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property of the respondents Baello and Rodriguez heirs in the RTC. The NHA secured a writ of possession
over the property.
During the same period, respondents acquired titles over the lots. Petitioners filed an amended
complaint. The respondent heirs filed separate motions to dismiss the complaint. The trial court issued an
Order granting the motion and dismissed the complaint on the ground of res judicata and lack of cause of
action. The petitioner appealed to the Court of Appeals, the court rendered a Decision affirming the Order of
the RTC. The petitioner then filed a petition for review on certiorari in the Supreme Court. The Court issued
a Resolution denying due course the petition on the ground that the CA committed no reversible error.
But the petitioner was undaunted; it filed a complaint against the respondent heirs in the RTC of
Caloocan City, this time, for declaration of nullity of OCT which was issued to Pedro T. Baello and his sister
Nicanora Baello-Rodriguez. The subject property was declared alienable and disposable by the government
only lately on 17 January 1986, and thus the said OCT could not have been validly issued in 1954.
The trial court dismissing the complaint on the grounds of estoppel and res judicata. On appeal, the
appellate court affirmed the assailed resolution of the RTC, ruling that the petitioners complaint was barred
by res judicata. It also held that the Republic of the Philippines and the petitioner, by their own acts, had
admitted that the properties titled to the respondents were private lands, even long before Administrative
Order No. 4-1766 was issued by then Minister of Agriculture Rodolfo del Rosario during Martial Law. Thus,
the present petition.
Issue: Whether or not the decision of the then Court of First Instance in LRC Case No. 520, G.R.L.O. No.
4815 (case of the issuance of OCT) and the consequent issuance of OCT No. (804) 53839 (title to the subject
property) is valid? -VALID DECISION > valid title
Held: (RES JUDICATA)
The Court held that NHA did not expressly assail or pray for the nullification of the CFI decision,
which granted the title to the Baellos. What the NHA prayed for was the nullification of the title by claiming
that the property was a forestland which makes it inalienable and not disposable. The nullification of the title
cannot be done unless the CFI decision is declared as null void first. This complaint should have been filed
in the CA, which had exclusive jurisdiction over the action, not in the trial court. Even assuming that the trial
court had jurisdiction over the action of the petitioner, nonetheless, the Court agrees with the ruling of the
trial and appellate courts that the petitioners action to annul the title was barred by the decision in
LRC Case No. 520.
Property Issue: Whether or not NHA is a builder who acted in good faith?- NO
Held:
The SC reaffirmed the trial and appellate courts in holding that NHA was a builder in bad faith when
it took possession of the property in 1976, and introduced improvement and disposed of said property despite
the knowledge that the ownership pertained to the respondents.
Not only that, NHA also violated the Constitution by disregarding the Constitutional mandate that
property shall not be taken without just compensation and unless it is for public use. The NHA may have a
laudable purpose in the expropriation of the land, which was to provide affordable housing in the Metro
Manila area. However, the manner by the use of force and guns to take property in 1976 was scary and
reprehensible. Moreover, there was no notice of the possession, control and disposition of the property. It
infringed the rights of the Baellos and their right to due process.
Relevant provision:
Art. 526: He is deemed a possessor in good faith who is not aware that there exists in his title or mode of
acquisition any flaw which invalidates it.