G.R. No. 161380 - Aznar Brothers Realty Co. vs. Spouses Ybanez

On March 21, 1964, Casimiro YbaAez, with the marital consent of Maria Daclan, executed a Deed of Absolute Sale in favor of Aznar Brothers Realty Company, conveying a 17,575‑square‑meter unregistered agricultural land with 17 coconut trees in Banika-Bulacao, Cebu City, described with specific boundaries and covered by Tax Declaration No. IV-00128.

On February 17, 1967, Saturnino Tanuco sold a 15,760‑square‑meter parcel of corn and cogon land with coconut trees in Candawawan, Cebu City, to Aznar Brothers, with its boundaries defined and recorded under Tax Declaration No. IV-004787.

An affidavit by Angel Abellana confirmed that during his daughter Rosa’s lifetime, he had given a parcel of land known as Lot No. 18563 to her husband, Tanuco, which later was sold for a higher amount to Aznar Brothers.

Casimiro YbaAez died intestate on July 3, 1968, leaving his wife Maria and their children (Fabian, Adriano, Carmen, Fe, and Dulcisima) as heirs.

On August 29, 1977, the heirs executed an Extrajudicial Declaration of Heirs with Extrajudicial Settlement of Estate and Deed of Absolute Sale, dividing and adjudicating Lot No. 18563 (16,050 square meters) among themselves and selling it for a nominal price to co-heir Adriano D. YbaAez.

Jose R. YbaAez subsequently filed a Free Patent Application on January 15, 1979, and an Original Certificate of Title (OCT No. 2150) was issued on July 20, 1979, thereby registering the land under the Torrens system.

On May 26, 1989, Aznar Brothers filed a complaint in the RTC seeking a declaration of nullity of the extrajudicial declaration and deed of sale executed by the heirs, as well as the cancellation of OCT No. 2150, asserting its prior purchase based on the 1964 deed from Casimiro.

Jose R. YbaAez raised several defenses including lack of merit, lack of jurisdiction, and estoppel by laches, arguing that the Spouses YbaAez—holders of OCT No. 2150—had acquired the property in good faith through registration and possession.

During the course of the proceedings, both parties amended their pleadings. Aznar Brothers reaffirmed its claim based on the earlier deed, while the YbaAez spouses maintained that the sale from Adriano, followed by the issuance of a free patent and OCT, validated their ownership.

The RTC rendered judgment on March 8, 1996, dismissing Aznar Brothers’ claim for lack of merit, declaring Lot No. 18563 legally owned by the YbaAez spouses, and awarding them damages, attorney’s fees, and litigation expenses.

The Court of Appeals (CA) on October 10, 2002, affirmed the RTC’s decision on the ownership issue but deleted the award of damages, attorney’s fees, and other expenses.

Both lower courts determined that the identity of the property in issue (the land sold and that covered by OCT No. 2150) was not a matter for re-examination as it was not raised during the pre-trial conference.

The parties’ failure to perfect or challenge certain evidentiary issues during the pre-trial phase played a crucial role in limiting subsequent arguments regarding the identity of the lot.

The controversy centers on whether the free patent and subsequent title issued over Lot No. 18563 were valid given that the land was previously conveyed as private property to Aznar Brothers through a duly registered deed.

Whether the Court of Appeals erred in holding that Aznar Brothers’ claim over Lot No. 18563 was barred by estoppel by laches, given its delay in asserting its ownership despite early acquisition and registration under Act No. 3344.
Whether the identity of the land in litis should have been re-examined despite its non-inclusion as an issue in the pre‑trial proceedings.
Whether the Spouses YbaAez, having acquired the land via a deed of sale from Adriano and obtaining a free patent and OCT, could be validly considered purchasers in good faith, despite allegations that their sellers did not have good title.
Whether the issuance of a free patent on Lot No. 18563—a parcel claimed to be public land in the free patent application—was legitimate when, in fact, the land had already been transferred as private property to Aznar Brothers.