G.R. No. 200858; August 7, 2013
NATIONAL HOUSING AUTHORITY, PETITIONER, vs. CORAZON B. BAELLO, WILHELMINA BAELLO-SOTTO, AND ERNESTO B. BAELLO, JR., RESPONDENTS.

FACTS

On September 21, 1951, Pedro Baello and Nicanora Baello filed an application for registration of a 147,972-square meter parcel of land in Caloocan, which they inherited from their mother. The Court of First Instance (CFI) of Rizal granted the application on November 2, 1953, awarding Pedro 2/3 and Nicanora 1/3 of the land. The decision became final. Decree No. 13400 and Original Certificate of Title (OCT) No. (804) 53839 were issued in their names on October 27, 1954. The property was later subdivided, with Pedro’s portion (Lot A) covered by TCT No. 181493. Pedro died on December 3, 1971, leaving multiple heirs, including the respondents.
During the martial law regime, President Ferdinand Marcos issued Presidential Decree No. 569 on October 30, 1974, to expropriate the Dagat-Dagatan Lagoon area, which included the Baello property, for a housing project. Armed military personnel ejected the family caretaker, demolished structures, and the National Housing Authority (NHA) took possession. The NHA subdivided the property and awarded lots to beneficiaries.
After the EDSA Revolution, the Baello heirs executed an extrajudicial partition on February 23, 1987. Respondents were issued TCT No. 280647 for an 8,404-square meter portion, which was later consolidated under TCT No. C-362547 in the name of Ernesto Baello, Jr.
On August 18, 1987, the NHA filed an expropriation case (Civil Case No. C-169) against the heirs. The Regional Trial Court (RTC) dismissed it on September 5, 1990, on grounds of res judicata and lack of cause of action. The Court of Appeals affirmed the dismissal on August 21, 1992, and the Supreme Court denied the NHA’s petition on May 3, 1993.
Subsequently, on November 5, 1993, the NHA filed a complaint to nullify OCT No. (804) 53839 (Civil Case No. C-16399). The RTC dismissed it on October 17, 1995, on grounds of estoppel and res judicata, stating the issue was barred by the final judgment in the 1953 land registration case. The Court of Appeals affirmed on January 26, 2000, and the Supreme Court, in G.R. No. 143230 (promulgated August 20, 2004), denied the NHA’s petition, ruling the action was barred by judicial estoppel.
Meanwhile, on June 30, 1994, during the pendency of the nullity case, respondents filed an action for Recovery of Possession and Damages against the NHA (Civil Case No. C-16578). The NHA, in its Answer, alleged the OCT was fraudulently obtained as the land was declared alienable only in 1986. The case was archived pending the Supreme Court’s resolution of G.R. No. 143230 and resumed after its denial.
The RTC, Branch 128, rendered a decision on May 13, 2009, in favor of respondents. It ordered the NHA to surrender possession of the land, pay reasonable compensation/rental value from September 21, 1993, until actual surrender, and pay moral damages, exemplary damages, attorney’s fees, and costs. The Court of Appeals affirmed the RTC decision on November 28, 2011. The NHA filed the present petition for review.

ISSUE

Whether the Court of Appeals erred in affirming the trial court’s decision ordering the NHA to surrender possession of the subject property to the respondents and to pay compensation and damages.

RULING

The Supreme Court DENIED the petition and AFFIRMED the Court of Appeals’ Decision and Resolution. The Court held that the NHA’s possession of the property was illegal. The NHA’s claims regarding the validity of the respondents’ title had already been conclusively settled and barred by prior final judgments. Specifically, the Supreme Court’s 2004 Decision in G.R. No. 143230, which involved the same parties and the same property, definitively ruled that the NHA was barred by judicial estoppel from assailing the validity of OCT No. (804) 53839 and its derivative titles. That prior ruling constituted the “law of the case” and was binding. Consequently, the respondents, as established bona fide owners, had a clear right to possess the property. The NHA, having taken possession without the owners’ consent and without completing a valid expropriation, was a possessor in bad faith. As such, the NHA was liable to restore possession and pay reasonable compensation for the use of the property (equivalent to fair rental value) from the time of demand, as well as moral and exemplary damages for the illegal takeover and the suffering inflicted upon the owners.