Republic of the PhilippinesSUPREME COURT

Manila

SECOND DIVISION

G.R. No. L-60174 February 16, 1983

EDUARDO FELIPE, HERMOGENA V. FELIPE AND VICENTE V. FELIPE, petitioners, vs.HEIRS OF MAXIMO ALDON, NAMELY: GIMENA ALMOSARA, SOFIA ALDON, SALVADOR ALDON, AND THE HONORABLE COURT OF APPEALS, respondents.

Romulo D. San Juan for petitioner.

Gerundino Castillejo for private respondent.

 

ABAD SANTOS, J.:

Maximo Aldon married Gimena Almosara in 1936. The spouses bought several pieces of land sometime between 1948 and 1950. In 1960-62, the lands were divided into three lots, 1370, 1371 and 1415 of the San Jacinto Public Land Subdivision, San Jacinto, Masbate.

In 1951, Gimena Almosara sold the lots to the spouses Eduardo Felipe and Hermogena V. Felipe. The sale was made without the consent of her husband, Maximo.

On April 26, 1976, the heirs of Maximo Aldon, namely his widow Gimena and their children Sofia and Salvador Aldon, filed a complaint in the Court of First Instance of Masbate against the Felipes. The complaint which was docketed as Civil Case No. 2372 alleged that the plaintiffs were the owners of Lots 1370, 1371 and 1415; that they had orally mortgaged the same to the defendants; and an offer to redeem the mortgage had been refused so they filed the complaint in order to recover the three parcels of land.

The defendants asserted that they had acquired the lots from the plaintiffs by purchase and subsequent delivery to them. The trial court sustained the claim of the defendants and rendered the following judgment:

a. declaring the defendants to be the lawful owners of the property subject of the present litigation;

b. declaring the complaint in the present action to be without merit and is therefore hereby ordered dismissed;

c. ordering the plaintiffs to pay to the defendants the amount of P2,000.00 as reasonable attorney's fees and to pay the costs of the suit.

The plaintiffs appealed the decision to the Court of Appeals which rendered the following judgment:

PREMISES CONSIDERED, the decision appealed from is hereby REVERSED and SET ASIDE, and a new one is hereby RENDERED, ordering the defendants-appellees to surrender the lots in question as well as the plaintiffs'-appellants' muniments of title thereof to said plaintiffs-appellants, to make an accounting of the produce derived from the lands including expenses incurred since 1951, and to solidarity turn over to the plaintiffs-appellants the NET monetary value of the profits, after deducting the sum of P1,800.00. No attorney's fees nor moral damages are awarded for lack of any legal justification therefor. No. costs.

The ratio of the judgment is stated in the following paragraphs of the decision penned by Justice Edgardo L. Paras with the concurrence of Justices Venicio Escolin and Mariano A. Zosa:

One of the principal issues in the case involves the nature of the aforementioned conveyance or transaction, with appellants claiming the same to be an oral contract of mortgage or antichresis, the redemption of which could be done anytime upon repayment of the P1,800.00 involved (incidentally the only thing written about the transaction is the aforementioned receipt re the P1,800). Upon the other hand, appellees claim that the transaction was one of sale, accordingly, redemption was improper. The appellees claim that plaintiffs never conveyed the property because of a loan or mortgage or antichresis and that what really transpired was the execution

of a contract of sale thru a private document designated as a 'Deed of Purchase and Sale' (Exhibit 1), the execution having been made by Gimena Almosara in favor of appellee Hermogena V. Felipe.

After a study of this case, we have come to the conclusion that the appellants are entitled to recover the ownership of the lots in question. We so hold because although Exh. 1 concerning the sale made in 1951 of the disputed lots is, in Our opinion, not a forgery the fact is that the sale made by Gimena Almosara is invalid, having been executed without the needed consent of her husband, the lots being conjugal. Appellees' argument that this was an issue not raised in the pleadings is baseless, considering the fact that the complaint alleges that the parcels 'were purchased by plaintiff Gimena Almosara and her late husband Maximo Aldon' (the lots having been purchased during the existence of the marriage, the same are presumed conjugal) and inferentially, by force of law, could not, be disposed of by a wife without her husband's consent.

The defendants are now the appellants in this petition for review. They invoke several grounds in seeking the reversal of the decision of the Court of Appeals. One of the grounds is factual in nature; petitioners claim that "respondent Court of Appeals has found as a fact that the 'Deed of Purchase and Sale' executed by respondent Gimena Almosara is not a forgery and therefore its authenticity and due execution is already beyond question." We cannot consider this ground because as a rule only questions of law are reviewed in proceedings under Rule 45 of the Rules of Court subject to well-defined exceptions not present in the instant case.

The legal ground which deserves attention is the legal effect of a sale of lands belonging to the conjugal partnership made by the wife without the consent of the husband.

It is useful at this point to re-state some elementary rules: The husband is the administrator of the conjugal partnership. (Art. 165, Civil Code.) Subject to certain exceptions, the husband cannot alienate or encumber any real property of the conjugal partnership without the wife's consent. (Art. 166, Idem.) And the wife cannot bind the conjugal partnership without the husband's consent, except in cases provided by law. (Art. 172, Idem.)

In the instant case, Gimena, the wife, sold lands belonging to the conjugal partnership without the consent of the husband and the sale is not covered by the phrase "except in cases provided by law." The Court of Appeals described the sale as "invalid" - a term which is imprecise when used in relation to contracts because the Civil Code uses specific names in designating defective contracts, namely: rescissible (Arts. 1380 et seq.), voidable(Arts. 1390 et seq.), unenforceable (Arts. 1403, et seq.), and void or inexistent (Arts. 1409 et seq.)

The sale made by Gimena is certainly a defective contract but of what category? The answer: it is a voidable contract.

According to Art. 1390 of the Civil Code, among the voidable contracts are "[T]hose where one of the parties is incapable of giving consent to the contract." (Par. 1.) In the instant case-Gimena had no capacity to give consent to the contract of sale. The capacity to give consent belonged not even to the husband alone but to both spouses.

The view that the contract made by Gimena is a voidable contract is supported by the legal provision that contracts entered by the husband without the consent of the wife when such consent is required, are annullable at her instance during the marriage and within ten years from the transaction questioned. (Art. 173, Civil Code.)

Gimena's contract is not rescissible for in such contract all the essential elements are untainted but Gimena's consent was tainted. Neither can the contract be classified as unenforceable because it does not fit any of those described in Art. 1403 of the Civil Code. And finally, the contract cannot be void or inexistent because it is not one of those mentioned in Art. 1409 of the Civil Code. By process of elimination, it must perforce be a voidable contract.

The voidable contract of Gimena was subject to annulment by her husband only during the marriage because he was the victim who had an interest in the contract. Gimena, who was the party responsible for the defect, could not ask for its annulment. Their children could not likewise seek the annulment of the contract while the marriage subsisted because they merely had an inchoate right to the lands sold.

The termination of the marriage and the dissolution of the conjugal partnership by the death of Maximo Aldon did not improve the situation of Gimena. What she could not do during the marriage, she could not do thereafter.

The case of Sofia and Salvador Aldon is different. After the death of Maximo they acquired the right to question the defective contract insofar as it deprived them of their hereditary rights in their father's share in the lands.

The father's share is one-half (1/2) of the lands and their share is two-thirds (2/3) thereof, one-third (1/3) pertaining to the widow.

The petitioners have been in possession of the lands since 1951. It was only in 1976 when the respondents filed action to recover the lands. In the meantime, Maximo Aldon died.

Two questions come to mind, namely: (1) Have the petitioners acquired the lands by acquisitive prescription? (2) Is the right of action of Sofia and Salvador Aldon barred by the statute of limitations?

Anent the first question, We quote with approval the following statement of the Court of Appeals:

We would like to state further that appellees [petitioners herein] could not have acquired ownership of the lots by prescription in view of what we regard as their bad faith. This bad faith is revealed by testimony to the effect that defendant-appellee Vicente V. Felipe (son of appellees Eduardo Felipe and Hermogena V. Felipe) attempted in December 1970 to have Gimena Almosara sign a ready-made document purporting to self the disputed lots to the appellees. This actuation clearly indicated that the appellees knew the lots did not still belong to them, otherwise, why were they interested in a document of sale in their favor? Again why did Vicente V. Felipe tell Gimena that the purpose of the document was to obtain Gimena's consent to the construction of an irrigation pump on the lots in question? The only possible reason for purporting to obtain such consent is that the appellees knew the lots were not theirs. Why was there an attempted improvement (the irrigation tank) only in 1970? Why was the declaration of property made only in 1974? Why were no attempts made to obtain the husband's signature, despite the fact that Gimena and Hermogena were close relatives? An these indicate the bad faith of the appellees. Now then, even if we were to consider appellees' possession in bad faith as a possession in the concept of owners, this possession at the earliest started in 1951, hence the period for extraordinary prescription (30 years) had not yet lapsed when the present action was instituted on April 26, 1976.

As to the second question, the children's cause of action accrued from the death of their father in 1959 and they had thirty (30) years to institute it (Art. 1141, Civil Code.) They filed action in 1976 which is well within the period.

WHEREFORE, the decision of the Court of Appeals is hereby modified. Judgment is entered awarding to Sofia and Salvador Aldon their shares of the lands as stated in the body of this decision; and the petitioners as possessors in bad faith shall make an accounting of the fruits corresponding to the share aforementioned from 1959 and solidarity pay their value to Sofia and Salvador Aldon; costs against the petitioners.

SO ORDERED.

Concepcion Jr., Guerrero and De Castro, JJ., concur.

Makasiar, (Chairman), J., In the result.

Escolin J., took no part.

 

 

Separate Opinions

 

AQUINO, J., concurring:

I concur in the result. The issue is whether the wife's sale in 1651 of an unregistered sixteen-hectare conjugal land, without the consent of her husband (he died in 1959), can be annulled in 1976 by the wife and her two children.

As a rule, the husband cannot dispose of the conjugal realty without the wife's consent (Art. 166, Civil Code). Thus, a sale by the husband of the conjugal realty without the wife's consent was declared void (Tolentino vs. Cardenas, 123 Phil. 517; Villocino vs. Doyon, L-19797, December 17, 1966, 18 SCRA 1094 and L-28871, April 25, 1975, 63 SCRA 460; Reyes vs. De Leon, L-22331, June 6,1967, 20 SCRA 369; Bucoy vs. Paulino, L-25775, April 26, 1968, 23 SCRA 248; Tinitigan vs. Tinitigan, L-45418, October 30,1980, 100 SCRA 619).

With more reason, the wife cannot make such a disposition without the husband's consent since the husband is the administrator of the conjugal assets.

In the instant case, the Court of Appeals did not err in voiding the wife's sale of the conjugal land without the husband's consent. As that sale is contrary to law, the action to have it declared void or inexistent does not prescribe.

Moreover, there are indications that the contract between the parties was an antichresis, a transaction which is very common in rural areas.

 

Separate Opinions

AQUINO, J., concurring:

I concur in the result. The issue is whether the wife's sale in 1651 of an unregistered sixteen-hectare conjugal land, without the consent of her husband (he died in 1959), can be annulled in 1976 by the wife and her two children.

As a rule, the husband cannot dispose of the conjugal realty without the wife's consent (Art. 166, Civil Code). Thus, a sale by the husband of the conjugal realty without the wife's consent was declared void (Tolentino vs. Cardenas, 123 Phil. 517; Villocino vs. Doyon, L-19797, December 17, 1966, 18 SCRA 1094 and L-28871, April 25, 1975, 63 SCRA 460; Reyes vs. De Leon, L-22331, June 6,1967, 20 SCRA 369; Bucoy vs. Paulino, L-25775, April 26, 1968, 23 SCRA 248; Tinitigan vs. Tinitigan, L-45418, October 30,1980, 100 SCRA 619).

With more reason, the wife cannot make such a disposition without the husband's consent since the husband is the administrator of the conjugal assets.

In the instant case, the Court of Appeals did not err in voiding the wife's sale of the conjugal land without the husband's consent. As that sale is contrary to law, the action to have it declared void or inexistent does not prescribe.

Moreover, there are indications that the contract between the parties was an antichresis, a transaction which is very common in rural areas.

Republic of the PhilippinesSUPREME COURT

Manila

FIRST DIVISION

G.R. No. L-18238 January 22, 1980

ZENAIDA K. CASTILLO and EMILIO CORDOVA, JR., plaintiffs- appellants, vs.HORACIO K. CASTILLO, BEATRIZ K. CASTILLO, CONRADO VALERA (Formal Party), LOURDES K. CASTILLO, PELAGIO ARAMBULO, JR. (Formal Party), ENRIQUETA LEONOR K. CASTILLO, YSIDRO K. CASTILLO, JR., CRISPIN K. CASTILLO, ALICIA K. CASTILLO, BENJAMIN SORIANO (Formal Party), ERNESTO K. CASTILLO, and ENRIQUETA K. VDA. DE CASTILLO, defendants-appellants.

Crispin Baisas & A Associates for plaintiffs-appellants.

Manuel O. Chan for defendants-appellants.

 

GUERRERO, J.:

This is a joint appeal from the decision dated January 13, 1961 as amended by an order dated February 4, 1961 of the Court of First Instance of Manila in Civil Case No. 42496 entitled "Zenaida K. Castillo, et al versus Horacio K. Castillo, et al." The dispositive portion of the decision states thus:

IN VIEW WHEREOF,

1. The Court orders the partition of the properties as follows.

a). The private properties of Ysidro Castillo consisting ill 38 parcels described in the project of partition shall be partitioned in the proportion of 1/9 to each of the children, i.e., 1/9 to plaintiff;

b). The four (4) parcel of land share of the children in the conjugal properties as set forth in the project of partition shall be also partitioned in the same proportion;

c). The seven (7) parcels of land under usufruct of Enriqueta shall also be partitioned in the same proportion but subject to said usufruct.

d). The ½ share in the property described in Exh. Plaintiff 2 shall be partitioned in the proportion of 1/36 to each of the children and 1/4 unto Enriqueta Castillo the Court grants the partition as to the other ½ in the proportion outlined in par. (h) below;

e). The property described in Exh. Plaintiff 3, 7, 8 and 9 shah be partitioned in the proportion of ½ to Enriqueta and 1/18 to each of the 9 children;

f). The property in Tagaytay City, exh. Plaintiff 63, shall be partitioned among the 9 children in the proportion of 1/9 each;

g). The partition of the properties in the names of defendants (with the exception of Enriqueta) i.e., these in Exhs. 36, 37, 38, 39, 41, 42, 43, 44, 45, 46, 47, 48, 49, 50, 51, 65, 66, 67, 68, 69, 70, 25, 26, 62, 56, 57, 58, 22, 59, 60, 61, 52, 53, 54, and 55 is denied; h).

h). The properties described in the remaining ½ of Exh. Plaintiff 2 and those in Exhs. 6, 10, 12, 13, 15, 16, 17, 18, 19, 20, 21, 40, 72, 74, 75, 76, 78 and 78-A are ordered to be partitioned, giving unto plaintiff a 6/100ths undivided share in the same;

i). The parties are given 30 days from notice to arrive at an amicable partition under the proportions set forth above of the properties whose partition is decreed, should they fail to do so, the Court orders commissioners of partition to be appointed to proceed accordingly

1. From and after the date of the filing of the complaint and until partition shall have been terminated, all the income on the properties be partitioned shall he also partitioned in the proportion already stated:

2. The stock of plaintiff in the Tiaong Rural Bank is ordered cancelled and placed in the name of Enriqueta Vda. de Castillo;

3. The counterclaims are dismissed.

4. No pronouncement as to costs except the costs of partition which shall be borne by all in proportion to the share of each.

SO ORDERED, Manila, Philippines, 12 January, 1961.

Acting on the motion for reconsideration filed by plaintiff 's the court a quo on February 4, 1961, issued an Order, amending its decision as follows:

... the Court does not agree that the situation of Dr. Horacio and his brothers and sisters is the same as that of Enriqueta for the reason that with respect to Enriqueta there is definite proof and it is admitted by her that she had been in administration of the common property even after the closing of the probate case; with respect to the other portion of ground two as well as ground three concerning the monies which Enriqueta had used in her personal investment and borrowings, the Court having adopted for this purpose the total of P153,591.69 and the plaintiff complaining that this should be reduced because the money was raised after the properties of the children had been used as collateral the Court does not agree that the said amount should be reduced; in the mind of the Court the point is that this total sum of P153,591.69 were used by Enriqueta herself in her personal investments; this will dispose of ground three, paragraph three; and for the reason that the mention by the Court of the sale of the Moret property is only a preliminary to the acceptance by the court of the sum of P153,591.69, stated otherwise, the proceeds of the sale of the Moret property having in fact been already in the computation by the Court made a part of the investments by Enriqueta, there is no more need to modify this amount of P153,591.69 with respect to the claim that Enriqueta had bought shares of stock in the Tiaong Rural Bank in the sum of P107,410.00 if this is correct, and it is correct according to Exhibit Plaintiff 122, that really should be added to the original sum of P359,350.00 found by this court as her acquisition and investments so that the total will be P466,760.00; deducting from this the amount of P153,591.69 would leave a balance of P313,168.31; divide this by 9 which is the number of the children would give a quotient of P34,795.37 which is equivalent to 7% of P466,760.00; the result will be to grant the motion in part and to deny it in part.

IN VIEW WHEREOF, the dispositive part of the decision on page 496, specifically paragraph (h) thereof is hereby amended to read, as follows:

(h) The properties described in the remaining ½ of Exh. plaintiff 2 and those in Exhs. 6, 10, 12, 13, 15, 16, 17, 18, 19, 20, 21, 40, 72, 74, 75, 76, 78 and 78-A are ordered to be partitioned, giving unto plaintiff a 7/100ths undivided share in the same.

SO ORDERED.

The records disclose that Ysidro C. Castillo died on October 15, 1947 leaving as his heirs his wife Enriqueta Katigbak and their nine children — Horacio, Beatriz, Zenaida, Ysidro, Jr., Leonor, Crispin, Lourdes, Alicia and Ernesto. Intestate proceedings for the settlement of the deceased's estate (Special Proceedings No. 4211 of the Court of First Instance of Manila) were instituted and in January, 1948, Enriqueta Katigbak Vda. de Castillo was appointed administratrix. On June 21, 1948, she filed an inventory of the properties as well as the obligations left by the deceased. Two months thereafter, she was ordered to submit a project of partition. On August 23, 1948, she filed an urgent petition asking the Court to reconsider its order on the ground that there were pending obligations of the estate amounting to P90,920.00. However, on November 11, 1948, the surviving spouse as administratrix of the intestate estate of Ysidro C. Castillo submitted a project of partition, stating that the properties which constituted the residuary hereditary estate of the deceased Ysidro C. Castillo, after complete payment of debts, funeral charges, expenses of administration, the allowance of the widow and inheritance and estate taxes are: (1) 38 parcels of land which are properties brought to the marriage by the deceased Ysidro C. Castillo and (2) 19 parcels of land which are conjugal properties of the spouses. Under said project of partition, all the 38 parcels of land brought by the deceased into the marriage and 4 parcels of the conjugal properties were adjudicated to all the nine children in equal shares, pro-indiviso; 8 parcels of the conjugal properties were adjudicated to the widow as her share in the conjugal partnership and the remaining 7 parcels given in usufruct to the widow. Despite approval of the project of partition and the closing of the intestate proceedings, the properties remained under the administration of Enriqueta K. Vda. de Castillo.

On February 4, 1960, after an extrajudicial demand for partition failed, herein plaintiff-appellant Zenaida K. Castillo, assisted by her husband, filed an action for partition with accounting and receivership against her mother Enriqueta K. Vda. de Castillo and her brothers and sisters (Civil Case No. 42496, CFI of Manila). Alleging that the project of partition omitted to include certain properties acquired by the defendants using

community funds in their acquisition, she prayed that said properties be divided and partitioned accordingly. The complaint was duly answered by the defendants-appellants. After hearing, the Court of First instance of Manila rendered judgment on January 12, 1961, which was amended on February 4, 1961. From said judgment, both parties appealed to this court, raising the following assignment of errors:

PLAINTIFFS-APPELLANTS' ASSIGNMENT OF ERRORS

I. The lower court erred in finding that -plaintiff Zenaida K. Castillo was entitled to an undivided share of only 7/100ths in the properties described in the remaining 1/2 of Exhibit Plaintiff 2, and those in Exhibits 6, 10, 12, 13, 15, 16, 17, 18, 19, 20, 21, 40, 72, 74, 75, 76, 78 and 78-A.

II. The lower court erred in not finding that the income and the fruits of the common properties were used in the acquisition of those properties in the names of defendants (with the exception of Enriqueta Vda. de Castillo) and in consequently denying thu partition of the same.

III. The lower court likewise erred in not holding that the investments in the Tiaong Rural Bank of defendants (with the exception of Enriqueta Vda. de Castillo) including the investment of P20,000.00 in the name of plaintiff Zenaida Castillo, having an aggregate value of P318,950.00 were made with the fruits and income of the common properties and consequently erred in not ordering the Partition of the same among the nine of them.

DEFENDANTS-APPELLANTS' ASSIGNMENT OF ERRORS

I. The lower court erred when it held that the money used in the purchase of 1/2 of the land covered by Exhibit Plaintiff 2 below to the spouses Ysidro C. Castillo and Enriqueta Katigbak and therefore, erred when it ordered that the same be partitioned as a conjugal partnership property.

II. The lower court erred when it held that the properties covered by Exhibit 2 (the remaining half 6, 10, 12, 13, 15, 16, 17, 18, 19, 20, 21, 40, 72, 74, 75, 76, 78 and 78-A were acquired with the fruits of the properties of Enriqueta K. Vda. de Castillo under her administration and, therefore, erred when it ordered that the said properties be partitioned.

III. The lower court erred when it denied the counterclaim of defendants-appellants.

Both plaintiffs-appellants and defendants-appellants under their respective assignments of errors the derision rendered by the trial court on the following properties which the trial court itself classified as follows:

I. Those not included in the project of partition and allegedly acquired before the death of Ysidro Castillo;

II. Those acquired or purchased by Enriqueta Vda. de Castillo after the death of Ysidro Castillo; and

III. Those acquired by the brothers and sisters of plaintiff appellant Zenaida Castillo after the death of Ysidro Castillo.

The first classification of properties are those claimed to be not included in the project of partition and allegedly acquired before the death of Ysidro Castillo. And among these properties is the land described under Exhibit Plaintiff 2, situated in Cabay, Tiaong, Quezon, with an area of 262,421 sq. meters originally co-owned by Romeo Baldeo Ona. The lower court ruled that ½ of this property was conjugal and therefore subject to partition among the heirs. The defendants-appellants in their first assignment of error maintain that the lower court erred when it held that the money used in the purchase of one-half of the land covered by said Exhibit belonged to the spouses Ysidro C. Castillo and Enriqueta Katigbak and, therefore, it was erroneous for the court to order that it be partitioned as conjugal partnership property. Defendants-appellants contend that in ruling thus, the lower court committed error in disregarding the testimony of Enriqueta K. Vda. de Castillo which was corroborated by her eldest son, defendant-appellant Horacio K. Castillo, that although she and her husband appear as two of the buyers of said property, neither of them paid any part of the purchase price for lack of money at the time the deed of sale was executed (Exhibit Plaintiff 2) 1 ; that neither did their co-buyers, the spouses Paulo Macasaet and Gabriela Macasaet pay the whole price but merely gave a down-payment; that after the death of her husband and the intestate proceedings were closed, Paulo Macasaet, upon learning that the land was involved in a litigation, sold the entire parcel of land to her; that She had to make arrangements with the Baldeos in whose favor there still remained the unpaid balance of the purchase price; that Macasaet agreed that Enriqueta K. Vda. de Castillo pay on installment basis that portion of the purchase price he had already paid; and that the said installments were paid from the fruits of the property sold and her other properties.

We find no error in the lower court's ruling that the money used in the purchase of ½ of the land covered by Exhibit Plaintiff 2 belonged to the spouses Ysidro C. Castillo and Enriqueta Katigbak and ordering that such land be partitioned as conjugal partnership property. We must here underscore the specific rule in our civil law that all properties of the marriage shall be presumed conjugal unless it be proved that they belong exclusively to either of the spouses. 2 To rebut or overcome this presumption, there must be clear, convincing and satisfactory proof that this consideration of the sale was paid by only one of the spouses and from her exclusive or separate property. 3

We agree with the plaintiffs-appellants that the version of Enriqueta K. Vda. de Castillo that the controverted property is paraphernal cannot be given serious consideration. The improbability that her name and that of her husband would not have been written as co- buyers of the land in Exhibit Plaintiff 2 unless they were the actual co-purchasers thereof can easily be discerned It is indeed extremely difficult to believe that the vendor Romeo Baldeo Ona would have acknowledged in the deed of sale receipt in full of the purchase price of P30,000.00 from the vendees if he had not really received full payment from the latter, This version of Enriqueta becomes even more doubtful in view of the fact that the vendor, Romeo Baldeo Ona, signed and executed the said deed of sale not only in his personal capacity but also as attorney-in-fact of his brother Claro Baldeo Ona and his sister Adelaida Baldeo Ona, for such fiduciary capacity naturally and rightly would have made him more careful and cautious in entering into the transaction. It stands to reason to conclude that Romeo Baldeo Ona would not have signed or executed the document in question unless its recital were in truth and in fact as therein stated. Although the testimony of the surviving spouse regarding the nature of the property is corroborated by defendant- appellant Horacio K. Castillo, the eldest of the surviving children, such corroboration cannot carry weight, the same being self-serving. In fine, defendants-appellants have not come up with such substantial, satisfactory and convincing proof as would be sufficient to rebut the presumption that the property in controversy is conjugal.

The document in question, Exhibit Plaintiff 2, is a public instrument valid and binding even as against third parties, the said deed of sale having been duly registered in the Register of Deeds on June 23, 1947. The Register of Deeds has duly certified that said deed of sale was duly recorded in the Registration Book under Act 3344. It needs no further argumentation to hold that the defendants-appellants' gratuitous testimony cannot prevail over the recitals in said public instrument, for it must be here reiterated that:

A recital in a public instrument celebrated with all the legal formalities under the safeguard of a notarial certificate is evidence against the parties and a high degree of proof is necessary to overcome the legal presumption that such recital is true." (Valencia vs. Tantoco, et al., 99 Phil. 824).

The second classification of properties are those acquired or purchase by Enriqueta Vda. de Castillo after the death of Ysidro Castillo, among them the remaining one-half of the property described in Exhibit Plaintiff 2 as well as the properties shown under Exhibits 6, 10, 12, 13, 15, 16, 17, 18, 19, 20, 21, 40, 72, 74, 75, 76, 78 and 78-A. The lower court ruled that these properties were acquired with the fruits of the properties of the children of the spouses Ysidro Castillo and Enriqueta K. de Castillo and, therefore, ordered that the said properties be partitioned. Defendants-appellants under the second assignment of error take the position that the lower court committed a reversible error. On the other hand, plaintiffs-appellants in their first assignment of error maintain that the lower court erred in finding that Zenaida K. Castillo was entitled to an undivided share of only 7/100ths in these properties mentioned under the second classification. Zenaida claims that she should be entitled to an undivided share of at least 9/100ths of the said properties.

We agree with the reasoning of the trial court in its disposition of the properties enumerated under the second classification, stated thus:

... (A)s to these, it must be conceived for the plaintiff that as there is no question that Enriqueta was the one who administered the properties of the children not only after the death of Ysidro but even after the approval of the project of partition, harvesting their fruits and it being established in the evidence that she did not during the period after the closure of the intestate proceeding ever account to their children formally, for said harvests, to the court, this is evidence that would indicate that she had obtained moneys of her claims one of them being plaintiff, and it is a question what she did with these moneys; nor can the court account her version and that of her witnesses that the lands hardly gave any creditable income being only coconut lands; what so the court is telling is that they were 180 hectares assessed at no less than P100,000.00 and it is not easy for the Court to believe that they had produced no creditable income for the ten years that she was alone in possession.

There is of course the difficulty that there is no clear proof on how much use the harvest she collected year after year; this however, in the face of the established administration by her conducted and the admitted fact that she was the one who harvest would be enough for the court to make her responsible x x x. now appears that for all these properties, she spent at least a total of P359,350.00, the court making its additions, as follows:

Exh. 6. . . . . . . . . . . . . . . . . . . . . . . . . . . . P 1,500.00

Exh. 10. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,600.00

Exh. 12. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,000.00

Exh. 13. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38,000.00

Exh. 15. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000.00

Exh. 16. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,800.00

Exh. 17. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,600.00

Exh. 18. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47,000.00

Exh. 19. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,500.00

Exh. 20. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,500.00

Exh. 21. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,500.00

Exh. 72. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,410.00

Exh. 74. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 610.00

Exh. 75. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,190.00

Exh. 76. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 480.00

Exh. 78. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000.00

Exh. 78-A

Exh. 40. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,400.00

1/2 of Exh. 2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,000.00 Exh.

Exh. 7. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 690.00

Exh. 8. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 610.00

Exh. 9. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,960.00. 4

Defendants-appellants maintain that contrary to the ruling of the lower court, Enriqueta K. Vda. de Castro, the surviving widow and administratrix of the properties of her children, did not use the assets of her children for her personal acquisitions. They argue that these properties in question were not acquired by her overnight but slowly, involving thrift and knowledge of financing, by mortgaging her personal properties to obtain loans from the banks and use the proceeds in building houses which were rent producing, by sewing a piece of her property located at Moret Street, Sampaloc and invested the proceeds in the construction of other houses, sari-sari store and the purchase of other parcels of land as well as investments in the Tiaong Rural Bank in the name of the children. She had also income from the fruits of her citrus, rice and coconut plantation which increased her income, enabling her to buy other parcels of land. On the other hand, the properties of their children produced no creditable income, rather she testified that their income was not sufficient to defray all their expenses for their living, education, medicine, and maintenance and improvement of the children's properties.

Defendants-appellants also claim that the court a quo erred in determining the total investments of the appellant Enriqueta K. Vda. de Castillo and the appellant Zenaida Castillo's participation in the same when it included the properties described under Exhibits 7, 8, and 9 which are admittedly conjugal partnership properties which the court had already ordered their partition as such in its decision, hence, they cannot again be appreciated as properties acquired with funds of the children to increase their share correspondingly.

The properties covered or described under Exhibits 10 and 40 which the lower court ordered to be partitioned are also claimed by defendants-appellants not to belong to the defendant-appellant Enriqueta K. Vda. de

Castillo. It is claimed that Exhibit 10 is a deed entitled "Kasunduan ng Pagbibile at Magbibile Ulit" executed by Juan Maralit and Maria Salamat in favor of the appellant Enriqueta K. Vda. de Castillo but the vendors, however, exercised their right of repurchase and the lot was transferred to them. With respect to the land under Exhibit 40, the same belongs to defendant-appellant Horacio Castillo, who purchased it from his mother, Enriqueta, for good and sufficient consideration.

We cannot agree with defendants-appellants' theory that Enriqueta K. Vda. de Castillo did not use the fruits of the properties of her children for her personal acquisitions. Since the evidence has fully established that Enriqueta remained in administration and management of the common properties for quite a considerable period of time after her husband's death which, from an examination of the documents evidencing the same would reach some P800,000.00 in worth, whereas the fact was that her personal income alone was greatly disproportionate to her acquisitions because for the years 1951-1958 her income was only P43,674.34 or a net average yearly income of a little more than P5,400.00 a year, and the court a quo considered her explanation on how she was able to raise and acquire her huge acquisitions, as unacceptable, We are not persuaded nor convinced to review, revise or alter the lower court's conclusion. In fact, there is merit to plaintiffs-appellants' argument that the personal income of Enriqueta was false and misleading since the sources thereof were questionable, the 16 hectares of citrus land having been given to her only in May, 1956 per Exhibit 121-Plaintiff, the sale of her Moret property gave her only a net of P19,500.00 in cash from the sale and the P75,000.00 loan from the Philippine National Bank was taken in her capacity as attorney-in-fact of the children with properties of the children mortgaged as security therefor. Moreover, the vastness of the properties allotted to the children in the project of partition consisting of 42 parcels of land, assessed at about P100,000.00 with a combined area of more than 180 hectares, 84.36 hectares of which consist of riceland and the rest being residential lots and coconut land planted with approximately 2,050 trees cannot but be productive of substantial fruits and profits, an accounting of which Enriqueta as administratrix had not submitted to the court.

As to defendants-appellants' claim that the properties described under Exhibits 7, 8 and 9 should not be considered or included as properties acquired with funds of the children because they are admittedly conjugal partnership properties and the court had already ordered their partition as such in its decision, We find the same to be meritorious. Indeed, said lands under Exhibits 7, 8 and 9 were already ruled by the lower court as conjugal partnership properties and subject to partition, pursuant to paragraph (e) of the dispositive portion of the decision. Hence, from the total investment of P466,760.00 should be deducted the amount of P20,260.00 representing the investments relating to Exhibits 7, 8 and 9, thereby arriving at the sum of P446,500.00.

With respect to the property under Exhibit 10, We find the ruling of the lower court to be correct and meritorious. Exhibit 10, of the plaintiff refers to a deed of sale with right of repurchase executed on April 30, 1955 by Juan Maralit and Maria Salamat in favor of Enriqueta K. Vda. de Castillo for the sum of P3,600.00 with the following conditions: (1) that vendors can exercise their right of repurchase for the same amount within two (2) years from date of execution of contract; (2) that if repurchase is not effected within the 2-year period, then vendors would be given a one-year extension; (3) that if after the one year extension vendors have not repurchased the property, then the sale would be considered an absolute sale and said property can no more be the subject of repurchase. Defendants- appellants through Exhibit Defendant 65 sought to show that the vendors repurchased the property from Enriqueta K. Castillo in April, 1957 but that they could not locate the document relative thereto and that said vendors have sold this same property to one Reynaldo Manguiat who was then the councilor of Tiaong, Quezon. This exhibit which is an affidavit executed by the vendors on April 1, 1960 was rejected by the court a quo and to this We acquiesce, since the affidavit (Exhibit 6) executed in 1960 is self-serving and cannot supersede or revoke the deed of sale executed on April 30, 1955.

Defendants-appellants' assignment that the court erred in the inclusion of the property under Exhibit 40 in the determination of the total investments, is without merit. Exhibit 40 covers a parcel of land in the name of defendant-appellant Horacio Castillo, and while it is admitted that said property was purchased by Enriqueta K. Vda. de Castillo from Florentino Villaverde the same was thereafter purchased by Horacio for good and sufficient consideration and, therefore, the latter has exclusive right of ownership thereto. It is also pointed out that although a discrepancy appears in the purchase price paid by the defendant-appellant Enriqueta K. Vda. de Castillo for the land and the price appearing in Exhibit 40 as paid by Horacio to his mother, the latter explained that when her husband band Ysidro Castillo died, Horacio was awarded his war damage claim which he gave to Mrs. Castillo and when Exhibit 40 was executed, he delivered P1,500.00 more, thereby giving the impression that the consideration for the parcel of land was the war damage claim amount plus P1,500.00 in cash. The recitals of Exhibit Plaintiff 40, however, clearly belie Mrs. Castillo's assertion that the consideration was other than the P1,500.00 as shown and cited as follows:

Na ako, ENRIQUETA K. CASTILLO, pilipino, balo, may sapat na gulang, naninirahan at may padalang sulat sa 1107 Pennsylvania, Malate, Manila, alang-alang at dahilan sa halagang ISANG LIBO AT LIMANG DAANG (Pl,500.00) PISO, kuartang Pilipino, an ibinayad sa akin ni Dr. HORACIO K. CASTILLO, pilipino rin may sapat na gulang, binata, naninirahan at may padalang sulat sa Poblacion, Bayan ng Tiaong, Lalawigan ng Quezon, ay aking ipinagbibili, inililipat at isinasalin, at sa pamamagitan ng kasunduang ito ng BILIHANG LUBOS AT TULUYAN ay akin ngang IPINAGBIBILI, INILILIPAT at ISINASALIN sa naulit na Dr. Horacio K.

Castillo, sa kanyang magiging tagapagmana at kahalili, ang isang lagay ng lupang tubigan, sampo ng lahat ng mga mejoras dito...

The document evidencing the sale of the property by Enriqueta to Horacio clearly indicates that the consideration is the amount of P1,500.00, no more, no less. Said document is a notarized absolute deed of sale duly acknowledged by Enriqueta before Notary Public Restituto C. de Ramos on May 3, 1955 in Tiaong, Quezon. We must apply the rule deeply-rooted in Our jurisprudence that mere preponderance of evidence is not sufficient to overthrow a certification of a notary public to the effect that a grantor executed a certain document and acknowledged the fact of its due execution before him. To accomplish this result, the evidence must be so clear, strong and convincing as to exclude all reasonable controversy as to the falsity of the certification. And when the evidence is conflicting, the certification will be upheld. 6

We agree with the ruling of the court a quo that the property under Exhibit Plaintiff 40 was a property acquired first by Enriqueta with the fruits of the common properties of the children and although it was later transferred to defendant-appellant Horacio for P1,500.00 barely three months after it had been purchased by Enriqueta from the, original owner Florentino Villaverde for P5,400.00, the patent disparity in the sale price to Horacio as well as the evident partiality of the disposition in favor of Horacio, the eldest child who was her alter ego in the administration of the undivided portion of her husband's estate, are strong and cogent reasons supporting the holding of the lower court that this particular property should be considered part or included in the classification of properties bought with the fruits of the children's properties and should, therefore, be partitioned in favor of all the children of the deceased Ysidro Castillo.

We shall now address Ourselves to plaintiffs- appellants' assignment of errors and the third classification of properties.

The first error assigned by plaintiffs-appellants is that the lower court erred in finding that plaintiff-appellant Zenaida K. Castillo is entitled to an undivided share of only 7/100ths in the properties describe in the remaining ½ of Exhibit Plaintiff 2, and those in Exhibits 6, 10, 12, 13, 15, 16, 17, 18, 19, 20, 21, 40, 72, 74, 75, 76, 78 and 78-A. According to her, she should be entitled to an undivided share of at least 9/100ths of the said properties.

According to the decision of the trial court, Enriqueta K. Vda. de Castillo spent at least a total of P359,350.00 in acquiring the properties described under Exhibits 6, 10, 12, 13, 15, 16, 17, 18, 19, 20, 21, 72, 74, 75, 76, 78, 78-A, 40, ½ of Exh. 2, E exh. 7, 8, and 9 (Decision, pp. 107-108, Record on Appeal). The court then added her investment of P107,410.00 in the Tiaong Rural Bank, thus making an aggregate total of P466,760.00 as the value of properties and investments acquired by Enriqueta after the death of her husband (Order of February 4, 1961, pp. 130-131, Record on Appeal). And from the aggregate total of P466,760.00, there was deducted a sum of P153,591.69 which the lower court accepted as Enriqueta's personal investments and borrowings, on the basis of her mortgage loans as appearing in her statements of assets and liabilities (Exh. Plaintiff 123) as follows:

LIABILITIES AND EQUITY

CURRENT LIABILITY.

Trade Account Payable . . . . . . . . . . . . . . . . . . . . . . . . . . .P 4,832.00

MORTGAGES PAYABLE.-

Phil. Nat. Bank (Manila) P75,000.00

Phil. Nat. Bank (Lucena) 58,200.00

Retailer's Loan (PNB Mla.) 1,541.90 .

Phil. Dev. Bank (RFC) 14,017.79

Total Mortgages Payable 148,759.69

TOTAL LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . 153,591.69

And after deducting P153,591.69 from the total investments of P466,760.00, leaving a balance of P313,168.31, the court divided this by 9 which is the number of the children resulting in a quotient of P34,795-37 which is equivalent to 7% of ?466,760.00. The court concluded that plaintiff-appellant Zenaida K. Castillo was entitled to a 7/100ths undivided share in the properties described in the remaining one-half of Exhibit Plaintiff 2 and those in Exhibits 6, 10, 12, 13, 15, 16, 17, 18, 19, 20, 21, 40, 12, 74, 75, 76, 78 and 78-A.

Plaintiffs-appellants contend that the above computation of the court a quo is erroneous, claiming that the P75,000.00 loan from the Philippine National Bank should not be included in Enriqueta's personal borrowings because the collateral used in obtaining the same were three parcels of land belonging to the 9 children and that in securing said loan from these collaterals, Enriqueta Vda. de Castillo signed not in her personal capacity but as the attorney-in- fact of her children (Exhs. Plaintiff 125 and 125-A) and was in duty-bound to account for the same to the children. And following the process adopted by the trial court, the amount of the P75,000.00 loan should be deducted from P153,591.69, leaving a balance of P78,591.69 which should represent Enriqueta's personal investments and borrowings. This amount of P78,591.69 should be deducted from P466,760.00 (the aggregate total of properties and investments of Enriqueta acquired after her husband's death) and get a balance of P388,168.31 representing the value of those properties impressed with the character of a trust to be divided among the 9 children. P388,168.31 divided by 9 will give a quotient of P43,129.80 which is slightly over 9/100ths of the aggregate total, as the share of each of the 9 children, including plaintiff-appellant Zenaida Castillo.

Disposing of this contention of plaintiffs-appellants, the court a quo in its order granting the motion for reconsideration of plaintiffs-appellants in part and denying it in part, said: with respect to the other portion of ground two as well as ground three concerning the monies which Enriqueta had used in her personal investment and borrowings, the Court having adopted for this purpose the total of P153,591.69 and the plaintiff complaining that this should be reduced because the money was raised after the properties of the children had been used as collateral, the Court does not agree that the said amount should be reduced; in the mind of the Court the point is that this total sum of P153,591.69 were used by Enriqueta herself in her personal investments;" (pp. 129-130, Record on Appeal).

We agree with the above ruling of the lower court because, as pointed out by defendants-appellants, Enriqueta was the sole debtor of the loan, the use of the collaterals not being authorized by the court or the children, and as such should also be the sole benefactor thereof

In disposing previously defendants-appellants' second assignment of error in relation to the properties under Exhibits 7, 8 and 9, We have ruled that from the total investment of P466,760.00 should be deducted the amount of P20,260.00 representing the investments made in the acquisition of the properties under Exhibits 7, 8 and 9, leaving a balance of P446,500.00. From this balance of P446,500.00 must be deducted the personal investments of Enriqueta in the sum of P153,591.69 as accepted by the lower court, giving a balance of P292,908.31 which should be divided by 9 (there being 9 children) making a quotient of P32,565.35, which is 7/100ths, more or less, of the aggregate total, as the share of each of the 9 children, including plaintiff-appellant Zenaida K. Castillo. As a result thereof, We reject plaintiffs-appellants' claim of 9/100ths and affirm the lower Court's disposition of 7/100ths in its order of February 4, 1961.

With respect to the third classification of properties which are those acquired by the brothers and sisters of plaintiff-appellant Zenaida Castillo after the death of their father Ysidro Castillo and which plaintiff-appellant claims the court a quo erred in not finding that the income and the fruits of the common properties were used in the acquisition of those properties in the names of defendants-appellants (with the exception of Enriqueta Vda. de Castillo) and in consequently denying the partition of the same, We are in full agreement with the disposition by the trial court and its rationale stated thus:

II A—Now, however, the Court believes that it should eliminate from the right of plaintiff to demand partition, the properties acquired not by her mother but by her brothers and sisters, Horacio, Crispin, Ysidro, Jr., Lourdes, Nita, Alice and Ernesto, for the reason that there is no proof at all that the moneys with which they had acquired said properties now claimed as common by plaintiff after the death of their father, had been so acquired with fruits of the common properties to all of them adjudicated in the project of partition inasmuch that they had made use of the share of plaintiff in said fruits; it is true that there is in the evidence an indication that the mother, Enriqueta, had made Dr. Horacio Castillo her alter ego in her de facto administration after the death of her husband and even after the approval of the project of partition; but the evidence points to the effect just the same that Dr. Horacio was only such alter ego and no more and that his mother was the one that ultimately gathered the harvest; now since this is the evidence, it cannot be said with reason that plaintiff has proved that her share in the fruits of the common properties had been used by her brothers and sisters in their acquisition of these questioned properties; if as she claims in her counsel's memorandum, said brothers and sisters were in no financial position to buy said properties that alone while suspicious is no proof that they had used her money; the result will be to discard the right to partition the properties described in Exhs. 36, 37, 38, 39, 41, 42, 43, 44, 45, 46, 47, 48, 49, 50, 51, 55, 66, 67, 68, 69, 70, 25, 26, 62, 56, 57, 58, 22, 59, 60, 61, 52, 53, 54, and 55." (Decision, pp. 104-105, Record on Appeal).

Ruling on the same point raised in plaintiffs- appellants' motion for reconsideration, the lower court was correct in declaring that—

... the fact that Dr. Horacio Castillo was an alter ego of the mother Enriqueta is no proof that he had used the money coming from the fruits of his own purposes; the natural presumption should be that the money coming from the fruits went to the principal and not to the agent; this will relieve Horacio; with respect to the brothers and sisters neither is there any proof at all that the money coming from the fruits of the properties are or were being used to enrich said brothers and sisters; mere suspicion cannot take the place of evidence; the Court does not agree that the situation of Dr. Horacio and his brothers and sisters is the same as that of Enriqueta, for the reason that with respect to Enriqueta there is definite proof and it is admitted by her that she had been in administration of the common property even after the closing of the probate case. (Order of February 4, 1961, p. 129, Record on Appeal).

For the same reasons that We reject plaintiffs-appellants' second assignment of error, We find no merit to her third assignment of error. Her claim that the investments in the Tiaong Rural Bank of defendants excepting her mother Enriqueta, including the investment of P20,000.00 in the name of plaintiff-appellant Zenaida having an aggregate value of P318,950.00 were made with the fruits and income of the common properties, is not supported by factual evidence; at most, they are simply suspicions which, however, do not constitute proof. Circumstantial evidence showing gross disparity in their income and investments as well as their refusal to submit their respective income tax returns do not substantially support plaintiffs-appellants' contentions for it is her duty to establish her allegations with preponderance of evidence based on clear, competent and cogent proofs which she failed to discharge in the case at bar.

As regards the P20,000.00 shares of stock subscribed by defendant- appellant Enriqueta K. Vda. de Castillo for plaintiff-appellant 'Zenaida K. Castillo in the Tiaong Rural Bank, without the knowledge of the latter, the lower court disposed of it, saying: "There is no need to debate on the same since plaintiff is willing to have her share subscribed without her knowledge, surrendered unto Enriqueta," (Decision, p. 109, Record on Appeal) and in the dispositive portion of the decision ordered "2.—The stock of plaintiff in the Tiaong Rural Bank is ordered cancelled and placed in the name of Enriqueta Vda. de Castillo;" (Decision, p. 11 5, Record on Appeal).

Plaintiff-appellant in her Brief stated that she was willing to have these stocks cancelled and placed in her mother's name but this manifestation was made under the belief and presumption that all properties and investments, including this P20,000.00 stock, acquired with the fruits of the common properties, would be partitioned equally among the 9 children. This is manifest from her evidence and pleadings and such willingness on her part would not in any reasonable manner be taken as an intention on her part to waive her rights to said stock (Brief for Plaintiffs-Appellants, p. 25). In other words, she contends that her willingness to surrender the stocks was conditional and not absolute, to which We agree.

We note that in plaintiffs-appellants' Exhibit No. 122 listing the stockholders of the Tiaong Rural Bank as of September 30, 1960, there are also subscribed shares in the same amount of P20,000.00 in the name of Alicia K. Castillo, another P20,000.00 in the name of Lourdes K. Castillo, and another P20,000.00 in the name of Beatriz K. Castillo, all sisters of the plaintiff-appellant Zenaida K. Castillo. 'There is strong and cogent reason to conclude that Enriqueta K. Vda. de Castillo, the mother, intended her children Alicia, Lourdes, Beatriz and Zenaida to be the beneficiary of these stocks but with respect to Zenaida, Enriqueta has now adopted a volte face stance because of the complaint filed by Zenaida. Since there is no unequivocal and categorical waiver of her rights to said stocks, We rule that the same be maintained in her name, just as the shares of Alicia, Lourdes and Beatriz are recognized in their respective names.

Defendants-appellants under their third assignment of error maintain that the lower court erred when it denied the counterclaims of defendants-appellants. We are in full agreement with the ruling laid down by the lower court that absent any showing that the complaint was malicious and Chat in fact said court found the complaint meritorious to a reasonable extent, damages may not be claimed by defendants-appellants. The lower court ruled correcting when it said:

III. —Those of the brothers and sisters hardly need any discussion; they refer to moral damages of defendants Beatriz, (answer, p. 32), Crispin (Answer, p. 62), Horacio, Lourdes, Leonor, Alicia, Ysidro, Jr. and Ernesto, (Answer, p. 35) but there is no showing that the complaint was malicious, in fact the court has found it meritorious to a reasonable extent; as to the counterclaims of the mother, Enriqueta, while it must be admitted that this case is peculiar in that it is one filed by a daughter against her own mother, that alone does not justify any counterclaim, specifically for the exemplary damages and moral damages sought to be collected since the complaint as has been said has been found to have some merit; as to the counterclaim for expenses for Zenaida's education, living maintenance, medical expenses, vacation to Hongkong and Japan for her health the court does not see that they are proper items for counterclaim; it does not appear that they were loaned moneys from which Enriqueta had expected to be repaid; on the contrary to an indications they were spent if truly all of them were, as part of the obligation she believed herself bound to perform for her daughter; at least that is the law that the parent should support the child; as to the counterclaim for the stay of

Zenaida in the apartment in Pennsylvania, there is no proof either other than the mother's uncorroborated testimony that Zenaida had agreed to pay for her stay; to all indications, once again, she was allowed to stay because she is her own child, apart from the finding already made by the Court that virtually, Zenaida was a co-owner and could therefore stay without paying; as to the counterclaim for damages allegedly suffered because Zenaida cancelled the authority by her previously given unto her mother to give their properties in security for her mother's overdraft, the Court accepts Zenaida's contention that it was her right and that being the case, the cancellation and its effect was damnum absque injuria as to the counterclaim for the share of Zenaida in the P60,000.00 allegedly paid by the mother unto the creditors of the intestate, and which seeks to impose upon Zenaida the payment of that share in the sum of P6,666.00, the Court once again will have to accept her contention that in the very project of partition presented by her in Special Proceeding No. 4211, Enriqueta manifested that there were no more debts; (Page 1, Project of Partition, Exh. Plff. 1); and her testimony that she had paid them after the closing of the intestate neither is clear and convincing:

xxx xxx xxx

at any rate, while it may have been true that she did really pay the RFC after the closing of the intestate, as can be seen in Exh. Def. 4, the bank book of the RFC and her total debt therein satisfied after that was P17,452-53 so that 1/9 of it would be P1,939.17 and this should be shouldered by Zenaida, it should be remembered that the Court already had adjudicated unto Enriqueta the worth of all her borrowings in the total sum of P153,591,69, so that she no longer should be allowed once again to recover that from the children; ...

Indeed, the right of plaintiff-appellant Zenaida Castillo to demand partition is indisputable, such right being embodied in paragraph 1, Article 494 of the New Civil Code which provides thus:

No co-owner shall be obliged to remain in the co-ownership. Each co-owner may demand at any time the partition of the thing owned in common, insofar as his share is concerned.

With respect to Zenaida's brothers and sisters as co-owners, they were necessary parties and had to be joined as defendants in compliance with the procedural requirement embodied in Section 1, Rule 69 of the Revised Rules of Court which provides thus:

A person having the right to compel the partition of real estate may do so as in this rule prescribed, setting forth in his complaint the nature and extent of his title and an adequate description of the real estate of which partition is demanded and joining as defendants all the other persons interested in the property.

The finding of the trial court that the firing of the complaint in the case at bar was not malicious is a finding of fact which is binding and conclusive upon Us, thereby negating any award of damages against plaintiffs-appellants, following the ruling that it is not a sound policy to place a penalty on the right to litigate (Koster Inc. vs. Zulueta, 99 Phil. 945; Receiver for North Negros Sugar Co., Inc. vs. Ybanez, L-22183, Aug. 30, 1968), and that in order that a person may be made liable to the payment of moral damages, the law requires that his act be wrongful. The adverse result of an action does not per se make the act wrongful and subject the actor to the payment of moral damages. The law could not have meant to impose a penalty on the right to litigate; such right is so precious that moral damages may not be charged on those who may exercise it erroneously." (Barreto vs. Arevalo, 99 Phil. 771).

WHEREFORE, the judgment appealed from is hereby AFFIRMED but with the modification that the stocks of plaintiff-appellant Zenaida K. Castillo in the amount of P20,000.00 in the Tiaong Rural Bank remain in her name. No pronouncement as to costs.

SO ORDERED.

Republic of the PhilippinesSUPREME COURT

Manila

THIRD DIVISION

G.R. No. L-68838             March 11, 1991

FLORENCIO FABILLO and JOSEFA TANA (substituted by their heirs Gregorio Fabillo, Roman Fabillo, Cristeta F. Maglinte and Antonio Fabillo), petitioners, vs.THE HONORABLE INTERMEDIATE APPELLATE COURT (Third Civil Case Division) and ALFREDO MURILLO (substituted by his heirs Fiamita M. Murillo, Flor M. Agcaoili and Charito M. Babol),respondents.

Francisco A. Tan for petitioners.Von Kaiser P. Soro for private respondent.

FERNAN, C.J.:

In the instant petition for review on certiorari, petitioners seek the reversal of the appellate court's decision interpreting in favor of lawyer Alfredo M. Murillo the contract of services entered into between him and his clients, spouses Florencio Fabillo and Josefa Taña.

In her last will and testament dated August 16, 1957, Justina Fabillo bequeathed to her brother, Florencio, a house and lot in San Salvador Street, Palo, Leyte which was covered by tax declaration No. 19335, and to her husband, Gregorio D. Brioso, a piece of land in Pugahanay, Palo, Leyte. 1 After Justina's death, Florencio filed a petition for the probate of said will. On June 2, 1962, the probate court approved the project of partition "with the reservation that the ownership of the land declared under Tax Declaration No. 19335 and the house erected thereon be litigated and determined in a separate proceedings." 2

Two years later, Florencio sought the assistance of lawyer Alfredo M. Murillo in recovering the San Salvador property. Acquiescing to render his services, Murillo wrote Florencio the following handwritten letter:

Dear Mr. Fabillo:

I have instructed my stenographer to prepare the complaint and file the same on Wednesday if you are ready with the filing fee and sheriffs fee of not less than P86.00 including transportation expenses.

Considering that Atty. Montilla lost this case and the present action is a revival of a lost case, I trust that you will gladly give me 40% of the money value of the house and lot as a contigent (sic) fee in case of a success. When I come back I shall prepare the contract of services for your signature.

Thank you.

Cordially yours,(Sgd.) Alfredo M. Murillo

Aug. 9, 1964 3

Thirteen days later, Florencio and Murillo entered into the following contract:

CONTRACT OF SERVICES

KNOW ALL MEN BY THESE PRESENTS:

That I, FLORENCIO FABILLO, married to JOSEFA TANA, of legal age, Filipino citizen and with residence and postal address at Palo, Leyte, was the Petitioner in Special Proceedings No. 843, entitled "In the Matter of the Testate Estate of the late Justina Fabillo, Florencio Fabillo, Petitioner" of the Court of First Instance of Leyte;

That by reason of the Order of the Court of First Instance of Leyte dated June 2, 1962, my claim for the house and lot mentioned in paragraph one (1) of the last will and testament of the late Justina Fabillo, was denied altho the will was probated and allowed by the Court;

That acting upon the counsel of Atty. Alfredo M. Murillo, I have cause(d) the preparation and filing of another case, entitled "Florencio Fabillo vs. Gregorio D. Brioso," which was docketed as Civil Case No. 3532 of the Court of First Instance of Leyte;

That I have retained and engaged the services of Atty. ALFREDO M. MURILLO, married and of legal age, with residence and postal address at Santa Fe, Leyte to be my lawyer not only in Social Proceedings No. 843 but also in Civil Case No. 3532 under the following terms and conditions;

That he will represent me and my heirs, in case of my demise in the two cases until their successful conclusion or until the case is settled to my entire satisfaction;

That for and in consideration for his legal services, in the two cases, I hereby promise and bind myself to pay Atty. ALFREDO M. MURILLO, in case of success in any or both cases the sum equivalent to FORTY PER CENTUM (40%) of whatever benefit I may derive from such casesto be implemented as follows:

If the house and lot in question is finally awarded to me or a part of the same by virtue of an amicable settlement, and the same is sold, Atty. Murillo, is hereby constituted as Atty. in-fact to sell and convey the said house and lot and he shall be given as his compensation for his services as counsel and as attorney-in-fact the sum equivalent to forty per centum of the purchase price of the house and lot;

If the same house and lot is just mortgage(d) to any person, Atty. Murillo shall be given the sum equivalent to forty per centum (40%) of the proceeds of the mortgage;

If the house and lot is leased to any person, Atty. Murillo shall be entitled to receive an amount equivalent to 40% (FORTY PER CENTUM) of the rentals of the house and lot, or a part thereof;

If the house and lot or a portion thereof is just occupied by the undersigned or his heirs, Atty. Murillo shall have the option of either occupying or leasing to any interested party FORTY PER CENT of the house and lot.

Atty. Alfredo M. Murillo shall also be given as part of his compensation for legal services in the two cases FORTY PER CENTUM of whatever damages, which the undersigned can collect in either or both cases, provided, that in case I am awarded attorney's fees, the full amount of attorney's fees shall be given to the said Atty. ALFREDO M. MURILLO;

That in the event the house and lot is (sic) not sold and the same is maintained by the undersigned or his heirs, the costs of repairs, maintenance, taxes and insurance premiums shall be for the account of myself or my heirs and Attorney Murillo, in proportion to our rights and interest thereunder that is forty per cent shall be for the account of Atty. Murillo and sixty per cent shall be for my account or my heirs.

IN WITNESS HEREOF, I hereby set unto my signature below this 22nd day of August 1964 at Tacloban City.

(Sgd.) FLORENCIO FABILLO

(Sgd.) JOSEFA T. FABILLOWITH MY CONFORMITY:

(Sgd.) ALFREDO M. MURILLO

(Sgd.) ROMAN T. FABILLO(Witness)

(Sgd.) CRISTETA F. MAGLINTE(Witness) 4

Pursuant to said contract, Murillo filed for Florencio Fabillo Civil Case No. 3532 against Gregorio D. Brioso to recover the San Salvador property. The case was terminated on October 29, 1964 when the court, upon the parties' joint motion in the nature of a compromise agreement, declared Florencio Fabillo as the lawful owner not only of the San Salvador property but also the Pugahanay parcel of land.

Consequently, Murillo proceeded to implement the contract of services between him and Florencio Fabillo by taking possession and exercising rights of ownership over 40% of said properties. He installed a tenant in the Pugahanay property.

Sometime in 1966, Florencio Fabillo claimed exclusive right over the two properties and refused to give Murillo his share of their produce. 5 Inasmuch as his demands for his share of the produce of the Pugahanay property were unheeded, Murillo filed on March 23, 1970 in the then Court of First Instance of Leyte a complaint captioned "ownership of a parcel of land, damages and appointment of a receiver" against Florencio Fabillo, his wife Josefa Taña, and their children Ramon (sic) Fabillo and Cristeta F. Maglinte. 6

Murillo prayed that he be declared the lawful owner of forty per cent of the two properties; that defendants be directed to pay him jointly and severally P900.00 per annum from 1966 until he would be given his share of the produce of the land plus P5,000 as consequential damages and P1,000 as attorney's fees, and that defendants be ordered to pay moral and exemplary damages in such amounts as the court might deem just and reasonable.

In their answer, the defendants stated that the consent to the contract of services of the Fabillo spouses was vitiated by old age and ailment; that Murillo misled them into believing that Special Proceedings No. 843 on the probate of Justina's will was already terminated when actually it was still pending resolution; and that the contingent fee of 40% of the value of the San Salvador property was excessive, unfair and unconscionable considering the nature of the case, the length of time spent for it, the efforts exerted by Murillo, and his professional standing.

They prayed that the contract of services be declared null and void; that Murillo's fee be fixed at 10% of the assessed value of P7,780 of the San Salvador property; that Murillo be ordered to account for the P1,000 rental of the San Salvador property which he withdrew from the court and for the produce of the Pugahanay property from 1965 to 1966; that Murillo be ordered to vacate the portion of the San Salvador property which he had occupied; that the Pugahanay property which was not the subject of either Special Proceedings No. 843 or Civil Case No. 3532 be declared as the exclusive property of Florencio Fabillo, and that Murillo be ordered to pay moral damages and the total amount of P1,000 representing expenses of litigation and attorney's fees.

In its decision of December 2, 1975, 7 the lower court ruled that there was insufficient evidence to prove that the Fabillo spouses' consent to the contract was vitiated. It noted that the contract was witnessed by two of their children who appeared to be highly educated. The spouses themselves were old but literate and physically fit.

In claiming jurisdiction over the case, the lower court ruled that the complaint being one "to recover real property from the defendant spouses and their heirs or to enforce a lien thereon," the case could be decided independent of the probate proceedings. Ruling that the contract of services did not violate Article 1491 of the Civil Code as said contract stipulated a contingent fee, the court upheld Murillo's claim for "contingent attorney's fees of 40% of the value of recoverable properties." However, the court declared Murillo to be the lawful owner of 40% of both the San Salvador and Pugahanay properties and the improvements thereon. It directed the defendants to pay jointly and severally to Murillo the amount of P1,200 representing 40% of the net produce of the Pugahanay property from 1967 to 1973; entitled Murillo to 40% of the 1974 and 1975 income of the Pugahanay property which was on deposit with a bank, and ordered defendants to pay the costs of the suit.

Both parties filed motions for the reconsideration of said decision: Fabillo, insofar as the lower court awarded 40% of the properties to Murillo and the latter insofar as it granted only P1,200 for the produce of the properties from 1967 to 1973. On January 29, 1976, the lower court resolved the motions and modified its decision thus:

ACCORDINGLY, the judgment heretofore rendered is modified to read as follows:

(a) Declaring the plaintiff as entitled to and the true and lawful owner of forty percent (40%) of the parcels of land and improvements thereon covered by Tax Declaration Nos. 19335 and 6229 described in Paragraph 5 of the complaint;

(b) Directing all the defendants to pay jointly and severally to the plaintiff the sum of Two Thousand Four Hundred Fifty Pesos (P2,450.00) representing 40% of the net produce of the Pugahanay property from 1967 to 1973;

(c) Declaring the plaintiff entitled to 40% of the 1974 and 1975 income of said riceland now on deposit with the Prudential Bank, Tacloban City, deposited by Mr. Pedro Elona, designated receiver of the property;

(d) Ordering the defendants to pay the plaintiff the sum of Three Hundred Pesos (P 300.00) as attorney's fees; and

(e) Ordering the defendants to pay the costs of this suit.

SO ORDERED.

In view of the death of both Florencio and Justina Fabillo during the pendency of the case in the lower court, their children, who substituted them as parties to the case, appealed the decision of the lower court to the then Intermediate Appellate Court. On March 27, 1984, said appellate court affirmed in toto the decision of the lower court. 8

The instant petition for review on certiorari which was interposed by the Fabillo children, was filed shortly after Murillo himself died. His heirs likewise substituted him in this case. The Fabillos herein question the appellate court's interpretation of the contract of services and contend that it is in violation of Article 1491 of the Civil Code.

The contract of services did not violate said provision of law. Article 1491 of the Civil Code, specifically paragraph 5 thereof, prohibits lawyers from acquiring by purchase even at a public or judicial auction, properties and rights which are the objects of litigation in which they may take part by virtue of their profession. The said prohibition, however, applies only if the sale or assignment of the property takes place during the pendency of the litigation involving the client's property. 9

Hence, a contract between a lawyer and his client stipulating a contingent fee is not covered by said prohibition under Article 1491 (5) of the Civil Code because the payment of said fee is not made during the pendency of the litigation but only after judgment has been rendered in the case handled by the lawyer. In fact, under the 1988 Code of Professional Responsibility, a lawyer may have a lien over funds and property of his client and may apply so much thereof as may be necessary to satisfy his lawful fees and disbursements. 10

As long as the lawyer does not exert undue influence on his client, that no fraud is committed or imposition applied, or that the compensation is clearly not excessive as to amount to extortion, a contract for contingent fee is valid and enforceable. 11 Moreover, contingent fees were impliedly sanctioned by No. 13 of the Canons of Professional Ethics which governed lawyer-client relationships when the contract of services was entered into between the Fabillo spouses and Murillo. 12

However, we disagree with the courts below that the contingent fee stipulated between the Fabillo spouses and Murillo is forty percent of the properties subject of the litigation for which Murillo appeared for the Fabillos. A careful scrutiny of the contract shows that the parties intended forty percent of the value of the properties as Murillo's contingent fee. This is borne out by the stipulation that "in case of success of any or both cases," Murillo shall be paid "the sum equivalent to forty per centum of whatever benefit" Fabillo would derive from favorable judgments. The same stipulation was earlier embodied by Murillo in his letter of August 9, 1964 aforequoted.

Worth noting are the provisions of the contract which clearly states that in case the properties are sold, mortgaged, or leased, Murillo shall be entitled respectively to 40% of the "purchase price," "proceeds of the mortgage," or "rentals." The contract is vague, however, with respect to a situation wherein the properties are neither sold, mortgaged or leased because Murillo is allowed "to have the option of occupying or leasing to any interested party forty per cent of the house and lot." Had the parties intended that Murillo should become the lawful owner of 40% of the properties, it would have been clearly and unequivocally stipulated in the contract considering that the Fabillos would part with actual portions of their properties and cede the same to Murillo.

The ambiguity of said provision, however, should be resolved against Murillo as it was he himself who drafted the contract. 13 This is in consonance with the rule of interpretation that, in construing a contract of professional services between a lawyer and his client, such construction as would be more favorable to the client should be adopted even if it would work prejudice to the lawyer. 14 Rightly so because of the inequality in situation between an attorney who knows the technicalities of the law on the one hand and a client who usually is ignorant of the vagaries of the law on the other hand. 15

Considering the nature of the case, the value of the properties subject matter thereof, the length of time and effort exerted on it by Murillo, we hold that Murillo is entitled to the amount of Three Thousand Pesos (P3,000.00) as reasonable attorney's fees for services rendered in the case which ended on a compromise agreement. In so ruling, we uphold "the time-honored legal maxim that a lawyer shall at all times uphold the integrity and dignity of the legal profession so that his basic ideal becomes one of rendering service and securing justice, not money-making. For the worst scenario that can ever happen to a client is to lose the litigated property to his lawyer in whom all trust and confidence were bestowed at the very inception of the legal controversy." 16

WHEREFORE, the decision of the then Intermediate Appellate Court is hereby reversed and set aside and a new one entered (a) ordering the petitioners to pay Atty. Alfredo M. Murillo or his heirs the amount of P3,000.00 as his contingent fee with legal interest from October 29, 1964 when Civil Case No. 3532 was terminated until the amount is fully paid less any and all amounts which Murillo might have received out of the produce or rentals of the Pugahanay and San Salvador properties, and (b) ordering the receiver of said

properties to render a complete report and accounting of his receivership to the court below within fifteen (15) days from the finality of this decision. Costs against the private respondent.

SO ORDERED.

Republic of the PhilippinesSUPREME COURTManila

FIRST DIVISION

G.R. No. L-36731 January 27, 1983

VICENTE GODINEZ, ET AL., plaintiffs-appellants, vs.FONG PAK LUEN ET AL., defendants, TRINIDAD S. NAVATA, defendant-appellee.

Dominador Sobrevinas for plaintiffs-appellants.

Muss S. Inquerto for defendant-appellee

 

GUTIERREZ, JR., J.:

The plaintiffs filed this case to recover a parcel of land sold by their father, now deceased, to Fong Pak Luen, an alien, on the ground that the sale was null and void ab initio since it violates applicable provisions of the Constitution and the Civil Code.

The order of the Court of First Instance of Sulu dismissing the complaint was appealed to the Court of Appeals but the latter court certified the appeal to us since only pure questions of law were raised by the appellants.

The facts of the case were summarized by the Court of Appeals as follows:

On September 30, 1966, the plaintiffs filed a complaint in the Court of First Instance of Sulu alleging among others that they are the heirs of Jose Godinez who was married to Martina Alvarez Godinez sometime in 1910; that during the marriage of their parents the said parents acquired a parcel of land lot No. 94 of Jolo townsite with an area of 3,665 square meters as evidenced by Original Certificate of Title No. 179 (D -155) in the name of Jose Godinez; that their mother died sometime in 1938 leaving the plaintiffs as their sole surviving heirs; that on November 27, 1941, without the knowledge of the plaintiffs, the said Jose Godinez, for valuable consideration, sold the aforesaid parcel of land to the defendant Fong Pak Luen, a Chinese citizen, which transaction is contrary to law and in violation of the Civil Code because the latter being an alien who is inhibited by law to purchase real property; that Transfer Certificate Title No. 884 was then issued by the Register of Deeds to the said defendant, which is null and void ab initio since the transaction constituted a non-existent contract; that on January 11, 1963, said defendant Fong Pak Luen executed a power of attorney in favor of his co-defendant Kwan Pun Ming, also an alien, who conveyed and sold the above described parcel of land to co-defendant Trinidad S. Navata, who is aware of and with full knowledge that Fong Pak Luen is a Chinese citizen as well as Kwan Pun Ming, who under the law are prohibited and disqualified to acquire real property in this jurisdiction; that defendant Fong Pak Luen has not acquired any title or interest in said parcel of land as the purported contract of sale executed by Jose Godinez alone was contrary to law and considered non- existent, so much so that the alleged attorney-in-fact, defendant Kwan Pun Ming had not conveyed any title or interest over said property and defendant Navata had not acquired anything from said grantor and as a consequence Transfer Certificate of Title No. 1322, which was issued by the Register of Deeds in favor of the latter is null and void ab initio,- that since one-half of the said property is conjugal property inherited by the plaintiffs from their mother, Jose Godinez could -not have legally conveyed the entire property; that notwithstanding repeated demands on said defendant to surrender to plaintiffs the said property she refused and still refuses to do so to the great damage and prejudice of the plaintiffs; and that they were constrained to engage the services of counsel in the sum of P2,000.00.1äwphï1.ñët The plaintiffs thus pray that they be adjudged as the owners of the parcel of land in question and that Transfer Certificate of Title RT-90 (T-884) issued in the name of defendant Fong Pak Luen be declared null and void ab initio; and that the power of attorney issued in the name of Kwan Pun Ming, as well as Transfer Certificate of Title No. 'L322 issued in the name of defendant Navata be likewise declared null and void, with costs against defendants.

On August 18, 1966, the defendant Register of Deeds filed an answer claiming that he was not yet the register of deeds then; that it was only the ministerial duty of his office to issue the title in

favor of the defendant Navata once he was determined the registerability of the documents presented to his office.

On October 20, 1966, the defendant Navata filed her answer with the affirmative defenses and counterclaim alleging among others that the complaint does not state a cause of action since it appears from the allegation that the property is registered in the name of Jose Godinez so that as his sole property he may dispose of the same; that the cause of action has been barred by the statute of limitations as the alleged document of sale executed by Jose Godinez on November 27, 1941, conveyed the property to defendant Fong Pak Luen as a result of which a title was issued to said defendant; that under Article 1144 (1) of the Civil Code, an action based upon a written contract must be brought within 10 years from the time the right of action accrues; that the right of action accrued on November 27, 1941 but the complaint was filed only on September 30, 1966, beyond the 10 year period provided for by law; that the torrens title in the name of defendant Navata is indefeasible who acquired the property from defendant Fong Pak Luen who had been in possession of the property since 1941 and thereafter defendant Navata had possessed the same for the last 25 years including the possession of Fong Pak Luen; that the complaint is intended to harass the defendant as a civic leader and respectable member of the community as a result of which she suffered moral damages of P100,000.00, P2,500.00 for attorney's fees and P500.00 expenses of litigation, hence, said defendant prays that the complaint be dismissed and that her counterclaim be granted, with costs against the plaintiffs. On November 24, 1967, the plaintiffs filed an answer to the affirmative defenses and counter-claim. As the defendants Fong Pak Luen and Kwan Pun Ming are residing outside the Philippines, the trial court upon motion issued an order of April 17, 1967, for the service of summons on said defendants by publication. No answer has been filed by said defendants.

On December 2, 196 7, the court issued an order as follows:

Both parties having agreed to the suggestion of the Court that they submit their supplemental pleadings to support both motion and opposition and after submittal of the same the said motion to dismiss which is an affirmative defense alleged in the complaint is deemed submitted. Failure of both parties or either party to submit their supplemental pleadings on or about December 9, the Court will resolve the case.

On November 29, 1968, the trial court issued an order missing the complaint without pronouncement as to costs. (Record on Appeal, pp. 31- 37). A motion for reconsideration of this order was filed by the plaintiffs on December 12, 196F, which was denied by the trial court in an order of July 11, 1969, (Rec. on Appeal, pp. 38, 43, 45, 47). The plaintiffs now interpose this appeal with the following assignments of errors:

I. The trial court erred in dismissing plaintiffs-appellants' complaint on the ground of prescription of action, applying Art. 1144 (1) New Civil Code on the basis of defendant Trinidad S. Navata's affirmative defense of prescription in her answer treated as a motion to dismiss.

II. The trial court erred in denying plaintiffs-appellants' motion for reconsideration of the order of dismissal.

III. The trial court erred in not ordering this case to be tried on the merits."

The appellants contend that the lower court erred in dismissing the complaint on the ground that their cause of action has prescribed. While the issue raised appears to be only the applicability of the law governing prescription, the real question before us is whether or not the heirs of a person who sold a parcel of land to an alien in violation of a constitutional prohibition may recover the property if it had, in the meantime, been conveyed to a Filipino citizen qualified to own and possess it.

The question is not a novel one. Judicial precedents indicate fairly clearly how the question should be resolved.

There can be no dispute that the sale in 1941 by Jose Godinez of his residential lot acquired from the Bureau of Lands as part of the Jolo townsite to Fong Pak Luen, a Chinese citizen residing in Hongkong, was violative of Section 5, Article XIII of the 1935 Constitution which provided:

Sec. 5. Save in cases of hereditary succession, no private agricultural land will be transferred or assigned except to individuals, corporations, or associations qualified to acquire or hold lands of the public domain in the Philippines.

The meaning of the above provision was fully discussed in Krivenko v. Register of Deeds of Manila (79 Phil. 461) which also detailed the evolution of the provision in the public land laws, Act No. 2874 and Commonwealth Act No. 141. The Krivenko ruling that "under the Constitution aliens may not acquire private or agricultural lands, including residential lands" is a declaration of an imperative constitutional policy. Consequently, prescription may never be invoked to defend that which the Constitution prohibits. However, we see no necessity from the facts of this case to pass upon the nature of the contract of sale executed by Jose Godinez and Fong Pak Luen whether void ab initio, illegal per se or merely pro-exhibited.** It is enough to stress that insofar as the vendee is concerned, prescription is unavailing. But neither can the vendor or his heirs rely on an argument based on imprescriptibility because the land sold in 1941 is now in the hands of a Filipino citizen against whom the constitutional prescription was never intended to apply. The lower court erred in treating the case as one involving simply the application of the statute of limitations.

From the fact that prescription may not be used to defend a contract which the Constitution prohibits, it does not necessarily follow that the appellants may be allowed to recover the property sold to an alien. As earlier mentioned, Fong Pak Luen, the disqualified alien vendee later sold the same property to Trinidad S. Navata, a Filipino citizen qualified to acquire real property.

In Vasquez v. Li Seng Giap and Li Seng Giap & Sons (96 Phil. 447), where the alien vendee later sold the property to a Filipino corporation, this Court, in affirming a judgment dismissing the complaint to rescind the sale of real property to the defendant Li Seng Giap on January 22, 1940, on the ground that the vendee was an alien and under the Constitution incapable to own and hold title to lands, held:

In Caoile vs. Yu Chiao 49 Qff Gaz., 4321; Talento vs. Makiki 49 Off. Gaz., 4331; Bautista vs. Uy 49 Off. Gaz., 4336; Rellosa vs. Gaw Chee 49 Off. Gaz., 4345 and Mercado vs. Go Bio, 49 Off. Gaz., 5360, the majority of this Court has ruled that in sales of real estate to aliens incapable of holding title thereto by virtue of the provisions of the Constitution (Section 5, Article XIII Krivenko vs. Register of Deeds, 44 Off. Gaz., 471) both the vendor and the vendee are deemed to have committed the constitutional violation and being thus in pari delicto the courts will not afford protection to either party. (Article 1305, old Civil Code; Article 1411, new Civil Code) From this ruling three Justices dissented. (Mr. Justice Pablo, Mr. Justice Alex. Reyes and the writer. See Caoile vs. Yu Chiao Talento vs. Makiki Bautista us. Uy, Rellosa vs. Gaw Chee and Mercado vs. Go Bio). supra.

The action is not of rescission because it is not postulated upon any of the grounds provided for in Article 1291 of the old Civil Code and because the action of rescission involves lesion or damage and seeks to repair it. It is an action for annulment under Chapter VI, Title II, Book 11, on nullity of contracts, based on a defect in the contract which invalidates it independently of such lesion or damages. (Manresa, Commentarios al Codigo Civil Espanol Vol. VIII, p. 698, 4th ed.) It is very likely that the majority of this Court proceeded upon that theory when it applied the in pari delicto rule referred to above.

In the United States the rule is that in a sale of real estate to an alien disqualified to hold title thereto the vendor divests himself of the title to such real estate and has no recourse against the vendee despite the latter's disability on account of alienage to hold title to such real estate and the vendee may hold it against the whole world except as against the State. It is only the State that is entitled by proceedings in the nature of office found to have a forfeiture or escheat declared against the vendee who is incapable of holding title to the real estate sold and conveyed to him. Abrams vs. State, 88 Pac. 327; Craig vs. Leslie et al., 4 Law, Ed. 460; 3 Wheat, 563, 589590; Cross vs. Del Valle, 1 Wall, [U.S.] 513; 17 Law. Ed., 515; Governeur vs. Robertson, 11 Wheat, 332, 6 Law. Ed., 488.)

However, if the State does not commence such proceedings and in the meantime the alien becomes naturalized citizen, the State is deemed to have waived its right to escheat the real property and the title of the alien thereto becomes lawful and valid as of the date of its conveyance or transfer to him. (Osterman vs. Baldwin, 6 Wall, 116, 18 Law. ed. 730; Manuel vs. Wulff, 152 U.S. 505, 38 Law. ed. 532; Pembroke vs. Houston, 79, SW 470; Fioerella vs. Jones, 259 SW 782. The rule in the United States that in a sale of real estate to an alien disqualified to hold title thereto, the vendor divests himself of the title to such real estate and is not permitted to sue for the annulment Of his Contract, is also the rule under the Civil Code. ... Article 1302 of the old Civil Code provides: ... Persons sui juriscannot, however, avail themselves of the incapacity of those with whom they contracted; ...

xxx xxx xxx

. . . (I)f the ban on aliens from acquiring not only agricultural but, also urban lands, as construed by this Court in the Krivenko case, is to preserve the nation's land for future generations of Filipinos, that aim or purpose would not be thwarted but achieved by making lawful the

acquisition of real estate by aliens who became Filipino citizens by naturalization. The title to the parcel of land of the vendee, a naturalized Filipino citizen, being valid that of the domestic corporation to which the parcel of land has been transferred, must also be valid, 96.67 per cent of its capital stock being owned by Filipinos.

Herrera v. Luy Kim Guan (SCRA 406) reiterated the above ruling by declaring that where land is sold to a Chinese citizen, who later sold it to a Filipino, the sale to the latter cannot be impugned.

The appellants cannot find solace from Philippine Banking Corporation v. Lui She (21 SCRA 52) which relaxed the pari delicto doctrine to allow the heirs or successors-in-interest, in appropriate cases, to recover that which their predecessors sold to aliens.

Only recently, in Sarsosa vda. de Barsobia v. Cuenco (113 SCRA 547) we had occasion to pass upon a factual situation substantially similar to the one in the instant case. We ruled:

But the factual set-up has changed. The litigated property is now in the hands of a naturalized Filipino. It is no longer owned by a disqualified vendee. Respondent, as a naturalized citizen, was constitutionally qualified to own the subject property. There would be no more public policy to be served in allowing petitioner Epifania to recover the land as it is already in the hands of a qualified person. Applying by analogy the ruling of this Court in Vasquez vs. Giap & Sons: (.96 Phil. 447 [1955])

... if the ban on aliens from acquiring not only agricultural but also urban lands, as construed by this Court in the Krivenko case, is to preserve the nation's lands for future generations of Filipinos, that aim or purpose would not be thwarted but achieved by making lawful the acquisition of real estate by aliens who became Filipino citizens by naturalization.

While, strictly speaking, Ong King Po, private respondent's vendor, had no rights of ownership to transmit, it is likewise in escapable that petitioner Epifania had slept on her rights for 26 years from 1936 to 1962. By her long inaction or inexcusable neglect, she should be held barred from asserting her claim to the litigated property (Sotto vs. Teves, 86 SCRA 157 [1978])

Laches has been defined as the failure or neglect, for an unreasonable and unexplained length of time, to do that which by exercising due diligence could or should have been done earlier; it is negligence or ommission to assert a right within a reasonable time, warranting a presumption that the party entitled to assert it either has abandoned it or declined to assert it. (Tijam, et al. vs. Sibonghanoy, et al., No. L-21450, April 15, 1968, 23 SCRA 29, 35).' (Cited in Sotto vs. Teves, 86 SCRA 154 [1978]).

Respondent, therefore, must be declared to be the rightful owner of the property.

In the light of the above considerations, we find the second and third assignments of errors without merit. Respondent Navata, the titled owner of the property is declared the rightful owner.

WHEREFORE, the instant appeal is hereby denied. The orders dismissing the complaint and denying the motion for reconsideration are affirmed.

SO ORDERED.

THIRD DIVISION

[G.R. No. 128573. January 13, 2003]

NAAWAN COMMUNITY RURAL BANK INC., petitioner, vs. THE COURT OF APPEALS and SPOUSES ALFREDO AND ANNABELLE LUMO,respondents.

D E C I S I O N

CORONA, J.:

Under the established principles of land registration, a person dealing with registered land may generally rely on the correctness of a certificate of title and the law will in no way oblige him to go beyond it to determine the legal status of the property.

Before us is a Petition for Review on Certiorari challenging the February 7, 1997 Decision [1] of the Court of Appeals in CA-G.R. CV No. 55149, which in turn affirmed the decision[2] of the Regional Trial Court of Misamis Oriental, Branch 18 as follows:

WHEREFORE, the plaintiffs-spouses are adjudged the absolute owners and possessors of the properties in question (Lot 18583, under TCT No. T-50134, and all improvements thereon) and quieting title thereto as against any and all adverse claims of the defendant. Further, the sheriffs certificate of sale, Exhibit 4; 4-A; Sheriffs deed of final conveyance, Exhibit 5, 5-A; Tax Declarations No. 71211, Exhibit 7, and any and all instrument, record, claim, encumbrance or proceeding in favor of the defendant, as against the plaintiffs, and their predecessor-in-interest, which may be extant in the office of the Register of Deeds of Province of Misamis Oriental, and of Cagayan de Oro City, and in the City Assessors Office of Cagayan de Oro City, are declared as invalid and ineffective as against the plaintiffs title.The counterclaim is dismissed for lack of merit.SO ORDERED.[3]

The facts of the case, as culled from the records, are as follows:

On April 30, 1988, a certain Guillermo Comayas offered to sell to private respondent-spouses Alfredo and Annabelle Lumo, a house and lot measuring 340 square meters located at Pinikitan, Camaman-an, Cagayan de Oro City.

Wanting to buy said house and lot, private respondents made inquiries at the Office of the Register of Deeds of Cagayan de Oro City where the property is located and the Bureau of Lands on the legal status of the vendors title. They found out that the property was mortgaged for P8,000 to a certain Mrs. Galupo and that the owners copy of the Certificate of Title to said property was in her possession.

Private respondents directed Guillermo Comayas to redeem the property from Galupo at their expense, giving the amount of P10,000 to Comayas for that purpose.

On May 30, 1988, a release of the adverse claim of Galupo was annotated on TCT No. T-41499 which covered the subject property.

In the meantime, on May 17, 1988, even before the release of Galupos adverse claim, private respondents and Guillermo Comayas, executed a deed of absolute sale.The subject property was allegedly sold for P125,000 but the deed of sale reflected the amount of only P30,000 which was the amount private respondents were ready to pay at the time of the execution of said deed, the balance payable by installment.

On June 9, 1988, the deed of absolute sale was registered and inscribed on TCT No. T-41499 and, on even date, TCT No. T-50134 was issued in favor of private respondents.

After obtaining their TCT, private respondents requested the issuance of a new tax declaration certificate in their names. However, they were surprised to learn from the City Assessors Office that the property was also declared for tax purposes in the name of petitioner Naawan Community Rural Bank Inc. Records in the City Assessors Office revealed that, for the lot covered by TCT No. T-50134, Alfredo Lumos T/D # 83324 bore the note: This lot is also declared in the name of Naawan Community Rural Bank Inc. under T/D # 71210.

Apparently, on February 7, 1983, Guillermo Comayas obtained a P15,000 loan from petitioner Bank using the subject property as security. At the time said contract of mortgage was entered into, the subject property was then an unregistered parcel of residential land, tax-declared in the name of a certain Sergio A. Balibay while the residential one-storey house was tax-declared in the name of Comayas.

Balibay executed a special power of attorney authorizing Comayas to borrow money and use the subject lot as security. But the Deed of Real Estate Mortgage and the Special Power of Attorney were recorded in the registration book of the Province of Misamis Oriental, not in the registration book of Cagayan de Oro City. It appears that, when the registration was made, there was only one Register of Deeds for the entire province of Misamis Oriental, including Cagayan de Oro City. It was only in 1985 when the Office of the Register of Deeds for Cagayan de Oro City was established separately from the Office of the Register of Deeds for the Province of Misamis Oriental.

For failure of Comayas to pay, the real estate mortgage was foreclosed and the subject property sold at a public auction to the mortgagee Naawan Community Rural Bank as the highest bidder in the amount of P16,031.35. Thereafter, the sheriffs certificate of sale was issued and registered under Act 3344 in the Register of Deeds of the Province of Misamis Oriental.

On April 17, 1984, the subject property was registered in original proceedings under the Land Registration Act. Title was entered in the registration book of the Register of Deeds of Cagayan de Oro City as Original Certificate of Title No. 0-820, pursuant to Decree No. N-189413.

On July 23, 1984, Transfer Certificate of Title No. T-41499 in the name of Guillermo P. Comayas was entered in the Register of Deeds of Cagayan de Oro City.

Meanwhile, on September 5, 1986, the period for redemption of the foreclosed subject property lapsed and the MTCC Deputy Sheriff of Cagayan de Oro City issued and delivered to petitioner bank the sheriffs deed

of final conveyance. This time, the deed was registered under Act 3344 and recorded in the registration book of the Register of Deeds of Cagayan de Oro City.

By virtue of said deed, petitioner Bank obtained a tax declaration for the subject house and lot.

Thereafter, petitioner Bank instituted an action for ejectment against Comayas before the MTCC which decided in its favor. On appeal, the Regional Trial Court affirmed the decision of the MTCC in a decision dated April 13, 1988.

On January 27, 1989, the Regional Trial Court issued an order for the issuance of a writ of execution of its judgment. The MTCC, being the court of origin, promptly issued said writ.

However, when the writ was served, the property was no longer occupied by Comayas but herein private respondents, the spouses Lumo who had, as earlier mentioned, bought it from Comayas on May 17, 1988

Alarmed by the prospect of being ejected from their home, private respondents filed an action for quieting of title which was docketed as Civil Case No. 89-138. After trial, the Regional Trial Court rendered a decision declaring private respondents as purchasers for value and in good faith, and consequently declaring them as the absolute owners and possessors of the subject house and lot.

Petitioner appealed to the Court of Appeals which in turn affirmed the trial courts decision.

Hence, this petition.

Petitioner raises the following issues:

I. WHETHER OR NOT THE SHERIFFS DEED OF FINAL CONVEYANCE WAS DULY EXECUTED AND REGISTERED IN THE REGISTER OF DEEDS OF CAGAYAN DE ORO CITY ON DECEMBER 2, 1986;

II. WHETHER OR NOT REGISTRATION OF SHERIFFS DEED OF FINAL CONVEYANCE IN THE PROPER REGISTRY OF DEEDS COULD BE EFFECTIVE AS AGAINST SPOUSES LUMO.

Both parties cite Article 1544 of the Civil Code which governs the double sale of immovable property.

Article 1544 provides:

x x x. Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith first recorded it in the Registry of Property.

Petitioner bank contends that the earlier registration of the sheriffs deed of final conveyance in the day book under Act 3344 should prevail over the later registration of private respondents deed of absolute sale under Act 496,[4] as amended by the Property Registration Decree, PD 1529.

This contention has no leg to stand on. It has been held that, where a person claims to have superior proprietary rights over another on the ground that he derived his title from a sheriffs sale registered in the Registry of Property, Article 1473 (now Article 1544) of the Civil Code will apply only if said execution sale of real estate is registered under Act 496.[5]

Unfortunately, the subject property was still untitled when it was acquired by petitioner bank by virtue of a final deed of conveyance. On the other hand, when private respondents purchased the same property, it was already covered by the Torrens System.

Petitioner also relies on the case of Bautista vs. Fule[6] where the Court ruled that the registration of an instrument involving unregistered land in the Registry of Deeds creates constructive notice and binds third person who may subsequently deal with the same property.

However, a close scrutiny of the records reveals that, at the time of the execution and delivery of the sheriffs deed of final conveyance on September 5, 1986, the disputed property was already covered by the Land Registration Act and Original Certificate of Title No. 0-820 pursuant to Decree No. N189413 was likewise already entered in the registration book of the Register of Deeds of Cagayan De Oro City as of April 17, 1984.

Thus, from April 17, 1984, the subject property was already under the operation of the Torrens System. Under the said system, registration is the operative act that gives validity to the transfer or creates a lien upon the land.

Moreover, the issuance of a certificate of title had the effect of relieving the land of all claims except those noted thereon. Accordingly, private respondents, in dealing with the subject registered land, were not required by law to go beyond the register to determine the legal condition of the property.  They were only charged with notice of such burdens on the property as were noted on the register or the certificate of title.  To have required them to do more would have been to defeat the primary object of the Torrens System which is to make the Torrens Title indefeasible and valid against the whole world.

Private respondents posit that, even assuming that the sheriffs deed of final conveyance in favor of petitioner bank was duly recorded in the day book of the Register of Deeds under Act 3344, ownership of the subject real property would still be theirs as purchasers in good faith because they registered the sale first under the Property Registration Decree.

The rights created by the above-stated statute of course do not and cannot accrue under an inscription in bad faith. Mere registration of title in case of double sale is not enough; good faith must concur with the registration.[7]

Petitioner contends that the due and proper registration of the sheriffs deed of final conveyance on December 2, 1986 amounted to constructive notice to private respondents. Thus, when private respondents bought the subject property on May 17, 1988, they were deemed to have purchased the said property with the knowledge that it was already registered in the name of petitioner bank.

Thus, the only issue left to be resolved is whether or not private respondents could be considered as buyers in good faith.

The priority in time principle being invoked by petitioner bank is misplaced because its registration referred to land not within the Torrens System but under Act 3344.On the other hand, when private respondents bought the subject property, the same was already registered under the Torrens System. It is a well-known rule in this jurisdiction that persons dealing with registered land have the legal right to rely on the face of the Torrens Certificate of Title and to dispense with the need to inquire further, except when the party concerned has actual knowledge of facts and circumstances that would impel a reasonably cautious man to make such inquiry.[8]

Did private respondents exercise the required diligence in ascertaining the legal condition of the title to the subject property so as to be considered as innocent purchasers for value and in good faith?

We answer in the affirmative.

Before private respondents bought the subject property from Guillermo Comayas, inquiries were made with the Registry of Deeds and the Bureau of Lands regarding the status of the vendors title. No liens or encumbrances were found to have been annotated on the certificate of title. Neither were private respondents aware of any adverse claim or lien on the property other than the adverse claim of a certain Geneva Galupo to whom Guillermo Comayas had mortgaged the subject property. But, as already mentioned, the claim of Galupo was eventually settled and the adverse claim previously annotated on the title cancelled. Thus, having made the necessary inquiries, private respondents did not have to go beyond the certificate of title. Otherwise, the efficacy and conclusiveness of the Torrens Certificate of Title would be rendered futile and nugatory.

Considering therefore that private respondents exercised the diligence required by law in ascertaining the legal status of the Torrens title of Guillermo Comayas over the subject property and found no flaws therein, they should be considered as innocent purchasers for value and in good faith.

Accordingly, the appealed judgment of the appellate court upholding private respondents Alfredo and Annabelle Lumo as the true and rightful owners of the disputed property is affirmed.

WHEREFORE, petition is hereby DENIED.

SO ORDERED.

THIRD DIVISION

[G.R. No. 142403. March 26, 2003]

ALEJANDRO GABRIEL and ALFREDO GABRIEL, petitioners, vs. SPOUSES PABLO MABANTA AND ESCOLASTICA COLOBONG, DEVELOPMENT BANK OF THE PHILIPPINES (Isabela Branch) and ZENAIDA TAN-REYES, respondents.

D E C I S I O N

SANDOVAL-GUTIERREZ, J.:

Born of the need to protect our land registration system from being converted into an instrument of fraud, this Court has consistently adhered to the principle that a mere registration of title in case of double sale is not enough, good faith must concur with the registration.

In this petition for review on certiorari, Alejandro Gabriel and Alfredo Gabriel assailed the Decision [1] dated March 30, 1999 of the Court of Appeals in CA-G.R. CV No. 33941 modifying the Decision [2] dated April 12, 1991 of the Regional Trial Court, Branch 21, Santiago, Isabela in Civil Case No. 0399 for specific performance, reconveyance and damages with application for preliminary injunction.

The facts are as follows:

Spouses Pablo and Escolastica Mabanta were the registered owners of two lots located in Patul and Capaltitan, Santiago, Isabela, with an area of 512 and 15,000 square meters, covered by Transfer Certificates of Title (TCT) Nos. 72705 and 72707, respectively. On October 25, 1975, they mortgaged both lots with the Development Bank of the Philippines (DBP) as collateral for a loan of P14,000.00.[3]

Five years thereafter or on September 1, 1980, spouses Mabanta sold the lots to Susana Soriano by way of a Deed of Sale of Parcels of Land With Assumption of Mortgage.[4] Included in the Deed is an agreement that they could repurchase the lots within a period of two (2) years.

Spouses Mabanta failed to repurchase the lots. But sometime in 1984, they were able to convince Alejandro Gabriel to purchase the lots from Susana Soriano. As consideration, Alejandro delivered to Susana a 500-square meter residential lot with an actual value of P40,000.00 and paid spouses Mabanta the sum of P5,000.00. On May 15, 1984, spouses Mabanta executed a Deed of Sale with Assumption of Mortgage[5] in favor of Alejandro. For her part, Susana executed a document entitled Cancellation of Contract[6] whereby she transferred to Alejandro all her rights over the two lots.

Alejandro and his son Alfredo cultivated the lots. They also caused the restructuring of spouses Mabantas loan with the DBP.[7] However, when they were ready to pay the entire loan, they found that spouses Benito and Pura Tan had paid it and that the mortgage was already cancelled.[8]

On August 18, 1985, Benito Tan and Alejandro Tridanio, a barangay official, approached Alejandro to refund to him the P5,000.00 he paid to spouses Mabanta.Alejandro refused because Tan was unwilling to return the formers 500-square meter lot delivered to Susana as purchase price for the lots. Thereafter, spouses Tan tried to eject Alejandro from the lot covered by TCT No. 72707.

On September 17, 1985, Alejandro and Alfredo filed with the Regional Trial Court, Branch 21, Santiago, Isabela a complaint (involving the lot covered by TCT No. 72707) for specific performance, reconveyance and damages with an application for a preliminary injunction against spouses Mabanta, spouses Tan, the DBP and barangay officials Dominador Maylem and Alejandro Tridanio. In due time, these defendants filed their respective answers.

During the proceedings, it turned out that it was spouses Tans daughter, Zenaida Tan-Reyes who bought one of the lots (covered by TCT No. 72707) from spouses Mabanta on August 21, 1985.  Not having been impleaded as a party-defendant, she filed an answer-in-intervention alleging that she is the registered owner of the lot covered by TCT No. 72707; that she purchased it from spouses Mabanta in good faith and for value; that she paid their loan with the DBP in the amounts ofP17,580.88 and P16,845.17 per Official Receipts Nos. 1749539 and 1749540, respectively; that the mortgage with the DBP was cancelled and spouses Mabanta executed a Deed of Absolute Sale[9] in her favor; and that TCT No. T-72707 was cancelled and in lieu thereof, TCT No. T-160391 was issued in her name.

On April 12, 1991, the trial court rendered its Decision sustaining the right of Alejandro and Alfredo Gabriel over the lot covered by TCT No. 72707 (now TCT No. T-160391), thus:

WHEREFORE, in the light of the foregoing considerations judgment is hereby rendered:

1. DECLARING Exhibit A, the deed of sale with assumption of mortgage executed by the spouses Pablo Mabanta and Escolastica Colobong (in favor of Alejandro and Alfredo Gabriel) valid and subsisting.

2. ORDERING the plaintiff Alejandro Gabriel to pay to the spouses Pablo Mabanta and Escolastica Colobong the sums of P5,000.00 plus P34,426.05 (representing the loan with the DBP which plaintiff assumed) within 30 days from receipt hereof.

3. DECLARING the deed of sale executed by the spouses Pablo Mabanta and Escolastica Colobong in favor of Zenaida Tan Reyes as null and void.

4. ORDERING the intervenor Zenaida Tan-Reyes to reconvey the land covered by T.C.T. No. T-160391 in favor of Alejandro Gabriel.

SO ORDERED.

In declaring null and void the Deed of Absolute Sale (or second sale) of the lot covered by TCT No. 72707 between spouses Mabanta and Zenaida Tan-Reyes, the trial court ratiocinated as follows:

But Zenaida (Tan) Reyes professes that she is a buyer in good faith and for value. In her testimony she said that the spouses Mabanta offered to sell the land to her on August 19, 1985. She was informed that the land was mortgaged in the DBP. She readily agreed to buy the land on that same day. She did not inquire further into the status of the land. She did not go and see the land first. What she did was to immediately go to the DBP the following day and paid the mortgage obligation in the amount of P16,845.17 and P17,580.88 (Exhibits 1 and 2). The following day August 21, a deed of sale in her favor was prepared and on October 17, 1985 she secured a certificate of title (Exhibit 5). Under the above circumstances, it cannot be said that she is a purchaser in good faith. She should have first made a thorough investigation of the status of the land. Had she inquired, she should have been informed that the land was previously sold to at least two persons Susana Soriano and Alejandro Gabriel. She should also have first visited the land she was buying. Had she done so she should have discovered that the land was being cultivated by the Gabriels who would have informed her that they already bought the land from the Mabantas. The reason why she did not do this is because she already was appraised of the status of the land by her father Benito Tan. For reasons known only to her, she decided to buy the land just the same.

x x x x x x

Zenaida Tan therefore is not a purchaser in good faith and she cannot seek refuge behind her certificate of title. True, Article 1544 of the Civil Code provides that should immovable property be sold to different vendees, the ownership shall belong to the person who in good faith first recorded it in the registry of property. Unfortunately, the registration made by Zenaida (Tan) Reyes of her deed of sale was not in good faith. For this reason in accordance with the same Article 1544, the land shall pertain to the person who in good faith was first in possession. There is no question that it is the Gabriels who are in possession of the land.

Unsatisfied, spouses Mabanta and Zenaida Tan-Reyes interposed an appeal to the Court of Appeals.

On March 30, 1999, the Court of Appeals rendered a Decision modifying the trial courts Decision, declaring as valid the second sale of the lot covered by TCT No. 72707 between spouses Mabanta and Zenaida Tan-Reyes on the ground that a person dealing with registered land may simply rely on the correctness of the certificate of title and, in the absence of anything to engender suspicion, he is under no obligation to look beyond it. The dispositive portion of the Appellate Courts Decision reads:

Wherefore the appealed judgment is AFFIRMED with the following modification:

1. DECLARING Exhibit A, the deed of sale with assumption of mortgage executed by the defendants-appellants spouses Pablo Mabanta and Escolastica Colobong over lots covered by TCT Nos. T-72705 and T-72707 valid and subsisting;

2. ORDERING spouses Pablo Mabanta and Escolastica Colobong to surrender TCT No. 72705 to plaintiff-appellee Alejandro Gabriel;

3. DECLARING the deed of sale executed over lot with TCT No. 72707 (now T-160391) by spouses Pablo Mabanta and Escolastica Colobong in favor of intervenor-appellant Zenaida Tan Reyes as valid;

4. ORDERING plaintiffs-appellees and any all persons claiming rights under them to vacate Lot 3651-A now covered by TCT No. T-160391 and to deliver to intervenor-appellant Zenaida Tan-Reyes the possession thereof;

5. Dismissing the case against defendants-appellants Benito Tan and Purita Masa;

6. No pronouncement as to costs.

SO ORDERED.

In the instant petition for review on certiorari, petitioners Alejandro and Alfredo Gabriel raise this lone issue:

WHETHER OR NOT THE COURT OF APPEALS ERRED IN DECLARING THE SECOND SALE OF THE DISPUTED LOT EXECUTED BY SPOUSES MABANTA IN FAVOR OF ZENAIDA TAN-REYES VALID UNDER ARTICLE 1544 OF THE CIVIL CODE.

Petitioners contend that respondent Reyes is not a purchaser in good faith since she bought the disputed lot with the knowledge that petitioner Alejandro is claiming it in a previous sale.

In her comment on the petition, respondent Reyes maintains that the Court of Appeals factual finding that she is a purchaser in good faith and for value is final and conclusive. Meeting the issue head on, she claims that there is no evidence that prior to August 21, 1985, when she purchased the lot from respondent spouses Mabanta, she had knowledge of any previous lien or encumbrance on the property.

For its part, respondent DBP avers that it acted in utmost good faith in releasing the mortgaged lots to respondent spouses Mabanta who had the loan restructured and paid the same. Also, it did not transact business with spouses Tan.

With respect to respondent spouses Mabanta, this Courts Resolution dated June 14, 2000 requiring them to file comment on the present petition was returned unserved. Thus, in its Resolution dated January 22, 2001, this Court resolved to consider the Resolution of June 14, 2000 deemed served upon them.[10]

The petition is impressed with merit.

The issue for our resolution is whether or not respondent Zenaida Tan-Reyes acted in good faith when she purchased the subject lot and had the sale registered.

Settled is the principle that this Court is not a trier of facts. In the exercise of its power of review, the findings of fact of the Court of Appeals are conclusive and binding and consequently, it is not our function to analyze or weigh evidence all over again.[11] This rule, however, is not an iron-clad rule.[12] In Floro vs. Llenado,[13] we enumerated the various exceptions and one which finds application to the present case is when the findings of the Court of Appeals are contrary to those of the trial court.

We start first with the applicable law.

Article 1544 of the Civil Code provides:

ART. 1544. If the same thing should have been sold to different vendees, the ownership shall be transferred to the person who may have first possession thereof in good faith, if it should be movable property.

Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith first recorded it in the Registry of Property.

Should there be no inscription, the ownership shall pertain to the person who in good faith was first in possession; and, in the absence thereof; to the person who presents the oldest title, provided there is good faith.

Otherwise stated, where it is an immovable property that is the subject of a double sale, ownership shall be transferred (1) to the person acquiring it who in good faith first recorded it in the Registry of Property; (2) in default thereof, to the person who in good faith was first in possession; and (3) in default thereof, to the person who presents the oldest title, provided there is good faith. [14] The requirement of the law then is two-fold: acquisition in good faith and registration in good faith .[15]The rationale behind this is well-expounded in Uraca vs. Court of Appeals,[16] where this Court held:

Under the foregoing, the prior registration of the disputed property by the second buyer does not by itself confer ownership or a better right over the property. Article 1544 requires that such registration must be coupled with good faith. Jurisprudence teaches us that (t)he governing principle is primus tempore, potior jure (first in time, stronger in right). Knowledge gained by the first buyer of the second sale cannot defeat the first buyers right except where the second buyer registers in good faith the second sale ahead of the first, as provided by the Civil Code. Such knowledge of the first buyer does not bar her from availing of her rights under the law, among them, to register first her purchase as against the second buyer. But in converso, knowledge gained by the second buyer of the first sale defeats his right even if he is first to register the second sale, since such knowledge taints his prior registration with bad faith. This is the price exacted by Article 1544 of the

Civil Code for the second buyer being able to displace the first buyer, that before the second buyer can obtain priority over the first, he must show that he acted in good faith throughout (i.e. in ignorance of the first sale and of the first buyers right) from the time of acquisition until the title is transferred to him by registration or failing registration, by delivery of possession. (Emphasis supplied)

In the case at bar, certain pieces of evidence, put together, would prove that respondent Reyes is not a buyer in good faith. The records show that on August 18, 1985, spouses Mabanta offered to her for sale the disputed lot. They told her it was mortgaged with respondent DBP and that she had to pay the loan if she wanted to buy it.[17]She readily agreed to such a condition. The following day, her father Benito Tan, accompanied by barangay official Tridanio, went to petitioner Alejandros house offering to return to him the P5,000.00 he had paid to spouses Mabanta. Tan did not suggest to return the 500-square meter lot petitioner delivered to Susana Soriano.[18] For this reason, petitioner refused Tans offer and even prohibited him from going to respondent DBP. We quote the following testimony of petitioner who, despite his blindness as shown by the records, testified to assert his right, thus:

ATTY. CHANGALE:

Q What can you say to that statement?

A That is their mistake, sir.

Q Why do you say that is their mistake?

A Because her husband and Tridanio went at home offering to return the money but I did not accept, sir.

Q Who is this Benito Tan you are referring to?

A The husband of Pura Masa, sir.

Q What is the relationship with the intervenor Zenaida Tan?

A The daughter, sir.

Q When did Benito Tan together with Councilman Tridanio came?

A Before they went to the Development Bank of the Philippines they came at home and I prohibit them, sir.

Q How did you prohibit them?

A No, I said please I am just waiting for the Bank to inspect then I will pay my obligation.

x x x x x x

Q You stated earlier that you will just pay the payments. What are those payments you are referring to?

A The payment I have given to Colobong and to the Bank, sir. They do not want to return the payment I have given to Susana Soriano and that is the beginning of our quarrel.[19]

We are thus convinced that respondent Reyes had knowledge that petitioner previously bought the disputed lot from respondent spouses Mabanta. Why should her father approach petitioner and offer to return to him the money he paid spouses Mabanta? Obviously, aware of the previous sale to petitioner, respondent Reyes informed her father about it. At this juncture, it is reasonable to conclude that what prompted him to go to petitioners house was his desire to facilitate his daughters acquisition of the lot, i.e., to prevent petitioner Alejandro from contesting it. He did not foresee then that petitioner would insist he has a prior right over the lot.

Now respondent Reyes claims that she is a purchaser in good faith. This is preposterous. Good faith is something internal. Actually, it is a question of intention. In ascertaining ones intention, this Court must rely on the evidence of ones conduct and outward acts. From her actuations as specified above, respondent Reyes cannot be considered to be in good faith when she bought the lot.

Moreover, it bears noting that on September 16, 1985, both petitioners filed with the trial court their complaint involving the lot in question against respondents. After a month, or on October 17, 1985, respondent Reyes had the Deed of Absolute Sale registered with the Registry of Property. Evidently, she wanted to be the first one to effect its registration to the prejudice of petitioners who, although in possession, have not registered the same. This is another indicum of bad faith.

We have consistently held that in cases of double sale of immovables, what finds relevance and materiality is not whether or not the second buyer was a buyer in good faith but whether or not said second buyer registers such second sale in good faith, that is, without knowledge of any defect in the title of the property sold.[20] In Salvoro vs. Tanega,[21] we had the occasion to rule that:

If a vendee in a double sale registers the sale after he has acquired knowledge that there was a previous sale of the same property to a third party or that another person claims said property in a previous sale, the registration will constitute a registration in bad faith and will not confer upon him any right.

Mere registration of title is not enough, good faith must concur with the registration.  To be entitled to priority, the second purchaser must not only establish prior recording of his deed, but must have acted in good faith, without knowledge of the existence of another alienation by the vendor to the other. [22] In the old case of Leung Yee vs. F. L. Strong Machinery, Co. and Williamson, this Court ruled:

One who purchases a real estate with knowledge of a defect of title in his vendor cannot claim that he has acquired title thereto in good faith as against the true owner of the land or of an interest therein; and the same rule must be applied to one who has knowledge of facts which should have put him upon such inquiry and investigation as might be necessary to acquaint him with the defects in the title of his vendor. A purchaser cannot close his eyes to facts which should put a reasonable man upon his guard, and then claim that he acted in good faith under the belief that there was no defect in the title of the vendor. His mere refusal to believe that such a defect exists, or his willful closing of his eyes to the possibility of the existence of a defect in his vendors title will not make him an innocent purchaser for value, if it afterwards develops that the title was in fact defective, and it appears that he had such notice of the defect as would have led to its discovery had he acted with that measure of precaution which may reasonably be required of a prudent man in a like situation. x x x [23]

In fine, we hold that respondent Zenaida Tan-Reyes did not act in good faith when she bought the lot and had the sale registered.

WHEREFORE, the assailed Decision of the Court of Appeals is REVERSED and SET ASIDE. The Decision of the trial court is hereby REINSTATED.

SO ORDERED.

THIRD DIVISION

[G.R. No. 151212. September 10, 2003]

TEN FORTY REALTY AND DEVELOPMENT CORP., Represented by its President, VERONICA G. LORENZANA, petitioner, vs. MARINA CRUZ, respondent.

D E C I S I O N

PANGANIBAN, J.:

In an ejectment suit, the question of ownership may be provisionally ruled upon for the sole purpose of determining who is entitled to possession de facto. In the present case, both parties base their alleged right to possess on their right to own. Hence, the Court of Appeals did not err in passing upon the question of ownership to be able to decide who was entitled to physical possession of the disputed land.

The Case

Before us is a Petition for Review[1] under Rule 45 of the Rules of Court, seeking to nullify the August 31, 2001 Decision[2] and December 19, 2001 Resolution[3] of the Court of Appeals (CA) in CA- GR SP No. 64861. The dispositive portion of the assailed Decision is as follows:

WHEREFORE, premises considered, the petition is hereby DISMISSED and the Decision dated May 4, 2001 is hereby AFFIRMED.[4]

The assailed Resolution denied petitioner's Motion for Reconsideration.

The Facts

The facts of the case are narrated by the CA as follows:

A complaint for ejectment was filed by [Petitioner Ten Forty Realty and Development Corporation] against x x x [Respondent Marina Cruz] before the Municipal Trial Court in Cities (MTCC) of Olongapo City, docketed as Civil Case 4269, which alleged that: petitioner is the true and absolute owner of a parcel of lot and residential house situated in #71 18th Street, E.B.B. Olongapo City, particularly described as:

A parcel of residential house and lot situated in the above-mentioned address containing an area of 324 square meters more or less bounded on the Northeast by 041 (Lot 255, Ts-308); on the Southeast by 044 (Lot 255, Ts-308); on the Southwest by 043 (Lot 226-A & 18th street) and on the Northwest by 045 (Lot 227, Ts-308) and declared for taxation purposes in the name of [petitioner] under T.D. No. 002-4595-R and 002-4596.

having acquired the same on December 5, 1996 from Barbara Galino by virtue of a Deed of Absolute Sale; the sale was acknowledged by said Barbara Galino through a 'Katunayan'; payment of the capital gains tax for the transfer of the property was evidenced by a Certification Authorizing Registration issued by the Bureau of Internal Revenue; petitioner came to know that Barbara Galino sold the same property on April 24, 1998 to Cruz, who immediately occupied the property and which occupation was merely tolerated by petitioner; on October 16, 1998, a complaint for ejectment was filed with the Barangay East Bajac-Bajac, Olongapo City but for failure to arrive at an amicable settlement, a Certificate to File Action was issued;on April 12, 1999 a demand letter was sent to [respondent] to vacate and pay reasonable amount for the use and occupation of the same, but was ignored by the latter; and due to the refusal of [respondent] to vacate the premises, petitioner was constrained to secure the services of a counsel for an agreed fee of P5,000.00 as attorneys fee and P500.00 as appearance fee and incurred an expense of P5,000.00 for litigation.

In respondents Answer with Counterclaim, it was alleged that: petitioner is not qualified to own the residential lot in dispute, being a public land; according to Barbara Galino, she did not sell her house and lot to petitioner but merely obtained a loan from Veronica Lorenzana; the payment of the capital gains tax does not necessarily show that the Deed of Absolute Sale was at that time already in existence; the court has no jurisdiction over the subject matter because the complaint was filed beyond the one (1) year period after the alleged unlawful deprivation of possession; there is no allegation that petitioner had been in prior possession of the premises

and the same was lost thru force, stealth or violence; evidence will show that it was Barbara Galino who was in possession at the time of the sale and vacated the property in favor of respondent; never was there an occasion when petitioner occupied a portion of the premises, before respondent occupied the lot in April 1998, she caused the cancellation of the tax declaration in the name of Barbara Galino and a new one issued in respondents name; petitioner obtained its tax declaration over the same property on November 3, 1998, seven (7) months [after] the respondent [obtained hers]; at the time the house and lot [were] bought by respondent, the house was not habitable, the power and water connections were disconnected; being a public land, respondent filed a miscellaneous sales application with the Community Environment and Natural Resources Office in Olongapo City; and the action for ejectment cannot succeed where it appears that respondent had been in possession of the property prior to the petitioner.[5]

In a Decision[6] dated October 30, 2000, the Municipal Trial Court in Cities (MTCC) ordered respondent to vacate the property and surrender to petitioner possession thereof. It also directed her to pay, as damages for its continued unlawful use, P500 a month from April 24, 1999 until the property was vacated, P5,000 as attorneys fees, and the costs of the suit.

On appeal, the Regional Trial Court[7] (RTC) of Olongapo City (Branch 72) reversed the MTCC. The RTC ruled as follows: 1) respondents entry into the property was not by mere tolerance of petitioner, but by virtue of a Waiver and Transfer of Possessory Rights and Deed of Sale in her favor; 2) the execution of the Deed of Sale without actual transfer of the physical possession did not have the effect of making petitioner the owner of the property, because there was no delivery of the object of the sale as provided for in Article 1428 of the Civil Code; and 3) being a corporation, petitioner was disqualified from acquiring the property, which was public land.

Ruling of the Court of Appeals

Sustaining the RTC, the CA held that petitioner had failed to make a case for unlawful detainer, because no contract -- express or implied -- had been entered into by the parties with regard to possession of the property. It ruled that the action should have been for forcible entry, in which prior physical possession was indispensable -- a circumstance petitioner had not shown either.

The appellate court also held that petitioner had challenged the RTCs ruling on the question of ownership for the purpose of compensating for the latters failure to counter such ruling. The RTC had held that, as a corporation, petitioner had no right to acquire the property which was alienable public land.

Hence, this Petition.[8]

Issues

Petitioner submits the following issues for our consideration:

1. The Honorable Court of Appeals had clearly erred in not holding that [r]espondents occupation or possession of the property in question was merely through the tolerance or permission of the herein [p]etitioner;

[2.] The Honorable Court of Appeals had likewise erred in holding that the ejectment case should have been a forcible entry case where prior physical possession is indispensable; and

[3.] The Honorable Court of Appeals had also erred when it ruled that the herein [r]espondents possession or occupation of the said property is in the nature of an exercise of ownership which should put the herein [p]etitioner on guard.[9]

The Courts Ruling

The Petition has no merit.

First Issue:Alleged Occupation by Tolerance

Petitioner faults the CA for not holding that the former merely tolerated respondents occupation of the subject property. By raising this issue, petitioner is in effect asking this Court to reassess factual findings. As a

general rule, this kind of reassessment cannot be done through a petition for review on certiorari under Rule 45 of the Rules of Court, because this Court is not a trier of facts; it reviews only questions of law.[10] Petitioner has not given us ample reasons to depart from the general rule.

On the basis of the facts found by the CA and the RTC, we find that petitioner failed to substantiate its case for unlawful detainer. Admittedly, no express contract existed between the parties. Not shown either was the corporations alleged tolerance of respondents possession.

While possession by tolerance may initially be lawful, it ceases to be so upon the owners demand that the possessor by tolerance vacate the property.[11] To justify an action for unlawful detainer, the permission or tolerance must have been present at the beginning of the possession.[12] Otherwise, if the possession was unlawful from the start, an action for unlawful detainer would be an improper remedy. Sarona v. Villegas[13] elucidates thus:

A close assessment of the law and the concept of the word tolerance confirms our view heretofore expressed that such tolerance must be present right from the start of possession sought to be recovered, to categorize a cause of action as one of unlawful detainer not of forcible entry. Indeed, to hold otherwise would espouse a dangerous doctrine. And for two reasons. First.Forcible entry into the land is an open challenge to the right of the possessor. Violation of that right authorizes the speedy redress in the inferior court provided for in the rules. If one year from the forcible entry is allowed to lapse before suit is filed, then the remedy ceases to be speedy; and the possessor is deemed to have waived his right to seek relief in the inferior court.Second, if a forcible entry action in the inferior court is allowed after the lapse of a number of years, then the result may well be that no action for forcible entry can really prescribe. No matter how long such defendant is in physical possession, plaintiff will merely make a demand, bring suit in the inferior court upon a plea of tolerance to prevent prescription to set in and summarily throw him out of the land. Such a conclusion is unreasonable. Especially if we bear in mind the postulates that proceedings of forcible entry and unlawful detainer are summary in nature, and that the one year time bar to suit is but in pursuance of the summary nature of the action.[14]

In this case, the Complaint and the other pleadings do not recite any averment of fact that would substantiate the claim of petitioner that it permitted or tolerated the occupation of the property by Respondent Cruz. The Complaint contains only bare allegations that 1) respondent immediately occupied the subject property after its sale to her, an action merely tolerated by petitioner;[15] and 2) her allegedly illegal occupation of the premises was by mere tolerance.[16]

These allegations contradict, rather than support, petitioners theory that its cause of action is for unlawful detainer. First, these arguments advance the view that respondents occupation of the property was unlawful at its inception. Second, they counter the essential requirement in unlawful detainer cases that petitioners supposed act of sufferance or tolerance must be present right from the start of a possession that is later sought to be recovered.[17]

As the bare allegation of petitioners tolerance of respondents occupation of the premises has not been proven, the possession should be deemed illegal from the beginning. Thus, the CA correctly ruled that the ejectment case should have been for forcible entry -- an action that had already prescribed, however, when the Complaint was filed on May 12, 1999. The prescriptive period of one year for forcible entry cases is reckoned from the date of respondents actual entry into the land, which in this case was on April 24, 1998.

Second Issue:Nature of the Case

Much of the difficulty in the present controversy stems from the legal characterization of the ejectment Complaint filed by petitioner. Specifically, was it for unlawful detainer or for forcible entry?

The answer is given in Section 1 of Rule 70 of the Rules of Court, which we reproduce as follows:

SECTION 1. Who may institute proceedings, and when. - Subject to the provisions of the next succeeding section, a person deprived of the possession of any land or building by force, intimidation, threat, strategy, or stealth, or a lessor, vendor, vendee, or other person against whom the possession of any land or building is unlawfully withheld after the expiration or termination of the right to hold possession, by virtue of any contract, express or implied, or the legal representatives or assigns of any such lessor, vendor, vendee, or other person, may, at any time within one (1) year after such unlawful deprivation or withholding of possession, bring an action in the proper Municipal Trial Court against the person or persons unlawfully withholding or depriving of possession, or any person or persons claiming under them, for the restitution of such possession, together with damages and costs.

While both causes of action deal only with the sole issue of physical or de facto possession,[18] the two cases are really separate and distinct, as explained below:

x x x. In forcible entry, one is deprived of physical possession of land or building by means of force, intimidation, threat, strategy, or stealth. In unlawful detainer, one unlawfully withholds possession thereof after the expiration or termination of his right to hold possession under any contract, express or implied. In forcible entry, the possession is illegal from the beginning and the basic inquiry centers on who has the prior possession de facto. In unlawful detainer, the possession was originally lawful but became unlawful by the expiration or termination of the right to possess, hence the issue of rightful possession is decisive for, in such action, the defendant is in actual possession and the plaintiffs cause of action is the termination of the defendants right to continue in possession.

What determines the cause of action is the nature of defendants entry into the land. If the entry is illegal, then the action which may be filed against the intruder within one year therefrom is forcible entry. If, on the other hand, the entry is legal but the possession thereafter became illegal, the case is one of unlawful detainer which must be filed within one year from the date of the last demand.[19]

It is axiomatic that what determines the nature of an action as well as which court has jurisdiction over it are the allegations in the complaint[20] and the character of the relief sought.[21]

In its Complaint, petitioner alleged that, having acquired the subject property from Barbara Galino on December 5, 1996,[22] it was the true and absolute owner[23]thereof; that Galino had sold the property to Respondent Cruz on April 24, 1998;[24] that after the sale, the latter immediately occupied the property, an action that was merely tolerated by petitioner;[25] and that, in a letter given to respondent on April 12, 1999,[26] petitioner had demanded that the former vacate the property, but that she refused to do so. [27] Petitioner thereupon prayed for judgment ordering her to vacate the property and to pay reasonable rentals for the use of the premises, attorneys fees and the costs of the suit.[28]

The above allegations appeared to show the elements of unlawful detainer. They also conferred initiatory jurisdiction on the MTCC, because the case was filed a month after the last demand to vacate -- hence, within the one-year prescriptive period.

However, what was actually proven by petitioner was that possession by respondent had been illegal from the beginning. While the Complaint was crafted to be an unlawful detainer suit, petitioners real cause of action was for forcible entry, which had already prescribed. Consequently, the MTCC had no more jurisdiction over the action.

The appellate court, therefore, did not err when it ruled that petitioners Complaint for unlawful detainer was a mere subterfuge or a disguised substitute action for forcible entry, which had already prescribed. To repeat, to maintain a viable action for forcible entry, plaintiff must have been in prior physical possession of the property; this is an essential element of the suit.[29]

Third Issue:Alleged Acts of Ownership

Petitioner next questions the CAs pronouncement that respondents occupation of the property was an exercise of a right flowing from a claim of ownership. It submits that the appellate court should not have passed upon the issue of ownership, because the only question for resolution in an ejectment suit is that of possession de facto.

Clearly, each of the parties claimed the right to possess the disputed property because of alleged ownership of it. Hence, no error could have been imputed to the appellate court when it passed upon the issue of ownership only for the purpose of resolving the issue of possession de facto.[30] The CAs holding is moreover in accord with jurisprudence and the law.

Execution of a Deed of SaleNot Sufficient as Delivery

In a contract of sale, the buyer acquires the thing sold only upon its delivery in any of the ways specified in Articles 1497 to 1501, or in any other manner signifying an agreement that the possession is transferred from the vendor to the vendee.[31] With respect to incorporeal property, Article 1498 lays down the general rule: the execution of a public instrument shall be equivalent to the delivery of the thing that is the object of the contract if, from the deed, the contrary does not appear or cannot be clearly inferred.

However, ownership is transferred not by contract but by tradition or delivery. [32] Nowhere in the Civil Code is it provided that the execution of a Deed of Sale is aconclusive presumption of delivery of possession of a piece of real estate.[33]

This Court has held that the execution of a public instrument gives rise only to a prima facie presumption of delivery. Such presumption is destroyed when the delivery is not effected because of a legal impediment.

[34] Pasagui v. Villablanca[35] had earlier ruled that such constructive or symbolic delivery, being merely presumptive, was deemed negated by the failure of the vendee to take actual possession of the land sold.

It is undisputed that petitioner did not occupy the property from the time it was allegedly sold to it on December 5, 1996 or at any time thereafter. Nonetheless, it maintains that Galinos continued stay in the premises from the time of the sale up to the time respondents occupation of the same on April 24, 1998, was possession held on its behalf and had the effect of delivery under the law.[36]

Both the RTC and the CA disagreed. According to the RTC, petitioner did not gain control and possession of the property, because Galino had continued to exercise ownership rights over the realty. That is, she had remained in possession, continued to declare it as her property for tax purposes and sold it to respondent in 1998.

For its part, the CA found it highly unbelievable that petitioner -- which claims to be the owner of the disputed property -- would tolerate possession of the property by respondent from April 24, 1998 up to October 16, 1998. How could it have been so tolerant despite its knowledge that the property had been sold to her, and that it was by virtue of that sale that she had undertaken major repairs and improvements on it?

Petitioner should have likewise been put on guard by respondents declaration of the property for tax purposes on April 23, 1998,[37] as annotated in the tax certificate filed seven months later.[38] Verily, the tax declaration represented an adverse claim over the unregistered property and was inimical to the right of petitioner.

Indeed, the above circumstances derogated its claim of control and possession of the property.

Order of Preference in DoubleSale of Immovable Property

The ownership of immovable property sold to two different buyers at different times is governed by Article 1544 of the Civil Code, which reads as follows:

Article 1544. x x x

Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith first recorded it in the Registry of Property.

Should there be no inscription, the ownership shall pertain to the person who in good faith was first in possession; and, in the absence thereof, to the person who presents the oldest title, provided there is good faith.

Galino allegedly sold the property in question to petitioner on December 5, 1996 and, subsequently, to respondent on April 24, 1998. Petitioner thus argues that being the first buyer, it has a better right to own the realty. However, it has not been able to establish that its Deed of Sale was recorded in the Registry of Deeds of Olongapo City.[39] Its claim of an unattested and unverified notation on its Deed of Absolute Sale [40] is not equivalent to registration. It admits that, indeed, the sale has not been recorded in the Registry of Deeds.[41]

In the absence of the required inscription, the law gives preferential right to the buyer who in good faith is first in possession. In determining the question of who is firstin possession, certain basic parameters have been established by jurisprudence.

First, the possession mentioned in Article 1544 includes not only material but also symbolic possession.[42] Second, possessors in good faith are those who are not aware of any flaw in their title or mode of acquisition.[43] Third, buyers of real property that is in the possession of persons other than the seller must be wary -- they must investigate the rights of the possessors.[44] Fourth, good faith is always presumed; upon those who allege bad faith on the part of the possessors rests the burden of proof.[45]

Earlier, we ruled that the subject property had not been delivered to petitioner; hence, it did not acquire possession either materially or symbolically. As between the two buyers, therefore, respondent was first in actual possession of the property.

Petitioner has not proven that respondent was aware that her mode of acquiring the property was defective at the time she acquired it from Galino. At the time, the property -- which was public land -- had not been registered in the name of Galino; thus, respondent relied on the tax declarations thereon. As shown, the formers name appeared on the tax declarations for the property until its sale to the latter in 1998. Galino was in fact occupying the realty when respondent took over possession. Thus, there was no circumstance that could have placed the latter upon inquiry or required her to further investigate petitioners right of ownership.

Disqualification from Ownership

of Alienable Public Land

Private corporations are disqualified from acquiring lands of the public domain, as provided under Section 3 of Article XII of the Constitution, which we quote:

Sec. 3. Lands of the public domain are classified into agricultural, forest or timber, mineral lands, and national parks. Agricultural lands of the public domain may be further classified by law according to the uses to which they may be devoted. Alienable lands of the public domain shall be limited to agricultural lands. Private corporations or associations may not hold such alienable lands of the public domain except by lease, for a period not exceeding twenty-five years, and not to exceed one thousand hectares in area. Citizens of the Philippines may not lease not more than five hundred hectares, or acquire not more than twelve hectares thereof by purchase, homestead, or grant. x x x. (Italics supplied)

While corporations cannot acquire land of the public domain, they can however acquire private land.[46] Hence, the next issue that needs to be resolved is the determination of whether the disputed property is private land or of the public domain.

According to the certification by the City Planning and Development Office of Olongapo City, the contested property in this case is alienable and disposable public land.[47] It was for this reason that respondent filed a miscellaneous sales application to acquire it.[48]

On the other hand, petitioner has not presented proof that, at the time it purchased the property from Galino, the property had ceased to be of the public domain and was already private land. The established rule is that alienable and disposable land of the public domain held and occupied by a possessor -- personally or through predecessors-in-interest, openly, continuously, and exclusively for 30 years -- is ipso jure converted to private property by the mere lapse of time.[49]

In view of the foregoing, we affirm the appellate courts ruling that respondent is entitled to possession de facto. This determination, however, is only provisional in nature.[50] Well-settled is the rule that an award of possession de facto over a piece of property does not constitute res judicata as to the issue of its ownership.[51]

WHEREFORE, this Petition is DENIED and the assailed Decision AFFIRMED. Costs against petitioner.

SO ORDERED.

THIRD DIVISION

[G.R. No. 144576. May 28, 2004]

SPOUSES ISABELO and ERLINDA PAYONGAYONG, petitioners, vs. HON. COURT OF APPEALS, SPOUSES CLEMENTE and ROSALIA SALVADOR,respondents.

D E C I S I O N

CARPIO MORALES, J.:

Being assailed by petition for review on certiorari under Rule 45 of the Rules of Court[1] is the June 29, 2000 Decision[2] of the Court of Appeals in CA-G.R. CV No. 52917 affirming that of the Regional Trial Court (RTC), Branch 217, Quezon City dismissing Civil Case No. Q-93-16891,[3] the complaint of spouses Isabelo and Erlinda Payongayong (petitioners) against spouses Clemente and Rosalia Salvador (respondents).

Eduardo Mendoza (Mendoza) was the registered owner of a two hundred square meter parcel of land situated in Barrio San Bartolome, Caloocan, covered by and described in Transfer Certificate of Title No. 329509[4] of the Registry of Deeds of Quezon City.

On April 18, 1985, Mendoza mortgaged the parcel of land to the Meralco Employees Savings and Loan Association (MESALA) to secure a loan in the amount of P81,700.00. The mortgage was duly annotated on the title as Primary Entry No. 2872[5] on April 23, 1985.

On July 11, 1987, Mendoza executed a Deed of Sale with Assumption of Mortgage [6] over the parcel of land together with all the improvements thereon (hereinafter referred to as the property) in favor of petitioners in consideration of P50,000.00. It is stated in the deed that petitioners bound themselves to assume payment of the balance of the mortgage indebtedness of Mendoza to MESALA.[7]

On December 7, 1987, Mendoza, without the knowledge of petitioners, mortgaged the same property to MESALA to secure a loan in the amount of P758,000.00. On even date, the second mortgage was duly annotated as Primary Entry No. 8697[8] on Mendozas title.

On November 28, 1991, Mendoza executed a Deed of Absolute Sale[9] over still the same property in favor of respondents in consideration of P50,000.00. The sale was duly annotated as Primary Entry No. 1005 [10] on Mendozas title. On even date, MESALA issued a Cancellation of Mortgage[11] acknowledging that for sufficient and valuable consideration which it received from Mendoza, it was cancelling and releasing the real estate mortgage over the property. The cancellation was annotated as Primary Entry No. 1003[12] on Mendozas title.

Respondents caused the cancellation of Mendozas title and the issuance of Transfer Certificate Title No. 67432[13] in their name.

Getting wind of the sale of the property to respondents, petitioners filed on July 16, 1993 a complaint [14] for annulment of deed of absolute sale and transfer certificate of title with recovery of possession and damages against Mendoza, his wife Sally Mendoza, and respondents before the Quezon City RTC.

In their complaint, petitioners alleged that the spouses Mendoza maliciously sold to respondents the property which was priorly sold to them and that respondents acted in bad faith in acquiring it, the latter having had knowledge of the existence of the Deed of Absolute Sale with Assumption of Mortgage between them (petitioners) and Mendoza.

Branch 217 of the Quezon City RTC, by Order[15] of December 3, 1993, archived the case in view of the failure to determine the whereabouts of the spouses Mendoza.

A motion[16] for the revival of the case as against respondents and its dismissal as against the spouses Mendoza was later filed on December 17, 1993 by petitioners, which motion was granted by the trial court by Order[17] of December 27, 1993.

By Decision of February 5, 1996, the trial court found for respondents.

Dissatisfied, petitioners appealed the decision to the Court of Appeals (CA) which, as stated early on, affirmed the same.

Petitioners Motion for Reconsideration[18] having been denied by the CA by Resolution of August 25, 2000,[19] the petition at bar was lodged.

Petitioners assign to the CA the following errors:[20]

I

THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING IN (sic) EXCESS OF JURISDICTION WHEN IT FAILED TO RULE THAT THE DEED OF SALE EXECUTED BY EDUARDO MENDOZA IN FAVOR OF PRIVATE RESPONDENTS WAS SIMULATED AND THEREFORE NULL AND VOID.

II

THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING IN (sic) EXCESS OF JURISDICTION WHEN IT GAVE CREDENCE TO THE THEORY OF THE PRIVATE RESPONDENTS THUS FOUND TO BE INNOCENT PURCHASERS FOR VALUE.

III

THE HONORABLE COURT OF APPEALS GRAVELY ABUSED ITS DISCRETION AMOUNTING IN (sic) EXCESS OF ITS JURISDICTION BY HOLDING THAT PETITIONERS ARE BARRED BY LACHES.[21]

On procedural and substantive grounds, the petition fails.

The petition which was filed by registered mail was not accompanied by a written explanation why such service was not done personally, in contravention of Section 11, Rule 13 of the Revised Rules of Court which provides:

SEC. 11. Priorities in modes of service and filing. Whenever practicable, the service and filing of pleadings and other papers shall be done personally. Except with respect to papers emanating from the court, a resort to other modes must be accompanied by a written explanation why the service or filing was not done personally. A violation of this Rule may be cause to consider the paper as not filed.

Under the above-quoted provision, service and filing of pleadings and other papers must, whenever practicable, be done personally. If they are made through other modes, the party concerned must provide a written explanation why the service or filing was not done personally. If only to underscore the mandatory nature of this innovation to the set of adjective rules requiring personal service whenever practicable, the provision gives the court the discretion to consider a pleading or paper as not filed if the other modes of service or filing were resorted to and no written explanation was made as to why personal service was not done in the first place.[22] Strictest compliance is mandated, lest this provision be rendered meaningless and its sound purpose negated.[23]

On the merits, respondents claim that they are entitled to the protection accorded to purchasers in good faith is well-taken.

It is a well-established principle that a person dealing with registered land may safely rely on the correctness of the certificate of title issued therefor and the law will in no way oblige him to go behind the certificate to determine the condition of the property.[24] He is charged with notice only of such burdens and claims as are annotated on the title.[25] He is considered in law as an innocent purchaser for value or one who buys the 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 of another person.[26]

That petitioners did not cause the cancellation of the certificate of title of Mendoza and procure one in their names is not disputed. Nor that they had their claims annotated on the same title. Thus, at the time of the sale of the property to respondents on November 28, 1991, only the mortgages in favor of MESALA appeared on the annotations of encumbrances on Mendozas title. Respondent Rosalia Salvador (Rosalia) so testified:

Q: Now, according to you, you bought this property from the Mendozas (sic), Eduardo and Sally Mendoza on November 28, 1991, is that correct?

A: Yes, sir.

x x x

Q: Now, Mrs. Sally Salvador, what did you do after buying the property from the Mendozas (sic)?

A: We renovated it, we constructed a concrete fence, sir.

Q: When you bought the property, is this property encumbered or mortgaged?

A: The property was mortgaged to Meralco Savings and Loan Association, sir.

x x x

Q: And what did you do before buying the property?

A: I verified with the City Hall if they are real owners of the property.

x x x

Q: When you bought the property, mortgaged to Meralco, was this particular property titled in the name of Eduardo Mendoza?

A: Yes, sir.

x x x

Q: When you bought the property, Mrs. Sally Salvador, is this covered by any real property tax in the name of Eduardo Mendoza?

A: In the name of Eduardo Mendoza the one given to me, sir.

x x x

Q: Now, Mrs. Sally Salvador, when for the first time did you see Mr. Payongayong?

A: On the third call of Honorable Judge Enriquez, sir.

x x x

Q: Is it not a fact that before you bought that property, you made an ocular inspection of the premises, is that correct?

A: Yes, sir.

x x x

Q: And after you have inspected the premises in question, is it not a fact that you went to the Register of Deeds, is that correct?

A: Yes, sir. Together with Sally Mendoza and the agent.

x x x

Q: So, you went to the Office of the Register of Deeds of Quezon City, you, together with Benny Salvador and Mrs. Mendoza?

A: Yes, sir.

Q: What did you find out from your verification as to the authenticity of the title?

A: That she is the real owner of the property registered in the Register of Deeds.

Q: Who is the owner?

A: Mr. and Mrs. Eduardo Mendoza.

Q: Did you try to see if the property is free from any lien or encumbrance?

A: Before we went to the Register of Deeds, she told us that the property is mortgaged at (sic) Meralco, sir.

Q: Did you check it up, were you given a Xerox copy of the TCT, Transfer Certificate of Title No. 329509, in addition to the information given to you that the property in question is mortgaged in favor of Meralco Employees Savings?

A: Yes, sir.

Q: And when you went to the Register of Deeds, you saw that the mortgage in favor of the Meralco Employees Savings and Loan Association was duly annotated on the title which is being kept and intact in the Office of the Register of Deeds, is that correct?

A: Yes, sir.[27]

Where innocent third persons rely upon the correctness of a certificate of title and acquire rights over the property, the court cannot just disregard such rights. Otherwise, public confidence in the certificate of title, and ultimately, the Torrens system, would be impaired, for everyone dealing with registered property would still have to inquire at every instance whether the title has been regularly or irregularly issued.[28]

The real purpose of the Torrens system of registration is to quiet title to land and to put a stop to any question of legality of the title except to claims which have been recorded in the certificate of title at the time of registration or which may arise subsequent thereto. Every registered owner and every subsequent purchaser for value in good faith holds the title to the property free from all encumbrances except those noted in the certificate. Hence, a purchaser is not required to explore further what the Torrens title on its face indicates in quest for any hidden defect or inchoate right that may subsequently defeat his right thereto.[29]

In respondents case, they did not only rely upon Mendozas title. Rosalia personally inspected the property and verified with the Registry of Deeds of Quezon City if Mendoza was indeed the registered owner. Given this

factual backdrop, respondents did indeed purchase the property in good faith and accordingly acquired valid and indefeasible title thereto.

The law is thus in respondents favor. Article 1544 of the Civil Code so provides:

Art. 1544. If the same thing should have been sold to different vendees, the ownership shall be transferred to the person who may have first taken possession thereof in good faith, if it should be movable property.

Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith first recorded it in the Registry of Property.

Should there be no inscription, the ownership shall pertain to the person who in good faith was first in the possession; and, in the absence thereof, to the person who presents the oldest title, provided there is good faith.

There being double sale of an immovable property, as the above-quoted provision instructs, ownership shall be transferred (1) to the person acquiring it who in good faith first recorded it in the Registry of Property; (2) in default thereof, to the person who in good faith was first in possession; and (3) in default thereof, to the person who presents the oldest title, provided there is good faith.[30]

The trial and appellate courts thus correctly accorded preferential rights to respondents who had the sale registered in their favor.

Petitioners claim, however, that the sale between Mendoza and respondents was simulated.

Simulation occurs when an apparent contract is a declaration of a fictitious will, deliberately made by agreement of the parties, in order to produce, for the purpose of deception, the appearance of a juridical act which does not exist or is different from that which was really executed. [31] Its requisites are: a) an outward declaration of will different from the will of the parties; b) the false appearance must have been intended by mutual agreement; and c) the purpose is to deceive third persons.[32]

The basic characteristic then of a simulated contract is that it is not really desired or intended to produce legal effects or does not in any way alter the juridical situation of the parties.[33]

The cancellation of Mendozas certificate of title over the property and the procurement of one in its stead in the name of respondents, which acts were directed towards the fulfillment of the purpose of the contract, unmistakably show the parties intention to give effect to their agreement. The claim of simulation does not thus lie.

That petitioners and respondents were forced to litigate due to the deceitful acts of the spouses Mendoza, this Court is not unmindful. It cannot be denied, however, that petitioners failure to register the sale in their favor made it possible for the Mendozas to sell the same property to respondents.

Under the circumstances, this Court cannot come to petitioners succor at the expense of respondents-innocent purchasers in good faith. Petitioners are not without remedy, however.They may bring an action for damages against the spouses Mendoza.[34]

WHEREFORE, the petition is DENIED.

SO ORDERED.

   

SECOND DIVISION 

RUDOLF LIETZ, INC., G.R. No. 122463Petitioner,Present: - versus- PUNO, J.,Chairman, AUSTRIA-MARTINEZ,CALLEJO, SR.,THE COURT OF APPEALS, TINGA, andAGAPITO BURIOL, TIZIANA CHICO-NAZARIO, JJ.TURATELLO & PAOLA SANI,Respondents. Promulgated: December 19, 2005 x --------------------------------------------------------------------x

D E C I S I O N 

TINGA, J.: 

This is a petition for review on certiorari under Rule 45 of the Revised Rules of Court, praying for the

annulment of the Decision[1] dated April 17, 1995 and the Resolution[2] dated October 25, 1995 of the Court of

Appeals in CA-G.R. CV No. 38854. The Court of Appeals affirmed theDecision[3] in Civil Case No. 2164 of the

Regional Trial Court (RTC), Branch 48, of Palawan and Puerto Princesa City with the modification that herein

respondents Tiziana Turatello and Paola Sani are entitled to damages, attorneys fees, and litigation expenses.

 

The dispositive portion of the RTC Decision reads:

 WHEREFORE, in view of the foregoing and as prayed for by the defendants, the instant

complaint is hereby DISMISSED. Defendants counterclaim is likewise DISMISSED. Plaintiff, however, is ordered to pay defendant Turatello and Sanis counsel the sum of P3,010.38 from August 9, 1990 until fully paid representing the expenses incurred by said counsel when the trial was cancelled due to the non-appearance of plaintiffs witnesses. With costs against the plaintiff.

 SO ORDERED.[4]

 

As culled from the records, the following antecedents appear: 

Respondent Agapito Buriol previously owned a parcel of unregistered land situated at Capsalay Island, Port

Barton, San Vicente, Palawan. On August 15, 1986, respondent Buriol entered into a lease agreement with

Flavia Turatello and respondents Turatello and Sani, all Italian citizens, involving one (1) hectare of respondent

Buriols property. The lease agreement was for a period of 25 years, renewable for another 25 years. The

lessees took possession of the land after paying respondent Buriol a down payment of P10,000.00.[5] The

lease agreement, however, was reduced into writing only in January 1987. 

On November 17, 1986, respondent Buriol sold to petitioner Rudolf Lietz, Inc. the same parcel of land for the

amount of P30,000.00. The Deed of Absolute Sale embodying the agreement described the land as follows:

 A parcel of land, consisting of FIVE (5) hectares, more or less, a portion of that parcel of land declared in the name of Agapito Buriol, under Tax Declaration No. 0021, revised in the year 1985, together with all improvements thereon, situated at the Island of Capsalay, Barangay Port Barton, municipality of San Vicente, province of Palawan which segregated from the whole parcel described in said tax declaration, has the following superficial boundaries: NORTH, Sec. 01-017; and remaining property of the vendor; EAST, by Seashore; SOUTH, 01-020; and WEST, by 01-018 (now Elizabeth Lietz).[6]

  

Petitioner later discovered that respondent Buriol owned only four (4) hectares, and with one more hectare

covered by lease, only three (3) hectares were actually delivered to petitioner. Thus, petitioner instituted on

April 3, 1989 a complaint for Annulment of Lease with Recovery of Possession with Injunction and

Damages against respondents and Flavia Turatello before the RTC. The complaint alleged that with evident

bad faith and malice, respondent Buriol sold to petitioner five (5) hectares of land when respondent Buriol knew

for a fact that he owned only four (4) hectares and managed to lease one more hectare to Flavia Turatello and

respondents Tiziana Turatello and Paola Sani. The complaint sought the issuance of a restraining order and a

writ of preliminary injunction to prevent Flavia Turatello and respondents Turatello and Sani from introducing

improvements on the property, the annulment of the lease agreement between respondents, and the

restoration of the amount paid by petitioner in excess of the value of the property sold to him. Except for Flavia

Turatello, respondents filed separate answers raising similar defenses of lack of cause of action and lack of

jurisdiction over the action for recovery of possession. Respondents Turatello and Sani also prayed for the

award of damages and attorneys fees.[7]

 

After trial on the merits, the trial court rendered judgment on May 27, 1992, dismissing both petitioners

complaint and respondents counterclaim for damages. Petitioner and respondents Turatello and Sani

separately appealed the RTC Decision to the Court of Appeals, which affirmed the dismissal of petitioners

complaint and awarded respondents Turatello and Sani damages and attorneys fees. The dispositive portion of

the Court of Appeals Decision reads: 

WHEREFORE, the decision appealed from is hereby AFFIRMED, with the following modification:

Plaintiff-appellant Rudolf Lietz, Inc. is hereby (1) ordered to pay defendants-appellants Turatello and Sani, the sum of P100,000.00 as moral damages; (2) P100,000.00 as exemplary damages; (3) P135,728.73 as attorneys fees; and (4) P10,000.00 as litigation expenses.

 SO ORDERED.[8]

 

Petitioner brought to this Court the instant petition after the denial of its motion for reconsideration of the Court

of Appeal Decision. The instant petition imputes the following errors to the Court of Appeals.I.                   IN DEFENDING AGAPITO BURIOLS GOOD FAITH AND IN STATING THAT

ASSUMING THAT HE (BURIOL) WAS IN BAD FAITH PETITIONER WAS SOLELY RESPONSIBLE FOR ITS INEXCUSABLE CREDULOUSNESS.

 II.                 IN ASSERTING THAT ARTICLES 1542 AND 1539 OF THE NEW CIVIL CODE

ARE, RESPECTIVELY, APPLICABLE AND INAPPLICABLE IN THE CASE AT BAR. 

III.              IN NOT GRANTING PETITIONERS CLAIM FOR ACTUAL AND EXEMPLARY DAMAGES.

 IV.              IN GRANTING RESPONDENTS TIZIANA TURATELLO AND PAOLA SANI

EXHORBITANT [sic] AMOUNTS AS DAMAGES WHICH ARE EVEN BEREFT OF EVIDENTIARY BASIS.[9]

 

 

Essentially, only two main issues confront this Court, namely: (i) whether or not petitioner is entitled to

the delivery of the entire five hectares or its equivalent, and (ii) whether or not damages may be awarded to

either party.

Petitioner contends that it is entitled to the corresponding reduction of the purchase price because the

agreement was for the sale of five (5) hectares although respondent Buriol owned only four (4) hectares. As in

its appeal to the Court of Appeals, petitioner anchors its argument on the second paragraph of Article 1539 of

the Civil Code, which provides: Art. 1539. The obligation to deliver the thing sold includes that of placing in the control of

the vendee all that is mentioned in the contract, in conformity with the following rules: If the sale of real estate should be made with a statement of its area, at the rate of a

certain price for a unit of measure or number, the vendor shall be obliged to deliver to the vendee, if the latter should demand it, all that may have been stated in the contract; but, should this be not possible, the vendee may choose between a proportional reduction of the price and the rescission of the contract, provided that, in the latter case, the lack in the area be not less than one-tenth of that stated.

 . . . .

  

The Court of Appeals Decision, however, declared as inapplicable the abovequoted provision and

instead ruled that petitioner is no longer entitled to a reduction in price based on the provisions of Article 1542

of the Civil Code, which read:

 Art. 1542. In the sale of real estate, made for a lump sum and not at the rate of a certain

sum for a unit of measure or number, there shall be no increase or decrease of the price, although there be a greater or lesser area or number than that stated in the contract.

 The same rule shall be applied when two or more immovables are sold for a single price;

but if, besides mentioning the boundaries, which is indispensable in every conveyance of real estate, its area or number should be designated in the contract, the vendor shall be bound to deliver all that is included within said boundaries, even when it exceeds the area or number specified in the contract; and, should he not be able to do so, he shall suffer a reduction in the price, in proportion to what is lacking in the area or number, unless the contract is rescinded because the vendee does not accede to the failure to deliver what has been stipulated.

  

Article 1539 governs a sale of immovable by the unit, that is, at a stated rate per unit area. In a unit

price contract, the statement of area of immovable is not conclusive and the price may be reduced or

increased depending on the area actually delivered. If the vendor delivers less than the area agreed upon, the

vendee may oblige the vendor to deliver all that may be stated in the contract or demand for the proportionate

reduction of the purchase price if delivery is not possible. If the vendor delivers more than the area stated in

the contract, the vendee has the option to accept only the amount agreed upon or to accept the whole area,

provided he pays for the additional area at the contract rate.[10]

 

In some instances, a sale of an immovable may be made for a lump sum and not at a rate per unit. The

parties agree on a stated purchase price for an immovable the area of which may be declared based on an

estimate or where both the area and boundaries are stated. 

In the case where the area of the immovable is stated in the contract based on an estimate, the actual

area delivered may not measure up exactly with the area stated in the contract. According to Article 1542 [11] of

the Civil Code, in the sale of real estate, made for a lump sum and not at the rate of a certain sum for a unit of

measure or number, there shall be no increase or decrease of the price although there be a greater or lesser

area or number than that stated in the contract. However, the discrepancy must not be substantial. A vendee of

land, when sold in gross or with the description more or less with reference to its area, does not thereby ipso

facto take all risk of quantity in the land. The use of more or less or similar words in designating quantity covers

only a reasonable excess or deficiency.[12]

 

Where both the area and the boundaries of the immovable are declared, the area covered within the

boundaries of the immovable prevails over the stated area. In cases of conflict between areas and boundaries,

it is the latter which should prevail. What really defines a piece of ground is not the area, calculated with more

or less certainty, mentioned in its description, but the boundaries therein laid down, as enclosing the land and

indicating its limits. In a contract of sale of land in a mass, it is well established that the specific boundaries

stated in the contract must control over any statement with respect to the area contained within its boundaries.

It is not of vital consequence that a deed or contract of sale of land should disclose the area with mathematical

accuracy. It is sufficient if its extent is objectively indicated with sufficient precision to enable one to identify it.

An error as to the superficial area is immaterial.[13] Thus, the obligation of the vendor is to deliver everything

within the boundaries, inasmuch as it is the entirety thereof that distinguishes the determinate object.[14]

 

As correctly noted by the trial court and the Court of Appeals, the sale between petitioner and

respondent Buriol involving the latters property is one made for a lump sum. The Deed of Absolute Sale shows

that the parties agreed on the purchase price on a predetermined area of five hectares within the specified

boundaries and not based on a particular rate per area. In accordance with Article 1542, there shall be no

reduction in the purchase price even if the area delivered to petitioner is less than that stated in the contract. In

the instant case, the area within the boundaries as stated in the contract shall control over the area agreed

upon in the contract. 

The Court rejects petitioners contention that the propertys boundaries as stated in the Deed of Absolute

Sale are superficial and unintelligible and, therefore, cannot prevail over the area stated in the contract. First,

as pointed out by the Court of Appeals, at an ocular inspection prior to the perfection of the contract of sale,

respondent Buriol pointed to petitioner the boundaries of the property. Hence, petitioner gained a fair estimate

of the area of the property sold to him. Second, petitioner cannot now assail the contents of the Deed of

Absolute Sale, particularly the description of the boundaries of the property, because petitioners subscription to

the Deed of Absolute Sale indicates his assent to the correct description of the boundaries of the property. 

Petitioner also asserts that respondent Buriol is guilty of misleading petitioner into believing that the

latter was buying five hectares when he knew prior to the sale that he owned only four hectares. The review of

the circumstances of the alleged misrepresentation is factual and, therefore, beyond the province of the Court.

Besides, this issue had already been raised before and passed upon by the trial court and the Court of

Appeals. The factual finding of the courts below that no sufficient evidence supports petitioners allegation of

misrepresentation is binding on the Court. 

The Court of Appeals reversed the trial courts dismissal of respondents Turatello and Sanis

counterclaim for moral and exemplary damages, attorneys fees and litigation expenses. In awarding moral

damages in the amount of P100,000 in favor of Turatello and Sani, the Court of Appeals justified the award to

alleviate the suffering caused by petitioners unfounded civil action. The filing alone of a civil action should not

be a ground for an award of moral damages in the same way that a clearly unfounded civil action is not among

the grounds for moral damages.[15]

 

Exemplary or corrective damages are imposed, by way of example or correction for the public good, in

addition to the moral, temperate, liquidated or compensatory damages.[16] With the deletion of the award for

moral damages, there is no basis for the award of exemplary damages. 

WHEREFORE, the instant petition for review on certiorari is GRANTED in PART. The Court of

Appeals Decision in CA-G.R. CV No. 38854 is AFFIRMED with the MODIFICATION that the award of moral

and exemplary damages is DELETED. 

SO ORDERED.

  

THIRD DIVISION  

SPOUSES MARIO ONG AND MARIA CARMELITA ONG, and DEMETRIO VERZANO,Petitioners,   - versus - 

SPOUSES ERGELIA OLASIMAN and LEONARDO OLASIMAN,Respondents.

G.R. No. 162045 Present: QUISUMBING, J., Chairperson,*

CARPIO, Acting Chairperson,CARPIO MORALES, andTINGA, JJ. Promulgated: March 28, 2006

x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x 

D E C I S I O N 

CARPIO MORALES, J.: 

By Deed of Sale dated June 1, 1992, Paula Verzano (Paula) sold an unregistered parcel of land

covered by Tax Declaration No. 18-270-A[1] in her name to her niece Bernandita Verzano-Matugas

(Bernandita)-daughter of her brother Isebero.[2] The land was particularly described as:

 A parcel of land, covered by Tax Dec. No. 18-270-A, situated at Mampas, Valencia,

Negros Oriental, bounded on the North by Crisanta Abequibel, 62.00 m.; on the East by Victoria Verzano, 90.00 m.; on the South by Demetrio Abante, 62.00 m.; and, on the West by Vicente Darong, 90.00 m., containing an area of .5518 square meters, more or less. x x x[3]

A road traversed the land, dividing it into two lots: Lot 4080, Cad. 903, with an area of approximately 3,624 sq.

m., covered by Tax Declaration No. 20-020-0174;[4] and Lot 4091, Cad. 903, with an area of approximately 506

sq. m., covered by Tax Declaration No. 20-020-0214.[5]

 

Bernandita took initial steps to register the land but failed to complete the registration process.[6]

 

On November 26, 1992, Paula died single and without issue.[7] She was survived by her siblings herein

petitioner Demetrio Verzano (Verzano), Victoria Verzano, and the children of her deceased brother Isebero

Verzano, namely Isebero Verzano, Jr.,[8] Epifanio Verzano, Bernandita and Estrella Verzano.[9]

 

On November 22, 1995, Verzano executed a public document entitled Extrajudicial Settlement by Sole

Heir and Sale[10] wherein he adjudicated exclusively unto himself Lot 4080, Cad. 903 (the questioned lot) and

sold it to petitioner Carmelita Ong (Carmelita). Carmelita subsequently caused the cancellation of Tax

Declaration No. 20-020-0174 covering the questioned lot and the issuance of Tax Declaration No. 96-020-

0316[11] in her own name.

 

On February 5, 1996, Bernandita, by Deed of Sale of even date, [12] sold the questioned lot to

respondents spouses Ergelia Olasiman and Leonardo Olasiman.

 

On November 28, 1997, respondents filed a Complaint[13] against petitioners, for annulment of the

Extrajudicial Settlement by Sole Heir and Sale, quieting of title, and damages before the Regional Trial Court

(RTC) of Dumaguete City. They alleged, inter alia, that they, through their predecessors-in-interest, have been

in actual, continuous and adverse possession of the questioned lot since time immemorial until mid-February

1996 when petitioners spouses Ong disturbed them in their possession by fencing the same; [14] and petitioner

Verzano executed the Extrajudicial Settlement by Sole Heir and Sale fraudulently.

 

In their Answer (with Affirmative Defenses and Compulsory Counterclaim), [15] petitioners alleged that

respondents, not being co-heirs, are not the real parties in interest;[16] and the RTC has no jurisdiction over the

case as their cause of action is more of forcible entry.[17]

 

Applying Article 1544 of the Civil Code which provides:

 Article 1544. If the same thing should have been sold to different vendees, the

ownership shall be transferred to the person who may have first taken possession thereof in good faith, if it should be movable property.

 Should it be immovable property, the ownership shall belong to the person acquiring it

who in good faith first recorded it in the Registry of Property. Should there be no inscription, the ownership shall pertain to the person who in good

faith was first in the possession; and, in the absence thereof, to the person who presents the oldest title, provided there is good faith, (Underscoring supplied)

 

 

and finding petitioners spouses Ong to be buyers in good faith and the first to possess the questioned lot,

Branch 41 of the Dumaguete City RTC dismissed respondents complaint.

 Defendant Demetrio Verzano is a compulsory heir [sic] of the deceased Paula Verzano

and as the Tax Declaration under the name of the latter had not been cancelled, coupled with the fact that he continued to be in possession of the property in question, defendant Verzano had every reason to believe that the title to the property passed on to him upon Paulas death by operation of law. He had continued paying realty taxes thereon which plaintiffs, thru their predecessor-in-interest had not even bothered to pay. Hence, when defendant Maria Carmelita Ong had established defendant Verzanos relationship with the registered owner [ sic ] of the property and thereafter secured clearances from the Provincial Agrarian Reform Office, the BIR, the Municipal Agrarian Reform Office, and the Community Environment and Natural Resources Office II, and caused the cancellation of the Tax Declaration in the name of Paula Verzano, and filed an application for free patent, she was no doubt a   buyer in good faith .  Further   being first in the possession of the property, defendant Maria Carmelita Ong must necessarily be preferred   as neither of the parties have inscribed their respective Deeds of Sale with the Register of Deeds.

 In the case of Vda. De Laig v. Court of Appeals, 82 SCRA 294, it was held: 

Where there was no proper inscription of two deeds of sale of the same land, the vendee who in good faith was first in possession will be preferred. 

Plaintiffs have not shown an iota of proof that they were first in possession of the property as vendees thereof. Plaintiffs predecessor-in-interest, Bernandita Matugas contends that her caretaker, Fidela Darong, cultivated the land in question. However, the Agricultural Leasehold Contract shows that Darong cultivated the same as a lessee of the questioned property and not as an agent or caretaker of the buyer thereof. Had plaintiffs Olasimans made further inquiries, they would have known that as early as 23 November 1995, defendant Maria Carmelita Ong had filed her notice and application for free patent. Hence, they were buyers in bad faith.

 On the other hand, defendant Maria Carmelita Ong has shown that she had fenced the

property and that per certifications of the MARO, the said property has not been cultivated nor tenanted. Between a bare allegation of possession by plaintiffs and a certification from the MARO that the property is untenanted, the latter is given more credence on the presumption that its officers acted in the performance of its duties. Hence, the Contract of Sale executed by Demetrio Verzano in favor of Maria Carmelita Ong should be given effect.

 Therefore, it becomes unnecessary to discuss the other issues as without ownership, an

action may not be brought to remove such cloud or to quiet title. [18] (Underscoring in the original; emphasis supplied)

 

 

On appeal by respondents, the Court of Appeals reversed the decision of the trial court by the assailed

Decision[19] of October 14, 2003. It found the Extrajudicial Settlement by Sole Heir and Sale to be void not only

because Verzano was not the only heir when he executed the same document, [20] but also because when the

deed, by which the property in question was sold by Demetrio Verzano to appellees Carmelita and Mario Ong,

was executed on November 22, 1995, the original owner, PaulaVerzano, had already disposed of the same in

favor of her niece, Bernandita Matugas, on June 1, 1992, by virtue of a Deed of Sale. (Underscoring supplied)

 

The appellate court thus concluded that the second sale was invalid and of no effect because Demetrio

Verzano had nothing to convey   and transfer to appellees at the time of the second sale.[21] (Emphasis and

underscoring supplied)

 

The trial courts application of Article 1544 of the Civil Code was erroneous, held the appellate court,

because the case does not involve a double sale. For respondents bought the questioned

lot from Bernandita to whom it was sold by the original owner Paula, whereas petitioners bought

it from Verzano whose claim to ownership arose from the Extrajudicial Settlement by Sole Heir and Sale.

 

The Court of Appeals thus disposed:

 WHEREFORE, the Decision appealed from is hereby REVERSED and SET ASIDE and

another one entered (1) declaring as null and void the Deed of Extra-judicial Settlement by Sole Heir and Sale and Tax Declaration No. 96-20-020-0316 issued in the name of appellees; (2) declaring and restoring the appellants as the true, rightful and legal owners of Lot No. 4080, Cad 903, situated in Mampas, Valencia, Negros Oriental; and (3) ordering appellees to vacate the said property thirty (30) days from receipt of this decision.

 SO ORDERED.[22] (Underscoring supplied) 

 

Their Motion for Reconsideration[23] having been denied by the Court of Appeals by a Resolution[24] of

February 9, 2004, petitioners filed the petition[25] at bar.

 

The petition fails.

 

When Paula sold to Bernandita by Deed of Absolute Sale dated June 1, 1992 the parcel of land of

which the questioned lot formed part, ownership thereof was transferred to the latter in accordance with Article

1496 of the Civil Code reading:

 ART. 1496. The ownership of the thing sold is acquired by the vendee from the moment

it is delivered to him in any of the ways specified in articles 1497 to 1501, or in any other manner signifying an agreement that the possession is transferred from the vendor to the vendee,

 

 

in relation to Article 1498 of the Civil Code reading:

 ART. 1498. When the sale is made through a public instrument, the execution thereof shall be equivalent to the delivery of the thing which is the object of the contract, if from the deed the contrary does not appear or cannot clearly be inferred. x x x x

The Deed of Absolute Sale in favor of Bernandita contains nothing contrary to an intent to transfer ownership.

 

When Paula died on November 26, 1992, she no longer owned the questioned lot and, therefore, her

brother petitioner Verzano could not have inherited it. The Extrajudicial Settlement by Sole Heir and Sale did

not thus confer upon Verzano ownership of the questioned lot; hence, he could not have conveyed it to

petitioners spouses Ong.

 

Parenthetically, the execution by Verzano of the Extrajudicial Settlement by Sole Heir and Sale is

fraudulent, he having falsely stated therein that his deceased sister Paula left no known debts, neither has she

left any ascendants or descendants or any other heirs, except myself being his [sic] brother[26] despite the

fact that other heirs his sister Victoria and the four children of his deceased brother Isebero were still alive.[27]

 

Petitioners insistence that Article 1544 on double sales should apply does not lie. Article 1544 applies

where the same thing is sold to different vendees by the same vendor. It does not apply where the same thing

is sold to different vendees by different vendors[28] as in the case at bar.

 

Finally, petitioners claim of good faith does not lie too as it is irrelevant:

 [T]he issue of good faith or bad faith of the buyer is relevant only where the subject of the sale is registered land and the purchaser is buying the same from the registered owner whose title to the land is clean xxx in such case the purchaser who relies on the clean title of the registered owner is protected if he is a purchaser in good faith for value. Since the properties in question areunregistered lands, petitioners as subsequent buyers thereof did so at their peril. Their claim of having bought the land in good faith, i.e., without notice that some other person has a right to or interest in the property, would not protect them if it turns out, as it actually did in this case,

that their   seller did not own the property at the time of the sale .[29] (Italics in the original;underscoring supplied) 

 

WHEREFORE, the assailed October 14, 2003 Decision of the Court of Appeals is AFFIRMED. This

Decision is WITHOUT PREJUDICE to the filing of any action which petitioner-spouses Mario Ong and Maria

Carmelita Ong may maintain against their co-petitioner Demetrio Verzano.

 

Costs against petitioners.

 

SO ORDERED.

    FIRST DIVISION

 

 

SPOUSES AVELINO and EXALTACION SALERA,

Petitioners,

 

 

 

 

-versus-

 

 

 

 

SPOUSES CELEDONIO and POLICRONIA RODAJE,

Respondents.

 

G.R. No. 135900

 

 

Present:

 

PUNO, C.J., Chairperson,

SANDOVAL-GUTIERREZ,

CORONA,

AZCUNA, and

GARCIA, JJ.

 

 

Promulgated:

 

August 17, 2007

x-----------------------------------------------------------------------------------------x

  

DECISION 

 

SANDOVAL-GUTIERREZ, J.:

 

 

Challenged in this Petition for Review on Certiorari is the Decision [1] dated October 9, 1998 of the Court

of Appeals (Seventeenth Division) in CA-G.R. CV No. 51480, entitled Spouses Avelino Salera and Exaltacion

Salera, plaintiffs-appellees, v. Spouses Celedonio Rodaje and Policronia Rodaje, defendants-appellants.

On May 7, 1993, spouses Avelino and Exaltacion Salera, now petitioners, filed with the Regional Trial

Court (RTC), Branch 11, Calubian, Leyte, a complaint for quieting of title, docketed as Civil Case No. CN-27,

against spouses Celedonio and Policronia Rodaje, herein respondents. Petitioners alleged that they are the

absolute owners of a parcel of land situated at Basud, San Isidro, Leyte with an area of 448.98 square meters,

more or less. They acquired the property from the heirs of Brigido Tonacao as shown by a Deed of Absolute

Sale executed on June 23, 1986. They had the document registered in the Registry of Deeds of Iloilo on July 1,

1986. When they asked the Provincial Assessor to declare the property under their names for taxation

purposes, they found that Tax Declaration No. 2994 (R-5) in the name of Brigido was already cancelled and

another one, Tax Declaration No. 2408, was issued in the names of respondents. Petitioners further alleged

that they have been in possession of the property and the house they built thereon because they had paid the

purchase price even before the execution of the deed of sale.

In their answer to the complaint, respondents claimed that they are the absolute owners of the same

property. They acquired it from Catalino Tonacao, the father of Brigido, in a Deed of Absolute Sale dated June

6, 1986. The sale was registered in the Registry of Deeds of Leyte on June 10, 1986 and Tax Declaration No.

2408 was issued in their names. Prior thereto, or on January 11, 1984, they had a verbal contract of sale with

Catalino. They paid him P1,000.00 as downpayment. They agreed that the balance ofP4,000.00 shall be paid

upon execution of the deed of sale. Since then, they have been exercising their right of ownership over the

property and the building constructed thereon peacefully, publicly, adversely and continuously. Apart from

being the first registrants, they are buyers in good faith.

On July 17, 1995, the RTC rendered a Decision declaring petitioners the rightful and legal owners of

the property, thus:

In view of all the foregoing, judgment is hereby rendered in favor of the plaintiffs and against the

defendants, declaring the plaintiffs the rightful and legal owners of the property described in

paragraph 3 of the complaint; declaring as null and void the sale (Exhibits 1 and 2) made by

Catalino Tonacao to herein defendants for lack of capacity to sell; and ordering the cancellation

of Tax Declaration No. 2408 issued in favor of Sps. Celedonio Rodaje and Policronia Rodaje by

the Provincial Assessor of Leyte and directing defendants to pay the costs.

 

 

 

In declaring null and void the Deed of Absolute Sale between Catalino and herein respondents and

ordering the cancellation of Tax Declaration No. 2408 issued in the latters names, the RTC ratiocinated as

follows:

Assessing the validity of the sale in favor of plaintiffs by the heirs of Brigido

Tonacao vis--vis the sale by Catalino Tonacao, father of Brigido Tonacao, to the defendants of

the property, the Court believes that the former must survive over the latter.

To begin with, defendants admit that Brigido Tonacao was the declared owner of the

land in question before defendants purchased such land from Catalino Tonacao. Defendants

also admit that the wife and children of Brigido Tonacao indeed partitioned the land in question

extrajudicially among themselves and that such wife and children of Brigido Tonacao sold the

land to plaintiffs although defendants question the capacity of some children to sell the property

for being minors.

These admissions tend to establish ownership of the land in question by Brigido

Tonacao. Upon his death, therefore, the property subject of the case at bar would by operation

of law on succession, pass to the heirs of Brigido Tonacao, namely: to the surviving spouse and

his children.

Catalino Tonacao, the father of the deceased Brigido Tonacao, is excluded by operation

of law by the presence of the compulsory heirs who are the children of Brigido

Tonacao.Whatever sale Catalino Tonacao may have executed in favor of the defendants is a

sale by one who has no legal personality or authority to do so. Thus, the sale by Catalino

Tonacao to defendants is invalidated by his lack of personality to execute such sale, which

conferred no rights to the defendants nor did it impair the right of Brigido Tonacaos heirs to

dispose of their inheritance in favor of the plaintiffs.

 

On appeal, the Court of Appeals, in a Decision dated October 9, 1998, reversed and set aside the trial

courts Decision, declaring respondents the true and lawful owners of the property in dispute, thus:

WHEREFORE, the decision, dated July 17, 1995, of the Regional Trial Court (Branch 11) in

Calubian, Leyte is hereby REVERSED AND SET ASIDE. Therewithal, another judgment is

rendered declaring the order of the trial court null and void, hereby: declaring the defendants-

appellants to have the superior right to the property in question and to be the true and lawful

owners thereof; directing the Register of Deeds of Leyte to cancel the Deed of Absolute Sale,

dated June 23, 1986, in favor of the plaintiffs-appellees and to reinstate the Deed of Absolute

Sale in favor of the defendants-appellants and Tax Declaration No. 2408 be issued in favor of

spouses Celedonio Rodaje and Policronia Rodaje; and directing the plaintiffs-appellees and

other persons claiming rights under them, and residing in the premises of the land in question,

to immediately vacate the same and to remove whatever improvements they had placed in the

premises.No pronouncement as to costs.

 

 

Hence, this petition.

The issue before us is which of the two contracts of sale is valid.

Petitioners contend that the sale between Catalino and respondents is void because the former was not

the owner of the lot, hence had no legal capacity to sue. The true owner was Brigido as shown by Tax

Declaration No. 2994 (R-5) in his name. Thus, his spouse and children, being his successors-in-interest, could

validly sell the property to them (petitioners).

On the other hand, respondents insist that they are buyers in good faith. They bought the property, had

the deed of sale registered, and took possession thereof ahead ofpetitioners. They also constructed a house

thereon which they used as a store. They paid the real estate taxes corresponding to the period from 1974 up

to 1993.

The Court of Appeals, in upholding the validity of the sale in favor of respondents, relied on Article 1544

of the Civil Code on double sale, thus:

As between two purchasers, the one who registered the sale in his favor has a preferred right

over the other who has not registered his title, even if the latter is in actual possession of the

immovable property (Taedo v. Court of Appeals, 252 SCRA 80). A fortiori the defendants-

appellants have a superior right over the contested property inasmuch as they have both actual

possession and prior registration of the conveyance (Exhibit 2; page 6, TSN, August 9, 1994;

page 5, TSN, August 23, 1994). Dominium a possessione cepisse dicitur. Right is said to have

its beginning from possession.

The applicable provision of the New Civil Code provides:

Art. 1544. If the same thing should have been sold to different vendees, the ownership shall be transferred to the person who may have taken possession thereof in good faith, if it should be movable property.

Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith first recorded it in the Registry of Property.

Should there be no inscription, the ownership shall pertain to the person who in good faith was first in the possession; and, in the absence thereof, to the person who presents the oldest title, provided there is good faith.

x x x

Since the controversy involves two deeds of sale over the same property, Article 1544

properly applies thereto (Vda. De Alcantara v. Court of Appeals, 252 SCRA 457). Following the

above-quoted provision, the court a quo was not justified in according preferential rights to the

plaintiffs-appellees, who had registered the sale in their favor later, as against the defendants-

appellants.

 

The Court of Appeals is wrong. Article 1544 of the Civil Code contemplates a case of double sale or

multiple sales by a single vendor. More specifically, it covers a situation where a single vendor sold one and

the same immovable property to two or more buyers.[2] It cannot be invoked where the two different contracts

of sale are made by two different persons, one of them not being the owner of the property sold. [3] In the instant

case, the property was sold by two different vendors to different purchasers. The first sale was between

Catalino and herein respondents, while the second was between Brigidos heirs and herein petitioners.

Settled is the principle that this Court is not a trier of facts. In Gabriel v. Mabanta[4] we said that (t)his

rule, however, is not an iron-clad rule. One of the recognized exceptions is when the findings of fact of the

Court of Appeals are contrary to those of the trial court, as in this case.

Here, the trial court which had the opportunity to observe the demeanor of the parties and first to

consider the evidence submitted by them, concluded that respondents are not purchasers in good faith, thus:

The court finds no merit in the claim of good faith by the defendants in purchasing the

land in question. Exhibit 14, which is Tax Declaration No. 2408, shows that such declaration is a

transfer from Tax Declaration No. 2994 (R-5) in the name of Brigido Tonacao. Defendants,

therefore, knew when they bought the property that they were buying the property from Catalino

who is not the registered owner. The Deed of Sale (Exh. 2) showcases defendants bad faith in

that they purchased the property from Catalino Tonacao and Lourdes Tonacao and not from the

declared owner, Brigido Tonacao.

 

In reversing the trial courts findings, the appellate court found, thus:

Since the plaintiffs-appellees had prior knowledge of the sale of the questioned property

to the defendants-appellantsand even recognized and respected the latters possession

thereofthey acted with gross and evident bad faith in perfecting a contract of sale in their

favor. Accordingly, since it has been proven that the defendants-appellants were the anterior

possessors in good faith, ownership of the questioned property vested in them by sheer force of

law. Besides, the defendants-appellants subsequently registered the deed of sale in their favor

on June 10, 1986. For all intents and purposes, they were the first to register the deed of

conveyance. Irrefragably, since they were the first vendees, their registration enjoyed the

presumption of good faith.

 

Good faith is something internal. Actually, it is a question of intention. In ascertaining ones intention,

this Court must rely on the evidence of ones conduct and outward acts.[5] Good faith, or want of it, is capable

of being ascertained only from the acts of one claiming its presence, for it is a condition of the mind which can

be judged by actual or fancied tokens or signs.[6] Good faith consists in the possessors belief that the person

from whom he received the thing was the owner of the same and could convey his title.Good faith, while it is

always to be presumed in the absence of proof to the contrary, requires a well founded belief that the person

from whom title was received was himself the owner of the land, with the right to convey it. There is good faith

where there is an honest intention to abstain from taking any unconscientious advantage of another.[7]

Contrastingly, in Magat, Jr. v. Court of Appeals,[8] the Court explained that [b]ad faith does not simply

connote bad judgment or negligence. It imports a dishonest purpose or some moral obliquity and conscious

doing of wrong. It means a breach of a known duty through some motive or interest or ill will that partakes of

the nature of fraud.In Arenas v. Court of Appeals,[9] the Court held that the determination of whether one acted

in bad faith is evidentiary in nature. Thus, [s]uch acts (of bad faith) must be substantiated by evidence. Indeed,

the unbroken jurisprudence is that [b]ad faith under the law cannot be presumed; it must be established by

clear and convincing evidence.

Evidence submitted to the court, oral and documentary, established that respondents knew beforehand

that the property was declared in the name of Brigido Tonacao for taxation purposes. Respondent Celedonio

Rodaje testified as follows:

Q: Mr. Celedonio Rodaje, you said the property you bought in this case was bought from

Catalino Tonacao?

A: It was from Catalino Tonacao.

 

Q: And the Deed of Absolute Sale was executed in the year 1986?

A: Yes.

Q: It was likewise Catalino Tonacao who signed and executed the Deed of Absolute Sale?

A: Yes, including his wife.

Q: Before you purchased this property, did you find for yourself the ownership of the property

you were supposed to buy?

A: Yes, I did.

Q: Did Catalino Tonacao presented to you a document showing that he really owns the

property?

A: The Tax Declaration of his son Brigido Tonacao signed by Catalino Tonacao.

Q: It was presented to you, the Tax Declaration declared in the name of Brigido Tonacao?

A: It was presented to me.[10]

 

Respondents claim that they have been in possession of the lot even before the execution of the Deed

of Absolute Sale on June 6, 1986. Catalino allowed them to take possession after they made an initial payment

on January 11, 1984. They constructed a house thereon which they use as a store. They are the ones paying

the electric bills and realty taxes.

However, a perusal of the records of the case shows that petitioners are the ones in prior possession of

the property. After they purchased it from the heirs of Brigido in 1981, they started building a house

thereon. The construction was completed in 1984. The house was declared in the name of their daughter Aida

Salera[11] under Tax Declaration No. 4403 issued on October 11, 1984.[12] She occupied the house and used it

as a sari-sari store until 1985 when she had to close it because business was bad. [13]Even the electrical

connection of the house was registered in her name.[14] In fact, respondent Celedonio Rodaje testified that the

electric bills are in the name of Aida Salera,[15] thus:

Q: Aida Salera testified that she is the owner of the house, plaintiffs daughter in this case. She

presented the electric bills in her name, what can you say to that?

A: The electric bills are in her name, but I was the one paying.

 

Q: How did it come that the electric bills are in her name?

A: It was a time when the house was newly constructed where she lived for a while.

 

Q: You said you were the one paying her electric bills, do you have any evidence to prove your

allegation?

A: I have.

 

Q: What is your proof?

A: A certification from the electric bill collector that I have paid the electric bills from the

beginning.

 

 

 

The certification referred to by respondent Celedonio states that Mr. Celedonio C. Rodaje, Jr. is the one

paying the electric bills of Aida Salera whose dwelling unit is situated in barangay Basud, San

Isidro, Leyte since 1986. The certification clearly shows that the house is owned by Aida Salera and that

respondents started paying the electric bills only in 1986.[16]

Respondent Celedonio Rodaje likewise testified that he paid the realty taxes for the lot from 1974 to

1984 up to the present.[17] However, it appears from his Realty Tax Clearance that he paid only in 1984 and

that the payment was in lump sum.[18]

As stated earlier, respondents knew, prior to the sale to them, that the lot was declared for taxation

purposes under the name of Brigido. Thus, respondents should have been wary in buying the property. Any lot

buyer is expected to be vigilant, exercising utmost care in determining whether the seller is the true owner of

the property and whether there are other claimants. There is no indication from the record that respondents

first determined the status of the lot.

While tax declarations are not conclusive proofs of ownership, however, they are good indicia of

possession in the concept of owner, for no one in his right mind would be paying taxes for a property that is not

in his actual or at least constructive possession.[19] Hence, as between Brigido and Catalino, the former had

better right to the property. In other words, Catalino, not being the owner or possessor, could not validly sell the

lot to respondents.

The Court is convinced that respondents had knowledge that the disputed property was previously sold

to petitioners by Brigidos heirs. Obviously, aware that the sale to petitioners was not registered, they

purchased the property and have the sale registered ahead of petitioners, who although in possession, failed

to have their contract of sale registered immediately in the Registry of Deeds.

WHEREFORE, the petition is GRANTED. The assailed Decision of the Court of Appeals in CA-G.R. CV

No. 51480 is REVERSED and the Decision of the trial court is REINSTATED.

SO ORDERED.

  

 SECOND DIVISION

CARMELITA FUDOT, G.R. No. 171008Petitioner,Present: QUISUMBING, J.,- versus - Chairperson,CARPIO,CARPIO MORALES,

TINGA, andCATTLEYA LAND, INC., VELASCO, JR., JJ.Respondent.Promulgated:September 13, 2007 x-----------------------------------------------------------------------------------x  

D E C I S I O N 

TINGA, J.: 

For resolution is a petition that seeks to nullify the Decision[1] and Resolution[2] of the Court of Appeals dated 28

April 2005 and 11 January 2006, respectively, in C.A.G.R. CV No. 73025 which declared respondent as having

a better right over a parcel of land located in Doljo, Panglao, Bohol.

 

 

The facts, as culled from the records, follow.

 

Sometime in July 1992, Cattleya Land, Inc. (hereinafter referred to as respondent) asked someone to check,

on its behalf, the titles of nine (9) lots, the subject land included, which it intended to buy from the spouses

Troadio and Asuncion Tecson. Finding no defect on the titles, respondent purchased the nine lots through a

Deed of Conditional Sale on 6 November 1992. Subsequently, on 30 August 1993, respondent and the

Tecsons executed a Deed of Absolute Sale over the same properties. The Deed of Conditional Sale and the

Deed of Absolute Sale were registered with the Register of Deeds on 06 November 1992 and 04 October

1993, respectively.[3] The Register of Deeds, Atty. Narciso dela Serna, refused to actually annotate the deed of

sale on the titles because of the existing notice of attachment in connection with Civil Case No. 3399 pending

before the Regional Trial Court of Bohol.[4] The attachment was eventually cancelled by virtue of a compromise

agreement between the Tecsons and their attaching creditor which was brokered by respondent. Titles to six

(6) of the nine (9) lots were issued, but the Register of Deeds refused to issue titles to the remaining three (3)

lots , because the titles covering the same were still unaccounted for.

On 23 January 1995, petitioner presented for registration before the Register of Deeds the owners copy of the

title of the subject property, together with the deed of sale purportedly executed by the Tecsons in favor of

petitioner on 19 December 1986. On the following day, respondent sent a letter of protest/opposition to

petitioners application.Much to its surprise, respondent learned that the Register of Deeds had already

registered the deed of sale in favor of petitioner and issued a new title in her name.[5]

 

On 5 May 1995, respondent filed its Complaint[6] for Quieting Of Title &/Or Recovery Of Ownership,

Cancellation Of Title With Damages before the Regional Trial Court ofTagbilaran City.[7] On 26 June

1995, Asuncion filed a complaint-in-intervention, claiming that she never signed any deed of sale covering any

part of their conjugal property in favor of petitioner. She averred that her signature in petitioners deed of sale

was forged thus, said deed should be declared null and void. [8] She also claimed that she has discovered only

recently that there was an amorous relationship between her husband and petitioner.[9]

 

Petitioner, for her part, alleged in her answer[10] that the spouses Tecson had sold to her the subject

property for P20,000.00 and delivered to her the owners copy of the title on 26 December 1986. She claims

that she subsequently presented the said title to the Register of Deeds but the latter refused to register the

same because the property was still under attachment.

 

On 31 October 2001, the trial court rendered its decision:[11] (i) quieting the title or ownership of the subject land

in favor of respondent; (ii) declaring the deed of sale between petitioner and spouses Tecson invalid; (iii)

ordering the registration of the subject land in favor of respondent; (iv) dismissing respondents claim for

damages against the Register of Deeds for insufficiency of evidence; (v) dismissing Asuncions claim for

damages against petitioner for lack of factual basis; and (vi) dismissing petitioners counterclaim for lack of the

required preponderance of evidence.[12]

According to the trial court, respondent had recorded in good faith the deed of sale in its favor ahead of

petitioner. Moreover, based on Asuncions convincing and unrebutted testimony, the trial court concluded that

the purported signature of Asuncion in the deed of sale in favor of petitioner was forged, thereby rendering the

sale void.[13]

 

Petitioner sought recourse to the Court of Appeals, arguing in the main that the rule on double sale was

applicable to the case. The appellate court, however, dismissed her appeal, holding that there was no double

sale because the alleged sale to petitioner was null and void in view of the forgery of Asuncions purported

signature in the deed. The appellate court noted that petitioner failed to rebut Asuncions testimony despite

opportunities to do so.[14] Moreover, even if there was double sale, according to the appellate court,

respondents claim would still prevail since it was able to register the second sale in its favor in good faith, had

made inquiries before it purchased the lots, and was informed that the titles were free from encumbrance

except the attachment on the property due to Civil Case No. 3399.[15]

 

Petitioner sought reconsideration of the decision but the Court of Appeals denied her motion for

reconsideration for lack of merit.[16]

 

Petitioner thus presents before this Court the following issues for resolution: 

I.          

BETWEEN 2 BUYERS OF REGISTERED LAND, WHO HAS THE BETTER RIGHT-IS IT THE FIRST BUYER WHO WAS GIVEN THE OWNERS DUPLICATE TCT TOGETHER WITH A DEED OF SALE IN 1986, OR THE SECOND BUYER IN 1992 WITH ONLY A DEED OF SALE. 

II.IS A BUYER OF REGISTERED LAND WHO DID NOT DEMAND OR REQUIRE THE DELIVERY OF THE OWNERS DUPLICATE TCT A BUYER IN GOOD FAITH. 

III. 

II.     IN SUBSEQUENT REGISTRATION OF REGISTERED LANDS, AS BY SALE, WHICH LAW SHALL GOVERN, ARTICLE 1455 OF CIVIL CODE OR P.D. 1529 OR TORRENSSYSTEM.[17]

 

Petitioner avers that she was the first buyer in good faith and even had in her possession the owners

copy of the title so much so that she was able to register the deed of sale in her favor and caused the issuance

of a new title in her name. She argues that the presentation and surrender of the deed of sale and the owners

copy carried with it the conclusive authority of Asuncion Tecson which cannot be overturned by the latters oral

deposition.[18]

 

Petitioner claims that respondent did not demand nor require delivery of the owners duplicate title from

the spouses Tecson, neither did it investigate the circumstances surrounding the absence of the title. These

indicate respondents knowledge of a defect in the title of the spouses and, thus, petitioner concludes that

respondent was not a buyer in good faith.[19]

 

Finally, petitioner insists that the applicable law in this case is P.D. No. 1529, a special law dealing

precisely with the registration of registered lands or any subsequent sale thereof, and not Article 1544 of the

Civil Code which deals with immovable property not covered by the Torrens System.[20]

 

Respondent points out, on one hand, that petitioners first two issues which present an inquiry on who

has a better right or which one is a buyer in good faith, are questions of fact not proper in a petition for review.

The third issue, on the other hand, is ostensibly a question of law which had been unsuccessfully raised below.

[21]

 

Respondent maintains that there is no room to speak of petitioner as a buyer in good faith since she

was never a buyer in the first place, as her claim is based on a null and void deed of sale, so the court  a

quo found. Respondent also asserts that its status as a buyer in good faith was established and confirmed

in the proceedings before the two courts below.[22]

 

Lastly, respondent argues that P.D. No. 1529 finds no application in the instant case. The production of

the owners duplicate certificate x x x being conclusive authority from the registered owner is only true as

between the registration applicant and the register of deeds concerned, but never to third parties. Such

conclusive authority, respondent adds, is only for the Register of Deeds to enter a new certificate or to make a

memorandum of registration in accordance with such instrument. It cannot cure the fatal defect that the

instrument from which such registration was effected is null and void ab initio, respondent concludes.[23]

 

The petition is bereft of merit.

 

Petitioners arguments, which rest on the assumption that there was a double sale, must fail.

 

In the first place, there is no double sale to speak of. Art. 1544 of the Civil Code,[24] which provides the rule on

double sale, applies only to a situation where the same property is validly sold to different vendees. In this

case, there is only one sale to advert to, that between the spouses Tecson and respondent.

 

In Remalante v. Tibe,[25] this Court ruled that the Civil Law provision on double sale is not applicable where

there is only one valid sale, the previous sale having been found to be fraudulent. Likewise, in Espiritu and

Apostol v. Valerio,[26] where the same parcel of land was purportedly sold to two different parties, the Court

held that despite the fact that one deed of sale was registered ahead of the other, Art. 1544 of the Civil Code

will not apply where said deed is found to be a forgery, the result of this being that the right of the other vendee

should prevail.

 

The trial court declared that the sale between the spouses Tecson and petitioner is invalid, as it bears the

forged signature of Asuncion. Said finding is based on the unrebutted testimony of Asuncion and the trial

courts visual analysis and comparison of the signatures in her Complaint-in-Intervention and the purported

deed of sale. This finding was upheld by the Court of Appeals, as it ruled that the purported sale in

petitioners favor is null and void, taking into account Asuncions unrefuted deposition. In particular, the Court of

Appeals noted petitioners failure to attend the taking of the oral deposition and to give written interrogatories. In

short, she did not take the necessary steps to rebut Asuncions definitive assertion.

 

The congruence of the wills of the spouses is essential for the valid disposition of conjugal property. [27] Thus,

under Article 166 of the Civil Code[28] which was still in effect on 19 December 1986 when the deed of sale was

purportedly executed, the husband cannot generally alienate or encumber any real property of the conjugal

partnership without the wifes consent.

 

In this case, following Article 173[29] of the Civil Code, on 26 June 1995, or eight and a half years (8 ) after the

purported sale to petitioner, Asuncion filed her Complaint-in-Intervention seeking the nullification thereof, and

while her marriage with Troadio was still subsisting. Both the Court of Appeals and the trial court

found Asuncions signature in the deed of sale to have been forged, and consequently, the deed of sale void for

lack of marital consent. We find no reason to disturb the findings of the trial court and the Court of

Appeals. Findings of fact of lower courts are deemed conclusive and binding upon the Supreme Court subject

to certain exceptions,[30] none of which are present in this case. Besides, it has long been recognized in our

jurisprudence that a forged deed is a nullity and conveys no title.[31]

 

Petitioner argues she has a better right over the property in question, as the holder of and the first one to

present, the owners copy of the title for the issuance of a new TCT. The Court is not persuaded.

 

The act of registration does not validate petitioners otherwise void contract. Registration is a mere ministerial

act by which a deed, contract, or instrument is sought to be inscribed in the records of the Office of the

Register of Deeds and annotated at the back of the certificate of title covering the land subject of the deed,

contract, or instrument.While it operates as a notice of the deed, contract, or instrument to others, it does not

add to its validity nor converts an invalid instrument into a valid one as between the parties,[32] nor amounts to a

declaration by the state that the instrument is a valid and subsisting interest in the land. [33] The registration of

petitioners void deed is not an impediment to a declaration by the courts of its invalidity.

 

Even assuming that there was double sale in this case, petitioner would still not prevail. The pertinent portion

of Art. 1544 provides:

 Art. 1544. x x x.

 Should it be immovable property, the ownership shall belong to the person acquiring it

who in good faith first recorded it in the Registry of Property. x x x x.

 

 

In interpreting this provision, the Court declared that the governing principle is primus tempore, potior jure (first

in time, stronger in right). Knowledge gained by the first buyer of the second sale cannot defeat the first buyers

rights, except where the second buyer registers in good faith the second sale ahead of the first as provided by

the aforequoted provision of the Civil Code. Such knowledge of the first buyer does not bar him from availing of

his rights under the law, among them to register first his purchase as against the second buyer. However,

knowledge gained by the second buyer of the first sale defeats his rights even if he is first to register the

second sale, since such knowledge taints his prior registration with bad faith. [34] It is thus essential, to merit the

protection of Art. 1544, second paragraph, that the second realty buyer must act in good faith in registering his

deed of sale.[35]

We agree with the trial court and the Court of Appeals that respondent was a buyer in good faith, having

purchased the nine (9) lots, including the subject lot, without any notice of a previous sale, but only a notice of

attachment relative to a pending civil case. In fact, in its desire to finally have the title to the properties

transferred in its name, it persuaded the parties in the said case to settle the same so that the notice of

attachment could be cancelled.

 

Relevant to the discussion are the following provisions of P.D. No. 1529: 

Sec. 51. Conveyance and other dealings by registered owner. An owner of registered land may convey, mortgage, lease, charge or otherwise deal with the same in accordance with existing laws. He may use such forms of deeds, mortgages, lease or other voluntary instruments as are sufficient in law. But no deed, mortgage, lease or other voluntary instrument, except a will purporting to convey or affect registered land shall take effect as a conveyance or bind the land, but shall operate only as a contract between the parties and as evidence of authority to the Register of Deeds to make Registration.

The act of registration shall be the operative act to convey or affect the land insofar as third persons are concerned, and in all cases under this Decree, the registration shall be made in the office of the Register of Deeds for the province or city where the land lies. (Emphasis supplied)     Sec. 52. Constructive notice upon registration.Every conveyance, mortgage, lease, lien attachment, order, judgment, instrument or entry affecting registered land shall, if registered, filed or entered in the office of the Register of Deeds for the province or city where the land to which it relates lies, be constructive notice to all persons from the time of such registering, filing or entering.

 

 

It has been held that between two transactions concerning the same parcel of land, the registered transaction

prevails over the earlier unregistered right. The act of registration operates to convey and affect the registered

land so that a bona fide purchaser of such land acquires good title as against a prior transferee, if such prior

transfer was unrecorded.[36] As found by the courts a quo, respondent was able to register its purchase ahead

of petitioner. It will be recalled that respondent was able to register its Deed of Conditional Sale with the

Register of Deeds as early as 6 November 1992, and its Deed of Absolute Sale on 14 October 1993. On the

other hand, petitioner was able to present for registration her deed of sale and owners copy of the title only

on 23 January 1995, or almost nine years after the purported sale. Why it took petitioner nine (9) years to

present the deed and the owners copy, she had no credible explanation; but it is clear that when she finally did,

she already had constructive notice of the deed of sale in respondents favor. Without a doubt, respondent had

acquired a better title to the property.

Finally, anent petitioners claim that P.D. No. 1529 applies to registered lands or any subsequent sale thereof,

while Art. 1544 of the Civil Code applies only to immovable property not covered by the Torrens System,

suffice it to say that this quandary has already been answered by an eminent former member of this

Court, Justice Jose Vitug, who explained that the registration contemplated under Art. 1544 has been held to

refer to registration under P.D. No. 1529, thus:The registration contemplated under Art. 1544 has been held to refer to

registration under Act 496 Land Registration Act (now PD 1529) which considers the act of registration as the operative act that binds the land (see Mediante v. Rosabal, 1 O.G. [12] 900, Garcia v. Rosabal, 73 Phil 694). On lands covered by the Torrens System, the purchaser acquires such rights and interest as they appear in the certificate of title, unaffected by any prior lien or encumbrance not noted therein. The purchaser is not required to explore farther than what the Torrens title, upon its face, indicates. The only exception is where the purchaser has actual knowledge of a flaw or defect in the title of the seller or of such liens or encumbrances which, as to him, is equivalent to registration (see Sec. 39, Act 496; Bernales v. IAC, G.R. 75336, 18 October 1988; Hernandez vs. Sales, 69 Phil 744; Tajonera s. Court of Appeals, L-26677, 27 March 1981) (Emphasis supplied)[37]

 

 

WHEREFORE, the petition is DENIED. The assailed decision and resolution of the Court of Appeals

are affirmed. Costs against petitioner.  

SO ORDERED.

Republic of the PhilippinesSUPREME COURT

Manila

FIRST DIVISION

G.R. No. 166913             October 5, 2007

SPOUSES MARIANO S. TANGLAO and CORAZON M. TANGLAO, petitioners, vs.SPOUSES CORAZON S. PARUNGAO and LORENZO G. PARUNGAO (deceased), substituted by LAWRENCE S. PARUNGAO, MARY CHRISTINE PARUNGAO-CURUTCHET, LORDBERT S. PARUNGAO, LODELBERTO S. PARUNGAO and MA. CECILIA PARUNGAO-HERNANDEZ, respondents.

D E C I S I O N

SANDOVAL-GUTIERREZ, J.:

For our resolution is the instant Petition for Review on Certiorari seeking to reverse the Decision1 of the Court of Appeals (Fifteenth Division) dated January 31, 2005 in CA-G.R. SP No. 78079.

The facts of the case are:

In 1992, spouses Lorenzo and Corazon Parungao, respondents, purchased from Spring Homes Subdivision (Spring Homes) Lot Nos. 1, 2, 3, and 4 with a total area of 486 square meters (sq. m.) at P1,350.00 per sq. m. or a total price of P656,100.00. In addition, they also bought Lot Nos. 7, 8, and 9 with a total area of 457 sq. m. atP1,550.00 per sq. m. or a total price of P708,360.00. All these lots are located at Block VI, Phase II-C, Spring Homes, Barangay Culiat, Calamba City, Laguna. Respondents made a down payment of P536,000.00, leaving a balance of P828,450.00, exclusive of interest.

Sometime in November 1992, respondents introduced improvements on the lots consisting of a concrete perimeter fence with cyclone wires on top, a heavy steel gate, and two fish breeding buildings, all at a cost ofP945,000.00. They also elevated the ground level of the lots by filling them with earth and "adobe."

Under the terms of the Contracts to Sell signed by respondents and Spring Homes, the balance of P828,450.00 was to be paid by them within one year from its execution; and that should they apply for a loan as payment for the balance, they would continue to pay the monthly installment until their obligation is fully paid.

Respondents failed to pay the installments. They also failed to secure a loan because Spring Homes refused to deliver to them the Transfer Certificates of Title (TCTs) covering the lots required in their application for a loan secured by a real estate mortgage. Apparently, respondents had requested Spring Homes to furnish them copies of the Contracts to Sell, the TCTs, receipts of real estate taxes paid, tax declarations, and the survey and vicinity plans of the lots they purchased. However, Roy Madamba, salesman-representative of Spring Homes, gave respondents only copies of the Contracts to Sell. But respondents returned these copies to Spring Homes for correction of the lot numbers and the names of the vendees.

On April 11, 1997, Spring Homes executed two separate Deeds of Absolute Sale in favor of spouses Mariano and Corazon Tanglao, petitioners, wherein the former sold to the latter two lots covered by TCT Nos. T-268566 and T-268572. Hence, the said TCTs were cancelled and in lieu thereof, TCT Nos. T-393365 and T-3377723 were issued in the names of petitioners. It turned out that the lots sold to them were among the lots previously sold to respondents.

In a letter dated September 15, 1997, respondents demanded that Spring Homes deliver to them the corrected Contracts to Sell, as well as the TCTs covering the lots they purchased.

Meanwhile, petitioners took possession of the two lots they bought. They forcibly opened the steel gate as well as the doors of the buildings and entered the premises.

When informed of these events, respondents demanded an explanation from Spring Homes. Bertha Pasic, its treasurer, apologized and promised she would settle the matter with petitioners. However, the controversy was not settled.

On July 15, 1999, respondents filed with the Housing and Land Use Regulatory Board (HLURB), Regional Office No. 1V a complaint for annulment of deed of sale and/or return of investment for the seven (7) lots and

costs of improvements, plus interest and damages, docketed as HLURB Case No. R-1V6-08199-1104. Impleaded as respondents were Spring Homes, Berta Pasic, Felipa Messiah, and petitioners.

Despite notice, Spring Homes, Pasic, and Messiah did not file their respective answers to the complaint, nor did they appear during the hearings.

On October 3, 2000, HLURB Arbiter Gregorio L. Dean rendered a Decision, the dispositive portion of which reads:

WHEREFORE, judgment is hereby rendered:

1. Dismissing the complaint filed against respondents Felipa Messiah and Spouses Tanglao for lack of merit;

2. Ordering respondent Spring Homes to pay complainants:

a) Php536,000.00 by way of refund of payments with 12% interest per annum to commence from August 11, 1999;

b) Php935,000.00 as actual damages; and

c) Php20,000.00 as attorney’s fees..

3. Ordering respondents Spring Homes Subdivision Co., Inc., and Bertha Pasic, jointly and severally, to pay complainant the sum of Php20,000.00 as moral damages and to pay this Board the sum of Php10,000.00 as administrative fine.

IT IS SO ORDERED.

Dissatisfied with the ruling, respondents filed a petition for review with the HLURB Board of Commissioners, docketed as HLURB Case No. REM-A-001211-0272.

On August 24, 2001, the HLURB Board of Commissioners rendered its Judgment reversing the Arbiter’s Decision and granting the petition for review, thus:

WHEREFORE, premises considered, the petition for review is granted. The decision of the office below is set aside and a new decision is rendered as follows:

1. Declaring as valid and subsisting the contract to sell between complainants and respondent Spring Homes;

2. Directing complainants to immediately update their account and directing respondent Spring Homes to accept payment and to deliver title to complainants upon full payment of the purchases price;

3. Declaring as invalid the deed of absolute sale in favor of the spouses Tanglao over the subject lots and directing the cancellation of respondent spouses TCTs Nos. T-268566 and T-268572 of the Registry of Deeds for Calamba, Laguna and its reversion to respondent Spring Homes;

4. Directing respondent Spring Homes to refund to respondent spouses Tanglao all the amounts paid by the latter in connection with the sale of the subject lots to the latter with 12% interest reckoned from the date of the sale;

5. Directing respondent Spring Homes to pay administrative fine of P10,000.00 for unsound business practice.

SO ORDERED.

The HLURB Board of Commissioners found that at the time of the sale of the two lots in question to petitioners, the contracts between respondents and Spring Homes were still subsisting. Moreover, the fence and existing structures erected on the premises should have forewarned petitioners that there are adverse claimants of the two lots.

Petitioners filed a motion for reconsideration, but this was denied by the HLURB Board of Commissioners in a Resolution promulgated on February 22, 2002.

Petitioners then filed an appeal with the Office of the President, docketed as O.P. Case No. 02-C-099. But in its Decision dated March 12, 2003, the Office of the President dismissed their appeal and affirmed the Decision of the HLURB Board of Commissioners.

Petitioners’ motion for reconsideration was also denied by the said Office in its Order dated June 18, 2003.

Eventually, petitioners filed with the Court of Appeals a petition for review under Rule 43 of the 1997 Rules of Civil Procedure, as amended.

On January 31, 2004, the Court of Appeals rendered its Decision dismissing the petition, thus:

WHEREFORE, premises considered, the petition for review is DENIED DUE COURSE and ordered DISMISSED. The Decision dated 12 March 2003 of the Office of the President which affirmed the Decision of the HLURB Board of Commissioners (Third Division) dated 24 August 2001 reversing the 03 October 2000 Decision of Housing and Land Use Arbiter Gerardo L. Dean and the Order dated 18 June 2003 of the Office of the President denying the motion for reconsideration are hereby AFFIRMED. Costs against petitioners Sps. Mariano S. Tanglao and Corazon M. Tanglao.

SO ORDERED.

The Court of Appeals held that there was a perfected contract to sell between respondents and Spring Homes as early as 1992. As this contract was subsisting at the time of the second sale, respondents have a superior right over the lots in question.

The only issue for our resolution is who between the petitioners and respondents have the right of ownership over the two lots in controversy.

The ownership of immovable property sold to two different persons at different times is governed by Article 1544 of the Civil Code,2 which provides:

Art. 1544. If the same thing should have been sold to different vendees, the ownership shall be transferred to the person who may have taken possession thereof in good faith, if it should be movable property.

Should it be immovable property, the ownership shall belong to the person acquiring it who, in good faith, first recorded it in the Registry of Property.

Should there be no inscription, the ownership shall pertain to the person who in good faith was first in possession and, in the absence thereof, to the person who presents the oldest title, provided there is good faith.

In double sales of immovable property, the governing principle is prius tempore, prius jure (first in time, stronger in right). Thus, in Payongayong v. Court of Appeals,3 this Court held that under Article 1544, preferential rights shall be accorded to: (1) the person acquiring it who in good faith first recorded it in the Registry of Property, (2) in default thereof to the person who in good faith was first in possession, and (3) in default thereof, to the person who presents the oldest title, provided there is good faith. In all of these cases, good faith is essential, being the basic premise of the preferential rights granted to the person claiming ownership of the immovable.4

In Occeña v. Esponilla,5 this Court, speaking through then Associate Justice (now Chief Justice) Reynato S. Puno, laid down the following rules in the application of Article 1544: (1) Knowledge by the first buyer of the second sale cannot defeat the first buyer’s rights except when the second buyer first registers in good faith the second sale; and (2) Knowledge gained by the second buyer of the first sale defeats his rights even if he is first to register, since such knowledge taints his registration with bad faith. Differently put, the act of registration by the second buyer must be coupled with good faith, meaning, the registrant must have no knowledge of the defect or lack of title of his vendor or must not have been aware of facts which should put him upon such inquiry and investigation as might be necessary to acquaint him with the defects in the title of his vendor.6

Applying the foregoing doctrines, the pivotal question before us is whether petitioners, the second buyers, are purchasers in good faith.

A purchaser in good faith or innocent purchaser for value is one who buys property and pays a full and fair price for it at the time of the purchase or before any notice of some other person’s claim on or interest in it.7 The burden of proving the status of a purchaser in good faith lies upon him who asserts that status and it is not sufficient to invoke the ordinary presumption of good faith, that is, that everyone is presumed to have acted in good faith.8

In the instant case, the HLURB Arbiter, the HLURB Commission, the Office of the President, and the Court of Appeals found that at the time of the second sale to petitioners by Spring Homes, there were already occupantsand improvements on the two lots in question. These facts should have put petitioners on their guard. Settled is the rule that a buyer of real property in possession of persons other than the seller must be wary and should investigate the rights of those in possession, for without such inquiry the buyer can hardly be regarded as a buyer in good faith and cannot have any right over the property.9

As the petitioners cannot be considered buyers in good faith, they cannot rely upon the indefeasibility of their TCTs in view of the doctrine that the defense of indefeasibility of a torrens title does not extend to transferees who take the certificate of title in bad faith.10

Considering that respondents who, in good faith, were first in possession of the subject lots, we rule that the ownership thereof pertains to them.

WHEREFORE, we DENY the petition. The Decision of the Court of Appeals (Fifteenth Division) dated January 31, 2005 in CA-G.R. SP No. 78079 is AFFIRMED in toto. Costs against the petitioners.

SO ORDERED.

Republic of the PhilippinesSUPREME COURT

Manila

THIRD DIVISION

G.R. No. 169447             February 26, 2007

D’ORO LAND REALTY AND DEVELOPMENT CORPORATION, Petitioner, vs.NILA CLAUNAN, SILVANO1 SALAS, JOBERTO MAGHANO,2 ALFREDO MOMPAR,3 VICENTE GARCIA, EDITHA LAPIZ and HEIRS OF ELEUTERIO MAGHANO, namely: AVELINA, RICARDO, ROMEO, JOBERTO, ROY, LUCRESIA, SUSAN, JOHNNY, CONCHITA, and BEBENA all surnamed MAGHANO, Respondents.

D E C I S I O N

YNARES-SANTIAGO, J.:

This is a petition for review on certiorari of the Decision4 of the Court of Appeals in CA-G.R. CV No. 65522 dated May 31, 2005, which affirmed in toto the Decision5 of the Regional Trial Court of Cagayan De Oro City, Branch 21, in Civil Case No. 93-126 for recovery of possession and damages. Also assailed is the Resolution6 of the Court of Appeals dated August 9, 2005 which denied petitioner’s motion for reconsideration.

The facts of the case are as follows:

Petitioner D’Oro Land Realty and Development Corporation and Lorna, Florencio, Luis and Felomina, all surnamed Regalado ("Regalados"), are registered owners of three parcels of land situated in Barrio Mambato (Agora), Lapasan, Cagayan de Oro City. The lots were originally owned by Chacon Enterprises Inc. as evidenced by Original Certificate of Title (OCT) No. P-47 issued on July 18, 1956.7 Sometime in the early 1990’s, the lots were sold to petitioner and the Regalados. Thus, on September 9, 1992, Transfer Certificate of Title (TCT) Nos. T-698888 and T-695259 were issued in the name of petitioner for Lots 2-A and 2-B while the Regalados were issued TCT No. T-6952610 for Lot 2-C. Petitioner later purchased Lot 2-C from the Regalados.

Thereafter, petitioner caused a relocation survey to be conducted and confirmed that there were about 34 houses sporadically erected on the lots. Apparently, certain individuals surreptitiously entered the properties and introduced improvements thereon shortly after the opening of the nearby Agora Public Market. After demands to vacate went unheeded, petitioner filed an action for recovery of possession and damages against more than 50 individuals who refused to surrender possession of the lots. The case was docketed as Civil Case No. 93-126 and raffled to Branch 21 of the Regional Trial Court of Cagayan De Oro City.

In its Complaint,11 petitioner prayed that the defendants, their assigns and other persons acting in their behalf, be ordered to vacate the lots and pay a monthly rental of P100.00 from the time they occupied the property until they vacate the same. Petitioner also prayed for the award of attorney’s fees as well as litigation expenses and costs.

Of the more than 50 defendants, only the following filed an Answer12 within the reglementary period: Eleuterio Manghano, Joberto Manghano, Siliano Salas, Alfredo Mompar, Virgilio Lapiz, Vicente Garcia and Mila13 Claunan. The other defendants belatedly filed their answer to the complaint and were thus declared in default.

Respondents alleged that they entered the lots between the years 1970 to 1982; that their occupation of the lots has been continuous, undisturbed, public and adverse and has therefore ripened into ownership; that whatever rights petitioner had over the lots were barred by laches; that they need not pay any rent and must instead be awarded attorney’s fees, exemplary and moral damages as well as litigation expenses and costs.

In support of their claim, respondents presented a Certification14 issued on June 11, 1984 by Forest Guards Conrado Pagutayao and Marcelo Virtudazo, and approved by District Forester Primitivo Galinato Jr., that the lots were alienable and disposable land of the State. According to respondents, the lots were marshy, swampy, surrounded by "piyapi" trees and without improvements when they occupied the same.

In due course, the trial court rendered judgment on September 21, 1998, as follows:

WHEREFORE, the complaint is hereby dismissed as regards defendants Joberto Manghano, Siliano Salas, Alfredo Mompar, Virgilio Lapiz, Vicente Garcia, Nila Claunan and deceased Defendant Eleuterio Manghano,

represented by his heirs who duly substituted him and declares their possessions legal, without pronouncement as to the counterclaim, defendants having failed to introduce evidence in support of said claim.

Defaulted defendants who by reason of their default were unable to introduce evidence similar to the aforementioned defendants evidence are hereby ordered ejected and to pay plaintiffs proportionately the following:

Attorney’s fees P 30,000.00

Actual damages P 10,000.00

Rental at each month from 1980

until they are ejected P 100.00

And to pay the costs.

SO ORDERED.15

The trial court held that while respondents could not acquire title to the registered lots in derogation of that of petitioner through prescription, the latter’s claim was nonetheless barred by laches. There was no reason for petitioner and its predecessor not to have knowledge of respondents’ possession of the lots as the same was public and adverse. As such, the failure of petitioner and its predecessor to assert its right of ownership over the lots within a reasonable length of time necessarily barred its claim against respondents.

The trial court also faulted petitioner for not making the necessary inquiries when it bought the disputed lots from Chacon Enterprises, Inc. in 1990. According to the trial court, petitioner should have investigated the nature of respondents’ possession before it purchased the lots from the original owner. Having failed to do so, petitioner must be deemed a buyer in bad faith under the principle of caveat emptor.

Petitioner appealed to the Court of Appeals which affirmed the trial court’s decision in toto. Hence, upon denial16of its motion for reconsideration,17 petitioner filed the instant petition for review under Rule 45 of the Rules of Court.

Petitioner mainly contends that laches could not bar its claim over the subject lots since respondents had no colorable title or any valid claim of ownership to it. Respondents are mere squatters whose possession of the lots, no matter how long, could not prevail over petitioner’s certificate of title. At any rate, respondents’ length of possession does not even meet jurisprudential standards for laches to set in.

The petition is impressed with merit.

At the outset, it must be stressed that this Court is not a trier of facts and would not normally undertake a re-examination of the evidence presented by the contending parties during the trial of the case except for compelling reasons. Factual findings of the trial court and the Court of Appeals, especially when these concur, are ordinarily binding on this Court, subject to the following well-recognized exceptions: (1) when the findings are grounded entirely on speculation, surmises or conjectures; (2) when the inference made is manifestly mistaken, absurd or impossible; (3) when there is grave abuse of discretion; (4) when the judgment is based on a misapprehension of facts; (5) when the findings of facts are conflicting; (6) when in making its findings the Court of Appeals went beyond the issues of the case, or its findings are contrary to the admissions of both the appellant and the appellee; (7) when the findings are contrary to the trial court; (8) when the findings are conclusions without citation of specific evidence on which they are based; (9) when the facts set forth in the petition as well as in the petitioner’s main and reply briefs are not disputed by respondent; (10) when the findings of fact are premised on the supposed absence of evidence and contradicted by the evidence of record; and (11) when the Court of Appeals manifestly overlooked certain relevant facts not disputed by the parties, which, if properly considered, could justify a different conclusion.18

In the case at bar, both the trial court and the appellate court mistakenly inferred from the evidence presented that petitioner was a buyer in bad faith and that respondents, in turn, were possessors in good faith of the lots in question. Both courts overlooked the fact that respondents had no valid claim of title whatsoever to the disputed lots. If this was considered by both courts, there would have been no room for them to conclude that petitioner’s claim was barred by laches.

For purposes of clarity, we quote the trial court’s summary of respondents’ evidence as follows:

Defendants presented three witnesses, namely defendants Joberto Manghano, Alfredo Mompar and Marcelo Virtudazo of the Bureau of Forest Development.

Joberto Manghano declared that he is one of the sons of deceased defendant Eleuterio Manghano.

He claimed that he was born on March 18, 1964 at Padada, Davao Del Sur; that in October 1975 they transferred to La Paz Extension, Lapasan, Cagayan De Oro City. They live in the house constructed by his father on a 100 square meter lot on the land in question. The house is made of wood and galvanized iron sheets for roofing with a dimension of 14 x 16 feet with three (3) bedrooms. The land is swampy with piapi trees. In the same year he saw defendants Virgilio Lapiz, Vicente Garcia and Nila Claunan among the occupants of the land in question while Siliano Salas and Alfredo Mompar entered in 1982 and 1980 respectively.1awphi1.net

Joberto Manghano got married in 1987 and thereafter built his own house on the land in question which is fifteen (15) meters away from that of his parents. His house is 12 x 18 feet which consists of wood and GI sheets for roofing.

In 1984, upon the written request (Exhibit 2) of his father, Marcelo Virtudaso and Conrado Pagutayao, employees of the Bureau of Forest Development conducted a survey and a sketch map (Exhibit 1) was prepared by the two.

He claimed that his father chose the land in question as it is a public land. x x x

He further testified that he did not file any application for free patent, homestead, or miscellaneous sales claiming that he is ignorant of the procedure.

Defendant Alfredo Mompar, a fourth year college engineering student declared that in October 1980, after having obtained permission from the deceased Eleuterio Manghano, he entered the land in question x x x.

x x x x

He made verification as to the status of the land before he constructed his house and was informed that there is no owner. He did not, however, verify with other government office as to the status of the land. He did not declare the land for taxation purposes as he has no money.

The third and last witness for the defendants is Marcelo Virtudazo, an employee of the Bureau of Forest Development, who declared that on May 31, 1984, the deceased Eleuterio Manghano came to their office with a written request (Exhibit 2) for a verification of the land in question.

In response to said request, a certain Agustilo Obsioma, Chief of the Timber Management Section of the Bureau of Forest Development District Office of Cagayan De Oro City, wrote a note (Exhibit 3) instructing him and Conrado Pagutayao to conduct a verification survey on the land in question. They obliged and as a result they prepared a location map (Exhibit 1).

On June 11, 1984, they submitted their report. x x x19

The narration above shows that respondents entered the lots and built their dwellings thereon without any colorable title. Believing that the lots were alienable and disposable property of the State, they occupied the same in the hope that they would not be disturbed in their possession. They knew that they did not own the lots and concluded, on the basis of a certification issued by the Bureau of Forest Development, that the lots were government-owned. Regardless of the nature of the lots’ ownership, however, the fact remains that respondents entered the properties without permission from the owner.

It may thus be concluded from the foregoing that respondents are mere squatters on the properties. They are trespassers who, under the law, enjoy no possessory rights.20 This is notwithstanding the length of time that they may have physically occupied the lots; they are deemed to have entered the same in bad faith, such that the nature of their possession is presumed to have retained the same character throughout their occupancy.1awphil.net

In Bañez v. Court of Appeals,21 the Court held that a squatter has no right of possession that may be prejudiced by his eviction:

What rights of respondent Pio Arcilla were prejudiced? The Court of Appeals found that Pio Arcilla "makes no pretense that he entered into and built his land upon appellee PHHC’s land with the consent of the latter." Pio Arcilla was therefore, a trespasser, or a squatter, he being a person who settled or located on land, inclosed or uninclosed with ‘no bona fide claim or color of title and without consent of the owner.’ He began his material possession of the lot in bad faith, knowing that he did not have a right thereto, and it is presumed that his possession continued to be enjoyed in the same character in which it was acquired, i.e. in bad faith until the contrary is proved. x x x A squatter can have no possessory rights whatsoever, and his occupancy of the land

is only at the owner’s sufferance, his acts are merely tolerated and cannot affect the owner’s possession. The squatter is necessarily bound to an implied promise, that he will vacate upon demand."22 (Italics supplied)

Thus, the trial court and the Court of Appeals erred in giving more weight to respondents’ alleged equitable right over the lots as against petitioner’s certificate of title. Having no possessory rights whatsoever, no injury could be caused to respondents if they return the lots to petitioner. Unless there are intervening rights of third persons which may be affected or prejudiced by a decision ordering the return of the lots to the registered owner, the equitable defense of laches will not apply as against the latter.23

Laches has been defined as the failure or neglect, for an unreasonable and unexplained length of time, to do that which by exercising due diligence could or should have been done earlier. It is negligence or omission to assert a right within a reasonable time, warranting a presumption that the party entitled to assert it either has abandoned or declined to assert it. The defense of laches is an equitable one and does not concern itself with the character of the defendant’s title, but only with whether or not by reason of plaintiff’s long inaction or inexcusable neglect, he should be barred from asserting his claim at all, because to allow him to do so would be inequitable and unjust to the defendant.24

The elements of laches are: (1) conduct on the part of the defendant, or one under whom he claims, giving rise to the situation that led to the complaint and for which the complaint seeks a remedy; (2) delay in asserting the complainant’s rights, having had knowledge or notice of the defendant’s conduct and having been afforded an opportunity to institute a suit; (3) lack of knowledge or notice on the part of the defendant that the complainant would assert the right on which he bases his suit; and (4) injury or prejudice to the defendant in the event relief is accorded to the complainant, or the suit is not held barred.25

The third and fourth elements of laches are not present in the instant case. It cannot be said that respondents lacked notice that petitioner would assert its right over the lots considering that they knew from the beginning that they have no right to the same. Neither can respondents claim any injury or prejudice that would result by restoring possession of the lots to petitioner. Respondents have no possessory rights over the lots. As mere intruders, they are bound to an implied promise to surrender possession of the property to the real owner, regardless of the identity of the latter.

In De Vera-Cruz v. Miguel,26 the Court held, upon similar facts, that although a registered landowner may lose his right to recover possession of his registered property by reason of laches, the equitable defense is unavailing to one who has not shown any color of title to the property:

Having no title or document to overcome petitioners’ ownership over the land in question, respondent is therefore an intruder or squatter whose occupation of the land is merely being tolerated. A squatter has no possessory rights over the land intruded upon. As such, her occupancy of the land is only at the owner’s sufferance, her acts are merely tolerated and cannot affect the owner’s possession. She is necessarily bound to an implied promise that she will vacate upon demand.27

For the same reason, the lower courts erred in applying the principle of caveat emptor in the instant case. The rule simply requires the purchaser of real property to be aware of the alleged title of the vendor such that one who buys without checking the vendor’s title takes all the risks and losses consequent to such failure.28 While a buyer of registered land need not go beyond its certificate of title, the buyer is obliged to investigate or inspect the property sold to him when there are circumstances that would put him on guard, such as the presence of occupants other than the registered owner. The buyer cannot claim ignorance of any defect in the vendor’s title if, in neglecting to verify the nature of the occupant’s possession, the latter should turn out to have a better right to the property than the registered owner.

In the instant case, respondents cannot claim any better right over the lots than its original registered owner, Chacon Enterprises Inc. Apart from the assertion that they have been in open, adverse and notorious possession of the lots for a long period of time, respondents have not shown any proof of title that is superior to that of the registered owner. It should be emphasized that a certificate of title cannot be defeated by adverse, open and notorious possession by third persons. The title, once registered, is notice to the whole world and no one can plead ignorance of the registration.29

Thus, while possession by a third person other than the registered owner could indicate a defect in the title of the vendor, it does not per se render the latter’s title defective. It is only when such possession is of a character that would confer upon the possessor some superior right against the registered owner that the latter may be deemed to have a flawed title. Since respondents’ "adverse, open and notorious possession" of the lots cannot defeat the title of Chacon Enterprises Inc., the former did not acquire any superior possessory right over the lots. Petitioner thus acquired a clean title from Chacon Enterprises Inc. and is not barred from recovering possession of the lots from respondents.

WHEREFORE, the instant petition is GRANTED. The Decision of the Court of Appeals in CA-G.R. CV No. 65522, which affirmed in toto the Decision of the Regional Trial Court of Cagayan De Oro City, Branch 21, in

Civil Case No. 93-126, is REVERSED and SET ASIDE. A new judgment is entered ordering respondents Mila Claunan, Siliano Salas, Joberto Manghano, Alfredo Mompar, Vicente Garcia, Editha Lapiz, Heirs of Eleuterio Manghano, as well as their assigns and heirs, to:

1. Immediately VACATE the lots covered by TCT Nos. T-69888, T-69525 and T-69526 located in Barrio Mambato (Agora), Lapasan, Cagayan De Oro City, upon finality of this Decision; and

2. PAY petitioner D’Oro Land Realty and Development Corporation a MONTHLY RENTAL of P100.00 from the time that Civil Case No. 93-126 was filed on March 3, 1993 until they vacate the same.

SO ORDERED.

Republic of the PhilippinesSUPREME COURT

Manila

THIRD DIVISION

G.R. No. 169129             March 28, 2007

SPS. VIRGILIO F. SANTOS & ESPERANZA LATI SANTOS, SPS.VICTORINO F. SANTOS, & LAGRIMAS SANTOS, ERNESTO F. SANTOS, and TADEO F. SANTOS, Petitioners, vs.SPS. JOSE LUMBAO and PROSERFINA LUMBAO, Respondents.

D E C I S I O N

CHICO-NAZARIO, J.:

Before this Court is a Petition for Review on Certiorari under Rule 45 of the 1997 Revised Rules of Civil Procedure seeking to annul and set aside the Decision1 and Resolution2 of the Court of Appeals in CA-G.R. CV No. 60450 entitled, Spouses Jose Lumbao and Proserfina Lumbao v. Spouses Virgilio F. Santos and Esperanza Lati, Spouses Victorino F. Santos and Lagrimas F. Santos, Ernesto F. Santos and Tadeo F. Santos, dated 8 June 2005 and 29 July 2005, respectively, which granted the appeal filed by herein respondents Spouses Jose Lumbao and Proserfina Lumbao (Spouses Lumbao) and ordered herein petitioners Spouses Virgilio F. Santos and Esperanza Lati, Spouses Victorino F. Santos and Lagrimas F. Santos, Ernesto F. Santos and Tadeo F. Santos to reconvey to respondents Spouses Lumbao the subject property and to pay the latter attorney’s fees and litigation expenses, thus, reversing the Decision3 of the Regional Trial Court (RTC) of Pasig City, dated 17 June 1998 which dismissed the Complaint for Reconveyance with Damages filed by respondents Spouses Lumbao for lack of merit.

Herein petitioners Virgilio, Victorino, Ernesto and Tadeo, all surnamed Santos, are the legitimate and surviving heirs of the late Rita Catoc Santos (Rita), who died on 20 October 1985. The other petitioners Esperanza Lati and Lagrimas Santos are the daughters-in-law of Rita.

Herein respondents Spouses Jose Lumbao and Proserfina Lumbao are the alleged owners of the 107-square meter lot (subject property), which they purportedly bought from Rita during her lifetime.

The facts of the present case are as follows:

On two separate occasions during her lifetime, Rita sold to respondents Spouses Lumbao the subject property which is a part of her share in the estate of her deceased mother, Maria Catoc (Maria), who died intestate on 19 September 1978. On the first occasion, Rita sold 100 square meters of her inchoate share in her mother’s estate through a document denominated as "Bilihan ng Lupa," dated 17 August 1979.4 Respondents Spouses Lumbao claimed the execution of the aforesaid document was witnessed by petitioners Virgilio and Tadeo, as shown by their signatures affixed therein. On the second occasion, an additional seven square meters was added to the land as evidenced by a document also denominated as "Bilihan ng Lupa," dated 9 January 1981.5

After acquiring the subject property, respondents Spouses Lumbao took actual possession thereof and erected thereon a house which they have been occupying as exclusive owners up to the present. As the exclusive owners of the subject property, respondents Spouses Lumbao made several verbal demands upon Rita, during her lifetime, and thereafter upon herein petitioners, for them to execute the necessary documents to effect the issuance of a separate title in favor of respondents Spouses Lumbao insofar as the subject property is concerned. Respondents Spouses Lumbao alleged that prior to her death, Rita informed respondent Proserfina Lumbao she could not deliver the title to the subject property because the entire property inherited by her and her co-heirs from Maria had not yet been partitioned.

On 2 May 1986, the Spouses Lumbao claimed that petitioners, acting fraudulently and in conspiracy with one another, executed a Deed of Extrajudicial Settlement,6 adjudicating and partitioning among themselves and the other heirs, the estate left by Maria, which included the subject property already sold to respondents Spouses Lumbao and now covered by TCT No. 817297 of the Registry of Deeds of Pasig City.

On 15 June 1992, respondents Spouses Lumbao, through counsel, sent a formal demand letter8 to petitioners but despite receipt of such demand letter, petitioners still failed and refused to reconvey the subject property to the respondents Spouses Lumbao. Consequently, the latter filed a Complaint for Reconveyance with Damages9before the RTC of Pasig City.

Petitioners filed their Answer denying the allegations that the subject property had been sold to the respondents Spouses Lumbao. They likewise denied that the Deed of Extrajudicial Settlement had been fraudulently executed because the same was duly published as required by law. On the contrary, they prayed for the dismissal of the Complaint for lack of cause of action because respondents Spouses Lumbao failed to comply with the Revised Katarungang Pambarangay Law under Republic Act No. 7160, otherwise known as the Local Government Code of 1991, which repealed Presidential Decree No. 150810 requiring first resort to barangay conciliation.

Respondents Spouses Lumbao, with leave of court, amended their Complaint because they discovered that on 16 February 1990, without their knowledge, petitioners executed a Deed of Real Estate Mortgage in favor of Julieta S. Esplana for the sum of P30,000.00. The said Deed of Real Estate Mortgage was annotated at the back of TCT No. PT-81729 on 26 April 1991. Also, in answer to the allegation of the petitioners that they failed to comply with the mandate of the Revised Katarungang Pambarangay Law, respondents Spouses Lumbao said that the Complaint was filed directly in court in order that prescription or the Statute of Limitations may not set in.

During the trial, respondents Spouses Lumbao presented Proserfina Lumbao and Carolina Morales as their witnesses, while the petitioners presented only the testimony of petitioner Virgilio.

The trial court rendered a Decision on 17 June 1998, the dispositive portion of which reads as follows:

Premises considered, the instant complaint is hereby denied for lack of merit.

Considering that [petitioners] have incurred expenses in order to protect their interest, [respondents spouses Lumbao] are hereby directed to pay [petitioners], to wit: 1) the amount of P30,000.00 as attorney’s fees and litigation expenses, and 2) costs of the suit.11

Aggrieved, respondents Spouses Lumbao appealed to the Court of Appeals. On 8 June 2005, the appellate court rendered a Decision, thus:

WHEREFORE, premises considered, the present appeal is hereby GRANTED. The appealed Decision dated June 17, 1998 of the Regional Trial Court of Pasig City, Branch 69 in Civil Case No. 62175 is hereby REVERSED and SET ASIDE. A new judgment is hereby entered ordering [petitioners] to reconvey 107 square meters of the subject [property] covered by TCT No. PT-81729 of the Registry of Deeds of Pasig City, Metro Manila, and to pay to [respondents spouses Lumbao] the sum of P30,000.00 for attorney’s fees and litigation expenses.

No pronouncement as to costs.12

Dissatisfied, petitioners filed a Motion for Reconsideration of the aforesaid Decision but it was denied in the Resolution of the appellate court dated 29 July 2005 for lack of merit.

Hence, this Petition.

The grounds relied upon by the petitioners are the following:

I. THE APPELLATE COURT COMMITTED A REVERSIBLE ERROR IN REVERSING THE DECISION OF THE TRIAL COURT, THEREBY CREATING A VARIANCE ON THE FINDINGS OF FACTS OF TWO COURTS.

II. THE APPELLATE COURT COMMITTED A REVERSIBLE ERROR IN ORDERING THE PETITIONERS TO RECONVEY THE SUBJECT [PROPERTY] TO THE RESPONDENTS [SPOUSES LUMBAO] AND IN NOT RULING THAT THEY ARE GUILTY OF LACHES, HENCE THEY CANNOT RECOVER THE LOT ALLEGEDLY SOLD TO THEM.

III. THE APPELLATE COURT COMMITTED A REVERSIBLE ERROR IN NOT FINDING HEREIN PETITIONER[S] TO BE IN GOOD FAITH IN EXECUTING THE "DEED OF EXTRAJUDICIAL SETTLEMENT" DATED [2 MAY 1986].

IV. THE APPELLATE COURT COMMITTED A REVERSIBLE ERROR IN NOT FINDING THAT PETITIONERS ARE NOT LEGALLY BOUND TO COMPLY WITH THE SUPPOSED BILIHAN NG LUPA DATED [17 AUGUST 1979] AND [9 JANUARY 1981] THAT WERE SUPPOSEDLY EXECUTED BY THE LATE RITA CATOC.

V. THE APPELLATE COURT COMMITTED A REVERSIBLE ERROR IN NOT FINDING THAT RESPONDENTS [SPOUSES LUMBAO’S] ACTION FOR RECONVEYANCE WITH DAMAGES CANNOT BE

SUPPORTED WITH AN UNENFORCEABLE DOCUMENTS, SUCH AS THE BILIHAN NG LUPA DATED [17 AUGUST 1979] AND [9 JANUARY 1981].

VI. THE APPELLATE COURT COMMITTED A REVERSIBLE ERROR IN NOT FINDING THAT RESPONDENTS [SPOUSES LUMBAO’S] COMPLAINT FOR RECONVEYANCE IS DISMISSABLE (SIC) FOR NON COMPLIANCE OF THE MANDATE OF [P.D. NO.] 1508, AS AMENDED BY Republic Act No. 7160.

VII. THE APPELLATE COURT COMMITTED A REVERSIBLE ERROR IN NOT FINDING THAT RESPONDENTS [SPOUSES LUMBAO] SHOULD BE HELD LIABLE FOR PETITIONERS’ CLAIM FOR DAMAGES AND ATTORNEY[‘]S FEES.

Petitioners ask this Court to scrutinize the evidence presented in this case, because they claim that the factual findings of the trial court and the appellate court are conflicting. They allege that the findings of fact by the trial court revealed that petitioners Virgilio and Tadeo did not witness the execution of the documents known as "Bilihan ng Lupa"; hence, this finding runs counter to the conclusion made by the appellate court. And even assuming that they were witnesses to the aforesaid documents, still, respondents Spouses Lumbao were not entitled to the reconveyance of the subject property because they were guilty of laches for their failure to assert their rights for an unreasonable length of time. Since respondents Spouses Lumbao had slept on their rights for a period of more than 12 years reckoned from the date of execution of the second "Bilihan ng Lupa," it would be unjust and unfair to the petitioners if the respondents will be allowed to recover the subject property.

Petitioners allege they are in good faith in executing the Deed of Extrajudicial Settlement because even respondents Spouses Lumbao’s witness, Carolina Morales, testified that neither petitioner Virgilio nor petitioner Tadeo was present during the execution of the "Bilihan ng Lupa," dated 17 August 1979 and 9 January 1981. Petitioners affirm that the Deed of Extrajudicial Settlement was published in a newspaper of general circulation to give notice to all creditors of the estate subject of partition to contest the same within the period prescribed by law. Since no claimant appeared to interpose a claim within the period allowed by law, a title to the subject property was then issued in favor of the petitioners; hence, they are considered as holders in good faith and therefore cannot be barred from entering into any subsequent transactions involving the subject property.

Petitioners also contend that they are not bound by the documents denominated as "Bilihan ng Lupa" because the same were null and void for the following reasons: 1) for being falsified documents because one of those documents made it appear that petitioners Virgilio and Tadeo were witnesses to its execution and that they appeared personally before the notary public, when in truth and in fact they did not; 2) the identities of the properties in the "Bilihan ng Lupa," dated 17 August 1979 and 9 January 1981 in relation to the subject property in litigation were not established by the evidence presented by the respondents Spouses Lumbao; 3) the right of the respondents Spouses Lumbao to lay their claim over the subject property had already been barred through estoppel by laches; and 4) the respondents Spouses Lumbao’s claim over the subject property had already prescribed.

Finally, petitioners claim that the Complaint for Reconveyance with Damages filed by respondents Spouses Lumbao was dismissible because they failed to comply with the mandate of Presidential Decree No. 1508, as amended by Republic Act No. 7160, particularly Section 412 of Republic Act No. 7160.

Given the foregoing, the issues presented by the petitioners may be restated as follows:

I. Whether or not the Complaint for Reconveyance with Damages filed by respondents spouses Lumbao is dismissible for their failure to comply with the mandate of the Revised Katarungang Pambarangay Law under R.A. No. 7160.

II. Whether or not the documents known as "Bilihan ng Lupa" are valid and enforceable, thus, they can be the bases of the respondents spouses Lumbao’s action for reconveyance with damages.

III. Whether or not herein petitioners are legally bound to comply with the "Bilihan ng Lupa" dated 17 August 1979 and 9 January 1981 and consequently, reconvey the subject property to herein respondents spouses Lumbao.

It is well-settled that in the exercise of the Supreme Court’s power of review, the court is not a trier of facts and does not normally undertake the re-examination of the evidence presented by the contending parties during the trial of the case considering that the findings of fact of the Court of Appeals are conclusive and binding on the Court.13 But, the rule is not without exceptions. There are several recognized exceptions14 in which factual issues may be resolved by this Court. One of these exceptions is when the findings of the appellate court are contrary to those of the trial court. This exception is present in the case at bar.

Going to the first issue presented in this case, it is the argument of the petitioners that the Complaint for Reconveyance with Damages filed by respondents Spouses Lumbao should be dismissed for failure to comply

with the barangay conciliation proceedings as mandated by the Revised Katarungang Pambarangay Law under Republic Act No. 7160. This argument cannot be sustained.

Section 408 of the aforesaid law and Administrative Circular No. 14-9315 provide that all disputes between parties actually residing in the same city or municipality are subject to barangay conciliation. A prior recourse thereto is a pre-condition before filing a complaint in court or any government offices. Non-compliance with the said condition precedent could affect the sufficiency of the plaintiff’s cause of action and make his complaint vulnerable to dismissal on ground of lack of cause of action or prematurity; but the same would not prevent a court of competent jurisdiction from exercising its power of adjudication over the case before it, where the defendants failed to object to such exercise of jurisdiction.16

While it is true that the present case should first be referred to the Barangay Lupon for conciliation because the parties involved herein actually reside in the same city (Pasig City) and the dispute between them involves a real property, hence, the said dispute should have been brought in the city in which the real property, subject matter of the controversy, is located, which happens to be the same city where the contending parties reside. In the event that respondents Spouses Lumbao failed to comply with the said condition precedent, their Complaint for Reconveyance with Damages can be dismissed. In this case, however, respondents Spouses Lumbao’s non-compliance with the aforesaid condition precedent cannot be considered fatal. Although petitioners alleged in their answer that the Complaint for Reconveyance with Damages filed by respondents spouses Lumbao should be dismissed for their failure to comply with the condition precedent, which in effect, made the complaint prematurely instituted and the trial court acquired no jurisdiction to hear the case, yet, they did not file a Motion to Dismiss the said complaint.

Emphasis must be given to the fact that the petitioners could have prevented the trial court from exercising jurisdiction over the case had they filed a Motion to Dismiss. However, instead of doing so, they invoked the very same jurisdiction by filing an answer seeking an affirmative relief from it. Worse, petitioners actively participated in the trial of the case by presenting their own witness and by cross-examining the witnesses presented by the respondents Spouses Lumbao. It is elementary that the active participation of a party in a case pending against him before a court is tantamount to recognition of that court’s jurisdiction and a willingness to abide by the resolution of the case which will bar said party from later on impugning the court’s jurisdiction.17 It is also well-settled that the non-referral of a case for barangay conciliation when so required under the law is not jurisdictional in nature and may therefore be deemed waived if not raised seasonably in a motion to dismiss.18 Hence, herein petitioners can no longer raise the defense of non-compliance with the barangay conciliation proceedings to seek the dismissal of the complaint filed by the respondents Spouses Lumbao, because they already waived the said defense when they failed to file a Motion to Dismiss.

As regards the second issue, petitioners maintain that the "Bilihan ng Lupa," dated 17 August 1979 and 9 January 1981 are null and void for being falsified documents as it is made to appear that petitioners Virgilio and Tadeo were present in the execution of the said documents and that the identities of the properties in those documents in relation to the subject property has not been established by the evidence of the respondents Spouses Lumbao. Petitioners also claim that the enforceability of those documents is barred by prescription of action and laches.

It is the petitioners’ incessant barking that the "Bilihan ng Lupa" documents dated 17 August 1979 and 9 January 1981 were falsified because it was made to appear that petitioners Virgilio and Tadeo were present in the executions thereof, and their allegation that even respondents Spouses Lumbao’s witness Carolina Morales proved that said petitioners were not present during the execution of the aforementioned documents. This is specious.

Upon examination of the aforesaid documents, this Court finds that in the "Bilihan ng Lupa," dated 17 August 1979, the signatures of petitioners Virgilio and Tadeo appeared thereon. Moreover, in petitioners’ Answer and Amended Answer to the Complaint for Reconveyance with Damages, both petitioners Virgilio and Tadeo made an admission that indeed they acted as witnesses in the execution of the "Bilihan ng Lupa," dated 17 August 1979.19However, in order to avoid their obligations in the said "Bilihan ng Lupa," petitioner Virgilio, in his cross-examination, denied having knowledge of the sale transaction and claimed that he could not remember the same as well as his appearance before the notary public due to the length of time that had passed. Noticeably, petitioner Virgilio did not categorically deny having signed the "Bilihan ng Lupa," dated 17 August 1979 and in support thereof, his testimony in the cross-examination propounded by the counsel of the respondents Spouses Lumbao is quoted hereunder:

ATTY. CHIU:

Q. Now, you said, Mr. Witness…Virgilio Santos, that you don’t know about this document which was marked as Exhibit "A" for the [respondents spouses Lumbao]?

ATTY. BUGARING:

The question is misleading, your Honor. Counsel premised the question that he does not have any knowledge but not that he does not know.

ATTY. CHIU:

Q. Being… you are one of the witnesses of this document? [I]s it not?

WITNESS:

A. No, sir.

Q. I am showing to you this document, there is a signature at the left hand margin of this document Virgilio Santos, will you please go over the same and tell the court whose signature is this?

A. I don’t remember, sir, because of the length of time that had passed.

Q. But that is your signature?

A. I don’t have eyeglasses… My signature is different.

Q. You never appeared before this notary public Apolinario Mangahas?

A. I don’t remember.20

As a general rule, facts alleged in a party’s pleading are deemed admissions of that party and are binding upon him, but this is not an absolute and inflexible rule. An answer is a mere statement of fact which the party filing it expects to prove, but it is not evidence.21 And in spite of the presence of judicial admissions in a party’s pleading, the trial court is still given leeway to consider other evidence presented.22 However, in the case at bar, as the Court of Appeals mentioned in its Decision, "[herein petitioners] had not adduced any other evidence to override the admission made in their [A]nswer that [petitioners Virgilio and Tadeo] actually signed the [Bilihan ng Lupa dated 17 August 1979] except that they were just misled as to the purpose of the document, x x x."23 Virgilio’s answers were unsure and quibbled. Hence, the general rule that the admissions made by a party in a pleading are binding and conclusive upon him applies in this case.

On the testimony of respondents Spouses Lumbao’s witness Carolina Morales, this Court adopts the findings made by the appellate court. Thus -

[T]he trial court gave singular focus on her reply to a question during cross-examination if the [petitioners Virgilio and Tadeo] were not with her and the vendor [Rita] during the transaction. It must be pointed out that earlier in the direct examination of said witness, she confirmed that [respondents spouses Lumbao] actually bought the lot from [Rita] ("nagkabilihan"). Said witness positively identified and confirmed the two (2) documents evidencing the sale in favor of [respondents spouse Lumbao]. Thus, her subsequent statement that the [petitioners Virgilio and Tadeo] were not with them during the transaction does not automatically imply that [petitioners Virgilio and Tadeo] did not at any time sign as witnesses as to the deed of sale attesting to their mother’s voluntary act of selling a portion of her share in her deceased mother’s property. The rule is that testimony of a witness must be considered and calibrated in its entirety and not by truncated portions thereof or isolated passages therein.24

Furthermore, both "Bilihan ng Lupa" documents dated 17 August 1979 and 9 January 1981 were duly notarized before a notary public. It is well-settled that a document acknowledged before a notary public is a public document25 that enjoys the presumption of regularity. It is a prima facie evidence of the truth of the facts stated therein and a conclusive presumption of its existence and due execution.26 To overcome this presumption, there must be presented evidence that is clear and convincing. Absent such evidence, the presumption must be upheld.27 In addition, one who denies the due execution of a deed where one’s signature appears has the burden of proving that contrary to the recital in the jurat, one never appeared before the notary public and acknowledged the deed to be a voluntary act. Nonetheless, in the present case petitioners’ denials without clear and convincing evidence to support their claim of fraud and falsity were not sufficient to overthrow the above-mentioned presumption; hence, the authenticity, due execution and the truth of the facts stated in the aforesaid "Bilihan ng Lupa" are upheld.

The defense of petitioners that the identities of the properties described in the "Bilihan ng Lupa," dated 17 August 1979 and 9 January 1981 in relation to the subject property were not established by respondents Spouses Lumbao’s evidence is likewise not acceptable.

It is noteworthy that at the time of the execution of the documents denominated as "Bilihan ng Lupa," the entire property owned by Maria, the mother of Rita, was not yet divided among her and her co-heirs and so the

description of the entire estate is the only description that can be placed in the "Bilihan ng Lupa, dated 17 August 1979 and 9 January 1981" because the exact metes and bounds of the subject property sold to respondents Spouses Lumbao could not be possibly determined at that time. Nevertheless, that does not make the contract of sale between Rita and respondents Spouses Lumbao invalid because both the law and jurisprudence have categorically held that even while an estate remains undivided, co-owners have each full ownership of their respective aliquots or undivided shares and may therefore alienate, assign or mortgage them.28 The co-owner, however, has no right to sell or alienate a specific or determinate part of the thing owned in common, because such right over the thing is represented by an aliquot or ideal portion without any physical division. In any case, the mere fact that the deed purports to transfer a concrete portion does not per se render the sale void. The sale is valid, but only with respect to the aliquot share of the selling co-owner. Furthermore, the sale is subject to the results of the partition upon the termination of the co-ownership.29

In the case at bar, when the estate left by Maria had been partitioned on 2 May 1986 by virtue of a Deed of Extrajudicial Settlement, the 107- square meter lot sold by the mother of the petitioners to respondents Spouses Lumbao should be deducted from the total lot, inherited by them in representation of their deceased mother, which in this case measures 467 square meters. The 107-square meter lot already sold to respondents Spouses Lumbao can no longer be inherited by the petitioners because the same was no longer part of their inheritance as it was already sold during the lifetime of their mother.

Likewise, the fact that the property mentioned in the two "Bilihan ng Lupa" documents was described as "a portion of a parcel of land covered in Tax Declarations No. A-018-01674," while the subject matter of the Deed of Extrajudicial Settlement was the property described in Transfer Certificate of Title (TCT) No. 3216 of the Registry of Deeds of the Province of Rizal in the name of Maria is of no moment because in the "Bilihan ng Lupa," dated 17 August 1979 and 9 January 1981, it is clear that there was only one estate left by Maria upon her death. And this fact was not refuted by the petitioners. Besides, the property described in Tax Declaration No. A-018-01674 and the property mentioned in TCT No. 3216 are both located in Barrio Rosario, Municipality of Pasig, Province of Rizal, and almost have the same boundaries. It is, thus, safe to state that the property mentioned in Tax Declaration No. A-018-01674 and in TCT No. 3216 are one and the same.

The defense of prescription of action and laches is likewise unjustifiable. In an action for reconveyance, the decree of registration is respected as incontrovertible. What is sought instead is the transfer of the property or its title which has been wrongfully or erroneously registered in another person’s name to its rightful or legal owner, or to the one with a better right. It is, indeed, true that the right to seek reconveyance of registered property is not absolute because it is subject to extinctive prescription. However, when the plaintiff is in possession of the land to be reconveyed, prescription cannot set in. Such an exception is based on the theory that registration proceedings could not be used as a shield for fraud or for enriching a person at the expense of another.30

In the case at bar, the right of the respondents Spouses Lumbao to seek reconveyance does not prescribe because the latter have been and are still in actual possession and occupation as owners of the property sought to be reconveyed, which fact has not been refuted nor denied by the petitioners. Furthermore, respondents Spouses Lumbao cannot be held guilty of laches because from the very start that they bought the 107-square meter lot from the mother of the petitioners, they have constantly asked for the transfer of the certificate of title into their names but Rita, during her lifetime, and the petitioners, after the death of Rita, failed to do so on the flimsy excuse that the lot had not been partitioned yet. Inexplicably, after the partition of the entire estate of Maria, petitioners still included the 107-square meter lot in their inheritance which they divided among themselves despite their knowledge of the contracts of sale between their mother and the respondents Spouses Lumbao.

Under the above premises, this Court holds that the "Bilihan ng Lupa" documents dated 17 August 1979 and 9 January 1981 are valid and enforceable and can be made the basis of the respondents Spouses Lumbao’s action for reconveyance. The failure of respondents Spouses Lumbao to have the said documents registered does not affect its validity and enforceability. It must be remembered that registration is not a requirement for validity of the contract as between the parties, for the effect of registration serves chiefly to bind third persons. The principal purpose of registration is merely to notify other persons not parties to a contract that a transaction involving the property had been entered into. Where the party has knowledge of a prior existing interest which is unregistered at the time he acquired a right to the same land, his knowledge of that prior unregistered interest has the effect of registration as to him.31 Hence, the "Bilihan ng Lupa" documents dated 17 August 1979 and 9 January 1981, being valid and enforceable, herein petitioners are bound to comply with their provisions. In short, such documents are absolutely valid between and among the parties thereto.

Finally, the general rule that heirs are bound by contracts entered into by their predecessors-in-interest applies in the present case. Article 131132 of the NCC is the basis of this rule. It is clear from the said provision that whatever rights and obligations the decedent have over the property were transmitted to the heirs by way of succession, a mode of acquiring the property, rights and obligations of the decedent to the extent of the value of the inheritance of the heirs.33 Thus, the heirs cannot escape the legal consequence of a transaction entered into by their predecessor-in-interest because they have inherited the property subject to the liability affecting

their common ancestor. Being heirs, there is privity of interest between them and their deceased mother. They only succeed to what rights their mother had and what is valid and binding against her is also valid and binding as against them. The death of a party does not excuse nonperformance of a contract which involves a property right and the rights and obligations thereunder pass to the personal representatives of the deceased. Similarly, nonperformance is not excused by the death of the party when the other party has a property interest in the subject matter of the contract.34

In the end, despite the death of the petitioners’ mother, they are still bound to comply with the provisions of the "Bilihan ng Lupa," dated 17 August 1979 and 9 January 1981. Consequently, they must reconvey to herein respondents Spouses Lumbao the 107-square meter lot which they bought from Rita, petitioners’ mother. And as correctly ruled by the appellate court, petitioners must pay respondents Spouses Lumbao attorney’s fees and litigation expenses for having been compelled to litigate and incur expenses to protect their interest.35 On this matter, we do not find reasons to reverse the said findings.

WHEREFORE, premises considered, the instant Petition is hereby DENIED. The Decision and Resolution of the Court of Appeals dated 8 June 2005 and 29 July 2005, respectively, are hereby AFFIRMED. Herein petitioners are ordered to reconvey to respondents Spouses Lumbao the subject property and to pay the latter attorney’s fees and litigation expenses. Costs against petitioners.

SO ORDERED.

MINITA V. CHICO-NAZARIOAssociate Justice

SECOND DIVISION  

JAIME D. ANG,Petitioner,   - versus -   COURT OF APPEALS AND BRUNO SOLEDAD,

Respondents.  

G.R. No. 177874 Present:

 QUISUMBING, J., Chairperson,CARPIO MORALES,TINGA,VELASCO, JR., andBRION, JJ.

 Promulgated:September 29, 2008

x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x   

D E C I S I O N  

CARPIO MORALES, J.: 

Under a car-swapping scheme, respondent Bruno Soledad (Soledad) sold his Mitsubishi GSR sedan 1982 model to petitioner Jaime Ang (Ang) by Deed of Absolute Sale[1] dated July 28, 1992. For his part, Ang conveyed to Soledad his Mitsubishi Lancer model 1988, also by Deed of Absolute Sale[2] of even date. As Angs car was of a later model, Soledad paid him an additional P55,000.00.

 Ang, a buyer and seller of used vehicles, later offered the Mitsubishi GSR for sale

through Far Eastern Motors, a second-hand auto display center. The vehicle was eventually sold to a certain Paul Bugash (Bugash) for P225,000.00, by Deed of Absolute Sale[3] dated August 14, 1992. Before the deed could be registered in Bugashs name, however, the vehicle was seized by virtue of a writ of replevin[4] dated January 26, 1993 issued by the Cebu City Regional Trial Court (RTC), Branch 21 in Civil Case No. CEB-13503, BA Finance Corporation vs. Ronaldo and Patricia Panes, on account of the alleged failure of Ronaldo Panes, the owner of the vehicle prior to Soledad, to pay the mortgage debt[5] constituted thereon.

 To secure the release of the vehicle, Ang paid BA Finance the amount

of P62,038.47[6]on March 23, 1993. Soledad refused to reimburse the said amount, despite repeated demands, drawing Ang to charge him for Estafa with abuse of confidence before the Office of the City Prosecutor, Cebu City. By Resolution[7] of July 15, 1993, the City Prosecutors Office dismissed the complaint for insufficiency of evidence, drawing Ang to file on November 9, 1993 the first[8] of three successive complaints for damages against Soledad before the RTC of Cebu City where it was docketed as Civil Case No. Ceb-14883.

 Branch 19 of the Cebu City RTC, by Order[9] dated May 4, 1995, dismissed Civil Case

No. Ceb-14883 for failure to submit the controversy to barangay conciliation. Ang thereafter secured a certification to file action and again filed a complaint for

damages,[10] docketed as Ceb-17871, with the RTC of Cebu City, Branch 14 which dismissed it, by Order[11] dated March 27, 1996, on the ground that the amount involved is not within its jurisdiction.

 Ang thereupon filed on July 15, 1996 with the Municipal Trial Court in Cities (MTCC) a

complaint,[12] docketed as R-36630, the subject of the instant petition. 

After trial, the MTCC dismissed the complaint on the ground of prescription, vz:

 It appearing that the Deed of Sale to plaintiff o[f] subject vehicle was

dated and executed on 28 July 1992, the complaint before the Barangay terminated 21 September 1995 per Certification to File Action attached to the Complaint, and this case eventually was filed with this Court on 15 July 1996, this action has already been barred since more than six (6) months elapsed   from the delivery of the subject vehicle to the plaintiff buyer to the filing of this action, pursuant to the aforequoted Article 1571.[13] (Emphasis and underscoring supplied)

 His motion for reconsideration having been denied, Ang appealed to the RTC, Branch 7 of which affirmed the dismissal of the complaint, albeit it rendered judgment in favor of Ang for the sake of justice and equity, and in consonance with the salutary principle of non-enrichment at anothers expense. The RTC ratiocinated:

 x x x x 

[I]t was error for the Court to rely on Art. 1571 of the Civil Code to declare the action as having prescribed, since the action is not one for the enforcement of the warranty against hidden defects. Moreover, Villostas vs. Court of Appeals declared thatthe six-month prescriptive period for a redhibitory action applies only to implied warranties. There is here an express warranty. If at all, what applies is Art. 1144 of the Civil Code, the general law on prescription, which states, inter alia, that actions upon a written contract prescribes in ten (10) years [Engineering & Machinery Corporation vs. Court of Appeals, G.R. No. 52267, January 24, 1996]. More appropriate to the discussion would be defendants warranty against eviction, which he explicitly made in the Deed of Absolute Sale: I hereby covenant my absolute ownership to (sic) the above-described property and the same is free from all liens and encumbrances and I will defend the same from all claims or any claim whatsoever Still the Court finds that plaintiff cannot recover under this warranty. There is no showing of compliance with the requisites. 

x x x x Nonetheless, for the sake of justice and equity, and in consonance with the salutaryprinciple of non-enrichment at anothers expense, defendant should reimburse plaintiff the P62,038.47 which on March 23, 1993 he paid BA Finance Corporation to release the mortgage on the car. (Emphasis and underscoring supplied)[14]

  The RTC thus disposed as follows:   Wherefore, judgment is rendered directing defendant to pay plaintiff   P 62,038.47 , the amount the latter paid BA Finance Corporation to release the mortgage on the vehicle, with interest at the legal rate computed from March 23, 1993. Except for this, the judgment in the decision of the trial court, dated October 8, 2001 dismissing the claims of plaintiff is affirmed. (Underscoring supplied)[15]

 Soledads Motion for Reconsideration was denied by Order[16] of December 12, 2002, hence, he elevated the case to the Court of Appeals, Cebu City.The appellate court, by the challenged Decision[17] of August 30, 2006, noting the sole issue to be resolved whether the RTC erred in directing Soledad to pay Ang the amount the latter paid to BA Finance plus legal interest, held that, following Goodyear Phil., Inc. v. Anthony Sy,[18] Ang cannot anymore seek refuge under the Civil Code provisions granting award of damages for breach of warranty against eviction for the simple fact that three years and ten months have lapsed from the execution of the deed of sale in his favor prior to the filing of the instant complaint. It further held:

 It bears to stress that the deed of absolute sale was executed

on July 28, 1992, and the instant complaint dated May 15, 1996 was received by the MTCC on July 15, 1996.

 While it is true that someone unjustly enriched himself at the

expense of herein respondent, we agree with petitioner (Soledad) that it is not he.

The appellate court accordingly reversed the RTC decision and denied the petition. By Resolution[19] of April 25, 2007, the appellate court denied Angs motion for

reconsideration, it further noting that when Ang settled the mortgage debt to BA Finance, he did so voluntarily in order to resell the vehicle, hence, Soledad did not benefit from it as he was unaware of the mortgage constituted on the vehicle by the previous owner.

 The appellate court went on to hold that Soledad has nothing to do with the transaction

anymore; his obligation ended when he delivered the subject vehicle to the respondent upon the perfection of the contract of sale. And it reiterated its ruling that the action, being one arising from breach of warranty, had prescribed, it having been filed beyond the 6-month prescriptive period.

 The appellate court brushed aside Angs contention that Soledad was the proximate cause

of the loss due to the latters failure to thoroughly examine and verify the registration and ownership of the previous owner of the vehicle, given that Ang is engaged in the business of buying and selling second-hand vehicles and is therefore expected to be cautious in protecting his rights under the circumstances.

 Hence, the present recourse petition for review on certiorari, Ang maintaining that his

cause of action had not yet prescribed when he filed the complaint and he should not be blamed for paying the mortgage debt.

 To Ang, the ruling in Goodyear v. Sy is not applicable to this case, there being

an expresswarranty in the herein subject Deed of Absolute Sale and, therefore, the action based thereon prescribes in ten (10) years following Engineering & Machinery Corp. v. CA[20] which held that where there is an express warranty in the contract, the prescriptive period is the one specified in the contract or, in the absence thereof, the general rule on rescission of contract.

 Ang likewise maintains that he should not be blamed for paying BA Finance and should

thus be entitled to reimbursement and damages for, following Carrascoso, Jr. v. Court of Appeals,[21] in case of breach of an express warranty, the seller is liable for damages provided that certain requisites are met which he insists are present in the case at bar.

 The resolution of the sole issue of whether the complaint had prescribed hinges on a

determination of what kind of warranty is provided in the Deed of Absolute Sale subject of the present case.

 A warranty is a statement or representation made by the seller of goods,

contemporaneously and as part of the contract of sale, having reference to the character, quality or title of the goods, and by which he promises or undertakes to insure that certain facts are or shall be as he then represents them.[22]

 Warranties by the seller may be express or implied. Art. 1546 of the Civil Code

definesexpress warranty as follows:

 Art. 1546. Any affirmation of fact or any promise by the seller

relating to the thing is an express warranty if the natural tendency of such affirmation or promise is to induce the buyer to purchase the same, and if the buyer purchases the thing relying thereon. No affirmation of the value of the thing, nor any statement purporting to be a statement of the sellers opinion only, shall be construed as a warranty, unless the seller made such affirmation or statement as an expert and it was relied upon by the buyer. (Emphasis and underscoring supplied)

 On the other hand, an implied warranty is that which the law derives by application

orinference from the nature of the transaction or the relative situation or circumstances of the parties, irrespective of any intention of the seller to create it.[23] Among the implied warranty provisions of the Civil Code are: as to the sellers title (Art. 1548), against hidden defects and encumbrances (Art. 1561), as to fitness or merchantability (Art. 1562), and against eviction (Art. 1548).

 The earlier cited ruling in Engineering & Machinery Corp. states that the prescriptive

period for instituting actions based on a breach of express warranty is that specified in the contract, and in the absence of such period, the general rule on rescission of contract, which isfour years (Article 1389, Civil Code).

 

 

 

 As for actions based on breach of implied warranty, the prescriptive period is, under Art.

1571 (warranty against hidden defects of or encumbrances upon the thing sold) and Art. 1548 (warranty against eviction), six months from the date of delivery of the thing sold.

 The following provision of the Deed of Absolute Sale reflecting the kind of warranty

made by Soledad reads: 

x x x xI hereby covenant my absolute ownership to (sic) the above-

described property and the same is free from all liens and encumbrances and I will defend the same from all claims or any claim whatsoever; will save the vendee from any suit by the government of the Republic of the Philippines.

 

x x x x (Emphasis supplied) In declaring that he owned and had clean title to the vehicle at the time the Deed of

Absolute Sale was forged, Soledad gave an implied warranty of title. In pledging that he will defend the same from all claims or any claim whatsoever [and] will save the vendee from any suit by the government of the Republic of the Philippines, Soledad gave a warranty against eviction.

 Given Angs business of buying and selling used vehicles, he could not have merely relied

on Soledads affirmation that the car was free from liens and encumbrances. He was expected to have thoroughly verified the cars registration and related documents.

Since what Soledad, as seller, gave was an implied warranty, the prescriptive period to file a breach thereof is six months after the delivery of the vehicle, following Art. 1571. But even if the date of filing of the action is reckoned from the date petitioner instituted his first complaint for damages on November 9, 1993, and not on July 15, 1996 when he filed the complaint subject of the present petition, the action just the same had prescribed, it having been filed 16 months after July 28, 1992, the date of delivery of the vehicle.

 On the merits of his complaint for damages, even if Ang invokes breach of warranty against eviction as inferred from the second part of the earlier-quoted provision of the Deed of Absolute Sale, the following essential requisites for such breach, vz:

 A breach of this warranty requires the concurrence of the

following circumstances: (1) The purchaser has been deprived of the whole or part of the

thing sold; (2) This eviction is by a final judgment; (3) The basis thereof is by virtue of a right prior to the sale

made by the vendor; and (4) The vendor has been summoned and made co-defendant in

the suit for eviction at the instance of the vendee. In the absence of these requisites, a breach of the warranty against

eviction under Article 1547 cannot be declared. [24] (Emphasis supplied),

 have not been met. For one, there is no judgment which deprived Ang of the vehicle. For another, there was no suit for eviction in which Soledad as seller was impleaded as co-defendant at the instance of the vendee.

  

Finally, even under the principle of solutio indebiti which the RTC applied, Ang cannot recover from Soledad the amount he paid BA Finance. For, as the appellate court observed, Ang settled the mortgage debt on his own volition under the supposition that he would resell the car.It turned out

that he did pay BA Finance in order to avoid returning the payment made by the ultimate buyer Bugash. It need not be stressed that Soledad did not benefit from Angs paying BA Finance, he not being the one who mortgaged the vehicle, hence, did not benefit from the proceeds thereof.

 WHEREFORE, the petition is, in light of the foregoing disquisition, DENIED. 

SO ORDERED.   

 FIRST DIVISION

  

SPS. ERNESTO V. YU AND G.R. No. 172172ELSIE ONG YU,

Petitioners, Present:

PUNO, C.J., Chairperson,

- versus - CARPIO,

CORONA,

LEONARDO-DE CASTRO, and

BALTAZAR N. PACLEB, BRION, JJ.

(Substituted by ANTONIETA S.

PACLEB, LORNA PACLEB- Promulgated :

GUERRERO, FLORENCIO C.

PACLEB, and MYRLA C. PACLEB),

Respondents. February 24, 2009

x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x

D E C I S I O N PUNO, C.J.:

Before the Court is a Petition filed under Rule 45 of the Rules of Court assailing: (i) the Decision [1] dated

August 31, 2005 of the Court of Appeals in CA-G.R. CV No. 78629 setting aside the Decision [2] dated

December 27, 2002 of the Regional Trial Court in Civil Case No. 1325-96; and (ii) the Resolution [3] dated April

3, 2006 of the Court of Appeals denying reconsideration of the said decision.

 

The facts are well established.

Respondent Baltazar N. Pacleb and his late first wife, Angelita Chan, are the registered owners of an

18,000-square meter parcel of land in Barrio Langcaan, Dasmarias,Cavite, covered by Transfer Certificate of

Title (TCT) No. T-118375[4] (Langcaan Property).

 

In 1992, the Langcaan Property became the subject of three (3) documents purporting to transfer its

ownership. On February 27, 1992, a Deed of Absolute Sale[5] was entered into between Spouses Baltazar N.

Pacleb and Angelita Chan and Rebecca Del Rosario. On May 7, 1992, a Deed of Absolute Sale[6] was entered

into between Rebecca Del Rosario and Ruperto L. Javier (Javier). On November 10, 1992, a Contract to

Sell[7] was entered into between Javier and petitioner spouses Ernesto V. Yu and Elsie Ong Yu. In their

contract, petitioner spouses Yu agreed to pay Javier a total consideration of P900,000. Six hundred thousand

pesos (P600,000) (consisting of P200,000 as previous payment and P400,000 to be paid upon execution of

the contract) was acknowledged as received by Javier and P300,000 remained as balance. Javier undertook to

deliver possession of the Langcaan Property and to sign a deed of absolute sale within thirty (30) days from

execution of the contract.

 

All the aforementioned sales were not registered.

 

On April 23, 1993, petitioner spouses Yu filed with the Regional Trial Court of Imus, Cavite, a Complaint [8] for

specific performance and damages against Javier, docketed as Civil Case No. 741-93, to compel the latter to

deliver to them ownership and possession, as well as title to the Langcaan Property. In their Complaint, they

alleged that Javier represented to them that the Langcaan Property was not tenanted. However, after they

already paid P200,000 as initial payment and entered into an Agreement dated September 11, 1992 for the

sale of the Langcaan Property, they discovered it was tenanted by Ramon C. Pacleb (Ramon). [9] Petitioner

spouses demanded the cancellation of their agreement and the return of their initial payment. Thereafter,

petitioner spouses and Javier verified from Ramon if he was willing to vacate the property and the latter was

agreeable. Javier then promised to make arrangements with Ramon to vacate the property and to pay the

latter his disturbance compensation. Hence, they proceeded to enter into a Contract to Sell canceling the

Agreement mentioned. However, Javier failed to comply with his obligations.

 

Javier did not appear in the proceedings and was declared in default. On September 8, 1994, the trial court

rendered a Decision,[10] the dispositive portion of which reads:

 

WHEREFORE, judgment is hereby rendered for the plaintiff and against the defendant based on the sale of subject parcel of land to the former who is entitled thereby to the ownership and possession thereof from the said defendant who is further directed to pay damages of Thirty Thousand Pesos (P30,000.00) including attorneys fees and expenses incurred by the plaintiff in this case as a consequence.

The defendant is further directed to deliver the certificate of title of the land to the plaintiff who is entitled to it as transferee and new owner thereof upon payment by the plaintiff of his balance of the purchase price in the sum of Three Hundred Thousand Pesos (P300,000.00) with legal interest from date.

SO ORDERED.

 

The said Decision and its Certificate of Finality[11] were annotated on TCT No. T-118375 as Entry No. 2676-

75[12] and Entry No. 2677-75,[13] respectively.

 

On March 10, 1995, petitioner spouses and Ramon and the latters wife, Corazon Bodino, executed

a Kusangloob na Pagsasauli ng Lupang Sakahan at Pagpapahayag ng Pagtalikod sa Karapatan.[14] Under the

said agreement, petitioner spouses paid Ramon the amount of P500,000 in exchange for the waiver of his

tenancy rights over the Langcaan Property.

On October 12, 1995, respondent filed a Complaint[15] for annulment of deed of sale and other documents

arising from it, docketed as Civil Case No. 1199-95. He alleged that the deed of sale purportedly executed

between him and his late first wife and Rebecca Del Rosario was spurious as their signatures thereon were

forgeries. Respondent moved to have summons served upon Rebecca Del Rosario by publication since the

latters address could not be found. The trial court, however, denied his motion.[16] Respondent then moved to

dismiss the case, and the trial court granted the motion in its Order [17] dated April 11, 1996, dismissing the case

without prejudice.

 

Meanwhile, on November 23, 1995, petitioner spouses filed an action for forcible entry against

respondent with the Municipal Trial Court (MTC). They alleged that they had prior physical possession of the

Langcaan Property through their trustee, Ramon, until the latter was ousted by respondent in September 1995.

The MTC ruled in favor of petitioner spouses, which decision was affirmed by the Regional Trial Court.

[18] However, the Court of Appeals set aside the decisions of the lower courts and found that it was respondent

who had prior physical possession of the property as shown by his payment of real estate taxes thereon.[19]

 

On May 29, 1996, respondent filed the instant case for removal of cloud from title with damages to

cancel Entry No. 2676-75 and Entry No. 2677-75, the annotated Decision in Civil Case No. 741-93 and its

Certificate of Finality, from the title of the Langcaan Property. [20] Respondent alleged that the deed of sale

between him and his late first wife and Rebecca Del Rosario, who is not known to them, could not have been

possibly executed on February 27, 1992, the date appearing thereon. He alleged that on said date, he was

residing in the United States[21] and his late first wife, Angelita Chan, died twenty (20) years ago.[22]

On May 28, 1997, during the pendency of the instant case before the trial court, respondent died without

having testified on the merits of his case. Hence, he was substituted by his surviving spouse, Antonieta S.

Pacleb, and Lorna Pacleb-Guerrero, Florencio C. Pacleb and Myrla C. Pacleb representing the children with

the first wife.[23]

 

On December 27, 2002, the trial court dismissed respondents case and held that petitioner spouses are

purchasers in good faith.[24] The trial court ratiocinated that the dismissal of respondents complaint for

annulment of the successive sales at his instance sealed the regularity of the purchase [25] by petitioner spouses

and that he in effect admits that the said salewas valid and in order. [26] Further, the trial court held that the

Decision in Civil Case No. 741-93 on petitioner spouses action for specific performance against Javier is

already final and can no longer be altered. Accordingly, the trial court ordered the cancellation of TCT No. T-

118375 in the name of respondent and the issuance of a new title in the name of petitioner spouses. The trial

court also ordered the heirs of respondent and all persons claiming under them to surrender possession of the

Langcaan Property to petitioner spouses.

On appeal by respondent, the Court of Appeals reversed and set aside the decision of the trial court. [27] The

Court of Appeals ruled that petitioner spouses are not purchasers in good faith and that the Decision in Civil

Case No. 741-93 did not transfer ownership of the Langcaan Property to them. Accordingly, the appellate court

ordered the cancellation of the annotation of the Decision in Civil Case No. 741-93 on the title of the Langcaan

Property. The Court of Appeals denied reconsideration of said decision.[28]

 

Hence, this Petition.

 

Two issues are involved in the instant petition. The first is whether petitioner spouses are innocent purchasers

for value and in good faith. The second is whether ownership over the Langcaan Property was properly vested

in petitioner spouses by virtue of the Decision in Civil Case No. 741-93.

 

Petitioner spouses argue that they are purchasers in good faith. Further, they contend that the Court of

Appeals erred in finding that: Ramon told him [Ernesto V. Yu] that the property is owned by his father, Baltazar,

and that he is the mere caretaker thereof [29] since Ramon clarified that his father was the former owner of the

Langcaan Property.In support of their stance, they cite the following testimony of petitioner Ernesto V. Yu:

 

Atty. Abalos: Mr. Witness, you testified during the direct that you acquired the subject property from one Ruperto Javier, when for the first time have you come to know Mr. Ruperto Javier?

 

A: I first came to know him in the year 1992 when he was accompanied by Mr. Kalagayan. He showed me some papers to the office.

 

Q: Do you know the exact date Mr. Witness?

 

A: I forgot the exact date, maam.

 

Q: More or less can you estimate what month?

 

A: Sometime in February or March 1992.

 

Q: When you said that the subject property was offered to you for sale, what did you do Mr. Witness, in preparation for a transaction?

 

A: I asked my lawyer Atty. Florencio Paredes to check and verify the Deed of Sale.

Q: And after Atty. Florencio Paredes verified the document you decided to buy the property?

 

A: No, maam. We visited the place.

 

Q: When was that?

 

A: I could not remember the exact date but I visited the place and I met the son, Ramon Pacleb. I went there in order to verify if the property is existing. When I verified that the property is existing Mr. Javier visited me again to follow-up what decision I have but I told him that I will wait for my lawyers advi[c]e.

 

Q: Mr. Witness, what particular instruction did you give to your lawyer?

 

A: To verify the title and the documents.

 

Court: Documents for the title?

 

A: Yes, Your Honor.

 

Atty. Abalos: When you were able to get the title in whose name the title was registered?

 

A: It was registered in the name of the older Pacleb.

 

Court: By the way Mr. Witness, when you said you met Ramon Pacleb the son of the owner of the property, was he residing there or he was (sic) just went there? When you visited the property did you find him to be residing in that property?

 

A: No, Your Honor.

 

Atty. Abalos: You mean to say Mr. Witness, you just met Mr. Ramon Pacleb in the place at the time you went there?

 

A: No, maam. He went to my office with Mr. Kalagayan. He was introduced to me at the Kelly Hardware. I do not know Mr. Ruperto Javier. He told me that there is a property that [is] tenanted and occupied by the son Ramon Pacleb after that I went with them to visit the place. On (sic) there he introduced me [to] Mr. Ramon Pacleb the caretaker of the property and I told them that I will still look at the property and he gave me some documents and that (sic) documents I gave it to my lawyer for verification.

 

Q: You said that Mr. Ruperto Javier went to your office with Mr. Kalagayan, so the first time you visited the property you did not see Mr. Ramon Pacleb there?

 

A: No, maam. When I went there I met Ramon Pacleb the caretaker and he was the one who showed the place to us.

 

Q: Mr. Witness, since you visited the place you were able to see the allege[d] caretaker Mr. Ramon Pacleb, did you ask him regarding the property or the whereabouts of the registered owner, did you ask him?

 

A: When Ruperto introduced me to Mr. Ramon Pacleb he told me that he is the son of the owner and he is the caretaker and his father is in the States. He showed me the place, I verified and I saw the monuments and I told him I will come back to check the papers and if it is okay I will bring with me the surveyor.

 

Q: Could you estimate Mr. Witness, more or less what was the month when you were able to talk to Mr. Ramon Pacleb?

 

A: I am not sure but it was morning of February.

 

Q: So it was in February, Mr. Witness?

 

A: I am not sure if February or March.

 

Q: But definitely

 

A: Before I purchased the property I checked the property.

 

Q: But that was definitely after Mr. Ruperto offered to you for sale the subject property?

 

x x x

 

Atty. Abalos: Okay, Mr. Witness, you said that you talked to Mr. Ramon Pacleb and he told you that his father is the owner of the property?

 

A: He told me that property is their former property and it was owned by them. Now, he is the tenant of the property.[30] (Emphasis ours)

 

 

Petitioner spouses conclude that based on their personal inspection of the property and the

representations of the registered tenant thereon, they had no reason to doubt the validity of the deeds of

absolute sale since these were duly notarized. Consequently, the alleged forgery of Angelita Chans signature

is of no moment since they had no notice of any claim or interest of some other person in the property despite

their diligent inquiry.

We find petitioner spouses contentions without merit.

At the outset, we note that in petitioner Ernesto V. Yus testimony, he stated that he inspected the Langcaan

Property and talked with the tenant, Ramon, before he purchased the same. However, in his Complaint for

specific performance and damages which he filed against Javier, he alleged that it was only after he had

entered into an Agreement for the sale of the property and his initial payment of P200,000 that he discovered

that the property was indeed being tenanted by Ramon who lives in the said farm, viz.:

 

8. Sometime on September 11, 1992, defendant came again to the Office of plaintiff reiterating his offer to sell said Lot No. 6853-D, containing an area of 18,000 square meters, at P75.00 per square meters (sic). Defendant manifested to the plaintiff that if his offer is acceptable to the plaintiff, he binds and obligates himself to pay the capital gains of previous transactions with the BIR and register subject Lot No. 6853-D in his name (defendant). On these conditions, plaintiff accepted the offer and made [the] initial payment of TWO HUNDRED THOUSAND PESOS (P200,000.00) to defendant by issuance and delivery of plaintiffs personal check.

 

9. Sometime on September 11, 1992, plaintiff and defendant signed an AGREEMENT on the sale of Lot No. 6853-D of the subdivision plan (LRC) Psd-282604, containing an area of 18,000 square meters, more or less, located at Bo. Langcaan, Municipality of Dasmarinas, Province of Cavite, at a selling price of P75.00 per square meter. A xerox copy of this AGREEMENT signed by the parties thereto is hereto attached and marked as ANNEX D of this complaint.

 

10. Thereafter, however, plaintiff and defendant, with their surveyor discovered that subject Lot No. 6853-D offered for sale to the plaintiff is indeed being tenanted by one RAMON PACLEB who lives in the said farm.

 

11. In view of the foregoing developments, plaintiff informed defendant that he wanted the Agreement be cancelled and for the defendant to return the sum of TWO HUNDRED THOUSAND PESOS (P200,000.00).[31] (Emphasis supplied)

 

This inconsistency casts grave doubt as to whether petitioner spouses personally inspected the

property before purchasing it.

 

More importantly, however, several facts should have put petitioner spouses on inquiry as to the

alleged rights of their vendor, Javier, over the Langcaan Property.

 

First, it should be noted that the property remains to be registered in the name of respondent despite

the two (2) Deeds of Absolute Sale[32] purporting to transfer the Langcaan Property from respondent and his

late first wife, Angelita Chan, to Rebecca Del Rosario then from the latter to Javier. Both deeds were not even

annotated in the title of the Langcaan Property.

 

Second, a perusal of the two deeds of absolute sale reveals that they were executed only about two (2)

months apart and that they contain identical provisions.

 

Third, it is undisputed that the Langcaan Property is in the possession of Ramon, the son of the

registered owner. Regardless of the representations given by the latter, this bare fact alone should have made

petitioner spouses suspicious as to the veracity of the alleged title of their vendor.  Moreover, as noted by the

Court of Appeals, petitioner spouses could have easily verified the true status of the Langcaan Property from

Ramons wife, since the latter is their relative, as averred in paragraph 13 of their Answer in Civil Case No.

1199-95.[33] The case law is well settled, viz.:

 

The law protects to a greater degree a purchaser who buys from the registered owner himself. Corollarily, it requires a higher degree of prudence from one who buys from a person who is not the registered owner, although the land object of the transaction is registered. While one who buys from the registered owner does not need to look behind the certificate of title, one who buys from one who is not the registered owner is expected to examine not only the certificate of title but all factual circumstances necessary for him to determine if there are any flaws in the title of the transferor, or in his capacity to transfer the land.

 

This Court has consistently applied the stricter rule when it comes to deciding the issue of good faith of one who buys from one who is not the registered owner, but who exhibits a certificate of title.[34] (Emphasis supplied)

 

Finally, as correctly pointed out by the Court of Appeals, the dismissal of Civil Case No. 1199-95 (the

action to annul the successive sales of the property) cannot serve to validate the sale to petitioner spouses

since the dismissal was ordered because Rebecca Del Rosario and Javier could no longer be found. Indeed,

the dismissal was without prejudice.

 

Based on the foregoing, therefore, petitioner spouses cannot be considered as innocent purchasers in

good faith.

 

We now go to the second issue.

 

Petitioner spouses argue that the decision of the Regional Trial Court in Civil Case No. 741-93 as to the rightful

owner of the Langcaan Property is conclusive and binding upon respondent even if the latter was not a party

thereto since it involved the question of possession and ownership of real property, and is thus not merely an

action in personam but an action quasi in rem.

 

In Domagas v. Jensen,[35] we distinguished between actions in personam and actions quasi in rem.

 

The settled rule is that the aim and object of an action determine its character. Whether a proceeding is in rem, or in personam, or quasi in rem for that matter, is determined by its nature and purpose, and by these only. A proceeding in personam is a proceeding to enforce personal rights and obligations brought against the person and is based on the jurisdiction of the person, although it may involve his right to, or the exercise of ownership of, specific property, or seek to compel him to control or dispose of it in accordance with the mandate of the court. The purpose of a proceeding in personam is to impose, through the judgment of a court, some responsibility or liability directly upon the person of the defendant. Of this character are suits to compel a defendant to specifically perform some act or actions to fasten a pecuniary liability on him. An action in personam is said to be one which has for its object a judgment against the person, as distinguished from a judgment against the propriety (sic) to determine its state. It has been held that an action in personam is a proceeding to enforce personal rights or obligations; such action is brought against the person.

 

x x x

 

On the other hand, a proceeding quasi in rem is one brought against persons seeking to subject the property of such persons to the discharge of the claims assailed. In an action quasi in rem, an individual is named as defendant and the purpose of the proceeding is to subject his interests therein to the obligation or loan burdening the property . Actions quasi in remdeal with the status, ownership or liability of a particular property but which are intended to operate on these questions only as between the particular parties to the

proceedings and not to ascertain or cut off the rights or interests of all possible claimants. The judgments therein are binding only upon the parties who joined in the action.

 

Civil Case No. 741-93 is an action for specific performance and damages filed by petitioner spouses against

Javier to compel performance of the latters undertakings under their Contract to Sell.  As correctly held by the

Court of Appeals, its object is to compel Javier to accept the full payment of the purchase price, and to execute

a deed of absolute sale over the Langcaan Property in their favor. The obligations of Javier under the contract

to sell attach to him alone, and do not burden the Langcaan Property.[36]

 

We have held in an unbroken string of cases that an action for specific performance is an action in

personam.[37] In Cabutihan v. Landcenter Construction and Development Corporation,[38] we ruled that an

action for specific performance praying for the execution of a deed of sale in connection with an undertaking in

a contract, such as the contract to sell, in this instance, is an action in personam.

 

Being a judgment in personam, Civil Case No. 741-93 is binding only upon the parties properly impleaded

therein and duly heard or given an opportunity to be heard.[39]Therefore, it cannot bind respondent since he

was not a party therein. Neither can respondent be considered as privy thereto since his signature and that of

his late first wife, Angelita Chan, were forged in the deed of sale.

 

All told, we affirm the ruling of the Court of Appeals finding that, as between respondent and petitioner

spouses, respondent has a better right over the Langcaan Property as the true owner thereof.

IN VIEW WHEREOF, the petition is DENIED. The decision of the Court of Appeals is affirmed. Costs

against petitioners.

 

SO ORDERED.

 

FIRST DIVISION  

CEBU WINLAND DEVELOPMENT G.R. No. 173215CORPORATION,

Petitioner,

 

Present:

 

PUNO, C.J., Chairperson,

- versus - CARPIO,

CORONA,

LEONARDO-DE CASTRO, and

BERSAMIN, JJ.

 

 

ONG SIAO HUA, Promulgated:

Respondent. May 21, 2009

x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x

D E C I S I O N 

PUNO, C.J.: 

 

Before us is a Petition for Review[1] filed under Rule 45 of the Rules of Court assailing the Decision [2] dated

February 14, 2006 of the Court of Appeals and its Resolution[3]dated June 2, 2006 denying petitioners motion

for reconsideration of the said decision.

 

The facts are undisputed.

 

Petitioner, Cebu Winland Development Corporation, is the owner and developer of a condominium project

called the Cebu Winland Tower Condominium located in Juana Osmea Extension, Cebu City.

 

Respondent, Ong Siao Hua, is a buyer of two condominium units and four parking slots from petitioner.

 

Sometime before January 6, 1995 while the Cebu Winland Tower Condominium was under construction,

petitioner offered to sell to respondent condominium units at promotional prices. As an added incentive,

petitioner offered a 3% discount provided 30% of the purchase price is paid as down payment and the balance

paid in 24 equal monthly installments.

 

On January 6, 1995, respondent accepted the offer of petitioner and bought two condominium units designated

as Unit Nos. 2405 and 2406, as well as four parking slots designated as slots 91, 99, 101 and 103 (subject

properties).

 

The area per condominium unit as indicated in petitioners price list is 155 square meters and the price per

square meter is P22,378.95. The price for the parking slot is P240,000 each. Respondent, therefore,

paid P2,298,655.08 as down payment and issued 24 postdated checks in the amount of P223,430.70 per

check for the balance of the purchase price in the total amount of P5,362,385.19 computed as follows:[4]

 

155 sq.m./unit x 2 units x P22,378.95/sq.m. P6,937,474.50

4 parking slots at P240,000/slot 960,000.00

Sub-total P 7,897,474.50

Less: 3% discount ( 236,924.23)

Net purchase price P 7,660,550.27

30% down payment ( 2,298,165.08)

Balance at P223,430.70 per month for 24

months

P   5,362,385.19

 

The parties did not execute any written document setting forth the said transaction.

 

On October 10, 1996, possession of the subject properties was turned over to respondent.[5]

 

After the purchase price was fully paid with the last check dated January 31, 1997, respondent requested

petitioner for the condominium certificates of title evidencing ownership of the units. Petitioner then sent to

respondent, for the latters signature, documents denominated as Deeds of Absolute Sale for the two

condominium units.

 

Upon examination of the deed of absolute sale of Unit No. 2405 and the identical document for Unit No. 2406,

respondent was distressed to find that the stated floor area is only 127 square meters contrary to the area

indicated in the price list which was 155 square meters. Respondent caused a verification survey of the said

condominium units and discovered that the actual area is only 110 square meters per unit. Respondent

demanded from petitioner to refund the amount of P2,014,105.50 representing excess payments for the

difference in the area, computed as follows:[6]

 

155 sq.m.-110 = 45 x 2 units = 90 sq.m. x P22,378.95 = P2,014,105.50

 

Petitioner refused to refund the said amount to respondent. Consequently, respondent filed a Complaint[7] on

August 7, 1998 in the Regional Office of the Housing and Land Use Regulatory Board (HLURB) in Cebu City,

praying for the refund of P2,014,105.50 plus interest, moral damages and attorneys fees, including the

suspension of petitioners license to sell. The case was docketed as HLURB Case No. REM-0220-080798.

 

On December 6, 1999, the Housing and Land Use Arbiter (the Arbiter) rendered a Decision [8] dismissing the

complaint. The Arbiter found petitioner not guilty of misrepresentation. Considering further that the subject

properties have been delivered on October 10, 1996 and respondent filed his complaint only on August 7,

1998, the Arbiter further ruled that respondents action had already prescribed pursuant to Article 1543, [9] in

relation to Articles 1539 and 1542,[10] of the Civil Code. The dispositive portion of the said decision reads:

 

WHEREFORE, Premises Considered, judgment is hereby rendered DISMISSING this Complaint, and ordering the parties to do the following, to wit:

 

1.      For the Complainant to SIGN the two (2) Deed[s] of Absolute Sale which this Board finds to be in order within 30 days from finality of this decision; and

 

2.      For the Respondent to DELIVER the corresponding condominium certificate of title for the two units namely units 2405 and 2406 free from all liens and encumbrances.

 

Consequently, the counterclaim is likewise dismissed for it finds no evidence that Complainant acted in bad faith in filing this complaint.

 

Cost against the parties.

SO ORDERED.[11]

 

Aggrieved, respondent filed a Petition for Review of said decision with the Board of Commissioners of the

HLURB (the Board). In the course of its proceedings, the Board ordered that an ocular inspection of Unit Nos.

2405 and 2406 be conducted by an independent engineer. The Board further ordered that there should be two

measurements of the areas in controversy, one based on the master deed and another based on the internal

surface of the perimeter wall. After the ocular inspection, the independent geodetic engineer found the

following measurements:

 

Unit 2405- Based on internal face of perimeter wall = 109 sq. m. Based on master deed = 115 sq. m.

 

Unit 2406- Based on internal face of perimeter wall = 110 sq. m.

Based on master deed = 116 sq. m.[12]

Thereafter, the Board rendered its Decision[13] dated June 8, 2004 affirming the Arbiters finding that

respondents action had already prescribed. However, the Board found that there was a mistake regarding the

object of the sale constituting a ground for rescission based on Articles 1330 and 1331 [14] of the Civil

Code. Hence, the Board modified the decision 

of the Arbiter as follows:

Wherefore[,] the decision of the [O]ffice below is hereby modified with the following additional directive:

 

In the alternative, and at the option of the complainant, the contract is rescinded and the respondent is directed to refund to (sic) P7,660,550[.]27 while complainant is directed to turn over possession of the units 2405, 2406 and the four parking lots to the respondent.

 

So ordered.[15]

 

Not satisfied with the decision of the Board, petitioner filed an appeal to the Office of the President

arguing that the Board erred in granting relief to respondent considering that the latters action had already

prescribed. On March 11, 2005, the Office of the President rendered a Decision [16] finding that respondents

action had already prescribed pursuant to Article 1543 of the Civil Code. The dispositive portion of said

decision reads as follows:

 

WHEREFORE, premises considered, the Decision dated June 8, 2004 of the HLURB is hereby MODIFIED and the Decision dated December 6, 1999 of the Housing and Land Use Arbiter is hereby REINSTATED.

 

SO ORDERED.[17]

 

Respondent filed a Motion for Reconsideration but the same was denied by the Office of the President

in a Resolution[18] dated June 20, 2005. Hence, respondent filed a Petition for Review before the Court of

Appeals.

 

On February 14, 2006, the Court of Appeals rendered the assailed Decision finding that respondents

action has not prescribed. The dispositive portion of the Decision reads:

 

WHEREFORE, in view of the foregoing premises, judgment is hereby rendered by us GRANTING the petition filed in this case, REVERSING and SETTING ASIDE the assailed Decision and Resolution of the Office of the President dated March 11, 2005 and June 20, 2005, respectively, and reinstating the Decision promulgated by the Board of Commissioners of the HLURB on June 8, 2004.

 

SO ORDERED.[19]

 

 

Petitioners Motion for Reconsideration[20] of the assailed decision having been denied in the Resolution

dated June 2, 2006, petitioner is now before us, in this petition for review raising the following grounds:

 

I.

 

The Court of Appeals Erred in Holding That in A Contract of Sale Ownership Is Not Transferred by Delivery[.]

 

II.

 

The Court of Appeals Erred in Holding That Respondents Action Has Not Prescribed.

 

III.

 

The Court of Appeals Erred And Exceeded Its Jurisdiction When It Found Petitioner Guilty Of Misrepresentation As The Decision Of The HLURB Board of Commissioners On The Same Matter Is Final With Respect To Respondent Who Did Not Appeal Said Decision That Petitioner Did Not Commit Misrepresentation.[21]

 

 

The issue before us is whether respondents action has prescribed pursuant to Article 1543, in relation to

Articles 1539 and 1542 of the Civil Code, to wit:

 

ARTICLE 1539. The obligation to deliver the thing sold includes that of placing in the control of the vendee all that is mentioned in the contract, in conformity with the following rules: 

If the sale of real estate should be made with a statement of its area, at the rate of a certain price for a unit of measure or number, the vendor shall be obliged to deliver to the vendee, if the latter should demand it, all that may have been stated in the contract; but, should this be not possible, the vendee may choose between a proportional reduction of the price and the rescission of the contract, provided that, in the latter case, the lack in the area be not less than one-tenth of that stated. 

The same shall be done, even when the area is the same, if any part of the immovable is not of the quality specified in the contract.

The rescission, in this case, shall only take place at the will of the vendee, when the inferior value of the thing sold exceeds one-tenth of the price agreed upon. 

Nevertheless, if the vendee would not have bought the immovable had he known of its smaller area or inferior quality, he may rescind the sale. (1469a) [Emphasis supplied]

 ARTICLE 1542. In the sale of real estate, made for a lump sum and not at the rate of a

certain sum for a unit of measure or number, there shall be no increase or decrease of the price, although there be a greater or lesser area or number than that stated in the contract.

 

The same rule shall be applied when two or more immovables are sold for a single price; but if, besides mentioning the boundaries, which is indispensable in every conveyance of real estate, its area or number should be designated in the contract, the vendor shall be bound to deliver all that is included within said boundaries, even when it exceeds the area or number specified in the contract; and, should he not be able to do so, he shall suffer a reduction in the price, in proportion to what is lacking in the area or number, unless the contract is rescinded because the vendee does not accede to the failure to deliver what has been stipulated. (1471) [Emphasis supplied]

 ARTICLE 1543. The actions arising from Articles 1539 and 1542 shall prescribe in six

months, counted from the day of delivery. (1472a) [Emphasis supplied]

 

Petitioner argues that it delivered possession of the subject properties to respondent on October 10, 1996,

hence, respondents action filed on August 7, 1998 has already prescribed.

 

Respondent, on the one hand, contends that his action has not prescribed because the prescriptive period has

not begun to run as the same must be reckoned from the execution of the deeds of sale which has not yet

been done.

 

The resolution of the issue at bar necessitates a scrutiny of the concept of delivery in the context of the Law on

Sales or as used in Article 1543 of the Civil Code. Under the Civil Code, the vendor is bound to transfer the

ownership of and deliver the thing which is the object of the sale. The pertinent provisions of the Civil Code on

the obligation of the vendor to deliver the object of the sale provide:

 

ARTICLE 1495. The vendor is bound to transfer the ownership of and deliver, as well as warrant the thing which is the object of the sale. (1461a)

 

ARTICLE 1496. The ownership of the thing sold is acquired by the vendee from the moment it is delivered to him in any of the ways specified in Articles 1497 to 1501, or in any other manner signifying an agreement that the possession is transferred from the vendor to the vendee. (n)

 

ARTICLE 1497. The thing sold shall be understood as delivered, when it is placed in the control and possession of the vendee. (1462a)

 

ARTICLE 1498. When the sale is made through a public instrument, the execution thereof shall be equivalent to the delivery of the thing which is the object of the contract, if from the deed the contrary does not appear or cannot clearly be inferred.

 

xxxx

Under the Civil Code, ownership does not pass by mere stipulation but only by delivery.

[22] Manresa explains, the delivery of the thing . . . signifies that title has passed from the seller to the

buyer."[23] According to Tolentino, the purpose of delivery is not only for the enjoyment of the thing but also a

mode of acquiring dominion and determines the transmission of ownership, the birth of the real right. The

delivery under any of the forms provided by Articles 1497 to 1505 of the Civil Code signifies that the

transmission of ownership from vendor to vendee has taken place.[24]

 

Article 1497 above contemplates what is known as real or actual delivery, when the thing sold is placed in the

control and possession of the vendee. Article 1498, on the one hand, refers to symbolic delivery by the

execution of a public instrument. It should be noted, however, that Article 1498 does not say that the execution

of the deed provides a conclusive presumption of the delivery of possession. It confines itself to providing that

the execution thereof is equivalent to delivery, which means that the presumption therein can be rebutted by

means of clear and convincing evidence. Thus, the presumptive delivery by the execution of a public

instrument can be negated by the failure of the vendee to take actual possession of the land sold.[25]

In Equatorial Realty Development, Inc. v. Mayfair Theater, Inc.,[26] the concept of delivery was explained as

follows:

 

Delivery has been described as a composite act, a thing in which both parties must join and the minds of both parties concur. It is an act by which one party parts with the title to and the possession of the property, and the other acquires the right to and the possession of the same. In its natural sense, delivery means something in addition to the delivery of property or title; it means transfer of possession. In the Law on Sales, delivery may be either actual or constructive, but both forms of delivery contemplate "the absolute giving up of the control and custody of the property on the part of the vendor, and the assumption of the same by the vendee." (Emphasis supplied)

 

In light of the foregoing, delivery as used in the Law on Sales refers to the concurrent transfer

of two things: (1) possession and (2) ownership. This is the rationale behind the jurisprudential doctrine

that presumptive delivery via execution of a public instrument is negated by the reality that the vendee actually

failed to obtain material possession of the land subject of the sale. [27] In the same vein, if the vendee is

placed in actual possession of the property, but by agreement of the parties ownership of the same is

retained by the vendor until the vendee has fully paid the price, the mere transfer of the possession of

the property subject of the sale is not the delivery contemplated in the Law on Sales or as used in

Article 1543 of the Civil Code.

 

In the case at bar, it appears that respondent was already placed in possession of the subject

properties. However, it is crystal clear that the deeds of absolute sale were still to be executed by the parties

upon payment of the last installment. This fact shows that ownership of the said properties was withheld by

petitioner. Following case law, it is evident that the parties did not intend to immediately transfer ownership of

the subject properties until full payment and the execution of the deeds of absolute sale. [28]Consequently, there

is no delivery to speak of in this case since what was transferred was possession only and not ownership of

the subject properties.

 

We, therefore, hold that the transfer of possession of the subject properties on October 10, 1996 to

respondent cannot be considered as delivery within the purview of Article 1543 of the Civil Code. It follows that

since there has been no transfer of ownership of the subject properties since the deeds of absolute sale have

not yet been executed by the parties, the action filed by respondent has not prescribed.

 

The next issue is whether the sale in the case at bar is one made with a statement of its area or at the

rate of a certain price for a unit of measure and not for a lump sum.Article 1539 provides that If the sale of real

estate should be made with a statement of its area, at the rate of a certain price for a unit of measure or

number, the vendor shall be obliged to deliver to the vendeeall that may have been stated in the contract; but,

should this be not possible, the vendee may choose between a proportional reduction of the price and the

rescission of the contract. Article 1542, on the one hand, provides that In the sale of real estate, made for a

lump sum and not at the rate of a certain sum for a unit of measure or number, there shall be no increase or

decrease of the price, although there be a greater or lesser area or number than that stated in the contract."

 

The distinction between Article 1539 and Article 1542 was explained by Manresa[29] as follows:

 

. . . If the sale was made for a price per unit of measure or number, the consideration of the contract with respect to the vendee, is the number of such units, or, if you wish, the thing purchased as determined by the stipulated number of units. But if, on the other hand, the sale was made for a lump sum, the consideration of the contract is the object sold, independently of its number or measure, the thing as determined by the stipulated boundaries, which has been called in law a determinate object.

 

This difference in consideration between the two cases implies a distinct regulation of the obligation to deliver the object, because, for an acquittance delivery must be made in accordance with the agreement of the parties, and the performance of the agreement must show the confirmation, in fact, of the consideration which induces each of the parties to enter into the contract.

 

In Rudolf Lietz, Inc. v. Court of Appeals,[30] we held:

 

Article 1539 governs a sale of immovable by the unit, that is, at a stated rate per unit area. In a unit price contract, the statement of area of immovable is not conclusive and the price may be reduced or increased depending on the area actually delivered. If the vendor delivers less than the area agreed upon, the vendee may oblige the vendor to deliver all that may be stated in the contract or demand for the proportionate reduction of the purchase price if delivery is not possible. If the vendor delivers more than the area stated in the contract, the vendee has the option to accept only the amount agreed upon or to accept the whole area, provided he pays for the additional area at the contract rate.

 

In some instances, a sale of an immovable may be made for a lump sum and not at a rate per unit. The parties agree on a stated purchase price for an immovable the area of which may be declared based on an estimate or where both the area and boundaries are stated.

 

In the case where the area of the immovable is stated in the contract based on an estimate, the actual area delivered may not measure up exactly with the area stated in the contract. According to Article 1542 of the Civil Code, in the sale of real estate, made for a lump sum and not at the rate of a certain sum for a unit of measure or number, there shall be no increase or decrease of the price although there be a greater or lesser area or number than that stated in the contract. However, the discrepancy must not be substantial. A vendee of land, when sold in gross or with the description "more or less" with reference to its area, does not thereby ipso facto take all risk of quantity in the land. The use of "more or less" or similar words in designating quantity covers only a reasonable excess or deficiency.

 

Where both the area and the boundaries of the immovable are declared, the area covered within the boundaries of the immovable prevails over the stated area. In cases of conflict between areas and boundaries, it is the latter which should prevail. What really defines a piece of ground is not the area, calculated with more or less certainty, mentioned in its description, but the boundaries therein laid down, as enclosing the land and indicating its limits. In a contract of sale of land in a mass, it is well established that the specific boundaries stated in the contract must control over any statement with respect to the area contained within its boundaries. It is not of vital consequence that a deed or contract of sale of land should disclose the area with mathematical accuracy. It is sufficient if its extent is objectively indicated with sufficient precision to enable one to identify it. An error as to the superficial area is immaterial. Thus, the obligation of the vendor is to deliver everything within the boundaries, inasmuch as it is the entirety thereof that distinguishes the determinate object.

 

In the case at bar, it is undisputed by the parties that the purchase price of the subject properties was

computed based on the price list prepared by petitioner, or P22,378.95 per square meter. Clearly, the parties

agreed on a sale at a rate of a certain price per unit of measure and not one for a lump sum. Hence, it is Article

1539 and not Article 1542 which is the applicable law. Accordingly, respondent is entitled to the relief afforded

to him under Article 1539, that is, either a proportional reduction of the price or the rescission of the contract, at

his option. Respondent chose the former remedy since he prayed in his Complaint for the refund of the amount

of P2,014,105.50 representing the proportional reduction of the price paid to petitioner.

 

In its decision, the Court of Appeals held that the action filed by respondent has not prescribed and reinstated

the decision of the Board. It is an error to reinstate the decision of the Board. The Board, in its decision, held

that there was a mistake regarding the object of the sale constituting a ground for rescission based on Articles

1330 and 1331 of the Civil Code. It then granted the relief of rescission at the option of respondent. Articles

1330 and 1331 of the Civil Code provide:

 

ARTICLE 1330. A contract where consent is given through mistake, violence, intimidation, undue influence, or fraud is voidable. (1265a) 

ARTICLE 1331. In order that mistake may invalidate consent, it should refer to the substance of the thing which is the object of the contract, or to those conditions which have principally moved one or both parties to enter into the contract.

 

We find that these articles are inapplicable to the case at bar. In order that mistake may invalidate consent and

constitute a ground for annulment of contract based on Article 1331, the mistake must be material as to go to

the essence of the contract; that without such mistake, the agreement would not have been made. [31] The effect

of error must be determined largely by its influence upon the party. If the party would have entered into the

contract even if he had knowledge of the true fact, then the error does not vitiate consent.[32]

 

In the case at bar, the relief sought by respondent was for a refund and he continued to occupy the subject

properties after he found out that the same were smaller in area. All these show that respondent did not

consider the error in size significant enough to vitiate the contract. Hence, the Court of Appeals erred in

affirming the Boards decision to grant rescission based on Articles 1330 and 1331 of the Civil Code.

 

IN VIEW WHEREOF, the petition is DENIED. The decision of the Court of Appeals is AFFIRMED but

with the MODIFICATION that the decision of the HLURB is not reinstated. Petitioner is ordered to refund the

amount of Two Million Fourteen Thousand One Hundred Five Pesos and Fifty Centavos (P2,014,105.50) to

respondent with legal interest of six percent (6%) per annum from August 7, 1998, the date of judicial

demand. A twelve percent (12%) interest per annum, in lieu of six percent (6%), shall be imposed on such

amount from the date of promulgation of this decision until the payment thereof. Costs against petitioner.

 

SO ORDERED.

Republic of the Philippines

SUPREME COURT

Manila

 FIRST DIVISION

 

ANTHONY ORDUA, DENNIS ORDUA, and ANTONITA ORDUA,

Petitioners,

 

- versus -

 

 

EDUARDO J. FUENTEBELLA, MARCOS S. CID, BENJAMIN F. CID, BERNARD G. BANTA, and ARMANDO GABRIEL, JR.,

Respondents.

  G.R. No. 176841

 

Present:

 

CORONA, C.J., Chairperson,

VELASCO, JR.,

LEONARDO-DE CASTRO,

DEL CASTILLO, and

PEREZ, JJ.

 

Promulgated:

 

June 29, 2010

x-----------------------------------------------------------------------------------------x 

D E C I S I O N

 

 

VELASCO, JR., J.:

 

In this Petition for Review[1] under Rule 45 of the Rules of Court, Anthony Ordua, Dennis Ordua and

Antonita Ordua assail and seek to set aside the Decision[2] of the Court of Appeals (CA) dated December 4,

2006 in CA-G.R. CV No. 79680, as reiterated in its Resolution of March 6, 2007, which affirmed the May 26,

2003 Decision[3] of the Regional Trial Court (RTC), Branch 3 in Baguio City, in Civil Case No. 4984-R, a suit

for annulment of title and reconveyance commenced by herein petitioners against herein respondents.

 

Central to the case is a residential lot with an area of 74 square meters located at Fairview Subdivision,

Baguio City, originally registered in the name of Armando Gabriel, Sr. (Gabriel Sr.) under Transfer Certificate of

Title (TCT) No. 67181 of the Registry of Deeds of Baguio City.[4]

 

As gathered from the petition, with its enclosures, and the comments thereon of four of the five

respondents,[5] the Court gathers the following relevant facts:

 

Sometime in 1996 or thereabouts, Gabriel Sr. sold the subject lot to petitioner Antonita Ordua

(Antonita), but no formal deed was executed to document the sale. The contract price was apparently payable

in installments as Antonita remitted from time to time and Gabriel Sr. accepted partial payments. One of the

Orduas would later testify that Gabriel Sr. agreed to execute a final deed of sale upon full payment of the

purchase price.[6]

 

As early as 1979, however, Antonita and her sons, Dennis and Anthony Ordua, were already occupying

the subject lot on the basis of some arrangement undisclosed in the records and even constructed their house

thereon. They also paid real property taxes for the house and declared it for tax purposes, as evidenced by

Tax Declaration No. (TD) 96-04012-111087[7] in which they place the assessed value of the structure at PhP

20,090.

 

After the death of Gabriel Sr., his son and namesake, respondent Gabriel Jr., secured TCT No. T-

71499[8] over the subject lot and continued accepting payments from the petitioners. On December 12, 1996,

Gabriel Jr. wrote Antonita authorizing her to fence off the said lot and to construct a road in the adjacent lot.

[9] On December 13, 1996, Gabriel Jr. acknowledged receipt of a PhP 40,000 payment from petitioners.

[10] Through a letter[11] dated May 1, 1997, Gabriel Jr. acknowledged that petitioner had so far made an

aggregate payment of PhP 65,000, leaving an outstanding balance of PhP 60,000. A receipt Gabriel Jr. issued

dated November 24, 1997 reflected a PhP 10,000 payment.

 

Despite all those payments made for the subject lot, Gabriel Jr. would later sell it to Bernard Banta

(Bernard) obviously without the knowledge of petitioners, as later developments would show.

 

As narrated by the RTC, the lot conveyance from Gabriel Jr. to Bernard was effected against the

following backdrop: Badly in need of money, Gabriel Jr. borrowed from Bernard the amount of PhP 50,000,

payable in two weeks at a fixed interest rate, with the further condition that the subject lot would answer for the

loan in case of default.Gabriel Jr. failed to pay the loan and this led to the execution of a Deed of Sale [12] dated

June 30, 1999 and the issuance later of TCT No. T-72782[13] for subject lot in the name of Bernard upon

cancellation of TCT No. 71499 in the name of Gabriel, Jr. As the RTC decision indicated, the reluctant Bernard

agreed to acquire the lot, since he had by then ready buyers in respondents Marcos Cid and Benjamin F. Cid

(Marcos and Benjamin or the Cids).

 

Subsequently, Bernard sold to the Cids the subject lot for PhP 80,000. Armed with a Deed of Absolute

Sale of a Registered Land[14] dated January 19, 2000, the Cids were able to cancel TCT No. T-72782 and

secure TCT No. 72783[15] covering the subject lot. Just like in the immediately preceding transaction, the deed

of sale between Bernard and the Cids had respondent Eduardo J. Fuentebella (Eduardo) as one of the

instrumental witnesses.

 

Marcos and Benjamin, in turn, ceded the subject lot to Eduardo through a Deed of Absolute

Sale[16] dated May 11, 2000. Thus, the consequent cancellation of TCT No. T-72782 and issuance on May 16,

2000 of TCT No. T-3276[17] over subject lot in the name of Eduardo.

 

As successive buyers of the subject lot, Bernard, then Marcos and Benjamin, and finally Eduardo,

checked, so each claimed, the title of their respective predecessors-in-interest with the Baguio Registry and

discovered said title to be free and unencumbered at the time each purchased the property. Furthermore,

respondent Eduardo, before buying the property, was said to have inspected the same and found it

unoccupied by the Orduas.[18]

 

Sometime in May 2000, or shortly after his purchase of the subject lot, Eduardo, through his lawyer,

sent a letter addressed to the residence of Gabriel Jr. demanding that all persons residing on or physically

occupying the subject lot vacate the premises or face the prospect of being ejected.[19]

 

Learning of Eduardos threat, petitioners went to the residence of Gabriel Jr. at No. 34 Dominican

Hill, Baguio City. There, they met Gabriel Jr.s estranged wife, Teresita, who informed them about her having

filed an affidavit-complaint against her husband and the Cids for falsification of public documents on March 30,

2000. According to Teresita, her signature on the June 30, 1999 Gabriel Jr.Bernard deed of sale was a forgery.

Teresita further informed the petitioners of her intent to honor the aforementioned 1996 verbal agreement

between Gabriel Sr. and Antonita and the partial payments they gave her father-in-law and her husband for the

subject lot.

 

On July 3, 2001, petitioners, joined by Teresita, filed a Complaint[20] for Annulment of Title,

Reconveyance with Damages against the respondents before the RTC, docketed as Civil Case No. 4984-R,

specifically praying that TCT No. T-3276 dated May 16, 2000 in the name of Eduardo be annulled. Corollary to

this prayer, petitioners pleaded that Gabriel Jr.s title to the lot be reinstated and that petitioners be declared as

entitled to acquire ownership of the same upon payment of the remaining balance of the purchase price

therefor agreed upon by Gabriel Sr. and Antonita.

 

While impleaded and served with summons, Gabriel Jr. opted not to submit an answer.

 

Ruling of the RTC

 

By Decision dated May 26, 2003, the RTC ruled for the respondents, as defendants a quo, and against

the petitioners, as plaintiffs therein, the dispositive portion of which reads:

 

WHEREFORE, the instant complaint is hereby DISMISSED for lack of merit. The four (4) plaintiffs are hereby ordered by this Court to pay each defendant (except Armando Gabriel, Jr., Benjamin F. Cid, and Eduardo J. Fuentebella who did not testify on these damages), Moral Damages of Twenty Thousand (P20,000.00) Pesos, so that each defendant shall receive Moral Damages of Eighty Thousand (P80,000.00) Pesos each. Plaintiffs shall also pay all defendants (except Armando Gabriel, Jr., Benjamin F. Cid, and Eduardo J. Fuentebella who did not testify on these damages), Exemplary Damages of Ten Thousand (P10,000.00) Pesos each so that each defendant shall receive Forty Thousand (P40,000.00) Pesos as Exemplary Damages. Also, plaintiffs are ordered to pay each defendant (except Armando Gabriel, Jr., Benjamin F. Cid, and Eduardo J. Fuentebella who did not testify on these damages), Fifty Thousand (P50,000.00) Pesos as Attorneys Fees, jointly and solidarily.

 

Cost of suit against the plaintiffs.[21]

 

 

On the main, the RTC predicated its dismissal action on the basis of the following grounds and/or premises:

 

 

1. Eduardo was a purchaser in good faith and, hence, may avail himself of the provision of Article

1544[22] of the Civil Code, which provides that in case of double sale, the party in good faith who is able to

register the property has better right over the property;

 

2. Under Arts. 1356[23] and 1358[24] of the Code, conveyance of real property must be in the proper form,

else it is unenforceable;

 

3. The verbal sale had no adequate consideration; and

 

4. Petitioners right of action to assail Eduardos title prescribes in one year from date of the issuance of

such title and the one-year period has already lapsed.

 

From the above decision, only petitioners appealed to the CA, their appeal docketed as CA-G.R. CV

No. 79680.

 

The CA Ruling

 

On December 4, 2006, the appellate court rendered the assailed Decision affirming the RTC

decision. The fallo reads:

WHEREFORE, premises considered, the instant appeal is hereby DISMISSED and the 26 May 2003 Decision of the Regional Trial Court, Branch 3 of Baguio City in Civil Case No. 4989-R is hereby AFFIRMED.

 

SO ORDERED.[25]

 

 

Hence, the instant petition on the submission that the appellate court committed reversible error of law:

 

1. xxx WHEN IT HELD THAT THE SALE OF THE SUBJECT LOT BY ARMANDO GABRIEL, SR. AND RESPONDENT ARMANDO GABRIEL, JR. TO THE PETITIONERS IS UNENFORCEABLE.

 

2. xxx IN NOT FINDING THAT THE SALE OF THE SUBJECT LOT BY RESPONDENT ARMANDO GABRIEL, JR. TO RESPONDENT BERNARD BANTA AND ITS SUBSEQUENT SALE BY THE LATTER TO HIS CO-RESPONDENTS ARE NULL AND VOID.

 

3. xxx IN NOT FINDING THAT THE RESPONDENTS ARE BUYERS IN BAD FAITH

 

4. xxx IN FINDING THAT THE SALE OF THE SUBJECT LOT BETWEEN GABRIEL, SR. AND RESPONDENT GABRIEL, JR. AND THE PETITIONERS HAS NO ADEQUATE CONSIDERATION.

 

5. xxx IN RULING THAT THE INSTANT ACTION HAD ALREADY PRESCRIBED.

 

6. xxx IN FINDING THAT THE PLAINTIFFS-APPELLANTS ARE LIABLE FOR MORAL AND EXEMPLARY DAMAGES AND ATTORNEYS FEES.[26]

 

 

The Courts Ruling

 

The core issues tendered in this appeal may be reduced to four and formulated as follows, to wit: first,

whether or not the sale of the subject lot by Gabriel Sr. to Antonita is unenforceable under the Statute of

Frauds; second, whether or not such sale has adequate consideration; third, whether the instant action has

already prescribed; and, fourth, whether or not respondents are purchasers in good faith.

The petition is meritorious.

 

Statute of Frauds Inapplicable

to Partially Executed Contracts

 

 

It is undisputed that Gabriel Sr., during his lifetime, sold the subject property to Antonita, the purchase

price payable on installment basis. Gabriel Sr. appeared to have been a recipient of some partial payments.

After his death, his son duly recognized the sale by accepting payments and issuing what may be considered

as receipts therefor. Gabriel Jr., in a gesture virtually acknowledging the petitioners dominion of the property,

authorized them to construct a fence around it. And no less than his wife, Teresita, testified as to the fact of

sale and of payments received.

 

Pursuant to such sale, Antonita and her two sons established their residence on the lot, occupying the

house they earlier constructed thereon. They later declared the property for tax purposes, as evidenced by the

issuance of TD 96-04012-111087 in their or Antonitas name, and paid the real estates due thereon, obviously

as sign that they are occupying the lot in the concept of owners.

 

Given the foregoing perspective, Eduardos assertion in his Answer that persons appeared in the

property[27] only after he initiated ejectment proceedings[28] is clearly baseless. If indeed petitioners entered and

took possession of the property after he (Eduardo) instituted the ejectment suit, how could they explain the fact

that he sent a demand letter to vacate sometime in May 2000?

 

With the foregoing factual antecedents, the question to be resolved is whether or not the Statute of

Frauds bars the enforcement of the verbal sale contract between Gabriel Sr. and Antonita.

The CA, just as the RTC, ruled that the contract is unenforceable for non-compliance with the Statute of

Frauds.

 

We disagree for several reasons. Foremost of these is that the Statute of Frauds expressed in Article

1403, par. (2),[29] of the Civil Code applies only to executory contracts, i.e., those where no performance has

yet been made. Stated a bit differently, the legal consequence of non-compliance with the Statute does not

come into play where the contract in question is completed, executed, or partially consummated.[30]

 

The Statute of Frauds, in context, provides that a contract for the sale of real property or of an interest

therein shall be unenforceable unless the sale or some note or memorandum thereof is in writing and

subscribed by the party or his agent. However, where the verbal contract of sale has been partially executed

through the partial payments made by one party duly received by the vendor, as in the present case, the

contract is taken out of the scope of the Statute.

 

The purpose of the Statute is to prevent fraud and perjury in the enforcement of obligations depending

for their evidence on the unassisted memory of witnesses, by requiring certain enumerated contracts and

transactions to be evidenced by a writing signed by the party to be charged.[31] The Statute requires certain

contracts to be evidenced by some note or memorandum in order to be enforceable.  The

term Statute of Frauds is descriptive of statutes that require certain classes of contracts to be in writing.  The

Statute does not deprive the parties of the right to contract with respect to the matters therein involved, but

merely regulates the formalities of the contract necessary to render it enforceable.[32]

 

Since contracts are generally obligatory in whatever form they may have been entered into, provided all

the essential requisites for their validity are present,[33] the Statute simply provides the method by which the

contracts enumerated in Art. 1403 (2) may be proved but does not declare them invalid because they are not

reduced to writing.  In fine, the form required under the Statute is for convenience or evidentiary purposes

only. 

 

There can be no serious argument about the partial execution of the sale in question. The records show

that petitioners had, on separate occasions, given Gabriel Sr. and Gabriel Jr. sums of money as partial

payments of the purchase price. These payments were duly receipted by Gabriel Jr. To recall, in his letter of

May 1, 1997, Gabriel, Jr. acknowledged having received the aggregate payment of PhP 65,000 from

petitioners with the balance of PhP 60,000 still remaining unpaid. But on top of the partial payments thus

made, possession of the subject of the sale had been transferred to Antonita as buyer. Owing thus to its partial

execution, the subject sale is no longer within the purview of the Statute of Frauds.

 

Lest it be overlooked, a contract that infringes the Statute of Frauds is ratified by the acceptance of

benefits under the contract.[34] Evidently, Gabriel, Jr., as his father earlier, had benefited from the partial

payments made by the petitioners. Thus, neither Gabriel Jr. nor the other respondentssuccessive purchasers

of subject lotscould plausibly set up the Statute of Frauds to thwart petitioners efforts towards establishing their

lawful right over the subject lot and removing any cloud in their title. As it were, petitioners need only to pay the

outstanding balance of the purchase price and that would complete the execution of the oral sale.

 

There was Adequate Consideration

 

Without directly saying so, the trial court held that the petitioners cannot sue upon the oral sale since in

its own words: x x x for more than a decade, [petitioners] have not paid in full Armando Gabriel, Sr. or his

estate, so that the sale transaction between Armando Gabriel Sr. and [petitioners] [has] no adequate

consideration.

 

The trial courts posture, with which the CA effectively concurred, is patently flawed. For starters, they

equated incomplete payment of the purchase price with inadequacy of price or what passes as lesion, when

both are different civil law concepts with differing legal consequences, the first being a ground to rescind an

otherwise valid and enforceable contract. Perceived inadequacy of price, on the other hand, is not a sufficient

ground for setting aside a sale freely entered into, save perhaps when the inadequacy is shocking to the

conscience.[35]

 

The Court to be sure takes stock of the fact that the contracting parties to the 1995 or 1996 sale agreed

to a purchase price of PhP 125,000 payable on installments. But the original lot owner, Gabriel Sr., died before

full payment can be effected. Nevertheless, petitioners continued remitting payments to Gabriel, Jr., who sold

the subject lot to Bernard on June 30, 1999. Gabriel, Jr., as may be noted, parted with the property only for

PhP 50,000. On the other hand, Bernard sold it for PhP 80,000 to Marcos and Benjamin.  From the foregoing

price figures, what is abundantly clear is that what Antonita agreed to pay Gabriel, Sr., albeit in installment,

was very much more than what his son, for the same lot, received from his buyer and the latters buyer

later. The Court, therefore, cannot see its way clear as to how the RTC arrived at its simplistic conclusion

about the transaction between Gabriel Sr. and Antonita being without adequate consideration.

 

The Issues of Prescription and the Bona

Fides of the Respondents as Purchasers

 

 

Considering the interrelation of these two issues, we will discuss them jointly.

 

There can be no quibbling about the fraudulent nature of the conveyance of the subject lot effected by

Gabriel Jr. in favor of Bernard. It is understandable that after his fathers death, Gabriel Jr. inherited subject lot

and for which he was issued TCT No. No. T-71499. Since the Gabriel Sr. Antonita sales transaction called for

payment of the contract price in installments, it is also understandable why the title to the property remained

with the Gabriels. And after the demise of his father, Gabriel Jr. received payments from the Orduas and even

authorized them to enclose the subject lot with a fence. In sum, Gabriel Jr. knew fully well about the sale and is

bound by the contract as predecessor-in-interest of Gabriel Sr. over the property thus sold.

 

Yet, the other respondents (purchasers of subject lot) still maintain that they are innocent purchasers

for value whose rights are protected by law and besides which prescription has set in against petitioners action

for annulment of title and reconveyance.

 

The RTC and necessarily the CA found the purchaser-respondents thesis on prescription correct

stating in this regard that Eduardos TCT No. T-3276 was issued on May 16, 2000 while petitioners filed their

complaint for annulment only on July 3, 2001. To the courts below, the one-year prescriptive period to assail

the issuance of a certificate of title had already elapsed.

 

We are not persuaded.

 

The basic complaint, as couched, ultimately seeks the reconveyance of a fraudulently registered piece

of residential land. Having possession of the subject lot, petitioners right to the reconveyance thereof, and the

annulment of the covering title, has not prescribed or is not time-barred. This is so for an action for annulment

of title or reconveyance based on fraud is imprescriptible where the suitor is in possession of the property

subject of the acts,[36] the action partaking as it does of a suit for quieting of title which is imprescriptible.

[37] Such is the case in this instance. Petitioners have possession of subject lots as owners having purchased

the same from Gabriel, Sr. subject only to the full payment of the agreed price.

 

The prescriptive period for the reconveyance of fraudulently registered real property is 10 years,

reckoned from the date of the issuance of the certificate of title, if the plaintiff is not in possession, but

imprescriptible if he is in possession of the property.[38] Thus, one who is in actual possession of a piece of land

claiming to be the owner thereof may wait until his possession is disturbed or his title is attacked before taking

steps to vindicate his right.[39] As it is, petitioners action for reconveyance is imprescriptible.

 

 

 

This brings us to the question of whether or not the respondent-purchasers, i.e., Bernard, Marcos and

Benjamin, and Eduardo, have the status of innocent purchasers for value, as was the thrust of the trial courts

disquisition and disposition.

 

We are unable to agree with the RTC.

 

It is the common defense of the respondent-purchasers that they each checked the title of the subject

lot when it was his turn to acquire the same and found it clean, meaning without annotation of any

encumbrance or adverse third party interest. And it is upon this postulate that each claims to be an innocent

purchaser for value, or one who buys the property of another without notice that some other person has a right

to or interest in it, and who pays therefor a full and fair price at the time of the purchase or before receiving

such notice.[40]

 

The general rule is that one dealing with a parcel of land registered under the Torrens System may

safely rely on the correctness of the certificate of title issued therefor and is not obliged to go beyond the

certificate.[41] Where, in other words, the certificate of title is in the name of the seller, the innocent purchaser

for value has the right to rely on what appears on the certificate, as he is charged with notice only of burdens or

claims on the res as noted in the certificate. Another formulation of the rule is that (a) in the absence of

anything to arouse suspicion or (b) except where the party has actual knowledge of facts and circumstances

that would impel a reasonably cautious man to make such inquiry or (c) when the purchaser has knowledge of

a defect 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,[42] said purchaser is without obligation to look beyond the certificate and investigate

the title of the seller.

Eduardo and, for that matter, Bernard and Marcos and Benjamin, can hardly claim to be innocent

purchasers for value or purchasers in good faith. For each knew or was at least expected to know that

somebody else other than Gabriel, Jr. has a right or interest over the lot. This is borne by the fact that the initial

seller, Gabriel Jr., was not in possession of subject property. With respect to Marcos and Benjamin, they knew

as buyers that Bernard, the seller, was not also in possession of the same property. The same goes with

Eduardo, as buyer, with respect to Marcos and Benjamin.

 

Basic is the rule that a buyer of a piece of land which is in the actual 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. When a man proposes to buy or deal with

realty, his duty is to read the public manuscript, i.e., to look and see who is there upon it and what his rights

are. A want of caution and diligence which an honest man of ordinary prudence is accustomed to exercise in

making purchases is, in contemplation of law, a want of good faith. The buyer who has failed to know or

discover that the land sold to him is in adverse possession of another is a buyer in bad faith.[43]

 

Where the land sold is in the possession of a person other than the vendor, the purchaser must go

beyond the certificates of title and make inquiries concerning the rights of the actual possessor. [44] And where,

as in the instant case, Gabriel Jr. and the subsequent vendors were not in possession of the property, the

prospective vendees are obliged to investigate the rights of the one in possession. Evidently, Bernard, Marcos

and Benjamin, and Eduardo did not investigate the rights over the subject lot of the petitioners who, during the

period material to this case, were in actual possession thereof. Bernard, et al. are, thus, not purchasers in good

faith and, as such, cannot be accorded the protection extended by the law to such purchasers.[45] Moreover,

not being purchasers in good faith, their having registered the sale, will not, as against the petitioners, carry the

day for any of them under Art. 1544 of the Civil Code prescribing rules on preference in case of double sales of

immovable property. Occea v. Esponilla[46] laid down the following rules in the application of Art. 1544: (1)

knowledge by the first buyer of the second sale cannot defeat the first buyers rights except when the second

buyer first register in good faith the second sale; and (2) knowledge gained by the second buyer of the first

sale defeats his rights even if he is first to register, since such knowledge taints his registration with bad faith.

 

Upon the facts obtaining in this case, the act of registration by any of the three respondent-purchasers

was not coupled with good faith. At the minimum, each was aware or is at least presumed to be aware of facts

which should put him upon such inquiry and investigation as might be necessary to acquaint him with the

defects in the title of his vendor.

 

The award by the lower courts of damages and attorneys fees to some of the herein respondents was

predicated on the filing by the original plaintiffs of what the RTC characterized as an unwarranted suit. The

basis of the award, needless to stress, no longer obtains and, hence, the same is set aside.

 

WHEREFORE, the petition is hereby GRANTED. The appealed December 4, 2006 Decision and the

March 6, 2007 Resolution of the Court of Appeals in CA-G.R. CV No. 79680 affirming the May 26, 2003

Decision of the Regional Trial Court, Branch 3 in Baguio City are hereby REVERSED and SET

ASIDE. Accordingly, petitioner Antonita Ordua is hereby recognized to have the right of ownership over subject

lot covered by TCT No. T-3276 of the Baguio Registry registered in the name of Eduardo J. Fuentebella.  The

Register of Deeds of Baguio City is hereby ORDERED to cancel said TCT No. T-3276 and to issue a new one

in the name of Armando Gabriel, Jr. with the proper annotation of the conditional sale of the lot covered by said

title in favor of Antonita Ordua subject to the payment of the PhP 50,000 outstanding balance. Upon full

payment of the purchase price by Antonita Ordua, Armando Gabriel, Jr. is ORDERED to execute a Deed of

Absolute Sale for the transfer of title of subject lot to the name of Antonita Ordua, within three (3) days from

receipt of said payment.

 

No pronouncement as to costs.

 

SO ORDERED.

Republic of the PhilippinesSUPREME COURT

Manila

THIRD DIVISION

G.R. No. 192486               November 21, 2012

RUPERTA CANO VDA. DE VIRAY and JESUS CARLO GERARD VIRAY, Petitioners, vs.SPOUSES JOSE USI and AMELITA USI, Respondents.

D E C I S I O N

VELASCO, JR., J.:

The Case

Petitioners have availed of Rule 45 to assail and nullify the Decision1 dated July 24, 2009, as effectively reiterated in a Resolution2 of June 2, 2010, both rendered by the Court of Appeals (CA) in CA-G.R. CV No. 90344, setting aside the Decision3 dated June 21, 2007 of the Regional Trial Court (RTC), Branch 55 in Macabebe, Pampanga, in Civil Case No. 01-1118(M), an accion publiciana/reivindicatoria, which respondents commenced with, but eventually dismissed by, that court.

The Facts

At the core of the present controversy are several parcels of land which form part of what was once Lot No. 733, Cad-305-D, Masantol Cadastre (Lot 733 hereinafter), registered in the name of Ellen P. Mendoza (Mendoza), married to Moses Mendoza, under Transfer Certificate of Title No. (TCT) 141-RP of the Registry of Deeds of Pampanga. With an area of 9,137 square meters, more or less, Lot 733 is located in Brgy. Bebe Anac, Masantol, Pampanga.

On April 28, 1986, Geodetic Engineer Abdon G. Fajardo prepared a subdivision plan4 (Fajardo Plan, for short) for Lot 733, in which Lot 733 was divided into six (6) smaller parcels of differing size dimensions, designated as: Lot 733-A, Lot 733-B, Lot 733-C, Lot 733-D, Lot 733-E, and Lot 733-F consisting of 336, 465, 3,445, 683, 677 and 3,501 square meters, respectively.

The following day, April 29, 1986, Mendoza executed two separate deeds of absolute sale, the first, transferring Lot 733-F to Jesus Carlo Gerard Viray (Jesus Viray),5 and the second deed conveying Lot 733-A to spouses Avelino Viray and Margarita Masangcay (Sps. Viray).6 The names McDwight Mendoza, Mendoza’s son, and one Ernesto Bustos appear in both notarized deeds as instrumental witnesses. As of that time, the Fajardo Plan has not been officially approved by the Land Management Bureau (LMB), formerly the Bureau of Lands. And at no time in the course of the controversy did the spouses Viray and Jesus Viray, as purchasers of Lots 733-A and 733-F, respectively, cause the annotations of the conveying deeds of sale on TCT 141-RP.

Herein petitioner, Ruperta Cano Vda. de Viray (Vda. de Viray), is the surviving spouse of Jesus Viray, who died in April 1992.

As of April 29, 1986, the dispositions made on and/or the ownership profile of the subdivided lots appearing under the Fajardo Plan are as follows:

Lot No. Area Conveyances by Mendoza

Lot 733-A 366 square meters Sold to Sps. Avelino and Margarita Viray

Lot 733-B 465 square meters Unsold

Lot 733-C 3,445 square meters Unsold

Lot 733-D 683 square meters Proposed Road

Lot 733-E 677 square meters Unsold

Lot 733-F 3,501 square meters Sold to Jesus Viray

The aforementioned conveyances notwithstanding, Mendoza, Emerenciana M. Vda. de Mallari (Vda. de Mallari) and respondent spouses Jose Usi and Amelita T. Usi (Sps. Usi or the Usis), as purported co-owners of Lot 733, executed on August 20, 1990 a Subdivision Agreement,7 or the

1st subdivision agreement (1st SA). Pursuant to this agreement which adopted, as base of reference, the LMB-approved subdivision plan prepared by Geodetic Engineer Alfeo S. Galang (Galang Plan), Lot 733 was subdivided into three lots, i.e., Lots A to C, with the following area coverage: Lots 733-A, 465 square meters, 733-B, 494 square meters, and 733-C, 6,838 square meters. In its pertinent parts, the 1st SA reads:

That the above-parties are the sole and exclusive owners of a certain parcel of land situated in the Bo. of Bebe Anac, Masantol, Pampanga, which is known as Lot No. 733 under TCT No. 141 R.P. of the Registry of Deeds of Pampanga, under Psd-No. 03-10-025242;

That for the convenience of the parties hereto that the existing community of the said Lot be terminated and their respective share be determined by proper adjudication;

That the parties hereto agreed to subdivided (sic) the above-mentioned property by Geodetic Engineer Alfeo S. Galang, as per tracing cloth and blue print copy of plan Psd-03-025242 and technical description duly approved by the Bureau of Lands, hereto Attached and made internal part of this instrument in the following manner:

Lot 733-A - - - - - - - To Emerencia M. Vda. Mallari;

Lot 733-B - - - - - - - To Sps. Jose B. Usi and Amelita B. Usi;

Lot 733-C - - - - - - - To Ellen P. Mendoza8 (Emphasis added.)

TCT 141-RP would eventually be canceled and, in lieu thereof, three derivative titles were issued to the following, as indicated: TCT 1584-RP for Lot 733-A to Mallari; TCT 1585-RP9 for Lot 733-B to Sps. Usi; and TCT 1586-RP for Lot 733-C to Mendoza.

On April 5, 1991, Mendoza, McDwight P. Mendoza, Bismark P. Mendoza, Beverly P. Mendoza, Georgenia P. Mendoza, Sps. Alejandro Lacap and Juanita U. Lacap, Sps. Nestor Coronel and Herminia Balingit, Sps. Bacani and Martha Balingit, Sps. Ruperto and Josefina Jordan, and Sps.

Jose and Amelita Usi executed another Subdivision Agreement10 (2nd SA) covering and under which the 8,148-sq. m. Lot 733-C was further subdivided into 13 smaller lots (Lot 733-C-1 to Lot 733-C-13 inclusive). The subdivision plan11 for Lot 733-C, as likewise prepared by Engr. Galang on October 13, 1990, was officially approved by the LMB on March 1, 1991.

The 2nd SA partly reads:

1. That we are the sole and exclusive undivided co-owners of a parcel of land situated at Barrio Putat and Arabia, Bebe Anac, Masantol, Pampanga, identified as Lot No. 733-C of Psd-No. 03-041669, containing an area of 8,148 sq. meters and covered by T.C.T. No. 1586 R.P. of the

Register of Deeds of Pampanga;

2. That it is for the benefit and best interest of the parties herein that the [sic] their co-ownership relation over the above-mentioned parcel of land be terminated and their respective share over the co-ownership be allotted [sic] to them;

Wherefore, by virtue of the foregoing premises, we have agreed, as we hereby agree to subdivide our said parcel of land x x x.12 (Emphasis added.)

Consequent to the subdivision of Lot 733-C in line with the Galang Plan and its subsequent partition and distribution to the respective allotees pursuant to the 2nd SA, the following individuals appeared as owners of the subdivided units as indicated in the table below:

 

Lot No. Land Area Partitioned to:

Lot 733-C-1 200 square meters Sps. Jose and Amelita Usi

Lot 733-C-2 1,000 square meters Sps. Alejandro & Juanita Lacap

Lot 733-C-3 300 square meters Sps. Nestor & Herminia Coronel

Lot 733-C-4 500 square meters Sps. Nestor & Herminia Coronel and Sps. Bacani & Martha Balingit

Lot 733-C-5 400 square meters Sps. Ruperto & Josefina Jordan

Lot 733-C-6 500 square meters Ellen, McDwight, Bismark, Beverly and Georgenia Mendoza

Lot 733-C-7 220 square meters Ellen, McDwight, Bismark, Beverly and Georgenia Mendoza

Lot 733-C-8 1,000 square meters Ellen, McDwight, Bismark, Beverly and Georgenia Mendoza

Lot 733-C-9 500 square meters Ellen, McDwight, Bismark, Beverly and Georgenia Mendoza

Lot 733-C-10 1,000 square meters Sps. Jose and Amelita Usi

Lot 733-C-11 668 square meters Ellen, McDwight, Bismark, Beverly and Georgenia Mendoza

Lot 733-C-12 550 square meters Ellen, McDwight, Bismark, Beverly and Georgenia Mendoza

[Lot 733-C-13] [1,310 square meters] [Allotted for a proposed road]

In net effect, the two subdivision agreements paved the way for the issuance, under the Sps. Usi’s name, of TCT Nos. 1585-RP,13 2092-RP,14 and 2101-RP,15 covering Lots 733-B, 733-C-1 and 733-C-10, respectively.

On the other hand, the subdivision of Lot 733, per the Galang Plan, and the two subdivision agreements concluded based on that plan, virtually resulted in the loss of the identity of what under the Fajardo Plan were Lot 733-A and Lot 733-F. The Sps. Viray and the late Jesus Viray, to recall, purchased Lot 733-A and Lot 733-F, respectively, from Mendoza.

Then came the ocular inspection and survey16 conducted on Lot 733, as an undivided whole, by Geodetic Engr. Angelito Nicdao of the LMB. Some highlights of his findings:

(a) Lot 733-A of the Fajardo Plan with an area of 336 square meters that Sps. Viray bought is within Lot 733-B (Galang Plan) allotted under 1st SA to Sps. Jose and Amelita Usi; and

(b) Lot 733-F of the Fajardo Plan with an area of 3,501 square meters is almost identical to the combined area of Lots 733-C-8 to 733-C-12 awarded to Ellen Mendoza and her children—McDwight, Bismark, Beverly and Georgenia, and a portion (1,000 square meters) of Lot 733-C-10 of the Galang Plan awarded to Sps. Jose and Amelita Usi.

As to be expected, the foregoing overlapping transactions involving the same property or portions thereof spawned several suits and counter- suits featuring, in particular, herein petitioners and respondents, viz:

(a) A suit for Annulment of Deed of Absolute Sale filed before the RTC, Branch 55 in Macabebe, Pampanga, docketed as Civil Case No. 88-0265-M, in which the Usis and Mendoza, as plaintiffs, assailed the validity and sought the annulment of the deed of absolute sale executed by Mendoza on April 29, 1986 conveying Lot 733-A (Fajardo Plan) to defendants Sps. Viray.

(b) A similar suit for Annulment of Deed of Absolute Sale commenced by Mendoza against Jesus Viray before RTC-Br. 55 in Macabebe, Pampanga, docketed as Civil Case No. 88-0283-M, entitled Ellen P. Mendoza v. Jesus Carlo Gerard Viray, also seeking to nullify the April 29, 1986 Deed of Absolute Sale conveying Lot 733-F (Fajardo Plan) to Jesus Viray and to declare the plaintiff as entitled to its possession.

The adverted Civil Case Nos. 88-0265-M and 88-0283-M were jointly tried by RTC-Br. 55, which, on August 1, 1989, rendered a Joint Decision17 finding for the Sps. Viray and Jesus Viray, as defendants, and accordingly dismissing the separate complaints to annul the deeds of sale subject of the joint cases.

On appeal, the CA, in CA-G.R. CV Nos. 24981-82, and later this Court, in its Decision of December 11, 1995, in G.R. No. 122287 in effect affirmed in toto the RTC dismissal decision.18 The Court, via its Resolution of April 17, 1998, would eventually deny with finality19 Mendoza and the Usis’ motion for reconsideration of the aforesaid December 11, 1995 Decision.

(c) A forcible entry case filed on November 19, 1991 by the late Jesus Viray against the Sps. Usi before the Municipal Circuit Trial Court (MCTC) in Macabebe, Pampanga, docketed as Civil Case No. 91 (13), entitled Jesus Carlo Gerard Viray v. Spouses Jose Usi and Emelita Tolentino, to eject the Usis from Lot 733-F (Fajardo Plan).

On July 29, 1998, the MCTC rendered a Decision20 in favor of Jesus Viray, the dispositive portion of which pertinently reads:

WHEREFORE, premises considered, judgment is hereby rendered for the plaintiff the late petitioner Jesus Viray, and accordingly, the defendants Sps. Usi and any other persons claiming under them are hereby ordered to vacate the subject premises, Lot 733-F embraced in T.C.T. No. 141-R.P., Register of Deeds Pampanga, and Lot 733-A, both situated at Bebe Anac, Masantol, Pampanga and to remove at their own expense, all structures or improvements they built and introduced thereon.

Defendants are likewise sentenced to pay plaintiff the amount of THREE HUNDRED (P300.00) PESOS per month from November 19, 1991, until they vacate the premises, as reasonable compensation for the use and occupation thereof x x x.

x x x x

SO ORDERED.21

The Decision eventually became final and executory, the Usis having opted not to appeal it.

(d) A Petition for Annulment of the MCTC’s July 29, 1998 Decision filed by the Sps. Usi before the RTC, docketed as Civil Case No. 99-0914M, entitled Sps. Jose & Amelita Usi v. Hon. Pres. Judge MCTC, Macabebe, Pampanga, the Court Sheriff, MCTC, Macabebe, Pampanga and

Ruperta Cano Vda. de Viray, which decision placed Jesus Viray’s widow, Ruperta, in possession of Lot 733-F of the Fajardo Plan.

As may be noted, the spouses Usi, instead of appealing from the July 29, 1998 MCTC Decision in Civil Case No. 91 (13), sought, after its finality, its annulment before the RTC. By Decision22 dated June 29, 2000, the RTC dismissed the petition to annul. The Usis’ appeal to the CA, docketed as CA-G.R. CV No. 67945, merited the same dismissal action.23 And finally, in G.R. No. 154538 (Spouses Jose and Amelita Usi v. Ruperta Cano Vda. de Viray), the Court denied, on February 12, 2003, Sps. Usi’s petition for review of the CA’s Decision. The denial became final on April 8, 2003 and an Entry of Judgment24 issued in due course.

(e) A Petition for Accion Publiciana/ Reivindicatoria 25 instituted on December 12, 2001 by Sps. Usi against the late Jesus Viray, as substituted by Vda. de Viray, et al., before the RTC in Macabebe, Pampanga, docketed as Civil Case No. 01-1118(M), involving Lots 733-B, 733-C-1 and 733-C-10 (Galang Plan) covered by TCT Nos. 1585-RP, 2092-RP and 2101-RP.

The execution of the July 29, 1998 MCTC Decision in Civil Case No. 91 (13), as the Sps. Usi asserted in their petition, would oust them from their own in fee simple lots even though the dispositive portion of said forcible entry Decision mentioned Lots 733-A and 733-F (Fajardo Plan) and not Lots 733-B, 733-C-1 and 733-C-10 (Galang Plan) which are registered in their names per TCT Nos. 1585-RP, 2092-RP and 2101-RP.

In time, Vda. de Viray moved for the dismissal26 of these publiciana/ reivindicatoria actions on grounds, among others, of litis pendentia and res judicata, on account of (1) the Sps. Usi’s appeal, then pending before the CA, from the dismissal by the RTC of Civil Case No. 99-0914M;27 and (2) the August 1, 1989 RTC Decision in Civil Case Nos. 88-0265-M and 88-0283-M, as effectively affirmed by the CA, and finally by the Court in G.R. No.

122287. This motion to dismiss would, however, be denied by the RTC through an Order28 of March 8, 2002, compelling Vda. de Viray to file an answer,29 again invoking in defense the doctrine of res judicata. Sps. Usi’s Reply to Answer30 contained an averment that their titles over the subject lots are the best evidence of their ownership.

(f) An action for Cancellation of Titles or Surrender of Original Titles with Damages31 commenced by Vda. de Viray, et al., against the Sps. Usi, Mendoza and eight others before the RTC, Branch 54 in Macabebe, Pampanga, docketed as Civil Case No. (02)-1164(M), seeking the cancellation of TCT Nos. 3614-R.P., 2099-R.P., 2101-R.P., 7502-R.P. and 2103-R.P. covering Lots 733-C-8 to 733-C-12 as subdivided under the 2nd SA of April 5, 1991 which taken together is basically identical to Lot 733-F (Fajardo Plan) sold to Jesus Viray.

To recap, the six (6) cases thus filed involving portions of Lot 733 and their status are:

Civil Case No.

The Parties Action/Suit for Subject Lot(s) Disposition

88-0265-M Sps. Usi v. Sps. Viray

Annulment of Deed of Absolute Sale

733-A

(Fajardo Plan)

Decision in favor of Sps. Viray. Decision is now final.

88-0283-M Mendoza v. Jesus Viray

Annulment of Deed of Absolute Sale

733-F

(Fajardo Plan)

Decision in favor of Sps. Viray.

Subject of CA-G.R. CV Nos. 24981-82 – denied. Subject of G.R. No. 122287 – petition denied.

91 (13) Jesus Viray v. Sps. Usi

Forcible Entry 733-F

(Fajardo Plan)

Judgment in favor of Viray. No appeal.

90-0914M Sps. Usi v. Vda. de Viray

Petition for Annulment of MCTC

Decision in CC No. 91 (13)

733-F

(Fajardo Plan)

RTC dismissed petition.

CA-G.R. CV No. 67945 – appeal dismissed. G.R. No. 154538 – petition denied.

(02)-1164(M)

Vda. de Viray v. Mendoza, et al.

Cancellation of Titles before RTC, Br. 55, Pampanga

Lots 733-C-8

To 733-C-12

(Lot 733-F (Fajardo Plan)

Pending before the RTC.

01-1118(M) Sps. Usi v. Vda. de Viray

Petition for

Accion Publiciana and Reivindicatoria before RTC, Br. 55, Pampanga

733-B, 733-C-

1 and 733-C-

10 (Galang Plan)

Petition dismissed.

CA-G.R. CV No. 90344 – reversed RTC Decision.

Subject of instant case, G.R. No. 192486

In sum, of the six (6) cases referred to above, the first four (4) have been terminated and the main issue/s therein peremptorily resolved. To a precise point, the matter of the validity of the April 29, 1986 deeds of absolute sale conveying Lots 733-A and 733-F under the Fajardo Plan to Sps. Viray and Vda. de Viray (vice Jesus Viray), respectively, is no longer a contentious issue by force of the Court’s Decision in G.R. No. 122287 effectively upholding the dismissal of the twin complaints to nullify the deeds aforementioned. Likewise, the issue of who has the better possessory right independent of title over the disputed lots has been resolved in favor of Vda. de Viray and the Sps. Viray and against the Usis and veritably put to rest by virtue of the Court’s final, affirmatory Decision in G.R. No. 154538.

Only two cases of the original six revolving around Lot 733 remained unresolved. The first refers to the petition for review of the decision of the CA in CA-G.R. CV No. 90344 which, in turn, is an appeal from the decision of the RTC in Civil Case No. 01-1118(M), a Petition for Accion Publiciana/ Reivindicatoria and Damages, and the second is Civil Case No. (02)-1164(M) for Cancellation of Titles or Surrender of Original Titles with Damages. The first case is subject of the present recourse, while the second is, per records, still pending before the RTC, Branch 54 in Macabebe, Pampanga, its resolution doubtless on hold in light of the instant petition.

In the meantime, the Sps. Usi have remained in possession of what in the Galang Plan are designated as Lots 733-B, 733-C-1 and 733-C-10.

The Ruling of the RTC in Civil Case No. 01-1118(M)

As may be recalled, on June 21, 2007 in Civil Case No. 01-1118(M), the Macabebe, Pampanga RTC rendered judgment dismissing the petition of the Sps. Usi32 for Accion Publiciana/Reivindicatoria. In its dismissal action, the RTC held that the Sps. Usi failed to establish by preponderance of evidence to support their claim of title, possession and ownership over the lots subject of their petition.

Following the denial of their motion for reconsideration per the RTC’s Order33 of September 25, 2007, the Sps. Usi interposed an appeal before the CA, docketed as CA-G.R. CV No. 90344.

The Ruling of the CA

On July 24, 2009, the CA rendered the assailed decision, reversing and setting aside the appealed June 21, 2007 RTC decision. The fallo of the CA decision reads:

WHEREFORE, the instant appeal is GRANTED and the assailed Decision of the Regional Trial Court, REVERSED and SET ASIDE. Judgment is hereby rendered declaring as legal and valid, the right of ownership of petitioner-appellant respondents herein spouses Jose Usi and Amelita T. Usi over Lot Nos. 733-B, 733-C-1 and 733-C-10 covered by TCT Nos. 1585-R.P., 2092-R.P, and 2101-R.P., respectively. Consequently, respondents-appellees herein petitioners are hereby ordered to cease and desist from further committing acts of dispossession or from disturbing possession and ownership of petitioners-appellants of the said property as herein described and specified. Claims for damages, however, are hereby denied x x x.

SO ORDERED.

The CA predicated its ruling on the interplay of the following premises and findings: (a) the validity of the two (2) duly notarized subdivision agreements, or the 1st SA and 2nd SA, which the LMB later approved; (b) the subdivisions of Lot 733 on the basis of the Galang Plan actually partook the nature of the partition of the shares of its co-owners; (c) what Mendoza conveyed through the April 29, 1986 deeds of absolute sale is only her ideal, abstract or pro-indiviso share of Lot 733 of which she had full ownership, the conveyance or sale subject to the eventual delineation and partition of her share; (d) Vda. de Viray has not shown that fraud surrounded the execution of the partition of Lot 733 through the subdivision agreements of August 20, 1990 and April 5, 1991; (e) the certificates of title of the Sps. Usi constitute indefeasible proof of their ownership of Lots 733-B, 733-C-1 and 733-C-10; (f) said certificate entitled the Sps. Usi to take possession thereof, the right to possess being merely an attribute of ownership; (g) Vda. de Viray can only go after the partitioned shares of Mendoza in Lot 733; and (h) the issue of possessory right has been mooted by the judgment of ownership in favor of the Sps. Usi over Lots 733-B, 733-C-1 and 733-C-10.

Vda. de Viray sought but was denied reconsideration per the assailed June 2, 2010 CA Resolution.

Hence, We have this petition.

The Issue

WHETHER OR NOT THE COURT A QUO GRAVELY AND SERIOUSLY ERRED IN REVERSING AND SETTING ASIDE THE DECISION OF THE RTC DISMISSING RESPONDENTS’ PETITION.34

The Court’s Ruling

In the main, the issue tendered in this proceeding boils down to the question of whether the two (2) subdivision agreements dated August 20, 1990 and April 5, 1991, respectively, partake of a bona fide and legally binding partition contracts or arrangements among co-owners that validly effectuated the transfer of the subject lots to respondent spouses Usi. Intertwined with the main issue is the correlative question bearing on the validity of the deeds of absolute sale upon which the petitioners hinged their claim of ownership and right of possession over said lots.

The Court rules in favor of petitioners.

Petitioners contend first off that the CA erred in its holding that the partitions of Lot 733 and later of the divided unit Lot 733-C following the Galang Plan were actually the partitions of the pro-indiviso shares of its co-owners effectively conveying to them their respective specific shares in the property.

We agree with petitioners.

First, the CA’s holding aforestated is neither supported by, nor deducible from, the evidentiary facts on record. He who alleges must prove it. Respondents have the burden to substantiate the factum probandum of their complaint or the ultimate fact which is their claimed ownership over the lots in question. They were, however, unsuccessful in adducing the factum probans or the evidentiary facts by which the factum probandum or ultimate fact can be established. As shall be discussed shortly, facts and circumstances obtain arguing against the claimed co-ownership over Lot 733.

Second, the earlier sale of Lot 733-A and Lot 733-F (Fajardo Plan) on April 29, 1986 was valid and effective conveyances of said portions of Lot 733. The subsequent transfers to the Sps. Usi of substantially the same portions of Lot 733 accomplished through the subdivision agreements constitute in effect double sales of those portions. This aberration was brought to light by the results of the adverted survey conducted sometime in June 22, 1999 of Engr. Nicdao of the LMB.

Third, even granting arguendo that the subject subdivision agreements were in fact but partitions of the pro-indiviso shares of co-owners, said agreements would still be infirm, for the Sps. Viray and Vda. de Viray (vice Jesus Viray) were excluded from the transaction. Like Vda. de Mallari, Sps. Viray and Jesus Viray had validly acquired and, hence, owned portions of Lot 733 and are themselves co-owners of Lot 733.

And last, over and above the foregoing considerations, the instant petition must be resolved in favor of petitioners, the underlying reinvindicatory and possessory actions in Civil Case No. 01-1118 (M) being barred by the application of the res judicata principle. What is more, the issue of superior possessory rights of petitioner Vda. de Viray over Lot 733-F (Fajardo Plan) has been laid to rest with finality in Civil Case No. 91 (13). Besides, Sps. Usi’s action to assail the final and executory July 29, 1998 MCTC Decision in Civil Case No. 91 (13) has been denied with finality in G.R. No. 154538.

The subdivision agreements not partition of co-owners

Partition, in general, is the separation, division, and assignment of a thing held in common by those to whom it may belong.35

Contrary to the finding of the CA, the subdivision agreements forged by Mendoza and her alleged co-owners were not for the partition of pro-indiviso shares of co-owners of Lot 733 but were actually conveyances, disguised as partitions, of portions of Lot 733 specifically Lots 733-A and 733-B, and portions of the subsequent subdivision of Lot 733-C.

Notably, after a full-blown trial in Civil Case No. 01-1118 (M) wherein the spouses Usi merged an accion publiciana with an accion reinvindicatoria in one petition, the RTC held that Sps. Usi failed to prove their case. However, in CA G.R. CV No. 90344, an appeal from said RTC decision, the CA, while acknowledging the existence of the April 29, 1986 deeds of absolute sale, nonetheless accorded validity to the August 20, 1990 and April 5, 1991 subdivision agreements. This is incorrect. The CA held that the two (2) subdivision agreements, as notarized, enjoy the presumption of regularity and effectuated the property transfers covered thereby, obviously glossing over the mala fides attendant the execution of the two subdivision agreements. It

cannot be overemphasized enough that the two (2) deeds of absolute sale over portions of substantially the same parcel of land antedated the subdivision agreements in question and their execution acknowledged too before a notary public.

The appellate court found and so declared the subdivision agreements valid without so much as explaining, let alone substantiating, its determination. The CA never elucidated how the Sps. Usi became, in the first place co-owners, with Mendoza over Lot 733. On its face, TCT 141-RP covering Lot 733 was in the name of spouses Ellen and Moses Mendoza only. Then too, the CA did not explain how under the 2nd SA the Sps. Usi, the Sps. Lacap, the Sps. Balingit and the Sps. Jordan became co-owners with Mendoza over Lot 733-C, when Mendoza, under the 1st SA, virtually represented herself as the sole owner of Lot 733-C.

A scrutiny of the records with a fine-tooth comb likewise fails to substantially show a partition of Lot 733 by its co-owners. While the 1st and 2nd SAs purport to be deeds of partition by and among co-owners of the lot/s covered thereby, partition as a fact is belied by the evidence extant on record. Consider:

It is undisputed that TCT 141 RP covering Lot 733 was originally in the name of Ellen P. Mendoza and husband, Moses.36 The joint decision of the RTC in Civil Case Nos. 88-0265 and 88-0283-M narrated how the couple came to own Lot 733, thus: "Lot 733 was acquired by Spouses Moses Mendoza and Ellen Mendoza and Spouses Pacifico Bustos and Maria Roman from Donato Lacap for P5,000.00 (Exh. "1") in 1977. After two years, Spouses Pacifico Bustos and Maria Roman sold one-half pro-indiviso portion of Lot 733 to spouses Moses Mendoza and Ellen Mendoza for P6,000.00 (Exh. "2") and the acquisition cost of the whole lot is only P8,500.00 and x x x."37

Mendoza and the Sps. Usi, in their separate complaints for annulment of deeds of sale, docketed as Civil Case Nos. 88-0265 and 88-0283-M of the Macabebe, Pampanga RTC, alleged that Moses Mendoza authorized Atty. Venancio Viray to sell the subject lot for at least PhP 200 per square meter, and that after his (Moses’) death on April 5, 1986, Lot 733 was included in the proceedings for the settlement of his estate docketed as Sp. Proc. Case No. 86-0040-M of the RTC, Branch 55 in Macabebe, Pampanga, The events thus alleged by Mendoza and the Usis can be gleaned from the final and executory joint decision in Civil Case Nos. 88-0265-M and 88-0283-M which petitioner Vda. de Viray attached as Annex "5" in her Answer with Counterclaim38 to the Usis’ petition for accion publicana/reivindicatoria. Said Joint Decision amply shows, in gist, the allegations39 of both the Sps. Usi and Mendoza in Civil Case Nos. 88-0265-M and 88-0283-M asserting said facts. And these assertions, made in their complaints, are judicial admissions under Sec. 4,40 Rule 129 of the Rules of Court.

Unlike Vda. de Mallari who, per Vda. de Viray’s own admission, purchased the 416-square meter portion of Lot 733 on February 14, 1984, thus constituting her (Vda. de Mallari) as co-owner of Mendoza to the extent of said area purchased,41 the Sps. Usi have not been shown to be co-owners with Mendoza. There is simply nothing in the records to demonstrate how the Sps. Usi became co-owners of Lot 733 before or after the death of Moses Mendoza. Elsewise put, no evidence had been adduced to show how the alleged interest of the Sps. Usi, as co-owner, came about, except for the bare assertions in the 1st and 2nd SAs that they co-owned Lot 733 and Lot 733-C (Galang Plan).

It is fairly clear that Lot 733, even from the fact alone of its being registered under the name of the late Moses Mendoza and Ellen Mendoza, formed part of the couple’s conjugal property at the time Moses’ demise on April 5, 1986. Equally clear, too, is that Vda. de Mallari became a co-owner of Lot 733 by virtue of the purchase of its 416-square meter portion on February 14, 1984, during the lifetime of Moses. Be that as it may and given that the Sps. Usi have not been shown to be co-owners of Mendoza and Vda. de Mallari prior to the sale by Mendoza on April 29, 1986 of Lots 733-A and 733-F (Fajardo Plan) to the Sps. Viray and Jesus Viray, respectively, then the execution of the 1st SA on August 20, 1990 could not have been a partition by co-owners of Lot 733. The same could be said of the 2nd SA of April 5, 1991 vis-à-vis Lot 733-C, for the records are similarly completely bereft of any evidence to show on how the purported participating co-owners, namely Sps. Usi, the Sps. Lacap, the Sps. Balingit and the Sps. Jordan became co-owners with Mendoza and her children, i.e., McDwight, Bismark, Beverly and Georgenia.

The April 29, 1986 Deeds of Absolute Sale

of Lot 733-A and Lot 733-F are Valid

It must be noted that the RTC, in its decision in Civil Case Nos. 88-0265-M and 88-0283-M, upheld the validity of the separate April 29, 1986 deeds of absolute sale of Lots 733-A and 733-F (Fajardo Plan). The combined area of Lot 733-A (366 sq. m.) and Lot 733-F (3,501) is less than one half of the total area coverage of Lot 733 (9,137). The sale of one-half portion of the conjugal property is valid as a sale. It cannot be gainsaid then that the deeds, executed as they were by the property owner, were sufficient to transfer title and ownership over the portions covered thereby. And the aforesaid RTC decision had become final and executory as far back as December 11, 1995 when the Court, in G.R. No. 122287, in effect, affirmed the RTC decision. Likewise, the MCTC’s decision in Civil Case No. 91 (13) for forcible entry, declaring Vda. de Viray, as successor-in-interest of Jesus Viray, as entitled to the physical possession, or possession de facto, of Lot 733-F (Fajardo Plan), and

the RTC’s decision in Civil Case No. 99-0914M, disposing of the belated appeal of the MCTC decision in the forcible entry case, have become final and executory on February 12, 2003 under G.R. No. 154538.

In light of the convergence of the foregoing disposed-of cases, there can be no question as to the ownership of the Sps. Viray and Vda. de Viray (vice Jesus Viray) over the specified and delineated portions of Lot 733 which they purchased for value from Mendoza. And Mendoza, as vendor, was bound to transfer the ownership of and deliver, as well as warrant, the thing which is the object of the sale.42

In the instant case, the April 29, 1986 deeds of absolute sale indeed included the technical description of that part of Lot 733 subject of the transactions, thus clearly identifying the portions (Lots 733-A and 733-F under the Fajardo Plan) sold by Mendoza to the Sps. Viray and Vda. de Viray (vice Jesus Viray). Hence, there can be no mistaking as to the identity of said lots.

The deeds in question were, to reiterate, not only valid but constitute prior conveyances of the disputed portions of Lot 733. Accordingly, the subsequent conveyances in 1990 and 1991 to the Sps. Usi through transfer contracts, styled as subdivision agreements, resulted, in effect, in a double sale situation involving substantially the same portions of Lot 733.

The survey report of LMB surveyor, Engr. Nicdao, would support a finding of double sale. His report, as earlier indicated, contained the following key findings: (1) Lot 733-A (Fajardo Plan) with an area of 336 square meters thus sold to the Sps. Viray is within Lot 733-B (Galang Plan), the part assigned to Sps. Usi under the division; and (2) Lot 733-F (Fajardo Plan) with an area of 3,501 square meters is almost identical to the combined area of Lots 733-C-8 to 733-C-12 awarded to Ellen Mendoza and her children, McDwight, Bismark, Beverly and Georgenia, and a portion (1,000 square meters) of Lot 733-C-10 (Galang Plan) adjudicated to Sps. Usi.

A double sale situation, which would call, if necessary, the application of Art. 1544 of the Civil Code, arises when, as jurisprudence teaches, the following requisites concur:

(a) The two (or more) sales transactions must constitute valid sales;

(b) The two (or more) sales transactions must pertain to exactly the same subject matter;

(c) The two (or more) buyers at odds over the rightful ownership of the subject matter must each represent conflicting interests; and

(d) The two (or more) buyers at odds over the rightful ownership of the subject matter must each have bought from the very same seller.43

From the facts, there is no valid sale from Mendoza to respondents Usi. The parties did not execute a valid deed of sale conveying and transferring the lots in question to respondents. What they rely on are two subdivision agreements which do not explicitly chronicle the transfer of said lots to them. Under the 1st SA, all that can be read is the declaration that respondents, together with others, are the "sole and exclusive owners" of the lots subject of said agreement. Per the 2nd SA, it simply replicates the statement in the 1st SA that respondents are "sole and exclusive undivided co-owners" with the other parties. While respondents may claim that the SAs of 1990 and 1991 are convenient conveying vehicles Mendoza resorted to in disposing portions of Lot 733 under the Galang Plan, the Court finds that said SAs are not valid legal conveyances of the subject lots due to non-existent prestations pursuant to Article 1305 which prescribes "a meeting of minds between two persons whereby one binds himself, with respect to the other, to give something or to render some service." The third element of cause of the obligation which is established under Art. 1318 of the Civil Code is likewise visibly absent from the two SAs. The transfer of title to respondents based on said SAs is flawed, irregular, null and void. Thus the two SAs are not "sales transactions" nor "valid sales" under Art. 1544 of the Civil Code and, hence, the first essential element under said legal provision was not satisfied.1âwphi1

Given the above perspective, the Sps. Viray and Vda. de Viray (vice Jesus Viray) have, as against the Sps. Usi, superior rights over Lot 733-A and Lot 733-F (Fajardo Plan) or portions thereof.

Res Judicata Applies

Notably, the Sps. Viray and Vda. de Viray, after peremptorily prevailing in their cases supportive of their claim of ownership and possession of Lots 733-A and 733-F (Fajardo Plan), cannot now be deprived of their rights by the expediency of the Sps. Usi maintaining, as here, an accion publiciana and/or accion reivindicatoria, two of the three kinds of actions to recover possession of real property. The third, accion interdictal, comprises two distinct causes of action, namely forcible entry and unlawful detainer,44 the issue in both cases being limited to the right to physical possession or possession de facto, independently of any claim of ownership that either party may set forth in his or her pleadings,45 albeit the court has the competence to delve into and resolve the issue of ownership but only to address the issue of priority of possession.46 Both actions must be brought

within one year from the date of actual entry on the land, in case of forcible entry, and from the date of last demand to vacate following the expiration of the right to possess, in case of unlawful detainer.47

When the dispossession or unlawful deprivation has lasted more than one year, one may avail himself of accion publiciana to determine the better right of possession, or possession de jure, of realty independently of title. On the other hand, accion reivindicatoria is an action to recover ownership which necessarily includes recovery of possession.48

Now then, it is a hornbook rule that once a judgment becomes final and executory, it may no longer be modified in any respect, even if the modification is meant to correct an erroneous conclusion of fact or law, and regardless of whether the modification is attempted to be made by the court rendering it or by the highest court of the land, as what remains to be done is the purely ministerial enforcement or execution of the judgment.49 Any attempt to reopen a close case would offend the principle of res judicata.

Res judicata embraces two concepts or principles, the first is designated as "bar by prior judgment" and the other, "conclusiveness of judgment." Tiongson v. Court of Appeals50 describes the effects of res judicata, as a bar by prior judgment, in the following manner:

There is no question that where as between the first case where the judgment is rendered and the second where such judgment is invoked, there is identity of parties, subject matter and cause of action, the judgment on the merits in the first case constitutes an absolute bar to the subsequent action not only as to every matter which was offered and received to sustain or defeat the claim or demand, but also as to any other admissible matter which might have been offered for that purpose and to all matters that could have been adjudged in that case. x x x

Res judicata operates as bar by prior judgment if the following requisites concur: (1) the former judgment or order must be final; (2) the judgment or order must be on the merits; (3) the decision must have been rendered by a court having jurisdiction over the subject matter and the parties; and (4) there must be, between the first and second action, identity of parties, of subject matter and of causes of action.51 All the requisites are present in the instant case.

The better right to possess and the right of ownership of Vda. de Viray (vice Jose Viray) and the Sps. Viray over the disputed parcels of land cannot, by force of the res judicata doctrine, be re-litigated thru actions to recover possession and vindicate ownership filed by the Sps. Usi. The Court, in G.R. No. 122287 (Ellen P. Mendoza and Jose and Amelita Usi v. Spouses Avelino Viray and Margarita Masangcay and Jesus Carlo Gerard Viray), has in effect determined that the conveyances and necessarily the transfers of ownership made to the Sps. Viray and Vda. de Viray (vice Jose Viray) on April 29, 1986 were valid. This determination operates as a bar to the Usis reivindicatory action to assail the April 29, 1986 conveyances and precludes the relitigation between the same parties of the settled issue of ownership and possession arising from ownership. It may be that the spouses Usi did not directly seek the recovery of title or possession of the property in question in their action for annulment of the deed sale of sale. But it cannot be gainsaid that said action is closely intertwined with the issue of ownership, and affects the title, of the lot covered by the deed. The prevalent doctrine, to borrow from Fortune Motors, (Phils.), Inc. v. Court of Appeals,52 "is that an action for the annulment or rescission of a sale of real property does not operate to efface the fundamental and prime objective and nature of the case, which is to recover said real property."

And lest it be overlooked, the Court, in G.R. No. 154538 (Spouses Jose and Amelita Usi v. Ruperta Cano Vda. de Viray), again in effect ruled with finality that petitioner Vda. de Viray has a better possessory right over Lot 733-F (Fajardo Plan). Thus, the Court’s decision in G.R. No. 122287 juxtaposed with that in G.R. No. 154538 would suffice to bar the Sps. Usi’s accion publiciana, as the spouses had invoked all along their ownership over the disputed Lot 733-F as basis to defeat any claim of the right of possessiOn. While an accion reivindicatoria is not barred by a judgment in an ejectment case, such judgment constitutes a bar to the institution of the accion publiciana, because the matter of possessioq between the same parties has become res judicata and cannot be delved into in a new action.53

The doctrine of res judicata is a basic postulate to the end that controversies and issues once decided on the merits by a court of competent jurisdiction shall remain in repose. It is simply unfortunate that the RTC, in Civil Case No. 01-1118(M), did not apply the doctrine of res judicata to the instant case, despite petitioners, as respondents below, had raised that ground both in their motion to dismiss and answer to the underlying petition.

WHEREFORE, the instant petition is GRANTED. The assailed Decision dated July 24, 2009 and Resolution dated June 2, 2010 of the Court of Appeals in CA-G.R. CV No. 90344 are REVERSED and SET ASIDE. The Decision dated June 21, 2007 in Civil Case No. 01-1118(M) of the RTC, Branch 55 in Macabebe, Pampanga is accordingly REINSTATED.

Costs against respondents.

SO ORDERED.