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Property rules

Restlessness in the village

The residents of Happy Village were unhappy. They had no choice but to take action.

The residents of Happy Village filed a civil case for quieting of title with damages Smiley Development Corporation. Their complaint essentially alleged that they are successors and transferees-in-interest of Manuel Torre, the supposed owner of an unregistered parcel of land in the City of Pines which Manuel possessed and declared for tax purposes in 1918. The residents further claimed that they are in possession of the property in the concept of owner, declared their respective lots and homes for tax purposes, and paid the real estate taxes thereon.

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Much to their surprise, Smiley Development Corp. began to erect a fence on the property, claiming that it is the owner of a large portion thereof by virtue of Transfer Certificate of Title No. T-1234. The residents alleged that Smiley Development Corp.’s title is null and void, as it was derived from Original Certificate of Title No. 5678, which was declared void pursuant to a Presidential Decree and in a decided case that reached the High Court. Consequently, Smiley Development Corp.’s title is a cloud upon their title and interests and should therefore be cancelled.

Smiley Development Corp., in its answer, claimed that the villagers have no cause of action; that TCT No. 1234 is a valid and subsisting title; that the case for quieting of title constitutes a collateral attack upon TCT No. 1234; and that the residents have no title to the subject property and are mere illegal occupants of the property.

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In the course of the proceedings, the residents of Happy Village submitted documents to the trial court where they, among others, acknowledged that they applied for the purchase of the property from the government, through townsite sales applications coursed through the DENR.

Q: What are the requisites for an action to quiet title to prosper?

A: For an action to quiet title to prosper, two indispensable requisites must be present, namely: (1) the complainant has a legal or an equitable title to or interest in the real property subject of the action; and (2) the deed, claim, encumbrance or proceeding claimed to be casting cloud on his title must be shown to be in fact invalid or inoperative despite its prima facie appearance of validity or legal efficacy.

Q: What is the difference between legal title and equitable title?

A: Legal title denotes registered ownership, while equitable title means beneficial ownership.

Q: What is beneficial ownership?

A: Beneficial ownership has been defined as ownership recognized by law and capable of being enforced in the courts at the suit of the beneficial owner. Black’s Law Dictionary indicates that the term is used in two senses: first, to indicate the interest of a beneficiary in trust property (also called “equitable ownership”); and second, to refer to the power of a corporate shareholder to buy or sell the shares, though the shareholder is not registered in the corporation’s books as the owner. Usually, beneficial ownership is distinguished from naked ownership, which is the enjoyment of all the benefits and privileges of ownership, as against possession of the bare title to property.

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Q: Do the residents of Happy Village have legal or equitable title to the subject property?

A: No. Evidently, there are no certificates of title in their respective names. And by their own admission in the documents they submitted to the trial court, they acknowledged that they applied for the purchase of the property from the government, through townsite sales applications coursed through the DENR. The villagers thus admitted that they are not the owners of the subject property; that the land in question constitutes state or government land which they would like to acquire by purchase. It would have been different if they were directly claiming the property as their own as a result of acquisitive prescription, which would then give them the requisite equitable title.

By stating that they were in the process of applying to purchase the subject property from the government, they admitted that they had no such equitable title, at the very least, which should allow them to prosecute a case for quieting of title. In short, the villagers recognize that legal and equitable title to the subject property lies in the State. Consequently, as to them, quieting of title is not an available remedy.

Q: Is there still a remedy available to the villagers?

A: The residents of Happy Village are not precluded from filing another case—a direct proceeding to question Smiley Development Corp.’s title after all, it appears that their townsite sales applications are still pending and have not been summarily dismissed by the government—which could indicate that the subject property is still available for distribution to qualified beneficiaries.

If Smiley Development Corp.’s title is indeed null and void, then such proceeding would only be proper to nullify the same. It is just that a quieting of title case is not an option for the villagers, because in order to maintain such action, it is primarily required that the plaintiff must have legal or equitable title to the subject property—a condition which they could not satisfy.

(Source: Residents of Lower Atab & Teachers Village, Sto. Tomas Proper Barangay, Baguio City vs. Sta. Monica Industrial Development Corporation, G.R. No.198878, Oct. 15, 2014)

Ma. Soledad Deriquito-Mawis Dean, College of Law, Lyceum of the Philippines University; Member of the Board of Trustees, Philippine Association of Law Schools Mawis Law Office

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