Cruz vs Secretary of DENR

Natural Resources and Environmental Law; Constitutional Law; IPRA;

Regalian Doctrine

GR. No. 135385, Dec. 6, 2000

FACTS:
Petitioners Isagani Cruz and Cesar Europa filed a suit for prohibition and mandamus
as citizens and taxpayers, assailing the constitutionality of certain provisions of
Republic Act No. 8371, otherwise known as the Indigenous Peoples Rights Act of
1997 (IPRA) and its implementing rules and regulations (IRR). The petitioners
assail certain provisions of the IPRA and its IRR on the ground that these amount to
an unlawful deprivation of the States ownership over lands of the public domain as
well as minerals and other natural resources therein, in violation of the regalian
doctrine embodied in section 2, Article XII of the Constitution.

ISSUE:
Do the provisions of IPRA contravene the Constitution?

HELD:
No, the provisions of IPRA do not contravene the Constitution. Examining the IPRA,
there is nothing in the law that grants to the ICCs/IPs ownership over the natural
resources within their ancestral domain. Ownership over the natural resources in
the ancestral domains remains with the State and the rights granted by the IPRA to
the ICCs/IPs over the natural resources in their ancestral domains merely gives
them, as owners and occupants of the land on which the resources are found, the
right to the small scale utilization of these resources, and at the same time, a priority
in their large scale development and exploitation.

Additionally, ancestral lands and ancestral domains are not part of the lands of the
public domain. They are private lands and belong to the ICCs/IPs by native title,
which is a concept of private land title that existed irrespective of any royal grant
from the State. However, the right of ownership and possession by the ICCs/IPs of
their ancestral domains is a limited form of ownership and does not include the
right to alienate the same.
Secretary of DENR vs Yap
Natural Resources and Environmental Laws: Regalian Doctrine

GR No. 167707; Oct 8, 2008

FACTS:
This petition is for a review on certiorari of the decision of the Court of Appeals (CA)
affirming that of the Regional Trial Court (RTC) in Kalibo Aklan, which granted the
petition for declaratory relief filed by respondents-claimants Mayor Jose Yap et al,
and ordered the survey of Boracay for titling purposes.
On Nov. 10, 1978, President Marcos issued Proclamation No. 1801 declaring
Boracay Island as a tourist zone and marine reserve. Claiming that Proc. No. 1801
precluded them from filing an application for a judicial confirmation of imperfect
title or survey of land for titling purposes, respondents-claimants filed a petition for
declaratory relief with the RTC in Kalibo, Aklan.
The Republic, through the Office of the Solicitor General (OSG) opposed the petition
countering that Boracay Island was an unclassified land of the public domain. It
formed part of the mass of lands classified as public forest, which was not
available for disposition pursuant to section 3(a) of PD No. 705 or the Revised
Forestry Code.

ISSUE:
Whether unclassified lands of the public domain are automatically deemed
agricultural land, therefore making these lands alienable.

HELD:
No. To prove that the land subject of an application for registration is alienable, the
applicant must establish the existence of a positive act of the government such as a
presidential proclamation or an executive order, an administrative action,
investigative reports of the Bureau of Lands investigators, and a legislative act or
statute.
A positive act declaring land as alienable and disposable is required. In keeping with
the presumption of state ownership, the Court has time and again emphasized that
there must be a positive act of the government, such as an official proclamation,
declassifying inalienable public land into disposable land for agricultural or other
purposes.
The Regalian Doctrine dictates that all lands of the public domain belong to the
State, that the State is the source of any asserted right to ownership of land and
charged with the conservation of such patrimony.

All lands not otherwise appearing to be clearly within private ownership are
presumed to belong to the State. Thus, all lands that have not been acquired from
the government, either by purchase or by grant, belong to the State as part of the
inalienable public domain.
Legarda vs. Saleeby

G.R. No. 8936

October 2, 1915

FACTS: The plaintiffs and the defendant occupy, as owners, adjoining lots in the
district of Ermita in the city of Manila. There exists and has existed a number of
years a stone wall between the said lots. Said wall is located on the lot of the
plaintiffs. The plaintiffs, March 2, 1906, presented a petition in the Court of Land
Registration for the registration of their lot, which decreed that the title of the
plaintiffs should be registered and issued to them the original certificate provided
for under the Torrens system. Said registration and certificate included the wall.

Later the predecessor of the defendant presented a petition in the Court of Land
Registration for the registration of the lot now occupied by him. On March 25, 1912,
the court decreed the registration of said title and issued the original certificate
provided for under the Torrens system. The description of the lot given in the
petition of the defendant also included said wall.

On December 13, 1912 the plaintiffs discovered that the wall which had been
included in the certificate granted to them had also been included in the certificate
granted to the defendant .They immediately presented a petition in the Court of
Land Registration for an adjustment and correction of the error committed by
including said wall in the registered title of each of said parties.

The lower court however, without notice to the defendant, denied said petition upon
the theory that, during the pendency of the petition for the registration of the
defendants land, they failed to make any objection to the registration of said lot,
including the wall, in the name of the defendant.

ISSUE: Who is the owner of the wall and the land occupied by it?

HELD: The decision of the lower court is based upon the theory that the action for
the registration of the lot of the defendant was a judicial proceeding and that the
judgment or decree was binding upon all parties who did not appear and oppose it

Granting that theory to be correct one , then the same theory should be applied to
the defendant himself. Applying that theory to him, he had already lost whatever
right he had therein, by permitting the plaintiffs to have the same registered in their
name, more than six years before. Having thus lost hid right, may he be permitted to
regain it by simply including it in a petition for registration?

For the difficulty involved in the present case the Act (No. 496) provides for the
registration of titles under the Torrens system affords us no remedy. There is no
provision in said Act giving the parties relief under conditions like the present.
There is nothing in the Act which indicates who should be the owner of land which
has been registered in the name of two different persons.

We have decided, in case of double registration under the Land Registration Act,
that the owner of the earliest certificate is the owner of the land. May this rule be
applied to successive vendees of the owners of such certificates? Suppose that one
or the other of the parties, before the error is discovered, transfers his original
certificate to an innocent purchaser. The general rule is that the vendee of land has
no greater right, title, or interest than his vendor; that he acquires the right which
his vendor had, only. Under that rule the vendee of the earlier certificate would be
the owner as against the vendee of the owner of the later certificate.

It would be seen to a just and equitable rule, when two persons have acquired equal
rights in the same thing, to hold that the one who acquired it first and who has
complied with all the requirements of the law should be protected.

In view of our conclusions, above stated, the judgment of the lower court should be
and is hereby revoked. The record is hereby returned to the court now having and
exercising the jurisdiction heretofore exercised by the land court, with direction to
make such orders and decrees in the premises as may correct the error heretofore
made in including the land in the second original certificate issued in favor of the
predecessor of the appellee, as well as in all other duplicate certificates issued.
G.R. No. 86787 May 8, 1992

MILAGROS TUMULAK BISHOP, JUANA PANGILINAN, EMILIO MAXIMO, ANITA

PANGILINAN, MAGDALENA ROSETE, MANUEL DACUT, RECTO DIESTA,
VIRGINIA NOVICIO, and LINDA BONILLA, petitioners,
vs.
HONORABLE COURT OF APPEALS and SPOUSES MANUEL AND JESUSA SALANG,
respondents.

Saturnino Bactad for petitioners.

CRUZ, J.:

The question presented in this case is not novel. As in previous cases resolving the
same issue, the answer will not change.

In dispute are certain portions of a parcel of land situated in Calapacuan, Subic,

Zambales, with a total area of 1,652 square meters. These portions are in the
possession of the petitioners. The entire parcel is registered in the name of the
private respondents under Transfer Certificate of Title No. T-29018.

On January 22, 1985, the private respondents sued the petitioners for recovery of
possession of the lots in question. The plaintiffs invoked their rights as registered
owners of the land. In their answer, the defendants claimed that the lots were part
of the public domain and could not have been registered under the Torrens system.
All alleged long and continuous possession of the lots and produced tax declarations
in their names. Two of them maintained that they had acquired their respective lots
by virtue of valid contracts of sale. Another based her claim on inheritance.

After trial, Judge Nicias O. Mendoza of the Regional Trial Court of Olongapo City
rendered judgment in favor of the plaintiffs. 1 He held in part as follows:

The plaintiffs, being the registered owners in fee simple of the land in question,
necessarily have the lawful right to the physical possession of the land. The owner of
a land has a right to enjoy and possess it, and he has also the right to recover and
repossess the same from any person occupying it unlawfully.

Art. 428 New Civil Code

The owner has the right to enjoy and dispose of a thing, without other limitations
than those established by law.

The owner has also a right of action against the holder and possessor of the thing in
order to recover it.
There is, therefore, no doubt in law, that the plaintiffs being the registered owners of
the land in question have also the corresponding right to the recovery and
possession of the same. The defendants who are in physical occupancy of the land
belonging to the plaintiffs have no right whatsoever to unjustly withhold the
possession of the said land from the plaintiffs. The defendants' occupancy of the
land in question is unlawful and in violation of plaintiffs right to the recovery and
possession of the land they owned. The evidence presented by the defendants
claiming as per certifications of the Bureau of Forestry that the land occupied by
them is within the alienable and disposable public land, deserves scant
consideration as the said certification are without basis in law. The moment the land
in question was titled in the name of the plaintiffs, it ceased to become a part of the
public domain as the same became the private property of the registered owner, the
herein plaintiffs. Tax declarations of the land made in the names of the defendants
are not evidence of title, it appearing that the land is already titled to the plaintiffs.
The registration of the land in the names of the defendants with the Assessor's
Office for taxation purposes and the payments of real property taxes by the
defendants can not and does not defeat the title of the plaintiffs to the land. The fact
that the defendants have been in occupancy of the land in question for quite a
period of time is of no moment as prescription will not ripen into ownership
because the land is covered by a torrens title. Acquisitive prescription will not be
available to land titled under Art. 496.

PREMISED THEREFORE on the foregoing consideration, the Court finds and so holds
that the plaintiffs being the registered owners of the land in question are entitled to
the possession of the same, and that the defendants who are occupying the land
belonging to the plaintiffs in violation of the right of the latter, are duty-bound to
restore possession of the same to the titled owners, the herein plaintiffs.

On appeal, this decision was affirmed by the respondent court on August 22, 1988. 2
Their motion for reconsideration having been denied, the petitioners then came to
this Court, urging reversal of the courts below.

They allege that:

1. The land in question is part of the public domain and could not have been
validly registered under the Torrens system.

2. The petitioners have acquired title to their respective lots by laches.

3. In the alternative, they should be considered builders in good faith entitled to

the rights granted by Articles 448, 546, 547 and 548 of the Civil Code.

The petition has no merit.

On the first ground, the Court notes that the private respondents' title is traceable to
an Original Certificate of Title issued way back in 1910 or eighty-two years ago. That
certificate is now incontrovertible and conclusive against the whole world. The
resumption of regularity applies to the issuance of that certificate. This presumption
covers the finding that the land subject of the certificate was private in nature and
therefore registrable under the Torrens system.

To sustain an action for annulment of a Torrens certificate for being void ab initio, it
must be shown that the registration court had not acquired jurisdiction over the
case and that there was actual fraud in securing the title. 3 Neither of these
requirements has been established by the petitioners. All they submitted was the
certification of the Bureau of Forestry that the land in question was alienable and
disposable public land. The trial court was correct in ruling that this deserved scant
consideration for lack of legal basis. To be sure, a certification from an
administrative body cannot prevail against court decision declaring the land to be
registrable.

Significantly, it does not appear in the record that the Director of Forestry, or any
other representative of the Government for that matter, entered any opposition to
the land registration proceedings that led to the issuance of the Original Certificate
of Title. No less importantly, an action to invalidate a certificate of title on the
ground of fraud prescribes after the expiration of one (1) year from the entry of the
decree of registration 4 and cannot now be resorted to by the petitioners at this late
hour. And collaterally at that.

The strange theory submitted by the petitioners that the owner of registered land
must also possess it does not merit serious attention. The non-presentation by the
private respondents of their tax declarations on the land is no indication that they
have never acquired ownership thereof or have lost it by such omission.

The second ground must also be rejected.

As registered owners of the lots in question, the private respondents have a right to
eject any person illegally occupying their property. This right is imprescriptible.
Even if it be supposed that they were aware of the petitioners' occupation of the
property, and regardless of the length of that possession, the lawful owners have a
right to demand the return of their property at any time as long as the possession
was unauthorized or merely tolerated, if at all. This right is never barred by laches.

In urging laches against the private respondents for not protesting their long and
continuous occupancy of the lots in question, the petitioners are in effect contending
that they have acquired the said lots by acquisitive prescription. It is an elementary
principle that the owner of a land registered under the Torrens system cannot lose
it by prescription. 5

As the Court observed in the early case Legarda v. Saleeby: 6

The real purpose of the Torrens system of land registration is to quite title to land;
to put a stop forever to any question of the legality of the title, except claims which
were noted at the time of registration in the certificate, or which may arise
subsequent thereto. That being the purpose of the law, it would seem that once the
title was registered, the owner may rest secure, without the necessity of waiting in
the portals of the court, or sitting in the "mirador de su casa," to avoid the possibility
of losing his land.

Applied consistently these many years, this doctrine has been burnished bright with
use and has long become a settled rule of law.

In light of the observations already made, it is obvious that the petitioners cannot
invoke the status of builders in good faith to preserve their claimed rights to the
constructions they have made on the lots in dispute.

A builder in good faith is one who is unaware of any flaw in his title to the land at
the time he builds on it. 7 This definition cannot apply to the petitioners because
they knew at the very outset that they had no right at all to occupy the subject lots.

The petitioners have consistently insisted that the lots were part of the public
domain and even submitted a certification to that effect from the Bureau of Forestry.
The land was in fact registered under the Torrens system and such registration was
constructive notice to the whole world, including the petitioners. Apparently, the
petitioners did not take the trouble of checking such registration. At any rate, the
point is that, whether the land be public or private, the petitioners knew they had no
right to occupy it and build on it. The Court of Appeals was correct in calling them
squatters for having entered, without permission or authority, land that did not
belong to them.

In urging reversal of the trial court and the respondent court, the petitioners are
asking us to overturn long established doctrines guaranteeing the integrity of the
Torrens system and the indefeasibility of titles issued thereunder for the protection
and peace of mind of the registered owner against illegal encroachments upon his
property. We are not disposed to take this drastic step on the basis alone of their
feeble arguments.

WHEREFORE, the petition is DENIED, with costs against the petitioners. It is so

ordered.

Narvasa, C.J., Grio-Aquino, Medialdea and Bellosillo, JJ., concur.

G.R. No. L-68741 January 28, 1988

NATIONAL GRAINS AUTHORITY, plaintiff-appellee,

vs.
INTERMEDIATE APPELLATE COURT, MELECIO MAGCAMIT, NENA COSICO and
EMELITA MAGCAMIT, defendants-appellants.

PARAS, J.:

This is a petition for review of the decision of the then Intermediate Appellate Court
* (now Court of Appeals) dated January 31, 1984, reversing the decision of the Court
of First Instance of Laguna and San Pablo City, 8th Judicial District, Branch III, and of
the resolution dated August 28, 1984 denying the motion for reconsideration filed
thereof.

The undisputed facts of this case as found by the Trial Court and the Intermediate
Appellate Court are as follows:

On December 2,1971, the spouses Paulino Vivas and Engracia Lizards, as owners of
a parcel of land situated in Bo. San Francisco, Victoria, Laguna, comprising more or
less 105,710 square meters, sold for P30,000.00 said property in favor of spouses
Melencio Magcamit and Nena Cosico, and Amelita Magcamit (herein private
respondents) as evidenced by "Kasulatan Ng Bilihang Mabiling Muli." This sale with
right to repurchase was recorded in the Office of the Register of Deeds of Laguna on
December 6,1971 under Act No. 3344. On January 31,1972 the sale was made
absolute by the spouses Vivas and Lizardo in favor of the private respondents for
the sum of P90,000.00; P50,000.00 of which was paid upon the execution of the
instrument, entitled "Kasulatan Ng Bilihan Tuluyan," after being credited with the
P30,000.00 consideration of the "Kasulatan Ng Mabibiling Muli," and the balance of
P40,000.00 was to be paid the moment that the certificate of title is issued. From the
execution of said Kasulatan, private respondent have remained in peaceful, adverse
and open possession of subject property.

On February 26, 1975, an Original Certificate of Title No. T-1728 covering the
property in question was issued to and in the name of the spouses Vivas and Lizardo
without the knowledge of the private respondents and on April 30, 1975, said
Spouses executed a Special Power of Attorney in favor of Irenea Ramirez
authorizing the latter to mortgage the property with the petitioner, National Grains
Authority.

On May 2, 1974, the counsel for the petitioner wrote the Provincial Sheriff in Sta.
Cruz, Laguna, requesting for the extrajudicial foreclosure of the mortgage executed
by Irenea Ramirez on May 18, 1975, covering, among others, the property involved
in this case covered by OCT No. T-1728, for unpaid indebtedness in the amount of
P63,948.80 in favor of the petitioner.

On May 31, 1974, the Provincial Sheriff caused the issuance of the notice of sale of
the property in question, scheduling the public auction sale on June 28, 1974. The
petitioner was the highest and successful bidder so that a Certificate of Sale was
issued in its favor on the same date by the Provincial Sheriff.

On July 10, 1974, the petitioner in its capacity as attorney-in-fact of the mortgagor
sold the subject real property in favor of itself. By virtue of the deed of absolute sale,
TCT No. T-75171 of the Register of Deeds for the Province of Laguna was issued in
the name of the petitioner on July 16, 1974. It was only in July 1974, that private
respondents learned that a title in the name of the Vivas spouses had been issued
covering the property in question and that the same property had been mortgaged
in favor of the petitioner. Private respondent Nena Magcamit offered to pay the
petitioner NGA the amount of P40,000.00 which is the balance of the amount due
the Vivas spouses under the terms of the absolute deed of sale but the petitioner
refused to accept the payment. On July 31, 1974, counsel for private respondents
made a formal demand on the spouses Vivas and Lizardo to comply with their
obligation under the terms of the absolute deed of sale; and soon after reiterated to
the NGA, the offer to pay the balance of P40,000.00 due under the absolute deed of
sale. On August 13, 1974 petitioner in its reply informed counsel of private
respondents that petitioner is now the owner of the property in question and has no
intention of disposing of the same.

The private respondents, who as previously stated, are in possession of subject

property were asked by petitioner to vacate it but the former refused. Petitioner
filed a suit for ejectment against private respondents in the Municipal Court of
Victoria, Laguna, but the case was dismissed.

On June 4, 1975, private respondents filed a complaint before the then Court of First
Instance of Laguna and San Pablo City, Branch III, San Pablo City, against the
petitioner and the spouses Vivas and Lizardo, praying, among others, that they be
declared the owners of the property in question and entitled to continue in
possession of the same, and if the petitioner is declared the owner of the said
property, then, to order it to reconvey or transfer the ownership to them under such
terms and conditions as the court may find just, fair and equitable under the
premises. (Record on Appeal, pp. 2-11).

In its answer to the complaint, the petitioner (defendant therein) maintained that it
was never a privy to any transaction between the private respondents (plaintiffs
therein) and the spouses Paulino Vivas and Engracia Lizardo that it is a purchaser in
good faith and for value of the property formerly covered by OCT No. 1728; and that
the title is now indefeasible, hence, private respondents' cause of action has' already
prescribed. (Record on Appeal, pp. 16-22).
After due hearing, the trial court ** rendered its decision on March 17, 1981, in
favor of the petitioner, the dispositive portion of said judgment reading as follows:

WHEREFORE, judgment is hereby rendered as follows:

(1) declaring defendant National Grains Authority the lawful owner of the
property in question by virtue of its indefeasible title to the same;

(2) ordering plaintiffs to turn over possession of the land to defendant National
Grains Authority;

(3) ordering defendants-spouses Paulino Vivas and Engracia Lizardo to pay

plaintiffs the sum of P56,000.00 representing the amount paid pursuant to the
Kasulatan Ng Bilihang Tuluyan marked Exhibit "3", with legal interest thereon from
January 31, 1972 until the amount is paid, to pay an additional amount of P5,000.00
for and as attorney's fees, an additional amount of Pl0,000.00 as moral damages,
another amount of P5,000.00 by way of exemplary damages and to pay the costs of
this suit. (Rollo, P. 35).

The private respondents interposed an appeal from the decision of the trial court to
the Intermediate Appellate Court.

After proper proceedings, the appellate court rendered its decision on January 31,
1984, reversing and setting aside the decision of the trial court as follows:

WHEREFORE, the decision of the lower court is hereby reversed and set aside and
another one is rendered ordering the National Grains Authority to execute a deed of
reconveyance sufficient in law for purposes of registration and cancellation of
transfer Certificate of Title No. T-75171 and the issuance of another title in the
names of plaintiff-appellants, and ordering defendants-appellees Paulino Vivas and
Engracia Lizardo to pay the National Grains Authority the sum of P78,375.00 (Exh.
3) within thirty (30) days from the receipts of the writ of execution. No damages and
costs. (Rollo, p. 19).

The petitioner filed a motion for reconsideration of the said decision but the same
was denied. (Rollo, p. 26).

Hence, this petition.

In the resolution of May 20, 1985, the petition was given due course and the parties
were required to submit simultaneous memoranda (Rollo, p. 128). The
memorandum for the petitioner was filed on July 3, 1985 (Rollo, p. 129) while the
memorandum for the private respondents was filed on August 26, 1985 1 Rollo p.
192).
The main issue in this case is whether or not violation of the terms of the agreement
between the spouses Vivas and Lizardo, the sellers, and private respondents, the
buyers, to deliver the certificate of title to the latter, upon its issuance, constitutes a
breach of trust sufficient to defeat the title and right acquired by petitioner NGA, an
innocent purchaser for value.

It is undisputed that: (1) there are two deeds of sale of the same land in favor of
private respondents, namely: (a) the conditional sale with right to repurchase or the
'Kasulatan Ng Bilihang Mabibiling Muli" which was registered under Act 3344 and
(b) the deed of absolute sale or "Kasulatan ng Bilihang Tuluyan" which was not
registered; (2) the condition that the Certificate of Title will be delivered to the
buyers upon its issuance and upon payment of the balance of P40,000.00 is
contained in the deed of absolute sale; and (3) the land in question at the time of the
execution of both sales was not yet covered by the Torrens System of registration.

It is axiomatic, that while the registration of the conditional sale with right of
repurchase may be binding on third persons, it is by provision of law "understood to
be without prejudice to third party who has better right" (Section 194 of the
Administrative Code, as amended by Act No. 3344). In this case, it will be noted that
the third party NGA, is a registered owner under the Torrens System and has
obviously a better right than private respondents and that the deed of absolute sale
with the suspensive condition is not registered and is necessarily binding only on
the spouses Vivas and Lizardo and private respondents.

In their complaint at the Regional Trial Court, private respondents prayed among
others, for two alternative reliefs, such as: (a) to be declared the owners of the
property in question or (b) to order the declared owner to reconvey or transfer the
ownership of the property in their favor.

Private respondents claim a better right to the property in question by virtue of the
Conditional Sale, later changed to a deed of Absolute Sale which although
unregistered under the Torrens System allegedly transferred to them the ownership
and the possession of the property in question. In fact, they argue that they have
been and are still in possession of the same openly, continuously, publicly under a
claim of ownership adverse to all other claims since the purchase on December 2,
1971 (Rollo, p. 165). It is stressed that not until the month of July, 1974 did the
plaintiff learn that a title had been issued covering the property in question (Rollo,
p. 15).

Time and time again, this Court has ruled that the proceedings for the registration of
title to land under the Torrens System is an action in rem not in personam, hence,
personal notice to all claimants of the res is not necessary in order that the court
may have jurisdiction to deal with and dispose of the res. Neither may lack of such
personal notice vitiate or invalidate the decree or title issued in a registration
proceeding, for the State, as sovereign over the land situated within it, may provide
for the adjudication of title in a proceeding in rem or one in the nature of or akin a to
proceeding in rem which shall be binding upon all persons, known or unknown
(Moscoso vs. Court of appeals, 128 SCRA 719 [1984], citing: City of Manila vs. Lack,
et al., 19 Phil. 324, 337; Roxas vs. Enriquez, 29 Phil. 31; Director of Lands vs. Roman
Catholic Archbishop of Manila, 41 Phil. 120; Aguilar vs. Caogdan, 105 Phil. 661). It is
thus evident that respondents' right over the property was barred by res judicata
when the decree of registration was issued to spouses Vivas and Lizards. It does not
matter that they may have had some right even the right of ownership, BEFORE the
grant of the Torrens Title.

Thus, under Section 44 of P.D. 1529, every registered owner receiving a certificate of
title in pursuance of a decree of registration, and every subsequent purchaser of
registered land taking a certificate of title for value and in good faith, shall hold the
same free from all encumbrances except those noted on the certificate and any of
the encumbrances which may be subsisting, and enumerated in the law. Under said
provision, claims and liens of whatever character, except those mentioned by law as
existing, against the land prior to the issuance of certificate of title, are cut off by
such certificate if not noted thereon, and the certificate so issued binds the whole
world, including the government (Aldecoa and Co. vs. Warner Barns & Co., 30 Phil.
209 [1915]; Snyder vs. Fiscal of Cebu and Avila, 42 Phil. 766 [1922]). Under said
ruling, if the purchaser is the only party who appears in the deeds and the
registration of titles in the property registry, no one except such purchaser may be
deemed by law to be the owner of the properties in question (Ibid). Moreover, no
title to registered land in derogation to that of the registered owner shall be
acquired by prescription or adverse possession (Umbay vs. Alecha, 135 SCRA 427
[1985]).

It does not appear that private respondents' claim falls under any of the exceptions
provided for under Section 44 of P.D. 1529 which can be enforced against petitioner
herein.

Thus, it has been invariably restated by this Court, that "The real purpose of the
Torrens System is to quiet title to land and to stop forever any question as to its
legality. "Once a title is registered, the owner may rest secure, without the necessity
of waiting in the portals of the court, or sitting on the "mirador su casato," avoid the
possibility of losing his land." "An indirect or collateral attack on a Torrens Title is
not allowed (Dominga vs. Santos, 55 Phil. 361; Singian vs. Manila Railroad, 62 Phil.
467)."

The only exception to this rule is where a person obtains a certificate of title to a
land belonging to another and he has full knowledge of the rights of the true owner.
He is then considered as guilty of fraud and he may be compelled to transfer the
land to the defrauded owner so long as the property has not passed to the hands of
an innocent purchaser for value (Angeles vs. Sania, 66 Phil. 444 [1938], emphasis
supplied).
It will be noted that the spouses Vivas and Lizardo never committed any fraud in
procuring the registration of the property in question. On the contrary, their
application for registration which resulted in the issuance of OCT No. 1728 was with
complete knowledge and implied authority of private respondents who retained a
portion of the consideration until the issuance to said spouses of a certificate of title
applied for under the Torrens Act and the corresponding delivery of said title to
them. The question therefore, is not about the validity of OCT No. 1728 but in the
breach of contract between private respondents and the Vivas spouses. Petitioner
NGA was never a privy to this transaction. Neither was it shown that it had any
knowledge at the time of the execution of the mortgage, of the existence of the
suspensive condition in the deed of absolute sale much less of its violation. Nothing
appeared to excite suspicion. The Special Power of Attorney was regular on its face;
the OCT was in the name of the mortgagor and the NGA was the highest bidder in
the public auction. Unquestionably, therefore, the NGA is an innocent purchaser for
value, first as an innocent mortgagee under Section 32 of P.D. 1529 and later as
innocent purchaser for value in the public auction sale.

Private respondents claim that NGA did not even field any representative to the land
which was not even in the possession of the supposed mortgagors, nor present any
witness to prove its allegations in the ANSWER nor submit its DEED OF MORTGAGE
to show its being a mortgages in good faith and for value (Rollo, p. 110).

Such contention is, however, untenable. Well settled is the rule that all persons
dealing with property covered by a torrens certificate of title are not required to go
beyond what appears on the face of the title. When there is nothing on the certificate
of title to indicate any cloud or vice in the ownership of the property, or any
encumbrance thereon, the purchaser is not required to explore further than what
the torrens title upon its face indicates in quest for any hidden defect or inchoate
right that may subsequently defeat his right thereto (Centeno vs. Court of Appeals,
139 SCRA 545 [1985]).

More specifically, the Court has ruled that a bank is not required before accepting a
mortgage to make an investigation of the title of the property being given as security
(Phil. National Cooperative Bank vs. Carandang Villalon, 139 SCRA 570 [1985]), and
where innocent third persons like mortgagee relying on the certificate of title
acquire rights over the property, their rights cannot be disregarded (Duran vs. IAC,
138 SCRA 489 [1985]).

Under the circumstances, the Regional Trial Court could not have erred in ruling
that plaintiffs (private respondents herein) complaint insofar as it prays that they be
declared owners of the land in question can not prosper in view of the doctrine of
indefeasibility of title under the Torrens System, because it is an established
principle that a petition for review of the decree of registration will not prosper
even if filed within one year from the entry of the decree if the title has passed into
the hands of an innocent purchaser for value (Pres. Decree No. 1529, Sec. 32). The
setting aside of the decree of registration issued in land registration proceedings is
operative only between the parties to the fraud and the parties defrauded and their
privies, but not against acquirers in good faith and for value and the successors in
interest of the latter; as to them the decree shall remain in full force and effect
forever (Domingo vs. The Mayon Realty Corp. et al., 102 Phil. 32 [19571). Assuming,
therefore, that there was fraud committed by the sellers against the buyers in the
instant case, petitioner NGA who was not privy therein cannot be made to suffer the
consequences thereof As correctly declared by the trial court, the National Grains
Authority is the lawful owner of the property in question by virtue of its indefeasible
title.

As to private respondents' alternative prayer that the declared owner be ordered to

reconvey or transfer the ownership of the property in their favor, it is clear that
there is absolutely no reason why petitioner, an innocent purchaser for value,
should reconvey the land to the private respondents.

PREMISES CONSIDERED, the decision of the Court of Appeals is REVERSED and SET
ASIDE, and the decision of the Court of First Instance of Laguna and San Pablo City,
now Regional Trial Court, is REINSTATED.

SO ORDERED.
D.B.T. MAR-BAY CONSTRUCTION, INCORPORATED,
Petitioner,

- versus -

RICAREDO PANES, ANGELITO PANES, SALVADOR CEA, ABOGADO MAUTIN,

DONARDO PACLIBAR, ZOSIMO PERALTA and HILARION MANONGDO,
Respondents.
G.R. No. 167232

Present:

YNARES-SANTIAGO, J.,
Chairperson,
CHICO-NAZARIO,
VELASCO, JR.,
NACHURA, and
PERALTA, JJ.

Promulgated:

July 31, 2009

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

DECISION

NACHURA, J.:

Before this Court is a Petition[1] for Review on Certiorari under Rule 45 of the Rules
of Civil Procedure, assailing the Court of Appeals (CA) Decision[2] dated October 25,
2004 which reversed and set aside the Order[3] of the Regional Trial Court (RTC) of
Quezon City, Branch 216, dated November 8, 2001.

The Facts

Subject of this controversy is a parcel of land identified as Lot Plan Psu-123169,[4]

containing an area of Two Hundred Forty Thousand, One Hundred Forty-Six
(240,146) square meters, and situated at Barangay (Brgy.) Pasong Putik, Novaliches,
Quezon City (subject property). The property is included in Transfer Certificate of
Title (TCT) No. 200519,[5] entered on July 19, 1974 and issued in favor of B.C.
Regalado & Co. (B.C. Regalado). It was conveyed by B.C. Regalado to petitioner D.B.T.
Mar-Bay Construction, Inc. (DBT) through a dacion en pago[6] for services rendered
by the latter to the former.

On June 24, 1992, respondents Ricaredo P. Panes (Ricaredo), his son Angelito P.
Panes (Angelito), Salvador Cea, Abogado Mautin, Donardo Paclibar, Zosimo P.
Peralta, and Hilarion Manongdo (herein collectively referred to as respondents)
filed a Complaint[7] for Quieting of Title with Cancellation of TCT No. 200519 and all
Titles derived thereat (sic), Damages, with Petition for the Issuance of Injunction
with Prayer for the Issuance of Restraining Order Ex-Parte, Etc. against B.C.
Regalado, Mar-Bay Realty, Inc., Spouses Gereno Brioso and Criselda M. Brioso,
Spouses Ciriaco and Nellie Mariano, Avelino C. Perdido and Florentina Allado,
Eufrocina A. Maborang and Fe Maborang, Spouses Jaime and Rosario Tabangcura,
Spouses Oscar Ikalina and the Register of Deeds (RD) of Quezon City. Subsequently,
respondents filed an Amended Complaint[8] and a Second Amended Complaint[9]
particularly impleading DBT as one of the defendants.

In the Complaints, Ricaredo alleged that he is the lawful owner and claimant of the
subject property which he had declared for taxation purposes in his name, and
assessed in the amount of P2,602,190.00 by the City Assessor of Quezon City as of
the year 1985. Respondents alleged that per Certification[10] of the Department of
Environment and Natural Resources (DENR) National Capital Region (NCR) dated
May 7, 1992, Lot Plan Psu-123169 was verified to be correct and on file in said
office, and approved on July 23, 1948.

Respondents also claimed that Ricaredo, his immediate family members, and the
other respondents had been, and still are, in actual possession of the portions of the
subject property, and their possession preceded the Second World War. To perfect
his title in accordance with Act No. 496 (The Land Registration Act) as amended by
Presidential Decree (P.D.) No. 1529 (The Property Registration Decree), Ricaredo
filed with the RTC of Quezon City, Branch 82 a case docketed as LRC Case No. Q-91-
011, with LRC Rec. No. N-62563.[11]

Respondents averred that in the process of complying with the publication

requirements for the Notice of Initial Hearing with the Land Registration Authority
(LRA), it was discovered by the Mapping Services of the LRA that there existed an
overlapping of portions of the land subject of Ricaredos application, with the
subdivision plan of B.C. Regalado. The said portion had, by then, already been
conveyed by B.C. Regalado to DBT.

Ricaredo asseverated that upon verification with the LRA, he found that the
subdivision plan of B.C. Regalado was deliberately drawn to cover portions of the
subject property. Respondents claimed that the title used by B.C. Regalado in the
preparation of the subdivision plan did not actually cover the subject property. They
asserted that from the records of B.C. Regalado, they gathered that TCT Nos.
211081,[12] 211095[13] and 211132,[14] which allegedly included portions of the
subject property, were derived from TCT No. 200519. However, TCT No. 200519
only covered Lot 503 of the Tala Estate with an area of Twenty-Two Thousand Six
Hundred Fifteen (22,615) square meters, and was different from those mentioned in
TCT Nos. 211081, 211095 and 211132. According to respondents, an examination of
TCT No. 200519 would show that it was derived from TCT Nos. 14814,[15]
14827,[16] 14815[17] and T-28.

In essence, respondents alleged that B.C. Regalado and DBT used the derivative
titles which covered properties located far from Pasong Putik, Novaliches, Quezon
City where the subject property is located, and B.C. Regalado and DBT then offered
the same for sale to the public. Respondents thus submitted that B.C Regalado and
DBT through their deliberate scheme, in collusion with others, used (LRC) Pcs-
18345 as shown in the consolidation-subdivision plan to include the subject
property covered by Lot Plan Psu-123169.

In his Answer[18] dated July 24, 1992, the RD of Quezon City interposed the defense
that at the time of registration, he found all documents to be in order. Subsequently,
on December 5, 1994, in his Motion[19] for Leave to Admit Amended Answer, with
the Amended Answer attached, he admitted that he committed a grave mistake
when he earlier said that TCT No. 200519 covered only one lot, i.e. Lot 503. He
averred that upon careful examination, he discovered that TCT No. 200519 is
composed of 17 pages, and actually covered 54 lots, namely: Lots 503, 506, 507,
508, 509, 582, 586, 655, 659, 686, 434, 495, 497, 299, 498, 499, 500, 501, 502, 493,
692, 776, 496, 785, 777, 786, 780, 783, 505, 654, 660, 661, 663, 664, 665, 668, 693,
694, 713, 716, 781, 779, 784, 782, 787, 893, 1115, 1114, 778, 669 and 788, all of the
Tala Estate. Other lots included therein are Lot 890-B of Psd 36854, Lot 2 of (LRC)
Pcs 12892 and Lot 3 of (LRC) Pcs 12892. Thus, respondents' allegation that Lots
661, 664, 665, 693 and 694 of the Tala Estate were not included in TCT No. 200519
was not true.

On December 28, 1993, then defendants Spouses Jaime and Rosario Tabangcura
(Spouses Tabangcura) filed their Answer[20] with Counterclaim, claiming that they
were buyers in good faith and for value when they bought a house and lot covered
by TCT No. 211095 from B.C. Regalado, the latter being a subdivision developer and
registered owner thereof, on June 30, 1986. When respondent Abogado Mautin
entered and occupied the property, Spouses Tabangcura filed a case for Recovery of
Property before the RTC, Quezon City, Branch 97 which rendered a decision[21] in
their favor.

On its part, DBT, traversing the complaint, alleged that it is the legitimate owner and
occupant of the subject property pursuant to a dacion en pago executed by B.C.
Regalado in the formers favor; that respondents were not real parties-in-interests
because Ricaredo was a mere claimant whose rights over the property had yet to be
determined by the RTC where he filed his application for registration; that the other
respondents did not allege matters or invoke rights which would entitle them to the
relief

prayed for in their complaint; that the complaint was premature; and that the action
inflicted a chilling effect on the lot buyers of DBT.[22]
The RTC's Rulings

On June 15, 2000, the RTC through Judge Marciano I. Bacalla (Judge Bacalla),
rendered a Decision[23] in favor of the respondents. The RTC held that the
testimony of Ricaredo that he occupied the subject property since 1936 when he
was only 16 years old had not been rebutted; that Ricaredo's occupation and
cultivation of the subject property for more than thirty (30) years in the concept of
an owner vested in him equitable ownership over the same by virtue of an approved
plan, Psu 123169; that the subject property was declared under the name of
Ricaredo for taxation purposes;[24] and that the subject property per survey should
not have been included in TCT No. 200519, registered in the name of B.C. Regalado
and ceded to DBT. The RTC further held that Spouses Tabangcura failed to present
satisfactory evidence to prove their claim. Thus, the RTC disposed of the case in this
wise:
WHEREFORE, in view of the foregoing considerations, judgment is hereby rendered
declaring Certificate of Title No. 200519 and all titles derived thereat as null and
void insofar as the same embrace the land covered by Plan PSU-123169 with an
area of 240,146 square meters in the name of Ricaredo Panes; ordering defendant
DBT Marbay Realty, Inc. to pay plaintiff Ricaredo Panes the sum of TWENTY
THOUSAND (P20,000) pesos as attorneys fees plus costs of suit.

SO ORDERED.

On September 12, 2000, DBT filed a Motion[25] for Reconsideration, based on the
grounds of prescription and laches. DBT also disputed Ricaredos claim of open,
adverse, and continuous possession of the subject property for more than thirty
(30) years, and asserted that the subject property could not be acquired by
prescription or adverse possession because it is covered by TCT No. 200519.

While the said Motion for Reconsideration was pending, Judge Bacalla passed away.

Meanwhile, on January 2, 2001, a Motion[26] for Intervention and a Complaint in

Intervention were filed by Atty. Andres B. Pulumbarit (Atty. Pulumbarit),
representing the Don Pedro/Don Jose de Ocampo Estate. The intervenor alleged that
the subject property formed part of the vast tract of land with an area of 117,000
hectares, covered by Original Certificate of Title (OCT) No. 779 issued by the
Honorable Norberto Romualdez on March 14, 1913 under Decree No. 10139, which
belongs to the Estate of Don Pedro/Don Jose de Ocampo. Thus, the Complaint[27] in
Intervention prayed that the RTCs Decision be reconsidered; that the legitimacy and
superiority of OCT 779 be upheld; and that the subject property be declared as
belonging to the Estate of Don Pedro/Don Jose de Ocampo.
In its Order[28] dated March 13, 2001, the RTC, through Acting Judge Modesto C.
Juanson (Judge Juanson), denied Atty. Pulumbarits Motion for Intervention because
a judgment had already been rendered pursuant to Section 2,[29] Rule 19 of the
1997 Rules of Civil Procedure.

On April 10, 2001, the RTC issued an Order[30] stating that there appeared to be a
need for a clarificatory hearing before it could act on DBT's Motion for
Reconsideration. Thus, a hearing was held on May 17, 2001. Thereafter,
supplemental memoranda were required of the parties.[31] Both parties
complied.[32] However, having found that the original copy of TCT No. 200519 was
not submitted to it for comparison with the photocopy thereof on file, the RTC
directed DBT to present the original or certified true copy of the TCT on August 21,
2001.[33] Respondents moved to reconsider the said directive[34] but the same
was denied.[35] DBT, on the other hand, manifested that a copy of TCT No. 200519,
consisting of 17 pages, had already been admitted in evidence; and that because of
the fire in the Office of the RD in Quezon City sometime in 1988, DBT, despite
diligent effort, could not secure an original or certified true copy of said TCT.
Instead, DBT submitted a certified true copy of Consolidated Subdivision Plan Pcs
18345.[36]

On November 8, 2001, the RTC, through Judge Juanson, issued an Order[37]

reversing the earlier RTC Decision and dismissing the Complaint for lack of merit.
The RTC held that prescription does not run against registered land; hence, a title
once registered cannot be defeated even by adverse, open or notorious possession.
Moreover, the RTC opined that even if the subject property could be acquired by
prescription, respondents' action was already barred by prescription and/or laches
because they never asserted their rights when B.C. Regalado registered the subject
property in 1974; and later developed, subdivided and sold the same to individual
lot buyers.

On December 18, 2001, respondents filed a Motion for Reconsideration[38] which

the RTC denied in its Order[39] dated June 17, 2002. Aggrieved, respondents
appealed to the CA.[40]
The CA's Ruling

On October 25, 2004, the CA reversed and set aside the RTC Orders dated November
8, 2001 and June 17, 2002 and reinstated the RTC Decision dated June 15, 2000. The
CA held that the properties described and included in TCT No. 200519 are located in
San Francisco del Monte, San Juan del Monte, Rizal and Cubao, Quezon City while the
subject property is located in Brgy. Pasong Putik, Novaliches, Quezon City.
Furthermore, the CA held that Engr. Vertudazo's testimony that there is a gap of
around 1,250 meters between Lot 503 and Psu 123169 was not disproved or
refuted. The CA found that Judge Juanson committed a procedural infraction when
he entertained issues and admitted evidence presented by DBT in its Motion for
Reconsideration which were never raised in the pleadings and proceedings prior to
the rendition of the RTC Decision. The CA opined that DBT's claims of laches and
prescription clearly appeared to be an afterthought. Lastly, the CA held that DBT's
Motion for Reconsideration was not based on grounds enumerated in the Rules of
Procedure.[41]

Petitioner filed a Motion for Reconsideration,[42] which was, however, denied by

the CA in its Resolution[43] dated February 22, 2005.

Hence, this Petition.

The Issues

Petitioner raises the following as grounds for this Petition:

I.

PETITIONER'S FAILURE TO ALLEGE PRESCRIPTION IN ITS ANSWER IS NOT A

WAIVER OF SUCH DEFENSE.

II.

IT IS NOT ERRONEOUS TO REQUIRE THE PRODUCTION OF A CERTIFIED TRUE

COPY OF TCT NO. 200519 AFTER THE DECISION ON THE MERITS HAS BEEN
RENDERED BUT BEFORE IT BECAME FINAL.

III.

A REGISTERED LAND CAN NOT BE ACQUIRED BY ACQUISITIVE PRESCRIPTION.

IV.

THE TESTIMONY OF ENGR. VERTUDAZO ON THE BASIS OF THE TECHNICAL

DESCRIPTION OF LOT 503 IN AN INCOMPLETE DOCUMENT IS UNRELIABLE.

V.

MR. PANES HAS NEVER BEEN IN OPEN, ADVERSE AND CONTINUOUS POSSESSION
OF THE SUBJECT PROPERTY FOR MORE THAN THIRTY (30) YEARS.[44]

Distilled from the petition and the responsive pleadings, and culled from the
arguments of the parties, the issues may be reduced to two questions, namely:

1) Did the RTC err in upholding DBT's defenses of prescription and laches as raised
in the latter's Motion for Reconsideration?
2) Which between DBT and the respondents have a better right over the subject
property?

Our Ruling

We answer the first question in the affirmative.

It is true that in Dino v. Court of Appeals[45] we ruled:

(T)rial courts have authority and discretion to dismiss an action on the ground of
prescription when the parties' pleadings or other facts on record show it to be
indeed time-barred; (Francisco v. Robles, Feb. 15, 1954; Sison v. McQuaid, 50 O.G.
97; Bambao v. Lednicky, Jan. 28, 1961; Cordova v. Cordova, Jan. 14, 1958; Convets,
Inc. v. NDC, Feb. 28, 1958; 32 SCRA 529; Sinaon v. Sorongan, 136 SCRA 408); and it
may do so on the basis of a motion to dismiss (Sec. 1, [f] Rule 16, Rules of Court), or
an answer which sets up such ground as an affirmative defense (Sec. 5, Rule 16), or
even if the ground is alleged after judgment on the merits, as in a motion for
reconsideration (Ferrer v. Ericta, 84 SCRA 705); or even if the defense has not been
asserted at all, as where no statement thereof is found in the pleadings (Garcia v.
Mathis, 100 SCRA 250; PNB v. Pacific Commission House, 27 SCRA 766; Chua Lamco
v. Dioso, et al., 97 Phil. 821); or where a defendant has been declared in default (PNB
v. Perez; 16 SCRA 270). What is essential only, to repeat, is that the facts
demonstrating the lapse of the prescriptive period be otherwise sufficiently and
satisfactorily apparent on the record; either in the averments of the plaintiff's
complaint, or otherwise established by the evidence. (Emphasis supplied)

Indeed, one of the inherent powers of courts is to amend and control its processes
so as to make them conformable to law and justice. This includes the right to reverse
itself, especially when in its opinion it has committed an error or mistake in
judgment, and adherence to its decision would cause injustice.[46] Thus, the RTC in
its Order dated November 8, 2001 could validly entertain the defenses of
prescription and laches in DBT's motion for reconsideration.

However, the conclusion reached by the RTC in its assailed Order was erroneous.
The RTC failed to consider that the action filed before it was not simply for
reconveyance but an action for quieting of title which is imprescriptible.

Verily, an action for reconveyance can be barred by prescription. When an action for
reconveyance is based on fraud, it must be filed within four (4) years from discovery
of the fraud, and such discovery is deemed to have taken place from the issuance of
the original certificate of title. On the other hand, an action for reconveyance based
on an implied or constructive trust prescribes in ten (10) years from the date of the
issuance of the original certificate of title or transfer certificate of title. The rule is
that the registration of an instrument in the Office of the RD constitutes constructive
notice to the whole world and therefore the discovery of the fraud is deemed to
have taken place at the time of registration.[47]

However, the prescriptive period applies only if there is an actual need to reconvey
the property as when the plaintiff is not in possession of the property. If the plaintiff,
as the real owner of the property also remains in possession of the property, the
prescriptive period to recover title and possession of the property does not run
against him. In such a case, an action for reconveyance, if nonetheless filed, would be
in the nature of a suit for quieting of title, an action that is imprescriptible.[48] Thus,
in Vda. de Gualberto v. Go,[49] this Court held:

[A]n 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 or the date of the issuance of the certificate of title over the property, but
this rule applies only when the plaintiff or the person enforcing the trust is not in
possession of the property, since if a person claiming to be the owner thereof is in
actual possession of the property, as the defendants are in the instant case, 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 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.

Insofar as Ricaredo and his son, Angelito, are concerned, they established in their
testimonies that, for some time, they possessed the subject property and that
Angelito bought a house within the subject property in 1987.[50] Thus, the
respondents are proper parties to bring an action for quieting of title because
persons having legal, as well as equitable, title to or interest in a real property may
bring such action, and title here does not necessarily denote a certificate of title
issued in favor of the person filing the suit.[51]

Although prescription and laches are distinct concepts, we have held, nonetheless,
that in some instances, the doctrine of laches is inapplicable where the action was
filed within the prescriptive period provided by law. Therefore, laches will not apply
to this case, because respondents' possession of the subject property has rendered
their right to bring an action for quieting of title imprescriptible and, hence, not
barred by laches. Moreover, since laches is a creation of equity, acts or conduct
alleged to constitute the same must be intentional and unequivocal so as to avoid
injustice. Laches will operate not really to penalize neglect or sleeping on one's
rights, but rather to avoid recognizing a right when to do so would result in a clearly
inequitable situation.[52]
Albeit the conclusion of the RTC in its Order dated November 8, 2001, which
dismissed respondents' complaint on grounds of prescription and laches, may have
been erroneous, we, nevertheless, resolve the second question in favor of DBT.

It is a well-entrenched rule in this jurisdiction that no title to registered land in

derogation of the rights of the registered owner shall be acquired by prescription or
adverse possession.[53]

Article 1126[54] of the Civil Code in connection with Section 46[55] of Act No. 496
(The Land Registration Act), as amended by Section 47[56] of P.D. No. 1529 (The
Property Registration Decree), clearly supports this rule. Prescription is unavailing
not only against the registered owner but also against his hereditary successors.
Possession is a mere consequence of ownership where land has been registered
under the Torrens system, the efficacy and integrity of which must be protected.
Prescription is rightly regarded as a statute of repose whose objective is to suppress
fraudulent and stale claims from springing up at great distances of time and
surprising the parties or their representatives when the facts have become obscure
from the lapse of time or the defective memory or death or removal of
witnesses.[57]

Thus, respondents' claim of acquisitive prescription over the subject property is

baseless. Under Article 1126 of the Civil Code, acquisitive prescription of ownership
of lands registered under the Land Registration Act shall be governed by special
laws. Correlatively, Act No. 496, as amended by PD No. 1529, provides that no title
to registered land in derogation of that of the registered owner shall be acquired by
adverse possession. Consequently, in the instant case, proof of possession by the
respondents is immaterial and inconsequential.[58]

Moreover, it may be stressed that there was no ample proof that DBT participated in
the alleged fraud. While factual issues are admittedly not within the province of this
Court, as it is not a trier of facts and is not required to re-examine or contrast the
oral and documentary evidence anew, we have the authority to review and, in
proper cases, reverse the factual findings of lower courts when the findings of fact of
the trial court are in conflict with those of the appellate court.[59] In this regard, we
reviewed the records of this case and found no clear evidence that DBT participated
in the fraudulent scheme. In Republic v. Court of Appeals,[60] this Court gave due
importance to the fact that the private respondent therein did not participate in the
fraud averred. We accord the same benefit to DBT in this case. To add, DBT is an
innocent purchaser for value and good faith which, through a dacion en pago duly
entered into with B.C. Regalado, acquired
ownership over the subject property, and whose rights must be protected under
Section 32[61] of P.D. No. 1529.
Dacion en pago is the delivery and transmission of ownership of a thing by the
debtor to the creditor as an accepted equivalent of the performance of the
obligation. It is a special mode of payment where the debtor offers another thing to
the creditor, who accepts it as an equivalent of the payment of an outstanding debt.
In its modern concept, what actually takes place in dacion en pago is an objective
novation of the obligation where the thing offered as an accepted equivalent of the
performance of an obligation is considered as the object of the contract of sale, while
the debt is considered as the purchase price.[62]

It must also be noted that portions of the subject property had already been sold to
third persons who, like DBT, are innocent purchasers in good faith and for value,
relying on the certificates of title shown to them, and who had no knowledge of any
defect in the title of the vendor, or of facts sufficient to induce a reasonably prudent
man to inquire into the status of the subject property.[63] To disregard these
circumstances simply on the basis of alleged continuous and adverse possession of
respondents would not only be inimical to the rights of the aforementioned
titleholders, but would ultimately wreak havoc on the stability of the Torrens
system of registration.

A final note.

While the Torrens system is not a mode of acquiring title, but merely a system of
registration of titles to lands, justice and equity demand that the titleholder should
not be made to bear the unfavorable effect of the mistake or negligence of the State's
agents, in the absence of proof of his complicity in a fraud or of manifest damage to
third persons. The real purpose of the Torrens system is to quiet title to land and
put a stop forever to any question as to the legality of the title, except claims that
were noted in the certificate at the time of the registration or that may arise
subsequent thereto. Otherwise, the integrity of the Torrens system would forever be
sullied by the ineptitude and inefficiency of land registration officials, who are
ordinarily presumed to have regularly performed their duties.[64] Thus, where
innocent third persons, relying on the correctness of the certificate of title thus
issued, acquire rights over the property, the court cannot disregard those rights and
order the cancellation of the certificate. The effect of such outright cancellation will
be to impair public confidence in the certificate of title. The sanctity of the Torrens
system must be preserved; otherwise, everyone dealing with the property
registered under the system will have to inquire in every instance on whether the
title had been regularly or irregularly issued, contrary to the evident purpose of the
law. Every person dealing with the registered land may safely rely on the
correctness of the certificate of title issued therefor, and the law will in no way
oblige him to go behind the certificate to determine the condition of the
property.[65]

WHEREFORE, the instant Petition is GRANTED and the assailed Court of Appeals
Decision dated October 25, 2004 is hereby REVERSED and SET ASIDE. A new
judgment is hereby entered DISMISSING the Complaint filed by the respondents for
lack of merit.