G.R. No. 167232 - D.B.T. Mar-Bay Construction, Inc. vs. Panes

The subject matter is a parcel of land identified as Lot Plan Psu-123169 with an area of 240,146 square meters, located at Barangay Pasong Putik, Novaliches, Quezon City.
The property is included in Transfer Certificate of Title (TCT) No. 200519, which was entered on July 19, 1974, in favor of B.C. Regalado & Co.
B.C. Regalado subsequently conveyed the property to D.B.T. Mar-Bay Construction, Inc. (DBT) through a dacion en pago for services rendered.

Respondents, comprising Ricaredo Panes, his son Angelito Panes, Salvador Cea, Abogado Mautin, Donardo Paclibar, Zosimo Peralta, and Hilarion Manongdo, filed a Complaint for quieting title, cancellation of TCT No. 200519 (and derivative titles), damages, and injunctive relief.
They alleged that:

Ricaredo Panes is the lawful owner and claimant of the subject property, having declared it for taxation purposes with an assessed value, and that his possession predates the Second World War.
The DENR certification and historical records corroborate the existence and accuracy of Lot Plan Psu-123169 in official files.
The subdivision plan of B.C. Regalado was deliberately drawn to include portions of the subject property even though the title itself, TCT No. 200519, originally covered only a separate lot (Lot 503 of the Tala Estate).

The derivative titles (TCT Nos. 211081, 211095, 211132) were artificially created from TCT No. 200519, which in fact covered a much smaller area than claimed.
There existed an overlapping and fraudulent scheme involving the consolidation-subdivision plan and the misrepresentation of the property boundaries.

Ricaredo Panes had initiated proceedings (through the LRC docketed case) to perfect his title, discovering discrepancies and overlaps with subdivision plans approved by the Land Registration Authority (LRA).

The Regional Trial Court (RTC) of Quezon City initially rendered a decision on June 15, 2000, by Judge Bacalla:

Decision favored respondents by recognizing Ricaredo’s long and continuous possession since 1936, asserting that such possession conferred equitable ownership.
It declared that the subject property should not be included in TCT No. 200519 and its derivative titles.
Spouses Tabangcura’s claim as innocent buyers in good faith was found unsubstantiated.

Defenses based on prescription and laches.
Arguments that the subject property, being registered under the Torrens system, could not be acquired by adverse or acquisitive prescription.

An intervention by Atty. Andres B. Pulumbarit, representing a separate claim on behalf of the Don Pedro/Don Jose de Ocampo Estate, which was ultimately denied.
The RTC, after a clarificatory hearing and subsequent procedural orders, reversed its initial decision on November 8, 2001, dismissing the complaint on the grounds of prescription and laches.

The Court of Appeals (CA) later intervened on October 25, 2004, reversing and setting aside the RTC’s November 2001 order and reinstating its earlier June 15, 2000 decision favoring the respondents.

Asserts that it is the legitimate owner and occupant of the subject property based on the dacion en pago executed by B.C. Regalado.
Claims that the defenses of prescription and laches are applicable because the title was duly registered under the Torrens system, which precludes acquisition by adverse possession.
Emphasizes that its failure to expressly allege prescription in its answer does not constitute a waiver of the defense.

Argue that their long and continuous possession, established by actual use and cultivation of the property, gives them an equitable interest sufficient for quieting title.
Maintain that any errors in the registration or subdivision planning should not affect their substantive rights over the property dated prior to the registration controversy.

Whether the trial court erred in upholding DBT’s defenses of prescription and laches, especially in light of the fact that the action was one for quieting title—a suit which is generally considered imprescriptible when the plaintiff retains possession.
Which party possesses a superior right over the subject property:

On one hand, the respondents assert a rightful claim through long-standing and adverse possession, coupled with equitable ownership from years of uninterrupted occupation.
On the other, DBT argues that as an innocent purchaser for value and through the legal mechanism of dacion en pago, it holds a title protected under the Torrens system, thereby precluding acquisition by prescription or adverse possession.