IGNACIO MESINA, plaintiff-appellant,

vs.
EULALIA PINEDA VDA. DE SONZA, ET AL., defendants.
EULALIA PINEDA VDA. DE SONZA, defendant-appellee.
Agustin C. Bagasao for appellant.
Luis Manalang and Associates for appellee.
G.R. No. L-14722 May 25, 1960

BAUTISTA ANGELO, J.:
Plaintiff brought this action before the Court of First Instance of Nueva Ecija praying that Original Certificate of Title No.
P-1137 of the Register of Deeds of Nueva Ecija be ordered cancelled and that the registration case pending before the
same court covering the property described therein be given due course and that defendants be ordered to pay plaintiff
P1,000.00 as attorney's fees and costs.
Defendants filed a motion to dismiss on the ground that plaintiff's action is already barred by the statute of limitations.
The reasons advanced are: the complaint was filed on March 25, 1958. The decree of registration or issuance of patent
over the property was issued "sometime on September 12, 1953 or thereabout", while the transfer certificate of title
covering the same was issued on September 16, 1953. The present action which calls for the cancellation of said decree
and title has, therefore, been filed after the elapse of more than four years, which cannot be done, because the title has
already become indefeasible and incontrovertible. The court sustained this motion and dismissed the complaint. Hence
the present appeal.
Plaintiff claims that he is the owner in fee simple of Lot No. 3259, with improvements thereon, situated in San Antonio,
Nueva Ecija; that he has been in actual possession thereof since 1914, publicly, openly, peacefully and against the whole
world and up to the present time he is the only one who benefits from the produce thereof; that said lot is at present
the subject of registration proceedings pending in the same court known as Registration Case No. N-372, L.R.C. Cad.
Record No. N-12238; that sometime in September 12, 1953, the Director of Lands, without exercising due care, and in
spite of his knowledge that defendants had not complied with the requirements of Commonwealth Act No. 141, issued a
homestead patent in their favor as a consequence of which a certificate of title was issued in their name by the register
of deeds; that said title was procured by defendants through frauds, deception and misrepresentation since they knew
that the lot belonged to the plaintiff; and that the Director of Lands has no authority nor jurisdiction to issue a patent
covering said land because it is a private property of plaintiff. For these reasons, plaintiff prays that said decree and title
be cancelled.
Republic Act No. 1942, which took effect on June 22, 1957 (amending Section 48-b of Commonwealth Act 141),
provides:
(b) Those who by themselves or through their predecessors in interest have been in open, continuous, exclusive and
notorious possession and occupation of agricultural lands of the public domain, under a bona fide claim of acquisition of
ownership, for at least thirty years immediately preceeding the filing of the application for confirmation of title except
when prevented by war or force majeure. These shall be conclusively presumed to have performed all the conditions
essential to a Government grant and shall be entitled to a certificate of title under the provisions of this chapter.
In the case of Susi vs. Razon, et al., 48 Phil., 424, it was observed that where all the necessary requirements for a grant
by the Government are complied with through actual physical possession openly, continuously, and publicly, with a right
to a certificate of title to said land under the provisions of Chapter VIII of Act No. 2874, amending Act No. 926 (carried
over as Chapter VIII of Commonwealth Act No. 141), the possessor is deemed to have already acquired by operation of
law not only a right to a grant, but a grant of the Government, for it is not necessary that a certificate of title be issued in
order that said grant may be sanctioned by the court an application therefor being sufficient under the provisions of
Section 47 of Act No. 2874 (reproduced as Section 50, Commonwealth Act No. 141). Thus, the following is what this
Court said on the matter:
It clearly appears from the evidence that Valentin Susi has been in possession of the land in question openly,
continuously, adversely and publicly, personally and through his predecessors, since the year 1880, that is, for about
forty-five years. ... When on August 15, 1914, Angela Razon applied for the purchase of said land, Valentin Susi had
already been in possession thereof personally and through his predecessors for thirty-forty years. And if it is taken into
account that Nemesio Pinlac had already made said land a fish pond when he sold it on December 13, 1880, it can hardly
be estimated when he began to possess and occupy it, the period of time being so long that it is beyond the reach of
memory. ... In favor of Valentin Susi, there is, moreover the presumption juris et de jure established paragraph (b) of
section 45 of Act No. 2874, amending Act No. 926, that all the necessary requirements for a grant by the Government
were complied with, for he has been in actual and physical possession, personally and through his predecessors, of an
agricultural land of the public domain openly, continuously, exclusively and publicly since July 26, 1894, with a right to a
certificate of title to said land under the provisions of Chapter VIII of said Act. So that when Angela Razon applied for the
grant in her favor, Valentin Susi had already acquired, by operation of law, not only a right to grant, but a grant of the
Government, for it is not necessary that certificate of title should be issued in order that said grant may be sanctioned by
the courts, an application therefor is sufficient, under the provisions of section 47 of Act No. 2874. If by a legal fiction,
Valentin Susi had acquired the land in question by a grant of the State, it had already ceased to be of the public domain
and had become private property, at least by presumption, of Valentin Susi, beyond the control, of the Director of Lands.
Consequently, in selling the land in question to Angela Razon, the Director of Lands disposed of a land over which he had
no longer any title or control, and the sale thus made was void and of no effect, and Angela Razon did not thereby
acquire any right. (Emphasis supplied)
Such is the situation in which the plaintiff claims to be in his complaint. He alleges that he is the owner in fee simple of
the lot in question, with the improvements thereon, situated in San Antonio, Nueva Ecija, and that he has been in actual
possession thereof since 1914, publicly, openly, peacefully and against the whole world, and that up to the present time
he is the only one who benefits from the produce thereof. He further claims that said lot is present the subject of a
registration proceeding pending in the same court, known as Registration Case No. N-372, L.R.C. Cad. Record No. N-
12238. If by legal fiction, as stated in the Susi case, plaintiff is deemed to have acquired the lot by a grant of the State, it
follows that the same had ceased to be part of the public domain and had become private property and, therefore, is
beyond the control of the Director of Lands. Consequently, the homestead patent and the original certificate of title
covering said lot issued by the Director of Lands in favor of the defendants can be said to be null and void, for having
been issued through fraud, deceit and misrepresentation.
Considering that this case was dismissed by the trial court merely on a motion to dismiss on the ground that plaintiff's
action is already barred by the statute of limitations, which apparently is predicated on the theory that a decree of
registration can no longer be impugned on the ground of fraud one year after the issuance and entry of the
decree,
1
which theory does not apply here because the property involved is allegedly private in nature and has ceased to
be part of the public domain, we are of the opinion that the trial court erred in dismissing the case outright without
giving plaintiff a chance to prove his claim. It would have been more proper for the court to deny the motion on the
ground that its object does not appear to be indubitable, rather than to have dismissed it, as was done by the trial court.
Wherefore, the order appealed from is set aside. The case is remanded to the trial court for further proceedings. No
costs.
Paras, Bengzon, C.J., Padilla, Labrador, Concepcion, Barrera, and Gutierrez David, JJ., concur.


Footnotes
1
Sorsogon vs. Makalintal, 80 Phil., 259; 45 Off. Gaz., 3819; See also G. M. Tuason & Co., Inc. vs. Quirino Bolaos, 95 Phil.,
106; Aguilar, et al. vs. Caoagdan, et al., 105 Phil., 661; 56 Off. Gaz. (28) 4546; Henderson vs. Garrido, et al., G.R. No. L-
4913, December 28, 1951.

FIRST DIVISION


THE HEIRS OF EMILIO G.R. No. 160832
SANTIOQUE, represented by
FELIMON W. SANTIOQUE,
Petitioners, Present:

PANGANIBAN, CJ.,
- versus - Chairperson,
YNARES-SANTIAGO,
AUSTRIA-MARTINEZ,
CALLEJO, SR., and
THE HEIRS OF EMILIO CALMA, CHICO-NAZARIO, JJ.
FABIAN CALMA, AGATONA
CALMA, and DEMETRIA
CALMA, represented by LOPE
AKOL and LUCIA CALMA-AKOL,
and the REGISTER OF DEEDS
OF THE PROVINCE OF TARLAC, Promulgated:
Respondents.
October 27, 2006
--------------------------------------------------------------------------------------------

D E C I S I O N

CALLEJO, SR., J.:


This is a petition for review on certiorari of the Decision
[1]
of the Court of Appeals (CA) in CA-G.R. CV No. 65352
affirming the Decision
[2]
of the Regional Trial Court (RTC) in Civil Case No. 8634, as well as the Resolution
dated November 21, 2003 which denied the motion for reconsideration thereof.

On March 31, 1932, the Governor General granted a homestead patent over a 20.9740-hectare parcel of land located in
Barrio Tibag, Tarlac, Tarlac. On the basis of said patent, Original Certificate of Title (OCT) No. 1112 was issued by the
Register of Deeds on April 21, 1932. The title was cancelled by Transfer Certificate of Title (TCT) No.
13287. On November 27, 1953, TCT No. 13287 was cancelled by TCT No. 19181 under the names of Agatona Calma,
Fabian Calma, Emilio Calma and Demetria Calma.
[3]
On September 23, 1954, the parties executed a contract of lease in
favor of the Spouses Lope A. Akol, who then executed an Assignment of Leasehold Rights under the Contract of Lease in
favor of the Rehabilitation Finance Corporation (RFC) on January 26, 1955.
[4]


In the meantime, Fabian Calma died intestate. A petition for the administration of his estate was filed in the RTC of
Tarlac docketed as Special Proceedings No. 1262. Lucia Calma was appointed as administratrix of the estate. The heirs
executed a Deed of Partition over the property on April 17, 1967. On September 13, 1967,
[5]
TCT No. 19181 was
cancelled by TCT No. 71826 in the names of Agatona Calma, Emilio Calma, Demetria Calma and Fabian Calma.

Meanwhile, in 1967, a 20.564-ha parcel of land located in Tibag, Tarlac and identified as Lot No. 3844 of Pat-H-132104 -
prt. was declared for taxation purposes under the name of Emilio Santioque (Tax Dec. No. 19675).
[6]
However, the
declaration did not bear the name and signature of the declarant.

On June 3, 1973, Santioque died intestate. His children, Felimon, Rose, Filomena, Jose, Josefina, Ana, Rufino, and
Avelina, all surnamed Santioque, filed on February 29, 1998, a complaint in the RTC of Tarlac for declaration of nullity of
title, reconveyance, with damages, over a piece of land situated in Tibag, Tarlac City. The case was docketed as Civil Case
No. 8634.

The heirs claimed that on March 31, 1932, Emilio was awarded Homestead Patent No. 18577 by virtue of Homestead
Application No. 132104 over a lot located in Barrio Tibag, Tarlac City; the said lot was identified as Lot No. 3844 of the
Tarlac Cadastre No. 274, with an area of 20.5464 hectares; OCT No. 1112 was issued to Emilio on April 21, 1932, and
from then had enjoyed full ownership and dominion over the said lot; and prior to his death, Emilio ordered Felimon to
work for the recovery of the said property.
[7]
They further averred that when Felimon went to the Register of Deeds of
Tarlac for a final verification, he discovered that the lot covered by OCT No. 1112 was already registered in the names of
Agatona, Fabian, Emilio and Demetria, all surnamed Calma, under TCT No. 19181 issued on November 27, 1953. It
appeared from the said TCT No. 19181 that the title was a transfer from TCT No. 13287.
[8]


The heirs contended that Emilio was the first registrant of the subject lot and, as such, was its lawful owner. The land
could no longer be the subject matter of subsequent cadastral proceedings, and any title issued pursuant thereto would
be void. They prayed that judgment be rendered in their favor, as follows:

WHEREFORE, it is most respectfully prayed that after due notice and hearing, judgment be rendered ordering the
nullification of TCT No. 19181 and TCT No. 13287 of the Register of Deeds of Tarlac and upholding and declaring the
existence, legality and validity of the Homestead Patent bearing No. 18577 and OCT No. 1112 issued in the name of the
late Emilio Santioque and

1. Ordering Defendants to reimburse to the Plaintiffs the income, profits or benefits unjustly derived by them from TCT
No. 19181 and 13287 the estimation of which is left to the sound discretion of the Honorable Court;

2. Ordering the Defendants to pay to the Plaintiffs the amount of P50,000.00 as attorneys fees;

3. Cost of suit;

4. Any and all remedies just and equitable under the premises.
[9]


The heirs of Calma filed a motion to dismiss the complaint alleging that (a) the action had prescribed and was barred by
laches; (b) the claim has been abandoned, and (c) the complaint stated no cause of action.
[10]
The court denied the
motion. The heirs of Calma filed their answer, reiterating the grounds and allegations in their motion to dismiss by way
of special and affirmative defenses.
[11]


During trial, Felimon Santioque testified for the plaintiffs. He admitted that they had no copy of OCT No. 1112; the
Register of Deeds likewise had no record of the said title, nor TCT No. 13287.
[12]
He discovered from the said office that
the subject lot was covered by TCT No. 19181 with the names of Agatona Calma and her co-heirs as owners.
[13]
The title
was, in turn, cancelled and replaced by TCT No. 71286 also in the names of Agatona Calma and her co-heirs.

On cross-examination, Felimon declared that his father, Emilio, mentioned the property to the plaintiffs sometime
before he died in 1973. From that time on, he tried to ascertain the particulars of the property and succeeded in 1990
only when he went through the records at the Community Environment and Natural Resources Office (CENRO).
[14]


Felimon declared that, on August 4, 1992, he secured a document from the Lands Management Bureau (LMB) stating
that on March 1 to 6, 1930, a parcel of land with an area of 209,746 square meters located in Tibag, Tarlac, Tarlac, was
surveyed by W. Santiago and approved on February 27, 1932.
[15]
However, the document was not certified by the Chief
Geodetic Engineer. Neither did the plaintiffs present the employee of the Bureau who prepared the document to testify
on its authenticity.

Felimon admitted that Amando Bangayan, Chief, Records Management Division of the LMB certified that, based on the
survey records of Cadastral Survey No. 274 and as indicated in the Area Sheet of Lot 3844, Cad. 274, Emilio Santioque
was the claimant of the lot. However, the Bureau had no available records of Homestead Application No. 132104 and
Homestead Patent No. 18577 dated March 31, 1932.
[16]
Felino Cortez, Chief, Ordinary and Cadastral Decree Division of
the Land Registration Authority (LRA), certified that after due verification of the records of the Book of Cadastral Lots,
Lot 3844 had been the subject of Cadastral Case No. 61, LRC Cad. Record No. 1879; the case had been decided but no
final decree of registration had been issued; and the lot was subject to the annotation con patent No. 18577
segun report of B.L.
[17]
The Register of Deeds of Tarlac stated that, on January 25, 1998, despite diligent efforts, he
could not locate TCT No. 13287 and OCT No. 1112 or any other document leading to the issuance of TCT No. 19181. He
explained that in 1987 and 1988, his office had to be reconstructed, and titles and documents had to be moved from
one place to another.
[18]
The Register of Deeds issued a certification
[19]
dated September 10, 1998 stating that despite
diligent efforts, he could not locate OCT No. 1112 or any document showing how it was cancelled. The Records Officer
of the Register of Deeds in Tarlac City also certified that OCT No. 1112 and TCT No. 13287 could not be found despite
diligent efforts.
[20]


After the heirs of Santioque rested their case, the defendants, heirs of Calma, demurred to plaintiffs evidence and
sought its dismissal on the ground that the latter failed to establish a preponderance of evidence to support their
ownership over the property.
[21]


On August 11, 1999, the trial court issued an Order
[22]
granting the demurrer and dismissing the complaint on the ground
that plaintiffs failed to establish their case.

The heirs of Santioque appealed said order to the CA claiming that

I

THE TRIAL COURT ERRED IN HOLDING THAT PLAINTIFFS-APPELLANTS FAILED TO PROVE THAT ORIGINAL CERTIFICATE OF
TITLE NO. 1112 WAS ISSUED IN THE NAME OF EMILIO SANTIOQUE, THE PLAINTIFFS PREDECESSOR-IN-INTEREST, DESPITE
THE FACT THAT SUFFICIENT, ADEQUATE AND CONVINCING EVIDENCE HAVE BEEN PRESENTED TO PROVE THAT SAID OCT
1112 WAS ISSUED IN THE NAME OF EMILIO SANTIOQUE.

II

THE TRIAL COURT ERRED IN RESORTING TO SPECULATIONS, SURMISES AND CONJECTURES WHEN IT RULED THAT OCT
1112 COULD HAVE BEEN ISSUED TO ANOTHER PERSON OTHER THAN THE LATE EMILIO SANTIOQUE.

III

THE TRIAL COURT ALSO RESORTED TO SPECULATIONS, SURMISES AND CONJECTURES WHEN IT HELD THAT THERE WAS
NO EVIDENCE TO PROVE THAT PATENT NO. 18577 WAS ISSUED TO EMILIO SANTIOQUE, THUS DISREGARDING THE
COMPETENT AND SUFFICIENT EVIDENCE ADDUCED BY PLAINTIFFS-APPELLANTS TO PROVE THAT SAID PATENT WAS
ISSUED TO EMILIO SANTIOQUE.

IV

THE TRIAL COURT ERRED IN HOLDING THAT TCT NO. 19181 ISSUED TO DEFENDANTS-APPELLEES WAS PRESUMED TO
HAVE BEEN ISSUED IN THE ORDINARY COURSE OF BUSINESS WHEN IN FACT ITS ISSUANCE IS PLAINLY FRAUDULENT AND
EVIDENTLY ANOMALOUS.

V

THE TRIAL COURT ERRED IN SWEEPINGLY CONCLUDING THAT DEFENDANTS-APPELLEES HAVE ACQUIRED THE SUBJECT
PROPERTY BY ACQUISITIVE PRESCRIPTION AND IN RULING THAT PLAINTIFFS-APPELLANTS HAVE SLEPT ON THEIR RIGHT
FOR MANY YEARS AND THAT THEY HAVE CONSTRUCTIVE NOTICE OF THE ISSUANCE OF DEFENDANTS-APPELLEES TITLE,
THUS THEY ARE ESTOPPED BY LACHES.

VI

THE TRIAL COURT ERRED IN REFUSING WITHOUT VALID CAUSE TO ISSUE SUBPOENA DUCES TECUM AND AD
TESTIFICANDUM TO THE REGISTER OF DEEDS OF TARLAC AND THE LAND REGISTRATION AUTHORITY IN ORDER TO SHED
LIGHT ON THE WHEREABOUTS OF OCT 1112 AND THE ISSUANCE OF TCT NOS. 13287, 19181 AND 71826.
[23]



On August 30, 2000, Felimon Santioque wrote to the Director of the National Bureau of Investigation (NBI), Federico
Opinion, Jr., requesting for his assistance in investigating the disappearance of the copy of the Registrar of Deeds of
Tarlac of OCT No. 1112 and TCT No. 13287.
[24]
Attached to the said letter were the following certifications and
investigation reports of the LRA:

1. Xerox copy of TCT No. 71826 dated September 13, 1967 under the names of Agatona Calma, Emilio Calma, Dorotea
Calma and Lucia Calma.
[25]


2. Certified xerox copy Tax Declaration No. 22116 in the name of Agatona Calma, et al;
[26]


3. Certified xerox copy of Tax Declaration No. 39766 in the name of Agatona Calma, et al;
[27]


4. Certified xerox copy of Tax Declaration No. 35226 in the names of Agatona Calma, et al;
[28]


5. Certified xerox copy of the Investigation Report of Mr. Felix Cabrera Investigator, Land Registration Authority,
dated September 30, 1999, finding that there are no documents in the Registry supporting the cancellation of OCT 1112
and the issuance of TCT Nos. 13287, and that TCT No. 71826 is irregularly issued inasmuch as no transaction which
would justify its issuance appears in the Primary Entry Book;
[29]


6. Certification of Mr. Andres B. Obiena, Records Officer I of the Register of Deeds of Tarlac, Tarlac, dated April 5,
1999, that OCT No. 1112 could not be located in the archives;
[30]


7. Certification of Mr. Meliton I. Vicente, Jr., Community Environment and Natural Resources Officer of the DENR,
Region III, that Lot No. 3844 is already covered by Homestead Application No. 132104 with Patent No. 1877 issued to
Emilio Santioque on March 31, 1932;
[31]


8. Certified xerox copy of Record Book Page 383 signed by Florida S. Quiaoit, Records Management Unit, CENRO III-
6, Tarlac City, showing that Emilio Santioque is a claimant of Lot No. 3844 under Homestead Application No. HA-132104
and Patent No. 1877;
[32]


9. Certified xerox copy of Area Sheet over Lot 3844 prepared for Emilio Santioque, certified by Emilanda M. David,
Record Officer 1, DENRO, San Fernando, Pampanga dated February 29, 2000;
[33]


10. Certified xerox copy of Case No. 6, Cad Record No. I, showing that Emilio Santioque was the claimant of Lot No.
3844, under Pat-H-132104 Part.
[34]


The heirs of Santioque did not present the said documents at the trial below but they included the same in their
appellants brief.

Without waiting for the report of the NBI on their request, the heirs of Santioque filed a motion with the CA for the early
resolution of the case.
[35]
On June 27, 2003, the CA affirmed the appealed decision.
[36]
The appellate court did not give
probative weight to the certifications and other documents submitted by the heirs of Santioque, as their authenticity
had not been established and the signatories therein were not presented for cross-examination. It noted that none of
the crucial documents were presented in the trial court. Assuming that OCT No. 1112 was indeed issued to Emilio
Santioque, the claim of his heirs was nevertheless barred by laches; the latter must bear the consequences of their
fathers inaction.
The heirs of Santioque filed a motion for reconsideration, which the CA resolved to deny on November 21, 2003.
[37]


The heirs of Santioque, now petitioners, seek relief from this Court on the following issues:
I.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN NOT GIVING CREDENCE TO THE CERTIFICATIONS,
DOCUMENTS, RECORDS AND PICTURES SUBMITTED BY PETITIONER BEFORE THE SAID COURT ON THE GROUND THAT
THEY WERE NOT SUBMITTED IN EVIDENCE AT THE TRIAL AND THAT THEIR AUTHENTICITY HAS NOT BEEN ESTABLISHED,
DESPITE THE FACT THAT PETITIONERS FAILURE TO SUBMIT THE SAME AS EVIDENCE BEFORE THE TRIAL COURT AND TO
ESTABLISH THEIR AUTHENTICITY WAS DUE TO THE PREMATURE AND UNJUSTIFIED DISMISSAL OF THEIR COMPLAINT,
WHICH WAS TANTAMOUNT TO DENIAL OF THEIR RIGHT TO BE HEARD AND TO DUE PROCESS.

II.
THE HONORABLE COURT OF APPEALS ERRED IN NOT HOLDING THAT DESPITE PETITIONERS FAILURE TO PRESENT THEIR
ORIGINAL CERTIFICATE OF TITLE, OCT NO. 1112, SUFFICIENT AND CONVINCING EVIDENCE WERE ADDUCED BY
PETITIONERS TO PROVE THAT SAID TITLE WAS ISSUED TO THEIR PREDECESSOR-IN-INTEREST, EMILIO SANTIOQUE. ON
THE OTHER HAND, SINCE PETITIONERS COMPLAINT WAS DISMISSED BY THE TRIAL COURT ON RESPONDENTS
DEMURRER TO EVIDENCE, THE RESPONDENTS FAILED EITHER (1) TO CONTROVERT THE EVIDENCE ADDUCED BY
PETITIONERS IN SUPPORT OF THEIR CLAIM OVER THE SUBJECT PROPERTY OR THEIR PRETENSION OF FACTS.

III.
THE HONORABLE COURT OF APPEALS GRAVELY MISAPPREHENDED THE FACTS OF THE CASE WHEN IT HELD THAT
RESPONDENTS ARE IN ACTUAL POSSESSION OF THE SUBJECT PROPERTY, DESPITE CLEAR ABSENCE OF EVIDENCE BY
RESPONDENTS TO SUPPORT THEIR CLAIM OF POSSESSION AND AS EVIDENCED BY THE PICTURES SUBMITTED BY
PETITIONERS.

IV.
THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT PETITIONERS DID NOTHING TO RECOVER THEIR
CERTIFICATE OF TITLE, OCT NO. 1112, IN A DIRECT ACTION IF INDEED SAID OCT NO. 1112 WAS ISSUED TO EMILIO
SANTIOQUE AND INVALIDLY CANCELLED AND REPLACED WITH TCT NO. 13287 IN THE NAME OF RESPONDENTS, AND
THAT THE PETITIONERS SHOULD BEAR THE CONSEQUENCES OF THEIR FATHER EMILIO SANTIOQUES INACTION, DESPITE
THE FACT THAT PETITIONERS HAVE BEEN VIGILANT OF THEIR RIGHTS AND, HENCE, PRESCRIPTION AND LACHES DO NOT
BAR PETITIONERS COMPLAINT.

V.
WHETHER OR NOT REMAND OF THE INSTANT CASE TO THE LOWER COURT IS PROPER, INSTEAD OF A DECISION ON THE
MERITS.
[38]


Petitioners contend that the appellate court erred in not giving credence to the certifications, records, documents and
pictures they attached to their appellants brief. They aver that they had not yet discovered the said documents when
they presented their evidence at the trial court; hence, they could have presented the documents and their affiants
during the rebuttal stage of the proceedings had the trial court not prematurely aborted the proceedings before it. They
insist that they were denied their right to due process when the trial court granted respondents demurrer to evidence
and dismissed the case.
[39]


Petitioners aver that they have clearly shown and proven their claim over the property, particularly through Tax Dec. No.
19675 and the contents of the Record Book. They posit that judicial notice should be taken that tax declarations are
usually issued in the name of the prospective owner upon a showing of the basis of ownership. On the other hand,
respondents have no factual and evidentiary basis to support their claim over the subject property since they have not
adduced before the trial court any documentary and testimonial evidence to support ownership of the property.
Petitioners further contend that they have clearly shown, through the pictures they submitted before the appellate
court, that respondents have not been in actual possession of the property; hence, it cannot be presumed that
respondents, as registered owners, are likewise in possession of the subject property.
[40]


Petitioners aver that prescription and laches do not bar their complaint since they have been vigilant in protecting
their rights. They contend that Emilio was old and sickly and died at an old age. Laches presupposes negligence, and
neither Emilio nor his successors were negligent in protecting their rights over the subject property. It took sometime
before they could lodge a complaint against respondents because they had to make inquiries first and retrieve
documents from different offices to support their claim.
[41]


For their part, respondents aver that there were no indicia of proof that OCT No.1112 was really issued to Emilio.
The evidence proffered by the petitioners only tends to prove that Emilio was a mere claimant. It is not incumbent upon
the respondents to present any proof that they are the owners of the subject lot because the property is registered in
their name. The mere fact that the records are not available would not ipso facto mean that the transactions made
affecting OCT No. 1112 were irregular.
[42]


Respondents further aver that the appellate court was correct in not giving credence to the documents, which were not
submitted during the trial even though they were obtainable at that time. To allow the introduction of these documents
on appeal would violate the essence of due process as the respondents would not be able to interpose objections to
their admissibility. Even if these documents were admitted, they would not help petitioners case since they would still
not prove that Emilios claim ripened into full ownership. Respondents likewise agree with the finding of the appellate
court that the complaint is already barred by prescription and laches.
[43]


The petition is without merit.

The core issues in this case are: (1) whether the trial court erred in granting the demurrer to evidence of respondents,
and (2) whether petitioners claim is barred by prescription and laches.

On the first issue, the Court holds that CA ruling which affirmed that of the RTC granting the demurrer is correct.

Demurrer to evidence authorizes a judgment on the merits of the case without the defendant having to submit evidence
on his part as he would ordinarily have to do, if it is shown by plaintiffs evidence that the latter is not entitled to the
relief sought. The demurrer, therefore, is an aid or instrument for the expeditious termination of an action, similar to a
motion to dismiss, which a court or tribunal may either grant or deny.
[44]


A demurrer to evidence may be issued when, upon the facts and the law, the plaintiff has shown no right to
relief.
[45]
Where the plaintiffs evidence together with such inferences and conclusions as may reasonably be drawn
therefrom does not warrant recovery against the defendant, a demurrer to evidence should be sustained.
[46]
A demurrer
to evidence is likewise sustainable when, admitting every proven fact favorable to the plaintiff and indulging in his favor
all conclusions fairly and reasonably inferable therefrom, the plaintiff has failed to make out one or more of the material
elements of his case,
[47]
or when there is no evidence to support an allegation necessary to his claim.
[48]
It should be
sustained where the plaintiffs evidence is prima facie insufficient for a recovery.
[49]


Petitioners, as plaintiffs below, were obliged to prove their claim in their complaint that their father, Emilio, applied for
and was granted Homestead Patent No. 18577, and that OCT No. 1112 was issued by the Register of Deeds in his name
on the basis of said patent. Petitioners had the burden of proof to present evidence on the fact in issue to establish
their claim by their own evidence required by law.
[50]
More so, where, as in this case, on the face of TCT No. 19181
under the names of the respondents, it was derived from TCT No. 13287, which in turn cancelled OCT No. 1112 issued
on April 21, 1932 on the basis of a homestead patent. It must be stressed that the original certificate of title carries a
strong presumption that the provisions of law governing the registration of land have been complied with. The OCT
enjoys a presumption of validity. Once the title is registered, the owners can rest secure on their ownership and
possession.
[51]
Once a homestead patent granted in accordance with law is registered, the certificate of title issued in
virtue of said patent has the force and effect of a Torrens title issued under the land registration law.
[52]


In the present case, petitioners failed to prove the material allegations in their complaint that Emilio Santioque applied
for and was granted Patent No. 18577 and that OCT No. 1112 was issued on the basis thereof. We quote with approval
the ruling of the RTC:

The plaintiffs failed to prove that OCT [N]o. 1112 was issued in the name of Emilio Santioque. It was issued all right, but
there is no evidence it was in the name of Emilio Santioque. OCT [N]o. 1112 could have been in the name of another
person. Exhibit B merely shows that Emilio Santioque is a survey claimant.

Exhibit A contradicted all these claims of plaintiffs. It is stated therein that Lot No. 3844 of Tarlac Cadastre, Cadastral
Case [N]o. 61, L.R.C. Record No. 1879 was previously decided but no final decree of registration has yet issued thereon.
Hence, there was already a decision by the cadastral court. In whose favor the land was awarded is a mystery up to the
date.

There is also no evidence that [P]atent [N]o. 18577 was issued to Emilio Santioque. In fact, there is no available record to
prove that [P]atent [N]o. 18577 was in the name of Emilio Santioque. (Exhibit B-1) It is safe to assume that the
decision of the cadastral Court awarded the land to a person who was also the awardee of [P]atent [N]o. 18577, because
of the entry said lot is subject to annotation quote: con patent no. 18577 segun report of the B.L. , this being the
very reason why no decree of registration was issued pursuant to the cadastral proceeding.
[53]



Petitioners even failed to present Homestead Application No. 132104 allegedly filed by Emilio with the Bureau of
Lands. In fact, as evidenced by the Certification of the LMB, it had no record of said application and patent. The records
of the LMB relative to Cadastral Case No. 61 and LRC Cad. Record No. 1879 were, likewise, not presented.

It should be noted that, under Section 14 of Commonwealth Act 141, The Public Land Act, there are certain
requirements that a homestead applicant should comply with before a patent could be issued to him, thus:


SECTION 14. No certificate shall be given or patent issued for the land applied for until at least one-fifth of the land has
been improved and cultivated. The period within which the land shall be cultivated shall not be less than one nor more
than five years, from the date of the approval of the application. The applicant shall, within the said period, notify the
Director of Lands as soon as he is ready to acquire the title. If at the date of such notice, the applicant shall prove to the
satisfaction of the Director of Lands, that he has resided continuously for at least one year in the municipality in which
the land is located, or in a municipality adjacent to the same, and has cultivated at least one-fifth of the land
continuously since the approval of the application, and shall make affidavit that no part of said land has been alienated
or encumbered, and that he has complied with all the requirements of this Act, then, upon the payment of five pesos, as
final fee, he shall be entitled to a patent.

Petitioners failed to present competent and credible evidence that Emilio Calma complied with the aforesaid
requirements before his death.

Petitioners rely on Tax Dec. No. 19675 to substantiate their claim over the subject property. However, it is axiomatic
that tax receipts and tax declarations of ownership for taxation purposes do not constitute sufficient proof of ownership.
They must be supported by other effective proofs.
[54]


The appellate court was also correct in not giving credence to the certifications which petitioners submitted before it on
the ground that the said documents were not presented in the trial court. Petitioners, thus, failed to prove the
authenticity of said documents because they failed to present the government officials who certified the same.

It is well settled that courts will consider as evidence only that which has been formally offered,
[55]
otherwise, the
opposing party would be denied due process of law.
[56]
Thus, the Court explained in one case that

A formal offer is necessary since judges are required to base their findings of fact and judgment onlyand strictly
upon the evidence offered by the parties at the trial. To allow a party to attach any document to his pleading and then
expect the court to consider it as evidence may draw unwarranted consequences. The opposing party will be deprived of
his chance to examine the document and object to its admissibility. The appellate court will have difficulty reviewing
documents not previously scrutinized by the court below.
[57]



Petitioners, however, contend that they could have presented the said documents during the rebuttal stage of the
proceedings before the trial court. It bears stressing, however, that a plaintiff is bound to introduce all evidence that
supports his case during the presentation of his evidence in chief.
[58]
A party holding the affirmative of an issue is bound
to present all of the evidence on the case in chief before the close of the proof, and may not add to it by the device of
rebuttal.
[59]
After the parties have produced their respective direct proofs, they are allowed to offer rebutting evidence
only.
[60]


Generally, rebuttal evidence is confined to that which explains, disproves, or counteracts evidence introduced by the
adverse party. It is not intended to give a party an opportunity to tell his story twice or to present evidence that was
proper in the case in chief.
[61]
However, the court for good reasons, in the furtherance of justice, may permit them to
offer evidence upon their original case, and its ruling will not be disturbed in the appellate court where no abuse of
discretion appears. This is usually allowed when the evidence is newly discovered, or where it has been omitted through
inadvertence or mistake, or where the purpose of the evidence is to correct evidence previously offered.
[62]


It is true that petitioners failed to adduce rebuttal evidence because respondents filed a Demurrer to Evidence.
However, petitioners should have filed a motion for new trial based on newly-discovered evidence under Rule 37,
Section 2 of the 1997 Rules of Civil Procedure after the trial court granted the demurrer and dismissed the complaint.

Petitioners aver that the documents they submitted on appeal were not yet discovered during the presentation of their
evidence before the trial court.
[63]
Assuming this claim to be true, the Court notes however, that petitioners nevertheless
failed to establish that they could not, with reasonable diligence, have discovered and produced the documents at the
trial, and prove that such documents would probably alter the result, if presented. The documents belatedly submitted
by petitioners on appeal can hardly be considered newly discovered since they are public records. Petitioners could
have earlier secured copies thereof during trial. Moreover, a perusal of these documents reveals that even if admitted,
they would not, in any way, bolster petitioners case, or remedy the vacuum in their evidence-in-chief.

Further, we agree with the appellate court that petitioners complaint is barred by prescription and laches. An action for
reconveyance prescribes in ten years, the point of reference being the date of registration of the deed or the date of
issuance of the certificate of title over the property.
[64]
Even if we reckon the prescription period from TCT No. 19181
issued on November 27, 1953, the only title verified to be in the name of respondents, more than ten years have
already elapsed since then until the time the petitioners filed their complaint on February 29, 1998. An action for
reconveyance is imprescriptible only when the plaintiff is in actual possession of the property.
[65]
In the present case,
there is no showing that petitioners were in actual possession of the subject property.

In any event, petitioners cause of action is likewise barred by laches. The essence of laches or stale demands is the
failure or neglect for an unreasonable and unexplained length of time to do that which, by exercising due diligence,
could or should have been done earlier, thus giving rise to the presumption that the party entitled to assert it either has
abandoned or declined to assert it.
[66]
Petitioners right of action had long been barred by laches during the lifetime of
their father, their predecessor in interest; petitioners must necessarily bear the consequences of their predecessors
inaction. We quote, with approval, the following ruling of the CA:

The trial court further held that There is also no evidence that patent No. 18577 was issued to Emilio Santioque. In fact,
there is no available record to prove that patent No. 18577 was in the name of Emilio Santioque. (Exhibit B-1). We
add that nowhere in the certificates of title presented by appellants is the source of OCT No. 1112 indicated as
Homestead Patent No. 18577.

Even assuming that appellants constructive notice of another title over Lot No. 3844 could be reckoned only from 1953
when TCT No. 19181 was issued to replace TCT No. 13287, still appellants and their predecessors-in-interest waited 45
years before bringing the action below. Meanwhile, Lot No. 3844 became the subject of various litigations among
appellees and with third parties, as well as several transactions, such as the contract of lease between Emilio Calmas
heirs and spouses Lope A. Akol from 1954-1964 (Entry No. 46563); the Assignment of Leasehold rights to Rehabilitation
Finance Corporation, 1955 (Entry No. 53205); the Termination of Lease (Entry No. 1-7584; the Partial Release of
Leasehold (Entry No. 65888). No proof was submitted in the court below to belie the actual possession of the subject lot
by the appellees, who as the registered owners are also presumed to be in possession of the same.

While the indefeasibility of the Torrens title of appellees can be claimed only if a previous valid title to the same parcel
does not exist (Register of Deeds vs. Philippine National Bank, 13 SCRA 46), appellants have failed to establish that OCT
No. 1112 was issued in their fathers name and was later invalidly cancelled in 1947 and replaced with TCT No.
13287. Only in 1998 was an action brought to directly question the validity of TCT No. 13287. The principle of laches
has indeed come into play. Laches or stale demand is based upon grounds of public policy which requires for the peace
of society the discouragement of stale actions, and unlike the statute of limitations is not a mere question of time but
primarily a question of the inequality or unfairness of permitting a right or claim to be enforced or asserted (Pangilinan
vs. Court of Appeals, 279 SCRA 590). In Agne vs. Director of Lands, 181 SCRA 793, 809 [1990], it was held that the failure
of the registered owners to assert their claim over the disputed property for almost thirty (30) years constituted laches.

The question of laches is addressed to the sound discretion of the court. Laches being an equitable doctrine, its
application is controlled by equitable considerations, although the better rule is that courts under the principle of equity
will not be guided or bound strictly by the statute of limitations or doctrine of laches when to do so would result in
manifest wrong or injustice result (Santiago vs. Court of Appeals, 278 SCRA 98).

We are aware of rulings to the effect that even if the defendants have been in actual possession of the property for
more than ten (10) years, the registered title of plaintiffs over the property cannot be lost by prescription or laches
(Board of Liquidators vs. Roxas, 179 SCRA 809); or that an action by the registered owner to recover possession based on
a Torrens title is not barred by laches (Dablo vs. Court of Appeals, 226 SCRA 621). However, the laches committed by the
appellants pertained to the establishment of their very title itself. Only after they have recovered their title could they
then have standing to question the title of the appellants and recover possession of the subject lot. Besides, it has been
held that an action for reconveyance or quieting of title instituted only after thirty (30) years could be barred by laches
(City Government of Danao vs. Monteverde Consunji, 358 SCRA 107). This being so, all the more should an action to
recover title, filed after 45 years, be barred by laches where the complainants title is itself clearly
doubtful.
[67]



IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for lack of merit. The Decision and Resolution of the Court of
Appeals in CA-G.R. CV No. 65352 are AFFIRMED. Cost against the petitioners.

SO ORDERED.



[1]
Penned by Associate Justice Eliezer R. De Los Santos,
with Associate Justices Romeo A. Brawner (retired) and
Regalado E. Maambong, concurring; rollo, pp. 60-72.
[2]
Penned by Judge Arsenio P. Adriano.
[3]
Exhibit I.
[4]
RTC records, p. 99.
[5]
Exhibit I (dorsal portion).
[6]
Exhibit D.
[7]
Records, pp. 1-2.
[8]
Id. at 2-3.
[9]
Id. at 4.
[10]
Id. at 39-43.
[11]
Id. at 54-60.
[12]
TSN, November 24, 1998, pp. 10-11.
[13]
TSN, January 14, 1999, pp. 9-14.
[14]
TSN, March 25, 1999, pp. 2-4.
[15]
Exhibit C.
[16]
Exhibits B and B-1.
[17]
Exhibit A-1.
[18]
Exhibit G.
[19]
Exhibit H-2.
[20]
Exhibit J.
[21]
Records, pp. 106-108.
[22]
Rollo, p. 114.
[23]
CA rollo, pp. 34-35.
[24]
Id. at 73.
[25]
Id. at 76-77.
[26]
Id. at 79.
[27]
Id. at 80.
[28]
Id. at 81.
[29]
Id. at 82-83.
[30]
Id. at 84.
[31]
Id. at 85.
[32]
Id. at 86.
[33]
Id. at 87.
[34]
Id. at 89.
[35]
Id. at 158-159.
[36]
Rollo, p. 72.
[37]
Id. at 74.
[38]
Rollo, pp. 343-344.
[39]
Id. at 347-348.
[40]
Id. at 353-355.
[41]
Id. at 361-362.
[42]
Id. at 387-388.
[43]
Id. at 390-392.
[44]
Nepomuceno v. Commission on Elections, G.R. No. L-
60601, December 29, 1983, 126 SCRA 472, 478.
[45]
Section 1, Rule 33, RULES OF CIVIL PROCEDURE.
[46]
Boles v. Johnson, 205 Okla. 356, 237 P.2d 620 (1951).
[47]
Carver v. Farmers & Bankers Broadcasting
Corporation, 162 Kan. 663, 179 P.2d 195 (1947).
[48]
Black v. Wickett, 127 Okla. 53, 259 P. 642 (1927).
[49]
State v. Goetz, 131 Mo. 675, 33 S.W. 161 (1895).
[50]
RULE 131, SECTION 1, REVISED RULES OF COURT.
[51]
Tichangco v. Judge Enriquez, G.R. No. 150629, June
30, 2004, 433 SCRA 324, 334.
[52]
Lopez v. Court of Appeals, G.R. No. 49739, January
20, 1989, 169 SCRA 271, 275.
[53]
Rollo, p. 113.
[54]
Santos v. Santos, 418 Phil. 681, 689 (2001).
[55]
Section 34, Rule 132, RULES OF EVIDENCE.
[56]
Pigao v. Rabanillo, G.R. No. 150712, May 2, 2006,
488 SCRA 546, 557.
[57]
Candido v. Court of Appeals, 323 Phil. 95, 100 (1996).
[58]
Buckingham v. Buckingham, 492 So.2d 858, 861
(1986).
[59]
M.E. Crawford v. City of Meridian, 186 So. 2d 250
(1966).
[60]
Lopez v. Liboro, 81 Phil. 429, 434 (1948).
[61]
Wright v. Forney, 233 Neb. 258, 444 N.W. 2d 895
(1989).
[62]
Lopez v. Liboro, supra note 60.
[63]
Rollo, p. 347.
[64]
Leyson v. Bontuyan, G.R. No. 156357, February 18,
2005, 452 SCRA 94, 113.
[65]
Id.
[66]
China Airlines, Ltd. v. Court of Appeals, 453 Phil. 959,
971-972 (2003).
[67]
Rollo, pp. 69-71.



THIRD DIVISION
G.R. No. L-69303 July 23, 1987
HEIRS OF MARIA MARASIGAN, namely, Teofilo, Isabel, Maximina, Anicia, and Francisco, all surnamed
Marasigan, petitioners,
vs.
THE INTERMEDIATE APPELLATE COURT and MARIA MARRON, respondents.
GUTIERREZ, JR., J.:
Who has a better right to the property in question, the party who bought it with a notice of lis pendens annotated at the
back of her title or the party in whose favor the notice of lis pendens was made? The appellate court answered this
question in favor of the party who had the notice annotated and who won the litigation over the property. We affirm.
The disputed property in this case is a residential lot (Lot No. 2-A) covered by Transfer Certificate of Title No. 100612
issued by the Register of Deeds of the City of Manila in the name of one Fe Springael-Bazar, married to Felicisimo Bazar.
The pertinent facts as disclosed by the record are as follows:
On April 24, 1975, Civil Case No. 97479 entitled "Maria Marron v. Felicisimo Bazar and Fe S. Bazaar" was filed before the
then Court of First Instance of Manila, Branch XIII. The action sought to compel defendants Bazar to execute a
registrable Deed of Absolute Sale of their lot covered by T.C.T. No. 100612 in favor of Maria Marron.
On January 27, 1976, while Civil Case No. 97479 was still pending, the private respondent caused the annotation of a
notice of lis pendens at the back of T.C.T. No. 100612.
On February 24, 1976, judgment was rendered in Civil Case No. 97479. The dispositive portion reads:
WHEREFORE, the Court hereby renders judgment in favor of the plaintiff and against the defendants as follows:
a) Ordering the defendants Fe Springael Bazar and Felicisimo Bazar as vendors (1) to execute in favor of the plaintiff
Maria Marron as vendee a Deed of Absolute Sale in a public instrument over the residential lot covered by Transfer
Certificate of Title No. 100612 issued by the Registry of Deeds of the City of Manila to and in the name of Fe S. Bazar,
married to Felicisimo Bazaar; and (2) to deliver to plaintiff sufficient copies of such deed of sale, together with the
Owner's copy of said Transfer Certificate of Title No. 100612, in order that the plaintiff can register the Deed of Absolute
Sale with the Registry of Deeds of the City of Manila and secure a transfer certificate of title for the land in her name.
b) Ordering the defendants to pay to the plaintiff the sum of P500.00 Philippine Currency, as and for attorney's fees; and
c) Ordering the defendants to pay the costs of the suit. (Rollo, p. 15).
The above judgment became final and executory so Maria Marron filed a motion for execution which was granted. A
writ of execution was issued by the court on July 12, 1976. The spouses Bazar, however, refused to surrender their title
to the property in question and to execute the required deed of sale in Marron's favor. On November 29, 1978, the
lower court finally ordered the Clerk of Court to execute the deed of sale in behalf of the erring spouses. When the said
deed was presented to the Register of Deeds of Manila for registration, the Deputy Clerk of Court was advised to secure
a court order in order that the new title issued in the name of herein petitioner Maria Marasigan could be cancelled.
It appears that on December 18, 1974, a deed of absolute sale of Lot 2-A covered by T.C.T. No. 100612 was executed by
Fe S. Bazar in favor of Maria Marasigan for and in consideration of the sum of Fifteen Thousand Pesos (P15,000.00).
However, it was only on July 5, 1977 that said deed was registered with the Registry of Deeds of Manila. Consequently,
T.C.T. No. 100612 was cancelled and a new title was issued in Maria Marasigan's name. When the Register of Deeds of
Manila issued Transfer Certificate of Title No. 126056 naming Maria Marasigan as the new owner of Lot 2-A, the notice
of lis pendens caused to be annotated by Marron on the Bazar's title was carried over on the said new title.
Meanwhile, on May 26, 1977, the Bazaars filed a petition for relief from the judgment dated February 24, 1976 in Civil
Case No. 97479. While their petition was still pending, they moved to set aside the said judgment on June 22, 1979 on
the ground of lack of jurisdiction over their persons.
On the other hand, on February 24, 1979, Marron instituted L.R.C. Case No. 7680 captioned "Maria Marron v. Maria
Marasigan" which prayed for a court order requiring the Register of Deeds of Manila to register the deed of sale
executed by the Deputy Clerk of Court in behalf of the Bazaars pursuant to the order dated November 29, 1978 of the
Court of First Instance, Manila, Branch XIII. L.R.C. Case No. 7680 was tried by the Court of First Instance of Manila,
Branch IV acting as a land registration court. Said case was dismissed for the following reason:
... This court acting as a Land Registration Court, with limited and special jurisdiction cannot act on this petition under
summary proceedings but (sic) should be ventilated before a court of general jurisdiction Branch XIII, which issued the
aforesaid Order dated November 29, 1978, the said petition is hereby dismissed for lack of jurisdiction without prejudice
on the part of the petitioner to institute the appropriate civil action before the proper court. ... (Annex "A," p. 4, Rollo, p.
138)
On September 6, 1979, Marron filed another case docketed as Civil Case No. 126378 to have Marasigan's TCT 126056
cancelled conformably to the procedure outlined in the decision of the above land registration court. On July 30, 1980,
the parties submitted said case for decision.
On February 18, 1982, the Court of First Instance of Manila, Branch IV to which Civil Case No. 126378 was assigned
dismissed Marron's complaint for being premature since the decision rendered by the CFI, Branch XIII in Civil Case No.
97479 had not yet become final and executory considering that it was still the subject of a petition for relief from
judgment.
On appeal, the Intermediate Appellate Court, on August 7, 1984, ruled that Marron is entitled to the property under
litigation by virtue of the notice of lis pendens annotated at the back of Maria Marasigan's title. The appellate court
further ruled that the decision in Civil Case No. 97479 had become final and executory because the petition for relief
from judgment of the spouses Bazar was filed out of time. The dispositive portion of the appellate court's decision reads:
WHEREFORE, the appealed decision is hereby REVERSED and another one entered
(a) Ordering the Register of Deeds of Manila to cancel T.C.T. No. 126056 in the name of Maria Marasigan and issue
another in the name of Maria Marron by virtue of the Deed of Sale executed by the Branch Clerk of Court of Branch XIII;
(b) Ordering the said Register of Deeds, during the pendency of this case, to refrain from registering any deed of sale
pertaining to T.C.T. No. 126056 in the name of Maria Marasigan other than that of the herein plaintiff; and
(c) Ordering the defendant Maria Marasigan to pay attorney's fees in the amount of P10,000.00. (IAC, Decision. Rollo,
pp. 17-18).
Maria Marasigan who died in the course of the proceedings is now represented by her heirs in the instant petition which
assigns the following errors:
I
THAT THE INTERMEDIATE APPELLATE COURT FAILED TO APPREHEND THAT THE RIGHT OF ACTION OF RESPONDENT
MARIA MARRON (AS PLAINTIFF) IN CIVIL CASE NO. 97479 HAD PRESCRIBED AND SHE INCURRED IN LACHES.
II
THAT THE INTERMEDIATE APPELLATE COURT FAILED TO APPREHEND THAT RESPONDENT ABANDONED OR WAIVED HER
PROPERTY RIGHTS AND EFFECTS TO/OF THE DECISION IN CIVIL CASE NO. 97479, WHEN SHE FILED CIVIL CASES NO. 7680
AND 126378, DURING ITS EFFECTIVITY.
III
THAT THE INTERMEDIATE APPELLATE COURT ERRED IN CONCLUDING THAT THE DECISION IN CIVIL CASE NO. 97479 HAS
BECOME FINAL AND EXECUTORY.
IV
THAT THE INTERMEDIATE APPELLATE COURT FAILED TO APPREHEND THE LACK OF JURISDICTION OF THE TRIAL COURT
IN CIVIL CASES NO. 7680 AND 126378 OVER THE PERSONS OF PETITIONERS.
V
THAT THE INTERMEDIATE APPELLATE COURT ERRED IN CONSIDERING THAT THE TRIAL COURT IN CIVIL CASE NO. 97479
HAS JURISDICTION OVER THE PERSONS OF DEFENDANTS SPOUSES FELICISIMO BAZAAR AND FE S. BAZAAR.
VI
THAT THE INTERMEDIATE APPELLATE COURT FAILED TO APPREHEND THAT THE DEED OF ABSOLUTE SALE EXECUTED BY
THE DEPUTY CLERK OF COURT, WAS NOT LEGAL AND VALID AND WITHOUT PROOF AND EFFECT. (Brief for the appellant,
pp. 1 and 2)
We find no merit in the present petition.
There is a clear showing that although the late Maria Marasigan acquired the property in question from the Bazaars
pursuant to a deed of absolute sale on December 18, 1974 or a little over four months before the filing of Civil Case No.
97479, the transaction became effective as against third persons only on July 5, 1977 when it was registered with the
Registry of Deeds of Manila. It is the act of registration which creates constructive notice to the whole world. Section 51
of Act 496, as amended by Section 52 of the Property Registration Decree (P.D. 1529) provides:
Sec. 52. Constructive notice upon registration. Every conveyance ... affecting registered land shall, if registered, filed
or entered in the office of the Register of Deeds for the province or city where the land to which it relates lies, be
constructive notice to all persons from the time of such registering, filing or entering.
Moreover, there is no question that when the late Maria Marasigan was issued her transfer certificate of title to the
subject property (T.C.T. No. 126056), the Registrar of Deeds of Manila then carried over to the new title the notice of lis
pendens which the private respondent had caused to be annotated at the back of the Bazar's title. In case of subsequent
sales or transfers, the Registrar of Deeds is duty bound to carry over the notice of lis pendens on all titles to be issued.
Otherwise, if he cancels any notice of lis pendens in violation of his duty, he may be held civilly and even criminally liable
for any prejudice caused to innocent third persons (The Director of Lands, et al. v. Reyes, 68 SCRA 177).
A notice of lis pendens means that a certain property is involved in a litigation and serves as notice to the whole world
that one who buys the same does it at his own risk (Rehabilitation Finance Corporation v. Morales, 101 Phil. 171). It was
also a clear notice to Maria Marasigan that there was a court case affecting her rights to the property she had
purchased.
As earlier stated it was only on July 5, 1977 that the sale between Maria Marasigan and the Bazaars became effective as
against third persons. The registration of the deed of sale over the subject property was definitely subsequent to the
annotation made on January 27, 1976. Consequently, Marasigan was bound by the outcome of the litigation against her
vendors or transferors. (See Rivera v. Tirona, et al., 109 Phil. 505).
We reiterate the established rule that:
... the filing of a notice of lis pendens charges all strangers with a notice of the particular litigation referred to therein
and, therefore, any right they may thereafter acquire on the property is subject to the eventuality of the suit. The
doctrine of lis pendens is founded upon reason of public policy and necessity, the purpose of which is to keep the
subject matter of the litigation within the power of the Court until the judgment or decree shall have been entered;
otherwise, by successive alienations pending the litigation, its judgment or decree shall be rendered abortive and
impossible of execution. ... (Laroza v. Guia, 134 SCRA 34 1)
The late Marasigan's transferors did not interpose any appeal from the adverse judgment dated February 24, 1976 in
Civil Case No. 97479. The 30-day period under the old rule (Rule 41, section 3 of the Revised Rules of court now
amended by Batas Pambansa Bilang 129, section 39) within which the Bazaars may have taken an appeal started to run
from May 12, 1976 when they were served with a copy of the said decision. On June 11, 1976, the February 24, 1976
decision in Civil Case No. 97479 became final and executory. At this point after the finality of the said decision, the
Bazaars no longer had the right to alienate the property subject of the litigation. Any transaction effective during the
period of litigation is subject to the risks implicit in the notice of lis pendens and to the eventual outcome of the
litigation.
Moreover, we agree with the finding of the appellate court that the petition for relief from judgment by the Bazaars
dated May 26, 1977 was filed beyond the two periods provided in Section 3 Rule 38 of the Revised Rules of Court. There
may have been some errors in the computations but the petition itself was out of time.
Rule 38, Section 3 of said Rules provides, in part, that:
Sec. 3. Time for filing petition. ... A petition provided for in either of the preceding sections of this rule must be
verified, filed within sixty (60) days after the petitioner learns of the judgment, order or other proceeding to be set
aside, and not more than six (6) months after such judgment or order was entered or such proceeding was taken. ...
The 60-day period must be reckoned from May 12, 1976 when the Bazaars were served with a copy of the assailed
decision. Therefore, the 60-day period expired on July 11, 1976. It was only after 379 days or more than 12 months after
they learned of the judgment that the Bazaars filed their petition for relief from said judgment. (See Domingo v. Dela
Cruz, 23 SCRA 1121) The appellate court computed the 6-month period from the date of the judgment was rendered.
Rule 38 states that the counting should commence from the entry of the judgment or order. (See Dirige v. Biranya, 17
SCRA 840). A judgment is entered only after its finality and Civil Case No. 97479 became final on June 11, 1976. Since the
records do not bear the exact date the questioned judgment was entered, the 6-month period can be counted for
purposes of our decision from July 12, 1976 when the writ of execution of the final judgment was issued. The phrase "or
other proceeding" in Section 3 of Rule 38 includes a writ of execution (Aquino v. Blanco, 79 Phil. 647). The 6-month
period from July 12, 1976 lapsed on January 8, 1977. A period of ten (10) months had already lapsed when the Bazaars
filed their petition for relief from judgment on May 26, 1977. Obviously, the petitioners cannot now question the effects
of the final and executory judgment in Civil Case No. 97479. In the words of Laroza v. Guia (supra) they cannot render
the final judgment abortive and impossible of execution. The deed of sale executed by the Deputy Clerk of Court on
behalf of the Bazar spouses pursuant to the court's judgment was valid and binding.
The petitioners cannot also raise before us the issues of prescription or laches and lack of jurisdiction over the persons
of the Bazar spouses in Civil Case No. 97479. This cannot be done in this petition which stems from Civil Case No. 126378
in the trial court and AC-G.R. No. 00183 in the appellate court. The Bazaars were the proper parties who ought to have
raised them as defenses either in a motion to dismiss or in their answer. Since they did not do so, the same were
deemed waived. (See Rule 9, section 2 of the Revised Rules of Court; MD Transit & Taxi Co., Inc. v. Estrella, 113 SCRA
378; Torreda v. Boncaros, 69 SCRA 247; Visayan Electric Co., Inc. v. Commissioner of Internal Revenue, 39 SCRA 43;
Republic v. Mambulao Lumber Company, 6 SCRA 858).
WHEREFORE, in view of all the foregoing, the petition is hereby DISMISSED for lack of merit. The appellate court's
decision is AFFIRMED.
SO ORDERED.
Fernan (Chairman), Feliciano and Cortes, JJ., concur
Bidin, J., took no part.

EN BANC
G.R. No. L-14641 November 23, 1960
THE DIRECTOR OF LANDS, petitioner-appellant,
vs.
EUSTAQUIO DE LUNA, ET AL., respondents.,
EUSTAQUIO DE LUNA, respondent-appellee.
Asst. Solicitor General Antonio A. Torres and Solicitor D.L. Quiroz for appellant.
McClure, Salas and Gonzales for appellee.
BARRERA, J.:
On February 19, 1958, petitioner Director of Lands, filed with the Court of First Instance of Oriental Mindoro a petition
alleging, inter alia, that on April 28, 1955, respondent Eustaquio de Luna filed with his office, an application for free
patent over a parcel of land, designated as Lot No. 4422, Cad. No. 200 Ext., in Naujan, Oriental Mindoro claiming that he
(de Luna) is in actual occupation of said land, having acquired it from Eusebia and Bernardina Castillo, who had been in
possession and cultivation thereof since 1943; that relying on the statements made by respondent de Luna in his said
application that his occupation of the land was made prior to July 4, 1945, he (Director) approved it as Free Patent
Application No. V-35154 (E-V-21291),on September 7, 1955 and thereafter gave it due course; that on October 4, 1955,
he issued Free Patent No. V-21168 for the land, in favor, and in the name of respondent, and the same was transmitted
to the Register of Deeds of Calapan, Oriental Mindoro, who registered it and issued the corresponding Original
Certificate of Title No. P-1537, in accordance with Section 122 of Act No. 496; that, subsequently, upon complaint made
by one Igmedio Gaa against said free patent issued to respondent, he conducted an investigation thereon and, from the
result thereof, it was found that respondent and his alleged predecessors-in-interest, have never been in occupation of
the land covered by the patent and title, but on the contrary, it is in the actual and exclusive cultivation of said Igmedio
Gaa, who has been in possession thereof since prior to the last war up to the present, openly, adversely, and in the
concept of an owner; that said patent and title were issued to respondent by virtue of his said application, which was
approved and given due course due to respondent's misinterpretation and false statement made in said application; and
that inasmuch as respondents is not entitled to a free patent, on account of his failure to fulfill the conditions prescribed
by the Public Land Act, said patent and title issued to him for the land, are null and void said patent and title issued to
respondent.
Respondent, on April 16, 1958, filed a motion to dismiss, on the ground that petitioner has no legal capacity to sue, the
real party in interest being Igmedio Gaa, whose rights are adversely affected by the issuance of said patent and title to
him (respondent). On June 2, 1958, petitioner filed an opposition to said motion to dismiss, which opposition was duly
answered by respondent on June 30, 1958.
On August 16, 1958, the court dismissed the petition filed, in an order which in part reads:
The allegations contained in the petition clearly shows that the action for the reversion of the lot in question to the
government is premised on the ground of false representation. However, action instituted pursuant to Sec. 101 of the
Public Land Act must be in the name of the (Commonwealth) Republic of the Philippines and prosecuted by the Solicitor
General. Since the present petition is instituted in the name of the Director of the Lands, it stands to reason that the
petition is fundamentally defective. Hence, under Rule 8, the petition should be dismissed, on the ground that the
Director of Lands is not legally authorized to institute the present petition.
On September 3, 1958, petitioner filed a motion for reconsideration of said order, but the same was denied by the court
on September 30, 1958. Hence, this appeal.
The only issue to be resolved in this appeal is whether petitioner had the authority to file the petition in question.
It is not disputed that the free patent to the land in question was issued to respondent on October 4, 1955, on the basis
of which Original Certificate of Title No. P-1537 was, likewise, issued to him, pursuant to Section 122 of the Land
Registration Act.
1
Well settled is the rule that once the patent is registered and the corresponding certificate of title is
issued, the land cases to be part of the public domain and becomes private property over which the Director of Lands
has neither control nor jurisdiction. (Sumail vs. Judge of the Court of First Instance of Cotabato, et al., 96 Phil., 946; 51
Off. Gaz. [5] 2413; Republic vs. Heirs of Ciriaco Carle, 105, Phil, 1231).
There is, likewise, no controversy as to the fact that the present action was instituted by petitioner on February 19,
1958, or more than 2 years after the issuance of the aforementioned free patent to respondent, or more than 1 year
after the expiration of the 1-year period provided in Section 38 of the Land Registration Act for review of the certificate
of title, on the ground of fraud. A public land patent when registered in the corresponding register of the deeds office, is
a veritable torrens title(Dagdag vs. Nepomuceno, 105 Phil., 216; 56 Off. Gaz. [48] 7294) and becomes as indefeasible as a
Torrens title (Ramoso vs. Obligado, 70 Phil., 86), upon the expiration of 1 year from the date of the issuance thereof
(Lucas vs. Durian, G.R. No. L-7886, prom. September 23, 1957). As such it can no longer be cancelled or annulled. In the
Sumail case (supra), we stated:
We agree with the Director of Lands and trial court that the latter had no jurisdiction to entertain Civil Case No.
420
2
which was filed for the purpose of cancelling the Patent issued by the Director of Lands on lot No. 3633, and, also
for the cancellation of the Original Certificate of Title V-23 issued to Gepuliano on the basis of his free patent. Under
section 122 of Act No. 496 known as the Land Registration Act, when any public lands in the Philippines are alienated,
granted, or conveyed to persons or public or private corporations, the same shall be brought forthwith under the
operation of the said Act and shall become registered lands and that the instrument of conveyance in the form of the
Patent, before its delivery to the grantee shall become registered therein a certificate of title shall be issued as in other
cases of registered land. That is the reason why an original certificate of title was issued to Gepuliano sometime in 1950
on the basis of his free patent issued in 1994.
xxx xxx xxx
As already stated, free patent No. 420 was filed in court only on July 21,1952, or almost three years after the issuance of
the free patent. It is, therefore, clear that the trial court no longer had jurisdiction to entertain the complaint in Civil
Case No. 420 for the reasons already stated, but not as contended by the Director of Lands that it involved public land,
over which he had exclusive and executive control, because once the patent was granted and the corresponding
certificate of title was issued, the land ceased to be part of the public domain and become private property over which
the Director of Lands has neither control nor jurisdiction.
Notwithstanding the aforementioned doctrine of indefeasibility of a torrens title after the expiration of the 1-year
period provided in Section 38 of the Land Registration Act, Section 101 of the Public Law
3
provides a remedy whereby
lands of the public domain fraudulently awarded to the applicant maybe covered or reverted back to its original owner,
the Government. Said section provides that:
Sec. 101. All actions for the reversions to the Government of Lands of the public domain or improvements thereon shall
be instituted by the Solicitor General or the Officer acting in his stead, in the proper courts in the name of Republic
(Commonwealth) of the Philippines.
It is quiet clear from the provision just quoted that actions for reversions of public lands fraudulently awarded are to be
instituted by the Solicitor General or the officer acting in his stead, and that the same must be brought in the name of
the Republic of the Philippines. (See Sumail case, supra).
In support of the view that petitioner may bring the present action, he cited Section 91 of the Public Land Law. Suffice it
to say that said provision is only applicable where the patent or title is sought to be cancelled or annulled, for having
been procured through fraud or misrepresentation, prior to the expiration of the 1-year period provided in Section 38 of
the Land Registration Act, from its issuance and registration, and not where, as in the instance case, said period had
already elapsed.
However, we note that petitioner's error in this case merely one of form which is non-prejudicial. In furtherance of
justice, and to the end that the real matter in dispute within the parties may be completely determined in this
proceeding (Sec. 2, Rule 17, Rules of Court), we have decided to remand this case to the court of origin for further
proceedings, allowing petitioner to amend his pleadings accordingly, in compliance with the requirement of law.
Without pronouncement as to costs. So ordered.
Paras, C.J., Bengzon, Padilla, Bautista Angelo, Labrador, Reyes, J.B.L., Gutierrez David, Paredes and Dizon, JJ.,concur.


Footnotes
1
Act No. 496 as amended.
2
Field almost 3 years after the issuance of the Free Patent.
3
Comm. Act No. 141, as amended.






THIRD DIVISION

JULIO FLORES (deceased), substituted by his heirs;
BENITOFLORES (deceased), substituted by his heirs;
DOLORES FLORES and VIRGINIA FLORES-DALERE,
represented by their Attorney-in-Fact, JIMENA TOMAS,
Petitioners,

- versus -


MARCIANO BAGAOISAN,
Respondent.

G.R. No. 173365

Present:

CORONA, J.,
Chairperson,
VELASCO, JR.,
NACHURA,
PERALTA, and
MENDOZA, JJ.

Promulgated:

April 15, 2010
x------------------------------------------------------------------------------------x


DECISION

NACHURA, J.:

Petitioners seek a review of the March 29, 2006 Decision
[1]
and the June 20, 2006 Resolution of the Court of Appeals
(CA), denying their motion for reconsideration.

The case involves a 13,552-square meter portion of a parcel of l-and covered by Original Certificate of Title (OCT) No. P-
11880
[2]
in the name of the Heirs of Victor Flores, namely: Julio, Benito, Dolores, and Virginia, herein petitioners. OCT
No. P-11880 was issued pursuant to Homestead Patent No. 138892, given on November 12, 1973. This property is
located in the Municipality of Piddig, Ilocos Norte.

On December 20, 1976, petitioners, together with their mother Luisa Viernes, executed a Deed of Confirmation and
Quitclaim
[3]
in favor of Vicente T. Lazo. Through this document, petitioners agreed to sell, cede, convey, grant, and
transfer by way of QUITCLAIM the subject property to Lazo. Thereafter, respondent, Marciano Bagaoisan, bought the
subject property from Lazo, as evidenced by a Deed of Absolute Sale dated February 20, 1977.
[4]


On April 4, 1983, Viernes and petitioner Virginia Flores-Dalere executed a Palawag A Nasapataan (Affidavit), attesting to
the fact that they conveyed to Lazo the subject property through the Deed of Confirmation and Quitclaim. Affiants also
attested that Lazo and his predecessors-in-interest had been in possession of the disputed portion since 1940 and that
the same was mistakenly included in the patent application of Victor Flores.

On June 21, 1996, respondent filed an action for ownership, quieting of title, partition and damages against petitioners,
praying that he be declared as the true owner of the subject property and that the entire property covered by OCT No.
P-11880 be partitioned among them. In the Complaint, respondent asserted that he was a tenant of Lazo and that he
had been working on the subject property since time immemorial. He said that, since he bought the property in 1977, he
possessed the land as owner and paid real property tax thereon. He claimed that the subject property was erroneously
covered by OCT No. P-11880 and that petitioners have previously recognized such fact, considering that they executed
an affidavit acknowledging the erroneous inclusion of the property in their title. He averred that, lately, petitioners had
denied his ownership of the land and asserted their ownership thereof by working and harvesting the crops thereon.
[5]


In answer, petitioners stated that they did not relinquish ownership or possession of the land to Lazo. While admitting
that they executed the Deed of Confirmation and Quitclaim in favor of Lazo, petitioners claimed that they were misled
into signing the same, with Lazo taking advantage of their lack of education. Petitioners contended that it was too late
for respondent to assert title to the disputed portion because the title covering the same had already become
indefeasible one year after it was issued.
[6]


On February 3, 2000, the Regional Trial Court rendered a decision, disposing as follows:

WHEREFORE, in view of the foregoing, judgment is hereby rendered ordering the defendants, jointly and severally:

1. To recognize plaintiff Marciano Bagaoisan as owner of the 13,552 sq.m. parcel of land situated in Barrio Maab-
abucay (now Estancia) Municipality of Piddig, Ilocos Norte;

2. To cease and desist from further possession of said parcel of land and to immediately reconvey the same to
plaintiff;

3. To pay said plaintiff such amount as would be the peso equivalent of 100 cavanes of palay per year, for the loss of
harvest he incurred in 1994, 1995, 1996, 1997, 1998 and 1999, computed as the price then obtaining in said years; and

4. To pay plaintiff the amount of P20,000.00 as reasonable attorneys fees.

No pronouncement as to costs.

SO ORDERED.
[7]



On appeal, the CA upheld the validity of the Deed of Confirmation and Quitclaim. In light of petitioners admission that
they signed the deed after it was read to them, the CA dismissed their assertion that they did not know the contents of
the document. It further declared that the deed merely confirmed petitioners non-ownership of the subject property
and it did not involve an alienation or encumbrance. Accordingly, it concluded that the five-year prohibition against
alienation of a property awarded through homestead patent did not apply.

The CA likewise rejected petitioners contention that the action was barred by prescription or laches. Citing Vital v.
Anore,
[8]
the CA held that where the registered owner knew that the property described in the patent and the certificate
of title belonged to another, any statute barring an action by the real owner would not apply, and the true owner might
file an action to settle the issue of ownership.

The dispositive portion of the assailed March 29, 2006 Decision reads:

WHEREFORE, the appeal is hereby DISMISSED for lack of sufficient merit. The assailed 3 February 2000 decision by the
Regional Trial Court, Laoag City, in Civil Case No. 11048-14 is hereby AFFIRMED.

SO ORDERED.
[9]



The CA likewise denied petitioners motion for reconsideration in its Resolution dated June 20, 2006.
[10]


Consequently, petitioners filed this petition for review, insisting that the Deed of Confirmation and Quitclaim is void as
its contents were not fully explained to them, and it violates Section 118 of the Public Land Act (Commonwealth Act No.
141), which prohibits the alienation of lands acquired through a homestead patent.

The petition is meritorious.

Without going into petitioners allegation that they were unaware of the contents of the Deed of Confirmation and
Quitclaim, we nonetheless hold that the deed is void for violating the five-year prohibitory period against alienation of
lands acquired through homestead patent as provided under Section 118 of the Public Land Act, which states:

Sec. 118. Except in favor of the Government or any of its branches, units, or institutions, lands acquired under free
patent or homestead provisions shall not be subject to encumbrance or alienation from the date of the approval of the
application and for a term of five years from and after the date of issuance of the patent and grant, nor shall they
become liable to the satisfaction of any debt contracted prior to the expiration of said period, but the improvements or
crops on the land may be mortgaged or pledged to qualified persons, associations, or corporations.

No alienation, transfer, or conveyance of any homestead after five years and before twenty-five years after the issuance
of title shall be valid without the approval of the Secretary of Agriculture and Commerce, which approval shall not be
denied except on constitutional and legal grounds.


We do not agree with the CA that the Deed of Confirmation and Quitclaim merely confirmed petitioners non-
ownership of the subject property. The deed uses the words sell, cede, convey, grant, and transfer. These
words admit of no other interpretation than that the subject property was indeed being transferred to Lazo.

The use of the words confirmation and quitclaim in the title of the document was an obvious attempt to circumvent
the prohibition imposed by law. Labeling the deed as a confirmation of non-ownership or as a quitclaim of rights would
actually make no difference, as the effect would still be the alienation or conveyance of the property. The act of
conveyance would still fall within the ambit of the prohibition. To validate such an arrangement would be to throw the
door open to all possible fraudulent subterfuges and schemes that persons interested in land given to a homesteader
may devise to circumvent and defeat the legal provisions prohibiting their alienation within five years from the issuance
of the patent.
[11]


It bears stressing that the law was enacted to give the homesteader or patentee every chance to preserve for himself
and his family the land that the State had gratuitously given to him as a reward for his labor in cleaning and cultivating
it.
[12]
Its basic objective, as the Court had occasion to stress, is to promote public policy, that is to provide home and
decent living for destitutes, aimed at providing a class of independent small landholders which is the bulwark of peace
and order.
[13]
Hence, any act which would have the effect of removing the property subject of the patent from the hands
of a grantee will be struck down for being violative of the law.

To repeat, the conveyance of a homestead before the expiration of the five-year prohibitory period following the
issuance of the homestead patent is null and void and cannot be enforced, for it is not within the competence of any
citizen to barter away what public policy by law seeks to preserve.
[14]
There is, therefore, no doubt that the Deed of
Confirmation and Quitclaim, which was executed three years after the homestead patent was issued, is void and cannot
be enforced.

Furthermore, respondent failed to present sufficient evidence to surmount the conclusiveness and indefeasibility of the
certificate of title.

An OCT issued on the strength of a homestead patent partakes of the nature of a certificate issued in a judicial
proceeding and becomes indefeasible and incontrovertible upon the expiration of one year from the date of the
promulgation of the Director of Lands order for the issuance of the patent.
[15]
After the lapse of such period, the sole
remedy of a landowner, whose property has been wrongfully or erroneously registered in anothers name is to file an
action for reconveyance so long as the property has not passed to an innocent purchaser for value.
[16]
In order that an
action for reconveyance based on fraud may prosper, it is essential for the party seeking reconveyance to prove, by clear
and convincing evidence, his title to the property and the fact of fraud.
[17]


Respondent did not allege in his complaint or prove during the trial that fraud attended the registration of the subject
property in petitioners names. In fact, there was no allegation as to how petitioners were able to secure title to the
property despite the alleged ownership of respondents predecessor.

More importantly, respondent failed to prove that he has title to the subject property. He merely asserted that his
predecessors-in-interest had been in possession of the property since 1940. The basic presumption is that lands of
whatever classification belong to the State and evidence of a land grant must be well-nigh incontrovertible. The Public
Land Act requires that the possessor or his predecessors-in-interest must be in open, continuous, exclusive, and
notorious possession and occupation of the land for at least thirty years. When these conditions are complied with, the
possessor is deemed to have acquired, by operation of law, a right to a government grant, without the necessity of a
certificate of title being issued. The land ceases to be a part of the public domain and beyond the authority of the
Director of Lands,
[18]
such that the latter would have no more right to issue a homestead patent to another person.

Respondent merely established that he had been in possession of the property and that he had been paying real
property taxes thereon since 1977. The only evidence on record attesting to the fact that respondent and his
predecessors-in-interest had been in possession of the property since 1940 was the affidavit executed by some of
petitioners. This, however, would not suffice.

In closing, it would be well to mention that the execution of the Deed of Confirmation and Quitclaim within the five-year
prohibitory period also makes the homestead patent susceptible to cancellation, and the subject property being
reverted to the public domain.
[19]
It is the Solicitor General, on behalf of the government, who is by law mandated to
institute an action for reversion.
[20]
Should the Solicitor General decide to file such an action, it is in that action that
petitioners defenses, particularly their alleged lack of knowledge of the contents of the deed, will have to be resolved.

WHEREFORE, the petition is GRANTED. The March 29, 2006 Decision of the Court of Appeals and its June 20,
2006 Resolution are REVERSED and SET ASIDE. The complaint for ownership, quieting of title and damages
is DISMISSED, without prejudice to an action for reversion that the Solicitor General may decide to file for the State.

SO ORDERED.


[1]
Penned by Associate Justice Santiago Javier
Ranada, with Associate Justices Roberto A. Barrios and
Mario L. Guaria III, concurring; rollo, pp. 92-99.
[2]
Exhibit A; Folder of Exhibits.
[3]
Exhibit B; Folder of Exhibits.
[4]
Exhibit A-5; Folder of Exhibits.
[5]
Records, pp. 1-2.
[6]
Id. at 17-18.
[7]
Rollo, pp. 60-61.
[8]
90 Phil. 855 (1952).
[9]
Rollo, pp. 98-99.
[10]
CA rollo, p. 113.
[11]
Pangilinan v. Ramos, G.R. No. 44617, January
23, 1990, 181 SCRA 350, 358.
[12]
Heirs of Venancio Bajenting v. Baez, G.R. No.
166190, September 20, 2006, 502 SCRA 531, 553.
[13]
Id.
[14]
De Romero v. Court of Appeals, 377 Phil.189,
201 (1999).
[15]
Buston-Arendain v. Gil, G.R. No. 172585, June
26, 2008, 555 SCRA 561, 574.
[16]
Abejaron v. Nabasa, G.R. No. 84831, June 20,
2001, 359 SCRA 47, 56-57.
[17]
Id. at 57.

[18]
De Guzman v. Court of Appeals, 442 Phil. 534,
548 (2002).
[19]
Section 124 of the Public Land Act.
[20]
Abejaron v. Nabasa, supra note 16, at 67.

SECOND DIVISION
G.R. No. 126875 August 26, 1999
HEIRS OF MARIANO, JUAN, TARCELA and JOSEFA, all surnamed BRUSAS, petitioners,
vs.
COURT OF APPEALS and HEIRS OF SPOUSES INES BRUSAS and CLETO REBOSA, respondents.
BELLOSILLO, J.:
This is a bitter dispute spanning more than two (2) decades of protracted legal entanglements and deep-seated enmity
among the protagonists, even descending to their children, each claiming ownership over a 19-hectare land located in
San Francisco, Baao, Camarines Sur. In view of the prolonged litigation, the original parties have since died and are now
substituted by their heirs.
Petitioners, heirs of Juan, Mariano, Tarcela and Josefa, all surnamed Brusas, claimed that the disputed property,
formerly a public land, was part of the 33-hectare land in the actual physical possession of their grandfather Sixto Brusas
since 1924, having inherited the same from their great grandfather Pedro Brusas. Sometime in 1946 Sixto Brusas caused
the property to be surveyed in the name of his five (5) children, namely, Juan, Ines, Mariano, Tarcela and Josefa. The
survey was approved as Psu-116520.
1
As indicated in the survey plan the property was traversed by the Barit River, and
the eastern portion thereof with an aggregate area of 19.8992 hectares was denominated as Lots 1 and 2, while the
western portion measuring 13.2439 hectares was designated as Lots 3 and 4. In the same year, the property was
subdivided among the five (5) children of Sixto Brusas. The partition was made lengthwise so that each heir would have
access to the river and, as was the custom of the place, the distribution was made according to their age: the
southernmost lot was assigned to Juan being the eldest, followed successively by Ines, Mariano, Tarcela and Josefa.
2
All
of them purportedly took immediate possession of their respective shares.
On 17 July 1968 Ines Brusas applied for and was granted a free patent over Lots 1 and 2 of Psu-116520 with an
aggregate area of 19.8992 hectares for which OCT No. 23356 was issued in her name. Thus, when Mariano Brusas and
Josefa Brusas filed their sworn statements of landholdings in 1973 they supposedly discovered that their properties
were already titled in the name of their sister Ines. The discover1y triggered a controversy among the Brusas siblings and
earnest efforts to settle the conflict before the barangay officials, the local police and the PC Provincial Commander
proved futile.
Private respondents, heirs of Ines Brusas and Cleto Rebosa, denied on the other hand that Lots 1 and 2 were owned and
possessed by their grandfather Sixto Brusas during his lifetime. They asserted that Ines Brusas was the absolute owner
having entered the property as early as 1924. Since then Ines Brusas and her husband Cleto Rebosa were clearing the
land on their own by cutting down trees and removing their roots it being a forested area. In 1957 Ines Brusas applied
for a free patent which was approved and the corresponding certificate of title issued in 1967.
Sometime in 1974 Ines Brusas filed a complaint for recovery of six (6) hectares of land alleging that her brothers and
sisters forcibly entered and deprived her of that portion of the property.
3
Juan, Josefa, Mariano and Tarcela countered
by instituting in the same court an action for reconveyance imputing fraud, misrepresentation and bad faith to Ines
Brusas in using a forged affidavit to obtain title over Lots 1 and 2 despite full knowledge that she owned only 1/5 portion
thereof.
4

After the cases were consolidated trial dragged on for nineteen (19) years. The lower court finally rendered its decision
in 1993 dismissing the complaint filed by Ines Brusas, declaring Lots 1 and 2 as the pro-indiviso property of the Brusas
siblings, and ordering Ines Brusas to reconvey to her brothers and sisters their respective shares in the disputed
property.
On appeal, however, the Court of Appeals in its Decision of 16 July 1996 reversed and set aside the decision of the trial
court thus
WHEREFORE . . . . the appealed decision is REVERSED and SET ASIDE and another judgment is hereby rendered as
follows:
1. In Civil Case No. IR-1058, ordering defendants and/or their successors-in-interest to vacate the land described in
paragraph 4 of the complaint and/or to deliver possession thereof to plaintiffs or their successors-in-interest;
2. Dismissing the complaint for reconveyance and damages in Civil Case No. IR-1059.
The Court of Appeals ratiocinated
Apart from the self-serving and bare allegations of appellees, no competent evidence was adduced to substantiate their
claim of fraud on the part of Ines Brusas in her application for a free patent over the land in dispute. They submitted
specimens of their signatures to the NBI office at Naga City for examination but failed to submit to the court the result
thereof. Such failure indicates either that they did not pursue their request for examination or that, if they did, the result
thereof is adverse to their cause.
It is significant to note that aside from the supposedly falsified affidavit, Exhibit 4, another affidavit was executed by
Ines, together with Tarcela, Juan and Josefa, all surnamed Brusas, renouncing their rights to Lots 3 and 4 in favor of
Mariano Brusas (Exhibit 11). Both appear to have been notarized by the same Notary Public on April 22, 1960. The
existence of the two affidavits, Exhibits 4 and 11, strongly suggests that the Brusas recognized Ines Brusas as the sole
claimant of Lots 1 and 2 and Mariano Brusas, the sole claimant of lots 3 and 4.
There is likewise a presumption of regularity in the performance of official duty. There is no showing that the grant of a
free patent in favor of Ines Brusas was predicated solely on the affidavit of waiver, Exhibit 4, or that without it her
application would not have been given due course.
It must be borne in mind, in this regard, that the land in dispute was originally a public land. The occupation and
cultivation thereof by Sixto Brusas, the father of Ines, Tarcela, Josefa, Juan and Mariano Brusas, did not make it a part of
his hereditary estate. If he had complied with all the legal requirements for the grant of a free patent, he could have
filed the corresponding application therefor. But he did not. Hence, he could not have transmitted ownership thereof to
his heirs upon his death (citing Naval v. Jonsay, 50 O.G. 4792)
Their motion for reconsideration having been denied by the Court of Appeals in its Resolution of 30 September 1996,
petitioners now come to us through this petition for review.
The pivotal issues to be resolved are: first, who are the rightful owners of the disputed property is it the heirs of
Mariano, Juan, Josefa and Tarcela Brusas, whose claim of ownership is evidenced by a survey and subdivision plan; or, is
it the heirs of spouses Ines Brusas and Cleto Rebosa, whose claim of ownership flows from an original certificate of title
in the name of their parents, and covering the litigated property? And second, was there fraud on the part of Ines Brusas
in causing the registration of the disputed land under her name thus entitling petitioners to the reconveyance of their
shares therein?
It is a fundamental principle in land registration that the certificate of title serves as evidence of an indefeasible and
incontrovertible title to the property in favor of the person whose name appears therein. A title once registered under
the Torrens System cannot be defeated even by adverse, open and notorious possession; neither can it be defeated by
prescription. It is notice to the whole world and as such all persons are bound by it and no one can plead ignorance of
the registration.
5

The real purpose of the Torrens System of land registration is to quiet title to land and stop forever any question as to its
legality. Once a title is registered the owner may rest secure without the necessity of waiting in the portals of the court,
or sitting on the mirador de su casa, to avoid the possibility of losing his land.
6
Indeed, titles over lands under the
Torrens system should be given stability for on it greatly depends the stability of the country's economy. Interest
reipublicae ut sit finis litium.
This does not mean, however, that the landowner whose property has been wrongfully or erroneously registered in
another's name is without remedy in law. When a person obtains a certificate of title to a land belonging to another and
he has full knowledge of the rights of the true owner, he is considered guilty of fraud. He may then be compelled to
transfer the land to the defrauded owner so long as the property has not passed to the hands of an innocent purchaser
for value.
7

In the instant case, the litigated property is still registered in the name of Ines Brusas, so that insofar as procedure is
concerned, petitioners were correct in availing of the remedy of reconveyance. However, an action for reconveyance
presupposes the existence of a defrauded party who is the lawful owner of the disputed property. It is thus essential for
petitioners to prove by clear and convincing evidence their title to the property, and the fact of fraud committed by Ines
Brusas in registering their property in her name, which they miserably failed to do.
Primarily, the survey and subdivision plan submitted in evidence by petitioners are inferior proofs of ownership and
cannot prevail against the original certificate of title in the name of Ines Brusas who remains and is recognized as the
registered owner of the disputed property.
The survey of the land in the name of the five (5) children of Sixto Brusas is only an indication that each has an interest
over the property, but it does not define the nature and extent of those interests, nor the particular portions of the
property to which those interests appertain. The subdivision plan, on the other hand, is of doubtful evidentiary value
and can hardly be the basis of a claim of ownership. A careful examination thereof shows that it is nothing but a sketch
of the land purportedly prepared by a private land surveyor. It is not apparent therein when and where the partition was
made, or who caused the property to be subdivided. Worse, this document was not even signed by any of the parties to
the supposed partition to show their conformity thereto, nor acknowledged in writing by any of them or their heirs.
Even petitioners' tax declarations and tax receipts are unavailing. It is well-settled that they are not conclusive evidence
of ownership or of the right to possess land, in the absence of any other strong evidence to support them.
8
The fact that
the disputed property may have been declared for taxation purposes in the names of the brothers and sisters of Ines
Brusas does not necessarily prove their ownership thereof. The tax receipts and tax declarations are merely indicia of a
claim of ownership.
What perhaps militates heavily against petitioners is the Affidavit (of waiver) marked Exh. "4" executed sometime in
1960 by Mariano, Tarcela, Juan and Josefa, whereby they relinquished, ceded and transferred to Ines Brusas their rights
and interests over the controversial property, and recognized her as the absolute owner thereof, thus
WE, MARIANO BRUSAS, JUAN BRUSAS, TARCELA BRUSAS and JOSEFA BRUSAS, all of legal age, married except the last
who is a widow, residence (sic) and with postal address at Baao, Camarines Sur, after having been duly sworn to
according to law, state the following, to wit
That we are the brothers and sisters of Ines Brusas, applicant of Free Patent Application No. 10-4375 covering Lots 1 and
2, Psu-116520, situated in Baao, Camarines Sur;
That by virtue of this instrument, we relinquish, cede and transfer whatever rights and interests we might have over Lots
1 and 2, Psu-116520 in favor of our sister, Ines Brusas;
That we do not have any opposition to Ines Brusas acquiring title to said Lots 1 and 2, Psu-116520 by virtue of her Free
Patent Application No. 10-4375;
That we recognize our sister, Ines Brusas as the legal and absolute owner of Lots 1 and 2, Psu-116520 as covered by her
Free Patent Application No. 10-4375;
WHEREFORE, we sign this instrument of our own will and voluntary act and after the same has been translated in our
own native dialect and understood fully its contents, this April 20, 1960 at Naga City.
(SGD) MARIANO BRUSAS (SGD) JUAN BRUSAS
(SGD) TARCELA BRUSAS (SGD) JOSEFA BRUSAS
On the basis of the foregoing reasons alone the instant case should immediately be dismissed. Having failed to show any
valid title to the land involved petitioners are not the proper parties who can rightfully claim to have been fraudulently
deprived thereof. Nonetheless, for the satisfaction of all and sundry, we shall proceed to refute their accusation of
fraud.
First, Ines Brusas allegedly misrepresented in her application for free patent that she was the only claimant of the
disputed property, without disclosing that her other brothers and sisters were claiming portions that supposedly
belonged to them. It is worthy to emphasize, to the point of being repetitious, that Juan, Tarcela, Mariano and Josefa
executed an affidavit of waiver recognizing Ines Brusas as the legal and absolute owner of Lots 1 and 2, and manifesting
that they have no opposition to Ines Brusas' acquiring certificates of title over those lots. It was on the basis of this
affidavit of waiver that Ines stated in her application for free patent that she was the sole claimant of Lots 1 and 2.
Certainly this is not fraud. At any rate, it appears from the records that Juan, Tarcela, Mariano and Josefa were notified
of the application for free patent of Ines Brusas and duly afforded the opportunity to object to the registration and to
substantiate their claims, which they failed to do. Hence their opposition was accordingly disregarded and Ines Brusas'
application was given due course.
9
Petitioners cannot thus feign ignorance of the registration. Moreover, it is significant
that petitioners never contested the order of the Bureau of Lands disregarding their claims, i.e., by filing a motion for
reconsideration, or an appeal, for that purpose. This could only mean that they either agreed with the order or decided
to abandon their claims.
Petitioners next assailed the genuineness of Exh. "4" asserting that the signatures therein were forged. However, no
evidence was adduced by them to substantiate their allegation. It appears that they submitted for examination by the
NBI eighteen (18) specimen signatures of Juan, Tarcela, Mariano and Josefa. Unfortunately, no standard signature could
be found for the year 1960 when Exh. "4" was executed.
10
Petitioners admitted that they were unable to produce what
was required by the NBI, hence, they "just had to give up."
11

Furthermore, there was another Affidavit (Exh. "11") signed in the same year by the Brusases, Ines included, recognizing
Mariano Brusas as the sole claimant of Lots 3 and 4 and waiving their interests therein in his favor. This fact all the more
confirms that the affidavit of waiver in favor of Ines Brusas was authentic. As correctly observed by the appellate court

It is significant to note that aside from the supposedly falsified affidavit, Exhibit 4, another affidavit, was executed by
Ines, together with Tarcela, Juan and Josefa, all surnamed Brusas, renouncing their rights to Lots 3 and 4 in favor of
Mariano Brusas (Exhibit 11). Both appear to have been notarized by the same Notary Public on April 22, 1960. The
existence of the two affidavits, Exhibits 4 and 11, strongly suggests that the Brusas[es] recognized Ines Brusas as the sole
claimant of Lots 1 and 2 and Mariano Brusas, the sole claimant of Lots 3 and 4.
12

It is not for private respondents to deny forgery. The burden of proof that the affidavit of waiver is indeed spurious rests
on petitioners. Yet, significantly, even as they insist on forgery they never really took serious efforts in establishing such
allegation by preponderant evidence. It must be stressed that mere allegations of fraud are not enough. Intentional acts
to deceive and deprive another of his right, or in some manner injure him, must be specifically alleged and proved.
The affidavit of waiver in favor of Ines, being a public document duly acknowledged before a notary public, under his
hand and seal, with his certificate thereto attached, is prima facie evidence of the facts stated therein.
13
Petitioners
cannot impugn its validity by mere self-serving allegations. There must be evidence of the clearest and most satisfactory
character. Correlatively, in granting the application of Ines Brusas for free patent, the Bureau of Lands enjoyed the
presumption of regularity in the performance of its official duties. This presumption has not been rebutted by
petitioners as there was likewise no evidence of any anomaly or irregularity in the proceedings which led to the
registration of the land.
Finally, as we are not trier of facts, we generally rely upon and are bound by the conclusions of the lower courts, which
are better equipped and have better opportunity to assess the evidence first-hand, including the testimony of witnesses.
We have consistently adhered to the rule that findings of the Court of Appeals are final and conclusive, and cannot
ordinarily be reviewed by this Court as long as they are based on substantial evidence. Among the exceptions to this rule
are: (a) when the conclusion is grounded entirely on speculations, surmises or conjectures; (b) when the inference made
is manifestly mistaken, absurd or impossible; (c) where there is grave abuse of discretion; (d) when the judgment is
based on a misapprehension of facts; (e) when the findings of facts are conflicting; and, (f) when the Court of Appeals, in
making its findings, goes beyond the issues of the case and the same is contrary to the admissions of both the appellant
and appellee. We emphasize that none of these exceptions is present in this case.
WHEREFORE, the petition is DENIED. The 16 July 1996 Decision of the Court of Appeals ordering petitioners to vacate
the disputed property and restore respondents in possession thereof, as well as its 30 September 1996 Resolution
denying reconsideration, is AFFIRMED. Costs against petitioners.
SO ORDERED.
Mendoza, Quisumbing and Buena, JJ., concur.


Footnotes


1
Records, p. 292; Exh. "A."
2
Id., p. 292-A; Exh. "B."
3
Ines Brusas, et al. v. Pedro Badillo, et al., Civil Case No.
P-293, now Civil Case No. IR-1058.
4
Pedro Badillo, et al. v. Ines Brusas, Civil Case No. P-
299, now Civil Case No. IR-1059.
5
See Sec. 47, P.D. 1529; Jacob v. Court of Appeals, G.R.
No. 92159, 1 July 1993, 224 SCRA 189, 193-194.
6
Dominga v. Santos, 55 Phil. 361 (1930).
7
National Grains Authority v. Intermediate Appellate
Court, G.R. No. 68741, 28 January 1988, 157 SCRA 380,
388.
8
Director of Lands v. Court of Appeals, G.R. No. 50340,
26 December 1984, 192 SCRA 296.
9
Exh. "G."
10
NBI Questioned Documents Report No. 432-574, 7
May 1974.
11
Memorandum for Petitioners, Rollo, p. 140.
12
Decision of the Court of Appeals, p. 4.
13
Antillon v. Barcelon, 37 Phil. 148 (1917).

SECOND DIVISION
[G.R. No. 158455. June 28, 2005]
SHERWILL DEVELOPMENT CORPORATION, petitioner, vs. SITIO STO. NIO RESIDENTS ASSOCIATION, INC. and/or
NILDA DEVILLERES, and the LANDS MANAGEMENT BUREAU, respondents.
D E C I S I O N
CALLEJO, SR., J.:
This is a petition for review on certiorari assailing the Order
[1]
of the Regional Trial Court (RTC) of Muntinlupa City,
Branch 205, dismissing Civil Action No. 02-237 on the ground of litis pendentia and forum shopping.
Petitioner Sherwill Development Corporation is the registered owner of two parcels of land in Muntinlupa, Rizal. Lot 88
is covered by Transfer Certificate of Title (TCT) No. 131918
[2]
consisting of 8,774 square meters, while Lot 86, with an
area of 16,766 square meters, is covered by TCT No. 131919.
[3]
Both lots form part of the Muntinlupa Estate, while the
titles thereon were issued by the Registry of Deeds of Rizal on September 24, 1913.
On October 16, 2002, the petitioner filed a Complaint
[4]
for quieting of title against respondents Sitio Sto. Nio Residents
Association, Inc. (SSNRAI), Nilda Devilleres, and the Lands Management Bureau (LMB). The petitioner made the
following allegations in its complaint:
6. Since petitioner acquired subject two (2) lots in 1984, it has dutifully paid realty taxes thereon. A copy of its latest tax-
payment receipt is attached as Annex E.
7. In the late 1960s and the 1970s, and up to the 1980s, unauthorized persons, without the prior knowledge and consent
of petitioner and/or Mr. Lipio, by force, stealth and strategy, unlawfully entered and occupied the lots covered by TCT
Nos. 131918 and 131919. Among said unauthorized persons are members and officers of SSNRAI, Devilleres included;
8. Said LMB Case No. 7-98 is the first step of respondents to disturb and/or cast clouds on TCT Nos. 131918 and 131919,
as in fact they are disturbing and casting clouds over said titles. From all indications, LMB is set to recommend to the
Philippine Government, [through] the Office of the Solicitor General (OSG), the nullification of TCT Nos. 131918 and
131919 and/or the reversion thereof to the Philippine Government, despite the fact that the latter, sometime in 1927 or
thereabout, sold and/or disposed of subject lots, then covered by Original Certificate of Title (OCT) No. 684, pursuant to
Act No. 1120 and other pertinent laws. Petitioner is the third or fourth transferee and buyer in good faith of the lots in
question. Certainly, its titles (TCT Nos. 131918 and 131919) have long become indefeasible and conclusive, considering
that indefeasibility and conclusiveness of titles accrue one year after the issuance thereof.
[5]

As part of its prayer for relief, the petitioner prayed that a writ of preliminary injunction be issued, ordering the LMB to
cease and desist from proceeding with the hearings in LMB Case No. 7-98, a case pending before it where petitioners
titles to the subject lots were being questioned by the respondents SSNRAI and Nilda Devilleres. Thus:
WHEREFORE, petitioner most respectfully prays for the following:
(a) The immediate issuance of a writ of preliminary injunction against LMB, ordering it to cease and desist from hearing
or continuing its hearing of LMB Case No. 7-98; thereafter, after due hearing, the issuance of another order making said
injunction permanent; and
(b) The quieting of title of TCT Nos. 131918 and 131919, and the complete removal of any and all clouds thereon, and
the accompanying declaration that said titles are indefeasible and conclusive against the whole world, as in fact they
are.
Petitioner further prays for other reliefs which this Honorable Court may deem proper to grant.
[6]

The trial court set the hearing of the prayer of the writ of preliminary injunction at 8:30 a.m. of November 22,
2002.
[7]
On November 6, 2002, the private respondents, through counsel, filed a Motion to Dismiss
[8]
the petition on the
following grounds:
(a) THE PETITION ITSELF IS FATALLY DEFECTIVE AS THE CERTIFICATE OF NON-FORUM SHOPPING DID NOT SPECIFY
AND/OR DISCLOSE THE PENDENCY OF THE ADMINISTRATIVE CASE, LANDS MANAGEMENT BUREAU CASE NO. 7-98;
(b) PETITIONER IS GUILTY OF FORUM-SHOPPING; and
(c) THERE IS ANOTHER ACTION PENDING BETWEEN THE PARTIES INVOLVING THE SAME SUBJECT MATTER AND FOR THE
SAME CAUSE.
In its opposition to the motion to dismiss, the petitioner averred that contrary to the private respondents allegations, it
did disclose the pendency of LMB Case No. 7-98 in paragraph 3 of its petition, to wit:
3. Said LMB Case No. 7-98 was filed on May 5, 1995 and is, at present, being heard by [the] LMB thru Hearing Officer
Rogelio C. Mandar, the same Special Investigator-Designate who, on Feb. 12, 1998, wrote the LMB Director thru the
Chief, Legal Division, recommending that an order be issued directing the Surveys Divisions of this Office or its duly-
authorized representatives to conduct verification and relocation survey of subject lots. In effect, Atty. Mandar as such
Hearing Officer has already prejudged the case in favor of SSNRAI. A copy of the petition filed by SSNRAI (minus
annexes) is attached as Annex B, and that of Atty. Mandars letter consisting of seven (7) pages (minus annexes), as
Annex C;
[9]

According to the petitioner, there was no identity of actions and reliefs sought in the two cases. The petitioner pointed
out that in LMB Case No. 7-98, the private respondents (as the petitioners therein) sought the declaration of the nullity
of the said titles issued in its favor, on their claim that their issuance was highly irregular and erroneous, and that the
subject properties were not disposed of in accordance with Act No. 1120, otherwise known as the Friar Lands Act. On
the other hand, in SP Civil Action No. 02-237, the petitioners right of action was based on the private respondents act
of disturbing and casting clouds over TCT Nos. 131918 and 131919, considering that such titles have long become
indefeasible and conclusive.
The motion to dismiss filed by the private respondents was submitted for resolution on November 15, 2002.
[10]

In its Order
[11]
dated February 24, 2003, the trial court dismissed the petition on the grounds of litis pendencia and forum
shopping. In so ruling, the trial court made the following ratiocination:
As alleged in the petition filed with the LMB itself, quoted elsewhere in this order, and as shown in the copy of said
petition attached to this petition, herein petitioner is respondent therein and herein private respondents are petitioners
there. The element of identity of parties is therefore present. The cause of action and reliefs sought in the two sets of
cases are, likewise, identical. The ultimate issue involved in both is who between the parties has a better right to the
properties covered by TCT Nos. 131918 and 131919 which are alleged in the LMB case to originally constitute a portion
of the Muntinlupa Friar Lands Estate titled in the name of the government. As to the third requirement that the result
of the first action is determinative of the second, it is true here inasmuch as the Lands Management Bureau, public
respondent herein before which the case earlier filed is pending, absorbed the functions and powers of the Bureau of
Lands (abolished by Executive Order No. 131) and is mandated by law to implement the provisions of the Public Land Act
(Com. Act No. 141) which governs the administration and disposition of lands commonly known as friar lands, so an
earlier recourse to it would be an exercise of the doctrine of exhaustion of administrative remedies, regardless of which
party is successful.
It is clear from the petition that what the petitioner wants is for this court to enjoin public respondent from proceeding
with the case before it and take over the same which it cannot and should not do.
WHEREFORE, this case is hereby dismissed on the grounds of litis pendencia and forum shopping. No cost.
SO ORDERED.
[12]

The petitioner filed a motion for reconsideration, which the trial court denied in an Order
[13]
dated May 29, 2003.
Hence, the present petition, on the following question of law: whether or not the grounds of litis pendentia and forum
shopping insofar as SP Civil Action No. 02-237 is concerned are applicable. The petitioner puts forth the following
arguments:
1. THE GROUNDS OF LITIS PENDENCIA AND FORUM SHOPPING RELIED UPON BY THE COURT A QUO IN DISMISSING SP.
CIVIL ACTION NO. 02-237 AND DENYING PETITIONERS MOTION FOR RECONSIDERATION ARE SHAKY AT BEST. IN FACT,
THEY ARE NON-EXISTENT.
[14]

2. MOREOVER, AS ALREADY RAISED BY PETITIONER IN ITS REPLIES TO RESPONDENTS COMMENTS ON ITS AFORESAID
MOTION FOR RECONSIDERATION, LMB HAS NO JURISDICTION TO TRY LMB CASE NO. 7-98 INASMUCH AS CASES LIKE
THIS FALL UNDER THE EXCLUSIVE ORIGINAL JURISDICTION OF REGIONAL TRIAL COURTS.
[15]

To bolster its pose that no forum shopping and litis pendentia exist, the petitioner invokes the ruling of the Court
in Silahis International Hotel, Inc. v. NLRC, et al.,
[16]
averring that when a party does not pursue simultaneous remedies in
fora, there is no forum shopping. The petitioner reiterates that the issue and the causes of action in LMB Case No. 7-98
and SP Civil Action No. 02-237 are different. It points out that it certainly is not a party against whom an adverse
judgment or order has been rendered in one forum; neither has it instituted two or more actions or proceedings
grounded on the same cause. The petitioner further insists that the LMB has no jurisdiction to try LMB Case No. 7-98; it
is the regional trial courts that have original jurisdiction in such cases. The petitioner points out that the private
respondents failed to file an action for nullification of TCT Nos. 131918 and 131919 within the one-year period from the
date of issuance of the subject titles and are, therefore, barred from questioning the said titles. The petitioner further
points out that the certificates of title under the Torrens system of registration cannot be collaterally attacked. The
petitioner concludes that the trial court should not have dismissed SP Civil Action No. 02-237, but instead should have
given it due course.
The Office of the Solicitor General (OSG), for its part, points out that the parties in both cases are identical. It further
points out that LMB Case No. 7-98 was filed as early as 1995, and that the petitioner subsequently initiated SP Civil
Action No. 02-237 obviously to preempt the outcome of the case before the Lands Management Bureau. Hence, the
trial court correctly dismissed SP Civil Action No. 02-237 on the ground of litis pendentia.
The OSG further contends that the determination of whether there was a violation of the Friar Lands Act, the very issue
raised in the two cases, is well within the authority of the LMB to investigate, it being the agency of the government
charged with administrative control over Friar Land Estates under Commonwealth Act No. 2550. As such, according to
the OSG, the LMB has primary jurisdiction over the subject matter. The OSG points out that the petitioners resort to
the courts is premature, considering that the LMB has primary jurisdiction over the matter.
The OSG, likewise, avers that the petitioner is guilty of violating Section 5, Rule 7 of the Rules of Court, on certification
against forum shopping. It points out that the petitioners representative, Roland Leslie V. Lipio, certified under oath
that the petitioner had no knowledge of any action pending before any tribunal or agency. It further points out that it
cannot be said that the petitioner was unaware of LMB Case No. 7-98, since it even filed an Answer therein on July 31,
1995. To justify the dismissal of the case, the OSG cites the ruling of the Court in Republic v. Carmel Development, Inc.
[17]

The Ruling of the Court
At the outset, the Court notes that the petitioner assails an order of dismissal issued by the RTC, with direct recourse to
this Court. It must be stressed that in so doing, the petitioner violated an established policy, one that is necessary to
prevent inordinate demands upon the Courts time and attention which are better devoted to those matters within its
exclusive jurisdiction, and to prevent further overcrowding of the Courts docket.
[18]
There is, after all, a hierarchy of
courts which is determinative of the venue of appeals.
[19]
This rule may be relaxed only for special and important reasons
clearly and specifically set out in the petition.
[20]
The petitioner should thus have filed its petition first before the Court of
Appeals, conformably with this principle of hierarchy of courts. The Court notes that the petitioner failed to
satisfactorily explain its failure to comply with or its non-observance of judicial hierarchy.
Even upon the merits of the case, the petition at bar is still destined to fail for the following additional reasons:
First. Contrary to the petitioners contention, at this instance, it is the courts which should defer the exercise of
jurisdiction on the matter. Jurisdiction having been correctly assumed by the Director of Lands over the parties
conflicting claims, the case should, in accordance with law, remain there for final adjudication.
[21]
After all, the Director
of Lands, who is the officer charged with carrying out the provisions of the Public Land Act, has control over the survey,
classification, lease, sale or any other form of concession or disposition and management of the public lands, and his
finding and decision as to questions of fact, when approved by the Secretary of Agriculture and Natural Resources (now
Secretary of Environment and Natural Resources), is conclusive.
[22]

The power and authority of the Director of Lands were discussed in the recent case of Republic of the Philippines v. De
Guzman.
[23]
According to the Court, the Director of Lands does not lose authority over the land even upon the issuance
of an original certificate of title over the same. Thus:
The authority of the Director of Lands to investigate conflicts over public lands is derived from Section 91 of the Public
Land Act. In fact, it is not merely his right but his specific duty to conduct investigations of alleged fraud in securing
patents and the corresponding titles thereto. While title issued on the basis of a patent is as indefeasible as one
judicially secured, such indefeasibility is not a bar to an investigation by the Director of Lands as to how such title had
been acquired, if the purpose of such investigation is to determine whether or not fraud had been committed in
securing such title, in order that the appropriate action for reversion may be filed by the Government.
[24]

As a rule then, courts have no jurisdiction to intrude upon matters properly falling within the powers of the LMB.
[25]

On the petitioners claim that its titles to the subject lots have been rendered indefeasible, the pronouncement of the
Court in Republic v. Court of Appeals
[26]
is instructive:
It is true that under Section 122 of the Land Registration Act, a Torrens title issued on the basis of a free patent or a
homestead patent is as indefeasible as one judicially secured. And in repeated previous decisions of this Court that
indefeasibility has been emphasized by our holding that not even the Government can file an action for annulment, but
at the same time, it has been made clear that an action for reversion may be instituted by the Solicitor General, in the
name of the Republic of the Philippines. It is also to the public interest that one who succeeds in fraudulently acquiring
title to a public land should not be allowed to benefit therefrom, and the State should, therefore, have an even existing
authority, thru its duly-authorized officers, to inquire into the circumstances surrounding the issuance of any such title,
to the end that the Republic, thru the Solicitor General or any other officer who may be authorized by law, may file the
corresponding action for the reversion of the land involved to the public domain, subject thereafter to disposal to other
qualified persons in accordance with law. In other words, the indefeasibility of a title over land previously public is not a
bar to an investigation by the Director of Lands as to how such title has been acquired, if the purpose of such
investigation is to determine whether or not fraud had been committed in securing such title in order that the
appropriate action for reversion may be filed by the Government.
[27]

Second. The OSG correctly invoked the doctrine of primary jurisdiction in this case. Indeed, the courts cannot and will
not resolve a controversy involving a question which is within the jurisdiction of an administrative tribunal, especially
where the question demands the exercise of sound administrative discretion requiring the special knowledge,
experience and services of the administrative tribunal to determine technical and intricate matters of fact.
[28]
The
doctrine of primary jurisdiction applies where a claim is originally cognizable in the courts, and comes into play
whenever enforcement of the claim requires the resolution of issues which, under a regulatory scheme, have been
placed within the special competence of an administrative body; in such case, the judicial process is suspended pending
referral of such issues to the administrative body for its view. And in such cases, the court cannot arrogate unto itself
the authority to resolve a controversy, the jurisdiction over which is initially lodged with an administrative body of
special competence,
[29]
in this case, the LMB.
Third. The trial court correctly ruled that the petitioners action was barred by the pendency of the proceedings before
the LMB. For litis pendencia to lie, the following requisites must be satisfied:
1. Identity of parties or representation in both cases;
2. Identity of rights asserted and relief prayed for;
3. The relief must be founded on the same facts and the same basis; and
4. Identity of the two preceding particulars should be such that any judgment, which may be rendered in the other
action, will, regardless of which party is successful, amount to res judicata on the action under consideration.
[30]

To the Courts mind, these requisites are present in the instant case. For one, the parties in the LMB case and in SP Civil
Action No. 02-237 are the same. There is, likewise, identity of rights asserted and reliefs prayed for. The petition filed
by the private respondents SSNRAI and its President Devilleres before the LMB alleged that the lots in question had been
the subject of double titling; on the other hand, the petition with prayer for preliminary injunction filed before the RTC
sought the declaration from the court that TCT Nos. 131918 and 131919, in the name of the petitioner, are indefeasible
and conclusive as against the whole world. The resolution of the foregoing issue would likewise require the
presentation of evidence from the parties. Verily, the conclusion in one proceeding would amount to the adjudication
of the merits on the other that is, a favorable ruling from the LMB would have virtually removed any and all existing
clouds from the petitioners titles to the subject property; in the same vein, a declaration of the indefeasibility of TCT
Nos. 131918 and 131919 would preempt any ruling of the LMB on the matter.
Indeed, the underlying principle of litis pendentia is the theory that a party is not allowed to vex another more than once
regarding the same subject matter and for the same cause of action. This theory is founded on the public policy that the
same subject matter should not be the subject of controversy in court more than once in order that possible conflicting
judgments may be avoided, for the sake of the stability of the rights and status of persons.
[31]
The RTC of Muntinlupa
City, Branch 205, recognized this doctrine when it dismissed SP Civil Action No. 02-237 to avoid the possibility of two
contradictory decisions on the question of the validity of the subject titles.
In any case, should the petitioner disagree with the ruling of the LMB, it is not precluded from taking the matter up to
with the courts of law.
Fourth. To determine whether a party violated the rule against forum shopping, the test applied is whether the
elements of litis pendentia are present or whether a final judgment in one case will amount to res judicata in
another.
[32]
Considering our pronouncement that the requisites of litis pendentia barred the filing of SP Civil Action No.
02-237, the RTC correctly dismissed the same on the additional ground of forum shopping.
WHEREFORE, considering the foregoing, the petition is DENIED for lack of merit. The Order of the Regional Trial Court of
Muntinlupa City, Branch 205, dismissing SP Civil Action No. 02-237 on the ground of litis pendentia and forum shopping,
is AFFIRMED.
SO ORDERED.
Puno, (Chairman), Austria-Martinez, Tinga, and Chico-Nazario, JJ., concur.



[1]
Penned by Judge Myrna V. Lim-Verano.
[2]
Records, pp. 24-25.
[3]
Records, pp. 26-28.
[4]
Id. at 1-9.
[5]
Id. at 4-5.
[6]
Records, p. 7.
[7]
Id. at 41.
[8]
Id. at 43-48.
[9]
Records, p. 57.
[10]
Id. at 71.
[11]
Id. at 81-83.
[12]
Records, pp. 82-83.
[13]
Rollo, p. 33.
[14]
Id. at 6.
[15]
Rollo, p. 16.
[16]
G.R. No. 104513, 4 August 1993, 225 SCRA 94.
[17]
G.R. No. 142572, 20 February 2002, 377 SCRA 459.
[18]
People v. Cuaresma, G.R. No. 67787, 18 April 1989,
172 SCRA 415; reiterated in Liga ng mga Barangay
National v. Atienza, Jr., G.R. No. 154599, 21 January
2004, 420 SCRA 562 and Microsoft Corporation v. Best
Deal Computer Center Corporation, G.R. No. 148029, 24
September 2002, 389 SCRA 615.
[19]
Del Rosario v. Montaa, G.R. No. 134433, 28 May
2004, 430 SCRA 109, citing People v. Court of
Appeals, 301 SCRA 566 (1999).
[20]
See Zamboanga Barter Goods Retailers Association,
Inc. v. Lobregat, G.R. No. 145466, 7 July 2004, 433 SCRA
624; Cuada v. Drilon, G.R. No. 159118, 28 June 2004,
432 SCRA 618. See also Advincula-Velasquez v. Court of
Appeals, G.R. Nos. 111387 and 127497, 8 June 2004,
431 SCRA 165.
[21]
Cerdon v. Court of Appeals, G.R. No. 47422, 6 April
1990, 184 SCRA 198.
[22]
In Re: Petition Seeking for Clarification as to the
Validity and Forceful Effect of Two Final and Executory
Conflicting Decisions of the Supreme Court, G.R. No.
123780, 17 December 1999, 321 SCRA 62, citingVda. De
Calibo v. Ballesteros, 15 SCRA 37.
[23]
Republic of the Phils. v. De Guzman, 383 Phil. 151
(2000).
[24]
Id. at 160-161.
[25]
Heirs of Lourdes Saez Sabanpan v. Comorposa, G.R.
No. 152807, 12 August 2003, 408 SCRA 692.
[26]
G.R. No. 60169, 23 March 1990, 183 SCRA 620,
citing Piero, Jr. v. Director of Lands, 57 SCRA 386
(1974).
[27]
Id. at 627-628.
[28]
Villaflor v. Court of Appeals, G.R. No. 95694, 9
October 1997, 280 SCRA 297.
[29]
Id. at 327.
[30]
Tirona v. Alejo, G.R. No. 129313, 10 October 2001,
367 SCRA 17, citing Tourist Duty Free Shops, Inc. v.
Sandiganbayan, 323 SCRA 358 (2000).
[31]
Tirona v. Alejo, supra.
[32]
Tirona v. Alejo, supra, citing Solid Homes, Inc. v.
Court of Appeals, 337 Phil. 605 (1997).

HIRD DIVISION

G.R. No. 100709 November 14, 1997
REPUBLIC OF THE PHILIPPINES, represented by the DIRECTOR OF LANDS, petitioner,
vs.
COURT OF APPEALS, JOSEFINA L. MORATO, SPOUSES NENITA CO and ANTONIO QUILATAN AND THE REGISTER OF
DEEDS OF QUEZON PROVINCE, respondents.

PANGANIBAN, J.:
Will the lease and/or mortgage of a portion of a realty acquired through free patent constitute sufficient ground for the
nullification of such land grant? Should such property revert to the State once it is invaded by the sea and thus becomes
foreshore land?
The Case
These are the two questions raised in the petition before us assailing the Court of Appeals'
1
Decision in CA-G.R. CV No.
02667 promulgated on June 13, 1991 which answered the said questions in the negative.
2
Respondent Court's
dismissed
3
petitioner's appeal and affirmed in toto the decision of the Regional Trial Court
4
of Calauag, Quezon, dated
December 28, 1983 in Civil Case No. C-608. In turn, the Regional Trial Court's decision dismissed petitioner's complaint
for cancellation of the Torrens Certificate of Title of Respondent Morato and for reversion of the parcel of land subject
thereof of the public domain.

The Facts
The petition of the solicitor general, representing the Republic of the Philippines, recites the following facts:
5

Sometime in December, 1972, respondent Morato filed a Free Patent Application No. III-3-8186-B on a parcel of land
with an area of 1,265 square meters situated at Pinagtalleran, Calauag, Quezon. On January 16, 1974, the patent was
approved and the Register of Deeds of Quezon at Lucena City issued on February 4, 1974 Original Certificate of Title No.
P-17789. Both the free patent and the title specifically mandate that the land shall not
be alienated nor encumbered within five years from the date of the issuance of the patent (Sections 118 and 124 of CA
No. 141, as amended).
Subsequently, the District Land Officer in Lucena City, acting upon reports that respondent Morato had encumbered the
land in violation of the condition of the patent, conducted an investigation. Thereafter, it was established that the
subject land is a portion of the Calauag Bay, five (5) to six (6) feet deep under water during high tide and two (2) feet
deep at low tide, and not suitable to vegetation. Moreover, on October 24, 1974, a portion of the land was mortgaged
by respondent Morato to respondents Nenita Co and Antonio Quilatan for P10,000.00 (pp. 2, 25, Folder of Exhibits). The
spouses Quilatan constructed a house on the land. Another portion of the land was leased to Perfecto Advincula on
February 2, 1976 at P100.00 a month, where a warehouse was constructed.
On November 5, 1978, petitioner filed an amended complaint against respondents Morato, spouses Nenita Co and
Antonio Quilatan, and the Register of Deeds of Quezon for the cancellation of title and reversion of a parcel of land to
the public domain, subject of a free patent in favor of respondent Morato, on the grounds that the land is a foreshore
land and was mortgaged and leased within the five-year prohibitory period (p. 46, Records).
After trial, the lower court, on December 28, 1983, rendered a decision dismissing petitioner's complaint. In finding for
private respondents, the lower court ruled that there was no violation of the 5-year period ban against alienating or
encumbering the land, because the land was merely leased and not alienated. It also found that the mortgage to Nenita
Co and Antonio Quilatan covered only the improvement and not the land itself.
On appeal, the Court of Appeals affirmed the decision of the trial court. Thereafter, the Republic of the Philippines filed
the present petition.
6

The Issues
Petitioner alleges that the following errors were committed by Respondent Court:
7

I
Respondent court erred in holding that the patent granted and certificate of title issued to Respondent Morato cannot
be cancelled and annulled since the certificate of title becomes indefeasible after one year from the issuance of the title.
II
Respondent Court erred in holding that the questioned land is part of a disposable public land and not a foreshore land.
The Court's Ruling
The petition is meritorious.
First Issue: Indefeasibility of a Free Patent Title
In resolving the first issue against petitioner, Respondent Court held:
8

. . . As ruled in Heirs of Gregorio Tengco vs. Heirs of Jose Alivalas, 168 SCRA 198. ". . . The rule is well-settled that an
original certificate of title issued on the strength of a homestead patent partakes of the nature of a certificate of title
issued in a judicial proceeding, as long as the land disposed of is really part of the disposable land of the public domain,
and becomes indefeasible and incontrovertible upon the expiration of one year from the date of promulgation of the
order of the Director of Lands for the issuance of the patent. (Republic v. Heirs of Carle, 105 Phil. 1227 (1959); Ingaran v.
Ramelo, 107 Phil. 498 (1960); Lopez v. Padilla, (G.R. No. L-27559, May 18, 1972, 45 SCRA 44). A homestead patent, one
registered under the Land Registration Act, becomes as indefeasible as a Torrens Title. (Pamintuan v. San Agustin, 43
Phil. 558 (1982); El Hogar Filipino v. Olviga, 60 Phil. 17 (1934); Duran v. Oliva, 113 Phil. 144 (1961); Pajomayo v. Manipon,
G.R. No. L-33676, June 30, 1971, 39 SCRA 676). (p. 203).
Again, in Lopez vs. Court of Appeals, 169 SCRA 271, citing Iglesia ni Cristo v. Hon. Judge, CFI of Nueva Ecija, Branch I, (123
SCRA 516 (1983) and Pajomayo, et al. v. Manipon, et al. (39 SCRA 676 (1971) held that once a homestead patent granted
in accordance with the Public Land Act is registered pursuant to Section 122 of Act 496, the certificate of title issued in
virtue of said patent has the force and effect of a Torrens Title issued under the Land Registration Act.
Indefeasibility of the title, however, may not bar the State, thru the Solicitor General, from filing an action for reversion,
as ruled in Heirs of Gregorio Tengco v. Heirs of Jose Aliwalas, (supra), as follows:
But, as correctly pointed out by the respondent Court of Appeals, Dr. Aliwalas' title to the property having become
incontrovertible, such may no longer be collaterally attacked. If indeed there had been any fraud or misrepresentation in
obtaining the title, an action for reversion instituted by the Solicitor General would be the proper remedy (Sec. 101, C.A.
No. 141; Director of Lands v. Jugado, G.R. No. L-14702, May 21, 1961, 2 SCRA 32; Lopez v. Padilla, supra). (p. 204).
Petitioner contends that the grant of Free Patent (IV-3) 275 and the subsequent issuance of Original Certificate of Title
No. P-17789 to Respondent Josefina L. Morato were subject to the conditions provided for in Commonwealth Act (CA)
No. 141. It alleges that on October 24, 1974, or nine (9) months and eight (8) days after the grant of the patent,
mortgaged a portion of the land" to Respondent Nenita Co, who thereafter constructed a house thereon. Likewise, on
February 2, 1976 and "within the five-year prohibitory period," Respondent Morato "leased a portion of the land to
Perfecto Advincula at a monthly rent of P100.00 who, shortly thereafter, constructed a house of concrete materials on
the subject land."
9
Further, petitioner argues that the defense of indefeasibility of title is "inaccurate." The original
certificate of title issued to Respondent Morato "contains the seeds of its own cancellation": such certificate specifically
states on its face that "it is subject to the provisions of Sections 118, 119, 121, 122, 124 of CA No. 141, as amended."
10

Respondent Morato counters by stating that although a "portion of the land was previously leased," it resulted "from
the fact that Perfecto Advincula built a warehouse in the subject land without [her] prior consent." The mortgage
executed over the improvement "cannot be considered a violation of the said grant since it can never affect the
ownership."
11
She states further:
. . . . the appeal of the petitioner was dismissed not because of the principle of indefeasibility of title but mainly due to
failure of the latter to support and prove the alleged violations of respondent Morato. The records of this case will
readily show that although petitioner was able to establish that Morato committed some acts during the prohibitory
period of 5 years, a perusal thereof will also show that what petitioner was able to prove never constituted a violation of
the grant.
12

Respondent-Spouses Quilatan, on the other hand, state that the mortgage contract they entered into with Respondent
Morato "can never be considered as [an] 'alienation' inasmuch as the ownership over the property remains with the
owner."
13
Besides, it is the director of lands and not the Republic of the Philippines who is the real party in interest in
this case, contrary to the provision of the Public Land Act which states that actions for reversion should be instituted by
the solicitor general in the name of Republic of the Philippines.
14

We find for petitioner.
Quoted below are relevant sections of Commonwealth Act No. 141, otherwise known as the Public Land Act:
Sec. 118. Except in favor of the Government or any of its branches, units or institutions, or legally constituted banking
corporations, lands acquired under free patent or homestead provisions shall not be subject to encumbrance or
alienation from the date of the approval of the application and for a term of five years from and after the date of
issuance of the patent or grant nor shall they become liable to the satisfaction of any debt contracted prior to the
expiration of said period; but the improvements or crops on the land may be mortgaged or pledged to qualified persons,
associations, or corporations.
No alienation, transfer, or conveyance of any homestead after five years and before twenty-five years after issuance of
title shall be valid without the approval of the Secretary of Agriculture and Natural Resources, which approval shall not
be denied except on constitutional and legal grounds. (As amended by Com. Act No. 456, approved June 8, 1939.)
xxx xxx xxx
Sec. 121. Except with the consent of the grantee and the approval of the Secretary of Agriculture and Natural Resources,
and solely for educational, religious, or charitable purposes or for a right of way, no corporation, association, or
partnership may acquire or have any right, title, interest, or property right whatsoever to any land granted under the
free patent, homestead, or individual sale provisions of this Act or to any permanent improvement on such land. (As
amended by Com. Act No. 615, approved May 5, 1941)
Sec. 122. No land originally acquired in any manner under the provisions of this Act, nor any permanent improvement
on such land, shall be encumbered, alienation or transferred, except to persons, corporations, association, or
partnerships who may acquire lands of the public domain under this Act or to corporations organized in the Philippines
authorized therefore by their charters.
Except in cases of hereditary successions, no land or any portion thereof originally acquired under the free patent,
homestead, or individual sale provisions of this Act, or any permanent improvement on such land, shall be transferred or
assigned to any individual, nor shall such land or any permanent improvement thereon be leased to such individual,
when the area of said land, added to that of this own, shall exceed one hundred and forty-four hectares. Any transfer,
assignment, or lease made in violation hereto shall be null and void. (As amended by Com Act No. 615, Id.).
xxx xxx xxx
Sec. 124. Any acquisition, conveyance, alienation, transfer, or other contract made or executed in violation of any of the
provisions of sections one hundred and eighteen, one hundred and twenty, one hundred and twenty-one, one hundred
and twenty-two, and one hundred and twenty-three of this Actshall be unlawful and null and void from its execution and
shall produce the effect of annulling and cancelling the grant, title, patent, or permit originally issued, recognized or
confirmed, actually or presumatively, and cause the reversion of the property and its improvements to the State.
(Emphasis supplied)
The foregoing legal provisions clearly proscribe the encumbrance of a parcel of land acquired under a free patent or
homestead within five years from the grant of such patent. Furthermore, such encumbrance results in the cancellation
of the grant and the reversion of the land to the public domain. Encumbrance has been defined as "[a]nything that
impairs the use or transfer of property; anything which constitutes a burden on the title; a burden or charge upon
property; a claim or lien upon property." It may be a "legal claim on an estate for the discharge of which the estate is
liable; and embarrassment of the estate or property so that it cannot be disposed of without being subject to it; an
estate, interest, or right in lands, diminishing their value to the general owner; a liability resting upon an estate."
15
Do
the contracts of lease and mortgage executed within five (5) years from the issuance of the patent constitute an
"encumbrance" and violate the terms and conditions of such patent? Respondent Court answered in the negative:
16

From the evidence adduced by both parties, it has been proved that the area of the portion of the land, subject matter
of the lease contract (Exh. "B") executed by and between Perfecto Advincula and Josefina L. Morato is only 10 x 12
square meters, where the total area of the land granted to Morato is 1,265 square meters. It is clear from this that the
portion of the land leased by Advincula does not significantly affect Morato's ownership and possession. Above all, the
circumstances under which the lease was executed do not reflect a voluntary and blatant intent to violate the conditions
provided for in the patent issued in her favor. On the contrary, Morato was compelled to enter into that contract of
lease out of sympathy and the goodness of her heart to accommodate a fellow man. . . .
It is indisputable, however, that Respondent Morato cannot fully use or enjoy the land during the duration of the lease
contract. This restriction on the enjoyment of her property sufficiently meets the definition of an encumbrance under
Section 118 of the Public Land Act, because such contract "impairs the use of the property" by the grantee. In a contract
of lease which is consensual, bilateral, onerous and commutative, the owner temporarily grants the use of his or her
property to another who undertakes to pay rent therefor.
17
During the term of the lease, the grantee of the patent
cannot enjoy the beneficial use of the land leased. As already observed, the Public Land Act does not permit a grantee of
a free patent from encumbering any portion of such land. Such encumbrance is a ground for the nullification of the
award.
Morato's resort to equity, i.e. that the lease was executed allegedly out of the goodness of her heart without any
intention of violating the law, cannot help her. Equity, which has been aptly described as "justice outside legality," is
applied only in the absence of, and never against, statutory law or judicial rules of procedure. Positive rules prevail over
all abstract arguments based on equity contra legem.
18

Respondents failed to justify their position that the mortgage should not be considered an encumbrance. Indeed, we do
not find any support for such contention. The questioned mortgage falls squarely within the term "encumbrance"
proscribed by Section 118 of the Public Land Act.
19
Verily, a mortgage constitutes a legal limitation on the estate, and
the foreclosure of such mortgage would necessarily result in the auction of the property.
20

Even if only part of the property has been sold or alienated within the prohibited period of five years from the issuance
of the patent, such alienation is a sufficient cause for the reversion of the whole estate to the State. As a condition for
the grant of a free patent to an applicant, the law requires that the land should not be encumbered, sold or alienated
within five years from the issuance of
the patent. The sale or the alienation of part of the homestead violates that condition.
21

The prohibition against the encumbrance lease and mortgage included of a homestead which, by analogy applies
to a free patent, is mandated by the rationale for the grant, viz.:
22

It is well-known that the homestead laws were designed to distribute disposable agricultural lots of the State to land-
destitute citizens for their home and cultivation. Pursuant to such benevolent intention the State prohibits the sale or
incumbrance of the homestead (Section 116) within five years after the grant of the patent. After that five-year period
the law impliedly permits alienation of the homestead; but in line with the primordial purpose to favor the homesteader
and his family the statute provides that such alienation or conveyance (Section 117) shall be subject to the right of
repurchase by the homesteader, his widow or heirs within five years. This section 117 is undoubtedly a complement of
section 116. It aims to preserve and keep in the family of the homesteader that portion of public land which the State
had gratuitously given to him. It would, therefore, be in keeping with this fundamental idea to hold, as we hold, that the
right to repurchase exists not only when the original homesteader makes the conveyance, but also when it is made by
his widow or heirs. This construction is clearly deducible from the terms of the statute.
By express provision of Section 118 of Commonwealth Act 141 and in conformity with the policy of the law, any transfer
or alienation of a free patent or homestead within five years from the issuance of the patent is proscribed. Such transfer
nullifies said alienation and constitutes a cause for the reversion of the property to the State.
The prohibition against any alienation or encumbrance of the land grant is a proviso attached to the approval of every
application.
23
Prior to the fulfillment of the requirements of law, Respondent Morato had only an inchoate right to the
property; such property remained part of the public domain and, therefore, not susceptible to alienation or
encumbrance. Conversely, when a "homesteader has complied with all the terms and conditions which entitled him to a
patent for [a] particular tract of public land, he acquires a vested interest therein and has to be regarded an equitable
owner thereof."
24
However, for Respondent Morato's title of ownership over the patented land to be perfected, she
should have complied with the requirements of the law, one of which was to keep the property for herself and her
family within the prescribed period of five (5) years. Prior to the fulfillment of all requirements of the law, Respondent
Morato's title over the property was incomplete. Accordingly, if the requirements are not complied with, the State as
the grantor could petition for the annulment of the patent and the cancellation of the title.
Respondent Morato cannot use the doctrine of the indefeasibility of her Torrens title to bar the state from questioning
its transfer or encumbrance. The certificate of title issued to her clearly stipulated that its award was "subject to the
conditions provided for in Sections 118, 119, 121, 122 and 124 of Commonwealth Act (CA) No. 141." Because she
violated Section 118, the reversion of the property to the public domain necessarily follows, pursuant to Section 124.
Second Issue: Foreshore Land Revert to the Public Domain
There is yet another reason for granting this petition.
Although Respondent Court found that the subject land was foreshore land, it nevertheless sustained the award thereof
to Respondent Morato:
25

First of all, the issue here is whether the land in question, is really part of the foreshore lands. The Supreme Court
defines foreshore land in the case of Republic vs. Alagad, 169 SCRA 455, 464, as follows:
Otherwise, where the rise in water level is due to, the "extraordinary" action of nature, rainful, for instance, the portions
inundated thereby are not considered part of the bed or basin of the body of water in question. It cannot therefore be
said to be foreshore land but land outside of the public dominion, and land capable of registration as private property.
A foreshore land, on the other hand has been defined as follows:
. . . that part of (the land) which is between high low water and left dry by the flux and reflux of the tides . . . . (Republic
vs. C.A., Nos. L-43105, L-43190, August 31, 1984, 131 SCRA 532; Government vs. Colegio de San Jose, 53 Phil 423)
The strip of land that lies between the high and low water marks and that is alternatively wet and dry according to the
flow of the tide. (Rep. vs. CA,supra, 539).
The factual findings of the lower court regarding the nature of the parcel of land in question reads:
Evidence disclose that the marginal area of the land radically changed sometime in 1937 up to 1955 due to a strong
earthquake followed by frequent storms eventually eroding the land. From 1955 to 1968, however, gradual reclamation
was undertaken by the lumber company owned by the Moratos. Having thus restored the land thru mostly human
hands employed by the lumber company, the area continued to be utilized by the owner of the sawmill up to the time of
his death in 1965. On or about March 17, 1973, there again was a strong earthquake unfortunately causing destruction
to hundreds of residential houses fronting the Calauag Bay including the Santiago Building, a cinema house constructed
of concrete materials. The catastrophe totally caused the sinking of a concrete bridge at Sumulong river also in the
municipality of Calauag, Quezon.
On November 13, 1977 a typhoon code named "Unding" wrought havoc as it lashed the main land of Calauag, Quezon
causing again great erosion this time than that which the area suffered in 1937. The Court noted with the significance of
the newspaper clipping entitled "Baryo ng Mangingisda Kinain ng Dagat" (Exh. "11").
xxx xxx xxx
Evidently this was the condition of the land when on or about December 5, 1972 defendant Josefina L. Morato filed with
the Bureau of Lands her free patent application. The defendant Josefina Morato having taken possession of the land
after the demise of Don Tomas Morato, she introduced improvement and continued developing the area, planted it to
coconut tree. Having applied for a free patent, defendant had the land area surveyed and an approved plan (Exh. "9")
based on the cadastral survey as early as 1927 (Exh. "10") was secured. The area was declared for taxation purposes in
the name of defendant Josefina Morato denominated as Tax Declaration No. 4115 (Exh. "8") and the corresponding
realty taxes religiously paid as shown by Exh. "8-A"). (pp. 12-14, DECISION).
Being supported by substantial evidence and for failure of the appellant to show cause which would warrant
disturbance, the aforecited findings of the lower court, must be respected.
Petitioner correctly contends, however, that Private Respondent Morato cannot own foreshore land:
Through the encroachment or erosion by the ebb and flow of the tide, a portion of the subject land was invaded by the
waves and sea advances. During high tide, at least half of the land (632.5 square meters) is 6 feet deep under water and
three (3) feet deep during low tide. The Calauag Bay shore has extended up to a portion of the questioned land.
While at the time of the grant of free patent to respondent Morato, the land was not reached by the water, however,
due to gradual sinking of the land caused by natural calamities, the sea advances had permanently invaded a portion of
subject land. As disclosed at the trial, through the testimony of the court-appointed commissioner, Engr. Abraham B. Pili,
the land was under water during high tide in the month of August 1978. The water margin covers half of the property,
but during low tide, the water is about a kilometer (TSN, July 19, 1979, p. 12). Also, in 1974, after the grant of the patent,
the land was covered with vegetation, but it disappeared in 1978 when the land was reached by the tides (Exh. "E-1", "E-
14"). In fact, in its decision dated December 28, 1983, the lower court observed that the erosion of the land was caused
by natural calamities that struck the place in 1977 (Cf. Decision, pp. 17-18).
26

Respondent-Spouses Quilatan argue, however, that it is "unfair and unjust if Josefina Morato will be deprived of the
whole property just because a portion thereof was immersed in water for reasons not her own doing."
27

As a general rule, findings of facts of the Court of Appeals are binding and conclusive upon this Court, unless such factual
findings are palpably unsupported by the evidence on record or unless the judgment itself is based on a
misapprehension of facts.
28
The application for a free patent was made in 1972. From the undisputed factual findings of
the Court of Appeals, however, the land has since become foreshore. Accordingly, it can no longer be subject of a free
patent under the Public Land Act. Government of the Philippine Islands vs. Cabagis
29
explained the rationale for this
proscription:
Article 339, subsection 1, of the Civil Code, reads:
Art. 339. Property of public ownership is
1. That devoted to public use, such as roads, canals, rivers, torrents, ports and bridges constructed by the State,
riverbanks, shores, roadsteads, and that of a similar character.
xxx xxx xxx
Article 1, case 3, of the law of Waters of August 3, 1866, provides as follows:
Art. 1. The following are part of the national domain open to public use.
xxx xxx xxx
3. The Shores. By the shore is understood that space covered and uncovered by the movement of the tide. Its interior or
terrestrial limit is the line reached by the highest equinoctal tides. Where the tides are not appreciable, the shore begins
on the land side at the line reached by the sea during ordinary storms or tempests.
In the case of Aragon vs. Insular Government (19 Phil. 223), with reference to article 339 of the Civil Code just quoted,
this Court said:
We should not be understood, by this decision, to hold that in a case of gradual encroachment or erosion by the ebb and
flow of the tide, private property may not become "property of public ownership." as defined in article 339 of the code,
where it appear that the owner has to all intents and purposes abandoned it and permitted it to be totally destroyed, so
as to become a part of the "playa" (shore of the sea), "rada" (roadstead), or the like. . . .
In the Enciclopedia Juridica Espaola, volume XII, page 558, we read the following:
With relative frequency the opposite phenomenon occurs; that is, the sea advances and private properties are
permanently invaded by the waves, and in this case they become part of the shore or breach. The then pass to the
public domain, but the owner thus dispossessed does not retain any right to the natural products resulting from their
new nature; it is a de facto case of eminent domain, and not subject to indemnity.
In comparison, Article 420 of the Civil Code provides:
Art. 420. The following things are property of public dominion:
(1) Those intended for public use, such as roads, canals, rivers, torrents, ports and bridges constructed by the State,
banks, shores, roadsteads, and others of similar character;
(2) Those which belong to the State, without being for public use, and are intended for some public service or for the
development of the national wealth.
When the sea moved towards the estate and the tide invaded it, the invaded property became foreshore land and
passed to the realm of the public domain. In fact, the Court in Government vs. Cabangis
30
annulled the registration of
land subject of cadastral proceedings when the parcel subsequently became foreshore land.
31
In another case, the
Court voided the registration decree of a trial court and held that said court had no jurisdiction to award foreshore land
to any private person or entity.
32
The subject land in this case, being foreshore land, should therefore be returned to the
public domain.
WHEREFORE, the petition is GRANTED. This Court hereby REVERSES and SETS ASIDE the assailed Decision of Respondent
Court and ORDERS the CANCELLATION of Free Patent No. (IV-3) 275 issued to Respondent Morato and the subsequent
Original Certificate of Title No. P-17789. The subject land therefore REVERTS to the State. No costs.
SO ORDERED.
Romero, Melo and Francisco, JJ., concur.
Narvasa, C.J., is on leave.
Footnotes
1 First Division composed of J. Asaali S. Isnani, ponente;
and JJ. Rodolfo A. Nocon and Antonio M. Martinez,
concurring.
2 Rollo, pp. 25-32.
3 Ibid., p. 32.
4 Branch 63.
5 Petition, pp. 3-5; rollo, pp. 9-11.
6 The case was deemed submitted for resolution upon
receipt by the Court of Private Respondent Quilatans'
Memorandum, dated July 19, 1996, on February 16,
1996. (Rollo, p. 143).
7 Ibid., p. 5; rollo, p. 11.
8 Decision, p. 3; rollo, p. 27.
9 Petition, pp. 6-7; rollo, pp. 12-13.
10 Ibid., pp. 11-12; rollo, pp. 17-18.
11 Respondent Morato's Comment, p. 2; rollo, p. 44.
12 Ibid., pp. 3-4; rollo, pp. 45-46.
13 Respondents Quilatan's Comment, p. 1; rollo, p. 64.
14 Ibid., p. 2; rollo, p. 65.
15 Moreno, Philippine Law Dictionary, second edition,
1972, pp. 207-208.
16 CA Decision, p. 6; rollo, p. 30.
17 Lim Si vs. Lim, 98 Phil. 868, 870, April 25, 1956.
18 Causapin vs. Court of Appeals, 233 SCRA 615, 625,
July 4, 1994, citing Zabat vs. Court of Appeals, No. L-
36958, July 10, 1986, 142 SCRA 587.
20 Prudential Bank vs. Panis, 153 SCRA 390, 397, August
31, 1987.
21 Republic of the Philippines vs. Garcia, et al., 105 Phil.
826, May 27, 1959.
22 Pascua vs. Talens, 80 Phil 792, 793-794, April 30,
1948, per Bengzon, J.
23 Republic vs. Ruiz, 23 SCRA 348, 353-354, April 29,
1968.
24 Vda. de Delizo vs. Delizo, 69 SCRA 216, 229, January
30, 1976 citing Juanico vs. American Land Commercial
Company, Inc., 97 Phil. 221, Simmons vs. Wagner, 10
U.S. 260, 68 C.J.S. 875; Balboa vs. Farrales, 51 Phil. 498;
Fiel, et al vs. Wagas, 48 O.G., 195, January 9,
1950. SEE Uy Un vs. Perez and Villaplana, 71 Phil. 508.
25 CA Decision, pp. 4-5; rollo, pp. 28-29.
26 Petition, pp. 12-13; rollo, pp. 18-19.
27 Respondents Quilatan's Comment, p. 2; rollo, p. 65.
28 Valenzuela vs. Court of Appeals, 253 SCRA 303, 313,
February 7, 1996.
29 53 Phil. 112, 115-116, March 27, 1929, per Villa-
Real, J.
30 Supra.
31 Ibid., p. 119.
32 Republic vs. Lozada, 90 SCRA 503, 510, May 31,
1979.


FIRST DIVISION
[ G.R. No. 50008, August 31, 1987 ]
PRUDENTIAL BANK, PETITIONER, VS. HONORABLE DOMINGO D. PANIS, PRESIDING JUDGE OF BRANCH III, COURT OF
FIRST INSTANCE OF ZAMBALES AND OLONGAPO CITY; FERNANDO MAGCALE & TEODULA BALUYUT-MAGCALE,
RESPONDENTS.

D E C I S I O N
PARAS, J.:
This is a petition for review on certiorari of the November 13, 1978 Decision* of the then Court of First Instance
of Zambales and Olongapo City in Civil Case No. 2443-0 entitled "Spouses Fernando A. Magcale and Teodula Baluyut-
Magcale vs. Hon. Ramon Y. Pardo and Prudential Bank" declaring that the deeds of real estate mortgage executed by
respondent spouses in favor of petitioner bank are null and void.
The undisputed facts of this case by stipulation of the parties are as follows:
"x x x on November 19, 1971, plaintiffs-spouses Fernando A. Magcale and Teodula Baluyut Magcale secured a loan in the
sum of P70,000.00 from the defendant Prudential Bank. To secure payment of this loan, plaintiffs executed in favor of
'defendant on the aforesaid date a deed of Real Estate Mortgage over the following described properties:
'1. A 2-STOREY, SEMI-CONCRETE, residential building with warehouse spaces containing a total floor area of 263 sq.
meters, more or less, generally constructed of mixed hard wood and concrete materials, under a roofing of cor. g. i.
sheets; declared and assessed in the name of FERNANDO MAGCALE under Tax Declaration No. 21109, issued by the
Assessor of Olongapo City with an assessed value of P35,290.00. This building is the only improvement on the lot.
'2. THE PROPERTY hereby conveyed by way of MORTGAGE includes the right of occupancy on the lot where the above
property is erected, and more particularly described and bounded, as follows:
'A first class residential land identified as Lot No. 720, (Ts-308, Olongapo Townsite Subdivision) Ardoin Street, East Bajac-
Bajac, Olongapo City, containing an area of 465 sq. m., more or less; declared and assessed in the name of FERNANDO
MAGCALE under Tax Declaration No. 19595 issued by the Assessor of Olongapo City with an assessed value of P1,860.00;
bounded on the
NORTH : By No. 6, Ardoin Street
SOUTH : By No. 2, Ardoin Street
EAST : By 37 Canda Street and
WEST : By Ardoin Street.'
All corners of the lot marked by conc. cylindrical monuments of the Bureau of Lands as visible limits.' (Exhibit "A", also
Exhibit "1" for defendant).
Apart from the stipulations in the printed portion of the aforestated deed of mortgage, there appears a rider typed at
the bottom of the reverse side of the document under the lists of the properties mortgaged which reads, as follows:
'AND IT IS FURTHER AGREED that in the event the Sales Patent on the lot applied for by the Mortgagors as herein stated
is released or issued by the Bureau of Lands, the Mortgagors hereby authorize the Register of Deeds to hold the
Registration of same until this Mortgage is cancelled, or to annotate this encumbrance on the Title upon authority from
the Secretary of Agriculture and Natural Resources, which title with annotation, shall be released in favor of the herein
Mortgage.'
From the aforequoted stipulation, it is obvious that the mortgagee (defendant Prudential Bank) was at the outset aware
of the fact that the mortgagors (plaintiffs) have already filed a Miscellaneous Sales Application over the
lot, possessory rights over which, were mortgaged to it.
Exhibit "A" (Real Estate Mortgage) was registered under the Provisions of Act 3344 with the Registry of Deeds
of Zambales on November 23, 1971.
On May 2, 1973, plaintiffs secured an additional loan from defendant Prudential Bank in the Sum of P20,000.00. To
secure payment of this additional loan, plaintiffs executed in favor of the said defendant another deed of Real Estate
Mortgage over the same properties previously mortgaged in Exhibit "A". (Exhibit "B"; also Exhibit "2" for
defendant). This second deed of real Estate Mortgage was likewise registered with the Registry of Deeds, this time
in Olongapo City, on May 2, 1973.
On April 24, 1973, the Secretary of Agriculture issued Miscellaneous Sales Patent No. 4776 over the parcel of
land, possessory rights over which were mortgaged to defendant Prudential Bank, in favor of plaintiffs. On the basis of
the aforesaid Patent, and upon its transcription in the Registration Book of the Province of Zambales, Original Certificate
of Title No. P-2554 was issued in the name of Plaintiff Fernando Magcale, by the Ex-Oficio Register of Deeds of Zambales,
on May 15, 1972.
For failure of plaintiffs to pay their obligation to defendant Bank after it became due, and upon application of said
defendant, the deeds of Real Estate Mortgage (Exhibits "A" and "B") were extra judicially foreclosed. Consequent to the
foreclosure was the sale of the properties therein mortgaged to defendant as the highest bidder in a public auction sale
conducted by the defendant City Sheriff on April 12, 1978 (Exhibit "E"). The auction sale aforesaid was held despite
written request from plaintiffs through counsel, dated March 29, 1978, for the defendant City Sheriff to desist from
going with the scheduled public auction sale (Exhibit "D")." (Decision, Civil Case No. 2443-0, Rollo, pp. 29-31).
Respondent Court, in a Decision dated November 3, 1978 declared the deeds of Real Estate Mortgage as null and void
(Ibid., p. 35).
On December 14, 1978, petitioner filed a Motion for Reconsideration (Ibid., pp. 41-53), opposed by private respondents
on January 5, 1979 (Ibid., pp. 54-62), and in an Order dated January 10, 1979 (Ibid., p. 63), the Motion for
Reconsideration was denied for lack of merit. Hence, the instant petition (Ibid., pp. 5-28).
The First Division of this Court, in a Resolution dated March 9, 1979, resolved to require the respondents to comment
(Ibid., p. 65), which order was complied with the Resolution dated May 18, 1979, (Ibid., p. 100), petitioner filed its Reply
on June 2, 1979 (Ibid., pp. 101-112).
Thereafter, in the Resolution dated June 13, 1979, the petition was given due course and the parties were required to
submit simultaneously their respective memoranda. (Ibid., p. 114).
On July 18, 1979, petitioner filed its Memorandum (Ibid., pp. 116-144), while private respondents filed their
Memorandum on August 1, 1979 (Ibid., pp. 146-155).
In a Resolution dated August 10, 1979, this case was considered submitted for decision (Ibid., p. 158).
In its Memorandum, petitioner raised the following issues:
1. WHETHER OR NOT THE DEEDS OF REAL ESTATE MORTGAGE ARE VALID; AND
2. WHETHER OR NOT THE SUPERVENING ISSUANCE IN FAVOR OF PRIVATE RESPONDENTS OF MISCELLANEOUS SALES
PATENT NO. 4776 ON APRIL 24, 1972 UNDER ACT NO. 730 AND THE COVERING ORIGINAL CERTIFICATE OF TITLE NO. P-
2554 ON MAY 15, 1972 HAVE THE EFFECT OF INVALIDATING THE DEEDS OF REAL ESTATE MORTGAGE. (Memorandum
for Petitioner, Rollo, p. 122).
This petition is impressed with merit.
The pivotal issue in this case is whether or not a valid real estate mortgage can be constituted on the building erected on
the land belonging to another.
The answer is in the affirmative.
In the enumeration of properties under Article 415 of the Civil Code of the Philippines, this Court ruled that, "it is
obvious that the inclusion of 'building' separate and distinct from the land, in said provision of law can only mean that a
building is by itself an immovable property". (Lopez vs. Orosa, Jr., et al., L-10817-18, Feb. 28, 1958; Associated Inc. and
Surety Co., Inc. vs. Iya, et al., L-10837-38, May 30, 1958).
Thus, while it is true that a mortgage of land necessarily includes, in the absence of stipulation of the improvements
thereon, buildings, still a building by itself may be mortgaged apart from the land on which it has been built. Such a
mortgage would be still a real estate mortgage for the building would still be considered immovable property even if
dealt with separately and apart from the land (Leung Yee vs. Strong Machinery Co., 37 Phil. 644). In the same manner,
this Court has also established that possessory rights over said properties before title is vested on the grantee, may be
validly transferred or conveyed as in a deed of mortgage (Vda. de Bautista vs. Marcos, 3 SCRA 438 [1961]).
Coming back to the case at bar, the records show, as aforestated that the original mortgage deed on the 2-storey semi-
concrete residential building with warehouse and on the right of occupancy on the lot where the building was erected,
was executed on November 19, 1971 and registered under the provisions of Act 3344 with the Register of Deeds
of Zambales on November 23, 1971. Miscellaneous Sales Patent No. 4776 on the land was issued on April 24, 1872, on
the basis of which OCT No. 2554 was issued in the name of private respondent Fernando Magcale on May 15, 1972. It is
therefore without question that the original mortgage was executed before the issuance of the final patent and before
the government was divested of its title to the land, an event which takes effect only on the issuance of the sales patent
and its subsequent registration in the Office of the Register of Deeds (Visayan Realty Inc. vs. Meer, 96 Phil. 515; Director
of Lands vs. De Leon, 110 Phil. 28; Director of Lands vs. Jurado, L-14702, May 23, 1961; Pena, "Law on Natural
Resources, p. 49). Under the foregoing considerations, it is evident that the mortgage executed by private respondent
on his own building which was erected on the land belonging to the government is to all intents and purposes a valid
mortgage.
As to restrictions expressly mentioned on the face of respondents' OCT No. P-2554, it will be noted that Sections 121,
122 and 124 of the Public Land Act, refer to land already acquired under the Public Land Act, or any improvement
thereon and therefore have no application to the assailed mortgage in the case at bar which was executed before such
eventuality. Likewise, Section 2 of Republic Act No. 730, also a restriction appearing on the face of private respondent's
title has likewise no application in the instant case, despite its reference to encumbrance or alienation before the patent
is issued because it refers specifically to encumbrance or alienation on the land itself and does not mention anything
regarding the improvements existing thereon.
But it is a different matter, as regards the second mortgage executed over the same properties on May 2, 1973 for an
additional loan of P20,000.00 which was registered with the Registry of Deeds of Olongapo City on the same
date. Relative thereto, it is evident that such mortgage executed after the issuance of the sales patent and of the
Original Certificate of Title, falls squarely under the prohibitions stated in Sections 121, 122 and 124 of the Public Land
Act and Section 2 of Republic Act 730, and is therefore null and void.
Petitioner points out that private respondents, after physically possessing the title for five years, voluntarily surrendered
the same to the bank in 1977 in order that the mortgage may be annotated, without requiring the bank to get the prior
approval of the Ministry of Natural Resources beforehand, thereby implicitly authorizing Prudential Bank to cause the
annotation of said mortgage on their title.
However, the Court, in recently ruling on violations of Section 124 which refers to Sections 118, 120, 122 and 123 of
Commonwealth Act 141, has held:
"x x x Nonetheless, we apply our earlier rulings because we believe that as in pari delicto may not be invoked to defeat
the policy of the State neither may the doctrine of estoppel give a validating effect to a void contract. Indeed, it is
generally considered that as between parties to a contract, validity cannot be given to it by estoppel if it is prohibited by
law or is against public policy (19 Am. Jur. 802). It is not within the competence of any citizen to barter away what public
policy by law seeks to preserve (Gonzalo Puyat & Sons, Inc. vs. De los Amas and Alino, supra). x x x." (Arsenal vs. IAC,
143 SCRA 54 [1986]).
This pronouncement covers only the previous transaction already alluded to and does not pass upon an new contract
between the parties (Ibid.), as in the case at bar. It should not preclude new contracts that may be entered into
between petitioner bank and private respondents that are in accordance with the requirements of the law. After all,
private respondents themselves declare that they are not denying the legitimacy of their debts and appear to be open to
new negotiations under the law (Comment; Rollo, pp. 95-96). Any new transaction, however, would be subject to
whatever steps the Government may take for the reversion of the land in its favor.
PREMISES CONSIDERED, the decision of the Court of First Instance of Zambales & Olongapo City is hereby MODIFIED,
declaring that the Deed of Real Estate Mortgage for P70,000.00 is valid but ruling that the Deed of Real Estate Mortgage
for an additional loan of P20,000.00 is null and void, without prejudice to any appropriate action the Government may
take against private respondents.
SO ORDERED.

Teehankee, C.J., Narvasa, Cruz, and Gancayco, JJ., concur.


* Penned by Judge Domingo D. Panis.




SECOND DIVISION


METROPOLITAN BANK AND TRUST COMPANY,
Petitioner,




- versus -





EDGARDO D. VIRAY,
Respondent.
G.R. No. 162218



Present:

CARPIO, J., Chairperson,
BRION,
DEL CASTILLO,
ABAD, and
PEREZ, JJ.


Promulgated:
February 25, 2010
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x


DECISION


CARPIO, J.:


The Case

Before the Court is a petition for review on certiorari
[1]
assailing the Decision
[2]
dated 21 August 2003 and
Resolution
[3]
dated 13 February 2004 of the Court of Appeals (CA) in CA-G.R. CV No. 43926, which reversed the
Decision
[4]
dated 21 September 2003 of the Regional Trial Court (RTC) of Cagayan de Oro City, Misamis Oriental, Branch
23, in Civil Case No. 91-309.
The Facts
On 7 July 1979, Rico Shipping, Inc., represented by its President, Erlinda Viray-Jarque, together with respondent
Edgardo D. Viray (Viray), in their own personal capacity and as solidary obligors (the three parties collectively known as
the debtors), obtained two separate loans from petitioner Metropolitan Bank and Trust Company (MBTC) in the total
amount of P250,000. The debtors executed a promissory note promising to pay in four semi-annual installments
of P62,500 starting on 23 January 1980, with 15% interest and 2% credit evaluation and supervision fee per annum. The
two loans were subsequently renewed and secured by one promissory note. Under the note, the debtors made a total
payment of P134,054 leaving a balance of P115,946 which remained unpaid despite demands by MBTC.
On 5 June 1981, the debtors executed another promissory note and obtained a loan from MBTC in the amount
of P50,000, payable on 2 November 1981, with 16% interest and 2% credit evaluation and supervision fee
per annum. On the due date, the debtors again failed to pay the loan despite demands to pay by MBTC.
On 3 September 1981, the debtors obtained a third loan from MBTC in the amount of P50,000 payable on 14
November 1981, with 16% interest and 2% credit evaluation and supervision fee per annum. Again, the debtors failed
and refused to pay on due date.
MBTC filed a complaint for sum of money against the debtors with the RTC of Manila, Branch 4.
[5]
On 28 April
1983, the RTC of Manila rendered a judgment in favor of MBTC.
[6]
The dispositive portion of the decision states:
WHEREFORE, judgment is hereby rendered ordering defendants to pay jointly and severally plaintiff the
following:

I On the first cause of action:
(a) The sum of P50,000 with interest thereon at the rate of 16% per annum from date of filing of the
complaint until fully paid;
(b) The sum equivalent to 1% per month of the principal obligation as penalty charge, computed likewise from
the filing of the complaint;

II On the second cause of action:
(a) The sum of P50,000 with interest thereon at the rate of 16% per annum from date of filing of the
complaint until fully paid;
(b) The sum equivalent to 1% per month of the principal sum as penalty charge, computed from date
of filing of the complaint;

III On the third cause of action:
(a) The sum of P115,946.00 with interest thereon at the rate of 1% per annum from date of filing of the
complaint until fully paid;
(b) The sum equivalent to 1% per month of the sum of P115,946.00 as penalty charge, computed from date
of filing of the complaint;

IV
(1) The sum of P15,000.00 as attorneys fees; and
(2) To pay the costs of suit.

SO ORDERED.

Meanwhile, on 29 December 1982, the government issued Free Patents in favor of Viray over three parcels of land
(lots) designated as (1) Lot No. 26275, Cad-237 with an area of 500 square meters; (2) Lot No. 26276, Cad-237, with
an area of 888 square meters; and (3) Lot No. 26277, Cad-237 with an area of 886 square meters, all situated in
Barangay Bulua, Cagayan de Oro City, Misamis Oriental. Original Certificate of Title (OCT) Nos. P-2324, P-2325 and P-
2326 were issued covering Free Patent Nos. [X-1] 10525, [X-1] 10526 and [X-1] 10527, respectively.

The OCTs containing the free patents were registered with the Registry of Deeds of Cagayan de Oro City on 18
January 1983. Written across the face of the OCTs were the following:
x x x To have and to hold said tract of land, with the appurtenances thereunto of right belonging unto the said EDGARDO
D. VIRAY and to his heirs and assigns forever, subject to the provisions of Sections 118, 119, 121 as amended by P.D. No.
763, 122 and 124 of Commonwealth Act No. 141, as amended, which provide that except in favor of the Government or
any of its branches, units or institutions, the land thereby acquired shall be inalienable and shall not be subject to
encumbrance for a period of five (5) years from the date of this patent, and shall not be liable for the satisfaction of
any debt contracted prior to the expiration of said period x x x.
[7]


On 6 March 1984, the RTC of Manila issued a writ of execution over the lots owned by Viray. On 12 October 1984,
pursuant to the writ of execution, the City Sheriff of Cagayan de Oro sold the lots at public auction in favor of MBTC as
the winning bidder. The next day, the sheriff issued a Certificate of Sale to MBTC.
[8]


On 23 August 1990, the sheriff executed a Deed of Final Conveyance to MBTC. The Register of Deeds of Cagayan
de Oro City cancelled OCT Nos. P-2324, P-2325 and P-2326 and issued in MBTCs name Transfer Certificate of Title (TCT)
Nos. T-59171, T-59172 and T-59173,
[9]
respectively.

On 30 July 1991, Viray filed an action for annulment of sale against the sheriff and MBTC with the RTC of Cagayan
de Oro City, Misamis Oriental, Branch 23.
[10]
Viray sought the declaration of nullity of the execution sale, the sheriffs
certificate of sale, the sheriffs deed of final conveyance and the TCT's issued by the Register of Deeds.

On 21 September 1993, the RTC of Cagayan de Oro City rendered its decision in favor of MBTC.
[11]
The dispositive
portion states:

Wherefore, based on facts and jurisprudence, the Auction Sale by the Sheriff of the then lots of plaintiff covered
by [free] patents to satisfy the judgment in favor of Defendant Bank is considered valid. While plaintiff had until April 2,
1991 to redeem the property, the former never attempted to show interest in redeeming the properties, and therefore
such right has prescribed. Defendant Bank therefore is declared as the lawful transferee of the three (3) lots now
covered by Titles in the name of Defendant Bank.
SO ORDERED.
[
Viray filed an appeal with the CA alleging that the RTC of Cagayan de Oro City committed reversible error in ruling solely
on the issue of redemption instead of the issue of validity of the auction sale, being the lis mota
[13]
of the action.

The Ruling of the Court of Appeals

On 21 August 2003, the appellate court reversed the decision of the RTC of Cagayan de Oro City. The CA
ruled that the auction sale conducted by the sheriff was null and void ab initio since the sale was made during the
five-year prohibition period in violation of Section 118 of Commonwealth Act No. 141 (CA 141) or the Public Land
Act. The dispositive portion states:

WHEREFORE, in view of the foregoing considerations, the decision appealed from is hereby REVERSED, and
plaintiff-appellant Edgardo Viray is declared entitled to the return and possession of the three (3) parcels of land
covered by O.C.T. Nos. P-2324, P-2325 and P-2326, without prejudice to his continuing obligation to pay the judgment
debt, and expenses connected therewith.

Accordingly, the Register of Deeds of Cagayan de Oro City is ordered to
cancel TCT Nos. T-59171, T-59172 and T-59173 in the name of defendant-appellee Metrobank, and to restore O.C.T.
Nos. P-2324, P-2325 and P-2326 in the name of plaintiff-appellant Edgardo Viray.

No pronouncement as to costs.

SO ORDERED.
[14]



MBTC filed a Motion for Reconsideration which was denied in a Resolution dated 13 February 2004.

Hence, the instant petition.
The Issue
The main issue is whether the auction sale falls within the five-year prohibition period laid down in Section 118 of
CA 141.

The Courts Ruling
The petition lacks merit.
Petitioner MBTC insists that the five-year prohibition period against the alienation or sale of the property provided
in Section 118 of CA 141 does not apply to an obligation contracted before the grant or issuance of the free patent or
homestead. The alienation or sale stated in the law pertains to voluntary sales and not to forced or execution sales.

Respondent Viray, on the other hand, maintains that the express prohibition in Section 118 of CA 141 does not qualify or
distinguish whether the debt was contracted prior to the date of the issuance of the free patent or within five years
following the date of such issuance. Further, respondent asserts that Section 118 of CA 141 absolutely prohibits any and
all sales, whether voluntary or not, of lands acquired under free patent or homestead, made within the five-year
prohibition period.

Section 118 of CA 141 states:

SECTION 118. Except in favor of the Government or any of its branches, units, or instruction, lands acquired under
free patent or homestead provisions shall not be subject to encumbrance or alienation from the date of the approval of
the application and for a term of five years from and after the date of issuance of the patent and grant, nor shall they
become liable to the satisfaction of any debt contracted prior to the expiration of said period, but the improvements or
crops on the land may be mortgaged or pledged to qualified persons, associations, or corporations.

No alienation, transfer, or conveyance of any homestead after five years and before twenty-five years after
issuance of title shall be valid without the approval of the Secretary of Agriculture and Natural Resources, which
approval shall not be denied except on constitutional and legal grounds.


The law clearly provides that lands which have been acquired under free patent or homestead shall not be
encumbered or alienated within five years from the date of issuance of the patent or be liable for the satisfaction of any
debt contracted prior to the expiration of the period.

In the present case, the three loans were obtained on separate dates 7 July 1979, 5 June 1981 and 3 September
1981, or several years before the free patents on the lots were issued by the government to respondent on 29
December 1982. The RTC of Manila, in a Decision dated 28 April 1983, ruled in favor of petitioner ordering the debtors,
including respondent, to pay jointly and severally certain amounts of money. The public auction conducted by the
sheriff on the lots owned by respondent occurred on 12 October 1984.

For a period of five years or from 29 December 1982 up to 28 December 1987, Section 118 of CA 141 provides that
the lots comprising the free patents shall not be made liable for the payment of any debt until the period of five years
expires. In this case, the execution sale of the lots occurred less than two years after the date of the issuance of the
patents. This clearly falls within the five-year prohibition period provided in the law, regardless of the dates when the
loans were incurred.

In Artates v. Urbi,
[15]
we held that a civil obligation cannot be enforced against, or satisfied out of, the sale of the
homestead lot acquired by the patentee less than five years before the obligation accrued even if the sale is
involuntary. For purposes of complying with the law, it is immaterial that the satisfaction of the debt by the
encumbrance or alienation of the land grant was made voluntarily, as in the case of an ordinary sale, or involuntarily,
such as that effected through levy on the property and consequent sale at public auction. In both instances, the law
would have been violated.

Likewise, in Beach v. Pacific Commercial Company and Sheriff of Nueva Ecija,
[16]
we held that to subject the land to
the satisfaction of debts would violate Section 116 of Act No. 2874 (now Section 118 of CA 141).


As correctly observed by the CA in the present case:

It is argued by defendant-appellee, however, that the debt referred to in the law must have been contracted
within the five-year prohibitory period;any debt contracted before or after the five-year prohibitory period is definitely
not covered by the law. This argument is weakest on two points. Firstly, because the provision of law does not say that
the debt referred to therein should be contracted before the five-year prohibitory period but before the expiration of
the five-year prohibitory period. (Defendant-appellee deliberately omitted the word expiration to suit its
defense.) This simply means that it is not material whether the debt is contracted before the five-year prohibitory
period; what is material is that the debt must be contracted before or prior to the expiration of the five-year prohibitory
period from the date of the issuance and approval of the patent or grant. x x x

And secondly, while it is true that the debt in this case was contracted prior to the five-year prohibitory
period, the same is of no consequence, for as held in Artates vs. Urbi, supra, such indebtedness has to be reckoned from
the date said obligation was adjudicated and decreed by the court. x x x
[17]


It must be emphasized that the main purpose in the grant of a free patent or homestead is to preserve and keep in
the family of the homesteader that portion of public land which the State has given to him so he may have a place to live
with his family and become a happy citizen and a useful member of the society.
[18]
InJocson v. Soriano,
[19]
we held that
the conservation of a family home is the purpose of homestead laws. The policy of the state is to foster families as the
foundation of society, and thus promote general welfare. The sentiment of patriotism and independence, the spirit of
free citizenship, the feeling of interest in public affairs, are cultivated and fostered more readily when the citizen lives
permanently in his own home, with a sense of its protection and durability.

Section 118 of CA 141, therefore, is predicated on public policy. Its violation gives rise to the cancellation of the
grant and the reversion of the land and its improvements to the government at the instance of the latter.
[20]
The
provision that nor shall they become liable to the satisfaction of any debt contracted prior to the expiration of the five-
year period is mandatory
[21]
and any sale made in violation of such provision is void
[22]
and produces no effect
whatsoever, just like what transpired in this case. Clearly, it is not within the competence of any citizen to barter away
what public policy by law seeks to preserve.
[23]


WHEREFORE, we DENY the petition. We AFFIRM the Decision dated 21 August 2003 and Resolution dated 13
February 2004 of the Court of Appeals in CA-G.R. CV No. 43926.

SO ORDERED.


ANTONIO T. CARPIO
Associate Justice


WE CONCUR :




D. BRION
Associate Justice






MARIANO C. DEL CASTILLO ROBERTO A. ABAD
Associate Justice Associate Justice





JOSE P. PEREZ
Associate Justice



ATTESTATION

I attest 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 Courts Division.




ANTONIO T. CARPIO
Associate Justice
Chairperson



CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairpersons 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 Courts Division.





REYNATO S. PUNO
Chief Justice




[1]
Under Rule 45 of the 1997 Revised Rules of Civil Procedure.
[2]
Rollo, pp. 33-42. Penned by Justice Buenaventura J. Guerrero with Justices Renato C. Dacudao and Mario L. Guaria III,
concurring.
[3]
Id. at 43-44.
[4]
Id. at 63-65. Penned by Judge Jose L. Sabio, Jr.
[5]
Docketed as Civil Case No. 82-10140 and entitled Metropolitan Bank and Trust Company v. Rico Shipping, Inc., Erlinda
Viray-Jarque and Edgardo D. Viray.
[6]
Rollo, pp. 49-50.
[7]
Id. at 46-48.
[8]
Id. at 51-52.
[9]
Id. at 53-55.
[10]
Id. at 56-60. Docketed as Civil Case No. 91-309.
[11]
Id. at 63-65.
[12]
Id. at 65.
[13]
The cause of the suit or action. It is understood to be the commencement of the controversy, and the beginning of
the suit.
[14]
Rollo, p. 41.
[15]
147 Phil. 334 (1971).
[16]
49 Phil. 365, 369 (1926).
[17]
Rollo, pp. 39-40.
[18]
Philippine National Bank v. De Los Reyes, G.R. Nos. 46898-99, 28 November 1989, 179 SCRA 619, 628; Gonzaga v.
Court of Appeals, 151-A Phil. 834 (1973); Cadiz v. Nicolas, 102 Phil. 1039 (1958); De Los Santos v. Roman Catholic Church
of Midsayap, 94 Phil. 405 (1954); Pascua v. Talens, 80 Phil. 792 (1948); Jocson v. Soriano, 45 Phil. 375 (1923).
[19]
Supra note 18.
[20]
Gonzalo Puyat & Sons, Inc. v. De Las Ama, 74 Phil. 3, 4 (1942).
[21]
Beniga v. Bugas, 146 Phil. 118 (1970); Republic of the Philippines v. Ruiz, 131 Phil. 870 (1968).
[22]
Ortega v. Tan, G.R. No. 44617, 23 January 1990, 181 SCRA 350; Acierto v. De Los Santos, 95 Phil. 887 (1954).
[23]
Saltiga de Romero v. Court of Appeals, 377 Phil. 189, 201 (1999); Ortega v. Tan, supra note 22; Gayotin v. Tolentino,
169 Phil. 559, 569 (1977); Gonzalo Puyat & Sons, Inc. v. De Las Ama, supra note 20.

THIRD DIVISION

G.R. No. L-68109 July 17, 1991
SEVERINO GAYAPANAO, TEODORO GAYAPANAO, LAURO GAYAPANAO, SALVADOR GAYAPANAO, RAYMUNDA
GAYAPANAO-RAMOS, HEIRS OF ELEUTERIO GAYAPANAO and HEIRS OF ROBERTO GAYAPANAO, petitioners,
vs.
THE HONORABLE INTERMEDIATE APPELLATE COURT and SIMEONA GAYAPANAO-NOVENARIO,respondents.

FERNAN, C.J.:p
In this Petition for Review on Certiorari, petitioners Severino Gayapanao and his siblings question the decision of the
then Intermediate Appellate Court (IAC)
1
in AC-G.R. No. CV-59589, entitled "Severino Gayapanao, et al. vs. Simeona
Gayapanao-Novenario" upholding the validity of the sale of two (2) hectares of the ten-hectare homestead land by their
father in favor of their sister Simeona Gayapanao-Novenario.
Briefly, the facts of the case as found by the Appellate Court are as
follows:
2

. . . the 2-hectare land subject of this case is part and parcel of a homestead lot registered in the name of Constantino
Gayapanao under Original Certificate of Title No. 3625 (Exhibits B and 2, Plaintiffs' Folder of Exhibits, p. 2). The
homestead application of the late Constantino Gayapanao over the said lot was approved on September 7, 1931 (Exhibit
C, Ibid., p. 5) and the final order of the Director of Lands for the issuance of patent was issued on December 10, 1937,
(Exhibit A, Ibid., p. 1). On July 13, 1939, the Homestead Patent Title was issued in the name of Constantino Gayapanao
married to Aurelia Maamo (Exhibit D, Ibid., p. 2). On November 15, 1938, the late Constantino Gayapanao executed a
private deed entitled Kasulatan ng Bilihan in favor of Serafin Novenario and his wife, Simeona Gayapanao over 20,000
square meters of the homestead land (Exhibit 4, Defendants' Folder of Exhibits, p. 8).
Constantino Gayapanao and his wife Aurelia Maamo died intestate on December 22, 1942 and September 29, 1966,
respectively (Record on Appeal, p. 70) . . .
On January 2, 1974, Severino, Teodoro, Roberto, Salvador, and Lauro, all surnamed Gayapanao, Raymunda Gayapanao-
Ramos and the heirs of Eleuterio Gayapanao filed before the then Court of First Instance of Oriental Mindoro Civil Case
No. R-317, a Complaint for Partition and Accounting with Prayer for Appointment of Receiver against their sisters Gloria
Gayapanao-Saet and Simeona Gayapanao-Novenario (private respondent herein) who were then occupying the subject
homestead lot. Both defendants filed their Answer to the complaint.
On March 11, 1975, the court a quo rendered a decision
3
declaring as null and void Exhibit 4, the contract of sale
between Simeona Gayapanao-Novenario and her father Constantino Gayapanao for having been executed within the
five-year prohibitory period provided under Section 118 of the Public Land Law,
4
and at the same time declaring as valid
Exhibit 5, the deed of sale executed by Teodoro Gayapanao in favor of his sister Gloria Gayapanao-Saet covering the
former's hereditary share in the homestead lot. Accordingly, the lower court ruled as follows:
5

WHEREFORE, in view of the above findings, judgment is hereby rendered as follows:
A. Adjudicating unto plaintiffs SEVERINO, ROBERTO, SALVADOR, LAURO, RAYMUNDA and the heirs of ELEUTERIO, all
surnamed Gayapanao and Simeona Gayapanao-Novenario one-ninth 1/9 each of the intestate estate of the deceased
Constantino and Aurelia Maamo covered in and embraced by Original Certificate of Title No. 3625 and the remaining
two-ninths (2/9) to Gloria Gayapanao-Saet, she having purchased the one-ninth (1/9) hereditary share of plaintiff
Teodoro Gayapanao;
B. Authorizing the herein parties to agree among themselves to cause the relocated survey of the entire land in question
covered by Original Certificate of Title No. 3625 so that their respective shares may be properly delineated;
C. Ordering the parties to submit the necessary project of partition after the relocation survey has been executed not
later than three (3) months after entry of this judgment in order to terminate tills proceeding;
D. Declaring as null and void document marked Exhibit "4", the same having been executed one year prior to the
issuance of the patent, but Exhibit "5" is confirmed and declared valid.
WITHOUT special findings as to costs.
IT IS SO ORDERED.
Simeona Gayapanao-Novenario moved to reconsider, but failed. She then sought relief before the IAC which, finding the
sale in her favor to be perfectly valid, set aside the decision of the lower court and entered a new one dismissing the
complaint against her.
6

Hence, this appeal filed by Severino Gayapanao, et al. after their motion for reconsideration was denied
7
by the
respondent appellate court.
In upholding the sale of a portion of the homestead lot by Constantino Gayapanao to his daughter, herein private
respondent Simeona Gayapanao-Novenario, the respondent court interpreted the prohibition against the alienation or
encumbrance of the homestead land under Section 118 of the Public Land Law as referring to an alienation or
encumbrance in favor of a third person outside the family circle of the original homesteader. Since, according to the
appellate court, the conveyance involved herein was made in favor of Simeona Gayapanao-Novenario, who is one of the
nine (9) children of the original homesteader and who is the "continuity of the personality of her father for all legal
intents and purposes," such sale is "not in contravention of the avowed policy of the State, which is to preserve and
keep to the homesteader and his family the land granted to him by the State."
8

We rule otherwise. The pertinent portion of Section 118 of the Public Land Law provides:
9

Except in favor of the government or any of its branches, units or institutions land acquired under free patent or
homestead provisions shall not be subject to encumbrance or alienation from the date of the approval of the application
and for a term of five years from and after the date of issuance of the patent or grant nor shall they become liable to the
satisfaction of any debt contracted prior to the expiration of said period, but the improvements or crops on the land
may be mortgaged or pledged to qualified persons, associations or corporations.
The provision of law which prohibits the sale or encumbrance of the homestead within five years after the grant is
mandatory. From the date of the approval of the application and for a term of five (5) years from and after the date of
issuance of the patent or grant, lands acquired under free patent or homestead provisions cannot be subject to
encumbrance or alienation, nor shall they become liable to the satisfaction of any debt contracted prior to the
expiration of said period. The only exception mentioned by the law is the sale or encumbrance in favor of the
government or any of its branches, units or institutions.
In a number of cases, we have consistently ruled that a sale of homestead within the five (5) year prohibitive period
is void ab initio and the same cannot be ratified nor can it acquire validity through the passage of time.
In the case of Arsenal vs. IAC,
10
we said:
The above provisions of law are clear and explicit. A contract which purports to alienate, transfer, convey or encumber
any homestead within the prohibitory period of five (5) years from the date of issuance of the patent is void from its
execution. In a number of cases, this Court has held that such provision is mandatory (De los Santos vs. Roman Catholic
Church of Midsayap, 94 Phil. 405).
It is dangerous precedent to allow the sale of a homestead during the five-year prohibition to anyone, even to the
homesteader's own son or daughter. As aptly put by the petitioners, a clever homesteader who wants to circumvent the
ban may simply sell the lot to his descendant and the latter after registering the same in his name would sell it to a third
person. This way, public policy would not be subserved.
Moreover, the sale to a descendant is not one of the exceptions contemplated by law. Only the government or any of its
branches, units or institutions is given the right to acquire homestead by purchase at any time and even during the five-
year prohibitory period. To hold valid the sale at bar would be to throw the door open to schemes and subterfuges
which would defeat the law prohibiting the alienation of homestead within five (5) years from the issuance of the
patent.
The respondent Court cited the case of Lasud v. Lasud,
11
in support of its decision. Said case is not applicable to the case
at bar, considering that the plaintiff, Sigbe Lasud sold the inherited homestead to his brother Santay Lasud and the
latter's wife twenty-one (21) years after the patent was issued to his father the homesteader. On the other hand, the
questioned conveyance in the case at bar was done within the five year prohibitory period. Furthermore, what was
involved in the Lasud case is the right of therein plaintiff under Section 119 of the Public Land Law to redeem the portion
sold. In contrast, the case at bar centers on Section 118 of the same law
WHEREFORE, the assailed decision of the then Intermediate Appellate Court, now Court of Appeals, is REVERSED and
SET ASIDE. The decision in Civil Case No. R-317 of the then Court of First Instance of Oriental Mindoro is REINSTATED.
Costs against private respondent.
SO ORDERED.
Gutierrez, Jr., Feliciano, Bidin and Davide, Jr., JJ., concur.

Footnotes
1 Penned by Justice Crisolito Pascual and concurred in
by Justices Edgardo L. Paras and Serafin E. Camilon.
2 Decision, Annex "A", Petition, pp. 20-21, Rollo,
emphasis supplied.
3 Penned by Judge Ildefonso M. Bleza.
4 Commonwealth Act No. 141.
5 Record on Appeal, pp. 77-78, Annex "C", Petition, p.
25, Rollo.
6 p. 23, Rollo.
7 Per resolution dated March 20, 1984.
8 Decision, p. 22, Rollo.
9 Emphasis supplied.
10 143 SCRA 49.
11 10 SCRA 425.

FIRST DIVISION
[G.R. No. 144225. June 17, 2003]
SPOUSES GODOFREDO ALFREDO and CARMEN LIMON ALFREDO, SPOUSES ARNULFO SAVELLANO and EDITHA B.
SAVELLANO, DANTON D. MATAWARAN, SPOUSES DELFIN F. ESPIRITU, JR. and ESTELA S. ESPIRITU and ELIZABETH
TUAZON, petitioners, vs.SPOUSES ARMANDO BORRAS and ADELIA LOBATON BORRAS, respondents.
D E C I S I O N
CARPIO, J.:
The Case
Before us is a petition for review assailing the Decision
[1]
of the Court of Appeals dated 26 November 1999 affirming the
decision
[2]
of the Regional Trial Court of Bataan, Branch 4, in Civil Case No. DH-256-94. Petitioners also question the
Resolution of the Court of Appeals dated 26 July 2000 denying petitioners motion for reconsideration.
The Antecedent Facts
A parcel of land measuring 81,524 square meters (Subject Land) in Barrio Culis, Mabiga, Hermosa, Bataan is the
subject of controversy in this case. The registered owners of the Subject Land were petitioner spouses, Godofredo
Alfredo (Godofredo) and Carmen Limon Alfredo (Carmen). The Subject Land is covered by Original Certificate of
Title No. 284 (OCT No. 284) issued to Godofredo and Carmen under Homestead Patent No. V-69196.
On 7 March 1994, the private respondents, spouses Armando Borras (Armando) and Adelia Lobaton Borras (Adelia),
filed a complaint for specific performance against Godofredo and Carmen before the Regional Trial Court of Bataan,
Branch 4. The case was docketed as Civil Case No. DH-256-94.
Armando and Adelia alleged in their complaint that Godofredo and Carmen mortgaged the Subject Land for P7,000.00
with the Development Bank of the Philippines (DBP). To pay the debt, Carmen and Godofredo sold the Subject Land
to Armando and Adelia for P15,000.00, the buyers to pay the DBP loan and its accumulated interest, and the balance to
be paid in cash to the sellers.
Armando and Adelia gave Godofredo and Carmen the money to pay the loan to DBP which signed the release of
mortgage and returned the owners duplicate copy of OCT No. 284 to Godofredo and Carmen. Armando and Adelia
subsequently paid the balance of the purchase price of the Subject Land for which Carmen issued a receipt dated 11
March 1970. Godofredo and Carmen then delivered to Adelia the owners duplicate copy of OCT No. 284, with the
document of cancellation of mortgage, official receipts of realty tax payments, and tax declaration in the name of
Godofredo. Godofredo and Carmen introduced Armando and Adelia, as the new owners of the Subject Land, to the
Natanawans, the old tenants of the Subject Land. Armando and Adelia then took possession of the Subject Land.
In January 1994, Armando and Adelia learned that hired persons had entered the Subject Land and were cutting trees
under instructions of allegedly new owners of the Subject Land. Subsequently, Armando and Adelia discovered that
Godofredo and Carmen had re-sold portions of the Subject Land to several persons.
On 8 February 1994, Armando and Adelia filed an adverse claim with the Register of Deeds of Bataan. Armando and
Adelia discovered that Godofredo and Carmen had secured an owners duplicate copy of OCT No. 284 after filing a
petition in court for the issuance of a new copy. Godofredo and Carmen claimed in their petition that they lost their
owners duplicate copy. Armando and Adelia wrote Godofredo and Carmen complaining about their acts, but the latter
did not reply. Thus, Armando and Adelia filed a complaint for specific performance.
On 28 March 1994, Armando and Adelia amended their complaint to include the following persons as additional
defendants: the spouses Arnulfo Savellano and Editha B. Savellano, Danton D. Matawaran, the spouses Delfin F. Espiritu,
Jr. and Estela S. Espiritu, and Elizabeth Tuazon (Subsequent Buyers). The Subsequent Buyers, who are also petitioners
in this case, purchased from Godofredo and Carmen the subdivided portions of the Subject Land. The Register of Deeds
of Bataan issued to the Subsequent Buyers transfer certificates of title to the lots they purchased.
In their answer, Godofredo and Carmen and the Subsequent Buyers (collectively petitioners) argued that the action is
unenforceable under the Statute of Frauds. Petitioners pointed out that there is no written instrument evidencing the
alleged contract of sale over the Subject Land in favor of Armando and Adelia. Petitioners objected to whatever parole
evidence Armando and Adelia introduced or offered on the alleged sale unless the same was in writing and subscribed
by Godofredo. Petitioners asserted that the Subsequent Buyers were buyers in good faith and for value. As
counterclaim, petitioners sought payment of attorneys fees and incidental expenses.
Trial then followed. Armando and Adelia presented the following witnesses: Adelia, Jesus Lobaton, Roberto Lopez,
Apolinario Natanawan, Rolando Natanawan, Tomas Natanawan, and Mildred Lobaton. Petitioners presented two
witnesses, Godofredo and Constancia Calonso.
On 7 June 1996, the trial court rendered its decision in favor of Armando and Adelia. The dispositive portion of the
decision reads:
WHEREFORE, premises considered, judgment is hereby rendered in favor of plaintiffs, the spouses Adelia Lobaton Borras
and Armando F. Borras, and against the defendant-spouses Godofredo Alfredo and Carmen Limon Alfredo, spouses
Arnulfo Sabellano and Editha B. Sabellano, spouses Delfin F. Espiritu, Jr. and Estela S. Espiritu, Danton D. Matawaran and
Elizabeth Tuazon, as follows:
1. Declaring the Deeds of Absolute Sale of the disputed parcel of land (covered by OCT No. 284) executed by the
spouses Godofredo Alfredo and Camen Limon Alfredo in favor of spouses Arnulfo Sabellano and Editha B. Sabellano,
spouses Delfin F. Espiritu, Danton D. Matawaran and Elizabeth Tuazon, as null and void;
2. Declaring the Transfer Certificates of Title Nos. T-163266 and T-163267 in the names of spouses Arnulfo
Sabellano and Editha B. Sabellano; Transfer Certificates of Title Nos. T-163268 and 163272 in the names of spouses
Delfin F. Espiritu, Jr. and Estela S. Espiritu; Transfer Certificates of Title Nos. T-163269 and T-163271 in the name of
Danton D. Matawaran; and Transfer Certificate of Title No. T-163270 in the name of Elizabeth Tuazon, as null and void
and that the Register of Deeds of Bataan is hereby ordered to cancel said titles;
3. Ordering the defendant-spouses Godofredo Alfredo and Carmen Limon Alfredo to execute and deliver a good
and valid Deed of Absolute Sale of the disputed parcel of land (covered by OCT No. 284) in favor of the spouses Adelia
Lobaton Borras and Armando F. Borras within a period of ten (10) days from the finality of this decision;
4. Ordering defendant-spouses Godofredo Alfredo and Carmen Limon Alfredo to surrender their owners duplicate
copy of OCT No. 284 issued to them by virtue of the Order dated May 20, 1992 of the Regional Trial Court of Bataan,
Dinalupihan Branch, to the Registry of Deeds of Bataan within ten (10) days from the finality of this decision, who, in
turn, is directed to cancel the same as there exists in the possession of herein plaintiffs of the owners duplicate copy of
said OCT No. 284 and, to restore and/or reinstate OCT No. 284 of the Register of Deeds of Bataan to its full force and
effect;
5. Ordering the defendant-spouses Godofredo Alfredo and Carmen Limon Alfredo to restitute and/or return the
amount of the respective purchase prices and/or consideration of sale of the disputed parcels of land they sold to their
co-defendants within ten (10) days from the finality of this decision with legal interest thereon from date of the sale;
6. Ordering the defendants, jointly and severally, to pay plaintiff-spouses the sum of P20,000.00 as and for
attorneys fees and litigation expenses; and
7. Ordering defendants to pay the costs of suit.
Defendants counterclaims are hereby dismissed for lack of merit.
SO ORDERED.
[3]

Petitioners appealed to the Court of Appeals.
On 26 November 1999, the Court of Appeals issued its Decision affirming the decision of the trial court, thus:
WHEREFORE, premises considered, the appealed decision in Civil Case No. DH-256-94 is hereby AFFIRMED in its
entirety. Treble costs against the defendants-appellants.
SO ORDERED.
[4]

On 26 July 2000, the Court of Appeals denied petitioners motion for reconsideration.
The Ruling of the Trial Court
The trial court ruled that there was a perfected contract of sale between the spouses Godofredo and Carmen and the
spouses Armando and Adelia. The trial court found that all the elements of a contract of sale were present in this
case. The object of the sale was specifically identified as the 81,524-square meter lot in Barrio Culis, Mabigas, Hermosa,
Bataan, covered by OCT No. 284 issued by the Registry of Deeds of Bataan. The purchase price was fixed at P15,000.00,
with the buyers assuming to pay the sellers P7,000.00 DBP mortgage loan including its accumulated interest. The
balance of the purchase price was to be paid in cash to the sellers. The last payment of P2,524.00 constituted the full
settlement of the purchase price and this was paid on 11 March 1970 as evidenced by the receipt issued by Carmen.
The trial court found the following facts as proof of a perfected contract of sale: (1) Godofredo and Carmen delivered to
Armando and Adelia the Subject Land; (2) Armando and Adelia treated as their own tenants the tenants of Godofredo
and Carmen; (3) Godofredo and Carmen turned over to Armando and Adelia documents such as the owners duplicate
copy of the title of the Subject Land, tax declaration, and the receipts of realty tax payments in the name of Godofredo;
and (4) the DBP cancelled the mortgage on the Subject Property upon payment of the loan of Godofredo and
Carmen. Moreover, the receipt of payment issued by Carmen served as an acknowledgment, if not a ratification, of the
verbal sale between the sellers and the buyers. The trial court ruled that the Statute of Frauds is not applicable because
in this case the sale was perfected.
The trial court concluded that the Subsequent Buyers were not innocent purchasers. Not one of the Subsequent Buyers
testified in court on how they purchased their respective lots. The Subsequent Buyers totally depended on the
testimony of Constancia Calonso (Calonso) to explain the subsequent sale. Calonso, a broker, negotiated with
Godofredo and Carmen the sale of the Subject Land which Godofredo and Carmen subdivided so they could sell anew
portions to the Subsequent Buyers.
Calonso admitted that the Subject Land was adjacent to her own lot. The trial court pointed out that Calonso did not
inquire on the nature of the tenancy of the Natanawans and on who owned the Subject Land. Instead, she bought out
the tenants for P150,000.00. The buy out was embodied in a Kasunduan. Apolinario Natanawan (Apolinario) testified
that he and his wife accepted the money and signed the Kasunduan because Calonso and the Subsequent Buyers
threatened them with forcible ejectment. Calonso brought Apolinario to the Agrarian Reform Office where he was
asked to produce the documents showing that Adelia is the owner of the Subject Land. Since Apolinario could not
produce the documents, the agrarian officer told him that he would lose the case. Thus, Apolinario was constrained to
sign the Kasunduan and accept the P150,000.00.
Another indication of Calonsos bad faith was her own admission that she saw an adverse claim on the title of the
Subject Land when she registered the deeds of sale in the names of the Subsequent Buyers. Calonso ignored the adverse
claim and proceeded with the registration of the deeds of sale.
The trial court awarded P20,000.00 as attorneys fees to Armando and Adelia. In justifying the award of attorneys fees,
the trial court invoked Article 2208 (2) of the Civil Code which allows a court to award attorneys fees, including litigation
expenses, when it is just and equitable to award the same. The trial court ruled that Armando and Adelia are entitled to
attorneys fees since they were compelled to file this case due to petitioners refusal to heed their just and valid
demand.
The Ruling of the Court of Appeals
The Court of Appeals found the factual findings of the trial court well supported by the evidence. Based on these
findings, the Court of Appeals also concluded that there was a perfected contract of sale and the Subsequent Buyers
were not innocent purchasers.
The Court of Appeals ruled that the handwritten receipt dated 11 March 1970 is sufficient proof that Godofredo and
Carmen sold the Subject Land to Armando and Adelia upon payment of the balance of the purchase price. The Court of
Appeals found the recitals in the receipt as sufficient to serve as the memorandum or note as a writing under the
Statute of Frauds.
[5]
The Court of Appeals then reiterated the ruling of the trial court that the Statute of Frauds does not
apply in this case.
The Court of Appeals gave credence to the testimony of a witness of Armando and Adelia, Mildred Lobaton, who
explained why the title to the Subject Land was not in the name of Armando and Adelia. Lobaton testified that
Godofredo was then busy preparing to leave for Davao. Godofredo promised that he would sign all the papers once
they were ready. Since Armando and Adelia were close to the family of Carmen, they trusted Godofredo and Carmen to
honor their commitment. Armando and Adelia had no reason to believe that their contract of sale was not perfected or
validly executed considering that they had received the duplicate copy of OCT No. 284 and other relevant
documents. Moreover, they had taken physical possession of the Subject Land.
The Court of Appeals held that the contract of sale is not void even if only Carmen signed the receipt dated 11 March
1970. Citing Felipe v. Heirs of Maximo Aldon,
[6]
the appellate court ruled that a contract of sale made by the wife
without the husbands consent is not void but merely voidable. The Court of Appeals further declared that the sale in
this case binds the conjugal partnership even if only the wife signed the receipt because the proceeds of the sale were
used for the benefit of the conjugal partnership. The appellate court based this conclusion on Article 161
[7]
of the Civil
Code.
The Subsequent Buyers of the Subject Land cannot claim that they are buyers in good faith because they had
constructive notice of the adverse claim of Armando and Adelia. Calonso, who brokered the subsequent sale, testified
that when she registered the subsequent deeds of sale, the adverse claim of Armando and Adelia was already annotated
on the title of the Subject Land. The Court of Appeals believed that the act of Calonso and the Subsequent Buyers in
forcibly ejecting the Natanawans from the Subject Land buttresses the conclusion that the second sale was tainted with
bad faith from the very beginning.
Finally, the Court of Appeals noted that the issue of prescription was not raised in the Answer. Nonetheless, the
appellate court explained that since this action is actually based on fraud, the prescriptive period is four years, with the
period starting to run only from the date of the discovery of the fraud. Armando and Adelia discovered the fraudulent
sale of the Subject Land only in January 1994. Armando and Adelia lost no time in writing a letter to Godofredo and
Carmen on 2 February 1994 and filed this case on 7 March 1994. Plainly, Armando and Adelia did not sleep on their
rights or lose their rights by prescription.
The Court of Appeals sustained the award of attorneys fees and imposed treble costs on petitioners.
The Issues
Petitioners raise the following issues:
I
Whether the alleged sale of the Subject Land in favor of Armando and Adelia is valid and enforceable, where (1) it was
orally entered into and not in writing; (2) Carmen did not obtain the consent and authority of her husband, Godofredo,
who was the sole owner of the Subject Land in whose name the title thereto (OCT No. 284) was issued; and (3) it was
entered into during the 25-year prohibitive period for alienating the Subject Land without the approval of the Secretary
of Agriculture and Natural Resources.
II
Whether the action to enforce the alleged oral contract of sale brought after 24 years from its alleged perfection had
been barred by prescription and by laches.
III
Whether the deeds of absolute sale and the transfer certificates of title over the portions of the Subject Land issued to
the Subsequent Buyers, innocent purchasers in good faith and for value whose individual titles to their respective lots
are absolute and indefeasible, are valid.
IV
Whether petitioners are liable to pay Armando and Adelia P20,0000.00 as attorneys fees and litigation expenses and
the treble costs, where the claim of Armando and Adelia is clearly unfounded and baseless.
V
Whether petitioners are entitled to the counterclaim for attorneys fees and litigation expenses, where they have
sustained such expenses by reason of institution of a clearly malicious and unfounded action by Armando and Adelia.
[8]

The Courts Ruling
The petition is without merit.
In a petition for review on certiorari under Rule 45, this Court reviews only errors of law and not errors of facts.
[9]
The
factual findings of the appellate court are generally binding on this Court.
[10]
This applies with greater force when both
the trial court and the Court of Appeals are in complete agreement on their factual findings.
[11]
In this case, there is no
reason to deviate from the findings of the lower courts. The facts relied upon by the trial and appellate courts are borne
out by the record. We agree with the conclusions drawn by the lower courts from these facts.
Validity and Enforceability of the Sale
The contract of sale between the spouses Godofredo and Carmen and the spouses Armando and Adelia was a perfected
contract. A contract is perfected once there is consent of the contracting parties on the object certain and on the cause
of the obligation.
[12]
In the instant case, the object of the sale is the Subject Land, and the price certain
is P15,000.00. The trial and appellate courts found that there was a meeting of the minds on the sale of the Subject Land
and on the purchase price of P15,000.00. This is a finding of fact that is binding on this Court. We find no reason to
disturb this finding since it is supported by substantial evidence.
The contract of sale of the Subject Land has also been consummated because the sellers and buyers have performed
their respective obligations under the contract. In a contract of sale, the seller obligates himself to transfer the
ownership of the determinate thing sold, and to deliver the same, to the buyer who obligates himself to pay a price
certain to the seller.
[13]
In the instant case, Godofredo and Carmen delivered the Subject Land to Armando and Adelia,
placing the latter in actual physical possession of the Subject Land. This physical delivery of the Subject Land also
constituted a transfer of ownership of the Subject Land to Armando and Adelia.
[14]
Ownership of the thing sold is
transferred to the vendee upon its actual or constructive delivery.
[15]
Godofredo and Carmen also turned over to
Armando and Adelia the documents of ownership to the Subject Land, namely the owners duplicate copy of OCT No.
284, the tax declaration and the receipts of realty tax payments.
On the other hand, Armando and Adelia paid the full purchase price as evidenced by the receipt dated 11 March 1970
issued by Carmen. Armando and Adelia fulfilled their obligation to provide the P7,000.00 to pay the DBP loan of
Godofredo and Carmen, and to pay the latter the balance of P8,000.00 in cash. The P2,524.00 paid under the receipt
dated 11 March 1970 was the last installment to settle fully the purchase price. Indeed, upon payment to DBP of
the P7,000.00 and the accumulated interests, the DBP cancelled the mortgage on the Subject Land and returned the
owners duplicate copy of OCT No. 284 to Godofredo and Carmen.
The trial and appellate courts correctly refused to apply the Statute of Frauds to this case. The Statute of
Frauds
[16]
provides that a contract for the sale of real property shall be unenforceable unless the contract or some note
or memorandum of the sale is in writing and subscribed by the party charged or his agent. The existence of the receipt
dated 11 March 1970, which is a memorandum of the sale, removes the transaction from the provisions of the Statute
of Frauds.
The Statute of Frauds applies only to executory contracts and not to contracts either partially or totally
performed.
[17]
Thus, where one party has performed ones obligation, oral evidence will be admitted to prove the
agreement.
[18]
In the instant case, the parties have consummated the sale of the Subject Land, with both sellers and
buyers performing their respective obligations under the contract of sale. In addition, a contract that violates the
Statute of Frauds is ratified by the acceptance of benefits under the contract.
[19]
Godofredo and Carmen benefited from
the contract because they paid their DBP loan and secured the cancellation of their mortgage using the money given by
Armando and Adelia. Godofredo and Carmen also accepted payment of the balance of the purchase price.
Godofredo and Carmen cannot invoke the Statute of Frauds to deny the existence of the verbal contract of sale because
they have performed their obligations, and have accepted benefits, under the verbal contract.
[20]
Armando and Adelia
have also performed their obligations under the verbal contract. Clearly, both the sellers and the buyers have
consummated the verbal contract of sale of the Subject Land. The Statute of Frauds was enacted to prevent
fraud.
[21]
This law cannot be used to advance the very evil the law seeks to prevent.
Godofredo and Carmen also claim that the sale of the Subject Land to Armando and Adelia is void on two grounds. First,
Carmen sold the Subject Land without the marital consent of Godofredo. Second, the sale was made during the 25-year
period that the law prohibits the alienation of land grants without the approval of the Secretary of Agriculture and
Natural Resources.
These arguments are without basis.
The Family Code, which took effect on 3 August 1988, provides that any alienation or encumbrance made by the
husband of the conjugal partnership property without the consent of the wife is void. However, when the sale is made
before the effectivity of the Family Code, the applicable law is the Civil Code.
[22]

Article 173 of the Civil Code provides that the disposition of conjugal property without the wifes consent is not void but
merely voidable. Article 173 reads:
The wife may, during the marriage, and within ten years from the transaction questioned, ask the courts for the
annulment of any contract of the husband entered into without her consent, when such consent is required, or any act
or contract of the husband which tends to defraud her or impair her interest in the conjugal partnership
property. Should the wife fail to exercise this right, she or her heirs, after the dissolution of the marriage, may demand
the value of property fraudulently alienated by the husband.
In Felipe v. Aldon,
[23]
we applied Article 173 in a case where the wife sold some parcels of land belonging to the conjugal
partnership without the consent of the husband. We ruled that the contract of sale was voidable subject to annulment
by the husband. Following petitioners argument that Carmen sold the land to Armando and Adelia without the
consent of Carmens husband, the sale would only be voidable and not void.
However, Godofredo can no longer question the sale. Voidable contracts are susceptible of ratification.
[24]
Godofredo
ratified the sale when he introduced Armando and Adelia to his tenants as the new owners of the Subject Land. The trial
court noted that Godofredo failed to deny categorically on the witness stand the claim of the complainants witnesses
that Godofredo introduced Armando and Adelia as the new landlords of the tenants.
[25]
That Godofredo and Carmen
allowed Armando and Adelia to enjoy possession of the Subject Land for 24 years is formidable proof of Godofredos
acquiescence to the sale. If the sale was truly unauthorized, then Godofredo should have filed an action to annul the
sale. He did not. The prescriptive period to annul the sale has long lapsed. Godofredos conduct belies his claim that his
wife sold the Subject Land without his consent.
Moreover, Godofredo and Carmen used most of the proceeds of the sale to pay their debt with the DBP. We agree with
the Court of Appeals that the sale redounded to the benefit of the conjugal partnership. Article 161 of the Civil Code
provides that the conjugal partnership shall be liable for debts and obligations contracted by the wife for the benefit of
the conjugal partnership. Hence, even if Carmen sold the land without the consent of her husband, the sale still binds
the conjugal partnership.
Petitioners contend that Godofredo and Carmen did not deliver the title of the Subject Land to Armando and Adelia as
shown by this portion of Adelias testimony on cross-examination:
Q -- No title was delivered to you by Godofredo Alfredo?
A -- I got the title from Julie Limon because my sister told me.
[26]

Petitioners raise this factual issue for the first time. The Court of Appeals could have passed upon this issue had
petitioners raised this earlier. At any rate, the cited testimony of Adelia does not convincingly prove that Godofredo and
Carmen did not deliver the Subject Land to Armando and Adelia. Adelias cited testimony must be examined in context
not only with her entire testimony but also with the other circumstances.
Adelia stated during cross-examination that she obtained the title of the Subject Land from Julie Limon (Julie), her
classmate in college and the sister of Carmen. Earlier, Adelias own sister had secured the title from the father of
Carmen. However, Adelias sister, who was about to leave for the United States, gave the title to Julie because of the
absence of the other documents. Adelias sister told Adelia to secure the title from Julie, and this was how Adelia
obtained the title from Julie.
It is not necessary that the seller himself deliver the title of the property to the buyer because the thing sold is
understood as delivered when it is placed in the control and possession of the vendee.
[27]
To repeat, Godofredo and
Carmen themselves introduced the Natanawans, their tenants, to Armando and Adelia as the new owners of the Subject
Land. From then on, Armando and Adelia acted as the landlords of the Natanawans. Obviously, Godofredo and Carmen
themselves placed control and possession of the Subject Land in the hands of Armando and Adelia.
Petitioners invoke the absence of approval of the sale by the Secretary of Agriculture and Natural Resources to nullify
the sale. Petitioners never raised this issue before the trial court or the Court of Appeals. Litigants cannot raise an issue
for the first time on appeal, as this would contravene the basic rules of fair play, justice and due process.
[28]
However, we
will address this new issue to finally put an end to this case.
The sale of the Subject Land cannot be annulled on the ground that the Secretary did not approve the sale, which was
made within 25 years from the issuance of the homestead title. Section 118 of the Public Land Act (Commonwealth Act
No. 141) reads as follows:
SEC. 118. Except in favor of the Government or any of its branches, units, or institutions or legally constituted
banking corporation, lands acquired under free patent or homestead provisions shall not be subject to encumbrance or
alienation from the date of the approval of the application and for a term of five years from and after the date of the
issuance of the patent or grant.
xxx
No alienation, transfer, or conveyance of any homestead after 5 years and before twenty-five years after the issuance of
title shall be valid without the approval of the Secretary of Agriculture and Commerce, which approval shall not be
denied except on constitutional and legal grounds.
A grantee or homesteader is prohibited from alienating to a private individual a land grant within five years from the
time that the patent or grant is issued.
[29]
A violation of this prohibition renders a sale void.
[30]
This prohibition, however,
expires on the fifth year. From then on until the next 20 years
[31]
the land grant may be alienated provided the Secretary
of Agriculture and Natural Resources approves the alienation. The Secretary is required to approve the alienation unless
there are constitutional and legal grounds to deny the approval. In this case, there are no apparent constitutional or
legal grounds for the Secretary to disapprove the sale of the Subject Land.
The failure to secure the approval of the Secretary does not ipso facto make a sale void.
[32]
The absence of approval by
the Secretary does not nullify a sale made after the expiration of the 5-year period, for in such event the requirement of
Section 118 of the Public Land Act becomes merely directory
[33]
or a formality.
[34]
The approval may be secured later,
producing the effect of ratifying and adopting the transaction as if the sale had been previously authorized.
[35]
As held
in Evangelista v. Montano:
[36]

Section 118 of Commonwealth Act No. 141, as amended, specifically enjoins that the approval by the Department
Secretary "shall not be denied except on constitutional and legal grounds." There being no allegation that there were
constitutional or legal impediments to the sales, and no pretense that if the sales had been submitted to the Secretary
concerned they would have been disapproved, approval was a ministerial duty, to be had as a matter of course and
demandable if refused. For this reason, and if necessary, approval may now be applied for and its effect will be to ratify
and adopt the transactions as if they had been previously authorized. (Emphasis supplied)
Action Not Barred by Prescription and Laches
Petitioners insist that prescription and laches have set in. We disagree.
The Amended Complaint filed by Armando and Adelia with the trial court is captioned as one for Specific Performance.
In reality, the ultimate relief sought by Armando and Adelia is the reconveyance to them of the Subject Land. An action
for reconveyance is one that seeks to transfer property, wrongfully registered by another, to its rightful and legal
owner.
[37]
The body of the pleading or complaint determines the nature of an action, not its title or heading.
[38]
Thus, the
present action should be treated as one for reconveyance.
[39]

Article 1456 of the Civil Code provides that a person acquiring property through fraud becomes by operation of law a
trustee of an implied trust for the benefit of the real owner of the property. The presence of fraud in this case created
an implied trust in favor of Armando and Adelia. This gives Armando and Adelia the right to seek reconveyance of the
property from the Subsequent Buyers.
[40]

To determine when the prescriptive period commenced in an action for reconveyance, plaintiffs possession of the
disputed property is material. An action for reconveyance based on an implied trust prescribes in ten years.
[41]
The ten-
year prescriptive period applies only if there is an actual need to reconvey the property as when the plaintiff is not in
possession of the property.
[42]
However, if the plaintiff, as the real owner of the property also remains in possession of
the property, the prescriptive period to recover title and possession of the property does not run against him.
[43]
In such
a case, an action for reconveyance, if nonetheless filed, would be in the nature of a suit for quieting of title, an action
that is imprescriptible.
[44]

In this case, the appellate court resolved the issue of prescription by ruling that the action should prescribe four years
from discovery of the fraud. We must correct this erroneous application of the four-year prescriptive period. In Caro v.
Court of Appeals,
[45]
we explained why an action for reconveyance based on an implied trust should prescribe in ten
years. In that case, the appellate court also erroneously applied the four-year prescriptive period. We declared in Caro:
We disagree. The case of Liwalug Amerol, et al. v. Molok Bagumbaran, G.R. No. L-33261, September 30, 1987,154 SCRA
396 illuminated what used to be a gray area on the prescriptive period for an action to reconvey the title to real
property and, corollarily, its point of reference:
xxx It must be remembered that before August 30, 1950, the date of the effectivity of the new Civil Code, the old Code
of Civil Procedure (Act No. 190) governed prescription. It provided:
SEC. 43. Other civil actions; how limited.- Civil actions other than for the recovery of real property can only be brought
within the following periods after the right of action accrues:
xxx xxx xxx
3. Within four years: xxx An action for relief on the ground of fraud, but the right of action in such case shall not be
deemed to have accrued until the discovery of the fraud;
xxx xxx xxx
In contrast, under the present Civil Code, we find that just as an implied or constructive trust is an offspring of the law
(Art. 1456, Civil Code), so is the corresponding obligation to reconvey the property and the title thereto in favor of the
true owner. In this context, and vis-a-vis prescription, Article 1144 of the Civil Code is applicable.
Article 1144. The following actions must be brought within ten years from the time the right of action accrues:
(1) Upon a written contract;
(2) Upon an obligation created by law;
(3) Upon a judgment.
x x x x x x x x x
(Emphasis supplied).
An action for reconveyance based on an implied or constructive trust must perforce prescribe in ten years and not
otherwise. A long line of decisions of this Court, and of very recent vintage at that, illustrates this rule. Undoubtedly, it
is now well-settled that an action for reconveyance based on an implied or constructive trust prescribes in ten years
from the issuance of the Torrens title over the property. The only discordant note, it seems, is Balbin vs. Medalla which
states that the prescriptive period for a reconveyance action is four years. However, this variance can be explained by
the erroneous reliance on Gerona vs. de Guzman. But in Gerona, the fraud was discovered on June 25,1948, hence
Section 43(3) of Act No. 190, was applied, the new Civil Code not coming into effect until August 30, 1950 as mentioned
earlier. It must be stressed, at this juncture, that article 1144 and article 1456, are new provisions. They have no
counterparts in the old Civil Code or in the old Code of Civil Procedure, the latter being then resorted to as legal basis of
the four-year prescriptive period for an action for reconveyance of title of real property acquired under false pretenses.
An action for reconveyance has its basis in Section 53, paragraph 3 of Presidential Decree No. 1529, which provides:
In all cases of registration procured by fraud, the owner may pursue all his legal and equitable remedies against the
parties to such fraud without prejudice, however, to the rights of any innocent holder of the decree of registration on
the original petition or application, xxx
This provision should be read in conjunction with Article 1456 of the Civil Code, which provides:
Article 1456. If property is acquired through mistake or fraud, the person obtaining it is, by force of law, considered a
trustee of an implied trust for the benefit of the person from whom the property comes.
The law thereby creates the obligation of the trustee to reconvey the property and the title thereto in favor of the true
owner. Correlating Section 53, paragraph 3 of Presidential Decree No. 1529 and Article 1456 of the Civil Code with
Article 1144(2) of the Civil Code, supra, the prescriptive period for the reconveyance of fraudulently registered real
property is ten (10) years reckoned from the date of the issuance of the certificate of title xxx (Emphasis supplied)
[46]

Following Caro, we have consistently held that an action for reconveyance based on an implied trust prescribes in ten
years.
[47]
We went further by specifying the reference point of the ten-year prescriptive period as the date of the
registration of the deed or the issuance of the title.
[48]

Had Armando and Adelia remained in possession of the Subject Land, their action for reconveyance, in effect an action
to quiet title to property, would not be subject to prescription. Prescription does not run against the plaintiff in actual
possession of the disputed land because such plaintiff has a right to wait until his possession is disturbed or his title is
questioned before initiating an action to vindicate his right.
[49]
His undisturbed possession gives him the continuing right
to seek the aid of a court of equity to determine the nature of the adverse claim of a third party and its effect on his
title.
[50]

Armando and Adelia lost possession of the Subject Land when the Subsequent Buyers forcibly drove away from the
Subject Land the Natanawans, the tenants of Armando and Adelia.
[51]
This created an actual need for Armando and
Adelia to seek reconveyance of the Subject Land. The statute of limitation becomes relevant in this case. The ten-year
prescriptive period started to run from the date the Subsequent Buyers registered their deeds of sale with the Register
of Deeds.
The Subsequent Buyers bought the subdivided portions of the Subject Land on 22 February 1994, the date of execution
of their deeds of sale. The Register of Deeds issued the transfer certificates of title to the Subsequent Buyers on 24
February 1994. Armando and Adelia filed the Complaint on 7 March 1994. Clearly, prescription could not have set in
since the case was filed at the early stage of the ten-year prescriptive period.
Neither is the action barred by laches. We have defined laches as the failure or neglect, for an unreasonable time, to do
that which, by the exercise of due diligence, could or should have been done earlier.
[52]
It is negligence or omission to
assert a right within a reasonable time, warranting a presumption that the party entitled to assert it either has
abandoned it or declined to assert it.
[53]
Armando and Adelia discovered in January 1994 the subsequent sale of the
Subject Land and they filed this case on 7 March 1994. Plainly, Armando and Adelia did not sleep on their rights.
Validity of Subsequent Sale of Portions of the Subject Land
Petitioners maintain that the subsequent sale must be upheld because the Subsequent Buyers, the co-petitioners of
Godofredo and Carmen, purchased and registered the Subject Land in good faith. Petitioners argue that the testimony
of Calonso, the person who brokered the second sale, should not prejudice the Subsequent Buyers. There is no
evidence that Calonso was the agent of the Subsequent Buyers and that she communicated to them what she knew
about the adverse claim and the prior sale. Petitioners assert that the adverse claim registered by Armando and Adelia
has no legal basis to render defective the transfer of title to the Subsequent Buyers.
We are not persuaded. Godofredo and Carmen had already sold the Subject Land to Armando and Adelia. The settled
rule is when ownership or title passes to the buyer, the seller ceases to have any title to transfer to any third
person.
[54]
If the seller sells the same land to another, the second buyer who has actual or constructive knowledge of the
prior sale cannot be a registrant in good faith.
[55]
Such second buyer cannot defeat the first buyers title.
[56]
In case a title
is issued to the second buyer, the first buyer may seek reconveyance of the property subject of the sale.
[57]

Thus, to merit protection under the second paragraph of Article 1544
[58]
of the Civil Code, the second buyer must act in
good faith in registering the deed.
[59]
In this case, the Subsequent Buyers good faith hinges on whether they had
knowledge of the previous sale. Petitioners do not dispute that Armando and Adelia registered their adverse claim with
the Registry of Deeds of Bataan on 8 February 1994. The Subsequent Buyers purchased their respective lots only on 22
February 1994 as shown by the date of their deeds of sale. Consequently, the adverse claim registered prior to the
second sale charged the Subsequent Buyers with constructive notice of the defect in the title of the
sellers,
[60]
Godofredo and Carmen.
It is immaterial whether Calonso, the broker of the second sale, communicated to the Subsequent Buyers the existence
of the adverse claim. The registration of the adverse claim on 8 February 1994 constituted, by operation of law, notice to
the whole world.
[61]
From that date onwards, the Subsequent Buyers were deemed to have constructive notice of the
adverse claim of Armando and Adelia. When the Subsequent Buyers purchased portions of the Subject Land on 22
February 1994, they already had constructive notice of the adverse claim registered earlier.
[62]
Thus, the Subsequent
Buyers were not buyers in good faith when they purchased their lots on 22 February 1994. They were also not
registrants in good faith when they registered their deeds of sale with the Registry of Deeds on 24 February 1994.
The Subsequent Buyers individual titles to their respective lots are not absolutely indefeasible. The defense of
indefeasibility of the Torrens Title does not extend to a transferee who takes the certificate of title with notice of a flaw
in his title.
[63]
The principle of indefeasibility of title does not apply where fraud attended the issuance of the titles as in
this case.
[64]

Attorneys Fees and Costs
We sustain the award of attorneys fees. The decision of the court must state the grounds for the award of attorneys
fees. The trial court complied with this requirement.
[65]
We agree with the trial court that if it were not for petitioners
unjustified refusal to heed the just and valid demands of Armando and Adelia, the latter would not have been compelled
to file this action.
The Court of Appeals echoed the trial courts condemnation of petitioners fraudulent maneuverings in securing the
second sale of the Subject Land to the Subsequent Buyers. We will also not turn a blind eye on petitioners brazen
tactics. Thus, we uphold the treble costs imposed by the Court of Appeals on petitioners.
WHEREFORE, the petition is DENIED and the appealed decision is AFFIRMED. Treble costs against petitioners.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Vitug, Ynares-Santiago, and Azcuna, JJ., concur.





[1]
Penned by Associate Justice Martin S. Villarama, Jr.
with Associate Justices Angelina Sandoval-
Gutierrez and Romeo A. Brawner, concurring, Sixth
Division.
[2]
Penned by Judge Pedro B. Villafuerte.
[3]
Rollo, pp. 48-49.
[4]
Ibid., p. 50.
[5]
Rollo, p. 55.
[6]
205 Phil. 537 (1982).
[7]
Article 161 of the Civil Code provides as follows: The
conjugal partnership shall be liable for:
All debts and obligations contracted by the husband for
the benefit of the conjugal partnership, and those
contracted by the wife, also for the same purpose, in
the cases where she may legally bind the partnership.
x x x.
[8]
Rollo, pp. 106-107.
[9]
W-Red Construction and Development Corporation v.
Court of Appeals, G.R. No. 122648, 17 August 2000, 338
SCRA 341.
[10]
Ibid.
[11]
Ibid.
[12]
Article 1318, Civil Code.
[13]
Article 1458, Civil Code.
[14]
Pealosa v. Santos, G.R. No. 133749, 23 August 2001,
363 SCRA 545.
[15]
Article 1477, Civil Code.
[16]
Article 1403, Civil Code.
[17]
Article 1497 of the Civil Code. See also The
Associated Anglo-American Tobacco Corporation v.
Court of Appeals, G.R. No. 125602, 29 April 1999, 325
SCRA 694.
[18]
Ibid.
[19]
Article 1405, Civil Code.
[20]
Mactan Cebu International Airport Authority v. Court
of Appeals, 331 Phil. 1046 (1996).
[21]
Ibid.
[22]
Spouses Guiang v. Court of Appeals, 353 Phil. 578
(1998).
[23]
Supra, see note 6.
[24]
Article 1390 of the Civil Code.
[25]
Rollo, p. 47.
[26]
Ibid., p. 18.
[27]
Article 1497 of the Civil Code. See also The
Associated Anglo-American Tobacco Corporation v.
Court of Appeals, G.R. No. 125602, 29 April 1999, 325
SCRA 694.
[28]
Sumbad v. Court of Appeals, 368 Phil. 52 (1999).
[29]
Jacinto v. Jacinto, 105 Phil. 1218 (1959).
[30]
Ibid.
[31]
Ibid.
[32]
Ibid.
[33]
Ibid.; Evangelista v. Montano, 93 Phil. 275 (1953);
Flores v. Plasina, 94 Phil. 327 (1954).
[34]
De los Santos v. Roman Catholic Church of Midsayap,
94 Phil. 405 (1954).
[35]
Ibid.
[36]
93 Phil. 275 (1953).
[37]
Ibid.
[38]
David v. Malay, G.R. No. 132644, 19 November 1999,
318 SCRA 711.
[39]
Ibid.
[40]
Ibid. See also Heirs of Olviga v. Court of Appeals, G.R.
No. 104813, 21 October 1993, 227 SCRA 330.
[41]
Vda. de Cabrera v. Court of Appeals, 335 Phil. 19
(1997).
[42]
Ibid.
[43]
Supra, see note 38.
[44]
Ibid.
[45]
G.R. No. 76148, 20 December 1989, 180 SCRA 401.
[46]
Ibid.
[47]
Development Bank of the Philippines, G.R. No.
129471, 28 April 2000, 331 SCRA 267; David v.
Malay, supra, see note 38; Vda. de Cabrera v. Court of
Appeals, supra, see note 41.
[48]
Supra, see note 38.
[49]
Supra, see note 38.
[50]
Supra, see note 38.
[51]
Rollo, p. 59; TSN, 8 March 1995, pp. 336-337
(Rolando Natanawan); TSN, 23 November 1994, p. 262
(Adelia Lobaton).
[52]
Coronel v. Court of Appeals, 331 Phil. 294 (1996).
[53]
Ibid.
[54]
Ibid.
[55]
Ibid.
[56]
Ibid.
[57]
Ibid.
[58]
Article 1544 of the Civil Code provides as follows: If
the same thing should have been sold to
different vendees, the ownership shall be transferred
to the person who may have first taken possession
thereof in good faith, if it should be movable property.
Should it be immovable property, the ownership shall
belong to the person acquiring it who in good faith first
recorded it in the Registry of Property.
Should there be no inscription, the ownership shall
pertain to the person who in good faith was first in the
possession; and, in the absence thereof, to the person
who presents the oldest title, provided there is good
faith.
[59]
Bayoca v. Nogales, G.R. No. 138201, 12 September
2000, 340 SCRA 154.
[60]
See Balatbat v. Court of Appeals, 329 Phil. 858
(1996); Ocampo v. Court of Appeals, G.R. No. 97442, 30
June 1994, 233 SCRA 551.
[61]
Section 52 of the Property Registration Decree (PD
No. 1529) provides as follows: Constructive
notice upon registration. Every x x x lien, x x x
instrument or entry affecting registered land shall, if
registered, filed or entered in the office of the Register
of Deeds for the province or city where the land to
which it relates lies, be constructive notice to all
persons from the time of such registering, filing or
entering. See also Caviles v. Bautista, G.R. No. 102648,
24 November 1999, 319 SCRA 24; DBP v. Acting Register
of Deeds of Nueva Ecija, UDK No. 7671, 23 June 1988,
162 SCRA 450.
[62]
Gardner v. Court of Appeals, G.R. No. L-59952, 31
August 1984, 131 SCRA 584; PNB v. Court of Appeals,
G.R. No. L-30831 & L-31176, 21 November 1979, 94
SCRA 357.
[63]
Supra, see note 41.
[64]
Supra, see note 41.
[65]
Cipriano v. Court of Appeals, 331 Phil. 1019 (1996
).





FIRST DIVISION

G.R. No. 104114 December 4, 1995
LEE CHUY REALTY CORPORATION, petitioner,
vs.
HON. COURT OF APPEALS AND MARC REALTY AND DEVELOPMENT CORPORATION, respondents.

BELLOSILLO, J.:
Is a judicial action to redeem coupled with consignation of the price within the redemption period equivalent to a formal
offer to redeem under Art. 1623 in relation to Art. 1620 of the Civil Code? Corollarily, is a formal offer to redeem
accompanied with tender of payment a condition precedent to the filing of an action for the valid exercise of the right of
legal redemption? Plainly stated, is the filing of the action with consignation equivalent to a formal offer to redeem?
A valuable piece of land in Malhacan, Meycauayan, Bulacan, with an area of 24,576 square meters and covered by OCT
No. 0-5290 is disputed by petitioner Lee Chuy Realty Corporation (LEE CHUY REALTY) and private respondent Marc
Realty and Development Corporation (MARC REALTY). Originally the property was co-owned by Ruben Jacinto to the
extent of one-sixth and Dominador, Arsenio, Liwayway, all surnamed Bascara, and Ernesto Jacinto who collectively
owned the remaining five-sixths.
On 4 February 1981 Ruben Jacinto sold his one-sixth pro-indiviso share to LEE CHUY REALTY. The sale was registered on
30 April 1981. On 5 May 1989 the Bascaras and Ernesto Jacinto also sold their share to MARC REALTY. The sale was
registered on 16 October 1989.
LEE CHUY REALTY claims that it was never informed of the existence of the sale between MARC REALTY on one hand and
the Bascaras and Jacinto on the other, and that on the contrary it was only upon inquiry from the Register of Deeds of
Bulacan that the sale was brought to its attention. MARC REALTY contends otherwise. It insists that LEE CHUY REALTY
was verbally notified of the sale and was in fact given a copy of the deed of sale.
On 13 November 1989 LEE CHUY REALTY filed a complaint for legal redemption against MARC REALTY
1
and consigned in
court a manager's check for 614,400. In its Amended Answer with Counterclaim with Motion to Dismiss, MARC REALTY
insisted that the complaint be dismissed for failure to state a cause of action there being no allegation of prior valid
tender of payment nor a prior valid notice of consignation.
On 26 December 1990 the trial court
2
ruled in favor of LEE CHUY REALTY holding that there was a prior valid tender of
payment and consignation. It further decreed that "(n)either a separate offer to redeem nor a formal notice of
consignation are (sic) necessary for the reason that the filing of the action itself, within the period of redemption, is
equivalent to a formal offer to redeem."
3

On 1 February 1991 MARC REALTY filed a Petition for Certiorari, Prohibition with Temporary Restraining Order and/or
Writ of Preliminary Injunction with this Court. The petition however was referred to the Court of Appeals pursuant to
Sec. 9, B.P. Blg. 129.
On 22 November 1991 the Court of Appeals rendered a decision reversing that of the lower court and ruling that "a prior
tender or offer of redemption is a prerequisite or precondition to the filing of an action for legal redemption." It further
ruled that "there must be tender of the redemption price within the required period . . . because the policy of the law is
not to leave the purchaser's title in uncertainty beyond the established 30-day period." LEE CHUY REALTY filed a motion
for reconsideration but it was denied hence the present petition.
MARC REALTY contends that prior tender of payment is a condition precedent to the filing of an action in court in order
to validly exercise the right of legal redemption. LEE CHUY REALTY however argues that the filing of the action itself is
equivalent to a formal offer to redeem, which is a condition precedent to the valid exercise of the right of legal
redemption.
We sustain LEE CHUY REALTY. Arts. 1620 and 1623 of the Civil Code on legal redemption provide:
Art. 1620. A co-owner of a thing may exercise the right of redemption in case the shares of all the other co-owners or of
any of them are sold to a third person. If the price of the alienation is grossly excessive, the redemptioner shall pay only
a reasonable one.
xxx xxx xxx
Art. 1623. The right of legal pre-emption or redemption shall not be exercised except within thirty days from the notice
in writing by the prospective vendor, or by the vendor, as the case may be. The deed of sale shall not be recorded in the
Registry of Property unless accompanied by an affidavit of the vendor that he has given written notice thereof to all
possible redemptioners.
MARC REALTY would apply the ruling in Cabrera v. Villanueva
4
and De la Merced v. De Guzman
5
where an offer to
redeem was required for the exercise of the right of redemption. On the other hand, LEE CHUY REALTY anchors its claim
onTioseco v. Court of Appeals,
6
Tolentino v. Court of Appeals,
7
and Belisario v. Intermediate Appellate
Court.
8
Specifically, in Cabrera v. Villanueva
9
we held that for the legal and effective exercise of the right of legal
redemption one must make the offer within the period set in Art. 1623. In other words, if no claim or offer is made
within thirty (30) days from written notice, no action may be allowed to enforce the right of redemption. But
in Tolentino v. Court of Appeals,
10
Tioseco v. Court of Appeals
11
and Belisario v. Intermediate Appellate Court
12
we
adopted the view that a formal offer to redeem, accompanied by a bona fide tender of the redemption price, is not
essential where the right to redeem is exercised through a judicial action within the redemption period and
simultaneously depositing the redemption price. The formal offer to redeem accompanied by a bona fide tender of the
redemption price prescribed by law is only essential to preserve the right of redemption for future enforcement even
beyond the period of redemption. The filing of the action itself within the period of redemption is equivalent to a formal
offer to redeem.
A judicious scrutiny of the cases herein cited impugns the impression of MARC REALTY that they enunciate conflicting
doctrines. On the contrary, we view them as complementing one another. The Court of Appeals erroneously concluded
that a prior tender or offer of redemption is a prerequisite or precondition to the filing of the action for legal
redemption, notwithstanding prevailing jurisprudence holding that to avail of the right of redemption what is essential is
to make an offer to redeem within the prescribed period. There is actually no prescribed form for an offer to redeem to
be properly effected. Hence, it can either be through a formal tender with consignation, or by filing a complaint in court
coupled with consignation of the redemption price within the prescribed period. What is condition precedent to a valid
exercise of the right of legal redemption is either the formal tender with consignation or the filing of a complaint in
court. What is paramount is the availment of the fixed and definite period within which to exercise the right of legal
redemption.
13

In Hulganza v. Court of Appeals
14
the Court, citing previous decisions, declared that the formal offer to redeem,
accompanied by a bona fide tender of the redemption price, within the prescribed period is only essential to preserve
the right of redemption for future enforcement beyond such period of redemption and within the period prescribed for
the action by the statute of limitations. Where, as in the instant case, the right to redeem is exercised through judicial
action within the reglementary period the formal offer to redeem, accompanied by a bona fide tender of the
redemption price, while proper, may be unessential. The filing of the action itself is equivalent to a formal offer to
redeem.
In sum, the formal offer to redeem is not a distinct step or condition sine qua non to the filing of the action in Court for
the valid exercise of the right of legal redemption. What constitutes a condition precedent is either a formal offer to
redeem or the filing of an action in court together with the consignation of the redemption price within the
reglementary period.
The doctrine in Tolentino, Tioseco and Belisario cases was jettisoned by the Court of Appeals on the ground that they do
not involve legal redemption by a co-owner but by a mortgagor. It concluded that the application of the rules on legal
redemption by a co-owner differs from the legal redemption by a mortgagor. But the law does not distinguish; neither
should we. For sure, the principle in the aforecited cases is applicable regardless of whether the redemptioner is a co-
owner or a mortgagor. Public policy favors redemption regardless of whether the redemptioner is a co-owner or
mortgagor, although perhaps with unequal force and effect since each is given a fixed but different period. A co-owner
desirous of exercising his right of legal redemption is given a period of thirty (30) days from notice of the sale within
which to avail of the right to redeem.
15
Under the free patent or homestead provisions of the Public Land Act a period of
five (5) years from the date of conveyance is provided,
16
the five-year period to be reckoned from the date of the sale
and not from the date of registration in the office of the Register of Deeds.
17
The redemption of extrajudicially
foreclosed properties, on the other hand, is exercisable within one (1) year from the date of the auction sale as provided
for in Act No. 3135.
18

WHEREFORE, the petition for certiorari is GRANTED. The decision of respondent Court of Appeals in CA-G.R. SP No.
24220 dated 22 November 1991 is REVERSED and SET ASIDE. The decision of the Regional Trial Court of Malolos,
Bulacan, Br. 7, in Civil Case No. 661-M-89 dated 26 December 1990 holding that the filing of the action for legal
redemption coupled with the consignation of the redemption price is equivalent to a formal offer to redeem as a
condition precedent to the valid exercise of the right of legal redemption, is REINSTATED.
Let the records of this case be REMANDED to the court of origin for further proceedings in the light of this
pronouncement.










SO ORDERED.
Padilla, Davide, Jr., Kapunan and Hermosisima, Jr., JJ.,
concur.
Footnotes
1 Docketed as Civil Case No. 661-M-89, RTC Malolos, Br.
7; Annex "D," Rollo, pp. 38-40.
2 Presided by Judge Danilo A. Manalastas; Annex "F,"
Records, p. 54.
3 Citing Tolentino v. Court of Appeals, G.R. No. 50405-
06, 5 August 1981, 106 SCRA 513.
4 G.R. No. 75069, 15 April 1988, 160 SCRA 672.
5 No. L-36626, 15 August 1988, 160 SCRA 87.
6 G.R. No. 66597, 29 August 1986, 143 SCRA 705.
7 G.R. No. 50405, 5 August 1981, 106 SCRA 513.
8 G.R. No. 73503, 30 August 1988, 165 SCRA 101.
9 Supra, p. 677.
10 Supra, p. 526.
11 Supra, pp. 709, 710.
12 Supra, p. 108.
13 Tolentino, Arturo M., Commentaries and
Jurisprudence on the Civil Code of the Philippines, Vol.
5, 1992 ed., pp. 185, 187.
14 G.R. No. 56196, 7 January 1986, 147 SCRA 77.
15 Art. 1623, Civil Code.
16 Sec. 119, Act No. 141.
17 Pea, Narciso, Philippine Law on Natural Resources,
1992 Revised Ed., p. 35, citing Galanza v. Nuesa, No. L-
6628, 31 August 1954, 95 Phil. 713.
18 Supra footnote 17, p. 37.



SECOND DIVISION

HEIRS OF EDUARDO MANLAPAT, G.R. No. 125585
represented by GLORIA MANLAPAT-
BANAAG and LEON M. BANAAG, JR., Petitioners, Present:
,
- versus -
,

HON. COURT OF APPEALS,
RURAL BANK OF SAN PASCUAL,
INC., and JOSE B. SALAZAR,
CONSUELO CRUZ and Promulgated:
ROSALINA CRUZ-BAUTISTA,
and the REGISTER OF DEEDS of
Meycauayan, Bulacan, June 8, 2005
Respondents.

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

D E C I S I O N

TINGA, J.:


Before this Court is a Rule 45 petition assailing the Decision
[1]
dated 29 September 1994 of the Court of Appeals that
reversed the Decision
[2]
dated 30 April 1991 of the Regional Trial Court (RTC) of Bulacan, Branch 6, Malolos. The trial
court declared Transfer Certificates of Title (TCTs) No. T-9326-P(M) and No. T-9327-P(M) as void ab initio and ordered
the restoration of Original Certificate of Title (OCT) No. P-153(M) in the name of Eduardo Manlapat (Eduardo),
petitioners predecessor-in-interest.

The controversy involves Lot No. 2204, a parcel of land with an area of 1,058 square meters, located at Panghulo,
Obando, Bulacan. The property had been originally in the possession of Jose Alvarez, Eduardos grandfather, until his
demise in 1916. It remained unregistered until 8 October 1976 when OCT No. P-153(M) was issued in the name of
Eduardo pursuant to a free patent issued in Eduardos name
[3]
that was entered in the Registry of Deeds of Meycauayan,
Bulacan.
[4]
The subject lot is adjacent to a fishpond owned by one Ricardo Cruz (Ricardo), predecessor-in-interest
of respondents Consuelo Cruz and Rosalina Cruz-Bautista (Cruzes).
[5]


On 19 December 1954, before the subject lot was titled, Eduardo sold a portion thereof with an area of 553 square
meters to Ricardo. The sale is evidenced by a deed of sale entitled Kasulatan ng Bilihang Tuluyan ng Lupang Walang
Titulo (Kasulatan)
[6]
which was signed by Eduardo himself as vendor and his wife Engracia Aniceto with a certain
Santiago Enriquez signing as witness. The deed was notarized by Notary Public Manolo Cruz.
[7]
On 4 April 1963,
the Kasulatan was registered with the Register of Deeds of Bulacan.
[8]


On 18 March 1981, another Deed of Sale
[9]
conveying another portion of the subject lot consisting of 50 square meters
as right of way was executed by Eduardo in favor of Ricardo in order to reach the portion covered by the first sale
executed in 1954 and to have access to his fishpond from the provincial road.
[10]
The deed was signed by Eduardo
himself and his wife Engracia Aniceto, together with Eduardo Manlapat, Jr. and Patricio Manlapat. The same was also
duly notarized on 18 July 1981 by Notary Public Arsenio Guevarra.
[11]


In December 1981, Leon Banaag, Jr. (Banaag), as attorney-in-fact of his father-in-law Eduardo, executed a mortgage with
the Rural Bank of San Pascual, Obando Branch (RBSP), for P100,000.00 with the subject lot as collateral. Banaag
deposited the owners duplicate certificate of OCT No. P-153(M) with the bank.

On 31 August 1986, Ricardo died without learning of the prior issuance of OCT No. P-153(M) in the name of
Eduardo.
[12]
His heirs, the Cruzes, were not immediately aware of the consummated sale between Eduardo and Ricardo.

Eduardo himself died on 4 April 1987. He was survived by his heirs, Engracia Aniceto, his spouse; and children, Patricio,
Bonifacio, Eduardo, Corazon, Anselmo, Teresita and Gloria, all surnamed Manlapat.
[13]
Neither did the heirs of Eduardo
(petitioners) inform the Cruzes of the prior sale in favor of their predecessor-in-interest, Ricardo. Yet subsequently, the
Cruzes came to learn about the sale and the issuance of the OCT in the name of Eduardo.

Upon learning of their right to the subject lot, the Cruzes immediately tried to confront petitioners on the mortgage and
obtain the surrender of the OCT. The Cruzes, however, were thwarted in their bid to see the heirs. On the advice of the
Bureau of Lands, NCR Office, they brought the matter to the barangay captain of Barangay Panghulo, Obando, Bulacan.
During the hearing, petitioners were informed that the Cruzes had a legal right to the property covered by OCT and
needed the OCT for the purpose of securing a separate title to cover the interest of Ricardo. Petitioners, however, were
unwilling to surrender the OCT.
[14]


Having failed to physically obtain the title from petitioners, in July 1989, the Cruzes instead went to RBSP which had
custody of the owners duplicate certificate of the OCT, earlier surrendered as a consequence of the mortgage.
Transacting with RBSPs manager, Jose Salazar (Salazar), the Cruzes sought to borrow the owners duplicate certificate
for the purpose of photocopying the same and thereafter showing a copy thereof to the Register of Deeds. Salazar
allowed the Cruzes to bring the owners duplicate certificate outside the bank premises when the latter showed
the Kasulatan.
[15]
The Cruzes returned the owners duplicate certificate on the same day after having copied the same.
They then brought the copy of the OCT to Register of Deeds Jose Flores (Flores) of Meycauayan and showed the same to
him to secure his legal opinion as to how the Cruzes could legally protect their interest in the property and register the
same.
[16]
Flores suggested the preparation of a subdivision plan to be able to segregate the area purchased by Ricardo
from Eduardo and have the same covered by a separate title.
[17]


Thereafter, the Cruzes solicited the opinion of Ricardo Arandilla (Arandilla), Land Registration Officer, Director III, Legal
Affairs Department, Land Registration Authority at Quezon City, who agreed with the advice given by Flores.
[18]
Relying
on the suggestions of Flores and Arandilla, the Cruzes hired two geodetic engineers to prepare the corresponding
subdivision plan. The subdivision plan was presented to the Land Management Bureau, Region III, and there it was
approved by a certain Mr. Pambid of said office on 21 July 1989.

After securing the approval of the subdivision plan, the Cruzes went back to RBSP and again asked for the owners
duplicate certificate from Salazar. The Cruzes informed him that the presentation of the owners duplicate certificate
was necessary, per advise of the Register of Deeds, for the cancellation of the OCT and the issuance in lieu thereof of
two separate titles in the names of Ricardo and Eduardo in accordance with the approved subdivision plan.
[19]
Before
giving the owners duplicate certificate, Salazar required the Cruzes to see Atty. Renato Santiago (Atty. Santiago), legal
counsel of RBSP, to secure from the latter a clearance to borrow the title. Atty. Santiago would give the clearance on the
condition that only Cruzes put up a substitute collateral, which they did.
[20]
As a result, the Cruzes got hold again of the
owners duplicate certificate.

After the Cruzes presented the owners duplicate certificate, along with the deeds of sale and the subdivision plan, the
Register of Deeds cancelled the OCT and issued in lieu thereof TCT No. T-9326-P(M) covering 603 square meters of Lot
No. 2204 in the name of Ricardo and TCT No. T-9327-P(M) covering the remaining 455 square meters in the name of
Eduardo.
[21]


On 9 August 1989, the Cruzes went back to the bank and surrendered to Salazar TCT No. 9327-P(M) in the name of
Eduardo and retrieved the title they had earlier given as substitute collateral. After securing the new separate titles, the
Cruzes furnished petitioners with a copy of TCT No. 9327-P(M) through the barangay captain and paid the real property
tax for 1989.
[22]


The Cruzes also sent a formal letter to Guillermo Reyes, Jr., Director, Supervision Sector, Department III of the Central
Bank of the Philippines, inquiring whether they committed any violation of existing bank laws under the circumstances.
A certain Zosimo Topacio, Jr. of the Supervision Sector sent a reply letter advising the Cruzes, since the matter is
between them and the bank, to get in touch with the bank for the final settlement of the case.
[23]


In October of 1989, Banaag went to RBSP, intending to tender full payment of the mortgage obligation. It was only then
that he learned of the dealings of the Cruzes with the bank which eventually led to the subdivision of the subject lot and
the issuance of two separate titles thereon. In exchange for the full payment of the loan, RBSP tried to persuade
petitioners to accept TCT No. T-9327-P(M) in the name of Eduardo.
[24]


As a result, three (3) cases were lodged, later consolidated, with the trial court, all involving the issuance of the TCTs, to
wit:

(1) Civil Case No. 650-M-89, for reconveyance with damages filed by the heirs of Eduardo Manlapat against Consuelo
Cruz, Rosalina Cruz-Bautista, Rural Bank of San Pascual, Jose Salazar and Jose Flores, in his capacity as Deputy Registrar,
Meycauayan Branch of the Registry of Deeds of Bulacan;

(2) Civil Case No. 141-M-90 for damages filed by Jose Salazar against Consuelo Cruz, et. [sic] al.; and

(3) Civil Case No. 644-M-89, for declaration of nullity of title with damages filed by Rural Bank of San Pascual, Inc. against
the spouses Ricardo Cruz and Consuelo Cruz, et al.
[25]


After trial of the consolidated cases, the RTC of Malolos rendered a decision in favor of the heirs of Eduardo, the
dispositive portion of which reads:

WHEREFORE, premised from the foregoing, judgment is hereby rendered:

1.Declaring Transfer Certificates of Title Nos. T-9326-P(M) and T-9327-P(M) as void ab initio and ordering the Register
of Deeds, Meycauayan Branch to cancel said titles and to restore Original Certificate of Title No. P-153(M) in the name of
plaintiffs predecessor-in-interest Eduardo Manlapat;

2.-Ordering the defendants Rural Bank of San Pascual, Jose Salazar, Consuelo Cruz and Rosalina Cruz-Bautista, to pay the
plaintiffs Heirs of Eduardo Manlapat, jointly and severally, the following:

a)P200,000.00 as moral damages;
b)P50,000.00 as exemplary damages;
c)P20,000.00 as attorneys fees; and
d)the costs of the suit.

3.Dismissing the counterclaims.

SO ORDERED.
[26]



The trial court found that petitioners were entitled to the reliefs of reconveyance and damages. On this matter, it
ruled that petitioners were bona fide mortgagors of an unclouded title bearing no annotation of any lien and/or
encumbrance. This fact, according to the trial court, was confirmed by the bank when it accepted the mortgage
unconditionally on 25 November 1981. It found that petitioners were complacent and unperturbed, believing that the
title to their property, while serving as security for a loan, was safely vaulted in the impermeable confines of RBSP. To
their surprise and prejudice, said title was subdivided into two portions, leaving them a portion of 455 square meters
from the original total area of 1,058 square meters, all because of the fraudulent and negligent acts of respondents and
RBSP. The trial court ratiocinated that even assuming that a portion of the subject lot was sold by Eduardo to Ricardo,
petitioners were still not privy to the transaction between the bank and the Cruzes which eventually led to the
subdivision of the OCT into TCTs No. T-9326-P(M) and No. T-9327-P(M), clearly to the damage and prejudice of
petitioners.
[27]


Concerning the claims for damages, the trial court found the same to be bereft of merit. It ruled that although the act of
the Cruzes could be deemed fraudulent, still it would not constitute intrinsic fraud. Salazar, nonetheless, was clearly
guilty of negligence in letting the Cruzes borrow the owners duplicate certificate of the OCT. Neither the bank nor its
manager had business entrusting to strangers titles mortgaged to it by other persons for whatever reason. It was a clear
violation of the mortgage and banking laws, the trial court concluded.

The trial court also ruled that although Salazar was personally responsible for allowing the title to be borrowed, the bank
could not escape liability for it was guilty of contributory negligence. The evidence showed that RBSPs legal counsel was
sought for advice regarding respondents request. This could only mean that RBSP through its lawyer if not through its
manager had known in advance of the Cruzes intention and still it did nothing to prevent the eventuality. Salazar was
not even summarily dismissed by the bank if he was indeed the sole person to blame. Hence, the banks claim for
damages must necessarily fail.
[28]


The trial court granted the prayer for the annulment of the TCTs as a necessary consequence of its declaration that
reconveyance was in order. As to Flores, his work being ministerial as Deputy Register of the Bulacan Registry of Deeds,
the trial court absolved him of any liability with a stern warning that he should deal with his future transactions more
carefully and in the strictest sense as a responsible government official.
[29]


Aggrieved by the decision of the trial court, RBSP, Salazar and the Cruzes appealed to the Court of Appeals. The
appellate court, however, reversed the decision of the RTC. The decretal text of the decision reads:

THE FOREGOING CONSIDERED, the appealed decision is hereby reversed and set aside, with costs against the appellees.

SO ORDERED.
[30]



The appellate court ruled that petitioners were not bona fide mortgagors since as early as 1954 or before the 1981
mortgage, Eduardo already sold to Ricardo a portion of the subject lot with an area of 553 square meters. This fact, the
Court of Appeals noted, is even supported by a document of sale signed by Eduardo Jr. and Engracia Aniceto, the
surviving spouse of Eduardo, and registered with the Register of Deeds of Bulacan. The appellate court also found that
on 18 March 1981, for the second time, Eduardo sold to Ricardo a separate area containing 50 square meters, as a road
right-of-way.
[31]
Clearly, the OCT was issued only after the first sale. It also noted that the title was given to the Cruzes by
RBSP voluntarily, with knowledge even of the banks counsel.
[32]
Hence, the imposition of damages cannot be justified,
the Cruzes themselves being the owners of the property. Certainly, Eduardo misled the bank into accepting the entire
area as a collateral since the 603-square meter portion did not anymore belong to him. The appellate court, however,
concluded that there was no conspiracy between the bank and Salazar.
[33]


Hence, this petition for review on certiorari.

Petitioners ascribe errors to the appellate court by asking the following questions, to wit: (a) can a mortgagor be
compelled to receive from the mortgagee a smaller portion of the originally encumbered title partitioned during the
subsistence of the mortgage, without the knowledge of, or authority derived from, the registered owner; (b) can the
mortgagee question the veracity of the registered title of the mortgagor, as noted in the owners duplicate certificate,
and thus, deliver the certificate to such third persons, invoking an adverse, prior, and unregistered claim against the
registered title of the mortgagor; (c) can an adverse prior claim against a registered title be noted, registered and
entered without a competent court order; and (d) can belief of ownership justify the taking of property without due
process of law?
[34]


The kernel of the controversy boils down to the issue of whether the cancellation of the OCT in the name of the
petitioners predecessor-in-interest and its splitting into two separate titles, one for the petitioners and the other for
the Cruzes, may be accorded legal recognition given the peculiar factual backdrop of the case. We rule in the affirmative.

Private respondents (Cruzes) own the portion titled in their names

Consonant with law and justice, the ultimate denouement of the property dispute lies in the determination of the
respective bases of the warring claims. Here, as in other legal disputes, what is written generally deserves credence.

A careful perusal of the evidence on record reveals that the Cruzes have sufficiently proven their claim of ownership
over the portion of Lot No. 2204 with an area of 553 square meters. The duly notarized instrument of conveyance was
executed in 1954 to which no less than Eduardo was a signatory. The execution of the deed of sale was rendered beyond
doubt by Eduardos admission in his Sinumpaang Salaysay dated 24 April 1963.
[35]
These documents make the
affirmance of the right of the Cruzes ineluctable. The apparent irregularity, however, in the obtention of the owners
duplicate certificate from the bank, later to be presented to the Register of Deeds to secure the issuance of two new
TCTs in place of the OCT, is another matter.

Petitioners argue that the 1954 deed of sale was not annotated on the OCT which was issued in 1976 in favor of
Eduardo; thus, the Cruzes claim of ownership based on the sale would not hold water. The Court is not persuaded.

Registration is not a requirement for validity of the contract as between the parties, for the effect of registration serves
chiefly to bind third persons.
[36]
The principal purpose of registration is merely to notify other persons not parties to a
contract that a transaction involving the property had been entered into. Where the party has knowledge of a prior
existing interest which is unregistered at the time he acquired a right to the same land, his knowledge of that prior
unregistered interest has the effect of registration as to him.
[37]


Further, the heirs of Eduardo cannot be considered third persons for purposes of applying the rule. The conveyance shall
not be valid against any person unless registered, except (1) the grantor, (2) his heirs and devisees, and (3) third persons
having actual notice or knowledge thereof.
[38]
Not only are petitioners the heirs of Eduardo, some of them were actually
parties to the Kasulatan executed in favor of Ricardo. Thus, the annotation of the adverse claim of the Cruzes on the
OCT is no longer required to bind the heirs of Eduardo, petitioners herein.

Petitioners had no right to constitute mortgage over disputed portion

The requirements of a valid mortgage are clearly laid down in Article 2085 of the New Civil Code, viz:

ART. 2085. The following requisites are essential to the contracts of pledge and mortgage:

(1) That they be constituted to secure the fulfillment of a principal obligation;
(2) That the pledgor or mortgagor be the absolute owner of the thing pledged or mortgaged;
(3) That the persons constituting the pledge or mortgage have the free disposal of their property, and in the absence
thereof, that they be legally authorized for the purpose.

Third persons who are not parties to the principal obligation may secure the latter by pledging or mortgaging their
own property. (emphasis supplied)


For a person to validly constitute a valid mortgage on real estate, he must be the absolute owner thereof as
required by Article 2085 of the New Civil Code.
[39]
The mortgagor must be the owner, otherwise the mortgage is
void.
[40]
In a contract of mortgage, the mortgagor remains to be the owner of the property although the property is
subjected to a lien.
[41]
A mortgage is regarded as nothing more than a mere lien, encumbrance, or security for a debt,
and passes no title or estate to the mortgagee and gives him no right or claim to the possession of the property.
[42]
In
this kind of contract, the property mortgaged is merely delivered to the mortgagee to secure the fulfillment of the
principal obligation.
[43]
Such delivery does not empower the mortgagee to convey any portion thereof in favor of
another person as the right to dispose is an attribute of ownership.
[44]
The right to dispose includes the right to donate,
to sell, to pledge or mortgage. Thus, the mortgagee, not being the owner of the property, cannot dispose of the whole
or part thereof nor cause the impairment of the security in any manner without violating the foregoing rule.
[45]
The
mortgagee only owns the mortgage credit, not the property itself.
[46]


Petitioners submit as an issue whether a mortgagor may be compelled to receive from the mortgagee a smaller portion
of the lot covered by the originally encumbered title, which lot was partitioned during the subsistence of the mortgage
without the knowledge or authority of the mortgagor as registered owner. This formulation is disingenuous, baselessly
assuming, as it does, as an admitted fact that the mortgagor is the owner of the mortgaged property in its entirety.
Indeed, it has not become a salient issue in this case since the mortgagor was not the owner of the entire mortgaged
property in the first place.

Issuance of OCT No. P-153(M), improper

It is a glaring fact that OCT No. P-153(M) covering the property mortgaged was in the name of Eduardo, without any
annotation of any prior disposition or encumbrance. However, the property was sufficiently shown to be not entirely
owned by Eduardo as evidenced by the Kasulatan. Readily apparent upon perusal of the records is that the OCT was
issued in 1976, long after theKasulatan was executed way back in 1954. Thus, a portion of the property registered in
Eduardos name arising from the grant of free patent did not actually belong to him. The utilization of the Torrens
system to perpetrate fraud cannot be accorded judicial sanction.

Time and again, this Court has ruled that the principle of indefeasibility of a Torrens title does not apply where fraud
attended the issuance of the title, as was conclusively established in this case. The Torrens title does not furnish a shied
for fraud.
[47]
Registration does not vest title. It is not a mode of acquiring ownership but is merely evidence of such title
over a particular property. It does not give the holder any better right than what he actually has, especially if the
registration was done in bad faith. The effect is that it is as if no registration was made at all.
[48]
In fact, this Court has
ruled that a decree of registration cut off or extinguished a right acquired by a person when such right refers to a lien or
encumbrance on the landnot to the right of ownership thereofwhich was not annotated on the certificate of title
issued thereon.
[49]


Issuance of TCT Nos. T-9326-P(M)
and T-9327-P(M), Valid


The validity of the issuance of two TCTs, one for the portion sold to the predecessor-in-interest of the Cruzes and the
other for the portion retained by petitioners, is readily apparent from Section 53 of the Presidential Decree (P.D.) No.
1529 or the Property Registration Decree. It provides:

SEC 53. Presentation of owners duplicate upon entry of new certificate. No voluntary instrument shall be registered by
the Register of Deeds, unless the owners duplicate certificate is presented with such instrument, except in cases
expressly provided for in this Decree or upon order of the court, for cause shown.

The production of the owners duplicate certificate, whenever any voluntary instrument is presented for registration,
shall be conclusive authority from the registered owner to the Register of Deeds to enter a new certificate or to make
a memorandum of registration in accordance with such instrument, and the new certificate or memorandum shall be
binding upon the registered owner and upon all persons claiming under him, in favor of every purchaser for value and in
good faith.

In all cases of registration procured by fraud, the owner may pursue all his legal and equitable remedies against the
parties to such fraud without prejudice, however, to the rights of any innocent holder of the decree of registration on
the original petition or application, any subsequent registration procured by the presentation of a forged duplicate
certificate of title, or a forged deed or instrument, shall be null and void. (emphasis supplied)


Petitioners argue that the issuance of the TCTs violated the third paragraph of Section 53 of P.D. No. 1529. The
argument is baseless. It must be noted that the provision speaks of forged duplicate certificate of title and forged deed
or instrument. Neither instance obtains in this case. What the Cruzes presented before the Register of Deeds was the
very genuine owners duplicate certificate earlier deposited by Banaag, Eduardos attorney-in-fact, with RBSP. Likewise,
the instruments of conveyance are authentic, not forged. Section 53 has never been clearer on the point that as long as
the owners duplicate certificate is presented to the Register of Deeds together with the instrument of conveyance, such
presentation serves as conclusive authority to the Register of Deeds to issue a transfer certificate or make a
memorandum of registration in accordance with the instrument.

The records of the case show that despite the efforts made by the Cruzes in persuading the heirs of Eduardo to allow
them to secure a separate TCT on the claimed portion, their ownership being amply evidenced by
the Kasulatan and Sinumpaang Salaysaywhere Eduardo himself acknowledged the sales in favor of Ricardo, the heirs
adamantly rejected the notion of separate titling. This prompted the Cruzes to approach the bank manager of RBSP for
the purpose of protecting their property right. They succeeded in persuading the latter to lend the owners duplicate
certificate. Despite the apparent irregularity in allowing the Cruzes to get hold of the owners duplicate certificate, the
bank officers consented to the Cruzes plan to register the deeds of sale and secure two new separate titles, without
notifying the heirs of Eduardo about it.

Further, the law on the matter, specifically P.D. No. 1529, has no explicit requirement as to the manner of acquiring the
owners duplicate for purposes of issuing a TCT. This led the Register of Deeds of Meycauayan as well as the Central
Bank officer, in rendering an opinion on the legal feasibility of the process resorted to by the Cruzes. Section 53 of P.D.
No. 1529 simply requires the production of the owners duplicate certificate, whenever any voluntary instrument is
presented for registration, and the same shall be conclusive authority from the registered owner to the Register of
Deeds to enter a new certificate or to make a memorandum of registration in accordance with such instrument, and the
new certificate or memorandum shall be binding upon the registered owner and upon all persons claiming under him, in
favor of every purchaser for value and in good faith.
Quite interesting, however, is the contention of the heirs of Eduardo that the surreptitious lending of the owners
duplicate certificate constitutes fraud within the ambit of the third paragraph of Section 53 which could nullify the
eventual issuance of the TCTs. Yet we cannot subscribe to their position.

Impelled by the inaction of the heirs of Eduardo as to their claim, the Cruzes went to the bank where the property was
mortgaged. Through its manager and legal officer, they were assured of recovery of the claimed parcel of land since they
are the successors-in-interest of the real owner thereof. Relying on the bank officers opinion as to the legality of the
means sought to be employed by them and the suggestion of the Central Bank officer that the matter could be best
settled between them and the bank, the Cruzes pursued the titling of the claimed portion in the name of Ricardo. The
Register of Deeds eventually issued the disputed TCTs.

The Cruzes resorted to such means to protect their interest in the property that rightfully belongs to them only because
of the bank officers acquiescence thereto. The Cruzes could not have secured a separate TCT in the name of Ricardo
without the banks approval. Banks, their business being impressed with public interest, are expected to exercise more
care and prudence than private individuals in their dealings, even those involving registered lands.
[50]
The highest degree
of diligence is expected, and high standards of integrity and performance are even required of it.
[51]


Indeed, petitioners contend that the mortgagee cannot question the veracity of the registered title of the mortgagor as
noted in the owners duplicate certificate, and, thus, he cannot deliver the certificate to such third persons invoking an
adverse, prior, and unregistered claim against the registered title of the mortgagor. The strength of this argument is
diluted by the peculiar factual milieu of the case.

A mortgagee can rely on what appears on the certificate of title presented by the mortgagor and an innocent mortgagee
is not expected to conduct an exhaustive investigation on the history of the mortgagors title. This rule is strictly applied
to banking institutions. A mortgagee-bank must exercise due diligence before entering into said contract. Judicial notice
is taken of the standard practice for banks, before approving a loan, to send representatives to the premises of the land
offered as collateral and to investigate who the real owners thereof are.
[52]


Banks, indeed, should exercise more care and prudence in dealing even with registered lands, than private individuals,
as their business is one affected with public interest. Banks keep in trust money belonging to their depositors, which
they should guard against loss by not committing any act of negligence that amounts to lack of good faith. Absent good
faith, banks would be denied the protective mantle of the land registration statute, Act 496, which extends only to
purchasers for value and good faith, as well as to mortgagees of the same character and description.
[53]
Thus, this Court
clarified that the rule that persons dealing with registered lands can rely solely on the certificate of title does not apply
to banks.
[54]


Bank Liable for Nominal Damages

Of deep concern to this Court, however, is the fact that the bank lent the owners duplicate of the OCT to the Cruzes
when the latter presented the instruments of conveyance as basis of their claim of ownership over a portion of land
covered by the title. Simple rationalization would dictate that a mortgagee-bank has no right to deliver to any stranger
any property entrusted to it other than to those contractually and legally entitled to its possession. Although we cannot
dismiss the banks acknowledgment of the Cruzes claim as legitimized by instruments of conveyance in their possession,
we nonetheless cannot sanction how the bank was inveigled to do the bidding of virtual strangers. Undoubtedly, the
banks cooperative stance facilitated the issuance of the TCTs. To make matters worse, the bank did not even notify
the heirs of Eduardo. The conduct of the bank is as dangerous as it is unthinkably negligent. However, the aspect does
not impair the right of the Cruzes to be recognized as legitimate owners of their portion of the property.

Undoubtedly, in the absence of the banks participation, the Register of Deeds could not have issued the disputed TCTs.
We cannot find fault on the part of the Register of Deeds in issuing the TCTs as his authority to issue the same is clearly
sanctioned by law. It is thus ministerial on the part of the Register of Deeds to issue TCT if the deed of conveyance and
the original owners duplicate are presented to him as there appears on theface
of the instruments no badge of irregularity or nullity.
[55]
If there is someone to blame for the shortcut resorted to by
the Cruzes, it would be the bank itself whose manager and legal officer helped the Cruzes to facilitate the issuance of
the TCTs.

The bank should not have allowed complete strangers to take possession of the owners duplicate certificate even if the
purpose is merely for photocopying for a danger of losing the same is more than imminent. They should be aware of
the conclusive presumption in
Section 53. Such act constitutes manifest negligence on the part of the bank which would necessarily hold it liable for
damages under Article 1170 and other relevant provisions of the Civil Code.
[56]


In the absence of evidence, the damages that may be awarded may be in the form of nominal damages. Nominal
damages are adjudicated in order that a right of the plaintiff, which has been violated or invaded by the defendant, may
be vindicated or recognized, and not for the purpose of indemnifying the plaintiff for any loss suffered by him.
[57]
This
award rests on the mortgagors right to rely on the banks observance of the highest diligence in the conduct of its
business. The act of RBSP of entrusting to respondents the owners duplicate certificate entrusted to it by the mortgagor
without even notifying the mortgagor and absent any prior investigation on the veracity of respondents claim and
character is a patent failure to foresee the risk created by the act in view of the provisions of Section 53 of P.D. No. 1529.
This act runs afoul of every banks mandate to observe the highest degree of diligence in dealing with its clients.
Moreover, a mortgagor has also the right to be afforded due process before deprivation or diminution of his property is
effected as the OCT was still in the name of Eduardo. Notice and hearing are indispensable elements of this right which
the bank miserably ignored.

Under the circumstances, the Court believes the award of P50,000.00 as nominal damages is appropriate.


Five-Year Prohibition against alienation or encumbrance under the Public Land Act


One vital point. Apparently glossed over by the courts below and the parties is an aspect which is essential, spread as it
is all over the record and intertwined with the crux of the controversy, relating as it does to the validity of the
dispositions of the subject property and the mortgage thereon. Eduardo was issued a title in 1976 on the basis of his
free patent application. Such application implies the recognition of the public dominion character of the land and,
hence, the five (5)-year prohibition imposed by the Public Land Act against alienation or encumbrance of the land
covered by a free patent or homestead
[58]
should have been considered.

The deed of sale covering the fifty (50)-square meter right of way executed by Eduardo on 18 March 1981 is obviously
covered by the proscription, the free patent having been issued on 8 October 1976. However, petitioners may recover
the portion sold since the prohibition was imposed in favor of the free patent holder. In Philippine National Bank v. De
los Reyes,
[59]
this Court ruled squarely on the point, thus:

While the law bars recovery in a case where the object of the contract is contrary to law and one or both parties
acted in bad faith, we cannot here apply the doctrine of in pari delicto which admits of an exception, namely, that when
the contract is merely prohibited by law, not illegal per se, and the prohibition is designed for the protection of the party
seeking to recover, he is entitled to the relief prayed for whenever public policy is enhanced thereby. Under the Public
Land Act, the prohibition to alienate is predicated on the fundamental policy of the State to preserve and keep in the
family of the homesteader that portion of public land which the State has gratuitously given to him, and recovery is
allowed even where the land acquired under the Public Land Act was sold and not merely encumbered, within the
prohibited period.
[60]



The sale of the 553 square meter portion is a different story. It was executed in 1954, twenty-two (22) years before the
issuance of the patent in 1976. Apparently, Eduardo disposed of the portion even before he thought of applying for a
free patent. Where the sale or transfer took place before the filing of the free patent application, whether by the
vendor or the vendee, the prohibition should not be applied. In such situation, neither the prohibition nor the rationale
therefor which is to keep in the family of the patentee that portion of the public land which the government has
gratuitously given him, by shielding him from the temptation to dispose of his landholding, could be relevant. Precisely,
he had disposed of his rights to the lot even before the government could give the title to him.

The mortgage executed in favor of RBSP is also beyond the pale of the prohibition, as it was forged in December 1981 a
few months past the period of prohibition.

WHEREFORE, the Decision of the Court of Appeals is AFFIRMED, subject to the modifications herein. Respondent
Rural Bank of San Pascual is hereby ORDERED to PAY petitioners Fifty Thousand Pesos (P50,000.00) by way of nominal
damages. Respondents Consuelo Cruz and Rosalina Cruz-Bautista are hereby DIVESTED of title to, and respondent
Register of Deeds of Meycauayan, Bulacan is accordingly ORDERED to segregate, the portion of fifty (50) square meters
of the subject Lot No. 2204, as depicted in the approved plan covering the lot, marked as Exhibit A, and to issue a new
title covering the said portion in the name of the petitioners at the expense of the petitioners. No costs.

SO ORDERED.



DANTE O. TINGA Associate Justice


WE CONCUR:



(On Official Leave)
REYNATO S. PUNO
Associate Justice
Chairman



MA. ALICIA AUSTRIA-MARTINEZ ROMEO J. CALLEJO, SR.
Associate Justice Associate Justice
Acting Chairman


MINITA V. CHICO-NAZARIO
Associate Justice


ATTESTATION

I attest that the conclusions in the above Decision were reached in consultation before the case was assigned to the
writer of the opinion of the Courts Division.



MA. ALICIA AUSTRIA-MARTINEZ
Associate Justice
Acting Chairman, Second Division



CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairmans Attestation, it is hereby certified
that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of
the opinion of the Courts Division.



HILARIO G. DAVIDE, JR.
Chief Justice










*
On Official Leave.

[1]
Rollo, pp. 51-65. Decision penned by Associate Justice Bernardo Ll. Salas and concurred in by Justices Jorge S. Imperial
and Hector L. Hofilea.


[2]
Id. at 42-48. Decision penned by Judge Pablo S. Villanueva.

[3]
The Sinumpaang Salaysay signed by Eduardo on 24 April 1963 shows that he is the only heir of his grandfather Jose
Alvarez who died in 1916. Eduardos mother, daughter of Alvarez, predeceased her father. The sworn statement also
shows that the subject lot was in the possession of his grandfather at the time of his death. See also Exhibit 2 - E, p. 4.

[4]
The Bureau of Lands issued Free Patent No. 111-6 in the name of Eduardo which became the basis for the issuance of
OCT No. P-153(M) by the Register of Deeds dated October 8, 1976.


[5]
Rollo. p. 28.

[6]
Exhibits, p. 3.

[7]
Records, p. 30. See also Rollo, p. 213. The deed was entered in the notarial book of the notary public as Document No.
29, Page 6, Book No. I, Series of 1954.

[8]
Rollo, p. 213. The deed was recorded as Inscription No. 16707, Page No. 257, Volume 89, File No. 21819.

[9]
Records, p. 10. Annex A.


[10]
Rollo, p. 97.

[11]
Records, p. 11. See also Rollo, p. 97. The deed was entered in the notarial book of the notary public as Document No.
261, Page 54, Book XIII, Series of 1981.

[12]
Rollo, p. 98.

[13]
Records, p. 4.


[14]
Rollo, p. 99. See also Exhibit, p. 21. The Sinumpaang Salaysay of Barangay Captain Bonifacio Enriquez of Panghulo,
Obando, Bulacan attested to the fact that on July 1989 the Cruzes lodged a complaint with his office regarding a lot with
an area of 1,058 square meters, 553 square meters of which was sold to Ricardo on 19 December 1954. This sale was
confirmed by Eduardo through a Sinumpaang Salaysay dated 24 April 1963.


[15]
Id. at 52 and 100.

[16]
Id. at 100.

[17]
Ibid.

[18]
Id. at 101.


[19]
Ibid.

[20]
Id. at 102.


[21]
Id. at 28-29.

[22]
Id. at 103-104.

[23]
Exhibit, p. 18.


[24]
Rollo, p. 29.

[25]
Supra notes 1 and 2.


[26]
Rollo, p. 48.


[27]
Id. at 46.


[28]
Id. at 47-48.

[29]
Id. at 48.

[30]
Id. at 65.


[31]
Id. at 56.

[32]
Id. at 57.

[33]
Id. at 65.


[34]
Id. at 31-32.


[35]
Exhibit No. 4.


[36]
Samanilla v. Cajucom, et al., 107 Phil. 432 (1960).

[37]
Lagandaon v. Court of Appeals, G.R. Nos. 102526-31, 21 May 1998, 290 SCRA 330.

[38]
PEA, REGISTRATION OF LAND TITLES AND DEEDS, 1994 ed., p. 28.

[39]
Lagrosa v. Court of Appeals, 371 Phil. 225 (1999).

[40]
National Bank v. Palma Gil, 55 Phil. 639 (1930-1931); Contreras v. China Banking Corporation, 76 Phil. 709 (1946).

An agent cannot therefore mortgage in his own name the property of the principal, otherwise the contract is void. But
the agent can do so, in the name of the principal, for here the mortgagor is the principal. Hence, if the agent is properly
authorized, the contract is valid. See Arenas v. Raymundo, 19 Phil. 46 (1911).

[41]
Ching Sen Ben v. Court of Appeals, 373 Phil. 544 (1999).

[42]
Lagrosa v. Court of Appeals, supra note 39, citing Adlawan v. Torres, 233 SCRA 645.

That is why Article 2130 of the New Civil Code provides that a stipulation forbidding the owner from alienating the
immovable mortgaged shall be void.

[43]
Ownership is retained by the mortgagor since the latter merely subjects it to a lien. In case of nonpayment of debt
secured by a mortgage, the mortgagee has the right to foreclose the mortgaged property and have it sold to satisfy the
outstanding indebtedness to enforce his right and consolidation of ownership is not an appropriate remedy. Only upon
the lapse of the redemption period and the judgment debtor failed to exercise his right of redemption, ownership will
vest or be consolidated in the purchaser. (Dr. Igmidio Cuevas Lat, LAW ON MORTGAGE, 2001 ed., p. 1)

[44]
Article 428 of the Civil Code of the Philippines provides:

ART. 428. The owner has the right to enjoy and dispose of a thing, without other limitations than those established by
law.

The owner has also a right of action against the holder and possessor of the thing in order to recover it.


[45]
Article 2088 of the Civil Code of the Philippines provides:

ART. 2088. The creditor cannot appropriate the things given by way of pledge or mortgage, or dispose of them. Any
stipulation to the contrary is null and void.

[46]
Article 2128 of the Civil Code of the Philippines provides:

ART. 2128. The mortgage credit may be alienated or assigned to a third person, in whole or in part, with the formalities
required by law.


[47]
Sacdalan v. Court of Appeals, G.R. No. 128967, 20 May 2004, 428 SCRA 586; Republic v. Court of Appeals, G.R. No.
60169, 23 March 1990, 183 SCRA 620; Adille v. Court of Appeals, G.R. No. 44546, 29 January 1988, 157 SCRA 455;
Amerol v. Bagumbaran, G.R. No. 33261, 30 September 1987, 154 SCRA 396.

[48]
Avila v. Tapucar, G.R. No. 45947, 27 August 1991, 201 SCRA 148; Miranda v. Court of Appeals, G.R. No. 46064, 7
September 1989, 177 SCRA 303, citing De Guzman v. Court of Appeals, 156 SCRA 701.


[49]
Development Bank of the Philippines v. Court of Appeals, 387 Phil. 283 (2000).


[50]
Development Bank of the Philippines v. Court of Appeals, 387 Phil. 283 (2000), citing Cavite Development Bank v. Lim,
G.R. No. 13169, 1 February 2000, 324 SCRA 346, citingTomas v. Tomas, 98 SCRA 280(1980).

[51]
Bank of the Philippine Islands v. Casa Montessori Internationale, et al, G.R. No. 149454 and Casa Montessori
Internationale v. Bank of the Philippine Islands, G.R. No. 149507, 28 May 2004, 430 SCRA 261.


[52]
Tomas v. Tomas, No. L-36897, 25 June 1980, 98 SCRA 280.

[53]
Government Service Insurance System v. Court of Appeals, G.R. No. 128471, 6 March 1998, 287 SCRA 204,
209, citing Tomas v. Tomas, supra note 50.

[54]
Id. at 210, citing Rural Bank of Compostela v. Court of Appeals, et al, G.R. No. 122801, 8 April 1997.

[55]
See PEA, REGISTRATION OF LAND TITLES AND DEEDS, 1994 ed., p. 519 citing Tinatan v. Serilla, 54 O.G. 23,
September 15, 1958, Court of Appeals; Gonzales v. Basa, Jr., 73 Phil. 704 (1942).

[56]
The following Civil Code provisions are pertinent:

Article 1170. Those who in the performance of their obligations are guilty of fraud, negligence, or delay, and those
who in any manner contravene the tenor thereof, are liable for damages.

Article 1172. Responsibility arising from negligence in the performance of every kind of obligation is also demandable,
but such liability may be regulated by the courts, according to the circumstances.

Article 19. Every person must, in the exercise of his rights and in the performance of his duties, act with justice, give
everyone his due, and observe honesty and good faith.

Article 20. Every person who, contrary to law, willfully or negligently causes damage to another, shall indemnify the
latter for the same.

Article 21. Any person who willfully causes loss or injury to another in a manner that is contrary to morals, good customs
or public policy shall compensate the latter for the damage.

Article 1973. . . . . The depositary is responsible for the negligence of his employees.

[57]
Article 2221 of the Civil Code.

See also my Separate Opinion in the case of Agabon v. NLRC, G.R. No. 158693, November 17, 2004: Nominal damages
are adjudicated in order that a right of a plaintiff which has been violated or invaded by another may be vindicated or
recognized without having to indemnify the plaintiff for any loss suffered by him. Nominal damages may likewise be
awarded in every obligation arising from law, contracts, quasi-contracts, acts or omissions punished by law and quasi-
delicts, or where any property right has been invaded.

. . . [I]t should be recognized that nominal damages are not meant to be compensatory, and should not be computed
through a formula based on actual losses. Consequently, nominal damages are usually limited in pecuniary value. This
fact should be impressed upon the prospective claimant, especially one who is contemplating seeking
actual/compensatory damages.


[58]
SECTION 118. Except in favor of the Government or any of its branches, units, or institutions, lands acquired under
free patent or homestead provisions shall not be subject to encumbrance or alienation from the date of the approval of
the application and for a term of five years from and after the date of issuance of the patent or grant, nor shall they
become liable to the satisfaction of any debt contracted prior to the expiration of said period, but the improvements or
crops on the land may be mortgaged or pledged to qualified persons, associations, or corporations.

No alienation, transfer, or conveyance of any homestead after five years and before twenty-five years after issuance of
title shall be valid without the approval of the Secretary of Agriculture and Commerce, which approval shall not be
denied except on constitutional and legal grounds.

[59]
G.R. Nos. 46898-99, 28 November 1989, 179 SCRA 619.

[60]
Id. at 628-629, citing Pascua v. Talens, 80 Phil. 792 (1949); Delos Santos v. Roman Catholic Church of Midsayap, et al.,
94 Phil. 405 (1954); Ras v. Su