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 DELA CRUZ VS CA AND PASTOR ROMERO, J .:  This is a petition for review on certiorari seeking the reversal of the Decision 1  rendered by respondent Court of Appeals in CA-G.R. No. 56788-B, dated March 7, 1977, affirming the Decision 2  of the then Court of First Instance of Bataan, dated April 6, 1974, in Land Registration Case No. N-235, adjudicating in favor of herein private respondents the subject two (2) parcels of land. The undisputed facts of the case are as follows: On January 29, 1973, spouses Silvestre Manlapaz and Natividad Pizarro (herein private respondents) filed an application before the Court of First Instance of Bataan, seeking the registrat ion and confirmation of titles to two (2) parcels of land, under Act 496 in relation to Sec. 48 (B) of C.A. No. 141, designated as Lot No. 2855 and Lot No. 2856. The parcels of land applied for are portions of Lot 2749 of Orion Cadastre covered by plans Sgs-4600-D and Sgs-4601-D, situated at Barrio Damulog, Municipality of Orion, Province of Bataan, containing an area of 49,954 sq. meters and 54,052 sq. meters, respectively .  3  Prior to the initial hearing of the case, the trial court in its Order dated April 5, 1973, directed the Land Registration Co mmissioner to submit his report on whether or not the parcels of land in question had been issued patents or whether the same are subject of pending decrees. 4  In compliance with this directive, Acting Geodetic Engineer (Chief Surveyor) Amado Masicampo, on behalf of the Commissioner of Land Registration, filed a manifestation dated April 26, 1973 stating that the subject parcels of land described on Plans Sgs-4600-D and Sgs-4601-D are portions of Lot 2749, Cad. 241, Orion Cadastre and that the same have been the subject of registration proceedings in Court Cadastral Case No. 15, LRC (GLRO) Cadastral Record No. 1021 wherein a decision has been rendered although there is no existing record of the same on file because it was among those records lost or destroyed due to the ravages of the last global war. The record also disclosed that Plans Sgs-4600-D and Sgs-4601-D, when plotted in the Municipal Index Map through their respective lines conflict with Lot 1, Sgs-2806 which has been issued Sales Patent No. 5819. 5  The Director of Lands seasonably filed an opposition on the ground that neither the applicants nor their predecessor-in-interest possess sufficient title to acquire ownership in fee simple of the parcels of land applied for; that they have not been in open, cont inuous, exclusive and notorious possession and occupation of the l and in question for at least thirthy (30) years immediately preceding the filing of the present application; and that these parcels of land are portions of the public domain belonging to the Republic of the Philippines, and therefore, not subject to appropriation. 6   At the hearing on A ugust 21, 1973, t he Court issued an order of special default with the ex ception of the Dir ector of Lands. 7  As prayed for by private respondents' counsel, the parties were allowed to present evidence before the Clerk of Court who was commissioned to receive the same and to submit his findings after the termination of the reception of evidence. 8 In order to establish thirty (30) years of open and continuous possessio n over the subject property, private respondents presented Crisanto  Angeles and Monico Balila, Crisant o Angeles claimed that he first t ook possessio n of these tw o (2) parcels of land in the year 1931 while he was still twenty (20) years old. He cleared the land and planted different kinds of fruit-bearing trees such as mango, star apple and bananas, as well as seasonal crops thereon. He likewise converted 5,000 sq. meters there of into a ricefield which was enlarged to one hectare. 9  These parcels of land were declared for taxation purposes only in 1966. 10  Meanwhile, in the year 1938, he sold the parcel containing an area of about five (5) hectares to Pablito Punay, who immediately took possession of the same, cultivated it and introduced several improvements thereon. 11  In September 1972, after he had already cleared the whole tract of the second parcel of land, he sold the same to private respondents. 12  Pablito Punay also sold the first parcel of land he acquired from Crisanto to them. 13  Angeles further stated that he knew all the owners of the adjoining parcels of land but, on cross-examination, was unable to remember their names. 14  Witness Monico Balila testified that he is the owner of the parcel of land adjoining private respondent's property. He had seen Angeles clear the same and plant different fruit trees. On cross-examination, he said that he was twelve (12) years old when he first lived at Bilolo, Orion, Bataan in 1938. His land holding was five kilometers away from private respondents' land and it was his uncle who was then in possession of the land he presently owns. 15  Private respondent Silvestre Manlapaz also testified that upon their acquisition of the two (2) parcels of land designated as Lots 2855 and 2856, they immediately took possession of the same, planted coconuts, camotes and other vegetables and expanded the portion planted to palay. Some portions were converted into two (2) residential lots, one with an area of 276 sq. meters and the other, 105 s q. meters. They then declared those properties in their names and paid the corresponding land taxes. 16  The Director of Lands, on the other hand, did not present any evidence to support his opposition. On April 6, 1974, the lower court rendered its decision, the dispositive part of which reads as follows: WHEREFORE, the title to two parcels of land Identified and shown in plans Sgs-4600-D and 4601-D, situated at Barrio Damulog, Municipality of Orion, Province of Bataan, containing an area of 49,954 square meters and 54,052 square

description

psass

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    DELA CRUZ VS CA AND PASTOR

    ROMERO, J .:

    This is a petition for review on certiorari seeking the reversal of the Decision 1rendered by respondent Court of Appeals in CA-GNo. 56788-B, dated March 7, 1977, affirming the Decision 2of the then Court of First Instance of Bataan, dated April 6, 1in Land Registration Case No. N-235, adjudicating in favor of herein private respondents the subject two (2) parcels of la

    The undisputed facts of the case are as follows:

    On January 29, 1973, spouses Silvestre Manlapaz and Natividad Pizarro (herein private respondents) filed an application before the of First Instance of Bataan, seeking the registration and confirmation of titles to two (2) parcels of land, under Act 496 in relation to Se(B) of C.A. No. 141, designated as Lot No. 2855 and Lot No. 2856. The parcels of land applied for are portions of Lot 2749 of OrionCadastre covered by plans Sgs-4600-D and Sgs-4601-D, situated at Barrio Damulog, Municipality of Orion, Province of Bataan, contaan area of 49,954 sq. meters and 54,052 sq. meters, respectively.3

    Prior to the initial hearing of the case, the trial court in its Order dated April 5, 1973, directed the Land Registration Commissioner to shis report on whether or not the parcels of land in question had been issued patents or whether the same are subject of pending

    decrees. 4In compliance with this directive, Acting Geodetic Engineer (Chief Surveyor) Amado Masicampo, on behalf of tCommissioner of Land Registration, filed a manifestation dated April 26, 1973 stating that the subject parcels of landdescribed on Plans Sgs-4600-D and Sgs-4601-D are portions of Lot 2749, Cad. 241, Orion Cadastre and that the same been the subject of registration proceedings in Court Cadastral Case No. 15, LRC (GLRO) Cadastral Record No. 1021

    wherein a decision has been rendered although there is no existing record of the same on file because it was among thorecords lost or destroyed due to the ravages of the last global war. The record also disclosed that Plans Sgs-4600-D anSgs-4601-D, when plotted in the Municipal Index Map through their respective lines conflict with Lot 1, Sgs-2806 which hbeen issued Sales Patent No. 5819. 5

    The Director of Lands seasonably filed an opposition on the ground that neither the applicants nor their predecessor-in-interest possesufficient title to acquire ownership in fee simple of the parcels of land applied for; that they have not been in open, cont inuous, excluand notorious possession and occupation of the land in question for at least thirthy (30) years immediately preceding the filing of thepresent application; and that these parcels of land are portions of the public domain belonging to the Republic of the Philippines, andtherefore, not subject to appropriation. 6

    At the hearing on August 21, 1973, the Court issued an order of special default with the exception of the Director of Lands. 7As prayfor by private respondents' counsel, the parties were allowed to present evidence before the Clerk of Court who was

    commissioned to receive the same and to submit his findings after the termination of the reception of evidence. 8

    In order to establish thirty (30) years of open and continuous possession over the subject property, private respondents presented CrAngeles and Monico Balila, Crisanto Angeles claimed that he first took possession of these two (2) parcels of land in the year 1931 whe was still twenty (20) years old. He cleared the land and planted different kinds of fruit-bearing trees such as mango, star apple andbananas, as well as seasonal crops thereon. He likewise converted 5,000 sq. meters thereof into a ricefield which was enlarged to on

    hectare. 9These parcels of land were declared for taxation purposes only in 1966. 10Meanwhile, in the year 1938, he soldparcel containing an area of about five (5) hectares to Pablito Punay, who immediately took possession of the same,cultivated it and introduced several improvements thereon. 11In September 1972, after he had already cleared the wholetract of the second parcel of land, he sold the same to private respondents. 12Pablito Punay also sold the first parcel of lhe acquired from Crisanto to them. 13Angeles further stated that he knew all the owners of the adjoining parcels of land bon cross-examination, was unable to remember their names. 14Witness Monico Balila testified that he is the owner of thparcel of land adjoining private respondent's property. He had seen Angeles clear the same and plant different fruit treescross-examination, he said that he was twelve (12) years old when he first lived at Bilolo, Orion, Bataan in 1938. His land

    holding was five kilometers away from private respondents' land and it was his uncle who was then in possession of the he presently owns. 15

    Private respondent Silvestre Manlapaz also testified that upon their acquisition of the two (2) parcels of land designated as Lots 28552856, they immediately took possession of the same, planted coconuts, camotes and other vegetables and expanded the portion planto palay. Some portions were converted into two (2) residential lots, one with an area of 276 sq. meters and the other, 105 sq. metersThey then declared those properties in their names and paid the corresponding land taxes. 16

    The Director of Lands, on the other hand, did not present any evidence to support his opposition.

    On April 6, 1974, the lower court rendered its decision, the dispositive part of which reads as follows:

    WHEREFORE, the title to two parcels of land Identified and shown in plans Sgs-4600-D and 4601-D, situated at Ba

    Damulog, Municipality of Orion, Province of Bataan, containing an area of 49,954 square meters and 54,052 square

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    meters, respectively, is ordered confirmed in the name of the spouses Silvestre Manlapaz and Natividad Pizarro, bolegal age, Filipino citizens and residents of Pilar, Bataan.

    After this decision shall have become final, let an order issue for a decree of registration in favor of the applicants.

    SO ORDERED. 17

    From said judgment, the Director of Lands interposed an appeal to the Court of Appeals which promulgated its decision 18on May 71977, affirming the decision of the lower court. It found that the defense ofres judicatawas belatedly raised on appeal. Tomission to include the same in the answer as one of the affirmative defenses constitutes a waiver of said defense. Themanifestation of Mr. Masicampo stating that the two (2) parcels of land have been the subject of registration proceedings

    not enough to support res judicata. It concluded that the 30-year period of continuous possession of private respondentspredecessors-in-interest has been satisfactorily proved, the Director of Lands not having presented any evidence tocontradict, impugn or impeach the facts established by private respondents.

    Hence, this petition which assigns the following errors:

    I

    Respondent Court erred in ruling that petitioner failed to raise the defense of res judicatain the trial court and, hencwaived the same.

    II

    Respondent Court erred in ruling that petitioner failed to prove res judicata by competent evidence.

    III

    Respondent Court erred in ruling that after the cadastral proceedings and the declaration of the subject parcels of laas public land therein, the same may be the subject of judicial confirmation of imperfect title or claim based on adveand continuous possession of at least thirty (30) years, citingthe case of Mindanao v. Director of Lands, et al., G.RL-19535, July 10, 1967. 19

    The Court of Appeals committed no error in disregarding res judicata. In the case of Director of Lands v. Court of Appeals,20this Cohad addressed a similar contention in this manner:

    WE find no legal basis to uphold the foregoing contentions of Petitioner.It is clear from the evidence on record thatproceedings had before the Court of First Instance of Batangas, acting as a land registration court, the oppositor Diof Lands. petitioner herein, did not interpose any objection nor set up the defense of res judicata with respect to thein question. Such failure on the part of oppositor Director of Lands. to OUR mind, is a procedural infirmity which canbe cured on appeal.Section 2, Rule 9, Revised Rules of Court of 1964, in no uncertain language, provides that:

    SEC. 2. Defenses and obligations not pleaded deemed waived.Defenses and objections notpleaded either in a motion to dismiss or in the answer are deemed waived; . . .

    All defenses therefore not interposed in a motion to dismiss or in an answer are deemed waived. (Santiago, et al. vRamirez, et al.; L-15237, May 31, 1963, 8 SCRA 157, 162; Torrada v. Bonearos, L-39832, January 30, 1976, 69 SC247, 253).

    Thus, the defense of res adjudicata when not set up either in a motion to dismiss or in answer, is deemed waived. I

    cannot be pleaded for the first time at the trial or on appeal.(Phil. Coal Miners' Union v. CEPOC, et al., L-19007, Ap1964, 10 SCRA 784, 789). (Emphasis supplied)

    Furthermore, petitioner advanced the view that it is the intendment of the law that a person who fails to prove his title to a parcel of lawhich is the object of cadastral proceedings or one who does not file his claim therein is forever barred from doing so in a subsequenproceeding. Judgment in a cadastral proceeding which is a proceeding in remconstitutes res judicataeven against a person who did take part in the proceedings as claimant.

    We disagree. The above-cited case likewise settled this contention. It said:

    But granting for a moment, that the defenses of res adjudicatawas properly raised by petitioner herein, WE still holfactually, there is no prior final judgment all to speak of. The decision in Cadastral Case No. 41 does not constitute to the application of respondent Manuela Pastor; because a decision in a cadastral proceeding declaring a lot publiis not the final decree contemplated in Section 38 and 40 of the Land Registration Act.

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    A Judicial declaration that a parcel of land is public, does not preclude even the same applicant from subsequentlyseeking a judicial confirmation of his title to the same land, provided he thereafter complies with the provisions. ofSection 48 of Commonwealth Act No. 141, as amended, and as long as said public land remains alienable and

    disposable (now section 3 and 4, PD No. 1073,) 21(Emphasis supplied)

    As a rule, the Court respects the factual findings of the Court of Appeals, imparting to them a certain measure of finality. However, this not without clearly defined exceptions, among which are: " . . .(2) the inference made is manifestly mistaken; . . .(4) the judgment isbased on misapprehension of facts; . . .and (9) when the finding of fact of the Court of Appeals is premised on the absence of evidenand is contradicted by evidence on record." 22

    It must be emphasized that the burden is on applicant to prove his positive averments and not for the government or the private oppo

    to establish a negative proposition insofar as the applicants' specific lots are concerned. 23Applying this rule to the instant case, tconclusions reached by the court a quoand respondent Court of Appeals that the private respondents through theirpredecessors-in-interest have been in open, continuous, exclusive and notorious possession of the subject land undera bonafideclaim of ownership are not persuasive for the following reasons.

    First, the testimony of Crisanto Angeles as to his possession and ownership of the two (2) parcels of land fails to inspire belief. He clathat he was in possession of the land way back in 1930. Yet he declared the same for taxation purposes only in 1966. Although taxreceipts are not incontrovertible evidence of ownership, they constitute at least proof that the holder had a claim of title over the

    property. 24He stated that he knew the owners of the adjoining properties, but during the cross-examination, he was unabgive their names. Nor was he able to explain how he came into possession of the parcel of land and there is no showing any title, perfect or imperfect, granted by the state to him or his predecessors.

    Second, the attempt of Monico Balila to corroborate Angeles' length of possession over the subject property is less than credible. Havbeen an adjoining owner only in 1953 by his own admission, he could not have known how long Crisanto Angeles owned and posses

    the parcels of land.

    Third, Pablito Punay, the second predecessor-in-interest of Lot No. 2855 of the private respondents was not made to testify. No reasowas disclosed for his failure to appear before the court.

    Lastly, the documents introduced by the applicants merely evidenced the fact that the parcels of land applied for were alienable and

    disposable lands of the public domain, 25but no document has been presented that would clearly establish the length of timethe possession of their predecessors-in-interest. That the private respondents have paid the corresponding taxes since1972 26when they possessed the same is of no moment because what is vital to consider is their predecessors-in-interescompliance with the 30-year period.

    Undoubtedly, the private respondents have failed to submit convincing proof of their predecessors-in-interest's actual, peaceful andadverse possession in the concept of owner of the lots in question during the period required, by law. This is of utmost significance in

    of the basic presumption that lands of whatever classification belong to the State and evidence of a land grant must be "well-nighincontrovertible." 27

    WHEREFORE, premises considered, the May 7, 1977 decision of the Court of Appeals is hereby REVERSED and SET ASIDE, andjudgment is rendered DISMISSING the application for registration and confirmation of titles of Lots No. 2855 and 2656. No pronounceas to costs.

    SO ORDERED.

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    REPULIC VS HEIRS OF ALEJAGA

    PANGANIBAN, J.:

    We reiterate the familiar doctrine that a free patent obtained through fraud or misrepresentation is void. Furthermor

    one-year prescriptive period provided in the Public Land Act does not bar the State from asking for the reversion of

    property acquired through such means.

    Statement of the Case

    Before us is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, assailing the November 15, 2000

    Decision[1] of the Court of Appeals (CA) in CA-GR CV No. 44568. The decretal portion of the challenged Decision read

    follows:

    WHEREFORE, the appealed decision is hereby REVERSED, SET ASIDE and RECALLED.*2+

    The Facts

    The factual antecedents of the case are summarized by the CA thus:

    On December 28, 1978, *Respondent+ Felipe Alejaga, Sr. x x x filed with the District Land Office, Roxas City, Free Paten

    Application No. (VI-2) 8442 covering a parcel of land identified as Lot 1, Mli-06-000020-D, with an area of .3899 hectar

    more or less located at Dumolog, Roxas City (Exh. A; Exh 9). It appears that on December 27, 1978, when the

    application was executed under oath, Efren L. Recio, Land Inspector, submitted a report of his investigation and verific

    of the land to the District Land Office, Bureau of Lands, City of Roxas. On March 14, 1979, the District Land Officer of R

    City approved the application and the issuance of [a] Free Patent to the applicant. On March 16, 1979, the patent was

    ordered to be issued and the patent was forwarded to defendant Register of Deeds, City of Roxas, for registration and

    issuance of the corresponding Certificate of Title. Thereafter, Original Certificate of Title No. P-15 Free Patent No. (VI-3358 was issued to [respondent] by defendant Register of Deeds.

    On April 4, 1979, the heirs of Ignacio Arrobang, through counsel in a letter-complaint requested the Director of Lands

    Manila, for an investigation of the District Land Officer, Roxas City, and the Regional Office, Region VI, Iloilo City, for

    irregularities in the issuance of the title of a foreshore land in favor of [respondent]. Isagani Cartagena, Supervising Sp

    Investigator, Legal Division, Land Management Bureau (formerly Bureau of Lands) submitted his Report dated April 17

    1989. The Chief, Legal Division, Land Management Bureau, Manila, recommended to the Director of Lands appropriat

    proceeding for the cancellation of Free Patent Title No. (VI-2) 3358 and the corresponding Original Certificate of Title N

    15 in the name of [respondent].

    In the meantime, *respondent+ obtained a NACIDA loan under the Cottage Industry Guarantee and Loan Fund by the

    defendant Philippine National Bank (hereinafter referred to as PNB) executed in Cebu City in the amount of P100,000.

    August 18, 1981. The loan was secured by a real estate mortgage in favor of defendant PNB. The promissory note of

    appellant was annotated at the back of the title.

    On April 18, 1990, the government through the Solicitor General instituted an action for Annulment/Cancellation of P

    and Title and Reversion against [respondent], the PNB of Roxas City and defendant Register of Deeds of Roxas City cov

    Free Patent Application (VI-2) 8442 of the parcel of land with an area of .3899 hectares more or less located at Dumolo

    Roxas City.

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    On November 17, 1990, while the case is pending hearing, *respondent+ died. He was substituted by his wife Roquet

    Alejaga and his children, namely: Everette Alejaga, Lynnette Alejaga, Felipe Alejaga, Jr., Maria Dulla Alejaga. Roqueta

    Alejaga, Jennifer Alejaga and Felipe Alejaga III.

    x x x x x x x x x

    After hearing, the[trial] court in its dispositive portion decreed as follows:

    WHEREFORE, judgment is rendered declaring that the approval of Free Patent Application No. 3358 and issuance of

    Original Certificate of Title No. P-15 in the name of Felipe Alejaga is by means of fraud hence, null and void ab initio ancourt orders:

    a) the cancellation of the approval of the application No. (VI-2) 8442 covering Lot No. 1, Mli-06-000020-D with an a

    of .3899 hectares, more or less, located at Dumulog, Roxas City;

    b) the cancellation of Original Certificate of Title No. P-15, Free Patent No. (VI-2) 3358 in the name of Felipe Alejag

    c) the land covered thereby as above described is reverted to the mass of the public domain;

    d) the defendants, Heirs of Felipe Alejaga Sr. or defendant, Philippine National Bank, Roxas City Branch, to surrende

    owners duplicate copy of above described Original Certificate of Title No. P-15 to the Register of Deeds (now Registrie

    Land Titles and Deeds), Roxas City;

    e) the defendant, Register of Deeds, Roxas City, to cancel Original Certificate of Title No. P-15 and the owners dupl

    copy of said title surrendered by above stated defendants;

    f) defendants, Philippine National Bank, cross-claim is dismissed.

    Costs against the defendants Heirs of Felipe, Alejaga, Sr.*3+

    Ruling of the Court of Appeals

    In reversing the RTC, the CA ruled that petitioner failed to prove its allegation that respondents had obtained the freepatent and the Certificate of Title through fraud and misrepresentation.[4] The appellate court likewise held that, assu

    there was misrepresentation or fraud as claimed by petitioner, the action for reversion should have been brought with

    one (1) year from the registration of the patent with the Registry of Deeds.[5]

    Further, the CA brushed aside as hearsay Isagani Cartagenas testimony that Land Inspector Efren L. Recio had not

    conducted an investigation on the free patent application of Felipe Alejaga Sr.[6] The CA added that petitioner had fa

    support its claim that the lot covered by respondents free patent and title was foreshore land.*7+

    Hence, this Petition.[8]

    Issues

    Petitioner raises the following issues for this Courts consideration:

    I

    The Honorable Court of Appeals erred in not finding that the case is already final and executory as against respondent

    II

    The Court of Appeals erred in not considering that petitioner has proven the allegations to the Complaint.

    III

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    The Honorable Court of Appeals erred in declaring that the action for reversion is unavailing.*9+

    Simply stated, the issues can be summed up into two: (1) the efficacy of the grant of the free patent and (2) the

    indefeasibility of the Certificate of Title issued in consequence thereof.

    This Courts Ruling

    The Petition is meritorious.

    First Issue:

    Efficacy of the Grant

    Petitioner argues that it has proven fraud in the issuance of Respondent Alejagas free patent and Certificate of Title.*

    also avers that Respondent PNB has failed to file a timely Notice of Appeal.

    On the other hand, the Alejagas contend that they have acquired a vested right over the parcel of land covered by OCT

    P-15 by virtue of their proven open, actual, exclusive and undisputed possession of the land for more than 30 years.[1

    At the outset, we must immediately clarify that the records show receipt by Respondent PNB of a copy of the Decision

    October 27, not on October 3, 1993 as alleged by petitioner.[12] Further, the bank filed its Notice of Appeal on Novem

    9, 1993, within the 15-day reglementary period.

    In addition, we must point out that the essential issue raised in this Petition -- the presence of fraud -- is factual. As a

    general rule, this Court does not review factual matters.[13] However, the instant case falls under one of the exceptio

    because the findings of the CA conflict with those of the RTC and with the evidence on record.[14]

    We begin our resolution of this issue with the well-settled rule that the party alleging fraud or mistake in a transaction

    bears the burden of proof.[15] The circumstances evidencing fraud are as varied as the people who perpetrate it in ea

    case.[16] It may assume different shapes and forms; it may be committed in as many different ways.[17] Thus, the law

    requires that it be established by clear and convincing evidence.[18]

    In the case before us, we find that petitioner has adduced a preponderance of evidence before the trial court, showing

    manifest fraud in procuring the patent.[19] This Court agrees with the RTC that in obtaining a free patent over the lot

    scrutiny, petitioner had resorted to misrepresentation or fraud, signs of which were[20] ignored by the Court of

    Appeals.[21]

    First, the issuance of the free patent was not made in accordance with the procedure laid down by Commonwealth Ac

    141, otherwise known as the Public Land Act.[22] Under Section 91 thereof, an investigation should be conducted for t

    purpose of ascertaining whether the material facts set out in the application are true.[23]

    Further, after the filing of the application, the law requires sufficient notice to the municipality and the barrio where t

    land is located, in order to give adverse claimants the opportunity to present their claims.[24] Note that this notice an

    verification and investigation of the parcel of land are to be conducted after an application for free patent has been fil

    with the Bureau of Lands.

    In this case, however, Felipe Alejaga Sr.s Application for Free Patent*25+ was dated and filed on December 28, 1978. O

    other hand, the Investigation & Verification Report[26] prepared by Land Inspector Elfren L. Recio of the District Land

    of the Bureau of Lands of Roxas City was dated December 27, 1978. In that Report, he stated that he had conducted t

    necessary investigation and verification in the presence of the applicant. Even if we accept this statement as gospel

    truth, the violation of the rule cannot be condoned because, obviously, the required notice to adverse claimants was n

    served.

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    Evidently, the filing of the application and the verification and investigation allegedly conducted by Recio were precipi

    and beyond the pale of the Public Land Act.[27] As correctly pointed out by the trial court, investigation and verificatio

    should have been done only after the filing of the application. Hence, it would have been highly anomalous for Recio

    conduct his own investigation and verification on December 27, 1998, a day before Felipe Alejaga Sr. filed the Applicat

    for Free Patent.[28] It must also be noted that while the Alejagas insist that an investigation was conducted, they do n

    dispute the fact that it preceded the filing of the application.[29]

    Second, the claim of the Alejagas that an actual investigation was conducted is not sustained by the Verification &

    Investigation Report itself, which bears no signature.[30] Their reliance on the presumption of regularity in the

    performance of official duty*31+ is thus misplaced. Since Recios signature does not appear on the December 27, 1978

    Report, there can be no presumption that an investigation and verification of the parcel of land was actually conducte

    Strangely, respondents do not proffer any explanation why the Verification & Investigation Report was not signed by R

    Even more important and as will later on be explained, this alleged presumption of regularity -- assuming it ever existe

    overcome by the evidence presented by petitioner.

    Third, the report of Special Investigator Isagani P. Cartagena has not been successfully rebutted. In that report, Recio

    supposedly admitted that he had not actually conducted an investigation and ocular inspection of the parcel of land.

    Cartagenas statement on Recios alleged admission may be considered as independently relevant. Awitness may te

    as to the state of mind of another person -- the latters knowledge, belief, or good or bad faith -- and the formers

    statements may then be regarded as independently relevant without violating the hearsay rule.[32]

    Thus, because Cartagena took the witness stand and opened himself to cross-examination, the Investigation Report[3

    had submitted to the director of the Bureau of Lands constitutes part of his testimony. Those portions of the report th

    consisted of his personal knowledge, perceptions and conclusions are not hearsay.[34] On the other hand, the part

    referring to the statement made by Recio may be considered as independently relevant.[35]

    The doctrine on independently relevant statements holds that conversations communicated to a witness by a third pe

    may be admitted as proof that, regardless of their truth or falsity, they were actually made. Evidence as to the making

    such statements is not secondary but primary, for in itself it (a) constitutes a fact in issue[36] or (b) is circumstantially

    relevant to the existence of such fact.[37]

    Since Cartagenas testimony was based on the report of the investigation he had conducted, his testimony was not he

    and was, hence, properly admitted by the trial court.[38]

    Based on the foregoing badges of fraud, we sustain petitioners contention that the free patent granted to Felipe Aleja

    Sr. is void.[39] Such fraud is a ground for impugning the validity of the Certificate of Title.[40] The invalidity of the pate

    sufficient basis for nullifying the Certificate of Title issued in consequence thereof, since the latter is merely evidence o

    former.*41+ Verily, we must uphold petitioners claim that the issuance of the Alejagas patent and title was tainted wi

    fraud.[42]

    Second Issue:

    Indefeasibility of Title

    Petitioner contends that the State has an imprescriptible right to cause the reversion of a piece of property belonging

    the public domain.[43] On the other hand, the Alejagas claim that, pursuant to Section 32 of PD 1529[44] -- otherwise

    known as the Property Registration Decree -- the one-year period for reversion has already lapsed.*45+ Thus, the State

    Complaint for reversion should be dismissed.

    We agree with petitioner.

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    True, once a patent is registered and the corresponding certificate of title issued, the land covered by them ceases to

    part of the public domain and becomes private property. Further, the Torrens Title issued pursuant to the patent bec

    indefeasible a year after the issuance of the latter.[46] However, this indefeasibility of a title does not attach to titles

    secured by fraud and misrepresentation.[47] Well-settled is the doctrine that the registration of a patent under the To

    System does not by itself vest title; it merely confirms the registrants already existing one. Verily, registration under t

    Torrens System is not a mode of acquiring ownership.[48]

    Therefore, under Section 101 of Commonwealth Act No. 141,[49] the State -- even after the lapse of one year -- may s

    bring an action for the reversion to the public domain of land that has been fraudulently granted to private individuals

    Further, this indefeasibility cannot be a bar to an investigation by the State as to how the title has been acquired, if the

    purpose of the investigation is to determine whether fraud has in fact been committed in securing the title.[51]

    In the case before us, the indefeasibility of a certificate of title cannot be invoked by the Alejagas, whose forebear obt

    the title by means of fraud.[52] Public policy demands that those who have done so should not be allowed to benefit f

    their misdeed.[53] Thus, prescription and laches will not bar actions filed by the State to recover its own property acqu

    through fraud by private individuals.[54] This is settled law.[55]

    Prohibition Against Alienation

    or Encumbrance

    Assuming arguendo that the Alejagas title was validly issued, there is another basis for the cancellation of the grant an

    the reversion of the land to the public domain. Section 118 of Commonwealth Act No. 141[56] proscribes the

    encumbrance of a parcel of land acquired under a free patent or homestead within five years from its grant.[57] The

    prohibition against any alienation or encumbrance of the land grant is a proviso attached to the approval of every

    application.[58]

    Further, corporations are expressly forbidden by law to have any right or title to, or interest in, lands that are granted

    free or homestead patents; or any improvements thereon. They are forbidden from enjoying such right, title or intere

    they have not secured the consent of the grantee and the approval of the secretary of the Department of Agriculture

    Natural Resources; and if such lands are to be devoted to purposes other than education, charity, or easement of way

    In the case at bar, Free Patent No. (VI-2) 3358[60] was approved and issued on March 14, 1979. Corresponding Origin

    Certificate of Title No. P-15[61] was issued on the same date. On August 18, 1981, or two (2) years after the grant of t

    free patent, Felipe Alejaga Sr. obtained from Respondent PNB a loan[62] in the amount of P100,000. Despite the

    statement on the title certificate itself that the land granted under the free patent shall be inalienable for five (5) year

    from the gRant, a real estate mortgage was nonetheless constituted on the parcel of land covered by OCT No. P-15.[63

    his testimony, Gabriel D. Aranas Jr., then Cashier III of respondent bank, even admitted that the PNB was aware of suc

    restriction.

    COURT You testified Mr. Aranas that you inspected the title also when you credit investigated the loan applicant Feli

    Alejaga and you have personally examined this?

    A Yes, your Honor.

    COURT Do you conclude that this Original Certificate of Title is a [free] patent?

    A Yes, your Honor.

    COURT And this [free] patent was granted on March 19, 1979.

    A Yes, your honor

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    COURT And as such [free] patent it cannot be alienated except [to] the government or within five years from its issu

    A Yes, your honor.

    COURT Why did you recommend the loan?

    A Because it is just a mortgage.*64+

    Thus, the mortgage executed by Respondent Felipe Alejaga Sr. falls squarely within the term encumbrance proscribed

    Section 118 of the Public Land Act.[65] A mortgage constitutes a legal limitation on the estate, and the foreclosure of t

    mortgage would necessarily result in the auction of the property.[66]

    As early as Pascua v. Talens,[67] we have explained the rationale for the prohibition against the encumbrance of a

    homestead -- its lease and mortgage included -- an encumbrance which, by analogy, applies to a free patent. We rule

    follows:

    It is well-known that the homestead laws were designed to distribute disposable agricultural lots of the State to land-

    destitute citizens for their home and cultivation. Pursuant to such benevolent intention the State prohibits the sale or

    encumbrance of the homestead (Section 116) within five years after the grant of the patent.

    Further, an encumbrance on a parcel of land acquired through free patent constitutes sufficient ground for the nullific

    of such grant, as provided under Commonwealth Act No. 141, which we quote:

    SEC. 124. Any acquisition, conveyance, alienation, transfer, or other contract made or executed in violation of any of

    provisions of sections one hundred and eighteen, one hundred and twenty, one hundred and twenty-one, one hundre

    twenty-two, and one hundred and twenty-three of this Act shall be unlawful and null and void from its execution and s

    produce the effect of annulling and canceling the grant, title, patent, or permit originally issued, recognized or confirm

    actually or presumptively, and cause the reversion of the property and its improvements to the State.

    Mortgage over a parcel of land acquired through a free patent grant nullifies the award and constitutes a cause for the

    reversion of the property to the state, as we held in Republic v. Court of Appeals:[68]

    The foregoing legal provisions clearly proscribe the encumbrance of a parcel of land acquired under a free patent or

    homestead within five years from the grant of such patent. Furthermore, such encumbrance results in the cancellatio

    the grant and the reversion of the land to the public domain.*69+

    To comply with the condition for the grant of the free patent, within five years from its issuance, Felipe Alejaga Sr. sho

    not have encumbered the parcel land granted to him. The mortgage he made over the land violated that condition.[7

    Hence, the property must necessarily revert to the public domain, pursuant to Section 124 of the Public Land Act.

    WHEREFORE, the Petition is GRANTED and the assailed Decision SET ASIDE. The Decision of the RTC of Roxas City (Bra

    15) dated October 27, 1993 is REINSTATED. No costs.

    SO ORDERED.

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    HEIRS OF MARASIGAN VS IAC

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

    The disputed property in this case is a residential lot (Lot No. 2-A) covered by Transfer Certificate of Title No. 1006issued by the Register of Deeds of the City of Manila in the name of one Fe Springael-Bazar, married to Felicisimo

    Bazar.

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

    On April 24, 1975, Civil Case No. 97479 entitled "Maria Marron v. Felicisimo Bazar and Fe S. Bazaar" was filed bethe then Court of First Instance of Manila, Branch XIII. The action sought to compel defendants Bazar to execute aregistrable Deed of Absolute Sale of their lot covered by T.C.T. No. 100612 in favor of Maria Marron.

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

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

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

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

    b) Ordering the defendants to pay to the plaintiff the sum of P500.00 Philippine Currency, as and for attorn

    fees; and

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

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

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

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

    On the other hand, on February 24, 1979, Marron instituted L.R.C. Case No. 7680 captioned "Maria Marron v. Mar

    Marasigan" which prayed for a court order requiring the Register of Deeds of Manila to register the deed of sale

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    executed by the Deputy Clerk of Court in behalf of the Bazaars pursuant to the order dated November 29, 1978 of Court of First Instance, Manila, Branch XIII. L.R.C. Case No. 7680 was tried by the Court of First Instance of ManilBranch IV acting as a land registration court. Said case was dismissed for the following reason:

    ... This court acting as a Land Registration Court, with limited and special jurisdiction cannot act on this petunder summary proceedings but (sic) should be ventilated before a court of general jurisdiction Branch XIIwhich issued the aforesaid Order dated November 29, 1978, the said petition is hereby dismissed for lack

    jurisdiction without prejudice on the part of the petitioner to institute the appropriate civil action before theproper court. ... (Annex "A," p. 4, Rollo, p. 138)

    On September 6, 1979, Marron filed another case docketed as Civil Case No. 126378 to have Marasigan's TCT126056 cancelled conformably to the procedure outlined in the decision of the above land registration court. On Ju30, 1980, the parties submitted said case for decision.

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

    judgment.

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

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

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

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

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

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

    I

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

    II

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

    III

    THAT THE INTERMEDIATE APPELLATE COURT ERRED IN CONCLUDING THAT THE DECISION IN CIVIL CANO. 97479 HAS BECOME FINAL AND EXECUTORY.

    IV

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

    V

    THAT THE INTERMEDIATE APPELLATE COURT ERRED IN CONSIDERING THAT THE TRIAL COURT IN CIVCASE NO. 97479 HAS JURISDICTION OVER THE PERSONS OF DEFENDANTS SPOUSES FELICISIMO BAZA

    AND FE S. BAZAAR.

    VI

    THAT THE INTERMEDIATE APPELLATE COURT FAILED TO APPREHEND THAT THE DEED OF ABSOLUTESALE EXECUTED BY THE DEPUTY CLERK OF COURT, WAS NOT LEGAL AND VALID AND WITHOUT PROO

    AND EFFECT. (Brief for the appellant, pp. 1 and 2)

    We find no merit in the present petition.

    There is a clear showing that although the late Maria Marasigan acquired the property in question from the Bazaarpursuant to a deed of absolute sale on December 18, 1974 or a little over four months before the filing of Civil CaseNo. 97479, the transaction became effective as against third persons only on July 5, 1977 when it was registered wthe Registry of Deeds of Manila. It is the act of registration which creates constructive notice to the whole world.Section 51 of Act 496, as amended by Section 52 of the Property Registration Decree (P.D. 1529) provides:

    Sec. 52. Constructive notice upon registration. Every conveyance ... affecting registered land shall, ifregistered, filed or entered in the office of the Register of Deeds for the province or city where the land to wit relates lies, be constructive notice to all persons from the time of such registering, filing or entering.

    Moreover, there is no question that when the late Maria Marasigan was issued her transfer certificate of title to thesubject property (T.C.T. No. 126056), the Registrar of Deeds of Manila then carried over to the new title the notice

    pendenswhich the private respondent had caused to be annotated at the back of the Bazar's title. In case ofsubsequent sales or transfers, the Registrar of Deeds is duty bound to carry over the notice of lis pendenson all tito be issued. Otherwise, if he cancels any notice of lis pendensin violation of his duty, he may be held civilly and ecriminally liable for any prejudice caused to innocent third persons (The Director of Lands, et al. v. Reyes, 68 SCR177).

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

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

    We reiterate the established rule that:

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

    The late Marasigan's transferors did not interpose any appeal from the adverse judgment dated February 24, 1976Civil Case No. 97479. The 30-day period under the old rule (Rule 41, section 3 of the Revised Rules of court nowamended by Batas Pambansa Bilang 129, section 39) within which the Bazaars may have taken an appeal startedrun from May 12, 1976 when they were served with a copy of the said decision. On June 11, 1976, the February 241976 decision in Civil Case No. 97479 became final and executory. At this point after the finality of the said decisio

    the Bazaars no longer had the right to alienate the property subject of the litigation. Any transaction effective during

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    period of litigation is subject to the risks implicit in the notice of lis pendensand to the eventual outcome of thelitigation.

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

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

    Sec. 3. Time for filing petition. ... A petition provided for in either of the preceding sections of this rule m

    be verified, filed within sixty (60) days after the petitioner learns of the judgment, order or other proceedingbe set aside, and not more than six (6) months after such judgment or order was entered or such proceedinwas taken. ...

    The 60-day period must be reckoned from May 12, 1976 when the Bazaars were served with a copy of the assailedecision. Therefore, the 60-day period expired on July 11, 1976. It was only after 379 days or more than 12 monthsafter they learned of the judgment that the Bazaars filed their petition for relief from said judgment. (See Domingo Dela Cruz, 23 SCRA 1121) The appellate court computed the 6-month period from the date of the judgment wasrendered. Rule 38 states that the counting should commence from the entry of the judgment or order. (See Dirige vBiranya, 17 SCRA 840). A judgment is entered only after its finality and Civil Case No. 97479 became final on June1976. Since the records do not bear the exact date the questioned judgment was entered, the 6-month period can counted for purposes of our decision from July 12, 1976 when the writ of execution of the final judgment was issueThe phrase "or other proceeding" in Section 3 of Rule 38 includes a writ of execution (Aquino v. Blanco, 79 Phil. 64The 6-month period from July 12, 1976 lapsed on January 8, 1977. A period of ten (10) months had already lapsedwhen the Bazaars filed their petition for relief from judgment on May 26, 1977. Obviously, the petitioners cannot noquestion the effects of the final and executory judgment in Civil Case No. 97479. In the words of Laroza v. Guia(supra)they cannot render the final judgment abortive and impossible of execution. The deed of sale executed by tDeputy Clerk of Court on behalf of the Bazar spouses pursuant to the court's judgment was valid and binding.

    The petitioners cannot also raise before us the issues of prescription or laches and lack of jurisdiction over the persof the Bazar spouses in Civil Case No. 97479. This cannot be done in this petition which stems from Civil Case No126378 in the trial court and AC-G.R. No. 00183 in the appellate court. The Bazaars were the proper parties who oto have raised them as defenses either in a motion to dismiss or in their answer. Since they did not do so, the samwere deemed waived. (See Rule 9, section 2 of the Revised Rules of Court; MD Transit & Taxi Co., Inc. v. EstrellaSCRA 378; Torreda v. Boncaros, 69 SCRA 247; Visayan Electric Co., Inc. v. Commissioner of Internal Revenue, 3

    SCRA 43; Republic v. Mambulao Lumber Company, 6 SCRA 858).

    WHEREFORE, in view of all the foregoing, the petition is hereby DISMISSED for lack of merit. The appellate courtdecision is AFFIRMED.

    SO ORDERED.

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    SAJONAS VS CA

    Facts:

    The case is for cancellation of the inscription of a Notice of Levy on Execution from a certificate of Title coveriparcel of real property. The inscription was caused to be made by the private respondent on Transfer Certificaof Title No. N-79073 of the Register of Deeds of Marikina, issued in the name of the spouses Uychocde, and

    later carried over to and annotated on Transfer Certificate of Title No. N-109417 of the same registry, issued the name of the spouses Sajonas, who purchased the parcel of land from the Uychocdes, and are now thepetitioners in this case.

    The subject property was bought by Sajonas spouses on September 1983 and caused the annotation of theiadverse claim on August 1984. The Deed of Sale was executed upon the full payment of the purchase price athe same was registered only on August 1985.

    Meanwhile, without the petitioners' knowledge, there has been a compromise agreement between the spouseUychocde and Pilares (Uychocde's judgment creditor), and a notice of levy on execution was issued on Febru12, 1985. On February 12, 1985, defendant sheriff Roberto Garcia of Quezon City presented said notice of leon execution before the Register of Deeds of Marikina and the same was annotated at the back of TCT No.

    79073 as Entry No. 123283.

    Issue:Which should be preferred between the notice of levy on execution and the deed of absolute sale.The Deed o

    Absolute Sale was executed on September 4, 1984, but was registered only on August 28, 1985, while the noof levy on execution was annotated six (6) months prior to the registration of the sale on February 12, 1985.

    Decision:The annotation of the adverse claim is equivalent to notice to third persons of the interest of the claimant. Theprovision of the law (PD 1529) that the adverse claim is only valid for 30 days cannot be upheld. Clearly, theintention of the law is otherwise as may be gleaned on the following discussion:

    Sec. 70 Adverse Claim- Whoever claims any part or interest in registered land adverse to the registered own

    arising subsequent to the date of the original registration, may, if no other provision is made in this decree for

    registering the same, make a statement in writing setting forth fully his alleged right or interest, and how or un

    whom acquired, a reference to the number of certificate of title of the registered owner, the name of the regist

    owner, and a description of the land in which the right or interest is claimed.

    The statement shall be signed and sworn to, and shall state the adverse claimants residence, and a place at

    which all notices may be served upon him. This statement shall be entitled to registration as an adverse claim

    the certificate of title. The adverse claim shall be effective for a period of thirty days from the date of registrati

    After the lapse of said period, the annotation of adverse claim may be cancelled upon filing of a verifiedpetiti

    therefor by the party in interest: Provided, however, that after cancellation, no second adverse claim based on

    same ground shall be registered by the same claimant.

    Before the lapse of thirty days aforesaid, any party in interest may file a petition in the Court of First Instance

    where the land is situated for the cancellation of the adverse claim, and the court shall grant a speedy hearing

    upon the question of the validity of such adverse claim, and shall render judgment as may be just and equitab

    the adverse claim is adjudged to be invalid, the registration thereof shall be ordered cancelled. If, in any case

    court, after notice and hearing shall find that the adverse claim thus registered was frivolous, it may fine the

    claimant in an amount not less than one thousand pesos, nor more than five thousand pesos, in its

    discretion. Before the lapse of thirty days, the claimant may withdraw his adverse claim by filing with the Regi

    of Deeds a sworn petition to that effect.

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    Construing the provision as a whole would reconcile the apparent inconsistency between the portions of the l

    such that the provision on cancellation of adverse claim by verified petition would serve to qualify the provisio

    the effectivity period. The law, taken together, simply means that the cancellation of the adverse claim is still

    necessary to render it ineffective, otherwise, the inscription will remain annotated and shall continue as a lien

    upon the property. For if the adverse claim has already ceased to be effective upon the lapse of said period,

    cancellation is no longer necessary and the process of cancellation would be a useless ceremony.

    To interpret the effectivity period of the adverse claim as absolute and without qualification limited to thirty da

    defeats the very purpose for which the statute provides for the remedy of an inscription of adverse claim, as t

    annotation of an adverse claim is a measure designed to protect the interest of a person over a piece of real

    property where the registration of such interest or right is not otherwise provided for by the Land Registration

    or Act 496 (now P.D. 1529 or the Property Registration Decree), and serves as a warning to third parties dea

    with said property that someone is claiming an interest or the same or a better right than the registered owne

    thereof.

    Petition was granted. The inscription of the notice of levy on execution on TCT No. N-109417 is ordered

    CANCELLED

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    FULE VS LAGARE

    This is a petition for certiorarito review the decision of the Court of Appeals, promulgated on November 16, 1960, in CiviCase No. 15728-R, entitled" Emilia E. Legare, plaintiff-appellant, versus Conrado C. Fule and Lourdes F. Aragon,defendants-appellants..

    The facts of this case as found by the Court of Appeals in its decision are as follows:

    This is an action for annulment of certain deeds of sale and conveyance covering a parcel of land, together with improvements existing thereon, situated in the municipality of San Juan, province of Rizal, and for damages.

    It appears in evidence that the plaintiff, Emilia E. de Legare, was the owner of a parcel of land, together with aresidential house erected thereon, situated at No. 146 Sta. Mesa Boulevard Extension, San Juan, Rizal, herownership being evidenced by Transfer Certificate of Title No. 21253, issued by the Office of the Register of Deeof the province of Rizal. She was living in that house together with defendant John W. Legare, her adopted son, a maid named Purita Tarrosa. On September 26, 1951, the plaintiff, thru a public deed, constituted on the abovementioned house and lot a first class mortgage in favor of defendant Tomas Q. Soriano to guarantee the paymea loan in the amount of P8,000.00. This deed of mortgage was on the same date recorded in the Office of theRegister of Deeds of the province of Rizal and annotated in the memorandum of encumbrances of transfer certiof title No. 21253. On account of certain partial payments made by the plaintiff and the contracting by the latter oadditional loans in small amounts from Tomas Q. Soriano the debt guaranteed by the above mentioned mortgag

    was reduced to the sum of P7,000.00 as of February 23, 1953. These transactions, however, were not annotatethe memorandum of encumbrances of the above mentioned certificate of title.

    At about 9:00 o'clock in the evening of March 29, 1953, while the plaintiff, John W. Legare, and Purita Tarrosa wseated in the drawing room of the house above referred to, an unknown man intruded into the room, approachedplaintiff, covered her mouth, and, pressing a knife on her side, demanded that she give him P10,000.00 if she didlike to be killed. The plaintiff replied that she did not have that amount. Thereupon, the intruder told the plaintiff traise the necessary amount as he would come back the following morning and once more threatened to kill her would fail to do so. After having made that threat, the intruder left the house. John W. Legare did not call for helpmade any attempt to defend his mother, and when Purita Tarrosa stood up to go down the house to call for apoliceman, he held the latter by the hand and slapped her on the face when she persisted in going down, telling that the man had companions waiting downstairs.

    After the intruder was gone John W. Legare approached the plaintiff, and exhibiting to her a paper told her to sigas with the same he could secure from the U.S. Veterans Administration the amount which they needed to delivthat intruder. The plaintiff, who did not know how to read nor write, although she could sign her name, asked JoLegare what that paper was. The latter answered that it was an application for payment of compensation. As plahad confidence in John W. Legare and prior to that occasion she had received from the U.S. Veterans Administra letter concerning some compensation she was to receive, she signed that paper. After the paper was signed bplaintiff, John W. Legare had Purita Tarrosa sign it as a witness, without however, allowing the latter to read it.

    After that paper was thus signed, John W. Legare told the plaintiff and Purita Tarrosa to pack up their things as were leaving the house to hide in a hotel, adding that the men who came earlier that evening were Huks. Early thnext morning John W. Legare took the plaintiff and Purita Tarrosa to the Windsor Hotel in the City of Manila, andafter conducting them to a room in the hotel, told them not to leave the room or peep out of the window as they be seen by the men who came to their house in the previous evening. This advise given, John W. Legare left the

    hotel. The plaintiff and Purita Tarrosa stayed in that hotel for about a month and a half. John W. Legare occasiovisited them there. In one of said occasional visits the plaintiff told John that she wanted to go home. The latter toher that it was not yet safe for her to go home. On May 7, 1953, however, John W. Legare came to the hotel, gavthe plaintiff a five-peso bill, and told her that she could use the amount for transportation expenses if she wantedleave the hotel. On the following morning the plaintiff and Purita Tarrosa left the hotel and went direct to her houSta. Mesa Boulevard Extension. When they arrived at the house, however, they found that it was occupied bystrangers, and that all her furniture and personal belongings had disappeared. Inquiring from those strangers hothey happened to occupy the house, the latter told her that John W. Legare had sold the house to them and thatwas no longer hers. The plaintiff thereupon sought the help of her attorney. It was then discovered that the papewhich John W. Legare had the plaintiff and Purita Tarrosa sign in the evening of March 29, 1953 was a deed of sof the lot and house in question in favor of John W. Legare for the sum of P12,000.00, and that it was supposed have been executed on the 7th day of April, 1953, and acknowledged before a notary public on that date. Exhibi

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    It further appears that sometime prior to May 9, 1953, John W. Legare approached Elias B. Fermin, the real estabroker who intervened in the securing of the loan contracted by the plaintiff from Tomas Q. Soriano, and sought broker's help to sell the lot and house in question. Elias B. Fermin accepted the commission and offered the propin sale to defendants spouses Conrado C. Fule and Lourdes F. Aragon. Conrado C. Fule read the title papers inhand of John W. Legare and inspected the premises, and satisfied with the result of his inspection, he agreed topurchase the property for P12,000.00 on condition that the sum of P7,000, the unpaid balance of plaintiff'sindebtedness to Tomas Q. Soriano secured by a mortgage thereon, would be deducted from the price, and thatwould assume said mortgage. The terms offered by Conrado C. Fule being acceptable to John W. Legare andTomas Soriano, the parties proceeded to formalize the contract. Accordingly, on May 9, 1953, defendant TomasSoriano executed a deed of absolute sale thereof, free of all liens and encumbrances, in favor of defendant spouConrado C. Fule and Lourdes F. Aragon, Exhibit X-2, and said spouses in turn executed in favor of Tomas Q.

    Soriano a deed of mortgage covering the property for the sum of P7,000.00. Exhibit X-3. These three deeds,together with transfer certificate of Title No. 21253, issued in the name of the plaintiff, were on that same datepresented for registration in the Office of the Register of Deeds of the province of Rizal. The latter, following theusual procedure, recorded, first, the deed of sale executed by the plaintiff in favor of defendant John W. Legare(Exhibit 1) and issued in the name of the latter transfer certificate of title No. 30126 which cancelled transfercertificate of title No. 21253 (Exhibit Y), then the deed of sale executed by John W. Legare in favor of the spouseConrado C. Fule and Lourdes F. Aragon (Exhibit X-2) and issued in favor of the latter transfer certificate of title N30127 (Exhibit Y-1), which cancelled transfer certificate of title No. 30126, and then annotated on the memorandof encumbrances of transfer certificate of title No. 30127 the deed of mortgage (Exhibit X-1) executed in favor ofTomas Q. Soriano by said spouses. Once these were accomplished, Elias B. Fermin and John W. Legare went to the house of the spouses Conrado C. Fule and Lourdes P. Aragon and gave the transfer certificate of title No.30127. Thereupon said spouses delivered to John W. Legare the balance of the purchase price of the property adeducting therefrom the amount of the mortgage constituted thereon in favor of Tomas Q. Soriano, the brokerag

    fees and the expenses incident to the execution and registration of said deeds and issuance of new certificates title, which amounted to a little P4,000.00.

    Upon the evidence, the trial court rendered judgment, the dispositive part of which reads as follows:

    IN VIEW OF ALL THE FOREGOING, this Court hereby orders:

    1) the cancellation of Certificates of Title Nos. 30127 and 10126, thereby leaving valid TCT No. 21253 in the namEmilia E. de Legare together with the encumbrance thereon in favor of Tomas Q. Soriano;

    2) the delivery of the possession of the premises to the plaintiff and the monthly rental of P150.00 a month from 9, 1953, up to and including the date on which the delivery is to be made, this obligation being understood to be and several insofar as the defendants Fule and Aragon are concerned;

    3) the award of P5,000.00 as moral damages in favor of the plaintiff and enforceable against John W. Legare fofraud perpetrated by the latter on the former;

    4) the award of P1,000.00 as attorney's is fees enforceable against the defendants Fule and Aragon;

    And on the cross-claim, the court orders

    1) John W. Legare to refund to the spouses Fule and Aragon the amount paid by the latter on account of the salcontained in Exhibit X-2 plus interest thereon at the legal rate from the date of the cross-claim;

    2) the award of P5,000.00 as moral damages in favor of the spouses Fule and Aragon and enforceable against J

    W. Legare for the misrepresentation made by him;.

    3) the reimbursement to the spouses Fule and Aragon by John W. Legare of all amounts which may be paid by tformer to the plaintiff by way of rentals for the premises involved herein, as well as attorney's fees in the amountP1,000.00.

    SO ORDERED.

    The Court of Appeals, in deciding the appeal, entered a judgment the dispositive portion of which follows:.

    WHEREFORE, modified as indicated above, i.e., the transfer certificate of title No. 21253 issued in the name ofEmilia E. de Legare is revived with the mortgage in favor of appellee Tomas Q. Soriano annotated on its

    memorandum of encumbrances but reduced to the amount of P7,000.00, and that the award of attorney's fees i

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    amount of P1,000.00 to be paid by the spouses Conrado C. Fule and Lourdes F. Aragon, in favor of the plaintiff,eliminated therefrom, the judgment appealed from is hereby affirmed in all other respects, without specialpronouncement as to costs in this instance.

    IT IS SO ORDERED.

    In elevating the judgment of the Court of Appeals to this Tribunal for review, herein petitioners discussed 6 assignmentserror. However, this Court is of the view that, in effect and substance, only one issue was raised.We have always refrainfrom reviewing factual findings of the Court of Appeals and the first two errors assigned were but attempts at disputing thsame. The other four were simply detailed aspects of the one, sole issue, to wit:

    Were the herein petitioners purchasers in good faith and for value of the properties here contested?

    Guided by the facts found by the Court of Appeals, We hold the herein petitioners innocent purchasers for value of the hoand lot here disputed. In consequence, they are here adjudged the lawful owners thereof.

    A purchaser in good faith is one who buys property of another, without notice that some other persons has a right to, orinterest in, such property and pays a full and fair price for the same, at the time of such purchase, or before he has noticthe claim or interest of some other persons in the property. Good faith consists in an honest intention to abstain from takany unconscientious advantage of another (Cui and Joven v. Henson, 51 Phil. 606). We have measured the conduct of tpetitioner spouses by this yardstick.

    These facts were uncontroverted. The negotiation and transaction which eventually caused the certificate of title to be

    transferred from the herein respondent to the petitioner spouses were conducted by a real estate broker licensed since Nothing in John W. Legare's person or behaviour suggested anything suspicious. He was the adopted son of the hereinrespondent, and, to the time that he was contracting with the petitioner spouses, he had not been known to commit crimedishonesty. On the contrary, John has had previous dealings with the real estate broker during which he exhibited theexpected degree of trustworthiness.

    It should be noted that the deed of sale was regular upon its face, and no one would have questioned its authenticity sincwas duly acknowledged before a notary public. Moreover, even if the petitioners had the opportunity to compare thesignature of the respondent on the deed of conveyance with a specimen of her genuine signature, the effort, nonetheleswould have been in vain since the respondent's signature on the document was admittedly hers. Lastly, it should not beoverlooked that the respondent, during the whole period of the negotiation, was nowhere available to confirm or deny theexecution of the deed. She was then in hiding, or, hidden, at the Windsor Hotel in Manila.

    The diligence and precaution observed by the petitioners themselves could hardly have been wanting. The records showthey did not rely solely and fully upon the deed of sale in favor of John W. Legare and the fact that John had then in hispossession the corresponding certificate of title of the registered owner. They demanded more. They insisted that the safavor of John W. Legare be first registered and that the transfer in their favor be thereafter likewise registered. It was onlafter all these were complied with that they paid the purchase price. In other words, the petitioner spouses relied not reathe documents exhibited to them by John W. Legare, but, on the registerability of those documents. This in Our view,satisfies the measure of good faith contemplated by law.

    It is true that at the time the herein petitioners purchased the properties from John W. Legare, he was not yet the registeowner of the same. This fact alone, however, could not have caused the herein petitioners to lose their status as innocenpurchasers for value. It should be recalled that although the title was in the name of the respondent Emilia E. de Legarecertificate of title was in the possession of her adopted son, John. Under Section 55 of Act 496, as amended, John'spossession of the certificate and his subsequent production of it to the herein petitioners operated as a "conclusive auth

    from the registered owner to the register of deeds to enter a new certificate."

    SEC. 55. xxx xxx xxx

    The production of the owner's duplicate certificate whenever any voluntary instrument is presented for registratioshall be conclusive authority from the registered owner to the register of deeds to enter a new certificateor to mmemorandum or registration in accordance with such instrument, and the new certificate or memorandum shall binding upon the registered owner and upon all persons claiming under him, in favor of every purchaser for valueand in good faith. ....

    While it was true that the transfer in favor of John was still unregistered when he sought to sell the property to the hereinpetitioners, it was not true that the latter observed no precaution whatsoever from the complication of such non-registratAs already discussed above, the petitioners required that the registration of the previous sale (from the respondent to JoW. Legare) be first attended to and completed. After that was done and the certificate of title thereof was issued to John

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    the Register of Deeds, they still withheld payment till the second sale (from John to the petitioners) has in turn registeredthe corresponding certificate of title therefor was issued in their names. It was only after all these were followed that theentire negotiation was terminated with the payment of the balance of the purchase price. All these, We hold, were adequsafeguards against the objection interposed. A contrary conclusion would operate to weaken the reliance of the generalpublic on the indefeasibility of titles registered under the Torrens System.

    We have so far demonstrated the good faith of the petitioner spouses. By the very facts established by the Court of Appehowever, there is still another reason why the property herein in question should be adjudged to the petitioners.

    Although the deed of sale in favor of John W. Legare was fraudulent, the fact remains that he was able to secure a registitle to the house and lot. It was this title which he subsequently conveyed to the herein petitioners. We have indeed ruled

    that a forged or fraudulent deed is a nullity and conveys no title (Director of Lands v. Addison, 49 Phil. 19). However, Wehave also laid down the doctrine that there are instances when such a fraudulent document may become the root of validtitle. One such instance is where the certificate of title was already transferred from the name of the true owner to the forand while it remained that way, the land was subsequently sold to an innocent purchaser. For then, the vendee had the rto rely upon what appeared in the certificate (Inquimboy vs. Cruz, G.R. No. L-13953, July 28, 1960).

    Wherefore, the parties respectfully pray that the foregoing stipulation of facts be admitted and approved by this HonorabCourt, without prejudice to the parties adducing other evidence to prove their case not covered by this stipulation of facts

    We have been constrained to adopt the conclusion here set forth because under the Torrens system, "registration is theoperative act that gives validity to the transfer or creates a lien upon the land (Secs. 50 and 51, Land Registration Act).Consequently, where there was nothing in the certificate of title to indicate any cloud or vice in the ownership of the propor any encumbrance thereon, the purchaser is not required to explore farther than what the Torrens title upon its faceindicates in quest for any hidden defect or inchoate right that may subsequently defeat his right thereto. If the rule wereotherwise, the efficacy and conclusiveness of the certificate of title which the Torrens system seeks to insure would entirbe futile and nugatory. (Reynes vs. Barrera, 68 Phil. 656; De Lara and De Guzman vs. Ayroso, 50 O.G. No. 10, 4838). Tpublic shall then be denied of its foremost motivation for respecting and observing the Land Registration Act. In the end,business community stands to be inconvenienced and prejudiced immeasurably.

    Furthermore, when the Register of Deeds issued a certificate of title in the name of John W. Legare, and thereafterregistered the same, John W. Legare, insofar as third parties were concerned, acquired a valid title to the house and lot disputed. When, therefore, he transferred this title to the herein petitioners, third persons, the entire transaction fell withinpurview of Article 1434 of the Civil Code. The registration in John W. Legare's name effectively operated to convey theproperties to him.

    ART. 1434. When a person who is not the owner of a thing sells or alienates and delivers it, and later the seller grantor acquires title thereto, such title passes by operation of law to the buyer or grantee.

    This Court sympathizes with the respondent. It is aware of the treacherous, painful fraud committed on her by her adoptson. But positive provisions of law and settled jurisprudence cannot be subordinated to that feeling.

    Besides, the records of this case reveal that the herein respondent is herself not entirely free from blame. We note that wJohn presented to her the document which turned out to be a bed of conveyance in his favor, she readily affixed hersignature thereto upon the simple representation of John that it was a document pertaining to her claim with the U.S.Veterans Administration. She could have asked her maid to read the contents of the same for her and yet she did not. ThWe believe, amount to a lack of prudence and precaution on the part of Mrs. Emilia de Legare.

    IN VIEW OF THE FOREGOING, the decision of the Court of Appeals is hereby reversed and set aside. A new one is he

    entered dismissing the respondent's complaint and declaring the petitioners herein the lawful owners of the properties hinvolved. Without pronouncement as to costs.

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    TOMAS VS TOMAS

    DE CASTRO, J p:

    Plaintiff spouses, Florentino S. Tomas and Francisca Cario, are the owners of a parcel of land located in Malasian, Santiago, Is

    (now Saguday, Nueva Vizcaya) since 1929, which they obtained through a homestead patent with Original Certificate of Title

    4620. Through fraud and misrepresentation, one Eusebia Tomas succeeded in having OCT No. 1-4620 cancelled, and obtained

    name TCT No. 8779, Isabela, now TCT 350 Nueva Vizcaya, with which she obtained a loan from the Philippine National Bank bra

    Santiago, Isabela, as a security, mortgaging the land with the bank for the loan of P2,500.00. Florentino Tomas discovere

    fraudulent acts of Eusebia Tomas when he himself applied for a loan from the Philippine National Bank, and offered as a collater

    same land already mortgaged by Eusebia Tomas to the bank.

    In the action plaintiffs filed on April 14, 1964 to declare TCT - 350, Nueva Vizcaya, null and void, against Eusebia Tomas, it was fou

    the court (Court of First Instance of Nueva Vizcaya) that Eusebia Tomas succeeded in having plaintiffs' OCT No. I-4620 (Isab

    cancelled and having TCT No. 8779 (Isabela) 2 issued in her name, by executing a deed of extra-judicial settlement 3 in which she

    it appear that she is the lone heir of the registered owner, Florentino Tomas, to whom she was not even known before, and who

    the time very much alive. She then petitioned for the issuance of another owner's duplicate of OCT No. I-4620, alleging loss o

    owner's duplicate. On Order of the court (Court of First Instance of Isabela) where the petition was filed, a new owner's duplicat

    issued to Eusebia Tomas as the petitioner. Upon the registration of the deed of extra-judicial settlement (Exhibit "J"), OCT No. I

    was cancelled, and TCT No. 8779, now TCT - 350 Nueva Vizcaya was issued in the name of Eusebia Tomas on March 14, 1957.

    In the same action, the Philippine National Bank was made a co-defendant as the mortgagee of the land, the plaintiffs alleging th

    mortgage is null and void, the mortgagor not being the owner of the property mortgaged. After trial in which Eusebia Tomas

    appeared to present any evidence, the court a quo rendered judgment dated June 9, 1967, the dispositive portion 4 of which read

    "IN VIEW OF ALL THE FOREGOING CONSIDERATIONS, decision is hereby rendered in favor of the plaintiffs and against the defen

    (a) declaring Transfer Certificate of Title No. T-8779, now Transfer Certificate of Title No. T-350 in the name of defendant Eusebia T

    null and void; (b) declaring the deed of extra-judicial settlement executed by defendant Eusebia Tomas null and void; (c) dec

    Original Certificate of Title No. I-4620 and its file and owner's copy revived; (d) condemning defendant Eusebia Tomas to pa

    plaintiffs in the amount of P950.00 as attorney's fee and P55.80 representing the Actual expenses of the plaintiffs; (e) declarin

    mortgage in favor of the Philippine National Bank without force and effect against the plaintiffs, and (f) ordering defendant Eu

    Tomas to pay the costs of this proceedings."

    From the portion of the foregoing judgment declaring the mortgage in its favor without force and effect, the Philippine Nationa

    appealed to the Court of Appeals, 5 which, however, certified the appeal to this Court, the issue presented being purely legal. 6

    The only issue to be resolved is whether the mortgage of the land in favor of the appellant bank is valid or not as against appellees

    There is no dispute that the mortgagor Eusebia Tomas is not the owner of the land in question, the true owner being the appel lee

    had always been in possession of said land since they applied for it by way of homestead patent. The owner's duplicate of OCT

    4620 covering the land in favor of appellee Florentino Tomas had always been with the latter, and was never lost as false

    fraudulently misrepresented by Eusebia Tomas in her petition for a new owner's duplicate of OCT No. I-4620. Alleging however,

    faith so as to invoke the protective provision of the Land Registration Act (Section 39, Act 496), pointing to the fact that the certof title, TCT - 350 Nueva Vizcaya presented by Eusebia Tomas as mortgagor was in her name, and showed no encumbrance ov

    land, the appellant bank contends that its right as mortgagee must be fully respected, as a mortgagee in good faith.

    Verily, the resolution of the issue raised in this appeal hinges on whether the appellant is a mortgagee in good faith and for value,

    it is, and without anything to excite suspension as it claims, it is protected in the same way as a purchaser in good faith and for va

    protected under Section 39 of Act 496, otherwise known as the Land Registration Act.

    In claiming good faith as a mortgagee, and for value, appellant bank claims that no proof to the contrary was presented by appel

    the trial court. 7 It is a fact, however, that incontrovertible proofs have seen adduced showing that Eusebia Tomas, the mortgago

    not the owner of the property mortgaged. This is all that appellees had to prove that would place appellant bank on obligation to

    good faith, as in fact, it was the bank that alleged good faith as its defense. 8 It would be more legally correct, therefore, to say t

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    was incumbent on appellant to prove its affirmative allegation of good faith rather than appellee to show the contrary. In any ca

    the statement in Appellees' brief that appellant bank "did not object when appellees presented evidence in the lower court rega

    negligence of appellant, like their failure to send field inspector to the land to discover who is the real owner of the land being of

    as security to the loan of impostor Eusebia Tomas," no denial was made in a reply brief which appellant should have filed if it wan

    deny this assertion of appellees. The allegation that appellees presented no proof of lack of good faith on the part of appellan

    may, therefore, not altogether be accurate.

    The facts as properly taken note of by the lower court would seem to bring the instant case within the ruling of the case of Pich

    Celestino, 9 the essence of which is as between two innocent persons, the mortgagee and the owner of the mortgaged property,

    whom must suffer the consequence of a breach of trust, the one who made it possible by his act of confidence must bear the los

    is a principle that accords more with justice and equity, in the light of the common practice of banking institution, which is a mat

    public knowledge, as observed by the trial court in the case aforecited, with which this Court agreed, before approving a loan, to

    representatives to the premises of the land offered as collateral and investigate who are the true owners thereof. Incidental

    ruling cited herein was against the same appellant bank, the Philippine National Bank, with reference to a mortgage entered into

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

    individuals, for their business is one affected with public interest, keeping in trust money belonging to their depositors, whic

    should guard against loss by not committing any act of negligence which amount to lack of good faith by which they would be d

    the protective mantle of the land registration statute, Act 496, extended only to purchasers for value and in good faith, as wel

    mortgagees of the same character and description. This is evidently the rationale of the doctrine laid down in the case of Pich

    Celestino, supra, which as in the instant suit, involved also a mortgage of a land covered by a certificate of title, mortgaged b

    defendant who was not the owner. The latter, however, succeeded in canceling the original certificate of title in the name of thowner, by forging a deed of sale, purportedly executed by the said registered owner in his favor, upon the registration of whi

    obtained a transfer certificate of title in his name, presenting a new owner's duplicate certificate he obtained by falsely alleging th

    first owner's duplicate was burned in an ex-parte petition with prayer for the issuance of another owner's duplicate which the

    granted.

    Thus, the facts of the instant case so closely resemble, if they are not exactly the same as, those in the Pichay vs. Celestino case,

    make the application of the ruling in said case to the one at bar unavoidable and compelling. There were only 12 days betwee

    cancellation of OCT No. I-4620 on March 14, 1957 and the constitution of the mortgage on March 26, 1957, which shows tha

    application for the loan must have been filed within days only from the receipt of the new TCT No. 8779 by Eusebia Tomas. Thi

    should have aroused suspicion for appellant bank to send representative to the premises to ascertain who the true own

    considering that homestead patents are generally applied for by male applicants, and are very infrequently sold or alienated, the

    of the law being against sale or alienation.

    The decision of this Court in the aforecited case promulgated on May 30, 1967 preceded the decision of the lower court in thi

    dated June 7, 1967, by only a few days. However, the court a quo went along the doctrine as laid down in the Pichay vs. Celestino

    even perhaps without having actually read the decision, although a similar rule had earlier been laid down in Blondeau, et al. vs.

    et al. 10 We, therefore, find no error in the holding of the court a quo that the mortgage executed by Eusebia Tomas, appellan

    defendant in favor of said appellant bank over the land in question which the former never owned, is without effect as a

    appellees herein.

    We, indeed, find more weight and vigor in a doctrine which recognizes a better right for the innocent original registered owne

    obtained his certificate of title through perfectly legal and regular proceedings, than one who obtains his certificate from a total

    one, as to prevail over judicial pronouncements to the effect that one dealing with a registered land, such as a purchaser, is und

    obligation to look beyond the certificate of title of the vendor, for in the latter case, good faith has yet to be established by the v

    or transferee, being the most essential condition, coupled with valuable consideration, to entitle him to respect for his newly ac

    title even as against the holder of an earlier and perfectly valid title. There might be circumstances apparent on the face o

    certificate of title which could excite suspicion as to prompt inquiry, such as when the transfer is not by virtue of a voluntary act

    original registered owner, as in the instant case, where it was by means of a self-executed deed of extra-judicial settlement, a fact

    should be noted on the face of Eusebia Tomas' certificate of title. Failing to make such inquiry would hardly be consistent wit

    pretense of good faith, which the appellant bank invokes to claim the right to be protected as a mortgagee, and for the reversal o

    judgment rendered against it by the lower court.

    WHEREFORE, the judgment appealed from is hereby affirmed, without pronouncement as to costs.

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    REYES VS DE LEON

    Rodolfo Lanuza and his wife Belen were the owners of a two-story house built on a lot of the Maria Guizon Subdiviin Tondo, Manila, which the s