[G.R. NO.

150654 : December 13, 2007]
HEIRS OF ANACLETO B. NIETO, namely, SIXTA P. NIETO,
EULALIO P. NIETO, GAUDENCIO P. NIETO, and CORAZON P.
NIETO-IGNACIO, represented by EULALIO P.
NIETO, Petitioners, v. MUNICIPALITY OF MEYCAUAYAN,
BULACAN, represented by MAYOR EDUARDO
ALARILLA, Respondent.
imprescriptibility of actions to recover land covered by the Torrens System
could only be invoked by the registered owner, Anacleto Nieto, and that the
action was also barred by laches.
Petitioners appealed the case to the Court of Appeals (CA). On October 30,
2001, the CA rendered a Decision dismissing the case for lack of jurisdiction.
According to the CA, the petition involved a pure question of law; hence,
petitioners should have filed a petition directly with this Court.6

DECISION
NACHURA, J.:
This is a Petition for Review on Certiorari of the Decision1 of the Court of
Appeals, dated October 30, 2001, which dismissed the Petition for Review of
the Decision of the Regional Trial Court (RTC) of Malolos, Bulacan. The
latter dismissed a complaint to recover possession of a registered land on the
ground of prescription and laches.
The antecedents are as follows:
Anacleto Nieto was the registered owner of a parcel of land, consisting of
3,882 square meters, situated at Poblacion, Meycauayan, Bulacan and covered
by TCT No. T-24.055 (M). The property is being used by respondent,
Municipality of Meycauayan, Bulacan, which constructed an extension of the
public market therein.
Accordingly, petitioners elevated the case to this Court through a Petition for
Review on Certiorari, raising the following issues:
A. Are lands covered by the Torrens System subject to prescription?cralaw
library
B. May the defense of [l]aches be invoked in this specific case?cralaw library
C. May the defense of imprescriptibility only be invoked by the registered
owner to the exclusion of his legitimate heirs?7
The petition is meritorious.
Respondent argues that the action of petitioner to recover possession of the
property is already barred by prescription.
We do not agree.

Upon Anacleto's death on July 26, 1993, his wife, Sixta P. Nieto, and their
three children, namely, Eulalio P. Nieto, Gaudencio Nieto and Corazon Nieto-
Ignacio, herein petitioners, collated all the documents pertaining to his estate.
When petitioners failed to locate the owner's duplicate copy of TCT No. T-
24.055 (M), they filed a petition for the issuance of a second owner's copy
with the RTC, Malolos, Bulacan. In that case, petitioners discovered that the
missing copy of the title was in the possession of the respondent.
Consequently, petitioners withdrew the petition and demanded from
respondent the return of property and the certificate of title.
On February 23, 1994, petitioners formally demanded from respondent the
return of the possession and full control of the property, and payment of a
monthly rent with interest from January 1964. Respondent did not comply
with petitioners' demand.2
On December 28, 1994, petitioners filed a complaint3 for recovery of
possession and damages against respondent alleging that the latter was in
possession of the owner's copy of TCT No. T-24.055 (M). They averred that,
in 1966, respondent occupied the subject property by making it appear that it
would expropriate the same. Respondent then used the land as a public market
site and leased the stalls therein to several persons without paying Anacleto
Nieto the value of the land or rent therefor. Petitioners prayed that respondent
be ordered to surrender to them the owner's copy of TCT No. T-24.055 (M),
vacate the property, and pay them the rents thereon from 1966 until the date of
the filing of the complaint for the total of P1,716,000.00, and P10,000.00 a
month thereafter, as well as P300,000.00 as moral damages, and P100,000.00
as attorney's fees.
In its Answer,4 respondent alleged that the property was donated to it and that
the action was already time-barred because 32 years had elapsed since it
possessed the property.
Respondent and counsel failed to appear during the scheduled pre-trial
conference.5 Upon petitioners' motion, respondent was declared as in default
and petitioners were allowed to present evidence ex parte. Respondent filed a
motion for reconsideration which the RTC granted. Respondent was then
allowed to cross-examine petitioners' lone witness and present its own
evidence. However, despite notice, respondent failed again to appear during
the scheduled hearing. Hence, the RTC considered respondent to have waived
its right to cross-examine petitioners' witness and present its own evidence.
The case was then submitted for decision.
On August 1, 1995, the RTC rendered a Decision dismissing the complaint as
well as respondent's counterclaims for damages. For lack of proof, the RTC
disregarded respondent's claim that Anacleto Nieto donated the property to it
in light of the fact that the title remained in the name of Anacleto.
Nonetheless, the RTC did not rule in favor of petitioners because of its finding
that the case was already barred by prescription. It held that the
An action to recover possession of a registered land never prescribes in view
of the provision of Section 44 of Act No. 496 to the effect that no title to
registered land in derogation of that of a registered owner shall be acquired by
prescription or adverse possession.8 It follows that an action by the registered
owner to recover a real property registered under the Torrens System does not
prescribe.
Despite knowledge of this avowed doctrine, the trial court ruled that
petitioners' cause of action had already prescribed on the ground that the
imprescriptibility to recover lands registered under the Torrens System can
only be invoked by the person under whose name the land is registered.
Again, we do not agree. It is well settled that the rule on imprescriptibility of
registered lands not only applies to the registered owner but extends to the
heirs of the registered owner as well.9 Recently in Mateo v. Diaz,10 the Court
held that prescription is unavailing not only against the registered owner, but
also against his hereditary successors because the latter step into the shoes of
the decedent by operation of law and are the continuation of the personality of
their predecessor-in-interest. Hence, petitioners, as heirs of Anacleto Nieto,
the registered owner, cannot be barred by prescription from claiming the
property.
Aside from finding that petitioners' cause of action was barred by prescription,
the trial court reinforced its dismissal of the case by holding that the action
was likewise barred by laches.
Laches has been defined as the failure or neglect, for an unreasonable and
unexplained length of time, to do that which, by exercising due diligence
could or should have been done earlier. It is negligence or omission to assert a
right within a reasonable time, warranting the presumption that the party
entitled to assert his right has either abandoned or declined to assert it.11
In a number of cases, the Court has held that an action to recover registered
land covered by the Torrens System may not be barred by laches.12 Laches
cannot be set up to resist the enforcement of an imprescriptible legal
right.13 Laches, which is a principle based on equity, may not prevail against a
specific provision of law, because equity, which has been defined as "justice
outside legality," is applied in the absence of and not against statutory law or
rules of procedure.14
In recent cases, 15 however, the Court held that while it is true that a Torrens
title is indefeasible and imprescriptible, the registered landowner may lose his
right to recover possession of his registered property by reason of laches.
Yet, even if we apply the doctrine of laches to registered lands, it would still
not bar petitioners' claim. It should be stressed that laches is not concerned
only with the mere lapse of time.16 The following elements must be present in
order to constitute laches:
(1) conduct on the part of the defendant, or of one under whom he claims,
giving rise to the situation of which complaint is made for which the
complaint seeks a remedy;

(2) delay in asserting the complainant's rights, the complainant having had
knowledge or notice, of the defendant's conduct and having been afforded an
opportunity to institute a suit;

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

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

We note that the certificate of title in the name of Anacleto Nieto was found in
respondent's possession but there was no evidence that ownership of the
property was transferred to the municipality either through a donation or by
expropriation, or that any compensation was paid by respondent for the use of
the property. Anacleto allegedly surrendered the certificate of title to
respondent upon the belief that the property would be expropriated. Absent
any showing that this certificate of title was fraudulently obtained by
respondent, it can be presumed that Anacleto voluntarily delivered the same to
respondent. Anacleto's delivery of the certificate of title to respondent could,
therefore, be taken to mean acquiescence to respondent's plan to expropriate SPOUSES AMANCIO and   G.R. No. 152627
the property, or a tacit consent to the use of the property pending its LUISA SARMIENTO and
expropriation. PEDRO OGSINER,    

This Court has consistently held that those who occupy the land of another at P e t i t i o n e r s,    
the latter's tolerance or permission, without any contract between them, are
necessarily bound by an implied promise that the occupants will vacate the      
property upon demand.18 The status of the possessor is analogous to that of a
lessee or tenant whose term of lease has expired but whose occupancy - versus -   Present:
continues by tolerance of the owner. In such case, the unlawful deprivation or
     
withholding of possession is to be counted from the date of the demand to
vacate.19 Upon the refusal to vacate the property, the owner's cause of action   PUNO,
THE HON. COURT OF
accrues.
APPEALS (Special Former Fifth
Division), RODEANNA   Chairman,
In this case, the first element of laches occurred the moment respondent
refused to vacate the property, upon petitioners demand, on February 23, REALTY CORPORATION, THE
  AUSTRIA-MARTINEZ,
1994. The filing of the complaint on December 28, 1994, after the lapse of a HEIRS OF CARLOS MORAN
period of only ten months, cannot be considered as unreasonable delay SISON, PROVINCIAL SHERIFF   CALLEJO, SR.,
amounting to laches. OF PASIG, M.M., MUNICIPAL
(CITY) TREASURER OF   TINGA and
Moreover, case law teaches that if the claimant's possession of the land is MARIKINA, JOSE F. PUZON,
merely tolerated by its lawful owner, the latter's right to recover possession is THE HON. EFICIO ACOSTA,   CHICO-NAZARIO, JJ .
never barred by laches. Even if it be supposed that petitioners were aware of REGIONAL TRIAL COURT OF
PASIG CITY, BRANCH 155 and    
respondent's occupation of the property, and regardless of the length of that
possession, the lawful owners have a right to demand the return of their REGISTER OF DEEDS OF
 
property at any time as long as the possession was unauthorized or merely MARIKINA (CITY), RIZAL,
tolerated, if at all.20  
R e s p o n d e n t s.
Furthermore, the doctrine of laches cannot be invoked to defeat justice or to  
perpetrate fraud and injustice. It is the better rule that courts, under the
principle of equity, will not be guided or bound strictly by the statute of  
limitations or the doctrine of laches when by doing so, manifest wrong or
injustice would result.21  

Finally, we find that the rentals being prayed for by petitioners are reasonable  
considering the size and location of the subject property. Accordingly, the
Promulgated:
award of rentals is warranted.
 
WHEREFORE, premises considered, the petition is GRANTED. The
Decision of the Regional Trial Court of Malolos, Bulacan, dated August 1, September 16, 2005
1995, is REVERSED and SET ASIDE. Respondent is ORDERED (a) to
vacate and surrender peaceful possession of the property to petitioners, or pay x--------------------------------------------------x
the reasonable value of the property; (b) to pay P1,716,000.00 as reasonable
compensation for the use of the property from 1966 until the filing of the  
complaint and P10,000.00 monthly rental thereafter until it vacates the
property, with 12% interest from the filing of the complaint until fully paid; DECISION
and (c) to return to petitioners the duplicate copy of TCT No. T-24.055 (M).
 
SO ORDERED.
CHICO-NAZARIO, J .:
In a case for recovery of possession based on ownership (accion
reivindicatoria), is the defendant's third-party complaint for cancellation of
plaintiff's title a collateral attack on such title?
This is the primary issue that requires resolution in this petition for review
on certiorari of the Decision [1] of the Court of Appeals dated 27 November
2001 and its Resolution [2] dated 08 March 2002 affirming the Decision of
the Regional Trial Court (RTC) of Pasig, Branch 162, in Civil Case No.
54151, finding for then plaintiff (private respondent herein) Rodeanna Realty
Corporation (RRC).
The relevant antecedents of this case have been summarized by the Court of
Appeals as follows:
 
The subject of the present controversy is a parcel of land situated in Marikina
covered by Transfer Certificate of Title No. N-119631 and registered in the
name of the plaintiff-appellee RODEANNA REALTY CORPORATION.
 
The aforementioned land was previously owned by the Sarmiento spouses by
virtue of a deed of absolute sale executed on July 17, 1972 and as evidenced
by a Transfer Certificate of Title No. 3700807. Upon acquisition of the land,
the Sarmiento spouses appointed PEDRO OGSINER as their overseer.
On August 15, 1972, the subject land was mortgaged by the Sarmiento
spouses to Carlos Moran Sison (Mr. Sison) as a security for a sixty-five
thousand three hundred seventy pesos and 25/100 loan obtained by the
Sarmiento spouses from Mr. Sison.
Upon failure of the Sarmiento spouses to pay the loan, Mr. Sison initiated the
extra-judicial foreclosure sale of the mortgaged property, and on October 20,
1977, the said property was foreclosed through the Office of the Sheriff of
Rizal, which accordingly, issued a certificate of sale in favor of Mr. Sison, and
which Mr. Sison caused to be annotated on the title of Sarmiento spouses on
January 31, 1978.
On August 25, 1982, JOSE PUZON (Mr. Puzon) purchased the same property
in an auction sale conducted by the Municipal Treasurer of Marikina for non-
payment of taxes. After paying P3,400.00, he was issued a certificate of sale
and caused it to be registered in the Registry of Deeds of Marikina. No
redemption having been made by the Sarmiento spouses, a final bill of sale
was issued in his (Mr. Puzon) favor. Thereafter, Mr. Puzon filed a petition for
consolidation of ownership and issuance of new title over the subject property
before the Regional Trial Court of Pasig, Branch 155. The said petition, which
was docketed as LRC Case No. T-3367, was granted by the court in its Order
dated August 03, 1984. Thereafter, Transfer Certificate of Title No. 102902
was issued in the name of Jose Puzon.
 
On August 16, 1986, Mr. Puzon sold the property in question to herein
plaintiff-appellee. By virtue of such sale, a transfer certificate of title over the
subject property was issued in favor of the plaintiff-appellee. Records show
that Mr. Puzon assured the plaintiff-appellee that he (Jose Puzon) will take
care of the squatters in the subject property by filing an ejectment case against
them. However, Mr. Puzon failed to comply with his promise.
 
On December 19, 1986, plaintiff-appellee filed a complaint for recovery of
possession with damages against the Sarmiento spouses and Pedro Ogsiner,
the Sarmiento spouses' caretaker of the subject property who refused to vacate
the premises. In its complaint, plaintiff-appellee alleged that the Sarmiento
spouses lost all the rights over the property in question when a certificate of
sale was executed in favor of Mr. Sison for their failure to pay the mortgage
loan.
On January 30, 1987, the Sarmiento spouses filed a motion for leave to file a
third-party complaint against Mr. Sison, the Provincial Sheriff of Pasig, Mr.
Puzon, the Judge of Regional Trial Court of Branch 155 in LRC Case No. R-
3367 and the Register of Deeds of Marikina. On the same date the Sarmiento
spouses filed their answer to the complaint. Expectedly, plaintiff-appellee
opposed the motion.
In its order dated June 16, 1987, the trial court denied the motion of the
Sarmiento spouses. Records show that the said order of the trial court was set
aside in a petition for certiorari filed before this Court. Hence, the third-party
complaint was admitted. Consequently, Mr. Sison, the Register of Deeds of
Marikina filed their answer, while Mr. Puzon filed a motion to dismiss the
third-party complaint on the grounds of misjoinder of causes of action and
non-jurisdiction of the trial court over said third-party complaint. In a motion
to set for hearing its special and affirmative defenses, the Register of Deeds of
Marikina moved for the dismissal of the third-party complaint against them.
The motion of Mr. Puzon was held in abeyance by the trial court ratiocinating
that the issues raised in the motion still do not appear to be indubitable.
 
On October 20, 1988, Mr. Puzon filed his answer.
In its order dated February 22, 1989, the trial court dismissed the third-party
complaint against the Register of Deeds of Marikina on the ground that the
case may proceed even without the Register of Deeds being impleaded.
On April 29, 1991, the trial court issued its assailed decision in favor of the
plaintiff-appellee. A timely appeal was filed by the Sarmiento spouses. In
their manifestation filed on July 17, 1989, the Heirs of Mr. Sison prayed for
substitution for their late father. Consequently, the Heirs of Mr. Sison moved
for new trial or reconsideration on the ground that they were not properly
represented in the case after the death of Mr. Sison. In its order dated
November 28, 1991, the trial court granted the motion.
On February 4, 1993, the trial court dismissed the claim of Mr. Sison as
represented by his heirs, that he is the beneficial owner of the subject
property. In its order dated May 18, 1993, the court a quo denied the motion
for reconsideration of the Heirs of Mr. Sison. [3]
 
 
 
The dispositive portion of the trial court ruling dated 29 April 1991 reads as
follows:
 
WHEREFORE, premises considered, judgment is hereby rendered in favor of
plaintiff against all defendants:
 
1)                                         ordering defendant Pedro Ogsiner and all persons
claiming rights under him to vacate the premises and surrender peaceful
possession to the plaintiff within fifteen (15) days from receipt of this order;
 
2)                                         ordering defendant spouses Sarmiento to pay the
sum of P20,000.00 as and for attorney's fees;
 
3)                                         ordering the defendants jointly and severally to
pay the sum of P 300.00 a month as reasonable compensation for the use of
the property in question starting June, 1986 until such time that they actually
surrendered the possession of the property to the plaintiff;
 
4)                                         ordering defendant spouses Sarmiento to pay the
cost of this suit.
 
Defendant's third-party complaint against all third-party defendants is hereby
dismissed for lack of sufficient merit. [4]
 
On appeal by herein petitioners Amancio and Luisa Sarmiento (Sarmiento
spouses) and by the heirs of Carlos Moran Sison, the Court of Appeals
rendered the assailed Decision, dated 27 November 2001, the dispositive
portion of which reads:
WHEREFORE, for lack of merit, the instant appeal is hereby DISMISSED.
The assailed April 29, 1991 Decision of the Regional Trial Court of Pasig,
Metro Manila is hereby AFFIRMED with the modification that the award of P
20,000.00 as attorney's fees is hereby DELETED. The February 03, 1993
Resolution and the May 18, 1993 Order of the trial court are also hereby
AFFIRMED. [5]
 
 
On 08 March 2002, the Court of Appeals rendered the assailed Resolution
denying petitioners' motion for reconsideration.
 
The Sarmiento spouses anchor their petition on the following legal arguments:
 
1)                 The ruling of the Court of Appeals that private respondent RRC's
certificate of title cannot be collaterally attacked and that their right to claim
ownership over the subject property is beyond the province of the action for
recovery of possession is contrary to law and applicable decisions of the
Supreme Court;
2)                 The ruling of the Court of Appeals that private respondent RRC
is entitled to ownership of subject property simply by virtue of its title as
evidenced by Transfer Certificate of Title (TCT) No. N-119631 is contrary to
law and jurisprudence and is not supported by evidence; and
3)                 The affirmation by the Court of Appeals of the award of rentals
to private respondent RRC lacks factual and legal basis.
First Issue :
 
The Court of Appeals, in holding that the third-party complaint of the
Sarmiento spouses amounted to a collateral attack on TCT No. N-119631,
ratiocinated as follows:
 
In resolving the errors/issues assigned by the herein parties, We should be
guided by the nature of action filed by the plaintiff-appellee before the lower
court, and as previously shown it is an action for the recovery of possession of
the property in question with damages. Thus, from the said nature of action,
this Court believes that the focal point of the case is whether or not the
plaintiff-appellee has a better right to possess the contested real property.
Corollary, it must also be answered whether or not the Transfer Certificate of
Title No. N-119631 can be collaterally attacked in an action for recovery of
possession.
 
...
 
In their assigned errors, the Sarmiento spouses alleged that the plaintiff-
appellee is not a purchaser in good faith, as they were chargeable with the
knowledge of occupancy by Pedro Ogsiner in behalf of the Sarmiento
spouses, and that the auction sale of the property in favor of Mr. Puzon is null
and void for its failure to comply with the requirement of notice provided by
the law. The same have been argued by the Heirs of Mr. Sison.
The above assertions, We rule, amounts to a collateral attack on the certificate
of title of the plaintiff-appellee. A collateral attack is made when, in another
action to obtain a different relief, an attack on the judgment is made as an
incident in said action. This is proper only when the judgment on its face is
null and void, as where it is patent that the court, which rendered said
judgment has no jurisdiction. On the other hand, a direct attack against a
judgment is made through an action or proceeding the main object of which is
to annul, set aside, or enjoin the enforcement of such judgment, if not carried
into effect, or if the property has been disposed of, the aggrieved party may
sue for recovery.
In the present case, to rule for the nullity of the auction sale in favor of Mr.
Puzon will result in ruling for the nullity of the order of Branch 155 of the
Regional Trial Court of Pasig City, granting the petition for consolidation of
ownership over the subject property filed by Mr. Puzon. It will also result in
the nullity of title issued in the name of Mr. Puzon. Hence, the end objective
in raising the aforementioned arguments is to nullify the title in the name of
the plaintiff-appellee. In fact, a reading of the answer of the Sarmiento
spouses and the Heirs of Mr. Sison reveals that they are asking the court to
nullify all documents and proceedings which led to the issuance of title in
favor of the plaintiff-appellee. This is obviously a collateral attack which is
not allowed under the principle of indefeasibility of torrens title. The issue of
validity of plaintiff-appellee's title can only be raised in an action expressly
instituted for that purpose. A certificate of title shall not be subject to
collateral attack. It cannot be altered, modified, or canceled except in a direct
proceeding in accordance with law. Case law on the matter shows that the said
doctrine applies not only with respect to the original certificate of title but also
to transfer certificate of title. Hence, whether or not the plaintiff-appellee has a
right to claim ownership over the subject property is beyond the province of
the present action. It does not matter whether the plaintiff-appellee's title
is questionable because this is only a suit for recovery of possession. It
should be raised in a proper action for annulment of questioned
documents and proceedings, considering that it will not be procedurally
unsound for the affected parties to seek for such remedy. In an action to
recover possession of real property, attacking a transfer certificate of title
covering the subject property is an improper procedure. The rule is well-
settled that a torrens title as a rule, is irrevocable and indefeasible, and the
duty of the court is to see to it that this title is maintained and respected unless
challenged in a direct proceeding. [6] (Emphasis and underscoring supplied)
 
 
An action is deemed an attack on a title when the object of the action or
proceeding is to nullify the title, and thus challenge the judgment pursuant to
which the title was decreed. [7] The attack is direct when the object of the
action is to annul or set aside such judgment, or enjoin its enforcement. [8] On
the other hand, the attack is indirect or collateral when, in an action to obtain a
different relief, an attack on the judgment is nevertheless made as an incident
thereof. [9]
In its analysis of the controversy, the Court of Appeals, alas, missed one very
crucial detail which would have turned the tide in favor of the Sarmiento
spouses. What the Court of Appeals failed to consider is that Civil Case No.
54151 does not merely consist of the case for recovery of possession of
property (filed by RRC against the Sarmiento spouses) but embraces as well
the third-party complaint filed by the Sarmiento spouses against Carlos Moran
Sison, Jose F. Puzon (Mr. Puzon), the Provincial Sherriff of Pasig, Metro
Manila, the Municipal Treasurer of Marikina, Rizal, the Judge of the RTC,
Branch 155, in LRC Case No. R-3367 and the Register of Deeds of the then
Municipality of Marikina, Province of Rizal.
The rule on third-party complaints is found in Section 22, Rule 6 of the 1997
Rules of Court, which reads:
 
Sec. 22. Third, (fourth, etc.)party complaint. ' A third (fourth, etc.)-party
complaint is a claim that a defending party may, with leave of court, file
against a person not a party to the action, called the third-party defendant, for
contribution, indemnity, subrogation or any other relief, in respect of his
opponent's claim.
 
A third-party complaint is in the nature of an original complaint. This is so
because it is 'actually independent of and separate and distinct from the
plaintiff's complaint. [10] In herein case, after leave of court was
secured [11] to file a third-party complaint, the third-party complainants
(Sarmiento spouses) had to pay the necessary docket fees. [12] Summonses
were then issued on the third-party defendants [13] who answered in due
time. [14]
In Firestone Tire and Rubber Company of the Philippines v.
Tempongko, [15] we had occasion to expound on the nature of a third-party
complaint, thus:
 
The third-party complaint, is therefore, a procedural device whereby a 'third
party who is neither a party nor privy to the act or deed complained of by the
plaintiff, may be brought into the case with leave of court, by the defendant,
who acts as third-party plaintiff to enforce against such third-party defendant a
right for contribution, indemnity, subrogation or any other relief, in respect of
the plaintiff's claim. The third-party complaint is actually independent of
and separate and distinct from the plaintiff's complaint. Were it not for
this provision of the Rules of Court, it would have to be filed
independently and separately from the original complaint by the
defendant against the third-party. But the Rules permit defendant to bring
in a third-party defendant or so to speak, to litigate his separate cause of action
in respect of plaintiff's claim against a third party in the original and principal
case with the object of avoiding circuity of action and unnecessary
proliferation of lawsuits and of disposing expeditiously in one litigation the
entire subject matter arising from one particular set of facts. . . When leave to
file the third-party complaint is properly granted, the Court renders in effect
two judgments in the same case, one on the plaintiff's complaint and the other
on the third-party complaint. (Emphasis supplied)
 
 
Prescinding from the foregoing, the appellate court grievously erred in failing
to appreciate the legal ramifications of the third-party complaint vis--vis the
original complaint for recovery of possession of property. The third-party
complaint for cancellation of TCT being in the nature of an original complaint
for cancellation of TCT, it therefore constitutes a direct attack of such TCT.
The situation at bar can be likened to a case for recovery of possession
wherein the defendant files a counterclaim against the plaintiff attacking the
validity of the latter's title. Like a third-party complaint, a counterclaim is
considered an original complaint, as such, the attack on the title in a case
originally for recovery of possession cannot be considered as a collateral
attack. We thus held in Development Bank of the Philippines (DBP) v. Court
of Appeals: [16]
 
Nor is there any obstacle to the determination of the validity of TCT No.
10101. It is true that the indefeasibility of torrens titles cannot be collaterally
attacked. In the instant case, the original complaint is for recovery of
possession filed by petitioner against private respondent, not an original action
filed by the latter to question the validity of TCT No. 10101 on which the
petitioner bases its right. To rule on the issue of validity in a case for recovery
of possession is tantamount to a collateral attack. However, it should not be
overlooked that private respondent filed a counterclaim against petitioner,
claiming ownership over the land and seeking damages. Hence, we could rule
in the question of the validity of TCT No. 10101 for the counterclaim can be
considered a direct attack on the same. 'A counterclaim is considered a
complaint, only this time, it is the original defendant who becomes plaintiff ' It
stands on the same footing and is to be tested by the same rules as if it were an
independent action.
 
There being a direct attack on the TCT which was unfortunately ignored by
the appellate court, it behooves this Court to deal with and to dispose of the
said issue more so because all the facts and evidence necessary for a complete
determination of the controversy are already before us. Again, DBP instructs:
. . . In an analogous case, we ruled on the validity of a certificate of title
despite the fact that the original action instituted before the lower court was a
case for recovery of possession. The Court reasoned that since all the facts of
the case are before it, to direct the party to institute cancellation proceedings
would be needlessly circuitous and would unnecessarily delay the termination
of the controversy which has already dragged on for 20 years. [17]
 
 
 
Second Issue :
 
In their third-party complaint, as amended, the Sarmiento spouses asserted six
causes of action. The second [18] to sixth causes of action referred to the
proceedings leading to and resulting from the tax sale held on 28 August
1982, summarized by the trial court as follows:
 
. . . Third Party Plaintiffs alleged that on August 28, 1982, the Municipal
Treasurer of Marikina sold at public auction, the same property in favor of
Jose F. Puzon for tax deficiency at the price of Three Thousand Three
Hundred Eighty Four Pesos and 89/100 ( P 3,383.89) which is very low
considering that the area of the property is 1,060 square meters; that they were
not notified of the public auction sale and further, the requirements, such as
posting of notices in public places, among other requirements, were not
complied with; that since the property was sold at a very low price, the public
auction sale and the Certificate of Sale issued by Municipal Treasurer of
Marikina in favor of third party defendant Jose F. Puzon are null and void;
that in August 1984, the third party defendant in order to consolidate his
ownership and title to the property filed a Petition with the Land Registration
Commission in the Regional Trial Court, Branch 155, Pasig, Metro Manila in
LRC Case No. R-3367, for consolidation of his ownership and title; that third
party plaintiffs were not notified thereof and did not have their day in Court;
hence, the order of the Judge of the Regional trial Court in LRC Case No. R-
3367 authorizing the consolidation of the ownership and title of Jose F. Puzon
is null and void, that Jose F. Puzon after having been issued a new title in his
name sold in June 1986, the property in favor of plaintiff RODEANNA
REALTY CORPORATION. [19]
 
 
The Sarmiento spouses thus prayed that: (a) the certificate of sale executed by
the Municipal Treasurer of the then Municipality of Marikina, Rizal, in favor
of Mr. Puzon be declared null and void and all subsequent transactions
therefrom declared null and void as well; (b) the Order of the RTC in LRC
Case No. R-3367, authorizing the consolidation of ownership of and issuance
of new TCT No. 102909 in favor of Mr. Puzon, be declared null and void; (c)
the Register of Deeds be directed to cancel the Certificate of Sale and TCT
No. 102909 issued in favor of Mr. Puzon as well as TCT No. N-119631 issued
in the name of RRC and that TCT No. 370807 in the name of the Sarmiento
spouses be restored; (d) all third-party defendants be made to pay, jointly and
severally, moral and exemplary damages such amount as to be fixed by the
court as well as attorney's fees in the amount of P 10,000.00; and (e) Mr.
Puzon be made to pay P 500,000.00 ' the actual value of the property at the
time of the tax sale ' in the remote event that the title of RRC is not
invalidated.
The trial court held that the Sarmiento spouses were not entitled to the relief
sought by them as there was nothing irregular in the way the tax sale was
effected, thus:
 
Defendants Sarmiento aver that they were not notified of the auction sale of
the property by the Municipal Treasurer of Marikina. However, the Court
would like to point out that during the examination of Amancio Sarmiento, he
testified that in 1969 or 1970, he started residing at No. 13 19th Avenue,
Cubao, Quezon City; that his property was titled in 1972; that he transferred
his residence from Cubao to No. 76 Malumanay Street, Quezon City but he
did not inform the Municipal Treasurer of the said transfer. Hence, notice was
directed to his last known address.
...
 
The law requires posting of notice and publication. Personal notice to the
delinquent taxpayer is not required. In the case at bar, notice was sent to
defendants (sic) address at No. 12 13th Avenue, Cubao Quezon City. If said
notice did not reach the defendant, it is because of defendants' fault in not
notifying the Municipal Treasurer of Marikina of their change of address. [20]
 
 
The above-quoted ratiocination does not sit well with this Court for two
fundamental reasons. First, the trial court erroneously declared that personal
notice to the delinquent taxpayer is not required. On the contrary, personal
notice to the delinquent taxpayer is required as a prerequisite to a valid tax
sale under the Real Property Tax Code, [21] the law then prevailing at the
time of the tax sale on 28 August 1982. [22]
 
Section 73 of the Real Property Tax Code provides:
Sec. 73. Advertisement of sale of real property at public auction. ' After the
expiration of the year for which the tax is due, the provincial or city treasurer
shall advertise the sale at public auction of the entire delinquent real property,
except real property mentioned in subsection (a) of Section forty hereof, to
satisfy all the taxes and penalties due and the costs of sale. Such advertisement
shall be made by posting a notice for three consecutive weeks at the main
entrance of the provincial building and of all municipal buildings in the
province, or at the main entrance of the city or municipal hall in the case of
cities, and in a public and conspicuous place in barrio or district wherein the
property is situated, in English, Spanish and the local dialect commonly used,
and by announcement at least three market days at the market by crier, and, in
the discretion of the provincial or city treasurer, by publication once a week
for three consecutive weeks in a newspaper of general circulation published in
the province or city.
 
The notice, publication, and announcement by crier shall state the amount of
the taxes, penalties and costs of sale; the date, hour, and place of sale, the
name of the taxpayer against whom the tax was assessed; and the kind or
nature of property and, if land, its approximate areas, lot number, and location
stating the street and block number, district or barrio, municipality and the
province or city where the property to be sold is situated.
Copy of the notice shall forthwith be sent either by registered mail or by
messenger, or through the barrio captain, to the delinquent taxpayer, at
his address as shown in the tax rolls or property tax record cards of the
municipality or city where the property is located, or at his residence, if
known to said treasurer or barrio captain : Provided, however, That a
return of the proof of service under oath shall be filed by the person making
the service with the provincial or city treasurer concerned. (Emphasis
supplied)
 
 
We cannot overemphasize that strict adherence to the statutes governing tax
sales is imperative not only for the protection of the taxpayers, but also to
allay any possible suspicion of collusion between the buyer and the public
officials called upon to enforce the laws. [23] Notice of sale to the delinquent
land owners and to the public in general is an essential and indispensable
requirement of law, the non-fulfillment of which vitiates the sale. [24] Thus,
the holding of a tax sale despite the absence of the requisite notice is
tantamount to a violation of delinquent taxpayer's substantial right to due
process. [25] Administrative proceedings for the sale of private lands for
nonpayment of taxes being in personam, it is essential that there be actual
notice to the delinquent taxpayer, otherwise the sale is null and void although
preceded by proper advertisement or publication. [26]
 
The consequential issue in this case, therefore, is whether or not the registered
owners ' the Sarmiento spouses ' were personally notified that a tax sale was to
be conducted on 28 August 1982.
The Sarmiento spouses insist that they were not notified of the tax sale. The
trial court found otherwise, as it declared that a notice was sent to the spouses'
last known address. Such conclusion constitutes the second fundamental error
in the trial court's disposition of the case as such conclusion is totally bereft of  
factual basis. When findings of fact are conclusions without citation of
specific evidence upon which they are based, this Court is justified in In the fairly recent case of Requiron v. Sinaban, [34] we had occasion to
reviewing such finding. [27] reiterate the doctrine laid down in Valencia with respect specifically to tax
sales conducted under Commonwealth Act No. 470 (Assessment Law).
  Nevertheless, no substantial variance exists between Commonwealth Act No.
470 and the Real Property Tax Code, which took effect on 01 June 1974,
In herein case, the evidence does not support the conclusion that notice of the concerning the required procedure in the conduct of public auction sale
tax sale was sent to the Sarmiento spouses' last known address. What is clear involving real properties with tax delinquencies. [35]
from the evidence is that the Sarmiento spouses were notified by mail after the
subject property was already sold, i.e., the notice that was sent to the last  
known address was the 'Notice of Sold Properties' and not the notice to hold a
tax sale. [28] This was testified upon by third-party defendant Natividad M. In sum, for failure of the purchaser in the tax sale (third-party defendant Mr.
Cabalquinto, the Municipal Treasurer of Marikina, who swore that per her Puzon) to prove that notice of the tax sale was sent to the Sarmiento spouses,
records, neither notice of tax delinquency nor notice of tax sale was sent to the such sale is null and void.
Sarmiento spouses. [29] Counsel for respondent RRC did not cross-examine
Ms. Cabalquinto on this on the theory that Ms. Cabalquinto had no personal  
knowledge of the tax sale and the proceedings leading thereto as she became
As the tax sale was null and void, the title of the buyer therein (Mr. Puzon)
Municipal Treasurer only in 1989. [30]
was also null and void, which thus leads us to the question of who between
  petitioners and private respondent RRC has the right to possess the subject
property.
Notwithstanding Ms. Cabalquinto's lack of personal knowledge, her testimony
-- that per records in her possession no notice was actually sent to the  
Sarmiento spouses -- is sufficient proof of the lack of such notice in the
In its complaint for recovery of possession with damages filed before the trial
absence of contrary proof coming from the purchaser in the tax sale, Mr.
court, RRC averred that it is the present registered owner of the subject land
Puzon, and from his eventual buyer, herein private respondent RRC. Be it
which it bought from Mr. Puzon, who was then the registered owner thereof,
noted that under Section 73 of the Real Property Tax Code, it is required that a
free from liens and encumbrances. It also stated that therein defendant Pedro
return of the proof of service to the registered owner be made under oath and
Ogsiner was an illegal occupant as he was the overseer for the Sarmiento
filed by the person making the service with the provincial or city treasurer
spouses who no longer had any title to or rights over the property. It thus
concerned. This implies that as far as tax sales are concerned, there can be no
prayed that Pedro Ogsiner vacate the property and that he and the Sarmiento
presumption of the regularity of any administrative action; hence the
spouses be ordered to pay attorney's fees and rent in the amount of P 500.00
registered owner/delinquent taxpayer does not have the burden of proof to
monthly from 1984 until Pedro Ogsiner finally vacates the land. [36]
show that, indeed, he was not personally notified of the sale thru registered
mail.  
  In their Answer, [37] the Sarmiento spouses invoked certain affirmative
defenses, to wit:
There can be no presumption of the regularity of any administrative action
which results in depriving a taxpayer of his property through a tax  
sale. [31] This is an exception to the rule that administrative proceedings are
presumed to be regular. [32] This doctrine can be traced to the 1908 case (1) The certificate of sale issued by the Municipal Treasurer of Marikina,
of Valencia v. Jimenez and Fuster [33] where this Court held: Rizal, the order authorizing consolidation of ownership and the issuance of a
new title all in favor of Mr. Puzon were null and void as the Sarmiento
  spouses and Pedro Ogsiner were not notified of the tax sale;
The American law does not create a presumption of the regularity of any (2) Mr. Puzon, knowing that the sale of the subject property by the Municipal
administrative action which results in depriving a citizen or taxpayer of his Treasurer of Marikina was null and void, still sold the same to herein private
property, but, on the contrary, the due process of law to be followed in tax respondent RRC; and
proceedings must be established by proof and the general rule is that the
purchaser of a tax title is bound to take upon himself the burden of showing (3) RRC purchased the property in bad faith, thus the sale to it was null and
the regularity of all proceedings leading up to the sale. The difficulty of void.
supplying such proof has frequently lead to efforts on the part of legislatures
to avoid it by providing by statute that a tax deed shall be deemed either  
conclusive or presumptive proof of such regularity.
A complaint for recovery of possession based on ownership (accion
  reivindicatoria or accion reivindicacion) is an action whereby the plaintiff
alleges ownership over a parcel of land and seeks recovery of its full
Those statutes attributing to it a conclusive effect have been held invalid as possession. [38] As possession is sought based on ownership, we must inquire
operating to deprive the owner of his property without due process of law. But into the title of RRC which it acquired from Mr. Puzon who, in turn, derived
those creating a presumption only have been sustained as affecting a rule of his title from the void tax sale.
evidence, changing nothing but the burden of proof. (Turpin v. Lemon, 187
U.S., 51.)  

  The void tax sale notwithstanding, RRC's title cannot be assailed if it is a

The tax law applicable to Manila does not attempt to give any special
probative effect to the deed of the assessor and collector, and therefore leaves
the purchaser to establish the regularity of all vital steps in the assessment and
sale.
 
 
purchaser in good faith and for value. [39]
 
In its narration of the facts, the trial court acknowledged that RRC -- through
its President, Roberto Siy, and through its representative, Lorenzo Tabilog '
conducted an ocular inspection of the subject land and found therein that its
actual occupant, Pedro Ogsiner, had a house erected thereon and that such
occupant was the overseer for the Sarmiento spouses who claimed ownership
over the subject land. [40] Armed with this knowledge, RRC did only one
thing: it offered Pedro Ogsiner P 2,000.00 to vacate the subject
property. [41] Relying on the fact that the TCT in Mr. Puzon's name was free
of liens and encumbrances and that Mr. Puzon would take care of the
'squatters, RRC did not investigate whatever claim Pedro Ogsiner and the
Sarmiento spouses had over the subject land.
 
From the foregoing undisputed facts, the trial court held:
 
There is no doubt that when the plaintiff Rodeanna Realty Corporation
purchased the property, there was a title in the name of Jose Puzon, thus,
making them a purchaser (sic) in good faith and for value. Said buyers relied
on the owners (sic) title which is free and clear of all liens and encumbrances.
 
...
After a careful evaluation of the facts of this case, the Court believes that
plaintiff is entitled to the relief sought for. As enunciated in the case of
Carmelita E. Reyes vs. Intermediate Appellate Court, Gregorio Galang and
Soledad Pangilinan (No. L-60941, February 28, 1985, 135 SCRA 214), a
contract of sale between a buyer from public auction of land sold for unpaid
realty taxes and subsequent innocent purchaser in good faith and for value is
valid whether or not the City Treasurer followed the prescribed procedure.
 
In the case at bar, assuming that the Municipal Treasurer of Marikina failed to
comply with certain procedure, it does not follow that the Rodeanna Realty
Corporation has no valid title. For as they have asserted, they are purchaser in
good faith and for value in the amount of P190, 000.00. There is nothing in
the record which would show that they were aware or they were party to the
alleged irregularities. Hence, title of Rodeanna Realty Corporation cannot
now be assailed (William vs. Barrera, 68 Phil. 656; PMHC vs. Mencias,
August 16, 1967, 20 SRCA 1031; Pascua vs. Capuyos, 77 SCRA 78). [42]
 
 
 
In affirming the trial court, the Court of Appeals ruled:
As proven by the plaintiff-appellee, they obtained the property in question
from Mr. Puzon, who in turn acquired it in a public auction conducted by the
Municipality of Marikina. By virtue of the sale by Mr. Puzon to plaintiff-
appellee, TCT No. N-119631 was issued in its name. The best proof of
ownership of a piece of land is the certificate of title. The certificate of title is
considered the evidence of plaintiff-appellee's ownership over the subject real
property, and as its registered owner, it is entitled to its possession. Hence, as
compared to the Sarmiento spouses whose previous title over the subject
property has been cancelled, and to the Heirs of Mr. Sison, who had not
shown any better proof of ownership, the plaintiff-appellee, as evidenced by
its certificate of title, has superior right to possess the contested property.
Xxx [43]
 
Verily, every person dealing with registered land may safely rely on the
correctness of the certificate of title issued therefor and the law will in no way
oblige him to go behind the certificate to determine the condition of the
property. [44] Thus, the general rule is that a purchaser may be considered a
purchaser in good faith when he has examined the latest certificate of
title. [45] An exception to this rule is when there exist important facts that
would create suspicion in an otherwise reasonable man to go beyond the
present title and to investigate those that preceded it. Thus, it has been said
that a person who deliberately ignores a significant fact which would create
suspicion in an otherwise reasonable man is not an innocent purchaser for
value. [46] A purchaser cannot close his eyes to facts which should put a
reasonable man upon his guard, and then claim that he acted in good faith
under the belief that there was no defect in the title of the vendor. [47] As we
have held:
 
The failure of appellees to take the ordinary precautions which a prudent man
would have taken under the circumstances, specially in buying a piece of land
in the actual, visible and public possession of another person, other than
the vendor, constitutes gross negligence amounting to bad faith.
 
In this connection, it has been held that where, as in this case, the land sold is
in the possession of a person other than the vendor, the purchaser is
required to go beyond the certificate of title to ma[k]e inquiries concerning the
rights of the actual possessor. Failure to do so would make him a purchaser in
bad faith. (Citations omitted).
...
 
One who purchases real property which is in the actual possession of another
should, at least make some inquiry concerning the right of those in possession.
The actual possession by other than the vendor should, at least put the
purchaser upon inquiry. He can scarely, in the absence of such inquiry, be
regarded as a bona fide purchaser as against such possessors. [48] (Emphasis
supplied)
 
 
 
Prescinding from the foregoing, the fact that private respondent RRC did not
investigate the Sarmiento spouses' claim over the subject land despite its
knowledge that Pedro Ogsiner, as their overseer, was in actual possession
thereof means that it was not an innocent purchaser for value upon said land.
Article 524 of the Civil Code directs that possession may be exercised in one's
name or in that of another. In herein case, Pedro Ogsiner had informed RRC
that he was occupying the subject land on behalf of the Sarmiento spouses.
Being a corporation engaged in the business of buying and selling real
estate, [49] it was gross negligence on its part to merely rely on Mr. Puzon's
assurance that the occupants of the property were mere squatters considering
the invaluable information it acquired from Pedro Ogsiner and considering
further that it had the means and the opportunity to investigate for itself the
accuracy of such information.
Third Issue :
 
As it is the Sarmieno spouses, as exercised by their overseer Pedro Ogsiner,
who have the right of possession over the subject property, they cannot be
made to pay rent to private respondent RRC.
WHEREFORE, premises considered, the Decision of the Court of Appeals
dated 27 November 2001 and its Resolution dated 08 March 2002 are
REVERSED and SET ASIDE. The public auction sale conducted on 28
August 1982 is declared VOID for lack of notice to the registered owners
Amancio and Luisa Sarmiento. Transfer Certificate of Title No. N-119631 of
the Registry of Deeds of what was then
the Municipality of Marikina, Province of Rizal, in the name of Rodeanna
Realty Corporation is hereby ANNULLED. The Register of Deeds of
Marikina City, Metro Manila, is ordered to cancel TCT No. N-119631 and to
issue, in lieu thereof, a new title in the name of spouses Amancio and Luisa BETTY B. LACBAYAN, Petitioner,
Sarmiento. Costs against private respondent RRC. vs.
BAYANI S. SAMOY, JR., Respondent.
SO ORDERED.
DECISION
 
VILLARAMA, JR., J.:
  MINITA V. CHICO-NAZARIO
This settles the petition for review on certiorari filed by petitioner Betty B.
Associate Justice Lacbayan against respondent Bayani S. Samoy, Jr. assailing the September 14,
2004 Decision1 of the Court of Appeals (CA) in CA-G.R. CV No. 67596. The
CA had affirmed the February 10, 2000 Decision2 of the Regional Trial Court
(RTC), Branch 224, of Quezon City declaring respondent as the sole owner of
the properties involved in this suit and awarding to him ₱100,000.00 as
attorney’s fees.

This suit stemmed from the following facts.

Petitioner and respondent met each other through a common friend sometime
in 1978. Despite respondent being already married, their relationship
developed until petitioner gave birth to respondent’s son on October 12,
1979.3

During their illicit relationship, petitioner and respondent, together with three
more incorporators, were able to establish a manpower services
company.4 Five parcels of land were also acquired during the said period and
were registered in petitioner and respondent’s names, ostensibly as husband
and wife. The lands are briefly described as follows:

1. A 255-square meter real estate property located at Malvar St., Quezon City
covered by TCT No. 303224 and registered in the name of Bayani S. Samoy,
Jr. "married to Betty Lacbayan."5

2. A 296-square meter real estate property located at Main Ave., Quezon City
covered by TCT No. 23301 and registered in the name of "Spouses Bayani S.
Samoy and Betty Lacbayan."6

3. A 300-square meter real estate property located at Matatag St., Quezon City
covered by TCT No. RT-38264 and registered in the name of Bayani S.
Samoy, Jr. "married to Betty Lacbayan Samoy."7

4. A 183.20-square meter real estate property located at Zobel St., Quezon

City covered by TCT No. 335193 and registered in the name of Bayani S.
Samoy, Jr. "married to Betty L. Samoy."8

5. A 400-square meter real estate property located at Don Enrique Heights,

Quezon City covered by TCT No. 90232 and registered in the name of Bayani
S. Samoy, Jr. "married to Betty L. Samoy."9

Initially, petitioner lived with her parents in Mapagbigay St., V. Luna, Quezon
City. In 1983, petitioner left her parents and decided to reside in the property
located in Malvar St. in Project 4, Quezon City. Later, she and their son
transferred to Zobel St., also in Project 4, and finally to the 400-square meter
property in Don Enrique Heights.10

Eventually, however, their relationship turned sour and they decided to part
ways sometime in 1991. In 1998, both parties agreed to divide the said
properties and terminate their business partnership by executing a Partition
Agreement.11 Initially, respondent agreed to petitioner’s proposal that the
properties in Malvar St. and Don Enrique Heights be assigned to the latter,
while the ownership over the three other properties will go to
respondent.12 However, when petitioner wanted additional demands to be
included in the partition agreement, respondent refused.13 Feeling aggrieved,
petitioner filed a complaint for judicial partition14 of the said properties before
the RTC in Quezon City on May 31, 1999.

In her complaint, petitioner averred that she and respondent started to live
together as husband and wife in 1979 without the benefit of marriage and
worked together as business partners, acquiring real properties amounting to
₱15,500,000.00.15 Respondent, in his Answer,16 however, denied petitioner’s
claim of cohabitation and said that the properties were acquired out of his own
personal funds without any contribution from petitioner.17
G.R. No. 165427               March 21, 2011
During the trial, petitioner admitted that although they were together for
almost 24 hours a day in 1983 until 1991, respondent would still go home to
his wife usually in the wee hours of the morning.18 Petitioner likewise claimed
that they acquired the said real estate properties from the income of the
company which she and respondent established.19
Respondent, meanwhile, testified that the properties were purchased from his
personal funds, salaries, dividends, allowances and commissions.20 He
countered that the said properties were registered in his name together with
petitioner to exclude the same from the property regime of respondent and his
legal wife, and to prevent the possible dissipation of the said properties since
his legal wife was then a heavy gambler.21 Respondent added that he also
purchased the said properties as investment, with the intention to sell them
later on for the purchase or construction of a new building.22
On February 10, 2000, the trial court rendered a decision dismissing the
complaint for lack of merit.23 In resolving the issue on ownership, the RTC
decided to give considerable weight to petitioner’s own admission that the
properties were acquired not from her own personal funds but from the
income of the manpower services company over which she owns a measly
3.33% share.24
Aggrieved, petitioner elevated the matter to the CA asserting that she is the
pro indiviso owner of one-half of the properties in dispute. Petitioner argued
that the trial court’s decision subjected the certificates of title over the said
properties to collateral attack contrary to law and jurisprudence. Petitioner
also contended that it is improper to thresh out the issue on ownership in an
action for partition.25
Unimpressed with petitioner’s arguments, the appellate court denied the
appeal, explaining in the following manner:
Appellant’s harping on the indefeasibility of the certificates of title covering
the subject realties is, to say the least, misplaced. Rather than the validity of
said certificates which was nowhere dealt with in the appealed decision, the
record shows that what the trial court determined therein was the ownership of
the subject realties – itself an issue correlative to and a necessary adjunct of
the claim of co-ownership upon which appellant anchored her cause of action
for partition. It bears emphasizing, moreover, that the rule on the
indefeasibility of a Torrens title applies only to original and not to subsequent
registration as that availed of by the parties in respect to the properties in
litigation. To our mind, the inapplicability of said principle to the case at
bench is even more underscored by the admitted falsity of the registration of
the selfsame realties in the parties’ name as husband and wife.
The same dearth of merit permeates appellant’s imputation of reversible error
against the trial court for supposedly failing to make the proper delineation
between an action for partition and an action involving ownership. Typically
brought by a person claiming to be co-owner of a specified property against a
defendant or defendants whom the plaintiff recognizes to be co-owners, an
action for partition may be seen to present simultaneously two principal
issues, i.e., first, the issue of whether the plaintiff is indeed a co-owner of the
property sought to be partitioned and, second – assuming that the plaintiff
successfully hurdles the first – the issue of how the property is to be divided
between plaintiff and defendant(s). Otherwise stated, the court must initially
settle the issue of ownership for the simple reason that it cannot properly issue
an order to divide the property without first making a determination as to the
existence of co-ownership. Until and unless the issue of ownership is
definitely resolved, it would be premature to effect a partition of the
properties. This is precisely what the trial court did when it discounted the
merit in appellant’s claim of co-ownership.26
Hence, this petition premised on the following arguments:
I. Ownership cannot be passed upon in a partition case.
II. The partition agreement duly signed by respondent contains an admission
against respondent’s interest as to the existence of co-ownership between the
parties.
III. An action for partition cannot be defeated by the mere expedience of
repudiating co-ownership based on self-serving claims of exclusive ownership
of the properties in dispute.
IV. A Torrens title is the best evidence of ownership which cannot be
outweighed by respondent’s self-serving assertion to the contrary.
V. The properties involved were acquired by both parties through their actual
joint contribution of money, property, or industry.27
Noticeably, the last argument is essentially a question of fact, which we feel
has been squarely threshed out in the decisions of both the trial and appellate
courts. We deem it wise not to disturb the findings of the lower courts on the
said matter absent any showing that the instant case falls under the exceptions
to the general rule that questions of fact are beyond the ambit of the Court’s
jurisdiction in petitions under Rule 45 of the 1997 Rules of Civil Procedure,
as amended. The issues may be summarized into only three:
I. Whether an action for partition precludes a settlement on the issue of
ownership;
II. Whether the Torrens title over the disputed properties was collaterally
attacked in the action for partition; and
III. Whether respondent is estopped from repudiating co-ownership over the
subject realties.
We find the petition bereft of merit.
Our disquisition in Municipality of Biñan v. Garcia28 is definitive. There, we
explained that the determination as to the existence of co-ownership is
necessary in the resolution of an action for partition. Thus:
The first phase of a partition and/or accounting suit is taken up with the
determination of whether or not a co-ownership in fact exists, and a partition
is proper (i.e., not otherwise legally proscribed) and may be made by
voluntary agreement of all the parties interested in the property. This phase
may end with a declaration that plaintiff is not entitled to have a partition
either because a co-ownership does not exist, or partition is legally prohibited.
It may end, on the other hand, with an adjudgment that a co-ownership does in
truth exist, partition is proper in the premises and an accounting of rents and
profits received by the defendant from the real estate in question is in order. x
xx
The second phase commences when it appears that "the parties are unable to
agree upon the partition" directed by the court. In that event[,] partition shall
be done for the parties by the [c]ourt with the assistance of not more than
three (3) commissioners. This second stage may well also deal with the
rendition of the accounting itself and its approval by the [c]ourt after the
parties have been accorded opportunity to be heard thereon, and an award for
the recovery by the party or parties thereto entitled of their just share in the
rents and profits of the real estate in question. x x x29 (Emphasis supplied.)
While it is true that the complaint involved here is one for partition, the same
is premised on the existence or non-existence of co-ownership between the
parties. Petitioner insists she is a co-owner pro indiviso of the five real estate
properties based on the transfer certificates of title (TCTs) covering the
subject properties. Respondent maintains otherwise. Indubitably, therefore,
until and unless this issue of co-ownership is definitely and finally resolved, it
would be premature to effect a partition of the disputed properties.30 More
importantly, the complaint will not even lie if the claimant, or petitioner in
this case, does not even have any rightful interest over the subject properties.31
Would a resolution on the issue of ownership subject the Torrens title issued
over the disputed realties to a collateral attack? Most definitely, it would not.
There is no dispute that a Torrens certificate of title cannot be collaterally
attacked,32 but that rule is not material to the case at bar. What cannot be
collaterally attacked is the certificate of title and not the title itself.33 The
certificate referred to is that document issued by the Register of Deeds known
as the TCT. In contrast, the title referred to by law means ownership which is,
more often than not, represented by that document.34 Petitioner apparently
confuses title with the certificate of title. Title as a concept of ownership
should not be confused with the certificate of title as evidence of such
ownership although both are interchangeably used.35
Moreover, placing a parcel of land under the mantle of the Torrens system
does not mean that ownership thereof can no longer be disputed. Ownership is
different from a certificate of title, the latter only serving as the best proof of
ownership over a piece of land. The certificate cannot always be considered as
conclusive evidence of ownership.36 In fact, mere issuance of the certificate of
title in the name of any person does not foreclose the possibility that the real
property may be under co-ownership with persons not named in the
certificate, or that the registrant may only be a trustee, or that other parties
may have acquired interest over the property subsequent to the issuance of the
certificate of title.37 Needless to say, registration does not vest ownership over
a property, but may be the best evidence thereof.1avvphi1

Finally, as to whether respondent’s assent to the initial partition agreement

serves as an admission against interest, in that the respondent is deemed to
have admitted the existence of co-ownership between him and petitioner, we
rule in the negative.

An admission is any statement of fact made by a party against his interest or

unfavorable to the conclusion for which he contends or is inconsistent with the
facts alleged by him.38 Admission against interest is governed by Section 26 of
Rule 130 of the Rules of Court, which provides:

Sec. 26. Admissions of a party. – The act, declaration or omission of a party as

to a relevant fact may be given in evidence against him.

To be admissible, an admission must (a) involve matters of fact, and not of

law; (b) be categorical and definite; (c) be knowingly and voluntarily made;
and (d) be adverse to the admitter’s interests, otherwise it would be self-
serving and inadmissible.39

A careful perusal of the contents of the so-called Partition Agreement

indicates that the document involves matters which necessitate prior
settlement of questions of law, basic of which is a determination as to whether
the parties have the right to freely divide among themselves the subject
properties. Moreover, to follow petitioner’s argument would be to allow
respondent not only to admit against his own interest but that of his legal
spouse as well, who may also be lawfully entitled co-ownership over the said
properties. Respondent is not allowed by law to waive whatever share his
lawful spouse may have on the disputed properties. Basic is the rule that rights
may be waived, unless the waiver is contrary to law, public order, public
policy, morals, good customs or prejudicial to a third person with a right
recognized by law.40

Curiously, petitioner herself admitted that she did not assent to the Partition
Agreement after seeing the need to amend the same to include other matters.
Petitioner does not have any right to insist on the contents of an agreement she
intentionally refused to sign.

As to the award of damages to respondent, we do not subscribe to the trial

court’s view that respondent is entitled to attorney’s fees. Unlike the trial
court, we do not commiserate with respondent’s predicament. The trial court
ruled that respondent was forced to litigate and engaged the services of his
counsel to defend his interest as to entitle him an award of ₱100,000.00 as
attorney’s fees. But we note that in the first place, it was respondent himself
who impressed upon petitioner that she has a right over the involved
properties. Secondly, respondent’s act of representing himself and petitioner
as husband and wife was a deliberate attempt to skirt the law and escape his
legal obligation to his lawful wife. Respondent, therefore, has no one but
himself to blame the consequences of his deceitful act which resulted in the
filing of the complaint against him.

WHEREFORE, the petition is DENIED. The September 14, 2004 Decision of

the Court of Appeals in CA-G.R. CV No. 67596 is AFFIRMED with
MODIFICATION. Respondent Bayani S. Samoy, Jr. is hereby declared the
sole owner of the disputed properties, without prejudice to any claim his legal
wife may have filed or may file against him. The award of ₱100,000.00 as
attorney’s fees in respondent’s favor is DELETED.

No costs.

SECOND DIVISION
[G.R. No. 132677. October 20, 2000.]
ISABELA COLLEGES, INC., Petitioner, v. THE HEIRS OF NIEVES
TOLENTINO-RIVERA, namely: PABLO T. RIVERA, FELICULA R.
PEREZ, DOLORES R. QUERIDO, OLGA BUNAG, LOLITA RIVERA,
LUCIA FLORES, MANUEL RIVERA, ANDRES RIVERA, CAMILO
RIVERA, EMMA ALFONSO, ANTONIA PEREZ; and PROCESO
CORTEZ, DANILO DE LA CRUZ, ALEXANDER CORTEZ,
CORAZON MENOR and CARLOS CALDERON, Respondents.
DECISION
MENDOZA, J.:
This is a petition for review on certiorari of the decision of the Court of
Appeals 1 dated September 26, 1997 which reversed and set aside the decision
of the Regional Trial Court, Branch 20, Cauayan, Isabela dismissing the
complaint filed by respondents against petitioner. The facts are as
follows:chanrob1es virtual 1aw library
The late Nieves Tolentino-Rivera (Nieves for short) and her husband, Pablo
Rivera, were married in 1921. The couple resided at Cauayan, Isabela and
begot 13 children. On October 20, 1934, Nieves, still using her maiden name,
filed an application for a sales patent over a 13.5267-hectare land in Cauayan,
Isabela. Her application was approved and, after payment of the purchase
price, Nieves was issued Sales Patent No. V-119 on March 24, 1948. 2
Thereafter, on March 29, 1948, OCT No. P-216 was issued in the name of
"Nieves Tolentino, married to Pablo Rivera." chanrob1es virtua1 1aw 1ibrary
On August 15, 1949, Pablo Rivera and Nieves Tolentino sold to petitioner
Isabela Colleges, then newly-founded, four hectares of the land covered by
OCT No. P-216. The sale is evidenced by a deed of sale (Exh. 1) signed by
both Nieves Tolentino and Pablo Rivera, with Francisca R. Reyes, a member
of petitioner’s board of trustees, and Cecilia L. Ramos, its librarian, as
witnesses. The deed was notarized by Justice of the Peace Gaudencio R.
Litao, but it was not registered with the Register of Deeds.
Petitioner Isabela Colleges immediately occupied the land and used the same
as its new campus. One hectare was used for school buildings, two for an
athletics field, and the remainder was reserved for future projects. Starting
1950, the Isabela Colleges declared the land for tax purposes, but it did not
immediately secure a separate title to the property. Its president, Dr. Pura
Toledo, explained that the school did not then have enough money to have the
land surveyed. The Isabela Colleges secured title to the land only on January
13, 1970 when TCT No. 45890 was issued in its name.chanrob1es virtua1
1aw 1ibrary
After the death of Pablo Rivera on December 2, 1955, Nieves filed a petition
in the Court of First Instance of Isabela for the amendment of OCT No. P-216
to reflect the change in her civil status from "married to Pablo Rivera" to
"widow." Her petition was granted and OCT No. P-216 was accordingly
amended.
In December 1976, the Office of the Register of Deeds of Isabela was burned.
Among the titles destroyed was TCT No. 45890 in the name of the Isabela
Colleges. The title was administratively reconstituted in 1978.
In 1980, Nieves went to the United States. Upon her return to the Philippines
in 1988, she filed a petition for the reconstitution of OCT No. P-216 and the
annulment of an illegally reconstituted original of OCT No. P-216 obtained by
a certain Paulino while Nieves was abroad. Both petitions were granted by the
trial court. The Register of Deeds of Isabela was ordered to reconstitute the
original OCT No. P-216 in the name of Nieves. The decision of trial court was
affirmed by the Court of Appeals in 1993.
In January 1988, Pablo Rivera Jr., George Lucero, Danilo de la Cruz, Alex
Cortez, Proceso Cortez, Olga R. Bunag, Corazon Menor, and Carlos Calderon,
some of whom are the respondents in this case, entered the property bought by
Isabela Colleges, prompting the latter to bring an action for forcible entry
against them. In February 1991, the Municipal Trial Court of Cauayan, Isabela
rendered a decision ordering the intruders to vacate the land in question. This
decision became final and executory.chanrob1es virtua1 1aw 1ibrary
In 1991, Nieves brought the present suit against the Isabela Colleges for
"Nullity of Titles, Deeds of Sale, Recovery of Ownership and Possession,
Cancellation of Titles, Damages with Preliminary Injunction." Nieves alleged:
(1) that she was the exclusive owner of a parcel of land which had an area of
13.5267 hectares and was covered by OCT No. P-216 issued in her name by
the Register of Deeds of Isabela; (2) that sometime in 1950, petitioner Isabela
Colleges occupied four hectares of her land, allegedly by virtue of a sale
between petitioner and her husband Pablo Rivera; (3) that the deed of sale
between the Isabela Colleges and Pablo Rivera was void because the land sold
was her paraphernal property and the sale was made without her knowledge
and consent; and (4) that TCT No. T-45890, which was issued on August 29,
1978 in the name of the Isabela Colleges, was fake and spurious. Nieves
prayed that the sale be declared void, that the title of the Isabela Colleges be
cancelled, and that she be placed in possession of the subject
property.chanrob1es virtua1 1aw 1ibrary
In its Answer, 3 the Isabela Colleges asserted that the property in question had
been sold to it with the knowledge and consent of Nieves Tolentino who in
fact signed the deed of sale. The issuance of TCT No. T-45890 in its name
enjoys the presumption of regularity. Noting that Nieves’ complaint in 1991
was filed 42 years after the questioned sale took place in 1949, the Isabela
Colleges contended that the complaint was barred by prescription and/or
laches.
At the pre-trial conference, the parties agreed to limit the issues to the
following:chanrob1es virtual 1aw library
1. Is the land in question consisting of four hectares paraphernal or not?
2. Is the signature of Nieves Tolentino in the Deed of Sale dated August 15,
1949 forged or not?
3. Is the cause of action of the plaintiff barred by prescription and/or laches;
and
4. The losing party will pay to the prevailing party damages by way of
attorney’s fees and costs in the amount of P10,000.00. 4
Two complaints-in-intervention were allowed by the trial court. One was filed
by Proceso Cortez, 5 and the other was by the group of Danilo de la Cruz,
George Lucero, Alexander Cortez, Corazon Menor, Olga R. Bunag, and
Carlos Calderon. The intervenors claimed to be either buyers in good faith or
lessees of Nieves as to certain portions of the subject land. These parties were
the defendants in the ejectment case filed by petitioner in 1988.
In March 1992, alleging that her signature in the questioned deed of sale had
been forged, Nieves filed a motion asking that the deed be submitted to the
National Bureau of Investigation for a determination of the authenticity of her
signature. The motion was granted by the trial court, but examination of the
document was not made as Nieves subsequently withdrew her motion.
Nieves’ deposition was ordered taken as she was then already 88 years old
and unable to walk. In fact, before petitioner’s counsel could finish her cross-
examination, Nieves died on January 15, 1993. She was substituted by her
heirs, herein respondents Pablo Rivera, Jr., Felicula R. Perez, Dolores R.
Querido, Olga R. Bunag, Lolita A. Rivera, Lucia R. Flores, Manuel T. Rivera,
Andres T. Rivera, Camilo T. Rivera, Emma R. Alfonso and Antonia R. Perez.
On September 30, 1994, the trial court rendered its decision, the dispositive
portion of which reads:chanrob1es virtual 1aw library
WHEREFORE, judgment is hereby rendered in favor of the defendant Isabela
Colleges and against the plaintiffs heirs of Nieves Tolentino, namely, Pablo
Rivera, Jr., Felicula R. Perez, Dolores R. Querido, Olga R. Bunag, Lolita A.
Rivera, Lucia R. Flores, Manuel T. Rivera, Andres T. Rivera, Camilo T.
Rivera, Emma R. Alfonso and Antonia R. Perez, (1) dismissing the complaint;
(2) declaring the deed of sale dated August 15, 1949 and the titles of the
defendant Isabela Colleges valid; (3) declaring the defendant Isabela Colleges
owner of the land in question which is covered by Transfer Certificate of Title
No. T-45890 and the titles of the land as subdivided (Exhs. "9" to "34"); (4)
ordering the plaintiffs Heirs of Nieves Tolentino to pay to the defendant
P10,000.00; (5) ordering the plaintiffs Heirs of Nieves Tolentino to pay to the
Intervenor and cross-claimant Proceso J. Cortez, Sixty Seven Thousand
(P67,000.00) representing the purchase price of the lots he purchased from
Nieves Tolentino; and (6) ordering all the plaintiffs and intervenors to vacate
the land in question and remove all their buildings and other improvements
thereon it being understood that this decision will not in any way interfere
with the execution of the decision of the Municipal Trial Court of Cauayan,
Isabela, in Civil Case No. 1469, entitled, Isabela Colleges v. Pablo Rivera. Jr.,
Et. Al. Let a copy of this decision be annotated at the back of Original
Certificate of Title No. P-216. Costs against the plaintiffs and
intervenors.chanrob1es virtua1 1aw 1ibrary
SO ORDERED. 6
On appeal, its decision was reversed. In its decision rendered on September
26, 1997, the Court of Appeals ruled:chanrob1es virtual 1aw library
WHEREFORE, in view of the foregoing, the judgment appealed from is
hereby REVERSED and SET ASIDE, and a new one rendered, to
wit:chanrob1es virtual 1aw library
1. Declaring the plaintiffs-appellants as the lawful owners of the property in
question;
2. Declaring null and void and canceling Transfer Certificate of Title No.
45890 as well as the subsequent Transfer Certificates of Titles proceeding
therefrom, of the Register of Deeds of Isabela, covering the real property
described therein in the name of defendant-appellee Isabela Colleges, Inc.;
3. Ordering defendant-appellee Isabela Colleges to execute the necessary deed
of reconveyance of the aforesaid real property to the plaintiffs;
4. Ordering defendant-appellee Isabela Colleges to indemnify plaintiffs in the
sum of P50,000.00 as and for attorney’s fees;
5. Appellant intervenor and cross-claimant Proceso J. Cortez is hereby
declared owner and entitled to the possession of an aggregate area of three
hundred seventy (370) square meters, covered by Exhibits "E", "F" and "G" ;
and
6. Ordering defendant-appellee Isabela Colleges to pay the costs of the suit.
SO ORDERED. 7
Hence, this petition. Petitioner contends that the Court of Appeals erred in
ruling that: (1) the subject property is paraphernal despite Nieves’ admission
that it was purchased from the government during her marriage with Pablo
Rivera out of conjugal funds; (2) Nieves’ signature in the questioned deed of
sale is forged; and (3) laches cannot defeat the claim of a registered property
owner despite the long delay of 41 years. 8
First. The Court of Appeals ruled that the four-hectare land subject of the
1949 sale is paraphernal property based on Nieves Tolentino’s deposition that
she occupied the 13-hectare land (which eventually was covered by OCT No.
P-216 in her name) and applied for a sales patent thereon when she was
single. However, her deposition shows that while Nieves initially claimed that
she applied for a sales patent when she was still single, she later admitted that
she filed her application for a sales patent in 1934, more than ten years after
her marriage to Pablo Rivera in 1921. Thus, she stated:chanrob1es virtual 1aw
library
Q: Why did you place in your application that you were single?
A: Yes, sir.chanrob1es virtua1 1aw 1ibrary
Q: Why did you place in your application that you were single when in fact
you were already married?
A: Yes, sir, because when I applied I was still single.
Q: Why, what year was it when you applied for the sales patent of this parcel
of land?
A: I could not remember anymore, sir.
Q: According to your Exhibit V here dated February 2, 1947, in your letter to
the Honorable Director of Lands, sub-paragraph 1 and I read, ‘That the
undersigned petitioner for the application of Sales Application 19281 covering
a piece of land consisting of 14.2800 hectares" filed on October 20, 1934 and
acknowledged by the Bureau of Lands on November 2, 1934. It appears that
you filed this sales application on October 20, 1934, is this correct?
ATTY. ALBANO:chanrob1es virtual 1aw library
May we ask that the document be presented to the deponent, in your Honor,
for referral.
DEPOSITION OFFICER:chanrob1es virtual 1aw library
The deponent may read the document for referral purposes, to refresh her
memory.
NIEVES RIVERA:chanrob1es virtual 1aw library
Yes, sir, that is correct.
ATTY. RAMIREZ:chanrob1es virtual 1aw library
Q: And so you filed this application more than ten years after you were
married to Pablo Rivera, Sr.?
A: That is correct, sir. 9
In any case, the date of the sales patent application is irrelevant for that fact
alone would not vest in her ownership over the subject land. Neither is Nieves
Tolentino’s allegation that she was already in possession of the land even
before her marriage to Pablo Rivera in 1921 material. The land was acquired
through sales patent under Commonwealth Act No. 141, 10 and not through
prescription or any other mode of acquiring ownership.
Under C.A. No. 141, her application must be approved and the purchase price
paid before Nieves Tolentino could be granted a sales patent and issued a
certificate of title. It is undisputed that Nieves Tolentino was issued a sales
patent only on March 24, 1948, after she had complied with the foregoing
requirements. The land in question was thus acquired during her marriage to
Pablo Rivera.
Both the acquisition of the 13-hectare land and the sale of a portion thereof to
petitioner in 1949 took place when the Spanish Civil Code was still in effect.
Under Article 1407 of that Code, the property of the spouses are deemed
conjugal partnership property in the absence of proof that it belongs
exclusively to one or the other spouse. This presumption arises with respect to
property acquired during the marriage. It is not necessary to prove that the
property was acquired with conjugal funds. 11
To overthrow this presumption, the evidence to the contrary must be strong,
clear, and convincing. The registration alone of the subject land in the name of
Nieves Tolentino is insufficient to rebut the presumption. Nor is there clear
and convincing proof that the funds used in purchasing the four-hectare land
subject of the sale belonged exclusively to her. Nieves’ own deposition on this
question is vague and contradictory. Although she claimed that she used her
exclusive funds to pay for the land, she also said that the funds used came
from the proceeds of the sale of palay which they produced from the subject
land. Thus, in her deposition, Nieves stated:chanrob1es virtua1 1aw 1ibrary

Q: My question now is who paid for the purchase consideration of your sales
application on this land?
A: I was the one, sir.
Q: Where did you get the money that you paid?
A: From the proceeds of the palay that I sold, sir.
Q: Where did you produce the palay?
A: We were tilling that land, sir.
Q: What land did you till?
A: This land sir. 12
It thus appears that the land was cultivated and tilled by the family, and that
the funds used in buying the land had been derived out of the proceeds of this
joint industry. Under Art. 1401 (2) of the Spanish Civil Code, property
obtained by the industry, wages or work of the spouses or either of them,
among others, belong to the conjugal partnership.
Indeed, other than its finding that Nieves Tolentino was already in possession
of the land and applied for a sales patent before she married Pablo Rivera, the
Court of Appeals cited no other evidence to prove that the land was her
paraphernal property. On the contrary, the evidence clearly shows that the
land was acquired during the marriage of Nieves Tolentino and Pablo Rivera.
It is thus presumed to be conjugal property and respondents’ evidence fails to
rebut this presumption.
Second. Having established that the land covered by OCT No. P-216 from
which had come the four-hectare portion purchased by petitioner is conjugal
property, we shall now consider the validity of the sale.chanrob1es virtua1
1aw 1ibrary
In contending that the sale is void, Nieves Tolentino argued that the land sold
was her paraphernal property and that the sale was done without her consent
because her signature in the deed of sale is a forgery. We are convinced that
Nieves Tolentino’s signature in the deed of sale was forged. We quote with
approval the following findings of the Court of Appeals, to wit:chanrob1es
virtual 1aw library
Apart from the foregoing circumstances, it appears in the questioned
document itself a convincing piece of physical evidence which establishes
beyond any doubt that the signature therein purporting to be that of Nieves
Tolentino was not written by the latter but by a different hand. A closer look
at the questioned signature would show that it is merely copied from the
original signature of the late Nieves Tolentino. The difference is discernible to
the naked eye. In the questioned signature, there is a loop stroke that started at
letter "O" and looping further or whirling further to letter "T" and extended in
between letter "I" and letter "N" in the family name Tolentino. Likewise, all
the specimen signatures of the late Nieves Tolentino which she identified
during the deposition to be hers, consisting of several documents executed by
her during her lifetime, were written in a slanting position: whereas, the
questioned signature was entirely written in a straight manner.
x          x       x
The trial court likewise erred in disregarding the testimony of Attorney
Romulo Gines. The said lawyer testified that the signature "NIEVES
TOLENTINO" in the questioned Deed of Sale is not the signature of Nieves
Tolentino because of the flourish in the "T" and "O" which are absent in the
other signatures of Nieves Tolentino. That he is familiar with the signature of
Nieves Tolentino as he has seen her sign documents for at least fifty (50)
times. The trial court rejected his testimony on account that he did not present
sufficient number of documents to prove his claim and that the documents he
saw which Nieves Tolentino allegedly signed were executed long after 1949.
Moreover, he is disqualified to testify since he is not a handwriting expert.
Again, we disagree. The court a quo failed to consider that what Atty. Romulo
testified to is that he was familiar with the signature of Nieves Tolentino as he
saw her signed several documents in his presence, he being the lawyer of the
said Nieves Tolentino for a long time. Such testimony is more than enough to
establish the signature as a forgery.
Section 23, Rule 132 of the Rules of Court, provides:chanrob1es virtual 1aw
library
SECTION 23. Handwriting, how proved. — The handwriting of a person may
be proved by any witness who believes it to be the handwriting of such
person, and has seen the person write, or has seen writing purporting to be his
upon which the witness has acted or has been charged, and has thus acquired
knowledge of the handwriting of such person. Evidence respecting the
handwriting may also be given by a comparison made by the witness or the
court with writings admitted or treated as genuine by the party against whom
the evidence is offered, or proved to be genuine to the satisfaction of the
judge." (Emphasis supplied)
In the case at bar, Atty. Gines acquired familiarity of the signature of the
deceased, Nieves Tolentino, since he has been the lawyer of Nieves Tolentino
for a long time and he has seen her sign several documents in his presence. 13
The fact that Nieves Tolentino’s signature in the deed of sale is a forgery does
not, however, render the deed of sale void. For the land was conjugal property
and, under the Spanish Civil Code, the wife’s consent to the sale is not
required. Therefore, that her signature is a forgery is determinative only of
Nieves Tolentino’s lack of consent but not of the validity of the sale. Art.
1413 of the Spanish Civil Code provides:chanrob1es virtua1 1aw 1ibrary
In addition to his powers as manager the husband may for valuable
consideration alienate and encumber the property of the conjugal partnership
without the consent of the wife.
Nevertheless, no alienation or agreement which the husband may make with
respect to such property in contravention of this Code or in fraud of the wife
shall prejudice her or her heirs.
As the husband may validly sell or dispose of conjugal property even without
the wife’s consent, the absence of the wife’s consent alone does not make the
sale "in fraud" of her.chanrob1es virtua1 1aw 1ibrary
Third. The Court of Appeals ruled that, notwithstanding the lapse of 42 years,
respondents’ action was not barred by prescription and/or laches. The Court of
Appeals held that since the subject land is registered, the title covering the
same is indefeasible and imprescriptible. On the other hand, laches is
inapplicable because the same cannot be used to perpetrate a fraud. 14
We disagree. The law provides that no title to registered land in derogation of
that of the registered owner can be acquired by prescription or adverse
possession. 15 Nonetheless, while it is true that a Torrens title is indefeasible
and imprescriptible, 16 the registered landowner may lose his right to recover
the possession of his registered property by reason of laches. 17
Laches means the failure or neglect for an unreasonable and unexplained
length of time to do that which, by observance of due diligence, could or
should have been done earlier. It is negligence or omission to assert a right
within a reasonable time, warranting the presumption that the party entitled to
assert his right either has abandoned or declined to assert it. 18 Laches thus
operates as a bar in equity. 19
Thus, in Catholic Bishop of Balanga v. Court of Appeals, 20 a parcel of
registered land was donated by its owner in 1936. After the donee had been in
possession of the land, adversely, continuously, publicly, and peacefully for
49 years, the registered owner filed an action to recover the property on the
ground that the donation was invalid. The trial court ruled in favor of the
registered owner and ordered the donee to vacate the land. On appeal, the
Court of Appeals reversed the trial court and ruled that the complaint for
recovery of possession was barred by laches. We affirmed the Court of
Appeals as follows:chanrob1es virtual 1aw library
The time-honored rule anchored on public policy is that relief will be denied
to a litigant whose claim or demand has become "stale," or who has
acquiesced for an unreasonable length of time, or who has not been vigilant or
who has slept on his rights either by negligence, folly or inattention. In other
words, public policy requires, for peace of society, the discouragement of
claims grown stale for non-assertion; thus laches is an impediment to the
assertion or enforcement of a right which has become, under the
circumstances, inequitable or unfair to permit.
x          x       x
only bought the property in 1988 when it was already purchased by and titled
under the name of petitioner.
WHEREFORE, the Court of Appeals is REVERSED and the complaint and
complaints-in-intervention against petitioner Isabela Colleges, Inc. are
DISMISSED.
SO ORDERED.chanrob1es virtua1 1aw 1ibrary

In applying the doctrine of laches, we had ruled that where a party allows the
following number of years to lapse from the emergence of his cause of action,
before instituting court action to enforce his claim, such action would be
barred by the equitable defense of laches: 36 years, 12 years, 50 years, 34
years, 37 years, 32 years, 20 years, 47 years, 11 years, 25 years, 40 years, 19
years, 27 years, 7 years, 44 years, 4 years, and 67 years.

In this case, petitioner filed its complaint in court only after forty-nine (49)
years had lapsed since the donation in its behalf of the subject property to
private respondent’s predecessor-in-interest. There is nary an explanation for
the long delay in the filing by petitioner of the complaint in the case at bench,
and that inaction for an unreasonable and unexplained length of time
constitutes laches. As such, petitioner cannot claim nullity of the donation as
an excuse to avoid the consequences of its own unjustified inaction and as a
basis for the assertion of a right on which they had slept for so long. 21

So it is in the present case where the complaint questioning the validity of the
sale to petitioner Isabela Colleges was filed only after 42 years had lapsed.
Respondents could not feign ignorance of the sale because petitioner had been
in open, public, and continuous possession of the land which it had used as its
school campus since 1949. Nieves Tolentino claimed in her deposition that
she and her husband Pablo Rivera intended to donate the land to the Isabela
Colleges in exchange for their children’s free education, and that she started
suspecting that her husband had broken their agreement when the Isabela
Colleges charged them tuition fees. She further claimed that, after some
investigation, she discovered that Pablo Rivera had sold the land to the Isabela
Colleges. Yet, despite her discovery, she did not bring her action against
petitioner until 1991, taking her 42 years before finally doing so. No reason
had been given to explain her delay.chanrob1es virtua1 1aw 1ibrary

Indeed, even if the sale to petitioner was made in bad faith, laches would
nonetheless apply. In Claveria v. Quingco, 22 notwithstanding the fact that the
buyer had acted in bad faith because he knew that the vendor was not the
registered owner, it was held that the registered owner’s inaction for 36 years
had definitely foreclosed his right to recover the property.

Fourth. Proceso Cortez filed a complaint-in-intervention claiming ownership

over two parcels of land with an aggregate area of 370 square meters by virtue
of a sale between him and Nieves Tolentino in 1988. He initially alleged that
the lots were included in the four-hectare land covered by TCT No. 45890 of
petitioner Isabela Colleges. On appeal, however, he asserted that these lots
were located outside petitioner’s land. He claimed to be a buyer in good faith.

Even assuming that Cortez was not guilty of bad faith when he bought the
land in question, the fact remains that the Isabela Colleges was first in
possession. Art. 1544 of the Civil Code on double sales provides:chanrob1es
virtual 1aw library

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.

Indeed, petitioner has been in possession of the land since 1949. Between
petitioner and Cortez, therefore, the former had a better right for the latter

REPUBLIC OF THE PHILIPPINES, represented by the
DEPARTMENT OF PUBLIC WORKS AND HIGHWAYS
(DPWH), Petitioner, v. HON. ROSA SAMSON-TATAD, as Presiding
Judge of the Regional Trial Court, Branch 105, Quezon City, and
SPOUSES WILLIAM AND REBECCA GENATO, Respondents.
DECISION
SERENO, C.J.:
1 Reconsideration,12 but the motion was denied by the RTC in an Order dated
This is an appeal via a Petition for Review on Certiorari  dated 19 June 2009
assailing the Decision2 and Resolution3of the Court of Appeals (CA) in C.A.
G.R. SP No. 93227 which affirmed the Orders4 of the Regional Trial Court
(RTC), Branch 105, Quezon City in Civil Case No. Q-01-44595.The RTC
barred petitioner from presenting evidence to prove its claim of ownership
over the subject property, as the presentation thereof would constitute a
collateral attack on private respondents' title.
The antecedent facts are as follows:chanroblesvirtualawlibrary
On 13 July 2001, petitioner Republic of the Philippines, represented by the
Department of Public Works and Highways (DPWH), filed a Complaint
against several defendants, including private respondents, for the
expropriation of several parcels of land affected by the construction of the
EDSA-Quezon Avenue Flyover.5 Private respondents, Spouses William and
Rebecca Genato, are the registered owners of a piece of land ("subject
property") covered by Transfer Certificate of Title (TCT) No. RT-11603
(383648)6 and having an area of 460 square meters.
During the pendency of the proceedings, petitioner received a letter dated 14
June 2002 from Engr. Patrick B. Gatan, Project Manager IV of the DPWH-
NCR, reporting that the subject property was "government land and that the
transfer certificate of title of the said claimant respondent x x x is of dubious
origin and of fabrication as it encroached or overlapped on a government
property."7 As a result, petitioner filed an Amended Complaint on 24 June
2002,8 seeking to limit the coverage of the proceedings to an area conforming
to the findings of the DPWH:chanroblesvirtualawlibrary
4. To accomplish said project, which is to be undertaken by the Department of
Public Works and Highways [DPWH], it is necessary and urgent for plaintiff
to acquire in fee simple portions of the following parcels of land belonging to,
occupied, possessed, and/or the ownership of which are being claimed by the
defendants, to wit:chanroblesvirtualawlibrary
xxx
[c] Defendants William O. Genato and Rebecca G. Genato.
xxx
5. The portion of the above properties that are affected by the project and
shaded green in the sketch plan hereto attached and made integral part hereof
as Annex E, consisting of an area of: x x x [c] 460 square meters of the
aforedescribed property registered in the name of defendants spouses William
and Rebecca Genato; x x x. (Emphasis in the original)
On 18 July 2002, petitioner filed a Manifestation and Motion9 to have the
subject property "declared or considered of uncertain ownership or subject to
conflicting claims."
In an Order dated 10 December 2002,10 the RTC admitted petitioner's
Amended Complaint, deferred the release to respondents the amount of
eighteen million four hundred thousand pesos (P18,400,000) deposited in the
bank, equivalent to the current zonal valuation of the land, and declared the
property as the subject of conflicting claims.
While petitioner was presenting evidence to show that the subject property
actually belonged to the Government, private respondents interposed
objections saying that petitioner was barred from presenting the evidence, as it
constituted a collateral attack on the validity of their TCT No. RT-11603
(383648). The RTC then required the parties to submit their respective
Memoranda.
Upon receipt of the Memoranda, the trial court issued on 12 July 2005 an
Order11 as follows:chanroblesvirtualawlibrary
WHEFEFORE, premises considered, the Court finds that the issue of the
validity of the TCT No. 11603 (383648) can only be raised in an action
expressly instituted for that purpose and not in this instant proceeding.
Accordingly, plaintiff is barred from presenting evidence as they [sic]
constitute collateral attack on the validity of the title to the subject lot in
violation of Sec. 48 of P. D. 1529.
On 4 August 2005, petitioner seasonably filed a Motion for
17 November 2005.13chanroblesvirtualawlibrary
On 4 January 2006, private respondents filed a Motion for the payment of just
compensation amounting to twenty million seven hundred thousand pesos (?
20,700,000) and for the release of eighteen million four hundred thousand
pesos (?P18,400,000) deposited in the Land Bank'South
Harbor Branch as partial payment.14 This Motion remains pending in the RTC
to date.
On 9 February 2006, petitioner filed with the CA a Petition
for Certiorari with Prayer for the Issuance of a Temporary Restraining Order
and/or Writ of Preliminary Injunction.15chanroblesvirtualawlibrary
The appellate court ruled that since the subject property was covered by a
Torrens title, Presidential Decree No. 1529, or the Property Registration
Decree (P. D. 1529), necessarily finds significance. Thus, it held that the RTC
rightly applied Sec. 48. Accordingly, the CA issued its 29 September 2008
Decision,16 the dispositive portion of which reads:chanroblesvirtualawlibrary
WHEREFORE, the Petition for Certiorari is DISMISSED. The prayer for the
issuance of a Writ of Preliminary Injunction is accordingly DENIED.
On 29 October 2008, petitioner filed a Motion for Reconsideration,17 but the
motion was also denied in a Resolution dated 27 April
2009.18chanroblesvirtualawlibrary
Hence, the instant Petition.
A Comment19 on the Petition was filed by private respondents on 1 September
2009, and a Reply20 thereto by petitioner on 27 January 2010.
ISSUE
From the foregoing, the sole issue submitted for resolution before this Court is
whether petitioner may be barred from presenting evidence to assail the
validity of respondents' title under TCT No. RT-11603 (383648).
The Court's Ruling
Petitioner argues that under Section 9, Rule 67 of the Rules of Court, if the
ownership of a property to be expropriated is uncertain, the court in the same
expropriation proceeding is also given authority to make a proper adjudication
of the matter. Section 9 of Rule 67 reads:chanroblesvirtualawlibrary
SECTION 9. Uncertain Ownership. Conflicting Claims. If the ownership of
the property taken is uncertain, or there are conflicting claims to any part
thereof, the court may order any sum or sums awarded as compensation for
the property to be paid to the clerk of the court for the benefit of the persons
adjudged in the same proceeding to be entitled thereto. But the judgment shall
require the payment of the sum or sums awarded to either the defendant or the
clerk before the plaintiff can enter upon the property, or retain it for the public
use or purpose if entry has already been made.
This view is allegedly supported by Republic v. Court of First Instance of
Pampanga, presided formerly by Judge L. Pasicolan21(Republic) in which the
trial court hearing the expropriation proceeding was also allowed to resolve
the issue of ownership.
Petitioner further argues that the original Complaint was amended "precisely
to reflect the fact that herein private respondents, albeit ostensibly appearing
as registered owners, are to be considered as mere claimants of one of the
properties subject of the expropriation." This is the reason why the RTC
issued an Order declaring the property subject of conflicting claims.
Moreover, this being an in rem proceeding, "plaintiff Republic of the
Philippines seeks the relief, both in the original and amended complaints, to
transfer to plaintiff the titles to said parcels of land together with their
improvements free from all liens and encumbrances. For this particular
purpose, the expropriation suit is essentially a direct
proceeding."22chanroblesvirtualawlibrary
Private respondents, on the other hand, invoke Section 48 of P. D. 1529,
viz:chanroblesvirtualawlibrary
SECTION 48. Certificate Not Subject to Collateral Attack. A certificate of
title shall not be subject to collateral attack. It cannot be altered, modified, or
cancelled except in a direct proceeding in accordance with law.
It is their contention that by allowing petitioner to present adversarial
evidence, the court is in effect allowing respondents' Torrens title to be
collaterally attacked an action prohibited by P. D. 1529.
We rule that petitioner may be allowed to present evidence to assert its
ownership over the subject property, but for the sole purpose of determining
who is entitled to just compensation.
I However, the authority to resolve ownership should be taken in the proper
Proper interpretation of Section 9, Rule 67
Proceeding from the principle of jus regalia, the right to eminent domain has
always been considered as a fundamental state power that is inseparable from
sovereignty.23 It is described as the State's inherent power that need not be
granted even by the Constitution,24 and as the government's right to
appropriate, in the nature of compulsory sale to the State, private property for
public use or purpose.25chanroblesvirtualawlibrary
Expropriation, or the exercise of the State's right to eminent domain, is
proscribed by the restraints of public use and just compensation.26It is
governed by Rule 67 of the Rules of Court, which presents procedural
guidelines for the court to ensure that due process is observed and just
compensation rightly paid to the private owners.
Indeed, this Court first had the occasion to interpret Section 9, Rule 67 in the
case of Republic. In addressing the issue of "whether or not the court that
hears the expropriation case has also jurisdiction to determine, in the same
proceeding, the issue of ownership of the land sought to be condemned," the
Court answered in the affirmative:chanroblesvirtualawlibrary
The sole issue in this case, i.e., whether or not the court that hears the
expropriation case has also jurisdiction to determine, in the same proceeding,
the issue of ownership of the land sought to be condemned, must be resolved
in the affirmative. That the court is empowered to entertain the conflicting
claims of ownership of the condemned or sought to be condemned property
and adjudge the rightful owner thereof, in the same expropriation case, is
evident from Section 9 of the Revised Rule 69, which
provides:chanroblesvirtualawlibrary
SEC. 9. Uncertain ownership. Conflicting claims. If the ownership of the
property taken is uncertain, or there are conflicting claims to any part thereof,
the court may order any sum or sums awarded as compensation for the
property to be paid to the clerk of court for the benefit of the persons adjudged
in the same proceeding to be entitled thereto. But the judgment shall require
the payment of the sum or sums awarded to either the defendant or the clerk
before the plaintiff can enter upon the property, or retain it for the public use
or purpose if entry has already been made.
In fact, the existence of doubt or obscurity in the title of the person or persons
claiming ownership of the properties to be expropriated would not preclude
the commencement of the action nor prevent the court from assuming
jurisdiction thereof. The Rules merely require, in such eventuality, that the
entity exercising the right of eminent domain should state in the complaint
that the true ownership of the property cannot be ascertained or specified with
accuracy.27chanroblesvirtualawlibrary
We arrived at the same conclusion in Republic v. Rural Bank of Kabacan,
Inc.,28 in which we held thus:chanroblesvirtualawlibrary
The trial court should have been guided by Rule 67, Section 9 of the 1997
Rules of Court, which provides thus:chanroblesvirtualawlibrary
SEC. 9. Uncertain ownership; conflicting claims. If the ownership of the
property taken is uncertain, or there are conflicting claims to any part thereof,
the court may order any sum or sums awarded as compensation for the
property to be paid to the court for the benefit of the person adjudged in the
same proceeding to be entitled thereto. But the judgment shall require the
payment of the sum or sums awarded to either the defendant or the court
before the plaintiff can enter upon the property, or retain it for the public use
or purpose if entry has already been made.
Hence, the appellate court erred in affirming the trial court's Order to award
payment of just compensation to the defendants-intervenors. There is doubt as
to the real owner of Lot No. 3080.
Despite the fact that the lot was covered by TCT No. T-61963 and was
registered under its name, the Rural Bank of Kabacan manifested that the
owner of the lot was no longer the bank, but the defendants-intervenors;
however, it presented no proof as to the conveyance thereof. In this regard, we
deem it proper to remand this case to the trial court for the reception of
evidence to establish the present owner of Lot No. 3080 who will be entitled
to receive the payment of just compensation. (Emphases supplied)
context. The discussion in Republic was anchored on the question of who
among the respondents claiming ownership of the property must be
indemnified by the Government:chanroblesvirtualawlibrary
Now, to determine the person who is to be indemnified for the expropriation
of Lot 6, Block 6, Psd-2017, the court taking cognizance of the expropriation
must necessarily determine if the sale to the Punzalan spouses by Antonio
Feliciano is valid or not. For if valid, said spouses must be the ones to be paid
by the condemnor; but if invalid, the money will be paid to someone else. x x
x.29chanroblesvirtualawlibrary
Thus, such findings of ownership in an expropriation proceeding should not
be construed as final and binding on the parties. By filing an action for
expropriation, the condemnor (petitioner), merely serves notice that it is
taking title to and possession of the property, and that the defendant is
asserting title to or interest in the property, not to prove a right to possession,
but to prove a right to compensation for the
taking.30chanroblesvirtualawlibrary

If at all, this situation is akin to ejectment cases in which a court is

temporarily authorized to determine ownership, if only to determine who is
entitled to possession. This is not conclusive, and it remains open to challenge
through proper actions.31 The consequences of Sec. 9, Rule 67 cannot be
avoided, as they are due to the intimate relationship of the issue of ownership
with the claim for the expropriation payment.32chanroblesvirtualawlibrary

II

Inapplicability of Section 48, P. D. 1529

Verily, our interpretation of Sec. 9, Rule 67 does not run counter to Section 48
of P.D. 1529. Under Sec. 48, collateral attacks on a Torrens title are
prohibited. We have explained the concept in Oño v. Lim,33 to
wit:chanroblesvirtualawlibrary

An action or proceeding is deemed an attack on a title when its objective is to

nullify the title, thereby challenging the judgment pursuant to which the title
was decreed. The attack is direct when the objective is to annul or set aside
such judgment, or enjoin its enforcement. On the other hand, the attack is
indirect or collateral when, in an action to obtain a different relief, an attack
on the judgment is nevertheless made as an incident thereof.

In several instances, we have considered an Answer praying for the

cancellation of the plaintiff's Torrens title as a form of a collateral attack.34 We
have afforded the similar treatment in a petition questioning the validity of a
deed of sale for a registered land,35 and in a reformation of a deed of sale to
include areas registered under the name of another party.36 But a resolution on
the issue of ownership in a partition case was deemed neither to be a direct or
collateral attack, for "until and unless this issue of co-ownership is definitely
and finally resolved, it would be premature to effect a partition of the disputed
properties."37chanroblesvirtualawlibrary
Here, the attempt of petitioner to present evidence cannot be characterized as
an "attack." It must be emphasized that the objective of the case is to
appropriate private property, and the contest on private respondents' title arose
only as an incident to the issue of whom should be rightly compensated.
Contrary to petitioner's allegations, the Complaint and Amended Complaint
cannot also be considered as a direct attack. The amendment merely limited
the coverage of the expropriation proceedings to the uncontested portion of
the subject property. The RTC's Order declaring the property as subject of
conflicting claims is a recognition that there are varying claimants to the sums
to be awarded as just compensation. This serves as an authority for the court
to conduct a limited inquiry on the property's ownership.
WHEREFORE, the Court GRANTS the Petition for Review on Certiorari and
the prayer for a Writ of Preliminary Injunction. The assailed Decision and
Resolution of the Court of Appeals in CA-G.R. SP No. 93227, as well as the
Decision of the Regional Trial Court, Branch 105, Quezon City in Civil Case
No. Q-01-44595, are hereby REVERSED and SET ASIDE. This case is
REMANDED to the RTC to hear the issue of ownership for the purpose of
just compensation.
SO ORDERED.
G.R. No. 210669, August 01, 2017
HI-LON MANUFACTURING, INC., Petitioner, v. COMMISSION ON
AUDIT, Respondent.
DECISION
PERALTA, J.:
This Petition for Certiorari under Rule 64, in relation to Rule 65 of the 1997
Rules of Civil Procedure, seeks to annul and set aside the Commission on
Audit (COA) Decision No. 2011-0031 dated January 20, 2011, which denied
HI-LON Manufacturing, Inc.'s (HI-LON) petition for review, and affirmed
with modification the Notice of Disallowance (ND) No. 2004-032 dated
January 29, 2004 of COA's Legal and Adjudication Office-National Legal and
Adjudication Section (LAO-N). The LAO-N disallowed the amount of
P9,937,596.20, representing the difference between the partial payment of
P10,461,338.00 by the Department of Public Works and Highways (DPWH)
and the auditor's valuation of P523/741.80, as just compensation for the
29,690-square-meter road right-of-way taken by the government in 1978 from
the subject property with a total area of 89,070 sq. m. supposedly owned by
HI-LON. The dispositive portion of the assailed COA Decision No. 2011-003
reads:
WHEREFORE, premises considered, the instant petition for review is
hereby DENIED for lack of merit. Accordingly, ND No. 2004-32 dated
January 29, 2004 amounting to P9,937,596.20 is hereby AFFIRMED with
modification on the reason thereof that the claimant is not entitled thereto.

On the other hand, the Special Audit Team constituted under COA Office
Order No. 2009-494 dated July 16, 2009 is hereby instructed to issue a ND for
the P523,741.80 payment to Hi-Lon not covered by ND No. 2004-032 without
prejudice to the other findings to be embodied in the special audit report.2

This Petition likewise assails COA's Decision3 No. 2013-212 dated December

3, 2013 which denied HI-LON's motion for reconsideration, affirmed with
finality COA Decision No. 2011-003, and required it to refund payment made
by DPWH in the amount of P10,461,338.00. The dispositive portion of the
assailed COA Decision No. 2013-212 reads:chanRoblesvirtualLawlibrary
WHEREFORE, the instant Motion for Reconsideration is
hereby DENIED for lack of merit. Accordingly, Commission on Audit
Decision No. 2011-003 dated January 20, 2011 is hereby AFFIRMED WITH
FINALITY. Hi-Lon Manufacturing Co., Inc. is hereby required to refund the
payment made by the Department of Public Works and Highways in the
amount of P10,461,338.00.4
The antecedent facts are as follows:
Sometime in 1978, the government, through the then Ministry of Public
Works and Highways (now DPWH), converted to a road right-of-way
(RROW) a 29,690 sq. m. portion of the 89,070 sq. m. parcel of land (subject
property) located in Mayapa, Calamba, Laguna, for the Manila South
Expressway Extension Project. The subject property was registered in the
name of Commercial and Industrial Real Estate Corporation (CIREC) under
Transfer Certificate of Title (TCT) No. T-40999.
Later on, Philippine Polymide Industrial Corporation (PPIC) acquired the
subject property, which led to the cancellation of TCT No. T-40999 and the
issuance of TCT No. T-120988 under its name. PPIC then mortgaged the
subject property with the Development Bank of the Philippines (DBP), a
government financing institution, which later acquired the property in a
foreclosure proceeding on September 6, 1985. TCT No. T-120988, under
PPIC's name, was then cancelled, and TCT No. T-151837 was issued in favor
of DBP.
Despite the use of the 29,690 sq. m. portion of the property as RROW, the
government neither annotated its claim or lien on the titles of CIREC, PPIC
and DBP nor initiated expropriation proceedings, much less paid just
compensation to the registered owners.
Upon issuance of Administrative Order No. 14 dated February 3, 1987,
entitled "Approving the Identification of and Transfer to the National
Government of Certain Assets and Liabilities of the Development Bank of the
Philippines and the Philippine National Bank," the DBP submitted all its
acquired assets, including the subject property, to the Asset Privatization Trust
(APT) for disposal, pursuant to Proclamation No. 50 dated 8 December 1986.
On June 30, 1987, APT disposed of a portion of the subject property in a
public bidding. The Abstract of Bids5 indicated that Fibertex Corporation
(Fibertex), through Ester H. Tanco, submitted a P154,000,000.00 bid for the
asset formerly belonging to PPIC located in Calamba, Laguna, i.e., "Land (5.9
hectares) TCT 4099, buildings & improvements, whole mill," while TNC
Philippines, Inc. and P. Lim Investment, Inc. submitted a bid of
P106,666,000.00 and P138,000,000.00, respectively. With respect to the
former assets of Texfiber Corporation (Texfiber) in Taytay, Rizal i.e., "Land
(214,062 sq. m. TCT (493917) 506665, buildings & improvements, whole
mill"), only Fibertex submitted a bid of P210,000,000.00.
6
In a Certification  dated July 1, 1987, APT certified that Fibertex was the
highest bidder of PPIC and Texfiber assets for P370,000,000.00, and
recommended to the Committee on Privatization to award said assets to
Fibertex. In a Letter7 dated November 10, 1988, APT certified that Fibertex
paid APT P370,000,000.00 for the purchase of the said assets formerly
belonging to PPIC and Texfiber.
Meanwhile, Fibertex allegedly requested APT to exclude separate deeds of
sale for the parcel of land and for improvements under the subject property
covered by TCT No. 151837 in the name of DBP. Having been paid the full
bid amount, APT supposedly agreed with Fibertex that the land would be
registered in the name of TG Property, Inc. (TGPI) and the improvements to
Fibertex. Thus, APT executed two (2) separate Deeds of Sale with TGPI and
Fibertex with regard to the property, namely:
a. Deed of Sale between APT and TGPI executed on October 29,
1987 for the sale of a parcel of land covered by TCT No. T-151837
for a consideration of P2,222,967.00.
b. Deed of Sale between APT and Fibertex executed on 19 August
1987 for the sale of improvements (machinery, equipment and
other properties) on the same property for a consideration of
P154,315,615.39.
Upon complete submission of the required documents and proof of tax
payments on December 9, 1987, the Register of Deeds of Calamba, Laguna,
cancelled DBP's TCT No. 151837 and issued TCT No. T-158786 in the name
of TGPI, covering the entire 89,070 sq. m. subject property, including the
29,690 sq. m. RROW. From 1987 to 1996, TGPI had paid real property taxes
for the entire 89,070 sq. m. property, as shown by the Tax Declarations and
the Official Receipt issued by the City Assessor's Office and Office of the
City Treasurer of Calamba, Laguna, respectively.
On April 16, 1995, TGPI executed a Deed of Absolute Sale in favor of HI-
LON over the entire 89,070 sq. m. subject property for a consideration of
P44,535,000.00. HI-LON registered the Deed with the Register of Deeds of
Calamba, Laguna, which issued in its name TCT No. 383819.
Sometime in 1998, Rupert P. Quijano, Attorney-in-Fact of HI-LON, requested
assistance from the Urban Road Project Office (URPO) DPWH for payment
of just compensation for the 29,690 sq. m. portion of the subject property
converted to a RROW. The DPWH created an Ad Hoc Committee which
valued the RROW at P2,500/sq. m. based on the 1999 Bureau of/ Internal
Revenue (BIR) zonal valuation.
On December 21, 2001, a Deed of Sale was executed between HI-LON and
the Republic of the Philippines, represented by Lope S. Adriano, URPO-PMO
Director, by authority of the DPWH Secretary, covering the 29,690 sq. m.
parcel of land converted to RROW for a total consideration of
P67,492,500.00. On January 23, 2002, the Republic, through the DPWH,
made the first partial payment to HI-LON in the amount of P10,461,338.00.
On post audit, the Supervising Auditor of the DPWH issued Audit
Observation Memorandum No. NGS VIII-A-03-001 dated April 2, 2003
which noted that the use of the 1999 zonal valuation of P2,500.00/sq. m. as
basis for the determination of just compensation was unrealistic, considering
that as of said year, the value of the subject property had already been
"glossed over by the consequential benefits" it has obtained from the years of
having been used as RROW. The auditor pointed out that the just
compensation should be based on the value of said property at the time of its
actual taking in 1978. Taking into account the average value between the 1978
and 1980 Tax Declarations covering the subject land, the Auditor arrived at
the amount of P19.40/sq. m. as reasonable compensation and, thus,
recommended the recovery of excess payments.
Upon review of the auditor's observations, the Director of the LAO-N issued
on January 29, 2004 ND No. 2004-32 in the amount of P9,937,596.20,
representing the difference between the partial payment of P10,461,338.00 to
HI-LON and the amount of P532.741.80, which should have been paid as just
compensation for the conversion of the RROW.
Acting on the request of Dir. Lope S. Adriano, Project Director (URPO-PMO)
for the lifting of ND No. 2004-032 dated January 29, 2004, the LAO-N
rendered Decision No. 2004-172 dated May 12, 2004, affirming the same ND,
and stating the value of the property must be computed from the time of the
actual taking.
Resolving (1) the motions for reconsideration and request for exclusion from
liability of former DPWH Secretary Gregorio R. Vigilar, et al. (2) the request
for lifting, of Notice of Disallowance No. 2004-032 of OIC Director Leonora
J. Cuenca; (3) the motion to lift the disallowance and/or exclusion as person
liable of Ms. Teresita S. de Vera, Head, Accounting Unit, DPWH; and (4) the
appeal from ND No. 2004-032 of former Assistant Secretary Joel C. Altea and
of Mr. Rupert P. Quijano, Attorney-in-Fact of HI-LON, the LAO-N issued
Decision No. 2008-172-A dated June 25, 2008, which denied the appeal and
affirmed the same ND with modification that payment of interest is
appropriate under the circumstances.
Aggrieved, HI-LON filed a petition for review before the COA. In its regular
meeting on June 9, 2009, the COA deferred the resolution of the petition, and
instructed its Legal Service Section to create a Special Audit Team from the
Fraud Audit and Investigation Office to investigate and validate HI-LON's
claim.
In its assailed Decision No. 2011-003 dated January 20, 2011, the COA
denied for lack of merit HI-LON's petition for review of the LAO-N Decision
No. 2008-172-A, and affirmed ND No. 2004-032 dated July 29, 2004 with
modification declaring the claimant not entitled to just compensation. The
COA also instructed the Special Audit Team to issue an ND for the
P523,741.80 payment to HI-LON not covered by ND No. 2004-032, without
prejudice to the other findings embodied by the special audit report.
On the issue of whether or not HI-LON is entitled to just compensation for the
29,690 sq. m. portion of the subject property, the COA found that the
evidence gathered by the Special Audit Team are fatal to the claim for such
compensation.
First, the COA noted that the transfer of the subject property in favor of TGPI,
the parent corporation of HI-LON, was tainted with anomalies because
records show that TGPI did not participate in the public bidding held on June
30, 1987, as only three (3) bidders participated, namely: Fibertex Corporation,
TNC Philippines, Inc., and P. Lim Investment, Inc.
Second, the COA pointed out that the Deed of Sale between APT and Fibertex
has a disclosure that "The subject of this Deed of Absolute Sale, therefore, as
fully disclosed in the APT Asset Catalogue, is the total useable area of 59,380
sq. m.,"8 excluding for the purpose the 29,690 sq. m. converted to RROW.
The COA added that such exclusion was corroborated by the Abstract of Bids
duly signed by the then APT Executive Assistant and Associate Executive
Trustee, showing that the land covered by TCT No. T-151387 was offered to
the public bidding for its useable portion of 5.9 hectares only, excluding the
subject 29,690 sq. m. converted to RROW.
Third, the COA observed that HI-LON is a mere subsidiary corporation which
cannot acquire better title than its parent corporation TGPI. The COA stressed
that for more than (7) seven years that the subject property was under the
name of TGPI from its registration on December 9, 1987 until it was
transferred to HI-LON on April 16, 1995, TGPI did not attempt to file a claim
for just compensation because it was estopped to do so as the Deed of Sale
executed between APT and TGPI clearly stated that the 29,690 sq. m. RROW
was excluded from the sale and remains a government property. Applying the
principle of piercing the veil of corporate fiction since TGPI owns 99.9% of
HI-LON, the COA ruled that HI-LON cannot claim ignorance that the 29,690
sq. m. RROW was excluded from the public auction.
Having determined that HI-LON or its predecessor-in-interest TGPI does not
own the RROW in question, as it has been the property of the Republic of the
Philippines since its acquisition by the DBP up to the present, the COA
concluded that the proper valuation of the claim for just compensation is
irrelevant as HI-LON is not entitled thereto in the first place.
Dissatisfied, HI-LON filed a Motion for Reconsideration of COA Decision
No. 2011-003 and a Supplement thereto.
On December 3, 2013, the COA issued the assailed Decision No. 2013-212
denying HI-LON's motion, for reconsideration, affirming with finality its
assailed Decision No. 2011-003, and requiring HI-LON to refund the payment
made by DPWH in the amount of P10,461,338.00.
In this Petition for Certiorari, HI-LON argues that the COA committed grave
abuse of discretion, amounting to lack or excess of jurisdiction when it held
(1) that there was no property owned by HI-LON that was taken by the
government for public use; (2) that the 89,070-sq. m. subject parcel of land,
including the 29,690 sq. m. portion used as RROW by the government, had
been the property of the Republic of the Philippines; (3) that HI-LON is not
entitled to payment of just compensation; and (4) that it collaterally attacked
HI-LON's ownership of the subject land, including the RROW.9
The Office of the Solicitor General (OSG) counters that the COA acted within
its jurisdiction when it evaluated and eventually disallowed what it found to
be an irregular, anomalous and unnecessary disbursement of public funds. The
OSG agrees with the COA that HI-LON is not entitled to payment of just
compensation because the 29,690 sq. m. portion used as RROW is already
owned by the Republic since 1987 when DBP transferred the entire 89,070 sq.
m. subject property to APT, pursuant to Administrative Order No. 14. The
OSG emphasizes that the Deed of Absolute Sale dated October 29, 1987
between the Republic (through APT) and TGPI clearly stated that the subject
thereof, as fully disclosed in the APT Asset Specific Catalogue, is the total
useable area of 59,380 sq. m., hence, the 29,690 sq. m. portion used as RROW
was expressly excluded from the sale. Besides, the OSG notes that the COA
aptly found that there were only three bidders who participated in APT's
public bidding of the subject property and TGPI was not one of the bidders.
There being an anomaly in the transfer of the property from APT to TGPI, the
OSG posits that HI-LON, as TGPI's successor-in-interest, is not entitled to
just compensation.
Stating that the intention of Proclamation No. 50 was to transfer the non-
performing assets of DBP to the national government, the OSG maintains that
APT has no authority to offer for sale the said portion because it is a
performing asset, having been used by the government as RROW for the
Manila South Expressway since 1978. Considering that the said 29,690 sq. m.
portion was not sold and transferred by APT to TGPI, the OSG submits that
TGPI cannot also transfer the same portion to its subsidiary, HI-LON. The
OSG concludes that HI-LON is not entitled to payment of just compensation
as it is not the owner of the said portion, and that the COA properly ordered
full disallowance of the P10,461,338.00 paid to HI-LON.
HI-LON's Petition for HI-LON is devoid of merit.
In support of its claim of entitlement to just compensation, HI-LON relies on
the Deed of Sale dated October 29, 1987, and insists that its predecessor-in-
interest (TGPI) acquired from the national government, through APT, the
entire 89,070 sq. m. property, which was previously registered in the name of
DBP under TCT No. 151837. HI-LON asserts that the 29,690 sq. m. RROW
was not excluded from the sale because: (1) APT referred to the entire
property in the Whereas Clauses as one of the subject of the sale; (2) APT
made an express warranty in the said Deed that the properties sold are clear of
liens and encumbrances, which discounts the need to investigate on the real
status of the subject property; and (3) the title registered in the name of DBP,
as well as the titles of the previous owners, CIREC and PPIC, contains no
annotation as regards any government's claim over the RROW.
HI-LON's assertions are contradicted by the clear and unequivocal terms of
the Deed of Sale10 dated 29 October 1987 between APT and TGPI, which
state that the subject thereof is the total usable area of 59,380 sq. m. of the
subject property. Contrary to HI-LON's claim, nothing in the Whereas Clauses
of the Deed indicates that the object of the sale is the entire 89,070 sq. m.
property, considering that the 29,690 sq. m. portion thereof had been used as
road right-of-way (RROW) for the South Expressway, to
wit:chanRoblesvirtualLawlibrary
xxxx
WHEREAS, the Development Bank of the Philippines (DBP) was the
mortgagee of a parcel of land (hereafter to be referred to as the
"PROPERTY") covered by Transfer Certificate of Title No. T-151837 of the
Registry of Deeds for the Province of Laguna (Calamba Branch), more
particularly described as follows:chanRoblesvirtualLawlibrary
A parcel of land (Lot 2-D-I-J of the subd. Plan Psd-39402, being a portion-of
Lot 2-D-l, described on plan Psd-18888, LRC (GLRO Rec:No. 9933, situated
in the Bo. of Mayapa & San Cristobal, Municipality of Calamba, Province of
Laguna. Bounded on the N.E. by Lot No. 2-D-1-1; of the subd. Plan; on the
S., by the Provincial Road; on the SW., by Lot 2-D-l-K of the subd. plan and
on the NW., by Lot No. 2-B of plan Psd-925. Beginning at a point marked "1"
on plan, being S. 62 deg. 03'W., 1946.22 from L.M. 5, Calamba Estate;
Thence — N. 64 deg. 35'E., 200.27 m. to point 2; S.21 deg. 03'E. 166.82 m. to
point 3; S. 12 deg. 30'E, 141.01 m. to point 4; S. 10 deg. 25'E, 168.29 m. to
point 5; N. 84 deg. 47'W, 215.01 m. to point 6; N. 13 deg. 44'W., 150.99 m.
Thence — to point 7; N. 13 deg. 45'W., 27.66 m. to the point of beginning;
containing an area of EIGHTY-NINE THOUSAND SEVENTY (89,070)
SQUARE METERS, more or less. All points referred to are indicated on the
plan and are marked on the ground by PLS. cyl. cone. mons. bearings true
detloop deg. 03'E., date of original survey Jan. 1906 - Jan. 1908 and Sept.
1913 and that of subd. survey, Aug. 23-25, 1953.
[As per Tax Declaration No. 9114, an area of 29,690 sq. m. had been used
(road-right-of-way) for the South Expressway. The subject of this Deed of
Absolute Sale, therefore, as fully disclosed in the APT Asset Specific
Catalogue, is the total useable area of 59,380 sq. m.]11
WHEREAS, the PROPERTY was subsequently acquired by DBP at public
auction in a foreclosure sale as evidenced by a Sheriffs Certificate of Sale
dated September 6, 1985 issued by Mr. Godofredo E. Quiling, Deputy
Provincial Sheriff, Office of the Provincial Sheriff of Laguna, Philippines. x x
x (road-right-of-way) for the South Expressway. The subject of this Deed of
WHEREAS, pursuant to Administrative Order No. 14 issued on February 3,
1987 [Approving the Identification of and Transfer to the National
Government of Certain Assets and Liabilities of the Development Bank of the
Philippines and the Philippine National Bank], DBP's ownership and interest
over the PROPERTY were transferred to the National Government through
the ASSET PRIVATIZATION TRUST (APT), a public trust created under
Proclamation No. 50 dated December 8, 1986.
WHEREAS, in the public bidding conducted by the APT on June 30, 1987,
the VENDEE [TGPI] made the highest cash bid for the PROPERTY and was
declared the winning bidder.
WHEREAS, the sale of the PROPERTY has been authorized by the
COMMITTEE ON PRIVATIZATION under Notice of Approval dated July
21, 1987 of the APT;
WHEREAS, the VENDEE [TGPI] has fully paid the VENDOR [Government
of the Republic of the Philippines, through APT] the purchase price of the
PROPERTY in the amount of PESOS: TWO MILLION TWO HUNDRED
TWENTY-TWO THOUSAND NINE HUNDRED SIXTY-SEVEN
(P2,222,967.00).
NOW, THEREFORE, for and in consideration of the above premises and for
the sum of PESOS: TWO MILLION TWO HUNDRED TWENTY-TWO
THOUSAND NINE HUNDRED SIXTY-SEVEN (P2,222,967.00), Philippine
Currency, paid by the VENDEE to the VENDOR, the VENDOR does by
these presents sell, transfer and convey the PROPERTY hereinabove
described unto the VENDEE, its successors and assigns, subject to the
following conditions:chanRoblesvirtualLawlibrary
1. The VENDOR hereby warrant that the PROPERTIES shall be sold and
transferred free and clear of liens and encumbrances accruing before August
18, 1987, and that all taxes or charges accruing or becoming due on the
PROPERTIES before said date have or shall be fully paid by the VENDOR;
2. Documentary Stamp Taxes, Transfer Taxes. Registration fees, and all other
expenses arising out of or relating to the execution and delivery of this Deed
shall be for the account of and paid by the VENDEE;
3. Capital gains tax, if any, payable on or in respect of the transfer of the
PROPERTY to the VENDEE shall be for the account of and paid by the
VENDOR.
IN WITNESS WHEREOF, the parties hereto have caused these presents to be
signed at Makati, Metro Manila this [29th] day of [October], 1987.12
As the Deed of Sale dated October 29, 1987 is very specific that the object of
the sale is the 59,380. sq. m. portion of the subject property, HI-LON cannot
insist to have acquired more than what its predecessor-in-interest (TGPI)
acquired from APT. Article 1370 of the New Civil Code provides that if the
terms of a contract are clear and leave no doubt upon the intention of the
contracting parties, the literal meaning of its stipulations shall control. Every
contracting party is presumed to know the contents of the contract before
signing and delivering it,13 and that the words used therein embody the will of
the parties. Where the terms of the contract are simple and clearly appears.to
have been executed with all the solemnities of the law, clear and convincing
evidence is required to impugn it.14 Perforce, HI-LON's bare allegation that
the object of the Deed of Sale is the entire 89,070 sq. m. area of the subject
property, is self-serving and deserves short shrift.
The Court thus agrees with the COA in rejecting HI-LON's claim of
ownership over the 29,690 sq. m. RROW portion of the subject property in
this wise:chanRoblesvirtualLawlibrary
xxxx
As clearly shown in the Abstract of Bids, the subject of the bidding was
59,380 sq. m. only. The Deed of Sale expressly states that -
[As per Tax Declaration No. 9114, an area of 29,690 sq. m. had been used
Absolute Sale, therefore, as fully disclosed in the APT Asset Specific
Catalogue, is the total useablc area of 59,380 sq. m.]
The government cannot enter into a contract with the highest bidder and
incorporate substantial provisions beneficial to the latter which are not
included or contemplated in the terms and specifications upon which the bids
were solicited. It is contrary to the very concept of public bidding to permit an
inconsistency between the terms and conditions under which the bids were
solicited and those under which the bids were solicited and those under which
proposals are submitted and accepted. Moreover, the substantive amendment
of the terms and conditions of the contract bid out, after the bidding process
had been concluded, is violative of the principles in public bidding and will
render the government vulnerable to the complaints from the losing bidders.
Thus, since the area of [29,690 sq. m. which later became] 26,997 sq. m.
covered by the ROW was not subject of the public bidding, Hi-Lon cannot
validly acquire and own the same. The owner of this property is still the
Republic of the Philippines.
x x x x15
Citing Bagatsing v. Committee on Privatization16 where it was held that
Proclamation No. 50 does not prohibit APT from selling and disposing other
kinds of assets whether they are performing or non-performing, necessary or
appropriate, HI-LON contends that regardless of whether or not the RROW is
a performing or non-performing asset, it could not have been excluded in the
sale of the entire 89,070 sq. m. property pursuant to the said Proclamation.
Concededly, the 29,690 sq. m. portion of the subject property is not just an
ordinary asset, but is being used as a RROW for the Manila South Expressway
Extension Project, a road devoted for a public use since it was taken in 1978.
Under the Philippine Highway Act of 1953, "right-of-way" is defined as the
land secured and reserved to the public for highway purposes, whereas
"highway" includes rights-of-way, bridges, ferries, drainage structures, signs,
guard rails, and protective structures in connection with highways.17 Article
420 of the New Civil Code considers as property of public dominion those
intended for public use, such as roads, canals, torrents, ports and bridges
constructed by the state, banks, shores, roadsteads, and others of similar
character.
Being of similar character as roads for public use, a road right-of-way
(RROW) can be considered as a property of public dominion, which is outside
the commerce of man, and cannot be leased, donated, sold, or be the object of
a contract,18 except insofar as they may be the object of repairs or
improvements and other incidental matters. However, this RROW must be
differentiated from the concept of easement of right of way under Article
64919 of the same Code, which merely gives the holder of the easement an
incorporeal interest on the property but grants no title thereto,20 inasmuch as
the owner of the servient estate retains ownership of the portion on which the
easement is established, and may use the same in such a manner as not to
affect the exercise of the easement.21
As a property of public dominion akin to a public thoroughfare, a RROW
cannot be registered in the name of private persons under the Land
Registration Law and be the subject of a Torrens Title; and if erroneously
included in a Torrens Title, the land involved remains as such a property of
public dominion.22 In Manila International Airport Authority v. Court of
Appeals,23 the Court declared that properties of public dominion, being for
public use, are not subject to levy, encumbrance or disposition through public
or private sale. "Any encumbrance, levy on execution or auction sale of any
property of public dominion is void for being contrary to public policy.
Essential public services will stop if properties of public dominion are subject
to encumbrances, foreclosures and auction sale."24
It is, therefore, inconceivable that the government, through APT, would even
sell in a public bidding the 29,690 sq. m. portion of the subject property, as
long as the RROW remains as property for public use. Hence, HI-LON's
contention that the RROW is included in the Deed of Absolute Sale dated 29
October 1987, regardless whether the property is a performing or non-
performing asset, has no legal basis.
Neither can HI-LON harp on the express warranty in the Deed of Sale that the
subject property is clear from any encumbrance, and the lack of annotation of
the government's claim of RROW on the TCTs of CIREC, PPIC and DBP
covering the subject property, to bolster its claim of having acquired
ownership of such property in good faith.
There is no dispute as to the finding of COA Commissioner Juanito G. Espino
and DPWH Officer-in-Charge Manuel M. Bonoan based on the examination
of land titles of the subject property that the entire 89,070 sq. m. area thereof
was never reduced in the process of seven (7) transfers of ownership from
Emerito Banatin, et al., in 1971 to HI-LON in 1996, nor was there an
annotation of a RROW encumbrance on the TCTs of CIREC, PPIC, DBP and
TGPI. Be that as it may, HI-LON cannot overlook the fact that the RROW
was taken upon the directive of the Ministry of Public Works and Highways
in 1978 for the construction of the Manila South Expressway Extension
project. Such public highway constitutes as a statutory lien on the said TCTs,
pursuant to Section 39 of the Land Registration Act (Act No. 496) and Section
44 of the Property Registration Decree (Presidential Decree No.
1529):chanRoblesvirtualLawlibrary
Section 39. Every applicant receiving a certificate of title in pursuance of a
decree of registration, and every subsequent purchaser of registered land who
takes a certificate of title for value in good faith, shall hold the same free of all
encumbrance except those noted on said certificate, and any of the following
encumbrances which may be subsisting, namely:
First. Liens, claims, or rights arising or existing under the laws or Constitution
of the United States or of the Philippine Islands which the statutes of the
Philippine Islands cannot require to appear of record in the registry.
Second. Taxes within two years after the same have become due and payable.
Third. Any public highway, way, or private way established by law, where
the certificate of title does not state that the boundaries of such
highway or way have been determined. But if there are easements or other
rights appurtenant to a parcel of registered land which for any reason have
failed to be registered, such easements or rights shall remain so appurtenant
notwithstanding such failure, and shall be held to pass with the land until cut
off or extinguished by the registration of the servient estate, or in any other
manner.
xxxx
SECTION 44. Statutory Liens Affecting Title. — Every registered owner
receiving a certificate of title in pursuance of a decree of registration, and
every subsequent purchaser of registered land taking a certificate of title for
value and in good faith, shall hold the same free from all encumbrances except
those noted in said certificate and any of the following encumbrances which
maybe subsisting, namely:
First. Liens, claims or rights arising or existing under the laws and
Constitution of the Philippines which are not by law required to appear of
record in the Registry of Deeds in order to be valid against subsequent
purchasers or encumbrancers of record.
Second. Unpaid real estate taxes levied and assessed within two years
immediately preceding the acquisition of any right over the land by an
innocent purchaser for value, without prejudice to the right of the government
to collect taxes payable before that period from the delinquent taxpayer alone.
Third. Any public highway or private way established or recognized by law,
or any government irrigation canal or lateral thereof, if the certificate of title
docs not state that the boundaries of such highway or irrigation canal or
lateral thereof have been determined.
Fourth. Any disposition of the property or limitation on the use thereof by
virtue of, or pursuant to, Presidential Decree No. 27 or any other law or
regulations on agrarian reform.25
Section 39 of Act No. 496 and Section 44 of P.D. No. 1529 provide for
statutory liens which subsist and bind the whole world, even without the
benefit of registration under the Torrens System. Thus, even if the TCTs of
CIREC, PPIC, DBP and TGPI contain no annotation of such encumbrance,
HI-LON can hardly feign lack of notice of the government's claim of
ownership over the public highway built along the RROW, and claim to be an
innocent purchaser for value of the entire 89,070 sq. m. subject property
because such highway prompts actual notice of a possible claim of the
government on the RROW.
Given that prospective buyers dealing with registered lands are normally not
required by law to inquire further than what appears on the face of the TCTs
on file with the Register of Deeds, it is equally settled that purchasers cannot
close their eyes to known facts that should have put a reasonable person on
guard.26 Their mere refusal to face up to that possibility will not make them
innocent purchasers for value, if it later becomes apparent that the title was
defective, and that they would have discovered the fact, had they acted with
the measure of precaution required of a prudent person in a like
situation.27 Having actual notice of a public highway built on the RROW
portion of the subject property, HI-LON cannot afford to ignore the possible
claim of encumbrance thereon by the government, much less fail to inquire
into the status of such property.
Invoking the principle of estoppel by laches, HI-LON posits that the
government's failure to assert its right of ownership over the RROW by
registering its claim on the titles of CIREC, PPIC, and DBP since the 29,690
sq. m. portion of the property was converted to a RROW way back in 1978
until the purported sale of the entire 89,070 sq. m. property to TGPI in 1987,
bars it from claiming ownership of the RROW because it slept over its rights
for almost nine (9) years. HI-LON states that if it were true that the
government was convinced that it acquired the RROW, it would have lost no
time in registering its claim before the Register of Deeds, instead of
surrendering to TGPI the owner's duplicate of TCT No. 151837 in the name of
DBP, to facilitate the issuance of a new title over the entire 89,070 sq. m.
property, which includes the 29,690 sq. m. RROW. HI-LON further claims
that the government is estopped from claiming its alleged right of ownership
of the RROW because the DPWH itself offered to buy and, in fact, executed a
Deed of Sale, thereby acknowledging that the RROW is a private property
owned by HI-LON.
The failure of the government to register its claim of RROW on the titles of
CIREC, PPIC, DBP and TGPI is not fatal to its cause. Registration is the
ministerial act by which a deed, contract, or instrument is inscribed in the
records of the Office of the Register of Deeds and annotated on the back of
the TCT covering the land subject of the deed, contract, or instrument.28 It
creates a constructive notice to the whole world and binds third
persons.29 Nevertheless, HI-LON cannot invoke lack of notice of the
government's claim over the 29,690 sq. m. RROW simply because it has
actual notice of the public highway built thereon, which constitutes as a
statutory lien on its title even if it is not inscribed on the titles of its
predecessors-in-interest, CIREC, PPIC, DBP, and TGPI. Indeed, actual notice
is equivalent to registration, because to hold otherwise would be to tolerate
fraud and the Torrens System cannot be used to shield fraud.30
Meanwhile, the mistake of the government officials in offering to buy the
29,690 sq. m. RROW does not bind the State, let alone vest ownership of the
property to HI-LON. As a rule, the State, as represented by the government, is
not estopped by the mistakes or errors of its officials or agents, especially true
when the government's actions are sovereign in nature.31 Even as this rule
admits of exceptions in the interest of justice and fair play, none was shown to
obtain in this case. Considering that only 59,380 sq. m. of the subject property
was expressly conveyed and sold by the government (through APT) to HI-
LON's predecessor-in-interest (TGPI), HI-LON has no legal right to claim
ownership over the entire 89,070 sq. m. property, which includes the 29,690
sq. m. RROW taken and devoted for public use since 1978.
In arguing that the government had no legal title over the RROW, HI-LON
points out that the government acquired title thereto only in 2001 when a
Deed of Sale was executed between HI-LON and the DPWH. HI-LON claims
that when the government used the 29,690 sq. m. portion of the subject
property as RROW in 1978, it never acquired legal title because it did not
institute any expropriation proceeding, let alone pay the registered owner just
compensation for the use thereof.
HI-LON's claim of ownership over the said RROW has been duly rejected by
the COA in this manner:chanRoblesvirtualLawlibrary
xxxx
By virtue of Administrative Order No. 14, s. 1987, pursuant to Section 23 of
Proclamation No. 50, the 89,070 sq. m. subject parcel of land, including the
29,690 sq. m. which had been used as ROW by the Government, was
transferred to and owned by the National Government. TG Property, Inc.
cannot acquire a portion of the parcel of land without authority and consent of
the Philippine Government, being the owner and seller of the said property.
Hi-Lon cannot even claim ownership on the portion of the subject land
without the said deed of sale executed by the Government in favor of TG
Property, Inc. The facts would show that the ROW has been the property of
the Republic of the Philippines since its transfer from DBP in 1987.
x x x32
It bears emphasis that the right to claim just compensation for the 29,690 sq.
m. portion which was not exercised by CIREC or PPIC, ceased to exist when
DBP acquired the entire 89,070 sq. m. property in a foreclosure sale and later
transferred it to the national government (through APT) in 1987, pursuant to
Proclamation No. 50. Having consolidated its title over the entire property,
there is no more need for the government to initiate an action to determine just
compensation for such private property which it previously took for public
use sans expropriation proceedings.
Citing Section 48 of P.D. 1529 which bars collateral attack to certificates of
title, HI-LON asserts that COA erred in ruling that there was no property
owned by HI-LON that was taken by the government for public use, despite
the fact that: (a) the ownership of the subject property was not raised before
the Commission Proper of the COA; and (b) COA has no jurisdiction over
issues of ownership and entitlement to just compensation. HI-LON stresses
that the titles issued to TGPI and HI-LON conclusively show that they are the
registered owners of the entire 89,070 sq. m. property in Calamba, Laguna,
including the 29,690 sq. m. RROW. Absent any proceeding directly assailing
the said titles, the ownership of the said property by HI-LON and TGPI is
beyond dispute. HI-LON further states that Leoncio Lee Tek Sheng v. Court of
Appeal33 cited by the OSG is inapplicable because a notice of lis pendens was
annotated on the title subject of the case, unlike the titles of TGPI and HI-
LON which contain no annotation of claims of ownership by the Republic.
Suffice it to state that there is no merit in HI-LON's argument that the TCTs
issued in its name and that of its predecessor-in-interest (TGPI) have become
incontrovertible and indefeasible, and can no longer be altered, cancelled or
modified or subject to any collateral attack after the expiration of one (1) year
from the date of entry of the decree of registration, pursuant to Section 32 of
P.D. No. 1529. In Heirs of Clemente Ermac v. Heirs of Vicente Ermac,34 the
Court clarified the foregoing principle, viz.:chanRoblesvirtualLawlibrary
x x x While it is true that Section 32 of PD 1529 provides that the decree of
registration becomes incontrovertible after a year, it does not altogether
deprive an aggrieved party of a remedy in law. The acceptability of the
Torrens System would be impaired, if it is utilized to perpetuate fraud against
the real owners.
Furthermore, ownership is not the same as a certificate of title. Registering a
piece of land under the Torrens System does not create or vest title, because
registration is not a mode of acquiring ownership. A certificate of title is
merely an evidence of ownership or title over the particular property described
therein. Its issuance in favor of a particular person does not foreclose the
possibility that the real property may be co-owned with persons not named in
the certificate, or that it may be held in trust for another person by the
registered owner.35
In Lacbayan v. Samoy, Jr.,36 the Court noted that what cannot be collaterally
attacked is the certificate of title, and not the title
itself:chanRoblesvirtualLawlibrary
x x x The certificate referred to is that document issued by the Register of
Deeds known as the TCT. In contrast, the title referred to by law means
ownership which is, more often than not, represented by that document. x x x
Title as a concept of ownership should not be confused with the certificate of
title as evidence of such ownership although both are interchangeably used.
In Mallilin, Jr. v. Castillo,37 the Court defined collateral attack on the title, as
follows:chanRoblesvirtualLawlibrary
x x x When is an action an attack' on a title? It is when the object of the action
or proceeding is to nullify the title, and thus challenge the judgment pursuant
to which the title was decreed. The attack is direct when the object of an
action or proceeding is to annul or set aside such judgment, or enjoin its
enforcement. On the other hand, the attack is indirect or collateral when, in an
action to obtain a different relief, an attack on the judgment is nevertheless
made as an incident thereof.38
In this case, what is being assailed by the COA when it sustained the Notice of
Disallowance for payment of just compensation is HI-LON's claim of
ownership over the 29,690 sq. m. portion of the property, and not the TCT of
TGPI from which HI-LON derived its title. Granted that there is an error in
the registration of the entire 89,070 sq. m. subject property previously in the
name of TGPI under TCT No. 15678639 and currently in the name of HI-LON
under TCT No. T-38381940 because the 29,690 sq. m. RROW portion
belonging to the government was mistakenly included, a judicial
pronouncement is still necessaiy in order to have said portion excluded from
the Torrens title.41
HI-LON's assertion that the titles issued to TGPI and HI-LON conclusively
show that they are the registered owners of the entire 89,070 sq. m. property
in Calamba, Laguna, including the 29,690 sq. m. RROW is anathema to the
purpose of the Torrens System, which is intended to guarantee the integrity
and conclusiveness of the certificate of registration, but cannot be used for the
perpetration of fraud against the real owner of the registered land.42 On point
is the case of Balangcad v. Court of Appeals43 where it was held that "the
system merely confirms ownership and does not create it. Certainly, it cannot
be used to divest the lawful owner of his title for the purpose of transferring it
to another who has not acquired it by any of the modes allowed or recognized
by law. Where such an erroneous transfer is made, as in this case, the law
presumes that no registration has been made and so retains title in the real
owner of the land."
It is also not amiss to cite Ledesma v. Municipality of Iloilo44 where it was
ruled that "if a person obtains title, under the Torrens system, which includes,
by mistake or oversight, lands which cannot be registered under the Torrens
system, he does not, by virtue of said certificate alone, become the owner of
the land illegally included." Inasmuch as the inclusion of public highways in
the certificate of title under the Torrens system does not thereby give to the
holder of such certificate said public highways,45 the same holds true with
respect to RROWs which are of similar character as roads for public use.
Assuming arguendo that collateral attack of said titles are allowed, HI-LON
claims that its right of ownership of the subject RROW can no longer be
assailed by the COA because it never questioned such right until after it
denied the petition for review. HI-LON notes that ND No. 2004-032 was
issued and it was denied payment of just compensation for the RROW solely
on the ground that such compensation should be based on the value of the lot
at the time of the actual taking by the government in 1978. HI-LON avers that
it was surprised to find out that in the Decision dated 20 January 2011, the
COA Commission Proper assailed for the first time TGPI's and HI-LON's
right of ownership over the RROW, instead of merely finding whether or not
the valuation of the property should be based on the value at the time of the
taking in 1978 or the value of the P2,500.00/sq. m.
HI-LON's arguments fail to persuade.
COA may delve into the question of ownership although this was not an
original ground for the issuance of the Notice of Disallowance, but only the
proper valuation of the just compensation based on the date of actual taking of
the property. In Yap v. Commission on Audit,46 the Court ruled that "COA is
not required to limit its review only to the grounds relied upon by a
government agency's auditor with respect to disallowing certain
disbursements of public funds. In consonance with its general audit power,
respondent COA is not merely legally permitted, but is also duty-bound to
make its own assessment of the merits of the disallowed disbursement and not
simply restrict itself to reviewing the validity of the ground relied upon by the
auditor of the government agency concerned. To hold otherwise would render
the COA's vital constitutional power unduly limited and thereby useless and
ineffective." Tasked to be vigilant and conscientious in safeguarding the
proper use of the government's, and ultimately the people's property, the COA
is endowed with enough latitude to determine, prevent, and disallow irregular,
unnecessary, excessive, extravagant or unconscionable expenditures of
government funds.47
It is the policy of the Court to sustain the decisions of administrative
authorities, especially one that was constitutionally created like herein
respondent COA, not only on the basis of the doctrine of separation of
powers, but also of their presumed expertise in the laws they are entrusted to
enforce.48 Considering that findings of administrative agencies are accorded
not only respect but also finality when the decision and order are not tainted
with unfairness or arbitrariness amounting to grave abuse of discretion, it is
only when the COA acted with such abuse of discretion that the Court
entertains a petition for certiorari under Rule 65 of the Rules of Court.49
Grave abuse of discretion implies such capricious and whimsical exercise of
judgment as is equivalent to lack of jurisdiction or, in other words, the
exercise of the power in an arbitrary manner by reason of passion, prejudice,
or personal hostility;50 and it must be so patent or gross as to amount to an
evasion of a positive duty or to a virtual refusal to perform the duty enjoined
or to act at all in contemplation of law.51 No grave abuse of discretion can be
imputed against the COA when it affirmed the Notice of Disallowance issued
by the LAO-N in line with its constitutional authority52 and jurisdiction over
cases involving "disallowance of expenditures or uses of government funds
and properties found to be illegal, irregular, unnecessary, excessive,
extravagant or unconscionable."53 Having determined that HI-LON does, not
own the disputed RROW, the COA correctly ruled that HI-LON is not entitled
to payment of just compensation and must accordingly refund the partial
payment made by the DPWH in the amount of P10,461,338.00. To stress,
even if HI-LON is the registered owner of the subject property under TCT No.
T-383819 with an area of 89,070 sq. m., the Deed of Absolute Sale dated 29
October 1987 clearly shows that only the 59,380 sq. m. portion of the subject
property, and not 29,690 sq. m. portion used as RROW, was sold and
conveyed by the government (through APT) to HI-LON's immediate
predecessor-in-interest (TGPI).
In light of the foregoing disquisition, HI-LON's prayer for issuance of
Temporary Restraining Order and/or Writ of Injunction must necessarily be
denied for lack of clear and unmistakable right over the disputed 29,690 sq. m.
portion of the subject property.
Lastly, from the finality of the Court's decision until full payment, the total
amount to be refunded by HI-LON shall earn legal interest at the rate of six
percent (6%) per annum, pursuant to Bangko Sentral ng Pilipinas Monetary
Board Circular No. 799, Series of 2013, because such interest is imposed by
reason of the Court's decision and takes the nature of a judicial debt.54
WHEREFORE, premises considered, the Petition
for Certiorari is DENIED for lack of merit, and the Commission on Audit
Decision No. 2011-003 dated January 20, 2011 and Decision No. 2013-212
dated December 3, 2013 are AFFIRMED with MODIFICATION that a
legal interest of six percent (6%) per annum from the finality of this Decision
until fully paid, is imposed on the amount of P10,461,338.00 that HI-LON
Manufacturing Co., Inc. is required to refund to the Department of Public
Works and Highways.
SO ORDERED.
G.R. No. 185091               August 8, 2010
REPUBLIC OF THE PHILIPPINES, REPRESENTED BY THE
DEPARTMENT OF EDUCATION DIVISION OF LIPA CITY (FOR
PANINSINGIN PRIMARY SCHOOL), Petitioner,
vs.
PRIMO MENDOZA and MARIA LUCERO, Respondents.
DECISION
ABAD, J.:
This case is about the propriety of filing an ejectment suit against the
Government for its failure to acquire ownership of a privately owned property
that it had long used as a school site and to pay just compensation for it.
The Facts and the Case
Paninsingin Primary School (PPS) is a public school operated by petitioner
Republic of the Philippines (the Republic) through the Department of
Education. PPS has been using 1,149 square meters of land in Lipa City,
Batangas since 1957 for its school. But the property, a portion of Lots 1923
and 1925, were registered in the name of respondents Primo and Maria
Mendoza (the Mendozas) under Transfer Certificate of Title (TCT) T-11410.1
On March 27, 1962 the Mendozas caused Lots 1923 and 1925 to be
consolidated and subdivided into four lots, as follows:
Lot 1 – 292 square meters in favor of Claudia Dimayuga
Lot 2 – 292 square meters in favor of the Mendozas
Lot 3 – 543 square meters in favor of Gervacio Ronquillo; and
Lot 4 – 1,149 square meters in favor of the City Government of Lipa2
As a result of subdivision, the Register of Deeds partially cancelled TCT T-
11410 and issued new titles for Lots 1 and 3 in favor of Dimayuga and
Ronquillo, respectively. Lot 2 remained in the name of the Mendozas but no
new title was issued in the name of the City Government of Lipa for Lot
4.3 Meantime, PPS remained in possession of the property.
The Republic claimed that, while no title was issued in the name of the City
Government of Lipa, the Mendozas had relinquished to it their right over the
school lot as evidenced by the consolidation and subdivision plan. Further, the
property had long been tax-declared in the name of the City Government and
PPS built significant, permanent improvements on the same. These
improvements had also been tax-declared.4
The Mendozas claim, on the other hand, that although PPS sought permission
from them to use the property as a school site, they never relinquished their
right to it. They allowed PPS to occupy the property since they had no need
for it at that time. Thus, it has remained registered in their name under the
original title, TCT T-11410, which had only been partially cancelled.
On November 6, 1998 the Mendozas wrote PPS, demanding that it vacate the
disputed property.5 When PPS declined to do so, on January 12, 1999 the
Mendozas filed a complaint with the Municipal Trial Court in Cities (MTCC)
of Lipa City in Civil Case 0002-99 against PPS for unlawful detainer with
application for temporary restraining order and writ of preliminary
injunction.6
On July 13, 1999 the MTCC rendered a decision, dismissing the complaint on
ground of the Republic’s immunity from suit.7 The Mendozas appealed to the
Regional Trial Court (RTC) of Lipa City which ruled that the Republic’s
consent was not necessary since the action before the MTCC was not against
it.8
In light of the RTC’s decision, the Mendozas filed with the MTCC a motion
to render judgment in the case before it.9 The MTCC denied the motion,
however, saying that jurisdiction over the case had passed to the RTC upon
appeal.10 Later, the RTC remanded the case back to the MTCC,11 which then
dismissed the case for insufficiency of evidence.12 Consequently, the
Mendozas once again appealed to the RTC in Civil Case 2001-0236.
On June 27, 2006 the RTC found in favor of the Mendozas and ordered PPS
to vacate the property. It held that the Mendozas had the better right of
possession since they were its registered owners. PPS, on the other hand,
could not produce any document to prove the transfer of ownership of the land
in its favor.13 PPS moved for reconsideration, but the RTC denied it.
The Republic, through the Office of the Solicitor General (OSG), appealed the
RTC decision to the Court of Appeals (CA) in CA-G.R. SP 96604 on the
grounds that: (1) the Mendozas were barred by laches from recovering
possession of the school lot; (2) sufficient evidence showed that the Mendozas
relinquished ownership of the subject lot to the City Government of Lipa City
for use as school; and (3) Lot 4, Pcs-5019 has long been declared in the name
of the City Government since 1957 for taxation purposes.14
In a decision dated February 26, 2008, the CA affirmed the RTC
decision.15 Upholding the Torrens system, it emphasized the indefeasibility of
the Mendozas’ registered title and the imprescriptible nature of their right to
eject any person occupying the property. The CA held that, this being the
case, the Republic’s possession of the property through PPS should be
deemed merely a tolerated one that could not ripen into ownership.
The CA also rejected the Republic’s claim of ownership since it presented no
documentary evidence to prove the transfer of the property in favor of the
government. Moreover, even assuming that the Mendozas relinquished their
right to the property in 1957 in the government’s favor, the latter never took
steps to have the title to the property issued in its name or have its right as
owner annotated on the Mendozas’ title. The CA held that, by its omissions,
the Republic may be held in estoppel to claim that the Mendozas were barred
by laches from bringing its action.
With the denial of its motion for reconsideration, the Republic has taken
recourse to this Court via petition for review on certiorari under Rule 45.
The Issue Presented
The issue in this case is whether or not the CA erred in holding that the
Mendozas were entitled to evict the Republic from the subject property that it
had used for a public school.
Further, as the Court also held in Eusebio v. Luis,22 the failure for a long time
of the owner to question the lack of expropriation proceedings covering a
property that the government had taken constitutes a waiver of his right to
gain back possession. The Mendozas’ remedy is an action for the payment of
just compensation, not ejectment.1avvphi1
In Republic of the Philippines v. Court of Appeals,23 the Court affirmed the
RTC’s power to award just compensation even in the absence of a proper
expropriation proceeding. It held that the RTC can determine just
compensation based on the evidence presented before it in an ordinary civil
action for recovery of possession of property or its value and damages. As to
the time when just compensation should be fixed, it is settled that where
property was taken without the benefit of expropriation proceedings and its
owner filed an action for recovery of possession before the commencement of
expropriation proceedings, it is the value of the property at the time of taking
that is controlling.24
Since the MTCC did not have jurisdiction either to evict the Republic from
the land it had taken for public use or to hear and adjudicate the Mendozas’
right to just compensation for it, the CA should have ordered the complaint for
unlawful detainer dismissed without prejudice to their filing a proper action
for recovery of such compensation.
WHEREFORE, the Court partially GRANTS the petition, REVERSES the
February 26, 2008 decision and the October 20, 2008 resolution of the Court
of Appeals in CA-G.R. 96604, and ORDERS the dismissal of respondents
Primo and Maria Mendoza’s action for eviction before the Municipal Trial
Court in Cities of Lipa City in Civil Case 0002-99 without prejudice to their
filing an action for payment of just compensation against the Republic of the
Philippines or, when appropriate, against the City of Lipa.
SO ORDERED.

The Court’s Ruling

A decree of registration is conclusive upon all persons, including the

Government of the Republic and all its branches, whether or not mentioned by
name in the application for registration or its notice.16 Indeed, title to the land,
once registered, is imprescriptible.17 No one may acquire it from the registered
owner by adverse, open, and notorious possession.18 Thus, to a registered
owner under the Torrens system, the right to recover possession of the
registered property is equally imprescriptible since possession is a mere
consequence of ownership.

Here, the existence and genuineness of the Mendozas’ title over the property
has not been disputed. While the consolidation and subdivision plan of Lots
1923 and 1925 shows that a 1,149 square meter lot had been designated to the
City Government, the Republic itself admits that no new title was issued to it
or to any of its subdivisions for the portion that PPS had been occupying since
1957.19

That the City Government of Lipa tax-declared the property and its
improvements in its name cannot defeat the Mendozas’ title. This Court has
allowed tax declarations to stand as proof of ownership only in the absence of
a certificate of title.20 Otherwise, they have little evidentiary weight as proof
of ownership.21

The CA erred, however, in ordering the eviction of PPS from the property that
it had held as government school site for more than 50 years. The evidence on
record shows that the Mendozas intended to cede the property to the City
Government of Lipa permanently. In fact, they allowed the city to declare the
property in its name for tax purposes. And when they sought in 1962 to have
the bigger lot subdivided into four, the Mendozas earmarked Lot 4, containing
1,149 square meters, for the City Government of Lipa. Under the
circumstances, it may be assumed that the Mendozas agreed to transfer
ownership of the land to the government, whether to the City Government of
Lipa or to the Republic, way back but never got around to do so and the
Republic itself altogether forgot about it. Consequently, the Republic should
be deemed entitled to possession pending the Mendozas’ formal transfer of
ownership to it upon payment of just compensation.

The Court holds that, where the owner agrees voluntarily to the taking of his
property by the government for public use, he thereby waives his right to the
institution of a formal expropriation proceeding covering such property.

G.R. No. 161030               September 14, 2011
JOSE FERNANDO, JR., ZOILO FERNANDO, NORMA FERNANDO
BANARES, ROSARIO FERNANDO TANGKENCGO, HEIRS OF
TOMAS FERNANDO, represented by ALFREDO V. FERNANDO,
HEIRS OF GUILLERMO FERNANDO, represented by Ronnie H.
Fernando, HEIRS OF ILUMINADA FERNANDO, represented by
Benjamin Estrella and HEIRS OF GERMOGENA
FERNANDO, Petitioners,
vs.
LEON ACUNA, HERMOGENES FERNANDO, HEIRS OF SPOUSES
ANTONIO FERNANDO AND FELISA CAMACHO, represented by
HERMOGENES FERNANDO, Respondents.
DECISION
LEONARDO-DE CASTRO, J.:
This is a petition for review on certiorari under Rule 45 of the 1997 Rules of
Civil Procedure seeking to reverse and set aside the Decision1 dated
November 24, 2003 of the Court of Appeals in CA-G.R. CV No. 75773,
entitled "Jose Fernando, Jr., et al. v. Heirs of Germogena Fernando, et al.,"
which reversed and set aside the Decision2 dated May 16, 2002 of Branch 84,
Regional Trial Court (RTC) of Malolos, Bulacan in Civil Case No. 256-M-97.
At the heart of this controversy is a parcel of land covered by Original
Certificate of Title (OCT) No. RO-487 (997)3 registered in the names of Jose
A. Fernando, married to Lucila Tinio, and Antonia A. Fernando, married to
Felipe Galvez, and located in San Jose, Baliuag, Bulacan. When they died
intestate, the property remained undivided. Petitioners herein – namely, Jose
Fernando, Jr., Zoilo Fernando, Norma Fernando Banares, Rosario Fernando
Tangkencgo, the heirs of Tomas Fernando, the heirs of Guillermo Fernando,
the heirs of Iluminada Fernando and the heirs of Germogena Fernando – are
the heirs and successors-in-interest of the deceased registered owners.
However, petitioners failed to agree on the division of the subject property
amongst themselves, even after compulsory conciliation before the Barangay
Lupon.
Thus, petitioners, except for the heirs of Germogena Fernando, filed a
Complaint4 for partition on April 17, 1997 against the heirs of Germogena
Fernando. In the Complaint, plaintiffs alleged, among others, that they and
defendants are common descendants and compulsory heirs of the late spouses
Jose A. Fernando and Lucila Tinio, and the late spouses Antonia A. Fernando
and Felipe Galvez. They further claimed that their predecessors-in-interest
died intestate and without instructions as to the disposition of the property left
by them covered by OCT No. RO-487 (997). There being no settlement, the
heirs are asking for their rightful and lawful share because they wish to build
up their homes or set up their business in the respective portions that will be
allotted to them. In sum, they prayed that the subject property be partitioned
into eight equal parts, corresponding to the hereditary interest of each group of
heirs.
In their Answer5 filed on May 20, 1997, defendants essentially admitted all of
the allegations in the complaint. They alleged further that they are not
opposing the partition and even offered to share in the expenses that will be
incurred in the course of the proceedings.
In his Complaint in Intervention6 filed on January 12, 1998, respondent Leon
Acuna (Acuna) averred that in the Decision7 dated November 29, 1929 of the
Cadastral Court of Baliuag, Bulacan, the portion of the property identified as
Lot 1303 was already adjudicated to: (a) Antonio Fernando, married to Felisa
Camacho; (b) spouses Jose Martinez and Gregoria Sison; (c) spouses Ignacio
de la Cruz and Salud Wisco; and (d) Jose Fernando, married to Lucila Tinio,
the petitioners’ predecessor-in-interest. He likewise claimed that in a 1930
Decision of the Cadastral Court, the portion identified as Lot 1302 was also
already adjudicated to other people as well.
Respondent Acuna further alleged that Salud Wisco, through her authorized
attorney-in-fact, Amador W. Cruz, sold her lawful share denominated as Lot
1303-D with an area of 3,818 square meters to Simeon P. Cunanan,8 who in
turn sold the same piece of land to him as evidenced by a Deed of Sale.9 He
also belied petitioners’ assertion that the subject property has not been settled
by the parties after the death of the original owners in view of the
Decision10 dated July 30, 1980 of the Court of First Instance (CFI) of Baliuag,
Bulacan, in LRC Case No. 80-389 which ordered the Register of Deeds of
Bulacan to issue the corresponding certificates of title to the claimants of the
portion of the subject property designated as Lot 1302.11 Norma Fernando, one
of the petitioners in the instant case, even testified in LRC Case No. 80-389.
According to respondent Acuna, this circumstance betrayed bad faith on the
part of petitioners in filing the present case for partition.
Respondent Acuna likewise averred that the action for partition cannot
prosper since the heirs of the original owners of the subject property, namely
Rosario, Jose Jr., Norma, Tomas, Guillermo, Leopoldo, Hermogena,
Illuminada and Zoilo, all surnamed Fernando, and Lucila Tinio, purportedly
had already sold their respective one-tenth (1/10) share each in the subject
property to Ruperta Sto. Domingo Villasenor for the amount of ₱35,000.00 on
January 25, 1978 as evidenced by a "Kasulatan sa Bilihang Patuluyan."12 He
added that he was in possession of the original copy of OCT No. RO-487
(997) and that he had not commenced the issuance of new titles to the
subdivided lots because he was waiting for the owners of the other portions of
the subject property to bear their respective shares in the cost of titling.
Subsequently, a Motion for Intervention13 was filed on June 23, 1998 by
respondent Hermogenes Fernando (Hermogenes), for himself and on behalf of
the heirs of the late spouses, Antonio A. Fernando and Felisa Camacho.
According to him, in the July 30, 1980 Decision of the CFI of Bulacan, their
predecessors-in-interest had already been adjudged owners of Lots 1302-A,
1302-F, 1302-G,14 1302-H and 1302-J of OCT No. RO-487 (997) and any
adverse distribution of the properties would cause respondents damage and
prejudice. He would also later claim, in his Answer-in-Intervention,15 that the
instant case is already barred by res judicata and, should be dismissed.
In the interest of substantial justice, the trial court allowed the respondents to
intervene in the case.
The plaintiffs and defendants jointly moved to have the case submitted for
judgment on the pleadings on May 7, 1999.16 However, the trial court denied
said motion in a Resolution17 dated August 23, 1999 primarily due to the
question regarding the ownership of the property to be partitioned, in light of
the intervention of respondents Acuna and Hermogenes who were claiming
legal right thereto.
In their Manifestation18 filed on April 12, 2000, petitioners affirmed their
execution of a Deed of Sale in favor of Ruperta Sto. Domingo Villasenor in
1978, wherein they sold to her 1,000 square meters from Lot 1303 for the sum
of ₱ 35,000.00.
After the pre-trial conference, trial ensued. On September 19, 2000, petitioner
Elizabeth Alarcon testified that they (plaintiffs) are not claiming the entire
property covered by OCT No. RO-487 (997) but only the area referred to as
Lot 1303 and Sapang Bayan. She also admitted that Lot 1302 had already
been divided into ten (10) sublots and allocated to various owners pursuant to
the July 30, 1980 Decision of the CFI of Baliuag, Bulacan and these owners
already have their own titles. She likewise claimed that the entire area
consisting of Lot 1303 and Sapang Bayan is based on the subdivision plan of
Lot 1303. She admitted that plaintiffs’ predecessor-in-interest was only
allocated a portion of Lot 1303 based on the said plan. However, she claimed
that the November 29, 1929 Decision subdividing Lot 1303 was never
implemented nor executed by the parties.19
Petitioner Norma Fernando testified on October 3, 2000 that she is one of the
children of Jose A. Fernando and Lucila Tinio. She affirmed that plaintiffs
were only claiming Lot 1303 and Sapang Bayan. She also testified that
Sapang Bayan was supposedly included in Lot 1302 and was previously a
river until it dried up. Unlike Lot 1302, the rest of the property was
purportedly not distributed. She likewise averred that she is aware of a
November 29, 1929 Decision concerning the distribution of Lot 1303 issued
by the cadastral court but insisted that the basis of the claims of the petitioners
over Lot 1303 is the title in the name of her ascendants and not said
Decision.20
On November 16, 2000, as previously directed by the trial court and agreed to
by the parties, counsel for respondent Hermogenes prepared and submitted an
English translation of the November 29, 1929 Decision. The same was
admitted and marked in evidence as Exhibit "X"21 as a common exhibit of the
parties. The petitioners also presented Alfredo Borja, the Geodetic Engineer
who conducted a relocation survey of the subject property.
After plaintiffs rested their case, respondent Hermogenes testified on
December 7, 2000. In his testimony, he claimed to know the plaintiffs and
defendants as they were allegedly his relatives and neighbors. He confirmed
that according to the November 29, 1929 Decision, portions of Lot 1303 was
designated as Lots 1303-A, 1303-B, 1303-C and 1303-D which were
adjudicated to certain persons, including Jose Fernando, while the rest of Lot
1303 was adjudicated to his parents, Antonio A. Fernando married to Felisa
Camacho. According to respondent Hermogenes, his family’s tenant and the
latter’s children occupied the portion of Lot 1303 allotted to his (Hermogenes)
parents while the rest of Lot 1303 was occupied by the persons named in the
said November 29, 1929 Decision. He admitted, however, that nobody among
the purported possessors of Lot 1303 registered the lots assigned to them in
the Decision.22
On January 18, 2001, respondent Hermogenes presented a witness, Engineer
Camilo Vergara who testified that the subject land is divided into Lots 1302
and 1303 with a creek dividing the two lots known as Sapang Bayan. He also
identified a Sketch Plan numbered as PSD-45657 and approved on November
11, 1955.23 During the hearing on January 30, 2001, respondent Hermogenes
made an oral offer of his evidence and rested his case. On the same date,
respondent Acuna, in lieu of his testimony, offered for the parties to simply
stipulate on the due execution and authenticity of the Deeds of Sale dated
April 6, 1979 and December 28, 1980, showing the transfer of Lot 1303-D
from Salud Wisco to Simeon Cunanan and subsequently to respondent Acuna.
When counsel for plaintiffs and defendants agreed to the stipulation, albeit
objecting to the purpose for which the deeds of sale were offered, the trial
court admitted Acuna’s exhibits and Acuna rested his case.24
On February 15, 2001, plaintiffs recalled Norma Fernando as a rebuttal
witness. In her rebuttal testimony, she identified the tax declaration25 over the
said property in the name of Jose A. Fernando; an official receipt26 dated
October 3, 1997 issued by the Office of the Treasurer of the Municipality of
Baliuag, Bulacan for payment of real property taxes from 1991 to 1997; and a
real property tax clearance27 dated October 6, 1997, to show that plaintiffs
have allegedly been paying the real property taxes on the entire property
covered by OCT No. RO-487 (997). However, she further testified that they
were now willing to pay taxes only over the portion with an area of 44,234
square meters, which is included in their claim.28
In a Decision dated May 16, 2002, the trial court ruled that plaintiffs and
defendants (petitioners herein) were indeed the descendants and successors-in-
interest of the registered owners, Jose A. Fernando (married to Lucila Tinio)
and Antonia Fernando (married to Felipe Galvez), of the property covered by
OCT No. RO-487 (997). After finding that the parties admitted that Lot 1302
was already distributed and titled in the names of third persons per the July
30, 1980 Decision of the CFI of Baliuag, Bulacan the trial court proceeded to
rule on the allocation of Lot 1303 and Sapang Bayan.
With respect to Lot 1303, the trial court found that the November 29, 1929
Decision of the Cadastral Court, adjudicating said lot to different persons and
limiting Jose Fernando’s share to Lot 1303-C, was never implemented nor
executed despite the lapse of more than thirty years. Thus, the said decision
has already prescribed and can no longer be executed. The trial court ordered
the reversion of Lot 1303 to the ownership of spouses Jose A. Fernando and
Lucila Tinio and spouses Antonia A. Fernando and Felipe Galvez under OCT
No. RO-487 (997) and allowed the partition of Lot 1303 among petitioners as
successors-in-interest of said registered owners. Excluded from the partition,
however, were the portions of the property which petitioners admitted had
been sold or transferred to Ruperta Sto. Domingo Villasenor and respondent
Acuna.
As for the ownership of Sapang Bayan, the trial court found that the same had
not been alleged in the pleadings nor raised as an issue during the pre-trial
conference. Also, according to the trial court, the parties failed to clearly show
whether Sapang Bayan was previously a dry portion of either Lot 1302 or Lot
1303. Neither was there any proof that Sapang Bayan was a river that just
dried up or that it was an accretion which the adjoining lots gradually received
from the effects of the current of water. It was likewise not established who
were the owners of the lots adjoining Sapang Bayan. The trial court concluded
that none of the parties had clearly and sufficiently established their claims
over Sapang Bayan.
The dispositive portion of the May 16, 2002 Decision of the trial court reads:
WHEREFORE, all the foregoing considered, judgment is hereby rendered
ordering the reversion of Lot 1303, except the portions allotted to Acuna and
Ruperta Sto. Domingo Villasenor, to the ownership of Jose Fernando and
Lucia Tinio and Antonia Fernando and Felipe Galvez under OCT No. 997 and
thereafter allowing the partition of said Lot 1303 among the plaintiffs and the
defendants as successors-in-interest of Jose and Lucia as well as Antonia and
Felipe after the settlement of any inheritance tax, fees, dues and/or obligation
chargeable against their estate.29
All the parties, with the exception of respondent Acuna, elevated this case to
the Court of Appeals which rendered the assailed November 24, 2003
Decision, the dispositive portion of which reads:
WHEREFORE, premises considered, the decision dated May 16, 2002, of the
Regional Trial Court of Malolos, Bulacan, Third Judicial Region, Branch 84,
in Civil Case No. 256-M-97, is hereby REVERSED and SET ASIDE and the
complaint dated April 17, 1997 filed by plaintiffs-appellants is dismissed.
Costs against plaintiffs-appellants.30
Hence, plaintiffs and defendants in the court a quo elevated the matter for our
review through the instant petition.
Petitioner raises the following issues for consideration:
1. Whether or not the ownership of Lot 1303 and the Sapang Bayan portion of
the piece of land covered by O.C.T. No. RO-487 (997) or Plan Psu-39080
should revert to the descendants and heirs of the late spouses Jose Fernando
and Lucila Tinio and Antonia Fernando, married to Felipe Galvez;
2. Whether or not a title registered under the Torrens system, as the subject
original certificate of title is the best evidence of ownership of land and is a
notice against the world.31
The petition is without merit.
Petitioners based their claims to the disputed areas designated as Lot 1303 and
Sapang Bayan on their ascendants’ title, OCT No. RO-487 (997), which was
issued on February 26, 1927 in the name of Jose A. Fernando married to
Lucila Tinio and Antonia A. Fernando married to Felipe Galvez. The Court
now rules on these claims in seriatim.
Petitioners’ claim with respect to Lot 1303
As the records show, in the November 29, 1929 Decision of the Cadastral
Court of Baliuag, Bulacan (in Cadastral Record No. 14, GLRO Cad. Record
No. 781) which was written in Spanish, Lot 1303 had already been divided
and adjudicated to spouses Jose A. Fernando and Lucila Tinio; spouses
Antonia A. Fernando and Felipe Galvez; spouses Antonio A. Fernando and
Felisa Camacho; spouses Jose Martinez and Gregoria Sison; and spouses
Ignacio de la Cruz and Salud Wisco from whom respondent Acuna derived his
title. The English translation of the said November 29, 1929 Decision was
provided by respondent Hermogenes and was adopted by all the parties as a
common exhibit designated as Exhibit "X." The agreed English translation of
said Decision reads:
Lot No. 1303 – This lot is decreed in record No. 448, G.L.R.O. Record No.
25414 and actually with Original Certificate No. 997 (exhibited today) in the
name of Jose A. Fernando and Antonia A. Fernando, who now pray that said
lot be subdivided in accordance with the answers recorded in the instant
cadastral record, and the sketch, Exh. "A", which is attached to the records.
A part or portion of the lot has been claimed by Antonio A. Fernando, of legal
age, married to Felisa Camacho; another portion by the spouses Jose Martinez
and Gregoria Sison; another portion by Antonia A. Fernando, of legal age,
married to Felipe Galvez; another portion by Jose A. Fernando, of legal age,
married to Lucila Tinio; and another portion by the spouses Ignacio de la Cruz
and Salud Wisco, both of legal age. The part claimed by the spouses Jose A.
Martinez and Gregoria Sison is Lot 1303-A of Exh. A; the part claimed by
Antonia A. Fernando is Lot 1303-B of said exhibit; the part claimed by Jose
A. Fernando is Lot 1303-C of said exhibit, and the part claimed by the spouses
Ignacio de la Cruz and Salud Wisco is Lot 1303-D of the aforementioned
Exhibit.
The subdivision of said lot is hereby ordered, separating from the same the
portions that correspond to each of the claimants, which portions are known as
Lots 1303-A, 1303-B, 1303-C, and 1303-D in the sketch, Exh. "A", and once
subdivided, are adjudicated in favor of the spouses, Jose Martinez and
Gregoria Sison, of legal age, Lot No. 1303-A, in favor of Antonia A.
Fernando, of legal age, married to Felipe Galvez, Lot No. 1303-B; in favor of
Jose A. Fernando, of legal age, married to Lucila Tinio, Lot 1303-C; in favor
of the spouses Ignacio de la Cruz and Salud Wisco, of legal age, Lot 1303-D;
and the rest of Lot 1303 is adjudged in favor of Antonio A. Fernando married
to Felisa Camacho. It is likewise ordered that once the subdivision plan is
approved, the same be forwarded by the Director of Lands to this Court for its
final decision.
It is ordered that the expense for mentioned subdivision, shall be for the
account of the spouses Jose Martinez and Gregoria Sison, Antonia A.
Fernando, Jose A. Fernando, the spouses Ignacio de la Cruz and Salud Wisco,
and Antonio A. Fernando.32
From the foregoing, it would appear that petitioners’ ascendants themselves
petitioned for the cadastral court to divide Lot 1303 among the parties to the
1929 case and they were only allocated Lots 1303-B and 1303-C. Still, as the
trial court noted, the November 29, 1929 Decision was never fully
implemented in the sense that the persons named therein merely proceeded to
occupy the lots assigned to them without having complied with the other
directives of the cadastral court which would have led to the titling of the
properties in their names. Nonetheless, it is undisputed that the persons named
in the said November 29, 1929 Decision and, subsequently, their heirs and
assigns have since been in peaceful and uncontested possession of their
respective lots for more than seventy (70) years until the filing of the suit for
partition on April 17, 1997 by petitioners which is the subject matter of this
case. Respondent Hermogenes, who testified that petitioners were his relatives
and neighbors, further affirmed before the trial court that the persons named in
the November 29, 1929 Decision took possession of their respective lots:
ATTY. VENERACION:
Q – This Jose A. Fernando married to Lucila Tinio, you testified earlier are
the parents of the plaintiffs. Did they take possession of lot 1303-C?
A – Yes, sir. They took possession.
Q – Did they take possession of the other lots?
A – No. Yes, the portion…
Q – The other lots in the name of the other persons. Did they take possession
of that?
A – Yes, they took took possession of the other… No, sir.
Q – I am asking you whether they took possession, the children…
ATTY. SANTIAGO:
The questions are already answered, your Honor.
ATTY. VENERACION:
What is the answer?
ATTY. SANTIAGO:
It’s in the record.
COURT:
The persons named in the Decision already took possession of the lots allotted
to them as per that Decision. So that was already answered. Anything else?
ATTY. VENERACION;
No more question, Your Honor.33
It is noteworthy that petitioners do not dispute that the November 29, 1929
Decision of the cadastral court already adjudicated the ownership of Lot 1303
to persons other than the registered owners thereof. Petitioners would,
nonetheless, claim that respondents’ purported failure to execute the
November 29, 1929 Decision over Lot 1303 (i.e., their failure to secure their
own titles) meant that the entire Lot 1303 being still registered in the name of
their ascendants rightfully belongs to them. This is on the theory that
respondents’ right to have the said property titled in their names have long
prescribed.
On this point, we agree with the appellate court.
Section 47 of Presidential Decree No. 1529, otherwise known as the Property
Registration Decree, states that "[n]o title to registered land in derogation of
the title of the registered owner shall be acquired by prescription or adverse
possession." Thus, the Court has held that the right to recover possession of
registered land is imprescriptible because possession is a mere consequence of
ownership.34
However, in Heirs of Anacleto B. Nieto v. Municipality of Meycauayan,
Bulacan,35 the Court had recognized the jurisprudential thread regarding the
exception to the foregoing doctrine that while it is true that a Torrens title is
indefeasible and imprescriptible, the registered landowner may lose his right
to recover possession of his registered property by reason of laches.
Thus, in Heirs of Batiog Lacamen v. Heirs of Laruan,36 the Court had held that
while a person may not acquire title to the registered property through
continuous adverse possession, in derogation of the title of the original
registered owner, the heir of the latter, however, may lose his right to recover
back the possession of such property and the title thereto, by reason of laches.
In the more recent case of Bartola M. Vda. De Tirona v. Encarnacion,37 we
similarly held that while jurisprudence is settled on the imprescriptibility and
indefeasibility of a Torrens title, there is equally an abundance of cases where
we unequivocally ruled that registered owners may lose their right to recover
possession of property through the equitable principle of laches.
Laches means the failure or neglect for an unreasonable and unexplained
length of time to do that which, by observance of due diligence, could or
should have been done earlier. It is negligence or omission to assert a right
within a reasonable time, warranting the presumption that the party entitled to
assert his right either has abandoned or declined to assert it. Laches thus
operates as a bar in equity.38 The essential elements of laches are: (a) conduct
on the part of the defendant, or of one under whom he claims, giving rise to
the situation complained of; (b) delay in asserting complainant’s rights after
he had knowledge of defendant’s acts and after he has had the opportunity to
sue; (c) lack of knowledge or notice by defendant that the complainant will
assert the right on which he bases his suit; and (d) injury or prejudice to the
defendant in the event the relief is accorded to the complainant.39
In view of respondents’ decades long possession and/or ownership of their
respective lots by virtue of a court judgment and the erstwhile registered
owners’ inaction and neglect for an unreasonable and unexplained length of
time in pursuing the recovery of the land, assuming they retained any right to
recover the same, it is clear that respondents’ possession may no longer be
disturbed. The right of the registered owners as well as their successors-in-
interest to recover possession of the property is already a stale demand and,
thus, is barred by laches.
In the same vein, we uphold the finding of the Court of Appeals that the title
of petitioners’ ascendants wrongfully included lots belonging to third
persons.40 Indeed, petitioners’ ascendants appeared to have acknowledged this
fact as they were even the ones that prayed for the cadastral court to subdivide
Lot 1303 as evident in the November 29, 1929 Decision. We concur with the
Court of Appeals that petitioners’ ascendants held the property erroneously
titled in their names under an implied trust for the benefit of the true owners.
Article 1456 of the Civil Code provides:
ART. 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.
As aptly observed by the appellate court, the party thus aggrieved has the right
to recover his or their title over the property by way of reconveyance while the
same has not yet passed to an innocent purchaser for value.41 As we held in
Medizabel v. Apao,42 the essence of an action for reconveyance is that the
certificate of title is respected as incontrovertible. What is sought is the
transfer of the property, in this case its title, which has been wrongfully or
erroneously registered in another person's name, to its rightful owner or to one
with a better right. It is settled in jurisprudence that mere issuance of the
certificate of title in the name of any person does not foreclose the possibility
that the real property may be under co-ownership with persons not named in
the certificate or that the registrant may only be a trustee or that other parties
may have acquired interest subsequent to the issuance of the certificate of
title.43
Even assuming that Sapang Bayan was a dried-up creek bed, under Article
420, paragraph 146 and Article 502, paragraph 147 of the Civil Code, rivers and
their natural beds are property of public dominion. In the absence of any
provision of law vesting ownership of the dried-up river bed in some other
person, it must continue to belong to the State.
We ruled on this issue in Republic v. Court of Appeals,48 to wit:
The lower court cannot validly order the registration of Lots 1 and 2 in the
names of the private respondents. These lots were portions of the bed of the
Meycauayan river and are therefore classified as property of the public
domain under Article 420 paragraph 1 and Article 502, paragraph 1 of the
Civil Code of the Philippines. They are not open to registration under the
Land Registration act. The adjudication of the lands in question as private
property in the names of the private respondents is null and void.49 1avvphi1
Furthermore, in Celestial v. Cachopero,50 we similarly ruled that a dried-up
creek bed is property of public dominion:
A creek, like the Salunayan Creek, is a recess or arm extending from a river
and participating in the ebb and flow of the sea. As such, under Articles
420(1) and 502(1) of the Civil Code, the Salunayan Creek, including its
natural bed, is property of the public domain which is not susceptible to
private appropriation and acquisitive prescription. And, absent any declaration
by the government, that a portion of the creek has dried-up does not, by itself,
alter its inalienable character.51
Therefore, on the basis of the law and jurisprudence on the matter, Sapang
Bayan cannot be adjudged to any of the parties in this case.
WHEREFORE, premises considered, the petition is hereby DENIED. The
assailed Decision dated November 24, 2003 of the Court of Appeals in CA-
G.R. CV No. 75773 is hereby AFFIRMED. Costs against petitioners.
SO ORDERED.

We cannot subscribe to petitioners’ argument that whatever rights or claims

respondents may have under the November 29, 1929 Decision has prescribed
for their purported failure to fully execute the same. We again concur with the
Court of Appeals in this regard. An action for reconveyance of registered land
based on implied trust prescribes in ten (10) years, the point of reference being
the date of registration of the deed or the date of the issuance of the certificate
of title over the property. However, this Court has ruled that the ten-year
prescriptive period applies only when the person enforcing the trust is not in
possession of the property. If a person claiming to be its owner is in actual
possession of the property, the right to seek reconveyance, which in effect
seeks to quiet title to the property, does not prescribe. The reason is that the
one who is in actual possession of the land claiming to be its owner may wait
until his possession is disturbed or his title is attacked before taking steps to
vindicate his right.44

Petitioners’ claim with respect to Sapang Bayan

As for the issue of the ownership of Sapang Bayan, we sustain the appellate
court insofar as it ruled that petitioners failed to substantiate their ownership
over said area. However, we find that the Court of Appeals erred in ruling that
the principle of accretion is applicable. The said principle is embodied in
Article 457 of the Civil Code which states that "[t]o the owners of lands
adjoining the banks of rivers belong the accretion which they gradually
receive from the effects of the current of the waters." We have held that for
Article 457 to apply the following requisites must concur: (1) that the deposit
be gradual and imperceptible; (2) that it be made through the effects of the
current of the water; and (3) that the land where accretion takes place is
adjacent to the banks of rivers.45 The character of the Sapang Bayan property
was not shown to be of the nature that is being referred to in the provision
which is an accretion known as alluvion as no evidence had been presented to
support this assertion.

In fact from the transcripts of the proceedings, the parties could not agree how
Sapang Bayan came about. Whether it was a gradual deposit received from
the river current or a dried-up creek bed connected to the main river could not
be ascertained.

G.R. No. 158002             February 28, 2005
SPOUSES AURORA N. DE PEDRO and ELPIDIO DE
PEDRO, petitioners,
vs.
ROMASAN DEVELOPMENT CORPORATION and MANUEL
KO, respondents.
DECISION
CALLEJO, SR., J.:
This is a petition for review on certiorari of the Court of Appeals’
Decision1 in CA-G.R. CV No. 68424 dated November 29, 2002, as well as its
Resolution dated April 11, 2003 denying the motion for reconsideration
thereof. The assailed decision affirmed the trial court’s order dismissing the
petitioners’ complaint for damages.
This case proceeded from the following antecedents:
On December 1, 1997, petitioner spouses Aurora and Elpidio de Pedro filed a
Complaint for Damages with Prayer for Preliminary Injunction against
respondents Romasan Development Corporation and Manuel Ko. The
complaint stated, inter alia, that the spouses De Pedro were the registered
owners of a parcel of land in Barangay San Isidro, now Barangay Inarawan,
Antipolo, Rizal, with an area of 50,000 square meters, covered and described
in Original Certificate of Title (OCT) No. P-691, issued by the Register of
Deeds of Marikina City, Metro Manila on March 26, 1992; that they had been
continuously paying the real estate taxes on the said property; that sometime
in January 1997, the respondents started putting up a barbed-wire fence on the
perimeter of the adjacent property; and that in the course of such construction,
the petitioners’ farm house was destroyed and bamboos and other trees were
cut.2
The complaint further alleged that the respondents made claims that the
petitioners’ farm house and the trees were built and planted on a portion of the
adjacent property owned by the respondents. The respondents then prevented
and refused to allow the petitioners and their families to enter the property,
through security guards. The respondents, likewise, threatened to clear the
trees and scrape the area owned by the petitioners with the use of a bulldozer.
The petitioners also alleged that as a consequence of the illegal and wrongful
acts of the respondents, they suffered actual damages and incurred expenses;
as such, they were entitled to moral and exemplary damages, and expenses of
litigation and attorney’s fees.3 1awphi1.nét
On June 16, 1998, the respondents filed their Answer to the complaint,
alleging therein that the respondent corporation was the owner of the land as
evidenced by Transfer Certificate of Title (TCT) No. 236044 which was
issued by the Register of Deeds on March 5, 1993. By fencing the property in
order to determine its metes and bounds, the respondent corporation merely
exercised its rights of ownership over the property. The respondents further
maintained that the petitioners failed to establish the metes and bounds of the
property which was claimed to have been usurped by them. A counterclaim
for damages was, likewise, interposed against the petitioners.
On September 18, 1998, the trial court issued an Order granting the joint
motion of the parties to have a relocation survey on the property in order to
verify its location.4 The survey team consisted of Robert Pangyarihan, Chief of
the Department of Environment and Natural Resources (DENR), Region IV,
Surveys Division as Chairman of the Survey Team;5 Engr. Avelino L. San
Buenaventura, representing the petitioners; and Engr. Patricio Cabalo,
representing the respondents.
On January 30, 1999, the survey team issued a Report on the relocation survey
with the following recommendation:
WHEREFORE, this Commission finds that OCT No. P-691 of the plaintiff
overlaps TCT No. 236044 of parcel H-162341 of the defendant but finds on
the contrary that this land is not the actual area that is being claimed and
occupied by the plaintiff but another parcel instead, namely H-164008. The
overlapping of titles was brought about by the double issuance of title for H-
162341 but the technical descriptions of OCT No. P-691 describing a land
different from the actual occupation of the plaintiff was a result of the
defective survey.6
The survey team made the following findings: (1) TCT No. 236044 originated
from OCT No. 438 in the name of Marcelino Santos, which was based on a
Homestead Patent. The said OCT was, in turn, based on Plan H-162341
surveyed on March 8, 1935 and approved on June 30, 1937; (2) under the
Cadastral Map Sheet of the Lungsod Silangan Cadastre or CM 14-38 N., 121-
12 E on file with the Records Division of the DENR, Region IV, H-162341,
the land covered by the said OCT was reflected as Lot 10455; (3) OCT No. P-
691, under the name of petitioner Aurora de Pedro, was based on Plan Cad.
04-0097-63-D which was a subdivision survey of Lot 10455 of the Lungsod
Silangan Cadastre; (4) Lot 10455 was subdivided into Lots 10455-A to
10455-G; (5) Lot 10455-G was the subject of the petitioners’ application for a
Free Patent; and (6) the land occupied by petitioner Aurora de Pedro is
actually a portion of Lot 10454/H-164008 originally registered on July 2,
1965 under OCT No. 468 based on Homestead Patent No. 99480 under the
name of Isidro Benitez.7 The survey team further declared that:
The nature of this case, however, is one of overlapping titles even if the
erroneous technical descriptions rectified because even while it may not fall
inside the titled H-162341, the lot of Mrs. de Pedro, et al. given the correct
description of the boundary, falls inside another titled parcel under H-164008.
Both H-162341 and H-164008 are presently registered in the name of
Romasan Development Corporation, the defendant.
The granting of Free Patent to Mrs. de Pedro, et al. over a previously titled
property is unwarranted or can be unwittingly an act resulting in double titling
by the CENRO, DENR in Antipolo City.8
Based on the report, the respondents filed a Manifestation/Motion to Dismiss,
averring that there was no legal or factual basis for the complaint as shown by
the findings of the survey team; hence, the petitioners had no cause of action
against them.9 The petitioners did not file any opposition to the motion. Thus,
on December 22, 1999, the trial court issued an Order granting the motion and
ordering the dismissal of the complaint on the ground that the petitioners had
no cause of action.10
The petitioners filed a motion for reconsideration of the order, contending that
(1) the findings and conclusions of the survey team were unreliable; (2) the
chairman of the team was facing criminal and administrative charges in
connection with the performance of his duties; (3) the technical description of
the property contained in OCT No. P-691 was conclusive and should prevail
over the findings of the team; and (4) the petitioners had a cause of action for
damages against the respondents. According to the petitioners, it was
premature for the court to dismiss the complaint without affording them the
right to adduce their evidence on their claim for damages.11
The petitioners appended to their motion the counter-affidavit of Jesus
Pampellona, Deputy Land Inspector, Office of the Community Environment
and Natural Resources Office in Antipolo City. Pampellona alleged that
subsequent to the application for a free patent filed by petitioner Aurora de
Pedro over Lots 10455-F and 10455-G, he conducted the required ocular
inspections to determine the truth of her claim of actual possession over the
properties subject of her application. He found out that she was in actual,
public, adverse and continuous possession of the lots applied for by her, and
that they were with several improvements, like petitioner Aurora de Pedro’s
house and several fruit-bearing trees with an average age of 20 to 25 years. He
averred that, as evidence of her ownership and possession over the lots,
petitioner Aurora de Pedro also submitted an Extrajudicial Partition with
Waiver of Rights dated May 10, 1991, executed by the heirs of Marcelino
Santos, and an Affidavit of Waiver of Rights dated June 6, 1991, which she
herself executed. Pampellona declared that there was no overlapping of claims
or rights over the subject lot based on a certification from the Lands
Management Bureau of the DENR in Manila, and that there was no existing
record of a previous Homestead Application applied for by Marcelino Santos.
He asserted that he secured another Certification dated January 17, 1991 to the
effect that Lot No. 10455, Mcad-585 located in San Isidro, Antipolo, Rizal,
was not covered by any public land application and there was no record of the
alleged Homestead Application 162341 under the name of Marcelino Santos.
Pampellona, likewise, alleged that respondent corporation was the ninth (9th)
transferee from the alleged original registered owner, Marcelino Santos, in
whose favor OCT No. 438 Homestead Patent was issued on August 30,
1937.12
Also appended to the said motion for reconsideration were Certifications from
the Lands Management Bureau, stating that Plan H-164008 was not available
on file despite diligent efforts in locating the same, and that H-164008 was not
listed in the EDP listing; and Certifications from the Register of Deeds of
Rizal and Marikina City that OCT No. 468 issued on July 2, 1965 was not
among the records on file with them.13
The respondents opposed the petitioners’ motion, claiming that the petitioners
failed to oppose the appointment of the chairman of the team before the
relocation survey. Moreover, since according to the report, the land claimed
by the petitioners was covered by the title under the name of respondent
corporation, the petitioners’ claim for damages had no leg to stand on.14
On July 11, 2000, the trial court issued an Order denying the petitioners’
motion for reconsideration, "without prejudice" to the filing of an appropriate
action for the correction or alteration of the technical description of the
property covered by OCT No. P-691.15
The petitioners appealed the order to the Court of Appeals (CA). On
November 29, 2002, the CA rendered a Decision affirming the assailed orders.
The CA ruled that the result of the relocation survey has the presumption of
regularity, such that it must be respected absent any clear showing that it had
been irregularly conducted by the survey team. The CA held that the
petitioners had every opportunity to question and object to the composition of
the survey team before the trial court; since they failed to do so, they cannot
now be allowed to do the same on appeal. According to the CA, it could not
take judicial notice of the alleged cases filed against the chairman of the
survey team since this was not one of the matters which the courts could take
judicial notice of, whether mandatory or directory.16 1a\^/phi1.net
Finally, the CA ruled that the respondents could not be adjudged liable for the
damages allegedly sustained by the petitioners as a consequence of a valid and
justified exercise of ownership over the disputed property. The CA reiterated
the trial court’s holding that the petitioners were not barred from filing the
appropriate action where they may seek to correct whatever mistake or
irregularity that their title had.17
On April 11, 2003, the CA issued a Resolution denying the motion for
reconsideration filed by the petitioners; hence, this petition for review.
The petitioners rely upon the following grounds in support of their petition:
I. THE HONORABLE COURT OF APPEALS GRAVELY ERRED AND
DECIDED THE ISSUES IN THE INSTANT CASE IN A MANNER
CONTRARY TO ESTABLISHED LAW AND JURISPRUDENCE BY
HOLDING THAT THE INSTANT CASE IS A SIMPLE CASE FOR
DAMAGES.
II. THE HONORABLE COURT OF APPEALS GRAVELY ERRED AND
DECIDED THE ISSUES IN THE INSTANT CASE IN A MANNER
CONTRARY TO ESTABLISHED LAW AND JURISPRUDENCE BY
HOLDING THAT THE RESULTS OF THE PRIOR RELOCATION
SURVEY ENJOYS THE PRESUMPTION OF REGULARITY THEREBY
DISPOSSESSING PETITIONERS OF THEIR OWNERSHIP OVER THE
DISPUTED PROPERTY DESPITE CLEAR AND CONVINCING
EVIDENCE THAT:
A. THE TITLE OF PETITIONER AURORA N. DE PEDRO IS VALID AND
INDEFEASIBLE; AND
B. THE TITLE OF RESPONDENT ROMASAN DEVELOPMENT
CORPORATION IS DEFECTIVE.
III. THE HONORABLE COURT OF APPEALS GRAVELY ERRED AND
DECIDED THE ISSUES IN THE INSTANT CASE IN A MANNER
CONTRARY TO ESTABLISHED LAW AND JURISPRUDENCE IN NOT
RULING THAT PETITIONERS HAD BEEN DEPRIVED OF THEIR
CONSTITUTIONAL RIGHT TO COUNSEL.18
The petitioners maintain that petitioner Aurora de Pedro is the registered
owner of the subject property as evidenced by OCT No. P-961, and that this
title is conclusive of their ownership over the same.19 They aver that their title
cannot be the subject of a collateral attack.20
The petitioners contend that in contrast to their title, the title of the
respondents is defective. This can be gleaned from the certifications issued by
the Lands Management Bureau attesting to the fact that Survey Plan H-
164008, under the name of the respondents does not exist and that its
verification is not listed in the EDP listing, as well as the certifications from
the Register of Deeds of Rizal and Marikina that OCT No. 468, upon which
the respondents’ title was allegedly based, does not exist.21
The petitioners further posit that the relocation survey report cannot prevail
over the technical description of the property in their title. They likewise
assail the relocation survey report by alleging that Pangyarihan, the chairman
of the survey team, is the respondent in a number of criminal and
administrative cases relating to the performance of his duties.22
The petitioners also claim that the CA mischaracterized their complaint as a
complaint for damages. They submit that their complaint is not a simple case
for damages but one for the recovery of possession over the disputed property
on the strength of their ownership over the same. They blame the ambiguity of
the complaint on the inadequacies of their former counsel.23
Finally, the petitioners assert that they were deprived of their right to due
process because their previous counsel did not adequately defend them. They
aver that their rights were prejudiced by their former counsel’s negligence;
hence, such negligent acts should not be binding on them.24
On the other hand, the respondents submit that the petitioners are now in
estoppel to assail the veracity and validity of the relocation survey report since
they actively participated in its preparation.25 They assert that the survey report
is entitled to full faith and credence as it was prepared and made by competent
persons who were appointed by the trial court, represented the parties, and
were qualified to exact a report based on their expertise.26 They maintain that
the petitioners’ objection to the appointment of Pangyarihan as chairman of
the survey team is a mere afterthought and they should have objected to it
from the very start.27
The respondents aver that since the survey report revealed that there was error
in the technical description of the petitioners’ property and that it was the
petitioners who usurped the respondents’ property, the claim for damages can
no longer be sustained.28 The private respondents also assert that the fact that
the plan and the verification of the survey plan of H-164008 do not exist in the
records of the Register of Deeds is not sufficient proof that their title is
defective.29
Further, the respondents submit that the dismissal of the complaint was not
due to the negligence of the petitioners’ former counsel but was based on the
result of the survey, the conduct of which was agreed upon by the parties.
Even if the former counsel of the petitioners made a mistake on how to
proceed with the case, such mistake is not so gross and is still binding on the
client.30 The respondents added that the failure to oppose the
Manifestation/Motion to Dismiss was not solely the former counsel’s fault,
since at the time the new counsel entered his appearance, such motion had not
yet been resolved by the trial court and the new counsel had still ample time to
oppose it.31
The pivotal issue between the parties in the trial court is whether or not, as
claimed by the petitioners in their complaint, the subject property is a portion
of the property covered by OCT No. P-691; or, as claimed by the respondents
in their answer to the complaint, whether the subject property is a portion of
the property covered by TCT No. 236044, which appears to be a portion of
that property originally registered in 1937 as gleaned from TCT No. 236044.
In contrast to the apposite claims of the parties, the Survey Team found that
the subject property, which is part of the lot actually occupied by the
petitioners, is a portion of Lot 10454/H-164008 which was originally covered
by OCT No. 468 issued to Isidro Benitez, whereas the technical description of
Lot 10455-G covered by OCT No. P-691 was erroneous for being the result of
a defective survey.
The resolution of the issue will involve the alteration, correction or
modification either of OCT No. P-691 under the name of petitioner Aurora de
Pedro, or TCT No. 236044 under the name of respondent corporation. If the
subject property is found to be a portion of the property covered by OCT No.
P-691 but is included in the technical description of the property covered by
TCT No. 236044, the latter would have to be corrected.l^vvphi1.net On the
other hand, if the subject property is found to be a portion of the property
covered by TCT No. 236044 but is included in the property covered by OCT
No. P-691, then the latter title must be rectified. However, the rectification of
either title may be made only via an action filed for the said
purpose,32 conformably with Section 48 of Act No. 496, which provides:
SEC. 48. Certificate not subject to collateral attack. – A certificate of title
shall not be subject to collateral attack. It cannot be altered, modified, or
cancelled except in a direct proceeding in accordance with law.
It has been held that a certificate of title, once registered, should not thereafter
be impugned, altered, changed, modified, enlarged or diminished except in a
direct proceeding permitted by law.33 The resolution of the issue is, thus, not
dependent on the report of the survey team filed in the trial court.
The action of the petitioners against the respondents, based on the material
allegations of the complaint, is one for recovery of possession of the subject
property and damages. However, such action is not a direct, but a collateral
attack of TCT No. 236044.34 Neither did the respondents directly attack OCT
No. P-691 in their answer to the complaint. Although the respondents averred
in said answer, by way of special and affirmative defenses, that the subject
property is covered by TCT No. 236044 issued in the name of the respondent
corporation, and as such the said respondent is entitled to the possession
thereof to the exclusion of the petitioners, such allegation does not constitute a
direct attack on OCT No. P-691, but is likewise a collateral attack thereon.
Indeed, in Ybanez v. Intermediate Appellate Court,35 we held that:
It was erroneous for petitioners to question the Torrens Original Certificate of
Title issued to private respondent over Lot No. 986 in Civil Case No. 671, an
ordinary civil action for recovery of possession filed by the registered owner
of the said lot, by invoking as affirmative defense in their answer the Order of
the Bureau of Lands, dated July 19, 1978, issued pursuant to the investigatory
power of the Director of Lands under Section 91 of Public Land Law (C.A.
141 as amended). Such a defense partakes of the nature of a collateral attack
against a certificate of title brought under the operation of the Torrens system
of registration pursuant to Section 122 of the Land Registration Act, now
Section 103 of P.D. 1259. The case law on the matter does not allow a
collateral attack on the Torrens certificate of title on the ground of actual
fraud. The rule now finds expression in Section 48 of P.D. 1529 otherwise
known as the Property Registration Decree.36
Thus, the court a quo had no jurisdiction to resolve the decisive issue raised
by the parties in the trial court; hence, it behooved the trial court to order the
dismissal of the complaint on that ground.
The petitioners anchor their claim of lawful possession of the subject property
on their allegation that said property is a portion of the property covered by
OCT No. P-691 in the name of petitioner Aurora de Pedro. The petitioners
were burdened to prove not only their ownership over the property covered by
OCT No. P-691 but also that the subject property is a portion of the property
covered by the said title and, if they fail to do so, the complaint must be
dismissed.
We agree with the petitioners that, generally, a certificate of title shall be
conclusive as to all matters contained therein and conclusive evidence of the
ownership of the land referred to therein. However, it bears stressing that
while certificates of title are indefeasible, unassailable and binding against the
whole world, including the government itself, they do not create or vest
title.37 They merely confirm or record title already existing and vested. They
cannot be used to protect a usurper from the true owner, nor can they be used
as a shield for the commission of fraud; neither do they permit one to enrich
himself at the expense of others.38
As we had the occasion to state in Metropolitan Waterworks and Sewerage
System v. Court of Appeals:39
It must be observed that the title of petitioner MWSS was a transfer from TCT
No. 36957 which was derived from OCT No. 994 registered on May 3, 1917.
Upon the other hand, private respondents’ title was derived from the same
OCT No. 994 but dated April 19, 1917. Where two certificates (of title)
purport to include the same land, the earlier in date prevails. x x x. In
successive registrations, where more than one certificate is issued in respect of
a particular estate or interest in land, the person claiming under the prior
certificate is entitled to the estate or interest; and the person is deemed to hold
under the prior certificate who is the holder of, or whose claim is derived,
directly or indirectly, from the person who was the holder of the earliest
certificate issued in respect thereof. Hence, in point of priority issuance,
private respondents’ title prevails over that of petitioner MWSS.
Lastly, a certificate is not conclusive evidence of title if it is shown that the
same land had already been registered and an earlier certificate for the same is
in existence. Since the land in question has already been registered under OCT
No. 994 dated April 19, 1917, the subsequent registration of the same land on
May 3, 1917 is null and void.40
While it is true that the petitioners claimed damages against the respondents
on account of the latter’s alleged trespass on the subject property and the
alleged destruction of the petitioners’ property, the resolution by the court a
quo of the claim for damages against the petitioners is riveted to its resolution
of the issue of whether the subject property is a portion of the petitioners’
property covered by OCT No. P-691 or the respondents’ property covered by
TCT No. 236044.
IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for lack
of merit. The Decision of the Court of Appeals in CA-G.R. CV No. 68424
affirming the assailed Orders of the Regional Trial Court is AFFIRMED. The
complaint is DISMISSED without prejudice. No costs.
SO ORDERED.

G.R. No. 185638

HONORABLE ALVIN P. VERGARA, IN HIS CAPACITY AS CITY

MAYOR OF CABANATUAN CITY AND SANGGUNIANG
PANLUNGSOD OF CABANATUAN CITY, Petitioners
vs.
LOURDES MELENCIO S GRECIA, REPRESENTED BY RENATO
GRECIA, AND SANDRA MELENCIO IN REPRESENTATION OF
MA. PAZ SAGADO VDA. DE MELENCIO, CONCHITA MELENCIO,
CRISTINA MELENCIO AND LEONARDO MELENCIO, Respondents

DECISION

REYES, J.:

Before this Cpurt is a petition for review on certiorari1 seking to annul and set
aside the Decision2 dated August 8, 2008 and the Resolution3 dated December
5, 2008 of the Court of Appeals(CA) in CA-G.R. SP No. 97851. The CA
affirmed with modification the Order4 dated November 8, 2006 of the
Regional Trial Court (RTC) of Cabanatuan City, Branch 86, and the
Order5 dated January 30, 2007 issued by the RTC of Cabanatuan City, Branch
30, in Civil Case No. 5078, and reduced the amount to be paid by Honorable
Julius Cesar Vergara (Mayor Vergara), in his capacity as Mayor of
Cabanatuan City, and the Sangguniang Panlungsod  of Cabanatuan
(Sanggunian) (petitioners) from Ten Million Pesos (Pl0,000,000.00) to Two
Million Five Hundred Fifty-Four Thousand Three Hundred Thirty-Five Pesos
(₱2,554,335.00) representing 15o/o of the total value of the property of
Lourdes Melencio S. Grecia (Lourdes), represented by Renato Grecia, and
Sandra Melencio, in representation of Ma. Paz, Conchita, Cristina and
Leonardo, all surnamed Melencio (respondents).

The Facts

The subject of this petition is a parcel of land covered by Transfer Certificate

of Title No. T-101793, with an area of 7,420 square meters, more or less,
situated in Barangay Barrera, Cabanatuan City, and registered under the name
of the respondents.6

The record showed that sometime in 1989, the subject land was taken by the
Sanggunian for road-right-of-way and road widening projects. Despite the
taking of the subject land and the completion of the road widening projects,
the Sanggunian failed to tender the just compensation to the respondents.
Upon the request of Lourdes, the Sanggunian created an appraisal committee,
composed of City Assessor of Cabanatuan Lorenza L. Esguerra as Chairman,
with City Treasurer Bernardo C. Pineda and City Engineer Mac Arthur C. Yap
as members, to determine the proper amount of just compensation to be paid
by the Sanggunian for the subject land. The Appraisal Committee then issued
Resolution No. 20-S-2001 7 recommending the payment of P2,295.00 per sq
mas just compensation.8
Thereafter, the Sanggunian issued Resolution No. 148-20009 authorizing
Mayor Vergara to negotiate, acquire, purchase and accept properties needed
by the Sanggunian for its project.
Pursuant to the said resolution, on December 4, 2001, Mayor Vergara
executed a Memorandum of Agreement10 (MOA) with Lourdes as Attorney-
in-fact of the respondents, whereby the Sanggunian bound itself to pay the
respondents the amount of Pl 7,028,900.00 in 12 years at the rate of
₱1,419,075.00 every year starting the first quarter of 2002 as payment of the
subject land.
More than four years had lapsed after the signing of the MOA but no payment
was ever made by the petitioners to the respondents despite the fact that the
subject land was already taken by the petitioners and was being used by the
constituents of the City of Cabanatuan.11
Despite personal and written demands,12 the petitioners still failed to pay the
respondents the just and fair compensation of the subject land.13 In a
letter14 dated November 18, 2005, Mayor Vergara said that
the Sanggunian denied the ratification of the MOA per its Resolution No.
129-20015 on the ground of fiscal restraint or deficit of the Sanggunian. In
view of this resolution, Mayor Vergara claimed that the said MOA could
neither be enforced, nor bind the Sanggunian.
Aggrieved, on December 29, 2005, the respondents filed a petition
for mandamus16 before the RTC of Cabanatuan City, which was raffled to
Branch 86.
On September 18, 2006, R TC-Branch 86 rendered its Order17 in favor of the
respondents, thus:
WHEREFORE, let a writ of mandamus be issued compelling [the petitioners]
to pay the [respondents] the following sums of money:
1. Php17,028,900.00 as just compensation of their.property taken by the
Sanggunian plus accrued legal interest thereon from the filing of this case
until fully paid;
2. Php50,000.00 as attorney's fees; and
3. Php50,000.00 as actual expenses and damages.
SO ORDERED. 18
The petitioners immediately filed their appeal19 before the CA, docketed as
CA-G.R. SP No. 98397. However, before the records of appeal were
submitted to the CA, the respondents filed a Motion for Partial
Execution20 before the RTC-Branch 86.21
On November 8, 2006, the RTC-Branch 86 issued an Order22 granting the
respondents' motion and thereby ordering the petitioners to pay the sum of
₱10,000,000.00 as partial execution of the decision. The petitioners then filed
a motion for inhibition and a motion for reconsideration.23
On November 17, 2006, RTC-Branch 86 issued an Order granting the motion
for inhibition which subsequently led to the assignment by raffle of the case to
RTC-Branch 30.24
On January 30, 2007, RTC-Branch 30 issued an Order25 denying the
petitioners' motions.
On February 7, 2007, a writ of execution was issued. Accordingly, a Notice·
of Garnishment was issued to the manager of United Coconut Planters Bank
of Cabanatuan City. 26
Aggrieved, the petitioners filed a Petition for Certiorari with urgent Motion
for the Issuance of a Temporary Restraining Order and Writ of Preliminary
Injunction27 before the CA.
In a Resolution28 dated February 26, 2007, the CA granted the petitioners’
prayer for an injunctive relief and enjoined the RTC-Branch 30 Presiding
Judge and Sheriff from enforcing the said writ of execution and orders.
On appeal, the CA, in its Decision29 dated August 8, 2008, affirmed the trial
court's order but modified the same by reducing the amount to be paid by the
petitioners from ₱10,000,000.00 to ₱2,554,335.00 representing 15% of the
value of the property as provided by law.30 Undeterred, the petitioners filed a
motion for reconsideration31 but it was denied. 32 Hence, this petition.
For their part, the petitioners argue that the subject land is a subdivision road
which is beyond the commerce of man as provided for in Section 50 of
Presidential Decree (P.D.) No. 1529.33 Thus, the said contract entered into by
Mayor Vergara with the respondents is null and void, and there is no
obligation on the part of the petitioners to pay the respondents. 34
The Issue
The main issue before this Court is whether there is propriety in the partial
execution of the judgment pending appeal.
Ruling of the Court
The petition is bereft of merit.
To begin with, the Court notes that there has already been a final judgment in
CA-G.R. SP No. 98397. The CA Third. Division issued a Resolution35 dated
March 14, 2008 dismissing the petitioners' appeal on the ground of lack of
jurisdiction stating that the issues that were raised are pure questions of law.
The petitioners filed a motion for reconsideration but it was also
denied.36 hence, the case was elevated to this Court which was docketed as
G.R. No. 186211. However, in a Resolution dated June 22, 2011, the Court
Second Division likewise denied the petition.
It is uncontroverted that the subject land was taken by the petitioners without
paying any compensation to the respondents that is too long to be ignored.
The petitioners, however, argue that they are not obliged to pay the
respondents because the subject land is burdened by encumbrances37 which
showed that it is a subdivision lot which is beyond the commerce of man.
Thus, the MOA between the petitioners and the respondents is null and void.
To support their argument, they invoked Section 50 of P.D. No.
1529.38 Essentially, the sole issue for resolution is whether the petitioners are
liable for just compensation. Hence, the pertinent point of inquiry is whether
the subject land of the respondents is beyond the commerce of man as
provided for in Section 50 of P.D. No. 1529.
Meanwhile, a look at the petition in CA-G.R. SP No. 98397, now G.R. No.
186211, would show that the petitioners interposed the same issues in their
appeal: (1) the subject land is not within the commerce of men, hence, the
MOA is void; (2) the petitioners are under estoppel to deny its liability under
the MOA; (3) Mayor Vergara has no authority to sign the MOA prior to its
approval by the Sanggunian; and (4) there is no basis for the lower court to
award attorney's fees and damages.39
Since these issues did not merit the attention of the Court in G.R. No. 1
86211, the Court will now put all these issues to rest.
ONE. The alleged encumbrance in the respondents’ title ad interpretation and
application of Section 5040 of P.D. No. 1529 are no longer novel since this
Court had already made a definitive ruling on the mater in the case
of Republic of the Philippines v. Ortigas and Company Limited Partnership,41
where the Court ruled that therein petitioners' reliance on Section 50 of P.D.
No. 1529 is erroneous since it contemplates roads and streets in a subdivided
property, not public thoroughfares built on a private property that was taken
from an owner for public purpose. A public thoroughfare is not a subdivision
road or street.
Section 50 contemplates roads and streets in a subdivided property, not public
thoroughfares built on a private property that was taken from an owner for
public purpose. A public thoroughfare is not a subdivision road or street.
xxxx
Delineated roads and streets, whether part of a subdivision or segregated for
public use, remain private and will remain as such until conveyed to the
·government by donation or through expropriation proceedings. An owner
may not be forced to donate his or her property even if it has been delineated
as road lots because that would partake of an illegal taking. He or she may
even choose to retain said properties. If he or she chooses to retain them,
however, he or she also retains the burden of maintaining them and paying for
real estate taxes.
xxxx
x x x [W]hen the road or street was delineated upon government request and
taken for public use, as in this case, the government has no choice but to
compensate the owner for his or her sacrifice, lest it violates the constitutional
provision against taking without just . compensation, thus:
Section 9. Private property shall not be taken for public use without just
compensation.
As with all laws, Section 50 of the Property Registration Decree cannot be
interpreted to mean a license on the part of the government to disregard
constitutionally guaranteed rights. 42 (Citations omitted)
Apparently, the subject land is within the commerce of man and is therefore a
proper subject of an expropriation proceeding. Pursuant to this, the MOA
between the petitioners and the respondents is valid and binding. Thus, there
is no need to discuss the matter of the petitioners' estoppel or the authority of
Mayor Vergara to sign the MOA.
TWO. The petitioners are liable to pay the full market value of the subject
land.
Without a doubt, the respondents are entitled to the payment of just
compensation. The right to recover just compensation is enshrined in the Bill
of Rights; Section 9, Article III of the 1987 Constitution states that no private
property shall be taken for public use without just compensation.
There is no question raised concerning the right of the petitioners here to
acquire the subject land under the power of eminent domain. But the exercise
of such right is not unlimited, for two mandatory requirements should underlie
the Government's exercise of the power of eminent domain namely: (1) that it
is for a particular public purpose; and (2) that just compensation be paid to the
property owner. These requirements partake the nature of implied conditions
that should be complied with to enable the condemnor to keep the property
expropriated. 43
Undisputedly, in this case, the purpose of the condemnation is public but there
was no payment of just compensation to the respondents. The petitioners
should have first instituted eminent domain proceedings and deposit with the
authorized government depositary an amount equivalent to the assessed value
of the subject land before it occupied the same. Due to the petitioners'
omission, the respondents were constrained to file inverse condemnation
proceedings to demand the payment of just compensation before the trial
court. From 1989 until the present, the respondents were deprived of just
compensation, while the petitioners continuously burdened their property.
The determination of just compensation in eminent domain cases is a judicial
function and any valuation for just compensation laid down in the statutes
may serve only as a guiding principle or one of the factors in determining just
compensation but it may not substitute the court's own judgment as to what
amount should be awarded and how to arrive at such amount.44
An evaluation of the circumstances of this case and the parties' arguments
showed that the petitioners acted oppressively in their position to deny the
respondents of the just compensation that the immediate taking of their
property entailed. The Court cannot allow the petitioners to profit from its
failure to comply with the mandate of the law. To adequately compensate the
respondents from the decades of burden on their land, the petitioners should
be made to pay the full value of Pl 7,028,900.00 representing the just
compensation of the subject land at the time of the filing of the instant
complaint when the respondents made a judicial demand for just
compensation.
THREE. The undue delay of the petitioners to pay the just compensation
brought about the basis for the grant of interest.1âwphi1
Apart from the requirement that compensation for expropriated land must be
fair and reasonable, compensation, to be "just", must also be made without
delay. Without prompt payment, compensation cannot be considered "just" if
the property is immediately taken as the property owner suffers the immediate
deprivation of both his land and its fruits or income. 45
Obviously, the delay in payment of just compensation occurred and cannot at
all be disputed. The undisputed fact is that the respondents were deprived of
their lands since 1989 and have not received a single centavo to date. The
petitioners should not be allowed to exculpate itself from this delay and
should suffer all the consequences the delay has caused.
The Court has already dealt with cases involving similar background and
issues, that is, the government took control and possession of the subject
properties for public use without initiating expropriation proceedings and
without payment of just compensation, and the landowners failed for a long
period of time to question such government act and later instituted actions to
recover just compensation with damages.
Here, the records showed that the respondents fully cooperated with the
petitioners' road widening program, and allowed their landholdings to be
taken by the petitioners without any questions. The present case therefore is
not one where substantial conflict arose on the issue of whether expropriation
is proper; the respondents voluntarily submitted to expropriation and
surrendered their landholdings, and never contested the valuation that was
made. Apparently, had the petitioners paid the just compensation on the
subject land, there would have been no need for this case. But, as borne by the
records, the petitioners refused to pay, telling instead that the subject land is
beyond the commerce of man. Hence, the respondents have no choice but to
file actions to claim what is justly due to them. Consequently, interest must be
granted to the respondents.
The rationale for imposing the interest is to compensate the petitioners for the
income they would have made had thel been properly compensated for their
properties at the time of the taking. 46 There is a need for prompt payment and
the necessity of the payment of interest to compensate for any delay in the
payment of compensation for property already taken. 47 Settled is the rule that
the award of interest is imposed in the nature of damages for delay in payment
which in effect makes the obligation on the part of the government one of
forbearance. This is to ensure prompt payment of the value of the land and
limit the opportunity loss of the owner that can drag from days to decades. 48
Based on a judicious review of the records and application of jurisprudential
rulings, legal interest shall be pegged at the rate of twelve percent (12%) per
annum, reckoned from the time of the filing of the complaint for
expropriation, which in this case is on December 29, 2005, the date when the
respondents filed a petition for mandamus to compel the petitioners to comply
with the MOA. Thereafter, or beginning July 1, 2013, until fully paid, just
compensation shall earn interest at the new legal rate of six percent (6%) per
annum, conformably with the modification on the rules respecting interest
rates introduced by the Bangko Sentral ng Pilipinas Monetary Board Circular
No. 799, Series of 2013.49 To clarify, this incremental interest is not granted
on the computed just compensation; rather, it is a penalty imposed for
damages incurred by the landowner due to the delay in its payment.50
FOURTH. The award of exemplary damages and attorney's fees is warranted.
The taking of the respondents' subject land without the benefit of
expropriation proceedings and without payment of just compensation, clearly
resulted in an "expropriate now, pay later" situation, which the Court abhors.
It has been more than two decades since the petitioners took the subject land
without a timely expropriation proceeding and without the petitioners exerting
efforts to negotiate with the respondents.
This irregularity will not proceed without any consequence. The Court had
repeatedly ruled that the failure of the government to initiate an expropriation
proceeding to the prejudice of the landowner may be corrected with the
awarding of exemplary damages, attorney's fees and costs of litigation.51
Evidently, the petitioners' oppressive taking of the subject land for a very long
period of time surely resulted in pecuniary loss to the respondents. The
petitioners cannot now be heard to claim that they were simply protecting
their interests when they stubbornly defended their erroneous arguments
before the courts. The more truthful statement is that they adopted a grossly
unreasonable position and the unwanted developments that followed,
particularly the attendant delay, should be directly chargeable to them.
Indeed, the respondents were deprived of their subject land for road widening
programs, were uncompensated, and were left without any expropriation
proceeding undertaken. Hence, in order to serve as a deterrent to the State for
failing to institute such proceedings within the prescribed period under the
law, the award of exemplary damages and attorney's fees is in order.

In sum, the respondents have waited too long before the petitioners fully pay
the amount of the just compensation due them. Since the trial court had
already made the proper determination of the amount of just compensation in
accordance with law and to forestall any further delay in the resolution of this
case, it is but proper to order the petitioners to pay in full the amount of
₱17,028,900.00 representing the just compensation of the subject land.
Furthermore, the respondents are entitled to· an additional grant of interest,
exemplary damages and attorney's fees. In accordance with existing
jurisprudence, the award of exemplary damages in the amount of ₱200,000.00
is proper, as well as attorney's fees equivalent to one percent (1%) of the total
amount due.

WHEREFORE, the petition is DENIED. The Decision dated , August 8,

2008 and the Resolution dated December 5, 2008 of the Court of Appeals in
CA-G.R. SP No. 97851 are AFFIRMED with MODIFICATION. Honorable
Alvin P. Vergara, in his capacity as Mayor of Cabanatuan City, and the
Sangguniang Panlungsod of Cabanatuan are hereby ordered to PAY Lourdes
Melencio S. Grecia, represented by Renato Grecia, and Sandra Melencio, in
representation of Ma. Paz Salgado V da. De Melencio, Conchita Melencio,
Cristina Melencio and Leonardo Melencio the amount of Seventeen Million
Twenty-Eight Thousand Nine Hundred Pesos (₱17,028,900.00) representing
the just compensation of the subject land, exemplary damages in the amount
of Two Hundred Thousand Pesos (₱200,000.00), and attorney's fees
equivalent to one percent (1%) of the amount due. Lastly, legal interest shall
be pegged at the rate of twelve percent (2%) per annum, from the time of
judicial demand on December 29, 2005. Thereafter, or beginning July 1, 2013,
until fully paid, just compensation shall earn interest at the new legal rate of
six percent (6%) per annum.

SO ORDERED.