30 and raffled to the Regional Trial Court
(RTC) of Surigao del Sur, Branch 27. The Office of the Solicitor General (OSG) was furnished a copy
of the petition. The trial court set the case for hearing and directed the publication of the
corresponding Notice of Hearing in the Official Gazette. On 30 September 1999, the OSG, in behalf
of the Republic of the Philippines, opposed the petition on the grounds that appellees possession
was not in accordance with Section 48(b) of Commonwealth Act No. 141; that his muniments of title
were insufficient to prove bona-fide acquisition and possession of the subject parcels; and that the
properties formed part of the public domain and thus not susceptible to private appropriation. 2
Despite the opposition filed by the OSG, the RTC issued an order of general default, even against
the Republic of the Philippines, on 29 March 2000. This ensued when during the hearing of even
date, no party appeared before the Court to oppose Martinezs petition.3

Afterwards, the trial court proceeded to receive Martinezs oral and documentary evidence in support
of his petition. On 1 August 2000, the RTC rendered a Decision 4 concluding that Martinez and his
predecessors-in-interest had been for over 100 years in possession characterized as continuous,
open, public, and in the concept of an owner. The RTC thus decreed the registration of the three (3)
lots in the name of Martinez.

From this Decision, the OSG filed a Notice of Appeal dated 28 August 2000,5 which was approved by
the RTC. However, after the records had been transmitted to the Court of Appeals, the RTC received
a letter dated 21 February 20016 from the Land Registration Authority (LRA) stating that only Lot
Nos. 464-A and 464-B were referred to in the Notice of Hearing published in the Official Gazette; and
that Lot No. 370, Cad No. 597 had been deliberately omitted due to the lack of an approved survey
plan for that property. Accordingly, the LRA manifested that this lot should not have been adjudicated
to Martinez for lack of jurisdiction. This letter was referred by the RTC to the Court of Appeals for
appropriate action.7

On 10 October 2003, the Court of Appeals promulgated the assailed Decision, 8 reversing the RTC
and instead ordering the dismissal of the petition for registration. In light of the opposition filed by the
OSG, the appellate court found the evidence presented by Martinez as insufficient to support the
registration of the subject lots. The Court of Appeals concluded that the oral evidence presented by
Martinez merely consisted of general declarations of ownership, without alluding to specific acts of
ownership performed by him or his predecessors-in-interest. It likewise debunked the documentary
evidence presented by Martinez, adjudging the same as either inadmissible or ineffective to
establish proof of ownership.

No motion for reconsideration appears to have been filed with the Court of Appeals by Martinez, who
instead directly assailed its Decision before this Court through the present petition.

We cannot help but observe that the petition, eight (8) pages in all, was apparently prepared with all
deliberate effort to attain nothing more but the perfunctory. The arguments raised center almost
exclusively on the claim that the OSG no longer had personality to oppose the petition, or appeal its
allowance by the RTC, following the order of general default. Starkly put, "the [OSG] has no
personality to raise any issue at all under the circumstances pointed out hereinabove." 9 Otherwise, it
is content in alleging that "[Martinez] presented sufficient and persuasive proof to substantiate the
fact that his title to Lot Nos. 464-A and 464-B is worth the confirmation he seeks to be done in this
registration case";10 and that the RTC had since issued a new Order dated 1 September 2003,
confirming Martinezs title over Lot No. 370.

In its Comment dated 24 May 2004,11 the OSG raises several substantial points, including the fact
that it had duly opposed Martinezs application for registration before the RTC; that jurisprudence
and the Rules of Court acknowledge that a party in default is not precluded from appealing the
unfavorable judgment; that the RTC had no jurisdiction over Lot No. 370 since its technical
description was not published in the Official Gazette; and that as found by the Court of Appeals the
evidence presented by Martinez is insufficient for registering the lots in his name. 12 Despite an order
from the Court requiring him to file a Reply to the Comment, counsel for Martinez declined to do so,
explaining, among others, that "he felt he would only be taxing the collective patience of this [Court]
if he merely repeats x x x what petitioner had succinctly stated x x x on pages four (4) to seven (7) of
his said petition." Counsel for petitioner was accordingly fined by the Court. 13
The Courts patience is taxed less by redundant pleadings than by insubstantial arguments. The
inability of Martinez to offer an effective rebuttal to the arguments of the OSG further debilitates what
is an already weak petition.

The central question, as posed by Martinez, is whether the OSG could have still appealed the RTC
decision after it had been declared in default. The OSG argues that a party in default is not
precluded from filing an appeal, citing Metropolitan Bank & Trust Co. v. Court of Appeals,14 and
asserts that "[t]he Rules of Court expressly provides that a party who has been declared in default
may appeal from the judgment rendered against him." 15

There is error in that latter, unequivocal averment, though one which does not deter from the
ultimate correctness of the general postulate that a party declared in default is allowed to pose an
appeal. Elaboration is in order.

We note at the onset that the OSG does not impute before this Court that the RTC acted improperly
in declaring public respondent in default, even though an opposition had been filed to Martinezs
petition. Under Section 26 of Presidential Decree No. 1529, as amended, the order of default may be
issued "[i]f no person appears and answers within the time allowed." The RTC appears to have
issued the order of general default simply on the premise that no oppositor appeared before it on the
hearing of 29 March 2000. But it cannot be denied that the OSG had already duly filed its Opposition
to Martinezs petition long before the said hearing. As we held in Director of Lands v. Santiago:16

[The] opposition or answer, which is based on substantial grounds, having been formally
filed, it was improper for the respondent Judge taking cognizance of such registration case to
declare the oppositor in default simply because he failed to appear on the day set for the
initial healing. The pertinent provision of law which states: "If no person appears and
answers within the time allowed, the court may at once upon motion of the applicant, no
reason to the contrary appearing, order a general default to be recorded . . . ," cannot be
interpreted to mean that the court can just disregard the answer before it, which has long
been filed, for such an interpretation would be nothing less than illogical, unwarranted, and
unjust. Had the law intended that failure of the oppositor to appear on the date of the initial
hearing would be a ground for default despite his having filed an answer, it would have been
so stated in unmistakable terms, considering the serious consequences of an order of
default. Especially in this case where the greater public interest is involved as the land
sought to be registered is alleged to be public land, the respondent Judge should have
received the applicant's evidence and set another date for the reception of the oppositor's
evidence. The oppositor in the Court below and petitioner herein should have been accorded
ample opportunity to establish the government's claim.17

Strangely, the OSG did not challenge the propriety of the default order, whether in its appeal before
the Court of Appeals or in its petition before this Court. It would thus be improper for the Court to
make a pronouncement on the validity of the default order since the same has not been put into
issue. Nonetheless, we can, with comfort, proceed from same apparent premise of the OSG that the
default order was proper or regular.

The juridical utility of a declaration of default cannot be disputed. By forgoing the need for
adversarial proceedings, it affords the opportunity for the speedy resolution of cases even as it
penalizes parties who fail to give regard or obedience to the judicial processes.

The extent to which a party in default loses standing in court has been the subject of considerable
jurisprudential debate. Way back in 1920, in Velez v. Ramas,18 we declared that the defaulting
defendant "loses his standing in court, he not being entitled to the service of notices in the case, nor
to appear in the suit in any way. He cannot adduce evidence; nor can he be heard at the final
hearing."19 These restrictions were controversially expanded in Lim Toco v. Go Fay,20 decided in
1948, where a divided Court pronounced that a defendant in default had no right to appeal the
judgment rendered by the trial court, except where a motion to set aside the order of default had
been filed. This, despite the point raised by Justice Perfecto in dissent that there was no provision in
the then Rules of Court or any law "depriving a defaulted defendant of the right to be heard on
appeal."21

The enactment of the 1964 Rules of Court incontestably countermanded the Lim Toco ruling. Section
2, Rule 41 therein expressly stated that "[a] party who has been declared in default may likewise
appeal from the judgment rendered against him as contrary to the evidence or to the law, even if no
petition for relief to set aside the order of default has been presented by him in accordance with Rule
38."22 By clearly specifying that the right to appeal was available even if no petition for relief to set
aside the order of default had been filed, the then fresh Rules clearly rendered the Lim Toco ruling
as moot.

Another provision in the 1964 Rules concerning the effect of an order of default acknowledged that
"a party declared in default shall not be entitled to notice of subsequent proceedings, nor to take part
in the trial."23Though it might be argued that appellate proceedings fall part of "the trial" since there is
no final termination of the case as of then, the clear intent of the 1964 Rules was to nonetheless
allow the defaulted defendant to file an appeal from the trial court decision. Indeed, jurisprudence
applying the 1964 Rules was unhesitant to affirm a defaulted defendants right to appeal, as
guaranteed under Section 2 of Rule 41, even as Lim Toco was not explicitly abandoned.

In the 1965 case of Antonio, et al. v. Jacinto,24 the Court acknowledged that the prior necessity of a
ruling setting aside the order of default "however, was changed by the Revised Rules of Court.
Under Rule 41, section 2, paragraph 3, a party who has been declared in default may likewise
appeal from the judgment rendered against him as contrary to the evidence or to the law, even if no
petition for relief to set aside the order of default has been presented by him in accordance with Rule
38."25 It was further qualified in Matute v. Court of Appeals26 that the new availability of a defaulted
defendants right to appeal did not preclude "a defendant who has been illegally declared in default
from pursuing a more speedy and efficacious remedy, like a petition for certiorari to have the
judgment by default set aside as a nullity."27

In Tanhu v. Ramolete,28 the Court cited with approval the commentaries of Chief Justice Moran,
expressing the reformulated doctrine that following Lim Toco, a defaulted defendant "cannot adduce
evidence; nor can he be heard at the final hearing, although [under Section 2, Rule 41,] he may
appeal the judgment rendered against him on the merits."29

Thus, for around thirty-odd years, there was no cause to doubt that a defaulted defendant had the
right to appeal the adverse decision of the trial court even without seeking to set aside the order of
default. Then, in 1997, the Rules of Civil Procedure were amended, providing for a new Section 2,
Rule 41. The new provision reads:

SECTION 1. Subject of appeal.An appeal may be taken from a judgment or final order that
completely disposes of the case, or of a particular matter therein when declared by these
Rules to be appealable.

No appeal may be taken from:

(a) An order denying a motion for new trial or reconsideration;

 (b) An order denying a petition for relief or any similar motion seeking relief from judgment;

(c) An interlocutory order;

(d) An order disallowing or dismissing an appeal;

(e) An order denying a motion to set aside a judgment by consent, confession or

compromise on the ground of fraud, mistake or duress, or any other ground vitiating consent;

(f) An order of execution;

(g) A judgment or final order for or against or one or more of several parties or in separate
claims, counterclaims, cross-claims and third-party complaints, while the main case is
pending, unless the court allows an appeal therefrom; and

(h) An order dismissing an action without prejudice.

In all the above instances where the judgment or final order is not appealable, the aggrieved
party may file an appropriate special civil action under Rule 65.

Evidently, the prior warrant that a defaulted defendant had the right to appeal was removed from
Section 2, Rule 41. On the other hand, Section 3 of Rule 9 of the 1997 Rules incorporated the
particular effects on the parties of an order of default:

Sec. 3. Default; declaration of.If the defending party fails to answer within the time allowed
therefor, the court shall, upon motion of the claiming party with notice to the defending party,
and proof of such failure, declare the defending party in default. Thereupon, the court shall
proceed to render judgment granting the claimant such relief as his pleading may warrant,
unless the court in its discretion requires the claimant to submit evidence. Such reception of
evidence may be delegated to the clerk of court.

(a) Effect of order of default.A party in default shall be entitled to notice of subsequent
proceedings but shall not take part in the trial.

(b) Relief from order of default.A party declared in default may any time after notice thereof
and before judgment file a motion under oath to set aside the order of default upon proper
showing that his failure to answer was due to fraud, accident, mistake or excusable
negligence and that he has a meritorious defense. In such case, the order of default may be
set aside on such terms and conditions as the judge may impose in the interest of justice.

(c) Effect of partial default.When a pleading asserting a claim states a common cause of
action against several defending parties, some of whom answer and the others fail to do so,
the court shall try the case against all upon the answers thus filed and render judgment upon
the evidence presented.

(d) Extent of relief to be awarded.A judgment rendered against a party in default shall not
exceed the amount or be different in kind from that prayed for nor award unliquidated
damages.

xxx
It cannot be escaped that the old provision expressly guaranteeing the right of a defendant declared
in default to appeal the adverse decision was not replicated in the 1997 Rules of Civil Procedure.
Should this be taken as a sign that under the 1997 Rules a defaulted defendant no longer has the
right to appeal the trial court decision, or that the Lim Toco doctrine has been reinstated?

If post-1997 jurisprudence and the published commentaries to the 1997 Rules were taken as an
indication, the answer should be in the negative. The right of a defaulted defendant to appeal
remains extant.

By 1997, the doctrinal rule concerning the remedies of a party declared in default had evolved into a
fairly comprehensive restatement as offered in Lina v. Court of Appeals:30

a) The defendant in default may, at any time after discovery thereof and before judgment, file
a motion, under oath, to set aside the order of default on the ground that his failure to answer
was due to fraud, accident, mistake or excusable neglect, and that he has meritorious
defenses; (Sec 3, Rule 18)

b) If the judgment has already been rendered when the defendant discovered the default, but
before the same has become final and executory, he may file a motion for new trial under
Section 1(a) of Rule 37;

c) If the defendant discovered the default after the judgment has become final and executory,
he may file a petition for relief under Section 2 of Rule 38; and

d) He may also appeal from the judgment rendered against him as contrary to the evidence
or to the law, even if no petition to set aside the order of default has been presented by him.
(Sec. 2, Rule 41)31

The fourth remedy, that of appeal, is anchored on Section 2, Rule 41 of the 1964 Rules. Yet even
after that provisions deletion under the 1997 Rules, the Court did not hesitate to expressly rely again
on the Lina doctrine, including the pronouncement that a defaulted defendant may appeal from the
judgment rendered against him. This can be seen in the cases of Indiana Aerospace University v.
Commission on Higher Education,32 Tan v. Dumarpa,33 and Crisologo v. Globe Telecom, Inc.34

Annotated textbooks on the 1997 Rules of Civil Procedure similarly acknowledge that even under
the new rules, a defaulted defendant retains the right to appeal as previously confirmed under the
old Section 2, Rule 41. In his textbook on Civil Procedure, Justice Francisco answers the question
"What are the remedies available to a defending party in default?" with a reiteration of
the Lina doctrine, including the remedy that a defaulted defendant "may also appeal from the
judgment rendered against him as contrary to the evidence or to the law, even if no petition to set
aside the order of default has been presented by him." 35 Justice Regalado also restates the Linarule
in his textbook on Civil Procedure, opining that the remedies enumerated therein, even if under the
former Rules of Procedure, "would hold true under the present amended Rules." 36 Former Court of
Appeals Justice Herrerra likewise reiterates the Lina doctrine, though with the caveat that an appeal
from an order denying a petition for relief from judgment was no longer appealable under Section 1,
Rule 41 of the 1997 Rules.37 Herrera further adds:

Section 2, paragraph [2] of the former Rule 41, which allows an appeal from a denial of a
petition for relief, was deleted from the present Rule, and confined appeals to cases from a
final judgment or final order that completely disposes of the case, or of a particular matter
therein, when declared by these rules to be appealable. A judgment by default may be
considered as one that completely disposes of the case.38
We are hard-pressed to find a published view that the enactment of the 1997 Rules of Civil
Procedure accordingly withdrew the right, previously granted under the 1964 Rules, of a defaulted
defendant to appeal the judgment by default against him. Neither is there any provision under the
1997 Rules which expressly denies the defaulted defendant such a right. If it is perplexing why the
1997 Rules deleted the previous authorization under the old Section 2, Rule 41 (on subject of
appeal), it is perhaps worth noting that its counterpart provision in the 1997 Rules, now Section 1,
Rule 41, is different in orientation even as it also covers "subject of appeal." Unlike in the old
provision, the bulk of the new provision is devoted to enumerating the various rulings from which no
appeal may be taken, and nowhere therein is a judgment by default included. A declaration therein
that a defaulted defendant may still appeal the judgment by default would have seemed out of place.

Yet even if it were to assume the doubtful proposition that this contested right of appeal finds no
anchor in the 1997 Rules, the doctrine still exists, applying the principle of stare decisis.
Jurisprudence applying the 1997 Rules has continued to acknowledge the Lina doctrine which
embodies this right to appeal as among the remedies of a defendant, and no argument in this
petition persuades the Court to rule otherwise.

In Rural Bank of Sta. Catalina v. Land Bank of the Philippines,39 the Court, through Justice Callejo,
Sr., again provided a comprehensive restatement of the remedies of the defending party declared in
default, which we adopt for purposes of this decision:

It bears stressing that a defending party declared in default loses his standing in court and
his right to adduce evidence and to present his defense. He, however, has the right to appeal
from the judgment by default and assail said judgment on the ground, inter alia, that the
amount of the judgment is excessive or is different in kind from that prayed for, or that the
plaintiff failed to prove the material allegations of his complaint, or that the decision is
contrary to law. Such party declared in default is proscribed from seeking a modification or
reversal of the assailed decision on the basis of the evidence submitted by him in the Court
of Appeals, for if it were otherwise, he would thereby be allowed to regain his right to adduce
evidence, a right which he lost in the trial court when he was declared in default, and which
he failed to have vacated. In this case, the petitioner sought the modification of the decision
of the trial court based on the evidence submitted by it only in the Court of Appeals. 40

If it cannot be made any clearer, we hold that a defendant party declared in default retains the right
to appeal from the judgment by default on the ground that the plaintiff failed to prove the material
allegations of the complaint, or that the decision is contrary to law, even without need of the prior
filing of a motion to set aside the order of default. We reaffirm that the Lim Toco doctrine, denying
such right to appeal unless the order of default has been set aside, was no longer controlling in this
jurisdiction upon the effectivity of the 1964 Rules of Court, and up to this day.

Turning to the other issues, we affirm the conclusion of the Court of Appeals that Martinez failed to
adduce the evidence needed to secure the registration of the subject lots in his name.

It should be noted that the OSG, in appealing the case to the Court of Appeals, did not introduce any
new evidence, but simply pointed to the insufficiency of the evidence presented by Martinez before
the trial court. The Court of Appeals was careful to point out that the case against Martinez was
established not by the OSGs evidence, but by petitioners own insufficient evidence. We adopt with
approval the following findings arrived at by the Court of Appeals, thus:

The burden of proof in land registration cases is incumbent on the applicant who must show
that he is the real and absolute owner in fee simple of the land applied for. Unless the
applicant succeeds in showing by clear and convincing evidence that the property involved
was acquired by him or his ancestors by any of the means provided for the proper
acquisition of public lands, the rule is settled that the property must be held to be a part of
the public domain. The applicant must, therefore, present competent and persuasive proof to
substantiate his claim. He may not rely on general statements, or mere conclusions of law
other than factual evidence of possession and title.

Considered in the light of the opposition filed by the Office of the Solicitor General, we find
the evidence adduced by appellee, on the whole, insufficient to support the registration of the
subject parcels in his name. To prove the provenance of the land, for one, all that appellee
proffered by way of oral evidence is the following cursory testimony during his direct
examination, viz:

xxxx

Q You mentioned that you are the owner of these three (3) parcels of land. How did you
begin the ownership of the same?

A I bought it from my uncles Julian Martinez and Juan Martinez.

xxxx

Q x x x x Who took possession of these parcels of land from then on?

A I took possession, sir

Q As owner?

A Yes, as owner.

Q Up to the present who is in possession as owner of these parcels of land?

A I took possession.

Q Before Julian Martinez and Juan Martinez sold these parcels of land before you took
possession who were the owners and in possession of these?

A Hilarion Martinez, the father of my predecessors-in-interest and also my grandfather.

xxxx

Court:

Q Of your own knowledge[,] where [sic] did your grandfather Hilarion Martinez acquire these
lands?

A According to my grandfather he bought that land from a certain Juan Casano in the year
1870s[,] I think.

xxxx
 Q By the way[,] when did your grandfather Hilarion Martinez die?

A Either in 1920 or 1921.

Q Since you said your immediate predecessors-in-interest Julian Martinez and Juan
Martinez inherited the same from your grandfather. Can you say it the same that your
predecessors-in-interest were the owners and possessors of the same since 1921 up to the
time they sold the land to you in 1952?

A Yes, sir.

xxxx

In the dreary tradition of most land registration cases, appellee has apparently taken
the absence of representation for appellant at the hearing of his petition as license to
be perfunctory in the presentation of his evidence. Actual possession of land,
however, consists in the manifestation of acts of dominion over it of such a nature as
a party would naturally exercise over his own property. It is not enough for an
applicant to declare himself or his predecessors-in-interest the possessors and
owners of the land for which registration is sought. He must present specific acts of
ownership to substantiate the claim and cannot just offer general statements which
are mere conclusions of law requiring evidentiary support and substantiation.

The record shows that appellee did not fare any better with the documentary evidence he
adduced before the trial court. The October 20, 1952 Deed of Sale by which appellee
claims to have purchased the subject parcels from his uncle, Julian Martinez, was not
translated from the vernacular in which it was executed and, by said token, was
inadmissible in evidence. Having submitted a white print copy of the survey plan for
Lot Nos. 464-A and 464-B, appellee also submitted the tracing cloth plan for Lot No.
370 which does not, however, appear to be approved by the Director of Lands. In much
the same manner that the submission of the original tracing cloth plan is a mandatory
statutory requirement which cannot be waived, the rule is settled that a survey plan not
approved by the Director of Lands is not admissible in evidence. 41

These findings of the Court of Appeals, arrived at after a sufficiently extensive evaluation of the
evidence, stand in contrast to that contained in the RTC decision, encapsulated in a one-
paragraph prcis of the factual allegations of Martinez concerning how he acquired possession of
the subject properties. The Court of Appeals, of course, is an appropriate trier of facts, and a
comparison between the findings of fact of the Court of Appeals and that of the RTC clearly
demonstrates that it was the appellate court which reached a more thorough and considered
evaluation of the evidence.

As correctly held by the Court of Appeals, the burden of proof expected of the petitioner in a land
registration case has not been matched in this case.

WHEREFORE, the petition is DISMISSED. Costs against petitioner.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 160711 August 14, 2004

HEIRS OF MAXIMO LABANON, represented by ALICIA LABANON CAEDO and the

PROVINCIAL ASSESSOR OF COTABATO, Petitioners,
vs.
HEIRS OF CONSTANCIO LABANON, represented by ALBERTO MAKILANG, Respondents.

DECISION

VELASCO, JR., J.:

The Case

This Petition for Review on Certiorari under Rule 45 seeks the recall and nullification of the May 8,
2003 Decision1of the Court of Appeals (CA) in CA-G.R. CV No. 65617 entitled Heirs of Constancio
Labanon represented by Alberto Makilang v. Heirs of Maximo Labanon represented by Alicia
Labanon Caedo and the Provincial Assessor of Cotabato, which reversed the August 18, 1999
Decision2 of the Kidapawan City, Cotabato Regional Trial Court (RTC), Branch 17, in Civil Case No.
865. Likewise assailed is the October 13, 2003 Resolution3 which disregarded petitioners Motion for
Reconsideration.

The Facts

The CA culled the facts this way:

During the lifetime of Constancio Labanon, prior to the outbreak of WWII, he settled upon a piece of
alienable and disposable public agricultural land situated at Brgy. Lanao, Kidapawan, Cotabato x x x.
Constancio cultivated the said lot and introduced permanent improvements that still exist up to the
present. Being of very limited educational attainment, he found it difficult to file his public land
application over said lot. Constancio then asked his brother, Maximo Labanon who was better
educated to file the corresponding public land application under the express agreement that they will
divide the said lot as soon as it would be feasible for them to do so. The offer was accepted by
Maximo. During the time of the application it was Constancio who continued to cultivate the said lot
in order to comply with the cultivation requirement set forth under Commonwealth Act 141, as
amended, on Homestead applications. After which, on June 6, 1941, due to industry of Constancio,
Homestead Application No. 244742 (E-128802) of his brother Maximo was approved with
Homestead Patent No. 67512. Eventually, Original Certificate of Title No. P-14320 was issued by the
Register of Deeds of Cotabato over said lot in favor of Maximo Labanon.

On February 11, 1955, Maximo Labanon executed a document denominated as "Assignment of

Rights and Ownership" and docketed as Doc. No. 20; Page No. 49; Book No. V; Series of 1955 of
the Notarial Register of Atty. Florentino Kintanar. The document was executed to safeguard the
ownership and interest of his brother Constancio Labanon. Pertinent portion of which is reproduced
as follows:
"That I, MAXIMO LABANON, of legal age, married to Anastacia Sagarino, and a resident of
Kidapawan, Cotabato, for and in consideration of the expenses incurred by my elder brother
CONSTANCIO LABANON also of legal age, Filipino, widower and a resident of Kidapawan,
Cotabato, for the clearing, cultivation and improvements on the eastern portion xxx Lot No. 1, Blk.
22, Pls-59 xxx which expenses have been incurred by my said brother xxx before the outbreak of the
last world war xxx I do hereby assign transfer and convey my rights to, interests in and ownership on
the said eastern portion of said Lot No. 1, Block 22, Pls-59 ONE HUNDRED (100 M) ALONG THE
NATIONAL HIGHWAY, (DAVAO-COTABATO ROAD) by TWO HUNDRED FIFTY METERS (250 M)
going inside the land to cover an area of TWO AND ONE HALF HECTARES (25,000 SQ. M.), more
or less, adjoining the school site of barrio Lanao, Kidapawan, Cotabato, to the said CONSTANCIO
LABANON, his heirs and assigns, can freely occupy for his own use and benefit xxx.

IN WITNESS WHEREFOF, I have hereunto set my hand this 11th day of February 1995 at
Kidapawan, Cotabato.

(SGD) MAXIMO LABANON

With my marital consent.

(SGD) ANASTACIA SAGARINO

(Wife)" (p.16, rollo)

On April 25, 1962, Maximo Labanon executed a sworn statement reiterating his desire that his elder
brother Constancio, his heirs and assigns shall own the eastern portion of the Lot, pertinent portion
of which reads:

"That I am the same and identical person who is a homestead applicant (HA-224742, E-128802) of a
tract of land which is covered by Homestead Patent No. 67512 dated June 6, 1941, known as Lot
No. 1, Block 22, Pls-59, situated in [B]arrio Lanao, Municipality of Kidapawan, Province of Cotabato,
Philippines, and containing an area of 5.0000 hectares, more or less;

That I am the same and identical person who executed a deed of ASSIGNMENT OF RIGHTS AND
OWNERSHIP in favor of my brother Constancio Labanon, now deceased, now for his heirs, for the
eastern half portion of the land above described, and which deed was duly notarized by notary public
Florentino P. Kintanar on February 11, 1955 at Kidapawan, Cotabato and entered in his Notarial
Register as Doc. No. 20, Page No. 49, Book No. V, Series of 1955; and

That in order that I and the Heirs of Constancio Labanon will exercise our respective rights and
ownership over the aforementioned lot, and to give force and effect to said deed of assignment, I
hereby, by these presents, request the Honorable Director of Lands and the Land Title Commission
to issue a separate title in my favor covering the western half portion of the aforementioned lot and
to the Heirs of Constancio Labanon a title for the eastern half portion thereof.

IN WITNESS THEREOF, I have hereunto set my hand this 25th day of April, 1962, at Pikit, Cotabato,
Philippines." (p. 9, records)

After the death of Constancio Labanon, his heirs executed an [e]xtra-judicial settlement of estate
with simultaneous sale over the aforesaid eastern portion of the lot in favor of Alberto Makilang, the
husband of Visitacion Labanon, one of the children of Constancio. Subsequently, the parcel of land
was declared for taxation purposes in the name of Alberto under TD No. 11593. However, in March
1991, the defendants heirs of Maximo Labanon namely, Alicia L. Caniedo, Leopoldo Labanon,
Roberto Nieto and Pancho Labanon, caused to be cancelled from the records of the defendant
Provincial Assessor of Cotabato the aforesaid TD No. 11593 and the latter, without first verifying the
legality of the basis for said cancellation, did cancel the same. x x x Further, after discovering that
the defendant-heirs of Maximo Labanon were taking steps to deprive the heirs of Constancio
Labanon of their ownership over the eastern portion of said lot, the latter, thru Alberto Makilang,
demanded the owners copy of the certificate of title covering the aforesaid Lot to be surrendered to
the Register of Deeds of Cotabato so that the ownership of the heirs of Constancio may be fully
effected but the defendants refused and still continue to refuse to honor the trust agreement entered
into by the deceased brothers. x x x4

Thus, on November 12, 1991, petitioners filed a complaint 5 for Specific Performance, Recovery of
Ownership, Attorneys Fees and Damages with Writ of Preliminary Injunction and Prayer for
Temporary Restraining Order against respondents docketed as Civil Case No. 865 before the
Kidapawan City RTC. After hearing, the trial court rendered its August 18, 1999 Decision, the
decretal portion of which reads:

Wherefore, prescinding from the foregoing facts and considerations the Court finds and so holds that
the [defendant-heirs] of Maximo Labanon represented by Alicia Labanon Caniedo have proved by
preponderance of evidence that they are entitled to the reliefs set forth in their answer and
consequently judgment is hereby rendered as follows:

1. Ordering the dismissal of the complaint against the Heirs of Maximo Labanon represented
by Alicia Labanon Caniedo for lack of merit;

2. Ordering the dismissal of the case against the Provincial Assessor. The claim of the
plaintiff is untenable, because the duties of the Provincial Assessor are ministerial. Moreover,
the presumption of regularity in the performance of his duty is in his favor;

3. Ordering the plaintiff to pay the defendants the amount of P20,000.00 as exemplary
damages, P10,000.00 for Attorneys Fees, P500.00 per appearance in Court; and

4. To pay the costs of this suit.

IT IS SO ORDERED.6

Aggrieved, respondents elevated the adverse judgment to the CA which issued the assailed May 8,
2003 Decision in CA-G.R. CV No. 65617, the fallo of which states:

WHEREFORE, the appeal is hereby GRANTED for being meritorious. The assailed decision of the
Regional Trial Court is hereby REVERSED and SET ASIDE and a new one is hereby entered as
follows:

1) Recognizing the lawful possession of the plaintiffs-appellants over the eastern portion of
the property in dispute;

2) Declaring the plaintiffs-appellants as owners of the eastern portion of the property by

reason of lawful possession;

3) Ordering the Provincial Assessor to reinstate TD No. 11593 and declaring TD No. 243-A
null and void;
 4) Ordering the defendants-appellees to pay the plaintiffs-appellants the amount of P20,000
as moral damages, P10,000 for attorneys fees, P500.00 per appearance in Court and

5) To pay the costs of the suit.

SO ORDERED.

The Issues

Surprised by the turn of events, petitioners brought this petition before us raising the following
issues, to wit:

1. Whether or not Original Certificate of Title No. 41320 issued on April 10, 1975 in the name
of MAXIMO LABANON be now considered indefeasible and conclusive; and

2. Whether or not the Trust Agreement allegedly made by Constancio Labanon and Maximo
Labanon prescribed.7

The Courts Ruling

The petition must fail.

First Issue

Respondents are not precluded from challenging the validity of Original Certificate of Title No. P-
41320

Petitioners argue that respondents can no longer question Maximo Labanons ownership of the land
after its registration under the principle of indefeasibility of a Transfer Certificate of Title (TCT).

Such argument is inaccurate.

The principle of indefeasibility of a TCT is embodied in Section 32 of Presidential Decree No. (PD)
1529, amending the Land Registration Act, which provides:

Section 32. Review of decree of registration; Innocent purchaser for value. The decree of
registration shall not be reopened or revised by reason of absence, minority, or other disability of any
person adversely affected thereby, nor by any proceeding in any court for reversing judgments,
subject, however, to the right of any person, including the government and the branches thereof,
deprived of land or of any estate or interest therein by such adjudication or confirmation of title
obtained by actual fraud, to file in the proper Court of First Instance a petition for reopening and
review of the decree of registration not later than one year from and after the date of the entry of
such decree of registration, but in no case shall such petition be entertained by the court where an
innocent purchaser for value has acquired the land or an interest therein, whose rights may be
prejudiced. Whenever the phrase "innocent purchaser for value" or an equivalent phrase occurs in
this Decree, it shall be deemed to include an innocent lessee, mortgagee, or other encumbrancer for
value.

Upon the expiration of said period of one year, the decree of registration and the certificate of title
issued shall become incontrovertible. Any person aggrieved by such decree of registration in any
case may pursue his remedy by action for damages against the applicant or any other persons
responsible for the fraud.

Contrary to petitioners interpretation, the aforequoted legal provision does not totally deprive a party
of any remedy to recover the property fraudulently registered in the name of another. Section 32 of
PD 1529 merely precludes the reopening of the registration proceedings for titles covered by the
Torrens System, but does not foreclose other remedies for the reconveyance of the property to its
rightful owner. As elaborated in Heirs of Clemente Ermac v. Heirs of Vicente Ermac:

While it is true that Section 32 of PD 1529 provides that the decree of registration becomes
incontrovertible after a year, it does not altogether deprive an aggrieved party of a remedy in law.
The acceptability of the Torrens System would be impaired, if it is utilized to perpetuate fraud against
the real owners.8

A more succinct explanation is found in Vda. De Recinto v. Inciong, thus:

The mere possession of a certificate of title under the Torrens system does not necessarily make the
possessor a true owner of all the property described therein for he does not by virtue of said
certificate alone become the owner of the land illegally included. It is evident from the records that
the petitioner owns the portion in question and therefore the area should be conveyed to her. The
remedy of the land owner whose property has been wrongfully or erroneously registered in another's
name is, after one year from the date of the decree, not to set aside the decree, but, respecting the
decree as incontrovertible and no longer open to review, to bring an ordinary action in the ordinary
court of justice for reconveyance or, if the property has passed into the hands of an innocent
purchaser for value, for damages.9 (Emphasis supplied.)

Undeniably, respondents are not precluded from recovering the eastern portion of Original Certificate
of Title (OCT) No. P-14320, with an area subject of the "Assignment of Rights and Ownership"
previously owned by their father, Constancio Labanon. The action for Recovery of Ownership before
the RTC is indeed the appropriate remedy.

Second Issue

The trust agreement between Maximo Labanon and Constancio Labanon may still be enforced

Former Vice-President and Senator Arturo Tolentino, a noted civilist, explained the nature and import
of a trust:

Trust is the legal relationship between one person having an equitable ownership in property and
another person owning the legal title to such property, the equitable ownership of the former entitling
him to the performance of certain duties and the exercise of certain powers by the latter.10

This legal relationship can be distinguished from other relationships of a fiduciary character, such as
deposit, guardianship, and agency, in that the trustee has legal title to the property.11 In the case at
bench, this is exactly the relationship established between the parties.

Trusts are classified under the Civil Code as either express or implied. Such classification
determines the prescriptive period for enforcing such trust.

Article 1444 of the New Civil Code on express trust provides that "[n]o particular words are required
for the creation of an express trust, it being sufficient that a trust is clearly intended."
Civil law expert Tolentino further elucidated on the express trust, thus:

No particular form of words or conduct is necessary for the manifestation of intention to create a
trust. It is possible to create a trust without using the word "trust" or "trustee". Conversely, the mere
fact that these words are used does not necessarily indicate an intention to create a trust. The
question in each case is whether the trustor manifested an intention to create the kind of relationship
which to lawyers is known as trust. It is immaterial whether or not he knows that the relationship
which he intends to create is called a trust, and whether or not he knows the precise characteristics
of the relationship which is called a trust.12

Correlatively, we ruled in Estate of Edward Miller Grimm v. Estate of Charles Parsons and Patrick C.
Parsons, that:

An express trust is created by the direct and positive acts of the parties, by some writing or deed or
by words evidencing an intention to create a trust; the use of the word trust is not required or
essential to its constitution, it being sufficient that a trust is clearly intended. 13
1avvphi1

In the instant case, such intention to institute an express trust between Maximo Labanon as trustee
and Constancio Labanon as trustor was contained in not just one but two written documents, the
Assignment of Rights and Ownership as well as Maximo Labanons April 25, 1962 Sworn Statement.
In both documents, Maximo Labanon recognized Constancio Labanons ownership and possession
over the eastern portion of the property covered by OCT No. P-14320, even as he recognized
himself as the applicant for the Homestead Patent over the land. Thus, Maximo Labanon maintained
the title over the property while acknowledging the true ownership of Constancio Labanon over the
eastern portion of the land. The existence of an express trust cannot be doubted nor disputed.

On the issue of prescription, we had the opportunity to rule in Bueno v. Reyes that unrepudiated
written express trusts are imprescriptible:

While there are some decisions which hold that an action upon a trust is imprescriptible, without
distinguishing between express and implied trusts, the better rule, as laid down by this Court in other
decisions, is that prescription does supervene where the trust is merely an implied one. The reason
has been expressed by Justice J.B.L. Reyes in J.M. Tuason and Co., Inc. vs. Magdangal, 4 SCRA
84, 88, as follows:

Under Section 40 of the old Code of Civil Procedure, all actions for recovery of real property
prescribed in 10 years, excepting only actions based on continuing or subsisting trusts that were
considered by section 38 as imprescriptible. As held in the case of Diaz v. Gorricho, L-11229, March
29, 1958, however, the continuing or subsisting trusts contemplated in section 38 of the Code of Civil
Procedure referred only to express unrepudiated trusts, and did not include constructive trusts (that
are imposed by law) where no fiduciary relation exists and the trustee does not recognize the trust at
all.14

This principle was amplified in Escay v. Court of Appeals this way: "Express trusts prescribe 10
years from the repudiation of the trust (Manuel Diaz, et al. vs. Carmen Gorricho et al., 54 0.G. p.
8429, Sec. 40, Code of Civil Procedure)."15

In the more recent case of Secuya v. De Selma, we again ruled that the prescriptive period for the
enforcement of an express trust of ten (10) years starts upon the repudiation of the trust by the
trustee.16
In the case at bar, Maximo Labanon never repudiated the express trust instituted between him and
Constancio Labanon. And after Maximo Labanons death, the trust could no longer be renounced;
thus, respondents right to enforce the trust agreement can no longer be restricted nor prejudiced by
prescription.

It must be noted that the Assignment of Rights and Ownership and Maximo Labanons Sworn
Statement were executed after the Homestead Patent was applied for and eventually granted with
the issuance of Homestead Patent No. 67512 on June 6, 1942. Evidently, it was the intent of Maximo
Labanon to hold the title over the land in his name while recognizing Constancio Labanons
equitable ownership and actual possession of the eastern portion of the land covered by OCT No. P-
14320.

In addition, petitioners can no longer question the validity of the positive declaration of Maximo
Labanon in the Assignment of Rights and Ownership in favor of the late Constancio Labanon, as the
agreement was not impugned during the formers lifetime and the recognition of his brothers rights
over the eastern portion of the lot was further affirmed and confirmed in the subsequent April 25,
1962 Sworn Statement.

Section 31, Rule 130 of the Rules of Court is the repository of the settled precept that "[w]here one
derives title to property from another, the act, declaration, or omission of the latter, while holding the
title, in relation to the property, is evidence against the former." Thus, petitioners have accepted the
declaration made by their predecessor-in-interest, Maximo Labanon, that the eastern portion of the
land covered by OCT No. P-14320 is owned and possessed by and rightfully belongs to Constancio
Labanon and the latters heirs. Petitioners cannot now feign ignorance of such acknowledgment by
their father, Maximo.

Lastly, the heirs of Maximo Labanon are bound to the stipulations embodied in the Assignment of
Rights and Ownership pursuant to Article 1371 of the Civil Code that contracts take effect between
the parties, assigns, and heirs.

Petitioners as heirs of Maximo cannot disarrow the commitment made by their father with respect to
the subject property since they were merely subrogated to the rights and obligations of their
predecessor-in-interest. They simply stepped into the shoes of their predecessor and must therefore
recognize the rights of the heirs of Constancio over the eastern portion of the lot. As the old adage
goes, the spring cannot rise higher than its source.

WHEREFORE, the petition is DENIED. The May 8, 2003 CA Decision and October 13, 2003
Resolution in CA-G.R. CV No. 65617 are AFFIRMED with the modifications that the Kidapawan City,
Cotabato RTC, Branch 17 is directed to have OCT No. P-14320 segregated and subdivided by the
Land Management Bureau into two (2) lots based on the terms of the February 11, 1955 Assignment
of Rights and Ownership executed by Maximo Labanon and Constancio Labanon; and after
approval of the subdivision plan, to order the Register of Deeds of Kidapawan City, Cotabato to
cancel OCT No. P-14320 and issue one title each to petitioners and respondents based on the said
subdivision plan.

Costs against petitioners.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 150629 June 30, 2004

RENATO TICHANGCO; ROMEO RAMOS, for himself and the SAMAHANG

MAGKAKAPITBAHAY NG DULONG GAGALANGIN; ANTONIO PASCO, for himself and the
SAMAHANG MAGKAKAPITBAHAY NG BARANGAY 186; CELSO SANTIAGO, for himself and
the SAMAHANG NAGKAKAISANG DAMDAMIN NG SUNOG APOG; and ARTURO BALLO, for
himself and the FEDERATION KAPIT-BISIG HOMEOWNERS ASSOCIATION, INC., petitioners,
vs.
The Honorable ALFREDO ENRIQUEZ, Administrator, Land Registration Authority; The LAND
REGISTRATION AUTHORITY; and/or The SUCCESSORS-IN-INTEREST OF SEVERINO
MANOTOK, BENITA MANOTOK, AMBROSIO MANOTOK and/or RICARDO MANOTOK, namely,
PATRICIA L. TIONGSON and/or ELISA V. MANOTOK, respondents.

DECISION

PANGANIBAN, J.:

Unless contrary substantial evidence is presented in the proper proceedings by the proper party, a
Torrens certificate of title cannot be overturned. The Torrens system rests on stability -- on the
assurance that once ownership is recorded in the proper registry, owners can rest easy on their
properties.

The Case

Before us is a Petition for Review1 challenging the August 8, 2001 Decision2 and the October 29,
2002 Resolution3 of the Court of Appeals (CA) in CA-GR SP No. 54648. The assailed Decision
affirmed the findings of the then Land Registration Authority (LRA) administrator, Alfredo Enriquez,
that there were no legal grounds to initiate appropriate proceedings to nullify Original Certificate of
Title (OCT) Nos. 820 and 7477 and the subsequent titles derived therefrom: Transfer Certificate of
Title (TCT) Nos. 128240 to 128249, inclusive, and TCT No. 128270 -- all covering parcels of land in
Tondo, Manila registered in the names of private respondents.

The challenged Resolution denied reconsideration.

The Facts

The antecedents are summarized in the Decision of the CA as follows:

Sometime in March 1996, Renato Tichangco, in behalf of the homeowners association of

Gagalangin and Sunog Apog (Tondo, Manila), who are occupants of various parcels of land
in Gagalangin, Tondo, filed a land title verification request with the Land Registration
Authority (LRA), docketed as LTV No. 96-0376. The verification request was prompted by an
alleged claim of ownership of a certain Manotok over the land which petitioners occupy, and
which they perceive as public land, being portions of the dried or filled bed of Estero de
Maypajo and Sunog Apog area, and which allegedly have already been identified as Area for
Priority Development under the Urban Poor Law. Manotoks claim is anchored upon Survey
Plan Psd-25141, allegedly covering Lots 62-B and 69, Blk. 2918 of the Manila Cadastre,
dated 22 December 1948 and Survey Plan (LRC) Psd-44026, allegedly covering Lots 86-A
to C and 80-C-1 to 3, also of the Manila Cadastre. On 23 October 1996, the LRA-Task Force
issued a report stating, among others, that "(a)s appearing on the survey plan (i.e., plan Psd-
25141), Lots 62 and 69 were bounded among others by ESTERO DE MAYPAJO and Lot 55-
C, Psd-11746." The task force also found that Psd-25141 and (LRC) Psd-44026 overlap with
other surveys. Moreover, it found that "(t)he Lands Management Bureau x x x has no record
showing that Lot 55-C, Psd-11746 was issued patent in favor of some private persons," and
that "(v)erification on MIS No. 1955 for Manila, in the file with this Authority, disclosed no
previous plotting of a title over Lot 55-C, Psd-11746 located near the Estero de Maypajo,
Tondo, Manila and appearing as boundary in survey plan Psd-25141 of Ricardo Manotok."

Subsequently, the Estero de Sunog Apog homeowners, thru City Councilor Danilo Varona,
2nd District, Tondo, Manila, made similar requests for verification of TCTs Nos. 12870, and
128240 to 128249, inclusive, with the LRA, docketed as LTV-98-1222. The LRA-Task Force
found that "[s]ubject titles covered ten (10) lots under (LRC) Pcs-14840, which were
consolidation-subdivision of Psd-11746 and (LRC) Psd-7815." TCT Nos. 128240 to 128249
had its origin from two Original Certificate of Title (OCT) No. 820, issued pursuant to Decree
of Registration No. 1424 (31 January 1905), Expediente Number 302. These consist of Lots
1 to [10] of the consolidation-subdivision plan (LRC) Pcs-14840, portions of the consolidation
of Lots 55-B and 55-C, Block 2918, Psd-11746, B, (LRC) Psd-7815, LRC Record No. 302 &
N-1555. TCT No. 128270, on the other hand, had its origin from OCT No. 520 (sic) and 7477,
issued pursuant to Decree Nos. 1424 and N-[23419], LRC Record No[s. 302,] N-1555. This
lot is more particularly identified as Lot 10 of the consolidation-subdivision plan (LRC) Pcs-
14686, portion of the consolidated Lots A, (LRC) Psd-7815, Psu-117259 & 55-A, Blk. 2918,
Psd-11746, LRC Cad. No. 302 & Rec. No. N-1555. Moreover, the task force found that "(i)n
plotting, based on the Manila Cadastral Map, surveys (LRC) Pcs-14686 and (LRC) Pcs-
14840, of the above subjects, have encroached:

1. Over the Estero de Sunog Apog by an estimated 30 meters; and

2. Over all of the Sapang Visita."

The task force hence referred the matter to the LRA-OSG Task Force for appropriate action.

Petitioners sought the assistance of the Office of the Solicitor General (OSG) for legal action
on OCTs Nos. 820 and 7477. On 18 February 1999, the OSG wrote a letter to public
respondent for a review and evaluation of the records on the issuance of TCTs Nos. 128240
to 128249, and 128270 covering parcels of land in Gagalangin, Tondo, Manila, docketed as
Task Force TM No. 98-0087. In reply, public respondent issued the assailed "final resolution",
stating, inter alia, that the parcels of land described in TCTs Nos. 128240 to 128249 were
originally registered on 09 January 1907 in the Manila Registry of Deeds as OCT No. 820
pursuant to Decree No. 1424 in Record No. 702 [sic]. In finding no legal grounds to initiate
an action for the nullification of the assailed certificates of title, public respondent ratiocinated
that:

"Upon thorough examination of Lots 55-A (28,525 sqm.), 55-B (28,525.4 sqm.) and
55-C (15,377.8 sqm.) of Plan 11746 covered by TCTs Nos. 49286 to 49288,
respectively, which emanated from OCT No. 820, the following were established:

1. That the adjoining on the S.W., N.W. of Lot 55-A, Block 2918, of the
subdivision plan Psd-11746, covering TCT No. 42986 are by Lots 56, 70,
Block 2918, Manila Cadastre and Sapang Visita and by Sunog Apog,
respectively;

2. That the adjoining on the West of Lot 55-B, Block 2918 of the subdivision
plan Psd-11746, covering TCT No. 42987 is by Estero de Sapang (sic) Apog;

3. That the adjoining N.E., N.W. of Lot 55-C, Block 2918 of the subdivision
plan Psd-11746, covering TCT No. 49288 are by Estero de Maypajo and
Estero de Sunog Apog, respectively;

4. That it was mentioned on the decision dated April 25, 1955 that the parcel
of land Psu-117186 and Psu-117259 decreed under N-23419, issued in the
name of Severino Manotoc, are the adjoining properties of Lot 55-A, 55-B
and 55-C, Block No. 2918 of the subdivision plan Psd-11746, covered by
TCTs Nos. 49286, 24542 and 24522, respectively, and was further mentioned
in the said decision that the said land were really acquired by accretion as
the Sapang Visita is no longer navigable and Estero de Maypajo and Sapang
(sic) Apog Creek is generally dried[;]

5. That in the course of examining the subdivision plan (LRC) Psd-7815, it

appears that the adjoining on the N.E. and S.W. are Lots 1 and 3 of Plan
Psu-174649 and Psu-11259 in the name of Severino Manotoc and beyond of
which are Estero de Maypajo (10 to 12 meters wide), Estero de Sunog Apog
(20 meters wide) and Sapang Visita, respectively.

"On the other hand, Lot 10 of Plan (LRC) Pcs-14684, being a portion of the
consolidation of Lots A, (LRC) Psd-7815, Psu-117259 & 55-A, Blk. 2918, Psd-11746,
was originally registered in Manila Registry of Deeds as OCT No. 820 (erroneously
typed therein as OCT No. 520) and OCT No. 7477. In other words, Lot 10 is the
result of the earlier consolidation and subdivision of certain parcels of land covered
by certificates of title which emanated from OCT No. 820 and OCT No. 7477, as
evidenced by Plan (LRC) Pcs- 14648 (approved by LRA on 19 December 1972),
Plan (LRC) Psd-7815 (approved by LRA on 24 July 1969), Plan Psu-117259
(appears to have been approved by the Bureau of Lands on 11 February 1936).
"OCT No. 7477 was issued by the Manila Register of Deeds in 1955 pursuant to
Decree No. N-23419 in Land Registration Case No. N-1-LRC Record No. N-1555 in
favor of Severino Manotok, covering two (2) parcels of land described in Plan Psu-
117186 (8,838 sq. meters) and Plan Psu-117259 (1,689.30 sq. meters). Decree No.
N-23419 was issued by this Authority on 18 June 1955 pursuant to the Decision
dated 25 A[pril] 1955 of former Judge Bienvenido A. Tan of the then Court of First
Instance of Manila in GLRO Record No. 1555 (Severino Manotok, applicant vs. The
Director of Lands, Oppositor), the pertinent portions of which read:

It is conceded that the two parcels of land are agricultural in nature, and the
only question to be decided is whether they are public or private lands. The
decision of the Court of Appeals raises no other question but the following:

Applicant likewise contended that he, his coheirs and his late father,
(Severino), had always believed that the land, sought for registration
was a part, and in fact included, in their old registered property. Such
contention could have been properly substantiated by the certificate
of title covering the old property and the tax declaration for
assessment purposes, showing whether it was bounded by the
creeks now cited as boundaries of the Lot in question. But they were
not presented as evidence.

Now that the said certificates of title were presented together with the
memorandum of the Commissioner of Land Registration, the
contention of the applicant is duly corroborated. The parcels of land
sought to be registered are not included in the titles issued; but are
adjoining the lots covered by said certificates of title. There is no
question that the said parcels of land have been in the actual
possession of the applicant and that his possession as well as that of
his predecessors have been open, exclusive, continuous, adverse
and in the concept of owner for the number of years required by law
as the Sapang Visita is no longer navigable and its bed is dry, and
that the Sunog Apog Creek is generally dried up due to the ordinary
course of its current. The fact that his physical possession of these
two parcels of land for the number of years required cannot be
denied, and has not been denied or contradicted by any other
evidence submitted by the oppositor. As well remarked by the Court
of Appeals in its decision, the oppositor by a mere inference would
make us believe that the applicant or his predecessors could not
have occupied these Lots from time immemorial, as alleged. They got
flooded at high tide, and only on Lot B does bacaoan grow and
sparsely.

"Based on the said decision, it would appear that the parcels of land covered by OCT
No. 7477 were formerly part of Estero de Maypajo, Sapang Visita and Estero de
Sunog Apog which had dried up.
 "Accordingly, and considering that the dried up portion of the esteros were the
subject of regular land registration proceedings; and that a period of one (1) year
form the decree of registration and original certificate of title had already lapsed
without said decrees being controverted by any adverse party within the
reglementary period, the certificate of title become incontrovertible. (Sec. 32, PD
1529; Pamintuan vs. San Agustin, 343 Phil. 558)

"As narrated above, the issuance of TCTs Nos. 128240 to 128249, which emanated
from OCT No. 820, are supported by the records of the Manila Registry of Deeds." 4

Ruling of the Court of Appeals

The CA held that OCT No. 820 had been issued on January 7, 1907, not on January 31, 1905, as
petitioners claim. True, Decree No. 1424 had been issued on January 31, 1905, but it was entered or
transcribed in the registration book of the Register of Deeds only in 1907. Pursuant to Section 42 of
Act No. 4965 (otherwise known as the Land Registration Act), OCT No. 820 took effect on January 7,
1907, the date of the transcription of the decree. The record number of Decree No. 1424, however,
should be 786. Further, the appellate court held that an OCT was conclusive on all matters stated
therein. Hence, the fact that the copy of Decree No. 1424 was no longer extant in the records of the
LRA was of no moment.

The CA also held that OCT No. 7477 was already incontrovertible, because it had been the subject
of regular land registration proceedings. More than one year after its registration, the decree was not
controverted by any adverse party.

In their Motion for Reconsideration, petitioners raised the minority of the land registration applicants
-- Severino, Benita, Ambrosio and Ricardo, all surnamed Manotok -- as an additional ground to
nullify OCT No. 820. Ostensibly, they had filed their application without the assistance of a legally
appointed guardian. The CA, however, denied petitioners Motion for Reconsideration for lack of
merit.6

Hence, this present recourse entitled by petitioners as a "Petition for Certiorari under Rule 65," filed
on November 20, 2001.

On December 10, 2001, this Court (Third Division) dismissed the Petition, because certiorari was not
a substitute for the lost remedy of appeal.7

On February 6, 2002, the Court -- upon reconsideration -- deemed the Petition as one filed under
Rule 45 and required respondents to comment thereon.8 After all, it had been submitted within the
15-day period required by Rule 45.

Issues

Petitioners raise the following issues:

"A. With respect to OCT No. 820

 (10) Did respondent Court of Appeals commit grave abuse of discretion tantamount to or in
excess of jurisdiction when it failed to declare null and void OCT No. 820, despite the
following undisputed facts:

(1) OCT No. 820 was issued in the name of [m]inors Severino, Benita, Ambrosio and
Ricardo, all surnamed Manotok, aged 17, 14, 12 and 10, without a court appointed
guardian; and

(2) Decree of Registration No. 1424 of January 31, 1905 (which led to the issuance
of OCT No. 820) was issued before completion of the magnetic survey of the parcels
of land covered by OCT No. 820 on November 15, 1906.

(11) Did respondent Court of Appeals violate Section 14, Article VIII, 1987 Constitution when
it omitted in its narration of facts that the Magnetic Survey of the parcels of land covered by
OCT No. 820 was made and completed only on November 15, 1906?

"B. With respect to OCT No. 7477

(12) Did respondent Court of Appeals commit grave abuse of discretion tantamount to or in
excess of jurisdiction when it failed to declare OCT No. 7477 null and void despite the
undisputed and conclusive fact that the parcels of land it covers were formerly part of the
Estero de Maypajo, Estero de Sunog Apog and Sapang Visita, or inalienable lands of the
public domain intended for public use?"9

In simpler and more understandable language, the issues raised by petitioners are as follows: 1)
whether OCT Nos. 820 and 7477 are valid; and 2) whether the CA complied with Section 14 of
Article VIII of the 1987 Constitution.

The Courts Ruling

The Petition has no merit.

Preliminary Issue:

Propriety of Petition for Certiorari Under Rule 65

At the outset, this Court notes that petitioners erroneously anchor their Petition on Rule 65. Their
remedy should be based on Rule 45, because they are appealing a final disposition of the Court of
Appeals.

"Certiorari under Rule 65 is a remedy narrow in scope and inflexible in character. It is not a general
utility tool in the legal workshop."10 It involves a correction of errors of jurisdiction only, or grave
abuse of discretion amounting to lack or excess of jurisdiction. It is not a substitute for an appeal,
when the latter remedy is available.11
Indubitably, the CA had jurisdiction over petitioners appeal from the Resolution of the LRA and
rendered the assailed Decision in the proper exercise of that jurisdiction. Under the circumstances,
Rule 45 was the plain, speedy and adequate remedy in the ordinary course of law.

Since the Petition was filed within the 15-day period, in the interest of justice it shall be treated as
one for review under Rule 45, and not for certiorari under Rule 65.

First Issue:

Validity of OCT Nos. 820 and 7477

The fundamental purpose of the Land Registration Law (Act No. 496, now PD 1529) is to finally
settle title to real property12 in order to preempt any question on the legality of the title -- except
claims that were noted on the certificate itself at the time of registration or those that arose
subsequent thereto.13 Consequently, once the title is registered under the said law, owners can rest
secure on their ownership and possession.

The proceedings for the judicial registration of land under the Torrens system involve more
consequences than an ordinary action would.14 Once a decree of registration is made under the
Torrens system, and the reglementary period has passed within which the decree may be
questioned, the title is perfected and cannot be collaterally questioned later on. 15

OCT No. 820

In assailing the validity of OCT No. 820, petitioners capitalize on the plain statement written on the
face of the Certificate that the magnetic survey was completed only on November 15, 1906, while
the decree had been issued earlier on January 31, 1905. They insist that the land registration court
acquired no jurisdiction over the land that was the subject of the registration proceedings; and that --
as no survey had been made, completed and submitted to it -- therefore, the court had no authority
to issue the decree.

We are not persuaded. Petitioners erroneously and baselessly speculate that the magnetic survey of
the land was the only survey conducted, or that no other plan was submitted to the registration court,
or that the land was not surveyed at all. Mere conclusions and speculations are not sufficient to
defeat or impair the title of private respondents.

OCT No. 820 was issued more than 90 years ago in 1907, but the original Certificate is still existing
in the records of the Register of Deeds. Having been issued under the Torrens system, the original
Certificate enjoys a presumption of validity.16 Correlatively, it also carries a strong presumption that
the provisions of the law governing the registration of land under the Torrens system have duly been
followed.

The law applicable at the time of registration of OCT No. 820, Act No. 496, provides thus:

"SEC. 26. The applicant shall file with the application a plan of the land, and an original
muniments of title within his control mentioned in the schedule of documents, such original
 muniments to be produced before the court at the hearing when required. When an
application is dismissed or discontinued, the applicant may, with the consent of the court,
withdraw such original muniments of title."

"SEC. 36. x x x. The court may in any case before decree require a survey to be made for
the purpose of determining boundaries, and may order durable bounds to be set, and
referred to in the application, by amendment. x x x."

"SEC. 40. Every decree of registration shall bear the day of the year, hour, and minute of its
entry, and shall be signed by the clerk. x x x. It shall contain a description of the land as
finally determined by the court, x x x."

Based on the foregoing, an original survey plan other than that completed in 1906 was presumably
submitted to the land registration court prior to the issuance of the decree. In his Comment, 17 then
LRA Director Benjamin A. Flestado quoted a portion of the Decision in Land Registration Case No.
N-1-LRC, Record No. N-1555, pertaining to the history of the two lots embraced in OCT No. 820.
The Decision stated that a survey of those lots had been undertaken by American surveyors on or
before 1905. That Decision is certainly more reliable than the plain assertions of petitioners, who
obviously had no personal knowledge of the original land registration proceedings.

The completion of the magnetic survey does not discount the existence and the submission of a
prior survey plan. Relevant is the Courts ruling in Francisco v. Borja,18 from which we quote:

"x x x. When surveys under the old system are not correct and differ from the result obtained
by the modern and more scientific way of surveying, corrections of errors contained in the
old plan should be permitted by the court so long as the boundaries laid down in the
description as enclosing the land and indicating its limits are not changed. If they are not
allowed in the expediente of the case, no other remedy may be resorted to by which errors
or imperfections in the old plan can be cured and to permit a decree based on such
erroneous survey to stand would be absurd. The decree is not reopened and thereby
modified. It is the new plan that is made to conform to the decree, which procedure
should be allowed and even encouraged in these Islands where, as court records
show, many certificates of title are still based on the old and highly defective
surveys. x x x."19

From the above, it is clear that a new survey may be conducted to conform to a decree, even after it
has been issued.

In the same Comment, Director Flestado stated that Decree No. 1424, issued before the Second
World War, had either been lost or destroyed during that war. Thus, it could no longer be the basis
for determining which parcels of land were covered by the decree and on what date they had
originally been surveyed.20

At any rate, by legal presumption, public officers are deemed to have regularly performed their
official duties. Thus, the proceedings for land registration that led to the issuance of OCT No. 820
are presumed to have regularly and properly been conducted. To overturn this legal presumption
carelessly -- more than 90 years since the termination of the case -- will not only endanger judicial
stability, but also violate the underlying principle of the Torrens system. Indeed, to do so would
reduce the vaunted legal indefeasibility of Torrens titles to meaningless verbiage.

In the same vein, we reject the contention of petitioners that OCT No. 820 is null and void on the
ground that the applicants for land registration were minors who were not assisted by a legal
guardian. They allege that while the names of the minor applicants were contained in the title, no
legal guardian was named therein.

Again, petitioners rely on mere speculations and conjectures, which cannot be sustained by this
Court. The mere failure to mention on the title the names of the legal guardians does not necessarily
imply their absence during the actual land registration proceedings. Besides, the absence of legal
guardians cannot be used as a basis for depriving minors of benefits that have accrued to them. If at
all, it could be a ground to invalidate an imprudent attack against their interest, not to deprive them of
any advantage or gain.

OCT No. 7477

It cannot be denied that OCT No. 7477 was the subject of judicial proceedings in which the
government, represented by the director of lands, amply participated. We quote hereunder pertinent
portions of the April 25, 1955 Decision of Judge Bienvenido A. Tan of the then Court of First Instance
of Manila in GLRO (General Land Registration Office) Record No. 1555, entitled Severino Manotok,
Applicant v. The Director of Lands, Oppositor:

The Director of Lands filed an opposition alleging that the parcels of land are public domain
belonging to the Republic of the Philippines and the applicant has no title and possession under
claim of ownership since 26 July 1894; that on 18 November 1950, a decision was rendered denying
the application, which decision was appealed to the Court of Appeals in due time; that eventually the
Decision dated 18 November 1950 was set aside and a new trial was ordered; that pursuant to the
order of CA for new trial, the Chief Surveyor of LRC was ordered "to determine whether or not said
parcels of land. . . are included in any certificate of title of the applicant"; that in due time, the LRC
submitted a report stating that the lands "are not included in any of the TCT Nos. 49286, 24542 and
24522 submitted to this Commission by the applicant" and that said certificates of title "cover Lots
55-A, 55-B and 55-C, Block No. 2918 of the subdivision plan Psd-11746" which lots adjoin the
parcels of land subject matter of the instant case (Record No. 1555); that during the trial, the
applicant testified that the lands in question are not included in the land described in OCT No. 820;
that the said parcels of land were believed by him and his predecessors as included therein
"because on the West the first parcel in OCT No. 820, the boundary is the Sunog Apog Creek, and
that on the South, the boundary is the Sapang Visita"; that the first parcel of land covered by OCT
No. 820 was subdivided into 3 Lots, known as Lots 55-a, 55-b and 55-c, the last two Lots were
bought by the applicant from Ricardo Manotok (1 August 1946) and Benita Manotok de Geronimo
(17 September 1949) while Lot 55-a was adjudicated to him and now covered by TCT No. 49286.

Public Land Surveyor Gregorio M. Aranzas testified on cross examination that the shore-line of
Sunog Apog Creek "is traced by him by dotted lines on Exh. A and marked as Exh. O" and the
shoreline of Sapang Visita "is that traced by him, also by a dotted line, and marked as Exh. P on
Exh. B"; that while the applicant testified that the lands in question "are now high and are dry even
during rainy season", no evidence to the contrary "has been presented by the oppositor", thus it
"only goes to show that the lands in question are no longer banks of the Sunog Apog Creek and the
Sapang Visita, as previously contended by the Director of Lands."

That the parcels of land sought to be registered are not included in titles already issued; that the
lands have been in the actual possession of the applicant and his possession, as well as that of his
predecessors, "has been open, exclusive, continuous, adverse and in the concept of owner for the
number of years required by law"; that portions of said land "were really acquired by accretions as
the Sapang Visita is no longer navigable and its bed is dry, and that the Sunog Apog Creek is
generally dried up due to the ordinary course of its current"; that the herein applicant sought
registration of these land only in 1947 "as it was then that he discovered that the lands were not
included in the old title."21

As things stand now, private respondents have in their favor a judicial pronouncement showing,
prima facie at least, that the expanded areas do not belong to the public domain, and that they have
acquired rights of ownership over them by accretion. In brief, they have overcome the presumption
that the land is within an unclassified property of the public domain. 22

While registration proceedings are judicial, they involve more consequences than an ordinary action
would. The entire world, including the government, is given a chance to participate in the case.

After the registration is completed and finalized in the regular course, the rights of all adverse
claimants are foreclosed by the decree of registration.23 The government itself assumes the burden
of giving notice to all parties. The very purpose and intent of the law, however, would be defeated by
permitting persons to litigate again on the basis of the same adverse claims in the registration
proceedings, after they have already been given the opportunity to do so. For them to raise the
same questions anew would be to cast doubt again upon the validity of the registered title. 24

Even assuming that petitioners may still institute an action for the nullification of OCT No. 7477, the
review of a decree of registration under Section 38 of Act No. 496 (Section 32 of Presidential Decree
No. 1529) would prosper only upon proof that the registration was procured through actual
fraud.25 "The fraud must be actual and extrinsic, not merely constructive or intrinsic; the evidence
thereof must be clear, convincing and more than merely preponderant, because the proceedings
which are assailed as having been fraudulent are judicial proceedings which by law, are presumed to
have been fair and regular."26

Actual fraud proceeds from an intentional deception perpetrated through the misrepresentation or
the concealment of a material fact.27 The fraud is extrinsic if it is employed to deprive parties of their
day in court and thus prevent them from asserting their right to the property registered in the name of
the applicant. The fraud is intrinsic if that which is alleged in the petition to set aside the decree is the
fraud involved in the same proceedings in which the parties seeking relief have had ample
opportunity to assert their right, to attack the document presented by the applicant for registration,
and to cross-examine the witnesses who have testified thereon.28Inquiry into this latter kind of fraud
is barred after the judgment of the land registration court has become final.
Petitioners fail to convince the Court that the facts they rely upon to justify a review of the decree in
question constitute actual extrinsic fraud.

Legal Standing

Finally, assuming arguendo that the validity of the two titles may still be impugned, petitioners do not
have any legal standing to ask directly for their annulment.

We can only infer the interest, supposedly in their favor, from their allegation that they were
occupants of a portion of the parcel covered by OCT Nos. 820 and 7477, which they perceive to be
public land. Petitioners were neither applicants nor claimants of any preferential right over the
aforesaid disputed lands. Being too vague, too highly speculative and uncertain, their presumed
interest does not suffice to constitute a legal right or interest that would grant them standing in court.

"Legal standing has been defined as a personal and substantial interest in the case, such that the
party has sustained or will sustain direct injury as a result of the challenged act. Interest means a
material interest in issue that is affected by the questioned act or instrument, as distinguished from a
mere incidental interest in the question involved." 29 Since the parcels they claim are properties of the
public domain, only the government can bring an action to nullify the TCTs. 30

Second Issue:

Compliance with the Constitution

The first paragraph of Section 14 of Article VIII of the Constitution mandates that "[n]o decision shall
be rendered by any court without expressing therein clearly and distinctly the facts and the law on
which it is based."

Petitioners attack the validity of the assailed CA Decision for its failure to mention that a magnetic
survey was completed only on November 15, 1906, a fact that they perceived to be crucial to the
determination of the case. The untenability of such grasping at straws can easily be demonstrated.

In its assailed Decision, the CA affirmed the resolution of LRA Administrator Enriquez. The appellate
court deliberated on the law and the reasons it relied upon in its determination of the issues
presented only after giving a detailed account and assessment of the factual antecedents found by
respondent administrator.

Since the Decision of the CA contains the necessary antecedents to warrant its conclusions, the
appellate court cannot be said to have withheld "any specific finding of facts." What the law insists
on is that a decision state the "essential ultimate facts." Indeed, the "mere failure to specify x x x the
contentions of the petitioner and the reasons for refusing to believe them is not sufficient to hold the
same contrary to the requirements of the provision of law and the Constitution."7 31

This constitutional provision deals with the disposition of petitions for review and of motions for
reconsideration. In appellate courts, the rule does not require any comprehensive statement of facts
or mention of the applicable law, but merely a statement of the "legal basis" for denying due course. 32
Thus, there is sufficient compliance with the constitutional requirement when a collegiate appellate
court, after deliberation, decides to deny a motion; states that the questions raised are factual or
have already been passed upon; or cites some other legal basis.33 There is no need to explain fully
the courts denial, since the facts and the law have already been laid out in the assailed Decision.

WHEREFORE, the Petition is DENIED and the assailed Decision and Resolution AFFIRMED. Costs
against petitioners.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 189647 February 6, 2012

NANCY T. LORZANO, Petitioner,

vs.
JUAN TABAYAG, JR., Respondent.

DECISION

REYES, J.:

Nature of the Petition

This is a petition for review on certiorari under Rule 45 of the Rules of Court filed by Nancy T.
Lorzano (petitioner) assailing the Court of Appeals (CA) Decision 1 dated March 18, 2009 and
Resolution2 dated September 16, 2009 in CA-G.R. CV No. 87762 entitled "Juan Tabayag, Jr. v.
Nancy T. Lorzano."

The Antecedent Facts

The instant case stemmed from an amended complaint3 for annulment of document and
reconveyance filed by Juan Tabayag, Jr. (respondent) against the petitioner, docketed as Civil Case
No. Ir-3286, with the Regional Trial Court (RTC) of Iriga City.

The petitioner and the respondent are two of the children of the late Juan Tabayag (Tabayag) who
died on June 2, 1992. Tabayag owned a parcel of land situated in Sto. Domingo, Iriga City (subject
property). Right after the burial of their father, the petitioner allegedly requested from her siblings that
she be allowed to take possession of and receive the income generated by the subject property until
after her eldest son could graduate from college. The petitioners siblings acceded to the said
request.

After the petitioners eldest son finished college, her siblings asked her to return to them the
possession of the subject property so that they could partition it among themselves. However, the
petitioner refused to relinquish her possession of the subject property claiming that she purchased
the subject property from their father as evidenced by a Deed of Absolute Sale of Real
Property4 executed by the latter on May 25, 1992.
The respondent claimed that their father did not execute the said deed of sale. He pointed out that
the signature of their father appearing in the said deed of sale was a forgery as the same is
markedly different from the real signature of Tabayag.

Further, the respondent asserted that the said deed of sale was acknowledged before a person who
was not a duly commissioned Notary Public. The deed of sale was acknowledged by the petitioner
before a certain Julian P. Cabaes (Cabaes) on May 25, 1992 at Iriga City. However, as per the
Certification5 issued by the Office of the Clerk of Court of the RTC on May 16, 2002, Cabaes has
never been commissioned as a Notary Public for and in the Province of Camarines Sur and in the
Cities of Iriga and Naga.

The respondent alleged that the petitioner purposely forged the signature of Tabayag in the said
deed of sale to deprive him and their other siblings of their share in the subject property. He then
averred that the subject property was already covered by Original Certificate of Title (OCT) No.
17866 issued by the Register of Deeds of Iriga City on January 9, 2001 registered under the name of
the petitioner. OCT No. 1786 was issued pursuant to Free Patent No. 051716 which was procured
by the petitioner on June 24, 1996.

For her part, the petitioner maintained she is the owner of the subject parcel of land having
purchased the same from Tabayag as evidenced by the May 25, 1992 deed of sale. Further, the
petitioner asserted that the respondent failed to establish that the signature of Tabayag appearing on
the said deed of sale was a forgery considering that it was not submitted for examination by a
handwriting expert.

The RTC Decision

On April 28, 2006, the RTC rendered an Amended Decision7 the decretal portion of which reads:

WHEREFORE, Judgment is hereby rendered[:]

a. Declaring the supposed Deed of Sale null and void and of no legal effect;

b. Ordering the [petitioner] to reconvey to the heirs of the late Juan Tabayag, Sr. the land
subject matter of this case[;]

c. Declaring the property described in the complaint and in the spurious deed of sale to be
owned in common by the heirs of Juan Tabayag, Sr. as part of their inheritance from said
Juan Tabayag, Sr[.];

d. Ordering [petitioner] to pay plaintiff the sum of One Hundred Thousand Pesos
(P100,000.00)by way of moral damages;

e. Ordering defendant to pay plaintiff the attorneys fees in the sum of Fifteen Thousand
Pesos (P15,000.00), based on quantum meruit;

f. Dismissing the counterclaim for lack of merit[;]

 g. Costs against the defendant.

SO ORDERED.8

The RTC opined that a cursory comparison between the signature of Tabayag appearing on the said
deed of sale and his signatures appearing on other documents would clearly yield a conclusion that
the former was indeed a forgery. Moreover, the RTC asserted that the nullity of the said May 25,
1992 deed of sale all the more becomes glaring considering that the same was purportedly
acknowledged before a person who is not a duly commissioned Notary Public.

The CA Decision

Thereafter, the petitioner appealed the decision with the CA. On March 18, 2009, the CA rendered
the assailed decision affirming in toto the RTC decision.9 The CA held that the testimony of a
handwriting expert in this case is not indispensable as the similarity and dissimilarity between the
questioned signature of Tabayag as compared to other signatures of the latter in other documents
could be determined by a visual comparison.

Further, the CA upheld the award of moral damages and attorneys fees in favor of the respondent
as the petitioners conduct caused "great concern and anxiety" to the respondent and that the latter
had to go to court and retain the services of counsel to pursue his rights and protect his interests.

Undaunted, the petitioner instituted the instant petition for review on certiorari before this Court
asserting the following: (1) the questioned signature of Tabayag in the May 25, 1992 deed of sale
could not be declared spurious unless first examined and declared to be so by a handwriting expert;
(2) considering that the subject property was registered under the petitioners name pursuant to a
free patent, reconveyance of the same in favor of the respondent is improper since only the
Government, through the Office of the Solicitor General (OSG), could assail her title thereto in an
action for reversion; and (3) the respondent is not entitled to an award for moral damages and
attorneys fees.

In his Comment,10 the respondent claimed that the issues raised in the instant petition are factual in
nature and, hence, could not be passed upon by this Court in a petition for review on certiorari under
Rule 45. Likewise, the respondent asserted that the petitioners free patent, having been issued on
the basis of a falsified document, does not create a right over the subject property in her favor.

Issues

In sum, the threshold issues for resolution are the following: (a) whether the lower courts erred in
declaring the May 25, 1992 deed of sale a nullity; (b) whether an action for reconveyance is proper
in the instant case; and (c) whether the respondent is entitled to an award of moral damages and
attorneys fees.

The Courts Ruling

First and Third Issues: Nullity of the Deed of Sale and Award of Moral Damages and Attorneys Fees
This Court shall jointly discuss the first and third issues as the resolution of the same are
interrelated.

Primarily, Section 1, Rule 45 of the Rules of Court categorically states that the petition filed shall
raise only questions of law, which must be distinctly set forth. A question of law arises when there is
doubt as to what the law is on a certain state of facts, while there is a question of fact when the
doubt arises as to the truth or falsity of the alleged facts. For a question to be one of law, the same
must not involve an examination of the probative value of the evidence presented by the litigants or
any of them. The resolution of the issue must rest solely on what the law provides on the given set of
circumstances. Once it is clear that the issue invites a review of the evidence presented, the
question posed is one of fact.11

That the signature of Tabayag in the May 25, 1992 deed of sale was a forgery is a conclusion
derived by the RTC and the CA on a question of fact. The same is conclusive upon this Court as it
involves the truth or falsehood of an alleged fact, which is a matter not for this Court to
resolve.12 Where a petitioner casts doubt on the findings of the lower court as affirmed by the CA
regarding the existence of forgery is a question of fact.13

In any case, the CA aptly ruled that a handwriting expert is not indispensable to prove that the
signature of Tabayag in the questioned deed of sale was indeed a forgery. It is true that the opinion
of handwriting experts are not necessarily binding upon the court, the experts function being to
place before the court data upon which the court can form its own opinion. Handwriting experts are
usually helpful in the examination of forged documents because of the technical procedure involved
in analyzing them. But resort to these experts is not mandatory or indispensable to the examination
or the comparison of handwriting. A finding of forgery does not depend entirely on the testimonies of
handwriting experts, because the judge must conduct an independent examination of the questioned
signature in order to arrive at a reasonable conclusion as to its authenticity.14

For the same reason, we would ordinarily disregard the petitioners allegation as to the propriety of
the award of moral damages and attorneys fees in favor of the respondent as it is a question of fact.
Thus, questions on whether or not there was a preponderance of evidence to justify the award of
damages or whether or not there was a causal connection between the given set of facts and the
damage suffered by the private complainant or whether or not the act from which civil liability might
arise exists are questions of fact.15

Essentially, the petitioner is questioning the award of moral damages and attorneys fees in favor of
the respondent as the same is supposedly not fully supported by evidence. However, in the final
analysis, the question of whether the said award is fully supported by evidence is a factual question
as it would necessitate whether the evidence adduced in support of the same has any probative
value. For a question to be one of law, it must involve no examination of the probative value of the
evidence presented by the litigants or any of them. 16

Nevertheless, a review of the amount of moral damages actually awarded by the lower courts in
favor of the respondent is necessary.
Here, the lower courts ordered the petitioner to pay the respondent moral damages in the amount
of P100,000.00. We find the said amount to be excessive.

Moral damages are not intended to enrich the complainant at the expense of the defendant. Rather,
these are awarded only to enable the injured party to obtain "means, diversions or amusements" that
will serve to alleviate the moral suffering that resulted by reason of the defendants culpable action.
The purpose of such damages is essentially indemnity or reparation, not punishment or correction.
In other words, the award thereof is aimed at a restoration within the limits of the possible, of the
spiritual status quo ante; therefore, it must always reasonably approximate the extent of injury and
be proportional to the wrong committed.17

Accordingly, the amount of moral damages must be reduced to P30,000.00, an amount reasonably
commensurate to the injury sustained by the respondent.

Second Issue: Propriety of the Reconveyance of the Subject Property to the Heirs of the late Juan
Tabayag

The petitioner asserted that the CA erred in not finding that her ownership over the subject property
was by virtue of a free patent issued by the government and, thus, even assuming that the subject
deed of sale is invalid, her title and ownership of the subject property cannot be divested or much
less ordered reconveyed to the heirs of Tabayag.

Simply put, the petitioner points out that the subject property, being acquired by her through a grant
of free patent from the government, originally belonged to the public domain. As such, the lower
courts could not order the reconveyance of the subject property to the heirs of Tabayag as the latter
are not the original owners thereof. If at all, the subject property could only be ordered reverted to
the public domain.

An issue cannot be raised for the first time on appeal as it is already barred by estoppel.

This Court notes that the foregoing argument is being raised by the petitioner for the first time in the
instant petition. It is well-settled that no question will be entertained on appeal unless it has been
raised in the proceedings below. Points of law, theories, issues and arguments not brought to the
attention of the lower court, administrative agency or quasi-judicial body, need not be considered
by a reviewing court, as they cannot be raised for the first time at that late stage. Basic
considerations of fairness and due process impel this rule. Any issue raised for the first time on
appeal is barred by estoppel.18

Accordingly, the petitioners attack on the propriety of the action for reconveyance in this case ought
to be disregarded. However, in order to obviate any lingering doubt on the resolution of the issues
involved in the instant case, this Court would proceed to discuss the cogency of the petitioners
foregoing argument.

Title emanating from a free patent fraudulently secured does not become indefeasible.
The petitioner asserts that the amended complaint for annulment of document, reconveyance and
damages that was filed by the respondent with the RTC is a collateral attack on her title over the
subject property. She avers that, when the said amended compliant was filed, more than a year had
already lapsed since OCT No. 1786 over the subject property was issued under her name. Thus, the
petitioner maintains that her title over the subject property is already indefeasible and, hence, could
not be attacked collaterally.

We do not agree.

A Free Patent may be issued where the applicant is a natural-born citizen of the Philippines; is not
the owner of more than twelve (12) hectares of land; has continuously occupied and cultivated,
either by himself or through his predecessors-in-interest, a tract or tracts of agricultural public land
subject to disposition, for at least 30 years prior to the effectivity of Republic Act No. 6940; and has
paid the real taxes thereon while the same has not been occupied by any person. 19

Once a patent is registered and the corresponding certificate of title is issued, the land covered
thereby ceases to be part of public domain and becomes private property, and the Torrens Title
issued pursuant to the patent becomes indefeasible upon the expiration of one year from the date of
such issuance.20 However, a title emanating from a free patent which was secured through fraud
does not become indefeasible, precisely because the patent from whence the title sprung is itself
void and of no effect whatsoever.21

On this point, our ruling in Republic v. Heirs of Felipe Alejaga, Sr.22 is instructive:

True, once a patent is registered and the corresponding certificate of title [is] issued, the land
covered by them ceases to be part of the public domain and becomes private property. Further, the
Torrens Title issued pursuant to the patent becomes indefeasible a year after the issuance of the
latter. However, this indefeasibility of a title does not attach to titles secured by fraud and
misrepresentation. Well-settled is the doctrine that the registration of a patent under the Torrens
System does not by itself vest title; it merely confirms the registrants already existing one. Verily,
registration under the Torrens System is not a mode of acquiring ownership. 23 (citations omitted)

A fraudulently acquired free patent may only be assailed by the government in an action for
reversion.

Nonetheless, a free patent that was fraudulently acquired, and the certificate of title issued pursuant
to the same, may only be assailed by the government in an action for reversion pursuant to Section
101 of the Public Land Act.24 In Sherwill Development Corporation v. Sitio Sto. Nio Residents
Association, Inc.,25 this Court pointed out that:

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.26

In Kayaban, et al. v. Republic, et al.,27 this Court explained the reason for the rule that only the
government, through the OSG, upon the recommendation of the Director of Lands, may bring an
action assailing a certificate of title issued pursuant to a fraudulently acquired free patent:

Since it was the Director of Lands who processed and approved the applications of the appellants
and who ordered the issuance of the corresponding free patents in their favor in his capacity as
administrator of the disposable lands of the public domain, the action for annulment should have
been initiated by him, or at least with his prior authority and consent. 28

An action for reconveyance is proper in this case.

However, the foregoing rule is not without an exception. A recognized exception is that situation
where plaintiff-claimant seeks direct reconveyance from defendant public land unlawfully and in
breach of trust titled by him, on the principle of enforcement of a constructive trust. 29

A private individual may bring an action for reconveyance of a parcel of land even if the title thereof
was issued through a free patent since such action does not aim or purport to re-open the
registration proceeding and set aside the decree of registration, but only to show that the person
who secured the registration of the questioned property is not the real owner thereof. 30

In Roco, et al. v. Gimeda,31 we stated that if a patent had already been issued through fraud or
mistake and has been registered, the remedy of a party who has been injured by the fraudulent
registration is an action for reconveyance, thus:

It is to be noted that the petition does not seek for a reconsideration of the granting of the patent or
of the decree issued in the registration proceeding. The purpose is not to annul the title but to have it
conveyed to plaintiffs. Fraudulent statements were made in the application for the patent and no
notice thereof was given to plaintiffs, nor knowledge of the petition known to the actual possessors
and occupants of the property. The action is one based on fraud and under the law, it can be
instituted within four years from the discovery of the fraud. (Art. 1146, Civil Code, as based on
Section 3, paragraph 43 of Act No. 190.) It is to be noted that as the patent here has already been
issued, the land has the character of registered property in accordance with the provisions of Section
122 of Act No. 496, as amended by Act No. 2332, and the remedy of the party who has been injured
by the fraudulent registration is an action for reconveyance. (Director of Lands vs. Registered of
Deeds, 92 Phil., 826; 49 Off. Gaz. [3] 935; Section 55 of Act No. 496.)32

In the same vein, in Quiiano, et al. v. Court of Appeals, et al., 33 we stressed that:

The controlling legal norm was set forth in succinct language by Justice Tuason in a 1953 decision,
Director of Lands v. Register of Deeds of Rizal. Thus: "The sole remedy of the land owner whose
property has been wrongfully or erroneously registered in another's name is, after one year from the
date of the decree, not to set aside the decree, as was done in the instant case, but, respecting the
decree as incontrovertible and no longer open to review, to bring an ordinary action in the ordinary
court of justice for reconveyance or, if the property has passed into the hands of an innocent
purchaser for value, for damages." Such a doctrine goes back to the 1919 landmark decision of
Cabanos v. Register of Deeds of Laguna. If it were otherwise the institution of registration would, to
quote from Justice Torres, serve "as a protecting mantle to cover and shelter bad faith ...." In the
language of the then Justice, later Chief Justice, Bengzon: "A different view would encourage fraud
and permit one person unjustly to enrich himself at the expense of another." It would indeed be a
signal failing of any legal system if under the circumstances disclosed, the aggrieved party is
considered as having lost his right to a property to which he is entitled. It is one thing to protect an
innocent third party; it is entirely a different matter, and one devoid of justification, if [deceit] would be
rewarded by allowing the perpetrator to enjoy the fruits of his nefarious deed. As clearly revealed by
the undeviating line of decisions coming from this Court, such an undesirable eventuality is precisely
sought to be guarded against. So it has been before; so it should continue to be. 34 (citations omitted)

Here, the respondent, in filing the amended complaint for annulment of documents, reconveyance
and damages, was not seeking a reconsideration of the granting of the patent or the decree issued
in the registration proceedings. What the respondent sought was the reconveyance of the subject
property to the heirs of the late Tabayag on account of the fraud committed by the petitioner. Thus,
the lower courts did not err in upholding the respondents right to ask for the reconveyance of the
subject property. To hold otherwise would be to make the Torrens system a shield for the
commission of fraud.

That the subject property was not registered under the name of the heirs of Tabayag prior to the
issuance of OCT No. 1786 in the name of the petitioner would not effectively deny the remedy of
reconveyance to the former. An action for reconveyance is a legal and equitable remedy granted to
the rightful landowner, whose land was wrongfully or erroneously registered in the name of another,
to compel the registered owner to transfer or reconvey the land to him. 35

It cannot be gainsaid that the heirs of Tabayag, by themselves and through their predecessors-in-
interest, had already acquired a vested right over the subject property. An open, continuous, adverse
and public possession of a land of the public domain from time immemorial by a private individual
personally and through his predecessors confers an effective title on said possessors whereby the
land ceases to be public, to become private property, at least by presumption. 36 Hence, the right of
the heirs of Tabayag to ask for the reconveyance of the subject property is irrefutable. 1wphi1

At this juncture, we deem it necessary to reiterate our disquisition in Naval v. Court of

Appeals,37 thus:

The fact that petitioner was able to secure a title in her name did not operate to vest ownership upon
her of the subject land. Registration of a piece of land under the Torrens System does not create or
vest title, because it is not a mode of acquiring ownership. A certificate of title is merely an evidence
of ownership or title over the particular property described therein. It cannot be used to protect a
usurper from the true owner; nor can it be used as a shield for the commission of fraud; neither does
it permit one to enrich himself at the expense of others. Its issuance in favor of a particular person
does not foreclose the possibility that the real property may be co-owned with persons not named in
the certificate, or that it may be held in trust for another person by the registered owner.38 (citations
omitted)

WHEREFORE, in consideration of the foregoing disquisitions, the petition is DENIED. The Decision
dated March 18, 2009 and Resolution dated September 16, 2009 issued by the Court of Appeals in
CA-G.R. CV No. 87762 are hereby AFFIRMED with MODIFICATION. The petitioner is ordered to
pay the respondent moral damages in the amount of Thirty Thousand Pesos (P30,000.00).

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 168661 October 26, 2007

ESTATE OF THE LATE JESUS S. YUJUICO, represented by ADMINISTRATORS BENEDICTO V.

YUJUICO and EDILBERTO V. YUJUICO; and AUGUSTO Y. CARPIO, Petitioners,
vs.
REPUBLIC OF THE PHILIPPINES and the COURT OF APPEALS, Respondents.

DECISION

VELASCO, JR., J.:

In 1973, Fermina Castro filed an application for the registration and confirmation of her title over a
parcel of land with an area of 17,343 square meters covered by plan (LRC) Psu-964 located in the
Municipality of Paraaque, Province of Rizal (now Paraaque City), in the Pasig-Rizal Court of First
Instance (CFI), Branch 22. The application was docketed LRC Case No. N-8239. The application
was opposed by the Office of the Solicitor General (OSG) on behalf of the Director of Lands, and by
Mercedes Dizon, a private party. Both oppositions were stricken from the records since the
opposition of Dizon was filed after the expiration of the period given by the court, and the opposition
of the Director of Lands was filed after the entry of the order of general default. After considering the
evidence, the trial court rendered its April 26, 1974 Decision. The dispositive portion reads:

____________________________
* As per September 3, 2007 raffle.

WHEREFORE, the Court hereby declares the applicant, Fermina Castro, of legal age, single,
Filipino and a resident of 1515 F. Agoncillo St., Corner J. Escoda St., Ermita, Manila, the true and
absolute owner of the land applied for situated in the Municipality of Paraaque, Province of Rizal,
with an area of 17,343 square meters and covered by plan (LRC) Psu-964 and orders the
registration of said parcel of land in her name with her aforementioned personal circumstances.

Once this decision becomes final and executory, let the corresponding order for the issuance of the
decree be issued.

SO ORDERED.1

The Director of Lands and Mercedes Dizon did not appeal from the adverse decision of the Pasig-
Rizal CFI. Thus, the order for the issuance of a decree of registration became final, and Decree No.
N-150912 was issued by the Land Registration Commission (LRC). 2 Original Certificate of Title
(OCT) No. 10215 was issued in the name of Fermina Castro by the Register of Deeds for the
Province of Rizal on May 29, 1974.3
The land was then sold to Jesus S. Yujuico, and OCT No. 10215 was cancelled. On May 31,
1974,4 Transfer Certificate of Title (TCT) No. 445863 was issued in Yujuicos name, who subdivided
the land into two lots. TCT No. 4463865 over Lot 1 was issued in his name, while TCT No. S-
293616 over Lot 2 was issued in the name of petitioner Augusto Y. Carpio.

Annotations at the back of TCT No. 446386 show that Yujuico had, at one time or another,
mortgaged the lot to the Philippine Investments System Organization (PISO) and Citibank, N.A.
Annotations in the title of petitioner Carpio reveal the lot was mortgaged in favor of Private
Development Corporation (PDC), Rizal Commercial Banking Corporation (RCBC) and then
Philippine Commercial and Industrial Bank (PCIB) and the Development Bank of the Philippines
(DBP) to secure various loans.

Sometime in 1977, Presidential Decree No. (PD) 1085 entitled Conveying the Land Reclaimed in the
Foreshore and Offshore of the Manila Bay (The Manila-Cavite Coastal Road Project) as Property of
the Public Estates Authority as well as Rights and Interests with Assumptions of Obligations in the
Reclamation Contract Covering Areas of the Manila Bay between the Republic of the Philippines
and the Construction and Development Corporation of the Philippines (1977) was issued. Land
reclaimed in the foreshore and offshore areas of Manila Bay became the properties of the Public
Estates Authority (PEA), a government corporation that undertook the reclamation of lands or the
acquisition of reclaimed lands. On January 13, 1989, OCT No. SP 02 was issued in favor of PEA.
The PEA also acquired ownership of other parcels of land along the Manila Bay coast, some of
which were subsequently sold to the Manila Bay Development Corporation (MBDC), which in turn
leased portions to Uniwide Holdings, Inc.7

The PEA undertook the construction of the Manila Coastal Road. As this was being planned, Yujuico
and Carpio discovered that a verification survey they commissioned showed that the road directly
overlapped their property, and that they owned a portion of the land sold by the PEA to the MBDC.

On July 24, 1996, Yujuico and Carpio filed before the Paraaque City Regional Trial Court (RTC), a
complaint for the Removal of Cloud and Annulment of Title with Damages docketed as Civil Case
No. 96-0317 against the PEA. On May 15, 1998 the parties entered into a compromise agreement
approved by the trial court in a Resolution dated May 18, 1998. On June 17, 1998, the parties
executed a Deed of Exchange of Real Property, pursuant to the compromise agreement, where the
PEA property with an area of 1.4007 hectares would be conveyed to Jesus Yujuico and petitioner
Carpio in exchange for their property with a combined area of 1.7343 hectares.

On July 31, 1998, the incumbent PEA General Manager, Carlos P. Doble, informed the OSG that the
new PEA board and management had reviewed the compromise agreement and had decided to
defer its implementation and hold it in abeyance following the view of the former PEA General
Manager, Atty. Arsenio Yulo, Jr., that the compromise agreement did not reflect a condition of the
previous PEA Board, requiring the approval of the Office of the President. The new PEA
management then filed a petition for relief from the resolution approving the compromise agreement
on the ground of mistake and excusable negligence.

The petition was dismissed by the trial court on the ground that it was filed out of time and that the
allegation of mistake and excusable negligence lacked basis.
The PEA fared no better in the Court of Appeals (CA), as the petition was dismissed for failure to pay
the required docket fees and for lack of merit.

The matter was raised to the Supreme Court in Public Estates Authority v. Yujuico 8 but PEAs petition
was denied, upholding the trial courts dismissal of the petition for relief for having been filed out of
time. The allegation of fraud in the titling of the subject property in the name of Fermina Castro was
not taken up by the Court.

On June 8, 2001, in a Complaint for Annulment and Cancellation of Decree No. N-150912 and its
Derivative Titles, entitled Republic of the Philippines v. Fermina Castro, Jesus S. Yujuico, August Y.
Carpio and the Registry of Deeds of Paraaque City docketed as Civil Case No. 01-0222, filed with
the Paraaque City RTC, respondent Republic of the Philippines, through the OSG, alleged that
when the land registered to Castro was surveyed by Engr. H. Obreto on August 3, 1972 and
subsequently approved by the LRC on April 23, 1973, the land was still a portion of Manila Bay as
evidenced by Namria Hydrographic Map No. 4243, Surveys to 1980; 1st Ed/. January 9/61: Revised
80-11-2; that Roman Mataverde, the then OIC of the Surveys Division, Bureau of Lands, informed
the OIC of the Legal Division that "[w]hen projected on Cadastral Maps CM 14 deg. 13 N-120 deg,
59E, Sec.2-A of Paraaque Cadastre (Cad. 299), (LRC) Psu-964 falls inside Manila Bay, outside
Cad. 299"; that then Acting Regional Lands Director Narciso V. Villapando issued a Report dated
November 15, 1973 stating that plan (LRC) Psu-964 is a portion of Manila Bay; that then Officer-in-
Charge, Assistant Director of Lands, Ernesto C. Mendiola, submitted his Comment and
Recommendation re: Application for Registration of Title of FERMINA CASTRO, LRC Case No. N-
8239, dated Dec. 1, 1977, praying that the instant registration case be dismissed; and that Fermina
Castro had no registrable rights over the property.

More significantly, respondent Republic argued that, first, since the subject land was still underwater,
it could not be registered in the name of Fermina Castro. Second, the land registration court did not
have jurisdiction to adjudicate inalienable lands, thus the decision adjudicating the subject parcel of
land to Fermina Castro was void. And third, the titles of Yujuico and Carpio, being derived from a
void title, were likewise void.9

On September 13, 2001, Yujuico and Carpio filed a Motion to Dismiss (With Cancellation of Notice of
Lis Pendens),10 on the grounds that: (1) the cause of action was barred by prior judgment; (2) the
claim had been waived, abandoned, or otherwise extinguished; (3) a condition precedent for the
filing of the complaint was not complied with; and (4) the complaint was not verified and the
certification against forum shopping was not duly executed by the plaintiff or principal party.

On November 27, 2001, respondent Republic filed an Opposition11 to the motion to dismiss to which
defendants filed a Reply12 on January 14, 2002, reiterating the grounds for the motion to dismiss.

In the August 7, 2002 Order of the RTC,13 Civil Case No. 01-0222 was dismissed. The trial court
stated that the matter had already been decided in LRC Case No. N-8239, and that after 28 years
without being contested, the case had already become final and executory. The trial court also
1wphi1

found that the OSG had participated in the LRC case, and could have questioned the validity of the
decision but did not. Civil Case No. 01-0222 was thus found barred by prior judgment.
On appeal to the CA, in CA-G.R. CV No. 76212, respondent Republic alleged that the trial court
erred in disregarding that appellant had evidence to prove that the subject parcel of land used to be
foreshore land of the Manila Bay and that the trial court erred in dismissing Civil Case No. 01-0222
on the ground of res judicata.14

The CA observed that shores are properties of the public domain intended for public use and,
therefore, not registrable and their inclusion in a certificate of title does not convert the same into
properties of private ownership or confer title upon the registrant.

Further, according to the appellate court res judicata does not apply to lands of public domain, nor
does possession of the land automatically divest the land of its public character.

The appellate court explained that rulings of the Supreme Court have made exceptions in cases
where the findings of the Director of Lands and the Department of Environment and Natural
Resources (DENR) were conflicting as to the true nature of the land in as much as reversion efforts
pertaining foreshore lands are embued with public interest.

The dispositive portion of the CA decision reads,

WHEREFORE, premises considered, the present appeal is hereby GRANTED. The appealed Order
dated August 7, 2002 of the trial court in Civil Case No. 01-0222 is hereby REVERSED and SET
ASIDE. The case is hereby REMANDED to said court for further proceedings and a full-blown trial
on the merits with utmost dispatch.15

Hence, this petition.

The Issues

Petitioners now raise the following issues before this Court:

THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR AND DECIDED A QUESTION OF

SUBSTANCE IN A WAY NOT IN ACCORDANCE WITH LAW AND THE APPLICABLE DECISIONS
OF THE HONORABLE COURT AND HAS DEPARTED FROM THE ACCEPTED AND USUAL
COURSE OF JUDICIAL PROCEEDINGS NECESSITATING THE HONORABLE COURTS
EXERCISE OF ITS POWER OF SUPERVISION CONSIDERING THAT:

I. THE REVERSAL BY THE COURT OF APPEALS OF THE TRIAL COURTS APPLICATION OF

THE PRINCIPLE OF RES JUDICATA IN THE INSTANT CASE IS BASED ON ITS ERRONEOUS
ASSUMPTION THAT THE SUBJECT LAND IS OF PUBLIC DOMAIN, ALLEGEDLY PART OF
MANILA BAY.

A. IN THE FIRESTONE CASE, THE HONORABLE COURT APPLIED THE PRINCIPLE OF

RES JUDICATA NOTWITHSTANDING ALLEGATIONS OF LACK OF JURISDICTION OF A
LAND REGISTRATION COURT, FORECLOSING ANY FURTHER ATTEMPT BY
RESPONDENT THEREIN, AS IN THE INSTANT CASE, TO RESURRECT A LONG-
SETTLED JUDICIAL DETERMINATION OF REGISTRABILITY OF A PARCEL OF LAND
 BASED ON THE SHEER ALLEGATION THAT THE SAME IS PART OF THE PUBLIC
DOMAIN.

B. THE LAND REGISTRATION COURT HAD JURISDICTION TO DETERMINE WHETHER

THE SUBJECT LAND WAS PART OF THE PUBLIC DOMAIN.

C. RESPONDENTS REVERSION CASE SEEKS TO RETRY THE VERY SAME FACTUAL

ISSUES THAT HAVE ALREADY BEEN JUDICIALLY DETERMINED OVER THIRTY (30)
YEARS AGO.

D. THE JURISPRUDENTIAL BASES APPLIED BY THE COURT OF APPEALS IN ITS

QUESTIONED DECISION ARE MISPLACED, CONSIDERING THAT THEY ARE ALL
PREDICATED ON THE ERRONEOUS PREMISE THAT IT IS UNDISPUTED THAT THE
SUBJECT LAND IS PART OF THE PUBLIC DOMAIN.

II. RESPONDENT IS BARRED BY JURISDICTIONAL ESTOPPEL AND LACHES FROM

QUESTIONING THE JURISDICTION OF THE LAND REGISTRATION COURT.

III. RELIANCE BY THE COURT OF APPEALS ON THE ISOLATED PRONOUNCEMENT OF THE

HONORABLE COURT IN THE PEA CASE IS UNWARRANTED AND MISLEADING CONSIDERING
THAT THE MATTER OF WHETHER RES JUDICATA APPLIES WITH RESPECT TO THE LAND
REGISTRATION COURTS DECISION IN 1974 WAS NOT IN ISSUE IN SAID CASE.

A. THE INSTANT REVERSION CASE IS NOT THE PROPER RECOURSE.

B. THE VALIDITY OF THE COURT-APPROVED COMPROMISE AGREEMENT 15 MAY

1998 HAS ALREADY BEEN AFFIRMED BY THE HONORABLE COURT IN THE PEA CASE.

IV. EQUITABLE CONSIDERATIONS MANDATE THE APPLICATION OF THE RULE ON ORDINARY

ESTOPPEL AND LACHES IN THE INSTANT CASE AGAINST RESPONDENT.

V. RESPONDENT CANNOT BE GIVEN SPECIAL CONSIDERATION AND EXCUSED FOR

TRANSGRESSING RULES OF PROCEDURE.16

Essentially, the issues boil down to three: (1) Is a reversion suit proper in this case? (2) Is the
present petition estopped by laches? (3) Did the CA erroneously apply the principle of res judicata?

An action for reversion seeks to restore public land fraudulently awarded and disposed of to private
individuals or corporations to the mass of public domain. 17 This remedy is provided under
Commonwealth Act (CA) No. 141 (Public Land Act) which became effective on December 1, 1936.
Said law recognized the power of the state to recover lands of public domain. Section 124 of CA No.
141 reads:

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 twenty-three of this Act
shall 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
presumptively, and cause the reversion of the property and its improvements to the State. (Emphasis
supplied.)

Pursuant to Section 124 of the Public Land Act, reversion suits are proper in the following instances,
to wit:

1. Alienations of land acquired under free patent or homestead provisions in violation of

Section 118, CA No. 141;

2. Conveyances made by non-Christians in violation of Section 120, CA No. 141; and

3. Alienations of lands acquired under CA No. 141 in favor of persons not qualified under
Sections 121, 122, and 123 of CA No. 141.

From the foregoing, an action for reversion to cancel titles derived from homestead patents or free
patents based on transfers and conveyances in violation of CA No. 141 is filed by the OSG pursuant
to its authority under the Administrative Code with the RTC. It is clear therefore that reversion suits
were originally utilized to annul titles or patents administratively issued by the Director of the Land
Management Bureau or the Secretary of the DENR.

While CA No. 141 did not specify whether judicial confirmation of titles by a land registration court
can be subject of a reversion suit, the government availed of such remedy by filing actions with the
RTC to cancel titles and decrees granted in land registration applications.

The situation changed on August 14, 1981 upon effectivity of Batas Pambansa (BP) Blg. 129 which
gave the Intermediate Appellate Court the exclusive original jurisdiction over actions for annulment of
judgments of RTCs.

When the 1997 Rules of Civil Procedure became effective on July 1, 1997, it incorporated Rule 47
on annulment of judgments or final orders and resolutions of the RTCs. The two grounds for
annulment under Sec. 2, Rule 47 are extrinsic fraud and lack of jurisdiction. If based on extrinsic
fraud, the action must be filed within four (4) years from its discovery, and if based on lack of
jurisdiction, before it is barred by laches or estoppel as provided by Section 3, Rule 47. Thus,
effective July 1, 1997, any action for reversion of public land instituted by the Government was
already covered by Rule 47.

The instant Civil Case No. 01-0222 for annulment and cancellation of Decree No. N-150912 and its
derivative titles was filed on June 8, 2001 with the Paraaque City RTC. It is clear therefore that the
reversion suit was erroneously instituted in the Paraaque RTC and should have been dismissed for
lack of jurisdiction. The proper court is the CA which is the body mandated by BP Blg. 129 and
prescribed by Rule 47 to handle annulment of judgments of RTCs.

In Collado v. Court of Appeals,18 the government, represented by the Solicitor General pursuant to
Section 9(2) of BP Blg. 129, filed a petition for annulment of judgment with the CA. Similarly in the
case of Republic v. Court of Appeals,19 the Solicitor General correctly filed the annulment of judgment
with the said appellate court.

This was not done in this case. The Republic misfiled the reversion suit with the Paraaque RTC. It
should have been filed with the CA as required by Rule 47. Evidently, the Paraaque RTC had no
jurisdiction over the instant reversion case.

Assuming that the Paraaque RTC has jurisdiction over the reversion case, still the lapse of almost
three decades in filing the instant case, the inexplicable lack of action of the Republic and the injury
this would cause constrain us to rule for petitioners. While it may be true that estoppel does not
operate against the state or its agents,20deviations have been allowed. In Manila Lodge No. 761 v.
Court of Appeals, we said:

Estoppels against the public are little favored. They should not be invoked except in rare and
unusual circumstances, and may not be invoked where they would operate to defeat the effective
operation of a policy adopted to protect the public. They must be applied with circumspection and
should be applied only in those special cases where the interests of justice clearly require it.
Nevertheless, the government must not be allowed to deal dishonorably or capriciously with its
citizens, and must not play an ignoble part or do a shabby thing; and subject to limitations x x x, the
doctrine of equitable estoppel may be invoked against public authorities as well as against private
individuals.21 (Emphasis supplied.)

Equitable estoppel may be invoked against public authorities when as in this case, the lot was
already alienated to innocent buyers for value and the government did not undertake any act to
contest the title for an unreasonable length of time.

In Republic v. Court of Appeals, where the title of an innocent purchaser for value who relied on the
clean certificates of the title was sought to be cancelled and the excess land to be reverted to the
Government, we ruled that "[i]t is only fair and reasonable to apply the equitable principle of estoppel
by laches against the government to avoid an injustice to innocent purchasers for value (emphasis
supplied)."22 We explained:

Likewise time-settled is the doctrine that where innocent third persons, relying on the correctness of
the certificate of title, acquire rights over the property, courts cannot disregard such rights and order
the cancellation of the certificate. Such cancellation would impair public confidence in the certificate
of title, for everyone dealing with property registered under the Torrens system would have to inquire
in every instance whether the title has been regularly issued or not. This would be contrary to the
very purpose of the law, which is to stabilize land titles. Verily, all persons dealing with registered
land may safely rely on the correctness of the certificate of title issued therefore, and the law or the
courts do not oblige them to go behind the certificate in order to investigate again the true condition
of the property. They are only charged with notice of the liens and encumbrances on the property
that are noted on the certificate.23

xxxx
But in the interest of justice and equity, neither may the titleholder be made to bear the unfavorable
effect of the mistake or negligence of the States agents, in the absence of proof of his complicity in a
fraud or of manifest damage to third persons. First, the real purpose of the Torrens system is to quiet
title to land to put a stop forever to any question as to the legality of the title, except claims that were
noted in the certificate at the time of the registration or that may arise subsequent thereto. Second,
as we discussed earlier, estoppel by laches now bars petitioner from questioning private
respondents titles to the subdivision lots. Third, it was never proven that Private Respondent St.
Jude was a party to the fraud that led to the increase in the area of the property after its subdivision.
Finally, because petitioner even failed to give sufficient proof of any error that might have been
committed by its agents who had surveyed the property, the presumption of regularity in the
performance of their functions must be respected. Otherwise, the integrity of the Torrens system,
which petitioner purportedly aims to protect by filing this case, shall forever be sullied by the
ineptitude and inefficiency of land registration officials, who are ordinarily presumed to have regularly
performed their duties.24

Republic v. Court of Appeals is reinforced by our ruling in Republic v. Umali,25 where, in a reversion
case, we held that even if the original grantee of a patent and title has obtained the same through
fraud, reversion will no longer prosper as the land had become private land and the fraudulent
acquisition cannot affect the titles of innocent purchasers for value.

Considering that innocent purchaser for value Yujuico bought the lot in 1974, and more than 27
years had elapsed before the action for reversion was filed, then said action is now barred by laches.

While the general rule is that an action to recover lands of public domain is imprescriptible, said right
can be barred by laches or estoppel. Section 32 of PD 1592 recognized the rights of an innocent
purchaser for value over and above the interests of the government. Section 32 provides:

SEC. 32. Review of decree of registration; Innocent purchaser for value.The decree of registration
shall not be reopened or revised by reason of absence, minority, or other disability of any person
adversely affected thereby, nor by any proceeding in any court for reversing judgments, subject,
however, to the right of any person, including the government and the branches thereof, deprived of
land or of any estate or interest therein by such adjudication or confirmation of title obtained by
actual fraud, to file in the proper Court of First Instance a petition for reopening and review of the
decree of registration not later than one year from and after the date of the entry of such decree of
registration, but in no case shall such petition be entertained by the court where an innocent
purchaser for value has acquired the land or an interest therein, whose rights may be prejudiced.
Whenever the phrase "innocent purchaser for value" or an equivalent phrase occurs in this Decree,
it shall be deemed to include an innocent lessee, mortgagee, or other encumbrances for value.
(Emphasis supplied.)

In this petition, the LRC (now LRA), on May 30, 1974, issued Decree No. N-150912 in favor of
Fermina Castro and OCT No. 10215 was issued by the Rizal Registrar of Deeds on May 29, 1974.
OCT No. 10215 does not show any annotation, lien, or encumbrance on its face. Relying on the
clean title, Yujuico bought the same in good faith and for value from her. He was issued TCT No.
445863 on May 31, 1974. There is no allegation that Yujuico was a buyer in bad faith, nor did he
acquire the land fraudulently. He thus had the protection of the Torrens System that every
subsequent purchaser of registered land taking a certificate of title for value and in good faith shall
hold the same free from all encumbrances except those noted on the certificate and any of the x x x
encumbrances which may be subsisting.26 The same legal shield redounds to his successors-in-
interest, the Yujuicos and Carpio, more particularly the latter since Carpio bought the lot from Jesus
Y. Yujuico for value and in good faith.

Likewise protected are the rights of innocent mortgagees for value, the PISO, Citibank, N.A., PDC,
RCBC, PCIB, and DBP. Even if the mortgagors title was proved fraudulent and the title declared null
and void, such declaration cannot nullify the mortgage rights of a mortgagee in good faith. 27

All told, a reversion suit will no longer be allowed at this stage.

More on the issue of laches. Laches 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. It
is negligence or omission to assert a right within a reasonable time, warranting a presumption that
the party entitled thereto has either abandoned or declined to assert it. 28

When respondent government filed the reversion case in 2001, 27 years had already elapsed from
the time the late Jesus Yujuico purchased the land from the original owner Castro. After the issuance
of OCT No. 10215 to Castro, no further action was taken by the government to question the
issuance of the title to Castro until the case of Public Estates Authority, brought up in the oral
argument before this Court on September 6, 2000.29 We then held that allegation of fraud in the
issuance of the title was not proper for consideration and determination at that stage of the case.

From the undisputed facts of the case, it is easily revealed that respondent Republic took its sweet
time to nullify Castros title, notwithstanding the easy access to ample remedies which were readily
available after OCT No. 10215 was registered in the name of Castro. First, it could have appealed to
the CA when the Pasig-Rizal CFI rendered a decision ordering the registration of title in the name of
applicant Castro on April 26, 1974. Had it done so, it could have elevated the matter to this Court if
the appellate court affirms the decision of the land registration court. Second, when the entry of
Decree No. N-150912 was made on May 29, 1974 by the Rizal Register of Deeds, the Republic had
one (1) year from said date or up to May 28, 1975 to file a petition for the reopening and review of
Decree No. N-150912 with the Rizal CFI (now RTC) on the ground of actual fraud under section 32
of PD 1592. Again, respondent Republic did not avail of such remedy. Third, when Jesus Yujuico
filed a complaint for Removal of Cloud and Annulment of Title with Damages against PEA before the
Paraaque RTC in Civil Case No. 96-0317, respondent could have persevered to question and
nullify Castros title. Instead, PEA undertook a compromise agreement on which the May 18, 1998
Resolution30 was issued. PEA in effect admitted that the disputed land was owned by the
predecessors-in-interest of petitioners and their title legal and valid; and impliedly waived its right to
contest the validity of said title; respondent Republic even filed the petition for relief from judgment
beyond the time frames allowed by the rules, a fact even acknowledged by this Court in Public
Estates Authority. Lastly, respondent only filed the reversion suit on June 8, 2001 after the passage
of 27 years from the date the decree of registration was issued to Fermina Castro.

Such a Rip Van Winkle, coupled with the signing of the settlement with PEA, understandably misled
petitioners to believe that the government no longer had any right or interest in the disputed lot to the
extent that the two lots were even mortgaged to several banks including a government financing
institution. Any nullification of title at this stage would unsettle and prejudice the rights and
obligations of innocent parties. All told, we are constrained to conclude that laches had set in.

Even granting arguendo that respondent Republic is not precluded by laches from challenging the
title of petitioners in the case at bar, still we find that the instant action for reversion is already barred
by res judicata.

Petitioners relying on Firestone Ceramics, Inc. v. Court of Appeals 31 as a precedent to the case at bar
contend that the instant reversion suit is now barred by res judicata.

We agree with petitioners.

The doctrine on precedents is expressed in the latin maximStare decisis et non quieta movere.
Follow past precedents and do not disturb what has been settled.32 In order however that a case can
be considered as a precedent to another case which is pending consideration, the facts of the first
case should be similar or analogous to the second case.

A perusal of the facts of the Firestone case and those of the case at bar reveals that the facts in the
two (2) cases are parallel. First, in Firestone and in this case, the claimants filed land registration
applications with the CFI; both claimants obtained decrees for registration of lots applied for and
were issued OCTs. Second, in Firestone, the Republic filed a reversion case alleging that the land
covered by the OCT was still inalienable forest land at the time of the application and hence the
Land Registration Court did not acquire jurisdiction to adjudicate the property to the claimant. In the
instant case, respondent Republic contend that the land applied for by Yujuico was within Manila
Bay at the time of application and therefore the CFI had no jurisdiction over the subject matter of the
complaint. Third, in Firestone, the validity of the title of the claimant was favorably ruled upon by this
Court in G.R. No. 109490 entitled Patrocinio E. Margolles v. CA. In the case at bar, the validity of the
compromise agreement involving the disputed lot was in effect upheld when this Court in Public
Estates Authority v. Yujuico dismissed the petition of PEA seeking to reinstate the petition for relief
from the May 18, 1998 Resolution approving said compromise agreement. With the dismissal of the
petition, the May 18, 1998 Resolution became final and executory and herein respondent Republic
through PEA was deemed to have recognized Castros title over the disputed land as legal and valid.
In Romero v. Tan,33 we ruled that "a judicial compromise has the effect of res judicata." We also
made clear that a judgment based on a compromise agreement is a judgment on the merits, wherein
the parties have validly entered into stipulations and the evidence was duly considered by the trial
court that approved the agreement. In the instant case, the May 18, 1998 Resolution approving the
compromise agreement confirmed the favorable decision directing the registration of the lot to
Castros name in LRC Case No. N-8239. Similarly, in Firestone, the Margolles case confirmed the
decision rendered in favor of Gana in Land Registration Case No. 672 ordering the issuance of the
decree to said applicant. Fourth, in Firestone, the Supreme Court relied on the letter of then Solicitor
General Francisco Chavez that the evidence of the Bureau of Lands and the LRC was not sufficient
to support an action for cancellation of OCT No. 4216. In the instant case, both the Solicitor General
and the Government Corporate Counsel opined that the Yujuico land was not under water and that
"there appears to be no sufficient basis for the Government to institute the action for
annulment." Fifth, in Firestone, we ruled that "the Margolles case had long become final, thus the
validity of OCT No. 4216 should no longer be disturbed and should be applied in the instant case
(reversion suit) based on the principle of res judicata or, otherwise, the rule on conclusiveness of
judgment."34

Clearly from the above, Firestone is a precedent case. The Public Estates Authority had become
final and thus the validity of OCT No. 10215 issued to Castro could no longer be questioned.

While we said in Public Estates Authority that the court does not foreclose the right of the Republic
from pursuing the proper recourse in a separate proceedings as it may deem warranted, the
statement was obiter dictum since the inquiry on whether or not the disputed land was still under
water at the time of its registration was a non-issue in the said case.

Even granting for the sake of argument that Firestone is not squarely applicable, still we find the
reversion suit already barred by res judicata.

For res judicata to serve as an absolute bar to a subsequent action, the following requisites must
concur: (1) there must be a final judgment or order; (2) the court rendering it must have jurisdiction
over the subject matter and the parties; (3) it must be a judgment or order on the merits; and (4)
there must be between the two cases, identity of parties, subject matter and causes of action. 35

There is no question as to the first, third and last requisites. The threshold question pertains to the
second requisite, whether or not the then Pasig-Rizal CFI, Branch 22 had jurisdiction over the
subject matter in LRC Case No. N-8239. In Civil Case No. 01-0222, the Paraaque City RTC,
Branch 257 held that the CFI had jurisdiction. The CA reversed the decision of the Paraaque City
RTC based on the assertion of respondent Republic that the Pasig-Rizal CFI had no jurisdiction over
the subject matter, and that there was a need to determine the character of the land in question.

The Paraaque City RTC Order dismissing the case for res judicata must be upheld.

The CA, in rejecting the dismissal of the reversion case by the Paraaque RTC, relied on two cases,
namely: Municipality of Antipolo v. Zapanta36 and Republic v. Vda. De Castillo.37

In Municipality of Antipolo, we held that the land registration court had no jurisdiction to entertain any
land registration application if the land was public property, thus:

Since the Land Registration Court had no jurisdiction to entertain the application for registration of
public property of ANTIPOLO, its Decision adjudicating the DISPUTED PROPERTY as of private
ownership is null and void. It never attained finality, and can be attacked at any time. It was not a bar
to the action brought by ANTIPOLO for its annulment by reason of res judicata.

"[x x x] the want of jurisdiction by a court over the subject matter renders the judgment void and a
mere nullity, and considering that a void judgment is in legal effect no judgment, by which no rights
are divested, from which no rights can be obtained, which neither binds nor bars any one, and under
which all acts performed and all claims flowing out of are void, and considering, further, that the
decision, for want of jurisdiction of the court, is not a decision in contemplation of law, and hence,
can never become executory, it follows that such a void judgment cannot constitute a bar to another
case by reason of res judicata."

xxxx

"It follows that if a person obtains a title under the Public Land Act which includes, by oversight,
lands which cannot be registered under the Torrens System, or when the Director of Lands did not
have jurisdiction over the same because it is a public forest, the grantee does not, by virtue of the
said certificate of title alone, become the owner of the land illegally included (Republic vs. Animas,
56 SCRA 499, 503; Ledesma vs. Municipality of Iloilo, 49 Phil. 769)."

[x x x x]

"Under these circumstances, the certificate of title may be ordered cancelled (Republic vs. Animas,
et al., supra), and the cancellation maybe pursued through an ordinary action therefore. This action
cannot be barred by the prior judgment of the land registration court, since the said court had no
jurisdiction over the subject matter. And if there was no such jurisdiction, then the principle of res
judicata does not apply. [x x x] Certainly, one of the essential requisites, i.e., jurisdiction over the
subject matter, is absent in this case." (Italics supplied). 38

The plain import of Municipality of Antipolo is that a land registration court, the RTC at present, has
no jurisdiction over the subject matter of the application which respondent Republic claims is public
land. This ruling needs elucidation.

Firmly entrenched is the principle that jurisdiction over the subject matter is conferred by
law.39 Consequently, the proper CFI (now the RTC) under Section 14 of PD 152940 (Property
Registration Decree) has jurisdiction over applications for registration of title to land.

Section 14 of PD 1592 provides:

SEC. 14. Who may apply.The following persons may file in the proper Court of First Instance an
application for registration of title to land, whether personally or through their duly authorized
representatives:

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

Conformably, the Pasig-Rizal CFI, Branch XXII has jurisdiction over the subject matter of the land
registration case filed by Fermina Castro, petitioners predecessor-in-interest, since jurisdiction over
the subject matter is determined by the allegations of the initiatory pleadingthe
application.41 Settled is the rule that "the authority to decide a case and not the decision rendered
therein is what makes up jurisdiction. When there is jurisdiction, the decision of all questions arising
in the case is but an exercise of jurisdiction."42
In our view, it was imprecise to state in Municipality of Antipolo that the "Land Registration Court
[has] no jurisdiction to entertain the application for registration of public property x x x" for such court
precisely has the jurisdiction to entertain land registration applications since that is conferred by PD
1529. The applicant in a land registration case usually claims the land subject matter of the
application as his/her private property, as in the case of the application of Castro. Thus, the
conclusion of the CA that the Pasig-Rizal CFI has no jurisdiction over the subject matter of the
application of Castro has no legal mooring. The land registration court initially has jurisdiction over
the land applied for at the time of the filing of the application. After trial, the court, in the exercise of
its jurisdiction, can determine whether the title to the land applied for is registrable and can be
confirmed. In the event that the subject matter of the application turns out to be inalienable public
land, then it has no jurisdiction to order the registration of the land and perforce must dismiss the
application.

Based on our ruling in Antipolo, the threshold question is whether the land covered by the titles of
petitioners is under water and forms part of Manila Bay at the time of the land registration application
in 1974. If the land was within Manila Bay, then res judicata does not apply. Otherwise, the decision
of the land registration court is a bar to the instant reversion suit.

After a scrutiny of the case records and pleadings of the parties in LRC Case No. N-8239 and in the
instant petition, we rule that the land of Fermina Castro is registrable and not part of Manila Bay at
the time of the filing of the land registration application.

The trial courts Decision in 1974 easily reveals the basis for its conclusion that the subject matter
was a dry land, thus:

On February 1, 1974, the applicant presented her evidence before the Deputy Clerk of this Court
and among the evidence presented by her were certain documents which were marked as Exhibits
D to J, inclusive. The applicant testified in her behalf and substantially declared that: she was 62
years old, single, housekeeper and residing at 1550 J. Escoda, Ermita, Manila; that she was born on
June 3, 1911; that she first came to know of the land applied for which is situated in the Municipality
of Paraaque, province of Rizal, with an area of 17,343 square meters and covered by plan (LRC)
Psu-964 while she was still ten (10) years old or sometime in 1921; that when she first came to know
of the land applied for, the person who was in possession and owner of said land was her father,
Catalino Castro; that during that time her father used to plant on said land various crops like pechay,
mustard, eggplant, etc.; that during that time, her father built a house on said land which was used
by her father and the other members of the family, including the applicant, as their residential house;
that the land applied for was inherited by her father from her grandfather Sergio Castro; that Catalino
Castro continuously possessed and owned the land in question from 1921 up to the time of his death
in 1952; and that during that period of time nobody ever disturbed the possession and ownership of
her father over the said parcel of land; that after the death of her father in 1952 she left the place and
transferred her place of residence but she had also occasions to visit said land twice or thrice a
week and sometimes once a week; that after she left the land in question in 1952, she still continued
possessing said land, through her caretaker Eliseo Salonga; that her possession over the land in
question from the time she inherited it up to the time of the filing of the application has been
continuous, public, adverse against the whole world and in the concept of an owner; that it was
never encumbered, mortgaged, or disposed of by her father during his lifetime and neither did she
ever encumber or sell the same; that it was declared for taxation purposes by her father when he
was still alive and her father also paid the real estate taxes due to the government although the
receipt evidencing the payment of said real estate taxes for the property applied for have been lost
and could no longer be found inspite of diligent effort exerted to locate the same.

The other witness presented by the applicant was Emiliano de Leon, who declared that he was 70
years old, married, farmer and residing at San Jose, Baliwag, Bulacan; that he knew Catalino
Castro, the father of the applicant because said Catalino Castro was his neighbor in Tambo,
Paraaque, Rizal, he had a house erected on the land of Catalino Castro; that he was born in 1903
and he first came to know of the land in question when in 1918 when he was about 18 years old; that
the area of the land owned and possessed by Catalino Castro where he constructed a residential
house has an area of more than one and one-half (1 ) hectares; that the possession of Catalino
Castro over the land in question was peaceful, continuous, notorious, adverse against the whole
world and in the concept of an owner; that during the time that Catalino Castro was in possession of
the land applied for he planted on said parcel of land mango, coconut and banana, etc.; that Catalino
Castro continuously possessed and owned said parcel of land up to the year 1952 when he died;
that during the time that Catalino Castro was in possession of said land, nobody ever laid claim over
the said property; that said land is not within any military or naval reservation; that upon the death of
Catalino Castro, the applicant took possession of the land applied for and that up to the present the
applicant is in possession of said land; that he resided in the land in question from 1918 up to the
time he transferred his place of residence in Baliwag, Bulacan in the year 1958.

On February 11, 1974, the Court, pursuant to the provision of Presidential Decree No. 230 issued by
his Excellency, Ferdinand E. Marcos dated July 9, 1973 held in abeyance the rendition of a decision
in this case and directed the applicant to submit a white print copy of plan (LRC) Psu-964 to the
Director of lands who was directed by the Court to submit his comment and recommendation
thereon.

The property in question is declared for taxation purposes under Tax Declaration No. 51842 (Exhibit
G) and real estate taxes due thereon have been paid up to the year 1973 (Exhibit H).

In compliance with the Order of this Court February 11, 1974, the Director of Lands, thru Special
Attorney Saturnino A. Pacubas, submitted a report to this Court dated April 25, 1974, stating among
other things, that upon ocular inspection conducted by Land Inspector Adelino G. Gorospe and the
subsequent joint ocular inspection conducted by Geodetic Engineer Manuel A. Cervantes and
Administrative Assistant Lazaro G. Berania, it was established that the parcel of land covered by
plan (LRC) Psu-964 no longer forms part of the Manila Bay but is definitely solid and dry land.

In this connection, it should be noted that Administrative Assistant Lazaro G. Berania and Geodetic
Engineer Manuel A. Cervantes, in their report dated March 22, 1974 have also stated that the land
applied for cannot be reached by water even in the highest tide and that the said land is occupied by
squatter families who have erected makeshift shanties and a basketball court which only prove that
the same is dry and solid land away from the shores of Manila Bay.

Furthermore, Land Inspector Adelino G. Gorospe in his letter-report dated November 28, 1973 has
also stated that there is a house of pre-war vintage owned by the applicant on the land in question
which in effect corroborates the testimony of the applicant and her witness that they have lived on
the land in question even prior to the outbreak of the second world war and that the applicant has
been in possession of the land in question long time ago.43

To counter the evidence of applicant Castro, and bolster its claim that she has no valid title,
respondent Republic relies on the July 18, 1973 Office Memorandum 44 of Roman Mataverde, OIC,
Surveys Division, to the OIC, Legal Division, of the Bureau of Lands, stating that "when projected on
cadastral maps CM 14 13N - 120 59 E., Sec. 3-D and CM 14 30N - 120 59E., Sec. 2-A of
Paranaque [sic] Cadastre (Cad-299), (LRC) Psu-964 falls inside Manila Bay, outside Cad-299." 45

The same conclusion was adopted in a November 15, 1973 letter of Narciso Villapando, Acting
Regional Lands Director to the Chief, Legal Division, Bureau of Lands and in the Comment and
Recommendation of Ernesto C. Mendiola, Assistant Director, also of the Bureau of Lands.

Respondent likewise cites Namria Hydrographic Map No. 4243 Revised 80-11-2 to support its
position that Castros lot is a portion of Manila Bay.

The burden of proving these averments falls to the shoulders of respondent Republic. The difficulty
is locating the witnesses of the government. Roman Mataverde, then OIC of the Surveys Division
retired from the government service in 1982. He should by this time be in his 90s. Moreover, Asst.
Regional Director Narciso Villapando and Asst. Director Ernesto C. Mendiola are no longer
connected with the Bureau of Lands since 1986.

Assuming that OIC Roman Mataverde, Asst. Regional Director Narciso Villapando and Assistant
Director Ernesto C. Mendiola are still available as witnesses, the projections made on the cadastral
maps of the then Bureau of Lands cannot prevail over the results of the two ocular inspections by
several Bureau of Lands officials that the disputed lot is definitely "dry and solid land" and not part of
Manila Bay. Special Attorney Saturnino A. Pacubas, Land Inspector Adelino G. Gorospe, Geodetic
Engineer Manuel A. Cervantes and Administrative Asst. Lazaro A. Berana, all officials of the Bureau
of Lands, were positive that the disputed land is solid and dry land and no longer forms part of
Manila Bay. Evidence gathered from the ocular inspection is considered direct and firsthand
information entitled to great weight and credit while the Mataverde and Villapando reports are
evidence weak in probative value, being merely based on theoretical projections "in the cadastral
map or table surveys."46 Said projections must be confirmed by the actual inspection and verification
survey by the land inspectors and geodetic engineers of the Bureau of Lands. Unfortunately for
respondent Republic, the bureau land inspectors attested and affirmed that the disputed land is
already dry land and not within Manila Bay.

On the other hand, the Namria Hydrographic Map No. 4243 does not reveal what portion of Manila
Bay was Castros lot located in 1974. Moreover, a hydrographic map is not the best evidence to
show the nature and location of the lot subject of a land registration application. It is derived from a
hydrographic survey which is mainly used for navigation purposes, thus:

Surveys whose principal purpose is the determination of data relating to bodies of water. A
hydrographic survey may consist of the determination of one or several of the following classes of
data: depth water; configuration and nature of the bottom; directions and force of currents; heights
and times of tides and water stages; and location of fixed objects for survey and navigation
purposes.47

Juxtaposed with finding of the ocular inspection by Bureau of Lands Special Attorney Pacubas and
others that Castros lot is dry land in 1974, Namria Hydrographic Map No. 4243 is therefore inferior
evidence and lacking in probative force.

Moreover, the reliability and veracity of the July 18, 1973 report of Roman Mataverde based on the
alleged projection on cadastral maps and the Villapando report dated November 15, 1973 are put to
serious doubt in the face of the opinion dated October 13, 1997 of the Government Corporate
Counsel, the lawyer of the PEA, which upheld the validity of the titles of petitioners, thus:

We maintain to agree with the findings of the court that the property of Fermina Castro was
registrable land, as based on the two (2) ocular inspections conducted on March 22, 1974 by Lands
Administrative Assistant Lazaro G. Berania and Lands Geodetic Engr. Manuel Cervantes, finding
the same no longer forms part of Manila Bay but is definitely solid land which cannot be reached by
water even in the highest of tides. This Berania-Cervantes report based on ocular inspections
literally overturned the findings and recommendations of Land Director Narciso V. Villapando dated
November 15, 1973, and that of Director Ernesto C. Mendiola dated December 1, 1977, and the fact
that the Villapando-Mendiola reports were merely based on projections in the cadastral map or table
surveys.

xxxx

A. The Legal prognosis of the case is not promising in favor of PEA.

4.1 LRC Case No. N-8239 has already become final and executory and OCT No. 10215 was
already issued in favor of Fermina Castro. Any and all attempts to question its validity can
only be entertained in a quo warranto proceedings (sic), assuming that there are legal
grounds (not factual grounds) to support its nullification. Subjecting it to a collateral attack is
not allowed under the Torrens Title System. In Calalang vs. Register of Deeds of Quezon
City, 208 SCRA 215, the Supreme Court held that the present petition is not the proper
remedy in challenging the validity of certificates of titles since the judicial action required is a
direct and not a collateral attack (refer also to: Toyota Motor Philippine Corporation vs. CA,
216 SCRA 236).

4.2 OCT No. 10215 in favor of Fermina Castro was issued pursuant to a cadastral
proceeding, hence is a rem proceedings which is translated as a constructive notice to the
whole world, as held in Adez Realty Incorporated vs. CA, 212 SCRA 623.

4.3 From the cursory and intent reading of the decision of Judge Sison in LRC Case No. N-
8239, we cannot find any iota of fraud having been committed by the court and the parties. In
fact, due process was observed when the Office of the Solicitor General represented ably the
Bureau of Lands. In Balangcad vs. Justices of the Court of Appeals, 206 SCRA 169, the
Supreme Court held that title to registered property becomes indefeasible after one-year
from date of registration except where there is actual fraud in which case it may be
 challenged in a direct proceeding within that period. This is also the ruling in Bishop vs. CA,
208 SCRA 636, that to sustain an action for annulment of a torrens certificate for being void
ab initio, it must be shown that the registration court had not acquired jurisdiction over the
case and there was actual fraud in securing the title.

4.4 As to priority of torrens title, PEA has no defense, assuming that both PEA and Yujuico
titles are valid, as held in Metropolitan Waterworks and Sewerage System vs. CA, 215 SCRA
783, where two (2) certificates purport to include the same land, the earlier in date prevails.

4.5 The documents so far submitted by the parties to the court indicate that the mother title
of the Yujuico land when registered in 1974 was not underwater. This was shown in the two
(2) ocular inspections conducted by the officials of the Land Bureau.

4.6 The provision of P.D. 239 that no decree of registration may be issued by the court
unless upon approval and recommendation of the Bureau of Lands was substantially
complied with in the Report of Lands Special Attorney Saturnino Pacubas, submitted to the
court.48

Even the counsel of respondent Republic, the OSG, arrived at the conclusion that there is no
sufficient legal basis for said respondent to institute action to annul the titles of petitioners, thus:

It may be stated at the outset that a petition for annulment of certificate of title or reconveyance of
land may be based on fraud which attended the issuance of the decree of registration and the
corresponding certificate of title.

Based on the decision in the LRC Case No. N-8239 involving the petition for registration and
confirmation of title filed by Fermina Castro, there is no showing that fraud attended the issuance of
OCT No. 10215. it appears that the evidence presented by Fermina Castro was sufficient for the trial
court to grant her petition.

The testimony of Fermina Castro, which was corroborated by Emiliano de Leon, that she and her
predecessors-in-interest had been in possession of the land for more than thirty (30) years
sufficiently established her vested right over the property initially covered by OCT No. 10215. The
report dated April 25, 1974 which was submitted to the trial court by the Director of Lands through
Special Attorney Saturnino Pacubas showed that the parcel of land was solid and dry land when
Fermina Castros application for registration of title was filed. It was based on the ocular inspection
conducted by Land Inspector Adelino Gorospe and the joint circular inspection conducted by
Geodetic Engineer Manuel A. Cervantes and Administrative Assistant Lazaro Berania on November
28, 1973 and March 22, 1974 respectively.

The aforesaid report must be requested unless there is a concrete proof that there was an
irregularity in the issuance thereof. In the absence of evidence to the contrary, the ocular inspection
of the parcel of land, which was made the basis of said report, is presumed to be in order.

Based on the available records, there appears to be no sufficient basis for the Government to
institute an action for the annulment of OCT No. 10215 and its derivative titles. It is opined that a
petition for cancellation/annulment of Decree No. N-150912 and OCT No. 10215 and all its
derivative titles will not prosper unless there is convincing evidence to negate the report of the then
Land Management Bureau through Special Attorney Pacubas. Should the Government pursue the
filing of such an action, the possibility of winning the case is remote. 49

More so, respondent Government, through its counsel, admits that the land applied by Fermina
Castro in 1973 was solid and dry land, negating the nebulous allegation that said land is underwater.
The only conclusion that can be derived from the admissions of the Solicitor General and
Government Corporate Counsel is that the land subject of the titles of petitioners is alienable land
beyond the reach of the reversion suit of the state.

Notably, the land in question has been the subject of a compromise agreement upheld by this Court
in Public Estates Authority.50 In that compromise agreement, among other provisions, it was held that
the property covered by TCT Nos. 446386 and S-29361, the land subject of the instant case, would
be exchanged for PEA property. The fact that PEA signed the May 15, 1998 Compromise Agreement
is already a clear admission that it recognized petitioners as true and legal owners of the land
subject of this controversy.

Moreover, PEA has waived its right to contest the legality and validity of Castros title. Such waiver is
clearly within the powers of PEA since it was created by PD 1084 as a body corporate "which shall
have the attribute of perpetual succession and possessed of the powers of the corporations, to be
exercised in conformity with the provisions of this Charter [PD 1084]." 51 It has the power "to enter
into, make, perform and carry out contracts of every class and description, including loan
agreements, mortgages and other types of security arrangements, necessary or incidental to the
realization of its purposes with any person, firm or corporation, private or public, and with any foreign
government or entity."52 It also has the power to sue and be sued in its corporate name. 53Thus, the
Compromise Agreement and the Deed of Exchange of Real Property signed by PEA with the
petitioners are legal, valid and binding on PEA. In the Compromise Agreement, it is provided that it
"settles in full all the claims/counterclaims of the parties against each other." 54 The waiver by PEA of
its right to question petitioners title is fortified by the manifestation by PEA in the Joint Motion for
Judgment based on Compromise Agreement that

4. The parties herein hereto waive and abandon any and all other claims and counterclaims which
they may have against each other arising from this case or related thereto. 55

Thus, there was a valid waiver of the right of respondent Republic through PEA to challenge
petitioners titles.

The recognition of petitioners legal ownership of the land is further bolstered by the categorical and
unequivocal acknowledgment made by PEA in its September 30, 2003 letter where it stated that:
"Your ownership thereof was acknowledged by PEA when it did not object to your membership in the
CBP-IA Association, in which an owner of a piece of land in CBP-IA automatically becomes a
member thereof."56 Section 26, Rule 130 provides that "the act, declaration or omission of a party as
to a relevant fact may be given in evidence against him." The admissions of PEA which is the real
party-in-interest in this case on the nature of the land of Fermina Castro are valid and binding on
respondent Republic. Respondents claim that the disputed land is underwater falls flat in the face of
the admissions of PEA against its interests. Hence, res judicata now effectively precludes the
relitigation of the issue of registrability of petitioners lot.

In sum, the Court finds that the reversion case should be dismissed for lack of jurisdiction on the part
of the Paraaque RTC. Even if we treat said case as a petition for annulment of judgment under
Rule 47 of the 1997 Rules of Civil Procedure, the dismissal of the case nevertheless has to be
upheld because it is already barred by laches. Even if laches is disregarded, still the suit is already
precluded by res judicata in view of the peculiar facts and circumstances obtaining therein.

WHEREFORE, premises considered, the petition is GRANTED. The Decision of the Court of
Appeals in CA-G.R. CV No. 76212 is REVERSED and SET ASIDE, and the August 7, 2002 Order of
the Paraaque City RTC, Branch 257 in Civil Case No. 01-0222 entitled Republic of the Philippines
v. Fermina Castro, et al. dismissing the complaint is AFFIRMED.

No costs.

SO ORDERED.