HEIRS OF DECEASED COSME RABE, MIGUEL MABUTE AND FELISA MABUTE, PETITIONERS, VS. THE COURT OF APPEALS AND LEON FAYTAREN, RESPONDENTS.

Heirs of Deceased Cosme Rabe versus Court of Appeals

The Case

This is a petition brought by the heirs of the deceased Cosme Rabe, joined by Miguel Mabute and Felisa Mabute, against the Court of Appeals and the private respondent Leon Faytaren. The action began as a dispute over a parcel of land in Pinamalayan, Oriental Mindoro — a complaint for quieting of title filed by Faytaren against Rabe, and a counter-complaint for quieting of title filed by Rabe against the Mampusti heirs and their successors. The case matters because it tests the reach of Section 20 of the Public Land Act against a homestead sale made before any patent was issued, and because it shows how laches and long adverse possession can defeat a Torrens title that was issued over land already belonging to another.

Procedural History

The two consolidated cases were jointly tried in the lower court, which rendered judgment on October 20, 1976 in favor of the Rabe spouses. The trial court dismissed Faytaren's complaint, declared the land as belonging exclusively to the Rabe spouses, declared void Faytaren's transfer certificate of title and all titles that preceded it except the original certificate, ordered the Mampusti-Lazo heirs to execute a deed of sale in favor of the Rabes, awarded damages and attorney's fees, lifted the receivership, and restored possession to the Rabes.

Faytaren appealed. On April 2, 1987, the Court of Appeals reversed and set aside the lower court decision. It declared Faytaren the owner of the subject land and ordered the Mampusti-Lazo heirs to reimburse Cosme Rabe the sum of 200 pesos, the price of the sale, with the value of improvements and interest deemed equitably compensated by the fruits Rabe had received. The appellate court held that the 1938 sale by Potenciana Lazo was void under Section 20 of the Public Land Act for lack of the previous approval of the Director of Lands, and that a void contract can neither be confirmed nor ratified. Rabe's motion for reconsideration was denied on July 12, 1988. Rabe then filed the present petition, anchored mainly on the validity of the sale to him.

Facts

The spouses Isidoro Mampusti and Potenciana Lazo originally owned two adjoining parcels of land in Pinamalayan, Oriental Mindoro. Parcel A, with an area of 11.7023 hectares, was covered by an original certificate of title issued in 1928 pursuant to a homestead patent. Parcel B, with an area of 8.7673 hectares, was covered by an original certificate of title issued in 1939, also pursuant to a homestead patent.

On May 26, 1938, Potenciana Lazo, then already a widow, sold two portions of Parcel B: about four hectares to the spouses Cosme Rabe and Felisa Mabute, and about one hectare to the spouses Sabino Manrique and Aurelia Mogo. Parcel B was still public land in 1938, though already declared for taxation purposes. From 1938 the Rabe spouses cleared the land, converted it into an irrigated ricefield, enjoyed its fruits, declared it in their name for taxation, paid the realty taxes and irrigation fees, and possessed it continuously, adversely, peacefully and notoriously for thirty-two years until 1970, when Faytaren filed his complaint. Potenciana Lazo died in 1950.

In 1956 the Mampusti-Lazo heirs executed a deed of extrajudicial partition recognizing and affirming the sale of five hectares of Parcel B to the Rabe and Manrique spouses. Two years later, in 1958, the heirs executed another instrument declaring all prior sales void and cancelling the first partition. The land sold to Rabe was included in the original certificate for Parcel B, which was cancelled and replaced by a transfer certificate in the names of the heirs. Through a series of subsequent transfers, the land passed to Gregorio Moratilla and Gregorio Marquines, then to Nori Moratilla, and on February 21, 1970, to Leon Faytaren, in whose name a new transfer certificate was issued. On April 8, 1970, Faytaren filed his complaint for quieting of title, and in 1972 Rabe filed his own complaint for quieting of title against the heirs and their successors.

Issues

• Whether or not the sale of the land by Potenciana Lazo to the Rabe spouses in 1938 is null and void under Section 20 of the Public Land Act for lack of the previous approval of the Director of Lands.
• Whether or not the Court of Appeals erred in declaring Faytaren the owner of the subject land on the basis of his transfer certificate of title.
• Whether or not the long adverse possession of the Rabe spouses, coupled with the inaction of the Mampusti-Lazo heirs, barred the latter and their successors from asserting title to the land.

Applicable Provisions

Section 20 of the Public Land Act, as amended, provides:

If at any time after the approval of the application and before the patent is issued, the applicant shall prove to the satisfaction of the Director of the Lands that he has complied with all the requirements of the law, but cannot continue with his homestead, through no fault of his own, and there is a bona fide purchaser for the rights and improvements of the applicant on the land, and that the conveyance is not made for purposes of speculation, then the applicant, with the previous approval of the Director of Lands, may transfer his rights to the land and improvements to any person legally qualified to apply for a homestead, and immediately after such transfer, the purchaser shall file a homestead application to the land so acquired and shall succeed the original homesteader in his rights and obligations beginning with the date of the approval of said application of the purchaser.

This provision is the very basis of the Court of Appeals ruling, and the Supreme Court's reading of its scope decides the case.

The same Section 20 further provides:

Any person who has so transferred his rights may not again apply for a new homestead. Every transfer made without the previous approval of the Director of Lands shall be null and void and shall result in the cancellation of the entry and the refusal of the patent.

This is the clause the appellate court applied to void the 1938 sale, and which the Supreme Court holds inapplicable because its precondition was never shown to exist.

Article 1409 of the New Civil Code, invoked by the Court of Appeals, provides:

The following contracts are inexistent and void from the beginning: Those whose cause, object or purpose is contrary to law, morals, good customs, public order or public policy; Those which are absolutely simulated or fictitious; Those whose cause or object did not exist at the time of the transaction; Those whose object is outside the commerce of men; Those which contemplate an impossible service; Those where the intention of the parties relative to the principal object of the contract cannot be ascertained; Those expressly prohibited or declared void by law. These contracts cannot be ratified. Neither can the right to set up the defense of illegality be waived.

The Court of Appeals used this article to hold that the heirs' later recognition of the sale could not validate it, a conclusion the Supreme Court does not need to reach once it finds Section 20 inapplicable.

Ruling

On the first issue, the Court held that Faytaren's reliance on Section 20 is misplaced. The provision contemplates a situation where an applicant, considered as such because his application has already been approved, wishes to transfer his homestead rights to a bona fide purchaser, not for speculation, in which case the approval of the Director of Lands must be obtained prior to the transfer. It applies only to transfers made after a homestead application has been approved but before the corresponding patent is issued; a transfer made after the issuance of the patent would be governed by Section 118 of the Public Land Act. There was no showing that at the time of the 1938 sale an application had in fact been filed by the Mampusti spouses, or that if one had been filed it was already approved. Since the approval of the Director of Lands is a prerequisite only when an application has been approved, Section 20 does not apply.

On the second and third issues, the Court agreed with the trial court that the inaction and indifference of the heirs of Potenciana Lazo, coupled with their tacit approval and recognition of the Rabes' right over the property from 1938 until 1970, constituted laches — they had slept on their rights. Whatever transactions they entered into with third parties like Leon Faytaren did not affect the right and interest of the Rabe couple, whose purchase automatically transferred the land to them and segregated it from the mass of the Mampusti-Lazo estate. The Court held that reconveyance was a necessary consequence, for to adjudge Faytaren owner solely on the basis of a certificate of title that erroneously included the land would be to put a premium on land-grabbing and to transgress the broader principle in human relations that no person shall unjustly enrich himself at the expense of another.

Doctrine

Section 20 of the Public Land Act voids a transfer of homestead rights made without the previous approval of the Director of Lands only when the transfer occurs after the homestead application has been approved and before the patent is issued. Absent proof that an application had been filed and approved at the time of the sale, the provision does not apply and the sale is not void on that ground. A Torrens certificate of title does not confer ownership over land that already belongs to another by virtue of a prior valid sale; laches on the part of the registered owners and their heirs, shown by long inaction despite the adverse possession of another, bars them and their successors from asserting title, and reconveyance follows.

Disposition

The petition was granted; the Court of Appeals decision was reversed and set aside, and the decision of the lower court dated October 20, 1976 was reinstated, immediately executory.

Remember This

Memorize this line: Section 20 of the Public Land Act requires the approval of the Director of Lands only for a transfer made after the homestead application is approved and before the patent issues, so a sale before any approved application is not void under it. Examiners use this case to test the scope of Section 20, the limits of the Torrens title as a shield, and laches as a defense against heirs who sleep on their rights.