Heirs of Limense vs. Vda. de Ramos

A certificate of title under the Torrens system cannot be collaterally attacked in an action for removal of obstruction and damages, and actual knowledge of a pre-existing apparent easement binds the registered owner even without annotation on the certificate of title.

Dalmacio Lozada was the registered owner of Lot No. 12, Block No. 1074 in Pandacan, Manila, covered by OCT No. 7036. In 1932, he subdivided the property into five lots and donated them to his daughters — Isabel (married to Isaac Limense), Catalina (married to Sotero Natividad), Salud (married to Francisco Ramos), and Felicidad (married to Galicano Centeno). Lot 12-C was donated to Catalina, Isabel, and Salud in equal parts, while Lot 12-D was donated to Salud alone. Respondents are the surviving heirs of Francisco Ramos, Salud's husband, and have occupied Lot 12-D since 1932. Petitioners are the heirs of Joaquin Limense, who obtained TCT No. 96886 over Lot 12-C in 1969. Lot 12-C had served as a common alley or right of way for all the heirs of Dalmacio Lozada and area residents since 1932.

Dalmacio Lozada was the registered owner of a parcel of land identified as Lot No. 12, Block No. 1074 of the cadastral survey of Manila, covered by Original Certificate of Title No. 7036 issued on June 14, 1927, containing 873.80 square meters located on Beata Street, Pandacan, Manila. He subdivided the property into five lots — 12-A through 12-E — and, through a Deed of Donation dated March 9, 1932, donated the subdivided lots to his daughters Isabel, Salud, Catalina, and Felicidad, all surnamed Lozada. The deed was registered with the Register of Deeds of Manila on March 15, 1932. Lot 12-C was donated to Catalina, Isabel, and Salud in equal parts, while Lot 12-D was donated to Salud alone. OCT No. 7036 was cancelled and Transfer Certificates of Title Nos. 40041 through 40045 were issued in favor of the donees, with TCT No. 40043 covering Lot 12-C issued in the names of the three co-owners. In 1932, respondents' predecessor-in-interest constructed their residential building on Lot 12-D, adjacent to Lot 12-C.

On May 16, 1969, TCT No. 96886 was issued in the name of Joaquin Limense covering the same area of Lot 12-C. The title was a transfer from TCT No. 48866, not directly from TCT No. 40043, which bore an annotation that it had been "CANCELLED." On October 1, 1981, Joaquin Limense secured a building permit to construct a hollow block fence on the boundary line between Lot 12-C and Lot 12-D, which was occupied by respondents. The fence could not be constructed because a substantial portion of respondents' residential building on Lot 12-D encroached upon Lot 12-C. Joaquin Limense demanded removal of the encroached area, but respondents ignored both oral and written demands. The parties failed to settle amicably despite barangay referral.

On March 9, 1983, Joaquin Limense, through his attorney-in-fact Teofista L. Reyes, filed a complaint against respondents before the RTC of Manila, Branch 15, for removal of obstruction and damages. Respondents answered that they were the surviving heirs of Francisco Ramos, married to Salud Lozada, and that Lot 12-C had served as a common alley or right of way for all heirs of Dalmacio Lozada since 1932 and could not be fenced without causing prejudice. They also questioned the legality of TCT No. 96886, suggesting it may have been obtained through fraud because the registered owners of TCT No. 40043 were already dead prior to 1969. After trial, the RTC dismissed the complaint on September 21, 1990, finding an apparent easement of right of way under Article 624 of the Civil Code, noting that the alley was established by the original owner and continued to be used as such, and that Joaquin Limense knew the lot could serve no other purpose than as an alley. The CA affirmed in toto on December 20, 2001, but additionally observed that TCT No. 96886 was of dubious origin and that co-ownership existed over Lot 12-C. Joaquin Limense died during the pendency of the appeal in 1999, and his heirs elevated the case to the Supreme Court.

• Validity of TCT No. 96886: Petitioners argued that TCT No. 96886, being the only and best legitimate proof of ownership over Lot 12-C, must prevail over TCT No. 40043, and that the CA erred in ruling the title was of dubious origin and in declaring co-ownership.
• No Easement of Right of Way: Petitioners contended that respondents are not entitled to an easement of right of way over Lot 12-C because Lot 12-D is not annotated at the back of TCT No. 96886, unlike other lots (12-A-1 through 12-A-6) that are so annotated.
• Encroachment as Nuisance: Petitioners maintained that the protruding portions of respondents' house extending into Lot 12-C constitute a nuisance and should be removed at respondents' expense.

• Fraudulent Title: Respondents alleged that TCT No. 96886 may have been obtained through fraud, misrepresentation, or falsification because the donees of TCT No. 40043 were already dead prior to its issuance in 1969 and could not have executed any valid transfer.
• Lack of Proof of Title: Respondents asserted that petitioners failed to produce proof substantiating the issuance of TCT No. 96886 in the name of Joaquin Limense.
• Entitlement to Easement: Respondents claimed entitlement to an easement of right of way over Lot 12-C, which had been continuously used as an alley by the heirs of Dalmacio Lozada, area residents, and the general public from 1932 to the present, and that petitioners, being fully aware of its long existence, are bound to respect it.

• Collateral Attack on Title: Whether the CA committed grave abuse of discretion in holding that TCT No. 96886 was of dubious origin and that co-ownership existed over Lot 12-C.
• Easement of Right of Way: Whether respondents are entitled to an easement of right of way over Lot 12-C despite the absence of annotation on TCT No. 96886.
• Encroachment as Nuisance: Whether the protruding portions of respondents' house on Lot 12-D extending into Lot 12-C constitute a nuisance that should be removed.

• Collateral Attack on Title: No. TCT No. 96886 cannot be collaterally attacked in an action for removal of obstruction; it is the best proof of Joaquin Limense's exclusive ownership over Lot 12-C, and no co-ownership exists between petitioners and respondents.
• Easement of Right of Way: Yes. Respondents are entitled to an easement of right of way because Lot 12-C has been continuously used as an alley since 1932 and Joaquin Limense had actual knowledge thereof, which is as binding as registration under the Torrens system.
• Encroachment as Nuisance: No. The encroachment cannot simply be removed because respondents were builders in good faith, and the respective rights of the parties are governed by Articles 448 and 546 of the Civil Code.

• Collateral Attack on Title: The validity of a Torrens title cannot be assailed collaterally. Section 48 of PD No. 1529 provides that a certificate of title shall not be subject to collateral attack and can only be altered, modified, or cancelled in a direct proceeding. The action filed before the RTC was for removal of obstruction and damages; respondents' defense that Joaquin Limense's title was obtained through fraud constituted an indirect attack, which is not allowed. Moreover, TCT No. 96886 became incontrovertible after the lapse of one year from registration in 1969, and respondents never instituted any direct proceeding to assail it. An examination of TCT No. 40043 showed it was annotated as "CANCELLED," and TCT No. 96886 was a transfer from TCT No. 48866, not directly from TCT No. 40043, indicating a possible series of intermediate transfers. Thus, respondents' argument that the donees were already dead before 1969 did not prove fraud. The CA's observation that TCT No. 96886 was of dubious origin constituted an improper indirect attack, and the CA erred in ruling that co-ownership existed.

• Easement of Right of Way: The easement of right of way over Lot 12-C is discontinuous and apparent — discontinuous because its use depends on the acts of persons passing through, and apparent because the alley shows a permanent path to and from Beata Street. Under Article 622 of the Civil Code, a discontinuous and apparent easement can only be acquired by virtue of a title. Although TCT No. 96886 contained no annotation of the easement, Joaquin Limense and his successors-in-interest had actual knowledge that Lot 12-C had been continuously used as an alley since 1932. His attorney-in-fact testified to this fact. Citing Mendoza vs. Rosel, the Court held that actual notice or knowledge is as binding as registration; where a party has knowledge of a prior existing interest that was unregistered at the time of acquisition, that knowledge has the effect of registration. Because the alley was established by the original owner Dalmacio Lozada and the apparent signs were not made to disappear before issuance of the titles, petitioners are bound by the easement despite non-registration on TCT No. 96886.

• Encroachment as Nuisance: Although the encroaching portions may appear to hinder petitioners' use of their property, they cannot be removed outright because respondents were builders in good faith. Good faith is always presumed, and the burden of proving bad faith rests on the alleging party. Respondents' predecessor-in-interest constructed the residential building on Lot 12-D in 1932 and, at that time, owned a 1/3 portion of Lot 12-C as a co-owner under the Deed of Donation. The encroaching portions — the overhang (1 meter wide, 17 meters long), the stairs, and concrete structures — all fell within the 1/3 share allotted to respondents' predecessor by the donor. There was no showing of bad faith. Citing Spouses Del Campo vs. Abesia, when co-ownership is terminated by partition (here, by transfer of the whole property to Joaquin Limense) and an erstwhile co-owner's house encroaches upon land now belonging to another but was built in good faith, Article 448 applies. Under Article 448, the landowner has the option to appropriate the works after paying indemnity under Article 546, or to oblige the builder to pay the price of the land; if the land's value is considerably more than the building, the builder pays reasonable rent. The choice belongs to the landowner but is preclusive — he must choose one option. Pursuant to Depra vs. Dumlao, the case was remanded for determination of the option petitioners would take and the amount of indemnity.

• Indefeasibility of Torrens Title and Prohibition Against Collateral Attack — A certificate of title under the Torrens system shall not be subject to collateral attack and cannot be altered, modified, or cancelled except in a direct proceeding permitted by law (Section 48, PD 1529). After one year from registration, the decree of registration and certificate of title become incontrovertible (Section 32, PD 1529). The Court applied this by holding that respondents' challenge to TCT No. 96886's validity, raised as a defense in an action for removal of obstruction, was an impermissible collateral attack. Respondents never filed a direct proceeding to annul the title despite its registration in 1969.

• Actual Notice as Binding as Registration — Where a party has knowledge of a prior existing interest that was unregistered at the time he acquired a right to the same land, his knowledge of that prior unregistered interest has the effect of registration as to him. The Court relied on this principle to bind Joaquin Limense and his successors to the easement of right of way over Lot 12-C, even though the servitude was not annotated on TCT No. 96886, because he had actual knowledge of the alley's continuous use since 1932.

• Discontinuous and Apparent Easement Acquired Only by Title — Under Article 622 of the Civil Code, discontinuous and apparent easements can be acquired only by virtue of a title. The easement of right of way over Lot 12-C was classified as discontinuous (use depends on acts of man) and apparent (external signs reveal its existence). Despite the absence of a registered title annotating the easement, the Court found that actual knowledge supplied the binding effect equivalent to registration.

• Builder in Good Faith and the Landowner's Option Under Article 448 — Good faith is presumed; one is considered in good faith if unaware of any flaw invalidating his title or mode of acquisition. When a co-owner builds on common land in good faith and co-ownership is later terminated by partition, Article 448 applies to determine the respective rights. The landowner has a preclusive option: (1) appropriate the building after paying indemnity under Article 546, or (2) oblige the builder to pay the price of the land; if the land's value considerably exceeds the building's, the builder pays reasonable rent. The builder may also remove the structure at his own expense. The choice belongs to the landowner, consistent with the principle of accession that the accessory follows the principal.

• "It is a rule that the validity of a torrens title cannot be assailed collaterally." — This passage states the controlling rule that barred respondents from challenging TCT No. 96886 in an action for removal of obstruction, establishing the procedural boundary for attacking registered titles.

• "It is an established principle that actual notice or knowledge is as binding as registration." — Quoted from Mendoza vs. Rosel, this formulation binds a registered owner to a pre-existing unregistered easement when the owner has actual knowledge of it, forming the ratio for upholding respondents' right of way.

• "Where the builder, planter or sower has acted in good faith, a conflict of rights arises between the owners, and it becomes necessary to protect the owner of the improvements without causing injustice to the owner of the land." — This passage articulates the rationale behind Article 448, explaining why the law grants the landowner a preclusive option rather than allowing outright demolition of good-faith encroachments.

• "The choice belongs to the owner of the land, a rule that accords with the principle of accession that the accessory follows the principal and not the other way around." — This defines who exercises the option under Article 448 and the doctrinal basis for vesting that choice in the landowner.

• Mendoza vs. Rosel, 74 Phil. 84 (1943) — Controlling precedent on actual notice as binding as registration. The Court applied its holding that a purchaser who knows a lot can serve no other purpose than as an alley must respect the easement despite absence of annotation on the certificate of title.

• Spouses Del Campo vs. Abesia, 160 SCRA 379 (1988) — Applied to the situation where a co-owner's house, built during co-ownership, encroaches upon land that later pertains to another co-owner after partition. The Court used this case to establish that Article 448 becomes applicable upon termination of co-ownership.

• Depra vs. Dumlao, 221 Phil. 168 (1985) — Cited as basis for remanding the case to the trial court to determine facts essential to the proper application of Articles 448 and 546, including the landowner's option and the amount of indemnity.

• Vda. de Gualberto vs. Go, 463 SCRA 671 (2005) — Cited for the rule that the validity of a Torrens title cannot be assailed collaterally.

• Seville vs. National Development Company, 403 Phil. 843 (2001) — Cited for the principle that a registered title becomes incontrovertible after one year from registration and that an aggrieved party's remedy is an action for damages against the applicant or persons responsible for fraud.

• Private Development Corporation of the Philippines vs. Court of Appeals, 475 SCRA 591 (2005) — Cited for the doctrine that knowledge of a prior unregistered interest has the effect of registration as to the party with such knowledge.

• Article 430, Civil Code — Grants the owner of property the right to enclose or fence his land or tenements by any means without detriment to servitudes constituted thereon. The Court acknowledged Joaquin Limense's right to fence Lot 12-C but held he must respect the easement constituted thereon.

• Article 615, Civil Code — Defines continuous, discontinuous, apparent, and non-apparent easements. The Court classified the easement over Lot 12-C as discontinuous and apparent.

• Article 622, Civil Code — Provides that discontinuous and apparent easements can be acquired only by virtue of a title. The Court applied this provision but found that actual knowledge supplied the binding effect equivalent to registration.

• Article 624, Civil Code — Governs apparent easements established by the owner of two or more properties; the easement continues to exist if the non-existence of the easement was not expressed in the titles and the apparent signs were not made to disappear before issuance. The RTC relied on this provision, and the Supreme Court affirmed its applicability.

• Article 448, Civil Code — Governs the rights of parties when something has been built on another's land in good faith. The landowner may appropriate the works after paying indemnity or oblige the builder to pay the price of the land; if the land's value is considerably more, the builder pays reasonable rent. The Court held this provision applicable upon termination of co-ownership and remanded for its proper application.

• Article 546, Civil Code — Provides for the refund of necessary and useful expenses to a possessor in good faith, with the right of retention until reimbursement. Applied in relation to Article 448 for determining the indemnity payable should petitioners choose to appropriate the encroaching structures.

• Article 527, Civil Code — Presumes good faith in every possessor, placing the burden of proving bad faith on the alleging party. The Court relied on this presumption in concluding respondents were builders in good faith.

• Section 48, PD No. 1529 (Property Registration Decree) — Provides that a certificate of title shall not be subject to collateral attack and cannot be altered, modified, or cancelled except in a direct proceeding. The Court applied this to bar respondents' challenge to TCT No. 96886.

• Section 32, PD No. 1529 — Provides that upon expiration of one year from the date of entry of the decree of registration, the certificate of title becomes incontrovertible. The Court cited this to emphasize that TCT No. 96886, registered in 1969, had long become incontrovertible.

Leonardo A. Quisumbing, Antonio T. Carpio, Minita V. Chico-Nazario, and Roberto A. Abad concurred. No separate concurring opinions were noted.