Sta. Monica Industrial and Development Corporation vs. The Court of Appeals and The Republic of the Philippines

A judgment of a land registration court confirming title over agricultural public land is presumed regular and valid, and a subsequent action to annul it on the ground of lack of jurisdiction must fail where the petitioner does not establish by clear and convincing evidence that the land was not agricultural or that the court lacked jurisdiction at the time the judgment was rendered. The burden of proving a judgment's nullity rests upon the party seeking annulment, who must overcome the legal presumption in favor of the decree's regularity.

The case arose from proceedings to annul a 1912 decision of the land registration court. In 1912, the Tribuna del Registro de la Propiedad (Court of Land Registration) of Zambales, through Judge James Ostrand, in Land Registration Case (LRC) No. 6431, confirmed the title of Justo de Perio over two parcels of land in Zambales. The applicable law was Act No. 926, the Public Land Act, which took effect on July 26, 1904, and which allowed persons in open, continuous, exclusive, and notorious possession of agricultural public lands for at least ten years prior to the Act's effectivity to apply for confirmation of their claims.

In 1912, the Tribuna del Registro de la Propiedad of Zambales, through Judge James Ostrand, in Land Registration Case (LRC) No. 6431, confirmed the title of Justo de Perio over two parcels of land in Zambales. On August 28, 1912, Decree No. 9328 was issued ordering the registration of the two parcels in De Perio's name, and on December 6, 1912, Original Certificate of Title No. 48 of the Registry of Deeds of Zambales was issued to him. Parcel No. 1 consisted of 11,697 square meters, while Parcel No. 2 consisted of 340,820 square meters.

In 1936, a portion of Parcel No. 2 consisting of 10,400 square meters was sold to the Province of Zambales, and the sale was annotated at the back of OCT No. 48. In 1954, OCT No. 48 was cancelled and TCT No. T-1369 was issued to Mercedes de Valencia pursuant to an extrajudicial settlement of De Perio's estate. In 1962, De Valencia sold Parcel No. 1 to Ricardo Baloy, who was issued TCT No. T-7696 in 1966. In 1967, De Valencia subdivided Parcel No. 2 into five lots (Lots 2-A to 2-E), and TCT No. T-1369 was cancelled, with TCT Nos. 11865, 11866, 11867, and 11869 issued to De Valencia, and TCT No. 11868, corresponding to the portion previously sold to the Province of Zambales, issued to the Republic. In 1970, De Valencia sold the lots covered by TCT Nos. 11865 and 11866 to petitioner Sta. Monica Industrial and Development Corporation, and TCT Nos. T-12054 and T-12055 were issued to petitioner. Petitioner consolidated the two parcels and subdivided them into 536 residential lots, which it sold to individual buyers.

In 1985, the Republic, through the Solicitor General, filed with the Court of Appeals a complaint for annulment of the decree in LRC No. 6431, OCT No. 48, TCT No. T-1369, and TCT No. T-7696, alleging that the decree was null and void for lack of jurisdiction because the land was inside the U.S. naval reservation and was still within the forest zone in 1912, having been released therefrom only in 1961. Named defendants were De Valencia and her husband, Baloy and his wife, and the Register of Deeds of Zambales. The Baloy spouses filed their answer, and petitioner intervened with leave of court, filing an answer-in-intervention. Petitioner filed a motion for preliminary hearing on its affirmative defense of res judicata, which the Court of Appeals denied; petitioner did not seek reconsideration.

Trial on the merits ensued. The Republic offered its evidence, consisting of a land classification map prepared by the Director of Forestry in 1961 to prove that the land became alienable and disposable only in 1961, and rested its case. Petitioner's presentation of evidence was cut short when the Republic moved to amend its complaint to include all other transferees of the land and filed its amended complaint. Petitioner again moved for a preliminary hearing on its affirmative defense of res judicata. The Court of Appeals denied the motion, holding that res judicata cannot be invoked as a bar to an action for annulment of judgment on the ground of lack of jurisdiction, and denied petitioner's motion for reconsideration.

Petitioner argued that it must be presumed that the court in LRC No. 6431 found that the two parcels were agricultural lands as used in Act No. 926, that De Perio had been in open, continuous, exclusive, and notorious possession for at least 10 years before July 26, 1912, and that his possession was in the concept of owner. Petitioner also argued that the boundaries of the parcels, which were bounded by privately owned property and described in the notice published in the March 1912 issue of the Official Gazette as "lying within the Civil Reservation, town site of Olongapo," debunk the contention that they are forest lands. The Republic, through the Office of the Solicitor General, contended that by virtue of a Proclamation dated November 11, 1908, Governor-General James F. Smith reserved for naval purposes certain lands of the public domain in Subic, Zambales, which included the parcels under OCT No. 48, and that it was only in 1961 that such Proclamation was revoked by Proclamation No. 731, issued by President Garcia on February 2, 1961, declaring the portions open for disposition under R.A. No. 274, in relation to C.A. 141 and Act No. 3038. The Republic also contended that at the time OCT No. 48 was issued on December 9, 1912, the land was still within the forest zone, released only on January 31, 1961 under Land Classification Map No. 2427, and that Land Classification Map No. 665 dated June 7, 1927 showed the parcels were still part of the unclassified public forest at the time of registration.

• Presumption of Regularity of the 1912 Judgment: Petitioner argued that it must be presumed that in LRC Case No. 6431, the court found from the evidence adduced that (1) the two parcels of land were agricultural lands as the phrase is used in Act No. 926, (2) Justo de Perio had been in open, continuous, exclusive, and notorious possession thereof for at least 10 years before July 26, 1912, and (3) his possession was in the concept of owner. If the Attorney General, the Director of Forestry, the Director of Lands, and the Director of Public Works opposed the application, it must be presumed that the court declared the lands agricultural over their opposition; if they did not oppose, it must be presumed they agreed with the court.
• Question of Fact Not Reviewable: Petitioner argued that whether the two parcels are agricultural and not timber lands is a question of fact, and the finding of Judge Ostrand that they are agricultural cannot be reviewed by the Supreme Court at that point in time.
• Boundaries and Description of the Parcels: Petitioner argued that the boundaries of the two parcels, as described in Decree No. 9328, debunk the contention that they are forest lands, as the parcels were bounded by privately owned property and were described in the notice published in the March 1912 issue of the Official Gazette as "lying within the Civil Reservation, town site of Olongapo, situated in the municipality of Olongapo, Province of Zambales, P. I."

• Naval Reservation Proclamation: The Republic contended that by virtue of a Proclamation dated November 11, 1908, Governor-General James F. Smith reserved for naval purposes certain lands of the public domain in Subic, Zambales, which included the parcels of land embraced under OCT No. 48 secured by De Perio in 1912. It was only in 1961 that such Proclamation was revoked by Proclamation No. 731, issued by President Garcia on February 2, 1961, and such portions already classified as alienable and disposable and not needed for government purposes were declared open for disposition under R.A. No. 274, in relation to C.A. 141 and Act No. 3038.
• Forest Zone Classification: The Republic reiterated that at the time OCT No. 48 was issued on December 9, 1912, the parcel of land covered by the title was still within the forest zone, and it was not until January 31, 1961 that said land was released by the Bureau of Forest Development as alienable and disposable under Land Classification Map No. 2427. It also added that Land Classification Map No. 665 dated June 7, 1927 shows that the parcels of land covered by OCT No. 48 were still part of the unclassified public forest at the time of the registration.

• Res Judicata and Jurisdiction: Whether the Court of Appeals committed reversible error of law in denying petitioner's motion for preliminary hearing on its affirmative defense of res judicata.
• Jurisdiction of the Land Registration Court: Whether the land registration court had jurisdiction over the two parcels of land claimed by De Perio, the predecessor-in-interest of the petitioner.

• Res Judicata and Jurisdiction: No reversible error was committed in denying the preliminary hearing on res judicata, since res judicata cannot be invoked as a bar to an action for annulment of judgment on the ground of lack of jurisdiction. However, the ultimate issue of whether the land registration court had jurisdiction over the subject parcels of land was resolved in petitioner's favor.
• Jurisdiction of the Land Registration Court: Yes. The land registration court had jurisdiction over the two parcels of land, and OCT No. 48 and the Transfer Certificates of Title derived from OCT No. 48 are valid. The Republic failed to establish by clear and convincing evidence that the judgment was fatally defective.

• Res Judicata and Jurisdiction: The Court noted the long line of cases requiring the following requisites for a prior judgment to constitute a bar to a subsequent case: (1) the judgment must be final; (2) the judgment must have been rendered by a court having jurisdiction over the subject matter and the parties; (3) the judgment must be on the merits; and (4) there must be identity of parties, of subject matter, and of causes of action between the first and second actions. Because the Republic put in issue the presence of the second requisite — jurisdiction — the ultimate issue became whether the land registration court had jurisdiction over the two parcels of land claimed by De Perio. The resolution of this issue required an inquiry into the nature of the subject parcels of land in light of the laws prevailing at the time the judgment in the land registration case was rendered.
• Jurisdiction of the Land Registration Court: Act No. 926, the Public Land Act, enacted on October 7, 1903 and effective July 26, 1904, was the law applicable to De Perio's petition for confirmation of title. Section 54 thereof allowed persons who had been in open, continuous, exclusive, and notorious possession and occupation of agricultural public lands under a bona fide claim of ownership for a period of ten years next preceding the taking effect of the Act to apply for confirmation of their claims. The land registration court confirmed De Perio's title after due notice and hearing, from which the following conclusions were derived: (1) the two parcels are agricultural as defined by law, i.e., neither timber nor mineral land; (2) De Perio had been in open, continuous, exclusive, and notorious possession for at least ten years prior to 1904; (3) his possession was under a bona fide claim of ownership; and (4) under the law, De Perio had title to the land as of 1904, although confirmed only later in 1912. If the land is agricultural as confirmed by Judge Ostrand, it could not have been forest land as claimed by the Republic, the subsequent land classification map notwithstanding, especially since the parcels were in the Olongapo townsite and bounded by privately-owned land. If De Perio had title to the land in 1904, although still imperfect, it could not have been prejudiced by the 1908 proclamation of Governor-General Smith, which expressly recognized private rights ("salvo los derechos privados"). The Republic also failed to explain its sudden interest in annulment after some 73 years of inaction and after the land had been developed into a subdivision with hundreds of residences. The area was released from the unclassified public forest and the Subic naval reservation territory in 1961, and almost 30 years had passed since the release. Finally, in an action to annul a judgment, the burden of proving the judgment's nullity rests upon the petitioner, who must establish by clear and convincing evidence that the judgment is fatally defective. The Republic's case rested solely on land classification maps drawn several years after the 1912 decree, which fail to conclusively establish the actual classification of the land in 1912 and the years prior to that, and on the 1908 proclamation, which itself recognizes private rights. These were insufficient to overcome the legal presumption in favor of the decree's regularity.

• Res Judicata Requisites — For a prior judgment to constitute a bar to a subsequent case, the following must concur: (1) the judgment must be final; (2) the judgment must have been rendered by a court having jurisdiction over the subject matter and the parties; (3) the judgment must be on the merits; and (4) there must be between the first and second actions identity of parties, of subject matter, and of causes of action. In this case, because the Republic attacked the jurisdiction of the land registration court, the second requisite was put in issue, and res judicata could not bar the annulment action on that ground.
• Presumption of Regularity of Judicial Proceedings — A judgment of a court is presumed regular and valid, and the burden of proving its nullity rests upon the party seeking annulment, who must establish by clear and convincing evidence that the judgment is fatally defective. The Republic's evidence — land classification maps drawn years after the decree and a naval reservation proclamation that itself recognized private rights — was insufficient to overcome this presumption.
• Nature of Land Determined by Law at Time of Registration — The nature and classification of land subject to registration is determined by the laws prevailing at the time the judgment in the land registration case was rendered. Under Act No. 926, agricultural public lands possessed in open, continuous, exclusive, and notorious occupation under a bona fide claim of ownership for at least ten years prior to the Act's effectivity could be confirmed in favor of the possessor.
• Private Rights Recognized in Government Reservations — A government proclamation reserving public land for naval or other purposes cannot prejudice private rights that already existed at the time of the proclamation. The 1908 proclamation of Governor-General Smith expressly recognized private rights ("salvo los derechos privados"), and De Perio's title, though imperfect, dated back to 1904.

• "It has been established that the land registration court had jurisdiction over the two (2) parcels of land, and that OCT No. 48 and the Transfer Certificates of Title (TCT) derived from OCT No. 48 are valid." — This passage states the core holding of the case: the validity of the 1912 decree and all derivative titles, resolving the ultimate issue of jurisdiction in favor of the petitioner.
• "Finally, we find the need to emphasize that in an action to annul a judgment, the burden of proving the judgment's nullity rests upon the petitioner. The petitioner must establish by clear and convincing evidence that the judgment is fatally defective." — This passage articulates the controlling standard for actions to annul judgments, which the Republic failed to meet.
• "These, for reasons discussed earlier, are insufficient to overcome the legal presumption in favor of the decree's regularity, more so when we consider that notice of the application for registration and the date of hearing thereof, addressed to the Attorney General, the Director of Lands, the Director of Public Works and the Director of Forestry, among others, was published in the Official Gazette and that Governor General Smith's Proclamation of 1908 itself recognizes private rights." — This passage explains why the Republic's evidence was insufficient, emphasizing the presumption of regularity and the notice given to all relevant government agencies in the original registration proceedings.

• San Diego vs. Cardona, 70 Phil. 281 (1940) — Cited as controlling authority for the requisites of res judicata, specifically the requirement that the prior judgment must have been rendered by a court having jurisdiction over the subject matter and the parties.
• Ipekdjian Merchandising Co., Inc. vs. Court of Tax Appeals, G.R. No. L-15430, September 30, 1963, 9 SCRA 72 — Cited as controlling authority for the requisites of res judicata.
• Yusingco vs. Ong Hing Lian, G.R. No. L-26523, December 24, 1971, 42 SCRA 589 — Cited as controlling authority for the requisites of res judicata.
• Aroc vs. People's Homesite and Housing Corporation, G.R. No. L-39674, January 31, 1978, 81 SCRA 350 — Cited as controlling authority for the requisites of res judicata.
• Republic vs. Alagad, G.R. No. 66807, January 26, 1989, 169 SCRA 455 — Cited as controlling authority for the requisites of res judicata.
• Vencilao vs. Vano, G.R. No. L-25660, February 23, 1990 — Cited as controlling authority for the requisites of res judicata.
• Mapa vs. Insular Government, 10 Phil. 175 (1908) — Cited for the proposition that agricultural land, as defined by law, is neither timber land nor mineral land.

• Section 54, Act No. 926 (Public Land Act) — The law applicable to De Perio's petition for confirmation of title, which allowed persons who had been in open, continuous, exclusive, and notorious possession and occupation of agricultural public lands under a bona fide claim of ownership for a period of ten years next preceding the taking effect of the Act to apply for confirmation of their claims and issuance of a certificate of title.
• Article 1137, Civil Code — Cited to note that the possessors of the land would acquire title to the portions they adversely possess through acquisitive prescription, without need of title or of good faith, in a few more months from the time of the decision.
• Proclamation of Governor-General James F. Smith, November 11, 1908 — The proclamation reserving for naval purposes certain lands of the public domain in Subic, Zambales, which expressly recognized private rights ("salvo los derechos privados") and therefore could not prejudice De Perio's title.
• Proclamation No. 731, February 2, 1961 — Issued by President Garcia, revoking the 1908 proclamation and declaring portions already classified as alienable and disposable and not needed for government purposes open for disposition under R.A. No. 274, in relation to C.A. 141 and Act No. 3038.

Gutierrez, Jr., Feliciano, and Bidin, JJ., concurred. Fernan, C.J., was on leave.