G.R. No.

175485

July 27, 2011

CASIMIRO DEVELOPMENT CORPORATION, Petitioner, vs. RENATO L. MATEO, Respondent. DECISION BERSAMIN, J.: The focus of this appeal is the faith that should be accorded to the Torrens title that the seller holds at the time of the sale. In its decision promulgated on August 31, 2006,1 the Court of Appeals (CA) declared that the respondent and his three brothers were the rightful owners of the land in litis, and directed the Office of the Register of Deeds of Las Pias City to cancel the transfer certificate of title (TCT) registered under the name of petitioner Casimiro Development Corporation (CDC) and to issue in its place another TCT in favor of the respondent and his three brothers. Thereby, the CA reversed the judgment of the Regional Trial Court (RTC) rendered on May 9, 2000 (dismissing the respondents complaint for quieting of title and reconveyance upon a finding that CDC had been a buyer in good faith of the land in litis and that the respondents suit had already been time-barred). Aggrieved, CDC brought its petition for review on certiorari. Antecedents The subject of this case is a registered parcel of land (property) with an area of 6,693 square meters, more or less, located in Barrio Pulang Lupa, Las Pias City, that was originally owned by Isaias Lara,2 the respondents maternal grandfather. Upon the death of Isaias Lara in 1930, the property passed on to his children, namely: Miguela, Perfecta and Felicidad, and a grandson, Rosauro (son of Perfecta who had predeceased Isaias in 1920). In 1962, the co-heirs effected the transfer of the full and exclusive ownership to Felicidad (whose married surname was Lara-Mateo) under an agreement denominated as Pagaayos Na Gawa Sa Labas Ng Hukuman. Felicidad Lara-Mateo had five children, namely: Laura, respondent Renato, Cesar, Candido, Jr. and Leonardo. With the agreement of the entire Lara-Mateo family, a deed of sale covering the property was executed in favor of Laura, who, in 1967, applied for land registration. After the application was granted, Original Certificate of Title (OCT) No. 6386 was issued in Lauras sole name. In due course, the property now covered by OCT No. 6386 was used as collateral to secure a succession of loans. The first loan was obtained from Bacoor Rural Bank (Bacoor Bank). To repay the loan to Bacoor Bank and secure the release of the mortgage, Laura borrowed funds from Parmenas Perez (Perez), who, however, required that the title be meanwhile transferred to his name. Thus, OCT No. 6386 was cancelled and Transfer Certificate of Title (TCT) No. 438959 was issued in the name of Perez. Subsequently, Laura recovered the property by repaying the obligation with the proceeds of another loan obtained from Rodolfo Pe (Pe), resulting in the cancellation of TCT No. 438595, and in the issuance of TCT No. S-91595 in Lauras name. She later executed a deed of sale in favor of Pe, leading to the issuance of TCT No. S-91738 in the name of Pe, who in turn constituted a mortgage on the property in favor of China Banking Corporation (China Bank) as security for a loan. In the end, China Bank foreclosed the mortgage, and consolidated its ownership of the property in 1985 after Pe failed to redeem. Thus, TCT No. (99527) T-11749-A was issued in the name of China Bank.

In 1988, CDC and China Bank negotiated and eventually came to terms on the purchase of the property, with China Bank executing a deed of conditional sale for the purpose. On March 4, 1993, CDC and China Bank executed a deed of absolute sale over the property. Resultantly, on March 29, 1993, CDC was issued TCT No. T-34640 in its own name. In the meanwhile, on February 28, 1991, Felicidad died intestate. On June 6, 1991, CDC brought an action for unlawful detainer in the Metropolitan Trial Court (MeTC) in Las Pias City against the respondents siblings, namely: Cesar, Candido, Jr., and Leonardo, and the other occupants of the property. Therein, the defendants maintained that the MeTC did not have jurisdiction over the action because the land was classified as agricultural; that the jurisdiction belonged to the Department of Agrarian Reform Adjudication Board (DARAB); that they had been in continuous and open possession of the land even before World War II and had presumed themselves entitled to a government grant of the land; and that CDCs title was invalid, considering that the land had been registered before its being declared alienable.3 On October 19, 1992, the MeTC ruled in favor of CDC, viz: The Court, after careful consideration of the facts and the laws applicable to this case[,] hereby resolves: 1. On the issue of jurisdiction. The defendants alleged that the land in question is an agricultural land by presenting a Tax Declaration Certificate classifying the land as "FISHPOND." The classification of the land in a tax declaration certificate as a "fishpond" merely refers to the use of the land in question for the purpose of real property taxation. This alone would not be sufficient to bring the land in question under the operation of the Comprehensive Agrarian Reform Law. 2. On the issue of open and adverse possession by the defendants. It should be noted that the subject land is covered by a Transfer Certificate of Title in the name of plaintiffs predecessor-in-interest China Banking Corporation. Certificates of Title under the Torrens System is indefeasible and imprescriptible. As between two persons claiming possession, one having a [T]orrens title and the other has none, the former has a better right. 3. On the issue of the nullity of the Certificate of Title. The defense of the defendants that the subject property was a forest land when the same was originally registered in 1967 and hence, the registration is void[,] is not for this Court to decide[,] for lack of jurisdiction. The certificate of title over the property must be respected by this Court until it has been nullified by a competent Court. WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff[,] ordering the defendants 1. [sic] and all persons claiming right[s] under it to vacate the subject premises located at Pulang Lupa I, Las Pias, Metro Manila and surrender the possession of the same to herein plaintiff;

2. to pay the plaintiff reasonable compensation for the use and occupation of the subject premises hereby fixed at (P100.00) one hundred pesos a month starting November 22, 1990 (the time when the demand letter to vacate was given) until defendants actually vacate the property; No pronouncement as to costs and attorneys fees. SO ORDERED.4 The decision of the MeTC was assailed in the RTC via petition for certiorari and prohibition. The RTC resolved against CDC, and held that the MeTC had acted without jurisdiction because the land, being a fishpond, was agricultural; hence, the dispute was within the exclusive jurisdiction of the DARAB pursuant to Republic Act No. 6657 (Comprehensive Agrarian Reform Law of 1988).5 CDC appealed to the CA, which, on January 25, 1996, found in favor of CDC, declaring that the MeTC had jurisdiction. As a result, the CA reinstated the decision of the MeTC.6 On appeal (G.R. No. 128392), the Court affirmed the CAs decision in favor of CDC, ruling thusly: WHEREFORE, the petition is DENIED and the Court of Appeals Decision and Resolution in CAG.R. SP No. 34039, dated January 25, 1996 and February 21, 1997 respectively, are AFFIRMED. No costs. SO ORDERED.7 The decision in G.R. No. 128392 became final. Nonetheless, on June 29, 1994, the respondent brought an action for quieting of title, reconveyance of four-fifths of the land, and damages against CDC and Laura in the RTC in Las Pias City entitled Renato L. Mateo v. Casimiro Development Corporation and Laura Mateo de Castro. In paragraph 4 of his complaint, he stated that he was "bringing this action to quiet title on behalf of himself and of his three (3) brothers Cesar, Leonardo, and Candido, Jr., all surnamed MATEO in his capacity as one of the co-owners of a parcel of land situated at Barrio Pulang Lupa, Municipality of Las Pias, Metro Manila." On May 9, 2001, the RTC held in favor of CDC, disposing: WHEREFORE, and by strong preponderance of evidence, judgment is hereby rendered in favor of the defendant Casimiro Development Corporation and against the plaintiff Renato L. Mateo by (1) Dismissing the complaint, and upholding the validity and indefeasibility of Transfer Certificate of Title No. T-34640 in the name of Casimiro Development Corporation; (2) Ordering the plaintiff Renato Mateo to pay defendant Casimiro Development Corporation the sum of [a] P200,000.00 as compensatory damages; [b] P200,000.00 as attorneys fees; and [c] to pay the costs. SO ORDERED.8 On appeal (C.A.-G.R. CV No. 71696), the CA promulgated its decision on August 31, 2006, reversing the RTC and declaring CDC to be not a buyer in good faith due to its being charged with notice of the defects and flaws of the title at the time it acquired the property from China Bank, and decreeing:

WHEREFORE, the Decision dated May 9, 2001 of Branch 225, Regional Trial Court, Las Pias City in Civil Case No. 94-2045 is hereby REVERSED and SET ASIDE and a new one rendered: (1) Declaring appellant Renato Mateo and his brothers and co-owners Cesar, Candido, Jr., and Leonardo, all surnamed Mateo as well as his sister, Laura Mateo de Castro as the rightful owners of the parcel of land, subject of this case; and (2) Ordering the Register of Deeds of Las Pias City, Metro-Manila to cancel Transfer Certificate of Title No. T-34640 under the name of appellee Casimiro Development Corporation, and that a new one be issued in favor of the appellant and his co-heirs and siblings, mentioned above as co-owners pro indiviso of the said parcel. (3) No pronouncement as to cost. SO ORDERED.9 The CA denied CDCs motion for reconsideration. Hence, this appeal, in which CDC urges that the CA committed serious errors of law,10 as follows: (A) xxx in failing to rule that the decree of registration over the Subject Property is incontrovertible and no longer open to review or attack after the lapse of one (1) year from entry of such decree of registration in favor of Laura Mateo de Castro. (B) xxx in failing to rule that the present action is likewise barred by res judicata. (C) xxx in failing to rule that the instant action for quieting of title and reconveyance under PD No. 1529 cannot prosper because the Subject Property had already been conveyed and transferred to third parties who claimed adverse title for themselves. (D) xxx in failing to rule that the action of respondent for "quieting of title, reconveyance and damages" is barred by laches. (E) xxx in ruling that the Subject Property must be reconveyed to respondent because petitioner Casimiro Development Corporation is not a "purchaser in good faith." CDC argues that it was a buyer in good faith; and that the CA did not rule on matters that fortified its title in the property, namely: (a) the incontrovertibility of the title of Laura; (b) the action being barred by laches and res judicata; and (c) the property having been conveyed to third parties who had then claimed adverse title. The respondent counters that CDC acquired the property from China Bank in bad faith, because it had actual knowledge of the possession of the property by the respondent and his siblings; that CDC did not actually accept delivery of the possession of the property from China Bank; and that CDC ignored the failure of China Bank to warrant its title. Ruling We grant the petition. 1.

Indefeasibility of title in the name of Laura As basis for recovering the possession of the property, the respondent has assailed the title of Laura. We cannot sustain the respondent. There is no doubt that the land in question, although once a part of the public domain, has already been placed under the Torrens system of land registration. The Government is required under the Torrens system of registration to issue an official certificate of title to attest to the fact that the person named in the certificate is the owner of the property therein described, subject to such liens and encumbrances as thereon noted or what the law warrants or reserves.11 The objective is to obviate possible conflicts of title by giving the public the right to rely upon the face of the Torrens certificate and to dispense, as a rule, with the necessity of inquiring further. The Torrens system gives the registered owner complete peace of mind, in order that he will be secured in his ownership as long as he has not voluntarily disposed of any right over the covered land.12 The Government has adopted the Torrens system due to its being the most effective measure to guarantee the integrity of land titles and to protect their indefeasibility once the claim of ownership is established and recognized. If a person purchases a piece of land on the assurance that the sellers title thereto is valid, he should not run the risk of being told later that his acquisition was ineffectual after all, which will not only be unfair to him as the purchaser, but will also erode public confidence in the system and will force land transactions to be attended by complicated and not necessarily conclusive investigations and proof of ownership. The further consequence will be that land conflicts can be even more abrasive, if not even violent. The Government, recognizing the worthy purposes of the Torrens system, should be the first to accept the validity of titles issued thereunder once the conditions laid down by the law are satisfied.13 Yet, registration under the Torrens system, not being a mode of acquiring ownership, does not create or vest title.14 The Torrens certificate of title is merely an evidence of ownership or title in the particular property described therein.15 In that sense, the issuance of the certificate of title to a particular person does not preclude the possibility that persons not named in the certificate may be co-owners of the real property therein described with the person named therein, or that the registered owner may be holding the property in trust for another person.16 Nonetheless, it is essential that title registered under the Torrens system becomes indefeasible and incontrovertible.17 The land in question has been covered by a Torrens certificate of title (OCT No. 6386 in the name of Laura, and its derivative certificates) before CDC became the registered owner by purchase from China Bank. In all that time, neither the respondent nor his siblings opposed the transactions causing the various transfers. In fact, the respondent admitted in his complaint that the registration of the land in the name of Laura alone had been with the knowledge and upon the agreement of the entire Lara-Mateo family. It is unthinkable, therefore, that the respondent, fully aware of the exclusive registration in her sister Lauras name, allowed more than 20 years to pass before asserting his claim of ownership for the first time through this case in mid-1994. Making it worse for him is that he did so only after CDC had commenced the ejectment case against his own siblings. Worthy of mention is that Candido, Jr., Leonardo, and Cesars defense in the ejectment case brought by CDC against them was not predicated on a claim of their ownership of the property, but on their being agricultural lessees or tenants of CDC. Even that defense was ultimately rejected by this Court by observing in G.R. No. 128392 as follows:

With regard to the first element, the petitioners have tried to prove that they are tenants or agricultural lessees of the respondent corporation, CDC, by showing that the land was originally owned by their grandfather, Isaias Lara, who gave them permission to work the land, and that CDC is merely a successor-in-interest of their grandfather. It must be noted that the petitioners failed to adequately prove their grandfathers ownership of the land. They merely showed six tax declarations. It has been held by this Court that, as against a transfer certificate of title, tax declarations or receipts are not adequate proofs of ownership. Granting arguendo that the land was really owned by the petitioners grandfather, petitioners did not even attempt to show how the land went from the patrimony of their grandfather to that of CDC. Furthermore, petitioners did not prove, but relied on mere allegation, that they indeed had an agreement with their grandfather to use the land. As for the third element, there is apparently no consent between the parties. Petitioners were unable to show any proof of consent from CDC to work the land. For the sake of argument, if petitioners were able to prove that their grandfather owned the land, they nonetheless failed to show any proof of consent from their grandfather to work the land. Since the third element was not proven, the fourth element cannot be present since there can be no purpose to a relationship to which the parties have not consented.18 The respondents attack against the title of CDC is likewise anchored on his assertion that the only purpose for having OCT No. 6386 issued in the sole name of Laura was for Laura to hold the title in trust for their mother. This assertion cannot stand, however, inasmuch as Lauras title had long ago become indefeasible. Moreover, the respondents suit is exposed as being, in reality, a collateral attack on the title in the name of Laura, and for that reason should not prosper. Registration of land under the Torrens System, aside from perfecting the title and rendering it indefeasible after the lapse of the period allowed by law, also renders the title immune from collateral attack.19 A collateral attack occurs when, in another action to obtain a different relief and as an incident of the present action, an attack is made against the judgment granting the title. This manner of attack is to be distinguished from a direct attack against a judgment granting the title, through an action whose main objective is to annul, set aside, or enjoin the enforcement of such judgment if not yet implemented, or to seek recovery if the property titled under the judgment had been disposed of.20 2. CDC was an innocent purchaser for value The CA found that CDC acquired the property in bad faith because CDC had knowledge of defects in the title of China Bank, including the adverse possession of the respondents siblings and the supposed failure of China Bank to warrant its title by inserting an as-is, where-is clause in its contract of sale with CDC. The CA plainly erred in so finding against CDC. To start with, one who deals with property registered under the Torrens system need not go beyond the certificate of title, but only has to rely on the certificate of title.21 He is charged with notice only of such burdens and claims as are annotated on the title.22 The pertinent law on the matter of burdens and claims is Section 44 of the Property Registration Decree,23 which provides: Section 44. Statutory liens affecting title. Every registered owner receiving a certificate of title in pursuance of a decree of registration, and every subsequent purchaser of registered land taking a

certificate of title for value and in good faith, shall hold the same free from all encumbrances except those noted on said certificate and any of the following encumbrances which may be subsisting, namely: First. Liens, claims or rights arising or existing under the laws and Constitution of the Philippines which are not by law required to appear of record in the Registry of Deeds in order to be valid against subsequent purchasers or encumbrances of record. Second. Unpaid real estate taxes levied and assessed within two years immediately preceding the acquisition of any right over the land by an innocent purchaser for value, without prejudice to the right of the government to collect taxes payable before that period from the delinquent taxpayer alone. Third. Any public highway or private way established or recognized by law, or any government irrigation canal or lateral thereof, if the certificate of title does not state that the boundaries of such highway or irrigation canal or lateral thereof have been determined. Fourth. Any disposition of the property or limitation on the use thereof by virtue of, or pursuant to, Presidential Decree No. 27 or any other law or regulations on agrarian reform. In short, considering that China Banks TCT No. 99527 was a clean title, that is, it was free from any lien or encumbrance, CDC had the right to rely, when it purchased the property, solely upon the face of the certificate of title in the name of China Bank.24 The CAs ascribing of bad faith to CDC based on its knowledge of the adverse possession of the respondents siblings at the time it acquired the property from China Bank was absolutely unfounded and unwarranted. That possession did not translate to an adverse claim of ownership that should have put CDC on actual notice of a defect or flaw in the China Banks title, for the respondents siblings themselves, far from asserting ownership in their own right, even characterized their possession only as that of mere agricultural tenants. Under no law was possession grounded on tenancy a status that might create a defect or inflict a flaw in the title of the owner. Consequently, due to his own admission in his complaint that the respondents own possession was not any different from that of his siblings, there was really nothing factually or legally speaking that ought to have alerted CDC or, for that matter, China Bank and its predecessors-in-interest, about any defect or flaw in the title. The vendees notice of a defect or flaw in the title of the vendor, in order for it to amount to bad faith, should encompass facts and circumstances that would impel a reasonably cautious person to make further inquiry into the vendors title,25 or facts and circumstances that would induce a reasonably prudent man to inquire into the status of the title of the property in litigation.26 In other words, the presence of anything that excites or arouses suspicion should then prompt the vendee to look beyond the certificate and to investigate the title of the vendor appearing on the face of said certificate.27 And, secondly, the CA grossly erred in construing the as-is, where-is clause contained in the deed of sale between CDC (as vendee) and China Bank (as vendor) as proof or manifestation of any bad faith on the part of CDC. On the contrary, the as-is, where-is clause did not affect the title of China Bank because it related only to the physical condition of the property upon its purchase by CDC. The clause only placed on CDC the burden of having the occupants removed from the property. In a sale made on an as-is, where-is basis, the buyer agrees to take possession of the things sold "in the condition where they are found and from the place where they are located," because the phrase asis, where-is pertains solely "to the physical condition of the thing sold, not to its legal situation" and is

"merely descriptive of the state of the thing sold" without altering the sellers responsibility to deliver the property sold to the buyer.28 What the foregoing circumstances ineluctably indicate is that CDC, having paid the full and fair price of the land, was an innocent purchaser for value, for, according to Sandoval v. Court of Appeals:29 A purchaser in good faith is one who buys property of another, without notice that some other person has a right to, or interest in, such property and pays a full and fair price for the same, at the time of such purchase, or before he has notice of the claim or interest of some other persons in the property. He buys the property with the belief that the person from whom he receives the thing was the owner and could convey title to the property. A purchaser cannot close his eyes to facts which should put a reasonable man on his guard and still claim he acted in good faith. WHEREFORE, we grant the petition for review on certiorari; set aside the decision of the Court of Appeals in CA-GR. CV No. 71696; dismiss the complaint in Civil Case No. 94-2045; and declare Transfer Certificate of Title No. T-34640 in the name of Casimiro Development Corporation valid and subsisting. The respondent shall pay the costs of suit. SO ORDERED.

G.R. No. 151424

July 4, 2008

EAGLE REALTY CORPORATION, petitioner, vs. REPUBLIC OF THE PHILIPPINES, represented by the Administrator of the Land Registration Authority, NATIONAL TREASURER OF THE PHILIPPINES, HEIRS OF CASIANO DE LEON, MARIA SOCORRO DE LEON, and PILARITA M. REYES, respondents. DECISION NACHURA, J.: This petition assails the Court of Appeals Decision1 dated January 22, 2001, and Resolution2 dated January 8, 2002, which annulled Original Certificate of Title (OCT) No. 129 issued by the Register of Deeds of Pasay City, and its derivative titles, the latest of which is in the name of petitioner. The antecedents of the case are as follows: On May 21, 1963, the spouses Casiano de Leon and Maria Socorro de Leon filed with the then Court of First Instance (CFI) of Rizal an application for registration of Lots 1 and 2, Plan Psu173022-B, located at Barrio San Dionisio, Paraaque, Rizal, with an area of 57,989 square meters. The case was raffled to Branch II presided over by Judge Pedro C. Navarro and docketed as LRC Case No. N-4140. The applicants were represented by Atty. Domicador L. Reyes.

Several parties opposed the application, including the Heirs of Dionisio Tomas, represented by Atty. Lorenzo Sumulong, and the Carabeo family, represented by Atty. Romulo Bobadilla. On December 11, 1979, the CFI rendered a decision in favor of Casiano de Leon and his children, namely, Esmeralda, Rosario Rodriguez, Bernardita, and Cesario (Maria Socorro having died on September 21, 1974). Copies of this decision (De Leon Decision, for brevity) were sent through registered mail to the Land Registration Commission (LRC), Solicitor General, Atty. Sumulong, and Atty. Bobadilla.3 The Heirs of Dionisio Tomas appealed the De Leon Decision to the Intermediate Appellate Court. On March 23, 1984, the appellate court affirmed the decision. The Heirs of Tomas elevated the case to this Court for review, docketed as G.R. No. 66949. On June 25, 1984, this Court dismissed the petition for having been filed out of time and for lack of merit. This judgment became final and executory on August 13, 1984.4 It appears that another decision, similar to the De Leon Decision but adjudicating the property to a certain Martina G. Medina, alleged intervenor in LRC Case No. N-4140, was surreptitiously inserted in the records of the LRC.5This decision (Medina Decision, for brevity) was similarly dated December 11, 1979 and purportedly signed by Judge Pedro C. Navarro. Likewise inserted in the records of the LRC was the Order for the Issuance of the Decree dated February 14, 1980, also bearing what purports to be the signature of Judge Pedro C. Navarro, with a Certification dated February 17, 1980 by Clerk of Court Nicanor G. Salaysay, attesting that the decision has not been supplemented, amended or otherwise modified. 6 On May 30, 1983, pursuant to these documents, Hon. Oscar R. Victoriano, then Acting Land Registration Commissioner, issued Decree of Registration No. N-188044. In accordance with this Decree, the Register of Deeds of Pasay City issued OCT No. 129 on July 7, 1983 in the name of a Martina G. Medina.7 Medina later exchanged the property for a 3,000-hectare parcel of land in Norzagaray, Bulacan owned by Pilarita Reyes through a Deed of Exchange dated September 12, 1983. The value of each property was approximatelyP451,900.00. On November 2, 1983, OCT No. 129 was canceled and Transfer Certificate of Title (TCT) No. 74216 issued in the name of Reyes. Thereafter, through a Deed of Sale dated February 22, 1984, Reyes sold the property to petitioner for P1,200,000.00. On March 1, 1984, TCT No. 74216 was canceled, and TCT No. 78982 was issued in petitioners name.8 Meanwhile, Cesario de Leon discovered that OCT No. 129 was issued to Martina G. Medina. The De Leons sent a letter-complaint to the LRC asking for an investigation on the matter. This was referred to Atty. Manuel Panis, Chief of the Inspection and Investigation Division of the LRC. In a report dated July 20, 1984, Atty. Panis concluded that the Medina Decision and the Order for the Issuance of Decree dated February 14, 1980 were fake. He then recommended that the appropriate action be filed for the nullification of OCT No. 129 and its derivative titles TCT No. 74216 in the name of Pilarita Reyes, and TCT No. 78982 in the name of petitioner Eagle Realty Corporation. Consequently, on September 6, 1984, the Republic of the Philippines, represented by the Acting Land Registration Commissioner, filed a complaint for "Annulment of Judgment and Cancellation of Decree and Titles" against Martina G. Medina, Pilarita Reyes and petitioner Eagle Realty Corporation. The Register of Deeds of Pasay City was impleaded as a nominal party. The complaint alleged that the LRC received a copy of the De Leon Decision but this was surreptitiously substituted with the Medina Decision, together with the Order for the Issuance of the

Decree dated February 14, 1980, in the LRC records. It further alleged that the LRC, unaware of any irregularity, issued OCT No. 129 to Martina Medina on the basis of these fake documents. In her Answer, Medina averred that she purchased the property from Justino de Leon on March 5, 1973. Justino, in turn, acquired this property from Casiano and Maria de Leon on October 29, 1971 through a Deed of Absolute Sale. She alleged that she verified the genuineness of this Deed of Absolute Sale from the Manila CFI Notarial Section and from Casiano de Leon himself. She immediately occupied the properties, appointed a caretaker thereof, paid all the land taxes, and caused the transfer to her name of LRC Survey Plan No. 13305 covering the property.9 She claimed that, in 1979, she learned that this property was the subject of a pending registration proceeding, commenced by Casiano and Maria de Leon in 1966. She then filed, on September 28, 1979, a petition for intervention in said case. This petition for intervention was allegedly granted on October 4, 1979 by the CFI of Pasig.10 For its part, petitioner Eagle Realty Corporation alleged, inter alia, as affirmative defenses, that (a) the Republic of the Philippines is not the real party-in-interest since the subject property is private, (b) the one-year prescriptive period within which to seek a review of a decree of registration has already lapsed, and (c) it is a buyer in good faith and for value. Petitioner also filed a cross-claim against Pilarita Reyes to seek reimbursement for the purchase price and the Register of Deeds to hold the Assurance Fund liable in case Reyes fails to pay.11 Later, petitioner filed a third-party complaint against the National Treasurer of the Philippines, the public officer entrusted with the payment of claims against the Assurance Fund.12 Pilarita Reyes interposed the same defenses as the petitioner. She further claimed that she had no knowledge of any infirmity in Medinas title and that she entered into the Deed of Exchange in good faith and for value. As for the petitioners cross-claim, she averred that she acted in good faith in selling the property to petitioner.13 On February 8, 1985, respondents Heirs of Casiano and Maria de Leon filed a Motion for Leave of Court to Intervene which the trial court granted.14 On July 19, 1985, they filed a Complaint-inIntervention praying that judgment be rendered "in accordance with the prayer alleged in the complaint" and, in addition, order defendants jointly and severally to pay intervenors actual, moral and nominal damages, attorneys fees plus legal interest.15 On November 17, 1992, the RTC ruled in favor of the private respondents Heirs of De Leon, thus: From all the foregoing discussion, judgment is hereby rendered as follows: 1. Declaring the decision dated December 11, 1979 and the order for the issuance of decree dated February 14, 1980 in favor of Martina G. Medina purporting to emanate from LRC Case No. N-4140, LRC Record No. N-24165, null and void; 2. Declaring Decree No. N-188044 and Original Certificate of Title No. 129 in the name of Martina G. Medina, and Transfer Certificates of Title Nos. 74216 and 78982 in the name, respectively, of Pilarita M. Reyes and Eagle Realty Corporation, null and void; 3. Ordering Eagle Realty Corporation to surrender the owners duplicate copy of Transfer Certificate of Title No. 78982 to the Register of Deeds of Pasay City (or his successor) who is hereby ordered to cancel this owners copy and the original copy in his files;

4. Ordering the defendants to desist from exercising or representing acts of possession or ownership over the lots covered by the said titles; 5. Ordering the defendant Martina G. Medina to pay to the INTERVENORS the following amounts: a. the sum of P500,000.00 as moral damages for the sufferings said INTERVENORS have suffered arising from the submission of the forged decision and order for the issuance of decree to the Land Registration Commission; b. The sum of P300,000.00 to serve as exemplary damages and thereby discourage the proliferation of similar incidents; 6. Ordering the defendants Martina G. Medina, Pilarita Reyes and Eagle Realty Corporation jointly and severally to pay or reimburse to the INTERVENORS attorneys fees in the sum of P250,000.00; 7. Ordering Martina G. Medina and Pilarita Reyes, jointly and severally, to refund to Eagle Realty Corporation the following amounts: a. The sum of P1.2 Million which Eagle Realty Corporation paid to Pilarita Reyes for the property, with interest at the legal rate from February 22, 1984 to the time the same is fully paid; b. The sum of P250,000.00 by way of reimbursement of attorneys fees; c. The attorneys fees that Eagle Realty Corporation, under paragraph 6 above, may have paid to the INTERVENORS; 8. The counterclaims interposed by the defendants are dismissed; 9. In the event that Eagle Realty Corporation is unable to collect the sum of P1.2 million with legal interest from its co-defendants, the third-party defendant National Treasurer of the Philippines is ordered to pay the said amount.16 On appeal, the CA, in its Decision dated January 22, 2001, affirmed the RTC Decision with modifications, thus: Wherefore, premises considered, the appeal is DISMISSED and the Decision, dated November 17, 1992, of the Regional Trial Court of Makati, Branch 142, in Civil Case No. 8400, is AFFIRMED with the following modifications: the liability of defendant-appellant Eagle Realty Corporation for attorneys fees under paragraph 6 of the dispositive portion is deleted and; paragraph 9 [Id.] is also deleted. Costs against defendants-appellants Medina and Eagle Realty Corporation. SO ORDERED.17 The CA held that the complaint is actually an action for the annulment of a certificate of title, not for annulment of judgment as alleged by petitioner; hence, the RTC properly acquired jurisdiction. It also

upheld the LRCs personality to institute the complaint based on Section 100 of Presidential Decree (P.D.) No. 1529 in order to protect the Assurance Fund from being held accountable by the private respondents for the erroneous issuance of a certificate of title to Medina. It dismissed the issue on prescription, ratiocinating that an action to declare the nullity of a void title does not prescribe and, moreover, prescription does not run against the State.18 According to the CA, the trial court was correct in finding that the Medina Decision and the Order for the Issuance of Decree were both spurious and that petitioner was not an innocent purchaser for value because it failed to make a prior inspection of the subject property which would have revealed that it was being occupied by the private respondents. This omission amounted to a failure to exercise diligence which prevented it from becoming an innocent purchaser for value.19 Hence, the Assurance Fund cannot be made liable.20 On January 8, 2002, the CA issued a Resolution21 denying petitioners motion for reconsideration. Petitioner filed this petition for review alleging the following errors: I. WITH ALL DUE RESPECT, THE COURT OF APPEALS ERRED IN RULING THAT THE SUBJECT MATTER OR NATURE OF THE ACTION IS NOT ONE FOR ANNULMENT OF JUDGMENT WITHIN THE EXCLUSIVE ORIGINAL JURISDICTION OF THE COURT OF APPEALS AND THAT THE TRIAL COURT ALLEGEDLY PROPERLY ACQUIRED JURISDICTION OVER THE SAME. II. WITH ALL DUE RESPECT, THE COURT OF APPEALS ERRED IN RULING THAT THE RESPONDENT REPUBLIC IS A REAL PARTY-IN-INTEREST AND HAS THE PERSONALITY TO FILE THE SUIT BELOW. III. WITH ALL DUE RESPECT, THE COURT OF APPEALS ERRED IN RULING THAT THE ONE-YEAR PRESCRIPTIVE PERIOD PROVIDED BY LAW IS NOT APPLICABLE TO THE INSTANT CASE. IV. WITH ALL DUE RESPECT, THE COURT OF APPEALS ERRED IN RULING THAT PETITIONER EAGLE REALTY IS NOT AN INNOCENT PURCHASER FOR VALUE OF THE SUBJECT PROPERTY. V. WITH ALL DUE RESPECT, THE COURT OF APPEALS COMMITTED A GRAVE AND SERIOUS MISAPPREHENSION OF THE FACTS HEREIN INVOLVED AND MADE MANIFESTLY MISTAKEN, ABSURD OR IMPOSSIBLE INFERENCES: A.

IN UPHOLDING THE FACTUAL FINDINGS OF THE TRIAL COURT DESPITE THE GLARING EVIDENCE ON RECORD WHICH SHOWS THAT THE DECISION DATED 11 DECEMBER 1979 IN LRC CASE NO. 4140 IN FAVOR OF DEFENDANT-APPELLANT MEDINA IS THE GENUINE DECISION OF JUDGE PEDRO G. NAVARRO. B. IN FAILING TO CONSIDER THE DEEDS OF SALE EXECUTED BY CASIANO DE LEON, JUSTINO DE LEON AND MEDINA, AS WELL AS THE PETITION FOR INTERVENTION AND SUBSTITUTION AND THE MEDINA DECISION. VI. WITH ALL DUE RESPECT, THE COURT OF APPEALS GRAVELY ERRED IN RULING THAT RESPONDENT NATIONAL TREASURER IS NOT LIABLE TO PETITIONER EAGLE REALTY UNDER THE ASSURANCE FUND.22 We deny the petition. Initially, petitioner undertakes to have the case dismissed on the ground of lack of jurisdiction by the RTC over the complaint. It insists that the complaint is an action for annulment of judgment which, under Rule 47 of the Rules of Court is cognizable by the CA.23 We do not agree. The body of the pleading or complaint determines the nature of an action, not its title or heading.24 This is because the complaint must contain a concise statement of the ultimate facts constituting the plaintiffs cause of action and specify the relief sought.25 Although denominated as an "Action for Annulment of Judgment and Cancellation of Decree and Titles," the complaint is not an action for annulment of judgment under Rule 47, but a case for cancellation of void titles. Annulment of judgment is a remedy against a final and executory judgment. Therefore, a necessary allegation in the complaint would be that there was in fact a judgment that has been issued by the trial court, which judgment has become final. Here, the Complaint does not contain any averment to such effect. On the contrary, the Complaint consistently mentions that the Medina Decision, upon which OCT No. 129 was issued, is a fake document. The pertinent portions of the Complaint state: 8. Subsequently thereafter, without the knowledge of the Land Registration Commission as to the contents and true import of the Decision mentioned in paragraph 6 hereof and before the said Decision, together with the case record, could be processed and examined, there were surreptitiously inserted and substituted in its place, in the records of the Land Registration Commission, copies of another Decision also dated December 11, 1979 and an Order for the Issuance of Decree dated February 14, 1980, both purportedly rendered in the same land registration case and record, the dispositive portion of said falsified decision quoted hereunder: xxxx 13. In July 1984, upon representations of the Applicants-Heirs of Casiano B. de Leon and Maria L. de Leon, thru Counsel Atty. Conrado M. Vasquez, Jr., and after a thorough investigation, the Land Registration Commission found and confirmed the falsity of the

decision dated December 11, 1979 adjudicating the lots in favor of defendantMartina Medina and the order of decree dated February 14, 1980 for several reasons x x x.26 From the allegations in the Complaint, it is evident that the action is mainly for the declaration of nullity of the certificates of title issued as a result of the fake court decision. This is an action incapable of pecuniary estimation; hence, the RTC properly assumed jurisdiction. Secondly, petitioner attacks the personality of the Republic of the Philippines, represented by the Commissioner of Land Registration, to file the Complaint. It contends that the CAs reliance on Section 100 of P.D. 1529 to justify the plaintiffs personality to file the complaint for cancellation of erroneously or unlawfully issued titles is misplaced as this provision only gives the Register of Deeds the authority to file such action. It is Section 32 of the same law that should apply and this provision clearly requires that the plaintiff must have a dominical right over the property. Petitioner argues that since the subject parcel of land is private property over which the government has no interest, the Republic of the Philippines has no right to file the suit for cancellation of titles. Indisputably, the government is charged with the duty to preserve the integrity of the Torrens System and protect the Assurance Fund. The plaintiff instituted the complaint precisely to perform this duty. The Complaint seeks the cancellation of erroneously issued titles to protect the Assurance Fund from being made liable by the private respondents for damages in case they fail to recover the property. The public officer specifically tasked to perform this duty is the Register of Deeds who, under Section 100 of P.D. No. 1529, is authorized to file an action to annul a certificate of title erroneously or unlawfully issued, thus: SEC. 100. Register of Deeds as party in interest. When it appears that the Assurance Fund may be liable for damages that may be incurred due to the unlawful or erroneous issuance of a certificate of title, the Register of Deeds concerned shall be deemed a proper party in interest who shall, upon the authority of the Commissioner of Land Registration, file the necessary action in court to annul or amend the title. The court may order the Register of Deeds to amend or cancel a certificate of title or to do any other acts as may be just and equitable. (Emphasis supplied.) Under Section 6, P.D. 1529, the Commissioner of Land Registration shall exercise supervision and control over all Registers of Deeds. It is well understood that "supervision and control" includes the authority to act directly whenever a specific function is entrusted by law or regulation to a subordinate.27 As the public officer having supervision and control over Registers of Deeds, the Commissioner of Land Registration therefore also has the authority to file the action himself. The LRC is a mere agency of the government, unincorporated, and with no separate juridical personality from that of the Republic of the Philippines. Naming the Republic of the Philippines as plaintiff and merely acting as its representative was not even necessary since the Commissioner of Land Registration himself, as the superior of and exercising control over the Register of Deeds, had the authority to file the complaint on his own. Under Section 1, Rule 3, an entity specifically authorized by law to file the action may be a party in a civil action. Likewise, it is not essential that the Republic of the Philippines has proprietary rights over the property covered by the subject titles as it does not lay any claim over this property. As previously stated, the complaint merely seeks the cancellation of erroneously issued titles in order to protect the Assurance Fund from liability for damages that may be filed by the rightful owners under Section 95 of P.D. No. 1529.

Moreover, it should be noted that the private respondents also filed a Complaint-in-Intervention which was granted by the RTC. The complaint in intervention reiterated the material allegations in the complaint and prayed for the same reliefs, plus damages. Hence, even if the main action is dismissed on the ground that the plaintiff had no personality to file the action, the complaint in intervention will remain. Dismissal of the plaintiffs action would not necessarily result in the dismissal of the intervenors complaint in intervention. An intervenor has the right to claim the benefit of the original suit and to prosecute it to judgment.28 Having been permitted to become a party in order to better protect his interest, an intervenor is entitled to have the issues raised between him and the original parties tried and determined.29 Petitioner likewise makes an issue out of the inclusion of the Register of Deeds as a partydefendant. It contends that it would cause an absurd situation because the plaintiff and defendant would be represented by the same counsel. Such contention is not worthy of consideration because the Register of Deeds was only impleaded as a nominal party for purposes of enforcement, since he is the public officer charged with the duty of registering land documents and certificates of title.30 Still on its bid to have the case dismissed, petitioner submits that the action to cancel OCT No. 129, and its derivative titles, has already prescribed because under Sec. 32 of P.D. No. 1529, upon the expiration of one year from the entry of the decree of registration, the certificate of title shall become incontrovertible. In this case, more than one year has already lapsed since the entry of the decree of registration on May 30, 1983. Petitioner further contends that the indefeasibility of a Torrens title binds even the government. The principle of indefeasibility of a Torrens title does not apply where fraud attended the issuance of the title. The Torrens title does not furnish a shield for fraud. As such, a title issued based on void documents may be annulled.31 Moreover, elementary is the rule that prescription does not run against the State and its subdivisions.32 As a rule, the Court cannot review the factual findings of the trial court and the CA in a petition for review on certiorari under Rule 45 of the Rules of Court. When supported by substantial evidence, findings of fact of the trial court, as affirmed by the CA, are conclusive and binding on the parties. As found by both the trial court and the appellate court, Medina never intervened in the land registration case and the Medina Decision and the Order of Registration were forged documents. These findings are firmly grounded on the evidence on record which leaves no room for a review by this Court. Petitioner is left with no other recourse but to pursue its claim that it is an innocent purchaser for value, entitled to be protected by law. Petitioner asserts that a person dealing with registered land may safely rely on the correctness of the certificate of title and need not go beyond the said title to determine the condition of the property. It argues that it had no actual knowledge of any fact that would engender suspicion that the sellers title is defective. It could hardly have discovered any defect in OCT No. 129 and TCT No. 72416 considering that these titles were actually issued by the Register of Deeds. Case law has it that he who alleges that he is a purchaser in good faith and for value of registered land bears the onus of proving such statement. This burden is not discharged by involving the ordinary presumption of good faith.33 Petitioner failed to discharge this burden. In its Answer, petitioner merely alleged that it is an innocent purchaser for value since it acquired the land from Pilarita Reyes for P1,200,000.00, without notice of any defect in her title and after verifying the genuineness of the title in the Register of Deeds of Pasay City and the LRC. However, petitioner did not present any proof that would

substantiate this allegation nor did it present any evidence to show that it took other steps to verify the authenticity of its predecessors title. Indeed, the general rule is that a purchaser may rely on what appears on the face of a certificate of title. He may be considered a purchaser in good faith even if he simply examines the latest certificate of title. An exception to this rule is when there exist important facts that would create suspicion in an otherwise reasonable man (and spur him) to go beyond the present title and to investigate those that preceded it.34 The presence of anything which excites or arouses suspicion should then prompt the vendee to look beyond the certificate and investigate the title of the vendor as appearing on the face of said certificate. One who falls within the exception can neither be denominated an innocent purchaser for value nor a purchaser in good faith, hence, does not merit the protection of the law.35 As correctly observed by the public respondent, the property covered by the void titles was transferred from Medina to petitioner with unusual haste. Only 8 months lapsed since OCT No. 129 was issued on July 7, 1983 until it was transferred to petitioner on February 22, 1984. The property was transferred to petitioner from Reyes only more than five months after she herself acquired the property. These circumstances, plus the fact that the subject property is a vast tract of land in a prime location, should have, at the very least, triggered petitioners curiosity. Moreover, petitioner is a corporation engaged in the real estate business. A corporation engaged in the buying and selling of real estate is expected to exercise a higher standard of care and diligence in ascertaining the status and condition of the property subject of its business transaction. Similar to investment and financing corporations, it cannot simply rely on an examination of a Torrens certificate to determine what the subject property, looks like as its condition is not apparent in the document.36 Petitioners claim against the Assurance Fund must necessarily fail. Its situation does not come within the ambit of the cases protected by the Assurance Fund. It was not deprived of land in consequence of bringing it under the operation of the Torrens system through fraud or in consequence of any error, omission, mistake or misdescription in the certificate of title37 It was simply a victim of unscrupulous individuals. More importantly, it is a condition sine qua non that the person who brings the action for damages against the Assurance Fund be the registered owner and, as the holders of transfer certificates of title, that they be innocent purchasers in good faith and for value.38 And we have already established that petitioner does not qualify as such. WHEREFORE, premises considered, the petition is DENIED. The Court of Appeals Decision dated January 22, 2001, and Resolution dated January 8, 2002, are AFFIRMED. SO ORDERED. Ynares-Santiago, Chairperson, Austria-Martinez, Chico-Nazario, Reyes, JJ., concur.

G.R. No. 172146

July 30, 2008

RODOLFO CORNES, VIRGILIO CORNES, ENRIQUITO CORNES, ALFREDO CORNES, ELESEO CORNES, BENITO CORNES, CONSUELO "NITA" CORNES-VALENZUELA, MA. ALBERTA CORNES and her children CHERILYN, JONALYN, DIANALYN, MARIE-JOY, ERNESTO, JR., JERSON and ERIKA, all surnamed CORNES, (Ernesto, Jr., Jerson and Erika, being minors, are represented herein by their mother and guardian ad litem, Ma. Alberta Cornes), DONATO ROBLES, EDUARDO ROBLES, MARIA ROBLES and her children DONATO, EDUARDO, RIZALINO, EDWIN, VICENTE, JESSIE, ANICETO, JERRY, all surnamed ROBLES, and MARITES ROBLES-FABIAN, CRISANTO, RANDY, MAUREEN, DINIA, JOANA, NOVA, FRANCISCO, JR., and BEATRIZ, all surnamed GADIANO, (Beatriz, being a minor is represented herein by her said siblings and guardians ad litem), Petitioners, vs. LEAL REALTY CENTRUM CO., INC., LEAL HAVEN, INC., ERNESTO M. LEGASPI, and All Persons Claiming Rights Under Them, Respondents. DECISION CHICO-NAZARIO, J.: For review under Rule 45 of the Rules of Court are the Decision1 and Resolution2 of the Court of Appeals, dated 31 March 2005 and 5 April 2005, respectively, which reversed the Decision3 dated 1 February 2000 of the Department of Agrarian Reform Adjudication Board (DARAB), and reinstated the Decision4 dated 31 July 1997 of the Provincial Adjudicator in DARAB Cases No. 6489-6492 (Reg. Case Nos. 234-T91, 396-T93, 397-T93 and 827-T95). The instant Petition traces its origins from four separate Complaints filed with the Provincial Adjudication Board, Region III in Tarlac, Tarlac. DARAB Case No. 234-T91 The first Complaint5 dated 19 August 1991, and docketed as DARAB Case No. 234-T91 was filed by petitioners and their predecessors-in interest Rodolfo Cornes, Pablo Cornes, Sr., Renato T. Cornes, Virgilio T. Cornes, Enriquito T. Cornes, Ernesto T. Cornes, Juanito Robles, Donato Robles, Francisco Gadiano and Eduardo Robles against respondents Leal Realty Centrum Co., Inc. (LEAL REALTY), Leal Haven, Inc. (LEAL HAVEN), their Managing Director Ernesto M. Legaspi, and all persons claiming rights under them for maintenance of peaceful possession and for issuance of a writ of preliminary injunction. Petitioners contended that they had been farmers and full-fledged tenants for more than 30 years of an agricultural landholding which was previously owned and registered in the name of Josefina Roxas Omaa (JOSEFINA) under TCT No. 103275 of the Registry of Deeds of Tarlac. The subject landholding consists of at least 21 hectares and is principally devoted to rice and sugar. According to petitioners, the subject landholding is covered by Republic Act No. 6657,6 but was sold by JOSEFINA to respondents in contravention of the law. Meanwhile, LEAL HAVEN converted a portion of the subject landholding into a memorial park. It is petitioners stance that when respondents entered into a contract of sale with JOSEFINA, they were aware of the tenancy relationship which existed between petitioners and JOSEFINA. Respondents purportedly negotiated with petitioners to renounce their tenancy rights under the Comprehensive Agrarian Reform Law (CARL) in exchange for a compensation package as a form of disturbance compensation. However, respondents failed to comply with the terms and conditions thereof. For this reason, petitioners filed a complaint with the Municipal Agrarian Reform Officer (MARO) in Victoria, Tarlac; but the conciliation efforts of the latter proved to be futile, prompting petitioners to move for their termination. Petitioners further claim that in a letter7 dated 16 February 1991, respondents admitted their inability to pay the balance in the compensation package drawn

between them and advised petitioners to continue working on the subject landholding, and to continue to appropriate for themselves the fruits thereof until complete payment shall have been made. Finally, petitioners allege that they were residing in their respective homes made of strong materials built within the premises of the subject landholding. However, they were threatened to be ousted and evicted by respondents who had solicited the assistance of saboteurs and military officers to disturb their peaceful possession without any lawful order from the courts. Petitioners sought an injunction against respondents, and prayed for the declaration of the landholding as subject to the compulsory coverage of the CARL and their entitlement to the rights and privileges accorded thereby, as well as for the payment of damages. DARAB Case No. 396-T93 The second Complaint,8 dated 2 March 1993, docketed as DARAB Case No. 396-T93 was filed by petitioners against respondent LEAL REALTY and Spouses William Tugadi and Remedios Tugadi (SPS. TUGADI) for violation of Republic Act No. 6657, annulment of documents, title and damages, reiterating their averments in DARAB Case No. 396-T93. In addition, petitioners posited that LEAL REALTY executed a Deed of Absolute Sale in favor of the SPS. TUGADI without proper conversion of the lot from agricultural to non-agricultural in breach of the CARL. Petitioners contended that LEAL REALTY, without proper authority, caused the subdivision of the subject landholding into smaller lots. One of such lots is Lot No. 1961-B-3-B which was transferred by LEAL REALTY in favor of the SPS. TUGADI. Petitioners impugned the subdivision as having been done without the approval of the Housing and Land Use Regulatory Board (HLURB). Fearing that they may be ejected from their dwellings, petitioners prayed that respondents be declared to have violated Republic Act No. 6657; and that the transfer from JOSEFINA to LEAL REALTY, the subdivision of the subject landholding into smaller lots, and the transfer of Lot No. 1961-B-3-B to SPS. TUGADI be declared null and void. DARAB Case No. 397-T93 The third Complaint,9 also dated 2 March 1993, and docketed as DARAB Case No. 397-T93 was filed by petitioners against respondent LEAL REALTY and Spouses Romeo Alcazaren and Juliet Astrero-Alcazaren (SPS. ALCAZAREN) for violation of Republic Act No. 6657, annulment of documents, title and damages. In like manner, as with their prior Complaints, petitioners questioned the subdivision of the subject landholding into smaller lots as contrary to law. In particular, petitioners contested the issuance of TCT No. T-237899 of the Register of Deeds of Tarlac over Lot No. 1961B-1-A in favor of the SPS. ALCAZAREN. As with their prior two Complaints, petitioners prayed for the declaration of nullity of the transfer of the subject landholding from JOSEFINA to LEAL REALTY, including the nullity of TCT No. T-237899 in the name of the SPS. ALCAZAREN. DARAB Case No. 329-T95 On 17 March 1995, respondent LEAL REALTY, represented by its Manager, Ernesto Legaspi, filed a Complaint10with the Provincial Adjudication Board, Region III in Tarlac against petitioner Nita Cornes-Valenzuela (VALENZUELA), docketed as DARAB Case No. 827-T95 for injunction with prayer for temporary restraining order and preliminary injunction. LEAL REALTY alleged that sometime in February 1995, despite its objection, VALENZUELA constructed a residential house within the premises of the subject landholding; hence, it prayed for the removal of the construction at VALENZUELAs expense. Later, all four Complaints were consolidated.

The Ruling of the Provincial Adjudicator On 31 July 1997, Provincial Adjudicator Benjamin M. Yambao rendered a Decision in favor of respondents and against petitioners. The Complaints filed by petitioners, i.e., DARAB Cases No. 234-T91, No. 396-T93, and No. 397-T93 were ordered dismissed. On the other hand, the prayer of respondent LEAL REALTY in the fourth Complaint, DARAB Case No. 329-T95 was granted. The Provincial Adjudicator found that there was no tenancy relationship which existed between the parties. He maintained that no convincing evidence was established to prove the tenancy arrangement other than petitioners self-serving declaration. The Provincial Adjudicator ruled that Jacinto Cornes (JACINTO), the father and predecessor-in-interest of the petitioners Cornes, declared that he was a hired laborer in the subject landholding.11 Petitioners other predecessors-ininterest,12 namely, Pablo Cornes (PABLO), Francisco Gadiano (FRANCISCO), Domingo Pagarigan (DOMINGO), and Juanito Robles (JUANITO), were also found to have worked as hired hands. As petitioners merely derived the relationship from their predecessors-in-interest who were hired workers, they cannot be expected to rise above their source. According to the Provincial Adjudicator, the fact that petitioners were seen working on the subject landholding did not raise a presumption of the existence of a tenancy relationship. Further, the Provincial Adjudicator declared that a tenancy relationship cannot be inferred from the alleged compensation package entered into by petitioners and their predecessors-in-interest with respondent LEAL REALTY in the amount of P114,000.00, leaving an unpaid balance of P46,000.00. At best, it was deemed as a gesture of compassion akin to a pabuya upon the instruction of JOSEFINA, the former landowner, to respondent LEAL REALTY. The Provincial Adjudicator also declared the sale between JOSEFINA and LEAL REALTY as valid on the following rationalization: On the issue of coverage or non-coverage. The landholding in question consists of 201,051 square meters, more or less, located at Brgy. Bulo, Victoria, Tarlac. The property was formerly owned by Josefina Roxas Omana then covered by TCT No. 103275. On June 6, 1988 or nine (9) days before Republic Act No. 6657 took effect, Josefina Roxas Omana sold the land by virtue of a Deed of Absolute Sale in favor of defendant corporation. A title was subsequently issued in favor of the latter under TCT No. 215216 of the Register of Deeds of Tarlac, Tarlac and registered on September 12, 1988. Given this situation, there is no question that the sale between the previous owner, Josefina Roxas Omana, and defendant corporation is valid. [The] [p]rovision of Section 6, paragraph 4 of Republic Act No. 6657 states that: "x x x Upon the effectivity of this Act, any sale, disposition, lease, management contract or transfer of possession of private lands executed by the original landowner in violation of this Act shall be null and void; Provided, however, That those executed prior to this Act shall be valid only when registered with the Register of Deeds within a period of three (3) months after the effectivity of this Act. Thereafter, all Registers of Deeds shall inform the DAR within thirty (30) days of any transaction involving agricultural lands in excess of five (5) hectares." What is being prohibited by law is the disposition of the property after the effectivity of RA 6657 in order to circumvent the provision of the said law.13 The Provincial Adjudicator also declared that a portion of the subject landholding was within the coverage of the CARL. He reached the foregoing conclusion in this wise:

Likewise, the remaining portion which is 17 hectares, more or less, which is agricultural in nature, excluding the memorial park duly approved for conversion appears to be within the coverage of the Comprehensive Agrarian Reform Program. It should be noted that on July 22, 1988, former President Corazon C. Aquino approved and signed Proclamation No. 131 instituting a Comprehensive Agrarian Reform Program which shall cover, regardless of tenurial arrangements and commodity produce, all public and private agricultural lands as provided in the Constitution, including whenever applicable in accordance with law, other land if the public domain is suitable for agriculture. On the same date, Executive Order No. 229 was promulgated providing for the mechanism for the implementation of the Comprehensive Agrarian Reform Program. On June 15, 1988, or nine (9) days after the sale of the land in issue, RA 6657 took effect. Said law covers, regardless of tenurial arrangements and commodity produced, all public and private agricultural land as provided in Proclamation No. 131 and Executive Order No. 229, including lands of public domain suitable for agriculture. The fact that the landholding in question was not covered by Operation Land Transfer pursuant to PD 27 is well[-]taken considering that the land in issue is predominantly sugar land[,] whereas PD No. 27 covers only rice and corn lands. In its schedule of implementation provided in Section 7 thereof, the land in question clearly, squarely and timely falls within its last phase of implementation. Under Phase III (b) of the said section, "Landholdings from the retention limit up to twenty-four (24) hectares, to be covered on the sixth (6th) year from the effectivity of this Act and to be completed within four (4) years, to implement principally the right of farmers and regular farmworkers who are landless, to own directly or collectively the lands they till.14 The Provincial Adjudicator held that the Department of Agrarian Reform (DAR) was, thus, dutybound to look into the petitioners qualification as prospective farmer-beneficiaries, notwithstanding the fact that they were found to be hired laborers. Finally, the Provincial Adjudicator held that LEAL REALTY violated Republic Act No. 6657 when it subdivided and inter-subdivided the subject landholding and sold portions thereof to the SPS. TUGADI and SPS. ALCAZAREN. Both sales were found to have been made after the effectivity of the said Act. However, it denied jurisdiction thereon on the ground that the matter was within the cognizance of the Regional Trial Court. Also, anent the fourth Complaint which was filed by LEAL REALTY against petitioner VALENZUELA, the Provincial Adjudicator found that VALENZUELA constructed the improvements on the portion of the landholding in question as an extension of the house of her father and predecessor-in-interest Pablo Cornes. As the latter cannot be said to be a bona fide tenant, VALENZUELA was ordered to have the said improvements removed. The decretal portion of the Provincial Adjudicators Decision of 31 July 1997 reads: WHEREFORE, premises considered, judgment is hereby rendered in the following cases, to wit: 1. Dismissing DARAB CASE NO. 234-T91 for lack of merit; 2. Dismissing DARAB CASE NO. 396-T93 and 397-T93 for lack of jurisdiction; 3. Ordering the removal of any improvements made by the defendant in DARAB CASE NO. 827-T95; and 4. No cost.15 Petitioners brought forth an appeal of the 31 July 1997 Decision of the Provincial Adjudicator of Tarlac before the DARAB Central Office in Diliman, Quezon City.

The Ruling of the DARAB On 1 February 2000, the DARAB vacated the appealed Decision. It reversed the 31 July 1997 Decision of the Provincial Adjudicator, and disposed, thus: WHEREFORE, premises considered, judgment is hereby rendered SETTING ASIDE the decision of the Honorable Adjudicator and ENTERING A NEW ONE as follows: 1. Declaring [herein petitioners] as bona fide tenants of the subject landholding; 2. If reinstatement is no longer possible due to the effective change of the subject landholding unto other purposes other than agricultural, then [herein respondents] are ordered to pay [herein petitioners] disturbance compensation and other benefits provided for in par. VI-B (6), DAR Administrative Order No. 7, Series of 1997 without prejudice to the prosecution of the former for illegal conversion.16 The DARAB held that the right to security of tenure does not only apply to bona fide tenants; but also to actual tillers of the land. It also declared that there was an implied tenancy between the parties. The DARAB ruled that for more than 30 years, the petitioners were deemed tenants of the subject landholding. The DARAB pronounced: Pursuant to Department Memorandum Circular No. 2, Series of 1973 issued by the DAR for the implementation of P.D. No. 27, security of tenure is likewise available to actual tillers of the land and actual tillers has been defined "to be the tenant-farmer, sublessee and purchaser or mortgagee of possession who at the time the decree was promulgated has been in actual possession and cultivation of his farmholding and who has shared the products thereof for at [l]east one (1) agricultural year preceding the Decree." x x x. xxxx For tenancy to exist, there must have been an agreement between the tenant and the landowner, x x x x this means that without such agreement, express or implied there can be no tenancy. [Herein respondents] claimed that [herein petitioners] had not been instituted as tenants on the land in suit. However, the fact that they did not at all question his tenancy over the land in question for quite several years, is an implied admission or consent to the establishment of a tenancy relationship between the parties. Thus, Sec. 5 [of] Republic Act No. 3844 provides: "Sec. 5. Establishment of Agricultural Leasehold Relation The agricultural leasehold relation shall be established by operation of law in accordance with Sec. 4 of this Code and, in other cases, either orally or in writing express or implied." Consequently, the tenant herein is entitled to security of tenure on this landholding and can not be ejected therefrom unless authorized by the Court (Sec. 7 of the Code of Agrarian Reforms (sic), R.A. No. 3844, Baoanan vs. Reyes, CA-G.R. No. SP-04210, July 15, 1976). Security of tenure is a legal concession to agricultural lessees which they value as life itself and deprivation of their landholdings is tantamount to deprivation of their and their families[] only means of livelihood. Such

dispossession, therefor, is indeed a grave injury which social justice seeks to vindicate (Bernardo vs. Court of Appeals, 168 SCRA 440, December 14, 1988). Likewise in Sec. 56, Republic Act No. 1199, it provides that in case there is doubt in the interpretation and enforcement of laws or acts relative to tenancy, including agreements between the landowner and the tenant, it should be resolved in favor of the latter to protect him from unjust exploitation and arbitrary ejectment by unscrupulous landowners. Sect[ion] 7 of Republic Act No. 38844 (sic) provides: "Sec. 7. Tenure of Agricultural Leasehold Relation. The agricultural leasehold relation once established shall confer upon the agricultural lessee the right to continue working on the landholding until such leasehold relation is extinguished. The agricultural lessee shall be entitled to security of tenure on his landholding and cannot be ejected therefrom unless authorized by the Court for causes herein provided." The Supreme Court in the case of Bernardo vs. Court of Appeals, 168 SCRA 440-441, December 14, 1988, held that "the purchaser of the landholding is subrogated to the rights and substituted to the obligations of the agricultural lessor (Sec. 10, Rep. Act No. 3844), the agricultural leasehold relationship continues between the agricultural lessee and the purchaser automatically by operation of law and the latter, an agricultural lessor, is bound to respect the agricultural lessee[s] possession and cultivation of the land." [Petitioners] have been in possession and cultivation of the subject landholding for more than thirty (30) years and have been identified as tenants therein by Araceli Pascua, an employee of DAR, Victoria, Tarlac in an ocular inspection conducted by the latter on the subject landholding.17 (Underscoring supplied.) Respondents moved for reconsideration of the foregoing DARAB Decision. On 20 February 2002, the DARAB issued a Resolution18 denying the Motion for lack of merit. Respondents went to the Court of Appeals on a Petition for Review. On 24 April 2002, the Court of Appeals issued a Resolution19 dismissing the same. It found that the certification of non-forum shopping attached to the Petition was signed by Ernesto M. Legaspi sans a board resolution and a special power of attorney giving him authority to file the action in behalf of LEAL REALTY and LEAL HAVEN, and the individual respondents. Also, certified copies of pertinent pleadings were not shown to have been attached to the Petition. On reconsideration, the Court of Appeals issued a Resolution,20 dated 7 August 2002, reinstating the Petition. The Ruling of the Court of Appeals On 31 March 2005, the Court of Appeals rendered the herein assailed Decision which granted respondents Petition for Review. The dispositive portion of the judgment states: WHEREFORE, the decision dated February 1, 2000 of the Department of Agrarian Reform Adjudication Board is VACATED and SET ASIDE, while the decision dated July 31, 1997 of the Provincial Adjudicator is REINSTATED.21

Essentially, the Court of Appeals sided with the findings of the Provincial Adjudicator. It was adamant in ruling that for a tenancy relationship to exist, there must be a concurrence of the six requisites, i.e., (i) the parties are the landowner and the tenant; (ii) the subject is agricultural land; (iii) there is consent by the landowner; (iv) the purpose is agricultural production; (v) there is personal cultivation; and (vi) there is sharing of the harvest. The Court of Appeals ruled that substantial evidence was wanting to support a conclusion that a tenancy relationship existed between the parties. It held that the fact that petitioners had worked on the subject landholding did not give rise to the existence of a tenancy relationship. However, it opined that notwithstanding the lack of tenancy relationship between the parties, the compensation agreement package entered into between LEAL REALTY and petitioners must be respected. Hence: Rodolfo, et al[.] failed to prove that Josefina agreed to constitute them as tenants of the landholding and that there was sharing of the produce thereof between them. On the contrary, Josefina executed an affidavit of non-tenancy in respect to the landholding which was annotated on the back of TCT No. 103275 as Entry Nos. E-17-7182, E-22-4361 and E-28-16373. Such non-tenancy was confirmed by Jacinto, Pablo, Juanito and Francisco in their affidavit admitting that they were merely hired laborers. Although the aforesaid annotations are not conclusive upon courts as to the legal nature and incidents of the relationship between Josefina and said hired laborers (Cuao vs. Court of Appeals, 237 SCRA 122), the same corroborate the sworn declaration of Jacinto, Pablo, Juanito and Francisco that they were mere hired laborers, thereby precluding the existence of tenancy relationship. Respondents contend that the status of Rodolfo, et al[.] as tenants was substantially supported by (i) the unrebutted testimony of Rodolfo, (ii) the testimony of [Senior Agrarian Reform Technologist] Araceli, (iii) their compensation package agreement with Leal Realty which partakes of the nature of tenants disturbance compensation, (iv) the affidavits executed by the chairman of the Barangay Agrarian Reform Council and the barangay chairman of Bulo, Victoria, Tarlac recognizing them as tenants and (v) Leal Realtys letter admitting its inability to comply with the financial package and allowing them to continue working on the landholding. Nevertheless, Rodolfo et al[.] failed to establish the concurrence of all the requisites of tenancy relationship; the absence of one does not make an occupant or a cultivator of a land or a planter thereon a de jure tenant (Heirs of Jose Juanite vs. Court of Appeals, 375 SCRA 273). It is noteworthy that [Senior Agrarian Reform Technologist] Aracelis testimony indicates that in 1989, she conducted an ocular inspection of the landholding and found five tenants working thereon, including Jacinto, Pablo, Juanito and Francisco. However, the former hired laborers occupation of their respective portions of the landholding was part of their compensation package agreement with Leal Realty which was found by the Provincial Adjudicator to be a gesture of compassion ("pabuya") extended by the latter, upon the instruction of Josefina, that Rodolfo, et al[.], being her laborers, be given some consideration. It is settled that certifications issued by administrative agencies or officers that a certain person is a tenant are merely provisional and not conclusive on courts (Bautista vs. Araneta, supra, citing Oarde vs. Court of Appeals, 280 SCRA 235). Thus, affidavits of administrative officials recognizing Rodolfo, et al[.] as tenants cannot be given weight in the absence of substantial evidence supporting such fact.22 The Court of Appeals also pronounced the sale of the subject landholding to LEAL REALTY as valid for the reason that it was entered into before the effectivity of Republic Act No. 6657.

Petitioners Motion for Reconsideration of the 31 March 2005 Decision was denied by the Court of Appeals in a Resolution dated 5 April 2005. Moreover, in the same Resolution, the Court of Appeals granted petitioners Motion for Substitution of Parties, to wit: It appears from respondents Motion for Substitution of Parties dated July 18, 2005, that respondents Pablo Cornes, Sr., Ernesto T. Cornes, Juanito C. Robles and Francisco M. Gadiano died on September 23, 2001, April 2, 1997, May 9, 2005 and October 5, 2005, respectively. Consequently, Pablo Cornes, Sr. is substituted by his children Alfredo Cornes, Eleseo Cornes, Benito Cornes and Consuelo "Nita" Cornes-Valenzuela; Ernesto T. Cornes is substituted by his widow Ma. Alberta Cornes and their children Cherilyn, Jonalyn, Dianalyn, Marie Joy, Ernesto Jr., Jerson and Erika, all surnamed Cornes, the last three, being minors, represented by their guardian ad litem Ma. Alberta Cornes; Juanito Robles is substituted by his widow Maria Robles and their children Donato Robles, Eduardo Robles, Rizalino Robles, Edwin Robles, Vicente Robles, Jessie Robles, Aniceto Robles, Jerry Robles and Marites Robles-Fabian; and Francisco Gadiano is substituted by his children Crisanto, Randy, Dinia, Maureen, Joana, Nova, Francisco, Jr. and Beatriz, all surnamed Gadiano, the last four represented by their siblings and guardians ad litem.23 Hence, the instant Petition. The Issue Petitioners assign several errors24 which revolve on the jugular issue of whether petitioners and their predecessors-in-interest are tenants de jure of the subject landholding. The Ruling of the Court A. Tenancy Relationship It must be initially emphasized that for the DARAB to have jurisdiction over a case, there must be a tenancy relationship between the parties.25 We stress that a tenancy relationship cannot be presumed.26 In order for a tenancy agreement to arise, it is essential to establish all its indispensable elements, viz: 1) the parties are the landowner and the tenant or agricultural lessee; 2) the subject matter of the relationship is an agricultural land; 3) there is consent between the parties to the relationship; 4) the purpose of the relationship is to bring about agricultural production; 5) there is personal cultivation on the part of the tenant or agricultural lessee; and 6) the harvest is shared between the landowner and the tenant or agricultural lessee.27 Tenants are defined as persons who in themselves and with the aid available from within their immediate farm households cultivate the land belonging to or possessed by another, with the latters consent, for purposes of production, sharing the produce with the landholder under the share tenancy system, or paying to the landholder a price certain or ascertainable in produce or money or both under the leasehold tenancy system.28 In resolving the question of tenancy, it must be borne in mind that whether a person is an agricultural tenant or not is basically a question of fact.29 The general rule is, a question of fact is beyond the office of this Court in a petition for review under Rule 45 of the Rules of Court in which only questions of law may be raised.30 It is settled doctrine that findings of fact of the Court of Appeals are binding and conclusive upon this Court.31 Such factual findings shall not be disturbed, unless: (1) the conclusion is a finding grounded entirely on speculation, surmise and conjecture; (2) the inference made is manifestly mistaken; (3) there is a grave abuse of discretion; (4) the judgment is based on a misapprehension of facts; (5) the findings of fact are conflicting; (6) the Court of Appeals went beyond the issues of the case and its findings are contrary to the admissions of both appellant and

appellee; (7) the findings of fact of the Court of Appeals are contrary to those of the trial court; (8) said findings of fact are conclusions without citation of specific evidence on which they are based; (9) the facts set forth in the petition as well as in the petitioners main and reply briefs are not disputed by the respondents; and (10) the findings of fact of the Court of Appeals are premised on the supposed absence of evidence and contradicted by the evidence on record.32 We find herein a proper application of the exception to the rule. In the case at bar, the findings of fact are conflicting. The Provincial Adjudicator and the Court of Appeals were in concurrence that no tenancy relationship existed between the parties. In contrast, the DARAB ruled that petitioners are bona fide tenants of the subject landholding. After a thorough evaluation of the records, we conclude that petitioners failed to adduce substantial evidence to show the existence of all the indispensable requisites for the constitution of a tenancy relationship. We shall address the elements of tenancy33 seriatim as they apply to the instant Petition. At the outset, the parties do not appear to be the landowner and the tenants. While it appears that there was personal cultivation34 by petitioners and their predecessors-in-interest of the subject landholding, what was established was that petitioners claim of tenancy was founded on the selfserving testimony of petitioner Rodolfo Cornes that his predecessors-in-interest had been in possession of the landholding for more than 30 years and had engaged in a "50-50" sharing scheme with JOSEFINA and JOSEFINAs grandmother, the previous owner thereof. Self-serving statements in pleadings are inadequate; proof must be adduced.35 Such claims do not suffice absent concrete evidence to support them. The burden rests on the shoulders of petitioners to prove their affirmative allegation of tenancy, which burden they failed to discharge with substantial evidence. Such a juridical tie must be aptly shown. Simply put, he who alleges the affirmative of the issue has the burden of proof, and from the plaintiff in a civil case, the burden of proof never parts.36 The same rule applies to administrative cases. In fact, if the complainant, upon whom rests the burden of proving his cause of action, fails to show in a satisfactory manner the facts upon which he bases his claim, the respondent is under no obligation to prove his exception or defense.37 While it might have been shown and not contested that petitioners predecessors-in-interest, namely JACINTO, PABLO, JUANITO and FRANCISCO38 occupied the subject landholding as tillers thereof, the records support the fact that their occupancy was in the nature of hired laborers of JOSEFINA. This was the factual finding of the Provincial Adjudicator which was seconded by the Court of Appeals. On the other hand, there is evidence to support that the subject landholding was not tenanted. As can be gleaned from the Entry No. E-17-7182,39annotated on 2 June 1977 at the back of TCT No. 103275, covering the subject landholding in the name of JOSEFINA, the same was not tenanted. Moreover, Entry No. E-22-4361, dated 26 March 1982, also annotated on the aforesaid certificate of title, is explicit that the subject landholding is not tenanted.40 Further, the records reveal that petitioners predecesssorsin-interest, namely PABLO, JACINTO, FRANCISCO and JUANITO, executed an affidavit on 8 December 1988, attesting that they were working on the subject landholding as "hired laborers only." These facts taken together were deemed by both the Provincial Adjudicator and the Court of Appeals to be corroborative of the entries annotated on TCT No. 103275 that the subject landholding was indeed not tenanted, and that petitioners predecessors-in-interest were hired laborers of JOSEFINA. Such type of occupation on the subject landholding does not create a presumption of tenancy in petitioners favor. Clearly, the fact alone of working on anothers landholding does not raise a presumption of the existence of agricultural tenancy.41
1aw phi 1

Neither was it shown to the satisfaction of this Court that there existed a sharing of harvests in the context of a tenancy relationship between petitioners and/or their predecessors-in-interest and JOSEFINA. Jurisprudence is illuminating to the effect that to prove such sharing of harvests, a receipt or any other evidence must be presented.42 None was shown. No receipts were presented as testaments to the claimed sharing of harvests. The only evidence submitted to establish the

purported sharing of harvests was the testimony of petitioner Rodolfo Cornes. The sharing arrangement cannot be deemed to have existed on the basis alone of petitioner Rodolfo Corness claim. It is self-serving and is without evidentiary value. Self-serving statements are deemed inadequate; competent proof must be adduced.43 If at all, the fact alone of sharing is not sufficient to establish a tenancy relationship.44 We also sustain the conclusion reached by the Provincial Adjudicator and the Court of Appeals that the testimony of Araceli Pascua, an employee of the DAR in Victoria, Tarlac, that the subject landholding was tenanted cannot overcome substantial evidence to the contrary. To prove the alleged tenancy no reliance may be made upon the said public officers testimony. What cannot be ignored is the precedent ruling of this Court that the findings of or certifications issued by the Secretary of Agrarian Reform, or his authorized representative, in a given locality concerning the presence or absence of a tenancy relationship between the contending parties, are merely preliminary or provisional and are not binding upon the courts.45 This ruling holds with greater effect in the instant case in light of the fact that petitioners, as herein shown, were not able to prove the presence of all the indispensable elements of tenancy. The element of consent in the creation of the tenancy relationship was sorely missing. As was seen earlier, even petitioners predecessors-in-interest were unequivocal in their admission that they worked as hired laborers on the subject landholding. The intent, if any, to institute them as tenants of the landholdings was debunked by their very admission. All the requisites46 must concur in order to create a tenancy relationship between the parties and the absence of one or more requisites is fatal to petitioners cause. It cannot even make the alleged tenant a de facto tenant as contradistinguished from a de jure tenant.47 This is so because unless a person has established his status as a de jure tenant, he is not entitled to security of tenure nor is he covered by the Land Reform Program of the Government under existing tenancy laws.48 One glaring factor that strikes the mind of this Court is the fact that petitioners did not implead JOSEFINA, the seller of the subject landholding, in any of their Complaints filed below. JOSEFINA, who is a party49 to the said contract of sale, is an indispensable party. An indispensable party is a party who has such an interest in the controversy or subject matter that a final adjudication cannot be made, in his absence, without injuring or affecting that interest.50 As a party to the contract of sale, which petitioners seek to declare voided and annulled, there cannot be a determination between the parties already before the court, a determination that is effective, complete, or equitable51 without impleading JOSEFINA; hence, rendering their action dismissible. From the beginning, this was a legal hindrance which petitioners were not able to successfully overcome. It is hornbook doctrine that the joinder of all indispensable parties must be made under any and all conditions, their presence being a sine qua non for the exercise of the judicial power.52 When an indispensable party is not before the court, the action should be dismissed.53 B. Compensation Package Agreement For a wholistic determination of the issues in the case at bar, we proceed to consider the ruling of the Court of Appeals on the compensation package agreement (compensation agreement) between petitioners and their predecessors-in-interest and respondent LEAL REALTY. On this matter, the Court of Appeals held that notwithstanding the lack of tenancy relationship, the compensation agreement must be respected.54 However, we note that the aforesaid finding concerning the compensation package was not incorporated by the Court of Appeals in the dispositive portion of its 31 March 2005 Decision. The Court of Appeals, in affirming the Decision of the Provincial Adjudicator, merely reinstated the latters Decision, which was silent on the manner in which the compensation agreement may be settled.

We affirm the ruling of the Court of Appeals that the compensation package agreement must be respected. As evident from the records, on 10 August 1988, the compensation agreement55 was particularized, as follows: Relative to the Omaa property per T.C.T. No. 103275 now owned by LEAL REALT CENTRUM CO., INC., hereunder is the compensation package for you: 1. The amount of PESOS: ONE HUNDRED SIXTY THOUSAND ONLY (P160,000.00) to be prorated according to the area apportioned to you with terms as follows: a. P10,000.00 payable upon signing of affidavit and upon issuance of clearance by the Ministry of Agrarian Reform (MAR). Oct. 17, 1988 b. P20,000.00 payable upon issuance of locational clearance by Housing & Land Use Regulatory Board (HLRS) Nov. 17, 1988. c. P65,000.00 payable on or before Dec. 15, 1988 upon the beginning of project. d. P65,000.00 payable upon relocation to new residential area- 2,500 square meters more or less. 2. The area across the railroad on the southern portion of the property will be given free to you as your work area. 3. An area of 2,500 square meters will be given free to you as your residential area which you will occupy within a year from todate. (sic) 4. We will provide trucking services in transporting your home paraphernalia. 5. You are given first priority as your workforce recruitment scheme for manual labor. 6. USAGE OF LAND: The property can be used for livelihood while it is not yet needed by the owner however, the term and condition of the usage will be at the discretion of the owner. (Emphasis supplied.) In addition, the compensation agreement was set forth in more detail in a Memorandum dated 6 January 1989,56stating thus: January 6, 1989 MESSRS. JUANITO ROBLES PABLO CORNES JACINTO CORNES FRANCISCO GADIANO Brgy. Bulo, Victoria Tarlac

GENTLEMEN: As agreed the following would be the terms and conditions of the land located after the barangay road (ricefield consisting of six (6) hectares and sugarland of nine (9) hectares estimatedly erpsectively). (sic) It is understood and agreed that within a period of two (2) years from January 1, 1989 to December 31, 1990, you can cultivate the riceland covering an area of six (6) hectares per attached plan, and appropriate for yourselves the fruits thereof after which LEAL REALTY CENTRUM CO., INC. will exclusively cultivate and operate the said parcels of Riceland without need of any demand for you to surrender possession thereof. As regards the sugarland consisting of seven (7) hectares per attached location plan, you will cultivate the same within a period of two (2) years from January 1, 1989 to December 31, 1990 and divide the fruits and expenses thereof equally between yourselves and LEAL REALTY CENTRUM CO., INC. through MR. FRANCISCO RIVERA, our Farm Supervisor, who is duly authorized to transact in our behalf. On the third year thereof, that is, on January 1, 1991 LEAL REALTY CENTRUM CO., INC., will takeover the cultivation of said parcel of land exclusively, without need of any further demand for you to surrender possession thereof. It is also agreed and understood that you are freeing LEAL REALTY CENTRUM CO., INC. and LEAL HAVEN, INC., from any and all further civil or criminal liabilities which may arise out of this usufructuary contract and that you have entered this contract on your free and voluntary will by signing on the spaces provided for below. Very truly yours, LEAL REALTY CENTRUM CO., INC. (sgd.) ERNESTO M. LEGASPI Managing Director CONFORME: (Sgd.) JUANITO ROBLES (Sgd.) JACINTO CORNES (Sgd.) PABLO CORNES (Sgd.) FRANCISCO GADIANO

Due to LEAL REALTYs failure to pay the full amount as contained in the compensation agreement, petitioners were allowed to continue tilling the land for their sole benefit until such time that it is able to pay the balance thereof. On 16 February 1991, Ernesto M. Legaspi as Managing Director of LEAL REALTY sent a letter57 to JACINO, which is worded in like manner as the letters addressed to PABLO, JUANITO and FRANCISCO, except as to amount owed, to wit:

Feb. 16, 1991 MR. Jacinto Cornes BRGY. BULO, VICTORIA, TARLAC Under our compensation package dated August 10, 1988 and the Memorandum dated January 6, 1989 on our Victoria property (Omaa Property), you have been paid so far the total sum ofP31,000.00 leaving a balance of P27,000.00 (which includes P2,000.00 representing your unrealized harvest for that piece of lot which had been included in the simple subdivision). In this regard, please be advised that because of our inability to pay you the balance, you may continue working in the property and continue appropriating for yourself the fruits thereof until we shall have paid you. In other words, we are not yet taking over exclusive cultivation of the area under our agreement but will do so upon payment to you of the balance. Very truly yours, (sgd.) ERNESTO M. LEGASPI Managing Director Therefore, LEAL REALTY may not be allowed to ignore the terms of the compensation agreement on the premise that petitioners have long been tilling the land for their sole benefit. The terms of the compensation agreement must be respected. The records show that out of the amount of P160,000.00 stated in the compensation package, LEAL REALTY has already paid P114,000.00 thereof, leaving a balance of P46,000.00. This amount should, thus, be paid to JACINTO, PABLO, JUANITO and FRANCISCO (or their heirs, where applicable) by LEAL REALTY in accordance with the compensation agreement. In the same vein, LEAL REALTY is enjoined to respect the terms of the compensation agreement by turning over the 2,500 square-meter lot58 to JACINTO, PABLO, JUANITO, and FRANCISCO as described therein. Finally, anent the question on the coverage of the subject landholding under the CARP, it pays well to heed that the jurisdiction over the aforesaid issue is within the proper confines of the DAR Secretary, pursuant to DARAB Revised Rules, Rule II, Section 1(g), as well as Section 2 of Administrative Order No. 06-00, providing for the Rules of Procedure for Agrarian Law Implementation Cases, granting exclusive jurisdiction to the DAR Secretary in matters involving the classification and identification of landholdings for coverage under the CARP, including the identification, qualification or disqualification of potential farmer-beneficiaries. WHEREFORE, the instant Petition is DENIED. The Decision and Resolution of the Court of Appeals, dated 31 March 2005 and 5 April 2005, respectively, are AFFIRMED with MODIFICATIONS, to wit: (1) Respondent LEAL REALTY are DIRECTED to PAY JACINTO, PABLO, JUANITO, and FRANCISCO (and their heirs, where applicable) the amount of P46,000.00 to be pro-rated among the latter in accordance with the compensation agreement; and (2) Respondent LEAL REALTY is ORDERED to TURN OVER THE 2,500 square-meter lot to JACINTO, PABLO, JUANITO, and FRANCISCO (and their heirs, where applicable) per the compensation agreement.

No costs. SO ORDERED.

G.R. No. 150175

February 5, 2007

ERLINDA PILAPIL and HEIRS OF DONATA ORTIZ BRIONES, namely: ESTELA, ERIBERTO AND VIRGILIO SANTOS, ANA SANTOS CULTURA, ELVIRA SANTOS INOCENTES, ERNESTO MENDOZA, RIZALINA SANTOS, ADOLFO MENDOZA and PACITA MENDOZA, Petitioners, vs. HEIRS OF MAXIMINO R. BRIONES, namely: SILVERIO S. BRIONES, PETRA BRIONES, BONIFACIO CABAHUG, JR., ANITA TRASMONTE, CIRILITA FORTUNA, CRESENCIA BRIONES, FUGURACION MEDALLE and MERCEDES LAGBAS, Respondents. RESOLUTION CHICO-NAZARIO, J.: On 10 March 2006, this Court promulgated its Decision1 in the above-entitled case, ruling in favor of the petitioners. The dispositive portion2 reads as follows: IN VIEW OF THE FOREGOING, the assailed Decision of the Court of Appeals in CA-GR CV No. 55194, dated 31 August 2001, affirming the Decision of the Cebu City RTC in Civil Case No. CEB5794, dated 28 September 1986, is hereby REVERSED and SET ASIDE; and the Complaint for partition, annulment, and recovery of possession filed by the heirs of Maximino in Civil Case No. CEB-5794 is hereby DISMISSED. On 10 May 2006, a Motion for Reconsideration3 of the foregoing Decision was filed by Atty. Celso C. Reales of the Reales Law Office on behalf of the respondents, heirs of Maximino R. Briones. On 19 May 2006, petitioners Erlinda Pilapil and the other co-heirs of Donata Ortiz Vda. de Briones, through counsel, filed an Opposition to Respondents Motion for Reconsideration,4 to which the respondents filed a Rejoinder5 on 23 May 2006. Thereafter, Atty. Amador F. Brioso, Jr. of the Canto Brioso Arnedo Law Office entered his appearance as collaborating counsel for the respondents.6 Atty. Brioso then filed on 11 June 2006 and 16 June 2006, respectively, a Reply7 and Supplemental Reply8 to the petitioners Opposition to respondents Motion for Reconsideration. Finally, petitioners filed a Rejoinder9 to the respondents Reply and Supplemental Reply on 5 July 2006. The facts of the case, as recounted in the Decision,10 are as follows Petitioners are the heirs of the late Donata Ortiz-Briones (Donata), consisting of her surviving sister, Rizalina Ortiz-Aguila (Rizalina); Rizalinas daughter, Erlinda Pilapil (Erlinda); and the other nephews and nieces of Donata, in representation of her two other sisters who had also passed away. Respondents, on the other hand, are the heirs of the late Maximino Briones (Maximino), composed of his nephews and nieces, and grandnephews and grandnieces, in representation of the deceased siblings of Maximino.

xxxx Maximino was married to Donata but their union did not produce any children. When Maximino died on 1 May 1952, Donata instituted intestate proceedings to settle her husbands estate with the Cebu City Court of First Instance (CFI), 14th Judicial District, designated as Special Proceedings No. 928R. On 8 July 1952, the CFI issued Letters of Administration appointing Donata as the administratrix of Maximinos estate. She submitted an Inventory of Maximinos properties, which included, among other things, the following parcels of land x x x. xxxx The CFI would subsequently issue an Order, dated 2 October 1952, awarding ownership of the aforementioned real properties to Donata. On 27 June 1960, Donata had the said CFI Order recorded in the Primary Entry Book of the Register of Deeds, and by virtue thereof, received new TCTs, covering the said properties, now in her name. Donata died on 1 November 1977. Erlinda, one of Donatas nieces, instituted with the RTC a petition for the administration of the intestate estate of Donata. Erlinda and her husband, Gregorio, were appointed by the RTC as administrators of Donatas intestate estate. Controversy arose among Donatas heirs when Erlinda claimed exclusive ownership of three parcels of land, covered by TCTs No. 21542, 21545, and 58684, based on two Deeds of Donation, both dated 15 September 1977, allegedly executed in her favor by her aunt Donata. The other heirs of Donata opposed Erlindas claim. This Court, however, was no longer informed of the subsequent development in the intestate proceedings of the estate of Donata; and as far as this Petition is concerned, all the heirs of Donata, including Erlinda, appear to be on the same side. On 21 January 1985, Silverio Briones (Silverio), a nephew of Maximino, filed a Petition with the RTC for Letters of Administration for the intestate estate of Maximino, which was initially granted by the RTC. The RTC also issued an Order, dated 5 December 1985, allowing Silverio to collect rentals from Maximinos properties. But then, Gregorio filed with the RTC a Motion to Set Aside the Order, dated 5 December 1985, claiming that the said properties were already under his and his wifes administration as part of the intestate estate of Donata. Silverios Letters of Administration for the intestate estate of Maximino was subsequently set aside by the RTC. On 3 March 1987, the heirs of Maximino filed a Complaint with the RTC against the heirs of Donata for the partition, annulment, and recovery of possession of real property, docketed as Civil Case No. CEB-5794. They later filed an Amended Complaint, on 11 December 1992. They alleged that Donata, as administratrix of the estate of Maximino, through fraud and misrepresentation, in breach of trust, and without the knowledge of the other heirs, succeeded in registering in her name the real properties belonging to the intestate estate of Maximino. xxxx After trial in due course, the RTC rendered its Decision, dated 8 April 1986, in favor of the heirs of Maximino x x x. xxxx x x x[T]he RTC declared that the heirs of Maximino were entitled to of the real properties covered by TCTs No. 21542, 21543, 21544, 21545, 21546, and 58684. It also ordered Erlinda to reconvey to the heirs of Maximino the said properties and to render an accounting of the fruits thereof.

The heirs of Donata appealed the RTC Decision, dated 8 April 1986, to the Court of Appeals. The Court of Appeals, in its Decision, promulgated on 31 August 2001, affirmed the RTC Decision, x x x. xxxx Unsatisfied with the afore-quoted Decision of the Court of Appeals, the heirs of Donata filed the present Petition, x x x. In its Decision, dated 10 March 2006, this Court found the Petition meritorious and, reversing the Decisions of the Court of Appeals and the Regional Trial Court (RTC), dismissed the Complaint for partition, annulment, and recovery of possession of real property filed by the heirs of Maximino in Civil Case No. CEB-5794. This Court summed up its findings,11 thus In summary, the heirs of Maximino failed to prove by clear and convincing evidence that Donata managed, through fraud, to have the real properties, belonging to the intestate estate of Maximino, registered in her name. In the absence of fraud, no implied trust was established between Donata and the heirs of Maximino under Article 1456 of the New Civil Code. Donata was able to register the real properties in her name, not through fraud or mistake, but pursuant to an Order, dated 2 October 1952, issued by the CFI in Special Proceedings No. 928-R. The CFI Order, presumed to be fairly and regularly issued, declared Donata as the sole, absolute, and exclusive heir of Maximino; hence, making Donata the singular owner of the entire estate of Maximino, including the real properties, and not merely a co-owner with the other heirs of her deceased husband. There being no basis for the Complaint of the heirs of Maximino in Civil Case No. CEB-5794, the same should have been dismissed. Respondents move for the reconsideration of the Decision of this Court raising still the arguments that Donata committed fraud in securing the Court of First Instance Order, dated 2 October 1952, which declared her as the sole heir of her deceased husband Maximino and authorized her to have Maximinos properties registered exclusively in her name; that respondents right to succession to the disputed properties was transmitted or vested from the moment of Maximinos death and which they could no longer be deprived of; that Donata merely possessed and held the properties in trust for her co-heirs/owners; and that, by virtue of this Courts ruling in Quion v. Claridad12 and Sevilla, et al. v. De Los Angeles,13 respondents action to recover title to and possession of their shares in Maximinos estate, held in trust for their benefit by Donata, and eventually, by petitioners as the latters successors-in-interest, is imprescriptible. Respondents also advance a fresh contention that the CFI Order, dated 2 October 1952, being based on the fraudulent misrepresentation of Donata that she was Maximinos sole heir, was a void order, which produced no legal effect. Lastly, respondents asseverate that, by relying on certain procedural presumptions in its Decision, dated 10 March 2006, this Court has sacrificed their substantive right to succession, thus, making justice "subservient to the dictates of mere procedural fiats."14 While this Court is persuaded to reexamine and clarify some points in its previous Decision in this case, it does not find any new evidence or argument that would adequately justify a change in its previous position. On the finding of fraud As this Court declared in its Decision, the existence of any trust relations between petitioners and respondents shall be examined in the light of Article 1456 of the New Civil Code, which provides that, "[i]f 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."

Hence, the foremost question to be answered is still whether an implied trust under Article 1456 of the New Civil Code had been sufficiently established in the present case. In the Decision, this Court ruled in the negative, since there was insufficient evidence to establish that Donata committed fraud. It should be remembered that Donata was able to secure certificates of title to the disputed properties by virtue of the CFI Order in Special Proceedings No. 928-R (the proceedings she instituted to settle Maximinos intestate estate), which declared her as Maximinos sole heir. In the absence of proof to the contrary, the Court accorded to Special Proceedings No. 928-R the presumptions of regularity and validity. Reproduced below are the relevant portions15 of the Decision At the onset, it should be emphasized that Donata was able to secure the TCTs covering the real properties belonging to the estate of Maximino by virtue of a CFI Order, dated 2 October 1952. It is undisputed that the said CFI Order was issued by the CFI in Special Proceedings No. 928-R, instituted by Donata herself, to settle the intestate estate of Maximino. The petitioners, heirs of Donata, were unable to present a copy of the CFI Order, but this is not surprising considering that it was issued 35 years prior to the filing by the heirs of Maximino of their Complaint in Civil Case No. CEB-5794 on 3 March 1987. The existence of such CFI Order, nonetheless, cannot be denied. It was recorded in the Primary Entry Book of the Register of Deeds on 27 June 1960, at 1:10 p.m., as Entry No. 1714. It was annotated on the TCTs covering the real properties as having declared Donata the sole, absolute, and exclusive heir of Maximino. The non-presentation of the actual CFI Order was not fatal to the cause of the heirs of Donata considering that its authenticity and contents were never questioned. The allegation of fraud by the heirs of Maximino did not pertain to the CFI Order, but to the manner or procedure by which it was issued in favor of Donata. Moreover, the nonpresentation of the CFI Order, contrary to the declaration by the RTC, does not amount to a willful suppression of evidence that would give rise to the presumption that it would be adverse to the heirs of Donata if produced. x x x. xxxx The CFI Order, dated 2 October 1952, issued in Special Proceedings No. 928-R, effectively settled the intestate estate of Maximino by declaring Donata as the sole, absolute, and exclusive heir of her deceased husband. The issuance by the CFI of the said Order, as well as its conduct of the entire Special Proceedings No. 928-R, enjoy the presumption of validity pursuant to the Section 3(m) and (n) of Rule 131 of the Revised Rules of Court, reproduced below SEC. 3. Disputable presumptions. The following presumptions are satisfactory if uncontradicted, but may be contradicted and overcome by other evidence: xxxx (m) That official duty has been regularly performed; (n) That a court, or judge acting as such, whether in the Philippines or elsewhere, was acting in the lawful exercise of jurisdiction. By reason of the foregoing provisions, this Court must presume, in the absence of any clear and convincing proof to the contrary, that the CFI in Special Proceedings No. 928-R had jurisdiction of the subject matter and the parties, and to have rendered a judgment valid in every respect; and it could not give credence to the following statements made by the Court of Appeals in its Decision. xxxx

There was totally no evidentiary basis for the foregoing pronouncements. First of all, the Petition filed by Donata for Letters of Administration in Special Proceedings No. 928-R before the CFI was not even referred to nor presented during the course of the trial of Civil Case No. CEB-5794 before the RTC. How then could the Court of Appeals make a finding that Donata willfully excluded from the said Petition the names, ages, and residences of the other heirs of Maximino? Second, there was also no evidence showing that the CFI actually failed to send notices of Special Proceedings No. 928-R to the heirs of Maximino or that it did not require presentation of proof of service of such notices. It should be remembered that there stands a presumption that the CFI Judge had regularly performed his duties in Special Proceedings No. 928-R, which included sending out of notices and requiring the presentation of proof of service of such notices; and, the heirs of Maximino did not propound sufficient evidence to debunk such presumption. They only made a general denial of knowledge of Special Proceedings No. 928-R, at least until 1985. There was no testimony or document presented in which the heirs of Maximino categorically denied receipt of notice from the CFI of the pendency of Special Proceedings No. 928-R. The only evidence on record in reference to the absence of notice of such proceedings was the testimony of Aurelia Briones (Aurelia), one of the heirs of Maximino, x x x. xxxx Aurelias testimony deserves scant credit considering that she was not testifying on matters within her personal knowledge. The phrase "I dont think" is a clear indication that she is merely voicing out her opinion on how she believed her uncles and aunts would have acted had they received notice of Special Proceedings No. 928-R. It is worth noting that, in its foregoing ratiocination, the Court was proceeding from an evaluation of the evidence on record, which did not include an actual copy of the CFI Order in Special Proceedings No. 928-R. Respondents only submitted a certified true copy thereof on 15 June 2006, annexed to their Supplemental Reply to petitioners opposition to their motion for reconsideration of this Courts Decision. Respondents did not offer any explanation as to why they belatedly produced a copy of the said Order, but merely claimed to have been "fortunate enough to obtain a copy" thereof from the Register of Deeds of Cebu.16 Respondents should be taken to task for springing new evidence so late into the proceedings of this case. Parties should present all their available evidence at the courts below so as to give the opposing party the opportunity to scrutinize and challenge such evidence during the course of the trial. However, given that the existence of the CFI Order in Special Proceedings No. 928-R was never in issue and was, in fact, admitted by the petitioners; that the copy submitted is a certified true copy of the said Order; and that the said Order may provide new information vital to a just resolution of the present case, this Court is compelled to consider the same as part of the evidence on record. The CFI Order17 in question reads in full as ORDER This is with reference to the Motion of the Administratrix, dated January 5, 1960, that she be declared the sole heir of her deceased husband, Maximino Suico Briones, the latter having died without any legitimate ascendant nor descendant, nor any legitimate brother or sister, nephews or nieces. At the hearing of this incident today, nobody appeared to resist the motion, and based on the uncontradicted testimony of Donata G. Ortiz that she was the nearest surviving relative of the deceased Maximino Suico Briones at the time of the latters death, and pursuant to the pertinent

provisions of the new Civil Code of the Philippines, the Court hereby declares the aforesaid Donata G. Ortiz the sole, absolute and exclusive heir of the estate of the deceased Maximino Suico Briones, and she is hereby entitled to inherit all the residue of this estate after paying all the obligations thereof, which properties are those contained in the Inventory, dated October 2, 1952.
1awphi1.net

Cebu City, January 15, 1960. From the contents of the afore-quoted Order, this Court is able to deduce that the CFI Order was in fact issued on 15 January 1960 and not 2 October 1952, as earlier stated in the Decision. It was the inventory of properties, submitted by Donata as administratrix of Maximinos intestate estate, which was dated 2 October 1952.18 Other than such observation, this Court finds nothing in the CFI Order which could change its original position in the Decision under consideration. While it is true that since the CFI was not informed that Maximino still had surviving siblings and so the court was not able to order that these siblings be given personal notices of the intestate proceedings, it should be borne in mind that the settlement of estate, whether testate or intestate, is a proceeding in rem,19 and that the publication in the newspapers of the filing of the application and of the date set for the hearing of the same, in the manner prescribed by law, is a notice to the whole world of the existence of the proceedings and of the hearing on the date and time indicated in the publication. The publication requirement of the notice in newspapers is precisely for the purpose of informing all interested parties in the estate of the deceased of the existence of the settlement proceedings, most especially those who were not named as heirs or creditors in the petition, regardless of whether such omission was voluntarily or involuntarily made. This Court cannot stress enough that the CFI Order was the result of the intestate proceedings instituted by Donata before the trial court. As this Court pointed out in its earlier Decision, the manner by which the CFI judge conducted the proceedings enjoys the presumption of regularity, and encompassed in such presumption is the order of publication of the notice of the intestate proceedings. A review of the records fails to show any allegation or concrete proof that the CFI also failed to order the publication in newspapers of the notice of the intestate proceedings and to require proof from Donata of compliance therewith. Neither can this Court find any reason or explanation as to why Maximinos siblings could have missed the published notice of the intestate proceedings of their brother. In relying on the presumptions of the regular performance of official duty and lawful exercise of jurisdiction by the CFI in rendering the questioned Order, dated 15 January 1960, this Court is not, as counsel for respondents allege, sacrificing the substantive right of respondents to their share in the inheritance in favor of mere procedural fiats. There is a rationale for the establishment of rules of procedure, as amply explained by this Court in De Dios v. Court of Appeals20 Procedural rules are designed to insure the orderly and expeditious administration of justice by providing for a practical system by which the parties to a litigation may be accorded a full and fair opportunity to present their respective positions and refute each other's submissions under the prescribed requirements, conditions and limitations. Adjective law is not the counterfoil of substantive law. In fact, there is a symbiotic relationship between them. By complying faithfully with the Rules of Court, the bench and the bar are better able to discuss, analyze and understand substantive rights and duties and consequently to more effectively protect and enforce them. The other alternative is judicial anarchy. Thus, compliance with the procedural rules is the general rule, and abandonment thereof should only be done in the most exceptional circumstances. The presumptions relied upon by this Court in the instant case are disputable presumptions, which are satisfactory, unless contradicted or

overcome by evidence. This Court finds that the evidence presented by respondents failed to overcome the given presumptions. Although Donata may have alleged before the CFI that she was her husbands sole heir, it was not established that she did so knowingly, maliciously and in bad faith, so as for this Court to conclude that she indeed committed fraud. This Court again brings to the fore the delay by which respondents filed the present case, when the principal actors involved, particularly, Donata and Maximinos siblings, have already passed away and their lips forever sealed as to what truly transpired between them. On the other hand, Special Proceedings No. 928-R took place when all these principal actors were still alive and each would have been capable to act to protect his or her own right to Maximinos estate. Letters of Administration of Maximinos estate were issued in favor of Donata as early as 8 July 1952, and the CFI Order in question was issued only on 15 January 1960. The intestate proceedings for the settlement of Maximinos estate were thus pending for almost eight years, and it is the burden of the respondents to establish that their parents or grandparents, Maximinos surviving siblings, had absolutely no knowledge of the said proceedings all these years. As established in Ramos v. Ramos,21 the degree of proof to establish fraud in a case where the principal actors to the transaction have already passed away is proof beyond reasonable doubt, to wit "x x x But length of time necessarily obscures all human evidence; and as it thus removes from the parties all the immediate means to verify the nature of the original transactions, it operates by way of presumption, in favor of innocence, and against imputation of fraud. It would be unreasonable, after a great length of time, to require exact proof of all the minute circumstances of any transaction, or to expect a satisfactory explanation of every difficulty, real or apparent, with which it may be encumbered. The most that can fairly be expected, in such cases, if the parties are living, from the frailty of memory, and human infirmity, is, that the material facts can be given with certainty to a common intent; and, if the parties are dead, and the cases rest in confidence, and in parol agreements, the most that we can hope is to arrive at probable conjectures, and to substitute general presumptions of law, for exact knowledge. Fraud, or breach of trust, ought not lightly to be imputed to the living; for, the legal presumption is the other way; as to the dead, who are not here to answer for themselves, it would be the height of injustice and cruelty, to disturb their ashes, and violate the sanctity of the grave, unless the evidence of fraud be clear, beyond a reasonable doubt (Prevost vs. Gratz, 6 Wheat. [U.S.], 481, 498). Moreover, even if Donatas allegation that she was Maximinos sole heir does constitute fraud, it is insufficient to justify abandonment of the CFI Order, dated 15 January 1960,22 considering the nature of intestate proceedings as being in rem and the disputable presumptions of the regular performance of official duty and lawful exercise of jurisdiction by the CFI in rendering the questioned Order, dated 15 January 1960, in Special Proceedings No. 928-R. On prescription of the right to recover based on implied trust Assuming, for the sake of argument, that Donatas misrepresentation constitutes fraud that would impose upon her the implied trust provided in Article 1456 of the Civil Code, this Court still cannot sustain respondents contention that their right to recover their shares in Maximinos estate is imprescriptible. It is already settled in jurisprudence that an implied trust, as opposed to an express trust, is subject to prescription and laches. The case of Ramos v. Ramos23 already provides an elucidating discourse on the matter, to wit "Trusts are either express or implied. Express trusts are created by the intention of the trustor or of the parties. Implied trusts come into being by operation of law" (Art. 1441, Civil Code). "No express

trusts concerning an immovable or any interest therein may be proven by oral evidence. An implied trust may be proven by oral evidence" (Ibid; Arts. 1443 and 1457). "No particular words are required for the creation of an express trust, it being sufficient that a trust is clearly intended" (Ibid; Art. 1444; Tuason de Perez vs. Caluag, 96 Phil. 981; Julio vs. Dalandan, L19012, October 30, 1967, 21 SCRA 543, 546). "Express trusts are those which are created by the direct and positive acts of the parties, by some writing or deed, or will, or by words either expressly or impliedly evincing an intention to create a trust" (89 C.J. S. 122). "Implied trusts are those which, without being expressed, are deducible from the nature of the transaction as matters of intent, or which are superinduced on the transaction by operation of law as matters of equity, independently of the particular intention of the parties" (89 C.J.S. 724). They are ordinarily subdivided into resulting and constructive trusts (89 C.J.S. 722). "A resulting trust is broadly defined as a trust which is raised or created by the act or construction of law, but in its more restricted sense it is a trust raised by implication of law and presumed always to have been contemplated by the parties, the intention as to which is to be found in the nature of their transaction, but not expressed in the deed or instrument of conveyance" (89 C.J.S. 725). Examples of resulting trusts are found in Article 1448 to 1455 of the Civil Code. See Padilla vs. Court of Appeals, L-31569, September 28, 1973, 53 SCRA 168, 179). On the other hand, a constructive trust is a trust "raised by construction of law, or arising by operation of law." In a more restricted sense and as contradistinguished from a resulting trust, a constructive trust is "a trust not created by any words, either expressly or impliedly evincing a direct intention to create a trust, but by the construction of equity in order to satisfy the demands of justice. It does not arise by agreement or intention but by operation of law." (89 C.J.S. 726-727). "If a person obtains legal title to property by fraud or concealment, courts of equity will impress upon the title a so-called constructive trust in favor of the defrauded party." A constructive trust is not a trust in the technical sense (Gayondato vs. Treasurer of the P.I., 49 Phil. 244; See Art. 1456, Civil Code). There is a rule that a trustee cannot acquire by prescription the ownership of property entrusted to him (Palma vs. Cristobal, 77 Phil. 712), or that an action to compel a trustee to convey property registered in his name in trust for the benefit of the cestui qui trust does not prescribe (Manalang vs. Canlas, 94 Phil. 776; Cristobal vs. Gomez, 50 Phil. 810), or that the defense of prescription cannot be set up in an action to recover property held by a person in trust for the benefit of another (Sevilla vs. De los Angeles, 97 Phil. 875), or that property held in trust can be recovered by the beneficiary regardless of the lapse of time (Marabilles vs. Quito, 100 Phil. 64; Bancairen vs. Diones, 98 Phil. 122, 126; Juan vs. Zuiga, 62 O.G. 1351; 4 SCRA 1221; Jacinto vs. Jacinto, L-17957, May 31, 1962. See Tamayo vs. Callejo, 147 Phil. 31, 37). That rule applies squarely to express trusts. The basis of the rule is that the possession of a trustee is not adverse. Not being adverse, he does not acquire by prescription the property held in trust. Thus, Section 38 of Act 190 provides that the law of prescription does not apply "in the case of a continuing and subsisting trust" (Diaz vs. Gorricho and Aguado, 103 Phil. 261, 266; Laguna vs. Levantino, 71 Phil. 566; Sumira vs. Vistan, 74 Phil. 138; Golfeo vs. Court of Appeals, 63 O.G. 4895, 12 SCRA 199; Caladiao vs. Santos, 63 O.G. 1956, 10 SCRA 691). The rule of imprescriptibility of the action to recover property held in trust may possibly apply to resulting trusts as long as the trustee has not repudiated the trust (Heirs of Candelaria vs. Romero, 109 Phil. 500, 502-3; Martinez vs. Grao, 42 Phil. 35; Buencamino vs. Matias, 63 O. G. 11033, 16 SCRA 849).

The rule of imprescriptibility was misapplied to constructive trusts (Geronimo and Isidoro vs. Nava and Aquino, 105 Phil. 145, 153. Compare with Cuison vs. Fernandez and Bengzon, 105 Phil. 135, 139; De Pasion vs. De Pasion, 112 Phil. 403, 407). Acquisitive prescription may bar the action of the beneficiary against the trustee in an express trust for the recovery of the property held in trust where (a) the trustee has performed unequivocal acts of repudiation amounting to an ouster of the cestui qui trust; (b) such positive acts of repudiation have been made known to the cestui qui trust and (c) the evidence thereon is clear and conclusive (Laguna vs. Levantino, supra; Salinas vs. Tuason, 55 Phil. 729. Compare with the rule regarding coowners found in the last paragraph of Article 494, Civil Code; Casaas vs. Rosello, 50 Phil. 97; Gerona vs. De Guzman, L-19060, May 29, 1964, 11 SCRA 153, 157). With respect to constructive trusts, the rule is different. The prescriptibility of an action for reconveyance based on constructive trust is now settled (Alzona vs. Capunitan, L-10228, February 28, 1962, 4 SCRA 450; Gerona vs. De Guzman, supra; Claridad vs. Henares, 97 Phil. 973; Gonzales vs. Jimenez, L-19073, January 30, 1965, 13 SCRA 80; Boaga vs. Soler, 112 Phil. 651; J. M. Tuason & Co., vs. Magdangal, L-15539, January 30, 1962, 4 SCRA 84).Prescription may supervene in an implied trust (Bueno vs. Reyes, L-22587, April 28, 1969, 27 SCRA 1179; Fabian vs. Fabian, L-20449, January 29, 1968; Jacinto vs. Jacinto, L-17957, May 31, 1962, 5 SCRA 371). And whether the trust is resulting or constructive, its enforcement may be barred by laches (90 C.J.S. 887-889; 54 Am Jur. 449-450; Diaz vs. Gorricho and Aguado, supra; Compare with Mejia vs. Gampona, 100 Phil. 277). [Emphases supplied.] A present reading of the Quion24 and Sevilla25 cases, invoked by respondents, must be made in conjunction with and guided accordingly by the principles established in the afore-quoted case. Thus, while respondents right to inheritance was transferred or vested upon them at the time of Maximinos death, their enforcement of said right by appropriate legal action may be barred by the prescription of the action. Prescription of the action for reconveyance of the disputed properties based on implied trust is governed by Article 1144 of the New Civil Code, which reads ART. 1144. The following actions must be brought within ten years from the time the right of action accrues: (1) Upon a written contract; (2) Upon an obligation created by law; (3) Upon a judgment. Since an implied trust is an obligation created by law (specifically, in this case, by Article 1456 of the New Civil Code), then respondents had 10 years within which to bring an action for reconveyance of their shares in Maximinos properties. The next question now is when should the ten-year prescriptive period be reckoned from. The general rule is that an action for reconveyance of real property based on implied trust prescribes ten years from registration and/or issuance of the title to the property,26 not only because registration under the Torrens system is a constructive notice of title,27 but also because by registering the disputed properties exclusively in her name, Donata had already unequivocally repudiated any other claim to the same.

By virtue of the CFI Order, dated 15 January 1960, in Special Proceedings No. 928-R, Donata was able to register and secure certificates of title over the disputed properties in her name on 27 June 1960. The respondents filed with the RTC their Complaint for partition, annulment, and recovery of possession of the disputed real properties, docketed as Civil Case No. CEB-5794, only on 3 March 1987, almost 27 years after the registration of the said properties in the name of Donata. Therefore, respondents action for recovery of possession of the disputed properties had clearly prescribed. Moreover, even though respondents Complaint before the RTC in Civil Case No. CEB-5794 also prays for partition of the disputed properties, it does not make their action to enforce their right to the said properties imprescriptible. While as a general rule, the action for partition among co-owners does not prescribe so long as the co-ownership is expressly or impliedly recognized, as provided for in Article 494, of the New Civil Code, it bears to emphasize that Donata had never recognized respondents as co-owners or co-heirs, either expressly or impliedly.28 Her assertion before the CFI in Special Proceedings No. 928-R that she was Maximinos sole heir necessarily excludes recognition of some other co-owner or co-heir to the inherited properties; Consequently, the rule on nonprescription of action for partition of property owned in common does not apply to the case at bar. On laches as bar to recovery Other than prescription of action, respondents right to recover possession of the disputed properties, based on implied trust, is also barred by laches. The defense of laches, which is a question of inequity in permitting a claim to be enforced, applies independently of prescription, which is a question of time. Prescription is statutory; laches is equitable.29 Laches is defined as the failure to assert a right for an unreasonable and unexplained length of time, warranting a presumption that the party entitled to assert it has either abandoned or declined to assert it. This equitable defense is based upon grounds of public policy, which requires the discouragement of stale claims for the peace of society.30 This Court has already thoroughly discussed in its Decision the basis for barring respondents action for recovery of the disputed properties because of laches. This Court pointed out therein31 that In further support of their contention of fraud by Donata, the heirs of Maximino even emphasized that Donata lived along the same street as some of the siblings of Maximino and, yet, she failed to inform them of the CFI Order, dated [15 January 1960], in Special Proceedings No. 928-R, and the issuance in her name of new TCTs covering the real properties which belonged to the estate of Maximino. This Court, however, appreciates such information differently. It actually works against the heirs of Maximino. Since they only lived nearby, Maximinos siblings had ample opportunity to inquire or discuss with Donata the status of the estate of their deceased brother. Some of the real properties, which belonged to the estate of Maximino, were also located within the same area as their residences in Cebu City, and Maximinos siblings could have regularly observed the actions and behavior of Donata with regard to the said real properties. It is uncontested that from the time of Maximinos death on 1 May 1952, Donata had possession of the real properties. She managed the real properties and even collected rental fees on some of them until her own death on 1 November 1977. After Donatas death, Erlinda took possession of the real properties, and continued to manage the same and collect the rental fees thereon. Donata and, subsequently, Erlinda, were so obviously exercising rights of ownership over the real properties, in exclusion of all others, which must have already put the heirs of Maximino on guard if they truly believed that they still had rights thereto. The heirs of Maximino knew he died on 1 May 1952. They even attended his wake. They did not offer any explanation as to why they had waited 33 years from Maximinos death before one of them, Silverio, filed a Petition for Letters of Administration for the intestate estate of Maximino on 21

January 1985. After learning that the intestate estate of Maximino was already settled in Special Proceedings No. 928-R, they waited another two years, before instituting, on 3 March 1987, Civil Case No. CEB-5794, the Complaint for partition, annulment and recovery of the real property belonging to the estate of Maximino. x x x Considering the circumstances in the afore-quoted paragraphs, as well as respondents conduct before this Court, particularly the belated submission of evidence and argument of new issues, respondents are consistently displaying a penchant for delayed action, without any proffered reason or justification for such delay. It is well established that the law serves those who are vigilant and diligent and not those who sleep when the law requires them to act. The law does not encourage laches, indifference, negligence or ignorance. On the contrary, for a party to deserve the considerations of the courts, he must show that he is not guilty of any of the aforesaid failings.32 On void judgment or order Respondents presented only in their Reply and Supplemental Reply to the petitioners Opposition to their Motion for Reconsideration the argument that the CFI Order, dated 15 January 1960, in Special Proceedings No. 928-R is void and, thus, it cannot have any legal effect. Consequently, the registration of the disputed properties in the name of Donata pursuant to such Order was likewise void. This Court is unconvinced. In the jurisprudence referred to by the respondents,33 an order or judgment is considered void when rendered by the court without or in excess of its jurisdiction or in violation of a mandatory duty, circumstances which are not present in the case at bar. Distinction must be made between a void judgment and a voidable one, thus "* * * A voidable judgment is one which, though not a mere nullity, is liable to be made void when a person who has a right to proceed in the matter takes the proper steps to have its invalidity declared. It always contains some defect which may become fatal. It carries within it the means of its own overthrow. But unless and until it is duly annulled, it is attended with all the ordinary consequences of a legal judgment. The party against whom it is given may escape its effect as a bar or an obligation, but only by a proper application to have it vacated or reversed. Until that is done, it will be efficacious as a claim, an estoppel, or a source of title. If no proceedings are ever taken against it, it will continue throughout its life to all intents a valid sentence. If emanating from a court of general jurisdiction, it will be sustained by the ordinary presumptions of regularity, and it is not open to impeachment in any collateral action. * * *" But it is otherwise when the judgment is void. "A void judgment is in legal effect no judgment. By it no rights are divested. From it no rights can be obtained. Being worthless in itself, all proceedings founded upon it are equally worthless. It neither binds nor bars any one. All acts performed under it and all claims flowing out of it are void. The parties attempting to enforce it may be responsible as trespassers. The purchaser at a sale by virtue of its authority finds himself without title and without redress." (Freeman on Judgments, sec. 117, citing Campbell vs. McCahan, 41 Ill., 45; Roberts vs. Stowers, 7 Bush, 295, Huls vs. Buntin, 47 Ill., 396; Sherrell vs. Goodrum, 3 Humph., 418; Andrews vs. State, 2 Sneed, 549; Hollingsworth vs. Bagley, 35 Tex., 345; Morton vs. Root, 2 Dill., 312; Commercial Bank of Manchester vs. Martin, 9 Smedes & M., 613; Hargis vs. Morse, 7 Kan., 259. See also Cornell vs. Barnes, 7 Hill, 35; Dawson and Another vs. Wells, 3 Ind., 399; Meyer vs.

Mintonye, 106 Ill., 414; Olson vs. Nunnally, 47 Kan., 391; White vs. Foote L. & M. Co., 29 W. Va., 385.) It is not always easy to draw the line of demarcation between a void judgment and a voidable one, but all authorities agree that jurisdiction over the subject-matter is essential to the validity of a judgment and that want of such jurisdiction renders it void and a mere nullity. In the eye of the law it is non-existent. (Fisher vs. Harnden, 1 Paine, 55; Towns vs. Springer, 9 Ga., 130; Mobley vs. Mobley, 9 Ga., 247; Beverly and McBride vs. Burke, 9 Ga., 440; Central Bank of Georgia vs. Gibson, 11 Ga., 453; Johnson vs. Johnson, 30 Ill., 215; St. Louis and Sandoval Coal and Mining Co. vs. Sandoval Coal and Mining Co., 111 Ill., 32; Swiggart vs. Harber, 4 Scam., 364; Miller vs. Snyder, 6 Ind., 1; Seely vs. Reid, 3 Greene [Iowa], 374.)34
The fraud and misrepresentation fostered by Donata on the CFI in Special Proceedings No. 928-R did not deprive the trial court of jurisdiction over the subject-matter of the case, namely, the intestate estate of Maximino. Donatas fraud and misrepresentation may have rendered the CFI Order, dated 15 January 1960, voidable, but not void on its face. Hence, the said Order, which already became final and executory, can only be set aside by direct action to annul and enjoin its enforcement.35 It cannot be the subject of a collateral attack as is being done in this case. Note that respondents Complaint before the RTC in Civil Case No. CEB-5794 was one for partition, annulment, and recovery of possession of the disputed properties. The annulment sought in the Complaint was not that of the CFI Order, dated 15 January 1960, but of the certificates of title over the properties issued in Donatas name. So until and unless respondents bring a direct action to nullify the CFI Order, dated 15 January 1960, in Special Proceedings No. 928R, and attain a favorable judgment therein, the assailed Order remains valid and binding.

Nonetheless, this Court also points out that an action to annul an order or judgment based on fraud must be brought within four years from the discovery of the fraud.36 If it is conceded that the respondents came to know of Donatas fraudulent acts only in 1985, during the course of the RTC proceedings which they instituted for the settlement of Maximinos estate, then their right to file an action to annul the CFI Order, dated 15 January 1960, in Special Proceedings No. 928-R (earlier instituted by Donata for the settlement of Maximinos estate), has likewise prescribed by present time.

In view of the foregoing, the Motion for Reconsideration is DENIED.

SO ORDERED.

MINITA V. CHICO-NAZARIO Associate Justice

G.R. No. 133110

March 28, 2007

BARSTOWE PHILIPPINES CORPORATION, Petitioner, vs. REPUBLIC OF THE PHILIPPINES, Respondent. DECISION CHICO-NAZARIO, J.: Before this Court is a Petition for Review on Certiorari1 under Rule 45 of the Rules of Court seeking the reversal and setting aside the Decision,2 dated 8 August 1997, and Resolution,3 dated 18 March 1998, of the Court of Appeals in CA-G.R. CV No. 47522, which in turn, reversed and set aside the

Decision,4 dated 22 December 1992, of the Quezon City Regional Trial Court (RTC), Branch 80 in Civil Case No. Q-92-11806. Antecedent Facts This case involves the conflicting titles to the same parcels of land (subject lots) of petitioner Barstowe Philippines Corporation (BPC) and the respondent Republic of the Philippines (Republic). The subject lots have a total area of 111,447 square meters, and are situated along the northeastern perimeter boundary of the National Government Center in Payatas, Quezon City. BPC traces its titles to the subject lots back to Servando Accibal (Servando) who was supposedly issued on 24 July 1974, at 3:20 p.m., Transfer Certificates of Title (TCTs) No. 200629 and 200630 over the subject lots. TCTs No. 200629 and 200630 were purportedly signed by Nestor N. Pena, Deputy Register of Deeds of Quezon City. On 10 June 1988, Servando executed a Deed of Absolute Sale of the subject lots to his son Antonio Accibal (Antonio), with the concurrence of his other heirs. Despite his prior sale of the subject lots to Antonio, Servando, by virtue of a Deed of Conveyance, dated 8 February 1989, transferred/conveyed the subject lots to BPC in exchange for subscription of 51% of the capital stock of BPC, such subscription supposedly amounting toP6,000,000.00.5 About a year after the death of Servando on 3 October 1989, particularly on 10 October 1990, Antonio executed another Deed of Conveyance of the subject lots in favor of BPC in exchange for subscription of 2,450 shares of its capital stock, with an alleged total value of P49,000,000.00.6 Due to the fire that gutted the Office of the Quezon City Register of Deeds on 11 June 1988 and destroyed many certificates of title kept therein, Antonio sought the administrative reconstitution of the original copies and owners duplicate copies of TCTs No. 200629 and 200630 with the Land Registration Authority (LRA). On 12 December 1990, the LRA issued TCTs No.RT-23687 and RT-23688 (reconstituting TCTs No. 200629 and 200630, respectively), which were transmitted to the Quezon City Register of Deeds and signed by Deputy Register of Deeds Edgardo Castro on 19 February 1991. Also on 19 February 1991, TCTs No. RT-23687 and RT-23688 were cancelled and in lieu thereof, TCTs No. 30829, 30830, 30831, and 30832 in the name of BPC were issued. BPC then acquired from the Housing and Land Use Regulatory Board (HLURB) a permit to develop the subject lots into a residential subdivision. Subsequently, BPC entered into Joint Venture Agreements with other corporations for the development of the subject lots into a subdivision called Parthenon Hills. Meanwhile, according to the Republic, prior to 14 November 1979, the subject lots were owned by First Philippine Holdings Corporation (FPHC). As evidence of its title to the subject lots, FPHC was issued TCT No. 257672, on an undetermined date, and TCT No. 275201, on 20 January 1981. Pursuant to a Deed of Sale, dated 14 November 1979, FPHC sold one of the subject lots, covered by TCT No. 257672, to the Republic for P2,757,360.00. Thus, on 22 January 1981, TCT No. 257672 was cancelled and TCT No. 275443 was issued in place thereof in the name of the Republic. FPHC executed another Deed of Sale on 25 March 1982 in which it sold the remainder of the subject lots, covered by TCT No. 275201, to the Republic for P9,575,920.00. On 31 May 1982, TCT No. 275201 was cancelled and was replaced by TCT No. 288417 issued in the name of the Republic. Because of the 11 June 1988 fire which razed the Quezon City Office of the Register of Deeds and destroyed the original copies of TCTs No. 275443 and 288417, the Republic applied for administrative reconstitution of the same with the LRA. It was then that the Republic came to know that another party had applied for reconstitution of TCTs No. 200629 and 200630 which also covered the subject lots. This prompted the Republic to file before the RTC on 26 March 1992 a petition for cancellation of title against Antonio, Servando, and BPC, docketed as Civil Case No. Q-92-11806. Civil Case No. Q-92-11806

Counsel for Antonio and the late Servando filed two successive Motions for extension of time to file the proper pleading, dated 17 June 1992 and 1 July 1992, but despite the grant thereof by the RTC,7 no such responsive pleading on behalf of Antonio and the late Servando was ever filed. Hence, on 31 July 1992, the RTC issued an Order8 declaring Antonio and the late Servando in default. In another Order,9 also dated 31 July 1992, the RTC, upon the motion of BPC, allowed the latter to continue with the development of the subject lots. It concluded that Considering the plight of [BPC] and the possible irreparable damage that may be caused against the residents in the surrounding developed subdivision, even as said corporation is possessed of a good title, the court in the exercise of its discretion grants the motion. More importantly, consideration of equity demands that the titled owner [BPC] herein must be able to exercise all its dominical right bloosoming [sic] forth from its ownership of the land in suit. WHEREFORE, under cool reflection and prescinding from the foregoing, the motion is hereby granted. [BPC] is hereby permitted and allowed to continue with the improvement and development of the controverted property into a residential subdivision.10 On 12 October 1992, the Republic filed with the Quezon City Register of Deeds a Notice of Lis Pendensrequesting the recording of the pendency of Civil Case No. Q-92-11806 on TCTs No. 30830, 30831, and 30832, all in the name of BPC. While Civil Case No. Q-92-11806 was still pending before the RTC, there were two intervenors. Gloria Accibal Rettoriano (Gloria) filed with the RTC a Motion for Intervention, with a Complaint in Intervention, both dated 1 September 1992. Gloria alleged that she was the only child of Basilia Accibal, Servandos sister; the subject lots were inherited by Basilia, Servando, and their other siblings from their parents Martin and Mauricia Accibal; upon her mothers death, Gloria inherited and came into possession of a portion of the subject lots with an area of about 2.5 hectares; Gloria had been possessing, cultivating and improving her portion of the subject lots for the last 30 years; Servando, through fraudulent means, was able to secure TCTs over all the subject lots, including Glorias portion therein; the inclusion of Glorias portion in the TCTs of Servando and, later, in those of BPC, was done through fraud and gross bad faith; and unless the TCTs of Servando and BPC are declared null and void, Gloria will be deprived of her property without due process and just compensation. BPC opposed Glorias intervention in Civil Case No. Q-92-11806 considering that she had already instituted Civil Case No. Q-91-10933 before the RTC, Quezon City, Branch 76, seeking the annulment of TCTs No. 30830, 30831, and 30832 of BPC based on the very same grounds she raised in her present Complaint in Intervention; on 11 February 1992, Gloria entered into a Compromise Agreement with BPC in which she waived and renounced any and all claims whatsoever which she may have over the titles of BPC in consideration of the payment by the latter ofP2,000,000.00; the RTC, Branch 76, after finding that the said Compromise Agreement was not contrary to law, morals, good customs, public order or public policy, approved the same, thus putting an end to Civil Case No. Q-91-10933;11 Glorias cause of action to intervene in Civil Case No. Q-9211806 was already barred by prior judgment in Civil Case No. Q-91-10933 and Glorias Complaint in Intervention is tantamount to a collateral attack against a TCT. In rejecting Glorias intervention in Civil Case No. Q-92-11806, the RTC found as follows The motion for intervention must be denied and the complaint in intervention therein attached must be rejected.

For one thing, herein movant Gloria Accibal Rettoriano, was the plaintiff in the first case (RTC Br. 76 No. Q-91-10933) and with "eyes wide open" she entered into a compromise agreement with [BPC], which was the basis of the 26 February 1992 decision rendered therein and it being based on a compromise agreement, said decision became immediately final and executory. Whether or not the decision rendered in the first case was satisfied is of no moment in the present case, as herein movant intervenor has all the remedies to protect her rights therein. For another, movant intervenor Gloria Accibal Rettoriano, from her complaint in intervention would ask for the cancellation of the titles issued to their [sic] relative Servando Accibal and those titles duly issued and registered in the name of [BPC]. Certainly, this can not be done, as it constitutes a collateral attack on the questioned titles which the law and settled jurisprudence do not allow. Perforce, a separate action against the questioned titles is the remedy available for intervenor Gloria A. Retoriano [sic]. Accordingly, the Court finds the opposition of [BPC] to be impressed with merit and the motion for intervention does not inspire confidence. WHEREFORE, the subject motion for intervention is denied and the complaint in intervention attached thereto must be rejected.12 Another intervenor in Civil Case No. Q-92-11806 was EL-VI Realty and Development Corporation (ERDC) which filed with the RTC a Motion for Leave to Intervene, dated 1 September 1992. Subsequently, it filed an Answer in Intervention, dated 15 September 1992, in which, it alleged that it acquired interest in the subject lots after having entered into a Joint Venture Agreement dated 16 January 1992, with BPC, for the development of the subject lots into a residential subdivision; the action initiated by the Republic for the cancellation of the TCTs of BPC was already barred by laches and estoppel because of the recognition accorded upon the said TCTs by the instrumentalities of the Republic, particularly the Register of Deeds and the HLURB, on which the ERDC relied in all good faith when it entered into the Joint Venture Agreement with BPC; the Republic is liable to ERDC for moral damages and attorneys fees; should the RTC find the TCTs of BPC infirm, rendering the Joint Venture Agreement between ERDC and BPC of no force and effect, then BPC should be held liable to ERDC, being an innocent third party, for reimbursement of all expenses incurred by the latter in the development of the subject lots; and should the RTC find that the TCTs of BPC are spurious, then it should be declared in bad faith when it entered into the Joint Venture Agreement with ERDC, for which it should be liable for exemplary damages and attorneys fees. In an Order,13 dated 27 October 1992, the RTC granted ERDCs Motion to Intervene and admitted its Answer in Intervention. After all the parties had submitted their respective Pre-Trial Briefs,14 and upon motion by the BPC,15 the RTC decided the case on 22 December 1992 on summary judgment.16 Although it found both the Republic and the BPC as buyers in good faith, it held that the titles of BPC should prevail. It ratiocinated thus 3. To the third issue, we rule that the title of [BPC] must prevail over that of the [Republic]. There is no dispute that the titles of the First Philippine Holdings Corporation, predecessor-in-interest of [Republic] were either issued in the year 1979 and 1981 (Exh. "A" and "B"). On the other hand, there is likewise no dispute that the titles of defaulted defendant Servando Accibal, and predecessorin-interest of [BPC], were both issued and registered much earlier on July 24, 1974 (Exhs. "F" and "G", pp. 210-213, record) and/or a difference of 5 or 6 years in point of time.

MORE, Servando Accibal, the predecessor-in-interest of [BPC] has been in the actual and peaceful physical possession of the lots in suit before he sold them to [BPC] on February 08, 1991. Upon registration of the same on February 19, 1991, [BPC], after having subdivided the land into four (4) smaller lots was issued on 19 February TCT Nos. 30829, 30830, 30831, and 30832 (Exhs. 1, 2, 3 and 4). It is true [Republic] acquired the land in suit on November 14, 1979 and for which TCT Nos. 275443 and 288417 were issued in the years 1979 and 1981, but [Republic] never took assertive steps to take actual possession of the land sold to it by the First Philippine Holdings Corporation. It is even of grave doubt that the latter took actual possession of the land before the land in suit was sold to the [Republic]. So much so, that the area had been occupied by several squatters, one of them is Servando Accibal who by the way, was able to have the land in suit titled in his name as early as July 24, 1974, under TCT Nos. 200629 and 200630 of the land records of Quezon City. Further, [Republic] and its predecessor-in-interest were not able to discover the overlapping of their titles by the titles of Servando Accibal for a period of eighteen (18) long years starting from July 24, 1974 to about June 10, 1992 when the LRA during a reconstitution of the titles of [Republic] was initiated, as evidenced by a report of reconstituting officer Benjamin A. Flestado of that office (Exh. "H", pp. 214258, record). Simply stated, [Republic] may be guilty of LACHES. xxxx Perforce, the claim of [Republic] which was probably originally VALID became a STALE claim as the years went by. Verily, the titles of [Republic] must be cancelled and the titles of [BPC] must be upheld and declared as good and valid titles and [BPC] is entitled to all the rights bloosoming [sic] fourth from its dominical right of ownership. More importantly, the predecessor-in-interest of [BPC] had been long in the actual and physical possession of the lands in suit, while that of the predecessor-in-interest of [Republic] was not in the actual possession of the land before the sale to [Republic]. On the other hand, [BPC] immediately after the sale in its favor took actual, physical and peaceful possession of the land in suit to the exclusion of all others. It has no knowledge, actual or constructive that said parcels of land were sold to the [Republic]. When it registered the sale, there was no inscription in the Land Registry that the same parcels of land were earlier sold to the [Republic]. Hence, there was and is a continuing good faith on the part of [BPC]. (Article 1544, NCC; Cruz vs Cabana, 129 SCRA 656). In the same Decision, the RTC found certain irregularities in TCTs No. 200629 and 200630 in the name of Servando and that the said TCTs should be cancelled, without prejudice to the rights and interests of BPC. The RTC discussed the matter in this wise We shall now dwell on the validity of the titles TCT Nos. 200629 and 200630, issued in the name of Servando Accibal on July 24, 1974 by the Register of Deeds of Quezon City. The LRA report dated 10 June 1992 (Exh. H, pp. 214-258, record) is competent proof that indeed said titles must be cancelled. In short, the LRA found after due investigation that the said titles of Servando Accibal were issued with certain irregularities. It recommended the cancellation therefore, of TCT Nos. 200629 and 200630, to which the court concurs, as said report must be accorded due respect and in the absence of fraud or irregularities that attended the investigation, which the Court finds none, the same must be persuasive, if not conclusive. Moreover, herein defendant Servando Accibal because of his failure to answer, despite extension of time given him, failed to file his answer. Upon motion of [Republics] counsel, he was declared as in default and since then, he never asked the court to lift and set aside the default order. There is no way, his title must be cancelled. For one thing, he was

not able to present evidence to controvert the recommendation of LRA to cancel his titles. For another, Servando Accibal is deemed to have impliedly admitted the irregularities that attended the issuance of his aforestated titles. However, the cancellation of the titles of Servando Accibal, would not affect the rights and interests of [BPC] as the latter is declared to be a purchaser in good faith and for value. MORE, under the circumstances of the case, and even when the titles of Servando Accibal are cancelled, the titles of [BPC] are still good and indefeasible titles, as it is settled rule that good titles may be sustained even when the seller has spurious titles. As for the intervention of ERDC, the RTC addressed the same as follows Finally, we shall next discuss the claim of intervenor EL-VI Realty and Development Corporation. A close reading from the Joint Venture Agreement dated January 16, 1992, shows that in case of litigation, intervenor Realty Corporation shall have the right to suspend all development activities and the development period of 5 years shall automatically be suspended until such time as the said case is finally settled/decided (Exh. "5" and Annex "A" answer in intervention pp. 109-114). Upon the signing of the said agreement the amount of P1,500,000.00 was received by [BPC] as advance payment of the 50-50 sharing basis in the sales proceeds. During the pre-trial conference, herein intervenor tried to enforce a supplemental agreement dated October 15, 1992, by filing a motion for a writ of preliminary injunction with prayer for the issuance of a restraining order. Resolution of the same was held in abeyance to await the decision to be rendered, after [BPC] assured intervenor herein that it will abide by and strictly comply with its commitments arising from the aforesaid agreement, after proper accounting is made therefore. Herein intervenor admits that another financier-developer has entered the area due to the delay of the project caused by the filing of the present case. MORE, due to the filing of the present case, herein intervenor was reluctant to further finance the project because of its big exposure already made. Hence, intervenors works and other activities in the area was suspended in accordance with their Joint Venture Agreement. Perforce, there is compelling necessity for a proper accounting, more particularly its substantial exposure to the project, on a quantum meruit basis, in fairness to all concerned and involved parties in the project, including but not limited to the present contractor-developer of the area. Finally, the RTC concluded that A FORTIORARI, the environmental setting and factual scenario of the case, in relation to its legal ambience will show that the great preponderance of evidence lies in favor of [BPC]. (Section 01, Rule 133, Revised Rules of Court), and the motion for summary judgment is granted. The hearing as to damages, including attorneys fees shall be scheduled soonest possible. WHEREFORE, under cool reflection and prescinding from the foregoing, judgment is rendered as follows: 1. Ordering the Register of Deeds of Quezon City to cancel Transfer Certificates of Title No. 275443 and 288417 issued in the name of the [Republic] covering the lots in suit. However, [Republic] being a purchaser in good faith, and based on considerations of equity and justice Barstowe Philippine[s] Corporation is ordered to re-imburse and pay [Republic], the sum of P12,333,280.00 representing the purchase price from the vendor, First Philippine Holdings Corporation soonest possible;

2. Ordering the Register of Deeds of Quezon City to officially and finally cancel from his records, Transfer Certificates of Title Nos. 200629 and 200630 issued in the name of Servando Accibal, on July 24, 1974, covering the same lots in suit (Exh. "F" and "G", pp. 210-213, record). 3. Declaring herein defendant Barstowe Philippines Corporation as the absolute owner in fee simple title over the lots in suit, as evidenced by Transfer Certificates of Title Nos. 30829, 30830, 30831 and 30832 of the land records of Quezon City, all issued on February 19, 1991 and the said titles are further more declared valid, existing and indefeasible titles of [BPC] and as such is entitled to all the dominical rights bloosoming [sic] forth from its ownership over the lots in suit. 4. Ordering [BPC] to abide by and strictly comply with the terms and conditions of the supplemental Agreement entered into by it with herein intervenor EL-VI Realty and Development Corporation dated October 15, 1992, after proper accounting is made; 5. Perforce, the Register of Deeds of Quezon City is likewise ordered to cancel any and all encumbrances annotated on said titles of defendant corporation including, but not limited to the lis pendens notice filed by the [Republic], if any; 6. The hearing as to damages, including the claim for attorneys fees shall be scheduled soonest. 7. Considering the admissions and agreements of the parties during the pre-trial conference, which are considered judicial admissions, this decision acquires the nature of one based on a compromise agreement. Perforce, the Court declares this decision to be immediately final and executory. 8. No pronouncement as to costs. Despite the promulgation of the foregoing Decision by the RTC on 22 December 1992, the proceedings in Q-92-11806 were still far from over; significant developments still took place thereafter. ERDC sought the execution of paragraph 4 of the dispositive portion of the RTC Decision dated 22 December 1992. In an Order,17 dated 13 January 1993, the RTC issued a writ of execution in favor of ERDC, and a notice of levy on execution was accordingly made on the subject lots. In a dialogue held between the counsels for BPC and ERDC in the chamber of the RTC Judge on 26 February 1993, an amicable settlement was reached whereby BPC agreed to settle the claim of ERDC in the form of developed subdivision lots in Parthenon Hills, subject to proper accounting.18 BPC offered to ERDC 40 developed subdivision lots in Parthenon Hills, valued at P18,543,000.00, representing 65% of the total claims (prior to proper accounting) of ERDC, which amounted to P28,787,306.32. However, ERDC refused the offer of BPC and demanded that it be paid the total amount of its claims. It also brought to the attention of the RTC that, in violation of their Joint Venture Agreement, BPC contracted another realty developer for the development of Parthenon Hills. Thus, ERDC opposed the lifting of the notice of levy on execution on the subject lots for the protection of its interests. In an Order,19 dated 17 March 1993, the RTC found that BPC already substantially complied with the terms of its agreement with ERDC and that the rights and interests of the latter were well-protected and safeguarded. In the same Order, the RTC lifted and set aside the notice of levy on execution on the subject lots. However, on 20 April 1993, ERDC filed a Motion for Contempt20against BPC and informed the RTC that BPC, fraudulently, maliciously, and in bad faith, already sold 36 of the 40 subdivision lots it earlier offered to ERDC by accepting downpayments

thereon of only 30% of the selling price. Upon further investigation, it discovered that of the four remaining lots, two were vacant while the other two were reserved. ERDC subsequently filed two other motions: (1) A Motion,21 dated 29 April 1993, to set for trial the claim of ERDC for damages. Said motion was granted, and the RTC set the hearing on 16 September 1993, at 8:30 a.m.,22 but upon the motion of the counsel for BPC, the hearing was reset to 7 October 1993;23 and (2) A Motion,24 dated 6 September 1993, for the issuance of a partial writ of execution for the undisputed amount ofP18,543,000.00, representing 65% of the total claims of ERDC. Unfortunately, the records no longer show the succeeding incidents concerning these motions. In a Motion for Leave to Intervene25 dated 8 March 1993, and the attached Complaint in Intervention,26 dated 10 March 1993, Kadakilaan Estate expressed its intent to intervene in Civil Case No. Q-92-11806. It anchored its claims on the contention that the subject lots were already registered as private property under the Spanish Mortgage Law since 18 May 1891, and under the Torrens System of Registration since 31 August 1907, by the predecessors-in-interest of Kadakilaan Estate. The subject lots were supposedly included in a vast track of land covered by Titulo de la Propiedad de Terrenos No. 01-4 in the name of Doa Petra Rodriguez, who transferred the same to her son, Don Gonzalo Yanesa y Rodriguez. Kadakilaan Estate came into ownership and possession of the vast track of land, including the subject lots, by virtue of its successive sales from Don Gonzalo Yanesa yRodriguez to Doa Lourdez Rodriguez Yanesa, and from the latter to Kadakilaan Estate. Kadakilaan Estate further alleged that the Original Certificate of Title (OCT) No. 333, from which the TCTs of both BPC and the Republic were ultimately derived, was null and void ab initio, and that the TCTs of BPC and the Republic were spurious and likewise null and void ab initio, and without any probative value. Kadakilaan Estate prayed for judgment declaring it the owner of the subject lots; directing the other parties to respect its ownership, possession, rights and interests over the subject lots; and ordering the other parties to pay just compensation, damages, and attorneys fees. The RTC, in an Order27 dated 27 April 1993, denied the Motion for Leave to Intervene and rejected the Complaint in Intervention of Kadakilaan Estate for the following reasons New intervenor Kadakilaan Estate alleges that the titles of the [Republic] and [Antonio, Servando, and BPC] are all falsified, spurious in origin and null and void ab initio, as the property in question were already registered as private properties of [Kadakilaan Estates] predecessors-in-interest, under Spanish Mortgage law since May 18, 1891, and under the Torrens System, Act No. 496, as amended, in Titulo dela propriedad de Terrenos No. 01-4. If this is clearly so, then [Kadakilaan Estate] is attacking the validity of the titles of [Republic] and [Antonio, Servando, and BPC] in this case. It is settled rule that titles registered under the Torrens System cannot be the subject of a collateral attack. Perforce, the remedy of [Kadakilaan Estate] is to file a separate action. For, if the intervention is allowed at this late stage of the proceedings, then it will cause unnecessary delay in the soonest termination of this case. MORE, the law and the rules as well as jurisprudence on the matter, will only allow in the courts discretion, intervention, before or during the trial. Certainly NOT after the trial and with more reason intervention may no longer be allowed after the decision has been rendered as in the present case. In the meantime, on 4 January 1993, the Republic filed a Notice of Appeal28 of the RTC Decision, dated 22 December 1992. The RTC, in an Order,29 dated 16 February 1993, denied the same. It reasoned that Considering these judicial dimensions and acquiescence of the [Republic] in open court during the hearings held and during the pre-trial conference, the court in its dispositive portion of the questioned decision, declared it to be a judgment based on a compromise agreement which by operation of law becomes immediately executory.

It is unfortunate that despite the above declarations of the court [Republic] failed to ask for a clarification of the said declarations, by way of a motion for reconsideration of the decision based on fraud, mistake or duress mandated by the rules. The notice of appeal must be denied due course. xxxx WHEREFORE, prescinding from the foregoing, the notice of appeal filed by plaintiff is rejected and denied due course. From the foregoing RTC Order, the Republic filed with the Court of Appeals a Petition for Certiorari and Mandamus (with Urgent Prayer for Temporary Restraining Order and/or Writ of Preliminary Injunction), docketed as CA-G.R. SP No. 30647. The Republic primarily questioned the denial of its Notice of Appeal by the RTC in its Order, dated 16 February 1993, on the basis that the RTC Decision of 22 December 1992 constitutes a compromise agreement, and is immediately final and executory. The Court of Appeals issued a writ of preliminary injunction30 enjoining the RTC from implementing and enforcing its Order, dated 16 February 1993, during the pendency of CA-G.R. SP No. 30647 or until otherwise directed by the appellate court. Apparently, from the denial by the RTC of its Motion for Leave to Intervene and the rejection of its Complaint in Intervention in Civil Case No. Q-92-11806, the Kadakilaan Estate again filed a Motion for Leave to Intervene in CA-G.R. SP No. 30647, which in a Resolution,31 dated 13 September 1993, the Court of Appeals also denied on the following grounds We find the stance of [Republic] and [BPC] well-grounded. Not only is [Kadakilaan Estate] precluded by estoppel from filing the present motion, after failing to challenge before this Court or the Supreme Court the trial courts denial of subject motion for intervention, on April 27, 1993; it is too late for [Kadakilaan Estate] to come in at this stage of the present litigation. Furthermore, as aptly put by the [Republic] the alleged rights [Kadakilaan Estate] seeks to protect here can be amply protected in an appropriate action [Kadakilaan Estate] may later bring. In a Decision,32 dated 29 June 1994, the Court of Appeals granted the Republics Petition for Certiorari and Mandamus, ruling in this wise We rule for [Republic]. Respondent Courts conclusion lost sight of the nature of a compromise agreement, and the circumstances under which a judgment based on a compromise may be rendered. xxxx Guided by the aforecited law and jurisprudence in point, it can be safely concluded that neither mere silence or acquiescence by the [Republic] in open court during the hearing nor [Republics] stipulation of facts, marking of exhibits, alleged admission of Exhibit 6 which contains [BPCs] offer of compromise during the pre-trial, be properly considered as a compromise agreement. Had the parties really intended to enter into a compromise to end their case, they could have executed and submitted a compromise agreement for the approval of the trial court. But no such step was taken. xxxx Records readily show that due to lack of an amicable settlement or any compromise agreement, the respondent judge directed the parties to present their documentary exhibits so as to facilitate the

trial; no longer for the purpose of settling the case. Evidently, there was no explicit agreement nor any reciprocal concession between the parties with an end in view of terminating the litigation. Absence of these essential elements of a compromise inevitably results in the absence of a valid compromise agreement. (Merced vs. Roman Catholic Archbishop, L-24614, August 17, 1967, 20 SCRA 1077). Consequently, the opinion of respondent Judge that his December 22, 1992 Decision had the nature of a judgment based on compromise, cannot be upheld. So also, the doctrine relied on by respondents that a compromise agreement constitutes the law between the parties and a judgment based thereon is immediately final, executory and not appealable, is inapplicable under the premises. xxxx WHEREFORE, the petition is GRANTED; the questioned order dated 16 February 1993 is SET ASIDE; and respondent court is hereby ordered to give due course to [Republics] Notice of Appeal in Civil Case No. Q-92-11806. Costs against [BPC]. This Court, in its Resolution, dated 6 February 1995, issued in G.R. No. 117969, in effect, sustained the afore-mentioned Decision of the Court of Appeals. CA-G.R. CV No. 47522 Finally, the Republic was allowed to appeal the RTC Decision, dated 22 December 1992, in Civil Case No. Q-92-11806, to the Court of Appeals, where it was docketed as CA-G.R. CV No. 47522. In a Decision,33 dated 8 August 1997, the Court of Appeals found in favor of the Republic, and disposed thus WHEREFORE, premises considered, plaintiff-appellant Republic of the Philippines appeal is GRANTED. Except for paragraph 2 of the dispositive portion of the decision appealed from declaring TCT Nos. 200629 and 200630 in the name of Servando Accibal null and void and ordering the Register of Deeds of Quezon City to cancel said TCT Nos. 200629 and 200630, the appealed decision is REVERSED and SET ASIDE and a new one entered: (a) declaring and affirming the validity of TCT Nos. 288417 and 275443 of the Registry of Deeds of Quezon City in the name of appellant Republic of the Philippines and that appellant Republic has indefeasible title to the property covered thereby; (b) declaring TCT Nos. 30829, 30830, 30831 and 30832 also of the Registry of Deeds of Quezon City in the name of Barstowe Philippines Corporation null and void and ordering the Register of Deeds of Quezon City to cancel said titles; (c) ordering Barstowe Philippines Corporation to surrender to the Register of Deeds of Quezon City the owners duplicate certificates of title of TCT Nos. 30829, 30830, 30831 and 30832 for cancellation; (d) enjoining defendant-appellee Barstowe Philippines Corporation and intervenor EL-VI Realty Development Corporation from exercising any act of ownership or possession of the land in question; and

(e) remanding the case to the court of origin for further proceedings for determination of the crossclaim of intervenor EL-VI Realty and Development Corporation against defendantappellee Barstowe Philippines Corporation. There is no pronouncement as to costs. The Motion for Reconsideration filed by BPC was denied by the Court of Appeals in a Resolution,34 dated 18 March 1998. G.R. No. 133110 Aggrieved, BPC came before this Court via a Petition for Review on Certiorari35 under Rule 45 of the Rules of Court, dated 28 April 1998, raising the sole issue of who between BPC and the Republic has a better title over the subject lots. BPC prays that this Court rule in its favor, and reverse and set aside the Court of Appeals Decision, dated 8 August 1997, in CA-G.R. CV No. 47522, based on the following grounds THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ERROR IN NOT CONSIDERING THE GOOD FAITH OF [BPC] THOUGH IT WAS ADMITTED BY [REPUBLIC] DURING THE PRETRIAL CONFERENCE. THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ERROR IN UPHOLDING THE VALIDITY OF THE TITLE OF [REPUBLIC] OVER THAT OF [BPC.] THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ERROR IN ORDERING [BPC] TO SURRENDER ITS TITLE TO THE REGISTER OF DEEDS FOR CANCELLATION[.] THE HONORABLE COURT OF APPEALS ERRED IN ENJOINING [BPC] FROM EXERCISING ACTS OF OWNERSHIP OVER THE SUBJECT PARCEL OF LAND[.] THE HONORABLE COURT OF APPEALES [sic] ERRED IN APPLYING THE CALALANG CASE (231 SCRA 88) AS IT IS NOT APPLICABLE TO THE CASE AT BAR[.] THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN NOT FINDING [REPUBLIC] GUILTY OF ESTOPPEL BY LACHES[.] After the Republic filed its Comment, dated 29 October 1998, several parties again sought to intervene in the case. Winnie U. Nicolas (Nicolas), through her sister and attorney-in-fact, Ditas Felicitas Nicolas-Agbulos (Nicolas-Agbulos), and Edgardo Q. Abesamis (Abesamis), filed their respective Petitions for Intervention, dated 22 October 1998 and 9 December 1998, respectively. Nicolas-Agbulos invokes the provisions of the Rules of Court on the joinder of indispensable parties and necessary parties for the complete determination of all possible issues, not only between the parties themselves but also as regards to other persons who may be affected by the judgment. Nicolas-Agbulos contends that she was a buyer in good faith of Lots No. 27 and 28, Block 13, of Parthenon Hills, covered by TCTs No. 76497 and 76498, respectively, of the Quezon City Register of Deeds, derived from TCTs No. 30830, 30831, and 30832 in the name of BPC. Nicolas-Agbulos had already partially paid BPC for Lots No. 27 and 28 in the amount ofP1,500,000.00, and the balance of P800,000.00 was already deposited in a trust account in the name of BPC with the Far

East Bank and Trust Company (FEBTC). She bought Lots No. 27 and 28 after relying on the face of the TCTs of BPC which were intact and subsisting in the records of the Quezon City Register of Deeds, and on the authority granted to BPC by several government agencies, such as the HLURB, LRA, and the Register of Deeds, for the subdivision, development, and sale of the subject lots to private individuals. She only came to know, through her sister and attorney-in-fact, Nicolas-Agbulos, that the TCTs of BPC covering the subject lots, which comprised the Parthenon Hills, were being assailed in Civil Case No. Q-92-11806 pending before the RTC. Nicolas inquiry on the matter was answered by BPC with an assurance that despite the "bad publicity," Parthenon Hills was an ongoing project and that she should continue paying her installments. Acting cautiously, NicolasAgbulos decided that instead of paying the balance of the purchase price for Lots No. 27 and 28 directly to BPC, she would open a trust account with FEBTC in the name of BPC where she would deposit Nicolas-Agbulos succeeding installment payments. Nicolas-Agbulos was compelled to intervene in the instant case because BPC made no mention of the fact that it had already sold numerous subdivision lots in Parthenon Hills to innocent purchasers for value, either through absolute or installment sales. She thus sought a ruling upholding the title of BPC, and recognizing and protecting the rights of Nicolas as an innocent purchaser for value of Lots No. 27 and 28.36 Abesamis seeks to intervene in the present case as an indispensable party since no complete and conclusive determination can be had therein, which shall be legally binding and effective on Abesamis, unless he be allowed to intervene. Abesamis claims to have acquired by purchase Lot No. 16, Block 4, of Parthenon Hills, for the purchase price of P720,000.00, and evidenced by a Deed of Absolute Sale dated 9 June 1993. BPC processed and secured TCT No. 92270 covering Lot No. 16 in Abesamis name. He only learned that the subject lots comprising the Parthenon Hills, including his Lot No. 16, was mired in controversy, when he attended an emergency meeting of the Homeowners Association of Parthenon Hills. He asserts that, being a bona fidepurchaser and holder of a legitimate and indefeasible title to Lot No. 16, he had valid and enforceable rights against both BPC and the Republic.37 A third Petition in Intervention, dated 8 February 1999, was filed by spouses Jacinto H. Santiago, Jr. and Arlene C. Santiago (spouses Santiago). The spouses Santiago aver that, doing business as ACS Trading, they entered into a supply agreement with Proven International Development Corporation (PIDC), which had a construction contract with BPC, for the development of Parthenon Hills. The spouses Santiago agreed to accept lots in Parthenon Hills as payment for the construction materials they supplied BPC since the latter showed them clean TCTs to the subject lots, and HLURB licenses and permits to develop Parthenon Hills. In payment for the construction materials delivered, and financial assistance and various other professional services rendered by the spouses Santiago to BPC, the latter initially executed in their favor 15 Deeds of Assignment for 15 subdivision lots in Parthenon Hills. The TCTs for the 15 subdivision lots were transferred in the name of the spouses Santiago free from any lien or encumbrance. The spouses Santiago mortgaged 13 of the subdivision lots with the Planters Development Bank and sold the remaining two to different buyers. Thereafter, BPC again executed in favor of the spouses Santigao 71 Deeds of Assignment over 71 subdivision lots in Parthenon Hills. When the spouses Santiago attempted to transfer the TCTs covering the 71 subdivision lots to their names, they discovered that the TCTs of BPC already bore the annotation of the notice of lis pendens. The Quezon City Register of Deeds cancelled the TCTs of BPC covering the 71 subdivision lots and issued new ones in the names of the spouses Santiago, still bearing the annotation of the notice of lis pendens. The spouses Santiago claim that they were unable to intervene earlier in this case because of the pendency of the case filed by BPC against them, docketed as Civil Case No. 93-18231, with the Quezon City RTC, Branch 84, for the annulment of the last 71 Deeds of Assignment. This case had since been dismissed. The spouses Santiago invoke that they have sufficient interest in the present case which would necessarily be affected by the resolution/decision thereof, and they must necessarily intervene herein to protect their interest. The spouses Santiago pray for this Court to declare the assignment to them by BPC of

the subdivision lots as valid, and to direct both BPC and the Republic to recognize and respect their rights and interest.38 BPC supports the intervention in the case by Nicolas-Agbulos and Abesamis. It explains that its failure to mention that it has already practically sold all the subdivision lots in Parthenon Hills was not by design, but by mere oversight.39 However, BPC opposes the intervention of the spouses Santiago claiming that the latter are not indispensable parties to the case; they acquired their TCTs through fraudulent means; and Civil Case No. 93-18231 which it instituted against the spouses Santiago was dismissed by the Quezon City RTC, Branch 84, without prejudice. According to BPC, the supply agreement for construction materials was between the spouses Santiago and PIDC, so that it could not be enforced against BPC. This issue, as well as the validity of the 71 Deeds of Assignment over 71 subdivision lots supposedly executed by BPC in favor of the spouses Santiago, requires the holding of a trial, not a mere intervention.40 The Republic opposed all efforts of other parties to intervene in the case. The legal interests of Nicolas-Agbulos, Abesamis, and the spouses Santiago are totally dependent on the alleged right of ownership of BPC, and the issues they raised are similar to those raised by BPC. The fact that Nicolas-Agbulos and Abesamis are purchasers in good faith will not render their titles valid and indefeasible. The titles of Servando from whom BPC acquired its titles and from whom, in turn, Nicolas-Agbulos and Abesamis, derived their titles, were found to be spurious; and the spring cannot rise higher than its source.41 In the interim, BPC filed its Reply dated 22 January 1999, to the Comment of the Republic. This Court, in a Resolution, dated 22 March 1999, granted the motion of the Republic for the issuance of a temporary restraining order enjoining BPC from selling the remaining unsold portions of the subject lots and from allowing buyers to enter and occupy portions thereof.42 Thereafter, BPC,43 the Republic,44 spouses Santiago,45 Abesamis,46 and Nicolas-Agbulos,47 filed their respective Memoranda. However, even before the case could be submitted for decision, Servandos heirs, namely Virgilio V. Accibal (Virgilio), Virginia A. Macabudbod (Virginia), and Antonio, filed an Urgent Ex Parte Motion to Defer Resolution of the same. Soon after, they filed a Petition for New Trial, dated 23 May 2001.48 Although Servandos heirs concede that the period allowed for the filing of a motion to set aside the judgment and grant a new trial under Rule 37, Section 1 of the Rules of Court, had already lapsed, on grounds of justice and equity, they still move that this Court grant their Petition. Servandos heirs were allegedly prevented from participating in Civil Case No. Q-92-11806 before the RTC by the fraudulent misrepresentations of Rev. Father Antonio O. Ipo (Ipo), BPC President, together with the BPC counsel, who convinced the nave Antonio that there was no need to worry about the case filed by the Republic against them and to hire another counsel as the BPC counsel shall represent all of them. Unknown to Servandos heirs, the BPC counsel neither represented them nor included them in the Answer he filed on behalf of BPC, thus, Servandos heirs were declared in default by the RTC. Because of the extrinsic fraud perpetrated upon them and their excusable negligence, Servandos heirs should be granted a new trial, otherwise, they would be deprived of their constitutional right to due process of law. According to Servandos heirs, neither BPC nor the Republic was a purchaser in good faith who acquired clean titles to the subject lots. The BPC President Ipo, hoodwinked Antonio into agreeing to convey the subject lots to BPC in exchange for 51% of its capital stock. However, despite acquiring titles to the subject lots, BPC failed to transfer the promised 51% of its capital stock. On the other hand, the TCTs of FPHC, the Republics predecessor-in-interest, were of doubtful origin; and the Republics acquisition of the subject lots

from FPHC was anomalous in the sense that it purchased the said property through ordinary sale when it could have easily expropriated the same. Without formally intervening in the case at bar, Sariling Sikap Pabahay (SSP), through its President, Elias V. Esraita, submitted to this Court a letter,49 dated 26 August 2002, together with other documents to disprove the validity of the titles of Servando and his heirs to the subject lots. SSP is a cooperative formed by the urban poor to help secure for its members award from the government of titles to the portions of the subject lots which they are presently occupying. It presented the affidavit of a certain Edith C. Mantaring,50 who attests that the Accibals are still misrepresenting themselves as owners of the subject lots and fraudulently selling portions thereof to unsuspecting buyers. This Courts Ruling Ultimately, this Court is called upon to determine which party now has superior title to the subject lots: the Republic, BPC, the intervenors Abesamis, Nicolas-Agbulos, and spouses Santiago, or Servandos heirs? BPC, the intervenors Abesamis, Nicolas-Agbulos, spouses Santiago, and Servandos heirs derived their title to the subject lots from Servandos TCTs No. 200629 and 200630. This Court then is compelled to look into the validity, authenticity, and existence of these two TCTs. It is alleged by BPC and Servandos heirs that Servando was issued TCTs No. 200629 and 200630 on 24 July 1974. However, there is an absolute dearth of information and proof as to how Servando acquired ownership and came into possession of the subject lots. An investigation conducted by the LRA revealed even more irregularities which raised serious doubts as to the validity and authenticity of TCTs No. 200629 and 200630. The LRA Report, dated 10 June 1992, submitted by Investigator Benjamin A. Flestado (Flestado), found the said certificates of titles spurious after a very detailed and exhaustive analysis of the evidence available. First, it should be noted that despite letters sent by Investigator Flestado to BPC President Ipo, Servando, and Antonio, requesting copies of documents to support the issuance of TCTs No. 200629 and 200630, they failed to file a reply and furnish him with the documents requested. A certain Atty. Justino Z. Benito (Atty. Benito) appeared before Investigator Flestado claiming to be the counsel for BPC and promising to contact Servandos heirs. Yet, even by the time the LRA Report was finalized on 10 June 1992, Atty. Benito still failed to submit the documents requested. Instead, he wrote letters insisting that TCTs No. 200629 and 200630 be returned to the Quezon City Register of Deeds since these certificates "were detached and transferred to [your LRA central] office for no cogent reason or purpose;" and his client, BPC, "is a transferee in good faith and for value, and its titles unchallenged." Second, although the 109-D forms on which TCTs No. 200629 and 200630 were printed appeared to be genuine, and determined to have been issued to the Quezon City Register of Deeds on 5 July 1974, the signature therein of the Quezon City Register of Deeds Atty. Nestor N. Pea (Atty. Pea) was forged. No less than Atty. Pea himself refuted that the signatures on TCTs No. 200629 and 200630 were his. In his sworn statement, he noted A. At a glance, I am definitely sure that the signatures appearing here are not mine. My attention is invited on the loop, on the starting point of the signature. The loop should be sharp on the last portion of my signature. The portion going-up starts from a point and is also sharp because that represents hypen [sic] on letter n. I notice in these titles my surname is typed as PENA and not PEA. If ever there is no in the typewriter, I used to add hypen [sic] over the letter n. Besides,

my position here is indicated as Deputy Register of Deeds. I never signed titles as Deputy Register of Deeds, during my time; and if ever a title was presented indicating my position as Deputy Register of Deeds, I would erase the word Deputy. Moreso, the pen used here was a sign-pen. I never used a signpen, as shown in the other 5 titles I identified earlier. His employment records revealed that Atty. Pea was appointed as the Quezon City Register of Deeds on 27 May 1968, and served as such until his retirement in August of 1980, so that at the time when he supposedly signed TCTs No. 200629 and 200630 on 24 July 1974, he was the Quezon City Register of Deeds, not the Deputy Register of Deeds. Third, even the then incumbent Quezon City Register of Deeds Samuel Cleofe (RD Cleofe) and Deputy Register of Deeds Edgardo Castro (DRD Castro) believed that TCTs No. 200629 and 200630 were spurious. According to RD Cleofe, the size of the area covered by the TCTs made him highly suspicious of the same. In Quezon City, only a few people own big tracts of land, namely, the Aranetas, Tuazons, etc. Commonly, ordinary individuals own only 300 to 2,000 square meters of land. Both RD Cleofe and DRD Castro identified differences in the signatures and designation of Atty. Pea appearing on the questionable TCTs No. 200629 and 200630 compared to those on five other admittedly authentic TCTs.51. Fourth, the National Bureau of Investigation (NBI), upon request of Investigator Flestado, conducted an examination and issued Questioned Documents Report No. 636-991, dated 31 March 1992, wherein it noted significant differences in the handwriting characteristics between the standard/sample signatures of Atty. Pea and those appearing on TCTs No. 200629 and 200630, i.e., in the manner of execution, direction/movement of strokes, and other identifying details. The NBI concluded that "[t]he questioned and the standard/sample signatures of [N]estor N. Pea were NOT WRITTEN by one and the same person." Finally, Investigator Flestado made inquiries with the Land Management Bureau (LMB) regarding the consolidation-subdivision plan Pcs-2480 and plan Psu-32606 of Lots 34 and 40 (the subject lots) as described in TCTs No. 200629 and 200630. LMB Geodetic Surveys Division Chief Privadi J.G. Dalire, in a letter, dated 29 November 1991, informed Investigator Flestado that LMB had no records of Pcs-2480, while the original copy of Psu-32606 is no longer available as it had been badly damaged. Thus, there was no record in the LMB that Lots 34 and 40, Psu-32606, were in fact consolidated and then subdivided into Lots 3, 4, 5, and 6 pursuant to plan Pcs-2480, as mentioned in TCTs No. 200629 and 200630. To rebut the foregoing findings of LRA Investigator Flestado, BPC presented, in support of the authenticity and validity of TCTs No. 200629 and 200630, the LRA Resolution,52 dated 4 November 1991, in Consulta No. 1957, and NBI Questioned Documents Report No. 585-891,53 dated 2 September 1991. A careful study of the said documents does little to support the position of BPC. The LRA Resolution in Consulta No. 1957 merely allowed the registration of the rescission of a Joint Venture Agreement on TCTs No. 200629 and 200630 despite the initial adverse finding that the said certificates were of doubtful authenticity. It did not make any categorical finding as to the authenticity or validity of the TCTs. In fact, the last paragraph of the said Resolution elucidated that This resolution, however, should be understood to be limited to the issue of registrability of the instrument sought to be registered and is without prejudice to any action, if warranted, that may be filed in court assailing the validity or authenticity of the certificate of titles. (Emphasis supplied.) The NBI Questioned Documents Report No. 585-891 was even in accordance with the finding in the LRA Report that the 109-D forms on which TCTs No. 200629 and 200630 were printed seemed to

be genuine. The NBI concluded that the words "109-D" and the serial numbers printed on the forms were not altered. The NBI did a very limited examination of the genuineness of the forms on which TCTs No. 200629 and 200630 were printed, but it did not look into the authenticity of Atty. Peas signature (which was the subject of NBI Questioned Documents Report No. 636-991, dated 31 March 1992, mentioned in the LRA Report) or the accuracy of the entries made therein. The LRA Report, dated 10 June 1992, of Investigator Flestado was submitted as evidence before the RTC. It must be emphasized that the LRA Report was extensive and thorough. Its findings are sufficiently supported by independent and reliable proof. The BPC failed to present evidence to refute the same. The LRA Report deserves great weight sufficient to overcome the presumption that TCTs No. 200629 and 200630 were genuine, authentic, and indefeasible.54 It having been established that TCTs No. 200629 and 200630 were forged and spurious, their reconstitution was also attended with grave irregularities. Once more, this Court relies on the findings in the LRA Report, dated 10 June 1992, of Investigator Flestado. Quezon City RD Cleofe; the unnamed Chief of the LRA Micrographics and Computer Division; and Records Officer Viterbo Cahilig of the Quezon City Register of Deeds, all confirmed that there were no records of any applications for reconstitution of TCTs No. 200629 and 200630 in the name of Servando. It would seem that an LRA employee, Cartographer Rovil Ruiz (Ruiz), made it appear that there were applications for reconstitution of TCTs No. 200629 and 200630 filed, and which were included in Folder 1614. When Folder 1614 was inspected, TCTs No. 200629 and 200630 were not included in its table of contents; and although the said folder did have 44 missing pages, the missing pages pertain to the supporting documents of other TCTs, and there was no showing that TCTs No. 200629 and 200630 and the applications for reconstitution thereof were among these missing pages. Ruiz undertook by himself the computation of the tie-lines of the subject lots as described in TCTs No. 200629 and 200630, the plotting, and examination of the titles. The LRA Report thus recommended that Ruiz be administratively charged for grave misconduct, it appearing that he was the one who facilitated the administrative reconstitution of TCTs No. 200629 and 200630. In contrast, the Republic was able to supply Investigator Flestado with the documents supporting the transfer of the titles to the subject lots from FPHC to the Republic, among which were the TCTs of FPHC, the Deeds of Sale executed by FPHC to the Republic, notice to the real property owners within 300-meter radius from the area, receipts for payment of registration fees, and payment order for the documentary stamp tax on the sales. TCTs No. 275443 and 288417 in the name of the Republic were included in LRA Folder No. 1976-B, together with other certificates of title in the name of the Republic. One of the applications filed by the Republic was docketed as Application for Reconstitution No. 41869. The Chief of the LRA Micrographics and Computer Division confirmed that the applications for reconstitution of TCTs No. 275443 and 288417 by the Republic were recorded in the computerized Administrative Reconstitution System. BPC was unable to attack the authenticity and validity of the titles of the Republic to the subject lots, and could only interpose the defense that it was a buyer in good faith. Only Servandos heirs, in their Petition for New Trial, attempted to raise doubts as to the titles of the Republic to the subject lots by averring that the transfer thereof from FPHC to the Republic was highly irregular because the latter could have acquired the property by expropriation. Such an averment is totally baseless. Expropriation as the means by which the State can acquire private property is always the remedy of last resort. Expropriation lies only when it is made necessary by the opposition of the owner of the property to the sale or by the lack of any agreement as to the price.55 There being, in the present case, valid and subsisting contracts between the FPHC, the previous owner, and the Republic, the buyer, for the purchase of the subject lots at an agreed price, there was no reason for the expropriation.

In consideration of all the foregoing findings, it is indubitable that TCTs No. 275443 and 288417 of the Republic covering the subject lots are authentic and valid, while TCTs No. 200629 and 200630 of Servando covering the same property are not. However, BPC maintains that it was a purchaser in good faith, for value and without any inkling about any flaw from Servandos titles. It points out that it purchased the subject lots from Servando on 8 February 1989 and registered the same on 19 February 1991, way before the titles of Servando were declared null by the RTC on 22 December 1992. BPC relies on this Courts ruling in TenioObsequio v. Court of Appeals,56 to wit Under Section 55 of the Land Registration Act, as amended by Section 53 of Presidential Decree No. 1529, an original owner of registered land may seek the annulment of a transfer thereof on the ground of fraud. However, such a remedy is without prejudice to the rights of any innocent holder for value with a certificate of title. A purchaser in good faith and for value is one who buys the property of another, without notice that some other person has a right to or interest in such property, and pays a full and fair price for the same at the time of such purchase or before he has notice of the claim or interest of some other person in the property. In consonance with this accepted legal definition, petitioner Consorcia TenioObsequio is a purchaser in good faith. There is no showing whatsoever nor even an allegation that herein petitioner had any participation, voluntarily or otherwise, in the alleged forgery. xxxx The main purpose of the Torrens system is to avoid possible conflicts of title to real estate and to facilitate transactions relative thereto by giving the public the right to rely upon the face of a Torrens certificate of title and to dispense with the need of inquiring further, except when the party concerned has actual knowledge of facts and circumstances that should impel a reasonable cautious man to make such further inquiry. Where innocent third persons, relying on the correctness of the certificate of title thus issued, acquire rights over the property, the court cannot disregard such rights and order the total cancellation of the certificate. The effect of such an outright cancellation would be to impair public confidence in the certificate of title, for everyone dealing with property registered under the Torrens system would have to inquire in every instance as to whether the title has been regularly or irregularly issued by the court. 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 beyond the certificate to determine the condition of the property. xxxx It has been consistently ruled that a forged deed can legally be the root of a valid title when an innocent purchaser for value intervenes. A deed of sale executed by an impostor without the authority of the owner of the land sold is a nullity, and registration will not validate what otherwise is an invalid document. However, where the certificate of title was already transferred from the name of the true owner to the forger and, while it remained that way, the land was subsequently sold to an innocent purchaser, the vendee had the right to rely upon what appeared in the certificate and, in the absence of anything to excite suspicion, was under no obligation to look beyond the certificate and investigate the title of the vendor appearing on the face of said certificate. Now the question is whether BPC qualifies as an innocent purchaser for value which acquired valid titles to the subject lots, despite the fact that the titles of its predecessor-in-interest were found to be forged and spurious.

This Court finds in the negative. Foremost is the fact that there seem to be two documents by which titles to the subject lots were transferred from the Accibals to BPC: (1) A Deed of Conveyance, dated 8 February 1989, executed by Servando in favor of BPC, transferring to the latter titles to the subject lots in exchange for 51% of its capital stock; and (2) A Deed of Conveyance, dated 10 October 1990, executed by Antonio in favor of BPC, transferring to the latter the very same property in exchange for 2,450 shares in BPC. It should be noted that even prior to these Deeds of Conveyance, Servando already transferred the subject lots by way of a Deed of Absolute Sale, dated 10 June 1988, in favor of his son Antonio, with the concurrence of his other heirs. Thus, by the time Servando executed the Deed of Conveyance over the subject lots in favor of BPC on 8 February 1989, he no longer had any right to the said property, having sold the same to Antonio. It was probably to rectify this mistake that a second Deed of Conveyance was executed by Antonio on 10 October 1990. Comparing all these transfer documents, the LRA Report, dated 10 June 1992, prepared by Investigator Flestado noted that Servandos Tax Account Number (TAN) in the Deed of Conveyance, dated 8 February 1989, which he executed over the subject lots in favor of BPC, was "A2140-M1746-A-1;" while in the Deed of Sale, dated 10 June 1988, which he executed over the subject lots in favor of Antonio, his TAN was "4110-241-R." Moreover, despite being executed a year apart, Servando had the same residence certificate (No. 5901393, issued at Quezon City, on 6 April 1988) appearing in both documents. Furthermore, BPC cannot really claim that it was a purchaser in good faith which relied upon the face of Servandos titles. It should be recalled that the Quezon City Register of Deeds caught fire on 11 June 1988. Presumably, the original copies of TCTs No. 200629 and 200630 were burnt in the said fire. Servandos heirs sought the administrative reconstitution of of TCTs No. 200629 and 200630 only in December 1990. The two Deeds of Conveyance over the subject lots were executed in favor of BPC by Servando and Antonio on 8 February 1989 and 10 October 1990, respectively, both prior to the administrative reconstitution of TCTs No. 200629 and 200630. If BPC bought the subject lots after TCTs No. 200629 and 200630 were destroyed when the Quezon City Register of Deeds burned down, but before the said certificates were reconstituted, then on the face of what titles did BPC rely on before deciding to proceed with the purchase of the subject lots? There was no showing that there were surviving owners duplicate copies of TCTs No. 200629 and 200630, or even if there were, without the original copies of the said TCTs which were stored in the Quezon City Register of Deeds and purportedly destroyed in the fire, there would have been no way for BPC to have verified the owners duplicate copies. In addition, without the original copies and owners duplicate copies of TCTs No. 200629 and 200630, BPC had to rely on the reconstituted certificates, issued on 12 December 1990, bearing the following numbers: TCTs No. RT-23687 (for TCT No. 200629) and RT-23688 (for TCT No. 200630). Under section 7 of Republic Act No. 26,57"Reconstituted titles shall have the same validity and legal effect as the originals thereof" unless the reconstitution was made extrajudicially.58 In this case, TCTs No. 200629 and 200630 were reconstituted administratively, hence, extrajudicially. In contrast to the judicial reconstitution of a lost certificate of title which is in rem, the administrative reconstitution is essentially ex-parte and without notice.59 The reconstituted certificates of title do not share the same indefeasible character of the original certificates of title for the following reason x x x The nature of a reconstituted Transfer Certificate Of Title of registered land is similar to that of a second Owner's Duplicate Transfer Certificate Of Title. Both are issued, after the proper proceedings, on the representation of the registered owner that the original of the said TCT or the original of the Owner's Duplicate TCT, respectively, was lost and could not be located or found despite diligent efforts exerted for that purpose. Both, therefore, are subsequent copies of the originals thereof. A cursory examination of these subsequent copies would show that they are not the originals. Anyone dealing with such copies are put on notice of such fact and thus warned to be extra-careful. x x x.60

The fact that the TCTs were reconstituted should have alerted BPC and its officers to conduct an inquiry or investigation as might be necessary to acquaint themselves with the defects in the titles of Servando.61 What is more, BPC again invokes LRA Resolution, dated 4 November 1991, in Consulta No. 1957, and NBI Questioned Documents Report No. 585-891, dated 2 September 1991 as proof that it did inquire or investigate into the validity and authenticity of Servandos titles. But again, it should be noted that these documents were issued after BPC already acquired the subject lots from Servando and Antonio. Lastly, there are serious doubts that BPC acquired the subject lots for value. The Republic bought the subject lots from FPHC for the combined price of P12,333,280.00. BPC, on the other hand, supposedly acquired the subject lots from Servando on 8 February 1989 in exchange for 51% of the capital stock of BPC, with a subscription value of P6,000,000.00. In the LRA Report, dated 10 June 1992, Investigator Flestado pointed out that in the Articles of Incorporation, dated 16 January 1989, of BPC, submitted to the Securities and Exchange Commission (SEC) on 20 January 1989, BPC had an authorized capital stock of only P1,000,000.00, which was divided into 10,000 shares, with a par value of P100.00 each; and the amount of capital stock actually subscribed was P250,000.00. Therefore, in 1989, fifty-one percent of the capital stock of BPC would be 5,100 shares, with an aggregate value of only P510,000.00. BPC is not saved by the second Deed of Conveyance, executed more than a year later by Antonio, again transferring to BPC the subject lots in exchange for 2,450 shares in the latter, with the alleged value of P49,000.000.00. Unless BPC is able to present proof that it applied for, and the SEC approved, a substantial increase in its capital stock, then this Court can only assume that its capital stock remained the same as the year before, 2,450 shares in BPC, with a par value of P100.00 each, amount only to P245,000.00. This Court cannot find a plausible explanation for the discrepancy in the value of 2,450 shares of BPC between theP245,000.00 it has hereby computed and the P49,000,000.00 claimed by BPC. For the above-stated reasons, this Court cannot declare BPC an innocent purchaser for value, and it acquired no better titles to the subject lots than its predecessors-in-interest, Servando and Antonio. At this point, it would seem that the Republic does hold better titles to the subject lots. Nonetheless, another level of transactions involving the subject lots was brought by intervenors to the attention of this Court. From the reconstituted TCTs No. RT-23687 (200629) and RT- 23688 (200630) in the name of Servando, BPC derived and was issued by the Quezon City Register of Deeds new certificates, TCTs No. 30829, 30830, 30831 and 30832, in its own name. It was able to secure the necessary licenses and permits from the appropriate government agencies to subdivide, develop, and sell the subject lots as Parthenon Hills. The Parthenon Hills project was openly advertised and marketed, and a substantial portion of the subject lots was already sold by BPC to the public. Except for the spouses Santiago, BPC recognizes that the intervenors, Nicolas-Agbulos and Abesamis, together with other legitimate homeowners in Parthenon Hills, acquired from BPC titles to their respective subdivided lots in good faith and for value. Even the Republic could not refute that the individuals who acquired lots in Parthenon Hills from BPC were purchasers in good faith and for value. It insists, however, that these buyers could not acquire better titles to the property than its predecessors-in-interest BPC, Servando, and Antonio since the spring cannot rise higher than its source. The law must protect and prefer the lawful holder of registered title over the transferee of a vendor bereft of any transmissible rights.62

It is true that the general rule is that a forged deed is a nullity and conveys no title.63 A forged deed may be defined as an instrument which purports to have been executed by the person or persons whose signatures appear thereon, but which, in fact, was not executed, and the signatures thereon had been merely imitated so as to give them the deceptive appearance of genuineness.64 In the case at bar, it was not any of the deeds of transfer or conveyance of the subject lots which was forged, but TCTs No. 200629 and 200630 themselves. The forged TCTs, nevertheless, just as a forged deed, can make it appear that one had title, right, or interest to the land, when in truth, he had none, to the deprivation of the rightful owner. It has been recognized that while a forged instrument is null and void and of no effect as between the parties, it may nevertheless be the root of a good title; so that the title of a registered owner who has taken it bona fide and for value, is not affected by reason of his claiming through someone, that the registration was void because it had been procured by the presentation of a forged instrument.65 The forged TCTs No. 200629 and 200630 were later administratively reconstituted, and although an investigation would show that their reconstitution was also attended with irregularities, TCTs No. RT23687 (200629) and RT-23688 (200630) appear, on either face, to have been duly approved by the LRA and issued by the Quezon City Register of Deeds. With the cancellation of the reconstituted TCTs and the issuance of new ones, TCTs No. 30829, 30830, 30831, and 30832, in the name of BPC, any trace of forgery or irregularity as to BPCs titles was eliminated. TCTs No. 30829, 30830, 30831, and 30832 were clean, at least, until the annotation therein of the notice of lis pendens of the Republic on 21 October 1992. It is a settled doctrine that one who deals with property registered under the Torrens system need not go beyond the same, but only has to rely on the certificates of title. He is charged with notice only of such burdens and claims as are annotated on the certificates.66 Herein intervenors, Nicolas-Agbulos and Abesamis, before purchasing subdivision lots in Parthenon Hills, looked into the TCTs of BPC and found nothing on the face thereof to raise doubts or suspicions as to their validity and authenticity. Besides, BPC was the holder of licenses and permits to subdivide, develop, and sell the subject lots as Parthenon Hills, issued by the appropriate government agencies, primarily HLURB. This is definitely a situation which constitutes an exception to the general rule that estoppel cannot lie against the government. The Republic v. Court of Appeals,67 provides an illuminating discourse on when such an exception applies, thus Is the immunity of the government from laches and estoppel absolute? May it still recover the ownership of lots sold in good faith by a private developer to innocent purchasers for value, notwithstanding its approval of the subdivision plan and its issuance of separate individual certificates of title thereto? xxxx The general rule is that the State cannot be put in estoppel by the mistakes or errors of its officials or agents. However, like all general rules, this is also subject to exceptions, viz: "Estoppels against the public are little favored. They should not be invoked except in rare and unusual circumstances, and may not be invoked where they would operate to defeat the effective operation of a policy adopted to protect the public. They must be applied with circumspection and should be applied only in those special cases where the interests of justice clearly require it. Nevertheless, the government must not be allowed to deal dishonorably or capriciously with its citizens, and must not play an ignoble part or do a shabby thing; and subject to limitations x x x the doctrine of equitable estoppel may be invoked against public authorities as well as against private individuals."

xxxx Significantly, the other private respondents Spouses Santos, Spouses Calaguian, Dela Fuente and Madaya bought such "expanded" lots in good faith, relying on the clean certificates of St. Jude, which had no notice of any flaw in them either. It is only fair and reasonable to apply the equitable principle of estoppel by laches against the government to avoid an injustice to the innocent purchasers for value. Likewise time-settled is the doctrine that where innocent third persons, relying on the correctness of the certificate of title, acquire rights over the property, courts cannot disregard such rights and order the cancellation of the certificate. Such cancellation would impair public confidence in the certificate of title, for everyone dealing with property registered under the Torrens system would have to inquire in every instance whether the title has been regularly issued or not. This would be contrary to the very purpose of the law, which is to stabilize land titles. Verily, all persons dealing with registered land may safely rely on the correctness of the certificate of title issued therefor, and the law or the courts do not oblige, them to go behind the certificate in order to investigate again the true condition of the property. They are only charged with notice of the lions and encumbrances on the property that are noted on the certificate. When private respondents-purchasers bought their lots from St. Jude, they did not have to go behind the titles thereto to verify their contents or search for hidden defects or inchoate rights that could defeat their rights to said lots. Although they were bound by liens and encumbrances annotated on the titles, private respondents purchasers could not have had notice of defects that only an inquiry beyond the face of the titles could have satisfied. The rationale for this presumption has been stated thus: "The main purpose of the Torrens System is to avoid possible conflicts of title to real estate and to facilitate transactions, relative thereto by giving the public the right to rely upon the face of a Torrens Certificate of Title and to dispense with the need of inquiring further, except when the party concerned had actual knowledge of facts and circumstances that should impel a reasonably cautious man to make such further inquiry (Pascua v. Capuyoc, 77 SCRA 78). Thus, where innocent third persons relying on the correctness of the certificate thus issued, acquire rights over the property, the court cannot disregard such rights (Director of Land v. Abache, et al., 73 Phil. 606)." In another case, this Court further said: "The Torrens System was adopted in this country because it was believed to be the most effective measure to guarantee the integrity of land titles and to protect their indefeasibility once the claim of ownership is established and recognized. If a person purchases a piece of land on the assurance that the seller's title thereto is valid, he should not run the risk of being told later that his acquisition was ineffectual after all. This would not only be unfair to him. What is worse is that if this were permitted, public confidence in the system would be eroded and land transactions would have to be attended by complicated and not necessarily conclusive investigations and proof of ownership. The further consequence would be that land conflicts could be even more abrasive, if not even violent. The Government, recognizing the worthy purposes of the Torrens System, should be the first to accept the validity of titles issued thereunder once the conditions laid down by the law are satisfied. [Italics supplied.] Petitioner never presented proof that the private respondents who had bought their lots from St. Jude were buyers in bad faith. Consequently, their claim of good faith prevails. A purchaser good faith and for value is one who buys the property of another without notice that some other person has a right to or an interest in such property; and who pays a full and fair price for the same at the

time of such purchase or before he or she has notice of the claims or interest of some other person. Good faith is the honest intention to abstain from taking any unconscientious advantage of another. It also bears to emphasize that the subject lots covered by TCTs No. 30829, 30830, 30831, and 30832 were already subdivided, and new TCTs were issued in the names of the buyers of each subdivision lot. To order the cancellation of all these derivative titles and the return of the subdivision lots to the Republic shall irrefragably be unjust to the innocent purchasers for value and shall wreak havoc on the Torrens System. Anyway, the Republic is not without recourse. It can claim damages from BPC, found herein not to be a buyer of the subject lots in good faith. For its loss of portions of the subdivision lots to innocent purchasers from BPC, the Republic may recover from BPC the purchase price it paid to FPHC corresponding to such subdivision lots, with interest at 6% per annum from 26 March 1992 (the date when the Republic instituted its petition for the cancellation of the TCTs of Servando, Antonio, and BPC) until finality of this Decision, and 12% per annum thereafter until fully paid.68 Although this Court allowed in the case at bar the intervention of Nicolas-Agbulos and Abesamis, and recognized their title to their respective subdivision lots in Parthenon Hills as purchasers in good faith and for value from BPC, it could not do the same for the spouses Santiago, for the reason that BPC contested their claim that they had acquired titles to the subdivision lots in Parthenon Hills in good faith and for value, and further asserted that the spouses Santiago acquired the said subdivision lots by fraudulent means. The allegations by the spouses Santiago of good faith, on one hand, and by BPC of fraud, on the other, in the acquisition by the spouses Santiago of the subdivision lots in question, are factual matters, best proven and established before the RTC, which could receive evidence in support of each partys position during trial. Should the RTC find that the spouses Santiago have indeed acquired the subdivision lots in good faith and for value, then their titles thereto shall, likewise, be valid and indefeasible even against that of the Republic. However, in a contrary case, should the RTC find that the spouses Santiago acquired the subdivision lots by fraud, then titles thereto return to BPC. Though estoppel by laches may lie against the Republic when titles to the subdivision lots are already in the names of the respective innocent purchasers for value from BPC, it may not be used by BPC to defeat the titles of the Republic as regards the subdivision lots which remain unsold and the titles to which are still in the name of BPC. It must be recalled that BPC is not a purchaser in good faith. Estoppel, being an equitable principle, may only be invoked by one who comes to court with clean hands.69 Pertinent provisions of the New Civil Code concerning builders in bad faith provide that ART. 449. He who builds, plants, or sows in bad faith on the land of another, loses what is built, planted or sown without right to indemnity. ART. 450. The owner of the land on which anything has been built, planted or sown in bad faith may demand the demolition of the work, or that the planting or sowing be removed, in order to replace things in their former condition at the expense of the person who built, planted or sowed; or he may compel the builder or planter to pay the price of the land, and the sower the proper rent. ART. 451. In cases of the two preceding articles, the landowner is entitled to damages from the builder, planter or sower. ART. 452. The builder, planter or sower in bad faith is entitled to reimbursement for the necessary expenses of preservation of the land.

Hence, as far as the subdivision lots still in the name of BPC are concerned, the Republic has the option to either (1) recover the said lots and demand that BPC demolish whatever improvements it has made therein, to return the lots to their former condition, at the expense of BPC; or (2) compel BPC to pay the price of the land. The choice can only be made by the Republic, as the rightful owner of the said subject lots. Should the Republic choose the first option, BPC is under the obligation to return the possession of the subdivision lots to the Republic and surrender its corresponding TCTs for cancellation and issuance of new ones in the name of the Republic. Should the Republic select the second option, then BPC shall pay the Republic the purchase price that the latter had paid to FPHC corresponding to such subdivision lots, with interest at 6% per annum from 26 March 1992 until finality of this Decision, and 12% per annum thereafter until fully paid. In either option, the Republic may claim damages from BPC, while BPC cannot seek indemnity from the Republic for any improvements made on the subdivision lots, except if these constitute as necessary expenses for the preservation of the land, for which it shall still be entitled to reimbursement. As for the Petition for New Trial filed by Servandos heirs, this Court dismisses the same for lack of legal basis. Section 1, Rule 37 of the Rules of Court reads SECTION 1. Grounds of and period for filing motion for new trial or reconsideration. Within the period for taking an appeal, the aggrieved party may move the trial court to set aside the judgment or final order and grant a new trial for one or more of the following causes materially affecting the substantial rights of the said party: (a) Fraud, accident, mistake or excusable negligence which ordinary prudence could not have guarded against and by reason of which such aggrieved party has probably been impaired in his rights; or (b) Newly discovered evidence, which he could not, with reasonable diligence, have discovered and produced at the trial, and which if presented would probably alter the result. Servandos heirs themselves admit that the period allowed for the filing of a motion to set aside the judgment and grant a new trial under the afore-quoted provision had already lapsed, but they still pray that this Court give due course to their Petition on the grounds of justice and equity. In Malipol v. Lim Tan,70 this Court ruled that It is within the sound discretion of the court to set aside an order of default and to permit a defendant to file his answer and to be heard on the merits even after the reglementary period for the filing of the answer has expired, but it is not error, or an abuse of discretion, on the part of the court to refuse to set aside its order of default and to refuse to accept the answer where it finds no justifiable reason for the delay in the filing of the answer. In the motions for reconsideration of an order of default, the moving parry has the burden of showing such diligence as would justify his being excused from not filing the answer within the reglementary period as provided by the Rules of Court, otherwise these guidelines for an orderly and expeditious procedure would be rendered meaningless. Unless it is shown clearly that a party has justifiable reason for the delay, the court will not ordinarily exercise its discretion in his favor. In the present case, the late Servando and Antonio were already declared in default by the RTC on 31 July 1992, after their supposed counsel failed to file an answer to the Republics petition for cancellation of title. Nothing was heard from Servandos heirs even after the promulgation of the RTC Decision on 22 December 1992, and the Court of Appeals Decision, dated 8 August 1997, until they filed their Petition for New Trial, dated 23 May 2001, before this Court, or nine years from the date they were declared in default.

According to Servandos heirs, due to the extrinsic fraud committed by the President and counsel of BPC, they were prevented from participating in the proceedings before the trial court. They allegedly relied on the assurance of the President and counsel of BPC that the latter shall also represent them and their interests in the subject lots in the case. This allegation of fraud by Servandos heirs has no leg to stand on. It should be recalled that the late Servando and Antonio were represented by a counsel at the beginning of the proceedings before the RTC. Their counsel even submitted two consecutive motions for extension of time to file the appropriate pleadings. There was no explanation provided as to why, despite the grant of said motions, the counsel still failed to file an answer to the Republics petition for cancellation of title. It is also contrary to common human experience that Servandos heirs, by the mere assurance of the President and counsel of BPC, adopted a totally hands-off attitude in a case where they supposedly have substantial interest. There is no showing during the nine years when they were not participating in the court proceedings, that they, at least, inquired into or followed-up on the status of the case with BPC. Such blind trust in the President and counsel of BPC is surely difficult to comprehend, especially if this Court takes into account the contention of Servandos heirs that BPC failed to deliver the shares of stock in exchange for the subject lots. What is apparent to this Court is not the alleged fraud committed by BPC but, rather, the inexcusable negligence of Servandos heirs when it came to protecting their titles, rights, and interests to the subject lots, if indeed, there were still any. Worth reproducing herein, is the conclusion71 made by the Court of Appeals on Servandos titles On the strength of the LRA report, Exhibit H (Record, pp. 214-258), the court a quo found TCT Nos. 200629 and 200630, in the name of Servando Accibal and from which the titles of defendantappellee Barstowe Philippines Corporation were derived, spurious, and ordered the Register of Deeds of Quezon City "to officially and finally cancel (said titles) from his records" (Par. 2, dispositive portion, Decision, p. 16; Rollo, p. 71). As explained by the court a quo: "We shall now dwell on the validity of the titles, TCT Nos. 200629 and 200630, issued in the name of Servando Accibal on July 24, 2974 by the Register of Deeds of Quezon City. The LRA Report dated 10 June 1992 (Exh. H, pp. 214-258, record) is competent proof that indeed said titles must be cancelled. In short, the LRA found after due investigation that the said titles of Servando Accibal were issued with certain irregularties (sic). It recommended the cancellation therefore, of TCT Nos. 200629 and 200630, to which the court concurs, as said report must be accorded due respect and in the absence of fraud or irregularties (sic) that attended the investigation, which the Court finds none, the same must be persuasive, if not conclusive. Moreover, herein defendant Servando Accibal because of his failure to answer, despite extension of time given him, plaintiffs counsel, he was declared as in default since then, he never asked the court to lift and set aside the default order. There is no way, his title may be cancelled. For one thing, he was not able to present evidence to controvert the recommendation of the LRA to cancel his titles. For another, Servando Accibal is deemed to have impliedly admitted the irregularties (sic) that attended the issuance of his aforestated titles." (Decision, pp. 14-15; Rollo, pp. 69-70) This portion of the decision ordering the cancellation of TCT Nos. 200629 and 200630 in the name of Servando Accibal was not appealed nor assigned as a counter-assigment of error in the brief of Barstowe Philippines Corporation; hence, is now final. Thus, the findings of this Court as to the rights of the parties involved in the present case are summarized as follows

(1) The certificates of title acquired by Servando over the subject lots were forged and spurious, and such finding made by both the RTC and Court of Appeals is already final and binding on Servandos heirs; (2) BPC did not acquire the subject lots in good faith and for value, and its certificates of title cannot defeat those of the Republics; (3) As between BPC and the Republic, the latter has better titles to the subject lots being the purchaser thereof in good faith and for value from FPHC; (4) However, considering that the subject lots had already been subdivided and the certificates of title had been issued for each subdivision lot, which were derived from the certificates of title of BPC, it is more practical, convenient, and in consonance with the stability of the Torrens System that the certificates of title of BPC and its derivative certificates be maintained, while those of the Republics be cancelled; (5) Estoppel lies against the Republic for granting BPC governmental permits and licenses to subdivide, develop, and sell to the public the subject lots as Parthenon Hills. Relying on the face of the certificates of title of BPC and the licenses and permits issued to BPC by government agencies, innocent individuals, including intervenors Nicolas-Agbulos and Abesamis, purchased subdivision lots in good faith and for value; (6) The claims of the intervenor spouses Santiago that they acquired portions of the subject lots in good faith and for value still need to be proven during trial before the court a quo. Unlike the claims of intervenors Nicolas-Agbulos and Abesamis, which BPC admitted, the claims of the spouses Santiago were opposed by BPC on the ground of fraud; (7) Certificates of title over portions of the subject lots, acquired by purchasers in good faith and for value, from BPC, are valid and indefeasible, even as against the certificates of title of the Republic. The Republic, however, is entitled to recover from BPC the purchase price the Republic paid to FPHC for the said portions, plus appropriate interests; and (8) As portions of the subject lots are still unsold and their corresponding certificates of title remain in the name of BPC, the Republic may exercise two options: (a) It may recover the said portions and demand that BPC demolish whatever improvements it has made therein, so as to return the said portions to their former condition, at the expense of BPC. In such a case, certificates of title of BPC over the said portions shall be cancelled and new ones issued in the name of the Republic; or (b) It may surrender the said portions to BPC and just compel BPC to reimburse the Republic for the purchase price the Republic paid to FPHC for the said portions, plus appropriate interest. WHEREFORE, premises considered, the instant Petition is hereby PARTLY GRANTED. The Decision, dated 8 August 1997, of the Court of Appeals in CA-G.R. CV No. 47522 is hereby REVERSED and SET ASIDE and a new one is hereby entered, as follows: (1) In view of the finding that the Transfer Certificates of Title No. 200629 and 200630 in the name of Servando Accibal are forged and spurious, the Quezon City Register of Deeds is ORDERED to officially and finally cancel the same from his records; (2) In view of the finding that the respondent Republic of the Philippines was a purchaser in good faith of the subject lots from Philippine First Holdings Corporation, but also taking into consideration the functioning and stability of the Torrens System, as well as the superior

rights of subsequent purchasers in good faith and for value of portions of the subject lots subdivided, developed, and sold as Parthenon Hills from petitioner Barstowe Philippines Corporation (a) The Quezon City Register of Deeds is ORDERED to cancel Transfer Certificates of Title No. 275443 and 288417 in the name of respondent Republic of the Philippines; (b) The respondent Republic of the Philippines is ORDERED to respect and recognize the certificates of title to the subject portions of land in the name of purchasers of good faith and for value from petitioner Republic of the Philippines; (c) Petitioner Barstowe Philippines Corporation is ORDERED to pay respondent Republic of the Philippines for the purchase price the latter paid to First Philippine Holdings Corporation corresponding to the portions of the subject lots which are already covered by certificates of title in the name of purchasers in good faith and for value from petitioner Barstowe Philippines Corporation, plus appropriate interest; (d) The respondent Republic of the Philippines is ORDERED to choose one of the options available to it as regards the portions of the subject lots which remain unsold and covered by certificates of title in the name of petitioner Barstowe Philippines Corporation, either (i) To recover the said portions and demand that petitioner Barstowe Philippines Corporation demolish whatever improvements it has made therein, so as to return the said portions to their former condition, at the expense of the latter, or (ii) To surrender the said portions to petitioner Barstowe Philippines Corporation and compel the latter to reimburse the respondent Republic of the Philippines for the purchase price it had paid to First Philippine Holdings Corporation for the said portions, plus appropriate interest. Regardless of the option chosen by the respondent Republic of the Philippines, it is ORDERED to reimburse petitioner Barstowe Philippines Corporation for any necessary expenses incurred by the latter for the said portions; (2) In view of the finding that petitioner Barstowe Philippines Corporation is not a purchaser and builder in good faith, and depending on the option chosen by respondent Republic of the Philippines concerning the portions of the subject lots which remain unsold and covered by certificates of title in the name of petitioner Barstowe Philippines Corporation, as enumerated in paragraph 2(d) hereof (a) In case the respondent Republic of the Philippines chooses the option under paragraph 2(d)(i) hereof, petitioner Barstowe Philippines Corporation is ORDERED to demolish whatever improvements it has made on the said portions, so as to return the same to their former condition, at its own expense. The Quezon City Register of Deeds is also ORDERED to cancel the certificates of title of petitioner Barstowe Philippines Corporation over the said portions and to issue in lieu thereof certificates of title in the name of respondent Republic of the Philippines; (b) In case the respondent Republic of the Philippines chooses the option under paragraph 2(d)(ii) hereof, petitioner Barstowe Philippines Corporation is ORDERED to reimburse the petitioner Republic of the Philippines for the purchase price it had paid to First Philippine Holdings Corporation for the said portions, plus appropriate interest; (c) Petitioner Barstowe Philippines Corporaton is ORDERED to pay appropriate damages to respondent Republic of the Philippines as may be determined by the trial court;

(3) In view of the finding that intervenors Winnie U. Nicolas-Agbulos and Edgardo Q. Abesamis are purchasers in good faith and for value of portions of the subject lots subdivided, developed, and sold as Parthenon Hills from petitioner Barstowe Philippines Corporation, it is DECLARED that their certificates of title are valid and indefeasible as to all parties; (4) In view of the finding that the Petition for New Trial filed by the heirs of Servando Accibal, namely, Virgilio V. Accibal, Virginia A. Macabudbud, and Antonio V. Accibal, lacks merit, the said Petition is DISMISSED; and (5) The case is REMANDED to the court of origin for determination of the following (a) The validity of the claims, and identification of the purchasers, in good faith and for value, of portions of the subject lots from petitioner Barstowe Philippines Corporation, other than intervenors Winnie U. Nicolas-Agbulos and Edgardo Q. Abesamis, whose titles are to be declared valid and indefeasible; (b) The identification of the portions of the subject lots in the possession and names of purchasers in good faith and for value and those which remain with petitioner Barstowe Philippines Corporation; (c) The computation of the amount of the purchase price which respondent Republic of the Philippines may recover from petitioner Barstowe Philippines Corporation in consideration of the preceding paragraphs hereof; (d) The types and computation of the damages recoverable by the parties; and (e) The computation and award of the cross-claim of EL-VI Realty and Development Corporation against petitioner Barstowe Philippines Corporation. SO ORDERED. MINITA V. CHICO-NAZARIO Associate Justice

G.R. No. 166786

May 3, 2006

MICHEL J. LHUILLER Pawnshop, Inc. Petitioner, vs. COMMISSIONER OF INTERNAL REVENUE, Respondent. DECISION YNARES-SANTIAGO, J.: Assailed in this petition for review on certiorari is the June 29, 2004 Decision1 of the Court of Appeals in CA-G.R. SP No. 67667, which reversed the October 24, 2001 Decision2 of the Court Tax Appeals

and ordered petitioner Michel J. Lhuillier Pawnshop, Inc., to pay (1) P19,961,636.09 as deficiency Value Added Tax (VAT); and (2) P3,142,986.02 as deficiency Documentary Stamp Tax (DST), for the year 1997. The facts show that petitioner, a corporation engaged in the pawnshop business, received Assessment Notice Nos. 81-VAT-13-97-99-12-118 and 81-DST-13-97-99-12-119, issued by the Chief Assessment Division, Revenue Region No. 13, Cebu City, for deficiency VAT in the amount of P19,961,636.09 and deficiency DST in the amount of P13,142,986.02, for the year 1997. Petitioner filed a motion for reconsideration of said assessment notices but was denied by respondent Commissioner of Internal Revenue (CIR). On petition for review with the Court of Tax Appeals, the latter rendered decision in favor of petitioner setting aside the assessment notices issued by the CIR. It ruled, inter alia, that the subject of a DST under Section 195 of the National Internal Revenue Code (NIRC) is the document evidencing the covered transaction. Holding that a pawn ticket is neither a security nor a printed evidence of indebtedness, the tax court concluded that such pawn ticket cannot be the subject of a DST. The dispositive portion thereof, states: WHEREFORE, in view of all the foregoing, the instant Petition for Review is hereby GRANTED. Accordingly, Assessment Notices Nos. 81-VAT-13-97-99-12-118 and 81-DST-13-97-99-11-119 are hereby CANCELLED and SET ASIDE. SO ORDERED.3 Respondent filed a petition for review with the Court of Appeals which reversed the CTA decision and sustained the assessments against petitioner. It ratiocinated, among others, that a pawn ticket, per se, is not subject to DST; rather, it is the transaction involved, which in this case is pledge, that is being taxed. Hence, petitioner was properly assessed to pay DST. The decretal portion thereof, provides: WHEREFORE, the instant petition is hereby GRANTED. The decision of the Court of Tax Appeals dated October 24, 2001 is REVERSED and SET ASIDE. In lieu thereof, respondent Michel J. Lhuillier Pawnshop, Inc., is ORDERED TO PAY: (1) P19,961636.09, as deficiency Value-Added Tax, inclusive of surcharge and interest; and (2) P3,142,986.02, as deficiency Documentary Stamp Tax, inclusive of surcharge and interest, for the year 1997. No pronouncement as to cost. SO ORDERED.4 Respondent filed a motion for partial reconsideration praying that petitioner be ordered to pay deficiency interest of 20% per annum for failure to pay the same on January 2, 2000, as indicated in the notices. On December 29, 2004, the Court of Appeals granted the motion and modified the June 29, 2004 decision as follows: WHEREFORE, the instant petition is hereby GRANTED. The decision of the Court of Tax Appeals dated October 24, 2001 is REVERSED and SET ASIDE. In lieu thereof, respondent Michel J. Lhuillier Pawnshop, Inc., is ORDERED TO PAY: (1) 19,961,636.09, as deficiency Value-Added Tax, inclusive of surcharge and interest; (2) P3,142,986.02, as deficiency Documentary Stamp Tax, inclusive of surcharge and interest, for the year 1997; and (3) Delinquency Interest at the rate of 20% per annum from January 2, 2000, until the deficiency assessment are fully paid, pursuant to Section 249 of the National Internal Revenue Code. No pronouncement as to costs. SO ORDERED.5

On January 25, 2005, petitioner elevated the case to this Court. Subsequently, it filed a motion to withdraw the petition with respect to the issue of VAT.6 Petitioner manifested that the Chamber of Pawnbrokers of the Philippines, where it is a member, entered into a Memorandum of Agreement7 with the Bureau of Internal Revenue (BIR) allowing the pawnshop industry to compromise the issue of VAT on pawnshops. Considering that petitioner already paid the agreed amount of settlement, it prayed that the case be decided solely on the issue of DST. On September 28, 2005, the Court granted petitioners partial withdrawal of the petition.8 Hence, the lone question to be resolved in the present petition is whether petitioners pawnshop transactions are subject to DST. The Court rules in the affirmative. Sections 173 and 195 of the NIRC, state: SEC. 173. Stamp Taxes Upon Documents, Loan Agreements, Instruments, and Papers. Upon documents, instruments, loan agreements and papers, and upon acceptances, assignments, sales and transfers of the obligation, right or property incident thereto, there shall be levied, collected and paid for, and in respect of the transaction so had or accomplished, the corresponding documentary stamp taxes x x x. (Emphasis supplied) SEC. 195. Stamp Tax on Mortgages, Pledges, and Deeds of Trust. On every mortgage or pledge of lands, estate, or property, real or personal, heritable or movable, whatsoever, where the same shall be made as security for the payment of any definite and certain sum of money lent at the time or previously due and owing or forborne to be paid, being payable and on any conveyance of land, estate, or property whatsoever, in trust or to be sold, or otherwise converted into money which shall be and intended only as security, either by express stipulation or otherwise, there shall be collected a documentary stamp tax at the following rates: "(a) When the amount secured does not exceed Five thousand pesos (P5,000), Twenty pesos (P20).
1avv phil.net

(b) On each Five thousand pesos (P5,000), or fractional part thereof in excess of Five thousand pesos (P5,000), an additional tax of Ten pesos (10.00). x x x x. (Emphasis supplied) It is clear from the foregoing provisions that the subject of a DST is not limited to the document embodying the enumerated transactions. A DST is an excise tax on the exercise of a right or privilege to transfer obligations, rights or properties incident thereto. In Philippine Home Assurance Corporation v. Court of Appeals,9 it was held that: In general, documentary stamp taxes are levied on the exercise by persons of certain privileges conferred by law for the creation, revision, or termination of specific legal relationships through the execution of specific instruments. Examples of such privileges, the exercise of which, as effected through the issuance of particular documents, are subject to the payment of documentary stamp taxes are leases of lands, mortgages, pledges and trusts, and conveyances of real property. (Emphasis added) Pledge is among the privileges, the exercise of which is subject to DST. A pledge may be defined as an accessory, real and unilateral contract by virtue of which the debtor or a third person delivers to

the creditor or to a third person movable property as security for the performance of the principal obligation, upon the fulfillment of which the thing pledged, with all its accessions and accessories, shall be returned to the debtor or to the third person.10This is essentially the business of pawnshops which are defined under Section 3 of Presidential Decree No. 114, or the Pawnshop Regulation Act, as persons or entities engaged in lending money on personal property delivered as security for loans. Section 12 of the Pawnshop Regulation Act and Section 21 of the Rules and Regulations For Pawnshops11 issued by the Central Bank12 to implement the Act, require every pawnshop or pawnbroker to issue, at the time of every such loan or pledge, a memorandum or ticket signed by the pawnbroker and containing the following details: (1) name and residence of the pawner; (2) date the loan is granted; (3) amount of principal loan; (4) interest rate in percent; (5) period of maturity; (6) description of pawn; (7) signature of pawnbroker or his authorized agent; (8) signature or thumb mark of pawner or his authorized agent; and (9) such other terms and conditions as may be agreed upon between the pawnbroker and the pawner. In addition, Central Bank Circular No. 445,13 prescribed a standard form of pawn tickets with entries for the required details on its face and the mandated terms and conditions of the pledge at the dorsal portion thereof. Section 3 of the Pawnshop Regulation Act defines a pawn ticket as follows: "Pawn ticket" is the pawnbrokers receipt for a pawn. It is neither a security nor a printed evidence of indebtedness." True, the law does not consider said ticket as an evidence of security or indebtedness. However, for purposes of taxation, the same pawn ticket is proof of an exercise of a taxable privilege of concluding a contract of pledge. At any rate, it is not said ticket that creates the pawnshops obligation to pay DST but the exercise of the privilege to enter into a contract of pledge. There is therefore no basis in petitioners assertion that a DST is literally a tax on a document and that no tax may be imposed on a pawn ticket. The settled rule is that tax laws must be construed in favor of the taxpayer and strictly against the government; and that a tax cannot be imposed without clear and express words for that purpose.14 Taking our bearing from the foregoing doctrines, we scrutinized Section 195 of the NIRC, but there is no way that said provision may be interpreted in favor of petitioner. Section 195 unqualifiedly subjects all pledges to DST. It states that "[o]n every x x x pledge x x x there shall be collected a documentary stamp tax x x x." It is clear, categorical, and needs no further interpretation or construction. The explicit tenor thereof requires hardly anything than a simple application.15 The onus of proving that pawnshops are not subject to DST is thus shifted to petitioner. In establishing tax exemptions, it should be borne in mind that taxation is the rule, exemption is the exception. Accordingly, statutes granting tax exemptions must be construed in strictissimi juris against the taxpayer and liberally in favor of the taxing authority. One who claims an exemption from tax payments rests the burden of justifying the exemption by words too plain to be mistaken and too categorical to be misinterpreted.16 In the instant case, there is no law specifically and expressly exempting pledges entered into by pawnshops from the payment of DST. Section 19917 of the NIRC enumerated certain documents which are not subject to stamp tax; but a pawnshop ticket is not one of them. Hence, petitioners nebulous claim that it is not subject to DST is without merit. It cannot be over-emphasized that tax exemption represents a loss of revenue to the government and must, therefore, not rest on vague

inference.18 Exemption from taxation is never presumed. For tax exemption to be recognized, the grant must be clear and express; it cannot be made to rest on doubtful implications.19 The Court notes that BIR Ruling No. 305-87,20 and BIR Ruling No. 018-88,21 which held that a pawn ticket is subject to DST because it is an evidence of a pledge transaction, had been revoked by BIR Ruling No. 325-88.22In the latter ruling, the BIR held that DST is a tax on the document; and since a pawn ticket is not an evidence of indebtedness, it cannot be subject to DST. Nevertheless, this interpretation is not consistent with the provisions of Section 195 of the NIRC which categorically taxes the privilege to enter into a contract of pledge. Indeed, administrative issuances must not override, supplant or modify the law but must be consistent with the law they intend to carry out.23 Finally, petitioner invokes the declaration of nullity of Revenue Memorandum Circular (RMC) No. 4391 inCommissioner of Internal Revenue v. Michel J. Lhuillier Pawnshop, Inc.24 Said case, however, is not applicable to the present controversy. RMC No. 43-91 is actually a clarification of Revenue Memorandum Order No. 15-91 which classified pawnshops as "lending investors" and imposed upon them a 5% lending investors tax. While RMC No. 43-91 declared in addition that pawnshops are subject to DST, such was never an issue in Commissioner of Internal Revenue v. Michel J. Lhuillier Pawnshop, Inc., because nowhere was it mentioned therein that the pawnshop involved was directed to pay DST. Otherwise stated, the declaration of nullity of RMC No. 43-91 was the Courts finding, among others, that pawnshops cannot be classified as lending investors; and certainly not because pawnshops are not subject to DST. The invocation of said ruling is therefore misplaced. WHEREFORE, the petition is DENIED and the June 29, 2004 Decision of the Court of Appeals, as modified on December 29, 2004, in CA-G.R. SP No. 67667, is AFFIRMED. SO ORDERED. CONSUELO YNARES-SANTIAGO Associate Justice

G.R. No. 148777

October 18, 2007

ESTATE OF THE LATE ENCARNACION VDA. DE PANLILIO, represented by GEORGE LIZARES, Petitioner, vs. GONZALO DIZON, RICARDO GUINTU, ROGELIO MUNOZ, ELISEO GUINTU, ROBERTO DIZON, EDILBERTO CATU, HERMINIGILDO FLORES, CIPRIANO DIZON, JUANARIO MANIAGO, GORGONIO CANLAS, ANTONIO LISING, CARLOS PINEDA, RENATO GOZUN, ALFREDO MERCADO, BIENVENIDO MACHADA, and the REGIONAL DIRECTOR of the DEPARTMENT OF AGRARIAN REFORM, REGION III, Respondents. x - - - - - - - - - - - - - - - - - - - - - - -x G.R. No. 157598 REYNALDO VILLANUEVA, CENON GUINTO, CELESTINO DIZON, CARMELITA VDA. DE DAVID, FORTUNATO TIMBANG, OSCAR SANTIAGO, CELESTINO ESGUERRA, ANTONIO

DIZON, and TEODULO DIZON, Petitioners, vs. COURT OF APPEALS and GEORGE LIZARES, Respondents. DECISION VELASCO, JR., J.: Did the owner of two (2) lots by a subsequent affidavit validly and legally revoke the first affidavit voluntarily surrendering said lots for land acquisition under the Comprehensive Agrarian Reform Law? The answer will determine the rights of the parties in the instant petitionsthe heirs of the lot owner vis--vis the tenants declared to be beneficiaries of the Operation Land Transfer (OLT) under Presidential Decree No. (PD) 27.1 The Case Before us are two petitions. The first is a Petition for Review on Certiorari2 under Rule 45 docketed as G.R. No. 148777, which seeks to set aside the November 29, 2000 Amended Decision3 of the Court of Appeals (CA) in CA-G.R. SP No. 47502, which affirmed the August 7, 1997 Decision4 of the Department of Agrarian Reform Adjudication Board (DARAB) in DARAB Case Nos. 4558-4561; and the June 26, 2001 Resolution5 disregarding the Motion for Reconsideration6 of said Amended Decision. The other is a Petition for Certiorari and Mandamus7under Rule 65 docketed as G.R. No. 157598, which seeks to set aside the November 14, 2002 CA Resolution8which denied petitioners Motion for Entry of Judgment,9 and the January 24, 2003 CA Resolution10 likewise denying petitioners Motion for Reconsideration.11 Through our August 27, 2003 Resolution,12 these cases were consolidated as they arose out of the same factual milieu. The Facts Encarnacion Vda. De Panlilio is the owner of the disputed landholdings over a vast tract of land, with an aggregate area of 115.41 hectares called Hacienda Masamat located in Masamat, Mexico, Pampanga covered by Transfer Certificates of Title (TCT) Nos. 3510, 3513, 3514, 3515, 3522, 3523, 3524, 3525, 3526, 3528, 3530, 3531, 3532, 3533, RT-499 (9191), and RT-500 (11670),13 all of the Pampanga Registry of Deeds. On April 19, 1961, Panlilio entered into a contract of lease over the said landholdings with Paulina Mercado, wife of Panlilios nephew. The contract of lease was subsequently renewed on October 13, 196414 and September 18, 1974,15 covering agricultural years from 1961 to 1979. Sometime in 1973, pursuant to the OLT under PD 27, the Department of Agrarian Reform (DAR) issued thirty eight (38) Certificates of Land Transfer (CLTs) to Panlilios tenants. The tenantawardees were made defendants in the instant consolidated complaints filed by petitioner Lizares. On November 26, 1973, lessee Paulina Mercado filed a letter-complaint with the DAR questioning the issuance of CLTs to Panlilios tenants, alleging, among others, that the DAR should not have issued the CLTs since the land involved was principally being planted with sugar and was outside the coverage of PD 27. She claimed that respondents surreptitiously planted palay (rice plant) instead of sugar in order to bring the land within the purview of the law. After proper investigation, the DAR concluded that the CLTs were "properly and regularly issued."

Paulina Mercado likewise filed a similar complaint with the Court of Agrarian Relations (CAR) at San Fernando, Pampanga, docketed as CAR Case No. 1649-P74. On December 4, 1976, the tenants of the portion of the land planted with sugar cane petitioned the DAR to cause the reversion of their sugarland to riceland so that it may be covered by the Agrarian Reform Law. The petition was with the conformity of Panlilio. Thus, on January 12, 1977, Panlilio executed an Affidavit, partly quoted as follows: 1. That I am the owner of an agricultural landholding situated [in] Mexico, Pampanga, with an area of 115.4 hectares, more or less, dedicated at present to the production of palay and sugarcane crops; 2. That I have been informed that 50.22 hectares comprising the portion dedicated to palay crop have been placed under the provisions and coverage of P.D. No. 27 and that Certificates of Land Transfer have been issued to the tenant-farmers thereon; 3. That as owner of the abovementioned property, I interpose no objection to the action taken by the Department of Agrarian Reform in placing the aforesaid portion dedicated to palay crop within the coverage of P.D. No. 27; 4. That lately, all the tenants of my said property including those in the sugarcane portions, have filed a petition dated December 4, 1976 with the Honorable Secretary Conrado F. Estrella, Secretary of Agrarian Reform, requesting for the reversion of the sugarcane portion of my property adverted to [the] palay land which is the original classification of my entire subject property; 5. That the aforesaid petition dated December 4, 1976 of the tenants of my property which was filed with the DAR carries my written conformity; 6. That it is my desire that my entire subject property which is referred to as Hacienda Masamat be placed under the coverage of P.D. 27 without exception and that thereafter the same be sold to tenant-petitioners.16 (Emphasis supplied.) On January 20, 1977, by virtue of the said Affidavit, the DAR Secretary, through Director Gaudencio Besa, ordered Director Severino Santiago, Regional Director of Region III, San Fernando, Pampanga, "to distribute all land transfer certificates, in view of the desire of Encarnacion Vda. de Panlilio to place her property under the Land Transfer Program of the government." On the basis of the action of the DAR Secretary, the CAR, on March 17, 1978, issued an Order dismissing the complaint of Paulina Mercado (lessee) in CAR Case No. 1649-P74, thus: With this development, the resolution of the principal issue in the instant case has become moot and academic, it being already settled in the DAR proceedings the placement of the land in question under the land transfer program of the government. Therefore, the instant case should be dismissed. Necessarily, all pending incidents should be deemed disposed of. 17 On December 29, 1986, Panlilio died. Thereafter, sometime in 1993, the DAR issued Emancipation Patents (EPs) to the following tenants of Panlilio:

EP Nos. Hermenegildo Flores Celestino Dizon 690774 143627 690960 683355 45390 680524 690758 45260 45256 681072 45326 143207 45265 45219 690759 45259 143508 197097 45254 143208 475341 475340

Gonzalo Dizon Roberto Dizon Cipriano Dizon Antonio Dizon Teodulo Dizon Juanario Maniago Celestino Esguerra Florentino Lapuz Gorgonio Canlas Carlos Pineda Renato Gozun Romeo Pangilinan Jose Serrano

Wenceslao Pangilinan 476572 Guillermo del Rosario Candido Timbang 475339 143931 45262 45257 4526618

Arsenio Legaspi

Subsequently, in June 1994, the Bacolod City Regional Trial Court (RTC), Branch 49 appointed petitioner George Lizares as executor of the estate of Panlilio.19 Records show that petitioner Lizares is the son of the late Jesus Lizares, Panlilios administrator of Hacienda Masamat during her lifetime. On February 28, 1994, petitioner Lizares filed his first complaint with the Provincial Agrarian Reform Adjudicator (PARAD), Region III, San Fernando, Pampanga, docketed as DARAB Case No. 638 P94,20 for annulment of coverage of landholdings under PD 27 and ejectment against Reynaldo Villanueva, et al. who filed their Answer with Counterclaim21 on April 12, 1994.

On April 10, 1995, petitioner filed with the PARAD three more complaints for cancellation of EPs, docketed as DARAB Case Nos. 933-P95,22 934-P95,23 and 935-P95,24 against the rest of respondents who filed their motions to dismiss25 on grounds of lack of cause of action and lack of jurisdiction. On July 13, 1995, the PARAD denied the motions.26 Respondents then filed their Answer with Counterclaim.27 Upon petitioners motion, all the cases were consolidated. The PARAD then directed the parties to submit their respective position papers,28 and, thereafter, considered the cases submitted for decision. The three (3) complaints filed in 1995 for cancellation of EPs have the following defendants: (1) in DARAB Case No. 933-P95, Herminigildo Flores and the Regional Director, DAR, Region III; (2) in DARAB Case No. 934-P95, Celestino Dizon, Gonzalo Dizon, Roberto Dizon, and the Regional Director, DAR, Region III; and (3) in DARAB Case No. 935-P95, Cipriano Dizon, Antonio Dizon, Teodulo Dizon, Juanario Maniago, Celestino Esguerra, Florentino Lapuz, Gorgonio Canlas, Antonio Lising, Carlos Pineda, Renato Gozun, Alfredo Mercado, Romeo Pangilinan, Jose Serrano, Wenceslao Pangilinan, Guillermo del Rosario, Candido Timbang, Bienvenido Mechada, and Arsenio Legaspi, and the Regional Director, DAR, Region III. Thus, aside from public respondent DAR Regional Director, Region III, DARAB Case No. 638-P94 had 15 defendants, DARAB Case No. 933-P95 had a sole defendant, DARAB Case No. 934-P95 had three defendants, and DARAB Case No. 935-P95 had 18 defendants. All the four (4) consolidated cases were against 37 defendants. The Ruling of the PARAD in DARAB Case Nos. 638-P94, 933-P95, 934-P95 and 935-P95 On November 14, 1995, the PARAD rendered a Joint Decision29 dismissing petitioner Lizares complaint on the ground that the subject landholdings have been properly placed under the coverage of PD 27 through the January 12, 1977 Affidavit30 of Panlilio, unequivocally placing her entire property within the coverage of the OLT. In addition, the PARAD relied on the report of the DAR and the Bureau of Lands personnel that the subject landholding is devoted to palay. And, finally, the PARAD applied the equitable remedy of laches, in that Panlilio failed during her lifetime to bring to the attention of the DAR and CAR her February 3, 1977 Affidavit31 ostensibly revoking her previous January 12, 1977 Affidavit. The Ruling of the DARAB in DARAB Case Nos. 4558-4561 (DARAB Case Nos. 638-P94, 933-P95, 934-P95 and 935-P95) Aggrieved, petitioner Lizares appealed the PARAD decision before the DARAB, which, on August 7, 1997, rendered a Decision32 affirming the PARAD decision. The DARAB likewise disregarded petitioner Lizares Motion for Reconsideration33 of the August 7, 1997 Decision. Prior to the issuance of the August 7, 1997 DARAB Decision, petitioner Lizares and defendantappellees Wenceslao Pangilinan, Romeo Pangilinan, Jose Serrano, and Guillermo del Rosario filed their February 10, 1997 Joint Partial Motion to Dismiss34 with the DARAB, seeking dismissal of their respective claims in DARAB Case No. 4561 (DARAB Case No. 935-P95) based on an Affidavit of Cancellation of Lis Pendens Annotation of TCT Nos. 14321, 14322, 14323, and 14324, all of the Pampanga Register of Deeds,35 which was executed by petitioner Lizares. Apparently, petitioner Lizares received from a certain Ms. Petronila Catap the amount of PhP 1,356,619 for the settlement

of DARAB Case No. 4561 (DARAB Case No. 935-P95) against the abovementioned defendantappellees.36 Earlier on, petitioner Lizares filed his April 19, 1996 Motion to Withdraw Appeal in favor of defendantappellees Reynaldo Villanueva, Cenon Guinto, Carmelita Vda. de David, Oscar Santiago, Celestino Dizon, Fortunato Timbang, and Florentino Lapuz in DARAB Case No. 4558 (DARAB Case No. 638P94); defendant-appellee Celestino Dizon in DARAB Case No. 4559 (DARAB Case No. 933-P95); and defendant-appellees Antonio Dizon, Teodulo Dizon, Celestino Esguerra, Florentino Lapuz, and Candido Timbang in DARAB Case No. 4561 (DARAB Case No. 935-P95), as said defendantappellees agreed to settle and compromise with petitioner Lizares. The motion was however resisted by other defendant-appellees through a May 27, 1996 Counter-Motion to the Plaintiff-Appellant Motion to Withdraw Appeal,37 on the ground that a piece-meal withdrawal is not proper as the matter in controversy is common and the same to all. Unfortunately, the Motion to Withdraw Appeal was not resolved as petitioner Lizares did not attend the DARAB scheduled hearings. Thus, the August 7, 1997 Decision was subsequently promulgated in favor of all defendant-appellees. Petitioner Lizares elevated the DARAB consolidated cases to the CA for review in CA-G.R. SP No. 47502 under Rule 43 of the Rules of Court. The Ruling of the Court of Appeals The April 11, 2000 CA Decision At the outset, the CA saw it differently. On April 11, 2000, the CA rendered a Decision sustaining petitioners position and granted relief, thus: WHEREFORE, the petition is GRANTED. The decision of the Department of Agrarian Reform Adjudication Board affirming the decision of the Provincial Agrarian Reform Adjudication Board, Region III, San Fernando, Pampanga is REVERSED and SET ASIDE. The Certificates of Land Transfer issued to private respondents insofar as they pertain to sugarlands are hereby declared NULL and VOID.38 The CA primarily anchored its ruling on Panlilios February 3, 1977 Affidavit ostensibly revoking her January 12, 1977 Affidavit and ascribed error to both the PARAD and DARAB in ignoring Panlilios second affidavit. Moreover, it relied on the November 26, 1973 letter-complaint of Paulina Mercado to the DAR Secretary and the CAR Resolution in CAR Case No. 1649-P74, that the subject landholding in question is principally devoted to the production of sugar cane as buttressed by the report and findings of Atty. Gregorio D. Sapera, Legal Officer III of the DAR Central Office. The November 29, 2000 CA Amended Decision Unconvinced, Reynaldo Villanueva, et al. interposed a Motion for Reconsideration or in the alternative, Motion to Remand for New Trial39 of said Decision, where they contended that: 1. Petitioners complaints should have been dismissed for his failure to implead therein indispensable parties, namely the Land Bank of the Philippines which paid Panlilio the amortizations on the land and the third persons who purchased the landholdings from the tenants;

2. [The CA] disturbed and reversed the findings of fact by the PARAD and the DARAB supported by substantial evidence. x x x 3. It is not the job of the appellate court to sieve through the evidence considered by the administrative agency in adjudicating the case before it, following the doctrine of primary jurisdiction. x x x 4. [The CA] violated the principle of res judicata in reversing the CAR resolution dismissing the complaint in Case No. 1649-P74 rendered twenty-two years ago. Likewise, estoppel and laches bar the instant actions. x x x 5. Lastly, the petition should be dismissed in favor of Romeo Pangilinan, Wenceslao Pangilinan, Jose Serrano and Guillermo del Rosario in view of the compromise agreement in DARAB Case No. 4561 between them and petitioner herein. They submitted, as proof, their joint motion to dismiss the complaint executed on February 10, 1997 and petitioner Lizares receipt from them of P1,356,619.00 as consideration for the dismissal of his complaints against them.40 After considering the above contentions together with petitioner Lizares Comment on the Motion for Reconsideration dated May 2, 2000 with Motion for Correction of the Dispositive Portion of the Decision,41respondents Reply42 to said comment, and petitioners Rejoinder,43 the appellate court rendered on November 29, 2000 the assailed Amended Decision on a vote of 3-2, the dispositive portion of which reads: WHEREFORE, respondents motion for reconsideration of Our Decision is hereby GRANTED. The petition is ordered DISMISSED and the challenged DARAB decision is AFFIRMED. Costs against petitioner.44 In reversing its earlier April 11, 2000 Decision, the CA concluded that the February 3, 1977 Affidavit was not executed by Panlilio, ratiocinating that if she indeed made the second affidavit which purportedly repudiated her earlier January 12, 1977 Affidavit, the natural course of action to take was for her to submit the second affidavit to the DAR to exclude the majority of her landholdings planted with sugar cane from the coverage of the OLT under PD 27. Her failure to effectuate the removal of her land from the Comprehensive Agrarian Reform Program (CARP) coverage for nine (9) years until her death on December 29, 1986 led the court a quo to believe that the second affidavit was not genuine. Moreover, Jesus Lizares, Panlilios administrator and father of petitioner Lizares, likewise did not take any action, in accordance with the second affidavit showing that he was not aware of such affidavit of revocation. The CA even doubted petitioner Lizares contention that the second affidavit was submitted to the DAR and CAR but was not acted upon for such averment was not substantiated. The appellate court also found Panlilio and her successors-in-interest guilty of laches, pointing out that aside from the alleged second affidavit of revocation, there was no indication of Panlilios intention to recover the disputed landholdings. On the issue of fraud and collusion on the part of the DAR personnel, the CA found that no preponderance of evidence was evinced to prove the accusation. In fine, the CA recognized and applied the principle of res judicata to the March 17, 1978 CAR Order rendered more than 20 years ago, holding that the resolution of said court placing the entire landholdings in question under the coverage of PD 27 had long become final and executory.

Petitioner Lizares plea for recall of the assailed Amended Decision was rejected through the assailed June 26, 2001 CA Resolution.45 Petition for review on certiorari under G.R. No. 148777 Thus, we have this Petition for Review on Certiorari against only 15 private respondents from the original defendants below, namely: Gonzalo Dizon, Ricardo Guintu, Rogelio Munoz, Eliseo Guintu, Roberto Dizon, Edilberto Catu, Herminigildo Flores, Cipriano Dizon, Juanario Maniago, Gorgonio Canlas, Antonio Lising, Carlos Pineda, Renato Gozun, Alfredo Mercado, and Bienvenido Machada. Petition for certiorari under G.R. No. 157598 Consequent to the filing of the Petition for Review on Certiorari by petitioner Lizares, on January 28, 2002, the other original defendants in the consolidated cases before the PARAD and DARAB, who were not made respondents in G.R. No. 148777, namely: Reynaldo Villanueva, Cenon Guinto, Celestino Dizon, Carmelita Vda. de David, Florentino Lapuz, Fortunato Timbang, Oscar Santiago, Candido Timbang, Celestino Esguerra, Antonio Dizon, and Teodulo Dizon, filed before the CA a Motion for Entry of Judgment46 of the November 29, 2000 Amended Decision in CA-G.R. SP No. 47502 based on the out-of-court settlement during the pendency of the case. On July 4, 2002, a second Motion for Entry of Judgment47 with the same averments was filed reiterating their plea for execution. The November 14, 2002 CA Resolution48 denied their motions for entry of judgment. A Motion for Reconsideration49 having been turned down through the January 24, 2003 CA Resolution,50 petitioners now register the instant Petition for Certiorari and Mandamus in G.R. No. 157598, assailing the aforesaid Resolutions for grave abuse of discretion. The Issues In G.R. No. 148777, petitioner Lizares presents the following issues for our consideration: 1. Whether or not in its 29 November 2000 Amended Decision, the Court of Appeals erred gravely in reversing its ruling in the 11 April 2000 Decision on the import and significance of the second affidavit executed by Encarnacion L. Vda. de Panlilio revoking or repudiating her first affidavit (by which she purportedly agreed to have her land at Hacienda Masamat, which was dedicated to sugarcane, placed under the coverage of P.D. No. 27); 2. Whether or not in its 29 November 2000 Amended Decision, the Court of Appeals erred gravely in setting aside the 11 April 2000 Decisions ruling that the land in question being planted with sugarcane is not covered by P.D. No. 27, by instead declaring that "the fact that land is sugarland has become inconsequential to the coverage under P.D. No. 27 in the light of the affidavit dated January 12, 1977"; 3. Whether or not in its 29 November 2000 Amended Decision, the Court of Appeals erred gravely in finding Encarnacion L. Vda. de Panlilio and petitioner guilty of laches or estoppel; 4. Whether or not res judicata applies in the instant case; 5. Whether or not in its 29 November 2000 Amended Decision, the Court of Appeals erred gravely in failing to rule that there was fraud and collusion on the part of the respondents in the coverage of the subject parcels of land;

6. Whether or not the Court of Appeals acted with grave abuse of discretion in declaring the transfer made by the private respondents to third persons valid; 7. Whether or not forum-shopping or a false certification of non-forum shopping [is present] here; and 8. Whether or not the instant petition complies with the nature and requisites of an appeal by certiorari under Rule 45.51 In G.R. No. 157598, petitioners raise the sole issue of "whether the petitioners are entitled to an entry of judgment."52 The Courts Ruling G.R. No. 148777 Before we go to the substantial issues, we tackle first the procedural issues raised in the last two issues in G.R. No. 148777 on whether the instant petition complies with the requirements of Rule 45 and whether forum shopping is present. Petition complied with requisites for review on certiorari Private respondents contend that the grounds relied upon by petitioner are factual in nature and thus outside the purview of a review on certiorari by this Court. Petitioner disagrees and posits that the petition raises issues of both fact and law which are so intimately intertwined and that issues of law permeate the controversy between the parties. We find for petitioner. The rule is clearquestions of facts are proscribed by Rule 45. A question of law exists when the doubt or controversy concerns the correct application of law or jurisprudence to a certain set of facts; or when the issue does not call for an examination of the probative value of the evidence presented, the truth or falsehood of facts being admitted. A question of fact exists when the doubt or difference arises as to the truth or falsehood of facts or when the query invites calibration of the whole evidence considering mainly the credibility of the witnesses, the existence and relevancy of specific surrounding circumstances, as well as their relation to each other and to the whole, and the probability of the situation.53 The rule is subject to exceptions. One such exception exists in this case. Mixed questions of law and facts are raised pertaining to the applicability of PD 27 on a large portion of subject landholdings that were planted with sugar cane, which would have been otherwise exempt, but were voluntary waived through an affidavit by the lot owner to be placed under the OLT pursuant to said law; the import and significance of the purported affidavit of revocation; and, the interpretation of Executive Order No. (EO) 22854 in relation to subsequent land transfer made by the farmer-beneficiaries. At the very least, the instant petition complies with the requisites of Rule 45, particularly Section 6, as we have given the instant petition due course.55 No forum shopping Private respondents argue that petitioner Lizares is guilty of forum shopping for having pursued other civil cases allegedly involving the same subject matter and on the same grounds raised in this petition. Petitioner Lizares counters that there is no forum shopping, first, as the instant petition is a

mere continuation of a pending action, that is, the consolidated cases filed with the PARAD; second, the causes of action and issues raised in the other civil cases lodged with the RTC were different. Respondents postulation cannot be entertained. Private respondents failed to furnish us copies of portions of the relevant records of the other civil cases instituted by petitioner Lizares needed to determine the existence of forum shopping. Absent such necessary pleadings, we are constrained to take petitioners assertion at face value that the other cases, particularly Civil Case Nos. 11342, 11344, 11345, 11346 and 11347, filed before the RTC differ from the instant case as to the issues raised, the reliefs prayed for, and the parties impleaded. Time and again, the court has reminded prospective petitioners and lawyers alike that it is necessary that they attach to the petition under Rule 45 all the material portions of the case records of the lower courts or quasi-judicial bodies which at one time or another had adjudicated the case or complaint. These documents are required to support the grounds presented in the petition under Rule 45.56 Any decision, order, pleading, or document forming parts of the records that is relevant or important to the petition should be appended to it so that the court, in reviewing the petition, will have easy access to these papers. More importantly, the submission will obviate delay as the court can readily decide the petition without need of the elevation of the records of the court or quasi-judicial body a quo. Now we move on to the substantive issues. Main Issue: Genuineness and authenticity of the February 3, 1977 Affidavit The pith of the dispute is whether or not the February 3, 1977 affidavit of the lot owner, the late Encarnacion Vda. de Panlilio, is genuine or authentic. We rule in the negative. In a slew of cases, the principle is firmly entrenched in this jurisdiction that this Court is not a trier of facts, and is not tasked to calibrate and assess the probative weight of evidence adduced by the parties during trial all over again.57 However, in rare occasions, exceptions are allowed. One exception is when there are competing factual findings by the different triers of fact, such as those made by the quasi-agencies on the one hand and the CA on the other, this Court is compelled to go over the records of the case, as well as the submissions of the parties, and resolve the factual issues.58 In this case, however, there is coalescence in the findings of the appellate court with that of the two quasi-judicial agencies belowthe PARAD and DARABon the issue of the authenticity of the second Panlilio Affidavit. It being a question of fact, we find no reason to disturb the findings and conclusions of the court a quo in its questioned November 29, 2000 Amended Decision holding that the challenged February 3, 1977 Panlilio Affidavit is not an authentic document. We quote with approval the factual findings of the CA which completely gave full accord and affirmed the findings of the PARAD and DARAB, viz: After assessing the grounds raised by respondents in their motion for reconsideration and a meticulous review of the records, We are now in serious doubts as to the correctness of Our Decision. Our reasons are:

First, according to petitioner Lizares, Panlilios second affidavit (revoking her first affidavit) upon which this Court anchors its assailed Decision, was executed as early as February 2, 1977. If it were true, Panlilios natural reaction was to submit her second affidavit or affidavit of revocation to the DAR in order to exclude her landholdings from the coverage of the Operation Land Transfer under P.D. 27. Significantly, Panlilio died on December 29, 1986. She had therefore, nine (9) years from the date of execution of her second affidavit, within which to have her land excluded by the DAR from such coverage considering that it was principally planted [with] sugar and that she was misled by DAR lawyer, Atty. Pepito Sanchez, into signing her first affidavit. But she did not. Petitioners father, Jesus Lizares, was her administrator. Yet he did not also take any action for apparently he was not aware of such affidavit of revocation. Moreover, in her second affidavit, Panlilio specifically stated: "That another reason for my desire not to place my entire property referred to as Hacienda Masamat in Mexico, Pampanga, under P.D. 27 is the fact that the said Hacienda Masamat is leased to my nephews wife, Mrs. Paulina Y. Mercado, and the lease contract I executed in her favor covering my said Hacienda Masamat is still subsisting and in force and will expire only after the agricultural crop year 1978-1979;" If Panlilio indeed signed her affidavit of revocation, why did she not inform her niece Paulina about it in order to protect her right as a lessee? It must be remembered that at that time, the latters complaints (for cancellation of CLTs) against the tenants of Panlilio were still pending in the DAR and the CAR. Had Panlilio given Paulina a copy of such second affidavit, she could have brought it to the attention of the CAR and the DAR. Certainly, the subject landholdings could not have been placed entirely under Operation Land Transfer. We need not emphasize here that being a lessee, Paulina would not want to part with her Aunts landholdings. Out of the blue, the second affidavit surfaced only in 1994 and 1995 when petitioner Lizares brought the instant actions against Panlilios tenants or after eighteen (18) years from the date of its alleged execution. At this juncture, We can only conclude without hesitation that Panlilio did not execute the second affidavit. Petitioner alleged in his position paper that the same affidavit of revocation was submitted to the DAR and the CAR, but they were not acted upon because of the dismissal of the cases for cancellation of CLTs filed by Paulina Mercado. Petitioners claim is a mere allegation. It has not been substantiated. Again, if it were true, why did Panlilio and Paulina fail to pursue any further action?59 We respect and accord finality to the aforequoted findings of facts of the CA, being the tribunal tasked to undertake a final review of the facts of the case subject of course to certain tolerated exceptional situations. Once again we reiterate the prevailing rule that the findings of fact of the trial court, particularly when affirmed by the Court of Appeals are binding upon this Court.60 Second Issue: There is valid waiver through the January 12, 1977 Affidavit The CA likewise did not err in reversing its April 11, 2000 Decision that the subject land was properly covered by PD 27 since Panlilio surrendered said lot to the DAR for coverage under PD 27 pursuant to her January 12, 1977 Affidavit. The non-existence of the February 3, 1977 Affidavit supports the inclusion of the entire lot in the CARP of the Government. On the other hand, petitioner Lizares argues that there was no valid waiver under PD 27.

We are not convinced. Considering the non-revocation of the January 12, 1977 Panlilio Affidavit,, the CA considered the land of Panlilio planted with sugar cane as falling under the coverage of PD 27, thus: [W]hile the proceedings in the CAR tend to establish the land as principally sugarland, hence outside the coverage of P.D. 27, still, Panlilios consent to have the entire land covered by the said law as alleged in her first affidavit, cannot be construed as a violation of its provisions. In fact, in executing the said affidavit, she did not defeat, nor contravene the express intent of the law to emancipate her tenants from the bondage of the soil. In doing so, she even supported its implementation. In Our challenged Decision We found that the subject land was principally planted [with] sugar and therefore outside the pale of P.D. 27. But We overlooked the fact that Panlilio in her first affidavit, which was not validly revoked, expressed her desire to have her entire landholdings placed within the coverage of Operation Land Transfer. To be sure, the fact that Panlilios land is sugarland has become inconsequential in the light of her first affidavit.61 We agree with the CA. While PD 27 clearly applies to private agricultural lands primarily devoted to rice and corn under a system of sharecrop or lease-tenancy, whether classified as landed estate or not, it does not preclude nor prohibit the disposition of landholdings planted with other crops to the tenants by express will of the landowner under PD 27. In the instant case, a large portion of Hacienda Masamat with an aggregate area of 115.41 hectares was planted with sugar cane. It is undisputed, as was duly shown in the January 12, 1977 Panlilio Affidavit, that only 50.22 hectares were planted with palay. Thus, approximately 65.19 hectares of the subject landholdings were planted with sugar cane aside from the portions used for the residences of the tenants and planted with crops for their daily sustenance. Needless to say, with the January 12, 1977 Panlilio Affidavit, she expressed her intent to include the 65.19 hectares to be placed under the OLT pursuant to PD 27 in favor of her tenants which otherwise would have been exempt. Indeed, waiver or an intentional and voluntary surrender of a right can give rise to a valid title or ownership of a property in favor of another under Article 6 of the Civil Code. Thus, such disposition through the OLT pursuant to PD 27 is indeed legal and proper and no irregularity can be attributed to the DAR which merely relied on the January 12, 1977 Panlilio Affidavit. Third Issue: Equitable remedy of laches The court a quo correctly ruled that Panlilio and her successors-in-interest are bound by the coverage of the lot under PD 27 by reason of laches. Even granting arguendo that the February 3, 1977 Affidavit of revocation is genuine and was furnished both the DAR and the CAR, still, no relief can be accorded petitioner Lizares on account of laches. Laches and its elements Delay for a prolonged period of time can result in loss of rights and actions. The equitable defense of laches does not even concern itself with the character of the defendants title, but only with plaintiffs long inaction or inexcusable neglect to bar the latters action as it would be inequitable and unjust to the defendant.

According to settled jurisprudence, "laches" means "the failure or neglect, for an unreasonable and unexplained length of time, to do that whichby the exercise of due diligencecould or should have been done earlier."62Verily, laches serves to deprive a party guilty of it of any judicial remedies. Its elements are: (1) conduct on the part of the defendant, or of one under whom the defendant claims, giving rise to the situation which the complaint seeks a remedy; (2) delay in asserting the complainants rights, the complainant having had knowledge or notice of the defendants conduct as 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 in which the defendant bases the suit; and (4) injury or prejudice to the defendant in the event relief is accorded to the complainant, or the suit is not held barred.63 In Santiago v. Court of Appeals, we explained that there is "no absolute rule as to what constitutes laches or staleness of demand; each case is to be determined according to its particular circumstances."64 Laches has set in The records demonstrate clear signs of laches. The first element is undisputed. Panlilios erstwhile tenants were issued CLTs sometime in 1973 and subsequently EPs in 1993. CAR Case No. 1649P74 filed by Panlilios lessee, Paulina Mercado, was dismissed with finality on March 17, 1978 as no appeal was pursued. Since then, Panlilio and her administrator for the subject landholdings in Hacienda Masamat, Jesus Lizares, did not take any action to revoke the CLTs. With the dismissal of the land case in 1978, with finality, the possession of the tenants of Panlilio was fully recognized by her and her successors-in-interest. It cannot be disputed that Panlilios tenants, the private respondents, occupied portions of the subject landholdings in an open, continuous, and adverse manner in the concept of owners from 1978 until 1994 and 1995 when the subject cases were instituted by petitioner Lizares or for more than sixteen (16) years. Private respondents possession of said portions for a lengthy period of time gave cause to petitioner to complain and take legal steps to protect Panlilios rights of ownership and title over the disputed lot. No such action was taken. Likewise, the second element of laches is amply shown. Panlilio and her successors-in-interest did not take any administrative or judicial action to protect her rights for more than 16 years. As it is, if Panlilio indeed executed the affidavit of revocation in February 3, 1977, why did she not pursue any action to implement her affidavit disregarding her January 12, 1977 Affidavit? Indeed, Panlilio, during her lifetime, did not lift a finger to regain her land. After she died on December 29, 1986, Jesus Lizares, her administrator for Hacienda Masamat, likewise did not initiate any legal action to effectuate her alleged wish. Unfortunately for petitioner Lizares, the cases initiated by him in 1994 and 1995 were belatedly filed and much delay had transpired which proved to be prejudicial to his interests. Anent the third element, private respondents did not know nor anticipate that their possession, occupancy, and ownership of the subject landholdings after 16 years would still be questioned. In fact, private respondents did not only continue tilling the land, but later on had conveyed their lots to innocent third parties for value. Moreover, we take judicial notice that numerous commercial buildings, residential houses, and a large mall stand on major portions of former Hacienda Masamat. In fact, the subject landholdings are now much different from what they were more than two decades ago. Thus, after more than sixteen (16) years of unquestioned, peaceful, and uninterrupted possession, private respondents did not expect that petitioner Lizares would still assert any right over the landholdings after the lapse of such a long period of occupation.

Finally, grave prejudice and serious damage would befall private respondents, in general, who relied on their CLTs and EPs, and subsequent purchasers for value of the lots forming parts of the former hacienda who relied on private respondents titles if the complaints of petitioner were not barred. As a matter of fact, some buyers not impleaded in the instant case opted to settle out-of-court with petitioner Lizares rather than be disturbed in their possession and their right of ownership. Considering the foregoing discussion, we uphold the finding of laches. Verily, it would be a grave injustice if private respondents and the subsequent purchasers for value would now be made to suffer after petitioner Lizares and his predecessors-in-interest had slept on their rights for more than 16 years. Fourth Issue: Principle of res judicata inapplicable Private respondents contend that the dismissal in CAR Case No. 1649-P74 constitutes res judicata over the instant case. CAR Case No. 1649-P74 involved Panlilios lessee against private respondents with the issue of the crops being planted on subject landholdings, while the instant case involves Panlilios successor-in-interest petitioner Lizares against private respondents involving the issue of the alleged affidavit of revocation. The reliance on res judicata is misplaced. Res judicata, either in the concept of bar by former judgment or conclusiveness of judgment, cannot be applied to the present case. In Vda. de Cruzo v. Carriaga, Jr., we discussed the doctrine of res judicata, as follows: The doctrine of res judicata thus lays down two main rules which may be stated as follows: 1) The judgment or decree of a court of competent jurisdiction on the merits concludes the parties and their privies to the litigation and constitutes a bar to a new action or suit involving the same cause of action either before the same or any other tribunal; and 2) Any right, fact, or matter in issue directly adjudicated or necessarily involved in the determination of an action before a competent court in which a judgment or decree is rendered on the merits is conclusively settled by the judgment therein and cannot again be litigated between the parties and their privies whether or not the claim or demand, purpose or subject matter of the two suits is the same. These two main rules mark the distinction between the principles governing the two typical cases in which a judgment may operate as evidence. In speaking of these cases, the first general rule above stated, and which corresponds to the aforequoted paragraph (b) of Section 49, is referred to as "bar by former judgment" while the second general rule, which is embodied in paragraph (c) of the same section, is known as "conclusiveness of judgment." Stated otherwise, when we speak of res judicata in its concept as a "bar by former judgment," the judgment rendered in the first case is an absolute bar to the subsequent action since said judgment is conclusive not only as to the matters offered and received to sustain that judgment but also as to any other matter which might have been offered for that purpose and which could have been adjudged therein. This is the concept in which the termres judicata is more commonly and generally used and in which it is understood as the bar by prior judgment constituting a ground for a motion to dismiss in civil cases. On the other hand, the less familiar concept or less terminological usage of res judicata as a rule on conclusiveness of judgment refers to the situation where the judgment in the prior action operates as an estoppel only as to the matters actually determined therein or which were necessarily included therein. Consequently, since other admissible and relevant matters which the parties in the second

action could properly offer are not concluded by the said judgment, the same is not a bar to or a ground for dismissal of the second action. At bottom, the other elements being virtually the same, the fundamental difference between the rule of res judicataas a bar by former judgment and as merely a rule on the conclusiveness of judgment is that, in the first, there is an identity in the cause of action in both cases involved whereas, in the second, the cause of action in the first case is different from that in the second case.65 Premised on the foregoing disquisition, the principle of res judicata requires the concurrence of the following requisites: a) The former judgment or order must be final; b) It must be a judgment or order on the merits, that is, it was rendered after a consideration of the evidence or stipulations submitted by the parties at the trial of the case; c) It must have been rendered by a court having jurisdiction over the subject matter and the parties; and d) There must be, between the first and second actions, identity of parties, of subject matter and of cause of action. This requisite is satisfied if the two actions are substantially between the same parties.66 For want of the fourth requisite that there must be, between the first and second actions, identity of parties, subject matter, and cause of action, the instant case is thus removed from the operation of the principle of res judicata. Stated differently, there is no identity of parties and issues in CAR Case No. 1649-P74 and the instant case. Nevertheless, while res judicata is not applicable in the instant case, still, it will not accord legal relief to petitioner with respect to his claim of ownership over the lots in dispute. Fifth Issue: Fraud and collusion not proven Petitioner Lizares accuses the DAR personnel and private respondents of fraud and collusion. Absent any proof, such allegation falls flat. In the recent case of Heirs of Cipriano Reyes v. Calumpang, we elucidated on this same issue of the required evidential proof, thus: Basic is the rule of actori incumbit onus probandi, or the burden of proof lies with the plaintiff. Differently stated, upon the plaintiff in a civil case, the burden of proof never parts. In the case at bar, petitioners must therefore establish their case by a preponderance of evidence, that is, evidence that has greater weight, or is more convincing than that which is offered in opposition to itwhich petitioners utterly failed to do so. Besides, it is an age-old rule in civil cases that one who alleges a fact has the burden of proving it and a mere allegation is not evidence. Fraud is never presumed, but must be established by clear and convincing evidence. Thus, by admitting that Victorino, Luis, and Jovito, all surnamed Reyes, indeed executed the Deed of Quitclaim coupled with the absence of evidence substantiating fraud and mistake in its execution, we are constrained to uphold the appellate courts conclusion that the execution of the Deed of Quitclaim was valid.67

Hence, we uphold the CAs pronouncement that there was no collusion and fraud especially considering that no clear and convincing evidence was presented to overwhelm and rebut the presumption that official duty has been regularly performed68 by the DAR personnel. Sixth Issue: Subsequent transfers valid only to qualified farmer-beneficiaries Petitioner Lizares asseverates that ownership of lands granted to tenant-farmers under PD 27 may not be transferred or conveyed to third parties except by hereditary succession or to the Government. He contends that the CA committed grave abuse of discretion in declaring the sale of the land by private respondents Gonzalo Dizon, et al. to third persons valid. The CA ratiocinated that EO 228 was enacted after PD 27 and since EO 228 is a later law, it will prevail over PD 27. Thus, the ownership of the lot may now be transferred to persons other than the heirs of the beneficiary or the Government. Petitioner is correct. EO 228 not inconsistent with PD 27 on prohibition of transfers The prohibition in PD 27, the Tenants Emancipation Decree, which took effect on October 21, 1972, states that "[t]itle to land acquired pursuant to this Decree or the Land Reform Program of the Government shall not be transferable except by hereditary succession or to the Government in accordance with the provisions of this Decree, the Code of Agrarian Reforms and other existing laws and regulations (emphasis supplied)." Hereditary succession means succession by intestate succession or by will to the compulsory heirs under the Civil Code, but does not pertain to testamentary succession to other persons. "Government" means the DAR through the Land Bank of the Philippines which has superior lien by virtue of mortgages in its favor. Thus, PD 27 is clear that after full payment and title to the land is acquired, the land shall not be transferred except to the heirs of the beneficiary or the Government. If the amortizations for the land have not yet been paid, then there can be no transfer to anybody since the lot is still owned by the Government. The prohibition against transfers to persons other than the heirs of other qualified beneficiaries stems from the policy of the Government to develop generations of farmers to attain its avowed goal to have an adequate and sustained agricultural production. With certitude, such objective will not see the light of day if lands covered by agrarian reform can easily be converted for non-agricultural purposes. On the other hand, Sec. 6 of EO 228 provides, thus: Sec. 6 The total cost of the land including interest at the rate of six percent (6%) per annum with a two percent (2%) interest rebate for amortizations paid on times, shall be paid by the farmerbeneficiary or his heirs to the Land Bank over a period of up to twenty (20) years in twenty (20) equal annual amortizations. Lands already valued and financed by Land Bank are likewise extended a 20year period of payment of twenty (20) equal annual amortizations. However, the farmer-beneficiary if he so elects, may pay in full before the twentieth year or may request the Land Bank to structure a repayment period of less than twenty (20) years if the amount to amount to be financed and the corresponding annual obligations are well within the farmers capacity to meet. Ownership of lands acquired by farmer-beneficiary may be transferred after full payment of amortizations. (Emphasis supplied.)

The CA highlighted and made much of the last sentence of Sec. 6 which authorizes the transfer of the ownership of the lands acquired by the farmer-beneficiary after full payment of amortizations. It construed said provision to mean that the farmer-beneficiary can sell the land even to a non-qualified person. This is incorrect. First of all, the provision in question is silent as to who can be the transferees of the land acquired through the CARP. The rule in statutory construction is that statutes in pari materia should be construed together and harmonized.69 Since there appears to be no irreconcilable conflict between PD 27 and Sec. 6 of EO 228, then the two (2) provisions can be made compatible by maintaining the rule in PD 27 that lands acquired under said decree can only be transferred to the heirs of the original beneficiary or to the Government. Second, PD 27 is the specific law on agrarian reform while EO 228 was issued principally to implement PD 27. This can easily be inferred from EO 228 which provided for the mode of valuation of lands subject of PD 27 and the manner of payment by the farmer-beneficiary and mode of compensation to the land owner. Third, implied repeals are not favored. A perusal of the aforequoted Sec. 6 of EO 228 readily reveals that it confers upon the beneficiary the privilege of paying the value of the land on a twenty (20)-year annual amortization plan at six percent (6%) interest per annum. He may elect to pay in full the installments or have the payment plan restructured. Said provision concludes by saying that after full payment, ownership of the land may already be transferred. Thus, it is plain to see that Sec. 6 principally deals with payment of amortization and not on who qualify as legal transferees of lands acquired under PD 27. Since there is no incompatibility between PD 27 and EO 228 on the qualified transferees of land acquired under PD 27, ergo, the lands acquired under said law can only be transferred to the heirs of the beneficiary or to the Government for eventual transfer to qualified beneficiaries by the DAR pursuant to the explicit proscription in PD 27. Thus, the alleged transfers made by private respondents in G.R. No. 148777 of lands acquired under PD 27 to non-qualified persons are illegal and null and void.70 The ruling in Victorino Torres v. Leon Ventura sheds light on the policy behind the prohibition, thus: The law is clear and leaves no room for doubt. Upon the promulgation of Presidential Decree No. 27 on October 21, 1972, petitioner was DEEMED OWNER of the land in question. As of that date, he was declared emancipated from the bondage of the soil. As such, he gained the rights to possess, cultivate, and enjoy the landholding for himself. Those rights over that particular property were granted by the government to him and to no other. To insure his continued possession and enjoyment of the property, he could not, under the law, make any valid form of transfer except to the government or by hereditary succession, to his successors.71 In addition, the prohibition was expanded not only to cover the title issued to the tenant-farmer but also the rights and interests of the farmer in the land while he is still paying the amortizations on it. A contrary ruling would make the farmer an "easy prey to those who would like to tempt [him/her] with cash in exchange for inchoate title over the same," and PD 27 could be easily circumvented and the title shall eventually be acquired by non-tillers of the soil.72 Anent the contravention of the prohibition under PD 27, we ruled in Siacor v. Gigantana73 and more recently in Caliwag-Carmona v. Court of Appeals,74 that sales or transfers of lands made in violation of PD 27 and EO 228 in favor of persons other than the Government by other legal means or to the farmers successor by hereditary succession are null and void. The prohibition even extends to the surrender of the land to the former landowner. The sales or transfers are void ab initio, being contrary to law and public policy under Art. 5 of the Civil Code that "acts executed against the

provisions of mandatory or prohibiting laws shall be void x x x." In this regard, the DAR is duty-bound to take appropriate measures to annul the illegal transfers and recover the land unlawfully conveyed to non-qualified persons for disposition to qualified beneficiaries. In the case at bar, the alleged transfers made by some if not all of respondents Gonzalo Dizon, et al. (G.R. No. 148777) of lands covered by PD 27 to non-qualified persons are illegal and null and void. G.R. No. 157598 Finally, we resolve the sole issue raised in G.R. No. 157598 on whether petitioners Reynaldo Villanueva, et al. are entitled to a partial entry of judgment of the Amended Decision in CA-G.R. SP No. 47502. Petitioners in G.R. No. 157598 are not entitled to a partial entry of judgment in CA-G.R. SP No. 47502 Petitioners contend that they are entitled to a partial entry of judgment in CA-G.R. SP No. 47502 as respondent George Lizares in G.R. No. 148777 deliberately excluded them on account of the amicable settlement concluded between them. Thus, they contend that any judgment rendered by the Court in G.R. No. 148777 will not affect them. In gist, petitioners strongly assert that the Amended Decision in CA-G.R. SP No. 47502 is already final and executory with respect to them. Respondent Lizares, on the other hand, has continually affirmed that he deliberately excluded petitioners in his petition for review under G.R. No. 148777 as they had amicably settled with him; and that he has released, discharged, and waived any and all claims against petitioners on account of the petition. Thus, respondent Lizares interposes no objection for the issuance of a partial entry of judgment in CA-G.R. SP No. 47502 insofar as petitioners are concerned, as the issues and reliefs he is seeking in G.R. No. 148777 do not concern nor prejudice petitioners. We disagree. It is clear that petitioners, though they settled with respondent Lizares out-of-court, were not able to get a favorable ruling from the DARAB approving the motion to withdraw appeal filed by respondent Lizares in DARAB Case Nos. 4558, 4559, and 4561. This motion for the recall of the appeal remained unacted upon until the August 7, 1997 DARAB Decision was rendered in favor of all the defendants and appellees. Subsequently, the DARAB cases were elevated for review to the CA and docketed as CA-G.R. SP No. 47502. In its November 29, 2000 Amended Decision, the CA upheld the DARAB Decision. On January 28, 2002, petitioners Reynaldo Villanueva, et al. filed a Motion for Entry of Judgment based on their out-of-court settlement with petitioner Lizares while the DARAB case was pending. On July 4, 2002, a second motion for entry of judgment was filed which was denied together with the first motion by the CA on November 14, 2002. The reason for the denial by the CA of the aforementioned prayers for entry of judgment is as follows: Our Amended Decision in this case had long been elevated to the Supreme Court by a petition for review on certiorari under Rule 45. As held by the Supreme Court in Heirs of the Late Justice Jose

B. L. Reyes vs. Court of Appeals, by the mere fact of the filing of the petition, the finality of the Court of Appeals decision was stayed, andthere could be no entry of judgment therein, and hence, no premature execution could be had. In that case, the High Court emphatically declared that when this Court adopted a resolution granting execution pending appeal after the petition for review was already filed in the Supreme Court, the Court of Appeals encroached on the hallowed grounds of the Supreme Court. Thus, We find no legal basis or justification to allow [the] motions for partial entry of judgment even on the ground that private [respondent]-movants were not impleaded in G.R. No. 148777 and in the absence of opposition from herein petitioner who had allegedly concluded an outof-court settlement with private [respondent]-movants.75 We fully agree with the CA that there should be no partial entry of judgment for petitioners Reynaldo Villanueva, et al. since their motion to withdraw was not acted upon by the DARAB nor by the CA. Thus, there is nothing to record in the Book of Entry of Judgments. More importantly, it appears that the transfers made by some or all of petitioners Reynaldo Villanueva, et al. (G.R. No. 157598) to non-qualified persons are proscribed under PD 27. Such finding necessarily preludes the entry of judgment in favor of said petitioners. Consequently, the alleged transfers made by petitioners Villanueva, et al., being in contravention of a prohibitory provision of PD 27, are null and void, and the titles issued to non-qualified individuals have to be cancelled and new ones issued to the Government.
1w phi 1

WHEREFORE, the petition in G.R. No. 148777 is partly granted. The November 29, 2000 Amended Decision of the CA in CA-G.R. SP No. 47502 is affirmed with the modification that the transfers made by private respondents to non-qualified persons, if any, under PD 27 are illegal and declared NULL and VOID, and the titles issued based on the transfers are likewise NULL and VOID. The DAR is ORDERED to investigate the transfers covering the subject landholdings and, based on the findings of illegal transfers for violations of PD 27 and EO 228, to coordinate with the Register of Deeds of Pampanga for the cancellation of the titles registered in the names of the transferees or to their subsequent transferees and to issue new titles to the Government for disposition to qualified beneficiaries. The November 14, 1995 PARAD Joint Decision in DARAB Cases Nos. 638-P94, 933P95, 934-P95, and 935-P95, as affirmed by the August 7, 1997 DARAB Decision in DARAB Case Nos. 4558, 4559, 4560, and 4561, is accordingly MODIFIED. The petition in G.R. No. 157598 is DISMISSED for lack of merit. The transfers made by petitioners Reynaldo, et al. to non-qualified persons, if any, under PD 27 are likewise declared NULL and VOID. Similarly, the DAR is ORDERED to investigate the transfers covering the subject landholdings and, based on the findings of illegal transfers for violations of PD 27 and EO 228, to coordinate with the Register of Deeds of Pampanga for the cancellation of the titles concerned registered in the names of the transferees or to their subsequent transferees and to issue new titles to the Government for disposition to qualified beneficiaries. SO ORDERED. PRESBITERO J. VELASCO, JR. Associate Justice

47

G.R. No. 167232

July 31, 2009

D.B.T. MAR-BAY CONSTRUCTION, INCORPORATED, Petitioner, vs. RICAREDO PANES, ANGELITO PANES, SALVADOR CEA, ABOGADO MAUTIN, DONARDO PACLIBAR, ZOSIMO PERALTA and HILARION MANONGDO, Respondents. DECISION NACHURA, J.: Before this Court is a Petition1 for Review on Certiorari under Rule 45 of the Rules of Civil Procedure, assailing the Court of Appeals (CA) Decision2 dated October 25, 2004 which reversed and set aside the Order3 of the Regional Trial Court (RTC) of Quezon City, Branch 216, dated November 8, 2001. The Facts Subject of this controversy is a parcel of land identified as Lot Plan Psu-123169,4 containing an area of Two Hundred Forty Thousand, One Hundred Forty-Six (240,146) square meters, and situated at Barangay (Brgy.) Pasong Putik, Novaliches, Quezon City (subject property). The property is included in Transfer Certificate of Title (TCT) No. 200519,5 entered on July 19, 1974 and issued in favor of B.C. Regalado & Co. (B.C. Regalado). It was conveyed by B.C. Regalado to petitioner D.B.T. MarBay Construction, Inc. (DBT) through a dacion en pago6 for services rendered by the latter to the former. On June 24, 1992, respondents Ricaredo P. Panes (Ricaredo), his son Angelito P. Panes (Angelito), Salvador Cea, Abogado Mautin, Donardo Paclibar, Zosimo P. Peralta, and Hilarion Manongdo (herein collectively referred to as respondents) filed a Complaint7 for "Quieting of Title with Cancellation of TCT No. 200519 and all Titles derived thereat (sic), Damages, with Petition for the Issuance of Injunction with Prayer for the Issuance of Restraining Order Ex-Parte, Etc." against B.C. Regalado, Mar-Bay Realty, Inc., Spouses Gereno Brioso and Criselda M. Brioso, Spouses Ciriaco and Nellie Mariano, Avelino C. Perdido and Florentina Allado, Eufrocina A. Maborang and Fe Maborang, Spouses Jaime and Rosario Tabangcura, Spouses Oscar Ikalina and the Register of Deeds (RD) of Quezon City. Subsequently, respondents filed an Amended Complaint8 and a Second Amended Complaint9particularly impleading DBT as one of the defendants. In the Complaints, Ricaredo alleged that he is the lawful owner and claimant of the subject property which he had declared for taxation purposes in his name, and assessed in the amount of P2,602,190.00 by the City Assessor of Quezon City as of the year 1985. Respondents alleged that per Certification10 of the Department of Environment and Natural Resources (DENR) National Capital Region (NCR) dated May 7, 1992, Lot Plan Psu-123169 was verified to be correct and on file in said office, and approved on July 23, 1948. Respondents also claimed that Ricaredo, his immediate family members, and the other respondents had been, and still are, in actual possession of the portions of the subject property, and their possession preceded the Second World War. To perfect his title in accordance with Act No. 496 (The Land Registration Act) as amended by Presidential Decree (P.D.) No. 1529 (The Property Registration Decree), Ricaredo filed with the RTC of Quezon City, Branch 82 a case docketed as LRC Case No. Q-91-011, with LRC Rec. No. N-62563.11

Respondents averred that in the process of complying with the publication requirements for the Notice of Initial Hearing with the Land Registration Authority (LRA), it was discovered by the Mapping Services of the LRA that there existed an overlapping of portions of the land subject of Ricaredos application, with the subdivision plan of B.C. Regalado. The said portion had, by then, already been conveyed by B.C. Regalado to DBT. Ricaredo asseverated that upon verification with the LRA, he found that the subdivision plan of B.C. Regalado was deliberately drawn to cover portions of the subject property. Respondents claimed that the title used by B.C. Regalado in the preparation of the subdivision plan did not actually cover the subject property. They asserted that from the records of B.C. Regalado, they gathered that TCT Nos. 211081,12 21109513 and 211132,14 which allegedly included portions of the subject property, were derived from TCT No. 200519. However, TCT No. 200519 only covered Lot 503 of the Tala Estate with an area of Twenty-Two Thousand Six Hundred Fifteen (22,615) square meters, and was different from those mentioned in TCT Nos. 211081, 211095 and 211132. According to respondents, an examination of TCT No. 200519 would show that it was derived from TCT Nos. 14814,1514827,16 1481517 and T-28. In essence, respondents alleged that B.C. Regalado and DBT used the derivative titles which covered properties located far from Pasong Putik, Novaliches, Quezon City where the subject property is located, and B.C. Regalado and DBT then offered the same for sale to the public. Respondents thus submitted that B.C Regalado and DBT through their deliberate scheme, in collusion with others, used (LRC) Pcs-18345 as shown in the consolidation-subdivision plan to include the subject property covered by Lot Plan Psu-123169. In his Answer18 dated July 24, 1992, the RD of Quezon City interposed the defense that at the time of registration, he found all documents to be in order. Subsequently, on December 5, 1994, in his Motion19 for Leave to Admit Amended Answer, with the Amended Answer attached, he admitted that he committed a grave mistake when he earlier said that TCT No. 200519 covered only one lot, i.e. Lot 503. He averred that upon careful examination, he discovered that TCT No. 200519 is composed of 17 pages, and actually covered 54 lots, namely: Lots 503, 506, 507, 508, 509, 582, 586, 655, 659, 686, 434, 495, 497, 299, 498, 499, 500, 501, 502, 493, 692, 776, 496, 785, 777, 786, 780, 783, 505, 654, 660, 661, 663, 664, 665, 668, 693, 694, 713, 716, 781, 779, 784, 782, 787, 893, 1115, 1114, 778, 669 and 788, all of the Tala Estate. Other lots included therein are Lot 890-B of Psd 36854, Lot 2 of (LRC) Pcs 12892 and Lot 3 of (LRC) Pcs 12892. Thus, respondents' allegation that Lots 661, 664, 665, 693 and 694 of the Tala Estate were not included in TCT No. 200519 was not true. On December 28, 1993, then defendants Spouses Jaime and Rosario Tabangcura (Spouses Tabangcura) filed their Answer20 with Counterclaim, claiming that they were buyers in good faith and for value when they bought a house and lot covered by TCT No. 211095 from B.C. Regalado, the latter being a subdivision developer and registered owner thereof, on June 30, 1986. When respondent Abogado Mautin entered and occupied the property, Spouses Tabangcura filed a case for Recovery of Property before the RTC, Quezon City, Branch 97 which rendered a decision21 in their favor. On its part, DBT, traversing the complaint, alleged that it is the legitimate owner and occupant of the subject property pursuant to a dacion en pago executed by B.C. Regalado in the formers favor; that respondents were not real parties-in-interests because Ricaredo was a mere claimant whose rights over the property had yet to be determined by the RTC where he filed his application for registration; that the other respondents did not allege matters or invoke rights which would entitle them to the relief

prayed for in their complaint; that the complaint was premature; and that the action inflicted a chilling effect on the lot buyers of DBT.22 The RTC's Rulings On June 15, 2000, the RTC through Judge Marciano I. Bacalla (Judge Bacalla), rendered a Decision23 in favor of the respondents. The RTC held that the testimony of Ricaredo that he occupied the subject property since 1936 when he was only 16 years old had not been rebutted; that Ricaredo's occupation and cultivation of the subject property for more than thirty (30) years in the concept of an owner vested in him equitable ownership over the same by virtue of an approved plan, Psu 123169; that the subject property was declared under the name of Ricaredo for taxation purposes;24 and that the subject property per survey should not have been included in TCT No. 200519, registered in the name of B.C. Regalado and ceded to DBT. The RTC further held that Spouses Tabangcura failed to present satisfactory evidence to prove their claim. Thus, the RTC disposed of the case in this wise: WHEREFORE, in view of the foregoing considerations, judgment is hereby rendered declaring Certificate of Title No. 200519 and all titles derived thereat as null and void insofar as the same embrace the land covered by Plan PSU-123169 with an area of 240,146 square meters in the name of Ricaredo Panes; ordering defendant DBT Marbay Realty, Inc. to pay plaintiff Ricaredo Panes the sum of TWENTY THOUSAND (P20,000) pesos as attorneys fees plus costs of suit. SO ORDERED. On September 12, 2000, DBT filed a Motion25 for Reconsideration, based on the grounds of prescription and laches. DBT also disputed Ricaredos claim of open, adverse, and continuous possession of the subject property for more than thirty (30) years, and asserted that the subject property could not be acquired by prescription or adverse possession because it is covered by TCT No. 200519. While the said Motion for Reconsideration was pending, Judge Bacalla passed away. Meanwhile, on January 2, 2001, a Motion26 for Intervention and a Complaint in Intervention were filed by Atty. Andres B. Pulumbarit (Atty. Pulumbarit), representing the Don Pedro/Don Jose de Ocampo Estate. The intervenor alleged that the subject property formed part of the vast tract of land with an area of 117,000 hectares, covered by Original Certificate of Title (OCT) No. 779 issued by the Honorable Norberto Romualdez on March 14, 1913 under Decree No. 10139, which belongs to the Estate of Don Pedro/Don Jose de Ocampo. Thus, the Complaint27 in Intervention prayed that the RTCs Decision be reconsidered; that the legitimacy and superiority of OCT 779 be upheld; and that the subject property be declared as belonging to the Estate of Don Pedro/Don Jose de Ocampo. In its Order28 dated March 13, 2001, the RTC, through Acting Judge Modesto C. Juanson (Judge Juanson), denied Atty. Pulumbarits Motion for Intervention because a judgment had already been rendered pursuant to Section 2,29 Rule 19 of the 1997 Rules of Civil Procedure. On April 10, 2001, the RTC issued an Order30 stating that there appeared to be a need for a clarificatory hearing before it could act on DBT's Motion for Reconsideration. Thus, a hearing was held on May 17, 2001. Thereafter, supplemental memoranda were required of the parties.31 Both parties complied.32 However, having found that the original copy of TCT No. 200519 was not submitted to it for comparison with the photocopy thereof on file, the RTC directed DBT to present the original or certified true copy of the TCT on August 21, 2001.33 Respondents moved to reconsider the said directive34 but the same was denied.35 DBT, on the other hand, manifested that a

copy of TCT No. 200519, consisting of 17 pages, had already been admitted in evidence; and that because of the fire in the Office of the RD in Quezon City sometime in 1988, DBT, despite diligent effort, could not secure an original or certified true copy of said TCT. Instead, DBT submitted a certified true copy of Consolidated Subdivision Plan Pcs 18345.36 On November 8, 2001, the RTC, through Judge Juanson, issued an Order37 reversing the earlier RTC Decision and dismissing the Complaint for lack of merit. The RTC held that prescription does not run against registered land; hence, a title once registered cannot be defeated even by adverse, open or notorious possession. Moreover, the RTC opined that even if the subject property could be acquired by prescription, respondents' action was already barred by prescription and/or laches because they never asserted their rights when B.C. Regalado registered the subject property in 1974; and later developed, subdivided and sold the same to individual lot buyers. On December 18, 2001, respondents filed a Motion for Reconsideration38 which the RTC denied in its Order39dated June 17, 2002. Aggrieved, respondents appealed to the CA.40 The CA's Ruling On October 25, 2004, the CA reversed and set aside the RTC Orders dated November 8, 2001 and June 17, 2002 and reinstated the RTC Decision dated June 15, 2000. The CA held that the properties described and included in TCT No. 200519 are located in San Francisco del Monte, San Juan del Monte, Rizal and Cubao, Quezon City while the subject property is located in Brgy. Pasong Putik, Novaliches, Quezon City. Furthermore, the CA held that Engr. Vertudazo's testimony that there is a gap of around 1,250 meters between Lot 503 and Psu 123169 was not disproved or refuted. The CA found that Judge Juanson committed a procedural infraction when he entertained issues and admitted evidence presented by DBT in its Motion for Reconsideration which were never raised in the pleadings and proceedings prior to the rendition of the RTC Decision. The CA opined that DBT's claims of laches and prescription clearly appeared to be an afterthought. Lastly, the CA held that DBT's Motion for Reconsideration was not based on grounds enumerated in the Rules of Procedure.41 Petitioner filed a Motion for Reconsideration,42 which was, however, denied by the CA in its Resolution43 dated February 22, 2005. Hence, this Petition. The Issues Petitioner raises the following as grounds for this Petition: I. PETITIONER'S FAILURE TO ALLEGE PRESCRIPTION IN ITS ANSWER IS NOT A WAIVER OF SUCH DEFENSE. II. IT IS NOT ERRONEOUS TO REQUIRE THE PRODUCTION OF A CERTIFIED TRUE COPY OF TCT NO. 200519 AFTER THE DECISION ON THE MERITS HAS BEEN RENDERED BUT BEFORE IT BECAME FINAL.

III. A REGISTERED LAND CAN NOT BE ACQUIRED BY ACQUISITIVE PRESCRIPTION. IV. THE TESTIMONY OF ENGR. VERTUDAZO ON THE BASIS OF THE TECHNICAL DESCRIPTION OF LOT 503 IN AN INCOMPLETE DOCUMENT IS UNRELIABLE. V. MR. PANES HAS NEVER BEEN IN OPEN, ADVERSE AND CONTINUOUS POSSESSION OF THE SUBJECT PROPERTY FOR MORE THAN THIRTY (30) YEARS.44 Distilled from the petition and the responsive pleadings, and culled from the arguments of the parties, the issues may be reduced to two questions, namely: 1) Did the RTC err in upholding DBT's defenses of prescription and laches as raised in the latter's Motion for Reconsideration? 2) Which between DBT and the respondents have a better right over the subject property? Our Ruling We answer the first question in the affirmative. It is true that in Dino v. Court of Appeals45 we ruled: (T)rial courts have authority and discretion to dismiss an action on the ground of prescription when the parties' pleadings or other facts on record show it to be indeed time-barred; (Francisco v. Robles, Feb. 15, 1954; Sison v. McQuaid, 50 O.G. 97; Bambao v. Lednicky, Jan. 28, 1961; Cordova v. Cordova, Jan. 14, 1958; Convets, Inc. v. NDC, Feb. 28, 1958; 32 SCRA 529; Sinaon v. Sorongan, 136 SCRA 408); and it may do so on the basis of a motion to dismiss (Sec. 1, [f] Rule 16, Rules of Court), or an answer which sets up such ground as an affirmative defense (Sec. 5, Rule 16), or even if the ground is alleged after judgment on the merits, as in a motion for reconsideration (Ferrer v. Ericta, 84 SCRA 705); or even if the defense has not been asserted at all, as where no statement thereof is found in the pleadings (Garcia v. Mathis, 100 SCRA 250; PNB v. Pacific Commission House, 27 SCRA 766; Chua Lamco v. Dioso, et al., 97 Phil. 821); or where a defendant has been declared in default (PNB v. Perez; 16 SCRA 270). What is essential only, to repeat, is that the facts demonstrating the lapse of the prescriptive period be otherwise sufficiently and satisfactorily apparent on the record; either in the averments of the plaintiff's complaint, or otherwise established by the evidence. (Emphasis supplied) Indeed, one of the inherent powers of courts is to amend and control its processes so as to make them conformable to law and justice. This includes the right to reverse itself, especially when in its opinion it has committed an error or mistake in judgment, and adherence to its decision would cause injustice.46 Thus, the RTC in its Order dated November 8, 2001 could validly entertain the defenses of prescription and laches in DBT's motion for reconsideration.

However, the conclusion reached by the RTC in its assailed Order was erroneous. The RTC failed to consider that the action filed before it was not simply for reconveyance but an action for quieting of title which is imprescriptible. Verily, an action for reconveyance can be barred by prescription. When an action for reconveyance is based on fraud, it must be filed within four (4) years from discovery of the fraud, and such discovery is deemed to have taken place from the issuance of the original certificate of title. On the other hand, an action for reconveyance based on an implied or constructive trust prescribes in ten (10) years from the date of the issuance of the original certificate of title or transfer certificate of title. The rule is that the registration of an instrument in the Office of the RD constitutes constructive notice to the whole world and therefore the discovery of the fraud is deemed to have taken place at the time of registration.47
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However, the prescriptive period applies only if there is an actual need to reconvey the property as when the plaintiff is not in possession of the property. If the plaintiff, as the real owner of the property also remains in possession of the property, the prescriptive period to recover title and possession of the property does not run against him. In such a case, an action for reconveyance, if nonetheless filed, would be in the nature of a suit for quieting of title, an action that is imprescriptible.48 Thus, in Vda. de Gualberto v. Go,49 this Court held: [A]n action for reconveyance of a parcel of land based on implied or constructive trust prescribes in ten 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, but this rule applies only when the plaintiff or the person enforcing the trust is not in possession of the property, since if a person claiming to be the owner thereof is in actual possession of the property, as the defendants are in the instant case, the right to seek reconveyance, which in effect seeks to quiet title to the property, does not prescribe. The reason for this is that one who is in actual possession of a piece of land claiming to be the owner thereof may wait until his possession is disturbed or his title is attacked before taking steps to vindicate his right, the reason for the rule being, that his undisturbed possession gives him a continuing right to seek the aid of a court of equity to ascertain and determine the nature of the adverse claim of a third party and its effect on his own title, which right can be claimed only by one who is in possession. Insofar as Ricaredo and his son, Angelito, are concerned, they established in their testimonies that, for some time, they possessed the subject property and that Angelito bought a house within the subject property in 1987.50Thus, the respondents are proper parties to bring an action for quieting of title because persons having legal, as well as equitable, title to or interest in a real property may bring such action, and "title" here does not necessarily denote a certificate of title issued in favor of the person filing the suit.51 Although prescription and laches are distinct concepts, we have held, nonetheless, that in some instances, the doctrine of laches is inapplicable where the action was filed within the prescriptive period provided by law. Therefore, laches will not apply to this case, because respondents' possession of the subject property has rendered their right to bring an action for quieting of title imprescriptible and, hence, not barred by laches. Moreover, since laches is a creation of equity, acts or conduct alleged to constitute the same must be intentional and unequivocal so as to avoid injustice. Laches will operate not really to penalize neglect or sleeping on one's rights, but rather to avoid recognizing a right when to do so would result in a clearly inequitable situation.52 Albeit the conclusion of the RTC in its Order dated November 8, 2001, which dismissed respondents' complaint on grounds of prescription and laches, may have been erroneous, we, nevertheless, resolve the second question in favor of DBT.

It is a well-entrenched rule in this jurisdiction that no title to registered land in derogation of the rights of the registered owner shall be acquired by prescription or adverse possession.53 Article 112654 of the Civil Code in connection with Section 4655 of Act No. 496 (The Land Registration Act), as amended by Section 4756 of P.D. No. 1529 (The Property Registration Decree), clearly supports this rule. Prescription is unavailing not only against the registered owner but also against his hereditary successors. Possession is a mere consequence of ownership where land has been registered under the Torrens system, the efficacy and integrity of which must be protected. Prescription is rightly regarded as a statute of repose whose objective is to suppress fraudulent and stale claims from springing up at great distances of time and surprising the parties or their representatives when the facts have become obscure from the lapse of time or the defective memory or death or removal of witnesses.57 Thus, respondents' claim of acquisitive prescription over the subject property is baseless. Under Article 1126 of the Civil Code, acquisitive prescription of ownership of lands registered under the Land Registration Act shall be governed by special laws. Correlatively, Act No. 496, as amended by PD No. 1529, provides that no title to registered land in derogation of that of the registered owner shall be acquired by adverse possession. Consequently, in the instant case, proof of possession by the respondents is immaterial and inconsequential.58 Moreover, it may be stressed that there was no ample proof that DBT participated in the alleged fraud. While factual issues are admittedly not within the province of this Court, as it is not a trier of facts and is not required to re-examine or contrast the oral and documentary evidence anew, we have the authority to review and, in proper cases, reverse the factual findings of lower courts when the findings of fact of the trial court are in conflict with those of the appellate court.59 In this regard, we reviewed the records of this case and found no clear evidence that DBT participated in the fraudulent scheme. In Republic v. Court of Appeals,60 this Court gave due importance to the fact that the private respondent therein did not participate in the fraud averred. We accord the same benefit to DBT in this case. To add, DBT is an innocent purchaser for value and good faith which, through a dacion en pago duly entered into with B.C. Regalado, acquired ownership over the subject property, and whose rights must be protected under Section 3261 of P.D. No. 1529. Dacion en pago is the delivery and transmission of ownership of a thing by the debtor to the creditor as an accepted equivalent of the performance of the obligation. It is a special mode of payment where the debtor offers another thing to the creditor, who accepts it as an equivalent of the payment of an outstanding debt. In its modern concept, what actually takes place in dacion en pago is an objective novation of the obligation where the thing offered as an accepted equivalent of the performance of an obligation is considered as the object of the contract of sale, while the debt is considered as the purchase price.62 It must also be noted that portions of the subject property had already been sold to third persons who, like DBT, are innocent purchasers in good faith and for value, relying on the certificates of title shown to them, and who had no knowledge of any defect in the title of the vendor, or of facts sufficient to induce a reasonably prudent man to inquire into the status of the subject property.63 To disregard these circumstances simply on the basis of alleged continuous and adverse possession of respondents would not only be inimical to the rights of the aforementioned titleholders, but would ultimately wreak havoc on the stability of the Torrens system of registration. A final note.

While the Torrens system is not a mode of acquiring title, but merely a system of registration of titles to lands, justice and equity demand that the titleholder should not be made to bear the unfavorable effect of the mistake or negligence of the State's agents, in the absence of proof of his complicity in a fraud or of manifest damage to third persons. The real purpose of the Torrens system is to quiet title to land and put a stop forever to any question as to the legality of the title, except claims that were noted in the certificate at the time of the registration or that may arise subsequent thereto. Otherwise, the integrity of the Torrens system would forever be sullied by the ineptitude and inefficiency of land registration officials, who are ordinarily presumed to have regularly performed their duties.64 Thus, where innocent third persons, relying on the correctness of the certificate of title thus issued, acquire rights over the property, the court cannot disregard those rights and order the cancellation of the certificate. The effect of such outright cancellation will be to impair public confidence in the certificate of title. The sanctity of the Torrens system must be preserved; otherwise, everyone dealing with the property registered under the system will have to inquire in every instance on whether the title had been regularly or irregularly issued, contrary to the evident purpose of the law. Every person dealing with the 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.65 WHEREFORE, the instant Petition is GRANTED and the assailed Court of Appeals Decision dated October 25, 2004 is hereby REVERSED and SET ASIDE. A new judgment is hereby entered DISMISSING the Complaint filed by the respondents for lack of merit. SO ORDERED. ANTONIO EDUARDO B. NACHURA Associate Justice

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 Decision2dated 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)3registered 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,8who 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 P35,000.00 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 P 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 familys tenant and the latters 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 Acunas 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 Fernandos 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: Its 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 complainants rights after he had knowledge of defendants 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 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.45The 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. 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. TERESITA J. LEONARDO-DE CASTRO Associate Justice

G.R. No. 161943

June 28, 2005

RUBEN ROMERO, represented by DIOSDADO ROMERO, petitioner, vs. EDISON N. NATIVIDAD and HERMINIA NATIVIDAD-MEJORADA, respondents. DECISION GARCIA, J.: Assailed in this petition for review on certiorari under Rule 45 of the Rules of Court is the decision1 dated August 29, 2003 of the Court of Appeals in CA-G.R. CV. No. 71617, affirming with modification the June 15, 2001 decision of the Regional Trial Court (RTC) at Morong, Rizal in an action for recovery of possession and quieting of title thereat commenced by the herein petitioner Ruben Romero against respondents Edison Natividad and Herminia Natividad-Mejorada. Subject of the controversy is a portion of a parcel of land at T. Claudio St., Morong, Rizal and covered by T.C.T. No. 20890 in the name of one Francisca Galarosa (Francisca, hereafter). Petitioner Ruben Romero is Franciscas grandson while respondents Edison Natividad and Herminia Natividad-Majorada are Franciscas great grandnephew and great grandniece, respectively. In the latter part of 1996, petitioner filed with the RTC at Morong, Rizal a complaint for recovery of possession and quieting of title against respondents, alleging that he is the owner of the subject property by virtue of inheritance from his mother, Estelita Bautista-Atendido (Estelita), who, in turn, inherited the same from her mother, Francisca. Petitioner claims that on July 27, 1994, respondents, despite knowledge that the property belonged to him, entered the contested portion of the land and constructed a building of strong materials thereon. In their answer, respondents raised the defense of prescription and laches. They averred that they and their predecessors-in-interest had been in open, continuous and uninterrupted possession of the subject property since the 1920s when it was donated to their grandparents, Demetrio Natividad and Ulpiana Raymundo, by the latters aunt Francisca, when Ulpiana got married; that their father, Herminigildo Natividad, inherited the same portion from their grandparents; and that, they, in turn, inherited the property upon their fathers death. Respondents pointed out that during the lifetime of their father Herminigildo, the latter operated a bakery store thereon until it was burned. On March 3, 1994, they constructed a commercial building on said property. In a decision dated June 15, 2001,2 the trial court rendered judgment for the respondents by dismissing petitioners complaint and ordering him to pay attorneys fees, thus: WHEREFORE, in view of the foregoing judgment is hereby rendered in favor of the defendants and as against the plaintiff, dismissing the complaint for utter lack of merit, and ordering the latter to pay

defendants P50,000.00 in concept of attorneys fee plus P1,000.00 per actual appearance of defendants counsel in court. Without pronouncement as to costs and damages. SO ORDERED. In ruling for the respondents, the trial court declared that the latters long possession had ripened to acquisitive prescription in their favor: This court is of the opinion and so holds that the defendants are now the owners of the disputed lot involved in this case. Defendants predecessors-in-interest spouses Demetrio Natividad and Ulpiana Raymundo after the execution of the Deed of Donation dated May 21, 1921 took possession of the portion of the lot in question where they engaged their usual business without anybody from the plaintiffs relatives disturbing and questioning the possession. Demetrio Natividad had caused to declare for taxation purposes the improvement he introduced into the disputed lot, and for the period from the deed of donation executed by Francisca Galarosa, grandmother of the plaintiff, up to the present, efforts to recover possession were unsuccessful, thus strengthening the rightful claim of possession and ownership over the land in question by the defendants. Indeed, it has been an acknowledged principle in law, that uninterrupted possession in concept of owner, ripens into ownership. In the case at bar, plaintiff as well as his predecessor-in-interest had failed to question within the period allowable under the law, the claim of possession and ownership by defendants and their predecessor-in-interest. As correctly pointed out by the defendants counsel, plaintiff and his predecessor slept on their right to recover ownership and possession of the disputed property, and this neglect should be counted against them. Defendants possession in concept of owner, metamorphosed into an acquisitive prescription, that granted them the right to consolidate their right of ownership over the lot in question.3 On appeal to the Court of Appeals in CA-G.R. CV No. 71617, petitioner argued that the trial court erred in declaring respondents as owners of the subject property on the basis of prescription as there can be no prescription against a titled property. He also insists that there was no valid donation by Francisca because it was not contained in a public document, as required by law, adding that respondents grandfather Demetrio was never in possession of the entire property because he only occupied the second floor of the building then existing thereon. In the herein assailed decision4 dated August 29, 2003, the appellate court affirmed with modification the appealed decision of the trial court by deleting the award of attorneys fees: WHEREFORE, in view of the foregoing, the decision of the Regional Trial Court of Morong, Rizal, Branch 79, dated 15 June 2001, is hereby AFFIRMED with the MODIFICATION that the award of attorneys fees is hereby DELETED. SO ORDERED. In arriving at such a disposition, the appellate court refused to apply the general rule regarding the operation of prescription against a titled property, ratiocinating that said rule does not apply if the person invoking it is not the registered owner, as in this case. Petitioner moved for reconsideration but his motion was denied by the appellate court in its subsequent resolution5 of January 29, 2004. Hence, petitioners present recourse seeking reversal of the challenged decision and resolution of the Court of Appeals.

The petition is unavailing. Apparently, the instant case was not the only one instituted by petitioner against respondents. Sometime in 1994, an ejectment suit (Civil Case No. 566) was filed by him but it was dismissed for his failure to prove prior possession of the disputed property. Later, a case for recovery of possession (Civil Case No. 680-M) was also instituted by the petitioner but similarly dismissed. There is no absolute rule as to what constitutes laches or staleness of demand; each case is to be determined according to its particular circumstances. The question of laches is addressed to the sound discretion of the court, and since laches is an equitable doctrine, its application is controlled by equitable considerations. It cannot work to defeat justice or to perpetrate fraud and injustice. It would be rank injustice and patently iniquitous to deprive the lawful heirs of their rightful inheritance. Here, we are inclined to apply the above rule in favor of respondents. We find support in Tambot, et al. v. Court of Appeals, et al.6 where this Court, through then Associate Justice Carolina GrioAquino, held: The Court of Appeals ruling that the private respondents, by continuous, open, and adverse possession of the land for more than thirty-six (36) years as owner, had acquired title through prescription and that the petitioners title is not protected by Section 46 of the Land Registration Act (which provides that a registered owners title may not be lost through prescription) because the petitioners are not the registered owners of the land in question, finds support in various decisions of this Court. In Wright, Jr., et al. vs. Lepanto Consolidated Mining Co.,7 where the mining companys possession of the mining claims under the color of title began since 1936 while the appellants whose father had been the patentee of those claims did not lift a finger to assert their title or right for over 25 years, this Court held: xxx Assuming that Albert P. Wright ever held a Torrens title to the claims (which is not adequately shown), and that his ownership and that of his heirs may not be defeated by prescription, still those rights have become barred by their inactivity and laches for nearly thirty years. This long inaction, coupled with renewed activity after total destruction of official records, strongly indicate an unmeritorious claim. The above jurisprudence finds application in this case. For one, as in Tambot, herein petitioner is not the registered owner of the land in question. Moreover, it was never disputed that respondents and their predecessors-in-interest had been in open, continuous and uninterrupted possession of the subject parcel of land since the 1920s. It was only in 1994, or after a period of about seventy-four (74) years when petitioner started asserting ownership by filing an ejectment case against them. For another, even if we take into consideration that there was a case filed by petitioners mother Estelita against Demetrio Natividad in 1965, said case was filed only after forty-four (44) years from the time respondents grandfather Demetrio Natividad first started occupying the property in the early 1920s. The Court also notes that this case was dismissed by agreement of the parties, although it can no longer be determined from the records what exactly was the agreement reached. It should further be noted that from 1965 until 1996, when petitioner filed his complaint in this case, a period of twenty-six (26) years have lapsed and no other case was filed against respondents. Petitioner would rely on the case of Mateo vs. Diaz where this Court ruled that no title to registered land in derogation to that of a registered owner shall be acquired by prescription or adverse

possession and that the heirs of the registered owner are not estopped from claiming their fathers property, since they merely stepped into the shoes of the previous owners. Unfortunately, the Mateo case is not on all fours with the case at bar. In Mateo, it was found that immediately after petitioners therein discovered the existence of the original certificate of title of the disputed property in the name of their father, they took steps to assert their rights thereto. Petitioners divided the property among themselves in an extra-judicial partition. Then they filed an action to recover ownership and possession as the only surviving children of the original owner. In contrast, petitioner in the present case and his deceased mother have slumbered on their perceived rights for seventy (70) years. Verily, in a number of cases, it had been held that laches, the essence of which is the neglect to assert a right over a long period of time, may prevent recovery of a titled property.8 For sure, in the same case of Tambot, this Court further held that laches will bar recovery of the property even if the mode of transfer was invalid: In Heirs of Batiog Lacamen vs. Heirs of Laruan, 65 SCRA 606, Laruan conveyed a parcel of land in La Trinidad, Benguet, to Batiog Lacamen in 1928 for P300. The deed was acknowledged before a notary in Baguio City, and immediately after the sale, Laruan delivered the certificate of title No. 420 to Lacamen who entered in possession of the land without securing a transfer certificate of title in his name. He introduced improvements and paid the taxes. After his death in 1942, his heirs remained in possession of the land and also paid the taxes. However, they discovered in 1957 that Laruans heirs (Laruan had died in 1938) had obtained a new owners copy of Certificate of Title No. 420 by alleging in a petition filed in court that their copy had been lost or destroyed. Lacamens heirs sued for reconveyance. Laruans heirs alleged that the sale to Lacamen was null and void under Act. No. 2874 and Sections 145 and 146 of the Code of Mindanao and Sulu. This Court upheld the title of Lacamen and his heirs despite the invalidity of the sale. It has been 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. Much more should it be in the instant case where the possession of nearly 30 years or almost half a century now is in pursuance of sale which regrettably did not bear the approval of the executive authority but which the vendor never questioned during his life time. Laruans laches extends to his heirs, the respondents-appellants herein, since they stand in privity with him. Where a period of 37 years elapsed between the sale of land by the patentee (Mejia) to Zacarias Ciscar and the action of Mejias heirs to recover it from the vendee (Gamponia) of an heir of Ciscar, the Court ruled that: While the defendant may not be considered as having acquired title by virtue of his and his predecessors long continued possession (37 years), the original owners right to recover back the possession of the property and the title thereto from the defendant has, by the latters long period of possession and by patentees inaction and neglect, been converted into a stale demand. (Mejia de Lucas vs. Gamponia, 100 Phil. 277, 280) In Vda. De Lima vs. Tio, 32 SCRA 516, where the plaintiffs paraphernal property was sold in 1936 by her husband without her consent and her action to recover it was filed only in 1964, or after 28 years, we likewise ruled:

It is now an established doctrine that inaction and neglect convert what otherwise could be a valid claim into a stale demand x x x Such passivity in the face of what might have given rise to an action in court is visited with the loss of such a right. That in essence is what laches signifies. Nor does ignorance resulting from inexcusable negligence suffice to explain such failure to file seasonably the necessary suit." (181 SCRA at 207-208) (Emphasis supplied) To recapitulate, respondents and their predecessors-in-interest had been in open continuous possession of the property in question since the early 1920s when the former owner Francisca Galarosa executed what was intended as a deed of donation propter nuptias. Petitioners and his predecessor-in-interests neglect to assert ownership for a long period of time acts as a bar to the present action. Vigilantibus sed non dormientibus jura subverniunt. The law aids the vigilant, not those who sleep on their rights. This legal precept finds perfect application in the case at bar. WHEREFORE, the petition is hereby DENIED and the assailed decision and resolution of the Court of Appeals AFFIRMED. Costs against petitioner. SO ORDERED.

G.R. No. 137305

January 17, 2002

QUIRINO MATEO and MATIAS MATEO, petitioners, vs. DOROTEA DIAZ; REYNALDO DIAZ; REMEDIOS DIAZ; ADORACION DIAZ; NORBERTO DIAZ; YOLANDA CRUZ; OSCAR CRUZ; ESTER CRUZ; NENITA CRUZ; PRIMO POLICARPIO; GAVINO POLICARPIO; FLORENTINA POLICARPIO; MAURO POLICARPIO; and MIGUEL POLICARPIO, respondents. PARDO, J.: The Case This petition for review via certiorari1 raises the question of whether or not the equitable doctrine of laches may override a provision of the Land Registration Act on imprescriptibility of title to registered land. The case is a petition for review on certiorari of the decision of the Court of Appeals2 affirming that of the Regional Trial Court, Bulacan, at Malolos. The trial court ruled that prescription and laches are applicable against the petitioners, that real actions over immovable prescribe after thirty (30) years, that ownership can be acquired through possession in good faith and with just title for a period of ten (10) years, and that ownership may be acquired through uninterrupted adverse possession for thirty years without need of just title or of good faith. The Facts

The facts, as found by the Court of Appeals,3 are as follows: "1. The spouses Canuto Mateo and Simeona (Simona) Manuel-Mateo, during their marital union, were blessed with two (2) daughters, namely: CORNELIA MATEO and FELISA MATEO. In time, Cornelia will marry Ulpiano Diaz with whom she will have the following children, to wit: DOROTEA, REYNALDO, REMEDIOS, ADORACION and NORBERTO, all surnamed DIAZ. On the other hand, FELISA MATEO will eventually marry Cirilo Policarpio and they will raise the following children, namely: PRIMO, GAVINO, FLORENTINA, MAURO and MIGUEL, all surnamed POLICARPIO. Likewise, Cornelia will eventually have the following grandchildren, to wit: YOLANDA, OSCAR, ESTER and NENITA, all surnamed CRUZ. "2. Canuto Mateo died sometime in 1898. Not long thereafter, his widow Simeona will take in a second husband in the person of CLARO MATEO, a first cousin of Canuto. And out of their marital union, the spouses Claro Mateo and Simeona Manuel-Mateo will have two (2) sons, to wit: QUIRINO MATEO and MATIAS MATEO, the plaintiffs-appellants herein. "3. The property involved in the controversy is an 11-hectare Riceland located at Bulak, Sta. Maria, Bulacan and covered by Original Certificate of Title (OCT) No. 206 issued by the Registry of Deeds of Bulacan on October 21, 1910 in the name of "Claro Mateo, married to Simeona Manuel." "4. Claro Mateo died on September 8, 1932, while Simeona Manuel-Mateo died on October 18, 1948. "5. On June 12, 1951, the children of Simeon Manuel-Mateo in her two (2) previous marriages, namely: Cornelia Mateo-Diaz, Felisa Mateo-Policarpio, Quirino Mateo and Matias Mateo, executed a document entitled KATIBAYAN NG PAGHAHATI-HATI NG LUPA (Exhibit "B", 2/28/89, List of Exhibits, p. 60), whereunder they divided among themselves three (3) separate parcels of land all located at Bulak, Sta. Maria, Bulacan which they had inherited from their parents. These properties were then covered by Tax Declaration Nos. 3556, 3794 and 3849. It is not clear if these properties are part and parcel of that property covered by OCT No. 206. "6. At any rate, the parties to the said partition thenceforth occupied and possessed the respective areas allotted to each of them, their occupation thereof being peaceful, uninterrupted and continuous. "7. On February 15, 1979, in San Carlos City, Pangasinan, the brothers Quirino Mateo and Matias Mateo executed a DEED OF EXTRA-JUDICIAL PARTITION (Exh. "B", 12/22/81, List of Exhibits, p. 62), whereunder they partitioned between themselves alone, to the exclusion of their half-sisters Cornelia Mateo-Diaz and Felisa Mateo-Policarpio, that 11-hectare parcel of Riceland covered by OCT No. 206. It was not explained if, at the time the brothers executed the deed, any or both of their half-sisters were already dead. In any event, the deed of extra-judicial partition was duly published in a daily newspaper, the Balita. "8. It was through this newspaper publication that the children of both Cornelia Mateo-Diaz and Felisa Mateo-Policarpio learned about the deed of extra-judicial partition executed by their uncles. "9. Sometime in 1981, some of the children and grandchildren of Cornelia and Felisa, namely: Reynaldo Diaz, Miguel Policarpio, Dorotea Diaz-Perez, Felicidad Diaz-Mercadel,

Maxima and Yolanda Cruz represented by Oscar Cruz, and Ricardo Nolasco, filed a complaint for Declaration of Nullity of Extra-Judicial Partition with Damages against their uncles Quirino Mateo and Matias Mateo. Filed in the then Court of First Instance (CFI) of Bulacan, the complaint was docketed thereat as Civil Case No. SM-975 (Exh. "15" surrebuttal). At the same time, a criminal information was filed at the proper court in San Carlos City, Pangasinan charging Quirino Mateo and Matias Mateo with falsification of public document. "10. On September 25, 1984, following a trial on the merits, the CFI, which, by now, has become the Regional Trial Court at Malolos, Bulacan rendered judgment in Civil Case No. SM-975 in favor of the plaintiffs therein (Exh. "17"), by declaring as void and inexistent the Deed of Extra-Judicial Partition executed by the brothers Quirino Mateo and Matias Mateo. The records do not disclose when, but it was revealed that eventually, the proper court at San Carlos City, Pangasinan found the brothers Quirino Mateo and Matias Mateo guilty of the crime of falsification of public document and sentenced them accordingly (Page 2, of Memorandum for the Plaintiffs, Rec., p. 314). "11. The record is likewise silent if Quirino Mateo and/or Matias Mateo had appealed both adverse decisions before the proper forum. "12. On April 1, 1987, in the Regional Trial Court at Malolos, Bulacan, Quirino Mateo and Matias Mateo commenced the present suit, which was originally a PETITION FOR DECLARATORY RELIEF, against (1) Dorotea Diaz, Reynaldo Diaz, Remedios Diaz, Adoracion Diaz and Norberto Diaz, the children of the late Cornelia Mateo-Diaz; (2) Yolanda Cruz, Oscar Cruz, Ester Cruz and Nenita Cruz, the grand-children of Cornelia; and (3) Primo Policarpio, Gavino Policarpio, Florentina Policarpio, Mauro Policarpio and Miguel Policarpio, the children of the late Felisa Mateo-Policarpio. The petition was docketed as Civil Case No. 165-SM-87. "13. On June 16, 1987, the defendants Diazes, Cruzes and Policarpios, with the exception of Doroteo Diaz, Reynaldo Diaz and Remedios Diaz-Sandel, filed a motion to dismiss the above petition on the following grounds: (a) the case was not referred to the barangay concerned for confrontation and mediation, as mandated by P. D. 1508; (b) there has been a decision previously rendered which involved the same parties over the same cause of action (obviously referring to the decision in Civil Case No. SM-975); and (c) the action is between members of the same family and no earnest efforts towards a compromise have been exerted (Records, pp. 60-63). The said motion to dismiss elicited an opposition from the petitioners (Rec., p. 79-83). "14. For their part, defendants Reynaldo Diaz and Remedios Diaz-Sandel filed their separate motion to dismiss, grounded, as follows: (a) the lower court has no jurisdiction to hear and decide the case; (b) the complaint states no cause of action against them; (c) the cause of action of the petitioners is already barred by a prior judgment; (d) the case is between members of the same family and no earnest efforts towards a compromise have been made; and (e) the present case will not in any way terminate the uncertainty or controversy between the parties as any declaration or construction of the rights of the parties is not necessary and proper (Rec., pp. 84-89). "15. On August 27, 1987, the lower court issued an order dropping Reynaldo Diaz and Remedios Diaz-Sandel as party-defendants in the case (Rec., p. 93).

"16. On December 4, 1987, defendant Dorotea Diaz filed her answer with compulsory counterclaim (Rec., pp. 106-109). "17. On October 11, 1988, the petitioners filed a Motion to Admit Complaint in Lieu of Petition, therein alleging that: 1. The evidence adduced and still to be adduced show the necessity of amending the petition into an ordinary complaint, so that the evidence could conform with the allegations of the cause of action sought to be established. 2. The conversion of the petition to an ordinary complaint would not affect the basic cause of action and defense of the defendants. (Rec., p. 143). Attached to the motion is the intended amended complaint where Reynaldo Diaz and Remedios Diaz-Sandel had been dropped as party-defendants (Rec., pp. 144-147). "18. In the said amended complaint, the plaintiffs Mateo brothers (Quirino and Matias alleged, inter alia: 2. The late Claro Mateo, was the absolute and exclusive owner of a parcel of land with an area of around eleven (11) hectares situated at Bulac, Sta. Maria, Bulacan and covered by Original Certificate of Title No. 206 x x x. "xxx xxx xxx. "19. In an order dated November 28, 1988, the lower court granted the Motion to Admit Complaint in Lieu of Petition and accordingly admitted the amended complaint thereto attached (Rec., p. 151). "20. On September 8, 1989, the defendants filed their Amended Answer with Compulsory Counterclaim (Rec., pp. 199-203), whereunder they raised the following special and affirmative defenses: 11. That the cause of action, if any, has already prescribed and also the petitioners are guilty of laches; xxx xxx xxx 14. That the parcel of land allegedly covered by and described in OCT No. 206 was/is actually non-existent as the same had been the subject of several conveyances and the late Claro Mateo had never laid claim over the said property/ies; 15. That since time immemorial, the late Melquiades Policarpio had been all along in possession of the land covered by and described in OCT No. 206; subsequently, the portion belonging to the former was inherited by Cirilo Policarpio x x x and then on May 13, 1968, the latter sold the property to defendant Miguel Policarpio as evidenced by a Deed of Sale x x x; 16. That likewise, the land- holding in question has been the subject of mortgage wherein some of the defendants and/or their predecessor-in-interest were the

mortgagors to the exclusion of the plaintiffs who did not for once object to said mortgages; 17. That from 1910, the date OCT No. 206 was issued to Claro Mateo, to the year 1927, Felix Herrera was in actual possession of about 4 hectares of the subject land and on March 10, 1925 said portion was sold to Juana Badillo x x x who in turn sold the same to Ulpiano Diaz x x x who sold it to defendant Reynaldo Diaz x x x; 18. That furthermore, the landholding in question was acquired by Felisa Mateo from Claro Mateo and Simeona Manuel by purchase, thru a valid and sufficient consideration, as even certified to by said spouses in a document executed as early as 1914 x x x; 19. That in view of the several conveyances adverted to above OCT No. 206 should be cancelled and new ones issued to herein defendants, if said OCT is really authentic and/or genuine. The Issues The issues raised are: (1) whether prescription and the equitable principle of laches are applicable in derogation of the title of the registered owner; (2) whether the Court of Appeals erred in awarding attorneys fees to respondents.4 The Courts Ruling We grant the petition. The land involved is registered under the Torrens system in the name of petitioners father Claro Mateo. There is no question raised with respect to the validity of the title. The factual issue now raised is that petitioners had slept on their rights and had not taken any positive step to assert their rights and interests over the land covered by OCT No. 206. The records will show that immediately after petitioners discovered the existence of OCT No. 206 in 1977 or 1978, they took steps to assert their rights thereto. They divided the land between the two of them in an extra-judicial partition. Then petitioners filed the case below to recover ownership and possession as the only surviving children of the original owner, the late Claro Mateo. In St. Peter Memorial Park, Inc. v. Cleofas,5 we ruled that a party who had filed immediately a case as soon as he discovered that the land in question was covered by a transfer certificate in the name of another person is not guilty of laches. In J. M. Tuason & Co. v. Aguirre,6 we ruled that "an action to recover possession of a registered land never prescribes in view of the provision of Section 44 of Act No. 4967 to the effect that no title to registered land in derogation to that of a registered owner shall be acquired by prescription or adverse possession." In fact, there is a host of jurisprudence that hold that prescription and laches could not apply to registered land covered by the Torrens system.8

With more reason are these principles applicable to laches, which is an equitable principle. Laches may not prevail against a specific provision of law, since equity, which has been defined as justice outside legality is applied in the absence of and not against statutory law or rules of procedure.9 On the other hand, the heirs of the registered owner are not estopped from claiming their fathers property, since they merely stepped into the shoes of the previous owners. In Barcelona v. Barcelona,10 we held that: "The property in litigation, being registered land under the provisions of Act 496, is not subject to prescription, and it may not be claimed that imprescriptibility is in favor only of the registered owner, because as we have held in the cases of Teofila de Guinoo, et al., v. Court of Appeals, (97 Phil. 235) and Gil Atun, et al., v. Eusebio Nuez (97 Phil. 762), prescription is unavailing not only against the registered owner, but also against his hereditary successors because the latter merely step into the shoes of the decedent by operation of law and are merely the continuation of the personality of their predecessor in interest." On the second issue, we rule that petitioners could not be liable for attorneys fees. An award of attorneys fees must have a factual, legal or equitable justification and cannot be left to speculation and conjecture.11 In awarding attorneys fees, it is necessary for the court to make findings of fact and law that would justify the award.12 On the third and last issue raised, we rule that the Court of Appeals erred in ordering the Register of Deeds to cancel OCT No. 206 of Claro Mateo and issue new titles to those who are occupying the subject land. This violates the indefeasibility of a Torrens title. The title of Claro Mateo could be cancelled only if there is competent proof that he had transferred his rights over the parcel of land to another party, otherwise title would pass to his heirs only by testate or intestate succession. The Fallo WHEREFORE, the Court REVERSES the decision of the Court of Appeals.13 In lieu thereof, the Court remands the case to the trial court for determination of the heirs of Claro Mateo in a proper proceeding. No costs. SO ORDERED.

Republic of the Philippines SUPREME COURT SECOND DIVISION G.R. No. 140752 November 11, 2005 DIONISIO CARAAN, represented by HEIDI CARAAN and ERLINDA CARAAN *, Petitioners, vs.

COURT OF APPEALS and SPOUSES SALCEDO R. COSME and NORA LINDA S. COSME**, Respondents. DECISION AUSTRIA-MARTINEZ, J.: This resolves the petition for review on certiorari seeking to set aside the Decision1 of the Court of Appeals (CA) dated October 29, 1999 affirming with modification the Decision of the Regional Trial Court of Quezon City, Branch 104 (RTC), thereby ordering herein petitioners to vacate the property located at No. 65 Commodore St., Veterans Subdivision, Barangay Holy Spirit, Quezon City and surrender possession thereof to herein private respondents. The antecedent facts are as follows. On September 16, 1992, private respondents-spouses Salcedo R. Cosme and Nora Linda S. Cosme filed a complaint (accion reivindicatoria) with damages against Dionisio Caraan in the RTC. Therein, it was alleged that: herein private respondents are the registered owners of the real property located at No. 65 Commodore St., Veterans Subdivision, Barangay Holy Spirit, Quezon City under Transfer Certificate of Title (TCT) No. 214949; they had been paying realty taxes on the property from 1969 to 1993; sometime in March 1991, they discovered that the land was being occupied by petitioner who had built his residential house thereon; such occupancy by petitioner was effected through fraud, strategy and stealth without private respondents knowledge and consent; demands to vacate, both oral and written, were made upon petitioner, the last written demand having been received by petitioner on August 7, 1992, but said demands went unheeded; thus, private respondents prayed that judgment be rendered ordering petitioner and all persons holding title under him to vacate the subject premises and deliver possession thereof to private respondents; pay private respondents the amount ofP54,000.00 by way of reasonable compensation for the use and occupancy of the premises, P50,000.00 as moral damages, and P50,000.00 as attorneys fees. In his Answer with Counterclaim, petitioner alleged that he had acquired the land in question through extra-ordinary prescription of thirty years of continuous, public, open and uninterrupted possession; private respondents title was one of the numerous titles derived from TCT No. 3548 in the name of Eustacio Morales and Vicente Villar doing business under the style of Vilma Malolos Subdivision, which was in turn derived from TCT No. 33531 which came from TCT No. 26285 and derived from (OCT) No. 614; and OCT No. 614 had been declared null and void by the RTC, Quezon City (Branch 83).2 After trial on the merits, the RTC rendered its Decision dated August 9, 1995, the dispositive portion of which reads as follows: WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiffs [herein private respondents], whereby defendant [herein petitioner] is ordered to: (a) Vacate the premises concerned and to deliver and surrender the possession of the same to the plaintiff; (b) To pay plaintiffs the sum of P54,000.00 as reasonable compensation for the use and occupancy of the premises subject matter of the above-entitled case; (c) Pay the plaintiffs the sum P30,000.00 as moral damages;

(d) Pay the plaintiffs the sum of P20,000.00 as attorneys fees and to pay the cost of the suit.3 Herein petitioner Dionisio Caraan then appealed the RTC judgment to the CA. On October 29, 1999, the CA promulgated its Decision ruling thus: Absent any countervailing factum probandum adduced by the defendant-appellant [herein petitioner], the indefeasibility of the Torrens title under their [herein private respondents] names buttresses the presumption ad homini that they have a better right of ownership over the land. The defendant-appellant [herein petitioner] cannot seek refuge on his contention that he is a holder of a residential permit allegedly issued by the Bureau of Forest Development. Within the aegis of Section 3 (ff) of Presidential Decree No. 705, otherwise known as the Revised Forestry Code, a "[p]ermit is a short-term privilege or authority granted by the State to a person to utilize any limited forest resources or undertake a limited activity within any forest land without any right to occupation and possession therein." Neither is the defendant-appellant a possessor in the concept of an owner, which fact is a conditio sine qua non in order to be entitled to ownership through acquisitive prescription. mere possession with a juridical title, e.g., as a usufructuary, a trustee, a lessee, an agent or a pledgee, not being in the concept of owner, cannot ripen into ownership by acquisitive prescription, unless the juridical relation is first expressly repudiated and such repudiation has been communicated to the other party.4 The appellate court then affirmed the RTC judgment ordering petitioner Dionisio Caraan to vacate subject premises and to deliver and surrender possession thereof to herein private respondents. The CA, however, deleted the sums for compensatory and moral damages and attorneys fees awarded by the RTC in favor of private respondents. No motion for reconsideration of the CA Decision was filed. In the meantime, petitioner Dionisio Caraan died and his surviving heirs filed with this Court a petition for review oncertiorari with motion that said heirs be substituted as petitioners in this case. Petitioners insist that private respondents TCT No. 214949 is a derivative of OCT No. 614 and TCT No. 3548 which had been declared spurious and null and void; Dionisio Caraan has a better right of possession because he had been in open, public, adverse, continuous, and uninterrupted possession in the concept of owner of subject land for more than thirty years; and the subject land is part of a large tract of public land not yet classified for alienation to private ownership. On the other hand, private respondents argue that a certificate of title cannot be collaterally attacked, thus, TCT No. 214949 is valid and existing and conclusive evidence of ownership unless it becomes subject of a direct attack through a proceeding for cancellation of title. The Court finds the present petition bereft of merit. In Eduarte vs. Court of Appeals,5 the Court reiterated the hornbook principle that "a certificate of title serves as evidence of an indefeasible title to the property in favor of the person whose name appears therein."6 Private respondents having presented TCT No. RT-71061, which is the reconstituted title of TCT No. 214949, they have thus proven their allegation of ownership over the

subject property. The burden of proof then shifted to petitioners who must establish by preponderance of evidence their allegation that they have a better right over the subject property. Petitioners attack the validity of private respondents certificate of title, alleging that TCT No. 214949 is spurious as it was derived from OCT No. 614 which had allegedly been declared null and void pursuant to the Partial Decision on Defaulted Private Respondents dated March 21, 1988 issued in Civil Case No. Q-35672, entitled Teofilo M. Gariando, et al. vs. Gregorio Dizon, et al. Petitioners further point out that the subject land could not have been titled in favor of private respondents as said land is within the unclassified public forest land of Quezon City and not subject to disposition under the Public Land Law, per Certification dated April 16, 1985 issued by the Bureau of Forest Development. Petitioners further argue that they have a better right to subject property, as they had been in possession thereof in open, public, adverse, continuous, and uninterrupted possession in the concept of owner of subject land for more than thirty years. It should be borne in mind, however, that Section 48, Presidential Decree No. 1529 (P.D. No. 1529), provides that "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." Petitioners defense takes the form of a collateral attack on private respondents certificate of title. In Mallilin, Jr. vs. Castillo,7 the Court defined a collateral attack on the title in this wise: 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.8 In the present case, the attack on the title is definitely merely collateral as the relief being sought by private respondents in their action was recovery of possession. The attack on the validity of private respondents certificate of title was merely raised as a defense in petitioners Answer filed with the trial court. In Ybaez vs. Intermediate Appellate Court,9 the Court categorically ruled 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 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.10 (Emphasis supplied) The Court cannot, therefore, resolve the issue of the alleged invalidity of private respondents certificate of title in the present action for recovery of possession. Even petitioners claim that subject property could not have been titled in favor of private respondents because the same has not yet been classified for alienation for private ownership, cannot be given consideration because, as clearly stated in Apostol vs. Court of Appeals, "[t]he issue of the validity of the title of respondents can only be assailed in an action expressly instituted for that purpose."11

Petitioners asseveration that TCT No. RT-71061 (214949) should not have been admitted into evidence because private respondents merely presented the photocopy thereof is also unmeritorious. Private respondents presented the original of TCT No. RT-71061 (214949) in open court during the hearing held on April 13, 1994. The pertinent portions of the transcript of stenographic notes of said hearing are reproduced hereunder: Atty. Mazo: Your Honor, we are presenting in evidence this Transfer Certificate of Title No. RT-71061 (214949) as Exhibit A. The purpose of which, Your Honor, is to show that the property subject matter of this case is registered in the name of the herein plaintiff spouses Salcedo R. Cosme and Nora Linda S. Cosme. And in that regard, Your Honor, may we invite Counsel to stipulate that this is a Xerox copy and that we request to be marked as Exhibit A is a faithful reproduction of the original. If Counsel will stipulate, this will be the one to be submitted in evidence. Atty. Moya: This is a faithful reproduction, Your Honor. (Emphasis supplied) Furthermore, no objection was raised by counsel for petitioners in their written opposition/comment to private respondents offer of evidence12 regarding the fact that what was marked and submitted to the court was the photocopy. In Blas vs. Angeles-Hutalla,13 the Court held thus: The established doctrine is that when a party failed to interpose a timely objection to evidence at the time they were offered in evidence, such objection shall be considered as waived. In Tison v. Court of Appeals, the Supreme Court set out the applicable principle in the following terms: [F]or while the documentary evidence submitted by petitioners do not strictly conform to the rules on their admissibility, we are, however, of the considered opinion that the same may be admitted by reason of private respondents failure to interpose any timely objection thereto at the time they were being offered in evidence. It is elementary that an objection shall be made at the time when an alleged inadmissible document is offered in evidence, otherwise, the objection shall be treated as waived, since the right to object is merely a privilege which the party may waive. As explained in Abrenica vs. Gonda, et al., it has been repeatedly laid down as a rule of evidence that a protest or objection against the admission of any evidence must be made at the proper time, otherwise, it will be deemed to have been waived. The proper time is when from the question addressed to the witness, or from the answer thereto, or from the presentation of the proof, the inadmissibility of the evidence is, or may be inferred. Thus, a failure to except to the evidence because it does not conform with the statute is a waiver of the provisions of the law.14 Hence, considering the fact that counsel for petitioners admitted that the photocopy of TCT No. RT71061 (214949) is a faithful reproduction of the original thereof, stipulated with private respondents counsel that what will be marked and submitted to the trial court as Exhibit A is the photocopy, and the lack of objection on such ground which is then deemed a waiver thereof, the admission into evidence of the photocopy of TCT No. RT-71061 was absolutely correct.

Moreover, although the reconstituted title of TCT No. 214949 does show on its face that it was derived from OCT No. 614,15 both the trial and appellate courts are correct in saying that petitioners assertion that OCT No. 614 had been declared null and void is misleading. The RTC of Quezon City, Branch 83 issued a Partial Decision on Defaulted Private Respondents16 dated March 21, 1988 in Civil Case No. Q-35672 which declared OCT No. 614 and subsequent TCTs issued therefrom, "with the exception of those titles belonging to the non-defaulted respondents,"17 null and void. However, the defaulted private respondents in Civil Case No. Q-35672 filed a case for annulment of said partial judgment. The CA granted the petition for annulment of partial judgment in Civil Case No. Q35672. The case was elevated via a petition for review on certiorari assailing the CA decision and on January 19, 2001, this Court promulgated a Decision in Pinlac vs. Court of Appeals,18 docketed as G.R. No. 91486, affirming the CA Decision setting aside and annulling said partial decision on the ground of the trial courts lack of jurisdiction over the persons of respondents in said case. Petitioners have not been able to present any proof that, indeed, OCT No. 614 had been declared null and void by final judgment. Hence, petitioners claim that private respondents certificate of title is spurious deserves no consideration whatsoever. Private respondents certificate of title must be deemed valid and existing, as it cannot be assailed through a collateral attack in the present action. Consequently, petitioners defense that they have a better right over the subject land because they had been in open, public, adverse, continuous, and uninterrupted possession in the concept of owner for more than 30 years must be struck down. Section 47 of P.D. No. 1529 provides that "[n]o title to registered land in derogation of the title of the registered owner shall be acquired by prescription or adverse possession." The ruling in Ragudo vs. Fabella Estate Tenants Association, Inc.,19 is exactly in point, to wit: In a long line of cases, we have consistently ruled that lands covered by a title cannot be acquired by prescription or adverse possession. So it is that in Natalia Realty Corporation vs. Vallez, et al., we held that a claim of acquisitive prescription is baseless when the land involved is a registered land because of Article 1126 of the Civil Code in relation to Act 496 (now, Section 47 of Presidential Decree No. 1529): Appellants claim of acquisitive prescription is likewise baseless. Under Article 1126 of the Civil Code, prescription of ownership of lands registered under the Land Registration Act shall be governed by special laws. Correlatively, Act No. 496 provides that no title to registered land in derogation of that of the registered owner shall be acquired by adverse possession. Consequently, proof of possession by the defendants is both immaterial and inconsequential. (Emphasis supplied) Therefore, as emphasized in the above quoted ruling, petitioners allegations of uninterrupted possession for 30 years cannot prevail over private respondents certificate of title, which is the best proof of ownership. As the Court stated in Apostol vs. Court of Appeals, et al.,20 the registered owners are entitled to the possession of the property covered by the said title from the time such title was issued in their favor. Preponderance of evidence being in favor of private respondents, there can be no other conclusion but that private respondents, being the registered owners of subject property, should be placed in possession thereof. WHEREFORE, the petition is DENIED for lack of merit. The Decision of the Court of Appeals dated October 29, 1999 is hereby AFFIRMED. SO ORDERED. MA. ALICIA AUSTRIA-MARTINEZ

G.R. No. 146823. August 9, 2005 SPOUSES RAMON and ESTRELLA RAGUDO, Petitioners, vs. FABELLA ESTATE TENANTS ASSOCIATION, INC., Respondent. DECISION GARCIA, J.: Under consideration is this petition for review on certiorari under Rule 45 of the Rules of Court to nullify and set aside the following issuances of the Court of Appeals in CA-G.R. CV No. 51230, to wit: 1. Decision dated 19 July 2000,1 affirming with modification an earlier decision of the Regional Trial Court at Pasig City, Branch 155, in an action for recovery of possession thereat commenced by the herein respondent against the petitioners; and 2. Resolution dated 29 January 2001,2 denying petitioners motion for reconsideration. The facts may be briefly stated, as follows: Earlier, the tenants of a parcel of land at Mandaluyong City with an area of 6,825 square meters (hereinafter referred to as the Fabella Estate), which formed part of the estate of the late Don Dionisio M. Fabella, organized themselves and formed the Fabella Estate Tenants Association, Inc. (FETA), for the purpose of acquiring said property and distributing it to its members. Unable to raise the amount sufficient to buy the property from the heirs of Don Dionisio M. Fabella, FETA applied for a loan from the National Home Mortgage Finance Corporation (NHMFC) under the latters Community Mortgage Program. However, as a pre-condition for the loan, and in order that specific portions of the property could be allotted to each tenant who will have to pay the corresponding price therefor, NHMFC required all tenants to become members of FETA. Accordingly, all the tenants occupying portions of the Fabella Estate were asked to join FETA. While the rest did, the spouses Ramon Ragudo and Estrella Ragudo who were occupying the lot subject matter of this controversy, consisting of about 105 square meters of the Fabella Estate, refused to join the Association. Consequently, the portion occupied by them was awarded to Mrs. Miriam De Guzman, a qualified FETA member. Later, and with the help of the city government of Mandaluyong, FETA became the registered owner of the entire Fabella Estate, as evidenced by Transfer Certificate of Title No. 2902 issued in its name by the Register of Deeds of Mandaluyong in 1989. To effect the ejectment of the spouses Ragudo from the portion in question which they continued to occupy despite the earlier award thereof to Mrs. Miriam de Guzman, FETA filed against them a complaint for unlawful detainer before the Metropolitan Trial Court (MeTC) of Mandaluyong City. In a decision dated 6 August 1990, the MeTC dismissed the unlawful detainer case on the ground that it was an improper remedy because the Ragudos had been occupying the subject portion for

more than one (1) year prior to the filing of the complaint, hence the proper action should have been one for recovery of possession before the proper regional trial court. FETA appealed the dismissal to the Regional Trial Court at Pasig City, which affirmed the same. FETA then filed with the RTC-Pasig a complaint for recovery of possession against the Ragudos. In their Answer, the spouses interposed the defense that they have already acquired ownership of the disputed portion since they have been in occupation thereof in the concept of an owner for more than forty (40) years. They further argued that FETAs title over the entire Fabella Estate is fake because as appearing on TCT No. 2902, it was originally registered as OCT No. 13, a title which has been previously adjudged null and void by RTC-Pasig in a much earlier case involving different parties. Finally, they insist that FETAs right to recover has been barred by laches in view of their more than 40-year occupancy of the portion in question. Eventually, in a decision dated 29 July 1994,3 the trial court rendered judgment in FETAs favor, thus: WHEREFORE, premises considered, judgment is hereby rendered: 1) ordering [spouses Ragudo] to vacate the premises in question and to turn over possession thereof to [FETA]; 2) to pay [FETA] rent in the amount of P500.00 for the month of November 1981 and every month thereafter until they vacate the premises; 3) to pay [FETA] attorneys fees in the amount of P20,000.00; 4) to pay [FETA] the amount of P50,000.00 as exemplary damages; and 5) to pay the costs of suit. SO ORDERED. Therefrom, the spouses Ragudo went on appeal to the Court of Appeals, whereat their appellate recourse was docketed as CA-G.R. CV No. 51230. Meanwhile, pending resolution by the appellate court of the Ragudos appeal, FETA filed with the trial court a motion for the issuance of a writ of execution pending appeal, to which the Ragudos interposed an Opposition, followed by FETAs Reply to Opposition. Then, on 11 October 1994, the Ragudos filed with the trial court aRejoinder to Reply With Counter-Motion to Admit Attached Documentary Evidence Relevant to the Pending Incident.4 Attached thereto and sought to be admitted therein were the following documents and photographs, to wit: 1. Letter dated 21 November 19895 of the spouses Ragudos son, Engr. Aurelio Ragudo, addressed to FETA, stating therein that the Ragudos were willing to become FETA members; 2. Joint Affidavit, dated 07 October 1994, of three (3) residents of the Fabella Estate;6 3. Photos of three (3) alleged houses of Miriam de Guzman located at the Fabella Estate;7 4. Photos of two (2) alleged houses of the sons of Miriam de Guzman located at the Fabella Estate;8

5. Photo of a lot allegedly awarded by FETA to its president, Amparo Nobleza, located at the Fabella Estate;9 and 6. Photo of a three (3)-storey house of Noblezas relative named Architect Fernandez located at the Fabella Estate.10 In an order dated 25 November 1994, the trial court admitted in evidence the attachments to the Ragudos' aforementioned Rejoinder With Counter-Motion, etc., and ultimately denied FETAs motion for execution pending appeal. Later, in CA-G.R. CV No. 51230, the Ragudos filed with the appellate court a Motion To Admit Certain Documentary Evidence by Way of Partial New Trial, In the Interest of Justice,11 thereunder seeking the admission in evidence of the very documents earlier admitted by the trial court in connection with the then pending incident of execution pending appeal, and praying that said documents be made part of the records and considered in the resolution of their appeal in CA-G.R. CV No. 51230. This time, however, the Ragudos were not as lucky. For, in a Resolution dated 19 May 1997,12 the appellate court denied their aforesaid motion and ordered expunged from the records of the appealed case the documents they sought admission of, on the ground that they could not be considered as newly discovered evidence under Rule 37 of the Rules of Court. Dispositively, the Resolution reads: WHEREFORE, the instant motion to admit certain documentary evidence by way of partial new trial is DENIED for lack of merit. ACCORDINGLY, the Joint Affidavit dated October 7, 1994 of Honesto Garcia III and Miguela L. Balbino and the latter of Aurelio Raguo to Atty. Cesar G. Untalan dated November 21, 1989 are ordered EXPUNGED from the records of this case. SO ORDERED. The Ragudos moved for a reconsideration, invoking "liberality in the exercise of judicial discretion" and the "interest of equity and substantial justice". Unmoved, the appellate court denied their motion in its subsequent Resolution of 24 September 1997.13 Eventually, in the herein assailed decision dated 19 July 2000, the Court of Appeals dismissed the Ragudos appeal in CA-G.R. CV No. 51230 and affirmed with modification the RTC decision in the main case, thus: WHEREFORE, premises considered, the appealed decision is hereby AFFIRMED, except for the second clause of the dispositive portion which should be MODIFIED, as follows: "2) to pay [FETA] rent in the amount of P500.00 for the month of November, 1989 and every month thereafter until they vacate the premises." SO ORDERED. With their motion for reconsideration having been denied by the appellate court in its equally challenged Resolution of 29 January 2001, the Ragudos are now with us via the instant recourse, commending for our resolution the following issues:

1. WHETHER OR NOT THE COURT OF APPEALS ERRED IN NOT ADMITTING IN EVIDENCE THE DOCUMENTS SOUGHT TO BE INTRODUCED BY RAGUDO AT THE APPELLATE LEVEL ON THE GROUND OF "LIBERALITY OF PROCEDURAL RULES", "EQUITY AND SUBSTANTIAL JUSTICE", THE "MISTAKE AND EXCUSABLE NEGLIGENCE" ON THE PART OF THEIR FORMER COUNSEL, AND THE "SOCIAL JUSTICE AND PARENS PATRIAE CLAUSE" OF THE 1987 CONSTITUTION. 2. WHETHER OR NOT "ACQUISITIVE PRESCRIPTION AND EQUITABLE LACHES" HAD SET IN TO WARRANT THE CONTINUED POSSESSION OF THE SUBJECT LOT BY RAGUDO AND WHETHER THE SAME PRINCIPLES HAD CREATED A "VESTED RIGHT" IN FAVOR OF RAGUDO TO CONTINUE TO POSSESS AND OWN THE SUBJECT LOT.14 Informed of Mr. Ramon Ragudos death on 26 March 2001, the Court, in a resolution dated 14 January 2002,15allowed his substitution by his other heirs. The recourse must fall. Relative to the first issue, it is petitioners submission that the appellate court committed an error when it refused admission as evidence in the main case the documents earlier admitted by the trial court in connection with FETAs motion for execution pending appeal. Appealing to this Courts sense of judicial discretion in the interest of equity and substantial justice, petitioners explain that the documents in question were not presented and offered in evidence during the trial of the main case before the RTC due to the honest mistake and excusable negligence of their former counsel, Atty. Celso A. Tabobo, Jr. We are not persuaded. In this jurisdiction, well-entrenched is the rule that the mistake and negligence of counsel to introduce, during the trial of a case, certain pieces of evidence bind his client.16 For sure, in Aguila vs. Court of First Instance of Batangas,17 we even ruled that the omitted evidence by reason of counsels mistake or negligence, cannot be invoked as a ground for new trial: On the effects of counsels acts upon his client, this Court has categorically declared: It has been repeatedly enunciated that a client is bound by the action of his counsel in the conduct of a case and cannot be heard to complain that the result might have been different had he proceeded differently. A client is bound by the mistakes of his lawyer. If such grounds were to be admitted and reasons for reopening cases, there would never be an end to a suit so long as new counsel could be employed who could allege and show that prior counsel had not been sufficiently diligent or experienced or learned. x x x Mistakes of attorneys as to the competency of a witness, the sufficiency, relevancy or irrelevancy of certain evidence, the proper defense, or the burden of proof, x x x failure to introduce certain evidence, to summon witnesses and to argue the case arenot proper grounds for a new trial, unless the incompetency of counsel is so great that his client is prejudiced and prevented from properly presenting his case. (Vol. 2, Moran, Comments on the Rules of Court, pp. 218, 219-220, citing Rivero v. Santos, et al., 98 Phil. 500, 503-504; Isaac v. Mendoza, 89 Phil. 279; Montes v. Court, 48 Phil. 64; People v. Manzanilla, 43 Phil. 167; U.S. v. Umali, 15 Phil. 33; see also People v. Ner, 28 SCRA 1151, 1164). In the 1988 case of Palanca v. American Food, etc. (24 SCRA 819, 828), this principle was reiterated. (Tesoro v. Court of Appeals, 54 SCRA 296, 304). [Citations in the original; Emphasis supplied]. This is, as it should be, because a counsel has the implied authority to do all acts which are necessary or, at least, incidental to the prosecution and management of the suit in behalf of his

client.18 And, any act performed by counsel within the scope of his general and implied authority is, in the eyes of the law, regarded as the act of the client himself and consequently, the mistake or negligence of the clients counsel may result in the rendition of an unfavorable judgment against him.19 A contrary rule would be inimical to the greater interest of dispensing justice. For, all that a losing party will do is to invoke the mistake or negligence of his counsel as a ground for reversing or setting aside a judgment adverse to him, thereby putting no end to litigation. Again, to quote from our decision in Aguila: Now petitioner wants us to nullify all of the antecedent proceedings and recognize his earlier claims to the disputed property on the justification that his counsel was grossly inept. Such a reason is hardly plausible as the petitioners new counsel should know. Otherwise, all a defeated party would have to do to salvage his case is claim neglect or mistake on the part of his counsel as a ground for reversing the adverse judgment. There would be no end to litigation if this were allowed as every shortcoming of counsel could be the subject of challenge by his client through another counsel who, if he is also found wanting, would likewise be disowned by the same client through another counsel, and so on ad infinitum. This would render court proceedings indefinite, tentative and subject to reopening at any time by the mere subterfuge of replacing counsel. (Emphasis supplied). Admittedly, the rule thus stated admits of exceptions. Thus, in cases where the counsels mistake is so great and serious that the client is prejudiced and denied his day in court20 or when he is guilty of gross negligence resulting in the clients deprivation of his property without due process of law,21 the client is not bound by his counsels mistakes and the case may even be reopened in order to give the client another chance to present his case. Unfortunately, however, petitioners case does not fall under any of the exceptions but rather squarely within the ambit of the rule. As it is, petitioners were given full opportunity during the trial of the main case to adduce any and all relevant evidence to advance their cause. In no sense, therefore, may it be argued that they were denied due process of law. As we said in Antonio vs. Court of Appeals,22 a client cannot be said to have been deprived of his day in court and there is no denial of due process as long as he has been given an opportunity to be heard, which, we emphasize, was done in the instant case. Petitioners further argue that the documents which their former counsel failed to adduce in evidence during trial of the main case must be allowed to stay in the records thereof and duly considered in the resolution of their appeal because they were duly admitted in the trial court during the hearing on the incidental motion for execution pending appeal. Again, we are not persuaded. With the reality that those documents were never presented and formally offered during the trial of the main case, their belated admission for purposes of having them duly considered in the resolution of CA-G.R. CV No. 51230 would certainly collide with Section 34, Rule 132, of the Rules of Court, which reads: SECTION 34. Offer of Evidence. The court shall consider no evidence which has not been formally offered. The purpose for which the evidence is offered must be specified. (Emphasis supplied).

To stress, it was only during the hearing of the motion for execution pending appeal that said documents were presented and offered in evidence. Sure, the trial court admitted them, but the admission was only for the purpose for which they were offered, that is, by way of opposition to FETAs motion for execution pending appeal. It is basic in the law of evidence that the court shall consider evidence solely for the purpose for which it was offered.23 While the said documents may have the right to stay in the records of the case for purposes of the incidental issue of execution pending appeal, they do not have that same right insofar as far as the main case is concerned, and ought not be considered in the resolution thereof. Petitioners next contend that acquisitive prescription and equitable laches had set in, thereby vesting them with a right to a continued possession of the subject lot. The contention holds no water. It is not disputed that at the core of this controversy is a parcel of land registered under the Torrens system. In a long line of cases,24 we have consistently ruled that lands covered by a title cannot be acquired by prescription or adverse possession. So it is that in Natalia Realty Corporation vs. Vallez, et al.,25 we held that a claim of acquisitive prescription is baseless when the land involved is a registered land because of Article 1126 of the Civil Code26 in relation to Act 496 (now, Section 47 of Presidential Decree No. 152927): Appellants claim of acquisitive prescription is likewise baseless. Under Article 1126 of the Civil Code, prescription of ownership of lands registered under the Land Registration Act shall be governed by special laws. Correlatively, Act No. 496 provides that no title to registered land in derogation of that of the registered owner shall be acquired by adverse possession. Consequently, proof of possession by the defendants is both immaterial and inconsequential. (Emphasis supplied). Petitioners would take exception from the above settled rule by arguing that FETA as well as its predecessor in interest, Don Dionisio M. Fabella, are guilty of laches and should, therefore, be already precluded from asserting their right as against them, invoking, in this regard, the rulings of this Court28 to the effect that while a registered land may not be acquired by prescription, yet, by virtue of the registered owners inaction and neglect, his right to recover the possession thereof may have been converted into a stale demand. While, at a blush, there is apparent merit in petitioners posture, a closer look at our jurisprudence negates their submission. To start with, the lower court found that petitioners possession of the subject lot was merely at the tolerance of its former lawful owner. In this connection, Bishop vs. Court of Appeals29 teaches that if the claimants possession of the land is merely tolerated by its lawful owner, the latters right to recover possession is never barred by laches: As registered owners of the lots in question, the private respondents have a right to eject any person illegally occupying their property. This right is imprescriptible. Even if it be supposed that they were aware of the petitioners occupation of the property, and regardless of the length of that possession, the lawful owners have a right to demand the return of their property at any time as long as the possession was unauthorized or merely tolerated, if at all. This right is never barred by laches. (Emphasis supplied). To the same effect is our pronouncement in Urquiaga vs. Court of Appeals,30 to wit:

We find no reversible error committed by respondent Court of Appeals. We sustain private respondents ownership of Lot No. 6532-B. As between the verbal claim of ownership by petitioners through possession for a long period of time, which was found by the court a quo to be inherently weak, and the validly documented claim of ownership of respondents, the latter must naturally prevail. (Emphasis supplied). WHEREFORE, the instant petition is DENIED and the assailed decision and resolution of the Court of Appeals AFFIRMED. Costs against petitioners. SO ORDERED. Panganiban, (Chairman), Sandoval-Gutierrez, and Carpio-Morales, JJ., concur. Corona, J., on official leave. G.R. No. 154270 March 9, 2010

TEOFISTO OO, PRECY O. NAMBATAC, VICTORIA O. MANUGAS and POLOR O. CONSOLACION, Petitioners, vs. VICENTE N. LIM, Respondent. DECISION BERSAMIN, J.: The subject of controversy is Lot No. 943 of the Balamban Cadastre in Cebu City, covered by Original Certificate of Title (OCT) No. RO-9969-(O-20449), over which the contending parties in this action for quieting of title, initiated by respondent Vicente N. Lim (Lim) in the Regional Trial Court (RTC) in Cebu City, assert exclusive ownership, to the exclusion of the other. In its decision dated July 30, 1996,1 the RTC favored Lim, and ordered the cancellation of OCT No. RO-9969-(O-20449) and the issuance of a new certificate of title in the name of Luisa Narvios-Lim (Luisa), Lims deceased mother and predecessor-in-interest. On appeal (CA-GR CV No. 57823), the Court of Appeals (CA) affirmed the RTC on January 28, 2002.2 It later denied the petitioners motion for reconsideration through the resolution dated June 17, 2002.3 Hence, this appeal via petition for review on certiorari. Antecedents On October 23, 1992, Lim filed in the RTC in Cebu City a petition for the reconstitution of the owners duplicate copy of OCT No. RO-9969-(O-20449), alleging that said OCT had been lost during World War II by his mother, Luisa;4 that Lot No. 943 of the Balamban Cadastre in Cebu City covered by said OCT had been sold in 1937 to Luisa by Spouses Diego Oo and Estefania Apas (Spouses Oo), the lots registered owners; and that although the deed evidencing the sale had been lost without being registered, Antonio Oo (Antonio), the only legitimate heir of Spouses Oo, had

executed on April 23, 1961 in favor of Luisa a notarized document denominated asconfirmation of sale,5 which was duly filed in the Provincial Assessors Office of Cebu. Zosimo Oo and petitioner Teofisto Oo (Oos) opposed Lims petition, contending that they had the certificate of title in their possession as the successors-in-interest of Spouses Oo. On account of the Oos opposition, and upon order of the RTC, Lim converted the petition for reconstitution into a complaint for quieting of title,6 averring additionally that he and his predecessorin-interest had been in actual possession of the property since 1937, cultivating and developing it, enjoying its fruits, and paying the taxes corresponding to it. He prayed, inter alia, that the Oos be ordered to surrender the reconstituted owners duplicate copy of OCT No. RO-9969-(O-20449), and that said OCT be cancelled and a new certificate of title be issued in the name of Luisa in lieu of said OCT. In their answer,7 the Oos claimed that their predecessors-in-interest, Spouses Oo, never sold Lot No. 943 to Luisa; and that the confirmation of sale purportedly executed by Antonio was fabricated, his signature thereon not being authentic. RTC Ruling On July 30, 1996, after trial, the RTC rendered its decision,8 viz: WHEREFORE, premises considered, judgment is hereby rendered quieting plaintiff's title to Lot No. 943 of the Balamban (Cebu) Cadastre, and directing the Register of Deeds of Cebu (1) To register the aforestated April 23, 1961 Confirmation of Sale of Lot No. 943 of the Balamban, Cebu Cadastre by Antonio Oo in favor of Luisa Narvios-Lim; (2) To cancel the original certificate of title covering the said Lot No. 943 of the Balamban, Cebu Cadastre; and, (3) To issue in the name of Luisa Narvios-Lim, a new duplicate certificate of title No. RO9969 (O-20449) of the Register of Deeds of Cebu, which shall contain a memorandum of the fact that it is issued in place of the lost duplicate certificate of title, and shall in all respects be entitled to like faith and credit as the original certificate, and shall be regarded as such for all purposes of this decree, pursuant to the last paragraph of Section 109, Presidential Decree No. 1529. Without special pronouncement as to costs. SO ORDERED.9 The RTC found that the Lims had been in peaceful possession of the land since 1937; that their possession had never been disturbed by the Oos, except on two occasions in 1993 when the Oos seized the harvested copra from the Lims caretaker; that the Lims had since declared the lot in their name for taxation purposes, and had paid the taxes corresponding to the lot; that the signature of Antonio on the confirmation of sale was genuine, thereby giving more weight to the testimony of the notary public who had notarized the document and affirmatively testified that Antonio and Luisa had both appeared before him to acknowledge the instrument as true than to the testimony of the expert witness who attested that Antonios signature was a forgery.

CA Ruling On appeal, the Oos maintained that the confirmation of sale was spurious; that the property, being a titled one, could not be acquired by the Lims through prescription; that their (the Oos) action to claim the property could not be barred by laches; and that the action instituted by the Lims constituted a collateral attack against their registered title.
1avv phi 1

The CA affirmed the RTC, however, and found that Spouses Oo had sold Lot No. 943 to Luisa; and that such sale had been confirmed by their son Antonio. The CA ruled that the action for quieting of title was not a collateral, but a direct attack on the title; and that the Lims undisturbed possession had given them a continuing right to seek the aid of the courts to determine the nature of the adverse claim of a third party and its effect on their own title. Nonetheless, the CA corrected the RTC, by ordering that the Office of the Register of Deeds of Cebu City issue a new duplicate certificate of title in the name of Luisa, considering that the owners duplicate was still intact in the possession of the Oos. The decree of the CA decision was as follows: WHEREFORE, the appeal is DISMISSED for lack of merit. However, the dispositive portion of the decision appealed from is CORRECTED as follows: (1) Within five (5) days from finality of the decision, defendants-appellants are directed to present the owner's duplicate copy of OCT No. RO-9969 (O-20449) to the Register of Deeds who shall thereupon register the "Confirmation of Sale" of Lot No. 943, Balamban Cadastre, Cebu, executed on April 23, 1961 by Antonio Oo in favor of Luisa Narvios-Lim, and issue a new transfer certificate of title to and in the name of the latter upon cancellation of the outstanding original and owner's duplicate certificate of title. (2) In the event defendants-appellants neglect or refuse to present the owner's copy of the title to the Register of Deeds as herein directed, the said title, by force of this decision, shall be deemed annulled, and the Register of Deeds shall make a memorandum of such fact in the record and in the new transfer certificate of title to be issued to Luisa Narvios-Lim. (3) Defendants-appellants shall pay the costs. SO ORDERED.10 The CA denied the Oos motion for reconsideration11 on June 17, 2002.12 Hence, this appeal. Issues The petitioners raise the following issues: 1. Whether or not the validity of the OCT could be collaterally attacked through an ordinary civil action to quiet title; 2. Whether or not the ownership over registered land could be lost by prescription, laches, or adverse possession;

3. Whether or not there was a deed of sale executed by Spouses Oo in favor of Luisa and whether or not said deed was lost during World War II; 4. Whether or not the confirmation of sale executed by Antonio in favor of Luisa existed; and 5. Whether or not the signature purportedly of Antonio in that confirmation of sale was genuine. Ruling of the Court The petition has no merit. A. Action for cancellation of title is not an attack on the title The petitioners contend that this action for quieting of title should be disallowed because it constituted a collateral attack on OCT No. RO-9969-(O-20449), citing Section 48 of Presidential Decree No. 1529, viz: 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. The petitioners contention is not well taken. 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.13 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.14 Quieting of title is a common law remedy for the removal of any cloud, doubt, or uncertainty affecting title to real property.15 Whenever there is a cloud on title to real property or any interest in real property by reason of any instrument, record, claim, encumbrance, or proceeding that is apparently valid or effective, but is, in truth and in fact, invalid, ineffective, voidable, or unenforceable, and may be prejudicial to said title, an action may be brought to remove such cloud or to quiet the title.16 In such action, the competent court is tasked to determine the respective rights of the complainant and the other claimants, not only to place things in their proper places, and to make the claimant, who has no rights to said immovable, respect and not disturb the one so entitled, but also for the benefit of both, so that whoever has the right will see every cloud of doubt over the property dissipated, and he can thereafter fearlessly introduce the improvements he may desire, as well as use, and even abuse the property as he deems fit.17 Lims complaint pertinently alleged: 18. If indeed, the genuine original of the Owner's Duplicate of the Reconstituted Original Certificate of Title No. RO-9699 (O-20449) for Lot 943, Balamban Cadastre xxx is in Defendant's (Oos) possession, then VNL submits the following PROPOSITIONS: xxx

18.2. Therefore, the Original of Owners Duplicate Certificate (which Respondents [Defendants Oos] claim in their Opposition is in their possession) must be surrendered to VNL upon order of this Court, after the Court shall have determined VNL's mother's acquisition of the attributes of ownership over said Lot 943, in this action, in accordance with Section 107, P.D. 1529, Property Registration Decree xxx xxx [t]hat OCT 20449 be cancelled and new title for Lot 943 be issued directly in favor of LUISA NARVIOS, to complete her title to said Lot;18 The averments readily show that the action was neither a direct nor a collateral attack on OCT No. RO-9969-(O-20449), for Lim was asserting only that the existing title registered in the name of the petitioners predecessors had become inoperative due to the conveyance in favor of Lims mother, and resultantly should be cancelled. Lim did not thereby assail the validity of OCT No. RO-9969-(O20449), or challenge the judgment by which the title of the lot involved had been decreed. In other words, the action sought the removal of a cloud from Lims title, and the confirmation of Lims ownership over the disputed property as the successor-in-interest of Luisa. B. Prescription was not relevant The petitioners assert that the lot, being titled in the name of their predecessors-in-interest, could not be acquired by prescription or adverse possession. The assertion is unwarranted. Prescription, in general, is a mode of acquiring or losing ownership and other real rights through the lapse of time in the manner and under the conditions laid down by law.19 However, prescription was not relevant to the determination of the dispute herein, considering that Lim did not base his right of ownership on an adverse possession over a certain period. He insisted herein, instead, that title to the land had been voluntarily transferred by the registered owners themselves to Luisa, his predecessor-in-interest. Lim showed that his mother had derived a just title to the property by virtue of sale; that from the time Luisa had acquired the property in 1937, she had taken over its possession in the concept of an owner, and had performed her obligation by paying real property taxes on the property, as evidenced by tax declarations issued in her name;20 and that in view of the delivery of the property, coupled with Luisas actual occupation of it, all that remained to be done was the issuance of a new transfer certificate of title in her name. C. Forgery, being a question of fact, could not be dealt with now The petitioners submit that Lims evidence did not preponderantly show that the ownership of the lot had been transferred to Luisa; and that both the trial and the appellate courts disregarded their showing that Antonios signature on the confirmation of sale was a forgery.

Clearly, the petitioners hereby seek a review of the evaluation and appreciation of the evidence presented by the parties. The Court cannot anymore review the evaluation and appreciation of the evidence, because the Court is not a trier of facts.21 Although this rule admits of certain exceptions, viz: (1) when the conclusion is a finding grounded entirely on speculation, surmises, or conjecture; (2) when the inference made is manifestly mistaken; (3) where there is a grave abuse of discretion; (4) when the judgment is based on a misapprehension of facts; (5) when the findings of fact are conflicting; (6) when the Court of Appeals, in making its findings, went beyond the issues of the case, and the findings are contrary to the admissions of both appellant and appellee; (7) when the findings of the Court of Appeals are contrary to those of the trial court; (8) when the findings of fact are conclusions without specific evidence on which they are based; (9) when the facts set forth in the petition as well in the petitioners main and reply briefs are not disputed by the respondents; and, (10) when the findings of fact of the Court of Appeals are premised on the supposed absence of evidence and are contradicted by the evidence on record,22 it does not appear now that any of the exceptions is present herein. We thus apply the rule without hesitation, and reject the appeal for that reason. It is emphasized, too, that the CA upheld the conclusion arrived at by the RTC that the signature of Antonio had not been simulated or forged. The CA ruled that the testimony of the notary public who had notarized the confirmation of sale to the effect that Antonio and Luisa had appeared before him prevailed over that of the petitioners expert witness. The concurrence of their conclusion on the genuineness of Antonios signature now binds the Court.23 In civil cases, the party having the burden of proof must establish his case by a preponderance of evidence. Preponderance of evidence is the weight, credit, and value of the aggregate evidence on either side, and is usually considered to be synonymous with the term greater weight of the evidence or greater weight of the credible evidence. Preponderance of evidence is a phrase that means, in the last analysis, probability of the truth.24 It is evidence that is more convincing to the court as worthy of belief than that which is offered in opposition thereto. Lim successfully discharged his burden of proof as the plaintiff. He established by preponderant evidence that he had a superior right and title to the property. In contrast, the petitioners did not present any proof of their better title other than their copy of the reconstituted certificate of title. Such proof was not enough, because the registration of a piece of land under the Torrens system did not create or vest title, such registration not being a mode of acquiring ownership. The petitioners need to be reminded that 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.25 WHEREFORE, the petition for review on certiorari is denied, and the decision dated January 28, 2002 is affirmed. The petitioners are ordered to pay the costs of suit. SO ORDERED. LUCAS P. BERSAMIN Associate Justice G.R. No. 151235 July 28, 2005

HEIRS OF JUAN PANGANIBAN & INES PANGANIBAN, namely: ERLINDA B. PACURSA, ERNESTO P. BACONGA, EVELYN BACONGA, AMY B. BIHAG, SIEGFREDO BACONGA, IMELDA B. PACALDO, REBECCA B. LI, OFELIA B. OALIVAR, GEMMA BACONGA, MARIE INES BACONGA, MELANIE BACONGA, and ANITA FUENTES, Petitioners, vs. ANGELINA N. DAYRIT, Respondent. DECISION Tinga, J.: This is a petition for review on certiorari seeking the partial reversal of the Decision1 and the Resolution2 denying the motion for reconsideration rendered by the Court of Appeals (CA) Second Division in CA-G.R. CV No. 57148. This case stemmed from a petition for cancellation of owners duplicate copy of Original Certificate of Title (OCT) No. 7864 of the Registry of Deeds of Misamis Oriental and recovery of damages filed by the heirs of Juan and Ines Panganiban, more particularly Erlinda B. Pacursa, Ernesto P. Baconga, Asito P. Baconga and Anita B. Fuentes, against Angelina N. Dayrit, respondent herein, on 3 April 1992.3 The petition was later amended to add the heirs of Asito P. Baconga as petitioners upon the latters death and to include a prayer for quieting of title over the property in dispute.4 The undisputed operative facts follow. The property subject of controversy is a two thousand twenty-five (2,025)-square meter portion of a lot denominated as Lot 1436, situated at Kauswagan, Cagayan de Oro City. It constitutes threefourths (3/4) of Lot 1436, one of the three (3) lots covered by OCT No. 7864, the other two being Lots 1441 and 1485. OCT No. 7864 was registered in the names of Juan Panganiban (Juan) and Ines Panganiban (Ines), father and daughter respectively, on 17 April 1940.5 Juan died sometime in June 19426 while Ines, his only child, died in April 1944.7 In the amended complaint filed with the trial court, petitioners alleged that they are the possessors and owners of Lot 1436 which they inherited from the late Juan and Ines. They acknowledge that Lot 1436 was the only remaining lot covered by OCT No. 7864, Lots 1485 and 1441 having been sold in 1949 to Galo Sabanal and Pablo Dagbay respectively, by virtue of a deed denominated as Extrajudicial Settlement of Estate Among Heirs and Sale.8 The owners duplicate copy of OCT No. 7864 covering Lot 1436 had been lost but upon petition with the trial court in 1977 by Erlinda B. Pacursa (Erlinda), one of the heirs of Ines and a petitioner herein, the trial court granted the petition.9 Accordingly, the Register of Deeds of Misamis Oriental issued an owners duplicate certificate of OCT No. 7864 to Erlinda.10 Petitioners further alleged that unknown to them, a certain Cristobal Salcedo (Salcedo) asserted ownership over Lot 1436 and believing that it was unregistered, sold a portion of it to respondent. The latter subsequently discovered that what she had bought was registered land. Unable to annotate the deed of sale at the back of OCT No. 7864, respondent fraudulently filed a petition for issuance of the owners copy of said title, docketed as Misc. Case No. 90-018 in March 1990. This petition of the respondent alleged that the copy issued to Erlinda was lost in the fire that razed Lapasan, Cagayan de Oro City in 1981. While the petition mentioned Erlinda as the last one in possession of the alleged lost owners duplicate copy of the title, she was not notified of the proceedings.11

The petition in Misc. Case No. 90-018 was subsequently granted and the Register of Deeds of Misamis Oriental issued an owners duplicate certificate of OCT No. 7864 to respondent.12 This second duplicate certificate issued to respondent contained Entry No. 160180, the annotation of a Notice of Adverse Claim filed by Erlinda.13 TheNotice of Adverse Claim14 dated 24 February 1992 alleged in part that Erlinda is one of the lawful heirs of Juan and Ines, the registered owners of the property, and as such, she has a legitimate claim thereto. Petitioners further alleged that the newly issued owners duplicate certificate of OCT No. 7864 to respondent was prejudicial to their previously issued title which is still in existence. Thus, they prayed among others that they be declared as the rightful owners of the property in question and that the duplicate certificate of OCT No. 7864 in their possession be deemed valid and subsisting.15 In her answer to the amended complaint, respondent denied all the material allegations of the complaint and set up affirmative and special defenses. She alleged that Lot 1436 was actually sold sometime in 1947 by the petitioners themselves and their father, Mauricio Baconga. The sale was purportedly covered by a Deed of Definite Sale. Salcedo then came into ownership, possession and enjoyment of the property in question.16 On 14 February 1978, Salcedo sold a portion of Lot 1436 with an area of two thousand twenty- five (2,025) square meters, more or less, to respondent. From then on, the property in question has been in her actual and physical enjoyment, she added.17 Respondent further alleged that the complaint was barred by the principles of estoppel and laches by virtue of the sales executed by petitioners themselves and their father. The complaint, according to her, also failed to include as defendants, the heirs of Salcedo who are indispensable parties.18 On 10 August 1992, upon motion duly granted, respondent filed a third-party complaint against the heirs of Salcedo alleging that as such heirs, they carry the burden of warranting that their predecessors in interest were the true, legal and rightful owners of the property in question at the time of the sale. Hence, she prayed therein that she be maintained in peaceful and legal ownership, possession and enjoyment of the questioned property.19 Answering the third-party complaint, the heirs of Salcedo effectively admitted the existence of the 1978 deed of sale in favor of respondent by their parents and considered the sale as within the personal and legal right of their parents and an act outside their control.20 After due trial and consideration of the documentary and testimonial evidence adduced by both parties, the trial court rendered a decision against petitioners and in favor of respondent. The dispositive portion of the decision provides: WHEREFORE, premises considered judgment is hereby rendered: 1. DISMISSING plaintiffs complaint, for lack of merit and cause of action; 2. DECLARING defendant as the true and real owner of the lot in question; 3. DECLARING the owners duplicate copy of Original Certificate of Title No. 7864 (plaintiffs Exh. "A") null and void same being obtained by plaintiffs when they were not owners anymore of Lot 1436; 4. DECLARING the owners duplicate copy of Original Certificate of Title No. 7864 obtained by defendant (Exh. "1") as the one valid to be given like faith and credit as the one that was lost and declared null and void; and

5. ORDERING the Register of Deeds of Cagayan de Oro City to issue a transfer certificate of title to Angela N. Dayrit, herein defendant, for her 2,025 square meter portion of Lot 1436; to Anita Baconga Fuentes for her 505 square meter portion of Lot 1436 and to Atty. Isabelo N. Pacursa or his heirs, he being allegedly dead already, for his 170 square meter portion of Lot 1436 and after they shall have presented an approved subdivision plan and an agreement to partition, to issue to each of them, their respective transfer certificate of title with an area according to the respective technical description corresponding to each of their land. Defendants counterclaim and third-party complaint are hereby dismissed. SO ORDERED.21 The Regional Trial Court Decision was modified by the CA on appeal by petitioners. The appellate court held that contrary to the ruling of the trial court, the valid and subsisting duplicate certificate of OCT No. 7864 was the one issued to Erlinda, not to respondent, considering that respondent had failed to comply with the mandatory jurisdictional requirements of law for the reconstitution of title under Sec. 13 of Republic Act No. 26.22 The CA invoked the doctrine that a trial court does not acquire jurisdiction over a petition for the issuance of a new owners duplicate certificate of title if the original is in fact not lost. Citing Strait Times, Inc. v. Court of Appeals,23the CA held that the reconstituted certificate is itself void once the existence of the original is unquestionably demonstrated.24 Nonetheless, the CA affirmed in all other respects the ruling of the trial court, including the critical holding that respondent was the owner of the subject property. The decretal portion of the CAs decision reads: WHEREFORE, in view of the foregoing, and pursuant to applicable law and jurisprudence on the matter and evidence on hand, judgment is hereby rendered granting partly the instant appeal. Consequently, the decision of the trial court is MODIFIED so as to order the cancellation of the owners duplicate copy of OCT No. 7864 issued to defendant Angelina Dayrit and declaring the owners duplicate copy of OCT No. 7864 (Exh. "A" and sub-markings with SN No. 014439) to be still valid for all intents and purposes and to be given like faith and credit as the original. All other aspects are AFFIRMED. No costs. SO ORDERED.25 (Emphasis in the original.) Petitioners now come before this Court seeking the partial reversal of the decision rendered by the CA. They contend that the CA erred in finding that the tax declarations and the alleged adverse possession of respondent and her predecessor-in-interest are conclusive proofs of their ownership of Lot 1436. They further contend that the CA erred when it found them guilty of laches.26 However, it is apparent that in order that the petition may be properly resolved, we must ascertain first, who between petitioners and respondent is the rightful owner of the property in dispute and second, whether petitioners right to recover the property is barred by laches assuming they are the rightful owners thereof as they claim. The resolution of the foregoing issues hinges on the question of which owners duplicate certificate of title is valid and subsisting, the one in petitioners possession or the one issued to respondent. What appears on the face of the title is controlling in questions of ownership since the certificate of title is an absolute and indefeasible evidence of ownership of the property in favor of the person whose name appears therein.27

The CA correctly ruled that the duplicate certificate of title in petitioners possession is valid and subsisting. This Court had already ruled in Serra Serra v. Court of Appeals28 that if a certificate of title has not been lost but is in fact in the possession of another person, the reconstituted title is void and the court rendering the decision has not acquired jurisdiction over the petition for issuance of a new title.29 Since the owners duplicate copy of OCT No. 7864 earlier issued to Erlinda is still in existence, the lower court did not acquire jurisdiction over respondents petition for reconstitution of title. The duplicate certificate of title subsequently issued to respondent is therefore void and of no effect. The registered owners of OCT No. 7864 on the face of the valid and subsisting duplicate certificate of title are still Juan and Ines, petitioners predecessors in interest.30 Per Section 46 of the Land Registration Act, no title to registered land in derogation to that of the registered owner shall be acquired by prescription or adverse possession. This rule taken in conjunction with the indefeasibility of a Torrens title leads to the conclusion that the rightful owners of the property in dispute are petitioners. They are indisputably the heirs of the registered owners, both of whom are already dead. These premises considered, it was error on the part of the trial court to rule that respondent was the owner of the subject property and for the CA to have affirmed such holding. We rule instead that the successors-in-interest of Juan and Ines are the legal owners of the subject property, namely petitioners herein. Petitioners ownership of the property having been established, the question now is whether they are entitled to its possession. On this point, the Court rules in the negative. Petitioners are no longer entitled to recover possession of the property by virtue of the equitable defense of laches. Thus, petitioners argument that laches is not applicable to them has no merit. By laches is meant: the failure or neglect, for an unreasonable and unexplained length of time, to do that which by exercising due diligence could or should have been done earlier, it is negligence or omission to assert a right within a reasonable time, warranting a presumption that the party entitled to assert it either has abandoned it or declined to assert it. The defense of laches is an equitable one and does not concern itself with the character of the defendants title but only with whether or not by reason of plaintiffs long inaction or inexcusable neglect, he should be barred from asserting his claim at all, because to allow him to do so would be inequitable and unjust to defendant.31 In our jurisdiction, it is an enshrined rule that even a registered owner of property may be barred from recovering possession of property by virtue of laches.32 Thus, in the case of Lola v. Court of Appeals,33 this Court held that petitioners acquired title to the land owned by respondent by virtue of the equitable principles of laches due to respondents failure to assert her claims and ownership for thirty-two (32) years. In Miguel v. Catalino,34 this Court said that appellants passivity and inaction for more than thirty-four (34) years (1928-1962) justifies the defendant-appellee in setting up the equitable defense of laches in his behalf. Likewise, in the case of Mejia de Lucas v. Gamponia,35 we stated that while the defendant may not be considered as having acquired title by virtue of his and his predecessors long continued possession for thirty-seven (37) years, the original owners right to recover possession of the property and the title thereto from the defendant has, by the latters long period of possession and by patentees inaction and neglect, been converted into a stale demand.36 In this case, both the lower court and the appellate court found that contrary to respondents claim of possession, it was Salcedo, respondents predecessor-in-interest who had been in actual possession of the property. In fact, when the lower court conducted an ocular inspection on the subject premises sometime on 16 March 1993, the court-appointed Commissioner elicited from the people residing near the subject property, more particularly Celso Velez, Nieto Abecia and Paquito

Nabe, that Salcedo was the owner and the one in possession of the land until 1978 when respondent became the possessor thereof.37 It was only in 1992 or forty-five (45) years from the time Salcedo took possession of the property that petitioners made an attempt to claim it as their own. Petitioners declared the property for tax purposes, registered their adverse claim to respondents title, and filed the instant case all in 1992.38 These actuations of petitioners point to the fact that for forty-five (45) years, they did nothing to assert their right of ownership and possession over the subject property. Given the circumstances in the case at bar, the application of the equitable defense of laches is more than justified. Petitioners claim that prescription and adverse possession can never militate against the right of a registered owner since a title, once registered cannot be defeated even by adverse, open and notorious possession.39 They are right in that regard. But their cause is defeated not by prescription and adverse possession, but by laches. This Court had occasion to distinguish laches from prescription in the case of Heirs of Batiog Lacamen v. Heirs of Laruan.40 It was held therein that: "Laches" has been defined as "such neglect or omission to assert a right, taken in conjunction with lapse of time and other circumstances causing prejudice to an adverse party, as will operate as a bar in equity." It is a delay in the assertion of a right "which works disadvantage to another" because of the "inequity founded on some change in the condition or relations of the property or parties." It is based on public policy which, for the peace of society, ordains that relief will be denied to a stale demand which otherwise could be a valid claim. It is different from and applies independently of prescription. While prescription is concerned with the fact of delay, laches is concerned with the effect of delay. Prescription is a matter of time; laches is principally a question of inequity of permitting a claim to be enforced, this inequity being founded on some change in the condition of the property or the relation of the parties. Prescription is statutory; laches is not. Laches applies in equity, whereas prescription applies at law. Prescription is based on a fixed time, laches is not.41 (Footnotes are omitted.) Thus, it is the effect of delay in asserting their right of ownership over the property which militates against petitioners, not merely the fact that they asserted their right to the property too late in the day. All the four (4) elements of laches prescribed by this Court in the case of Go Chi Gun, et al. v. Co Cho, et al.42and reiterated in the cases of Mejia de Lucas v. Gamponia,43 Miguel v. Catalino44 and Claverias v. Quingco45 are present in the case at bar, to wit: (1) conduct on the part of the defendant, or of one under whom he claims, giving rise to the situation of which complaint is made for which the complaint seeks a remedy; (2) delay in asserting the complainants rights, the complainant having had knowledge or notice, of the defendants conduct and having been afforded an opportunity to institute a suit; (3) lack of knowledge or notice on the part of the defendant that the complainant would assert the right on which he bases his suit; and

(4) injury or prejudice to the defendant in the event relief is accorded to the complainant, or the suit is not held to be barred.46 Petitioners inaction for forty-five (45) years reduced their right to recover the subject property into a stale demand. In Mejia,47 the Court held in essence that the principle of laches is one of estoppel because it prevents people who have slept on their rights from prejudicing the rights of third parties who have placed reliance on the inaction of the original patentee and his successors in interest.48 The following pronouncement in the case of Claverias v. Quingco49 is therefore apropos to the case at bar: Courts cannot look with favor at parties who, by their silence, delay and inaction, knowingly induce another to spend time, effort and expense in cultivating the land, paying taxes and making improvements thereon for 30 long years, only to spring from ambush and claim title when the possessors efforts and the rise of the land values offer an opportunity to make easy profit at his expense.50 WHEREFORE, the Petition is DENIED. The challenged decision of the Court of Appeals is AFFIRMED insofar as it ruled that the claim of petitioners is barred by laches. No pronouncement as to costs. SO ORDERED. DANTE O. TINGA Associate Justice WE CONCUR: G.R. No. 150654 December 13, 2007

HEIRS OF ANACLETO B. NIETO, namely, SIXTA P. NIETO, EULALIO P. NIETO, GAUDENCIO P. NIETO, and CORAZON P. NIETO-IGNACIO, represented by EULALIO P. NIETO, Petitioners, vs. MUNICIPALITY OF MEYCAUAYAN, BULACAN, represented by MAYOR EDUARDO ALARILLA, Respondent. DECISION NACHURA, J.: This is a petition for review on certiorari of the Decision1 of the Court of Appeals, dated October 30, 2001, which dismissed the petition for review of the Decision of the Regional Trial Court (RTC) of Malolos, Bulacan. The latter dismissed a complaint to recover possession of a registered land on the ground of prescription and laches. The antecedents are as follows: Anacleto Nieto was the registered owner of a parcel of land, consisting of 3,882 square meters, situated at Poblacion, Meycauayan, Bulacan and covered by TCT No. T-24.055 (M). The property is being used by respondent, Municipality of Meycauayan, Bulacan, which constructed an extension of the public market therein.

Upon Anacletos death on July 26, 1993, his wife, Sixta P. Nieto, and their three children, namely, Eulalio P. Nieto, Gaudencio Nieto and Corazon Nieto-Ignacio, herein petitioners, collated all the documents pertaining to his estate. When petitioners failed to locate the owners duplicate copy of TCT No. T-24.055 (M), they filed a petition for the issuance of a second owners copy with the RTC, Malolos, Bulacan. In that case, petitioners discovered that the missing copy of the title was in the possession of the respondent. Consequently, petitioners withdrew the petition and demanded from respondent the return of property and the certificate of title. On February 23, 1994, petitioners formally demanded from respondent the return of the possession and full control of the property, and payment of a monthly rent with interest from January 1964. Respondent did not comply with petitioners demand.2 On December 28, 1994, petitioners filed a complaint3 for recovery of possession and damages against respondent alleging that the latter was in possession of the owners copy of TCT No. T24.055 (M). They averred that, in 1966, respondent occupied the subject property by making it appear that it would expropriate the same. Respondent then used the land as a public market site and leased the stalls therein to several persons without paying Anacleto Nieto the value of the land or rent therefor. Petitioners prayed that respondent be ordered to surrender to them the owners copy of TCT No. T-24.055 (M), vacate the property, and pay them the rents thereon from 1966 until the date of the filing of the complaint for the total of P1,716,000.00, and P10,000.00 a month thereafter, as well as P300,000.00 as moral damages, and P100,000.00 as attorneys fees. In its Answer,4 respondent alleged that the property was donated to it and that the action was already time-barred because 32 years had elapsed since it possessed the property. Respondent and counsel failed to appear during the scheduled pre-trial conference.5 Upon petitioners motion, respondent was declared as in default and petitioners were allowed to present evidence ex parte. Respondent filed a motion for reconsideration which the RTC granted. Respondent was then allowed to cross-examine petitioners lone witness and present its own evidence. However, despite notice, respondent failed again to appear during the scheduled hearing. Hence, the RTC considered respondent to have waived its right to cross-examine petitioners witness and present its own evidence. The case was then submitted for decision. On August 1, 1995, the RTC rendered a Decision dismissing the complaint as well as respondents counterclaims for damages. For lack of proof, the RTC disregarded respondents claim that Anacleto Nieto donated the property to it in light of the fact that the title remained in the name of Anacleto. Nonetheless, the RTC did not rule in favor of petitioners because of its finding that the case was already barred by prescription. It held that the imprescriptibility of actions to recover land covered by the Torrens System could only be invoked by the registered owner, Anacleto Nieto, and that the action was also barred by laches. Petitioners appealed the case to the Court of Appeals (CA). On October 30, 2001, the CA rendered a Decision dismissing the case for lack of jurisdiction. According to the CA, the petition involved a pure question of law; hence, petitioners should have filed a petition directly with this Court.6 Accordingly, petitioners elevated the case to this Court through a petition for review on certiorari, raising the following issues: A. Are lands covered by the Torrens System subject to prescription? B. May the defense of [l]aches be invoked in this specific case?

C. May the defense of imprescriptibility only be invoked by the registered owner to the exclusion of his legitimate heirs?7 The petition is meritorious. Respondent argues that the action of petitioner to recover possession of the property is already barred by prescription. We do not agree. An action to recover possession of a registered land never prescribes in view of the provision of Section 44 of Act No. 496 to the effect that no title to registered land in derogation of that of a registered owner shall be acquired by prescription or adverse possession.8 It follows that an action by the registered owner to recover a real property registered under the Torrens System does not prescribe. Despite knowledge of this avowed doctrine, the trial court ruled that petitioners cause of action had already prescribed on the ground that the imprescriptibility to recover lands registered under the Torrens System can only be invoked by the person under whose name the land is registered. Again, we do not agree. It is well settled that the rule on imprescriptibility of registered lands not only applies to the registered owner but extends to the heirs of the registered owner as well.9 Recently in Mateo v. Diaz,10 the Court held that prescription is unavailing not only against the registered owner, but also against his hereditary successors because the latter step into the shoes of the decedent by operation of law and are the continuation of the personality of their predecessor-in-interest. Hence, petitioners, as heirs of Anacleto Nieto, the registered owner, cannot be barred by prescription from claiming the property. Aside from finding that petitioners cause of action was barred by prescription, the trial court reinforced its dismissal of the case by holding that the action was likewise barred by laches. Laches has been defined as the failure or neglect, for an unreasonable and unexplained length of time, to do that which, by exercising due diligence could or should have been done earlier. It is negligence or omission to assert a right within a reasonable time, warranting the presumption that the party entitled to assert his right has either abandoned or declined to assert it.11 In a number of cases, the Court has held that an action to recover registered land covered by the Torrens System may not be barred by laches.12 Laches cannot be set up to resist the enforcement of an imprescriptible legal right.13 Laches, which is a principle based on equity, may not prevail against a specific provision of law, because equity, which has been defined as "justice outside legality," is applied in the absence of and not against statutory law or rules of procedure.14 In recent cases, 15 however, the Court held that while it is true that a Torrens title is indefeasible and imprescriptible, the registered landowner may lose his right to recover possession of his registered property by reason of laches. Yet, even if we apply the doctrine of laches to registered lands, it would still not bar petitioners claim. It should be stressed that laches is not concerned only with the mere lapse of time.16 The following elements must be present in order to constitute laches:

(1) conduct on the part of the defendant, or of one under whom he claims, giving rise to the situation of which complaint is made for which the complaint seeks a remedy; (2) delay in asserting the complainants rights, the complainant having had knowledge or notice, of the defendants conduct and having been afforded an opportunity to institute a suit; (3) lack of knowledge or notice on the part of the defendant that the complainant would assert the right on which he bases his suit; and (4) injury or prejudice to the defendant in the event relief is accorded to the complainant, or the suit is not held to be barred.17 We note that the certificate of title in the name of Anacleto Nieto was found in respondents possession but there was no evidence that ownership of the property was transferred to the municipality either through a donation or by expropriation, or that any compensation was paid by respondent for the use of the property. Anacleto allegedly surrendered the certificate of title to respondent upon the belief that the property would be expropriated. Absent any showing that this certificate of title was fraudulently obtained by respondent, it can be presumed that Anacleto voluntarily delivered the same to respondent. Anacletos delivery of the certificate of title to respondent could, therefore, be taken to mean acquiescence to respondents plan to expropriate the property, or a tacit consent to the use of the property pending its expropriation. This Court has consistently held that those who occupy the land of another at the latters tolerance or permission, without any contract between them, are necessarily bound by an implied promise that the occupants will vacate the property upon demand.18 The status of the possessor is analogous to that of a lessee or tenant whose term of lease has expired but whose occupancy continues by tolerance of the owner. In such case, the unlawful deprivation or withholding of possession is to be counted from the date of the demand to vacate.19 Upon the refusal to vacate the property, the owners cause of action accrues. In this case, the first element of laches occurred the moment respondent refused to vacate the property, upon petitioners demand, on February 23, 1994. The filing of the complaint on December 28, 1994, after the lapse of a period of only ten months, cannot be considered as unreasonable delay amounting to laches. Moreover, case law teaches that if the claimants possession of the land is merely tolerated by its lawful owner, the latters right to recover possession is never barred by laches. Even if it be supposed that petitioners were aware of respondents occupation of the property, and regardless of the length of that possession, the lawful owners have a right to demand the return of their property at any time as long as the possession was unauthorized or merely tolerated, if at all.20 Furthermore, the doctrine of laches cannot be invoked to defeat justice or to perpetrate fraud and injustice. It is the better rule that courts, under the principle of equity, will not be guided or bound strictly by the statute of limitations or the doctrine of laches when by doing so, manifest wrong or injustice would result.21 Finally, we find that the rentals being prayed for by petitioners are reasonable considering the size and location of the subject property. Accordingly, the award of rentals is warranted. WHEREFORE, premises considered, the petition is GRANTED. The Decision of the Regional Trial Court of Malolos, Bulacan, dated August 1, 1995, is REVERSED and SET ASIDE. Respondent is ORDERED (a) to vacate and surrender peaceful possession of the property to petitioners, or pay the

reasonable value of the property; (b) to pay P1,716,000.00 as reasonable compensation for the use of the property from 1966 until the filing of the complaint and P10,000.00 monthly rental thereafter until it vacates the property, with 12% interest from the filing of the complaint until fully paid; and (c) to return to petitioners the duplicate copy of TCT No. T-24.055 (M). SO ORDERED. ANTONIO EDUARDO B. NACHURA Associate Justice

Laches

D.B.T. MAR-BAY CONSTRUCTION, INCORPORATED, Petitioner, vs. RICAREDO PANES, ANGELITO PANES, SALVADOR CEA, ABOGADO MAUTIN, DONARDO PACLIBAR, ZOSIMO PERALTA and HILARION MANONGDO, Respondents. DECISION NACHURA, J.: Before this Court is a Petition1 for Review on Certiorari under Rule 45 of the Rules of Civil Procedure, assailing the Court of Appeals (CA) Decision2 dated October 25, 2004 which reversed and set aside the Order3 of the Regional Trial Court (RTC) of Quezon City, Branch 216, dated November 8, 2001. The Facts Subject of this controversy is a parcel of land identified as Lot Plan Psu-123169,4 containing an area of Two Hundred Forty Thousand, One Hundred Forty-Six (240,146) square meters, and situated at Barangay (Brgy.) Pasong Putik, Novaliches, Quezon City (subject property). The property is included in Transfer Certificate of Title (TCT) No. 200519,5 entered on July 19, 1974 and issued in favor of B.C. Regalado & Co. (B.C. Regalado). It was conveyed by B.C. Regalado to petitioner D.B.T. MarBay Construction, Inc. (DBT) through a dacion en pago6 for services rendered by the latter to the former. On June 24, 1992, respondents Ricaredo P. Panes (Ricaredo), his son Angelito P. Panes (Angelito), Salvador Cea, Abogado Mautin, Donardo Paclibar, Zosimo P. Peralta, and Hilarion Manongdo (herein collectively referred to as respondents) filed a Complaint7 for "Quieting of Title with Cancellation of TCT No. 200519 and all Titles derived thereat (sic), Damages, with Petition for the Issuance of Injunction with Prayer for the Issuance of Restraining Order Ex-Parte, Etc." against B.C. Regalado, Mar-Bay Realty, Inc., Spouses Gereno Brioso and Criselda M. Brioso, Spouses Ciriaco and Nellie Mariano, Avelino C. Perdido and Florentina Allado, Eufrocina A. Maborang and Fe Maborang, Spouses Jaime and Rosario Tabangcura, Spouses Oscar Ikalina and the Register of Deeds (RD) of Quezon City. Subsequently, respondents filed an Amended Complaint8 and a Second Amended Complaint9particularly impleading DBT as one of the defendants.

In the Complaints, Ricaredo alleged that he is the lawful owner and claimant of the subject property which he had declared for taxation purposes in his name, and assessed in the amount of P2,602,190.00 by the City Assessor of Quezon City as of the year 1985. Respondents alleged that per Certification10 of the Department of Environment and Natural Resources (DENR) National Capital Region (NCR) dated May 7, 1992, Lot Plan Psu-123169 was verified to be correct and on file in said office, and approved on July 23, 1948. Respondents also claimed that Ricaredo, his immediate family members, and the other respondents had been, and still are, in actual possession of the portions of the subject property, and their possession preceded the Second World War. To perfect his title in accordance with Act No. 496 (The Land Registration Act) as amended by Presidential Decree (P.D.) No. 1529 (The Property Registration Decree), Ricaredo filed with the RTC of Quezon City, Branch 82 a case docketed as LRC Case No. Q-91-011, with LRC Rec. No. N-62563.11 Respondents averred that in the process of complying with the publication requirements for the Notice of Initial Hearing with the Land Registration Authority (LRA), it was discovered by the Mapping Services of the LRA that there existed an overlapping of portions of the land subject of Ricaredos application, with the subdivision plan of B.C. Regalado. The said portion had, by then, already been conveyed by B.C. Regalado to DBT. Ricaredo asseverated that upon verification with the LRA, he found that the subdivision plan of B.C. Regalado was deliberately drawn to cover portions of the subject property. Respondents claimed that the title used by B.C. Regalado in the preparation of the subdivision plan did not actually cover the subject property. They asserted that from the records of B.C. Regalado, they gathered that TCT Nos. 211081,12 21109513 and 211132,14 which allegedly included portions of the subject property, were derived from TCT No. 200519. However, TCT No. 200519 only covered Lot 503 of the Tala Estate with an area of Twenty-Two Thousand Six Hundred Fifteen (22,615) square meters, and was different from those mentioned in TCT Nos. 211081, 211095 and 211132. According to respondents, an examination of TCT No. 200519 would show that it was derived from TCT Nos. 14814,1514827,16 1481517 and T-28. In essence, respondents alleged that B.C. Regalado and DBT used the derivative titles which covered properties located far from Pasong Putik, Novaliches, Quezon City where the subject property is located, and B.C. Regalado and DBT then offered the same for sale to the public. Respondents thus submitted that B.C Regalado and DBT through their deliberate scheme, in collusion with others, used (LRC) Pcs-18345 as shown in the consolidation-subdivision plan to include the subject property covered by Lot Plan Psu-123169. In his Answer18 dated July 24, 1992, the RD of Quezon City interposed the defense that at the time of registration, he found all documents to be in order. Subsequently, on December 5, 1994, in his Motion19 for Leave to Admit Amended Answer, with the Amended Answer attached, he admitted that he committed a grave mistake when he earlier said that TCT No. 200519 covered only one lot, i.e. Lot 503. He averred that upon careful examination, he discovered that TCT No. 200519 is composed of 17 pages, and actually covered 54 lots, namely: Lots 503, 506, 507, 508, 509, 582, 586, 655, 659, 686, 434, 495, 497, 299, 498, 499, 500, 501, 502, 493, 692, 776, 496, 785, 777, 786, 780, 783, 505, 654, 660, 661, 663, 664, 665, 668, 693, 694, 713, 716, 781, 779, 784, 782, 787, 893, 1115, 1114, 778, 669 and 788, all of the Tala Estate. Other lots included therein are Lot 890-B of Psd 36854, Lot 2 of (LRC) Pcs 12892 and Lot 3 of (LRC) Pcs 12892. Thus, respondents' allegation that Lots 661, 664, 665, 693 and 694 of the Tala Estate were not included in TCT No. 200519 was not true. On December 28, 1993, then defendants Spouses Jaime and Rosario Tabangcura (Spouses Tabangcura) filed their Answer20 with Counterclaim, claiming that they were buyers in good faith and

for value when they bought a house and lot covered by TCT No. 211095 from B.C. Regalado, the latter being a subdivision developer and registered owner thereof, on June 30, 1986. When respondent Abogado Mautin entered and occupied the property, Spouses Tabangcura filed a case for Recovery of Property before the RTC, Quezon City, Branch 97 which rendered a decision21 in their favor. On its part, DBT, traversing the complaint, alleged that it is the legitimate owner and occupant of the subject property pursuant to a dacion en pago executed by B.C. Regalado in the formers favor; that respondents were not real parties-in-interests because Ricaredo was a mere claimant whose rights over the property had yet to be determined by the RTC where he filed his application for registration; that the other respondents did not allege matters or invoke rights which would entitle them to the relief prayed for in their complaint; that the complaint was premature; and that the action inflicted a chilling effect on the lot buyers of DBT.22 The RTC's Rulings On June 15, 2000, the RTC through Judge Marciano I. Bacalla (Judge Bacalla), rendered a Decision23 in favor of the respondents. The RTC held that the testimony of Ricaredo that he occupied the subject property since 1936 when he was only 16 years old had not been rebutted; that Ricaredo's occupation and cultivation of the subject property for more than thirty (30) years in the concept of an owner vested in him equitable ownership over the same by virtue of an approved plan, Psu 123169; that the subject property was declared under the name of Ricaredo for taxation purposes;24 and that the subject property per survey should not have been included in TCT No. 200519, registered in the name of B.C. Regalado and ceded to DBT. The RTC further held that Spouses Tabangcura failed to present satisfactory evidence to prove their claim. Thus, the RTC disposed of the case in this wise: WHEREFORE, in view of the foregoing considerations, judgment is hereby rendered declaring Certificate of Title No. 200519 and all titles derived thereat as null and void insofar as the same embrace the land covered by Plan PSU-123169 with an area of 240,146 square meters in the name of Ricaredo Panes; ordering defendant DBT Marbay Realty, Inc. to pay plaintiff Ricaredo Panes the sum of TWENTY THOUSAND (P20,000) pesos as attorneys fees plus costs of suit. SO ORDERED. On September 12, 2000, DBT filed a Motion25 for Reconsideration, based on the grounds of prescription and laches. DBT also disputed Ricaredos claim of open, adverse, and continuous possession of the subject property for more than thirty (30) years, and asserted that the subject property could not be acquired by prescription or adverse possession because it is covered by TCT No. 200519. While the said Motion for Reconsideration was pending, Judge Bacalla passed away. Meanwhile, on January 2, 2001, a Motion26 for Intervention and a Complaint in Intervention were filed by Atty. Andres B. Pulumbarit (Atty. Pulumbarit), representing the Don Pedro/Don Jose de Ocampo Estate. The intervenor alleged that the subject property formed part of the vast tract of land with an area of 117,000 hectares, covered by Original Certificate of Title (OCT) No. 779 issued by the Honorable Norberto Romualdez on March 14, 1913 under Decree No. 10139, which belongs to the Estate of Don Pedro/Don Jose de Ocampo. Thus, the Complaint27 in Intervention prayed that the

RTCs Decision be reconsidered; that the legitimacy and superiority of OCT 779 be upheld; and that the subject property be declared as belonging to the Estate of Don Pedro/Don Jose de Ocampo. In its Order28 dated March 13, 2001, the RTC, through Acting Judge Modesto C. Juanson (Judge Juanson), denied Atty. Pulumbarits Motion for Intervention because a judgment had already been rendered pursuant to Section 2,29 Rule 19 of the 1997 Rules of Civil Procedure. On April 10, 2001, the RTC issued an Order30 stating that there appeared to be a need for a clarificatory hearing before it could act on DBT's Motion for Reconsideration. Thus, a hearing was held on May 17, 2001. Thereafter, supplemental memoranda were required of the parties.31 Both parties complied.32 However, having found that the original copy of TCT No. 200519 was not submitted to it for comparison with the photocopy thereof on file, the RTC directed DBT to present the original or certified true copy of the TCT on August 21, 2001.33 Respondents moved to reconsider the said directive34 but the same was denied.35 DBT, on the other hand, manifested that a copy of TCT No. 200519, consisting of 17 pages, had already been admitted in evidence; and that because of the fire in the Office of the RD in Quezon City sometime in 1988, DBT, despite diligent effort, could not secure an original or certified true copy of said TCT. Instead, DBT submitted a certified true copy of Consolidated Subdivision Plan Pcs 18345.36 On November 8, 2001, the RTC, through Judge Juanson, issued an Order37 reversing the earlier RTC Decision and dismissing the Complaint for lack of merit. The RTC held that prescription does not run against registered land; hence, a title once registered cannot be defeated even by adverse, open or notorious possession. Moreover, the RTC opined that even if the subject property could be acquired by prescription, respondents' action was already barred by prescription and/or laches because they never asserted their rights when B.C. Regalado registered the subject property in 1974; and later developed, subdivided and sold the same to individual lot buyers. On December 18, 2001, respondents filed a Motion for Reconsideration38 which the RTC denied in its Order39dated June 17, 2002. Aggrieved, respondents appealed to the CA.40 The CA's Ruling On October 25, 2004, the CA reversed and set aside the RTC Orders dated November 8, 2001 and June 17, 2002 and reinstated the RTC Decision dated June 15, 2000. The CA held that the properties described and included in TCT No. 200519 are located in San Francisco del Monte, San Juan del Monte, Rizal and Cubao, Quezon City while the subject property is located in Brgy. Pasong Putik, Novaliches, Quezon City. Furthermore, the CA held that Engr. Vertudazo's testimony that there is a gap of around 1,250 meters between Lot 503 and Psu 123169 was not disproved or refuted. The CA found that Judge Juanson committed a procedural infraction when he entertained issues and admitted evidence presented by DBT in its Motion for Reconsideration which were never raised in the pleadings and proceedings prior to the rendition of the RTC Decision. The CA opined that DBT's claims of laches and prescription clearly appeared to be an afterthought. Lastly, the CA held that DBT's Motion for Reconsideration was not based on grounds enumerated in the Rules of Procedure.41 Petitioner filed a Motion for Reconsideration,42 which was, however, denied by the CA in its Resolution43 dated February 22, 2005. Hence, this Petition. The Issues

Petitioner raises the following as grounds for this Petition: I. PETITIONER'S FAILURE TO ALLEGE PRESCRIPTION IN ITS ANSWER IS NOT A WAIVER OF SUCH DEFENSE. II. IT IS NOT ERRONEOUS TO REQUIRE THE PRODUCTION OF A CERTIFIED TRUE COPY OF TCT NO. 200519 AFTER THE DECISION ON THE MERITS HAS BEEN RENDERED BUT BEFORE IT BECAME FINAL. III. A REGISTERED LAND CAN NOT BE ACQUIRED BY ACQUISITIVE PRESCRIPTION. IV. THE TESTIMONY OF ENGR. VERTUDAZO ON THE BASIS OF THE TECHNICAL DESCRIPTION OF LOT 503 IN AN INCOMPLETE DOCUMENT IS UNRELIABLE. V. MR. PANES HAS NEVER BEEN IN OPEN, ADVERSE AND CONTINUOUS POSSESSION OF THE SUBJECT PROPERTY FOR MORE THAN THIRTY (30) YEARS.44 Distilled from the petition and the responsive pleadings, and culled from the arguments of the parties, the issues may be reduced to two questions, namely: 1) Did the RTC err in upholding DBT's defenses of prescription and laches as raised in the latter's Motion for Reconsideration? 2) Which between DBT and the respondents have a better right over the subject property? Our Ruling We answer the first question in the affirmative. It is true that in Dino v. Court of Appeals45 we ruled: (T)rial courts have authority and discretion to dismiss an action on the ground of prescription when the parties' pleadings or other facts on record show it to be indeed time-barred; (Francisco v. Robles, Feb. 15, 1954; Sison v. McQuaid, 50 O.G. 97; Bambao v. Lednicky, Jan. 28, 1961; Cordova v. Cordova, Jan. 14, 1958; Convets, Inc. v. NDC, Feb. 28, 1958; 32 SCRA 529; Sinaon v. Sorongan, 136 SCRA 408); and it may do so on the basis of a motion to dismiss (Sec. 1, [f] Rule 16, Rules of Court), or an answer which sets up such ground as an affirmative defense (Sec. 5, Rule 16), or even if the ground is alleged after judgment on the merits, as in a motion for reconsideration (Ferrer v. Ericta, 84 SCRA 705); or even if the defense has not been asserted at all, as where no statement thereof is found in the pleadings (Garcia v. Mathis, 100 SCRA 250; PNB v. Pacific Commission

House, 27 SCRA 766; Chua Lamco v. Dioso, et al., 97 Phil. 821); or where a defendant has been declared in default (PNB v. Perez; 16 SCRA 270). What is essential only, to repeat, is that the facts demonstrating the lapse of the prescriptive period be otherwise sufficiently and satisfactorily apparent on the record; either in the averments of the plaintiff's complaint, or otherwise established by the evidence. (Emphasis supplied) Indeed, one of the inherent powers of courts is to amend and control its processes so as to make them conformable to law and justice. This includes the right to reverse itself, especially when in its opinion it has committed an error or mistake in judgment, and adherence to its decision would cause injustice.46 Thus, the RTC in its Order dated November 8, 2001 could validly entertain the defenses of prescription and laches in DBT's motion for reconsideration. However, the conclusion reached by the RTC in its assailed Order was erroneous. The RTC failed to consider that the action filed before it was not simply for reconveyance but an action for quieting of title which is imprescriptible. Verily, an action for reconveyance can be barred by prescription. When an action for reconveyance is based on fraud, it must be filed within four (4) years from discovery of the fraud, and such discovery is deemed to have taken place from the issuance of the original certificate of title. On the other hand, an action for reconveyance based on an implied or constructive trust prescribes in ten (10) years from the date of the issuance of the original certificate of title or transfer certificate of title. The rule is that the registration of an instrument in the Office of the RD constitutes constructive notice to the whole world and therefore the discovery of the fraud is deemed to have taken place at the time of registration.47
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However, the prescriptive period applies only if there is an actual need to reconvey the property as when the plaintiff is not in possession of the property. If the plaintiff, as the real owner of the property also remains in possession of the property, the prescriptive period to recover title and possession of the property does not run against him. In such a case, an action for reconveyance, if nonetheless filed, would be in the nature of a suit for quieting of title, an action that is imprescriptible.48 Thus, in Vda. de Gualberto v. Go,49 this Court held: [A]n action for reconveyance of a parcel of land based on implied or constructive trust prescribes in ten 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, but this rule applies only when the plaintiff or the person enforcing the trust is not in possession of the property, since if a person claiming to be the owner thereof is in actual possession of the property, as the defendants are in the instant case, the right to seek reconveyance, which in effect seeks to quiet title to the property, does not prescribe. The reason for this is that one who is in actual possession of a piece of land claiming to be the owner thereof may wait until his possession is disturbed or his title is attacked before taking steps to vindicate his right, the reason for the rule being, that his undisturbed possession gives him a continuing right to seek the aid of a court of equity to ascertain and determine the nature of the adverse claim of a third party and its effect on his own title, which right can be claimed only by one who is in possession. Insofar as Ricaredo and his son, Angelito, are concerned, they established in their testimonies that, for some time, they possessed the subject property and that Angelito bought a house within the subject property in 1987.50Thus, the respondents are proper parties to bring an action for quieting of title because persons having legal, as well as equitable, title to or interest in a real property may bring such action, and "title" here does not necessarily denote a certificate of title issued in favor of the person filing the suit.51

Although prescription and laches are distinct concepts, we have held, nonetheless, that in some instances, the doctrine of laches is inapplicable where the action was filed within the prescriptive period provided by law. Therefore, laches will not apply to this case, because respondents' possession of the subject property has rendered their right to bring an action for quieting of title imprescriptible and, hence, not barred by laches. Moreover, since laches is a creation of equity, acts or conduct alleged to constitute the same must be intentional and unequivocal so as to avoid injustice. Laches will operate not really to penalize neglect or sleeping on one's rights, but rather to avoid recognizing a right when to do so would result in a clearly inequitable situation.52 Albeit the conclusion of the RTC in its Order dated November 8, 2001, which dismissed respondents' complaint on grounds of prescription and laches, may have been erroneous, we, nevertheless, resolve the second question in favor of DBT. It is a well-entrenched rule in this jurisdiction that no title to registered land in derogation of the rights of the registered owner shall be acquired by prescription or adverse possession.53 Article 112654 of the Civil Code in connection with Section 4655 of Act No. 496 (The Land Registration Act), as amended by Section 4756 of P.D. No. 1529 (The Property Registration Decree), clearly supports this rule. Prescription is unavailing not only against the registered owner but also against his hereditary successors. Possession is a mere consequence of ownership where land has been registered under the Torrens system, the efficacy and integrity of which must be protected. Prescription is rightly regarded as a statute of repose whose objective is to suppress fraudulent and stale claims from springing up at great distances of time and surprising the parties or their representatives when the facts have become obscure from the lapse of time or the defective memory or death or removal of witnesses.57 Thus, respondents' claim of acquisitive prescription over the subject property is baseless. Under Article 1126 of the Civil Code, acquisitive prescription of ownership of lands registered under the Land Registration Act shall be governed by special laws. Correlatively, Act No. 496, as amended by PD No. 1529, provides that no title to registered land in derogation of that of the registered owner shall be acquired by adverse possession. Consequently, in the instant case, proof of possession by the respondents is immaterial and inconsequential.58 Moreover, it may be stressed that there was no ample proof that DBT participated in the alleged fraud. While factual issues are admittedly not within the province of this Court, as it is not a trier of facts and is not required to re-examine or contrast the oral and documentary evidence anew, we have the authority to review and, in proper cases, reverse the factual findings of lower courts when the findings of fact of the trial court are in conflict with those of the appellate court.59 In this regard, we reviewed the records of this case and found no clear evidence that DBT participated in the fraudulent scheme. In Republic v. Court of Appeals,60 this Court gave due importance to the fact that the private respondent therein did not participate in the fraud averred. We accord the same benefit to DBT in this case. To add, DBT is an innocent purchaser for value and good faith which, through a dacion en pago duly entered into with B.C. Regalado, acquired ownership over the subject property, and whose rights must be protected under Section 3261 of P.D. No. 1529. Dacion en pago is the delivery and transmission of ownership of a thing by the debtor to the creditor as an accepted equivalent of the performance of the obligation. It is a special mode of payment where the debtor offers another thing to the creditor, who accepts it as an equivalent of the payment of an outstanding debt. In its modern concept, what actually takes place in dacion en pago is an objective novation of the obligation where the thing offered as an accepted equivalent of the

performance of an obligation is considered as the object of the contract of sale, while the debt is considered as the purchase price.62 It must also be noted that portions of the subject property had already been sold to third persons who, like DBT, are innocent purchasers in good faith and for value, relying on the certificates of title shown to them, and who had no knowledge of any defect in the title of the vendor, or of facts sufficient to induce a reasonably prudent man to inquire into the status of the subject property.63 To disregard these circumstances simply on the basis of alleged continuous and adverse possession of respondents would not only be inimical to the rights of the aforementioned titleholders, but would ultimately wreak havoc on the stability of the Torrens system of registration. A final note. While the Torrens system is not a mode of acquiring title, but merely a system of registration of titles to lands, justice and equity demand that the titleholder should not be made to bear the unfavorable effect of the mistake or negligence of the State's agents, in the absence of proof of his complicity in a fraud or of manifest damage to third persons. The real purpose of the Torrens system is to quiet title to land and put a stop forever to any question as to the legality of the title, except claims that were noted in the certificate at the time of the registration or that may arise subsequent thereto. Otherwise, the integrity of the Torrens system would forever be sullied by the ineptitude and inefficiency of land registration officials, who are ordinarily presumed to have regularly performed their duties.64 Thus, where innocent third persons, relying on the correctness of the certificate of title thus issued, acquire rights over the property, the court cannot disregard those rights and order the cancellation of the certificate. The effect of such outright cancellation will be to impair public confidence in the certificate of title. The sanctity of the Torrens system must be preserved; otherwise, everyone dealing with the property registered under the system will have to inquire in every instance on whether the title had been regularly or irregularly issued, contrary to the evident purpose of the law. Every person dealing with the 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.65 WHEREFORE, the instant Petition is GRANTED and the assailed Court of Appeals Decision dated October 25, 2004 is hereby REVERSED and SET ASIDE. A new judgment is hereby entered DISMISSING the Complaint filed by the respondents for lack of merit. SO ORDERED. ANTONIO EDUARDO B. NACHURA Associate Justice G.R. No. 182716 June 20, 2012

HEIRS OF JOSE MALIGASO, SR., namely, ANTONIO MALIGASO, CARMELO MALIGASO and JOSE MALIGASO, JR., Petitioners, vs. SPOUSES SIMON D. ENCINAS and ESPERANZA E. ENCINAS, Respondents. DECISION REYES, J.:

This is a petition for review under Rule 45 of the Rules of Court of the Decision1 dated November 26, 2007 and Resolution2 dated April 28, 2008 of the Court of Appeals (CA) in CA-G.R. SP No. 64775. The CA reversed and set aside the Decision3 dated April 2, 2001 of Branch 51 of the Regional Trial Court (RTC) of Sorsogon, Sorsogon, which affirmed the Decision4 dated August 22, 2000 of the Municipal Trial Court (MTC) of Sorsogon, Sorsogon dismissing the Spouses Simon D. Encinas and Esperanza E. Encinas (respondents) complaint for unlawful detainer. Respondents are the registered owners of Lot No. 3517 of the Cadastral Survey of Sorsogon, which has an area of 2,867 square meters and covered by Transfer Certificate of Title (TCT) No. T4773.5 The subject matter of this controversy is a portion of Lot No. 3517 with an area of 980 square meters, which the Heirs of Jose Maligaso, Sr. (petitioners) continue to occupy despite having received two (2) notices to vacate from the respondents. Lot No. 3517 was previously covered by Original Certificate of Title (OCT) No. 543, which was issued in the name of Maria Maligaso Ramos (Maria), the petitioners aunt, on February 7, 1929. Sometime in May 1965, Maria sold Lot No. 3517 to Virginia Escurel (Virginia). Three (3) years later, on April 5, 1968, Virginia sold Lot No. 3517 to the respondents, resulting to the cancellation of OCT No. 543 and issuance of TCT No. T-4773.6 On March 16, 1998 and June 19, 1998 or approximately thirty (30) years from the time they purchased Lot No. 3517, the respondents issued two (2) demand letters to the petitioners, asking them to vacate the contested area within thirty (30) days from notice.7 The petitioners refused to leave, claiming that the subject area was the share of their father, Jose Maligaso, Sr. (Jose, Sr.), in their grandparents estate. Thus, the respondents filed a complaint for unlawful detainer against them with the MTC, alleging that the petitioners occupation is by mere tolerance and had become illegal following their refusal to vacate the property despite being demanded to do so twice. The petitioners, in their defense, denied that their possession of the disputed area was by mere tolerance and claimed title thereto on the basis of their fathers successional rights. That the petitioners occupation remained undisturbed for more than thirty (30) years and the respondents failure to detail and specify the petitioners supposedly tolerated possession suggest that they and their predecessors-in-interest are aware of their claim over the subject area. The petitioners also attacked the validity of OCT No. 543 and TCT No. T-4773, alleging that it was thru fraud that Maria was able to register Lot No. 3517, including the disputed area, under her name. The petitioners likewise moved for the dismissal of the complaint, claiming that the allegations therein indicate that it was actually an action for reconveyance. Further, laches had already set in view of the respondents failure to assail their possession for more than thirty (30) years.8 In an August 22, 2000 Decision,9 the dispositive portion of which is quoted below, the MTC dismissed the respondents complaint. WHEREFORE, premises considered, judgment is hereby rendered 1. Dismissing the instant case; 2. Adjudicating the possessory rights over the litigated portion to the defendants; 3. Ordering the Register of Deeds to cause the annotation of the equitable title of defendants, who are entitled to their fathers rightful inheritance which is part of the property in plaintiffs TCT No. T-4773 as a lien or encumbrance;

4. Ordering the plaintiffs to pay defendants the amount of [P]10,000.00 as attorneys fees; and 5. The cost of suit. SO ORDERED.10 The MTC gave more weight to the petitioners possession of the contested area than the respondents title as the former is founded on Jose Sr.s successional rights and even held that the registration of Lot No. 3517 in Marias name created a trust in Jose Sr.s favor insofar as the disputed portion is concerned. The MTC also held that the respondents are barred by laches from pursuing their cause of action against the petitioners given their inaction for more than thirty (30) years despite being fully aware of the petitioners adverse possession and claim over the subject property. The RTC dismissed the respondents appeal and affirmed the MTCs Decision dated August 22, 2000. In a Decision11 dated April 2, 2001, the RTC found the respondents allegations relative to the petitioners merely tolerated possession of the subject area to be wanting. The RTC also concluded, albeit implicitly, that the petitioners possession is a necessary consequence of their title as evidenced by their occupation in the concept of an owner for a significant period of time. The dispositive portion thereof states: WHEREFORE, premises considered, the appealed decision is AFFIRMED with the modification that the annotations and the payment of attorney[]s fees as ordered by the Court a quo be deleted. The instant appeal is DISMISSED, for lack of merit.12 Consequently, the respondents filed with the CA a petition for review under Rule 42 of the Rules of Court. This was given due course and the RTCs Decision dated April 2, 2001 was reversed and set aside. In its Decision13dated November 26, 2007, the CA had a different view and rationalized the grant of possession to the respondents as follows: The rule is well-entrenched that a person who has a Torrens title over the property is entitled to the possession thereof. In like manner, prior physical possession by the plaintiff is not necessary in unlawful detainer cases as the same is only required in forcible entry cases. Moreover, the allegations in the answer of [the] defendant as to the nullity of plaintiffs title is unavailing and has no place in an unlawful detainer suit since the issue of the validity of a Torrens title can only be assailed in an action expressly instituted for that purpose. This may be gleaned from Spouses Apostol vs. Court of Appeals and Spouses Emmanuel, where the Supreme Court held that: xxx In the case at bench, petitioners are the registered owners of Lot No. 3517 and, as a consequence of such, are entitled to the material and physical possession thereof. Thus, both the MTC and RTC erred in ruling that respondents prior physical possession and actual possession of the 980-square meter disputed portion of Lot No. 3517 should prevail over petitioners Torrens title over the said property. Such pronouncement contravenes the law and settled jurisprudence on the matter.14 (Citation omitted) The CA denied the petitioners motion for reconsideration in its Resolution dated April 28, 2008.15

As earlier intimated, the petitioners anchor their possession of the subject property on their fathers right thereto as one of his parents heirs. The petitioners insist on the nullity of the respondents title, TCT No. T-4773, as the inclusion of the contested area in its coverage was never intended. The petitioners accuse Maria of fraud for having registered Lot No. 3517 in her name, including the portion that their father allegedly inherited from his parents, thus, reneging on her promise to cause the registration of such portion in his name. It was their father who had a legitimate claim over the subject area and Maria never acquired any right thereto. Therefore, respondents purchase of Lot No. 3517 did not include the portion occupied by the petitioners, who succeeded to Jose Sr.s rights thereto. On the other hand, the respondents cause of action is based on their ownership of Lot No. 3517, which is evidenced by TCT No. T-4773, and on their claim that they merely tolerated the petitioners occupation thereof. According to the respondents, their being registered owners of Lot No. 3517, including the portion possessed by the petitioners, entitles them to the possession thereof and their right to recovery can never be barred by laches. They also maintain that the petitioners cannot collaterally attack their title to the subject property. The point of inquiry is whether the respondents have the right to evict the petitioners from the subject property and this should be resolved in the respondents favor. Between the petitioners unsubstantiated self-serving claim that their father inherited the contested portion of Lot No. 3517 and the respondents Torrens title, the latter must prevail. The respondents title over such area is evidence of their ownership thereof. That a certificate of title serves as evidence of an indefeasible and incontrovertible title to the property in favor of the person whose name appears therein and that a person who has a Torrens title over a land is entitled to the possession thereof16 are fundamental principles observed in this jurisdiction. Alternatively put, the respondents title and that of their predecessors-in-interest give rise to the reasonable presumption that the petitioners have no right over the subject area and that their stay therein was merely tolerated. The petitioners failed to overcome this presumption, being inadequately armed by a narration that yearns for proof and corroboration. The petitioners harped that the subject area was their fathers share in his parents estate but the absence of any evidence that such property was indeed adjudicated to their father impresses that their claim of ownership is nothing but a mere afterthought. In fact, Lot No. 3517 was already registered in Marias name when Jose Sr. built the house where the petitioners are now presently residing. It is rather specious that Jose Sr. chose inaction despite Marias failure to cause the registration of the subject area in his name and would be contented with a bungalow that is erected on a property that is supposedly his but registered in anothers name. That there is allegedly an unwritten agreement between Maria and Virginia that Jose Sr.s and the petitioners possession of the subject area would remain undisturbed was never proven, hence, cannot be the basis for their claim of ownership. Rather than proving that Jose Sr. and the petitioners have a right over the disputed portion of Lot No. 3517, their possession uncoupled with affirmative action to question the titles of Maria and the respondents show that the latter merely tolerated their stay. Forcible entry and unlawful detainer cases are summary proceedings designed to provide for an expeditious means of protecting actual possession or the right to the possession of the property involved. The avowed objective of actions for forcible entry and unlawful detainer, which have purposely been made summary in nature, is to provide a peaceful, speedy and expeditious means of preventing an alleged illegal possessor of property from unjustly continuing his possession for a long time, thereby ensuring the maintenance of peace and order in the community.17 The said objectives can only be achieved by according the proceedings a summary nature. However, its being summary poses a limitation on the nature of issues that can be determined and fully ventilated. It is for this reason that the proceedings are concentrated on the issue on possession. Thus, whether the petitioners have a better right to the contested area and whether fraud attended the issuance of Marias title over Lot No. 3517 are issues that are outside the jurisdiction and competence of a trial court in actions for unlawful detainer and forcible entry. This is in addition to the long-standing rule

that a Torrens title cannot be collaterally attacked, to which an ejectment proceeding, is not an exception. In Soriente v. Estate of the Late Arsenio E. Concepcion,18 a similar allegation possession of the property in dispute since time immemorial was met with rebuke as such possession, for whatever length of time, cannot prevail over a Torrens title, the validity of which is presumed and immune to any collateral attack. In this case, the trial court found that respondent owns the property on the basis of Transfer Certificate of Title No. 12892, which was "issued in the name of Arsenio E. Concepcion, x x x married to Nenita L. Songco." It is a settled rule that the person who has a Torrens title over a land is entitled to possession thereof. Hence, as the registered owner of the subject property, respondent is preferred to possess it. The validity of respondents certificate of title cannot be attacked by petitioner in this case for ejectment. Under Section 48 of Presidential Decree No. 1529, a certificate of title shall not be subject to collateral attack. It cannot be altered, modified or cancelled, except in a direct proceeding for that purpose in accordance with law. The issue of the validity of the title of the respondents can only be assailed in an action expressly instituted for that purpose. Whether or not petitioner has the right to claim ownership over the property is beyond the power of the trial court to determine in an action for unlawful detainer.19 (Citations omitted) In Salandanan,20 the prohibition against the collateral attack of a Torrens title was reiterated: In Malison, the Court emphasized that when [a] property is registered under the Torrens system, the registered owners title to the property is presumed and cannot be collaterally attacked, especially in a mere action for unlawful detainer. In this particular action where petitioners alleged ownership cannot be established, coupled with the presumption that respondents title to the property is legal, then the lower courts are correct in ruling that respondents are the ones entitled to possession of the subject premises.21 (Citation omitted) Given the foregoing, the petitioners attempt to remain in possession by casting a cloud on the respondents title cannot prosper. Neither will the sheer lapse of time legitimize the petitioners refusal to vacate the subject area or bar the respondents from gaining possession thereof. As ruled in Spouses Ragudo v. Fabella Estate Tenants Association, Inc.,22 laches does not operate to deprive the registered owner of a parcel of land of his right to recover possession thereof: It is not disputed that at the core of this controversy is a parcel of land registered under the Torrens system. In a long line of cases, we have consistently ruled that lands covered by a title cannot be acquired by prescription or adverse possession. So it is that in Natalia Realty Corporation vs. Vallez, et al., we held that a claim of acquisitive prescription is baseless when the land involved is a registered land because of Article 1126 of the Civil Code, in relation to Act 496 (now, Section 47 of Presidential Decree No. 1529). xxxx Petitioners would take exception from the above settled rule by arguing that FETA as well as its predecessor[-]in[-]interest, Don Dionisio M. Fabella, are guilty of laches and should, therefore, be already precluded from asserting their right as against them, invoking, in this regard, the rulings of this Court to the effect that while a registered land may not be acquired by prescription, yet, by virtue

of the registered owners inaction and neglect, his right to recover the possession thereof may have been converted into a stale demand. While, at a blush, there is apparent merit in petitioners posture, a closer look at our jurisprudence negates their submission. To start with, the lower court found that petitioners possession of the subject lot was merely at the tolerance of its former lawful owner. In this connection, Bishop vs. Court of Appeals teaches that if the claimants possession of the land is merely tolerated by its lawful owner, the latters right to recover possession is never barred by laches. As registered owners of the lots in question, the private respondents have a right to eject any person illegally occupying their property. This right is imprescriptible. Even if it be supposed that they were aware of the petitioners occupation of the property, and regardless of the length of that possession, the lawful owners have a right to demand the return of their property at any time as long as the possession was unauthorized or merely tolerated, if at all. This right is never barred by laches.23 (Citations omitted) It is, in fact, the petitioners who are guilty of laches. Petitioners, who claimed that Maria fraudulently registered the subject area inherited by their father, did not lift a finger to question the validity of OCT No. 543, which was issued in 1929. Petitioners waited for the lapse of a substantial period of time and if not for the respondents demands to vacate, they would not have bothered to assert their fathers supposed successional rights. The petitioners inaction is contrary to the posture taken by a reasonably diligent person whose rights have supposedly been trampled upon and the pretense of ignorance does not provide justification or refuge. Maria was able to register Lot No. 3517 in her name as early as 1929 and respondents acquired title in April 5, 1968 and knowledge of these events is imputed to the petitioners by the fact of registration. In fine, this Court finds no cogent reason to reverse and set aside the findings and conclusions of the CA. WHEREFORE, premises considered, the petition is DENIED and the Decision dated November 26, 2007 and Resolution dated April 28, 2008 of the Court of Appeals in CA-G.R. SP No. 64775 are hereby AFFIRMED. SO ORDERED. BIENVENIDO L. REYES Associate Justice G.R. No. 169447 February 26, 2007

DORO LAND REALTY AND DEVELOPMENT CORPORATION, Petitioner, vs. NILA CLAUNAN, SILVANO1 SALAS, JOBERTO MAGHANO,2 ALFREDO MOMPAR,3 VICENTE GARCIA, EDITHA LAPIZ and HEIRS OF ELEUTERIO MAGHANO, namely: AVELINA, RICARDO, ROMEO, JOBERTO, ROY, LUCRESIA, SUSAN, JOHNNY, CONCHITA, and BEBENA all surnamed MAGHANO, Respondents. DECISION

YNARES-SANTIAGO, J.: This is a petition for review on certiorari of the Decision4 of the Court of Appeals in CA-G.R. CV No. 65522 dated May 31, 2005, which affirmed in toto the Decision5 of the Regional Trial Court of Cagayan De Oro City, Branch 21, in Civil Case No. 93-126 for recovery of possession and damages. Also assailed is the Resolution6 of the Court of Appeals dated August 9, 2005 which denied petitioners motion for reconsideration. The facts of the case are as follows: Petitioner DOro Land Realty and Development Corporation and Lorna, Florencio, Luis and Felomina, all surnamed Regalado ("Regalados"), are registered owners of three parcels of land situated in Barrio Mambato (Agora), Lapasan, Cagayan de Oro City. The lots were originally owned by Chacon Enterprises Inc. as evidenced by Original Certificate of Title (OCT) No. P-47 issued on July 18, 1956.7 Sometime in the early 1990s, the lots were sold to petitioner and the Regalados. Thus, on September 9, 1992, Transfer Certificate of Title (TCT) Nos. T-698888 and T-695259 were issued in the name of petitioner for Lots 2-A and 2-B while the Regalados were issued TCT No. T6952610 for Lot 2-C. Petitioner later purchased Lot 2-C from the Regalados. Thereafter, petitioner caused a relocation survey to be conducted and confirmed that there were about 34 houses sporadically erected on the lots. Apparently, certain individuals surreptitiously entered the properties and introduced improvements thereon shortly after the opening of the nearby Agora Public Market. After demands to vacate went unheeded, petitioner filed an action for recovery of possession and damages against more than 50 individuals who refused to surrender possession of the lots. The case was docketed as Civil Case No. 93-126 and raffled to Branch 21 of the Regional Trial Court of Cagayan De Oro City. In its Complaint,11 petitioner prayed that the defendants, their assigns and other persons acting in their behalf, be ordered to vacate the lots and pay a monthly rental of P100.00 from the time they occupied the property until they vacate the same. Petitioner also prayed for the award of attorneys fees as well as litigation expenses and costs. Of the more than 50 defendants, only the following filed an Answer12 within the reglementary period: Eleuterio Manghano, Joberto Manghano, Siliano Salas, Alfredo Mompar, Virgilio Lapiz, Vicente Garcia and Mila13 Claunan. The other defendants belatedly filed their answer to the complaint and were thus declared in default. Respondents alleged that they entered the lots between the years 1970 to 1982; that their occupation of the lots has been continuous, undisturbed, public and adverse and has therefore ripened into ownership; that whatever rights petitioner had over the lots were barred by laches; that they need not pay any rent and must instead be awarded attorneys fees, exemplary and moral damages as well as litigation expenses and costs. In support of their claim, respondents presented a Certification14 issued on June 11, 1984 by Forest Guards Conrado Pagutayao and Marcelo Virtudazo, and approved by District Forester Primitivo Galinato Jr., that the lots were alienable and disposable land of the State. According to respondents, the lots were marshy, swampy, surrounded by "piyapi" trees and without improvements when they occupied the same. In due course, the trial court rendered judgment on September 21, 1998, as follows:

WHEREFORE, the complaint is hereby dismissed as regards defendants Joberto Manghano, Siliano Salas, Alfredo Mompar, Virgilio Lapiz, Vicente Garcia, Nila Claunan and deceased Defendant Eleuterio Manghano, represented by his heirs who duly substituted him and declares their possessions legal, without pronouncement as to the counterclaim, defendants having failed to introduce evidence in support of said claim. Defaulted defendants who by reason of their default were unable to introduce evidence similar to the aforementioned defendants evidence are hereby ordered ejected and to pay plaintiffs proportionately the following: Attorneys fees P 30,000.00 Actual damages P 10,000.00 Rental at each month from 1980 until they are ejected P 100.00 And to pay the costs. SO ORDERED.15 The trial court held that while respondents could not acquire title to the registered lots in derogation of that of petitioner through prescription, the latters claim was nonetheless barred by laches. There was no reason for petitioner and its predecessor not to have knowledge of respondents possession of the lots as the same was public and adverse. As such, the failure of petitioner and its predecessor to assert its right of ownership over the lots within a reasonable length of time necessarily barred its claim against respondents. The trial court also faulted petitioner for not making the necessary inquiries when it bought the disputed lots from Chacon Enterprises, Inc. in 1990. According to the trial court, petitioner should have investigated the nature of respondents possession before it purchased the lots from the original owner. Having failed to do so, petitioner must be deemed a buyer in bad faith under the principle of caveat emptor. Petitioner appealed to the Court of Appeals which affirmed the trial courts decision in toto. Hence, upon denial16of its motion for reconsideration,17 petitioner filed the instant petition for review under Rule 45 of the Rules of Court. Petitioner mainly contends that laches could not bar its claim over the subject lots since respondents had no colorable title or any valid claim of ownership to it. Respondents are mere squatters whose possession of the lots, no matter how long, could not prevail over petitioners certificate of title. At any rate, respondents length of possession does not even meet jurisprudential standards for laches to set in. The petition is impressed with merit. At the outset, it must be stressed that this Court is not a trier of facts and would not normally undertake a re-examination of the evidence presented by the contending parties during the trial of the case except for compelling reasons. Factual findings of the trial court and the Court of Appeals, especially when these concur, are ordinarily binding on this Court, subject to the following well-

recognized exceptions: (1) when the findings are grounded entirely on speculation, surmises or conjectures; (2) when the inference made is manifestly mistaken, absurd or impossible; (3) when there is grave abuse of discretion; (4) when the judgment is based on a misapprehension of facts; (5) when the findings of facts are conflicting; (6) when in making its findings the Court of Appeals went beyond the issues of the case, or its findings are contrary to the admissions of both the appellant and the appellee; (7) when the findings are contrary to the trial court; (8) when the findings are conclusions without citation of specific evidence on which they are based; (9) when the facts set forth in the petition as well as in the petitioners main and reply briefs are not disputed by respondent; (10) when the findings of fact are premised on the supposed absence of evidence and contradicted by the evidence of record; and (11) when the Court of Appeals manifestly overlooked certain relevant facts not disputed by the parties, which, if properly considered, could justify a different conclusion.18 In the case at bar, both the trial court and the appellate court mistakenly inferred from the evidence presented that petitioner was a buyer in bad faith and that respondents, in turn, were possessors in good faith of the lots in question. Both courts overlooked the fact that respondents had no valid claim of title whatsoever to the disputed lots. If this was considered by both courts, there would have been no room for them to conclude that petitioners claim was barred by laches. For purposes of clarity, we quote the trial courts summary of respondents evidence as follows: Defendants presented three witnesses, namely defendants Joberto Manghano, Alfredo Mompar and Marcelo Virtudazo of the Bureau of Forest Development. Joberto Manghano declared that he is one of the sons of deceased defendant Eleuterio Manghano. He claimed that he was born on March 18, 1964 at Padada, Davao Del Sur; that in October 1975 they transferred to La Paz Extension, Lapasan, Cagayan De Oro City. They live in the house constructed by his father on a 100 square meter lot on the land in question. The house is made of wood and galvanized iron sheets for roofing with a dimension of 14 x 16 feet with three (3) bedrooms. The land is swampy with piapi trees. In the same year he saw defendants Virgilio Lapiz, Vicente Garcia and Nila Claunan among the occupants of the land in question while Siliano Salas and Alfredo Mompar entered in 1982 and 1980 respectively.
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Joberto Manghano got married in 1987 and thereafter built his own house on the land in question which is fifteen (15) meters away from that of his parents. His house is 12 x 18 feet which consists of wood and GI sheets for roofing. In 1984, upon the written request (Exhibit 2) of his father, Marcelo Virtudaso and Conrado Pagutayao, employees of the Bureau of Forest Development conducted a survey and a sketch map (Exhibit 1) was prepared by the two. He claimed that his father chose the land in question as it is a public land. x x x He further testified that he did not file any application for free patent, homestead, or miscellaneous sales claiming that he is ignorant of the procedure. Defendant Alfredo Mompar, a fourth year college engineering student declared that in October 1980, after having obtained permission from the deceased Eleuterio Manghano, he entered the land in question x x x.

xxxx He made verification as to the status of the land before he constructed his house and was informed that there is no owner. He did not, however, verify with other government office as to the status of the land. He did not declare the land for taxation purposes as he has no money. The third and last witness for the defendants is Marcelo Virtudazo, an employee of the Bureau of Forest Development, who declared that on May 31, 1984, the deceased Eleuterio Manghano came to their office with a written request (Exhibit 2) for a verification of the land in question. In response to said request, a certain Agustilo Obsioma, Chief of the Timber Management Section of the Bureau of Forest Development District Office of Cagayan De Oro City, wrote a note (Exhibit 3) instructing him and Conrado Pagutayao to conduct a verification survey on the land in question. They obliged and as a result they prepared a location map (Exhibit 1). On June 11, 1984, they submitted their report. x x x19 The narration above shows that respondents entered the lots and built their dwellings thereon without any colorable title. Believing that the lots were alienable and disposable property of the State, they occupied the same in the hope that they would not be disturbed in their possession. They knew that they did not own the lots and concluded, on the basis of a certification issued by the Bureau of Forest Development, that the lots were government-owned. Regardless of the nature of the lots ownership, however, the fact remains that respondents entered the properties without permission from the owner. It may thus be concluded from the foregoing that respondents are mere squatters on the properties. They are trespassers who, under the law, enjoy no possessory rights.20 This is notwithstanding the length of time that they may have physically occupied the lots; they are deemed to have entered the same in bad faith, such that the nature of their possession is presumed to have retained the same character throughout their occupancy.
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In Baez v. Court of Appeals,21 the Court held that a squatter has no right of possession that may be prejudiced by his eviction: What rights of respondent Pio Arcilla were prejudiced? The Court of Appeals found that Pio Arcilla "makes no pretense that he entered into and built his land upon appellee PHHCs land with the consent of the latter." Pio Arcilla was therefore, a trespasser, or a squatter, he being a person who settled or located on land, inclosed or uninclosed with no bona fide claim or color of title and without consent of the owner. He began his material possession of the lot in bad faith, knowing that he did not have a right thereto, and it is presumed that his possession continued to be enjoyed in the same character in which it was acquired, i.e. in bad faith until the contrary is proved. x x x A squatter can have no possessory rights whatsoever, and his occupancy of the land is only at the owners sufferance, his acts are merely tolerated and cannot affect the owners possession. The squatter is necessarily bound to an implied promise, that he will vacate upon demand."22 (Italics supplied) Thus, the trial court and the Court of Appeals erred in giving more weight to respondents alleged equitable right over the lots as against petitioners certificate of title. Having no possessory rights whatsoever, no injury could be caused to respondents if they return the lots to petitioner. Unless there are intervening rights of third persons which may be affected or prejudiced by a decision ordering the return of the lots to the registered owner, the equitable defense of laches will not apply as against the latter.23

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 a presumption that the party entitled to assert it either has abandoned or declined to assert it. The defense of laches is an equitable one and does not concern itself with the character of the defendants title, but only with whether or not by reason of plaintiffs long inaction or inexcusable neglect, he should be barred from asserting his claim at all, because to allow him to do so would be inequitable and unjust to the defendant.24 The elements of laches are: (1) conduct on the part of the defendant, or one under whom he claims, giving rise to the situation that led to the complaint and for which the complaint seeks a remedy; (2) delay in asserting the complainants rights, having had knowledge or notice of the defendants conduct and having been afforded an opportunity to institute a suit; (3) lack of knowledge or notice on the part of the defendant that the complainant would assert the right on which he bases his suit; and (4) injury or prejudice to the defendant in the event relief is accorded to the complainant, or the suit is not held barred.25 The third and fourth elements of laches are not present in the instant case. It cannot be said that respondents lacked notice that petitioner would assert its right over the lots considering that they knew from the beginning that they have no right to the same. Neither can respondents claim any injury or prejudice that would result by restoring possession of the lots to petitioner. Respondents have no possessory rights over the lots. As mere intruders, they are bound to an implied promise to surrender possession of the property to the real owner, regardless of the identity of the latter. In De Vera-Cruz v. Miguel,26 the Court held, upon similar facts, that although a registered landowner may lose his right to recover possession of his registered property by reason of laches, the equitable defense is unavailing to one who has not shown any color of title to the property: Having no title or document to overcome petitioners ownership over the land in question, respondent is therefore an intruder or squatter whose occupation of the land is merely being tolerated. A squatter has no possessory rights over the land intruded upon. As such, her occupancy of the land is only at the owners sufferance, her acts are merely tolerated and cannot affect the owners possession. She is necessarily bound to an implied promise that she will vacate upon demand.27 For the same reason, the lower courts erred in applying the principle of caveat emptor in the instant case. The rule simply requires the purchaser of real property to be aware of the alleged title of the vendor such that one who buys without checking the vendors title takes all the risks and losses consequent to such failure.28 While a buyer of registered land need not go beyond its certificate of title, the buyer is obliged to investigate or inspect the property sold to him when there are circumstances that would put him on guard, such as the presence of occupants other than the registered owner. The buyer cannot claim ignorance of any defect in the vendors title if, in neglecting to verify the nature of the occupants possession, the latter should turn out to have a better right to the property than the registered owner. In the instant case, respondents cannot claim any better right over the lots than its original registered owner, Chacon Enterprises Inc. Apart from the assertion that they have been in open, adverse and notorious possession of the lots for a long period of time, respondents have not shown any proof of title that is superior to that of the registered owner. It should be emphasized that a certificate of title cannot be defeated by adverse, open and notorious possession by third persons. The title, once registered, is notice to the whole world and no one can plead ignorance of the registration.29

Thus, while possession by a third person other than the registered owner could indicate a defect in the title of the vendor, it does not per se render the latters title defective. It is only when such possession is of a character that would confer upon the possessor some superior right against the registered owner that the latter may be deemed to have a flawed title. Since respondents "adverse, open and notorious possession" of the lots cannot defeat the title of Chacon Enterprises Inc., the former did not acquire any superior possessory right over the lots. Petitioner thus acquired a clean title from Chacon Enterprises Inc. and is not barred from recovering possession of the lots from respondents. WHEREFORE, the instant petition is GRANTED. The Decision of the Court of Appeals in CA-G.R. CV No. 65522, which affirmed in toto the Decision of the Regional Trial Court of Cagayan De Oro City, Branch 21, in Civil Case No. 93-126, is REVERSED and SET ASIDE. A new judgment is entered ordering respondents Mila Claunan, Siliano Salas, Joberto Manghano, Alfredo Mompar, Vicente Garcia, Editha Lapiz, Heirs of Eleuterio Manghano, as well as their assigns and heirs, to: 1. Immediately VACATE the lots covered by TCT Nos. T-69888, T-69525 and T-69526 located in Barrio Mambato (Agora), Lapasan, Cagayan De Oro City, upon finality of this Decision; and 2. PAY petitioner DOro Land Realty and Development Corporation a MONTHLY RENTAL of P100.00 from the time that Civil Case No. 93-126 was filed on March 3, 1993 until they vacate the same. SO ORDERED. CONSUELO YNARES-SANTIAGO Associate Justice G.R. No. 173158 December 4, 2009

ALEJANDRO B. TY and INTERNATIONAL REALTY CORPORATION, Petitioners, vs. QUEEN'S ROW SUBDIVISION, INC., NEW SAN JOSE BUILDERS, INC., GOVERNMENT SERVICE INSURANCE SYSTEM and REGISTER OF DEEDS OF CAVITE, Respondents. DECISION CHICO-NAZARIO, J.: This is a Petition for Review on Certiorari seeking the reversal of the Decision1 of the Court of Appeals dated 31 January 2005 in CA-G.R. CV No. 62610 and the Resolution of the same Court dated 29 July 2006 denying the Motion for Reconsideration. Said Decision affirmed the Joint Decision dated 18 November 1997 of the Regional Trial Court (RTC) of Imus, Cavite dismissing the separate Complaints for Declaratory Relief filed by petitioners Alejandro B. Ty and International Realty Corporation (IRC). The facts of the case are as follows: Petitioner Ty is the registered owner of a parcel of land situated in Molino, Bacoor, Cavite covered by Transfer Certificate of Title (TCT) No. T-3967. Petitioner IRC, on the other hand, is the registered

owner of three parcels of land situated in the same barangay covered by TCTs No. T-1510, No. T3617 and No. T-3618. The four titles were issued to petitioners sometime in 1960 and 1961. In 1970, respondent Queens Row Subdivision, Inc. (QRSI) was issued TCTs No. T-54188, No. T54185, No. T-54186 and No. T-54187, covering exactly the same areas and containing the same technical descriptions as those embraced in the titles of petitioners. On 29 June 1971, mortgages entered into by QRSI in favor of respondent Government Service Insurance System (GSIS) were annotated at the back of the four titles of QRSI. In October 1973, petitioners Ty and IRC instituted with the then Court of First Instance (CFI) of Bacoor, Cavite four Complaints for the cancellation of the four aforementioned certificates of title of QRSI, impleading only the latter and the Register of Deeds. GSIS was not impleaded, despite the fact that the mortgage in its favor had already been annotated in the subject titles. The Complaints were docketed as Civil Cases No. B-44, No. B-45, No. B-48 and No. B-49. Petitioners did not move to have a notice of lis pendens annotated in the subject titles. On 8 December 1980, the CFI of Bacoor, Cavite, rendered a Decision declaring that Tys certificate of title, TCT No. 3967, was validly issued, and ordering the Register of Deeds to cancel QRSIs TCT No. 54188 for being void. On 20 December 1985, the same CFI rendered a Joint Decision ordering the Register of Deeds to cancel QRSIs TCTs No. T-54185, No. T-54186 and No. T-54187. Both Decisions were rendered for failure of respondent QRSI to appear at pre-trial despite filing an Answer to the Complaints. QRSI defaulted in the payment of its mortgage indebtedness to GSIS, leading to the foreclosure of the mortgages. The properties were sold at public auction, with GSIS emerging as the highest bidder. On 10 April 1986, Certificates of Sale were issued in favor of GSIS. QRSI failed to redeem the foreclosed properties within the one-year redemption period, allowing GSIS to consolidate its ownership thereof. TCTs No. T-230070, No. T-230071, No. T-230072 and No. T-225212 were, thus, issued in the name of GSIS. Thereupon, GSIS entered into a joint venture agreement with respondent New San Jose Builders, Inc. (NSJBI) for the development of the properties. NSJBI subsequently commenced construction and development works thereon. On 8 November 1993, petitioners counsel, through a letter, demanded that GSIS and NSJBI vacate the subject properties. On 7 August 1994, Ty and IRC each filed a Petition for Declaratory Relief to Quiet Title/Remove Cloud from Real Property against respondents with the RTC of Imus, Cavite, this time impleading all respondents, QRSI, GSIS, NSJBI, and the Register of Deeds of Cavite. The cases were docketed as Civil Case No. BSC 94-2 and Civil Case No. 94-3. The cases were consolidated under Branch 20 of said court. On 18 November 1997, the RTC of Imus, Cavite, rendered its Joint Decision dismissing the complaints. Petitioners appealed to the Court of Appeals. The appeal was docketed as CA-G.R. CV No. 62610 and was raffled to the Seventh Division. On 31 January 2005, the Court of Appeals rendered its

Decision affirming the Joint Decision of the RTC. On 29 June 2006, the Court of Appeals denied the Motion for Reconsideration filed by Petitioners. Hence, this Petition, wherein petitioners present the following issues for our consideration: I. PRIVATE RESPONDENT GSIS, BEING A FINANCIAL INSTITUTION, IS CHARGED WITH THE DUTY TO EXERCISE MORE CARE AND PRUDENCE IN DEALING WITH REGISTERED LANDS FOR ITS BUSINESS IS ONE AFFECTED WITH PUBLIC INTEREST KEEPING IN TRUST MONEY BELONGING TO ITS MEMBERS AND SHOULD GUARD AGAINST LOSSES AND, THEREFORE, CANNOT INVOKE THE PROTECTED MANTLE OF LAND REGISTRATION STATUTE (ACT 496). II. THE TITLE OF PETITIONERS BEING SUPERIOR TO THAT OF PRIVATE RESPONDENT QUEENS ROW, THE PRINCIPLE OF INDEFEASIBILITY OF TITLE REMAINED UNAFFECTED AND PETITIONERS COULD NOT HAVE BEEN GUILTY OF LACHES, ESTOPPEL, MUCH LESS PRESCRIPTION.2 Innocent Purchaser for Value In the first issue raised by petitioners, they assail the finding of the Court of Appeals that GSIS was an innocent purchaser for value. The appellate court held: The records clearly show that the mortgages entered into by Queens Row and GSIS were already inscribed on the formers titles on June 29, 1971 as shown by the entries appearing at the back of TCT Nos. T-54188, T-54185, T-54186 and T-54187, even before Civil Cases Nos. B-44, 45, 48 and 49 were instituted. In spite of this, petitioners-appellants (plaintiffs then) did not implead the GSIS as a party to the complaints. Moreso, no adverse claim or notice of lis pendens was annotated by petitioners-appellants on the titles of Queens Row during the pendency of these cases. To make matters worse, as earlier stated, petitioners-appellants, after securing favorable decisions against Queens Row, did not enforce the same for more than ten (10) years. By their inaction, the efficacy of the decisions was rendered at naught. Verily, a buyer in good faith is one who buys the property of another without notice that some other person has a right to or interest in such property. He is a buyer for value if he pays a full and fair price at the time of the purchase or before he has notice of the claim or interest of some other person in the property. In the instant case, the GSIS clearly had no notice of any defect, irregularity or encumbrance in the title of Queens Row when the latter mortgaged the subject property. Neither did GSIS have any knowledge of facts and circumstances which should have put it on inquiry, requiring it to go [beyond] the certificate of title. Obviously, GSIS was an innocent purchaser for value and in good faith at the time it acquired the subject property.3 Petitioners claim that since GSIS is a financial institution, it is charged with the duty to exercise more care and prudence in dealing with registered lands. On this basis, petitioners conclude that GSIS cannot invoke the protection of land registration statutes insofar as they protect innocent purchasers for value. While we agree with petitioners that GSIS, as a financial institution, is bound to exercise more than just ordinary diligence in the conduct of its financial dealings, we nevertheless find no law or

jurisprudence supporting petitioners claim that financial institutions are not protected when they are innocent purchasers for value. When financial institutions exercise extraordinary diligence in determining the validity of the certificates of title to properties being sold or mortgaged to them and still fail to find any defect or encumbrance upon the subject properties after said inquiry, such financial institutions should be protected like any other innocent purchaser for value if they paid a full and fair price at the time of the purchase or before having notice of some other persons claim on or interest in the property. On this note, petitioners insist that "GSIS was guilty of gross negligence in its failure to inquire and investigate the status and condition of the property when it approved the loan of private respondent Queens Row."4 This allegation has no leg to stand on. Respondents allege that GSIS ascertained to its satisfaction the existence and authenticity of the titles of its predecessor-in-interest, QRSI; and was, in fact, able to procure true copies of the latters titles from the Registry of Deeds.5 GSIS furthermore conducted an ocular inspection and found that the property was not in the possession of any person claiming an interest that was adverse to that of its predecessor-ininterest.6 Respondents allegations are much more convincing in light of the fact that NSJBI was able to enter the subject property by virtue of its joint venture agreement with GSIS, and was able to commence construction and development works thereon. Petitioners have presented absolutely no evidence to prove their allegation of fraud on the part of QRSI and bad faith on the part of GSIS. They want us to merely conclude the same on the ground that they were able to secure the favorable decisions they obtained in Civil Cases No. B-44, No. B45, No. B-48 and No. B-49. However, as shall be discussed later, these are already stale judgments, which cannot be executed anymore. Furthermore, these judgments were obtained ex parte, for failure of respondent QRSI to appear at the pre-trial despite filing an Answer to the Complaints. GSIS, on the other hand, was never impleaded in these four Complaints for cancellation filed in October 1973, despite the fact that the mortgages in GSISs favor had been annotated on the subject titles since 29 June 1971. GSIS, therefore, never had any notice of these proceedings. Petitioners cannot expect GSIS to check the technical descriptions of each and every title in the Registry of Deeds of Cavite in order to determine whether there is another title to the same property. There is no one to blame for the failure of GSIS to have notice of such fact other than petitioners themselves. As stated above, they did not implead GSIS in their actions for cancellation of title despite the fact that, at the time of the filing of the cases, the mortgages in GSISs favor had already been annotated on the subject titles. Petitioners likewise neglected to have a notice of lis pendens of the cancellation cases annotated on the subject titles, fueling respondents suspicions that the former wanted their actions for cancellation to be uncontested by GSIS, the party really interested in challenging the same. Laches Petitioners challenge the ruling of the Court of Appeals finding them guilty of laches for their failure to execute the favorable decisions they obtained in Civil Cases No. B-44, No. B-45, No. B-48 and No. B-49, arguing that laches "cannot be raised even as a valid defense for claiming ownership of registered land, more so, if titles are tainted with fraud in their issuances."7 Their basis for this claim is the 1950 Court of Appeals case Dela Cruz v. Dela Cruz.8 We are not persuaded. Firstly, as discussed above, while petitioners persistently harp on their allegation of fraud in the issuance of the title of GSIS, nevertheless, they have not presented any evidence to prove the alleged fraud on the part of either GSIS or even QRSI.

Secondly, it must be stressed that the Decisions of this Court are the only judicial decisions that form part of our legal system. While rulings of the Court of Appeals may serve as precedents for lower courts, they only apply to points of law not covered by any Supreme Court decision.9 Thirdly, this Court has, on several occasions, already ruled that even a registered owner of a property may be barred from recovering possession of the same by virtue of laches. Thus, in Heirs of Panganiban v. Dayrit,10 this Court discussed several cases wherein the principle of laches was applied against the registered owner: In our jurisdiction, it is an enshrined rule that even a registered owner of property may be barred from recovering possession of property by virtue of laches. Thus, in the case of Lola v. Court of Appeals, this Court held that petitioners acquired title to the land owned by respondent by virtue of the equitable principles of laches due to respondents failure to assert her claims and ownership for thirty-two (32) years. In Miguel v. Catalino, this Court said that appellants passivity and inaction for more than thirty-four (34) years (1928-1962) justifies the defendant-appellee in setting up the equitable defense of laches in his behalf. Likewise, in the case of Mejia de Lucas v. Gamponia, we stated that while the defendant may not be considered as having acquired title by virtue of his and his predecessors long continued possession for thirty-seven (37) years, the original owners right to recover possession of the property and the title thereto from the defendant has, by the latters long period of possession and by patentees inaction and neglect, been converted into a stale demand. Laches is the failure or neglect, for an unreasonable and unexplained length of time, to do that which by exerting due diligence could or should have been done earlier.11 The law serves those who are vigilant and diligent, and not those who sleep when the law requires them to act.12
1av vphi1

The Court of Appeals based its finding of laches on the fact that petitioners Ty and IRC failed to move for the execution of the favorable ex parte judgments, which they obtained on 8 December 1980 and 20 December 1985, respectively. If we read Section 6, Rule 39 of the Rules of Court together with Article 1144 of the Civil Code, we would see that the winning party in litigation has a period of five years from the date of entry of judgment to execute said judgment by motion, and another five years to execute it by action. Section 6, Rule 39 of the Rules of Court provides that a motion for the execution of a final judgment or order may be filed within five years from the date of its entry. After the lapse of such time, and before it is barred by the statute of limitations, a judgment may be enforced by action: Section 6. Execution by motion or by independent action. A final and executory judgment or order may be executed on motion within five (5) years from the date of its entry. After the lapse of such time, and before it is barred by the statute of limitations, a judgment may be enforced by action. The revived judgment may also be enforced by motion within five (5) years from the date of its entry and thereafter by action before it is barred by the statute of limitations. The statute of limitations referred to in the above section is found in Article 1144 of the Civil Code, which provides: Art. 1144. The following actions must be brought within ten years from the time the right of action accrues: (1) Upon a written contract; (2) Upon an obligation created by law;

(3) Upon a judgment. While indeed, the above provisions on extinctive prescription cannot be the basis for depriving a registered owner of its title to a property, they nevertheless prohibit petitioners from enforcing the ex parte judgment in their favor, which can likewise be the basis of a pronouncement of laches. In Villegas v. Court of Appeals,13 we held that: But even if Fortune had validly acquired the subject property, it would still be barred from asserting title because of laches. The failure or neglect, for an unreasonable length of time to do that which by exercising due diligence could or should have been done earlier constitutes laches. It is negligence or omission to assert a right within a reasonable time, warranting a presumption that the party entitled to assert it has either abandoned it or declined to assert it. While it is by express provision of law that no title to registered land in derogation of that of the registered owner shall be acquired by prescription or adverse possession, it is likewise an enshrined rule that even a registered owner may be barred from recovering possession of property by virtue of laches. (Emphasis supplied.) Petitioners neglect in asserting their rights is likewise manifested in their failure to implead GSIS in the four Complaints for cancellation, which they filed in October 1973, despite the fact that the mortgages in the GSISs favor had been annotated on the subject titles since 29 June 1971. It even became more evident from the fact that petitioners failed to have a notice of lis pendens annotated on the subject titles of the said cancellation of title cases, leading GSIS to believe that there were no other certificates of title to the same properties when it proceeded to foreclose the subject properties in 1986. We, therefore, find no reason to overrule the finding of the Court of Appeals that petitioners were guilty of laches. WHEREFORE, the instant Petition is DENIED. The Decision of the Court of Appeals dated 31 January 2005 in CA-G.R. CV No. 62610 and the Resolution of the same Court dated 29 July 2006 are hereby AFFIRMED. No pronouncement as to costs. SO ORDERED. MINITA V. CHICO-NAZARIO Associate Justice G.R. No. 151235 July 28, 2005 HEIRS OF JUAN PANGANIBAN & INES PANGANIBAN, namely: ERLINDA B. PACURSA, ERNESTO P. BACONGA, EVELYN BACONGA, AMY B. BIHAG, SIEGFREDO BACONGA, IMELDA B. PACALDO, REBECCA B. LI, OFELIA B. OALIVAR, GEMMA BACONGA, MARIE INES BACONGA, MELANIE BACONGA, and ANITA FUENTES, Petitioners, vs. ANGELINA N. DAYRIT, Respondent. DECISION Tinga, J.: This is a petition for review on certiorari seeking the partial reversal of the Decision1 and the Resolution2 denying the motion for reconsideration rendered by the Court of Appeals (CA) Second Division in CA-G.R. CV No. 57148.

This case stemmed from a petition for cancellation of owners duplicate copy of Original Certificate of Title (OCT) No. 7864 of the Registry of Deeds of Misamis Oriental and recovery of damages filed by the heirs of Juan and Ines Panganiban, more particularly Erlinda B. Pacursa, Ernesto P. Baconga, Asito P. Baconga and Anita B. Fuentes, against Angelina N. Dayrit, respondent herein, on 3 April 1992.3 The petition was later amended to add the heirs of Asito P. Baconga as petitioners upon the latters death and to include a prayer for quieting of title over the property in dispute.4 The undisputed operative facts follow. The property subject of controversy is a two thousand twenty-five (2,025)-square meter portion of a lot denominated as Lot 1436, situated at Kauswagan, Cagayan de Oro City. It constitutes threefourths (3/4) of Lot 1436, one of the three (3) lots covered by OCT No. 7864, the other two being Lots 1441 and 1485. OCT No. 7864 was registered in the names of Juan Panganiban (Juan) and Ines Panganiban (Ines), father and daughter respectively, on 17 April 1940.5 Juan died sometime in June 19426 while Ines, his only child, died in April 1944.7 In the amended complaint filed with the trial court, petitioners alleged that they are the possessors and owners of Lot 1436 which they inherited from the late Juan and Ines. They acknowledge that Lot 1436 was the only remaining lot covered by OCT No. 7864, Lots 1485 and 1441 having been sold in 1949 to Galo Sabanal and Pablo Dagbay respectively, by virtue of a deed denominated as Extrajudicial Settlement of Estate Among Heirs and Sale.8 The owners duplicate copy of OCT No. 7864 covering Lot 1436 had been lost but upon petition with the trial court in 1977 by Erlinda B. Pacursa (Erlinda), one of the heirs of Ines and a petitioner herein, the trial court granted the petition.9 Accordingly, the Register of Deeds of Misamis Oriental issued an owners duplicate certificate of OCT No. 7864 to Erlinda.10 Petitioners further alleged that unknown to them, a certain Cristobal Salcedo (Salcedo) asserted ownership over Lot 1436 and believing that it was unregistered, sold a portion of it to respondent. The latter subsequently discovered that what she had bought was registered land. Unable to annotate the deed of sale at the back of OCT No. 7864, respondent fraudulently filed a petition for issuance of the owners copy of said title, docketed as Misc. Case No. 90-018 in March 1990. This petition of the respondent alleged that the copy issued to Erlinda was lost in the fire that razed Lapasan, Cagayan de Oro City in 1981. While the petition mentioned Erlinda as the last one in possession of the alleged lost owners duplicate copy of the title, she was not notified of the proceedings.11 The petition in Misc. Case No. 90-018 was subsequently granted and the Register of Deeds of Misamis Oriental issued an owners duplicate certificate of OCT No. 7864 to respondent.12 This second duplicate certificate issued to respondent contained Entry No. 160180, the annotation of a Notice of Adverse Claim filed by Erlinda.13 TheNotice of Adverse Claim14 dated 24 February 1992 alleged in part that Erlinda is one of the lawful heirs of Juan and Ines, the registered owners of the property, and as such, she has a legitimate claim thereto. Petitioners further alleged that the newly issued owners duplicate certificate of OCT No. 7864 to respondent was prejudicial to their previously issued title which is still in existence. Thus, they prayed among others that they be declared as the rightful owners of the property in question and that the duplicate certificate of OCT No. 7864 in their possession be deemed valid and subsisting.15 In her answer to the amended complaint, respondent denied all the material allegations of the complaint and set up affirmative and special defenses. She alleged that Lot 1436 was actually sold sometime in 1947 by the petitioners themselves and their father, Mauricio Baconga. The sale was

purportedly covered by a Deed of Definite Sale. Salcedo then came into ownership, possession and enjoyment of the property in question.16 On 14 February 1978, Salcedo sold a portion of Lot 1436 with an area of two thousand twenty- five (2,025) square meters, more or less, to respondent. From then on, the property in question has been in her actual and physical enjoyment, she added.17 Respondent further alleged that the complaint was barred by the principles of estoppel and laches by virtue of the sales executed by petitioners themselves and their father. The complaint, according to her, also failed to include as defendants, the heirs of Salcedo who are indispensable parties.18 On 10 August 1992, upon motion duly granted, respondent filed a third-party complaint against the heirs of Salcedo alleging that as such heirs, they carry the burden of warranting that their predecessors in interest were the true, legal and rightful owners of the property in question at the time of the sale. Hence, she prayed therein that she be maintained in peaceful and legal ownership, possession and enjoyment of the questioned property.19 Answering the third-party complaint, the heirs of Salcedo effectively admitted the existence of the 1978 deed of sale in favor of respondent by their parents and considered the sale as within the personal and legal right of their parents and an act outside their control.20 After due trial and consideration of the documentary and testimonial evidence adduced by both parties, the trial court rendered a decision against petitioners and in favor of respondent. The dispositive portion of the decision provides: WHEREFORE, premises considered judgment is hereby rendered: 1. DISMISSING plaintiffs complaint, for lack of merit and cause of action; 2. DECLARING defendant as the true and real owner of the lot in question; 3. DECLARING the owners duplicate copy of Original Certificate of Title No. 7864 (plaintiffs Exh. "A") null and void same being obtained by plaintiffs when they were not owners anymore of Lot 1436; 4. DECLARING the owners duplicate copy of Original Certificate of Title No. 7864 obtained by defendant (Exh. "1") as the one valid to be given like faith and credit as the one that was lost and declared null and void; and 5. ORDERING the Register of Deeds of Cagayan de Oro City to issue a transfer certificate of title to Angela N. Dayrit, herein defendant, for her 2,025 square meter portion of Lot 1436; to Anita Baconga Fuentes for her 505 square meter portion of Lot 1436 and to Atty. Isabelo N. Pacursa or his heirs, he being allegedly dead already, for his 170 square meter portion of Lot 1436 and after they shall have presented an approved subdivision plan and an agreement to partition, to issue to each of them, their respective transfer certificate of title with an area according to the respective technical description corresponding to each of their land. Defendants counterclaim and third-party complaint are hereby dismissed. SO ORDERED.21 The Regional Trial Court Decision was modified by the CA on appeal by petitioners. The appellate court held that contrary to the ruling of the trial court, the valid and subsisting duplicate certificate of

OCT No. 7864 was the one issued to Erlinda, not to respondent, considering that respondent had failed to comply with the mandatory jurisdictional requirements of law for the reconstitution of title under Sec. 13 of Republic Act No. 26.22 The CA invoked the doctrine that a trial court does not acquire jurisdiction over a petition for the issuance of a new owners duplicate certificate of title if the original is in fact not lost. Citing Strait Times, Inc. v. Court of Appeals,23the CA held that the reconstituted certificate is itself void once the existence of the original is unquestionably demonstrated.24 Nonetheless, the CA affirmed in all other respects the ruling of the trial court, including the critical holding that respondent was the owner of the subject property. The decretal portion of the CAs decision reads: WHEREFORE, in view of the foregoing, and pursuant to applicable law and jurisprudence on the matter and evidence on hand, judgment is hereby rendered granting partly the instant appeal. Consequently, the decision of the trial court is MODIFIED so as to order the cancellation of the owners duplicate copy of OCT No. 7864 issued to defendant Angelina Dayrit and declaring the owners duplicate copy of OCT No. 7864 (Exh. "A" and sub-markings with SN No. 014439) to be still valid for all intents and purposes and to be given like faith and credit as the original. All other aspects are AFFIRMED. No costs. SO ORDERED.25 (Emphasis in the original.) Petitioners now come before this Court seeking the partial reversal of the decision rendered by the CA. They contend that the CA erred in finding that the tax declarations and the alleged adverse possession of respondent and her predecessor-in-interest are conclusive proofs of their ownership of Lot 1436. They further contend that the CA erred when it found them guilty of laches.26 However, it is apparent that in order that the petition may be properly resolved, we must ascertain first, who between petitioners and respondent is the rightful owner of the property in dispute and second, whether petitioners right to recover the property is barred by laches assuming they are the rightful owners thereof as they claim. The resolution of the foregoing issues hinges on the question of which owners duplicate certificate of title is valid and subsisting, the one in petitioners possession or the one issued to respondent. What appears on the face of the title is controlling in questions of ownership since the certificate of title is an absolute and indefeasible evidence of ownership of the property in favor of the person whose name appears therein.27 The CA correctly ruled that the duplicate certificate of title in petitioners possession is valid and subsisting. This Court had already ruled in Serra Serra v. Court of Appeals28 that if a certificate of title has not been lost but is in fact in the possession of another person, the reconstituted title is void and the court rendering the decision has not acquired jurisdiction over the petition for issuance of a new title.29 Since the owners duplicate copy of OCT No. 7864 earlier issued to Erlinda is still in existence, the lower court did not acquire jurisdiction over respondents petition for reconstitution of title. The duplicate certificate of title subsequently issued to respondent is therefore void and of no effect. The registered owners of OCT No. 7864 on the face of the valid and subsisting duplicate certificate of title are still Juan and Ines, petitioners predecessors in interest.30 Per Section 46 of the Land Registration Act, no title to registered land in derogation to that of the registered owner shall be acquired by prescription or adverse possession. This rule taken in conjunction with the indefeasibility

of a Torrens title leads to the conclusion that the rightful owners of the property in dispute are petitioners. They are indisputably the heirs of the registered owners, both of whom are already dead. These premises considered, it was error on the part of the trial court to rule that respondent was the owner of the subject property and for the CA to have affirmed such holding. We rule instead that the successors-in-interest of Juan and Ines are the legal owners of the subject property, namely petitioners herein. Petitioners ownership of the property having been established, the question now is whether they are entitled to its possession. On this point, the Court rules in the negative. Petitioners are no longer entitled to recover possession of the property by virtue of the equitable defense of laches. Thus, petitioners argument that laches is not applicable to them has no merit. By laches is meant: the failure or neglect, for an unreasonable and unexplained length of time, to do that which by exercising due diligence could or should have been done earlier, it is negligence or omission to assert a right within a reasonable time, warranting a presumption that the party entitled to assert it either has abandoned it or declined to assert it. The defense of laches is an equitable one and does not concern itself with the character of the defendants title but only with whether or not by reason of plaintiffs long inaction or inexcusable neglect, he should be barred from asserting his claim at all, because to allow him to do so would be inequitable and unjust to defendant.31 In our jurisdiction, it is an enshrined rule that even a registered owner of property may be barred from recovering possession of property by virtue of laches.32 Thus, in the case of Lola v. Court of Appeals,33 this Court held that petitioners acquired title to the land owned by respondent by virtue of the equitable principles of laches due to respondents failure to assert her claims and ownership for thirty-two (32) years. In Miguel v. Catalino,34 this Court said that appellants passivity and inaction for more than thirty-four (34) years (1928-1962) justifies the defendant-appellee in setting up the equitable defense of laches in his behalf. Likewise, in the case of Mejia de Lucas v. Gamponia,35 we stated that while the defendant may not be considered as having acquired title by virtue of his and his predecessors long continued possession for thirty-seven (37) years, the original owners right to recover possession of the property and the title thereto from the defendant has, by the latters long period of possession and by patentees inaction and neglect, been converted into a stale demand.36 In this case, both the lower court and the appellate court found that contrary to respondents claim of possession, it was Salcedo, respondents predecessor-in-interest who had been in actual possession of the property. In fact, when the lower court conducted an ocular inspection on the subject premises sometime on 16 March 1993, the court-appointed Commissioner elicited from the people residing near the subject property, more particularly Celso Velez, Nieto Abecia and Paquito Nabe, that Salcedo was the owner and the one in possession of the land until 1978 when respondent became the possessor thereof.37 It was only in 1992 or forty-five (45) years from the time Salcedo took possession of the property that petitioners made an attempt to claim it as their own. Petitioners declared the property for tax purposes, registered their adverse claim to respondents title, and filed the instant case all in 1992.38 These actuations of petitioners point to the fact that for forty-five (45) years, they did nothing to assert their right of ownership and possession over the subject property. Given the circumstances in the case at bar, the application of the equitable defense of laches is more than justified.

Petitioners claim that prescription and adverse possession can never militate against the right of a registered owner since a title, once registered cannot be defeated even by adverse, open and notorious possession.39 They are right in that regard. But their cause is defeated not by prescription and adverse possession, but by laches. This Court had occasion to distinguish laches from prescription in the case of Heirs of Batiog Lacamen v. Heirs of Laruan.40 It was held therein that: "Laches" has been defined as "such neglect or omission to assert a right, taken in conjunction with lapse of time and other circumstances causing prejudice to an adverse party, as will operate as a bar in equity." It is a delay in the assertion of a right "which works disadvantage to another" because of the "inequity founded on some change in the condition or relations of the property or parties." It is based on public policy which, for the peace of society, ordains that relief will be denied to a stale demand which otherwise could be a valid claim. It is different from and applies independently of prescription. While prescription is concerned with the fact of delay, laches is concerned with the effect of delay. Prescription is a matter of time; laches is principally a question of inequity of permitting a claim to be enforced, this inequity being founded on some change in the condition of the property or the relation of the parties. Prescription is statutory; laches is not. Laches applies in equity, whereas prescription applies at law. Prescription is based on a fixed time, laches is not.41 (Footnotes are omitted.) Thus, it is the effect of delay in asserting their right of ownership over the property which militates against petitioners, not merely the fact that they asserted their right to the property too late in the day. All the four (4) elements of laches prescribed by this Court in the case of Go Chi Gun, et al. v. Co Cho, et al.42and reiterated in the cases of Mejia de Lucas v. Gamponia,43 Miguel v. Catalino44 and Claverias v. Quingco45 are present in the case at bar, to wit: (1) conduct on the part of the defendant, or of one under whom he claims, giving rise to the situation of which complaint is made for which the complaint seeks a remedy; (2) delay in asserting the complainants rights, the complainant having had knowledge or notice, of the defendants conduct and having been afforded an opportunity to institute a suit; (3) lack of knowledge or notice on the part of the defendant that the complainant would assert the right on which he bases his suit; and (4) injury or prejudice to the defendant in the event relief is accorded to the complainant, or the suit is not held to be barred.46 Petitioners inaction for forty-five (45) years reduced their right to recover the subject property into a stale demand. In Mejia,47 the Court held in essence that the principle of laches is one of estoppel because it prevents people who have slept on their rights from prejudicing the rights of third parties who have placed reliance on the inaction of the original patentee and his successors in interest.48 The following pronouncement in the case of Claverias v. Quingco49 is therefore apropos to the case at bar:

Courts cannot look with favor at parties who, by their silence, delay and inaction, knowingly induce another to spend time, effort and expense in cultivating the land, paying taxes and making improvements thereon for 30 long years, only to spring from ambush and claim title when the possessors efforts and the rise of the land values offer an opportunity to make easy profit at his expense.50 WHEREFORE, the Petition is DENIED. The challenged decision of the Court of Appeals is AFFIRMED insofar as it ruled that the claim of petitioners is barred by laches. No pronouncement as to costs. SO ORDERED. DANTE O. TINGA Associate Justice G.R. No. 150654 December 13, 2007

HEIRS OF ANACLETO B. NIETO, namely, SIXTA P. NIETO, EULALIO P. NIETO, GAUDENCIO P. NIETO, and CORAZON P. NIETO-IGNACIO, represented by EULALIO P. NIETO, Petitioners, vs. MUNICIPALITY OF MEYCAUAYAN, BULACAN, represented by MAYOR EDUARDO ALARILLA, Respondent. DECISION NACHURA, J.: This is a petition for review on certiorari of the Decision1 of the Court of Appeals, dated October 30, 2001, which dismissed the petition for review of the Decision of the Regional Trial Court (RTC) of Malolos, Bulacan. The latter dismissed a complaint to recover possession of a registered land on the ground of prescription and laches. The antecedents are as follows: Anacleto Nieto was the registered owner of a parcel of land, consisting of 3,882 square meters, situated at Poblacion, Meycauayan, Bulacan and covered by TCT No. T-24.055 (M). The property is being used by respondent, Municipality of Meycauayan, Bulacan, which constructed an extension of the public market therein. Upon Anacletos death on July 26, 1993, his wife, Sixta P. Nieto, and their three children, namely, Eulalio P. Nieto, Gaudencio Nieto and Corazon Nieto-Ignacio, herein petitioners, collated all the documents pertaining to his estate. When petitioners failed to locate the owners duplicate copy of TCT No. T-24.055 (M), they filed a petition for the issuance of a second owners copy with the RTC, Malolos, Bulacan. In that case, petitioners discovered that the missing copy of the title was in the possession of the respondent. Consequently, petitioners withdrew the petition and demanded from respondent the return of property and the certificate of title. On February 23, 1994, petitioners formally demanded from respondent the return of the possession and full control of the property, and payment of a monthly rent with interest from January 1964. Respondent did not comply with petitioners demand.2

On December 28, 1994, petitioners filed a complaint3 for recovery of possession and damages against respondent alleging that the latter was in possession of the owners copy of TCT No. T24.055 (M). They averred that, in 1966, respondent occupied the subject property by making it appear that it would expropriate the same. Respondent then used the land as a public market site and leased the stalls therein to several persons without paying Anacleto Nieto the value of the land or rent therefor. Petitioners prayed that respondent be ordered to surrender to them the owners copy of TCT No. T-24.055 (M), vacate the property, and pay them the rents thereon from 1966 until the date of the filing of the complaint for the total of P1,716,000.00, and P10,000.00 a month thereafter, as well as P300,000.00 as moral damages, and P100,000.00 as attorneys fees. In its Answer,4 respondent alleged that the property was donated to it and that the action was already time-barred because 32 years had elapsed since it possessed the property. Respondent and counsel failed to appear during the scheduled pre-trial conference.5 Upon petitioners motion, respondent was declared as in default and petitioners were allowed to present evidence ex parte. Respondent filed a motion for reconsideration which the RTC granted. Respondent was then allowed to cross-examine petitioners lone witness and present its own evidence. However, despite notice, respondent failed again to appear during the scheduled hearing. Hence, the RTC considered respondent to have waived its right to cross-examine petitioners witness and present its own evidence. The case was then submitted for decision. On August 1, 1995, the RTC rendered a Decision dismissing the complaint as well as respondents counterclaims for damages. For lack of proof, the RTC disregarded respondents claim that Anacleto Nieto donated the property to it in light of the fact that the title remained in the name of Anacleto. Nonetheless, the RTC did not rule in favor of petitioners because of its finding that the case was already barred by prescription. It held that the imprescriptibility of actions to recover land covered by the Torrens System could only be invoked by the registered owner, Anacleto Nieto, and that the action was also barred by laches. Petitioners appealed the case to the Court of Appeals (CA). On October 30, 2001, the CA rendered a Decision dismissing the case for lack of jurisdiction. According to the CA, the petition involved a pure question of law; hence, petitioners should have filed a petition directly with this Court.6 Accordingly, petitioners elevated the case to this Court through a petition for review on certiorari, raising the following issues: A. Are lands covered by the Torrens System subject to prescription? B. May the defense of [l]aches be invoked in this specific case? C. May the defense of imprescriptibility only be invoked by the registered owner to the exclusion of his legitimate heirs?7 The petition is meritorious. Respondent argues that the action of petitioner to recover possession of the property is already barred by prescription. We do not agree.

An action to recover possession of a registered land never prescribes in view of the provision of Section 44 of Act No. 496 to the effect that no title to registered land in derogation of that of a registered owner shall be acquired by prescription or adverse possession.8 It follows that an action by the registered owner to recover a real property registered under the Torrens System does not prescribe. Despite knowledge of this avowed doctrine, the trial court ruled that petitioners cause of action had already prescribed on the ground that the imprescriptibility to recover lands registered under the Torrens System can only be invoked by the person under whose name the land is registered. Again, we do not agree. It is well settled that the rule on imprescriptibility of registered lands not only applies to the registered owner but extends to the heirs of the registered owner as well.9 Recently in Mateo v. Diaz,10 the Court held that prescription is unavailing not only against the registered owner, but also against his hereditary successors because the latter step into the shoes of the decedent by operation of law and are the continuation of the personality of their predecessor-in-interest. Hence, petitioners, as heirs of Anacleto Nieto, the registered owner, cannot be barred by prescription from claiming the property. Aside from finding that petitioners cause of action was barred by prescription, the trial court reinforced its dismissal of the case by holding that the action was likewise barred by laches. Laches has been defined as the failure or neglect, for an unreasonable and unexplained length of time, to do that which, by exercising due diligence could or should have been done earlier. It is negligence or omission to assert a right within a reasonable time, warranting the presumption that the party entitled to assert his right has either abandoned or declined to assert it.11 In a number of cases, the Court has held that an action to recover registered land covered by the Torrens System may not be barred by laches.12 Laches cannot be set up to resist the enforcement of an imprescriptible legal right.13 Laches, which is a principle based on equity, may not prevail against a specific provision of law, because equity, which has been defined as "justice outside legality," is applied in the absence of and not against statutory law or rules of procedure.14 In recent cases, 15 however, the Court held that while it is true that a Torrens title is indefeasible and imprescriptible, the registered landowner may lose his right to recover possession of his registered property by reason of laches. Yet, even if we apply the doctrine of laches to registered lands, it would still not bar petitioners claim. It should be stressed that laches is not concerned only with the mere lapse of time.16 The following elements must be present in order to constitute laches: (1) conduct on the part of the defendant, or of one under whom he claims, giving rise to the situation of which complaint is made for which the complaint seeks a remedy; (2) delay in asserting the complainants rights, the complainant having had knowledge or notice, of the defendants conduct and having been afforded an opportunity to institute a suit; (3) lack of knowledge or notice on the part of the defendant that the complainant would assert the right on which he bases his suit; and (4) injury or prejudice to the defendant in the event relief is accorded to the complainant, or the suit is not held to be barred.17

We note that the certificate of title in the name of Anacleto Nieto was found in respondents possession but there was no evidence that ownership of the property was transferred to the municipality either through a donation or by expropriation, or that any compensation was paid by respondent for the use of the property. Anacleto allegedly surrendered the certificate of title to respondent upon the belief that the property would be expropriated. Absent any showing that this certificate of title was fraudulently obtained by respondent, it can be presumed that Anacleto voluntarily delivered the same to respondent. Anacletos delivery of the certificate of title to respondent could, therefore, be taken to mean acquiescence to respondents plan to expropriate the property, or a tacit consent to the use of the property pending its expropriation. This Court has consistently held that those who occupy the land of another at the latters tolerance or permission, without any contract between them, are necessarily bound by an implied promise that the occupants will vacate the property upon demand.18 The status of the possessor is analogous to that of a lessee or tenant whose term of lease has expired but whose occupancy continues by tolerance of the owner. In such case, the unlawful deprivation or withholding of possession is to be counted from the date of the demand to vacate.19 Upon the refusal to vacate the property, the owners cause of action accrues. In this case, the first element of laches occurred the moment respondent refused to vacate the property, upon petitioners demand, on February 23, 1994. The filing of the complaint on December 28, 1994, after the lapse of a period of only ten months, cannot be considered as unreasonable delay amounting to laches. Moreover, case law teaches that if the claimants possession of the land is merely tolerated by its lawful owner, the latters right to recover possession is never barred by laches. Even if it be supposed that petitioners were aware of respondents occupation of the property, and regardless of the length of that possession, the lawful owners have a right to demand the return of their property at any time as long as the possession was unauthorized or merely tolerated, if at all.20 Furthermore, the doctrine of laches cannot be invoked to defeat justice or to perpetrate fraud and injustice. It is the better rule that courts, under the principle of equity, will not be guided or bound strictly by the statute of limitations or the doctrine of laches when by doing so, manifest wrong or injustice would result.21 Finally, we find that the rentals being prayed for by petitioners are reasonable considering the size and location of the subject property. Accordingly, the award of rentals is warranted. WHEREFORE, premises considered, the petition is GRANTED. The Decision of the Regional Trial Court of Malolos, Bulacan, dated August 1, 1995, is REVERSED and SET ASIDE. Respondent is ORDERED (a) to vacate and surrender peaceful possession of the property to petitioners, or pay the reasonable value of the property; (b) to pay P1,716,000.00 as reasonable compensation for the use of the property from 1966 until the filing of the complaint and P10,000.00 monthly rental thereafter until it vacates the property, with 12% interest from the filing of the complaint until fully paid; and (c) to return to petitioners the duplicate copy of TCT No. T-24.055 (M). SO ORDERED. ANTONIO EDUARDO B. NACHURA G.R. No. 152423 December 15, 2010

SPOUSES MARCOS R. ESMAQUEL and VICTORIA SORDEVILLA, Petitioners, vs. MARIA COPRADA, Respondent. DECISION PERALTA, J.: Before this Court is a petition for review on certiorari under Rule 45 of the Rules of Court seeking to set aside the Decision1 and the Resolution2 of the Court of Appeals, dated April 6, 2001 and February 15, 2002, respectively, (CA) in CA-G.R. SP No. 49994. The antecedents are as follows: On February 24, 1997, petitioners, spouses Marcos Esmaquel and Victoria Sordevilla (Victoria) filed an ejectment case3 against respondent Maria V. Coprada before the 2nd Municipal Circuit Trial Court (MCTC) of Magdalena, Liliw and Majayjay Laguna. Petitioners claimed that they are the registered owners of a parcel of land situated in M.H. Del Pilar St., Barangay San Miguel, Majayjay, Laguna, containing an area of Two Hundred Fifty-Three (253) square meters and covered by Transfer Certificate of Title (TCT) No. T-93542. In 1945, respondent was able to persuade the petitioners to allow her and her family to use and occupy the land for their residence, under the condition that they will vacate the premises should petitioners need to use the same. Respondent and her family were allowed to construct their residential house. Since then, the petitioners never made an attempt to drive them away out of pity, knowing that respondent and her eight children have no other place to live in. Also, respondent and her family have been occupying the subject premises free of rent, including payment of realty taxes. Respondent's present circumstances have completely improved, i.e., some of her children are already working; they are regularly sending her financial assistance; and she has acquired her own residential house at Barangay Panglan, Majayjay, Laguna. Because of this, petitioners verbally demanded that respondent vacate the subject land, but the latter refused. Thus, petitioners were forced to send a demand letter dated August 22, 1996, giving respondent until November 30, 1996 to vacate the subject premises. However, respondent still ignored said demand, which prompted petitioners to bring a complaint before the barangay authorities. No settlement was reached, hence, a certification to file action in Court was issued. Petitioners were, therefore, constrained to lodge an ejectment case against the respondent before the MCTC. Respondent admitted that petitioners are the registered owners of the subject land. However, she averred that in 1945, it was Emiliana Coprada (petitioner Victoria Sordevilla's mother and original owner of the subject land) and not the petitioners who gave permission to her late husband Brigido Coprada to use the subject lot. Emiliana allowed her nephew Brigido and his family to occupy the lot as their permanent abode, because of her love and affection for her nephew, and also, due to the fact that the said lot is virtually a wasteland. Thereafter, Brigido and his family cleared the area and built therein a nipa hut to dwell in. When Emiliana died, the ownership of the property was inherited by her only child, petitioner Victoria Sordevilla. Respondent alleged that sometime in the early 1960's, petitioner Victoria offered the said lot for sale for P2,000.00 to respondent, who readily agreed. The purchase price was paid in installments and was fully paid in 1962. Due to their close relationship, the agreement was never reduced to writing. Respondent further maintained that since the execution of the oral sale of the subject lot, she has been the one paying the realty taxes due on the property. After the sale, respondent built on the subject land a semi-concrete structure. Respondent stated that petitioners' claim is barred by laches. Even granting, without admitting, that respondent's claim of ownership over the property is improper because petitioners are the registered

owners thereof, respondent argued that she is a builder in good faith, because she was able to build the structure on the subject lot with the prior permission of the owner. In its Decision4 dated September 11, 1997, the MCTC rendered judgment dismissing the complaint. It held that laches had already set in which prevented petitioners from questioning the validity of the purported sale between Victoria and Maria. On appeal, the Regional Trial Court (RTC) reversed the MCTCs judgment. The RTC ruled that respondent's occupation of the subject property was by virtue of petitioners' tolerance and permission. Hence, respondent is bound by an implied promise that she will vacate the property upon demand. Thus, her possession over the subject property became unlawful after the petitioners demanded her to vacate the property. The RTC found that respondent failed to prove the alleged oral sale and that petitioners have adequately proven that they are entitled to the possession of the subject land as registered owners thereof. The RTC ordered the respondent and all other persons claiming rights under her to vacate and surrender the possession of the subject land to the petitioners and to remove any and all improvements she introduced on the parcel of land.5 Respondent filed a Motion for Reconsideration, which was denied by the RTC in an Order6 dated November 24, 1998. Obviously dissatisfied by the Decision, respondent filed with the CA a petition for review with prayer for temporary restraining order and preliminary injunction.7 In its Decision dated April 6, 2001, the CA granted respondent's petition, reversed the Decision of the RTC and affirmed in toto the Decision of the MCTC. Petitioners filed a Motion for Reconsideration, which was denied by the CA in a Resolution8 dated February 15, 2002. Hence, the instant petition raising the following grounds: I THE RIGHT OF THE REGISTERED OWNERS TO RECOVER POSSESSION IS NEVER BARRED BY LACHES AND/OR THE PERSON WHO HAS A TORRENS TITLE OVER A PARCEL OF LAND IS ENTITLED TO THE POSSESSION THEREOF. II THE OWNERSHIP AND RIGHT OF PETITIONERS TO RECOVER POSSESSION OF THE SUBJECT PROPERTY CANNOT BE DEFEATED BY UNPROVEN ORAL SALE. III LACHES HAD SET IN AGAINST [RESPONDENT]. IV THE CERTIFICATE OF TITLE IS NOT SUBJECT TO COLLATERAL ATTACK.9 The petition is meritorious. The pertinent point of inquiry in this case is whether or not petitioners have a valid ground to evict respondent from the subject property.

An action for forcible entry or unlawful detainer is governed by Section 1, Rule 70 of the Rules of Court, which provides: SECTION 1. Who may institute proceedings, and when. - Subject to the provisions of the next succeeding section, a person deprived of the possession of any land or building by force, intimidation, threat, strategy, or stealth, or a lessor, vendor, vendee, or other person against whom the possession of any land or building is unlawfully withheld after the expiration or termination of the right to hold possession by virtue of any contract, express or implied, or the legal representatives or assigns of any such lessor, vendor, vendee, or other person, may, at any time within one (1) year after such unlawful deprivation or withholding of possession, bring an action in the proper Municipal Trial Court against the person or persons unlawfully withholding or depriving of possession, or any person or persons claiming under them, for the restitution of such possession, together with damages and costs. In unlawful detainer cases, the possession of the defendant was originally legal, as his possession was permitted by the plaintiff on account of an express or implied contract between them. However, defendant's possession became illegal when the plaintiff demanded that defendant vacate the subject property due to the expiration or termination of the right to possess under their contract, and defendant refused to heed such demand.10 The sole issue for resolution in an unlawful detainer case is physical or material possession of the property involved, independent of any claim of ownership by any of the parties. Where the issue of ownership is raised by any of the parties, the courts may pass upon the same in order to determine who has the right to possess the property. The adjudication is, however, merely provisional and would not bar or prejudice an action between the same parties involving title to the property.11 Since the issue of ownership was raised in the unlawful detainer case, its resolution boils down to which of the parties' respective evidence deserves more weight. In the case at bar, petitioners' cause of action for unlawful detainer is based on their ownership of the land covered by TCT No. T-93542 and on their claim that they merely tolerated respondent's stay thereat. Respondent's possession, as well as those persons claiming right under her, became unlawful upon her refusal to vacate the premises. Petitioners contend that since they are the registered owners of the subject land, they are entitled to the possession thereof and their right to recover possession over it is never barred by laches. They maintain that respondent's claim of ownership is based on an unproven oral sale, which does not exist. Further, respondent cannot rely on the Tax Declarations as she was paying taxes in the petitioners' name, as the declared owners of the property. Moreover, she started paying the taxes only in 1984 despite her claim that the property was sold to her in 1962. Even assuming that the sale took place in 1962, respondent is guilty of laches as she failed to take any positive action for the delivery and conveyance to her of the portion of the property she is occupying. Finally, respondent cannot collaterally attack the title of the petitioners to the subject land. On her part, respondent, although admitting that the property is registered in petitioners' name, claimed that the 100-square-meters portion of the property, where her house was erected, was already sold to her by petitioner Victoria. Thus, by virtue of the sale, she and her family have the right to possess the said property. The non-presentation of receipt and deed of sale, non-delivery of the owner's certificate of title, and her payment of the real property taxes in the name of the petitioners were due to the close relationship between the parties and the existing practice of palabra de honor in their day to day transactions. Respondent further alleged that she is not guilty of laches; rather, it is the registered owners' right to recover possession of their property which is barred by laches.

In the present case, respondent failed to present evidence to substantiate her allegation that a portion of the land was sold to her in 1962. In fact, when petitioners sent a letter12 to the respondent, demanding her to vacate the subject property, the respondent, in reply13 to the said letter, never mentioned that she purchased the subject land in 1962. If the sale really took place, the respondent should have immediately and categorically claimed that in her letter response. Clearly therefore, respondent's submission that there was an oral sale is a mere afterthought. On the other hand, it is undisputed that the subject property is covered by Transfer Certificate of Title No. T-93542, registered in the name of the petitioners. As against the respondent's unproven claim that she acquired a portion of the property from the petitioners by virtue of an oral sale, the Torrens title of petitioners must prevail. Petitioners' title over the subject property is evidence of their ownership thereof. It is a fundamental principle in land registration that the certificate of title serves as evidence of an indefeasible and incontrovertible title to the property in favor of the person whose name appears therein. Moreover, the age-old rule is that the person who has a Torrens title over a land is entitled to possession thereof.14 Further, respondent's argument that petitioners are no longer the owners of a portion of the subject land because of the sale in her favor is a collateral attack on the title of the petitioners, which is not allowed. The validity of petitioners' certificate of title cannot be attacked by respondent in this case for ejectment. Under Section 48 of Presidential Decree No. 1529, a certificate of title shall not be subject to collateral attack. It cannot be altered, modified or canceled, except in a direct proceeding for that purpose in accordance with law. The issue of the validity of the title of the petitioners can only be assailed in an action expressly instituted for that purpose. Whether or not the respondent has the right to claim ownership over the property is beyond the power of the trial court to determine in an action for unlawful detainer.15 In Rodriguez v. Rodriguez,16 citing the case of Co v. Militar,17 the Court held that: [T]he Torrens System was adopted in this country because it was believed to be the most effective measure to guarantee the integrity of land titles and to protect their indefeasibility once the claim of ownership is established and recognized. It is settled that a Torrens Certificate of title is indefeasible and binding upon the whole world unless and until it has been nullified by a court of competent jurisdiction. Under existing statutory and decisional law, the power to pass upon the validity of such certificate of title at the first instance properly belongs to the Regional Trial Courts in a direct proceeding for cancellation of title. As the registered owner, petitioner had a right to the possession of the property, which is one of the attributes of ownership. x x x Anent the issue on laches, the CA's ruling that petitioners' long inaction to assert their rights over the subject land bars them from recovering the same is without basis. Also, the doctrine invoked by the appellate court that a registered owner may loose his right to recover its possession by reason of laches is not applicable here. Laches is the failure or neglect, for an unreasonable and unexplained length of time, to do that which, by exercising due diligence, could or should have been done earlier; it is negligence or omission to assert a right within a reasonable time, warranting the presumption that the party entitled to assert it either has abandoned or declined to assert it.18 There is no absolute rule as to what constitutes laches or staleness of demand; each case is to be determined according to its particular circumstances, with the question of laches addressed to the sound discretion of the court. Because

laches is an equitable doctrine, its application is controlled by equitable considerations and should not be used to defeat justice or to perpetuate fraud or injustice.19 Respondent first acquired possession of the subject lot by mere tolerance. From 1945 until the filing of the complaint for ejectment in 1997, the nature of that possession has never changed. Petitioners allowed the respondent to possess the property with the knowledge that the respondent will vacate the same upon demand. Hence, until such demand to vacate was communicated by the petitioners to the respondent, petitioners are not required to do any act to recover the subject land, precisely because they knew of the nature of the respondent's possession, i.e., possession by mere tolerance. Thus, it cannot be said that petitioners are guilty of failure or neglect to assert a right within a reasonable time. Further, after the petitioners gave a demand letter to the respondent giving the latter until November 30, 1996 to vacate the subject premises, which respondent failed to heed, they immediately filed a complaint before the barangay authorities and, thereafter, lodged an ejectment case before the MCTC on February 24, 1997. In sum, We find that petitioners are not guilty of laches as would bar their claim to the property in question. In contrast, respondent, who is claiming that a portion of the property was sold to her in 1962, has herself failed within a long period of time to have that portion transferred in her name. Respondent had to wait for almost 35 years since 1962, and were it not for the filing of the ejectment suit in 1997, she would not have bothered to assert her rights under the alleged sale. Respondent's failure to assert that right only goes to prove that no sale ever transpired between the parties. Moreover, as the registered owners, petitioners' right to eject any person illegally occupying their property is not barred by laches. In Gaudencio Labrador, represented by Lulu Labrador Uson, as Attorney-in-Fact v. Spouses Ildefonso Perlas and Pacencia Perlas and Spouse Rogelio Pobre and Melinda Fogata Pobre,20 the Court held that: x x x As a registered owner, petitioner has a right to eject any person illegally occupying his property. This right is imprescriptible and can never be barred by laches. In Bishop v. Court of Appeals, we held, thus: As registered owners of the lots in question, the private respondents have a right to eject any person illegally occupying their property. This right is imprescriptible. Even if it be supposed that they were aware of the petitioners' occupation of the property, and regardless of the length of that possession, the lawful owners have a right to demand the return of their property at any time as long as the possession was unauthorized or merely tolerated, if at all. This right is never barred by laches. Since respondent's occupation of the subject lot is by mere tolerance or permission of the petitioners, without any contract between them, respondent is bound by an implied promise that she will vacate the same upon demand, failing which a summary action for ejectment is the proper remedy against her.21 In respondent's Answer filed before the MCTC, she claimed that since she was able to build a structure on the subject lot with the prior permission from the owner, she is a builder in good faith and thus entitled to be reimbursed the necessary and useful expenses under Articles 546 and 548 of the Civil Code of the Philippines. Without such reimbursement, she has the right of retention over the property and she cannot just be ejected from the premises. Respondent's argument does not hold water. Since respondent's occupation of the subject property was by mere tolerance, she has no right to retain its possession under Article 448 of the Civil Code. She is aware that her tolerated possession may be terminated any time and she cannot be considered as builder in good faith.22 It is well settled that both Article 44823 and Article 54624 of the

New Civil Code, which allow full reimbursement of useful improvements and retention of the premises until reimbursement is made, apply only to a possessor in good faith, i.e., one who builds on land with the belief that he is the owner thereof. Verily, persons whose occupation of a realty is by sheer tolerance of its owners are not possessors in good faith.25 At the time respondent built the improvements on the premises in 1945, she knew that her possession was by mere permission and tolerance of the petitioners; hence, she cannot be said to be a person who builds on land with the belief that she is the owner thereof. Respondent's reliance on her payment of realty taxes on the property is unavailing. She started paying taxes only in 1984 despite her claim that she bought the property in 1962. Further, aside from the rule that tax declarations and corresponding tax receipts cannot be used to prove title to or ownership of a real property inasmuch as they are not conclusive evidence of the same,26 the RTC found that although the payment for said taxes were received from respondent, the declared owner was petitioner Victoria. It must be stressed, however, that the court's adjudication of ownership in an ejectment case is merely provisional, and affirmance of the RTC's decision would not bar or prejudice an action between the same parties involving title to the property, if and when such action is brought seasonably before the proper forum.27 WHEREFORE, the petition is GRANTED. The Decision and the Resolution of the Court of Appeals, dated April 6, 2001 and February 15, 2002, respectively, in CA-G.R. SP No. 49994, affirming the Decision of the 2nd Municipal Circuit Trial Court in Civil Case No. 1875, are REVERSED and SET ASIDE. The Decision of the Regional Trial Court of Santa Cruz, Laguna, Branch 26, in Civil Case No. SC-3580, is REINSTATED. SO ORDERED.