G.R. No. 222482, June 2, 2020
PRINCESS RACHEL DEVELOPMENT CORPORATION AND BORACAY ENCLAVE CORPORATION, PETITIONERS, V. HILL VIEW MARKETING CORPORATION, STEFANIE DORNAU AND ROBERT DORNAU, RESPONDENTS.

FACTS

The controversy stems from the perceived conflict between the general presumption of good faith regarding possession under Article 527 of the Civil Code and the principle of constructive notice of registration under Section 52 of Presidential Decree No. 1529 (Property Registration Decree). The case involves an encroachment scenario where the lots encroached upon are registered under the Torrens system in the name of petitioner Princess Rachel Development Corporation (PRDC).

ISSUE

The core issue is determining the applicable legal principles for adjudicating rights and obligations in encroachment cases, specifically reconciling the Civil Code provisions on good faith possession with the Torrens system’s constructive notice rule.

RULING

In a Separate Concurring Opinion, Justice Caguioa clarified that there is no conflict between Article 527 of the Civil Code and Section 52 of PD 1529, as they differ in scope. The interplay between the general provisions of the Civil Code and the specific provisions of PD 1529 is reconciled as follows:
1. When both adjoining properties are unregistered, the general presumption of good faith under the Civil Code applies.
2. When the property encroached upon is registered under the Torrens system:
a. If the encroachment is by an adjacent owner of unregistered land, the constructive notice rule under Section 52 of PD 1529 applies, deeming the adjacent owner a builder in bad faith.
b. If the encroachment is by an adjacent owner of registered land and there is no overlap in the Torrens titles, Sections 15 and 31 of PD 1529 apply, deeming the adjacent owner a builder in bad faith due to actual knowledge of his property’s bounds and constructive notice of the encroached property’s bounds.
c. If the encroachment is by an adjacent owner of registered land and there is an overlap in the Torrens titles, Sections 15 and 31 of PD 1529 apply, but the adjacent owner is deemed in good faith regarding improvements built within his own title’s bounds.
d. If the encroachment is by an adjacent owner of registered land and his title is completely subsumed within the encroached property’s title, the constructive notice rule applies if he derives title from a later registrant; priority of registration governs.
3. When the property encroached upon is unregistered, but the encroachment is by an adjacent owner of registered land, the adjacent owner is deemed a builder in bad faith due to actual knowledge of his property’s bounds.
The opinion emphasizes that for registered lands, Articles 448 to 454 of the Civil Code should be applied in conjunction with PD 1529, pursuant to Articles 18 and 711 of the Civil Code, which state that special laws govern matters they cover.