VOL.

543, FEBRUARY 4, 2008 453

Land Bank of the Philippines vs. Republic

*
G.R. No. 150824. February 4, 2008.

LAND BANK OF THE PHILIPPINES, petitioner, vs.

REPUBLIC OF THE PHILIPPINES, represented by the
Director of Lands, respondent.

Land Registration; Mortgagees of non-disposable lands, titles

to which were erroneously issued, acquire no protection under the
Land Registration Law.—Since Lourdes Farms, Inc. is not the
owner of the land, it does not have the capacity to mortgage it to
LBP. x x x As correctly pointed out by the OSG, mortgagees of
non-disposable lands, titles to which were erroneously issued,
acquire no protection under the Land Registration Law.

Same; A certificate of title is void when it covers property of

public domain classified as forest or timber or mineral land; Any
title issued covering non-disposable lots even in the hands of an
alleged innocent purchaser for value shall be cancelled.—Even
assuming that LBP was able to obtain its own TCT over the
property by means of its mortgage contract with Lourdes Farms,
Inc., the title must also be cancelled as it was derived from OCT
No. P-2823 which was not validly issued to Bugayong. Forest
lands cannot be owned by private persons. It is not registerable
whether the title is a Spanish title or a Torrens title. It is well-
settled that a certificate of title is void when it covers property of
public domain classified as forest or timber or mineral land. Any
title issued covering non-disposable lots even in

_______________

* THIRD DIVISION.

454

454 SUPREME COURT REPORTS ANNOTATED

Land Bank of the Philippines vs. Republic

the hands of an alleged innocent purchaser for value shall be
cancelled.

Same; Prescription does not run against the government.—

Contrary to the argument of LBP, since the title is void, it could
not have become incontrovertible. Even prescription may not be
used as a defense against the Republic. On this aspect, the Court
in Reyes v. Court of Appeals, 295 SCRA 296 (1998), citing Republic
v. Court of Appeals, 171 SCRA 721 (1989), held: Petitioners’
contention that the government is now estopped from questioning
the validity of OCT No. 727 issued to them, considering that it
took the government 45 years to assail the same, is erroneous. We
have ruled in a host of cases that prescription does not run
against the government. In point is the case of Republic v. Court
of Appeals, wherein we declared: And in so far as the timeliness of
the action of the Government is concerned, it is basic that
prescription does not run against the State x x x.

Same; The State’s restraint upon the right to have an interest

or ownership over forest lands does not violate the constitutional
guarantee of non-impairment of contracts.—The constitutional
guarantee of non-impairment of contracts may not likewise be
used by LBP to validate its interest over the land as mortgagee.
The State’s restraint upon the right to have an interest or
ownership over forest lands does not violate the constitutional
guarantee of nonimpairment of contracts. Said restraint is a valid
exercise of the police power of the State.

PETITION for review on certiorari of the decision and

resolution of the Court of Appeals.

The facts are stated in the opinion of the Court.

     Miguel M. Gonzales, Rosemarie M. Osoteo and Danilo
B. Beramo for petitioner.
     The Solicitor General for respondent.
455

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Land Bank of the Philippines vs. Republic

REYES, R.T., J.:

FOREST lands are outside the commerce of man 1

and
unsusceptible of private appropriation in any form.
It is well-settled that a certificate of title is void when it
covers property of public domain classified as forest, timber
or mineral lands. Any title issued covering non-disposable
lots even in the hands of 2an alleged innocent purchaser for
value shall be cancelled. The rule must stand no matter

3
 3
how harsh it may seem. Dura lex sed lex. Ang batas ay
maaaring mahigpit subalit ito ang mananaig.
Before Us is a petition for review on certiorari under
Rule 45 filed by petitioner Land 4 Bank of the Philippines
(LBP) appealing the: (1) Decision of the Court of Appeals
(CA), dated August 23, 2001, in CA-G.R. CV No. 64121
entitled “Republic of the Philippines, represented by the
Director of5 Lands v. Angelito Bugayong, et al.”; and (2)
Resolution of the same Court, dated November 12, 2001,
denying LBP’s motion for reconsideration.
6
The CA affirmed the Decision of the Regional Trial
Court (RTC), dated July 9, 1996, declaring null and void
Original Certificate of Title (OCT) No. P-2823, as well as
other titles

_______________

1 Gordula v. Court of Appeals, 348 Phil. 670, 684; 284 SCRA 617, 629
(1998).
2 Republic v. Reyes, G.R. Nos. L-30263-5, October 30, 1987, 155 SCRA
313, 325; Republic v. Court of Appeals, G.R. No. L-40402, March 16, 1987,
148 SCRA 480, 492.
3 Reyes v. Court of Appeals, G.R. No. 94524, September 10, 1998, 295
SCRA 296, 313.
4 Rollo, pp. 33-40. Penned by Associate Justice Martin S. Villarama,
Jr., with Associate Justices Conrado M. Vasquez, Jr. and Eliezer R. De
Los Santos, concurring.
5 Id., at pp. 66-67.
6 Records, pp. 511-529. Penned by Judge Jesus V. Quitain.

456

456 SUPREME COURT REPORTS ANNOTATED

Land Bank of the Philippines vs. Republic

originating from it, on the ground that at the time it was 7

issued, the land covered was still within the forest zone.

The Facts

OCT No. P-2823 was issued on September 26, 1969 in favor

of one Angelito C. Bugayong. Said mother title emanated
from Sales Patent No.8
4576 issued in Bugayong’s name on
September 22, 1969. It covered a parcel of land located in
Bocana, Kabacan, Davao City, with an area of 41,276
square meters. It was originally identified and surveyed as
Lot No. 4159 under Plan SI-(VIII-1), 328-D. Marshy and
under water during high tide, it used to be 9a portion of a
dry river bed near the mouth of Davao River.
The land was initially subdivided into four lots, viz.: Lot
Nos. 4159-A, 4159-B, 4159-C and 4159-D under
Subdivision Plan (LRC) Psd-139511 approved by the 10
Commissioner of Land Registration on April 23, 1971.
Consequently, OCT No. P-2823 was cancelled and new
Transfer Certificates of Title (TCTs) replaced it, all in the
name of Bugayong.
Bugayong sold all of the four lots to different persons.
Lot No. 4159-A, which was then under TCT No. T-32769,
was sold to spouses Lourdes and Candido Du. Accordingly,
said TCT was cancelled and 11
replaced by TCT No. T-42166
in the name of spouses Du.
Afterwards, the spouses Du further caused the
subdivision of the land covered by their TCT No. T-42166
into two (2) lots. They sold one of said lots to spouses Felix
and Guadalupe Dayola, who were issued TCT No. T-45586.
The other remain-

_______________

7 Rollo, pp. 38-39.

8 Id., at pp. 33-34.
9 Id., at p. 33.
10 Id., at p. 34.
11 Id.

457

VOL. 543, FEBRUARY 4, 2008 457

Land Bank of the Philippines vs. Republic

ing lot, registered under TCT No. T-45587,12was retained by

and registered in the names of spouses Du.
Subsequently, Du spouses’ TCT No. T-45587 was
cancelled and was replaced by TCT No. T-57348 registered 13
in the name of Lourdes Farms, Inc. subject of this case.
Lourdes Farms, Inc. mortgaged
14
this property to petitioner
LBP on April 14, 1980.
The validity of OCT No. P-2823, as well as its derivative
TCTs, remained undisturbed until some residents of the
land it covered, particularly those along Bolton Diversion
Road, filed a formal
15
petition before the Bureau of Lands on
July 15, 1981.
Investigation and ocular inspection were conducted by
the Bureau of Lands to check the legitimacy of OCT No. P-
2823. They found out that: (1) at the time Sales Patent No.
4576 was issued to Bugayong, the land it covered was still
within the forest zone, classified under Project No. 1, LC-47
dated August 6, 1923; it was released as alienable and
disposable land only on March 25, 1981, pursuant to BFD
Administrative Order No. 4-1585 and to the 16provisions of
Section 13, Presidential Decree (P.D.) No. 705; (2) the land
was marshy and covered by sea water during high tide; and 17
(3) Bugayong was never in actual possession of the land.
In view of the foregoing findings, the Bureau of Lands
resolved that the sales patent in favor of Bugayong was
improperly and illegally issued and that the Director 18
of
Lands had no jurisdiction to dispose of the subject land.

_______________

12 Id.
13 Id.
14 Records, pp. 338-364.
15 Rollo, p. 34.
16 Revised Forestry Code of the Philippines.
17 Rollo, p. 35.
18 Id.

458

458 SUPREME COURT REPORTS ANNOTATED

Land Bank of the Philippines vs. Republic

Upon recommendation of the Bureau of Lands, the

Republic of the Philippines represented by the Director of
Lands, through the Office
19
of the Solicitor General (OSG),
instituted a complaint before the RTC in Davao, Branch
15, for the cancellation of title/patent and reversion of the
land covered by OCT No. P-2823 into20 the mass of public
domain. The complaint, as amended, was filed against
Bugayong and other present owners and mortgagees of the
land, such as Lourdes Farms, Inc. and the latter’s21
mortgagee, petitioner LBP. In its answer with cross-claim,
LBP claimed that it is a mortgagee in good faith and for
value. It prayed that should TCT No. T-57348 of Lourdes
Farms, Inc. be annulled by the court, Lourdes Farms, Inc.
should be ordered to pay its outstanding22
obligations to LBP
or to provide a new collateral security.

RTC Judgment
23
Eventually, the RTC rendered its judgment on July 9,
1996 determining that:

“x x x The mistakes and the flaws in the granting of the title were
made by the Bureau of Lands personnel more particularly the
Director of Lands who is the Officer charged with the following
the provisions of the Public Land Law. x x x.
It is clear that the mother Title, OCT–P-2823 in the name of
defendant Bugayong was issued at a time when the area was not
yet released by the Bureau of Forestry to the Bureau of Lands.
 The area covered by OCT No. P. 2823 was not yet declared by
the Bureau of Lands alienable and disposable when the said OCT
was issued. The subdivision of the lot covered by OCT P-2823 into
4

_______________

19 Records, pp. 1-7.

20 Id., at pp. 69-77.
21 Id., at pp. 102-107.
22 Rollo, p. 35.
23 Records, pp. 511-529.

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VOL. 543, FEBRUARY 4, 2008 459

Land Bank of the Philippines vs. Republic

lots covered by TCT Nos.24 T-32768, 32769, 32756 and 32771 did
not cure the defect. x x x.”

The RTC explained that titles issued to private parties by

the Bureau of Lands25are void ab initio if the land covered
by it is a forest land.
26
It went further by stating that if the
mother title is void, all titles arising from the mother title
are also void. It thus ruled in favor of the Republic with a
fallo reading:

“IN VIEW WHEREOF, judgment is hereby rendered declaring

Original Certificate of Title No. P-2823 issued in the name of
defendant Angelito Bugayong null and void. The following
Transfer Certificate of Titles which were originally part of the lot
covered by O.C.T. No. P-2823 are likewise declared void:

1.A. TCT No. 57348 in the name of defendant Lourdes Farms

mortgaged to defendant Land Bank.

B. TCT No. 84749 in the name of defendants Johnny and

Catherine Du mortgaged to defendant Development Bank
of the Philippines.
C. TCT No. 37386 in the name of defendants spouses
Pahamotang mortgaged to defendant Lourdes Du
mortgaged with defendant Allied Bank.
E. TCT Nos. 68154 and 32768 in the names of
defendants/spouses Maglana Santamaria.

2. All private defendants shall give to the Davao City

Register of Deeds their titles, who shall cancel the
Transfer Certificate of Titles mentioned in paragraph
number one.
3. Lot No. 4159, Plan SI (VIII-1) 328-D covered by O.C.T.
P2823 is hereby REVERTED to the mass of public
 domain.
27
SO ORDERED. (Italics supplied)

_______________

24 Id., at p. 526.
25 Id., at p. 527.
26 Id., at p. 528.
27 Id., at pp. 528-529; Rollo, p. 36.

460

460 SUPREME COURT REPORTS ANNOTATED

Land Bank of the Philippines vs. Republic

Disagreeing with the RTC judgment, LBP appealed to the 28

CA on October 31, 1996. It asserted in its appellant’s brief
that it validly acquired mortgage interest or lien over the
subject property because 29it was an innocent mortgagee for
value and in good faith. It also emphasized that it is a
government financial institution.

CA Disposition
30
In a Decision dated
31
August 23, 2001, the CA ruled against
the appellants, disposing thus:

“WHEREFORE, premises considered, the present appeals are

hereby DISMISSED and the Decision 32of the trial court in Civil
Case No. 17516 is hereby AFFIRMED.”

The CA confirmed that the “evidence for the plaintiff

clearly established that the land covered by OCT No. P-
2823 issued pursuant to a sales patent granted to
defendant Angelito C. Bugayong was still within 33the
forestal zone at the time of the grant of the said patent.” It
explained:

“Forest lands or forest reserves, are incapable of private

appropriation and possession thereof, however long, cannot
convert them into private properties. This is premised on the
Regalian Doctrine enshrined not only in the 1935 and 1973
Constitutions but also in the 1987 Constitution. Our Supreme
Court has upheld this rule consistently even in earlier cases. It
has also been held that whatever possession of the land prior to
the date of release of forested land as alienable and disposable
cannot be credited to the 30-year requirement (now, since June
12, 1945) under Section 48(b) of the

_______________
 28 CA Rollo, pp. 29-38.
29 Id., at p. 31.
30 Rollo, pp. 33-40.
31 Appellants include the mortgagees, namely: Philippine National
Bank and petitioner LBP.
32 Rollo, p. 39.
33 Id., at p. 38.

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Land Bank of the Philippines vs. Republic

Public Land Act. It is only from that date that the period of
occupancy for purposes of confirmation of imperfect or incomplete
title may be counted. Since the subject land was declared as
alienable and disposable only on March 25, 1981, appellants and
their predecessors-in-interest could not claim any vested right
thereon prior to its release from public forest zone.
The inclusion of forest land in a title, “whether title be issued
during the Spanish regime or under the Torrens system, nullifies
the title.” It is, of course, a well-recognized principle that the
Director of Lands (now Land Management Bureau) is bereft of
any jurisdiction over public forest or any lands not capable of
registration. It is the Bureau of Forestry that has jurisdiction and
authority over the demarcation, protection, management,
reproduction, occupancy and use of all public forests and forest
reservations and over the granting of licenses for the taking of
products therefrom. And where the land applied for is part of the
public forest, the land registration court acquires no jurisdiction
over the land, which is not yet alienable and disposable.
Thus, notwithstanding the issuance of a sales patent over the
subject parcel of land, the State may still take action to have the
same land reverted to the mass of public domain and the
certificate of title covering said forest land declared null and void
for having been improperly and illegally issued. Titles issued over
non-alienable public lands have been held as void ab initio. The
defense of indefeasibility of title issued pursuant to such patent
does not lie against the State. Public land fraudulently included
in patents or certificates of title may be recovered or reverted to
the State in accordance with Section 101 of the Public Land Act.
In such cases, prescription does not lie against the State.
Likewise, the government is not estopped by such fraudulent or
wrongful issuance of a patent over public forest land inasmuch as
the principle of estoppel does not 34
operate against the Government
for the acts of its agents. x x x.” (Citations omitted)
35
With respect to LBP’s contention that it was a mortgagee
in good faith and for value, the CA declared, citing Republic
v.
_______________

34 Id., at pp. 38-39.

35 This is also the contention of the Philippine National Bank.

462

462 SUPREME COURT REPORTS ANNOTATED

Land Bank of the Philippines vs. Republic

36
Reyes that: “mortgagees of non-disposable lands where
titles thereto were erroneously issued acquire no protection
under the land registration law. Appellants-mortgagees’
proper recourse therefore is to pursue their
37
claims against
their respective mortgagors and debtors.”
When LBP’s motion for reconsideration was denied, it
resorted to the petition at bar.

Issues

LBP seeks the reversal of the CA disposition on the

following grounds—

A.

THE COURT OF APPEALS ERRED IN NOT FINDING THAT

THE PETITIONER LAND BANK OF THE PHILIPPINES’
MORTGAGE RIGHT AND INTEREST AS AN INNOCENT
PURCHASER (MORTGAGEE) FOR VALUE AND IN GOOD
FAITH OVER THE SUBJECT LAND COVERED BY TCT NO. T-
57348 IS VALID AND SUBSISTING IN ACCORDANCE WITH
THE LAW AND EXISTING JURISPRUDENCE IN OUR
COUNTRY.

B.

THE COURT OF APPEALS ERRED IN NOT FINDING

PETITIONER LAND BANK OF THE PHILIPPINES’
MORTGAGE RIGHT AND INTEREST OVER THE SUBJECT
LAND AS VALID AND SUBSISTING UNDER THE
CONSTITUTIONAL GUARANTEE OF NON-IMPAIRMENT OF
OBLIGATION OF CONTRACTS.

C.

THE COURT OF APPEALS ERRED IN NOT AWARDING TO

PETITIONER LAND BANK OF THE PHILIPPINES THE
RELIEF PRAYED FOR UNDER ITS CROSS-CLAIM AGAINST
CODEFENDANT LOURDES FARMS, INC., THAT IS,
ORDERING SAID CO-DEFENDANT LOURDES FARMS, INC.
TO PAY ITS
_______________

36 G.R. Nos. L-30263-5, October 30, 1987, 155 SCRA 313.

37 Rollo, p. 39.

463

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Land Bank of the Philippines vs. Republic

OUTSTANDING OBLIGATION TO THE LAND BANK

COVERED BY THE SUPPOSED NULL AND VOID TCT NO. T-
57348, OR TO PROVIDE A SUBSTITUTE
38
COLLATERAL IN
LIEU OF SAID TCT NO. T-57348. (Italics supplied)

Our Ruling

LBP has no valid and subsisting mortgagee’s interest

over the land covered by TCT No. T-57348.
It has been established and admitted by LBP that: (1) the
subject land mortgaged to it by Lourdes Farms, Inc. is
covered by TCT No. T-57348; and (2) the said39 TCT is
derived from OCT No. P-2823 issued to Bugayong.
It was further ascertained by the courts below that at
the time OCT No. P-2823 was issued to Bugayong on
September 26, 1969, the land it covered was still within the
forest zone. It was declared
40
as alienable and disposable
only on March 25, 1981.
Despite these established facts, LBP argues that its
alleged interest as mortgagee of the subject land covered by
TCT No. T-57348 must be respected. It avers that TCT No.
T-57348 is a Torrens title which has no written indications
of defect or vice affecting the ownership of Lourdes Farms,
Inc. Hence, it posits that it was not and could not have
been required to explore or go beyond what the title
indicates or to search for defects not indicated in it.
LBP cites cases where the Court ruled that a party is
not required to explore further than what the Torrens title
upon its face indicates in quest of any hidden defect of an
inchoate right that may subsequently defeat his right to it;
and that a bank is not required before accepting a
mortgage to make an

_______________

38 Id., at pp. 19-20.

39 Id., at p. 38.
40 Id.

464
464 SUPREME COURT REPORTS ANNOTATED
Land Bank of the Philippines vs. Republic

investigation of the title of the property being given as

security. LBP submits that its right as a mortgagee is
binding against
41
the whole world and may not be
disregarded.
It further argues that review or reopening of registration
is proscribed, as the title has become incontrovertible
pursuant to Section 32 of P.D. No. 1529; and that its
mortgage rights and interest over the subject land is
protected by the constitutional
42
guarantee of non-
impairment of contracts.
The contention that LBP has an interest over the subject
land as a mortgagee has no merit. The mortgagor, Lourdes
Farms, Inc. from which LBP supposedly obtained its
alleged interest has never been the owner of the mortgaged
land. Acquisition of the subject land by Lourdes Farms, Inc.
is legally impossible as the land was released as alienable
and disposable only on March 25, 1981. Even at present, no
one could have possessed the same under a claim of
ownership for the period of thirty (30) years required under43
Section 48(b) of Commonwealth Act No. 141, as amended.
Hence, LBP acquired no rights over the land.
Under Article 2085 of the Civil Code, it is essential that
the mortgagor be the absolute owner of the thing
mortgaged, to wit:

“ARTICLE 2085. The following requisites are essential to the

contracts of pledge and mortgage:

(1) That they be constituted to secure the fulfillment of a

principal obligation;
(2) That the pledgor or mortgagor be the absolute owner of the
thing pledged or mortgaged;

_______________

41 Id., at p. 25.
42 Id., at pp. 24-25.
43 See Zarate v. Director of Lands, G.R. No. 131501, July 14, 2004, 434
SCRA 322, 334, citing Republic v. Court of Appeals, G.R. No. L-56948,
September 30, 1987, 154 SCRA 476.

465

VOL. 543, FEBRUARY 4, 2008 465

Land Bank of the Philippines vs. Republic
 (3) That the persons constituting the pledge or mortgage have
the free disposal of their property, and in the absence
thereof, that they be legally authorized for the purpose.”
(Emphasis ours)

Since Lourdes Farms, Inc. is not the owner of the land, it

does not have the capacity
44
to mortgage it to LBP. In De la
Cruz v. Court of Appeals, the Court declared:

“While it is true that the mortgagees, having entered into a

contract with petitioner as mortgagor, are estopped from
questioning the latter’s ownership of the mortgaged property and
his concomitant capacity to alienate or encumber the same, it
must be considered that, in the first place, petitioner did not
possess such capacity to encumber the land at the time for the
stark reason that it had been classified as a forest land and
remained a part of the patrimonial property of the State.
Assuming, without admitting, that the mortgagees cannot
subsequently question the fact of ownership of petitioner after
having dealt with him in that capacity, still, petitioner was never
vested with the proprietary power to encumber the property. In
fact, even if the mortgagees continued to acknowledge petitioner
as the owner of the disputed land, in the eyes of the law, the latter
can never be presumed to be owner.”

As correctly pointed out by the OSG, mortgagees of

nondisposable lands, titles to which were erroneously
issued,
45
acquire no protection under the Land Registration
Law.
Even assuming that LBP was able to obtain its own TCT
over the property by means of its mortgage contract with
Lourdes Farms, Inc., the title must also be cancelled as it
was derived from OCT No. P-2823 which was not validly
issued to Bugayong. Forest lands cannot be owned by
private persons. It is not registerable
46
whether the title is a
Spanish title or a Torrens title. It is well-settled that a
certificate of title is

_______________

44 349 Phil. 898, 906; 286 SCRA 230, 237 (1998).

45 Rollo, p. 55.
46 Director of Forest Administration v. Fernandez, G.R. No. 36827,
December 10, 1990, 192 SCRA 121, 138, citing Director of Lands v. Court
of Appeals, G.R. No. L-50340, December 26, 1984,

466

466 SUPREME COURT REPORTS ANNOTATED

Land Bank of the Philippines vs. Republic
void when it covers property of public domain classified as
forest or timber or mineral land. Any title issued covering
non-disposable lots even in the hands of 47an alleged
innocent purchaser for value shall be cancelled.
Moreover, the Court has already addressed the same
issue in its Resolution of November 14, 2001 on the petition
filed by the Philippine National Bank (PNB) in G.R. No.
149568 entitled “Philippine National Bank v. Republic of
the Philippines represented by the Director of Lands,” which
also appealed the subject CA decision. PNB, like LBP, is
also a mortgagee of another derivative TCT of the same
OCT No. 2823. Said resolution reads:

“On September 22, 1969, Angelito C. Bugayong was issued a sales

patent covering a 41,276 square meter parcel of land in Bocana,
Barrio Kabacan, Davao City by the Bureau of Lands. On the basis
of the sales patent, the Register of Deeds of Davao City issued
OCT No. P-2823 to Bugayong. Bugayong later subdivided the land
into four lots, one of which (Lot No. 4159-B covered by TCT No.
T32770) was sold by him to the spouses Reynaldo Rogacion and
Corazon Pahamotang. After obtaining TCT No. T-37786 in their
names, the spouses mortgaged the lot to the Philippine National
Bank (PNB). As they defaulted in the payment of their loan, the
PNB foreclosed the property and purchased it at the foreclosure
sale as the highest bidder. Eventually, the PNB consolidated its
title.
Sometime in 1981, upon the petition of the residents of the
land, the Bureau of Lands conducted an investigation into the
sales patent issued in favor of Angelito C. Bugayong and found
the sales patent to have been illegally issued because (1) the land
was released as alienable and disposable only on March 25, 1981;
previous to that, the land was within the forest zone; (2) the land
is covered by sea water during high tide; and (3) the patentee,
Angelito C. Bugayong, had never been in actual possession of the
land.

_______________

133 SCRA 701; Republic v. Court of Appeals, G.R. No. L-56077,

February 28, 1985, 135 SCRA 156; Vallarta v. Intermediate Appellate
Court, G.R. No. L-74957, June 30, 1987, 151 SCRA 679.
47 Republic v. Reyes, supra note 2.

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VOL. 543, FEBRUARY 4, 2008 467

Land Bank of the Philippines vs. Republic

Based on this investigation, the government instituted the

present suit in 1987 for cancellation of title/patent and reversion
of the parcel of land against Angelito C. Bugayong, the Rogacion
spouses, and the PNB, among others.
On July 6, 1996, the trial court rendered a decision declaring
OCT No. P-2823 and all titles derived therefrom null and void and
ordering reversion of the subject property to the mass of the
public domain. On appeal, the Court of Appeals affirmed the trial
court’s decision. Hence, this petition.
First. Petitioner contends that it had a right to rely on TCT No.
T-37786 showing the mortgagors Reynaldo Rogacion and Corazon
Pahamotang’s ownership of the property.
The contention is without merit. It is well-settled that a
certificate of title is void when it covers property of public domain
classified as forest or timber or mineral lands. Any title issued
covering non-disposable lots even in the hands of an alleged
innocent purchaser for value shall be cancelled (Republic v. Reyes,
155 SCRA 313 [1987]).
(Republic v. Court of Appeals, 148 SCRA 480 [1987]). In this
case, petitioner does not dispute that its predecessor-in-interest,
Angelito C. Bugayong, had the subject property registered in his
name when it was forest land. Indeed, even if the subject property
had been eventually segregated from the forest zone, neither
petitioner nor its predecessors-in-interest could have possessed
the same under claim of ownership for the requisite period of
thirty (30) years because it was released as alienable and
disposable only on March 25, 1981.
Second. Petitioner’s contention that respondent’s action for
reversion is barred by prescription for having been filed nearly
two decades after the issuance of Bugayong’s sales patent is
likewise without merit. Prescription does not lie against the State
for reversion of property which is part of the public forest or of a
forest reservation registered in favor of any party. Public land
registered under the Land Registration Act may be recovered by
the State at 48any time (Republic v. Court of Appeals, 258 SCRA
223 [1996]).”

_______________

48 Second Division Resolution dated November 14, 2001.

468

468 SUPREME COURT REPORTS ANNOTATED

Land Bank of the Philippines vs. Republic

Contrary to the argument of LBP, since the title is void, it

could not have become incontrovertible. Even prescription
may not be used as a defense against the Republic. 49On this
aspect, the Court in Reyes 50v. Court of Appeals, citing
Republic v. Court of Appeals, held:
“Petitioners’ contention that the government is now estopped from
questioning the validity of OCT No. 727 issued to them,
considering that it took the government 45 years to assail the
same, is erroneous. We have ruled in a host of cases that
prescription does not run against the government. In point is the
case of Republic v. Court of Appeals, wherein we declared:

And in so far as the timeliness of the action of the Government is

concerned, it is basic that prescription does not run against the State x x
x. The case law has also been:

When the government is the real party in interest, and is proceeding mainly to
assert its own rights and recover its own property, there can be no defense on the
ground of laches or limitation x x x.
Public land fraudulently included in patents or certificates of title may be
recovered or reverted to the State in accordance with Section 101 of the Public
Land Act. Prescription does not lie against the State in such cases for the Statute
of Limitations does not run against the State. The right of reversion or
reconveyance to the State is not barred by prescription. (Emphasis ours)

There is no impairment of contract but a valid

exercise of police power of the State.
The constitutional guarantee of non-impairment of
contracts may not likewise be used by LBP to validate its
interest over the land as mortgagee. The State’s restraint
upon the right to have an interest or ownership over forest
lands does

_______________

49 Supra note 3.
50 G.R. No. 79582, April 10, 1989, 171 SCRA 721, 734.

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Land Bank of the Philippines vs. Republic

not violate the constitutional guarantee of non-impairment

of contracts. Said restraint is a valid exercise of the police
power of the State.51As explained by the Court in Director of
Forestry v. Muñoz:

“The view this Court takes of the cases at bar is but in adherence
to public policy that should be followed with respect to forest
lands. Many have written much, and many more have spoken,
and quite often, about the pressing need for forest preservation,
conservation, protection, development and reforestation. Not
without justification. For, forests constitute a vital segment of any
country’s natural resources. It is of common knowledge by now
that absence of the necessary green cover on our lands produces a
number of adverse or ill effects of serious proportions. Without the
trees, watersheds dry up; rivers and lakes which they supply are
emptied of their contents. The fish disappear. Denuded areas
become dust bowls. As waterfalls cease to function, so will
hydroelectric plants. With the rains, the fertile topsoil is washed
away; geological erosion results. With erosion come the dreaded
floods that wreak havoc and destruction to property—crops,
livestock, houses and highways—not to mention precious human
lives. Indeed, the foregoing observations should be written down
in a lumberman’s decalogue.
Because of the importance of forests to the nation, the State’s
police power has been wielded to regulate the use and occupancy of
forest and forest reserves.
To be sure, the validity of the exercise of police power in the
name of the general welfare cannot be seriously attacked. Our
government had definite instructions from the Constitution’s
preamble to “promote the general welfare.” Jurisprudence has
time and again upheld the police power over individual rights,
because of the general welfare. Five decades ago, Mr. Justice
Malcolm made it clear that the “right of the individual is
necessarily subject to reasonable restraint by general law for the
common good” and that the “liberty of the citizen may be
restrained in the interest of public health, or of the public order
and safety, or otherwise within the proper scope of the police
power.” Mr. Justice Laurel, about twenty years later, affirmed the
precept when he declared that “the state in order to promote the
general welfare may interfere with personal liberty, with

_______________

51 132 Phil. 637, 669-670; 23 SCRA 1183, 1214-1215 (1968).

470

470 SUPREME COURT REPORTS ANNOTATED

Land Bank of the Philippines vs. Republic

property, and with business and occupations” and that “[p]ersons

and property may be subjected to all kinds of restraints and
burdens, in order to secure the general comfort, health, and
prosperity of the state.” Recently, we quoted from leading
American case, which pronounced that “neither property rights
nor contract rights are absolute; for government cannot exist if the
citizen may at will use his property to the detriment of his fellows,
or exercise his freedom of contract to work them harm,” and that,
therefore, “[e]qually fundamental with the private right is that of
the public to regulate it in the common interest.” (Emphasis ours
and citations omitted)
52
In Edu v. Ericta, the Court defined police power as the
authority of the state to enact legislation that may
interfere with personal liberty or property in order to
promote the general welfare. It is the power to prescribe
regulations to promote the health, morals, peace,
education, good order or safety, and general welfare of the
people. It is that inherent and plenary power of the State
which enables it to prohibit all things53
hurtful to the
comfort, safety and welfare of society. It extends to all the
great public needs and is described as the most pervasive,
the least limitable and the most demanding of the three
inherent powers 54of the State, far outpacing taxation and
eminent domain. It is a ubiquitous and often unwelcome
intrusion. Even so, as long as the activity or the property
has some relevance to the public welfare, its regulation 55
under the police power is not only proper but necessary.
Preservation of our forest lands could entail intrusion
upon contractual rights as in this case but it is justified by
the Latin maxims Salus populi est suprema lex and Sic
utere tuo ut alienum non laedas, which call for the
subordination of56 individual interests to the benefit of the
greater number.

_______________

52 G.R. No. L-32096, October 24, 1970, 35 SCRA 481.

53 Rubi v. Provincial Board, 39 Phil. 660, 708 (1919).
54 Ynot v. Intermediate Appellate Court, G.R. No. 74457, March 20,
1987, 148 SCRA 659, 670.
55 Id.
56 Id.

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Land Bank of the Philippines vs. Republic

While We sympathize with petitioner, We nonetheless

cannot, in this instance, yield to compassion and equity.
57
The rule must stand no matter how harsh it may seem.

We cannot resolve the cross-claim for lack of factual

basis. The cross-claim must be remanded to the RTC
for further proceedings.
LBP filed a58 cross-claim against Lourdes Farms, Inc. before
the RTC. The cross-claim is for the payment of
crossdefendant Lourdes Farms, Inc.’s alleged obligation to
LBP or its submission of a substitute collateral security in
lieu of the property covered by TCT No. T-57348.
However, the records do not show that Lourdes Farms,
Inc. was required by the RTC to file an answer to the cross-
claim. Likewise, Lourdes Farms, Inc. was not notified of
the proceedings before the CA. It was not also made a party
to this petition.
LPB now contends that the CA erred in not granting its
cross-claim against Lourdes Farms, Inc. We are thus
confronted with the question: Should We now order
Lourdes Farms, Inc. to comply with the demand of LBP?
We rule in the negative. It may be true that Lourdes
Farms, Inc. still has an obligation to LBP but We cannot
make a ruling regarding the same for lack of factual basis.
There is no evidence-taking on the cross-claim. No evidence
was adduced before the RTC or the CA regarding it. No
factual finding or ruling was made by the RTC or the CA
about it.
It bears stressing that in a petition for review on
certiorari, the scope of this Court’s judicial review of
decisions of the CA

_______________

57 Reyes v. Court of Appeals, supra note 3.

58 Records, p. 512.

472

472 SUPREME COURT REPORTS ANNOTATED

Land Bank of the Philippines vs. Republic

is generally confined59 only to errors of law. Questions of fact

are not entertained.
Moreover, the failure to make a ruling on the cross-claim
by the RTC was 60
not assigned as an error in LBP’s
appellant’s brief before the CA. Hence, the CA cannot be
faulted for not making a ruling on it. 61
As held in De Liano v. Court of Appeals, appellant has
to specify in what aspect of the law or the facts the trial
court erred. The conclusion, therefore, is that appellant
must carefully formulate his assignment of errors. Its
importance cannot be underestimated, as Section 8, Rule
51 of the Rules of Court will attest:

“Questions that may be decided.—No error which does not affect

the jurisdiction over the subject matter or the validity of the
judgment appealed from or the proceedings therein will be
considered unless stated in the assignment of errors, or closely
related to or dependent on an assigned error and properly argued
in the brief, save as the court may pass upon plain errors and
clerical errors.”

Apparently, the cross-claim was taken for granted not only

by the RTC but also by LBP. The cross-claim was not
included as a subject or issue in the pre-trial order and
instead of asking that the same be heard, LBP filed a
62
 62
motion to submit the main case for resolution. The main
case was thus resolved by the RTC without touching on the
merits of the cross-claim.
On the other hand, while the CA did not make a
categorical ruling on LBP’s cross-claim, it pointed out that:
(1) as found by the RTC, there is a mortgage contract
between LBP and Lourdes Farms, Inc., with LBP as
mortgagee and Lourdes

_______________

59 Diokno v. Cacdac, G.R. No. 168475, July 4, 2007, 526 SCRA 440, 460,
citing Gerlach v. Reuters Limited Phils., G.R. No. 148542, January 17,
2005, 448 SCRA 535, 544-545.
60 CA Rollo, pp. 29-38.
61 421 Phil. 1033, 1043; 370 SCRA 349, 363 (2001).
62 Records, pp. 490-491.

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Land Bank of the Philippines vs. Republic

Farms, Inc. as mortgagor; and (2) LBP’s proper63 recourse is

to pursue its claim against Lourdes Farms, Inc.
The CA thus impliedly ruled that LBP’s cross-claim
should not be included in this case. Instead of making a
ruling on the same, it recommended that LBP pursue its
claim against Lourdes Farms, Inc.
All told, although the relationship between LBP and
Lourdes Farms, Inc. as mortgagee and mortgagor was
established, the cross-claim of LBP against Lourdes Farms,
Inc. was left unresolved.
The Court is not in a position to resolve the cross-claim
based on the records. In order for the cross-claim to be
equitably decided, the Court, not being a trier of facts, is
constrained to remand the case to the RTC for further
proceedings. Remand of the case for further proceedings is
proper due to absence of a64 definitive factual determination
regarding the cross-claim.
WHEREFORE, the appealed Decision of the Court of
Appeals is hereby AFFIRMED with the MODIFICATION
that the cross-claim of petitioner Land Bank of the
Philippines against Lourdes Farms, Inc. is REMANDED to
the Regional Trial Court, Branch 15, Davao City, for
further proceedings.
SO ORDERED.

          Ynares-Santiago (Chairperson), Austria-Martinez,

Corona** and Nachura, JJ., concur.
 _______________

63 CA Rollo, p. 187.
64 See Telefunken Semiconductors Employees Union-FFW v. Court of
Appeals, G.R. Nos. 143013-14, December 18, 2000, 348 SCRA 565, 580; Cf.
Government Service Insurance System v. Commission on Audit, G.R. No.
138381, November 10, 2004, 441 SCRA 532, 544.
** Vice Associate Justice Minita V. Chico-Nazario. Justice Nazario is on
official leave per Special Order No. 484 dated January 11, 2008.

474

474 SUPREME COURT REPORTS ANNOTATED

Kaunlaran Lending Investors, Inc. vs. Uy

Judgment affirmed with modification.

Note.—Property of the public domain is incapable of

registration and its inclusion in a title nullifies that title.
(Morandarte vs. Court of Appeals, 436 SCRA 213 [2004])

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