Capitol Subdivisions vs. Province of Negros Oriental

Capitol Subdivisions vs. Province of Negros Oriental

7 SCRA 60 (1963)

FACTS: Lot 378, which is the subject matter of this case, is part of Hacienda Madalagan, registered under the name of Agustin Amenabar and Pilar Amenabar, covered by Original Certificate of Title No. 1776 issued in the name of the aforementioned in 1916.

Sometime in 1920, the Amenabars sold the aforementioned Hacienda to Jose Benares for the purchase price of P300,000, payable in installments. In 1924, the Original Certificate of Title issued in the name of the Amenabars was cancelled, and in lieu thereof, Benares obtained a Transfer Certificate of Title under his name.

Meanwhile, in 1921, Benares mortgaged the Hacienda including Lot 378 to Bacolod-Murcia Milling Co. And then later in 1926, he again mortgaged the Hacienda, including said Lot 378, on the Philippine National Bank, subject to the first mortgage held by the Bacolod-Murcia Milling Co.

These transactions were duly recorded in the office of the Register of Deeds of Negros Occidental.

The mortgage in favor of the Bank was subsequently foreclosed and the Bank acquired the Hacienda, including Lot 378, as purchaser at the foreclosure sale.

Accordingly, the TCT in the name of Benares was cancelled and another TCT was issued in the name of the Bank. 

In 1935, the Bank agreed to sell the Hacienda to the son of Jose Benares, Carlos Benares, for the sum of P400,000, payable in annual installments, subject to the condition that the title will remain with the Bank until full payment.

Thereafter, Carlos Benares transferred his rights, under his contract with the Bank, to plaintiff herein, which completed the payment of the installments due to the Bank in 1949.

Hence, the Bank executed the corresponding deed of absolute sale to the plaintiff and a transfer certificate of title covering Lot 378 was issued.

It should be noted that, despite the acquisition of the Hacienda in 1934 by the Bank, the latter did not take possession of the property for Jose Benares claimed to be entitled to retain it under an alleged right of lease.

For this reason, the deed of promise to sell, executed by the Bank in favour of Carlos P. Benares, contained a caveat emptor stipulation.

When, upon the execution of the deed of absolute sale 1949, plaintiff took steps to take possession the Hacienda and it was discovered that Lot 378 was the land occupied by the Provincial Hospital of Negros Occidental. Immediately thereafter, plaintiff made representations with or on October 4, 1949, plaintiff made representations with the proper officials to clarify the status of said occupation.  Not being satisfied with the explanations given by said officials, it brought the present action on June 10, 1950.

In its answer, defendant maintained that it had acquired the lot in question in the year 1924-1925 through expropriation proceedings and that it took possession of the lost and began the construction of the provincial hospital thereon. They further claimed that for some reason beyond their comprehension, title was never transferred in its name and it was placed in its name only for assessment purposes.

And that defendant acted in bad faith in purchasing the lot knowing that the provincial hospital was situated there and that he did not declare such property for assessment purposes only until 1950.

ISSUE: Whether or not defendant herein had acquired the lot in question in the aforementioned expropriation proceedings.

HELD: The Court held that defendant was not able to sufficiently prove that they have acquired the legal title over Lot 378. Several circumstances indicate that the expropriation had not been consummated.

First, there, the entries in the docket pertaining to the expropriation case refer only to its filing and the publication in the newspaper of the notices. Second, there was an absence of a deed of assignment and of a TCT in favour of the Province as regards Lot 378. Third, the property was mortgaged to Bacolod-Murcia Milling Co. Lot 378 could not have been expropriated without the intervention of the Milling Co. And yet, the latter was not made a party in the expropriation proceedings. And fourth, a second mortgage was constituted in favour of the Bank, which would not have accepted the mortgage had Lot 378 not belonged to the mortgagor. Neither could said lot have been expropriated without the Bank’s knowledge and participation.

Furthermore, in the deed executed by the Bank promising to sell the Hacienda Mandalagan to Carlos Benares, it was explicitly stated that some particular lots had been expropriated by the Provincial Government of Negros Occidental, thus indicating, by necessary implication, that Lot 378 had not been expropriated.