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.

Both the Regional Trial Court1 and the Court of Appeals2 found that Hillview Marketing Corporation (Hillview) encroached on 2,783 sq. m.3 of Princess Rachel Development Corporation's (Princess Rachel) property. However, in determining the rights and duties of the parties, the trial and appellate courts contrarily decided on whether Hillview, in doing so, acted in good or bad faith.

On the basis of Engineer Reynaldo Lopez's4 (Engineer Lopez) testimony, the Regional Trial Court declared Hillview a builder in bad faith.5 Engineer Lopez testified that when he "discovered an error in the concrete monuments mounted on the boundary limits"6 of Hillview's property, he relayed the matter of intrusion to one of Hillview's owners, Martin Dornau (Martin).7 Despite the notice, Martin nevertheless directed Engineer Lopez to continue with the survey assuring that he will stand accountable for the error mentioned.8

Accordingly, the Regional Trial Court ordered Hillview to vacate the encroached portion and to remove the improvements made on it at its own cost.9 The dispositive portion of the trial court's Decision reads:

WHEREFORE, in view of the foregoing premises, this Court hereby rules and so holds that the defendants have encroached into the properties of the plaintiff consisting of 383 square meters in Lot 1-B-7-B-1 covered by TCT No. T-24349 and 2,400 square meters in Lot 1-B-7-A-1 covered by TCT No. T-24348 or a total of 2,783 square meters in the name of plaintiff Princess Rachel Development Corporation and now in the name of Boracay Enclave Corporation. This Court also finds the defendants acting in bad faith in introducing the improvements on the said encroached areas of plaintiff's properties. By reason of the encroachment by defendant of plaintiff's properties and having refused to vacate said area despite demand, the plaintiff was forced to file this case and is entitled to recover litigation expenses in the amount of P143,494.20 (Legal Fees form [sic] dated January 25, 2008) plus P3,402,669.00 as additional filing fees or a total of P3,546,163.20 and attorney's fee of P200,000.00.

For this reason, the defendants, jointly and severally, are hereby ordered to vacate the said premises and demolish the buildings and improvements made in the encroached premises at its own cost and to return to plaintiff the physical possession of the encroached premises and to pay plaintiff in the amount of P3,546,163.20 for litigation/filing fees and P200,000.00 as attorney's fees.

On appeal, however, the testimony of Engineer Lopez was found innately weak.11 Hinging on his proficiency, the Court of Appeals pointed out that Engineer Lopez should have ensured that the survey and subdivision plans he made were "true and accurate."12 Hillview, as a client, cannot be faulted in relying on these survey reports.13

The Court of Appeals added that there was no indication that Martin conveyed the information he got from Engineer Lopez to Hillview.14 It also emphasized Princess Rachel's belated filing of the complaint in 2007 despite the construction of the A largo Residences as early as 2004.15

Accordingly, the Court of Appeals declared that Hillview is a builder in good faith16 and ruled that Articles 448,17 546,18 and 54819 of the Civil Code apply in its favor.20 The dispositive portion of the appellate court's Decision provides:

WHEREFORE, premises considered, the instant appeal is PARTIALLY GRANTED and the assailed Decision dated April 30, 2012 is AFFIRMED with MODIFICATION. The award of P3,402,669.00 as additional filing fees in favor of plaintiffs-appellees is DELETED. Only defendant-appellant Hillview Marketing Corporation is liable. The case is REMANDED to the Regional Trial Court, Branch 6, Kalibo, Aklan for further proceedings consistent with the proper application of Articles 448, 546 and 548 of the Civil Code, as follows:

2. After said amounts shall have been determined by competent evidence, the Regional Trial Court shall render the judgment, as follows:

In that event, the parties shall be given a period of fifteen (15) days from such notice of rejection within which to agree upon the terms of the lease, and give the Court formal written notice of such agreement and its provisos. If no agreement is reached by the parties, the trial court, within fifteen (15) days from and after the termination of the said period fixed for negotiation, shall then fix the terms of the lease, payable within the first five (5) days of each calendar month. The period for the forced lease shall not be more than two (2) years, counted from the finality of the judgment, considering the long period of time since petitioners have occupied the subject area. The rental thus fixed shall be increased by ten percent (10%) for the second year of the forced lease.

Defendants-appellants shall not make any further constructions or improvements on the lot. Upon expiration of the two (2)-year period, or upon default by defendants-appellants in the payment of rentals for two (2) consecutive months, the plaintiffs-appellees shall be entitled to terminate the forced lease, to recover their land, and to have the improvements removed by defendants-appellants at the latter's expense. The rentals herein provided shall be tendered by defendants-appellants to the Court for payment to the plaintiffs-appellees, and such tender shall constitute evidence of whether or not compliance was made within the period fixed by the Court.

Contrary to the Court of Appeals' pronouncement, the ponencia declared that Hillview is a builder in bad faith.22

Hinging on Hillview's presumptive knowledge of Princess Rachel's Torren's title over the encroached portion, the ponencia underscored that Hillview is similarly charged with presumptive knowledge of the property's actual boundaries as reflected in the owner's title:

[I]n cases involving the encroachment of registered property, the builder cannot be considered in law to be in good faith since he is deemed to have presumptive knowledge of the registered owner's Torrens title, which, in turn, reflects the metes and bounds of [Princess Rachel's] property.

In the instant case, when Hillview built upon [Princess Rachel's] registered property, [it] should be deemed to have acted in bad faith for [it] is presumed to have knowledge of the metes and bounds of [Princess Rachel's] property as described in its title.

For Hillview to be regarded as a builder or possessor in good faith, it must prove that it built within the property as described in its own Torrens title or that the encroached portion fell within its own boundaries, or that the encroached portion overlapped with that of [Princess Rachel's], for then it would have rightfully relied on the indefeasibility of its own title.

However, as established, the improvements were built on a portion belonging to [Princess Rachel] and that there was no error in the technical descriptions of either [Princess Rachel] or Hillview's properties. On the contrary, Hillview used a wrong boundary line that does not conform with Hillview's title. Thus, there is no basis for the Court to deem Hillview a builder in good faith.23 (Emphasis supplied)

Moreover, as a registered owner, the ponencia emphasized that Hillview must have actual knowledge of its property's extent.24 For this reason, it "is deemed to have known that it constructed improvements beyond the boundaries of its own lots, and consequently encroached upon [the] lots belonging to the adjacent owner, [Princess Rachel]."25 The ponencia disposed the case in this wise:

The November 28, 2014 Decision and January 15, 2016 Resolution or the Court of Appeals in CA-G.R. C.V. No. 04415 are REVERSED insofar as it found Hillview Marketing Corporation to be a builder in good faith and insofar as it applied the provisions of Article 448, 546, and 548 of the Civil Code in determining the rights and obligations of the parties.

Accordingly, the April 30, 2012 Decision of the Regional Trial Court, Kalibo, Aklan, Branch 6 in Civil Case No. 8237 is REINSTATED insofar as it:

The case is REMANDED to the Regional Trial Court for further proceedings for the proper application of Article 449, 450, and 451 of the Civil Code. The trial court shall grant petitioners a reasonable period within which to exercise its option either to:

In any case, Hillview Marketing Corporation is further ORDERED to pay nominal damages in the amount of P100,000.00.

The decision and resolution of the Court of Appeals are AFFIRMED insofar as it absolved individual respondents Stefanie Dornau and Roberto Dornau of solidary liability with Hillview Marketing Corporation, and deleted the award of additional filing fees in the amount of P3,546,163.20.

I concur with the ponencia that Hillview is a builder in bad faith. In addition to the points raised, I wish to emphasize that the concomitant duty of a registered owner to be charged with notice of everything about his or her property (including its actual metes and bounds on site) is inherent in the nature of the right. Therefore, as an owner of a registered land under the Torrens System, Hillview ought to know the exact parameters of its property.

Besides, it is highly improbable that Hillview could not have known such encroachment.1aшphi1 For one, a higher degree of diligence is expected of it since it is engaged in large property development projects. Also, there are relevant circumstances indicating that despite prior knowledge of the intrusion, Hillview heedlessly persisted with the construction of the project being complained of.

The main purpose of registration under the Torrens System is "to make registered titles indefeasible."27 Under the Torrens System, when an application for the registration of the land title is presented before the Court of Land Registration, "the theory of the law is that all occupants, adjoining owners, adverse claimants, and other interested persons, are notified of the proceedings, and have a right to appear in opposition to such application."28 Otherwise stated, "the proceeding is against the whole world."29

Presidential Decree No. 1529, otherwise known as the Property Registration Decree, aims to reinforce the Torrens System.30 The objective of integrating the Torrens System into our jurisdiction "is to guarantee the integrity of land titles and to protect their indefeasibility once the claim of ownership is established and recognized."31 This is intended to prevent "any possible conflicts of title that may arise by giving the public the right to rely upon the face of the Torrens title and dispense with the need of inquiring further as to the ownership of the property."32 Corollary, Section 2 of Presidential Decree No. 1529 explicitly provides that land registration is an in rem proceeding:

SECTION 2. Nature of Registration Proceedings; Jurisdiction of Courts. — Judicial proceedings for the registration of lands throughout the Philippines shall be in rem and shall be based on the generally accepted principles underlying the Torrens system. (Emphasis supplied)

As an in rem proceeding, "[j]urisdiction is acquired by virtue of the power of the court over the res."33 Furthermore, "[s]uch a proceeding in rem, dealing with a tangible res, may be instituted and carried to judgment without personal service upon the claimants within the state or notice by mail to those outside of it."34

In other words, it would be needless "to give personal notice to the owners or claimants of the land sought to be registered, to vest the court with authority over the res."35 As provided for under Section 2336 of Presidential Decree No. 1529, upon the filing of an application for land registration, the date of initial hearing will then be set through an order where the public will be given notice through publication, mailing, and posting.

It is the publication of the notice of application—which informs everyone that a petition has been filed and whomsoever may oppose or contest—"that brings in the whole world as a party and vests the court with jurisdiction to hear the case."37 Thus, if no person files any opposition within the time prescribed to do so, Section 26 of Presidential Decree No. 1529 provides that an order of default in favor of the applicant will follow:

SECTION 26. Order of Default; Effect. — If no person appears and answers within the time allowed, the court shall, upon motion of the applicant, no reason to the contrary appearing, order a default to be recorded and require the applicant to present evidence. By the description in the notice "To all Whom It May Concern", all the world are made parties defendant and shall be concluded by the default order.

After considering the evidence presented and the court finds that the applicant has sufficient title appropriate for registration, it will render a judgment confirming title38 which, in turn, will attain finality after 30 days from receipt of the notice of judgment.39 Thereafter, the court releases an order to cause the issuance of the decree of registration and certificate of title in favor of the applicant.40

The court's judgment confirming the applicant's title and the subsequent order of registration under the latter's name, "when final, [constitutes] res judicata against the whole world."41 Accordingly, the resultant decree of registration42 shall be conclusive against all persons:

SECTION 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 [or her] 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." (Emphasis supplied)

Consistent with the nature of land registration as an in rem proceeding, once a title is registered, "[a]11 persons must take notice [and] [n]o one can plead ignorance of the registration."43 On the part of the owner, he or she "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 [or her] land."44

Considering that "[a]ll persons dealing with the land so recorded, or any portion of it, must be charged with notice of whatever it contains[,]"45 it is only incumbent on the part of the property owner to be charged with notice of every fact appearing on his or her title. This encompasses not only the land's technical description (as reflected in the owner's decree of registration and certificate of title), but also the property's actual boundaries on site. Simply put, the duty to know everything about one's property is inherent in the nature of the right as an owner of a registered land.

In Spouses Padilla, Jr. v. Malicsi, et al.,46 this Court defined a builder in good faith: A builder in good faith is a builder who was not aware of a defect or flaw in his or her title when he or she introduced improvements on a lot that turns out to be owned by another.

Philippine National Bank v. De Jesus explains that the essence of good faith is an honest belief of the strength and validity of one's right while being ignorant of another's superior claim at the same time:

Good faith, here understood, 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[.]47 (Citations omitted) (Emphasis supplied)

Applying the foregoing to the case at hand, Hillview's claim that it acted in good faith48 fails to persuade. It is undisputed that both parties are registered property owners.49 However, as between Princess Rachel and Hillview, the latter was the active participant in the matter of encroachment. As it is inherent in Hillview's right as a registered owner to know the precise boundaries of its property on site, it cannot be in good faith when it built the constructions on Princess Rachel's lot.

Furthermore, Hillview's own insistence that "[t]here was no manifestation of [Princess Rachel's] claim of possession over the area in controversy [as] there was no noticeable mark or boundary which delineated the adjoining properties"50 should have put it in inquiry all the more. Also, considering that Hillview is capable of engaging in huge property development projects such as this, it should have exercised a higher degree of diligence in verifying the definite boundaries of the land that it sought to improve. Surprisingly, however, it proceeded heedlessly with construction without regard to the properties of adjoining owners that it encroached on a significant extent of 2,783 square meters. Indubitably, this falls short of a status of a builder in good faith.

Finally, this Court cannot simply disregard the statements of Engineer Lopez that he informed Martin about the encroachment51 which, according to Princess Rachel, was unrefuted by Hillview.52 While Hillview may possibly be in good faith when it relied on the misplaced concrete monuments erected on its land, such alleged good faith ceased when it was already forewarned about the intrusion. The fact that Hillview ensued with the construction, despite prior notice, buttress bad faith.

Impelled by a forthcoming sale of its property to Boracay Enclave Corporation,53 Princess Rachel directed Engineer Lester Madlangbayan to conduct a relocation survey in August 2007.54 It was only from that moment when Princess Rachel came to know about the encroachment.55

On September 20, 2007, Princess Rachel sent Hillview a demand letter directing it "to vacate the subject premises, but the latter ignored it."56 On September 27, 2007, it sent another letter but the same was also unheeded.57 Ultimately, on January 25, 2008, Princess Rachel was constrained to file a complaint for accion publiciana and damages58 before the Regional Trial Court of Kalibo, Aklan.59

A landowner is in bad faith "when the act of building, planting, or sowing was done with his [or her] knowledge and without opposition on his [or her] part."60 As provided for under Article 453 of the Civil Code:

ARTICLE 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. (Emphasis supplied)

Undeniably, Princess Rachel is a landowner in good faith. As aptly underscored in the ponencia, it "lost no time in asserting its right and protecting its interest[.]"61 To emphasize, when Princess Rachel discovered that Hillview unlawfully held a portion of its property, it promptly sent demand letters directing Hillview to vacate the encroached lot. However, despite the advice given, Hillview seemingly "turned a blind eye and deaf ear"62 and still commenced with making improvements in the area owned by Princess Rachel.

Contrary to the Court of Appeals' ruling,63 Princess Rachel never slept on its right.1âшphi1 In fact, it was committed in asserting its claim over its property that all the actions against Hillview ensued within just five (5) to six (6) months from the time it discovered the encroachment. As a holder of a Torrens title, Princess Rachel has the right "to eject any person illegally occupying [its] property."64 Besides, "[t]he right to possess and occupy the land is an attribute and a logical consequence of [its] ownership."65

Finally, on the premise that Princess Rachel is a landowner in good faith and Hillview is a builder in bad faith, we apply the following Civil Code provisions in determining the rights and duties of the parties:

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.

ARTICLE 451. In the cases of the two preceding articles, the landowner is entitled to damages from the builder, planter or sower.

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

ACCORDINGLY, I concur that Hillview is a builder in bad faith and hence, the pertinent provisions of Articles 449, 450, 451 and 452 of the Civil Code shall be applied in determining the rights and obligations of the parties.