816 Phil. 554
DEL CASTILLO, J.:
Plaintiff-Appellee Martinez Leyba, Inc. (hereafter Martinez) is a corporation organized and existing under Philippine laws and the registered owner of three (3) contiguous parcels of land situated in Antipolo, Rizal, surveyed and identified as Lot Nos. 29, 30 and 31, Block 3, (LRC) Pcs-7305 and registered under Transfer Certificate of Title Nos. 250242, 250244 and 250243, respectively, with the Register of Deeds of Rizal.
Defendants-Appellants Pen Development Corporation and Las Brisas Resorts Corporation are also domestic corporations duly organized and existing under Philippine laws. Appellants, thereafter, merged into one corporate entity under the name Las Brisas Resorts Corporation (hereafter Las Brisas). Las Brisas is the registered owner of a parcel of land under TCT No. 153101 which is situated adjacent to the lands owned by Martinez. Las Brisas occupied the said land in 1967 and fenced the same.
In 1968, Martinez noticed that the construction of Las Brisas' fence seemed to encroach on its land. Upon verification by surveyors, Martinez was informed that the fence of Las Brisas overlaps its property. On 11 March 1968, Martinez sent a Letter informing Las Brisas that the fence it constructed encroaches [sic] on Martinez's land and requested Las Brisas to refrain from further intruding on the same. Las Brisa did not respond to Martinez's letter and continued developing its land.
Martinez sent two (2) more Letters dated 31 March 1970 and 3 November 1970 to Las Brisas informing the latter of the encroachment of its structures and improvements over Martinez's titled land.
On 31 July 1971, Las Brisas, through a certain Paul Naidas, sent a letter to Martinez, claiming that it 'can not [sic] trace the origin of these titles' (pertaining to Martinez's land).
Martinez sent two (2) Letters to Las Brisas reiterating its ownership over the land that Las Brisas' improvements have encroached upon. Despite the notices, Las Brisas continued developing its property.
Martinez sought the services of a licensed geodetic engineer to survey the boundaries of its land. The verification survey plan Vs-04,00034, which was approved by the Regional Technical Director for Lands of the Department of Environment and Natural Resources (DENR), revealed that the building and improvements constructed by Las Brisas occupied portions of Martinez's lands: 567 square meters of Lot No. 29, Block 3, (LRC) Pcs. 7305; a portion of 1,389 square meters of Lot No. 30, Block 3, (LRC) Pes. 7305 covered under TCT Nos. 250242, 250244 and 250243, respectively.
On 24 November 1994, Martinez sent a letter to Las Brisas demanding the latter to cease and desist from unlawfully holding portions of Martinez's land occupied by Las Brisas structures and improvements. Despite the said demand, no action was taken by Las Brisas.
On 24 March 1997, Martinez filed a Complaint for Quieting of Title, Cancellation of Title and Recovery of Ownership with Damages against Las Brisas before the Regional Trial Court of Antipolo City, docketed as Civil Case No. 97-4386. The case was raffled to, and heard by, Branch 71 thereof x x x.
In its Answer, Las Brisas denied that it encroached on Martinez's land and that it constructed the Las Brisas Resort Complex within the land covered by TCT No. 153101.[6]
To clarify matters, the plaintiff[12] engaged the services of Ricardo S. Cruz, a licensed Geodetic Engineer, to plot and verify the plans and technical descriptions to determine the relative geographic positions of the land covered by the titles of plaintiff and defendant.[13] This verification survey was approved by the Regional Technical Director of Lands on May 23, 1996, under plan VS-04-000394. (Exh. T-1, T-2, T-3, T-4, T-5). This plan revealed that Psu-234002, in relation to T.C.T. No. 153101 of the defendant overlapped thus:
- A portion of 567 square meters of Lot No. 29, Block 3, (LRC) Pcs-7305, covered by plaintiff's T.C.T. No. 250242. This is the portion where the defendant built a riprapping.
- A portion of 1,389 square meters of Lot No. 30, Block 3, (LRC) Pcs-7305, covered by plaintiff's T.C.T. No. 250243. This is the portion where the defendant had constructed an old building.
- A portion of 1,498 square meters of Lot No. 31, Block 3, (LRC) Pcs-7305, covered by plaintiff's T.C.T. No. 250244. This is the portion where the defendant constructed a new multi-story edifice.
x x x x
The issues sought to be resolved x x x can be read in the respective memorandum [sic] submitted by the parties.
For the plaintiff, the statement of issues are as follows:
- Whether x x x the Certificate of Title of the defendant overlapped and thus created a cloud on plaintiff T.C.T. Nos. 250242, 250243, 250244, covering lots nos. 29, 30, and 31, block 3 (LRC) PCS-7305, which should be removed under Article 476 of the Civil Code of the Philippines;
- Whether x x x defendant's T.C.T. No. 153101 should be cancelled insofar as it overlapped Lots 29, 30 and 31, Block 3, (LRC) PCS-7305;
- Whether x x x the defendant is a builder in bad faith and is liable for the consequence of his acts;
- Whether x x x the plaintiff is entitled to collect actual or compensatory and moral damages in the amount of P5,000,000.00, exemplary damage in the amount of P1,000,000.00, nominal damage in the amount of P1,000,000.00, and attorney's fees in the amount of P300,000.00, exclusive of appearance fee of P3,000.00 per hearing or unferome [sic] attended.
For defendants, the issues presented are:
- Whether x x x defendant's title over the property is valid and effective;
- Whether x x x defendant is an innocent purchaser for value;
- Whether x x x defendant is entitled to reimbursement for expenses in developing the property.
For its evidence in chief, plaintiff presented Nestor Quesada (direct, June 7, 2001; cross Ju1y 26, 2001) rested its case on October 4, 2001. Its Formal Offer of Evidence as filed with the Court on November 15, 2001 wherein Court Order dated January 15, 2002, Exhibit A to U, inclusive of their submarkings were admitted over the objections of defendant.
The defendant presented Eufracia Naidas (direct/cross on July 11, 2004), then rested its case on May 11, 2005, the Formal Offer of Evidence was filed in Court on June 10, 2005 wherein the Court Order dated June 27, 2005, Exhibit 1 to 7 inclusive of submarkings were all admitted over plaintiff's objections.
x x x x
Considering that the defendant has raised the defense of the validity of T.C.T. No. N-21871 of the Registry of Deeds, Marikina (Exhibit 1), and subsequently cancelled by T.C.T. No. 153101 as transferred to the Pen Development Corp. (Exh. 2) and introduced substantial improvements thereon which from the facts established and evidence presented during the hearings of the case it cannot be denied that said title over the property in question is genuine and valid. Moreover, the defendant obtained the property as innocent purchasers for value, having no knowledge of any irregularity, defect, or duplication in the title.
Defendant further argued that there is no proof to plaintiff's claim that it had sent notices and claims to defendant. Assuming that notices were sent to defendant as early as 1968, it took plaintiff almost thirty (30) years to file the action to quiet its title. Therefore, by the principle of laches it should suffer the consequence of its failure to do so within a reasonable period of time. x x x
Defendant, having introduced substantial improvements on the property, if on the ground or assumption that the case will be decided in favor of the plaintiff, that defendant should be, by law, entitled to be reimbursed for the expenses incurred in purchasing and developing the property, the construction cost of the building alone estimated to be Fifty-Five Million Pesos (P55,000,000.00) x x x.
Defendant also cited Articles 544, 546, 548 of the New Civil Code of the Philippines in further support of its defense.
It is incumbent upon the plaintiff to adduce evidence in support of his complaint x x x. Likewise, the trial shall be limited to the issues stated in the pre-trial order.
As earlier stated, the Court shall rule on whether x x x plaintiff has discharged its obligation to do so in compliance with the Rules of Court. Having closely examined, evaluated and passed upon the evidence presented by both the plaintiff and defendant the Court is convinced that the plaintiff has successfully discharged said obligation and is inclined to grant the reliefs prayed for.
Clearly this is a valid complaint for quieting of title specifically defined under Article 476 of the Civil Code and as cited in the cases of Vda. De Angeles v. CA, G.R. No. 95748, November 21, 1996; Tan vs. Valdehuesa, 66 SCRA 61 (1975).
As claimed by the plaintiff, defendant's T.C.T. No. 153101 is an instrument, record or claim which constitutes or casts a cloud upon its T.C.T. Nos. 250242, 250243, and 250244. Sufficient and competent evidence has been introduced by the plaintiff that upon plotting verification of the technical description of both parcels of land conducted by Geodetic Engineer Ricardo Cruz, duly approved by the Regional Technical Director of Lands of the DENR that Psu-234002, covered by defendant's T.C.T. No. 153101 overlapped a portion of 567 square meters of Lot No. 29 x x x, a portion of 1,389 square meters of Lot No. 30 x x x covered by plaintiffs T.C.T. Nos. 250242, 2502 and 250244, respectively. Surprisingly, defendant has not disputed nor has it adduced evidence to disprove these findings.
It was likewise established that plaintiff's T.C.T. No[s]. 250242, 250243 and 250244 emanated from O.C.T. No. 756, which was originally registered on August 14, 1915, whereas, from defendant's own evidence, its T.C.T. No. 153101 was derived from O.C.T. No. 9311, which was originally registered on September 14, 1973, pursuant to Decree No. D-147380, in LRC Case No. N-7993, Rec. No. 43097.
Plaintiff's mother title was registered 58 years ahead of defendant's mother title. Thus, while defendant's T.C.T. No. 153101 and its mother title are apparently valid and effective in the sense that they were issued in consequence of a land registration proceeding, they are in truth and in fact invalid, ineffective, voidable, and unforceable [sic] insofar as it overlaps plaintiff's prior and subsisting titles.
x x x x
In the cases of Chan vs. CA, 298 SCRA 713, de Villa vs. Trinidad, 20 SCRA 1167, Gotian vs. Gaffud, 27 SCRA 706, again the Supreme Court held:'When two certificates of title are issued to different persons covering the same land, in whole or in part, the earlier in date must prevail and in cases of successive registrations where more than one certificate of title is issued over the same land, the person holding a prior certificate is entitled to the land as against a person who relies on a subsequent certificate.'
x x x x
Article 526 of the Civil Code defines a possession in good faith as 'one who is not aware that there exists in his title or mode of acquisition any flaw which invalidates it, and a possession in bad faith as one who possesses in any case contrary to the foregoing.'
x x x x
In the case of Ortiz vs. Fuentebella, 27 Phil. 537, the Supreme Court held:'Thus, where defendant received a letter from the daughter of the plaintiff, advising defendant to desist from planting coconut on a land in possession of defendant, and which letter the defendant answered by saying she did not intend to plant coconuts on the land belonging to plaintiff, it was held that the possession [in] bad faith began from the receipt of such letter.'
A close similarity exists in Fuentebella above cited with the facts obtaining in this case. The pieces evidence [sic] show that while defendant was in good faith when it bought the land from the Republic Bank as a foreclosed property, the plaintiff in a letter dated as early as March 11, 1968 x x x advised the defendant that the land it was trying to fence is within plaintiff's property and that the defendant should refrain from occupying and building improvements thereon and from doing any act in derogation of plaintiff's property rights. Six other letters followed suit x x x. The records show that defendant received these letters but chose to ignore them and the only communication in writing from the defendant thru Paul Naidas was a letter dated July 31, 1971, stating that he (Naidas) was al1 the more confused about plaintiff's claim to the land. The defendant cannot dispute the letters sent because it sent a response dated July 31, 1970. It is very clear that while defendant may have been [in] good faith when it purchased the land from Republic Bank on December 6, 1977, such good faith ceased upon being informed in writing about plaintiff's title or claim over the same land, and, worse, it acted with evident bad faith when it proceed [sic] to build the structures on the land despite such notice.
Consequently, the rule on the matter can be found in Articles 449, 450 of the Civil Code of the Philippines which provide:'Article 449. – He who builds, plants, or sows in bad faith on the land of another, loses what is built, planted or sown without right to indemnity."
Article 450. – The owner of the land on which anything has been built, planted or sown in bad faith may demand the demolition of the work; or that the planting or sowing be removed, in order to replace things in their former condition at the expense of the person who built, planted or sowed, or he may compel the builder or planter to pay the price of the land, and the sower the proper rent.'
In the case of Tan Queto vs. CA, 122 SCRA 206, the Supreme Court held:'A builder in bad faith loses the building he builds on another's property without right of refund,' x x xx x x x
As to defendant's claim that they had obtained title to the property as innocent purchasers for value, lack of knowledge of any irregularity, effect or duplication of title, they could have discovered the overlapping had they only bothered to engage a licensed geodetic engineer to check the accuracy of their plan Psu-234002. To that extent, defendant has failed to exercise the diligence to be entitled to the status as an innocent purchaser for value. It was clearly established that defendant's certificate of title emanated from a mother title that partially overlapped the plaintiff's prior and subsisting title. Hence, defendant's certificate of title is void abinittio [sic] insofar as the overlapped areas are concerned.
Defendant's claim of lack of notice on the claim of the plaintiff on the overlapped properties is belied by the evidence presented by plaintiff which consisted by [sic] a letter dated as early as March 11, 1968 (Exh. N, N-1, N-2) advising defendant that the land it was trying to fence of [sic] is within plaintiff's property, and at the same time asking the defendant to refrain from occupying and building improvements thereon and from doing any act in derogation plaintiff's property rights. Five (5) succeeding letters addressed to defendant followed suit and the evidence clearly show that the same were received by defendant and no less than Paul Naidas wrote a reply letter to plaintiff's counsel, Alfonso Roldan on July 31, 1971 which conclusively affirm the fact that defendant is well aware of plaintiff's claim to the portion of the land encroached. Thus, the defendant's claim that it is a builder in good faith finds no factual nor legal basis. On the contrary, the defendant's continued construction and introduction of improvements on the questioned portion of plaintiff's property clearly negates good faith.
The claim for damages prayed for by plaintiff as a result of defendant's obstinate refusal to recognize [the] plaintiffs title to the land insofar as the encroachments were made and to turn over the possession thereof entitles the plaintiff to the award of moral, exemplary damages and attorney's fees. However, since no sufficient evidence was presented that the plaintiff suffered actual damages, the Court cannot award any pursuant to [Article] 2199 of the New Civil Code of the Philippines.
WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against 1he defendant as follows:
- Quieting its T.C.T. Nos. 250242, 240243 and 250[2]44, and removing the clouds thereon created by the issuance of T.C.T. No. 153101 insofar as the said titles are overlapped by the T.C.T. No. 153101;
- Ordering the cancellation or annulment of portions of T.C.T. No. 153101 insofar as it overlaps plaintiff's T.C.T. No. 250242, to Lot 29, Block 3, (LRC) Pcs-7305; plaintiff's T.C.T. No. 250243 to Lot 30, Block 3 (LRC) Pcs-7305; and plaintiff's [TCT] No. 250244 to Lot 31, Block 3, (LRC) Pcs-7305;
- Ordering the defendant to vacate and turn over the possession of said portions in favor of the plaintiff, and to remove the building or structures it has constructed thereon at its own expense without right to indemnity [therefor]; to allow the plaintiff to appropriate what the defendant has built or to compel the defendant to pay for the value of the land encroached upon;
- Ordering the defendant to pay moral damages to the plaintiff in thy amount of P1,000,000.00; exemplary damages in the amount of P1,000,000.00 and attorney's fees in the amount of P100,000.00.
- Ordering the defendant to pay for the cost of suit.
SO ORDERED.[14]
The appeal fails.
Good faith is an intangible and abstract quality with no technical meaning or statutory definition, and it encompasses, among other things, an honest belief, the absence of malice and the absence of design to defraud or to seek an unconscionable advantage. An individual's personal good faith is a concept of his own mind and, therefore, may not conclusively be determined by his protestations alone. It implies honesty of intention, and freedom from knowledge of circumstances which ought to put the holder upon inquiry. The essence of good faith lies in an honest belief in the validity of one's right, ignorance of a superior claim, and absence of intention to overreach another.
Article 528 of the New Civil Code provides that possession acquired in good faith does not lose this character, except in a case and from the moment facts exist which show that the possessor is not unaware that he possesses the thing improperly or wrongfully. Possession in good faith ceases from the moment defects in the title are made known to the possessors, by extraneous evidence or by suit for recovery of the property by the true owner. Whatever may be the cause or the fact from which it can be deduced that the possessor has knowledge of the defects of his title or mode of acquisition, it must be considered sufficient to show bad faith.
In the instant case, as early as 1968, Martinez sent several letters to Las Brisas informing the latter of Martinez's ownership over the land covered by TCT Nos. 250242, 250243 and 250244 and that the buildings and improvements Las Brisas made have encroached on the said property. In the Letter dated 11 March 1968, Martinez informed Las Brisas that the latter's fence had overlapped into the former's land and requested that Las Brisas refrain from entering Martinez's property. However, Las Brisas did not heed Martinez's demand and continued developing its property. Martinez sent six (6) more letters to Las Brisas reiterating that the latter's structure and improvements encroached on Martinez's land. Records show that Las Brisas received these notices and in fact, made a reply to one of Martinez's letters. Clearly, Las Brisas was informed on several occasions about Martinez's titles x x x over its land and, despite such notices, Las Brisas chose to ignore Martinez's demand and continued constructing other buildings and improvements that intruded into Martinez's property. Hence, Las Brisas cannot claim that it had no knowledge of the defects of its title and, consequently, cannot be considered in good faith.
Neither did Las Brisas bother to have its property surveyed in order to discover, for its own benefit, the actual boundaries of its land (TCT No. 153101). It is doctrinal in land registration law that possession of titled property adverse to the registered owner is necessarily tainted with bad faith. Thus, proceeding with the construction works on the overlapped portions of TCT Nos. 250242, 250243 and 250244 despite knowledge of Martinez's ownership thereof puts Las Brisas in bad faith.
Las Brisas further argues that Martinez is guilty of laches as it failed to assert its right over the encroached portions of TCT Nos. 250242, 250243 and 250244 within reasonable time.
We disagree.
x x x x
Furthermore, Martinez is the registered owner of TCT Nos. 250242, 250243 and 250244 and, as such, its right to demand to recover the portions thereof encroached by Las Brisas is never barred by laches. In the case of Arroyo vs. Bocago Inland Dev't Corp., the Supreme Court held:'As registered owners of the lots in question, the private respondents have a right to eject any person illegally occupying their property. This right is imprescriptible. Even if it be supposed that they were aware of the petitioners' occupation of the property, and regardless of the length of that possession, the lawful owners have a right to demand the return of their property at any time as long as the possession was unauthorized or merely tolerated, if at all. This right is never barred by laches.'
Las Brisas argues that the court a quo erred in admitting Martinez's Relocation Survey of Lot Nos. 28, 29 and 30 and the Verification Plan Vs 04-00394 as they constitute hearsay evidence and as such are inadmissible.
We are not persuaded.
It bears noting that this issue of hearsay evidence was raised for the first time on appeal. It is a fundamental rule that no question will be entertained on appeal unless it has been raised below, Stated differently, issues of fact and arguments not adequately brought to the attention of the lower courts will not be considered by the reviewing courts as they cannot be raised for the first time on appeal. An issue, which was neither averred in the complaint nor raised during the trial in the lower courts, cannot be raised for the first time on appeal because it would be offensive to the basic rule of fair play and justice, and would be violative of the constitutional right to due process of the other party. In fact, the determination of issues at the pre-trial bars consideration of other issues or questions on appeal,
In this case, Las Brisas failed to raise this argument during pre-trial and in the trial proper. Las Brisas even failed to [raise] its objection during Martinez's formal offer of evidence. Clearly, Las Brisas waived its right to object on [sic] the admissibility of Martinez's evidence. Thus, We cannot bend backwards to examine this issue raised by Las Brisas at this late stage of the proceedings as it would violate Martinez's right to due process and should thus be disregarded.
Anent the award of moral damages of Php1,000,000.00 and exemplary damages of Php1,000,000.00, We find the same without factual or legal basis.
A juridical person is generally not entitled to moral damages because, unlike a natural person, it not experience physical suffering, or such sentiments as wounded feelings, serious anxiety, mental anguish or moral shock. While the courts may allow the grant of moral damages to corporations in exceptional situations, it is not automatically granted because there must still be proof of the existence of the factual basis of the damage and its casual relation to the defendant's acts. Moral damages, though incapable of pecuniary estimation, are in the category of an award designed to compensate the claimant for actual injury suffered and not to impose a penalty on the wrongdoer. In this case, We find no evidence that Martinez suffered besmirched reputation on account of the Las Brisas encroachment on Martinez's land. Hence, the award of moral damages should be deleted.
Neither is Martinez entitled to exemplary damages. Exemplary damages may only be awarded if it has been shown that the wrongful act was accompanied by bad faith or done in a wanton, fraudulent and reckless or malevolent manner. Exemplary damages are allowed only in addition to moral damages such that no exemplary damage can be awarded unless the claimant first establishes his clear right to moral damages. As the moral damages are improper in the instant case, so is the award of exemplary damages.
Nevertheless, an award of nominal damages of Php100,000.00 is warranted since Las Brisas violated the property rights of Martinez. The New Civil Code provides:Art. 2221. Nominal damages are adjudicated in order that a right of the plaintiff, which has been violated or invaded by the defendant, may be vindicated or recognized, and not for the purpose of indemnifying the plaintiff for any loss suffered by him.
Art. 2222. The court may award nominal damages in every obligation arising from any source enumerated in Article 1157, or in every case where any property right has been invaded.
The award of damages is also in accordance with Article 451 of the New Civil Code which states that the landowner is entitled to damages from the builder in bad faith.
WHEREFORE, the Decision dated 20 January 2009 of the Regional Trial Court of Antipolo City, Branch 71, in Civil Case No. 974386 is AFFIRMED with MODIFICATION, as follows:SO ORDERED.[17] (Citations omitted)
1.) deleting the award of moral damages and exemplary damages to Martinez Leyba, Inc.; and 2.) ordering Las Brisas Resort Corporation, Leyba, Inc., Php100,000.00, nominal damages.
- THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN RULING THAT PETITIONER IS A POSSESSOR/BUILDER IN BAD FAITH.
- THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN FAILING TO RULE THAT THE RESPONDENT INCURRED LACHES IN ENFORCING ITS PUTATIVE RIGHTS.
- THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN RULING THAT THE ISSUE ON HEARSAY CANNOT BE RAISED FOR THE FIRST TIME ON APPEAL.[19]
Section 146. The Regional Technical Director for Lands may issue order to conduct a verification survey whenever any approved survey is reported to be erroneous, or when titled lands are reported to overlap or where occupancy is reported to encroach another property. x x x
x x x x
Section 149. All survey work undertaken for verification purposes shall be subject of verification and approval in the DENR-LMS Regional Office concerned and shall be designated as Verification Surveys Vs). x x x
- A Portion of 567 square meters of Lot No. 29, Block 3, (LRC) Pcs-7305, covered by respondent's TCT 250242. This is the portion where the petitioners built a riprapping.
- A portion of 1,389 square meters of Lot No. 30, Block 3, (LRC) Pcs-7305, covered by respondent's TCT 250243. This is the portion where the petitioners had constructed an old building.
- A portion of 1,498 square meters of Lot No. 31, Block 3, (LRC) Pcs-7305, covered by respondent's TCT 250244. This is the portion where the petitioners constructed & new multi-story edifice.
Art. 449. He who builds, plants or sows in bad faith on the land of another, loses what is built, planted or sown without right to indemnity.
Art. 450. The owner of the land on which anything has been built, planted or sown in bad faith may demand the demolition of the work, or that the planting or sowing be removed, in order to replace things in their former condition at the expense of the person who built, planted or sowed; or he may compel the builder or planter to pay the price of the land, and the sower the proper rent.
Art. 451. In the cases of the two preceding articles, the landowner is entitled to damages from the builder planter or sower.
The right of the owner of the land to recover damages from a builder in bad faith is clearly provided for in Article 451 of the Civil Code. Although said Article 451 does not elaborate on the basis for damages, the Court perceives that it should reasonably correspond with the value of the properties lost or destroyed as a result of the occupation in bad faith, as well as the fruits (natural, industrial or civil) from those properties that the owner of the land reasonably expected to obtain. x x x[28]
Jurisprudence consistently holds that 'prescription and laches cannot apply to registered land covered by the Torrens system' because 'under the Property Registration Decree, no title to registered land in derogation to that of the registered owner shall be acquired by prescription or adverse possession.'[30]
We have decided, in case of double registration under the Land Registration Act, that the owner of the earliest certificate is the owner of the land. That is the rule between original parties. May this rule be applied to successive vendees of the owners of such certificates? Suppose that one or the other of the parties, before the error is discovered, transfers his original certificate to an "innocent purchaser." The general rule is that the vendee of land has no greater right, title, or interest than his vendor, that he acquires the right which his vendor had, only. Under that rule the vendee of the earlier certificate would be the owner as against the vendee of the owner of the later certificate.[3] (Emphasis and underscoring supplied)
[W]hile [Las Brisas] may have been [an] innocent [purchaser] for value with respect to [its] land, this does not prove that they are equally innocent of the claim of encroachment upon [MLI]'s lands. The evidence suggest otherwise; despite being apprised of the encroachment, [Las Brisas] turned a blind eye and deaf ear and continued to construct on the disputed area. They did not bother to conduct their own survey to put the issue to rest, and to avoid the possibility of being adjudged as builders in bad faith upon land that did not belong to them.[4]
ART. 526. He is deemed a possessor in good faith who is not aware that there exists in his title or mode of acquisition any flaw which invalidates it.
He is deemed a possessor in bad faith who possesses in any case contrary to the foregoing.
Mistake upon a doubtful or difficult question of law may be the basis of good faith.
May the purchaser of land which has been included in a "second original certificate" ever be regarded as an "innocent purchaser," as against the rights or interest of the owner of the first original certificate, his heirs, assigns, or vendee? The first original certificate is recorded in the public registry. It is never issued until it is recorded. The record is notice to all the world. All persons are charged with the knowledge of what it contains. All persons dealing with the land so recorded, or any portion of it, must be charged with notice of whatever it contains. The purchaser is charged with notice of every fact shown by the record and is presumed to know every fact which the record discloses. x x x
When a conveyance has been properly recorded such record is constructive notice of its contents and all interests, legal and equitable, included therein. x x x
Under the rule of notice, it is presumed that the purchaser has examined every instrument of record affecting the title. Such presumption is irrebutable. He is charged with notice of every fact shown by the record and is presumed to know every fact which an examination of the record would have disclosed. This presumption cannot be overcome by proof of innocence or good faith. Otherwise the very purpose and object of the law requiring a record would be destroyed. Such presumption cannot be defeated by proof of want of knowledge of what the record contains any more than one may be permitted to show that he was ignorant of the provisions of the law. The rule that all persons must take notice of the facts which the public record contains is a rule of law. The rule must be absolute. Any variation would lead to endless confusion and useless litigation.
x x x x
In view, therefore, of the foregoing rules of law, may the purchaser of land from the owner of the second original certificate be an "innocent purchaser," when a part or all of such land had theretofore been registered in the name of another, not the vendor? We are of the opinion that said sections 38, 55, and 112 should not be applied to such purchasers. We do not believe that the phrase "innocent purchaser" should be applied to such a purchaser. He cannot be regarded as an "innocent purchaser" because of the facts contained in the record of the first original certificate. x x x He, in no sense, can be an "innocent purchaser" of the portion of the land included in another earlier original certificate. The rule of notice of what the record contains precludes the idea of innocence. By reason of the prior registry there cannot be an innocent purchaser of land included in a prior original certificate and in a name other than that of the vendor, or his successor. In order to minimize the difficulties we think this is the safer rule to establish. We believe the phrase "innocent purchaser," used in said sections, should be limited only to cases where unregistered land has been wrongfully included in a certificate under the torrens system. When land is once brought under the torrens system, the record of the original certificate and all subsequent transfers thereof is notice to all the world. x x x[13] (citations omitted)
On the matter of possession of plaintiffs-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, they 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 possessor 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 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 of the necessary expenses made on the lands.[18] (Emphasis and italics supplied)
We have laid the rule that where two certificates of title are issued to different persons covering the same land in whole or in part, the earlier in date must prevail as between original parties and in case of successive registrations where more than one certificate is issued over the land, the person holding under the prior certificate is entitled to the land as against the person who rely on the second certificate. The purchaser from the owner of the later certificate and his successors, should resort to his vendor for redress, rather than molest the holder of the first certificate and his successors, who should be permitted to rest secure in their title. Consequently, since Original Certificate of Title No. 183 was registered on January 30, 1920, De Villa's claim which is based on said title should prevail, as against Trinidad's whose original title was registered on November 25, 1920. And from the point of equity, this is the proper solution, considering that unlike the titles of Palma and the DBP, De Villa's title was never tainted with fraud.
x x x x
The facts and circumstances, however, do not call for assessment of damages against appellants until after the filing of the present suit on January 26, 1962 for only then could they be positively adjudged in bad faith in view of their knowledge that there was an adverse claimant to the land.
Trinidad's repossession of the land on March 2, 1961 cannot be deemed in bad faith as it was pursuant to a court order legally obtained, and as his possession before that time was in good faith.
Appellant does not question the specific amounts of the damages[20] awarded in De Villa's favor and the same, at any rate, is borne out by the records. Said damages, however should be offset against the value of whatever necessary and useful expenses and improvements were made or incurred by Trinidad with respect to the land, provided that in the case of useful expenses or improvements these were made or incurred prior to the filing of the present action. Such reimbursable amount due to Trinidad must, therefore, first be determined before the aforesaid award of damages in De Villa's favor can be executed. And its determination shall be by way of supplementary proceedings in aid of execution in the lower court.[21]
A more factual approach would lead to the same result. From the stipulated facts, it can be seen that prior to the execution of the mortgage between appellant and the defendant spouses, the appellee had been mortgaging the land described in TCT No. T-1212 to it. She did this first in the year 1950 for a loan of P900.00 and again in 1954 for a loan of P1,100.00. In both instances, the appellant Bank had possession of, or at least, must have examined appellee's title, TCT No. T-1212, wherein appear clearly the technical description, exact area, lot number and cadastral number of the land covered by said title. In other words, by the time the defendant spouses offered OCT P-6038, in their names, for scrutiny in connection with their own application for loan with appellant, the latter was charged with the notice of the identity of the technical descriptions, areas, lot numbers and cadastral numbers of the lands purportedly covered by the two titles and was in a position to know, if it did not have such knowledge actually, that they referred to one and the same lot. Under the circumstances, appellant had absolutely no excuse for approving the application of the defendant spouses and giving the loans in question. x x x[23]
A close similarity exists in [Ortiz] with the facts obtaining in this case. The pieces evidence [sic] show that while defendant was in good faith when it bought the land from the Republic Bank as a foreclosed property, the plaintiff in a letter dated as early as March 11, 1968 x x x had advised the defendant that the land it was trying to fence is within plaintiffs property and that the defendant should refrain from occupying and building improvements thereon and from doing any act in derogation of plaintiffs property rights. Six other letters followed suit x x x.[25] The records show that defendant received these letters but chose to ignore them and the only communication in writing from the defendant thru Paul Naidas was a letter dated July 31, 1971, stating that he (Naidas) was all the more confused about plaintiff's claim to the land. x x x[26]
If there was bad faith, not only on the part of the person who built, planted or sowed on the land of another, but also on the part of the owner of such land, the rights of one and the other shall be the same as though both had acted in good faith.
It is understood that there is bad faith on the part of the landowner whenever the act was done with his knowledge and without opposition on his part.
The owner of the land on which anything has been built, sown or planted in good faith, shall have the right to appropriate as his own the works, sowing or planting, after payment of the indemnity provided for in Articles 546 and 548, or to oblige the one who built or planted to pay the price of the land, and the one who sowed, the proper rent. However, the builder or planter cannot be obliged to buy the land if its value is considerably more than that of the building or trees. In such case, he shall pay reasonable rent, if the owner of the land does not choose to appropriate the building or trees after proper indemnity. The parties shall agree upon the terms of the lease and in case of disagreement, the court shall fix the terms thereof.