PROVINCE OF ZAMBOANGA DEL NORTE VS. CITY OF ZAMBOANGA, digested

GR# L-24440 March 28, 1968 (Constitutional Law – Just Compensation, Patrimonial Property)

FACTS:  After the incorporation of the Municipality of Zamboanga as a chartered city, petitioner province contends that

facilities belonging to the latter and located within the City of Zamboanga will be acquired and paid for by the said city.

However, respondent city avers that pursuant to RA No. 3039 providing for the transfer free of charge of all buildings,

properties and assets belonging to the former province of Zamboanga and located within the City of Zamboanga to the

said City.

ISSUE: Whether or not facilities which the province shall abandon will be acquired by the city upon just compensation.

HELD: Yes, If the property is owned by the municipality in its public and governmental capacity, the property is public and

can be transferred free of charge. But if the property is owned in its private or proprietary capacity, then it is patrimonial

and can be expropriated upon payment of just compensation

Province of Zamboanga Del Norte vs. City of Zamboanga

G.R. No. L-2440. March 28, 1964

Bengzon, J:

Doctrine: In the case of state properties, properties for public service are of public dominion; this is not

so in the case of provinces, cities, etc., said properties for public service are patrimonial since they are

not for public use.

Facts: Prior to its incorporation as a chartered city, the Municipality of Zamboanga used to be the

provincial capital of the then Zamboanga Province. On October 12, 1936, Commonwealth Act 39 was

approved converting the Municipality of Zamboanga into Zamboanga City.

Sec. 50 of the said Act also provided that —Buildings and properties which the province shall abandon

upon the transfer of the capital to another place will be acquired and paid for by the City of Zamboanga

at a price to be fixed by the Auditor General.

The properties and buildings referred to consisted of 50 lots and some buildings constructed thereon,

located in the City of Zamboanga and covered individually by Torrens certificates of title in the name of

Zamboanga Province.

It appears that in 1945, the capital of Zamboanga Province was transferred to Dipolog. Subsequently,

Republic Act 286 was approved. creating the municipality of Molave and making it the capital of

Zamboanga Province.

Republic Act 711 was approved dividing the province of Zamboanga into two (2): Zamboanga del Norte

and Zamboanga del Sur.

The Auditor General, apportioned the assets and obligations of the defunct Province of Zamboanga as

follows: 54.39% for Zamboanga del Norte and 45.61% for Zamboanga del Sur.

The Executive Secretary, by order of the President, issued a ruling holding that Zamboanga del Norte

had a vested right as owner (should be co-owner pro-indiviso) of the properties mentioned in Sec. 50 of

Commonwealth Act 39, and is entitled to the price thereof, payable by Zamboanga City. This ruling

revoked the previous Cabinet Resolution conveying all the said 50 lots and buildings thereon to

Zamboanga City for P1.00, effective as of 1945, when the provincial capital of the then Zamboanga

Province was transferred to Dipolog.

Issue: Whether all the properties concerned are patrimonial properties.

Held: There are two conflicting applicable laws in the case at bar. Applying the New Civil Code, if the

property is owned by the municipality (meaning municipal corporation) in its public and governmental

capacity, the property is public and Congress has absolute control over it. But if the property is owned in

its private or proprietary capacity, then it is patrimonial and Congress has no absolute control. The

municipality cannot be deprived of it without due process and payment of just compensation. Under the

said law, all the properties in question, except the two (2) lots used as High School playgrounds, could be

considered as patrimonial properties of the former Zamboanga province. Even the capital site, the

hospital and leprosarium sites, and the school sites will be considered patrimonial for they are not for

public use. They would fall under the phrase “public works for public service” for it has been held that

under the ejusdem generis rule, such public works must be for free and indiscriminate use by anyone,

just like the preceding enumerated properties in the first paragraph of Art 424. The playgrounds,

however, would fit into this category.

On the other hand, applying the norm obtaining under the principles constituting the law of Municipal

Corporations, all those of the 50 properties in question which are devoted to public service are deemed

public; the rest remain patrimonial. Under this norm, to be considered public, it is enough that the

property be held and, devoted for governmental purposes like local administration, public education,

public health, etc. Under the aforementioned law, Republic Act 3039 is valid insofar as it affects the lots

used as capitol site, school sites and its grounds, hospital and leprosarium sites and the high school

playground sites — a total of 24 lots — since these were held by the former Zamboanga province in its

governmental capacity and therefore are subject to the absolute control of Congress.

The records do not disclose whether they were constructed at the expense of the former Province of

Zamboanga. Considering however the fact that said buildings must have been erected even before 1936

when Commonwealth Act 39 was enacted and the further fact that provinces then had no power to

authorize construction of buildings such as those in the case at bar at their own expense, 14 it can be

assumed that said buildings were erected by the National Government, using national funds. Hence,

Congress could very well dispose of said buildings in the same manner that it did with the lots in

question.

But even assuming that provincial funds were used, still the buildings constitute mere accessories to the

lands, which are public in nature, and so, they follow the nature of said lands, i.e., public. Moreover, said

buildings, though located in the city, will not be for the exclusive use and benefit of city residents for they

could be availed of also by the provincial residents. The province then — and its successors-in-interest —

are not really deprived of the benefits thereof.

But Republic Act 3039 cannot be applied to deprive Zamboanga del Norte of its share in the value of the

rest of the 26 remaining lots which are patrimonial properties since they are not being utilized for

distinctly, governmental purposes.

The fact that these 26 lots are registered strengthens the proposition that they are truly private in

nature. On the other hand, that the 24 lots used for governmental purposes are also registered is of no

significance since registration cannot convert public property to private.

In fine, the Court ordered herein defendant Zamboanga City to return to plaintiff Zamboanga del Norte in

lump sum the amount of P43,030.11 which the former took back from the latter out of the sum of

P57,373.46 previously paid to the latter. Secondly, the defendants were ordered to effect payments in

favor of plaintiff of whatever balance remains of plaintiff’s 54.39% share in the 26 patrimonial properties,

after deducting therefrom the sum of P57,373.46, on the basis of Resolution No. 7 dated March 26, 1949

of the Appraisal Committee formed by the Auditor General, by way of quarterly payments from the

allotments of defendant City, in the manner originally adopted by the Secretary of Finance and the

Commissioner of Internal Revenue.

Caveat: Anyone who claims this digest as his own without proper authority shall be held liable

under the law of KarmaRAFAEL S. SALAS, in his capacity as Executive Secretary; CONRADO F. ESTRELLA, in his capacity as Governor of the Land Authority; and LORENZO GELLA, in his capacity as Register of Deeds of Manila, petitioners-appellants,

vs.

HON. HILARION U. JARENCIO, as Presiding Judge of Branch XXIII, Court of First Instance of Manila; ANTONIO J. VILLEGAS, in his capacity as Mayor of the City of Manila; and the CITY OF MANILA, respondents-appellees.

Facts:

City of Manila – owner in fee simple of a parcel of land known as Lot 1, Block 557 of Cadastral Survey of City of Manila, containing an area of 9689.80 sqm. On various dates in 1927, City of Manila sold portions of the parcel of land. When the last sale was effected August 1924, Transfer Certificate of Title 22547 covering the residue of the land 7490.10 sam was issued in the name of City of Manila.

On September 1960, Municipal Board of Manila adopted a resolution requesting the President to consider the feasibility of declaring the land under Transfer Certificate of Title 25545-25547 as patrimonial property of Manila for the purpose of selling these lots to the actual occupants thereof. The resolution was then transmitted to the Congress. The bill was then passed by Congress and approved by President, and became Republic Act 4118, converting the land from communal property to disposable and alienable land of State.

To implement RA 4118, Land Authority requested City of Manila to deliver the City’s TCT 22547 in order to obtain title thereto in the name of Land Authority. The request was granted with the knowledge and consent of City mayor, cancelling TCT 22547 and issuing TCT 80876 in the name of Land Authority.

City of Manila, for some reasons, brought an action to restrain, prohibit, and enjoin Land Authority and Register of Deeds from implementing RA 4118, and praying for the declaration of RA 4118 as unconstitutional.

Trial court declared RA 4118 to be unconstitutional and invalid on the ground that it deprived City of its property without due process of law and payment of just compensation.

Land Authority and Register of Deeds argued that the land is a communal land, or a portion of public domain owned by State; that the land has not been used by City of Manila for any public purpose; that it was originally a communal land not because it was needed in connection with its organisation as a municipality but rather for the common use of its inhabitants; that the City mayor merely enjoys the usufruct over said land and its exercise of acts of ownership by selling parts thereof did not necessarily convert the land into a patrimonial property of City of Manila nor divert the State of its paramount title.

Issue:Whether the aforementioned land is a private or patrimonial property of the City of Manila.

Held:

The land is public property.

As a general rule, regardless of the source or classification of the land in the possession of municipality, excepting those which it acquired in its own funds in its private or corporate capacity, such property is held for the State for the benefit of its inhabitants, whether it be for governmental or proprietary purposes. The legal situation is the same if the State itself holds the property and puts it to a different use.

When it comes to property of municipality which it did not acquire in its private or corporate capacity with its own funds (the land was originally given to City by Spain), the legislature can transfer its administration and disposition to an agency of the National Government to be disposed of according to its discretion. Here it did so in obedience to the constitutional mandate of promoting social justice to insure the well-being and economic security of the people.

The property was not acquired by the City of Manila with its own funds in its private or proprietary capacity. The land was part of the territory of City of Manila granted by sovereign in its creation. Furthermore, City expressly recognised the paramount title of the State over its land when it requested the President to consider the feasibility of declaring the lot as patrimonial property for selling.

There could be no more blatant recognition of the fact that said land belongs to the State and was simply granted in usufruct to the City of Manila for municipal purposes. But since the City did not actually use said land for any recognized public purpose and allowed it to remain idle and unoccupied for a long time until it was overrun by squatters, no presumption of State grant of ownership in favor of the City of Manila may be acquiesced in to justify the claim that it is its own private or patrimonial property.

WHEREFORE, the appealed decision is hereby reversed, and petitioners shall proceed with the free and untrammeled implementation of Republic Act No. 4118 without any obstacle from the respondents. Without costs.

CEBU OXYGEN AND ACETYLENE CO. V. BERCILLES  

66 SCRA 431

 

FACTS:

The  land  sought  to  be  registered  in  this  case  was  formerly  a  part  of  a street.  Through a resolution, it was declared to be an abandoned road and not part of the City development plan.   Thereafter, it was sold through a public  bidding  and  petitioner  was  the  highest  bidder.    He  then  sought  to register said land but his application was dismissed.    

HELD:

The  portion  of  the  city  street  subject  to  petitioner’s  application  for registration  of  title  was  withdrawn  from  public  use.    Then  it  follows  that such  withdrawn  portion  becomes  patrimonial  property  of  the  State.    It  is also very clear from the Charter that property thus withdrawn from public servitude  may  be  used  or  conveyed  for  any  purpose  for  which  other  real property belonging to the City may be lawfully used or conveyed.

Francisco Chavez vs Public Estates Authority (July 2002)

384 SCRA 152 – Civil Law – Land Titles and Deeds – Lands of the Public Domain

The Public Estates Authority (PEA) is the central implementing agency tasked to undertake reclamation projects nationwide. It took over the leasing and selling functions of the DENR (Department of Environmental and Natural Resources) insofar as reclaimed or about to be reclaimed foreshore lands are concerned.

PEA sought the transfer to the Amari Coastal Bay and Development Corporation, a private corporation, of the ownership of 77.34 hectares of the Freedom Islands. PEA also sought to have 290.156 hectares of submerged areas of Manila Bay to Amari.

ISSUE: Whether or not the transfer is valid.

HELD: No. To allow vast areas of reclaimed lands of the public domain to be transferred to Amari as private lands will sanction a gross violation of the constitutional ban on private corporations from acquiring any kind of alienable land of the public domain.

The Supreme Court affirmed that the 157.84 hectares of reclaimed lands comprising the Freedom Islands, now covered by certificates of title in the name of PEA, are alienable lands of the public domain. The 592.15 hectares of submerged areas of Manila Bay remain inalienable natural resources of the public domain. The transfer (as embodied in a joint venture agreement) to AMARI, a private corporation, ownership of 77.34 hectares of the Freedom Islands, is void for being contrary to Section 3, Article XII of the 1987 Constitution which prohibits private corporations from acquiring any kind of alienable land of the public domain. Furthermore, since the Amended JVA also seeks to transfer to Amari ownership of 290.156 hectares of still submerged areas of Manila Bay, such transfer is void for being contrary to Section 2, Article XII of the 1987 Constitution which prohibits the alienation of natural resources other than agricultural lands of the public domain

FIRST DIVISION 

FRISCO F. DOMALSIN,Petitioner,

- versus -

SPOUSES JUANITO VALENCIANO and AMALIA VALENCIANO,

Respondents.

G.R. No. 158687

Present:PANGANIBAN, C.J.Chairman,YNARES-SANTIAGO,AUSTRIA-MARTINEZ,CALLEJO, SR.[1] andCHICO-NAZARIO, JJ.

Promulgated:

January 25, 2006x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

 D E C I S I O N

  

CHICO-NAZARIO, J.:

Before Us is a petition for review which seeks to set aside the decision [2] of the Court of Appeals in CA-G.R. SP No. 69415 dated 20

August 2002 which reversed and set asidethe decision [3] of Branch 63 of the Regional Trial Court (RTC) of La Trinidad, Benguet, in

Civil Case No. 01-CV-1582(150) dated 23 January 2002, which affirmed the decision [4]of the Municipal Circuit Trial Court (MCTC)

of Tuba-Sablan, Tuba, Benguet, in Civil Case No. 150 dated 20 November 2000, declaring petitioner Frisco F. Domalsin the actual

possessor of the lot in dispute and ordering, inter alia, respondent spouses Juanito and Amalia Valenciano to vacate and deliver the

physical possession thereof to the former, and its Resolution[5] dated 20 May 2003 denying petitioners motion for reconsideration.

 

The respective allegations of the parties as contained in the complaint and answer are substantially summarized by the Court of

Appeals as follows:

 The property subject of this action for forcible entry is a parcel of land located at sitio Riverside, Camp 3,

Tuba, Benguet. Respondent Frisco B. Domalsin claims to be the lawful owner and possessor of said parcel of land since 1979 up to the present. He declared it for taxation purposes in 1983 as (per) Tax Declaration No. 9540 issued on September 12, 1983 by the Municipal Assessor of Tuba Benguet. He allegedly introduced improvements consisting of levelling, excavation, riprapping of the earth and a private road to the river, fruitbearing trees and other agricultural plants of economic value. He was in continuous, adverse possession and in the concept of an owner for the past nineteen (19) years.

 On August 1, 1998, petitioners Spouses Juanito Valenciano and Amalia Valenciano (Sps. Valenciano, for

brevity) allegedly entered the premises to construct a building made of cement and strong materials, without the authority and consent of respondent, by means of force and strategy, and without a building permit from the Department of Public Works and Highways (DPWH, for brevity). Respondent protested and demanded that petitioners Sps. Valenciano halt construction of said building, but the latter refused to do so. Hence, he filed the instant case.

 Petitioners Sps. Valenciano, on the other hand, claimed that the ongoing construction was with the consent

and conformity of the DPWH and in fact the improvements found in the property were introduced by the residents thereof, including its first residents, William and Gloria Banuca, and not by respondent. The premises on which petitioners Sps. Valenciano are constructing their house were leveled after the earthquake in 1990 by the Banuca spouses. Petitioners Sps. Valenciano are just starting the construction because the permission was only given now by Gloria Banuca.[6]

  

On 18 August 1998, petitioner filed before the MCTC of Tuba, Benguet, a complaint for Forcible Entry with Prayer for Preliminary

Mandatory Injunction with Application for Issuance of a Temporary Restraining Order plus Damages. [7] The complaint was amended

on 27 August 1998.[8] Per Order dated 19 August 1998, a Temporary Restraining Order (TRO) was issued ordering respondents to

desist and cease and refrain from continuing the construction of a house on the land in question.[9]

 

On 27 August 1998, respondent spouses Juanito and Amalia Valenciano filed their Answer with Opposition to the Prayer for Issuance

of Writ of Preliminary Injunction.[10] On 07 September 1998, they filed an Answer to the Amended Complaint [11] to which petitioner

filed a Reply.[12]

 

On 15 September 1998, the MCTC issued another TRO.[13]

 

The pre-trial order dated 6 November 1998 contained, among other things, petitioners admission that he was temporarily not operating

any business in the area, and respondents admission regarding the issuance of Tax Declarations on the property in dispute in

petitioners name.[14]

 

Trial ensued. Petitioner presented Mariano Suyam and Tonsing Binay-an, two of his former truck drivers from 1981 to 1985 in his

business of hauling sand, gravel and other aggregates at Riverside, Camp 3, Tuba, Benguet.

Mariano Suyam testified that sometime in 1981, petitioner caused the construction of a private road leading to the Bued River

from Kennon Road. He added that petitioner constructed two houses, the first was located along the road-right-of-way of Kennon

Road where respondents are now constructing their house, while the second was located below the private road around 40 to 60 meters

down from Kennon Road. He explained that the first house was used for sleeping quarters and resting center for laborers, while

petitioner used the second one as his quarters. He said William Banuca was hired as foreman in 1983 and that the latter and his family

stayed in the second house.

 

Tonsing Binay-an corroborated the testimony of Suyam as regards the two houses constructed by petitioner and added that

petitioner was the manager of Salamander Enterprises and had a concession permit from the Bureau of Mines to haul gravel and sand.

 

Petitioner testified that he is a lawyer-businessman formerly engaged in trucking business, hauling sand and gravel, and

operated under the name Salamander Enterprises.[15] He narrated that while he was passing Kennon Road, he discovered that a portion

of the Bued River, Camp 3, Tuba Benguet, can be a potential source of supplies for his business. Though the area was steep and deep,

he scouted a place where he can construct a road from Kennon Road to the Bued River. In the course of cleaning the area, his workers

noticed that the place had been tilled. A certain Castillo Binay-an appeared informing him that he was the occupant of the site of the

proposed private road. After agreeing on the consideration, the former executed a Deed of Waiver and Quitclaim [16] over the land in

his favor.

 

Thereafter, the Office of the Highway District Engineer of Baguio, Ministry of Public Highways (now Department of Public

Works and Highways [DPWH]) issued a permit in favor of petitioner to extract construction materials at Camp 3, Tuba, Benguet,

[17] which was followed by the issuance on 1 October 1981 of Commercial Permit No. 147 by the Office of the Mines Regional

Officer, Mineral Region No. 1, Bureau of Mines and Geo-Sciences (Bureau of Mines). [18] The Commercial Permit, which was

renewable every year, was last renewed in 1987.[19]

 

Based on the Deed of Waiver and Quitclaim executed by Castillo Binay-an, petitioner was able to apply for, and was issued,

a tax declaration over the land covering one hectare. Tax Declaration No. 9540 [20] dated 12 September 1983 was issued to petitioner

describing the land bounded on the North by Bued River, on the South by Kennon Road, on the East by Kennon Road, and on the

West by a Creek. With the revision of the fair market value and assessed value of lands, Tax Declaration No. 94-004-00327 dated 12

November 1994 was issued to him.[21] From 1983 up to 1998, petitioner has been regularly paying real property taxes over the land.

 

Petitioner disclosed that in 1983, William Banuca applied for, and was accepted, as foreman. [22] Due to the nature of his job,

Banuca was permitted to stay in the second house beside the private road. [23] Banuca now lives permanently in said house after

petitioner gave it to him. Petitioner revealed that the houses his former laborers constructed were awarded to them as a kind gesture to

them. As to the land he occupied along the Kennon Road where the first house was erected, he claims that same still belongs to him.

This house, which his laborers and drivers used as a resting area, was cannibalized and leveled, and the land over which it once stood

was taken possession by respondents who are now building their house thereon.

 

Gloria Banuca testified for respondents. She disclosed that it was she who invited respondents to come and reside at

Riverside, Camp 3, Tuba, Benguet. She said she knew petitioner to be engaged in the sand and gravel business in Tuba, Benguet, from

1981 to 1985, and that the latter stopped in 1985 and never returned to haul sand and gravel at the Bued River. She claimed she never

saw petitioner introduce any improvements on the land he claimed he bought from Castillo Binay-an, and that it was she and the other

residents who introduced the existing improvements.

 

She narrated that in 1983, she planted fruit-bearing trees in the area where respondents were constructing their house which is

located along the Kennon Roads road-right-of-way, fronting petitioners property. After the earthquake of 1990, the private road

constructed by petitioner became impassable and it was she who hired the equipment used to clear the same. She even leveled the area

where respondents were building their home. Based on the ocular inspection, she said this area is within the 15-meter radius from the

center of the road. This area, she claims, was sold to her by the Spouses Jularbal. However, the agreement between them shows that

what was sold to her were the improvements near her house which was 40 meters down from Kennon Road and the improvements

along Kennon Road.[24]

 

Agustin Domingo next testified for respondents. He testified that in 1986, upon the invitation of Gloria Banuca, he

transferred his residence to sitio Riverside because of its proximity to his place of work. He stayed there for good and even buried his

father near his house. He said that in 1990, the private road constructed by petitioner was covered by boulders, soil and rocks, and it

was Mrs. Banuca who initiated the clearing of the road. Finally, he declared that since 1986, he never saw petitioner introduce any

improvement in the area.

 

Respondent Juanito Valenciano revealed that he is the cousin of Gloria Banuca. He narrated that in 1984, he went to

Riverside to see the latter whose husband, William Banuca, was working as foreman of petitioner. At that time, the lot under litigation

was still a hill. It was Gloria Banuca who leveled the hill and told him to construct his house there. Finding the place to be an ideal

place to build his house, he paid the Banucas P10,000.00 for the improvements.

 

He explained that before he started building his house, he sought the permission of the Benguet District Engineer, DPWH,

which the latter granted. In August 1998, he received a notice [25] to stop and desist from continuing the construction of a permanent

one-storey house made of hollow blocks and cement since the condition was only to utilize light materials. Thereafter, a letter dated

22 January 1999 was sent to him informing him that the temporary permit issued to him for the improvement/utilization of a portion of

the national road along Kennon Road had been revoked for non-submission of the waiver as required by the Office of the District

Engineer and his non-compliance with the condition that no permanent structures are to be constructed within the road-right-of-way.

He, however, denied receiving said letter.

 

Juan de Vera, a retired DPWH foreman, testified last for the respondents. He claimed he witnessed the execution of the

document[26] regarding the sale by Adriano Jularbal to Gloria Banuca of improvements found near the house of the latter in the amount

of P1,000.00.

 

The MCTC found that what is being contested is the possession of a portion of the road-right-of way of Kennon Road which

is located in front of a parcel of land that petitioner bought by way of Deed of Waiver and Quitclaim from Castillo Binay-an. It held

that petitioner had prior material possession over the subject land. It ruled that the destruction of his house built thereon by the

earthquake in 1990, and later cannibalized without being reconstructed was not tantamount to abandonment of the site by the

petitioner because it was destroyed by a fortuitous event which was beyond his control. It explained that his possession over the land

must be recognized by respondents who came later after the earthquake. It brushed aside respondents allegation that the land in

dispute was abandoned by the latter after he stopped operating his sand and gravel business in 1985 and never returned anymore, and

when the house erected on it was destroyed during the 1990 earthquake, it was no longer reconstructed and was subsequently leveled

or demolished by Gloria Banuca. However, it pronounced that respondents action to occupy the land was done in good faith

considering that their occupation of the land was with the assurance of the seller (Gloria Banuca) and that they were armed with the

permit issued by the DPWH for him to construct his house thereon.

 

On 20 November 2000, the MCTC came out with its decision, the decretal portion of which reads:

 WHEREFORE PREMISES CONSIDERED, decision is hereby rendered in favor of plaintiff, FRISCO

DOMALSIN, and against defendants, JUANITO VALENCIANO and AMALIA VALENCIANO, with the following:

 1.      Order to declare the injunction permanent. 2.      Order the plaintiff as the actual possessor of the lot in question.

 3.      Order the defendant(s) to vacate and deliver the physical possession voluntarily of the disputed land

to plaintiff within 60 days from receipt of this decision. 

4.      Order defendant(s) to remove his structure within from receipt of this decision. 

5.      Order the defendant(s) to (sic) plaintiff the amount of P10,000.00, as litigation expenses. 

6.      Order defendant(s) to pay the cost of suit[27]

  

Respondents appealed the decision to the RTC.[28] In affirming the decision in toto the RTC ratiocinated:

 It may be well to consider that even after plaintiffs business ceased operation, he religiously paid the taxes due thereon. Appellants theory that the plaintiff-appellee abandoned the property does not sit well and finds no support in the record. Notice that since 1985 up to mid-1990, the Banucas never laid claim over the property taking into consideration that they were already residents of the place. This only goes to show that they acknowledged and respected the prior possession of the plaintiff-appellee. Besides, what right has Gloria to cause the leveling of the property destroying the natural contour thereof, to presume that plaintiff-appellee abandoned it and to invite and allow other persons to settle thereat? Absolutely none. Knowing fully well that the plaintiff-appellee has prior possession of the property, Glorias actions are unjustified, to say the least. Her consummated act of leveling the property without the knowledge of the plaintiff-appellee is viewed as a test to determine whether or not the latter is still interested in the property. From then on until 1998 (but before the construction), the Banucas still recognize the plaintiffs possession. But as Gloria claims to have heard no word from the plaintiff, she unilaterally declared that the place is now abandoned as she invited and allowed the defendants to live and construct their house thereat. Contrary to the assertion of the appellants, there was no abandonment simply because plaintiff-appellee continuously paid the corresponding taxes due thereon and that he promptly objected to the construction of the defendants-appellants house. These are clear manifestations of his intention not to abandon the property. Sad to say though that here is a former employer. By passing off such property to be hers is so unkind, unfair and against social order. It is very clear that the Banucas knew of the prior possession of the plaintiff way back then so that they themselves never personally build construction over the property. If they honestly believe that they now own the land, why will they still have to invite other people who are not their relatives to settle thereat? Why the preference of strangers over relatives? The Court does not believe that they did not receive any compensation for having allowed strangers, the defendants included, to settle on the land.

 From all the foregoing, Gloria is clearly in bad faith. And her being in bad faith must be corrected and if warranted, must be meted appropriate penalty. If the Banucas are in bad faith, then the appellants cannot have better rights either. The Banucas transferred nothing to them. Defendants-appellants cannot even be considered as builders in good faith. It must be noted that they were prohibited by the plaintiff from going further but they ignored it. They shall lose what was built (Art. 449, Civil Code). Again, if the Banucas believe that they have an action or a right to deprive the plaintiffs possession, why did they not invoke judicial interference as required under Art. 536 of the same code? Nonetheless, notwithstanding the fact of leveling without the knowledge of the plaintiff-appellee, the same did not affect his possession (Art. 537, Civil Code).[29]

  

Via a petition for review, respondents appealed to the Court of Appeals. The Court of Appeals made a sudden turn-around

and reversed the decision under review. Its decision dated 20 August 2002 reads in part:

 [T]here is a need to clarify a few things. What is undisputed are the identity and nature of the property subject of the action for forcible entry. The subject of the action concerns a portion of the road-right-of-way along Kennon Road just above the private road constructed by respondent. The problem, however, is that petitioners Sps. Valenciano started constructing a house on the same spot where a house belonging to respondent once stood. Both parties are now asserting that they are entitled to the possession of said lot. But the decision of the lower court seems to imply that respondents right to possess the subject property stems from his acquisition of the one-hectare property below it. That is not the case. We must emphasize that the subject of the deed of quitclaim and waiver of rights of Castillo Binay-an was not the road-right-of-way but the sloping terrain below it. This was the property acquired by the respondent to have access to the sand and gravel on the Bued River. It did not include the road-right-of-way. As regards Gloria Banucass claims, the evidence show that her agreement with Jularbal involved only the improvements near her residence down the private road and not the road-right-of-way. Since the subject property is a road-right-of-way, it forms part of the public dominion. It is not susceptible to private acquisition or ownership. Prolonged occupation thereof, improvements introduced thereat or payment of the realty taxes thereon will never ripen into ownership of said parcel of land. Thus, what We have are two parties, neither of which can be owners, only possessors of the subject property. Beyond these two, only the government has a better right to the subject property which right it may exercise at any time. This bears emphasizing because if either party has possessory rights to the subject property, it is not predicated on ownership but only on their actual possession of the subject property. x x x x There is no doubt that respondent had prior physical possession of the subject property. He entered and acquired possession of the subject property when he built his house thereon. The house was destroyed during the 1990 earthquake and respondent did not rebuild it. The mound on which it stood was later leveled by Gloria Banuca and in 1998 petitioners Sps. Valenciano began construction thereat. Petitioners Sps. Valenciano claim there was abandonment, but the lower court ruled that respondent did not abandon the subject property as he continued to pay the realty taxes thereon and objected to petitioners Sps. Valencianos construction. We believe, and so hold, that at this point in time, it is immaterial whether or not there was abandonment by respondent .The fact remains that Gloria Banuca took possession of the subject property soon after the earthquake. She leveled the mound and the ruins of respondents house, yet respondent remained silent. Respondent objected only after petitioners Sps. Valenciano started construction of the house on the subject property. Respondent cannot now interpose an action for forcible entry against petitioners Sps. Valenciano, which he should have filed against Gloria Banuca, petitioners Sps. Valencianos predecessor-in-interest. But more than a year had passed and his right to do so lapsed. Thus, respondents prior possession is material only as against Gloria Banuca and only within a period of one year from the time she wrested possession of the property from respondent. We view with distate Gloria Banucas ingratitude toward her husbands former employer. Her actions smack of the proverbial hand being offered in aid but the person to whom it is offered would rather have the whole arm instead. This is an instance where it is the employees who commit injustice against their employer. Nonetheless, petitioners Sps. Valenciano should not suffer because of Gloria Banucas ingratitude for the former came across the property in good faith. But respondent is also reminded that he only has himself to blame. His failure to assert his right for an unreasonable and unexplained length of time allowed Gloria Banuca to wrest possession from him. Especially in this case where they do not and cannot own the subject property, actual possession becomes particularly important.[30]

   

The case was disposed as follows:

 WHEREFORE, in view of the foregoing, the petition is GRANTED and the decision of the Municipal

Circuit Trial Court of tuba-Sablan dated November 20, 2000 as affirmed by the Regional Trial Court on January 23, 2002 is hereby REVERSED and SET ASIDE.[31]

  

The Motion for Reconsideration filed by petitioner was denied in a resolution[32] dated 20 May 2003.

 

Petitioner is now before us seeking redress. He assigns the following as the errors committed by the Court of Appeals:

 

I.THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT PRIVATE RESPONDENT (NOW PETITIONER) FRISCO DOMALSIN ABANDONED THE PROPERTY SUBJECT OF THE LITIGATION. 

II. 

THE HONORABLE COURT OF APPEALS ERRED IN REVERSING AND SETTING ASIDE THE DECISION OF THE REGIONAL TRIAL COURT OF LA TRINIDAD, BENGUET, BRANCH 63 WHICH AFFIRMED THE DECISION OF THE MUNICIPAL CIRCUIT TRIAL COURT OF TUBA-SABLAN.  

At the outset, it must be made clear that the property subject of this case is a portion of the road-right-of way of Kennon Road which is

located in front of a parcel of land that petitioner bought by way of Deed of Waiver and Quitclaim from Castillo Binay-an. [33] The

admission[34] of petitioner in his Amended Complaint that respondents started constructing a building within the Kennon Road road-

right-of-way belies his claim that the lot in question is his.

 

In light of this exposition, it is clear that neither the petitioner nor the respondents can own nor possess the subject property the same

being part of the public dominion. Property of public dominion is defined by Article 420 of the Civil Code as follows:

 

ART.  420.  The following things are property of public dominion:

(1)     Those intended for public use such as roads, canals, rivers, torrents, ports and bridges constructed by the State, banks, shores, roadsteads, and other of similar character.

(2)     Those which belong to the State, without being for public use, and are intended for some public service or for the development of the national wealth.  

Properties of public dominion are owned by the general public.[35] Public use is use that is not confined to privileged

individuals, but is open to the indefinite public.[36] As the land in controversy is a portion of Kennon Road which is for the use of the

people, there can be no dispute that same is part of public dominion. This being the case, the parties cannot appropriate the land for

themselves. Thus, they cannot claim any right of possession over it.  This is clear from Article 530 of the Civil Code which provides:

 ART. 530. Only things and rights which are susceptible of being appropriated may be the object of

possession. 

 

Notwithstanding the foregoing, it is proper to discuss the position of the Court of Appeals for comprehensive understanding

of the facts and the law involved.

 

Petitioner maintains that the Court of Appeals erred when it ruled that he abandoned the land being disputed contrary to the rulings of

the MCTC and RTC. The MCTC found there was no abandonment of the land because the house erected thereon was destroyed by a

fortuitous event (earthquake), while the RTC ruled there was no abandonment because petitioner paid taxes due on the land and that

he promptly objected to the construction of respondents house which are clear manifestations of his intention not to abandon the

property.

A reading of the decision of the Court of Appeals shows that it did not reverse the two lower courts on the issue of abandonment. It

merely declared that such issue is not material in the resolution of the case at bar. It faulted petitioner for not asserting his right for a

long time allowing Gloria Banuca to wrest the possession of the land in question from petitioner by leveling the house he built thereon

and pronounced that actual possession becomes important in a case where parties do not and cannot own the land in question.

From the foregoing it appears that the Court of Appeals did not give weight or importance to the fact that petitioner had prior physical

possession over the subject land. It anchored its decision on the fact that the parties do not and cannot own the land and that

respondents now have actual possession over it.

 

Ejectment proceedings are summary proceedings intended to provide an expeditious means of protecting actual possession or

right to possession of property. Title is not involved. The sole issue to be resolved is the question as to who is entitled to the physical

or material possession of the premises or possession de facto.[37]

 

The Court of Appeals erred when it preferred the present and actual possession of respondents vis--vis the prior possession of

petitioner on the ground that the parties do not and cannot own the lot in question. Regardless of the actual condition of the title to the

property, the party in peaceable, quiet possession shall not be thrown out by a strong hand, violence or terror. Neither is the unlawful

withholding of property allowed. Courts will always uphold respect for prior possession. Thus, a party who can prove prior possession

can recover such possession even against the owner himself. Whatever may be the character of his possession, if he has in his favor

prior possession in time, he has the security that entitles him to remain on the property until a person with a better right lawfully ejects

him.[38]

 

The fact that the parties do not and cannot own the property under litigation does not mean that the issue to be resolved is no

longer priority of possession. The determining factor for one to be entitled to possession will be prior physical possession and not

actual physical possession. Since title is never in issue in a forcible entry case, the Court of Appeals should have based its decision on

who had prior physical possession. The main thing to be proven in an action for forcible entry is prior possession and that same was

lost through force, intimidation, threat, strategy and stealth, so that it behooves the court to restore possession regardless of title or

ownership.[39]

 

Inasmuch as prior physical possession must be respected, the Court of Appeals should have ruled squarely on the issue of

abandonment because it gave precedence to the actual present possession of respondents. If, indeed, there was abandonment of the

land under consideration by petitioner, only then should respondents be given the possession of the same since abandonment is one

way by which a possessor may lose his possession.[40]

 

Abandonment of a thing is the voluntary renunciation of all rights which a person may have in a thing, with the intent to lose

such thing.[41] A thing is considered abandoned and possession thereof lost if the spes recuperandi (the hope of recovery) is gone and

the animus revertendi (the intention of returning) is finally given up.[42]

 

In the case before us, we find that petitioner never abandoned the subject land. His opposition to the construction of

respondents house upon learning of the same and the subsequent filing of the instant case are clear  indicia of non-abandonment;

otherwise, he could have just allowed the latter to continue with the construction. Moreover, the fact that the house petitioner built was

destroyed by the earthquake in 1990, was never rebuilt nor repaired and that same was leveled to the ground by Gloria Banuca do not

signify abandonment. Although his house was damaged by the earthquake, Gloria Banuca, the person who supposedly demolished

said house, had no right to do the same. Her act of removing the house and depriving petitioner of possession of the land was an act of

forcible entry. The entry of respondents in 1998 was likewise an act of forcible entry.

 

The next question is: Was the action filed the correct one and was it timely filed?

 

Well-settled is the rule that what determines the nature of the action as well as the court which has jurisdiction over the case

are the allegations in the complaint.[43] In actions for forcible entry, the law tells us that two allegations are mandatory for the

municipal court to acquire jurisdiction: First, the plaintiff must allege prior physical possession of the property. Second, he must also

allege that he was deprived of his possession by any of the means provided for in Section 1, Rule 70 of the Rules of Court. [44] To effect

the ejectment of an occupant or deforciant on the land, the complaint should embody such a statement of facts as to bring the party

clearly within the class of cases for which the statutes provide a remedy, as these proceedings are summary in nature. The complaint

must show enough on its face to give the court jurisdiction without resort to parol evidence.[45]

 

A look at the Amended Complaint filed by petitioner clearly shows a case for forcible entry. Petitioner alleged therein that he

has been in possession of the subject land for the last nineteen years and that respondents, in the first week of August 1998, without

his permission and consent, entered the land by means of force, strategy and stealth and started the construction of a building thereon;

and upon being informed thereof, he requested them to stop their construction but respondents refused to vacate the land forcing him

to file the instant case to recover possession thereof.

 

The Court of Appeals pronounced that petitioner cannot interpose an action for forcible entry against respondents and that the

same should have been filed against Gloria Banuca. It added that the right to file against the latter had already lapsed because more

than a year had passed by from the time she wrestled possession of the property from the petitioner.

 

We find such pronouncement to be flawed. An action of forcible entry and detainer may be maintained only against one in

possession at the commencement of the action, and not against one who does not in fact hold the land. [46] Under Section 1,[47] Rule 70

of the Rules of Court, the action may be filed against persons unlawfully withholding or depriving possession or any person claiming

under them. Considering that respondents are the ones in present actual possession and are depriving petitioner of the possession of

the land in question, it is proper that they be the ones to be named defendants in the case. The fact that Gloria Banuca was supposedly

the one who first committed forcible entry when she allegedly demolished the house of petitioner does not make her the proper party

to be sued because she is no longer in possession or control of the land in controversy.

 

As regards the timeliness of the filing of the case for forcible entry, we find that same was filed within the one-year

prescriptive period. We have ruled that where forcible entry was made clandestinely, the one-year prescriptive period should be

counted from the time the person deprived of possession demanded that the deforciant desist from such dispossession when the former

learned thereof.[48] As alleged by petitioner in the Amended Complaint, he was deprived of his possession over the land by force,

strategy and stealth. Considering that one of the means employed was stealth because the intrusion was done by respondents without

his knowledge and consent, the one-year period should be counted from the time he made the demand to respondents to vacate the

land upon learning of such dispossession. The record shows that upon being informed that respondents were constructing a building in

the subject land sometime in the first week of August 1998, petitioner immediately protested and advised the former to stop; but to no

avail. The one-year period within which to file the forcible entry case had not yet expired when the ejectment suit was filed on 18

August 1998 with the MCTC.

 

Despite the foregoing findings, this Court finds that the MCTC and the RTC, as well as the Court of Appeals, to be in error

when they respectively declared that petitioner and respondents to be entitled to the possession of the land in dispute. The parties

should not be permitted to take possession of the land, much more, claim ownership thereof as said lot is part of the public dominion.

WHEREFORE, the foregoing considered, the instant petition is hereby PARTIALLY GRANTED. Nonetheless, there being a finding

that the subject property is a part of the public dominion, of which neither party is entitled to own nor possess, the decisions of the

Court of Appeals dated 20 August 2002, the Regional Trial Court of La Trinidad, Benguet, dated 23 January 2002, and the Municipal

Circuit Trial Court of Tuba-Sablan, Tuba, Benguet, dated 20 November 2000 are SET ASIDE. Respondents Juanito and Amalia

Valenciano are ordered to remove their structure on the subject land within sixty (60) days from receipt of this decision, and to vacate

and deliver the physical possession thereof to the Office of the District Engineer, Benguet Engineering District, Department of Public

Works and Highways.   

SECOND DIVISIONHEIRS OF EDUARDO MANLAPAT, G.R. No. 125585represented by GLORIA MANLAPAT-BANAAG and LEON M. BANAAG, JR., Petitioners, Present: PUNO, J.,*

Chairman,- versus - AUSTRIA-MARTINEZ,Acting Chairman,CALLEJO, SR.,TINGA, and

CHICO-NAZARIO, JJ.HON. COURT OF APPEALS,RURAL BANK OF SAN PASCUAL,INC., and JOSE B. SALAZAR,CONSUELO CRUZ and Promulgated:ROSALINA CRUZ-BAUTISTA,and the REGISTER OF DEEDS ofMeycauayan, Bulacan, June 8, 2005Respondents. x-------------------------------------------------------------------x 

D E C I S I O N 

TINGA, J.:  

Before this Court is a Rule 45 petition assailing the Decision[1] dated 29 September 1994 of the

Court of Appeals that reversed theDecision[2] dated 30 April 1991 of the Regional Trial Court (RTC) of

Bulacan, Branch 6, Malolos. The trial court declared Transfer Certificates of Title (TCTs) No. T-9326-P(M)

and No. T-9327-P(M) as void ab initio and ordered the restoration of Original Certificate of Title (OCT) No.

P-153(M) in the name of Eduardo Manlapat (Eduardo), petitioners predecessor-in-interest. 

The controversy involves Lot No. 2204, a parcel of land with an area of 1,058 square meters,

located at Panghulo, Obando, Bulacan. The property had been originally in the possession of Jose Alvarez,

Eduardos grandfather, until his demise in 1916. It remained unregistered until 8 October 1976 when OCT

No. P-153(M) was issued in the name of Eduardo pursuant to a free patent issued in Eduardos name [3] that

was entered in the Registry of Deeds of Meycauayan, Bulacan.[4] The subject lot is adjacent to a fishpond

owned by one Ricardo Cruz (Ricardo), predecessor-in-interest of respondents Consuelo Cruz and Rosalina

Cruz-Bautista (Cruzes).[5]

 

On 19 December 1954, before the subject lot was titled, Eduardo sold a portion thereof with an

area of 553 square meters to Ricardo. The sale is evidenced by a deed of sale entitled Kasulatan ng

Bilihang Tuluyan ng Lupang Walang Titulo (Kasulatan)[6] which was signed by Eduardo himself as vendor

and his wife Engracia Aniceto with a certain Santiago Enriquez signing as witness. The deed was notarized

by Notary Public Manolo Cruz.[7] On 4 April 1963, the Kasulatan was registered with the Register of Deeds

of Bulacan.[8]

 

On 18 March 1981, another Deed of Sale[9] conveying another portion of the subject lot consisting of

50 square meters as right of way was executed by Eduardo in favor of Ricardo in order to reach the portion

covered by the first sale executed in 1954 and to have access to his fishpond from the provincial road.[10] The deed was signed by Eduardo himself and his wife Engracia Aniceto, together with Eduardo

Manlapat, Jr. and Patricio Manlapat. The same was also duly notarized on 18 July 1981 by Notary Public

Arsenio Guevarra.[11]

 

In December 1981, Leon Banaag, Jr. (Banaag), as attorney-in-fact of his father-in-law Eduardo,

executed a mortgage with the Rural Bank of San Pascual, Obando Branch (RBSP), for P100,000.00 with the

subject lot as collateral. Banaag deposited the owners duplicate certificate of OCT No. P-153(M) with the

bank. 

On 31 August 1986, Ricardo died without learning of the prior issuance of OCT No. P-153(M) in the

name of Eduardo.[12] His heirs, the Cruzes, were not immediately aware of the consummated sale between

Eduardo and Ricardo. 

Eduardo himself died on 4 April 1987. He was survived by his heirs, Engracia Aniceto, his spouse;

and children, Patricio, Bonifacio, Eduardo, Corazon, Anselmo, Teresita and Gloria, all surnamed Manlapat.[13] Neither did the heirs of Eduardo (petitioners) inform the Cruzes of the prior sale in favor of their

predecessor-in-interest, Ricardo. Yet subsequently, the Cruzes came to learn about the sale and the

issuance of the OCT in the name of Eduardo. 

Upon learning of their right to the subject lot, the Cruzes immediately tried to confront petitioners

on the mortgage and obtain the surrender of the OCT. The Cruzes, however, were thwarted in their bid to

see the heirs. On the advice of the Bureau of Lands, NCR Office, they brought the matter to

the barangay captain of Barangay Panghulo, Obando, Bulacan. During the hearing, petitioners were

informed that the Cruzes had a legal right to the property covered by OCT and needed the OCT for the

purpose of securing a separate title to cover the interest of Ricardo. Petitioners, however, were unwilling to

surrender the OCT.[14]

 

Having failed to physically obtain the title from petitioners, in July 1989, the Cruzes instead went to

RBSP which had custody of the owners duplicate certificate of the OCT, earlier surrendered as a

consequence of the mortgage. Transacting with RBSPs manager, Jose Salazar (Salazar), the Cruzes sought

to borrow the owners duplicate certificate for the purpose of photocopying the same and thereafter

showing a copy thereof to the Register of Deeds. Salazar allowed the Cruzes to bring the owners duplicate

certificate outside the bank premises when the latter showed theKasulatan.[15] The Cruzes returned the

owners duplicate certificate on the same day after having copied the same. They then brought the copy of

the OCT to Register of Deeds Jose Flores (Flores) of Meycauayan and showed the same to him to secure his

legal opinion as to how the Cruzes could legally protect their interest in the property and register the

same.[16] Flores suggested the preparation of a subdivision plan to be able to segregate the area purchased

by Ricardo from Eduardo and have the same covered by a separate title.[17]

 

Thereafter, the Cruzes solicited the opinion of Ricardo Arandilla (Arandilla), Land Registration

Officer, Director III, Legal Affairs Department, Land Registration Authority at Quezon City, who agreed with

the advice given by Flores.[18] Relying on the suggestions of Flores and Arandilla, the Cruzes hired two

geodetic engineers to prepare the corresponding subdivision plan. The subdivision plan was presented to

the Land Management Bureau, Region III, and there it was approved by a certain Mr. Pambid of said office

on 21 July 1989. 

After securing the approval of the subdivision plan, the Cruzes went back to RBSP and again asked

for the owners duplicate certificate from Salazar. The Cruzes informed him that the presentation of the

owners duplicate certificate was necessary, per advise of the Register of Deeds, for the cancellation of the

OCT and the issuance in lieu thereof of two separate titles in the names of Ricardo and Eduardo in

accordance with the approved subdivision plan.[19] Before giving the owners duplicate certificate, Salazar

required the Cruzes to see Atty. Renato Santiago (Atty. Santiago), legal counsel of RBSP, to secure from

the latter a clearance to borrow the title. Atty. Santiago would give the clearance on the condition that

only Cruzes put up a substitute collateral, which they did.[20] As a result, the Cruzes got hold again of the

owners duplicate certificate. 

After the Cruzes presented the owners duplicate certificate, along with the deeds of sale and the

subdivision plan, the Register of Deeds cancelled the OCT and issued in lieu thereof TCT No. T-9326-P(M)

covering 603 square meters of Lot No. 2204 in the name of Ricardo and TCT No. T-9327-P(M) covering the

remaining 455 square meters in the name of Eduardo.[21]

 

On 9 August 1989, the Cruzes went back to the bank and surrendered to Salazar TCT No. 9327-P(M)

in the name of Eduardo and retrieved the title they had earlier given as substitute collateral. After securing

the new separate titles, the Cruzes furnished petitioners with a copy of TCT No. 9327-P(M) through

the barangay captain and paid the real property tax for 1989.[22]

 

The Cruzes also sent a formal letter to Guillermo Reyes, Jr., Director, Supervision Sector,

Department III of the Central Bank of the Philippines, inquiring whether they committed any violation of

existing bank laws under the circumstances. A certain Zosimo Topacio, Jr. of the Supervision Sector sent a

reply letter advising the Cruzes, since the matter is between them and the bank, to get in touch with the

bank for the final settlement of the case.[23]

 

In October of 1989, Banaag went to RBSP, intending to tender full payment of the mortgage

obligation. It was only then that he learned of the dealings of the Cruzes with the bank which eventually

led to the subdivision of the subject lot and the issuance of two separate titles thereon. In exchange for the

full payment of the loan, RBSP tried to persuade petitioners to accept TCT No. T-9327-P(M) in the name of

Eduardo.[24]

 

As a result, three (3) cases were lodged, later consolidated, with the trial court, all involving the

issuance of the TCTs, to wit:  

(1) Civil Case No. 650-M-89, for reconveyance with damages filed by the heirs of Eduardo Manlapat against Consuelo Cruz, Rosalina Cruz-Bautista, Rural Bank of San Pascual, Jose Salazar and Jose Flores, in his capacity as Deputy Registrar, Meycauayan Branch of the Registry of Deeds of Bulacan;

 (2) Civil Case No. 141-M-90 for damages filed by Jose Salazar against Consuelo Cruz,

et. [sic] al.; and (3) Civil Case No. 644-M-89, for declaration of nullity of title with damages filed by

Rural Bank of San Pascual, Inc. against the spouses Ricardo Cruz and Consuelo Cruz, et al.[25]

 

After trial of the consolidated cases, the RTC of Malolos rendered a decision in favor of the heirs of

Eduardo, the dispositive portion of which reads:

 WHEREFORE, premised from the foregoing, judgment is hereby rendered:

 1.Declaring Transfer Certificates of Title Nos. T-9326-P(M) and T-9327-P(M)

as void ab initio and ordering the Register of Deeds, Meycauayan Branch to cancel

said titles and to restore Original Certificate of Title No. P-153(M) in the name of plaintiffs predecessor-in-interest Eduardo Manlapat;

 2.-Ordering the defendants Rural Bank of San Pascual, Jose Salazar,

Consuelo Cruz and Rosalina Cruz-Bautista, to pay the plaintiffs Heirs of Eduardo Manlapat, jointly and severally, the following:

 a)P200,000.00 as moral damages;b)P50,000.00 as exemplary damages;c)P20,000.00 as attorneys fees; andd)the costs of the suit. 3.Dismissing the counterclaims. 

SO ORDERED.[26]

  

The trial court found that petitioners were entitled to the reliefs of reconveyance and damages. On this

matter, it ruled that petitioners were bona fide mortgagors of an unclouded title bearing no annotation of

any lien and/or encumbrance. This fact, according to the trial court, was confirmed by the bank when it

accepted the mortgage unconditionally on 25 November 1981. It found that petitioners were complacent

and unperturbed, believing that the title to their property, while serving as security for a loan, was safely

vaulted in the impermeable confines of RBSP. To their surprise and prejudice, said title was subdivided into

two portions, leaving them a portion of 455 square meters from the original total area of 1,058 square

meters, all because of the fraudulent and negligent acts of respondents and RBSP. The trial court

ratiocinated that even assuming that a portion of the subject lot was sold by Eduardo to Ricardo,

petitioners were still not privy to the transaction between the bank and the Cruzes which eventually led to

the subdivision of the OCT into TCTs No. T-9326-P(M) and No. T-9327-P(M), clearly to the damage and

prejudice of petitioners.[27]

 

Concerning the claims for damages, the trial court found the same to be bereft of merit. It ruled

that although the act of the Cruzes could be deemed fraudulent, still it would not constitute intrinsic fraud.

Salazar, nonetheless, was clearly guilty of negligence in letting the Cruzes borrow the owners duplicate

certificate of the OCT. Neither the bank nor its manager had business entrusting to strangers titles

mortgaged to it by other persons for whatever reason. It was a clear violation of the mortgage and banking

laws, the trial court concluded. 

The trial court also ruled that although Salazar was personally responsible for allowing the title to

be borrowed, the bank could not escape liability for it was guilty of contributory negligence. The evidence

showed that RBSPs legal counsel was sought for advice regarding respondents request. This could only

mean that RBSP through its lawyer if not through its manager had known in advance of the Cruzes

intention and still it did nothing to prevent the eventuality. Salazar was not even summarily dismissed by

the bank if he was indeed the sole person to blame. Hence, the banks claim for damages must necessarily

fail.[28]

 

The trial court granted the prayer for the annulment of the TCTs as a necessary consequence of its

declaration that reconveyance was in order. As to Flores, his work being ministerial as Deputy Register of

the Bulacan Registry of Deeds, the trial court absolved him of any liability with a stern warning that he

should deal with his future transactions more carefully and in the strictest sense as a responsible

government official.[29]

 

Aggrieved by the decision of the trial court, RBSP, Salazar and the Cruzes appealed to the Court of

Appeals. The appellate court, however, reversed the decision of the RTC. The decretal text of the decision

reads:

 THE FOREGOING CONSIDERED, the appealed decision is hereby reversed and set

aside, with costs against the appellees. SO ORDERED.[30]

 

The appellate court ruled that petitioners were not bona fide mortgagors since as early as 1954 or

before the 1981 mortgage, Eduardo already sold to Ricardo a portion of the subject lot with an area of 553

square meters. This fact, the Court of Appeals noted, is even supported by a document of sale signed by

Eduardo Jr. and Engracia Aniceto, the surviving spouse of Eduardo, and registered with the Register of

Deeds of Bulacan. The appellate court also found that on 18 March 1981, for the second time, Eduardo

sold to Ricardo a separate area containing 50 square meters, as a road right-of-way.[31] Clearly, the OCT

was issued only after the first sale. It also noted that the title was given to the Cruzes by RBSP voluntarily,

with knowledge even of the banks counsel.[32] Hence, the imposition of damages cannot be justified, the

Cruzes themselves being the owners of the property. Certainly, Eduardo misled the bank into accepting

the entire area as a collateral since the 603-square meter portion did not anymore belong to him. The

appellate court, however, concluded that there was no conspiracy between the bank and Salazar.[33]

 

Hence, this petition for review on certiorari. 

Petitioners ascribe errors to the appellate court by asking the following questions, to wit: (a) can a

mortgagor be compelled to receive from the mortgagee a smaller portion of the originally encumbered

title partitioned during the subsistence of the mortgage, without the knowledge of, or authority derived

from, the registered owner; (b) can the mortgagee question the veracity of the registered title of the

mortgagor, as noted in the owners duplicate certificate, and thus, deliver the certificate to such third

persons, invoking an adverse, prior, and unregistered claim against the registered title of the mortgagor;

(c) can an adverse prior claim against a registered title be noted, registered and entered without a

competent court order; and (d) can belief of ownership justify the taking of property without due process of

law?[34]

 

The kernel of the controversy boils down to the issue of whether the cancellation of the OCT in the

name of the petitioners predecessor-in-interest and its splitting into two separate titles, one for the

petitioners and the other for the Cruzes, may be accorded legal recognition given the peculiar factual

backdrop of the case. We rule in the affirmative.

 

 

 Private respondents (Cruzes) own

the portion titled in their names

 

Consonant with law and justice, the ultimate denouement of the property dispute lies in the

determination of the respective bases of the warring claims. Here, as in other legal disputes, what is

written generally deserves credence. 

A careful perusal of the evidence on record reveals that the Cruzes have sufficiently proven their

claim of ownership over the portion of Lot No. 2204 with an area of 553 square meters. The duly notarized

instrument of conveyance was executed in 1954 to which no less than Eduardo was a signatory. The

execution of the deed of sale was rendered beyond doubt by Eduardos admission in his Sinumpaang

Salaysay dated 24 April 1963.[35] These documents make the affirmance of the right of the Cruzes

ineluctable. The apparent irregularity, however, in the obtention of the owners duplicate certificate from

the bank, later to be presented to the Register of Deeds to secure the issuance of two new TCTs in place of

the OCT, is another matter. 

Petitioners argue that the 1954 deed of sale was not annotated on the OCT which was issued in

1976 in favor of Eduardo; thus, the Cruzes claim of ownership based on the sale would not hold water. The

Court is not persuaded. 

Registration is not a requirement for validity of the contract as between the parties, for the effect of

registration serves chiefly to bind third persons.[36] The principal purpose of registration is merely to notify

other persons not parties to a contract that a transaction involving the property had been entered into.

Where the party has knowledge of a prior existing interest which is unregistered at the time he acquired a

right to the same land, his knowledge of that prior unregistered interest has the effect of registration as to

him.[37]

 

Further, the heirs of Eduardo cannot be considered third persons for purposes of applying the rule.

The conveyance shall not be valid against any person unless registered, except (1) the grantor, (2) his

heirs and devisees, and (3) third persons having actual notice or knowledge thereof. [38] Not only are

petitioners the heirs of Eduardo, some of them were actually parties to the Kasulatan executed in favor of

Ricardo. Thus, the annotation of the adverse claim of the Cruzes on the OCT is no longer required to bind

the heirs of Eduardo, petitioners herein. Petitioners had no right to constitute

mortgage over disputed portion

 

The requirements of a valid mortgage are clearly laid down in Article 2085 of the New Civil

Code, viz:

 ART. 2085. The following requisites are essential to the contracts of pledge and mortgage: (1)      That they be constituted to secure the fulfillment of a principal obligation;(2)      That the pledgor or mortgagor be the absolute owner of the thing pledged

or mortgaged;(3)      That the persons constituting the pledge or mortgage have the free

disposal of their property, and in the absence thereof, that they be legally authorized for the purpose.

 Third persons who are not parties to the principal obligation may secure the latter by pledging or mortgaging their own property. (emphasis supplied)

  

For a person to validly constitute a valid mortgage on real estate, he must be the absolute owner thereof

as required by Article 2085 of the New Civil Code.[39] The mortgagor must be the owner, otherwise the

mortgage is void.[40] In a contract of mortgage, the mortgagor remains to be the owner of the property

although the property is subjected to a lien.[41] A mortgage is regarded as nothing more than a mere lien,

encumbrance, or security for a debt, and passes no title or estate to the mortgagee and gives him no right

or claim to the possession of the property.[42] In this kind of contract, the property mortgaged is merely

delivered to the mortgagee to secure the fulfillment of the principal obligation.[43] Such delivery does not

empower the mortgagee to convey any portion thereof in favor of another person as the right to dispose is

an attribute of ownership.[44] The right to dispose includes the right to donate, to sell, to pledge or

mortgage. Thus, the mortgagee, not being the owner of the property, cannot dispose of the whole or part

thereof nor cause the impairment of the security in any manner without violating the foregoing rule.[45] The

mortgagee only owns the mortgage credit, not the property itself.[46]

 

Petitioners submit as an issue whether a mortgagor may be compelled to receive from the

mortgagee a smaller portion of the lot covered by the originally encumbered title, which lot was

partitioned during the subsistence of the mortgage without the knowledge or authority of the mortgagor as

registered owner. This formulation is disingenuous, baselessly assuming, as it does, as an admitted fact

that the mortgagor is the owner of the mortgaged property in its entirety. Indeed, it has not become a

salient issue in this case since the mortgagor was not the owner of the entire mortgaged property in the

first place. 

Issuance of OCT No. P-153(M), improper 

It is a glaring fact that OCT No. P-153(M) covering the property mortgaged was in the name of

Eduardo, without any annotation of any prior disposition or encumbrance. However, the property was

sufficiently shown to be not entirely owned by Eduardo as evidenced by the Kasulatan. Readily apparent

upon perusal of the records is that the OCT was issued in 1976, long after the Kasulatan was executed way

back in 1954. Thus, a portion of the property registered in Eduardos name arising from the grant of free

patent did not actually belong to him. The utilization of the Torrens system to perpetrate fraud cannot be

accorded judicial sanction. 

Time and again, this Court has ruled that the principle of indefeasibility of a Torrens title does not

apply where fraud attended the issuance of the title, as was conclusively established in this case. The

Torrens title does not furnish a shied for fraud.[47] Registration does not vest title. It is not a mode of

acquiring ownership but is merely evidence of such title over a particular property. It does not give the

holder any better right than what he actually has, especially if the registration was done in bad faith. The

effect is that it is as if no registration was made at all.[48] In fact, this Court has ruled that a decree of

registration cut off or extinguished a right acquired by a person when such right refers to a lien or

encumbrance on the landnot to the right of ownership thereofwhich was not annotated on the certificate of

title issued thereon.[49]

 Issuance of TCT Nos. T-9326-P(M)and T-9327-P(M), Valid

  

The validity of the issuance of two TCTs, one for the portion sold to the predecessor-in-interest of

the Cruzes and the other for the portion retained by petitioners, is readily apparent from Section 53 of the

Presidential Decree (P.D.) No. 1529 or the Property Registration Decree. It provides: 

SEC 53. Presentation of owners duplicate upon entry of new certificate. No voluntary instrument shall be registered by the Register of Deeds, unless the owners duplicate certificate is presented with such instrument, except in cases expressly provided for in this Decree or upon order of the court, for cause shown.

 The production of the owners duplicate certificate, whenever any voluntary

instrument is presented for registration, shall be conclusive authority from the registered owner to the Register of Deeds to enter a new certificate or to make a memorandum of registration in accordance with such instrument, and the new certificate or memorandum shall be binding upon the registered owner and upon all persons claiming under him, in favor of every purchaser for value and in good faith.

 In all cases of registration procured by fraud, the owner may pursue all his legal and

equitable remedies against the parties to such fraud without prejudice, however, to the rights of any innocent holder of the decree of registration on the original petition or application, any subsequent registration procured by the presentation of a forged duplicate certificate of title, or a forged deed or instrument, shall be null and void. (emphasis supplied)

  

Petitioners argue that the issuance of the TCTs violated the third paragraph of Section 53 of P.D.

No. 1529. The argument is baseless. It must be noted that the provision speaks of forged duplicate

certificate of title and forged deed or instrument. Neither instance obtains in this case. What the Cruzes

presented before the Register of Deeds was the very genuine owners duplicate certificate earlier deposited

by Banaag, Eduardos attorney-in-fact, with RBSP. Likewise, the instruments of conveyance are authentic,

not forged. Section 53 has never been clearer on the point that as long as the owners duplicate certificate

is presented to the Register of Deeds together with the instrument of conveyance, such presentation

serves as conclusive authority to the Register of Deeds to issue a transfer certificate or make a

memorandum of registration in accordance with the instrument.

 

The records of the case show that despite the efforts made by the Cruzes in persuading the heirs of

Eduardo to allow them to secure a separate TCT on the claimed portion, their ownership being amply

evidenced by the Kasulatan and Sinumpaang Salaysay where Eduardo himself acknowledged the sales in

favor of Ricardo, the heirs adamantly rejected the notion of separate titling. This prompted the Cruzes to

approach the bank manager of RBSP for the purpose of protecting their property right. They succeeded in

persuading the latter to lend the owners duplicate certificate. Despite the apparent irregularity in allowing

the Cruzes to get hold of the owners duplicate certificate, the bank officers consented to the Cruzes plan to

register the deeds of sale and secure two new separate titles, without notifying the heirs of Eduardo about

it. 

Further, the law on the matter, specifically P.D. No. 1529, has no explicit requirement as to the

manner of acquiring the owners duplicate for purposes of issuing a TCT. This led the Register of Deeds of

Meycauayan as well as the Central Bank officer, in rendering an opinion on the legal feasibility of the

process resorted to by the Cruzes. Section 53 of P.D. No. 1529 simply requires the production of the

owners duplicate certificate, whenever any voluntary instrument is presented for registration, and the

same shall be conclusive authority from the registered owner to the Register of Deeds to enter a new

certificate or to make a memorandum of registration in accordance with such instrument, and the new

certificate or memorandum shall be binding upon the registered owner and upon all persons claiming

under him, in favor of every purchaser for value and in good faith.

Quite interesting, however, is the contention of the heirs of Eduardo that the surreptitious lending

of the owners duplicate certificate constitutes fraud within the ambit of the third paragraph of Section 53

which could nullify the eventual issuance of the TCTs. Yet we cannot subscribe to their position.

Impelled by the inaction of the heirs of Eduardo as to their claim, the Cruzes went to the bank

where the property was mortgaged. Through its manager and legal officer, they were assured of recovery

of the claimed parcel of land since they are the successors-in-interest of the real owner thereof. Relying on

the bank officers opinion as to the legality of the means sought to be employed by them and the

suggestion of the Central Bank officer that the matter could be best settled between them and the bank,

the Cruzes pursued the titling of the claimed portion in the name of Ricardo. The Register of Deeds

eventually issued the disputed TCTs. 

The Cruzes resorted to such means to protect their interest in the property that rightfully belongs to

them only because of the bank officers acquiescence thereto. The Cruzes could not have secured a

separate TCT in the name of Ricardo without the banks approval. Banks, their business being impressed

with public interest, are expected to exercise more care and prudence than private individuals in their

dealings, even those involving registered lands.[50] The highest degree of diligence is expected, and high

standards of integrity and performance are even required of it.[51]

 

Indeed, petitioners contend that the mortgagee cannot question the veracity of the registered title

of the mortgagor as noted in the owners duplicate certificate, and, thus, he cannot deliver the certificate to

such third persons invoking an adverse, prior, and unregistered claim against the registered title of the

mortgagor. The strength of this argument is diluted by the peculiar factual milieu of the case. 

A mortgagee can rely on what appears on the certificate of title presented by the mortgagor and an

innocent mortgagee is not expected to conduct an exhaustive investigation on the history of the

mortgagors title. This rule is strictly applied to banking institutions. A mortgagee-bank must exercise due

diligence before entering into said contract. Judicial notice is taken of the standard practice for banks,

before approving a loan, to send representatives to the premises of the land offered as collateral and to

investigate who the real owners thereof are.[52]

 

Banks, indeed, should exercise more care and prudence in dealing even with registered lands, than

private individuals, as their business is one affected with public interest. Banks keep in trust money

belonging to their depositors, which they should guard against loss by not committing any act of

negligence that amounts to lack of good faith. Absent good faith, banks would be denied the protective

mantle of the land registration statute, Act 496, which extends only to purchasers for value and good faith,

as well as to mortgagees of the same character and description. [53] Thus, this Court clarified that the rule

that persons dealing with registered lands can rely solely on the certificate of title does notapply to banks.[54]

 

Bank Liable for Nominal Damages 

Of deep concern to this Court, however, is the fact that the bank lent the owners duplicate of the

OCT to the Cruzes when the latter presented the instruments of conveyance as basis of their claim of

ownership over a portion of land covered by the title. Simple rationalization would dictate that a

mortgagee-bank has no right to deliver to any stranger any property entrusted to it other than to those

contractually and legally entitled to its possession. Although we cannot dismiss the banks acknowledgment

of the Cruzes claim as legitimized by instruments of conveyance in their possession, we nonetheless

cannot sanction how the bank was inveigled to do the bidding of virtual strangers. Undoubtedly, the banks

cooperative stance facilitated the issuance of the TCTs. To make matters worse, the bank did not even

notify the heirs of Eduardo. The conduct of the bank is as dangerous as it is unthinkably negligent.

However, the aspect does not impair the right of the Cruzes to be recognized as legitimate owners of their

portion of the property. 

Undoubtedly, in the absence of the banks participation, the Register of Deeds could not have issued

the disputed TCTs. We cannot find fault on the part of the Register of Deeds in issuing the TCTs as his

authority to issue the same is clearly sanctioned by law. It is thus ministerial on the part of the Register of

Deeds to issue TCT if the deed of conveyance and the original owners duplicate are presented to him as

there appears on theface of the instruments no badge of irregularity or nullity.[55] If there is someone to

blame for the shortcut resorted to by the Cruzes, it would be the bank itself whose manager and legal

officer helped the Cruzes to facilitate the issuance of the TCTs. 

The bank should not have allowed complete strangers to take possession of the owners duplicate

certificate even if the purpose is merely for photocopying for a danger of losing the same is more than

imminent. They should be aware of the conclusive presumption in

Section 53. Such act constitutes manifest negligence on the part of the bank which would necessarily hold

it liable for damages under Article 1170 and other relevant provisions of the Civil Code.[56]

 

In the absence of evidence, the damages that may be awarded may be in the form of nominal

damages. Nominal damages are adjudicated in order that a right of the plaintiff, which has been violated

or invaded by the defendant, may be vindicated or recognized, and not for the purpose of indemnifying the

plaintiff for any loss suffered by him.[57] This award rests on the mortgagors right to rely on the banks

observance of the highest diligence in the conduct of its business. The act of RBSP of entrusting to

respondents the owners duplicate certificate entrusted to it by the mortgagor without even notifying the

mortgagor and absent any prior investigation on the veracity of respondents claim and character is a

patent failure to foresee the risk created by the act in view of the provisions of Section 53 of P.D. No. 1529.

This act runs afoul of every banks mandate to observe the highest degree of diligence in dealing with its

clients. Moreover, a mortgagor has also the right to be afforded due process before deprivation or

diminution of his property is effected as the OCT was still in the name of Eduardo. Notice and hearing are

indispensable elements of this right which the bank miserably ignored. 

Under the circumstances, the Court believes the award of P50,000.00 as nominal damages is

appropriate.  Five-Year Prohibition against alienationor encumbrance under the Public Land Act  

One vital point. Apparently glossed over by the courts below and the parties is an aspect which is

essential, spread as it is all over the record and intertwined with the crux of the controversy, relating as it

does to the validity of the dispositions of the subject property and the mortgage thereon. Eduardo was

issued a title in 1976 on the basis of his free patent application. Such application implies the recognition of

the public dominion character of the land and, hence, the five (5)-year prohibition imposed by the Public

Land Act against alienation or encumbrance of the land covered by a free patent or homestead [58] should

have been considered.

 

The deed of sale covering the fifty (50)-square meter right of way executed by Eduardo on 18

March 1981 is obviously covered by the proscription, the free patent having been issued on 8 October

1976. However, petitioners may recover the portion sold since the prohibition was imposed in favor of the

free patent holder. In Philippine National Bank v. De los Reyes,[59] this Court ruled squarely on the point,

thus:

 While the law bars recovery in a case where the object of the contract is contrary to law and one or both parties acted in bad faith, we cannot here apply the doctrine of in pari

delicto which admits of an exception, namely, that when the contract is merely prohibited by law, not illegal per se, and the prohibition is designed for the protection of the party seeking to recover, he is entitled to the relief prayed for whenever public policy is enhanced thereby. Under the Public Land Act, the prohibition to alienate is predicated on the fundamental policy of the State to preserve and keep in the family of the homesteader that portion of public land which the State has gratuitously given to him, and recovery is allowed even where the land acquired under the Public Land Act was sold and not merely encumbered, within the prohibited period.[60]

  

The sale of the 553 square meter portion is a different story. It was executed in 1954, twenty-two

(22) years before the issuance of the patent in 1976. Apparently, Eduardo disposed of the portion even

before he thought of applying for a free patent. Where the sale or transfer took place before the filing of

the free patent application, whether by the vendor or the vendee, the prohibition should not be applied. In

such situation, neither the prohibition nor the rationale therefor which is

to keep in the family of the patentee that portion of the public land which the government has gratuitously

given him, by shielding him from the temptation to dispose of his landholding, could be relevant. Precisely,

he had disposed of his rights to the lot even before the government could give the title to him.

 

The mortgage executed in favor of RBSP is also beyond the pale of the prohibition, as it was forged

in December 1981 a few months past the period of prohibition. 

WHEREFORE, the Decision of the Court of Appeals is AFFIRMED, subject to the modifications herein.

Respondent Rural Bank of San Pascual is hereby ORDERED to PAY petitioners Fifty Thousand Pesos

(P50,000.00) by way of nominal damages. Respondents Consuelo Cruz and Rosalina Cruz-Bautista are

hereby DIVESTED of title to, and respondent Register of Deeds of Meycauayan, Bulacan is accordingly

ORDERED to segregate, the portion of fifty (50) square meters of the subject Lot No. 2204, as depicted in

the approved plan covering the lot, marked as Exhibit A, and to issue a new title covering the said portion

in the name of the petitioners at the expense of the petitioners. No costs.

 

SO ORDERED.