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.

In Legarda v. Saleeby1 and the twin cases of JM Tuason & Co., Inc. v. Macalindong2 and JM Tuason & Co., Inc. v. Lumanlan,3 the Court essentially held that a person who occupies a titled property is presumed to have knowledge of this title, including the metes and bounds of the property. These cases do not apply here.

In the 1915 En Banc case of Legarda v. Saleeby, plaintiffs and defendant owned adjoining lots in Ermita, Manila. For years, a stone wall had stood between these lots. The parties' respective predecessors-in-interest filed separate petitions for registration of their individual properties. The trial court granted plaintiffs' petition on October 25, 1906, and defendant's petition, on March 25, 1912. On even dates, the court also issued their individual original certificates of title. Both their titles, however, included the portion where the dividing wall stood. The issue --- who owned this portion? The Court held:

The question, who is the owner of land registered in the name of two different persons, has been presented to the courts in other jurisdictions. In some jurisdictions, where the "torrens" system has been adopted, the difficulty has been settled by express statutory provision. In others it has been settled by the courts. Hogg, in his excellent discussion of the "Australian Torrens System," at page 823, says: "The general rule is that in the case of two certificates of title, purporting to include the same land, the earlier in date prevails, whether the land comprised in the latter certificate be wholly, or only in part, comprised in the earlier certificate. Hogg adds however that, "if it can be clearly ascertained by the ordinary rules of construction relating to written documents, that the inclusion of the land in the certificate of title of prior date is a mistake, the mistake may be rectified by holding the latter of the two certificates of title to be conclusive." Niblack, in discussing the general question, said: "Where two certificates purport to include the same land the earlier in date prevails . . . In successive registrations, where more than one certificate is issued in respect of a particular estate or interest in land, the person claiming under the prior certificate is entitled to the estate or interest; and that person is deemed to hold under the prior certificate who is the holder of, or whose claim is derived directly or indirectly from the person who was the holder of the earliest certificate issued in respect thereof. While the acts in this country do not expressly cover the case of the issue of two certificates for the same land, they provide that a registered owner shall hold the title, and the effect of this undoubtedly is that where two certificates purport to include the same registered land, the holder of the earlier one continues to hold the title". (emphases added, citations omitted)

These facts significantly differ from the present petition. Legarda involved the same portion covered by both titles. Consequently, the Court held that real property sold to two different persons belonged to the person who first inscribed it in the registry.

Here, it does not appear that the title certificates of Princess Rachel and Boracay Enclave, on the one hand, and Hillview, on the other, overlap substantially or otherwise. What exists here is Hillview's encroachment on a portion of the lot belonging to Princess Rachel/Boracay Enclave.

I submit that Legarda would only apply when there are at least two title certificates purporting to include the same land or portion. To resolve the parties' conflicting claims of ownership, the Court ruled that the second registrant is charged with constructive notice of the metes and bounds of the first registrant's property pursuant to Section 52 of Presidential Decree (PD) 1529, viz:

Section 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.

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. (emphases added)

To emphasize, the rule on constructive notice is expressed in decisional law only as to the existence of instruments properly executed and placed on the records of the title and all that is shown or found thereon. If the overlap, therefore, is apparent on the face of at least two certificates of title, the second registrant is presumed to have acted in bad faith should he or she subsequently build on the same area already covered by the title of the first registrant. As shown, this doctrine finds no application to the present case.

The twin JM Tuason cases, decided by the Court En Banc in 1962 and 1968, do not apply here either. There, respondents Macalindong and Lumanlan were claiming ownership over two (2) smaller lots forming part of the bigger parcel registered in the name of JM Tuason. They traced their claim of ownership to one Pedro Deudor who allegedly acquired the lots from JM Tuason through a compromise agreement. Ultimately, the Court ruled in favor of JM Tuason when it discovered that the compromise agreement did not grant to Deudor ownership of the two lots in question, but a mere preferential right to purchase the same, thus:

Careful analysis of this paragraph of the compromise agreement will show that while the same created "a sort of contractual relation" between the J.M. Tuason & Co., Inc., and the Deudor vendees (as ruled by this Court in Evangelista vs. Dendor, ante), the same in no way obligated Tuason & Co. to sell to those buyers the lots occupied by them at the price stipulated with the Deudors, but at "the current prices and terms specified by the OWNERS (Tuason) in their sales of lots in their subdivision known as 'Sta. Mesa Heights Subdivision'." This is what is expressly provided. Further, paragraph plainly imports that these buyers of the Deudors must "recognize the title of the OWNERS (Tuason) over the property purportedly bought by them" from the Deudors, and "sign, whenever possible, new contracts of purchase for said property"; and, if and when they do so, "the sums paid by them to the Deudors ... shall be credited to the buyers." All that Tuason & Co. agreed to, therefore, was to grant the Deudor buyers preferential right to purchase "at current prices and terms" the lots occupied by them, upon their recognizing the title of Tuason & Co., Inc., and signing new contracts therefor; and to credit them for the amounts they had paid to the Deudors. (emphases added)

On whether respondents Macalindong and Lumanlang acted in bad faith in taking possession of subject lots, the Court held:

xxx There being a presumptive knowledge of the Torrens title issued to Tuason & Co., and its predecessors-in-interest since 1914, the buyer from the Deudors cannot in good conscience claim that she believed her vendor had rights of ownership over the lot purchased. She is bound conclusively by Tuason's Torrens title. Respondent is, therefore, not a builder in good faith.

Indubitably, the parties in the JM Tuason cases were both claiming ownership over the same subject lots.1âшphi1 There was no issue on the identity of these lots. Macalindong and Lumanlan never denied that JM Tuason had registered title over them but insisted that their right thereto was superior to that of JM Tuason.

The situations in Legarda and JM Tuason are not too different from each other. In both cases, the parties laid conflicting claims of ownership over the same lot or area. In stark contrast, the present petition does not present conflicting claims of ownership. It hinges solely on the merits of Hillview's defense of good faith vis-à-vis its encroachment on a portion of petitioners' property.

Considering such fundamental difference between Legarda and the JM Tuason cases, on the one hand, and the present case, on the other, the standard of constructive notice in the former cases for the purpose of upholding or rejecting one's claim of good faith cannot be applied here.

We should instead apply Co Tao v. Joaquin Chan Chico4 and Tecnogas Philippines Manufacturing Corporation v. Court of Appeals.5

In the 1949 En Banc case of Co Tao, Chico was the owner of a property described as Lot No. 7 and covered by Certificate of Title No. 24239. Co Tao owned the adjoining lot No. 6. The conflict arose when Chico asserted that the house constructed by Co Tao encroached on a portion of Chico's land. After due proceedings, the Court ultimately found it was actually Chico who encroached on Co Tao's property by 6.97 sqm.; not the other way around. The Court emphasized though that the fact alone that Co Tao's property was registered did not automatically mean that Chico was a builder in bad faith insofar as the encroachment was concerned. The Court aptly decreed:

xxx It 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. (emphasis and underscoring added)

Notably, Co Tao was cited in the 1997 case of Tecnogas, decided by the Third Division. To recall, Tecnogas was the registered owner of a lot in Barrio San Dionisio, Parañaque City, known as Lot 4531-A and covered by Transfer Certificate of Title No. 409316. It bought the property from Pariz Industries in 1970, together with all the buildings and improvements thereon. Meanwhile, Eduardo Uy was the registered owner of the adjoining parcels covered by Transfer Certificate of Title Nos. 279838 (Lot 4531-B) and 31390, respectively. Tecnogas later learned that portions of the structures it bought actually stood on a small portion of Uy's property. For this reason, Tecnogas offered to buy this portion, but Uy refused and sued Tecnogas instead.

The Court ruled that Tecnogas did not act in bad faith when it built on a portion of Uy's titled property. The Court even rejected the application of the JM Tuason cases in resolving Tecnogas, thus:

Respondent Court, citing the cases of J.M. Tuason & Co., Inc. vs. Vda. De Lumanlan and J. M. Tuason & Co., Inc. v. Macalindong, ruled that petitioner "cannot be considered in good faith" because as a land owner, it is "presumed to know the metes and bounds of his own property, specially if the same are reflected in a properly issued certificate of title. One who erroneously builds on the adjoining lot should be considered a builder in (b)ad (f)aith, there being presumptive knowledge of the Torrens title, the area, and the extent of the boundaries."

We disagree with respondent Court. The two cases it relied upon do not support its main pronouncement that a registered owner of land has presumptive knowledge of the metes and bounds of its own land, and is therefore in bad faith if he mistakenly builds on an adjoining land. Aside from the fact that those cases had factual moorings radically different from those obtaining here, there is nothing in those cases which would suggest, however remotely, that bad faith is imputable to a registered owner of land when a part of his building encroaches upon a neighbor's land, simply because he is supposedly presumed to know the boundaries of his land as described in his certificate of title. No such doctrinal statement could have been made in those cases because such issue was not before the Supreme Court. Quite the contrary, we have rejected such a theory in Co Tao vs. Chico, where we held that unless one is versed in the science of surveying, "no one can determine the precise extent or location of his property by merely examining his paper title."

The Court declined to apply the supposed irrebuttable presumption of bad faith in JM Tuason. Instead, the Court applied the disputable presumption of good faith considering the attendant circumstances, viz:

There is no question that when petitioner purchased the land from Pariz Industries, the buildings and other structures were already in existence. The record is not clear as to who actually built those structures, but it may well be assumed that petitioner's predecessor-in-interest, Pariz Industries, did so. Article 527 of the Civil Code presumes good faith, and since no proof exists to show that the encroachment over a narrow, needle-shaped portion of private respondent's land was done in bad faith by the builder of the encroaching structures, the latter should be presumed to have built them in good faith. It is presumed that possession continues to be enjoyed in the same character in which it was acquired, until the contrary is proved. Good faith consists in the belief of the builder that the land he is building on is his, and his ignorance of any defect or flaw in his title. Hence, such good faith, by law, passed on to Pariz's successor, petitioner in this case. Further, "(w)here one derives title to property from another, the act, declaration, or omission of the latter, while holding the title, in relation to the property, is evidence against the former." And possession acquired in good faith does not lose this character except in case and from the moment facts exist which show that the possessor is not unaware that he possesses the thing improperly or wrongfully. The good faith ceases from the moment defects in the title are made known to the possessor, by extraneous evidence or by suit for recovery of the property by the true owner.

Recall that the encroachment in the present case was caused by a very slight deviation of the erected wall (as fence) which was supposed to run in a straight line from point 9 to point 1 of petitioner's lot. It was an error which, in the context of the attendant facts, was consistent with good faith. xxx

Indeed, the law always presumes good faith. The one who alleges bad faith must prove it by clear and convincing evidence, viz:

Article 527. Good faith is always presumed, and upon him who alleges bad faith on the part of a possessor rests the burden of proof. (434)

In resolving the issue of good faith, the Court in Co Tao and Tecnogas considered several factors. For instance, the 6.97 sqm. encroachment over the titled property in Co Tao and the "very slight deviation" of a constructed wall in Tecnogas did not automatically render Chico and Tecnogas builders in bad faith. The Court may also consider the circumstances that led to the fact of encroachment, including the history of the encroaching party's claim of title. Thus, the Court deemed it proper to evaluate the peculiar circumstances by which Chico and Tecnogas acquired their respective properties.

Here, the courts below found that Hillview encroached on petitioners' property by 2,783 sqm. By itself, however, the size of the encroachment is not sufficient to support the conclusion that Hillview acted in bad faith. Compared to the entire expanse of petitioners' property, extending up to 30,000 sqm. altogether, the size of the encroached area may appear miniscule. Besides, in cases of encroachment, there should always be margins for error and possibilities of good faith. For who among us mortals, by our naked eye alone, can instantly and accurately ascertain that 2,783 sqm. when plotted on the ground is already the same size as the courtyard of the Supreme Court facing Padre Faura?

To emphasize, no one can determine the precise extent or location of his or her property by merely examining the four (4) comers of his or her paper title. Although a paper title may inform a person of the specific points bounding a property, how these points are plotted on actual land is beyond the expertise of a layperson. Even licensed geodetic engineers sometimes make mistakes on the exact physical location of a titled property. When honest mistakes are committed, the good faith of the builder serves as his or her own protection.

Suffice it to state that the metes and bounds of a piece of land do not jump out of the page to tell the reader where the piece of land is, how big it is, what shape it is and what its edges are. The actual boundaries as plotted, on the ground will only be apparent after examining the registry and accomplishing several additional processes that all require expertise and expense. It is therefore unreasonable to conclude that just because a property is registered, all persons dealing with them may already be charged with constructive notice of not only the technical metes and bounds but also how the same will appear when actually laid on the ground.

Co Tao did not overrule Legarda and does not conflict with JM Tuason. Similarly, Tecnogas, which was decided by a Division of the Court, did not as it could not have overturned JM Tuason. These cases govern different facts, hence, at no point can there be conflict between them. All told, I respectfully suggest that the following guidelines be considered in the application of these cases:

Verily, the cases of Co Tao and Tecnogas are applicable here. Any finding of bad faith on the part of Hillview, therefore, should not be based on any mere presumption but should be warranted by the factual circumstances obtaining in the present case. On this score, I agree that the factual circumstances here support a finding of bad faith against Hillview.

I therefore join the majority in granting the petition and remanding the same to the trial court for further proceedings on the proper application of Articles 449, 450 and 451 of the Civil Code.