G.R. No. 163125

Republic of the Philippines

Supreme Court

Baguio City

SECOND DIVISION

JOSE ABELGAS, JR. and LETECIA JUSAYAN DE ABELGAS,

Petitioners,

- versus -

SERVILLANO COMIA, RURAL BANK OF SOCORRO INC. And RURAL BANK OF PINAMALAYAN, INC.

Respondents.

G.R. No. 163125

Present:

CARPIO, J., Chairperson,

BRION,

PEREZ,

SERENO, and

REYES, JJ.

Promulgated:

April 18, 2012

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D E C I S I O N

SERENO, J.:

Before this Court is a Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court, seeking to review the Court of Appeals (CA) 20 March 2003 Decision and 31 March 2004 Resolution in CA-G.R. CV No. 46241. The assailed Decision nullified the Deed of Relinquishment, Renunciation of Rights and Quitclaim executed by respondent Servillano Comia in favor of petitioner spouses Jose Abelgas, Jr. and Letecia Jusayan de Abelgas, as well as the encumbrances executed by the spouses in favor of respondent banks.

The pertinent facts are as follows:

On 4 April 1971, Comia obtained a free patent over Lot No. 919-B situated in Pinamalayan, Oriental Mindoro with an area of 6,790 square meters.[1] Pursuant to this free patent, Lot No. 919-B was originally registered on 26 April 1976 as Original Certificate of Title (OCT) No. P-8553.

Subsequently, on 1 May 1971, by virtue of a notarized Deed of Relinquishment, Renunciation of Rights and Quitclaim, Comia voluntarily conveyed a 3,000-square-meter (3,000-sqm) portion of Lot No. 919-B to the spouses Abelgas. It was stated in the said Deed that the subject portion was the sole property of the spouses; and that it had only been included in the title of Comia for it adjoined his land. Indeed, based on the Subdivision Survey, the 3,000-sqm portion of Lot No. 919-B bordered Lot No. 919-E owned by Jose Abelgas, Jr.[2]

By virtue of this subsequent voluntary dealing over the property, the Register of Deeds cancelled OCT No. P-8553 in the name of Comia and Transfer Certificate of Title (TCT) No. T-46030[3] was issued on 3 May 1971 in the names of CO-OWNERS, (1) SERVILLANO COMIA, married to Estelita Amaria, and (2) SPS. JOSE ABELGAS, JR. AND LETECIA JUSAYAN DE ABELGAS[4] as co-owners of Lot No. 919-B. There is no explanation in the records on how TCT No. T-46030 came about to be recorded in the names of these people when the subject portion should have been, as a consequence of the 1971 Deed of Relinquishment, Renunciation of Rights and Quitclaim, in the name of the spouses Abelgas only.

Thereafter, the spouses subdivided their 3,000-sqm portion into twelve (12) lots as evidenced by TCT Nos. T-46374 to 46375.[5] Using their TCTs, they used the lots to secure their loan obligations with Rural Bank of Pinamalayan, Inc. (RBPI), Rural Bank of Socorro, Inc. (RBSI), and the Philippine National Bank (PNB).

Specifically, on 6 July 1971, the spouses Abelgas constituted a mortgage on TCT No. 46366 to secure a loan for ₱1,000. Then, to secure another loan for ₱600, the spouses mortgaged on 23 August 1971 the lot covered by TCT No. T-46367. Petitioners defaulted on their obligations and hence, the lots were sold at a public auction, wherein RBPI prevailed as the winning bidder.[6] After the lapse of the redemption period, TCT Nos. T-17448 and T-17445 were issued in the name of RBPI.[7]

As for the remaining lots, the spouses mortgaged most[8] of these to RBSI in 1971 to 1972 as security for the spouses various loans. Petitioners defaulted on their obligations, and, thus, the mortgagee bank foreclosed the securities wherein it emerged as the winning bidder. Thus:[9]

TCT Nos.	Security Date	Auction Date	Loan (₱)
46364	04 September 1971	19 December 1974	800
46365	15 June 1971	26 January 1976	1,000
46369 & 46370	13 November 1971	21 December 1973	1,000
46372 & 46373	19 April 1972	21 December 1973	2,000

Of these properties, lots covered by TCT Nos. 46369 and 46370 had certificates that were cancelled and a new one, TCT No. 71198,[10] was issued in RBSIs name.

Comia contested the issuance of these titles. He claimed that he was the sole owner of Lot No. 919-B; and that the Deed of Relinquishment, Renunciation of Rights and Quitclaim, which resulted in the issuance of TCT Nos. T-46030, and T-4634 to 46375, is fictitious and nonexisting.[11] Thus, Comia demanded the recovery of Lot No. 919-B under OCT No. P-8553 and the cancellation of the subsequent titles.[12]

He pursued his action before the Regional Trial Court (RTC) by filing a Complaint for cancellation and recovery of, and/or quieting of title to real property and damages against the Abelgas spouses, RBPI, RBSI, and PNB.[13] For their answer, the spouses asserted that they had been in possession of the 3,000-sqm portion of Lot No. 919-B.[14] During trial, Jose Abelgas Jr. testified that before 1971, he had already purchased the said portion from respondent.[15]

In turn, the mortgagee banks, RBPI and RBSI, filed cross-claims against the spouses for them to pay their obligations in the event that the TCTs offered as security for their loans would be declared as null and void. Respondent assailed the encumbrances in favor of the mortgagee banks as void ab initio and obtained in bad faith as these were executed within the period of prohibition to dispose lands subject of a free patent under Section 118 of the Public Land Act (CA 141). Claiming lack of notice of any defect in the certificates, both banks denied Comias allegations.

Section 118 of CA 141[16] prohibits the alienation of lands subject to a free patent within five years from the issuance of the grant. Additionally, any disposition made after the prohibited period must be with the consent of the Secretary of Environment and Natural Resources. Evidently, the Deed and the mortgages were executed within the prohibited period and without the Secretarys consent.

The RTC dismissed the Complaint of Comia.[17] It found that the Deed as signed by him voluntarily relinquished the subject parcel of land in favor of its rightful owner and possessors the spouses Abelgas.[18] The trial court also upheld the validity of the mortgages, since encumbrances made in favor of banks are exempted according to the amendatory laws of the Public Land Act.[19] Moreover, based on Decolongon v. CA,[20] the approval of the Secretary of Environment and Natural Resources is only directory.

Accordingly, the dispositive portion reads:[21]

WHEREFORE, premises considered, judgment is hereby rendered in favor of defendants spouses JOSE ABELGAS, Jr. and LETECIA JUSAYAN DE ABELGAS; RURAL BANKS OF SOCORRO, INC. and RURAL BANK OF PINAMALAYAN, INC., against plaintiff SERVILLANO COMIA, as follows:

1. Dismissing plaintiffs Amended Complaint;

2. Declaring Transfer Certificate of Title No. T-46030, and Transfer Certificates of Title Nos. T-46364 to T-46375 and subsequent certificates of title thereto in the name of defendants Rural Bank of Socorro, Inc. or defendant Rural Bank of Pinamalayan, Inc. as valid and existing;

3. Ordering the plaintiff to pay the following:

(a) Defendants spouse (sic) Jose Abelgas, Jr. and Letecia Jusayan de Abelgas the sum of ₱5,000.00 as attorneys fees;

(b) Defendant Rural Bank of Socorro, Inc., the sum of ₱50,000.00 as damages for besmirched reputation being a bank institution with good standing; ₱2,000.00 as attorneys fee, and ₱1,000.00 as litigation expenses;

(c) Defendant Rural Bank of Pinamalayan, Inc., the sum of ₱50,000.00 as damages for besmirched reputation being a bank institution with good standing; ₱2,000.00 as attorneys fee, and ₱1,000.00 as litigation expenses; and

4. The costs.

SO ORDERED.

Comia appealed to the CA, which modified the RTCs Decision. While the appellate court sustained the due execution of the Deed of Relinquishment, Renunciation of Rights and Quitclaim, it construed the document as an alienation prohibited by CA 141. The CA pronounced that in an attempt to circumvent the law, it was made to appear that the 3,000 square meters adjoining the land of Comia was owned by the spouses. However, based on testimonial evidence, Abelgas purchased the said portion contrary to law.[22]

Likewise, the CA nullified the mortgages, as the exemption of the banks had been removed by Commonwealth Act 456[23] amending Section 118 of Commonwealth Act 141, which took effect on 8 June 1939.[24] Nevertheless, the banks may recover the value of the loans with interest.[25]

In view of the Deeds nullity, and in the absence of escheat proceedings, the CA restored to Comia Lot No. 919-B. The appellate court ruled thus:[26]

WHEREFORE, the Decision appealed from is REVERSED and SET ASIDE, and another one entered as follows:

1. Declaring the deed of relinquishment and renunciation of rights and quitclaim as null and void;

2. Declaring the deeds of real estate mortgage executed by defendants-appellees Jose Abelgas, Jr. and Letecia Jusayan de Abelgas in favor of Rural Bank Pinamalayan, Inc. and Rural Bank of Socorro, Inc., as well as the foreclosure proceedings and certificates of sale, null and void;

3. Ordering the Register of Deeds of the Province of Oriental Mindoro to cancel TCT nos. T-46030, 465364 to 465375, 46821, 71171 and 71198 and to reinstate OCT No. P-8553 in the name of plaintiff-appellant Servillano Comia;

4. Ordering defendants-appellees Jose Abelgas, Jr. and Letecia Jusayan de Abelgas to pay Rural Bank of Pinamalayan, Inc., their indebtedness in the total amount of ₱1,600.00 plus interest thereon at the legal rate from the date of maturity of promissory notes, attached as Annexes 1-A, and 2-A to its cross-claim, and the amount of ₱3,000.00 as attorneys fees.

5. Ordering defendants-appellees Jose Abelgas, Jr. and Letecia Jusayan de Abelgas to pay Rural Bank of Socorro, Inc. their indebtedness in the total amount of ₱5,600.00, plus interest thereon at the legal rate from the date of maturity of the promissory notes, attached as Annexes 1, 2, 3 and 4 to its cross-claim, and the amount of ₱3,000.00 as attorneys fees.

SO ORDERED.

Hence, the central issue in this Petition filed by the aggrieved spouses is whether the CA gravely erred in declaring the Deed of Relinquishment, Renunciation of Rights and Quitclaim and the mortgages in favor of mortgagee banks, as null and void for being contrary to the provisions of CA 141 and its amendatory laws.

Section 118 of CA 141[27] requires that before the five year prohibition applies, there should be an alienation or encumbrance of the land acquired under free patent or homestead.

Section 118. Except in favor of the Government or any of its branches, units, or institutions, 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.

No alienation, transfer, or conveyance of any homestead after five years and before twenty-five years after issuance of title shall be valid without the approval of the Secretary of Agriculture and Commerce, which approval shall not be denied except on constitutional and legal grounds.

Thus, to ascertain the correctness of the CAs Decision, there is a need to verify whether in executing the Deed of Relinquishment, Renunciation of Rights and Quitclaim, Comia alienated the 3,000-sqm portion after the grant of the free patent. Although this is a finding of fact generally beyond this Courts jurisdiction,[28] this Court will consider the issue, considering the conflicting factual and legal conclusions of the lower courts.

In real property law, alienation is defined as the transfer of the property and possession of lands, tenements, or other things from one person to another. It is the act by which the title to real estate is voluntarily resigned by one person to another and accepted by the latter, in the forms prescribed by law.[29] In this case, Comia did not transfer, convey or cede the property; but rather, he relinquished, renounced and quitclaimed the property considering that the property already belonged to the spouses. The voluntary renunciation by Comia of that portion was not an act of alienation, but an act of correcting the inclusion of the property in his free patent.

The evidence on record reveals that prior the grant of the free patent, the spouses already owned the property. This fact can be inferred from the following testimony of Jose Abelgas, Jr.:[30]

A: It was in 1971 when he (Servillano Comia) went to our house bringing with him an Original Certificate of Title issued to him by the Bureau of Lands.

Q: What was his purpose of bringing to you Original Certificate of Title (sic) issued by the Bureau of Lands?

A: He wants to segregate the 3,000 square meters out of 6,790 square meters from the Original Certificate of Title which I bought from him, sir. (Emphasis supplied.)

This testimony was not contested or objected to by Comia. Neither did he put in evidence that he sold the property during the period of the prohibition as he would have been deemed to be in violation of the law. Rather, his argument has always been the non-existence of the said Deed which both lower courts have already concluded otherwise.[31]

More important, Comia failed to dispute by clear and convincing evidence[32] the presumption that the spouses owned the property prior to the grant of his free patent. This presumption is present in this case since the Deed of Relinquishment and Renunciation of Right was annotated in a public document, specifically, the original certificate of title. Documents consisting of entries in public records made in the performance of a duty by a public officer are prima facie evidence of the facts therein stated. [33] Entry No. 81908 annotating OCT No. P-8553 reads as:[34]

MEMORANDUM OF INCUMBRANCES (sic)

Entry No. 81908; Doc. No. xxx [not legible] RENUNCIATION OF RIGHTS AND QUITCLAIMS In favor of the espouses (sic): JOSE ABELGAS JR. AND LETECIA JUSAYAN DE ABELGAS, of legal age, filipinos, (sic) and residing at Poblacion, Gloria, Oriental Mindoro, Philippines, - covering this Original Certificate of Title No. P-8553, in conformity with the conditions stipulated in the Deed of Renunciation of Rights and Quitclaim executed by SERVILLANO COMIA married to ESTELITA AIMARIA, of legal age, filipino, (sic) and residing at Socorro, Oriental Mindoro, Philippines, on file in this registry.

Date of Instrument ------------------------- May 1, 1971

Date of Inscription ------------------------- May 3, 1971 at 8:10 a.m.

(Sgd.)

REYNALDO M. MAMBIL

The Deed of Relinquishment, Renunciation of Rights and Quitclaim, as referred in the title, recognizes the ownership of the spouses. Comia explicitly declared in the said Deed that the subject portion belonging to the spouses Abelgas had been included in his title for it adjoins his land. The Deed reads thus: [35]

That I hereby relinquish, renounce, and quitclaim, and by these presents have RELINQUISHED, RENOUNCED, and QUITCLAIMED, all my rights, interests, possession, occupation, and participation of a portion of THREE THOUSAND (3,000) SQUARE METERS, of the parcel of land described above, free from all liens and encumbrances, together with all its existing improvements that may be found there unto the ESPOUSES (sic) JOSE A. ABELGAS Jr. and LETECIA JUSAYAN DE ABELGAS, likewise of legal ages, filipinos (sic) and a resident of Poblacion, Gloria, Province of Oriental Mindoro, Philippines, their heirs, executors, administrators, and assigns, and agreeing further to warrant and forever defend the title and peaceful possession of the herein espouses (sic): JOSE A. ABELGAS JR. and LETECIA JUSAYAN DE ABELGAS, their heirs, executors, administrators, and assigns against the just and lawful claims of any or all persons whomsoever.

That the above described property, with an area of THREE THOUSAND (3000) SQ. METERS, is the sole property of the above described espouses (sic) and it had only been included in my title for it adjoins my land situated in the barrio of Quinabigan, Pinamalayan Oriental Mindoro and it was not my fault therefore so it being not mine (sic). I have voluntarily renounced the area of three thousand (3000) square meters, in favor of the said Jose Abelgas Jr. and LETECIA JUSAYAN DE ABELGAS. (Emphasis and underscoring in the original).

In support of the fact that the alienation transpired prior to the grant of a free patent, it is remarkable that Comia never contested that the spouses had been in actual possession of the subject portion even before his patent application. The private ownership of land as when there is a prima facie proof of ownership like a duly registered possessory information or a clear showing of open, continuous, exclusive, and notorious possession is not affected by the issuance of a free patent over the same land.[36]

A prima facie proof of ownership is not necessarily defeated by a free patent, especially if the title covers a portion not belonging to the grantee. Where an applicant has illegally included portions of an adjoining land that does not form part of the applicants homestead, the title issued by virtue thereof should be cancelled.[37] In Angeles v. Samia[38], this Court explained that:

The Land Registration Act as well as the Cadastral Act protects only the holders of a title in good faith and does not permit its provisions to be used as a shield for the commission of fraud, or that one should enrich himself at the expense of another (Gustilo vs. Maravilla, 48 Phil., 442; Angelo vs. Director of Lands, 49 Phil., 838). The above-stated Acts do not give anybody, who resorts to the provisions thereof, a better title than he really and lawfully has. If he happened to obtain it by mistake or to secure, to the prejudice of his neighbor, more land than he really owns, with or without bad faith on his part, the certificate of title, which may have been issued to him under the circumstances, may and should be cancelled or corrected (Legarda and Prieto vs. Saleeby, 31 Phil., 590). (Emphasis supplied.)

Seeing that there is no alienation to begin with, this Court finds that the prohibition is not applicable. Thus, the Deed of Relinquishment, Renunciation of Rights and Quitclaim is not null and void for being contrary to the Public Land Act.

In a similar case, in Heirs of Manlapat v. Court of Appeals, this Court held that where the alienation or transfer took place before the filing of a free patent application, the prohibition should not be applied. In that situation, neither the prohibition nor the rationale therefor which is to keep in the family of the patentee that portion of the public land which the government has gratuitously given him, by shielding him from the temptation to dispose of his landholding, could be relevant.[39]

Consequently, this Court rules against the cancellation of TCT Nos. T-46030, and T-46364 to 46375. Indeed, these subsequent certificates were issued based on a duly executed instrument sanctioned by law.

As for the encumbrances, Comia also unsuccessfully assailed the mortgages by virtue of an alleged violation of the Public Land Act.

For the prohibition in Section 118 of CA 141 to apply, the subject property must be acquired by virtue of either a free patent or a homestead patent. In this case, the 3,000-sqm portion subdivided into twelve (12) lots as evidenced by TCT Nos. T-4634 to 46375 has not been shown to be under a free patent. As it appears, what was submitted to the mortgagee banks were TCTs not derived from a free patent.

Thus, the encumbrances thereon are not null and void, as these do not fall within the ambit of the prohibition. This being the case, it cannot be said that the banks were in bad faith for accepting the encumbered properties that did not originate from a free patent. In any event, at the time of the mortgage, the Rural Banks Act (Republic Act No. 720), as amended by Republic Act No. 5939,[40] already allows banks to accept free patents as security for loan obligations.[41]

Absent any finding of nullity, we sustain the RTCs ruling that the alienation and encumbrances are valid. Consequently, there is no cause to cancel the subsequent TCTs and the resulting mortgages thereon.

IN VIEW THEREOF, the Petition is GRANTED and the assailed 20 March 2003 Decision and 31 March 2004 Resolution of the Court of Appeals are REVERSED and SET ASIDE.

SO ORDERED.

MARIA LOURDES P. A. SERENO

Associate Justice

WE CONCUR:

ANTONIO T. CARPIO

Associate Justice

Chairperson

ARTURO D. BRION

Associate Justice

JOSE PORTUGAL PEREZ

Associate Justice

BIENVENIDO L. REYES

Associate Justice

A T T E S T A T I O N

I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division.

ANTONIO T. CARPIO

Associate Justice

Chairperson, Second Division

C E R T I F I C A T I O N

Pursuant to Section 13, Article VIII of the Constitution and the Division Chairpersons Attestation, I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division.

RENATO C. CORONA

Chief Justice

[1] Servillano Comias Memorandum dated 20 June 2005, p. 7; rollo, p. 198.

[2] Subdivision Survey dated 13 April 1966; rollo, p. 219.

[4] Letecia Jusayan is the spouse of Jose Abelgas, Jr.

[5] CA Decision penned by Associate Justice Marina L. Buzon, with Associate Justices Josefina Guevara-Salonga and Danilo B. Pine concurring, p. 2; rollo, p. 102.

[6] RBPIs Memorandum dated 17 April 2009, p. 7; rollo, p. 326.

[7] On 9 June 2005, RBPI manifested before this Court that the properties had already been sold for business reasons.

[8] Lots covered by TCT Nos. 46371 and 46375 were mortgaged to PNB, but were later on released by the bank in the name of the Abelgas spouses.

[9] RBSIs Memorandum dated 3 September 2008, pp.7-8; rollo, pp. 276-277.

[11] Supra note 1Error! Bookmark not defined., at 8; rollo, p. 199.

[12] Comias Amended Complaint dated 12 May 1976, p. 5; RTC records, p. 33.

[13] The Complaint against PNB was dismissed in view of its release of the mortgage.

[14] Spouses Abelgas Answer to the Amended Complaint dated 15 June 1976, p. 2; RTC records, p. 60.

[15] TSN of Civil Case No. R-444 dated 16 June 1983, pp. 5-9.

[16] An Act to Amend and Compile the Laws Relative to Lands of the Public Domain (1936).

[17] RTC Decision penned by Judge Manuel A. Roman; rollo, p. 56.

[19] Id. at 54 citing Act 3517, An act to Amend Certain Sections of Act Numbered Twenty-Eight Hundred and Seventy-Four, known as "The Public Land Act (1929).

[23] Commonwealth Act No. 456 - An act to Amend Sections Nineteen, Twenty, and One Hundred and Eighteen of Commonwealth Act numbered One Hundred Forty-One, commonly known as the Public Land Act (1939).

[27] As amended by Commonwealth Act No. 456, An Act to Amend Sections Nineteen, Twenty and One Hundred and Eighteen of Commonwealth Act Numbered One Hundred Forty-One, commonly known as The Public Land Act (1939).

[28] Republic v. Regional Trial Court, Br. 18, Roxas, Capiz, G.R. No. 172931, 18 June 2009, 589 SCRA 552.

[30] TSN of Civil Case No. R-444 dated 16 June 1983, pp. 4-5.

[31] Supra note 5, at 16; rollo, p. 116; Supra note 17, at 5, rollo, p. 53.

[32] Thomson Shirts Factory v. Commissioner of Internal Revenue, 160-A Phil. 140 (1975).

[33] Rule 132, Sec. 23. Public Documents as Evidence. Documents consisting of entries in public records made in the performance of a duty by a public officer are prima facie evidence of the facts therein stated.

[36] Heirs of Simplicio Santiago v. Heirs of Mariano E. Santiago, 452 Phil. 238 (2003).

[37] Director of Lands v. Reyes, 69 Phil. 497 (1940).

[39] Heirs of Manlapat v. Court of Appeals, 498 Phil. 453, 478 (2005).

[40] An Act Amending Sections Three, Four, Five, Seven, Eleven, Fourteen, Sixteen and Seventeen of Republic Act Numbered Seven Hundred Twenty, as amended, otherwise known as the Rural Banks Act (1969): Sec. 5. xxx

Loans may be granted by rural ranks on the security of lands without Torrens title xxx or of homesteads or free patent lands pending the issuance of titles but already approved, the provisions of any law or regulations to the contrary notwithstanding: Provided, That when the corresponding titles are issued the same shall be delivered to the register of deeds of the province where such lands are situated for the annotation of the encumbrance: Provided, further, That in the case of lands pending homestead or free patent titles, copies of notices for the presentation of the final proof shall also be furnished the creditor rural bank and, if the borrower applicants fail to present the final proof within thirty days from date of notice, the creditor rural bank may do so for them at their expense:xxx

[41] Rural Bank of Compostela v. Court of Appeals, 337 Phil. 521 (1997).