Case Summary (G.R. No. 240047)
Petitioner and Respondent
Petitioner: Authority of the Freeport Area of Bataan (AFAB).
Respondent: F.F. Cruz & Company, Inc. (FFCCI), and Register of Deeds of Bataan (as to cancellation of titles).
Key Dates and Procedural History
- Statutory and executive acts establishing reservation and agency succession: R.A. No. 5490 (1969); Proclamation Nos. 899 and 939 (1971); P.D. No. 66 (1972); R.A. No. 7916 and E.O. No. 282 (1995); R.A. No. 9728 (2009) creating AFAB.
- Original OCT issued in 1972 (OCT No. 234) from which FFCCI’s TCTs were derived.
- RTC Orders denying FFCCI’s Motion to Dismiss (Dec. 21, 2015; Mar. 30, 2016).
- Court of Appeals (CA) initial Decision affirming the RTC (July 7, 2017); CA Amended Decision granting FFCCI’s Motion for Reconsideration and dismissing AFAB’s complaint (June 7, 2018).
- Supreme Court decision on AFAB’s petition (May 14, 2021). Applicable constitutional framework: 1987 Constitution.
Applicable Law and Controlling Doctrines
- 1987 Constitution (framework for government instrumentalities and state ownership).
- Public Land Act (Commonwealth Act No. 141), particularly Section 101 (reversion actions to be instituted by the Solicitor General in the name of the Republic).
- Administrative Code of 1987 (definition and treatment of government instrumentalities).
- Statutes and executive issuances affecting the parcels: R.A. No. 5490 (foreign trade zone), Proclamation Nos. 899 and 939 (reservations), P.D. No. 66 (EPZA), R.A. No. 7916 (PEZA conversion), R.A. No. 9728 (creation of AFAB and transfer of PEZA’s Bataan assets).
- Controlling case law cited and applied: Republic v. Guerrero; Republic v. Hachero; Republic v. Mangotara; Heirs of Ma. Teresita Bernabe; Manila International Airport Authority; City of Lapu‑Lapu and Province of Bataan v. PEZA; Alvarico v. Sola; Cawis v. Hon. Cerilles; Republic v. Alagad; East Asia Traders, Inc. v. Republic; Reyes v. Court of Appeals.
Antecedent Facts (substantive background)
Congress and successive executive proclamations and decrees established Mariveles, Bataan as a principal port of entry and foreign trade zone, reserved for public use and characterized as lands of the public domain. PEZA (and its predecessors) held the properties and later transferred them to AFAB pursuant to R.A. No. 9728. In the course of transferring titles to AFAB’s name, AFAB discovered several parcels originally reserved under Proclamation Nos. 899 and 939 that had been registered and titled in FFCCI’s name (derived from OCT No. 234 issued in 1972). AFAB filed an amended complaint seeking annulment and cancellation of OCT No. 234 and the corresponding TCTs, alleging that the lands were inalienable public domain reserved for foreign trade zone/freeport purposes and that the titles issued to FFCCI were null and void.
AFAB’s Pleadings and Reliefs Sought
AFAB’s amended complaint alleged: (1) the subject parcels were reserved by Proclamation Nos. 899 and 939 and therefore inalienable and indisposable; (2) OCT No. 234 (1972) and the respondent’s TCTs derived therefrom were void; and (3) as successor to PEZA, AFAB was the proper owner/claimant of those parcels. Relief sought included declaration of nullity of the OCT and cancellation of the TCTs, reconveyance and return of possession to AFAB, and cancellation by the Register of Deeds.
FFCCI’s Motion to Dismiss — Primary Defenses
FFCCI moved to dismiss on multiple grounds: failure to state a cause of action (alleged absence of clear territorial demarcation and failure to identify the legal right violated); characterization of the suit as expropriation (which AFAB cannot effectuate); protection of FFCCI as a good‑faith purchaser under the Torrens System and the indefeasibility of its Torrens titles; res judicata and collateral attack objections given the titles’ origin in a judicial issuance; prescription and laches; and alleged deficiency in filing fees.
RTC’s Ruling and Rationale
The Regional Trial Court denied the Motion to Dismiss, holding that AFAB’s amended complaint sufficiently alleged ultimate facts to state a cause of action and that the technical descriptions and demarcations relied upon by FFCCI were evidentiary matters to be litigated at trial. The RTC further ruled that the action was not one for expropriation because the subject lands were alleged to be public, inalienable domain, and that buyer in good faith protection did not apply to public domain lands. The RTC rejected res judicata and prescription defenses for lack of merit in the circumstances.
CA’s Initial Decision and Subsequent Reconsideration
The CA initially affirmed the RTC, agreeing that technical descriptions were evidentiary and that the amended complaint alleged sufficient ultimate facts. The CA acknowledged an error in the RTC’s hypothetical admission of inalienability but treated it as an error of judgment not amenable to certiorari at that stage and allowed the matter to proceed to trial. Upon FFCCI’s motion for reconsideration, however, the CA amended its decision and dismissed AFAB’s complaint. The CA concluded that AFAB’s action was, in substance, a reversion claim seeking annulment of a prior judicially‑authorized OCT and that only the State, through the OSG, may institute reversion proceedings.
Supreme Court’s Issues Presented
AFAB raised questions whether: the CA properly entertained FFCCI’s certiorari under Rule 65; the CA erred in amending a final decision; the CA erred in ruling the complaint failed to state a cause of action; the CA exceeded issues raised by FFCCI by acting motu proprio; the CA erred in ruling the action is one of reversion exclusive to the State through the OSG; and whether the RTC had jurisdiction.
Supreme Court’s Holding — Denial of Petition
The Supreme Court denied AFAB’s petition and affirmed the CA’s Amended Decision dismissing AFAB’s amended complaint. The Court’s core holdings are: (1) the action as pleaded is one for reversion — a remedy aimed at cancelling titles and reverting public land to the State — and therefore the Republic (through the OSG) is the real party in interest pursuant to Section 101 of the Public Land Act; (2) AFAB is a government instrumentality, and under the controlling doctrine (Heirs of Bernabe and related precedent) the State retains beneficial ownership of lands held in the name of government instrumentalities; consequently, reversion claims involving lands titled in the name of an instrumentality remain actions in which the State is the proper party; and (3) the CA did not commit reversible error in granting FFCCI’s motion to dismiss on grounds that AFAB, as pleaded, was not the proper party to institute reversion proceedings.
Reasoning on AFAB’s Status and State Ownership
The Court analyzed AFAB’s corporate and statutory character under R.A. No. 9728 and the Administrative Code. AFAB was characterized as a government instrumentality vested with corporate powers but not as a Government‑Owned or Controlled Corporation (GOCC) with private proprietorial ownership. Reliance on Manila International Airport Authority and subsequent cases led the Court to reaffirm that an instrumentality holding title to public dominion property typically holds such title in trust for the Republic; the Republic remains the beneficial owner and thus the real party in interest for reversion claims.
Reversion Doctrine, Prescriptive and Res Judicata Considerations
The Court reiterated settled law that actions for reversion are the proper remedy against fraudulent, unlawful, mistaken, or oversight inclusions of public land in private patents or certificates of title. Where lands belong to the public domain, the prior land registration court’s issuance of title is void for want of jurisdiction; therefore res judicata does not bar a reversion action. The Court also reiterated that prescription and la
Case Syllabus (G.R. No. 240047)
Case Title, Court, Docket and Decision
- Full caption as presented in the source: AUTHORITY OF THE FREEPORT AREA OF BATAAN, PETITIONER, VS. F.F. CRUZ & CO., INC., RESPONDENT.
- Supreme Court: First Division; G.R. No. 240047; Decision dated May 14, 2021.
- Decision authored by Justice Gaerlan; concurring Justices: Gesmundo, C.J., Caguioa, Carandang, and Zalameda, JJ.
- Relief sought by petitioner (AFAB): annulment and setting aside of the Court of Appeals’ Amended Decision dated June 7, 2018 in CA-G.R. SP No. 146039.
Antecedent Facts and Historical Statutory Background
- R.A. No. 5490 (June 21, 1969) created Mariveles, Bataan as a principal port of entry and foreign trade zone under Foreign Trade Zone Authority (FTZA).
- Proclamation No. 899 (Aug. 31, 1971) reserved parcels of land (497.034 hectares, more or less) in Mariveles, Bataan for quarry site purposes under the foreign trade zone.
- Proclamation No. 939 (Dec. 10, 1971) reserved additional parcels (267.69 hectares) in Mariveles, Bataan for foreign trade zone purposes.
- P.D. No. 66 (Nov. 20, 1972) created the Export Processing Zone Authority (EPZA), which assumed FTZA’s functions and assets (citing PD No. 66, Sections 24 and 29).
- R.A. No. 7916 ("The Special Economic Zone Act of 1995") converted EPZA into PEZA; Executive Order No. 282 (Oct. 30, 1995) ordered PEZA to assume EPZA’s powers, functions and assets.
- R.A. No. 9728 ("Freeport Area of Bataan, Act of 2009") (July 27, 2009) converted the Bataan Economic Zone into the Freeport Area of Bataan (FAB), created the Authority of the Freeport Area of Bataan (AFAB) to manage and operate FAB, and transferred to AFAB all properties, assets, funds, rights, obligations and liabilities of PEZA in the Bataan Economic Zone (citing RA 9728, Sections 3, 11, 22 and 28).
Discovery by AFAB, Subject Properties and Origin of Titles
- In the process of transferring titles from PEZA to AFAB, AFAB discovered several parcels that were reserved under Proclamation Nos. 899 and 939 but were erroneously registered in the name of F.F. Cruz & Company, Inc. (FFCCI) (the “Subject Properties”).
- AFAB’s Amended Complaint identified five TCTs issued in FFCCI’s name derived from OCT No. 234 (issued 28 December 1972):
- TCT No. T-144045 — 31,353 sq. m., more or less.
- TCT No. T-144046 — 10,000 sq. m., more or less.
- TCT No. T-144047 — 50,007 sq. m., more or less.
- TCT No. T-144225 — 39,997 sq. m., more or less.
- TCT No. T-144226 — 20,000 sq. m., more or less.
- AFAB’s central assertion: Proclamation Nos. 899 and 939 had rendered the land inalienable and indisposable prior to issuance of OCT No. 234; the titles issued thereafter were null and void and must be cancelled; FFCCI, as successor in interest, cannot acquire better title than its predecessor (the spring cannot rise higher than its source).
AFAB’s Amended Complaint — Causes and Relief Sought
- Nature of action: Amended Complaint for Declaration of Nullity and Cancellation of Title.
- Principal allegations:
- AFAB owns the land reserved by Proclamation Nos. 899 and 939 as part of FAB.
- The Subject Properties are erroneously registered under FFCCI’s name, derived from OCT No. 234 issued in 1972 when the land was already inalienable.
- Titles issued over inalienable land are null and void even if held by an alleged innocent purchaser for value.
- Reliefs requested:
- Declare OCT No. 234 and corresponding TCTs T-144045, T-144046, T-144047, T-144225 and T-144226 null and void.
- Order FFCCI to reconvey and surrender possession of the Subject Properties to AFAB.
- Order the Bataan Register of Deeds to cancel the subject TCTs.
- Such other equitable reliefs.
FFCCI’s Procedural Response — Motion to Dismiss (Grounds)
- FFCCI did not file an Answer; instead it moved to dismiss on multiple grounds (Motion to Dismiss filed; grounds summarized):
- I. The Amended Complaint fails to state a cause of action; AFAB fails to identify legal right and corresponding obligation of FFCCI; R.A. No. 5490 lacks clear demarcations to delineate AFAB territory; complaint lacks legal bases and does not ask for formal reversion.
- II. The complaint is in the nature of expropriation, which AFAB is not empowered to undertake.
- III. FFCCI is a buyer in good faith entitled to Torrens protection; its Torrens title is indefeasible.
- IV. Res judicata — FFCCI as Torrens title holder is entitled to generally conclusive evidence of ownership.
- V. The action is barred by prescription and laches.
- VI. The Amended Complaint was filed without corresponding requisite filing fees paid in full.
AFAB’s Opposition and Further Pleadings
- AFAB’s Comment/Opposition to the Motion to Dismiss:
- AFAB argued its complaint sufficiently stated a cause of action and attached Proclamation Nos. 899 and 939 to identify territory; the action is not expropriation because the Subject Properties are public domain, not private; FFCCI cannot be a buyer in good faith insofar as the land is public domain; prescription and laches do not lie against the State; AFAB is exempt from paying legal fees under Section 22, Rule 141 of the Rules of Court.
- FFCCI’s Reply:
- Reiterated insufficiency of delineation: Proclamation No. 899 attached did not include the plan with technical descriptions; AFAB is not the real party in interest — if Subject Properties are public domain they belong to the State and reversion may only be brought by the Office of the Solicitor General (OSG); OGCC and AFAB lack standing to institute reversion proceedings.
- AFAB’s Rejoinder:
- Technical plans and detailed descriptions are evidentiary and not ultimate facts required in complaint; the case is not reversion against the State but an action by AFAB under R.A. No. 9728 because AFAB owns properties transferred from PEZA; AFAB is a government instrumentality expressly empowered to sue and to acquire and sell property without the State’s prior authority; FFCCI allegedly violated the Omnibus Motion Rule by raising new arguments in its Reply.
Regional Trial Court (RTC) Proceedings and Rulings
- RTC of Mariveles, Bataan, Branch 4 issued Order dated December 21, 2015 denying FFCCI’s Motion to Dismiss; the Order was penned by Presiding Judge Emmanuel A. Silva.
- RTC’s reasoning:
- AFAB’s Amended Complaint adequately stated a cause of action; insufficiency of territorial delineation is an evidentiary matter for trial; the case is not expropriation but involves inalienable lands of public domain; buyer in good faith doctrine in Torrens system did not apply to public domain lands; res judicata defense denied because the court that ordered issuance of OCT No. 234 lacked jurisdiction to issue it; prescription cannot lie against the State in this context.
- RTC denied FFCCI’s Motion for Reconsideration in Order dated March 30, 2016, affirming denial of the Motion to Dismiss.
Petition for Certiorari to the Court of Appeals (CA) — Initial Decision
- FFCCI filed a petition for certiorari (Rule 65) with the Court of Appeals assailing the RTC Orders, contending the Amended Complaint failed to state a cause of action, and raising issues including: insufficiency of factual identification, lack of allegation that FFCCI properties were within AFAB parcels, theory of contiguity insufficient; titles were issued pursuant to a judicial decision invoking res judicata; action to annul judgment is prescribed.
- CA Decision dated July 7, 2017:
- Initially denied FFCCI’s Petition for Certiorari and affirmed the RTC Orders.
- CA agreed that technical descriptions in Proclamations 899 and 939 are evidentiary matters to be determined at trial; the Amended Complaint sufficiently alleged ultimate facts necessary to render judgm