REPUBLIC OF THE PHILIPPINES (BUREAU OF FOREST DEVELOPMENT), PETITIONER, VS. INTERMEDIATE APPELLATE COURT (FIRST CIVIL CASES DIVISION) AND HILARIO P. RAMA, RESPONDENTS.

The decision of the trial court in this case declared the
disputed parcels of land to be forest land and, therefore, inalienable. The appellate court sustained the factual
finding. The issue raised in this
petition refers to the propriety of awarding necessary expenses to the alleged
possessor in good faith with right of retention until the expenses are paid.

In May 1974, Anselmo Logronio, in his official capacity as
officer-in-charge of the Bohol Reforestation Project of the Bureau of Forest
Development, bulldozed portions of two (2) parcels of land which he believed to
be forest lands located at Talibon, Bohol, occupied the same, and planted
mulberry and other trees.

Soon thereafter, respondent Hilario P. Rama commenced in the then
Court of First Instance, now Regional Trial Court of Bohol, a complaint for
recovery of possession, ownership and damages against Logronio alleging that he
is the absolute owner and possessor of the two (2) parcels of land occupied by
Logronio. He specifically described the
two (2) parcels of land as follows:

A. A parcel of land, Lot
1, Psu-218360 beginning at a point marked “1” of Lot 1, Psu 218360,
being N. 41-39 E., 15391.24 m. from B.L.L.M. No. 1, Municipality of Carmen,
Province of Bohol, thence N. 47-35 W., 163.40 m. to point 2; S. 67-59 W.,
173.82 m. to point 3; N.5-17 E., 250.71 m. to point 4; S. 71­-33 E., 168.51 m.
to point 5; S. 82­-11 E., 107.55 m. to point 6; S. 0-45 W., 228.32 m. to point
1; point of beginning x x x containing an area of FIFTY ONE THOUSAND TWO
HUNDRED AND TWENTY SIX (51,226) square meters x x x evidenced by Original
Certificate of Title No. 6148 (Free Patent No. 319750) Office of the Register
of Deeds for the Province of Bohol x x x also covered by Tax Dec. No. R-3859 in
the name of Plaintiff x x x assessed at P990.00 x x x.

B. A parcel of land (as
shown on plant H-154932, LRC Rec. No.), situated in the Barrio of Malitbog,
Municipality of Trinidad, Province of Bohol. Bounded on the H., (sic) along lines 1-2-3 by the property of Rufino Autida
(H-166571), on the E., along lines 4-5-6-7 by Creek; on the S., along lines
7-8-9-10, by the Marinao Creek 4.00 m. wide; on the W., along line 10-11 by
Public Land (Forest Zone), and on the N., along lines 11-12-1 by the property
of Angel Jumawan x x x containing an area of Ninety Six Thousand Three Hundred
Forty Three (96,343) square meters x x x covered by Tax Dec. No. R-4019 in the name of Plaintiff x x x with an
assessed value of P1,390.00 x x x.’

x x x

(Record on Appeal, pp.
54-56)

In his answer, Logronio claimed that the two parcels of land are
forest lands and that the questioned acts were performed by him in the regular
and lawful performance of his duties as officer-in-charge of the Bohol
Reforestation Project of the Bureau of Forest Development. He prayed for the dismissal of the
complaint.

Petitioner Republic filed a motion for leave to intervene
attaching its complaint-in-intervention.

The complaint-in-intervention alleged that Logronio’s acts were
authorized by the government through the Director of the Bureau of Forest
Development in connection with the reforestation program of the government;
that the two (2) subject parcels of land are located within the timberland
Block D, L. C. Project No. 33 of Talibon, Bohol per BF Map L. C. 686 and,
therefore, are forest lands; that the said lands were never released by the
government as alienable and disposable lands, hence, are not susceptible of
disposition or private appropriation under the provisions of the Public Land
Act (Commonwealth Act No. 41), as amended, nor were the said parcels of land
registered under the provisions of the Land Registration Law (Act No. 496), as
amended. It prayed that Free Patent No.
319750 covering the forest portion of the first lot be declared null and void;
that the Register of Deeds be ordered to cancel OCT No. 6148 covering the said
forest portion; that both forest lands be reverted back to the public domain;
and that the complaint against Logronio be dismissed.

The motion was granted and the complaint-in-intervention was
admitted by the lower court.

Rama, then, filed an answer to the complaint-in­-intervention
alleging that the Republic has no cause of action, and is guilty of estoppel for having caused the issuance of the
certificate of title covering the forest land. He claimed that if his title is to be cancelled, and he is deprived of
ownership over the parcels of land, he should be paid by the Republic for all
existing improvements plus whatever expenses he has incurred in connection with
the improvement of said lands.

The trial of the case resulted in the following undisputed facts
stated in the decision of the lower court:

x x x x x x x x x

“1.     On parcel A in
the complaint. The evidence discloses
that Lot 1, Psu-218360, as described in the complaint, and containing an
area of 51,226 square meters, is one of
the two lots covered by OCT No. 6148
(Free Patent Title No. 319750) in the name of Hilario Piscos Rama (Exhs. A and A-1) and is, according to
the plaintiff, free from any liens or encumbrances.

Thus, plaintiff Hilario P. Rama, 42 testified that of the two
parcels of land mentioned in the complaint, one parcel was covered by title, as
shown by a xerox copy of OCT No. 6148
(Exhs. A and A-1), and by tax declaration No. R-3859 (Exh. B); that he secured
a certification from the Office of the District Forester, Tagbilaran City,
regarding the status of the land covered by OCT 6148 (Exh. C); that he
had a plan of the land covered by OCT No. 6148 (Exh. D); that in the memorandum
of encumbrances on OCT No. 6148 (Exh. A-1), Entry No. 3382 referred to a real
estate mortgage executed on 23 November 1967 by Hilario Piscos Rama and Socorro
Regañon in favor of the Development Bank of the Philippines, but the obligation
was already paid, and there was a written release of the mortgage in 1975,
which was not yet registered because when he went to the Registry of Deeds
payment was required for registering the release and he did not have money at
that time.

As shown in OCT No. 6148 (Exh. A), the free patent title was given
on 13 January 1967, and the certificate of title was issued on 4 May 1967. Then on 7 November 1967, the Office of the
District Forester, Tagbilaran City, issued Certification No. 57 (Exh. C) to the
effect ‘that according to the records of this Office, there is no pending case
as far as the Bureau of Forestry is concerned, involving the validity of the
title over a parcel of land containing an area of 10.2450 hectares covered by
Original Certificate of Title No. 6148 (Free Patent No. 319750 situated in
barrio of Malitbog, Municipality of Dagohoy, Province of Bohol issued by the
Register of Deeds of Tagbilaran City on January 13, 1967 in the name of Hilario
Piscos Rama, Filipino, of legal age, married to Socorro Riganon and resident in
Malitbog, Dagohoy, Bohol.’

Meantime, on 11 September 1967, Hipolito Amihan, Forester in Charge
of the Bohol Reforestation Project, Dagohoy, Bohol, addressed a letter to the
Administrator, Reforestation Administration, Diliman, Quezon City, thru the
Regional Officer, Cebu City, (Exh. 8), stating that relative to OCT No. 6148 in
the name of Hilario Piscos Rama —

‘Upon verification of the area in question it is found out that Lot
I in an area of 51,226 sq. m. is within the area of Bohol Reforesta­tion
Project, Dagohoy, Bohol. xxx.’

and recommending ‘that Lot No. 1 under
PSU-21-8360 with an area of 51,226 sq. m. under Free Patent No. 318750 issued
in favor of Mr. Hilario Piscos Rama be cancelled.’

On 29 October 1974, Lope D. Reyes, Assistant OIC, Legal Staff, Bureau
of Forest Development, Diliman, Quezon City, sent a memorandum to the OIC
Silviculture Division (Exh. 1), requesting that OCT No. 6148 issued in favor of
Hilario Piscos Rama ‘be verified as to whether or not the area is inside a
timberland or alienable or
disposable land.’ And on 22 November 1974, Primo P. Andres, Officer in Charge,
Silviculture Division, Bureau of Forest Development, Diliman, Quezon City, returned by first indorsement (Exh. 2)
the aforesaid memorandum with the information that per verification and control
-?

‘1. Lot 1, PSU-218360 is within the Timberland Block-A of LC
Project No. 33 of Talibon, Bohol, per BF Map LC-685, and;

2. Lot 2, PSU-218360, is within the Alienable or Disposable
Block-I, of LC Project 33 of Talibon, Bohol, certified as such on September 7,
1927, per BF Map LC-685.’

And the Commissioner’s Report (Exh. A-Commissioner) finds that–

‘On Lot 1, Psu-218360 and (sic) approximate area of 45,826 sq. m.
colored green on the sketch is inside the Timberland and 5,400 sq. m. more or
less is in the Alienable and Disposable Area.’

And the Commissioner, Emmanuel Maboloc, 38, Junior Geodetic
Engineer, Bureau of Forest Development, Region VII, Cebu City, testified to
this effect, stating, however, that he did not make technical descriptions of
the portion of the lot within the Bohol Reforestation Project and the portion
outside it, so that, if required, he would have to go to the field again to
make such technical descriptions.” (Record on Appeal, pp. 61-65)

x x x x x x x x x

“2. On parcel B in
the complaint. — xxx

The land is covered by TD No. R-4019 in the name of plaintiff
Hilario Piscos Rama (Exh. F) and was surveyed for the Heirs of German Remarata
in 1952, as shown by the technical description (Exh. G) and plan H-­154932
(Exh. H). But the land is not covered
by any certificate of title.

On 12 March 1968, the Office of the District Forester, Tagbilaran
City, issued Certification No. 90 (Exh. I) to the effect ‘that the parcel of
land containing an approximate area of 9.6345 hectares situated in Barrio
Malitbog, Municipality of Dagohoy, Province of Bohol, described in the Tax
Declaration proposed in the name of German Remarata, a resident of Bo. Malitbog, Dagohoy, Bohol was
verified by a representative of this Office and was found to be within the
Alienable and Disposable Block “1”, Land Classification Project No. 33,
Talibon, Bohol, L.C. Map No. 685, certified on September 7, 1927.’ And on 4
March 1970, the Office of the District Forester, City of Tagbilaran, thru Acting
District Forester Pastor O. Ibarra, issued Certification No. 101 (Exh. J),
which is similarly worded as Certification No. 90 (Exh. I), except that the
proposed tax declaration is ‘in the name of HILARIO PISCOS RAMA.’

But on 15 May 1974, the Office of the District Forester, City of
Tagbilaran, thru District Forester Pastor O. Ibarra, sent a letter to Hilario
P. Rama (Exh. 4) informing him ‘that CERTIFICATION NO. 101, issued to you on
March 4, 1970, by the District Forester of Tagbilaran City, is hereby revoked
on the ground that after thorough (sic) investigation by representative of this
Office the parcel of land which you claim and the subject matter in the
above-mentioned CERTIFICATION NO. 101, is found to be within the Bohol
Reforestation Project.’ And on the same date, a letter to the same effect was
sent by District Forester Ibarra to the Provincial Assessor, City of Tagbilaran
(Exh. 5).

The Commissioner’s Report (Exh. A-Commissioner) inter alia
states:

‘It was found out that on lot H-154932 an approximate area of
94,719 Sq. M. is inside Timberland block A, Project No. 33 a part of Bohol
Reforestation Project (colored green on the sketch plan) and only approximately 1,624 Sq. M. is inside the
Alienable and Disposable area colored orange on the sketch plan.’

Likewise, Commissioner Maboloc declared that he did not make
technical descriptions of the portion of said lot within the Bohol
Reforestation Project and the portion outside it.” (Record on Appeal, pp.
66-68)

In view of its findings that the two (2) subject parcels of land
are forest lands, the lower court declared as null and void the Certificate of
Title covering the first lot in the name of Rama and ordered him to vacate the
said parcel “upon being reimbursed by the intervenor in the sum of SIX
THOUSAND PESOS (P6,000.00) as necessary expenses.” As regards the
second parcel of land, the lower court ordered Rama to vacate the same parcel
of land “with right to refund from the intervenor for the necessary
expenses in the sum of THREE THOUSAND PESOS (P3,000.00), but without
rights of retention.” The dispositive portion of the decision reads:

“WHEREFORE, judgment is hereby rendered, as follows:

1.     
Relative to Lot 1, Psu-218360, (parcel A in the
complaint): declaring that portion
thereof indicated in the Commissioner’s Report (Exh. A-Commissioner) as having
an approximate area of 45,836 Sq. M. and shown on the sketch (Exh.
B-Commissioner) as timberland and therefore part of the public domain (colored
green, Parcel B in said sketch); declaring null and void Original Certificate
of Title No. 6148 in the name of HILARIO PISCOS RAMA insofar as it includes the
aforesaid portion; and ordering the plaintiff to vacate said portion upon being
reimbursed by the intervenor in the sum of SIX THOUSAND PESOS (P6,000.00)
as necessary expenses;

2.     
Relative to the parcel of land shown on plan H-154932 (parcel
B in the complaint): declaring that the
portion thereof indicated in the Commissioner’s Report (Exh. A-Commissioner) as
having ‘an approximate area of 94,719 Sq. M.’ and shown on the sketch (Exh. B­-Commissioner) as timberland and
therefore part of the public domain (colored green, Parcel A in said sketch);
declaring null and void Tax Declaration No. R-4019 (Exh. F) insofar as it
includes the aforesaid portion; and ordering the plaintiff to vacate said
portion, with right to refund from the intervenor for the necessary expenses in
the sum of THREE THOUSAND PESOS (P3,000.00), but without right of
retention;

3.     
Dismissing the complaint as against defendant Anselmo Logroño,
both in his private and in his official capacity;

4.     
Dismissing defendant Logroño’s counterclaim; and

5.     
Ordering the Register of Deeds of the Province of Bohol to annotate this
judgment relative to Lot 1, Psu-­218360 at the back of Original Certificate of
Title No. 6148.

Without pronouncement of costs.” (Record on Appeal, pp. 77-79)

Petitioner Republic appealed the lower court’s decision to the
then Intermediate Appellate Court, now Court of Appeals, insofar as it ordered petitioner
Republic to pay Rama the necessary expenses with the right of retention over
the titled parcel of land.

The appellate court, however, did not only affirm the questioned
decision, but modified it by ruling that as regards the second parcel which is
not covered by any certificate of title, Rama has also the right of retention
until the necessary expenses awarded to him are paid by petitioner Republic.

A motion for reconsideration was denied. Hence, the instant petition.

In a resolution dated March 27, 1985, the Court gave due course
to the petition. Because of the
reorganization of the Court after the 1986 political upheaval and subsequent
changes caused by retirement of certain Justices, the case could not be decided
until its recent assignment to the undersigned ponente.

On May 15, 1989, we issued another resolution stating therein:

“Considering the length of time that this case has remained pending
and as a practical measure to ease the backlog of this Court, the parties
shall, within ten (10) days from notice, MANIFEST whether or not they are still
interested in prosecuting this case, or
supervening events have transpired which render this case moot and academic or otherwise substantially affect
the same.” Rollo, p. 70)

In response to this resolution, the Solicitor General,
representing petitioner Republic, filed on August 4, 1989, a manifestation
stating that he is not aware of any supervening event that may have transpired
which would render the case moot and academic.

As stated earlier, the only issue in this petition is the
propriety of awarding necessary expenses with right of retention over the two
(2) parcels of land in favor of the possessor in this case, Rama, until the
payment of the necessary expenses by petitioner Republic on the ground that
Rama is a possessor in good faith as defined in Article 526 of the Civil Code.

In ruling that private respondent Rama, the possessor of the two
forest lands is entitled to payment of
necessary expenses, the appellate court cited the case of Dizon v.
Rodriguez (13 SCRA 704 [1965]).

The background facts of the Dizon case are as follows:

“Hacienda Calatagan owned by Alfonso and Jacobo Zobel was
originally covered by TCT No. T-722. In
1938, the Hacienda constructed a pier, called ‘Santiago Landing,’ about 600
meters long from the shore into the navigable waters of the Pagaspas Bay, to be
used by vessels loading sugar produced
by the Hacienda sugar mill. When the
sugar mill ceased its operation in 1948, the owners of the Hacienda converted
the pier into a fishpond dike and built additional strong dikes enclosing an
area of about 30 hectares (of the Bay) and converted the same into a fishpond. The Hacienda owners
also enclosed a similar area of about 37 hectares of the Bay on the other side
of the pier which was also converted into a fishpond.

In 1949, the Zobels ordered the subdivision of the Hacienda by
ordering the preparation of the subdivision plan Psd-27941 wherein fishpond No.
1 (with 30 hectares) was referred to as Lot No. 1 and fishpond No. 2 (with 37
hectares) was referred to as Lot No. 49. The plan was approved by the Director of Lands, and the Register of
Deeds issued, from TCT No. T-722, TCT No. 2739 for lots 49 and 1 in the name of
Jacobo Zobel.

In 1950, Jacobo Zobel sold to Antonino Dizon, et al. Lot 49 for
which said purchasers obtained at first TCT No. T-2740 and later T?4718,
Lot 1, on the other hand, was purchased by Carlos Goco, et al., who in turn,
sold one-half thereof to Manuel Sy-Juco, et al. Transfer Certificate of Title No. 4159 was issued in the names of
the Gocos and Sy?Jucos.

On May 24, 1952, Miguel Tolentino filed with the Bureau of
Fisheries an application for ordinary fishpond permit or lease for Lot 49, and
an application for a similar permit, for Lot 1, was filed by his daughter
Clemencia Tolentino.

The Dizons, Sy-Jucos, and Gocos filed a protest with the Bureau of
Fisheries, claiming the properties to be private land covered by a certificate
of title. This protest was dismissed by
the Director of Fisheries, on the ground that the areas applied for are outside
the boundaries of TCT No. T-722 of Hacienda Calatagan. This ruling was based upon the findings of
the committee created by the Secretary of Agriculture and Natural Resources to
look into the matter, that Lots 1 and 49 are not originally included within the
boundaries of the hacienda.

On October 1, 1954, the protestants Dizons, Sy-Jucos, and Gocos
filed an action in the Court of First Instance of Manila (Civ. Case No. 24237)
to restrain the Director of Fisheries from issuing the fishpond permits applied
for by the Tolentinos. The court
dismissed this petition for non-exhaustion of administrative remedy, it
appearing that petitioners had not appealed from the decision of the Director
of Fisheries to the Secretary of Agriculture and Natural Resources. On appeal to this Court, the decision of the
lower court was sustained (G. R. No. L-8654, promulgated April 28, 1956). The protestants then filed an appeal with
the Secretary of Agriculture and Natural Resources. This time, the same was dismissed for being filed out of time.

On August 16, 1956, the Dizons filed Civil Case 135 and the
Sy-Jucos and Gocos, Civil Case 136, in the Court of First Instance of Batangas,
to quiet their titles over Lots 49 and 1. Named defendants were the Secretary of Agriculture and Natural Resources
and applicants Tolentinos. The Republic
of the Philippines was allowed to intervene in view of the finding by the
investigating committee created by the respondent Secretary, that the lots were
part of the foreshore area before their
conversion into fishponds by the hacienda-owners.

On January 30, 1958, after due hearing, the Court of First Instance
of Batangas promulgated a joint decision making the finding, among others, that
the subdivision plan Psd-27941 was prepared in disregard of the technical
description stated in TCT No. T-722, because the surveyor merely followed the
existing shoreline and placed his monuments on the southwest lateral of Lot 49,
which was the pier abutting into the sea; and made the conclusion that Lots 1
and 49 of Psd-27941 were part of the foreshore lands. As the certificate of
title obtained by petitioners covered lands not subject to registration, the same were declared null and void, and Lots
1 and 49 were declared properties of the public domain. Petitioners appealed to the Court of
Appeals.

“In its decision of October 31, 1961, as well as the
resolution of August 20, 1962, the appellate court adopted the findings of the
lower court, that the lots in question are part of the foreshore area and
affirmed the ruling cancelling the titles to plaintiffs. Although in the decision of October 31,
1961, the Court of Appeals awarded to applicants Tolentinos damages in the
amount of P200.00 per hectare
from October 1, 1954, when plaintiffs were notified of the denial of their
protest by the Director of Fisheries, such award was eliminated in the
resolution of August 20, 1962, for reason that plaintiffs, who relied on
the efficacy of their certificates of title, cannot be considered possessors in
bad faith until after the legality of their said titles has been finally
determined. Appellants were
thus declared entitled to retention of
the properties until they are reimbursed by the landowner, the Republic of the Philippines, of the necessary expenses made on the
lands, in the sums of P40,000.00
(for Lot 49) and P25,000.00 (for
Lot 1). It
is from this portion of the decision as thus modified that defendants
Tolentinos and the intervenor Republic of the Philippines appealed (in G. R. Nos.
L-20355?56), claiming that plaintiffs’ possession became in bad faith
when their protest against the application for lease was denied by the Director
of Fisheries. In addition, the
intervenor contends that being such possessors in bad faith, plaintiffs are not
entitled to reimbursement of the expenses made on the properties.” (at pp.
705-708; Emphasis supplied)

The appellate court’s decision was appealed to us by both the Republic and the Dizons, et al.

We dismissed both appeals.

A comparative study
of the present case and the Dizon
case shows different circumstances which make the Dizon case not applicable to
the instant case.

In the present case, the parcel of land titled in the name of
Hilario P. Rama is covered by an original torrens title issued in Rama’s name
on May 4, 1967. Earlier, he applied for
the issuance of title based on a patent which was given on January 13,
1967. The fact that he applied for a
patent title shows a recognition on his part that the parcel is part of the
public domain. True, government
officials caused the issuance of the patent title and the original torrens
title covering the land in Rama’s name. However, the well-entrenched principle is that the State cannot be put
in estoppel by the mistakes or errors of its officials or agents. (Republic v. Court of Appeals, 135 SCRA 156
[1985]; and Republic v. Aquino, 120 SCRA 186 [1983])

Considering that the subject parcel of land is forest land, the
patent and original certificate of title covering the subject parcel issued to
Rama did not confer any validity to his possession or claim of ownership. (Sunbeam Convenience Foods, Inc. v. Court of
Appeals, 181 SCRA 443 [1990]; Vallarta v. Intermediate Appellate Court, 151
SCRA 679 [1987]; Republic v. Court of Appeals,
148 SCRA 480 [1987]; Republic v. Court of Appeals, 135 SCRA 156 [1985])

The titles are void ab initio. (Heirs of Amunategui v. Director of
Forestry, 126 SCRA 69 [1983]; Republic v. Animas, 56 SCRA 499 [1974]) The
titles issued cannot ripen into private ownership. (Director of Forestry v. Muñoz, 23 SCRA 1183 [1968]; Heirs of
Amunategui v. Director of Forestry, supra; Vallarta v. Intermediate Appellate Court, supra). In effect, Rama’s possession of the parcel
from the beginning was fraudulent and illegal. He was merely a squatter on the parcel. Under these circumstances, we cannot see any reason why Rama
should be considered a possessor in good faith as defined in Article 526 of the
Civil Code.

In the Dizon case, however, the occupants of the
parcels of land which were adjudged as part of the seashore or foreshore area
and part of the public domain bought the land from Alfonso and Jacobo Zobel
relying on the original certificate of title covering the parcels. This intervening event
constitutes the difference between the Dizon case and the present case. Dizon, et al. buyers of the foreshore lands
were protected by the principle that an innocent buyer of a registered land may
rely on the torrens title of the seller. In the absence of anything to excite suspicion, the buyer is not obligated to look beyond the certificate
to investigate the title of the sellers appearing on the face of the
certificate. (Philippine National Bank
v. Court of Appeals, 187 SCRA 735 [1990]; Gonzales v. Intermediate Appellate
Court, 157 SCRA 587 [1988]; Philippine National Cooperative Bank v. Carandang?Villalon,
139 SCRA 570 [1985]); Penullar v. Philippine National Bank, 120 SCRA 171
[1983])

Another distinction
between the two (2) cases is in the degree of participation of the parties and
the public officials in the titling of the subject parcels of land. In the present case, respondent Rama was the
one who secured a certificate from the office of the District Forester,
Tagbilaran City as regards the status of the parcel of land with his
representations that “he had a plan of the land.” It appears,
therefore, that it was through the representations of Rama that the land was
titled in his name. Some months later,
however, or on November 7, 1967, the Office of the District Forester suspected
that the parcel of land thus titled was forest land. Why this angle was not pursued is not shown in the records. It, however, negates the good faith of Rama
who actively pursued the titling of the parcel in his name.

Good faith which entitles the possessors to necessary expenses
with right of retention until reimbursement was explained in the Dizon
case:

“On the matter of possession of plantiffs-appellants, the
ruling of the Court of Appeals must be upheld. There is no showing that plaintiffs
are not purchasers in good faith and for value. As such title-­holders,
thay have reason to rely on the indefeasible character of their
certificates.

“On the issue of good faith of the plaintiffs, the Court of
Appeals reasoned out:

‘The concept of possessors in good faith given in Art. 526 of the Civil Code and when said possession
loses this Character under Art. 528, needs to be reconciled with the doctrine
of indefeasibility of a Torrens Title. Such reconciliation can only be achieved by holding that the possessor
with a Torrens Title is not aware of any flaw in his Title which invalidates it
until his Torrens Title is declared null and void by final judgment of the
Courts.

‘Even if the doctrine of indefeasibility of a Torrens Title were not
thus reconciled, the result would be the same, considering the third paragraph
of Art. 526 which provides that:

‘Art. 526. x x x

‘Mistake upon a doubtful or difficult question of law may be the
basis of good faith.

The legal question whether plaintiffs-appellants’
possession in good faith, under their Torrens Titles acquired in good faith, does not lose this character except in
the case and from the moment their Titles are declared null and void by the
Courts, is a difficult one. Even the
members of this Court were for a long time divided, two to one, on the
answer. It was only after several
sessions, where the results of exhaustive researches on both sides were
thoroughly discussed, that an undivided Court finally found the answer given in
the next preceding paragraph. Hence,
even if it be assumed for the sake of argument that the Supreme Court would
find that the law is not as we have stated it in the next preceding paragraph
and that the plaintiffs-appellants made a mistake in relying thereon, such
mistake on a difficult question of law may be the basis of good faith. Hence, their possession in good faith does
not lose this character except in the case and from the moment their Torrens
Titles are declared null and void by the Courts.’

Under the circumstances of the case,
especially where the subdivision plan was originally approved by the Director of Lands, we are not ready to
conclude that the above reasoning of the Court of Appeals on this point is a
reversible error. Needless to state, as
such occupants in good faith, plaintiffs have the right to the retention of the
property until they are reimbursed the necessary expenses made on the lands.

With respect to the contention of the Republic of the Philippines
that the order for the reimbursement by it of such necessary expenses
constitutes a judgment against the government in a suit not consented to by it,
suffice it to say that the Republic, on its own initiative, asked and was
permitted to intervene in the case and thereby submitted itself voluntarily to
the jurisdiction of the court.” (at pp. 709-710; Emphasis supplied)

With the foregoing findings, the appellate court’s ruling as
regards the unregistered parcel of land which is to the effect that Rama is
also entitled to necessary expenses with right of retention until reimbursed of
the necessary expenses must be reversed. His title over the forest land is null and void for the same
reasons. There are no special circumstances
which would warrant the application of the Dizon case.

WHEREFORE, the petition is GRANTED. The questioned decision and resolution of the then Intermediate Appellate
Court, now Court of Appeals, are SET ASIDE in so far as they ordered petitioner
Republic to pay private respondent Hilario P. Rama the necessary expenses
incurred by him, with right of retention over the two (2) parcels of land
adjudged as forest lands until reimbursed of the necessary expenses. The decision of the then Court of First Instance of Bohol (now
Regional Trial Court of Bohol) in Civil Case No. 2613 is MODIFIED in that the portion of the decision
which ordered petitioner Republic to pay private respondent Hilario P. Rama
necessary expenses with right of retention in parcel number one described in
the complaint is DELETED. In all other
respects, the questioned decision and resolution are AFFIRMED. No costs.

SO ORDERED.

Feliciano, Bidin, Davide, Jr., and
Romero, JJ., concur.