VI.

Non-registrable Properties

Doctrine of Reparian Rights:

JULIAN SANTULAN VS. EXECUTIVE SECRETARY G.R. No. L-
28021 December 15, 1977

Lease of a parcel land in Public domain- Doctrine of Reparian Rights

Facts:
Petitioner Julian Santulan and Antonio Lusin who have been
succeeded by their heirs were rival claimants with respect to the lease of
a parcel of foreshore land of public domain with an area of about 4 ½
hectares located at Barrio Kaingin, Kawit Cavite. The Petitioner
Santulan surveyed the land on December 5, 1942 and filed an
application on Dec. 29, 1942 to lease for five (5) years for agricultural
purposes an area of 36, 120 sq. meters and including the application for
revocable permit to occupy the said land for planting of Bakawan which
later develop to fishpond seven years later after acquiring ordinary
fishpond permit from BFAR. On the other hand, private respondent
Lusin was reported and was being summoned that he was illegally
entered the area covered by the petitioners fishpond permit and was
refrain from introducing improvements.

However, private respondent Lusin filed applications 1n 1942 and

1945 for a revocable-permit and a lease of a foreshore for the purpose of
producing salt in the said land. He also contends that he had been in the
continues and exclusive possession of the land since 1920 when it was
still under water, and that he had used it as a site of his fish corrals, and
allegedly converted two (2) hectares into fishpond enclosed with mud
dikes and provided with a concrete sluice gate and another sluice gate
made of wood. On the northern part of the land bordering the bay were
bamboo stakes placed at close intervals to serve as water breakers to
protect the mud dikes from being washed away by the action of the sea.
The private respondent said that he introduced the alleged improvements
from 1951 to 1953. The 1942 foreshore lease applications of Petitioner
Santulan and private respondent Lusin gave rise to Bureau of Lands
Conflict.
Issue:
Whether or not the continues and exclusive possession of the
private respondent could nullify the petitioner’s preferential right to
lease the land by reason of his riparian rights?

Ruling:
The Director of Land ruled that the disputed land was subject to
―reparian rights‖ which may he invoked by petitioner Julian Santulan as
owner of the upland in accordance with section 32 of Lands
Administrative Order No. 7-1. It was found out that the disputed land is
foreshore land covered and uncovered by the flow and ebb of the
ordinary tides that is an extension of Santulan’s Lot No. 986 of the
Kawit cadastre, with an area of 17, 301 square meters, registered in his
name in 1937 under Original Certificate of Title No. 6 which was issued
by virtue of a free patent, and the said foreshore land was allegedly
formed by soil deposits accumulated by the alluvial action of the sea,
and the petitioner was the first to enter the land and to make dikes
thereon.
Private Respondent Antonio Lusin was found out to be possessor in bad
faith, and latter’s allegation with respect to the possession and
improvements could not nullify the petitioner’s preferential right to lease
the land by reason of his riparian rights. Therefore, the rejection of the
private respondent’s revocable permit and foreshore lease is proper.
__________________________________________________________
______
Lands Administrative Order No. 7-1 dated April 30. 1936
32. Preference of the Reparian Owner � The owner of the property
adjoining foreshore lands, marshy lands or lands covered with water
bordering upon shores or banks of navigable lakes or rivers, shall be
given preference to apply for such lands adjoining his property as may
not be needed for the public service, subject to the laws and regulations
governing lands of this nature, provided that he applies therefore within
sixty (60) days from the date he receives a communication from the
Director of Lands advising him of his preferential right.
Strictly speaking, "riparian" refers to rivers. A riparian owner is a person
who owns land situated on the bank of a river.
―Riparian owner" embraces not only the owners of lands on the banks of
rivers but also the littoral owners, meaning the owners of lands
bordering the shore of the sea or lake or other tidal waters. The littoral is
the coastal region including both the land along the coast and the water
near the coast or the shore zone between the high and low watermarks.
G.R. No. L-39473 April 30, 1979
REPUBLIC OF THE PHILIPPINES, petitioner,
vs.
HON. COURT OF APPEALS and ISABEL LASTIMADO,
respondents.

This is a Petition for Review (Appeal) by certiorari filed by the Republic

of the Philippines from the Decision of the Court of Appeals
promulgated on September 30, 1974 in CA-G.R. No. Sp-01504 denying
the State's Petition for certiorari and Mandamus.

Briefly, the facts of the case are as follows:

Private respondent, Isabel Lastimado, filed on September 11, 1967, in

the Court of First Instance of Bataan, Branch I, a Petition for the
reopening of cadastral proceedings over a portion of Lot No. 626 of the
Mariveles Cadastre, consisting of 971.0569 hectares, pursuant to
Republic Act No. 931, as amended by Republic Act No. 2061, docketed
as Cad. Case No. 19, LRC Cad. Rec. No. 1097. In the absence of any
opposition, whether from the Government or from private individuals,
private respondent was allowed to present her evidence ex-parte. On
October 14, 1967, the trial Court rendered a Decision granting the
Petition and adjudicating the land in favor of private respondent. The
trial Court issued an order for the issuance of a decree of registration on
November 20, 1967, and on November 21, 1967, the Land Registration
Commission issued Decree No. N-117573 in favor of private
respondent. Eventually, Original Certificate of Title No. N-144 was also
issued in her favor. Private respondent thereafter subdivided the land
into ten lots, and the corresponding titles. Transfer Certificates of Title
Nos. 18905 to 18914 inclusive, were issued by the Register of Deeds.

On June 3, 1968, or within one year from the entry of the decree of
registration, petitioner filed a Petition for Review pursuant to Sec. 38,
Act No. 496, on the ground of fraud alleging that during the period of
alleged adverse possession by private respondent, said parcel of land
was part of the U.S. Military Reservation in Bataan. which was formally
turned over to the Republic of the Philippines only on December 22,
1965, and that the same is inside the public forest of Mariveles, Bataan
and, therefore, not subject to disposition or acquisition under the Public
Land Law. Respondent field an Opposition thereto, which was
considered by the trial Court, as a Motion to Dismiss, and on December
20,1968, said Court (Judge Tito V. Tizon, presiding) issued an Order
dismissing the Petition for Review mainly on the ground that the
Solicitor General had failed to file opposition to the original Petition for
reopening of the cadastral proceedings and was, therefore, estopped
from questioning the decree of registration ordered issued therein. On
January 28, 1969, petitioner moved for reconsideration, which was
denied by the trial Court in its Order dated May 20, 1969, for lack of
merit.

Petitioner seasonably filed a Notice of Appeal and a Record on Appeal,

which was objected to by private respondent. On July 15, 1972, or three
years later, * the trial Court (Judge Abraham P. Vera, presiding) refused
to give due course to the appeal. Petitioner filed a Motion for
Reconsideration but the trial Court denied it in its Order of October 14,
1972 on the ground that the proper remedy of petitioner was a certiorari
petition, not an ordinary appeal, and that the Order sought to be appealed
from had long become final and executory as petitioner's Motion for
Reconsideration was pro-forma and did not suspend the running of the
reglementary period of appeal.

On November 9, 1972, petitioner filed a Petition for certiorari and

mandamus with the Court of Appeals claiming that the trial Court
gravely abused its discretion, amounting to lack of jurisdiction when,
without the benefit of hearing, it summarily dismissed the Petition for
Review; and since said Petition raised certain issues of fact which cannot
be decided except in a trial on the merits, the dismissal of the Petition on
the basis of private respondent's Opposition, considered as a Motion to
Dismiss, constituted a denial of due process of law. Petitioner then
prayed that the Order of the trial Court, dated December 20, 1968
dismissing the Petition for Review, be declared null and void, and that
said trial Court be directed to give due course to the Petition for Review;
or, in the alternative, to give due course to petitioner's appeal.

On September 30, 1974, the Court of Appeals upheld the trial Court's
dismissal of the Petition for Review stating:

... We cannot find any allegation in the petition for review which shows
that private respondent had committed fraud against petitioner. Its
representations and officials were duly notified of private respondent's
petition for reopening and registration of title in her name. In said
petition, the technical descriptions of the portion of Lot No. 626 of the
Mariveles (Bataan) Cadastre, subject-matter of the petition were
expressly stated, the boundaries, specifically delineated. The alleged
ground that the land forms part of a forest land exists at the time
petitioner was duly notified of said petition. Failure to file opposition is
in effect, an admission that the petition is actually not part of a forest
land. Indubitably, therefore, no justifiable reason exists for the
annulment of the Order, dated December 20, 1968 (Annex D-Petition) of
the lower court dismissing herein petitioner's petition for review of the
decree issued in favor of private respondent Lastimado. 1

The Court of Appeals then disposed as follows:

WHEREFORE, finding that the respondent Judge has not committed

any grave abuse of discretion amounting to lack of jurisdiction in the
issuance of an Order, dated December 20, 1968 (Annex D-Petition)
dismissing herein petitioner's petition for review, the present petition for
review is hereby denied.

The issuance of the writ of mandamus as prayed for in the petition is no

longer necessary as this Court, in the exercise of its appellate jurisdiction
and authority to supervise orderly administration of justice, has already
resolved on the merits the question whether or not the dismissal of the
petition for review had been done with grave abuse of discretion
amounting to lack of jurisdiction. 2

From this Decision, petitioner filed the present Petition for Review
(Appeal) by certiorari assigning the following errors to the Court of
Appeals and to the trial Court:

1. The Lower Court as well as the Court of Appeals erred in finding that
there can be possession, even for the purpose of claiming title, of land
which at the time of possession is subject to a military reservation.

2. The Lower Court as well as the Court of Appeals erred in finding that
such land which is subject to a government reservation, may
appropriately be the subject of cadastral proceedings, and hence. also of
a petition to reopen cadastral proceedings.
3. The Lower Court as well as the Court of Appeals erred in finding that
a parcel of land which is part of the public forest is susceptible of
occupation and registration in favor of private individual.

4. The Lower Court as well as the Court of Appeals erred in not finding
that the Republic of the Philippines is not estopped from questioning the
decree of registration and the title issued pursuant thereto in favor of
respondent Lastimado over the parcel of land in question.

5. The Lower Court erred in dismissing the petition for review of the
Republic of the Philippines.

6. The Court of Appeals erred in denying Petitioner's petition for

certiorari and mandamus.

Section 38 of the Land Registration Act (Act 496) provides:

Section 38. Decree of registration, and remedies after entry of decree.

If the court after hearing finds that the applicant or adverse claimant has
title as stated in his application or adverse claim and proper for
registration, a decree of confirmation and registration shall be entered.
Every decree of registration shall bind the land, and quiet title thereto.
subject only to the exceptions stated in the following section. It shall be
conclusive upon and against all persons, including the Insular
Government and all the branches thereof, whether mentioned by name in
the application, notice of citation, or included in the general description
"To all whom it may concern". Such decree shall not be opened by
reason of the absence, infancy, or other disability of any person affect
thereby, nor by any proceeding in any court for reversing judgments or
decrees; subject, however, to the right of any person deprived of land or
of any estate or interest therein by decree of registration obtained by
fraud to file in the competent Court of First Instance a petition for
review within one year after entry of the decree provided no innocent
purchaser for value has acquired an interest. ... 3

The essential elements for the allowance of the reopening or review of a

decree are: a) that the petitioner has a real and dominical right; b) that he
has been deprived thereof; c) through fraud; d) that the petition is filed
within one year from the issuance of the decree; and e) that the property
has not as yet been transferred to an innocent purchaser.4
However, for fraud to justify the review of a decree, it must be extrinsic
or collateral and the facts upon which it is based have not been
controverted or resolved in the case where the judgment sought to be
annulled was rendered. 5 The following ruling spells out the difference
between extrinsic and intrinsic fraud:

Extrinsic or collateral fraud, as distinguished from intrinsic fraud,

connotes any fraudulent scheme executed by a prevailing litigant
"outside the trial of a case against the defeated party, or his agents,
attorneys or witnesses, whereby said defeated party is prevented from
presenting fully and fairly his side of the case." But intrinsic fraud takes
the form of "acts of a party in a litigation during the trial such as the use
of forged instruments or perjured testimony, which did not affect the
present action of the case, but did prevent a fair and just determination
of the case. 6

The fraud is one that affects and goes into the jurisdiction of the Court. 7

In its Petition for Review filed before the trial Court, petitioner alleged
that fraud was committed by private respondent when she
misrepresented that she and her predecessors-in-interest had been in
possession of the land publicly, peacefully, exclusively and adversely
against the whole world as owner for more than forty years when, in
fact, the subject land was in. side the former U.S. Military Reservation,
which was formally turned over to the Republic of the Philippines only
on December 22, 1965, and that she likewise contended that her rights,
as derived from the original and primitive occupants of the land in
question, are capable of judicial confirmation under existing laws, when
the truth is, said parcel of land is within the public forest of Mariveles,
Bataan, and is not subject to disposition or acquisition by private persons
under the Public Land Law.

The trial Court ruled, and was upheld by the Court of Appeals, that no
fraud was committed by private respondent, which deprived petitioner of
its day in Court as there was no showing that she was aware of the facts
alleged by the Government, so that she could not have suppressed them
with intent to deceive. The trial Court also noted that petitioner had
failed to file an opposition to the reopening of the cadastral proceedings
despite notices sent not only to the Solicitor General as required by
Republic Act No. 931. but to the Bureau of Lands and the Bureau of
Forestry as well. It then concluded that "the remedy granted by section
38 of the Land Registration Act is designed to give relief to victims of
fraud, not to those who are victims of their own neglect, inaction or
carelessness, especially when no attempt is ever made to excuse or
justify the neglect." With the foregoing as the essential basis, the trial
Court dismissed the Petition for Review.

We find reversible error. Although there was an agreement by the parties

to submit for resolution the Opposition to the Petition for Review, which
was treated as a motion to dismiss, the trial Court, in the exercise of
sound judicial discretion, should not have dismissed the Petition outright
but should have afforded petitioner an opportunity to present evidence in
support of the facts alleged to constitute actual and extrinsic fraud
committed by private respondent. Thus, in the case of Republic vs.
Sioson, et al., 8 it was held that "the action of the lower Court in denying
the petition for review of a decree of registration filed within one year
from entry of the d without hearing the evidence in support of the
allegation and claim that actual and extrinsic fraud upon which the
petition is predicated, is held to be in error, because the lower Court
should have afforded the petitioner an opportunity to prove it."

If the allegation of petitioner that the land in question was inside the
military reservation at the time it was claimed is true, then, it cannot be
the object of any cadastral p nor can it be the object of reopening under
Republic Act No. 931. 9 Similarly, if the land in question, indeed forms
part of the public forest, then, possession thereof, however long, cannot
convert it into private property as it is within the exclusive jurisdiction
of the Bureau of Forestry and beyond the power and jurisdiction of the
Cadastral Court to register under the Torrens System. 10

Even assuming that the government agencies can be faulted for inaction
and neglect (although the Solicitor General claims that it received no
notice), yet, the same cannot operate to bar action by the State as it
cannot be estopped by the mistake or error of its officials or agents. 11
Further, we cannot lose sight of the cardinal consideration that "the State
as persona in law is the juridical entity, which is the source of any
asserted right to ownership in land" under basic Constitutional Precepts,
and that it is moreover charged with the conservation of such patrimony.
12
WHEREFORE, the Decision of the Court of Appeals dated September
30, 1974, dismissing the Petition for certiorari and mandamus filed
before it, as well as the Order of the Court of First Instance of Bataan
(Branch I) dated December 20, 1968, dismissing the Petition for Review,
are hereby set aside and the records of this case hereby ed to the latter
Court for further proceedings to enable petitioner to present evidence in
support of its Petition for Review.

No pronouncement as to costs.

Chavez vs. Public Estates Authority (G.R. No. 133250, July 9, 2002)

Fact:
In 1973, the Comissioner on Public Highways entered into a contract to
reclaim areas of Manila Bay with the Construction and Development
Corportion of the Philippines (CDCP).

PEA (Public Estates Authority) was created by President Marcos under

P.D. 1084, tasked with developing and leasing reclaimed lands. These
lands were transferred to the care of PEA under P.D. 1085 as part of the
Manila Cavite Road and Reclamation Project (MCRRP). CDCP and
PEA entered into an agreement that all future projects under the MCRRP
would be funded and owned by PEA.

By 1988, President Aquino issued Special Patent No. 3517 transferring

lands to PEA. It was followed by the transfer of three Titles (7309, 7311
and 7312) by the Register of Deeds of Paranaque to PEA covering the
three reclaimed islands known as the FREEDOM ISLANDS.

Subsquently, PEA entered into a joint venture agreement (JVA) with

AMARI, a Thai-Philippine corporation to develop the Freedom Islands.
Along with another 250 hectares, PEA and AMARI entered the JVA
which would later transfer said lands to AMARI. This caused a stir
especially when Sen. Maceda assailed the agreement, claiming that such
lands were part of public domain (famously known as the ―mother of all
scams‖).

Peitioner Frank J. Chavez filed case as a taxpayer praying for

mandamus, a writ of preliminary injunction and a TRO against the sale
of reclaimed lands by PEA to AMARI and from implementing the JVA.
Following these events, under President Estrada’s admin, PEA and
AMARI entered into an Amended JVA and Mr. Chaves claim that the
contract is null and void.

Issue:
w/n: the transfer to AMARI lands reclaimed or to be reclaimed as part of
the stipulations in the (Amended) JVA between AMARI and PEA
violate Sec. 3 Art. XII of the 1987 Constitution
w/n: the court is the proper forum for raising the issue of whether the
amended joint venture agreement is grossly disadvantageous to the
government.

Held:
On the issue of Amended JVA as violating the constitution:
1. The 157.84 hectares of reclaimed lands comprising the Freedom
Islands, now covered by certificates of title in the name of PEA, are
alienable lands of the public domain. PEA may lease these lands to
private corporations but may not sell or transfer ownership of these lands
to private corporations. PEA may only sell these lands to Philippine
citizens, subject to the ownership limitations in the 1987 Constitution
and existing laws.

2. The 592.15 hectares of submerged areas of Manila Bay remain

inalienable natural resources of the public domain until classified as
alienable or disposable lands open to disposition and declared no longer
needed for public service. The government can make such classification
and declaration only after PEA has reclaimed these submerged areas.
Only then can these lands qualify as agricultural lands of the public
domain, which are the only natural resources the government can
alienate. In their present state, the 592.15 hectares of submerged areas
are inalienable and outside the commerce of man.

3. Since the Amended JVA seeks to transfer to AMARI, a private

corporation, ownership of 77.34 hectares110 of the Freedom Islands,
such transfer is void for being contrary to Section 3, Article XII of the
1987 Constitution which prohibits private corporations from acquiring
any kind of alienable land of the public domain.

4. Since the Amended JVA also seeks to transfer to AMARI ownership

of 290.156 hectares111 of still submerged areas of Manila Bay, such
transfer is void for being contrary to Section 2, Article XII of the 1987
Constitution which prohibits the alienation of natural resources other
than agricultural lands of the public domain.

PEA may reclaim these submerged areas. Thereafter, the government

can classify the reclaimed lands as alienable or disposable, and further
declare them no longer needed for public service. Still, the transfer of
such reclaimed alienable lands of the public domain to AMARI will be
void in view of Section 3, Article XII of the 1987Constitution which
prohibits private corporations from acquiring any kind of alienable land
of the public domain.

Case Digest: Chavez v. National Housing Authority

G.R. No. 164527 15 August 2007

FACTS:

On August 5, 2004, former Solicitor General Francisco Chavez, filed an

instant petition raising constitutional issues on the JVA entered by
National Housing Authority and R-II Builders, Inc.

On March 1, 1988, then-President Cory Aquino issued Memorandum

order No. (MO) 161 approving and directing implementation of the
Comprehensive and Integrated Metropolitan Manila Waste Management
Plan. During this time, Smokey Mountain, a wasteland in Tondo,
Manila, are being made residence of many Filipinos living in a
subhuman state.

As presented in MO 161, NHA prepared feasibility studies to turn the

dumpsite into low-cost housing project, thus, Smokey Mountain
Development and Reclamation Project (SMDRP), came into place. RA
6957 (Build-Operate-Transfer Law) was passed on July 1990 declaring
the importance of private sectors as contractors in government projects.
Thereafter, Aquino proclaimed MO 415 applying RA 6957 to SMDRP,
among others. The same MO also established EXECOM and
TECHCOM in the execution and evaluation of the plan, respectively, to
be assisted by the Public Estates Authority (PEA).

Notices of public bidding to become NHA’s venture partner for SMDRP

were published in newspapers in 1992, from which R-II Builders, Inc.
(RBI) won the bidding process. Then-President Ramos authorized NHA
to enter into a Joint Venture Agreement with RBI.
Under the JVA, the project involves the clearing of Smokey Mountain
for eventual development into a low cost housing complex and
industrial/commercial site. RBI is expected to fully finance the
development of Smokey Mountain and reclaim 40 hectares of the land at
the Manila Bay Area. The latter together with the commercial area to be
built on Smokey Mountain will be owned by RBI as enabling
components. If the project is revoked or terminated by the Government
through no fault of RBI or by mutual agreement, the Government shall
compensate RBI for its actual expenses incurred in the Project plus a
reasonable rate of return not exceeding that stated in the feasibility study
and in the contract as of the date of such revocation, cancellation, or
termination on a schedule to be agreed upon by both parties.

To summarize, the SMDRP shall consist of Phase I and Phase II. Phase
I of the project involves clearing, levelling-off the dumpsite, and
construction of temporary housing units for the current residents on the
cleared and levelled site. Phase II involves the construction of a fenced
incineration area for the on-site disposal of the garbage at the dumpsite.

Due to the recommendations done by the DENR after evaluations done,

the JVA was amended and restated (now ARJVA) to accommodate the
design changes and additional work to be done to successfully
implement the project. The original 3,500 units of temporary housing
were decreased to 2,992. The reclaimed land as enabling component
was increased from 40 hectares to 79 hectares, which was supported by
the issuance of Proclamation No. 465 by President Ramos. The revision
also provided for the 119-hectare land as an enabling component for
Phase II of the project.

Subsequently, the Clean Air Act was passed by the legislature which
made the establishment of an incinerator illegal, making the off-site
dumpsite at Smokey Mountain necessary. On August 1, 1998, the
project was suspended, to be later reconstituted by President Estrada in
MO No. 33.

On August 27, 2003, the NHA and RBI executed a Memorandum of

Agreement whereby both parties agreed to terminate the JVA and
subsequent agreements. During this time, NHA reported that 34
temporary housing structures and 21 permanent housing structures had
been turned over by RBI.
ISSUES:

Whether respondents NHA and RBI have been granted the power and
authority to reclaim lands of the public domain as this power is vested
exclusively in PEA as claimed by petitioner
Whether respondents NHA and RBI were given the power and
authority by DENR to reclaim foreshore and submerged lands
Whether respondent RBI can acquire reclaimed foreshore and
submerged lands considered as alienable and outside the commerce of
man
Whether respondent RBI can acquire reclaimed lands when there was
no declaration that said lands are no longer needed for public use
Whether there is a law authorizing sale of reclaimed lands
Whether the transfer of reclaimed lands to RBI was done by public
bidding
Whether RBI, being a private corporation, is barred by the
Constitution to acquire lands of public domain
Whether respondents can be compelled to disclose all information
related to the SMDRP
Whether the operative fact doctrine applies to the instant position

HELD:

Executive Order 525 reads that the PEA shall be primarily responsible
for integrating, directing, and coordinating all reclamation projects for
and on behalf of the National Government. This does not mean that it
shall be responsible for all. The requisites for a valid and legal
reclamation project are approval by the President (which were provided
for by MOs), favourable recommendation of PEA (which were seen as a
part of its recommendations to the EXECOM), and undertaken either by
PEA or entity under contract of PEA or by the National Government
Agency (NHA is a government agency whose authority to reclaim lands
under consultation with PEA is derived under PD 727 and RA 7279).
Notwithstanding the need for DENR permission, the DENR is
deemed to have granted the authority to reclaim in the Smokey
Mountain Project for the DENR is one of the members of the EXECOM
which provides reviews for the project. ECCs and Special Patent Orders
were given by the DENR which are exercises of its power of supervision
over the project. Furthermore, it was the President via the
abovementioned MOs that originally authorized the reclamation. It must
be noted that the reclamation of lands of public domain is reposed first
in the Philippine President.
The reclaimed lands were classified alienable and disposable via MO
415 issued by President Aquino and Proclamation Nos. 39 and 465 by
President Ramos.
Despite not having an explicit declaration, the lands have been
deemed to be no longer needed for public use as stated in Proclamation
No. 39 that these are to be ―disposed to qualified beneficiaries.‖
Furthermore, these lands have already been necessarily reclassified as
alienable and disposable lands under the BOT law.
Letter I of Sec. 6 of PD 757 clearly states that the NHA can acquire
property rights and interests and encumber or otherwise dispose of them
as it may deem appropriate.
There is no doubt that respondent NHA conducted a public bidding of
the right to become its joint venture partner in the Smokey Mountain
Project. It was noted that notices were published in national
newspapers. The bidding proper was done by the Bids and Awards
Committee on May 18, 1992.
RA 6957 as amended by RA 7718 explicitly states that a contractor
can be paid ―a portion as percentage of the reclaimed land‖ subject to the
constitutional requirement that only Filipino citizens or corporation with
at least 60% Filipino equity can acquire the same. In addition, when the
lands were transferred to the NHA, these were considered Patrimonial
lands of the state, by which it has the power to sell the same to any
qualified person.
This relief must be granted. It is the right of the Filipino people to
information on matters of public concerned as stated in Article II, Sec.
28, and Article III, Sec. 7 of the 1987 Constitution.
When the petitioner filed the case, the JVA had already been
terminated by virtue of MOA between RBI and NHA. The properties
and rights in question after the passage of around 10 years from the start
of the project’s implementation cannot be disturbed or questioned. The
petitioner, being the Solicitor General at the time SMDRP was
formulated, had ample opportunity to question the said project, but did
not do so. The moment to challenge has passed.
VII. Remedies

SPOUSES ROQUE, Petitioner,

vs.
AGUADO, et.al, Respondent.
G.R. No. 193787 April 7, 2014

TOPIC: Contract of conditional sale, contract to sell, double sale

FACTS:

On July 21, 1977, petitioners-spouses Roque and the original

owners of the then unregistered Lot 18089 – namely, Rivero, et al.
executed the 1977 Deed of Conditional Sale over a 1,231-sq. m. portion
of Lot 18089 for a consideration of P30,775.00. The parties agreed that
Sps. Roque shall make an initial payment of P15,387.50 upon signing,
while the remaining balance of the purchase price shall be payable upon
the registration of Lot 18089, as well as the segregation and the
concomitant issuance of a separate title over the subject portion in their
names. After the deed’s execution, Sps. Roque took possession and
introduced improvements on the subject portion which they utilized as a
balut factory.

Pertinent provision of the 1977 Deed of Conditional Sale:

DEED OF CONDITIONAL SALE OF REAL PROPERTY

KNOW ALL MEN BY THESE PRESENTS:

xxx

That for and in consideration of the sum of THIRTY THOUSAND

SEVEN HUNDRED SEVENTY FIVE PESOS (P30,775.00), Philippine
Currency, payable in the manner hereinbelow specified, the VENDORS
do hereby sell, transfer and convey unto the VENDEE, or their heirs,
executors, administrators, or assignors, that unsegregated portion of the
above lot, x x x.

That the aforesaid amount shall be paid in two installments, the first
installment which is in the amount of __________ (P15,387.50) and the
balance in the amount of __________ (P15,387.50), shall be paid as
soon as the described portion of the property shall have been registered
under the Land Registration Act and a Certificate of Title issued
accordingly;

That as soon as the total amount of the property has been paid and the
Certificate of Title has been issued, an absolute deed of sale shall be
executed accordingly;

xxx

On August 12, 1991, Sabug, Jr, applied for a free patent over
the entire Lot 18089 and was eventually issued OCT No. M-59558 in his
name on October 21, 1991. On June 24, 1993, Sabug, Jr. and Rivero, in
her personal capacity and in representation of Rivero, et al., executed the
1993 Joint Affidavit, acknowledging that the subject portion belongs to
Sps. Roque and expressed their willingness to segregate the same from
the entire area of Lot 18089.

On December 8, 1999, however, Sabug, Jr., through the 1999

Deed of Absolute Sale, sold Lot 18089 to Aguado for P2,500,000.00,
who, in turn, caused the cancellation of OCT No. M-5955 and the
issuance of TCT No. M-96692 dated December 17, 199911 in her name.

Thereafter, Aguado obtained an P8,000,000.00 loan from the

Land Bank secured by a mortgage over Lot 18089. When she failed to
pay her loan obligation, Land Bank commenced extra-judicial
foreclosure proceedings and eventually tendered the highest bid in the
auction sale. Upon Aguado’s failure to redeem the subject property,
Land Bank consolidated its ownership, and TCT No. M-11589513 was
issued in its name on July 21, 2003.

On June 16, 2003, Sps. Roque filed a complaint for

reconveyance, annulment of sale, deed of real estate mortgage,
foreclosure, and certificate of sale, and damages before the RTC.

ISSUE:

Whether or not the 1977 Deed of Conditional Sale is a

conditional contract of sale or a contract to sell.
HELD:

It is a CONTRACT TO SELL. The Court held that where the

seller promises to execute a deed of absolute sale upon the completion
by the buyer of the payment of the purchase price, the contract is only a
contract to sell even if their agreement is denominated as a Deed of
Conditional Sale, as in this case. This treatment stems from the legal
characterization of a contract to sell, that is, a bilateral contract whereby
the prospective seller, while expressly reserving the ownership of the
subject property despite delivery thereof to the prospective buyer, binds
himself to sell the subject property exclusively to the prospective buyer
upon fulfillment of the condition agreed upon, such as, the full payment
of the purchase price. Elsewise stated, in a contract to sell, ownership is
retained by the vendor and is not to pass to the vendee until full payment
of the purchase price.

In contracts to sell the obligation of the seller to sell becomes

demandable only upon the happening of the suspensive condition, that
is, the full payment of the purchase price by the buyer. It is only upon
the existence of the contract of sale that the seller becomes obligated to
transfer the ownership of the thing sold to the buyer. Prior to the
existence of the contract of sale, the seller is not obligated to transfer the
ownership to the buyer, even if there is a contract to sell between them.

Final installment not paid thus no perfected contract of sale

Here, it is undisputed that Sps. Roque have not paid the final
installment of the purchase price. As such, the condition which would
have triggered the parties’ obligation to enter into and thereby perfect a
contract of sale in order to effectively transfer the ownership of the
subject portion from the sellers (i.e., Rivero et al.) to the buyers (Sps.
Roque) cannot be deemed to have been fulfilled. Consequently, the latter
cannot validly claim ownership over the subject portion even if they had
made an initial payment and even took possession of the same.

Conditional contract of sale and contract to sell in relation to double sale

It is essential to distinguish between a contract to sell and a conditional

contract of sale specially in cases where the subject property is sold by
the owner not to the party the seller contracted with, but to a third
person, as in the case at bench.
 In a contract to sell, there being no previous sale of the
property, a third person buying such property despite the fulfillment of
the suspensive condition such as the full payment of the purchase price,
for instance, cannot be deemed a buyer in bad faith and the prospective
buyer cannot seek the relief of reconveyance of the property.

There is no double sale in such case. Title to the property will transfer to
the buyer after registration because there is no defect in the owner-
seller’s title per se, but the latter, of course, may be sued for damages by
the intending buyer.

EMMA VER-REYES, Petitioner, versus

HONORABLE COURT OF APPEALS, THE LAND
REGISTRATION AUTHORITY, THE REGISTER OF DEEDS OF
CAVITE, and IRENE MONTEMAYOR, Respondents.,
G.R. No. 153263, 2008 August 28,

For resolution is a petition for review on certiorari under Rule 45 of the

Rules of Court of the Decision[1] dated January 18, 2002 and the
Resolution[2] dated April 25, 2002 of the Court of Appeals (CA) in CA-
G.R. SP No. 63820.

Petitioner Emma Ver-Reyes claims to have acquired a 41,837-square-

meter lot (Lot No. 6961 Psd-20246, Imus Estate, G.L.S.O. Record No.
8843) located in Dasmariñas, Cavite and covered by Transfer Certificate
of Title (TCT) No. 58459 in the name of the spouses Marciano and
Virginia Cuevas by virtue of a Deed of Absolute Sale[3] dated October
8, 1976 executed by the latter in her favor. While she religiously paid
the real estate taxes on the property, petitioner failed to register her title
over the same.

Later, it appeared that the Cuevas spouses executed another Deed of

Absolute Sale[4] on November 10, 1992 over the same property in favor
of respondent Irene Montemayor. This time, the sale was registered,
eventually leading to the cancellation of TCT No. 58459 and the
issuance of TCT No. 369793 in the name of respondent.

When this came to her knowledge, petitioner filed on February 18, 1994
a petition for reconveyance, docketed as Civil Case No. 878-94, with the
Regional Trial Court (RTC), Branch 21 of the Province of Cavite against
respondent, accusing her of forgery and fraudulently causing the
issuance of a new certificate of title in her name.

After trial, the RTC, Branch 21, Cavite, rendered its Decision[5] dated
October 7, 1996 dismissing the complaint for reconveyance and finding
respondent as the true and lawful owner of the property described in
TCT 369793.

Petitioner appealed the RTC Decision to the CA on July 11, 1997.

Pending appeal, or in August 1998, petitioner learned of the cancellation
of respondent’s TCT over the property in favor of a certain Engracia Isip
(Engracia), after which a mortgage was constituted thereon by
Engracia’s heirs.

Acting on this information, petitioner conducted an investigation, and

her inquiry revealed the following:

1. Respondent Irene Montemayor executed on January 15, 1998 a

Waiver and Quitclaim,[6] recognizing the genuineness of TCT No.
769357 in the name of Engracia Isip which had been transferred to her
heirs (Apolonia I. R. Alcaraz, Eliza I. Reyes-Gloria, Victor Isip Reyes
and Epitacio Isip Reyes) covered by TCT No. T-784707, declaring that
all documents relative to the issuance of subsequent TCTs, including
TCT No. 369793 in her name were simulated and fictitious, and
renouncing all her claims to the property in favor of Engracia and her
heirs, executors, administrators, and assigns.

2. The Register of Deeds of Cavite, notwithstanding being impleaded as

a party to the pending appeal before the CA, cancelled TCT No. T-
369793[7] in the name of respondent by virtue of the Waiver and
Quitclaim. It also caused the annotation of the Waiver and Quitclaim on
both TCT Nos. T-369793 and T-784707[8] in the name of Engracia’s
heirs.

3. The technical descriptions under TCT Nos. T-769357[9] and T-

784707 showed that the property described therein is the same property
subject of the pending appeal before the CA.

4. The basis of Engracia’s title under TCT No. 769357 is Bureau of

Lands Sales Contract/Certificate No. V-139[10] dated January 9, 1954
and Department of Agriculture and Natural Resources/Bureau of Lands
Deed of Conveyance No. V-9039[11] dated March 30, 1965. It
appeared that TCT No. 769357 was issued or entered only on October
24, 1997.

5. The subject parcel of land was originally part of Original Certificate

of Title No. 1002 (RT-17577)[12] under the name of the Republic of the
Philippines.

6. By virtue of the above Certificate No. V-139 and Deed of

Conveyance No. V-9039, both in favor of Engracia, TCT No. 13105[13]
dated April 23, 1965 was issued in her name.

7. There were a series of conveyances made and several titles were

issued thereon – TCT No. 13105 was cancelled and TCT No. 13113[14]
dated April 26, 1965 was issued to Rosalinda Puspos; TCT No. 13113
was cancelled and TCT No. T-45574[15] dated July 20, 1970 was issued
in favor of Belen R. Carungcong (pursuant to a Deed of Absolute Sale
dated July 21, 1970 executed by Rosalinda Puspos); TCT No. T-45574
was cancelled and TCT No. T-57845[16] dated February 28, 1972 was
issued in the name of Aurelia de la Cruz; and TCT No. T-57845 was
cancelled and TCT No. T-58459[17] dated April 3, 1972 was issued in
the name of the spouses Marciano and Virginia M. Cuevas by virtue of a
Deed of Absolute Sale dated March 27, 1972 executed by Aurelia de la
Cruz.

8. Notwithstanding the foregoing transfers of title, TCT No. T-769357

dated October 24, 1997 was issued in the name of Engracia Isip based
on the same Certificate No. V-139 and Conveyance No. V-9039.

9. TCT No. T-784707 in the name of Engracia’s heirs was issued by

virtue of a Deed of Extra-Judicial Settlement of the Estate of Deceased
Engracia Isip[18] dated September 24, 1997. Engracia Isip died way
back on January 12, 1981.

10. TCT No. T-784707 dated December 15, 1997 in the name of
Engracia’s heirs had been mortgaged to a certain Potentiano Ponce for
P6,500,000.00 on January 13, 1998. The mortgage was annotated on the
TCT on January 14, 1998.

On October 20, 1998, petitioner filed an Urgent Manifestation[19]

before the CA to advise it of the above information she had discovered.
On November 6, 1998, she served a Notice of Lis Pendens[20] affecting
the property under TCT No. T-784707 in the name of Engracia’s heirs
upon the Register of Deeds of Cavite.

In a letter dated November 17, 1998, the Register of Deeds of Cavite

through Deputy Registrar of Deeds Perfecto G. Dumay-as denied the
annotation of petitioner’s Notice of Lis Pendens on the following
grounds –

1. The cancelled title of IRENE VILLAMAYOR [sic] (TCT No. T-

369993) does not bear an inscription as to the pendency of Civil Case
No. 878-94 involving the said property;

2. Further, the title of the Heirs of Engracia Isip (TCT No. T-784707)
did not originate from the cancelled title of Irene Montemayor (TCT No.
T-369793);

3. That the Waiver/Quitclaim was done in recognition of a better and

stronger title and to avoid unnecessary, time consumming [sic] and
costly legal conprontation [sic] between the parties;

4. That the title of the Isips (TCT No. T-784707) is a derivative title
from TCT No. T-769357 (Engracia Isip) which originated from a Deed
of Conveyance duly issued by the Land Management Bureau, an
immediate transfer from OCT No. 1002 (Republic of the Philippines);

5. That the late Engracia Isip nor her heirs were not a party to the
ongoing court litigation between Emma Ver Reyes, et al. vs. Irene
Montemayor, et al., hence, the said notice of Lis Pendens does not meet
the necessary requirement of its registrability.[21]

Petitioner elevated the matter to the Land Registration Authority (LRA)

via Consulta No. 3039 dated December 7, 1998.[22] In its Resolution
dated August 21, 2000, the LRA denied the registration of the Notice of
Lis Pendens, sustaining the ground that ―the late ENGRACIA ISIP nor
her heirs were not impleaded as parties to the pending suit or
proceedings.‖

Petitioner moved to reconsider the Resolution dated August 21, 2000. In

an Order[23] dated January 8, 2001, the LRA denied the motion for lack
of merit.
In a petition for review under Rule 43 of the Rules of Court, petitioner
questioned before the CA the Resolution dated August 21, 2000 and the
Order dated January 8, 2001 of the LRA.

In the Decision[24] promulgated on January 18, 2002, the CA denied the

petition on the ground that the stance taken by the LRA was the most
logical under the circumstances; and while the remedy of a notice of lis
pendens is for the protection of third parties, it should not prejudice the
right of the party in whose favor the property is titled without him being
impleaded in the pending case.

Petitioner filed her motion for reconsideration of the CA Decision but

said motion was denied, for lack of merit, in the Resolution[25] dated
April 25, 2002. The CA held –

This Court is of the opinion and so holds that if it is desired to have a

Notice of Lis Pendens annotated, it must appear that the present
registered owners are impleaded in the pending case. We do not argue
with the petitioner’s contention that ―it is not necessary for the applicant
to prove his ownership or interest over the property sought to be effected
by lis pendens‖ (citing Villanueva vs. Court of Appeals, 281 SCRA
298). But what We are saying is that the notice of Lis Pendens should
not prejudice the right of the party in whose favor the property is duly
titled without giving them their day in court.

Thus, this petition, raising the sole issue of whether the Register of
Deeds was justified, under the attendant circumstances, in denying the
annotation of the Notice of Lis Pendens on TCT No. T-784707.

Petitioner maintains that it is required neither under Section 14[26] of

Rule 13 of the Rules of Court nor under Section 76[27] of Presidential
Decree No. 1529 (Property Registration Decree) that a registered owner
of real property should first be impleaded in the pending case for a
notice of lis pendens to be annotated in a TCT. She posits that these
provisions do not state the grounds to justify the refusal by the Register
of Deeds and/or the LRA to effect the said annotation. Petitioner also
cites Voluntad v. Spouses Dizon[28] wherein the annotation of a notice
of lis pendens was allowed on the TCT of Carmen and Maria Voluntad
despite the registered owners not being parties to the pending case.
Petitioner further claims that the duty to record the notice of lis pendens
filed by a party to a pending case is ministerial on the part of the
Register of Deeds of the province where the property is located as long
as the requisites for the recording thereof – the names of the parties, the
object of the action or defense, and a description of the property in that
province affected thereby – are indicated in the notice.

Citing our rulings that a notation of lis pendens does not create a right or
a lien upon the subject property,[29] and that the applying party is not
required to prove his right or interest over the property on which the
notice is sought to be annotated,[30] petitioner argues that the annotation
of the notice of lis pendens under the circumstances would only serve as
a warning to third parties that the real property is subject to a pending
litigation such that persons dealing with it would do so at their own risk,
and it would not, in any way, prejudice the rights of Engracia’s heirs
who are named as owners of the subject real estate.

While we do not contradict petitioner as to the nature, purpose, and

effects of a notice of lis pendens as held in the jurisprudence cited in her
petition and memorandum, we do not agree that these cases are squarely
applicable in this case to favor her cause.

It should be remembered that the Office of the Register of Deeds of

Cavite, as affirmed by both the LRA and the CA, denied the annotation
of the notice of lis pendens not only on the ground that Engracia’s heirs,
the persons named in TCT No. T-784707, were not impleaded in the
case between petitioner and respondent pending appeal before the CA.
It also relied on other attendant circumstances, namely: (1) the cancelled
title of respondent did not bear an inscription on the pendency of Civil
Case No. 878-94 then before the RTC, Branch 21, Cavite involving the
said property; (2) the title of Engracia’s heirs over the property did not
originate nor was it transferred from the title of respondent; (3)
respondent, by virtue of her Waiver and Quitclaim, renounced all her
claims over the property by stating that her title, including those of her
supposed predecessors-in-interest, was fictitious and simulated; and (4)
TCT No. T-784707 in the name of Engracia’s heirs was derived by
succession from TCT No. T-769357 in the name of Engracia Isip,
which, in turn, was derived from a conveyance in her favor by the
Republic of the Philippines under OCT No. 1002.
It is for these other reasons that our ruling in Voluntad cannot apply to
the present controversy. In Voluntad, the annotation of the notice of lis
pendens was allowed on the TCT of Carmen and Maria Voluntad even if
they were not parties to the pending litigation because they were the
predecessors-in-interest of the Voluntads who applied for the annotation
(applicant Voluntads) and that the real property subject thereof was still
in the names of Carmen and Maria despite already having passed on to
their heirs (applicant Voluntads).

In contrast, herein petitioner’s claim to the property is not derived from

the titles of Engracia and her heirs. While the property described in
TCT No. T-784707 in the name of Engracia’s heirs refers to the same
property described in TCT No. 58459 in the name of Marciano and
Virginia Cuevas from whom petitioner claimed to have derived her title,
it is apparent that the title of Engracia’s heirs over the property is totally
alien to the controversy between petitioner and respondent. Had
petitioner been truly prudent as she now poses to be, she should have
caused the annotation of the Notice of Lis Pendens on TCT No. 58459 in
the name of respondent way back when she filed the petition for
reconveyance (Civil Case No. 878-94), as this would have resulted in the
carrying over of the notice onto TCT Nos. T-769357 (Engracia Isip) and
T-784707 (Engracia’s heirs) after respondent waived her claim over the
property in Isips’ favor.

Indeed, petitioner’s belated act of applying for a notice of lis pendens, if

allowed by the Office of the Register of Deeds of Cavite, would infringe
on the right to due process of Engracia’s heirs, who were never parties to
the reconveyance suit between petitioner and respondent now pending
appeal before the CA.[31] While the notice of lis pendens would not
create a right or lien over the property, it will definitely be an
inconvenience or a burden, however slight, on the title of Engracia’s
heirs, especially when dealing with the same property in the concept of
owners. Justice and fair play require that Engracia’s heirs be rightfully
informed of petitioner’s claim over the same property by impleading
them in the pending suit before the application for annotation of lis
pendens be favorably acted upon.

WHEREFORE, the petition is DENIED for lack of merit. Costs against

petitioner.

SO ORDERED.
ESSIE GASATAYA, G.R. No. 148147
-versus-
EDITHA MABASA,
February 16, 2007
x-------------------------------------------------
- - -x
DECISION
CORONA, J.:

Before us is an appeal by certiorari under Rule 45 of the 1997 Rules of

Civil Procedure assailing the decision[1] of the Court of Appeals (CA)
in CA-G.R. CV No. 55055 which, in turn, affirmed the decision of the
Regional Trial Court (RTC) of Lanao del Norte, Branch 7.[2]

The facts follow.

Respondent Editha Mabasas father, Buenaventura Mabasa, was granted

a homestead patent on Lots 279, 272 and 972 located in Lala, Lanao del
Norte. Buenaventura Mabasa mortgaged these lots to secure a loan from
the Development Bank of the Philippines (DBP). Because of his failure
to pay his indebtedness, DBP foreclosed on the lots and sold them at
public auction where it emerged as the highest bidder. DBP then
obtained titles to the lots: Lot 279 under TCT No. T-2247 and
consolidated Lots 272 and 972 under TCT No. T-2448.

When Buenaventura Mabasa died, respondents siblings authorized her to

negotiate with DBP for the repurchase of the lots. DBP allowed
respondent to reacquire the foreclosed properties through a deed of
conditional sale for P25,875.[3]

Subsequently, respondent entered into an agreement with petitioners

father, Sabas Gasataya, for the latter to assume payment of her
obligation to DBP. They further agreed that Sabas Gasataya would take
possession of the lots for 20 years and develop them into a fishpond. As
consideration thereof, respondent received P10,000 cash, in addition to
the P25,000 that Sabas Gasataya had to pay DBP on her behalf.

Upon representation by Sabas Gasataya that respondents obligation to

DBP had already been settled, they entered into another agreement
denominated as Deed of Sale of Fishpond Lands with Right to
Repurchase.

Eight years after the execution of the above deed of sale with right to
repurchase, respondent discovered that Sabas Gasataya had stopped
paying DBP. As a result, DBP revoked her right to repurchase the
subject lots.

DBP later on held a public auction of the properties where petitioner

participated and bid the highest price of P27,200. Eventually, he
acquired titles to the lots for which he was issued TCT No. T-11720 in
lieu of TCT No. T-2447 (Lot 279) and TCT No. T-11721 for TCT No.
T-2448 (Lots 272 and 972).

Respondent then filed a complaint in the RTC for reconveyance of titles

of lands with damages[4] against petitioner and Sabas Gasataya
(Gasatayas). She claimed that the latter deliberately reneged on his
commitment to pay DBP to: (1) revoke her right to repurchase the lots
under the deed of conditional sale and (2) subject the properties to
another public auction where petitioner could bid.

Petitioner and his father denied the allegations saying that the deed of
conditional sale assumed by the latter from respondent was rendered
ineffective by DBPs refusal to accept payments thereon.

The trial court ruled in favor of respondent finding that the Gasatayas
failed to controvert her claim that they defrauded her just so petitioner
could acquire the lots at public auction.[5] According to the trial court,
the Gasatayas failed to prove that DBP indeed rejected payments from
Sabas Gasataya. The trial court ruled:

WHEREFORE, judgment is hereby rendered in favor of the

[respondent] and against [the Gasatayas] ordering [them] to wit:

a. Ordering [petitioner] to reconvey to [respondent] TCT. No.[T-

11720] and TCT No. T-11721, both of the Registry of Deeds for the
Province of Lanao del Norte, upon tender to and receipt by [petitioner]
of the amount of P37,200.00 Philippine money;

b. Ordering the Registrar of Deeds for the Province of Lanao del Norte
to procure and cause the transfer and registration of the aforesaid
transfer certificates of title in favor and in the name of herein
[respondent] Editha S. Mabasa;

c. Ordering [the Gasatayas] to cede, transfer and reconvey to

[respondent] the physical possession and occupancy of Lot 279, 272 and
Lot 972as covered by the aforesaid certificates of title;

d. Ordering [the Gasatayas] to pay [respondent] the sum of P5,000.00

for attorneys fees; P5,000.00 as litigation expenses;

e. Ordering [the Gasatayas] to pay costs of this proceeding[s].

SO ORDERED.[6]

Petitioner and his father appealed to the CA which affirmed the RTCs
decision and dismissed their appeal for lack of merit. The CA declared:

The contention of [respondent] that [the Gasatayas] deliberately chose

not to pay DBP as agreed, in order for them to acquire said properties in
a fraudulent and treacherous manner, was not fully controverted by
[them]. [The Gasatayas] failed to produce evidence to support their
defenses.

xxx xxx xxx

Moreover, [the Gasatayas] are in possession of said land[s] by virtue of a

Deed of Sale with a Right to Repurchase and not because the DBP
granted it to them[T]o facilitate their acquisition of the land in question,
[they] deliberately defaulted in the payment of the assumed obligation to
the damage and prejudice of [respondent]. Consequently, the lands in
question were subjected to public bidding wherein [petitioner]
participated and eventually won[the Gasatayas] committed a breach of
trust amounting to fraud which would warrant an action for
reconveyance.[7]

Petitioner alone came to us via this appeal by certiorari seeking the

reversal of the CA decision.

Before us, petitioner contests the CA decision affirming the trial courts
order to reconvey his titles on the disputed lots to respondent who,
according to him, is not the owner thereof.
We affirm the CA.

Reconveyance is available not only to the legal owner of a property but

also to the person with a better right than the person under whose name
said property was erroneously registered.[8] While respondent is not the
legal owner of the disputed lots, she has a better right than petitioner to
the contested lots on the following grounds: first, the deed of conditional
sale executed by DBP vested on her the right to repurchase the lots and
second, her right to repurchase them would have subsisted had they (the
Gasatayas) not defrauded her.

The trial courts findings, as affirmed by the CA, that petitioner and his
father deceived respondent to acquire the disputed lots bind us. Well-
settled is the rule that factual conclusions of the trial court deserve
respect and become irrefutable especially when affirmed by the CA.[9]
Absent any evidence that the CA overlooked salient matters that could
justify a reversal of the outcome of this case, we decline to disturb such
factual conclusions.

Petitioner, however, insists that respondent had no right to the disputed

lots since the conditional sale agreement where such right was based had
long been cancelled by DBP. According to petitioner, a void and
inexistent deed cannot override his right as registered owner of the lots.

We disagree.

Petitioner cannot discredit the deed of conditional sale just so he can to

keep his titles to the lots. Petitioner should be reminded that DBP
revoked respondents right to repurchase the lots under said deed because
of the deceitful maneuverings that he and his father employed. If we
were to sustain petitioners argument, then we would, in effect, reward
him for his misdeed.

Neither can this Court uphold petitioners contention that his titles are
unsullied on the mere fact that he purchased the properties at public
auction. Fraud overthrows the presumption that the public sale was
attended with regularity. The public sale did not vest petitioner with any
valid title to the properties since it was but the consequence of his and
his fathers fraudulent schemes.

The registration of the properties in petitioners name did not obliterate

the fact that fraud preceded and facilitated such registration. Actual or
positive fraud proceeds from an intentional deception practiced by
means of misrepresentation of material facts,[10] which in this case was
the conscious representation by petitioners father (Sabas Gasataya) that
respondents obligation to DBP had already been settled. It is fraud to
knowingly omit or conceal a fact, upon which benefit is obtained, to the
prejudice of another.[11] Consequently, fraud is a ground for
reconveyance.[12]

Moreover, the law only protects an innocent purchaser for value and not
one who has knowledge of and participation in the employment of fraud.
An innocent purchaser for value is one who buys the property of another
without notice that some other person has a right to or interest in that
same property, and who pays a full and fair price at the time of the
purchase or before receiving any notice of another persons claim.[13]
Obviously, petitioner was not an innocent purchaser for value.

As a final point, the Court takes significant note of the fact that
respondents father originally acquired the subject lots through
homestead grant. Commonwealth Act 141 (Public Land Act) aims to
confine and preserve to the homesteader and his kin the homestead lots.
We, therefore, agree with the CAs disquisition that courts should lend a
stout shoulder to help keep a homestead in the homesteaders family for
the stern reality cannot be belied that homesteaders and their families are
generally in the lower stratum of life and most likely, when they alienate
the homestead, it is out of dire necessity.[14] According to the CA,
desperation does not allow much of a choice, hence homesteaders and
their kin should be given every opportunity to repurchase their
homestead.

WHEREFORE, the assailed decision of the Court of Appeals in CA-

G.R. CV No. 55055 is hereby AFFIRMED.

Costs against petitioner.

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.

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.

Yap (Chairman), Melencio-Herrera and Paras, JJ., concur.

Separate Opinions
PADILLA, J, concurring and dissenting:

I concur in the result. I do not however agree with the sweeping

proposition that all actions for reconveyance, based upon the ground of
fraud, prescribed in ten (10) years. A distinction should be made. Fraud,
or dolo it should be recalled, is of two (2) kinds: dolo causante or that
which determines or is the essential cause of the consent; and dolo
incidente, or that which does not have such decisive influence and by
itself cannot cause the giving of consent by refers only to some
particular or accident of obligation. (Tolentino, Civil Code of the
Philippines, 1956 ed., Vol. IV, p. 463).

If the fraud committed was but an incident to the registration of land

(dolo incidents), as in the case at bar, then I would agree that the action
for reconveyance prescribes in ten (10) years. But, where it is necessary
to annul a deed or title before relief could be granted, as when fraud,
which vitiates consent dolo causante is alleged to have been committed
in the execution of the deed which became the basis for the registration
of a parcel of land, the action for reconveyance should be filed within
four (4) years from the discovery of the fraud.
In Rone vs. Claro and Baquiring (91 Phil. 250, 251), the Court held that
an action for the recovery of title to parcel of registered land, where it
was alleged that the defendants or one of them, through fraud, deceit and
breach of faith, succeeded in getting the original certificate of title from
one of the plaintiffs, and then, again, with use of fraud, deceit, breach of
faith, and other machinations, succeeded in having the plaintiffs execute
a deed of sale of the lot in question in favor of the defendants, and,
thereafter, obtained a certificate of title in their names: "It may be that
the recovery of title and possession of the lot was the ultimate objective
of plaintiffs, but to attain that goal, they must need first travel over the
road of relief on the ground of fraud."

Separate Opinions
PADILLA, J, concurring and dissenting:

I concur in the result. I do not however agree with the sweeping

proposition that all actions for reconveyance, based upon the ground of
fraud, prescribed in ten (10) years. A distinction should be made. Fraud,
or dolo it should be recalled, is of two (2) kinds: dolo causante or that
which determines or is the essential cause of the consent; and dolo
incidente, or that which does not have such decisive influence and by
itself cannot cause the giving of consent by refers only to some
particular or accident of obligation. (Tolentino, Civil Code of the
Philippines, 1956 ed., Vol. IV, p. 463).

If the fraud committed was but an incident to the registration of land

(dolo incidents), as in the case at bar, then I would agree that the action
for reconveyance prescribes in ten (10) years. But, where it is necessary
to annul a deed or title before relief could be granted, as when fraud,
which vitiates consent dolo causante is alleged to have been committed
in the execution of the deed which became the basis for the registration
of a parcel of land, the action for reconveyance should be filed within
four (4) years from the discovery of the fraud.

In Rone vs. Claro and Baquiring (91 Phil. 250, 251), the Court held that
an action for the recovery of title to parcel of registered land, where it
was alleged that the defendants or one of them, through fraud, deceit and
breach of faith, succeeded in getting the original certificate of title from
one of the plaintiffs, and then, again, with use of fraud, deceit, breach of
faith, and other machinations, succeeded in having the plaintiffs execute
a deed of sale of the lot in question in favor of the defendants, and,
thereafter, obtained a certificate of title in their names: "It may be that
the recovery of title and possession of the lot was the ultimate objective
of plaintiffs, but to attain that goal, they must need first travel over the
road of relief on the ground of fraud."

[G.R. No. 140457. January 19, 2005]

HEIRS OF MAXIMO SANJORJO, namely, VICENTE
SANJORJO, MACARIA SANJORJO, DOMINGO SANJORJO,
ALFREDO CASTRO, and SPOUSES SANTOS AND LOLITA
INOT, petitioners, vs.
HEIRS OF MANUEL Y. QUIJANO, namely, ROSA Q. LEDESMA,
MILAGROS Q. YULIONGSIU, ALAN P. QUIJANO AND
GWENDOLYN P. ENRIQUEZ, and VICENTE Z. GULBE,
respondents.

DECISION

CALLEJO, SR., J.:

This is a petition for review on certiorari under Rule 45 of the Revised

Rules of Court of the Decision[1] dated February 17, 1999 of the Court
of Appeals (CA) in CA-G.R. CV No. 50246 and its Resolution[2] dated
October 12, 1999 denying the petitioners motion for reconsideration.

The Antecedents

On August 29, 1988, Free Patent No. VII-4-2974 was issued to Alan P.
Quijano, married to Mila Matutina, over a parcel of land located in
Antipolo, Medellin, Cebu, with an area of 14,197 square meters
identified as Lot 374, Cadastre 374-D. Based on the said patent, Original
Certificate of Title (OCT) No. OP-38221 was issued by the Register of
Deeds to and in the name of Alan P. Quijano on September 6, 1988.[3]
On November 11, 1988, Free Patent No. VII-4-3088 was issued to and
in favor of Gwendolyn Q. Enriquez, married to Eugenio G. Enriquez,
over a parcel of land located in Antipolo, Medellin, Cebu, identified as
Lot 379, Cadastre 374-D, with an area of 6,640 square meters. Based on
the said patent, OCT No. OP-39847 was issued in her favor on February
11, 1989.[4]
In the meantime, Gwendolyn Enriquez filed an application for a free
patent over Lot 376 of Cadastre 374-D with the Department of
Environment and Natural Resources (DENR). The application was
docketed as Free Patent Application (F.P.A.) No. VII-4-3152. She also
filed an application for a free patent over Lot 378, docketed as F.P.A.
No. VII-4-3152-A. However, the heirs of Guillermo Sanjorjo, namely,
Tranquilina, Pablo, Boir, Erlinda, Josefina, Maria, Maximo, Isabel, Jose,
Dario, Vicente, Noel, Albina, Ramon, Domingo, Adriano and Celedonia,
all surnamed Sanjorjo, filed a protest/complaint with the DENR on May
22, 1991, praying for the cancellation of Free Patent No. VII-4-2974, as
well as Free Patent No. VII-4-3088, and for the dismissal of the free
patent applications over Lots 376 and 378.[5] The complaint was
docketed as PENRO Claim No. PN 072231-4, and was assigned to the
Regional Executive Director for hearing and decision.

The protestants/claimants alleged that the said parcels of land were

originally owned by Ananias Ursal but were exchanged for a parcel of
land located in San Remegio, Cebu, owned by their predecessor,
Guillermo Sanjorjo, married to Maria Ursal, and from whom they
inherited the property. They prayed that:

WHEREFORE, premises considered and after hearing on the merits, it is

most respectfully prayed of this most Honorable Office to render
judgment ordering:

1. The cancellation of Free Patent Titles Nos. VII-4-2974 and VII-4-

3088 issued to respondents Alan P. Quijano and Gwendolyn Quijano
Enriquez concerning Lot Nos. 374 and 379, respectively.

2. The cancellation of Free Patent Application Nos. VII-4-3152, VII-4-

3152-A, and VII-1-18277-I of respondents concerning Lot Nos. 376 and
378.

3. The return of possession and ownership of these lots to the

complainants/protestants who are the rightful owners by inheritance.

Protestants further pray for other relief, just and equitable, under the
premises.[6]

During the pre-trial conference of August 2, 1991, the

protestants/claimants manifested that they were withdrawing their
protest/complaint. Thus, on April 14, 1992, the Regional Executive
Director rendered a decision[7] giving due course to the applications.
However, he ruled that the free patents over Lots 374 and 379 could no
longer be disturbed since the complaint for the cancellation was filed
more than one year from their issuance. The dispositive portion of the
decision reads:

WHEREFORE, it is hereby ordered that the above-entitled

administrative case be dismissed and dropped from the records. It is
further ordered that the Free Patent Application of applicants-
respondents over Lot Nos. 376 and 378 be given due course for being in
the actual adverse and continuous possession of the land in controversy.
Patent/Titles already issued and entered in the Registry Book in favor of
applicants-respondents on Lot Nos. 374 and 379 in 1988 and 1989 need
not be disturbed anymore, for failure to show evidence of actual fraud in
the procurement of such titles.[8]

On September 13, 1993, Vicente Sanjorjo, the heirs of Maximo

Sanjorjo, namely, Macaria Sanjorjo, Domingo Sanjorjo, Alfredo Castro,
and the Spouses Santos and Lolita Inot, herein petitioners, filed a
complaint for cancellation of titles under tax declarations and
reconveyance of possession of real property covering Lots 374, 376, 378
and 379 located in Medellin, Cebu, against the private respondents, the
heirs of Manuel Quijano, namely, Rosa Q. Ledesma, Milagros Q.
Yuliongsiu, Alan P. Quijano and Gwendolyn P. Enriquez, and Vicente
Gulbe. The petitioners did not implead the rest of the heirs of Guillermo
Sanjorjo, including his daughter Tranquilina Sanjorjo, as parties-
plaintiffs, and alleged, inter alia

3. That the plaintiffs are the owners of several parcels of land in

Antipolo, Medellin, Cebu, which are more particularly described as
follows:

(a) Lot No. 374 with an area of 14,179 sq.m. and covered by Tax
Declaration No. 00718 in the name of PONCIANO DEMIAR and Tax
Declaration No. 01042 in the name of TRANQUILINA SANJORJO;

(b) Lot No. 376 with an area of 6,177 sq.m. and covered by Tax
Declaration No. 01038 in the name of MAURO SANJORJO;
(c) Lot No. 378 with an area of 3,201 sq.m. and covered by Tax
Declaration No. 01035 in the name of FLORENTINO SANJORJO;

(d) Lot No. 379 with an area of 6,640 sq.m. and covered by Tax
Declaration No. 00772 in the name of SANTOS INOT and Tax
Declaration No. 01039 in the name of SABINIANO SANJORJO;

The said Tax Declarations are hereto attached and marked as Annexes
A, B, C, D, E and F, respectively, and made integral parts of this
complaint;

4. That the aforestated lots originally belonged to the late MAXIMO

SANJORJO who died during World War II. His children MAURO,
FLORENTINO, SABINIANO, TRANQUILINA and RAYMUNDA, all
surnamed SANJORJO, inherited the said properties. They have also
passed away and the plaintiffs, who are the children of MAXIMO
SANJORJOs children are now the rightful heirs of the aforementioned
parcels of land;

5. That sometime in 1983, the parcels of land in question were leased to

MANUEL QUIJANO for a two (2) year period at the rate of P4,500.00
per year. However, the lease was never paid for nor was possession of
the said properties ever returned to the plaintiffs, despite repeated
demands on QUIJANO to return the same;

6. That MANUEL QUIJANO died in 1987 and the herein defendants,

the heirs of MANUEL QUIJANO, divided among themselves the land
belonging to the plaintiffs. Titles and Tax Declarations were then issued
on the said lots in the name of the defendants, as follows:

(a) Lot No. 374 is now covered by OCT No. OP-38221 in the name of
defendant ALAN P. QUIJANO. A copy of the title is hereto attached
and marked as Annex G and made an integral part of this complaint;

(b) Lot No. 376 is now covered by Tax Declaration No. 10015 in the
name of MANUEL Y. QUIJANO married to FLAVIANA P. QUIJANO.
A copy of the said tax declaration is hereto attached and marked as
Annex H and made an integral part of this complaint;
(c) Lot No. 379 is now covered by OCT No. OP-39847 in the name of
GWENDOLYN Q. ENRIQUEZ. A copy of the title is hereto attached
and marked as Annex I and made an integral part of this complaint;

7. That the plaintiffs nor their ascendants have never sold, donated, or
mortgaged any of these lots in question to the defendants or their
ascendants;

8. That sometime in September 1991, the defendant ALAN QUIJANO

charged plaintiff ALFREDO CASTRO with QUALIFIED THEFT for
allegedly having stolen the coconuts on the properties in question.
Subsequently, the Municipal Court of Medellin acquitted CASTRO on
the ground that he was the real owner of the lot. It was only on that time
that plaintiffs discovered that defendants had already titled their lots.
Furthermore, in 1992, the herein plaintiffs were sued by the defendants
for Quieting of Title, which case they subsequently withdrew. This case
made the plaintiffs realize that all their properties had already been titled
in defendants names;

9. That, at present, defendants have leased these lots to a certain

VICENTE GULBE, who is named as a defendant in this case. Plaintiffs
also demanded from defendant GULBE the return of their possession
over these lots but to no avail. The Certification to File Action from the
barangay captain of Antipolo, Medellin, Cebu, is hereto attached and
marked as Annex J and made an integral part of this complaint;

10. That upon their discovery of defendants fraudulent acts, plaintiffs

demanded the return of their properties but the defendants have failed
and refused and continue to fail and refuse to do so.[9]

The petitioners prayed that, after due proceedings, judgment be rendered

in their favor:

(a) Ordering the cancellation of OCT Nos. OP-38221 and OP-39847 and
Tax Declaration No. 10015;

(b) Ordering the defendants to pay rentals to the plaintiffs in the amount
of P4,500.00 per year from 1983 up to the time the properties are
returned to the plaintiffs; and
(c) Ordering the defendants to pay the plaintiffs moral damages in the
amount of not less than P20,000.00.

Plaintiffs further pray for such other relief and remedies as this Court
may deem just and equitable under the premises.[10]

The private respondents filed a motion to dismiss the complaint on the

ground of res judicata based on the decision of the Regional Executive
Director on April 14, 1992. They maintained that the decision of the
Regional Executive Director had become final and executory and, as
such, barred the petitioners action.

The petitioners opposed the motion. In their reply to such opposition, the
private respondents invoked another ground that the petitioners action
was barred by the issuance of OCT No. OP-38221 covering Lot 374 on
August 29, 1988, and OCT No. OP-39847 covering Lot 379 on
November 11, 1988.

On September 13, 1994, the trial court issued an Order dismissing the
complaint on the ground of res judicata. The petitioners appealed the
order to the CA.

We note that the petitioners limited the issues to the two titled lots, Lots
374 and 379, arguing that there can be no res judicata in this case
because one of its elements, i.e., that the former judgment is a judgment
on the merits, was lacking. The petitioners did not assail the trial courts
order dismissing the complaint insofar as Lots 376 and 378 are
concerned. Moreover, according to the petitioners, the April 14, 1992
Decision of the Regional Executive Director was not a decision on the
merits of the complaint, as they had yet to prove their allegation of fraud
as regards the said lots.

In its Decision promulgated on February 17, 1999, the appellate court

affirmed the assailed order of the trial court, albeit for a different reason,
i.e., prescription. Citing Section 32 of Presidential Decree No. 1529,[11]
it held that the OCTs issued to the respondents on the basis of their
respective free patents became as indefeasible as one which was
judicially secured upon the expiration of one year from the date of the
issuance of the patent. The CA did not deem it necessary to rule on the
issue of res judicata since it dismissed the case on the ground of
prescription.[12]
When their motion for reconsideration of the said decision of the CA
was denied,[13] the petitioners filed the instant petition for review,
contending that:

THE HONORABLE COURT OF APPEALS (THIRD DIVISION)

GRAVELY ERRED IN AFFIRMING THE DECISION OF THE
REGIONAL TRIAL COURT, BRANCH 13, CEBU CITY, DATED
SEPTEMBER 13, 1994.

PETITIONERS BEG THAT THIS PETITION BE GIVEN DUE

COURSE IN THE INTEREST OF SUBSTANTIAL JUSTICE, [SINCE]
THE DECISION OF THE COURT OF APPEALS, IF NOT
CORRECTED, WOULD CAUSE IRREPARABLE INJURY TO THE
PREJUDICE OF HEREIN PETITIONERS WHO ARE THE REAL
OWNERS OF THE LOTS IN QUESTION.[14]

The petitioners maintain that the appellate court erred in holding that
their action in Civil Case No. CEB 14580 was barred by the Decision
dated April 14, 1992 of the DENR Regional Executive Director. They
contend that the latter decision is not a decision on its merits so as to bar
their complaint.

We agree.

The elements of res judicata are the following: (1) the previous judgment
has become final; (2) the prior judgment was rendered by a court having
jurisdiction over the subject matter and the parties; (3) the first judgment
was made on the merits; and (4) there was substantial identity of parties,
subject matter and causes of action, as between the prior and subsequent
actions.[15]

A judgment on the merits is one rendered after argument and

investigation, and when there is determination which party is right, as
distinguished from a judgment rendered upon some preliminary or
formal or merely technical point, or by default and without trial.[16]

As gleaned from the decision of the DENR Regional Executive Director,

he dismissed the petitioners complaint for the cancellation of Free Patent
Nos. VII-4-2974 and VII-4-3088 on the ground that it was filed only on
May 22, 1991, more than three years from the issuance of the said
patents on August 29, 1988 and November 11, 1988, respectively. In the
said decision, the Regional Executive Director declared that after the
lapse of one year from the issuance of patent and registry thereof in the
Registry Book of the Register of Deeds, Cebu Province, only the regular
courts of justice have jurisdiction on the matter of cancellation of
title.[17] The petitioners agreed with the Regional Executive Director
and withdrew their complaint, opting to file an appropriate action in
court for the nullification of the said patents and titles. Hence, the
decision of the Regional Executive Director was not a decision on the
merits of the petitioners complaint.

On the second issue, we agree with the petitioners that their action
against the private respondents for the reconveyance of Lots 374 and
379, covered by OCT No. OP-38221 issued on September 6, 1988 and
OCT No. OP-39847 issued on February 11, 1989, respectively, was not
barred by Section 32 of P.D. No. 1529, which reads:

SEC. 32. Review of decree of registration; Innocent purchaser for value.

The decree of registration shall not be reopened or revised by reason of
absence, minority, or other disability of any person adversely affected
thereby, nor by any proceeding in any court for reversing judgments,
subject, however, to the right of any person, including the government
and the branches thereof, deprived of land or of any estate or interest
therein by such adjudication or confirmation of title obtained by actual
fraud, to file in the proper Court of First Instance a petition for
reopening and review of the decree of registration not later than one year
from and after the date of the entry of such decree of registration, but in
no case shall such petition be entertained by the court where an innocent
purchaser for value has acquired the land or an interest therein, whose
rights may be prejudiced. Whenever the phrase innocent purchaser for
value or any equivalent phrase occurs in this Decree, it shall be deemed
to include an innocent lessee, mortgagee, or other encumbrancer for
value.[18]

We agree with the ruling of the CA that the torrens title issued on the
basis of the free patents became as indefeasible as one which was
judicially secured upon the expiration of one year from date of issuance
of the patent.[19] The order or decision of the DENR granting an
application for a free patent can be reviewed only within one year
thereafter, on the ground of actual fraud via a petition for review in the
Regional Trial Court (RTC) provided that no innocent purchaser for
value has acquired the property or any interest thereon. However, an
aggrieved party may still file an action for reconveyance based on
implied or constructive trust, which prescribes in ten years from the date
of the issuance of the Certificate of Title over the property provided that
the property has not been acquired by an innocent purchaser for value.
Thus:

The basic rule is that after the lapse of one (1) year, a decree of
registration is no longer open to review or attack although its issuance is
attended with actual fraud. This does not mean, however, that the
aggrieved party is without a remedy at law. If the property has not yet
passed to an innocent purchaser for value, an action for reconveyance is
still available. The decree becomes incontrovertible and can no longer be
reviewed after one (1) year from the date of the decree so that the only
remedy of the landowner whose property has been wrongfully or
erroneously registered in anothers name is to bring an ordinary action in
court for reconveyance, which is an action in personam and is always
available as long as the property has not passed to an innocent third
party for value. If the property has passed into the hands of an innocent
purchaser for value, the remedy is an action for damages. In this case,
the disputed property is still registered in the name of respondent
Demetrio Caringal, so that petitioner was correct in availing himself of
the procedural remedy of reconveyance.[20]

An action for reconveyance is one that seeks to transfer property,

wrongfully registered by another, to its rightful and legal owner.[21] All
that must be alleged in the complaint are two (2) facts which, admitting
them to be true, would entitle the plaintiff to recover title to the disputed
land, namely, (1) that the plaintiff was the owner of the land and, (2) that
the defendant had illegally dispossessed him of the same.[22] The body
of the pleading or complaint determines the nature of an action, not its
title or heading.[23] In their complaint, the petitioners clearly asserted
that their predecessors-in-interest have long been the absolute and
exclusive owners of the lots in question and that they were fraudulently
deprived of ownership thereof when the private respondents obtained
free patents and certificates of title in their names.[24] These allegations
certainly measure up to the requisite statement of facts to constitute an
action for reconveyance.

Article 1456 of the New Civil Code provides that a person acquiring
property through fraud becomes by operation of law a trustee of an
implied trust for the benefit of the real owner of the property. The
presence of fraud in this case created an implied trust in favor of the
petitioners, giving them the right to seek reconveyance of the property
from the private respondents. However, because of the trial courts
dismissal order adverted to above, the petitioners have been unable to
prove their charges of fraud and misrepresentation.

The petitioners action for reconveyance may not be said to have

prescribed, for, basing the present action on implied trust, the
prescriptive period is ten years.[25] The questioned titles were obtained
on August 29, 1988 and November 11, 1988, in OCT Nos. OP-38221
and OP-39847, respectively. The petitioners commenced their action for
reconveyance on September 13, 1993. Since the petitioners cause of
action is based on fraud, deemed to have taken place when the
certificates of title were issued,[26] the complaint filed on September 13,
1993 is, therefore, well within the prescriptive period.

IN LIGHT OF ALL THE FOREGOING, the petition is PARTIALLY

GRANTED. The Decision of the Court of Appeals is MODIFIED.
Accordingly, the Regional Trial Court of Cebu City, Branch 13, is
DIRECTED to reinstate the complaint insofar as Lots 374 and 379 are
concerned. No costs.

SO ORDERED.