G.R. No. L-65584 and L-65895, July 20, 1990
LEONARDO MONTINOLA, ET AL. and NASIPIT LUMBER COMPANY, INC., petitioners, vs. THE INTERMEDIATE APPELLATE COURT and SILVERIA VDA. DE CARDONIGA, ET AL., respondents.

FACTS

The controversy involves Lot No. 150 in Nasipit, covered by two conflicting titles. Private respondents, the Cardonigas, derive their claim from a judicially reconstituted Original Certificate of Title (OCT) in the name of Lorenzo Cardoniga, based on a 1929 cadastral court decision awarding him the lot. Petitioners, the Montinolas, claim ownership through an extrajudicially reconstituted Transfer Certificate of Title (TCT) in the name of Carlos Rodriguez, their predecessor. Petitioner Nasipit Lumber Company, Inc. (NLCI) has been in possession of the lot since 1946 as the Montinolas’ lessee.
The Cardonigas demanded rentals from NLCI, which refused, leading to a 1972 complaint for recovery of possession and rentals against NLCI. NLCI impleaded the Montinolas as third-party defendants. The trial court dismissed the complaint, upholding the Montinolas’ title. The Intermediate Appellate Court reversed, declaring the Cardonigas as owners, ordering cancellation of the Montinolas’ title, and directing NLCI to vacate and pay rentals from the filing of the complaint.

ISSUE

The core issue is which of the two reconstituted certificates of title should prevail as evidence of ownership over Lot No. 150.

RULING

The Supreme Court affirmed the appellate court’s ruling that the Cardonigas’ title prevails. The legal logic rests on the principle of priority in registration under the Torrens system. The Court examined the origin of both claims. The Cardonigas’ ownership was established by a cadastral court decision dated June 3, 1929. In contrast, the Montinolas’ title traced back to an original registration decree dated March 8, 1927. The Court found the Montinolas’ title dubious, as it inaccurately reflected the original registration date as September 5, 1927. Between a cadastral decree (Cardonigas) and an earlier registration decree (Montinolas), the cadastral proceeding, being an in rem proceeding that conclusively settles ownership, is superior. The Montinolas’ title, being extrajudicially reconstituted and of questionable validity, cannot overcome the Cardonigas’ title rooted in a final cadastral judgment.
However, the Court modified the damages award. NLCI, as a lessee in good faith relying on its lessor’s title, should not be liable for accrued rentals. The Montinolas, as warrantors of peaceful possession, were held liable for rentals from the filing of the complaint until the decision. NLCI was ordered to pay rentals directly to the Cardonigas only from receipt of this final decision until it vacates the premises. The Court ordered the cancellation of the Montinolas’ reconstituted title.