ANIANO MATABUENA, PETITIONER, VS. HON. COURT OF APPEALS AND DEVELOPMENT BANK OF THE PHILIPPINES, RESPONDENTS.

From the decision^[1]
dated April 29, 1986 of the Court of Appeals in CA-G.R. CV No. 07067, entitled,
“Development Bank of the Philippines, Plaintiff-Appellee,
vs. Aniano Matabuena,
Defendant-Appellant,” which affirmed with modification the decision rendered on
February 25, 1985 by the Regional Trial Court Isabela,
the defendant-appellant below comes now before us by this petition for review
on certiorari.

The facts which propelled the instant petition are as follows:

On December 13, 1957, as security for a loan of P10,000.00
payable in ten (10) years, Candida Macaraeg mortgaged
in favor of the Rehabilitation
Finance Corporation, now the private respondent Development Bank of the
Philippines (DBP), a parcel of land consisting of 5.4849 hectares situated at
Barrio San Juan, Municipality of Alicia, Province of Isabela,
and registered under Original Certificate of Title (O.C.T.) No. P-4380 in her
name.  This O.C.T. had been issued to
Candida on February 26, 1955
pursuant to Homestead Patent No. V-5005, also
in her name, and which
patent, in turn, had been issued
the year previous, or precisely on June
23, 1954.

Candida, however, failed to pay the balance of P590.13 on her loan, forcing private
respondent DBP to foreclose the mortgaged property on August 26, 1968 and, subsequently, to sell it in
an auction.  The private respondent
emerged as the highest bidder in the auction and as a consequence thereof,
Transfer Certificate of Title (T.C.T.) No. 11308, cancelling
Candida’s O.C.T. No. P-4380, was issued in its favor
on April 19, 1978.

Sometime later in 1978, in the course of having the property
re-appraised, the private respondent discovered that petitioner Aniano Matabuena, who claimed
ownership of the property, had taken possession of the same, cultivated it, and
had even built his house thereon. 
Consequently, the private
respondent, as plaintiff, lodged a complaint for the recovery of the possession of the property against the petitioner
with the trial court.  On February 29, 1985, the trial court rendered a decision
in favor of the private respondent and ordered the petitioner to vacate the
land in question and to remove any improvement he has placed thereon.  The petitioner was further ordered by the
trial court to pay the private respondent the amount of P166,250.00 as
compensatory damages, and to pay the costs of the suit.

Finding the trial court’s decision unacceptable, the petitioner
elevated the case the respondent
Court of Appeals.  In its decision dated April 29, 1986, the respondent
appellate court found that Candida Macaraeg’s title was
void for the reason that it was constituted over a parcel of land covered not
by her patent application but by that of another person, Pedro Garan, who is the petitioner’s alleged
predecessor-in-interest.  In fine, the
area referred to in Macaraeg’s torrens
title was a portion of that already applied for and possessed by Pedro Garan, and later, by the petitioner.  According to the respondent appellate court,
this fact has been indubitably established in an investigation conducted by the
Bureau of Lands through its District Land Office No. II-2 at Ilagan, Isabela.  Nonetheless, the appellate court despite its
earlier finding, upheld the validity of the private respondent’s title on the
ground that the latter was a mortgagee in good faith and an innocent purchaser for value that had
no knowledge of the defect of Macaraeg’s title when
it accepted the mortgage thereon until it foreclosed the property in
question.  Accordingly, except with the
modification that the petitioner was ordered to pay only the amount of
P20,000.00 as temperate or moderate damages, instead of the compensatory
damages in the amount of P166,250.00 awarded by the trial court, the respondent
appellate court affirmed the trial court’s decision in all other respects.

The petitioner moved for a reconsideration of the respondent
appellate court’s decision but his motion was denied on October 22, 1986.  Hence, this petition.

Before us, the
petitioner postulates that the private respondent DBP has no valid title over
the property in question.  He argues that
pursuant to the decision of the respondent Court of Appeals, Candida Macaraeg, the private respondent DBP’s
predecesor-in-interest, had no valid title over the
mortgaged property.  Since Macaraeg’s title over the contested property was void ab initio, it
could not “metamorphose” into a valid one in the hands of the private
respondent.  The petitioner likewise
assails the respondent appellate court’s finding that the private respondent
DBP was a mortgagee in good faith because while the property was foreclosed on August 26, 1968, its sale was
registered only on April 19, 1978,
long after he, Matabuena, had taken possession
thereof in January 1975.^[2]
From this premise, the petitioner argues that the private respondent at the
time of the sale’s registration, should have become aware of his (petitioner’s) possession of the
contested realty.^[3]

On the other hand, the
private respondent points out that the petition is based on the wrong premise
that its (private respondent’s) predecessor-in-interest’s title over the
property was void from the start. 
Contrary to the petitioner’s
contention and to the respondent appellate court’s findings, Candida Macaraeg, the private respondent’s predecessor-in-interest,
not only had a valid title over the property but was likewise in physical
possession of the same.  Pedro Garan, whom petitioner Matabuena
identified as his predecessor-in-interest, never had possession of the subject
parcel of land.  In fact, the trial court
found that immediately after Macaraeg purchased the
rights to the land from Ireneo Abrian’s
widow, she and her children took possession and cultivated it.  When Candida died in 1962, her two children
continued to till the land in the hope of paying the mortgage thereon.  Poor harvests, however, prevented them from
doing so resulting in the foreclosure of the mortgage in 1968.  Even after the real estate mortgage had been foreclosed by, and sold at public auction
to, the private respondent, Candida’s sons continued
possession of the same, instituting one Jose Allera
as their tenant thereon.  Jose Allera remained on the property until the petitioner, a
retired army soldier, drove him away in 1974.^[4] The private respondent argues for the
repudiation of the findings of the Bureau of Land in this case claiming that
the same had been arrived at after a dubious investigation, conducted ex parte, wherein
the private respondent was not given any opportunity to be heard.^[5]
The private respondent likewise assails the findings of the respondent
appellate court, insofar as they are based on the findings of the Bureau of
Lands.

Against this backdrop of conflicting allegations and arguments by
the parties, we find the petition wanting in merit and consequently, deny it.

The private respondent correctly observes that the petition
suffers from a fatal defect, it being based on the wrong premise, i.e., the private respondent’s title as
well as that of its predecessor-in-interest, Candida Macaraeg,
is void ab initio.  Ironically, this wrong premise was supplied
by none other than the respondent Court of Appeals when it stated that “x x x Macaraeg
did not acquire a valid title x x x.”^[6] The respondent appellate court’s
pronouncement was based on the findings of the Bureau of Lands which the
respondent court held as conclusive on the matter.^[7]

The respondent appellate court gravely erred in giving full
credence to the Bureau of Land’s findings of fact.  These findings are not conclusive as they are tainted with
irregularities.  As claimed by the
private respondent — and this is not in any way disproved or
rebutted by the petitioner —
the investigation conducted by the District Land Office of the
Bureau of Lands at Ilagan, Isabela,
in 1978, or twenty-four (24) years after the issuance of the patent on June 23, 1954, was done ex parte and without the private respondent being given an opportunity to be heard.  The question that arises is — why did it take a long time for the
investigation to be made?  More importantly, there was a patent failure
of due process in the proceedings
conducted by the Bureau of Lands.  It is a well-established rule that even in
administrative adjudications, parties have certain “cardinal primary
rights” which should be observed
and respected to comply with the imperatives of due process.  The right to a hearing is one such right.^[8]

Significantly, the trial court,
on the question of who had physical
possession and valid title over the contested property, rendered the following
findings which we hold as more credible than that of the Bureau of Lands:

The claim of defendant
(petitioner) that he and his predecessor-in-interest have been in possession of
the land for more than thirty (30) years and therefore, entitled to a judicial confirmation of his title finds no
factual and legal basis.  The land in
question was titled in the name of
Candida Macaraeg as early as June 23,
1954.  The court can not also sustain the claim of
defendant (petitioner) that in the event that his claim of ownership is denied,
he should remain on the land because he was instituted thereon in
1975 as tenant by Agapito Garan,
son of Pedro Garan. 
Agapito Garan is not
the owner of the land in question.  He
was never (been) in possession thereof. 
He could not have instituted defendant as his tenant.  (Sec. 6, Rep. Act 3844).  If he did, the institution is not valid.  Defendant is an intruder and a squatter.

Defendant (petitioner),
a retired army man, took possession of the land in 1974 by driving away Jose Allera, the tenant of Bonifacio Ortaleza and Claudio Ortaleza, on
the land in question.  He was in bad
faith.  He had no authority to enter and
cultivate the same.  As such, he is
liable for the reimbursement of the fruits he received and those which plaintiff (private respondent) could
have received (Art. 549, Civil Code).  x x x

It was in 1975 that defendant actually began to cultivate the land
after driving away Jose Allera in 1974.^[9]

It
is therefore evident that the petitioner’s claim must fail.

Further on this score,
the respondent appellate court’s act of formulating its own findings of fact is uncalled for and
unjustifiable.  Absent any substantial
proof that the trial court’s decision was grounded entirely on speculations,
surmises or conjectures, the same must be accorded full consideration and
respect.^[10] This should be so because the trial court is, after all, in a much better position to observe and correctly appreciate the respective parties’ evidence as they were presented. 
Thus, the trial court’s finding that Candida Macaraeg,
the private respondent’s
predecessor-in-interest, had physical possession and a valid title over the
subject property, and that the petitioner is nothing but an “intruder and a squatter” thereon, must be
respected.

Finally, while the obtaining
circumstances point to the inevitable conclusion that damage was caused by the
petitioner, the private respondent, however, failed to present satisfactory evidence to support its claim for damages in the amount of P166,250.00. 
The respondent appellate
court thus acted correctly when it eliminated
the award of compensatory damages.

WHEREFORE,
the Petition is DENIED; the Decision of the Court of Appeals dated April 29, 1986 is hereby
AFFIRMED.  Costs against the petitioner.

SO ORDERED.

Melencio-Herrera, (Chairman), Paras, Padilla, and Regalado, JJ., concur.

^[1]
Camilon Serafin E., J., ponente:  Pascual, C. Campos, J. C., Jr., and Jurado,
D.P., JJ., concurring.

^[2]
Rollo, 53.

^[3]
Id., 51-55.

^[4]
Id.,
72.

^[5]
Id.,
70.

^[6]
Id., 14.

^[7]
Id.

^[8]
Ang Tibay v.
Court of Industrial Relations, 69 Phil. 635 (1940); Air Manila, Inc. v. Balatbat, G.R. No. L-29064, April 29, 1971, 38 SCRA 489.

^[9]
Rollo, 13; pp. 8-9 of the trial court’s decision
and quoted in private respondent’s Memorandum, p. 9.

^[10]
Legaspi vs. Court of Appeals, No. L-45510, May 27,
1986, 142 SCRA 82.