Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-31346 December 28, 1929

PO SUN TUN, plaintiff-appellant,
vs.
W. S. PRICE and THE PROVINCIAL GOVERNMENT OF LEYTE, defendants-appellees.

Vicente Sotto for appellant.

Kapunan and Kapunan for appellee Price.
Attorney-General Jaranilla for the Provincial Government of Leyte.

MALCOLM, J.:

The undisputed facts in this case are the following:

On November 29, 1921, Gabino Barreto P. Po Ejap was the owner of a certain parcel of land
situated in the municipality of Tacloban, Province of Leyte. On the date mentioned, he sold the land
to Po Tecsi for the sum of P8,000. On June 21, 1923, Po mortgaged the land to W. S. Price in the
amount of P17,000. The mortgage was duly noted in the office of the register of deeds of Leyte on
August 18th of the same year. On December 17, 1924, Po executed a deed of sale of the land to
Price in consideration of P17,000. This sale was recorded with the register of deeds on January 22,
1925. Price in turn, with the consent of his wife, sold the land on February 16, 1927, to the Province
of Leyte for P20,570.

In connection with the above facts, it should further be stated that when the Tacloban Cadastral
Case was before the courts in 1918, this land was claimed by Gabino Barreto P. Po Ejap acting
through his agent, Po Tecsi, but subsequently on motion the names of Mr. and Mrs. Price were
substituted as claimants. On March 17, 1927, the original certificate of title was issued in the name
of the spouses Price. Later, the proper transfer certificate of title was provided for the Province of
Leyte.

Returning again to the original date of November 29, 1921, on that date Po Tecsi gave a general
power of attorney including the right to sell to Gabino Barreto P. Po Ejap. Acting under this power,
Gabino sold the land on November 22, 1923, for P8,000 to Jose H. Katigbak. On this document
there appears on the upper right-hand margin the following: "Register of Deeds, Received, Dec. 15,
1923, Province of Leyte." In turn Jose H. Katigbak transferred the property to Po Sun Tun on
October 12, 1927, for P8,000.

Further explaining the relationship of the parties, it should be taken into consideration that Gabino
Barreto P. Po Ejap and Po Tecsi, between whom was the original transaction and between whom
was the provision made for the power of attorney, are brothers. Gabino Barreto P. Po Ejap and Po
Sun Tun, the first the original vendor, and the latter the person to whom the property eventually
returned pursuant to the power of attorney, are father and son. As to the possession of the property,
it has been under the control of Price and the Provincial Government of Leyte and has not been
under the material control of Po Sun Tun.

Predicated on these facts, Po Sun Tun began an action in the Court of First Instance of Leyte to gain
the possession of the property and to secure damages in the amount of P3,600. Judge Causing
sitting in first instance decided the case on the pleadings and the evidence, absolving the
defendants W. S. Prince and the Province of Leyte from the complaint, with costs against the
plaintiff. The principal error assigned on appeal by the plaintiff in connection with this judgment is
that the trial judge erred in finding that the deed, Exhibit D, in favor of Jose H. Katigbak had not been
registered in the corresponding registry of property.

The provision of law relied upon by the trial judge as authority for his decision was the second
paragraph of article 1473 of the Civil Code, which provides that if the same thing should have been
sold to different vendees, "Si fuere inmueble, la propiedad pertenecera al adquirente que antes la
haya inscrito en el Registro," or, as translated by Fisher, "Should it be real property, it shall belong to
the purchaser who first recorded it in the Registry of Deeds." Recalling that the deed of Po Tecsi to
Price was duly registered on January 22, 1925, and that thereafter a Torrens title was obtained in
the name of Price, and that the deed of Gabino Barreto P. Po Ejap to Jose H. Katigbak has noted on
it "Register of Deeds, Received, Dec. 15, 1923, Province of Leyte," can it be said that within the
meaning of the law this latter deed was ever recorded?

We are clearly of the opinion that it was not. The law and the authorities are overwhelmingly
demonstrative of this statement. The mere presentation to the office of the register of deeds of a
document on which acknowledgment of receipt is written is not equivalent to recording or registering
the real property. Escriche says that registration, in its juridical aspect, must be understood as the
entry made in a book or public registry of deeds. (See Altavas, Land Registration in the Philippine
Islands, 2d ed., p. 151.) Soler and Castello in their Diccionario de Legislacion Hipotecaria y Notarial,
vol. II, p. 185, state:

Registration in general, as the law uses the word, means any entry made in the books of the
Registry, including both registration in its ordinary and strict sense, and cancellation,
annotation, and even the marginal notes. In its strick acceptation, it is the entry made in the
Registry which records solemnly and permanently the right of ownership and other real
rights.

The American authorities conform in this respect to the Spanish authorities for the term "To register"
it has been said that it means to "enter in a register; to record formally and distinctly; to enroll; to
enter in a list" (Reck vs. Phoenix Ins. Co. [1889], 7 N. Y. Suppl., 492; 54 Hun., 637;
Harriman vs. Woburn Electric Light Co. [1895], 163 Mass., 85). If any doubt remained on the subject,
it would be dispelled by turning to Act No. 2837 amendatory of section 194 of the Administrative
Code, and recalling that it is therein provided that "No instrument or deed establishing, transmitting,
acknowledging, modifying or extinguishing rights with respect to real estate not registered under the
provisions of Act Numbered Four hundred and ninety-six, entitled "The Land Registration," and its
amendments, shall be valid, except as between the parties thereto, until such instrument or deed
has been registered, in the manner hereinafter prescribed, in the office of the register of deeds for
the province or city where the real estate lies." (There follows in the law the requirements regarding
the books which it is the duty of the register of deeds to keep and use.)

It results as a matter of course since the deed made by Gabino Barreto P. Po Ejap in favor of Jose
H. Katigbak was not only not first recorded in the registry of deeds but never legally so recorded, and
since the purchaser who did record his deed was Price, who secured a Torrens title and transferred
the same to the Province of Leyte, that Po Sun Tun, the holder of a defeasible title, has no legal
rights as against Price and the Province of Leyte, the holders of indefeasible titles. Also, if
necessary, it could be ruled that within the meaning of section 38 of the Land Registration Law, Price
and the Province of Leyte are innocent purchasers for value of the disputed property.

Finding the judgment appealed from to be correct from all points of view, it will be affirmed, with the
costs of this instance against the appellant.

Avanceña, C.J., Johnson, Street, Ostrand, Johns, Romualdez and Villa-Real, JJ., concur.
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. L-20611               May 8, 1969

AURELIO BALBIN and FRANCISCO BALBIN, petitioners,

vs.
REGISTER OF DEEDS OF ILOCOS SUR, respondent.

Vicente Llanes for petitioners.

Office of the Solicitor General for respondent.
Manuel A. Argel for respondents third parties affected.

MAKALINTAL, J.:

Appeal from the resolution of the Commissioner of Land Registration in LRC Consulta No. 366.

On November 15, 1961 petitioners presented to the register of deeds of Ilocos Sur a duplicate copy
of the registered owner's certificate of title (OCT No. 548) and an instrument entitled "Deed of
Donation inter-vivos," with the request that the same be annotated on the title. Under the terms of
the instrument sought to be annotated one Cornelio Balbin, registered owner of the parcel of land
described in OCT No. 548, appears to have donated inter-vivos an undivided two-thirds (²/³) portion
thereof in favor of petitioners. The entire area of the land is 11.2225 hectares.

The register of deeds denied the requested annotation for being "legally defective or otherwise not
sufficient in law." It appears that previously annotated in the memorandum of encumbrances on the
certificate are three separate sales of undivided portions of the land earlier executed by Cornelio
Balbin in favor of three different buyers. The pertinent entries read:

Entry No. 5658.           Sales.

Sale for the sum of P400.00 executed by the registered owner, conveying an undivided portion of an
area of 3,710 square meters only in favor of Florentino Gabayan, this Original Certificate of Title No.
548 is hereby cancelled with respect to said area of 3,710 square meters and in lieu thereof, the
name of the vendee ... is hereby substituted to succeed to all rights, participation in interest of the
vendor. ...

Date of Instrument:           January 25, 1955, ...

xxx     xxx     xxx

Entry No. 5659.           Sale of portion.

Sale for the sum of P100.00 executed by the registered owner, conveying an undivided portion of an
area of 16,713 square meters in favor of Roberto Bravo, this Original Certificate of Title No. 548 is
hereby cancelled with respect to said undivided portion ... and in lieu thereof the name of the vendee
... is hereby substituted to succeed to all rights, participation and interest of the vendor ...
 Date of Instrument:           June 9, 1953. ...

Entry No. 5660.           Sale of portion.

Sale for the sum of P400.00 executed by the registered owner, conveying an undivided
portion of an area of 15,000 square meters in favor of Juana Gabayan, this Certificate of
Title No. 548 is hereby cancelled with respect to said undivided portion ... and in lieu thereof
the name of the vendee ... is hereby substituted to succeed to all rights, participation and
interest of the vendor ...

Date of Instrument:           February 12, 1952. ...

The final part of the annotations referring to the abovementioned sales contains an additional
memorandum stating that "three co-owner's duplicate certificates of title No. 548 have been issued
(by the register of deeds of Ilocos Sur) in the name of Florentino Gabayan, Roberto Bravo and
Juana Gabayan upon verbal request of Mr. Andres Cabeldo, Notary Public of Caoayan, I. Sur, for
and in the name of the vendees, this 5th day of January, 1956 at Vigan, I. Sur." Mainly because
these three other co-owner's copies of the certificate of title No. 548 had not been presented by
petitioners, the Register of Deeds refused to make the requested annotation.

Unsatisfied, petitioners referred the matter to the Commissioner of Land Registration, who
subsequently upheld the action of the Register of Deeds in a resolution dated April 10, 1962. With
respect to the principal point in controversy, the Commissioner observed:

(1) It appears that the donor is now merely a co-owner of the property described in the
Original Certificate of Title No. 548, having previously sold undivided portions thereof on
three different occasions in favor of three different buyers. Consequently, aside from the
owner's duplicate issued to Cornelio Balbin, there are now three co-owner's duplicates which
are presumably in the possession of the three buyers. Accordingly, in addition to the owner's
duplicate of Original Certificate of Title No. 548, the three co-owner's duplicates must
likewise be surrendered. The claim of counsel for the donees that the issuance of the three
co-owner's duplicates was unauthorized is beside the point. Unless and until a court of
competent jurisdiction rules to the contrary, these titles are presumed to have been lawfully
issued.lawphi1 .ñet

Without presenting those three (3) other duplicates of the title, petitioners would want to compel
annotation of the deed of donation upon the copy in their possession, citing section 55 of Act 496,
which provides that "the production of the owner's duplicate certificate of title whenever any
voluntary instrument is presented for registration shall be conclusive authority from the registered
owner to the register of deeds to make a memorandum of registration in accordance with such
instrument." Under this provision, according to petitioners, the presentation of the other copies of the
title is not required, first, because it speaks of "registered owner" and not one whose claim to or
interest in the property is merely annotated on the title, such as the three vendees-co-owners in this
case; and secondly, because the issuance of the duplicate copies in their favor was illegal or
unauthorized.

We find no merit in petitioners' contention. Section 55, supra, obviously assumes that there is only
one duplicate copy of the title in question, namely, that of the registered owner himself, such that its
production whenever a voluntary instrument is presented constitutes sufficient authority from him for
the register of deeds to make the corresponding memorandum of registration. In the case at bar, the
three other copies of the title were in existence, presumably issued under section 43  * of Act 496. As
correctly observed by the Land Registration Commissioner, petitioners' claim that the issuance of
those copies was unauthorized or illegal is beside the point, its legality being presumed until
otherwise declared by a court of competent jurisdiction. There being several copies of the same title
in existence, it is easy to see how their integrity may be adversely affected if an encumbrance, or an
outright conveyance, is annotated on one copy and not on the others. The law itself refers to every
copy authorized to be issued as a duplicate of the original, which means that both must contain
identical entries of the transactions, particularly voluntary ones, affecting the land covered by the
title. If this were not so, if different copies were permitted to carry differing annotations, the whole
system of Torrens registration would cease to be reliable.

One other ground relied upon by the Land Registration Commissioner in upholding the action taken
by the Register of Deeds of Ilocos Sur is that since the property subject of the donation is presumed
conjugal, that is, property of the marriage of the donor, Cornelio Balbin, and his deceased wife,
Nemesia Mina, "there should first be a liquidation of the partnership before the surviving spouse may
make such a conveyance." This legal conclusion may appear too general and sweeping in its
implications, for without a previous settlement of the partnership a surviving spouse may dispose of
his aliquot share or interest therein — subject of course to the result of future liquidation.
Nevertheless, it is not to be denied that, if the conjugal character of the property is assumed, the
deed of donation executed by the husband, Cornelio Balbin, bears on its face an infirmity which
justified the denial of its registration, namely, the fact that the two-thirds portion of said property
which he donated was more than his one-half share, not to say more than what remained of such
share after he had sold portions of the same land to three other parties.

It appears that there is a case pending in the Court of First Instance of Ilocos Sur (CC No. 2221),
wherein the civil status of the donor Cornelio Balbin and the character of the land in question are in
issue, as well as the validity of the different conveyances executed by him. The matter of registration
of the deed of donation may well await the outcome of that case, and in the meantime the rights of
the interested parties could be protected by filing the proper notices of lis pendens.

IN VIEW OF THE FOREGOING, the decisions of the Register of Deeds of Ilocos Sur and that of the
Commissioner of Land Registration are affirmed. No pronouncement as to costs.

Reyes, J.B.L., Dizon, Zaldivar, Sanchez, Fernando, Teehankee and Barredo, JJ., concur.
Capistrano, J., took no part.
Concepcion, C.J., and Castro, J., are on leave.
 Republic of the Philippines
SUPREME COURT
Manila

THIRD DIVISION

G.R. No. L-46935 December 21, 1987

SPOUSES GREGORIO DE GUZMAN, JR. and CORAZON QUINTO petitioners,

vs.
HON. COURT OF APPEALS and RAYMUNDA RINGOR QUIRIMIT, respondents.

FERNAN, J.:

This is a petition for review of the decision * of the Court of Appeals dated March 3, 1977 in CA-G.R. No. 52746-R entitled
"Spouses Gregorio de Guzman, Jr. and Corazon Quinto, Plaintiffs-Appellees, versus Raymunda Ringor Quirmit, Defendant-Appellant,"
declaring herein private respondent Raymunda Ringor Quirmit owner of the land subject of litigation.

Deogracias Queriza was the original owner of a parcel of unregistered residential land containing an
area of 745 square meters, more or less, situated at San Fabian, Pangasinan. On July 20, 1957, he
executed a Deed of Pacto de Retro sale over said land in favor of his niece, private respondent
Quirmit for the sum of P 500.00, with the express stipulation that the "vendor a retro may exercise
the right of repurchase within 5 years from the execution of these presents and upon failure to take
advantage of the right herein granted him, then this contract shall acquire the character of absolute,
irrevocable and consummated sale. 1 Private respondent did not register the Deed of Pacto de Retro Sale, but took
possession of the land by building her house on a portion thereof.

It appears that subsequently, Deogracias Queriza mortgaged the same parcel of land to the
Manaoag Rural Bank, from which it was allegedly redeemed on his behalf by his nephew Miguel
Queriza on November 4, 1963. Supposedly for this reason, on April 26, 1967, Deogracias Queriza,
without having exercised his right to repurchase under the Pacto de Retro Sale, executed over said
parcel of land and two others, a Deed of "Rimunitary [sic] Inter-vivos Donation   in favor of Miguel 2

Queriza, who thereafter declared the land in his name for taxation purposes and registered the Deed
of Donation on August 8, 1967 in the Register of Deeds of Pangasinan.

On December 8, 1970, Miguel Queriza sold the land to petitioners spouses Gregorio de Guzman, Jr.
and Corazon Quinto. The Deed of Sale was registered on December 9, 1970 and the tax declaration
placed under their names.

In January, 1971, petitioners sent private respondent written notice to vacate the land in question,
and upon refusal by the latter to do so, instituted on February 7, 1971, Civil Case No. D-2662 for
Quieting of Title and Recovery of Possession before the then Court of First Instance of Pangasinan,
Fourth Branch.

After trial, the court rendered judgment on January 19, 1973, declaring petitioners owners of the land
in question and ordering private respondent to vacate the premises, to pay petitioners the total sum
of P1,000.00 for damages and attorney's fees and to pay the cost of suit. It ruled that the Pacto de
Retro Sale was only a mortgage and that the Deed of Donation in favor of Miguel Queriza was valid.
On Appeal by private respondent, the Court of Appeals reversed the decision of the trial court.
Applying Article 1544 of the New Civil Code, the appellate court held that private respondent had a
preferential right to the land as against petitioners who were purchasers in bad faith. It also found the
transaction between Deogracias Queriza and private respondent to be what it purported to be — a
pacto de retro sale and not an equitable mortgage.

Petitioners moved for a reconsideration of the appellate court's decision and upon denial thereof,
took the present recourse.

Petitioners contend that the appellate court erred in: [a] resolving the case under Article 1544 of the
New Civil Code when such provision was never cited nor invoked by private respondent in the
court a quo [b] not holding that the pacto de retro sale was an equitable mortgage in accordance
with Article 1602 of the said Code; [c] not applying the rule that as between two innocent parties, he
who was negligent should bear the loss; and, [d] in denying their motion for reconsideration.

Petitioners theorize that since the trial court did not cite Article 1544 of the New Civil Code in its
decision, the appellate court is precluded from applying the same, for in so doing it, in effect,
entertained an issue not raised in the lower court and allowed private respondent to change her
theory on appeal.

This theory is both right and wrong. Right because the appellate court erred in applying Article 1544
of the New Civil Code relating to double sales to this case which involves an earlier pacto de retro
sale of an unregistered land and the subsequent donation thereof by the vendor a retro. And wrong
because although the appellate court applied the wrong provision of law, it did not in so doing
entertain an issue not raised in the lower court nor allow private respondent to change her theory on
appeal. Precisely, the issue involved in an action for quieting of title and recovery of possession is
who, between the parties, has a better right to the property in dispute, and this is the very issue
resolved by the appellate court in the decision under consideration. Thus, it is incorrect to say that
this issue was never raised in the trial court.

As to the alleged change of theory on appeal by private respondent, an examination of the answer
filed by private respondent in the trial court reveals that she interposed two defenses: [a] the
supposed invalidity of the Deed of Donation in favor of Miguel Queriza by reason of fraud, undue
influence or mental incapacity of the donor at the time of the donation; and, [b] knowledge of
petitioners of the pacto de retro sale in her favor prior to their purchase of the land in question from
Miguel Queriza.   This being the case, it is equally inaccurate to say that she shifted her theory from
3

"senility of donor Deogracias Queriza to the bad faith of the vendees spouses Gregorio de Guzman,
Jr. and Corazon Quinto ... to avail of Article 1544 of the New Civil Code.  4

Petitioners further attribute error to the appellate court in not sustaining the lower court's finding that
the pacto de retro sale was an equitable mortgage. After a thorough review of the records, We are
as equally convinced as the appellate court that the transactions between Deogracias Queriza and
private respondent was a pacto de retro sale. The consideration of P500.00 paid by private
respondent in 1957 was not unusually inadequate, considering that the land had an assessed value
of only P380.00 at the time of Miguel Queriza's sale thereof to petitioners in 1971.   Also, the finding
5

of the trial court, allegedly on the admission of private respondent herself that it was the vendor a
retro who appropriated the fruits of the land after the sale is contrary to the evidence on record
because in her testimony, private respondent declared that it was she who enjoyed the products of
said land.   Moreover, private respondent explained why she did not consolidate her ownership over
6

the land in question, thus:

RE-DIRECT BY
 ATTY. BELEN:

Q Mrs. Quirmit, will you please tell the Court why you did not
consolidate your ownership on the land in question after Deogracias
failed to redeem the property?

A Because Deogracias told me not to worry because he has no child

to question me.

xxxxxxxxx

Q You testified you did not consolidate your ownership over the land
in question because your uncle told you there is nothing to worry
about because he has no children to challenge, is that correct?

A Yes, sir.

Q What year did he tell you that?

A All the time he told me that.

Q That was after the lapse of 5 years from the date of the execution
of the pacto de retro, is that correct?

A All the time he told me and he said, 'Never mind nobody will trouble
you. "I have no heirs to inherit.

RE-CROSS EXAMINATION

BY ATTY. ANCHETA:

Q He use to say that even after 1965, is that correct?

A Yes, sir.

That is all.  7

Ordinarily, such explanation would sound lame and flimsy. Considering however the close blood
relationship between Deogracias Queriza and private respondent as well as the degree of trust and
confidence traditionally accorded by Filipinos to their relatives, particularly in this case where private
respondent had reason to rely on the words of Deogracias Queriza, the latter being a Notary Public,
We find such explanation satisfactory.

Ironically, the rule relied upon by petitioners that as between two innocent parties, he who was
negligent should bear the loss, cannot apply to this case for the simple reason that it is petitioners
themselves who cannot be considered innocent purchasers. As found by the appellate court:

In the instant case, it can hardly be said that plaintiffs-appellees [herein petitioners]
were acting in good faith when they caused their Deed of Sale to be registered with
the Registry of Deeds. In the first place, when the sale was consummated in favor of
appellee, appellant was actually residing in a house standing right on the land in
question, and appellees were living not far from appellant. In the second place, even
before appellees bought the land, appellant had already confronted them and
informed them that the land had already been sold to her. [t.s.n., p. 8, July 7, 1972]
Appellees were thus forewarned; the least they could do was to inquire from their
vendor Miguel Queriza and from the other relatives of the original owner, Deogracias
Queriza, by what right or title appellant had her house on the lot she was occupying.
But it seems that appellees did not bother to do this and merely relied upon the Deed
of Donation made in favor of Miguel Queriza. Had appellees exercised due diligence
in inquiring into the right or title of the appellant who was residing in the property they
would doubtless have found out that appellant was occupying it by virtue of the Pacto
de Retro Sale of July 20, 1957, which apparently had become an absolute sale on
July 20, 1962 by express provision thereof and the apparent failure of Deogracias
Queriza to redeem the property.

Although it may be true, as testified by appellee Gregorio de Guzman that he noticed

that there was a house standing on the property, and that when he went there
nobody was in the house, and that he decided to buy the property because of the
advice of the Notary Public that its title was clean, We are of the considered opinion
that this was not sufficient to make appellees purchasers in good faith. If de Guzman
went once to the house and found nobody there, he could have gone back at least
once more, and if still there was no one he could have inquired from the neighbors if
any one resided therein. Besides, it is not disputed that appellees live near the
property in question and surely they could not fail to notice whether the house was
tenanted or not. The information of the Notary Public could hardly be relied upon,
considering that the property is unregistered and therefore, there was really no
certificate of title to speak of which the notary is alleged to have attested to the
"cleanness" of.

The failure of appellees to take the ordinary precautions which a prudent man would
have taken under the circumstances, specially in buying a piece of land in
the actual visible and public possession of another person, other than the vendor,
constitutes gross negligence amounting to bad faith.

In this connection, it has been held that where, as in this case, the
land sold is in the possession of a person other than the vendor, the
purchaser is required to go beyond the certificate of title and mae
[sic) inquiries concerning the rights of the actual possessor. Failure to
do so would make him a purchaser in bad faith. [Incala vs. Mendoza,
CA-G.R. No. 13677-R, November 9, 1965; De Jesus vs. Revilla, CA-
G. R. No. 13562-R, October 5, 1965; Martelino vs. Manikan CA-G.R.
No. 32792-R, June 22, 1956].

xxx xxx xxx

"One who purchases real property which is in the actual possession

of another should, at least make some inquiry concerning the right of
those in possession. The actual possession by other than the vendor
should at least put the purchaser upon inquiry. He can scarely, in the
absence of such inquiry, be regarded as a bona fide purchaser as
against such possessors. [Conspecto vs. Fruto, 31 Phil. 144] "
 xxx xxx xxx

Appellant has been and continues to be in actual possession of the property, and her
deed of pacto de retro sale dates back to 1957 while the deed of sale in favor of
appellees was executed in 1970; and there is no showing that appellant's possession
and her pacto de retro sale were done in bad faith.  8

While the appellate court misapplied Article 1544 of the Civil Code in this case, its ultimate
conclusion that private respondent should be declared owner of the land in question is correct. As
stated earlier, the transaction between Deogracias Queriza and private respondent was a true pacto
de retro sale. The essence of a pacto de retro sale is that title and ownership of the property sold are
immediately vested in the vendee a retro, subject to the resolutory condition of repurchase by the
vendor a retro within the stipulated period. Failure thus of the vendor a retro to perform said
resolutory condition vests upon the vendee by operation of law absolute title and ownership over the
property sold   and failure of the vendee a retro to consolidate his title under Article 1607 of the Civil
9

Code does not impair such title or ownership for the method prescribed thereunder is merely for the
purpose of registering the consolidated title. 10 In the case at bar, absolute ownership of the land in question was vested
on private respondent in 1962 upon failure of Deogracias Queriza to repurchase said land. Thus, in 1967 when he allegedly donated the
same to Miguel Queriza, he was no longer the owner thereof. Settled is the rule that a donor cannot lawfully convey what is not his
property. 11 There being no title to the property which Deogracias Queriza could convey to Miguel Queriza, it necessarily follows that no title
to the property could be conveyed by the latter to petitioners. The registration of the deeds under which they claimed to have acquired
ownership of the land in dispute was a useless ceremony. Registration does not vest title. It is not a mode of acquiring ownership but is
merely evidence of such title over a particular property. It does not give the holder any better title than what he actually has. Besides,
petitioners' registration of their deed of sale was done in bad faith. The effect is that it is as if no registration was made at all in so far as
private respondent is concerned. Conversely, actual knowledge of petitioners of the sale to private respondent amounted to registration
thereof. 12

WHEREFORE, the instant petition is hereby DENIED. The decision of the Court of Appeals under
review declaring private respondent Raymunda Ringor Quirmit owner of the land in dispute is
affirmed, with costs against petitioners.

SO ORDERED.

Gutierrez, Jr., Feliciano, Bidin and Cortes, JJ., concur.

G.R. No. 154409             June 21, 2004

Spouses NOEL and JULIE ABRIGO, petitioners,

vs.
ROMANA DE VERA, respondent.

DECISION

PANGANIBAN, J.:

Between two buyers of the same immovable property registered under the Torrens system, the law
gives ownership priority to (1) the first registrant in good faith; (2) then, the first possessor in good
faith; and (3) finally, the buyer who in good faith presents the oldest title. This provision, however,
does not apply if the property is not registered under the Torrens system.

The Case

Before us is a Petition for Review1 under Rule 45 of the Rules of Court, seeking to set aside the
March 21, 2002 Amended Decision2 and the July 22, 2002 Resolution3 of the Court of Appeals (CA)
in CA-GR CV No. 62391. The Amended Decision disposed as follows:

"WHEREFORE, the dispositive part of the original D E C I S I O N of this case, promulgated

on November 19, 2001, is SET ASIDE and another one is entered AFFIRMING in part
and REVERSING in part the judgment appealed from, as follows:

"1. Declaring [Respondent] Romana de Vera the rightful owner and with better right
to possess the property in question, being an innocent purchaser for value therefor;

"2. Declaring Gloria Villafania [liable] to pay the following to [Respondent] Romana
de Vera and to [Petitioner-]Spouses [Noel and Julie] Abrigo, to wit:

As to [Respondent] Romana de Vera:

1. ₱300,000.00 plus 6% per annum as actual damages;

2. ₱50,000.00 as moral damages;

3. ₱50,000.00 as exemplary damages;

4. ₱30,000.00 as attorney’s fees; and

5. Cost of suit.

As to [Petitioner-]Spouses [Noel and Julie] Abrigo:

1. ₱50,000.00 as moral damages;

2. ₱50,000.00 as exemplary damages;

3. ₱30,000.00 as attorney’s fees;

 4. Cost of suit."4

The assailed Resolution denied reconsideration.

The Facts

Quoting the trial court, the CA narrated the facts as follows:

"As culled from the records, the following are the pertinent antecedents amply summarized by the
trial court:

‘On May 27, 1993, Gloria Villafania sold a house and lot located at Banaoang, Mangaldan,
Pangasinan and covered by Tax Declaration No. 1406 to Rosenda Tigno-Salazar and Rosita Cave-
Go. The said sale became a subject of a suit for annulment of documents between the vendor and
the vendees.

‘On December 7, 1993, the Regional Trial Court, Branch 40 of Dagupan City rendered judgment
approving the Compromise Agreement submitted by the parties. In the said Decision, Gloria
Villafania was given one year from the date of the Compromise Agreement to buy back the house
and lot, and failure to do so would mean that the previous sale in favor of Rosenda Tigno-Salazar
and Rosita Cave-Go shall remain valid and binding and the plaintiff shall voluntarily vacate the
premises without need of any demand. Gloria Villafania failed to buy back the house and lot, so the
[vendees] declared the lot in their name.

‘Unknown, however to Rosenda Tigno-Salazar and Rosita Cave-Go, Gloria Villafania obtained a free
patent over the parcel of land involved [on March 15, 1988 as evidenced by OCT No. P-30522]. The
said free patent was later on cancelled by TCT No. 212598 on April 11, 1996.

‘On October 16, 1997, Rosenda Tigno-Salazar and Rosita Cave-Go, sold the house and lot to the
herein [Petitioner-Spouses Noel and Julie Abrigo].

‘On October 23, 1997, Gloria Villafania sold the same house and lot to Romana de Vera x x x.
Romana de Vera registered the sale and as a consequence, TCT No. 22515 was issued in her
name.

‘On November 12, 1997, Romana de Vera filed an action for Forcible Entry and Damages against
[Spouses Noel and Julie Abrigo] before the Municipal Trial Court of Mangaldan, Pangasinan
docketed as Civil Case No. 1452. On February 25, 1998, the parties therein submitted a Motion for
Dismissal in view of their agreement in the instant case that neither of them can physically take
possession of the property in question until the instant case is terminated. Hence the ejectment case
was dismissed.’5

"Thus, on November 21, 1997, [petitioners] filed the instant case [with the Regional Trial Court of
Dagupan City] for the annulment of documents, injunction, preliminary injunction, restraining order
and damages [against respondent and Gloria Villafania].

"After the trial on the merits, the lower court rendered the assailed Decision dated January 4, 1999,
awarding the properties to [petitioners] as well as damages. Moreover, x x x Gloria Villafania was
ordered to pay [petitioners and private respondent] damages and attorney’s fees.

"Not contented with the assailed Decision, both parties [appealed to the CA]." 6
 Ruling of the Court of Appeals

In its original Decision promulgated on November 19, 2001, the CA held that a void title could not
give rise to a valid one and hence dismissed the appeal of Private Respondent Romana de
Vera.7 Since Gloria Villafania had already transferred ownership to Rosenda Tigno-Salazar and
Rosita Cave-Go, the subsequent sale to De Vera was deemed void.

The CA also dismissed the appeal of Petitioner-Spouses Abrigo and found no sufficient basis to
award them moral and exemplary damages and attorney’s fees.

On reconsideration, the CA issued its March 21, 2002 Amended Decision, finding Respondent De
Vera to be a purchaser in good faith and for value. The appellate court ruled that she had relied in
good faith on the Torrens title of her vendor and must thus be protected. 8

Hence, this Petition.9

Issues

Petitioners raise for our consideration the issues below:

"1. Whether or not the deed of sale executed by Gloria Villafania in favor of [R]espondent
Romana de Vera is valid.

"2. Whether or not the [R]espondent Romana de Vera is a purchaser for value in good faith.

"3. Who between the petitioners and respondent has a better title over the property in
question."10

In the main, the issues boil down to who between petitioner-spouses and respondent has a better
right to the property.

The Court’s Ruling

The Petition is bereft of merit.

Main Issue:

Better Right over the Property

Petitioners contend that Gloria Villafania could not have transferred the property to Respondent De
Vera because it no longer belonged to her.11 They further claim that the sale could not be validated,
since respondent was not a purchaser in good faith and for value. 12

Law on Double Sale

The present case involves what in legal contemplation was a double sale. On May 27, 1993, Gloria
Villafania first sold the disputed property to Rosenda Tigno-Salazar and Rosita Cave-Go, from whom
petitioners, in turn, derived their right. Subsequently, on October 23, 1997, a second sale was
executed by Villafania with Respondent Romana de Vera.
Article 1544 of the Civil Code states the law on double sale thus:

"Art. 1544. If the same thing should have been sold to different vendees, the ownership shall
be transferred to the person who may have first taken possession thereof in good faith, if it
should be movable property.

"Should it be immovable property, the ownership shall belong to the person acquiring it who
in good faith first recorded it in the Registry of Property.

"Should there be no inscription, the ownership shall pertain to the person who in good faith
was first in the possession; and, in the absence thereof, to the person who presents the
oldest title, provided there is good faith."

Otherwise stated, the law provides that a double sale of immovables transfers ownership to (1) the
first registrant in good faith; (2) then, the first possessor in good faith; and (3) finally, the buyer who
in good faith presents the oldest title. 13 There is no ambiguity in the application of this law with
respect to lands registered under the Torrens system.

This principle is in full accord with Section 51 of PD 1529 14 which provides that no deed, mortgage,
lease or other voluntary instrument -- except a will -- purporting to convey or affect registered land
shall take effect as a conveyance or bind the land until its registration. 15 Thus, if the sale is not
registered, it is binding only between the seller and the buyer but it does not affect innocent third
persons.16

In the instant case, both Petitioners Abrigo and respondent registered the sale of the property. Since
neither petitioners nor their predecessors (Tigno-Salazar and Cave-Go) knew that the property was
covered by the Torrens system, they registered their respective sales under Act 3344. 17 For her part,
respondent registered the transaction under the Torrens system 18 because, during the sale,
Villafania had presented the transfer certificate of title (TCT) covering the property. 19

Respondent De Vera contends that her registration under the Torrens system should prevail over
that of petitioners who recorded theirs under Act 3344. De Vera relies on the following insight of
Justice Edgardo L. Paras:

"x x x If the land is registered under the Land Registration Act (and has therefore a Torrens
Title), and it is sold but the subsequent sale is registered not under the Land Registration Act
but under Act 3344, as amended, such sale is not considered REGISTERED, as the term is
used under Art. 1544 x x x."20

We agree with respondent. It is undisputed that Villafania had been issued a free patent registered
as Original Certificate of Title (OCT) No. P-30522.21 The OCT was later cancelled by Transfer
Certificate of Title (TCT) No. 212598, also in Villafania’s name. 22 As a consequence of the sale, TCT
No. 212598 was subsequently cancelled and TCT No. 22515 thereafter issued to respondent.

Soriano v. Heirs of Magali23 held that registration must be done in the proper registry in order to bind
the land. Since the property in dispute in the present case was already registered under the Torrens
system, petitioners’ registration of the sale under Act 3344 was not effective for purposes of Article
1544 of the Civil Code.

More recently, in Naawan Community Rural Bank v. Court of Appeals,24 the Court upheld the right of
a party who had registered the sale of land under the Property Registration Decree, as opposed to
another who had registered a deed of final conveyance under Act 3344. In that case, the "priority in
time" principle was not applied, because the land was already covered by the Torrens system at the
time the conveyance was registered under Act 3344. For the same reason, inasmuch as the
registration of the sale to Respondent De Vera under the Torrens system was done in good faith,
this sale must be upheld over the sale registered under Act 3344 to Petitioner-Spouses Abrigo.

Radiowealth Finance Co. v. Palileo25 explained the difference in the rules of registration under Act
3344 and those under the Torrens system in this wise:

"Under Act No. 3344, registration of instruments affecting unregistered lands is ‘without
prejudice to a third party with a better right.’ The aforequoted phrase has been held by this
Court to mean that the mere registration of a sale in one’s favor does not give him any right
over the land if the vendor was not anymore the owner of the land having previously sold the
same to somebody else even if the earlier sale was unrecorded.

"The case of Carumba vs. Court of Appeals26 is a case in point. It was held therein that
Article 1544 of the Civil Code has no application to land not registered under Act No. 496.
Like in the case at bar, Carumba dealt with a double sale of the same unregistered land. The
first sale was made by the original owners and was unrecorded while the second was an
execution sale that resulted from a complaint for a sum of money filed against the said
original owners. Applying [Section 33], Rule 39 of the Revised Rules of Court, 27 this Court
held that Article 1544 of the Civil Code cannot be invoked to benefit the purchaser at the
execution sale though the latter was a buyer in good faith and even if this second sale was
registered. It was explained that this is because the purchaser of unregistered land at a
sheriff’s execution sale only steps into the shoes of the judgment debtor, and merely
acquires the latter’s interest in the property sold as of the time the property was levied upon.

"Applying this principle, x x x the execution sale of unregistered land in favor of petitioner is
of no effect because the land no longer belonged to the judgment debtor as of the time of the
said execution sale."28

Petitioners cannot validly argue that they were fraudulently misled into believing that the property
was unregistered. A Torrens title, once registered, serves as a notice to the whole world. 29 All
persons must take notice, and no one can plead ignorance of the registration. 30

Good-Faith Requirement

We have consistently held that Article 1544 requires the second buyer to acquire the immovable in
good faith and to register it in good faith.31 Mere registration of title is not enough; good faith must
concur with the registration. 32 We explained the rationale in Uraca v. Court of Appeals,33 which we
quote:

"Under the foregoing, the prior registration of the disputed property by the second buyer
does not by itself confer ownership or a better right over the property. Article 1544 requires
that such registration must be coupled with good faith. Jurisprudence teaches us that ‘(t)he
governing principle is primus tempore, potior jure (first in time, stronger in right). Knowledge
gained by the first buyer of the second sale cannot defeat the first buyer’s rights except
where the second buyer registers in good faith the second sale ahead of the first, as
provided by the Civil Code. Such knowledge of the first buyer does not bar her from availing
of her rights under the law, among them, to register first her purchase as against the second
buyer. But in converso, knowledge gained by the second buyer of the first sale defeats his
rights even if he is first to register the second sale, since such knowledge taints his prior
 registration with bad faith. This is the price exacted by Article 1544 of the Civil Code for the
second buyer being able to displace the first buyer; that before the second buyer can obtain
priority over the first, he must show that he acted in good faith throughout (i.e. in ignorance
of the first sale and of the first buyer’s rights) ---- from the time of acquisition until the title is
transferred to him by registration, or failing registration, by delivery of possession.’"34 (Italics
supplied)

Equally important, under Section 44 of PD 1529, every registered owner receiving a certificate of title
pursuant to a decree of registration, and every subsequent purchaser of registered land taking such
certificate for value and in good faith shall hold the same free from all encumbrances, except those
noted and enumerated in the certificate.35 Thus, a person dealing with registered land is not required
to go behind the registry to determine the condition of the property, since such condition is noted on
the face of the register or certificate of title. 36 Following this principle, this Court has consistently held
as regards registered land that a purchaser in good faith acquires a good title as against all the
transferees thereof whose rights are not recorded in the Registry of Deeds at the time of the sale. 37

Citing Santiago v. Court of Appeals,38 petitioners contend that their prior registration under Act 3344
is constructive notice to respondent and negates her good faith at the time she registered the
sale. Santiago affirmed the following commentary of Justice Jose C. Vitug:

"The governing principle is prius tempore, potior jure (first in time, stronger in right).
Knowledge by the first buyer of the second sale cannot defeat the first buyer's rights except
when the second buyer first registers in good faith the second sale (Olivares vs. Gonzales,
159 SCRA 33). Conversely, knowledge gained by the second buyer of the first sale defeats
his rights even if he is first to register, since such knowledge taints his registration with bad
faith (see also Astorga vs. Court of Appeals, G.R. No 58530, 26 December 1984) In Cruz vs.
Cabana (G.R. No. 56232, 22 June 1984; 129 SCRA 656), it was held that it is essential, to
merit the protection of Art. 1544, second paragraph, that the second realty buyer must act in
good faith in registering his deed of sale (citing Carbonell vs. Court of Appeals, 69 SCRA
99, Crisostomo vs. CA, G.R. 95843, 02 September 1992).

xxx     xxx     xxx

"Registration of the second buyer under Act 3344, providing for the registration of all
instruments on land neither covered by the Spanish Mortgage Law nor the Torrens System
(Act 496), cannot improve his standing since Act 3344 itself expresses that registration
thereunder would not prejudice prior rights in good faith (see Carumba vs. Court of Appeals,
31 SCRA 558). Registration, however, by the first buyer under Act 3344 can have the
effect of constructive notice to the second buyer that can defeat his right as such
buyer in good faith (see Arts. 708-709, Civil Code; see also Revilla vs. Galindez, 107 Phil.
480; Taguba vs. Peralta, 132 SCRA 700). Art. 1544 has been held to be inapplicable to
execution sales of unregistered land, since the purchaser merely steps into the shoes of the
debtor and acquires the latter's interest as of the time the property is sold (Carumba vs.
Court of Appeals, 31 SCRA 558; see also Fabian vs. Smith, Bell & Co., 8 Phil. 496) or when
there is only one sale (Remalante vs. Tibe, 158 SCRA 138)."39 (Emphasis supplied)

Santiago was subsequently applied in Bayoca v. Nogales,40 which held:

"Verily, there is absence of prior registration in good faith by petitioners of the second sale in
their favor. As stated in the Santiago case, registration by the first buyer under Act No. 3344
can have the effect of constructive notice to the second buyer that can defeat his right as
such buyer. On account of the undisputed fact of registration under Act No. 3344 by [the first
 buyers], necessarily, there is absent good faith in the registration of the sale by the [second
buyers] for which they had been issued certificates of title in their names. x x x." 41

Santiago and Bayoca are not in point. In Santiago, the first buyers registered the sale under the
Torrens system, as can be inferred from the issuance of the TCT in their names. 42 There was no
registration under Act 3344. In Bayoca, when the first buyer registered the sale under Act 3344, the
property was still unregistered land.43 Such registration was therefore considered effectual.

Furthermore, Revilla and Taguba, which are cited in Santiago, are not on all fours with the present
case. In Revilla, the first buyer did not register the sale.44 In Taguba, registration was not an issue.45

As can be gathered from the foregoing, constructive notice to the second buyer through registration
under Act 3344 does not apply if the property is registered under the Torrens system, as in this case.

We quote below the additional commentary of Justice Vitug, which was omitted in Santiago. This
omission was evidently the reason why petitioner misunderstood the context of the citation therein:

"The registration contemplated under Art. 1544 has been held to refer to registration under
Act 496 Land Registration Act (now PD 1529) which considers the act of registration as the
operative act that binds the land (see Mediante vs. Rosabal, 1 O.G. [12] 900, Garcia vs.
Rosabal, 73 Phil 694). On lands covered by the Torrens System, the purchaser acquires
such rights and interest as they appear in the certificate of title, unaffected by any prior lien
or encumbrance not noted therein. The purchaser is not required to explore farther than what
the Torrens title, upon its face, indicates. The only exception is where the purchaser has
actual knowledge of a flaw or defect in the title of the seller or of such liens or encumbrances
which, as to him, is equivalent to registration (see Sec. 39, Act 496; Bernales vs. IAC, G.R.
75336, 18 October 1988; Hernandez vs. Sales, 69 Phil 744; Tajonera vs. Court of Appeals,
L-26677, 27 March 1981),"46

Respondent in Good Faith

The Court of Appeals examined the facts to determine whether respondent was an innocent
purchaser for value.47 After its factual findings revealed that Respondent De Vera was in good faith, it
explained thus:

"x x x. Gloria Villafania, [Respondent] De Vera’s vendor, appears to be the registered owner. The
subject land was, and still is, registered in the name of Gloria Villafania. There is nothing in her
certificate of title and in the circumstances of the transaction or sale which warrant [Respondent] De
Vera in supposing that she need[ed] to look beyond the title. She had no notice of the earlier sale of
the land to [petitioners]. She ascertained and verified that her vendor was the sole owner and in
possession of the subject property by examining her vendor’s title in the Registry of Deeds and
actually going to the premises. There is no evidence in the record showing that when she bought the
land on October 23, 1997, she knew or had the slightest notice that the same was under litigation in
Civil Case No. D-10638 of the Regional Trial Court of Dagupan City, Branch 40, between Gloria
Villafania and [Petitioners] Abrigo. She was not even a party to said case. In sum, she testified
clearly and positively, without any contrary evidence presented by the [petitioners], that she did not
know anything about the earlier sale and claim of the spouses Abrigo, until after she had bought the
same, and only then when she bought the same, and only then when she brought an ejectment case
with the x x x Municipal Court of Mangaldan, known as Civil Case No. 1452. To the [Respondent] De
Vera, the only legal truth upon which she had to rely was that the land is registered in the name of
Gloria Villafania, her vendor, and that her title under the law, is absolute and indefeasible. x x x." 48
We find no reason to disturb these findings, which petitioners have not rebutted. Spouses Abrigo
base their position only on the general averment that respondent should have been more vigilant
prior to consummating the sale. They argue that had she inspected the property, she would have
found petitioners to be in possession.49

This argument is contradicted, however, by the spouses’ own admission that the parents and the
sister of Villafania were still the actual occupants in October 1997, when Respondent De Vera
purchased the property.50 The family members may reasonably be assumed to be Villafania’s
agents, who had not been shown to have notified respondent of the first sale when she conducted
an ocular inspection. Thus, good faith on respondent’s part stands.

WHEREFORE, the Petition is DENIED and the assailed Decision AFFIRMED. Costs against

petitioners.

SO ORDERED.

Davide, Jr., Ynares-Santiago*, Carpio, and Azcuna, JJ., concur.

Footnotes
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 171008               September 13, 2007

CARMELITA FUDOT, Petitioner,
vs.
CATTLEYA LAND, INC., VELASCO, JR., JJ. Respondent.

DECISION

TINGA, J.:

For resolution is a petition that seeks to nullify the Decision 1 and Resolution2 of the Court of Appeals
dated 28 April 2005 and 11 January 2006, respectively, in C.A.–G.R. CV No. 73025 which declared
respondent as having a better right over a parcel of land located in Doljo, Panglao, Bohol.

The facts, as culled from the records, follow.

Sometime in July 1992, Cattleya Land, Inc. (hereinafter referred to as respondent) asked someone
to check, on its behalf, the titles of nine (9) lots, the subject land included, which it intended to buy
from the spouses Troadio and Asuncion Tecson. Finding no defect on the titles, respondent
purchased the nine lots through a Deed of Conditional Sale on 6 November 1992. Subsequently, on
30 August 1993, respondent and the Tecsons executed a Deed of Absolute Sale over the same
properties. The Deed of Conditional Sale and the Deed of Absolute Sale were registered with the
Register of Deeds on 06 November 1992 and 04 October 1993, respectively. 3 The Register of
Deeds, Atty. Narciso dela Serna, refused to actually annotate the deed of sale on the titles because
of the existing notice of attachment in connection with Civil Case No. 3399 pending before the
Regional Trial Court of Bohol.4 The attachment was eventually cancelled by virtue of a compromise
agreement between the Tecsons and their attaching creditor which was brokered by respondent.
Titles to six (6) of the nine (9) lots were issued, but the Register of Deeds refused to issue titles to
the remaining three (3) lots , because the titles covering the same were still unaccounted for.

On 23 January 1995, petitioner presented for registration before the Register of Deeds the owner’s
copy of the title of the subject property, together with the deed of sale purportedly executed by the
Tecsons in favor of petitioner on 19 December 1986. On the following day, respondent sent a letter
of protest/opposition to petitioner’s application. Much to its surprise, respondent learned that the
Register of Deeds had already registered the deed of sale in favor of petitioner and issued a new
title in her name.5

On 5 May 1995, respondent filed its Complaint6 for Quieting Of Title &/Or Recovery Of Ownership,
Cancellation Of Title With Damages before the Regional Trial Court of Tagbilaran City. 7 On 26 June
1995, Asuncion filed a complaint-in-intervention, claiming that she never signed any deed of sale
covering any part of their conjugal property in favor of petitioner. She averred that her signature in
petitioner’s deed of sale was forged thus, said deed should be declared null and void. 8 She also
claimed that she has discovered only recently that there was an amorous relationship between her
husband and petitioner.9
Petitioner, for her part, alleged in her answer10 that the spouses Tecson had sold to her the subject
property for ₱20,000.00 and delivered to her the owner’s copy of the title on 26 December 1986. She
claims that she subsequently presented the said title to the Register of Deeds but the latter refused
to register the same because the property was still under attachment.

On 31 October 2001, the trial court rendered its decision: 11 (i) quieting the title or ownership of the
subject land in favor of respondent; (ii) declaring the deed of sale between petitioner and spouses
Tecson invalid; (iii) ordering the registration of the subject land in favor of respondent; (iv) dismissing
respondent’s claim for damages against the Register of Deeds for insufficiency of evidence; (v)
dismissing Asuncion’s claim for damages against petitioner for lack of factual basis; and (vi)
dismissing petitioner’s counterclaim for lack of the required preponderance of evidence. 12

According to the trial court, respondent had recorded in good faith the deed of sale in its favor ahead
of petitioner. Moreover, based on Asuncion’s convincing and unrebutted testimony, the trial court
concluded that the purported signature of Asuncion in the deed of sale in favor of petitioner was
forged, thereby rendering the sale void.13

Petitioner sought recourse to the Court of Appeals, arguing in the main that the rule on double sale
was applicable to the case. The appellate court, however, dismissed her appeal, holding that there
was no double sale because the alleged sale to petitioner was null and void in view of the forgery of
Asuncion’s purported signature in the deed. The appellate court noted that petitioner failed to rebut
Asuncion’s testimony despite opportunities to do so.14 Moreover, even if there was double sale,
according to the appellate court, respondent’s claim would still prevail since it was able to register
the second sale in its favor in good faith, had made inquiries before it purchased the lots, and was
informed that the titles were free from encumbrance except the attachment on the property due to
Civil Case No. 3399.15

Petitioner sought reconsideration of the decision but the Court of Appeals denied her motion for
reconsideration for lack of merit. 16

Petitioner thus presents before this Court the following issues for resolution:

I.

BETWEEN 2 BUYERS OF REGISTERED LAND, WHO HAS THE BETTER RIGHT-IS IT THE
FIRST BUYER WHO WAS GIVEN THE OWNER’S DUPLICATE TCT TOGETHER WITH A DEED
OF SALE IN 1986, OR THE SECOND BUYER IN 1992 WITH ONLY A DEED OF SALE.

II.

IS A BUYER OF REGISTERED LAND WHO DID NOT DEMAND OR REQUIRE THE DELIVERY OF
THE OWNER’S DUPLICATE TCT A BUYER IN GOOD FAITH.

III.

II. IN SUBSEQUENT REGISTRATION OF REGISTERED LANDS, AS BY SALE, WHICH LAW

SHALL GOVERN, ARTICLE 1455 OF CIVIL CODE OR P.D. 1529 OR TORRENS SYSTEM. 17

Petitioner avers that she was the first buyer in good faith and even had in her possession the
owner’s copy of the title so much so that she was able to register the deed of sale in her favor and
caused the issuance of a new title in her name. She argues that the presentation and surrender of
the deed of sale and the owner’s copy carried with it the "conclusive authority of Asuncion Tecson"
which cannot be overturned by the latter’s oral deposition. 18

Petitioner claims that respondent did not demand nor require delivery of the owner’s duplicate title
from the spouses Tecson, neither did it investigate the circumstances surrounding the absence of
the title. These indicate respondent’s knowledge of a defect in the title of the spouses and, thus,
petitioner concludes that respondent was not a buyer in good faith. 19

Finally, petitioner insists that the applicable law in this case is P.D. No. 1529, a special law dealing
precisely with the registration of registered lands or any subsequent sale thereof, and not Article
1544 of the Civil Code which deals with immovable property not covered by the Torrens System. 20

Respondent points out, on one hand, that petitioner’s first two issues which present an inquiry on
who has a better right or which one is a buyer in good faith, are questions of fact not proper in a
petition for review. The third issue, on the other hand, is ostensibly a question of law which had been
unsuccessfully raised below.21

Respondent maintains that there is no room to speak of petitioner as a buyer in good faith since she
was never a buyer in the first place, as her claim is based on a null and void deed of sale, so the
court a quo found. Respondent also asserts that its status as a buyer in good faith was established
and confirmed in the proceedings before the two courts below. 22

Lastly, respondent argues that P.D. No. 1529 finds no application in the instant case. The
"production of the owner’s duplicate certificate x x x being conclusive authority from the registered
owner" is only true as between the registration applicant and the register of deeds concerned, but
never to third parties. Such conclusive authority, respondent adds, is "only for the Register of Deeds
to enter a new certificate or to make a memorandum of registration in accordance with such
instrument." It cannot cure the fatal defect that the instrument from which such registration was
effected is null and void ab initio, respondent concludes. 23

The petition is bereft of merit.

Petitioner’s arguments, which rest on the assumption that there was a double sale, must fail.

In the first place, there is no double sale to speak of. Art. 1544 of the Civil Code, 24 which provides the
rule on double sale, applies only to a situation where the same property is validly sold to different
vendees. In this case, there is only one sale to advert to, that between the spouses Tecson and
respondent.

In Remalante v. Tibe,25 this Court ruled that the Civil Law provision on double sale is not applicable
where there is only one valid sale, the previous sale having been found to be fraudulent. Likewise, in
Espiritu and Apostol v. Valerio,26 where the same parcel of land was purportedly sold to two different
parties, the Court held that despite the fact that one deed of sale was registered ahead of the other,
Art. 1544 of the Civil Code will not apply where said deed is found to be a forgery, the result of this
being that the right of the other vendee should prevail.

The trial court declared that the sale between the spouses Tecson and petitioner is invalid, as it
bears the forged signature of Asuncion. Said finding is based on the unrebutted testimony of
Asuncion and the trial court’s visual analysis and comparison of the signatures in her Complaint-in-
Intervention and the purported deed of sale. This finding was upheld by the Court of Appeals, as it
ruled that the purported sale in petitioner’s favor is null and void, taking into account Asuncion’s
unrefuted deposition. In particular, the Court of Appeals noted petitioner’s failure to attend the taking
of the oral deposition and to give written interrogatories. In short, she did not take the necessary
steps to rebut Asuncion’s definitive assertion.

The congruence of the wills of the spouses is essential for the valid disposition of conjugal
property.27 Thus, under Article 166 of the Civil Code28 which was still in effect on 19 December 1986
when the deed of sale was purportedly executed, the husband cannot generally alienate or
encumber any real property of the conjugal partnership without the wife’s consent.

In this case, following Article 17329 of the Civil Code, on 26 June 1995, or eight and a half years (8
½) after the purported sale to petitioner, Asuncion filed her Complaint-in-Intervention seeking the
nullification thereof, and while her marriage with Troadio was still subsisting. Both the Court of
Appeals and the trial court found Asuncion’s signature in the deed of sale to have been forged, and
consequently, the deed of sale void for lack of marital consent. We find no reason to disturb the
findings of the trial court and the Court of Appeals. Findings of fact of lower courts are deemed
conclusive and binding upon the Supreme Court subject to certain exceptions, 30 none of which are
present in this case. Besides, it has long been recognized in our jurisprudence that a forged deed is
a nullity and conveys no title. 31

Petitioner argues she has a better right over the property in question, as the holder of and the first
one to present, the owner’s copy of the title for the issuance of a new TCT. The Court is not
persuaded.

The act of registration does not validate petitioner’s otherwise void contract. Registration is a mere
ministerial act by which a deed, contract, or instrument is sought to be inscribed in the records of the
Office of the Register of Deeds and annotated at the back of the certificate of title covering the land
subject of the deed, contract, or instrument. While it operates as a notice of the deed, contract, or
instrument to others, it does not add to its validity nor converts an invalid instrument into a valid one
as between the parties,32 nor amounts to a declaration by the state that the instrument is a valid and
subsisting interest in the land. 33 The registration of petitioner’s void deed is not an impediment to a
declaration by the courts of its invalidity.

Even assuming that there was double sale in this case, petitioner would still not prevail. The
pertinent portion of Art. 1544 provides:

Art. 1544. x x x.

Should it be immovable property, the ownership shall belong to the person acquiring it who in good
faith first recorded it in the Registry of Property.

x x x x.

In interpreting this provision, the Court declared that the governing principle is primus tempore,
potior jure (first in time, stronger in right). Knowledge gained by the first buyer of the second sale
cannot defeat the first buyer’s rights, except where the second buyer registers in good faith the
second sale ahead of the first as provided by the aforequoted provision of the Civil Code. Such
knowledge of the first buyer does not bar him from availing of his rights under the law, among them
to register first his purchase as against the second buyer. However, knowledge gained by the
second buyer of the first sale defeats his rights even if he is first to register the second sale, since
such knowledge taints his prior registration with bad faith. 34 It is thus essential, to merit the protection
of Art. 1544, second paragraph, that the second realty buyer must act in good faith in registering his
deed of sale.35
We agree with the trial court and the Court of Appeals that respondent was a buyer in good faith,
having purchased the nine (9) lots, including the subject lot, without any notice of a previous sale,
but only a notice of attachment relative to a pending civil case. In fact, in its desire to finally have the
title to the properties transferred in its name, it persuaded the parties in the said case to settle the
same so that the notice of attachment could be cancelled.

Relevant to the discussion are the following provisions of P.D. No. 1529:

Sec. 51. Conveyance and other dealings by registered owner.— An owner of registered land may
convey, mortgage, lease, charge or otherwise deal with the same in accordance with existing laws.
He may use such forms of deeds, mortgages, lease or other voluntary instruments as are sufficient
in law. But no deed, mortgage, lease or other voluntary instrument, except a will purporting to
convey or affect registered land shall take effect as a conveyance or bind the land, but shall operate
only as a contract between the parties and as evidence of authority to the Register of Deeds to make
Registration.

The act of registration shall be the operative act to convey or affect the land insofar as third persons
are concerned, and in all cases under this Decree, the registration shall be made in the office of the
Register of Deeds for the province or city where the land lies. (Emphasis supplied)

Sec. 52. Constructive notice upon registration.—Every conveyance, mortgage, lease, lien
attachment, order, judgment, instrument or entry affecting registered land shall, if registered, filed or
entered in the office of the Register of Deeds for the province or city where the land to which it
relates lies, be constructive notice to all persons from the time of such registering, filing or entering.

It has been held that between two transactions concerning the same parcel of land, the registered
transaction prevails over the earlier unregistered right. The act of registration operates to convey and
affect the registered land so that a bona fide purchaser of such land acquires good title as against a
prior transferee, if such prior transfer was unrecorded. 36 As found by the courts a quo, respondent
was able to register its purchase ahead of petitioner. It will be recalled that respondent was able to
register its Deed of Conditional Sale with the Register of Deeds as early as 6 November 1992, and
its Deed of Absolute Sale on 14 October 1993. On the other hand, petitioner was able to present for
registration her deed of sale and owner’s copy of the title only on 23 January 1995, or almost nine
years after the purported sale. Why it took petitioner nine (9) years to present the deed and the
owner’s copy, she had no credible explanation; but it is clear that when she finally did, she already
had constructive notice of the deed of sale in respondent’s favor. Without a doubt, respondent had
acquired a better title to the property.1âwphi1

Finally, anent petitioner’s claim that P.D. No. 1529 applies to registered lands or any subsequent
sale thereof, while Art. 1544 of the Civil Code applies only to immovable property not covered by the
Torrens System, suffice it to say that this quandary has already been answered by an eminent
former member of this Court, Justice Jose Vitug, who explained that the registration contemplated
under Art. 1544 has been held to refer to registration under P.D. No. 1529, thus:

The registration contemplated under Art. 1544 has been held to refer to registration under Act 496
Land Registration Act (now PD 1529) which considers the act of registration as the operative act that
binds the land (see Mediante v. Rosabal, 1 O.G. [12] 900, Garcia v. Rosabal, 73 Phil 694). On lands
covered by the Torrens System, the purchaser acquires such rights and interest as they appear in
the certificate of title, unaffected by any prior lien or encumbrance not noted therein. The purchaser
is not required to explore farther than what the Torrens title, upon its face, indicates. The only
exception is where the purchaser has actual knowledge of a flaw or defect in the title of the seller or
of such liens or encumbrances which, as to him, is equivalent to registration (see Sec. 39, Act 496;
Bernales v. IAC, G.R. 75336, 18 October 1988; Hernandez vs. Sales, 69 Phil 744; Tajonera s. Court
of Appeals, L-26677, 27 March 1981) (Emphasis supplied) 37

WHEREFORE, the petition is DENIED. The assailed decision and resolution of the Court of Appeals
are affirmed. Costs against petitioner.

SO ORDERED.

DANTE O. TINGA
Associate Justice

WE CONCUR:

LEONARDO A. QUISUMBING
Associate Justice
Chairperson

ANTONIO T. CARPIO CONCHITA CARPIO MORALES

Associate Justice Associate Justice

PRESBITERO J. VELASCO, JR.

Associate Justice

ATTESTATION

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

LEONARDO A. QUISUMBING
Associate Justice
Chairperson, Second Division

CERTIFICATION

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

REYNATO S. PUNO
Chief Justice
 Republic of the Philippines
SUPREME COURT
Baguio City

THIRD DIVISION

G.R. No. 158040             April 14, 2008

SPOUSES ONESIFORO and ROSARIO ALINAS, petitioner,

vs.
SPOUSES VICTOR and ELENA ALINAS, respondents.

DECISION

AUSTRIA-MARTINEZ, J.:

This resolves the Petition for Review on Certiorari under Rule 45 of the Rules of Court, praying that
the Decision1 of the Court of Appeals (CA) dated September 25, 2002, and the CA Resolution 2 dated
March 31, 2003, denying petitioners' motion for reconsideration, be reversed and set aside.

The factual antecedents of the case are as follows.

Spouses Onesiforo and Rosario Alinas (petitioners) separated sometime in 1982, with Rosario
moving to Pagadian City and Onesiforo moving to Manila. They left behind two lots identified as Lot
896-B-9-A with a bodega standing on it and Lot 896-B-9-B with petitioners' house. These two lots
are the subject of the present petition.

Petitioner Onesiforo Alinas (Onesiforo) and respondent Victor Alinas (Victor) are brothers.
Petitioners allege that they entrusted their properties to Victor and Elena Alinas (respondent
spouses) with the agreement that any income from rentals of the properties should be remitted to the
Social Security System (SSS) and to the Rural Bank of Oroquieta City (RBO), as such rentals were
believed sufficient to pay off petitioners' loans with said institutions. Lot 896-B-9-A with the bodega
was mortgaged as security for the loan obtained from the RBO, while Lot 896-B-9-B with the house
was mortgaged to the SSS. Onesiforo alleges that he left blank papers with his signature on them to
facilitate the administration of said properties.

Sometime in 1993, petitioners discovered that their two lots were already titled in the name of
respondent spouses.

Records show that after Lot 896-B-9-A was extra-judicially foreclosed, Transfer Certificate of Title
(TCT) No. T-118533 covering said property was issued in the name of mortgagee RBO on November
13, 1987. On May 2, 1988, the duly authorized representative of RBO executed a Deed of
Installment Sale of Bank's Acquired Assets4 conveying Lot 896-B-9-A to respondent spouses. RBO's
TCT over Lot 896-B-9-A was then cancelled and on February 22, 1989, TCT No. T-12664 5 covering
said lot was issued in the name of respondent spouses.

Lot 896-B-9-B was also foreclosed by the SSS and on November 17, 1986, the Ex-Oficio City Sheriff
of Ozamis City issued a Certificate of Sale6 over said property in favor of the SSS. However,
pursuant to a Special Power of Attorney 7 signed by Onesiforo in favor of Victor, dated March 10,
1989, the latter was able to redeem, on the same date, Lot 896-B-9-B from the SSS for the sum
of P111,110.09. On June 19, 1989, a Certificate of Redemption 8 was issued by the SSS.
Onesiforo's signature also appears in an Absolute Deed of Sale 9 likewise dated March 10, 1989,
selling Lot 896-B-9-B to respondent spouses. The records also show a notarized document dated
March 10, 1989 and captioned Agreement10 whereby petitioner Onesiforo acknowledged that his
brother Victor used his own money to redeem Lot 896-B-9-B from the SSS and, thus, Victor became
the owner of said lot. In the same Agreeement, petitioner Onesiforo waived whatever rights, claims,
and interests he or his heirs, successors and assigns have or may have over the subject property.
On March 15, 1993, by virtue of said documents, TCT No. 17394 11 covering Lot 896-B-9-B was
issued in the name of respondent spouses.

On June 25, 1993, petitioners filed with the Regional Trial Court (RTC) of Ozamis City a complaint
for recovery of possession and ownership of their conjugal properties with damages against
respondent spouses.

After trial, the RTC rendered its Decision dated November 13, 1995, finding that:

1. Plaintiffs have not proven that they entrusted defendant spouses with the care and
administration of their properties. It was Valeria Alinas, their mother, whom plaintiff Onesiforo
requested/directed to "take care of everything and sell everything" and Teresita Nuñez, his
elder sister, to whom he left a "verbal" authority to administer his properties.

2. Plaintiffs have not proven their allegation that defendant spouses agreed to pay rent
of P1,500.00 a month for the occupancy of plaintiffs' house, which rent was to be remitted to
the SSS and Rural Bank of Oroquieta to pay off plaintiffs' loan and to keep for plaintiffs the
rest of the rent after the loans would have been paid in full.

3. Plaintiff Onesiforo's allegation that defendants concocted deeds of conveyances (Exh.

"M", "N" & "O") with the use of his signatures in blank is not worthy of credence. Why his
family would conspire to rob him at a time when life had struck him with a cruel blow in the
form of a failed marriage that sent him plummeting to the depths of despair is not explained
and likewise defies comprehension. That his signatures appear exactly on the spot where
they ought to be in Exhs. "M", "N" & "O" belies his pretension that he affixed them on blank
paper only for the purpose of facilitating his sister Terry's acts of administration.

This Court, therefore, does not find that defendant spouses had schemed to obtain title to
plaintiffs' properties or enriched themselves at the expense of plaintiffs. 12

with the following dispositive portion:

WHEREFORE, this Court renders judgment:

1. declaring [respondents] Victor Jr. and Elena Alinas owners of Lot 896-B-9-A with
the building (bodega) standing thereon and affirming the validity of their acquisition
thereof from the Rural Bank of Oroquieta, Inc.;

2. declaring [petitioners] Onesiforo and Rosario Alinas owners of Lot 896-B-9-B with
the house standing thereon, plaintiff Onesiforo's sale thereof to defendants spouses
without the consent of his wife being null and void and defendant spouses'
redemption thereof from the SSS not having conferred its ownership to them;

3. ordering [petitioners] to reimburse [respondents] Victor Jr. and Elena Alinas the
redemption sum of P111,100.09, paid by them to the SSS (without interest as it shall
 be compensated with the rental value of the house they occupy) within sixty days
from the finality of this judgment;

4. ordering [respondents] to vacate the subject house within thirty days from
receiving the reimbursement mentioned in No. 3 above; and

5. reinstating TCT No. T-7248 in the name of [petitioners] and cancelling TCT No. T-
17394 in the name of [respondents].

No costs.

SO ORDERED.13

Only respondent spouses appealed to the CA assailing the RTC's ruling that they acquired Lot 896-
B-9-B from the SSS by mere redemption and not by purchase. They likewise question the
reimbursement by petitioners of the redemption price without interest.

On September 25, 2002, the CA promulgated herein assailed Decision, the dispositive portion of
which reads:

WHEREFORE, in view of the foregoing disquisitions, the first paragraph of the dispositive
portion of the assailed decision is AFFIRMED and the rest MODIFIED as follows:

1. declaring [respondents] Victor Jr. and Elena Alinas owners of Lot 896-B-9-A with
the building (bodega) standing thereon and affirming the validity of their acquisition
thereof from the Rural Bank of Oroquieta, Inc.;

2. declaring Onesiforo's sale of Lot 896-B-9-B together with the house standing
thereon to [respondents] in so far as Rosario Alinas, his wife's share of one half
thereof is concerned, of no force and effect;

3. ordering [petitioners] Rosario Alinas to reimburse [respondents] the redemption

amount of P55,550.00 with interest of 12% per annum from the time of redemption
until fully paid.

4. ordering the [respondents] to convey and transfer one half portion of Lot 896-B-9-
B unto Rosario Alinas, which comprises her share on the property simultaneous to
the tender of the above redemption price, both to be accomplished within sixty (60)
days from finality of this judgment.

5. in the event of failure of [respondents] to execute the acts as specified above,

[petitioner] Rosario Alinas may proceed against them under Section 10, Rule 39 of
the 1997 Rules of Civil Procedure.

6. on the other hand, failure of [petitioner] Rosario Alinas to reimburse the

redemption price within sixty (60) days from the finality of this decision will render the
conveyance and sale of her share by her husband to [respondents], of full force and
effect.

No costs.
 SO ORDERED.14

Petitioners moved for reconsideration but the CA denied said motion per herein assailed Resolution
dated March 31, 2003.

Hence, the present petition on the following grounds:

The Honorable Court of Appeals abuse [sic] its discretion in disregarding the testimony of the
Register of Deeds, Atty. Nerio Nuñez, who swore that the signatures appearing on various
TCTs were not his own;

The Honorable Court of Appeals manifestly abuse [sic] its discretion in declaring the
respondents to be the owners of Lot 896-B-9-A with the building (bodega) standing thereon
when they merely redeemed the property and are therefore mere trustees of the real owners
of the property;

It was pure speculation and conjecture and surmise for the Honorable Court of Appeals to
impose an obligation to reimburse upon petitioners without ordering respondents to account
for the rentals of the properties from the time they occupied the same up to the present time
and thereafter credit one against the other whichever is higher. 15

The first issue raised by petitioners deserves scant consideration. By assailing the authenticity of the
Registrar of Deeds' signature on the certificates of title, they are, in effect, questioning the validity of
the certificates.

Section 48 of Presidential Decree No. 1529 provides, thus:

Sec. 48. Certificate not subject to collateral attack. - A certificate of title shall not be subject
to collateral attack. It cannot be altered, modified, or cancelled except in a direct proceeding
in accordance with law.

Pursuant to said provision, the Court ruled in De Pedro v. Romasan Development Corporation 16 that:

It has been held that a certificate of title, once registered, should not thereafter be impugned,
altered, changed, modified, enlarged or diminished except in a direct proceeding permitted
by law. x x x

The action of the petitioners against the respondents, based on the material allegations of

the complaint, is one for recovery of possession of the subject property and damages.
However, such action is not a direct, but a collateral attack of TCT No.
236044.17 (Emphasis supplied)

As in De Pedro, the complaint filed by herein petitioners with the RTC is also one for recovery of
possession and ownership. Verily, the present case is merely a collateral attack on TCT No. T-
17394, which is not allowed by law and jurisprudence.

With regard to the second issue, petitioners’ claim that it was the CA which declared respondent
spouses owners of Lot 896-B-9-A (with bodega) is misleading. It was the RTC which ruled that
respondent spouses are the owners of Lot 896-B-9-A and, therefore, since only the respondent
spouses appealed to the CA, the issue of ownership over Lot 896-B-9-A is not raised before the
appellate court. Necessarily, the CA merely reiterated in the dispositive portion of its decision the
RTC's ruling on respondent spouses' ownership of Lot 896-B-9-A.

It is a basic principle that no modification of judgment or affirmative relief can be granted to a party
who did not appeal.18 Hence, not having appealed from the RTC Decision, petitioners can no longer
seek the reversal or modification of the trial court's ruling that respondent spouses had acquired
ownership of Lot 896-B-9-A by virtue of the sale of the lot to them by RBO.

Furthermore, the CA did not commit any reversible error in affirming the trial court's factual findings
as the records are indeed bereft of proof to support the petitioners’ allegations that they left the care
and administration of their properties to respondent spouses; and that there is an agreement
between petitioners and respondent spouses regarding remittance to the SSS and the RBO of rental
income from their properties. Thus, respondent spouses may not be held responsible for the non-
payment of the loan with RBO and the eventual foreclosure of petitioners' Lot 896-B-9-A.

Petitioners do not assail the validity of the foreclosure of said lot but argues that respondent spouses
merely redeemed the property from RBO. This is, however, belied by evidence on record which
shows that ownership over the lot had duly passed on to the RBO, as shown by TCT No. T-11853
registered in its name; and subsequently, RBO sold the lot with its improvements to respondent
spouses. Needless to stress, the sale was made after the redemption period had lapsed. The trial
court, therefore, correctly held that respondent spouses acquired their title over the lot from RBO
and definitely not from petitioners.

However, with regard to Lot 896-B-9-B (with house), the Court finds it patently erroneous for the CA
to have applied the principle of equity in sustaining the validity of the sale of Onesiforo’s one-half
share in the subject property to respondent spouses.

Although petitioners were married before the enactment of the Family Code on August 3, 1988, the
sale in question occurred in 1989. Thus, their property relations are governed by Chapter IV on
Conjugal Partnership of Gains of the Family Code.

The CA ruling completely deviated from the clear dictate of Article 124 of the Family Code which
provides:

Art. 124. The administration and enjoyment of the conjugal partnership property shall belong
to both spouses jointly. x x x

In the event that one spouse is incapacitated or otherwise unable to participate in the
administration of the conjugal properties, the other spouse may assume sole powers of
administration. These powers do not include the powers of disposition or encumbrance
which must have the authority of the court or the written consent of the other spouse.  In the
absence of such authority or consent the disposition or encumbrance shall be void . x
x x (Underscoring and emphasis supplied)

In Homeowners Savings & Loan Bank v. Dailo,19 the Court categorically stated thus:

In Guiang v. Court of Appeals, it was held that the sale of a conjugal property requires the
consent of both the husband and wife. In applying Article 124 of the Family Code, this Court
declared that the absence of the consent of one renders the entire sale null and void,
including the portion of the conjugal property pertaining to the husband who
contracted the sale. x x x
 xxxx

x x x By express provision of Article 124 of the Family Code, in the absence of (court)
authority or written consent of the other spouse, any disposition or encumbrance of the
conjugal property shall be void. 20

Thus, pursuant to Article 124 of the Family Code and jurisprudence, the sale of petitioners' conjugal
property made by petitioner Onesiforo alone is void in its entirety.

It is true that in a number of cases, this Court abstained from applying the literal import of a particular
provision of law if doing so would lead to unjust, unfair and absurd results. 21

In the present case, the Court does not see how applying Article 124 of the Family Code would lead
to injustice or absurdity. It should be noted that respondent spouses were well aware that Lot 896-B-
9-B is a conjugal property of petitioners. They also knew that the disposition being made by
Onesiforo is without the consent of his wife, as they knew that petitioners had separated, and, the
sale documents do not bear the signature of petitioner Rosario. The fact that Onesiforo had to
execute two documents, namely: the Absolute Deed of Sale dated March 10, 1989 and a notarized
Agreement likewise dated March 10, 1989, reveals that they had full knowledge of the severe
infirmities of the sale. As held in Heirs of Aguilar-Reyes v. Spouses Mijares,22 "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."23 Such being the case, no injustice is being foisted on respondent spouses as they risked
transacting with Onesiforo alone despite their knowledge that the subject property is a conjugal
property.

Verily, the sale of Lot 896-B-9-B to respondent spouses is entirely null and void.

However, in consonance with the salutary principle of non-enrichment at another’s expense, the
Court agrees with the CA that petitioners should reimburse respondent spouses the redemption
price paid for Lot 896-B-9-B in the amount of P111,110.09 with legal interest from the time of filing of
the complaint.

In Heirs of Aguilar-Reyes, the husband's sale of conjugal property without the consent of the wife
was annulled but the spouses were ordered to refund the purchase price to the buyers, it was ruled
that an interest of 12% per annum on the purchase price to be refunded is not proper. The Court
elucidated as follows:

The trial court, however, erred in imposing 12% interest per annum on the amount due the
respondents. In Eastern Shipping Lines, Inc. v. Court of Appeals, it was held that interest on
obligations not constituting a loan or forbearance of money is six percent (6%) annually. If
the purchase price could be established with certainty at the time of the filing of the
complaint, the six percent (6%) interest should be computed from the date the complaint was
filed until finality of the decision. In Lui vs. Loy, involving a suit for reconveyance and
annulment of title filed by the first buyer against the seller and the second buyer, the Court,
ruling in favor of the first buyer and annulling the second sale, ordered the seller to refund to
the second buyer (who was not a purchaser in good faith) the purchase price of the lots. It
was held therein that the 6% interest should be computed from the date of the filing of the
complaint by the first buyer. After the judgment becomes final and executory until the
obligation is satisfied, the amount due shall earn interest at 12% per year, the interim period
being deemed equivalent to a forbearance of credit.
 Accordingly, the amount of P110,000.00 due the respondent spouses which could be
determined with certainty at the time of the filing of the complaint shall earn 6%
interest per annum from June 4, 1986 until the finality of this decision. If the adjudged
principal and the interest (or any part thereof) remain unpaid thereafter, the interest
rate shall be twelve percent (12%) per annum computed from the time the judgment
becomes final and executory until it is fully satisfied.24

Thus, herein petitioners should reimburse respondent spouses the redemption price plus interest at
the rate of 6% per annum from the date of filing of the complaint, and after the judgment becomes
final and executory, the amount due shall earn 12% interest per annum until the obligation is
satisfied.

Petitioners pray that said redemption price and interest be offset or compensated against the rentals
for the house and bodega.

The records show that the testimonial evidence for rentals was only with regard to the
bodega.25 However, the Court has affirmed the ruling of the RTC that Lot 896-B-9-A with the bodega
had been validly purchased by respondent spouses from the RBO and a TCT over said property was
issued in the name of respondent spouses on February 22, 1989. Testimonial evidence shows that
the bodega was leased out by respondent spouses only beginning January of 1990 when ownership
had been transferred to them.26 Hence, any rentals earned from the lease of said bodega rightfully
belongs to respondent spouses and cannot be offset against petitioners' obligation to respondent
spouses.

As to rentals for Lot 896-B-9-B and the house thereon, respondent Victor testified that they never
agreed to rent the house and when they finally took over the same, it was practically inhabitable and
so they even incurred expenses to repair the house. 27 There is absolutely no proof of the rental value
for the house, considering the condition it was in; as well as for the lot respondent spouses are
occupying.

Respondent spouses, having knowledge of the flaw in their mode of acquisition, are deemed to be
possessors in bad faith under Article 526 28 of the Civil Code. However, they have a right to be
refunded for necessary expenses on the property as provided under Article 546 29 of the same Code.
Unfortunately, there is no credible proof to support respondent spouses' allegation that they spent
more than P400,000.00 to repair and make the house habitable.

Set-off or compensation is governed by Article 1279 of the Civil Code which provides, thus:

Article 1279. In order that compensation may be proper, it is necessary:

1. That each one of the obligors be bound principally, and that he be at the time a principal
creditor of the other;

2. That both debts consist in a sum of money, or if the things due are consumable, they be of
the same kind, and also of the same quality if the latter has been stated;

3. That the two debts be due;

4. That they be liquidated and demandable;

 5. That over neither of them there be any retention or controversy, commenced by third
persons and communicated in due time to the debtor.

Therefore, under paragraph 4 of the foregoing provision, compensation or set-off is allowed only if
the debts of both parties against each other is already liquidated and demandable. To liquidate
means "to make the amount of indebtedness or an obligation clear and settled in the form of
money."30 In the present case, no definite amounts for rentals nor for expenses for repairs on subject
house has been determined. Thus, in the absence of evidence upon which to base the amount of
rentals, no compensation or set-off can take place between petitioners and respondent spouses.

While the courts are empowered to set an amount as reasonable compensation to the owners for
the use of their property, this Court cannot set such amount based on mere surmises and conjecture

WHEREFORE, the petition is PARTLY GRANTED. The Decision of the Court of Appeals dated
September 25, 2002 is MODIFIED to read as follows:

1. declaring respondent spouses Victor Jr. and Elena Alinas owners of Lot 896-B-9-A with the
building (bodega) standing thereon and affirming the validity of their acquisition thereof from the
Rural Bank of Oroquieta, Inc.;

2. declaring Onesiforo's sale of Lot 896-B-9-B together with the house standing thereon to
respondent spouses null and void ab initio;

3. ordering petitioners to jointly and severally reimburse respondent spouses the redemption amount
of P111,110.09 with interest at 6% per annum from the date of filing of the complaint, until
finality of this decision. After this decision becomes final, interest at the rate of 12% per
annum on the principal and interest (or any part thereof) shall be imposed until full payment;

4. ordering the respondent spouses to convey and transfer Lot 896-B-9-B to petitioners and vacate
said premises within fifteen (15) days from finality of this Decision; and

5. in the event of failure of respondent spouses to execute the acts as specified above, petitioners
may proceed against them under Section 10, Rule 39 of the 1997 Rules of Civil Procedure.

No costs.

SO ORDERED.

Ynares-Santiago, Chairperson, Chico-Nazario, Nachura, Reyes, JJ., concur.

 Republic of the Philippines
SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 160380               July 30, 2009

SPOUSES EDUARDO and LETICIA MONTAÑO, Petitioners,

vs.
ROSALINA FRANCISCO, THE CITY GOVERNMENT OF ILOILO, ROMEO V. MANIKAN, City
Treasurer of Iloilo City, and ERLINDA C. ZARANDIN, Head of the Treasurer's Enforcement
Group, Respondents.

DECISION

PERALTA, J.:

This is a petition for review on certiorari of the Decision1 dated April 24, 2003 of the Court of Appeals
in CA-G.R. CV No. 71004, and its Resolution dated August 20, 2003, denying petitioners’ motion for
reconsideration. The Court of Appeals Decision held that the tax delinquency proceedings involving
the parcel of land covered by Transfer Certificate of Title (TCT) No. T-41681 is legal and with force
and effect. It reversed and set aside the Decision2 dated January 12, 2001 of the Regional Trial
Court (RTC) of Iloilo City, Branch 23 (trial court).

The facts3 are as follows:

Petitioners spouses Eduardo and Leticia Montaño established that on April 13, 1977, they executed
a Deed of Conditional Sale4 with the Government Service Insurance System (GSIS) covering a
parcel of land situated at Block 2, Lot 6, Maharlika Homes, Jaro, Iloilo City, together with the house
and improvements thereon. The lot was covered by TCT No. T-41681. The Montaños started paying
the amortization in January 1979, and occupied the house and lot in 1980. However, in the summer
of 1994, one Atty. Salvador Paja I went to their house and claimed that the lot was already owned by
respondent Rosalina Francisco.

Leticia Montaño made inquiries regarding the alleged sale of the lot. She went to the Register of
Deeds and discovered an annotation at the back of TCT No. T-41681, 5 under Entry No. 170334
dated July 17, 1991, stating that a Certificate of Sale of Delinquent Real Property dated June 28,
1991 was executed by the City Treasurer's Office in favor of Rosalina Francisco covering the parcel
of land for the sum of ₱2,225.19 representing taxes, penalties and cost of sale pursuant to the
provision of Section 76 of Presidential Decree (P.D.) No. 464. 6 It also appeared at the back of the
same title, under Entry No. 201610 dated July 16, 1993, that Judge Quirico Defensor of the RTC of
Iloilo City, Branch 36 issued an Order7 dated April 29, 1993, directing the Register of Deeds of Iloilo
City to issue a new owner's duplicate copy of the said certificate of title in the name of GSIS and
declaring the lost copy as null and void.

On June 13, 1994, Leticia Montaño requested the Register of Deeds of Iloilo City to annotate a
Notice of Adverse Claim on TCT No. T-41681 to protect her right and interest in the subject property
by virtue of the Deed of Conditional Sale executed by GSIS in her favor.
Leticia Montaño also went to the Office of the City Treasurer where she learned that respondent
Francisco purchased the subject property in a public auction sale of delinquent real property
conducted by public respondents on June 27, 1991. Petitioners averred that they were neither given
any notice of tax delinquency nor informed of the schedule of the public auction sale. They were also
not furnished a copy of the sale certificate. Moreover, they did not receive any notice of their right to
redeem the subject property.

On July 11, 1994, the Montaños filed before the RTC of Iloilo City, Branch 23, an action for
declaration of nullity of sale and damages against Rosalina Francisco, the City Government of Iloilo,
the City Treasurer and the Head of the Treasurer’s Enforcement Group. They caused a Notice of Lis
Pendens8 to be recorded, and paid the tax due by consignation, 9 pursuant to Section 267 of the
Local Government Code of 1991.10

Benson Chin of the City Treasurer's Office, in compliance with the subpoena and subpoena duces
tecum issued by the trial court, brought the record folder of the subject property in the name of
Baldomero Dagdag. The property's records presented before the trial court consisted of the Notice of
Sale of Delinquent Real Property;11 the Certificate of Posting;12 the Certification on the conduct of
auction sale by crier held on June 10, 1991 at the terminal market, on June 11, 1991 at the La Paz
Public Market and on June 14, 1991 at the Central Market; 13 proof of service;14 the Certificate of Sale
of Delinquent Property to the City;15 the Report of Sale of Delinquent Property 16 dated July 2, 1991;
the Notice of Right to Redeem17 addressed to GSIS c/o Baldomero Dagdag dated July 12, 1991; and
the Final Deed of Sale18 dated July 17, 1992.

Public respondents City Treasurer of Iloilo City Romeo Manikan and Head of the Treasurer’s
Enforcement Group Erlinda Zarandin filed their Answer with Counterclaim, 19 alleging that petitioners
were not notified because they had no right to be notified since the property was owned by the GSIS
under the care of Baldomero Dagdag, who were notified in accordance with law. Moreover,
petitioners had no cause of action insofar as they were concerned, and that they had no personality
to sue.

The evidence for private respondent Rosalina Francisco showed that Atty. Salvador Paja I, in whose
favor respondent Francisco executed a Special Power of Attorney, 20 bought at a public auction sale
held on June 27, 1991, a parcel of land known as Lot 6, Block 2, Phase 2144-B, located in Barangay
Balabago, Jaro, Iloilo City, registered in the name of the GSIS, and covered by TCT No. T-
41681.21 The Certificate of Sale of Delinquent Real Property executed by the City Treasurer’s Office
in favor of respondent Francisco was annotated at the back of TCT No. T-41681 under Entry No.
170334.22 Since no redemption had been made within the one year period, a Final Deed of Sale was
executed.

On November 17, 1992, respondent Francisco, represented by Atty. Paja, filed a petition for the
entry of new Certificate of Title in her favor with the RTC of Iloilo City, Branch 36. She sought the
issuance of a new Owner’s Duplicate Copy of Certificate of Title in the name of GSIS c/o Baldomero
Dagdag to effect registration of the Final Deed of Sale. Absent any opposition, the RTC issued an
Order23 dated April 29, 1993 directing the Register of Deeds of Iloilo City "to issue a new owner's
duplicate copy of Transfer Certificate of Title No. T-41681 in the name of GSIS c/o Baldomero
Dagdag" and declaring the lost copy as null and void. The dispositive portion of the Order was
annotated at the back of the Certificate of Title under Entry No. 201610. 24lavvphil

The main issue sought to be resolved was whether or not the tax delinquency proceedings made on
the subject lot was regular and legal.
On January 12, 2001, the trial court rendered a Decision, holding that the failure of public
respondent Iloilo City Treasurer to comply with the requirements as to the publication and notice of
auction sale invalidated the auction sale. The dispositive portion of the Decision reads:

WHEREFORE, in the light of the facts obtaining and the jurisprudence aforecited, judgment is
hereby rendered in favor of the plaintiffs and against all the defendants, hereby:

1) Declaring the tax delinquency proceedings (the auction sale) on the lot subject of this
case as illegal and without force and effect;

2) No costs.

SO ORDERED.25

Respondent Francisco appealed the trial court’s Decision to the Court of Appeals. In a Decision
dated April 24, 2003, the appellate court reversed the decision of the trial court, the dispositive
portion of which states:

WHEREFORE, premises considered, the Decision dated January 12, 2001 of the Regional Trial
Court, Branch 23, Iloilo City in Civil Case No. 21871 is hereby REVERSED and SET ASIDE.

Accordingly, the tax delinquency proceedings involving the parcel of land (Lot No. 6) covered by
TCT No. 41681 is declared legal and with force and effect.

Defendant-appellant’s claim for damages is denied for lack of merit.

SO ORDERED.26

The Court of Appeals held that the GSIS, as the registered owner of the property, is the taxpayer
entitled to the notice of tax delinquency. It found that GSIS was not deprived of its property without
due process and that notice was regularly served. Under a contract to sell, the vendor retains the
ownership of the property until after the same is fully paid by the vendee. Hence, when public
respondents caused the service of the notice of sale to Baldomero Dagdag of the GSIS, the interest
of the taxpayer was deemed to have been protected and the notice requirement was complied with.

As regards the alleged defect in publication, the Court of Appeals noted that per affidavit of the
Editor-in-Chief of the Visayan Tribune, the notice was published thrice, as required by law. Citing
Talusan v. Tayag,27 the appellate court held that granting arguendo that the notice was published
only twice instead of thrice, as required by law, the same is no longer material to the case since the
interest of the taxpayer was protected by the service of personal notice to the registered owner of
the property.

Further, the Court of Appeals pointed out that in GSIS v. City Assessor of Iloilo City, 28 it had already
upheld the validity of the assessment of the real property taxes upon GSIS and the auction sale
proceedings, as it sustained the finding of the lower courts that notices were sent to the GSIS and
the beneficial owners of the properties in question, which includes the subject lot.

Petitioners’ motion for reconsideration was denied by the Court of Appeals in a Resolution 29 dated
August 20, 2003.

Hence, this petition.

The main issue raised is whether or not the tax delinquency proceedings conducted on the subject
parcel of land situated at Block 2, Lot 6, Alta Tierra Village, Jaro, Iloilo City 30 was regular and legal.

Petitioners contend that the Court of Appeals erred in holding that the tax delinquency proceedings
was legal and with force and effect, since the requirements regarding the publication and notice of
an auction sale under Section 73 of P.D. No. 464 were not complied with.

The petition is without merit.

The pertinent provision of law in this case is Section 73 of P.D. No. 464, thus:

SEC. 73. Advertisement of sale of real property at public auction. -After the expiration of the year for
which the tax is due, the provincial or city treasurer shall advertise the sale at public auction of the
entire delinquent real property, except real property mentioned in subsection (a) of Section forty
hereof, to satisfy all the taxes and penalties due and the costs of sale. Such advertisement shall be
made by posting a notice for three consecutive weeks at the main entrance of the provincial building
and of all municipal buildings in the province, or at the main entrance of the city or municipal hall in
the case of cities, and in a public and conspicuous place in the barrio or district wherein the property
is situated, in English, Spanish and the local dialect commonly used, and by announcement at least
three market days at the market by crier, and, in the discretion of the provincial or city treasurer, by
publication once a week for three consecutive weeks in a newspaper of general circulation published
in the province or city.

The notice, publication, and announcement by crier shall state the amount of the taxes, penalties
and costs of sale; the date, hour, and place of sale; the name of the taxpayer against whom the tax
was assessed; and the kind or nature of property and, if land, its approximate areas, lot number, and
location stating the street and block number; district or barrio, municipality and the province or city
where the property to be sold is situated.

Copy of the notice shall forthwith be sent either by registered mail or by messenger, or through the
barrio captain, to the delinquent taxpayer, at his address as shown in the tax rolls or property tax
records cards of the municipality or city where the property is located, or at his residence, if known to
said treasurer or barrio captain: Provided, however, that a return of the proof of service under oath
shall be filed by the person making the service with the provincial or city treasurer concerned.

In Talusan v. Tayag,31 the Court held that for purposes of the collection of real property taxes, the
registered owner of the property is considered the taxpayer. Hence, only the registered owner is
entitled to a notice of tax delinquency and other proceedings relative to the tax sale. 32

In this case, the Court of Appeals correctly held that the GSIS, as the registered owner of the subject
property, was the taxpayer that was entitled to the notice of tax delinquency and that of the auction
sale, as well as other related notices. It found that the GSIS was not deprived of its property without
due process and that notice was regularly served. It pointed out that it had already upheld the
validity of the assessment of the real property taxes upon GSIS and the auction sale proceedings in
GSIS v. City Assessor of Iloilo City.33

It is important to note that both the GSIS, as the registered owner of the subject property, and herein
petitioners Spouses Montaño separately questioned the validity of the auction sale of the subject
property covered by TCT No. T-41681.
The Court of Appeals mentioned in its Decision that there are two cases involving the same issue,
namely, this action for declaration of nullity of sale and damages filed by the Spouses Montaño, and
the petition for annulment of judgment filed by the GSIS, docketed as CA-G.R. SP No. 51149,
entitled GSIS v. City Assessor of Iloilo City, the Register of Deeds of Iloilo City and Rosalina
Francisco (GSIS v. City Assessor of Iloilo City).

In GSIS v. City Assessor of Iloilo City, the GSIS assailed the Order dated April 29, 1993 of the RTC
of Iloilo City, Branch 36 and the Order dated November 8, 1994 of the RTC of Iloilo, Branch 31 in
regard to the petition of herein respondent Rosalina Francisco for the entry of new transfer
certificates of title in her name, which included TCT No. T-41681 covering the subject parcel of land
in this case. The GSIS claimed that the assessment of real property taxes on the parcels of land was
void because it was exempt from all forms of taxes under its charter, Republic Act No. 8291. The
GSIS also claimed that it had no notice of the proceedings in the assessment and levy of the taxes,
as well as the sale of the properties at public auction; hence, its right to due process was violated.

In GSIS v. City Assessor of Iloilo City, the Court of Appeals upheld the findings of the lower courts
that notices were sent to GSIS and the

beneficial owners of the properties in question. It gave no credence to the arguments of GSIS and
denied its petition.

GSIS appealed the decision of the Court of Appeals before this Court via a petition for review on
certiorari. In a Decision dated June 27, 2006 in G.R. No. 147192, 34 this Court dismissed the GSIS’
petition for review on certiorari of the Decision of the Court of Appeals in CA-G.R. SP No. 51149
dated August 8, 2000. Hence, the finding of the Court of Appeals in regard to the validity of the
auction sale proceedings of the subject property has long been final.

WHEREFORE, the petition is DENIED. The Decision dated April 24, 2003 and the Resolution dated
August 20, 2003 of the Court of Appeals in CA-G.R. CV No. 71004 are hereby AFFIRMED.

No costs.

SO ORDERED.

DIOSDADO M. PERALTA
Associate Justice

WE CONCUR:

CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson

MINITA V. CHICO-NAZARIO PRESBITERIO J. VELASCO, JR.

Associate Justice Associate Justice

ANTONIO EDUARDO B. NACHURA

Associate Justice

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

CONSUELO YNARES-SANTIAGO
Associate Justice
Third Division, Chairperson

CERTIFICATION

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

REYNATO S. PUNO
Chief Justice
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 156318               September 5, 2011

SPOUSES ANSELMO1 and PRISCILLA BULAONG, Petitioners,

vs.
VERONICA GONZALES, Respondent.

DECISION

BRION, J.:

Petitioners Anselmo Bulaong and Priscilla Bulaong – collectively referred to as the Bulaongs – seek,
through their petition for review on certiorari, the reversal of the decision 2 of the Court of Appeals
(CA) dated July 31, 2002 in CA-G.R. SP No. 55423 and the subsequent resolution of November 27,
20023 reiterating this decision. These CA rulings reversed and set aside the decision 4 of the Regional
Trial Court (RTC) of Malolos, Bulacan, Branch 12, that ordered the cancellation of Transfer
Certificate of Title (TCT) No. T-62002 and TCT No. T-62003.

FACTUAL ANTECEDENTS

This case traces its roots to the conflicting claims of two sets of parties over two parcels of land. The
first parcel of land, with an area of 237 square meters and covered by TCT No. T-249639, 5 was
originally registered in the name of Fortunato E. Limpo, married to Bertha Limpo. 6 The other parcel
of land, with an area of 86 square meters and covered by TCT No. T-249641, 7 was originally
registered in the names of Pacifica E. Limpo, married to Nicanor C. Sincionco, and Fortunato E.
Limpo, married to Bertha Limpo.8

These parcels of land were mortgaged by the daughter of Fortunato and Bertha Limpo, Regina
Christi Limpo, upon the authority of her father, 9 to the Bulaongs, to secure a loan in the amount of
₱4,300,000.00. The mortgage was evidenced by a Deed of Mortgage dated January 13, 1993. 10

The Bulaongs alleged that before they executed the mortgage, Regina gave them the owner’s
duplicates of title of the two properties. In early January 1993 (the exact date is unknown but prior to
the execution of the mortgage), Anselmo Bulaong, together with his counsel, Atty. Roberto Dionisio,
allegedly went to the Office of the Register of Deeds of Bulacan to check the titles of the properties
to be mortgaged. According to the Bulaongs, the Register of Deeds, Atty. Elenita Corpus, assured
them that TCT Nos. T-249639 and T-249641 were completely clear of any liens or encumbrances
from any party. Relying on this assurance, Anselmo Bulaong agreed to the execution of the
mortgage over the two properties.11

After the execution of the mortgage, the Bulaongs once again went to the Office of the Register of
Deeds of Bulacan to register and annotate the mortgage on the titles. They learned then that the
Register of Deed’s copies of the two titles were among the records that were burned in the fire that
destroyed the entire office of the Register of Deeds of Bulacan on March 7, 1987. Atty. Elenita
Corpus convinced them to cause the reconstitution of the originals of the titles, and further assured
them that the mortgage over the properties would be protected since a copy of the Deed of
Mortgage had already been given to her office for annotation. 12

On February 4, 1993, the newly reconstituted titles were issued – TCT No. RT-29488 replaced TCT
No. T-249639, and TCT No. RT-22489 replaced TCT No. T-249641, still in the names of Fortunato
Limpo, and of Pacifica Limpo and Fortunato Limpo, respectively.

Thereafter, on February 24, 1993, new titles were again issued upon the extrajudicial settlement of
the estate of Regina’s parents. Thus, TCT No. RT-29488 was cancelled and TCT No. T-30395 was
issued in its place, with Regina replacing her parents as the registered owner; similarly, TCT No. RT-
22489 was cancelled and TCT No. T-30396 was issued in the names of Pacifica Limpo and Regina
Limpo, as her parents’ heir.13

To the Bulaongs’ astonishment, the new titles in Regina’s name now contained the following entries:

TCT No. T-30395

Entry No. 5306; Kind: Condition: The property herein described is subject to the prov. of sec. 4, rule
74 of the rules of court. date of instrument: 1-13-93; date of inscription: 2-24-93 at 10:42 a.m.

(SGD.) ELENITA E. CORPUS

Register of Deeds

Entry No. 5484; Kind: Mortgage: Exec. In favor of: Sps. Anselmo Bulaong & Priscilla Bulaong;
Condition: Covering the parcel of land herein described, for the sum of P4,300,000.00 subject to all
the conditions stipulated in the deed of mortgage on file in this office. Doc. No. 428, Page 86, Book
XXX, S. of 1993, N.P. – Roberto Dionisio of Mal. Bul. Date of Instrument: 1-13-93; date of inscription
– 3-1-93 at 9:20 a.m.

(SGD.) ELENITA E. CORPUS

Register of Deeds

/5306

(NOTE: Proceed to Entry no. 5484)

Entry No. 7808: Kind: NOTICE OF LEVY ON EXECUTION: Conditions: Notice is hereby given that
by virtue of the Writ of Execution, issued in Crim. Cases Nos. 9638 to 9646-M, entitled "People of
the Philippines v. Reggie Christi Schaetchen Limpo and Maria Lourdes (Bong) Diaz y Gamir, et al.,
Accused" by the Regional Trial Court, Third Jud. Region, Branch 12, Malolos, Bulacan, under date of
Dec. 29, 1992, and at the instance of the private complainant Veronica R. Gonzales, thru counsel,
levy on execution is hereby made upon all the rights, shares, interests and participations of accused
Reggie Christi Schaetchen14 over the real properties described in T-249641 and T-249639, by virtue
of Deeds of Absolute Sale executed by former registered owners in favor of Reggie Christi
Schaetchen dated November 5, 1991, together with all the improvements existing thereon, was
levied on execution preparatory to the sale of the same without prejudice to third persons having
better right thereof and to any valid lien and encumbrances. Date of instrument – Jan. 4, 1993; Date
of inscription – Jan. 4, 1993 at 11:50 a.m.
(SGD.) ELENITA E. CORPUS
Register of Deeds/negm15 (emphasis ours)

TCT No. T-30396

Entry No. 5306; Kind: Condition: One-half (1/2) of the property herein described is subject to the
prov. of sec. 4, rule 74 of the rules of court. date of instrument: 1-13-93; date of inscription: 2-24-93
at 10:42 a.m.

(SGD.) ELENITA E. CORPUS

Register of Deeds

Entry No. 5484; Kind: Mortgage: Exec. In favor of: Sps. Anselmo Bulaong & Priscilla Bulaong;
Condition: Covering the parcel of land herein described, for the sum of P4,300,000.00 subject to all
the conditions stipulated in the deed of mortgage on file in this office. Doc. No. 428, Page 86, Book
XXX, S. of 1993, N.P. – Roberto Dionisio of Mal. Bul. Date of Instrument: 1-13-93; date of inscription
– 3-1-93 at 9:20 a.m.

(SGD.) ELENITA E. CORPUS

Register of Deeds

/5306

(NOTE: Proceed to Entry No. 5484)

Entry No. 7808: Kind: NOTICE OF LEVY ON EXECUTION: Conditions: Notice is hereby given that
by virtue of the Writ of Execution, issued in Crim. Cases Nos. 9638 to 9646-M, entitled "People of
the Philippines v. Reggie Christi Schaetchen Limpo and Maria Lourdes (Bong) Diaz y Gamir, et al.,
Accused" by the Regional Trial Court, Third Jud. Region, Branch 12, Malolos, Bulacan, under date of
Dec. 29, 1992, and at the instance of the private complainant Veronica R. Gonzales, thru counsel,
levy on execution is hereby made upon all the rights, shares, interests and participations of accused
Reggie Christi Schaetchen over the real properties described in T-249641 and T-249639, by virtue
of Deeds of Absolute Sale executed by former registered owners in favor of Reggie Christi
Schaetchen dated Nov. 5, 1991, together with all the improvements existing thereon, was levied on
execution preparatory to the sale of the same without prejudice to third persons having better right
thereof and to any valid lien and encumbrances. Date of instrument – Jan. 4, 1993; Date of
inscription – Jan. 4, 1993 at 11:50 a.m.

(SGD.) ELENITA E. CORPUS

Register of Deeds/negm16 (emphasis ours)

It appears that a certain Veronica Gonzales had filed a criminal case for estafa against Regina with
the RTC of Bulacan, Branch 12.17 On October 28, 1991, the RTC rendered a decision acquitting
Regina, but at the same time ordering her to pay Veronica actual damages in the total amount of
₱275,000.00.18 By virtue of a writ of execution issued on December 29, 1992, the above-quoted
notice of levy was recorded in the Primary Entry Book of the Registry of Bulacan on January 4,
1993. However, this was not annotated on the titles themselves because at the time of the levy, the
properties had not yet been transferred to Regina, but were still registered in the name of her
parents.19
Based on the annotation referring to the notice of levy, the subject of the levy was Regina’s interest
in the properties which, in turn, was anchored on a Deed of Absolute Sale allegedly executed by her
parents on November 5, 1991 to transfer their interest in both properties to her. Notably, Regina
never registered this sale with the Register of Deeds.

To satisfy Regina’s judgment debt, the two lots were sold at public auction on June 8, 1993 to
Veronica, the only bidder, for ₱640,354.14.20 The Certificate of Sale was annotated on the titles on
June 8, 1993 as Entry No. 2075. Upon the lapse of the one year redemption period on June 20,
1994, Veronica’s titles over the properties were consolidated. A final deed of sale was issued in
Veronica’s name and annotated as Entry No. 40425 on TCT Nos. T-30395 and T-30396 on June 24,
1994.21

On the other hand, the Bulaongs also had the mortgage extrajudicially foreclosed, with the sheriff
conducting the auction sale on August 22, 1994. The Bulaongs were the highest bidders, buying the
properties for the sum of ₱4,300,000.00. They also paid the corresponding capital gains tax of
₱215,000.00, plus ₱64,500.00 for the documentary stamp tax, which were required before the titles
to the lots could be transferred in their names. The Certificate of Sale in their favor was inscribed on
August 23, 1994 on TCT No. T-30395 and TCT No. T-30396 as Entry No. 46739. 22

Veronica thereafter filed a petition for the surrender to the Register of Deeds of the owner’s copies of
TCT Nos. T-30395 and T-30396 with the RTC of Malolos, docketed as LRC Case No. P-292. On
December 16, 1994, the RTC granted the petition and ordered Regina to surrender her owner’s
copies of the titles; should Regina fail to comply, the RTC ordered the Register of Deeds to cancel
these titles and issue new ones in Veronica’s name. Complying with this order, the Register of
Deeds cancelled TCT Nos. T-30395 and T-30396, and issued TCT No. T-62002 in Veronica’s name,
and TCT No. T-62003 in the name of Veronica and Pacifica Limpo. These new titles were "clean"
and did not contain any annotations, liens or encumbrances.

The Bulaongs thus filed a petition for mandamus with the RTC of Bulacan against Ramon Sampana,
the incumbent Register of Deeds of Bulacan, and Veronica, praying that the court order Sampana to
cancel TCT Nos. T-62002 and T-62003, and issue new titles in their names; and order the
respondents therein to pay them moral and exemplary damages, and attorney’s fees.

On July 30, 1999, the RTC ruled in favor of the Bulaongs. According to the RTC, allowing Veronica
to levy on the properties worth at least ₱5,000,000.00 for a judgment of ₱275,000.00 would result in
gross unjust enrichment. The RTC thus ordered the Register of Deeds of Bulacan to issue new titles
in the name of the Bulaongs, but only after the Bulaongs had reimbursed the amount of ₱275,000.00
to Veronica, with interest. The RTC also ordered Veronica to pay the Bulaongs ₱50,000.00 as
attorney’s fees. The dispositive portion of the RTC decision reads:

WHEREFORE, conformably with all the foregoing, judgment is hereby rendered:

1. – Annulling and cancelling Transfer Certificates of Title Nos. T-62002 in the name of
defendant Veronica Gonzales, and T-62003 in the name of defendant Veronica Gonzales
and Pacifica E. Limpo married to Nicanor C. Sincioco;

2. – Ordering the Ex-Officio Sheriff of Bulacan to execute a final deed of sale in favor of
petitioner spouses Anselmo Bulaong and Pr[i]scilla Bulaong on the basis of the registered
Certificate of Sale executed by said court officer on August 23, 1994, in favor of said
spouses-mortgagee, without the owner-mortgagors exercising the right of redemption since
then;
 3. – Ordering the Register of Deeds of Bulacan to issue new titles, in place of Transfer
Certificate of Title Nos. T-62002 and T-62003, this time in the name of petitioner spouses
Anselmo Bulaong and Pr[is]cilla Bulaong, as soon as the aforesaid final deed of sale in their
favor is executed by the Ex-Officio Sheriff of Bulacan and only after said spouses shall have
paid and/or reimbursed Veronica Gonzales’ lien as judgment creditor in the amount of
₱275,000.00, plus interests at the legal rate computed from November 19, 1995, until fully
paid and satisfied;

4. – Order[ing] herein defendants Veronica R. Gonzales and the Register of Deeds of

Bulacan upon notice of this judgment, not to effect any transfer, encumbrance or any
disposition whatsoever of the parcels of land covered by Transfer Certificates of Title Nos.
62002 and T-62003, or any part thereof, right or interest therein, either by sale or any form of
conveyance, lien or encumbrance; and

5. – Ordering only defendant Veronica R. Gonzales to pay herein petitioners ₱50,000.00 as

just and equitable attorney’s fees, and the costs of suit, defendant Ramon C. Sampana as
the Register of Deeds of Bulacan having merely performed his ministerial duty of following
the court order of issuing titles to defendant Gonzales.

No pronouncement as to moral and exemplary damages alleged in the petition but not even testified
to by petitioners at the trial.23

Both parties appealed to the CA, with the case docketed as CA-G.R. SP No. 55423.

THE COURT OF APPEALS D E C I S I O N

In its July 31, 2002 decision, the CA upheld the validity of the Notice of Levy on Execution, noting
that it created a lien in favor of the judgment creditor over the property. According to the CA, when
the Bulaongs received the owners’ copies of TCT Nos. T-30395 and T-30396, the Notice of Levy
was already annotated on the titles and, thus, should have put them on guard. As mortgagees of the
lots, the Bulaongs had the option to redeem the properties within the redemption period provided by
law. Since they failed to avail of this remedy, the consolidation of titles in Veronica’s name was
proper.

THE PETITION

The Bulaongs filed the present petition, raising the following issues:

a) Whether Entry No. 7808 is valid;

b) Whether Veronica has a superior right over the properties; and

c) Assuming the notice of levy earlier annotated in favor of Veronica to be valid, whether
there was a valid foreclosure sale.

THE COURT’S RULING

We GRANT the petition.

Procedural issues
Time and again, we have stated that petitions for review on certiorari shall only raise questions of
law, as questions of fact are not reviewable by this Court. The main issue of who has a better right
over the disputed properties is not only a question of law but one that requires a thorough review of
the presented evidence, in view particularly of the Bulaongs’ allegation that fraud attended the
annotation of Entry No. 7808 in the titles. Thus, in the usual course, we would have denied the
present petition for violation of Section 1, Rule 45 of the Rules of Court, which provides:

Section 1. Filing of petition with Supreme Court. — A party desiring to appeal by certiorari from a
judgment or final order or resolution of the Court of Appeals, the Sandiganbayan, the Regional Trial
Court or other courts whenever authorized by law, may file with the Supreme Court a verified petition
for review on certiorari. The petition shall raise only questions of law which must be distinctly set
forth. (emphasis ours)

This rule, however, admits of several exceptions. Questions of fact may be reviewed, among others,
when the lower court makes inferences that are manifestly mistaken, and when the judgment of the
CA is based on a misapprehension of facts.24 As will be apparent in the discussions below, these
exceptional circumstances are present in the present case. A review of the evidence, therefore, is
not only allowed, but is necessary for the proper resolution of the presented issues.

It has not escaped our attention that the Bulaongs appear to have erroneously filed a petition for
mandamus for what is essentially an action to assail the validity of Veronica’s certificates of title over
the subject properties. This lapse, however, is not legally significant under the well-settled rule that
the cause of action in a complaint is not the title or designation of the complaint, but the allegations
in the body of the complaint. The designation or caption is not controlling as it is not even an
indispensable part of the complaint; the allegations of the complaint control. 25 We thus proceed to
resolve the case, bearing in mind that the relief the Bulaongs sought before the lower court was to
nullify Veronica’s certificates of title and to order the Register of Deeds to issue new titles in their
name.

Redemption not the proper remedy

The CA faulted the Bulaongs for not redeeming the properties from Veronica when they had the
option of doing so. For failing to exercise this right, the CA concluded that the consolidation of the
titles to the lots in Veronica’s name thus became a matter of course.

We disagree.

At the outset, we observe that this is not a simple case of determining which lien came first. A
perusal of the Bulaongs’ submissions to the Court shows that they have consistently maintained that
the levy and the corresponding execution sale in Veronica’s favor are null and void. Had the
Bulaongs merely exercised the right of redemption, they would have been barred from raising these
issues in court, pursuant to our ruling in Cometa v. Intermediate Appellate Court: 26

The respondent appellate court's emphasis on the failure of the petitioner to redeem the properties
within the period required by law is misplaced because redemption, in this case, is inconsistent with
the petitioner's claim of invalidity of levy and sale. Redemption is an implied admission of the
regularity of the sale and would estop the petitioner from later impugning its validity on that
ground.27 (emphasis ours)

The Bulaongs were thus justified in their refusal to redeem the properties.
Annotation is valid

The Bulaongs assail the validity of Entry No. 7808 (relating to the Notice of Levy on Execution in
Veronica’s favor) on the two titles, asserting that it is null and void for being a fraudulent entry. In
support of this contention, they note the following suspicious circumstances: (a) although Entry No.
7808 has a higher number and appears after Entry No. 5484 (corresponding to the Bulaongs’
mortgage) on the titles, Entry No. 7808 appeared in an earlier volume of the Book of Entries; and (b)
although the Notice of Levy on Execution was purportedly presented to the Registry of Bulacan on
January 4, 1993, or prior to the date when the Bulaongs’ deed of mortgage was presented on
January 13, 1993, the Notice of Levy on Execution, Entry No. 7808, was numbered and placed after
the mortgage, Entry No. 5484, on the titles.

We agree that these circumstances render the Notice of Levy on Execution, annotated on the titles,
highly suspicious. These circumstances, however, can be sufficiently explained when the records
are examined.

The records show that on January 4, 1993, Veronica went to the Registry of Bulacan with the Notice
of Levy on Execution, requesting that the notice be registered. While the Register of Deeds placed
the Notice of Levy on Execution in the Primary Entry Book, she did not immediately make a
registration when a question arose regarding the registrability of the notice; the question
necessitated the submission of a consulta to the Land Registration Authority (LRA) on January 25,
1993.28

The LRA Administrator responded to the consulta only on February 10, 1993. 29 Thus, the Notice of
Levy on Execution was not immediately annotated on the newly reconstituted titles, which were
issued on February 4, 1993. It was only when new titles were again issued to reflect the extrajudicial
settlement of the estate of Regina’s parents on February 24, 1993 that the Notice of Levy on
Execution appeared on the titles as Entry No. 7808.

The apparent discrepancy in the numbering of the Notice of Levy on Execution and the date of
inscription on the certificates of title is suitably explained by Section 56 of Presidential Decree No.
1529 whose pertinent portion states:

Section 56. Primary Entry Book; fees; certified copies. – Each Register of Deeds shall keep a
primary entry book in which, upon payment of the entry fee, he shall enter, in the order of their
reception, all instruments including copies of writs and processes filed with him relating to registered
land. He shall, as a preliminary process in registration, note in such book the date, hour and minute
of reception of all instruments, in the order in which they were received. They shall be regarded as
registered from the time so noted, and the memorandum of each instrument, when made on the
certificate of title to which it refers, shall bear the same date: Provided, that the national government
as well as the provincial and city governments shall be exempt from the payment of such fees in
advance in order to be entitled to entry and registration. [emphases ours]

In other words, the order of entries in the Primary Entry Book determines the priority in registration.
Thus, the Register of Deeds merely complied with the law when she fixed Entry No. 7808’s date of
inscription as January 4, 1993, to coincide with the date when the Notice of Levy on Execution was
presented and inscribed in the Primary Entry Book.

The late annotation of the levy on execution on the titles did not at all lessen its effectivity.
Jurisprudence has already established the rule that the entry of the notice of levy on execution in the
Primary Entry Book, even without the corresponding annotation on the certificate of titles, is
sufficient notice to all persons that the land is already subject to the levy. 30 As we explained in Armed
Forces and Police Mutual Benefit Association, Inc. v. Santiago: 31

The notice of levy on attachment in favor of petitioner may be annotated on TCT No. PT-
94912. Levin v. Bass (91 Phil. 420 [1952]; see also Dr. Caviles, Jr. v. Bautista, 377 Phil. 25; 319
SCRA 24 [1999]; Garcia v. Court of Appeals, 184 Phil. 358; 95 SCRA 380 [19890]) provided the
distinction between voluntary registration and involuntary registration. In voluntary registration,
such as a sale, mortgage, lease and the like, if the owner's duplicate certificate be not surrendered
and presented or if no payment of registration fees be made within fifteen (15) days, entry in the day
book of the deed of sale does not operate to convey and affect the land sold. In involuntary
registration, such as an attachment, levy upon execution, lis pendens and the like, entry thereof in
the day book is a sufficient notice to all persons of such adverse claim.

The entry of the notice of levy on attachment in the primary entry book or day book of the Registry of
Deeds on September 14, 1994 is sufficient notice to all persons, including the respondent, that the
land is already subject to an attachment. The earlier registration of the notice of levy on attachment
already binds the land insofar as third persons are concerned. 32 (emphases ours)

Consequently, when the Register of Deeds placed the Notice of Levy on Execution in the Primary
Entry Book on January 4, 1993, this entry already bound third persons to the notice entered.

Validity of the Levy

i. Regina’s interest in the properties is not established

The levy on execution for judgment is "the act x x x by which an officer sets apart or appropriate[s,]
for the purpose of satisfying the command of the writ, a part or the whole of the judgment debtor’s
property."33 Every interest which the judgment debtor may have in the property may be subjected to
levy on execution.34 As established by the Court in Reyes v. Grey:35

The term "property" as here applied to lands comprehends every species of title, inchoate or
complete; legal or equitable. This statute authorizes the sale under execution of every kind of
property, and every interest in property which is, or may be, the subject of private ownership and
transfer. It deals with equitable rights and interests as it deals with legal, without anywhere expressly
recognizing or making any distinction between them. [emphases ours]

In Reyes, the Court set the standard to be applied in determining the kind of property that can be
subject to attachment:

We think the real test, as to whether or not property can be attached and sold upon execution is —
does the judgment debtor hold such a beneficial interest in such property that he can sell or
otherwise dispose of it for value? If he does, then the property is subject to execution and payment
of his debts.36 (emphasis and underscoring ours)

Applying the test in Reyes, the Court, in Gotauco & Co. v. Register of Deeds of
Tayabas,37 recognized as valid the inscription of a notice of levy on execution on the certificates of
title, even though the titles were not in the name of the judgment debtor (Rafael Vilar). According to
the Court, while the certificates of title were still registered in the name of Florentino Vilar, since
Rafael Vilar presented a copy of a petition filed with the lower court, from which it could be inferred
that Florentino Vilar was dead and Rafael Vilar was one of his heirs, Rafael had an interest in
Florentino’s property that could properly be the subject of attachment, even if his participation in
Florentino’s property was indeterminable before the final liquidation of the estate.

Similarly, in Pacific Commercial Co. v. Geaga,38 the Court held that although the Register of Deeds
may properly reject an attachment where it appears that the titles involved are not registered in the
name of the defendants (debtors), that rule yields to a case where there is evidence submitted to
indicate that the defendants have present or future interests in the property covered by said titles,
regardless of whether they still stand in the names of other persons. The fact that the present
interests of the defendants are still indeterminate, and even though there was no judicial declaration
of heirship yet, is of no consequence for the purpose of registering the attachment in question. This
is the case since what is being attached and what may be later sold at public auction in pursuance of
the attachment cannot be anything more than whatever rights, titles, interests and participations
which the defendants may or might have in the property so attached. In other words, if they had
actually nothing in the property, then nothing is affected and the property will remain intact. 39 This
rule is expressed in Section 35, Rule 39 of the old Rules of Civil Procedure, which provides:

Upon the execution and delivery of said deed [of conveyance and possession], the purchaser, or
redemptioner, or his assignee, shall be substituted to and acquire all the right, title, interest and
claim of the judgment debtor to the property as of the time of the levy[.] [emphases ours]

Although we recognize the validity of the annotation of the levy on the execution in the present case,
the question of whether the levy itself is valid remains to be determined. To do this, Regina’s interest
in the subject properties at the time of the levy has to be ascertained. To recall, Veronica’s notice of
levy on execution is based on Regina’s interest in the two properties, which she acquired via the
Deed of Absolute Sale purportedly executed by her parents in her favor on November 5, 1991. But is
this Deed of Absolute Sale a sufficient evidence of Regina’s interest in the subject properties?

After carefully reviewing the evidence on record, we rule in the negative.

To begin with, not only were the properties subject of the attachment not registered in Regina’s
name, the Deed of Absolute Sale on which Regina based her interest was not even annotated on
these titles. While Regina purportedly purchased her parents’ rights to the subject properties in
1991, she never asserted her rights over these properties by presenting the Deed of Absolute Sale
to the Register of Deeds for registration and annotation on the titles. As a matter of fact, it was
Veronica, and not Regina, who presented the Deed of Absolute Sale to the Register of Deeds.

More importantly, from the records, it is clear that the subject properties were finally registered in
Regina’s name, not by virtue of the 1991 Deed of Absolute Sale, but by virtue of succession,
specifically by the "Adjudication" that Regina filed with the Register of Deeds on February 24,
1993,40 pursuant to Section 1, Rule 74 of the Rules of Court. 41 The procedure by which the properties
were registered in Regina’s name suggests that when Regina’s parents died, the subject lots still
formed part of Regina’s parents’ estate, and were not, as Veronica claims, sold to Regina in 1991,
thereby casting doubt to the validity of the Deed of Absolute Sale. As the Bulaongs reason in their
memorandum, if the subject properties had already been sold to Regina as early as 1991, why
would they still be considered a part of her parents’ estate in 1993? 42

Another point to consider is that Regina dealt with the Bulaongs as her father’s representative when
they were negotiating the mortgage over the properties. 43 If she had already acquired her parents’
interest in these properties in 1991, she would not have needed any authority from her father to
execute the mortgage with the Bulaongs; she would have done so in her own capacity.
These facts, taken together, lead us to doubt that Regina had any interest in the properties at the
time of the levy. Thus, unlike in the previously cited cases where the debtors, although possessing
merely an inchoate interest in the properties at the time of the levy, had interests that were
established with reasonable certainty and could be the subject of attachment; in the present case,
the evidence on record fails to prove that Regina actually had any interest in the properties which
could be the subject of levy.

The spring cannot rise higher than its source.44 Since Regina had no established interest in the
subject properties at the time of the levy, Veronica’s levy had nothing to attach to in the subject
properties.

ii. Unregistered sale of land cannot bind third parties

Even assuming that the Deed of Absolute Sale in Regina’s favor was valid, we still cannot uphold
the validity of the levy and execution sale in Veronica’s favor.

The general rule in dealing with registered land is set forth in Section 51 of P.D. No. 1529:

Section 51. Conveyance and other dealings by registered owner. – An owner of registered land may
convey, mortgage, lease, charge or otherwise deal with the same in accordance with existing laws.
He may use such forms of deeds, mortgages, leases or other voluntary instruments as are sufficient
in law. But no deed, mortgage, lease, or other voluntary instrument, except a will purporting to
convey or affect registered land shall take effect as a conveyance or bind the land, but shall operate
only as a contract between the parties and as evidence of authority to the Register of Deeds to make
registration.

The act of registration shall be the operative act to convey or affect the land insofar as third persons
are concerned, and in all cases under this Decree, the registration shall be made in the office of the
Register of Deeds for the province or city where the land lies. [emphases ours]

From the standpoint of third parties, a property registered under the Torrens system remains, for all
legal purposes, the property of the person in whose name it is registered, notwithstanding the
execution of any deed of conveyance, unless the corresponding deed is registered. 45 Simply put, if a
sale is not registered, it is binding only between the seller and the buyer, but it does not affect
innocent third persons.

Undoubtedly, Veronica’s claim on the properties is rooted in the unregistered Deed of Absolute Sale
between Regina and her parents. The Bulaongs do not appear to have had any knowledge that this
sale ever took place. To recall, Regina gave the Bulaongs the owner’s duplicate certificates of the
properties, which showed that the properties were registered in the names of her parents, Fortunato
and Bertha Limpo. It thus appears that the Bulaongs first learned about the sale between Regina
and her parents when they received the newly issued titles in Regina’s name which contained the
annotation of the levy in Veronica’s favor.

One of the principal features of the Torrens system of registration is that all encumbrances on the
land shall be shown, or at least intimated upon the certificate of title and a person dealing with the
owner of the registered land is not bound to go behind the certificate and inquire into transactions,
the existence of which is not there intimated. 46 Since the Bulaongs had no knowledge of the
unregistered sale between Regina and her parents, the Bulaongs can neither be bound by it, nor can
they be prejudiced by its consequences. This is but the logical corollary to the rule set forth in
Section 51 of P.D. No. 1529, in keeping with the basic legal maxim that what cannot be done directly
cannot be done indirectly.
Execution sale in Veronica’s favor was highly irregular

We also find that the execution sale in favor of Veronica is invalid because Regina’s interest in both
lots was sold together, in violation of Sections 15 and 21, Rule 39 of the old Rules of Court. The
pertinent portions of these provisions provide:

Section 15. Execution of money judgments. – The officer must enforce an execution of a money
judgment by levying on all the property, real and personal of every name and nature whatsoever,
and which may be disposed of for value, of the judgment debtor not exempt from execution, or on a
sufficient amount of such property, if there be sufficient, and selling the same, and paying to the
judgment creditor, or his attorney, so much of the proceeds as will satisfy the judgment. Any excess
in the proceeds over the judgment and accruing costs must be delivered to the judgment debtor,
unless otherwise directed by the judgment or order of the court. When there is more property of the
judgment debtor than is sufficient to satisfy the judgment and accruing costs, within the view of the
officer, he must levy only on such part of the property as is amply sufficient to satisfy the
judgment and costs.

Section 21. How property sold on execution. Who may direct manner and order of sale. – All sales of
property under execution must be made at public auction, to the highest bidder, between the hours
of nine in the morning and five in the afternoon. After sufficient property has been sold to satisfy the
execution, no more shall be sold. When the sale is of real property, consisting of several known
lots, they must be sold separately; or, when a portion of such real property is claimed by a third
person, he may require it to be sold separately. [emphases ours]

Where the property to be sold consists of distinct lots, tracts or parcels, or is susceptible of
division without injury, it should be offered for sale in parcels and not en masse, for the
reason that a sale in that manner will generally realize the best price, and will not result in
taking from the debtor any more property than is necessary to satisfy the judgment. It will
also enable the defendant to redeem any one or more of the parcels without being compelled
to redeem all the land sold.47 A sale of additional land or personal property after enough has
been sold to satisfy the judgment is unauthorized.48

While the general policy of the law is to sustain execution sales, the sale may be set aside
where there is a resulting injury based on fraud, mistake and irregularity. 49 Where the
properties were sold together when the sale of less than the whole would have been
sufficient to satisfy the judgment debt, the sale may be set aside.50  lawphi1

In Caja v. Nanquil, 51 we took judicial notice of the fact that the value of a property was usually bigger
than the amount for which it could be mortgaged. Since the two properties, taken together, were
mortgaged to the petitioners to secure a loan worth ₱4,300,000.00, we can easily assume that these
properties are worth at least this amount. Even Veronica does not contest this assumption.

From this premise, we can logically assume that the sale of just one of the lots would have been
sufficient to satisfy the judgment debt. Yet no explanation was provided as to why the sheriff
sold both parcels of land at the execution sale for the paltry sum of ₱640,354.14. This act
undoubtedly resulted in great prejudice to the Bulaongs. To our minds, this renders the
execution sale defective, and provides sufficient ground for us to set the sale aside.

For the foregoing reasons, we rule and so hold that the levy and the corresponding execution
sale in Veronica’s favor are invalid, and must be set aside. Veronica, however, is not without
recourse, as she may still seek to enforce the judgment debt against Regina.
WHEREFORE, premises considered, we GRANT the petition and REVERSE the decision of the
Court of Appeals dated July 31, 2002 in CA-G.R. SP No. 55423. We REINSTATE the decision of the
Regional Trial Court, Branch 12, Malolos, Bulacan, dated July 30, 1999 in Civil Case No. 170-M-95,
with the MODIFICATION that petitioners Anselmo Bulaong and Priscilla Bulaong are no longer
required to reimburse Veronica Gonzales for her lien in the amount of ₱275,000.00, plus interest.

SO ORDERED.

ARTURO D. BRION
Associate Justice

WE CONCUR:

ANTONIO T. CARPIO
Associate Justice
Chairperson

JOSE PORTUGAL PEREZ JOSE CATRAL MENDOZA*

Associate Justice Associate Justice

MARIA LOURDES P. A. SERENO

Associate Justice

ATTESTATION

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

ANTONIO T. CARPIO
Associate Justice
Chairperson

CERTIFICATION

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

RENATO C. CORONA
Chief Justice

Footnotes
G.R. No. 208450

SPS. ROBERTO ABOITIZ AND MARIA CRISTINA CABARRUS, Petitioners

vs.
SPS. PETER L. PO AND VICTORIA L. PO, Respondents

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

G.R. No. 208497

SPS. PETER L. PO AND VICTORIA L. PO, Petitioners,

vs.
SPS. ROBERTO ABOITIZ AND MARIA CRISTINA CABARRUS, JOSE MARIA MORAZA, AND
ERNESTO ABOITIZ AND ISABEL ABOITIZ, Respondents

DECISION

LEONEN, J.:

This resolves two (2) Petitions for Review on Certiorari   assailing the Court of Appeals' October 31,
1

2012 Decision  and its June 17, 2013 Resolution  in CA-G.R. CV No. 03803. The assailed decision
2 3

affirmed the Regional Trial Court's Decision,  which declared the spouses Peter Po and Victoria Po
4

(Spouses Po) as the rightful owners of the parcel of land. However, the Court of Appeals ruled that
respondents Jose Maria Moraza (Jose), spouses Ernesto Aboitiz (Ernesto), and Isabel Aboitiz
(Isabel) were innocent buyers in good faith whose titles were entitled to protection.   The assailed
5

resolution denied the Motion for Partial Reconsideration of the spouses Roberto Aboitiz and Maria
Cristina Cabarrus (Spouses Aboitiz). 6

The Spouses Aboitiz filed the Petition  docketed as G.R. No. 208450. The Spouses Po filed the
7

Petition  docketed as G.R. No. 208497. These cases are consolidated in the case at bar.
8

This case involves a parcel of land located in Cabancalan, Mandaue City,  initially registered as
9

Original Certificate of Title No. 0-887, and titled under the name of Roberto Aboitiz (Roberto).   The
10

land is referred to as Lot No. 2835. 

11

This parcel of land originally belonged to the late Mariano Seno (Mariano).  12

On July 31, 1973, Mariano executed a Deed of Absolute Sale in favor of his son, Ciriaco Seno
(Ciriaco), over a 1.0120-hectare land in Cebu covered by Tax Declaration No. 43358.   This property
13

included two (2)

lots: Lot No. 2807 and the land subject of this case, Lot No. 2835. 14
On May 5, 1978, Ciriaco sold the two (2) lots to Victoria Po (Victoria).  The parties executed a Deed
15

of Absolute Sale. 16

On July 15, 1982, Mariano died and was survived by his five (5) children (Mariano Heirs): Esperanza
Seno V da. De Kuizon, Ramon Seno,   Benita Seno Vda. De Lim, Simeon Seno,  and Ciriaco.
17 18 19

In 1990, Peter Po (Peter) discovered that Ciriaco "had executed a [q]uitclaim dated August 7, 1989
renouncing [his] interest over Lot [No.] 2807 in favor of [petitioner] Roberto."  In the quitclaim,
20

Ciriaco stated that he was "the declared owner of Lot [Nos.] 2835 and 2807." 21

The Spouses Po confronted Ciriaco.  By way of remedy, Ciriaco and the Spouses Po executed a
22

Memorandum of Agreement dated June 28, 1990 in which Ciriaco agreed to pay Peter the difference
between the amount paid by the Spouses Po as consideration for the entire property and the value
of the land the Spouses Po were left with after the quitclaim. 23

However, also in 1990, Lot No. 2835 was also sold to Roberto.  The Mariano Heirs, including
24

Ciriaco, executed separate deeds of absolute sale in favor of Roberto.  Thereafter, Roberto
25

immediately developed the lot as part of a subdivision called North Town Homes. 26

In 1991, the Spouses Po declared Lot No. 2835 for taxation purposes and was issued Tax
Declaration No. 0634-A. 27

In 1992, Roberto also declared Lot No. 2835 for taxation purposes and was issued Tax Declaration
No. 1100, annotated with: "This tax declaration is also declared in the name of Mrs. VICTORIA LEE
PO married to PETER PO under [T]ax [Declaration] [N]o. 0634-A so that one may be considered a
duplicate to the other. " 28

On April 19, 1993, Roberto filed an application for original registration of Lot No. 2835 with the
Mandaue City Regional Trial Court, acting as land registration court.   The case was raffled to
29

Branch 28 and docketed as LRC Case No. N-208. 30

In its Decision dated October 28, 1993, the trial court granted the issuance of Original Certificate of
Title No. 0-887 in the name of Roberto.  The lot was immediately subdivided with portions sold to
31

Ernesto and Jose. 32

On November 19, 1996, the Spouses Po filed a complaint to recover the land and to declare nullity
of title with damages. 33

The complaint was docketed in Branch 55, Regional Trial Court of Mandaue City.  34

The trial court ruled in favor of the Spouses Po in its Decision dated November 23, 2009:

WHEREFORE, premises considered, judgment is rendered in favor of plaintiffs, and against

defendants, declaring the plaintiffs as owner of subject land and ordering the defendants reconvey
and/or return to plaintiffs Lot No. 2835; declaring as absolute nullity all the documents of sale
involving Lot 283 5 executed by the Heirs of Mariano Seno in favor of defendant Roberto Aboitiz and
such other documents used in the improvident issuance of titles in the name of defendants, and to
cancel the said titles. 35

The Spouses Aboitiz appealed to the Court of Appeals. The Court of Appeals, in its Decision dated
October 31, 2012, partially affirmed the trial court decision, declaring the Spouses Po as the rightful
owner of the land. However, it ruled that the titles issued to respondents Jose, Ernesto, and Isabel
should be respected. 36

The Court of Appeals discussed the inapplicability of the rules on double sale and the doctrine of
buyer in good faith since the land was not yet registered when it was sold to the Spouses
Po.  However, it ruled in favor of the Spouses Po on the premise that registered property may be
37

reconveyed to the "rightful or legal owner or to the one with a better right if the title [was] wrongfully
or erroneously registered in another person's name."  The Court of Appeals held that the Mariano
38

Heirs were no longer the owners of the lot at the time they sold it to Roberto in 1990 because
Mariano, during his lifetime, already sold this to Ciriaco in 1973.  39

It found that the Deed of Absolute Sale between Ciriaco and the Spouses Po was duly notarized and
was thus presumed regular on its face.  Their Memorandum of Agreement did not cancel or rescind
40

the Deed of Absolute Sale but rather strengthened their claim that they "entered into a contract of
[s]ale. " 41

It likewise ruled that, contrary to the assertion of the Spouses Aboitiz, there was no showing that
Ciriaco merely held the property in trust for the Mariano Heirs.  42

It held that the action of the Spouses Po had not yet prescribed because their complaint in 1996 was
within the 10-year prescriptive period as the title in favor of the Spouses Aboitiz was issued in 1994. 43

However, the Court of Appeals ruled that the certificates of title of Jose, Ernesto, and Isabel were
valid as they were innocent buyers in good faith. 44

The Spouses Aboitiz thus filed their Petition for Review, which was docketed as G.R. No. 208450. 1âwphi1

 They argue that the Decision of Branch 55, Regional Trial Court of Mandaue City granting the
45

complaint of the Spouses Po is void for lack of jurisdiction over the matter.  They claim that a branch
46

of the Regional Trial Court has no jurisdiction to nullify a final and executory decision of a co-equal
branch;  it is the Court of Appeals that has this jurisdiction. 
47 48

They likewise assert that the Spouses Po's cause of action has prescribed   and allegedly accrued
49

when the Deed of Absolute Sale between the Spouses Po and Ciriaco was executed on May 5,
1978.  They maintain that more than 10 years had elapsed when the complaint was filed on
50

November 12, 1996, thus barring the action through prescription. 51

The Spouses Aboitiz further insist that "estoppel and laches have already set in."  They claim that
52

they have been "in open, public, continuous, uninterrupted, peaceful[,] and adverse possession" in
the concept of owners over the property for "46 years as of 1993," without the Spouses Po acting on
the Deed of Absolute Sale.  They attest that the development of North Town Homes Subdivision
53

"was covered by utmost publicity," but the Spouses Po did not immediately question the
development or interpose any objection during the registration proceedings.  54

They posit that the Deed of Absolute Sale between Ciriaco and the Spouses Po is "clearly fake and
fraudulent"   as evidenced by certifications of its non-existence in the notarial books and the
55

Spouses Po's failure to enforce their rights over the property until 18 years later.   They also affirm
56

that the Deed of Absolute Sale between Ciriaco and the Spouses Po is inadmissible as no
documentary stamp was paid and affixed.  57
Lastly, they contend that the Mariano Heirs should have been impleaded in the action as they are
indispensable parties. 58

The Spouses Po filed a Comment  where they argued that the Regional Trial Court had jurisdiction
59

when it granted their complaint because the case filed by the Spouses Aboitiz was for the
registration of the land, while the case they filed was for reconveyance.  They insisted that their
60

action had not prescribed because an action for reconveyance prescribes in 10 years from the "date
of issuance of the certificate of title over the property."  They argued that "laches ha[d] not set
61

in."  They claimed that the notarized Deed of Absolute Sale between them and Ciriaco was not fake
62

or fraudulent and was admissible in evidence  whereas the Spouses Aboitiz failed "to overcome [its]
63

presumption of regularity and due execution."  They asserted that "the documentary stamps tax
64

ha[d] been paid"  and that the Mariano Heirs were not indispensable parties.
65 66

Spouses Aboitiz filed a Reply  reiterating their arguments in the Petition.

67

The Spouses Po also filed a Petition for Review, which was docketed as G.R. No. 208497. They
claim that respondents Jose, Ernesto, and Isabel are not "innocent purchasers for value."  They
68

allegedly knew of the defective title of Roberto because his tax declaration had the following
annotation: "This tax declaration is also declared in the name of Mrs. VICTORIA LEE PO, married to
PETER PO under tax dec. No. 0634-A so that one may be considered a duplicate to the other.
(Section 89 Paragraph H PD 464)." 69

Spouses Aboitiz filed a Comment.  Aside from reiterating their assertions in their Petition for Review
70

in G.R No. 208450, they argued that there was no evidence that they acted in bad faith as
"subdivision lot buyers [were] not obliged to go beyond the [T]orrens title." 71

Spouses Po filed a Reply.  72

For resolution are the following issues:

First, whether the Regional Trial Court has jurisdiction over the Spouses Peter and Victoria Po's
complaint;

Second, whether the action is barred by prescription,

Third, whether the doctrines of estoppel and laches apply;

Fourth, whether the land registration court's finding that Ciriaco Seno only held the property in trust
for the Mariano Heirs is binding as res judicata in this case;

Fifth, whether the Deed of Absolute Sale between Ciriaco Seno and the Spouses Peter and Victoria
Po should be considered as evidence of their entitlement to the property;

Sixth, whether the Mariano Heirs, as sellers in a deed of conveyance of realty, are indispensable
parties; and

Finally, whether the respondents Jose Maria Moraza, Ernesto Aboitiz, and Isabel Aboitiz are
innocent purchasers in good faith.

I
The Spouses Aboitiz argue that Branch 55, Regional Trial Court did not have jurisdiction to nullify
the final and executory Decision of Branch 28, Regional Trial Court in LRC Case No. N-208.  They 73

claim that that it is the Court of Appeals that has jurisdiction to annul judgments of the Regional Trial
Court.74

However, the instant action is not for the annulment of judgment of a Regional Trial Court. It is a
complaint for reconveyance, cancellation of title, and damages. 75

A complaint for reconveyance is an action which admits the registration of title of another party but
claims that such registration was erroneous or wrongful.   It seeks the transfer of the title to the
76

rightful and legal owner, or to the party who has a superior right over it, without prejudice to innocent
purchasers in good faith.   It seeks the transfer of a title issued in a valid proceeding. The relief
77

prayed for may be granted on the basis of intrinsic fraud-fraud committed on the true owner instead
of fraud committed on the procedure amounting to lack of jurisdiction.

An action for annulment of title questions the validity of the title because of lack of due process of
law. There is an allegation of nullity in the procedure and thus the invalidity of the title that is issued.

The complaint of the Spouses Po asserted that they were the true owners of the parcel of land which
was registered in the name of the

Spouses Aboitiz.  They alleged that they acquired the property from Ciriaco, who acquired it from
78

Mariano.   They claimed that the Spouses Aboitiz had the property registered without their
79

knowledge and through fraud.   Thus, they sought to recover the property and to cancel the title of
80

the Spouses Aboitiz.  Thus the prayer in their Complaint stated:

81

WHEREFORE, premises considered, this Honorable Court is respectfully prayed to render judgment
in favor of plaintiffs and against defendants, ordering the latter as follows:

1. To reconvey and/or return to plaintiffs Lot No. 2835 which is the subject matter of
this complaint;

2. To declare as absolute nullity all the documents of sale involving Lot 2835 in favor
of defendants and such other documents used in the improvident issuance of the
Title in the name of defendants, and to cancel said Title;

3. To pay jointly and severally the amount of ₱ 1,000,000.00 as moral damages;

₱500,000.00 as actual damages; ₱ 100,000.00 as attorneys fees and ₱ 20,000.00 as
litigation expenses.

Plaintiffs further pray for such other reliefs and remedies just and equitable in the premises.  82

Except for actions falling within the jurisdiction of the Municipal Trial Courts, the Regional Trial
Courts have exclusive original jurisdiction over actions involving "title to, or possession of, real
property."  Section 19 of Batas Pambansa Blg. 129 provides:
83

Section 19. Jurisdiction in Civil Cases. - Regional Trial Courts shall exercise exclusive original
jurisdiction:

(2) In all civil actions which involve the title to, or possession of, real property, or any interest therein,
except actions for forcible entry into and unlawful detainer of lands or buildings, original jurisdiction
over which is conferred upon Metropolitan Trial Courts, Municipal Trial Courts, and Municipal Circuit
Trial Courts[.]

An action for reconveyance and annulment of title is an action involving the title to real property.  84

The complaint of the Spouses Po is clearly an action for reconveyance and annulment of title. Thus,
the Regional Trial Court has jurisdiction to hear the case.

The Spouses Aboitiz claim that it is the Court of Appeals that has jurisdiction over the annulment of
Regional Trial Court judgments.  85

The jurisdiction of the Court of Appeals is provided in Section 9 of Batas Pambansa Blg. 129:

Section 9. Jurisdiction. - The Intermediate Appellate Court shall exercise:

(2) Exclusive original jurisdiction over actions for annulment of judgments of Regional Trial Courts[.]

While the Court of Appeals has jurisdiction to annul judgments of the Regional Trial Courts, the case
at bar is not for the annulment of a judgment of a Regional Trial Court. It is for reconveyance and the
annulment of title.

The difference between these two (2) actions was discussed in Toledo l   v. Court of Appeals:
86

An action for annulment of judgment is a remedy in equity so exceptional in nature that it may be
availed of only when other remedies are wanting, and only if the judgment, final order or final
resolution sought to be annulled was rendered by a court lacking jurisdiction or through extrinsic
fraud. An action for reconveyance, on the other hand, is a legal and equitable remedy granted to the
rightful owner of land which has been wrongfully or erroneously registered in the name of another for
the purpose of compelling the latter to transfer or reconvey the land to him. The Court of Appeals
has exclusive original jurisdiction over actions for annulment of judgments of Regional Trial Courts
whereas actions for reconveyance of real property may be filed before the Regional Trial Courts or
the Municipal Trial Courts, depending on the assessed value of the property involved.

Petitioners allege that: first, they are the owners of the land by virtue of a sale between their and
respondents' predecessors-in-interest; and second, that respondents Ramoses and ARC Marketing
illegally dispossessed them by having the same property registered in respondents' names. Thus, far
from establishing a case for annulment of judgment, the foregoing allegations clearly show a case
for reconveyance.   (Citations omitted)
87

As stated, a complaint for reconveyance is a remedy where the plaintiff argues for an order for the
defendant to transfer its title issued in a proceeding not otherwise invalid. The relief prayed for may
be granted on the basis of intrinsic rather than extrinsic fraud; that is, fraud committed on the real
owner rather than fraud committed on the procedure amounting to lack of jurisdiction.

An action for annulment of title, on the other hand, questions the validity of the grant of title on
grounds which amount to lack of due process of law. The remedy is premised in the nullity of the
procedure and thus the invalidity of the title that is issued. Title that is invalidated as a result of a
successful action for annulment against the decision of a Regional Trial Court acting as a land
registration court may still however be granted on the merits in another proceeding not infected by
lack of jurisdiction or extrinsic fraud if its legal basis on the merits is properly alleged and proven.
Considering the Spouses Aboitiz's fraudulent registration without the Spouses Po's knowledge and
the latter's assertion of their ownership of the land, their right to recover the property and to cancel
the Spouses Aboitiz' s88 title, the action is for reconveyance and annulment of title and not for
annulment of judgment.

Thus, the Regional Trial Court has jurisdiction to hear this case.

II

The Spouses Aboitiz argue that the Spouses Po's cause of action has prescribed.  They claim that
89

prescription has set in because the original complaint was filed only on November 12, 1996, after
more than 10 years after the Deed of Absolute Sale between Ciriaco and Spouses Po was executed
on May 5, 1978.  90

The Spouses Po's action has not prescribed.

"[A]n action for reconveyance ... prescribes in [10] years from the issuance of the Torrens title over
the property."  The basis for this is Section 53, Paragraph 3  of Presidential Decree No. 1529  in
91 92 93

relation to Articles 1456  and 1144(2)  of the Civil Code.

94 95 96

Under Presidential Decree No. 1529 (Property Registration Decree), the owner of a property may
avail of legal remedies against a registration procured by fraud:

SECTION 53. Presentation of Owner's Duplicate Upon Entry of New Certificate. - ...

In all cases of registration procured by fraud, the owner may pursue all his legal and equitable
remedies against the parties to such fraud without prejudice, however, to the rights of any innocent
holder for value of a certificate of title ...

Article 1456 of the Civil Code provides that a person acquiring a property through fraud becomes an
implied trustee of the property's true and lawful owner. 97

An implied trust is based on equity and is either (i) a constructive trust, or (ii) a resulting trust.  A
98

resulting trust is created by implication of law and is presumed as intended by the parties.  A 99

constructive trust is created by force of law   such as when a title is registered in favor of a person
100

other than the true owner.  101

The implied trustee only acquires the right "to the beneficial enjoyment of [the] property."   The legal
102

title remains with the true owner.   In Crisostomo v. Garcia, J,r., .: 

103 104

Art. 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.

Thus, it was held that when a party uses fraud or concealment to obtain a certificate of title of
property, a constructive trust is created in favor of the defrauded party.

Constructive trusts are "created by the construction of equity in order to satisfy the demands of
justice and prevent unjust enrichment. They arise contrary to intention against one who, by fraud,
duress or abuse of confidence, obtains or holds the legal right to property which he ought not, in
equity and good conscience, to hold."

When property is registered in another's name, an implied or constructive trust is created by law in
favor of the true owner. The action for reconveyance of the title to the rightful owner prescribes in 10
years from the issuance of the title. 105 (Citations omitted)

Thus, the law creates a trust in favor of the property's true owner.

The prescriptive period to enforce this trust is 10 years from the time the right of action accrues.
Article 1144 of the Civil Code provides:

Article 1144. The following actions must be brought within ten years from the time the right of action
accrues:

(1) Upon a written contract;

(2) Upon an obligation created by law;

(3) Upon a judgment.

In an action for reconveyance, the right of action accrues from the time the property is registered .  106

In Crisostomo,   the petitioners were able to transfer the property under their names without
107

knowledge of the respondent.   The respondent filed an action for reconveyance.   In arguing that
108 109

the action for reconveyance had prescribed, the petitioners claimed that the cause of action of the
respondent should be based on the latter's Deed of Sale and thus the respondent's right of action
should have accrued from its execution.  This Court, however, ruled that the right of action accrued
110

from the time the property was registered because registration is the act that signifies that the
adverse party repudiates the implied trust:

In the case at bar, respondent's action which is for Reconveyance and Cancellation of Title is based
on an implied trust under Art. 1456 of the Civil Code since he averred in his complaint that through
fraud petitioners were able to obtain a Certificate of Title over the property. He does not seek the
annulment of a voidable contract whereby Articles 1390 and 1391 of the Civil Code would find
application such that the cause of action would prescribe in four years.

An action for reconveyance based on implied or constructive trust prescribes in ten years from the
alleged fraudulent registration or date of issuance of the certificate of title over the property.

It is now well-settled that the prescriptive period to recover property obtained by fraud or mistake,
giving rise to an implied trust under Art. 1456 of the Civil Code, is 10 years pursuant to Art.
1144. This tenyear prescriptive period begins to run from the date the adverse party repudiates the
implied trust, which repudiation takes place when the adverse party registers the land.   (Citations
111

omitted, emphasis supplied)

Likewise, in Duque v. Domingo:  112

The registration of an instrument in the Office of the Register of Deeds constitutes constructive
notice to the whole world, and, therefore, discovery of the fraud is deemed to have taken place at the
time of registration. Such registration is deemed to be a constructive notice that the alleged fiduciary
or trust relationship has been repudiated. It is now settled that an action on an implied or
constructive trust prescribes in ten (10) years from the date the right of action accrued. The issuance
of Transfer Certificate of Title No. 7501 in 1931 to Mariano Duque commenced the effective
assertion of adverse title for the purpose of the statute of limitations.   (Citations omitted)
113

Registration of the property is a "constructive notice to the whole world."  Thus, in registering the
114

property, the adverse party repudiates the implied trust.   Necessarily, the cause of action accrues
115

upon registration.  116

An action for reconveyance and annulment of title does not seek to question the contract which
allowed the adverse party to obtain the title to the property.   What is put on issue in an action for
117

reconveyance an d cancellation of title is the ownership of the property and its registration.   It does 118

not question any fraudulent contract. 119 Should that be the case, the applicable provisions are
Articles 1390  and 1391   of the Civil Code. 
120 121 122

Thus, an action for reconveyance and cancellation of title prescribes in 10 years from the time of the
issuance of the Torrens title over the property.  123

Considering that the Spouses Po's complaint was filed on November 19, 1996, less than three (3)
years from the issuance of the Torrens title over the property on April 6, 1994, it is well within the 10-
year prescriptive period imposed on an action for reconveyance.

III

The Spouses Aboitiz insist that estoppel and laches have already set in.   They claim that they have124

been in "open, continuous, public, peaceful, [and] adverse" possession in the concept of owners
over the property for "46 years as of 1993," without the Spouses Po acting on their Deed of Absolute
Sale.   Moreover, the development of North Town Homes Subdivision "was covered by utmost
125

publicity" but the Spouses Po did not promptly question the development.   In fact, they did not 126

interpose any objection during the registration proceedings.  127

There is laches when a party was negligent or has failed "to assert a right within a reasonable time,"
thus giving rise to the presumption that he or she has abandoned it.   Laches has set in when it is
128

already inequitable or unfair to allow the party to assert the right.   The elements of laches were
129

enumerated in Ignacio v. Basilio:

There is laches when: (1) the conduct of the defendant or one under whom he claims, gave rise to
the situation complained of; (2) there was delay in asserting a right after knowledge of the
defendant's conduct and after an opportunity to sue; (3) defendant had no knowledge or notice that
the complainant would assert his right; (4) there is injury or prejudice to the defendant in the event
relief is accorded to the complainant.   (Citation omitted)
130

"Laches is different from prescription."  Prescription deals with delay itself and thus is an issue of
131

how much time has passed.   The time period when prescription is deemed to have set in is fixed by
132

law.   Laches, on the other hand, concerns itself with the effect of delay and not the period of time
133

that has lapsed.  It asks the question whether the delay has changed "the condition of the property
134

or the relation of the parties" such that it is no longer equitable to insist on the original
right.   In Nielson & Co., Inc. v. Lepanto Consolidated Mining Co.: 
135 136

Appellee is correct in its contention that the defense of laches applies independently of prescription.
Laches is different from the statute of limitations. Prescription is concerned with the fact of delay.
Whereas 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
fixed time, Laches is not.  137

The defense of laches is based on equity.   It is not based on the title of the party invoking it, but on
138

the right holder's "long inaction or inexcusable neglect" to assert his claim. 
139

This Court rules that the Spouses Po is not barred by laches. There is no showing that they
abandoned their right to the property. The factual findings reveal that the Spouses Po had their
rights over the property registered in the assessor's office.   They testified that they introduced
140

improvements by cultivating fruit trees after they purchased the lots.  When the Spouses Po
141

discovered that Ciriaco executed a quitclaim renouncing his interest over Lot No. 2807 in favor of
Roberto, the Spouses Po executed a Memorandum of Agreement with Ciriaco to protect their
interest in Lot No. 2835.142

The Spouses Po also had the property declared for taxation purposes in their names and Tax
Declaration No. 0634-A was issued.   Thus, when the Spouses Aboitiz also had the property
143

declared for taxation purposes, it had the annotation: "This tax declaration is also declared in the
name of Mrs. Victoria Lee Po, married to Peter Po under tax dee. no. 0634-A so that one may be
considered a duplicate to the other." 144

The Spouses Aboitiz only acquired their alleged rights over the property in 1990, when the Mariano
Heirs executed the Deeds of Sale in their favor.   Assuming the Spouses Aboitiz immediately took
145

possession and began construction in 1990, it cannot be said that the Spouses Po were in delay in
asserting their right. In the Spouses Po's complaint, they asserted that they made demands upon the
Spouses Aboitiz to reconvey to them the property.   They also referred the matter to the barangay
146

for conciliation:

11) That demands were made upon the defendants to reconvey to plaintiffs Lot 2835 unlawfully and
feloniously acquired by defendants, but to no avail, thereby compelling the plaintiffs to elevate the
matter for barangay conciliation, and for failure of the parties to effect a settlement, the proper
Certification to file action was then issued, a copy of which is hereto attached as Annex "L."  147

In their Answer with Counterclaim, the Spouses Aboitiz did not deny that demands were made upon
them and that the matter was elevated for barangay conciliation:

8. Par. 11 is denied as regards the all[e]gation that Lot 2835 was feloniously and un[l]awfully
acquired by defendants, for being false. The truth is that defendants were in good faith in acquiring
same property. Defendants refused to meet the demands of settlement by plaintiffs because they
are strangers to the property in question.  148

When they discovered that the property was registered in the name of the Spouses Aboitiz in 1993,
the Spouses Po then filed the instant complaint to recover the property sold to them by Ciriaco,
alleging that it was done without their knowledge, through evident bad faith and fraud.   The
149

Spouses Po filed this case in less than three (3) years from the time of registration.

Based on these circumstances, the elements of laches are clearly lacking in this case. There was no
delay in asserting their right over the property, and the Spouses Aboitiz had knowledge that the
Spouses Po would assert their right.
Thus, it cannot be said that they are barred by laches.

IV

The Spouses Aboitiz insist that there is already a finding by the Regional Trial Court in LRC Case
No. N-208 that Ciriaco merely held the property "in trust for the [Mariano Heirs]."   Thus, Ciriaco
150

could not have validly sold the property to the Spouses Po.   They claim that these findings are
151

binding on the whole world because land registration proceedings are actions in rem.  152

In the Decision in LRC Case No. N-208, no one opposed the application for registration.  Moreover, 153

the Spouses Aboitiz presented only one (I) witness, Gregorio Espina (Espina), an employee of
Roberto,   whotestified:
154

That this parcel of land is covered by tax declarations, to wit: 1) Tax Dec. No. 43174 in the name of
Ciriaco Seno for the year 1953 (Exh. "T");

11) Tax Dec. No. 2835 in the name of applicant, Roberto Aboitiz for the year 1991 (Exh. "DD").

That the tax declarations covering Lot No. 2835 are in the name of Ciriaco Seno because the heirs
of Mariano Seno have agreed that Lot No. 2835 be held in trust by Ciriaco Seno in favor of the
heirs.  155

This Court rules that this cannot be binding in this action for reconveyance.

Res judicata embraces two (2) concepts: (i) bar by prior judgment and (ii) conclusiveness of
judgment, respectively covered under Rule 39, Section 47 of the Rules of Court, paragraphs (b) and
(c): 
156

Section 47. Effect of judgments or final orders. - The effect of a judgment or final order rendered by
a court of the Philippines, having jurisdiction to pronounce the judgment or final order, may be as
follows:

(b) In other cases, the judgment or final order is, with respect to the matter directly adjudged or as to
any other matter that could have been raised in relation thereto, conclusive between the parties and
their successors in interest by title subsequent to the commencement of the action or special
proceeding, litigating for the same thing and under the same title and in the same capacity; and

(c) In any other litigation between the same parties or their successors in interest, that only is
deemed to have been adjudged in a former judgment or final order which appears upon its face to
have been so adjudged, or which was actually and necessarily included therein or necessary
thereto.

Res judicata in the concept of bar by prior judgment proscribes the filing of another action based on
"the same claim, demand, or cause of action."  It applies when the following are present: (a) there is
157

a final judgment or order; (b) it is a judgment or order on the merits; (c) it was "rendered by a court
having jurisdiction over the subject matter and parties"; and (d) there is "identity of parties, of subject
matter, and of causes of action" between the first and second actions.  158

Res judicata in the concept of conclusiveness of judgment applies when there is an identity of issues
in two (2) cases between the same parties involving different causes of action.  Its effect is to bar
159
"the relitigation of particular facts or issues" which have already been adjudicated in the other
case.   In Calalang v. Register of Deeds of Quezon City:
160 161

The second concept - conclusiveness of judgment - states that a fact or question which was in issue
in a former suit and was there judicially passed upon and determined by a court of competent
jurisdiction, is conclusively settled by the judgment therein as far as the parties to that action and
persons in privity with them are concerned and cannot be again litigated in any future action
between such parties or their privies, in the same court or any other court of concurrent jurisdiction
on either the same or different cause of action, while the judgment remains unreversed by proper
authority. It has been held that in order that a judgment in one action can be conclusive as to a
particular matter in another action between the same parties or their privies, it is essential that the
issue[s] be identical. If a particular point or question is in issue in the second action, and the
judgment will depend on the determination of that particular point or question, a former judgment
between the same parties or their privies will be final and conclusive in the second if that same point
or question was in issue and adjudicated in the first suit (Nabus vs. Court of Appeals, 193 SCRA 732
[1991]). Identity of cause of action is not required but merely identity of issues.  162

However, in Racoma v. Fortich,   this Court held that res judicata could not be a defense in an
163

action for reconveyance based on fraud where the complainant had no knowledge of the application
for registration:

The other ground upon which the lower court dismissed the complaint is res judicata. It is stated in
the order of dismissal that the plaintiff had admitted that the property in controversy was applied for
by defendant Maximina Fortich in a cadastral proceeding and under Act 496; that the proceedings
were in rem and, therefore, the whole world, including the plaintiff, were parties thereto and bound
by the judgment thereon ... [I]t is obvious that the lower court was referring to the legal effect of the
conclusiveness against all persons of the in rem decision in the cadastral case rather than the actual
fact that the plaintiff was a claimant who appeared in the said case, for he alleged in his complaint
that he "has no knowledge whatsoever of the application for registration filed by defendant Maximina
Fortich and the order of decree of registration issued in favor of the defendant Maximina Fortich by
this Honorable Court until on February 25, 1967 ... " (Record on Appeal, page 30). Such being the
case, then an action for reconveyance is available to the plaintiff, the decree of registration
notwithstanding, for ...

" ... , it is now a well-settled doctrine in this jurisdiction that the existence of a decree of registration in
favor of one party is no bar to an action to compel reconveyance of the property to the true owner,
which is an action in personam, even if such action be instituted after the year fixed by Section 38 of
the Land Registration Act as a limit to the review of the registration decree, provided it is shown that
the registration is wrongful and the property sought to be reconveyed has not passed to an innocent
third party holder for value.["]   (Emphasis supplied)
164

The reason for this rule is to prevent the unjust deprivation of rights over real property. As discussed
in People v. Cainglet:  165

It is fundamental and well-settled that a final judgment in a cadastral proceeding - a proceeding in

rem - is binding and conclusive upon the whole world.  Reason is that public policy and public order
1âwphi1

demand not only that litigations must terminate at some definite point but also that titles over lands
under the Torrens system should be given stability for on it greatly depends the stability of the
country's economy. Interest republicae ut sit finis litium. However, this conclusiveness of judgment in
the registration of lands is not absolute. It admits of exception. Public policy also dictates that those
unjustly deprived of their rights over real property by reason of the operation of our registration laws
be afforded remedies. Thus, the aggrieved party may file a suit for reconveyance of property or a
personal action for recovery of damages against the party who registered his property through fraud,
or in case of insolvency of the party who procured the registration through fraud, an action against
the Treasurer of the Philippines for recovery of damages from the Assurance Fund. Through these
remedial proceedings, the law, while holding registered titles indefeasible, allows redress calculated
to prevent one from enriching himself at the expense of other. Necessarily, without setting aside the
decree of title, the issues raised in the previous registration case are relit1ated, for purposes of
reconveyance of said title or recovery of damages.   (Citations omitted, emphasis supplied)
166

In this case, the Spouses Po allege that the registration was done through fraud. They contend that
they were unaware and were thus unable to contest the registration and prove their claim over the
property. Aside from several tax receipts, the Spouses Po formally offered as evidence, among
others, the Deed of Sale executed by Mariano in Ciriaco's favor, the Deed of Absolute Sale executed
by Ciriaco in their favor, and the Tax Declaration under Victoria's name. Additionally, they also
submitted their Memorandum of Agreement with Ciriaco and the Quitclaim executed by Ciriaco in
favor of the Spouses Aboitiz.  These documents were not considered by the land registration court
167

when it issued the title in favor of the Spouses Aboitiz. The Spouses Po also offered the Application
of Original Registration of Title of the Spouses Aboitiz to prove that the Spouses Aboitiz only
submitted to the land registration court the cancelled tax declarations of Ciriaco, instead of the tax
declaration of the Spouses Po.  168

Thus, the ruling of the land registration court cannot be so conclusive as to deny the Spouses Po the
remedy afforded to them by law. The action for reconveyance allows them to prove their ownership
over the property. Hence, they are not precluded from presenting evidence that is contrary to the
findings in the land registration case.

The factual findings of the land registration court are not being questioned. An action for
reconveyance based on an implied trust seeks to compel the registered owner to transfer the
property to its true owner.   In Hortizuela v. Tagufa: 
169 170

[A]n action for reconveyance is a recognized remedy, an action in personam, available to a person

whose property has been wrongfully registered under the Torrens system in another's name. In an
action for reconveyance, the decree is not sought to be set aside. It does not seek to set aside the
decree but, respecting it as incontrovertible and no longer open to review, seeks to transfer or
reconvey the land from the registered owner to the rightful owner. Reconveyance is always available
as long as the property has not passed to an innocent third person for value.

There is no quibble that a certificate of title, like in the case at bench, can only be questioned
through a direct proceeding. The MCTC and the CA, however, failed to take into account that in a
complaint for reconveyance, the decree of registration is respected as incontrovertible and is not
being questioned. What is being sought is the transfer of the property wrongfully or erroneously
registered in another's name to its rightful owner or to the one with a better right. If the registration of
the land is fraudulent, the person in whose name the land is registered holds it as a mere trustee,
and the real owner is entitled to file an action for reconveyance of the property.   (Citations omitted,
171

emphasis supplied)

Likewise in Naval v. Court of Appeals: 172

Ownership is different from a certificate of title. The fact that petitioner was able to secure a title in
her name did not operate to vest ownership upon her of the subject land. Registration of a piece of
land under the Torrens System does not create or vest title, because it is not a mode of acquiring
ownership. A certificate of title is merely an evidence of ownership or title over the particular property
described therein. It cannot be used to protect a usurper from the true owner; nor can it be used as a
shield for the commission of fraud; neither does it permit one to enrich himself at the expense of
others. Its issuance in favor of a particular person does not foreclose the possibility that the real
property may be coowned with persons not named in the certificate, or that it may be held in trust for
another person by the registered owner.

As correctly held by the Court of Appeals, notwithstanding the indefeasibility of the Torrens title, the
registered owner may still be compelled to reconvey the registered property to its true owners. The
rationale for the rule is that reconveyance does not set aside or re-subject to review the findings of
fact of the Bureau of Lands. In an action for reconveyance, the decree of registration is respected as
incontrovertible. What is sought instead is the transfer of the property or its title which has been
wrongfully or erroneously registered in another person's name, to its rightful or legal owner, or to the
one with a better right.   (Citations omitted, emphasis supplied)
173

The rationale for allowing reconveyance despite the finality of the registration is that the issuance of
a certificate of title does not create or vest ownership to a person over the property.   Registration
174

under the Torrens system "is not a mode of acquiring ownership."  A certificate is only a proof of
175

ownership.   Thus, its issuance does not foreclose the possibility of having a different owner, and it
176

cannot be used against the true owner as a shield for fraud.  177

In an action for reconveyance, the parties are obliged to prove their ownership over the property.
Necessarily, the parties may present evidence to support their claims. The court must weigh these
pieces of evidence and decide who between the parties the true owner is. Therefore, it cannot be
bound simply by the factual findings of the land registration court alone.

An exception to this rule is if the party claiming ownership has already had the opportunity to prove
his or her claim in the land registration case.   In such a case, res judicata will then apply.   When
178 179

an issue of ownership has been raised in the land registration proceedings where the adverse party
was given full opportunity to present his or her claim, the findings in the land registration case will
constitute a bar from any other claim of the adverse party on the property.  180

However, this is not the circumstance in the case at bar. The Spouses Po were not able to prove
their claim in the registration proceedings. Thus, res judicata cannot apply to their action for
reconveyance.

The Spouses Aboitiz posit that the Deed of Absolute Sale between Ciriaco and the Spouses Po is
fake and fraudulent.   They argue that this is evidenced by certifications of the document's non-
181

existence in the notarial books and the Spouses Po's failure to enforce their rights over the property
until 18 years later.   They also claim that the Deed of Absolute Sale is inadmissible as no
182

documentary stamp was paid and affixed.  183

This Court notes that the Spouses Aboitiz are raising questions of fact which are not within the
scope of a review on certiorari under Rule 45 of the Rules of Court.   An appeal under Rule 45 must
184

raise only questions of law, unless the factual findings are not supported by evidence or the
judgment is based on a misapprehension of facts.   Absent these exceptions, the factual findings of
185

the lower courts are accorded respect and are beyond the review of this Court. 186

The Spouses Aboitiz failed to prove that these exceptions exist in the case at bar. The Regional Trial
Court lent credence to documents presented by the Spouses Po, Peter's testimony about Mariano's
sale of the property to Ciriaco,  Ciriaco's sale of the property to the Spouses Po, and the issuance
187

of a Tax Declaration in the name of Victoria.  188

During trial, Peter also testified that after they bought the land, they had a caretaker who cultivated
the property by planting fruit trees.   He claimed that when they subsequently discovered the
189

quitclaim executed by Ciriaco in favor of the Spouses Aboitiz, they executed a Memorandum of
Agreement to protect their interests in the property.   He stated that they filed a complaint in the
190

barangay when the Spouses Aboitiz started cutting down their improvements and that they
subsequently discovered that Ciriaco was forced by the Mariano Heirs to sell the property to the
Spouses Aboitiz.  191

The Spouses Aboitiz presented as their first witness Armando Avenido, who testified according to
the records only.   He claimed that he was familiar with the land which was being developed by
192

Aboitiz Land. He testified that Roberto acquired the land through separate Deeds of Sale from the
Mariano Heirs, had the tax declaration transferred in his name, paid the taxes on the property,
applied for the property's registration, and developed the property into a subdivision.  During cross-
193

examination it was revealed that the tax declaration of the Spouses Po was issued before the tax
declaration of the Spouses Aboitiz and that the Spouses Po acquired from Ciriaco the entire land,
while the Spouses Aboitiz purchased only one-fifth (1/5) of the property.  194

The Spouses Aboitiz's second witness, Bienvenido Escoton, testified that he was a mason working
in the subdivision on the road lot and that he knew no person claiming ownership of the land since
1989. 195

The Regional Trial Court thus held:

Analyzing the adduced and admitted evidence of both parties, Art. 1544 of the Civil Code cannot be
aptly applied in the case at bar, for reason that only the sale of Ciriaco Seno (Exh. "A" Exh. All" Exh.
2"/ A, A-1 and A-2) has the validating elements of sale, whereas the rest of the Deeds of Sale (Exhs
1 to 5) executed by the Heirs of Mariano Seno in favor of the Defendants are void, for containing
untruthful statements as pleaded and proven. They are no longer the owners of the subject property
when they executed the several Deeds of Conveyance to defendant Roberto Aboitiz.

On the first issue on the identity and location of the land, the sale of Ciriaco Seno to Plaintiffs (Exh.
"A") reflected in the Tax Declarations that the Defendants used in their titling proceeding is the very
same lot as certified by the Barangay Captain dated July 28, 1999 under Plaintiff's Request for
Admission. Concerning the second formulated issue, only the Deed of Sale executed by Ciriaco
Seno was valid with all the attending requisites of sale. It was sold by the legitimate owner of the
land, Ciriaco Seno to the Plaintiffs. The sale (Exh. A, Exhibit "X") enjoyed preferential date of
execution, being dated or executed in 1978 by the lawful owner Ciriaco Seno who was first to
register the sale in the Registry of Property office, and due to such registration, the Tax Declaration
of Ciriaco Seno, was cancelled and a new Tax Declaration was issued in the name of Victoria Po for
as shown in Exh. E the said tax declaration succeeded in canceling the Tax Declaration of Mariano
Seno (Exh. C) and was issued thereafter a Tax Declaration in the name of C[i]riaco Seno (Exh. D).
So, when the latter sold the subject land to plaintiffs in 1978, the same was already owned by
C[i]riaco Seno.

When Mariano Seno died in 1982, the subject land owned by C[i]riaco Seno, naturally, is not part of
the estate of Mariano Seno, for at that point in time, the subject land is now owned by plaintiffs Sps.
Po, and the same was declared in their names (Exh. "D" "E" & "E-1 ").

As to the issue whether defendant Roberto Aboitiz was a purchaser in good faith and for value, the
Court holds that defendant Roberto Aboitiz was not a purchaser in good faith and for value for he
was already informed of the ownership of plaintiffs over the subject land during the conciliation
proceedings before the barangay official when plaintiffs filed a barangay case against him.
In this case, the Court believes that defendant Roberto Aboitiz is aware of the proprietary rights of
the plaintiffs considering the land was already declared for taxation purposes in plaintiffs' names
after the tax declaration of said land, first in the name of Mariano Seno was cancelled and another
one issued in the name of C[i]riaco Seno when the latter bought the said land from his father
Mariano Seno, and after the said tax declaration in the name of C[i]riaco Seno was cancelled and
another one issued in the name of plaintiffs herein.

So, defendant Roberto Aboitiz purchased the subject land from the Heirs of Mariano Seno who are
no longer the owners thereof and the tax declaration of subject land was no longer in the name of
Mariano Seno nor in the name of Heirs of Mariano Seno.

The City Assessor of Mandaue City even issued a Certification (Exh. X) to the effect that Tax
Declaration No. 0634-A in the name of Mrs. Victoria Lee Po married to Peter Po was issued prior to
the issuance of T.D. No. 1100 in the name of Roberto Aboitiz married to Maria Cristina Cabarruz.

Buyers of any untitled parcel of land for that matter, to protect their interest, will first verify from the
Assessor's Office that status of said land whether it has clean title or not.  196

With the exception of its ruling regarding respondents Jose, Ernesto, and Isabel being purchasers in
good faith, these factual findings were affirmed by the Court of Appeals.

Thus, there is no showing that the factual findings are not supported by evidence or that the
judgment seems to be based on a misapprehension of facts. Therefore, the factual findings of the
lower courts are binding.

Furthermore, this Court finds that the Spouses Aboitiz failed to prove their claim of fraud. The
Spouses Aboitiz attempted to prove that the Deed of Absolute Sale between Ciriaco and the
Spouses Po was fake and fraudulent by presenting certifications of its non-existence in the notarial
books of the notary public who notarized the document. 197

However, a review of the certifications does not even state that the document does not exist in the
notarial books.

The Certification dated April 1, 1997 of the Records Management and Archives Office of the
Department of Education, Culture and Sports states:

This is to certify that per records of this Office, Deed of Sale executed by and between Ciriaco Seno
and Victoria Lee known as Doc. No. 66; Page No. 14; Book No. I; Series of 1978 entered in the
Notarial Register of Notary Public Jesus Pono is not among the documents transferred by the
Regional Trial Court of Cebu for safekeeping.  198

Likewise, the Certification dated April 4, 1997 of the Office of the Clerk of Court of the Regional Trial
Court of Cebu, 7th Judicial Region, Cebu City provides:

This is to certify that as per notarial records on file with this office, available and found as of this
date, Atty. Jesus M. Pono had been issued a Notarial Commission for the term 1978-1979.

It is further certifie[d] that said Notary Public has not submitted his notarial reports for the year 1978-
1979 in this office wherein the Deed of Sale as stated on the letter dated March 31, 1997 designated
as Doc. no. 66; Page no. 14; Book no. I and Series of 1978 is allegedly included.   (Emphasis
199

supplied)
These Certifications do not declare that the Deed of Absolute Sale does not exist. They only state
that at the time of their issuance, the Notary Public had not submitted his notarial reports or that the
document had not been transferred to the archives for safekeeping. It cannot logically be concluded
from these certifications that the document is inexistent, false, or fraudulent. In any case, the Notary
Public's failure to submit his or her notarial report does not affect the act of notarization. 
200

Rule 132, Section 30 of the Rules of Court provides that:

Section 30. Proof of notarial documents. - Every instrument duly acknowledged or proved and
certified as provided by law, may be presented in evidence without further proof, the certificate of
acknowledgment being prima facie evidence of the execution of the instrument or document
involved.

When a private document is notarized, the document is converted to a public document which is
presumed regular, admissible in evidence without need for proof of its authenticity and due
execution, and entitled to full faith and credit upon its face. 
201

To overturn the presumption in favor of a notarized document, the party questioning it must present
"clear, convincing, and more than merely preponderant evidence." 202

Thus, parties who appear before a Notary Public should not be prejudiced by the failure of the
Notary Public to follow rules imposed by the Notarial Law.  They are not obliged to ensure that the
203

Notary Public submits his or her notarial reports. 204

The Spouses Aboitiz failed to present clear and convincing evidence to overturn the presumption.
The notarized Deed of Absolute Sale between Ciriaco and the Spouses Po is, thus, presumed
regular and authentic.

Consequently, this Court can affirm the finding that the property was sold to Ciriaco in 1973, and that
Ciriaco, as the owner of the property, had the right to sell it to the Spouses Po. Hence, the lot did not
form part of the estate of Mariano, and the Mariano Heirs did not have the capacity to sell the
property to the Spouses Aboitiz later on.

VI

The Spouses Aboitiz argue that the Mariano Heirs are indispensable parties who should have been
impleaded in this case. 205

The Mariano Heirs are not indispensable parties.

Rule 3, Section 7 of the Revised Rules of Court provides:

Section 7. Compulsory Joinder of Indispensable Parties. - Parties in interest without whom no final
determination can be had of an action shall be joined either as plaintiffs or defendants.

An indispensable party is the party whose legal presence in the proceeding is so necessary that "the
action cannot be finally determined" without him or her because his or her interests in the matter and
in the relief "are so bound up with that of the other parties."
206

The property owners against whom the action for reconveyance is filed are indispensable
parties.  No relief can be had, and the court cannot render a valid judgment, without them.   The
207 208
property has been sold to respondents Jose, Ernesto, and Isabel.  Thus, they are indispensable
209

parties.

However, the seller of the property is not an indispensable party.  In Spring Homes Subdivision Co.,
210

Inc. v. Spouses Tablada, Jr.: 211

Similarly, by virtue of the second Deed of Absolute Sale between Spring Homes and the Spouses
Lumbres, the Spouses Lumbres became the absolute and registered owner of the subject property
herein. As such, they possess that certain interest in the property without which, the courts cannot
proceed for settled is the doctrine that registered owners of parcels of land whose title is sought to
be nullified should be impleaded as an indispensable party. Spring Homes, however, which has
already sold its interests in the subject land, is no longer regarded as an indispensableparty, but is,
at best, considered to be a necessary party whose presence is necessary to adjudicate the whole
controversy, but whose interests are so far separable that a final decree can be made in its absence
without affecting it. This is because when Spring Homes sold the property in question to the
Spouses Lumbres, it practically transferred all its interests therein to the said Spouses. In fact, a new
title was already issued in the names of the Spouses Lumbres. As such, Spring Homes no longer
stands to be directly benefited or injured by the judgment in the instant suit regardless of whether
the new title registered in the names of the Spouses Lumbres is cancelled in favor of the Spouses
Tablada or not. Thus, contrary to the ruling of the RTC, the failure to summon Spring Homes does
not deprive it of jurisdiction over the instant case for Spring Homes is not an indispensable
party.   (Citations omitted, emphasis supplied).
212

The Mariano Heirs, as the alleged sellers of the property, are not indispensable parties. They are at
best necessary parties, which are covered by Rule 3, Section 8 of the Rules of Court:

Section 8. Necessary Party. - A necessary party is one who is not indispensable but who ought to be
joined as a party if complete relief is to be accorded as to those already parties, or for a complete
determination or settlement of the claim subject of the action.

Necessary parties may be joined in the case "to adjudicate the whole controversy," but the case may
go on without them because a judgment may be rendered without any effect on their rights and
interests.  213

The Mariano Heirs may likewise be considered material witnesses to the action. A material matter to
which a witness can testify on can be a "main fact which was the subject of the inquiry" or any
circumstance or fact "which tends to prove" the fact subject of the inquiry, "which tends to
corroborate or strengthen the testimony relative to such inquiry," and "which legitimately affects the
credit of any witness who testifies."
214

The validity of the Deeds of Sale allegedly executed by the parties in this case is a material matter in
determining who the true owner of the property is. Thus, the Mariano Heirs, including Ciriaco, may
testify as to the Deeds of Sale they executed to prove which sale is the valid one.

However, it is clear that the Mariano Heirs are not indispensable parties. They have already sold all
their interests in the property to the Spouses Aboitiz. They will no longer be affected, benefited, or
injured byany ruling of this Court on the matter, whether it grants or denies the complaint for
reconveyance. The ruling of this Court as to whether the Spouses Po are entitled to reconveyance
will not affect their rights. Their interest has, thus, become separable from that of Jose, Ernesto, and
Isabel.

Thus, the Court of Appeals correctly ruled that the Mariano Heirs are not indispensable parties.
 VII

Despite these findings, the Spouses Po cannot recover the property. Respondents Jose, Ernesto,
and Isabel are innocent purchasers for value.

An innocent purchaser for value refers to the buyer of the property who pays for its full and fair price
without or before notice of another person's right or interest in it.  He or she buys the property
215

believing that "the [seller] [i]s the owner and could [transfer] the title to the property."
216

The Spouses Po argue that respondents Jose, Ernesto, and Isabel are not innocent purchasers for
value because the tax declaration over the property has the following annotation:

This tax declaration is also declared in the name of Mrs. Victoria Lee Po, married to Peter Po under
tax dee. no. 0634-A so that one may be considered a duplicate to the other.

However, if a property is registered, the buyer of a parcel of land is not obliged to look beyond the
transfer certificate of title to be considered a purchaser in good faith for value. 217

Section 44 of Presidential Decree No. 1529  states:

218

Section 44. Statutory liens affecting title. - Every registered owner receiving a certificate of title in
pursuance of a decree of registration, and every subsequent purchaser of registered land taking a
certificate of title for value and in good faith, shall hold the same free from all encumbrances except
those noted in said certificate and any of the following encumbrances which 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 ofrecord in the Registry of Deeds in order to be valid against
subsequent purchasers or encumbrancers of record.

Second. Unpaid real estate taxes levied and assessed within two years immediately preceding the
acquisition of any right over the land by an innocent purchaser for value, without prejudice to the
right of the government to collect taxes payable before that period from the delinquent taxpayer
alone.

Third. Any public highway or private way established or recognized by law, or any government
irrigation canal or lateral thereof, if the certificate of title 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. (Emphasis supplied)

In Cruz v. Court of Appeals: 219

The real purpose of the Torrens system of registration is to quiet title to land and to put a stop to any
question of legality of the title except claims which have been recorded in the certificate of title at the
time of registration or which may arise subsequent thereto. Every registered owner and every
subsequent purchaser for value in good faith holds the title to the property free from all
encumbrances except those noted in the certificate. Hence, a purchaser is not required to explore
further what the Torrens title on its face indicates in quest for any hidden defect or inchoate right that
may subsequently defeat his right thereto.
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 whether the title has been regularly or irregularly issued. This is
contrary to the evident purpose of the law. Every person dealing with registered land may safely rely
on the correctness of the certificate of title issued therefor and the law will in no way oblige him to go
behind the certificate to determine the condition of the property. Even if a decree in a registration
proceeding is infected with nullity, still an innocent purchaser for value relying on a Torrens title
issued in pursuance thereof is protected.  220

The rationale for this rule is the public's interest in sustaining "the indefeasibility of a certificate of
title, as evidence of the lawful ownership of the land or of any encumbrance" on it.  In Leong
221

v. See: 222

One need not inquire beyond the four comers of the certificate of title when dealing with registered
property ...

The protection of innocent purchasers in good faith for value grounds on the social interest
embedded in the legal concept granting indefeasibility of titles.  Between the third party and the
1âwphi1

owner, the latter would be more familiar with the history and status of the titled property.
Consequently, an owner would incur less costs to discover alleged invalidities relating to the
property compared to a third party. Such costs are, thus, better borne by the owner to mitigate costs
for the economy, lessen delays in transactions, and achieve a less optimal welfare level for the
entire society.  (Citations omitted)
223

Thus, respondents were not obliged to look beyond the title before they purchased the property.
They may rely solely on the face of the title.

The only exception to the rule is when the purchaser has actual knowledge of any defect or other
circumstance that would cause "a reasonably cautious man" to inquire into the title of the seller.  If 224

there is anything which arouses suspicion, the vendee is obliged to investigate beyond the face of
the title.   Otherwise, the vendee cannot be deemed a purchaser in good faith entitled to protection
225

under the law. 226

In this case, there is no showing that respondents Jose, Ernesto, and Isabel had any knowledge of
the defect in the title. Considering that the annotation that the Spouses Po are invoking is found in
the tax declaration and not in the title of the property, respondents Jose, Ernesto, and Isabel cannot
be deemed purchasers in bad faith.

WHEREFORE, the Court of Appeals' October 31, 2012 Decision  and its June 17, 2013
227

Resolution  in CA-G.R. CV No. 03803 is AFFIRMED.

228

SO ORDERED.

MARVIC M.V.F. LEONEN

Associate Justice

WE CONCUR:
 ANTONIO T. CARPIO
Associate Justice
Chairperson

(On Official Leave)

DIOSDADO M. PERALTA
JOSE CATRAL MENDOZA
Associate Justice
Associate Justice

(On Official Leave)

SAMUEL R. MARTIRES
Associate Justice

ATTESTATION

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

ANTONIO T. CARPIO
Associate Justice
Chairperson, Second Division

CERTIFICATION

Pursuant to the Section13, Article VIII of the Constitution and the Division Chairperson’s Attestation,
I certify that the conclusions in the above Decision had been reached in consultation before the case
was assigned to the writer of the opinion of the Court’s Division.

MARIA LOURDES P.A. SERENO

Chief Justice
G.R. No. 210669

HI-LON MANUFACTURING, INC., Petitioner,

vs.
COMMISSION ON AUDIT, Respondent

DECISION

PERALTA, J.:

This Petition for Certiorari under Rule 64, in relation to Rule 65 of the 1997 Rules of Civil Procedure,

seeks to annul and set aside the Commission on Audit (COA) Decision No. 2011-003  dated January
1

20, 2011, which denied HI-LON Manufacturing, Inc. 's (HI-LON) petition for review, and affirmed with
modification the Notice of Disallowance (ND) No. 2004-032 dated January 29, 2004 of COA's Legal
and Adjudication Office-National Legal and Adjudication Section (LAO-N). The LAO-N disallowed the
amount of ₱9,937,596.20, representing the difference between the partial payment of
₱10,461,338.00 by the Department of Public Works and Highways (DPWH) and the auditor's
valuation of ₱523,741.80, as just compensation for the 29,690-square-meter road right-of-way taken
by the government in 1978 from the subject property with a total area of 89,070 sq. m. supposedly
owned by HI-LON. The dispositive portion of the assailed COA Decision No. 2011-003 reads:

WHEREFORE, premises considered, the instant petition for review is hereby DENIED for lack of
merit. Accordingly, ND No. 2004- 32 dated January 29, 2004 amounting to ₱9,937,596.20 is
hereby AFFIRMED with modification on the reason thereof that the claimant is not entitled thereto.

On the other hand, the Special Audit Team constituted under COA Office Order No. 2009-494 dated
July 16, 2009 is hereby instructed to issue a ND for the ₱523,741.80 payment to Hi-Lon not covered
by ND No. 2004-032 without prejudice to the other findings to be embodied in the special audit
report.
2

This Petition likewise assails COA's Decision  No. 2013-212 dated December 3, 2013 which denied
3

HI-LON's motion for reconsideration, affirmed with finality COA Decision No. 2011-003, and required
it to refund payment made by DPWH in the amount of ₱10,461,338.00. The dispositive portion of the
assailed COA Decision No. 2013-212 reads:

WHEREFORE, the instant Motion for Reconsideration is hereby DENIED for lack of merit.

Accordingly, Commission on Audit Decision No. 2011-003 dated January 20, 2011 is
hereby AFFIRMEDWITHFINALITY. Hi-Lon Manufacturing Co., Inc. is hereby required to refund the
payment made by the Department of Public Works and Highways in the amount of ₱10,461,338.00. 4

The antecedent facts are as follows:

Sometime in 1978, the government, through the then Ministry of Public Works and Highways (now
DPWH), converted to a road right-of-way (RROW) a 29,690 sq. m. portion of the 89,070 sq. m.
parcel of land (subject property) located in Mayapa, Calamba, Laguna, for the Manila South
Expressway Extension Project. The subject property was registered in the name of Commercial and
Industrial Real Estate Corporation (CIREC) under Transfer Certificate of Title (TCT) No. T-40999.

Later on, Philippine Polymide Industrial Corporation (PPIC) acquired the subject property, which led
to the cancellation of TCT No. T-40999 and the issuance of TCT No. T-120988 under its name.
PPIC then mortgaged the subject property with the Development Bank of the Philippines (DBP), a
government financing institution, which later acquired the property in a foreclosure proceeding on
September 6, 1985. TCT No. T-120988, under PPIC's name, was then cancelled, and TCT No. T-
151837 was issued in favor of DBP.

Despite the use of the 29,690 sq. m. portion of the property as RROW, the government neither
annotated its claim or lien on the titles of CIREC, PPIC and DBP nor initiated expropriation
proceedings, much less paid just compensation to the registered owners.

Upon issuance of Administrative Order No. 14 dated February 3, 1987, entitled "Approving the
Identification of and Transfer to the National Government of Certain Assets and Liabilities of the
Development Bank of the Philippines and the Philippine National Bank," the DBP submitted all its
acquired assets, including the subject property, to the Asset Privatization Trust (APT) for disposal,
pursuant to Proclamation No. 50 dated 8 December 1986.

On June 30, 1987, APT disposed of a portion of the subject property in a public bidding. The
Abstract of Bids  indicated that Fibertex Corporation (Fibertex), through Ester H. Tanco, submitted a
5

₱154,000,000.00 bid for the asset formerly belonging to PPIC located in Calamba, Laguna, i.e.,
"Land (5.9 hectares) TCT 4099, buildings & improvements, whole mill," while TNC Philippines, Inc.
and P. Lim Investment, Inc. submitted a bid of ₱106,666,000.00 and ₱138,000,000.00, respectively.
With respect to the former assets of Texfiber Corporation (Texfiber) in Taytay, Rizal i.e., "Land
(214,062 sq. m. TCT (493917) 506665, buildings & improvements, whole mill"), only Fibertex
submitted a bid of ₱2 l 0,000,000.00.

In a Certification  dated July 1, 1987, APT certified that Fibertex was the highest bidder of PPIC and
6

Texfiber assets for ₱370,000,000.00, and recommended to the Committee on Privatization to award
said assets to Fibertex. In a Letter  dated November 10, 1988, APT certified that Fibertex paid APT
7

₱370,000,000.00 for the purchase of the said assets formerly belonging to PPIC and Texfiber.

Meanwhile, Fibertex allegedly requested APT to exclude separate deeds of sale for the parcel of
land and for improvements under the subject property covered by TCT No. 151837 in the name of
DBP. Having been paid the full bid amount, APT supposedly agreed with Fibertex that the land
would be registered in the name of TG Property, Inc. (TGPI) and the improvements to Fibertex.
Thus, APT executed two (2) separate Deeds of Sale with TGPI and Fibertex with regard to the
property, namely:

a. Deed of Sale between APT and TGPI executed on October 29, 1987 for the sale of a
parcel of land covered by TCT No. T-151837 for a consideration of ₱2,222,967.00.

b. Deed of Sale between APT and Fibertex executed on 19 August 1987 for the sale of
improvements (machinery, equipment and other properties) on the same property for a
consideration of ₱154,315,615.39.

Upon complete submission of the required documents and proof of tax payments on December 9,
1987, the Register of Deeds of Calamba, Laguna, cancelled DBP's TCT No. 151837 and issued TCT
No. T-158786 in the name of TGPI, covering the entire 89,070 sq. m. subject property, including the
29,690 sq. m. RROW. From 1987 to 1996, TGPI had paid real property taxes for the entire 89,070
sq. m. property, as shown by the Tax Declarations and the Official Receipt issued by the City
Assessor's Office and Office of the City Treasurer of Calamba, Laguna, respectively.

On April 16, 1995, TGPI executed a Deed of Absolute Sale in favor of HI-LON over the entire 89,070
sq. m. subject property for a consideration of ₱44,535,000.00. HI-LON registered the Deed with the
Register of Deeds of Calamba, Laguna, which issued in its name TCT No. 383819.

Sometime in 1998, Rupert P. Quijano, Attorney-in-Fact of HI-LON, requested assistance from the
Urban Road Project Office (URPO) DPWH for payment of just compensation for the 29,690 sq. m.
portion of the subject property converted to a RROW. The DPWH created an Ad Hoc Committee
which valued the RROW at ₱2,500/sq. m. based on the 1999 Bureau of Internal
Revenue (BIR) zonal valuation.

On December 21, 2001, a Deed of Sale was executed between HILON and the Republic of the
Philippines, represented by Lope S. Adriano, URPO-PMO Director, by authority of the DPWH
Secretary, covering the 29,690 sq. m. parcel of land converted to RROW for a total consideration of
₱67,492,500.00. On January 23, 2002, the Republic, through the DPWH, made the first partial
payment to HI-LON in the amount of ₱10,461,338.00.

On post audit, the Supervising Auditor of the DPWH issued Audit Observation Memorandum No.
NGS VIII-A-03-001 dated April 2, 2003 which noted that the use of the 1999 zonal valuation of
₱2,500.00/sq. m. as basis for the determination of just compensation was unrealistic, considering
that as of said year, the value of the subject property had already been "glossed over by the
consequential benefits" it has obtained from the years of having been used as RROW. The auditor
pointed out that the just compensation should be based on the value of said property at the time of
its actual taking in 1978. Taking into account the average value between the 1978 and 1980 Tax
Declarations covering the subject land, the Auditor arrived at the amount of ₱19.40/sq. m. as
reasonable compensation and, thus, recommended the recovery of excess payments.

Upon review of the auditor's observations, the Director of the LAO-N issued on January 29, 2004 ND
No. 2004-32 in the amount of ₱9,937,596.20, representing the difference between the partial
payment of ₱10,461,338.00 to HI-LON and the amount of P532,741.80, which should have been
paid as just compensation for the conversion of the RROW.

Acting on the request of Dir. Lope S. Adriano, Project Director (URPO-PMO) for the lifting of ND No.
2004-032 dated January 29, 2004, the LAO-N rendered Decision No. 2004-172 dated May 12, 2004,
affirming the same ND, and stating the value of the property must be computed from the time of the
actual taking.

Resolving (1) the motions for reconsideration and request for exclusion from liability of former DPWH
Secretary Gregorio R. Vigilar, et al.; (2) the request for lifting of Notice of Disallowance No. 2004-032
of OIC Director Leonora J. Cuenca; (3) the motion to lift the disallowance and/or exclusion as person
liable of Ms. Teresita S. de Vera, Head, Accounting Unit, DPWH; and (4) the appeal from ND No.
2004-032 of former Assistant Secretary Joel C. Altea and of Mr. Rupert P. Quijano, Attorney-in-Fact
of HI-LON, the LAO-N issued Decision No. 2008-172-A dated June 25, 2008, which denied the
appeal and affirmed the same ND with modification that payment of interest is appropriate under the
circumstances.

Aggrieved, HI-LON filed a petition for review before the COA. In its regular meeting on June 9, 2009,
the COA deferred the resolution of the petition, and instructed its Legal Service Section to create a
Special Audit Team from the Fraud Audit and Investigation Office to investigate and validate HI-
LON's claim.
In its assailed Decision No. 2011-003 dated January 20, 2011, the COA denied for lack of merit HI-
LON's petition for review of the LAO-N Decision No. 2008-172-A, and affirmed ND No. 2004-032
dated July 29, 2004 with modification declaring the claimant not entitled to just compensation. The
COA also instructed the Special Audit Team to issue an ND for the ₱523,741.80 payment to HI-LON
not covered by ND No. 2004- 032, without prejudice to the other findings embodied by the special
audit report.

On the issue of whether or not HI-LON is entitled to just compensation for the 29,690 sq. m. portion
of the subject property, the COA found that the evidence gathered by the Special Audit Team are
fatal to the claim for such compensation.

First, the COA noted that the transfer of the subject property in favor of TGPI, the parent corporation
of HI-LON, was tainted with anomalies because records show that TGPI did not participate in the
public bidding held on June 30, 1987, as only three (3) bidders participated, namely: Fibertex
Corporation, TNC Philippines, Inc., and P. Lim Investment, Inc.

Second, the COA pointed out that the Deed of Sale between APT and Fibertex has a disclosure that
"The subject of this Deed of Absolute Sale, therefore, as fully disclosed in the APT Asset Catalogue,
is the total useable area of 59,380 sq. m.,"  excluding for the purpose the 29,690 sq. m. converted to
8

RROW. The COA added that such exclusion was corroborated by the Abstract of Bids duly signed
by the then APT Executive Assistant and Associate Executive Trustee, showing that the land
covered by TCT No. T- 151387 was offered to the public bidding for its useable portion of 5.9
hectares only, excluding the subject 29,690 sq. m. converted to RROW.

Third, the COA observed that HI-LON is a mere subsidiary corporation which cannot acquire better
title than its parent corporation TGPI. The COA stressed that for more than (7) seven years that the
subject property was under the name of TGPI from its registration on December 9, 1987 until it was
transferred to HI-LON on April 16, 1995, TGPI did not attempt to file a claim for just compensation
because it was stopped so as the Deed of Sale executed between APT and TGPI clearly stated that
the 29,690 sq. m. RROW was excluded from the sale and remains a government property. Applying
the principle of piercing the veil of corporate fiction since TGPI owns 99.9% of HI-LON, the COA
ruled that HI-LON cannot claim ignorance that the 29,690 sq. m. RROW was excluded from the
public auction.

Having determined that HI-LON or its predecessor-in-interest TGPI does not own the RROW in
question, as it has been the property of the Republic of the Philippines since its acquisition by the
DBP up to the present, the COA concluded that the proper valuation of the claim for just
compensation is irrelevant as HI-LON is not entitled thereto in the first place.

Dissatisfied, HI-LON filed a Motion for Reconsideration of COA Decision No. 2011-003 and a
Supplement thereto.

On December 3, 2013, the COA issued the assailed Decision No. 2013-212 denying HI-LON's
motion for reconsideration, affirming with finality its assailed Decision No. 2011-003, and requiring
HI-LON to refund the payment made by DPWH in the amount of ₱10,461,338.00.

In this Petition for Certiorari, HI-LON argues that the COA committed grave abuse of discretion,
amounting to lack or excess of jurisdiction when it held (1) that there was no property owned by HI-
LON that was taken by the government for public use; (2) that the 89,070-sq. m. subject parcel of
land, including the 29,690 sq. m. portion used as RROW by the government, had been the property
of the Republic of the Philippines; (3) that HI-LON is not entitled to payment of just compensation;
and (4) that it collaterally attacked HI-LON's ownership of the subject land, including the RROW. 9
The Office of the Solicitor General (OSG) counters that the COA acted within its jurisdiction when it
evaluated and eventually disallowed what it found to be an irregular, anomalous and unnecessary
disbursement of public funds. The OSG agrees with the COA that HI-LON is not entitled to payment
of just compensation because the 29,690 sq. m. portion used as RROW is already owned by the
Republic since 1987 when DBP transferred the entire 89,070 sq. m. subject property to APT,
pursuant to Administrative Order No. 14. The OSG emphasizes that the Deed of Absolute Sale
dated October 29, 1987 between the Republic (through APT) and TGPI clearly stated that the
subject thereof, as fully disclosed in the APT Asset Specific Catalogue, is the total useable area of
59,380 sq. m., hence, the 29,690 sq. m. portion used as RROW was expressly excluded from the
sale. Besides, the OSG notes that the COA aptly found that there were only three bidders who
participated in APT's public bidding of the subject property and TGPI was not one of the bidders.
There being an anomaly in the transfer of the property from APT to TGPI, the OSG posits that HI-
LON, as TGPI's successor-in-interest, is not entitled to just compensation.

Stating that the intention of Proclamation No. 50 was to transfer the non-performing assets of DBP to
the national government, the OSG maintains that APT has no authority to offer for sale the said
portion because it is a performing asset, having been used by the government as RROW for the
Manila South Expressway since 1978. Considering that the said 29,690 sq. m. portion was not sold
and transferred by APT to TGPI, the OSG submits that TGPI cannot also transfer the same portion
to its subsidiary, HILON. The OSG concludes that HI-LON is not entitled to payment of just
compensation as it is not the owner of the said portion, and that the COA properly ordered full
disallowance of the ₱10,461,338.00 paid to HI-LON.

HI-LON's Petition for Certiorari is devoid of merit.

In support of its claim of entitlement to just compensation, HI-LON relies on the Deed of Sale dated
October 29, 1987, and insists that its predecessor-in-interest (TGPI) acquired from the national
government, through APT, the entire 89,070 sq. m. property, which was previously registered in the
name of DBP under TCT No. 151837. HI-LON asserts that the 29,690 sq. m. RROW was not
excluded from the sale because: (1) APT referred to the entire property in the Whereas Clauses as
one of the subject of the sale; (2) APT made an express warranty in the said Deed that the
properties sold are clear of liens and encumbrances, which discounts the need to investigate on the
real status of the subject property; and (3) the title registered in the name of DBP, as well as the
titles of the previous owners, CIREC and PPIC, contains no annotation as regards any government's
claim over the RROW.

HI-LON's assertions are contradicted by the clear and unequivocal terms of the Deed of Sale  dated
10

29 October 1987 between APT and TGPI, which state that the subject thereof is the total usable
area of 59,380 sq. m. of the subject property. Contrary to HI-LO N's claim, nothing in the Whereas
Clauses of the Deed indicates that the object of the sale is the entire 89,070 sq. m. property,
considering that the 29,690 sq. m. portion thereof had been used as road right-of-way (RROW) for
the South Expressway, to wit:

xxxx

WHEREAS, the Development Bank of the Philippines (DBP) was the mortgagee of a parcel of land
(hereafter to be referred to as the "PROPERTY") covered by Transfer Certificate of Title No. T-
151837 of the Registry of Deeds for the Province of Laguna (Calamba Branch), more particularly
described as follows:

A parcel of land (Lot 2-D-I-J of the subd. Plan Psd- 39402, being a portion of Lot 2-D-l, described on
plan Psd- 18888, LRC (GLRO Rec. No. 9933, situated in the Bo. of Mayapa & San Cristobal,
Municipality of Calamba, Province of Laguna. Bounded on the N.E. by Lot No. 2-D- 1-I; of the subd.
Plan; on the S., by the Provincial Road; on the SW., by Lot 2-D-1-K of the subd. plan and on the
NW., by Lot No. 2-B of plan Psd-925. Beginning at a point marked "l" on plan, being S. 62 deg. 03
'W., 1946.22 from L.M. 5, Calamba Estate; Thence --- N. 64 deg. 35'E., 200.27 m. to point 2; S.21
deg. 03'E. 166.82 m. to point 3; S. 12 deg. 30'E, 141.01 m. to point 4; S. 10 deg. 25'E, 168.29 m. to
point 5; N. 84 deg. 47'W, 215.01 m. to point 6; N. 13 deg. 44'W., 150.99 m. Thence--- to point 7; N.
13 deg. 45'W., 27.66 m. to the point of beginning; containing an area of EIGHTY-NINE THOUSAND
SEVENTY (89,070) SQUARE METERS, more or less. All points referred to are indicated on the plan
and are marked on the ground by PLS. cyl. conc. mons. bearings true detloop deg. 03 'E., date of
original survey Jan. 1906 - Jan. 1908 and Sept. 1913 and that of subd. survey, Aug. 23-25, 1953.

[As per Tax Declaration No. 9114, an area of 29,690 sq. m. had been used (road-right-of-way) for
the South Expressway. The subject of this Deed of Absolute Sale, therefore, as fully disclosed in the
APT Asset Sfecific Catalogue, is the total useable area of 59,380 sq. m.]11

WHEREAS, the PROPERTY was subsequently acquired by DBP at public auction in a foreclosure
sale as evidenced by a Sheriff's Certificate of Sale dated September 6, 1985 issued by Mr.
Godofredo E. Quiling, Deputy Provincial· Sheriff, Office of the Provincial Sheriff of Laguna,
Philippines, x x x

WHEREAS, pursuant to Administrative Order No. 14 issued on February 3, 1987 [Approving the
Identification of and Transfer to the National Government of Certain Assets and Liabilities of the
Development Bank of the Philippines and the Philippine National Bank], DBP's ownership and
interest over the PROPERTY were transferred to the National Government through the ASSET
PRIVATIZATION TRUST (APT), a public trust created under Proclamation No. 50 dated December
8, 1986.

WHEREAS, in the public bidding conducted by the APT on June 30, 1987, the VENDEE [TGPI]
made the highest cash bid for the PROPERTY and was declared the winning bidder.

WHEREAS, the sale of the PROPERTY has been authorized by the COMMITTEE ON
PRIVATIZATION under Notice of Approval dated July21, 1987oftheAPT;

WHEREAS, the VENDEE [TGPI] has fully paid the VENDOR [Government of the Republic of the
Philippines, through APT] the purchase price of the PROPERTY in the amount of PESOS: TWO
MILLION TWO HUNDRED TWENTY-TWO THOUSAND NINE HUNDRED SIXTY-SEVEN
(₱2,222,967.00).

NOW, THEREFORE, for and in consideration of the above premises and for the sum of PESOS:
TWO MILLION TWO HUNDRED TWENTY-TWO THOUSAND NINE HUNDRED SIXTY-SEVEN
(₱2,222,967.00), Philippine Currency, paid by the VENDEE to the VENDOR, the VENDOR does by
these presents sell, transfer and convey the PROPERTY hereinabove described unto the VENDEE,
its successors and assigns, subject to the following conditions:

1. The VENDOR hereby warrant that the PROPERTIES shall be sold and transferred
free and clear of liens and encumbrances accruing before August 18, 1987, and that
all taxes or charges accruing or becoming due on the PROPERTIES before said date
have or shall be fully paid by the VENDOR;

2. Documentary Stamp Taxes, Transfer Taxes. Registration fees, and all other
expenses arising out of or relating to the execution and delivery of this Deed shall be
for the account of and paid by the VENDEE;
 3. Capital gains tax, if any, payable on or in respect of the transfer of the PROPERTY
to the VEND EE shall be for the account of and paid by the VENDOR. 1awp++i1

IN WITNESS WHEREOF, the parties hereto have caused these presents to be signed at Makati,
Metro Manila this [29th] day of [October], 1987.12

As the Deed of Sale dated October 29, 1987 is very specific that the object of the sale is the 59,380.
sq. m. portion of the subject property, HILON cannot insist to have acquired more than what its
predecessor-in-interest (TGPI) acquired from APT. Article 1370 of the New Civil Code provides that
if the terms of a contract are clear and leave no doubt upon the intention of the contracting parties,
the literal meaning of its stipulations shall control. Every contracting party is presumed to know the
contents of the contract before signing and delivering it,  and that the words used therein embody
13

the will of the parties. Where the terms of the contract are simple and clearly appears to have been
executed with all the solemnities of the law, clear and convincing evidence is required to impugn
it.  Perforce, HI-LON's bare allegation that the object of the Deed of Sale is the entire 89,070 sq. m.
14

area of the subject property, is self-serving and deserves short shrift.

The Court thus agrees with the COA in rejecting HI-LON's claim of ownership over the 29,690 sq. m.
RROW portion of the subject property in this wise:

xxxx

As clearly shown in the Abstract of Bids, the subject of the bidding was 59,380 sq. m. only. The
Deed of Sale expressly states that -

[As per Tax Declaration No. 9114, an area of 29,690 sq. m. had been used (road-right-of-way) for
the South Expressway.  The subject of this Deed of Absolute Sale, therefore, as fully disclosed
1âwphi1

in the APT Asset Specific Catalogue, is the total useable area of 59,380 sq. m.]

The government cannot enter into a contract with the highest bidder and incorporate substantial
provisions beneficial to the latter which are not included or contemplated in the terms and
specifications upon which the bids were solicited. It is contrary to the very concept of public bidding
to permit an inconsistency between the terms and conditions under which the bids were solicited and
those under which the bids were solicited and those under which proposals are submitted and
accepted. Moreover, the substantive amendment of the terms and conditions of the contract bid out,
after the bidding process had been concluded, is violative of the principles in public bidding and will
render the government vulnerable to the complaints from the losing bidders.

Thus, since the area of [29,690 sq. m. which later became] 26,997 sq. m. covered by the ROW was
not subject of the public bidding, Hi-Lon cannot validly acquire and own the same. The owner of this
property is still the Republic of the Philippines.

x x x. 15

Citing Bagatsing v. Committee on Privatization  where it was held that Proclamation No. 50 does not
16

prohibit APT from selling and disposing other kinds of assets whether they are performing or non-
performing, necessary or appropriate, HI-LON contends that regardless of whether or not the RROW
is a performing or non-performing asset, it could not have been excluded in the sale of the entire
89,070 sq. m. property pursuant to the said Proclamation.
Concededly, the 29,690 sq. m. portion of the subject property is not just an ordinary asset, but is
being used as a RROW for the Manila South Expressway Extension Project, a road devoted for a
public use since it was taken in 1978. Under the Philippine Highway Act of 1953, "right-of-way" is
defined as the land secured and reserved to the public for highway purposes, whereas "highway"
includes rights-of-way, bridges, ferries, drainage structures, signs, guard rails, and protective
structures in connection with highways.  Article 420 of the New Civil Code considers as property of
17

public dominion those intended for public use, such as roads, canals, torrents, ports and bridges
constructed by the state, banks, shores, roadsteads, and others of similar character.

Being of similar character as roads for public use, a road right-of-way (RROW) can be considered as
a property of public dominion, which is outside the commerce of man, and cannot be leased,
donated, sold, or be the object of a contract,  except insofar as they may be the object of repairs or
18

improvements and other incidental matters. However, this RROW must be differentiated from the
concept of easement of right of way under Article 649  of the same Code, which merely gives the
19

holder of the easement an incorporeal interest on the property but grants no title thereto,  inasmuch
20

as the owner of the servient estate retains ownership of the portion on which the easement is
established, and may use the same in such a manner as not to affect the exercise of the easement. 21

As a property of public dominion akin to a public thoroughfare, a RROW cannot be registered in the
name of private persons under the Land Registration Law and be the subject of a Torrens Title; and
if erroneously included in a Torrens Title, the land involved remains as such a property of public
dominion.  In Manila International Airport Authority v. Court of Appeals,  the Court declared that
22 23

properties of public dominion, being for public use, are not subject to levy, encumbrance or
disposition through public or private sale. "Any encumbrance, levy on execution or auction sale of
any property of public dominion is void for being contrary to public policy. Essential public services
will stop if properties of public dominion are subject to encumbrances, foreclosures and auction sale.
"
24

It is, therefore, inconceivable that the government, through APT, would even sell in a public bidding
the 29,690 sq. m. portion of the subject property, as long as the RROW remains as property for
public use. Hence, Hl-LON's contention that the RROW is included in the Deed of Absolute Sale
dated 29 October 1987, regardless whether the property is a performing or non-performing asset,
has no legal basis.

Neither can HI-LON harp on the express warranty in the Deed of Sale that the subject property is
clear from any encumbrance, and the lack of annotation of the government's claim of RROW on the
TCTs of CIREC, PPIC and DBP covering the subject property, to bolster its claim of having acquired
ownership of such property in good faith.

There is no dispute as to the finding of COA Commissioner Juanito G. Espino and DPWH Officer-in-
Charge Manuel M. Bonoan based on the examination of land titles of the subject property that the
entire 89,070 sq. m. area thereof was never reduced in the process of seven (7) transfers of
ownership from Emerito Banatin, et al., in 1971 to HI-LON in 1996, nor was there an annotation of a
RROW encumbrance on the TCTs of CIREC, PPIC, DBP and TGPI. Be that as it may, HI-LON
cannot overlook the fact that the RROW was taken upon the directive of the Ministry of Public Works
and Highways in 1978 for the construction of the Manila South Expressway Extension project. Such
public highway constitutes as a statutory lien on the said TCTs, pursuant to Section 39 of the Land
Registration Act (Act No. 496) and Section 44 of the Property Registration Decree (Presidential
Decree No. 1529):

Section 39. Every applicant receiving a certificate of title in pursuance of a decree of registration,
and every subsequent purchaser of registered land who takes a certificate of title for value in good
faith, shall hold the same free of all encumbrance except those noted on said certificate, and any of
the following encumbrances which may be subsisting, namely:

First. Liens, claims, or rights arising or existing under the laws or Constitution of the United States or
of the Philippine Islands which the statutes of the Philippine Islands cannot require to appear of
record in the registry.

Second. Taxes within two years after the same have become due and payable.

Third. Any public highway, way, or private way established by law, where the certificate of title
does not state that the boundaries of such highway or way have been determined. But if there
are easements or other rights appurtenant to a parcel of registered land which for any reason have
failed to be registered, such easements or rights shall remain so appurtenant notwithstanding such
failure, and shall be held to pass with the land until cut off or extinguished by the registration of the
servient estate, or in any other manner.

xxxx

SECTION 44. Statutory Liens Affecting Title. - Every registered owner receiving a certificate of title in
pursuance of a decree of registration, and every subsequent purchaser of registered land taking a
certificate of title for value and in good faith, shall hold the same free from all encumbrances except
those noted in said certificate and any of the following encumbrances which 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 encumbrancers of record.

Second. Unpaid real estate taxes levied and assessed within two years immediately preceding the
acquisition of any right over the land by an innocent purchaser for value, without prejudice to the
right of the government to collect taxes payable before that period from the delinquent taxpayer
alone.

Third. Any public highway or private way established or recognized by law, or any government
irrigation canal or lateral thereof, if the certificate of title docs not state that the boundaries of
such highway or irrigation canal or lateral thereof have been determined.

Fourth. Any disposition of the property or limitation on the use thereof by virtue of, or pursuant to,

Presidential Decree No. 27 or any other law or regulations on agrarian reform. 25

Section 39 of Act No. 496 and Section 44 of P.D. No. 1529 provide for statutory liens which subsist
and bind the whole world, even without the benefit of registration under the Torrens System. Thus,
even if the TCTs of CIREC, PPIC, DBP and TGPI contain no annotation of such encumbrance, HI-
LON can hardly feign lack of notice of the government's claim of ownership over the public highway
built along the RROW, and claim to be an innocent purchaser for value of the entire 89,070 sq. m.
subject property because such highway prompts actual notice of a possible claim of the government
on the RROW.

Given that prospective .buyers dealing with registered lands are normally not required by law .to
inquire further than what appears on the face of the TCTs on file with the Register of Deeds, it is
equally settled that purchasers cannot close their eyes to known facts that should have put a
reasonable person on guard.  Their mere refusal to face up to that possibility will not make them
26

innocent purchasers for value, if it later becomes apparent that the title was defective, and that they
would have discovered the fact, had they acted with the measure of precaution required of a prudent
person in a like situation.  Having actual notice of a public highway built on the RROW portion of the
27

subject property, HI-LON cannot afford to ignore the possible claim of encumbrance thereon by the
government, much less fail to inquire into the status of such property.

Invoking the principle of estoppel by laches, HI-LON posits that the government's failure to assert its
right of ownership over the RROW by registering its claim on the titles of CIREC, PPIC, and DBP
since the 29,690 sq. m. portion of the property was converted to a RROW way back in 1978 until the
purported sale of the entire 89,070 sq. m. property to TGPI in 1987, bars it from claiming ownership
of the RROW because it slept over its rights for almost nine (9) years. HI-LON states that if it were
true that the government was convinced that it acquired the RROW, it would have lost no time in
registering its claim before the Register of Deeds, instead of surrendering to TGPI the owner's
duplicate of TCT No. 151837 in the name of DBP, to facilitate the issuance of a new title over the
entire 89,070 sq. m. property, which includes the 29,690 sq. m. RROW. HI-LON further claims that
the government is estopped from claiming its alleged right of ownership of the RROW because the
DPWH itself offered to buy and, in fact, executed a Deed of Sale, thereby acknowledging that the
RROW is a private property owned by HI-LON.

The failure of the government to register its claim of RROW on the titles of CIREC, PPIC, DBP and
TGPI is not fatal to its cause. Registration is the ministerial act by which a deed, contract, or
instrument is inscribed in the records of the Office of the Register of Deeds and annotated on the
back of the TCT covering the land subject of the deed, contract, or instrument.  It creates a
28

constructive notice to the whole world and binds third persons.  Nevertheless, HI-LON cannot invoke
29

lack of notice of the government's claim over the 29,690 sq. m. RROW simply because it has actual
notice of the public highway built thereon, which constitutes as a statutory lien on its title even if it is
not inscribed on the titles of its predecessors-in-interest, CIREC, PPIC, DBP, and TGPI. Indeed,
actual notice is equivalent to registration, because to hold otherwise would be to tolerate fraud and
the Torrens System cannot be used to shield fraud. 30

Meanwhile, the mistake of the government officials in offering to buy the 29,690 sq. m. RROW does
not bind the State, let alone vest ownership of the property to HI-LON. As a rule, the State, as
represented by the government, is not estopped by the mistakes or errors of its officials or agents,
especially true when the government's actions are sovereign in nature.  Even as this rule admits of
31

exceptions in the interest of justice and fair play, none was shown to obtain in this case. Considering
that only 59,380 sq. m. of the subject property was expressly conveyed and sold by the government
(through APT) to HI-LON's predecessor-in-interest (TGPI), HI-LON has no legal right to claim
ownership over the entire 89,070 sq. m. property, which includes the 29,690 sq. m. RROW taken
and devoted for public use since 1978.

In arguing that the government had no legal title over the RROW, HILON points out that the
government acquired title thereto only in 2001 when a Deed of Sale was executed between HI-LON
and the DPWH. HI-LON claims that when the government used the 29,690 sq. m. portion of the
subject property as RROW in 1978, it never acquired legal title because it did not institute any
expropriation proceeding, let alone pay the registered owner just compensation for the use thereof.

HI-LON's claim of ownership over the said RROW has been duly rejected by the COA in this
manner:

xxxx
By virtue of Administrative Order No. 14, s. 1987, pursuant to Section 23 of Proclamation No. 50, the
89,070 sq. m. subject parcel of land, including the 29,690 sq. m. which had been used as ROW by
the Government, was transferred to and owned by the National Government. TG Property, Inc.
cannot acquire a portion of the parcel of land without authority and consent of the Philippine
Government, being the owner and seller of the said property. Hi-Lon cannot even claim ownership
on the portion of the subject land without the said deed of sale executed by the Government in favor
of TG Property, Inc. The facts would show that the ROW has been the property of the Republic of
the Philippines since its transfer from DBP in 1987.

xxx 32

It bears emphasis that the right to claim just compensation for the 29,690 sq. m. portion which was
not exercised by CIREC or PPIC, ceased to exist when DBP acquired the entire 89,070 sq. m.
property in a foreclosure sale and later transferred it to the national government (through APT) in
1987, pursuant to Proclamation No. 50. Having consolidated its title over the entire property, there is
no more need for the government to initiate an action to determine just compensation for such
private property which it previously took for public use sans expropriation proceedings.

Citing Section 48 of P .D. 1529 which bars collateral attack to certificates of title, HI-LON asserts that
COA erred in ruling that there was no property owned by HI-LON that was taken by the government
for public use, despite the fact that: (a) the ownership of the subject property was not raised before
the Commission Proper of the COA; and (b) COA has no jurisdiction over issues of ownership and
entitlement to just compensation. HI-LON stresses that the titles issued to TGPI and HI-LON
conclusively show that they are the registered owners of the entire 89,070 sq. m. property in
Calamba, Laguna, including the 29,690 sq. m. RROW. Absent any proceeding directly assailing the
said titles, the ownership of the said property by HI-LON and TGPI is beyond dispute. HI-LON further
states that Leoncio Lee Tek Sheng v. Court of Appeal  cited by the OSG is inapplicable because a
33

notice of lis pendens was annotated on the title subject of the case, unlike the titles of TGPI and HI-
LON which contain no annotation of claims of ownership by the Republic.

Suffice it to state that there is no merit in HI-LON's argument that the TCTs issued in its name and
that of its predecessor-in-interest (TGPI) have become incontrovertible and indefeasible, and can no
longer be altered, cancelled or modified or subject to any collateral attack after the expiration of one
(1) year from the date of entry of the decree of registration, pursuant to Section 32 of P.D. No. 1529.
In Heirs of Clemente Ermac v. Heirs of Vicente Ermac,   the Court clarified the foregoing
34

principle, viz.:

x x x While it is true that Section 32 of PD 1529 provides that the decree of registration becomes
incontrovertible after a year, it does not altogether deprive an aggrieved party of a remedy in law.
The acceptability of the Torrens System would be impaired, if it is utilized to perpetuate fraud against
the real owners.

Furthermore, ownership is not the same as a certificate of title. Registering a piece of land under the
Torrens System does not create or vest title, because registration is not a mode of acquiring
ownership. A ce11ificate 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 coowned with persons not named in the certificate, or that it
may be held in trust for another person by the registered owner. 35

In Lacbayan v. Samay, Jr.,   the Court noted that what cannot be collaterally attacked is the
36

certificate of title, and not the title itself:

x x x The certificate referred to is that document issued by the Register of Deeds known as the TCT.
In contrast, the title referred to by law means ownership which is, more often than not, represented
by that document. xxx Title as a concept of ownership should not be confused with the certificate of
title as evidence of such ownership although both are interchangeably used.

In Mallilin, Jr. v. Castillo,  the Court defined collateral attack on the title, as follows:
37

x x x When is an action an attack on a title? It is when the object of the action or proceeding is to
nullify the title, and thus challenge the judgment pursuant to which the title was decreed. The attack
is direct when the object of an action or proceeding is to annul or set aside such judgment, or enjoin
its enforcement. On the other hand, the attack is indirect or collateral when, in an action to obtain a
different relief, an attack on the judgment is nevertheless made as an incident thereof. 38

In this case, what is being assailed by the COA when it sustained the Notice of Disallowance for
payment of just compensation is HI-LON's claim of ownership over the 29,690 sq. m. portion of the
property, and not the TCT of TGPI from which HI-LON derived its title. Granted that there is an error
in the registration of the entire 89,070 sq. m. subject property previously in the name of TGPI under
TCT No.· 156786  and currently in the name of HI-LON under TCT No. T-383819  because the
39 40

29,690 sq. m. RROW portion belonging to the government was mistakenly included, a judicial
pronouncement is still ·necessary in order to have said portion excluded from the Torrens title. 41

HI-LON's assertion that the titles issued to TGPI and HI-LON conclusively show that they are the
registered owners of the entire 89,070 sq. m. property in Calamba, Laguna, including the 29,690 sq.
m. RROW is anathema to the purpose of the Torrens System, which is intended to guarantee the
integrity and conclusiveness of the certificate of registration, but cannot be used for the perpetration
of fraud against the real owner of the registered land.  On point is the case of Balangcad v. Court of
42

Appeals  where it was held that "the system merely confirms ownership and does not create it.
43

Certainly, it cannot be used to divest the lawful owner of his title for the purpose of transferring it to
another who has not acquired it by any of the modes allowed or recognized by law. Where such an
erroneous transfer is made, as in this case, the law presumes that no registration has been made
and so retains title in the real owner of the land."

It is also not amiss to cite Ledesma v. Municipality of Iloilo  where it was ruled that "if a person
44

obtains title, under the Torrens system, which includes, by mistake or oversight, lands which cannot
be registered under the Torrens system, he does not, by virtue of said certificate alone, become the
owner of the land illegally included." Inasmuch as the inclusion of public highways in the certificate of
title under the Torrens system does not thereby give to the holder of such certificate said public
highways,  the same holds true with respect to RROW s which are of similar character as roads for
45

public use.

Assuming arguendo that collateral attack of said titles are allowed, HI-LON claims that its right of
ownership of the subject RROW can no longer be assailed by the COA because it never questioned
such right until after it denied the petition for review. HI-LON notes that ND No. 2004-032 was issued
and it was denied payment of just compensation for the RROW solely on the ground that such
compensation should be based on the value of the lot at the time of the actual taking by the
government in 1978. HI-LON avers that it was surprised to find out that in the Decision dated 20
January 2011, the COA Commission Proper assailed for the first time TGPI's and HI-LON's right of
ownership over the RROW, instead of merely finding whether or not the valuation of the property
should be based on the value at the time of the taking in 1978 or the value of the ₱2,500.00/sq. m.
HI-LON's arguments fail to persuade.
COA may delve into the question of ownership although this was not an original ground for the
issuance of the Notice of Disallowance, but only the proper valuation of the just compensation based
on the date of actual taking of the property. In Yap v. Commission on Audit,  the Court ruled that
46

"COA is not required to limit its review only to the grounds relied upon by a government agency's
auditor with respect to disallowing certain disbursements of public funds. In consonance with its
general audit power, respondent COA is not merely legally permitted, but is also duty-bound to make
its own assessment of the merits of the disallowed disbursement and not simply restrict itself to
reviewing the validity of the ground relied upon by the auditor of the government agency concerned .
To hold otherwise would render the COA's vital constitutional power unduly limited and thereby
useless and ineffective." Tasked to be vigilant and conscientious in safeguarding the proper use of
the government's, and ultimately the people's property, the COA is endowed with enough latitude to
determine, prevent, and disallow irregular, unnecessary, excessive, extravagant or unconscionable
expenditures of government funds. 47

It is the policy of the Court to sustain the decisions of administrative authorities, especially one that
was constitutionally created like herein respondent COA, not only on the basis of the doctrine of
separation of powers, but also of their presumed expertise in the laws they are entrusted to
enforce.  Considering that findings of administrative agencies are accorded not only respect but also
48

finality when the decision and order are not tainted with unfairness or arbitrariness amounting to
grave abuse of discretion, it is only when the COA acted with such abuse of discretion that the Court
entertains a petition for certiorari under Rule 65 of the Rules of Court.49

Grave abuse of discretion implies such capricious and whimsical exercise of judgment as is
equivalent to lack of jurisdiction or, in other words, the exercise of the power in an arbitrary manner
by reason of passion, prejudice, or personal hostility; and it must be so patent or gross as to amount
to an evasion of a positive duty or to a virtual refusal to perform the duty enjoined or to act at all in
contemplation of law.  No grave abuse of discretion can be imputed against the COA when it
51

affirmed the Notice of Disallowance issued by the LAO-N in line with its constitutional authority  and
52

jurisdiction over cases involving "disallowance of expenditures or uses of government funds and
properties found to be illegal, irregular, unnecessary, excessive, extravagant or
unconscionable."  Having determined that HI-LON does not own the disputed RROW, the COA
53

correctly ruled that HI-LON is not entitled to payment of just compensation and must accordingly
refund the partial payment made by the DPWH in the amount of ₱10,461,338.00 .. To stress, even if
HI-LON is the registered owner of the subject property under TCT No. T-383819 with an area of
89,070 sq. m., the Deed of Absolute Sale dated 29 October 1987 clearly shows that only the 59,380
sq.· m. portion of the subject property, and not 29,690 sq. m. portion used as RROW, was sold and
conveyed by the government (through APT) to HI-LON's immediate predecessor-in-interest (TGPI).

In light of the foregoing disquisition, Hl-LON's prayer for issuance of Temporary Restraining Order
and/or Writ of Injunction must necessarily be denied for lack of clear and unmistakable right over the
disputed 29,690 sq. m. portion of the subject property.

Lastly, from the finality of the Court's decision until full payment, the total amount to be refunded by
HI-LON shall earn legal interest at the rate of six percent (6%) per annum pursuant to Bangko
Sentral ng Pilipinas Monetary Board Circular No. 799, Series of 2013, because such interest is
imposed by reason of the Court's decision and takes the nature of a judicial debt. 54

WHEREFORE, premises considered, the Petition for Certiorari is DENIED for lack of merit, and the
Commission on Audit Decision No. 2011-003 dated January 20, 2011 and Decision No. 2013-212
dated December 3, 2013 are AFFIRMED with MODIFICATION that a legal interest of six percent
(6%) per annum from the finality of this Decision until fully paid, is imposed on the amount of
₱10,461,338.00 that HI-LON Manufacturing Co., Inc. is required to refund to the Department of
Public Works and Highways.

SO ORDERED.

DIOSDADO M. PERALTA,
Associate Justice

WE CONCUR:

MARIA LOURDES P.A. SERENO

Chief Justice

ANTONIO T. CARPIO PRESBITERO J. VELASCO, JR.

Associate Justice Associate Justice

TERESITA J. LEONARDO-DE CASTRO LUCAS P. BERSAMIN

Associate Justice Associate Justice

MARIANO C. DEL CASTILLO JOSE CATRAL MENDOZA

Associate Justice Associate Justice

ESTELA M. PERLAS-BERNABE MARVIC M.V.F. LEONEN

Associate Justice Associate Justice

On Leave
FRANCIS H. JARDELEZA
ALFREDO BENJAMIN S. CAGUIOA
Associate Justice
Associate Justice

No part prior OSG action

NOEL GIMENEZ TIJAM
SAMUEL R. MARTIRES
Associate Justice
Associate Justice

ANDRES B. REYES, JR.

Associate Justice

CERTIFICATION

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

MARIA LOURDES P.A. SERENO

Chief Justice