G.R. No.

116111 January 21, 1999

REPUBLIC OF THE PHILIPPINES, (Represented by the Acting Commissioner of Land

Registration), petitioner,
vs.
COURT OF APPEALS, Spouses CATALINO SANTOS and THELMA BARRERO SANTOS, ST.
JUDE'S ENTERPRISES, INC., Spouses DOMINGO CALAGUIAN and FELICIDAD CALAGUIAN,
VIRGINIA DELA FUENTE and LUCY MADAYA, respondents.

PANGANIBAN, J.:

Is the immunity of the government from laches and estoppel absolute? May it still recover the
ownership of lots sold in good faith by a private developer to innocent purchaser for value,
notwithstanding its approval of the subdivision plan issuance of separate individual certificates of the
title thereto?

The Case

These are the main questions raised in the Petition for Review before us, seeking to set aside the
November 29, 1993 Decision   of the Court of Appeals   in CA-G.R CV No. 34647. The assailed
1 2

Decision affirmed the ruling   of the Regional Trial Court in Caloocan City, Branch 125, in Civil Case
3

No. C-111708, which dismissed petitioner's Complaint for the cancellation of Transfer Certificates of
Title (TCTs) to several lots in Caloocan City, issued in the name of private respondents.

In a Resolution   dated July 7, 1994, the Court of Appeals denied the Republic's motion for
4

reconsideration.

The Fact

The facts of the case are not disputed. The trial court's summary, which was adopted by the Court of
Appeals, is reproduced below:

Defendant St. Jude's Enterprises, Inc. is the registered owner of a parcel of land
known as Lot 865-B-1 of the subdivision plan (LRC) PSD-52368, being a portion of
Lot 865-B located in Caloocan City containing an area of 40,623 square meters. For
Lot 865-B-1 defendant St. Jude's Enterprises, Inc. was issued TCT No. 22660 on
July 25, 1995.

Sometime in March 1966. defendant St. Jude's Enterprises, Inc. subdivided Lot No.
865-B-1 under subdivision plan (LRC) PSD-55643 and as a result thereof the
Register of Deeds of Caloocan City cancelled TCT No. 22660 and in lieu thereof
issued Certificates of Title Nos. 23967 up to 24068 inclusive, all in the name of
defendant St. Jude's Enterprises, Inc. The subdivision of lot 865-B-1 [which was]
covered [by] TCT No. 22660 was later found to have expanded and enlarged from its
original area of 40,523 square meters to 42,044 square meters or an increase of
1,421 square meters. This expansion or increase in area was confirmed by the Land
Registration Commission [to have been made] on the northern portion of Lot 865-B-
1.
 Subsequently, defendant St. Jude's Enterprises, Inc. sold the lots covered by TCT
Nos. 24013 and 24014 to defendant Sps. Catalino Santos and Thelma Barreto
Santos[;] TCT No. 24019 to defendant Sps. Domingo Calaguian and Felicidad de
Jesus[;] TCT No. 24022 to defendant Virginia dela Fuente[;] and TCT No. 2402[3] to
defendant Lucy Madaya. Accordingly, these titles were cancelled and said
defendants were issued the following: TCT No. C-43319 issued in the name of Sps.
Santos containing an area of 344 square meters[;] TCT No. 55513 issued in the
name of defendants Sps. Calaguian containing an area of 344 square meters[;] TCT
13309 issued in the name of Sps. Santos[;] TCT No. 24069 issued in the name of
Virginia dela Fuente containing an area of 350 square meters[;] and TCT No. C-
46648 issued in the name of defendant Lucy Madaya with an area of 350 square
meters.

[On January 29, 1985, then Solicitor General Estelito Mendoza filed] an action
seeking . . . the annulment and cancellation of Transfer Certificates of Title (TCT)
Nos. 24015, 24017, 24018, 24020, 24021, 24024, 24025 and 24068 issued in the
name of defendant St. Jude's Enterprises, Inc.[;] Transfer Certificates of Title Nos.
13309 and C-43319 both registered in the name of Sps. Catalino Santos and Thelma
B. Santos[;] and TCT No. 55513 registered in the name of Sps. Domingo Calaguian
and Felicidad de Jesus[;] TCT No. 24069 registered in the name of Virginia dela
Fuente[;] and TCT No. C-46648 registered in the name of Lucy Madaya, principally
on the ground that said Certificates of Title were issued on the strength of [a] null and
void subdivision plan (LRC) PSD-55643 which expanded the original area of TCT
No. 22660 in the name of St. Jude's Enterprises, Inc. from 40,623 square meters to
42,044 square meters upon its subdivision.

Defendants Virginia dela Fuente and Lucy Mandaya were declared in default for
failure to file their respective answer within the reglementary period.

Defendants Sps. Catalino Santos and Thelma Barreto Santos, St. Jude's
Enterprises, Inc. and Sps. Domingo Calaguian and Felicidad Calaguian filed
separate answers to the complaint. Defendants Sps. Domingo Calaguian and Sps.
Catalino Santos interposed defenses, among others, that they acquired the lots in
question in good faith from their former owner, defendant St. Jude's Enterprises, Inc.
and for value and that the titles issued to the said defendants were rendered
incontrovertible, conclusive and indefeasible after one year from the date of the
issuance of the titles by the Register of Deeds of Caloocan City.

On the other hand, defendant St. Jude's Enterprises, Inc. interposed defenses,
among others, that the cause of action of plaintiff is barred by prior judgement; that
the subdivision plan submitted having been approved by the LRC, the government is
now in estoppel to question the approved subdivision plan; and the plaintiff's
allegation that the area of the subdivision increased by 1,421 square meters is
without any basis in fact and in law.

Ruling of the Trial Court

On April 30, 1991, the trial court dismissed the Complaint. While the plaintiff sufficiently proved the
enlargement or expansion of the area of the disputed property, it presented no proof that
Respondent St. Jude Enterprises, Inc. ("St. Jude") had committed fraud when it submitted the
subdivision plan to the Land Registration Commission (LRC) for approval. Because the plan was
presumed to have been subjected to investigation, study and verification by the LRC, there was no
one to blame for the increase in the area "but the plaintiff[,] for having allowed and approved the
subdivision plan." Thus, the court concluded, the government was already "in estoppel to question
the approved subdivision plan."

The trial court also took into account the "absence of complaints from adjoining owners whose
supposed lots [were] encroached upon by the defendants," as well as the fact that an adjoining
owner had categorically stated that there was no such encroachment. Finding that Spouses Santos,
Spouses Calaguian, Dela Fuente and Madaya had bought their respective lots from St. Jude for
value and good faith, the court held that their titles could no longer be questioned, because under
the Torrens system, such titles had become absolute and irrevocable. As regards the Republic's
allegation that it had filed the case to protect the integrity of the said system, the court said:

. . . [S]ustaining the position taken by the government would certainly lead to

disastrous consequences. Buyers in good faith would lose their titles. Adjoining
owners who were deprived of a portion of their lot would be forced to accept the
portion of the property allegedly encroached upon. Actions for recovery will be filed
right and left[;] thus instead of preserving the integrity of the Torrens System it would
certainly cause chaos rather than stability. Finally, if only to strengthen the Torrens
System and in the interest of justice, the boundaries of the affected properties of the
defendants should not be disturbed and the status quo should be maintained.

The solicitor general appealed the trial court's Decision to the Court of Appeals.

Ruling of the Appelate Court

Citing several cases upholding the indefeasibility of the titles issued under the Torrens system, the
appelate court affirmed the trial court. It berated petitioner for bringing the suit only after nineteen
(19) years had passed since the issuance of St. Jude's title and the approval of the subdivision plan.
The pertinent portion of the assailed Decision reads:

. . . Rather than make the Torrens system reliable and stable, [its] act of filing the
instant suit rocks the system, as it gives the impression to Torrens title holders, like
appellees, that their titles to properties can be questioned by the same authority who
had approved the same even after a long period of time. In that case, no Torrens title
holder shall be at peace with the ownership and possession of his land, for the
Commission of Land Registration can question his title anytime it makes a finding
unfavorable to said Torrens title holder.

Undauted, petitioner seeks a review by this Court.  11

The Issues

In this petition, the Republic raises the following issues for our resolution: 12

1. Whether or not the government is estopped from questioning the approved

subdivision plan which expanded the areas covered by the transfer certificates of title
in question;

2. Whether or not the Court of Appeals erred when it did not consider the Torrens
System as merely a means of registering title to land;
 3. Whether or not the Court of Appeals erred when it failed to consider that
petitioner's complaint before the lower court was filed to preserve the integrity of the
Torrens System.

We shall discuss the second and third questions together. Hence, the issues shall be (1) the
applicability of estoppel against the State and (2) the Torrens system.

The Court's Ruling

The petition is bereft of merit.

First Issue:

Estoppel Against the Government

The general rule is that the State cannot be put in estoppel by the mistakes or errors of its officials or
agents. However, like all general rules, this is also subject to exception, viz.:

Estoppels against the public are little favored. They should not be invoked except in
a rare and unusual circumstances, and may not be invoked where they would
operate to defeat the effective operation of a policy adopted to protect the public.
They must be applied with circumspection and should be applied only in those
special cases where the interests of justice clearly require it. Nevertheless, the
government must not be allowed to deal dishonorably or capriciously with its citizens,
and must not play an ignoble part or do a shabby thing; and subject to limitations . . .,
the doctrine of equitable estoppel may be invoked against public authorities as well
as against private individuals.

In Republic v. Sandiganbayan, the government, in its effort to recover ill-gotten wealth, tried to skirt
the application of estoppel against it by invoking a specific constitutional provision. The Court
countered: 

We agree with the statement that the State is immune from estoppel, but this concept
is understood to refer to acts and mistakes of its officials especially those which are
irregular (Sharp International Marketing vs. Court of Appeals, 201 SCRA 299; 306
[1991]; Republic v. Aquino, 120 SCRA 186 [1983]), which peculiar circumstances are
absent in this case at bar. Although the State's right of action to recover ill-gotten
wealth is not vulnerable to estoppel; it is non sequitur to suggest that a contract,
freely and in good faith executed between the parties thereto is susceptible to
disturbance ad infinitum. A different interpretation will lead to the absurd scenario of
permitting a party to unilaterally jettison a compromise agreement which is supposed
to have the authority of res judicata (Article 2037, New Civil Code), and like any
other contract, has the force of law between parties thereto (Article 1159, New Civil
Code; Hernaez vs. Kao, 17 SCRA 296 [1996]; 6 Padilla, Civil Code Annotated, 7th
ed., 1987, p. 711; 3 Aquino, Civil Code, 1990 ed., p. 463). . . .

The Court further declared that "(t)he real office of the equitable norm of estoppel is limited to
supply[ing] deficiency in the law, but it should not supplant positive law."

In the case at bar, for nearly twenty years (starting from the issuance of St. Jude's titles in 1996 up to
the filing of the Complaint in 1985), petitioner failed to correct and recover the alleged increase in the
land area of St. Jude. Its prolonged inaction strongly militates against its cause, as it is tantamount to
laches, which means "the failure or neglect, for an unreasonable and unexplained length of time, to
do what which by exercising due diligence could or should have been done earlier; it is negligence or
omission to assert a right within a reasonable time, warranting a presumption that the party entitled
to assert it either has abandoned it or declined to assert it."

The Court notes private respondents' argument that, prior to the subdivision, the surveyors erred in
the original survey of the whole tract of land covered by TCT No. 22660, so that less than
the actual land area was indicated on the title. Otherwise, the adjoining owners would have
complained upon the partition of the land in accordance with the LRC-approved subdivision plan. As
it is, Florenci Quintos, the owner of the 9,146 square-meter Quintos Village adjoining the northern
potion of St. Jude's property (the portion allegedly "expanded"), even attested on August 16, 1973
that "there [was] no overlapping of boundaries as per my approved plan (LRC) PSD 147766 dated
September 8, 1971." None of the other neighboring owners ever complained against St. Jude or the
purchaser of its property. It is clear, therefore, that there was no actual damage to third persons
caused by the resurvey and the subdivision.

Significantly, the other private respondents — Spouses Santos, Spouses Calaguian, Dela Fuente
and Madaya — bought such "expanded" lots in good faith, relying on the clean certificates of St.
Jude, which had no notice of any flaw in them either. It is only fair and reasonable to apply the
equitable principle of estoppel by laches against the government to avoid an injustice to the innocent
purchasers for value.

Likewise time-settled is the doctrine that where innocent third persons, relying on the correctness of
the certificate of title, acquire rights over the property, courts cannot disregard such rights and order
the cancellation of the certificate. Such cancellation would impair public confidence in the certificate
of title, for everyone dealing with property registered under the Torrens system would have to inquire
in very instance whether the title has been regularly issued or not. This would be contrary to the very
purpose of the law, which is to stabilize land titles. Verily, all persons dealing with registered land
may safely rely on the correctness of the certificate of title issued therefor, and the law or the courts
do not oblige them to go behind the certificate in order to investigate again the true condition of the
property. They are only charged with notice of the liens and encumbrances on the property that are
noted on the certificate.

When private respondent-purchasers bought their lots from St. Jude, they did not have to go behind
the titles thereto to verify their contents or search for hidden defects or inchoate rights that could
defeat their rights to said lots. Although they were bound by liens and encumbrances annotated on
the titles, private respondents-purchasers could not have had notice of defects that only an inquiry
beyond the face of the titles could have satisfied. The rationale for this presumption has been stated
thus:

The main purpose of the Torrens System is to avoid possible conflicts of title to real
estate and to facilitate transactions relative thereto by giving the public the right to
rely upon the face of a Torrens Certificate of the Title and to dispense with the need
of inquiring further, except when the party concerned had actual knowledge of facts
and circumtances that should impel a reasonably cautious man to make such further
inquiry (Pascua v. Capuyoc, 77 SCRA 78). Thus, where innocent third persons
relying on the correctness of the certificate thus issued, acquire rights over the
property, the court cannot disregard such rights (Director of Land v. Abache, et al.,
73 Phil. 606).

In another case,   this Court further said:

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 The Torrens System was adopted in this country because it was believed to be the
most effective measure to guarantee the integrity of land titles and to protect their
indefeasibility once the claim of ownership is established and recognized. If a person
purchases a piece of land on the assurance that the seller's title thereto is valid, he
should not run the risk of being told later that his acquisition was ineffectual after all.
This would not only be unfair to him. What is worse is that if there were permitted,
public confidence in the system would be eroded and land transactions would have
to be attended by complicated and not necessarily conclusive investigations and
proof of ownership. The further consequence would be that land conflicts could be
even more abrasive, if not even violent. The Government, recognizing the worthy
purposes of the Torrens System, should be the first to accept the validity of the titles
issued thereunder once the conditions laid down by the law are satisfied [Emphasis
supplied.]

Petitioner never presented proof that the private respondents who had bought their lots from St.
Jude were buyers in bad faith. Consequently, their claim of good faith prevails. A purchaser in good
faith and for value is one who buys the property of another without notice that some other person
has right to or an interest in such property; and who pays a full and fair price for the same at the time
of such purchase or before he or she has notice of the claims or interest of some other person. Good
faith is the honest intention to abstain from taking any unconscientious advantage of another.

Furthermore, it should be stressed that the total area of forty thousand six hundred twenty-three
(40,623) square meters indicated on St. Jude's original title (TCT No, 22660) was not an exact area.
Such figure was followed by the phrase "more or less." This plainly means that the land area
indicated was not precise. Atty. Antonio H. Noblejas, who became the counsel of St. Jude
subsequent to his tenure as0 Land Registration Commissioner, offers a sensible explanation. In his
letter to the LRC dated November 8, 1982, he gave the following information:

a. Records show that our client owned a large tract of land situated in an area cutting
the boundary of Quezon City and Caloocan City, then known as Lot 865-B, Psd
60608, and described in T.C.T. No. 100412, containing an area of 96.931 sq. meters,
more or less.

b. It will be noted that on the northern portion of this lot 865-B, Psd-60608, is . . . Lot
865-A, Psd-60608, which means that at previous point of time, these 2 lots
composed one whole tract of land.

c. On December 23, 1995, Lot 865-B, Psd-60608, was subdivided into 2 lots,
denominated as Lot 865-B-1, with an area of 40,622 sq. meters, more or less, on the
Caloocan side, and Lot 865-B-2, with an area of 56,308 sq. meters, more or less,
Quezon City side, under plan (LRC) Psd-52368.

d. On March 1-10, 1966, Lot 865-B-1, Psd-52368, then covered by T.C.T. No. N-
22660, was subdivided into residential lots under Plan (LRC)Psd-55643, with a total
area of 42,044 sq. meters, more or less.

e. It will be noted that Lot 865-B, Psd-60608, covered by T.C.T. No. 100412,
contained an area of 96,931 sq. meters, more or less, but when subdivided under
Plan (LRC) Psd-52368, into 2 lots its total area shrank by 1 sq. meter, to wit:

Lot 865-B-1, Psd-52368 = 40,622 sq. meters

 Lot 865-B-2, Psd-52368 = 56,308 sq. meters

———

96,930 sq. meters

———

f. There is no allegation whatever in the Perez report that there was no error in laying
out the metes and bound of Lot 865-B-1 in Plan (LRC) Psd-55643 as specified in
Technical Description of the said lot set forth in T.C.T. No. N-22660 covering the
same. There is likewise no allegation, on the contrary there is no confirmation from
the boundary owner on the northern side. Mr. Florencio Quintos, that there is no
overlapping of boundaries on the northern side of Lot 865-B-1, Psd-55643.

g. We respectfully submit that the area of 42, 044 sq. meters stated in Plan (LRC)
Psd-55643 as the size of Lot 865-B-a, is the more accurate area, confirmed by the
Perez report 'as per surveyor[']s findings on the ground, which rectifies previous
surveyor's error in computing its area as 40,622 sq. meters in Plan (LRC) Psd-
52368, which is about 3.5% tolerable error (1,422 divided by 40,622 = 035).

[h.] It is well settled that in the identification of a parcel of land covered by certificate
of title, what is controlling are the metes and bounds as set forth in its Technical
Description and not the area stated therein, which is merely an approximation as
indicated in the more or less phrase placed after the number of square meters.

i. There is thus no unauthorized expansion of the survey occasioned by the

subdivision of Lot 865-B-1 under Plan (LRC) Psd-55643; consequently, LRC Circular
No. 167, Series of 1967, finds no application thereto, as to bar the processing and
registration in due course of transactions involving the subdivision lots of our client,
subject hereof. This is apart from the fact that LRC Circular No. 167 has not been
implemented by the Register of Deeds of Caloocan City or any proper government
authority since its issuance in 1967, and that, in the interest of justice and equity, its
restrictive and oppressive effect on transactions over certificates of titles of
subdivisions that allegedly expanded on re-surveys, cannot be allowed to continue
indefinitely. (Emphasis supplied.)

The discrepancy in the figures could have been caused by the inadvertence or the negligence of the
surveyors. There is no proof, though, that the land area indicated was intentionally and fraudulently
increased. The property originally registered was the same property that was subdivided. It is well-
settled that what defines a piece of titled property is not the numerical data indicated as the area of
the land, but the boundaries or "metes and bounds" of the property specified in its technical
description as enclosing it and showing its limits.

Petitioner miserably failed to prove any fraud, either on the part of Private Respondent St. Jude or
on the part of land registration officials who had approved the subdivision plan and issued the
questioned TCTs. Other than its peremptory statement in the Complaint that the "expansion" of the
area was "motivated by bad faith with intent to defraud, to the damage and prejudice of the
government and public interest," petitioner did not allege specifically how fraud was perpetrated to
cause an increase in the actual land size indicated. Nor was any evidence proffered to substantiate
the allegation. That the land registration authorities supposedly erred or committed an irregularity
was merely a conclusion drawn from the "table survey" showing that the aggregate area of the
subdivision lots exceeded the area indicated on the title of the property before its subdivision. Fraud
cannot be presumed, and the failure of petitioner to prove it defeats its own cause.

Second Issue:

The Torrens System

True, the Torrens system is not a means of acquiring titles to lands; it is merely a system of
registration of titles to lands. Consequently, land erroneously included in a Torrens certificate of title
is not necessarily acquired by the holder of such certificate.

But in the interest of justice and equity, neither may the title holder be made to bear the unfavorable
effect of the mistake or negligence of the State's agents, in the absence of proof of his complicity in a
fraud or of manifest damage to third persons. First, the real purpose of the Torrens system is to quiet
title to land to put a stop forever to any question as to the legality of the title, except claims that were
noted in the certificate at the time of the registration or that may arise subsequent thereto. Second,
as we discussed earlier, estoppel by laches now bars petitioner from questioning private
respondent's titles to the subdivision lots. Third, it was never proven that Private Respondent St.
Jude was a party to the fraud that led to the increase in the area of the property after its subdivision.
Finally, because petitioner even failed to give sufficient proof of any error that might have been
committed by its agent who had surveyed the property, the presumption of regularity in the
performance of their functions must be respected. Otherwise, the integrity of the Torrens system,
which petitioner purportedly aims to protect by filing this case, shall forever be sullied by the
ineptitude and inefficiency of land registration officials, who are ordinarily presumed to have regularly
performed their duties.

We cannot, therefore, adhere to petitioner's submission that, in filing this suit, it seeks to preserve
the integrity of the Torrens system. To the contrary, it is rather evident from our foregoing discussion
that petitioner's action derogates the very integrity of the system. Time and again, we have said that
a Torrens certificate is evidence of an indefeasible title to property in favor of the person whose
name appears thereon.

WHEREFORE, the petition is hereby DENIED and the assailed Decision is AFFIRMED. 1âwphi1.nêt

SO ORDERED.

Romero, Vitug, Purisima and Gonzaga-Reyes, JJ., concur.

Separate Opinions

VITUG, J., concurring opinion;

The rule has been to the effect that a purchaser of registered land is not ordinarily required to
explore further than what the record in the Registry indicates on its face in quest of any hidden
defect or inchoate right which might adversely affect the buyer's right over the
property.   Undoubtedly, to allow in the instant case the cancellation of the titles of herein private
1

respondents would defeat rather than enhance the purpose and scheme of the Torrens System. It is
my understanding, however, that the rule that the Court has here announced would not apply to a
situation where the enlargement or expansion in area would result in an encroachment on or
reduction of any area covered by a certificate of title previously issued. To rule otherwise would itself
be to downgrade the integrity of the Torrens System.

Separate Opinions
VITUG, J., concurring opinion;

The rule has been to the effect that a purchaser of registered land is not ordinarily required to
explore further than what the record in the Registry indicates on its face in quest of any hidden
defect or inchoate right which might adversely affect the buyer's right over the
property.   Undoubtedly, to allow in the instant case the cancellation of the titles of herein private
1

respondents would defeat rather than enhance the purpose and scheme of the Torrens System. It is
my understanding, however, that the rule that the Court has here announced would not apply to a
situation where the enlargement or expansion in area would result in an encroachment on or
reduction of any area covered by a certificate of title previously issued. To rule otherwise would itself
be to downgrade the integrity of the Torrens System.