In Development Bank of the Philippines v. Court of Appeals, the Supreme Court affirmed the right of a long-term occupant to own land acquired through acquisitive prescription, even when a Torrens title erroneously included that land. This decision protects individuals who have possessed land openly and continuously for many years, ensuring their rights are not unjustly nullified by subsequent land registration. The ruling emphasizes the importance of actual possession and ownership over formal land titles when discrepancies arise.

Land Dispute in Bohol: Prior Possession Prevails Over Later Registration?

The case revolves around a 19.4-hectare parcel of land in Bohol, originally owned by Ulpiano Mumar, who sold it to Carlos Cajes in 1950. Cajes openly occupied and cultivated the land, declaring it for tax purposes. Unbeknownst to Cajes, Jose Alvarez later obtained registration of a larger parcel that included Cajes’ land, eventually selling it to the spouses Beduya, who mortgaged it to the Development Bank of the Philippines (DBP). When the Beduyas defaulted, DBP foreclosed the mortgage, leading to a dispute with Cajes, who claimed ownership based on his long-term possession. The central legal question is whether Cajes’ established possession and ownership through acquisitive prescription outweigh DBP’s claim as an innocent purchaser based on the Torrens title.

DBP argued that the Torrens title held by its predecessor-in-interest, Jose Alvarez, extinguished any prior rights, citing the principle of indefeasibility of title. They relied on the case of Benin v. Tuason, which seemingly supported the idea that a decree of registration cuts off any prior prescriptive rights. However, the Supreme Court distinguished Benin, emphasizing that it involved vast tracts of land and numerous innocent purchasers, unlike the present case where Cajes’ possession was evident. The Court clarified that a decree of registration primarily cuts off unregistered liens or encumbrances, not established ownership rights acquired through acquisitive prescription.

The Court emphasized that registration does not create ownership; it merely confirms a title already vested. “The sole purpose of the Legislature in its creation was to bring the land titles of the Philippine Islands under one comprehensive and harmonious system, the cardinal features of which are indefeasibility of title and the intervention of the State as a prerequisite to the creation and transfer of titles and interest, with the resultant increase in the use of land as a business asset by reason of the greater certainty and security of title. It does not create a title nor vest one. It simply confirms a title already created and already vested, rendering it forever indefeasible,” as stated in City of Manila v. Lack. This principle underscores that a Torrens title cannot legitimize the inclusion of land already rightfully owned by another party.

In this case, Cajes had been in open, continuous, and peaceful possession of the land since 1950, a fact supported by tax declarations dating back to that year. This possession, when combined with that of his predecessor-in-interest, Ulpiano Mumar, extended back to 1917. Such long-term, adverse possession ripened into ownership through acquisitive prescription, a legal mechanism that recognizes ownership based on prolonged occupation. As the Supreme Court stated in Republic vs. Court of Appeals, “Although tax declarations or realty tax payments of property are not conclusive evidence of ownership, nevertheless, they are good indicia of possession in the concept of owner… They constitute at least proof that the holder has a claim of title over the property.”

The Court contrasted Cajes’ situation with that of Jose Alvarez and the spouses Beduya, who never possessed the land in question. The failure of Alvarez and the Beduyas to take actual possession or initiate actions to eject Cajes further weakened their claim. The Supreme Court noted that “If a person obtains a title under the Torrens system, which includes by mistake or oversight land which can no longer be registered under the system, he does not, by virtue of the said certificate alone, become the owner of the lands illegally included,” citing Avila v. Tapucar. This reaffirms the principle that registration cannot override established ownership rights.

DBP also argued that Cajes’ action for reconveyance had prescribed, as it was filed more than ten years after the issuance of the decree of registration. However, the Court clarified that the prescriptive period does not apply when the claimant is in actual possession of the land. The Court stated, “[A]n action for reconveyance of a parcel of land based on implied or constructive trust prescribes in ten years… but this rule applies only when the plaintiff or the person enforcing the trust is not in possession of the property, since if a person claiming to be the owner thereof is in actual possession of the property… the right to seek reconveyance… does not prescribe.” Cajes’ continuous possession thus preserved his right to seek reconveyance.

Furthermore, DBP claimed to be an innocent purchaser for value, relying on the validity of the Torrens title. However, the Court found that DBP failed to exercise due diligence in investigating the property. DBP’s representative, Patton R. Olano, admitted to inspecting the land in 1979 and discovering Cajes’ occupancy, meaning DBP was aware of a potential claim prior to the foreclosure sale. The court emphasized that banks, in particular, must exercise heightened diligence, stating, “Banks, their business being impressed with public interest, are expected to exercise more care and prudence than private individuals in their dealings, even those involving registered lands.”

The Supreme Court noted two key circumstances that negated DBP’s claim of good faith: (1) Gaudencio Beduya informed DBP that Cajes occupied a portion of the property, and (2) DBP’s representative investigated the property in 1979 and confirmed Cajes’ presence. By ignoring these facts, DBP acted with negligence, disqualifying it from being considered an innocent purchaser for value. The Court reiterated that “a purchaser cannot close his eyes to facts which should put a reasonable man upon his guard, and then claim that he acted in good faith under the belief that there was no defect in the title of the vendor.”

The Court concluded that Cajes was the rightful owner of the 19.4-hectare parcel and ordered its segregation and reconveyance in his favor. In its decision, the Supreme Court highlighted that “The true owner may bring an action to have the ownership or title to the land judicially settled and the Court in the exercise of its equity jurisdiction, without ordering the cancellation of the Torrens title issued upon the patent, may direct the defendants, the registered owner to reconvey the parcel of land to the plaintiff who has been found to be the true owner thereof.”

FAQs

What was the central issue in this case?	The primary issue was whether long-term possession and ownership through acquisitive prescription could prevail over a later-obtained Torrens title that erroneously included the land. The Court resolved this in favor of the long-term possessor.
What is acquisitive prescription?	Acquisitive prescription is a legal process by which a person acquires ownership of property by openly, continuously, and adversely possessing it for a specified period. In this case, Cajes’ possession met the requirements for acquisitive prescription.
Does a Torrens title always guarantee ownership?	While a Torrens title is generally considered indefeasible, it does not automatically override pre-existing rights acquired through other means, such as acquisitive prescription. Registration confirms existing rights but does not create them.
What does it mean to be an ‘innocent purchaser for value’?	An innocent purchaser for value is someone who buys property without knowledge of any defects or claims against the seller’s title. This status provides certain protections under the law, but requires due diligence.
What is the duty of a bank when dealing with mortgaged property?	Banks, due to their public interest nature, must exercise a higher degree of diligence when dealing with mortgaged property. This includes investigating the property’s condition and ownership claims.
What is an action for reconveyance?	An action for reconveyance is a legal remedy sought by a person whose property has been wrongfully registered in another’s name. The court orders the registered owner to transfer the property back to the true owner.
When does the prescriptive period for reconveyance begin?	Generally, the prescriptive period for an action for reconveyance is ten years from the date of registration. However, this period does not apply if the claimant remains in actual possession of the property.
What evidence supports a claim of long-term possession?	Evidence supporting long-term possession includes tax declarations, testimonies of neighbors, and any other documentation or actions demonstrating continuous and open occupation of the land.

This case illustrates the importance of protecting the rights of individuals who have long-standing claims to land based on possession and cultivation. It serves as a reminder that the Torrens system, while providing security, does not operate in a vacuum and must respect pre-existing property rights. This landmark ruling provides guidance on how competing land claims can be resolved equitably, prioritizing the rights of those with established possession.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Development Bank of the Philippines, G.R. No. 129471, April 28, 2000