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THIRD DIVISION

G. R. No. 152947 - July 7, 2004

EAST ASIA TRADERS, INC., Petitioner, vs. REPUBLIC OF THE PHILIPPINES, represented by the DIRECTOR, LANDS MANAGEMENT BUREAU, Respondent.


D E C I S I O N


SANDOVAL-GUTIERREZ, J.:

Before us is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, as amended, assailing the Decision1 dated November 26, 2001 and the Resolution2 dated April 9, 2002, both rendered by the Court of Appeals in CA-G.R. SP No. 59627, "East Asia Traders, Inc. vs. Hon. Regional Trial Court (RTC), Tanauan, Batangas, Branch 83, and Republic of the Philippines, represented by the Director of Lands Management Bureau."

The factual antecedents as borne by the records are:

On December 15, 1986, Galileo Landicho filed with the Bureau of Lands, District Office at Lemery, Batangas, Free Patent Application No. 1427. This application3 covers Lot No. 4355 consisting of 00.1312 hectare situated in Niogan, Laurel, Batangas. On March 6, 1987, then Acting District Land Officer Constante Asuncion, approved4 the application and issued Free Patent No. 1516 in Landicho's name. Subsequently or on January 22, 1988, the Registry of Deeds of Tanauan, Batangas issued to him Original Certificate of Title (OCT) No. P-3218.

On June 7, 1989, Landicho sold the lot to Teresita Reyes. Forthwith, Landicho's OCT No. P-3218 was cancelled by the same Registry of Deeds and in lieu thereof, TCT No. 36341 was issued in the name of Teresita Reyes. In turn, on June 7, 1990, Reyes sold the same lot to East Asia Traders, Inc., Petitioner, represented by its Vice-President, Betty Roxas Chua. Consequently, the Register of Deeds cancelled TCT No. 36341 in the name of Reyes and in lieu thereof, issued TCT No. 38609 in the name of petitioner.

Meanwhile, the Department of Environment and Natural Resources (DENR), pursuant to Section 91 of Commonwealth Act No. 141, as amended,5 conducted an investigation to ascertain the truth of the material facts alleged in various free patent applications or whether they are maintained and preserved in good faith. The investigation covered several parcels of land, including Lot 4355. The DENR found that at the time Landicho applied for a free patent, Lot 4355 was inalienable, being a property of public dominion intended to be used as a national road.

This prompted the Republic of the Philippines, respondent, through the Director of the Lands Management Bureau to file, on March 9, 1998, with the Regional Trial Court (RTC), Branch 83, Tanauan, Batangas, a complaint for reversion and cancellation of Free Patent No. 1516, OCT No. P-3218 and its derivative titles (TCT No. 36341 and TCT No. 38609), docketed as Civil Case No. CT-98-001. Impleaded as defendants were petitioner East Asia Traders, Inc., Landicho, Reyes, and the Register of Deeds of Tanauan, Batangas.

Instead of filing an answer, petitioner, on September 14, 1998, filed a motion to dismiss the complaint on the following grounds: (1) the cause of action has prescribed; (2) litis pendentia; and (3) the complaint fails to state a sufficient cause of action.

On January 11, 2000, the RTC issued an Order denying petitioner's motion to dismiss for lack of merit. Petitioner's motion for reconsideration was likewise denied in its Order dated May 31, 2000.

Petitioner then filed with the Court of Appeals a petition for certiorari and prohibition (with prayer for issuance of a temporary restraining order and a writ of preliminary injunction) seeking to nullify the trial court's (1) Order dated January 11, 2000 denying petitioner's motion to dismiss; and (2) Order dated May 31, 2000 denying it's motion for reconsideration.

On November 26, 2001, the Appellate Court rendered a Decision, the dispositive portion of which reads:

"WHEREFORE, in view of all the foregoing, the herein 'Petition for Certiorari and Prohibition with Prayer for the Issuance of Temporary Restraining Order and Writ of Preliminary Injunction' is DENIED DUE COURSE and, accordingly, DISMISSED, for lack of merit. The assailed Orders dated January 11, 2000 and May 31, 2000 of the Regional Trial Court, Branch 83, Fourth Judicial Region, Tanauan, Batangas, are UPHELD and REITERATED.

SO ORDERED."

The Court of Appeals ratiocinated as follows:

"As to the first ground for the petition, petitioner East Asia Traders, Inc. contends that respondent court committed an error when it denied its Motion to Dismiss despite the fact that prescription had already set in against the State.

As alleged in the complaint, Galileo Landicho's application for Free Patent was approved on March 6, 1987 and subsequently registered under his name. Then, the following year, he sold the same land to Teresita Reyes who, subsequently, sold it to petitioner East Asia Traders, Inc. Gathered from the foregoing events, it is now the contention of petitioner that the action for reversion filed by respondent Republic of the Philippines is already barred by prescription since it only filed the action for reversion on March 9, 1998, eleven (11) years after the registration of the land in question.

We are not swayed by the argument proffered by the petitioner, simply because prescription does not lie against the State. x x x.

And as provided in Article 1113 of the Civil Code: 'All things which are within the commerce of men, are susceptible of prescription, unless otherwise provided. Property of the State or any of its subdivisions not patrimonial in character shall not be the object of prescription.'

To our mind, respondent Republic could not have been more correct when it cited Article 1108 (4) of the Civil Code, which provides that prescription, both acquisitive and extinctive, does not run against the State and its subdivisions. x x x.

As to the second ground, respondent Republic correctly pointed out in its complaint that the subject land sought to be retained by petitioner is inalienable because subsequent investigations conducted by the DENR disclosed that the land in question was a private land taken by the government for the construction of a national road. Being private land, even if it belongs to the government, the same is not covered by Commonwealth Act No. 141, as amended, otherwise known as the Public Land Act much less can it be disposed of by the Bureau of Lands by a free patent under Chapter VII of said Act, and even assuming that there was re-routing of the national road, the land remains under the control of the Department of Public Works and Highways (DPWH); and even if the DPWH does not need the land anymore for road purposes, the same does not become available for application or appropriation by any private party until and unless officially released for that purpose, and even then the land can be disposed of only by sale or lease thru public bidding. Thus, the property in question is considered inalienable land of the public domain.

What respondent Republic is trying to point out was that the petitioner, through fraud and/or misrepresentation, was able to procure title to the land, as in fact, there was no record of any final investigation report in the folder of the application, nor was there any indication written in the summary of the survey data that the land in question was claimed during the cadastral survey. As stated by respondent Republic, the object of the complaint it filed was to cancel the title issued to defendant Galileo Landicho for being void ab initio pursuant to Section 91 of the Public Land Act. Apparently, the Director of Lands was misled into issuing patents over the land; therefore, the patents and corresponding certificates of title are immediately infected with jurisdictional flaw, which warrants the institution of suits to revert lands to the State. x x x. Hence, its complaint stated a valid cause of action.

With respect to the third ground for the petition, We hold that while it is true that the land in question used to be privately owned, it was converted into public land when it was acquired by the State through the Department of Public Works and Highways for the construction of a national road. Respondent Republic maintains that the land being public land, reserved for a specific public purpose, the same cannot be the subject of private ownership as it is beyond the commerce of man. Even if the proposed national road was re-routed elsewhere, it did not change the character of the land classified as public land. x x x:

x x x

But more importantly, even assuming, arguendo, that Galileo Landicho's Free Patent No. (IV-3-A) 1516 and his Original Certificate of Title (O.C.T.) No. P-3218 issued on March 6, 1987 were valid, the sale to Teresita Reyes of the property on June 7, 1989 and her Transfer Certificate of Title (T.C.T.) No. T-36341 issued pursuant thereto, as well as Reyes' sale thereof to petitioner East Asia Traders, Inc. on June 7, 1990 and its title, T.C.T. No. T-38609 subsequently issued, were all unlawful and null and void, as the acquisition, conveyance, alienation, and transfer of the property were made and executed within five (5) years from the issuance of Landicho's free patent and title on March 6, 1987, in flagrant violation of Sections 118 and 124 of the Public Land Act (Com. Act No. 141) x x x:

x x x

Hence, since the sale of the land subject of this case in favor of petitioner East Asia Traders, Inc. was null and void and of no legal force and effect, it did not acquire any right over the land whatsoever.

Consequently, respondent Regional Trial Court did not act with grave abuse of discretion amounting to lack or excess of jurisdiction in issuing its assailed Orders denying petitioner's motion to dismiss and motion for reconsideration in Civil Case No. CT-98-001."

Petitioner then filed a motion for reconsideration but was denied by the Appellate Court in its Resolution dated April 9, 2002.

Petitioner, in the instant petition, submits for our resolution the following issues:

"I

WHETHER OR NOT PRESCRIPTION HAS ALREADY SET IN AGAINST THE STATE.

II

WHETHER A PRIVATE LAND, THE SUBJECT MATTER OF THE INSTANT PETITION, CAN BE THE PROPER SUBJECT OF REVERSION PROCEEDINGS.

III

WHETHER OR NOT THE COMPLAINT FILED BY THE RESPONDENT STATES A CAUSE OF ACTION AGAINST PETITIONER DESPITE ITS FAILURE TO ALLEGE THEREIN THAT PETITIONER WAS A BUYER IN BAD FAITH OR HAD KNOWLEDGE OF THE DEFECT OR FLAW IN THE TITLE OF ITS PREDECESSORS-IN-INTEREST."

Petitioner contends that respondent's action for reversion, filed only on March 9, 1998 or more than 11 years after the approval and issuance of a free patent by the Bureau of Lands, is already barred by prescription. Respondent's complaint states no cause of action, not only because it failed to allege that Lot 4355 was acquired in bad faith and with notice of defect or irregularity in its title, but also because the same lot has become a private land and ceased to be part of the public domain after the registration of the patent and the issuance of the corresponding certificate of title. Moreover, TCT No. 38609 issued by the Register of Deeds in its name, being one of the derivative titles of OCT No. P-3218 registered on the basis of a free patent, became indefeasible after the lapse of one year as provided in Section 32 of P.D. No. 1529 (formerly Act No. 496, 38).6 Petitioner then maintains that the Appellate Court should not have sustained the trial court's denial of the motion to dismiss.

In his comment, the Solicitor General asserts that the State, in an action for reversion of inalienable land of the public domain, is not bound by prescription or laches for public policy requires an unimpeded exercise of its sovereign function. Petitioner's defense of indefeasibility of a certificate of title is not tenable considering that TCT No. 38609 issued in its name is void ab initio and does not form part of the Torrens system. The Solicitor General, citing Section 118 in relation to Section 124 of the Public Land Act, further asserts that the sale of the subject lot within the 5-year prohibited period, being unlawful, nullifies the patent originally issued and justifies the reversion of the property to the State.

Petitioner basically contends before the Court of Appeals that the RTC acted without or in excess of jurisdiction or with grave abuse of discretion when it denied the motion to dismiss the complaint in Civil Case No. CT-98-001.

The petition for certiorari and prohibition filed by petitioner with the Court of Appeals is not the proper remedy to assail the denial by the RTC of the motion to dismiss. The Order of the RTC denying the motion to dismiss is merely interlocutory. An interlocutory order does not terminate nor finally dispose of the case, but leaves something to be done by the court before the case is finally decided on the merits. It is always under the control of the court and may be modified or rescinded upon sufficient grounds shown at any time before final judgment. This proceeds from the court's inherent power to control its process and orders so as to make them conformable to law and justice. The only limitation is that the judge cannot act with grave abuse of discretion, or that no injustice results thereby.7

In Indiana Aerospace University vs. Commission on Higher Education,8 we held:

"An order denying a motion to dismiss is interlocutory, and so the proper remedy in such a case is to appeal after a decision has been rendered. A writ of certiorari is not intended to correct every controversial interlocutory ruling; it is resorted only to correct a grave abuse of discretion or a whimsical exercise of judgment equivalent to lack of jurisdiction. Its function is limited to keeping an inferior court within its jurisdiction and to relieve persons from arbitrary acts acts which courts or judges have no power or authority in law to perform. It is not designed to correct erroneous findings and conclusions made by the courts."

Assuming that certiorari is the proper remedy, we find no grave abuse of discretion committed by the RTC in denying petitioner's motion to dismiss. In the same vein, the Court of Appeals did not err in upholding the assailed RTC Order denying the motion to dismiss reproduced below:

"After a careful examination of the records of this case, as well as the contentions of both parties, the court finds no merit to the instant motion to dismiss.

It should be noted that the Civil Case No. T-1061 pending before the RTC of Tanauan, Batangas was not initiated by the Office of the Solicitor General and therefore, the same is not an action brought by the plaintiff, Republic of the Philippines. The inclusion of the Republic of the Philippines as an unwilling co-plaintiff did not make the Republic of the Philippines a party in said civil case.

Further, it is a rule in our jurisdiction that prescription does not lie against the State for the reversion to the public domain of the lands, which have been fraudulently granted to private individuals.

Furthermore, the complaint alleges that the certificates of title on the property subject matter of the complaint having been procured through fraud and misrepresentation are null and void and should therefore be cancelled, clearly states plaintiff's cause of action against defendants.

Lastly, defendants Galileo Landicho, Teresita Reyes and the Register of Deeds of Tanauan, Batangas did not file their respective answers despite receipt of the summons in this case. Hence, they may be declared in default.

WHEREFORE, premises considered, the instant Motion to Dismiss is hereby DENIED for lack of merit.

In the interest of justice, defendant East Asia Trading is given a period of ten (10) days from receipt of this Order within which to file its responsive pleading.

Also, for failure to file their answers, defendants Galileo Landicho, Teresita Reyes and the Register of Deeds of Tanauan, Batangas are hereby declared in default.

SO ORDERED."

A further ratiocination on the issues raised by petitioner shows that indeed the petition is bereft of merit.

I

WHETHER LOT 4355 IS ALIENABLE

We hold that this issue can only be properly determined during the hearing on the merits of Civil Case No. CT-98-001 wherein both parties may present their respective evidence. On this point, the Court of Appeals erred in concluding that Lot 4355 "is considered inalienable land of the public domain;" and that "since the sale of the land subject of this case in favor of petitioner East Asia Traders, Inc. is null and void and of no legal force and effect, it did not acquire any right over the land whatsoever." In reaching this conclusion, the Court of Appeals actually decided the entire case summarily, unmindful that the only incident before it for resolution is petitioner's motion to dismiss.

In Parañaque Kings Enterprises, Inc. vs. Court of Appeals,9 we held that matters which require presentation and/or determination of facts raised in a motion to dismiss can be best resolved after trial on the merits, thus:

"x x x, we find no more need to pass upon the question of whether the complaint states a cause of action for damages or whether the complaint is barred by estoppel or laches. As these matters require presentation and/or determination of facts, they can be best resolved after trial on the merits.

x x x, private respondents cannot be denied their day in court. While, in the resolution of a motion to dismiss, the truth of the facts alleged in the complaint are theoretically admitted, such admission is merely hypothetical and only for the purpose of resolving the motion. In case of denial, the movant is not to be deprived of the right to submit its own case and to submit evidence to rebut the allegation in the complaint. Neither will the grant of the motion by a trial court and the ultimate reversal thereof by an appellate court have the effect of stifling such right. So too, the trial court should be given the opportunity to evaluate the evidence, apply the law and decree the proper remedy. Hence, we remand the instant case to the trial court to allow private respondents to have their day in court."

Clearly, the Court of Appeals should not have ruled outright that Lot 4355 is inalienable. This could be best resolved only after trial on the merits.

II

WHETHER IN FILING THE COMPLAINT FOR REVERSION, THE STATE IS BARRED BY PRESCRIPTION.

Basic as a hornbook principle is that prescription does not run against the government. In Reyes vs. Court of Appeals,10 we held:

"In so far as the timeliness of the action of the Government is concerned, it is basic that prescription does not run against the State. x x x The case law has also been:

'When the government is the real party in interest, and is proceeding mainly to assert its own rights and recover its own property, there can be no defense on the ground of laches or limitation.' x x x

'Public land fraudulently included in patents or certificates of title may be recovered or reverted to the State in accordance with Section 101 of the Public Land Act. Prescription does not lie against the State in such cases for the Statute of Limitations does not run against the State. The right of reversion or reconveyance to the State is not barred by prescription."

III

WHETHER THE COMPLAINT IN CIVIL CASE NO. CT-98-001 STATES A CAUSE OF ACTION

When a motion to dismiss is grounded on the failure to state a cause of action, a ruling thereon should be based only on the facts alleged in the complaint. The court must pass upon this issue based solely on such allegations, assuming them to be true. For to do otherwise would be a procedural error and a denial of petitioner's right to due process.

In China Road and Bridge Corporation vs. Court of Appeals,11 we ruled:

"It is well settled that in a motion to dismiss based on lack of cause of action, the issue is passed upon on the basis of the allegations assuming them to be true. The court does not inquire into the truth of the allegations and declare them to be false, otherwise it would be a procedural error and a denial of due process to the plaintiff. Only the statements in the complaint may be properly considered, and the court cannot take cognizance of external facts or hold preliminary hearings to ascertain their existence. To put it simply, the test for determining whether a complaint states or does not state a cause of action against the defendants is whether or not, admitting hypothetically the truth of the allegations of fact made in the complaint, the judge may validly grant the relief demanded in the complaint."

We reviewed very carefully respondent's allegations in its complaint. In a nutshell, respondent alleged that the defendants (herein petitioner and its predecessors-in-interest) procured their lot is inalienable because the DENR investigation disclosed that it was intended by the government for the construction of a national road; that defendants' titles are null and void and should be cancelled and, therefore, Lot 4355 should be reverted to the State. These allegations are sufficient to constitute a cause of action for reversion.

In sum, we hold that petitioner's resort to certiorari is misplaced. And granting that certiorari is the proper remedy, the Court of Appeals correctly ruled that the RTC, in denying petitioner's motion to dismiss, did not commit any grave abuse of discretion.

WHEREFORE, the petition is DENIED. The assailed Decision dated November 26, 2001 and the Resolution dated April 9, 2002 of the Court of Appeals in CA-G.R. SP No. 59627 are hereby AFFIRMED with modification in its ratiocination. Petitioner is hereby directed to file with the trial court its answer to respondent's complaint within ten (10) days from notice.

SO ORDERED.

Vitug, (Chairman) and Corona, JJ., concur.
Carpio-Morales, J., no part.



Endnotes:

1 Penned by Justice Sergio L. Pestaño and concurred in by Justice Conchita Carpio Morales, then Chairman of the Ninth Division, Court of Appeals, now Justice of this Court, and Justice Martin S. Villarama, Jr. Annex "A", Petition, Rollo at 36-47.

2 Annex "B", id. at 48-49.

3 Galileo Landicho, in his patent application, claimed that he occupied, cultivated and planted coffee, banana and root crops on the subject land since 1944. Pursuant to R.A. No. 782, the following documents were attached to his application: (1) Joint Affidavit executed by Hugo Medina and Maxima Roxas, attesting to Landicho's occupancy of the land since July 4, 1945; (2) Affidavit on Confirmation of Sale executed by Leovigildo Landicho, Galileo's predecessor-in-interest; and (3) Attestation submitted by applicant Landicho regarding his compliance with the posting of the notice of his free patent application from December 15 to 30, 1986.

4 The approval of Landicho's free patent application was inscribed as Entry No. IV-3-A.

5 Section 91 of Commonwealth Act No. 141, as amended, otherwise known as the Public Land Act, provides:

"Section 91. The statements made in the application shall be considered as essential conditions and parts of any concession, title, or permit issued on the basis of such application, and any false statement therein or omission of facts altering, changing, or modifying the consideration of the facts set forth in such statements, and any subsequent modification, alteration, or change of the material facts set forth in the application shall ipso facto produce the cancellation of the concession, title, or permit granted. It shall be the duty of the Director of Lands, from time to time and whenever he may deem it advisable, to make the necessary investigations for the purpose of ascertaining whether the material facts set out in the application are true, or whether they continue to exist and are maintained and preserved in good faith, x x x. In every investigation made in accordance with this section, the existence of bad faith, fraud, concealment, or fraudulent and illegal modification of essential facts shall be presumed if the grantee or possessor of the land shall refuse or fail to obey a subpoena or subpoena duces tecum lawfully issued by the Director of Lands or his authorized delegates or agents, or shall refuse or fail to give direct and specific answers to pertinent questions, and on the basis of such presumption, an order of cancellation may issue out further proceedings."

6 Section 38, Act No. 496, otherwise known as "The Land Registration Act," provides:

"SEC. 38. If the court after hearing finds that the applicant or adverse claimant has title as stated in his application or adverse claim and proper for registration, a decree of confirmation and registration shall be entered. Every decree of registration shall bind the land, and quiet title thereto, subject only to the exceptions stated in the following section. It shall be conclusive upon and against all persons, including the Insular Government and all the branches thereof, x x x, subject, however, to the right of any person deprived of land or of any estate or interest therein by decree of registration obtained by fraud to file in the competent Court of First Instance (now Regional Trial Court) a petition for review within one year after entry of the decree, provided no innocent purchaser for value has acquired an interest. Upon the expiration of said term of one year, every decree or certificate of title issued in accordance with this section shall be incontrovertible. x x x."

7 Bangko Silangan Development Bank vs. Court of Appeals, G.R. No. 110480, June 29, 2001, 360 SCRA 322.

8 G.R. No. 139371, April 4, 2001, 356 SCRA 367, citing Carandang vs. Cabatuando, 53 SCRA 383, 390 (1973); Philippine Rabbit vs. Galanan, 118 SCRA 664, 667, (1982); and De Vera vs. Pineda, 213 SCRA 434, 442, (1992).

9 G.R. No. 111538, February 26, 1997, 268 SCRA 727, 746, citing Home Savings Bank vs. Court of Appeals, 237 SCRA 360 (1994).

10 G.R. No. 94524, September 10, 1998, citing Republic vs. Court of Appeals, 171 SCRA 721 (1989).

11 G.R. No. 137898, December 15, 2000, 348 SCRA 401, 408-409, citing Consolidated Bank and Trust Corp. vs. Court of Appeals,197 SCRA 663 (1991); Rava Development Corporation vs. Court of Appeals, 211 SCRA 144 (1992); Perpetual Savings Bank vs. Fajardo, 223 SCRA 720 (1993); and D.C. Crystal Incorporation vs. Laya, 170 SCRA 734 (1989).




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rporation vs. Court of Appeals, 211 SCRA 144 (1992); Perpetual Savings Bank vs. Fajardo, 223 SCRA 720 (1993); and D.C. Crystal Incorporation vs. Laya, 170 SCRA 734 (1989).




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