This case underscores the restrictions on alienating land acquired through free patent within five years of the patent’s issuance, as mandated by the Public Land Act. The Supreme Court ruled that conveyances made during this period are null and void, and while the land technically reverts to the State, the original grantee (or their heirs) maintains a better right to possession against the unauthorized buyer. This decision clarifies the interplay between property rights, statutory restrictions, and the implications for actions of reconveyance when dealing with public land grants.

Can a Sale Within Five Years of a Free Patent Grant Be Validated?

Spouses Virgilio and Lydia de Guzman sought reconveyance of a 480-square meter lot in Misamis Oriental, which they purchased in two transactions from Spouses Leoncio and Anastacia Bajao in 1969 and 1970. Leoncio Bajao had acquired the land through Free Patent No. 400087 issued on May 28, 1968. After the Bajaos failed to deliver a separate title, Lydia de Guzman filed an adverse claim in 1980. Following Leoncio’s death, his heir Lamberto Bajao executed an Extrajudicial Settlement, which included the subject property. Lamberto then cancelled the adverse claim and obtained a Transfer Certificate of Title (TCT) in his name. The De Guzmans sued for reconveyance, arguing they were innocent purchasers for value, but Lamberto claimed the action was time-barred.

The trial court ruled in favor of the De Guzmans, ordering Lamberto to reconvey the property. However, the Court of Appeals (CA) reversed this decision, citing prescription based on implied trust. The Supreme Court (SC) addressed whether the CA erred in dismissing the complaint, ultimately denying the petition but on different grounds. The SC raised an issue not initially argued by the parties: the prohibition on alienating land acquired through free patent within five years of its issuance.

The Supreme Court anchored its decision on Section 118 of the Commonwealth Act No. 141, also known as the Public Land Act, which explicitly states:

Except in favor of the Government or any of its branches, units, or institutions, lands acquired under free patent or homestead provisions shall not be subject to encumbrance or alienation from the date of the approval of the application and for a term of five years from and after the date of issuance of the patent or grant, nor shall they become liable to the satisfaction of any debt contracted prior to the expiration of said period, but the improvements or crops on the land may be mortgaged or pledged to qualified persons, associations, or corporations.

Building on this principle, the Court cited Section 124 of the same Act, which provides that any transaction violating Sections 118 to 123 is unlawful and void from its inception. The Court emphasized that such contracts are not susceptible to ratification, and actions to declare their nullity are imprescriptible. Here, the sales occurred in 1969 and 1970, within five years of the free patent issuance in 1968, rendering them void. Because the sales happened within the prohibited period, no rights were transferred to the De Guzmans.

The Court clarified that while Section 124 dictates reversion of the property to the State, a private individual cannot initiate an action for reversion. The Solicitor General is the proper party to bring such an action. Therefore, Lamberto, as heir of the original patentees, has a superior right to possess the property until the State initiates reversion proceedings.

The Supreme Court also addressed the concept of implied trust and prescription. It noted that if the Public Land Act restrictions were not applicable, the action would still be barred by prescription. Actions for reconveyance based on implied trust prescribe in ten years from the date of registration of the title. The De Guzmans filed their complaint in 2000, well beyond the ten-year period from the issuance of TCT No. T-7133 in 1981.

An exception to this rule exists when the plaintiff is in possession of the land, in which case the action becomes one for quieting of title, which is imprescriptible. The Court, however, affirmed the CA’s finding that the De Guzmans failed to establish their actual possession of the property. They presented insufficient evidence of continuous possession, such as a lack of consistent tax payments and unclear evidence of improvements they made on the land. The tax declarations and payments made by Lamberto served as better indicators of possession in the concept of owner.

The decision highlights the strict application of the Public Land Act’s restrictions on alienation. It also serves as a reminder of the significance of due diligence when purchasing land, especially land originating from free patents or homestead grants. While the De Guzmans could not claim ownership due to the illegal sales, the Court ordered Lamberto to return the purchase price of P2,400 with legal interest, effectively restoring the parties to their original positions before the void transactions.

FAQs

What was the key issue in this case?	The central issue was whether the sale of land acquired through a free patent was valid when sold within five years of the patent’s issuance, in light of restrictions imposed by the Public Land Act. The Court also considered prescription and possession of the land.
What is the Public Land Act?	The Public Land Act (Commonwealth Act No. 141) governs the administration and disposition of public lands in the Philippines. It includes provisions on homesteads, free patents, and restrictions on alienating land acquired through these means.
What does Section 118 of the Public Land Act prohibit?	Section 118 prohibits the encumbrance or alienation of lands acquired under free patent or homestead provisions within five years from the date of the patent’s issuance. This aims to protect the grantee and their family.
What happens if land is sold in violation of Section 118?	Under Section 124, any sale in violation of Section 118 is unlawful and void from its execution. The grant, title, or permit may be annulled, and the property reverts to the State.
Can a private individual file an action for reversion of land?	No, only the Solicitor General or an officer acting in their stead can file an action for reversion, as the land would revert to the State. A private individual cannot bring such an action.
What is an implied trust, and how does it relate to reconveyance?	An implied trust arises by operation of law when property is acquired through mistake or fraud. The person obtaining the property is considered a trustee for the benefit of the real owner, who can then file an action for reconveyance.
What is the prescriptive period for an action for reconveyance based on implied trust?	Generally, an action for reconveyance based on implied trust prescribes in ten years from the date of registration of the deed or issuance of the certificate of title. However, this period does not apply if the plaintiff is in possession of the property.
What is the significance of possession in a reconveyance case?	If the plaintiff is in possession of the land, the action becomes one for quieting of title, which is imprescriptible. Possession must be actual and demonstrated through sufficient evidence.
What was the outcome for the parties in this case?	The Supreme Court declared the Deeds of Absolute Sale void but ordered Lamberto Bajao to return the purchase price of P2,400 to the De Guzmans with legal interest. The De Guzmans did not get the land.

This case serves as a crucial reminder of the limitations placed on land acquired through free patents and the importance of adhering to the stipulations of the Public Land Act. It reaffirms the principle that transactions made in violation of these restrictions are void and emphasizes the state’s role in reclaiming such properties. It further highlights that purchasers are not left without recourse as reimbursement for the purchase price is warranted in instances of a void sale.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Spouses Virgilio de Guzman, Jr. vs. Court of Appeals, G.R. No. 185757, March 02, 2016