G.R. No.

104813 October 21, 1993

HEIRS OF JOSE OLVIGA vs. CA

This case started as an action filed in the RTC of Calauag, Quezon by Angelita Glor and her
children against the heirs of Jose Olviga for reconveyance of a parcel of land, measuring 5.44
has, more or less, known as Lot 13, Pls-84 of the Guinayangan Public Land Subdivision.

It was established by the evidence on record that the land in question was, in 1950, still forest
land when Eutiquio Pureza, then only twelve years old, and his father cleared and cultivated it.
In 1954, they introduced improvements such as, coconut trees, etc. When the area was released
for disposition, the Bureau of Lands surveyed the same in 1956 in the name of Eutiquio Pureza.
Godofredo Olviga, a son of Jose Olviga then living with the latter, protested the survey but
without respect to a one-half-hectare portion "sa dakong panulukan ng Amihanan-Silanganan."
This protest or "tutol" of Godofredo Olviga, brother of petitioners Virgilio Olviga and Lolita Olviga
Olila, is of public record in the Bureau of Lands. In said document, Godofredo Olviga expressly
admitted that the lot belonged to Eutiquio Pureza, except the 1/2 hectare portion claimed by him
(Godofredo) which was included in the survey of Pureza's Lot 13.

In 1960, Eutiquio Pureza filed a homestead application over Lot 13. Without his application
having been acted upon, he transferred his rights in said lot to Cornelia Glor in 1961. Neither the
homestead application of Eutiquio nor the proposed transfer of his rights to Cornelio Glor was
acted upon by the Director of Lands for reasons that the records of the Bureau of Lands do not
disclose.

In 1967, Jose Olviga obtained a registered title for said lot in a cadastral proceeding, in fraud of
the rights of Pureza and his transferee, Cornelio Glor and his family who were the real and actual
occupants of the land.

The RTC rendered judgment in favor of the private respondents as heirs of Jose Olviga to
reconvey the land in dispute to the plaintiffs as heirs of Cornelio Glor Sr.; condemning the
defendants jointly and severally to pay the plaintiffs attorneys fees of P5,000.00 plus the costs of
the suit. The counterclaim interposed by defendants is dismissed.

The judgment was appealed to the CA by the defendants who raised several factual issues
regarding possession and fraud, as well as legal issues involving prescription and purchaser in
good faith, but the appellate court dismissed the appeal and affirmed in toto the decision of
the trial court.

What must have happened as found by the CA , is that since Cornelio Glor, Sr. was sickly, and
his wife Angelita Glor, was unschooled, they failed to follow up Pureza's homestead application
over Lot 13 in the cadastral proceedings in the Municipal Court of Guinayangan Public Land
Subdivision, Pls-84, Case 1.In fact, they were not aware of the proceedings. Angelita Glor
testified that no notice was ever posted on Lot 13 about the proceedings nor did the
barangay captain, tell her about them. Neither did she receive any notice from the court sheriff
or any court employee. This non-posting of the hearing of the cadastral hearing on the land, or
in the barangay hall, was confirmed by petitioner Virgilio Olviga himself who testified that he did
not notice any papers posted on the property in question. On the other hand, petitioner's father
Jose Olviga, claimed both Lots 12 and 13, which are adjoining lots, in the same cadastral
proceedings. He falsely omitted in his answer mention of the fact that other persons were in
possession of, and claiming adverse interest in, Lot 13 and that the land had been surveyed for
Eutiquio Pureza, the former occupant who sold his interests to private respondents' parent. Glor
was Olviga's neighbour. As a result, both Lots 12 and 13 were declared as uncontested in the
name of Jose Olviga, and were registered in his name in 1967 in Original Certificate of Title, No.
0-12713. In 1971, Olviga requested that OCT No. 0-12713 be split into two (2) TCT's, one each
for the two (2) lots. TCT Nos. T-103823 and T-103824 were issued for lots 12 and 13,
respectively. Jose Olviga later transferred Lot 13 to his son-in-law, Jaime Olila and daughter,
Lolita Olviga resulting in the cancellation of TCT No. 241314 in the names of the spouses.

It was also established that the spouses Jaime Olila and Lolita Olviga Olila, were not innocent
purchasers for value of the land from their father, and have never been in the possession. The
Glors and their predecessor-in-interest were the ones found to be in possession of the property.

From said finding, and conclusions, the appellate court in its decision dated January 13, 1992,
resolved the issues presented, thus:

. . ., W-O-Nplaintiffs' action is really one for quieting of title that does not prescribe;
YES.

or assuming that their demand for reconveyance of the lot in question prescribes in 10
years, being based on an implied trust, whether their cause of action should be counted
from the date of the issuance of the late Jose Olviga's title over said lot in 1967 and has,
therefore, already prescribed, or whether the prescriptive period should be counted from
the date plaintiffs acquired knowledge of said title sometime in 1988. The action
prescribes in ten years, the lower court again correctly ruled that their cause of action
should be considered to have accrued not from the date of registration of the title of
Jose Olviga, defendants' predecessor-in-interest, over the lot in question in 1967,
but only from the time the plaintiffs learned of such title in 1988 or on April
10, 1989, or in less than a year after they learned of the issuance of a title over said lot
to Jose Olviga, predecessor-in-interest of defendants, has not yet prescribed.

WHEREFORE, the decision appealed from herein is AFFIRMED in toto.

Petitioners now seek a review of the above decision. They allege that, (1) the present action has
already prescribed; (2) the CA erred when it ruled that the private respondents' cause of action
accrued not in 1967 but in 1988; (3) that the CA erred when it failed to consider that private
respondents as mere homestead transferees cannot maintain an action for reconveyance; (4)
that the Faja and Caragay-Layno cases have no bearing and direct application to the case at bar;
and (5) that private respondents have not proven by preponderance of evidence their ownership
and possession of the disputed land.

With regard to the issue of prescription, this Court has ruled a number of times before an action
for reconveyance of a parcel of land based on implied or constructive trust prescribes in ten
years, the point of reference being the date of registration of the deed of the date of the
issuance of the certificate of title over the property. But this rule applies only when the
plaintiff is not in possession of the property, since if a person claiming to be the owner
thereof is in actual possession of the property, the right to seek reconveyance, which in
effect seeks to quiet title to the property, does not prescribe.

In Sapto vs. Fabiana, this Court held:

No enforcement of the contract is in fact needed, since the delivery of possession of the
land sold had consummated, the sale and transferred title to the purchaser, registration
of the contract not being indispensable as between the parties. Actually the action for
conveyance was one to quiet title, i.e., to remove the cloud cast upon appellee's
ownership by the refusal of the appellants to recognize the sale made by their
predecessors. This action accrued only when appellants initiated their suit to recover the
 land in 1954. Furthermore, it is an established rule that actions to quiet title to
property in the possession of the plaintiff are imprescriptible

In Faja vs. CA, , this Court likewise reiterated the ruling that:

. . . There is settled jurisprudence that one who is in actual possession of a piece of

land claiming to be owner thereof may wait until his possession is disturbed or
his title is attacked before taking steps to vindicate his right, the reason for the rule
being, that his undisturbed possession gives him a continuing right to seek the aid of a
court of equity to ascertain and determine the nature of the adverse claim of a third
party and its effect on his own title, which right can be claimed only by one who is in
possession. We hold that in such situation the right to quiet title to the property, to seek
its reconveyance and annul any certificate of title covering it, accrued only from the time
in possession was made aware of a claim adverse to his own, and it is only then that the
statutory period of prescription commences to run against possessor.

In the case at bar, private respondents and their predecessors-in-interest were in

actual possession of the property since 1950. Their undisturbed possession gave
them the continuing right to seek the aid of a court of equity to determine the nature
of the adverse claim of petitioners, who in 198 disturbed their possession.

The other issues raised in the petition are factual.

The CA and the trial court correctly based their findings of tact on the testimonies of the parties
and their witnessess. It can be said therefore that those conclusions are based on substantial
evidence. No cogent reason exists to disturb them. As reiterated in a long line of decisions, it is
beyond the province of this Court to make its own findings of facts different from those of the
trial court as affirmed by the CA .In petitions for review of decisions of the CA , the jurisdiction of
this Court is confined to a review of questions of law, except when the findings of fact are not
supported by the records or are so glaringly erroneous as to constitute a serious abuse of
discretion.

BANK OF COMMERCE vs SPS P SAN PABLO

On 20 December 1994, Santos obtained a loan from Direct Funders Management and
Consultancy Inc., (Direct Funders) in the amount of P1.064M. As a security for the loan
obligation, Natividad executed a SPA6 in favor of Santos, authorizing the latter to mortgage to
Direct Funders a paraphernal real property registered under her name and covered by TCT No
(26469)-7561 (subject property).

In the Deed of REM 8 executed in favor of Direct Funders, Natividad and her husband, Prudencio,
signed as the co-mortgagors of Santos. It was, however, clear between the parties that
the loan obligation was for the sole benefit of Santos and the spouses San Pablo merely
signed the deed in order to accommodate the former.

The aforesaid accommodation transaction was made possible because Prudencio and Santos
were close friends and business associates. Indeed, Prudencio was an incorporator and a
member of the Board of Directors of Intergems Fashion Jewelries Corporation (Intergems), a
domestic corporation in which Santos acted as the President.

Sometime in June 1995, the spouses San Pablo received a letter from Direct Funders informing
them that Santos failed to pay his loan obligation with the latter. When confronted with the
matter, Santos promised to promptly settle his obligation with Direct Funders, which he actually
did the following month.

Upon learning that Santos debt with Direct Funders had been fully settled, the spouses San
Pablo then demanded from Santos to turn over to them the TCT of the subject property but the
latter failed to do so despite repeated demands. Such refusal prompted the spouses San Pablo to
inquire as to the status of the TCT of the subject property with the ROD of Mandaue City and to
their surprise, they discovered that the property was again used by Santos as collateral for
another loan obligation he secured from the Bank of Commerce.

As shown in the annotation stamped at the back of the title, the spouses San Pablo purportedly
authorized Santos to mortgage the subject property to the Bank of Commerce, as evidenced by
the SPA allegedly signed by Natividad on 29 March 1995. It was further shown from the
annotation at the back of the title that the spouses San Pablo signed a Deed of REM over the
subject property in favor of Bank of Commerce, which they never did.9

In order to free the subject property from unauthorized encumbrances, the spouses San Pablo,
on 22 December 1995, filed a Complaint seeking for the Quieting of Title and Nullification of the
SPA and the deed of REM with the prayer for damages against Santos and the Bank of
Commerce before the MTC of Mandaue City, Branch 2.

In their complaint, the spouses San Pablo claimed that their signatures on the SPA and the
Deed of REM allegedly executed to secure a loan with the Bank of Commerce were forged.
They claimed that while the loan with the Direct Funders was obtained with their consent and
direct participation, they never authorized the subsequent loan obligation with the Bank of
Commerce.

During the pendency of the case, the Bank of Commerce, for non-payment of the loan, initiated
the foreclosure proceedings on the strength of the contested Deed of REM. During the auction
sale, the Bank of Commerce emerged as the highest bidder and thus a Certificate of Sale was
issued under its name. Accordingly, the spouses San Pablo amended their complaint to
include the prayer for annulment of the foreclosure sale.10

In his Answer, Santos countered that the loan with the Bank of Commerce was deliberately
resorted to with the consent, knowledge and direct participation of the spouses San Pablo in
order to pay off the obligation with Direct Funders. In fact, it was Prudencio who caused the
preparation of the SPA and together with Santos, they went to the Bank of Commerce to apply
for the loan. In addition, Santos averred that the spouses San Pablo were receiving consideration
from Intergems for extending accommodation transactions in favor of the latter.

For its part, Bank of Commerce filed an Answer with Compulsory Counterclaim, alleging that the
spouses San Pablo, represented by their attorney-in-fact, Santos, together with Intergems,
obtained a loan in the amount of P1.218M. It denied the allegation advanced by the spouses San
Pablo that the SPA and the Deed of REM were spurious. Since the loan already became due and
demandable, the Bank of Commerce sought the foreclosure of the subject property.

After the Pre-Trial Conference, trial on the merits ensued.

During the trial, Barbarona, Jr., the Manager of the Bank of Commerce, testified that the spouses
San Pablo personally signed the Deed of REM in his presence. The testimony of a document
examiner and a handwriting expert, however, belied this claim. The expert witness,
after carefully examining the loan documents with the Bank of Commerce, attested that the
signatures of the spouses San Pablo on the SPA and the Deed of REM were forged.
On 10 July 2001, the MTC rendered a Decision, dismissing the complaint for lack of merit without
prejudice to the filing of the appropriate criminal action against those responsible for the
falsification of the questioned SPA and deed of REM. The MTC declared that while it was proven
that the signatures of the spouses San Pablo on the loan documents were forged, the Bank of
Commerce were nevertheless in good faith.

Aggrieved, the spouses San Pablo appealed the adverse decision to the RTC of Mandaue City,
which, in turn, AFFIRMED the ruling of the MTC. MR denied.

The spouses San Pablo elevated the matter before the CA assailing the adverse decisions of the
MTC and RTC. The appellate court granted the petition filed by the spouses San Pablo and
reversed the decisions of the MTC and RTC. In setting aside the rulings of the lower courts, the
CA ruled that since it was duly proven that the signatures of the spouses San Pablo on the loan
documents were forged, and then such spurious documents could never become a valid
source of title. The mortgage contract executed by Santos over the subject property in favor of
Bank of Commerce, without the authority of the spouses San Pablo, was therefore
unenforceable, unless ratified. We therefore declare the so-called SPA, the Deed of
REM and the Foreclosure proceedings to be NULL and VOID ab initio. And, in the
meantime, if the subject Lot No 1882-C-1-A covered by Transfer Certificate of Title No. (26469)-
7561 has been sold and a new transfer certificate of title had been issued, let the ROD of
Mandaue City cancel the new title and issue a new one in favor of Natividad O. San Pablo, unless
the new title holder is a purchaser in good faith and for value. In the latter case, respondent
Bank of Commerce and respondent Melencio G. Santos are hereby held jointly and severally
liable to petitioners for the fair market value of the property as of the date of finality of this
decision. Moreover, private respondents are likewise held jointly and severally liable to
petitioners P50,000.00 as moral damages, P25,000.00 as exemplary damages, P25,000.00
plus P1,000.00 per count appearance as attorneys fees and P10,000.00 as litigation expenses.
No costs.

The Bank of Commerce is now before this Court assailing the adverse decision rendered by the
CA.

1) W-O-N THE MTC HAS JURISDICTION TO HEAR THE CASE FILED BY THE SPOUSES SAN
PABLO.
2) W-O-N THE FORGED SPA AND SPA COULD BECOME A VALID SOURCE OF A RIGHT TO
FORECLOSE A PROPERTY.
3) W-O-N THE AWARDS OF DAMAGES, ATTRONEYS FEES AND LITIGATION EXPENSES ARE
PROPER IN THE INSTANT CASE.

The Bank of Commerce, for the first time in more than 10 years of pendency of the instant case,
raises the issue of jurisdiction since the subject matter of the case is incapable of pecuniary
estimation, the complaint for quieting of title and annulment of the SPA, the Deed of REM, and
foreclosure proceedings should have been filed with the RTC and not with the MTC. The decision
rendered by the MTC, which did not acquire jurisdiction over the subject matter of the case, is
therefore void from the very beginning. Necessarily, the CA erred in giving due course to the
petition when the tribunal originally trying the case had no authority to try the issue.

We do not agree.

Upon cursory reading of the records, we gathered that the case filed by the spouses San Pablo
before the MTC was an action for quieting of title, and nullification of the SPA, Deed of REM, and
foreclosure proceedings. While the body of the complaint consists mainly of allegations of
forgery, however, the primary object of the spouses San Pablo in filing the same was to
effectively free the title from any unauthorized lien imposed upon it.
Clearly, the crux of the controversy before the MTC chiefly hinges on the question of who has
the better title over the subject property. Is it the spouses San Pablo who claim that their
signatures on the loan document were forged? Or is it the Bank of Commerce which maintains
that the SPA and the Deed of REM were duly executed and, therefore, a valid source of its right
to foreclose the subject property for non-payment of loan?

An action for quieting of title is a common law remedy for the removal of any cloud upon or
doubt or uncertainty with respect to title to real property. As clarified by this Court in Baricuatro,
Jr. v. CA 21 :

x x x Originating in equity jurisprudence, its purpose is to secure " an adjudication that a claim
of title to or an interest in property, adverse to that of the complainant, is invalid, so that the
complainant and those claiming under him may be forever afterward free from any danger or
hostile claim. In an action for quieting of title, the competent court is tasked to determine the
respective rights of the complainant and other claimants, " not only to place things in their
proper place, to make the one who has no rights to said immovable respect and not disturb the
other, but also for the benefit of both, so that he who has the right would see every cloud of
doubt over the property dissipated, and he could afterwards without fear introduce the
improvements he may desire, to use, and even to abuse the property as he deems best.

"ART. 476 of NCC Whenever there is a cloud on title to real property or any interest therein, by
reason of any instrument, record, claim, encumbrance or proceeding which is apparently valid or
effective but is in truth and in fact invalid, ineffective, voidable, or unenforceable, and may be
prejudicial to said title, an action may be brought to remove such cloud or to quiet the title,

An action may also be brought to prevent a cloud from being cast upon title to real property or
any interest therein."

The mortgage of the subject property to the Bank of Commerce, annotated on the Spouses San
Pablos TCT, constitutes a cloud on their title to the subject property, which may, at first, appear
valid and effective, but is allegedly invalid or voidable for having been made without their
knowledge and authority as registered owners. We thus have established that the case filed by
the spouses San Pablo before the MTC is actually an action for quieting of title, a real action, the
jurisdiction over which is determined by the assessed value of the property. The
assessed value of the subject property located in Mandaue City, as alleged in the complaint,
is P4,900, which falls within the jurisdiction of the MTC.

According to Section 33 of Batas Pambansa Blg. 129, as amended, otherwise known as The
Judiciary Reorganization Act of 1980:

Sec. 33. Jurisdiction of Metropolitan Trial Courts, MTC and Municipal Circuit Trial Courts in Civil
Cases. Metropolitan Trial Courts, MTCs, and Municipal Circuit Trial Courts shall exercise:

(3) Exclusive original jurisdiction in all civil actions which involve title to, or possession of, real
property, or any interest therein where the assessed value of the property or interest therein
does not exceed twenty thousand pesos (P20,000.00): Provided, That in cases of land not
declared for taxation purposes, the value of such property shall be determined by the assessed
value of the adjacent lots.

Even granting for the sake of argument that the MTC did not have jurisdiction over the case, the
Bank of Commerce is nevertheless estopped from repudiating the authority of the court
to try and decide the case after having actively participated in the proceedings before it and
invoking its jurisdiction by seeking an affirmative relief therefrom.
As we have explained quite frequently, a party may be barred from raising questions of
jurisdiction when estoppel by laches has set in. Estoppel by laches is failure or neglect for
unreasonable and unexplained length of time to do what, by exercising due diligence, ought to
have been done earlier, warranting the presumption that the party entitled to assert it has either
abandoned it or has acquiesced to the correctness or fairness of its resolution. This doctrine is
based on grounds of public policy which, for the peace of the society, requires the
discouragement of stale claims, and, unlike the statute of limitations, is not a mere question of
time but is principally an issue of inequity or unfairness in permitting a right or claim to be
enforced or espoused.

Participation in all stages before the trial court, that included invoking its authority in asking for
affirmative relief, effectively bars the party by estoppel from challenging the courts
jurisdiction. The Court frowns upon the undesirable practice of a party participating in the
proceedings and submitting his case for decision and then accepting the judgment, only if
favorable, and attacking it for lack of jurisdiction when adverse.

We now proceed to resolve the issue of whether a forged SPA or Deed of REM could be a source
of a valid title. Settled is the fact, as found by the MTC and as affirmed by both the RTC and the
CA, that the SPA and the Deed of REM had been forged. Such fact is no longer disputed by the
parties. Thus, the only issue remaining to be threshed out in the instant petition is whether
the Bank of Commerce is a mortgagee in good faith. The MTC and the RTC held that the
Bank of Commerce acted in good faith in entering into the loan transaction with Santos, while
the CA, on the other hand, ruled otherwise.

The Bank of Commerce posits that it is a mortgagee in good faith and therefore entitled to
protection under the law. It strenuously asserts that it is an innocent party who had no
knowledge that the right of Santos to mortgage the subject property was merely simulated.

In Cavite Development Bank v. Spouses Lim, the Court explained the doctrine of mortgagee in
good faith, thus:

There is, however, a situation where, despite the fact that the mortgagor is not the owner of the
mortgaged property, his title being fraudulent, the mortgage contract and any foreclosure sale
arising there from are given effect by reason of public policy. This is the doctrine of "the
mortgagee in good faith" based on the rule that all persons dealing with property covered by the
Torrens Certificates of Title, as buyers or mortgagees, are not required to go beyond what
appears on the face of the title. The public interest in upholding the indefeasibility of a
certificate of title, as evidence of lawful ownership of the land or of any encumbrance thereon,
protects a buyer or mortgagee who, in good faith, relied upon what appears on the face of the
certificate of title.

Indeed, a mortgagee has a right to rely in good faith on the certificate of title of the mortgagor
of the property given as security, and in the absence of any sign that might arouse suspicion,
the mortgagee has no obligation to undertake further investigation. This doctrine pre-
supposes, however, that the mortgagor, who is not the rightful owner of the
property, has already succeeded in obtaining Torrens title over the property in his name and
that, after obtaining the said title, he succeeds in mortgaging the property to another who relies
on what appears on the title. This is not the situation in the case at bar since Santos was not the
registered owner for he merely represented himself to be the attorney-in-fact of the spouses San
Pablo.

In cases where the mortgagee does not directly deal with the registered owner of real property,
the law requires that a higher degree of prudence be exercised by the mortgagee. As
we have enunciated in the case of Abad v. Guimba:28
x x x While one who buys from the registered owner does not need to look behind the certificate
of title, one who buys from one who is not a registered owner is expected to examine not only
the certificate of title but all the factual circumstances necessary for [one] to determine if there
are any flaws in the title of the transferor, or in [the] capacity to transfer the land. Although the
instant case does not involve a sale but only a mortgage, the same rule applies inasmuch as the
law itself includes a mortgagee in the term "purchaser."

This principle is applied more strenuously when the mortgagee is a bank or a banking institution.
In the case of Cruz v. Bancom Finance Corporation, We ruled:

Respondent, however, is not an ordinary mortgagee; it is a mortgagee-bank. As such,

unlike private individuals, it is expected to exercise greater care and prudence in its dealings,
including those involving registered lands. A banking institution is expected to exercise due
diligence before entering into a mortgage contract. The ascertainment of the status or condition
of a property offered to it as security for a loan must be a standard and indispensable part of its
operations. The banking system is an indispensable institution in the modern world
and plays a vital role in the economic life of every civilized nation. Consequently, the
highest degree of diligence is expected, and high standards of integrity and performance are
even required, of it.

The Bank of Commerce clearly failed to observe the required degree of caution. That the person
applying for the loan is other than the registered owner of the real property being mortgaged
should have already raised a red flag and which should have induced the Bank of Commerce to
make inquiries into and confirm Santos authority to mortgage the Spouses San Pablos property.

Having laid that the bank of Commerce is not in good faith necessitates us to award moral
damages, exemplary damages, attorneys fees and costs of litigation in favor of the spouses San
Pablo.

We thus rule that the forged SPA and Deed of REM is void ab initio. Consequently, the
foreclosure proceedings conducted on the strength of the said SPA and Deed of REM, is likewise
void ab initio. Since the Bank of Commerce is not entitled to the protection of its rights to the
subject property. Considering further that it was not shown that the Bank of Commerce has
already transferred the subject property to a third person who is an innocent purchaser for value
(since no intervention or third-party claim was interposed during the pendency of this case), it is
but proper that the subject property should be retained by the Spouses San Pablo.

HEIRS OF MARCELA BITUIN vs CAOLENG, SR, et al

Two parcels of land were originally owned by siblings Juan Romero and Epifania Romero, the
common ancestors of the parties in this instant petition. Both properties are located at Sta. Ines,
Betis, Guagua, Pampanga covering an area of 1,713 square meters and 788 sq. m., respectively.
The first property as Cad Lot No 3661; the second land was Cad Lot Nos 3448 and
3449. Juan Romero married Maria Pecson, while Epifania Romero married Jose Caoleng.

Juan Romero and Maria Pecson bore Jacoba Romero, while Epifania Romero and Jose
Caoleng bore Agustin Caoleng.

Eventually, Jacoba Romero married Antonio Salonga and they begot Marcela Salonga, the
immediate predecessor-in-interest of petitioners. Marcela was married to German Bituin and
they were blessed with ten children. On July 24, 1986, Marcela died intestate.
Meanwhile, Agustin Caoleng married Maria David and they had seven children, respondents in
this case. The children are: Silverio (deceased), Gonzalo, Rita (deceased), Juana, Teofilo,
Angela, and Lourdes (deceased).

On October 9, 1989, petitioners, represented by their attorney-in-fact German Bituin, filed a

Complaint for "Quieting of Title, Reconveyance, Ownership, Recovery of Possession, Damages,
with Prayer for Preliminary Injunction" before the RTC of Guagua, Pampanga, against
respondents.

Petitioners alleged in the Complaint that due to stealth and high-handed machination,
Teofilo Caoleng succeeded in securing a title for Cad Lot No 3661 of Guagua Cadastre by
fraudulently stating that the same was owned only by his late father, Agustin Caoleng. OCT No
3399 under Free Patent was issued on February 11, 1976 by the Bureau of Lands through the
ROD of Pampanga.

Petitioners averred that they are entitled to the one-half pro-indiviso share of Cad Lot Nos
3661, 3448, and 3449 as the only surviving heirs of Juan Romero. They admit that the other
half belongs to the surviving heirs of Epifania Romero, respondents herein. Petitioners
likewise assert that respondents Caolengs are occupying most of Cad Lot Nos 3448 and 3449
However, petitioners claim that they have been in the actual, physical, material, and
continuous possession of a great part of Cad Lot No 3661; while the smaller portion thereof is
being occupied by the respondent Gozums, the heirs of Rita Caoleng.

Petitioners further state that on November 24, 1983, an Extra-Judicial Settlement of

Estate of Deceased Person with Sale was executed for the real property covered by OCT
No 3399 Free Patent or Lot No. 3661, containing an area of 1,479 sq. m (1,713 -1,479 =
1479). In the said deed, Lot A, with an area of 162 sq. m., was adjudicated for Teofilo
Caoleng; Lot C, having an area of 148 sq. m., for Angela Caoleng; and Lot D, with an area of
148 sq. m., for the heirs of Rita Caoleng, the Gozums. In the same document, the shares of
Gonzalo, Lourdes, and Juana, all surnamed Caoleng, were sold to Marcela Salonga and this
portion was denominated as Lot B, having an area of 1,021 sq. m. All in all, 1,479 (Lot
3661).

Furthermore, Petitioners recounted that when Marcela Salonga ,died on July 24, 1986, the
properties she left behind were consolidated and it was only at that time that they discovered
OCT No. 3399 (or Cad Lot 3661), the document referring to the extra-judicial settlement, and
the corresponding subdivision plan.

Pursuant to the subdivision plan, Petitioners fenced the portion allotted to the late Marcela
Salonga Bituin. Petitioners alleged that they have been in possession of the property since
time immemorial. They claim that they were only able to fence the three sides of the
property, excepting the side adjoining the portion being occupied by the Gozums, because of a
misunderstanding as to the boundaries of the property.

On October 16, 1989, a TRO was issued by the court ordering respondents to desist temporarily
from selling, disposing, conveying, or creating any encumbrance against OCT No. 3399 (Cad
Lot 3661) until the issue of ownership shall have been finally determined or unless otherwise
ordered by the court.

In their Answer, respondents, except for Gonzalo Caoleng, declare that the complaint stated

1) No cause of action because OCT No. 3399(Cad Lot 3661) cannot be attacked,
cancelled, and annulled. To them, a collateral attack of the title is not allowed by law,
 2) They claim that petitioners are guilty of estoppel and laches since OCT No. 3399
(Cad Lot 3661) was issued as early as February 11, 1978.
3) They likewise allege that the deed of extra-judicial settlement was a forged
document and, therefore, cannot give rise to any right on the part of petitioners.

On July 30, 1990, petitioners filed an Complaint, petitioners included in their claim Lot No. 3449,
which they allegedly discovered to have been fraudulently titled by Teofilo Caoleng in the name
of the heirs of Agustin Caoleng alone under OCT No. 3398 Free Patent issued last February 11,
1976 by the ROD of Pampanga. Petitioners, therefore, pray that judgment be rendered in their
favor and against respondents. Plaintiffs pray further for such and other reliefs as may be just
and equitable.

During the trial, petitioners presented two witnesses, namely, Gonzalo Caoleng and German
Bituin.

Gonzalo Caoleng is 81 years old and one of respondents herein. He testified, among other
things, that Lot No. 3661 is located near the sugar land. Aside from Marcela Salonga Bituin,
the other dwellers of this lot are the Caolengs. Gonzalo also affirmed that Marcela occupied a
bigger portion of this land. The witness stated that Lot Nos. 3448 and 3449 are situated
near a creek and now occupied by the other Caolengs. Gonzalo further testified that the disputed
properties are titled though he had no idea how Teofilo Caoleng had them registered in the
name of Agustin Caoleng. He elaborated that when the titles were released, Marcela
summoned her relatives for a meeting and they agreed that the property being occupied by
Marcela would be given to her. The parties prepared an agreement which they called Extra-
Judicial Settlement of Estate of Deceased Person with Sale. When shown a copy of the
document, Gonzalo Caoleng confirmed that the signature appearing on top of his typewritten
name was his signature. When asked to identify the signatures of Teofilo and Angela Caoleng,
he did so and readily told the court that they signed the document at his residence. After the
execution of the deed, Gonzalo related that Lot No. 3661 was surveyed by the Bureau of Lands
and a subdivision plan was prepared pursuant thereto. Lastly, the witness averred that the extra-
judicial settlement was executed so that the share of Marcela would be given to her.

The second witness, German Bituin, testified that he is the widower of Marcela Salonga Bituin.
Salient points of his testimony show that petitioners are claiming more than 1,000 sq. m. of
the disputed properties which are already in their possession. Some of the improvements made
on the property were a fence and a bodega that unfortunately burned during the pendency of
the case. He added that his family is occupying a bigger portion of Lot No. 3661 because
his deceased wife was the sole heir of Jacoba Romero; and while Marcela was still alive, she
exchanged her share with that of her cousin. The witness explained that the contested lots
are titled; but his family did not secure a separate title for themselves inasmuch as the relatives
of his wife refused to acknowledge their right over the property after Marcela died. The relatives
did not even recognize the extra-judicial settlement after the death of Marcela.

The lone witness for respondents, Rosita Gabriana, testified that the signature appearing
above her name in the extra-judicial settlement was not her signature. After discovering the
forgery in the document, Rosita filed a complaint. She further avowed that the subdivision
plan, presented as evidence for the petitioners, is likewise fake because it was based on a
forged document. On cross-examination, Rosita admitted that she came to know the
properties subject of this case only when she saw the documents indicating that Agustin Caoleng
was the owner of the lots. The witness admitted that she never learned how Agustin got the
properties although she knows that Agustin is the owner of the lots.

On March 13, 1996, the trial court ruled in favor of petitioners.

 1. Declaring plaintiffs (petitioners) as owner to the extent of 941 square meters of Lot
3661 now covered by Original Certificate No 3399. The remaining area shall belong to
defendants (Respondents).

2. Ordering defendants (respondents) to cause the segregation of the aforementioned

portion and to reconvey the same to plaintiffs (petitioners). Segregations shall be
accomplished by means of an approved subdivision plan and an agreement of
subdivision/partition. The expense for the subdivision plan shall be borne by plaintiffs
and defendants pro-rata.

3. After the segregation and the subdivision plan have been accomplished defendants
are ordered to surrender the owners duplicate copy of OCT 3399 (Lot 3661) to the
ROD Pampanga who in turn is directed to cancelled said title and to issue two separate
titles, one in the name of plaintiffs (petitioners) for 941 square meters and another in
the name of defendants (respondents) for 538 square meters on the basis of the
approved subdivision plan; the herein parties shall bear their own expense for their own
title.

4. Ordering the defendants to pay plaintiffs P10k by way of attorneys fees and expense
of litigation.

Not satisfied with the decision of the RTC, respondents interposed an appeal.

On appeal, stating that respondents ownership over Lot No. 3661 is based on OCT No. 3399
issued under Free Patent, the appellate court ruled that respondents are the registered owners
of the lands in dispute. The CA reasoned that a free patent issued by the proper authority is
granted only to qualified applicants and indicates that the land was previously public in
character. Thus, OCT No. 3399 registered in the name of the respondents gives an
indefeasible title in their favour (respondents).

As to the issue of reconveyance of property, the CA held that the action had prescribed.
The CA further declared that the allegation of fraud on the part of respondents was not proven
by petitioners as OCT No. 3399 was issued by the Government through a free patent.

Petitioners now seek relief from this Court with the lone issue of W-O-N the CA committed
grave error in applying the law on prescription.

Petitioners posit that there are two fundamental legal grounds why prescription should not have
been applied by the appellate court against them to defeat their rights over the property at
issue:

1. Prescription was not raised by Respondents as a defense -- in a Motion to Dismiss, in

their Answer, or even in their Appeal Brief; and

2. Petitioners were, have been, and still are in possession of the portion allotted to their
predecessor-in-interest, Marcela Salonga-Bituin.

In their Comment, respondents assert that reconveyance is not a proper remedy because
the lands were previously public in character and only the Department of Environment and
Natural Resources has the capacity to determine who are qualified to be awarded. They add that
the lots are covered by OCT Nos. 3398 and 3399, and, therefore, cannot be impugned
collaterally. Lastly, respondents aver that they raised the defense of prescription in connection
with estoppel and laches.
The petition is partly meritorious.

Well entrenched is the rule that an action for reconveyance prescribes in ten years, the
reckoning point of which is the date of registration of the deed or the date of issuance of the
certificate of title over the property. In an action for reconveyance, the decree of registration
is highly regarded as incontrovertible. What is sought instead is the transfer of the property
or its title, which has been erroneously or wrongfully registered in another persons name to its
rightful or legal owner, or to one, who has a better right.

However, in a number of cases in the past, the Court declared that if the person claiming to be
the owner of the property is in actual possession thereof, the right to seek reconveyance,
which in effect seeks to quiet title to the property, does not prescribe. The reason for
this is that one who is in actual possession of a piece of land claiming to be the owner thereof
may wait until his possession is disturbed or his title is attacked before taking steps to vindicate
his right, the rationale for the rule being that his undisturbed possession provides him a
continuing right to seek the aid of a court of equity to ascertain and determine the nature of the
adverse claim of a third party and its effect on his own title, which right can be claimed only by
the one who is in possession.30

In his testimony, Gonzalo Caoleng, who is one of respondents, admitted that Marcela Salonga
Bituin occupies a portion of Lot No. 3661.

Surprisingly, respondents did not controvert petitioners allegations that they are in possession of
a large portion of Lot No. 3661 in the cross-examination or any of the pleadings. If respondents
were truly the owners of Lot No. 3661, why did they allow petitioners to stay there for such a
long period of time? All this time that petitioners introduced improvements on the land in
controversy, respondents did not oppose or complain about the improvements. Even the trial
court was correct in observing that petitioners possession of Lot No. 3661 is an advantage for
them, thus:

Gonzalo Caoleng, a man of 81 years of age and one of the defendants in this case testified for
and in behalf of the plaintiffs. He supported the claim of the plaintiffs. His testimony is a
declaration against his own interest because by saying that plaintiffs have an interest over the
land in dispute he practically waived his right and interest, which is substantial over the property
which is already titled in the name of the Heirs Agustin Caoleng and he happens to be one of the
heirs of Agustin Caoleng being one of his children. His testimony which is credible deserves full
faith and credit. A very old man, he undoubtedly has sufficient knowledge of the history of the
disputed land especially of its possessor, so that when he said plaintiff Marcela Salonga
was in possession of the bigger portion of Lot 3661 this testimony cannot be
ignored.33

However, the appellate court decided otherwise and emphasized the fact that respondents are
grantees of a free patent and eventually became holders of a title.

Elementary is the rule that simple possession of a certificate of title is not necessarily conclusive
to a holders genuine ownership of property. If a person obtains title that includes land to which
he has no legal right, that person does not, by virtue of said certificate alone, become the owner
of the land illegally or erroneously included. This Court has held time and again that the rule on
indefeasibility of title cannot be used for the perpetration of fraud against the legal
owner. Hence, registration proceedings could not be used as a shield for fraud. To hold
otherwise would be to put a premium on land-grabbing and transgress the broader principle in
human relations that no person shall unjustly enrich himself at the expense of another.
In the present case, it cannot be contradicted that petitioners have been in actual possession of
Lot No. 3661. The reconveyance is just and proper in order to bring to a halt the intolerable
anomaly that the patentees resort to in obtaining a Torrens title for the land which they and
their predecessors never possessed and which has been possessed by another in the concept of
an owner.39

After a careful scrutiny of the pleadings of the case, it was unearthed that petitioners were
asking for the reconveyance of the one-half portion of Lot Nos. 3661, 3448, and 3449. Sadly,
this cannot be done as the records lack sufficient evidence to support this contention. Petitioners
were only able to prove their right to ownership of the 1,021 sq. m. of Lot No. 3661 because
they showed adequate proof of their lengthy possession of that area of land which was
concurred in by the witness for the defendants. This Court cannot grant petitioners ownership of
half of Lot Nos. 3448 and 3449 as they have not shown any credible and trustworthy evidence
that they are entitled to that share in accordance with law or any existing jurisprudence.

The Court hereby AFFIRMS the ownership of petitioners of Lot No. 3661 to the extent of
1,021 square meters and respondents are ORDERED to RECONVEY title to the same to
petitioners. The ROD is ORDERED to CANCEL OCT No. 3399 and ISSUE another certificate of
title over the property in favor of petitioners, to the extent of 1,021 square meters, as co-owners
thereof, and another certificate of title in the name of respondents for the remainder of the lot
as pro-indiviso co-owners. No pronouncement as to costs.