ELISEO MALTOS AND ROSITA P. MALTOS, PETITIONERS, VS. HEIRS OF EUSEBIO BORROMEO, RESPONDENTS.

Maltos versus Heirs of Borromeo

The Case

This is a petition for review brought by the spouses Eliseo and Rosita Maltos against the heirs of the late Eusebio Borromeo. The heirs sued to nullify a deed of sale and to recover a parcel of agricultural land that Eusebio Borromeo had sold to Eliseo Maltos within the five-year period during which a free patent may not be alienated. The case matters because it gathers into one decision three rules every reviewee must carry: a sale made inside the five-year prohibitory period is void; reversion to the State is not automatic but must be pursued by the Office of the Solicitor General; and the doctrine of in pari delicto yields whenever its application would defeat public policy.

Procedural History

The heirs of Borromeo filed a complaint for nullity of title and reconveyance before the Regional Trial Court of Prosperidad, Agusan del Sur. The trial court dismissed the complaint for failure to state a cause of action, holding that the heirs had not proven their status as heirs and that such status must be established in special proceedings. It nevertheless ruled that the sale was null and void for having been made within the five-year prohibitory period, and that the in pari delicto defense did not apply.

On appeal, the Court of Appeals reversed. It held that because the sale fell within the prohibitory period, the property should revert to the State, but that reversion is not automatic and must be sought by the government. Pending such an action, it ordered Eliseo Maltos to reconvey the property to the heirs upon their refund of the purchase price, and directed the Register of Deeds to cancel the transfer certificate of title and revive the original certificate of title. It also furnished the Office of the Solicitor General a copy of the decision for its information and appropriate action. The Court of Appeals denied the Maltos spouses' motion for reconsideration, and the spouses came to the Supreme Court on a petition for review.

Facts

On February 13, 1979, Eusebio Borromeo was issued a free patent over a parcel of agricultural land in San Francisco, Agusan del Sur, covered by an original certificate of title. On June 15, 1983, well within the five-year prohibitory period counted from the issuance of the patent, he sold the land to Eliseo Maltos.

Eusebio Borromeo died on January 16, 1991. His heirs claimed that before his death he had told his wife and children to nullify the sale and have the transfer certificate of title cancelled, because the sale had been made within the prohibitory period. In 1993 the widow and children filed the complaint for nullity of title and reconveyance against the Maltos spouses and the Register of Deeds.

The Maltos spouses answered that they had bought in good faith in reliance on the title, that the parties were in pari delicto, and that since the land would revert to the public domain, only the Office of the Solicitor General could bring the reversion action. The Register of Deeds answered that the deed had been presented for registration only after the five-year period, so registration was ministerial. The heirs replied that good faith was no defense because the prohibitory period appeared on the face of the title.

Issues

• Whether or not the Court of Appeals erred in reversing the trial court and in ordering the reconveyance of the property from the Maltos spouses to the heirs of Borromeo.
• Whether or not the Court of Appeals erred in not applying the doctrine of in pari delicto.
• Whether or not the Court of Appeals erred in ruling that the Maltos spouses are not entitled to reimbursement for the improvements they introduced on the land.

Applicable Provisions

Section 118 of the Public Land Act provides:

Except in favor of the Government or any of its branches, units, or institutions, or legally constituted banking corporations, lands acquired under free patent or homestead provisions shall not be subject to encumbrance or alienation from the date of the approval of the application and for a term of five years from and after the date of issuance of the patent or grant, nor shall they become liable to the satisfaction of any debt contracted prior to the expiration of said period; but the improvements or crops on the land may be mortgaged or pledged to qualified persons, associations, or corporations.

This is the provision whose five-year bar the sale violated, and it is the source of the prohibition the Court enforces.

Section 124 of the Public Land Act provides:

Any acquisition, conveyance, alienation, transfer, or other contract made or executed in violation of any of the provisions of sections one hundred and eighteen, one hundred and twenty, one hundred and twenty-one, one hundred and twenty-two, and one hundred and twenty-three of this Act shall be unlawful and null and void from its execution and shall produce the effect of annulling and cancelling the grant, title, patent, or permit originally issued, recognized or confirmed, actually or presumptively, and cause the reversion of the property and its improvements to the State.

This fixes the consequence of the violation: the sale is void from its execution and the grant is annulled, causing reversion to the State.

Article 1412 of the Civil Code provides:

If the act in which the unlawful or forbidden cause consists does not constitute a criminal offense, the following rules shall be observed: (1) When the fault is on the part of both contracting parties, neither may recover what he has given by virtue of the contract, or demand the performance of the other's undertaking; (2) When only one of the contracting parties is at fault, he cannot recover what he has given by reason of the contract, or ask for the fulfilment of what has been promised him. The other, who is not at fault, may demand the return of what he has given without any obligation to comply with his promise.

This is the in pari delicto rule invoked by the Maltos spouses, which the Court declines to apply where public policy would be defeated.

Ruling

On the first issue, the Court held that the sale was void because it was made within the five-year prohibitory period under Section 118. The prohibition is predicated on public policy, and any sale made in violation of it is void and produces no effect whatsoever. The purpose is to preserve and keep in the family of the patentee that portion of public land which the State has given, so that he may have a place to live with his family. Because title had already vested in Eusebio Borromeo's name, Section 101 of the Public Land Act governed, and under that section reversion is not automatic: the Office of the Solicitor General must first file an action for reversion. The Court could not itself declare reversion in favor of the State, but it affirmed the reconveyance of the property to the heirs pending that action.

On the second issue, the Court held that the doctrine of in pari delicto does not apply when public policy will be violated. The doctrine is not absolute; it yields whenever its enforcement or application runs counter to an avowed fundamental policy or to public interest. Since the subject of the transaction is a piece of public land, public policy requires that the heir not be prevented from re-acquiring it, because it was given by law to the family for home and cultivation. That right cannot be waived, for it is not within the competence of any citizen to barter away what public policy by law seeks to preserve.

On the third issue, the Court held that the Maltos spouses were not entitled to reimbursement for the improvements they introduced on the land.

Doctrine

A sale of agricultural land covered by a free patent, made within the five-year prohibitory period under Section 118 of the Public Land Act, is void from its execution under Section 124, and produces the effect of annulling the grant and causing reversion of the property and its improvements to the State. Reversion, however, is not automatic: the Office of the Solicitor General must first file an action for reversion, and until then the courts cannot declare the land reverted. The doctrine of in pari delicto under Article 1412 of the Civil Code is not absolute and does not apply where its application would violate public policy, as where it would bar the patentee's heirs from re-acquiring public land given by law to the family for home and cultivation.

Disposition

The petition was denied, and the decision of the Court of Appeals ordering reconveyance of the property to the heirs of Borromeo, upon refund of the purchase price, and the cancellation of the transfer certificate of title and revival of the original certificate of title, was affirmed.

Remember This

The one line to memorize: a sale within the five-year prohibitory period is void, but reversion is not automatic and must be sought by the Office of the Solicitor General. Examiners use this case to test the effect of a violation of Section 118, the non-automatic character of reversion, and the public-policy exception to in pari delicto.