G.R. No. 123509 ; March 14, 2000
LUCIO ROBLES, EMETERIA ROBLES, ALUDIA ROBLES and EMILIO ROBLES, petitioners, vs. COURT OF APPEALS, Spouses VIRGILIO SANTOS and BABY RUTH CRUZ, RURAL BANK OF CARDONA, Inc., HILARIO ROBLES, ALBERTO PALAD JR. in his capacity as Director of Lands, and JOSE MAULEON in his capacity as District Land Officer of the Bureau Of Lands, respondents.

FACTS

The petitioners are heirs of Silvino Robles, who inherited a parcel of unregistered land from his father, Leon Robles. They possessed and cultivated the land, with petitioner Lucio Robles building a house and planting crops thereon. They entrusted tax payments to their half-brother, Hilario Robles. Unbeknownst to them, Hilario, through fraudulent means, had the tax declaration transferred to his wife’s father, Exequiel Ballena, and later to himself. Using this tax declaration as security, Hilario and his wife obtained a loan from respondent Rural Bank of Cardona, Inc., which led to a mortgage, foreclosure, and the Bank acquiring the property at auction. The Bank subsequently sold the land to respondent spouses Virgilio Santos and Baby Ruth Cruz, who obtained a Free Patent over it.

ISSUE

The core issue is whether the petitioners, as co-owners, can quiet title against the respondents who derived their claim from a fraudulent mortgage and subsequent patent, despite the land being unregistered.

RULING

The Supreme Court reversed the Court of Appeals and reinstated the trial court’s decision in favor of the petitioners. The legal logic proceeds from three key principles. First, for quieting of title, petitioners must prove their title and a cloud thereon. Their open, continuous, exclusive possession since 1942, coupled with tax declarations and payments, vested them with ownership by acquisitive prescription. The fraudulent mortgage and subsequent Free Patent constituted the requisite cloud. Second, the Bank acted in bad faith and failed to exercise due diligence. As a banking institution, it had the duty to ascertain the true owners and investigate the property’s actual possession. Its failure to do so, especially given that the mortgagors were not in possession and the tax declaration was not in their names initially, rendered the mortgage and all subsequent transactions null and void. Third, prescription cannot run in favor of a co-owner against his co-owners unless there is a clear repudiation of the co-ownership communicated to the others. Hilario Robles’s secret and fraudulent acts did not constitute such a repudiation. Therefore, the petitioners’ ownership rights were never extinguished, and the respondents, as purchasers in bad faith, acquired no valid title. The Free Patent issued to the Santos spouses was likewise declared void, as the land was no longer part of the public domain but already privately owned by the petitioners.