ALIENS:

G.R. No. 74833 January 21, 1991

THOMAS C. CHEESMAN, petitioner, vs.INTERMEDIATE APPELLATE COURT and ESTELITA PADILLA, respondents.

Estanislao L. Cesa, Jr. for petitioner.

Benjamin I. Fernandez for private respondent.

 

NARVASA, J.:p

This appeal concerns the attempt by an American citizen (petitioner Thomas Cheesman) to annul — for lack of consent on his part — the sale by his Filipino wife (Criselda) of a residential lot and building to Estelita Padilla, also a Filipino.

Thomas Cheesman and Criselda P. Cheesman were married on December 4, 1970 but have been separated since February 15,1981. 1

On June 4, 1974, a "Deed of Sale and Transfer of Possessory Rights" was executed by Armando Altares conveying a parcel of unregistered land and the house thereon (at No. 7 Neptune Street, Gordon Heights, Olongapo City) in favor of "Criselda P. Cheesman, of legal age, Filipino citizen, married to Thomas Cheesman, and residing at Lot No. 1, Blk. 8, Filtration Road, Sta. Rita, Olongapo City . . ." 2 Thomas Cheesman, although aware of the deed, did not object to the transfer being made only to his wife. 3

Thereafter—and again with the knowledge of Thomas Cheesman and also without any protest by him—tax declarations for the property purchased were issued in the name only of Criselda Cheesman and Criselda assumed exclusive management and administration of said property, leasing it to tenants. 4 On July 1, 1981, Criselda Cheesman sold the property to Estelita M. Padilla, without the knowledge or consent of Thomas Cheesman. 5 The deed described Criselda as being" . . . of legal age, married to an American citizen,. . ." 6

Thirty days later, or on July 31, 1981, Thomas Cheesman brought suit in the Court of First Instance at Olongapo City against his wife, Criselda, and Estelita Padilla, praying for the annulment of the sale on the ground that the transaction had been executed without his knowledge and consent. 7 An answer was filed in the names of both defendants, alleging that (1) the property sold was paraphernal, having been purchased by Criselda with funds exclusively belonging to her ("her own separate money"); (2) Thomas Cheesman, being an American, was disqualified to have any interest or right of ownership in the land; and (3) Estelita Padilla was a buyer in good faith. 8

During the pre-trial conference, the parties agreed upon certain facts which were subsequently set out in a pre-trial Order dated October 22, 1981, 9 as follows:

1. Both parties recognize the existence of the Deed of Sale over the residential house located at No. 7 Granada St., Gordon Heights, Olongapo City, which was acquired from Armando Altares

on June 4, 1974 and sold by defendant Criselda Cheesman to Estelita Padilla on July 12, 1981; and

2. That the transaction regarding the transfer of their property took place during the existence of their marriage as the couple were married on December 4, 1970 and the questioned property was acquired sometime on June 4,1974.

The action resulted in a judgment dated June 24, 1982, 10 declaring void ab initio the sale executed by Criselda Cheesman in favor of Estelita M. Padilla, and ordering the delivery of the property to Thomas Cheesman as administrator of the conjugal partnership property, and the payment to him of P5,000.00 as attorney's fees and expenses of litigation. 11

The judgment was however set aside as regards Estelita Padilla on a petition for relief filed by the latter, grounded on "fraud, mistake and/or excusable negligence" which had seriously impaired her right to present her case adequately. 12 "After the petition for relief from judgment was given due course," according to petitioner, "a new judge presided over the case." 13

Estelita Padilla filed a supplemental pleading on December 20, 1982 as her own answer to the complaint, and a motion for summary judgment on May 17, 1983. Although there was initial opposition by Thomas Cheesman to the motion, the parties ultimately agreed on the rendition by the court of a summary judgment after entering into a stipulation of facts, at the hearing of the motion on June 21, 1983, the stipulation being of the following tenor: 14

(1) that the property in question was bought during the existence of the marriage between the plaintiff and the defendant Criselda P. Cheesman;

(2) that the property bought during the marriage was registered in the name of Criselda Cheesman and that the Deed of Sale and Transfer of Possessory Rights executed by the former owner-vendor Armando Altares in favor of Criselda Cheesman made no mention of the plaintiff;

(3) that the property, subject of the proceedings, was sold by defendant Criselda Cheesman in favor of the other defendant Estelita M. Padilla, without the written consent of the plaintiff.

Obviously upon the theory that no genuine issue existed any longer and there was hence no need of a trial, the parties having in fact submitted, as also stipulated, their respective memoranda each praying for a favorable verdict, the Trial Court 15 rendered a "Summary Judgment" dated August 3, 1982 declaring "the sale executed by . . . Criselda Cheesman in favor of . . . Estelita Padilla to be valid," dismissing Thomas Cheesman's complaint and ordering him "to immediately turn over the possession of the house and lot subject of . . . (the) case to . . . Estelita Padilla . . ." 16

The Trial Court found that —

1) the evidence on record satisfactorily overcame the disputable presumption in Article 160 of the Civil Code—that all property of the marriage

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belongs to the conjugal partnership "unless it be proved that it pertains exclusively to the husband or to the wife"—and that the immovable in question was in truth Criselda's paraphernal property;

2) that moreover, said legal presumption in Article 160 could not apply "inasmuch as the husband-plaintiff is an American citizen and therefore disqualified under the Constitution to acquire and own real properties; and

3) that the exercise by Criselda of exclusive acts of dominion with the knowledge of her husband "had led . . . Estelita Padilla to believe that the properties were the exclusive properties of Criselda Cheesman and on the faith of such a belief she bought the properties from her and for value," and therefore, Thomas Cheesman was, under Article 1473 of the Civil Code, estopped to impugn the transfer to Estelita Padilla.

Thomas Cheesman appealed to the Intermediate Appellate Court. There he assailed the Trial Court acts (1) of granting Estelita Padilla's petition for relief, and its resolution of matters not subject of said petition; (2) of declaring valid the sale to Estelita Padilla despite the lack of consent thereto by him, and the presumption of the conjugal character of the property in question pursuant to Article 160 of the Civil Code; (3) of disregarding the judgment of June 24, 1982 which, not having been set aside as against Criselda Cheesman, continued to be binding on her; and (4) of making findings of fact not supported by evidence. All of these contentions were found to be without merit by the Appellate Tribunal which, on January 7, 1986, promulgated a decision (erroneously denominated, "Report") 17 affirming the "Summary Judgment complained of," "having found no reversible error" therein.

Once more, Thomas Cheesman availed of the remedy of appeal, this time to this Court. Here, he argues that it was reversible error for the Intermediate Appellate Court —

1) to find that the presumption that the property in question is conjugal in accordance with Article 160 had been satisfactorily overcome by Estelita Padilla; 18

2) to rule that Estelita Padilla was a purchaser of said property in good faith, it appearing:

a) that the deed by which the property was conveyed to Criselda Cheesman described her as "married to Thomas C. Cheesman," as well as the deed by which the property was later conveyed to Estelita Padilla by Criselda Cheesman also described her as "married to an American citizen," and both said descriptions had thus "placed Estelita on knowledge of the conjugal nature of the property;" and

b) that furthermore, Estelita had admitted to stating in the deed by which she acquired the property a price much lower than that actually paid "in order to avoid payment of more obligation to the government;" 19

3) to decline to declare that the evidence did not warrant the grant of Estelita Padilla's petition for relief on the ground of "fraud, mistake and/or excusable negligence;" 20

4) to hold that Thomas Cheesman had waived his objection to Estelita's petition for relief by failing to appeal from the order granting the same;

5) to accord to Estelita Padilla a relief other than that she had specifically prayed for in her petition for relief, ie., "the restoration of the purchase price which Estelita allegedly paid to Criselda;" 21 and

6) to fail to declare that Thomas Cheesman's citizenship is not a bar to his action to recover the lot and house for the conjugal partnership. 22

Such conclusions as that (1) fraud, mistake or excusable negligence existed in the premises justifying relief to Estelita Padilla under Rule 38 of the Rules of Court, or (2) that Criselda Cheesman had used money she had brought into her marriage to Thomas Cheesman to purchase the lot and house in question, or (3) that Estelita Padilla believed in good faith that Criselda Cheesman was the exclusive owner of the property that she (Estelita) intended to and did in fact buy—derived from the evidence adduced by the parties, the facts set out in the pleadings or otherwise appearing on record—are conclusions or findings of fact. As distinguished from a question of law—which exists "when the doubt or difference arises as to what the law is on a certain state of facts" — "there is a question of fact when the doubt or difference arises as to the truth or the falsehood of alleged facts;" 23or when the "query necessarily invites calibration of the whole evidence considering mainly the credibility of witnesses, existence and relevancy of specific surrounding circumstances, their relation; to each other and to the whole and the probabilities of the situation." 24

Now, it is axiomatic that only questions of law, distinctly set forth, may be raised in a petition for the review oncertiorari of a decision of the Court of Appeals presented to this Court. 25 As everyone knows or ought to know, the appellate jurisdiction of this Court is limited to reviewing errors of law, accepting as conclusive the factual findings of the lower court upon its own assessment of the evidence. 26 The creation of the Court of Appeals was precisely intended to take away from the Supreme Court the work of examining the evidence, and confine its task to the determination of questions which do not call for the reading and study of transcripts containing the testimony of witnesses. 27 The rule of conclusiveness of the factual findings or conclusions of the Court of Appeals is, to be sure, subject to certain exceptions,28 none of which however obtains in the case at bar.

It is noteworthy that both the Trial Court and the Intermediate Appellate Court reached the same conclusions on the three (3) factual matters above set forth, after assessment of the evidence and determination of the probative value thereof. Both Courts found that the facts on record adequately proved fraud, mistake or excusable negligence by which Estelita Padilla's rights had been substantially impaired; that the funds used by Criselda Cheesman was money she had earned and saved prior to her marriage to Thomas Cheesman, and that Estelita Padilla did believe in good faith that Criselda Cheesman was the sole owner of the property in question. Consequently, these determinations of fact will not be here disturbed, this Court having been cited to no reason for doing so.

These considerations dispose of the first three (3) points that petitioner Cheesman seeks to make in his appeal. They also make

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unnecessary an extended discussion of the other issues raised by him. As to them, it should suffice to restate certain fundamental propositions.

An order of a Court of First Instance (now Regional Trial Court) granting a petition for relief under Rule 38 is interlocutory and is not appealable. Hence, the failure of the party who opposed the petition to appeal from said order, or his participation in the proceedings subsequently had, cannot be construed as a waiver of his objection to the petition for relief so as to preclude his raising the same question on appeal from the judgment on the merits of the main case. Such a party need not repeat his objections to the petition for relief, or perform any act thereafter (e.g., take formal exception) in order to preserve his right to question the same eventually, on appeal, it being sufficient for this purpose that he has made of record "the action which he desires the court to take or his objection to the action of the court and his grounds therefor." 29

Again, the prayer in a petition for relief from judgment under Rule 38 is not necessarily the same prayer in the petitioner's complaint, answer or other basic pleading. This should be obvious. Equally obvious is that once a petition for relief is granted and the judgment subject thereof set aside, and further proceedings are thereafter had, the Court in its judgment on the merits may properly grant the relief sought in the petitioner's basic pleadings, although different from that stated in his petition for relief.

Finally, the fundamental law prohibits the sale to aliens of residential land. Section 14, Article XIV of the 1973 Constitution ordains that, "Save in cases of hereditary succession, no private land shall be transferred or conveyed except to individuals, corporations, or associations qualified to acquire or hold lands of the public domain." 30 Petitioner Thomas Cheesman was, of course, charged with knowledge of this prohibition. Thus, assuming that it was his intention that the lot in question be purchased by him and his wife, he acquired no right whatever over the property by virtue of that purchase; and in attempting to acquire a right or interest in land, vicariously and clandestinely, he knowingly violated the Constitution; the sale as to him was null and void. 31 In any event, he had and has no capacity or personality to question the subsequent sale of the same property by his wife on the theory that in so doing he is merely exercising the prerogative of a husband in respect of conjugal property. To sustain such a theory would permit indirect controversion of the constitutional prohibition. If the property were to be declared conjugal, this would accord to the alien husband a not insubstantial interest and right over land, as he would then have a decisive vote as to its transfer or disposition. This is a right that the Constitution does not permit him to have.

As already observed, the finding that his wife had used her own money to purchase the property cannot, and will not, at this stage of the proceedings be reviewed and overturned. But even if it were a fact that said wife had used conjugal funds to make the acquisition, the considerations just set out militate, on high constitutional grounds, against his recovering and holding the property so acquired or any part thereof. And whether in such an event, he may recover from his wife any share of the money used for the purchase or charge her with unauthorized disposition or expenditure of conjugal funds is not now inquired into; that would be, in the premises, a purely academic exercise. An equally decisive consideration is that Estelita Padilla is a purchaser in good faith, both the Trial Court and the Appellate Court having found that Cheesman's own conduct had led her to believe the property to be exclusive property of the latter's wife, freely disposable by her without his consent or intervention. An innocent buyer for value, she is entitled to the protection of the law in

her purchase, particularly as against Cheesman, who would assert rights to the property denied him by both letter and spirit of the Constitution itself.

WHEREFORE, the appealed decision is AFFIRMED, with costs against petitioner.

SO ORDERED.

Cruz, Gancayco, Griño-Aquino and Medialdea, JJ., concur.

FIRST DIVISION  IN RE: PETITION FOR                           G.R. No. 149615SEPARATION OF PROPERTY ELENA BUENAVENTURA MULLER,                             Petitioner,                  Present:

                               Panganiban, C.J. (Chairperson),          - versus -                                              Ynares-Santiago,                                                                      Austria-Martinez,Callejo, Sr., and Chico-Nazario, JJ.HELMUT MULLER,                             Respondent.                    Promulgated:                                                                      August 29, 2006 x ---------------------------------------------------------------------------------------- x 

DECISION YNARES-SANTIAGO, J.:

  

          This petition for review on certiorari[1] assails the February 26, 2001 Decision[2] of the Court of Appeals in CA-G.R. CV No. 59321 affirming with modification the August 12, 1996 Decision [3] of the Regional Trial Court of Quezon City, Branch 86 in Civil Case No. Q-94-21862, which terminated the regime of absolute community of property between petitioner and respondent, as well as the Resolution[4] dated August 13, 2001 denying the motion for reconsideration.           The facts are as follows:           Petitioner Elena Buenaventura Muller and respondent Helmut Muller were married in Hamburg, Germany on September 22, 1989.  The couple resided in Germany at a house owned by respondent’s parents but decided to move and reside permanently in thePhilippines in 1992.  By this time, respondent had inherited the house in Germany from his parents which he sold and used the proceeds for the purchase of a parcel of land in Antipolo, Rizal at the cost of P528,000.00 and the construction of a house amounting to P2,300,000.00.  The Antipolo property was registered in the name of petitioner under Transfer Certificate of Title No. 219438 [5] of the Register of Deeds of Marikina, Metro Manila.  

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          Due to incompatibilities and respondent’s alleged womanizing, drinking, and maltreatment, the spouses eventually separated. On September 26, 1994, respondent filed a petition[6] for separation of properties before the Regional Trial Court of Quezon City.            On August 12, 1996, the trial court rendered a decision which terminated the regime of absolute community of property between the petitioner and respondent.  It also decreed the separation of properties between them and ordered the equal partition of personal properties located within the country, excluding those acquired by gratuitous title during the marriage.  With regard to the Antipolo property, the court held that it was acquired using paraphernal funds of the respondent.  However, it ruled that respondent cannot recover his funds because the property was purchased in violation of Section 7, Article XII of the Constitution.  Thus – 

However, pursuant to Article 92 of the Family Code, properties acquired by gratuitous title by either spouse during the marriage shall be excluded from the community property.  The real property, therefore, inherited by petitioner in Germany is excluded from the absolute community of property of the herein spouses.  Necessarily, the proceeds of the sale of said real property as well as the personal properties purchased thereby, belong exclusively to the petitioner.  However, the part of that inheritance used by the petitioner for acquiring the house and lot in this country cannot be recovered by the petitioner, its acquisition being a violation of Section 7, Article XII of the Constitution which provides that “save in cases of hereditary succession, no private lands shall be transferred or conveyed except to individuals, corporations or associations qualified to acquire or hold lands of the public domain.”  The law will leave the parties in the situation where they are in without prejudice to a voluntary partition by the parties of the said real property. x x x

 x x x x As regards the property covered by

Transfer Certificate of Title No. 219438 of the Registry of Deeds of Marikina, Metro Manila, situated in Antipolo, Rizal and the improvements thereon, the Court shall not make any pronouncement on constitutional grounds.[7]

 Respondent appealed to the Court of Appeals which

rendered the assailed decision modifying the trial court’s Decision.  It held that respondent merely prayed for reimbursement for the purchase of the Antipolo property, and not acquisition or transfer of ownership to him.  It also considered petitioner’s ownership over the property in trust for the respondent.  As regards the house, the Court of Appeals ruled that there is nothing in the Constitution which prohibits respondent from acquiring the same.  The dispositive portion of the assailed decision reads:

 WHEREFORE, in view of the

foregoing, the Decision of the lower court dated August 12, 1996 is hereby MODIFIED. Respondent Elena Buenaventura Muller is hereby ordered to REIMBURSE the petitioner the amount of P528,000.00 for the

acquisition of the land and the amount of P2,300,000.00 for the construction of the house situated in Atnipolo, Rizal, deducting therefrom the amount respondent spent for the preservation, maintenance and development of the aforesaid real property including the depreciation cost of the house or in the alternative to SELL the house and lot in the event respondent does not have the means to reimburse the petitioner out of her own money and from the proceeds thereof, reimburse the petitioner of the cost of the land and the house deducting the expenses for its maintenance and preservation spent by the respondent.    Should there be profit, the same shall be divided in proportion to the equity each has over the property.  The case is REMANDED to the lower court for reception of evidence as to the amount claimed by the respondents for the preservation and maintenance of the property.

 SO ORDERED.[8]

 Hence, the instant petition for review raising the following

issues: 

I THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT THE RESPONDENT HEREIN IS ENTITLED TO REIMBURSEMENT OF THE AMOUNT USED TO PURCHASE THE LAND AS WELL AS THE COSTS FOR THE CONSTRUCTION OF THE HOUSE, FOR IN SO RULING, IT INDIRECTLY ALLOWED AN ACT DONE WHICH OTHERWISE COULD NOT BE DIRECTLY x x x DONE, WITHOUT DOING VIOLENCE TO THE CONSTITUTIONAL PROSCRIPTION THAT AN ALIEN IS PROHIBITED FROM ACQUIRING OWNERSHIP OF REAL PROPERTIES LOCATED IN THE PHILIPPINES. 

II THE COURT OF APPEALS GRAVELY ERRED IN SUSTAINING RESPONDENT’S CAUSE OF ACTION WHICH IS ACTUALLY A DESPERATE ATTEMPT TO OBTAIN OWNERSHIP OVER THE LOT IN QUESTION, CLOTHED UNDER THE GUISE OF CLAIMING REIMBURSEMENT. Petitioner contends that respondent, being an alien, is

disqualified to own private lands in the Philippines; that respondent was aware of the constitutional prohibition but circumvented the same; and that respondent’s purpose for filing an action for separation of property is to obtain exclusive possession, control and disposition of the Antipolo property.

 Respondent claims that he is not praying for transfer of

ownership of the Antipolo property but merely reimbursement; that the funds paid by him for the said property were in consideration of his marriage to petitioner; that the funds were given to petitioner in trust; and that equity demands that respondent should be reimbursed of his personal funds.

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 The issue for resolution is whether respondent is entitled to

reimbursement of the funds used for the acquisition of the Antipolo property.

 The petition has merit. Section 7, Article XII of the 1987 Constitution states: 

Save in cases of hereditary succession, no private lands shall be transferred or conveyed except to individuals, corporations, or associations qualified to acquire or hold lands of the public domain. Aliens, whether individuals or corporations, are

disqualified from acquiring lands of the public domain.  Hence, they are also disqualified from acquiring private lands.[9]  The primary purpose of the constitutional provision is the conservation of the national patrimony.  In the case of Krivenko v. Register of Deeds,[10] the Court held:

 Under section 1 of Article XIII of the

Constitution, “natural resources, with the exception of public agricultural land, shall not be alienated,” and with respect to public agricultural lands, their alienation is limited to Filipino citizens. But this constitutional purpose conserving agricultural resources in the hands of Filipino citizens may easily be defeated by the Filipino citizens themselves who may alienate their agricultural lands in favor of aliens. It is partly to prevent this result that section 5 is included in Article XIII, and it reads as follows:

 “Sec. 5. Save in cases of hereditary

succession, no private agricultural land will be transferred or assigned except to individuals, corporations, or associations qualified to acquire or hold lands of the public domain in the Philippines.”

 This constitutional provision closes the

only remaining avenue through which agricultural resources may leak into aliens’ hands. It would certainly be futile to prohibit the alienation of public agricultural lands to aliens if, after all, they may be freely so alienated upon their becoming private agricultural lands in the hands of Filipino citizens. x x x

 x x x x If the term “private agricultural lands”

is to be construed as not including residential lots or lands not strictly agricultural, the result would be that “aliens may freely acquire and possess not only residential lots and houses for themselves but entire subdivisions, and whole towns and cities,” and that “they may validly buy and hold in their names lands of any area for building homes, factories, industrial plants, fisheries, hatcheries, schools, health and vacation resorts, markets, golf courses, playgrounds, airfields, and a host of other uses and purposes that are not, in appellant’s words, strictly agricultural.” (Solicitor

General’s Brief, p. 6.) That this is obnoxious to the conservative spirit of the Constitution is beyond question. Respondent was aware of the constitutional prohibition and

expressly admitted his knowledge thereof to this Court. [11]  He declared that he had the Antipolo property titled in the name of petitioner because of the said prohibition.[12]  His attempt at subsequently asserting or claiming a right on the said property cannot be sustained.

 The Court of Appeals erred in holding that an implied trust

was created and resulted by operation of law in view of petitioner’s marriage to respondent.  Save for the exception provided in cases of hereditary succession, respondent’s disqualification from owning lands in the Philippines is absolute.  Not even an ownership in trust is allowed.  Besides, where the purchase is made in violation of an existing statute and in evasion of its express provision, no trust can result in favor of the party who is guilty of the fraud. [13]  To hold otherwise would allow circumvention of the constitutional prohibition. 

 Invoking the principle that a court is not only a court of law

but also a court of equity, is likewise misplaced.  It has been held that equity as a rule will follow the law and will not permit that to be done indirectly which, because of public policy, cannot be done directly.[14]  He who seeks equity must do equity, and he who comes into equity must come with clean hands.  The latter is a frequently stated maxim which is also expressed in the principle that he who has done inequity shall not have equity.  It signifies that a litigant may be denied relief by a court of equity on the ground that his conduct has been inequitable, unfair and dishonest, or fraudulent, or deceitful as to the controversy in issue.[15] 

 Thus, in the instant case, respondent cannot seek

reimbursement on the ground of equity where it is clear that he willingly and knowingly bought the property despite the constitutional prohibition. 

 Further, the distinction made between transfer of ownership

as opposed to recovery of funds is a futile exercise on respondent’s part.  To allow reimbursement would in effect permit respondent to enjoy the fruits of a property which he is not allowed to own.   Thus, it is likewise proscribed by law.  As expressly held in Cheesman v. Intermediate Appellate Court:[16]

 Finally, the fundamental law prohibits

the sale to aliens of residential land.  Section 14, Article XIV of the 1973 Constitution ordains that, “Save in cases of hereditary succession, no private land shall be transferred or conveyed except to individuals, corporations, or associations qualified to acquire or hold lands of the public domain.”  Petitioner Thomas Cheesman was, of course, charged with knowledge of this prohibition. Thus, assuming that it was his intention that the lot in question be purchased by him and his wife, he acquired no right whatever over the property by virtue of that purchase; and in attempting to acquire a right or interest in land, vicariously and clandestinely, he knowingly violated the Constitution; the sale as to him was null and void.  In any event, he had and has no capacity or personality to question the subsequent sale of the same property by his wife on the theory that in so doing he is merely

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exercising the prerogative of a husband in respect of conjugal property. To sustain such a theory would permit indirect controversion of the constitutional prohibition. If the property were to be declared conjugal, this would accord to the alien husband a not insubstantial interest and right over land, as he would then have a decisive vote as to its transfer or disposition. This is a right that the Constitution does not permit him to have.

 As already observed, the finding that

his wife had used her own money to purchase the property cannot, and will not, at this stage of the proceedings be reviewed and overturned. But even if it were a fact that said wife had used conjugal funds to make the acquisition, the considerations just set out to militate, on high constitutional grounds, against his recovering and holding the property so acquired, or any part thereof. And whether in such an event, he may recover from his wife any share of the money used for the purchase or charge her with unauthorized disposition or expenditure of conjugal funds is not now inquired into; that would be, in the premises, a purely academic exercise. (Emphasis added) WHEREFORE, in view of the foregoing, the instant

petition is GRANTED.  The Decision dated February 26, 2001 of the Court of Appeals in CA-G.R. CV No. 59321 ordering petitioner Elena Buenaventura Muller to reimburse respondent Helmut Muller the amount of P528,000 for the acquisition of the land and the amount of P2,300,000 for the construction of the house in Antipolo City, and the Resolution dated August 13, 2001 denying reconsideration thereof, are REVERSED and SET ASIDE.    The August 12, 1996 Decision of the Regional Trial Court of Quezon City, Branch 86 in Civil Case No. Q-94-21862 terminating the regime of absolute community between the petitioner and respondent, decreeing a separation of property between them and ordering the partition of the personal properties located in the Philippines equally, is REINSTATED.

 SO ORDERED.

FIRST DIVISION  

FELIX TING HO, JR.,                             G.R. No. 130115MERLA TING HO BRADEN,JUANA TING HO & LYDIATING HO BELENZO,                              Present:                              Petitioners,                      PUNO, C.J., Chairperson,

                                                          CARPIO,                                                                   CORONA,              - versus -                                       AZCUNA, and                                                                        LEONARDO-DE CASTRO, JJ.                                                                                                                                                                                                       Promulgated:VICENTE TENG GUI,                             Respondent.                             July 16, 2008

 

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 D E C I S I O N

                                                                   PUNO, C.J.: 

This is a Petition for Review on Certiorari[1] assailing the Decision[2] of the Court of Appeals (CA) in CA-G.R. CV No. 42993 which reversed and set aside the Decision of the Regional Trial Court (RTC) of Olongapo City, Branch 74, in Civil Case No. 558-0-88. 

The instant case traces its origin to an action for partition filed by petitioners Felix Ting Ho, Jr., Merla Ting Ho Braden, Juana Ting Ho and Lydia Ting Ho Belenzo against their brother, respondent Vicente Teng Gui, before the RTC, Branch 74 of Olongapo City.  The controversy revolves around a parcel of land, and the improvements established thereon, which, according to petitioners, should form part of the estate of their deceased father, Felix Ting Ho, and should be partitioned equally among each of the siblings.

 In their complaint before the RTC, petitioners alleged that

their father Felix Ting Ho died intestate on June 26, 1970, and left upon his death an estate consisting of the following:

a)    A commercial land consisting of 774 square meters, more or less, located at Nos. 16 and 18 Afable St., East Bajac-Bajac, Olongapo City, covered by Original Certificate of Title No. P-1064 and Tax Declaration No. 002-2451;

b)     A two-storey residential house on the aforesaid lot;c)  A two-storey commercial building, the first floor rented

to different persons and the second floor, Bonanza Hotel, operated by the defendant also located on the above described lot; and

d)   A sari-sari store (formerly a bakery) also located on the above described lot.[3]

 According to petitioners, the said lot and properties were titled and tax declared under trust in the name of respondent Vicente Teng Gui for the benefit of the deceased Felix Ting Ho who, being a Chinese citizen, was then disqualified to own public lands in thePhilippines; and that upon the death of Felix Ting Ho, the respondent took possession of the same for his own exclusive use and benefit to their exclusion and prejudice.[4]

           In his answer, the respondent countered that on October 11,

1958, Felix Ting Ho sold the commercial and residential buildings to his sister-in-law, Victoria Cabasal, and the bakery to his brother-in-law, Gregorio Fontela.[5]  He alleged that he acquired said properties from the respective buyers on October 28, 1961 and has since then been in possession of subject properties in the concept of an owner; and that on January 24, 1978, Original Certificate of Title No. P-1064 covering the subject lot was issued to him pursuant to a miscellaneous sales patent granted to him on January 3, 1978.[6]

 The undisputed facts as found by the trial court (RTC), and

affirmed by the appellate court (CA), are as follows: [T]he plaintiffs and the defendant are

all brothers and sisters, the defendant being the oldest.  They are the only legitimate children of the deceased Spouses Felix Ting Ho and Leonila Cabasal.  Felix Ting Ho died on June 26, 1970 while the wife Leonila Cabasal died onDecember 7, 1978.  The defendant Vicente Teng Gui is the oldest among the children as he was born on April 5, 1943.  The father of the plaintiffs and the defendant was a Chinese citizen

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although their mother was Filipino.  That sometime in 1947, the father of the plaintiffs and defendant, Felix Ting Ho, who was already then married to their mother Leonila Cabasal, occupied a parcel of land identified to (sic) as Lot No. 18 Brill which was thereafter identified as Lot No. 16 situated at Afable Street, East Bajac-Bajac, Olongapo City, by virtue of the permission granted him by the then U.S. Naval Reservation Office, Olongapo, Zambales.  The couple thereafter introduced improvements on the land.  They built a house of strong material at 16 Afable Street which is a commercial and residential house and another building of strong material at 18 Afable Street which was a residential house and a bakery.  The couple, as well as their children, lived and resided in the said properties until their death.  The father, Felix Ting Ho had managed the bakery while the mother managed the sari-sari store.  Long before the death of Felix Ting Ho, who died on June 26, 1970, he executed on October 11, 1958 a Deed of Absolute Sale of a house of strong material located at 16 Afable Street, Olongapo, Zambales, specifically described in Tax Dec. No. 5432, in favor of Victoria Cabasal his sister-in-law (Exh. C). This Deed of Sale cancelled the Tax Dec. of Felix Ting Ho over the said building (Exh. C-1) and the building was registered in the name of the buyer Victoria Cabasal, as per Tax Dec. No. 7579 (Exh. C-2).  On the same date, October 11, 1958 the said Felix Ting Ho also sold a building of strong material located at 18 Afable Street, described in Tax Dec. No. 5982, in favor of Gregorio Fontela, of legal age, an American citizen, married (Exh. D).  This Deed of Sale, in effect, cancelled Tax Dec. No. 5982 and the same was registered in the name of the buyer Gregorio Fontela, as per Tax Dec. No. 7580 (Exh. D-2).  In turn Victoria Cabasal and her husband Gregorio Fontela sold to Vicente Teng Gui on October 28, 1961 the buildings which were bought by them from Felix Ting Ho and their tax declarations for the building they bought (Exhs. C-2 and D-2) were accordingly cancelled and the said buildings were registered in the name of the defendant Vicente Teng Gui (Exhs. C-3 and D-3). On October 25, 1966 the father of the parties Felix Ting Ho executed an Affidavit of Transfer, Relinquishment and Renouncement of Rights and Interest including Improvements on Land in favor of his eldest son the defendant Vicente Teng Gui.  On the basis of the said document the defendant who then chose Filipino citizenship filed a miscellaneous sales application with the Bureau of Lands. Miscellaneous Sales Patent No. 7457 of the land which was then identified to be Lot No. 418, Ts-308 consisting of 774 square meters was issued to the applicant Vicente Teng Gui and accordingly on the 24th of January, 1978 Original Certificate of Title No. P-1064 covering the lot in question was issued to the defendant Vicente Teng Gui.  Although the buildings and improvements

on the land in question were sold by Felix Ting Ho to Victoria Cabasal and Gregorio Fontela in 1958 and who in turn sold the buildings to the defendant in 1961 the said Felix Ting Ho and his wife remained in possession of the properties as Felix Ting Ho continued to manage the bakery while the wife Leonila Cabasal continued to manage the sari-sari store.  During all the time that the alleged buildings were sold to the spouses Victoria Cabasal and Gregorio Fontela in 1958 and the subsequent sale of the same to the defendant Vicente Teng Gui in October of 1961 the plaintiffs and the defendant continued to live and were under the custody of their parents until their father Felix Ting Ho died in 1970 and their mother Leonila Cabasal died in 1978.[7] (Emphasis supplied)

         In light of these factual findings, the RTC found that Felix

Ting Ho, being a Chinese citizen and the father of the petitioners and respondent, resorted to a series of simulated transactions in order to preserve the right to the lot and the properties thereon in the hands of the family.  As stated by the trial court:

         After a serious consideration of the

testimonies given by both one of the plaintiffs and the defendant as well as the documentary exhibits presented in the case, the Court is inclined to believe that Felix Ting Ho, the father of the plaintiffs and the defendant, and the husband of Leonila Cabasal thought of preserving the properties in question by transferring the said properties to his eldest son as he thought that he cannot acquire the properties as he was a Chinese citizen.  To transfer the improvements on the land to his eldest son the defendant Vicente Teng Gui, he first executed simulated Deeds of Sales in favor of the sister and brother-in-law of his wife in 1958 and after three (3) years it was made to appear that these vendees had sold the improvements to the defendant Vicente Teng Gui who was then 18 years old.  The Court finds that these transaction (sic) were simulated and that no consideration was ever paid by the vendees.

 x x x                             x x

x                             x x x With regards (sic) to the transfer and

relinquishment of Felix Ting Ho’s right to the land in question in favor of the defendant, the Court believes, that although from the face of the document it is stated in absolute terms that without any consideration Felix Ting Ho was transferring and renouncing his right in favor of his son, the defendant Vicente Teng Gui, still the Court believes that the transaction was one of implied trust executed by Felix Ting Ho for the benefit of his family…[8]

         Notwithstanding such findings, the RTC considered the

Affidavit of Transfer, Relinquishment and Renouncement of Rights and Interests over the land as a donation which was accepted by the donee, the herein respondent.  With respect to the properties in the lot, the trial court held that although the sales were simulated, pursuant to Article 1471 of the New Civil Code [9] it can be assumed

7

that the intention of Felix Ting Ho in such transaction was to give and donate such properties to the respondent.  As a result, it awarded the entire conjugal share of Felix Ting Ho in the subject lot and properties to the respondent and divided only the conjugal share of his wife among the siblings.  The dispositive portion of the RTC decision decreed:

 WHEREFORE, judgment is hereby

rendered in favor of the plaintiffs and against the defendant as the Court orders the partition and the adjudication of the subject properties, Lot 418, Ts-308, specifically described in original Certificate of Title No. P-1064 and the residential and commercial houses standing on the lot specifically described in Tax Decs. Nos. 9179 and 9180 in the name of Vicente Teng Gui in the following manner, to wit: To the defendant Vicente Teng Gui is adjudicated an undivided six-tenth (6/10) of the aforementioned properties and to each of the plaintiffs Felix Ting Ho, Jr., Merla Ting-Ho Braden, Juana Ting and Lydia Ting Ho-Belenzo each an undivided one-tenth (1/10) of the properties…[10]  

                   From this decision, both parties interposed their respective appeals.  The petitioners claimed that the RTC erred in awarding respondent the entire conjugal share of their deceased father in the lot and properties in question contrary to its own finding that an implied trust existed between the parties.  The respondent, on the other hand, asserted that the RTC erred in not ruling that the lot and properties do not form part of the estate of Felix Ting Ho and are owned entirely by him.           On appeal, the CA reversed and set aside the decision of the RTC.  The appellate court held that the deceased Felix Ting Ho was never the owner and never claimed ownership of the subject lot since he is disqualified under Philippine laws from owning public lands, and that respondent Vicente Teng Gui was the rightful owner over said lot by virtue of Miscellaneous Sales Patent No. 7457 issued in his favor, viz:                         The deceased Felix Ting Ho, plaintiffs’

and defendant’s late father, was never the owner of the subject lot, now identified as Lot No. 418, Ts-308 covered by OCT No. P-1064 (Exh. A; Record, p. 104).  As stated by Felix Ting Ho no less in the “Affidavit of Transfer, Relinquishment and Renouncement of Rights and Interest” etc. (Exh. B: Record, p. 107), executed on October 25, 1966 he, the late Felix Ting Ho, was merely a possessor or occupant of the subject lot “by virtue of a permission granted… by the thenU.S. Naval Reservation Office, Olongapo, Zambales”.  The late Felix Ting Ho was never the owner and never claimed ownership of the land. (Emphasis supplied)

                                               The affidavit, Exhibit B, was subscribed and

sworn to before a Land Investigator of the Bureau of Lands and in the said affidavit, the late Felix Ting Ho expressly acknowledged that because he is a Chinese citizen he is not qualified to purchase public lands under Philippine laws for which reason he thereby transfers, relinquishes and renounces all his rights and interests in the subject land, including all the improvements

thereon to his son, the defendant Vicente Teng Gui, who is of legal age, single, Filipino citizen and qualified under the public land law to acquire lands.

 x x x                             x x

x                             x x x Defendant Vicente Teng Gui

acquired the subject land by sales patent or purchase from the government and not from his father, the late Felix Ting Ho.  It cannot be said that he acquired or bought the land in trust for his father because on December 5, 1977 when the subject land was sold to him by the government and on January 3, 1978 when Miscellaneous Sales Patent No. 7457 was issued, the late Felix Ting Ho was already dead, having died on June 6, 1970 (TSN, January 10, 1990, p. 4).[11]

                   Regarding the properties erected over the said lot, the CA held that the finding that the sales of the two-storey commercial and residential buildings and sari-sari store to Victoria Cabasal and Gregorio Fontela and subsequently to respondent were without consideration and simulated is supported by evidence, which clearly establishes that these properties should form part of the estate of the late spouses Felix Ting Ho and Leonila Cabasal. 

Thus, while the appellate court dismissed the complaint for partition with respect to the lot in question, it awarded the petitioners a four-fifths (4/5) share of the subject properties erected on the said lot.  The dispositive portion of the CA ruling reads as follows: 

          WHEREFORE, premises considered, the decision appealed from is REVERSED and SET ASIDE and NEW JUDGMENTrendered:             1.  DISMISSING plaintiff-appellants’ complaint with respect to the subject parcel of land, identified as Lot No. 418, Ts-308, covered by OCT No. P-1064, in the name of plaintiff-appellants [should be defendant-appellant];           2.  DECLARING that the two-storey commercial building, the two-storey residential building and sari-sari store (formerly a bakery), all erected on the subject lot No. 418, Ts-308, form part of the estate of the deceased spouses Felix Ting Ho and Leonila Cabasal, and that plaintiff-appellants are entitled to four-fifths (4/5) thereof, the remaining one-fifth (1/5) being the share of the defendant-appellant;             3.  DIRECTING the court a quo to partition the said two-storey commercial building, two-storey residential building and sari-sari store (formerly a bakery) in accordance with Rule 69 of the Revised Rules of Court and pertinent provisions of the Civil Code;             4.  Let the records of this case be remanded to the court of origin for further proceedings; 

8

            5.  Let a copy of this decision be furnished the Office of the Solicitor General; and 

6.      There is no pronouncement as to costs.

 SO ORDERED.[12]

         Both petitioners and respondent filed their respective

motions for reconsideration from this ruling, which were summarily denied by the CA in its Resolution[13] dated August 5, 1997.  Hence, this petition. 

According to the petitioners, the CA erred in declaring that Lot No. 418, Ts-308 does not form part of the estate of the deceased Felix Ting Ho and is owned alone by respondent.  Respondent, on the other hand, contends that he should be declared the sole owner not only of Lot No. 418, Ts-308 but also of the properties erected thereon and that the CA erred in not dismissing the complaint for partition with respect to the said properties.  

The primary issue for consideration is whether both Lot No. 418, Ts-308 and the properties erected thereon should be included in the estate of the deceased Felix Ting Ho.           We affirm the CA ruling. 

With regard to Lot No. 418, Ts-308, Article XIII, Section 1 of the 1935 Constitution states: 

          Section 1.  All agricultural timber, and mineral lands of the public domain, waters, minerals, coal, petroleum, and other mineral oils, all forces of potential energy and other natural resources of the Philippines belong to the State, and their disposition, exploitation, development, or utilization shall be limited to citizens of the Philippines or to corporations or associations at least sixty per centum of the capital of which is owned by such citizens, subject to any existing right, grant, lease, or concession at the time of the inauguration of the Government established under this Constitution… (Emphasis supplied)

 Our fundamental law cannot be any clearer.  The right to

acquire lands of the public domain is reserved for Filipino citizens or corporations at least sixty percent of the capital of which is owned by Filipinos.  Thus, in Krivenko v. Register of Deeds,[14] the Court enunciated that:

           …Perhaps the effect of our construction is to preclude aliens, admitted freely into the Philippines from owning sites where they may build their homes. But if this is the solemn mandate of the Constitution, we will not attempt to compromise it even in the name of amity or equity.  We are satisfied, however, that aliens are not completely excluded by the Constitution from the use of lands for residential purposes. Since their residence in the Philippines is temporary, they may be granted temporary rights such as a lease contract which is not forbidden by the Constitution. Should they desire to remain here forever and share our

fortunes and misfortunes, Filipino citizenship is not impossible to acquire.[15]

                                   In the present case, the father of petitioners and respondent

was a Chinese citizen; therefore, he was disqualified from acquiring and owning real property in the Philippines.  In fact, he was only occupying the subject lot by virtue of the permission granted him by the then U.S. Naval Reservation Office of Olongapo, Zambales.  As correctly found by the CA, the deceased Felix Ting Ho was never the owner of the subject lot in light of the constitutional proscription and the respondent did not at any instance act as the dummy of his father.

 On the other hand, the respondent became the owner of Lot

No. 418, Ts-308 when he was granted Miscellaneous Sales Patent No. 7457 on January 3, 1978, by the Secretary of Natural Resources “By Authority of the President of the Philippines,” and when Original Certificate of Title No. P-1064 was correspondingly issued in his name.  The grant of the miscellaneous sales patent by the Secretary of Natural Resources, and the corresponding issuance of the original certificate of title in his name, show that the respondent possesses all the qualifications and none of the disqualifications to acquire alienable and disposable lands of the public domain.  These issuances bear the presumption of regularity in their performance in the absence of evidence to the contrary.            Registration of grants and patents involving public lands is governed by Section 122 of Act No. 496, which was subsequently amended by Section 103 of Presidential Decree No. 1529, viz: 

            Sec. 103.  Certificate of title pursuant to patents.—Whenever public land is by the Government alienated, granted or conveyed to any person, the same shall be brought forthwith under the operation of this Decree.  It shall be the duty of the official issuing the instrument of alienation, grant, patent or conveyance in behalf of the Government to cause such instrument to be filed with the Register of Deeds of the province or city where the land lies, and to be there registered like other deeds and conveyance, whereupon a certificate of title shall be entered as in other cases of registered land, and an owner’s duplicate issued to the grantee.  The deeds, grant, patent or instrument of conveyance from the Government to the grantee shall not take effect as a conveyance or bind the land, but shall operate only as a contract between the Government and the grantee and as evidence of authority to the Register of Deeds to make registration.  It is the act of registration that shall be the operative act to affect and convey the land, and in all cases under this Decree registration shall be made in the office of the Register of Deeds of the province or city where the land lies.  The fees for registration shall be paid by the grantee.  After due registration and issuance of the certificate of title, such land shall be deemed to be registered land to all intents and purposes under this Decree.[16] (Emphasis supplied)

  

          Under the law, a certificate of title issued pursuant to any grant or patent involving public land is as conclusive and indefeasible as any other certificate of title issued to private lands in the ordinary or cadastral registration proceeding.  The effect of the registration of a patent and the issuance of a certificate of title to the patentee is to

9

vest in him an incontestable title to the land, in the same manner as if ownership had been determined by final decree of the court, and the title so issued is absolutely conclusive and indisputable, and is not subject to collateral attack.[17]

                   Nonetheless, petitioners invoke equity considerations and claim that the ruling of the RTC that an implied trust was created between respondent and their father with respect to the subject lot should be upheld.           This contention must fail because the prohibition against an alien from owning lands of the public domain is absolute and not even an implied trust can be permitted to arise on equity considerations.  

In the case of Muller v. Muller,[18] wherein the respondent, a German national, was seeking reimbursement of funds claimed by him to be given in trust to his petitioner wife, a Philippine citizen, for the purchase of a property in Antipolo, the Court, in rejecting the claim, ruled that:  

Respondent was aware of the constitutional prohibition and expressly admitted his knowledge thereof to this Court.  He declared that he had the Antipolo property titled in the name of the petitioner because of the said prohibition.  His attempt at subsequently asserting or claiming a right on the said property cannot be sustained.

 The Court of Appeals erred in

holding that an implied trust was created and resulted by operation of law in view of petitioner's marriage to respondent. Save for the exception provided in cases of hereditary succession, respondent's disqualification from owning lands in the Philippines is absolute. Not even an ownership in trust is allowed. Besides, where the purchase is made in violation of an existing statute and in evasion of its express provision, no trust can result in favor of the party who is guilty of the fraud. To hold otherwise would allow circumvention of the constitutional prohibition.

 Invoking the principle that a court is

not only a court of law but also a court of equity, is likewise misplaced. It has been held that equity as a rule will follow the law and will not permit that to be done indirectly which, because of public policy, cannot be done directly...[19]

 Coming now to the issue of ownership of the properties

erected on the subject lot, the Court agrees with the finding of the trial court, as affirmed by the appellate court, that the series of transactions resorted to by the deceased were simulated in order to preserve the properties in the hands of the family.  The records show that during all the time that the properties were allegedly sold to the spouses Victoria Cabasal and Gregorio Fontela in 1958 and the subsequent sale of the same to respondent in 1961, the petitioners and respondent, along with their parents, remained in possession and continued to live in said properties.

 However, the trial court concluded that: 

            In fairness to the defendant, although the Deeds of Sale executed by Felix Ting Ho regarding the improvements in favor of Victoria Cabasal and Gregorio Fontela and the subsequent transfer of the same by Gregorio Fontela and Victoria Cabasal to the defendant are all simulated, yet, pursuant to Article 1471 of the New Civil Code it can be assumed that the intention of Felix Ting Ho in such transaction was to give and donate the improvements to his eldest son the defendant Vicente Teng Gui… [20]

 Its finding was based on Article 1471 of the Civil Code,

which provides that: 

Art. 1471.  If the price is simulated, the sale is void, but the act may be shown to have been in reality a donation, or some other act or contract.[21]

 The Court holds that the reliance of the trial court on the

provisions of Article 1471 of the Civil Code to conclude that the simulated sales were a valid donation to the respondent is misplaced because its finding was based on a mere assumption when the law requires positive proof.  

The respondent was unable to show, and the records are bereft of any evidence, that the simulated sales of the properties were intended by the deceased to be a donation to him.  Thus, the Court holds that the two-storey residential house, two-storey residential building and sari-sari store form part of the estate of the late spouses Felix Ting Ho and Leonila Cabasal, entitling the petitioners to a four-fifths (4/5) share thereof. 

IN VIEW WHEREOF, the petition is DENIED.  The assailed Decision dated December 27, 1996 of the Court of Appeals in CA-G.R. CV No. 42993 is hereby AFFIRMED.

 SO ORDERED.  

CORPORATIONS:

FIRST DIVISION REPUBLIC OF THE PHILIPPINES,      G.R. No. 154953                        Petitioner,                                                                    Present:                                                                                                PUNO, C.J., Chairperson,                                                                       CARPIO,                - versus -                                    CORONA,                                                                     AZCUNA, and                                                                      LEONARDO-DE CASTRO, JJ.     T.A.N. PROPERTIES, INC.,                     Promulgated:                        Respondent.                       June 26, 2008

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

10

D E C I S I O N  CARPIO, J.: 

 The Case

          Before the Court is a petition for review[1] assailing the 21 August 2002  Decision[2] of the Court of Appeals in CA-G.R. CV No. 66658.  The Court of Appeals affirmed in toto the 16 December 1999 Decision[3] of the Regional Trial Court of Tanauan, Batangas, Branch 6 (trial court) in Land Registration Case No. T-635.   

The Antecedent Facts 

         This case originated from an Application for Original Registration of Title filed by T.A.N. Properties, Inc. covering Lot10705-B of the subdivision plan Csd-04-019741 which is a portion of the consolidated  Lot 10705, Cad-424, Sto. Tomas Cadastre. The land, with an area of 564,007 square meters, or 56.4007 hectares, is located at San Bartolome, Sto. Tomas, Batangas.          On 31 August 1999, the trial court set the case for initial hearing at 9:30 a.m. on 11 November 1999.  The Notice of Initial Hearing was published in the Official Gazette, 20 September 1999 issue, Volume 95,   No. 38, pages 6793 to 6794,[4] and in the 18 October 1999 issue of People’s Journal Taliba,[5] a newspaper of general circulation in the Philippines.  The Notice of Initial Hearing was also posted in a conspicuous place on the bulletin board of the Municipal Building of Sto. Tomas, Batangas, as well as in a conspicuous place on the land.[6]  All adjoining owners and all government agencies and offices concerned were notified of the initial hearing.[7]

          On 11 November 1999, when the trial court called the case for initial hearing, there was no oppositor other than the Opposition dated 7 October 1999 of the Republic of the Philippines represented by the Director of Lands (petitioner).  On 15 November 1999, the trial court issued an Order[8] of General Default against the whole world except as against petitioner.            During the hearing on 19 November 1999, Ceferino Carandang (Carandang) appeared as oppositor.  The trial court gave Carandang until 29 November 1999 within which to file his written opposition.[9]  Carandang failed to file his written opposition and to appear in the succeeding hearings.    In an Order[10] dated 13 December 1999, the trial court reinstated the Order of General Default.          During the hearings conducted on 13 and 14 December 1999, respondent presented three witnesses:  Anthony Dimayuga Torres (Torres), respondent’s Operations Manager and its authorized representative in the case; Primitivo Evangelista (Evangelista), a 72-year old resident of San Bartolome, Sto. Tomas, Batangas since birth; and Regalado Marquez, Records Officer II of the Land Registration Authority (LRA), Quezon City.          The testimonies of respondent’s witnesses showed that Prospero Dimayuga (Kabesang Puroy) had peaceful, adverse, open, and continuous possession of the land in the concept of an owner since 1942.  Upon his death, Kabesang Puroy was succeeded by his son Antonio Dimayuga (Antonio).  On 27 September 1960, Antonio executed a Deed of Donation covering the land in favor of one of his

children, Fortunato Dimayuga (Fortunato).  Later, however, Antonio gave Fortunato another piece of land.  Hence, on 26 April 1961, Antonio executed a Partial Revocation of Donation, and the land was adjudicated to one of Antonio’s children, Prospero Dimayuga (Porting).[11]  On 8 August 1997, Porting sold the land to respondent.  

The Ruling of the Trial Court 

         In its 16 December 1999 Decision, the trial court adjudicated the land in favor of respondent.          The trial court ruled that a juridical person or a corporation could apply for registration of land provided such entity and its predecessors-in-interest have possessed the land for 30 years or more.  The trial court ruled that the facts showed that respondent’s predecessors-in-interest possessed the land in the concept of an owner prior to 12 June 1945, which possession converted the land to private property.           The dispositive portion of the trial court’s Decision reads: 

         WHEREFORE, and upon previous confirmation of the Order of General Default, the Court hereby adjudicates and decrees Lot10705-B, identical to Lot 13637, Cad-424, Sto. Tomas Cadastre, on plan Csd-04-019741, situated in Barangay of San Bartolome,Municipality of Sto. Tomas, Province of Batangas, with an area of 564,007 square meters, in favor of and in the name of T.A.N. Properties, Inc., a domestic corporation duly organized and existing under Philippine laws with principal office at 19th Floor, PDCP Bank Building, 8737 Paseo de Roxas, Makati City.             Once this Decision shall have become final, let the corresponding decree of registration be issued.             SO ORDERED.[12]

           Petitioner appealed from the trial court’s Decision.  Petitioner alleged that the trial court erred in granting the application for registration absent clear evidence that the applicant and its predecessors-in-interest have complied with the period of possession and occupation as required by law.  Petitioner alleged that the testimonies of Evangelista and Torres are general in nature.  Considering the area involved, petitioner argued that additional witnesses should have been presented to corroborate Evangelista’s testimony.       

The Ruling of the Court of Appeals 

         In its 21 August 2002 Decision, the Court of Appeals affirmed in toto the trial court’s Decision.           The Court of Appeals ruled that Evangelista’s knowledge of the possession and occupation of the land stemmed not only from the fact that he worked there for three years but also because he and Kabesang Puroy were practically neighbors. On Evangelista’s failure to mention the name of his uncle who continuously worked on the land, the Court of Appeals ruled that Evangelista should not be faulted as he was not asked to name his uncle when he testified.  The Court of Appeals also ruled that at the outset, Evangelista disclaimed

11

knowledge of Fortunato’s relation to Kabesang Puroy, but this did not affect Evangelista’s statement that Fortunato took over the possession and cultivation of the land after Kabesang Puroy’s death.  The Court of Appeals further ruled that the events regarding the acquisition and disposition of the land became public knowledge because San Bartolome was a small community.  On the matter of additional witnesses, the Court of Appeals ruled that petitioner failed to cite any law requiring the corroboration of the sole witness’ testimony.          The Court of Appeals further ruled that Torres was a competent witness since he was only testifying on the fact that he had caused the filing of the application for registration and that respondent acquired the land from Porting.           Petitioner comes to this Court assailing the Court of Appeals’ Decision.   Petitioner raises the following grounds in its Memorandum:

         The Court of Appeals erred on a question of law in allowing the grant of title to applicant corporation despite the following: 

1.     Absence of showing that it or its predecessors-in-interest had open, continuous, exclusive, and notorious possession and occupation in the concept of an owner since 12 June 1945 or earlier; and 

2.     Disqualification of applicant corporation to acquire the subject tract of land.[13]

  The Issues

          The issues may be summarized as follows: 

1.     Whether the land is alienable and disposable; 

2.     Whether respondent or its predecessors-in-interest had open, continuous, exclusive, and notorious possession and occupation of the land in the concept of an owner since June 1945 or earlier; and

 3.     Whether respondent is qualified to apply for

registration of the land under the Public Land Act. 

 The Ruling of this Court

          The petition has merit. 

Respondent Failed to Provethat the Land is Alienable and Disposable

          Petitioner argues that anyone who applies for registration has the burden of overcoming the presumption that the land forms part of the public domain.    Petitioner insists that respondent  failed to prove that the land is no longer part of the public domain.          The well-entrenched rule is that all lands not appearing to be clearly of private dominion presumably belong to the State.[14] The onus to overturn, by incontrovertible evidence, the

presumption that the land subject of an application for registration is alienable and disposable rests with the applicant.[15]

          In this case, respondent submitted two certifications issued by the Department of Environment and Natural Resources (DENR).  The 3 June 1997 Certification by the Community Environment and Natural Resources Offices (CENRO), Batangas City,[16] certified that “lot 10705, Cad-424, Sto. Tomas Cadastre situated at Barangay San Bartolome, Sto. Tomas, Batangas with an area of 596,116 square meters falls within the ALIENABLE AND DISPOSABLE ZONE under Project No. 30, Land Classification Map      No. 582 certified [on] 31 December 1925.”  The second certification[17]  in the form of a memorandum to the trial court, which was issued by the Regional Technical Director, Forest Management Services of the DENR (FMS-DENR), stated  “that the subject area falls within an alienable and disposable land, Project No. 30 of Sto. Tomas, Batangas certified on Dec. 31, 1925 per LC No. 582.”          The certifications are not sufficient.  DENR Administrative Order (DAO) No. 20,[18] dated 30 May 1988, delineated the functions and authorities of the offices within the DENR.  Under DAO No. 20, series of 1988, the CENRO issues certificates of land classification status for areas below 50 hectares.  The Provincial Environment and Natural Resources Offices (PENRO) issues certificate of land classification status for lands covering over 50 hectares.  DAO No. 38,[19] dated 19 April 1990, amended DAO      No. 20, series of 1988.  DAO No. 38, series of 1990 retained the authority of the CENRO to issue certificates of land classification status for areas below 50 hectares, as well as the authority of the PENRO to issue certificates of land classification status for lands covering over 50 hectares.[20]  In this case, respondent applied for registration of Lot 10705-B.  The area covered by Lot 10705-B is over 50 hectares (564,007 square meters).  The CENRO certificate covered the entire Lot 10705 with an area of 596,116 square meters which, as per DAO No. 38, series of 1990, is beyond the authority of the CENRO to certify as alienable and disposable.          The Regional Technical Director, FMS-DENR, has no authority under DAO Nos. 20 and 38 to issue certificates of land classification.  Under DAO No. 20, the Regional Technical Director, FMS-DENR: 

1.     Issues original and renewal of ordinary minor products (OM) permits except rattan;

2.     Approves renewal of resaw/mini-sawmill permits;3.     Approves renewal of special use permits covering over

five hectares for public infrastructure projects; and4.     Issues renewal of certificates of registration for logs,

poles, piles, and lumber dealers. 

Under DAO No. 38, the Regional Technical Director, FMS-DENR: 

1.     Issues original and renewal of ordinary minor [products] (OM) permits except rattan;

2.     Issues renewal of certificate of registration for logs, poles, and piles and lumber dealers;

3.     Approves renewal of resaw/mini-sawmill permits;4.     Issues public gratuitous permits for 20 to 50 cubic

meters within calamity declared areas for public infrastructure projects; and

5.     Approves original and renewal of special use permits covering over five hectares for public infrastructure projects.

                

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Hence, the certification issued by the Regional Technical Director, FMS-DENR, in the form of a memorandum to the trial court, has no probative value.          Further, it is not enough for the PENRO or CENRO to certify that a land is alienable and disposable.  The applicant for land registration must prove that the DENR Secretary had approved the land classification and released the land of the public domain as alienable and disposable, and that the land subject of the application for registration falls within the approved area per verification through survey by the PENRO or CENRO.  In addition, the applicant for land registration must present a copy of the original classification approved by the DENR Secretary and certified as a true copy by the legal custodian of the official records.   These facts must be established to prove that the land is alienable and disposable.  Respondent failed to do so because  the certifications presented by respondent do not, by themselves, prove that the land is alienable and disposable.          Only Torres, respondent’s Operations Manager, identified the certifications submitted by respondent.  The government officials who issued the certifications  were  not presented before the trial court to testify on their contents.   The trial court should not have accepted the contents of the certifications as proof of the facts stated therein.  Even if the certifications are presumed duly issued and admissible in evidence, they have no probative value in establishing that the land is alienable and disposable.           Public documents are defined under Section 19, Rule 132 of the Revised Rules on Evidence as follows: 

         (a)  The written official acts, or records of the official acts of the sovereign authority, official bodies and tribunals, and public officers, whether of the Philippines, or of a foreign country;                 (b)  Documents acknowledged before a notary public except last wills and testaments; and          (c)  Public records, kept in the Philippines, of private documents required by law to be entered therein.

  Applying Section 24 of Rule 132, the record of public documents referred to in Section 19(a), when admissible for any purpose, may be evidenced by an official publication thereof or by a copy attested by the officer having legal custody of the record, or by his deputy  x x x.  The CENRO is not the official repository or legal custodian of  the issuances of the DENR Secretary declaring public lands as alienable and disposable.  The CENRO should have attached an official publication[21] of the DENR Secretary’s issuance declaring the land alienable and disposable.            Section 23, Rule 132 of the Revised Rules on Evidence provides: 

         Sec. 23.  Public documents as evidence.  Documents consisting of entries in public records made in the performance of a duty by a public officer are prima facie evidence of the facts stated therein.  All other public documents are evidence, even against a third person, of the

fact which gave rise to their execution and of the date of the latter.

 The CENRO and Regional Technical Director, FMS-DENR, certifications do not fall within the class of public documents contemplated in the first sentence of Section 23 of Rule 132.   The certifications do not reflect “entries in public records made in the performance of a duty by a public officer,” such as entries made by the Civil Registrar[22] in the books of registries, or by a ship captain in the ship’s logbook.[23] The certifications are not the certified copies or authenticated reproductions of original official records in the legal custody of a government office.  The certifications are not even records of public documents.[24]  The certifications are conclusions unsupported by adequate proof, and thus have no probative value.[25] Certainly, the certifications cannot be considered prima facie evidence of the facts stated therein.           The CENRO and Regional Technical Director, FMS-DENR, certifications do not prove that Lot 10705-B falls within the alienable and disposable land as proclaimed by the DENR Secretary.  Such government certifications do not, by their mere issuance, prove the facts stated therein.[26]  Such government certifications may fall under the class of documents contemplated in the second sentence of Section 23 of Rule 132. As such, the certifications are prima facie evidence of their due execution and date of issuance but they do not constitute prima facie evidence of the facts stated therein.           The Court has also ruled that a document or writing admitted as part of the testimony of a witness does not constitute proof of the facts stated therein.[27]  Here, Torres, a private individual and respondent’s representative, identified the certifications but the government officials who issued the certifications did not testify on the contents of the certifications.  As such, the certifications cannot be given probative value.[28]   The contents of the certifications are hearsay because Torres was incompetent to testify on the veracity of the contents of the certifications.[29]  Torres did not prepare the certifications, he was not an officer of CENRO or FMS-DENR, and he did not conduct any verification survey whether the land falls within the area classified by the DENR Secretary as alienable and disposable.          Petitioner also points out the discrepancy as to when the land allegedly became alienable and disposable.  The DENR Secretary certified that based on Land Classification Map No. 582, the land became alienable and disposable on 31 December 1925.  However, the certificate on the blue print plan states that it became alienable and disposable on 31 December 1985.                 We agree with petitioner that while the certifications submitted by respondent show that under the Land Classification Map No. 582, the land became alienable and disposable on 31 December 1925,  the blue print plan states that it became alienable and disposable on 31 December 1985.  Respondent alleged that “the blue print plan merely serves to prove the precise location and the metes and bounds of the land described therein x x x and does not in any way certify the nature and classification of the land involved.”[30]  It is true that the notation by a surveyor-geodetic engineer on the survey plan that the land formed part of the alienable and disposable land of the public domain is not sufficient proof of the land’s classification.[31]  However, respondent should have at least presented proof that would explain the discrepancy in the dates of classification.  Marquez, LRA Records Officer II, testified that the documents submitted to the court consisting of the tracing cloth plan, the technical description of Lot 10705-B, the approved subdivision plan, and the Geodetic Engineer’s certification were faithful reproductions of the original documents in the LRA office.  He did

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not explain the discrepancy in the dates.  Neither was the Geodetic Engineer presented to explain why the date of classification on the blue print plan was different from the other certifications submitted by respondent.  

There was No Open, Continuous, Exclusive, and NotoriousPossession and Occupation in the Concept of an Owner

          Petitioner alleges that the trial court’s reliance on the testimonies of Evangelista and Torres was misplaced.  Petitioner alleges that Evangelista’s statement that the possession of respondent’s predecessors-in-interest was open, public, continuous, peaceful, and adverse to the whole world was a general conclusion of law rather than factual evidence of possession of title.  Petitioner alleges that respondent failed to establish that its predecessors-in-interest had held the land openly, continuously, and exclusively for at least 30 years after it was declared alienable and disposable.           We agree with petitioner.           Evangelista testified that Kabesang Puroy had been in possession of the land before 1945.  Yet, Evangelista only worked on the land for three years.  Evangelista testified that his family owned a lot near Kabesang Puroy’s land.  The Court of Appeals took note of this and ruled that Evangelista’s knowledge of Kabesang Puroy’s possession of the land stemmed “not only from the fact that he had worked thereat but more so that they were practically neighbors.”[32]  The Court of Appeals observed: 

         In a small community such as that of San Bartolome, Sto. Tomas, Batangas, it is not difficult to understand that people in the said community knows each and everyone.  And, because of such familiarity with each other, news or events regarding the acquisition or disposition for that matter, of a vast tract of land spreads like wildfire, thus, the reason why such an event became of public knowledge to them.[33] 

  Evangelista testified that Kabesang Puroy was succeeded by Fortunato.  However, he admitted that he did not know the exact relationship between Kabesang Puroy and Fortunato, which is rather unusual for neighbors in a small community.  He did not also know the relationship between Fortunato and Porting.  In fact, Evangelista’s testimony is contrary to the factual finding of the trial court that Kabesang Puroy was succeeded by his son Antonio, not by Fortunato who was one of Antonio’s children. Antonio was not even mentioned in Evangelista’s testimony.          The Court of Appeals ruled that there is no law that requires that the testimony of a single witness needs corroboration. However, in this case, we find Evangelista’s uncorroborated testimony insufficient to prove that respondent’s predecessors-in-interest had been in possession of the land in the concept of an owner for more than 30 years.  We cannot consider the testimony of Torres as sufficient corroboration.  Torres testified primarily on the fact of respondent’s acquisition of the land.  While he claimed to be related to the Dimayugas, his knowledge of their possession of the land was hearsay.  He did not even tell the trial court where he obtained his information.          The tax declarations presented were only for the years starting 1955.  While tax declarations are not conclusive evidence of ownership, they constitute proof of claim of ownership.[34]  Respondent did not present any credible explanation why the

realty taxes were only paid starting 1955 considering the claim that the Dimayugas were allegedly in possession of the land before 1945. The payment of the realty taxes starting 1955 gives rise to the presumption that the Dimayugas claimed ownership or possession of the land only in that year. 

Land Application by a Corporation                 Petitioner asserts that respondent, a private corporation, cannot apply for registration of the land of the public domain in this case.          We agree with petitioner.                   Section 3, Article XII of the 1987 Constitution provides: 

         Sec. 3.  Lands of the public domain are classified into agricultural, forest or timber, mineral lands, and national parks.  Agricultural lands of the public domain may be further classified by law according to the uses to which they may be devoted.  Alienable lands of the public domain shall be limited to agricultural lands.  Private corporations or associations may not hold such alienable lands of the public domain except by lease, for a period not exceeding twenty-five years, renewable for not more than twenty-five years, and not to exceed one thousand hectares in area.  Citizens of the Philippines may lease not more than five hundred hectares, or acquire not more than twelve hectares thereof by purchase, homestead or grant.             Taking into account the requirements of conservation, ecology, and development, and subject to the requirements of agrarian reform, the Congress shall determine, by law, the size of lands of the public domain which may be acquired, developed, held, or leased and the conditions therefor.

 The 1987 Constitution absolutely prohibits private corporations from acquiring any kind of alienable land of the public domain.  InChavez v. Public Estates Authority,[35] the Court traced the law on disposition of lands of the public domain.  Under the 1935 Constitution, there was no prohibition against private corporations from acquiring agricultural land.  The 1973 Constitution limited the alienation of lands of the public domain to individuals who were citizens of the Philippines.  Under the 1973 Constitution, private corporations, even if wholly owned by Filipino citizens, were no longer allowed to acquire alienable lands of the public domain. The present 1987 Constitution continues the prohibition against private corporations from acquiring any kind of alienable land of the public domain.[36]  The Court explained in Chavez: 

         The 1987 Constitution continues the State policy in the 1973 Constitution banning private corporations from acquiring any kind of alienable land of the public domain.  Like the 1973 Constitution, the 1987 Constitution allows private corporations to hold alienable lands of the public domain only through lease.  x x x x             [I]f the constitutional intent is to prevent huge landholdings, the Constitution could have simply limited the size of alienable lands of the public domain that corporations could acquire.  The Constitution could have followed

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the limitations on individuals, who could acquire not more than 24 hectares of alienable lands of the public domain under the 1973 Constitution, and not more than 12 hectares under the 1987 Constitution.             If the constitutional intent is to encourage economic family-size farms, placing the land in the name of a corporation would be more effective in preventing the break-up of farmlands.  If the farmland is registered in the name of a corporation, upon the death of the owner, his heirs would inherit shares in the corporation instead of subdivided parcels of the farmland.  This would prevent the continuing break-up of farmlands into smaller and smaller plots from one generation to the next.             In actual practice, the constitutional ban strengthens the constitutional limitation on individuals from acquiring more than the allowed area of alienable lands of the public domain.  Without the constitutional ban, individuals who already acquired the maximum area of alienable lands of the public domain could easily set up corporations to acquire more alienable public lands.  An individual could own as many corporations as his means would allow  him.  An individual could even hide his ownership of a corporation by putting his nominees as stockholders of the corporation.  The corporation is a convenient vehicle to circumvent the constitutional limitation on acquisition by individuals of alienable lands of the public domain.             The constitutional intent, under the 1973 and 1987 Constitutions, is to transfer ownership of only a limited area of alienable land of the public domain to a qualified individual.  This constitutional intent is safeguarded by the provision prohibiting corporations from acquiring alienable lands of the public domain, since the vehicle to circumvent the constitutional intent is removed.  The available alienable public lands are gradually decreasing in the face of an ever-growing population.  The most effective way to insure faithful adherence to this constitutional intent is to grant or sell alienable lands of the public domain only to individuals.  This, it would seem, is the practical benefit arising from the constitutional ban.[37]           

          In Director of Lands v. IAC,[38]  the Court allowed the land registration proceeding filed by Acme Plywood & Veneer Co., Inc. (Acme)  for five parcels of land with an area of 481,390 square meters, or 48.139 hectares, which Acme acquired from members of the Dumagat tribe.  The issue in that case was whether the title could be confirmed in favor of Acme when the proceeding was instituted after the effectivity of the 1973 Constitution which prohibited private corporations or associations from holding alienable lands of the public domain except by lease not to exceed 1,000 hectares.  The Court ruled that the land was already private land when Acme acquired it from its owners in 1962, and thus Acme acquired a registrable title.   Under the 1935 Constitution, private corporations

could acquire public agricultural lands not exceeding 1,024 hectares while individuals could acquire not more than 144 hectares.[39]

          In Director of Lands, the Court further ruled that open, exclusive, and undisputed possession of alienable land for the period prescribed by law created the legal fiction whereby the land, upon completion of the requisite period, ipso jure and without the need of judicial or other sanction ceases to be public land and becomes private property.  The Court ruled: 

         Nothing can more clearly demonstrate the logical inevitability of considering possession of public land which is of the character and duration prescribed by statute as the equivalent of an express grant from the State than the dictum of the statute itself that the possessor(s) “x x x shall be conclusively presumed to have performed all the conditions essential to a Government grant and shall be entitled to a certificate of title x x x.”  No proof being admissible to overcome a conclusive presumption, confirmation proceedings would, in truth be little more than a formality, at the most limited to ascertaining whether the possession claimed is of the required character and length of time; and registration thereunder would not confer title, but simply recognize a title already vested.  The proceedings would not originallyconvert the land from public to private land, but only confirm such a conversion already effected by operation of law from the moment the required period of possession became complete.             x x x [A]lienable public land held by a possessor, personally or through his predecessors-in-interest, openly, continuously and exclusively for the prescribed statutory period of (30 years under The Public Land Act, as amended) is converted to private property by the mere lapse or completion of said period, ipso jure.  Following that rule and on the basis of the undisputed facts, the land subject of this appeal was already private property at the time it was acquired from the Infiels by Acme. Acme thereby acquired a registrable title, there being at the time no prohibition against said corporation’s holding or owning private land.       x x x.[40] (Emphasis supplied)

           Director of Lands is not applicable to the present case.   In Director of Lands,  the “land x x x was already private property at the time it was acquired x x x by Acme.”  In this case, respondent acquired the land on      8 August 1997 from Porting, who, along with his predecessors-in-interest, has not shown to have been, as of that date, in open, continuous, and adverse possession of the land for 30 years since 12 June 1945. In short, when respondent acquired the land from Porting, the land was not yet private property.              For Director of Lands to apply and enable a corporation to file for  registration of alienable and disposable land, the corporation must have acquired the land when its transferor had already a vested right to a judicial confirmation of title to the land by virtue of his open, continuous and adverse possession of the land in the concept of

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an owner for at least 30 years since 12 June 1945.  Thus, in Natividad v. Court of Appeals,[41] the Court declared: 

         Under the facts of this case and pursuant to the above rulings, the parcels of land in question had already been converted to private ownership through acquisitive prescription by the predecessors-in-interest of TCMC when the latter purchased them in 1979. All that was needed was the confirmation of the titles of the previous owners or predecessors-in-interest of TCMC.             Being already private land when TCMC bought them in 1979, the prohibition in the 1973 Constitution against corporations acquiring alienable lands of the public domain except through lease (Article XIV, Section 11, 1973 Constitution) did not apply to them for they were no longer alienable lands of the public domain but private property.

           What is determinative for the doctrine in Director of Lands to apply is for the corporate applicant for land registration to establish that when it acquired the land, the same was already private land by operation of law because the statutory acquisitive prescriptive period of 30 years had already lapsed.  The length of possession of the land by the corporation cannot be tacked on to complete the statutory 30 years acquisitive prescriptive period. Only an individual can avail of such acquisitive prescription since both the 1973 and 1987 Constitutions prohibit corporations from acquiring lands of the public domain.          Admittedly, a corporation can at present still apply for original registration of land under the doctrine in Director of Lands.  Republic Act No. 9176[42] (RA 9176) further amended the Public Land Act[43] and extended the period for the filing of applications for judicial confirmation of imperfect and incomplete titles to alienable and disposable lands of the public domain until 31 December 2020.  Thus:

          Sec. 2.  Section 47, Chapter VIII of the same Act, as amended, is hereby further amended to read as follows: 

      Sec. 47.  The persons specified in the next following section are hereby granted time, not to extend beyond December 31, 2020 within which to avail of the benefits of this Chapter:  Provided, That this period shall apply only where the area applied for does not exceed twelve (12) hectares:  Provided, further, That the several periods of time designated by the President in accordance with Section Forty-five of this Act shall apply also to the lands comprised in the provisions of this Chapter, but this Section shall not be construed as prohibiting any of said persons from acting under this Chapter at any time prior to the period fixed by the President.

            Sec. 3.  All pending applications filed before the effectivity of this amendatory Act shall be treated as having been filed in accordance with the provisions of this Act.    

           Under RA 9176, the application for judicial confirmation is limited only to 12 hectares, consistent with Section 3, Article XII of the 1987 Constitution that a private individual may only acquire not more than 12 hectares of alienable and disposable land. Hence, respondent, as successor-in-interest of an individual owner of the land, cannot apply for registration of land in excess of 12 hectares. Since respondent applied for 56.4007 hectares, the application for the excess area of 44.4007 hectares is contrary to law, and thus void ab initio.  In applying for land registration, a private corporation cannot have any right higher than its predecessor-in-interest from whom it derived its right.  This assumes, of course, that the corporation acquired the land, not exceeding 12 hectares, when the land  had already become private land by operation of law. In the present case, respondent has failed to prove that any portion of the land was already private land when respondent acquired it from Porting in 1997.          WHEREFORE, we SET ASIDE the 21 August 2002 Decision of the Court of Appeals in CA-G.R. CV No. 66658 and the 16 December 1999 Decision of the Regional Trial Court of Tanauan, Batangas, Branch 6 in Land Registration Case No. T-635.  WeDENY the application for registration filed by T.A.N. Properties, Inc.            SO ORDERED.

SPECIAL FIRST DIVISION

G.R. No. 124293             January 31, 2005

J.G. SUMMIT HOLDINGS, INC., petitioner, vs.COURT OF APPEALS; COMMITTEE ON PRIVATIZATION, its Chairman and Members; ASSET PRIVATIZATION TRUST; and PHILYARDS HOLDINGS, INC., respondents.

R E S O L U T I O N

PUNO, J.:

For resolution before this Court are two motions filed by the petitioner, J.G. Summit Holdings, Inc. for reconsideration of our Resolution dated September 24, 2003 and to elevate this case to the Court En Banc. The petitioner questions the Resolution which reversed our Decision of November 20, 2000, which in turn reversed and set aside a Decision of the Court of Appeals promulgated on July 18, 1995.

I. Facts

The undisputed facts of the case, as set forth in our Resolution of September 24, 2003, are as follows:

On January 27, 1997, the National Investment and Development Corporation (NIDC), a government corporation, entered into a Joint Venture Agreement (JVA) with Kawasaki Heavy Industries, Ltd. of Kobe, Japan (KAWASAKI) for the construction, operation and management of the Subic National Shipyard, Inc. (SNS) which subsequently became the Philippine Shipyard and Engineering Corporation (PHILSECO). Under the JVA, the NIDC and

16

KAWASAKI will contribute P330 million for the capitalization of PHILSECO in the proportion of 60%-40% respectively. One of its salient features is the grant to the parties of the right of first refusal should either of them decide to sell, assign or transfer its interest in the joint venture, viz:

1.4 Neither party shall sell, transfer or assign all or any part of its interest in SNS [PHILSECO] to any third party without giving the other under the same terms the right of first refusal. This provision shall not apply if the transferee is a corporation owned or controlled by the GOVERNMENT or by a KAWASAKI affiliate.

On November 25, 1986, NIDC transferred all its rights, title and interest in PHILSECO to the Philippine National Bank (PNB). Such interests were subsequently transferred to the National Government pursuant to Administrative Order No. 14. On December 8, 1986, President Corazon C. Aquino issued Proclamation No. 50 establishing the Committee on Privatization (COP) and the Asset Privatization Trust (APT) to take title to, and possession of, conserve, manage and dispose of non-performing assets of the National Government. Thereafter, on February 27, 1987, a trust agreement was entered into between the National Government and the APT wherein the latter was named the trustee of the National Government's share in PHILSECO. In 1989, as a result of a quasi-reorganization of PHILSECO to settle its huge obligations to PNB, the National Government's shareholdings in PHILSECO increased to 97.41% thereby reducing KAWASAKI's shareholdings to 2.59%.

In the interest of the national economy and the government, the COP and the APT deemed it best to sell the National Government's share in PHILSECO to private entities. After a series of negotiations between the APT and KAWASAKI, they agreed that the latter's right of first refusal under the JVA be "exchanged" for the right to top by five percent (5%) the highest bid for the said shares. They further agreed that KAWASAKI would be entitled to name a company in which it was a stockholder, which could exercise the right to top. On September 7, 1990, KAWASAKI informed APT that Philyards Holdings, Inc. (PHI)1 would exercise its right to top.

At the pre-bidding conference held on September 18, 1993, interested bidders were given copies of the JVA between NIDC and KAWASAKI, and of the Asset Specific Bidding Rules (ASBR) drafted for the National Government's 87.6% equity share in PHILSECO. The provisions of the ASBR were explained to the interested bidders who were notified that the bidding would be held on December 2, 1993. A portion of the ASBR reads:

1.0 The subject of this Asset Privatization Trust (APT) sale through public bidding is the National Government's equity in PHILSECO consisting of 896,869,942 shares of stock (representing 87.67% of PHILSECO's outstanding capital stock), which will be sold as a whole block in accordance with the rules herein enumerated.

xxx xxx xxx

2.0 The highest bid, as well as the buyer, shall be subject to the final approval of both the APT Board of Trustees and the Committee on Privatization (COP).

2.1 APT reserves the right in its sole discretion, to reject any or all bids.

3.0 This public bidding shall be on an Indicative Price Bidding basis. The Indicative price set for the National Government's 87.67% equity in PHILSECO is PESOS: ONE BILLION THREE HUNDRED MILLION (P1,300,000,000.00).

xxx xxx xxx

6.0 The highest qualified bid will be submitted to the APT Board of Trustees at its regular meeting following the bidding, for the purpose of determining whether or not it should be endorsed by the APT Board of Trustees to the COP, and the latter approves the same. The APT shall advise Kawasaki Heavy Industries, Inc. and/or its nominee, [PHILYARDS] Holdings, Inc., that the highest bid is acceptable to the National Government. Kawasaki Heavy Industries, Inc. and/or [PHILYARDS] Holdings, Inc. shall then have a period of thirty (30) calendar days from the date of receipt of such advice from APT within which to exercise their "Option to Top the Highest Bid" by offering a bid equivalent to the highest bid plus five (5%) percent thereof.

6.1 Should Kawasaki Heavy Industries, Inc. and/or [PHILYARDS] Holdings, Inc. exercise their "Option to Top the Highest Bid," they shall so notify the APT about such exercise of their option and deposit with APT the amount equivalent to ten percent (10%) of the highest bid plus five percent (5%) thereof within the thirty (30)-day period mentioned in paragraph 6.0 above. APT will then serve notice upon Kawasaki Heavy Industries, Inc. and/or [PHILYARDS] Holdings, Inc. declaring them as the preferred bidder and they shall have a period of ninety (90) days from the receipt of the APT's notice within which to pay the balance of their bid price.

6.2 Should Kawasaki Heavy Industries, Inc. and/or [PHILYARDS] Holdings, Inc. fail to exercise their "Option to Top the Highest Bid" within the thirty (30)-day period, APT will declare the highest bidder as the winning bidder.

xxx xxx xxx

12.0 The bidder shall be solely responsible for examining with appropriate care these rules, the official bid forms, including any addenda or amendments thereto issued during the bidding period. The bidder shall likewise be responsible for informing itself with respect to any and all conditions concerning the PHILSECO Shares which may, in any manner, affect the bidder's proposal. Failure on the part of the bidder to so examine and inform itself shall be its sole risk and no relief for error or omission will be given by APT or COP. . . .

At the public bidding on the said date, petitioner J.G. Summit Holdings, Inc.2 submitted a bid of Two Billion and Thirty Million Pesos (P2,030,000,000.00) with an acknowledgment of KAWASAKI/[PHILYARDS'] right to top, viz:

4. I/We understand that the Committee on Privatization (COP) has up to thirty (30) days to act on APT's recommendation based on the result of this bidding. Should the COP approve the highest bid, APT shall advise Kawasaki Heavy Industries, Inc. and/or its nominee, [PHILYARDS] Holdings, Inc. that the highest bid is acceptable to the National Government. Kawasaki Heavy Industries, Inc. and/or [PHILYARDS] Holdings, Inc. shall then have a period of thirty (30) calendar days from the date of receipt of such advice from APT within which to exercise their "Option to Top the Highest Bid" by offering a bid equivalent to the highest bid plus five (5%) percent thereof.

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As petitioner was declared the highest bidder, the COP approved the sale on December 3, 1993 "subject to the right of Kawasaki Heavy Industries, Inc./[PHILYARDS] Holdings, Inc. to top JGSMI's bid by 5% as specified in the bidding rules."

On December 29, 1993, petitioner informed APT that it was protesting the offer of PHI to top its bid on the grounds that: (a) the KAWASAKI/PHI consortium composed of KAWASAKI, [PHILYARDS], Mitsui, Keppel, SM Group, ICTSI and Insular Life violated the ASBR because the last four (4) companies were the losing bidders thereby circumventing the law and prejudicing the weak winning bidder; (b) only KAWASAKI could exercise the right to top; (c) giving the same option to top to PHI constituted unwarranted benefit to a third party; (d) no right of first refusal can be exercised in a public bidding or auction sale; and (e) the JG Summit consortium was not estopped from questioning the proceedings.

On February 2, 1994, petitioner was notified that PHI had fully paid the balance of the purchase price of the subject bidding. On February 7, 1994, the APT notified petitioner that PHI had exercised its option to top the highest bid and that the COP had approved the same on January 6, 1994. On February 24, 1994, the APT and PHI executed a Stock Purchase Agreement. Consequently, petitioner filed with this Court a Petition for Mandamus under G.R. No. 114057. On May 11, 1994, said petition was referred to the Court of Appeals. On July 18, 1995, the Court of Appeals denied the same for lack of merit. It ruled that the petition for mandamus was not the proper remedy to question the constitutionality or legality of the right of first refusal and the right to top that was exercised by KAWASAKI/PHI, and that the matter must be brought "by the proper party in the proper forum at the proper time and threshed out in a full blown trial." The Court of Appeals further ruled that the right of first refusal and the right to top are prima facie legal and that the petitioner, "by participating in the public bidding, with full knowledge of the right to top granted to KAWASAKI/[PHILYARDS] is…estopped from questioning the validity of the award given to [PHILYARDS] after the latter exercised the right to top and had paid in full the purchase price of the subject shares, pursuant to the ASBR." Petitioner filed a Motion for Reconsideration of said Decision which was denied on March 15, 1996. Petitioner thus filed a Petition for Certiorari with this Court alleging grave abuse of discretion on the part of the appellate court.

On November 20, 2000, this Court rendered x x x [a] Decision ruling among others that the Court of Appeals erred when it dismissed the petition on the sole ground of the impropriety of the special civil action of mandamus because the petition was also one of certiorari. It further ruled that a shipyard like PHILSECO is a public utility whose capitalization must be sixty percent (60%) Filipino-owned. Consequently, the right to top granted to KAWASAKI under the Asset Specific Bidding Rules (ASBR) drafted for the sale of the 87.67% equity of the National Government in PHILSECO is illegal — not only because it violates the rules on competitive bidding — but more so, because it allows foreign corporations to own more than 40% equity in the shipyard. It also held that "although the petitioner had the opportunity to examine the ASBR before it participated in the bidding, it cannot be estopped from questioning the unconstitutional, illegal and inequitable provisions thereof." Thus, this Court voided the transfer of the national government's 87.67% share in PHILSECO to Philyard[s] Holdings, Inc., and upheld the right of JG Summit, as the highest bidder, to take title to the said shares, viz:

WHEREFORE, the instant petition for review on certiorari is GRANTED. The assailed Decision and Resolution of the Court of Appeals are REVERSED and SET ASIDE. Petitioner is ordered to

pay to APT its bid price of Two Billion Thirty Million Pesos (P2,030,000,000.00), less its bid deposit plus interests upon the finality of this Decision. In turn, APT is ordered to:

(a) accept the said amount of P2,030,000,000.00 less bid deposit and interests from petitioner;

(b) execute a Stock Purchase Agreement with petitioner;

(c) cause the issuance in favor of petitioner of the certificates of stocks representing 87.6% of PHILSECO's total capitalization;

(d) return to private respondent PHGI the amount of Two Billion One Hundred Thirty-One Million Five Hundred Thousand Pesos (P2,131,500,000.00); and

(e) cause the cancellation of the stock certificates issued to PHI.

SO ORDERED.

In separate Motions for Reconsideration, respondents submit[ted] three basic issues for x x x resolution: (1) Whether PHILSECO is a public utility; (2) Whether under the 1977 JVA, KAWASAKI can exercise its right of first refusal only up to 40% of the total capitalization of PHILSECO; and (3) Whether the right to top granted to KAWASAKI violates the principles of competitive bidding.3 (citations omitted)

In a Resolution dated September 24, 2003, this Court ruled in favor of the respondents. On the first issue, we held that Philippine Shipyard and Engineering Corporation (PHILSECO) is not a public utility, as by nature, a shipyard is not a public utility4 and that no law declares a shipyard to be a public utility.5 On the second issue, we found nothing in the 1977 Joint Venture Agreement (JVA) which prevents Kawasaki Heavy Industries, Ltd. of Kobe, Japan (KAWASAKI) from acquiring more than 40% of PHILSECO’s total capitalization.6 On the final issue, we held that the right to top granted to KAWASAKI in exchange for its right of first refusal did not violate the principles of competitive bidding.7

On October 20, 2003, the petitioner filed a Motion for Reconsideration8 and a Motion to Elevate This Case to the Court En Banc.9 Public respondents Committee on Privatization (COP) and Asset Privatization Trust (APT), and private respondent Philyards Holdings, Inc. (PHILYARDS) filed their Comments on J.G. Summit Holdings, Inc.’s (JG Summit’s) Motion for Reconsideration and Motion to Elevate This Case to the Court En Banc on January 29, 2004 and February 3, 2004, respectively.

II. Issues

Based on the foregoing, the relevant issues to resolve to end this litigation are the following:

1. Whether there are sufficient bases to elevate the case at bar to the Court en banc.

2. Whether the motion for reconsideration raises any new matter or cogent reason to warrant a reconsideration of this Court’s Resolution of September 24, 2003.

18

Motion to Elevate this Case to the

Court En Banc

The petitioner prays for the elevation of the case to the Court en banc on the following grounds:

1. The main issue of the propriety of the bidding process involved in the present case has been confused with the policy issue of the supposed fate of the shipping industry which has never been an issue that is determinative of this case.10

2. The present case may be considered under the Supreme Court Resolution dated February 23, 1984 which included among en banc cases those involving a novel question of law and those where a doctrine or principle laid down by the Court en banc or in division may be modified or reversed.11

3. There was clear executive interference in the judicial functions of the Court when the Honorable Jose Isidro Camacho, Secretary of Finance, forwarded to Chief Justice Davide, a memorandum dated November 5, 2001, attaching a copy of the Foreign Chambers Report dated October 17, 2001, which matter was placed in the agenda of the Court and noted by it in a formal resolution dated November 28, 2001.12

Opposing J.G. Summit’s motion to elevate the case en banc, PHILYARDS points out the petitioner’s inconsistency in previously opposing PHILYARDS’ Motion to Refer the Case to the Court En Banc. PHILYARDS contends that J.G. Summit should now be estopped from asking that the case be referred to the Court en banc. PHILYARDS further contends that the Supreme Court en banc is not an appellate court to which decisions or resolutions of its divisions may be appealed citing Supreme Court Circular No. 2-89 dated February 7, 1989.13 PHILYARDS also alleges that there is no novel question of law involved in the present case as the assailed Resolution was based on well-settled jurisprudence. Likewise, PHILYARDS stresses that the Resolution was merely an outcome of the motions for reconsideration filed by it and the COP and APT and is "consistent with the inherent power of courts to ‘amend and control its process and orders so as to make them conformable to law and justice.’ (Rule 135, sec. 5)"14 Private respondent belittles the petitioner’s allegations regarding the change in ponente and the alleged executive interference as shown by former Secretary of Finance Jose Isidro Camacho’s memorandum dated November 5, 2001 arguing that these do not justify a referral of the present case to the Court en banc.

In insisting that its Motion to Elevate This Case to the Court En Banc should be granted, J.G. Summit further argued that: its Opposition to the Office of the Solicitor General’s Motion to Refer is different from its own Motion to Elevate; different grounds are invoked by the two motions; there was unwarranted "executive interference"; and the change in ponente is merely noted in asserting that this case should be decided by the Court en banc.15

We find no merit in petitioner’s contention that the propriety of the bidding process involved in the present case has been confused with the policy issue of the fate of the shipping industry which, petitioner maintains, has never been an issue that is determinative of this case. The Court’s Resolution of September 24, 2003 reveals a clear and

definitive ruling on the propriety of the bidding process. In discussing whether the right to top granted to KAWASAKI in exchange for its right of first refusal violates the principles of competitive bidding, we made an exhaustive discourse on the rules and principles of public bidding and whether they were complied with in the case at bar.16 This Court categorically ruled on the petitioner’s argument that PHILSECO, as a shipyard, is a public utility which should maintain a 60%-40% Filipino-foreign equity ratio, as it was a pivotal issue. In doing so, we recognized the impact of our ruling on the shipbuilding industry which was beyond avoidance.17

We reject petitioner’s argument that the present case may be considered under the Supreme Court Resolution dated February 23, 1984 which included among en banc cases those involving a novel question of law and those where a doctrine or principle laid down by the court en banc or in division may be modified or reversed. The case was resolved based on basic principles of the right of first refusal in commercial law and estoppel in civil law. Contractual obligations arising from rights of first refusal are not new in this jurisdiction and have been recognized in numerous cases.18 Estoppel is too known a civil law concept to require an elongated discussion. Fundamental principles on public bidding were likewise used to resolve the issues raised by the petitioner. To be sure, petitioner leans on the right to top in a public bidding in arguing that the case at bar involves a novel issue. We are not swayed. The right to top was merely a condition or a reservation made in the bidding rules which was fully disclosed to all bidding parties. In Bureau Veritas, represented by Theodor H. Hunermann v. Office of the President, et al., 19 we dealt with this conditionality, viz:

x x x It must be stressed, as held in the case of A.C. Esguerra & Sons v. Aytona, et al., (L-18751, 28 April 1962, 4 SCRA 1245), that in an "invitation to bid, there is a condition imposed upon the bidders to the effect that the bidding shall be subject to the right of the government to reject any and all bids subject to its discretion. In the case at bar, the government has made its choice and unless an unfairness or injustice is shown, the losing bidders have no cause to complain nor right to dispute that choice. This is a well-settled doctrine in this jurisdiction and elsewhere."

The discretion to accept or reject a bid and award contracts is vested in the Government agencies entrusted with that function. The discretion given to the authorities on this matter is of such wide latitude that the Courts will not interfere therewith, unless it is apparent that it is used as a shield to a fraudulent award (Jalandoni v. NARRA, 108 Phil. 486 [1960]). x x x The exercise of this discretion is a policy decision that necessitates prior inquiry, investigation, comparison, evaluation, and deliberation. This task can best be discharged by the Government agencies concerned, not by the Courts. The role of the Courts is to ascertain whether a branch or instrumentality of the Government has transgressed its constitutional boundaries. But the Courts will not interfere with executive or legislative discretion exercised within those boundaries. Otherwise, it strays into the realm of policy decision-making.

It is only upon a clear showing of grave abuse of discretion that the Courts will set aside the award of a contract made by a government entity. Grave abuse of discretion implies a capricious, arbitrary and whimsical exercise of power (Filinvest Credit Corp. v. Intermediate Appellate Court, No. 65935, 30 September 1988, 166 SCRA 155). The abuse of discretion must be so patent and gross as to amount to an evasion of positive duty or to a virtual refusal to perform a duty enjoined by law, as to act at all in contemplation of law, where the power is exercised in an arbitrary and despotic manner by reason of

19

passion or hostility (Litton Mills, Inc. v. Galleon Trader, Inc., et al[.], L-40867, 26 July 1988, 163 SCRA 489).

The facts in this case do not indicate any such grave abuse of discretion on the part of public respondents when they awarded the CISS contract to Respondent SGS. In the "Invitation to Prequalify and Bid" (Annex "C," supra), the CISS Committee made an express reservation of the right of the Government to "reject any or all bids or any part thereof or waive any defects contained thereon and accept an offer most advantageous to the Government." It is a well-settled rule that where such reservation is made in an Invitation to Bid, the highest or lowest bidder, as the case may be, is not entitled to an award as a matter of right (C & C Commercial Corp. v. Menor, L-28360, 27 January 1983, 120 SCRA 112). Even the lowest Bid or any Bid may be rejected or, in the exercise of sound discretion, the award may be made to another than the lowest bidder (A.C. Esguerra & Sons v. Aytona, supra, citing 43 Am. Jur., 788). (emphases supplied)1awphi1.nét

Like the condition in the Bureau Veritas case, the right to top was a condition imposed by the government in the bidding rules which was made known to all parties. It was a condition imposed on all bidders equally, based on the APT’s exercise of its discretion in deciding on how best to privatize the government’s shares in PHILSECO. It was not a whimsical or arbitrary condition plucked from the ether and inserted in the bidding rules but a condition which the APT approved as the best way the government could comply with its contractual obligations to KAWASAKI under the JVA and its mandate of getting the most advantageous deal for the government. The right to top had its history in the mutual right of first refusal in the JVA and was reached by agreement of the government and KAWASAKI.

Further, there is no "executive interference" in the functions of this Court by the mere filing of a memorandum by Secretary of Finance Jose Isidro Camacho. The memorandum was merely "noted" to acknowledge its filing. It had no further legal significance. Notably too, the assailed Resolution dated September 24, 2003 was decided unanimously by the Special First Division in favor of the respondents.

Again, we emphasize that a decision or resolution of a Division is that of the Supreme Court20 and the Court en banc is not an appellate court to which decisions or resolutions of a Division may be appealed.21

For all the foregoing reasons, we find no basis to elevate this case to the Court en banc.

Motion for Reconsideration

Three principal arguments were raised in the petitioner’s Motion for Reconsideration. First, that a fair resolution of the case should be based on contract law, not on policy considerations; the contracts do not authorize the right to top to be derived from the right of first refusal.22 Second, that neither the right of first refusal nor the right to top can be legally exercised by the consortium which is not the proper party granted such right under either the JVA or the Asset Specific Bidding Rules (ASBR).23 Third, that the maintenance of the 60%-40% relationship between the National Investment and Development Corporation (NIDC) and KAWASAKI arises from contract and from the Constitution because PHILSECO is a landholding corporation and need not be a public utility to be bound by the 60%-40% constitutional limitation.24

On the other hand, private respondent PHILYARDS asserts that J.G. Summit has not been able to show compelling reasons to warrant a reconsideration of the Decision of the Court.25 PHILYARDS denies that the Decision is based mainly on policy considerations and points out that it is premised on principles governing obligations and contracts and corporate law such as the rule requiring respect for contractual stipulations, upholding rights of first refusal, and recognizing the assignable nature of contracts rights.26 Also, the ruling that shipyards are not public utilities relies on established case law and fundamental rules of statutory construction. PHILYARDS stresses that KAWASAKI’s right of first refusal or even the right to top is not limited to the 40% equity of the latter.27 On the landholding issue raised by J.G. Summit, PHILYARDS emphasizes that this is a non-issue and even involves a question of fact. Even assuming that this Court can take cognizance of such question of fact even without the benefit of a trial, PHILYARDS opines that landholding by PHILSECO at the time of the bidding is irrelevant because what is essential is that ultimately a qualified entity would eventually hold PHILSECO’s real estate properties.28 Further, given the assignable nature of the right of first refusal, any applicable nationality restrictions, including landholding limitations, would not affect the right of first refusal itself, but only the manner of its exercise.29 Also, PHILYARDS argues that if this Court takes cognizance of J.G. Summit’s allegations of fact regarding PHILSECO’s landholding, it must also recognize PHILYARDS’ assertions that PHILSECO’s landholdings were sold to another corporation.30 As regards the right of first refusal, private respondent explains that KAWASAKI’s reduced shareholdings (from 40% to 2.59%) did not translate to a deprivation or loss of its contractually granted right of first refusal.31 Also, the bidding was valid because PHILYARDS exercised the right to top and it was of no moment that losing bidders later joined PHILYARDS in raising the purchase price.32

In cadence with the private respondent PHILYARDS, public respondents COP and APT contend:

1. The conversion of the right of first refusal into a right to top by 5% does not violate any provision in the JVA between NIDC and KAWASAKI.

2. PHILSECO is not a public utility and therefore not governed by the constitutional restriction on foreign ownership.

3. The petitioner is legally estopped from assailing the validity of the proceedings of the public bidding as it voluntarily submitted itself to the terms of the ASBR which included the provision on the right to top.

4. The right to top was exercised by PHILYARDS as the nominee of KAWASAKI and the fact that PHILYARDS formed a consortium to raise the required amount to exercise the right to top the highest bid by 5% does not violate the JVA or the ASBR.

5. The 60%-40% Filipino-foreign constitutional requirement for the acquisition of lands does not apply to PHILSECO because as admitted by petitioner itself, PHILSECO no longer owns real property.

6. Petitioner’s motion to elevate the case to the Court en banc is baseless and would only delay the termination of this case.33

20

In a Consolidated Comment dated March 8, 2004, J.G. Summit countered the arguments of the public and private respondents in this wise:

1. The award by the APT of 87.67% shares of PHILSECO to PHILYARDS with losing bidders through the exercise of a right to top, which is contrary to law and the constitution is null and void for being violative of substantive due process and the abuse of right provision in the Civil Code.

a. The bidders[’] right to top was actually exercised by losing bidders.

b. The right to top or the right of first refusal cannot co-exist with a genuine competitive bidding.

c. The benefits derived from the right to top were unwarranted.

2. The landholding issue has been a legitimate issue since the start of this case but is shamelessly ignored by the respondents.

a. The landholding issue is not a non-issue.

b. The landholding issue does not pose questions of fact.

c. That PHILSECO owned land at the time that the right of first refusal was agreed upon and at the time of the bidding are most relevant.

d. Whether a shipyard is a public utility is not the core issue in this case.

3. Fraud and bad faith attend the alleged conversion of an inexistent right of first refusal to the right to top.

a. The history behind the birth of the right to top shows fraud and bad faith.

b. The right of first refusal was, indeed, "effectively useless."

4. Petitioner is not legally estopped to challenge the right to top in this case.

a. Estoppel is unavailing as it would stamp validity to an act that is prohibited by law or against public policy.

b. Deception was patent; the right to top was an attractive nuisance.

c. The 10% bid deposit was placed in escrow.

J.G. Summit’s insistence that the right to top cannot be sourced from the right of first refusal is not new and we have already ruled on the issue in our Resolution of September 24, 2003. We upheld the mutual

right of first refusal in the JVA.34 We also ruled that nothing in the JVA prevents KAWASAKI from acquiring more than 40% of PHILSECO’s total capitalization.35 Likewise, nothing in the JVA or ASBR bars the conversion of the right of first refusal to the right to top. In sum, nothing new and of significance in the petitioner’s pleading warrants a reconsideration of our ruling.

Likewise, we already disposed of the argument that neither the right of first refusal nor the right to top can legally be exercised by the consortium which is not the proper party granted such right under either the JVA or the ASBR. Thus, we held:

The fact that the losing bidder, Keppel Consortium (composed of Keppel, SM Group, Insular Life Assurance, Mitsui and ICTSI), has joined PHILYARDS in the latter's effort to raise P2.131 billion necessary in exercising the right to top is not contrary to law, public policy or public morals. There is nothing in the ASBR that bars the losing bidders from joining either the winning bidder (should the right to top is not exercised) or KAWASAKI/PHI (should it exercise its right to top as it did), to raise the purchase price. The petitioner did not allege, nor was it shown by competent evidence, that the participation of the losing bidders in the public bidding was done with fraudulent intent. Absent any proof of fraud, the formation by [PHILYARDS] of a consortium is legitimate in a free enterprise system. The appellate court is thus correct in holding the petitioner estopped from questioning the validity of the transfer of the National Government's shares in PHILSECO to respondent.36

Further, we see no inherent illegality on PHILYARDS’ act in seeking funding from parties who were losing bidders. This is a purely commercial decision over which the State should not interfere absent any legal infirmity. It is emphasized that the case at bar involves the disposition of shares in a corporation which the government sought to privatize. As such, the persons with whom PHILYARDS desired to enter into business with in order to raise funds to purchase the shares are basically its business. This is in contrast to a case involving a contract for the operation of or construction of a government infrastructure where the identity of the buyer/bidder or financier constitutes an important consideration. In such cases, the government would have to take utmost precaution to protect public interest by ensuring that the parties with which it is contracting have the ability to satisfactorily construct or operate the infrastructure.

On the landholding issue, J.G. Summit submits that since PHILSECO is a landholding company, KAWASAKI could exercise its right of first refusal only up to 40% of the shares of PHILSECO due to the constitutional prohibition on landholding by corporations with more than 40% foreign-owned equity. It further argues that since KAWASAKI already held at least 40% equity in PHILSECO, the right of first refusal was inutile and as such, could not subsequently be converted into the right to top. 37 Petitioner also asserts that, at present, PHILSECO continues to violate the constitutional provision on landholdings as its shares are more than 40% foreign-owned.38PHILYARDS admits that it may have previously held land but had already divested such landholdings.39 It contends, however, that even if PHILSECO owned land, this would not affect the right of first refusal but only the exercise thereof. If the land is retained, the right of first refusal, being a property right, could be assigned to a qualified party. In the alternative, the land could be divested before the exercise of the right of first refusal. In the case at bar, respondents assert that since the right of first refusal was validly converted into a right to top, which was exercised not by KAWASAKI, but by PHILYARDS which is a Filipino corporation (i.e., 60% of its shares are owned by Filipinos), then there is no violation of the Constitution.40 At first, it would seem that questions of fact beyond

21

cognizance by this Court were involved in the issue. However, the records show that PHILYARDS admits it had owned land up until the time of the bidding.41 Hence, the only issue is whether KAWASAKI had a valid right of first refusal over PHILSECO shares under the JVA considering that PHILSECO owned land until the time of the bidding and KAWASAKI already held 40% of PHILSECO’s equity.

We uphold the validity of the mutual rights of first refusal under the JVA between KAWASAKI and NIDC. First of all, the right of first refusal is a property right of PHILSECO shareholders, KAWASAKI and NIDC, under the terms of their JVA. This right allows them to purchase the shares of their co-shareholder before they are offered to a third party. The agreement of co-shareholders to mutually grant this right to each other, by itself, does not constitute a violation of the provisions of the Constitution limiting land ownership to Filipinos and Filipino corporations. As PHILYARDS correctly puts it, if PHILSECO still owns land, the right of first refusal can be validly assigned to a qualified Filipino entity in order to maintain the 60%-40% ratio. This transfer, by itself, does not amount to a violation of the Anti-Dummy Laws, absent proof of any fraudulent intent. The transfer could be made either to a nominee or such other party which the holder of the right of first refusal feels it can comfortably do business with. Alternatively, PHILSECO may divest of its landholdings, in which case KAWASAKI, in exercising its right of first refusal, can exceed 40% of PHILSECO’s equity. In fact, it can even be said that if the foreign shareholdings of a landholding corporation exceeds 40%, it is not the foreign stockholders’ ownership of the shares which is adversely affected but the capacity of the corporation to own land – that is, the corporation becomes disqualified to own land. This finds support under the basic corporate law principle that the corporation and its stockholders are separate juridical entities. In this vein, the right of first refusal over shares pertains to the shareholders whereas the capacity to own land pertains to the corporation. Hence, the fact that PHILSECO owns land cannot deprive stockholders of their right of first refusal. No law disqualifies a person from purchasing shares in a landholding corporation even if the latter will exceed the allowed foreign equity, what the law disqualifies is the corporation from owning land. This is the clear import of the following provisions in the Constitution:

Section 2. All lands of the public domain, waters, minerals, coal, petroleum, and other mineral oils, all forces of potential energy, fisheries, forests or timber, wildlife, flora and fauna, and other natural resources are owned by the State. With the exception of agricultural lands, all other natural resources shall not be alienated. The exploration, development, and utilization of natural resources shall be under the full control and supervision of the State. The State may directly undertake such activities, or it may enter into co-production, joint venture, or production-sharing agreements with Filipino citizens, or corporations or associations at least sixty per centum of whose capital is owned by such citizens. Such agreements may be for a period not exceeding twenty-five years, renewable for not more than twenty-five years, and under such terms and conditions as may be provided by law. In cases of water rights for irrigation, water supply, fisheries, or industrial uses other than the development of water power, beneficial use may be the measure and limit of the grant.

xxx xxx xxx

Section 7. Save in cases of hereditary succession, no private lands shall be transferred or conveyed except to individuals,

corporations, or associations qualified to acquire or hold lands of the public domain.42(emphases supplied)

The petitioner further argues that "an option to buy land is void in itself (Philippine Banking Corporation v. Lui She, 21 SCRA 52 [1967]). The right of first refusal granted to KAWASAKI, a Japanese corporation, is similarly void. Hence, the right to top, sourced from the right of first refusal, is also void."43 Contrary to the contention of petitioner, the case of Lui She did not that say "an option to buy land is void in itself," for we ruled as follows:

x x x To be sure, a lease to an alien for a reasonable period is valid. So is an option giving an alien the right to buy real property on condition that he is granted Philippine citizenship. As this Court said in Krivenko vs. Register of Deeds:

[A]liens are not completely excluded by the Constitution from the use of lands for residential purposes. Since their residence in the Philippines is temporary, they may be granted temporary rights such as a lease contract which is not forbidden by the Constitution. Should they desire to remain here forever and share our fortunes and misfortunes, Filipino citizenship is not impossible to acquire.

But if an alien is given not only a lease of, but also an option to buy, a piece of land, by virtue of which the Filipino owner cannot sell or otherwise dispose of his property, this to last for 50 years, then it becomes clear that the arrangement is a virtual transfer of ownership whereby the owner divests himself in stages not only of the right to enjoy the land (jus possidendi, jus utendi, jus fruendi and jus abutendi) but also of the right to dispose of it (jus disponendi) — rights the sum total of which make up ownership. It is just as if today the possession is transferred, tomorrow, the use, the next day, the disposition, and so on, until ultimately all the rights of which ownership is made up are consolidated in an alien. And yet this is just exactly what the parties in this case did within this pace of one year, with the result that Justina Santos'[s] ownership of her property was reduced to a hollow concept. If this can be done, then the Constitutional ban against alien landholding in the Philippines, as announced in Krivenko vs. Register of Deeds, is indeed in grave peril.44 (emphases supplied; Citations omitted)

In Lui She, the option to buy was invalidated because it amounted to a virtual transfer of ownership as the owner could not sell or dispose of his properties. The contract in Lui She prohibited the owner of the land from selling, donating, mortgaging, or encumbering the property during the 50-year period of the option to buy. This is not so in the case at bar where the mutual right of first refusal in favor of NIDC and KAWASAKI does not amount to a virtual transfer of land to a non-Filipino. In fact, the case at bar involves a right of first refusal over shares of stock while the Lui She case involves an option to buy the land itself. As discussed earlier, there is a distinction between the shareholder’s ownership of shares and the corporation’s ownership of land arising from the separate juridical personalities of the corporation and its shareholders.

We note that in its Motion for Reconsideration, J.G. Summit alleges that PHILSECO continues to violate the Constitution as its foreign equity is above 40% and yet owns long-term leasehold rights which are real rights.45 It cites Article 415 of the Civil Code which includes in the definition of immovable property, "contracts for public works, and servitudes and other real rights over immovable property."46 Any existing landholding, however, is denied by PHILYARDS citing its recent financial statements.47 First, these are questions of fact, the veracity of which would require introduction of

22

evidence. The Court needs to validate these factual allegations based on competent and reliable evidence. As such, the Court cannot resolve the questions they pose. Second, J.G. Summit misreads the provisions of the Constitution cited in its own pleadings, to wit:

29.2 Petitioner has consistently pointed out in the past that private respondent is not a 60%-40% corporation, and this violates the Constitution x x x The violation continues to this day because under the law, it continues to own real property…

xxx xxx xxx

32. To review the constitutional provisions involved, Section 14, Article XIV of the 1973 Constitution (the JVA was signed in 1977), provided:

"Save in cases of hereditary succession, no private lands shall be transferred or conveyed except to individuals, corporations, or associations qualified to acquire or hold lands of the public domain."

32.1 This provision is the same as Section 7, Article XII of the 1987 Constitution.

32.2 Under the Public Land Act, corporations qualified to acquire or hold lands of the public domain are corporations at least 60% of which is owned by Filipino citizens (Sec. 22, Commonwealth Act 141, as amended). (emphases supplied)

As correctly observed by the public respondents, the prohibition in the Constitution applies only to ownership of land.48 It does not extend to immovable or real property as defined under Article 415 of the Civil Code.Otherwise, we would have a strange situation where the ownership of immovable property such as trees, plants and growing fruit attached to the land49 would be limited to Filipinos and Filipino corporations only.

III.

WHEREFORE, in view of the foregoing, the petitioner’s Motion for Reconsideration is DENIED WITH FINALITY and the decision appealed from is AFFIRMED. The Motion to Elevate This Case to the Court En Banc is likewise DENIED for lack of merit.

SO ORDERED.

Davide, Jr., C.J., (Chairman), Ynares-Santiago, Corona, and Tinga, JJ., concur.

CADASTRAL REGISTRATION:

HEIRS OF THE LATE JOSE DE LUZURIAGA,[1] represented by JOSE DE LUZURIAGA, JR., HEIRS OF MANUEL R. DE LUZURIAGA, HEIRS OF THE LATE REMEDIOS DE LUZURIAGA-VALERO, and THE LATE NORMA DE LUZURIAGA DIANON,

                      Petitioners, 

 G.R. No. 168848

 

 

Present:

 

YNARES-SANTIAGO, 

          -  versus  -

 REPUBLIC OF THEPHILIPPINES thru the OFFICE OF THE SOLICITOR GENERAL,

                      Respondent.

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

HEIRS OF THE LATE JOSE DE LUZURIAGA, represented by JOSE DE LUZURIAGA, JR., and HEIRS OF THE LATE REMEDIOS DE LUZURIAGA-VALERO AND THE LATE NORMA DE LUZURIAGA-DIANON,

                      Petitioners,           -  versus  -

 REPUBLIC OF THEPHILIPPINES thru the OFFICE OF THE SOLICITOR GENERAL,

                      Respondent.

J.,

                  Chairperson,  

CHICO-NAZARIO,

VELASCO, JR.,

NACHURA, and

PERALTA, JJ.

 

G.R. No. 169019

 

Promulgated:

 

June 30, 2009

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

 

D E C I S I O N

 

VELASCO, JR., J.:

 

Before us are two petitions under Rule 45 interposed by the heirs of the late Jose De Luzuriaga, assailing the November 26, 2004 Decision[2] and May 25, 2005 Resolution[3] of the Court of Appeals (CA) in CA-G.R. SP No. 75321.  The first is a Verified Petition for Review on Certiorari under G.R. No. 169019, while the second is styled Supplemental Petition and docketed as G.R. No. 168848.

 

The assailed CA decision and resolution reversed and set aside the Orders dated August 31, 2001[4] and October 24, 2002[5] in Cadastral Case No. 97-583 of the Regional Trial Court (RTC), Branch 51 in Bacolod City.

 

The Facts

 

Subject of the instant controversy is Lot No. 1524 of the Bacolod Cadastre, particularly described as follows:

  

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A parcel of land (Lot No. 1524 of the Cadastral Survey of Bacolod), with the improvements thereon, situated in the Municipality of Bacolod.  Bounded on the N. and NE., by the Lupit or Magsungay Pequeño River; on the SE., by Calle Araneta and Lots Nos. 440, 442 and 441; on the SW., by the Sapa Mamlot; and on the W. by Creeks x x x; containing an area of [TWO HUNDRED SIXTY EIGHT THOUSAND SEVEN HUNDRED AND SEVENTY TWO (268,772) square meters], more or less.[6]

 On May 16, 1997, petitioners filed an Application for the

Registration of Title, docketed as Cad. Case No. 97-583 before the RTC.  In it, the subject lot was specifically identified as Lot No. 1524, AP-06-005774, Cad. 39, Bacolod Cadastre, situated in the City of Bacolod, Island of Negros. The survey plan, conducted by Geodetic Engineer Eluminado E. Nessia, Jr. and duly approved on May 17, 1997 by the Department of Environment and Natural Resources (DENR) Regional Office, Iloilo City; and the technical description of the subject lot, prepared by the Office of the Regional Technical Director, Land Management Services, DENR, Region VI, Iloilo City, were submitted to the RTC.

 On May 12, 1998, the application was amended to state,

thus:  “x x x that the parcel of land in question be ordered registered and that an original Certificate of Title be issued in the name of the late Jose R. [De] Luzuriaga, Sr. pursuant to Decree No. 22752 covering Lot No. 1524 of Bacolod Cadastre.”[7]

 Subsequently, the RTC issued an Order of general default

except as against respondent Republic of the Philippines, which entered its due appearance through the Office of the Solicitor General (OSG) which, in turn, designated Bacolod Assistant City Prosecutor Abraham Bayona to represent the OSG at the trial.

 Among the evidence petitioners adduced during the

hearings was a copy of Decree No. 22752[8] dated October 7, 1916, issued by the General Land Registration Office (GLRO) pursuant to the decision in the cadastral case confirming and granting unto the late Jose R. De Luzuriaga full ownership of Lot No. 1524.

 RTC Decision Granting Application for Registration of Lot 1524

 By Decision[9] dated May 24, 1999, the trial court ratified

its order of general default and judicially confirmed the incomplete title of the late De Luzuriaga, Sr. over Lot No. 1524 pursuant to Decree No. 22752. The fallo reads:

WHEREFORE, premises considered, the order of general default previously entered is ratified and JUDGMENT is hereby rendered confirming the title of the late Jose R. De Luzuriaga, Sr. over Lot No. 1524 of Bacolod Cadastre under Decree No. 22752 dated October 7, 1916 (Exh. “K” & “L”) identified in the approved Survey Plan (Exh. “M”) and technically described in the Technical Description (Exh. “N”).

 As soon as this decision becomes final,

let an Original Certificate of Title be issued in the name of the late Jose R. De Luzuriaga, Sr., pursuant to Decree No. 22752 covering Lot No. 1524 of Bacolod Cadastre in accordance with law.

 SO ORDERED. 

 The OSG, for the Republic, received a copy of the Decision

on June 22, 1999, but opted not to file an appeal. Pursuant to the above decision the Bacolod Registry issued

Original Certificate of Title (OCT) No. RO-58 in the name of De Luzuriaga, Sr.

 DAALCO Sues for Quieting of Title Meanwhile, in September 1999, Dr. Antonio A. Lizares,

Co., Inc. (DAALCO) filed a Complaint[10] against petitioners before the RTC for Quieting of Title, Annulment and Cancellation of [OCT] No. RO-58 with prayer for injunctive relief and damages, docketed as Civil Case No. 99-10924 and entitled Dr. Antonio A. Lizares Co., Inc., (DAALCO) v. Jose R. De Luzuriaga, III, et al.[11] In gist, DAALCO claimed that its predecessor-in-interest, Antonio Lizares, was the registered, lawful, and absolute owner of Lot No. 1524 as evidenced by a Transfer Certificate of Title (TCT) No. 190-R (T-247 [T-19890]) issued by the Register of Deeds (RD) of Bacolod City on February 8, 1939.  Said TCT served to replace OCT No. 2765 in the name of Lizares and was issued pursuant to Decree No. 22752, GLRO Cad. Rec. No. 55 as early as November 14, 1916 and registered in the registration book of the Office of the RD of Negros Occidental, at Vol. 10, p. 283.

 To buttress its case, DAALCO pointed to the fact that the

RD, after the finality of the May 24, 1999 RTC Decision, did not issue an OCT in the name of De Luzuriaga, Sr., as prayed for in the application of petitioners and as ordered by the cadastral court.  What the RD instead issued––owing to the issuance in 1916 of OCT No. 2765 in the name of Lizares––was a reconstituted title, i.e., OCT No. RO-58. Finally, DAALCO maintained having been in actual, open, and continuous possession as registered owner of the subject lot.

 The Petition for Relief from Judgment by the Republic

  On November 24, 1999, or six months after the RTC

rendered its Decision, the Republic through the OSG, however, sought the annulment thereof via an unverified Petition for Relief from Judgment[12]filed before the same RTC which rendered the above decision in Cad. Case No. 97-583.

 To support its prayer for annulment, the Republic

alleged, first, that petitioners failed to indicate in their application all the heirs of the late De Luzuriaga, Sr. and their corresponding authorization for the application in their behalf.

 Second, the Republic asserted that petitioners cannot use

Decree No. 22752 as basis for the application of land registration as said decree effectively barred said application.  It invited attention to Section 39 of Presidential Decree No. (PD) 1529, which requires the simultaneous issuance of the decree of registration and the corresponding certificate of title.  As argued, the policy of simultaneous issuance prescribed in the decree has not been followed in the instant case.

Third, the Republic, relying on Metropolitan Waterworks and Sewerage System v. Court of Appeals,[13] contended that no new title over the subject lot can be issued in favor of the applicant, the same lot being already covered by a title, specifically OCT No. 2765 in the name of Lizares.

 Fourth, again citing jurisprudence,[14] the Republic

maintained that the applicant, even if entitled to registration by force

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of Decree No. 22752, is already barred by laches, the same registration decree having been issued 83 long years ago.

 In the meantime, Judge Anita G. Chua replaced retired

Judge Ramon B. Posadas as presiding judge of the RTC, Branch 51 in Bacolod City.

 The Ruling of the RTC

 By Order dated August 31, 2001, Judge Chua, on the

finding that the “petition for relief from judgment is not sufficient in form and substance and having been filed out of time,”[15] denied the petition. Specifically, the RTC found the Republic’s petition to be unverified and filed beyond the 60th day from receipt on June 22, 1999 of a copy of the May 24, 1999 RTC Decision.

 Subsequently, the Republic moved for reconsideration [16] of

the above denial order arguing that its procedural lapses are not fatal to its case.  It cited Uy v. Land Bank of the Philippines,[17] in which the Court held that the merits of the substantive aspects of the case are deemed a special circumstance or compelling reason for the reinstatement of its petition and prayed for the relaxation of the Rules. Moreover, the OSG alleged that the RTC did not acquire jurisdiction over Cadastral Case No. 97-583 inasmuch as the corresponding amended application for registration dated May 5, 1998 was not published and a copy of which the Republic was not served.

Finally, the Republic raised anew the argument on the unavailability of Decree No. 22752 as basis for the application of land registration in view of the implementation of Sec. 39 of PD 1529.

 The Republic later filed a Supplement (To Motion for

Reconsideration) reiterating the merits of its case. The RTC denied the Republic’s motion for reconsideration

through an Order of October 24, 2002.  In the same order, the trial court observed that the Republic is actually asking the present presiding judge to review the decision of her predecessor, Judge Posadas, and to annul the same decision.  Pursuing the point, the RTC, citing Miranda v. Court of Appeals[18] and Nery v. Leyson,[19] ratiocinated that a judge who succeeds another has no reviewing and appellate authority and jurisdiction over his predecessor’s final judgment on the merits of a case, such authority residing, as it does, in the ordinary course of things, with the appellate court.

 Aggrieved, the Republic elevated the case before the CA

through a Petition for Certiorari under Rule 65.  Docketed as CA-G.R. SP No. 75321, the petition raised the sole issue of whether the RTC gravely abused its discretion in denying its petition for relief from judgment.

 The Ruling of the CA

 On November 26, 2004, the appellate court rendered the

assailed decision granting certiorari and ordered the remand of the instant case to the trial court for reception of evidence to determine whether the RTC’s Decision confirming the title of the late Luzuriaga, Sr. over Lot 1524 will result in a double titling of the subject lot.  The fallo of the CA’s decision reads:

 WHEREFORE, premises considered,

the instant petition for certiorari is GRANTED.  Accordingly, the case is remanded to the court a quo for reception of evidence in order to resolve the issue of whether or not the

Decision dated May 24, 1999 confirming the title of the late Jose R. De Luzuriaga, Sr. over Lot No. 1524 of Bacolod Cadastre really resulted to “double titling” and thereafter, to rule on the merits of the petition for relief from judgment.

 SO ORDERED.[20]

  The CA predicated its ruling on the following factors: (1)

the merits of the petition for relief from judgment far outweigh the procedural technicalities that obstruct it, i.e., not verified and filed out of time; and (2) the Republic was able to make out a prima facie case of “double titling,” supported by a Letter/Report [21] issued by the Bacolod City RD on December 7, 2001 showing that Lot No. 1524 was already registered under, and an OCT already issued in, another man’s name.

 Through the equally assailed May 25, 2005 Resolution, the

CA denied petitioners’ motion for reconsideration. Hence, we have these petitions, with the supplemental

petition filed on July 28, 2005; while the main petition for review on certiorari was filed on August 11, 2005, which explains the lower docket number of the former.

 The Issues

 Petitioners raise as ground for review in G.R. No.

169019 the following issues and assignment of errors: A.        WITH ALL DUE RESPECT, THE HONORABLE [CA] SERIOUSLY ERRED IN GRANTING THE PETITION FOR CERTIORARI OF THE SOLICITOR GENERAL’S OFFICE, WITHOUT MAKING A DEFINITE FINDING OF ACTUAL PRESENCE OF GRAVE ABUSE OF DISCRETION, COMMITTED BY THE LOWER COURT, VIOLATING THE WELL-KNOWN PRINCIPLE THAT CERTIORARI IS NOT PROPER WHERE THERE IS NO GRAVE ABUSE OF DISCRETION, AND WHEN THERE ARE UNSETTLED FACTUAL CONTROVERSIES IN THE CASE;B.        WITH ALL DUE RESPECT, THE HONORABLE [CA] IN ITS HEREIN CONTESTED DECISION x x x DIRECTLY VIOLATED THE LONG-HELD PRINCIPLE OF “JUDICIAL STABILITY” THAT HOLDS THAT NO REVIEW CAN BE HAD BY ONE COURT OF A DECISION OF ANOTHER COURT OF CONCURRENT JURISDICTION, AND THE RULE THAT NO SUCCEEDING JUDGE CAN REVIEW A DECISION OF THE PREVIOUS PRESIDING JUDGE, AS HELD BY THE SUPREME COURT IN HACBANG V. LEYTE AUTOBUS CO., INC. 62 O.G. 31, Aug. 1, 1966, MIRANDA VS. COURT OF APPEALS, 71 SCRA 295, AND NERY VS. LEYSON, 339 SCRA 23; C.        WITH ALL DUE RESPECT, THE SUBJECT DECISION OF THE HONORABLE [CA] VIOLATED THE PRINCIPLE OF RES JUDICATA OR FINALITY OF JUDGMENT;

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 D.        WITH ALL DUE RESPECT, THE HONORABLE [CA] GRIEVOUSLY ERRED IN GRANTING THE OSG’S PETITION FOR CERTIORARI UNDER RULE 65, WHICH WAS CLEARLY RESORTED TO FOR THE FAILURE OF THE SOLICITOR GENERAL TO SEASONABLY FILE A MOTION FOR RECONSIDERATION, NOTICE OF APPEAL, OR PETITION FOR RELIEF FROM JUDGMENT OF THE ORDER OR OF THE DECISION OF THE HONORABLE COURT, RTC BRANCH 51, IN THE CASE A QUO, WHICH RESORT OR DEVISE IS THOROUGHLY FROWNED UPON IN OUR JURISDICTION; E.         THE HONORABLE [CA], WITH ALL DUE RESPECT, GRIEVOUSLY ERRED IN FINDING THAT THERE IS AN “EXCEPTIONAL CASE” IN THIS ABOVE-ENTITLED CASE WHICH JUSTIFIES THE GRANT OF THE PETITION, WHEN IN TRUTH AND IN FACT, THERE IS NONE; MOST IMPORTANTLY: F.         A POTENTIAL FOR SERIOUS CONFLICT OF DECISIONS HAS BEEN CREATED BY THE ORDER OF THE HONORABLE [CA] WITH ALL DUE RESPECT, IN REMANDING THE CASE FOR FURTHER PROCEEDINGS TO THE COURT A QUO, WHEN THERE IS ALREADY A SIMILAR CASE INVOLVING PRINCIPALLY THE SAME ISSUE OF ALLEGED “DOUBLE TITLING” IN ANOTHER BRANCH OF THE [RTC] OF NEGROS OCCIDENTAL NAMELY, BRANCH 46, IN THE CASE ENTITLED DAALCO VS. LUZURIAGA, ET AL. WITH CIVIL CASE [NO.] 99-10924, FOR QUIETING OF TITLE.[22]

                   In G.R. No. 168848, petitioners raise the sole issue in their Supplemental Petition of:

 WHETHER OR NOT THE RESOLUTION DATED NOVEMBER 26, 2004 AND RESOLUTION DATED MAY 25, 2005 WERE CONTRARY TO LAW AND/OR JURISPRUDENCE OF THE SUPREME COURT[23]

In the meantime, on September 12, 2005, DAALCO filed a Motion for Leave to Intervene,[24] apprising the Court of, among other things, the pendency of its complaint docketed as Civil Case No. 99-10924.

 The Court’s Ruling

 The core issue in these petitions is whether the appellate

court gravely abused its discretion in granting the Republic’s petition for relief from judgment despite: (1) the May 24, 1999 Decision in Cadastral Case No. 97-583 having become final and executory; and (2) the issue of double titling having been raised in DAALCO’s complaint in Civil Case No. 99-10924 for quieting of title and

cancellation of OCT No. RO-58 before the RTC, Branch 46 in Bacolod City.

 The petitions are bereft of merit. The CA acted within its sound discretion in giving, under

the factual premises and for reasons set out in the assailed decision, due course to the Republic’s petition for relief from judgment and remanding the case to the trial court for reception of evidence.   Under the peculiar facts and circumstances of the case, we agree with the appellate court’s holding that the RTC committed grave abuse of discretion in dismissing the petition for relief from the May 24, 1999 Decision.

 Procedural Issue: Relaxation of the Rules to

Promote Substantial Justice

 

We can concede that the unverified petition for relief from judgment of the OSG was filed out of time.  Such a petition must be filed within: (a) sixty (60) days from knowledge of judgment, order, or other proceedings to be set aside; and (b) six (6) months from entry of such judgment, order, or other proceedings.[25]  In the case at bar, the OSG admits receiving the May 24, 1999 Decision on June 22, 1999.  Thus, when it did not file a notice of appeal of said decision within the 15-day reglementary period for filing an appeal, the OSG was left with the remaining remedy of relief from judgment subject to the conditions provided under Secs. 1 and 3 of Rule 38 of the Rules of Court.  But, as thing turned out, the OSG, for the Republic, belatedly filed its petition only on November 24, 1999, or more than five months from receipt or knowledge of the May 24, 1999 RTC Decision. 

 

The Republic ascribes its failure to file a timely notice of appeal or a petition for relief from judgment on the negligence of the OSG person––in charge of receiving all pleadings assigned to Asst. Solicitor Josefina C. Castillo––who belatedly gave the copy of the RTC Decision to the latter due to oversight.  And the Republic prays for the relaxation of the rigid application of the Rules based on the merits of its petition for relief from judgment.

 

While the reglementary periods fixed under the rules for relief from judgment are mandatory in character, [26] procedural rules of the most mandatory character in terms of compliance may, in the interest of substantial justice, be relaxed.[27] Since rules of procedure are mere tools designed to facilitate the attainment of justice, they are not to be applied with severity and rigidity when such application would clearly defeat the very rationale for their existence. In line with this postulate, the Court can and will relax or altogether suspend the application of the rules, or except a particular case from the rules’ operation when their rigid application tends to frustrate rather than promote the ends of justice.[28]

 

The peculiarities of the instant case impel us to do so now. Foremost of these is the fact that the Republic had properly made out a prima facie case of double titling over the subject lot, meriting a ventilation of the factual and legal issues relative to that case.

 

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Apropos the matter of verification which the OSG failed to observe, it cannot be over-emphasized that the requirement on verification is simply a condition affecting the form of pleadings. Non-compliance with it is not jurisdictional, and would not render the pleading fatally defective.[29] A pleading required by the Rules of Court to be verified may be given due course even without a verification if the circumstances warrant the suspension of the rules in the interest of justice.[30] So it must be here.

 

Substantive Issue: Prima Facie Case of Double Titling

 

Relief from judgment is an equitable remedy; it is allowed only in exceptional cases where there is no other available or adequate remedy.[31]  And its determination rests with the court.  In the instant case, certain attending facts and circumstances, as shall be set forth below, make for an exceptional case for allowing relief from judgment.

 

Register of Deeds report shows doubling titling when another OCT is issued for subject lot

 

 

First. The Letter/Report[32] issued by the Bacolod City RD on December 7, 2001, ineluctably indicating the registration of subject Lot No. 1524 and the subsequent issuance of an OCT in the name of another person, provides a reasonable ground to believe that a case of double titling would result should another title issue for the same lot in the name of De Luzuriaga, Sr. Thus, there exists a compelling need for another hard look at Cad. Case No. 97-583 and for the trial court to address the likelihood of duplication of titles or “double titling,” an eventuality that will undermine the Torrens system of land registration.

 

OCT already issued for subject lot

 

Second.  The prior issuance on November 14, 1916 of OCT No. 2765 in the name of Lizares over Lot No. 1524 persuasively buttresses a prima facie case on the issue of double titling.  Civil Case No. 99-10924 for quieting of title filed by DAALCO before the RTC, Branch 46 in Bacolod City tends to show that DAALCO’s predecessor-in-interest, Lizares, was issued OCT No. 2765 in 1916 ostensibly pursuant to Decree No. 22752, GLRO Cad. Rec. No. 55.  This is confirmed by the adverted Letter/Report. 

 

 Decree No. 22752 is the same decree petitioners relied upon in Cad. Case No. 97-583 for judicial confirmation of imperfect title over subject Lot No. 1524.  Obviously, one and the same decree cannot serve as basis for a valid grant of separate titles in fee simple over the same lot to two different persons.

 

Ownership of subject lot best ventilated in civil case

 

Third.  Since petitioners and DAALCO separately claim owning Lot No. 1524, the ownership issue would be best litigated in Civil Case No. 99-10924 filed by DAALCO for quieting of title.  Lest it be overlooked, both parties anchor in a way their ownership claim on Decree No. 22752.  It ought to be stressed, however, that an OCT was issued several months after Decree No. 22752 was rendered, and the certificate was issued to Lizares, not to De Luzuriaga, Sr.  De Luzuriaga, Sr., during his lifetime, never contested or assailed the title issuance to Lizares, suggesting the possibility of a lawful transfer of ownership from one to the other during the period material.  In any case, for purposes of Cad. Case No. 97-583, the fact that an OCT was already issued for the subject lot would, perforce, foreclose the issuance of another OCT for the same lot.

 

As has been consistently held, neither prescription nor laches may render inefficacious a decision in a land registration case. [33] In line with this doctrine of the inapplicability of prescription and laches on registration cases, the Court has ruled that “the failure on the part of the administrative authorities to do their part in the issuance of the decree of registration cannot oust the prevailing party from ownership of the land.”[34] Following these doctrinal pronouncements, petitioners argue that they can rightfully bank on Decree No. 22752 to defeat the claim of DAALCO.

 Petitioners’ above posture may be given cogency but for

the issuance, pursuant to the same decree, of OCT No. 2765 in the name of Lizares. Nothing on the records adequately explains, nor do petitioners attempt to do so, how a registration decree adjudicating Lot No. 1524 to De Luzuriaga, Sr. became the very medium for the issuance of a certificate of title in favor of Lizares.   Consequently, whatever rights petitioners might have over the subject lot as heirs of De Luzuriaga, Sr. ought to be litigated against the successors-in-interest of Lizares to put a final rest to their clashing claims over Lot No. 1524.

 

Issuance of reconstituted title beyond the judgment in the cadastral case

 

 

Fourth.  OCT No. RO-58 was issued by the RD of Bacolod City purportedly in execution of the final and executory decision in Cad. Case No. 97-583. Yet the Court notes that the title issuance went beyond the scope of the judgment sought to be executed.  The second paragraph of the fallo of the May 24, 1999 RTC Decision granting and confirming ownership of subject Lot No. 1524 unto the late Jose R. De Luzuriaga clearly ordered, thus:

 

As soon as this decision becomes final, let an Original Certificate of Title be issued in the name of the late Jose R. De Luzuriaga, Sr., pursuant to Decree No. 22752 covering Lot No. 1524 of Bacolod Cadastre in accordance with law.[35]

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But the RD of Bacolod City––in grave abuse of discretion, instead of issuing an OCT in the name of De Luzuriaga, Sr., as directed by the court––issued a reconstituted title over Lot No. 1524 in the name of the heirs of De Luzuriaga, Sr.  Not lost on the Court is the fact that a reconstituted title is ordered issued in an ordinary civil case, not in a cadastral proceeding for judicial confirmation of imperfect title over unregistered property, as in the instant case.

 Basic is the rule that execution must conform to what the decision dispositively decrees.[36] Logically, an execution is void if it does not strictly conform to every essential particulars of the judgment rendered.[37]  Be that as it may, the issuance of the reconstituted title is rendered moot and ineffective by the grant of relief from judgment.

 Cadastral Case and Quieting of Title Case can proceed independently

Fifth.  Petitioners’ contention that a petition for relief from judgment and the special civil action for quieting of title cannot proceed separately is without solid basis.   Cad. Case No. 97-583 and the suit for quieting of title in Civil Case No. 99-10924 each involves different concerns and can proceed independently.  The cause of action of the Republic’s petition for relief from judgment of “double titling” of the subject lot is different from DAALCO’s quest for quieting of title. From another perspective, DAALCO basically seeks to nullify the issuance of OCT No. RO-58 in the name of the De Luzuriaga heirs, while the Republic’s petition assails the grant of ownership to De Luzuriaga, Sr. over a parcel of land duly registered under OCT No. 2765 in the name of Lizares, who thereafter transferred the title to his heirs or assigns. In fine, both actions may proceed independently, albeit a consolidation of both cases would be ideal to obviate multiplicity of suits.  

 The RTC Had Jurisdiction in Cadastral Case

 The Republic, after participating in the proceedings below, has raised the issue of jurisdiction, drawing attention to the non-publication of the amended application for registration during the trial of Cad. Case No. 93-857. The Court cannot see its way clear to the jurisdictional challenge posed by the Republic. As it were, the Republic entered its appearance in Cad. Case No. 97-583 represented by prosecutor Bayona. The petitioners in that case appeared to have complied with the essential jurisdictional requirement of publication. The required survey plan, technical description, and original tracing cloth have been duly presented and submitted as evidence. Prosecutor Bayona obviously found the cadastral proceedings to have been in order, else, he would have duly protested and assailed the same.

 We hardly can subscribe to the Republic’s argument that the publication of the amendment in petitioners’ application is a condition sine qua non for the RTC, acting as cadastral court, to acquire jurisdiction. Sec. 7[38] of Act No. 2259, otherwise known as the Cadastral Act, and Sec. 35[39] of PD 1529, otherwise known as the Land Registration Decree, provide for the publication of the application for registration and the schedule of the initial hearing.  This is so since judicial cadastral proceedings, like ordinary administrative registration, are in rem, and are governed by the usual rules of practice, procedure, and evidence. Due publication is required to give notice to all interested parties of the claim and identity of the property that will be surveyed.  And any additional territory or change in the area of the claim cannot be included by amendment of the plan or application without new publication,

otherwise the cadastral court does not acquire jurisdiction over the additional or amended claim.  But where the identity and area of the claimed property are not the subjects of amendment but other collateral matters, a new publication is not needed. 

In the case at bar, there is no dispute that due publication was made for Lot No. 1524, its identity and area.  The amendment in petitioners’ application in the relief portion neither altered the area and identity of the subject lot nor added any territory. Thus, no new publication is required.  Besides, the Republic, through Prosecutor Bayona, has been duly notified of such amendment.  Consequently, the Republic could not plausibly argue that it was deprived of its day in court.

Anent DAALCO’s motion to intervene and interest over the subject lot, it may address its motion to the lower court, although intervention may no longer be necessary in the light of Civil Case No. 99-10924 pending before the RTC, Branch 46 in Bacolod City, where DAALCO can properly ventilate its ownership claim as against that of petitioners, who, incidentally, are impleaded in said case as respondents/defendants.

A final consideration. A petition for relief is in effect a second opportunity for an aggrieved party to ask for a new trial.[40] Once granted either by the trial court or the appellate court, the final judgment whence relief is sought is deemed set aside and the case shall stand as if such judgment had never been rendered. In such a case, “the court shall then proceed to hear and determine the case as if a timely motion for new trial or reconsideration had been granted by it.”[41] 

Here, the presiding judge of the RTC, Branch 51 in Bacolod City, by the remand to the court of Cad. Case No. 97-583, is not asked to review and/or annul a final judgment of his or her predecessor or of another RTC, as there is nothing for the presiding judge to nullify in the first place, the annulling act having been taken by the CA. Hence, the trial court’s invocation, as seconded by petitioners, of the teachings of Nery,[42] is off-tangent. Nery, it is true, held that a trial court is without jurisdiction to annul a final judgment of a co-equal court. Nery was, however, cast against a different factual and legal milieu. Suffice it to state for the nonce that Nery involved a final judgment of the RTC against which no petition for relief has been interposed. In view of the first reason, the final judgment was not effectively set aside, unlike here.    

 WHEREFORE, the Verified Petition for Review on Certiorari and Supplemental Petition are hereby DENIED for lack of merit.  Accordingly, the CA’s November 26, 2004 Decision and May 25, 2005 Resolution in CA-G.R. SP No. 75321 are hereby AFFIRMED.

 Costs against petitioners.

 SO ORDERED.

G.R. No. L-35778 January 27, 1983

REPUBLIC OF THE PHILIPPINES, and THE DIRECTOR OF LANDS, petitioners, vs.HON. ABRAHAM P. VERA, Judge, CFI, Bataan, Branch I, and LUISITO MARTINEZ, respondents.

G.R. No. L-35779 January 27, l983

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REPUBLIC OF THE PHILIPPINES, and THE DIRECTOR OF LANDS, petitioners, vs.HON. ABRAHAM P. VERA, judge, CFI, Bataan, Branch I, and THELMA TANALEGA, respondents.

The Solicitor General for petitioners.

Benjamin M. Reyes for private respondent.

 DE CASTRO, J.:

The two (2) above-entitled petitions for review on certiorari of the decisions dated October 9, 1972 and October 16, 1972 issued by the CFI of Bataan, Branch I, in LRC No. N-210, and in LRC No. N-206, respectively, involve a common issue. For convenience, they are hereby decided jointly.

G.R. No. L-35778:

On May 4, 1972, respondent Luisito Martinez filed with the lower court an application for registration of title under Act 496 of one (1) parcel of land, situated in the Municipality of Mariveles, Bataan, containing an area of 323,093 square meters, more or less.

On July 7, 1972 the lower court issued an order of general default except as to the Republic of the Philippines and the Province of Bataan.

On July 24, 1972, the Republic of the Philippines filed with the lower court an opposition to the application stating that the parcel of land applied for is a portion of the public domain belonging to the Republic, not subject to private appropriation.

On September 16, 1972, the lower court issued an order reading:

Considering the testimony of the Provincial Forester Leonides B. Rodriguez during the hearing of August 8, 1972 that this land, subject matter of this application, was a subject of cadastral proceeding and that this land was assigned as Lot No. 626 (Tsn, August 3, 1972, page 41), this case is ordered re-opened and the Land Registration Commissioner is directed to submit his report and/or comment as to whether this lot is covered by the Mariveles Cadastre within five (5) days from receipt hereof.

xxx xxx xxx

On October 5, 1972, the Commissioner of Land Registration submitted to the lower court a report stating.

That the parcel of land applied for registration in the above-entitled case is entirely inside Lot No. 626 of the Cadastral Survey of Mariveles, Province of Bataan, Cad. Case no. 19, LTC Cad. Record No. 1097.

xxx xxx xxx

Records show that in the hearing of this case in the lower court, applicant Luisito Martinez, 62 years old, testified that he is the owner of the land applied for, having inherited the same from his parents, consisting of 32 hectares, more or less; that he started possessing the land in 1938; that about 8 hectares of the land is planted to palay, and there are about 42 mango trees; that kamoteng kahoy is also planted thereon; that he declared the land for taxation purposes only in 1969 because all the records were lost during the war, and that possession was continuous, open, undisturbed and in the concept of owner.

Another witness, Antonio Reyes, 67 years old, testified that he is the overseer of Luisito Martinez; that the area of his land is 32 hectares, more or less; that since 1938, applicant has possessed this land; that eight (8) hectares of land is devoted to palay, and his son Manuel Reyes and Silvestre Garcia are the ones tilling the land, and the harvest is shared alike between applicant, on one hand, and Manuel Reyes and Silvestre Garcia, on the other;that eighteen (18) hectares, more or less, is planted to vegetables.

While another witness, Silvestre Garcia, 60 years old, testified that he worked on the land of the applicant since 1932 which is 32 hectares, more or less; that said Luisito Martinez inherited the land from his parents; that he plants palay only on four (4) hectares; that there are 42 mango trees on the land,

G.R. No. L-35779:

On March 21, 1972, respondent Thelma Tanalega filed an application for registration under Act No. 496 in the Court of First Instance of Bataan, docketed as Land Registration Case No. N-206, L.R.C. Rec. No. N-41884, of two (2) parcels of land located in the barrio of Camaya, municipality of Mariveles, province of Bataan, containing an area of 443,297 square meters, more or less, and 378,506 square meters, more or less, respectively, and more particularly described and Identified as portions of Lot 626, Mariveles Cadastre, covered by Plans (LRC) SWO-13430 and (LRC) SWO-13431, respectively.

On March 21, 1972, the corresponding notice of initial hearing was duly issued by the Commissioner of Land Registration.

On March 21, 1972, the lower court ordered the Bureau of Lands to submit a report within ten (10) days if the land subject of the application has been issued patents or is the subject of any pending application for the issuance of patents. Likewise, the lower court directed the Commissioner of Land Registration to submit within the same period his report if the land applied for has been issued a title or is the subject of a pending decree.

On May 23, 1972, the Chief Surveyor of the Land Registration Commission filed a report in the lower court, stating that the parcels of land applied for registration "do not appear to have been passed upon and approved by the Director of Lands as required by Section 1858 of the Revised Administrative Code." Later, on July 24, 1972, the Chief Surveyor of the Land Registration Commission filed in the lower court another report or manifestation stating "that Plans (LRC) SWO-13430 and 13431, LRC Case No. N-206, LRC Record No. N-41884, when plotted on the Municipal Index Map on file in the Commission does not appear to overlap with any previously titled property under Act 496; that the plan and records of said Land Registration application will be subjected to further examination as soon as the decision to be rendered by this Honorable Court is received in this Commission to determine whether or not a patent or

29

title has in the meantime been issued in order to avoid duplication or overlapping of titles."

At the hearing on June 21, 1972, on motion of the applicant's counsel, the lower court issued an Order of General Default against all persons, with the exception of the Director of Lands and the Director of Forestry, represented by the Office of the provincial fiscal, and the oppositor Eliseo Martinez represented by Atty. Angelino Banzon, who were directed to file their respective oppositions,

On July 7, 1972, the provincial fiscal filed his opposition in behalf of the Directors of Lands and of Forestry, alleging that the parcels of land applied for are portions of the public domain belonging to the Republic of the Philippines, not subject to private appropriation.

Thereafter, the case was tried. The applicant, Thelma Tanalega (respondent herein), testified in her behalf, and presented two (2) witnesses, namely, Miguel Ocampo, 57 years old, and Agapito del Rosario, 50 years old, as well as her documentary evidence in support of her application for registration. On the other hand,. Fiscal Arsenio Roman appeared for the government, and submitted documentary proof in support of the opposition filed by the provincial fiscal's office in this case.

At the hearing of this case in the lower court, applicant Thelma Tanalega, 27 years old, testified that she had possessed the land "openly, adversely, notoriously and in the concept of owner since February 2, 1970 when the said land was sold to her by Elisa Llamas who allegedly possessed this land" in the same manner since 1935; that the applicant had paid for the taxes of the land for the years 1970-1972.

Another witness, Miguel Ocampo, 57 years old, testified that his parents were the ones working on the land before 1935 and due to the illness of his parents, on their request to owner Elisa Llamas, he became overseer up to 1970 when the same was sold to applicant; that 16 hectares of these lands were planted to palay while others were devoted to pasture land and planting vegetables.

Witness Agapito del Rosario, 50 years old, who testified that since childhood, he had known Elisa Llamas to be the owner of the land applied for; that she was the one managing the planting and improving of the land; that he used to see Leopoldo de Guzman and another one also named Agapito del Rosario worked on the 16 hectares portion of the land; that Elisa Llamas informed him that in 1970 she sold the land to Thelma Tanalega.

At the hearing on August 24, 1972, Fiscal Arsenio Guzman who is appearing for the government, submitted a certification dated July 3, 1972 of Leonides B. Rodriguez, District Forester of Balanga, Bataan (Exhibit 3) which states "that the tract of land situated at Barrio Camaya, Mariveles, Bataan containing an approximate area of EIGHTY TWO HECTARES more or less, as shown and described in the attached photostat copy of Plans in two sheets, as surveyed for Thelma Tanalega, et al., was found to be within the Alienable and Disposable Block, Project 4-B, Mariveles, Bataan, certified by the Director of Forestry as such on February 16, 1972."

The applicant did not present as witness her predecessor-in-interest, Elisa Llamas, to testify on the alleged possession of the land. The applicant also failed to present Guillermo Ramirez, who was hired by her as overseer and her alleged tenants. Not a single tenant was presented as witness to prove that the applicant had possessed the land as owners.

In both cases, the Court of First Instance of Bataan in two separate decisions, dated October 9, 1972 and October 16, 1972, confirmed the titles to subject parcels of land and adjudicated them in favor of applicants Luisito Martinez and Thelma Tanalega, now respondents herein.

In the instant petitions for review the Republic of the Philippines, through the Solicitor General, argued that Lot 626, Mariveles Cadastre was declared public land by the decision of the Cadastral Court dated October 11, 1937 and such being the case, the lower court is without jurisdiction over the subject matter of the application for voluntary registration under Act 496. Petitioner likewise stressed that the lands in question can no longer be subject to registration by voluntary proceedings, for they have already been subjected to compulsory registration proceedings under the Cadastral Act.

The petitions are meritorious and reversal of the questioned decisions is in order.

It is noteworthy that as per the report of the Commissioner of Land Registration, 1 the land subject matter of the instant proceedings "is entirely inside Lot No. 626 of the Cadastral Survey of Mariveles, Province of Bataan, Cad. Case No. 19, LRC Cad. Record No. 1097"; that some portions of Lot No. 626 were decreed and titles were issued therefor; and that "portion declared Public Land as per decision dated October 11, 1937."

In a cadastral proceedings any person claiming any interest in any part of the lands object of the petition is required by Section 9 of Act No. 2259 to file an answer on or before the return day or within such further time as may be allowed by the court, giving the details required by law, such as: (1) Age of the claimant; (2) Cadastral number of lot or lots claimed, or the block and lot numbers, as the case may be; (3) Name of the barrio and municipality, township or settlement in which the lots are situated; (4) Names of the owners of adjoining lots; (5) If claimant is in possession of the lots claims and can show no express grant of the land by the Government to him or to his predecessors-in-interest, the answer need state the length of time property was held in possession and the manner it was acquired, giving the length of time, as far as known, during which his predecessors, if any, held possession; (6) If claimant is not in possession or occupation of the land, the answer shall set forth the interest claimed by him and the time and manner of its acquisition; (7) If the lots have been assessed for taxation, their last assessed value; and (8) Encumbrance, if any, affecting the lots and the names of adverse claimants as far as known. In the absence of successful claimants, the property is declared public land.

In the instant cases, private respondents apparently either did not file their answers in the aforesaid cadastral proceedings or failed to substantiate their claims over the portions they were then occupying, otherwise, titles over the portions subject of their respective claims would have been issued to them. The Cadastral Court must have declared the lands in question public lands, and its decision had already become final and conclusive.

Respondents are now barred by prior judgment to assert their rights over the subject land, under the doctrine ofres judicata. A cadastral proceeding is one in rem and binds the whole world. Under this doctrine, parties are precluded from re-litigating the same issues already determined by final judgment. 2

Even granting that respondents can still petition for judicial confirmation of imperfect title over the lands subject matter of the

30

instant cases, the same must necessarily fail. It is to be noted that in the instant cases evidence for the respondents themselves tend to show that only portions of the entire area applied for are cultivated. A mere casual cultivation of portions of the land by the claimant does not constitute possession under claim of ownership. In that sense, possession is not exclusive and notorious so as to give rise to a presumptive grant from the State. The possession of public land however long the period thereof may have extended, never confers title thereto upon the possessor because the statute of limitations with regard to public land does not operate against the State, unless the occupant can prove possession and occupation of the same under claim of ownership for the required number of years to constitute a grant from the State. 3 Applicants, therefore, have failed to submit convincing proof actual, peaceful and adverse possession in the concept of owners of the entire area in question during the period required by law.

Apart from the foregoing, the survey plans submitted by petitioners were not approved by the Director of Lands but by the Land Registration Commission. The Land Registration Commission has no authority to approve original survey plans in this particular case. Section 34-A of R.A. No. 6389 relied upon by respondents applies only to lands subject of tenancy relation which are expropriated and sub-divided in favor of new amortizing-owner-beneficiaries. The submission of the plan is a statutory requirement of mandatory character and unless the plan and its technical description are duly approved by the Director of Lands, the same are not of much value. 4

WHEREFORE, the decisions dated October 9,1972 and October 16, 1972 of the Court of First Instance of Bataan, Branch I should be, as they are hereby reversed. Without pronouncement as to costs.

SO ORDERED.

Makasiar, Aquino, Concepcion, Jr., Guerrero and Escolin JJ., concur.

Abad Santos, J., concurs in the result.

 

G.R. No. L-16589             September 29, 1961

JOSE O. DURAN and TERESA DIAZ VDA. DE DURAN, applicants-appellants, vs.BERNABE OLIVIA, FE ALMAZAN, HEIRS OF VICENTE GODESANO, MANUEL ARCE and ESPERANZA SALUD, oppositors-appellees.

Reyes and Dy-Liacco for applicants-appellants.German G. Vilgera for oppositors-appellees.

LABRADOR, J.:

This is an appeal from two orders dated July 31, 1959 and September 12, 1959, both of the Court of First Instance of Camarines Sur, Hon. Perfecto R. Palacio, presiding, rendered in Land Registration Case No. N-564; G.L.R. Rec. No. N-7544, entitled "Jose O. Duran and

Teresa Diaz Vda. de Duran, applicants, versus Bernabe Olivia, Fe Almazan, Heirs of Vicente Godesano, Manuel Arce and Esperanza Salud, oppositors." The order of July 31, 1959 is for the dismissal of the land registration case for lack of jurisdiction of the lower court with respect to Lots Nos. 3, 6, 7, 9 and 15, and that dated September 12, 1959 with respect to Lots Nos. 12 and 16.

On December 3, 1952, Jose O. Duran and Teresa Diaz Vda. de Duran filed an application for the registration in their names of sixteen lots (denominated in said application as Lots Nos. 1 to 16, inclusive) under Plan PSU-128386 in the Court of First Instance of Camarines Sur. On April 20, 1954, the case was heard initially and on May 5, 1954, the oppositors filed their opposition to the application. On August 27, 1958, the oppositors filed a motion to dismiss the application on the ground that the court has no jurisdiction to decree registration of the lots respectively claimed by them, because said lots are already registered and certificates of title have been issued thereon in their names. They attached to the motion to dismiss the following: Original Certificate of Title No. 2342, in the name of Bernabe Olivia (covering Lot 6); Original Certificate of Title No. 2343, in the name of Fe Almazan (covering Lot 7); Original Certificate of Title No. 514, in the name of Manuel Arce (covering Lots Nos. 9 and 15); Original Certificate of Title No. 433, in the name of Esperanza Salud (covering Lot No. 16); and Original Certificate of Title No. 7439, in the name of Heirs of Florencio Godesano (covering Lots Nos. 3 and 12). The applicants filed their objection to said motion, alleging that the reasons for the motion to dismiss do not appear in the application but are mere assertions of the parties and that the trial court has jurisdiction to consider the application even though the lots subject matter thereof are already covered by certificates of title. After a reply to the opposition was filed by the oppositors, the lower court resolved the motion to dismiss and rendered successively the two orders of dismissal appealed from. Hence this appeal.1awphîl.nèt

The applicants-appellants assign two errors of the lower court, to wit:

THE LOWER COURT ERRED IN CONSIDERING AND GRANTING THE OBJECTORS-APPELLEES' MOTION TO DISMISS THE APPLICATION FOR REGISTRATION WITH RESPECT TO LOTS 3, 6, 7, 9, 12, 15 and 16 ALTHOUGH IT WAS BASED MERELY ON THE SUPPOSED FACTS ALLEGED IN THE SAID MOTION ITSELF; AND

THE LOWER COURT ERRED IN DISMISSING THE APPLICATION WITH RESPECT TO LOTS 3, 6, 7, 9, 12, 15 and 16 FOR ALLEGED LACK OF JURISDICTION UPON THE MERE ASSERTION OF THE OBJECTORS-APPELLEES THAT THESE LOTS ARE COVERED BY CERTIFICATES OF TITLE BASED MERELY UPON PUBLIC LAND PATENTS GRANTED TO THEM.

In support of their first assignment of error, appellants claim that oppositors-appellees can not avail of a motion to dismiss in a land registration case and that the application and the titles do not show similar identities between the lots covered by said titles and those applied for in these proceedings.

The first assignment of error can not be sustained. By express provision of Rule 132 of the Rules of Court, the rules contained therein apply to land registration and cadastral cases in a suppletory character and whenever practicable and convenient (Dulay v. The Director of Lands, Vol. 53 O.G. p. 161). The Land Registration Act

31

does not provide for a pleading similar or corresponding to a motion to dismiss. As a motion to dismiss is necessary for the expeditious termination of land registration cases, said motion contained in the Rules of Court can be availed of by the parties in this case.

With respect to the alleged failure of the oppositors-appellees to prove similar identities of the lots covered by the titles and those applied for, We have examined the certificates of title and the application, and We concur with the finding of the trial court that the lots covered by said titles are the same as some of those applied for by the appellants. We, therefore, find no justification for reversing the orders appealed from based only upon the first assignment of error.

Appellants argue in support of their second assignment of error that a certificate of title based upon a mere homestead, sales or free patent covering private land is null and void; that it is the decree of registration, not the certificate of title which confers the character of incontestability of title; that the appellants have been deprived of their property without hearing; and that the cases cited in the order of the lower court do not apply to the case at bar. Consequently, they claim that the lower court possesses jurisdiction to try and decide the instant land registration proceedings even with respect to the lots already covered by certificates of title.

Appellants' claim is without merit, if we have to consider that a patent once registered under Act No. 496 becomes indefeasible as a torrens title (Manalo v. Lukban, et al., 48 Phil. 973).

Sec. 122. — Whenever public lands in the Philippine Islands belonging to the Government of the United States or to the Government of the Philippine Islands are alienated, granted, or conveyed to persons or to public or private corporations, the same shall be brought forthwith under the operation of this Act and shall become registered lands. . . . After due registration and issue of the certificate and owner's duplicate, such land shall be registered land for all purposes under this Act. (Act 496)

The primary and fundamental purpose of the Torrens System of registration is to finally settle the titles to land; to put to stop any question of legality of title thereto. That being the purpose of the law, there would be no end to litigation if every property covered by torrens title may still be relitigated in a subsequent land registration proceedings. Pursuant to the above purpose, we have held in a long line of decisions that a homestead patent once registered under the Land Registration Act can not be the subject matter of a cadastral proceeding and that any title issued thereon is null and void.

A homestead patent, once registered under the Land Registration Act, becomes as indefeasible as a Torrens title, and cannot thereafter be the subject of an investigation for determination or judgment in a cadastral case. Any new title which the cadastral court may order to be issued is null and void and should be cancelled. All that the cadastral court may do is to make correction of technical errors in the description of the property contained in its title, or to proceed to the partition thereof if it is owned by two or more co-owners. (Ramoso v. Obligado, et al., 70 Phil. 86; See also Pamintuan vs. San Agustin, 43 Phil. 558; El Hogar Filipino v. Olviga, 60 Phil. 17; Republic v. Carle, et al., G.R. No. L-12485, July 31, 1959; Samonte et al. v. Descallar, et al., G.R. No. L-12964, Feb. 29, 1960).

The same may be said of a sales patent. Once a certificate of title is issued under the Land Registration Act in lieu of a sales patent, the land is considered registered under the Torrens system and the title of the patentee becomes indefeasible.

As the title of the respondents, who hold certificates of title under the Land Registration Act becomes indefeasible, it follows that the Court of First Instance has no power or jurisdiction to entertain proceedings for the registration of the same parcels of land covered by the certificates of title of the respondents. Such has been our express ruling in the case of Rojas, et al. v. The City of Tagaytay, et al., G.R. No. L-13333, prom. November 24, 1959, in which this Court, through Mr. Justice Barrera, said:

As thus viewed, the pivotal issue is one of jurisdiction on the part of the lower court. All the other contentions of respondent regarding possession in good faith, laches or claims of better right, while perhaps valid in an appropriate ordinary action, as to which we here express no opinion, can not avail in the case at bar if the court a quo, sitting as land registration court, had no jurisdiction over the subject matter in decreeing on June 30, 1957, the registration, in favor of respondent city, of a lot already previously decreed and registered in favor of the petitioners.

In a quite impressive line of decisions, it has been well-settled that a Court of First Instance has no jurisdiction to decree again the registration of land already decreed in an earlier land registration case and a second decree for the same land is null and void.1 This is so, because when once decreed by a court of competent jurisdiction, the title to the land thus determined is already a res judicata binding on the whole world, the proceedings being in rem. The court has no power in a subsequent proceeding (not based on fraud and within the statutory period) to adjudicate the same title in favor of another person. Furthermore, the registration of the property in the name of first registered owner in the Registration Book is a standing notice to the world that said property is already registered in his name. Hence, the later applicant is chargeable with notice that the land he applied for is already covered by a title so that he has no right whatsoever to apply for it. To declare the later title valid would defeat the very purpose of the Torrens system which is to quiet title to the property and guarantee its indefeasibility. It would undermine the faith and confidence of the people in the efficacy of the registration law.2

WHEREFORE, the orders appealed from are hereby affirmed. With costs against appellants.

Bengzon, C.J., Padilla, Reyes, J.B.L., Paredes and De Leon, JJ., concur.Concepcion, J., took no part.

SUBSEQUENT REGISTRATION

G.R. No. L-56483 May 29, 1984

SOSTENES CAMPILLO, petitioner, vs.HON. COURT OF APPEALS and ZENAIDA DIAZ VDA. DE SANTOS, in her capacity as Administratrix of the Intestate Estate of the late SIMPLICIO S. SANTOS, respondents.

Rosendo J. Tansinsin for petitioner.

Buenaventura Evangelista for private respondent.

32

 

DE CASTRO, J.:

In this petition for review on certiorari of the decision of the defunct Court of Appeals in CA-G.R. No. 62842-R issued on March 9, 1981, the only issue is whether who has a better right or title to the herein disputed two (2) parcels of land — Simplicio Santos who earlier purchased them in a private sale but failed to register his sale, or petitioner Sostenes Campillo who subsequently purchased them at an execution sale and obtained a certificate of title.

The pertinent undisputed facts, may be summarized as follows: On February 27, 1961, Tomas de Vera and his wife Felisa Serafico sold two (2) parcels of land located in Tondo, Manila, designated as Lots 1 and 2 of the consolidation and subdivision plan (LRC) Pcs. 888 and segregated from Transfer Certificate of Title No. 37277 under Transfer Certificate of Title No. 63559, to Simplicio Santos, now deceased and is represented by his administratrix, Zenaida Diaz Vda. de Santos, the herein private respondent. Said sale was however never presented for registration in the office of the Registry of Deeds of Manila nor noted in the title covering the property.

On January 27, 1962, petitioner Sostenes Campillo obtained a judgment for a sum of money against Tomas de Vera in Civil Case No. 49060 of the Court of First Instance of Manila. That judgment became final and executory, and petitioner obtained an order for the issuance of a writ of execution. The writ was issued on April 4, 1962 and pursuant thereto, the City Sheriff levied on three (3) parcels of land covered by TCT No. 63559 in the name of Tomas de Vera, including the two (2) parcels of land which the latter previously sold to Simplicio Santos.

On June 26, 1962, notice of the sale of said lots was issued by the Sheriff and published in the "Daily Record" and La Nueva Era."

On July 25, 1962, the three parcels of land were sold at public auction for P17,550.81 in favor of petitioner who was issued the corresponding certificate of sale. After the lapse of one year, the City Sheriff executed the final deed of sale in favor of petitioner over the three (3) parcels of land levied and sold on execution. On February 4, 1964, TCT No. 63559 was cancelled and in lieu thereof, TCT No. 73969 was issued by the Registry of Deeds of Manila in the name of petitioner Sostenes Campillo. Upon petition by the latter, the Registry of Deeds cancelled TCT No. 73969 and issued in hell thereof TCT Nos. 74019 and 74020 over the disputed Lots 1 and 2, respectively.

Claiming to be the owner of the two parcels of land by reason of the previous sale to him by Tomas de Vera, Simplicio Santos filed an action to annul the levy, notice of sale, sale at public auction and final deed of sale of Lots 1 and 2 in favor of petitioner Campillo, with damages. In resisting the complaint, the herein petitioner as one of the defendants below, alleged that he is an innocent purchaser for value and that the supposed previous sale could not be preferred over the levy and sale at public action because it was not registered.

After due trial, the lower court rendered judgment sustaining the validity of the levy and sale at public auction primarily because at the time of the levy and sale, the disputed properties were still registered in the name of the judgment debtor, Tomas de Vera. Besides, the trial court ruled, the sale to Simplicio Santos which was not registered nor noted in the title of the subject lots, cannot bind third persons.

On appeal at the instance of the herein private respondent, the respondent appellate court modified the decision of the lower court, as follows:

WHEREFORE, the judgment of the trial court is hereby modified as follows:

(1) The dismissal of the amended complaint as against defendant Sostenes Campillo only and ordering the plaintiff to pay the costs of suit are set aside;

(2) Declaring the levy, sheriff's sale and sheriff's certificate in favor of defendant Sostenes Campillo null and void and of no effect;

(3) Declaring plaintiff Simplicio Santos, now his estate, to be the owner of the two parcels of land under litigation and embraced in Transfer Certificate of Title No. 63559; and

(4) Ordering the Register of Deeds of Manila to cancel Transfer Certificate of Title Nos. 74019 and 74020 in the name of defendant Sostenes Campillo and to issue the proper certificate of title in the name of the estate of Simplicio Santos.

The rest of the judgment appealed from is hereby affirmed. (p. 45, Rollo)

Rationalizing its stand, the appellate court said that the subject lots could not be legally levied upon to satisfy the judgment debt of the de Veras in favor of petitioner because at the time of the execution sale, the judgment debtor, having previously sold said properties, was no longer the owner thereof; that since the judgment debtor had no more right to or interest on the said properties, then the purchaser at the auction sale acquires nothing considering that a judgment creditor only acquires the Identical interest possessed by the judgment debtor in the property which is the subject of the auction sale, and he takes the property subject to all existing equities to which the property would have been subject in the hands of the debtor; and, while it may be true that Simplicio Santos did not record or register the sale of the disputed lots, the levy on execution does not take precedence over the unrecorded deed of sale to the same property made by the judgment debtor anterior to the said levy since the judgment creditor is not a third party within the meaning of the law and could not therefore be considered as purchaser for value in good faith.

After a conscientious review and scrutiny of the records of this case as well as existing legislations and jurisprudence on the matter, We are constrained to reverse the judgment of the respondent appellate court and rule in favor of the herein petitioner.

It is settled in this jurisdiction that a sale of real estate, whether made as a result of a private transaction or of a foreclosure or execution sale, becomes legally effective against third persons only from the date of its registration.1 Consequently, and considering that the properties subject matter hereof were actually attached and levied upon at a time when said properties stood in the official records of the Registry of Deeds as still owned by and registered in the name of the judgment debtor, Tomas de Vera, the attachment, levy and subsequent sale of said properties are proper and legal. The net result is that the execution sale made in favor of the herein petitioner

33

transferred to him all the rights, interest and participation of the judgment debtor in the aforestated properties as actually appearing in the certificate of title, unaffected by any transfer or encumbrance not so recorded therein.

Section 51, PD No. 1529, otherwise known as the Property Registration Decree, provides as follows:

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

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

As succinctly stated in the case of Philippine National Bank vs. Court of Appeals, 98 SCRA 207:

Whatever might have been generally or unqualifiedly stated in the cases heretofore decided by this Court, We hold that under the Torrens System registration is the operative act that gives validity to the transfer or creates a hen upon the land. A person dealing with registered land is not required to go behind the register to determine the condition of the property. He is only charged with notice of the burdens on the property which are noted on the face of the register or the certificate of title. To require him to do more is to defeat one of the primary objects of the Torrens system. A bona fide purchaser for value of such property at an auction sale acquires good title as against a prior transferee of same property if such transfer was unrecorded at the time of the auction sale. (Italics for emphasis)

The case of Leyson vs. Tanada, 2 invoked by the private respondent is not in point. In that case, a notice of lis pendenswas inscribed at the back of the certificate of title of the land subject therein before it was sold at public auction. Necessarily, the purchaser at public auction is bound by the outcome of the pending case referred to therein. Since it turned out that the judgment debtor is merely a co-owner of the property sold at public auction, then the puchaser thereat is not entitled to the entirety of the land. As the Court held: "The interest acquired by a purchaser in an execution sale is limited to that which is possessed by the debtor. If there is more than one person owning property in common and an execution against one only is levied thereon, the sale effected by the Sheriff under such execution operates exclusively upon the interest of the execution debtor,

without being in any wise prejudicial to the interest of the other owners. The result in such case merely is that one new owner in common is substituted for the owner whose interest is alienated by process of law."

While it may be true as stated in the aforesaid case of Leyson vs. Tanada, that purchasers at execution sales should bear in mind that the rule of caveat emptor applies to such sales, that the sheriff does not warrant the title to real property sold by him as sheriff, and that it is not incumbent on him to place the purchaser in possession of such property, still the rule applies that a person dealing with registered land is not required to go behind the register to determine the condition of the property and he is merely charged with notice of the burdens on the property which are noted on the face of the register or the certificate of title. Hence, the petitioner herein, as the purchaser in the execution sale of the registered land in suit, acquires such right and interest as appears in the certificate of title unaffected by prior lien or encumbrances not noted therein. This must be so in order to preserve the efficacy and conclusiveness of the certificate of title which is sanctified under our Torrens system of land registration.

WHEREFORE, the questioned decision of the respondent appellate court is hereby reversed and set aside, and the judgment of the lower court is reinstated. Without pronouncement as to costs.

SO ORDERED.

Guerrero, J., concur.

Escolin, J., concurs in the result.

Concepcion Jr., J., is on leave.

 G.R. No. L-69303               July 23, 1987

HEIRS OF MARIA MARASIGAN, namely, Teofilo, Isabel, Maximina, Anicia, and Francisco, all surnamed Marasigan, petitioners, vs.THE INTERMEDIATE APPELLATE COURT and MARIA MARRON, respondents.

GUTIERREZ, JR., J.:

Who has a better right to the property in question, the party who bought it with a notice of lis pendens annotated at the back of her title or the party in whose favor the notice of lis pendens was made? The appellate court answered this question in favor of the party who had the notice annotated and who won the litigation over the property. We affirm.

The disputed property in this case is a residential lot (Lot No. 2-A) covered by Transfer Certificate of Title No. 100612 issued by the Register of Deeds of the City of Manila in the name of one Fe Springael-Bazar, married to Felicisimo Bazar.

The pertinent facts as disclosed by the record are as follows:

On April 24, 1975, Civil Case No. 97479 entitled "Maria Marron v. Felicisimo Bazar and Fe S. Bazaar" was filed before the then Court of First Instance of Manila, Branch XIII. The action sought to compel

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defendants Bazar to execute a registrable Deed of Absolute Sale of their lot covered by T.C.T. No. 100612 in favor of Maria Marron.

On January 27, 1976, while Civil Case No. 97479 was still pending, the private respondent caused the annotation of a notice of lis pendens at the back of T.C.T. No. 100612.

On February 24, 1976, judgment was rendered in Civil Case No. 97479. The dispositive portion reads:

WHEREFORE, the Court hereby renders judgment in favor of the plaintiff and against the defendants as follows:

a) Ordering the defendants Fe Springael Bazar and Felicisimo Bazar as vendors (1) to execute in favor of the plaintiff Maria Marron as vendee a Deed of Absolute Sale in a public instrument over the residential lot covered by Transfer Certificate of Title No. 100612 issued by the Registry of Deeds of the City of Manila to and in the name of Fe S. Bazar, married to Felicisimo Bazaar; and (2) to deliver to plaintiff sufficient copies of such deed of sale, together with the Owner's copy of said Transfer Certificate of Title No. 100612, in order that the plaintiff can register the Deed of Absolute Sale with the Registry of Deeds of the City of Manila and secure a transfer certificate of title for the land in her name.

b) Ordering the defendants to pay to the plaintiff the sum of P500.00 Philippine Currency, as and for attorney's fees; and

c) Ordering the defendants to pay the costs of the suit. (Rollo, p. 15).

The above judgment became final and executory so Maria Marron filed a motion for execution which was granted. A writ of execution was issued by the court on July 12, 1976. The spouses Bazar, however, refused to surrender their title to the property in question and to execute the required deed of sale in Marron's favor. On November 29, 1978, the lower court finally ordered the Clerk of Court to execute the deed of sale in behalf of the erring spouses. When the said deed was presented to the Register of Deeds of Manila for registration, the Deputy Clerk of Court was advised to secure a court order in order that the new title issued in the name of herein petitioner Maria Marasigan could be cancelled.

It appears that on December 18, 1974, a deed of absolute sale of Lot 2-A covered by T.C.T. No. 100612 was executed by Fe S. Bazar in favor of Maria Marasigan for and in consideration of the sum of Fifteen Thousand Pesos (P15,000.00). However, it was only on July 5, 1977 that said deed was registered with the Registry of Deeds of Manila. Consequently, T.C.T. No. 100612 was cancelled and a new title was issued in Maria Marasigan's name. When the Register of Deeds of Manila issued Transfer Certificate of Title No. 126056 naming Maria Marasigan as the new owner of Lot 2-A, the notice of lis pendens caused to be annotated by Marron on the Bazar's title was carried over on the said new title.

Meanwhile, on May 26, 1977, the Bazaars filed a petition for relief from the judgment dated February 24, 1976 in Civil Case No. 97479. While their petition was still pending, they moved to set aside the said judgment on June 22, 1979 on the ground of lack of jurisdiction over their persons.

On the other hand, on February 24, 1979, Marron instituted L.R.C. Case No. 7680 captioned "Maria Marron v. Maria Marasigan" which prayed for a court order requiring the Register of Deeds of Manila to register the deed of sale executed by the Deputy Clerk of Court in behalf of the Bazaars pursuant to the order dated November 29, 1978 of the Court of First Instance, Manila, Branch XIII. L.R.C. Case No. 7680 was tried by the Court of First Instance of Manila, Branch IV acting as a land registration court. Said case was dismissed for the following reason:

... This court acting as a Land Registration Court, with limited and special jurisdiction cannot act on this petition under summary proceedings but (sic) should be ventilated before a court of general jurisdiction Branch XIII, which issued the aforesaid Order dated November 29, 1978, the said petition is hereby dismissed for lack of jurisdiction without prejudice on the part of the petitioner to institute the appropriate civil action before the proper court. ... (Annex "A," p. 4, Rollo, p. 138)

On September 6, 1979, Marron filed another case docketed as Civil Case No. 126378 to have Marasigan's TCT 126056 cancelled conformably to the procedure outlined in the decision of the above land registration court. On July 30, 1980, the parties submitted said case for decision.

On February 18, 1982, the Court of First Instance of Manila, Branch IV to which Civil Case No. 126378 was assigned dismissed Marron's complaint for being premature since the decision rendered by the CFI, Branch XIII in Civil Case No. 97479 had not yet become final and executory considering that it was still the subject of a petition for relief from judgment.

On appeal, the Intermediate Appellate Court, on August 7, 1984, ruled that Marron is entitled to the property under litigation by virtue of the notice of lis pendens annotated at the back of Maria Marasigan's title. The appellate court further ruled that the decision in Civil Case No. 97479 had become final and executory because the petition for relief from judgment of the spouses Bazar was filed out of time. The dispositive portion of the appellate court's decision reads:

WHEREFORE, the appealed decision is hereby REVERSED and another one entered —

(a) Ordering the Register of Deeds of Manila to cancel T.C.T. No. 126056 in the name of Maria Marasigan and issue another in the name of Maria Marron by virtue of the Deed of Sale executed by the Branch Clerk of Court of Branch XIII;

(b) Ordering the said Register of Deeds, during the pendency of this case, to refrain from registering any deed of sale pertaining to T.C.T. No. 126056 in the name of Maria Marasigan other than that of the herein plaintiff; and

(c) Ordering the defendant Maria Marasigan to pay attorney's fees in the amount of P10,000.00. (IAC, Decision. Rollo, pp. 17-18).

Maria Marasigan who died in the course of the proceedings is now represented by her heirs in the instant petition which assigns the following errors:

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I

THAT THE INTERMEDIATE APPELLATE COURT FAILED TO APPREHEND THAT THE RIGHT OF ACTION OF RESPONDENT MARIA MARRON (AS PLAINTIFF) IN CIVIL CASE NO. 97479 HAD PRESCRIBED AND SHE INCURRED IN LACHES.

II

THAT THE INTERMEDIATE APPELLATE COURT FAILED TO APPREHEND THAT RESPONDENT ABANDONED OR WAIVED HER PROPERTY RIGHTS AND EFFECTS TO/OF THE DECISION IN CIVIL CASE NO. 97479, WHEN SHE FILED CIVIL CASES NO. 7680 AND 126378, DURING ITS EFFECTIVITY.

III

THAT THE INTERMEDIATE APPELLATE COURT ERRED IN CONCLUDING THAT THE DECISION IN CIVIL CASE NO. 97479 HAS BECOME FINAL AND EXECUTORY.

IV

THAT THE INTERMEDIATE APPELLATE COURT FAILED TO APPREHEND THE LACK OF JURISDICTION OF THE TRIAL COURT IN CIVIL CASES NO. 7680 AND 126378 OVER THE PERSONS OF PETITIONERS.

V

THAT THE INTERMEDIATE APPELLATE COURT ERRED IN CONSIDERING THAT THE TRIAL COURT IN CIVIL CASE NO. 97479 HAS JURISDICTION OVER THE PERSONS OF DEFENDANTS SPOUSES FELICISIMO BAZAAR AND FE S. BAZAAR.

VI

THAT THE INTERMEDIATE APPELLATE COURT FAILED TO APPREHEND THAT THE DEED OF ABSOLUTE SALE EXECUTED BY THE DEPUTY CLERK OF COURT, WAS NOT LEGAL AND VALID AND WITHOUT PROOF AND EFFECT. (Brief for the appellant, pp. 1 and 2)

We find no merit in the present petition.

There is a clear showing that although the late Maria Marasigan acquired the property in question from the Bazaars pursuant to a deed of absolute sale on December 18, 1974 or a little over four months before the filing of Civil Case No. 97479, the transaction became effective as against third persons only on July 5, 1977 when it was registered with the Registry of Deeds of Manila. It is the act of registration which creates constructive notice to the whole world. Section 51 of Act 496, as amended by Section 52 of the Property Registration Decree (P.D. 1529) provides:

Sec. 52. Constructive notice upon registration. — Every conveyance ... affecting registered land shall, if registered, filed or entered in the office of the Register of Deeds for the province or city where the land to which it relates lies,

be constructive notice to all persons from the time of such registering, filing or entering.

Moreover, there is no question that when the late Maria Marasigan was issued her transfer certificate of title to the subject property (T.C.T. No. 126056), the Registrar of Deeds of Manila then carried over to the new title the notice of lis pendens which the private respondent had caused to be annotated at the back of the Bazar's title. In case of subsequent sales or transfers, the Registrar of Deeds is duty bound to carry over the notice of lis pendenson all titles to be issued. Otherwise, if he cancels any notice of lis pendens in violation of his duty, he may be held civilly and even criminally liable for any prejudice caused to innocent third persons (The Director of Lands, et al. v. Reyes, 68 SCRA 177).

A notice of lis pendens means that a certain property is involved in a litigation and serves as notice to the whole world that one who buys the same does it at his own risk (Rehabilitation Finance Corporation v. Morales, 101 Phil. 171). It was also a clear notice to Maria Marasigan that there was a court case affecting her rights to the property she had purchased.1avvphi1

As earlier stated it was only on July 5, 1977 that the sale between Maria Marasigan and the Bazaars became effective as against third persons. The registration of the deed of sale over the subject property was definitely subsequent to the annotation made on January 27, 1976. Consequently, Marasigan was bound by the outcome of the litigation against her vendors or transferors. (See Rivera v. Tirona, et al., 109 Phil. 505).

We reiterate the established rule that:

... the filing of a notice of lis pendens charges all strangers with a notice of the particular litigation referred to therein and, therefore, any right they may thereafter acquire on the property is subject to the eventuality of the suit. The doctrine of lis pendens is founded upon reason of public policy and necessity, the purpose of which is to keep the subject matter of the litigation within the power of the Court until the judgment or decree shall have been entered; otherwise, by successive alienations pending the litigation, its judgment or decree shall be rendered abortive and impossible of execution. ... (Laroza v. Guia, 134 SCRA 34 1)

The late Marasigan's transferors did not interpose any appeal from the adverse judgment dated February 24, 1976 in Civil Case No. 97479. The 30-day period under the old rule (Rule 41, section 3 of the Revised Rules of court now amended by Batas Pambansa Bilang 129, section 39) within which the Bazaars may have taken an appeal started to run from May 12, 1976 when they were served with a copy of the said decision. On June 11, 1976, the February 24, 1976 decision in Civil Case No. 97479 became final and executory. At this point after the finality of the said decision, the Bazaars no longer had the right to alienate the property subject of the litigation. Any transaction effective during the period of litigation is subject to the risks implicit in the notice of lis pendensand to the eventual outcome of the litigation.

Moreover, we agree with the finding of the appellate court that the petition for relief from judgment by the Bazaars dated May 26, 1977 was filed beyond the two periods provided in Section 3 Rule 38 of the Revised Rules of Court. There may have been some errors in the computations but the petition itself was out of time.

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Rule 38, Section 3 of said Rules provides, in part, that:

Sec. 3. Time for filing petition. ... — A petition provided for in either of the preceding sections of this rule must be verified, filed within sixty (60) days after the petitioner learns of the judgment, order or other proceeding to be set aside, and not more than six (6) months after such judgment or order was entered or such proceeding was taken. ...

The 60-day period must be reckoned from May 12, 1976 when the Bazaars were served with a copy of the assailed decision. Therefore, the 60-day period expired on July 11, 1976. It was only after 379 days or more than 12 months after they learned of the judgment that the Bazaars filed their petition for relief from said judgment. (See Domingo v. Dela Cruz, 23 SCRA 1121) The appellate court computed the 6-month period from the date of the judgment was rendered. Rule 38 states that the counting should commence from the entry of the judgment or order. (See Dirige v. Biranya, 17 SCRA 840). A judgment is entered only after its finality and Civil Case No. 97479 became final on June 11, 1976. Since the records do not bear the exact date the questioned judgment was entered, the 6-month period can be counted for purposes of our decision from July 12, 1976 when the writ of execution of the final judgment was issued. The phrase "or other proceeding" in Section 3 of Rule 38 includes a writ of execution (Aquino v. Blanco, 79 Phil. 647). The 6-month period from July 12, 1976 lapsed on January 8, 1977. A period of ten (10) months had already lapsed when the Bazaars filed their petition for relief from judgment on May 26, 1977. Obviously, the petitioners cannot now question the effects of the final and executory judgment in Civil Case No. 97479. In the words of Laroza v. Guia (supra) they cannot render the final judgment abortive and impossible of execution. The deed of sale executed by the Deputy Clerk of Court on behalf of the Bazar spouses pursuant to the court's judgment was valid and binding.

The petitioners cannot also raise before us the issues of prescription or laches and lack of jurisdiction over the persons of the Bazar spouses in Civil Case No. 97479. This cannot be done in this petition which stems from Civil Case No. 126378 in the trial court and AC-G.R. No. 00183 in the appellate court. The Bazaars were the proper parties who ought to have raised them as defenses either in a motion to dismiss or in their answer. Since they did not do so, the same were deemed waived. (See Rule 9, section 2 of the Revised Rules of Court; MD Transit & Taxi Co., Inc. v. Estrella, 113 SCRA 378; Torreda v. Boncaros, 69 SCRA 247; Visayan Electric Co., Inc. v. Commissioner of Internal Revenue, 39 SCRA 43; Republic v. Mambulao Lumber Company, 6 SCRA 858).

WHEREFORE, in view of all the foregoing, the petition is hereby DISMISSED for lack of merit. The appellate court's decision is AFFIRMED.

SO ORDERED.

Fernan (Chairman), Feliciano and Cortes, JJ., concurBidin, J., took no part.

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