Case Digests on Civil Procedure (Part III)

REMEDIAL LAW REVIEW ICASE DIGESTS

[G.R. No. 116909. February 25, 1999]RUIZ vs. CA

FACTS: Respondent Pedro V. Garcia engaged the legal services of herein petitioners, Attys. Vivencio M. Ruiz and Emilio D. Castellanes, and an Agreement denominated as a Contract of Retainership. Pablo V. Garcia unilaterally terminated the said Contract of Retainership on the alleged ground that the petitioners, his lawyers, failed to settle amicably his differences with V. C. Ponce Co., Inc. Petitioners were paid attorney’s fees up to the month of July, 1982.

Thereafter, the petitioners Ruiz and Castellanes manifested their withdrawal as counsel for Pedro V. Garcia and moved that their attorney’s lien be put on record, in the cases involved. Such motion was granted by the trial court.

Petitioners Ruiz and Castellanes brought their action “For Collection of Sum of Money and for Specific Performance”, before RTC Makati City. While the said case was pending before the said lower court of origin, Pedro V. Garcia died. And so, after notifying the trial court of the demise of their client, counsel moved for the dismissal of the case, invoking Section 21, Rule 3 of the Rules of Court. RTC issued an Order dismissing petitioners’ complaint. On appeal, CA affirmed.

ISSUE: Whether or not the case at bar has survived the death of the private respondent, Pedro V. Garcia.

RULING: To determine whether the action survives or not, the Court ruling in Bonilla vs. Barcena (71 SCRA 491) comes to the fore, thus:

“The question as to whether an action survives or not depends on the nature of the action and the damage sued for (Iron Gate Bank vs. Brady, 184 U.S. 665, 22 SCT, 46 L.ed 739). In the cause of action which survive, the wrong complained affects primarily and principally property and property rights, the injuries to the person being merely incidental, while in the causes of action which do not survive, the injury complained of is to the person, the property and rights of property affected being incidental xxx..”

The core of petitioners’ argument is that action should not be dismissed since their complaint involves not just monetary claim but also real properties, as well.

Petitioners’ contention is untenable. While they maintain that what they are claiming include real properties, their Complaint is captioned as “For Collection of Money and for Specific Performance.”

Obviously, the petitioners themselves, who are lawyers, believed that their cause of action against the private respondent is in the nature of actio in personam.

“Actio in personam is a personal action seeking redress against a particular person. Personal actions are such whereby a man claims a debt, or personal duty, or damages in lieu thereof.” In the present case, petitioners seek to recover attorney’s fees from private respondent for professional services they rendered to the latter. Attorney’s fee is basically a compensation. In its ordinary sense, “the term (compensation) applies not only to salaries, but to compensation by fees for specific service.”

Viewed in proper perspective, an action to recover attorney’s fees is basically a monetary claim, which under Section 21, Rule 3 of B.P. 129 is an action that does not survive. Such is the fate of Civil Case No. 6465.

Petitioners theorize that the inclusion of real properties as part of the attorney’s fees private respondent owe them, converted the action into one that survives or at the very least, split the action into one that did not survive, with respect to the monetary obligation, and which survived, with respect to the real properties of the deceased.

In Harden vs. Harden, 20 SCRA 706, the Court ruled that an action for the satisfaction of attorney’s fees is founded on a personal obligation which does not survive the death of the defendant before adjudication.

As enunciated in Bonila, the litmus test in determining what action survives and what does not depends on the nature of the action and not on the object or kind of property sought to be recovered. All things studiedly considered, we are of the opinion, and, so hold, that the respondent Court of Appeals erred not in affirming the decision of the court a quo.

[G.R. No. 122947. July 22, 1999]BALUYOT vs. CA

FACTS: Petitioners filed a complaint for specific performance and damages against private respondent University of the Philippines before the RTC QC. The complaint was later on amended to include private respondent Quezon City government as defendant.

Herein petitioners and their ascendants have been in open, peaceful, adverse and continuous possession in the concept of an owner since memory can no longer recall of that parcel of riceland (now Diliman, Quezon City); U.P. Board of Regents approved the donation of about 9.2 hectares of the site, directly to the residents of Brgy. Krus Na Ligas; Notwithstanding the willingness of U.P. to proceed with the donation, Execution of the legal instrument to formalize it failed because of the

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unreasonable demand of the residents for an area bigger than 15.8 hectares.”

That upon advise of counsel and close study of the said offer of defendant UP to donate 15.8379 hectares, plaintiff Association proposed to accept and the defendant UP manifested in writing [its] consent to the intended donation directly to the plaintiff Association for the benefit of the bonafide residents of Barrio Cruz-na-Ligas and plaintiffs’ Association have agreed to comply with the terms and conditions of the donation;

UP backed-out from the arrangement to donate directly to the plaintiff Association for the benefit of the qualified residents and high-handedly resumed to negotiate the donation thru the defendant Quezon City Government under the terms disadvantageous or contrary to the rights of the bonafide residents.

A joint Motion to Dismiss was filed by UP and the Quezon City government on the ground that the complaint fails to state a cause of action. RTC denied respondents’ motion to dismiss. Respondents filed a petition for certiorari with the Court of Appeals, charging the trial court with grave abuse of discretion in refusing to dismiss the complaint filed by petitioners.

CA rendered a decision setting aside the trial court’s order. Petitioners argue that, on its face, their amended complaint alleges facts constituting a cause of action which must be fully explored during trial. They cite paragraphs 18, 19, and 20 of their complaint questioning the validity of the revocation of the donation and seek the enforcement of the donation through specific performance.

On the other hand, respondents contend that by seeking specific performance of the deed of donation as their primary cause of action, petitioners cannot at the same time claim ownership over the property subject of the donation by virtue of laches or acquisitive prescription. Petitioners cannot base their case on inconsistent causes of action. Moreover, as the trial court already found the deed to have been validly revoked, the primary cause of action was already thereby declared inexistent. Hence, according to respondents, the Court of Appeals correctly dismissed the complaint.

First. The trial court held that inasmuch as the donation made by UP to the Quezon City government had already been revoked, petitioners, for whose benefit the donation had been made, had no cause of action for specific performance. Nevertheless, it

denied respondents’ joint motion to dismiss petitioners’ action on the ground that respondent UP was barred from contesting petitioners’ right to remain in possession on the ground of laches.

This is error. While prescription does not run against registered lands, nonetheless a registered owner’s action to recover possession of his land may be barred by laches.

We hold that while defendant may not be considered as having acquired title by virtue of his and his predecessors’ long continued possession for 37 years, the original owner’s right to recover back the possession of the property and the title thereto from the defendant has, by the long period of 37 years and by patentee’s inaction and neglect, been converted into a stale demand.Thus, laches is a defense against a registered owner suing to recover possession of the land registered in its name.

But UP is not suing in this case. It is petitioners who are, and their suit is mainly to seek enforcement of the deed of donation made by UP in favor of the Quezon City government. The appellate court therefore correctly overruled the trial court on this point. Indeed, petitioners do not invoke laches. What they allege in their complaint is that they have been occupying the land in question from time immemorial, adversely, and continuously in the concept of owner, but they are not invoking laches. If at all, they are claiming ownership by prescription which, as already stated, is untenable considering that the land in question is a registered land. Nor can petitioners question the validity of UP’s title to the land. For as the Court of Appeals correctly held, this constitutes a collateral attack on registered title which is not permitted.

On the other hand, we think that the Court of Appeals erred in dismissing petitioners’ complaint for failure to state a cause of action. A cause of action exists if the following elements are present, namely:

(1) a right in favor of the plaintiff by whatever means and under whatever law it arises or is created; (2) an obligation on the part of the defendant to respect or not to violate such right; and (3) an act or omission on the part of such defendant in violation of the right of the plaintiff or constituting a breach of the obligations of the defendant to the plaintiff for which the latter may maintain an action for recovery of damages.

We find all the elements of a cause of action contained in the amended complaint of petitioners. While, admittedly, petitioners were not parties to the deed of donation, they anchor their right to seek its enforcement upon their allegation that they are intended beneficiaries of the



donation to the Quezon City government. (Refer to Art. 1311 on stipulation pour autrui)

It is hardly necessary to state that our conclusion that petitioners’ complaint states a cause of action against respondents is in no wise a ruling on the merits. That is for the trial court to determine in light of respondent UP’s defense that the donation to the Quezon City government, upon which petitioners rely, has been validly revoked.

It is evident that the trial court’s ruling on this question was only tentative, without prejudice to the final resolution of the question after the presentation by the parties of their evidence.

Second. It is further contended that the amended complaint alleges inconsistent causes of action for specific performance of the deed of donation. Respondents make much of the fact that while petitioners claim to be the beneficiaries-donees of 15.8 hectares subject of the deed, they at the same time seek recovery/delivery of title to the 42 hectares of land included in UP’s certificate of title. These are not inconsistent but, rather, alternative causes of action which Rule 8, §2 of the Rules of Court allows:

Alternative causes of action or defenses.- A party may set forth two or more statements of a claim or defense alternatively or hypothetically, either in one cause of action or defense or in separate causes of action or defenses. When two or more statements are made in the alternative and one of them if made independently would be sufficient, the pleading is not made insufficient by the insufficiency of one or more of the alternative statements.

Thus, the parties are allowed to plead as many separate claims as they may have, regardless of consistency, provided that no rules regarding venue and joinder of parties are violated. WHEREFORE, the decision of the Court of Appeals is REVERSED and the case is REMANDED to the Regional Trial Court of Quezon City, Branch 89, for trial on the merits.SO ORDERED.

[G.R. No. 125465. June 29, 1999]SPOUSES HONTIVEROS vs. RTC

FACTS: Petitioner spouses Hontiveros, filed a complaint for damages against private respondents Gregorio Hontiveros and Teodora Ayson before the RTC Iloilo City. Petitioners alleged that they are the owners of a parcel of land, in the Province of Capiz, that petitioners were deprived of income from the land as a result of the filing of the land registration case;

that such income consisted of rentals from tenants of the land and that private respondents filed the land registration case and withheld possession of the land from petitioners in bad faith.

Petitioners filed an Amended Complaint to insert therein an allegation that “earnest efforts towards a compromise have been made between the parties but the same were unsuccessful.”Private respondents filed an Answer to Amended Complaint with Counterclaim, in which they denied, among other things, that earnest efforts had been made to reach a compromise but the parties were unsuccessful.

Petitioners moved for a judgment on the pleadings on the ground that private respondents’ answer did not tender an issue or that it otherwise admitted the material allegations of the complaint. RTC denied petitioners’ motion.

Petitioners in their amended complaint allege that earnest efforts towards a compromise with the defendants were made, the fact is that their complaint was not verified as provided in Article 151 of the Family Code. Besides, it is not believed that there were indeed earnest efforts made to patch up and/or reconcile the two feuding brothers, Gregorio and Augusto, both surnamed Hontiveros.

RTC orders the dismissal of this case. Petitioners moved for a reconsideration of the order of dismissal, but their motion was denied. Hence, this petition for review on certiorari.

Private respondents raise a preliminary question. They argue that petitioners should have brought this case on appeal to the Court of Appeals since the order of the trial court judge was actually a decision on the merits. On the other hand, even if petition for certiorari were the proper remedy, they contend that the petition is defective because the judge of the trial court has not been impleaded as a respondent.

Private respondents’ contention is without merit. The petition in this case was filed pursuant to Rule 45 of the Rules of Court.

The rule, therefore, is that direct appeals to this Court from the trial court on questions of law have to be through the filing of a petition for review on certiorari. It has been held that:

x x x when a CFI (RTC) adjudicates a case in the exercise of its original jurisdiction, the correct mode of elevating the judgment to the Court of Appeals is by ordinary appeal, or appeal by writ of error, involving merely the filing of a notice of appeal - except only if the appeal is taken in special proceedings and other cases wherein multiple appeals are allowed under the



law, in which even the filing of a record on appeal is additionally required. Of course, when the appeal would involve purely questions of law or any of the other cases (except criminal cases as stated hereunder) specified in Section 5(2), Article X of the Constitution, it should be taken to the Supreme Court by petition for review on certiorari in accordance with Rules 42 and 45 of the Rules of Court.

By way of implementation of the aforestated provisions of law, this Court issued on March 9, 1990 Circular No. 2-90, paragraph 2 of which provides:

Appeals from Regional Courts to the Supreme Court. – Except in criminal cases where the penalty imposed is life imprisonment or reclusion perpetua, judgments of regional trial courts may be appealed to the Supreme Court only by petition for review on certiorari in accordance with Rule 45 of the Rules of Court in relation to Section 17 of the Judiciary Act of 1948, as amended, this being the clear intendment of the provision of the Interim Rules that (a)ppeals to the Supreme Court shall be taken by petition for certiorari which shall be governed by Rule 45 of the Rules of Court.

On the other hand, petitioners contend that the trial court erred in dismissing the complaint when no motion to that effect was made by any of the parties. They point out that, in opposing the motion for judgment on the pleadings, private respondents did not seek the dismissal of the case but only the denial of petitioners’ motion. Indeed, what private respondents asked was that trial be held on the merits.

Of course, there are instances when the trial court may order the dismissal of the case even without a motion to that effect filed by any of the parties. In Baja v. Macandog, this Court mentioned these cases, to wit:

The court cannot dismiss a case motu proprio without violating the plaintiff’s right to be heard, except in the following instances: if the plaintiff fails to appear at the time of the trial; if he fails to prosecute his action for an unreasonable length of time; or if he fails to comply with the rules or any order of the court; or if the court finds that it has no jurisdiction over the subject matter of the suit.

However, none of these exceptions appears in this case. Moreover, the trial court itself found that “judgment on the pleadings is inappropriate not only for the fact that [private respondents] in their answer . . . specifically denied the claim of damages against them, but also because of the [rule] . . . that the party

claiming damages must satisfactorily prove the amount thereof. . . .” Necessarily, a trial must be held.

Under the rules, if there is no controverted matter in the case after the answer is filed, the trial court has the discretion to grant a motion for judgment on the pleadings filed by a party. Where there are actual issues raised in the answer, such as one involving damages, which require the presentation of evidence and assessment thereof by the trial court, it is improper for the judge to render judgment based on the pleadings alone. In this case, aside from the amount of damages, the following factual issues have to be resolved, namely, (1) private respondent Teodora Ayson’s participation and/or liability, if any, to petitioners and (2) the nature, extent, and duration of private respondents’ possession of the subject property. The trial court, therefore, correctly denied petitioners’ motion for judgment on the pleadings.

However, the trial court erred in dismissing petitioners’ complaint on the ground that, although it alleged that earnest efforts had been made toward the settlement of the case but they proved futile, the complaint was not verified for which reason the trial court could not believe the veracity of the allegation.

The absence of the verification required in Art. 151 does not affect the jurisdiction of the court over the subject matter of the complaint. The verification is merely a formal requirement intended to secure an assurance that matters which are alleged are true and correct. If the court doubted the veracity of the allegations regarding efforts made to settle the case among members of the same family, it could simply have ordered petitioners to verify them.

As this Court has already ruled, the court may simply order the correction of unverified pleadings or act on it and waive strict compliance with the rules in order that the ends of justice may be served. Otherwise, mere suspicion or doubt on the part of the trial court as to the truth of the allegation that earnest efforts had been made toward a compromise but the parties’ efforts proved unsuccessful is not a ground for the dismissal of an action. Only if it is later shown that such efforts had not really been exerted would the court be justified in dismissing the action.

[G.R. No. 122269. September 30, 1999]REPUBLIC vs. CA, ET. AL.,

FACTS: The parcel of land that is presently the subject of the dispute in the instant case Lot 3 Portion forms part of the above-mentioned parcel of land declared by this Honorable Court as belonging to the public domain, classified/zonified land available for fishpond development.



This lot has been leased to Mr. Porfirio Morado by the Republic of the Philippines, represented by the Secretary of Agriculture, for a period of 25 years, or up to December 31, 2013, under Fishpond Lease Agreement.

On July 6, 1988, however, the late Zenaida Bustria [daughter of Isidro Bustria] filed a complaint against Porfirio Morado in the Regional Trial Court of Alaminos, Pangasinan for ownership and possession over the lot in question. Herein petitioner, the Republic of the Philippines, was not made a party to that suit.

In her complaint, Zenaida Bustria claimed absolute ownership and quiet and peaceful possession of several lots under PSU-155696 surveyed in the name of her father, Isidro Bustria. She further asserted that said Porfirio Morado maliciously applied for a fishpond permit with the Bureau of Fisheries and Aquatic Resources over Lot 3 thereof (the subject lot), well-knowing that said lot had always been occupied, possessed and worked by her and her predecessors-in-interest.

Porfirio Morado denied the allegations in the complaint, claiming that the lot in question is part of the public domain which he developed and converted into a fishpond. Due, however, to Porfirio Morado’s and his counsel’s failure to appear at the pre-trial and subsequent court hearings, the trial court subsequently declared Porfirio Morado ‘as in default.’

Respondent Judge rendered a decision declaring the plaintiff as the exclusive and absolute owner of the land in question. Petitioner (REPUBLIC), filed with the CA a petition for the annulment of the trial court’s decision. Petitioner alleged that the land in question is within the classified/zonified alienable and disposable land for fishpond development and that since the land formed part of the public domain, the BFAR has jurisdiction over its disposition in accordance with P.D. No. 704, §4. CA rendered a decision dismissing the petition. Hence, this petition for review.

The judgment rendered in a case may be annulled on any of the following grounds: (a) the judgment is void for want of jurisdiction or for lack of due process of law; or (b) it was obtained through extrinsic fraud. The question in this case is whether the decision of the Regional Trial Court is void on any of these grounds. The preliminary question, however, is whether the government can bring such action even though it was not a party to the action in which the decision sought to be annulled was rendered. We shall deal with these questions in inverse order.

RULING: First, is the question whether petitioner has personality to bring the action below. To begin with, an action to recover a parcel of land is in personam. As such, it is binding only between the parties thereto, as this Court explained in Ching v. Court of Appeals, viz:

An action to redeem, or to recover title to or possession of, real property is not an action in rem or an action against the whole world, like a land registration proceeding or the probate of a will; it is an action in personam, so much so that a judgment therein is binding only upon the parties properly impleaded and duly heard or given an opportunity to be heard. Actions in personam and actions in rem differ in that the former are directed against specific persons and seek personal judgments, while the latter are directed against the thing or property or status of a person and seek judgments with respect thereto as against the whole world. An action to recover a parcel of land is a real action but it is an action in personam, for it binds a particular individual only although it concerns the right to a tangible thing.

The appellate court, holding that the proceedings before the trial court were in personam, ruled that since petitioner was not a party to Civil Case No. A-1759, it is not a real party-in-interest and, therefore, has no personality to bring the action for annulment of the judgment rendered in that case.

The appellate court is in error. In Islamic Da’wah Council of the Phils. v. Court of Appeals, this Court held that a party claiming ownership of a parcel of land which is the subject of foreclosure proceedings has a sufficient interest to bring an action for annulment of the judgment rendered in the foreclosure proceedings even though it was not a party in such proceedings. It was held:

[A] person need not be a party to the judgment sought to be annulled. What is essential is that he can prove his allegation that the judgment was obtained by the use of fraud and collusion and he would be adversely affected thereby.

Private respondents do not deny that Isidro Bustria, to whom they trace their ownership, previously filed a fishpond application with the BFAR over the disputed land. Neither do they deny that the disputed land formed part of the public domain.

We agree with petitioner. The State clearly stands to be adversely affected by the trial court’s disposition of inalienable public land. The land involved in this case was classified as public land suitable for fishpond development. In controversies involving the disposition of public land, the burden of overcoming the presumption of state ownership of lands of the public domain lies upon the private



claimant. Private respondents have not discharged this burden.

The fact that the land in dispute was transformed into a “fully developed fishpond” does not mean that it has lost its character as one declared “suitable for fishpond purposes” under the decree. By applying for a fishpond permit with BFAR, Isidro Bautista admitted the character of the land as one suitable for fishpond development since the disposition of such lands is vested in the BFAR. Consequently, private respondents, as his successors-in-interests, are estopped from claiming otherwise.

It is settled under the Public Land Law that alienable public land held by a possessor, personally or through his predecessor-in-interest, openly, continuously, and exclusively for 30 years is ipso jure converted to private property by the mere lapse of time. However, only public lands classified as agricultural are alienable. Lands declared for fishery purposes are not alienable and their possession, no matter how long continued, cannot ripen into ownership.Since the disposition of lands declared suitable for fishpond purposes fall within the jurisdiction of the BFAR, in accordance with P.D. No 704, §4, the trial court’s decision is null and void. The trial court has no jurisdiction to make a disposition of inalienable public land.

[G.R. No. 124062. January 21, 1999]COMETA vs. CA

FACTS: Petitioner State Investment Trust, Inc. (SITI), formerly State Investment House, Inc. (SIHI), is an investment house engaged in quasi-banking activities. Petitioner Reynaldo Cometa is its president. Private respondent Honeycomb Builders, Inc. (HBI), on the other hand, is a corporation engaged in the business of developing, constructing, and selling townhouses and condominium units. Private respondent Reynaldo Guevara is president of HBI and chairman of the board of directors of Guevent Industrial Development Corp. (GIDC).

An information for Falsification of Public Document was thus filed against private respondent Guevara in the Regional Trial Court of Makati. After the prosecution presented its evidence, Guevara filed a demurrer to evidence which the trial court granted.

Following the dismissal of the criminal case against him, private respondents Reynaldo S. Guevara and HBI filed a complaint for malicious prosecution against petitioners Cometa and SITI in the Regional Trial Court of Quezon City.

Petitioners SITI and Cometa filed their respective answers. After the pre-trial of the case, they filed a joint motion to dismiss with alternative motion to drop respondent HBI as a party plaintiff, upon the following grounds: The complaint states no cause of action; Secretary Drilon, Undersecretary Bello and the prosecutor, not impleaded herein, are the real parties in-interest-defendants, which again makes the complaint lack a cause of action. At the least, the above public official are indispensable parties, and their non-inclusion renders this court without jurisdiction over the case; The action seeks to impose a penalty on the right to litigate and for that reason is unconstitutional and against settled public policy.

Trial court after a thorough perusal of the contents embodied in said pleadings, in the exercise of its sound judicial discretion finds that there are sufficient allegations of cause of action in the Complaint. The defense of lack of cause of action, and that defendants are not the real parties in interest, in the considered opinion of this Court, are matters of defense, which will be considered, after the contending parties thru counsel shall have rested their cases, and the case submitted for Decision.

Petitioners, in separate motions, asked for a reconsideration but their motions were denied. CA rendered its decision denying the petition for certiorari and prohibition of petitioners. Petitioners filed a motion for reconsideration but the appellate court denied their motion.

Hence, this petition. The principal question for decision is whether the complaint filed by private respondents against petitioners in the Regional Trial Court states a cause of action. First, petitioners maintain it does not as the allegations in the complaint are insufficient and indispensable parties were not impleaded in the case. Secondly, they contend that private respondent HBI should have been dropped as a party plaintiff upon petitioners’ motion therefor. Both contentions are without merit.

First. A complaint for malicious prosecution states a cause of action if it alleges:

1. that the defendant was himself the prosecutor or that at least he instigated the prosecution;2. that the prosecution finally terminated in the plaintiff’s acquittal;3. that in bringing the action the prosecutor acted without probable cause; and4. that the prosecutor was actuated by malice, i.e., by improper and sinister motives.

Whether the facts pleaded and the substantive law entitle plaintiff to a judgment. Otherwise stated, can a judgment be rendered upon the facts alleged and deemed admitted, in accordance with the prayer in the complaint? To



resolve this, the allegations of the complaint must be examined.

The mere allegation in a complaint for malicious prosecution that an information was filed after preliminary investigation and that a warrant of arrest was thereafter issued does not by itself negate allegations in the same complaint that the prosecution was malicious. All criminal prosecutions are by direction and control of the public prosecutor. To sustain petitioners’ stand that an allegation in a complaint for malicious prosecution that the information in the criminal case was filed after appropriate preliminary investigation negates a contrary allegation that the filing of the case was malicious would result in the dismissal of every action for malicious prosecution.

In contrast, the decision of the criminal court in the present case indicates that there was not even prima facie evidence to prove the alleged guilt of the accused. Consequently, a trial was in fact unnecessary and the criminal court dismissed the case against private respondent Guevara on the basis of a demurrer to evidence.

Second. Petitioners contend that the Secretary and the Undersecretary of the Department of Justice and the Assistant Provincial Prosecutor should have been included in the case for malicious prosecution because it was they who found probable cause against private respondents and under the law the prosecution of criminal actions is vested in the public prosecutor. According to petitioners, they did not conduct the preliminary investigation or order the filing of an information and their participation was limited to initiating the investigation in the NBI and testifying.

There is no merit in this contention. The issue in those cases was not whether the complaint stated a cause of action against defendants who were complainants in the criminal cases which led to the filing of civil cases for damages but whether they were liable to the plaintiffs. The Court merely ruled in those cases that the complainant in the criminal case is not necessarily liable simply because he initiated the criminal case which eventually was dismissed. It is noteworthy that, in the case at bar, private respondents do not only allege that petitioners initiated the filing of the criminal case against them but that because of the evidence they (petitioners) presented, the Department of Justice could have been induced to order the filing of a criminal case in court.

Third. It is contended that HBI is not a real-party-in-interest, whatever interest it may have being purely

speculative. On this point, we think the Court of Appeals correctly ruled.

It is true that a criminal case can only be filed against the officers of a corporation and not against the corporation itself. It does not follow from this, however, that the corporation cannot be a real-party-in-interest for the purpose of bringing a civil action for malicious prosecution.

[G.R. No. 132644. November 19, 1999]DAVID vs. MALAY

FACTS: The spouses Andres Adona and Leoncia Abad, husband and wife for a good number of years, were blessed with five children among them being Carmen Adona. Carmen married Filomeno Malay; three children were begotten by the marriage (among the herein private respondents). Following the death of Leoncia Abad in 1923, Andres Adona cohabited with Maria Espiritu, herself a widow, apparently without the benefit of marriage. Andres and Maria sired two children, represented herein by her heirs. Maria Espiritu likewise had a child by her previous marriage, now herein represented also by his own heirs.

During his lifetime, Andres Adona applied for a homestead patent over a parcel of agricultural land located at Iba, Zambales. After Andres Adona had died, Maria Espiritu, predecessor-in-interest of herein petitioners, succeeded in obtaining OCT over the land in her name. After Maria Espiritu had died in 1945, the children, as well as descendants of Andres Adona by his marriage with Leoncia Abad, continued to be in peaceful and quiet possession of the subject land.

Sometime in 1989, petitioners executed a deed of “Extrajudicial Settlement with Sale” over the subject property in favor of Mrs. Venancia Ungson. Private respondents protested the sale claiming that they were the true owners of the land. Ultimately, in any event, the sale in favor of Mrs. Ungson was rescinded in view of the latter’s failure to pay in full the consideration agreed upon. Subsequently, petitioners executed another deed of Extrajudicial Settlement with Sale. In this new instrument, dated 15 December 1990, petitioners divided the land equally among themselves and sold their respective shares to their co-petitioners herein, Antonio de Ubago, Jr., TCT was issued in favor of the de Ubagos.

Private respondents filed a complaint for “Annulment of Sale with Restraining Order, Injunction and Damages” against petitioners. Private respondents averred that the disputed land sold by the heirs of Maria Espiritu to the de Ubagos was the subject of a homestead application by their great grandfather, Andres Adona, but that OCT was instead fraudulently issued to Maria Espiritu,



Upon her false representation that she was the widow of Andres Adona. After a hearing on the merits of the case, the trial court dismissed the complaint for lack of cause of action and on the ground of prescription. It opined that the action being one for annulment of sale anchored on a fraudulent titling of the subject property, the cause of action constituted a collateral attack on the Torrens Certificate of Title. The court a quo added that even if the action were to be treated as being one for reconveyance, the suit would still have to fail since an action for reconveyance could only be brought within 10 years counted from the date of issuance of the certificate of title (in 1933).

On appeal, CA set aside the order of the trial court and directed the cancellation of TCT. Petitioners have come to this Court and seek to dispute the judgment of the CA.

Private respondents, upon the other hand, asks this Court to sustain the decision of the Court of Appeals on the thesis that the property in question indubitably belongs to the estate of Andres Adona whose incontestable right to it is derived from the perfected homestead application two years prior to his death as so admitted by Maria Espiritu herself in her affidavit submitted to the Director of Lands.

RULING: The Court rules for the affirmance of the challenged decision. A certificate of title issued under an administrative proceeding pursuant to a homestead patent covering a disposable public land within the contemplation of the Public Land Law or Commonwealth Act No. 141 is as indefeasible as a certificate of title issued under a judicial registration proceeding. Under the Land Registration Act, title to the property covered by a Torrens certificate becomes indefeasible after the expiration of one year from the entry of the decree of registration. Such decree of registration is incontrovertible and becomes binding on all persons whether or not they were notified of, or participated in, the in rem registration process.

There is no specific provision in the Public Land Law or the Land Registration Act (Act 496), now Presidential Decree 1529, fixing a similar one-year period within which a public land patent can be considered open to review on the ground of actual fraud, such as that provided for in Section 38 of the Land Registration Act, and now Section 32 of Presidential Decree 1529, and clothing a public land patent certificate of title with indefeasibility.

Original Certificate of Title No. 398 was issued in the name of Maria Espiritu on 04 December 1933 and would have become indefeasible a year thereafter had

not its issuance been attended with fraud. The attendance of fraud created an implied trust in favor of private respondents and gave them the right of action to seek the remedy of reconveyance of the property wrongfully obtained. In Javier vs. Court of Appealsthis Court ruled:

“x x x The basic rule is that after the lapse of one (1) year, a decree of registration is no longer open to review or attack although its issuance is attended with actual fraud. This does not mean however that the aggrieved party is without a remedy at law. If the property has not yet passed to an innocent purchaser for value, an action for reconveyance is still available. The decree becomes incontrovertible and can no longer be reviewed after one (1) year from the date of the decree so that the only remedy of the landowner whose property has been wrongfully or erroneously registered in another’s name is to bring an ordinary action in court for reconveyance, which is an action in personam and is always available as long as the property has not passed to an innocent third party for value. If the property has passed into the hands of an innocent purchaser for value, the remedy is an action for damages.”

The caption of the case before the court a quo while denominated as being one for “Annulment of Sale with Damages” is in reality an action for reconveyance since the ultimate relief sought by private respondents would be for the property covered by Original Certificate of Title No. 398 to be reconveyed to the estate of Andres Adona. In this jurisdiction, the dictum adhered to is that the nature of an action is determined, more importantly, by the body of the pleading or complaint itself than by its title or heading.

The Court of Appeals did not err in treating the action brought by private respondents as one for reconveyance or as one that seeks the transfer of the property, wrongfully registered by another, to its rightful and legal owner. It would seem that Andres Adona did perfect his homestead application prior to his death, the right to the issuance of the patent on which vests after complying with all the requirements of the law.

The next crucial issue focuses on the ruling of the Court of Appeals to the effect that if a person who claims to be the owner of the property is in actual possession thereof, the right to seek reconveyance does not prescribe.

There is no doubt about the fact that an action for reconveyance based on an implied trust ordinarily prescribes in ten years. This rule assumes, however, that there is an actual need to initiate that action, for when the right of the true and real owner is recognized, expressly or implicitly such as when he remains undisturbed in his possession, the statute of limitation would yet be irrelevant. An action for reconveyance, if nonetheless



brought, would be in the nature of a suit for quieting of title, or its equivalent, an action that is imprescriptible.

In Faja vs. Court of Appeals, the Court has held that a person in actual possession of a piece of land under claim of ownership may wait until his possession is disturbed or his title is attacked before taking steps to vindicate his right, and that his undisturbed possession gives him the continuing right to seek the aid of a court of equity to ascertain and determine the nature of the adverse claim of a third party and its effect on his title. In the words of the Court -

“x x x There is settled jurisprudence that one who is in actual possession of a piece of land claiming to be owner thereof may wait until his possession is disturbed or his title is attacked before taking steps to vindicate his right, the reason for the rule being, that his undisturbed possession gives him a continuing right to seek the aid of a court of equity to ascertain and determine the nature of the adverse claim of a third party and its effect on his own title, which right can be claimed only by one who is in possession. No better situation can be conceived at the moment for Us to apply this rule on equity than that of herein petitioners whose mother, Felipa Faja, was in possession of the litigated property for no less than 30 years and was suddenly confronted with a claim that the land she had been occupying and cultivating all these years, was titled in the name of a third person. We hold that in such a situation the right to quiet title to the property, to seek its reconveyance and annul any certificate of title covering it, accrued only from the time the one in possession was made aware of a claim adverse to his own, and it is only then that the statutory period of prescription commences to run against such possessor.”

The same dictum is reiterated in Heirs of Jose Olviga vs. Court of Appeals; thus -

“With regard to the issue of prescription, this Court has ruled a number of times before that an action for reconveyance of a parcel of land based on implied or constructive trust prescribes in ten years, the point of reference being the date of registration of the deed or the date of the issuance of the certificate of title over the property (Vda de Portugal vs. IAC, 159 SCRA 178) But this rule applies only when the plaintiff is not in possession of the property, since if a person claiming to be the owner thereof is in actual possession of the property, the right to seek reconveyance, which in effect seeks to quiet title to the property, does not prescribe.”

Finally, this Court sees no cogent reasons to disturb the finding of the Court of Appeals that the de Ubagos may not be considered buyers in good faith. Said the Appellate Court.

“x x x An innocent purchaser for value is one who buys property of another, without notice that some other person has a right to, or interest in, such property and pays a full and fair price for the same, at the time of such purchase, or before he has notice of the claim or interest of some other persons in the property. He buys the property with the belief that the person from whom he receives the thing was the owner and could convey title to the property. A purchaser can not close his eyes to facts which should put a reasonable man on his guard and still claim he acted in good faith (Sandoval vs. Court of Appeals, 260 SCRA 283, 296 [1996])

“It is well settled that one who deals with property registered under the Torrens system need not go beyond the same, but only has to rely on the title. He is charged with notice only of such burdens and claims as are annotated on the title. (Sandoval, supra., at p. 295)

“The aforestated principle admits of an unchallenged exception: that a person dealing with registered land has a right to rely on the Torrens certificate of title and to dispense with the need of inquiring further except when the party has actual knowledge of facts and circumstances that would impel a reasonably cautious man to make such inquiry or when the purchaser has some knowledge of a defect or the lack of title in his vendor or of sufficient facts to induce a reasonably prudent man to inquire into the status of the title of the property in litigation. The presence of anything which excites or arouses suspicion should then prompt the vendee to look beyond the certificate and investigate the title of the vendor appearing on the face of said certificate. One who falls within the exception can neither be denominated an innocent purchaser for value nor a purchaser in good faith and hence does not merit the protection of the law. (Sandoval, supra.) (Underscoring supplied)

The rule is settled that a buyer of real property which is in the possession of persons other than the seller must be wary and should investigate the rights of those in possession. Otherwise, without such inquiry, the buyer can hardly be regarded as a buyer in good faith. The buyer who has failed to know or discover that the land sold to him is in the adverse possession of another buyer in bad faith. (Embrado vs. Court of Appeals, 233 SCRA 335, 347 [1994]).WHEREFORE, the decision of CA is AFFIRMED.



[G.R. No. 115794. June 10, 1999]MANANGAN vs. DELOS REYES

FACTS: Respondents were co-owners of 3 parcels of land located in San Narciso, Zambales, covered by OCT No. 7372 of the Register of Deeds of Zambales. Petitioner, on the other hand, was a tenant of the respondents and had been sharing the harvest of the land with respondents’ mother, Macaria Villanueva, during her lifetime.

On December 11, 1932, Macaria Villanueva sold the parcels of land in question to Victoriano Manangan, petitioner’s father, evidenced by a duly notarized deed of sale signed by Macaria and the respondents except Inocencio de los Reyes. After cadastral proceedings were initiated over the land, the registration court decreed registration under the torrens system of the parcels of land involved in the names of Macaria Villanueva, Cirilo de los Reyes, and Francisco de los Reyes.

RD of Zambales, pursuant to the decree of registration, issued Original Certificate of Title No. 7372 in the names of Macaria Villanueva, Cirilo de los Reyes, and Francisco de los Reyes, now all deceased. Macaria is survived by three children, respondents herein. Francisco is survived by two children, respondents herein. Cirilo died without any issue.

On July 6, 1974, respondents filed with the Court of First Instance of Zambales, a complaint for recovery of possession of the aforesaid parcels of land against petitioner claiming the right of possession of said land. Petitioner resisted such claim alleging fraud in causing the land to be registered in respondents’ names despite its sale to petitioner’s father. Petitioner filed with the lower court an amended answer for reconveyance of the lots in question.

RTC rendered a decision in favor of respondents declaring that they had a better right over the subject parcels of land. Petitioners appealed to CA. CA affirmed the trial court’s conclusion and ruling that petitioner’s action had prescribed and was barred by laches. Hence, this petition for review on certiorari.

ISSUE: Can possession by a vendee of an unregistered real property defeat the torrens title thereon later secured by the vendor inspite of the sale, where the title was obtained in land registration proceedings filed thirty eight (38) years ago?

RULING: In this appeal via certiorari, petitioner seeks to reverse the decision of the Court of Appeals holding that an action for reconveyance or recovery of

ownership of the land fraudulently titled to respondent has prescribed and is barred by laches. We affirm.Petitioner’s right of action to recover ownership of the land in question has prescribed and is barred by laches.

In Alvarez vs. Intermediate Appellate Court, we ruled that the remedy of the landowner whose property has been wrongfully or erroneously registered in another’s name is to bring an action in the ordinary courts of justice for reconveyance. The Court of Appeals correctly ruled that an action for reconveyance based on an implied or constructive trust prescribes in ten (10) years from the issuance of the torrens title over the property, citing Tale vs. Court of Appeals.

Petitioner slept on his right for thirty eight (38) years counted from the time the Original Certificate of Title was issued on June 21, 1937, until he filed his amended answer to respondents’ complaint on March 14, 1975, asking for reconveyance of the lots in question. The petitioner’s right to bring such action was barred by laches as he took no step towards that direction reasonably after the title to the property was issued under the torrens system. Finally, petitioner cannot invoke Article 1141 of the Civil Code as this law provides only a period of thirty (30) years to bring real actions over immovable property.

[G.R. No. 63145. October 5, 1999]VENTURA vs. HON. MILITANTE

FACTS: Private respondent filed a Complaint for a Sum of Money and Damages against petitioner. During the lifetime of Carlos Ngo he was indebted with the plaintiff (herein priv. resp.). Said obligation is already due and demandable and the defendant thru Ms. Ventura who is ostensibly taking care of the properties/estate of deceased Carlos Ngo, refused, failed and neglected and still continues to refuse, fail and neglect to pay despite repeated demands.

Petitioner moved to dismiss the foregoing complaint on the ground that “the estate of Carlos Ngo has no legal personality,” the same being “neither a natural nor legal person in contemplation of law.”

In his Opposition to Motion to Dismiss, petitioner insisted that since “the money claim subject of this case actually represents the costs of automotive spare parts/replacements contracted by deceased Carlos Ngo during his lifetime for the benefit/business of the family x x x the conjugal partnership x x x shall be accountable for the payment thereof.” Subsequently, private respondent's counsel manifested that he is poised to “amend the complaint in order to state the correct party defendant that he intends to sue in this case”. The public respondent gave private respondent fifteen (15) days to make the amendment.



Petitioner filed a Motion for Reconsideration of the order of public respondent permitting private respondent to amend his complaint. Public respondent issued the herein assailed order that the indebtedness was incurred by Carlos Ngo and defendant Sulpicia Ventura and since Carlos Ngo is now dead that will not preclude the plaintiff from filing a case against the living defendant, Sulpicia Ventura.

Petitioner scurried to this Court praying that the foregoing order of the public respondent be set aside and the amended complaint of private respondent.

RULING: We grant the petition. The original complaint of petitioner named the “estate of Carlos Ngo as represented by surviving spouse Ms. Sulpicia Ventura” as the defendant. Petitioner moved to dismiss the same on the ground that the defendant as named in the complaint had no legal personality. We agree.

Neither a dead person nor his estate may be a party plaintiff in a court action. A deceased person does not have such legal entity as is necessary to bring action so much so that a motion to substitute cannot lie and should be denied by the court. An action begun by a decedent's estate cannot be said to have been begun by a legal person, since an estate is not a legal entity; such an action is a nullity and a motion to amend the party plaintiff will not likewise lie, there being nothing before the court to amend. Considering that capacity to be sued is a correlative of the capacity to sue, to the same extent, a decedent does not have the capacity to be sued and may not be named a party defendant in a court action.

It is clear that the original complaint of private respondent against the estate of Carlos Ngo was a suit against Carlos Ngo himself who was already dead at the time of the filing of said complaint. At that time, and this, private respondent admitted, no special proceeding to settle his estate had been filed in court. As such, the trial court did not acquire jurisdiction over either the deceased Carlos Ngo or his estate.

To cure this fatal defect, private respondent amended his original complaint. In his amended complaint, private respondent deleted the estate of Carlos Ngo and named petitioner as the defendant. When petitioner, in her comment to the amended complaint, reasoned that the conjugal partnership of gains between her and Carlos Ngo was terminated upon the latter's death and that the debt which he contracted, assuming it was a charge against the conjugal property, could only be paid after an inventory is made in the appropriate testate or intestate proceeding, private respondent simply reiterated his demand that

petitioner pay her husband's debt which, he insisted, redounded to the benefit of everyone in her family.

It is true that amendments to pleadings are liberally allowed in furtherance of justice, in order that every case may so far as possible be determined on its real facts, and in order to speed the trial of causes or prevent the circuitry of action and unnecessary expense. But amendments cannot be allowed so as to confer jurisdiction upon a court that never acquired it in the first place. When it is evident that the court has no jurisdiction over the person and the subject matter and that the pleading is so fatally defective as not to be susceptible of amendment, or that to permit such amendment would radically alter the theory and the nature of the action, then the court should refuse the amendment of the defective pleading and order the dismissal of the case.

Moreover, as correctly argued by petitioner, the conjugal partnership terminates upon the death of either spouse. After the death of one of the spouses, in case it is necessary to sell any portion of the conjugal property in order to pay outstanding obligations of the partnership, such sale must be made in the manner and with the formalities established by the Rules of Court for the sale of the property of deceased persons. Where a complaint is brought against the surviving spouse for the recovery of an indebtedness chargeable against said conjugal property, any judgment obtained thereby is void. The proper action should be in the form of a claim to be filed in the testate or intestate proceedings of the deceased spouse.

In many cases as in the instant one, even after the death of one of the spouses, there is no liquidation of the conjugal partnership. This does not mean, however, that the conjugal partnership continues. And private respondent cannot be said to have no remedy. Under Sec. 6, Rule 78 of the Revised Rules of Court, he may apply in court for letters of administration in his capacity as a principal creditor of the deceased Carlos Ngo if after thirty (30) days from his death, petitioner failed to apply for administration or request that administration be granted to some other person.

[G.R. No. 116151. July 2, 1999]ALMORA vs. CA

FACTS: As found by the lower court, the disputed property is public land, such being a part of the Mount Data National Reservation Park, over which Ben Almora, the late father of petitioners, was granted an occupancy permit by the Bureau of Forestry, and over which Ben Almora and petitioners herein have consistently paid real property taxes since the property’s declaration in 1945 until 1987.

Ben Almora leased the disputed property and the building situated thereon in favor of Federico Peralta, the now



deceased father of private respondents, as evidenced by a Contract of Lease, in which Ben Almora represented himself to be the “true and lawful owner” of the leased property, and in which Federico Peralta acknowledged the said true and lawful ownership of Ben Almora.

Federico Peralta failed to pay the rentals as they fell due, thus prompting Ben Almora to file a case for unlawful detainer and recovery of unpaid rentals. MTC ruled in favor of Almora, ordering Peralta to vacate the premises of the leased property and to pay the arrears in rentals. The MTC decision was affirmed by the defunct Court of First Instance of Baguio which decision on appeal became final and executory, no appeal having been interposed to the Court of Appeals or Supreme Court.

Inspite of said decision, the Peraltas refused to vacate the premises of the disputed property; rather, they continued to occupy it. When Federico Peralta died, his three children built their respective houses on the lot and continued to occupy the same. Before his death, Ben Almora sold the land in question, covered by and forming part of the property declared under Tax Declaration No. 9577, together with his other lands, to his children, petitioners herein, through a Deed of Sale of Unregistered Lands.

Private respondents did not dispute the fact of the lease between Ben Almora and their father, Federico Peralta, but contended that their father, along with the other lessees of Lots A and B, ceased to pay rentals upon learning that Ben Almora had no title to the lands he was leasing out, but was merely issued an occupancy permit by the Bureau of Forestry. They also pointed out that the permit granted to Ben Almora embodied specific restrictions against the alienation or subletting of the subject property.

These conflicting claims to occupy and use the disputed lots reached the Secretary of Agriculture and Natural Resources (SANR) and the Office of the President for resolution. Per Decision No. 1039 dated July 18, 1974, series of 1974, the Office of the President decided in favor of Federico Peralta and the other lessees-applicants, upholding their right to also file applications for permits to occupy and use the respective portions occupied by them as against the claim of Ben Almora that he already owned the said properties by virtue of prescription, and directing that Almora and all the occupants of the land be allowed to continue their occupation thereof upon the issuance of occupancy permits by the Bureau of Forest Development.

RTC Baguio City rendered a decision in favor of plaintiffs, petitioners herein ordering private respondents to vacate the premises of the property and to restore the possession thereof to petitioners. CA reversed the decision of the RTC.

In the course of this appeal, private respondents brought up several procedural matters which we summarize as follows: (1) the petition was filed out of time, resulting in this Court’s failure to acquire jurisdiction and take cognizance of the appeal; (2) no motion for reconsideration was filed in the Court of Appeals, thus depriving the said court of an opportunity to correct any errors as it may have made; and (3) the petition raises questions of fact which are not the proper subject of review in a petition for review under Rule 45.

RULING: Rule 45, Section 1 of the Rules of Court, however, distinctly provides that

“A party may appeal by certiorari from a judgment of the Court of Appeals, by filing with the Supreme Court a petition for certiorari within fifteen (15) days from notice of judgment, or of the denial of his motion for reconsideration filed in due time. (Emphasis supplied)”

The conjunctive “or” clearly indicates that the 15-day reglementary period for the filing of a petition for certiorari under Rule 45 commences either from notice of the questioned judgment or from notice of denial of the appellant’s motion for reconsideration. A prior motion for reconsideration is not indispensable for a petition for review on certiorari under Rule 45 to prosper. The reliance of private respondents in the cases cited in their Comment is unfounded, for all of these cases addressed petitions for certiorari grounded on grave abuse of discretion, or what is now known as special civil action of certiorari under Rule 65 of the Rules of Court. For such action to commence, the Rules require that the petitioner be left with “no appeal, nor any plain, speedy, and adequate remedy in the ordinary course of law.” A motion for reconsideration of an assailed decision is deemed a plain and adequate remedy provided by law.

Where, under Rule 45, certiorari is resorted to as a mode of appeal, the indispensability of a motion for reconsideration is negated, and the party aggrieved may validly file a petition for review on certiorari with the Supreme Court within 15 days from notice of judgment of the Court of Appeals.

Thirdly, petitioners seek to involve us in a re-evaluation of the factual veracity and probative value of the evidence they submitted in the lower court, contrary to the dictates of Rule 45 that only questions of law may be raised and resolved on petition. Absent any whimsical or capricious



exercise of judgment, and unless the lack of any basis for the conclusions made by the lower courts be amply demonstrated, the Supreme Court will not disturb such factual findings.

Having set aside these procedural issues, We proceed to evaluate the merits of this Petition. Do private respondents hold a better right of possession over the property than petitioners, who had prior possession thereof?

We hold in the affirmative. A perusal of the entire records of the case shows that Federico Peralta was granted an occupancy permit over the disputed property by the Bureau of Forestry.

The possession of the Almoras of the contested lots was not exclusive and was in fact interrupted by the adverse possessions of the other claimants who were similarly granted occupancy permits by the Bureau of forestry (now Bureau of Forest Development).

The issuance of an occupancy permit to Federico Peralta as a claimant in the administrative case vested upon him and private respondents, as his successors-in-interest, possessory rights over the land in dispute to the exclusion of all others, except the State and such persons as may hold legal and equitable title under law. Such issuance also resulted in the dispossession of petitioners and the tacit cancellation of petitioners’ permit over the same land, to the extent of the property covered by the permit issued to Peralta, as the fact of possession cannot be recognized at the same time in two different persons.

As the present possessors of the property, by virtue of a permit to ocuupy granted by the governmental authority vested with the power to issue the same, prior to the perfection of a sales application over the same property, private respondents’ possessory rights are preferred over anyone else’s, and clearly surpass the claim of petitioners of prior possession, which has long since terminated.

Firstly, recovery upon claim of ownership has no place in an accion publiciana. Where the object of the parties is to recover dominion over the property as owner, the appropriate action to file is an accion reinvindicatoria, and not a plenary action to recover possession as the case herein, which involves restitution of possession only, when the cause of dispossession is not among those covered by the grounds for forcible entry and unlawful detainer, or when possession has been lost for more than one year and can no longer be maintained under Rule 70 of the Rules of Court.

[G.R. No. 133491. October 13, 1999]ASUNCION vs. EVANGELISTA

FACTS: Private respondent organized Embassy Farms, Inc. and registered it with the Securities and Exchange Commission. Private respondent was the majority stockholder of the corporation, with 90% of the shares in his name. He also served as its president and chief executive officer. Private respondent borrowed from several financial institutions to use as working capital for Embassy Farms. He executed a real estate mortgage on three of his properties as security for the loan. Private respondent defaulted in his loan payments.

Petitioner and private respondent executed a Memorandum of Agreement ceding to petitioner his assets in exhange for the former’s assumption of his obligations. However, more than a year after the signing of the Memorandum of Agreement, the landholdings of private respondent which were mortgaged to Paluwagan ng Bayan Savings and Loan Association, PAIC Savings and Mortgage Bank and Mercator Finance Corporation still remained titled in his name. Neither did he inform said mortgagees of the transfer of his lands.

Petitioner filed in RTC a complaint for rescission of the Memorandum of Agreement with a prayer for damages. RTC rendered judgment in favor of private respondent. It ruled "The Memorandum of Agreement is essentially a contract of sale where [private respondent] agreed to sell his nineteen parcels of land and his shares in Embassy Farms, in consideration, among others, of the assumption by [petitioner] of [private respondent’s] loans with three financial institutions. As a matter of law and practice, it is incumbent upon the vendee to first comply with his obligations under the contract of sale before he can demand performance by the vendor. In a contract of sale, the vendor is not required to deliver the thing sold until the price is paid. Court hereby declared the MOA rescinded and of no further force and effect.

A copy of the decision of the trial court was sent by registered mail to petitioner’s counsel of record, Atty. Romeo Z. Comia. However, unknown to petitioner, Atty. Comia died while the case was still pending in the trial court. Private respondent filed in the trial court a Notice of Death of petitioner’s counsel, with a request that a copy of its decision be personally served on petitioner.

Private respondent filed by registered mail a Motion for Execution. RTC issued a writ of execution against petitioner. Petitioner filed in the trial court a Notice of Appeal, Substitution of Counsel, and an Urgent Motion to Recall the Order of Execution and Quash the Writ of Execution. Trial court issued an Order suspending the execution of its decision. CA affirmed the decision of the trial court and ordered its immediate execution.



CA issued a Resolution denying petitioner’s Motion for Reconsideration and noting private respondent’s Ex-Parte Motion for Issuance of a Writ of Attachment. Hence this petition raising the following issues:

“1. WHETHER OR NOT THE JULY 1, 1994 DECISION OF THE REGIONAL TRIAL COURT WAS ALREADY FINAL AND EXECUTORY WHEN ASUNCION FILED HIS NOTICE OF APPEAL."2. WHETHER OR NOT THE MEMORANDUM OF AGREEMENT EXECUTED BETWEEN ASUNCION AND EVANGELISTA WAS IN THE NATURE OF A CONTRACT OF SALE OR A JOINT VENTURE."3. WHETHER IT WAS ASUNCION OR EVANGELISTA WHO FIRST RENEGED OR FAILED TO COMPLY WITH HIS CORRESPONDING OBLIGATIONS UNDER THE MEMORANDUM OF AGREEMENT.”

The petition is meritorious.

One. The respondent Court of Appeals erred in holding that the decision of the trial court dated July 1, 1994 had become final and executory. It is established that petitioner was not aware of his counsel’s death while the case was pending in the trial court. He could not have known, therefore, that a copy of the trial court’s decision was sent by registered mail to his counsel. Indeed, it was private respondent who notified the trial court of the death of petitioner’s counsel and who requested that a copy of the decision be served personally to petitioner. His request was, however, denied.

While petitioner was furnished a copy of the decision by mail, the registry receipt evidencing its date of mailing did not bear a date. There was, therefore, no date from which to reckon the reglementary period to appeal. That petitioner received a copy of the motion and order for writ of execution should not be taken as a waiver of his right to appeal. Not only is petitioner a non-lawyer who could not be expected to know the legal consequences of the motion and the order, but the case is of such merit that it deserves a liberal interpretation of the rules in the interest of justice.

Two. After a meticulous perusal of the voluminous records of this case, we hold that the respondent Court of Appeals grossly misappreciated the facts and the applicable law. Under the Memorandum of Agreement, it was the obligation of private respondent to cede and convey, in a manner absolute and irrevocable, his real properties and stockholdings in the farm in favor of petitioner in exchange for, among

others, the outright payment by petitioner of a lump sum, the continuous operation of the piggery at his expense and the assumption by petitioner of all the financial obligations of private respondent upon their restructuring.

The records show that while petitioner paid private respondent the stipulated lump sum and gave more money for the restructuring of private respondent’s loans and for the continued operation of Embassy Farms, Inc., private respondent never executed a deed of sale with assumption of mortgage over his landholdings, and although he endorsed in blank his certificates of stock, he never delivered them to petitioner to effectuate their valid transfer.

Private respondent is clearly obliged under the Memorandum of Agreement to execute the deed of conveyance with assumption of mortgage in favor of petitioner. Had such deed been executed, the interests of both petitioner and private respondent would have been simultaneously secured, the former, as regards his ownership rights over the subject lands sold to him, and the latter, as regards the substitution, in his place, of petitioner as the new debtor in his loan obligations with Paluwagan ng Bayan Savings and Loan Association, PAIC Savings and Mortgage Bank and Mercator Finance Corporation.

Private respondent, however, failed and refused, despite demands, to execute this legal document. It follows that petitioner could not be faulted when he desisted from further paying private respondent's debts.

Three. In fine, petitioner and private respondent entered into what the law regards as reciprocal obligations. Of such specie of legal contracts, Tolentino says:

“x x x Reciprocity arises from identity of cause, and necessarily the two obligations are created at the same time.

“Reciprocal obligations, therefore, are those which arise from the same cause, and in which each party is a debtor and a creditor of the other, such that the obligation of one is dependent upon the obligation of the other. They are to be performed simultaneously, so that the performance of one is conditioned upon the simultaneous fulfillment of the other."

We find that private respondent failed to perform his substantial obligations under the Memorandum of Agreement. Hence, petitioner sought the rescission of the Memorandum of Agreement and ceased infusing capital into the piggery business of private respondent.

This Court holds, in fine, that the Memorandum of Agreement entered into by petitioner and private



respondent should indeed be rescinded. As aforediscussed, the respondent appellate court erred in assessing damages against petitioner for his refusal to fully pay private respondent's overdue loans. Such refusal was justified, considering that private respondent was the first to refuse to deliver to petitioner the lands and certificates of stock that were the consideration for the almost six million pesos in debt that petitioner was to assume and pay.

Five. Nevertheless, neither is petitioner entitled to recover the amount of P3,194,941.88 that he spent as lump sum payment, as feeds and veterinary costs for the continued operation of the piggery and as loan restructuring fees. Mutual restitution is required in rescission, but this presupposes that both parties may be restored in their original situation. In this case, it cannot be gainsaid that an essential part of the consideration of the amount of P3,194,941.88 paid by the petitioner was taking over the effective management of Embassy Farms, Inc.

Mutual restitution would require, thus, that petitioner restore private respondent in the effective management of said corporation and that private respondent return said amount to petitioner. This, however, has been rendered impossible by the foreclosure of the landholdings of private respondent and the shutdown of the piggery's operations. Private respondent has lost in his venture, and while he is not blameless for his unfortunate fate, to still order him to remit a considerable amount of money without receiving anything in return would certainly run counter to the essence of rescission as a remedy in equity.

[G.R. No. 132294. August 26, 1999]VOLUNTAD vs. SPOUSES DIZON

FACTS: For failure of petitioners to pay the loan, the Rural Bank of Pandi foreclosed the mortgage and the property was sold at public auction with the Bank becoming the highest bidder. More than three (3) months after the certificates of sheriff's sale were registered, the mortgagee-vendee Bank, without the knowledge of petitioners, assigned its rights over the property to respondent-spouses Magtanggol and Corazon Dizon. In their petition with the trial court, petitioners prayed to be allowed to exercise their right of redemption over the subject property.

The Dizons then filed an omnibus motion to dismiss the petition and to strike out the notice of lis pendens. Trial court issued an order dismissing the case on the ground of res judicata and granting the motion to strike out the notice of lis pendens "there is no longer need for such annotation on the title of the subject property with the dismissal of the case."

Upon denial of the motion for reconsideration, petitioners went to the CA and rendered a decision setting aside the order of the trial court. Trial court rendered a decision in favor of petitioners directing respondent-spouses Dizon (a) to render a true and correct accounting of the financial obligation of petitioners to the Rural Bank of Pandi, Inc., in Bulacan as assigned to respondent Dizons; (b) to allow petitioners to exercise their right of redemption over the one-half undivided portion of the parcel of land covered by TCT.

After the judgment had become final and executory, the trial court issued an order directing the issuance of a writ of execution. A writ of execution was issued which was however returned unsatisfied for the reason that the property was already sold to respondent-spouses Eugenio and Vicenta Reyes.

TCT was issued in the name of the spouses Eugenio and Vicenta Reyes. Petitioners filed a Motion for Second Alias Writ of Execution claiming, inter alia, that a notice of lis pendens had been annotated in the title with the filing of Civil Case and respondents Vicenta and Eugenio Reyes were transferees pendente lite when respondent-spouses Dizon sold and transferred to them the property subject of a pending litigation.

Trial court issued an order denying petitioners’ motion for second alias writ of execution. Petitioner's motion for reconsideration was also denied. CA dismissed the petition.

RULING: We find the petition meritorious. Based on the records and the pleadings of the parties with this Court, the following facts are undisputed: that during the pendency of Civil Case No. 142-M-93 with the trial court, petitioners caused the annotation of a notice of lis pendens on TCT covering the subject property; that pursuant to the order of the trial court the Register of Deeds cancelled the previous annotation of lis pendens. The following inscriptions appear in TCT:

Entry No. 74364(M): Lis Pendens in favor of Delfin R. Voluntad - An action has been commenced and is now pending in RTC of Bulacan Branch

From the attendant circumstances, it is crystal clear that an examination of the certificate of title and the annotations therein would disclose that a civil action was filed with the trial court involving the property described in the title. The annotation in the title that the property was involved in a suit should have prompted the prudent purchaser to inquire and verify if the suit was finally terminated and the property freed from any legal infirmity or judicial inquiry.



Although the notice of lis pendens was cancelled pursuant to the order of the trial court dismissing the civil action, the cancellation effected after barely 4 days was premature because the court order was not yet final, as petitioners still had the remaining period of 11 days to appeal the order. In fact, a mere inquiry with the trial court which issued the order of dismissal and the cancellation of the lis pendens would reveal that petitioners timely appealed the dismissal to the Court of Appeals.

The general rule is that a person dealing with registered land has a right to rely on the Torrens Certificate of Title without the need of inquiring further. But this rule cannot apply when the party has actual knowledge of facts and circumstances that would impel a reasonably cautious man to make such inquiry or when the purchaser has knowledge of a defect or lack of title in his vendor or of sufficient facts to induce a reasonably prudent man to inquire into the status of the title of the property in litigation.

Hence, when there is something in the certificate of title to indicate any cloud or vice in the ownership of the property or any encumbrance thereon, the purchaser is required to explore further than what the Torrens title upon its face indicates in quest for any hidden defect or inchoate right which may subsequently defeat his right thereto.

As a purchaser, respondent-spouses Reyes should have examined the certificate of title and all factual circumstances necessary for them to determine whether or not flaws existed which might invalidate their title. It is a settled rule that a purchaser of real estate with knowledge of any defect or lack of title of the vendor cannot claim that he has acquired title thereto in good faith as against the true owner of the land or interest therein.

The same rule applies to one with knowledge of facts which should have put him on inquiry and investigation as might be necessary to acquaint him with the defects in the title of his vendor. If circumstances exist that require a prudent man to investigate and he does not, he is deemed to have acted in mala fide. A party’s mere refusal to believe that a defect exists or his willful closing of his eyes to the possibility of the existence of a defect in his vendor’s title will not make him an innocent purchaser for value if it afterwards develops that the title was in fact defective.

Similarly, a buyer of registered land who fails to act with the diligence of a prudent man cannot be a purchaser in good faith. Therefore, given the facts of this case which are clearly set forth in the records and established by the evidence, there is no need for

petitioners to file a separate action to enforce their right to repurchase the property as against the new registered owners.

In Lising v. Plan, this Court ruled that a writ of execution may be issued against a person not a party to the case where the latter’s remedy which he did not avail of was to intervene in the case involving rights over the same parcel of land of which he claims to be the vendee. The cancellation of the lis pendens on the title of respondent-spouses Dizon prior to the purchase by the respondent-spouses Reyes need not alter our conclusion as the cancellation was prematurely done while the appeal in the case between petitioners and respondent-spouses Dizon was still pending with the appellate court.

Having purchased registered land with full notice of the fact that it is in litigation between the vendor and a third party, respondent-spouses Reyes stand in the place of their vendor and their title is subject to the incidents and results of the pending litigation. Ought to have been aware of the pendency of the case, respondent-spouses Reyes should have intervened in the suit for the protection of their alleged rights. Having failed to do so, they are bound by the results.

A transferee pendente lite stands exactly in the shoes of the transferor and is bound by any judgment or decree which may be rendered for or against the transferor. Petitioners can legally enforce the final judgment of the trial court against respondent-spouses Eugenio and Vicenta Reyes with respect to the petitioners' right to repurchase the property from the Reyeses as transferees pendente lite of respondent-spouses Magtanggol and Corazon Dizon.


Documents

Case Digests on Civil Procedure (Part III)