G.R. No.

72908 August 11, 1989

EUFEMIA PAJARILLO, CLAUDIO SUTERIO, JR., NYMIA SUTERIO and

MARILYN SUTERIO, petitioners,
vs.
INTERMEDIATE APPELLATE COURT, THIRD CIVIL CASES DIVISION,
SALUD SUTERIO and PEDRO MATIAS, respondents.

Agustin A. Ferrer for petitioners.

Alfredo I. Raya for respondents.

CRUZ, J.:

This is one of those distasteful litigations involving a controversy among close relatives
over properties left by a common ascendant. The petitioners are the widow and children
of the brother of the principal private respondent. She and her brother appear to be the
only remaining issue of the mother who seems to have caused all the present confusion.
The record does not show how close, if at all, the members of this small family were.
What is certain is that there is no affection now among the protagonists in this case.

The mother was Juana Balane de Suterio, who had a brother named Felipe Balane and a
sister named Perfecta Balane de Cordero. Perfecta died in 1945 leaving inter alia a tract
of land consisting of about 28 hectares and covered by TCT No. 4671 in the Registry of
Deeds of Quezon Province. On May 20, 1946, Juana and Felipe executed a public
instrument entitled "Extra-judicial Settlement of the Estate of the Deceased Perfecta
Balane de Cordero." 1 In it they disposed of the said property as follows:

EXTRA-JUDICIAL SETTLEMENT OF THE ESTATE OF DECEASED PERFECTA

BALANE DE CORDERO.

This agreement made to 20th day of May, 1946, by and between Felipe Balane and Juana
Balane de Suterio, both of age and residents of Macalelon, Tayabas, Philippines.

WITNESSETH:

That whereas, the said Felipe Balane and Juana Balane de Suterio are the only brother
and sister respectively and forced heirs of Perfecta Balane de Cordero who dies intestate
on January 21, 1945;
That whereas, the said Perfects Balane de Cordero, deceased, left property described as
follows:

TRANSFER CERTIFICATE OF TITLE NO. 4671.

Province of Tayabas.

A parcel of land (Lot No. 6-A, Plan Psu-12210), with an buildings and improvements
except those herein expressly noted as belonging to other person, situated in the barrio of
Luctol, Municipality of Macalelon. Bounded on the NE., by Lot No. 6-B; on the E., by
property by Andrea Fernandez, the sapa Luctob and the sapa Patay; on the SE., by
properties of Andrea Fernandez and Silvestra Mereis on the SW., by properties of Felix
Rodriguez, Dionisio Fornea Placido Abistado and Adriano Abistado and the mangrove of
the government; and on the NW., by properties of Orilleneda Mariano, Glindro Maxima
Orilleneda Placida Forcados and Basilio Rabe .. .. .. .. .. .. .. containing an area of TWO
HUNDRED EIGHTY FIVE THOUSAND THREE HUNDRED FIFTY-THREE
SQUARE METERS (285,353) more or less.

That whereas, we Felipe Balane and Juana Balane de Suterio, the only heirs of the
property described above left by the deceased Perfecta Balane de Cordero, do hereby
agree in carrying out the antemortem wish of our beloved deceased sister that in
consideration of love and affection the property described above be donated to Salud
Sutexio de Matias.

That whereas, the estate left by the said Perfecta Balane de Castro, deceased, is not free
from obligation or debt. It has an incumbrance of about ONE THOUSAND PESOS
(P1,000.00) to the Philippine National Bank, Tayabas Branch.

That whereas, Salud Suterio de Matias, to whom this property is donated extra-judicially
as agreed upon by both heirs, shall assume the said obligation to the Philippine National
Bank, Tayabas Branch.

NOW, THEREFORE, we Felipe Balane and Juana Balane de Suterio have mutually
agreed and covenanted to adjudicate, give, transfer and convey the property described
above to Salud Suterio de Matias heirs, executors, administrators and assign.

And the donee does hereby accept this donation and does hereby express her gratitutde
for the kindness and liberality of the donor.

IN WITNESS WHEREOF, we have hereunto set our hands tills 20th day of May, 1946.
(Sgd.) FELIPE BALANE FELIPE BALANE

(Sgd.) JUANA BALANE DE SUTERIO JUANA BALANE DE SUTERIO

(Acknowledgment)

On June 20, 1946, Salud Suterio executed the following public instrument, 2 petitioner
Eufemia Pajarillo was one of the witnesses:

KNOW ALL MEN BY THESE PRESENTS:

That on May 20, 1946, FELIPE BALANE and JUANA BALANE DE SUTERIO, the
only heirs to the properties of the late PERFECTA BALANE DE CORDERO, executed a
DEED OF DONATION in favor of the undersigned and the said donation was made, in
accordance to the antemortem wish of my late aunt, Perfecta Balane de Cordero, to the
effect that the property described in the Deed of Donation, be given to me because of her
love and affection for me, being her only niece.

That, I, SALUD SUTERIO, DE MATIAS, the only DONEE, do hereby receive and
accept this donation and further express my gratitude for the kindness and liberality of
the DONORS, FELIPE BALANE and JUANA BALANE DE SUTERIO.

IN WITNESS WHEREOF, I have hereunto set my hand this 20th day of June, 1946.

(Sgd.) SALUD SUTERIO DE MATIAS

SUTERIO DE MATIAS

Donee

Signed in the presence of

(Sgd.) SOFRONIO BALANE

(Sgd.) EUFEMIA P. SUTERIO

(Acknowledgment)

These instruments were never registered nor was title transferred in Salud's name
although she says she immediately took possession of the land. Meantime, intestate
proceedings were instituted on the estate of Perfecta and the said land was among those
included in the inventory of the properties belonging to the decedent. 3 Salud interposed
no objection to its inclusion nor did she oppose its subsequent adjudication to her mother
Juana in the project of partition. It is not clear if the land was ever registered in Juana's
name. However, there is evidence that Juana confirmed the earlier donation of the land to
Salud but requested that she be allowed to possess the same and enjoy its fruits, until her
death. 4 It has also not been controverted that Salud paid the P1,000.00 loan for which the
land was mortgaged.

Salud says that sometime in 1951, acceding to this request, she transferred the possession
of the land to her mother, who was then staying with Claudio and his family. During the
period they were occupying the land, Claudio paid the realty taxes thereon . 5 On May
25, 1956, Juana executed a deed of absolute sale conveying the land to Claudio for the
declared consideration of P12,000.00. 6 Two years later, on August 27, 1958, Claudio had
the land registered in as name and was issued TCT No. 32050 in the land records of
Quezon Province. 7

Claudio died in 1961 and his mother in 1963. On June 30, 1965, the private respondents
filed a complaint for the reconveyance of the property on the ground that the deed of sale
in favor of Claudio was fictitious and its registration in his name was null and void . 8

Salud (joined by her husband) alleged that she was unaware until later of the supposed
sale of the land to Claudio. She faulted it as having been procured through fraud and
improper influence on her sick and aged mother. She claimed that no compensation was
actually paid by Claudio and that the transaction was deliberately concealed from her by
her brother and the defendants. 9 For their part, the defendants assailed the donation to
Salud as legally inefficacious and defective and contended that her complaint was barred
by prescription, estoppel and res judicata. They also filed a counterclaim questioning the
sale to Salud by her mother of another tract of land, in which they said they were entitled
to share as Juana's heirs. 10

On April 17,1979, Judge Juan M. Montecillo of the Court of First Instance of Quezon
rendered judgment upholding the donation to the plaintiff and annulling the deed of sale
and the registration of the land in favor of Claudio Suterio, Sr. The defendants were
required to reconvey the land to Salud Suterio even as their counterclaim was dismissed
for lack of evidence. 11 On appeal, the decision was affirmed in toto. 12 The respondent
court is now sought to be reversed in this petition for certiorari under Rule 45 of the
Rules of Court.

We hold at the outset that, contrary to the ruling in the challenged decision, the
petitioners have the legal personality to challenge the validity of the donation on which
Salud bases her claim to the property under litigation. As defendants in the complaint for
reconveyance, they had every right to resist the plaintiffs' allegation that she was the
owner of the subject property by virtue of the claimed donation. Recognition of that
donation would topple the props of their own contention that Juana could dispose of the
property as its owner when she sold it to Claudio Suterio in 1956.

The petitioners also assail the intrinsic validity of the extrajudical settlement and submit
that it is not really a donation as conceptually understood in civil law. Their argument is
that the real donor of the property was Perfecta, the deceased sister, who, however, could
no longer bestow the intended gift. For their part, Felipe and Juana could not have made,
the donation either because they were not moved by the same sentiments Perfects had for
her niece Salud. That feeling would have provided the required consideration if Perfects
herself had made the donation, but not the other two.

This appears to be too much nitpicking, if not sophistry. Felipe and Juana had declared
themselves the heirs of Perfecta and the owners of the property in question. As such, they
were free to give the land to whomever they pleased and for whatever reason they saw
fit. Hence, if they chose to respect Perfecta's wishes and carry out her intentions by
donating the land to Salud, there was no legal impediment to their doing so. In fact, that
was not only the legal but also the moral thing to do.

There is no question that Felipe and Juana could have simply disregarded their sister's
sentiments and decided not to donate the property to Salud, keeping the same for
themselves. The fact that they did not do this speaks well indeed of their integrity and
their loyalty as well to their deceased sister. The extrajudicial settlement also reflects
their own affection for Salud which constituted the valid consideration for their own act
of liberality. Notably, in her acceptance of the donation, Salud referred to 'the donors
Felipe Balane and Juana Balane de Suterio," and not Perfecta.

It is also pointed out that the donation is defective in form because of non-compliance
with the requirements of the law regarding its acceptance. As it was executed in 1946,
the applicable rule is Article 633 of the old Civil Code reading as follows:

Art. 633. In order that a donation of real property be valid it must be made by public
instrument in which the property donated must be specifically described and the amount
of the charges to be assumed by the donee expressed.

The acceptance may be made, in the deed of gift or in a separate public writing; but it
shall produce no effect if not made during the lifetime of the donor.
If the acceptance is made, by separate public instrument, authentic notice thereof shall be
given the donor, and this proceeding shall be noted in both instruments.

There is no question that the donation was accepted in a separate public instrument and
that it was duly communicated to the donors. Even the petitioners cannot deny this. But
what they do contend is that such acceptance was not "noted in both instruments,"
meaning the extrajudicial partition itself and the instrument of acceptance, as required by
the Civil Code.

That is perfectly true. There is nothing in either of the two instruments showing that
"authentic notice" of the acceptance was made by Salud to Juana and Felipe. And while
the first instrument contains the statement that "the donee does hereby accept this
donation and does hereby express her gratitude for the kindness and liberality of the
donor," the only signatories thereof were Felipe Balane and Juana Balane de Suterio.
That was in fact the reason for the separate instrument of acceptance signed by Salud a
month later.

A strict interpretation of Article 633 can lead to no other conclusion than the annulment
of the donation for being defective in form as urged by the petitioners. This would be in
keeping with the unmistakable language of the above-quoted provision. However, we
find that under the circumstances of the present case, a literal adherence to the
requirement of the law might result not in justice to the parties but conversely a
distortion of their intentions. It is also a policy of the Court to avoid such an
intepretation.

The purpose of the formal requirement is to insure that the acceptance of the donation is
duly communicated to the donor. In the case at bar, it is not even suggested that Juana
was unaware of the acceptance for she in fact confirmed it later and requested that the
donated land be not registered during her lifetime by Salud. 13 Given this significant
evidence, the Court cannot in conscience declare the donation ineffective because there is
no notation in the extrajudicial settlement of the donee's acceptance. That would be
placing too much stress on mere form over substance. It would also disregard the clear
reality of the acceptance of the donation as manifested in the separate instrument dated
June 20,1946, and as later acknowledged by Juana.

The cases cited by the parties in their respective memoranda are not really in point.
In Legasto v. Verzosa, 14there was no evidence whatsoever that the claimed donations had
been accepted, as stressed by Justice Villa-Real. The same observation is made of Santos
v. Robledo, 15 where Justice Torres noted that the acceptance of the donation did not
appear in the deed of donation or in any other instrument.
The petitioners would also fault the private respondents for laches and argue that Salud's
inaction in protection of her rights should bar her from asserting them at this late hour.
Specifically, it is pointed out that she failed to register the deed of donation and its
acceptance in 1946; did not oppose the inclusion of the subject land in the inventory of
Perfecta's properties submitted in the intestate proceedings in 1946; did not object to the
adjudication of the land to Juana in the project of partition in 1951; did not protest the
sale of the land to Claudio Suterio in 1956; and did not question its registration in his
name in 1958. It is contended that all these acts constitute laches, which has been
described by this Court thus:

An estoppel by laches arises from the negligence or omission to assert a right within a
reasonable time, warranting a presumption that the party entitled to assert it either has
abandoned it or declined to assert it. 16

The problem with the petitioners' theory is that it would regard Juana and Salud as
strangers when they are in fact mother and daughter. One may expect a person to be
vigilant of his rights when dealing with an acquaintance or associate, or even with a
friend, but not when the other person is a close relative, as in the case at bar. To begin
with, the land came from Juana herself. Secondly, she requested her daughter not to
register the land as long as she was still alive so she could enjoy its fruits until her death.
To Salud, it was not difficult to comply with this request, coming as it did from her own
mother. There was no reason to disobey her. She did not have to protect herself against
her own mother. Indeed, what would have been unseemly was her registering the land
against her mother's request as if she had no confidence in her. Salud did no less than
what any dutiful daughter would have done under the circumstances.

If Salud did not protest the inclusion of the land in the inventory of Perfecta's properties
and its subsequent adjudication to Juana in the intestate proceedings, it was because she
did not feel threatened by these acts. She did not distrust her mother. Moreover, Juana
had herself acknowledged the donation when she was asked in whose name the property
would be registered following the intestate proceedings. Salud felt safe because she had
the extrajudicial settlement to rely on to prove that her mother and her uncle had donated
the subject land to her.

There is nothing in this instrument to suggest that the donation was to take effect upon
the death of the donors as to make it a donation mortis causa, as urged by the petitioners.
The donation became effective upon acceptance by Salud except that, in obedience to her
mother's request, she chose not to register the land in the meantime and to allow her
mother to enjoy its fruits. What was deferred was not its effectivity but only its
enjoyment by Salud. Registration was not necessary to make the donation a binding
commitment insofar as the donors and the donee were concerned. 17

As for her inaction against the deed of sale in favor of her brother Claudio, it should be
noted in the first place that she was not aware of it when it was executed in 1956. Her
mother, who was already 76 years old at the time, never informed her about it, nor did
her brother or any of the defendants, for reasons of their own. It was only later, when the
sale was registered in 1958 and a new title to the land was issued to Claudio, that she
started asking questions. Even then, being a sister to Claudio, she did not immediatey
take legal steps.

It is natural, even among non-relatives, to seek a non-judicial settlement through extra-

legal measures before going to court. It is more so in the case of relatives, who should
avoid as much as possible the asperity and bitterness of litigation. That is what Salud did
when she repeatedly asked the petitioners for the return of the property albeit to no avail.
It was only when it became clear that amicable persuasion was not possible that she
decided to sue the wife and children of her departed brother.

The petitioners stress that it took Salud all of seven years from the registration of the land
in Claudios's name before she filed the complaint for reconveyance against them. That is
true. But if one remembers that her brother died only in 1961 and her own mother only in
1963, at the age of 83, it will be easy to understand the reason for the delay, which would
otherwise have been unjustified. Suits among brothers and sisters are especially painful
to their parents. Salud must have thought many times about filing her complaint against
her brother Claudio while her old mother was still alive. In fact, Salud hesitated still even
after her mother's death and took two more years before she finally filed her complaint
against Claudio's wife and children.

It is clear that Juana Balane de Suterio had no right to sell the subject land to Claudio
because she was no longer its owner, having previously donated it to her daughter Salud.
Juana herself was holding the land merely as a trustee of Salud, who had transferred
possession to her mother at the old woman's request. The deed of sale was itself vitiated
by bad faith as Claudio is presumed to have known of the previous donation to his sister
Salud, whose acceptance of the donation was formally witnessed by hiw own wife, the
herein principal petitioner. 18When Claudio registered the land in his name knowing there
was a flaw in his title, an implied trust was created in favor of Salud as the real owner of
the property in accordance with Article 1456 of the Civil Code, reading as follows:
If the property is acquired through mistake or fraud, the person obtaining it is, by force of
law, considered a trustee of an implied trust for the benefit of the person from whom the
property comes.

As trustor, Salud had every right to sue for the recovery of the land in the action for
reconveyance against Claudio's heirs. As we said in Vda. de Jacinto, et al. v. Vda. de
Jacinto, et al. ... 19

Public policy demands that a person guilty of fraud or at least, of breach of trust, should
not be allowed to use a Torrens title as a shield against the consequences of his own
wrongdoing.

The petitioners do not insist on prescription as a bar to the action for reconveyance, and
understandably so. The legal principle is that if the registration of the land is fraudulent
and the person in whose name the land is registered thus holds it as a mere trustee, the
real owner is entitled to file an action for reconveyance of the property within a period of
ten years. As we have held in many cases:

Where the action is one for reconveyance based on constructive trust, a ten-year period is
allowed. 20

An action for reconveyance of realty, based upon a constructive or implied trust resulting
from fraud, may be barred by prescription. The prescriptive period is reckoned from the
issuance of the title which operates as a constructive notice. 21

While actions to enforce a constructive trust prescribe in 10 years from registration of the
property, private respondents' right commenced from actual discovery of petitioner's act
of defraudation. 22

The record shows that while the land was registered in the name of Claudio Suterio, Sr.
in 1958, the complaint for reconveyance was filed by the petitioners in 1965, or still
within the ten-year prescriptive period.

The last issue raised by the petitioners, viz., the validity of the deed of sale executed by
Juana Balane de Suterio on January 29,1950, in favor of Salud Suterio, 23 need not detain
us too long. The trial court sustained the contract for lack of sufficient evidence to
invalidate it and was upheld by the respondent court. We see no reason to disturb their
factual finding, absent a showing that it was reached arbitrarily. Interestingly, it occurred
to the petitioners to question the transaction only when they were sued by the private
respondents, after ten years from the date of the sale. This is an even longer period than
the nine years during which the petitioners say Salud Suterio was sleeping on her rights
following the sale of her land to Claudio Suterio.

WHEREFORE, the petition is DENIED, with costs against the petitioners. It is so

ordered.

Narvasa, Gancayco, Gri;o-Aquino and Medialdea, JJ., concur.

Footnotes
G.R. No. L-18210 December 29, 1966

LAURENTIO ARMENTIA, plaintiff-appellant,

vs.
ERLINDA PATRIARCA, FLORENCIA SOMECIERA JULIANA ARMENTIA
JOSE SOMECIERA and SOFRONIO FLORES in his capacity as The Register of
Deeds for the Province of Iloilo, defendants-appellees.

Cesar T. Martin for plaintiff and appellant.

Benjamin M. Moreno for defendants and appellees.

SANCHEZ, J.:

Plaintiff Laurentio Armentia, and Juliana and Marta Armentia, were brother and sisters of
the full blood. Jose Someciera is the acknowledged natural son of their deceased mother.
Defendant Florencia Someciera is a daughter of Jose Someciera. Defendant Erlinda
Patriarea is a granddaughter of Juliana Armentia. Marta Armentia was married to
Gregorio Bueno who died sometime in 1942.

By notarial document, Annex A of the complaint, dated July 22, 1955, Marta Armentia
did two things: First, she adjudicated to herself a parcel of land (Lot 5482, Pototan
cadastre, [Iloilo]) with the improvements thereon, covered by Transfer Certificate of Title
21328. and which she inherited from her deceased husband pursuant to Section 1,
Rule 74 of the 1940 Rules of Court; 1 and second, for and in consideration of P-99.00,
which she acknowledged to have received from Erlinda Patriarca, 13 years of age, single,
and Florencia Someciera, 20 years of age, single, she sold to them the property just
mentioned. The foregoing document was, on July 22, 1955, recorded in the registry of
deeds. - Whereupon, Torrens title 21323 was cancelled by Transfer Certificate of Title
18797 in the names of Erlinda Patriarca and Florencia Someciera.

Marta Armentia died intestate and without forced heirs on May 28, 1960.

On September 17, 1960, Laurentio Armentia commenced suit2 against Erlinda Patriarca
and Florencia Someciera as principal defendants.3 The complaint, as amended, and
reamended, avers: That the sale made by Marta in favor of Erlinda and Florencia "is null
and void because it is simulated and fictitious and if not null and void it is voidable
because the said defendants were minors at the time the contract was executed and could
not then have given their consent to the sale"; that "the said sale was fraudulently
executed, and after the supposed sale, Marta Armentia remained in possession of the
house and lot, as owner paying the taxes on the land until she died"; that "even assuming
hypothetically that there was consideration in the supposed sale, the consideration was
grossly inadequate"; that "plaintiff only came to know of the supposed sale in Annex A
one week before the suit was filed that "at the time of the alleged sale in Annex A", the
"house was already standing on the land", and that "after its execution Marta Armentia
repaired the house"; and that "the defendants Erlinda Patriarca, Florencia Someciera,
Juliana Armentia and Jose Someciera are personally possessing the land and the house in
question". The complaint further avers that Marta Armentia also left a "Singer" sewing
machine. Paragraph 8 thereof says that said sewing machine is "now in the possession of
Erlinda Patriarca and Florencia Someciera". However, paragraph 20 of the very same
complaint speaks of said sewing machine as "now in the possession of the defendants
Erlinda Patriarca, Florencia Someciera, Jose Someciera and Juliana Armentia"4

The complaint winds up with the prayer that the deed of sale be "declared inexistent or in
the alternative annulled"; that plaintiff Laurentio Armentia and defendant Juliana
Armentia, as heir of Marta Armentia, be declared owners of the land in dispute; that the
Register of Deeds be directed to cancel Torrens title 18797 in the names of Erlinda
Patriarca and Florencia Someciera, and, in lieu thereof, to issue a new title in the names
of Laurentio Armentia and Juliana Armentia; that the house and lot and sewing machine
be partitioned and plaintiff's share be delivered to him; and that should partition not be
feasible, said properties be sold and plaintiff given his share.

The complaint was met by defendant's motion to dismiss upon two grounds: (1) lack of
cause of action and (2) prescription.

On November 21, 1960, over plaintiff's opposition, the lower court dismissed the case for
the reason that plaintiff's action to annul the sale had prescribed. A move to reconsider
was thwarted by the court in its order of December 17, 1960.

The case is now before us on plaintiff's appeal in forma pauperis.

1. Plaintiff's attack is primarily directed at the sale. Plaintiff charges that the contract
therefor was fraudulently executed, but in the same breadth characterizes it, as simulated
and fictitious. These statements and but conclusions of law. Controlling, of course, is the
statement of' ultimate facts.6

Let us then look at the factual recitals. Particularly striking is the fact that plaintiff does
not dispute the self-adjudication made by Marta Armentia in the deed. Plaintiff does not
impugn the genuineness of Marta's signature thereon. He solo puts in issue that portion
of the document where the sale appears to have been made to Erlinda Patriarca and
Florencia Someciera.

To drive home his averment of nullity, plaintiff summons to his aid the following
circumstances: At the time of the sale, the vendees were still minors and the
consideration was grossly inadequate; after the sale, Marta Armentia repaired the house,
continued possession of the premises, paid the taxes thereon until her demise.

Hypothetically admitting the truth of these allegations, the conclusion is irresistible that
the sale is merely voidable. Because Marta Armentia executed the document, and this is
not controverted by plaintiff. Besides, the fact that the vendees were minors, makes
the contract, at worst, annullable by them. Then again, inadequacy of consideration does
not imply total want of consideration. Without more, the purported acts of Marta
Armentia after the sale did not indicate that said sale was void from the beginning.

The sum total of all of these is that, in essence, plaintiff's case is bottomed on fraud,
which renders the contract voidable.

2. May plaintiff annul the sale on the theory of fraud? Plaintiff was but a brother of the
deceased Marta Armentia. True, he is an intestate heir of Marta; but he is not a forced
heir. Upon the other hand, Marta was free to dispose of her properties the way she liked
it. She had neither ascendants nor descendants.

By Article 1397 of the Civil Code, "[t]he action for annulment of contracts may be
instituted by all who are thereby obliged principally or subsidiarily". This must be
construed in conjunction with Article 1311 of the same code providing that "[c]on tracts
take effect only between the parties, their assigns and heirs, except in case where the
rights and obligations arising from the contract are not transmissible by their nature, or
by stipulation or by provision of law", and that "the heir is not liable beyond the value of
the property he received from the decedent". Plaintiff is not a forced heir. He is not
obliged principally or subsidiarily under the contract. Marta Armentia did not transmit to
him by devise or otherwise any rights to the property, the subject thereof. On the
contrary, Marta voluntarily disposed of it. No creditors are defrauded; there are none. No
legitimes are impaired. Therefore, plaintiff has no cause of action to annul or to rescind
the sale.

In point is Concepcion vs. Sta. Ana, 87 Phil. 787. The facts there may well be analogized
with those of the present. In the Concepcion case, plaintiff Monico Concepcion was the
only surviving legitimate brother of Perpetua Concepcion, who died without issue and
without leaving any will. In her lifetime, or more precisely, on June 29, 1945, said
Perpetua Concepcion, "in connivance with the defendant and with intent to defraud the
plaintiff, sold and conveyed three parcels of land for a false and fictitious
consideration to the defendant, who secured transfer certificate of title of said lands
issued under her name and that the defendant has been in possession of the properties
sold since the death of Perpetua Concepcion, thereby causing damages to the plaintiff in
the amount of not less than two hundred (P200) pesos". 6 On motion to dismiss, the lower
court threw the complaint out of court upon the ground that "the plaintiff is not a party to
the deed of sale executed by Perpetua Concepcion in favor of the defendant"; that even
on the assumption "that the consideration of the contract is fictitious, the plaintiff has no
right of action against the defendant"; that under Article 1302 of the old Civil Code, "the
action to annul a contract may be brought by any person principally bound thereby"; that
"plaintiff is not bound by the deed of sale executed by the d ceased in favor of the
defendant"; and that he has "no obligations under the deed."

The following reproduced in haec verba from the Concepcion opinion is illuminating:

(2) As to the appellant's second and last contention, under the law action to annul a
contract entered into with all the requisites mentioned in article 12617 whenever they are
tainted with the vice which invalidate them in accordance with law, may be brought not
only by any person principally bound or who made them, but also by his heir to whom
the right and obligation arising from the contract are transmitted. Hence if no such
rights, actions or obligations have been transmitted to the heir, the latter can not bring an
action to annul the contract in representation of the contracting party who made it.
In Wolfson vs. Estate of Martinez, 20 Phil., 340, this Supreme Court quoted with
approval the judgment of the Supreme Court of Spain of April 18, 1901, in which it was
held that "he who is not a party to a contract, or an assignee thereunder, or does not
represent those who took part therein, has under Articles 1257 and 13028of the Civil
Code no legal capacity to challenge the validity of such contract". And in Irlanda vs.
Pitargue (22 Phil. 383) we held that "the testamentary or legal heir continues in law as
the juridical personality of his predecessor in interest, who transmit to him from the
moment of his death such of his rights, actions and obligations as are not extinguished
thereby".

The question to be resolved is, therefore, whether the deceased Perpetua Concepcion has
transmitted to the plaintiff any right arising from the contract under consideration in
order that he can bring an action to annul the sale voluntarily made by her to the
defendant with a false consideration.

We are of the opinion and so hold, that the late Perpetua Concepcion has not
transmitted to the plaintiff any right arising from the contract of conveyance or sale of
her lands to the defendant, and therefore the plaintiff cannot file an action to annul such
contract as representative of the deceased.

According to the complaint the deceased, in connivance with the defendant and with
intent to defraud the plaintiff, (that is, in order not to leave the properties above
mentioned upon her death to the plaintiff) sold and conveyed them to the latter, for a
false and fictitious consideration. It is, therefore obvious, that the conveyance or sale of
said properties to the defendant was voluntarily made by the deceased to said defendant.
As the deceased had no forced heir, she was free to dispose of all her properties as
absolute owner thereof, without further limitation than those established by law, and
the right to dispose of a thing involves the light to give or convey it to another without
any consideration. The only limitation established by law on her right to convey said
properties to the defendant without any consideration is, that she could not dispose of or
transfer her property to another in fraud of her creditors. And this court, in Solis vs.
Chua Pua Hermanos (50 Phil. 636), through Mr. Justice Street, held that a "voluntary
conveyance, without any consideration whatever, is prima facie good as between the
parties, and such an instrument can not be declared fraudulent as against creditors in the
absence of proof, that there was at the time of the execution of the conveyance a creditor
who could be defrauded by the conveyance, 27 C.J., 4770".

xxx xxx xxx

The reason why a forced heir has the right to institute an action of rescission is that the
right to the legitime is similar to a credit of a creditor. As the same Spanish author
Manresal correctly states in commenting on article 1291 9 of the Civil Code: "The rights
of a forced heir to the legitime are undoubtedly similar to a credit of a creditor in so far
as the rights to the legitime may be defeated by fraudulent contracts" and are superior to
the will of those bound to respect them. In its judgment of October 28, 1897, the
Supreme Court of Spain held that the forced heirs instituted as such by their father to the
latter's testament have the undeniable right to institute an action to annul contracts
entered into by the father to their prejudice. As it is seen the action is called action of
nullity, but is rather an action of rescission taking into account the purpose for which it
is instituted and the confusion of ideas that has prevailed in this matter. The doctrine we
shall expound in commenting on articles 1302 and 1306 10 will confirm what we have
just stated'. (Manresa, Codigo Civil, 4th edition, Vol. 8, pp. 667 and 668.)11

Our opinion in Concepcion needs no further elaboration. It would suffice to say that
plaintiff here has no cause of action.
3. But even if a right of action be conceded, plaintiff's case fails just the same. An action
to annul a contract based on fraud must be filed within four (4) years from the discovery
thereof.12 In legal contemplation, discovery must be reckoned to have taken place from
the time the document was registered in the office of the register of deeds. For, the
familiar rule is that registration is notice to the whole world, including plaintiff. 13 As
aforestated, the document in question was recorded on July 22, 1955. Action was started
only on September 17, 1960. The four-year period has elapsed. And, plaintiff's cause of
action, if any, is time-barred.

4. All that remains is the small item of plaintiff's share in the "Singer" sewing machine
which was not the subject of the sale aforesaid. The Court may well take judicial
notice14 of the fact that such share does not exceed P5,000.15 Plaintiff's separate action
if any he had to obtain said share, should have been addressed to the Municipal Court.

Premised on the foregoing considerations, the appealed order of November 21, 1960
dismissing the second amended complaint is, as it should be, affirmed. No cots So
ordered.

Concepcion, C.J., Dizon, Regala, Makalintal, Bengzon, JP Zaldivar and Castro,

JJ., concur.

Separate Opinions

REYES, J.B.L., J., concurring:

I concur with the main decision, but can not bring myself to agree to the proposition that
the heirs intestate would have no legal standing to contest the conveyance by the
deceased if the same were made without any consideration, or for a false and fictitious
consideration. For under the Civil Code of the Philippines, Article 1409, par. 3, contracts
with a cause that did not exist at the time of the transaction are inexistent and void from
the beginning. The same is true of contracts stating a false cause (consideration) unless
the persons interested in upholding the contract should prove that there is another true
and lawful consideration therefor (Ibid., Art. 1353).

If therefore the contract has no causa or considerations or the causa is false and fictitious
(and no true hidden causa is proved) the property allegedly conveys never really leaves
the patrimony of the transferor, and upon the latter's death without a testament, such
property would pass to the transferor's heirs intestate and be recoverable by them or by
the Administrator of the transferor's estate, should there be any. The cause of action of
the plaintiffs would not be then on fraud of creditors at all, but upon the fact that the
property in question is still part of the transferor's estate. In this particular regard, I
think Concepcion vs. Sta. Ana, 87 Phil. 787 and Solis vs. Chua Pua Hermanos, 50 Phil.
536, do not correctly state the present law, and must be clarified.

It is unquestionable that the owner of property has the right to convey it to another
person, either for a consideration (onerous contract) or out of sheer liberality (gratuitous
transfer). But it must not be overlooked that while the law does not limit the lawful
consideration as the transferor deems adequate (and he is the primary judge of its
adequacy), gratuitous transfers are by no means equally untrammeled The law, justifiably
or not, looks with suspicion at gratuitous conveyances (perhaps considering them
contrary to man's innate egotism) and subjects their validity to the observance of specific
formalities designed to assure that the nature of the conveyance is well understood, and
that it is not done impulsively, without due deliberation. It is well known that our law
only recognizes two forms of gratuitous conveyances: inter vivos by way of donation
and mortis causa by way of last will and testament. In either case, the validity of the
transfer of ownership is subordinated to the observance of the formalities prescribed by
law. Where Ian or tenements are conveyed, a donation and its acceptance must appear
in a public document, with the acceptance duly notified to the donor (Civ. Code, Art.
749); in case of movables, there must be at least a private writing unless the donation is
accompanied by simultaneous delivery of the donated chattel (Art. 748). In last wills and
testaments, the formalities ordained by law must be necessarily observed (Arts. 804, et
seq.) and ' in addition, the will must be judicially allowed or probated (Art. 838, Civil
Code).

It is a consequence of all the preceding considerations that a purported sale of property

would not vest ownership in the transferee if it is established that the transfer was really
gratuitous, and that the alleged price is non-existent. Such a "sale" would then either be
void for lack of an essential requisite, or else be a 'disguised donation, that would not be
operative unless the formalities prescribed for a valid donation are observed.1 If they are
not, then no title passes to the transferee, regardless of the voluntary accomplishment of
the deed of conveyance by the transferor, because the naked intent to convey, without the
required solemnities, does not suffice for gratuitous alienations, even as between the
parties inter se.

Of course, in the case at bar, it has not been satisfactorily established that the price is
non-existent, and for that reason the transaction, being onerous and not gratuitous, must
be upheld.
G.R. No. 76148 December 20, 1989

ELISEO CARO, CARLOS CARO, BENITO CARO, CARMEN CARO,

BATAYOLA AND LORENZO CARO, petitioners,
vs.
HON. COURT OF APPEALS, SERAFIN V. RONZALES, JOSE RONZALES, JR.
AND GEMME RONZALES, respondents.

Resurreccion S. Salvilla for petitioners.

Tirol & Tirol for private respondents.

MEDIALDEA, J.:

This is a petition for review on certiorari of the decision of the Court of Appeals in AC-
G.R. CV No. 01016 entitled, "Epifanio Caro, Plaintiff-Appellant v. Serafin V. Ronsales,
et al., Defendants-Appellees," dated January 28, 1986 affirming the decision of the Court
of First Instance (now Regional Trial Court) of Iloilo; and its resolution dated September
11, 1986 denying the motion for reconsideration.

The subject matter of the present controversy is a 260 square meter parcel of land which,
according to petitioners, is included in the parcel of land purchased by their predecessor,
Epifanio Caro, from Simeon Gallego; but contradicted by the private respondents by
claiming it as their own evidenced by a certificate of title issued in their favor. We
gathered from the records that the questioned land is the eastern portion allegedly
included in the parcel of land purchased from Simeon Gallego. The trial court ruled in
favor of the private respondents on the grounds of estoppel, absence of fraud in the
registration of the questioned land and prescription. This ruling was affirmed by the
respondent court. Likewise, We affirm, based on the first two grounds but not on the
ground of prescription.

The antecedent facts are as follows:

It appears that on May 14, 1946, Simeon Gallego bought a parcel of land from Loreto
Martinez, Presentacion Jereza, Hermenigildo Jereza, Maria Luz Nele Jereza and Maria
Elena Jereza, situated within the poblacion of Jordan, Sub-Province of Guimaras with an
area of 5,031 square meters and bounded on the North by Jordan River, Joaquin Galve
and Custodia Jalandoni; on the East by Roman Catholic Church and the Municipality of
Jordan; on the South by Graciana Martinez; and on the West by Jordan River. The above-
described parcel of land was then declared for taxation purposes under Tax Declaration
No. 6437. This land was later on sold by Simeon Gallego to Epifanio Caro in 1948. On
May 15, 1962, Trinidad Castem, Rolando Iranaya and Eriberto Iranaya sold a parcel of
land which they inherited from Custodia Jalandoni, situated in the poblacion of Jordan,
Sub-Province of Guimaras, with an area of 1,011 square meters and bounded on the
North by Jordan River; on the East by Roman Catholic Archbishop of Jaro; on the South
by Rafael Gaylan; and on the West by Jordan River, to Epifanio Caro. The land was then
declared for taxation purposes under Tax Declaration No. 4135. In the same year,
Epifanio Caro bought another parcel of land from the heirs of Rafael Gaylan, situated in
the poblacion of Jordan, Sub-Province of Guimaras, with an area of 1,750 square meters
and bounded on the North and East by the heirs of Custodia Jalandoni; on the South by
Simeon Gallego; and on the West by Jordan River, and declared for taxation purposes
under Tax Declaration No. 3638.

In 1963, Epifanio Caro had those three (3) parcels of land surveyed and were then
designated as Lot No. 54. When Blas Gonzales conducted the survey, he prepared a plan.
Epifanio Caro was given a copy of the plan and he just kept it. During that survey,
Epifanio Caro pointed the boundaries of his parcels of land to the survey team. These
parcels of land were relocated in 1968 by the Sirilan Surveying Company and Plan Psu-
207820 was prepared. The parcels of land of Epifanio Caro were denominated as Lot No.
54 and the land claimed by the private respondents Serafin V. Ronzales, Jose Ronzales,
Jr. and Gemme Ronzales, as Lot No. 55. Epifanio Caro had the three lots consolidated
after the survey into one lot, and Tax Declaration No. 7688 was issued. During the
cadastral proceeding, Epifanio Caro filed an answer for Lot 54. There is no showing
whether or not a title was issued to him.

On the other hand, the private respondents claim that the questioned land was formerly
owned by Pascuala Lacson and was declared in her name under Tax Declaration No.
4234. Pascuala Lacson was married to Domingo Ronzales. Long before World War II,
private respondents and their predessors-in-interest had been living on the questioned
land. When Epifanio Caro bought a parcel of land from Simeon Gallego, Jose Ronzales,
Sr., his brother Serafin Ronzales, and sister Gemme Ronzales children of Domingo
Ronzales, and Pascuala Lacson, were already living in a house of semi-strong materials
on the questioned land.

Sometime in 1964, another survey was conducted. The parcels of land claimed by
Epifanio Caro were denominated as Lot No. 54 and the land claimed by the private
respondents was denominated as Lot No. 55. Epifanio Caro filed an answer for Lot No.
54 and Purificacion Ronzales, mother of private respondent Jose Ronzales, Jr. filed an
answer for Lot No. 55. No other person or persons filed an answer for Lot No. 55.
Consequently, Original Certificate of Title No. 0-6836 was issued in the names of the
private respondents, in equal shares of 1/3 portion each on September 17, 1970.

In June 1973, the spouses Epifanio Caro and Paz Caro filed an ejectment case against
Augusta Chavez, Naciso Galila, Timoteo Parreno, Ramon Aranduque and Rafael
Galotera, involving Lot Nos. 56, 59 and 60. In 1974, the spouses filed an ejectment and
illegal detainer case against Ramon Aranduque, Timoteo Parreno and Augusta Chavez,
involving Lot No. 54.

On June 4, 1975, Epifanio Caro flied a complaint before the Court of First Instance of
Iloilo (Civil Case No. 10235) for cancellation of Certificate of Title No. 0-6836,
reconveyance, recovery of possession and damages on the ground of fraud. During the
pendency of the case, Epifanio Caro died, so he was substituted by his heirs, namely,
Eliseo Caro, Carlos Caro, Benito Caro, Carmen Caro Batayola and Lorenzo Caro.

On November 22, 1982, the trial court dismissed the complaint. On appeal, the dismissal
was affirmed by the respondent Court of Appeals. The motion for reconsideration was
denied. Hence, the present petition for review on certiorari.

The issues may be limited to the following:

1) Whether or not the action in Civil Case No. 10235 has prescribed;

2) Whether or not fraud attended the issuance of Original Certificate of Title No. 0-6836;
and

3) Whether or not the plaintiff in said civil case was in estoppel.

Petitioners contend that since private respondents do not own the questioned land, they
are mere trustees and this being the case, prescription does not lie in an action for
reconveyance.

In this regard, the trial court held (p. 413, Records):

An action for reconveyance on the ground of fraud prescribes in four (4) years from the
time of the decree of registration, for the reason that the registration of the decree
constitutes constructive notice to the whole world (Gerona v. de Guzman, G.R. No. L-
19060, May 29, 1964, citing the cases J.M. Tuason and Co. vs. Magdangal, G.R. No. L-
15539, June 30, 1962; Abdon v. Abella, C.A. G.R. No. L-29846-R, August 31, 1964).
Affirming, the respondent court said (p. 29, Rollo):

... even if a trust relationship had existed, the right to seek reconveyance prescribed ten
(10) years after 1948 when Epifanio Caro was informed by the wife of Jose Ronzales,
that she inherited the land from her grandmother (de la Cerna vs. de la Cerna, 72 SCRA
515; Alzona vs. Calupitan, 4 SCRA 450; Carantes vs. Court of Appeals, 76 SCRA 516).
Since there is no trust relationship between the ancestors of and between plaintiffs and
defendants, the same action prescribed in 4 years from the issuance of title on September
17, 1970, because the complaint was filed only on June 4,1975, as ruled by the lower
court (de la Cerna vs. de la Cerna, 72 SCRA 515).

We disagree. The case of Liwalug Amerol, et al. v. Molok Bagumbaran, G.R. No. L-
33261, September 30, 1987,154 SCRA 396 illuminated what used to be a gray area on
the prescriptive period for an action to reconvey the title to real property and, corollarily,
its point of reference:

... It must be remembered that before August 30,1950, the date of the effectivity of the
new Civil Code, the old Code of Civil Procedure (Act No. 190) governed prescription. It
provided:

SEC. 43. Other civil actions; how limited.- Civil actions other than for the recovery of
real property can only be brought within the following periods after the right of action
accrues:

xxx xxx xxx

3. Within four years: .... An action for relief on the ground of fraud, but the right of action
in such case shall not be deemed to have accrued until the discovery of the fraud;

xxx xxx xxx

In contrast, under the present Civil Code, we find that just as an implied or constructive
trust is an offspring of the law (Art. 1456, Civil Code), so is the corresponding obligation
to reconvey the property and the title thereto in favor of the true owner. In this context,
and vis-a-vis prescription, Article 1144 of the Civil Code is applicable.

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

(1) Upon a written contract;

(2) Upon an obligation created by law;

(3) Upon a judgment.

xxxxxxxxx

(Emphasis supplied).

An action for reconveyance based on an implied or constructive trust must perforce

prescribe in ten years and not otherwise. A long line of decisions of this Court, and of
very recent vintage at that, illustrates this rule. Undoubtedly, it is now well-settled that an
action for reconveyance based on an implied or constructive trust prescribes in ten years
from the issuance of the Torrens title over the property. The only discordant note, it
seems, is Balbin vs. Medalla which states that the prescriptive period for a reconveyance
action is four years. However, this variance can be explained by the erroneous reliance
on Gerona vs. de Guzman. But in Gerona, the fraud was discovered on June 25,1948,
hence Section 43(3) of act No. 190, was applied, the new Civil Code not coming into
effect until August 30,1950 as mentioned earlier. It must be stressed, at this juncture, that
article 1144 and article 1456, are new provisions. They have no counterparts in the old
Civil Code or in the old Code of Civil Procedure, the latter being then resorted to as legal
basis of the four-year prescriptive period for an action for reconveyance of title of real
property acquired under false pretenses.

An action for reconveyance has its basis in Section 53, paragraph 3 of Presidential
Decree No. 1529, which provides:

In all cases of registration procured by fraud, the owner may pursue all his legal and
equitable remedies against the parties to such fraud without prejudice, however, to the
rights of any innocent holder of the decree of registration on the original petition or
application, ...

This provision should be read in conjunction with Article 1456 of the Civil Code, which
provides:

Article 1456. If property is acquired through mistake or fraud, the person obtaining it is,
by force of law, considered a trustee of an implied trust for the benefit of the person from
whom the property comes.

The law thereby creates the obligation of the trustee to reconvey the property and the title
thereto in favor of the true owner. Correlating Section 53, paragraph 3 of Presidential
Decree No. 1529 and Article 1456 of the Civil Code with Article 1144(2) of the Civil
Code, supra, the prescriptive period for the reconveyance of fraudulently registered real
property is ten (10) years reckoned from the date of the issuance of the certificate of title.
In the present case, therefore, inasmuch as Civil Case No. 10235 was filed on June 4,
1975, it was well-within the prescriptive period of ten (10) years from the date of the
issuance of Original Certificate of Title No. 0-6836 on September 17, 1970.

Unfortunately for the petitioners, however, We agree with the respondent court and the
trial court that the private respondents did not employ any fraud in securing title to the
questioned land. A perusal of the pertinent portions of the deposition of Epifanio Caro
supports this finding, to wit:

ATTY. TANEO:

Q Now, at the time you bought this land from Simeon Gallego in 1948, who was residing
in that shack?

A There was no more shack, but there was a big house.

Q And who was residing on that big house?

A Jose and his wife and children, and his sister.

Q Since according to you at the time you bought this land from Simeon Gallego there
was already that big house occupied by Jose Ronzales and his wife, their children and
sister, did you make any demand from them to vacate the premises since you have
already purchased the land from Simeon Gallego?

A I informed them that I have already bought the lot from Simeon Gallego, and I
demanded from them rental of the house, because their house was already there at the
time I bought the land.

Q And what was their answer, if any, to your demand?

A They promised me that they will also pay the rent, or if I wish to sell the land to them,
they will buy the same. But I told them that I will not sell the land.

Q Now, since you told them that you did not want to sell to them the portion of the land
occupied by their big house, what did they, if any, suggest to you regarding their
occupancy of the land?

ATTY. ALINIO:
We would like now to object to this line of questioning because this is irrelevant,
immaterial, and impertinent, not being raised in the complaint. Not one of the issues in
this case.

ATTY. GRIJALVO:

Subject to the objection, witness may answer.

WITNESS:

A They told me that they will just pay the rent.

ATTY. TANEO:

Q Did you agree?

A I agreed. I consented, but they merely promised and promised to me, but they did not
pay anything.

Q In other words you mean that after they suggested to rent the land and you agreed, you
made several demands from them to pay the rentals?

A Yes, sir, I demanded from them the rentals. But later when I demanded from them the
payment of the rent, they told me that it is not my land being occupied by their house, but
it is the land of the municipality.

Q Around how many times did you demand from them for the payment of the rentals?

A Two times. And on the second time you demanded for the payment of rentals and they
did not still pay, what was their reason, if any?

ATTY. ALINIO:

Objection, because the witness has already answered the same or similar questions.

ATTY. TANEO:

The witness stated that he made around two demands for the payment of rentals. When
he made the demand later after there was an agreement that they would just pay the
rental, they reasoned out that the land occupied by their house is a portion of the land of
the municipality. Since the witness stated that there was a second demand, the purpose
now of the pending question is if there was any other reason stated by them.

ATTY. GRIJALVO:

Subject to the objection, witness may answer.

WITNESS:

A They will not pay, because according to them the land on which their house stands is a
portion of the land owned by the municipality. But actually it is my own, and the
municipality has nothing to do with it. (pp. 207-212, Records) ...

ATTY. TANEO:

Q The last time you stated that you know Lot No. 55. When for the first time did you
know about this Lot 55?

A I know this lot for the first time when I bought this lot from Simeon Gallego.

Q At that time did you know that this lot already bears Lot No. 55?

A I know it because one Purit told me that she inherited the same from her grandmother.

Q This Purit you are mentioning, are you referring to Purificacion Villanueva Ronsales,
who is the widow of Jose Ronsales?

A Yes, sir.

Q When was this when this Purit mentioned to you about this Lot 55?

A When I bought said land. (pp. 215-216, Records)

It is clear, therefore, that as early as 1948, Epifanio Caro was already aware of the
adverse claim of the private respondents. He should have been vigilant of his right as the
allegedly new owner of the questioned land. What he did was the reverse, he slept on his
rights for a number of years. In the recent case of Bagtas v. Court of Appeals, et al., G.R.
No. L-50732, August 10, 1989, We held that considerable delay in asserting one's right
before a court of justice is strongly persuasive of the lack of merit of his claim, since it is
human nature for a person to enforce his right when same is threatened or invaded. Thus,
he is estopped by laches from questioning the ownership of the questioned land. Not only
that. There is also estoppel in pais in this case because Epifanio Caro filed his answer
with respect to Lot No. 54 only while Purificacion Villanueva flied her answer with
respect to Lot No. 55 (see Tijam, et al. v. Sibonghanoy, et al., G.R. No. L-21450, April
15,1968, 23 SCRA 29). In addition, the trial court observed (pp. 414-415, Records):

The Tax Declaration of the land bought by Epifanio Caro, Exhibit 4, states that its
adjacent owner on the east is Pascual (sic) Lacson who is the grandmother of the
defendants. When said land was declared in the name of Epifanio Caro in 1969, the
adjacent owner on the East is still Pascuala Lacson, Exhibit E. The Tax Declaration of
the land bought by Epifanio Caro from the heirs of Custodia Jalandoni, Exhibit 8 shows
that the land in question is not an adjacent property. The same is true with the Tax
Declaration of the land bought by Epifano Caro from the heirs of Rafael Gaylan, Exhibit
9. This clearly shows that Lot No. 55 which originally belonged to Pascuala Lacson is a
different and distinct parcel from the lands bought by Epifanio Caro from Simeon
Gallego, from the heirs of Custodia Jalandoni and from the heirs of Rafael Gaylan (sic).

While We commiserate with the petitioners because of Epifanio Caro's lack of formal
education still, his negligence and belated action were undoubtedly the root cause of the
present controversy:

Q Is this the same survey plan which Mr. Gonzales gave you?

A That is the one but I have not read it because I do not understand English or Spanish
because I have never gone to school (p. 217, Records).

xxx xxx xxx

Q Now, when the cadastral survey was conducted, did you take occasion to verify also
the cadastral survey of your lot?

A I did not bother anymore because I entrusted everything to them (p. 232, Records).

xxx xxx xxx

Q Now, when you purchased the lot from Simeon Gallego because you said you could
not read English nor Spanish, did you ask the help of somebody else to explain to you the
document?

A I have not asked the help of anybody. In other words you did not read nor understand
the sale in your favor executed by Simeon Gallego?
A I have confidence in him because it was prepared by the father of the mayor.

Q Did you not inquire from Simeon Gallego of the boundaries of the church from him?

A Before that I knew that the boundaries of the lot of Loreta Martinez was the municipal
building, a road and a church.

Q Now, before you purchase the property from Simeon Gallego did you not also ask the
help of somebody to examine the tax declaration in the name of Simeon Gallego?

A No, because I already knew that lot was owned by Martinez.

Q And therefore, I gather from you that you relied on your knowledge, own knowledge
when you purchased the land from Simeon Gallego about the boundaries of the land?

A I relied on my own knowledge because I know it fully well. "

Q You did not, you said, anymore examine the tax declaration?

A I did not bother because I knew that the lot was owned by Martinez.

Q Did you inquire also from the Martinezes the boundaries of their lots?

A I did not bother because I knew fully well because since 1909 I was aready there in the
church (pp. 251-253, Records).

ACCORDINGLY, the petition is hereby DENIED. The decision dated January 28,1986
and the resolution dated September 11, 1986 of the respondent Court of Appeals are
AFFIRMED subject to the MODIFICATION regarding prescription.

SO ORDERED.
 [G.R. No. 156357. February 18, 2005]

ENGR. GABRIEL V. LEYSON, DR. JOSEFINA L. POBLETE, FE LEYSON QUA,

CARIDAD V. LEYSON and ESPERANZA V. LEYSON, petitioners, vs.
NACIANSINO BONTUYAN and MAURECIA B. BONTUYAN, respondents.

DECISION
CALLEJO, SR., J.:

This is a petition for review on certiorari of the Decision[1] of the Court of Appeals
(CA), as well as its Resolution in CA-G.R. CV No. 64471 denying the motion for
reconsideration of the said decision.

The Antecedents

Calixto Gabud was the owner of a parcel of land located in Barangay Adlawon,
Mabolo, Cebu City, which was declared for taxation purposes under Tax Declaration
(T.D.) No. 03276-R in 1945[2] with the following boundaries:
North Calixto Gabud East Marcelo Cosido
South Pedro Bontuyan West Asuncion Adulfo.[3]
Because of the construction of a provincial road, the property was divided into two
parcels of land covered by T.D. No. 03276-R and T.D. No. 01979-R. On February 14,
1948, Gabud executed a Deed of Absolute Sale[4] over the property covered by T.D. No.
03276-R, as well as the other lot covered by T.D. No. 01979-R, in favor of Protacio
Tabal, married to Leodegaria Bontuyan. On the basis of the said deed, T.D. No. 03276-R
was cancelled by T.D. No. 13615-R in the name of Protacio Tabal effective 1949. [5] On
January 5, 1959, Tabal executed a Deed of Sale [6] over the property covered by T.D. No.
13615-R in favor of Simeon Noval, married to Vivencia Bontuyan, daughter of Gregorio
Bontuyan, for P800.00. T.D. No. 13615-R was cancelled by T.D. No. 100356 in the
names of the spouses Noval.[7] Gregorio Bontuyan received a copy of the said tax
declaration in behalf of the spouses Noval.[8] The latter tax declaration was then cancelled
by T.D. No. 008876 under the same names effective 1967.[9]
 Subsequently, the property was surveyed by Cadastral Land Surveyor Mauro U.
Gabriel on January 22, 1964. The plan survey was approved on September 30, 1966.
[10]
The property covered by T.D. No. 008876 was identified as Lot No. 17150 of Cebu
Cadastre No. 12, while the property covered by T.D. No. 01979-R was identified as Lot
No. 13272. On May 22, 1968, the spouses Noval executed a Deed of Absolute
Sale[11] over the two lots covered by T.D. No. 008876 in favor of Lourdes V. Leyson
for P4,000.00. Lourdes Leyson took possession of the property and had it fenced.
Despite the said sale, T.D. No. 008876 was cancelled by T.D. No. 21267 effective 1974.
[12]
Thereafter, T.D. No. 21267 was cancelled by T.D. No. 23821 [13]which, in turn, was
cancelled by T.D. No. 01-17455 effective 1980. [14] In 1989, the latter was cancelled by a
new tax declaration, T.D. No. 01-001-00646. All these tax declarations were in the names
of the spouses Noval.[15]
Meanwhile, Lourdes Leyson paid for the realty taxes over the property. However,
the tax declaration issued thereon continued to be under the names of the spouses Noval.
[16]

Despite his knowledge that the property had been purchased by his son-in-law and
daughter, the spouses Noval, Gregorio Bontuyan, who was then 91 years old, filed an
application with the Bureau of Lands for a free patent over Lot No. 17150 on December
4, 1968. He alleged therein that the property was public land and was neither claimed nor
occupied by any person,[17] and that he first entered upon and began cultivating the same
in 1918. Thus, on November 19, 1971, Free Patent No. 510463 was issued over Lot No.
17150 in his favor, on the basis of which Original Certificate of Title (OCT) No. 0-1619
was issued to and under his name on March 21, 1974. [18] Another parcel of land, Lot No.
13272, was also registered under the name of Gregorio Bontuyan under OCT No. 0-
1618. He then declared Lot No. 17150 for taxation purposes under T.D. No. 13596
effective 1974.[19] On February 20, 1976, Gregorio Bontuyan executed a Deed of
Absolute Sale[20] over Lot No. 17150 in favor of his son, Naciansino Bontuyan.
On April 28, 1980, Gregorio Bontuyan, then 103 years old, executed another Deed
of Absolute Sale[21] over Lot Nos. 13272 and 17150, covered by OCT No. 0-1618 and
OCT No. 0-1619, respectively, in favor of Naciansino Bontuyan for P3,000.00. On the
basis of the said deed, OCT No. 0-1619 was cancelled by TCT No. 1392 in the name of
Naciansino Bontuyan on December 2, 1980.[22] Gregorio Bontuyan died intestate on April
12, 1981.[23]
On March 30, 1981, the spouses Bontuyan executed a Real Estate Mortgage over
Lot No. 17150 covered by OCT No. 0-1619 in favor of the Development Bank of the
Philippines (DBP) as security for a loan of P11,200.00.[24] Naciansino Bontuyan had
earlier executed an affidavit that the property was not tenanted. Shortly thereafter, the
spouses Bontuyan left the Philippines and resided in the United States. Meanwhile,
Lourdes Leyson died intestate.
The spouses Bontuyan returned to the Philippines in 1988 to redeem the property
from DBP only to discover that there were tenants living on the property installed by
Engineer Gabriel Leyson, one of the late Lourdes Leysons children. Despite being
informed that the said spouses owned the property, the tenants refused to vacate the
same. The tenants also refused to deliver to the spouses the produce from the property.
The spouses Bontuyan redeemed the property from DBP on September 22, 1989.
On February 12, 1993, Jose Bontuyan, Nieves Atilano, Pacifico Bontuyan, Vivencia
Noval and Naciansino Bontuyan, the surviving heirs of Gregorio Bontuyan, executed an
Extrajudicial Settlement[25] of the latters estate and adjudicated Lot No. 13272 in favor of
Naciansino. Based on the said deed, T.D. No. 01-001-00877 was issued to and under the
name of Naciansino over the said property starting 1994.
On June 24, 1993, Naciansino Bontuyan, through counsel, wrote Engr. Gabriel
Leyson, demanding that he be furnished with all the documents evidencing his
ownership over the two lots, Lots Nos. 17150 and 13272.[26] Engr. Leyson ignored the
letter.
The spouses Bontuyan, thereafter, filed a complaint against Engr. Leyson in the
Regional Trial Court (RTC) of Cebu City for quieting of title and damages. They alleged
that they were the lawful owners of the two lots and when they discovered, upon their
return from the United States, that the property was occupied and cultivated by the
tenants of Engr. Leyson, they demanded the production of documents evidencing the
latters ownership of the property, which was ignored.
The spouses Bontuyan prayed that, after due proceedings, judgment be rendered in
their favor, thus:

WHEREFORE, premises considered, it is most respectfully prayed of this Honorable

Court to render judgment against the defendant and in favor of the plaintiffs, to wit:

(a) Confirming the ownership of the plaintiffs on the lots in question;

(b) Ordering defendant to pay the plaintiffs the amount of Twenty Thousand Pesos
(P20,000.00) as the share of the plaintiffs of the produce of the lots in question;

(c) Ordering defendant to pay plaintiffs the sum of P50,000.00 as reimbursement of

attorneys fees and the further sum of P500.00 as appearance fee every time the case is
called for trial;
(d) Ordering the defendant to pay plaintiffs the sum of P50,000.00 as moral damages and
exemplary damages may be fixed by the court;

(e) Ordering defendant to pay plaintiffs the sum of P5,000.00 as actual expenses for the
preparation and filing of the complaint;

(f) Ordering defendant to pay the costs; and

(g) Granting to plaintiffs such other reliefs and remedies just and equitable in the
premises.[27]

In his answer to the complaint, Engr. Leyson averred, by way of affirmative

defenses, that the two lots were but portions of a parcel of land owned by Calixto Gabud,
covered by T.D. No. 03276-R, and was subdivided into two parcels of land because of
the construction of a provincial road on the property; Gabud later sold the two lots to
Protacio Tabal, who sold the same to Simeon Noval, married to Vivencia Bontuyan, one
of the children of Gregorio Bontuyan; Simeon Noval later sold the property to Lourdes
Leyson on May 22, 1968 who, forthwith, took possession thereof as owner; and Gregorio
Bontuyan was issued a free patent over the property through fraud. Engr. Leyson
concluded that the said patent, as well as OCT No. 0-1619 and TCT No. 1392, were null
and void and that the plaintiffs acquired no title over the property.
Engr. Leyson interposed a counterclaim against the spouses Bontuyan and repleaded
as an integral part thereof all the material allegations in his affirmative defense. He
prayed that, after due proceedings, judgment be rendered in his favor, thus:

a) Dismissing Plaintiffs complaint for failure to include indispensable parties;

b) Declaring the Defendant and his four (4) sisters, namely, Dr. Josefina L. Poblete, Mrs.
Fe L. Qua, Esperanza Leyson and Caridad Leyson as the true and legal owners and
possessors of the parcels of land in issue;

c) Declaring OCT No. 0-1619 in the name of Gregorio Bontuyan and TCT No. 1392 in
the name of Naciansino Bontuyan null and void and to order the Register of Deeds to
cancel the same and issue new ones in favor of the Defendant Gabriel V. Leyson and his
four (4) sisters, namely: Dr. Josefina L. Poblete, Mrs. Fe L. Qua, Esperanza V. Leyson
and Caridad V. Leyson;

d) And on the Counterclaim, to order Plaintiffs to pay the Defendant the following sums:
 d-1) P50,000.00 as attorneys fees and appearance fee of P1,000.00 per
hearing;
d-2) P500,000.00 as moral damages;
d-3) P20,000.00 as exemplary damages;
d-4) P10,000.00 as expenses of litigation.

Defendant further prays for such other reliefs just and equitable in the premises.[28]

In due course, the other children of Lourdes Leyson, namely, Dr. Josefina L. Poblete,
Fe Leyson Qua, Caridad V. Leyson and Esperanza V. Leyson, were allowed to intervene
as defendants. They filed their answer-in-intervention wherein they adopted, in their
counterclaim, paragraphs 7 to 26 of the answer of their brother, Engr. Leyson, the
original defendant. They prayed that, after due hearing, judgment be rendered in their
favor as follows:

Wherefore, this Honorable Court is prayed to render judgment in favor of the Defendant
and the Defendants-in-Intervention and against the Plaintiffs as follows:

a) Promissory Plaintiffs complaint for failure to include indispensable parties and for
lack of cause of action;

b) Declaring the Defendant and his four (4) sisters, namely: Dr. Josefina L. Poblete; Mrs.
Fe L. Qua, Esperanza Leyson and Caridad Leyson as the true and legal owners and
possessors of the parcels of land in issue;

c) Declaring OCT No. 0-1619 in the name of Gregorio Bontuyan and TCT No. 1392 in
the name of Naciansino Bontuyan null and void and to order the Register of Deeds to
cancel the same and issue new ones in favor of the Defendant Gabriel V. Leyson and his
four (4) sisters, namely: Dr. Josefina L. Poblete, Mrs. Fe L. Qua, Esperanza V. Leyson
and Caridad V. Leyson;

d) On the Counterclaim, Plaintiffs should pay the Defendants the following sums:

d-1) P50,000.00 as attorneys fees and appearance fee of P1,000.00 per hearing;
d-2) P500,000.00 as moral damages to each Intervenor;
d-3) P50,000.00 as exemplary damages;
d-4) P15,000.00 as expenses of litigation.

Defendant further prays for such other reliefs just and equitable in the premises.[29]
 In their reply, the spouses Bontuyan averred that the counterclaim of the defendants
for the nullity of TCT No. 1392 and the reconveyance of the property was barred by
laches and prescription.
On January 21, 1999, the trial court rendered judgment in favor of the Leyson heirs
and against the spouses Bontuyan. The fallo of the decision reads:

WHEREFORE, foregoing considered judgment is hereby rendered dismissing plaintiffs

complaint for dearth of evidence declaring the defendant and the intervenors as the true
and legal owners and possessors of the subject parcels of land; declaring OCT No. 0-
1619 in the name of Gregorio Bontuyan and TCT No. 1392 in the name of Naciansino
Bontuyan null and void; ordering the Register of Deeds to cancel OCT No. 0-1619 and
TCT No. 1392 and issue new ones in favor of defendant Gabriel Leyson and intervenors
Josefina Poblete, Fe Qua, Esperanza Leyson and Caridad Leyson; ordering plaintiff to
pay defendant and intervenors the following:

a) P50,000.00 attorneys fees;

b) 1,000.00 per appearance;
c) 100,000.00 moral damages for defendant and
intervenors;
d) 10,000.00 exemplary damages; and
e) 10,000.00 litigation expenses.

SO ORDERED.[30]

The trial court held that Simeon Noval had sold the lots to Lourdes Leyson on May
22, 1968, who thus acquired title over the property.
The spouses Bontuyan appealed the decision to the CA which affirmed, with
modification, the decision of the RTC. The appellate court held that the Leyson heirs
were the owners of Lot No. 13273, while the spouses Bontuyan were the owners of Lot
No. 17150. The CA ruled that the answer of the Leyson heirs to the complaint constituted
a collateral attack of OCT No. 0-1619 which was proscribed by law. The Leyson heirs
filed a motion for reconsideration of the decision insofar as Lot No. 17150 was
concerned, contending that their counterclaim for the nullification of OCT No. 0-1619
contained in their answer constituted a direct attack on the said title. The CA denied the
motion.
The Leyson heirs then filed a petition for review with this Court and made the
following assignments of error:

First Assignment of Error

THE HONORABLE COURT OF APPEALS COMMITTED ERROR WHEN IT
RULED THAT THE NULLITY OR THE VALIDITY OF OCT NO. 0-1619 CANNOT
BE RULED UPON IN THESE PROCEEDINGS BROUGHT BY THE RESPONDENTS
FOR THE QUIETING OF THEIR TITLE.

Second Assignment of Error

THE HONORABLE COURT OF APPEALS GRAVELY ERRED WHEN IT RULED

THAT PETITIONERS ANSWER WITH COUNTERCLAIM, PRAYING FOR THE
CANCELLATION OF PLAINTIFFS TORRENS CERTIFICATE IS A MERE
COLLATERAL ATTACK ON THE TITLE.[31]

Third Assignment of Error

THE APPELLATE COURT GRAVELY ERRED WHEN IT MODIFIED THE

DECISION OF THE REGIONAL TRIAL COURT DATED JANUARY 21, 1999 BY
RULING THAT PETITIONERS ARE DECLARED THE OWNERS OF LOT 13273
BUT RESPONDENTS ARE DECLARED THE OWNERS OF LOT 17150 UNDER
OCT NO. 0-1619 AND PRESENTLY COVERED BY TCT NO. 1392 IN THE NAME
OF NACIANSINO BONTUYAN, DESPITE THE APPELLATE COURTS AFFIRMING
THE FINDINGS OF THE TRIAL COURT THAT FRAUD WAS COMMITTED BY
GREGORIO BONTUYAN (RESPONDENTS PREDECESSOR-IN-INTEREST) IN
ACQUIRING TITLE OVER THE SUBJECT PROPERTIES.[32]

Fourth Assignment of Error

THE HONORABLE COURT OF APPEALS GRAVELY ERRED WHEN IT RULED

THAT RECONVEYANCE OF TITLE OF LOT 17150 COVERED BY OCT NO. 0-1619
AND PRESENTLY COVERED BY TCT NO. 1392, IN FAVOR OF PETITIONERS
HAD PRESCRIBED.[33]

Fifth Assignment of Error

THE APPELLATE COURT GRAVELY ERRED IN NOT GRANTING ATTORNEYS

FEES AND APPEARANCE FEES DESPITE RESPONDENTS FRAUD IN
ACQUIRING TITLE OVER THE SUBJECT PROPERTIES.[34]

On the first two assignments of errors, the petitioners aver that the counterclaim in
their answer to the complaint constituted a direct attack of the validity of OCT No. 0-
1619. They maintain that the appellate courts reliance on the ruling of this Court
in Cimafrancia v. Intermediate Appellate Court[35] was misplaced. They assert that what
is controlling is the ruling in Pro Line Sports Center, Inc. v. Court of Appeals [36] wherein
this Court held that the counterclaim of the petitioners therein constituted a direct attack
on a certificate of title. The petitioners, likewise, cited Section 55 of Act No. 496, as
amended, to buttress their stance. They plead that their answer to the complaint should be
liberally construed so as to afford them substantial justice.
On the other hand, the respondents assert that the decision of the CA is correct. They
claim that Lot No. 17150 was still public land when Lourdes Leyson purchased the same
from Simeon Noval, and that the property became private land only when Free Patent
No. 510463 was issued to and under the name of Gregorio Bontuyan.
We agree with the contention of the petitioners that the CA erred in not nullifying
OCT No. 0-1619 and TCT No. 1392 and ordering the respondents to reconvey the
property covered by the said title to the petitioners.
The respondents, as plaintiffs in the court a quo, were burdened to prove their claim
in their complaint that Gregorio Bontuyan was the owner of Lot No. 17150 and that they
acquired the property in good faith and for valuable consideration from him. [37] However,
the respondents failed to discharge this burden. The evidence on record shows that
Calixto Gabud sold the property to Protacio Tabal on February 14, 1948, [38] and that the
latter sold the property to Simeon Noval on January 5, 1959. [39] Simeon Noval then sold
the property to Lourdes Leyson on May 22, 1968. [40] The respondents failed to adduce
any evidence to prove that Lourdes Leyson, or even Simeon Noval, sold the property to
Gregorio Bontuyan, or to any of the respondents for that matter. Since Gregorio
Bontuyan was not the owner of the property, he could not have sold the same to his son
Naciansino Bontuyan and the latters wife, the respondents herein. As the Latin adage
goes: NEMO DAT QUOD NON HABET. Gregorio Bontuyan could not feign ignorance
of Simeon Novals ownership of the property, considering that the latter was his son-in-
law, and that he (Gregorio Bontuyan) was the one who received the owners copy of T.D.
No. 100356 covering the property under the name of Simeon Noval. [41] At the dorsal
portion of the said tax declaration, there was even an annotation that the property was
transferred to Simeon Noval as shown by the deed of sale executed before Notary Public
Gregorio A. Uriarte who notarized the deed of sale over the property executed by
Protacio Tabal in favor of Simeon Noval on January 5, 1959. [42] We note that the
respondents failed to adduce in evidence any receipts of real property tax payments made
on the property under their names, which would have fortified their claim that they were
the owners of the property. We agree with the findings of the CA, thus:

This case involves two parcels of land Lot 17150 and Lot 13273. Lot 17150 is registered
under the Torrens System under the names of plaintiffs-appellants, while Lot 13273
remained to be unregistered.
In this case, records show that defendant-appellee and intervenors-appellees are the true
owners of the subject lots. They have in their favor tax receipts covering the subject lots
issued since 1945.

While, indeed, tax receipts and declarations are not incontrovertible evidence of
ownership, such, however, if accompanied with open, adverse, continuous possession in
the concept of an owner, as in this case, constitute evidence of great weight that person
under whose name the real taxes were declared has a claim of right over the land.

Further, defendant-appellee and intervenors-appellees presented before the trial court the
Deed of Absolute Sale dated February 14, 1948, executed by Calixto Gabud, conveying
the subject lots in favor of Protacio Tabal. The deed is a notarial document.

Likewise presented is the Deed of Absolute Sale of the subject lots dated January 5,
1959, executed by Protacio Tabal in favor of spouses Simeon Noval and Vivencia
Bontuyan. The document is, likewise, a notarial document.

Defendant-appellee and intervenors-appellees also presented the Deed of Absolute Sale

of the subject lots dated May 22, 1968, executed by spouses Simeon Noval and Vivencia
Bontuyan in favor of Lourdes Leyson. The deed is a notarial document.

A notarial document is evidence of the facts in clear, unequivocal manner therein

expressed. It has in its favor the presumption of regularity. It is admissible in evidence
without necessity of preliminary proof as to its authenticity and due execution.

There exist (sic) no trace of irregularity in the transfers of ownership from the original
owner, Calixto Gabud, to defendant-appellee and intervenors-appellees.

Plaintiffs-appellants, on the other hand, offered no convincing evidence as to how their

predecessor-in-interest, Gregorio Bontuyan, acquired the subject lots. Plaintiffs-
appellants presented only the Free Patent and OCT No. 0-1619, covering Lot No. 17150,
issued in the name of Gregorio Bontuyan.

As to Lot No. 13273, We find no sufficient reason why defendant-appellee and

intervenors-appellees should be disturbed in their ownership and possession of the same.
[43]

As copiously shown by the record, Gregorio Bontuyan filed his application for a free
patent with the Bureau of Lands on December 4, 1968 in gross bad faith, thereby
defrauding Lourdes Leyson of the said property through deceit. Gregorio Bontuyan
falsely declared in the said application: (a) that he entered upon and cultivated the
property since 1918 and that the property was not claimed or occupied by any person;
and (b) that Lot No. 17150 was located in Sirao, Cebu City, when, in fact, the property
was located in Adlawon, Cebu City. Lourdes Leyson was not notified of the said
application and failed to file any opposition thereto. Gregorio Bontuyan was then able to
secure Free Patent No. 510463 on November 19, 1971 and OCT No. 0-1619 on March
21, 1974. It appears in the said title that the propertys location was indicated as Sirao,
Cebu City.[44] Indeed, the CA declared that Gregorio Bontuyan had acquired title to the
property through fraud:

However, as to Lot No. 17150, We find that despite the fraud committed by Gregorio
Bontuyan (plaintiffs-appellants predecessor-in-interest) in acquiring his title over the said
lot, ownership over the said lot should be adjudged in favor of plaintiffs-appellants.

Records, indeed, show that, at the time when Gregorio Bontuyan applied for Free Patent,
Gregorio Bontuyan was living with his daughter, Vivencia Bontuyan (defendant-
appellees predecessor-in-interest). Thus, Gregorio Bontuyan must have known that at the
time when he applied for free patent on December 1968, the subject lots were already
sold on May 1968 by his daughter Vivencia Bontuyan in favor of Lourdes Leyson,
predecessor-in-interest of defendants-appellees.

Moreover, records further show that Gregorio Bontuyan sold twice Lot [No.] 17150 to
plaintiffs-appellants. The first was in 1976 and the other was in 1980. Plaintiffs-
appellants offered no reasonable explanation why Gregorio Bontuyan have (sic) to sell
twice Lot No. 17150 in favor of plaintiffs-appellants.

As found by the trial court, these are badges of bad faith which affect the validity of the
title of Gregorio Bontuyan over the subject lots.

We are aware that the torrens system does not create or vest title. It only confirms and
records title already existing and vested. It does not protect a usurper from the true
owner. It cannot be a shield for the commission of fraud. It does not permit one to enrich
himself at the expense of another. Where one does not have any rightful claim over a real
property, the torrens system of registration can confirm or record nothing.[45]

The findings of the CA affirmed the findings of the trial court in its decision, thus:

After having thoroughly analyzed the records and the evidences adduced during the trial
of this case, this Court is convinced and sincerely believes that the lots in question were
originally owned by Calixto Gabud as evidenced by T.D. [No.] 03276R marked as Exh.
1. In 1945, this consisted of only one lot in Adlawon, Cebu City, as there was no
provincial road yet. However in 1948, the said parcel of land was divided into two
because a provincial road was constructed passing through it. Hence, T.D. [No.] 03276R
and T.D. [No.] 01979-R were issued to Calixto Gabud. On February 16, 1948, Calixto
Gabud sold the said parcels of land to spouses Protacio Tabal and Ludegaria (sic)
Bontuyan as evidenced by an Absolute Deed of Sale, Exh. 2. On January 5, 1959,
spouses Protacio Tabal and Ludegaria (sic) Bontuyan, in turn, sold the same parcels of
land to spouses Simeon Noval and Vivencia Bontuyan as evidenced by a Deed of Sale,
Exh. 4. It is noteworthy to mention at this point in time that Vivencia Bontuyan is one of
the daughters of Gregorio Bontuyan, the father of herein plaintiff Naciansino Bontuyan.
In May 1968, spouses Simeon Noval and Vivencia Bontuyan sold the subject parcels of
land to Lourdes vs. (sic) Leyson, the mother of herein defendant as evidenced by a Deed
of Sale marked as Exh. 6. It is quite perplexing for the court to imagine that Gregorio
Bontuyan, father of herein plaintiff, who was then residing with spouses Simeon Noval
and Vivencia Bontuyan at 179 C San Jose dela Montaa, Mabolo, Cebu City, as reflected
in his application for Free Patent (Exhs. 8 & 26) dated December 4, 1968 was unaware of
the sale of the subject parcels of land made by his daughter Vivencia Bontuyan and
spouse Simeon Noval to Lourdes Leyson. It is evident that, after the sale from spouses
Noval to Lourdes Leyson in May 1968, Gregorio Bontuyan applied for Free Patent for
the same parcels of land in December 1968 claiming to have cultivated the land since
1918, stating therein the location as Sirao and not Adlawon which is the true and correct
location. Sirao and Adlawon are two different barangays which are not even adjacent to
each other. In fact, as borne out by Exh. 25, it is separated by Barangay Guba. In 1974,
Free Patent No. 510463 and OCT# 0-1619 was issued to Gregorio Bontuyan covering
subject property, the location of which is in Barangay Sirao in consonance to his
application. Gregorio Bontuyans application for Free Patent over subject parcels of land
had raised in the mind of this Court reasonable badges of bad faith on his part as the
subject parcels of land were already sold by his daughter Vivencia Bontuyan and spouse
Simeon Noval to Lourdes Leyson. Another badge of bad faith is raised in the mind of
this Court when he (Gregorio) sold the subject parcels of land twice to his son
Naciansino Bontuyan in 1976 and 1980, respectively, wherein both Deeds of Sale were
notarized by different Notary Publics, (Exhs. 10 & 16).[46]

Considering that Lourdes Leyson was in actual possession of the property, the
respondents cannot, likewise, claim that they were in good faith when Gregorio
Bontuyan allegedly sold the property to them on April 28, 1980.
Anent the third and fourth assignments of error, we do not agree with the ruling of
the CA that the petitioners failed to directly attack the validity of OCT No. 0-1619. The
CA failed to consider the fact that, in their respective answers to the complaint, the
petitioners inserted therein a counterclaim wherein they repleaded all the material
allegations in their affirmative defenses, that Gregorio Bontuyan secured OCT No. 0-
1619 through fraud and deceit and prayed for the nullification thereof.
While Section 47 of Act No. 496 provides that a certificate of title shall not be
subject to collateral attack, the rule is that an action is an attack on a title if its object is to
nullify the same, and thus challenge the proceeding pursuant to which the title was
decreed. The attack is considered direct when the object of an action is to annul or set
aside such proceeding, or enjoin its enforcement. On the other hand, an attack is indirect
or collateral when, in an action to obtain a different relief, an attack on the proceeding is
nevertheless made as an incident thereof.[47]Such action to attack a certificate of title may
be an original action or a counterclaim in which a certificate of title is assailed as void. A
counterclaim is considered a new suit in which the defendant is the plaintiff and the
plaintiff in the complaint becomes the defendant. It stands on the same footing and is to
be tested by the same rules as if it were an independent action. [48]Furthermore, since all
the essential facts of the case for the determination of the titles validity are now before
the Court, to require the party to institute cancellation proceedings would be pointlessly
circuitous and against the best interest of justice.[49]
The CA, likewise, erred in holding that the action of the petitioners to assail OCT
No. 0-1619 and TCT No. 1392 and for the reconveyance of the property covered by the
said title had already prescribed when they filed their answer to the complaint.
Case law has it that an action for reconveyance prescribes in ten years, the point of
reference being the date of registration of the deed or the date of issuance of the
certificate of title over the property. In an action for reconveyance, the decree of
registration is highly regarded as incontrovertible. What is sought instead is the transfer
of the property or its title, which has been wrongfully or erroneously registered in
another persons name, to its rightful or legal owner, or to one who has a better right.[50]
However, in a series of cases, this Court declared that an action for reconveyance
based on fraud is imprescriptible where the plaintiff is in possession of the property
subject of the acts. In Vda. de Cabrera v. Court of Appeals,[51] the Court held:

... [A]n action for reconveyance of a parcel of land based on implied or constructive trust
prescribes in ten years, the point of reference being the date of registration of the deed or
the date of the issuance of the certificate of title over the property, but this rule applies
only when the plaintiff or the person enforcing the trust is not in possession of the
property, since if a person claiming to be the owner thereof is in actual possession of the
property, as the defendants are in the instant case, the right to seek reconveyance, which
in effect seeks to quiet title to the property, does not prescribe. The reason for this is that
one who is in actual possession of a piece of land claiming to be the owner thereof may
wait until his possession is disturbed or his title is attacked before taking steps to
vindicate his right, the reason for the rule being, that his undisturbed possession gives
him a continuing right to seek the aid of a court of equity to ascertain and determine the
nature of the adverse claim of a third party and its effect on his own title, which right can
be claimed only by one who is in possession.

Similarly, in the case of David v. Malay,[52] the same pronouncement was reiterated
by the Court:

... There is settled jurisprudence that one who is in actual possession of a piece of land
claiming to be owner thereof may wait until his possession is disturbed or his title is
attacked before taking steps to vindicate his right, the reason for the rule being, that his
undisturbed possession gives him a continuing right to seek the aid of the court of equity
to ascertain and determine the nature of the adverse claim of a third party and its effect
on his own title, which right can be claimed only by one who is in possession. No better
situation can be conceived at the moment for Us to apply this rule on equity than that of
herein petitioners whose ... possession of the litigated property for no less than 30 years
and was suddenly confronted with a claim that the land she had been occupying and
cultivating all these years, was titled in the name of a third person. We hold that in such a
situation the right to quiet title to the property, to seek its reconveyance and annul any
certificate of title covering it, accrued only from the time the one in possession was made
aware of a claim adverse to his own, and it is only then that the statutory period of
prescription commences to run against such possessor.

The paramount reason for this exception is based on the theory that registration
proceedings could not be used as a shield for fraud. [53] Moreover, to hold otherwise
would be to put premium on land-grabbing and transgressing the broader principle in
human relations that no person shall unjustly enrich himself at the expense of another.[54]
In the present case, Lourdes Leyson and, after her death, the petitioners, had been in
actual possession of the property. The petitioners were still in possession of the property
when they filed their answers to the complaint which contained their counterclaims for
the nullification of OCT No. 0-1619 and TCT No. 1392, and for the consequent
reconveyance of the property to them. The reconveyance is just and proper in order to
put a stop to the unendurable anomaly that the patentees should have a Torrens title for
the land which they and their predecessors never possessed and which has been
possessed by another in the concept of an owner.[55]
On the fifth assignment of error, we rule for the petitioners. The award of attorneys
and appearance fees is better left to the sound discretion of the trial court, and if such
discretion is well exercised, as in this case, it will not be disturbed on appeal. [56] With the
trial and the appellate courts findings that the respondents were in bad faith, there is
sufficient basis to award attorneys and appearance fees to the petitioners. Had it not been
for the filing of a baseless suit by the respondents against the petitioners, the latter would
not have sought the services of counsel to defend their interests and represent them in
this case.
IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The
Decision of the Court of Appeals declaring the respondents the owners of Lot No. 17150
covered by OCT No. 0-1619 and TCT No. 1392; and setting aside the award of attorneys
fees in favor of the petitioners by the Regional Trial Court are
REVERSED AND SET ASIDE.
The Court hereby AFFIRMS the ownership of the petitioners of Lot No. 17150.
OCT No. 0-1619 and TCT No. 1392 covering the said lot are hereby nullified. The
Register of Deeds is ORDERED to cancel TCT No. 1392 and to issue another title over
the property in favor of the petitioners as co-owners thereof. The trial courts award
of P50,000.00 for attorneys fees to the petitioners is AFFIRMED. No pronouncement as
to costs.
SO ORDERED.
G.R. No. 107112 February 24, 1994

NAGA TELEPHONE CO., INC. (NATELCO) AND LUCIANO M.

MAGGAY, petitioners,
vs.
THE COURT OF APPEALS AND CAMARINES SUR II ELECTRIC
COOPERATIVE, INC. (CASURECO II), respondents.

Ernesto P. Pangalangan for petitioners.

Luis General, Jr. for private respondent.

NOCON, J.:

The case of Reyes v. Caltex (Philippines), Inc. 1 enunciated the doctrine that where a
person by his contract charges himself with an obligation possible to be performed, he
must perform it, unless its performance is rendered impossible by the act of God, by the
law, or by the other party, it being the rule that in case the party desires to be excused
from performance in the event of contingencies arising thereto, it is his duty to provide
the basis therefor in his contract.

With the enactment of the New Civil Code, a new provision was included therein,
namely, Article 1267 which provides:

When the service has become so difficult as to be manifestly beyond the contemplation
of the parties, the obligor may also be released therefrom, in whole or in part.

In the report of the Code Commission, the rationale behind this innovation was
explained, thus:

The general rule is that impossibility of performance releases the obligor. However, it is
submitted that when the service has become so difficult as to be manifestly beyond the
contemplation of the parties, the court should be authorized to release the obligor in
whole or in part. The intention of the parties should govern and if it appears that the
service turns out to be so difficult as to have been beyond their contemplation, it would
be doing violence to that intention to hold their contemplation, it would be doing
violence to that intention to hold the obligor still responsible. 2
In other words, fair and square consideration underscores the legal precept therein.

Naga Telephone Co., Inc. remonstrates mainly against the application by the Court of
Appeals of Article 1267 in favor of Camarines Sur II Electric Cooperative, Inc. in the
case before us. Stated differently, the former insists that the complaint should have been
dismissed for failure to state a cause of action.

The antecedent facts, as narrated by respondent Court of Appeals are, as follows:

Petitioner Naga Telephone Co., Inc. (NATELCO) is a telephone company rendering local
as well as long distance telephone service in Naga City while private respondent
Camarines Sur II Electric Cooperative, Inc. (CASURECO II) is a private corporation
established for the purpose of operating an electric power service in the same city.

On November 1, 1977, the parties entered into a contract (Exh. "A") for the use by
petitioners in the operation of its telephone service the electric light posts of private
respondent in Naga City. In consideration therefor, petitioners agreed to install, free of
charge, ten (10) telephone connections for the use by private respondent in the following
places:

(a) 3 units The Main Office of (private respondent);

(b) 2 Units The Warehouse of (private respondent);

(c) 1 Unit The Sub-Station of (private respondent) at Concepcion Pequea;

(d) 1 Unit The Residence of (private respondent's) President;

(e) 1 Unit The Residence of (private respondent's) Acting General Manager; &

(f) 2 Units To be determined by the General Manager. 3

Said contract also provided:

(a) That the term or period of this contract shall be as long as the party of the first part
has need for the electric light posts of the party of the second part it being understood
that this contract shall terminate when for any reason whatsoever, the party of the second
part is forced to stop, abandoned [sic] its operation as a public service and it becomes
necessary to remove the electric lightpost; (sic) 4
It was prepared by or with the assistance of the other petitioner, Atty. Luciano M.
Maggay, then a member of the Board of Directors of private respondent and at the same
time the legal counsel of petitioner.

After the contract had been enforced for over ten (10) years, private respondent filed on
January 2, 1989 with the Regional Trial Court of Naga City (Br. 28) C.C. No. 89-1642
against petitioners for reformation of the contract with damages, on the ground that it is
too one-sided in favor of petitioners; that it is not in conformity with the guidelines of the
National Electrification Administration (NEA) which direct that the reasonable
compensation for the use of the posts is P10.00 per post, per month; that after eleven (11)
years of petitioners' use of the posts, the telephone cables strung by them thereon have
become much heavier with the increase in the volume of their subscribers, worsened by
the fact that their linemen bore holes through the posts at which points those posts were
broken during typhoons; that a post now costs as much as P2,630.00; so that justice and
equity demand that the contract be reformed to abolish the inequities thereon.

As second cause of action, private respondent alleged that starting with the year 1981,
petitioners have used 319 posts in the towns of Pili, Canaman, Magarao and Milaor,
Camarines Sur, all outside Naga City, without any contract with it; that at the rate of
P10.00 per post, petitioners should pay private respondent for the use thereof the total
amount of P267,960.00 from 1981 up to the filing of its complaint; and that petitioners
had refused to pay private respondent said amount despite demands.

And as third cause of action, private respondent complained about the poor servicing by
petitioners of the ten (10) telephone units which had caused it great inconvenience and
damages to the tune of not less than P100,000.00

In petitioners' answer to the first cause of action, they averred that it should be dismissed
because (1) it does not sufficiently state a cause of action for reformation of contract; (2)
it is barred by prescription, the same having been filed more than ten (10) years after the
execution of the contract; and (3) it is barred by estoppel, since private respondent seeks
to enforce the contract in the same action. Petitioners further alleged that their utilization
of private respondent's posts could not have caused their deterioration because they have
already been in use for eleven (11) years; and that the value of their expenses for the ten
(10) telephone lines long enjoyed by private respondent free of charge are far in excess
of the amounts claimed by the latter for the use of the posts, so that if there was any
inequity, it was suffered by them.

Regarding the second cause of action, petitioners claimed that private respondent had
asked for telephone lines in areas outside Naga City for which its posts were used by
them; and that if petitioners had refused to comply with private respondent's demands for
payment for the use of the posts outside Naga City, it was probably because what is due
to them from private respondent is more than its claim against them.

And with respect to the third cause of action, petitioners claimed, inter alia, that their
telephone service had been categorized by the National Telecommunication Corporation
(NTC) as "very high" and of "superior quality."

During the trial, private respondent presented the following witnesses:

(1) Dioscoro Ragragio, one of the two officials who signed the contract in its behalf,
declared that it was petitioner Maggay who prepared the contract; that the understanding
between private respondent and petitioners was that the latter would only use the posts in
Naga City because at that time, petitioners' capability was very limited and they had no
expectation of expansion because of legal squabbles within the company; that private
respondent agreed to allow petitioners to use its posts in Naga City because there were
many subscribers therein who could not be served by them because of lack of facilities;
and that while the telephone lines strung to the posts were very light in 1977, said posts
have become heavily loaded in 1989.

(2) Engr. Antonio Borja, Chief of private respondent's Line Operation and Maintenance
Department, declared that the posts being used by petitioners totalled 1,403 as of April
17, 1989, 192 of which were in the towns of Pili, Canaman, and Magarao, all outside
Naga City (Exhs. "B" and "B-1"); that petitioners' cables strung to the posts in 1989 are
much bigger than those in November, 1977; that in 1987, almost 100 posts were
destroyed by typhoon Sisang: around 20 posts were located between Naga City and the
town of Pili while the posts in barangay Concepcion, Naga City were broken at the
middle which had been bored by petitioner's linemen to enable them to string bigger
telephone lines; that while the cost per post in 1977 was only from P700.00 to P1,000.00,
their costs in 1989 went up from P1,500.00 to P2,000.00, depending on the size; that
some lines that were strung to the posts did not follow the minimum vertical clearance
required by the National Building Code, so that there were cases in 1988 where, because
of the low clearance of the cables, passing trucks would accidentally touch said cables
causing the posts to fall and resulting in brown-outs until the electric lines were repaired.

(3) Dario Bernardez, Project Supervisor and Acting General Manager of private
respondent and Manager of Region V of NEA, declared that according to NEA
guidelines in 1985 (Exh. "C"), for the use by private telephone systems of electric
cooperatives' posts, they should pay a minimum monthly rental of P4.00 per post, and
considering the escalation of prices since 1985, electric cooperatives have been charging
from P10.00 to P15.00 per post, which is what petitioners should pay for the use of the
posts.

(4) Engineer Antonio Macandog, Department Head of the Office of Services of private
respondent, testified on the poor service rendered by petitioner's telephone lines, like the
telephone in their Complaints Section which was usually out of order such that they
could not respond to the calls of their customers. In case of disruption of their telephone
lines, it would take two to three hours for petitioners to reactivate them notwithstanding
their calls on the emergency line.

(5) Finally, Atty. Luis General, Jr., private respondent's counsel, testified that the Board
of Directors asked him to study the contract sometime during the latter part of 1982 or in
1983, as it had appeared very disadvantageous to private respondent. Notwithstanding
his recommendation for the filing of a court action to reform the contract, the former
general managers of private respondent wanted to adopt a soft approach with petitioners
about the matter until the term of General Manager Henry Pascual who, after failing to
settle the matter amicably with petitioners, finally agreed for him to file the present
action for reformation of contract.

On the other hand, petitioner Maggay testified to the following effect:

(1) It is true that he was a member of the Board of Directors of private respondent and at
the same time the lawyer of petitioner when the contract was executed, but Atty.
Gaudioso Tena, who was also a member of the Board of Directors of private respondent,
was the one who saw to it that the contract was fair to both parties.

(2) With regard to the first cause of action:

(a) Private respondent has the right under the contract to use ten (10) telephone units of
petitioners for as long as it wishes without paying anything therefor except for long
distance calls through PLDT out of which the latter get only 10% of the charges.

(b) In most cases, only drop wires and not telephone cables have been strung to the posts,
which posts have remained erect up to the present;

(c) Petitioner's linemen have strung only small messenger wires to many of the posts and
they need only small holes to pass through; and

(d) Documents existing in the NTC show that the stringing of petitioners' cables in Naga
City are according to standard and comparable to those of PLDT. The accidents
mentioned by private respondent involved trucks that were either overloaded or had
loads that protruded upwards, causing them to hit the cables.

(3) Concerning the second cause of action, the intention of the parties when they entered
into the contract was that the coverage thereof would include the whole area serviced by
petitioners because at that time, they already had subscribers outside Naga City. Private
respondent, in fact, had asked for telephone connections outside Naga City for its officers
and employees residing there in addition to the ten (10) telephone units mentioned in the
contract. Petitioners have not been charging private respondent for the installation,
transfers and re-connections of said telephones so that naturally, they use the posts for
those telephone lines.

(4) With respect to the third cause of action, the NTC has found petitioners' cable
installations to be in accordance with engineering standards and practice and comparable
to the best in the country.

On the basis of the foregoing countervailing evidence of the parties, the trial court found,
as regards private respondent's first cause of action, that while the contract appeared to
be fair to both parties when it was entered into by them during the first year of private
respondent's operation and when its Board of Directors did not yet have any experience
in that business, it had become disadvantageous and unfair to private respondent because
of subsequent events and conditions, particularly the increase in the volume of the
subscribers of petitioners for more than ten (10) years without the corresponding increase
in the number of telephone connections to private respondent free of charge. The trial
court concluded that while in an action for reformation of contract, it cannot make
another contract for the parties, it can, however, for reasons of justice and equity, order
that the contract be reformed to abolish the inequities therein. Thus, said court ruled that
the contract should be reformed by ordering petitioners to pay private respondent
compensation for the use of their posts in Naga City, while private respondent should
also be ordered to pay the monthly bills for the use of the telephones also in Naga City.
And taking into consideration the guidelines of the NEA on the rental of posts by
telephone companies and the increase in the costs of such posts, the trial court opined
that a monthly rental of P10.00 for each post of private respondent used by petitioners is
reasonable, which rental it should pay from the filing of the complaint in this case on
January 2, 1989. And in like manner, private respondent should pay petitioners from the
same date its monthly bills for the use and transfers of its telephones in Naga City at the
same rate that the public are paying.

On private respondent's second cause of action, the trial court found that the contract
does not mention anything about the use by petitioners of private respondent's posts
outside Naga City. Therefore, the trial court held that for reason of equity, the contract
should be reformed by including therein the provision that for the use of private
respondent's posts outside Naga City, petitioners should pay a monthly rental of P10.00
per post, the payment to start on the date this case was filed, or on January 2, 1989, and
private respondent should also pay petitioners the monthly dues on its telephone
connections located outside Naga City beginning January, 1989.

And with respect to private respondent's third cause of action, the trial court found the
claim not sufficiently proved.

Thus, the following decretal portion of the trial court's decision dated July 20, 1990:

WHEREFORE, in view of all the foregoing, decision is hereby rendered ordering the
reformation of the agreement (Exh. A); ordering the defendants to pay plaintiff's electric
poles in Naga City and in the towns of Milaor, Canaman, Magarao and Pili, Camarines
Sur and in other places where defendant NATELCO uses plaintiff's electric poles, the
sum of TEN (P10.00) PESOS per plaintiff's pole, per month beginning January, 1989 and
ordering also the plaintiff to pay defendant NATELCO the monthly dues of all its
telephones including those installed at the residence of its officers, namely; Engr.
Joventino Cruz, Engr. Antonio Borja, Engr. Antonio Macandog, Mr. Jesus Opiana and
Atty. Luis General, Jr. beginning January, 1989. Plaintiff's claim for attorney's fees and
expenses of litigation and defendants' counterclaim are both hereby ordered dismissed.
Without pronouncement as to costs.

Disagreeing with the foregoing judgment, petitioners appealed to respondent Court of

Appeals. In the decision dated May 28, 1992, respondent court affirmed the decision of
the trial court, 5 but based on different grounds to wit: (1) that Article 1267 of the New
Civil Code is applicable and (2) that the contract was subject to a potestative condition
which rendered said condition void. The motion for reconsideration was denied in the
resolution dated September 10, 1992. 6 Hence, the present petition.

Petitioners assign the following pertinent errors committed by respondent court:

1) in making a contract for the parties by invoking Article 1267 of the New Civil Code;

2) in ruling that prescription of the action for reformation of the contract in this case
commenced from the time it became disadvantageous to private respondent; and

3) in ruling that the contract was subject to a potestative condition in favor of petitioners.
Petitioners assert earnestly that Article 1267 of the New Civil Code is not applicable
primarily because the contract does not involve the rendition of service or a personal
prestation and it is not for future service with future unusual change. Instead, the ruling
in the case of Occea, et al. v. Jabson, etc., et al., 7 which interpreted the article, should
be followed in resolving this case. Besides, said article was never raised by the parties in
their pleadings and was never the subject of trial and evidence.

In applying Article 1267, respondent court rationalized:

We agree with appellant that in order that an action for reformation of contract would lie
and may prosper, there must be sufficient allegations as well as proof that the contract in
question failed to express the true intention of the parties due to error or mistake,
accident, or fraud. Indeed, in embodying the equitable remedy of reformation of
instruments in the New Civil Code, the Code Commission gave its reasons as follows:

Equity dictates the reformation of an instrument in order that the true intention of the
contracting parties may be expressed. The courts by the reformation do not attempt to
make a new contract for the parties, but to make the instrument express their real
agreement. The rationale of the doctrine is that it would be unjust and inequitable to
allow the enforcement of a written instrument which does not reflect or disclose the real
meeting of the minds of the parties. The rigor of the legalistic rule that a written
instrument should be the final and inflexible criterion and measure of the rights and
obligations of the contracting parties is thus tempered to forestall the effects of mistake,
fraud, inequitable conduct, or accident. (pp. 55-56, Report of Code Commission)

Thus, Articles 1359, 1361, 1362, 1363 and 1364 of the New Civil Code provide in
essence that where through mistake or accident on the part of either or both of the parties
or mistake or fraud on the part of the clerk or typist who prepared the instrument, the true
intention of the parties is not expressed therein, then the instrument may be reformed at
the instance of either party if there was mutual mistake on their part, or by the injured
party if only he was mistaken.

Here, plaintiff-appellee did not allege in its complaint, nor does its evidence prove, that
there was a mistake on its part or mutual mistake on the part of both parties when they
entered into the agreement Exh. "A", and that because of this mistake, said agreement
failed to express their true intention. Rather, plaintiff's evidence shows that said
agreement was prepared by Atty. Luciano Maggay, then a member of plaintiff's Board of
Directors and its legal counsel at that time, who was also the legal counsel for defendant-
appellant, so that as legal counsel for both companies and presumably with the interests
of both companies in mind when he prepared the aforesaid agreement, Atty. Maggay
must have considered the same fair and equitable to both sides, and this was affirmed by
the lower court when it found said contract to have been fair to both parties at the time of
its execution. In fact, there were no complaints on the part of both sides at the time of
and after the execution of said contract, and according to 73-year old Justino de Jesus,
Vice President and General manager of appellant at the time who signed the agreement
Exh. "A" in its behalf and who was one of the witnesses for the plaintiff (sic), both
parties complied with said contract "from the very beginning" (p. 5, tsn, April 17, 1989).

That the aforesaid contract has become inequitous or unfavorable or disadvantageous to

the plaintiff with the expansion of the business of appellant and the increase in the
volume of its subscribers in Naga City and environs through the years, necessitating the
stringing of more and bigger telephone cable wires by appellant to plaintiff's electric
posts without a corresponding increase in the ten (10) telephone connections given by
appellant to plaintiff free of charge in the agreement Exh. "A" as consideration for its use
of the latter's electric posts in Naga City, appear, however, undisputed from the totality of
the evidence on record and the lower court so found. And it was for this reason that in the
later (sic) part of 1982 or 1983 (or five or six years after the subject agreement was
entered into by the parties), plaintiff's Board of Directors already asked Atty. Luis
General who had become their legal counsel in 1982, to study said agreement which they
believed had become disadvantageous to their company and to make the proper
recommendation, which study Atty. General did, and thereafter, he already recommended
to the Board the filing of a court action to reform said contract, but no action was taken
on Atty. General's recommendation because the former general managers of plaintiff
wanted to adopt a soft approach in discussing the matter with appellant, until, during the
term of General Manager Henry Pascual, the latter, after failing to settle the problem
with Atty. Luciano Maggay who had become the president and general manager of
appellant, already agreed for Atty. General's filing of the present action. The fact that said
contract has become inequitous or disadvantageous to plaintiff as the years went by did
not, however, give plaintiff a cause of action for reformation of said contract, for the
reasons already pointed out earlier. But this does not mean that plaintiff is completely
without a remedy, for we believe that the allegations of its complaint herein and the
evidence it has presented sufficiently make out a cause of action under Art. 1267 of the
New Civil Code for its release from the agreement in question.

xxx xxx xxx

The understanding of the parties when they entered into the Agreement Exh. "A" on
November 1, 1977 and the prevailing circumstances and conditions at the time, were
described by Dioscoro Ragragio, the President of plaintiff in 1977 and one of its two
officials who signed said agreement in its behalf, as follows:
Our understanding at that time is that we will allow NATELCO to utilize the posts of
CASURECO II only in the City of Naga because at that time the capability of
NATELCO was very limited, as a matter of fact we do [sic] not expect to be able to
expand because of the legal squabbles going on in the NATELCO. So, even at that time
there were so many subscribers in Naga City that cannot be served by the NATELCO, so
as a mater of public service we allowed them to sue (sic) our posts within the Naga City.
(p. 8, tsn April 3, 1989)

Ragragio also declared that while the telephone wires strung to the electric posts of
plaintiff were very light and that very few telephone lines were attached to the posts of
CASURECO II in 1977, said posts have become "heavily loaded" in 1989 (tsn, id.).

In truth, as also correctly found by the lower court, despite the increase in the volume of
appellant's subscribers and the corresponding increase in the telephone cables and wires
strung by it to plaintiff's electric posts in Naga City for the more 10 years that the
agreement Exh. "A" of the parties has been in effect, there has been no corresponding
increase in the ten (10) telephone units connected by appellant free of charge to plaintiff's
offices and other places chosen by plaintiff's general manager which was the only
consideration provided for in said agreement for appellant's use of plaintiffs electric
posts. Not only that, appellant even started using plaintiff's electric posts outside Naga
City although this was not provided for in the agreement Exh. "A" as it extended and
expanded its telephone services to towns outside said city. Hence, while very few of
plaintiff's electric posts were being used by appellant in 1977 and they were all in the
City of Naga, the number of plaintiff's electric posts that appellant was using in 1989 had
jumped to 1,403,192 of which are outside Naga City (Exh. "B"). Add to this the
destruction of some of plaintiff's poles during typhoons like the strong typhoon Sisang in
1987 because of the heavy telephone cables attached thereto, and the escalation of the
costs of electric poles from 1977 to 1989, and the conclusion is indeed ineluctable that
the agreement Exh. "A" has already become too one-sided in favor of appellant to the
great disadvantage of plaintiff, in short, the continued enforcement of said contract has
manifestly gone far beyond the contemplation of plaintiff, so much so that it should now
be released therefrom under Art. 1267 of the New Civil Code to avoid appellant's unjust
enrichment at its (plaintiff's) expense. As stated by Tolentino in his commentaries on the
Civil Code citing foreign civilist Ruggiero, "equity demands a certain economic
equilibrium between the prestation and the counter-prestation, and does not permit the
unlimited impoverishment of one party for the benefit of the other by the excessive
rigidity of the principle of the obligatory force of contracts (IV Tolentino, Civil Code of
the Philippines, 1986 ed.,
pp. 247-248).
We therefore, find nothing wrong with the ruling of the trial court, although based on a
different and wrong premise (i.e., reformation of contract), that from the date of the filing
of this case, appellant must pay for the use of plaintiff's electric posts in Naga City at the
reasonable monthly rental of P10.00 per post, while plaintiff should pay appellant for the
telephones in the same City that it was formerly using free of charge under the terms of
the agreement Exh. "A" at the same rate being paid by the general public. In affirming
said ruling, we are not making a new contract for the parties herein, but we find it
necessary to do so in order not to disrupt the basic and essential services being rendered
by both parties herein to the public and to avoid unjust enrichment by appellant at the
expense of plaintiff, said arrangement to continue only until such time as said parties can
re-negotiate another agreement over the same
subject-matter covered by the agreement Exh. "A". Once said agreement is reached and
executed by the parties, the aforesaid ruling of the lower court and affirmed by us shall
cease to exist and shall be substituted and superseded by their new agreement. . . .. 8

Article 1267 speaks of "service" which has become so difficult. Taking into
consideration the rationale behind this provision, 9 the term "service" should be
understood as referring to the "performance" of the obligation. In the present case, the
obligation of private respondent consists in allowing petitioners to use its posts in Naga
City, which is the service contemplated in said article. Furthermore, a bare reading of this
article reveals that it is not a requirement thereunder that the contract be for future
service with future unusual change. According to Senator Arturo M. Tolentino, 10 Article
1267 states in our law the doctrine of unforseen events. This is said to be based on the
discredited theory of rebus sic stantibus in public international law; under this theory, the
parties stipulate in the light of certain prevailing conditions, and once these conditions
cease to exist the contract also ceases to exist. Considering practical needs and the
demands of equity and good faith, the disappearance of the basis of a contract gives rise
to a right to relief in favor of the party prejudiced.

In a nutshell, private respondent in the Occea case filed a complaint against petitioner
before the trial court praying for modification of the terms and conditions of the contract
that they entered into by fixing the proper shares that should pertain to them out of the
gross proceeds from the sales of subdivided lots. We ordered the dismissal of the
complaint therein for failure to state a sufficient cause of action. We rationalized that the
Court of Appeals misapplied Article 1267 because:

. . . respondent's complaint seeks not release from the subdivision contract but that the
court "render judgment modifying the terms and conditions of the contract . . .
by fixing the proper shares that should pertain to the herein parties out of the gross
proceeds from the sales of subdivided lots of subject subdivision". The cited article
(Article 1267) does not grant the courts (the) authority to remake, modify or revise the
contract or to fix the division of shares between the parties as contractually stipulated
with the force of law between the parties, so as to substitute its own terms for those
covenanted by the parties themselves. Respondent's complaint for modification of
contract manifestly has no basis in law and therefore states no cause of action. Under the
particular allegations of respondent's complaint and the circumstances therein averred,
the courts cannot even in equity grant the relief sought. 11

The ruling in the Occea case is not applicable because we agree with respondent court
that the allegations in private respondent's complaint and the evidence it has presented
sufficiently made out a cause of action under Article 1267. We, therefore, release the
parties from their correlative obligations under the contract. However, our disposition of
the present controversy does not end here. We have to take into account the possible
consequences of merely releasing the parties therefrom: petitioners will remove the
telephone wires/cables in the posts of private respondent, resulting in disruption of their
service to the public; while private respondent, in consonance with the contract 12 will
return all the telephone units to petitioners, causing prejudice to its business. We shall not
allow such eventuality. Rather, we require, as ordered by the trial court: 1) petitioners to
pay private respondent for the use of its posts in Naga City and in the towns of Milaor,
Canaman, Magarao and Pili, Camarines Sur and in other places where petitioners use
private respondent's posts, the sum of ten (P10.00) pesos per post, per month, beginning
January, 1989; and 2) private respondent to pay petitioner the monthly dues of all its
telephones at the same rate being paid by the public beginning January, 1989. The
peculiar circumstances of the present case, as distinguished further from the Occea case,
necessitates exercise of our equity jurisdiction. 13 By way of emphasis, we reiterate the
rationalization of respondent court that:

. . . In affirming said ruling, we are not making a new contract for the parties herein, but
we find it necessary to do so in order not to disrupt the basic and essential services being
rendered by both parties herein to the public and to avoid unjust enrichment by appellant
at the expense of plaintiff . . . . 14

Petitioners' assertion that Article 1267 was never raised by the parties in their pleadings
and was never the subject of trial and evidence has been passed upon by respondent court
in its well reasoned resolution, which we hereunder quote as our own:

First, we do not agree with defendant-appellant that in applying Art. 1267 of the New
Civil Code to this case, we have changed its theory and decided the same on an issue not
invoked by plaintiff in the lower court. For basically, the main and pivotal issue in this
case is whether the continued enforcement of the contract Exh. "A" between the parties
has, through the years (since 1977), become too inequitous or disadvantageous to the
plaintiff and too one-sided in favor of defendant-appellant, so that a solution must be
found to relieve plaintiff from the continued operation of said agreement and to prevent
defendant-appellant from further unjustly enriching itself at plaintiff's expense. It is
indeed unfortunate that defendant had turned deaf ears to plaintiffs requests for
renegotiation, constraining the latter to go to court. But although plaintiff cannot, as we
have held, correctly invoke reformation of contract as a proper remedy (there having
been no showing of a mistake or error in said contract on the part of any of the parties so
as to result in its failure to express their true intent), this does not mean that plaintiff is
absolutely without a remedy in order to relieve itself from a contract that has gone far
beyond its contemplation and has become so highly inequitous and disadvantageous to it
through the years because of the expansion of defendant-appellant's business and the
increase in the volume of its subscribers. And as it is the duty of the Court to administer
justice, it must do so in this case in the best way and manner it can in the light of the
proven facts and the law or laws applicable thereto.

It is settled that when the trial court decides a case in favor of a party on a certain ground,
the appellant court may uphold the decision below upon some other point which was
ignored or erroneously decided by the trial court (Garcia Valdez v. Tuazon, 40 Phil. 943;
Relativo v. Castro, 76 Phil. 563; Carillo v. Salak de Paz, 18 SCRA 467). Furthermore, the
appellate court has the discretion to consider an unassigned error that is closely related to
an error properly assigned (Paterno v. Jao Yan, 1 SCRA 631; Hernandez v. Andal, 78
Phil. 196). It has also been held that the Supreme Court (and this Court as well) has the
authority to review matters, even if they are not assigned as errors in the appeal, if it is
found that their consideration is necessary in arriving at a just decision of the case (Saura
Import & Export Co., Inc. v. Phil. International Surety Co. and PNB, 8 SCRA 143). For it
is the material allegations of fact in the complaint, not the legal conclusion made therein
or the prayer, that determines the relief to which the plaintiff is entitled, and the plaintiff
is entitled to as much relief as the facts warrant although that relief is not specifically
prayed for in the complaint (Rosales v. Reyes and Ordoveza, 25 Phil. 495; Cabigao v.
Lim, 50 Phil. 844; Baguioro v. Barrios, 77 Phil. 120). To quote an old but very
illuminating decision of our Supreme Court through the pen of American jurist Adam C.
Carson:

"Under our system of pleading it is the duty of the courts to grant the relief to which the
parties are shown to be entitled by the allegations in their pleadings and the facts proven
at the trial, and the mere fact that they themselves misconstrue the legal effect of the facts
thus alleged and proven will not prevent the court from placing the just construction
thereon and adjudicating the issues accordingly." (Alzua v. Johnson, 21 Phil. 308)
And in the fairly recent case of Caltex Phil., Inc. v IAC, 176 SCRA 741, the Honorable
Supreme Court also held:

We rule that the respondent court did not commit any error in taking cognizance of the
aforesaid issues, although not raised before the trial court. The presence of strong
consideration of substantial justice has led this Court to relax the well-entrenched rule
that, except questions on jurisdiction, no question will be entertained on appeal unless it
has been raised in the court below and it is within the issues made by the parties in their
pleadings (Cordero v. Cabral, L-36789, July 25, 1983, 123 SCRA 532). . . .

We believe that the above authorities suffice to show that this Court did not err in
applying Art. 1267 of the New Civil Code to this case. Defendant-appellant stresses that
the applicability of said provision is a question of fact, and that it should have been given
the opportunity to present evidence on said question. But defendant-appellant cannot
honestly and truthfully claim that it (did) not (have) the opportunity to present evidence
on the issue of whether the continued operation of the contract Exh. "A" has now become
too one-sided in its favor and too inequitous, unfair, and disadvantageous to plaintiff. As
held in our decision, the abundant and copious evidence presented by both parties in this
case and summarized in said decision established the following essential and vital facts
which led us to apply Art. 1267 of the New Civil Code to this case:

xxx xxx xxx 15

On the issue of prescription of private respondent's action for reformation of contract,

petitioners allege that respondent court's ruling that the right of action "arose only after
said contract had already become disadvantageous and unfair to it due to subsequent
events and conditions, which must be sometime during the latter part of 1982 or in 1983 .
. ." 16 is erroneous. In reformation of contracts, what is reformed is not the contract itself,
but the instrument embodying the contract. It follows that whether the contract is
disadvantageous or not is irrelevant to reformation and therefore, cannot be an element in
the determination of the period for prescription of the action to reform.

Article 1144 of the New Civil Code provides, inter alia, that an action upon a written
contract must be brought within ten (10) years from the time the right of action accrues.
Clearly, the ten (10) year period is to be reckoned from the time the right of action
accrues which is not necessarily the date of execution of the contract. As correctly ruled
by respondent court, private respondent's right of action arose "sometime during the
latter part of 1982 or in 1983 when according to Atty. Luis General, Jr. . . ., he was asked
by (private respondent's) Board of Directors to study said contract as it already appeared
disadvantageous to (private respondent) (p. 31, tsn, May 8, 1989). (Private respondent's)
cause of action to ask for reformation of said contract should thus be considered to have
arisen only in 1982 or 1983, and from 1982 to January 2, 1989 when the complaint in
this case was filed, ten (10) years had not yet elapsed." 17

Regarding the last issue, petitioners allege that there is nothing purely potestative about
the prestations of either party because petitioner's permission for free use of telephones is
not made to depend purely on their will, neither is private respondent's permission for
free use of its posts dependent purely on its will.

Apart from applying Article 1267, respondent court cited another legal remedy available
to private respondent under the allegations of its complaint and the preponderant
evidence presented by it:

. . . we believe that the provision in said agreement

(a) That the term or period of this contract shall be as long as the party of the first
part [herein appellant] has need for the electric light posts of the party of the second part
[herein plaintiff] it being understood that this contract shall terminate when for any
reason whatsoever, the party of the second part is forced to stop, abandoned [sic] its
operation as a public service and it becomes necessary to remove the electric light post
[sic]"; (Emphasis supplied)

is invalid for being purely potestative on the part of appellant as it leaves the continued
effectivity of the aforesaid agreement to the latter's sole and exclusive will as long as
plaintiff is in operation. A similar provision in a contract of lease wherein the parties
agreed that the lessee could stay on the leased premises "for as long as the defendant
needed the premises and can meet and pay said increases" was recently held by the
Supreme Court in Lim v. C.A., 191 SCRA 150, citing the much earlier case of
Encarnacion v. Baldomar, 77 Phil. 470, as invalid for being "a purely potestative
condition because it leaves the effectivity and enjoyment of leasehold rights to the sole
and exclusive will of the lessee." Further held the High Court in the Lim case:

The continuance, effectivity and fulfillment of a contract of lease cannot be made to

depend exclusively upon the free and uncontrolled choice of the lessee between
continuing the payment of the rentals or not, completely depriving the owner of any say
in the matter. Mutuality does not obtain in such a contract of lease of no equality exists
between the lessor and the lessee since the life of the contract is dictated solely by the
lessee.
The above can also be said of the agreement Exh. "A" between the parties in this case.
There is no mutuality and equality between them under the afore-quoted provision
thereof since the life and continuity of said agreement is made to depend as long as
appellant needs plaintiff's electric posts. And this is precisely why, since 1977 when said
agreement was executed and up to 1989 when this case was finally filed by plaintiff, it
could do nothing to be released from or terminate said agreement notwithstanding that its
continued effectivity has become very disadvantageous and inequitous to it due to the
expansion and increase of appellant's telephone services within Naga City and even
outside the same, without a corresponding increase in the ten (10) telephone units being
used by plaintiff free of charge, as well as the bad and inefficient service of said
telephones to the prejudice and inconvenience of plaintiff and its customers. . . . 18

Petitioners' allegations must be upheld in this regard. A potestative condition is a

condition, the fulfillment of which depends upon the sole will of the debtor, in which
case, the conditional obligation is void. 19 Based on this definition, respondent court's
finding that the provision in the contract, to wit:

(a) That the term or period of this contract shall be as long as the party of the first part
(petitioner) has need for the electric light posts of the party of the second part (private
respondent) . . ..

is a potestative condition, is correct. However, it must have overlooked the other

conditions in the same provision, to wit:

. . . it being understood that this contract shall terminate when for any reason whatsoever,
the party of the second part (private respondent) is forced to stop, abandoned (sic) its
operation as a public service and it becomes necessary to remove the electric light post
(sic);

which are casual conditions since they depend on chance, hazard, or the will of a third
person. 20 In sum, the contract is subject to mixed conditions, that is, they depend partly
on the will of the debtor and partly on chance, hazard or the will of a third person, which
do not invalidate the aforementioned provision. 21 Nevertheless, in view of our
discussions under the first and second issues raised by petitioners, there is no reason to
set aside the questioned decision and resolution of respondent court.

WHEREFORE, the petition is hereby DENIED. The decision of the Court of Appeals
dated May 28, 1992 and its resolution dated September 10, 1992 are AFFIRMED.

SO ORDERED.
Narvasa, C.J., Padill
G.R. No. 96829 December 9, 1991

EMILIANO S. CASIPIT and ANTONIA C. CASIPIT VDA. DE

BEATO, petitioners,
vs.
HON. COURT OF APPEALS, (FORMER SECOND DIVISION), SPOUSES
SEVERINO B. DIAZ and ZENAIDA ALZONA-DIAZ, ROSA BEATO VDA. DE
DIAZ, FORTUNATO S. BEATO, JUANITA A. BEATO, FELICEDAD A. BEATO,
ARCADIO A. BEATO, ARCADIO A. BEATO, PACIENCIA A. BEATO, AVELINO
K. BEATO, ANTONIA K. BEATO, NILDA K. BEATO, THE REGISTER OF
DEEDS FOR THE PROVINCE OF LAGUNA, AND THE PROVINCIAL
ASSESSOR OF LAGUNA, respondents.

Roldan M. Noynay for petitioners.

Ramon C. Casano for private respondents.

MEDIALDEA, J.:p

This is a petition for review on certiorari seeking reversal of the adverse decision of
public respondent Court of Appeals dated August 22, 1990, in C.A. G.R. CV-No. 22671,
entitled "Emiliano S. Casipit, et al. v. Spouses Severino B. Diaz and Zenaida Alzona-
Diaz, et al.," which affirmed the dismissal of petitioners' complaint by the Regional Trial
Court of Calamba, Laguna and ordered them to vacate the questioned property and pay
to private respondents rentals, damages and attorney's fees; and its resolution dated
January 11, 1991, which denied petitioners' motion for reconsideration.

The antecedent facts, as found by the trial court are, are follows:

On July 21, 1919, Urbano Casipit, father of petitioner Emiliano S. Casipit, bought Lot
No. 144 (questioned property) located at Sinalhan, Sta. Rosa, Laguna, containing an area
of 661 square meters from the, government (Exhibit "2"). On June 7, 1923, he assigned
his rights to the questioned property to Gabriel Beato (Exhibit "3") due to his (Urbano
Casipit) default in paying the installments due thereon (Exhibits "2-A" and "2-B"). In
1932, Tax Declaration No. 7233 over the questioned property (Exhibit "4") was issued in
the name of Gabriel Beato. On February 23, 1933, Patent No. 31464 over the questioned
property was issued by Friar Lands Agency No. 2 in his name (Exhibit "3-A"). On
October 7, 1945, Gabriel Beato died.

In 1945, Tax Declaration No. 2561 (Exhibit "C") over the questioned property was issued
in the name of petitioner Emiliano S. Campit, but covering an area of 330 meters only.
On February 9, 1949, he paid real estate taxes thereon for the years 1945 to 1949. He
also paid taxes thereon for the years 1950 and 1954 (Exhibit "B").

On November 25, 1961, the heirs of Gabriel Beato namely, Ricardo, Rosa, Narciso,
Fortunata and Domingo, all surnamed Beato, executed a document entitled "Kasulatan
ng Pagmamana at Paghahati" wherein they adjudicated to themselves the properties of
Gabriel Beato. In the name document, they sold to private respondents spouses Severino
B. Diaz and Zenaida Alzona-Diaz the questioned property (Exhibits "F" and "l"). At the
time of the sale, there was no occupant on the questioned property and petitioner
Emiliano S. Casipit was then residing in an adjoining lot.

On January 6, 1962, Narciso Beato filed before the Court of First Instance of Laguna a
Petition for Reconsideration of Titles, which was granted on July 17, 1963. On August
30, 1963, TCT No. RT-7880 was cancelled by TCT No. T-27996 in the name of the heirs
of Gabriel Beato (Exhibit "8") which was in turn cancelled by TXT No. T-27997 in the
name of private respondents Diaz spouses (Exhibit "9").

In 1965, petitioner Antonia C. Casipit Vda. de Beato and Julian Almadovar erected their
respective houses on a portion of the questioned property. On October 8, 1981, a criminal
complaint for violation of P.D. No. 772 (Penalizing Squatting and Other Similar Acts)
was filed before the Municipal Court of Sta.Rosa, Laguna against them by private
respondent Severino B. Diaz (Exhibit "5"). This complaint was dismmissed at the
instance of the fiscal on March 26, 1985 because the questioned property is not among
the areas approved for inclusion in the slum improvement and resettlement program of
the government thus, said decree does not apply (Exhibit "5-A"). On June 6, 1985, a
complaint for ejectment (Civil Case No. 1601) was filed against petitioner Antonia C.
Casipit Vda. de Beato by private respondents Diaz spouses before the Municipal Trial
Court of Sta. Rosa, Laguna (Exhibit "6").

On April 27, 1987, a complaint was filed by petitioners agains private respondents Diaz
spouses, Rosa Beato Vda. de Diaz and Fortunate S. Beato mainly for recovery of
ownership over the questioned property before the Regional Trial Court of Bian,
Laguna (pp. 1-14, Records). On June 23, 1987 (pp. 84-98, Records) and April 15, 1988
(pp. 173-188, Records), the complaint was amended. The ejectment case (Civil Case No.
1601) was then suspended due to the filing of the present case. In their complaint, it was
alleged that petitioner Emiliano S. Casipit is the true and lawful owner of the questioned
property by virtue of continuous, uninterrupted, peaceful, open and public possession in
the concept of owner since 1930. Petitioners were deprived of ownership thereof by the
Beatos through Narciso Beato, who filed a Petition for Reconstitution of Titles in the
name of Gabriel Beato, using fictitious documents. Petitioners therefore prayed that TCT
No. RT-7880 and other succeeding titles be cancelled, as well as Tax Declaration No.
7192 (sic) and succeeding tax declarations; that the questioned property be reconveyed to
them; that the document entitled, "Kasulatan ng Pagmamana at Paghahati," insofar as it
included the questioned property be rescinded; and that private respondents be ordered to
pay damages and attorney's fees.

Private respondents disputed these allegations in their answer and by way of

counterclaim, prayed for petitioners and all persons deriving title from them to vacate the
questioned property, and to pay reasonable rentals, moral and exemplary damages and
attorney's fees.

On July 11, 1989, the trial court rendered judgment, the dispositive portion of which,
reads (p. 571, Records):

IN VIEW OF THE FOREGOING, judgment is rendered in favor of the defendants and

against the plaintiffs and the Second Amended Complaint is dismissed. Further, the
plaintiffs are ordered to pay jointly and severally the Spouses Severino Diaz and Zenaida
Diaz the amount of P5,000.00 as attorney's fees. With costs against the plaintiffs.

SO ORDERED.

In support of this ruling, the trial court ratiocinated (pp. 569-571, Records):

It must be noted that the plaintiffs' claim of ownership over Lot No. 144 is based on their
alleged continuous possession of the same and on Tax Declaration No. 2561 (Exhibit
"C") in the name of Emiliano Casipit, as well as on the receipts showing payments of real
estate taxes for the years starting 1945 to 1949, 1950 and 1954.

Such claims of the plaintiffs cannot be sustained by the Court for the following reasons:
(1) the testimonies of Antonia Casipit and Clara Casipit Calderon to the effect that they
and their predecessor-in-interest have been in continuous possession of Lot No. 144 since
time immemorial are self serving; (2) Tax Declaration No. 2561 (Extubit "C") in the
name of Emiliano Casipit has been (sic) issued only in 1945 and does not indicate the
previous tax declaration it cancelled. likewise, it only covers 330 square meters of Lot
No. 144. On the other hand, tax declaration No. 7233 (Exhibit "4") in the name of
Gabriel Beato was issued in 1932 and it covers the whole of Lot No.144; (3) the
testimony of Antonia Casipit that her father Emiliano Casipit inherited from Urbano
Casipit the land covered by tax declaration No. 2561 can not overcome the ancient
documents introduced by the defendants showing that Urbano Casipit after defaulting in
the payment of installments due the government assigned in 1923 his rights over Lot No.
144 to Gabriel Beato (Exhibits "2-A", "2-B"and "3"); and (4)the possession by the
plaintiffs of a portion of Lot No. 144 can not ripened (sic) into ownership, for land
registered under the Torrens System may not be acquired by prescription or adverse
possession.

Manifestly, the defendants have a better right over Lot No. 144 than the plaintiffs.
Besides, the cause of action of the plaintiffs being based on fraud, has prescribed for it
must be filed within four (4) years after the cause of action arose. The issuance of the
reconstituted title over Lot No. 144 and its registration in the office of the Register of
Deeds of Laguna, in 1973 (sic) is the starling date for the prescriptive period to
commence.

Anent the second issue, the Court finds no justifiable reason to order the cancellation of
TCT No. (T-27997) T-13161, since the plaintiffs have failed to prove that they are the
owners of the land covered by the said title. The fact that the Petition for Reconstitution
of titles was granted by the Court of First Instance of Laguna in LRC Record No. 23313
and such order having become final and executory, it is conclusive on Gabriel Beato's
title over Lot No. 144.

As to the third issue, the records show that the plaintiffs' (sic) have miserably failed to
present evidence to establish bad faith on the part of the defendants Severino Diaz and
Zenaida Diaz. On contrary, Zenaida Diaz declared that when they bought Lot No. 144
nobody was residing thereon and that Emiliano Casipit was the living at the adjoining
lot. Therefore, said defendants are buyers in good faith and for value, for good faith is
presumed unless the contrary is shown.

Regarding the last issue, definitely, the plaintiffs are not entitle to damages, attorney's
fees and costs, however, the defendants Severino Diaz and Zenaida Diaz are. The Diazes
since 1985 have bee trying to eject from the land in question the plaintiffs but have bee
unsuccessful. For this reason, the Diazes are entitled to actual dam ages and attorney's
fees. Unfortunately, the Diazes have not presented competent evidence to prove the
actual damages they sustained although as to attorney's fees they are entitled to the
amount o P5,000.00. The Court can not award moral damages in favor of the Diazes
since no bad faith or malice has been proven on the part of plaintiffs.
Both parties appealed to public respondent Court of Appeals Petitioners questioned the
dismissal of their complaint by the trial court whereas private respondents questioned the
fail of said court to grant them their prayer for reasonable rentals actual and moral
damages. On August 22, 1990, respond court resolved the appeal in favor of private
respondents, th dispositive portion of which, reads (p. 32, Rollo):

WHEREFORE, the appealed decision dismissing the complaint should be as it is hereby

AFFIRMED. On the counterclaim of defendants, judgment is hereby rendered ordering
plaintiffs to vacate lot No. 144, and to pay the reasonable rental in the amount of P300.00
from October, 1981 until they should have vacatedthe (sic) premises to pay moral
damages in the amount of P30,000.00, and attorney's fees in the amount of P5,000.00.
No costs.

SO ORDERED.

In affirming the trial court's decision, respondent court expounded (pp. 27-29, Rollo):

... To make it worse, on its face the tax declaration (No. 2561) appears to have been
cancelled by provincial form No. 183 in 1966. Thereafter, no other tax declaration or any
proof of ownership was issued in the name of plaintiffs-appellants.

The payment of realty taxes by plaintiffs-appellants do not give any added weight to their
claim of ownership of the lot in dispute. This is so considering the doctrine that 'payment
of land taxes is not an evidence of ownership of the parcel of land for which payment is
made.' (Reyes vs. Serra, 93 SCRA 472; Director of Lands vs. C.A., 133 SCRA 701).
During the pre-trial on November 2, 1988, the parties agreed, among other things

5. That Emiliano Casipit on February 9, 1949 paid the land taxes for lot 144 for the years
1945, 1946, 1947, 1948 and 1949; and on August 5, 1950 paid the land taxes for the said
lot for 1950 and on October 13, 1954 paid the land taxes for the said lot for 1954. (pp.
492-493, rec.)

Admittedly, therefore, it would appear that plaintiff-appellants paid realty taxes for the
land in dispute only 3 times and no more. Certainly that kind of payment cannot convey
the idea of ownership.

... Then, the record shows that on October 8, 1981, Severino Diaz filed charges of anti-
squatting against Casipit and Almadovar. On June 6, 1985, the Diaz spouses again filed
an ejectment suit against Antonia Casipit. These undisputed facts would disprove the
claim of the plaintiffs-appellants to uninterrupted possession that would have ripened to
ownership.
 xxx xxx xxx

... Plaintiffs-appellants, ... failed to explain how Emiliano Casipit acquired a right over
1/2 of lot 144. ...

... Then, tax declaration 7232 (sic) shows on its dorsal side that it was the very first or
original tax declaration issued for lot 144, as shown by the notation: "New". Thereafter,
in the same year, tax declaration 142 (sic) was issued in the name of the heirs of Gabriel
Beato, and, unlike tax declaration 2561 of Casipit, clearly stated that is was cancelling
tax declaration 7232 (sic) in the name of Gabriel Beato.

On January 11, 1991, the motion for reconsideration was denied (p.17, Rollo). Hence, the
present petition.

Petitioners assign as errors committed by respondent court the following (pp.7-8, Rollo):

First Assignment of Error

THE HONORABLE COURT OF APPEALS HAS GRAVELY ERRED WHEN IT

DENIED THE MOTION FOR RECONSIDERATION FILED BY THE PETITIONERS
AS THE ISSUES RAISED THEREIN WERE NOT SQUARELY AND THOROUGHLY
THRESHED OUT IN THE QUESTIONED RESOLUTION PROMULGATED ON
JANUARY 11, 1991 AS THE CERTIFICATION ISSUED BY THE BUREAU OF
LANDS OR ANNEX "F" OR EXHIBIT "D" HAS PROBATIVE VALUE TO BE
GIVEN FULL CREDENCE AS THE SAME HAS BEEN ADMITTED BY THE
PRIVATE RESPONDENTS AND THEREBY DECLARING AS NULL AND VOID
THE "KASULATAN NG PAGMAMANA AT PAGHAHTI" OR EXHIBIT "l"
EXECUTED ON NOVEMBER 25, 1961 FOR WHICH REASON THE ACTION OF
PETITIONERS IS IMPRESCRIPTIBLE.

Second Assignment of Error

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN PROMULGATING

ITS RESOLUTION OR ANNTEX "B" WHEN IT DENIED THE MOTION FOR
RECONSIDERATION OF PETITIONERS AS THE QUESTIONED "KASULATAN
NG PAGMAMANA AT PAGHAHATI" EXECUTED ON NOVEMBER 25, 1961
CANNOT BE MADE AS BASIS IN CANCELLING RECONSTITUTED TRANSFER
CERTIFICATE OF TITLE NO. RT-7880 WHICH WAS RECONSTITUTED ONLY ON
AUGUST 30,1963 AND NON-EXISTING ON NOVEMBER 25, 1961 WITHIN THE
KNOWLEDGE OF PRIVATE RESPONDENTS DIAZES MAKING THEM AS
BUYERS IN BAD FAITH AND BESIDES THE SAID "KASULATAN NG
PAGMAMANA AT PAGHAHATI" HAS TO BE DECLARED NULL AND VOID AB
INITIO.

Third Assignment of Error

THE HONORABLE COURT OF APPEALS HAS GRAVELY ABUSED ITS

DISCRETION IN PROMULGATING ITS RESOLUTION OR ANNEX "B"AND ITS
DECISION OR ANNEX "E" ORDERING THE EJECTMENT OF THE PETITIONERS
FROM THE PREMISES AND AWARD OF DAMAGES AND ATTORNEY'S FEES AS
SAID ORDER OF EJECTMENT IS EQUIVALENT TO VIOLATION OF THE
CONSTITUTIONAL RIGHT OF DUE PROCESS OF LAW AND THE RIGHT TO BE
HEARD WHICH THE PETITIONERS ARE ENTITLED AS PETITIONER
EMILLANO CASIPIT IS NOT A PARTY TO SAID EJECTMENT SUIT AND THE
TRIAL COURT ANDS NO EVIDENCE TO WARRANT EJECTMENT.

They allege that pursuant to the Certification issued by the Bureau of Lands (Exhibit
"D") that Patent No. 31464 over the questioned property has not been issued to Gabriel
Beato, the "Kasulatan ng Pagmamana at Paghahati" is therefore a void contract. This
being the case, the action taken by petitioners is imprescriptible. Private respondents
Diaz spouses were buyers in bad faith because they had full knowledge that Emiliano
Casipit has been in actual possession in the concept of owner of the questioned property
and paid the real property taxes thereon. Private respondent Zenaida Alzona-Diaz
testified that (pp. 46-48, tsn, March 20,1989):

ATTY. NOYNAY:

xxx xxx xxx

Q So, when was that year, if you still remember when Emiliano Casipit came from lot
144?

A I saw in 1948, that is my first year in teaching, I saw the house of Emiliano Casipit
situated on that Lot 144.

xxx xxx xxx

Q So, in other words, Mrs. witness before 1948 you have seen the house of Emiliano
Casipit in lot 144?

A Yes, sir.
Likewise, private respondents Diaz spouses were aware that the Beatos had no title over
the questioned property as of November 25, 1961 when the "Kasulatan ng Pagmamang at
Paghahati" was executed because TCT No. RT-7880 was issued only on August 30, 1963.
This was revealed by Zenaida Diaz in her testimony (pp. 45-46, supra):

ATTY. NOYNAY:

xxx xxx xxx

Q So, when you answered a while ago that during the time when this Kasulatan was
executed in 1961 and which according to you, you were shown titles by the Beatos' is not
(sic) correct?

WITNESS:

A At that time, sir, there was no title yet.

The ejectment of petitioners from the questioned property and the award of damages and
attomey's fees are violative of due process of law because petitioner Emiliano S. Casipit
is not a party to the ejectment suit before the trial court (Civil Case No. 1601).

The petition is not impressed with merit.

There is no dispute that an action for reconveyance based on a void contract is

imprescriptible (Castillo, et al. v. Madrigal, et al., G.R. No. 62650, June 27, 1991;
Baranda, et al. v. Baranda, et al., G.R. No. 73275, May 20, 1987, 150 SCRA 59).
However, We simply cannot apply this principle to the present case because the action
filed by petitioner before the trial court was 1) for reconveyance based on fraud since the
ownership of private respondents over the questioned property was allegedly established
on "false assertions, misrepresentations and deceptive allegations" (p. 182, Records); and
2) for rescission of the "Kasulatan ng Pagmamana at Paghahati" (pp. 173, 187, Records).
Besides, as against said Certification issued by the Bureau of Land (Exhibit "D") dated
March 18, 1987, which petitioners harp on, is the explicit Certification of Friar Lands
Agency No. 2 of the same Bureau dated June 17, 1951, that ... according to the records of
this Office, Lot No. 144 of the SANTA ROSA (DETACHED) ESTATE, was deeded
under Patent No. 31464 dated February 23, 1933 in the name of Gabriel Beato of
Sinalhan, Sta. Rosa, Laguna." Thus, the action for reconveyance based on fraud filed by
petitioners before the trial court is subject to prescription. In this regard, respondent court
shares the same view as the trial court that (p. 29, Rollo):
... The issuance of the reconstituted title over lot No. 144 and its registration in the office
of the Register of Deeds of Laguna in 1973 (sic) is the reckoning point for the
prescriptive period to commence. The 4-year period within which to file this case for
cancellation of title based on fraud must be done within 4 years after the cause of action
arose. Here, more than 4 years has elapsed. (emphasis supplied)

We were categorical in the case of Caro, et al. v. Court of Appeals, et al., G.R. No.
76148, December 20, 1989, 180 SCRA 401 citing the case of Liwalug Amerol, et al. v.
Molok Bagumbaran, G.R. No. L-33261, September 30, 1987, 154 SCRA 396 that 694
the prescriptive period for the reconveyance of fraudulently registered real property
is ten (10) years reckoned from the date of the issuance of the certificate of title. We even
said in the case of Heirs of Maria Revilleza Vda. de Vega, et al. v. Court of Appeals, et
al., G.R. No. 93507, July 12, 1991 that:

... after numerous illuminating decisions by this Court, nobody can successfully claim
ignorance of the rule that an action for reconveyance based on an implied or constructive
trust prescribes in ten (10) years...

Conformably with these settled jurisprudence, the prescriptive period for petitioners'
action for reconveyance is ten (10) years from August 30, 1963, the date of the issuance
of TCT No. RT-7880 (Exhibit "7-B"). Obviously, Our discussion on this subject matter is
not beneficial to petitioners because they filed the action for reconveyance only on April
27, 1987.

While private respondent Zenaida Alzona-Diaz saw the house of petitioner Emiliano S.
Casipit on the questioned property before 1948, at the time of the sale, there was no
occupant on the questioned property and he (Emiliano S. Casipit) was then residing in an
adjoining lot (supra). When she testified that there was no title yet when the "Kasulatan
ng Pagmamana at Paghahati" was executed in 1961, she was referring to the
reconstituted torrens title thereon. The other portions of her testimony which were
conveniently deleted by petitioners read 45-45, tsn, March 20, 1989):

Q In 1961, you mean to say that the Beatos had already told you that they have already a
reconstituted title over the portion that was sold to you?

A None yet, sir.

Q What (sic) is it that you were answering (sic) Atty. Noynay that you were told about
the reconstituted title?
A My husband and I were informed that they will file a petition for reconstitution on Lot
No. (sic) 132, 134 and 144.

A purchaser in good faith is one who buys the property of another without notice that
some other person has a right to, or interest in, such property and pays a full and fair
price for the same, at the time of such purchase, or before he has notice of the claim or
interest of some other person in the property (Vda. de Recinto v. Inciong, et al., G.R. No.
L-26083, May 31, 1977, 77 SCRA 196 citing Cui and Joven v. Henson, 51 Phil. 606 and
Fule v. De Legare, 7 SCRA 351). In consonance with this definition, private respondents
Diaz spouses were purchasers in good faith. They bought the property of private
respondents Beatos without notice that some other person has a right to, or interest in, the
questioned property and paid the fun price therefor at the time of such purchase. In
addition, respondent court said (pp. 29-30, Rollo):

The Diaz spouses who bought the land in question from the Beatos are buyers in good
faith. We find no need for an extended discussion on this issue, considering that
plaintiffs-appellants failed to show a better title to the lot than that of the defendants-
appellees Beatos. However, We shall dwell briefly on this matter if only to erase any
doubt as to the good title of the Diazes over the property which they now own. When the
Diazes bought the property in question for a valuable consideration, they were shown the
Beatos' documents which show and prove how the latter acquired ownership thereof.
These consisted of Exhibits 2, 2-A, 3, and 4, which are all ancient documents. Then,
when the Diaz spouses purchased the lot in question, there was no house or structure
built thereon, nor anyone living in the premises. Under the circumstance, the Diaz
spouses cannot be imputed with notice of this adverse claim of the plaintiff (sic) or any
flaw, assuming there is any, in the title of the vendors.

Regarding the last allegation of petitioners, We adopt respondent court's reasoning

thereon (pp. 31-32, Rollo):

... the herein defendants-appellants are entitled to lot 144, and thus, in effect, plaintiffs-
appellees are unlawfully occupying portions of the said lot. The trial court thus may
award actual (sic) damages in every case where a property right has been invaded
(Article 2222 of the New Civil Code). Defendant-appellant Zenaida Diaz testified that
the reasonable rental for the area occupied by Antonio (sic) Casipit is P300.00 a month
(p. 40, tsn; Mar. 20, 1987 (sic)). This testimony of Diaz was unrebutted. It is also
unrebutted that on October 8, 1981, Severino Diaz filed a criminal complaint against
Antonio (sic) Casipit and Julian Almadovar for violation of P.D. 772, but was dismissed
by the prosecuting fiscal on the ground that the said law applies to urban land only. And
on June 6,1987 (sic), a complaint for ejectment was filed by the Diazes against Antonia
Casipit before the Municipal Trial Court which was suspended due to the filing of this
instant case. Thus, October 8, 1981, should be the reckoning point for the awed (sic) of
P300.00 a month in the form of reasonable rentals to compensate the Diazes for the loss
of enjoyment of property that lawfully belongs to them.

An award of moral damages is justified since the evidence indicate (sic) bad faith in the
filing of this complaint by plaintiffs-appellees. Apparently, plaintiffs-appellees are not
even convinced of the validity of their claim since they permitted a period of more than
30 years to lapse before they went to court. It would seem that this complaint filed by
plaintiffs-appellees was merely an afterthought in order to counteract the ejectment suit
filed by defendants-appellants Diazes on June 6, 1985. The numerous court cases relative
to the lot in dispute have caused the Diazes sleepless nights and thus they should be
entitled to moral damages in the amount of P30,000.00.

In order to give complete relief to the Diazes, plaintiffs-appellees must vacate the lot in
dispute. True, there is now a pending ejectment case in the Municipal Trial Court of Sta.
Rosa, Laguna. However, the pendency of the said ejectment case should not constitute a
bar to the grant of the relief prayed for by appellants Diazes in their answer, i.e., to
vacate the premises. In the case at bar, the issue of ownership has in effect settled the
issue of possession which would be litigated upon in the ejectment suit. The trial court
took into account the fact that appellants Diazes first filed a criminal complaint against
plaintiff-appellees in 1981; and, in 1985, a complaint for ejectment. The Diazes,
therefore, being the lawful owners of the property in dispute, and in this case, the issue of
possession having been properly ventilated, should be awarded immediate possession of
the property. This is necessary in order to finish once and for all the controversy between
the defendants-appellants and the plaintiffs-appellees. To leave the issue of ejectment in
the hands of the Municipal Trial Court where a complaint has been pending, would be to
deny complete relief to defendants-appellants. It is best to grant the relief prayer (sic) for,
that of ejectment, in the case at bar, in order to avoid multiplicity of suits. It will not only
save the parties and the court the rigors and expenses of multitple (sic) litigations, but
also avoid the remote probability that there might be conflicting decisions relative to one
and the same imue.

ACCORDINGLY, the petition is hereby DENIED. The decision of the Court of Appeals
dated August 22, 1990 and its resolution dated January 11, 1991 are AFFIRMED.
G.R. No. 71110 November 22, 1988

PAZ VILLAGONZALO, ESTELA VILLAGONZALO, AIDA VILLAGONZALO,

HERMINIA VILLAGONZALO, GWENDOLYN VILLAGONZALO, JENSINE
VILLAGONZALO and LEONILA VILLAGONZALO, petitioners,
vs.
INTERMEDIATE APPELLATE COURT and CECILIA A.
VILLAGONZALO, respondents.

Julio L. Falcone and Makilito B. Mahinay for petitioners.

Adelino B. Sitoy for private respondent.

REGALADO, J.:

From a decision rendered in favor of herein petitioners, as plaintiffs, against herein

private respondent, as defendant, in an action for reconveyance in the then Court of First
Instance of Leyte, 1 which reads:

Wherefore, decision is hereby rendered in favor of the plaintiffs and against defendant
declaring Lot No. 7429 of the Ormoc Cadastre, situated at Bo. Dolores, Ormoc City, with
an area of 97,213 square meters, more or less, as the conjugal property of the deceased
spouses, Juan Villagonzalo and Felicisima Abella Villagonzalo hereby ordering the
cancellation of Transfer Certificate of Title No. 4259 in the name of Cecilia A.
Villagonzalo and ordering the Register of Deeds of Ormoc City to issue another Transfer
Certificate of Title in the name of spouses Juan C. Villagonzalo and Felicisima A.
Villagonzalo, Filipinos, of legal age, residents of Cebu City now deceased and survived
by the present plaintiffs and defendants, each of whom upon payment of the inheritance
taxes with the BIR, shall be entitled to 1/9 share of the land, subject to claims by other
heirs and creditors within a period of two (2) years as provided for by the Rules of Court,
and further ordering the partition of the said land within a period of ninety (90) days
from the finality of this decision and if the parties cannot agree on the partition this Court
may appoint a commissioner to partition the same without pronouncement as to costs. 2

therein defendant appealed to the former Intermediate Appellate Court which, in a

decision 3 of the Second Civil Cases Division in AC-G.R. No. 65128, reversed the
appealed judgment and dismissed the complaint for reconveyance.
As found by the respondent Court

The facts in this regard show that on February 22, 1961, Juan C. Villagonzalo, the
predecessor-in-interest of the parties, purchased Lot No. 7429 of the Ormoc Cadastre,
situated at Barrio Dolores, Municipality of Ormoc, containing an area of 97,213 sq.
meters covered by Transfer Certificate of Title No. 24611 of the Register of Deeds of
Ormoc City, from the Heirs of Roman Matuguina for Pl,500.00 (Exhibits A and 6, Folder
of Exhibits, pp. 1, 15). It was made to appear however that the sale was in the name of
his daughter, defendant Cecilia Villagonzalo, who was single, since he borrowed from
her the sum of P500.00 to complete the full payment of the price of the lot.
Consequently, TCT No. 4259 was issued in the name of defendant Cecilia A.
Villagonzalo as the registered owner (Exhibit 5, Ibid., p. 15) on July 18, 1962. The
complaint was filed on April 2, 1975 thirteen (13) years after the issuance of Transfer
Certificate of Title No. 4259 on the subject land in the name of the defendant Cecilia
Villagonzalo. 4

On such factual moorings, the respondent court, now the Court of Appeals, held that the
right of action of therein plaintiffs-appellees, petitioners herein, had prescribed for the
reasons that follow. 5

It ratiocinated that when private respondent obtained Transfer Certificate of Title No.
4259 in her name she thereby excluded herein petitioners from the estate of their
deceased predecessor-in-interest and, consequently, she set up a title to the land adverse
to them. The registration of the deed of sale with the Register of Deeds, so it opined, was
constructive notice to the whole world of defendant's adverse claim to the property,
thereby repudiating any fiduciary or trust relationship involved. It anchored its
conclusion on doctrinal holdings that an action for reconveyance based on an implied or
constructive trust prescribes in ten years counted from the date when adverse title is
asserted by the possessor of the property.

Prescinding therefrom into the field of laches, respondent court further noted that
because of the neglect and inaction of the present petitioners, the private respondent was
thereby made to feel secure in her belief that she had rightly acquired the controverted
land and that no legal action would be filed against her. She was thus induced to spend
time, money and effort for the cultivation of the land and the payment of the taxes
thereon. It then further rested its conclusion on the established principle that inaction and
neglect of a party to assert a right can convert what could otherwise be a valid claim into
a stale demand.
Petitioners have come before Us contending that their action was seasonably filed
because private respondent's registration of the land in her name was not a repudiation of
the implied trust created between her and their father; and, confusing extinctive for
aquisitive prescription, that good faith and just title are essential requisites in this case.

The respondent court is correct and certiorari must be denied.

It is now well settled that an action for reconveyance of real property to enforce an
implied trust shall prescribe after ten years, 6 since it is an action based upon an
obligation created by law, 7 and there can be no doubt as to its prescriptibility. 8

It is likewise established that said period of ten years is counted from the date adverse
title to the property is asserted by the possessor thereof. In the case at bar, that assertion
of adverse title, which consequently was a repudiation of the implied trust for the
purpose of the statute of limitations, took place when Transfer Certificate of Title No.
4259 was issued in the name of private respondent on July 18, 1962. As succinctly but
pithily resolved in Vda. de Pama vs. Pama, et al.: 9

... Considering the settled doctrine that an action for reconveyance of real property based
upon constructive or implied trust prescribes in ten (10) years counted from the date
adverse title is asserted by the possessor of the property (Diaz vs. Gorricho, 103 Phil.
261; Candelaria vs. Romero, 109 Phil. 100; J. M. Tuazon vs. Magdangal, 114 Phil. 42);
that when respondent Guillermo Pama caused the registration on June 18, 1956 of the
affidavit of adjudication declaring himself to be the sole heir of the late Mateo Pama and
obtained Transfer Certificate of Title No. T-4006 in his own name, he thereby excluded
petitioners from the estate of the deceased Mateo Pama and, consequently, set up a title
adverse to them; that such registration constitutes constructive notice to petitioners of the
respondent's adverse claim to the property (Carantes vs. Court of Appeals, 76 SCRA 514,
523; Gerona vs. de Guzman, 11 SCRA 153, 157); and it appearing that petitioners filed
their complaint for reconveyance only on April 28, 1969, or twelve (12) years, ten (10)
months and ten (10) days after their cause of action had accrued on June 18, 1956; this
Court resolved to dismiss this petition and to affirm the questioned order dismissing
petitioner's complaint ... 10

There is also evidence of record that as far back as 1961, private respondent refused to
give any share in the produce of the land to petitioners; that in 1963 she mortgaged the
property in her own name; and that in 1969, she leased the same to one Ramon Valera,
without the petitioners taking preventive or retaliatory legal action. 11
The rule in this jurisdiction is that an action to enforce an implied trust may be barred not
only by prescription but also by laches, in which case repudiation is not even
required. 12 Whether the trust is resulting or constructive, its enforcement may be barred
by laches. 13 Petitioners were, therefore, correctly faulted for their unjustified inaction.

WHEREFORE, the judgment of the respondent Court is hereby AFFIRMED.

SO ORDERED.
G.R. No. L-33261 September 30, 1987

LIWALUG AMEROL, MACATANTO AMEROL, TAIB AMEROL, DIBARATUN

AMEROL, DIBARATUN, MATABALAO, MINDALANO DIBARATUN,
DIPUNDUGUN MORO, and MANUCAO MORO, petitioners,
vs.
MOLOK BAGUMBARAN, respondent.

SARMIENTO, J.:

This is a petition for review on certiorari of the decision 1 of the then Court of First
Instance of Lanao del Sur, Branch III, Marawi City, in Civil Case No. 1354, entitled,
"Molok Bagumbaran vs. Liwalug Amerol et al.," under Republic Act No. 5400, "as only
question of law is raised." 2

The only issue for resolution is the prescriptive period of an action for reconveyance of
real property which has been wrongfully or erroneously registered under the Torrens
System in another's name. In other words, what is the prescriptive period for the action to
reconvey the title to real property arising from an implied or constructive trust and,
corrolarily reference. The petitioners herein, defendants in the trial court, assert that they
have ten years to bring the action, while the respondent, plaintiff in the court below,
claims the prescriptive period is four years. The trial court ruled tor the plaintiff, now
respondent.

We reverse. We hold that the prescriptive period for such an action for reconveyance, as
this case, is ten years. The point of reference is, or the ten-year prescriptive period
commences to run from, the. date of the issuance of the certificate of title over the real
property.

There is no issue as to the facts, this case having been elevated to this Court, as
aforestated, on purely a question of law. Be that as it may, in order to satisfy
constitutional requirements as well as to place the question of law in proper perspective,
there is need to state the facts of the case. On this regard, the findings of the trial court
would best serve the stated purposes.

xxx xxx xxx

From the evidence submitted during the trial there is no dispute concerning the fact
relative to the Identity of the land in litigation. It is commonly known as Lot No. 524,
Pls-126 and technically described and bounded in the sketch (Exh. "7 "). This is the very
tract of land alleged by the plaintiff to have been forcibly entered into by the defendants
and which plaintiff now w&s to recover possession thereof. It has also been proven that
the same lot was covered by two free patent applications: (l) that of defendant
Liwalug Datomanong (erroneously surnamed Amerol) which he filed on the 4th day of
September, 1953, and (2) that of Molok Bagumbaran which was filed on December 27,
1954. There is also no question regarding the fact that as to these two free patent
applications, that of plaintiff Molok Bagumbaran was given due course as a result of
which Free Patent No. V-19050 was issued on August 16,1955 by authority of the
President of the Philippines Ramon Magsaysay, by Jaime Ferrer, Undersecretary of
Agriculture and Natural Resources and duly registered with the office of the Register of
Deeds of the Province of Lanao (now Lanao del Sur) in the mm year whereupon Original
Certificate of Title No. P-466 was duly issued, owner's duplicate certificate having been
furnished the herein plaintiff.

This court is also inclined to believe that defendant Liwalug Datomanong had never
known of plaintiff's free patent application on the land in question nor was he ever
notified or participated in the administrative proceedings relative to plaintiff's free patent
application. In the meantime, since the date he purchased the land from Mandal Tondo,
said defendant has been and up to the present in con. tinuous occupation and cultivation
of the same. His co-defendants named in the complaint are merely his tenants.

It is also incontrovertible fact that said defendant did not take appropriate action to annul
the patent and title of the plaintiff within one year from issuance thereof and that the first
step taken by him to contest said patent and title was a formal protest (Exh. "12", p. 408,
Record) dated April 24, 1964, filed before the Bureau of Lands after the lapse of Nine (9)
long years from the issuance of patent in favor of the plaintiff. The second step he took
was his counterclaim contained in his answer to the complaint in the above entitled case,
which answer was filed with this court on December 4, 1964. In said counterclaim,
defendant reiterated his stand that plaintiff secured patent on the land by means of deceit
and fraud, wherefore, defendant prayed that said title be annulled, or, alternatively,
plaintiff be ordered to reconvey the said land to the said defendant Liwalug Datomanong.

First question to be resolved is whether or not the plaintiff is guilty of fraud or

misrepresentation in securing the Free Patent No. V-19050 covering the land in question.

Upon a thorough examination of the evidence, proofs are sufficient to support

defendant's contention that plaintiff is guilty of fraud and misrepresentation. In the first
place, proofs are abundant tending to show that since 1952 when Mandal Tando
transferred the land to said defendant, the latter occupied, took possession thereof and
cultivated the same continuously, publicly, adversely against any claimant and in the
concept of owner up to the present; that said defendant had introduced considerable
improvements such as coconut and coffee plantations and other fruit trees besides his
farm house, a mosque, cassava plantation and clearing and full cultivation of the entire
area. The fact of possession on the part of said defendant has been attested to by
competent and creditable witnesses like Mandal Tando who conveyed the land to the
defendant; Hadji Sirad Gomandang, the barrio captain of Montay, Malabang, Lanao del
Sur, Hadji Rasol Maruhom and Hadji Abdulcadir Pagayawan, both of Pialot, Malabang,
Lanao del Sur who are farmers and barrio-mates of said defendant; and also Disomnong
Dimna Macabuat, an employee in the office of the District Land Officer at Marawi City
who had officially conducted occular inspection and investigation of the premises in
connection with the protest of said defendant found thereon the above-mentioned
improvements introduced by the said defendant.

What is more, on or before filing his free patent application, plaintiff knew that the land
in question which was covered by his free patent application was then actually occupied
and cultivated by defendant Liwalug Datomanong if not by Mandal Tando, the original
occupant. Be it remembered that Mandal Tando had transferred to defendant Liwalug
Datomanong Twenty Four (24) hectares, more than eleven hectares of which is (sic)
outside the military reservation and designated as Lot No. 524, Pls-126 and the rest
which is in the southern portion lies within the military reservation. Now, immediately
adjacent thereto on the south is the land claimed and occupied by the herein plaintiff also
consisting of Twenty Four (24) hectares but wholly within the military reservation. It
appears that plaintiff declared this Twenty four hectares for the first time on October 24,
1950 for taxation purposes (Tax Declaration No. 1529, Record) and stated in said tax
declaration (Exhs. "8" and "8-A," p. 414, Record) regarding the boundaries that the
adjacent owner on the north is Mandal Tando. In other words, plaintiff had expressly
recognized the fact that Mandal Tando is an adjacent land owner north of plaintiff's
property. On February 19, 1951 herein plaintiff revised the above-stated tax declaration
and secured another (Tax Declaration No. 1794, Exh. "9" and "9-A," p. 413, Record) and
still plaintiff stated therein that his boundary land owner on the north is Hadji Abdul
Gani. 3[a.k.a.Liwalug Datomanong(Amerol)]. 4

xxx xxx xxx

Notwithstanding the aforequoted findings, very unequivocal to be sure, the trial court
denied the counterclaim of the defendants, now petitioners, for the affirmative relief of
reconveyance on the ground of prescription. Said the court:
xxx xxx xxx

The patent of the plaintiff having been registered back in 1955 and in contemplation of
law registration thereof is notice to the whole world and yet defendant exerted no effort
whatsoever either to annul the title or institute proceedings for reconveyance except in
his counterclaim contained in his answer to the complaint in this case at bar which
answer and counter-claim was filed on December 4, 1964, some nine long years from the
date of registration of the patent, defendant unfortunately lost his right to reconveyance
within the period of four (4) years from the date of registration of said patent. 5

xxx xxx xxx

Thus, the dispositive portion of the assailed decision stated:

xxx xxx xxx

PREMISES CONSIDERED, judgment is hereby rendered as follows: (1) declaring the

herein plaintiff the registered owner of Lot No. 524, Pls-126 and sustaining and
respecting the validity of the plaintiff's Original Certificate of Title No. P-466 covering
the said land; (2) ordering the defendants to vacate the premises of Lot No. 524; Pls-126
and deliver possession thereof to the herein plaintiff under certain terms and conditions
herein below stated; (3) denying and hereby dismissing the counterclaim of the herein
defendants and consequently the prayer to annul the title and/or for reconveyance of the
land to said defendant Liwalug Datomanong must Likewise be denied; (4) that before
plaintiff could take possession of said premises he must reimburse defendant Liwalug
Datomanong the total sum of Six Thousand Seven Hundred Fifty-Two Pesos and Sixty-
Two Centavos (P6,752.62) which he incurred for the necessary and useful expenses on
the land in question with the right of said defendant to retain possession of the premises
if said reimbursement be not completely made. No pronouncement as to costs. 6

xxx xxx xxx

Hence, this petition. 7

The petitioners in their Brief 8 assign the following two errors allegedly committed by
the trial court:

I.

THE COURT ERRED IN ITS CONCLUSION OF LAW TOTHE EFFECT THAT

PETITIONERS RIGHT OF ACTION FOR RECONVEYANCE FOR VIOLATION OF
AN IMPLIED TRUST PRESCRIBED AFTER FOUR YEARS FROM THE
REGISTRATION OF THE PATENT OF RESPONDENT.

II.

THE COURT ERRED IN NOT REQUIRING THE INTRODUCTION OF EVIDENCE

AS BASIS IN THE ASSESSMENT OF THE FAIR MARKET VALUE OF THE
IMPROVEMENT INTRODUCED ON THE LAND IN GOOD FAITH BY
PETITIONERS INSTEAD OF BASING SUCH ASSESSMENT UPON PURE AND
SIMPLE GUESS WORKS AND WILD ESTIMATIONS.

The first assignment of error is well-taken as adverted to at the outset.

Indubitably, the act of respondent in misrepresenting that he was in actual possession and
occupation of the property in question, obtaining a patent and Original Certificate of Title
No. P- 466 in his name, created an implied trust in favor of the actual possessor of the
said property. The Civil Code provides:

ARTICLE 1456. If property is acquired through mistake or fraud, the person obtaining it
is by force of law, considered a trustee of an implied trust for the benefit of the person
from whom the property comes.

In this case, the land in question was patented and titled in respondent's name by and
through his false pretenses. Molok Bagumbaran fraudulently misrepresented that he was
the occupant and actual possessor of the land in question when he was not because it was
Liwalug Datomanong. Bagumbaran falsely pretended that there was no prior applicant
for a free patent over the land but there was Liwalug Datomanong. By such fraudulent
acts, Molok Bagumbaran is deemed to hold the title of the property in trust and for the
benefit of petitioner Liwalug Datomanong. Notwithstanding the irrevocability of the
Torrens title already issued in the name of respondent, he, even being already the
registered owner under the Torrens system, may still be compelled under the law to
reconvey the subject property to Liwalug Datomanong. After all, the Torrens system was
not designed to shield and protect one who had committed fraud or misrepresentation
and thus holds title in bad faith. Further, contrary to the erroneous claim of the
respondent, 9 reconveyance does not work to set aside and put under review anew the
findings of facts 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, in this case the title thereof, which has been wrongfully or erroneously
registered in another person's name, to its rightful and legal owner, 10 or to one with a
better right. That is what reconveyance is all about.
Yet, the right to seek reconveyance based on an implied or constructive trust is not
absolute. It is subject to extinctive prescription. 11 Happily, both parties agree on this
point. The seeming impediment however, is that while the petitioners assert that the
action prescribes in ten years, the respondent avers that it does in only four years.

In support of his submission, the respondent invokes several cases. We have examined
the invocations and find them inapplicable. For instance, the case of Fabian vs.
Fabian, 12 relied on by the respondent, does not square with the present case. In Fabian,
the party who prayed for reconveyance was not in actual possession and occupation of
the property. It was instead the party to whom title over the property had been issued
who occupied and possessed it. Further, the litigated property had been in the adverse
possession of the registered owner for well-nigh over twenty-nine big years, hence,
reconveyance had been irretrievably lost.

Miguel vs. Court of Appeals, 13 is, likewise, inapplicable. In Miguel, the actual occupant
and possessor of the controverted parcel of land, after having been enticed by Leonor
Reyes, an ambulatory notary public, with promise of help, engaged and retained the
services of the latter to facilitate the issuance of a patent for the said land in his
(Miguel's) favor. Thus, there existed between the parties a relationship very much akin to
that of lawyer-client and which is similarly fiduciary in character. But Reyes, inspite of
his compensation of one-fifth of the yearly produce of the property, still violated the trust
reposed on him and instead worked for the issuance of the patent in the name of his own
wife. So, after the demise of Leonor Reyes, the property was fraudulently patented and
titled in his widow's favor. The reconveyance of the property was decreed by the Court
based on "breach of fiduciary relations and/or fraud." It was shown that the parties were
legally bound to each other by a bond of fiduciary trust, a bond lacking in the case at bar.

Finally, the case of Ramirez vs. Court of Appeals 14 can not be availed of because the
period of prescription was not there definitely and squarely settled. In fact, Ramirez
underscores a vacillation between the four-year and the ten-year rule. There it was stated
that "an action for relief on the ground of fraud to which class the remedy prayed for
by Paguia belong scan only be brought within four years after accrual of the right of
action, or from the discovery of the fraud." If the decision just stayed pat on that
statement, there would be merit in the respondent's presentation. But Ramirez continues:
"(I)ndepedently, however, of the alleged fraud on the part of Ramirez, the right to
demand a reconveyance prescribes after 10 years from accrual of the cause of action,
June 22, 1944, the date of registration of the patent and of the issuance of OCT No. 282-
A in his name." 15
Significantly, the three cases cited by the respondent to buttress his position and support
the ruling of the trial court have a common denominator, so to speak. The cause of action
assailing the frauds committed and impugning the Torrens titles issued in those cases, all
accrued prior to the effectivity of the present Civil Code. The accrual of the cause of
action in Fabian was in 1928, in Miguel, February, 1950, and in Ramirez, 1944. It must
be remembered that before August 30, 1950, the date of the effectivity of the new Civil
Code, the old Code of Civil Procedure (Act No. 190) governed prescription. It provided:

SEC. 43. Other civil actions; how limited-Civil actions other than for the recovery of real
property can only be brought within the following periods after the right of action
accrues:

xxx xxx xxx

3. Within four years: x x x An action for relief on the ground of fraud, but the right of
action in such case shall not be deemed to have accrued until the discovery of the fraud;

xxx xxx xxx

In contrast, under the present Civil Code, we find that just as an implied or constructive
trust is an offspring of the law (Art. 1456, Civil Code), so is the corresponding obligation
to reconvey the property and the title thereto in favor of the true owner. In this context,
and vis-a-vis prescription, Article 1144 of the Civil Code is applicable.

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

(1) Upon a written contract;

(2) Upon an obligation created by law;

(3) Upon a judgment.

xxx xxx xxx

(Emphasis supplied)

An action for reconveyance based on an implied or constructive trust must perforce

prescribed in ten years and not otherwise. A long line of decisions of this Court, and of
very recent vintage at that, illustrates this rule. Undoubtedly, it is now well-settled that an
action for reconveyance based on an implied or constructive trust prescribes in ten years
from the issuance of the Torrens title over the property. 16 The only discordant note, it
seems, is Balbin vs. Medalla, 17 which states that the prescriptive period for a
reconveyance action is four years. However, this variance can be explained by the
erroneous reliance on Gerona vs. de Guzman. 18 But in Gerona, the fraud was
discovered on June 25, 1948, hence Section 43(3) of Act No. 190, was applied, the new
Civil Code not coming into effect until August 30, 1950 as mentioned earlier. It must be
stressed, at this juncture, that Article 1144 and Article 1456, are new provisions. They
have no counterparts in the old Civil Code or in the old Code of Civil Procedure, the
latter being then resorted to as legal basis of the four-year prescriptive period for an
action for reconveyance of title of real property acquired under false pretenses.

It is abundantly clear from all the foregoing that the action of petitioner Datomanong for
reconveyance, in the nature of a counterclaim interposed in his Answer, filed on
December 4, 1964, to the complaint for recovery of possession instituted by the
respondent, has not yet prescribed. Between August 16, 1955, the date of reference,
being the date of the issuance of the Original Certificate of Title in the name of the
respondent, and December 4, 1964, when the period of prescription was interrupted by
the filing of the Answer cum Counterclaim, is less than ten years.

The respondent also interposed as a deterrent to reconveyance the existence of a

mortgage on the property. It is claimed by the respondent that reconveyance would not
be legally possible because the property under litigation has already been mortgaged by
him to the Development Bank of the Philippines. 19 This claim is untenable otherwise
the judgment for reconveyance could be negated at the will of the holder of the title. By
the simple expedient of constituting a mortgage or other encumbrance on the property,
the remedy of reconveyance would become illusory. In the instant case, the respondent
being doubly in bad faith for applying for and obtaining a patent and the Original
Certificate of Title therefor without being in possession of the land and for mortgaging it
to the Development Bank knowing that his Original Certificate of Title was issued under
false pretenses must alone suffer the consequences.

Besides, given the undisputed facts, we cannot consider the mortgage contracted by the
respondent in favor of the Development Bank of the Philippines as valid and binding
against petitioner Liwalug Datomanong. It would be most unjust to saddle him, as owner
of the land, with a mortgage lien not of his own making and from which he derived no
benefit whatsoever. The consequences of the void mortgage must be left between the
mortgagor and the mortgagee. In no small measure the Development Bank of the
Philippines might even be faulted for not making the requisite investigation on the
possession of the land mortgaged.
Premises considered, we deemed it superfluous to rule on the second assignment of error
raised by the petitioners.

WHEREFORE, the petition is GRANTED and the Decision dated June 3, 1970 of the
then Court of First Instance of Lanao del Sur in Civil Case No. 1354 is hereby
ANNULLED and SET ASIDE and a new one entered ORDERING the respondent to
RECONVEY Original Certificate of Title No. P-466 in favor of petitioner Liwalug
Datomanong, free of any encumbrance. Costs against the respondent.

SO ORDERED.
G.R. No. 83383 May 6, 1991

SOLID STATE MULTI-PRODUCTS CORPORATION, petitioner,

vs.
THE COURT OF APPEALS (Former Sixth Division) and THE INTESTATE
ESTATE OF ANTENOR S. VIRATA and the DEVELOPMENT BANK OF THE
PHILIPPINES, respondents.

Antonio M. Chavez for petitioner.

Rodolfo M. Dela Rosa for respondent Intestate Estate of Antenor S. Virata.

MEDIALDEA, J.:

This is a petition for review on certiorari of the decision of the Court of Appeals which
affirmed the decision of the trial court dismissing the complaint filed by petitioner for
quieting of title and declaring Antenor Virata as the true and lawful owner of the disputed
property.

The antecedent facts are as follows:

On September 28, 1982, petitioner, a domestic corporation, filed an action for quieting of
title against the respondent estate of Virata alleging that it is the registered owner of a
parcel of land located at Imus, Cavite, with an area of 48,182 sq. meters, covered by
Certificate of Title No. T-80889 of the Register of Deeds of Cavite, which was issued on
February 24, 1976; that Virata, during his lifetime thru the use of fraud, caused the
issuance of Certificate of Title No. T-11520 RT 1660 on September 1, 1959 thru an
administrative reconstitution of a nonexistent original title covering the same parcel of
land; that by reason of the said reconstitution and subsequent issuance of TCT No. T-
11520 RT 1660, there now exists a cloud on the title of petitioner.

As gathered by the respondent appellate court and trial court, the evidence for the
petitioner consists of the following:

Pursuant to the provisions of Act No. 32, as amended, Julian Pearanda submitted with
the Bureau of Lands, thru its District Land Office at Rosario, Cavite an application dated
November 22, 1968, in a verified Indorsement dated November 25, 1968, to purchase a
friar land which was subscribed and sworn to before Manuel Cupino, Acting District
Land Officer (Exh. "D"). The application covers Lot No. 7449 of the Imus Friar Lands
Estate, situated at Barrio Molino, Bacoor, Cavite, containing an area of 4 hectares, 81
ares and 82 centares. Said application was accompanied by a "SALAYSAY" (Exhibit
"A") signed and sworn to by one Mabini Legaspi before said District Land Officer
Cupino, purporting to transfer to, and to waive in favor of, Julian Pearanda, all the
rights of executor to Lot No. 7449.

Following the routine in cases of this nature, District Land Officer Cupino referred to
Land Investigator Alberto Buhain for investigation and in a verified Indorsement dated
November 25, 1968, said investigator made a Report (Exh. "B") on the result of his
investigation, to District Land Officer Cupino, District Land Office No. III-8 Bureau of
Lands, Rosario, Cavite, certifying that applicant Julian Pearanda is the actual occupant
of Lot No. 7449, has introduced improvements consisting of upland rice and other
seasonal crops; that Pearanda's occupation of the land is derived through a voluntary
assignment of right of the former occupant, Mabini Legaspi, and that the same is free
from claims and conflicts and that the said applicant has established his rights over the
subject land, in view of which, said investigator recommended that said lot be awarded to
applicant Julian Pearanda according to law.

Thereafter, the Report having been submitted to Cupino, the latter directed investigator
Buhain to prepare an Information Sheet (Exh. "G" up to "G-3") and Cupino made the
Appraisal Report (Exh. "E-2"). The above requirements having been accomplished,
District Land Officer Cupino forwarded Pearanda's application to the Director of Lands,
thru the Chief, Land Management Division, recommending disposition of Lot No. 7449
be made in accordance with the findings of his office, to Julian Pearanda, pursuant to
the provisions of C.A. of No. 32, as amended.

By second Indorsement dated December 16, 1968, Higinio P. Sunico, Chief, Land
Management Division, acting for and in behalf of the Director of Lands, forwarded to the
Secretary of Agriculture and Natural Resources, the application of Julian Pearanda,
recommending that Lot No. 7449 be sold to said applicant without public auction for a
sum of P1,198.00 (Exh. "I") and by a 3rd Indorsement dated December 16, 1969, the
application of Julian Pearanda was returned by the Secretary of Agriculture and
Natural Resources, to the Director of Lands, Manila, approving that sale without
auction, to Julian Pearanda, of lot No. 7449. Pursuant to this approval, the Director of
Lands authorized the District Land Officer, Rosario, Cavite, to sell without auction to
Julian Pearanda, and directing that the sales contract should be executed soonest (Exh-
"I"). The Director of Lands and Julian Pearanda executed, therefore, Sales Contract
No. V-447 (Exh. "K"), on February 28, 1969, for a consideration of P1,198.00, to be paid
in ten (10) monthly installments, the first installment of P290.00 having been paid upon
execution of the sales contract and the payment of the P1,198.00 was fully paid on
August 6, 1969 (Exh. "O").

The contract price of the land having been paid by Pearanda, Undersecretary of
Agriculture and Natural Resources Isoceles Pascual, on August 13, 1969, issued the
final deed of conveyance of lot No. 7449 (Exh. "8") in favor of Julian Pearanda and the
said deed of conveyance contains the physical and technical description of the lot in
question (See Exh. "S-l").

xxx xxx xxx

On the basis of said Deed of Conveyance No. 10431, the Register of Deeds of Cavite
issued on November 14, 1969 in favor of Julian Pearanda TCT No. T-39631 (Exh. "Z-
6") which on its face shows it to have come from a direct transfer from OCT no. 1002,
and on February 17, 1976, the plaintiff, by way of a Deed of Absolute Sale (Exh. "Z")
bought said Lot No. 7449 as a consequence of which, TCT No. T-39631 was cancelled
and new TCT No. T-80889 was issued on February 24, 1976 to the plaintiff, Solid State
Multi Products Corporation.

Plaintiff Solid State Multi-Products Corporation enrolled Lot No. 7449 with the issuance
of Tax Declaration No. 20893 which was superseded by Tax Declaration No. 10973 and
continued to religiously pay the realty taxes as covered by receipts of tax payments (Exh.
for 1977 and Exh. "7-19" for 1984) and the subject property is in its actual possession
since its acquisition from Pearanda up to the present. (pp. 109-112, Rollo (Emphasis
Ours)

On the other hand, respondent Virata denied the allegations in the complaint and
presented evidence to prove his claim over the land. The appellate court and trial court
made the following findings:

. . . on March 20, 1943, the Director of Lands, Mr. Jose F. Dans, gave authority to sell at
public auction Lot No. 7449 of the Imus Estate, containing an area of 4.8182 hectares at
the price of not less than its appraised value of P290.00 (Exh. X-33). Accordingly on
April 20, 1943, the Bureau of Friar Lands Agent Severo Rivera issued a Notice fixing the
public auction of Lot No. 7449, among others, on May 5, 1943 at 10:00 a.m. (Exh. 1).
On said date, Mabini Legaspi (appellee Virata's predecessor-in-interest) submitted a
winning bid of P290.00 and paid P29.00 (10% of the purchase price) and even issued
Bureau of Lands Official Receipt No. 77735 dated May 5, 1943 (Exh. 7). The subsequent
installments were paid on January 14, 1944, April 24, 1944, August 17, 1944, and
September 20, 1944 in the amounts of P29.00, P29.00, 87.00 and P116.00, respectively.
The payments were evidenced by Official Receipts Nos. 78396, 783392, 784704 and
78466 (Exhs. 7-A, 7-B, 7-C and V)

On December 12, 1944, the Bureau of Lands, through Mr. Vicente Tordesillas, sent a
letter to the Register of Deeds at Imus, Cavite, requesting the issuance of the
corresponding certificates of title to eight persons, among whom was Mabini Legaspi,
specifying with respect to him Lot No. 7449 with an area of 4.8182 located at Bacoor,
Cavite Exh. 2). Accordingly, the Register of Deeds of Cavite issued TCT No. A-2188 to
Mabini Legaspi who held ownership of the property up to December 6, 1957 when he
executed a Deed of Sale transferring it to Antenor S. Virata (Exh. 6). The deed was
registered with the Registry of Deeds on December 10, 1957 . . . . On the same day,
December 10, 1957, the Register of Deeds issued TCT No. 11520 (Exh. 12) to Antenor
Virata . . .

However, on June 7, 1959, the Provincial Capitol building of Cavite which housed the
Registry of Deeds was burned, destroying land records and titles in d registry among
which were the records relating to Lot No. 7449.

On September 1, 1959, the Registry of Deeds administratively reconstituted the original

of TCT No. T-11520 based on owner's duplicate certificate (Exh. 12) and renumbered the
same as TCT No. (T-11520) RT-1660.

xxx xxx xxx

The sentence of TCT No. 80889 issued in the name of appellant on February 24, 1976
came to the knowledge of Antenor Virata in August 1978 when he received a subpoena
from the National Bureau of Investigation (NBI) in connection with its investigation of
the conflicting land titles on Lot No. 7449. Virata presented Mabini Legaspi as his
witness. NBI Agent Manuel C. Dionisio took the sworn testimony of Mabini Legaspi on
August 27, 1978 (Exh. 10) and submitted a written report (Exhs. 9 to 9-H) of his
investigation on October 27, 1978. Mabini Legaspi in her sworn testimony (Exh. 10)
declared that she acquired Lot 7449 during the Japanese occupation and in support of her
acquisition, she presented to NBI agent Dionisio the carbon or duplicate original of the
notice of public auction and the letters dated December 12, 1944 of Vicente Tordesillas
of the Bureau of Lands to the Register of Deeds requesting the issuance of a certificate of
title in favor of Mabini Legaspi, which documents were substituted on the same occasion
with xerox copies (Exh. 1 and 2) also marked as Exhibits 10-C and 10-D, respectively,
after a comparison with the duplicate originals. Legaspi also presented the originals of
the receipts of payment she made to the Bureau of Lands, which were substituted with
xerox copies (Exhs. 7, 7-A, 7-B and 7-C, also marked as Exhibit 10-E, 10-F 10-G and
10-H) after comparison with the original. She (Mabini) also testified on the sale of the lot
in favor of Antenor Virata on December 6, 1957, presenting as proof thereof, the
duplicate or carbon original of the Absolute Deed of Sale of Agricultural Land, which
was likewise, substituted with xerox copies (Exhs. 6 to 6-F, inclusive, also marked Exh.
11).

Mabini Legaspi testified that the originals of Exhibits 1 and 2 got lost. She said she
placed the documents on the table in her house after returning from the NBI
investigation, thinking "all the while that those documents will be useless because I had
my property sold." (Tsn., p. 17, December 19, 1984). She denied having sold the land to
Julian Pearanda, nor having waived her right over the land in his favor (tsn., p. 12,
March 18, 1985). (pp. 113-116, Rollo).

On June 15, 1985, the trial court rendered its decision, the dispositive portion of which
reads:

WHEREFORE, by preponderance of evidence, judgment is hereby rendered for

defendant Virata and against the plaintiff, to wit:

a. Dismissing the complaint which states no cause of action;

b. Recognizing that defendant Virata is the true and lawful owner of the land covered by
Transfer Certificate of Title No. (T-11520) RT 1660 of the Register of Deeds of the
Province of Cavite and holding that the same is valid;

c. Declaring that Transfer Certificate of Title No. T-80889 in the name of plaintiff, the
Solid State Multi Products Corporation is null and void and of no force and effect and is,
therefore, ordered cancelled;

d. Sentencing the plaintiff to pay the costs of the proceeding.

SO ORDERED. (p. 70, Rollo).

Not satisfied with the decision of the trial court, the petitioner appealed to the Court of
Appeals. On July 13, 1987, the respondent appellate court rendered its decision affirming
the decision of the trial court.

Hence, this petition was filed with the petitioner assigning the following errors:

THE RESPONDENT COURT GROSSLY ERRED WHEN IT IGNORED THE BASIC

CONSIDERATION THAT THE CONTESTED PROPERTY CAME FROM THE
FRIAR LANDS ESTATE THE DISPOSITION OF WHICH IS GOVERNED BY
SPECIAL LAWS SPECIFYING THE REQUIREMENTS FOR ITS ACQUISITION
FROM THE GOVERNMENT THROUGH SALE, WHICH LAW AND SPECIAL
REQUIREMENTS SHOULD SERVE AS THE MEASURE AGAINST WHICH THE
EVIDENCE OF THE PARTIES TO THIS CASE SHOULD BE WEIGHED, SUCH
GROSS ERROR LEADING THE APPELLATE COURT TO

(A) ERRONEOUSLY INFER THE EXISTENCE AND/OR DUE ISSUANCE OF THE

SUPPOSED TCT NO. A-2188 (IN THE NAME OF PRIVATE RESPONDENTS
PREDECESSOR-IN INTEREST), FROM DOCUMENTS THAT CAME AFTER WERE
BASED ON SUCH TCT NO. A-2188, CLEARLY BEGGING THE ISSUE WHICH IS
PRECISELY WHETHER OR NOT THE TRANSFER CERTIFICATE OF TITLE WAS
IN FACT ISSUED IN COMPLIANCE WITH THE FRIAR LANDS ACT AND CA-32
TO COVER THE PROPERTY IN QUESTION;

(B) ERRONEOUSLY BASE ITS DECISION IN FAVOR OF PRIVATE RESPONDENT

ON TCTs ISSUED BY THE REGISTER OF DEEDS INSPITE OF THE FACT THAT IT
IS THE BUREAU OF LANDS UNDER THE DIRECTION OF THE SECRETARY OF
AGRICULTURE AND COMMERCE (NATURAL RESOURCES) WHICH DISPOSES
FRIAR LANDS AND NOT THE REGISTER OF DEEDS WHOSE RECORDS CAN
BE NO BETTER THAN THE RIGHT IT HAS REGISTERED;

(C) ERRONEOUSLY DISREGARD THE PATENT INADMISSIBILITY OF THE

DOCUMENTARY EVIDENCE OFFERED BY THE PRIVATE RESPONDENT THE
ORIGINALS OF WHICH WERE NEVER PRESENTED BEFORE THE TRIAL
COURT;

(D) ERRONEOUSLY IGNORE THE LACK OF PROBATIVE VALUE OF SUCH

DOCUMENTARY EVIDENCE SUCH LACK OF PROBATIVE VALUE BEING
PATENT ON THE FACE OF SUCH DOCUMENT;

(E) ERRONEOUSLY IGNORE THE VERITY THAT THE DOCUMENTARY

EVIDENCE COULD SUPPORT NO MORE THAN THE FACT THAT THE
RESPONDENTS PREDECESSOR-IN-INTEREST HAD MERELY A
QUESTIONABLE INCHOATE AND INCOMPLETE RIGHT TO ACQUIRE THE
PROPERTY IN QUESTION, WHICH QUESTIONABLE INCHOATE AND IN FACT
UNCOMPLETED RIGHT CANNOT PREVAIL OVER THE TITLE OF
PETITIONER'S PREDECESSOR IN INTEREST WHO WAS THE ACTUAL
POSSESSOR THAT APPLIED FOR THE PURCHASE OF THE LAND EVERY
NEEDED STEP FOR THE PURCHASE HAVING BEEN PASSED UPON AND
RECORDED BY THE BUREAU OF LANDS WHOSE RECORDS SHOW ONE AND
ONLY TITLE ISSUED OVER THE LAND, THAT IS, THE TITLE OF THE
PETITIONER'S PREDECESSOR-IN-INTEREST (pp. 20, 22, Rollo)

We find the petition impressed with merit.

Since the assigned errors were interrelated, it would be well for this Court to discuss
them jointly.

Petitioner does not question the factual findings made by the respondent appellate court
and supported by the records (p. 22, Rollo). It does not however accept the legal
conclusion made by the appellate court and trial court that the registered title of private
respondent to the land should prevail over its own title.

Petitioner contends that Act No. 1120, otherwise known as the Friar Lands Act provides
the procedure for the sale and disposition of the friar lands to private persons; that
pursuant thereto, the acquisition by petitioner's predecessor-in-interest Julian Pearanda
of the disputed Lot 7449, which was formerly part of the friar lands estate, was in
compliance with all legal requisites laid down in Act No. 1120, for the validity of the sale
by the government in favor of Pearanda of such friar lands.

It also argues that the sale of Lot No. 7449 to respondent's predecessor, Mabini Legaspi,
and the issuance of a certificate of title in her favor was in violation of the Friar Lands
Act as there was no required approval by the Secretary of Agriculture and Natural
Resources.

There is no dispute here that the land involved in this case is a friar land and that the laws
which are applicable are Act No. 1120, know as the Friar Lands Act, providing for the
administration and temporary leasing and sale of certain haciendas and parcels of land,
commonly known as friar lands, and Commonwealth Act No. 32 dated September 15,
1936 as amended by Commonwealth Act No. 316 dated June 9, 1938, which provided
for the subdivision and sale of all the portions of the friar lands estated remaining
undisposed of.

Sec. 12 of Act No. 1120 provides in part:

. . . the Chief of the Bureau of Public Lands shall give the said settler and occupant a
certificate which shall set forth in detail that the Government has agreed to sell to such
settler and occupant the amount of land so held by him at the price so fixed payable as
provided in this Act at the Office of the Chief of the Bureau of Public Lands . . . and that
upon the payment of the final installment together with all accrued interest the
Government will convey to such settler and occupant the said land so held by him by
proper instrument of conveyance, which shall be issued and become effective in the
manner provided in section one hundred and twenty two of the Land Registration Act.

Also, Sec. 18 of the same Act provides:

No lease or sale made by the Chief of the Bureau of Public Lands under the provisions of
this Act shall be valid until approved by the Secretary of the Interior. (Emphasis ours)

Similarly, Sec. 2 of C.A. No. 32, as amended by C.A. No. 316 provides in part:

. . . The persons who, at the time of the subdivision survey are actual and bona
fide occupants of any portion of the Friar Lands Estates, not exceeding ten hectares, shall
be given preference to purchase the portion occupied at a private sale and at a price to
be fixed in such case, by the Director of Lands, subject to the approval of the Secretary
of Agriculture and Commerce, after taking into consideration its location, quality, and
any other circumstances as may affect its value, the provisions of section twelve of Act
Numbered Eleven hundred and twenty, as amended, to the contrary, . . . (Emphasis ours)

It is clear from the foregoing provisions that the friar lands were purchased by the
government for sale to actual settlers and occupants at the time said lands are acquired by
the government. The Bureau of Lands shall first issue a certificate stating therein that the
government has agreed to sell the land to such settler or occupant. The latter then shall
accept the certificate and agree to pay the purchase price so fixed and in the installments
and at the interest specified in the certificate.

The conveyance executed in favor of a buyer or purchaser, or the so called certificate of

sale, is a conveyance of the ownership of the property, subject only to the resolutory
condition that the sale may be cancelled if the price agreed upon is not paid for in full.
The purchaser becomes the owner upon the issuance of the certificate of sale in his
favor subject only to the cancellation thereof in case the price agreed upon is not paid
(Pugeda vs. Trias, No. L-16925, March 31, 1962, 4 SCRA 849.)

Upon the payment of the final installment together with all accrued interests, the
government shall then issue a final deed of conveyance in favor of the purchaser.
However, the sale of such friar lands shall be valid only if approved by the Secretary of
Interior as provided in Act No. 1120. Later laws, however, required that the sale shall be
approved by the Secretary of Agriculture and Commerce. In short, the approval by the
Secretary of Agriculture and Commerce is indispensable for the validity of the sale.
It is undisputed that petitioner's predecessor, Julian Pearanda was the actual occupant of
Lot 7449 when he filed his application to purchase the said lot on November 22, 1968;
that on December 16, 1989, the Secretary of Agriculture and Natural Resources approved
the sale of the lot without auction to Pearanda; that a sales contract was executed
between the Director of Lands and Pearanda on February 28, 1969 for a consideration
of P 1,198.00 payable in 10 monthly installments; that upon the full payment of the price,
the Undersecretary of Agriculture and Natural Resources issued the final deed of
conveyance of Lot No. 7449 in favor of Pearanda. Subsequently, the Register of Deeds
of Cavite issued TCT No. 39631 in the name of Pearanda, and when the latter sold the
land to petitioner, TCT No. 39631 was cancelled and TCT No. T-80889 was issued in
favor of the latter.

Clearly, the purchase of the friar land made by Pearanda was in compliance with law.
The execution of the sales contract vested the right of ownership in Pearanda over the
land. There is no doubt whatsoever that the said sale was valid as it was approved by the
Secretary of Agriculture and Natural Resources. Hence, the sale made by Pearanda in
favor of the petitioner transferred the ownership of the land in favor of the latter resulting
in the proper issuance of TCT No. T-80889 in its name.

On the other hand, the antecedents leading to the acquisition of title by respondent Virata
are clearly shown in the records. The latter's predecessor, Mabini Legaspi bought Lot
7449 in a sale by public auction held on May 5, 1943 conducted by the Bureau of Lands
and friar lands agent Severino Rivera, and paid the purchase price thereof in installments
in 1943; that on December 12, 1944, the Bureau of Lands sent a letter to the Register of
Deeds of Cavite requesting the issuance of certificates of title to several persons
including Mabini Legaspi, in whose favor TCT A-2188 was issued; that subsequently on
December 6, 1957, she sold the disputed land to respondent Virata, which was evidenced
by a deed of sale registered with the Registry of Deeds of Cavite on December 10, 1957;
that on the same date, TCT No. 11520 was issued in the name of Virata. Due to the fire
which gutted the building housing the Registry of Cavite on June 7, 1959, the latter
administratively reconstituted the original of TCT No. 11520 on September 1, 1959,
based on the owner's duplicate certificate and renumbered the same as TCT No. 1120 RT
1660.

Apparently, the sale of the lot to Mabini Legaspi occurred much earlier than the date of
acquisition of same lot by petitioner's predecessor, and the evidence presented by
respondent Virata indicates that the latter's predecessor paid the purchase price of Lot
No. 7449 on installments.
Nowhere in the evidence for the respondent or in the records of this case however, would
show that a certificate of sale was ever issued by the Bureau of Lands, which would vest
ownership and title over the land in favor of Mabini Legaspi. The existence of the
official receipts showing payment of the price of the land by Legaspi does not prove that
the land was legally conveyed to her without any contract of sale having been executed
by the government in her favor. Viewed from all angles, the acquisition of the lot by
Legaspi was highly irregular and void, and not in compliance with the procedure
mandated by law for the sale of friar lands. For one thing, Mabini Legaspi allegedly
purchased the land in a sale at public auction, which procedure is nowhere provided in
Act No. 1120 or in C.A. 32, as amended by C.A. 316. The laws expressly state that an
actual occupant of the land shall purchase the lot occupied by him at a private sale and
not in a sale at public auction (Sec. 2, C.A. 32 as amended). Further, neither was there
any deed of conveyance issued to Legaspi by the government after the full payment of
the installments on the disputed lot.

Highly significant at this point is the fact that there was neither allegation nor proof that
the sale was with the approval of the Secretary of Agriculture and Commerce. The
absence of such approval made the supposed sale null and void ab initio. Without the
certificate of sale to prove the transfer of the ownership of the land from the government
Mabini Legaspi and without the required approval of the sale by the Secretary of
Agriculture and Commerce, We find that Mabini Legaspi did not in any manner acquire
ownership over the land in 1943. The ownership or title over the friar land, specifically
Lot No. 7449 remained in the government until Pearanda, petitioners predecessor,
lawfully acquired ownership over the same lot on February 28, 1969 by virtue of a sales
contract executed in his favor.

The issuance of a certificate of title in favor of Mabini Legaspi did not vest ownership
upon her over the land nor did it validate the alleged purchase of the lot, which is null
and void. Time and again, it has been held that registration does not vest title. It is merely
evidence of such title over a particular property. Our land registration laws do not give
the holder any better title than that what he actually has (De man et al. vs. Court of
Appeals, G.R. L- 46935 December 21, 1987, 156 SCRA 701; Cruz vs. Cabana, No.
56232, June 22, 1984, 129 SCRA 656).

Although a period of one year has already expired from the time the certificate of title
was issued to Mabini Legaspi pursuant to the alleged sale from the government, said title
does not become incontrovertible but is null and void since the acquisition of the
property was in violation of law. Further, the petitioner herein is in possession of the land
in dispute. Hence, its action to quiet title is imprescriptible (Coronel vs. Intermediate
Appellate Court, No. 70191, October 29, 1987, 155 SCRA 270).1wphi1 In one case,
this Court ruled that an adverse claimant of a registered land who is in possession thereof
for a long period of time is not barred from bringing an action for reconveyance which in
effect seeks to quiet title to the property against a registered owner relying upon a
Torrens title which was illegally or wrongfully acquired (Caragay-Layno vs. Court of
Appeals, 133 SCRA 718). In actions for reconveyance of property predicated on the fact
that the conveyance complained of was void ab initio, a claim of prescription of the
action would be unavailing (Corpus, et al. vs. Beltran, et al., 97 Phil. 722; Agne vs.
Director of Lands, G.R. L-40399, February 6, 1990, 181 SCRA 793). Being null and
void, the sale made to Mabini Legaspi and the subsequent titles issued pursuant thereto
produced no legal effects whatsoever. Quod nullum est nullum producit affectum (Agnes
vs. Director of Lands, supra). There being no title to the land that Mabini Legaspi
acquired from the government, it follows that no title to the same land could be conveyed
by the former to respondent Virata.

Even assuming that respondent Virata was a purchaser in good faith and for value, the
law is, as between two persons both of whom are in good faith and both innocent of any
negligence, the law must protect and prefer the lawful holder of registered title over the
transferee of a vendor bereft of any transmissible rights (Baltazar vs. Court of Appeals,
G.R. 78728, December 8, 1988, 168 SCRA 354, emphasis ours). Further if a person
happened to obtain property by mistake or to the prejudice of another with or without
bad faith, the certificate of title which may have been issued to him under the
circumstances may and should be cancelled or corrected.

Our unavoidable conclusion in this case is that the title of petitioner under the Torrens
land system should be upheld considering that no previous valid title to the same land
existed.

ACCORDINGLY, the petition is hereby GRANTED and the decision of the respondent
Court of Appeals dated July 13, 1987 is hereby REVERSED. Petitioner Solid State
Multi-Products Corporation is hereby declared the true owner of the land covered by
Transfer Certificate of Title No. T-80889. The Register of Deeds of Cavite is ordered to
cancer transfer Certificate of Title No. (T-11520) RT 1660 in the name of respondent
Antenor Virata.

SO ORDERED.
G.R. No. 73146-53 August 26, 1986

ROSARIO LACSAMANA, FLORENCIO BAUTISTA, QUIRICO PACLIBAR,

EDUARDO OCAMPO, JULIO BARIZO, PEDRO PANGILINAN, ET
AL., petitioners,
vs.
THE HONORABLE SECOND SPECIAL CASES DIVISION OF THE
INTERMEDIATE APPELLATE COURT, ANIGIA I. CRUZ, ET AL., respondents.

FERIA, J.:

The Court rules, for the guidance of Bench and Bar, that a motion for extension of time
to file a petition for review under Section 22 of The Judiciary Reorganization Act (Batas
Pambansa Blg. 129) and Section 22(b) of the Interim Rules, may properly be filed with
and granted by the Intermediate Appellate Court (now renamed Court of Appeals).

In the case at bar, a decision was rendered against petitioners by the Regional Trial Court
of Makati Metro Manila, in an appeal from the decision of the Metropolitan Trial Court
of Makati Metro Manila. Copy of said decision was received by counsel for petitioners
on September 30, 1985. On October 11, 1985, counsel for petitioners filed a motion with
respondent Court for 15 days extension or up to October 30, 1985 to file a petition for
review on the ground that he needed additional time to finalize the pleading (Petition for
Review) in view of his other written pleadings and trial commitments. Together with the
filing of the motion for extension petitioners paid the necessary docket fees.

However, on October 16, 1985, a decision was promulgated by the Second Special Cases
Division of respondent Court which is quoted in full as follows:

As the Supreme Court in the recent case of Habaluyas Enterprises, Inc. vs. Judge
Maximo Japzon, G.R. No. 70895, August 5, 1985, ruled that 'the period for appealing or
for filing a motion for reconsideration cannot be extended,' petitioners' motion for
extension of fifteen (15) days within which to file a petition for review of the decision of
the Regional Trial Court of Makati Branch 143, in Civil Cases Nos. 5160 to 5167, the
title of which they failed to mention in their motion, is denied.

WHEREFORE, this case is declared terminated The Division Clerk of Court is ordered
to furnish the respondents with a copy of this decision.
As hereinbelow noted, the original decision of this Court above cited did not involve the
period for appealing, it involved the period for filing a motion for reconsideration and
this decision was reversed by the court en banc on May 30, 1986.

On October 30, 1985, petitioner flied a motion for reconsideration and attached thereto
for admission the petition for review. On December 4, 1985, a division of five Members
of respondent Court promulgated a resolution denying the motion for reconsideration.
One Justice dissented and voted to grant petitioners' motion for reconsideration, while
another justice concurred in denying the motion but held that the doctrine laid down
in Habaluyas vs. Hon. Japzon did not constitute a hard and fast rule and that such
motions for extension of time must be addressed to the sound discretion of the court.

Petitioners then filed the present petition for certiorari to set aside and declare null and
void the abovestated decision and resolution of respondent Court. Private respondents
have filed a Manifestation and Motion for Early Resolution of this case.

We rule in favor of petitioners.

The issue in the case of Habaluyas Enterprises, Inc. vs. Japzon was whether the fifteen-
day period within which a party may file a motion for reconsideration of a final order or
ruling of the Regional Trial Court may be extended. The Second Division of this Court
originally held that this could not be done and set aside the order of respondent Judge
granting private respondents' motion for new trial. The question of the granting of a
motion for extension of time to file a petition for review was not involved in said case.
On May 30, 1986, acting on a motion for reconsideration, tbhis Court en banc reversed
the original decision and, for the guidance of Bench and Bar, restated and clarified the
rules on this point as follows:

1.) Beginning one month after the promulgation of this Resolution, the rule shall be
strictly enforced that no motion for extension of time to file a motion for new trial or
reconsideration may be filed with the Metropolitan or Municipal Trial Courts, the
Regional Trial Courts, and the Intermediate Appellate Court. Such a motion may be filed
only in cases pending with the Supreme Court as the court of last resort, which may in its
sound discretion either grant or deny of the extension requested.

2.) In appeals in special proceedings under Rule 109 of the Rules of Court and in other
cases wherein multiple appeals are allowed, a motion for extension of time to file the
record on appeal may be filed within the reglementary period of thirty (30) days. (Moya
vs. Barton, 76 Phil. 831, Heirs of Nantes vs. Court of Appeals, July 25, 1983, 123 SCRA
753.) If the court denies the motion for extension, the appeal must be taken within the
original period (Bello vs. Fernando, January 30, 1962, 4 SCRA 135), inasmuch as such a
motion does not suspend the period for appeal (Reyes vs. Sta. Maria, November 20,
1972, 48 SCRA 1). The trial court may grant said motion after the expiration of the
period for appeal provided it was filed within the original period. (Valero vs. Court of
Appeals, June 28, 1973, 51 SCRA 467; Berkenkotter vs. Court of Appeals, September
28, 1973, 53 SCRA 228).

All appeals heretofore timely taken, after extensions of time were granted for the filing
of a motion for new trial or reconsideration, shall be allowed and determined on the
merits.

The Court further restates and clarifies the modes and periods of appeal as follows:

1) ORDINARY APPEALS BY MERE NOTICE OF APPEAL.

In an ordinary appeal from the final judgment or order of a metropolitan or municipal

trial court to the regional trial court, and from the regional trial court to the Court of
Appeals in actions or proceedings originally filed in the regional trial court, the fifteen-
day period for appeal provided by Section 39 of BP No. 129 and Section 19(a) of the
Interim Rules is interrupted or suspended by a motion for new trial or reconsideration,
unless such motion fails to satisfy the requirements of Rule 37 (Section 3 of Rule 41). If
the motion for new trial or reconsideration is denied, the moving party has only the
remaining period from notice of denial within which to file a notice of appeal, which is
the only requirement for taking an appeal under the present rules. Obviously, no
extension of time to file such a notice of appeal is needed much less allowed.

2) APPEALS IN SPECIAL PROCEEDINGS AND OTHER CASES WHEREIN

MULTIPLE APPEALS ARE ALLOWED.

In an appeal in a special proceeding under Rule 109 of the Rules of Court and in other
cases wherein multiple appeals are allowed the period of appeal is thirty days, a record
on appeal being required (Section 19[b] of the Interim Rules). If a motion for new trial
or reconsideration is filed and denied, the remaining period within which to file a record
on appeal may be too short and, hence, a motion for extension of time to file the record
on appeal may be granted, subject to the requirements summarized in the Resolution of
May 30, 1986. As the Court stated in the case of Roque vs. Gunigundo, "the thirty-day
period may be extended because, where the record is voluminous or the appellant has
other pressing matters to attend to, it may not be practicable to submit the record on
appeal within the reglementary period." (89 SCRA 178, 183)
3) APPEALS BY PETITION FOR REVIEW TO THE COURT OF APPEALS.

The final judgment or order of a regional trial court in an appeal from the final judgment
or order of a metropolitan trial court, municipal trial court and municipal circuit trial
court, may be appealed to the Court of Appeals through a petition for review in
accordance with Section 22 of BP No. 129 and Section 22(b) of the Interim Rules, or to
this Court through a petition for review on certiorari in accordance with Rule 45 of the
Rules of Court and Section 25 of the Interim Rules. The reason for extending the period
for the filing of a record on appeal is also applicable to the filing of a petition for review
with the Court of Appeals. The period for filing a petition for review is fifteen days. If a
motion for reconsideration is filed with and denied by a regional trial court, the movant
has only remaining period within which to file a petition for review. Hence, it may be
necessary to file a motion with the Court of Appeals for extension of time to file such
petition for review.

4) APPEALS FROM QUASI-JUDICIAL BODIES TO THE COURT OF APPEALS.

In an appeal from quasi-judicial bodies to the Court of Appeals under Republic Act No.
5434 and Section 22(c) of the Interim Rules, the appeal shall be taken by filing a notice
of appeal with the Court of Appeals and with the quasi-judicial body within fifteen days
from notice of the ruling, award, order, decision or judgment; or in case a motion for
reconsideration is filed within said period, then within ten days from notice of the
resolution denying the motion for reconsideration (Sections 2 and 3 of RA No. 5434). No
extension of time to file such a notice of appeal is needed, much less allowed.

5) APPEALS BY certiorari TO THE SUPREME COURT.

In an appeal by certiorari to this Court under Rule 45 of the Rules of Court, Section 25 of
the Interim Rules and Section 7 of PD No. 1606, a party may file a petition for review on
certiorari of the judgment of a regional trial court, the Intermediate Appellate Court, or
the Sandiganbayan within fifteen days from notice of judgment or of the denial of his,
motion for reconsideration filed in due time, and paying at the same time the
corresponding docket fee (Section 1 of Rule 45). In other words, in the event a motion
for reconsideration is filed and denied, the period of fifteen days begins to run again
from notice of denial (See Codilla vs. Estenzo, 97 SCRA 351; Turingan vs. Cacdac, 122
SCRA 634.)

A motion for extension of time to file a petition for review on certiorari may be filed with
the Supreme Court within the reglementary period paying at the same time the
corresponding docket fee.
Copies of the motion for extension of time and of the subsequent petition for review on
certiorari must be served on certiorari must be served on the lower court and on the
adversed party.

6) PERIOD OF EXTENSION OF TIME TO FILE PETITION PETITION FOR

REVIEW.

Beginning one month after the promulgation of this Decision an extension of only
fifteen days for filing a petition for review may be granted by the Court of Appeals, save
in exceptionally meritorious cases.

The motion for extension of time must be filed and the corresponding docket fee paid
within the reglementary period of appeal.

Copies of the motion for extension of time and of the subsequent petition for review
must be served on the regional trial court and on the adverse party.

WHEREFORE, the decision of respondent Court promulgated on October 16, 1985 and
its resolution promulgated on December 4, 1985 are hereby set aside and said Court is
directed to admit the petition for review filed by petitioners for proper determination.
This decision is immediately executory.

SO ORDERED.
G.R. No. L-11285 May 16, 1958

VICENTE SAPTO, LAUREANA SAPTO and DORA (BAGONA), plaintiffs-

appellants,
vs.
APOLONIO FABIANA, defendant-appellee.

Rodolfo A. Ta-Asan for appellants.

Napoleon B. Nidea for appellee.

REYES, J.B.L., J.:

Sapto (Moro), now deceased was the registered owner of a parcel of land located in
Alambre, Toril, Davao City, under Transfer Certificate of Title No. T-5701 (0-28) of the
Register of Deeds of Davao City. When Sapto died, he left his children Samuel,
Constancio, and Ramon as heirs of the property in question. Ramon pre-deceased his two
brothers, leaving no, other heirs. On June 6, 1931, Samuel and Constancio Sapto
executed a deed of sale of a portion of four hectares of the land aforementioned if favor
of defendant Apolonio Fabiana, in consideration of the amount of P245.00. The sale was
duly approved by the Provincial Governor of Davao, but was never registered.
Possession of the land conveyed was, however, transferred to Fabiana and the latter has
been in the possession thereof 1931 up to the present.

Thereafter, Constancio Sapto died without any issue, Samuel Sapto married one Dora
(Bagoba) and upon his death was survived by his widow and two children, Laureana and
Vicente Sapto. On October 19, 1954, the widow and children of Samuel Sapto filed this
action in the Court of First Instance of Davao for the recovery of the parcel of land sold
by their predecessors to defendant Apolonio Fabiana in 1931. After trial, the lower court
held that although the sale between Samuel and Constancio Sapto and defendant in 1931
was never registered, it was valid and binding upon the parties and the vendors heirs, and
ordered the plaintiffs to execute the necessary deed of conveyance in defendant's favor
and its annotation in the certificate of title. From this judgment, plaintiffs appealed to this
Court.

The issue is whether the deed of sale executed by appellants' predecessors in favor of the
appellee over the land in question, although never registered, is valid and binding on
appellants and operated to convey title and ownership to the appellee.
The question is not new. In a long line of cases already decided by this Court, we have
consistently interpreted sec. 50 of the Land Registration Act providing that "no deed . . .
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 clerk or register of deeds to make
registration" in the sense that as between the parties to a sale registration is not necessary
to make it valid and effective, for actual notice is equivalent to registration (Obras
Pias vs. Devera Ignacio, 17 Phil., 45; Gustilo vs. Maravilla, 48 Phil., 442; Quimson vs.
Suarez, 45 Phil., 901; Winkleman vs. Veluz, 43 Phil., 609; Galasinao vs. Austria, 51 Off.
Gaz. No. 6, 2874; Carillo vs. Salak, 91 Phil., 265). "The peculiar force of a title under
Act No. 492", we said in Medina vs. Imaz and Warner Barnes and Co., 27 Phil., 314
(syllabus), "is exhibited only when the purchaser has sold to innocent third parties the
land described in the conveyance. Generally speaking, as between vendor and vendee,
the same rights and remedies exist in relation to land not so registered". In Galanza vs.
Nuesa, 95 Phil., 713, we held that "registration is intended to protect the buyer against
claims of third persons arising from subsequent alienations by the vendor, and is
certainly not necessary to give effect as between the parties to their deed of sale". And in
the recent case of Casica vs. Villaseca, G.R. No. L-9590, April 30, 1957, we reiterated
that "the purpose of registration is merely to notify and protect the interests of strangers
to a given transaction, who may be ignorant thereof, and the non-registration of the deed
evidencing said transaction does not relieve the parties thereto of their obligations
thereunder".

No right of innocent third persons or subsequent transferees of the property in question is

involved herein. The property has remained and still is in the possession of the vendee of
appellants' predecessors, herein appellee. It is, therefore, clear that the conveyance
between appellee and his vendors and valid and binding upon the latter, and is equally
binding and effective against the heirs of the vendors, herein appellants. To hold
otherwise would make of the Torrens system a shield for the commission of fraud by the
vendors or his heirs (Gustilo vs. Maravilla, 48 Phil., 442), who would then be able to
reconvey the same property to other persons.

Appellants cite several cases wherein we have held that under the Torrens system,
registration is the operative act that gives validity to the transfer or creates a lien upon the
land. The authorities cited refer, however, to cases involving conflicting rights over
registered property and those of innocent transferees who relied on the clean titles of the
properties in question. These cases have, therefore, no bearing on the instant case, where
the appellee has always, remained in the possession of the land in question and no
subsequent transfer thereof to other persons has been made either by appellants or their
prodecessors-in-interest.
The appellants aver that it was error to require them to execute a deed of conveyance in
favor of the plaintiff, appellee, and argue that the latter's action to obtain it had long
prescribed, twenty years having elapsed since the original sale. This contention must be
overruled, being predicated on the assumption that the reconveyance is sought by way of
performance of the contract of sale entered into in 1931. No enforcement of the contract
is in fact needed, since the delivery of possession of the land sold had consummated the
sale and transferred title to the purchaser, registration of the contract not being
indispensable as between the parties. Actually the action for conveyance was one to quiet
title, i.e., to remove the cloud cast upon appellee's ownership by the refusal of the
appellants to recognize the sale made by their predecessors. This action accrued only
when appellant, initiated their suit to recover the land in 1954. Furthermore, it is an
established rule of American jurisprudence (made applicable in this jurisdiction by Art.
480 of the New Civil Code) that actions to quiet title to property in the possession of the
plaintiff are imprescriptible (44 Am. Jur. p. 47; Cooper vs. Rhea, 39 L. R. A. 930; Inland
Empire Land Co. vs. Grant County, 138 Wash. 439, 245 Pac. 14).

The prevailing rule is that the right of a plaintiff to have his title to land quieted, as
against one who is asserting some adverse claim or lien thereon, is not barred while the
plaintiff or his grantors remain in actual possession of the land, claiming to be owners
thereof, the reason for this rule being that while the owner in fee continues liable to an
action, proceeding, or suit upon the adverse claim, he has a continuing right to the aid of
a court of equity to ascertain and determine the nature of such claim and its effect on his
title, or to assert any superior equity in his favor. He may wait until his possession is
disturbed or his title is attacked before taking steps to vindicate his right. But the rule that
the statute of limitations is not available as a defense to an action to remove a cloud from
title can only be invoked by a complaint when he is in possession. One who claims
property which is in the possession of another must, it seems, invoke his remedy within
the statutory period. (44 Am. Jur., p. 47)

Wherefore, the judgment appealed from is affirmed. Costs against appellants. So ordered.
G.R. No. L-52064 December 26, 1984

JULIANA CARAGAY-LAYNO, Assisted by Her Husband, BENITO

LAYNO, petitioner,
vs.
HONORABLE COURT OF APPEALS and SALVADOR ESTRADA as
Administrator of the Estate of the Deceased, MARIANO DE VERA, respondents.

Pedro Peralta for petitioner.

Andres T. Gutierrez for private respondent.

MELENCIO-HERRERA, J.:

Respondent Appellate Court, then the Court of Appeal, affirmed in toto the judgment of
the former Court of First Instance of Pangasinan, Branch III, at Dagupan adjudging
private respondent entitled to recover possession of a parcel of land and ordering
petitioners, as defendants below, to vacate the premises. Petitioners, as paupers, now
seek a reversal of that judgment.

It was established by a relocation survey that the Disputed Portion is a 3,732 square-
meter-area of a bigger parcel of sugar and coconut land (Lot No. 1, Psu-24206 [Case No.
44, GLRO Rec. No. 117]), with a total area of 8,752 square meters, situated at Calasiao,
Pangasinan. The entire parcel is covered by Original Certificate of Title No. 63, and
includes the adjoining Lots 2 and 3, issued on 11 September 1947 in the name of
Mariano M. DE VERA, who died in 1951 without issue. His intestate estate was
administered first by his widow and later by her nephew, respondent Salvador Estrada.

Petitioner, JULIANA Caragay, and the decedent, Mariano DE VERA, were first cousins,
"both orphans, who lived together under one roof in the care of a common aunt."

As Administratrix, DE VERA's widow filed in Special Proceedings No. 4058 of the

former Court of First Instance of Pangasinan, Branch III, an Inventory of all properties of
the deceased, which included "a parcel of land in the poblacion of Calasiao, Pangasinan,
containing an area of 5,417 square meters, more or less, and covered by Tax Declaration
No. 12664."
Because of the discrepancy in area mentioned in the Inventory as 5,147 square meters (as
filed by the widow), and that in the title as 8,752 square meters, ESTRADA repaired to
the Disputed Property and found that the northwestern portion, subsequently surveyed to
be 3,732 square meters, was occupied by petitioner-spouses Juliana Caragay Layno and
Benito Layno. ESTRADA demanded that they vacate the Disputed Portion since it was
titled in the name of the deceased DE VERA, but petitioners refused claiming that the
land belonged to them and, before them, to JULIANA's father Juan Caragay.

ESTRADA then instituted suit against JULIANA for the recovery of the Disputed
Portion (Civil Case No. D-2007), which she resisted, mainly on the ground that the
Disputed Portion had been fraudulently or mistakenly included in OCT No. 63, so that an
implied or constructive trust existed in her favor. She then counterclaimed for
reconveyance of property in the sense that title be issued in her favor.

After hearing, the Trial Court rendered judgment ordering JULIANA to vacate the
Disputed Portion.

On appeal respondent Appellate Court affirmed the Decision in toto.

Before us, JULIANA takes issue with the following finding of respondent Court:

Although Section 102 of Act 496 allows a Petition to compel a Trustee to reconvey a
registered land to the cestui que trust (Severino vs. Severino, 44 Phil 343; Escobar vs.
Locsin, 74 PhiL 86) this remedy is no longer available to Juliana Caragay. Mariano de
Vera's land, Lot 1, Psu-24206, was registered on September 11, 1947 (Exhibit"C") and it
was only on March 28, 1967 when the defendants filed their original answer that
Caragay sought the reconveyance to her of the 3,732 square meters. Thus, her claim for
reconveyance based on implied or constructive trust has prescribed after 10 years
(Banaga vs. Soler, L-15717, June 30,1961; J.M. Tuason & Co. vs. Magdangal, L-15539,
Jan. 30, 1962; Alzona vs. Capunitan, 4 SCRA 450). In other words, Mariano de Vera's
Original Certificate of Title No. 63 (Exhibit "C") has become indefeasible. 1

We are constrained to reverse.

The evidence discloses that the Disputed Portion was originally possessed openly,
continuously and uninterruptedly in the concept of an owner by Juan Caragay, the
deceased father of JULIANA, and had been declared in his name under Tax Declaration
No. 28694 beginning with the year 1921 (Exhibit "2-C"), later revised by Tax
Declaration No. 2298 in 1951 (Exhibit "2-B"). Upon the demise of her father in 1914,
JULIANA adjudicated the property to herself as his sole heir in 1958 (Exhibit "4"), and
declared it in her name under Tax Declaration No. 22522 beginning with the year 1959
(Exhibit "2-A"), later cancelled by TD No. 3539 in 1966 (Exhibit "2"). Realty taxes were
also religiously paid from 1938 to 1972 (Exhibits "3-A" to "3-H"). Tacking the previous
possession of her father to her own, they had been in actual open, continuous and
uninterrupted possession in the concept of owner for about forty five (45) years, until
said possession was disturbed in 1966 when ESTRADA informed JULIANA that the
Disputed Portion was registered in Mariano DE VERA's name.

To substantiate her claim of fraud in the inclusion of the Disputed Portion in OCT No.
63, JULIANA, an unlettered woman, declared that during his lifetime, DE VERA, her
first cousin, and whom she regarded as a father as he was much older, borrowed from her
the Tax Declaration of her land purportedly to be used as collateral for his loan and sugar
quota application; that relying on her cousin's assurances, she acceded to his request and
was made to sign some documents the contents of which she did not even know because
of her ignorance; that she discovered the fraudulent inclusion of the Disputed Portion in
OCT No. 63 only in 1966 when ESTRADA so informed her and sought to eject them.

Of significance is the fact, as disclosed by the evidence, that for twenty (20) years from
the date of registration of title in 1947 up to 1967 when this suit for recovery of
possession was instituted, neither the deceased DE VERA up to the time of his death in
1951, nor his successors-in-interest, had taken steps to possess or lay adverse claim to the
Disputed Portion. They may, therefore be said to be guilty of laches as would effectively
derail their cause of action. Administrator ESTRADA took interest in recovering the said
portion only when he noticed the discrepancy in areas in the Inventory of Property and in
the title.

Inasmuch as DE VERA had failed to assert any rights over the Disputed Portion during
his lifetime, nor did he nor his successors-in-interest possess it for a single moment: but
that, JULIANA had been in actual, continuous and open possession thereof to the
exclusion of all and sundry, the inescapable inference is, fraud having been
unsubstantiated, that it had been erroneously included in OCT No. 63. The mistake is
confirmed by the fact that deducting 3,732 sq. ms., the area of the Disputed Portion from
8,752 sq. ms., the area of Lot 1 in OCT No. 63, the difference is 5,020 sq. ms., which
closely approximates the area of 5,147 sq. ms., indicated in the Inventory of Property of
DE VERA. In fact, the widow by limiting the area in said Inventory to only 5,147 sq.
ms., in effect, recognized and admitted that the Disputed Portion of 3,132 sq. ms., did not
form part of the decedent's estate.

The foregoing conclusion does not necessarily wreak havoc on the indefeasibility of a
Torrens title. For, mere possession of a certificate of title under the Torrens System is not
conclusive as to the holder's true ownership of all the property described therein for he
does not by virtue of said certificate alone become the owner of the land illegally
included. 2 A Land Registration Court has no jurisdiction to decree a lot to persons who
have never asserted any right of ownership over it.

... Obviously then, the inclusion of said area in the title of Lot No. 8151 is void and of no
effect for a land registration Court has no jurisdiction to decree a lot to persons who have
put no claim in it and who have never asserted any right of ownership over it. The Land
Registration Act as well as the Cadastral Act protects only the holders of a title in good
faith and does not permit its provisions to be used as a shield for the commission of
fraud, or that one should enrich himself at the expense of another. 3

JULIANA, whose property had been wrongfully registered in the name of another, but
which had not yet passed into the hands of third parties, can properly seek its
reconveyance.

The remedy of the landowner whose property has been wrongfully or erroneously
registered in another's name is, after one year from the date of the decree, not to set aside
the decree, but, respecting the decree as incontrovertible and no longer open to review, to
bring an ordinary action in the ordinary court of justice for reconveyance or, if the
property has passed into the hands of an innocent purchaser for value, for damages. 4

Prescription cannot be invoked against JULIANA for the reason that as lawful possessor
and owner of the Disputed Portion, her cause of action for reconveyance which, in effect,
seeks to quiet title to the property, falls within settled jurisprudence that an action to quiet
title to property in one's possession is imprescriptible. 5 Her undisturbed possession over
a period of fifty two (52) years gave her a continuing right to seek the aid of a Court of
equity to determine the nature of the adverse claim of a third party and the effect on her
own title. 6

Besides, under the circumstances, JULIANA's right to quiet title, to seek reconveyance,
and to annul OCT. No. 63 accrued only in 1966 when she was made aware of a claim
adverse to her own. It was only then that the statutory period of prescription may be said
to have commenced to run against her, following the pronouncement in Faja vs. Court of
Appeals, supra, a case almost Identical to this one.

... Inasmuch as it is alleged in paragraph 3 of Frial's complaint, that Felipa Faja has been
in possession of the property since 1945 up to the present for a period of 30 years, her
cause of action for reconveyance, which in effect seeks to quiet her title to the property,
falls within that rule. If at all, the period of prescription began to run against Felipa Faja
only from the time she was served with copy of the complaint in 1975 giving her notice
that the property she was occupying was titled in the name of Indalecio Frial. There is
settled jurisprudence that one who is in actual possession of a piece of land claiming to
be owner thereof may wait until his possession is disturbed or his title is attacked before
taking steps to vindicate his right, the reason for the rule being, that his undisturbed
possession gives him a continuing right to seek the aid of a court of equity to ascertain
and determine the nature of the adverse claim of a third party and its effect on his own
title, which right can be claimed only by one who is in possession. No better situation
can be conceived at the moment for Us to apply this rule on equity than that of herein
petitioners whose mother, Felipa Faja, was in possession of the litigated property for no
less than 30 years and was suddenly confronted with a claim that the land she had been
occupying and cultivating all these years, was titled in the name of a third person. We
hold that in such a situation the right to quiet title to the property, to seek its
reconveyance and annul any certificate of title covering it, accrued only from the time
the one in possession was made aware of a claim adverse to his own, and it is only then
that the statutory period of prescription commences to run against such possessor.

WHEREFORE, the judgment under review is hereby REVERSED and SET ASIDE, and
another one entered ordering private respondent Salvador Estrada, as Administrator of
the Estate of the Deceased, Mariano de Vera, to cause the segregation of the disputed
portion of 3,732 square meters forming part of Lot No. 1, Psu-24206, Case No. 44,
GLRO Rec. No. 117, presently occupied by petitioner Juliana Caragay-Layno, and to
reconvey the same to said petitioner. After the segregation shall have been accomplished,
the Register of Deeds of Pangasinan is hereby ordered to issue a new certificate of title
covering said 3,732 sq. m. portion in favor of petitioner, and another crtificate of title in
favor of the Estate of the deceased, Mariano de Vera covering the remaining portion of
5,0520 square meters. No costs.

SO ORDERED
 [G.R. No. L-9335. October 31, 1956.]

CONCORDIA MEJIA DE LUCAS, Plaintif-Appellee, vs. ANDRES

GAMPONIA, Defendant-Appellant.

DECISION

LABRADOR, J.:

Appeal from the judgment of the Court of First Instance of Nueva Vizcaya, Honorable
Jose de Venecia, presiding, and appealed directly to this court as judgment was
rendered on a stipulation of facts and only questions of law are raised in the appeal.

By the stipulation of the parties it appears that on March 13, 1916, free patent No.
3699 was issued over the land subject of the action in the name of Domingo Mejia.
This patent was transcribed in the Office of the Register of Deeds of Nueva Vizcaya
on July 26, 1916 and certificate of title No. 380 issued in the name of Domingo Mejia.
On March 24, 1916, after the issuance of the patent but before the registration of the
same, patentee Domingo Mejia deeded the land to Zacarias Ciscar, who immediately
took possession thereof and enjoyed its fruits. Upon his death the property was
included in the distribution of his estate and adjudicated to Roque Sanchez. Roque
Sanchez in turn sold the land on January 21, 1940 to Andres
Gamponia, Defendant herein. Sanchez was in possession and enjoyment of the land
from the time he acquired it by inheritance from Ciscar up to the time he sold it
to Defendant Andres Gamponia, the latter has also possessed and enjoyed the
property from the time he bought it to date.

Domingo Mejia, upon his death, left no descendants or ascendants and his only
surviving kin was his brother Pedro Mejia. Pedro Mejia is now also dead and is
survived by his daughter Concordia Mejia de Lucas, Plaintif herein. Upon the above
facts the court a quo held that the sale by the patentee to Zacarias Ciscar is null and
void, as the sale was made only 11 days after the issuance of a patent in violation of
the provisions of section 35 of Act No. 926. The Court further held that since the land
is registered land no title in derogation to that of the registered owner could have
been acquired either by Zacarias Ciscar or his successors in interest, namely, Roque
Sanchez and Defendant Andres Gamponia.

The main defense presented in the answer, is that Plaintifs right of action has
already prescribed by virtue of the possession of the land by the Defendant and his
predecessors in interest for a period of 37 years. This defense was overruled by the
court a quo on the ground that as the land is registered, with a certificate of title in
the name of patentee Domingo Mejia, title thereto may not be acquired by
the Defendant and his predecessors in interest against said registered owner. This
ruling is evidently based on Section 46 of the Land Registration Act, which provides
that no title to registered land in derogation to that of the registered owner shall be
acquired by prescription or adverse possession.

Upon a careful consideration of the facts and circumstances, we are constrained to

find, however, that while no legal defense to the action lies, an equitable one lies in
favor of the Defendant and that is, the equitable defense of laches. No hold that the
defense of prescription or adverse possession in derogation of the title of the
registered owner Domingo Mejia does not lie, but that of the equitable defense of
laches. Otherwise, stated, we hold that while Defendant may not be considered as
having acquired title by virtue of his and his predecessors long continued possession
for 37 years, the original owners right to recover back the possession of the property
and the title thereto from the Defendant has, by the long period of 37 years and by
patentees inaction and neglect, been converted into a stale demand.

In Go Chi Gun, et al., vs. Co Cho, et al., (96 Phil., 622) we held that the equitable
defense of laches requires four elements:chanroblesvirtuallawlibrary (1) conduct on
the part of the Defendant, or of one under whom he claims, giving rise to the
situation of which complaint is made and for which the complaint seeks a
remedy; chan roblesvirtualawlibrary(2) delay in asserting the complainants rights,
the complainant having had knowledge or notice, of the Defendants conduct and
having been afforded an opportunity to institute a suit, (3) lack of knowledge or
notice on the part of the Defendant that the complainant would assert the right on
which he bases his suit; chan roblesvirtualawlibraryand (4) injury or prejudice to
the Defendant in the event relief is accorded to the complainant, or the suit is not
held to be barred.

All the four elements mentioned above are present in the case at bar. The first
element is present because on March 24, 1916 Domingo Mejia sold the land which
was covered by a free patent title dated March 13, 1916 and said sale or conveyance
was made in violation of Section 35 of the Public Land Act. The second element is
also present because from the date of the sale on March 24, 1916 the patentee and
vendor Domingo Mejia could have instituted the action to annul the conveyance and
obtain back the possession and ownership of the land, but notwithstanding the
apparent invalidity of the sale, neither patentee nor his successors in interest, his
brother, or the latters daughter, Plaintif herein, who should have known of the
invalidity of the sale because it is a matter of law and had all the opportunity to
institute an action for the annulment of the sale, instituted no suit to annul the sale
or to recover the land for a period of 37 years. Again the Defendant and his
predecessors in interest, the original vendee and purchaser Zacarias Ciscar, as well
as vendees successors in interest, Roque Sanchez, and later, Andres Gamponia,
never expected or believed that the original patentee or his successors in interest
would bring an action to annul the sale. These circumstances constitute the third
element of laches. The fourth element is also present, not only because Zacarias
Ciscar paid for the land but this same land was divided among the heirs of Zacarias
Ciscar in the proceedings for the settlement of his estate (Civil Case No. 301 of the
Court of First Instance of Nueva Vizcaya) and Roque Sanchez, to whom the land was
adjudicated, sold the property for P800 to the present Defendant Andres Gamponia.
All of these transfer from Zacarias Ciscar to his heirs, to Roque Sanchez and
to Defendant Andres Gamponia, acts which covered a period of 37 years, would all
have to be undone and the respective rights and obligations of the parties affected
adjusted, unless the defense is sustained.

It is to be noted that all the above complications would never had been occasioned
had the original patentee and his successors in interest not slept on their rights for
more than a generation. Add to this the fact that the original conveyance made by
the patentee is not absolutely null and void. The prohibition against the sale of free
patents is for a period of seven years (Section 35, Act No. 926); chan
roblesvirtualawlibraryafter that period of time a patentee would be free to dispose of
the land. Within seven years from the conveyance the original patentee could have
brought an action to recover back his property. Since nothing of this sort was done by
him, it was certainly natural for the purchase to have assumed that the original
patentee gave up his right to recover back the property and acquiesced in vendees
right and title. The successor in interest of the original purchaser must also have
believed in good faith that the patentee and his successors in interest were
reconciled to the idea of allowing the property to stay in the hands of the successors
in interest. By this inaction for a period of 37 years to the consequent prejudice that
annulment of the original sale would entail upon so many successive owners, the
equitable principle now stands up as a bar.

The reason upon which the rule is based is not alone the lapse of time during which
the neglect to enforce the right has existed, but the changes of condition which may
have arisen during the period in which there has been neglect. In other words, where
a court of equity finds that the position of the parties has to change that equitable
relief cannot be afforded without doing injustice, or that the intervening rights of
third persons may be destroyed or seriously impaired, it will not exert its equitable
powers in order to save one from the consequences of his own neglect. (Penn
Mutual Life Inc. Co., et al., vs. City of Austin et al., U. S. 962.)
In effect, the principle is one of estoppel because it prevents people who have slept
on their rights from prejudicing the rights of third parties who have placed reliance
on the inaction of the original patentee and his successors in interest.

The equitable defense of laches has been held to exist in this jurisdiction for periods
less than the period in the case at bar. Thus in the case of Gonzales vs. Director of
Lands, 52 Phil. 895, it was held in a cadastral case that the owner of a lot who failed
to appear in the proceedings, as a result of which his land was declared public
property, who brings an action 10 years later, is guilty of laches and inexcusable
negligence and his action under Section 513 of the Code of Civil Procedure can no
longer be maintained. In another case where the Plaintif loaned money to a couple
and when the wife died and the conjugal properties divided between her heirs and
her husband, the vendor did not present his claim against the estate and only did so
four years later against the widower, it was held that the lender was guilty of laches
in so far as the estate of the deceased spouse is concerned because it would be
inequitable and unjust to permit him to revive any claims which he may have had,
which claims he did not present during the distribution of the estate of the deceased
wife. (Yaptico vs. Marina Yulo, et al., 57 Phil., 818). In a third case (Kambal vs.
Director of Lands, 62 Phil., 293), cadastral proceedings for compulsory registration of
certain parcels of land in Cotabato were instituted. These proceedings included two
lands belonging to the Petitioner. Petitioner failed to claim said lands in said
proceedings and in 1917 the titles to the lands of the Petitioner were
cancelled. Petitioner alleges that he came to know by accident of the cancellation of
his titles in the year 1933 or 1935. It was held that because of the lapse of 16 years
from the date the decision was rendered in the said registration case to the filing of
the petition, no relief can be granted the Petitioner as he has been guilty of laches. In
the three cases decided previously by this Court, the periods of inaction were from
10 to 16 years. In the case at bar it was a full period of 37 years.

The judgment appealed from is hereby reversed and one is hereby entered absolving
the Defendant from the action. Without costs.

Paras, C.J., Padilla, Montemayor, Bautista Angelo, Concepcion, Reyes, J. B.

L., Endencia and Felix, JJ., concur.
G.R. No. 127876 December 17, 1999

ROXAS & CO., INC., petitioner,

vs.
THE HONORABLE COURT OF APPEALS, DEPARTMENT OF AGRARIAN
REFORM, SECRETARY OF AGRARIAN REFORM, DAR REGIONAL
DIRECTOR FOR REGION IV, MUNICIPAL AGRARIAN REFORM OFFICER
OF NASUGBU, BATANGAS and DEPARTMENT OF AGRARIAN REFORM
ADJUDICATION BOARD, respondents.

PUNO, J.:

This case involves three (3) haciendas in Nasugbu, Batangas owned by petitioner and the
validity of the acquisition of these haciendas by the government under Republic Act No.
6657, the Comprehensive Agrarian Reform Law of 1988.

Petitioner Roxas & Co. is a domestic corporation and is the registered owner of three
haciendas, namely, Haciendas Palico, Banilad and Caylaway, all located in the
Municipality of Nasugbu, Batangas. Hacienda Palico is 1,024 hectares in area and is
registered under Transfer Certificate of Title (TCT) No. 985. This land is covered by Tax
Declaration Nos. 0465, 0466, 0468, 0470, 0234 and 0354. Hacienda Banilad is 1,050
hectares in area, registered under TCT No. 924 and covered by Tax Declaration Nos.
0236, 0237 and 0390. Hacienda Caylaway is 867.4571 hectares in area and is registered
under TCT Nos. T-44662, T-44663, T-44664 and T-44665.

The events of this case occurred during the incumbency of then President Corazon C.
Aquino. In February 1986, President Aquino issued Proclamation No. 3 promulgating a
Provisional Constitution. As head of the provisional government, the President exercised
legislative power "until a legislature is elected and convened under a new
Constitution." 1 In the exercise of this legislative power, the President signed on July 22,
1987, Proclamation No. 131 instituting a Comprehensive Agrarian Reform Program and
Executive Order No. 229 providing the mechanisms necessary to initially implement the
program.

On July 27, 1987, the Congress of the Philippines formally convened and took over
legislative power from the President. 2 This Congress passed Republic Act No. 6657, the
Comprehensive Agrarian Reform Law (CARL) of 1988. The Act was signed by the
President on June 10, 1988 and took effect on June 15, 1988.

Before the law's effectivity, on May 6, 1988, petitioner filed with respondent DAR a
voluntary offer to sell Hacienda Caylaway pursuant to the provisions of E.O. No. 229.
Haciendas Palico and Banilad were later placed under compulsory acquisition by
respondent DAR in accordance with the CARL.

Hacienda Palico

On September 29, 1989, respondent DAR, through respondent Municipal Agrarian

Reform Officer (MARO) of Nasugbu, Batangas, sent a notice entitled "Invitation to
Parties" to petitioner. The Invitation was addressed to "Jaime Pimentel, Hda.
Administrator, Hda. Palico." 3 Therein, the MARO invited petitioner to a conference on
October 6, 1989 at the DAR office in Nasugbu to discuss the results of the DAR
investigation of Hacienda Palico, which was "scheduled for compulsory acquisition this
year under the Comprehensive Agrarian Reform Program." 4

On October 25, 1989, the MARO completed three (3) Investigation Reports after
investigation and ocular inspection of the Hacienda. In the first Report, the MARO found
that 270 hectares under Tax Declaration Nos. 465, 466, 468 and 470 were "flat to
undulating (0-8% slope)" and actually occupied and cultivated by 34 tillers of
sugarcane. 5 In the second Report, the MARO identified as "flat to undulating"
approximately 339 hectares under Tax Declaration No. 0234 which also had several
actual occupants and tillers of sugarcane; 6 while in the third Report, the MARO found
approximately 75 hectare under Tax Declaration No. 0354 as "flat to undulating" with 33
actual occupants and tillers also of sugarcane. 7

On October 27, 1989, a "Summary Investigation Report" was submitted and signed
jointly by the MARO, representatives of the Barangay Agrarian Reform Committee
(BARC) and Land Bank of the Philippines (LBP), and by the Provincial Agrarian
Reform Officer (PARO). The Report recommended that 333.0800 hectares of Hacienda
Palico be subject to compulsory acquisition at a value of P6,807,622.20. 8 The following
day, October 28, 1989, two (2) more Summary Investigation Reports were submitted by
the same officers and representatives. They recommended that 270.0876 hectares and
75.3800 hectares be placed under compulsory acquisition at a compensation of
P8,109,739.00 and P2,188,195.47, respectively. 9
On December 12, 1989, respondent DAR through then Department Secretary Miriam D.
Santiago sent a "Notice of Acquisition" to petitioner. The Notice was addressed as
follows:

Roxas y Cia, Limited

Soriano Bldg., Plaza Cervantes

Manila, Metro Manila. 10

Petitioner was informed that 1,023.999 hectares of its land in Hacienda Palico were
subject to immediate acquisition and distribution by the government under the CARL;
that based on the DAR's valuation criteria, the government was offering compensation of
P3.4 million for 333.0800 hectares; that whether this offer was to be accepted or rejected,
petitioner was to inform the Bureau of Land Acquisition and Distribution (BLAD) of the
DAR; that in case of petitioner's rejection or failure to reply within thirty days,
respondent DAR shall conduct summary administrative proceedings with notice to
petitioner to determine just compensation for the land; that if petitioner accepts
respondent DAR's offer, or upon deposit of the compensation with an accessible bank if
it rejects the same, the DAR shall take immediate possession of the land. 11

Almost two years later, on September 26, 1991, the DAR Regional Director sent to the
LBP Land Valuation Manager three (3) separate Memoranda entitled "Request to Open
Trust Account." Each Memoranda requested that a trust account representing the
valuation of three portions of Hacienda Palico be opened in favor of the petitioner in
view of the latter's rejection of its offered value. 12

Meanwhile in a letter dated May 4, 1993, petitioner applied with the DAR for conversion
of Haciendas Palico and Banilad from agricultural to non-agricultural lands under the
provisions of the CARL. 13 On July 14, 1993, petitioner sent a letter to the DAR Regional
Director reiterating its request for conversion of the two haciendas. 14

Despite petitioner's application for conversion, respondent DAR proceeded with the
acquisition of the two Haciendas. The LBP trust accounts as compensation for Hacienda
Palico were replaced by respondent DAR with cash and LBP bonds. 15 On October 22,
1993, from the mother title of TCT No. 985 of the Hacienda, respondent DAR registered
Certificate of Land Ownership Award (CLOA) No. 6654. On October 30, 1993, CLOA's
were distributed to farmer beneficiaries. 16

Hacienda Banilad
On August 23, 1989, respondent DAR, through respondent MARO of Nasugbu,
Batangas, sent a notice to petitioner addressed as follows:

Mr. Jaime Pimentel

Hacienda Administrator

Hacienda Banilad

Nasugbu, Batangas 17

The MARO informed Pimentel that Hacienda Banilad was subject to compulsory
acquisition under the CARL; that should petitioner wish to avail of the other schemes
such as Voluntary Offer to Sell or Voluntary Land Transfer, respondent DAR was willing
to provide assistance thereto. 18

On September 18, 1989, the MARO sent an "Invitation to Parties" again to Pimentel
inviting the latter to attend a conference on September 21, 1989 at the MARO Office in
Nasugbu to discuss the results of the MARO's investigation over Hacienda Banilad. 19

On September 21, 1989, the same day the conference was held, the MARO submitted
two (2) Reports. In his first Report, he found that approximately 709 hectares of land
under Tax Declaration Nos. 0237 and 0236 were "flat to undulating (0-8% slope)." On
this area were discovered 162 actual occupants and tillers of sugarcane. 20 In the second
Report, it was found that approximately 235 hectares under Tax Declaration No. 0390
were "flat to undulating," on which were 92 actual occupants and tillers of sugarcane. 21

The results of these Reports were discussed at the conference. Present in the conference
were representatives of the prospective farmer beneficiaries, the BARC, the LBP, and
Jaime Pimentel on behalf of the landowner. 22 After the meeting, on the same day,
September 21, 1989, a Summary Investigation Report was submitted jointly by the
MARO, representatives of the BARC, LBP, and the PARO. They recommended that after
ocular inspection of the property, 234.6498 hectares under Tax Declaration No. 0390 be
subject to compulsory acquisition and distribution by CLOA. 23The following day,
September 22, 1989, a second Summary Investigation was submitted by the same
officers. They recommended that 737.2590 hectares under Tax Declaration Nos. 0236
and 0237 be likewise placed under compulsory acquisition for distribution. 24

On December 12, 1989, respondent DAR, through the Department Secretary, sent to
petitioner two (2) separate "Notices of Acquisition" over Hacienda Banilad. These
Notices were sent on the same day as the Notice of Acquisition over Hacienda Palico.
Unlike the Notice over Hacienda Palico, however, the Notices over Hacienda Banilad
were addressed to:

Roxas y Cia. Limited

7th Floor, Cacho-Gonzales Bldg. 101 Aguirre St., Leg.

Makati, Metro Manila. 25

Respondent DAR offered petitioner compensation of P15,108,995.52 for 729.4190

hectares and P4,428,496.00 for 234.6498 hectares. 26

On September 26, 1991, the DAR Regional Director sent to the LBP Land Valuation
Manager a "Request to Open Trust Account" in petitioner's name as compensation for
234.6493 hectares of Hacienda Banilad. 27 A second "Request to Open Trust Account"
was sent on November 18, 1991 over 723.4130 hectares of said Hacienda. 28

On December 18, 1991, the LBP certified that the amounts of P4,428,496.40 and
P21,234,468.78 in cash and LBP bonds had been earmarked as compensation for
petitioner's land in Hacienda Banilad. 29

On May 4, 1993, petitioner applied for conversion of both Haciendas Palico and Banilad.

Hacienda Caylaway

Hacienda Caylaway was voluntarily offered for sale to the government on May 6, 1988
before the effectivity of the CARL. The Hacienda has a total area of 867.4571 hectares
and is covered by four (4) titles TCT Nos. T-44662, T-44663, T-44664 and T-44665.
On January 12, 1989, respondent DAR, through the Regional Director for Region IV,
sent to petitioner two (2) separate Resolutions accepting petitioner's voluntary offer to
sell Hacienda Caylaway, particularly TCT Nos. T-44664 and T-44663. 30 The Resolutions
were addressed to:

Roxas & Company, Inc.

7th Flr. Cacho-Gonzales Bldg.

Aguirre, Legaspi Village

Makati, M. M 31
On September 4, 1990, the DAR Regional Director issued two separate Memoranda to
the LBP Regional Manager requesting for the valuation of the land under TCT Nos. T-
44664 and T-44663. 32 On the same day, respondent DAR, through the Regional Director,
sent to petitioner a "Notice of Acquisition" over 241.6777 hectares under TCT No. T-
44664 and 533.8180 hectares under TCT No. T-44663. 33 Like the Resolutions of
Acceptance, the Notice of Acquisition was addressed to petitioner at its office in Makati,
Metro Manila.

Nevertheless, on August 6, 1992, petitioner, through its President, Eduardo J. Roxas, sent
a letter to the Secretary of respondent DAR withdrawing its VOS of Hacienda Caylaway.
The Sangguniang Bayan of Nasugbu, Batangas allegedly authorized the reclassification
of Hacienda Caylaway from agricultural to non-agricultural. As a result, petitioner
informed respondent DAR that it was applying for conversion of Hacienda Caylaway
from agricultural to other
uses. 34

In a letter dated September 28, 1992, respondent DAR Secretary informed petitioner that
a reclassification of the land would not exempt it from agrarian reform. Respondent
Secretary also denied petitioner's withdrawal of the VOS on the ground that withdrawal
could only be based on specific grounds such as unsuitability of the soil for agriculture,
or if the slope of the land is over 18 degrees and that the land is undeveloped. 35

Despite the denial of the VOS withdrawal of Hacienda Caylaway, on May 11, 1993,
petitioner filed its application for conversion of both Haciendas Palico and Banilad. 36 On
July 14, 1993, petitioner, through its President, Eduardo Roxas, reiterated its request to
withdraw the VOS over Hacienda Caylaway in light of the following:

1) Certification issued by Conrado I. Gonzales, Officer-in-Charge, Department of

Agriculture, Region 4, 4th Floor, ATI (BA) Bldg., Diliman, Quezon City dated March 1,
1993 stating that the lands subject of referenced titles "are not feasible and economically
sound for further agricultural development.

2) Resolution No. 19 of the Sangguniang Bayan of Nasugbu, Batangas approving the

Zoning Ordinance reclassifying areas covered by the referenced titles to non-agricultural
which was enacted after extensive consultation with government agencies, including [the
Department of Agrarian Reform], and the requisite public hearings.

3) Resolution No. 106 of the Sangguniang Panlalawigan of Batangas dated March 8,

1993 approving the Zoning Ordinance enacted by the Municipality of Nasugbu.
4) Letter dated December 15, 1992 issued by Reynaldo U. Garcia of the Municipal
Planning & Development, Coordinator and Deputized Zoning Administrator addressed to
Mrs. Alicia P. Logarta advising that the Municipality of Nasugbu, Batangas has no
objection to the conversion of the lands subject of referenced titles to non-agricultural. 37

On August 24, 1993 petitioner instituted Case No. N-0017-96-46 (BA) with respondent
DAR Adjudication Board (DARAB) praying for the cancellation of the CLOA's issued
by respondent DAR in the name of several persons. Petitioner alleged that the
Municipality of Nasugbu, where the haciendas are located, had been declared a tourist
zone, that the land is not suitable for agricultural production, and that the Sangguniang
Bayan of Nasugbu had reclassified the land to non-agricultural.

In a Resolution dated October 14, 1993, respondent DARAB held that the case involved
the prejudicial question of whether the property was subject to agrarian reform, hence,
this question should be submitted to the Office of the Secretary of Agrarian Reform for
determination. 38

On October 29, 1993, petitioner filed with the Court of Appeals CA-G.R. SP No. 32484.
It questioned the expropriation of its properties under the CARL and the denial of due
process in the acquisition of its landholdings.

Meanwhile, the petition for conversion of the three haciendas was denied by the MARO
on November 8, 1993.

Petitioner's petition was dismissed by the Court of Appeals on April 28,

1994. 39 Petitioner moved for reconsideration but the motion was denied on January 17,
1997 by respondent court. 40

Hence, this recourse. Petitioner assigns the following errors:

A. RESPONDENT COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT

PETITIONER'S CAUSE OF ACTION IS PREMATURE FOR FAILURE TO
EXHAUST ADMINISTRATIVE REMEDIES IN VIEW OF THE PATENT
ILLEGALITY OF THE RESPONDENTS' ACTS, THE IRREPARABLE DAMAGE
CAUSED BY SAID ILLEGAL ACTS, AND THE ABSENCE OF A PLAIN, SPEEDY
AND ADEQUATE REMEDY IN THE ORDINARY COURSE OF LAW ALL OF
WHICH ARE EXCEPTIONS TO THE SAID DOCTRINE.

B. RESPONDENT COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT

PETITIONER'S LANDHOLDINGS ARE SUBJECT TO COVERAGE UNDER THE
COMPREHENSIVE AGRARIAN REFORM LAW, IN VIEW OF THE UNDISPUTED
FACT THAT PETITIONER'S LANDHOLDINGS HAVE BEEN CONVERTED TO
NON-AGRICULTURAL USES BY PRESIDENTIAL PROCLAMATION NO. 1520
WHICH DECLARED THE MUNICIPALITY NASUGBU, BATANGAS AS A
TOURIST ZONE, AND THE ZONING ORDINANCE OF THE MUNICIPALITY OF
NASUGBU RE-CLASSIFYING CERTAIN PORTIONS OF PETITIONER'S
LANDHOLDINGS AS NON-AGRICULTURAL, BOTH OF WHICH PLACE SAID
LANDHOLDINGS OUTSIDE THE SCOPE OF AGRARIAN REFORM, OR AT THE
VERY LEAST ENTITLE PETITIONER TO APPLY FOR CONVERSION AS
CONCEDED BY RESPONDENT DAR.

C. RESPONDENT COURT OF APPEALS GRAVELY ERRED WHEN IT FAILED TO

DECLARE THE PROCEEDINGS BEFORE RESPONDENT DAR VOID FOR
FAILURE TO OBSERVE DUE PROCESS, CONSIDERING THAT RESPONDENTS
BLATANTLY DISREGARDED THE PROCEDURE FOR THE ACQUISITION OF
PRIVATE LANDS UNDER R.A. 6657, MORE PARTICULARLY, IN FAILING TO
GIVE DUE NOTICE TO THE PETITIONER AND TO PROPERLY IDENTIFY THE
SPECIFIC AREAS SOUGHT TO BE ACQUIRED.

D. RESPONDENT COURT OF APPEALS GRAVELY ERRED WHEN IT FAILED TO

RECOGNIZE THAT PETITIONER WAS BRAZENLY AND ILLEGALLY DEPRIVED
OF ITS PROPERTY WITHOUT JUST COMPENSATION, CONSIDERING THAT
PETITIONER WAS NOT PAID JUST COMPENSATION BEFORE IT WAS
UNCEREMONIOUSLY STRIPPED OF ITS LANDHOLDINGS THROUGH THE
ISSUANCE OF CLOA'S TO ALLEGED FARMER BENEFICIARIES, IN VIOLATION
OF R.A. 6657. 41

The assigned errors involve three (3) principal issues: (1) whether this Court can take
cognizance of this petition despite petitioner's failure to exhaust administrative remedies;
(2) whether the acquisition proceedings over the three haciendas were valid and in
accordance with law; and (3) assuming the haciendas may be reclassified from
agricultural to non-agricultural, whether this court has the power to rule on this issue.

I. Exhaustion of Administrative Remedies.

In its first assigned error, petitioner claims that respondent Court of Appeals gravely
erred in finding that petitioner failed to exhaust administrative remedies. As a general
rule, before a party may be allowed to invoke the jurisdiction of the courts of justice, he
is expected to have exhausted all means of administrative redress. This is not absolute,
however. There are instances when judicial action may be resorted to immediately.
Among these exceptions are: (1) when the question raised is purely legal; (2) when the
administrative body is in estoppel; (3) when the act complained of is patently illegal; (4)
when there is urgent need for judicial intervention; (5) when the respondent acted in
disregard of due process; (6) when the respondent is a department secretary whose acts,
as an alter ego of the President, bear the implied or assumed approval of the latter; (7)
when irreparable damage will be suffered; (8) when there is no other plain, speedy and
adequate remedy; (9) when strong public interest is involved; (10) when the subject of
the controversy is private land; and (11) in quo warranto proceedings. 42

Petitioner rightly sought immediate redress in the courts. There was a violation of its
rights and to require it to exhaust administrative remedies before the DAR itself was not
a plain, speedy and adequate remedy.

Respondent DAR issued Certificates of Land Ownership Award (CLOA's) to farmer

beneficiaries over portions of petitioner's land without just compensation to petitioner. A
Certificate of Land Ownership Award (CLOA) is evidence of ownership of land by a
beneficiary under R.A. 6657, the Comprehensive Agrarian Reform Law of
1988. 43 Before this may be awarded to a farmer beneficiary, the land must first be
acquired by the State from the landowner and ownership transferred to the former. The
transfer of possession and ownership of the land to the government are conditioned upon
the receipt by the landowner of the corresponding payment or deposit by the DAR of the
compensation with an accessible bank. Until then, title remains with the
landowner. 44 There was no receipt by petitioner of any compensation for any of the lands
acquired by the government.

The kind of compensation to be paid the landowner is also specific. The law provides
that the deposit must be made only in "cash" or "LBP bonds." 45 Respondent DAR's
opening of trust account deposits in petitioner' s name with the Land Bank of the
Philippines does not constitute payment under the law. Trust account deposits are not
cash or LBP bonds. The replacement of the trust account with cash or LBP bonds did
not ipso facto cure the lack of compensation; for essentially, the determination of this
compensation was marred by lack of due process. In fact, in the entire acquisition
proceedings, respondent DAR disregarded the basic requirements of administrative due
process. Under these circumstances, the issuance of the CLOA's to farmer beneficiaries
necessitated immediate judicial action on the part of the petitioner.

II. The Validity of the Acquisition Proceedings Over the Haciendas.

Petitioner's allegation of lack of due process goes into the validity of the acquisition
proceedings themselves. Before we rule on this matter, however, there is need to lay
down the procedure in the acquisition of private lands under the provisions of the law.
A. Modes of Acquisition of Land under R. A. 6657

Republic Act No. 6657, the Comprehensive Agrarian Reform Law of 1988 (CARL),
provides for two (2) modes of acquisition of private land: compulsory and voluntary. The
procedure for the compulsory acquisition of private lands is set forth in Section 16 of
R.A. 6657, viz:

Sec. 16. Procedure for Acquisition of Private Lands. For purposes of acquisition of
private lands, the following procedures shall be followed:

a). After having identified the land, the landowners and the beneficiaries, the DAR shall
send its notice to acquire the land to the owners thereof, by personal delivery or
registered mail, and post the same in a conspicuous place in the municipal building and
barangay hall of the place where the property is located. Said notice shall contain the
offer of the DAR to pay a corresponding value in accordance with the valuation set forth
in Sections 17, 18, and other pertinent provisions hereof.

b) Within thirty (30) days from the date of receipt of written notice by personal delivery
or registered mail, the landowner, his administrator or representative shall inform the
DAR of his acceptance or rejection of the offer.

c) If the landowner accepts the offer of the DAR, the LBP shall pay the landowner the
purchase price of the land within thirty (30) days after he executes and delivers a deed of
transfer in favor of the Government and surrenders the Certificate of Title and other
muniments of title.

d) In case of rejection or failure to reply, the DAR shall conduct summary administrative
proceedings to determine the compensation for the land requiring the landowner, the
LBP and other interested parties to submit evidence as to the just compensation for the
land, within fifteen (15) days from receipt of the notice. After the expiration of the above
period, the matter is deemed submitted for decision. The DAR shall decide the case
within thirty (30) days after it is submitted for decision.

e) Upon receipt by the landowner of the corresponding payment, or, in case of rejection
or no response from the landowner, upon the deposit with an accessible bank designated
by the DAR of the compensation in cash or in LBP bonds in accordance with this Act,
the DAR shall take immediate possession of the land and shall request the proper
Register of Deeds to issue a Transfer Certificate of Title (TCT) in the name of the
Republic of the Philippines. The DAR shall thereafter proceed with the redistribution of
the land to the qualified beneficiaries.
f) Any party who disagrees with the decision may bring the matter to the court of proper
jurisdiction for final determination of just compensation.

In the compulsory acquisition of private lands, the landholding, the landowners and the
farmer beneficiaries must first be identified. After identification, the DAR shall send a
Notice of Acquisition to the landowner, by personal delivery or registered mail, and post
it in a conspicuous place in the municipal building and barangay hall of the place where
the property is located. Within thirty days from receipt of the Notice of Acquisition, the
landowner, his administrator or representative shall inform the DAR of his acceptance or
rejection of the offer. If the landowner accepts, he executes and delivers a deed of
transfer in favor of the government and surrenders the certificate of title. Within thirty
days from the execution of the deed of transfer, the Land Bank of the Philippines (LBP)
pays the owner the purchase price. If the landowner rejects the DAR's offer or fails to
make a reply, the DAR conducts summary administrative proceedings to determine just
compensation for the land. The landowner, the LBP representative and other interested
parties may submit evidence on just compensation within fifteen days from notice.
Within thirty days from submission, the DAR shall decide the case and inform the owner
of its decision and the amount of just compensation. Upon receipt by the owner of the
corresponding payment, or, in case of rejection or lack of response from the latter, the
DAR shall deposit the compensation in cash or in LBP bonds with an accessible bank.
The DAR shall immediately take possession of the land and cause the issuance of a
transfer certificate of title in the name of the Republic of the Philippines. The land shall
then be redistributed to the farmer beneficiaries. Any party may question the decision of
the DAR in the regular courts for final determination of just compensation.

The DAR has made compulsory acquisition the priority mode of the land acquisition to
hasten the implementation of the Comprehensive Agrarian Reform Program
(CARP). 46 Under Section 16 of the CARL, the first step in compulsory acquisition is the
identification of the land, the landowners and the beneficiaries. However, the law is
silent on how the identification process must be made. To fill in this gap, the DAR issued
on July 26, 1989 Administrative Order No. 12, Series or 1989, which set the operating
procedure in the identification of such lands. The procedure is as follows:

II. OPERATING PROCEDURE

A. The Municipal Agrarian Reform Officer, with the assistance of the pertinent
Barangay Agrarian Reform Committee (BARC), shall:

1. Update the masterlist of all agricultural lands covered under the CARP in his area of
responsibility. The masterlist shall include such information as required under the
attached CARP Masterlist Form which shall include the name of the landowner,
landholding area, TCT/OCT number, and tax declaration number.

2. Prepare a Compulsory Acquisition Case Folder (CACF) for each title (OCT/TCT) or
landholding covered under Phase I and II of the CARP except those for which the
landowners have already filed applications to avail of other modes of land acquisition. A
case folder shall contain the following duly accomplished forms:

a) CARP CA Form 1 MARO Investigation Report

b) CARP CA Form 2 Summary Investigation Report of Findings and Evaluation

c) CARP CA Form 3 Applicant's Information Sheet

d) CARP CA Form 4 Beneficiaries Undertaking

e) CARP CA Form 5 Transmittal Report to the PARO

The MARO/BARC shall certify that all information contained in the above-mentioned
forms have been examined and verified by him and that the same are true and correct.

3. Send a Notice of Coverage and a letter of invitation to a conference/meeting to the

landowner covered by the Compulsory Case Acquisition Folder. Invitations to the said
conference/meeting shall also be sent to the prospective farmer-beneficiaries, the BARC
representative(s), the Land Bank of the Philippines (LBP) representative, and other
interested parties to discuss the inputs to the valuation of the property. He shall discuss
the MARO/BARC investigation report and solicit the views, objection, agreements or
suggestions of the participants thereon. The landowner shall also be asked to indicate
his retention area. The minutes of the meeting shall be signed by all participants in the
conference and shall form an integral part of the CACF.

4. Submit all completed case folders to the Provincial Agrarian Reform Officer (PARO).

B. The PARO shall:

1. Ensure that the individual case folders are forwarded to him by his MAROs.

2. Immediately upon receipt of a case folder, compute the valuation of the land in
accordance with A.O. No. 6, Series of 1988. 47 The valuation worksheet and the related
CACF valuation forms shall be duly certified correct by the PARO and all the personnel
who participated in the accomplishment of these forms.
3. In all cases, the PARO may validate the report of the MARO through ocular inspection
and verification of the property. This ocular inspection and verification shall be
mandatory when the computed value exceeds = 500,000 per estate.

4. Upon determination of the valuation, forward the case folder, together with the duly
accomplished valuation forms and his recommendations, to the Central Office. The LBP
representative and the MARO concerned shall be furnished a copy each of his report.

C. DAR Central Office, specifically through the Bureau of Land Acquisition and
Distribution (BLAD), shall:

1. Within three days from receipt of the case folder from the PARO, review, evaluate and
determine the final land valuation of the property covered by the case folder. A summary
review and evaluation report shall be prepared and duly certified by the BLAD Director
and the personnel directly participating in the review and final valuation.

2. Prepare, for the signature of the Secretary or her duly authorized representative, a
Notice of Acquisition (CARP CA Form 8) for the subject property. Serve the Notice to
the landowner personally or through registered mail within three days from its approval.
The Notice shall include, among others, the area subject of compulsory acquisition, and
the amount of just compensation offered by DAR.

3. Should the landowner accept the DAR's offered value, the BLAD shall prepare and
submit to the Secretary for approval the Order of Acquisition. However, in case of
rejection or non-reply, the DAR Adjudication Board (DARAB) shall conduct a summary
administrative hearing to determine just compensation, in accordance with the
procedures provided under Administrative Order No. 13, Series of 1989. Immediately
upon receipt of the DARAB's decision on just compensation, the BLAD shall prepare
and submit to the Secretary for approval the required Order of Acquisition.

4. Upon the landowner's receipt of payment, in case of acceptance, or upon deposit of

payment in the designated bank, in case of rejection or non-response, the Secretary shall
immediately direct the pertinent Register of Deeds to issue the corresponding Transfer
Certificate of Title (TCT) in the name of the Republic of the Philippines. Once the
property is transferred, the DAR, through the PARO, shall take possession of the land for
redistribution to qualified beneficiaries.

Administrative Order No. 12, Series of 1989 requires that the Municipal Agrarian
Reform Officer (MARO) keep an updated master list of all agricultural lands under the
CARP in his area of responsibility containing all the required information. The MARO
prepares a Compulsory Acquisition Case Folder (CACF) for each title covered by CARP.
The MARO then sends the landowner a "Notice of Coverage" and a "letter of invitation"
to a "conference/meeting" over the land covered by the CACF. He also sends invitations
to the prospective farmer-beneficiaries the representatives of the Barangay Agrarian
Reform Committee (BARC), the Land Bank of the Philippines (LBP) and other
interested parties to discuss the inputs to the valuation of the property and solicit views,
suggestions, objections or agreements of the parties. At the meeting, the landowner is
asked to indicate his retention area.

The MARO shall make a report of the case to the Provincial Agrarian Reform Officer
(PARO) who shall complete the valuation of the land. Ocular inspection and verification
of the property by the PARO shall be mandatory when the computed value of the estate
exceeds P500,000.00. Upon determination of the valuation, the PARO shall forward all
papers together with his recommendation to the Central Office of the DAR. The DAR
Central Office, specifically, the Bureau of Land Acquisition and Distribution (BLAD),
shall review, evaluate and determine the final land valuation of the property. The BLAD
shall prepare, on the signature of the Secretary or his duly authorized representative, a
Notice of Acquisition for the subject property. 48 From this point, the provisions of
Section 16 of R.A. 6657 then apply. 49

For a valid implementation of the CAR program, two notices are required: (1) the Notice
of Coverage and letter of invitation to a preliminary conference sent to the landowner,
the representatives of the BARC, LBP, farmer beneficiaries and other interested parties
pursuant to DAR A.O. No. 12, Series of 1989; and (2) the Notice of Acquisition sent to
the landowner under Section 16 of the CARL.

The importance of the first notice, i.e., the Notice of Coverage and the letter of invitation
to the conference, and its actual conduct cannot be understated. They are steps designed
to comply with the requirements of administrative due process. The implementation of
the CARL is an exercise of the State's police power and the power of eminent domain. To
the extent that the CARL prescribes retention limits to the landowners, there is an
exercise of police power for the regulation of private property in accordance with the
Constitution. 50 But where, to carry out such regulation, the owners are deprived of lands
they own in excess of the maximum area allowed, there is also a taking under the power
of eminent domain. The taking contemplated is not a mere limitation of the use of the
land. What is required is the surrender of the title to and physical possession of the said
excess and all beneficial rights accruing to the owner in favor of the farmer
beneficiary. 51 The Bill of Rights provides that "[n]o person shall be deprived of life,
liberty or property without due process of law." 52 The CARL was not intended to take
away property without due process of law. 53 The exercise of the power of eminent
domain requires that due process be observed in the taking of private property.

DAR A.O. No. 12, Series of 1989, from whence the Notice of Coverage first sprung, was
amended in 1990 by DAR A.O. No. 9, Series of 1990 and in 1993 by DAR A.O. No. 1,
Series of 1993. The Notice of Coverage and letter of invitation to the conference meeting
were expanded and amplified in said amendments.

DAR A.O. No. 9, Series of 1990 entitled "Revised Rules Governing the Acquisition of
Agricultural Lands Subject of Voluntary Offer to Sell and Compulsory Acquisition
Pursuant to R.A. 6657," requires that:

B. MARO

1. Receives the duly accomplished CARP Form Nos. 1 & 1.1 including supporting
documents.

2. Gathers basic ownership documents listed under 1.a or 1.b above and prepares
corresponding VOCF/CACF by landowner/landholding.

3. Notifies/invites the landowner and representatives of the LBP, DENR, BARC and
prospective beneficiaries of the schedule of ocular inspection of the property at least one
week in advance.

4. MARO/LAND BANK FIELD OFFICE/BARC

a) Identify the land and landowner, and determine the suitability for agriculture and
productivity of the land and jointly prepare Field Investigation Report (CARP Form No.
2), including the Land Use Map of the property.

b) Interview applicants and assist them in the preparation of the Application For Potential
CARP Beneficiary (CARP Form No. 3).

c) Screen prospective farmer-beneficiaries and for those found qualified, cause the
signing of the respective Application to Purchase and Farmer's Undertaking (CARP Form
No. 4).

d) Complete the Field Investigation Report based on the result of the ocular
inspection/investigation of the property and documents submitted. See to it that Field
Investigation Report is duly accomplished and signed by all concerned.
5. MARO

a) Assists the DENR Survey Party in the conduct of a boundary/ subdivision survey
delineating areas covered by OLT, retention, subject of VOS, CA (by phases, if possible),
infrastructures, etc., whichever is applicable.

b) Sends Notice of Coverage (CARP Form No. 5) to landowner concerned or his duly
authorized representative inviting him for a conference.

c) Sends Invitation Letter (CARP Form No. 6) for a conference/public hearing to

prospective farmer-beneficiaries, landowner, representatives of BARC, LBP, DENR, DA,
NGO's, farmers' organizations and other interested parties to discuss the following
matters:

Result of Field Investigation

Inputs to valuation

Issues raised

Comments/recommendations by all parties concerned.

d) Prepares Summary of Minutes of the conference/public hearing to be guided by CARP

Form No. 7.

e) Forwards the completed VOCF/CACF to the Provincial Agrarian Reform Office

(PARO) using CARP Form No. 8 (Transmittal Memo to PARO).

xxx xxx xxx

DAR A.O. No. 9, Series of 1990 lays down the rules on both Voluntary Offer to Sell
(VOS) and Compulsory Acquisition (CA) transactions involving lands enumerated under
Section 7 of the CARL. 54 In both VOS and CA. transactions, the MARO prepares the
Voluntary Offer to Sell Case Folder (VOCF) and the Compulsory Acquisition Case
Folder (CACF), as the case may be, over a particular landholding. The MARO notifies
the landowner as well as representatives of the LBP, BARC and prospective beneficiaries
of the date of the ocular inspection of the property at least one week before the scheduled
date and invites them to attend the same. The MARO, LBP or BARC conducts the ocular
inspection and investigation by identifying the land and landowner, determining the
suitability of the land for agriculture and productivity, interviewing and screening
prospective farmer beneficiaries. Based on its investigation, the MARO, LBP or BARC
prepares the Field Investigation Report which shall be signed by all parties concerned. In
addition to the field investigation, a boundary or subdivision survey of the land may also
be conducted by a Survey Party of the Department of Environment and Natural
Resources (DENR) to be assisted by the MARO. 55 This survey shall delineate the areas
covered by Operation Land Transfer (OLT), areas retained by the landowner, areas with
infrastructure, and the areas subject to VOS and CA. After the survey and field
investigation, the MARO sends a "Notice of Coverage" to the landowner or his duly
authorized representative inviting him to a conference or public hearing with the farmer
beneficiaries, representatives of the BARC, LBP, DENR, Department of Agriculture
(DA), non-government organizations, farmer's organizations and other interested parties.
At the public hearing, the parties shall discuss the results of the field investigation, issues
that may be raised in relation thereto, inputs to the valuation of the subject landholding,
and other comments and recommendations by all parties concerned. The Minutes of the
conference/public hearing shall form part of the VOCF or CACF which files shall be
forwarded by the MARO to the PARO. The PARO reviews, evaluates and validates the
Field Investigation Report and other documents in the VOCF/CACF. He then forwards
the records to the RARO for another review.

DAR A.O. No. 9, Series of 1990 was amended by DAR A.O. No. 1, Series of 1993. DAR
A.O. No. 1, Series of 1993 provided, among others, that:

IV. OPERATING PROCEDURES:

Steps Responsible Activity Forms/

Agency/Unit Document

(requirements)

A. Identification and

Documentation

xxx xxx xxx

5 DARMO Issue Notice of Coverage CARP

to LO by personal delivery Form No. 2

with proof of service, or

registered mail with return

card, informing him that his

property is now under CARP

coverage and for LO to select

his retention area, if he desires

to avail of his right of retention;

and at the same time invites him

to join the field investigation to

be conducted on his property

which should be scheduled at

least two weeks in advance of

said notice.

A copy of said Notice shall CARP

be posted for at least one Form No. 17

week on the bulletin board of

the municipal and barangay

halls where the property is

located. LGU office concerned

notifies DAR about compliance

with posting requirements thru

return indorsement on CARP

Form No. 17.

6 DARMO Send notice to the LBP, CARP

BARC, DENR representatives Form No. 3

and prospective ARBs of the schedule of the field investigation

to be conducted on the subject

property.

7 DARMO With the participation of CARP

BARC the LO, representatives of Form No. 4

LBP the LBP, BARC, DENR Land Use

DENR and prospective ARBs, Map

Local Office conducts the investigation on

subject property to identify

the landholding, determines

its suitability and productivity;

and jointly prepares the Field

Investigation Report (FIR)

and Land Use Map. However,

the field investigation shall

proceed even if the LO, the

representatives of the DENR and

prospective ARBs are not available

provided, they were given due

notice of the time and date of

investigation to be conducted.

Similarly, if the LBP representative

is not available or could not come

on the scheduled date, the field

investigation shall also be conducted,

after which the duly accomplished

Part I of CARP Form No. 4 shall

be forwarded to the LBP

representative for validation. If he agrees

to the ocular inspection report of DAR,

he signs the FIR (Part I) and

accomplishes Part II thereof.

In the event that there is a

difference or variance between

the findings of the DAR and the

LBP as to the propriety of

covering the land under CARP,

whether in whole or in part, on

the issue of suitability to agriculture,

degree of development or slope,

and on issues affecting idle lands,

the conflict shall be resolved by

a composite team of DAR, LBP,

DENR and DA which shall jointly

conduct further investigation

thereon. The team shall submit its

report of findings which shall be

binding to both DAR and LBP,

pursuant to Joint Memorandum

Circular of the DAR, LBP, DENR

and DA dated 27 January 1992.

8 DARMO Screen prospective ARBs

BARC and causes the signing of CARP

the Application of Purchase Form No. 5

and Farmer's Undertaking

(APFU).

9 DARMO Furnishes a copy of the CARP

duly accomplished FIR to Form No. 4

the landowner by personal

delivery with proof of

service or registered mail

will return card and posts

a copy thereof for at least

one week on the bulletin

board of the municipal

and barangay halls where

the property is located.

LGU office concerned CARP

notifies DAR about Form No. 17

compliance with posting

requirement thru return

endorsement on CARP

Form No. 17.

B. Land Survey

10 DARMO Conducts perimeter or Perimeter

And/or segregation survey or

DENR delineating areas covered Segregation

Local Office by OLT, "uncarpable Survey Plan

areas such as 18% slope

and above, unproductive/

unsuitable to agriculture,
retention, infrastructure.

In case of segregation or

subdivision survey, the

plan shall be approved

by DENR-LMS.

C. Review and Completion

of Documents

11. DARMO Forward VOCF/CACF CARP

to DARPO. Form No. 6

xxx xxx xxx.

DAR A.O. No. 1, Series of 1993, modified the identification process and increased the
number of government agencies involved in the identification and delineation of the land
subject to acquisition. 56 This time, the Notice of Coverage is sent to the landowner
before the conduct of the field investigation and the sending must comply with specific
requirements. Representatives of the DAR Municipal Office (DARMO) must send the
Notice of Coverage to the landowner by "personal delivery with proof of service, or by
registered mail with return card," informing him that his property is under CARP
coverage and that if he desires to avail of his right of retention, he may choose which
area he shall retain. The Notice of Coverage shall also invite the landowner to attend the
field investigation to be scheduled at least two weeks from notice. The field investigation
is for the purpose of identifying the landholding and determining its suitability for
agriculture and its productivity. A copy of the Notice of Coverage shall be posted for at
least one week on the bulletin board of the municipal and barangay halls where the
property is located. The date of the field investigation shall also be sent by the DAR
Municipal Office to representatives of the LBP, BARC, DENR and prospective farmer
beneficiaries. The field investigation shall be conducted on the date set with the
participation of the landowner and the various representatives. If the landowner and other
representatives are absent, the field investigation shall proceed, provided they were duly
notified thereof. Should there be a variance between the findings of the DAR and the
LBP as to whether the land be placed under agrarian reform, the land's suitability to
agriculture, the degree or development of the slope, etc., the conflict shall be resolved by
a composite team of the DAR, LBP, DENR and DA which shall jointly conduct further
investigation. The team's findings shall be binding on both DAR and LBP. After the field
investigation, the DAR Municipal Office shall prepare the Field Investigation Report and
Land Use Map, a copy of which shall be furnished the landowner "by personal delivery
with proof of service or registered mail with return card." Another copy of the Report
and Map shall likewise be posted for at least one week in the municipal or barangay halls
where the property is located.

Clearly then, the notice requirements under the CARL are not confined to the Notice of
Acquisition set forth in Section 16 of the law. They also include the Notice of Coverage
first laid down in DAR A.O. No. 12, Series of 1989 and subsequently amended in DAR
A.O. No. 9, Series of 1990 and DAR A.O. No. 1, Series of 1993. This Notice of
Coverage does not merely notify the landowner that his property shall be placed under
CARP and that he is entitled to exercise his retention right; it also notifies him, pursuant
to DAR A.O. No. 9, Series of 1990, that a public hearing, shall be conducted where he
and representatives of the concerned sectors of society may attend to discuss the results
of the field investigation, the land valuation and other pertinent matters. Under DAR
A.O. No. 1, Series of 1993, the Notice of Coverage also informs the landowner that a
field investigation of his landholding shall be conducted where he and the other
representatives may be present.

B. The Compulsory Acquisition of Haciendas Palico and Banilad

In the case at bar, respondent DAR claims that it, through MARO Leopoldo C. Lejano,
sent a letter of invitation entitled "Invitation to Parties" dated September 29, 1989 to
petitioner corporation, through Jaime Pimentel, the administrator of Hacienda
Palico. 57 The invitation was received on the same day it was sent as indicated by a
signature and the date received at the bottom left corner of said invitation. With regard to
Hacienda Banilad, respondent DAR claims that Jaime Pimentel, administrator also of
Hacienda Banilad, was notified and sent an invitation to the conference. Pimentel
actually attended the conference on September 21, 1989 and signed the Minutes of the
meeting on behalf of petitioner corporation. 58 The Minutes was also signed by the
representatives of the BARC, the LBP and farmer beneficiaries. 59 No letter of invitation
was sent or conference meeting held with respect to Hacienda Caylaway because it was
subject to a Voluntary Offer to Sell to respondent DAR. 60

When respondent DAR, through the Municipal Agrarian Reform Officer (MARO), sent
to the various parties the Notice of Coverage and invitation to the conference, DAR A.O.
No. 12, Series of 1989 was already in effect more than a month earlier. The Operating
Procedure in DAR Administrative Order No. 12 does not specify how notices or letters
of invitation shall be sent to the landowner, the representatives of the BARC, the LBP,
the farmer beneficiaries and other interested parties. The procedure in the sending of
these notices is important to comply with the requisites of due process especially when
the owner, as in this case, is a juridical entity. Petitioner is a domestic
corporation, 61 and therefore, has a personality separate and distinct from its shareholders,
officers and employees.

The Notice of Acquisition in Section 16 of the CARL is required to be sent to the

landowner by "personal delivery or registered mail." Whether the landowner be a
natural or juridical person to whose address the Notice may be sent by personal delivery
or registered mail, the law does not distinguish. The DAR Administrative Orders also do
not distinguish. In the proceedings before the DAR, the distinction between natural and
juridical persons in the sending of notices may be found in the Revised Rules of
Procedure of the DAR Adjudication Board (DARAB). Service of pleadings before the
DARAB is governed by Section 6, Rule V of the DARAB Revised Rules of Procedure.
Notices and pleadings are served on private domestic corporations or partnerships in the
following manner:

Sec. 6. Service upon Private Domestic Corporation or Partnership. If the defendant is

a corporation organized under the laws of the Philippines or a partnership duly
registered, service may be made on the president, manager, secretary, cashier, agent, or
any of its directors or partners.

Similarly, the Revised Rules of Court of the Philippines, in Section 13, Rule 14 provides:

Sec. 13. Service upon private domestic corporation or partnership. If the defendant is
a corporation organized under the laws of the Philippines or a partnership duly
registered, service may be made on the president, manager, secretary, cashier, agent, or
any of its directors.

Summonses, pleadings and notices in cases against a private domestic corporation before
the DARAB and the regular courts are served on the president, manager, secretary,
cashier, agent or any of its directors. These persons are those through whom the private
domestic corporation or partnership is capable of action. 62

Jaime Pimentel is not the president, manager, secretary, cashier or director of petitioner
corporation. Is he, as administrator of the two Haciendas, considered an agent of the
corporation?
The purpose of all rules for service of process on a corporation is to make it reasonably
certain that the corporation will receive prompt and proper notice in an action against
it. 63 Service must be made on a representative so integrated with the corporation as to
make it a priori supposable that he will realize his responsibilities and know what he
should do with any legal papers served on him, 64 and bring home to the corporation
notice of the filing of the action. 65 Petitioner's evidence does not show the official duties
of Jaime Pimentel as administrator of petitioner's haciendas. The evidence does not
indicate whether Pimentel's duties is so integrated with the corporation that he would
immediately realize his responsibilities and know what he should do with any legal
papers served on him. At the time the notices were sent and the preliminary conference
conducted, petitioner's principal place of business was listed in respondent DAR's
records as "Soriano Bldg., Plaza Cervantes, Manila," 66 and "7th Flr. Cacho-Gonzales
Bldg., 101 Aguirre St., Makati, Metro Manila." 67 Pimentel did not hold office at the
principal place of business of petitioner. Neither did he exercise his functions in Plaza
Cervantes, Manila nor in Cacho-Gonzales Bldg., Makati, Metro Manila. He performed
his official functions and actually resided in the haciendas in Nasugbu, Batangas, a place
over two hundred kilometers away from Metro Manila.

Curiously, respondent DAR had information of the address of petitioner's principal place
of business. The Notices of Acquisition over Haciendas Palico and Banilad were
addressed to petitioner at its offices in Manila and Makati. These Notices were sent
barely three to four months after Pimentel was notified of the preliminary
conference. 68Why respondent DAR chose to notify Pimentel instead of the officers of
the corporation was not explained by the said respondent.

Nevertheless, assuming that Pimentel was an agent of petitioner corporation, and the
notices and letters of invitation were validly served on petitioner through him, there is no
showing that Pimentel himself was duly authorized to attend the conference meeting with
the MARO, BARC and LBP representatives and farmer beneficiaries for purposes of
compulsory acquisition of petitioner's landholdings. Even respondent DAR's evidence
does not indicate this authority. On the contrary, petitioner claims that it had no
knowledge of the letter-invitation, hence, could not have given Pimentel the authority to
bind it to whatever matters were discussed or agreed upon by the parties at the
preliminary conference or public hearing. Notably, one year after Pimentel was informed
of the preliminary conference, DAR A.O. No. 9, Series of 1990 was issued and this
required that the Notice of Coverage must be sent "to the landowner concerned or his
duly authorized representative." 69

Assuming further that petitioner was duly notified of the CARP coverage of its
haciendas, the areas found actually subject to CARP were not properly identified before
they were taken over by respondent DAR. Respondents insist that the lands were
identified because they are all registered property and the technical description in their
respective titles specifies their metes and bounds. Respondents admit at the same time,
however, that not all areas in the haciendas were placed under the comprehensive
agrarian reform program invariably by reason of elevation or character or use of the
land. 70

The acquisition of the landholdings did not cover the entire expanse of the two
haciendas, but only portions thereof. Hacienda Palico has an area of 1,024 hectares and
only 688.7576 hectares were targetted for acquisition. Hacienda Banilad has an area of
1,050 hectares but only 964.0688 hectares were subject to CARP. The haciendas are not
entirely agricultural lands. In fact, the various tax declarations over the haciendas
describe the landholdings as "sugarland," and "forest, sugarland, pasture land,
horticulture and woodland." 71

Under Section 16 of the CARL, the sending of the Notice of Acquisition specifically
requires that the land subject to land reform be first identified. The two haciendas in the
instant case cover vast tracts of land. Before Notices of Acquisition were sent to
petitioner, however, the exact areas of the landholdings were not properly segregated and
delineated. Upon receipt of this notice, therefore, petitioner corporation had no idea
which portions of its estate were subject to compulsory acquisition, which portions it
could rightfully retain, whether these retained portions were compact or contiguous, and
which portions were excluded from CARP coverage. Even respondent DAR's evidence
does not show that petitioner, through its duly authorized representative, was notified of
any ocular inspection and investigation that was to be conducted by respondent DAR.
Neither is there proof that petitioner was given the opportunity to at least choose and
identify its retention area in those portions to be acquired compulsorily. The right of
retention and how this right is exercised, is guaranteed in Section 6 of the CARL, viz:

Sec. 6. Retention Limits. . . . .

The right to choose the area to be retained, which shall be compact or contiguous, shall
pertain to the landowner; Provided, however, That in case the area selected for retention
by the landowner is tenanted, the tenant shall have the option to choose whether to
remain therein or be a beneficiary in the same or another agricultural land with similar or
comparable features. In case the tenant chooses to remain in the retained area, he shall be
considered a leaseholder and shall lose his right to be a beneficiary under this Act. In
case the tenant chooses to be a beneficiary in another agricultural land, he loses his right
as a leaseholder to the land retained by the landowner. The tenant must exercise this
option within a period of one (1) year from the time the landowner manifests his choice
of the area for retention.

Under the law, a landowner may retain not more than five hectares out of the total area of
his agricultural land subject to CARP. The right to choose the area to be retained, which
shall be compact or contiguous, pertains to the landowner. If the area chosen for retention
is tenanted, the tenant shall have the option to choose whether to remain on the portion or
be a beneficiary in the same or another agricultural land with similar or comparable
features.

C. The Voluntary Acquisition of Hacienda Caylaway

Petitioner was also left in the dark with respect to Hacienda Caylaway, which was the
subject of a Voluntary Offer to Sell (VOS). The VOS in the instant case was made on
May 6, 1988, 72 before the effectivity of R.A. 6657 on June 15, 1988. VOS transactions
were first governed by DAR Administrative Order No. 19, series of 1989, 73 and under
this order, all VOS filed before June 15, 1988 shall be heard and processed in accordance
with the procedure provided for in Executive Order No. 229, thus:

III. All VOS transactions which are now pending before the DAR and for which no
payment has been made shall be subject to the notice and hearing requirements provided
in Administrative Order No. 12, Series of 1989, dated 26 July 1989, Section II,
Subsection A, paragraph 3.

All VOS filed before 15 June 1988, the date of effectivity of the CARL, shall be heard
and processed in accordance with the procedure provided for in Executive Order No.
229.

xxx xxx xxx.

Sec. 9 of E.O. 229 provides:

Sec. 9. Voluntary Offer to Sell. The government shall purchase all agricultural lands it
deems productive and suitable to farmer cultivation voluntarily offered for sale to it at a
valuation determined in accordance with Section 6. Such transaction shall be exempt
from the payment of capital gains tax and other taxes and fees.

Executive Order 229 does not contain the procedure for the identification of private land
as set forth in DAR A.O. No. 12, Series of 1989. Section 5 of E.O. 229 merely reiterates
the procedure of acquisition in Section 16, R.A. 6657. In other words, the E.O. is silent
as to the procedure for the identification of the land, the notice of coverage and the
preliminary conference with the landowner, representatives of the BARC, the LBP and
farmer beneficiaries. Does this mean that these requirements may be dispensed with
regard to VOS filed before June 15, 1988? The answer is no.

First of all, the same E.O. 229, like Section 16 of the CARL, requires that the land,
landowner and beneficiaries of the land subject to agrarian reform be identified before
the notice of acquisition should be issued. 74 Hacienda Caylaway was voluntarily offered
for sale in 1989. The Hacienda has a total area of 867.4571 hectares and is covered by
four (4) titles. In two separate Resolutions both dated January 12, 1989, respondent
DAR, through the Regional Director, formally accepted the VOS over the two of these
four
titles. 75 The land covered by two titles has an area of 855.5257 hectares, but only
648.8544 hectares thereof fell within the coverage of R.A. 6657. 76 Petitioner claims it
does not know where these portions are located.

Respondent DAR, on the other hand, avers that surveys on the land covered by the four
titles were conducted in 1989, and that petitioner, as landowner, was not denied
participation therein, The results of the survey and the land valuation summary report,
however, do not indicate whether notices to attend the same were actually sent to and
received by petitioner or its duly authorized representative. 77 To reiterate, Executive
Order No. 229 does not lay down the operating procedure, much less the notice
requirements, before the VOS is accepted by respondent DAR. Notice to the landowner,
however, cannot be dispensed with. It is part of administrative due process and is an
essential requisite to enable the landowner himself to exercise, at the very least, his right
of retention guaranteed under the CARL.

III. The Conversion of the three Haciendas.

It is petitioner's claim that the three haciendas are not subject to agrarian reform because
they have been declared for tourism, not agricultural
purposes. 78 In 1975, then President Marcos issued Proclamation No. 1520 declaring the
municipality of Nasugbu, Batangas a tourist zone. Lands in Nasugbu, including the
subject haciendas, were allegedly reclassified as non-agricultural 13 years before the
effectivity of R. A. No. 6657. 79 In 1993, the Regional Director for Region IV of the
Department of Agriculture certified that the haciendas are not feasible and sound for
agricultural development. 80 On March 20, 1992, pursuant to Proclamation No. 1520, the
Sangguniang Bayan of Nasugbu, Batangas adopted Resolution No. 19 reclassifying
certain areas of Nasugbu as non-agricultural. 81 This Resolution approved Municipal
Ordinance No. 19, Series of 1992, the Revised Zoning Ordinance of Nasugbu 82 which
zoning ordinance was based on a Land Use Plan for Planning Areas for New
Development allegedly prepared by the University of the Philippines. 83Resolution No.
19 of the Sangguniang Bayan was approved by the Sangguniang Panlalawigan of
Batangas on March 8, 1993. 84

Petitioner claims that proclamation No. 1520 was also upheld by respondent DAR in
1991 when it approved conversion of 1,827 hectares in Nasugbu into a tourist area
known as the Batulao Resort Complex, and 13.52 hectares in Barangay Caylaway as
within the potential tourist belt. 85 Petitioner present evidence before us that these areas
are adjacent to the haciendas subject of this petition, hence, the haciendas should
likewise be converted. Petitioner urges this Court to take cognizance of the conversion
proceedings and rule accordingly. 6

We do not agree. Respondent DAR's failure to observe due process in the acquisition of
petitioner's landholdings does not ipso facto give this Court the power to adjudicate over
petitioner's application for conversion of its haciendas from agricultural to non-
agricultural. The agency charged with the mandate of approving or disapproving
applications for conversion is the DAR.

At the time petitioner filed its application for conversion, the Rules of Procedure
governing the processing and approval of applications for land use conversion was the
DAR A.O. No. 2, Series of 1990. Under this A.O., the application for conversion is filed
with the MARO where the property is located. The MARO reviews the application and
its supporting documents and conducts field investigation and ocular inspection of the
property. The findings of the MARO are subject to review and evaluation by the
Provincial Agrarian Reform Officer (PARO). The PARO may conduct further field
investigation and submit a supplemental report together with his recommendation to the
Regional Agrarian Reform Officer (RARO) who shall review the same. For lands less
than five hectares, the RARO shall approve or disapprove applications for conversion.
For lands exceeding five hectares, the RARO shall evaluate the PARO Report and
forward the records and his report to the Undersecretary for Legal Affairs. Applications
over areas exceeding fifty hectares are approved or disapproved by the Secretary of
Agrarian Reform.

The DAR's mandate over applications for conversion was first laid down in Section 4 (j)
and Section 5 (l) of Executive Order No. 129-A, Series of 1987 and reiterated in the
CARL and Memorandum Circular No. 54, Series of 1993 of the Office of the President.
The DAR's jurisdiction over applications for conversion is provided as follows:

A. The Department of Agrarian Reform (DAR) is mandated to "approve or disapprove

applications for conversion, restructuring or readjustment of agricultural lands into non-
agricultural uses," pursuant to Section 4 (j) of Executive Order No. 129-A, Series of
1987.

B. Sec. 5 (l) of E.O. 129-A, Series of 1987, vests in the DAR, exclusive authority to
approve or disapprove applications for conversion of agricultural lands for residential,
commercial, industrial and other land uses.

C. Sec. 65 of R.A. No. 6657, otherwise known as the Comprehensive Agrarian Reform
Law of 1988, likewise empowers the DAR to authorize under certain conditions, the
conversion of agricultural lands.

D. Sec. 4 of Memorandum Circular No. 54, Series of 1993 of the Office of the President,
provides that "action on applications for land use conversion on individual landholdings
shall remain as the responsibility of the DAR, which shall utilize as its primary reference,
documents on the comprehensive land use plans and accompanying ordinances passed
upon and approved by the local government units concerned, together with the National
Land Use Policy, pursuant to R.A. No. 6657 and E.O. No. 129-A. 87

Applications for conversion were initially governed by DAR A.O. No. 1, Series of 1990
entitled "Revised Rules and Regulations Governing Conversion of Private Agricultural
Lands and Non-Agricultural Uses," and DAR A.O. No. 2, Series of 1990 entitled "Rules
of Procedure Governing the Processing and Approval of Applications for Land Use
Conversion." These A.O.'s and other implementing guidelines, including Presidential
issuances and national policies related to land use conversion have been consolidated in
DAR A.O. No. 07, Series of 1997. Under this recent issuance, the guiding principle in
land use conversion is:

to preserve prime agricultural lands for food production while, at the same time,
recognizing the need of the other sectors of society (housing, industry and commerce) for
land, when coinciding with the objectives of the Comprehensive Agrarian Reform Law
to promote social justice, industrialization and the optimum use of land as a national
resource for public welfare. 88

"Land Use" refers to the manner of utilization of land, including its allocation,
development and management. "Land Use Conversion" refers to the act or process of
changing the current use of a piece of agricultural land into some other use as approved
by the DAR. 89 The conversion of agricultural land to uses other than agricultural
requires field investigation and conferences with the occupants of the land. They involve
factual findings and highly technical matters within the special training and expertise of
the DAR. DAR A.O. No. 7, Series of 1997 lays down with specificity how the DAR
must go about its task. This time, the field investigation is not conducted by the MARO
but by a special task force, known as the Center for Land Use Policy Planning and
Implementation (CLUPPI-DAR Central Office). The procedure is that once an
application for conversion is filed, the CLUPPI prepares the Notice of Posting. The
MARO only posts the notice and thereafter issues a certificate to the fact of posting. The
CLUPPI conducts the field investigation and dialogues with the applicants and the
farmer beneficiaries to ascertain the information necessary for the processing of the
application. The Chairman of the CLUPPI deliberates on the merits of the investigation
report and recommends the appropriate action. This recommendation is transmitted to the
Regional Director, thru the Undersecretary, or Secretary of Agrarian Reform.
Applications involving more than fifty hectares are approved or disapproved by the
Secretary. The procedure does not end with the Secretary, however. The Order provides
that the decision of the Secretary may be appealed to the Office of the President or the
Court of Appeals, as the case may be, viz:

Appeal from the decision of the Undersecretary shall be made to the Secretary, and from
the Secretary to the Office of the President or the Court of Appeals as the case may be.
The mode of appeal/motion for reconsideration, and the appeal fee, from Undersecretary
to the Office of the Secretary shall be the same as that of the Regional Director to the
Office of the Secretary. 90

Indeed, the doctrine of primary jurisdiction does not warrant a court to arrogate unto
itself authority to resolve a controversy the jurisdiction over which is initially lodged
with an administrative body of special competence. 91Respondent DAR is in a better
position to resolve petitioner's application for conversion, being primarily the agency
possessing the necessary expertise on the matter. The power to determine whether
Haciendas Palico, Banilad and Caylaway are non-agricultural, hence, exempt from the
coverage of the CARL lies with the DAR, not with this Court.

Finally, we stress that the failure of respondent DAR to comply with the requisites of due
process in the acquisition proceedings does not give this Court the power to nullify the
CLOA's already issued to the farmer beneficiaries. To assume the power is to short-
circuit the administrative process, which has yet to run its regular course. Respondent
DAR must be given the chance to correct its procedural lapses in the acquisition
proceedings. In Hacienda Palico alone, CLOA's were issued to 177 farmer beneficiaries
in 1993. 92 Since then until the present, these farmers have been cultivating their
lands. 93 It goes against the basic precepts of justice, fairness and equity to deprive these
people, through no fault of their own, of the land they till. Anyhow, the farmer
beneficiaries hold the property in trust for the rightful owner of the land.
IN VIEW WHEREOF, the petition is granted in part and the acquisition proceedings over
the three haciendas are nullified for respondent DAR's failure to observe due process
therein. In accordance with the guidelines set forth in this decision and the applicable
administrative procedure, the case is hereby remanded to respondent DAR for proper
acquisition proceedings and determination of petitioner's application for conversion.

SO ORDERED.
G.R. No. L-23712 April 29, 1968

REPUBLIC OF THE PHILIPPINES, plaintiff-appellee,

vs.
RAMONA RUIZ, DOMINGO PINTO, BONIFACIO PINTO, VICTORIA PINTO,
MARIA PINTO, ET AL., defendants-appellants.

Office of the Solicitor General for plaintiff-appellee.

Silvestre Br. Bello for defendants-appellants.

REYES, J.B.L., Actg. C.J.:

This is an appeal from the decision of the Court of First Instance of Isabela (in its Civil
Case No. Br. II-419), ordering the cancellation of Original Certificate of Title No. I-1600,
substituted by Transfer Certificate of Title No. T-7196, issued in the names of therein
defendants heirs of Cayetano Pinto, and declaring the reversion to the State of the land
covered thereof.

During the hearing of the case in the lower court, the parties submitted the following
stipulation of facts:

1. That the plaintiff (Republic of the Philippines) instituted the present action filed with
the Court on October 12, 1958 for the reversion of the entire land containing an area of
23 hectares, 97 ares and 57 centares, covered by Homestead Patent No. 22711, granted
on June 13, 1933 corresponding to Original Certificate of Title No. I-1600, issued on
July 7, 1933 as per Annex "1" of the Complaint in the name of Cayetano Pinto, who died
in 1945;

2. That on May 28, 1937 the registered owner, Cayetano Pinto, married to Ramona Ruiz,
sold a portion of 3 hectares of land covered by Original Certificate of Title No. I-1600 in
favor of Jacobo Pinto, married to Herminia Tinonas, for the sum of P500.00 as per Annex
"3" of the Complaint;

3. That the Deed of Sale executed by the deceased Cayetano Pinto in favor of Jacobo
Pinto who died sometime in 1950, was never registered in the Office of the Register of
Deeds of Isabela, nor annotated at the back of the Original Certificate of Title No. I-
1600, as could be verified in Annex "1" of the Complaint;
4. That Ramona Ruiz and her children executed an extrajudicial partition of the entire
land on October 12, 1951 which was registered on February 2, 1956, reason for the
issuance of Transfer Certificate of Title No. T-7196, as per Annex "2" of the Complaint;

5. That on June 29, 1956, the widow Herminia Tinonas and heirs of the late Jacobo Pinto
filed an action against the widow Ramona Ruiz and heirs of the late Cayetano Pinto for
the conveyance of the portion of 3 hectares, sold and conveyed by the late Cayetano
Pinto in favor of the late Jacobo Pinto on May 28, 1937, which case was docketed in the
Court of First Instance of Isabela (Second Branch) as Civil Case No. Br. II-90;

6. That on August 5, 1958 the Court of First Instance of Isabela, Second Branch,
rendered a decision Annex "4" of the Complaint, declaring that the Deed of Sale
executed by the deceased Cayetano Pinto in favor of the late Jacobo Pinto (Annex 3) null
and void ab initio, for being in violation of Section 116 of the Public Land Law and
dismissed the complaint with costs against the plaintiffs;

7. That from the decision of the Court of First Instance of Isabela, Second Branch,
mentioned in the next preceding paragraph, the plaintiffs appealed to the Supreme Court
on September 4, 1958, which appeal was dismissed on November 6, 1959, thereby
terminating Civil Case No. Br. II-90 of the Second Branch of the Court of First Instance
of Isabela, whereby the appealed decision became final and executory;

8. That before the appeal of the plaintiffs in Civil Case No. Br. II-90 has been perfected
and the record elevated to the Supreme Court, the plaintiffs in the above-entitled case
filed the instant action against the widow and heirs of the late Cayetano Pinto, namely:
Ramona Ruiz, Domingo Pinto, Bonifacio Pinto, Victoria Pinto, Maria Pinto, Rufina
Pinto, Jesusa Pinto, and Teodoro Pinto on October 12, 1958 for cancellation of the
Original Certificate of Title No. I-1600 and Transfer Certificate of Title No. T-7196 and
the reversion of the land covered by the said titles to the State; and

9. That on April 23, 1956, the registered owners in Transfer Certificate of Title No. T-
7196 mortgaged the entire parcel of land covered therein to the Philippine National
Bank, Santiago Branch, to secure a loan of P4,000.00 and the mortgaged instrument was
registered in the Office of the Register of Deeds of Isabela and annotated at the back of
the Transfer Certificate of Title No. T-7196, on April 24, 1956, as per Annex 2 of the
Complaint.

Based upon the foregoing stipulation, the court ruled that the execution by the
homesteader Cayetano Pinto of the document, Exhibit "C", within the prohibited 5-year
period from the issuance of the patent, being in violation of Section 118 of
Commonwealth Act 141, produced the effect of annulling and cancelling the said patent
and thus caused the reversion to the State of the property thereby covered.

Defendants interposed the present appeal, raising as main issue the alleged lack of cause
of action of the complaint. It is now claimed that (1) the document, Exhibit C, executed
by Cayetano Pinto was not a consummated contract of sale, but a mere unilateral promise
to sell without consideration and, consequently, was unenforceable and without effect;
(2) assuming the contract to be one of sale within the prohibited 5-year period and,
therefore, null and void, then under Article 1409 of the Civil Code, said contract is
inexistent and without effect and Cayetano Pinto can not be considered to have
committed any violation of the Public Land law at all; (3) to order the reversion of the
land to the government would render nugatory the policy of the State to promote the
spread of small land-ownership and preserve land grants in the hands of the
underprivileged; (4) the violation of Commonwealth Act 141 by Cayetano Pinto, if there
was any, can not affect the rights of his heirs, particularly of his widow, who allegedly
owned 1/2 of the land; (5) the Original Certificate of Title No. I-1600 in the name of
Cayetano Pinto having been cancelled and substituted by Transfer Certificate of Title No.
T-7196, issued in the names of his widow and heirs on February 2, 1956, to order their
cancellation and the reversion of the property to the government would be contrary to the
principle underlying the Torrens System and (6) the prohibition under Section 118 of
Commonwealth Act 141 contemplates of the alienation or encumbrance of the entire land
grant and not merely of a portion thereof like the one in the present case.

There is no merit to this appeal.

Appellants can not be heard to question the nature of the document, Exhibit "C",
executed by their predecessor-in-interest. It appears on record that in their motion to
dismiss the complaint filed in the court below, appellants, as therein defendants, averred
among others: "While it is true as alleged in the complaint that on May 28, 1937, the late
Cayetano Pinto executed an absolute deed of sale over a portion of three hectares, of the
parcel of land covered by Original Certificate of Title No. I-1600, in favor of one Jacobo
Pinto . . ." (p. 51. Record on Appeal). And, when the aforesaid motion was denied,
defendant-appellants admitted in their answer the allegation of the complaint that, ". . .
on May 28, 1937, four years after the late Cayetano Pinto had been granted the said
homestead patent, he executed an absolute deed of sale over a portion of 3 hectares of the
parcel covered by Original Certificate of Title No. I-1600 in favor of one Jacobo Pinto"
(pp. 3, 93, Record on Appeal). The stipulation of facts, submitted by the parties and
approved by the court, likewise stated that Cayetano Pinto "sold a portion of 3 hectares
of land covered by Original Certificate of Title I-1600 in favor of Jacobo Pinto, married
to Herminia Tinonas, for the sum of P500.00" (p. 121, Record on Appeal). By
defendants' own admissions in the lower court, therefore, the character of Exhibit C as a
deed of sale executed almost four years after the issuance of the patent to the homestead
Cayetano Pinto has become a settled matter, which they cannot now dispute on appeal.

We also find as erroneous appellants' argument that because the deed of sale was null and
void, then it may be treated as not having ever existed, with the result that the grantee
Cayetano Pinto can not be considered to have violated the Public Land Law. Carried to
its logical conclusion, this argument would mean that no violation of law could be
punished.

This case is actually no necessity for logical reasoning; by express provision of Section
118 of Commonwealth Act 141, any transfer or alienation of a homestead grant within
five years from the issuance of the patent is forbidden, making said alienation null and
void, 1 and constituting a cause for reversion of the homestead to the State. 2 In other
words, it was the transgression of the law that nullifies and renders the deed of
conveyance null and void and without effect; not vice-versa. Inexistence in law merely
signifies that the act can not be taken into account as source of rights or obligations for
parties as well as strangers; as if it had never existed. Certainly, the law can not destroy
or wipe out physical existence, and it has never attempted to do so.

It may likewise be stated that while the prohibition against the alienation of the land
grant is designed to preserve it within the family of the homesteader and to promote
small land ownership in this country it is equally true that this policy of the State can not
be invoked to condone a violation of the Public Land Act and withhold enforcement of
the provision directing the reversion of the property to the grantor in case of such
violation. 3 For, the prohibitory provision against any alienation or encumbrance of the
land grant is not only mandatory, 4 but is considered a condition attached to the approval
of every application. 5

Neither is there merit in the proposition that Cayetano Pinto's heirs should not be made to
suffer on account of a violation of law committed by their said predecessor. In a previous
case wherein the same contention was made, this Court ruled:

One other point remains to be explained and that is whether the parties plaintiffs in this
case, the widow and the children of the deceased homesteader Jose Lagon, can be
considered as bound by the sale made by the husband and whether they can claim to be
third parties as to whom registration should be considered as the operative act of
conveyance. As to the widow, the sale was executed by Jose Lagon in his capacity as
administrator of the conjugal partnership. Jose Lagon was the agent of the conjugal
partnership, of which the widow is a partner, and under general principles the act of the
authorized agent is the act of the partners themselves (2 American Jurisprudence, 169,
276). It is not, therefore, necessary that the widow had actual notice of the sale, and she
can not be considered a third person or party in relation thereto. The sale made by the
husband is binding on her (Cruz vs. Buenaventura, 84 Phil. 12; 46 Off. Gaz., 6032.)

As respect the children of Jose Lagon, the other plaintiffs-appellees, they may not be
considered third parties because there is a privity of interest between them and their
father. They only succeed to whatever rights their father had and what is valid and
binding against him is also valid and binding against it them. (Galasinao, et al. vs.
Austria, 97 Phil. 82, 86-87).

Every penalty or sanction, in fact, carries with it some hardship for the family of the
offender; that is part of the penalty's built-in deterrence. Only that the occassion to reflect
on it is before, and not after, violating the law.

Similarly, the court below committed no error in ordering the reversion to plaintiff of the
land grant involved herein, notwithstanding the fact that the original certificate title
based on the patent had been cancelled and another certificate issued in the names of the
grantee's heirs. As held by this Court in the case of Campanero, et al. vs. Coloma, L-
11908, January 30, 1960, the principle of conclusiveness of the title of a registered
owner, "although sound as applied to land registered under the Land Registration Act
through judicial proceedings, cannot defeat the express policy of the State prohibiting the
alienation and encumbrance of lands of the public domain acquired under the provisions
of the Public Land Act within five years from and after the date of the issuance of
patent." Thus, where a grantee is found not entitled to hold and possess in fee simple the
land, by reason of his having violated Section 118 of the Public Land Law, the court may
properly order its reconveyance to the grantor, although the property has already been
brought under the operation of the Torrens System. 6 And, this right of the government to
bring an appropriate action for reconveyance (or reversion) is not barred by the lapse of
time; the Statute of Limitations does not run against the State.7

As regards the claim of appellants that reversion of the homestead may be ordered only if
the alienation covers the whole area and not merely a portion thereof, we declared in
another case:

Even if only 19 out of the 23.21 hectares of the homestead land had been sold or
alienated within the prohibitive period of five years from date of issuance of the patent to
the grantee, such alienation is a sufficient cause for reversion to the State of the whole
grant. In granting a homestead to an applicant, the law imposes as a condition that the
land should not be encumbered, sold or alienated within five years from the issuance of
the patent. The sale or alienation of part of the homestead violates that condition.
(Republic vs. Garcia, L-11597, May 27, 1959).

We found no abuse of discretion in the lower court's denial of defendants' motion for
postponement of the hearing of January 14, 1964, it appearing that the parties by then
had already submitted a stipulation of facts (upon which the decision now under
consideration was based), and that the many postponements of the hearing which delayed
early termination of the case were previously secured at the instance of counsel for said
defendants.

WHEREFORE, the decision appealed from being in accordance with law, the same is
hereby affirmed; defendants-appellants are ordered to reconvey to plaintiff-appellee the
land covered by Transfer Certificate of Title No. T-7196 of the Registry of Deeds of
Isabela. Costs against appellants.

Dizon, Makalintal, Bengzon, J.P., Zaldivar, Sanchez, Castro, Angeles and Fernando, JJ.,
concur.
< Concepcion, C.J., is on leave.