G.R. No. 188145 - Spouses Inalvez vs. Nool

The subject property, originally covered by Transfer Certificate of Title (TCT) No. 58398, was registered in the names of Spouses Nicolas and Francisca Nool and Spouses Cornelio and Bayang.
On May 3, 1965, Spouses Cornelio and Bayang sold a significant portion of their one‐half share to the petitioners (Spouses Primo and Juliana Inalvez) and Maria Zamora.
As a result, TCT No. 58398 was cancelled and replaced by TCT No. 58439, which was issued in the names of the following co-owners:

On June 4, 1979, Spouses Nicolas and Francisca sold their entire one-half share to Spouses Abraham and Olivia Macayanan, duly recorded as Entry No. E-19-7847 on the title.
On April 16, 1980, the new set of owners (Spouses Macayanan, Zamora, Spouses Cornelio and Bayang, and the petitioners) executed a Real Estate Mortgage (REM) over the entire property in favor of Tarlac Development Bank (TDB) to secure a loan of PhP10,000.00.
The mortgage was later foreclosed, leading to the consolidation of the title in the name of TDB with the issuance of TCT No. 188251.

On April 17, 1985, TDB sold the property to the petitioners together with Spouses Jim and Liberty Baluyot, which resulted in the cancellation of TCT No. 188251 and the issuance of TCT No. 188252 in the names of the petitioners and Spouses Baluyot.
The property underwent subdivision:

On October 3, 1991, based on an Agreement of Subdivision, the property was divided into Lot 1 (138,734 sq m) for the petitioners and Lots 2 and 3 (10,000 sq m and 2,707 sq m, respectively) for Spouses Baluyot.
The petitioners’ portion was separately titled under TCT No. 260916 and later replaced by TCT No. 262142 after a reduction in area.
On March 24, 1998, the petitioners caused further subdivision of their property into nine sub-lots, leading to the cancellation of TCT No. 262142 and the issuance of new titles (TCT Nos. 305854 to 305862).

Additionally, the petitioners declared the property for tax purposes, while the respondents continued to occupy a portion of the lot.

On June 16, 2000, the petitioners instituted a complaint before the Department of Agrarian Reform Adjudication Board (DARAB) for ejectment, collection of shares, and damages, alleging that the respondents had failed to pay their agreed share based on a cultivation arrangement.
The respondents countered by claiming that they were the actual and registered co-owners of the property inherited from their father, denying the sale to the petitioners and the alleged mortgage. They further invoked the doctrine of acquisitive prescription, citing more than 30 years of open and exclusive possession.
On January 14, 2002, the DARAB dismissed the case finding no tenancy relationship existed between the parties.
Dissatisfied, the petitioners filed a complaint for recovery of possession, damages, and an application for preliminary injunction before the RTC of Camiling, Tarlac (Civil Case No. 02-09, Branch 68). After trial, the RTC rendered judgment in favor of the petitioners by:

Ordering the respondents to vacate the subject portion of the lot (TCT No. 305862).
Ordering the respondents to pay compensation and attorney’s fees.

On appeal, the Court of Appeals (CA) reversed the RTC decision, dismissing the complaint for recovery of possession on the ground that co-ownership existed between the parties.

The CA stressed that possession and registration of title merely confirm an existing title rather than vest absolute ownership if co-ownership remains.
The CA also gave weight to evidence of forgery regarding the signatures of Spouses Cornelio and Bayang on the mortgage (REM).

Claim that by purchasing the property from TDB (following foreclosure), they acquired exclusive ownership, thereby terminating any existing co-ownership.
Assert that the consolidated title in their name should enable recovery of full possession of the disputed lot.

Argue that they inherited their respective shares of the property and that co-ownership existed since the original title and subsequent transactions.
Contend that the petitioners’ mortgage of the co-owned portion was executed without their knowledge or consent, thus leaving their ownership rights unaffected.
Maintain that the respondents' long-standing possession (over 35 years) reinforces their claim to the specific lot in question.

The CA found that the petitioners merely “stepped into the shoes” of TDB, acquiring no more than the rights TDB held, which did not transfer complete dominion over the co-owned property.
The record showed that the respondents, by virtue of their inheritance and uninterrupted possession, retained co-ownership and valid claims over the portion of the property they occupied.
The issue of alleged forgery in the REM, particularly the forged signatures of Cornelio and Bayang, bolstered the respondents’ claim that the mortgage was not honestly executed, thereby invalidating the petitioners’ attempt to extinguish co-ownership.

Whether co-ownership existed between the petitioners and the respondents covering the subject property.
Whether the petitioners’ acquisition of the property from TDB effectively terminated or superseded the existing co-ownership interests of the respondents.
Whether the alleged fraudulent actions, including the forged signatures on the mortgage and the unilateral mortgage of the co-owned property without consent, invalidated the petitioners’ claim to exclusive ownership and full possession.