G.R. No. 222482 - Concurring Opinion

G.R. No. 222482, June 2, 2020,
♦ Decision, J. Reyes Jr., [J]
♦ Concurring Opinion, Leonen, [J]
♦ Separate Concurring Opinion, Caguioa, [J]
♦ Separate Concurring Opinion, Lazaro-Javier, [J]
♦ Separate Concurring Opinion, Zalameda, [J]

PRINCESS RACHEL DEVELOPMENT CORPORATION AND BORACAY ENCLAVE CORPORATION, PETITIONERS, V. HILL VIEW MARKETING CORPORATION, STEFANIE DORNAU AND ROBERT DORNAU, RESPONDENTS.

The crux of the controversy stems from the perceived conflict between the general presumption of good faith regarding possession embodied in Article 5271 of the Civil Code and the principle of constructive notice of registration provided in Section 522 of Presidential Decree No. (PD) 15293 or the Property Registration Decree.

I submit this Separate Concurring Opinion to clarify that there is, in fact, no conflict between these two seemingly opposing principles, as they differ in scope.

In encroachment scenarios, the general presumption of good faith shall apply when the properties involved are both unregistered.

Conversely, when either or both of the properties involved are registered under the Torrens system, it is the constructive notice rule that applies. This is evident under Articles 18 and 711 of the Civil Code, which state that the general law defers to the special law with respect to matters governed by the latter, thus:

ART. 18. In matters which are governed by the Code or Commerce and special laws, their deficiency shall be supplied by the provisions of this Code.

ART. 711. For determining what titles are subject to inscription or annotation, as well as the form, effects, and cancellation of inscriptions and annotations, the manner of keeping the books in the Registry, and the value of the entries contained in said books, the provisions of the Mortgage Law, the Land Registration Act,4 and other special laws shall govern.

In my view, the interplay between the general provisions of the Civil Code and the specific provisions of PD 1529 can be reconciled, as follows:

The rights and obligations of the builder and landowner in an encroachment situation are spelled out under Articles 448 to 454 of the Civil Code. These provisions state:

ART. 448. 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.

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.

ART. 452. The builder, planter or sower in bad faith is entitled to reimbursement for the necessary expenses of preservation of the land.

ART. 453. 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.

ART. 454. When the landowner acted in bad faith and the builder, planter or sower proceeded in good faith, the provisions of Article 447 shall apply.

Pursuant to these provisions, good faith determines the rights and obligations of the builder and landowner in the event of an encroachment. Hence, as correctly observed by the ponencia, the character of Hillview's possession over the encroached portion determines the parties' relative rights and obligations.7

Under the Civil Code, good faith is always presumed, and upon him who alleges bad faith on the part of a possessor rests the burden of proof. This presumption regarding good faith possession is, however, rebuttable.

Articles 448 to 454 of the Civil Code do not appear to distinguish between registered and unregistered properties. However, pursuant to Articles 18 and 711 of the same statute, the general provisions of the Civil Code shall apply only if the properties involved in the encroachment are both unregistered. Conversely, if either or both properties involved are registered under the Torrens system, Articles 448 to 454 should be applied in conjunction with the provisions of PD 1529.

Here, the lots encroached upon are registered under the Torrens system in the name of Princess Rachel Development Corporation (PRDC). Thus, the determination of the existence of good faith on the part of landowner PRDC and builder Hillview Marketing Corporation (Hillview) should be done in consonance with the provisions of PD 1529, the latter being the special law governing registered land.

SEC. 52. Constructive notice upon registration. - Every conveyance, mortgage, lease, lien, attachment, order, judgment, instrument or entry affecting registered land shall, if registered, filed or entered in the office of the Register of Deeds for the province or city where the land to which it relates lies, be constructive notice to all persons from the time of such registering, filing or entering. (Emphasis supplied)

In turn, Sections 31 and 39 of the same statute detail the scope of constructive notice with respect to the decree of registration, thus:

SEC. 31. Decree of Registration. — Every decree of registration issued by the Commissioner shall bear the date, hour and minute of its entry, and shall be signed by him. It shall state whether the owner is married or unmarried, and if married, the name of the husband or wife: Provided, however, that if the land adjudicated by the court is conjugal property, the decree shall be issued in the name of both spouses. If the owner is under disability, it shall state the nature of disability, and if a minor, his age. It shall contain a description of the land as finally determined by the court, and shall set forth the estate of the owner, and also, in such manner as to show their relative priorities, all particular estates, mortgages, easements, liens, attachments, and other encumbrances, including rights of tenant-farmers, if any, to which the land or owner's estate is subject, as well as any other matters properly to be determined in pursuance of this Decree.

The decree of registration shall bind the land and quiet title thereto, subject only to such exceptions or liens as may be provided by law. It shall be conclusive upon and against all persons, including the National Government and all branches thereof, whether mentioned by name in the application or notice, the same being included in the general description "To all whom it may concern".

SEC. 39. Preparation of decree and Certificate of Title .- After the judgment directing the registration of title to land has become final, the court shall, within fifteen days from entry of judgment, issue an order directing the Commissioner to issue the corresponding decree of registration and certificate of title. The clerk of court shall send, within fifteen days from entry of judgment, certified copies of the judgment and of the, order of the court directing the Commissioner to issue the corresponding decree of registration and certificate of title, and a certificate stating that the decision has not been amended, reconsidered, nor appealed, and has become final. Thereupon, the Commissioner shall cause to be prepared the decree of registration as well as the original and duplicate of the corresponding original certificate of title. The original certificate of title shall be a true copy of the decree of registration. The decree of registration shall be signed by the Commissioner, entered and filed in the Land Registration Commission. The original of the original certificate of title shall also be signed by the Commissioner and shall be sent, together with the owner's duplicate certificate, to the Register of Deeds of the city or province where the property is situated for entry in his registration book. (Emphasis and underscoring supplied)

These provisions confirm that the decree and the corresponding certificate of title, both of which contain the description of the land to which they pertain, fall within the scope of the constructive notice rule, inasmuch as they are, by law, conclusive against all persons. Since the original certificate of title is "entered in [the Registrar of Deeds'] record book,"8 and serves as a true copy of the decree of registration, the constructive notice rule should necessarily be understood as covering all that appears on the face of such title, including the technical description of the property to which it corresponds.

Speaking of the parameters of the constructive notice rule, the Court, in Legarda v. Saleeby9 (Legarda) held:

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 irrebuttable. 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.10 (Emphasis, italics and underscoring supplied; citations omitted)

In Legarda, the Court resolved conflicting claims of ownership over a parcel of land registered in the name of both adjacent owners. Applying the constructive notice rule, the Court held that "in case of double registration under the Land Registration Act,11 x x x the owner of the earliest certificate is the owner of the land."12

I maintain that Legarda remains controlling with respect to the determination of ownership in cases of overlapping Torrens titles issued to different parties.

However, as I stated in my Concurring and Dissenting Opinion in Pen Development Corp. v. Martinez Leyba, Inc.13 (Pen Development), I oppose the "wholesale, indiscriminate, blind application of the constructive notice [rule] espoused in Legarda without regard to the peculiar factual circumstances of each case[.]"14 In turn, the peculiar circumstances which I alluded to in Pen Development were: (i) the case did not merely involve the issue of ownership, but also possession; and (ii) the case involved valid albeit overlapping Torrens titles issued to different parties. Taking these peculiar circumstances into account, I stated:

This case is NOT a simple boundary dispute where a neighbor builds a structure on an adjacent registered land belonging to another.1âшphi1 Here, the area where the former had built happens to be within the land registered in his name which overlaps with the titles of the latter. Thus, this is a proper case of overlapping of certificates of title belonging to different persons.

Given the fact that this case involves overlapping of titles, I fully concur with the Decision that as between Martinez Leyba, Inc. (MLI) and Las Brisas Resorts Corp. (Las Brisas), MLI has a superior right to the overlapped or encroached portions in issue being the holder of a transfer certificate of title that can be traced to the earlier original certificate of title.

In case of double registration where land has been registered in the name of two persons, priority of registration is the settled rule. x x x

TCT Nos. 250242, 250243 and 250244 registered in the name of MLI conflict with TCT No. 153101 registered in the name of Las Brisas. x x x The overlapped portions add up to 3,454 square meters. Given that the total area of TCT No. 153101 is 3,606 square meters and 3,454 square meters will be deducted therefrom because that portion rightfully pertains to MLI pursuant to prevailing and settled rule on double registration, only 152 square meters will remain under TCT No. 153101 in the name of Las Brisas.

However, I cannot agree with the finding that Las Brisas is a builder in bad faith. Thus, my dissent tackles directly and mainly the issue of good faith on the part of a registered owner (Las Brisas) who built within a portion of the parcel of land delimited by the boundaries or technical descriptions of its own certificate of title that turns out to be within the boundaries or technical descriptions of the adjoining titled parcels of land despite prior written notices by the registered owner (MLI) of the adjoining parcels of land that the former owner was building within the latter owner's registered property.

The Decision rules in favor of MLI and affirms the finding of the Court of Appeals (CA) that Las Brisas is a builder in bad faith. x x x

With due respect, the determination of the good faith of Las Brisas should not be made to depend solely on the written notices sent by MLI to Las Brisas warning the latter that it was building and making improvements on MLI's parcels of land. I firmly subscribe to the view that the fact that Las Brisas built within its titled property and the doctrine of indefeasibility or incontrovertibility of its certificate of title should also be factored in.

The provision of the Civil Code on the definition of a possessor in good faith, Article 526, provides:

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.

In turn, Article 528 of the Civil Code provides: "Possession acquired in good faith does not lose this character except in the case and from the moment facts exist which show that the possessor is not unaware that he possesses the thing improperly or wrongfully."

When did Las Brisas become aware of facts which show that it was possessing the disputed areas or portions improperly or wrongfully? There are several en banc Decisions of the Court which may find application in this case. These are [Legarda] (1915), Dizon v. Rodriguez (1965), De Villa v. Trinidad (1968) and Gatioan v. Gaffud (1969).

In Legarda, the Court had to grapple with Sections 38, 55 and 112 of Act No. 496 which indicate that the vendee may acquire rights and be protected against the defenses which the vendor would not and speak of available rights in favor of third parties which are cut off by virtue of the sale of the land to an "innocent purchaser." Thus, the Court said:

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.

Legarda was concerned more with the issue of ownership than with the issue of possession: To bar transferees of the "second or later original certificate of title" from ever having a right of ownership superior to those who derive their title from the "earlier or first original certificate of title," Legarda ruled that the "innocent purchaser [for value]" doctrine should not apply because "[w]hen land is once brought under the [T]orrens system, the record of the original certificate and all subsequent transfers thereof is notice to all the world." However, that notice is constructive and not actual.

If Legarda is strictly and uniformly applied, then holders of transfer certificates of title emanating from the "second or later original certificate of title" or any person deriving any interest from them can never be buyers in good faith.

I am not advocating in this dissent that the Legarda doctrine on double registration or titling be abandoned or overturned. I submit that it is and remains controlling in that respect. Rather, I take the position that a wholesale, indiscriminate, blind application of the constructive notice doctrine espoused in Legarda without regard to the peculiar factual circumstances of each case may not be the best approach to dispense justice.

Dizon v. Rodriguez did not involve double registration. It involved titled lots which are "actually part of the territorial waters and belong to the State." While the Court ruled that "the incontestable and indefeasible character of a Torrens certificate of title does not operate when the land thus covered is not capable of registration," the Court nonetheless upheld the CA's finding of possession in good faith in favor of the registered owners until the latter's titles were declared null and void, viz.:

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.

In Gatioan v. Gaffud, the Court did not only cite Legarda but held it controlling. In that case, while the appellant therein (Philippine National Bank) did not impugn the lower court's ruling in declaring null and void and cancelling OCT No. P-6038 in favor of defendant spouses Gaffud and Logan, it insisted that the lower court should have declared it an innocent mortgagee in good faith and for value as regards the mortgages executed in its favor by said defendant spouses and duly annotated on their OCT and that consequently, the said mortgage annotations should be carried over to and considered encumbrances on the land covered by TCT No. T-1212 of appellee which is the identical land covered by the OCT of the Gaffuds. The Court found the contention of the appellant therein without merit and quoted extensively Legarda wherein the Court held that the purchaser of the land or a part thereof which has been included in a "second original certificate" cannot be regarded as an "innocent purchaser" under Sections 38, 55, and 112 of Act No. 496 because of the facts contained in the record of the first original certificate.

However, in the same breath, the Court also took judicial notice that before a bank grants a loan on the security of a land, it first undertakes a careful examination of title of the applicant as well as a physical and on the-spot investigation of the land itself offered as security. In that case, had the appellant bank taken such a step which was demanded by the most ordinary prudence, it would have easily discovered the flaw in the title of the defendant spouses. As such, it was held guilty of gross negligence in granting the loans in question. x x x

Thus, the Court in Gatioan took "a more factual approach" in determining the good faith of the mortgagee who derived its right from the owner of the "second original certificate" and it did not simply apply the constructive notice doctrine espoused in Legarda.

In the Decision, the factual approach is being adopted. This is evident when it reproduced the Regional Trial Court of Antipolo City, Branch 71 (RTC) Decision's citation and discussion of Ortiz v. Fuentebella, wherein it was held that the defendant's possession in bad faith began from the receipt by the defendant of a letter from the daughter of the plaintiff therein, advising the defendant to desist from planting on a land in possession of the defendant. x x x

Unfortunately, Ortiz — decided "103 years ago" according to the ponente — is not squarely in point. There, the subject land is not registered land. It was merely covered by a possessory information title, which was allowed under the Spanish Mortgage Law. The informacion posesoria was a method of acquiring title to public lands, subject to two conditions, to wit: (1) the inscription or registration thereof in the Registry of Property, and (2) actual, public, adverse and uninterrupted possession of the land for 20 years.

If the constructive notice doctrine embodied in Section 52 of PD 1529 and espoused in Legarda has been strictly applied in this case and the ponente has not taken a "more factual approach," then it would be erroneous to hold that "they [referring to petitioners, Las Brisas and Pen Development Corporation, which are one and the same entity] acquired TCT 153101 in good faith and for value" or "petitioners may have been innocent purchasers for value with respect to their land," and that Las Brisas' good faith turned into bad faith upon "being apprised of the encroachment" by MLI — because Las Brisas should automatically be deemed to have had constructive notice of MLI's certificates of title that overlapped the certificate of title of Republic Bank which Las Brisas acquired as a foreclosed property. By the same token, a finding that Las Brisas is an "innocent purchaser for value with respect to its land" is precisely what Legarda wanted to avoid because that would result in a transferee of the "second or later original certificate of title" having a right of ownership superior to that of a transferee of the "first or earliest original certificate of title." Clearly, the Decision here betrays a fundamental confusion on the import of these earlier rulings.

I agree that the factual approach is preferable over the indiscriminate application of the constructive notice doctrine in cases of double registration with respect to the determination of the good faith or bad faith of the possessor or builder who derives his right from the "second original certificate of title."15 (Emphasis and underscoring supplied; emphasis in the original omitted; citations omitted)

However, my Concurring and Dissenting Opinion in Pen Development should not be used as basis to conclude that the constructive notice rule applies only in cases involving conflicting claims of ownership over registered land.

For clarity, I stress that the constructive notice rule is a statutory feature of the Torrens system which attaches to all lands registered under PD 1529 and its predecessor law. Necessarily, the constructive notice rule still applies in cases involving possession of registered land, albeit applied in consonance with the doctrine of indefeasibility or incontrovertibility of title in cases where the land in question is covered by overlapping titles, as in Pen Development.

The constructive notice rule applies to cases of usurpation and encroachment of registered lands.

As Associate Justice Amy C. Lazaro-Javier observes, this case involves Hillview's encroachment upon land covered by Torrens titles issued in the name of PRDC (now, Boracay Enclave Corporation).16

Here, the Court is called upon to resolve the issue of good faith in the context of encroachment of registered land. Verily, the Court's rulings in J.M. Tuason & Co., Inc. v. Macalindong17 (1962 J.M. Tuason case) squarely apply in this case.

J.M. Tuason & Co., Inc. (J.M. Tuason) filed a complaint to oust Teodosio Macalindong (Macalindong) from a portion of its registered property in Sta. Mesa Heights Subdivision, Quezon City. Macalindong vigorously opposed the complaint, claiming that he had purchased the disputed portion, and that he, together with his vendor and the latter's predecessors-in-interest "prior to 1955 and since time immemorial x x x have been in open, adverse, public, continuous and actual possession of the [disputed portion] in the concept of owner and, by reason of such possession, he had made improvement[s] thereon valued at P9,000.00."18

The Court of First Instance (CFI) granted the complaint. According to the CFI, Macalindong's claim of possession cannot defeat J.M. Tuason's title, considering that the disputed portion had been registered in the latter's name since 1914. Accordingly, the CFI ordered Macalindong to vacate the disputed portion, remove his improvements thereon, and pay J.M. Tuason monthly rental from the date of usurpation until possession in the latter's favor is restored.

Macalindong sought recourse before the Court where he argued, among others, that the CFI erred when it failed to consider him a possessor in good faith who was entitled to retention until he was reimbursed for the full value of his improvements. Addressing Macalindong's assertions, the Court held:

Appellant claims that he should have been declared a builder in good faith, that he should not have been ordered to pay rentals, and that the complaint should have been dismissed. Again this question is being raised for the first time on appeal. It was not alleged as a defense or counter-claim and the trial court did not make any finding on this factual issue. From the documents submitted, however, it appears that appellant was not a builder in good faith. From the initial certificate of title of appellee's predecessors-in-interest issued on July 8, 1914, there is a presumptive knowledge by appellant of appellee's Torrens It]itle (which is a notice to the whole world) over the subject premises and consequently appellant [cannot], in good conscience, say now that he believed his vendor (Flores), his vendor's vendor (Teotico) and the latter's seller (De Torres) had rights of ownership over said lot. x x x19 (Emphasis and underscoring supplied)

J.M. Tuason filed a subsequent case involving the usurpation of another portion of the same registered lot, this time against Estrella Vda. de Lumanlan (Lumanlan), who possessed and built improvements on an 800-square meter portion of J.M. Tuason's registered property. The case eventually reached the Court and was docketed as J.M. Tuason & Co., Inc. v. Estrella Vda. de Lumanlan20 (1968 J.M. Tuason case). There, the Court similarly rejected Lumanlan's assertion that she should be deemed a builder in good faith, thus:

As to Lumanlan's allegation in her counterclaim that she should be deemed a builder in good faith, a similar contention has been rejected in [the 1962 J.M. Tuason case] where We ruled that there being a presumptive knowledge of the Torrens titles issued to [J.M. Tuason] and its predecessors in interest since 1914, the buyer from Deudors (or from their transferees) cannot, in good conscience, say now that she believed her vendor had rights of ownership over the lot purchased. x x x21

In sum, the 1962 and 1968 JM Tuason cases instruct that one who builds upon property covered by a Torrens title and/or possesses the same is charged with the presumptive knowledge of said title's its existence. Thus, in cases involving the encroachment of registered property, the builder cannot be considered in law to be one in good faith since he is deemed to have presumptive knowledge of the registered owner's Torrens title, which reflects the metes and bounds of the latter's property.

It is crystal clear that under PD 1529, the presumption of good faith that is accorded to possessors and/or builders under the Civil Code does not apply in cases of encroachment of registered property, because what is applicable is the constructive notice rule.

In this connection, I find that the 1962 and 1968 J.M. Tuason cases correctly applied the constructive notice rule, considering that the parties who claimed to be possessors in good faith in these cases did not hold Torrens titles over the lots subject of their claims. To stress, the 1962 and 1968 J.M. Tuason cases did not involve overlapping Torrens titles, but claims of ownership concerning lots which fell entirely within the Torrens titles of J.M. Tuason.

Consistent with my position in Pen Development, I stress that the only way by which Hillview could be considered in law as a builder in good faith is if it had shown that the encroachment falls within the boundaries of its own subsisting Torrens titles, and that such portion overlaps with a portion of land covered by the Torrens titles belonging to PRDC. In such case, Hillview could be deemed to have built on the overlapping portion in good faith as it would have the right to rely on the indefeasibility or incontrovertibility of its Torrens titles until they are declared null and void.22

Here, PRDC presented Engineer Madlangbayan's Relocation Plan23 to show that the portion encroached upon fell within the boundaries of its own registered lots as described in its Torrens titles:

Hence, it became incumbent upon Hillview to present similar evidence to show that the encroached portion falls within the bounds of its registered lots, spanning 5,100 square meters.24 Since Hillview failed to do so, the Court is left without any basis to conclude that Hillview built within the bounds of its own registered lots in good faith.

Contrary to Hillview's assertions, its reliance on the erroneous survey plans prepared by Engineer Lopez does not support its claim of good faith. As observed by Senior Associate Justice Estela M. Perlas-Bernabe, the attendant circumstances show that Hillview had knowledge of the erroneous boundary line previously used by its predecessors, the Tirols. Nonetheless, Hillview proceeded with the construction of Alargo Residences despite the apparent encroachment upon PRDC's registered lots. Also notable is the ponencia's observation that Hillview's own witness, Althea Acevedo of the Department of Environment and Natural Resources admitted in her testimony that "the reference monument [in this case] was transferred [by] 2 to 3 meters."25

Conversely, PRDC is charged with actual knowledge of the boundaries of its registered lots. Nevetiheless, it must be stressed that PRDC stands as the owner of the lots encroached upon. Accordingly, the protection afforded by the Torrens system in this case extends to PRDC.

In this context, a distinction must be made between PRDC's knowledge of its own land boundaries on the one hand, and the fact of encroachment on the other.

As astutely observed by Associate Justice Rodil V. Zalameda, the registered owner cannot be deemed in bad faith when there are no circumstances indicating that such owner had knowledge of the fact of encroachment and, in effect, permitted it. Once land is duly registered under the Torrens system, "the owner may rest secure, without the necessity of waiting in the portals of the court, or, sitting in the mirador de su casa to avoid the possibility of losing his land."26 Here, the registered owner's lack of knowledge of the fact of encroachment is not taken against him, as he is indeed protected by the Torrens system. However, the registered owner is deemed in bad faith when there are circumstances indicating that he had become aware of the encroachment and had chosen not to act on it. In such cases, the owner's failure to act gives rise to laches or estoppel, and bars the registered owner from asserting good faith. This is pursuant to the express provision of Article 453 of the Civil Code, which provides 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.

As likewise observed by Associate Justice Rodil V. Zalameda, there appears to be no indication that PRDC had knowledge of Hillview's encroachment before 2007, considering that its main office was located in Quezon City. By the time PRDC discovered the encroachment in 2007, Alargo Residences had already been constructed. Hence, PRDC was left with no other recourse but to file the Complaint since Hillview refused to heed its demand to vacate.

Hillview attempts to escape liability by insisting that it relied in good faith on the erroneous survey plans submitted by Engineer Lopez, none of which showed any encroachment upon PRDC's property. Hillview's argument appears to find support in Co Tao v. Chico27 (Co Tao), a 1949 case.

It is now claimed by petitioner that the respondent's house took a portion of petitioner's land. The Court of Appeals, after examining the evidence, found that respondent's house occupies 6.97 square meters of petitioner's lot, but that respondent acted in good faith. Accordingly, the Court of Appeals declared "that the plaintiff (petitioner) has the right to elect to purchase that portion of the defendant's (respondent's) house which protrudes into the plaintiff’s property, or to sell to the defendant the land upon which the said portion of the defendant's house is built." And the case was remanded to the Court of First Instance "with direction to require the plaintiff to make the election as herein provided, within the time that the Court shall fix, and thereafter to reset the case for the admission of the evidence on the value of the improvement, in case the plaintiff elects to buy the same, or the value of the land, in case he elects to sell it, and to render decision as the result of the new trial shall warrant." From this decision petitioner appealed by certiorari to this Court.

All the questions raised by the petitioner are unmeritorious. He alleges, for instance, that respondent could not have acted in good faith in building a portion of his house beyond the limits of his land, because he ought to know the metes and bounds of his property as stated in his certificate of title. But, as rightly stated by the Court of Appeals[,] "[i]t is but stating the obvious to say that outside of the individuals versed in the science of surveying, and this is already going far, no one can determine the precise extent or location of his property by merely examining his paper title. The fact is even surveyors cannot with exactitude do so. The disagreement among the three surveyors in the case at hand who have made a resurvey of the ground with the aid of scientific devices and of their experience and knowledge of surveying, is a graphic and concrete illustration of this truth."28 (Emphasis and underscoring supplied)

I believe that it is high time for the Court en banc to explicitly abandon its ruling in Co Tao lest confusion ensue.

Co Tao was decided in 1949, over a decade prior to the promulgation of the 1962 J.M. Tuason case. As earlier stated, the Court's pronouncement in the latter case was reiterated in the 1968 J.M. Tuason case. Accordingly, the 1962 and 1968 J.M. Tuason cases, which adhere to the presumptive/constructive knowledge principle/rule, must take precedence.

The subsequent case of Tecnogas Philippines Manufacturing Corp. v. CA29 (Tecnogas) which relied on the Court's ruling in Co Tao should be deemed an aberration. Nonetheless, the ruling in Tecnogas was promulgated in division, while the 1962 and 1968 J.M. Tuason cases were both en banc. Thus, the principles set forth in the latter cases, which have been discussed above, may not be authoritatively overturned or abandoned except through another case similarly decided en banc.30

Moreover, there is no dispute that the precise extent or location of one's registered property cannot be determined by merely examining the technical description appearing on the face of one's Torrens title. As Justice Lazaro-Javier points out, "the actual boundaries as plotted on the ground will only be apparent after examining the registry and accomplishing several additional processes x x x."31 However, it must be emphasized that the examination of the registry and the ascertainment of the actual boundaries of one's land area are part and parcel of the due diligence that PD 1529 exacts upon those dealing with land registered under the Torrens system.

To note, confirmation of title under PD 1529 is a tedious process. It requires hearing, publication, posting, and personal notice to adjoining owners, among others.32 These stringent requirements are necessitated not only by the nature of land registration cases as proceedings in rem, but also by the strength of the Torrens title resulting therefrom.

The protection afforded by PD 1529 to registered land will be diluted if the exercise of due diligence on the part of those dealing with such land is deemed "unreasonable", considering that the difficulty in ascertaining the precise metes and bounds of registered property that might have existed in 1949 and 1970, when the improvements in question in Co Tao and Tecnogas were built, no longer obtains at present due to significant advancements in the field of surveying and the relative inexpensiveness of hiring a geodetic engineer.

To my mind, the fact that licensed geodetic engineers sometimes make mistakes when determining the exact physical location of titled property does not warrant a wholesale abdication of the rule on constructive notice. Geodesy, by nature, is a precise science. The occasional errors or mistakes made by licensed geodetic engineers are the exception rather than the general rule. The strength of the Torrens system lies in the full faith and credit accorded to the Torrens titles and their contents. The integrity of the Torrens system cannot be made subject to the claims of laymen and experts alike, if such claims are not consistent with what is reflected on the Torrens titles.

Finally, it may not be amiss to state that both Co Tao and Tecnogas involved registered land. In Co Tao, respondent Joaquin Chan Chico built improvements beyond the boundaries of his own Torrens title.33 In Tecnogas, petitioner Tecnogas Philippines Manufacturing Corporation purchased registered land with improvements that encroached on the adjoining land registered in the name of respondent Eduardo Uy. Nevertheless, both cases applied the general presumption of good faith under the Civil Code in determining the rights and obligations of the encroaching party. This reliance on the Civil Code is what I submit to be incorrect given that the properties involved in these cases were registered properties.

As stated at the outset, the general presumption of good faith under the Civil Code applies in an encroachment scenario when both properties involved are unregistered. When either or both of the properties involved are registered under the Torrens system, it is the constructive notice rule espoused in PD 1529 that applies. I respectfully submit that Co Tao and Tecnogas cannot serve as basis to carve out, as an exception to the constructive notice rule, situations where one's structure encroaches upon property registered in the name of another, for no such exception exists in law.

In every case involving the encroachment on registered land, it is the stability of the Torrens system that must first and foremost be upheld, and secondly, if not equally important, the primacy of PD 1529, being the special law applicable to registered land, must be accorded.

To accord good faith in favor of Hillview based on an erroneous relocation survey prepared by its geodetic engineer who is the supposed expert in the precise science of geodesy creates a dangerous precedent. It will make it almost impossible to rebut such "proof" of good faith. The correctness of a relocation survey prepared by a geodetic engineer will be rendered immaterial, as good faith will be automatically assured to the party who relies on it.

Such a precedent will dangerously confer on the builder a preferred status under Article 448 to the detriment of the registered owner, and open the floodgates to wealthy land grabbers who will be permitted to unscrupulously oust innocent landowners from their registered property through encroachment, by building improvements of significant value which the latter would not be able to acquire. I fail to see how adherence to the principles of the Torrens system would lead to the impairment of the real estate industry. On the contrary, I believe that such stance will enhance the real estate industry as it operates, as it always has, as a cloak of protection to valid titleholders.

The landowner has two mutually exclusive options under this Article: (1) to appropriate as his own the works or the improvements, or (2) to oblige the one who built to pay the price of the land. If the improvements are of significant value beyond the capacity of the registered landowner, the latter is left with no practical alternative but to choose the second option. This means that the registered owner is forced to lose the encroached portion of his registered land. Worse, if the wealthy land grabber unscrupulously builds on the entire registered land, the registered owner risks losing his entire registered land. In this situation, the Torrens system would have failed to protect the registered owner because one of its safeguards, the constructive notice rule, would have been disregarded. This should not be allowed. Such ruling puts owners of unregistered land, who are not bound by the irrefutable presumption of constructive knowledge on the metes and bounds of their property, in a position better than those who have placed their real property under the coverage of the Torrens system and are bound by such rule — this undermines the very purpose of the Torrens system and throws away the protection it was designed to afford.

Proceeding from the foregoing, I vote to reverse the Decision and Resolution respectively dated November 28, 2014 and January 15, 2016 rendered by the Court of Appeals in CA-G.R. CV No. 04415, insofar as they hold that respondent Hillview Marketing Corporation is a builder in good faith.

In view of the Court's finding that respondent is a builder in bad faith, the present case should be remanded to the Regional Trial Court for proper determination of the parties' respective rights and fulfillment of their respective obligations in accordance with Articles 449, 450 and 451 of the Civil Code.