G.R. No. 202364, August 30, 2017 - ARTURO C. CALUBAD, Petitioner, v.

RICARCEN
DEVELOPMENT CORPORATION, Respondent.

THIRD DIVISION

G.R. No. 202364, August 30, 2017

ARTURO C. CALUBAD, Petitioner, v. RICARCEN DEVELOPMENT CORPORATION,

Respondent.

DECISION

LEONEN, J.:

When a corporation intentionally or negligently clothes its agent with apparent authority to act in
its behalf, it is estopped from denying its agent's apparent authority as to innocent third parties
who dealt with this agent in good faith.1

This resolves the Petition for Review on Certiorari2 filed by petitioner Arturo C. Calubad
(Calubad), assailing the January 25, 2012 Decision3 and June 20, 2012 Resolution4 of the Court
of Appeals in CA-GR. CV No. 93185, which upheld the January 6, 2009 Decision5 of Branch
218, Regional Trial Court, Quezon City in Civil Case No. Q-03-50584.

Respondent Ricarcen Development Corporation (Ricarcen) was a domestic corporation engaged

in renting out real estate. It was the registered owner of a parcel of land located at 53 Linaw St.,
Sta. Mesa Heights, Quezon City.6 This parcel of land was covered by Transfer Certificate of
Title (TCT) No. RT-84937 (166018)7 and was subdivided into two (2) lots.8

Ricarcen was a family corporation. Marilyn R. Soliman (Marilyn) was its president from 2001 to
August 2003. The other members of the board of directors during that time were Marilyn's
mother, Erlinda Villanueva (Erlinda), her brother, Josefelix R. Villanueva (Josefelix), her aunt,
Maura Rico, and her sisters, Ma. Elizabeth V. Chamorro (Elizabeth), Ma. Theresa R. Villanueva,
and Annabelle R. Villanueva.9

On October 15, 2001, Marilyn, acting on Ricarcen's behalf as its president, took out a
P4,000,000.00 loan from Calubad. This loan was secured by a real estate mortgage over
Ricarcen's Quezon City property covered by TCT No. RT-84937 (166018), as evidenced by a
Deed of Real Estate Mortgage.10

The terms of the loan provided that Ricarcen would pay the P4,000,000.00 loan within a period
of six (6) months with "a compounded interest at the rate of FIVE (5%) percent for the first
month and THREE (3%) percent for [the] succeeding months and a penalty of ONE (1%)
percent per month on the principal sum in case of delay in payment."11 The terms of the loan also
provided that the first monthly interest payment of P200,000.00 would be deducted from the loan
proceeds.12

On December 6, 2001, Ricarcen, through Marilyn, and Calubad amended and increased the loan
to P5,000,000.00 in the Amendment of Deed of Mortgage (Additional Loan of P1,000,000.00),13
with the same property used as security and under the same terms and conditions as those of the
original Deed of Real Estate Mortgage.

On May 8, 2002, Ricarcen, again acting through Marilyn, took out an additional loan of
2,000,000.00 from Calubad, as evidenced by the executed Second Amendment of Deed of
Mortgage (Additional Loan of P2,000,000.00).14

To prove her authority to execute the three (3) mortgage contracts in Ricarcen's behalf, Marilyn
presented Calubad with a Board Resolution dated October 15, 2001.15 This Resolution
empowered her to borrow money and use the Quezon City property covered by TCT No. RT-
84937 (166018) as collateral for the loans. Marilyn also presented two (2) Secretary's
Certificates dated December 6, 200116 and May 8, 2002,17 executed by Marilyn's sister and
Ricarcen's corporate secretary, Elizabeth.

Sometime in 2003, after Ricarcen failed to pay its loan, Calubad initiated extrajudicial
foreclosure proceedings on the real estate mortgage. The auction sale was set on March 19,
2003.18

Calubad was the highest bidder during the scheduled auction sale; thus, on March 27, 2003, he
was issued a Certificate of Sale.19

On April 10, 2003, the Certificate of Sale was annotated on TCT No. RT-84937 (166018).20

Ricarcen claimed that it only learned of Marilyn's transactions with Calubad sometime in July
2003.21

Upon confirming that the Quezon City property had indeed been mortgaged, foreclosed, and sold
to Calubad as a result of Marilyn's actions, Ricarcen's board of directors removed her as
president and appointed Josefelix as its new president. Josefelix was also authorized to initiate
the necessary court actions to protect Ricarcen's interests over the Quezon City property.22

On September 9, 2003, Ricarcen filed its Complaint for Annulment of Real Estate Mortgage and
Extrajudicial Foreclosure of Mortgage and Sale with Damages against Marilyn, Calubad, and
employees of the Registry of Deeds of Quezon City and of the Regional Trial Court of Quezon
City.23

On October 9, 2003, the Clerk of Court and Ex-Officio Sheriff of the Regional Trial Court of
Quezon City. Atty. Mercedes S. Gatmaytan, was discharged as party-defendant.24
In its Complaint, Ricarcen claimed that it never authorized its former president Marilyn to obtain
loans from Calubad or use the Quezon City property as collateral for the loans.25

On the other hand, Calubad insisted that the incidents which led to the foreclosure and sale of the
Quezon City property were all above board and were not marked with irregularity. Furthermore,
he asserted that he exercised the necessary diligence required under the circumstances by
requiring Marilyn to submit the necessary documents to prove her authority from Ricarcen.
Calubad likewise argued that even if Ricarcen did not authorize Marilyn, it was already estopped
from denying her authority since the loan proceeds had been released and Ricarcen had benefited
from them.26

For their part, spouses Marilyn and Napoleon Soliman denied any knowledge of or participation
in the allegedly falsified documents and claimed that the falsification was perpetrated by their
broker, Nena leo, and Calubad's broker, a certain Malou, without their permission.27

On January 6, 2009, the Regional Trial Court28 granted Ricarcen's complaint and annulled the
mortgage contracts, extrajudicial foreclosure, and sale by public auction.

The Regional Trial Court held that Marilyn failed to present a special power of attorney as
evidence of her authority from Ricarcen. The lack of a special power of attorney should have
been enough for Calubad to be put on guard and to require further evidence of Marilyn's
authority from Ricarcen.29

The Regional Trial Court also ruled that the Board Resolution and Secretary's Certificates, which
were supposedly executed by Ricarcen's Board of Directors, had been unmasked to be merely
fabricated. Furthermore, Atty. William S. Merginio, who purportedly notarized the Board
Resolution and Secretary's Certificates, denied that he notarized those documents since they did
not appear in his notarial register.30

The Regional Trial Court then dismissed the complaint against the Registry of Deeds employees
for Ricarcen's failure to show any irregularity in the performance of their duties.31 The
dispositive portion of the Regional Trial Court Decision read:

WHEREFORE, premises considered, judgment is hereby rendered in favor of plaintiff Ricarcen

Development Corporation and further:

1. Declaring as null and void the following:

 Deed of Real Estate Mortgage dated 15 October 2001;

 Amendment of Real Estate Mortgage dated 06 December 2001;

 Second Amendment of Deed of Mortgage dated 08 May 2002;and

 Extrajudicial Foreclosure of Mortgage and Sale by public auction in favor of

Arturo Calubad[;]
2. Canceling TCT No. 261881 in the name of Arturo Calubad and reinstating TCT No. RT-
84937 (166018), both by the Regist[ry] of Deeds of Quezon City; and

3. Ordering defendants spouses Solimans and Calubad to pay jointly and severally damages in
the amount of Two Hundred Fifty Thousand Pesos (Php250,000.00) as attorney's fees and costs
of litigation.

SO ORDERED.32
Only Calubad appealed the Regional Trial Court Decision to the Court of Appeals.

On January 25, 2012, the Court of Appeals dismissed Calubad's appeal and affirmed the
Regional Trial Court Decision. The Court of Appeals emphasized that the rule on the
presumption of validity of a notarized board resolution and of a secretary's certificate is not
absolute and may be validly overcome by contrary evidence;33 thus:
In order to defeat the presumption, it is incumbent upon RICARCEN to prove "with clear,
convincing, strong and irrefutable proof' that the board resolution and secretary's certificates
purportedly authorizing Marilyn Soliman to secure a loan and mortgage the subject property in
behalf of the corporation are, in fact, invalid.

In the case at bench, RICARCEN was able to discharge this burden. The truth of the contents of
the board resolution and secretary's certificates relied upon by Calubad had been overthrown by
the records of this case which clearly show that such documents were not in fact executed by the
board of directors of RICARCEN, and are, therefore, fabricated.34
The Court of Appeals also disregarded Calubad's argument that Ricarcen was guilty of laches,
ruling that Ricarcen's board of directors only found out about the mortgage contracts in July
2003, when they received a copy of the notice of foreclosure of mortage. Upon verifying with the
Registry of Deeds of Quezon City, Ricarcen took immediate action by removing Marilyn as
president and instituting a case for annulment and cancellation of mortgage against Calubad and
Marilyn.35

The Court of Appeals likewise set aside Calubad's argument that Ricarcen was estopped from
denying the contracts. The Court of Appeals held that since Ricarcen did not know about the
existence of the contracts of mortgage between Caluband and Marilyn, it could not have ratified
them or knowingly accepted any benefits from the loan proceeds.36

The dispositive portion of the Court of Appeals Decision read:

WHEREFORE, in view of the foregoing premises, the instant appeal is hereby ordered
DISMISSED, and the appealed decision is AFFIRMED in toto.

SO ORDERED.37 (Emphasis in the original)

On August 10, 2012, Calubad filed his Petition38 before this Court.

Petitioner claims that Ricarcen is barred by estoppel from denying Marilyn's authority to enter
into a contract of loan and mortgage with Calubad for several reasons. He argues that Ricarcen
clothed Marilyn in apparent authority to act in its behalf.39 that it benefited from the loans
proceeds,40 and that it impliedly agreed to the mortgage loans by paying the monthly interest
payments.41

Petitioner avers that Elizabeth executed four (4) separate document which gave Marilyn the
authority to secure loans, use the Quezon City property as collateral, and execute all documents
needed for those purposes.42

The four (4) documents which petitioner claimed to have proved Marilyn's authority to act in
behalf of Ricarcen were:

a) Board Resolution dated October 15, 2001, which read:

RESOLVED, AS IT IS HEREBY RESOLVED, that the President MARILYN R. SOLIMAN, is
the authorized signatory of the corporation to transact any and all documents necessary for the
purpose of securing monetary loan using a parcel of land owned by the corporation located at
No. 53 Linaw St., Quezon City covered by TCT No. RT 84937 (166018) of the Registry of
Deeds of [Quezon City] with a total area of 840 square meters more or less, as collateral/security.

RESOLVED FURTHER, AS IT IS HEREBY RESOLVED, that she is authorized to sign all

documents required for the monetary loan for and in behalf of the corporation.43
b) Secretary's Certificate dated October 15, 2001, which read:
BE IT RESOLVED, AS IT IS HEREBY RESOLVED, that the corporation will borrow from
ARTURO CALUBAD, Filipino, of legal age, and residing at 89 East Maya Philam Homes
Village, Quezon City.

FURTHERMORE, BE IT RESOLVED, that the corporation is authorizing MARILYN R.

SOLIMAN, President, to sign for and in behalf of the corporation.44
c) Secretary's Certificate dated December 6, 2001, which read:
RESOLVED, as it is hereby resolved that the President, MARILYN R. SOLIMAN, is hereby
authorized to secure ADDITIONAL LOAN OF [P]1,000,000.00 from MR. ARTURO
CALUBAD, using as collateral two (2) parcels of land with the improvements existing thereon,
situated in Quezon City, Metro Manila, covered and embraced by Transfer Certificate of Title
No. RT-84937 (166018) of the Registry of Deeds of Quezon City, Metro Manila, and in such
amount that she deems it most proper and beneficial to the corporation.

RESOLVED FINALLY, that the President is hereby authorized to sign Amendment of Deed of
Real Estate Mortgage, Acknowledgment Receipt and other pertinent documents and get and
receive the loan either in cash or check/s with any bank lawfully doing business in the
Philippines for and in behalf of the corporation.45
d) Secretary's Certificate dated May 8, 2002, which read:
BE IT RESOLVED, AS IT IS HEREBY RESOLVED, that the corporation will secure additional
monetary loan of P2,000,000.00 from ARTURO CALUBAD, Filipino, of legal age, and residing
at 89 East Maya Philam Homes Village, Quezon City, using a parcel of land owned by the
corporation located at No. 53 Linaw St., Quezon City covered by TCT No. RT-84937 (166018)
of the Registry of Deeds of [Quezon City] with a total area of 840 square meters more or less, as
collateral/security.
FURTHERMORE, BE IT RESOLVED, that the corporation is authorizing MARILYN R.
SOLIMAN, President, to sign for and in behalf of the corporation.46
All these four (4) documents were signed by Elizabeth in her capacity as Ricarcen's corporate
secretary.

Elizabeth later on denied signing any of these four (4) documents cited by petitioner, saying that
she regularly signed blank documents and left them with her sister Marilyn. She opined that the
Board Resolution and Secretary's Certificates, which purportedly gave Marilyn the authority to
transact with petitioner in Ricarcen's behalf, might have been some of the blank documents she
had earlier signed.47

However, petitioner asserts that the fact that Elizabeth entrusted signed, blank documents to
Marilyn proved that Ricarcen authorized her to secure loans and use its properties as collateral
for the loans.48

Petitioner also points out that Marilyn had possession of the owner's duplicate copy of TCT No.
RT-84937 (166018), and thus, he had no reason but to believe that she was authorized by
Ricarcen to deal and transact in its behalf.49

Additionally, the loan proceeds were issued through checks payable to Ricarcen, which were
deposited in its bank account and were cleared. As further evidence of Ricarcen's receipt of the
loan proceeds, petitioner presented several checks drawn and issued by Elizabeth or Erlinda,
jointly with Marilyn, representing loan payments.50

Petitioner also presented several withdrawal slips signed by either Elizabeth or Erlinda, jointly
with Marilyn, authorizing a certain Lilydale Ombina to repeatedly withdraw from Ricarcen's
bank account.51

Petitioner likewise presented several checks drawn from Ricarcen's bank account, issued by
Elizabeth or Erlinda, jointly with Marilyn, payable to third persons or to cash.52 Petitioner
maintains that the foregoing evidence is indubitable proof that the loan proceeds have been used
by Ricarcen.53

Petitioner then claims that Ricarcen, in a check drawn and issued by Erlinda and Marilyn, paid
the 3% monthly interest for the first loan of P4,000,000.00. This bolstered his belief that
Ricarcen and its officers knew of and approved that loan, and induced him to grant Ricarcen,
through Marilyn, additional loans.54

Petitioner asserts that the acts of Elizabeth and Erlinda are equivalent to clothing Marilyn with
apparent authority to deal with him and use the Quezon City property as collateral:
Their acts are also a manifestation of their acquiescence to Marilyn Soliman's availment of loans
and execution of real estate mortgage with petitioner.

Thus, even if Marilyn Soliman had acted without or in excess of her actual authority, if she acted
within the scope of an apparent authority with which [Ricarcen] has clothed her by holding her
out or permitting her to appear as having such authority, [Ricarcen] is bound thereby in favor of
petitioner who in good faith relied on such apparent authority.55
On November 12, 2012, this Court required Ricarcen to comment on the Petition.56

On February 4, 2013, Ricarcen filed its Comment,57 where it claims that the Petition raised
questions of fact, which are not proper in a petition for review on certiorari. It also avers that
petitioner failed to raise any exceptional circumstances, and thus, should be dismissed outright.58

Ricarcen asserts that while the documents it purportedly issued enjoy the presumption of
validity, this presumption is not absolute and it has shown convincing evidence as to the
invalidity of the Board Resolution and of the Secretary's Certificates.59

Ricarcen points out that Marilyn clearly acted without authority when she entered into a loan and
mortgage agreement with petitioner. Being void, the contracts of loan and mortgage can never be
ratified.60

Ricarcen also denied that it was guilty of laches since it only learned about Marilyn's loan with
Calubad in July 2003, when it received a notice of foreclosure. Upon lean1ing of the
extrajudicial foreclosure and sale by public auction, it immediately removed Marilyn as president
and authorized Josefelix to file the necessary actions to protect Ricarcen's interests.61

Ricarcen likewise claims that it cannot be held guilty of estoppel in pais since it never induced
nor led petitioner to believe that Marilyn was duly authorized to take out a loan and to mortgage
the Quezon City property as collateral. Additionally, "it did not knowingly accept any benefit"
from the loan proceeds.62

Ricarcen declares that petitioner either connived with Marilyn or, at the very least, failed to
exercise reasonable diligence and prudence in ascertaining Marilyn's supposed agency from
Ricarcen.63

On March 11, 2013, this Court noted Ricarcen's Comment and required Calubad to reply to the
Comment,64

On May 9, 2013, Calubad filed his Reply,65 where he denied that he raised purely questions of
fact in his Petition since the issue raised was "the law and jurisprudence applicable to the facts of
this case, or whether the conclusion drawn by the Court of Appeals from those facts is correct or
not."66

Petitioner likewise claims that the findings of the Court of Appeals were contradicted by the
evidence on record, and hence, were not conclusive or binding on the parties.67

On April 6, 2016, this Court noted Calubad's motion for early decision dated March 21, 2016.68

The only issue presented for this Court's resolution is whether or not Ricarcen Development
Corporation is estopped from denying or disowning the authority of Marilyn R. Soliman, its
former President, from entering into a contract of loan and mortgage with Arturo C. Calubad.
The petition is meritorious.

The Rules of Court categorically state that a review of appeals filed before this Court is "not a
matter of right, but of sound judicial discretion."69 The Rules of Court further require that only
questions of law should be raised in petitions filed under Rule 4570 since factual questions are not
the proper subject of an appeal by certiorari. It is not this Court's function to analyze or weigh all
over again evidence that has already been considered in the lower courts.71

However, these rules admit exceptions. Medina v. Mayor Asistio, Jr.72 listed down 10 recognized
exceptions:
(1) When the conclusion is a finding grounded entirely on speculation, surmises or conjectures . .
.; (2) When the inference made is manifestly mist en, absurd or impossible . . .; (3) Where there
is a grave abuse of discretion . . .; (4) When the judgment is based on a misapprehension of facts
. . .; (5) When the findings of fact are conflicting . . .; (6) When the Court of Appeals, in making
its findings, went beyond the issues of the case and the same is contrary to the admissions of
both appellant and appellee . . .; (7) The findings of the Court of Appeals are contrary to those of
the trial court . . .; (8) When the findings of fact are conclusions without citation of specific
evidence on which they are based . . .; (9) When the facts set forth in the petition as well as in the
petitioners' main and reply briefs are not disputed by the respondents . . .; and (10) The finding of
fact of the Court of Appeals is premised on the supposed absence of evidence and is contradicted
by the evidence on record...73
Pascual v. Burgos74 instructed that parties must demonstrate by convincing evidence that the
case clearly falls under the exceptions to the rule:
Parties praying that this court review the factual findings of the Court of Appeals must
demonstrate and prove that the case clearly falls under the exceptions to the rule. They have the
burden of proving to this court that a review of the factual findings is necessary. Mere assertion
and claim that the case falls under the exceptions do not suffice.75
Petitioner claims that his case falls under the exceptions to the general rule on a Rule 45 appeal
since the findings of the lower courts are contradicted by the evidence on record.76 After a
careful study of the records, this Court is convinced that this case falls under the exceptions cited
in Medina, particularly in that "the inference made is manifestly mistaken," making a Rule 45
appeal proper.

II

As a corporation, Ricarcen exercises its powers and conducts its business through its board of
directors, as provided for by Section 23 of the Corporation Code:
Section 23. The board of directors or trustees. - Unless otherwise provided in this Code, the
corporate powers of all corporations formed under this Code shall be exercised, all business
conducted and all property of such corporations controlled and held by the board of directors or
trustees to be elected from among the holders of stocks, or where there is no stock, from among
the members of the corporation, who shall hold office for one (1) year until their successors are
elected and qualified.
However, the board of directors may validly delegate its functions and powers to its officers or
agents. The authority to bind the corporation is derived from law, its corporate by-laws, or
directly from the board of directors, "either expressly or impliedly by habit, custom or
acquiescence in the general course of business."77

The general principles of agency govern the relationship between a corporation and its
representatives.78 Article 131779 of the Civil Code similarly provides that the principal must
delegate the necessary authority before anyone can act on his or her behalf.

Nonetheless, law and jurisprudence recognize actual authority and apparent authority as the two
(2) types of authorities conferred upon a corporate officer or agent in dealing with third
persons.80

Actual authority can either be express or implied. Express actual authority refers to the power
delegated to the agent by the corporation, while an agent's implied authority can be measured by
his or her prior acts which have been ratified by the corporation or whose benefits have been
accepted by the corporation.81

On the other hand, apparent authority is based on the principle of estoppel. The Civil Code
provides:
Article 1431. Through estoppel an admission or representation is rendered conclusive upon the
person making it, and cannot be denied or disproved as against the person relying thereon.

....

Article 1869. Agency may be express, or implied from the acts of the principal, from his silence
or lack of action, or his failure to repudiate the agency, knowing that another person is acting on
his behalf without authority.

Agency may be oral, unless the law requires a specific form.

Yao Ka Sin Trading v. Court of Appeals82 instructed that an agent's apparent authority from the
principal may also be ascertained through:
(1) the general manner by which the corporation holds out an officer or agent as having power to
act or, in other words, the apparent authority with which it clothes him to act in general, or (2)
the acquiescence in his acts of a particular nature, with actual or constructive knowledge thereof,
whether within or without the scope of his ordinary powers.
The doctrine of apparent authority provides that even if no actual authority has been conferred on
an agent, his or her acts, as long as they are within his or her apparent scope of authority, bind
the principal. However, the principal's liability is limited to third persons who are reasonably led
to believe that the agent was authorized to act for the principal due to the principal's conduct.83

Apparent authority is determined by the acts of the principal and not by the acts of the agent.84
Thus, it is incumbent upon Calubad to prove how Ricarcen's acts led him to believe that Marilyn
was duly authorized to represent it.

III
As the former president of Ricarcen, it was within Marilyn's scope of authority to act for and
enter into contracts in Ricarcen's behalf. Her broad authority from Ricarcen can be seen with
how the corporate secretary entrusted her with blank yet signed sheets of paper to be used at her
discretion.85 She also had possession of the owner's duplicate copy of the land title covering the
property mortgaged to Calubad, further proving her authority from Ricarcen.86

The records show that on October 15, 2001, Calubad drew and issued two (2) checks payable to
Ricarcen representing the loan proceeds for the first mortgage. The first check was Equitable PCI
Bank check number 0024416 for P2,920,000.00 and the second check was Equitable PCI Bank
check number 0000461 for P600,000.00. Both checks were deposited in Ricarcen 's bank
account with Banco de Oro, Banawe Branch, and were honored by the drawee bank.87

On December 6, 2001, Marilyn negotiated for an additional P1,000,000.00 loan with Calubad,
under the same terms and conditions.88

From December 15, 2001 to April 15, 2002, Ricarcen paid and issued several checks payable to
Calubad, which he claimed were the monthly interest payments of the mortgage loans. The
following checks were drawn by Erlinda and Marilyn for Ricarcen:

(a) Banco de Oro check number 0000067624 dated December 15, 2001 for P120,000.00;

(b) Banco de Oro check number 0000067622 dated January 15, 2002 for P120,000.00;

(c) Banco de Oro check number 000067626 dated February 15, 2002 for P120,000.00;

(d) Banco de Oro check number 0000067673 dated March 6, 2002 for P30,000.00;

(e) Banco de Oro check number 0000067625 dated March 15, 2002 for P120,000.00;

(f) Banco de Oro check number 0000067674 dated April 6, 2002 for P30,000.00; and

(g) Banco de Oro check number 0002422 dated April 15, 2002 for P120,000.00.89

Calubad deposited the January 15, 2002 check into his Metrobank, EDSA-Caloocan Branch
account, while the rest of the checks were deposited in his bank account with Equitable PCI
Bank, A. De Jesus-EDSA Branch. All the checks from Ricarcen cleared.90

For the additional loan of P2,000,000.00 obtained on May 8, 2002, Ricarcen again issued several
Banco de Oro checks dated June 15, 2002 to December 6, 2002 as payments for this loan and its
monthly interest. These checks were made to Calubad's order and were drawn by either Erlinda
or Elizabeth with Marilyn.91

However, Banco de Oro check number 0082424 dated June 15, 2002 for P120,000.00, Banco de
Oro check number 0082425 dated July 15, 2002 for P120,000.00, and Banco de Oro check
number 0082426 dated August 15, 2002 for P120,000 were all dishonored by the drawee bank
for insufficiency of funds.92
Calubad states that he no longer deposited the following checks from Ricarcen upon Marilyn's
request, since she claimed that Ricarcen's funds were by then insufficient to pay the issued
checks:

(a) Banco de Oro check number 0082467 dated July 6, 2002 for P30,000.00;

(b) Banco de Oro check number 0082447 dated July 8, 2002 for P60,000.00;

(c) Banco de Oro check number 0082448 dated August 8, 2002 for P2,000,000.00;

(d) Banco de Oro check number 0082469 dated September 6, 2002 for P30,000.00;

(e) Banco de Oro check number 0082427 dated September 15, 2002 for P120,000.00;

(f) Banco de Oro check number 0082470 dated October 6, 2002 for P30,000.00;

(g) Banco de Oro check number 0082428 dated October 15, 2002 for P4,000,000.00;

(h) Banco de Oro check number 0082471 dated November 6, 2002 for P30,000.00; and

(i) Banco de Oro check number 0082472 dated December 6, 2002 for P1,000,000.00.93

Calubad could not be faulted for continuing to transact with Marilyn, even agreeing to give out
additional loans, because Ricarcen clearly clothed her with apparent authority. Likewise, it
reasonably appeared that Ricarcen's officers knew of the mortgage contracts entered into by
Marilyn in Ricarcen's behalf as proven by the issued Banco De Oro checks as payments for the
monthly interest and the principal loan.

Ricarcen claimed that it never granted Marilyn authority to transact with Calubad or use the
Quezon City property as collateral for the loans, but its actuations say otherwise. It appears as if
Ricarcen and its officers gravely erred in putting too much trust in Marilyn. However, Calubad,
as an innocent third party dealing in good faith with Marilyn, should not be made to suffer
because of Ricarcen's negligence in conducting its own business affairs. This finds support in
Yao Ka Sin Trading:94
Also, "if a private corporation intentionally or negligently clothes its officers or agents with
apparent power to perform acts for it, the corporation will be estopped to deny that such apparent
authority is real, as to innocent third persons dealing in good faith with such officers or agents."95
IV

Nonetheless, petitioner's prayer for the award of damages must be denied for failing to provide
factual or legal basis for the award.

Moral damages are not automatically awarded when there is a breach of contract. It must also be
proven that the party who breached the contract acted fraudulently or in bad faith, in wanton
disregard of the contracted obligation.96 In addition, the following conditions must be met before
moral damages may be awarded:
(1) first, there must be an injury, whether physical, mental or psychological, clearly sustained by
the claimant; (2) second, there must be culpable act or omission factually established; (3) third,
the wrongful act or omission of the defendant is the proximate cause of the injury sustained by
the claimant; and (4) fourth, the award of damages is predicated on any of the cases stated in
Article 2219 of the Civil Code.97 (Emphasis supplied)
Petitioner failed to allege that Ricarcen acted fraudulently or wantonly when it breached the loan
Md mortgage contract. Neither is this Court convinced that fraud, bad faith, or wanton disregard
of its obligation can be imputed to Ricarcen due to its bad business judgment and negligence in
putting too much trust in Marilyn. It was not sufficiently shown that Ricarcn was spurred by a
dishonest purpose or was motivated by ill will or fraud when it assailed the contract entered into
by Marilyn and Calubad.

In the same manner, exemplary damages98 cannot be awarded in the absence of evidence that
Ricarcen acted fraudulently or wantonly. Finally, in the absence of exemplary damages,
attorney's fees, and costs of suit also cannot be recovered.99

VHEREFORE, the Petition is GRANTED. The assailed January 25, 2012 Decision and June
20, 2012 Resolution of the Court of Appeals in CA-GR. CV No. 93185 are REVERSED and
SET ASIDE. Ricarcen Development Corporation's Amended Complaint in. Civil Case No. Q-
03-50584 before Branch 218, Regional Trial Court, Quezon City is hereby DISMISSED for lack
of merit.

SO ORDERED.

Velasco, Jr., (Chairperson), Bersamin, Martires, and Gesmundo, JJ., concur.

G.R. No. 190817

REPUBLIC OF THE PHILIPPINES, Petitioner

vs.
ROVENCY REALTY AND DEVELOPMENT CORPORATION, Respondent

DECISION

MARTIRES, J.:

This is a petition for review on certiorari seeking to reverse and set aside the 10 March 2009
Decision1 and the 3 December 2009 Resolution2 of the Court of Appeals (CA) in CA-G.R. CV
No. 00651, which affirmed the 7 November 2003 Decision3 of the Regional Trial Court (RTC),
Branch 41, Cagayan de Oro City, in LRA Case No. N-2000-084, which granted the application
for original registration of title to land by respondent Rovency Realty and Development
Corporation (RRDC).
 THE FACTS

On 22 March 2001, RRDC filed before the RTC an Amended Application for Registration4
covering a parcel of land identified as Lot No. 3009 (subject land) situated in Barangay
Balulang, Cagayan de Oro City, described as follows:

A parcel of land (Lot No. 3009, Cad-237, Cagayan Cadastre) situated in the Barrio of Carmen,
City of Cagayan de Oro, Island of Mindanao. Bounded on the S., along line 1-2 by Lot 6648; on
the NW., along line 2-3 by Lot 30011; along line 3-4 by Lot 301 O; along line 4-5 by Lot 3047;
along line 5-6 by Lot 3020; on the N., along line 6-7 by Lot 3007; on the SE., along line 8-9 by
Lot 6645; along line 9-1 by Lot 3008; all of Cad-237, Cagayan Cadastre.

Beginning at the point marked "1" on the plan being N. 51 deg. 24'W., 1091.05 m. from PBM
No. 24, Cad-237, Thence;

1-2 S. 79 deg. 15'W. 260.92 m.

2-3 N. 19 deg. 02'E. 231.49 m.
3-4 N. 13 deg. 32'E. 489.77 m.
4-5 N. 61 deg. 39'E. 302.54 m.
5-6 N. 40 deg. 09'E. 146.06 m.
6-7 S. 82 deg. 14'E. 140.06 m.
7-8 S. 24 deg. 28'E. 152.88 m.
8-9 S. 34 deg. 00'W. 448.33 m.
9-1 S. 33 deg. 26'W. 445.73 m.

beginning; containing an area of THREE HUNDRED EIGHTEEN THOUSAND THREE

HUNDRED FORTY FIVE (318,345) square meters more or less. All points referred to are
indicated on the plan and marked on the ground by Old BL., cyl. cone. mons. 15 x 60 cm.
Bearing true, date of Original Survey August 9 & 13, 1929, and that of the preparation June 29,
2000, executed by Crisanto M. Bagares, Geodetic Engineer and approved on August 1, 2000.5

RRDC alleged, among others, that it is a domestic corporation duly organized and existing under
and by virtue of the laws of the Republic of the Philippines; that it is the absolute owner in fee
simple of the subject land having acquired the same from its previous owner, P.N. Roa
Enterprises, Inc., by virtue of a notarized deed of absolute sale executed on 05 March 1997; that
the subject land was assessed at ₱2,228,000.00 as shown in the Tax Declaration (TD) No.
141011; that it has registered the subject land for taxation purposes and paid the realty taxes due
therein from its acquisition, to the filing of the application; that immediately after acquiring the
subject land, it took actual physical possession of the same and has been continuously occupying
the subject land; and that it and its predecessors-in- interest have been in open, continuous,
adverse, and peaceful possession in concept of owner of the subject land since time immemorial,
or for more than thirty (30) years.

Attached to the application are: original copy of the technical description of the subject land6;
the Tracing Cloth Plan of the survey plan7; Certification in Lieu of Surveyor's/Geodetic
Engineer's Certificate8 issued by the Chief of the Land Surveys Assistance Section, Department
of Environment and Natural Resources, Region X; T.D. No. 141011 in the name of RRDC9 ; and
the Deed of Absolute Sale between RRDC and P.N. Roa Enterprises, Inc., dated 5 March
1997.10

On 16 July 2001, an opposition to the application was filed by the Heirs of Paulino Avancena.
They alleged, that the subject land was already claimed and owned by the late Atty. Paulino
Avancena (Paulino), their father and predecessor-in-interest, as early as 1926; that Paulino had
been in open, continuous, notorious, adverse, and exclusive possession and occupation of the
subject land; that Paulino registered the subject land for taxation purposes and has paid the taxes
due thereon in 1948; that their parents, Paulino and Rizalina Neri (Rizalina) merely allowed and
tolerated Pedro N. Roa's (Pedro) possession of the subject land after the latter approached them
and requested that he be allowed to use the subject land for his businesses; that Pedro is one of
RRDC's predecessors-in-interest; that sometime in 1994, Rizalina demanded the return of the
subject land from the heirs of Pedro, but to no avail; that in 1996, Rizalina died leaving the
private oppositors as the rightful heirs of the subject land; that their parents never sold the subject
land to Pedro nor to RRDC, and as such, no right or title over the subject land was passed on to
RRDC. Thus, they prayed that RRDC's application be dismissed, and that their opposition be
treated as their own application for registration.11

On 3 August 2001, the petitioner Republic of the Philippines (Republic), through the Office of
the Solicitor General (OSG), filed its opposition to the application on the following grounds: that
neither RRDC nor its predecessors-in-interest have been in open, continuous, exclusive, and
notorious possession and occupation of the land in question since 12 June 1945 or prior thereto;
that the subject land exceeds the twelve (12)-hectare limit for confirmation of imperfect title set
by Section 47 of Commonwealth Act (CA.) No. 141, as amended by Republic Act (R.A.) No.
6940; and that the subject land forms part of the public domain belonging to the Republic and,
thus, not subject to private appropriation.12

During trial, RRDC presented the following documents in support of its application: (i) Deed of
Absolute Sale notarized by notary public Paulino Avancena showing that the subject land was
sold by Catalino Ebalo to Nicolas Beja and Maximo Amper on 21 June 193713 ; (ii) Deed of
Absolute Sale notarized by notary public Paulino A vancefia showing that a portion of the
subject land consisting of 159, 178.5 square meters (first portion) was sold by Maximo Amper to
Perfecto Virtudazo on 07 October 194014 ; (iii) Deed of Absolute Sale notarized by notary
public Troadio C. Ubay-ubay showing that the first portion consisting of 15 hectares, 91 ares and
72 centares (159,172 square meters) was sold by Trinidad Virtudazo, Israel Virtudazo, and
Adelina Virtudazo to Victor D. Beja on 22 April 196115 ; (iv) Deed of Absolute Sale showing
that the first portion of the subject land consisting of 159,172 square meters was sold by Victor
D. Beja to Pedro N. Roa on 01 February 19616 ; (v) Deed of Absolute Sale notarized by notary
public Troadio C. Ubay-ubay showing that the other portion (second portion) of the subject land
was sold by Nicolas Beja to Victor Beja on 22 April 196117 ; (vi) Deed of Sale showing that the
second portion was sold by Victor Beja to Pedro N. Roa on 01 February 196718 ; (vii) Deed of
Exchange notarized by notary public Jose L. Sabio, Jr. showing that the two portions of the
subject land were conveyed by Pedro N. Roa in favor of P.N. Roa Enterprises, Inc. on 23
September 1987;19 and (viii) Deed of Sale notarized by Rene C. Barbaso showing that the two
(2) portions of the subject land were sold by P.N. Roa Enterprises, Inc. to RRDC on 25 July
1996.20

RRDC also presented a certification21 from the Community Environment and Natural Resources
Office (CENRO), Cagayan de Oro City, certifying that the subject land is alienable and
disposable and not covered by any public land application patent and hence, no patent has been
issued thereon. Lastly, RRDC presented several tax declarations in the name of its predecessors-
in-interest, the earliest of which is T.D. No. 91264, which showed that realty taxes on the subject
land have been paid in 1947.22

On the other hand, to support their claim that a patent over the subject land had been issued in
the name of their father, the private oppositors presented a certification23 issued by the Records
Management Division of the Lands Management Bureau of the Department of Environment and
Natural Resources which merely states that " ...according to the verification made by the
Geodetic Surveys Division, survey plan no. Psu-45882 with an accession no. 284578 is located
at Cagayan, Misamis, as per their EDP listing. It is unfortunate however that as of this moment,
this office (Records Management Division) cannot locate said records despite diligent search
made thereon."

The RTC Ruling

In its decision, dated 7 November 2003, the RTC granted RRDC's application for registration of
the subject land. It opined that the CENRO certification, stating that the subject land is alienable
and disposable and not covered by any public land application, is sufficient to show the character
of the land. It further ruled, that RRDC and its predecessors-in-interest had been in open and
continuous possession under a bona fide claim of ownership over the subject land based on the
documentary and testimonial evidence offered by RRDC, without discussing how these pieces of
evidence established the required possession.

The trial court further brushed aside the opposition interposed by the heirs of Paulino Avanceña.
It was not convinced that the evidence they presented were sufficient to grant the application in
their favor. It noted that the oppositors' claim that they were the rightful owners of the subject
land does not hold water considering that the deeds of sale presented by RRDC in support of
their claim were notarized by Paulino himself.

The dispositive portion of the RTC decision reads:

WHEREFORE, this Court considering the evidence of the applicant, the reports of the Land
Registration Authority, Director of Lands and the Certification of the CENRO, DENR, Cagayan
de Oro City, hereby declares that the applicant, Rovency Realty & Development Corporation,
have sufficient title proper for registration over the parcel of land subject of this application. The
opposition of the Heirs of Paulino Avanceña, is hereby ordered dismissed, being lack of merit.

Accordingly, in accordance with the prayer of the applicant herein, the Commissioner, or anyone
acting on his behalf is hereby directed to ISSUE A DECREE OF REGISTRATION and the
CORRESPONDING CERTIFICATE OF TITLE FOR THE PARCEL OF LAND described in
the instant application in favor of RO VEN CY REAL TY and DEVELOPMENT
CORPORATION. SO ORDERED.24

Unconvinced, the Republic, through the OSG, and private oppositors heirs of Paulino Avancena,
elevated their respective appeals to the CA.25

The Republic contended that the trial court erred in granting the application for registration,
considering that the land applied for is in excess of what is allowed by the Constitution; and that
the Corporation Code further prohibits RRDC to acquire the subject land unless the acquisition
thereof is reasonably necessary for its business. On the other hand, the Avancena heirs insisted
that they are the rightful owners of the subject land, by virtue of the homestead patent granted to
their predecessor-in-interest.

The CA Ruling

In its assailed decision, dated 10 March 2009, the CA affirmed the 7 November 2003 RTC
decision. The appellate court concurred with the trial court's findings that the subject land is
alienable and disposable, and that RRDC has sufficiently established the required period and
character of possession. Likewise, the appellate court was not persuaded by the claims of the
heirs. It noted that the private oppositors anchored their claim on the alleged homestead grant to
Paulino, their predecessor-in-interest, which claim was unsupported by sufficient documentary
evidence.

The appellate court also ruled that the 12-hectare limit under the Constitution was not violated. It
explained that Section 3 of Article XII of the 1987 Constitution, the constitutional provision
which provided for the 12-hectare limit in the acquisition of land, covers only agricultural lands
of the public domain. It ratiocinated that when the subject land was acquired through acquisitive
prescription by RRDC's predecessors-in-interest, it was converted into a private property and, as
such, it ceased to be part of the public domain. Thus, when RRDC acquired the subject land by
purchase, it was no longer within the ambit of the constitutional limitation.

As to the contention that the Corporation Code bars RRDC to acquire the subject land, the
appellate court simply stated that while the said code imposes certain limitations on the
acquisition of real property, there is no such prohibition. It stressed that RRDC is an artificial
being imbued with the power to purchase, hold, and convey real and personal property for such
purposes that are within the objects of its creation. Considering that RRDC is a corporation
engaged in realty business, it has the power to purchase real properties. The dispositive portion
of said decision states:
WHEREFORE, the appeal is DENIED. The assailed November 7, 2003 Decision of the Regional
Trial Court (RTC) of Misamis Oriental, Branch 41, Cagayan de Oro City is hereby AFFIRMED.
SO ORDERED.26

The Republic moved for reconsideration; while the Heirs of Paulino Avanceña adopted the
Republic's motion for reconsideration as their own. In its resolution, dated 3 December 2009, the
CA denied the motion for reconsideration.

Hence, this petition.

THE ISSUES

I.

THE TRIAL COURT ERRED IN GRANTING THE AMENDED APPLICATION FOR

REGISTRATION AND ORDERING THE ISSUANCE OF A DECREE OF REGISTRATION
AND THE CORRESPONDING CERTIFICATE OF TITLE FOR A PARCEL OF LAND
CONTAINING AN AREA OF THREE HUNDRED EIGHTEEN THOUSAND THREE
HUNDRED FORTY FIVE (318,345) SQUARE METERS IN FAVOR OF ROVENCY
REALTY AND DEVELOPMENT CORPORATION, DESPITE THE FACTS THAT-

(i) THE LAND APPLIED FOR REGISTRATION OF TITLE IS IN EXCESS OF

WHAT IS ALLOWED BY LAW; AND,

(ii) RESPONDENT'S RIGHT TO ACQUIRE THE SUBJECT PARCEL OF

LAND IS FURTHER LIMITED BY THE CORPORATION CODE.

II.

RESPONDENT'S EVIDENCE IS INSUFFICIENT TO PROVE THAT IT OR ITS

PREDECESSORS-IN-INTEREST HAVE BEEN IN OPEN, CONTINUOUS, EXCLUSIVE
AND NOTORIOUS POSSESSION UNDER A BONA FIDE CLAIM OF OWNERSHIP SINCE
JUNE 12, 1945 OR EARLIER AND THE SUBJECT PROPERTY IS NO LONGER
INTENDED FOR PUBLIC USE OR FOR THE DEVELOPMENT OF THE NATIONAL
WEALTH.27

THE COURT'S RULING

The petition is meritorious.

12-hectare limit under Section 3, Article XII of the 1987 Constitution

The Republic argues that the trial and appellate courts erred in granting RRDC's application for
the registration of the subject land, as the same has a total land area of 31.8 hectares, which is
way beyond the 12-hectare limit under Section 3, Article XII of the 1987 Constitution, which
provides:
SECTION 3. Lands of the public domain are classified into agricultural, forest or timber, mineral
lands, and national parks. Agricultural lands of the public domain may be further classified by
law according to the uses which they may be devoted. Alienable lands of the public domain shall
be limited to agricultural lands. Private corporations or associations may not hold such
alienable lands of the public domain except by lease, for a period not exceeding twenty-five
years, renewable for not more than twenty-five years, and not to exceed one thousand hectares in
area. Citizens of the Philippines may lease not more than five hundred hectares, or acquire
not more than twelve hectares thereof by purchase, homestead, or grant. [emphasis
supplied]

As can be clearly gleaned from its language, Section 3, Article XII applies only to lands of the
public domain. Private lands are, therefore, outside of the prohibitions and limitations stated
therein. Thus, the appellate court correctly declared that the 12-hectare limitation on the
acquisition of lands under Section 3, Article XII of the 1987 Constitution has no application to
private lands.

A case in point is the absolute prohibition on private corporations from acquiring any kind of
alienable land of the public domain. This prohibition could be traced to the 1973 Constitution
which limited the alienation of lands of the public domain to individuals who were citizens of the
Philippines. This constitutional prohibition, however, does not necessarily mean that
corporations may not apply for original registration of title to lands. In fact, the Court, in several
instances, affirmed the grant of applications for original registration filed by corporations,28 for
as long as the lands were already converted to private ownership by operation of law as a result
of satisfying the requisite possession required by the Public Land Act.29

In Director of Lands v. Intermediate Appellate Court30 (Director of Lands), the Court granted
the application for original registration of parcels of land filed by a corporation which acquired
the lands by purchase from members of the Dumagat tribe. The Court ratiocinated that the lands
applied for registration were already private lands even before the corporation acquired them.
The Court observed that the sellers, being members of the national cultural minorities, had by
themselves and through their predecessors, possessed and occupied the lands since time
immemorial. As a consequence of their open, exclusive, and undisputed possession over the said
lands for the period required by law for the acquisition of alienable lands of the public domain,
said lands ceased to become part of the public land and were converted, by operation of law, into
private ownership. As such, the sellers, if not for their conveyance of the lands in question to the
corporation, were entitled to exercise the right granted to them by the Public Land Act to have
their title judicially confirmed. Considering further that the lands in question were already
private in character at the time the corporation acquired them, the constitutional prohibition does
not apply to the corporation.

In Republic v. TA.N. Properties 31 (TA.N. Properties), the Court stressed that what is
determinative for the application of the doctrine in Director of Lands is for the corporate
applicant for land registration to establish that when it acquired the land, the same was already
private land by operation of law because the statutory acquisitive prescriptive period of 30 years
had already lapsed.
The pronouncements in Director of Lands and TA.N. Properties apply with equal force to the 12-
hectare limitation, considering that both the limitation and the prohibition on corporations to
acquire lands, do not cover ownership of private lands. Stated differently, whether RRDC can
acquire the subject land and to what extent, depends on whether the pieces of evidence it
presented before the trial court sufficiently established that the subject land is alienable and
disposable land of the public domain; and that the nature and duration of the possession of its
individual predecessors-in-interest converted the subject land to private land by operation of law.

Requirements for original registration of title to land

In Republic of the Philippines vs. Cortez,32 the Court explained that applicants for original
registration of title to land must first establish compliance with the provisions of either Section
14(1) or Section 14(2) of P.D. No. 1529, which state:

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.

(2) Those who have acquired ownership of private lands by prescription under the provision of
existing laws.

It must be emphasized that the requirements and bases for registration under these two provisions
of law differ from one another. Section 14 (1) mandates registration on the basis of possession,
while Section 14 (2) entitles registration on the basis of prescription.33 Thus, it is important to
ascertain under what provision of Section 14 the registration is sought.

A reading of the application, however, is unavailing. In its application, RRDC alleged that it and
its predecessors-in-interest "had been in open, continuous, adverse, and peaceful possession in
concept of owner of the subject property since time immemorial or for more than thirty years."
This allegation made it unclear whether registration is sought under Section 14(1) - possession
since 12 June 1945 or earlier; or under Section 14(2) - possession for more than thirty years.

An examination of the 7 November 2003 RTC decision also proved futile considering that, and
as previously pointed out, aside from enumerating the exhibits offered by the applicant, the trial
court did not discuss how these pieces of evidence established the requisites for registration.
Thus, for the proper resolution of the issues and arguments raised herein, it becomes necessary
for the present application to be scrutinized based on the requirements of the provisions of
Sections 14 (1) and (2) of P.D. No. 1529.

Registration under Section 14(1) of P.D. No. 1529

Under Section 14(1), applicants for registration of title must sufficiently establish the following
requisites: first, that the subject land forms part of the disposable and alienable lands of the
public domain; second, that the applicant and his predecessors-in-interest have been in open,
continuous, exclusive, and notorious possession and occupation of the same; and third, that the
possession is under a bona fide claim of ownership since 12 June 1945, or earlier.34

The first requisite of Section 14(1) entails only that the property sought to be registered be
alienable and disposable at the time of the filing of the application for registration.35 To prove
that the land sought to be registered is alienable and disposable, the present rule is that the
application for original registration must be accompanied by (1) a CENRO or PENRO
Certification; and (2) a copy of the original classification approved by the DENR Secretary, and
certified as true copy by the legal custodian of the official records.36This strict requirement for
the registration of lands enunciated in TA.N Properties had been consistently applied and
affirmed by the Court in a plethora of cases.37

In the present case, to prove that the subject land is alienable and disposable, RRDC presented a
CENRO certification stating that the subject land is "alienable and disposable and not covered by
any public land application." RRDC, however, failed to present a certified true copy of the
original classification approved by the DENR Secretary declaring the subject land alienable and
disposable. Clearly, the evidence presented by RRDC falls short of the requirements in TA.N.
Properties. Thus, the trial and appellate courts erred when they ruled that the subject land is
alienable and disposable part of the public domain and susceptible to original registration.

Furthermore, RRDC also failed to prove that it and its individual predecessors-in-interest
sufficiently complied with the required period and nature of possession.

An applicant for land registration must exhibit that it and its predecessors-in-interest had been in
open, continuous, exclusive, and notorious possession and occupation of the land under a bona
fide claim of ownership since 12 June 1945 or earlier. It has been held that possession is open
when it is patent, visible, apparent, notorious, and not clandestine; it is continuous when
uninterrupted, unbroken, and not intermittent or occasional; it is exclusive when the adverse
possessor can show exclusive dominion over the land and an appropriation of it to his own use
and benefit; and notorious when it is so conspicuous, that it is generally known and talked of by
the public or the people in the neighborhood.38

In Republic vs. Remman Enterprises, Inc., 39 the Court held that for purposes of land registration
under Section 14(1) of P.D. No. 1529, proof of specific acts of ownership must be presented to
substantiate the claim of open, continuous, exclusive, and notorious possession and occupation
of the land subject of the application. Applicants for land registration cannot just offer general
statements which are mere conclusions of law rather than factual evidence of possession. Actual
possession is in the manifestation of acts of dominion over it of such nature as a party would
actually exercise over his own property.

In Republic v. Gielczyk, the Court explained that "possession" and "occupation" are not
synonymous to each other. Possession is broader than occupation because it includes
constructive possession; whereas occupation delimits the all-encompassing effect of constructive
possession. Thus, taken together with the words open, continuous, exclusive, and notorious, the
word occupation means that for one's title to land to be judicially recognized, his possession of
the land must not be mere fiction.40

In this case, aside from the deeds of absolute sale covering the subject land which were executed
prior to 12 June 1945, RRDC did not present any evidence which would show that its
predecessors-in-interest actually exercised acts of dominion over the subject land even before the
cut-off period. As such, RRDC failed to prove that its possession of the land, or at the very least,
its individual predecessors-in-interest's possession over the same was not mere fiction.

Neither would the tax declarations presented by RRDC suffice to prove the required possession.
To recall, the earliest of these tax declarations dates back only to 1948. Clearly, the required
possession and occupation since 12 June 1945 or earlier, was not demonstrated.

From the foregoing, it is clear that RRDC failed to prove that its individual predecessors-in-
interest had been in open, continuous, exclusive and notorious possession and occupation of the
subject land under a bona fide claim of ownership since 12 June 1945 or earlier; and that said
possession and occupation converted the subject land into a private property by operation of law.
Consequently, the subject land cannot be registered in the name of RRDC under Section 14(1) of
P.D. No. 1529.

Requirements under Section 14(2) of P.D. No. 1529

RRDC also failed to establish compliance with the requirements for registration under Section
14(2).

In Heirs of Mario Malabanan vs. Republic (Malabanan),41 the Court explained that when
Section 14(2) of P.D. No. 1529 provides that persons "who have acquired ownership over private
lands by prescription under the provisions of existing laws," it unmistakably refers to the Civil
Code as a valid basis for the registration of lands. The Civil Code is the only existing law that
specifically allows the acquisition by prescription of private lands, including patrimonial
property belonging to the State.

The Civil Code makes it clear that patrimonial property of the State may be acquired by private
persons through prescription.1âwphi1 This is brought about by Article 1113, which states that all
things which are within the commerce of man are susceptible to prescription, and that property of
the State or any of its subdivisions not patrimonial in character shall not be the object of
prescription.42

Nonetheless, this does not necessarily mean that when a piece of land is declared alienable and
disposable part of the public domain, it can already be acquired by prescription. In Malabanan,
this Court ruled that declaration of alienability and disposability is not enough - there must be an
express declaration that the public dominion property is no longer intended for public service or
the development of the national wealth or that the property has been converted into patrimonial,
thus:
"(2) In complying with Section 14(2) of the Property Registration Decree, consider that under the
Civil Code, prescription is recognized as a mode of acquiring ownership of patrimonial property.
However, public domain lands become only patrimonial property not only with a declaration that
these are alienable or disposable. There must also be an express government manifestation that
the property is already patrimonial or no longer retained for public service or the development of
national wealth, under Article 422 of the Civil Code. And only when the property has become
patrimonial can the prescriptive period for the acquisition of property of the public dominion
begin to run. "43 [emphasis supplied]

The classification of the land as alienable and disposable land of the public domain does not
change its status as property of the public dominion under Article 420(2) of the Civil Code. As
such, said land, although classified as alienable and disposable, is insusceptible to acquisition by
prescription.44

In this case, RRDC did not present any evidence which would show that the subject land was
expressly declared as no longer intended for public service or the development of the national
wealth, or that the property has been converted into patrimonial. Hence, it failed to prove that
acquisitive prescription has begun to run against the State, and that it has acquired title to the
subject land by virtue thereof.

In fine, RRDC failed to satisfy all the requisites for registration of title to land under either
Sections 14(1) or (2) of P.D. No. 1529. RRDC also failed to establish that when it or P.N. Roa
Enterprises, Inc., also a corporation and its direct predecessor-in-interest, acquired the subject
land, it had already been converted to private property, thus, the prohibition on the corporation's
acquisition of agricultural lands of the public domain under Section 3, Article XII of the 1987
Constitution applies. RRDC's application for original registration of imperfect title over Lot No.
3009 must perforce be denied.

WHEREFORE, the instant petition is GRANTED. The 10 March 2009 Decision and 3
December 2009 Resolution of the Court of Appeals in CA-G.R. CV No. 00651, which affirmed
the 7 November 2003 Decision of the Regional Trial Court, Branch 41, Cagayan de Oro City, in
LRA Case No. N-2000-084, are hereby REVERSED and SET ASIDE. The Application for
Registration of Lot No. 3009 filed by Rovency Realty and Development Corporation is
DENIED.

SO ORDERED.

SAMUEL R. MARTIRES
Associate Justice

WE CONCUR:

PRESBITERO J. VELASCO, JR.

Associate Justice
Chairperson
 LUCAS P. BERSAMIN MARVIC M.V.F. LEONEN
Associate Justice Associate Justice

ALEXANDER G. GESMUNDO
Associate Justice

ATTESTATION

I attest that the conclusions in the above Decisionhad been reached in consultation before the
case was assigned to the writer of the opinion of the Court’s Division.

PRESBITERO J. VELASCO, JR.

Associate Justice
Chairperson, Third Division

CERTIFICATION

Pursuant to the Section 13, Article VIII of the Constitution and the Division Chairperson’s
Attestation, I certify that the conclusions in the above Decision had been reached in consultation
before the case was assigned to the writer of the opinion of the Court’s Division.

MARIA LOURDES P.A. SERENO

Chief Justice