G.R. No. L-27473 - Republic vs. Heirs of Caballero y Abad

The original sale certificate for Lot No. 5211 was issued in favor of Mamerta Caballero on April 25, 1911, but later cancelled for non-payment of installments.
Following an auction, Sale Certificate No. 9094 was issued to Felix Caballero y Abad, who made two installment payments (P4.00 each on August 1, 1919 and November 3, 1919) but failed to make further payments.
Consequently, on July 15, 1935, the Secretary of Agriculture and Commerce cancelled Sale Certificate No. 9094 due to non-payment of subsequent installments pursuant to the relevant administrative order.

In December 1937, a collection letter was sent to Felix Caballero y Abad demanding payment for Lot 5211; this was reiterated on March 1, 1938 with an extended period to pay.
Felix Caballero y Abad did not pay the demanded amounts, and after his death in 1941, an ocular inspection revealed that the lot was occupied by Carlos Mantalaba, Juan Caballero, and Bernarda Mantalaba.
Based on the public lands inspector’s recommendation, the occupied lot was subdivided and applications to purchase the respective portions were filed by the actual occupants in 1941, with initial installments duly paid.

Despite the valid applications by Bernarda Mantalaba, Carlos Mantalaba, and Juan Caballero, a further collection letter in June 1957 indicated that Cresencio Caballero had already paid the full price for the lot on behalf of his deceased father, Felix Caballero y Abad—this payment was documented as being made on September 2, 1957.
Following the payment, on October 31, 1957, a final deed of conveyance (No. V-59733) was issued in the name of Felix Caballero y Abad, and subsequently, on January 2, 1958, a Transfer Certificate of Title (No. 5591) was issued in his name.

Bernarda Mantalaba filed a formal protest against the issuance of the deed and certificate—resulting in an investigation ordered by the Director of Lands.
The parties, in a stipulation of facts, presented exhaustive evidence including documents such as sale certificates, letters of demand, official receipts, and correspondences from various government agencies as well as evidence from both the plaintiff (Republic of the Philippines represented by the Director of Lands) and the defendants (heirs of Felix Caballero y Abad).
Throughout the years, the defendants-appellees did not challenge the administrative cancellation until Cresencio Caballero’s request for reinstatement was received in 1948, and the subsequent payment in 1957 further complicated the situation.
The Court of First Instance of Cebu, relying on the stipulation of facts, dismissed the complaint by the Government and declared the title of Felix Caballero y Abad as valid and legal.

Whether the title of Felix Caballero y Abad over Lot No. 5211, as evidenced by the final deed of conveyance and subsequent Transfer Certificate of Title, is valid given that the underlying sale certificate had been administratively cancelled.

Whether the cancellation of Sale Certificate No. 9094 by the Secretary of Agriculture and Commerce, executed under Lands Administrative Order No. 3-4 (as amended by Order No. 3-5), is legally operative in nullifying the sale and subsequent issuance of the title in favor of Felix Caballero y Abad.

Whether the equitable title acquired by the purchaser upon payment of the initial installment was compromised by his failure to continue payments, and subsequently, whether the prolonged inaction (laches) of the appellees in protesting the cancellation precludes their claim.
Whether the government’s duty as lienholder versus the recognition of equitable ownership plays a significant role in determining the outcome.