[G.R. No. 165427, March 21, 2011] 

BETTY B. LACBAYAN, PETITIONER, VS. BAYANI S. SAMOY, JR., RESPONDENT. 

D E C I S I O N 

VILLARAMA, JR., J.:

This settles the petition for review on certiorari filed by petitioner Betty B. Lacbayan against respondent Bayani S. Samoy, Jr. assailing the September 14, 2004 Decision[1] of the Court of Appeals (CA) in CA-G.R. CV No. 67596. The CA had affirmed the February 10, 2000 Decision[2] of the Regional Trial Court (RTC), Branch 224, of Quezon City declaring respondent as the sole owner of the properties involved in this suit and awarding to him P100,000.00 as attorney's fees.

This suit stemmed from the following facts.

Petitioner and respondent met each other through a common friend sometime in 1978. Despite respondent being already married, their relationship developed until petitioner gave birth to respondent's son on October 12, 1979.[3]

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

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

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

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

4. A 183.20-square meter real estate property located at Zobel St., Quezon City covered by TCT No. 335193 and registered in the name of Bayani S. Samoy, Jr. "married to Betty L. Samoy."[8]/sup>

5. A 400-square meter real estate property located at Don Enrique Heights, Quezon City covered by TCT No. 90232 and registered in the name of Bayani S. Samoy, Jr. "married to Betty L. Samoy."[9]

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

Eventually, however, their relationship turned sour and they decided to part ways sometime in 1991.  In 1998, both parties agreed to divide the said properties and terminate their business partnership by executing a Partition Agreement.[11] Initially, respondent agreed to petitioner's proposal that the properties in Malvar St. and Don Enrique Heights be assigned to the latter, while the ownership over the three other properties will go to respondent.[12] However, when petitioner wanted additional demands to be included in the partition agreement, respondent refused.[13]  Feeling aggrieved, petitioner filed a complaint for judicial partition[14] of the said properties before the RTC in Quezon City on May 31, 1999.

In her complaint, petitioner averred that she and respondent started to live together as husband and wife in 1979 without the benefit of marriage and worked together as business partners, acquiring real properties amounting to P15,500,000.00.[15]  Respondent, in his Answer,[16] however, denied petitioner's claim of cohabitation and said that the properties were acquired out of his own personal funds without any contribution from petitioner.[17]

During the trial, petitioner admitted that although they were together for almost 24 hours a day in 1983 until 1991, respondent would still go home to his wife usually in the wee hours of the morning.[18] Petitioner likewise claimed that they acquired the said real estate properties from the income of the company which she and respondent established.[19]

Respondent, meanwhile, testified that the properties were purchased from his personal funds, salaries, dividends, allowances and commissions.[20] He countered that the said properties were registered in his name together with petitioner to exclude the same from the property regime of respondent and his legal wife, and to prevent the possible dissipation of the said properties since his legal wife was then a heavy gambler.[21]  Respondent added that he also purchased the said properties as investment, with the intention to sell them later on for the purchase or construction of a new building.[22]

On February 10, 2000, the trial court rendered a decision dismissing the complaint for lack of merit.[23] In resolving the issue on ownership, the RTC decided to give considerable weight to petitioner's own admission that the properties were acquired not from her own personal funds but from the income of the manpower services company over which she owns a measly 3.33% share.[24]

Aggrieved, petitioner elevated the matter to the CA asserting that she is the pro

indiviso owner of one-half of the properties in dispute. Petitioner argued that the trial court's decision subjected the certificates of title over the said properties to collateral attack contrary to law and jurisprudence. Petitioner also contended that it is improper to thresh out the issue on ownership in an action for partition.[25]

Unimpressed with petitioner's arguments, the appellate court denied the appeal, explaining in the following manner:Appellant's harping on the indefeasibility of the certificates of title covering the subject realties is, to say the least, misplaced. Rather than the validity of said certificates which was nowhere dealt with in the appealed decision, the record shows that what the trial court determined therein was the ownership of the subject realties - itself an issue correlative to and a necessary adjunct of the claim of co-ownership upon which appellant anchored her cause of action for partition. It bears emphasizing, moreover, that the rule on the indefeasibility of a Torrens title applies only to original and not to subsequent registration as that availed of by the parties in respect to the properties in litigation. To our mind, the inapplicability of said principle to the case at bench is even more underscored by the admitted falsity of the registration of the selfsame realties in the parties' name as husband and wife.

The same dearth of merit permeates appellant's imputation of reversible error against the trial court for supposedly failing to make the proper delineation between an action for partition and an action involving ownership. Typically brought by a person claiming to be co-owner of a specified property against a defendant or defendants whom the plaintiff recognizes to be co-owners, an action for partition may be seen to present simultaneously two principal issues, i.e., first, the issue of whether the plaintiff is indeed a co-owner of the property sought to be partitioned and, second - assuming that the plaintiff successfully hurdles the first - the issue of how the property is to be divided between plaintiff and defendant(s). Otherwise stated, the court must initially settle the issue of ownership for the simple reason that it cannot properly issue an order to divide the property without first making a determination as to the existence of co-ownership. Until and unless the issue of ownership is definitely resolved, it would be premature to effect a partition of the properties. This is precisely what the trial court did when it discounted the merit in appellant's claim of co-ownership.[26]

Hence, this petition premised on the following arguments:I. Ownership cannot be passed upon in a partition case.

II. The partition agreement duly signed by respondent contains an admission against respondent's interest as to the existence of co-ownership between the parties.

III. An action for partition cannot be defeated by the mere expedience of repudiating co-ownership based on self-serving claims of exclusive ownership of the properties in dispute.

IV. A Torrens title is the best evidence of ownership which cannot be outweighed by respondent's self-serving assertion to the contrary.

V. The properties involved were acquired by both parties through their actual joint contribution of money, property, or industry.[27]

Noticeably, the last argument is essentially a question of fact, which we feel has been squarely threshed out in the decisions of both the trial and appellate courts.  We deem it wise not to disturb the findings of the lower courts on the said matter absent any showing that the instant case falls under the exceptions to the general rule that questions of fact are beyond the ambit of the Court's jurisdiction in petitions under Rule 45 of the 1997 Rules of Civil Procedure, as amended. The issues may be summarized into only three:

I. Whether an action for partition precludes a settlement on the issue of ownership;

II. Whether the Torrens title over the disputed properties was collaterally attacked in the action for partition; and

III. Whether respondent is estopped from repudiating co-ownership over the subject realties.

We find the petition bereft of merit.

Our disquisition in Municipality of Biñan v. Garcia[28] is definitive.  There, we explained that the determination as to the existence of co-ownership is necessary  in the resolution of an action for partition.  Thus:The first phase of a partition and/or accounting suit is taken up with the determination of whether or not a co-ownership in fact exists, and a partition is proper (i.e., not otherwise legally proscribed) and may be made by voluntary agreement of all the parties interested in the property. This phase may end with a declaration that plaintiff is not entitled to have a partition either because a co-ownership does not exist, or partition is legally prohibited. It may end, on the other hand, with an adjudgment that a co-ownership does in truth exist, partition is proper in the premises and an accounting of rents and profits received by the defendant from the real estate in question is in order. x x x

The second phase commences when it appears that "the parties are unable to agree upon the partition" directed by the court. In that event[,] partition shall be done for the parties by the [c]ourt with the assistance of not more than three (3) commissioners. This second stage may well also deal with the rendition of the accounting itself and its approval by the [c]ourt after the parties have been accorded opportunity to be heard thereon, and an award for the recovery by the party or parties thereto entitled of their just share in the rents and profits of the real estate in question. x x x[29] (Emphasis supplied.)

While it is true that the complaint involved here is one for partition, the same is premised on the existence or non-existence of co-ownership between the parties. Petitioner insists she is a co-ownerpro indiviso of the five real estate properties based on the transfer certificates of title (TCTs) covering the subject properties. Respondent maintains otherwise. Indubitably, therefore, until and unless this issue of

co-ownership is definitely and finally resolved, it would be premature to effect a partition of the disputed properties.[30] More importantly, the complaint will not even lie if the claimant, or petitioner in this case, does not even have any rightful interest over the subject properties.[31]

Would a resolution on the issue of ownership subject the Torrens title issued over the disputed realties to a collateral attack? Most definitely, it would not.

There is no dispute that a Torrens certificate of title cannot be collaterally attacked,[32] but that rule is not material to the case at bar. What cannot be collaterally attacked is the certificate of title and not the title itself.[33] The certificate referred to is that document issued by the Register of Deeds known as the TCT. In contrast, the title referred to by law means ownership which is, more often than not, represented by that document.[34] Petitioner apparently confuses title with the certificate of title. Title as a concept of ownership should not be confused with the certificate of title as evidence of such ownership although both are interchangeably used.[35]

Moreover, placing a parcel of land under the mantle of the Torrens system does not mean that ownership thereof can no longer be disputed. Ownership is different from a certificate of title, the latter only serving as the best proof of ownership over a piece of land. The certificate cannot always be considered as conclusive evidence of ownership.[36] In fact, mere issuance of the certificate of title in the name of any person does not foreclose the possibility that the real property may be under co-ownership with persons not named in the certificate, or that the registrant may only be a trustee, or that other parties may have acquired interest over the property subsequent to the issuance of the certificate of title.[37] Needless to say, registration does not vest ownership over a property, but may be the best evidence thereof.

Finally, as to whether respondent's assent to the initial partition agreement serves as an admission against interest, in that the respondent is deemed to have admitted the existence of co-ownership between him and petitioner, we rule in the negative.

An admission is any statement of fact made by a party against his interest or unfavorable to the conclusion for which he contends or is inconsistent with the facts alleged by him.[38] Admission against interest is governed by Section 26 of Rule 130 of the Rules of Court, which provides:Sec. 26. Admissions of a party. - The act, declaration or omission of a party as to a relevant fact may be given in evidence against him.

To be admissible, an admission must (a) involve matters of fact, and not of law; (b) be categorical and definite; (c) be knowingly and voluntarily made; and (d) be adverse to the admitter's interests, otherwise it would be self-serving and inadmissible.[39]

A careful perusal of the contents of the so-called Partition Agreement indicates that the document involves matters which necessitate prior settlement of questions of

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

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

As to the award of damages to respondent, we do not subscribe to the trial court's view that respondent is entitled to attorney's fees.  Unlike the trial court, we do not commiserate with respondent's predicament. The trial court ruled that respondent was forced to litigate and engaged the services of his counsel to defend his interest as to entitle him an award of P100,000.00 as attorney's fees. But we note that in the first place, it was respondent himself who impressed upon petitioner that she has a right over the involved properties. Secondly, respondent's act of representing himself and petitioner as husband and wife was a deliberate attempt to skirt the law and escape his legal obligation to his lawful wife. Respondent, therefore, has no one but himself to blame the consequences of his deceitful act which resulted in the filing of the complaint against him.

WHEREFORE, the petition is DENIED. The September 14, 2004 Decision of the Court of Appeals in CA-G.R. CV No. 67596 is AFFIRMED with MODIFICATION.  Respondent Bayani S. Samoy, Jr. is hereby declared the sole owner of the disputed properties, without prejudice to any claim his legal wife may have filed or may file against him. The award of P100,000.00 as attorney's fees in respondent's favor is DELETED.

No costs.

SO ORDERED.

G.R. No. 160711 August 14, 2004

HEIRS OF MAXIMO LABANON vs. HEIRS OF CONSTANCIO                    LABANONx-----------------------------------------------------------------------------------------x 

The Case 

This Petition for Review on Certiorari under Rule 45 seeks the recall and nullification of the May 8, 2003 Decision[1] of the Court of Appeals (CA) in CA-G.R. CV No. 65617 entitled Heirs of Constancio Labanon represented by Alberto Makilang v. Heirs of Maximo Labanon represented by Alicia Labanon Cañedo and the Provincial Assessor of Cotabato, which reversed the August 18, 1999 Decision[2] of the Kidapawan City, Cotabato Regional Trial Court (RTC), Branch 17, in Civil Case No. 865.  Likewise assailed is the October 13, 2003 Resolution[3] which disregarded petitioners’ Motion for Reconsideration. 

The Facts           The CA culled the facts this way:

        During the lifetime of Constancio Labanon, prior to the outbreak of WWII, he settled upon a piece of alienable and disposable public agricultural land situated at Brgy. Lanao, Kidapawan, Cotabato x x x. Constancio cultivated the said lot and introduced permanent improvements that still exist up to the present. Being of very limited educational attainment, he found it difficult to file his public land application over said lot. Constancio then asked his brother, Maximo Labanon who was better educated to file the corresponding public land application under the express agreement that they will divide the said lot as soon as it would be feasible for them to do so. The offer was accepted by Maximo. During the time of the application it was Constancio who continued to cultivate the said lot in order to comply with the cultivation requirement set forth under Commonwealth Act 141, as amended, onHomestead applications. After which, on June 6, 1941, due to industry of Constancio, Homestead Application No. 244742 (E-128802) of his brother Maximo was approved with Homestead Patent No. 67512. Eventually, Original Certificate of Title No. P-14320 was issued by the Register of Deeds of Cotabato over said lot in favor of Maximo Labanon.        On February 11, 1955, Maximo Labanon executed a document denominated as “Assignment of Rights and Ownership” and docketed as Doc. No. 20; Page No. 49; Book

No. V; Series of 1955 of the Notarial Register of Atty. Florentino Kintanar. The document was executed to safeguard the ownership and interest of his brother Constancio Labanon. Pertinent portion of which is reproduced as follows: 

      “That I, MAXIMO LABANON, of legal age, married to Anastacia Sagarino, and a resident of Kidapawan, Cotabato, for and in consideration of the expenses incurred by my elder brother CONSTANCIO LABANON also of legal age, Filipino, widower and a resident of Kidapawan, Cotabato, for the clearing, cultivation and improvements on the eastern portion xxx Lot No. 1, Blk. 22, Pls-59 xxx which expenses have been incurred by my said brother xxx before the outbreak of the last world war xxx I do hereby assign transfer and convey my rights to, interests in and ownership on the said eastern portion of said Lot No. 1, Block 22, Pls-59 ONE HUNDRED (100 M) ALONG THE NATIONAL HIGHWAY, (DAVAO-COTABATO ROAD) by TWO HUNDRED FIFTY METERS (250 M) going inside the land to cover an area of TWO AND ONE HALF HECTARES (25,000 SQ. M.), more or less, adjoining the school site of barrio Lanao, Kidapawan, Cotabato, to the said CONSTANCIO LABANON, his heirs and assigns, can freely occupy for his own use and benefit xxx.      IN WITNESS WHEREFOF, I have hereunto set my hand this 11th day of February 1995 at Kidapawan, Cotabato. 

(SGD) MAXIMO LABANON                 With my marital consent. 

(SGD) ANASTACIA SAGARINO(Wife)” (p.16, rollo)

        On April 25, 1962, Maximo Labanon executed a sworn statement reiterating his desire that his elder brother Constancio, his heirs and assigns shall own the eastern portion of the Lot, pertinent portion of which reads:

       “That I am the same and identical person who is a homestead applicant (HA-224742, E-128802) of a tract of land which is covered by

Homestead Patent No. 67512 dated June 6, 1941, known as Lot No. 1, Block 22, Pls-59, situated in [B]arrio Lanao, Municipality of Kidapawan, Province of Cotabato, Philippines, and containing an area of 5.0000 hectares, more or less;       That I am the same and identical person who executed a deed of ASSIGNMENT OF RIGHTS AND OWNERSHIP in favor of my brother Constancio Labanon, now deceased, now for his heirs, for the eastern half portion of the land above described, and which deed was duly notarized by notary public Florentino P. Kintanar on February 11, 1955 at Kidapawan, Cotabato and entered in his Notarial Register as Doc. No. 20, Page No. 49, Book No. V, Series of 1955; and       That in order that I and the Heirs of Constancio Labanon will exercise our respective rights and ownership over the aforementioned lot, and to give force and effect to said deed of assignment, I hereby, by these presents, request the Honorable Director of Lands and the Land Title Commission to issue a separate title in my favor covering the western half portion of the aforementioned lot and to the Heirs of Constancio Labanon a title for the eastern half portion thereof.       IN WITNESS THEREOF, I have hereunto set my hand this 25th day of April, 1962, at Pikit, Cotabato, Philippines.” (p. 9, records) 

       After the death of Constancio Labanon, his heirs executed an [e]xtra-judicial settlement of estate with simultaneous sale over the aforesaid eastern portion of the lot in favor of Alberto Makilang, the husband of Visitacion Labanon, one of the children of Constancio. Subsequently, the parcel of land was declared for taxation purposes in the name of Alberto under TD No. 11593. However, in March 1991, the defendants heirs of Maximo Labanon namely, Alicia L. Caniedo, Leopoldo Labanon, Roberto Nieto and Pancho Labanon, caused to be cancelled from the records of the defendant Provincial Assessor of Cotabato the aforesaid

TD No. 11593 and the latter, without first verifying the legality of the basis for said cancellation, did cancel the same. x x x Further, after discovering that the defendant-heirs of Maximo Labanon were taking steps to deprive the heirs of Constancio Labanon of their ownership over the eastern portion of said lot, the latter, thru Alberto Makilang, demanded the owner’s copy of the certificate of title covering the aforesaid Lot to be surrendered to the Register of Deeds of Cotabato so that the ownership of the heirs of Constancio may be fully effected but the defendants refused and still continue to refuse to honor the trust agreement entered into by the deceased brothers.  x x x[4]

           Thus, on November 12, 1991, petitioners filed a complaint[5] for Specific Performance, Recovery of Ownership, Attorney’s Fees and Damages with Writ of Preliminary Injunction and Prayer for Temporary Restraining Order against respondents docketed as Civil Case No. 865 before the Kidapawan City RTC.  After hearing, the trial court rendered its August 18, 1999 Decision, the decretal portion of which reads: 

       Wherefore, prescinding from the foregoing facts and considerations the Court finds and so holds that the [defendant-heirs] of Maximo Labanon represented by Alicia Labanon Caniedo have proved by preponderance of evidence that they are entitled to the reliefs set forth in their answer and consequently judgment is hereby rendered as follows:        1.         Ordering the dismissal of the complaint against the Heirs of Maximo Labanon represented by Alicia Labanon Caniedo for lack of merit;        2.         Ordering the dismissal of the case against the Provincial Assessor. The claim of the plaintiff is untenable, because the duties of the Provincial Assessor are ministerial. Moreover, the presumption of regularity in the performance of his duty is in his favor;        3.         Ordering the plaintiff to pay the defendants the amount of P20,000.00 as exemplary damages, P10,000.00 for Attorney’s Fees, P500.00 per appearance in Court; and        4.         To pay the costs of this suit.

 IT IS SO ORDERED.[6]

          Aggrieved, respondents elevated the adverse judgment to the CA which issued the assailed May 8, 2003 Decision in CA-G.R. CV No. 65617, the  fallo of which states: 

       WHEREFORE, the appeal is hereby GRANTED for being meritorious. The assailed decision of the Regional Trial Court is hereby REVERSED and SET ASIDE and a new one is hereby entered as follows: 1)        Recognizing the lawful possession of the plaintiffs-appellants      over the eastern portion of the property in dispute; 2)        Declaring the plaintiffs-appellants as owners of the

eastern portion of the property by reason of lawful possession;

 3)        Ordering the Provincial Assessor to reinstate TD No.

11593 and declaring TD No. 243-A null and void; 4)        Ordering the defendants-appellees to pay the

plaintiffs-appellants the amount of P20,000 as moral damages, P10,000 for attorney’s fees, P500.00 per appearance in Court and

 5)        To pay the costs of the suit.        SO ORDERED.

 The Issues

           Surprised by the turn of events, petitioners brought this petition  before us raising  the following issues, to wit: 

1.    Whether or not Original Certificate of Title No. 41320 issued on           April 10, 1975 in the name of MAXIMO LABANON be now     considered indefeasible and conclusive; and 2.    Whether or not the Trust Agreement allegedly made by             Constancio Labanon and Maximo Labanon prescribed.[7]

  The Court’s Ruling

           The petition must fail.

 First Issue

 Respondents are not precluded from challenging the validity ofOriginal Certificate of Title No. P-41320 

Petitioners argue that respondents can no longer question Maximo Labanon’s ownership of the land after its registration under the principle of indefeasibility of a Transfer Certificate of Title (TCT).           Such argument is inaccurate.           The principle of indefeasibility of a TCT is embodied in Section 32 of Presidential Decree No. (PD) 1529, amending the Land Registration Act, which provides: 

Section 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 an equivalent phrase occurs in this Decree, it shall be deemed to include an innocent lessee, mortgagee, or other encumbrancer for value.

 Upon the expiration of said period of one year, the

decree of registration and the certificate of title issued shall become incontrovertible. Any person aggrieved by such decree of registration in any case may pursue his remedy by action for damages against the applicant or any other persons responsible for the fraud.

            Contrary to petitioners’ interpretation, the aforequoted legal provision does not totally deprive a party of any remedy to recover the property fraudulently registered

in the name of another.  Section 32 of PD 1529 merely precludes the reopening of the registration proceedings for titles covered by the Torrens System, but does not foreclose other remedies for the reconveyance of the property to its rightful owner.  As elaborated in Heirs of Clemente Ermac v. Heirs of Vicente Ermac: 

While it is true that Section 32 of PD 1529 provides that the decree of registration becomes incontrovertible after a year, it does not altogether deprive an aggrieved party of a remedy in law. The acceptability of the Torrens System would be impaired, if it is utilized to perpetuate fraud against the real owners.[8]

           A more succinct explanation is found in Vda. De Recinto v. Inciong,  thus:

 The mere possession of a certificate of title under the Torrens system does not necessarily make the possessor a true owner of all the property described therein for he does not by virtue of said certificate alone become the owner of the land illegally included. It is evident from the records that the petitioner owns the portion in question and therefore the area should be conveyed to her. The remedy of the land owner whose property has been wrongfully or erroneously registered in another's name is, after one year from the date of the decree, not to set aside the decree, but, respecting the decree as incontrovertible and no longer open to review, to bring an ordinary action in the ordinary court of justice for reconveyance or, if the property has passed into the hands of an innocent purchaser for value, for damages.[9]  (Emphasis supplied.)  

Undeniably, respondents are not precluded from recovering the eastern portion of Original Certificate of Title (OCT) No. P-14320, with an area subject of the “Assignment of Rights and Ownership” previously owned by their father, Constancio Labanon.  The action for Recovery of Ownership before the RTC is indeed the appropriate remedy.

 Second Issue

 The trust agreement between Maximo Labanon and Constancio Labanon may still be enforced

 Former Vice-President and Senator Arturo Tolentino, a noted civilist,

explained the nature and import of a trust: 

       Trust is the legal relationship between one person having an equitable ownership in property and another person owning the legal title to such property, the equitable ownership of the former entitling him to the performance of certain duties and the exercise of certain powers by the latter.[10]

  This legal relationship can be distinguished from other relationships of a

fiduciary character, such as deposit, guardianship, and agency, in that the trustee has legal title to the property.[11]  In the case at bench, this is exactly the relationship established between the parties.

 Trusts are classified under the Civil Code as either express or implied. Such

classification determines the prescriptive period for enforcing such trust. 

          Article 1444 of the New Civil Code on express trust provides that “[n]o particular words are required for the creation of an express trust, it being sufficient that a trust is clearly intended.”

 Civil law expert Tolentino further elucidated on the express trust, thus:

        No particular form of words or conduct is necessary for the manifestation of intention to create a trust. It is possible to create a trust without using the word “trust” or “trustee”. Conversely, the mere fact that these words are used does not necessarily indicate an intention to create a trust. The question in each case is whether the trustor manifested an intention to create the kind of relationship which to lawyers is known as trust. It is immaterial whether or not he knows that the relationship which he intends to create is called a trust, and whether or not he knows the precise characteristics of the relationship which is called a trust.[12]

  Correlatively, we ruled in Estate of Edward Miller Grimm v. Estate of

Charles Parsons and Patrick C. Parsons,  that: 

       An express trust is created by the direct and positive acts of the parties, by some writing or deed or by words evidencing an intention to create a trust; the use of the word trust is not required or essential to its constitution, it being sufficient that a trust is clearly intended.[13]

  

In the instant case, such intention to institute an express trust between Maximo Labanon as trustee and Constancio Labanon as trustor was contained in not just one but two written documents, the Assignment of Rights and Ownership as well as Maximo Labanon’s April 25, 1962 Sworn Statement. In both documents, Maximo Labanon recognized Constancio Labanon’s ownership and possession over the eastern portion of the property covered by OCT No. P-14320, even as he recognized himself as the applicant for the Homestead Patent over the land. Thus, Maximo Labanon maintained the title over the property while acknowledging the true ownership of Constancio Labanon over the eastern portion of the land.  The existence of an express trust cannot be doubted nor disputed.

 On the issue of prescription, we had the opportunity to rule in Bueno v.

Reyes  that unrepudiated written express trusts are imprescriptible: 

       While there are some decisions which hold that an action upon a trust is imprescriptible, without distinguishing between express and implied trusts, the better rule, as laid down by this Court in other decisions, is that prescription does supervene where the trust is merely an implied one. The reason has been expressed by Justice J.B.L. Reyes in J.M. Tuason and Co., Inc. vs. Magdangal, 4 SCRA 84, 88, as follows:

 Under Section 40 of the old Code of Civil

Procedure, all actions for recovery of real property prescribed in 10 years, excepting only actions based on continuing or subsisting trusts that were considered by section 38 as imprescriptible. As held in the case of Diaz v. Gorricho, L-11229, March 29, 1958, however, the continuing or subsisting trusts contemplated in section 38 of the Code of Civil Procedure referred only to express unrepudiated trusts, and did not include constructive trusts (that are imposed by law) where no fiduciary relation exists and the trustee does not recognize the trust at all.[14]

  This principle was amplified in Escay v. Court of Appeals this

way:  “Express trusts prescribe 10 years from the repudiation of the trust (Manuel Diaz, et al. vs. Carmen Gorricho et al., 54 0.G. p. 8429, Sec. 40, Code of Civil Procedure).”[15]

 

In the more recent case of Secuya v. De Selma, we again ruled that the prescriptive period for the enforcement of an express trust of ten (10) years starts upon the repudiation of the trust by the trustee.[16]

 In the case at bar, Maximo Labanon never repudiated the express trust

instituted between him and Constancio Labanon. And after Maximo Labanon’s death, the trust could no longer be renounced; thus, respondents’ right to enforce the trust agreement can no longer be restricted nor prejudiced by prescription.

 It must be noted that the Assignment of Rights and Ownership and Maximo

Labanon’s Sworn Statement were executed after the Homestead Patent was applied for and eventually granted with the issuance of Homestead Patent No. 67512 on June 6, 1942. Evidently, it was the intent of Maximo Labanon to hold the title over the land in his name while recognizing Constancio Labanon’s equitable ownership and actual possession of the eastern portion of the land covered by OCT No. P-14320.

 In addition, petitioners can no longer question the validity of the positive

declaration of Maximo Labanon in the Assignment of Rights and Ownership in favor of the late Constancio Labanon, as the agreement was not impugned during the former’s lifetime and the recognition of his brother’s rights over the eastern portion of the lot was further affirmed and confirmed in the subsequent April 25, 1962 Sworn Statement.

           Section 31, Rule 130 of the Rules of Court is the repository of the settled precept that “[w]here one derives title to property from another, the act, declaration, or omission of the latter, while holding the title, in relation to the property, is evidence against the former.”  Thus, petitioners have accepted the declaration made by their predecessor-in-interest, Maximo Labanon, that the eastern portion of the land covered by OCT No. P-14320 is owned and possessed by and rightfully belongs to Constancio Labanon and the latter’s heirs. Petitioners cannot now feign ignorance of such acknowledgment  by their father, Maximo.

 Lastly, the heirs of Maximo Labanon are bound to the stipulations

embodied in the Assignment of Rights and Ownership pursuant to Article 1371 of the Civil Code that contracts take effect between the parties, assigns, and heirs.

 Petitioners as heirs of Maximo cannot disarrow the commitment made by

their father with respect to the subject property since they were merely subrogated to the rights and obligations of their predecessor-in-interest.  They simply stepped into the shoes of their predecessor and must therefore recognize the rights of the heirs of Constancio over the eastern portion of the lot. As the old adage goes, the spring cannot rise higher than its source.

 WHEREFORE, the petition is DENIED.  The May 8, 2003 CA Decision

and October 13, 2003 Resolution in CA-G.R. CV No. 65617 are AFFIRMED with the modifications that the Kidapawan City, Cotabato RTC, Branch 17 is directed to

have OCT No. P-14320 segregated and subdivided by the Land Management Bureau into two (2) lots based on the terms of the February 11, 1955 Assignment of Rights and Ownership executed by Maximo Labanon and Constancio Labanon; and after approval of the subdivision plan, to order the Register of Deeds of Kidapawan City, Cotabato to cancel OCT No. P-14320 and issue one title each to petitioners and respondents based on the said subdivision plan.           Costs against petitioners. 

 SO ORDERED.

G.R. No. 16355 July 18, 2011

DATU KIRAM SAMPACO vs.HADJI  SERAD  MINGCA LANTUD,

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

This is a petition for review on certiorari of the Court of Appeals’ Decision dated August 15, 2003 in CA-G.R. CV No. 63801 and its Resolution dated May 13, 2004, denying petitioner’s motion for reconsideration.  

 The facts, as stated by the Court of Appeals, are as follows:

On September 14, 1984, respondent Hadji Serad Mingca Lantud, the plaintiff in the lower court, filed an action to quiet title with damages [1] with the Regional Trial Court (RTC) of Lanao del Sur, Branch 8, Marawi City (trial court), against petitioner Datu Kiram Sampaco (deceased), the defendant in the lower court, who has been substituted by his heirs, represented by Hadji Soraya Sampaco-Macabando.[2]

  Respondent  alleged in his Complaint[3] that he is the owner in fee simple of

a parcel of residential lot located at Marinaut, Marawi City, with an area of 897 square meters covered by Original Certificate of Title (OCT) No. P-658.  On August 25, 1984, petitioner Datu Kiram Sampaco,  through his daughter Soraya Sampaco-Macabando with several armed men, forcibly and unlawfully entered his property and destroyed the nursery buildings, cabbage seedlings and other improvements therein worth P10,000.00.  On August 30, 1984, Barangay Captain Hadji Hassan Abato and his councilmen prepared and issued a decision[4] in writing stating that petitioner Datu  Kiram Sampaco is the owner of the subject parcel of land.  Respondent stated that the acts of petitioner and the said decision of the Barangay Captain may cast a cloud over or otherwise prejudice his title. Respondent stated that he and his predecessors-in-interest have been in open, public and exclusive possession of the subject property.  He prayed that the acts of petitioner and the decision of Barangay Captain Hadji Hassan Abato and his councilmen be declared invalid, and that petitioner be ordered to pay respondent damages in the amount of  P10,000.00 and attorney’s fees.

 In his Answer,[5] defendant Datu Kiram Sampaco, petitioner herein, denied

the material allegations of the Complaint. Petitioner asserted that he and his predecessors-in-interest are the ones who had been in open, public, continuous, and exclusive possession of the property in dispute.  Petitioner alleged that OCT No. P-658 was secured in violation of laws and through fraud, deception and misrepresentation, considering that the subject parcel of land is a residential lot   and the title issued is a free patent.  Moreover, respondent and his predecessors-in-interest had never taken actual possession or occupied the land under litigation. On

the contrary, petitioner has all the evidence of actual possession and ownership of permanent improvements and other plants on the land in dispute.

 Petitioner filed a counterclaim for actual and moral damages, and attorney's

fees for the unfounded complaint and prayed for its dismissal. He also sought the cancellation of respondent’s OCT No. P-658 and the reconveyance of the subject parcel of land.  

 During the trial, respondent Hadji Lantud testified that he acquired the

subject lot from his grandmother, Intumo Pagsidan, a portion thereof from his grandmother’s helper, Totop Malacop, pursuant to a court decision after litigating with him.[6]  Respondent had been residing on the lot for more than 30 years, applied for a title thereto and was issued OCT No. P-658. [7]  He paid the corresponding real estate taxes for the land.[8] He planted assorted trees and plants on the lot like bananas, jackfruits, coconuts and others.[9]  He testified that he was not aware of the alleged litigation over the lot before Barangay Captain Hadji Hassan Abato, although he was furnished a copy of the decision.[10]

 On the other hand, petitioner Datu Kiram Sampaco testified that the land

under litigation is only a portion of the 1,800 square meters of land that he inherited in 1952 from his father, Datu Sampaco Gubat.[11] Since then, he had been in adverse possession and ownership of the subject lot, cultivating and planting trees and plants through his caretaker Hadji Mustapha Macawadib.[12] In 1962, he mortgaged the land (1,800 square meters) with the  Development Bank of the Philippines, Ozamis branch.[13]  He declared the land (1,800 square meters) for taxation purposes[14]  and paid  real estate taxes, and adduced in evidence the latest Tax Receipt No. 1756386 dated September 15, 19[9]3.[15] Petitioner presented four corroborating witnesses as regards his possession of the subject property.

 After trial on the merits, the trial court rendered a Decision on March 31,

1999 in favor of petitioner, the dispositive portion of which reads: 

WHEREFORE, premises considered the court is of the opinion and so holds that the preponderance of evidence is in favor of the defendant and against the plaintiff. Judgment is hereby rendered as follows: 

1.             Dismissing plaintiff’s complaint for lack of merit;

2.            Declaring Original Certificate of Title No. P-658 (Exh. A) null and void and of no legal effect;

3.            Declaring the defendant the absolute or true owner and possessor of the land in dispute; and

4.            Ordering the plaintiff to pay the defendant the sum of P10,000.00 for attorney’s fees plus P500.00 per appearance.[16]

  The trial court held that the issuance of respondent’s title, OCT No. P-658,

was tainted with fraud and irregularities and the title is, therefore, spurious; hence, it is null and void, and without any probative value. The finding of fraud was based on: (1) the Certification issued by Datu Samra Andam, A/Adm. Assistant II, Natural Resources District No. XII-3, Marawi City, stating that the data contained in respondent’s title were verified and had no record in the said office; (2) the said Certification was not refuted or rebutted by  respondent; (3) while free patents are normally issued for agricultural lands, respondent’s title is a free patent title issued over a  residential land as the lot is described in the Complaint as a residential lot; and  (4) Yusoph Lumampa, an employee of the local Bureau of Lands, to whom respondent allegedly entrusted the paperwork of the land titling, was not presented as a witness.

 Moreover, the trial court stated that respondent failed to establish with

competent and credible evidence that he was in prior possession of the subject property. No corroborative witness was presented to further prove his prior possession.

 On the other hand, the trial court stated that petitioner offered documentary

evidence, consisting of a contract of real estate mortgage of the subject property, tax declarations, an official tax receipt, and testimonial evidence to prove that he had been in open, public, continuous, and lawful possession of the subject property in the concept of owner.           Respondent appealed the decision of the trial court to the Court of Appeals. 

On August 15, 2003, the Court of Appeals rendered a Decision reversing the decision of the trial court, the dispositive portion of which reads:

         WHEREFORE:

1.      The appeal is granted and the appealed judgment is hereby totally REVERSED.

2.      To quiet his title, plaintiff-appelant Hadji Serad Mingca Lantud is confirmed the owner of the parcel of land covered by Original Certificate of Title No. P-658;

3.      The defendant-appellee is ordered to pay P50,000.00 as attorney’s fees to the plaintiff-appellant; and

4.      Costs against the defendant-appellee.[17]

Petitioner’s motion for reconsideration was denied by the Court of Appeals in its Resolution[18] dated May 13, 2004.

 The Court of Appeals held that there is no controversy that respondent is a

holder of a Torrens title; hence, he is the owner of the subject property.   The appellate court stressed that Section 47[19] of the Land Registration Act (Act No. 496)

provides that the certificate of title covering registered land shall be received as evidence in all courts of the Philippines and shall be conclusive as to all matters stated therein.

 The Court of Appeals stated that the Torrens title has three attributes: (1) a

Torrens title is the best evidence of ownership over registered land and, unless annulled in an appropriate proceeding, the title is conclusive on the issue of ownership; (2) a Torrens title is incontrovertible and indefeasible upon the expiration of one year from the date of the entry of the decree of registration; [20] and (3) a Torrens title is not subject to collateral attack.[21]

 The Court of Appeals held that petitioner’s counterclaim filed on October

15, 1984 for cancellation of respondent’s original certificate of title issued on May 22, 1981 was filed beyond the statutory one-year period; hence, petitioner’s title had become indefeasible, and cannot be affected by the decision made by Barangay Captain Hadji Hassan Abato and his councilmen.  Moreover, the appellate court held that petitioner’s prayer for the cancellation of respondent’s title, OCT No. P-658, through a counterclaim included in his Answer is a collateral attack, which the law does not allow, citing Cimafranca v. Court of Appeals[22] and Natalia Realty Corporation v. Valdez.[23]

 The allegation of fraud in securing OCT No. P-658 on the ground that the

property in dispute is a residential lot and not subject of a free patent was not given weight by the appellate court as it was supported only by testimonial evidence that did not show how (by metes and bounds) and why the property in dispute could not have been the subject of a free patent. The appellate court stated that a mere preponderance of evidence is not adequate to prove fraud;[24] it must be established by clear and convincing evidence.

 The Court of Appeals also noted that petitioner claimed that the subject

property is only part of his larger property. Although petitioner introduced proof of payment of the real estate taxes of the said property, as well as a previous mortgage of the property, petitioner did not show that the disputed property is part of his larger property. Hence, the appellate court stated that under such circumstances, it cannot rule that petitioner owned the land under litigation, since petitioner failed to show that it is part of his larger property.

  The Court of Appeals did not award actual and moral damages, because

respondent failed to prove the amount of any actual damages sustained, and the instances enumerated under Article 2219 of the Civil Code warranting the award of moral damages were not present.

  However, the Court of Appeals awarded attorney's fees in the amount

of P50,000.00, considering that respondent was forced to incur expenses to protect his right through the action to quiet title.

 Petitioner filed this petition raising the following issues: 

ITHE COURT OF APPEALS MISERABLY FAILED TO

CONSIDER THE FACT THAT THE TORRENS TITLE INVOLVED HEREIN WAS ISSUED PURSUANT TO A FREE PATENT WHICH COULD NOT BE VALIDLY ISSUED OVER A PRIVATE LAND.

 II

THE COURT OF APPEALS ERRED IN DISREGARDING THE FACT THAT AS CERTIFIED TO BY THE BUREAU OF LANDS ITSELF NO SUCH FREE PATENT OVER THESUBJECT LAND WAS ISSUED BY IT; HENCE, SAID FREE PATENT IS SPURIOUS.

 III

THE COURT OF APPEALS ERRED IN REVERSING THE DECISION OF THE TRIAL COURT THAT THE SUBJECT LOT HAD LONG BEEN OWNED, POSSESSED AND CULTIVATED BY THE DEFENDANT (PETITIONER HEREIN) OR HIS PREDECESSORS-IN-INTEREST SINCE TIME IMMEMORIAL IN THE CONCEPT OF AN OWNER.

 IV

THE COURT OF APPEALS ERRED IN RULING THAT THE PETITIONER’S COUNTERCLAIM FOR CANCELLATION OF RESPONDENT’S TITLE IS BARRED.

 V

THE COURT OF APPEALS ERRED IN RULING THAT THE COUNTERCLAIM IN THE INSTANT CASE IS A COLLATERAL ATTACK ON RESPONDENT-PLAINTIFF’S TITLE.

 VI

THE COURT OF APPEALS ERRED IN DENYING PETITIONER’S MOTION FOR RECONSIDERATION.[25] 

  

 The main issue is whether or not the Court of Appeals erred in sustaining

the validity of OCT No. P-658 and confirming respondent as owner of the property in dispute.

 

Petitioner contends that the Court of Appeals erred in disregarding the fact that the Torrens title was issued to respondent by virtue of a free patent covering a residential lot that is private land as it has been acquired by petitioner through  open, public, continuous and lawful possession of the land in the concept of owner.  Petitioner thus prayed for the cancellation of respondent’s title and the reconveyance of the subject property.  Hence, the Court of Appeals erred in declaring that the subject lot belongs to respondent. 

 The contention is without merit. The Torrens title is conclusive evidence with respect to the ownership of the

land described therein, and other matters which can be litigated and decided in land registration proceedings.[26] Tax declarations and tax receipts cannot prevail over a certificate of title which is an incontrovertible proof of ownership.[27] An original certificate of title issued by the Register of Deeds under an administrative proceeding is as indefeasible as a certificate of title issued under judicial proceedings.[28]  However, the Court has ruled that indefeasibility of title does not attach to titles secured by fraud and misrepresentation.[29]

 In this case, petitioner alleged in his Answer to respondent’s Complaint in

the trial court that respondent’s title, OCT No. P-658, was secured in violation of the law and through fraud, deception and misrepresentation, because the subject parcel of land is a residential lot, which cannot be subject of a free patent, since only agricultural lands are subject of a free patent. 

 The trial court found that “[t]he lot under litigation as clearly described in

the complaint is a residential lot and a free patent title thereto cannot validly be issued.” This finding was one of the bases for the trial court’s declaration that the issuance of OCT was tainted with fraud and irregularities and is, therefore, spurious; thus, OCT No. P-658 is null and void.

It should be pointed out that the allegation in the Complaint that the land is residential was made only by respondent, but the true classification of the disputed land as residential was not shown to have been made by the President, upon recommendation by the Secretary of Environment and Natural Resources, pursuant to Section 9 of Commonwealth Act No. 141, otherwise known as The Public Land Act.[30] Hence, the trial court erred in concluding that there was fraud in the issuance of respondent’s free patent title on the ground that it covered residential land based only on the Complaint which stated that the property was residential land when it was not shown that it was the President who classified the disputed property as residential, and OCT No. P-658 itself stated that the free patent title covered agricultural land.   It has been stated that at present,not only agricultural lands, but also residential lands, have been made available by recent legislation for acquisition by free patent by any natural born Filipino citizen.[31] Nevertheless, the fact is that in this case, the free patent title was granted over agricultural land as stated in OCT No. P-658.      

 

Moreover, petitioner contends in his petition that the Certification[32] dated July 24, 1987 issued by Datu Samra I. Andam, A/Adm. Assistant II, Natural Resources District No. XII-3, Bureau of Lands, Marawi City, certifying that the data contained in OCT No. P-658 in respondent’s name had no records in the said office, showed that respondent’sTorrens title was spurious.

  The Court holds that the certification, by itself, is insufficient to prove the

alleged fraud. Fraud and misrepresentation, as grounds for cancellation of patent and annulment of title, should never be presumed, but must be proved by clear and convincing evidence, mere preponderance of evidence not being adequate.[33]   Fraud is a question of fact which must be proved.[34] The signatory of the certification, Datu Samra Andam, A/Adm. Assistant II, Natural Resources District No. XII-3, Marawi City, was not presented in court to testify on the due issuance of the certification, and to testify on the details of his certification, particularly the reason why the said office had no records of the data contained in OCT No. P-658 or to testify on the fact of fraud, if any.

 Thus, the Court holds that the evidence on record is insufficient to prove

that fraud was committed in the issuance of respondent’s Torrens title. Hence, respondent’sTorrens title is a valid evidence of his ownership of the land in dispute.   

 On the other hand, petitioner claims ownership of the subject lot, which is

merely a portion  of  a larger property (1,800 square meters) that he allegedly inherited from his father in 1952, by virtue of open, public and continuous possession of the land in the concept of owner making it petitioner’s private property.  Hence, petitioner prays for reconveyance of the said property.

 Article 434 of the Civil Code governs an action for reconveyance, thus: 

Art. 434.  In an action to recover, the property must be identified, and the plaintiff must rely on the strength of his title and not on the weakness of the defendant’s claim.   Under Article 434 of the Civil Code,  to successfully maintain an action to

recover the ownership of a real property, the person who claims a better right to it must prove two (2) things:  first, the identity of the land claimed; and second, his title thereto.[35] 

 In regard to the first requisite, in an accion reinvindicatoria,  the person who

claims that he has a better right to the property must first fix the identity of the land he is claiming by describing the location, area and boundaries thereof.[36]

 In this case, petitioner claims that the property in dispute is part of his larger

property.  However, petitioner failed to identify his larger property by providing

evidence of the metes and bounds thereof, so that the same may be compared with the technical description contained in the title of respondent, which would have shown whether the disputed property really formed part of petitioner’s larger property. The appellate court correctly held in its Resolution dated May 13, 2004 that petitioner’s claim is solely supported by testimonial evidence, which did not conclusively show the metes and bounds of petitioner’s larger property in relation to the metes and bounds of the disputed property; thus, there is no sufficient evidence on record to support petitioner’s claim that the disputed property is part of his larger property.  

 In regard to the second requisite of title to property, both petitioner and

respondent separately claim that they are entitled to ownership of the property by virtue of open, public, continuous and exclusive possession of the same in the concept of owner.  Petitioner claims that he inherited the subject property from his father in 1952, while respondent claims that he acquired the property from his grandmother Intumo Pagsidan, a portion thereof from his grandmother’s helper Totop Malacop pursuant to a court decision after litigating with him.[37]  Respondent has OCT No. P-658 to prove his title to the subject property, while petitioner merely claims that the property is already his private land by virtue of his  open, public, continuous  possession of the same in the concept of owner.   

 The Court holds that petitioner failed to prove the requisites of

reconveyance as he failed to prove the identity of his larger property in relation to the disputed property, and his claim of title by virtue of open, public and continuous possession of the disputed property in the concept of owner is nebulous in the light of a similar claim by respondent who holds a free patent title over the subject property. As stated in Ybañez v. Intermediate Appellate Court,[38] it is relatively easy to declare and claim that one owns and possesses public agricultural land, but it is entirely a different matter to affirmatively declare and to prove before a court of law that one actually possessed and cultivated the entire area to the exclusion of other claimants who stand on equal footing under the Public Land Act (Commonwealth Act No. 141, as amended) as any other pioneering claimants.  

Further,  petitioner contends that the Court of Appeals erred in ruling that petitioner’s counterclaim is time-barred, since the one-year prescriptive period does not apply when the person seeking annulment of title or reconveyance is in possession of the lot, citing Heirs of Simplicio Santiago v. Heirs of Mariano E. Santiago.[39]  Petitioner also contends that the Court of Appeals erred in ruling that the counterclaim in this case is a collateral attack on respondent’s title, citing Cimafranca v. Intermediate Appellate Court.[40] Petitioner cites the case of Heirs of Simplicio Santiago v. Heirs of Mariano E. Santiago,[41] which held that a counterclaim can be considered a direct attack on the title.

 The Court notes that the case of Cimafranca v. Intermediate Appellate

Court,[42] cited by the Court of Appeals to support its ruling that the prayer for the cancellation of respondent’s title through a counterclaim included in petitioner’s Answer is a collateral attack on the said title, is inapplicable to this

case.  In Cimafranca, petitioners therein filed a complaint for Partition and Damages, and respondents therein indirectly attacked the validity of the title involved in their counterclaim. Hence, the Court ruled that aTorrens title cannot be attacked collaterally, and the issue on its validity can be raised only in an action expressly instituted for that purpose.    

 Here, the case cited by petitioner, Heirs of Simplicio Santiago v. Heirs of

Mariano E. Santiago, declared that the one-year prescriptive period does not apply when the party seeking annulment of title or reconveyance is in possession of the lot, as well as distinguished a collateral attack under Section 48 of PD No. 1529 from a direct attack, and held that a counterclaim may be considered as a complaint or an independent action and can be considered a direct attack on the title, thus:

The one-year prescriptive period, however, does not apply when the person seeking annulment of title or reconveyance is in possession of the lot.  This is because the action partakes of a suit to quiet title which is imprescriptible.  In David v. Malay, we held that a person in actual possession of a piece of land under claim of ownership may wait until his possession is disturbed or his title is attacked before taking steps to vindicate his right, and his undisturbed possession gives him the continuing right to seek the aid of a court of equity to ascertain and determine the nature of the adverse claim of a third party and its effect on his title.

 x x x x

          Section 48 of P.D. 1529, the Property Registration Decree, provides that a certificate of title shall not be subject to collateral attack and cannot be altered, modified, or canceled except in a direct proceeding. An action is an attack on a title when the object of the action is to nullify the title, and thus challenge the judgment or proceeding pursuant to which the title was decreed.  The attack is direct when the object of an action is to annul or set aside such judgment, or enjoin its enforcement.  On the other hand, the attack is indirect or collateral when, in an action to obtain a different relief, an attack on the judgment or proceeding is nevertheless made as an incident thereof. x x x A counterclaim can be considered a direct attack on the title.  In Development Bank of the Philippines v. Court Appeals, we ruled on the validity of a certificate of title despite the fact that the nullity thereof was raised only as a counterclaim.  It was held that a counterclaim is considered a complaint, only this time, it is the original defendant who becomes the plaintiff.  It stands on the same footing and is to be tested by the same rules as if it were an independent action. x x x[43]

  

 The above ruling of the court on the definition of collateral attack under

Section 48 of P.D. No. 1529 was reiterated in Leyson v. Bontuyan,[44] Heirs of Enrique Diaz v. Virata,[45] Arangote v. Maglunob,[46] and Catores v. Afidchao.[47]

  

Based on the foregoing, the Court holds that petitioner’s counterclaim for cancellation of respondent’s title is not a collateral attack, but a direct attack on the Torrens title of petitioner. However, the counterclaim seeking for the cancellation of title and reconveyance  of the subject property  has prescribed as petitioner has not proven actual possession  and ownership of the property  due to his failure to prove the identity of his larger property that would show that the disputed property is a part thereof, and his claim of  title to the subject property by virtue of open, public and continuous possession in the concept of owner is nebulous in the light of a similar claim by respondent who holds a Torrens title  to the subject property.

 Respondent’s original certificate of title was issued on May 22, 1981, while

the counterclaim was filed by petitioner on October 15, 1984, which is clearly beyond the one-year prescriptive period.     

 In fine, the Court of Appeals did not err in confirming that respondent is the

owner of the parcel of land covered by OCT No. P-658. WHEREFORE, the petition is DENIED.  The Court of Appeals’

decision   dated August 15, 2003, and its Resolution dated May 13, 2004 in  CA-G.R. CV No. 63801, are hereby AFFIRMED.

 No costs. SO ORDERED. 

G.R. No. 175485 July 27, 2011

CASIMIRO DEVELOPMENT CORPORATIONvs. RENATO L. MATEO,                    Respondent.

x-----------------------------------------------------------------------------------------x          The focus of this appeal is the faith that should be accorded to the Torrens title that the seller holds at the time of the sale. 

In its decision promulgated on August 31, 2006,[1] the Court of Appeals (CA) declared that the respondent and his three brothers were the rightful owners of the land  in litis, and directed the Office of the Register of Deeds of Las Piñas City to cancel the transfer certificate of title (TCT) registered under the name of petitioner Casimiro Development Corporation (CDC) and to issue in its place another TCT in favor of the respondent and his three brothers. Thereby, the CA reversed the judgment of the Regional Trial Court (RTC) rendered on May 9, 2000 (dismissing the respondent’s complaint for quieting of title and reconveyance upon a finding that CDC had been a buyer in good faith of the land in litis and that the respondent’s suit had already been time-barred).

 Aggrieved, CDC brought its petition for review on certiorari.

 Antecedents

                    The subject of this case is a registered parcel of land (property) with an area of 6,693 square meters, more or less, located in Barrio Pulang Lupa, Las Piñas City, that was originally owned by Isaias Lara,[2] the respondent’s maternal grandfather. Upon the death of Isaias Lara in 1930, the property passed on to his children, namely: Miguela, Perfecta and Felicidad, and a grandson, Rosauro (son of Perfecta who had predeceased Isaias in 1920). In 1962, the co-heirs effected the transfer of the full and exclusive ownership to Felicidad (whose married surname was Lara-Mateo) under an agreement denominated as Pagaayos Na Gawa Sa Labas Ng Hukuman.           Felicidad Lara-Mateo had five children, namely: Laura, respondent Renato, Cesar, Candido, Jr. and Leonardo. With the agreement of the entire Lara-Mateo family, a deed of sale covering the property was executed in favor of Laura, who, in 1967, applied for land registration.  After the application was granted, Original Certificate of Title (OCT) No. 6386 was issued in Laura’s sole name. 

In due course, the property now covered by OCT No. 6386 was used as collateral to secure a succession of loans. The first loan was obtained from Bacoor Rural Bank (Bacoor Bank). To repay the loan to Bacoor Bank and secure the release of the mortgage, Laura borrowed funds from Parmenas Perez (Perez), who, however, required that the title be meanwhile transferred to his name. Thus, OCT No. 6386

was cancelled and Transfer Certificate of Title (TCT) No. 438959 was issued in the name of Perez. Subsequently, Laura recovered the property by repaying the obligation with the proceeds of another loan obtained from Rodolfo Pe (Pe), resulting in the cancellation of TCT No. 438595, and in the issuance of TCT No. S-91595 in Laura’s name.  She later executed a deed of sale in favor of Pe, leading to the issuance of TCT No. S-91738 in the name of Pe, who in turn constituted a mortgage on the property in favor of China Banking Corporation (China Bank) as security for a loan. In the end, China Bank foreclosed the mortgage, and consolidated its ownership of the property in 1985 after Pe failed to redeem. Thus, TCT No. (99527) T-11749-A was issued in the name of China Bank.           In 1988, CDC and China Bank negotiated and eventually came to terms on the purchase of the property, with China Bank executing a deed of conditional sale  for the purpose.  On March 4, 1993, CDC and China Bank executed a deed of absolute sale over the property. Resultantly, on March 29, 1993, CDC was issued TCT No. T-34640 in its own name.                   In the meanwhile, on February 28, 1991, Felicidad died intestate.           On June 6, 1991, CDC brought an action for unlawful detainer in the Metropolitan Trial Court (MeTC) in Las Piñas City against the respondent’s siblings, namely: Cesar, Candido, Jr., and Leonardo, and the other occupants of the property. Therein, the defendants maintained that the MeTC did not have jurisdiction over the action because the land was classified as agricultural; that the jurisdiction belonged to the Department of Agrarian Reform Adjudication Board (DARAB); that they had been in continuous and open possession of the land even before World War II and had presumed themselves entitled to a government grant of the land; and that CDC’s title was invalid, considering that the land had been registered before its being declared alienable.[3]     

On October 19, 1992, the MeTC ruled in favor of CDC, viz: 

The Court, after careful consideration of the facts and the laws applicable to this case[,] hereby resolves:

 1.  On the issue of jurisdiction. The defendants alleged that the land in question is an

agricultural land by presenting a Tax Declaration Certificate classifying the land as “FISHPOND.” The classification of the land in a tax declaration certificate as a “fishpond” merely refers to the use of the land in question for the purpose of real property taxation.  This alone would not be sufficient to bring the land in question under the operation of the Comprehensive Agrarian Reform Law.

 2. On the issue of open and adverse possession by the

defendants. It should be noted that the subject land is covered by a

Transfer Certificate of Title in the name of plaintiffs’ predecessor-in-interest China Banking Corporation.  Certificates of Title under the Torrens System is indefeasible and imprescriptible. As between two persons claiming possession, one having a [T]orrens title and the other has none, the former has a better right.

 3.  On the issue of the nullity of the Certificate of Title. The defense of the defendants that the subject property was

a forest land when the same was originally registered in 1967 and hence, the registration is void[,] is not for this Court to decide[,] for lack of jurisdiction.  The certificate of title over the property must be respected by this Court until it has been nullified by a competent Court.

 WHEREFORE, premises considered, judgment is hereby

rendered in favor of the plaintiff[,] ordering the defendants 1.  [sic] and all persons claiming right[s] under it to vacate

the subject premises located at Pulang Lupa I, Las Piñas, Metro Manila and surrender the possession of the same to herein plaintiff;

 2.  to pay the plaintiff reasonable compensation for the use

and occupation of the subject premises hereby fixed at (P100.00) one hundred pesos a month starting November 22, 1990 (the time when the demand letter to vacate was given) until defendants actually vacate the property;

 No pronouncement as to costs and attorney’s fees. SO ORDERED.[4]

 The decision of the MeTC was assailed in the RTC via petition

for certiorari and prohibition. The RTC resolved against CDC, and held that the MeTC had acted without jurisdiction because the land, being a fishpond, was agricultural; hence, the dispute was within the exclusive jurisdiction of the DARAB pursuant to Republic Act No. 6657 (Comprehensive Agrarian Reform Law of 1988).[5]

 

CDC appealed to the CA, which, on January 25, 1996, found in favor of CDC, declaring that the MeTC had jurisdiction. As a result, the CA reinstated the decision of the MeTC.[6]

 On appeal (G.R. No. 128392), the Court affirmed the CA’s decision in

favor of CDC,  ruling thusly: WHEREFORE, the petition is DENIED and the Court of

Appeals’ Decision and Resolution in CA- G.R. SP No. 34039, dated January 25, 1996 and February 21, 1997 respectively, are AFFIRMED. No costs.

 SO ORDERED.[7]

           The decision in G.R. No. 128392 became final. 

Nonetheless, on June 29, 1994, the respondent brought an action for quieting of title, reconveyance of four-fifths of the land, and damages against CDC and Laura in the RTC in Las Piñas City entitled Renato L. Mateo v. Casimiro Development Corporation and Laura Mateo de Castro.  In paragraph 4 of his complaint, he stated that he was “bringing this action to quiet title on behalf of himself and of his three (3) brothers – Cesar, Leonardo, and Candido, Jr., all surnamed MATEO – in his capacity as one of the co-owners of a parcel of land situated at Barrio Pulang Lupa, Municipality of Las Piñas, Metro Manila.”

 On May 9, 2001, the RTC held in favor of CDC, disposing:

 WHEREFORE, and by strong preponderance of evidence,

judgment is hereby rendered in favor of the defendant Casimiro Development Corporation and against the plaintiff Renato L. Mateo by (1) Dismissing the complaint, and upholding the validity and indefeasibility of Transfer Certificate of Title No. T-34640 in the name of Casimiro Development Corporation; (2) Ordering the plaintiff Renato Mateo to pay defendant Casimiro Development Corporation the sum of [a] P200,000.00 as compensatory damages; [b] P200,000.00 as attorney’s fees; and [c] to pay the costs.

 SO ORDERED.[8]

           On appeal (C.A.-G.R. CV No. 71696), the CA promulgated its decision on August 31, 2006, reversing the RTC and declaring CDC to be not a buyer in good faith due to its being charged with notice of the defects and flaws of the title at the time it acquired the property from China Bank, and decreeing: 

WHEREFORE, the Decision dated May 9, 2001 of Branch 225, Regional Trial Court, Las Piñas City in Civil Case No. 94-

2045 is hereby REVERSED and SET ASIDE and a new one rendered:

 (1)      Declaring appellant Renato Mateo and his brothers

and co-owners Cesar, Candido, Jr., and Leonardo, all surnamed Mateo as well as his sister, Laura Mateo de Castro as the rightful owners of the parcel of land, subject of this case; and

 (2)      Ordering the Register of Deeds of Las Piñas City, Metro-

Manila to cancel Transfer Certificate of Title No. T-34640 under the name of appellee Casimiro Development Corporation, and that a new one be issued in favor of the appellant and his co-heirs and siblings, mentioned above as co-owners pro indiviso of the said parcel.

 (3)      No pronouncement as to cost.

 SO ORDERED.[9]

 The CA denied CDC’s motion for reconsideration. Hence, this appeal, in which CDC urges that the CA committed serious

errors of law,[10] as follows: (A)   xxx in failing to rule that the decree of registration over the

Subject Property is incontrovertible and no longer open to review or attack after the lapse of one (1) year from entry of such decree of registration in favor of Laura Mateo de Castro.

 (B)   xxx in failing to rule that the present action is likewise barred

by res judicata. (C)   xxx in failing to rule that the instant action for quieting of title

and reconveyance under PD No. 1529 cannot prosper because the Subject Property had already been conveyed and transferred to third parties who claimed adverse title for themselves.

 (D)  xxx in failing to rule that the action of respondent for

“quieting of title, reconveyance and damages” is barred by laches.

 (E)   xxx in ruling that the Subject Property must be reconveyed to

respondent because petitioner Casimiro Development Corporation is not a “purchaser in good faith.”

 

          CDC argues that it was a buyer in good faith; and that the CA did not rule on matters that fortified its title in the property, namely: (a) the incontrovertibility of the title of Laura; (b) the action being barred by laches and res judicata; and (c) the property having been conveyed to third parties who had then claimed adverse title. 

The respondent counters that CDC acquired the property from China Bank in bad faith, because it had actual knowledge of the possession of the property by the respondent and his siblings; that CDC did not actually accept delivery of the possession of the property from China Bank; and that CDC  ignored the failure of China Bank to warrant its title.       

Ruling 

We grant the petition. 

1.Indefeasibility of title in

the name of Laura           As basis for recovering the possession of the property, the respondent has assailed the title of Laura.           We cannot sustain the respondent. 

There is no doubt that the land in question, although once a part of the public domain, has already been placed under the Torrens system of land registration. The Government is required under the Torrens system of registration to issue an official certificate of title to attest to the fact that the person named in the certificate is the owner of the property therein described, subject to such liens and encumbrances as thereon noted or what the law warrants or reserves.[11] The objective is to obviate possible conflicts of title by giving the public the right to rely upon the face of the Torrens certificate and to dispense, as a rule, with the necessity of inquiring further. The Torrens system gives the registered owner complete peace of mind, in order that he will be secured in his ownership as long as he has not voluntarily disposed of any right over the covered land.[12]

 The Government has adopted the Torrens system due to its being the most

effective measure to guarantee the integrity of land titles and to protect their indefeasibility once the claim of ownership is established and recognized. If a person purchases a piece of land on the assurance that the seller’s title thereto is valid, he should not run the risk of being told later that his acquisition was ineffectual after all, which will not only be unfair to him as the purchaser, but will also erode public confidence in the system and will force land transactions to be attended by complicated and not necessarily conclusive investigations and proof of ownership. The further consequence will be that land conflicts can be even more abrasive, if not even violent. The Government, recognizing the worthy purposes of the Torrens

system, should be the first to accept the validity of titles issued thereunder once the conditions laid down by the law are satisfied.[13]

 Yet, registration under the Torrens system, not being a mode of acquiring

ownership, does not create or vest title.[14] The Torrens certificate of title is merely an evidence of ownership or title in the particular property described therein.[15] In that sense, the issuance of the certificate of title to a particular person does not preclude the possibility that persons not named in the certificate may be co-owners of the real property therein described with the person named therein, or that the registered owner may be holding the property in trust for another person.[16]

 Nonetheless, it is essential that title registered under the Torrens system

becomes indefeasible and incontrovertible.[17]

 The land in question has been covered by a Torrens certificate of title (OCT

No. 6386  in the name of Laura, and its derivative certificates) before CDC became the registered owner by purchase from China Bank. In all that time, neither the respondent nor his siblings opposed the transactions causing the various transfers. In fact, the respondent admitted in his complaint that the registration of the land in the name of Laura alone had been with the knowledge and upon the agreement of the entire Lara-Mateo family. It is unthinkable, therefore, that the respondent, fully aware of the exclusive registration in her sister Laura’s name, allowed more than 20 years to pass before  asserting his claim of ownership for the first time through this case in mid-1994. Making it worse for him is that he did so only after CDC had commenced the ejectment case against his own siblings.

 Worthy of mention is that Candido, Jr., Leonardo, and Cesar’s defense in the

ejectment case brought by CDC against them was not predicated on a claim of their ownership of the property, but on their being agricultural lessees or tenants of CDC.  Even that defense was ultimately rejected by this Court by observing in G.R. No. 128392 as follows:

With regard to the first element, the petitioners have tried to prove that they are tenants or agricultural lessees of the respondent corporation, CDC, by showing that the land was originally owned by their grandfather, Isaias Lara, who gave them permission to work the land, and that CDC is merely a successor-in-interest of their grandfather. It must be noted that the petitioners failed to adequately prove their grandfather’s ownership of the land. They merely showed six tax declarations. It has been held by this Court that, as against a transfer certificate of title, tax declarations or receipts are not adequate proofs of ownership. Granting arguendo that the land was really owned by the petitioners’ grandfather, petitioners did not even attempt to show how the land went from the patrimony of their grandfather to that of CDC. Furthermore, petitioners did not prove, but relied on mere

allegation, that they indeed had an agreement with their grandfather to use the land.

 As for the third element, there is apparently no consent

between the parties. Petitioners were unable to show any proof of consent from CDC to work the land. For the sake of argument, if petitioners were able to prove that their grandfather owned the land, they nonetheless failed to show any proof of consent from their grandfather to work the land. Since the third element was not proven, the fourth element cannot be present since there can be no purpose to a relationship to which the parties have not consented.[18]

 The respondent’s attack against the title of CDC is likewise anchored on his

assertion that the only purpose for having OCT No. 6386 issued in the sole name of Laura was for Laura to hold the title in trust for their mother. This assertion cannot stand, however, inasmuch as Laura’s title had long ago become indefeasible.

 Moreover, the respondent’s suit is exposed as being, in reality, a collateral

attack on the title in the name of Laura, and for that reason should not prosper. Registration of land under the Torrens System, aside from perfecting the title and rendering it indefeasible after the lapse of the period allowed by law, also renders the title immune from collateral attack.[19] A collateral attack occurs when, in another action to obtain a different relief and as an incident of the present action, an attack is made against the judgment granting the title. This manner of attack is to be distinguished from a direct attack against a judgment granting the title, through an action whose main objective is to annul, set aside, or enjoin the enforcement of such judgment if not yet implemented, or to seek recovery if the property titled under the judgment had been disposed of.[20]

 2.

CDC was an innocent purchaser for value           The CA found that CDC acquired the property in bad faith because CDC had knowledge of defects in the title of China Bank, including the adverse possession of the respondent’s siblings and the supposed failure of China Bank to warrant its title by inserting an as-is, where-is clause in its contract of sale with CDC.           The CA plainly erred in so finding against CDC. 

To start with, one who deals with property registered under the Torrens system need not go beyond the certificate of title, but only has to rely on the certificate of title.[21]He is charged with notice only of such burdens and claims as are annotated on the title.[22] The pertinent law on the matter of burdens and claims is Section 44 of the Property Registration Decree,[23] which provides:

 

Section 44.  Statutory liens affecting title. — Every registered owner receiving a certificate of title in pursuance of a decree of registration, and every subsequent purchaser of registered land taking a certificate of title for value and in good faith, shall hold the same free from all encumbrances except those noted on said certificate and any of the following encumbrances which may be subsisting, namely:

 First.  Liens, claims or rights arising or existing under the

laws and Constitution of the Philippines which are not by law required to appear of record in the Registry of Deeds in order to be valid against subsequent purchasers or encumbrances of record.

 Second.  Unpaid real estate taxes levied and assessed within

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

 Third.  Any public highway or private way established or

recognized by law, or any government irrigation canal or lateral thereof, if the certificate of title does not state that the boundaries of such highway or irrigation canal or lateral thereof have been determined.

 Fourth.  Any disposition of the property or limitation on the

use thereof by virtue of, or pursuant to, Presidential Decree No. 27 or any other law or regulations on agrarian reform. In short, considering that China Bank’s TCT No. 99527 was a clean title,

that is, it was free from any lien or encumbrance, CDC had the right to rely, when it purchased the property, solely upon the face of the certificate of title in the name of China Bank.[24]

 The CA’s ascribing of bad faith to CDC based on its knowledge of the

adverse possession of the respondent’s siblings at the time it acquired the property from China Bank was absolutely unfounded and unwarranted. That possession did not translate to an adverse claim of ownership that should have put CDC on actual notice of a defect or flaw in the China Bank’s title, for the respondent’s siblings themselves, far from asserting ownership in their own right, even characterized their possession only as that of mere agricultural tenants. Under no law was possession grounded on tenancy a status that might create a defect or inflict a flaw in the title of the owner. Consequently, due to his own admission in his complaint that the respondent’s own possession was not any different from that of his siblings, there was really nothing – factually or legally speaking – that ought to have alerted CDC

or, for that matter, China Bank and its predecessors-in-interest, about any defect or flaw in the title.

           The vendee’s notice of a defect or flaw in the title of the vendor, in order for it to amount to bad faith, should encompass facts and circumstances that would impel a reasonably cautious person to make further inquiry into the vendor’s title, [25] or facts and circumstances that would induce a reasonably prudent man to inquire into the status of the title of the property in litigation. [26] In other words, the presence of anything that excites or arouses suspicion should then prompt the vendee to look beyond the certificate and to investigate the title of the vendor appearing on the face of said certificate.[27]

 And, secondly, the CA grossly erred in construing the as-is, where-is clause

contained in the deed of sale between CDC (as vendee) and China Bank (as vendor) as proof or manifestation of any bad faith on the part of CDC. On the contrary, the as-is, where-is clause did not affect the title of China Bank because it related only to the physical condition of the property upon its purchase by CDC. The clause only placed on CDC the burden of having the occupants removed from the property.  In a sale made on an as-is, where-isbasis, the buyer agrees to take possession of the things sold “in the condition where they are found and from the place where they are located,” because the phrase as-is, where-ispertains solely “to the physical condition of the thing sold, not to its legal situation” and is “merely descriptive of the state of the thing sold” without altering the seller’s responsibility to deliver the property sold to the buyer.[28]

 What the foregoing circumstances ineluctably indicate is that CDC, having

paid the full and fair price of the land, was an innocent purchaser for value, for, according toSandoval v. Court of Appeals:[29]

A purchaser in good faith is one who buys property of another, without notice that some other person has a right to, or interest in, such property and pays a full and fair price for the same, at the time of such purchase, or before he has notice of the claim or interest of some other persons in the property. He buys the property with the belief that the person from whom he receives the thing was the owner and could convey title to the property. A purchaser cannot close his eyes to facts which should put a reasonable man on his guard and still claim he acted in good faith. WHEREFORE, we grant the petition for review on certiorari; set aside the

decision of the Court of Appeals in CA-GR. CV No. 71696; dismiss the complaint in Civil Case No. 94-2045; and declare Transfer Certificate of Title No. T-34640 in the name of Casimiro Development Corporation valid and subsisting.

 The respondent shall pay the costs of suit. 

          SO  ORDERED.