Republic of the Philippines The Galangs in their Answer7 denied that the land subject of the complaint was
SUPREME COURT part of a creek and countered that OCT No. P-928 was issued to them after
Manila
THIRD DIVISION
G.R. No. 184746 August 8, 2012
SPOUSES CRISPIN GALANG and CARlOAD GALANG, Petitioners,
vs.
SPOUSES CONRADO S. REYES AND FE DE KASTRO REYES (As
substituted by their legal heir: Hermenigildo K. Reyes), Respondents.
REYES,*
DECISION
MENDOZA, J.:
This petition for review on certiorari under Rule 45 seeks to reverse and set
aside the April 9, 2008 Decision 1 of the Court of Appeals (CA)and its October
6, 2008 Resolution,2 in CA-G.R. CV. No. 85660.
The Facts
On September 4, 1997, spouses Conrado S. Reyes and Fe de Kastro Reyes
(the Reyeses)filed a case for the annulment of Original Certificate of Title
(OCT)No. P-928 against spouses Crispin and Caridad Galang (the
Galangs)with the Regional Trial Court, Antipolo, Rizal (RTC),docketed as Civil
Case No. 97-4560.
In their Complaint,3 the Reyeses alleged that they owned two properties: (1) a
subdivision project known as Ponderosa Heights Subdivision (Ponderosa),and
(2) an adjoining property covered by Transfer Certificate of Title (TCT)No.
185252, with an area of 1,201 sq.m.; 4 that the properties were separated by
the Marigman Creek, which dried up sometime in 1980 when it changed its
course and passed through Ponderosa; that the Galangs, by employing
manipulation and fraud, were able to obtain a certificate of title over the dried
up creek bed from the Department of Environment and Natural Resources
(DENR),through its Provincial Office (PENRO); that, specifically, the property
was denominated as Lot 5735, Cad 29 Ext., Case-1, with an area of 1,573
sq.m. covered by OCT No. P-928; that they discovered the existence of the
certificate of title sometime in March 1997 when their caretaker, Federico
Enteroso (Enteroso),informed them that the subject property had been
fraudulently titled in the names of the Galangs; that in 1984, prior to such
discovery, Enteroso applied for the titling of the property, as he had been
occupying it since 1968 and had built his house on it; that, later, Enteroso
requested them to continue the application because of financial constraints on
his part;5 that they continued the application, but later learned that the
application papers were lost in the Assessors Office; 6 and that as the owners
of the land where the new course of water passed, they are entitled to the
ownership of the property to compensate them for the loss of the land being
occupied by the new creek.
they had complied with the free patent requirements of the DENR, through the
PENRO; that they and their predecessor-in-interest had been in possession,
occupation, cultivation, and ownership of the land for quite some time; that the
property described under TCT No. 185252 belonged to Apolonio Galang, their
predecessor-in-interest, under OCT No. 3991; that the property was
transferred in the names of the Reyeses through falsified document; 8 that
assuming ex gratia argumentithat the creek had indeed changed its course
and passed through Ponderosa, the Reyeses had already claimed for
themselves the portion of the dried creek which adjoined and co-existed with
their property; that Enteroso was able to occupy a portion of their land by
means of force, coercion, machinations, and stealth in 1981; that such
unlawful entry was then the subject of an Accion Publiciana before the RTC of
Antipolo City (Branch 72); and that at the time of the filing of the Complaint, the
matter was still subject of an appeal before the CA, under CA-G.R. CV No.
53509.
The RTC Decision
In its Decision,9 dated July 16, 2004, the RTC dismissed the complaint for lack
of cause of action and for being an erroneous remedy. The RTC stated that a
title issued upon a patent may be annulled only on grounds of actual and
intrinsic fraud, which much consist of an intentional omission of fact required
by law to be stated in the application or willful statement of a claim against the
truth. In the case before the trial court, the Reyeses presented no evidence of
fraud despite their allegations that the Galangs were not in possession of the
property and that it was part of a dried creek. There being no evidence, these
contentions remained allegations and could not defeat the title of the Galangs.
The RTC wrote:
A title issued upon patent may be annulled only on ground of actual fraud.
Such fraud must consist [of] an intentional omission of fact required by law to
be stated in the application or willful statement of a claim against the truth. It
must show some specific facts intended to deceive and deprive another of his
right. The fraud must be actual and intrinsic, not merely constructive or
intrinsic; the evidence thereof must be clear, convincing and more than merely
preponderant, because the proceedings which are being assailed as having
been fraudulent are judicial proceedings, which by law, are presumed to have
been fair and regular. (Libudan v. Palma Gil 45 SCRA 17)
However, aside from allegations that defendant Galang is not in possession of
the property and that the property was part of a dried creek, no other sufficient
evidence of fraud was presented by the plaintiffs. They have, thus, remained
allegations, which cannot defeat the defendants title. 10
The RTC added that the land, having been acquired through a homestead
patent, was presumably public land. Therefore, only the State can institute an
action for the annulment of the title covering it.
1
It further opined that because the Reyeses claimed to have acquired the
property by right of accretion, they should have filed an action for
reconveyance, explaining "[t]hat the remedy of persons whose property had
been wrongly or erroneously registered in anothers name is not to set aside
the decree/title, but an action for reconveyance, or if the property has passed
into the hands of an innocent purchaser for value, an action for damages." 11
The Court of Appeals Decision
In its Decision, dated April 9, 2008, the CA reversedand set asidethe RTC
decision and ordered the cancellation of OCT No. P-928 and the reconveyance
of the land to the Reyeses.
The CA found that the Reyeses had proven by preponderance of evidence that
the subject land was a portion of the creek bed that was abandoned through
the natural change in the course of the water, which had now traversed a
portion of Ponderosa. As owners of the land occupied by the new course of the
creek, the Reyeses had become the owners of the abandoned creek bed ipso
facto. Inasmuch as the subject land had become private, a free patent issued
over it was null and void and produced no legal effect whatsoever. A posteriori,
the free patent covering the subject land, a private land, and the certificate of
title issued pursuant thereto, are null and void. 12
The Galangs moved for a reconsideration, 13 but their motion was denied in a
Resolution dated October 6, 2008.
Hence, this petition.
Issues
The Galangs present, as warranting a review of the questioned CA decision,
the following grounds:
THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ABUSE OF
DISCRETION AMOUNTING TO LACK OF JURISDICTION IN NOT
RESOLVING THAT THE OFFICE OF THE SOLICITOR GENERAL, NOT THE
PRIVATE RESPONDENTS, HAS THE SOLE AUTHORITY TO FILE [CASES
FOR] ANNULMENT OF TITLE INVOLVING PUBLIC LAND.
THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ABUSE OF
DISCRETION AMOUNTING TO LACK OF JURISDICTION IN HOLDING
THAT PRIVATE RESPONDENTS HAVE [A] CAUSE OF ACTION AGAINST
PETITIONERS EVEN WITHOUT EXHAUSTION OF ADMINISTRATIVE
REMED[IES].
THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ABUSE OF
DISCRETION AMOUNTING TO LACK OF JURISDICTION IN DEVIATING
FROM THE FINDINGS OF FACT OF THE TRIAL COURT AND
INTERPRETING ARTICLE 420 IN RELATION TO ARTICLE 461 OF THE
CIVIL CODE OF THE PHILIPPINES BY SUBSTITUTING ITS OWN OPINION
BASED ON ASSUMPTION OF FACTS.14
A reading of the records discloses that these can be synthesized into two
principal issues, to wit: (1) whether the Reyeses can file the present action for
annulment of a free patent title and reconveyance; and (2) if they can, whether
they were able to prove their cause of action against the Galangs.
The Courts Ruling
Regarding the first issue, the Galangs state that the property was formerly a
public land, titled in their names by virtue of Free Patent No. 045802-96-2847
issued by the DENR. Thus, they posit that the Reyeses do not have the
personality and authority to institute any action for annulment of title because
such authority is vested in the Republic of the Philippines, through the Office of
the Solicitor General.15
In this regard, the Galangs are mistaken. The action filed by the Reyeses
seeks the transfer to their names of the title registered in the names of the
Galangs. In their Complaint, they alleged that: first, they are the owners of the
land, being the owners of the properties through which the Marigman creek
passed when it changed its course; and second, the Galangs illegally
dispossessed them by having the same property registered in their names. It
was not an action for reversion which requires that the State be the one to
initiate the action in order for it to prosper. The distinction between the two
actions was elucidated in the case of Heirs of Kionisala v. Heirs of Dacut,16
where it was written:
An ordinary civil action for declaration of nullity of free patents and
certificates of title is not the same as an action for reversion.The
difference between them lies in the allegations as to the character of
ownership of the realty whose title is sought to be nullified. In an action for
reversion, the pertinent allegations in the complaint would admit State
ownership of the disputed land. Hence in Gabila v. Barrigawhere the plaintiff
in his complaint admits that he has no right to demand the cancellation or
amendment of the defendants title because even if the title were cancelled or
amended the ownership of the land embraced therein or of the portion affected
by the amendment would revert to the public domain, we ruled that the action
was for reversion and that the only person or entity entitled to relief would be
the Director of Lands.
On the other hand, a cause of action for declaration of nullity of free
patent and certificate of title would require allegations of the plaintiffs
ownership of the contested lot prior to the issuance of such free patent
and certificate of title as well as the defendants fraud or mistake; as the
case may be, in successfully obtaining these documents of title over the
parcel of land claimed by plaintiff. In such a case, the nullity arises strictly
not from the fraud or deceit but from the fact that the land is beyond the
jurisdiction of the Bureau of Lands to bestow and whatever patent or certificate
of title obtained therefor is consequently void ab initio. The real party in
interest is not the State but the plaintiff who alleges a pre-existing right
of ownership over the parcel of land in question even before the grant of
title to the defendant.In Heirs of Marciano Nagano v. Court of Appealswe
ruled
x x x x from the allegations in the complaint x x x private respondents claim
2
ownership of the 2,250 square meter portion for having possessed it in the
concept of an owner, openly, peacefully, publicly, continuously and adversely
since 1920. This claim is an assertion that the lot is private land x x x x
Consequently, merely on the basis of the allegations in the complaint, the lot in
question is apparently beyond the jurisdiction of the Director of the Bureau of
Lands and could not be the subject of a Free Patent. Hence, the dismissal of
private respondents complaint was premature and trial on the merits should
have been conducted to thresh out evidentiary matters. It would have been
entirely different if the action were clearly for reversion, in which case, it would
have to be instituted by the Solicitor General pursuant to Section 101 of C.A.
No. 141 x x x x
It is obvious that private respondents allege in their complaint all the facts
necessary to seek the nullification of the free patents as well as the certificates
of title covering Lot 1015 and Lot 1017. Clearly, they are the real parties in
interest in light of their allegations that they have always been the owners and
possessors of the two (2) parcels of land even prior to the issuance of the
documents of title in petitioners favor, hence the latter could only have
committed fraud in securing them
x x x x That plaintiffs are absolute and exclusive owners and in actual
possession and cultivation of two parcels of agricultural lands herein
particularly described as follows [technical description of Lot 1017 and Lot
1015 x x x x 3. That plaintiffs became absolute and exclusive owners of the
abovesaid parcels of land by virtue of inheritance from their late father, Honorio
Dacut, who in turn acquired the same from a certain Blasito Yacapin and from
then on was in possession thereof exclusively, adversely and in the concept of
owner for more than thirty (30) years x x x x 4. That recently, plaintiff
discovered that defendants, without the knowledge and consent of the former,
fraudulently applied for patent the said parcels of land and as a result thereof
certificates of titles had been issued to them as evidenced by certificate of title
No. P-19819 in the name of the Hrs. of Ambrocio Kionisala, and No. P- 20229
in the name of Isabel Kionisala x x x x 5. That the patents issued to defendants
are null and void, the same having been issued fraudulently, defendants not
having been and/or in actual possession of the litigated properties and the
statement they may have made in their application are false and without basis
in fact, and, the Department of Environment and Natural Resources not having
any jurisdiction on the properties the same not being anymore public but
already private property x x x x
It is not essential for private respondents to specifically state in the complaint
the actual date when they became owners and possessors of Lot 1015 and Lot
1017. The allegations to the effect that they were so preceding the issuance of
the free patents and the certificates of title, i.e., "the Department of
Environment and Natural Resources not having any jurisdiction on the
properties the same not being anymore public but already private property,"
are unquestionably adequate as a matter of pleading to oust the State of
jurisdiction to grant the lots in question to petitioners. If at all, the oversight in
not alleging the actual date when private respondents ownership thereof
accrued reflects a mere deficiency in details which does not amount to a failure
to state a cause of action. The remedy for such deficiency would not be a
motion to dismiss but a motion for bill of particulars so as to enable the filing of
appropriate responsive pleadings.
With respect to the purported cause of action for reconveyance, it is settled
that in this kind of action the free patent and the certificate of title are
respected as incontrovertible. What is sought instead is the transfer of the
property, in this case the title thereof, which has been wrongfully or
erroneously registered in the defendants name. All that must be alleged
in the complaint are two (2) facts which admitting them to be true would
entitle the plaintiff to recover title to the disputed land, namely, (1) that
the plaintiff was the owner of the land and, (2) that the defendant had
illegally dispossessed him of the same.
We rule that private respondents have sufficiently pleaded (in addition to the
cause of action for declaration of free patents and certificates of title) an action
for reconveyance, more specifically, one which is based on implied trust. An
implied trust arises where the defendant (or in this case petitioners) allegedly
acquires the disputed property through mistake or fraud so that he (or they)
would be bound to hold and reconvey the property for the benefit of the person
who is truly entitled to it. In the complaint, private respondents clearly assert
that they have long been the absolute and exclusive owners and in actual
possession and cultivation of Lot 1015 and Lot 1017 and that they were
fraudulently deprived of ownership thereof when petitioners obtained free
patents and certificates of title in their names. These allegations certainly
measure up to the requisite statement of facts to constitute an action for
reconveyance.17 [Emphases supplied]
In this case, the complaint instituted by the Reyeses before the RTC was for
the annulment of the title issued to the Galangs, and not for reversion. Thus,
the real party in interest here is not the State but the Reyeses who claim a
right of ownership over the property in question even before the issuance of a
title in favor of the Galangs. Although the Reyeses have the right to file an
action for reconveyance, they have failed to prove their case. Thus, on the
second issue, the Court agrees with the RTC that the Reyeses failed to
adduce substantial evidence to establish their allegation that the Galangs had
fraudulently registered the subject property in their names.
The CA reversed the RTC decision giving the reason that the property was the
former bed of Marigman Creek, which changed its course and passed through
their Ponderosa property, thus, ownership of the subject property was
automatically vested in them.
The law in this regard is covered by Article 461 of the Civil Code, which
provides:
Art. 461. River beds which are abandoned through the natural change in the
course of the waters ipso facto belong to the owners whose lands are
3
occupied by the new course in proportion to the area lost. However, the
owners of the lands adjoining the old bed shall have the right to acquire the
same by paying the value thereof, which value shall not exceed the value of
the area occupied by the new bed.
If indeed a property was the former bed of a creek that changed its course and
passed through the property of the claimant, then, pursuant to Article 461, the
ownership of the old bed left to dry by the change of course was
automaticallyacquired by the claimant.18 Before such a conclusion can be
reached, the fact of naturalabandonment of the old course must be shown, that
is, it must be proven that the creek indeed changed its course without artificial
or man-made intervention. Thus, the claimant, in this case the Reyeses, must
prove three key elements by clear and convincing evidence. These are: (1) the
oldcourse of the creek, (2) the newcourse of the creek, and (3) the change of
course of the creek from the old location to the new location by
naturaloccurrence.
In this regard, the Reyeses failed to adduce indubitable evidence to prove the
old course, its natural abandonmentand the new course. In the face of a
Torrens title issued by the government, which is presumed to have been
regularly issued, the evidence of the Reyeses was clearly wanting.
Uncorroborated testimonial evidence will not suffice to convince the Court to
order the reconveyance of the property to them. This failure did not escape the
observation of the Office of the Solicitor General. Thus, it commented:
In the case at bar, it is not clear whether or not the Marigman Creek dried-
up naturally back in 1980.Neither did private respondents submit any findings
or report from the Bureau of Lands or the DENR Regional Executive Director,
who has the jurisdiction over the subject lot, regarding the nature of change
in the course of the creeks waters.Worse, what is even uncertainin the
present case is the exact locationof the subject matter of dispute. This is
evident from the decision of the Regional Trial Court which failed to specify
which portion of the land is actually being disputed by the contending parties.
xxx
Since the propriety of the remedy taken by private respondents in the trial
court and their legal personality to file the aforesaid action depends on whether
or not the litigated property in the present case still forms part of the public
domain, or had already been converted into a private land, the identification
of the actual portion of the land subject of the controversy becomes
necessary and indispensablein deciding the issues herein involved.
xxx
Notably, private respondents failed to submit during trial any convincing proof
of a similar declaration by the government that a portion of the Marigman
Creek had already dried-up and that the same is already considered alienable
and disposable agricultural land which they could acquire through acquisitive
prescription.
Indeed, a thorough investigation is very imperative in the light of the conflicting
factual issues as to the character and actual location of the property in dispute.
These factual issues could properly be resolved by the DENR and the Land
Management Bureau, which have the authority to do so and have the duty to
carry out the provisions of the Public Land Act, after both parties have been
fully given the chance to present all their evidence. 19 [Emphases supplied]
Moreover, during cross-examination, Conrado S. Reyes admitted that the plan
surveyed for Fe de Castro Reyes and Jose de Castro, marked before the RTC
as Exhibit "A-2," was prepared by a geodetic engineer without conducting an
actual survey on the ground:
COUNSEL FOR DEFENDANTS:
I am showing to you Exhibit "A-2" which is a plan surveyed for Fe de Kastro
Reyes and Jose de Kastro. This plan was prepared by the geodetic engineer
without conducting actual survey on the ground, is it not?
A: I cannot agree to that question.
Q: But based on the certification of the geodetic engineer, who prepared this it
appears that this plan was plotted only based on the certification on this plan
marked as Exhibit "A-2", is it not?
A: Yes, sir.
Q: So, based on this certification that the geodetic engineer conducted the
survey of this plan based on the technical description without conducting
actual survey on the ground?
A: Yes, sir.20
At some point, Mr. Reyes admitted that he was not sure that the property even
existed:
COUNSEL FOR DEFENDANTS:
The subject matter of this document Exhibit I is that, that property which at
present is titled in the name of Fe de Castro Reyes married to Conrado Reyes,
et.al. is that correct?
A: Yes.
Q: The subject matter of this case now is the adjoining lot of this TCT 185252,
is that correct?
A: I do not know.
Q: You mean you do not know the lot subject matter of this case?
A: I do not know whether it really exists.
4
Q: Just answer the question, you do not know?
A: Yes.21
The conflicting claims here are (1) the title of the Galangs issued by the DENR,
through the PENRO, and (2) the claim of the Reyeses, based on
unsubstantiated testimony, that the land in question is the former bed of a dried
up creek. As between these two claims, this Court is inclined to decide in favor
of the Galangs who hold a valid and subsisting title to the property which, in
the absence of evidence to the contrary, the Court presumes to have been
issued by the PENRO in the regular performance of its official duty.
The bottom line here is that, fraud and misrepresentation, as grounds for
cancellation of patent and annulment of title, should never be presumed, but
must be proved by clear and convincing evidence, with mere preponderance of
evidence not being adequate. Fraud is a question of fact which must be
proved.22
In this case, the allegations of fraud were never proven. There was no
evidence at all specifically showing actual fraud or misrepresentation. Thus,
the Court cannot sustain the findings of the CA.
WHEREFORE,the petition 1s GRANTED.The April 9, 2008 Decision and the
October 6, 2008 Resolution .of the Court of Appeals, in CA-G.R. CV. No.
-85660, are hereby REVERSEDand SET ASIDE.Civil Case No. 97-4560 of the
Regional Trial Court of Anti polo City, Branch 73, is hereby ordered
DISMISSEDfor lack of merit.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 181359 August 5, 2013
SPOUSES CLEMENCIO C. SABITSANA, JR. and MA. ROSARIO M.
SABITSANA, Petitioners,
vs.
JUANITO F. MUERTEGUI, represented by his Attorney-in-Fact DOMINGO
A. MUERTEGUI, JR., Respondent.
DECISION
DEL CASTILLO, J.:
A lawyer may not, for his own personal interest and benefit, gamble on his client's
word, believing it at one time and disbelieving it the next. He owes his client his
undivided loyalty.
Assailed in this Petition for Review on Certiorari1 are the January 25, 2007
Decision2 of the Court of Appeals (CA) which denied the appeal in CA-G.R.
CV No. 79250, and its January 11, 2008 Resolution 3 denying petitioners
Motion for Reconsideration.4
Factual Antecedents
On September 2, 1981, Alberto Garcia (Garcia) executed an unnotarized Deed of
Sale5 in favor of respondent Juanito Muertegui 6 (Juanito) over a 7,500-square
meter parcel of unregistered land (the lot) located in Dalutan Island, Talahid,
Almeira, Biliran, Leyte del Norte covered by Tax Declaration (TD) No. 1996
issued in 1985 in Garcias name.7
Juanitos father Domingo Muertegui, Sr. (Domingo Sr.) and brother Domingo Jr.
took actual possession of the lot and planted thereon coconut and ipil-ipil trees.
They also paid the real property taxes on the lot for the years 1980 up to 1998.
On October 17, 1991, Garcia sold the lot to the Muertegui family lawyer,
petitioner Atty. Clemencio C. Sabitsana, Jr. (Atty. Sabitsana), through a notarized
deed of absolute sale.8 The sale was registered with the Register of Deeds on
February 6, 1992.9 TD No. 1996 was cancelled and a new one, TD No. 5327, 10
was issued in Atty. Sabitsanas name. Although Domingo Jr. and Sr. paid the real
estate taxes, Atty. Sabitsana also paid real property taxes in 1992, 1993, and 1999.
In 1996, he introduced concrete improvements on the property, which shortly
thereafter were destroyed by a typhoon.
When Domingo Sr. passed away, his heirs applied for registration and coverage of
the lot under the Public Land Act or Commonwealth Act No. 141. Atty. Sabitsana,
in a letter11 dated August 24, 1998 addressed to the Department of Environment
and Natural Resources CENRO/PENRO office in Naval, Biliran, opposed the
application, claiming that he was the true owner of the lot. He asked that the
application for registration be held in abeyance until the issue of conflicting
ownership has been resolved.
On April 11, 2000, Juanito, through his attorney-in-fact Domingo Jr., filed Civil
Case No. B-109712 for quieting of title and preliminary injunction, against
herein petitioners Atty. Sabitsana and his wife, Rosario, claiming that they bought
the lot in bad faith and are exercising acts of possession and ownership over the
same, which acts thus constitute a cloud over his title. The Complaint 13 prayed,
among others, that the Sabitsana Deed of Sale, the August 24, 1998 letter, and TD
No. 5327 be declared null and void and of no effect; that petitioners be ordered to
respect and recognize Juanitos title over the lot; and that moral and exemplary
damages, attorneys fees, and litigation expenses be awarded to him.
In their Answer with Counterclaim, 14 petitioners asserted mainly that the sale to
Juanito is null and void absent the marital consent of Garcias wife, Soledad Corto
5
(Soledad); that they acquired the property in good faith and for value; and that the
Complaint is barred by prescription and laches. They likewise insisted that the
Regional Trial Court (RTC) of Naval, Biliran did not have jurisdiction over the
case, which involved title to or interest in a parcel of land the assessed value of
which is merely P1,230.00.
The evidence and testimonies of the respondents witnesses during trial reveal that
petitioner Atty. Sabitsana was the Muertegui familys lawyer at the time Garcia
sold the lot to Juanito, and that as such, he was consulted by the family before the
sale was executed; that after the sale to Juanito, Domingo Sr. entered into actual,
public, adverse and continuous possession of the lot, and planted the same to
coconut and ipil-ipil; and that after Domingo Sr.s death, his wife Caseldita,
succeeded him in the possession and exercise of rights over the lot.
On the other hand, Atty. Sabitsana testified that before purchasing the lot, he was
told by a member of the Muertegui family, Carmen Muertegui Davies (Carmen),
that the Muertegui family had bought the lot, but she could not show the document
of sale; that he then conducted an investigation with the offices of the municipal
and provincial assessors; that he failed to find any document, record, or other
proof of the sale by Garcia to Juanito, and instead discovered that the lot was still
in the name of Garcia; that given the foregoing revelations, he concluded that the
Muerteguis were merely bluffing, and that they probably did not want him to buy
the property because they were interested in buying it for themselves considering
that it was adjacent to a lot which they owned; that he then proceeded to purchase
the lot from Garcia; that after purchasing the lot, he wrote Caseldita in October
1991 to inform her of the sale; that he then took possession of the lot and gathered
ipil-ipil for firewood and harvested coconuts and calamansi from the lot; and that
he constructed a rip-rap on the property sometime in 1996 and 1997.
Ruling of the Regional Trial Court
On October 28, 2002, the trial court issued its Decision 15 which decrees as
follows:
WHEREFORE, in view of the foregoing considerations, this Court finds in favor
of the plaintiff and against the defendants, hereby declaring the Deed of Sale dated
2 September 1981 as valid and preferred while the Deed of Absolute Sale dated 17
October 1991 and Tax Declaration No. 5327 in the name of Atty. Clemencio C.
Sabitsana, Jr. are VOID and of no legal effect.
The Provincial Assessor and the Municipal Assessor of Naval are directed to
cancel Tax Declaration No. 5327 as void and done in bad faith.
Further, Atty. Clemencio C. Sabitsana, Jr. is ordered to pay plaintiff Juanito
Muertigui, represented by his attorney-in-fact Domingo Muertigui, Jr. the amounts
of:
a) P30,000.00 as attorneys fees;
b) P10,000.00 as litigation expenses; and
c) Costs.
SO ORDERED.16
The trial court held that petitioners are not buyers in good faith. Petitioner Atty.
Sabitsana was the Muertegui familys lawyer, and was informed beforehand by
Carmen that her family had purchased the lot; thus, he knew of the sale to Juanito.
After conducting an investigation, he found out that the sale was not registered.
With this information in mind, Atty. Sabitsana went on to purchase the same lot
and raced to register the sale ahead of the Muerteguis, expecting that his purchase
and prior registration would prevail over that of his clients, the Muerteguis.
Applying Article 1544 of the Civil Code,17 the trial court declared that even
though petitioners were first to register their sale, the same was not done in good
faith. And because petitioners registration was not in good faith, preference
should be given to the sale in favor of Juanito, as he was the first to take
possession of the lot in good faith, and the sale to petitioners must be declared null
and void for it casts a cloud upon the Muertegui title.
Petitioners filed a Motion for Reconsideration 18 but the trial court denied19
the same.
Ruling of the Court of Appeals
Petitioners appealed to the CA20 asserting that the sale to Juanito was null and
void for lack of marital consent; that the sale to them is valid; that the lower court
erred in applying Article 1544 of the Civil Code; that the Complaint should have
been barred by prescription, laches and estoppel; that respondent had no cause of
action; that respondent was not entitled to an award of attorneys fees and
litigation expenses; and that they should be the ones awarded attorneys fees and
litigation expenses.
The CA, through its questioned January 25, 2007 Decision, 21 denied the appeal
and affirmed the trial courts Decision in toto. It held that even though the lot
admittedly was conjugal property, the absence of Soledads signature and consent
to the deed did not render the sale to Juanito absolutely null and void, but merely
voidable. Since Garcia and his wife were married prior to the effectivity of the
Family Code, Article 173 of the Civil Code 22 should apply; and under the said
provision, the disposition of conjugal property without the wifes consent is not
void, but merely voidable. In the absence of a decree annulling the deed of sale in
favor of Juanito, the same remains valid.
The CA added that the fact that the Deed of Sale in favor of Juanito was not
notarized could not affect its validity. As against the notarized deed of sale in favor
of petitioners, the CA held that the sale in favor of Juanito still prevails. Applying
Article 1544 of the Civil Code, the CA said that the determining factor is
petitioners good faith, or the lack of it. It held that even though petitioners were
first to register the sale in their favor, they did not do so in good faith, for they
already knew beforehand of Garcias prior sale to Juanito. By virtue of Atty.
Sabitsanas professional and confidential relationship with the Muertegui family,
6
petitioners came to know about the prior sale to the Muerteguis and the latters
possession of the lot, and yet they pushed through with the second sale. Far from
acting in good faith, petitioner Atty. Sabitsana used his legal knowledge to take
advantage of his clients by registering his purchase ahead of them.
Finally, the CA declared that Juanito, as the rightful owner of the lot, possessed the
requisite cause of action to institute the suit for quieting of title and obtain
judgment in his favor, and is entitled as well to an award for attorneys fees and
litigation expenses, which the trial court correctly held to be just and equitable
under the circumstances.
The dispositive portion of the CA Decision reads:
WHEREFORE, premises considered, the instant appeal is DENIED and the
Decision dated October 28, 2002 of the Regional Trial Court, 8th Judicial Region,
Branch 16, Naval, Biliran, is hereby AFFIRMED. Costs against defendants-
appellants.
SO ORDERED.23
Issues
Petitioners now raise the following issues for resolution:
I. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE
REGIONAL TRIAL COURT DID NOT HAVE JURISDICTION OVER THE
CASE IN VIEW OF THE FACT THAT THE ASSESSED VALUE OF THE
SUBJECT LAND WAS ONLY P1,230.00 (AND STATED MARKET VALUE OF
ONLY P3,450.00).
II. THE COURT OF APPEALS ERRED IN APPLYING ART. 1544 OF THE
CIVIL CODE INSTEAD OF THE PROPERTY REGISTRATION DECREE (P.D.
NO. 1529) CONSIDERING THAT THE SUBJECT LAND WAS
UNREGISTERED.
III. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE
COMPLAINT WAS ALREADY BARRED [BY] LACHES AND THE STATUTE
OF LIMITATIONS.
IV. THE COURT OF APPEALS ERRED IN AFFIRMING THE DECISION OF
THE REGIONAL TRIAL COURT ORDERING THE PETITIONERS TO PAY
ATTORNEYS FEES AND LITIGATION EXPENSES TO THE
RESPONDENT.24
Petitioners Arguments
Petitioners assert that the RTC of Naval, Biliran did not have jurisdiction over the
case. They argue that since the assessed value of the lot was a mere P1,230.00,
jurisdiction over the case lies with the first level courts, pursuant to Republic Act
No. 7691,25 which expanded their exclusive original jurisdiction to include "all
civil actions which involve title to, or possession of, real property, or any interest
therein where the assessed value of the property or interest therein does not exceed
Twenty thousand pesos (P20,000.00) or, in civil actions in Metro Manila, where
such assessed value does not exceed Fifty thousand pesos (P50,000.00) exclusive
of interest, damages of whatever kind, attorneys fees, litigation expenses and
costs."26 Petitioners thus conclude that the Decision in Civil Case No. B-1097
is null and void for lack of jurisdiction.
Petitioners next insist that the lot, being unregistered land, is beyond the coverage
of Article 1544 of the Civil Code, and instead, the provisions of Presidential
Decree (PD) No. 1529 should apply. This being the case, the Deed of Sale in favor
of Juanito is valid only as between him and the seller Garcia, pursuant to Section
113 of PD 1529;27 it cannot affect petitioners who are not parties thereto.
On the issue of estoppel, laches and prescription, petitioners insist that from the
time they informed the Muerteguis in writing about their purchase of the lot, or in
October 1991, the latter did not notify them of their prior purchase of the lot, nor
did respondent interpose any objection to the sale in their favor. It was only in
1998 that Domingo Jr. showed to petitioners the unnotarized deed of sale.
According to petitioners, this seven-year period of silence and inaction on the
Muerteguis part should be taken against them and construed as neglect on their
part to assert their rights for an unreasonable length of time. As such, their action
to quiet title should be deemed barred by laches and estoppel.
Lastly, petitioners take exception to the award of attorneys fees and litigation
expenses, claiming that since there was no bad faith on their part, such award may
not be considered just and equitable under the circumstances. Still, an award of
attorneys fees should remain the exception rather than the rule; and in awarding
the same, there must have been an express finding of facts and law justifying such
award, a requirement that is absent in this case.
Petitioners thus pray for the reversal of the questioned CA Decision and
Resolution; the dismissal of the Complaint in Civil Case No. B-1097; the deletion
of the award of attorneys fees and litigation expenses in respondents favor; and a
declaration that they are the true and rightful owners of the lot.
Respondents Arguments
Respondent, on the other hand, counters that a suit for quieting of title is one
whose subject matter is incapable of pecuniary estimation, and thus falls within the
jurisdiction of the RTC. He likewise insists that Article 1544 applies to the case
because there is a clear case of double sale of the same property to different
buyers, and the bottom line thereof lies in petitioners lack of good faith in
entering into the subsequent sale. On the issue of laches/estoppel, respondent
echoes the CAs view that he was persistent in the exercise of his rights over the
lot, having previously filed a complaint for recovery of the lot, which
unfortunately was dismissed based on technicality.
On the issue of attorneys fees and litigation expenses, respondent finds refuge in
Article 2208 of the Civil Code,28 citing three instances which fortify the award
in his favor petitioners acts compelled him to litigate and incur expenses to
protect his interests; their gross and evident bad faith in refusing to recognize his
ownership and possession over the lot; and the justness and equitableness of his
7
case.
Our Ruling
The Petition must be denied.
The Regional Trial Court has jurisdiction over the suit for quieting of title.
On the question of jurisdiction, it is clear under the Rules that an action for
quieting of title may be instituted in the RTCs, regardless of the assessed value of
the real property in dispute. Under Rule 63 of the Rules of Court, 29 an action to
quiet title to real property or remove clouds therefrom may be brought in the
appropriate RTC.
It must be remembered that the suit for quieting of title was prompted by
petitioners August 24, 1998 letter-opposition to respondents application for
registration. Thus, in order to prevent30 a cloud from being cast upon his
application for a title, respondent filed Civil Case No. B-1097 to obtain a
declaration of his rights. In this sense, the action is one for declaratory relief,
which properly falls within the jurisdiction of the RTC pursuant to Rule 63 of the
Rules.
Article 1544 of the Civil Code does not apply to sales involving unregistered land.
Both the trial court and the CA are, however, wrong in applying Article 1544 of
the Civil Code. Both courts seem to have forgotten that the provision does not
apply to sales involving unregistered land. Suffice it to state that the issue of the
buyers good or bad faith is relevant only where the subject of the sale is registered
land, and the purchaser is buying the same from the registered owner whose title to
the land is clean. In such case, the purchaser who relies on the clean title of the
registered owner is protected if he is a purchaser in good faith for value. 31
Act No. 3344 applies to sale of unregistered lands.
What applies in this case is Act No. 3344, 32 as amended, which provides for the
system of recording of transactions over unregistered real estate. Act No. 3344
expressly declares that any registration made shall be without prejudice to a third
party with a better right. The question to be resolved therefore is: who between
petitioners and respondent has a better right to the disputed lot?
Respondent has a better right to the lot.
The sale to respondent Juanito was executed on September 2, 1981 via an
unnotarized deed of sale, while the sale to petitioners was made via a notarized
document only on October 17, 1991, or ten years thereafter. Thus, Juanito who
was the first buyer has a better right to the lot, while the subsequent sale to
petitioners is null and void, because when it was made, the seller Garcia was no
longer the owner of the lot. Nemo dat quod non habet.
The fact that the sale to Juanito was not notarized does not alter anything, since the
sale between him and Garcia remains valid nonetheless. Notarization, or the
requirement of a public document under the Civil Code, 33 is only for
convenience, and not for validity or enforceability.34 And because it remained
valid as between Juanito and Garcia, the latter no longer had the right to sell the lot
to petitioners, for his ownership thereof had ceased.
Nor can petitioners registration of their purchase have any effect on Juanitos
rights. The mere registration of a sale in ones favor does not give him any right
over the land if the vendor was no longer the owner of the land, having previously
sold the same to another even if the earlier sale was unrecorded.35 Neither could
it validate the purchase thereof by petitioners, which is null and void. Registration
does not vest title; it is merely the evidence of such title. Our land registration laws
do not give the holder any better title than what he actually has.36
Specifically, we held in Radiowealth Finance Co. v. Palileo37 that:
Under Act No. 3344, registration of instruments affecting unregistered lands is
without prejudice to a third party with a better right. The aforequoted phrase has
been held by this Court to mean that the mere registration of a sale in ones favor
does not give him any right over the land if the vendor was not anymore the owner
of the land having previously sold the same to somebody else even if the earlier
sale was unrecorded.
Petitioners defense of prescription, laches and estoppel are unavailing since their
claim is based on a null and void deed of sale. The fact that the Muerteguis failed
to interpose any objection to the sale in petitioners favor does not change
anything, nor could it give rise to a right in their favor; their purchase remains void
and ineffective as far as the Muerteguis are concerned.
The award of attorneys fees and litigation expenses is proper because of
petitioners bad faith.
Petitioners actual and prior knowledge of the first sale to Juanito makes them
purchasers in bad faith. It also appears that petitioner Atty. Sabitsana was remiss in
his duties as counsel to the Muertegui family. Instead of advising the Muerteguis
to register their purchase as soon as possible to forestall any legal complications
that accompany unregistered sales of real property, he did exactly the opposite:
taking advantage of the situation and the information he gathered from his
inquiries and investigation, he bought the very same lot and immediately caused
the registration thereof ahead of his clients, thinking that his purchase and prior
registration would prevail. The Court cannot tolerate this mercenary attitude.
Instead of protecting his clients interest, Atty. Sabitsana practically preyed on him.
Petitioner Atty. Sabitsana took advantage of confidential information disclosed to
him by his client, using the same to defeat him and beat him to the draw, so to
speak. He rushed the sale and registration thereof ahead of his client. He may not
be afforded the excuse that he nonetheless proceeded to buy the lot because he
believed or assumed that the Muerteguis were simply bluffing when Carmen told
him that they had already bought the same; this is too convenient an excuse to be
believed. As the Muertegui family lawyer, he had no right to take a position, using
information disclosed to him in confidence by his client, that would place him in
possible conflict with his duty. He may not, for his own personal interest and
8
benefit, gamble on his clients word, believing it at one time and disbelieving it the
next. He owed the Muerteguis his undivided loyalty. He had the duty to protect the
client, at all hazards and costs even to himself.38
Petitioner Atty. Sabitsana is enjoined to "look at any representation situation from
the point of view that there are possible conflicts, and further to think in terms of
impaired loyalty, that is, to evaluate if his representation in any way will impair his
loyalty to a client."39
Moreover, as the Muertegui familys lawyer, Atty. Sabitsana was under obligation
to safeguard his client's property, and not jeopardize it. Such is his duty as an
attorney, and pursuant to his general agency.40
Even granting that Atty. Sabitsana has ceased to act as the Muertegui family's
lawyer, he still owed them his loyalty.1wphi1 The termination of attorney-client
relation provides no justification for a lawyer to represent an interest adverse to or
in conflict with that of the former client on a matter involving confidential
information which the lawyer acquired when he was counsel. The client's
confidence once reposed should not be divested by mere expiration of professional
employment.41 This is underscored by the fact that Atty. Sabitsana obtained
information from Carmen which he used to his advantage and to the detriment of
his client.
from the foregoing disquisition, it can be seen that petitioners are guilty of bad
faith in pursuing the sale of the lot despite being apprised of the prior sale in
respondent's favor. Moreover, petitioner Atty. Sabitsana has exhibited a lack of
loyalty toward his clients, the Muerteguis, and by his acts, jeopardized their
interests instead of protecting them. Over and above the trial court's and the CA's
findings, this provides further justification for the award of attorney's fees,
litigation expenses and costs in favor of the respondent.
Thus said, judgment must be rendered in favor of respondent to prevent the
petitioners' void sale from casting a cloud upon his valid title.
WHEREFORE, premises considered, the Petition is DENIED. The January 25,
2007 Decision and the January 11, 2008 Resolution of the Court of Appeals in CA-
G.R. CV No. 79250 are AFFIRMED. Costs against petitioners.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 146030 December 3, 2002
REPUBLIC OF THE PHILIPPINES, represented by the Department of
Environment and Natural Resources, petitioner,
vs.
HEIRS OF FELIPE ALEJAGA SR., represented by ROQUETA ALEJAGA,
FELIPE ALEJAGA JR., MARIA DULLA ALEJAGA, FELIPE ALEJAGA
III, ROQUETA ALEJAGA, JENNIFER ALEJAGA,
EVERETTE CAPUNDAN, AND LYNETTE ALEJAGA; THE PHILIPPINE
NATIONAL BANK and THE REGISTER OF DEEDS OF ROXAS CITY,
respondents.
DECISION
PANGANIBAN, J.:
We reiterate the familiar doctrine that a free patent obtained through fraud or
misrepresentation is void. Furthermore, the one-year prescriptive period provided
in the Public Land Act does not bar the State from asking for the reversion of
property acquired through such means.
Statement of the Case
Before us is a Petition for Review on Certiorari under Rule 45 of the Rules of
Court, assailing the November 15, 2000 Decision 1 of the Court of Appeals (CA) in
CA-GR CV No. 44568. The decretal portion of the challenged Decision reads as
follows:
"WHEREFORE, the appealed decision is hereby REVERSED, SET ASIDE and
RECALLED."2
The Facts
The factual antecedents of the case are summarized by the CA thus:
"On December 28, 1978, [Respondent] Felipe Alejaga, Sr. x x x filed with the
District Land Office, Roxas City, Free Patent Application No. (VI-2) 8442
covering a parcel of land identified as Lot 1, Mli-06-000020-D, with an area of .
3899 hectares, more or less located at Dumolog, Roxas City (Exh. "A"; Exh "9").
It appears that on December 27, 1978, when the application was executed under
oath, Efren L. Recio, Land Inspector, submitted a report of his investigation and
verification of the land to the District Land Office, Bureau of Lands, City of
Roxas. On March 14, 1979, the District Land Officer of Roxas City approved the
application and the issuance of [a] Free Patent to the applicant. On March 16,
1979, the patent was also ordered to be issued and the patent was forwarded to
defendant Register of Deeds, City of Roxas, for registration and issuance of the
corresponding Certificate of Title. Thereafter, Original Certificate of Title No. P-
15 Free Patent No. (VI-2) 3358 was issued to [respondent] by defendant Register
of Deeds.
"On April 4, 1979, the heirs of Ignacio Arrobang, through counsel in a letter-
complaint requested the Director of Lands, Manila, for an investigation of the
District Land Officer, Roxas City, and the Regional Office, Region VI, Iloilo City,
for irregularities in the issuance of the title of a foreshore land in favor of
[respondent]. Isagani Cartagena, Supervising Special Investigator, Legal Division,
Land Management Bureau (formerly Bureau of Lands) submitted his Report dated
April 17, 1989. The Chief, Legal Division, Land Management Bureau, Manila,
recommended to the Director of Lands appropriate civil proceeding for the
9
cancellation of Free Patent Title No. (VI-2) 3358 and the corresponding Original
Certificate of Title No. P-15 in the name of [respondent].
"In the meantime, [respondent] obtained a NACIDA loan under the Cottage
Industry Guarantee and Loan Fund by the defendant Philippine National Bank
(hereinafter referred to as PNB) executed in Cebu City in the amount of
P100,000.00 on August 18, 1981. The loan was secured by a real estate mortgage
in favor of defendant PNB. The promissory note of appellant was annotated at the
back of the title.
"On April 18, 1990, the government through the Solicitor General instituted an
action for Annulment/Cancellation of Patent and Title and Reversion against
[respondent], the PNB of Roxas City and defendant Register of Deeds of Roxas
City covering Free Patent Application (VI-2) 8442 of the parcel of land with an
area of .3899 hectares more or less located at Dumolog, Roxas City.
"On November 17, 1990, while the case is pending hearing, [respondent] died. He
was substituted by his wife Roqueta Alejaga and his children, namely: Everette
Alejaga, Lynnette Alejaga, Felipe Alejaga, Jr., Maria Dulla Alejaga. Roqueta
Alejaga, Jennifer Alejaga and Felipe Alejaga III.
xxx xxx xxx
"After hearing, the [trial] court in its dispositive portion decreed as follows:
WHEREFORE, judgment is rendered declaring that the approval of Free Patent
Application No. 3358 and issuance of Original Certificate of Title No. P-15 in the
name of Felipe Alejaga is by means of fraud hence, null and void ab initio and the
court orders:
a) the cancellation of the approval of the application No. (VI-2) 8442 covering
Lot No. 1, Mli-06-000020-D with an area of .3899 hectares, more or less, located
at Dumulog, Roxas City;
b) the cancellation of Original Certificate of Title No. P-15, Free Patent No. (VI-
2) 3358 in the name of Felipe Alejaga;
c) the land covered thereby as above described is reverted to the mass of the
public domain;
d) the defendants, Heirs of Felipe Alejaga Sr. or defendant, Philippine National
Bank, Roxas City Branch, to surrender the owners duplicate copy of above
described Original Certificate of Title No. P-15 to the Register of Deeds (now
Registries of Land Titles and Deeds), Roxas City;
e) the defendant, Register of Deeds, Roxas City, to cancel Original Certificate of
Title No. P-15 and the owners duplicate copy of said title surrendered by above
stated defendants;
f) defendants, Philippine National Bank, cross-claim is dismissed.
"Costs against the defendants Heirs of Felipe, Alejaga, Sr."3
Ruling of the Court of Appeals
In reversing the RTC, the CA ruled that petitioner failed to prove its allegation that
respondents had obtained the free patent and the Certificate of Title through fraud
and misrepresentation.4 The appellate court likewise held that, assuming there was
misrepresentation or fraud as claimed by petitioner, the action for reversion should
have been brought within one (1) year from the registration of the patent with the
Registry of Deeds.5
Further, the CA brushed aside as hearsay Isagani Cartagenas testimony that Land
Inspector Efren L. Recio had not conducted an investigation on the free patent
application of Felipe Alejaga Sr.6 The CA added that petitioner had failed to
support its claim that the lot covered by respondents free patent and title was
foreshore land.7
Hence, this Petition.8
Issues
Petitioner raises the following issues for this Courts consideration:
"I
The Honorable Court of Appeals erred in not finding that the case is already final
and executory as against respondent PNB.
"II
The Court of Appeals erred in not considering that petitioner has proven the
allegations to the Complaint.
"III
The Honorable Court of Appeals erred in declaring that the action for reversion is
unavailing."9
Simply stated, the issues can be summed up into two: (1) the efficacy of the grant
of the free patent and (2) the indefeasibility of the Certificate of Title issued in
consequence thereof.
This Courts Ruling
The Petition is meritorious.
First Issue:
Efficacy of the Grant
Petitioner argues that it has proven fraud in the issuance of Respondent Alejagas
free patent and Certificate of Title.10 It also avers that Respondent PNB has failed
to file a timely Notice of Appeal.
On the other hand, the Alejagas contend that they have acquired a vested right over
the parcel of land covered by OCT No. P-15 by virtue of their proven open, actual,
exclusive and undisputed possession of the land for more than 30 years. 11
At the outset, we must immediately clarify that the records show receipt by
Respondent PNB of a copy of the Decision on October 27, not on October 3, 1993
as alleged by petitioner.12 Further, the bank filed its Notice of Appeal on November
9, 1993, within the 15-day reglementary period.
In addition, we must point out that the essential issue raised in this Petition -- the
presence of fraud -- is factual. As a general rule, this Court does not review factual
matters.13 However, the instant case falls under one of the exceptions, because the
findings of the CA conflict with those of the RTC and with the evidence on
10
record.14
We begin our resolution of this issue with the well-settled rule that the party
alleging fraud or mistake in a transaction bears the burden of proof. 15 The
circumstances evidencing fraud are as varied as the people who perpetrate it in
each case.16 It may assume different shapes and forms; it may be committed in as
many different ways.17 Thus, the law requires that it be established by clear and
convincing evidence.18
In the case before us, we find that petitioner has adduced a preponderance of
evidence before the trial court, showing manifest fraud in procuring the patent. 19
This Court agrees with the RTC that in obtaining a free patent over the lot under
scrutiny, petitioner had resorted to misrepresentation or fraud, signs of which
were20 ignored by the Court of Appeals.21
First, the issuance of the free patent was not made in accordance with the
procedure laid down by Commonwealth Act No. 141, otherwise known as the
Public Land Act.22 Under Section 91 thereof, an investigation should be conducted
for the purpose of ascertaining whether the material facts set out in the application
are true.23
Further, after the filing of the application, the law requires sufficient notice to the
municipality and the barrio where the land is located, in order to give adverse
claimants the opportunity to present their claims. 24 Note that this notice and the
verification and investigation of the parcel of land are to be conducted after an
application for free patent has been filed with the Bureau of Lands.
In this case, however, Felipe Alejaga Sr.s Application for Free Patent 25 was dated
and filed on December 28, 1978. On the other hand, the Investigation &
Verification Report26 prepared by Land Inspector Elfren L. Recio of the District
Land Office of the Bureau of Lands of Roxas City was dated December 27, 1978.
In that Report, he stated that he had conducted the "necessary investigation and
verification in the presence of the applicant." Even if we accept this statement as
gospel truth, the violation of the rule cannot be condoned because, obviously, the
required notice to adverse claimants was not served.
Evidently, the filing of the application and the verification and investigation
allegedly conducted by Recio were precipitate and beyond the pale of the Public
Land Act.27 As correctly pointed out by the trial court, investigation and
verification should have been done only after the filing of the application. Hence,
it would have been highly anomalous for Recio to conduct his own investigation
and verification on December 27, 1998, a day before Felipe Alejaga Sr. filed the
Application for Free Patent.28 It must also be noted that while the Alejagas insist
that an investigation was conducted, they do not dispute the fact that it preceded
the filing of the application.29
Second, the claim of the Alejagas that an actual investigation was conducted is not
sustained by the Verification & Investigation Report itself, which bears no
signature.30 Their reliance on the presumption of regularity in the performance of
official duty31 is thus misplaced. Since Recios signature does not appear on the
December 27, 1978 Report, there can be no presumption that an investigation and
verification of the parcel of land was actually conducted. Strangely, respondents
do not proffer any explanation why the Verification & Investigation Report was
not signed by Recio. Even more important and as will later on be explained, this
alleged presumption of regularity -- assuming it ever existed -- is overcome by the
evidence presented by petitioner.
Third, the report of Special Investigator Isagani P. Cartagena has not been
successfully rebutted. In that report, Recio supposedly admitted that he had not
actually conducted an investigation and ocular inspection of the parcel of land.
Cartagenas statement on Recios alleged admission may be considered as
"independently relevant." A witness may testify as to the state of mind of another
person -- the latters knowledge, belief, or good or bad faith -- and the formers
statements may then be regarded as independently relevant without violating the
hearsay rule.32
Thus, because Cartagena took the witness stand and opened himself to cross-
examination, the Investigation Report33 he had submitted to the director of the
Bureau of Lands constitutes part of his testimony. Those portions of the report that
consisted of his personal knowledge, perceptions and conclusions are not
hearsay.34 On the other hand, the part referring to the statement made by Recio
may be considered as independently relevant.35
The doctrine on independently relevant statements holds that conversations
communicated to a witness by a third person may be admitted as proof that,
regardless of their truth or falsity, they were actually made. Evidence as to the
making of such statements is not secondary but primary, for in itself it (a)
constitutes a fact in issue 36 or (b) is circumstantially relevant to the existence of
such fact.37
Since Cartagenas testimony was based on the report of the investigation he had
conducted, his testimony was not hearsay and was, hence, properly admitted by
the trial court.38
Based on the foregoing badges of fraud, we sustain petitioners contention that the
free patent granted to Felipe Alejaga Sr. is void.39 Such fraud is a ground for
impugning the validity of the Certificate of Title. 40 The invalidity of the patent is
sufficient basis for nullifying the Certificate of Title issued in consequence thereof,
since the latter is merely evidence of the former.41 Verily, we must uphold
petitioners claim that the issuance of the Alejagas patent and title was tainted
with fraud.42
Second Issue:
Indefeasibility of Title
Petitioner contends that the State has an imprescriptible right to cause the
reversion of a piece of property belonging to the public domain. 43 On the other
hand, the Alejagas claim that, pursuant to Section 32 of PD 1529 44 -- otherwise
11
known as the Property Registration Decree -- the one-year period for reversion has
already lapsed.45 Thus, the States Complaint for reversion should be dismissed.
We agree with petitioner.
True, once a patent is registered and the corresponding certificate of title issued,
the land covered by them ceases to be part of the public domain and becomes
private property. Further, the Torrens Title issued pursuant to the patent becomes
indefeasible a year after the issuance of the latter.46 However, this indefeasibility of
a title does not attach to titles secured by fraud and misrepresentation. 47 Well-
settled is the doctrine that the registration of a patent under the Torrens System
does not by itself vest title; it merely confirms the registrants already existing one.
Verily, registration under the Torrens System is not a mode of acquiring
ownership.48
Therefore, under Section 101 of Commonwealth Act No. 141, 49 the State -- even
after the lapse of one year -- may still bring an action for the reversion to the
public domain of land that has been fraudulently granted to private individuals. 50
Further, this indefeasibility cannot be a bar to an investigation by the State as to
how the title has been acquired, if the purpose of the investigation is to determine
whether fraud has in fact been committed in securing the title. 51
In the case before us, the indefeasibility of a certificate of title cannot be invoked
by the Alejagas, whose forebear obtained the title by means of fraud. 52 Public
policy demands that those who have done so should not be allowed to benefit from
their misdeed.53 Thus, prescription and laches will not bar actions filed by the State
to recover its own property acquired through fraud by private individuals. 54 This is
settled law.55
Prohibition Against Alienation or Encumbrance
Assuming arguendo that the Alejagas title was validly issued, there is another
basis for the cancellation of the grant and the reversion of the land to the public
domain. Section 118 of Commonwealth Act No. 141 56 proscribes the encumbrance
of a parcel of land acquired under a free patent or homestead within five years
from its grant.57 The prohibition against any alienation or encumbrance of the land
grant is a proviso attached to the approval of every application.58
Further, corporations are expressly forbidden by law to have any right or title to, or
interest in, lands that are granted under free or homestead patents; or any
improvements thereon. They are forbidden from enjoying such right, title or
interest, if they have not secured the consent of the grantee and the approval of the
secretary of the Department of Agriculture and Natural Resources; and if such
lands are to be devoted to purposes other than education, charity, or easement of
way.59
In the case at bar, Free Patent No. (VI-2) 3358 60 was approved and issued on
March 14, 1979. Corresponding Original Certificate of Title No. P-15 61 was issued
on the same date. On August 18, 1981, or two (2) years after the grant of the free
patent, Felipe Alejaga Sr. obtained from Respondent PNB a loan 62 in the amount of
P100,000. Despite the statement on the title certificate itself that the land granted
under the free patent shall be inalienable for five (5) years from the grant, a real
estate mortgage was nonetheless constituted on the parcel of land covered by OCT
No. P-15.63 In his testimony, Gabriel D. Aranas Jr., then Cashier III of respondent
bank, even admitted that the PNB was aware of such restriction.
"COURT You testified Mr. Aranas that you inspected the title also when you credit
investigated the loan applicant Felipe Alejaga and you have personally examined
this?
A Yes, your Honor.
COURT Do you conclude that this Original Certificate of Title is a [free] patent?
A Yes, your Honor.
COURT And this [free] patent was granted on March 19, 1979.
A Yes, your honor.
COURT And as such [free] patent it cannot be alienated except [to] the
government or within five years from its issuance?
A Yes, your honor.
COURT Why did you recommend the loan?
A Because it is just a mortgage."64
Thus, the mortgage executed by Respondent Felipe Alejaga Sr. falls squarely
within the term encumbrance proscribed by Section 118 of the Public Land Act. 65
A mortgage constitutes a legal limitation on the estate, and the foreclosure of the
mortgage would necessarily result in the auction of the property.66
As early as Pascua v. Talens, 67 we have explained the rationale for the prohibition
against the encumbrance of a homestead -- its lease and mortgage included -- an
encumbrance which, by analogy, applies to a free patent. We ruled as follows:
"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
encumbrance of the homestead (Section 116) within five years after the grant of
the patent."
Further, an encumbrance on a parcel of land acquired through free patent
constitutes sufficient ground for the nullification of such grant, as provided under
Commonwealth Act No. 141, which we quote:
"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 Act shall be unlawful and
null and void from its execution and shall produce the effect of annulling and
canceling the grant, title, patent, or permit originally issued, recognized or
confirmed, actually or presumptively, and cause the reversion of the property and
its improvements to the State."
Mortgage over a parcel of land acquired through a free patent grant nullifies the
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award and constitutes a cause for the reversion of the property to the state, as we
held in Republic v. Court of Appeals:68
"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."69
To comply with the condition for the grant of the free patent, within five years
from its issuance, Felipe Alejaga Sr. should not have encumbered the parcel land
granted to him. The mortgage he made over the land violated that condition. 70
Hence, the property must necessarily revert to the public domain, pursuant to
Section 124 of the Public Land Act.
WHEREFORE, the Petition is GRANTED and the assailed Decision SET ASIDE.
The Decision of the RTC of Roxas City (Branch 15) dated October 27, 1993 is
REINSTATED. No costs.
SO ORDERED.

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