D.B.T. MAR-BAY CONSTRUCTION, INCORPORATED, PETITIONER, VS. RICAREDO PANES, ANGELITO PANES, SALVADOR CEA, ABOGADO MAUTIN, DONARDO PACLIBAR, ZOSIMO PERALTA AND HILARION MANONGDO, …

D.B.T. Mar-Bay Construction versus Panes

The Case

This is a petition for review on certiorari brought by D.B.T. Mar-Bay Construction, Incorporated against Ricaredo Panes, his son Angelito Panes, and several other occupants of a large parcel of land in Pasong Putik, Novaliches, Quezon City. The respondents sued to quiet title over that land, asking that the Torrens certificate held by D.B.T. Mar-Bay, and every title derived from it, be declared void insofar as it covers their property. The case matters because it sets two principles side by side: an action to quiet title is imprescriptible when the plaintiff is in possession, yet no title to registered land may be acquired against the registered owner by prescription or adverse possession. It is, in short, a case about which of two competing claims the Torrens system will protect.

Procedural History

The respondents filed their complaint for quieting of title, cancellation of the certificate, damages, and injunction before the Regional Trial Court of Quezon City, Branch 216, later amending it to implead D.B.T. Mar-Bay as a defendant. On June 15, 2000, the trial court, through Judge Bacalla, rendered judgment for the respondents, declaring the certificate and all titles derived from it null and void insofar as they embraced the land covered by the respondents' plan, and ordering D.B.T. Mar-Bay to pay attorney's fees and costs.

D.B.T. Mar-Bay moved for reconsideration on the grounds of prescription and laches. While that motion was pending, Judge Bacalla passed away. A motion for intervention by a representative of the Ocampo Estate was denied because judgment had already been rendered. The trial court then held a clarificatory hearing and directed D.B.T. Mar-Bay to produce the original or a certified true copy of its certificate, which the company could not do because of a fire in the registry. On November 8, 2001, the trial court, through Judge Juanson, issued an order reversing its earlier decision and dismissing the complaint on grounds of prescription and laches. Reconsideration was denied.

The respondents appealed, and the Court of Appeals reversed the trial court's orders and reinstated the June 15, 2000 decision. It found that the lands in the D.B.T. Mar-Bay certificate were located elsewhere, that the gap between the lots was established by an engineer's unrebutted testimony, and that the trial judge had entertained new issues and evidence only on reconsideration. Reconsideration was denied, and D.B.T. Mar-Bay came to the Supreme Court by petition for review on certiorari under Rule 45.

Facts

The subject property is a parcel of about 240,146 square meters in Pasong Putik, Novaliches, Quezon City, covered by Lot Plan Psu-123169, approved in July 1948. Ricaredo Panes claimed that he and his family had occupied and cultivated portions of it since before the Second World War, that he had declared it for taxation in his name, and that he had filed an application for registration of his title. In the course of publication, the Land Registration Authority discovered that his plan overlapped the subdivision plan of B.C. Regalado and Company.

The property was included in a transfer certificate of title entered in July 1974 in the name of B.C. Regalado, which then conveyed it to D.B.T. Mar-Bay by dacion en pago, that is, payment of a debt through the transfer of property accepted as equivalent performance. The respondents alleged that the Regalado subdivision plan had been deliberately drawn to swallow their land, and that the titles relied upon actually covered lots situated far from Pasong Putik. The Register of Deeds initially admitted a mistake, then corrected himself and explained that the certificate covered many lots of the Tala Estate.

In 1992 the respondents filed their complaint. D.B.T. Mar-Bay answered that it was the lawful owner under the dacion en pago, that the respondents were mere claimants whose rights were still undetermined, and that the complaint was premature. Portions of the land had, by then, already been sold to individual buyers who relied on the certificates shown to them.

Issues

• Whether or not the trial court erred in upholding the defenses of prescription and laches raised by D.B.T. Mar-Bay only in its motion for reconsideration.
• Whether or not the respondents' action to quiet title is barred by prescription and laches.
• Whether or not the respondents may acquire the registered land by acquisitive prescription.
• Whether or not, as between D.B.T. Mar-Bay and the respondents, D.B.T. Mar-Bay has the better right over the subject property.

Applicable Provisions

Article 1126 of the Civil Code provides:

Acquisitive prescription of dominion and other real rights may be ordinary or extraordinary. Ordinary acquisitive prescription requires possession of things in good faith and with just title for the time fixed by law.

This is the provision the Court reads together with the land registration law to hold that prescription over registered land is governed by special laws, not by the Civil Code's ordinary periods.

Section 47 of Presidential Decree Number 1529, the Property Registration Decree, provides:

No title to registered land in derogation of the title of the registered owner shall be acquired by prescription or adverse possession.

This is the decisive rule: it defeats the respondents' claim of acquisitive prescription over land already registered in the name of another.

Ruling

On the first issue, the Court answered in the affirmative: the trial court did err. It held that a trial court may entertain prescription even when raised only in a motion for reconsideration, because courts have the inherent power to amend and control their processes to conform to law and justice, and may reverse themselves when adherence to a decision would cause injustice. But the conclusion drawn from that power was wrong.

On the second issue, the Court held that the action is not barred. The complaint was not merely for reconveyance but for quieting of title, which is imprescriptible when the plaintiff is in possession. The prescriptive periods for reconveyance apply only where the plaintiff is not in possession; one who actually possesses the land as owner may wait until his possession is disturbed before vindicating his right. Since Ricaredo and Angelito established possession, and Angelito had bought a house within the property in 1987, they were proper parties, for title in a quieting action need not mean a certificate of title. Laches likewise does not apply, because the action was brought within the prescriptive period and because laches is a creation of equity, applied to avoid a clearly inequitable result, not to penalize neglect.

On the third issue, however, the Court ruled against the respondents. It is a well-entrenched rule that no title to registered land in derogation of the registered owner's rights may be acquired by prescription or adverse possession. Article 1126 of the Civil Code governs registered lands through special laws, and Section 47 of the Property Registration Decree forbids acquisition by adverse possession. Possession is a mere consequence of ownership where land is registered under the Torrens system, so proof of the respondents' possession became immaterial.

On the fourth issue, the Court resolved in favor of D.B.T. Mar-Bay. It reviewed the records, as it may when the findings of the trial court and the appellate court conflict, and found no clear evidence that D.B.T. Mar-Bay participated in the alleged fraud. D.B.T. Mar-Bay was an innocent purchaser for value and in good faith, having acquired the property through a valid dacion en pago, and its rights must be protected. Portions had already been sold to third persons who likewise relied on the certificates shown to them. The Court stressed that the Torrens system exists to quiet title and put a stop forever to questions as to the legality of a title, and that innocent third persons relying on the correctness of a certificate must be protected.

Doctrine

First, an action for quieting of title is imprescriptible when the plaintiff is in actual possession of the property claiming to be its owner; the prescriptive periods for reconveyance apply only where the plaintiff is not in possession. Second, prescription and laches may be raised and considered even after judgment on the merits, as in a motion for reconsideration, provided the facts showing the lapse of the prescriptive period are sufficiently apparent on the record. Third, and decisively, no title to registered land in derogation of the registered owner's title may be acquired by prescription or adverse possession, consistent with Article 1126 of the Civil Code and Section 47 of the Property Registration Decree. Fourth, an innocent purchaser for value and in good faith, including one who acquires registered land through dacion en pago, is protected, and the courts will not cancel a certificate at the instance of mere claimants where no complicity in fraud is shown.

Disposition

The petition was granted; the Court of Appeals decision was reversed and set aside, and the trial court's order dismissing the complaint was reinstated, with D.B.T. Mar-Bay prevailing.

Remember This

Memorize the pairing: quieting of title is imprescriptible for the possessor, but prescription never runs against registered land. Examiners use this case to test the distinction between reconveyance and quieting of title, and the protection owed to an innocent purchaser for value under the Torrens system.