Cases on Law on Property

January 2010 to December 2010

Axel Argel S. Adaya

THIRD DIVISION

CELESTINO BALUS, Petitioner,

G.R. No. 168970 Present: CORONA, J., Chairperson, VELASCO, JR., NACHURA, PERALTA, and MENDOZA, JJ. Promulgated: January 15, 2010

- versus -

SATURNINO BALUS andLEONARDA BALUS VDA. DE CALUNOD, Respondents.

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

DECISION PERALTA, J.: Assailed in the present petition for review on certiorari under Rule 45 of the Rules of Court is the Decision[1] of the Court of Appeals (CA) dated May 31, 2005 in CA-G.R. CV No. 58041 which set aside the February 7, 1997 Decision of the Regional Trial Court (RTC) of Lanao del Norte, Branch 4 in Civil Case No. 3263. The facts of the case are as follows: Herein petitioner and respondents are the children of the spouses Rufo and Sebastiana Balus. Sebastiana died on September 6, 1978, while Rufo died on July 6, 1984. On January 3, 1979, Rufo mortgaged a parcel of land, which he owns, as security for a loan he obtained from the Rural Bank of Maigo, Lanao del Norte (Bank). The said property was originally covered by Original Certificate of Title No. P-439(788) and more particularly described as follows: A parcel of land with all the improvements thereon, containing an area of 3.0740 hectares, more or less, situated in the Barrio of Lagundang, Bunawan, Iligan City, and bounded as follows: Bounded on the NE., along line 1-2, by Lot 5122, Csd-292; along line 2-12, by Dodiongan River; along line 12-13 by Lot 4649, Csd-292; and along line 12-1, by Lot 4661, Csd-292. x x x [2]

Rufo failed to pay his loan. As a result, the mortgaged property was foreclosed and was subsequently sold to the Bank as the sole bidder at a public auction held for that purpose. On November 20, 1981, a Certificate of Sale[3] was executed by the

sheriff in favor of the Bank. The property was not redeemed within the period allowed by law. More than two years after the auction, or on January 25, 1984, the sheriff executed a Definite Deed of Sale[4] in the Bank's favor. Thereafter, a new title was issued in the name of the Bank. On October 10, 1989, herein petitioner and respondents executed an Extrajudicial Settlement of Estate[5] adjudicating to each of them a specific one-third portion of the subject property consisting of 10,246 square meters. The Extrajudicial Settlement also contained provisions wherein the parties admitted knowledge of the fact that their father mortgaged the subject property to the Bank and that they intended to redeem the same at the soonest possible time. Three years after the execution of the Extrajudicial Settlement, herein respondents bought the subject property from the Bank. On October 12, 1992, a Deed of Sale of Registered Land[6] was executed by the Bank in favor of respondents. Subsequently, Transfer Certificate of Title (TCT) No. T39,484(a.f.)[7] was issued in the name of respondents. Meanwhile, petitioner continued possession of the subject lot. On June 27, 1995, respondents filed a Complaint[8] for Recovery of Possession and Damages against petitioner, contending that they had already informed petitioner of the fact that they were the new owners of the disputed property, but the petitioner still refused to surrender possession of the same to them. Respondents claimed that they had exhausted all remedies for the amicable settlement of the case, but to no avail. On February 7, 1997, the RTC rendered a Decision[9] disposing as follows: WHEREFORE, judgment is hereby rendered, ordering the plaintiffs to execute a Deed of Sale in favor of the defendant, the onethird share of the property in question, presently possessed by him, and described in the deed of partition, as follows: A one-third portion of Transfer Certificate of Title No. T39,484 (a.f.), formerly Original Certificate of Title No. P788, now in the name of Saturnino Balus and Leonarda B. Vda. de Calunod, situated at Lagundang, Bunawan, Iligan City, bounded on the North by Lot 5122; East by shares of Saturnino Balus and Leonarda Balus-Calunod; South by Lot 4649, Dodiongan River; West by Lot 4661, consisting of 10,246 square meters, including improvements thereon. and dismissing all other claims of the parties. The amount of P6,733.33 consigned by the defendant with the Clerk of Court is hereby ordered delivered to the plaintiffs, as purchase price of the one-third portion of the land in question.

Plaintiffs are ordered to pay the costs. SO ORDERED.[10]

The RTC held that the right of petitioner to purchase from the respondents his share in the disputed property was recognized by the provisions of the Extrajudicial Settlement of Estate, which the parties had executed before the respondents bought the subject lot from the Bank. Aggrieved by the Decision of the RTC, herein respondents filed an appeal with the CA. On May 31, 2005, the CA promulgated the presently assailed Decision, reversing and setting aside the Decision of the RTC and ordering petitioner to immediately surrender possession of the subject property to the respondents. The CA ruled that when petitioner and respondents did not redeem the subject property within the redemption period and allowed the consolidation of ownership and the issuance of a new title in the name of the Bank, their co-ownership was extinguished. Hence, the instant petition raising a sole issue, to wit: WHETHER OR NOT CO-OWNERSHIP AMONG THE PETITIONER AND THE RESPONDENTS OVER THE PROPERTY PERSISTED/CONTINUED TO EXIST (EVEN AFTER THE TRANSFER OF TITLE TO THE BANK) BY VIRTUE OF THE PARTIES' AGREEMENT PRIOR TO THE REPURCHASE THEREOF BY THE RESPONDENTS; THUS, WARRANTING THE PETITIONER'S ACT OF ENFORCING THE AGREEMENT BY REIMBURSING THE RESPONDENTS OF HIS (PETITIONER'S) JUST SHARE OF THE REPURCHASE PRICE.[11] The main issue raised by petitioner is whether co-ownership by him and respondents over the subject property persisted even after the lot was purchased by the Bank and title thereto transferred to its name, and even after it was eventually bought back by the respondents from the Bank. Petitioner insists that despite respondents' full knowledge of the fact that the title over the disputed property was already in the name of the Bank, they still proceeded to execute the subject Extrajudicial Settlement, having in mind the intention of purchasing back the property together with petitioner and of continuing their co-ownership thereof. Petitioner posits that the subject Extrajudicial Settlement is, in and by itself, a contract between him and respondents, because it contains a provision whereby the parties agreed to continue their co-ownership of the subject property by redeeming

or repurchasing the same from the Bank. This agreemen t, petitioner contends, is the law between the parties and, as such, binds the respondents. As a result, petitioner asserts that respondents' act of buying the disputed property from the Bank without notifying him inures to his benefit as to give him the right to claim his rightful portion of the property, comprising 1/3 thereof, by reimbursing respondents the equivalent 1/3 of the sum they paid to the Bank. The Court is not persuaded. Petitioner and respondents are arguing on the wrong premise that, at the time of the execution of the Extrajudicial Settlement, the subject property formed part of the estate of their deceased father to which they may lay claim as his heirs. At the outset, it bears to emphasize that there is no dispute with respect to the fact that the subject property was exclusively owned by petitioner and respondents' father, Rufo, at the time that it was mortgaged in 1979. This was stipulated by the parties during the hearing conducted by the trial court on October 28, 1996.[12] Evidence shows that a Definite Deed of Sale[13] was issued in favor of the Bank on January 25, 1984, after the period of redemption expired. There is neither any dispute that a new title was issued in the Bank's name before Rufo died on July 6, 1984. Hence, there is no question that the Bank acquired exclusive ownership of the contested lot during the lifetime of Rufo. The rights to a person's succession are transmitted from the moment of his death. In addition, the inheritance of a person consists of the property and transmissible rights and obligations existing at the time of his death, as well as those which have accrued thereto since the opening of the succession.[15] In the present case, since Rufo lost ownership of the subject property during his lifetime, it only follows that at the time of his death, the disputed parcel of land no longer formed
[14]

part of his estate to which his heirs may lay claim. Stated differently, petitioner and respondents never inherited the subject lot from their father. Petitioner and respondents, therefore, were wrong in assuming that they became co-owners of the subject lot. Thus, any issue arising from the supposed right of petitioner as co-owner of the contested parcel of land is negated by the fact that, in the eyes of the law, the disputed lot did not pass into the hands of petitioner and respondents as compulsory heirs of Rufo at any given point in time. The foregoing notwithstanding, the Court finds a necessity for a complete determination of the issues raised in the instant case to look into petitioner's argument that the Extrajudicial Settlement is an independent contract which gives him the right to enforce his right to claim a portion of the disputed lot bought by respondents.

It is true that under Article 1315 of the Civil Code of the Philippines, contracts are perfected by mere consent; and from that moment, the parties are bound not only to the fulfillment of what has been expressly stipulated but also to all the consequences which, according to their nature, may be in keeping with good faith, usage and law. Article 1306 of the same Code also provides that the contracting parties may establish such stipulations, clauses, terms and conditions as they may deem convenient, provided these are not contrary to law, morals, good customs, public order or public policy. In the present case, however, there is nothing in the subject Extrajudicial Settlement to indicate any express stipulation for petitioner and respondents to continue with their supposed co-ownership of the contested lot. On the contrary, a plain reading of the provisions of the Extrajudicial Settlement would not, in any way, support petitioner's contention that it was his and his sibling's intention to buy the subject property from the Bank and continue what they believed to be co-ownership thereof. It is a cardinal rule in the interpretation of contracts that the intention of the parties shall be accorded primordial consideration.[16] It is the duty of the courts to place a practical and realistic construction upon it, giving due consideration to the context in which it is negotiated and the purpose which it is intended to serve. [17] Such intention is determined from the express terms of their agreement, as well as their contemporaneous and subsequent acts.[18] Absurd and illogical interpretations should also be avoided.[19] For petitioner to claim that the Extrajudicial Settlement is an agreement between him and his siblings to continue what they thought was their ownership of the subject property, even after the same had been bought by the Bank, is stretching the interpretation of the said Extrajudicial Settlement too far. In the first place, as earlier discussed, there is no co-ownership to talk about and no property to partition, as the disputed lot never formed part of the estate of their deceased father. Moreover, petitioner's asseveration of his and respondents' intention of continuing with their supposed co-ownership is negated by no less than his assertions in the present petition that on several occasions he had the chance to purchase the subject property back, but he refused to do so. In fact, he claims that after the Bank acquired the disputed lot, it offered to re-sell the same to him but he ignored such offer. How then can petitioner now claim that it was also his intention to purchase the subject property from the Bank, when he admitted that he refused the Bank's offer to re-sell the subject property to him?

In addition, it appears from the recitals in the Extrajudicial Settlement that, at the time of the execution thereof, the parties were not yet aware that the subject property was already exclusively owned by the Bank. Nonetheless, the lack of knowledge on the part of petitioner and respondents that the mortgage was already foreclosed and title to the property was already transferred to the Bank does not give them the right or the authority to unilaterally declare themselves as co-owners of the disputed property; otherwise, the disposition of the case would be made to depend on the belief and conviction of the party-litigants and not on the evidence adduced and the law and jurisprudence applicable thereto. Furthermore, petitioner's contention that he and his siblings intended to continue their supposed co-ownership of the subject property contradicts the provisions of the subject Extrajudicial Settlement where they clearly manifested their intention of having the subject property divided or partitioned by assigning to each of the petitioner and respondents a specific 1/3 portion of the same. Partition calls for the segregation and conveyance of a determinate portion of the property owned in common. It seeks a severance of the individual interests of each co-owner, vesting in each of them a sole estate in a specific property and giving each one a right to enjoy his estate without supervision or interference from the other. [20] In other words, the purpose of partition is to put an end to co-ownership,[21] an objective which negates petitioner's claims in the present case. WHEREFORE, the instant petition is DENIED. The assailed Decision of the Court of Appeals, dated May 31, 2005 in CA-G.R. CV No. 58041, isAFFIRMED. SO ORDERED.

DIOSDADO M. PERALTA Associate Justice WE CONCUR:

RENATO C. CORONA Associate Justice Chairperson

PRESBITERO J. VELASCO, JR. Associate Justice

ANTONIO EDUARDO B. NACHURA Associate Justice

JOSE C. MENDOZA Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division.

RENATO C. CORONA Associate Justice Third Division, Chairperson

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution and the Division Chairpersons Attestation, I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division.

REYNATO S. PUNO Chief Justice

[1]

Penned by Associate Justice Arturo G. Tayag, with Associate Justices Rodrigo F. Lim, Jr. and Normandie B. Pizarro, concurring; CA rollo, pp. 69-76. [2] See Certificate of Sale and Definite Deed of Sale, Exhibits A and B, respectively, records, pp. 74-75. [3] Exhibit A, records, p. 74. [4] Exhibit B, id. at 75. [5] Exhibit C/4, id. at 76. [6] Exhibit D, id. at 79. [7] Exhibit E, id. at 80. [8] Records, pp. 1-6. [9] Id. at 131-140. [10] Id. at 139-140. [11] Rollo, p. 21. [12] See TSN, October 28, 1996 p. 2. [13] Exhibit B, records, p. 75. [14] Civil Code, Art. 777. [15] Civil Code, Art. 781. [16] Alio v. Heirs of Angelica A. Lorenzo, G.R. No. 159550, June 27, 2008, 556 SCRA 139, 148. [17] TSPIC Corporation v. TSPIC Employees Union (FFW), G.R. No. 163419, February 13, 2008, 545 SCRA 215, 226. [18] Tating v. Marcella, G.R. No. 155208, March 27, 2007, 519 SCRA 79, 87. [19] TSPIC Corporation v. TSPIC Employees Union (FFW), supra note 17. [20] Arbolario v. Court of Appeals, 449 Phil. 357, 369 (2003). [21] Cruz v. Court of Appeals, G.R. No. 122904, April 15, 2005, 456 SCRA 165, 171; Lopez v. Court of Appeals, 446 Phil. 722, 743 (2003).

SECOND DIVISION

REPUBLIC OF THE PHILIPPINES, Petitioner,

G.R. No. 171774 Present: Carpio, J., Chairperson, Brion, Del Castillo, Abad, and Perez, JJ.

- versus -

APOLINARIO CATARROJA, REYNALDO CATARROJA, and ROSITA CATARROJA-DISTRITO, Respondents. February 12, 2010 Promulgated:

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

DECISION ABAD, J.:

This is about a petition for reconstitution of a lost original certificate of title in which the respondents have been unable to present evidence that such title had in fact been issued by an appropriate land registration court. The Facts and the Case Respondents Apolinario Catarroja, Reynaldo Catarroja, and Rosita Catarroja-Distrito (the Catarrojas) filed a petition for reconstitution of lost original certificate of title covering two lots in Zapang, Ternate, Cavite, one with an area of 269,695 square meters and the other with an area of 546,239 square meters. [1] The Catarrojas alleged that they inherited these lands from their parents, Fermin and Sancha Catarroja, who reportedly applied for their registration with the Court of First Instance of Cavite sometime before the last world war.[2] The Land Registration Authority (LRA) issued a certification on August 3, 1998 and a report on February 4, 2002,[4] confirming that the land registration court issued Decree 749932 on May 21, 1941 covering the subject lots. A copy of this decree was, however, no longer available in the records of the LRA. The LRA report
[3]

verified as correct the plans and technical descriptions of the subject lots which had been approved under LRA PR-19042 and LRA PR-19043. The Catarrojas alleged that, pursuant to the decree, the Register of Deeds of Cavite issued an original certificate of title to their parents. But, as it happened, based on a certification issued by the Register of Deeds, the original on file with it was lost in the fire that gutted the old Cavite capitol building on June 7, 1959.[5] The Catarrojas also claimed that the owners duplicate copy of the title had been lost while with their parents.[6] Since the public prosecutor representing the government did not object to the admission of the evidence of the Catarrojas and since he said that he had no evidence to refute their claims, the case was submitted for decision.[7] On June 27, 2003 the Regional Trial Court (RTC) of Cavite issued an Order, granting the petition for reconstitution of title.[8] On appeal, however, the Court of Appeals (CA) reversed the RTC decision.[9] It held that the evidence of the Catarrojas failed to establish any of the sources for reconstitution enumerated in Section 2 of Republic Act (R.A.) 26 (An act providing a special procedure for reconstitution of Torrens certificate of title lost or destroyed). The Catarrojas did not have proof that an original certificate of title had in fact been issued covering the subject lots. On motion for reconsideration, however, the CA rendered an amended decision dated February 23, 2006, setting aside its decision dated July 12, 2005 and finding sufficient evidence to allow reconstitution of the Catarrojas title.[10] Petitioner Republic of the Philippines challenges that decision through this action.

The Issue Presented The sole issue presented in this case is whether or not the CA erred in finding sufficient evidence to grant the petition for reconstitution of title.

The Courts Ruling R.A. 26 governs the reconstitution of lost or destroyed Torrens certificates of title. Its Section 2 enumerates the following sources for the reconstitution of such titles:

(a)

The owners duplicate of the certificate of title;

(b) The co-owners, mortgagees, or lessees duplicate of the certificate of title;

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(c) A certified copy of the certificate of title, previously issued by the register of deeds or by a legal custodian thereof; (d) An authenticated copy of the decree of registration or patent, as the case may be, pursuant to which the original certificate of title was issued; (e) A document, on file in the Registry of Deeds, by which the property, the description of which is given in said document, is mortgaged, leased or encumbered, or an authenticated copy of said document showing that its original had been registered; and (f) Any other document which, in the judgment of the court, is sufficient and proper basis for reconstituting the lost or destroyed certificate of title.

Admittedly, the Catarrojas have been unable to present any of the documents mentioned in paragraphs (a) to (e) above. Their parents allegedly lost the owners duplicate certificate of title. They did not have a certified copy of such certificate of title or a co-owners, a mortgagees, or a lessees duplicate of the same. The LRA itself no longer has a copy of the original decree or an authenticated copy of it. Likewise, the Register of Deeds did not have any document of encumbrance on file that shows the description of the property. The only documentary evidence the Catarrojas could produce as possible sources for the reconstitution of the lost title are those other documents described in paragraph (f). Relying on this, they submitted the following documents: 1. The Microfilm printouts of the Official Gazette dated February 25, 1941, Vol. 39, No. 24, Pages 542-543, showing a notice of hearing in LRC 482, GLRO Record 54798, respecting their parents application for registration and confirmation of their title to the subject lots.[11]

2.

A certification issued by the LRA dated August 3, 1998, stating that, based on official records, GLRO Record 54798, Cavite, had been issued Decree 749932 on May 21, 1941.[12]

3.

A certification from the Register of Deeds of Cavite dated July 3, 1999, stating that it cannot ascertain whether the land covered by Decree 749932 and GLRO Record 54798 had been issued a certificate of title because its titles were arranged

11

numerically and not by lot numbers, location, or names of registered owners. The Register of Deeds also certified that all their records were lost in the June 7, 1959 fire.[13]

4.

The Report of the LRA dated February 4, 2002, stating that based on their record book of decrees, Decree 749932 had been issued on May 21, 1941 covering the subject lots under GLRO Record 54798. The report also verified as correct the plans (Psu-111787 and Psu-111788) and technical descriptions of the subject lots and approved under LRA PR-19042 and LRA PR-19043.[14]

5.

An Affidavit of Loss dated December 14, 2001, stating that the duplicate certificate of title covering the subject lots had been lost.[15]

This Court has, in Republic v. Intermediate Appellate Court,[16] applied the principle of ejusdem generis in interpreting Section 2(f) of R.A. 26. Any other document refers to reliable documents of the kind described in the preceding enumerations. This Court is not convinced that the above documents of the Catarrojas fall in the same class as those enumerated in paragraphs (a) to (e). None of them proves that a certificate of title had in fact been issued in the name of their parents. InRepublic v. Tuastumban,[17] the Court ruled that the documents must come from official sources which recognize the ownership of the owner and his predecessors-in-interest. None of the documents presented in this case fit such description. Moreover the Catarrojas failed to show that they exerted efforts to look for and avail of the sources in paragraphs (a) to (e) before availing themselves of the sources in paragraph (f). The Court said in Republic v. Holazo[18] that the documents referred to in Sec. 2(f) may be resorted to only in the absence of the preceding documents in the list. Only if the petitioner for reconstitution fails to show that he had, in fact, sought to secure such documents and failed to find them, can the presentation of the other document as evidence in substitution be allowed. Further, in Republic v. Tuastumban[19] the Court enumerated what needs to be shown before the issuance of an order for reconstitution: (a) that the certificate of title had been lost or destroyed; (b) that the documents presented by petitioner are sufficient and proper to warrant reconstitution of the lost or destroyed certificate of title; (c) that the petitioner is the registered owner of the property or had an interest therein; (d) that the certificate of title was in force at the time it was lost or destroyed;

12

and (e) that the description, area and boundaries of the property are substantially the same as those contained in the lost or destroyed certificate of title. The microfilm printouts of the Official Gazette are not proof that a certificate of title was in fact issued in the name of the Catarrojas parents. The publication in the Official Gazette only proved that the couple took the initial step of publishing their claim to the property. There was no showing, however, that the application had been granted and that a certificate of title was issued to them. Although the LRAs certification and its report confirmed the issuance of a decree, these documents do not sufficiently prove that a title had in fact been issued to the parents of the Catarrojas pursuant to such decree. Indeed, it remains uncertain what kind of decree the land registration court issued in the case. Significantly, Act 496 (the 1903 Land Registration Act) which was then in force recognized two kinds of decrees in land registration proceedings: first, a decree issued under Section 37 that dismisses the application and, second, a decree issued under Section 38 confirming title of ownership and its registration. [20]

SECTION 37. If in any case without adverse claim the court finds that the applicant has no proper title for registration, a decree shall be entered dismissing the application, and such decree may be ordered to be without prejudice x x x.

SECTION 38. If the court after hearing finds that the applicant or adverse claimant has title as stated in his application or adverse claim and proper registration, a decree of confirmation and registration shall be entered x x x.

Absent a clear and convincing proof that an original certificate of title had in fact been issued to their parents in due course, the Catarrojas cannot claim that their predecessors succeeded in acquiring title to the subject lots. The nature of reconstitution of a lost or destroyed certificate of title denotes a restoration of the instrument in its original form and condition. That cannot be done without proof that such certificate of title had once existed. The procedures laid down in R.A. 26 for reconstituting a title have to be strictly followed considering that reconstitution, if made easy, could be the source of anomalous titles. It could also be unscrupulously availed of by some as a convenient substitute for the rigid proceedings involved in original registration of title.[21] The Court observes that the subject property, supposedly located in Ternate, Cavite, where the naval reservation is found, covers more than 81 hectares of land. It is hardly believable that it has remained untouched by any documented transaction since its supposed titling in May 1941. It is also curious that no

13

photocopy of that title has ever been kept and preserved in some private or public repository. Parenthetically, the Catarrojas did not present any tax declaration covering such vast piece of property. Although a tax declaration is not a proof of ownership, payment of realty tax is an exercise of ownership over the property and is the payers unbroken chain of claim of ownership over it. Furthermore, the Catarrojas procrastination of over five decades before finally seeking reconstitution of title has allowed laches to set in. Once again, courts must be cautious against hasty and reckless grant of petitions for reconstitution, especially when they involve vast properties as in this case.[22] WHEREFORE, the Court GRANTS the petition, REVERSES the amended decision of the Court of Appeals dated February 23, 2006, and REINSTATES its decision dated July 12, 2005 in CA-G.R. CV 80401 that denied the petition for reconstitution of title of respondents Apolinario Catarroja, Reynaldo Catarroja, and Rosita Catarroja-Distrito. SO ORDERED.

ROBERTO A. ABAD Associate Justice

WE CONCUR:

ANTONIO T. CARPIO Associate Justice ARTURO D. BRION Associate Justice MARIANO C. DEL CASTILLO Associate Justice

JOSE P. PEREZ Associate Justice

ATTESTATION I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writ er of the opinion of the Courts Division.

14

ANTONIO T. CARPIO Associate Justice Chairperson, Second Division

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution and the Division Chairpersons Attestation, I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division.

REYNATO S. PUNO Chief Justice

[1] [2]

Exhibit A, records, pp. 1-6. Exhibit Q (inadvertently marked as Exhibit F), id. at 7-8. [3] Exhibit R (inadvertently marked as Exhibit G), id. at 9. [4] Exhibit E, id. at 24-25. [5] Exhibit H, id. at 10. [6] Exhibit S (inadvertently marked as Exhibit H), id. at 11. [7] Manifestation and Comment dated May 20, 2003, id. at 115; RTC Order dated May 30, 2003, id. at 116. [8] Id. at 117-120. [9] CA rollo, pp. 94-104. [10] Id. at 131-134. [11] Exhibit Q (inadvertently marked as Exhibit F), records, pp. 7-8. [12] Exhibit R (inadvertently marked as Exhibit G), id. at 110. [13] Exhibit H, id. at 10. [14] Exhibit E, id. at 24-25. [15] Exhibit S (inadvertently marked as Exhibit H), id. at 11. [16] 241 Phil. 75, 81 (1988). [17] G.R. No. 173210, April 24, 2009. [18] 480 Phil. 828, 840 (2004). [19] Supra note 17. [20] Registration of Land Titles and Deeds, Pea, 1988 Revised Edition, p. 86. [21] Ortigas & Co. Ltd. Partnership v. Judge Velasco, 343 Phil. 115, 136 (1997). [22] Angat v. Republic, G.R. No. 175788, June 30, 2009.

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THIRD DIVISION

JULIO FLORES (deceased), substituted by his heirs; BENITOFLORES (deceased), substituted by his heirs; DOLORES FLORES and VIRGINIA FLORES-DALERE, represented by their Attorney-in-Fact, JIMENA TOMAS, Petitioners,

G.R. No. 173365 Present:

CORONA, J., Chairperson, VELASCO, JR., - versus NACHURA, PERALTA, and MENDOZA, JJ. MARCIANO BAGAOISAN, Respondent. Promulgated:

April 15, 2010 x------------------------------------------------------------------------------------x

DECISION

NACHURA, J.:

Petitioners seek a review of the March 29, 2006 Decision [1] and the June 20, 2006 Resolution of the Court of Appeals (CA), denying their motion for reconsideration. The case involves a 13,552-square meter portion of a parcel of land covered by Original Certificate of Title (OCT) No. P-11880[2] in the name of the Heirs of Victor Flores, namely: Julio, Benito, Dolores, and Virginia, herein petitioners. OCT No. P11880 was issued pursuant to Homestead Patent No. 138892, given on November 12, 1973. This property is located in the Municipality of Piddig, Ilocos Norte. On December 20, 1976, petitioners, together with their mother Luisa Viernes, executed a Deed of Confirmation and Quitclaim[3] in favor of Vicente T. Lazo.Through this document, petitioners agreed to sell, cede, convey, grant, and

16

transfer by way of QUITCLAIM the subject property to Lazo. Thereafter, respondent, Marciano Bagaoisan, bought the subject property from Lazo, as evidenced by a Deed of Absolute Sale dated February 20, 1977.[4] On April 4, 1983, Viernes and petitioner Virginia Flores-Dalere executed a Palawag A Nasapataan (Affidavit), attesting to the fact that they conveyed to Lazo the subject property through the Deed of Confirmation and Quitclaim. Affiants also attested that Lazo and his predecessors-in-interest had been in possession of the disputed portion since 1940 and that the same was mistakenly included in the patent application of Victor Flores. On June 21, 1996, respondent filed an action for ownership, quieting of title, partition and damages against petitioners, praying that he be declared as the true owner of the subject property and that the entire property covered by OCT No. P11880 be partitioned among them. In the Complaint, respondent asserted that he was a tenant of Lazo and that he had been working on the subjec0t property since time immemorial. He said that, since he bought the property in 1977, he possessed the land as owner and paid real property tax thereon. He claimed that the subject property was erroneously covered by OCT No. P-11880 and that petitioners have previously recognized such fact, considering that they executed an affidavit acknowledging the erroneous inclusion of the property in their title. He averred that, lately, petitioners had denied his ownership of the land and asserted their ownership thereof by working and harvesting the crops thereon.[5] In answer, petitioners stated that they did not relinquish ownership or possession of the land to Lazo. While admitting that they executed the Deed of Confirmation and Quitclaim in favor of Lazo, petitioners claimed that they were misled into signing the same, with Lazo taking advantage of their lack of education. Petitioners contended that it was too late for respondent to assert title to the disputed portion because the title covering the same had already become indefeasible one year after it was issued.[6] On February 3, 2000, the Regional Trial Court rendered a decision, disposing as follows:

WHEREFORE, in view of the foregoing, judgment is hereby rendered ordering the defendants, jointly and severally:

1.

To recognize plaintiff Marciano Bagaoisan as owner of the 13,552 sq.m. parcel of land situated in Barrio Maab-abucay (now Estancia) Municipality of Piddig, Ilocos Norte;

17

2.

To cease and desist from further possession of said parcel of land and to immediately reconvey the same to plaintiff;

3.

To pay said plaintiff such amount as would be the peso equivalent of 100 cavanes of palay per year, for the loss of harvest he incurred in 1994, 1995, 1996, 1997, 1998 and 1999, computed as the price then obtaining in said years; and

4.

To pay plaintiff the amount of P20,000.00 as reasonable attorneys fees.

No pronouncement as to costs.

SO ORDERED.[7] On appeal, the CA upheld the validity of the Deed of Confirmation and Quitclaim. In light of petitioners admission that they signed the deed after it was read to them, the CA dismissed their assertion that they did not know the contents of the document. It further declared that the deed merely confirmed petitioners non ownership of the subject property and it did not involve an alienation or encumbrance. Accordingly, it concluded that the five-year prohibition against alienation of a property awarded through homestead patent did not apply. The CA likewise rejected petitioners contention that the acti on was barred by prescription or laches. Citing Vital v. Anore,[8] the CA held that where the registered owner knew that the property described in the patent and the certificate of title belonged to another, any statute barring an action by the real owner would not apply, and the true owner might file an action to settle the issue of ownership.

The dispositive portion of the assailed March 29, 2006 Decision reads:

WHEREFORE, the appeal is hereby DISMISSED for lack of sufficient merit. The assailed 3 February 2000 decision by the Regional Trial Court, Laoag City, in Civil Case No. 11048-14 is hereby AFFIRMED.

SO ORDERED.[9]

18

The CA likewise denied petitioners motion for reconsideration in its Resolution dated June 20, 2006.[10] Consequently, petitioners filed this petition for review, insisting that the Deed of Confirmation and Quitclaim is void as its contents were not fully explained to them, and it violates Section 118 of the Public Land Act (Commonwealth Act No. 141), which prohibits the alienation of lands acquired through a homestead patent. The petition is meritorious. Without going into petitioners allegation that they were unaware of the contents of the Deed of Confirmation and Quitclaim, we nonetheless hold that the deed is void for violating the five-year prohibitory period against alienation of lands acquired through homestead patent as provided under Section 118 of the Public Land Act, which states: Sec. 118. Except in favor of the Government or any of its branches, units, or institutions, lands acquired under free patent or homestead provisions shall not be subject to encumbrance or alienation from the date of the approval of the application and for a term of five years from and after the date of issuance of the patent and grant, nor shall they become liable to the satisfaction of any debt contracted prior to the expiration of said period, but the improvements or crops on the land may be mortgaged or pledged to qualified persons, associations, or corporations. No alienation, transfer, or conveyance of any homestead after five years and before twenty-five years after the issuance of title shall be valid without the approval of the Secretary of Agriculture and Commerce, which approval shall not be denied except on constitutional and legal grounds.

We do not agree with the CA that the Deed of Confirmation and Quitclaim merely confirmed petitioners non-ownership of the subject property. The deed uses the words sell, cede, convey, grant, and transfer. These words admit of no other interpretation than that the subject property was indeed being transferred to Lazo. The use of the words confirmation and quitclaim in the title of the document was an obvious attempt to circumvent the prohibition imposed by law. Labeling the deed as a confirmation of non-ownership or as a quitclaim of rights would actually make no difference, as the effect would still be the alienation or conveyance of the property. The act of conveyance would still fall within the ambit of the prohibition. To validate such an arrangement would be to throw the door open to all possible fraudulent subterfuges and schemes that persons interested in land given to a homesteader may devise to circumvent and defeat the legal provisions prohibiting their alienation within five years from the issuance of the patent.[11]

19

It bears stressing that the law was enacted to give the homesteader or patentee every chance to preserve for himself and his family the land that the State had gratuitously given to him as a reward for his labor in cleaning and cultivating it.[12] Its basic objective, as the Court had occasion to stress, is to promote public policy, that is to provide home and decent living for destitutes, aimed at providing a class of independent small landholders which is the bulwark of peace and order.[13] Hence, any act which would have the effect of removing the property subject of the patent from the hands of a grantee will be struck down for being violative of the law. To repeat, the conveyance of a homestead before the expiration of the fiveyear prohibitory period following the issuance of the homestead patent is null and void and cannot be enforced, for it is not within the competence of any citizen to barter away what public policy by law seeks to preserve.[14] There is, therefore, no doubt that the Deed of Confirmation and Quitclaim, which was executed three years after the homestead patent was issued, is void and cannot be enforced. Furthermore, respondent failed to present sufficient evidence to surmount the conclusiveness and indefeasibility of the certificate of title. An OCT issued on the strength of a homestead patent partakes of the nature of a certificate issued in a judicial proceeding and becomes indefeasible and incontrovertible upon the expiration of one year from the date of the promulgation of the Director of Lands order for the issuance of the patent.[15] After the lapse of such period, the sole remedy of a landowner, whose property has been wrongfully or erroneously registered in anothers name is to file an action for reconveyance so long as the property has not passed to an innocent purchaser for value. [16] In order that an action for reconveyance based on fraud may prosper, it is essential for the party seeking reconveyance to prove, by clear and convincing evidence, his title to the property and the fact of fraud.[17] Respondent did not allege in his complaint or prove during the trial that fraud attended the registration of the subject property in petitioners names. In fact, there was no allegation as to how petitioners were able to secure title to the property despite the alleged ownership of respondents predecessor. More importantly, respondent failed to prove that he has title to the subject property. He merely asserted that his predecessors-in-interest had been in possession of the property since 1940. The basic presumption is that lands of whatever classification belong to the State and evidence of a land grant must be well-nigh incontrovertible. The Public Land Act requires that the possessor or his predecessors-in-interest must be in open, continuous, exclusive, and notorious possession and occupation of the land for at least thirty years. When these conditions are complied with, the possessor is deemed to have acquired, by operation of law, a right to a government grant, without the necessity of a certificate of title being issued. The land ceases to be a part of the public domain and beyond

20

the authority of the Director of Lands,[18] such that the latter would have no more right to issue a homestead patent to another person. Respondent merely established that he had been in possession of the property and that he had been paying real property taxes thereon since 1977. The only evidence on record attesting to the fact that respondent and his predecessorsin-interest had been in possession of the property since 1940 was the affidavit executed by some of petitioners. This, however, would not suffice. In closing, it would be well to mention that the execution of the Deed of Confirmation and Quitclaim within the five-year prohibitory period also makes the homestead patent susceptible to cancellation, and the subject property being reverted to the public domain.[19] It is the Solicitor General, on behalf of the government, who is by law mandated to institute an action for reversion.[20] Should the Solicitor General decide to file such an action, it is in that action that petitioners defenses, particularly their alleged lack of knowledge of the contents of the deed, will have to be resolved. WHEREFORE, the petition is GRANTED. The March 29, 2006 Decision of the Court of Appeals and its June 20, 2006 Resolution are REVERSED andSET ASIDE. The complaint for ownership, quieting of title and damages is DISMISSED, without prejudice to an action for reversion that the Solicitor General may decide to file for the State. SO ORDERED. ANTONIO EDUARDO B. NACHURA Associate Justice WE CONCUR:

RENATO C. CORONA Associate Justice Chairperson

PRESBITERO J. VELASCO, JR. Associate Justice

DIOSDADO M. PERALTA Associate Justice

JOSE CATRAL MENDOZA Associate Justice

21

ATTESTATION

I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division.

RENATO C. CORONA Associate Justice Chairperson, Third Division

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution and the Division Chairperson's Attestation, I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division.

REYNATO S. PUNO Chief Justice

[1]

Penned by Associate Justice Santiago Javier Ranada, with Associate Justices Roberto A. Barrios and Mario L. Guaria III, concurring; rollo, pp. 92-99. [2] Exhibit A; Folder of Exhibits. [3] Exhibit B; Folder of Exhibits. [4] Exhibit A-5; Folder of Exhibits. [5] Records, pp. 1-2. [6] Id. at 17-18. [7] Rollo, pp. 60-61. [8] 90 Phil. 855 (1952). [9] Rollo, pp. 98-99. [10] CA rollo, p. 113. [11] Pangilinan v. Ramos, G.R. No. 44617, January 23, 1990, 181 SCRA 350, 358. [12] Heirs of Venancio Bajenting v. Baez, G.R. No. 166190, September 20, 2006, 502 SCRA 531, 553. [13] Id. [14] De Romero v. Court of Appeals, 377 Phil.189, 201 (1999). [15] Buston-Arendain v. Gil, G.R. No. 172585, June 26, 2008, 555 SCRA 561, 574. [16] Abejaron v. Nabasa, G.R. No. 84831, June 20, 2001, 359 SCRA 47, 56-57. [17] Id. at 57.
[18] [19] [20]

De Guzman v. Court of Appeals, 442 Phil. 534, 548 (2002). Section 124 of the Public Land Act. Abejaron v. Nabasa, supra note 16, at 67.

22

Republic of the Philippines SUPREME COURT Baguio City SECOND DIVISION G.R. No. 170207 April 19, 2010

VICENTE CAWIS (substituted by his son, EMILIO CAWIS), PEDRO BACLANGEN, FELIZA DOMILIES, IVAN MANDI-IT a.k.a. IVAN MANDI-IT LUPADIT, DOMINGO CAWIS and GERARD LIBATIQUE, Petitioners, vs. HON. ANTONIO CERILLES, in his capacity as the DENR Secretary, HON. MANUEL GEROCHI, in his capacity as the Director, Lands, Management Bureau, and MA. EDELIZA PERALTA, Respondents. DECISION CARPIO, J.: The Case This is a petition for review1 of the 17 February 2005 Decision2 and the 6 September 2005 Resolution3 of the Court of Appeals (appellate court) in CA-G.R. CV No. 66685. In its 17 February 2005 Decision, the appellate court affirmed the 3 November 1999 Resolution4 of Branch 61 of the Regional Trial Court of Baguio City (trial court), which dismissed the complaint filed by Vicente Cawis, Pedro Baclangen, Feliza Domilies, Ivan Mandi-it, Domingo Cawis, and Gerard Libatique (collectively petitioners). In its 6 September 2005 Resolution, the appellate court denied petitioners motion for reconsideration. The Facts On 23 September 1957, the Department of Environment and Natural Resources (DENR), pursuant to Section 795of the Public Land Act,6 approved the sales patent application of Jose V. Andrada (Andrada) for Lot No. 47 with an area of 1,339 square meters situated within Holy Ghost Hill Subdivision in Baguio City. Sales Patent No. 1319 was issued to Andrada upon full payment of the purchase price of the lot on 20 November 1968, as evidenced by O.R. No. 459651. 7 On 4 August 1969, Republic Act No. 60998 took effect. It provided that subject to certain conditions, parcels of land within the Holy Ghost Hill Subdivision, which included Lot No. 47, would be sold to the actual occupants without the necessity of a public bidding, in accordance with the provisions of Republic Act No. 730. 9 Claiming to be the actual occupants referred to in R.A. No. 6099, petitioners protested the sales patent awarded to Andrada. The Bureau of Lands denied their protest on the ground that R.A. No. 6099, being of later passage, could no longer affect the earlier award of sales patent to Andrada. Petitioners sought reconsideration, but the Bureau of Lands denied it on 19 May 1987. Petitioners failed to appeal the adverse decision of the Bureau of Lands to any higher administrative authority or to the courts. Thus, the decision had attained finality. 10 Sometime in 1987, private respondent Ma. Edeliza S. Peralta (Peralta) purchased Lot No. 47 from Andrada. On 28 October 1987, the Deputy Public Land Inspector, in his final report of investigation,11 found that neither Andrada nor Peralta had constructed a residential house on the lot, which was required in the Order of Award

23

and set as a condition precedent for the issuance of the sales patent. Apparently, it was Vicente Cawis, one of the petitioners, who had built a house on Lot No. 47. On 13 November 1987, Sales Patent No. 1319 was nonetheless transferred to Peralta. In the Order for the Issuance of Patent,12 the Assistant Director of Lands verified the investigation conducted by the Land Inspector, whose report was fully endorsed by the District Land Officer, that Peralta had complied with the requirements of the law regarding the construction of improvements on the land applied for. In the Order for Transfer of Sales Rights,13 the Director of Lands confirmed that before the transfer of the sales patent to Peralta, Andrada had complied with the construction requirement. On 4 December 1987, Original Certificate of Title (OCT) No. P-160414was duly issued in Peraltas name. On 8 September 1998, petitioners filed a complaint15 before the trial court alleging fraud, deceit, and misrepresentation in the issuance of the sales patent and the original certificate of title over Lot No. 47. They claimed they had interest in the lot as qualified beneficiaries of R.A. No. 6099 who met the conditions prescribed in R.A. No. 730. They argued that upon the enactment of R.A. No. 6099, Andradas sales patent was deemed cancelled and revoked in their favor. In her answer with a motion to dismiss,16 Peralta averred that petitioners have no cause of action against her, that she obtained her title after compliance with the legal requirements, that her title was issued more than ten years prior to the filing of the complaint, that the action was a collateral attack on a title, and that even if the action was a direct attack, petitioners were not the proper parties. The Ruling of the Trial Court The trial court issued a Resolution dated 3 November 1999 dismissing the complaint filed by petitioners. The trial court held that reversion of title on the ground of fraud must be initiated by the government through the Office of the Solicitor General (OSG). In its 13 January 2000 Order,17 the trial court denied petitioners motion for reconsideration. The Ruling of the Appellate Court In its 17 February 2005 Decision, the appellate court affirmed the resolution of the trial court. The appellate court explained that under Section 2 18 of R.A. No. 6099, ownership of public land within the Holy Ghost Hill Subdivision was not automatically conferred on petitioners as occupants. The appellate court stated that petitioners must first apply for a sales patent in order to avail of the benefits of the law. The appellate court agreed with the trial court that petitioners had no standing to file a suit for annulment of Sales Patent No. 1319 and OCT No. P-1604. It cited Section 10119 of the Public Land Act, which provides that only the government, through the OSG, could file an action for reversion. In its 6 September 2005 Resolution, the appellate court denied petitioners motion for reconsideration. The Issues The twin issues raised by petitioners are (1) whether the actual occupants of parcels of land covered by R.A. No. 6099, which includes Lot No. 47, have standing to question the validity of the sales patent and the original certificate of title issued over Lot No. 47; and (2) whether the suit for annulment of title allegedly issued through fraud, deceit, or misrepresentation, has prescribed. The Courts Ruling

24

The petition has no merit. Petitioners contend private respondent misrepresented that there was no improvement on Lot No. 47 at the time she filed her sales patent application when in fact, there were numerous improvements consisting of residential houses erected by them. Petitioners argue neither private respondent nor her predecessor-in-interest has introduced any improvement on Lot No. 47, which is a condition precedent before she can be a qualified awardee. Petitioners take exception to the rule that only the OSG is allowed to file a suit questioning the validity of the sales patent and the original certificate of title. As to the second issue, petitioners argue that since the sales patent and the original certificate of title are void from the beginning, the complaint filed by petitioners cannot be deemed to have prescribed. In her Comment, private respondent asserts that petitioners have no personality to question the validity of the sales patent and the original certificate of title issued in her name. She maintains that only the government, through the OSG, may file an action for reversion on the ground of fraud, deceit, or misrepresentation. As to the second issue, private respondent claims that petitioners annulment suit has prescribed pursuant to Section 3220of Presidential Decree No. 1529.21 At the outset, we must point out that petitioners complaint questioning the validit y of the sales patent and the original certificate of title over Lot No. 47 is, in reality, a reversion suit. The objective of an action for reversion of public land is the cancellation of the certificate of title and the resulting reversion of the land covered by the title to the State. This is why an action for reversion is oftentimes designated as an annulment suit or a cancellation suit. Coming now to the first issue, Section 101 of the Public Land Act 22 clearly states: SEC. 101. All actions for the reversion to the Government of lands of the public domain or improvements thereon shall be instituted by the Solicitor General or the officer acting in his stead, in the proper courts, in the name of the Republic of the Philippines. Even assuming that private respondent indeed acquired title to Lot No. 47 in bad faith, only the State can institute reversion proceedings, pursuant to Section 101 of the Public Land Act and our ruling in Alvarico v. Sola.23 Private persons may not bring an action for reversion or any action which would have the effect of canceling a land patent and the corresponding certificate of title issued on the basis of the patent, such that the land covered thereby will again form part of the public domain.24 Only the OSG or the officer acting in his stead may do so. Since the title originated from a grant by the government, its cancellation is a matter between the grantor and the grantee.251avvphi1 Similarly, in Urquiaga v. CA,26 this Court held that there is no need to pass upon any allegation of actual fraud in the acquisition of a title based on a sales patent. Private persons have no right or interest over land considered public at the time the sales application was filed. They have no personality to question the validity of the title. We further stated that granting, for the sake of argument, that fraud was committed in obtaining the title, it is the State, in a reversion case, which is the proper party to file the necessary action.27 In this case, it is clear that Lot No. 47 was public land when Andrada filed the sales patent application. Any subsequent action questioning the validity of the award of sales patent on the ground of fraud, deceit, or misrepresentation should thus be initiated by the State. The State has not done so and thus, we have to uphold the

25

validity and regularity of the sales patent as well as the corresponding original certificate of title issued based on the patent. At any rate, the Court, in the exercise of its equity jurisdiction, may directly resolve the issue of alleged fraud in the acquisition of a sales patent although the action is instituted by a private person. In this connection, the 19 May 1987 letter of the Director of Lands to petitioner Vicente Cawis is instructive: As to your allegation that the award in favor of applicant-respondent (Andrada) should be cancelled as he failed to introduce improvements on the land, we find the said contention to be untenable. Somewhere in your letter dated July 11, 1983, you stated that you took possession of the lot in question in the early 1950s, introduced improvements thereon, and resided therein continuously up to the present. By your own admission, it would appear that you were the ones who made it impossible for Mr. Andrada to take possession of the said lot and to improve the same. This being the case, the failure of the applicant-respondent (Andrada) to introduce improvements on the land in question is not attributable to him. In view of the foregoing facts and circumstances, we regret to inform you that we cannot reconsider our position on this matter. It is further advised that you vacate the premises and remove all your improvements thereon so that the applicant-awardee (Andrada) can take immediate possession of the land in question.28 Clearly then, fraud cannot be imputed to Andrada. His supposed failure to introduce improvements on Lot No. 47 is simply due to petitioners refusal to vacate the lot. It appears from the factual finding of the Director of Lands that petitioners are the ones in bad faith. Contrary to petitioners claim, R.A. No. 6099 did not automatically confer on them ownership of the public land within Holy Ghost Hill Subdivision. The law itself, Section 2 of R.A. No. 6099, provides that the occupants must first apply for a sales patent in order to avail of the benefits of the law, thus: SEC. 2. Except those contrary to the provisions of Republic Act Numbered Seven Hundred and Thirty, all other provisions of Commonwealth Act Numbered One hundred and Forty-One governing the procedure of issuing titles shall apply in the disposition of the parcels above-described to the beneficiaries of this Act. The complaint filed by petitioners did not state that they had filed an application for a sales patent over Lot No. 47. Even if it did, an application for a sales patent could only create, at most, an inchoate right. Not being the real parties-in-interest, petitioners have no personality to file the reversion suit in this case. Consequently, the prescription issue pertaining to the action for reversion initiated by petitioners who could not have successfully initiated the reversion suit in the first place, is now moot. WHEREFORE, we DENY the petition for review. We AFFIRM the 17 February 2005 Decision and the 6 September 2005 Resolution of the Court of Appeals in CA-G.R. CV No. 66685. Costs against petitioners. SO ORDERED. ANTONIO T. CARPIO Associate Justice WE CONCUR:

26

ARTURO D. BRION Associate Justice MARIANO C. DEL CASTILLO Associate Justice ROBERTO A. ABAD Associate Justice

JOSE PORTUGAL PEREZ Associate Justice ATTESTATION I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division. ANTONIO T. CARPIO Associate Justice Chairperson CERTIFICATION Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairpersons Attestation, I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division. REYNATO S. PUNO Chief Justice Footnotes
1

Under Rule 45 of the Rules of Court.

Rollo, pp. 98-104. Penned by Associate Justice Edgardo P. Cruz, with Presiding Justice Romeo A. Brawner and Associate Justice Jose C. Mendoza, concurring.
3

Id. at 106. Records, pp. 118-121.

SEC. 79. All lots, except those claimed by or belonging to private parties and those reserved for parks, buildings, and other public uses, shall be sold, after due notice, at public auction to the highest bidder, after the approval and recording of the plat of subdivision as above provided, but no bid shall be accepted that does not equal at least two-thirds of the appraised value, nor shall bids be accepted from persons, corporations, associations, or partnerships not authorized to purchase public lands for commercial, residential, or industrial purposes under the provisions of this Act. The provisions of Sections twenty-six and sixty-five of this Act shall be observed in so far as they are applicable. Lots for which satisfactory bids have not been received shall be again offered for sale, under the same conditions as the first time, and if they then remain unsold, the Director of Lands shall be authorized to sell them at private sale for not less than two-thirds of their appraised value.
6

Commonwealth Act No. 141, as amended. Records, p. 31.

An Act Authorizing the Sale of Fourteen Parcels of Land in the Baguio Townsite, City of Baguio.
9

An Act to Permit the Sale Without Public Auction of Public Lands of the Republic of the Philippines for Residential Purposes to Qualified Applicants under Certain Conditions.

27

10

Records, p. 35. Id. at 113-114. Rollo, p. 132. Id. at 133. Id. at 134. Records, pp. 2-9. Id. at 24-29. Id. at 134.

11

12

13

14

15

16

17

18

SEC. 2. Except those contrary to the provisions of Republic Act Numbered Seven Hundred and Thirty, all other provisions of Commonwealth Act Numbered One Hundred and Forty-One governing the procedure of issuing titles shall apply in the disposition of the parcels abovedescribed to the beneficiaries of this Act.
19

SEC. 101. All actions for the reversion to the Government of lands of the public domain or improvements thereon shall be instituted by the Solicitor General or the officer acting in his stead, in the proper courts, in the name of the Republic of the Philippines.
20

SEC. 32. Review of decree of registration; Innocent purchaser for value . The decree of registration shall not be reopened or revised by reason of absence, minority, or other disability of any person adversely affected thereby, nor by any proceeding in any court for reversing judgments, subject, however, to the right of any person, including the government and the branches thereof, deprived of land or of any estate or interest therein by such adjudication or confirmation of title obtained by actual fraud, to file in the proper Court of First Instance a petition for reopening and review of the decree of registration not later than one year from and after the date of the entry of such decree of registration, but in no case shall such petition be entertained by the court where an innocent purchaser for value has acquired the land or an interest therein, whose rights may be prejudiced. Whenever the phrase "innocent purchaser for value" or an equivalent phrase occurs in this Decree, it shall be deemed to include an innocent lessee, mortgagee, or other encumbrancer for value. Upon the expiration of said period of one year, the decree of registration and the certificate of title issued shall become incontrovertible. Any person aggrieved by such decree of registration in any case may pursue his remedy by action for damages against the applicant or any other persons responsible for the fraud.
21

Amending and Codifying the Laws Relative to Registration of Property and for other Purposes.
22

Commonwealth Act No. 141, as amended. 432 Phil. 792 (2002). Id. Id. 361 Phil. 660 (1999). Id. Records, pp. 31-32.

23

24

25

26

27

28

28

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. 172292 July 23, 2010

ALIDA MORES Petitioner, vs. SHIRLEY M. YU-GO, MA. VICTORIA M. YU-LIM, and MA. ESTRELLA M. YU, Respondents. DECISION CARPIO, J.: G.R. No. 172292 is a petition for review1 assailing the Decision2 promulgated on 26 August 2005 by the Court of Appeals (appellate court) as well as the Resolution3 promulgated on 14 March 2006 in CA-G.R. CV No. 76076. The appellate court partially granted the petition filed by Shirley M. Yu-Go, Ma. Victoria M. Yu-Lim, and Ma. Estrella M. Yu (Yu siblings) and reversed the decision of the Regional Trial Court of Naga City, Branch 27 (trial court), dated 28 June 2002 in Civil Case No. 99-4216. The appellate court ordered spouses Antonio and Alida Mores (spouses Mores) to pay the Yu siblings moral damages in the amount of P100,000. The Facts Antonio Mores passed away during the pre-trial stage. Hence, Alida Mores remained as the only defendant, per the trial courts order dated 3 May 2000.4 The appellate court narrated the facts as follows: On January 21, 1998, plaintiffs-appellants Shirley M. Yu-Go, Ma. Victoria M. Yu-Lim and Ma. Estrella M. Yu ("appellants") filed a Complaint for Injunction and Damages with Prayer for Issuance of a Temporary Restraining Order and Preliminary Injunction before the Regional Trial Court in Naga City against defendantsappellees, spouses Antonio and Alida Mores ("appellees"). Appellants alleged that they co-owned a parcel of land located in Sto. Tomas, Magarao, Camarines Sur on which a building of strong materials ("subject property") was built. In March 1983, appellees pleaded to appellants that they be allowed to stay in the subject property in the meantime that they did not own a house yet. Since appellee Antonio Mores used to be an errand boy of appellants family, they readily agreed without asking for any rental but subject only to the condition that the said stay would last until anyone of appellants would need the subject property. Forthwith, appellees and their children occupied the same as agreed upon. In November 1997, appellants made known to appellees that they were already in need of the subject property. They explained that appellant Shirley Yu-Go needed the same and, besides, appellees already have their own house in Villa Grande Homes, Naga City. Yet, appellees begged that they be given a 6-month extension to stay thereat or until May 1998. However, even after May 1998, appellees failed to make good their promise and even further asked that they be allowed to stay therein until October 1998, which was again extended until the end of the same year. Thus, sometime in the first week of January 1999, appellants gave their final demand for appellees to vacate the subject property. However, instead of heeding such demand,

29

appellees hired some laborers and started demolishing the improvements on the subject property on January 20, 1999. Appellants protest fell on deaf ears because appellees continued their demolition and even took away and appropriated for themselves the materials derived from such unlawful demolition. Consequently, appellants instituted the said action for injunction where they also prayed for the reimbursement of the value of the residential building illegally demolished as well as for the payment of moral damages, attorneys fees, litigation expenses and costs of suit. On February 5, 1999, appellees filed their Answer where they denied the material averments of the complaint. They claimed that appellee Antonio Mores, who was appellants uncle, used to be the assistant manager and cashier of appellants father at their Caltex Service Station until the laters death sometime in 1980. Appellants Caltex Filling Station had stopped operation and was just rented out to Herce Trucking Service. Upon the expiration of such lease contract, appellees were allowed to occupy the subject property as their dwelling places. They were the ones who caused its renovation consisting of a 3-bedroom annex, a covered veranda and a concrete hollow block fence, at their own expense, and with appellants consent, which renovation was made without altering the form and substance of the subject property. They denied that appellants made a demand for them to vacate the subject property, insisting that it was merely a sort of reminder that sooner or later appellees should yield possession thereof since, after all, they had already bought a secondhand house which was undergoing repair. Appellees argued that what they removed was merely the improvements made on the subject property, which removal had not caused any substantial damage thereto as, in fact, it remained intact. By way of counterclaims, they demanded payment of actual damages, attorneys fees and litigation expenses.5 The Trial Courts Ruling On 28 June 2002, the trial court promulgated its Decision in favor of the spouses Mores. The trial court ratiocinated and ruled thus: Defendants, who are possessors in good faith, were able to prove by preponderance of evidence that they removed only the improvements they introduced without destroying the principal building, after the plaintiffs refused to pay them the reasonable value of the improvements. x x x But defendants failed to prove the allegations in their counterclaims that plaintiffs acted in bad faith and/or through gross and reckless negligence in filing this complaint, and the damages defendants allegedly suffered. Failing in this, plaintiffs must also be presumed to have acted in good faith when they filed this complaint with the honest belief that their rights were violated when defendants removed the useful improvements from the principal building and land of plaintiffs. Applying the same principle, the equipoise rule, defendants counterclaims must necessarily fail. Both parties having acted in good faith, the court will not disturb the present status, and will leave the parties where it found them. Wounds should not be scratched in order to hasten the healing process, and neither should this Court scratch herein parties rift that torn [sic] them apart from being close relatives before this controversy started. Parties owe to their siblings and to their posterity to reconcile. Anyway, this case was started because parties were very close relatives. The courts are not only courts of justice but also courts of equity.

30

WHEREFORE, the complaint and the counterclaims are hereby dismissed. No pronouncement as to cost. SO ORDERED.6 The trial court gave due course to the Yu siblings Notice of Appeal in an Order dated 22 July 2002. The Appellate Courts Ruling The appellate court partially granted the Yu siblings appeal. The appellate court disagreed with the trial courts conclusion that the spouses Mores were builders in good faith and have the right of accession under Articles 546 and 547 of the Civil Code. Instead, the appellate court believed that the relationship between the Yu siblings and the spouses Mores is one between a lessor and a lessee, making Article 1678 of the Civil Code applicable to the present case. The options given by Article 1678, the right of appropriating the useful improvements after reimbursing 50% of its value or the right of removal of the useful improvements, are given by law to the lessor - the Yu siblings. The spouses Mores, however, failed to give the Yu siblings the opportunity to choose from these two options. The appellate court thus ordered the spouses Mores to pay the Yu siblings moral damages worthP100,000. The appellate court resolved to deny Alida Mores Motion for Reconsideration for want of merit.7 The Issues In her petition, Alida Mores stated that the decision of the appellate court awarding the Yu siblings moral damages in the amount of P100,000 is rendered with grave abuse of discretion and is not in accord with the decisions of this Court.8 The Courts Ruling The petition has merit. Alida Mores argues that in case of breach of contract between a lessor and a lessee, moral damages are not awarded to the lessor if the lessee is not shown to have acted in bad faith. She proves her and her husbands alleged good faith by quoting the appellate courts decision which stated that: [The Spouses Mores] good faith is underscored by the fact that no one from appellants had objected or prevented appellees from effecting said improvements which, obviously, were undertaken in quite a span of time. Even if we believe appellant Victoria Yu-Lims testimony that they would only learn of the introduction of such improvements after each of such improvements had already been built, [the Yu siblings] never made known their objections thereto nor did they pose a warning against future introduction of any improvement. After all, the said improvements were not introduced simultaneously.9 The good faith referred to by Alida Mores was about the building of the improvements on the leased subject property. However, tenants like the spouses Mores cannot be said to be builders in good faith as they have no pretension to be owners of the property.10 Indeed, full reimbursement of useful improvements and retention of the premises until reimbursement is made applies only to a possessor in good faith, i.e., one who builds on land with the belief that he is the owner thereof. It does not apply where ones only interest is that of a lessee under a rental contract;

31

otherwise, it would always be in the power of the tenant to "improve" his landlord out of his property.11 The appellate court is correct in ruling that Article 1678 of the Civil Code should apply in the present case. Article 1678 reads: If the lessee makes, in good faith, useful improvements which are suitable to the use for which the lease is intended, without altering the form or substance of the property leased, the lessor upon the termination of the lease shall pay the lessee one-half of the value of the improvements at that time. Should the lessor refuse to reimburse said amount, the lessee may remove the improvements, even though the principal thing may suffer damage thereby. He shall not, however, cause any more impairment upon the property leased than is necessary.1avvphi1 With regard to the ornamental expenses, the lessee shall not be entitled to any reimbursement, but he may remove the ornamental objects, provided no damage is caused to the principal thing, and the lessor does not choose to retain them by paying their value at the time the lease is extinguished. It is incorrect, however, for the appellate court to state that the spouses Mores did not give the Yu siblings the option to retain the improvements. The appellate court stated that "nothing in the records reveal that [the Yu siblings] were given the chance to choose from the options of either paying one-half () of the value of the improvements at the time they were made on the subject property, or to demand the removal by [the spouses Mores] of such improvements at their expense."12 The trial court even quoted from the transcript of Alida Mores direct testimony on 10 October 2001 on the subject: Q: Plaintiff Yu-Lim likewise testified that the plaintiffs demanded in 1998 that you vacate the premises because it will be needed by plaintiff Shirley Yu-Co, what can you say to that? A: It was in November 1998 that the plaintiff intimated that we will soon vacate the place because by that time we had already bought a second-hand house. Q: What happened after that? A: My husband good-naturedly asked for reimbursement for the improvements we constructed at our expense. Q: What happened to that demand? A: The plaintiffs became mad at us and refused to pay. Q: What happened after that, what did your husband do? A: My husband removed the roofing, coco lumber, trusses, the electrical installation and the improvements constructed, glass panel and window panel. Q: By the way, who spent for the introduction of these improvements? A: My husband and I.13 There is thus no reason for the appellate courts award of moral damages to the Yu siblings. We agree with the trial courts finding that the spouses Mores "removed

32

only the improvements they introduced without destroying the principal building, after the [Yu siblings] refused to pay them the reasonable value of the improvements."14When the spouses Mores demanded reimbursement, the Yu siblings should have offered to pay the spouses Mores one-half of the value of the improvements. Since the Yu siblings failed to make such offer, the spouses Mores had the right to remove the improvements. WHEREFORE, we GRANT the petition. We AFFIRM with MODIFICATION the Decision of the Court of Appeals promulgated on 26 August 2005 as well as the Resolution promulgated on 14 March 2006 in CA-G.R. CV No. 76076. Article 1678 of the Civil Code is applicable to the present case. The award of moral damages worthP100,000 to the Yu siblings is deleted. SO ORDERED. ANTONIO T. CARPIO Associate Justice WE CONCUR: ANTONIO EDUARDO B. NACHURA Associate Justice DIOSDADO M. PERALTA Associate Justice ROBERTO A. ABAD Associate Justice

JOSE C. MENDOZA Associate Justice ATTESTATION I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division. ANTONIO T. CARPIO Associate Justice Chairperson CERTIFICATION Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairpersons Attestation, I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division. RENATO C. CORONA Chief Justice

Footnotes
1

Under Rule 45 of the 1997 Rules of Civil Procedure.

Rollo, pp. 18-28. Penned by Associate Justice Magdangal M. De Leon, with Associate Justices Salvador J. Valdez, Jr. and Mariano C. Del Castillo (now an Associate Justice of this Court), concurring.

33

Id. at 36-38. Penned by Associate Justice Magdangal M. De Leon, with Associate Justices Mariano C. Del Castillo and Amelita G. Tolentino, concurring.
4

CA rollo, p. 25. Rollo, pp. 19-21. CA rollo, p. 29. Rollo, pp. 36-38. Id. at 11. Id. at 12-13, quoting page 10 of the appellate courts Decision. Quemuel and Solis v. Olaes and Prudente, 111 Phil. 797 (1961). Geminiano v. Court of Appeals, 328 Phil. 682 (1996). Rollo, pp. 27-28. CA rollo, p. 28. TSN (Alida Mores), 10 October 2001, pp. 16-17. Id. at 29.

10

11

12

13

14

34

THIRD DIVISION LUCIANO BRIONES and NELLY BRIONES, Petitioners, G.R. No. 150666 Present: CARPIO MORALES, J., Chairperson, BRION, BERSAMIN, ABAD,* and VILLARAMA, JR., JJ.

- versus -

JOSE MACABAGDAL, FE D. MACABAGDAL and VERGON Promulgated: REALTY INVESTMENTS August 3, 2010 CORPORATION, Respondents. x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x DECISION VILLARAMA, JR., J.: On appeal under Rule 45 of the 1997 Rules of Civil Procedure, as amended, is the Decision[1] dated December 11, 2000 of the Court of Appeals (CA) in CA-G.R. CV No. 48109 which affirmed the September 29, 1993 Decision [2] of the Regional Trial Court (RTC) of Makati City, Branch 135, ordering petitioners Luciano and Nelly Briones to remove the improvements they have made on the disputed property or to pay respondent-spouses Jose and Fe Macabagdal the prevailing price of the land as compensation. The undisputed factual antecedents of the case are as follows: Respondent-spouses purchased from Vergon Realty Investments Corporation (Vergon) Lot No. 2-R, a 325-square-meter land located in Vergonville Subdivision No. 10 at Las Pias City, Metro Manila and covered by Transfer Certificate of Title No. 62181 of the Registry of Deeds of Pasay City. On the other hand, petitioners are the owners of Lot No. 2-S, which is adjacent to Lot No. 2-R. Sometime in 1984, after obtaining the necessary building permit and the approval of Vergon, petitioners constructed a house on Lot No. 2-R which they thought was Lot No. 2-S. After being informed of the mix up by Vergons manager, respondent-spouses immediately demanded petitioners to demolish the house and vacate the property. Petitioners, however, refused to heed their demand. Thus, respondent-spouses filed an action to recover ownership and possession of the said parcel of land with the RTC of Makati City.[3] Petitioners insisted that the lot on which they constructed their house was the lot which was consistently pointed to them as theirs by Vergons agents over the

35

seven (7)-year period they were paying for the lot. They interposed the defense of being buyers in good faith and impleaded Vergon as third-party defendant claiming that because of the warranty against eviction, they were entitled to indemnity from Vergon in case the suit is decided against them.[4] The RTC ruled in favor of respondent-spouses and found that petitioners house was undoubtedly built on Lot No. 2-R. The dispositive portion of the trial courts decision reads as follows: PREMISES CONSIDERED, let judgment be rendered declaring, to wit: 1. That plaintiffs are the owners of Lot No. 2-R of subdivision plan (LRC) Psd-147392 at Vergonville Subdivision, No. 10, Las Pias, Metro Manila covered by TCT No. 62181 of the Registry of Deeds of Pasay City on which defendants have constructed their house; 2. Defendants, jointly and severally, are ordered to demolish their house and vacate the premises and return the possession of the portion of Lot No. 2-R as above-described to plaintiffs within thirty (30) days from receipt of this decision, or in the alternative, plaintiffs should be compensated by defendants, jointly and severally, by the payment of the prevailing price of the lot involved as Lot No. 2-R with an area of 325 square meters which should not be less than P1,500.00 per square meter, in consideration of the fact that prices of real estate properties in the area concerned have increased rapidly; 3. Defendants, jointly and severally, pay to plaintiffs for moral damages with plaintiffs plans and dreams of building their own house on their own lot being severely shattered and frustrated due to defendants incursion as interlopers of Lot No. 2-R in the sum of P50,000.00; 4. Defendants, jointly and severally, to pay plaintiffs in the amount of P30,000.00 as attorneys fees; and, 5. to pay the costs of the proceedings. Defendants counterclaim against plaintiffs is dismissed for lack of merit and with no cause of action. Defendants third-party complaint against third-party defendant Vergonville Realty and Investments Corporation is likewise ordered dismissed for lack of cause of action and evidently without merit. On the other hand, defendants, jointly and severally, are liable for the litigation expenses incurred by Vergonville Realty by way of counterclaim, which is also proven by the latter with a mere preponderance of evidence, and are hereby ordered to pay the sum of P20,000.00 as compensatory damage; and attorneys fees in the sum of P10,000.00 SO ORDERED.[5] On appeal, the CA affirmed the RTCs finding that the lot upon which petitioners built their house was not the one (1) which Vergon sold to them. Based on the documentary evidence, such as the titles of the two (2) lots, the contracts to

36

sell, and the survey report made by the geodetic engineer, petitioners house was built on the lot of the respondent-spouses.[6] There was no basis to presume that the error was Vergons fault. Also the warranty against eviction under Article 1548 of theCivil Code was not applicable as there was no deprivation of property: the lot on which petitioners built their house was not the lot sold to them by Vergon, which remained vacant and ready for occupation.[7] The CA further ruled that petitioners cannot use the defense of allegedly being a purchaser in good faith for wrongful occupation of land.[8] Aggrieved, petitioners filed a motion for reconsideration, but it was denied by the appellate court.[9] Hence, this petition for review on certiorari. Petitioners raise the following assignment of errors: I. THE COURT OF APPEALS DECIDED A QUESTION OF SUBSTANCE CONTRARY TO LAW AND APPLICABLE DECISIONS OF THE SUPREME COURT IN AFFIRMING THE DECISION OF THE TRIAL COURT ORDERING PETITIONERS TO DEMOLISH THEIR ONLY HOUSE AND VACATE THE LOT AND TO PAY MORAL AND COMPENSATORY DAMAGES AS WELL AS ATTORNEYS FEE IN THE TOTAL AMOUNT OF PS[P] 110,000; AND II. THE COURT OF APPEALS SANCTIONED THE DEPARTURE OF THE LOWER COURT FROM THE ACCEPTED AND USUAL COURSE OF JUDICIAL PROCEEDINGS AS TO CALL FOR AN EXERCISE OF THE POWER OF SUPERVISION.[10] In the main, it is petitioners position that they must not bear the damage alone. Petitioners insist that they relied with full faith and confidence in the reputation of Vergons agents when they pointed the wrong property to them. Even the President of Vergon, Felix Gonzales, consented to the construction of the house when he signed the building permit.[11] Also, petitioners are builders in good faith.[12] The petition is partly meritorious. At the outset, we note that petitioners raise factual issues, which are beyond the scope of a petition for review on certiorari under Rule 45 of the Rules. Well settled is the rule that the jurisdiction of this Court in cases brought to it from the CA via a petition for review on certiorari under Rule 45 is limited to the review of errors of law. The Court is not bound to weigh all over again the evidence adduced by the parties, particularly where the findings of both the trial court and the appellate court coincide. The resolution of factual issues is a function of the trial court whose findings on these matters are, as a general rule, binding on this Court, more so where these have been affirmed by the CA. [13] We note that the CA and RTC did not overlook or fail to appreciate any material circumstance which, when properly

37

considered, would have altered the result of the case. Indeed, it is beyond cavil that petitioners mistakenly constructed their house on Lot No. 2-R which they thought was Lot No. 2-S. However, the conclusiveness of the factual findings notwithstanding, we find that the trial court nonetheless erred in outrightly ordering petitioners to vacate the subject property or to pay respondent spouses the prevailing price of the land as compensation. Article 527[14] of the Civil Code presumes good faith, and since no proof exists to show that the mistake was done by petitioners in bad faith, the latter should be presumed to have built the house in good faith. When a person builds in good faith on the land of another, Article 448 of the Civil Code governs. Said article provides, ART. 448. The owner of the land on which anything has been built, sown or planted in good faith, shall have the right to appropriate as his own the works, sowing or planting, after payment of the indemnity provided for in Articles 546 and 548, or to oblige the one who built or planted to pay the price of the land, and the one who sowed, the proper rent. However, the builder or planter cannot be obliged to buy the land if its value is considerably more than that of the building or trees. In such case, he shall pay reasonable rent, if the owner of the land does not choose to appropriate the building or trees after proper indemnity. The parties shall agree upon the terms of the lease and in case of disagreement, the court shall fix the terms thereof. (Emphasis ours.) The above-cited article covers cases in which the builders, sowers or planters believe themselves to be owners of the land or, at least, to have a claim of title thereto.[15] The builder in good faith can compel the landowner to make a choice between appropriating the building by paying the proper indemnity or obliging the builder to pay the price of the land. The choice belongs to the owner of the land, a rule that accords with the principle of accession, i.e., that the accessory follows the principal and not the other way around. However, even as the option lies with the landowner, the grant to him, nevertheless, is preclusive. He must choose one.[16] He cannot, for instance, compel the owner of the building to remove the building from the land without first exercising either option. It is only if the owner chooses to sell his land, and the builder or planter fails to purchase it where its value is not more than the value of the improvements, that the owner may remove the improvements from the land. The owner is entitled to such remotion only when, after having chosen to sell his land, the other party fails to pay for the same. [17] Moreover, petitioners have the right to be indemnified for the necessary and useful expenses they may have made on the subject property. Articles 546 and 548 of the Civil Code provide,

38

ART. 546. Necessary expenses shall be refunded to every possessor; but only the possessor in good faith may retain the thing until he has been reimbursed therefor. Useful expenses shall be refunded only to the possessor in good faith with the same right of retention, the person who has defeated him in the possession having the option of refunding the amount of the expenses or of paying the increase in value which the thing may have acquired by reason thereof. ART. 548. Expenses for pure luxury or mere pleasure shall not be refunded to the possessor in good faith; but he may remove the ornaments with which he has embellished the principal thing if it suffers no injury thereby, and if his successor in the possession does not prefer to refund the amount expended. Consequently, the respondent-spouses have the option to appropriate the house on the subject land after payment to petitioners of the appropriate indemnity or to oblige petitioners to pay the price of the land, unless its value is considerably more than the value of the structures, in which case petitioners shall pay reasonable rent. In accordance with Depra v. Dumlao,[18] this case must be remanded to the RTC which shall conduct the appropriate proceedings to assess the respective values of the improvement and of the land, as well as the amounts of reasonable rentals and indemnity, fix the terms of the lease if the parties so agree, and to determine other matters necessary for the proper application of Article 448, in relation to Articles 546 and 548, of the Civil Code. As to the liability of Vergon, petitioners failed to present sufficient evidence to show negligence on Vergons part. Petitioners claim is obviously one (1) for tort, governed by Article 2176 of the Civil Code, which provides: ART. 2176. Whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay for the damage done. Such fault or negligence, if there is no preexisting contractual relation between the parties, is called a quasi-delict and is governed by the provisions of this Chapter. (Emphasis ours.) Under this provision, it is the plaintiff who has to prove by a preponderance of evidence: (1) the damages suffered by the plaintiff; (2) the fault or negligence of the defendant or some other person for whose act he must respond; and (3) the connection of cause and effect between the fault or negligence and the damages incurred.[19] This the petitioners failed to do. The President of Vergon signed the building permit as a precondition for its approval by the local government, but it did not guarantee that petitioners were constructing the structure within the metes and bounds of petitioners lot. The signature of the President of Ver gon on the building permit merely proved that petitioners were authorized to make constructions within the subdivision project of Vergon. And while petitioners acted in good faith in

39

building their house on Lot No. 2-R, petitioners did not show by what authority the agents or employees of Vergon were acting when they pointed to the lot where the construction was made nor was petitioners claim on this matter corroborated by sufficient evidence. One (1) last note on the award of damages. Considering that petitioners acted in good faith in building their house on the subject property of the respondentspouses, there is no basis for the award of moral damages to respondentspouses. Likewise, the Court deletes the award to Vergon of compensatory damages and attorneys fees for the litigation expenses Vergon had incurred as such amounts were not specifically prayed for in its Answer to petitioners third -party complaint. Under Article 2208[20] of the Civil Code, attorneys fees and expenses of litigation are recoverable only in the concept of actual damages, not as moral damages nor judicial costs. Hence, such must be specifically prayed foras was not done in this caseand may not be deemed incorporated within a general prayer for such other relief and remedy as this court may deem just and equitable. [21] It must also be noted that aside from the following, the body of the trial courts decision was devoid of any statement regarding attorneys fees. In Scott Consultants & Resource Development Corporation, Inc. v. Court of Appeals,[22] we reiterated that attorneys fees are not to be awarded every time a party wins a suit. The power of the court to award attorneys fees under Article 2208 of the Civil Code demands factual, legal, and equitable justification; its basis cannot be left to speculation or conjecture. Where granted, the court must explicitly state in the body of the decision, and not only in the dispositive portion thereof, the legal reason for the award of att orneys fees. WHEREFORE, the Decision dated December 11, 2000 of the Court of Appeals in CA-G.R. CV No. 48109 is AFFIRMED WITH MODIFICATION. The award of moral damages in favor of respondent-spouses Jose and Fe Macabagdal and the award of compensatory damages and attorneys fees to respondent Vergon Realty Investments Corporation are DELETED. The case is REMANDED to the Regional Trial Court of Makati City, Branch 135, for further proceedings consistent with the proper application of Articles 448, 546 and 548 of the Civil Code, as follows: 1. The trial court shall determine: a. the present fair price of the respondent-spouses lot; b. the amount of the expenses spent by petitioners for the building of their house; the increase in value (plus value) which the said lot may have acquired by reason thereof; and d. whether the value of said land is considerably more than that of the house built thereon. c.

40

2. After said amounts shall have been determined by competent evidence, the Regional Trial Court shall render judgment, as follows: a. The trial court shall grant the respondent-spouses a period of fifteen (15) days within which to exercise their option under Article 448 of the Civil Code, whether to appropriate the house as their own by paying to petitioners either the amount of the expenses spent by petitioners for the building of the house, or the increase in value (plus value) which the said lot may have acquired by reason thereof, or to oblige petitioners to pay the price of said land. The amounts to be respectively paid by the respondentspouses and petitioners, in accordance with the option thus exercised by written notice of the other party and to the Court, shall be paid by the obligor within fifteen (15) days from such notice of the option by tendering the amount to the Court in favor of the party entitled to receive it; b. The trial court shall further order that if the respondent-spouses exercises the option to oblige petitioners to pay the price of the land but the latter rejects such purchase because, as found by the trial court, the value of the land is considerably more than that of the house, petitioners shall give written notice of such rejection to the respondent-spouses and to the Court within fifteen (15) days from notice of the respondentspouses option to sell the land. In that event, the parties shall be given a period of fifteen (15) days from such notice of rejection within which to agree upon the terms of the lease, and give the Court formal written notice of such agreement and its provisos. If no agreement is reached by the parties, the trial court, within fifteen (15) days from and after the termination of the said period fixed for negotiation, shall then fix the terms of the lease, payable within the first five (5) days of each calendar month. The period for the forced lease shall not be more than two (2) years, counted from the finality of the judgment, considering the long period of time since petitioners have occupied the subject area. The rental thus fixed shall be increased by ten percent (10%) for the second year of the forced lease. Petitioners shall not make any further constructions or improvements on the house. Upon expiration of the two (2)-year period, or upon default by petitioners in the payment of rentals for two (2) consecutive months, the respondent-spouses shall be entitled to terminate the forced lease, to recover their land, and to have the house removed by petitioners or at the latters expense. The rentals herein provided shal l be tendered by petitioners to the Court for payment to the respondentspouses, and such tender shall constitute evidence of whether or not compliance was made within the period fixed by the Court. c. In any event, petitioners shall pay the respondent-spouses reasonable compensation for the occupancy of the respondent-spouses land for the period counted from the year petitioners occupied the subject area, up to the commencement date of the forced lease referred to in the preceding paragraph;

41

d.

The periods to be fixed by the trial court in its Decision shall be inextendible, and upon failure of the party obliged to tender to the trial court the amount due to the obligee, the party entitled to such payment shall be entitled to an order of execution for the enforcement of payment of the amount due and for compliance with such other acts as may be required by the prestation due the obligee.

No costs. SO ORDERED.

MARTIN S. VILLARAMA, JR. Associate Justice WE CONCUR:

CONCHITA CARPIO MORALES Associate Justice Chairperson

ARTURO D. BRION Associate Justice

LUCAS P. BERSAMIN Associate Justice

ROBERTO A. ABAD Associate Justice ATTESTATION I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division.

CONCHITA CARPIO MORALES Associate Justice Chairperson, Third Division

CERTIFICATION Pursuant to Section 13, Article VIII of the 1987 Constitution and the Division Chairpersons Attestation, I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division.

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RENATO C. CORONA Chief Justice

* [1]

Designated as additional member per Special Order No. 843 dated May 17, 2010. Rollo, pp. 43-51. Penned by Associate Justice Presbitero J. Velasco, Jr. (now a member of this Court) and concurred in by Associate Justices Conrado M. Vasquez, Jr. and Juan Q. Enriquez, Jr. The dispositive portion reads as follows: WHEREFORE, premises considered, the appealed Decision is hereby AFFIRMED in toto.

SO ORDERED. Id. at 81-84. Penned by Judge Omar U. Amin. [3] Id. at 6-8. [4] Id. at 71, 75-76. [5] Id. at 83-84. [6] Id. at 46-47. [7] Id. at 48. [8] Id. at 48-49. [9] Id. at 54. The Resolution was penned by Associate Justice Conrado M. Vasquez, Jr., with Associate Justices Mercedes Gozo-Dadole and Juan Q. Enriquez, Jr. concurring. [10] Id. at 14-15. [11] Id. at 16-27. [12] Id. at 27-28. [13] Bernarda Ch. Osmea v. Nicasio Ch. Osmea, et al., G.R. No. 171911, January 26, 2010, p. 4. [14] ART. 527. Good faith is always presumed, and upon him who alleges bad faith on the part of a possessor rests the burden of proof. [15] Vide Philippine National Bank v. De Jesus, 458 Phil. 454, 458 (2003) and Pada-Kilario v. Court of Appeals, 379 Phil. 515, 529-530 (2000). [16] Arangote v. Maglunob, G.R. No. 178906, February 18, 2009, 579 SCRA 620, 644. [17] Sarmiento v. Agana, No. L-57288, April 30, 1984, 129 SCRA 122, 126 and Ignacio v. Hilario, 76 Phil. 605, 608 (1946). [18] No. L-57348, May 16, 1985, 136 SCRA 475, 483, cited in National Housing Authority v. Grace Baptist Church, G.R. No. 156437, March 1, 2004, 424 SCRA 147, 154. [19] Child Learning Center, Inc. v. Tagorio, G.R. No. 150920, November 25, 2005, 476 SCRA 236, 242. [20] Art. 2208. In the absence of stipulation, attorneys fees and expenses of litigation, other than judicial costs, cannot be recovered, except: (1) When exemplary damages are awarded; (2) When the defendants act or omission has compelled the plaintiff to litigate with third persons or to incur expenses to protect his interest; (3) In criminal cases of malicious prosecution against the plaintiff; (4) In case of a clearly unfounded civil action or proceeding against the plaintiff; (5) Where the defendant acted in gross and evident bad faith in refusing to satisfy the plaintiffs plainly valid, just and demandable claim; (6) In actions for legal support; (7) In actions for the recovery of wages of household helpers, laborers and skilled workers; (8) In actions for indemnity under workmens compensation and employers liability laws; (9) In a separate civil action to recover civil liability arising from a crime; (10) When at least double judicial costs are awarded; (11) In any other case where the court deems it just and equitable that attorneys fees and expenses of litigation should be recovered. In all cases, the attorneys fees and expenses of litigation must be reasonable. [21] Mirasol v. de la Cruz, No. L-32552, 84 SCRA 337, 342-343. [22] G.R. No. 112916, March 16, 1995, 242 SCRA 393, 406.
[2]

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SECOND DIVISION HEIRS OF JUANITA PADILLA, represented by CLAUDIO PADILLA, Petitioners, G.R. No. 176858

Present:

CARPIO, J., Chairperson, - versus VELASCO, JR.,* PERALTA, BERSAMIN,** and ABAD, JJ.

DOMINADOR MAGDUA, Respondent. Promulgated:

September 15, 2010 x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x D E C I S I O N CARPIO, J.:

The Case Before the Court is a petition for review on certiorari[1] assailing the Orders dated 8 September 2006[2] and 13 February 2007[3] of the Regional Trial Court (RTC) of Tacloban City, Branch 34, in Civil Case No. 2001-10-161.

The Facts

Juanita Padilla (Juanita), the mother of petitioners, owned a piece of land located in San Roque, Tanauan, Leyte. After Juanitas death on 23 March 1989, petitioners, as legal heirs of Juanita, sought to have the land

44

partitioned. Petitioners sent word to their eldest brother Ricardo Bahia (Ricardo) regarding their plans for the partition of the land. In a letter dated 5 June 1998 written by Ricardo addressed to them, petitioners were surprised to find out that Ricardo had declared the land for himself, prejudicing their rights as co-heirs. It was then discovered that Juanita had allegedly executed a notarized Affidavit of Transfer of Real Property[4](Affidavit) in favor of Ricardo on 4 June 1966 making him the sole owner of the land. The records do not show that the land was registered under the Torrens system.

On 26 October 2001, petitioners filed an action with the RTC of Tacloban City, Branch 34, for recovery of ownership, possession, partition and damages. Petitioners sought to declare void the sale of the land by Ricardos daughters, Josephine Bahia and Virginia Bahia-Abas, to respondent Dominador Magdua (Dominador). The sale was made during the lifetime of Ricardo.

Petitioners alleged that Ricardo, through misrepresentation, had the land transferred in his name without the consent and knowledge of his coheirs. Petitioners also stated that prior to 1966, Ricardo had a house constructed on the land. However, when Ricardo and his wife Zosima separated, Ricardo left for Inasuyan, Kawayan, Biliran and the house was leased to third parties.

Petitioners further alleged that the signature of Juanita in the Affidavit is highly questionable because on 15 May 1978 Juanita executed a written instrument stating that she would be leaving behind to her children the land which she had inherited from her parents.

Dominador filed a motion to dismiss on the ground of lack of jurisdiction since the assessed value of the land was within the jurisdiction of the Municipal Trial Court of Tanauan, Leyte. In an Order dated 20 February 2006,[5] the RTC dismissed the case for lack of jurisdiction. The RTC explained that the assessed value of the land in the amount of P590.00 was less than the amount cognizable by the RTC to acquire jurisdiction over the case.[6]

Petitioners filed a motion for reconsideration. Petitioners argued that the action was not merely for recovery of ownership and possession, partition and damages but also for annulment of deed of sale. Since actions to annul contracts

45

are actions beyond pecuniary estimation, the case was well within the jurisdiction of the RTC.

Dominador filed another motion to dismiss on the ground of prescription.

In an Order dated 8 September 2006, the RTC reconsidered its previous stand and took cognizance of the case. Nonetheless, the RTC denied the motion for reconsideration and dismissed the case on the ground of prescription pursuant to Section 1, Rule 9 of the Rules of Court. The RTC ruled that the case was filed only in 2001 or more than 30 years since the Affidavit was executed in 1966. The RTC explained that while the right of an heir to his inheritance is imprescriptible, yet when one of the co-heirs appropriates the property as his own to the exclusion of all other heirs, then prescription can set in. The RTC added that since prescription had set in to question the transfer of the land under the Affidavit, it would seem logical that no action could also be taken against the deed of sale executed by Ricardos daughters in favor of Dominador. The dispositive portion of the order states:

WHEREFORE, premises considered, the order of the Court is reconsidered in so far as the pronouncement of the Court that it has no jurisdiction over the nature of the action. The dismissal of the action, however, is maintained not by reason of lack of jurisdiction but by reason of prescription.

SO ORDERED.[7]

Petitioners filed another motion for reconsideration which the RTC denied in an Order dated 13 February 2007 since petitioners raised no new issue.

Hence, this petition.

The Issue

The main issue is whether the present action is already barred by prescription.

46

The Courts Ruling

Petitioners submit that the RTC erred in dismissing the complaint on the ground of prescription. Petitioners insist that the Affidavit executed in 1966 does not conform with the requirement of sufficient repudiation of co-ownership by Ricardo against his co-heirs in accordance with Article 494 of the Civil Code. Petitioners assert that the Affidavit became part of public records only because it was kept by the Provincial Assessors office for real property tax declaration purposes. However, such cannot be contemplated by law as a record or registration affecting real properties. Petitioners insist that the Affidavit is not an act of appropriation sufficient to be deemed as constructive notice to an adverse claim of ownership absent a clear showing that petitioners, as co-heirs, were notified or had knowledge of the Affidavit issued by their mother in Ricardos favor.

Respondent Dominador, on the other hand, maintains that Juanita, during her lifetime, never renounced her signature on the Affidavit or interposed objections to Ricardos possession of the land, which was open, absolute and in the concept of an owner. Dominador contends that the alleged written instrument dated 15 May 1978 executed by Juanita years before she died was only made known lately and conveys the possibility of being fabricated. Dominador adds that the alleged highly questionable signature of Juanita on the Affidavit was only made an issue after 35 years from the date of the transfer in 1966 until the filing of the case in 2001. As a buyer in good faith, Dominador invokes the defense of acquisitive prescription against petitioners.

At the outset, only questions of law may be raised in a petition for review on certiorari under Rule 45 of the Rules of Court. The factual findings of the lower courts are final and conclusive and may not be reviewed on appeal except under any of the following circumstances: (1) the conclusion is grounded on speculations, surmises or conjectures; (2) the inference is manifestly mistaken, absurd or impossible; (3) there is grave abuse of discretion; (4) the judgment is based on a misapprehension of facts; (5) the findings of fact are conflicting; (6) there is no citation of specific evidence on which the factual findings are based; (7) the finding of absence of facts is contradicted by the presence of evidence on record; (8) the findings of the Court of Appeals are contrary to those of the trial court; (9) the Court of Appeals manifestly overlooked certain relevant and undisputed facts that, if properly considered, would justify a different conclusion; (10) the findings of the Court of Appeals are beyond the issues of the case; and (11) such findings are contrary to the admissions of both parties.[8]

47

We find that the conclusion of the RTC in dismissing the case on the ground of prescription based solely on the Affidavit executed by Juanita in favor of Ricardo, the alleged seller of the property from whom Dominador asserts his ownership, is speculative. Thus, a review of the case is necessary.

Here, the RTC granted the motion to dismiss filed by Dominador based on Section 1, Rule 9 of the Rules of Court which states:

Section 1. Defenses and objections not pleaded. Defenses and objections not pleaded either in a motion to dismiss or in the answer are deemed waived. However, when it appears from the pleadings or the evidence on record that the court has no jurisdiction over the subject matter, that there is another action pending between the same parties for the same cause, or that the action is barred by a prior judgment or by statute of limitations, the court shall dismiss the case. (Emphasis supplied)

The RTC explained that prescription had already set in since the Affidavit was executed on 31 May 1966 and petitioners filed the present case only on 26 October 2001, a lapse of more than 30 years. No action could be taken against the deed of sale made in favor of Dominador without assailing the Affidavit, and the action to question the Affidavit had already prescribed. After a perusal of the records, we find that the RTC incorrectly relied on the Affidavit alone in order to dismiss the case without considering petitioners evidence. The facts show that the land was sold to Dominador by Ricardos daughters, namely Josephine Bahia and Virginia Bahia-Abas, during the lifetime of Ricardo. However, the alleged deed of sale was not presented as evidence and neither was it shown that Ricardos daughters had any authority from Ricardo to dispose of the land. No cogent evidence was ever presented that Ricardo gave his consent to, acquiesced in, or ratified the sale made by his daughters to Dominador. In its 8 September 2006 Order, the RTC hastily concluded that Ricardos daughters had legal personality to sell the property:

On the allegation of the plaintiffs (petitioners) that Josephine Bahia and Virginia Bahia-Abas had no legal personality or right to [sell] the subject property is of no moment in this case. It should be Ricardo Bahia who has a cause of action against [his] daughters and not the herein plaintiffs. After all, Ricardo Bahia might have already consented to or ratified the alleged deed of sale.[9]

48

Also, aside from the Affidavit, Dominador did not present any proof to show that Ricardos possession of the land had been open, continuous and exclusive for more than 30 years in order to establish extraordinary acquisitive prescription.[10] Dominador merely assumed that Ricardo had been in possession of the land for 30 years based on the Affidavit submitted to the RTC. The petitioners, on the other hand, in their pleading filed with the RTC for recovery of ownership, possession, partition and damages, alleged that Ricardo left the land after he separated from his wife sometime after 1966 and moved to another place. The records do not mention, however, whether Ricardo had any intention to go back to the land or whether Ricardos family ever lived there.

Further, Dominador failed to show that Ricardo had the land declared in his name for taxation purposes from 1966 after the Affidavit was executed until 2001 when the case was filed. Although a tax declaration does not prove ownership, it is evidence of claim to possession of the land.

Moreover, Ricardo and petitioners are co-heirs or co-owners of the land. Coheirs or co-owners cannot acquire by acquisitive prescription the share of the other co-heirs or co-owners absent a clear repudiation of the co-ownership, as expressed in Article 494 of the Civil Code which states:

Art. 494. x x x No prescription shall run in favor of a coowner or co-heir against his co-owners or co-heirs as long as he expressly or impliedly recognizes the co-ownership.

Since possession of co-owners is like that of a trustee, in order that a coowners possession may be deemed adverse to the cestui que trust or other coowners, the following requisites must concur: (1) that he has performed unequivocal acts of repudiation amounting to an ouster of the cestui que trust or other co-owners, (2) that such positive acts of repudiation have been made known to the cestui que trust or other co-owners, and (3) that the evidence thereon must be clear and convincing.[11]

In the present case, all three requisites have been met. After Juanitas death in 1989, petitioners sought for the partition of their mothers land. The heirs, including Ricardo, were notified about the plan. Ricardo, through a letter dated 5 June 1998, notified petitioners, as his co-heirs, that he adjudicated the land solely

49

for himself. Accordingly, Ricardos interest in the land had now become adverse to the claim of his co-heirs after repudiating their claim of entitlement to the land. InGenerosa v. Prangan-Valera,[12] we held that in order that title may prescribe in favor of one of the co-owners, it must be clearly shown that he had repudiated the claims of the others, and that they were apprised of his claim of adverse and exclusive ownership, before the prescriptive period begins to run.

However, in the present case, the prescriptive period began to run only from 5 June 1998, the date petitioners received notice of Ricardos repudiation of their claims to the land. Since petitioners filed an action for recovery of ownership and possession, partition and damages with the RTC on 26 October 2001, only a mere three years had lapsed. This three-year period falls short of the 10-year or 30year acquisitive prescription period required by law in order to be entitled to claim legal ownership over the land. Thus, Dominador cannot invoke acquisitive prescription.

Further, Dominadors argument that prescription began to commence in 1966, after the Affidavit was executed, is erroneous. Dominador merely relied on the Affidavit submitted to the RTC that Ricardo had been in possession of the land for more than 30 years. Dominador did not submit any other corroborative evidence to establish Ricardos alleged possession since 1966. In Heirs of Maningding v. Court of Appeals,[13] we held that the evidence relative to the possession, as a fact, upon which the alleged prescription is based, must be clear, complete and conclusive in order to establish the prescription. Here, Dominador failed to present any other competent evidence to prove the alleged extraordinary acquisitive prescription of Ricardo over the land. Since the property is an unregistered land, Dominador bought the land at his own risk, being aware as buyer that no title had been issued over the land. As a consequence, Dominador is not afforded protection unless he can manifestly prove his legal entitlement to his claim.

With regard to the issue of the jurisdiction of the RTC, we hold that the RTC did not err in taking cognizance of the case. Under Section 1 of Republic Act No. 7691 (RA 7691),[14] amending Batas Pambansa Blg. 129, the RTC shall exercise exclusive jurisdiction on the following actions: Section 1. Section 19 of Batas Pambansa Blg. 129, otherwise known as the Judiciary Reorganization Act of 1980, is hereby amended to read as follows:

50

Sec. 19. Jurisdiction in civil cases. Regional Trial Courts shall exercise exclusive original jurisdiction. (1) In all civil actions in which the subject of the litigation is incapable of pecuniary estimation; (2) In all civil actions which involve the title to, or possession of, real property, or any interest therein, where the assessed value of the property involved exceeds Twenty Thousand Pesos (P20,000.00) or, for civil actions in Metro Manila, where such value exceeds Fifty Thousand Pesos (P50,000.00) except actions for forcible entry into and unlawful detainer of lands or buildings, original jurisdiction over which is conferred upon the Metropolitan Trial Courts, Municipal Trial Courts, and Municipal Circuit Trial Courts; x x x

On the other hand, Section 3 of RA 7691 expanded the jurisdiction of the Metropolitan Trial Courts, Municipal Trial Courts and Municipal Circuit Trial Courts over all civil actions which involve title to or possession of real property, or any interest, outside Metro Manila where the assessed value does not exceed Twenty thousand pesos (P20,000.00). The provision states:

Section 3. Section 33 of the same law is hereby amended to read as follows:

Sec. 33. Jurisdiction of Metropolitan Trial Courts, Municipal Trial Courts and Municipal Circuit Trial Courts in Civil Cases. - Metropolitan Trial Courts, Municipal Trial Courts, and Municipal Trial Circuit Trial Courts shall exercise: xxx (3) Exclusive original jurisdiction in all civil actions which involve title to, or possession of, real property, or any interest therein where the assessed value of the property or interest therein does not exceed Twenty thousand pesos (P20,000.00) or, in civil actions in Metro Manila, where such assessed value does not exceed Fifty thousand pesos (P50,000.00) exclusive of interest, damages of whatever kind, attorneys fees, litigation expenses and costs: Provided, That in cases of land not declared for taxation purposes, the value of such property shall be determined by the assessed value of the adjacent lots.

In the present case, the records show that the assessed value of the land was P590.00 according to the Declaration of Property as of 23 March 2000 filed with the RTC. Based on the value alone, being way below P20,000.00, the MTC has

51

jurisdiction over the case. However, petitioners argued that the action was not merely for recovery of ownership and possession, partition and damages but also for annulment of deed of sale. Since annulment of contracts are actions incapable of pecuniary estimation, the RTC has jurisdiction over the case.[15]

Petitioners are correct. In Singson v. Isabela Sawmill,[16] we held that:

In determining whether an action is one the subject matter of which is not capable of pecuniary estimation this Court has adopted the criterion of first ascertaining the nature of the principal action or remedy sought. If it is primarily for the recovery of a sum of money, the claim is considered capable of pecuniary estimation, and whether jurisdiction is in the municipal courts or in the courts of first instance would depend on the amount of the claim. However, where the basic issue is something other than the right to recover a sum of money, where the money claim is purely incidental to, or a consequence of, the principal relief sought, this Court has considered such actions as cases where the subject of the litigation may not be estimated in terms of money, and are cognizable by courts of first instance (now Regional Trial Courts).

When petitioners filed the action with the RTC they sought to recover ownership and possession of the land by questioning (1) the due execution and authenticity of the Affidavit executed by Juanita in favor of Ricardo which caused Ricardo to be the sole owner of the land to the exclusion of petitioners who also claim to be legal heirs and entitled to the land, and (2) the validity of the deed of sale executed between Ricardos daughters and Dominador. Since the principal action sought here is something other than the recovery of a sum of money, the action is incapable of pecuniary estimation and thus cognizable by the RTC. Wellentrenched is the rule that jurisdiction over the subject matter of a case is conferred by law and is determined by the allegations in the complaint and the character of the relief sought, irrespective of whether the party is entitled to all or some of the claims asserted.[17]

In sum, we find that the Affidavit, as the principal evidence relied upon by the RTC to dismiss the case on the ground of prescription, insufficiently established Dominadors rightful claim of ownership to the land. Thus, we direct the RTC to try the case on the merits to determine who among the parties are legally entitled to the land.

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WHEREFORE, we GRANT the petition. We REVERSE AND SET ASIDE the Orders dated 8 September 2006 and 13 February 2007 of the Regional Trial Court of Tacloban City, Branch 34 in Civil Case No. 2001-10-161. SO ORDERED.

ANTONIO T. CARPIO Associate Justice WE CONCUR:

PRESBITERO J. VELASCO, JR. Associate Justice

DIOSDADO M. PERALTA Associate Justice

LUCAS P. BERSAMIN Associate Justice

ROBERTO A. ABAD Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division.

ANTONIO T. CARPIO Associate Justice Chairperson

53

CERTIFICATION

Pursuant

to Section

13,

Article VIII

of

the

Constitution,

and

the

Division Chairpersons Attestation, I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division.

RENATO C. CORONA Chief Justice

* ** [1] [2] [3] [4] [5] [6] [7] [8]

[9] [10] [11] [12]

[13] [14]

[15] [16]

[17]

Designated additional member per Special Order No. 883 dated 1 September 2010. Designated additional member per Special Order No. 886 dated 1 September 2010. Under Rule 45 of the 1997 Revised Rules of Civil Procedure. Id. at 19-20. Rollo, pp. 17-18. Penned by Presiding Judge Frisco T. Lilagan. Id. at 30-31. Id. at 42. See Declaration of Property as of 23 March 2000, id. at 28-29. Id. at 20. International Container Terminal Services, Inc. v. FGU Insurance Corporation , G.R. No. 161539, 27 June 2008, 556 SCRA 194. Rollo, p. 20. See Article 1137 of the Civil Code. Salvador v. Court of Appeals, 313 Phil. 36 (1995). G.R. No. 166521, 31 August 2006, 500 SCRA 620, citing Pangan v. Court of Appeals, 248 Phil. 601 (1988); Jardin v. Hallasgo, 202 Phil. 858 (1982); Cortes v. Oliva, 33 Phil. 480 (1916). 342 Phil. 567 (1997). An Act Expanding the Jurisdiction of the Metropolitan Trial Courts, Municipal Trial Courts and Municipal Circuit Trial Courts, Amending for the Purpose Batas Pambansa Blg. 129, Otherwise Known as the Judiciary Reorganization Act of 1980. Approved on 25 March 1994. Spouses de Leon v. Court of Appeals, 350 Phil. 535 (1998). 177 Phil. 575 (1979), reiterated in Russell v. Vestil, 364 Phil. 392 (1999) and Social Security System v. Atlantic Gulf and Pacific Company of Manila, Inc., G.R. No. 175952, 30 April 2008, 553 SCRA 677. Radio Communications of the Philippines v. Court of Appeals , 435 Phil. 62 (2002).

54

THIRD DIVISION HEIRS OF ENRIQUE TORING, represented herein by MORIE TORING, Petitioners, - versus G.R. No. 163610 Present: CARPIO MORALES, J., Chairperson, PERALTA,* BERSAMIN, VILLARAMA, JR., and SERENO, JJ.

HEIRS OF TEODOSIA BOQUILAGA, represented herein by PAULINO CADLAWON, CRISPIN ALBURO, VIVENCIO GOMEZ, EDUARDO Promulgated: CONCUERA and PONCIANO NAILON, September 27, 2010 Respondents. x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x DECISION VILLARAMA, JR., J.: For review under Rule 45 of the 1997 Rules of Civil Procedure, as amended, are the Decision[1] dated July 11, 2003 of the Court of Appeals (CA) in CA-G.R. CV No. 70432 which affirmed the Decision[2] dated January 27, 1998 of the Regional Trial Court (RTC) of Bogo, Cebu, Branch 61 dismissing Civil Case No. BOGO-00105 except as to the land covered by reconstituted Transfer Certificate of Title (TCT) No. RT-3989 (T-16805) in the name of Enrique Toring, and the Resolution dated April 5, 2004 denying the motion for reconsideration. The case antecedents: On October 10, 1996, the heirs of Enrique Toring (petitioners) filed before the trial court a petition for production, delivery, surrender of documents, annulment of document against the heirs of Teodosia Boquilaga (respondents). The petition was subsequently amended to include as defendants Attys. Joseph Bernaldez, Earvin Estandarte and Marlo Cugtas. Petitioners alleged the following: 3. During the lifetime of the late Teodosia Boquilaga, and more particularly on June 3, 1927, said Teodosia Boquilaga sold to Enrique Toring now deceased, parcels of land for a consideration of Five Hundred and Eleven Pesos (P511.00), and particularly described as follows: Lot No. 1835, Cadastral Case No. 7, Cadastral Record No. 442, Decree No. 230740, with Original Certificate of Title No. 13720 Lot No. 2248, Cadastral Case No. 7, Cad. Record No. 442 Decree No. 231111, Original Certificate of Title No. 14057

55

Lot No. 2249, Cadastral Case No. 7, Cadastral Record No. 442, Decree No. 23112 (sic) [231112], Certificate of Title No. 14167 Lot No. 1834, Cadastral Case No. 7, Cadastral Record No. 442 Decree No. 230739, Original Certificate of [Title] No. 13719 These voluntary dealings of the above described parcels of land is (sic) evidenced by a deed of absolute sale written in Spanish, hereto attach[ed] as annex A; 4. This deed of absolute sale was duly registered with the [Register] of Deeds, and the fees for the registration were duly paid. Thereafter, new Transfer [Certificates] of [Title] were issued by the Office of the [Register] of Deeds in the Province of Cebu, for all the parcels of land, in the name [of] Enrique Toring, and attached as annex B and made [an] integral part of this petition; 5. That from the issuance of [Transfer Certificates] of Title, particularly August 20, 1927, plaintiffs have been in possession and religiously paid the real taxes due on said described lots, and collecting the proceeds of the fruits of the land. However, during World War II, the canceled Original Certificate in the name of Teodosia [Boquilaga], and the Transfer [Certificates] of [Title] in the name of Enrique Toring in the books of the Register of Deeds were destroyed; 6. That lately, while plaintiffs exercising their right of ownership over these parcels of land, defendants refused to share the proceeds and fruits of land on the reason that they owned the land. The matter was referred to the Office of the Barangay Captain, and in a conference, defendants presented Original Certificates of Title. Surprised by these Original [Certificates] of [Title], plaintiffs made verification from the Register of Deeds of the Province of Cebu, and from the Regional Trial Court Branch 16, Cebu City, and discovered that defendants representing the heirs of Teodosia Boquilaga filed a petition for reconstitution of title, and succeeded in having the original certificates of title reconstituted covering the four parcels of land in the name of Teodosia [Boquilaga]. The petition, the decision, the reconstituted titles, and the certification to file action are hereto attached as annexes C, D, E, and F and as part an d parcel of this petition; 7. Plaintiffs were never served any notice of the petition for reconstitution of the Original Certificates because the persons alleged in the petition as the actual possessor, or the adjacent lot owner alleged in the petition have long been dead, thus resulting into the success of the petition, and the failure of plaintiffs to interpose their opposition; 8. Meanwhile, in an earlier date, lot no. 1834 was reconstituted and new Certificate of Title was issued in the name of Enrique Toring attached hereto as annex G, and as a part of this petition; 9. For the services rendered by the [law] office in the reconstitution of the original certificate of titles, lot 1835 was transferred in the name of defendants Attorneys Joseph Bernaldez, Ervin B. Estandarte, and Marlo Cugtas under transfer certificate of title

56

no. 97615, attached and made an integral part of this petition as annex H; 10. Under P.D. 1529, registration is the operative act that conveys and affects the land, and that there is a need by plaintiffs to confirm the operative act made in the year 1927, and thus intend to register the sale with the Register of Deeds; 11. It is imperative for plaintiffs to take hold of the reconstituted Original [Certificates] of [Title] and the Transfer Certificates of Title 97615 now in possession with defendants to register and confirm the sale made in the year 1927, which documents are unjustifiably withheld by defendants; x x x x[3] (Italics supplied.) Petitioners thus sought the issuance of an order directing the defendants to deliver, produce and surrender the reconstituted Original Certificates of Title (OCTs) (RO-13240, RO-13238 and RO-13239) and TCT No. 97615. Should the defendants refuse to deliver the said titles, it is prayed that the court (a) declare OCT Nos. RO13240, RO-13238 and RO-13239 and TCT No. 97615 null and void; (b) direct the Register of Deeds to cancel said titles and in lieu thereof issue new TCTs in the name of Enrique Toring; and (c) declare OCT No. 13237 null and void for being cancelled by TCT No. RT-3989.[4] In their Answer with Motion to Hear Affirmative Defenses, defendants denied petitioners allegations and asserted that it was the heirs of Teodosia Boquilaga who have been in possession of the land since time immemorial, enjoying the fruits thereof and paying the taxes due thereon as evidenced by tax receipts issued for the years 1992 to 1995. They likewise denied for want of knowledge or information sufficient to form a belief as to the truth x x x relative to the original certificate of title in the name of Teodosia Boquilaga which was cancelled and the transfer certificate of title in the name of Enrique Toring were destroyed in the advent of the second world war. Prior to the reconstitution by defendants, it was verified from the Register of Deeds of the Province of Cebu and the Land Registration Authority (LRA) that no such titles were issued covering the subject lots; petitioners have yet to register their alleged deed of sale but that is now not proper. Defendants averred that Lot Nos. 1834, 2248 and 2249 rightfully belong to the heirs of Teodosia Boquilaga, while the lot covered by TCT No. 97615 (Lot No. 1835) was acquired by Attys. Bernaldez, Estandarte and Cugtas in good faith and in consideration of services rendered, hence acquired by innocent third persons in good faith and for value. As special and affirmative defenses, defendants contended that the RTC has no jurisdiction in this case since the assessed value of the properties involved does not exceed P20,000.00, and that petitioners are guilty of laches for failing to act and take corrective measures with the Register of Deeds for sixty-nine (69) years on the alleged destruction of the documents.[5] The parties agreed to submit the case for decision on the basis of position papers, memoranda/comment and other documentary evidence in support of their respective claims.

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On January 27, 1998, the trial court rendered its Decision dismissing the case on the ground that it cannot interfere with or render null and void the decision made by a co-equal and coordinate branch of the court which ordered the reconstitution of the OCTs in the name of Teodosia Boquilaga. Under the circumstances, petitioners owners duplicate certificates of title in the name of Enrique Toring are deemed overtaken by the reconstituted title[s]. Further, the trial court found petitioners guilty of laches in not reconstituting the original TCTs in the name of Enrique Toring and in not making any opposition to the reconstitution proceedings filed by the heirs of Teodosia Boquilaga. However, it was declared that the dismissal of the case will not affect the reconstituted TCT No. RT-3989 in the name of Enrique Toring.[6] Aggrieved, petitioners appealed to the CA arguing that the trial court erred in concluding that the action is one for the annulment of the order of the court which granted reconstitution, when in truth the petitioners merely sought the delivery of the owners duplicate copies of the reconstituted OCTs. They also faulted the trial court in failing to consider that the defendants predecessor-in-interest had long ago sold the lots to Enrique Toring, which document of sale defendants have not denied, and therefore defendant-heirs are no longer owners. Petitioners further assailed the trial court in finding them guilty of laches despite recognizing the existence of the owners duplicate of TCTs in the name of Enrique Toring; the submission by the petitioners of annexes in their Comment/Reply to defendants memorandum showing that there were previous cases wherein petitioners have asserted and defended their right over the subject properties and prevailed; and the fact that the OCTs were reconstituted by defendants only in 1995 and the petitioners instituted this case in 1996. [7] By Decision dated July 11, 2003, the CA dismissed the appeal and affirmed the trial courts ruling. It held that apart from the bare assertion that their predecessor-in-interest, Enrique Toring, purchased the subject lands from Teodosia Boquilaga for which TCTs in his name were issued but were lost during the last world war, petitioners have not established any right over the subject lands, and hence the reconstituted OCTs stand as strong evidence of ownership by the heirs of Teodosia Boquilaga. The appellate court likewise upheld the trial courts finding that petitioners were guilty of laches, citing their unexplained failure or neglect to have the alleged lost or destroyed TCTs reconstituted for more than fifty (50) years which weighs heavily against their claim and even bolsters the defendants-appellees claim that no such titles really exist.[8] A motion for reconsideration was filed by the petitioners but the CA denied the same in its Resolution[9] dated April 5, 2004. Petitioners submit the following arguments in this petition for review on certiorari: I. THE COURT OF APPEALS OVERLOOKED AND DISREGARDED CONCLUSIVE EVIDENCE ON RECORD THAT THE SUBJECT LANDS WERE ALREADY SOLD AS EARLY AS JUNE 3, 1927 BY TEODOSIA BOQUILAGA, RESPONDENTS

58

PREDECESSOR, TO ENRIQUE TORING, PETITIONERS PREDECESSOR, AS EVIDENCED BY THE ANCIENT DEED OF SALE IN SPANISH LANGUAGE DATED JUNE 3, 1927 WHICH EVIDENCE, IF PROPERLY CONSIDERED, WOULD HAVE CHANGED THE OUTCOME OF THE CASE. II. THE COURT OF APPEALS OVERLOOKED AND DISREGARDED CONCLUSIVE EVIDENCE ON RECORD THAT THE PETITIONERS ARE IN ACTUAL POSSESSION OF THE ORIGINAL OWNERS DUPLICATE TRANSFER CERTIFICATES OF TITLE IN THE NAME OF ENRIQUE TORING WHICH ARE GOOD PROOF OF PETITIONERS OWNERSHIP OF SUBJECT LANDS - WHICH EVIDENCE, IF PROPERLY CONSIDERED, WOULD HAVE ALTERED THE OUTCOME OF THE CASE. III. THE COURT OF APPEALS OVERLOOKED THE FACT THAT THE TITLES THAT PETITIONERS HAD RECONSTITUTED WERE THE CANCELLED ORIGINAL CERTIFICATES OF TITLE IN THE NAME OF TEODOSIA BOQUILAGA WHICH DO NOT PROVE OWNERSHIP OF THE LANDS BECAUSE THEY WERE ALREADY CANCELLED BY ENRIQUE TORINGS TRANSFER CERTIFICATES OF TITLE. IV. THE COURT OF APPEALS ERRED IN HOLDING PETITIONERS GUILTY OF LACHES JUST BECAUSE THEY FAILED TO RECONSTITUTE TORINGS ORIGINAL TRANSFER CERTIFICATES OF TITLE ON FILE IN THE RECORDS OF THE REGISTRY OF DEEDS, IT APPEARING THAT THEY AND THEIR PREDECESSOR HAVE BEEN IN ACTUAL POSSESSION OF THE LAND SINCE 1927 AND ARE IN POSSESSION OF THE ORIGINAL OWNERS DUPLICATE TRANSFER CERTIFICATES OF TITLE IN THE NAME OF THEIR PREDECESSOR, ENRIQUE TORING. V. THE COURT OF APPEALS ERRED IN NOT REVERSING THE TRIAL COURTS RULING THAT THE COMPLAINT/PETITION FILED BY PETITIONERS WITH THE TRIAL COURT WAS TANTAMOUNT TO AN ACTION TO ASSAIL THE DECISION OF A CO-EQUAL COURT, IT APPEARING THAT THE SAID COMPLAINT/PETITION WAS MERELY TO COMPEL DELIVERY OR SURRENDER BY RESPONDENTS OF THE RECONSTITUTED CERTIFICATES OF TITLE.[10] The issues raised are purely questions of fact that this Court cannot review in a petition filed under Rule 45. Ultimately, we are asked to determine the ownership of the subject lots originally registered in the name of Teodosia Boquilaga, respondents predecessor-in-interest. The CA declared that petitioners failed to establish any right over the lots other than their bare assertion that their predecessor-in-interest purchased these

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properties from Teodosia Boquilaga and subsequently titles in his name were issued but were lost during the last world war. It agreed with the trial court in finding that whatever claim petitioners have on the subject properties was lost by their unexplained neglect for more than fifty (50) years since the destruction of the records in the registry of deeds during the last world war, under the principle of laches. As to the nature of the action filed by petitioners, the CA likewise affirmed the trial courts ruling that it is one for annulment of the reconstituted title, which essentially assails the judgment or order of a co-equal court. As a general rule, factual findings of the trial court, especially those affirmed by the CA, are conclusive on this Court when supported by the evidence on record.[11] There are recognized exceptions to this rule, among which are: (1) the conclusion is grounded on speculations. surmises or conjectures; (2) the inference is manifestly mistaken, absurd or impossible; (3) there is a grave abuse of discretion; (4) the judgment is based on a misapprehension of facts ; (5) the findings of facts are conflicting; (6) there is no citation of specific evidence on which the factual findings are based; (7) the finding of absence of facts is contradicted by the presence of evidence on record; (8) the findings of the CA are contrary to the findings of the trial court; (9) the CA manifestly overlooked certain relevant and undisputed facts that, if properly considered, would justify a different conclusion; (10) the findings of the CA are beyond the issues of the case; and (11) such findings are contrary to the admissions of both parties.[12] In the case at bar, the records showed that the original petition was filed in the Municipal Circuit Trial Court of Bogo-San Remigio, Cebu but was subsequently transferred to the RTC on motion of the petitioners. TCT Nos. 16802, 16803, 16804 and RT-3989 (T-16805) were attached to the petition together with annexes A, C to G mentioned therein.[13] However, upon elevation to the CA, the records transmitted had missing pages, including the pages subsequent to the original petition where copies of the aforesaid TCTs should have been attached. [14] At any rate, there appears to be no indication from the pleadings filed and orders/decision issued by the trial court throughout the proceedings that such documentary evidence was not submitted by petitioners. Hence, the CA could have been misled by the absence of these annexes from the records transmitted on appeal. Petitioners submitted to this Court the photocopies of TCT Nos. 16802, 16803 and 16804 certified as true copy from the records by the RTC of Bogo, Branch 61 Clerk of Court VI Atty. Rey Dadula Caayon.[15]

TCT Nos. 16802, 16803 and 16804 in the name of Enrique Toring clearly indicate the corresponding lots and Original Certificates of Title from which each title was derived, the dates of issuance of such OCTs, as well as Cadastral Case Decree Numbers of the original registration, correspond to the recitals in the Escritura de Venta Absoluta pertaining to the properties being conveyed by Teodosia Boquilaga (TCT No. 16802[16] which is a transfer from OCT No. 13720 issued on November 22, 1926 covering Lot 1835 pursuant to Decree No. 230740; TCT No. 16803 [17] which is

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a transfer from OCT No. 14057 issued on November 29, 1926 covering Lot 2248 pursuant to Decree No. 231111; and TCT No. 16804[18] which is a transfer from OCT No. 14167 issued on November 29, 1926 covering Lot 2249 pursuant to Decree No. 231112). As to Lot 1834, the reconstituted title TCT No. RT-3989 (T-16805)[19] also in the name of Enrique Toring likewise shows on its face that the lot covered thereby (Lot 1834) was originally registered on November 22, 1926 pursuant to Decree No. 230739 in Cad Rec. No. 442 under OCT No. O-13719, which again corresponds to the recitals of the aforesaid document of sale executed by respondents predecessor-in-interest. It must be noted that petitioners presented before the trial court the owners duplicate copies of the said TCTs in the name of Enrique Toring. Indeed, had these pieces of evidence been duly considered on appeal, the resolution of the issue of ownership would have tilted in petitioners favor. But first, we resolve the issue of the propriety of the suit filed by the petitioners. The nature of an action is determined by the material allegations of the complaint and the character of the relief sought by plaintiff, and the law in effect when the action was filed irrespective of whether he is entitled to all or only some of such relief.[20] As gleaned from the averments of the petition filed before the trial court, though captioned as for delivery or production of documents and annulment of document, petitioners action was really for quieting of title and cancellation of reconstituted titles. Petitioners had prayed for the following reliefs before the trial court: WHEREFORE, it is respectfully prayed that an order be issued; a. Directing defendants to deliver, produce, and surrender Original [Certificates] of Title Nos. RO- 13240, 13238, 13239, and Transfer Certificate of Title [No.] 97615 to plaintiffs, and should defendants refuse to surrender these documents, to declare Original Certificate of Titles Nos. RO- 13238, 13239, 13240, and Transfer Certificate of Title 97615 null and void, and directing the Register of Deeds of the Province of Cebu, to cancel said Original Certificates of Title, and Transfer Certificate of Title and in lieu thereof issue new Transfer Certificates of Title in the name of Enrique Toring; b. Declare as null and void Original Certificate of Title 13237, being canceled by Transfer Certificate of Title RT-3989; c. Directing defendants heirs of Teodosia [Boquilaga] to pay P20,000.00 as attorneys fees. Plaintiffs, pray for other remedies just and equitable applicable to their case, pertinent with law and equity.[21] Petitioners contend that the delivery of the reconstituted OCTs in the name of Teodosia Boquilaga was necessary to confirm and register the 1927 sale in favor of their predecessor-in-interest, Enrique Toring. It appears that the remedy contemplated is a petition for surrender of withheld owners duplicate certificates provided in Section 107 of Presidential Decree (P.D.) No. 1529.

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SECTION 107. Surrender of withheld duplicate certificates. -Where it is necessary to issue a new certificate of title pursuant to any involuntary instrument which divests the title of the registered owner against his consent or where a voluntary instrument cannot be registered by reason of the refusal or failure of the holder to surrender the owners duplicate certificate of title, the party in interest may file a petition in court to compel surrender of the same to the Register of Deeds. The court, after hearing, may order the registered owner or any person withholding the duplicate certificate to surrender the same, and direct the entry of a new certificate or memorandum upon such surrender. If the person withholding the duplicate certificate is not amenable to the process of the court, or if [for] any reason the outstanding owners duplicate certificate cannot be delivered, the court may order the annulment of the same as well as the issuance of a new certificate of title in lieu thereof. Such new certificate and all duplicates thereof shall contain a memorandum of the annulment of the outstanding duplicate. (Emphasis supplied.) However, petitioners themselves alleged that the 1927 sale had long been duly registered -- OCT Nos. 1379, 14167, 14057 and 13720 in the name of Teodosia Boquilaga covering Cadastral Lot Nos. 1834, 2249, 2248 and 1835, respectively, as mentioned in the Escritura de Venta Absoluta[22] dated June 3, 1927, were cancelled and in lieu thereof TCTs have been issued in the name of Enrique Toring on August 20, 1927. Their predecessor-in-interest having already succeeded in registering the deed of sale as early as 1927, it is clear that the procedure under Section 107 of P.D. No. 1529 is inapplicable. Quieting of title is a common law remedy for the removal of any cloud upon or doubt or uncertainty with respect to title to real property. Originating in equity jurisprudence, its purpose is to secure an adjudication that a claim of title to or an interest in property, adverse to that of the complainant, is invalid, so that the complainant and those claiming under him may be forever afterward free from any danger of hostile claim.[23] In such action, the competent court is tasked to determine the respective rights of the complainant and other claimants, not only to place things in their proper places, and to make the claimant, who has no rights to said immovable, respect and not disturb the one so entitled, but also for the benefit of both, so that whoever has the right will see every cloud of doubt over the property dissipated, and he can thereafter fearlessly introduce the improvements he may desire, as well as use, and even abuse the property as he deems fit.[24] In alleging that petitioners were not served any notice as actual possessors or adjacent owners of the petition for reconstitution (Cad Case No. 7, Cad. Rec. No. 442, Decree Nos. 230739, 230740, 231111 and 231112) filed by the respondents for reconstitution of OCTs in the name of Teodosia Boquilaga which was granted by the court; and that the said OCTs have already been cancelled by the issuance of TCTs in the name of Enrique Toring by virtue of a deed of sale executed in 1927 by Teodosia Boquilaga petitioners did not just seek to remove any doubt or uncertainty in the title of their predecessor-in-interest over the subject real properties, but also claimed irregularity and defects in the reconstitution proceedings

62

which resulted in the issuance of reconstituted OCT Nos. RO-13237, RO-13238, RO-13239 and RO-13240 in the name of Teodosia Boquilaga. The governing law for judicial reconstitution of titles is Republic Act No. 26. Based on the provisions of said law, the following must be present for an order for reconstitution to issue: (a) that the certificate of title had been lost or destroyed; (b) that the documents presented by petitioner are sufficient and proper to warrant reconstitution of the lost or destroyed certificate of title; (c) that the petitioner is the registered owner of the property or had an interest therein; (d) that the certificate of title was in force at the time it was lost and destroyed ; and (e) that the description, area and boundaries of the property are substantially the same as those contained in the lost or destroyed certificate of title.[25] If indeed, as petitioners claimed, the OCTs in the name of Teodosia Boquilaga were already cancelled and new TCTs have already been issued in the name of Enrique Toring as early as 1927, then the reconstituted OCT Nos. RO-13237, RO-13238, RO-13239 and RO-13240 issued in Cad Case No. 7, Cad Rec. No. 442 are null and void. It may also be noted that the petition for reconstitution filed by respondents and the Certifications issued by the LRA stated only the registration decree numbers issued in favor of Teodosia Boquilaga without mentioning the numbers of the OCTs and dates of their issuance.[26] The reconstituted OCTs on their face contained no entry whatsoever as to the number of the OCT issued pursuant to the decrees of registration, nor the date of its issuance. We have held that such absence of any document, private or official, mentioning the number of the certificate of title and date when the certificate of title was issued, does not warrant the granting of a petition for reconstitution.[27] Moreover, notice of hearing of the petition for reconstitution of title must be served on the actual possessors of the property. Notice thereof by publication is insufficient. Jurisprudence is to the effect settled that in petitions for reconstitution of titles, actual owners and possessors of the land involved must be duly served with actual and personal notice of the petition. [28] The decision granting the petition for reconstitution filed by the respondents was promulgated on May 9, 1996. There is no allegation or proof that petitioners availed of the remedies of appeal, petition for relief, certiorari or annulment of judgment before the CA questioning the validity of the said reconstitution order. Notwithstanding petitioners failure to avail of the afore -mentioned remedies, the decision in the reconstitution case is not a bar to the adjudication of the issue of ownership raised in the present case. The nature of judicial reconstitution proceedings is the restoration of an instrument or the reissuance of a new duplicate certificate of title which is supposed to have been lost or destroyed in its original form and condition. Its purpose is to have the title reproduced after proper proceedings in the same form they were when the loss or destruction occurred and not to pass upon the ownership of the land covered by the lost or destroyed title. [29] We explained in the case of Heirs of Susana De Guzman Tuazon v. Court of Appeals[30] that:

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[I]n x x x reconstitution under Section 109 of P.D. No. 1529 and R.A. No. 26, the nature of the action denotes a restoration of the instrument which is supposed to have been lost or destroyed in its original form and condition. The purpose of the action is merely to have the same reproduced, after proper proceedings, in the same form they were when the loss or destruction occurred, and does not pass upon the ownership of the land covered by the lost or destroyed title. It bears stressing at this point that ownership should not be confused with a certificate of title. Registering land under the Torrens System does not create or vest title because registration is not a mode of acquiring ownership. A certificate of title is merely an evidence of ownership or title over the particular property described therein. Corollarily, any question involving the issue of ownership must be threshed out in a separate suit, which is exactly what the private respondents did when they filed Civil Case No. 95-3577 [Quieting of Title and Nullification and Cancellation of Title] before Branch 74. The trial court will then conduct a full-blown trial wherein the parties will present their respective evidence on the issue of ownership of the subject properties to enable the court to resolve the said issue. x x x. (Emphasis supplied.) After a careful review, we hold that petitioners have satisfactorily established their claim of ownership over the subject lots by preponderance of evidence. The existence and due execution of the Escritura de Venta Absoluta was never disputed by the respondents. Petitioners documentary evidence showed that the registration fees for the transfer of the lots mentioned in the said deed of absolute sale was duly paid, resulting in the issuance of TCTs in the name of Enrique Toring. Thereafter, petitioners took possession of the land, sharing in the fruits thereof and paying the realty taxes due on the lands.[31] While the original owners duplicate TCTs were in the possession of petitioners, the original transfer certificates of title on file with the registry of deeds were lost or destroyed during the last world war. Petitioners were also able to judicially reconstitute TCT No. T-16805 (RT-3989) on November 11, 1994, as per the annotation thereon.[32] On the other hand, respondents have not adduced competent evidence other than the reconstituted OCTs in their possession. The tax receipts presented revealed that they belatedly paid real estate taxes in 1995 (for the years 1992 to 1995),[33] which weakens their claim of possession since time immemorial. While tax declarations and receipts are not conclusive evidence of ownership, yet, when coupled with proof of actual possession, tax declarations and receipts are strong evidence of ownership.[34] And even assuming that respondents are indeed occupying the lands or portions thereof, it is not clear whether they occupy or possess the same as owners or tenants. Clearly, the trial and appellate courts seriously erred in disregarding material evidence strongly supporting petitioners claim of ownership of the disputed lots. There is likewise no basis for the conclusion that laches had set in, as to defeat the right of the petitioners to assert their claim over the subject properties.

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Laches means the failure or neglect, for an unreasonable 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 it or declined to assert it.[35] This equitable defense is based upon grounds of public policy, which requires the discouragement of stale claims for the peace of society. Indeed, while it is true that a Torrens Title is indefeasible and imprescriptible, the registered landowner may lose his right to recover the possession of his registered property by reason of laches.[36] In this case, however, laches cannot be appreciated in respondents favor. It should be stressed that laches is not concerned only with the mere lapse of time. The following elements must be present in order to constitute laches: (1) conduct on the part of the defendant, or of one under whom he claims, giving rise to the situation of which complaint is made for which the complaint seeks a remedy; delay in asserting the complainants rights, the complainant having had knowledge or notice, of the defendants conduct and having been afforded an opportunity to institute a suit; 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 injury or prejudice to the defendant in the event relief is accorded to the complainant, or the suit is not held to be barred.[37]

(2)

(3)

(4)

Only the first element was present in this case, which occurred from the moment respondents refused to give petitioners share in the fruits and proceeds of the land, claiming that they are owners thereof. In the ensuing barangay proceedings, respondents presented the reconstituted OCTs prompting petitioners to verify with the office of the registry of deeds. It was only then that petitioners discovered that respondents indeed filed a petition for judicial reconstitution. There being no personal notice to them as actual possessors or adjacent lot owners, petitioners never had the opportunity to file their opposition. The order of reconstitution was issued in May 1996. Petitioners filing of the present suit for the delivery and cancellation of said reconstituted OCTs in the possession of respondents on October 20, 1996, after the lapse of only five months, cannot be considered as unreasonable delay amounting to laches. Additionally, petitioners showed that they were never amiss in asserting their rights over the subject lots whenever any incident threatened their peaceful possession and ownership. They attached as annexes to the Comment/Reply dated September 4, 1997, copies of the judgment rendered in a criminal case for qualified theft filed against one Genaro Amoro Regala (Crim. Case No. CU-2312) and Orders issued in Civil Case No. B-571 and CAR Case No. 1197. In these instances, the courts have recognized petitioners ownership of the lands involved.[38]

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WHEREFORE, the petition is GRANTED. The Decision dated July 11, 2003 and Resolution dated April 5, 2004 of the Court of Appeals in CA-G.R. CV No. 70432 are hereby REVERSED and SET ASIDE. Petitioners Heirs of Enrique Toring are hereby declared the lawful owners of Lot Nos. 1834, 1835, 2248 and 2249 (Cad. Case No. 7, Cad. Rec. No. 442, Decree Nos. 230739, 230740, 231111 and 231112) situated in Bogo, Cebu. No costs. SO ORDERED.

MARTIN S. VILLARAMA, JR. Associate Justice WE CONCUR:

CONCHITA CARPIO MORALES Associate Justice Chairperson

DIOSDADO M. PERALTA Associate Justice

LUCAS P. BERSAMIN Associate Justice

MARIA LOURDES P. A. SERENO Associate Justice

ATTESTATION I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division.

CONCHITA CARPIO MORALES Associate Justice Chairperson, Third Division

CERTIFICATION

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Pursuant to Section 13, Article VIII of the 1987 Constitution and the Division Chairpersons Attestation, I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division.

RENATO C. CORONA Chief Justice

* [1]

[2] [3] [4] [5] [6] [7] [8] [9] [10] [11]

[12] [13] [14]

[15] [16] [17] [18] [19] [20]

[21] [22] [23]

[24] [25]

[26] [27]

[28] [29]

[30] [31] [32] [33] [34] [35]

Designated additional member per Special Order No. 885 dated September 1, 2010. Rollo, pp. 37-41. Penned by Associate Justice Conrado M. Vasquez, Jr. and concurred in by Associate Justices Mercedes Gozo-Dadole and Rosmari D. Carandang. Id. at 62-69. Penned by Judge Ildefonso G. Mantilla. Id. at 49-50. Id. at 50-51. Records, pp. 240-243. Rollo, pp. 67-69. CA rollo, pp. 19-34. Rollo, pp. 40-41. Id. at 43-44. Id. at 17-18. Dimaranan v. Heirs of Spouses Hermogenes Arayata and Flaviana Arayata, G.R. No. 184193, March 29, 2010, p. 11, citing Limbauan v. Acosta, G.R. No. 148606, June 30, 2008, 556 SCRA 614, 628. Id. at 11-12. Records, pp. 1-192. See records, pages 7-10 [attached Annex B (TCTs in the name of Enrique Toring) of the Petition] were missing. Rollo, pp. 54, 56 and 57. Rollo, p. 54. Id. at 56. Id. at 57. Id. at 61. Iglesia ni Cristo v. Ponferrada, G.R. No. 168943, October 27, 2006, 505 SCRA 828, 845, citing Barangay Piapi v. Talip, G.R. No. 138248, September 7, 2005, 469 SCRA 409, 413; Hilario v. Salvador, G.R. No. 160384, April 29, 2005, 457 SCRA 815, 824; and Serdoncillo v. Spouses Benolirao, 358 Phil. 83 (1998). Rollo, pp. 50-51. Id. at 52-53. Baricuatro, Jr. v. Court of Appeals, G.R. No. 105902, February 9, 2000, 325 SCRA 137, 146, citing TOLENTINO, Commentaries and Jurisprudence on the Civil Code of the Philippines, Vol. 2, p. 148. Id. at 146-147. Republic v. Tuastumban, G.R. No. 173210, April 24, 2009, 586 SCRA 600, 610-614, citing Sections 2, 3, 12 and 13 of R.A. No. 26. Records, pp. 11-19, 299-304. Tahanan Development Corp. v. Court of Appeals, et al., 203 Phil. 652 (1982) cited in Republic v. Heirs of Julio Ramos, G.R. No. 169481, February 22, 2010, p. 11. Dordas v. Court of Appeals, G.R. No. 118836, March 21, 1997, 270 SCRA 328, 336. Heirs of Rolando N. Abadilla v. Galarosa, G.R. No. 149041, July 12, 2006, 494 SCRA 675, 688, citing Puzon v. Sta. Lucia Realty and Development, Inc., G.R. No. 139518, March 6, 2001, 353 SCRA 699, 710; Heirs of Susana De Guzman Tuazon v. Court of Appeals, G.R. No. 125758, January 20, 2004, 420 SCRA 219, 228; Stilianopulos v. City of Legaspi, 374 Phil. 879, 893-894 (1999); and Lee v. Republic of the Phil., 418 Phil. 793, 803 (2001). Supra. Records, pp. 355-430. Rollo, p. 61. Records, p. 247. Gesmundo v. Court of Appeals, G.R. No. 119870, December 23, 1999, 321 SCRA 487, 495. Republic v. Court of Appeals, G.R. No. 116111, January 21, 1999, 301 SCRA 366, 378-379.

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[36]

[37]

[38]

Heirs of Enrique Diaz v. Virata, G.R. No. 162037, August 7, 2006, 498 SCRA 141, 167, citing Vda. de Rigonan v. Derecho, G.R. No. 159571, July 15, 2005, 463 SCRA 627, 648 and Isabela Colleges, Inc. v. Heirs of Nieves Tolentino-Rivera, G.R. No. 132677, October 20, 2000, 344 SCRA 95, 107. Heirs of Anacleto B. Nieto v. Municipality of Meycauayan, Bulacan, G.R. No. 150654, December 13, 2007, 540 SCRA 100, 107-108, citing Pineda v. Heirs of Eliseo Guevara, G.R. No. 143188, February 14, 2007, 515 SCRA 627, 635 and Heirs of Juan and Ines Panganiban v. Dayrit, G.R. No. 151235, July 28, 2005, 464 SCRA 370, 382. Records, pp. 538-559.

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Republic of the Philippines Supreme Court Manila FIRST DIVISION SPOUSES RAMY and PUDADERA, Petitioners, - versus IRENEO MAGALLANES and the late DAISY TERESA CORTEL MAGALLANES substituted by her children, NELLY M. MARQUEZ, ELISEO MAGALLANES and ANGEL Promulgated: MAGALLANES, Respondents. October 18, 2010 x------------------------------------------------------------------x DECISION DEL CASTILLO, J.: One is considered a buyer in bad faith not only when he purchases real estate with knowledge of a defect or lack of title in his seller but also when he has knowledge of facts which should have alerted him to conduct further inquiry or investigation. This Petition for Review on Certiorari seeks to reverse and set aside the Court of Appeals (CAs) June 6, 2005 Decision[1] in CA-G.R. CV No. 55850, which affirmed the September 3, 1996 Decision[2] of the Regional Trial Court (RTC) of Iloilo City, Branch 39 in Civil Case No. 22234. Likewise assailed is the September 20, 2005 Resolution[3] denying petitioners motion for reconsideration. Factual Antecedents Belen Consing Lazaro (Lazaro) was the absolute owner of a parcel of land, Lot 11E, with an area of 5,333 square meters (sq. m.) located in the District of Arevalo, Iloilo City and covered by Transfer Certificate of Title (TCT) No. T-51250. On March 13, 1979, Lazaro sold a 400 sq. m. portion of Lot 11-E to Daisy Teresa Cortel Magallanes (Magallanes) for the sum of P22,000.00 under a Contract To Sale[4] [sic] payable in two years. On July 21, 1980, upon full payment of the monthly installments, Lazaro executed a Deed of Definite Sale[5] in favor of Magallanes. Thereafter, Magallanes had the lot fenced and had a nipa hut constructed thereon. The other portions of Lot 11-E were, likewise, sold by Lazaro to several buyers, namely, Elizabeth Norada, Jose Macaluda, Jose Melocoton, Nonilon Esteya, Angeles Palma, Medina Anduyan, Evangelina Anas and Mario Gonzales.[6] On July 14, 1980, CORONA, C. J., Chairperson, VELASCO, JR., LEONARDO-DE CASTRO, DEL CASTILLO, and PEREZ, JJ. ZENAIDA G.R. No. 170073

Present:

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Lazaro executed a Partition Agreement[7] in favor of Magallanes and the aforesaid buyers delineating the portions to be owned by each buyer. Under this agreement, Magallanes and Mario Gonzales were assigned an 800 sq. m. portion of Lot 11-E, with each owning 400 sq. m. thereof, denominated as Lot No. 11-E-8 in a Subdivision Plan[8] which was approved by the Director of Lands on August 25, 1980. It appears that the Partition Agreement became the subject of legal disputes because Lazaro refused to turn over the mother title, TCT No. T-51250, of Lot 11-E to the aforesaid buyers, thus, preventing them from titling in their names the subdivided portions thereof. Consequently, Magallanes, along with the other buyers, filed an adverse claim with the Register of Deeds of Ilolilo City which was annotated at the back of TCT No. T51250 on April 29, 1981.[9] Thereafter, Magallanes and Gonzales filed a motion to surrender title in Cadastral Case No. 9741 with the then Court of First Instance of Iloilo City, Branch 1 and caused the annotation of a notice of lis pendens at the back of TCT No. T51250 on October 22, 1981.[10] On November 23, 1981, Lazaro sold Lot 11-E-8, i.e., the lot previously assigned to Magallanes and Mario Gonzales under the aforesaid Partition Agreement, to her niece, Lynn Lazaro, and the latters husband, Rogelio Natividad (Spouses Natividad), for the sum of P8,000.00.[11] As a result, a new title, TCT No. T-58606,[12] was issued in the name of Spouses Natividad. Due to this development, Magallanes pursued her claims against Spouses Natividad by filing a civil case for specific performance, injunction and damages. On September 2, 1983, Magallanes caused the annotation of a notice of lis pendens at the back of TCT No. T-58606.[13] Subsequently, Spouses Natividad subdivided Lot 11-E-8 into two, Lot 11-E-8-A and Lot 11-E-8-B, each containing 400 sq. m. The civil case filed by Magallanes was later dismissed by the trial court for lack of jurisdiction as per an Order dated September 16, 1985 which was inscribed at the back of TCT No. T-58606 on July 7, 1986.[14] Four days prior to this inscription or on July 3, 1986, Spouses Natividad sold Lot 11-E-8-A (subject lot) to petitioner Ramy Pudadera (who later married petitioner Zenaida Pudadera on July 31, 1989) as evidenced by a Deed of Sale[15] for the sum of P25,000.00. As a consequence, a new title, TCT No. 72734,[16] was issued in the name of the latter. Sometime thereafter Magallanes caused the construction of two houses of strong materials on the subject lot. On April 20, 1990, petitioners filed an action for forcible entry against Magallanes with the Municipal Trial Court in Cities of Iloilo City, Branch 2. On July 17, 1991, the trial court dismissed the action.[17] It held that Magallanes was first in possession of the subject lot by virtue of the Deed of Definite Sale dated July 21, 1980 between Lazaro and Magallanes. After the aforesaid sale, Magallanes filled the lot with soil; put up a fence; and built a small hut thereon. On the other hand, the trial court found that when petitioner Ramy Pudadera bought the subject lot from Spouses Natividad on July 3, 1986, the former had notice that someone else was already in possession of the subject lot.

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Having failed to recover the possession of the subject lot through the aforesaid forcible entry case, petitioners commenced the subject action for Recovery of Ownership, Quieting of Title and Damages against Magallanes and her husband, Ireneo, in a Complaint[18] dated February 25, 1995. Petitioners alleged that they are the absolute owners of Lot 11-E-8-A as evidenced by TCT No. T-72734; that Magallanes is also claiming the said lot as per a Deed of Definite Sale dated July 21, 1980; that the lot claimed by Magallanes is different from Lot 11-E-8-A; and that Magallanes constructed, without the consent of petitioners, several houses on said lot. They prayed that they be declared the rightful owners of Lot 11-E-8-A and that Magallanes be ordered to pay damages. In her Answer,[19] Magallanes countered that she is the absolute lawful owner of Lot 11-E-8-A; that Lot 11-E-8-A belongs to her while Lot 11-E-8-B belongs to Mario Gonzales; that petitioners had prior knowledge of the sale between her and Lazaro; that she enclosed Lot 11-E-8-A with a fence, constructed a house and caused soil fillings on said lot which petitioners were aware of; and that she has been in actual possession of the said lot from March 11, 1979 up to the present. She prayed that TCT No. T-72734 in the name of petitioner Ramy Pudadera be cancelled and a new one be issued in her name. During the pendency of this case, Magallanes passed away and was substituted by her heirs, herein respondents. Ruling of the Regional Trial Court On September 6, 1996, the trial court rendered judgment in favor of respondents, viz: WHEREFORE, premises considered, judgment is hereby rendered in favor of the [respondents] and against the [petitioners]: 1. Declaring the [respondent] Daisy Teresa Cortel Magallanes, substituted by her heirs, Nelly M. Magallanes, Eliseo Magallanes and Angel Magallanes and Ireneo Magallanes, as the rightful owners of Lot 11-E-8-A, Psd-06-002539, which is now covered by Transfer Certificate of Title No. T-72734, still in the name of Ramy Pudadera, situated in the District of Arevalo, Iloilo City, with an area of 400 square meters more or less; 2. The [petitioners] spouses Ramy Pudadera and Zenaida Pudadera are hereby ordered to execute the necessary Deed of Reconveyance in favor of the above-named parties, namely[,] Nelly M. Magallanes, Eliseo Magallanes, x x x Angel Magallanes, and Ireneo Magallanes; 3. Ordering the [petitioners] to pay jointly and severally the [respondents] the amount of P10,000.00 as attorneys fees and the costs of the suit. SO ORDERED.[20]

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The trial court ruled that respondents are the rightful owners of the subject lot which was sold by Lazaro to their predecessor-in-interest, Magallanes, on July 21, 1980. When Lazaro sold the subject lot for a second time to Spouses Natividad on November 23, 1981, no rights were transmitted because, by then, Magallanes was already the owner thereof. For the same reason, when Spouses Natividad subsequently sold the subject lot to petitioners on July 3, 1986, nothing was transferred to the latter. The trial court further held that petitioners cannot be considered buyers in good faith and for value because after Magallanes bought the subject lot from Lazaro, Magallanes immediately took possession of the lot, and constructed a fence with barbed wire around the property. The presence of these structures should, thus, have alerted petitioners to the possible flaw in the title of the Spouses Natividad considering that petitioners visited the subject lot several times before purchasing the same. Neither can petitioners claim that the title of the subject lot was clean considering that a notice of lis pendens was annotated thereon in connection with a civil case that Magallanes filed against Spouses Natividad involving the subject lot. Although the notice of lis pendens was subsequently cancelled on July 7, 1986, the deed of sale between petitioners and Spouses Natividad was executed on July 3, 1986 or four days before said cancellation. Thus, petitioners had notice that the subject property was under litigation. Since respondents are the rightful owners of the subject lot, petitioners should execute a deed of conveyance in favor of the former so that a new title may be issued in the name of the respondents. Ruling of the Court of Appeals On June 6, 2005, the CA rendered the assailed Decision: WHEREFORE, with all the foregoing, the decision of the Regional Trial Court, Branch 39, Iloilo City dated September 3, 1996 in civil case no. 22234 for Quieting of Title, Ownership and Damages is hereby AFFIRMED in toto. All other claims and counterclaims are hereby dismissed for lack of factual and legal basis. No pronouncement as to cost. SO ORDERED.[21]

In affirming the ruling of the trial court, the appellate court reasoned that under the rule on double sale what finds relevance is whether the second buyer registered the second sale in good faith, that is, without knowledge of any defect in the title of the seller. Petitioners predecessor-in-interest, Spouses Natividad, were not registrants in good faith. When Magallanes first bought the subject lot from Lazaro on July 21, 1980, Magallanes took possession of the same and had it fenced and filled with soil. This was made way ahead of

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the November 23, 1981 Deed of Sale between Lazaro and Spouses Natividad. With so much movement and transactions involving the subject lot and given that Lyn LazaroNatividad is the niece of Lazaro, the appellate court found it hard to believe that the Spouses Natividad were completely unaware of any controversy over the subject lot. The CA, likewise, agreed with the trial court that at the time petitioners acquired the subject lot from Spouses Natividad on July 3, 1986, a notice of lis pendenswas still annotated at the back of TCT No. T-58606 due to a civil case filed by Magallanes against Spouses Natividad. Although the case was subsequently dismissed by the trial court for lack of jurisdiction, the notice of lis pendens was still subsisting at the time of the sale of the subject lot between Spouses Natividad and petitioners on July 3, 1986 because the lis pendens notice was cancelled only on July 7, 1986. Consequently, petitioners cannot be considered buyers and registrants in good faith because they were aware of a flaw in the title of the Spouses Natividad prior to their purchase thereof. Issues 1. The Court of Appeals erred in not considering the judicial admissions of Magallanes as well as the documentary evidence showing that she was claiming a different lot, Lot No. 11-E-8-B, and not Lot 11-E-8-A which is registered in the name of petitioners under TCT No. T-72734, consequently, its findings that Magallanes is the rightful owner of Lot 11-E-8-A is contrary to the evidence on record; 2. The Court of Appeals erred in applying the principle of innocent purchasers for value and in good faith to petitioners. Granting that the said principle may be applied, the Court of Appeals erred in finding that petitioners are not innocent purchasers for value; The Court of Appeals erred in affirming the award of attorneys fees against the petitioners.[22]

3.

Petitioners Arguments Petitioners postulate that the subject lot is different from the lot which Magallanes bought from Lazaro. As per Magallanes testimony in the ejectment case, she applied for the zoning permit for Lot 11-E-8-B and not Lot 11-E-8-A. Further, the tax declarations submitted in evidence therein showed that Magallanes paid for the real estate taxes of Lot 11-E-8-B and not Lot 11-E-8-A. Hence, there is no conflict of claims since petitioners are asserting their rights over Lot 11-E-8-A while respondents claim ownership over Lot 11-E-8-B. Moreover, assuming that there was a double sale, the same did not involve petitioners. The first sale was between Lazaro and Magallanes while the second sale was between Lazaro and Spouses Natividad. It was erroneous for the appellate court to conclude that Lyn Natividad was in bad faith simply because she is the niece of Lazaro. The Spouses Natividad were not

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impleaded in this case and cannot be charged as buyers in bad faith without giving them their day in court. Petitioners claim that respondents should first impugn the validity of Spouses Natividads title by proving that the latter acted in bad faith when they bought the subject lot from Lazaro. Petitioners aver that the evidence on record failed to overcome the presumption of good faith. Considering that Spouses Natividad were buyers in good faith and considering f urther that petitioners title was derived from Lazaro, petitioners should, likewise, be considered buyers in good faith. Petitioners further argue that the rule on notice of lis pendens was improperly applied in this case. The trial courts order dismissing the civil case filed by Magallanes against Spouses Natividad had long become final and executory before petitioners bought the subject lot from Spouses Natividad. While it is true that the order of dismissal was annotated at the back of TCT No. T-58606 only on July 7, 1986 or four days after the sale between Spouses Natividad and petitioners, the cancellation of the notice of lis pendens was a mere formality. In legal contemplation, the notice was, at the time of the sale on July 3, 1986, ineffective. Citing Spouses Po Lam v. Court of Appeals,[23] petitioners contend that the then existing court order for the cancellation of the lis pendens notice at the time of the sale made them buyers in good faith. Finally, petitioners question the award of attorneys fees in favor of respondents for lack of basis. Petitioners claim that they should be awarded damages because respondents unlawfully prevented them from taking possession of the subject lot. Respondents Arguments Respondents counter that they are in possession of, and claiming ownership over the subject lot, i.e., Lot 11-E-8-A, and not Lot 11-E-8-B. The claim of petitioners that the subject lot is different from what respondents assert to be lawfully theirs is, thus, misleading. The subject lot was acquired by respondents predecessor -ininterest, Magallanes, when Lazaro sold the same to Magallanes through a contract to sell in 1979 and a deed of sale in 1980 after full payment of the monthly installments. After executing the contract to sell, Magallanes immediately took possession of the subject lot; constructed a fence with barbed wire; and filled it up with soil in preparation for the construction of concrete houses. She also built a nipa hut and stayed therein since 1979 up to her demise. Respondents emphasize that upon payment of the full purchase price under the contract to sell and the execution of the deed of sale, Magallanes undertook steps to protect her rights due to the refusal of Lazaro to surrender the mother title of the subject lot. Magallanes recorded an adverse claim at the back of the mother title of the subject lot and an initial notice of lis pendens thereon. She then filed a civil case against Lazaro, and, later on, against Lazaros successors-in-interest, Spouses Natividad, which resulted in the

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inscription of a notice of lis pendens on TCT No. 51250 and TCT No. T58606. When petitioners bought the subject lot from Spouses Natividad on July 3, 1986, the said notice of lis pendens was subsisting because the court dismissal of said case was inscribed on the title only on July 7, 1986. Petitioners cannot, therefore, be considered buyers in good faith. Our Ruling

We affirm the decision of the CA with modifications.

Petitioners and respondents are claiming ownership over the same lot.

Petitioners contend that they are claiming ownership over Lot 11-E-8-A while Magallanes claim is over Lot 11-E-8-B. Thus, there is no conflict between their claims.

The argument is specious.

It is clear that Magallanes is claiming ownership over Lot 11-E-8-A and not Lot 11-E8-B. In her Answer to the Complaint, she alleged that she is the absolute lawful owner of Lot 11-E-8-A.[24] Her act of fencing Lot 11-E-8-A and constructing two houses of strong materials thereon further evince her claim of ownership over the subject lot. Thus, in the forcible entry case which petitioners previously filed against Magallanes involving the subject lot, the trial court noted:

At the pre-trial conference held on June 13, 1990, both parties agreed to a relocation survey of the lot whereupon the Court commissioned the Bureau of Lands to undertake a relocation survey of the lot in question.

On October 1, 1990, the Bureau of Lands thru Engr. Filomeno P. Daflo submitted the relocation survey report with the following findings: x x x

xxxx 5. That it was ascertained in our investigation that the entire lot occupied by [Magallanes] (lot 11-E-8-A) is the very same lot claimed by the [petitioners], as pointed out by its representative.[25] (Emphasis supplied.)

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After losing in the aforesaid forcible entry case, petitioners commenced the subject action for quieting of title and recovery of ownership over Lot 11-E-8-A. Plainly, both parties are asserting ownership over the same lot, i.e. Lot 11-E-8-A, notwithstanding the error in the entries made by Magallanes in her zoning application and tax declaration forms. The notice of lis pendens at the back of the mother title of the subject lot was already ordered cancelled at the time of the sale of the subject lot to petitioners, hence, said notice cannot be made a basis for finding petitioners as buyers in bad faith.

A notice of lis pendens at the back of the mother title (i.e., TCT No. T-58606) of Lot 11-E-8-A was inscribed on September 2, 1983 in connection with the civil case for specific performance, injunction and damages which Magallanes filed against Spouses Natividad. This case was subsequently dismissed by the trial court for lack of jurisdiction in an Order dated September 16, 1985 which has already become final and executory as per the Certification dated June 16, 1986 issued by the Branch Clerk of Court of the RTC of Iloilo City, Branch 33.[26] The aforesaid court dismissal was, however, inscribed only on July 7, 1986 or three days after the sale of the subject lot to petitioners.[27] Based on these established facts, petitioners correctly argue that the said notice of lis pendens cannot be made the basis for holding that they are buyers in bad faith. Indeed, at the time of the sale of the subject lot by Spouses Natividad to petitioners on July 7, 1986, the civil case filed by Magallanes against Spouses Natividad had long been dismissed for lack of jurisdiction and the said order of dismissal had become final and executory. In Spouses Po Lam v. Court of Appeals,[28] the buyers similarly bought a property while a notice of lis pendens was subsisting on its title. Nonetheless, we ruled that the buyers cannot be considered in bad faith because the alleged flaw, the notice of lis pendens, was already being ordered cancelled at the time of the sale and the cancellation of the notice terminated the effects of such notice.[29] This notwithstanding, petitioners cannot be considered buyers in good faith because, as will be discussed hereunder, they were aware of other circumstances pointing to a possible flaw in the title of Spouses Natividad prior to the sale of the subject lot. Despite these circumstances, petitioners did not take steps to ascertain the status of the subject lot but instead proceeded with the purchase of the same. One who buys a property with knowledge of facts which should put him upon inquiry or investigation as to a possible defect in the title of the seller acts in bad faith.

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Lot 11-E-8, of which the subject lot (i.e., Lot 11-E-8-A) forms part, was sold by Lazaro to two different buyers. As narrated earlier, Lot 11-E-8 is a portion ofLot 11-E, a 5,333 sq. m. lot covered by TCT No. T-51250. Lazaro subdivided the said lot and sold portions thereof to several buyers. One of these buyers was Magallanes who purchased a 400 sq. m. portion on March 13, 1979. The metes and bounds of this lot were later delineated in a Partition Agreement dated July 14, 1980 executed by Lazaro in favor of the aforesaid buyers. As per this agreement, Magallanes and Mario Gonzales were assigned Lot 11-E-8 comprising 800 sq. m with each owning a 400 sq. m. portion thereof. This was the first sale involving Lot 11-E-8. After the aforesaid sale, it appears Lazaro refused to turnover the mother title of Lot 11-E which resulted in the filing of legal suits by Magallanes and the other buyers against her (Lazaro). While these suits were pending, Lazaro sold Lot 11-E-8 to her niece Lynn and the latters husband Rogelio Natividad on November 23, 1981. Consequently, a new title, TCT No. T-58606, was issued covering Lot 11-E-8 in the name of Spouses Natividad. This was the second sale of Lot 11-E-8. Subsequently, Spouses Natividad subdivided Lot 11-E-8 into two, i.e., Lot 11-E-8-A and Lot 11-E-8-B, with each containing 400 sq. m. On July 3, 1986, they sold Lot 11-E-8-A to petitioners. Lot 11-E-8-A is the 400 sq. m. portion of Lot 11-E-8 which Magallanes claims to be owned by her pursuant to the aforesaid Partition Agreement while the other half, Lot 11-E-8-B, pertains to the lot of Mario Gonzales. The question before us, then, is who between petitioners and respondents have a better right over Lot 11-E-8-A? 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 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.

Thus, in case of a double sale of immovables, ownership shall belong to (1) the first registrant in good faith; (2) then, the first possessor in good faith; and (3) finally, the buyer who in good faith presents the oldest title.[30] However, mere registration is not enough to confer ownership. The law requires that the second buyer must have acquired and registered the immovable property in good faith. In order for the second buyer to displace

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the first buyer, the following must be shown: (1) the second buyer must show that he acted in good faith (i.e., in ignorance of the first sale and of the first buyers rights) from the time of acquisition until title is transferred to him by registration or failing registration, by delivery of possession; and (2) the second buyer must show continuing good faith and innocence or lack of knowledge of the first sale until his contract ripens into full ownership through prior registration as provided by law.[31] One is considered a purchaser in good faith if he buys the property without notice that some other person has a right to or interest in such property and pays its fair price before he has notice of the adverse claims and interest of another person in the same property.[32] Well-settled is the rule that every 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 beyond the certificate to determine the condition of the property.[33] However, this rule shall not apply when the party has actual knowledge of facts and circumstances that would impel a reasonably cautious man to make such inquiry or when the purchaser has knowledge of a defect or the lack of title in his vendor or of sufficient facts to induce a reasonably prudent man to inquire into the status of the title of the property in litigation.[34] His mere refusal to believe that such 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 later develops that the title was in fact defective, and it appears that he had such notice of the defect had he acted with that measure of precaution which may reasonably be required of a prudent man in a like situation.[35] In the case at bar, both the trial court and CA found that petitioners were not buyers and registrants in good faith owing to the fact that Magallanes constructed a fence and small hut on the subject lot and has been in actual physical possession since 1979. Hence, petitioners were aware or should have been aware of Magallanes prior physical possession and claim of ownership over the subject lot when they visited the lot on several occasions prior to the sale thereof. Thus, the trial court held: This Court believes the version of [Magallanes], that when she bought the property from [Lazaro], she took immediate possession of the 400-square meter portion and constructed a fence [with] barbed wire surrounding the said property. She also constructed a house made of nipa, bamboo and concrete materials. This fact was even confirmed by [petitioner] Zenaida Pudadera in her testimony. This Court cannot believe the testimony of [petitioner] Zenaida Pudadera that they were the ones who constructed the fence surrounding the 400-square meter portion, because there was already an existing fence made of bamboos and barbed wire put up by [Magallanes]. When the [petitioners] therefore, visited the land in question, several times before the purchase, particularly [petitioner] Ramy Pudadera, he must have seen the fence surrounding the property in question. He should have been curious why there was an existing fence surrounding the property? [sic] He should have asked or verified as to the status of the said property. A real estate

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buyer must exercise ordinary care in buying x x x real estate, especially the existence of the fence in this case which must have [alerted him to inquire] whether someone was already in possession of the property in question.[36]

We find no sufficient reason to disturb these findings. The factual findings of the trial court are accorded great weight and respect and are even binding on this Court particularly where, as here, the findings of the trial and appellate courts concur.[37] Although this rule is subject to certain exceptions, we find none obtaining in this case. Petitioners next argue that since the second sale involves Lazaro and their predecessor-in-interest, Spouses Natividad, due process requires that Spouses Natividad should first be allowed to establish that they (Spouses Natividad) are second buyers and first registrants in good faith before any finding on petitioners own good faith can be made considering that they (petitioners) merely acquired their title from Spouses Natividad. Petitioners lament that Spouses Natividad were not impleaded in this case. Thus, the finding that petitioners acted in bad faith was improper. The argument fails on two grounds. First, as previously explained, the evidence duly established that petitioners were aware of facts pointing to a possible flaw in the title of Spouses Natividad when they visited the subject lot on several occasions prior to the sale. This, by itself, was sufficient basis to rule that they acted in bad faith. Stated differently, the presence or absence of good faith on the part of Spouses Natividad during the second sale involving the subject lot will not erase the bad faith of petitioners in purchasing the subject lot from Spouses Natividad. Second, petitioners miscomprehend the right to due process. The records indicate that at no instance during the trial of this case were they prevented from presenting evidence, including the testimonies of Spouses Natividad, to support their claims. Thus, they were not denied their day in court. Petitioners seem to forget that they were the ones who filed this action to recover ownership and quiet title against Magallanes. If petitioners intended to bolster their claim of good faith by impleading the Spouses Natividad in this case, there was nothing to prevent them from doing so. Time and again, we have ruled that the burden of proof to establish the status of a purchaser and registrant in good faith lies upon the one who asserts it.[38] This onus probandi cannot be discharged by mere invocation of the legal presumption of good faith.[39] In sum, petitioners were negligent in not taking the necessary steps to determine the status of the subject lot despite the presence of circumstances which would have impelled a reasonably cautious man to do so. Thus, we affirm the findings of the lower courts that they cannot be considered buyers and registrants in good faith. Magallanes, as the first buyer and actual possessor, was correctly adjudged by the trial court as the rightful owner of the subject lot and the conveyance thereof in favor of her heirs, herein respondents, is proper under the premises. In addition, the trial court should be ordered to cause the

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cancellation of TCT No. T-72734 by the Register of Deeds of Iloilo City and the issuance of a new certificate of title in the names of respondents.[40] This is without prejudice to any remedy which petitioners may have against Spouses Natividad and/or Lazaro. The award of attorneys fees is improper.

On the issue of the propriety of attorneys fees which the trial court awarded in favor of respondents, we are inclined to agree with petitioners that the same should be deleted for lack of basis. An award of attorneys fees is the exception rather than the rule.[41] The right to litigate is so precious that a penalty should not be charged on those who may exercise it erroneously.[42] It is not given merely because the defendant prevails and the action is later declared to be unfounded unless there was a deliberate intent to cause prejudice to the other party.[43] We find the evidence of bad faith on the part of petitioners in instituting the subject action to be wanting. Thus, we delete the award of attorneys fees. WHEREFORE, the petition is PARTIALLY GRANTED. The June 6, 2005 Decision and September 20, 2005 Resolution of the Court of Appeals in CA-G.R. CV No. 55850 are AFFIRMED with the following MODIFICATIONS: (1) The Regional Trial Court of Iloilo City, Branch 39 is ORDERED to cause the cancellation by the Register of Deeds of Iloilo City of TCT No. T-72734 and the issuance, in lieu thereof, of the corresponding certificate of title in the names of respondents, heirs of Daisy Teresa Cortel Magallanes, and (2) The award of attorneys fees in favor of respondents is DELETED. No pronouncement as to costs. SO ORDERED.

MARIANO C. DEL CASTILLO Associate Justice

WE CONCUR:

RENATO C. CORONA Chief Justice Chairperson

JOSE PORTUGAL PEREZ Associate Justice

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CERTIFICATION Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division.

RENATO C. CORONA Chief Justice

[1]

[2] [3]

[4]

[5] [6] [7] [8] [9] [10] [11] [12] [13] [14] [15] [16] [17] [18] [19] [20] [21] [22] [23] [24] [25] [26] [27] [28] [29] [30] [31] [32] [33] [34] [35] [36] [37] [38] [39] [40] [41]

[42] [43]

Rollo, pp. 10-17; penned by Associate Justice Pampio A. Abarintos and concurred in by Associate Justices Mercedes Gozo-Dadole and Ramon M. Bato, Jr. Records, pp. 271-282; penned by Judge Jose G. Abdallah. Rollo, p. 29; penned by Associate Justice Pampio A. Abarintos and concurred in by Associate Justices Vicente L. Yap and Ramon M. Bato, Jr. Records, p. 28; should be contract to sell as stated in the body of said contract and as per the terms thereof. Id. at 29. Id. at 31-32. Id. Id. at 34. Id. at 26. Id. at 27. Id. at 194. Id. at 137. Id. Id. at 138. Id. at 127. Id. at 5. Id. at 18-25. Id. at 1-4. Id. at 11-17. Id. at 282. Rollo, p. 16. Id. at 44. 400 Phil. 858 (2000). Records, p. 11. Id. at 19. Id. at 138. Id. Supra note 23. Id. at 871. Spouses Abrigo v. De Vera, 476 Phil. 641, 650 (2004). Cheng v. Genato, 360 Phil. 891, 910 (1998). Hemedes v. Court of Appeals, 374 Phil. 692, 719-720 (1999). Id. at 719. Sigaya v. Mayuga, 504 Phil. 600, 614 (2005). Id. Records, pp. 278-279. Uraca v. Court of Appeals, 344 Phil. 253, 267 (1997). Supra note 34 at 613. Id. Bautista v. Court of Appeals, 379 Phil. 386, 402 (2000). Albenson Enterprises Corp. v. Court of Appeals , G.R. No. 88694, January 11, 1993, 217 SCRA 16, 31. De la Pea v. Court of Appeals, G.R. No. 81827, March 28, 1994, 231 SCRA 456, 462. Id.

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SECOND DIVISION

FILINVEST DEVELOPMENT CORPORATION, Petitioner,

G.R. No. 187824 Present: CARPIO, J., Chairperson, NACHURA, PERALTA, ABAD, and MENDOZA, JJ.

- versus -

GOLDEN HAVEN MEMORIAL PARK, INC., Respondent.

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

GOLDEN HAVEN MEMORIAL PARK, INC., Petitioner,

G.R. No. 188265

- versus Promulgated: FILINVEST DEVELOPMENT CORPORATION, Respondent. November 17, 2010

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

DECISION ABAD, J.:

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These cases are about which of two real estate developers, both buyers of the same lands, acted in good faith and has a better title to the same.

The Facts and the Case

Petronila Yap (Yap), Victoriano and Policarpio Vivar (the Vivars), Benjamin Cruz (Cruz), Juan Aquino (Aquino), Gideon Corpuz (Corpuz), and Francisco Sobremesana (Sobremesana), and some other relatives inherited a parcel of land in Las Pias City covered by Transfer Certificate of Title (TCT) 67462 RT1. Subsequently, the heirs had the land divided into 13 lots and, in a judicial partition, the court distributed four of the lots as follows: a) Lots 1 and 12 to Aquino; b) Lot 2 to Corpuz and Sobremesana; and (c) Lot 6 to Yap, Cruz, and the Vivars. The other lots were distributed to the other heirs.

On March 6, 1989 Yap, acting for herself and for Cruz and the Vivars, executed an agreement to sell Lot 6 in favor of Golden Haven Memorial Park, Inc. (GHM), payable in three installments. On July 31, 1989 another heir, Aquino, acting for himself and for Corpuz and Sobremesana, also executed an agreement to sell Lots 1, 2, and 12 in favor of GHM, payable in the same manner. In both instances, GHM paid the first installment upon execution of the contract.

On August 4, 1989 GHM caused to be annotated a Notice of Adverse Claim on TCT 67462 RT-1. On September 20, 1989 the sellers of the four lots wrote GHM that they were still working on the titling of the lots in their names and wanted to know if GHM was still interested in proceeding with their agreements. GHM replied in the affirmative on September 21, 1989 and said that it was just waiting for the sellers titles so it can pay the second installments.

Sometime in August of 1989, Filinvest Development Corporation (Filinvest) applied for the transfer in its name of the titles over Lots 2, 4, and 5 but the Las Pias Register of Deeds declined its application. Upon inquiry, Filinvest learned that Lot 8, a lot belonging to some other heir or heirs and covered by the same mother title, had been sold to Household Development Corporation (HDC), a sister company of GHM, and HDC held the owners duplicate copy of that title. Filinvest immediately filed against HDC a petition for the surrender and cancellation of the co-owners duplicate copy of TCT 67462 RT-1. Filinvest alleged that it bought Lots 1, 2, 6, and 12 of the property from their respective owners as evidenced by three deeds of

83

absolute sale in its favor dated September 10, November 18, and December 29, 1989 and that Filinvest was entitled to the registrations of such sales.

On January 14, 1991 GHM filed against the sellers and Filinvest a complaint for the annulment of the deeds of sale issued in the latters favor before the Regional Trial Court (RTC) of Las Pias City in Civil Case 91-098. On March 16, 2006 the RTC rendered a decision after trial, declaring the contracts to sell executed by some of the heirs in GHMs favor valid and enforceable and the sale in favor of Filinvest null and void. Only Filinvest appealed among the defendants.

On November 25, 2008 the Court of Appeals (CA) affirmed the RTC decision with respect to the validity of the contract to sell Lot 6 in GHMs favor. But the CA declared the contracts to sell Lots 1, 2, and 12 in GHMs favor void and the sale of the same lots in favor of Filinvest valid.

Both parties filed their petitions for review before this Court, Filinvest in G.R. 187824, and GHM in G.R. 188265.

The Issue Presented

The issue presented in these cases is whether or not the contracts to sell that the sellers executed in GHMs favor covering the same lots sold to Filinvest are valid and enforceable.

The Courts Ruling

To prove good faith, the rule is that the buyer of registered land needs only show that he relied on the title that covers the property. But this is true only when, at the time of the sale, the buyer was unaware of any adverse claim to the property.[1] Otherwise, the law requires the buyer to exercise a higher degree of diligence before proceeding with his purchase. He must examine not only the certificate of title, but also the sellers right and capacity to transfer any interest in the property.[2] In such a situation, the buyer must show that he exercised reasonable precaution by inquiring beyond the four corners of the title.[3] Failing in these, he may be deemed a buyer in bad faith.[4]

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Here, Filinvest was on notice that GHM had caused to be annotated on TCT 67462 RT-1, the mother title, as early as August 4, 1989 a notice of adverse claim covering Lot 6. This notwithstanding, Filinvest still proceeded to buy Lots 1, 2, 6, and 12 on September 10, November 18, and December 29, 1989.

Filinvest of course contends that, although the title carried a notice of adverse claim, that notice was only with respect to seller Yaps interest in Lot 6 and it did not affect Lots 1, 2, 12, and the remaining interests in Lot 6. The Court disagrees.

The annotation of an adverse claim is intended to protect the claimants interest in the property. The notice is a warning to third parties dealing with the property that someone claims an interest in it or asserts a better right than the registered owner.[5] Such notice constitutes, by operation of law, notice to the whole world.[6] Here, although the notice of adverse claim pertained to only one lot and Filinvest wanted to acquire interest in some other lots under the same title, the notice served as warning to it that one of the owners was engaged in double selling.

What is more, upon inquiry with the Register of Deeds of Las Pias, Filinvest also learned that the heirs of Andres Aldana sold Lot 8 to HDC and turned over the co-owners duplicate copy of TCT 67462 RT -1 to that company which had since then kept the title. Filinvest (referred to below as FDC) admits this fact in its petition,[7] thus:

Sometime in August 1989, FDC applied with the Register of Deeds of Las Pias for the transfer and registration of Lots 2, 4, and 5 in its name and surrendered the co-owners duplicate copy of TCT No. (67462) RT-1 given to it by the Vivar family, but the Register of Deeds of Las Pias City refused to do the transfer of title in the name of FDC and instead demanded from FDC to surrender as well the other co-owner's duplicate copy of TCT No. (67462) RT-1 which was issued to the heirs of Andres Aldana. Upon further inquiry, FDC came to know that the heirs of Andres Aldana sold Lot 8 and delivered their co-owner's duplicate copy of TCT No. (67462) RT-1 to Household Development Corporation, a sister company of respondent GHMPI. FDC made representations to Household Development Corporation for the surrender of said co-owner's duplicate copy of TCT No. (67462) RT-1 to the Register of Deeds of Las Pias City, but Household Development Corporation refused to do so.

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Filinvests knowledge that GHM, a competitor, had bought Lot 6 in which Filinvest was interested, that GHM had annotated an adverse claim to that Lot 6, and that GHM had physical possession of the title, should have put Filinvest on its toes regarding the prospects it faced if it bought the other lots covered by the title in question. Filinvest should have investigated the true status of Lots 1, 2, 6, and 12 by asking GHM the size and shape of its interest in the lands covered by the same title, especially since both companies were engaged in the business of developing lands. One who has knowledge of facts which should have put him upon such inquiry and investigation cannot claim that he has acquired title to the property in good faith as against the true owner of the land or of an interest in it.[8]

The Court upholds the validity of the contracts between GHM and its sellers. As the trial court aptly observed, GHM entered into valid contracts with its sellers but the latter simply and knowingly refused without just cause to honor their obligations. The sellers apparently had a sudden change of heart when they found out that Filinvest was willing to pay more.

As to the award of exemplary damages, the Court sustains the CA ruling. This species of damages is allowed only in addition to moral damages such that exemplary damages cannot be awarded unless the claimant first establishes a clear right to moral damages.[9] Here, since GHM failed to prove that it is entitled to moral damages, the RTCs award of exemplary damages had no basis. But the grant of attorneys fees is proper. As the RTC noted, this case has been pending since 1991, or for 19 years now. GHM was forced to litigate and incur expenses in order to protect its rights and interests.

WHEREFORE, the Court GRANTS the petition in G.R. 188265 and DISMISSES the petition in G.R. 187824. The Court likewise REVERSES and SETS ASIDE the decision of the Court of Appeals dated November 25, 2008 in CAG.R. CV 89448, and REINSTATES the decision of the Regional Trial Court in Civil Case 91-098 dated March 16, 2006 with the MODIFICATION that the award of exemplary damages is DELETED. SO ORDERED.

ROBERTO A. ABAD Associate Justice

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WE CONCUR:

ANTONIO T. CARPIO Associate Justice

ANTONIO EDUARDO B. NACHURA Associate Justice

DIOSDADO M. PERALTA Associate Justice

JOSE CATRAL MENDOZA Associate Justice

ATTESTATION I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division. ANTONIO T. CARPIO Associate Justice Chairperson, Second Division

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution and the Division Chairpersons Attestation, I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division.

RENATO C. CORONA Chief Justice

[1] [2] [3] [4] [5]

Bautista v. Silva, G.R. No. 157434, September 19, 2006, 502 SCRA 334, 347. Orquiola v. Court of Appeals, 435 Phil. 323, 331 (2002). Instrade, Inc. v. Court of Appeals, 395 Phil. 791, 802 (2000). Sps. Castro v. Miat, 445 Phil. 282, 298 (2003). Sajonas v. Court of Appeals, 327 Phil. 689, 701-702 (1996).

87

Balatbat v. Court of Appeals, 329 Phil. 858, 872-873 (1996). Rollo (G.R. 187824), pp. 22-23. [8] Balatbat v. Court of Appeals, supra note 6, at 874. [9] Delos Santos v. Papa, G.R. No. 154427, May 8, 2009, 587 SCRA 385, 396-397, citing Mahinay v. Velasquez, Jr., 464 Phil. 146, 150 (2004).
[7]

[6]

88

Republic of the Philippines Supreme Court Manila

SECOND DIVISION

ASIA UNITED BANK, Petitioner, - versus -

G.R. No. 188051 Present: CARPIO MORALES, J.,* NACHURA,** Acting Chairperson, PERALTA,

GOODLAND COMPANY, INC., PEREZ,*** and Respondent. MENDOZA, JJ.

Promulgated:

November 22, 2010

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

DECISION

NACHURA, J.:

Petitioner assails the February 16, 2009 Decision [1] and the May 18, 2009 Resolution[2] of the Court of Appeals (CA) in CA-G.R. SP No. 103304, annulling the August 23, 2007[3] and February 15, 2008[4] Orders of the Regional Trial Court (RTC) of Makati City, Branch 150, which in turn denied due course to respondent Goodland Company, Inc.s (GOODLAND) notice of appeal for invalid substitution of counsel. The antecedents:

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An Ex-Parte Application/Petition for the Issuance of Writ of Possession [5] was filed by Asia United Bank (AUB) over a 5,801-square- meter lot located in Makati City and covered by Transfer Certificate of Title (TCT) No. 223120 of the Registry of Deeds of Makati in AUBs name. The property was previously registered in the name of GOODLAND under TCT No. 192674 (114645).

The petition alleged that, on February 20, 2000, GOODLAND executed a Third Party Real Estate Mortgage on the property in favor of AUB to secure the P202 million credit accommodation extended by the latter to Radiomarine Network (Smartnet) Inc. (Radiomarine).

When Radiomarine defaulted in the payment of its obligation, AUB instituted extrajudicial foreclosure proceedings against the real estate mortgage. At the public auction sale held on December 4, 2006, AUB was declared the highest bidder. On the same date, a Certificate of Sale was issued in its name and registered with the Registry of Deeds of Makati City.

With the expiration of the redemption period, AUB proceeded to execute an Affidavit of Consolidation of Ownership, through its First Vice-President, Florante del Mundo. AUB thereafter secured a Certificate Authorizing Registration from the Bureau of Internal Revenue to facilitate the transfer of the title.

On December 8, 2006, TCT No. 192674 (114645) was cancelled and, in lieu thereof, TCT No. 223120 was issued in the name of AUB. GOODLAND, through its counsel, Atty. Antonio Bautista (Atty. Bautista), opposed the petition, denying that it executed the real estate mortgage. GOODLAND further averred that the signature of the notary public appearing on the deed was a forgery, and that no technical description of the property supposedly mortgaged was indicated therein. Concluding that AUBs title was derived from the foreclosure of a fake mortgage, GOODLAND prayed for the petitions denial. [6]

On March 1, 2007, the RTC issued the writ of possession sought by AUB. It ratiocinated that, as the purchaser of the property at the foreclosure sale and as the new title holder thereof, AUBs right of possession and enjoyment of the same had become absolute.[7]

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GOODLAND, through its counsel on record, Atty. Bautista, filed a motion for reconsideration[8] and a supplemental motion for reconsideration,[9] but both were denied in the Order[10] dated April 25, 2007, which was received by Atty. Bautista on June 15, 2007.[11]

Relentless, GOODLAND sought recourse with the CA by initially filing a Notice of Appeal[12] with the RTC, through a certain Atty. Lito Mondragon (Atty. Mondragon) of the Mondragon & Montoya Law Offices. On August 23, 2007, the RTC issued an Order[13] denying due course to GOODLANDs notice of appeal for being legally inutile due to Atty. Mondragons failure to properly effect the substitution of former counsel on record, Atty. Bautista. GOODLAND moved for reconsideration, but the same was denied in the Order dated February 15, 2008. [14]

GOODLAND elevated the incident to the CA by way of a special civil acton for certiorari. In its February 16, 2009 Decision, the CA granted the petition and directed the RTC to give due course to the notice of appeal, thus:

WHEREFORE, the petition is hereby GRANTED. The assailed Orders dated August 23, 2007 and February 15, 2008 of the Regional Trial Court, Branch 150, Makati City are ANNULLED and SET ASIDE. The trial court is DIRECTED to give due course to petitioners Notice of Appeal.

SO ORDERED.[15]

Aggrieved, AUB moved for reconsideration, but the CA denied the motion in its Resolution dated May 18, 2009. Hence, the present petition for review oncertiorari,[16] praying for the reinstatement of the RTC Order.

The petition is meritorious.

Under Rule 138, Section 26 of the Rules of Court, for a substitution of attorney to be effectual, the following essential requisites must concur: (1) there must be a written application for substitution; (2) it must be filed with the written consent of the client; (3) it must be with the written consent of the attorney substituted; and (4) in case the consent of the attorney to be substituted cannot be

91

obtained, there must at least be proof of notice that the motion for substitution was served on him in the manner prescribed by the Rules of Court. [17]

The courts a quo were uniform and correct in finding that Atty. Mondragon failed to observe the prescribed procedure and, thus, no valid substitution of counsel was actualized. However, they took divergent postures as to the repercussion of such non-compliance, thereby igniting the herein controversy.

The RTC strictly imposed the rule on substitution of counsel and held that the notice of appeal filed by Atty. Mondragon was a mere scrap of paper.

However, relying on our pronouncement in Land Bank of the Philippines v. Pamintuan Development Co.,[18] the CA brushed aside the procedural lapse and took a liberal stance on considerations of substantial justice, viz.:

It is a far better and more prudent course of action for the court to excuse a technical lapse and afford the parties a review of the case on appeal to attain the ends of justice rather than dispose of the case on technicality and cause a grave injustice to the parties, giving a false impression of speedy disposal of cases while actually resulting in more delay, if not a miscarriage of justice. Thus, substantial justice would be better served by giving due course to petitioners notice of appeal.[19]

AUB argues that the liberality applied by the Court in Land Bank is incompatible with the herein controversy, and that Pioneer Insurance and Surety Corporation v. De Dios Transportation Co., Inc.,[20] which espouses the same view adopted by the RTC, is more appropriate.

GOODLAND, on the other hand, insists that the CA committed no reversible error in ordering that the notice of appeal be allowed in order not to frustrate the ends of substantial justice.

We agree with AUB. Bank and Pioneer is in order.

revisit

of

our

pronouncements

in Land

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In Land Bank, we held that the Department of Agrarian Reform Adjudication Board gravely abused its discretion when it denied due course to the Notice of Appeal and Notice of Entry of Appearance filed by petitioners new counsel for failure to effect a valid substitution of the former counsel on record.

We clarified that the new counsel never intended to replace the counsel of record because, although not so specified in the notice, they entered their appearance as collaborating counsel. Absent a formal notice of substitution, all lawyers who appear before the court or file pleadings in behalf of a client are considered counsel of the latter. We pursued a liberal application of the rule in order not to frustrate the just, speedy, and inexpensive determination of the controversy.

In Pioneer, we adopted a strict posture and declared the notice of withdrawal of appeal filed by appellants new counsel as a mere scrap of paper for his failure to file beforehand a motion for the substitution of the counsel on record.

Provoking such deportment was the absence of a special power of attorney authorizing the withdrawal of the appeal in addition to the lack of a proper substitution of counsel. More importantly, we found that the withdrawal of the appeal was calculated to frustrate the satisfaction of the judgment debt rendered against appellant, thereby necessitating a rigid application of the rules in order to deter appellant from benefiting from its own deleterious manipulation thereof.

The emerging trend of jurisprudence is more inclined to the liberal and flexible application of the Rules of Court. However, we have not been remiss in reminding the bench and the bar that zealous compliance with the rules is still the general course of action. Rules of procedure are in place to ensure the orderly, just, and speedy dispensation of cases;[21] to this end, inflexibility or liberality must be weighed. The relaxation or suspension of procedural rules or the exemption of a case from their operation is warranted only by compelling reasons or when the purpose of justice requires it.[22]

As early as 1998, in Hon. Fortich v. Hon. Corona,[23] we expounded on these guiding principles:

Procedural rules, we must stress, should be treated with utmost respect and due regard since they are designed to facilitate the

93

adjudication of cases to remedy the worsening problem of delay in the resolution of rival claims and in the administration of justice. The requirement is in pursuance to the bill of rights inscribed in the Constitution which guarantees that all persons shall have a right to the speedy disposition of their cases before all judicial, quasi-judicial and administrative bodies. The adjudicatory bodies and the parties to a case are thus enjoined to abide strictly by the rules. While it is true that a litigation is not a game of technicalities, it is equally true that every case must be prosecuted in accordance with the prescribed procedure to ensure an orderly and speedy administration of justice. There have been some instances wherein this Court allowed a relaxation in the application of the rules, but this flexibility was never intended to forge a bastion for erring litigants to violate the rules with impunity. A liberal interpretation and application of the rules of procedure can be resorted to only in proper cases and under justifiable causes and circumstances. In Sebastian v. Hon. Morales,[24] we straightened out the misconception that the enforcement of procedural rules should never be permitted if it would prejudice the substantive rights of litigants:

Under Rule 1, Section 6 of the 1997 Rules of Civil Procedure, liberal construction of the rules is the controlling principle to effect substantial justice. Thus, litigations should, as much as possible, be decided on their merits and not on technicalities. This does not mean, however, that procedural rules are to be ignored or disdained at will to suit the convenience of a party. Procedural law has its own rationale in the orderly administration of justice, namely, to ensure the effective enforcement of substantive rights by providing for a system that obviates arbitrariness, caprice, despotism, or whimsicality in the settlement of disputes. Hence, it is a mistake to suppose that substantive law and procedural law are contradictory to each other, or as often suggested, that enforcement of procedural rules should never be permitted if it would result in prejudice to the substantive rights of the litigants.

x x x. Hence, rules of procedure must be faithfully followed except only when for persuasive reasons, they may be relaxed to relieve a litigant of an injustice not commensurate with his failure to comply with the prescribed procedure. x x x.

Indeed, the primordial policy is a faithful observance of the Rules of Court, and their relaxation or suspension should only be for persuasive reasons and only in meritorious cases, to relieve a litigant of an injustice not commensurate with the degree of his thoughtlessness in not complying with the procedure

94

prescribed.[25]Further, a bare invocation of the interest of substantial justice will not suffice to override a stringent implementation of the rules.[26]

A reading of the CAs Decision readily shows that the leniency it granted GOODLAND was merely anchored on substantial justice. The CA overlooked GOODLANDs failure to advance meritorious reasons to support its plea for the relaxation of Rule 138, Section 26. The fact that GOODLAND stands to lose a valuable property is inadequate to dispense with the exacting imposition of a rather basic rule.

More importantly, the CA failed to realize that the ultimate consequences that will come about should GOODLANDs appeal proceed would in fact contravene substantial justice. The CA and, eventually, this Court will just re-litigate an otherwise non-litigious matter and thereby compound the delay GOODLAND attempts to perpetrate in order to prevent AUB from rightfully taking possession of the property.

It is a time-honored legal precept that after the consolidation of titles in the buyer's name, for failure of the mortgagor to redeem, entitlement to a writ of possession becomes a matter of right.[27] As the confirmed owner, the purchasers right to possession becomes absolute.[28] There is even no need for him to post a bond,[29] and it is the ministerial duty of the courts to issue the same upon proper application and proof of title.[30] To accentuate the writs ministerial character, the Court has consistently disallowed injunction to prohibit its issuance despite a pending action for annulment of mortgage or the foreclosure itself.[31]

The nature of an ex parte petition for issuance of the possessory writ under Act No. 3135 has been described as a non-litigious proceeding and summary in nature.[32] As an ex parte proceeding, it is brought for the benefit of one party only, and without notice to or consent by any person adversely interested.[33]

Subsequent proceedings in the appellate courts would merely involve a reiteration of the foregoing settled doctrines. The issue involved in the assailed RTC issuances is conclusively determined by the above cited legal dictum, and it would be unnecessarily vexatious and unjust to allow the present controversy to undergo protracted litigation. AUBs right of possession is founded on its right of ownership over the property which it purchased at the auction sale. Upon expiration of the redemption

95

period and consolidation of the title to the property, its possessory rights over the same became absolute. We quote with approval the pronouncement of the RTC, viz.:

As the purchaser of the property in the foreclosure sale to which new title has already been issued, petitioners right over the property has become absolute, vesting upon it the right of possession and enjoyment of the property which this Court must aid in effecting its delivery. Under the circumstances, and following established doctrine, the issuance of a writ of possession is a ministerial function whereby the court exercises neither discretion nor judgment x x x. Said writ of possession must be enforced without delay x x x.[34]

The law does not require that a petition for a writ of possession be granted only after documentary and testimonial evidence shall have been offered to and admitted by the court.[35] As long as a verified petition states the facts sufficient to entitle petitioner to the relief requested, the court shall issue the writ prayed for.[36]

Given the foregoing, we are bound to deny a liberal application of the rules on substitution of counsel and resolve definitively that GOODLANDs notice of appeal merits a denial, for the failure of Atty. Mondragon to effect a valid substitution of the counsel on record. Substantial justice would be better served if the notice of appeal is disallowed. In the same way that the appellant in Pioneer was not permitted to profit from its own manipulation of the rules on substitution of counsel, so too can GOODLAND be not tolerated to foster vexatious delay by allowing its notice of appeal to carry on.

WHEREFORE, premises considered, the petition is GRANTED. The February 16, 2009 Decision and the May 18, 2009 Resolution of the Court of Appeals are hereby ANNULLED and SET ASIDE; and the August 23, 2007 and February 15, 2008 Orders of the Regional Trial Court of Makati City, Branch 150, are REINSTATED. SO ORDERED. ANTONIO EDUARDO B. NACHURA Associate Justice Acting Chairperson WE CONCUR:

96

CONCHITA CARPIO MORALES Associate Justice

DIOSDADO M. PERALTA Associate Justice

JOSE PORTUGAL PEREZ Associate Justice

JOSE CATRAL MENDOZA Associate Justice

ATTESTATION I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division.

ANTONIO EDUARDO B. NACHURA Associate Justice Acting Chairperson, Second Division CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution and the Division Acting Chairperson's Attestation, I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division.

RENATO C. CORONA Chief Justice

Additional member in lieu of Associate Justice Roberto A. Abad per Raffle dated August 4, In lieu of Associate Justice Antonio T. Carpio. Additional member in lieu of Associate Justice Antonio T. Carpio per Raffle dated August 4,

2010.
** ***

2010.
[1]

Penned by Associate Justice Magdangal M. de Leon, with Associate Justices Jose L. Sabio, Jr. and Ramon R. Garcia, concurring; rollo, pp. 57-66. [2] Id. at 68-69. [3] Id. at 139-141. [4] Id. at 142-144. [5] Id. at 145-152. [6] Id. at 153-154. [7] Id. at 157-160. [8] Id. at 161-163. [9] Id. at 164-180.

97

[10] [11] [12] [13]

Id. at 185-188. Id. at 58. Id. at 189-190. The dispositive portion of the Order reads: In view of all the foregoing, the notice of appeal is hereby disallowed and denied due course. SO ORDERED. (Supra note 3, at 141.) The dispositive portion of the Order reads: In view of all the foregoing, Goodlands Motion for Reconsideration dated September 17, 2007 of the order dated August 23, 2007 is denied for lack of merit. SO ORDERED. (Supra note 4, at 144.) Supra note 1, at 65. RULES OF COURT, Rule 45.

[14]

[15] [16]

[17]

Greater Metropolitan Manila Solid Waste Management Committee v. Jancom Environmental Corporation, G.R. No. 163663, June 30, 2006, 494 SCRA 280, 305-306; SantanaCruz v. Court of Appeals, G.R. No. 120176, July 20, 2001, 361 SCRA 520, 532. [18] 510 Phil. 839 (2005). [19] Supra note 1, at 65.
[20] [21]

G.R. No. 147010, July 18, 2003, 406 SCRA 639. Heirs of Cesar Marasigan v. Marasigan, G.R. No. 156078, March 14, 2008, 548 SCRA

409.
[22]

See Commissioner of Internal Revenue v. Mirant Pagbilao Corporation (formerly Southern Energy Quezon, Inc.), G.R. No. 159593, October 16, 2006, 504 SCRA 484, 496.
[23] [24]

359 Phil. 210, 220 (1998). (Citations omitted.) 445 Phil. 595, 605 (2003), as reiterated in Land Bank of the Philippines v. Ascot Holdings and Equities, Inc., G.R. No. 175163, October 19, 2007, 537 SCRA 396, 405.

[25]

Lazaro v. Court of Appeals, 386 Phil. 412, 417 (2000).

[26] [27]

Id. National Housing Authority v. Augusto Basa, Jr., Luz Basa and Eduardo S. Basa , G.R. No. 149121, April 20, 2010, citing Manalo v. Court of Appeals, 419 Phil. 215, 235 (2001). [28] Motos v. Real Bank (A Thrift Bank), Inc., G.R. No. 171386, July 17, 2009, 593 SCRA 216, 226, citing Fernandez v. Espinoza, 551 SCRA 136, 149 (2008). [29] Top Art Shirt Manufacturing, Incorporated v. Metropolitan Bank and Trust Company, G.R. No. 184005, August 4, 2009, 595 SCRA 323, 335, citing Sps. Ong v. Court of Appeals, 388 Phil. 857, 865-866 (2000). [30] Top Art Shirt Manufacturing, Incorporated v. Metropolitan Bank and Trust Company, supra, at 336, citing F. David Enterprises v. Insular Bank of Asia and America, 191 SCRA 516, 523 (1990). [31] National Housing Authority v. Augusto Basa, Jr., Luz Basa and Eduardo S. Basa , supra note 27, citing Chailease Finance Corp. v. Spouses Ma, 456 Phil. 498, 503 (2003); and Manalo v. Court of Appeals, supra note 27, at 235. [32] Idolor v. Court of Appeals, 490 Phil. 808, 816 (2005). [33] Sagarbarria v. Philippine Business Bank , G.R. No. 178330, July 23, 2009, 593 SCRA 645, 653. [34] Supra note 7, at 159. [35] Oliveros v. Presiding Judge, RTC, Br. 24, Bian, Laguna, G.R. No. 165963, September 3, 2007, 532 SCRA 109, 120. [36] Spouses Santiago v. Merchants Rural Bank of Talavera, Inc., 493 Phil. 862, 870 (2005).

98

Republic of the Philippines Supreme Court Manila

SECOND DIVISION G.R. No. 152423 Present: CARPIO, J., Chairperson, NACHURA, PERALTA, ABAD, and MENDOZA, JJ. Promulgated: MARIA COPRADA, December 15, 2010 Respondent. x --------------------------------------------------x

SPOUSES MARCOS R. ESMAQUEL and VICTORIA SORDEVILLA, Petitioners,

- versus -

DECISION

PERALTA, J.:

Before this Court is a petition for review on certiorari under Rule 45 of the Rules of Court seeking to set aside the Decision[1] and the Resolution[2] of the Court of Appeals, dated April 6, 2001 and February 15, 2002, respectively, (CA) in CAG.R. SP No. 49994.

The antecedents are as follows:

On February 24, 1997, petitioners, spouses Marcos Esmaquel and Victoria Sordevilla (Victoria) filed an ejectment case[3] against respondent Maria V. Coprada before the 2nd Municipal Circuit Trial Court (MCTC) of Magdalena, Liliw and Majayjay Laguna. Petitioners claimed that they are the registered owners of a parcel of land situated in M.H. Del Pilar St., Barangay San Miguel, Majayjay, Laguna, containing an area of Two Hundred Fifty-Three (253) square meters and covered by Transfer Certificate of Title (TCT) No. T-93542. In 1945, respondent was able to persuade the petitioners to allow her and her family to use and occupy the land for their residence, under the condition that they will vacate the premises should petitioners need to use the same. Respondent and her family were allowed to construct their

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residential house. Since then, the petitioners never made an attempt to drive them away out of pity, knowing that respondent and her eight children have no other place to live in. Also, respondent and her family have been occupying the subject premises free of rent, including payment of realty taxes. Respondent's present circumstances have completely improved, i.e., some of her children are already working; they are regularly sending her financial assistance; and she has acquired her own residential house at Barangay Panglan, Majayjay, Laguna. Because of this, petitioners verbally demanded that respondent vacate the subject land, but the latter refused. Thus, petitioners were forced to send a demand letter dated August 22, 1996, giving respondent until November 30, 1996 to vacate the subject premises. However, respondent still ignored said demand, which prompted petitioners to bring a complaint before the barangay authorities. No settlement was reached, hence, a certification to file action in Court was issued. Petitioners were, therefore, constrained to lodge an ejectment case against the respondent before the MCTC.

Respondent admitted that petitioners are the registered owners of the subject land. However, she averred that in 1945, it was Emiliana Coprada (petitioner Victoria Sordevilla's mother and original owner of the subject land) and not the petitioners who gave permission to her late husband Brigido Coprada to use the subject lot. Emiliana allowed her nephew Brigido and his family to occupy the lot as their permanent abode, because of her love and affection for her nephew, and also, due to the fact that the said lot is virtually a wasteland. Thereafter, Brigido and his family cleared the area and built therein a nipa hut to dwell in. When Emiliana died, the ownership of the property was inherited by her only child, petitioner Victoria Sordevilla. Respondent alleged that sometime in the early 1960's, petitioner Victoria offered the said lot for sale for P2,000.00 to respondent, who readily agreed. The purchase price was paid in installments and was fully paid in 1962. Due to their close relationship, the agreement was never reduced to writing. Respondent further maintained that since the execution of the oral sale of the subject lot, she has been the one paying the realty taxes due on the property. After the sale, respondent built on the subject land a semi-concrete structure. Respondent stated that petitioners' claim is barred by laches. Even granting, without admitting, that respondent's claim of ownership over the property is improper because petitioners are the registered owners thereof, respondent argued that she is a builder in good faith, because she was able to build the structure on the subject lot with the prior permission of the owner.

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In its Decision[4] dated September 11, 1997, the MCTC rendered judgment dismissing the complaint. It held that laches had already set in which prevented petitioners from questioning the validity of the purported sale between Victoria and Maria. On appeal, the Regional Trial Court (RTC) reversed the MCTCs judgment. The RTC ruled that respondent's occupation of the subject property was by virtue of petitioners' tolerance and permission. Hence, respondent is bound by an implied promise that she will vacate the property upon demand. Thus, her possession over the subject property became unlawful after the petitioners demanded her to vacate the property. The RTC found that respondent failed to prove the alleged oral sale and that petitioners have adequately proven that they are entitled to the possession of the subject land as registered owners thereof. The RTC ordered the respondent and all other persons claiming rights under her to vacate and surrender the possession of the subject land to the petitioners and to remove any and all improvements she introduced on the parcel of land.[5]

Respondent filed a Motion for Reconsideration, which was denied by the RTC in an Order[6] dated November 24, 1998. Obviously dissatisfied by the Decision, respondent filed with the CA a petition for review with prayer for temporary restraining order and preliminary injunction.[7]

In its Decision dated April 6, 2001, the CA granted respondent's petition, reversed the Decision of the RTC and affirmed in toto the Decision of the MCTC. Petitioners filed a Motion for Reconsideration, which was denied by the CA in a Resolution[8] dated February 15, 2002. Hence, the instant petition raising the following grounds: I THE RIGHT OF THE REGISTERED OWNERS TO RECOVER POSSESSION IS NEVER BARRED BY LACHES AND/OR THE PERSON WHO HAS A TORRENS TITLE OVER A PARCEL OF LAND IS ENTITLED TO THE POSSESSION THEREOF. II THE OWNERSHIP AND RIGHT OF PETITIONERS TO RECOVER POSSESSION OF THE SUBJECT PROPERTY CANNOT BE DEFEATED BY UNPROVEN ORAL SALE.

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III LACHES HAD SET IN AGAINST [RESPONDENT].

IV THE CERTIFICATE OF TITLE IS NOT SUBJECT TO COLLATERAL ATTACK.[9]

The petition is meritorious.

The pertinent point of inquiry in this case is whether or not petitioners have a valid ground to evict respondent from the subject property.

An action for forcible entry or unlawful detainer is governed by Section 1, Rule 70 of the Rules of Court, which provides:

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.

In unlawful detainer cases, the possession of the defendant was originally legal, as his possession was permitted by the plaintiff on account of an express or implied contract between them. However, defendant's possession became illegal when the plaintiff demanded that defendant vacate the subject property due to the expiration or termination of the right to possess under their contract, and defendant refused to heed such demand.[10]

The sole issue for resolution in an unlawful detainer case is physical or material possession of the property involved, independent of any claim of ownership by any of the parties. Where the issue of ownership is raised by any of the parties, the courts may pass upon the same in order to determine who has the right to possess the property. The adjudication is, however, merely provisional and would

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not bar or prejudice an action between the same parties involving title to the property.[11]Since the issue of ownership was raised in the unlawful detainer case, its resolution boils down to which of the parties' respective evidence deserves more weight.

In the case at bar, petitioners' cause of action for unlawful detainer is based on their ownership of the land covered by TCT No. T-93542 and on their claim that they merely tolerated respondent's stay thereat. Respondent's possession, as well as those persons claiming right under her, became unlawful upon her refusal to vacate the premises. Petitioners contend that since they are the registered owners of the subject land, they are entitled to the possession thereof and their right to recover possession over it is never barred by laches. They maintain that respondent's claim of ownership is based on an unproven oral sale, which does not exist. Further, respondent cannot rely on the Tax Declarations as she was paying taxes in the petitioners' name, as the declared owners of the property. Moreover, she started paying the taxes only in 1984 despite her claim that the property was sold to her in 1962. Even assuming that the sale took place in 1962, respondent is guilty of laches as she failed to take any positive action for the delivery and conveyance to her of the portion of the property she is occupying. Finally, respondent cannot collaterally attack the title of the petitioners to the subject land.

On her part, respondent, although admitting that the property is registered in petitioners' name, claimed that the 100-square-meters portion of the property, where her house was erected, was already sold to her by petitioner Victoria. Thus, by virtue of the sale, she and her family have the right to possess the said property. The nonpresentation of receipt and deed of sale, non-delivery of the owner's certificate of title, and her payment of the real property taxes in the name of the petitioners were due to the close relationship between the parties and the existing practice of palabra de honor in their day to day transactions. Respondent further alleged that she is not guilty of laches; rather, it is the registered owners' right to recover possession of their property which is barred by laches.

In the present case, respondent failed to present evidence to substantiate her allegation that a portion of the land was sold to her in 1962. In fact, when petitioners sent a letter[12] to the respondent, demanding her to vacate the subject property, the respondent, in reply[13] to the said letter, never mentioned that she purchased the subject land in 1962. If the sale really took place, the respondent should have

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immediately and categorically claimed that in her letter response. Clearly therefore, respondent's submission that there was an oral sale is a mere afterthought.

On the other hand, it is undisputed that the subject property is covered by Transfer Certificate of Title No. T-93542, registered in the name of the petitioners. As against the respondent's unproven claim that she acquired a portion of the property from the petitioners by virtue of an oral sale, the Torrens title of petitioners must prevail. Petitioners' title over the subject property is evidence of their ownership thereof. It is a fundamental principle in land registration that the certificate of title serves as evidence of an indefeasible and incontrovertible title to the property in favor of the person whose name appears therein. Moreover, the age-old rule is that the person who has a Torrens title over a land is entitled to possession thereof. [14]

Further, respondent's argument that petitioners are no longer the owners of a portion of the subject land because of the sale in her favor is a collateral attack on the title of the petitioners, which is not allowed. The validity of petitioners' certificate of title cannot be attacked by respondent in this case for ejectment. Under Section 48 of Presidential Decree No. 1529, a certificate of title shall not be subject to collateral attack. It cannot be altered, modified or canceled, except in a direct proceeding for that purpose in accordance with law. The issue of the validity of the title of the petitioners can only be assailed in an action expressly instituted for that purpose. Whether or not the respondent has the right to claim ownership over the property is beyond the power of the trial court to determine in an action for unlawful detainer. [15] In Rodriguez v. Rodriguez,[16] citing the case of Co v. Militar,[17] the Court held that: [T]he Torrens System was adopted in this country because it was believed to be the most effective measure to guarantee the integrity of land titles and to protect their indefeasibility once the claim of ownership is established and recognized. It is settled that a Torrens Certificate of title is indefeasible and binding upon the whole world unless and until it has been nullified by a court of competent jurisdiction. Under existing statutory and decisional law, the power to pass upon the validity of such certificate of title at the first instance properly belongs to the Regional Trial Courts in a direct proceeding for cancellation of title. As the registered owner, petitioner had a right to the possession of the property, which is one of the attributes of ownership. xxx

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Anent the issue on laches, the CA's ruling that petitioners' long inaction to assert their rights over the subject land bars them from recovering the same is without basis. Also, the doctrine invoked by the appellate court that a registered owner may loose his right to recover its possession by reason of laches is not applicable here.

Laches is 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 the presumption that the party entitled to assert it either has abandoned or declined to assert it.[18] There is no absolute rule as to what constitutes laches or staleness of demand; each case is to be determined according to its particular circumstances, with the question of laches addressed to the sound discretion of the court. Because laches is an equitable doctrine, its application is controlled by equitable considerations and should not be used to defeat justice or to perpetuate fraud or injustice.[19]

Respondent first acquired possession of the subject lot by mere tolerance. From 1945 until the filing of the complaint for ejectment in 1997, the nature of that possession has never changed. Petitioners allowed the respondent to possess the property with the knowledge that the respondent will vacate the same upon demand. Hence, until such demand to vacate was communicated by the petitioners to the respondent, petitioners are not required to do any act to recover the subject land, precisely because they knew of the nature of the respondent's possession, i.e., possession by mere tolerance. Thus, it cannot be said that petitioners are guilty of failure or neglect to assert a right within a reasonable time. Further, after the petitioners gave a demand letter to the respondent giving the latter until November 30, 1996 to vacate the subject premises, which respondent failed to heed, they immediately filed a complaint before the barangay authorities and, thereafter, lodged an ejectment case before the MCTC on February 24, 1997. In sum, We find that petitioners are not guilty of laches as would bar their claim to the property in question.

In contrast, respondent, who is claiming that a portion of the property was sold to her in 1962, has herself failed within a long period of time to have that portion transferred in her name. Respondent had to wait for almost 35 years since 1962,

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and were it not for the filing of the ejectment suit in 1997, she would not have bothered to assert her rights under the alleged sale. Respondent's failure to assert that right only goes to prove that no sale ever transpired between the parties.

Moreover, as the registered owners, petitioners' right to eject any person illegally occupying their property is not barred by laches. In Gaudencio Labrador, represented by Lulu Labrador Uson, as Attorney-in-Fact v. Spouses Ildefonso Perlas and Pacencia Perlas and Spouse Rogelio Pobre and Melinda Fogata Pobre,[20] the Court held that: x x x As a registered owner, petitioner has a right to eject any person illegally occupying his property. This right is imprescriptible and can never be barred by laches. InBishop v. Court of Appeals, we held, thus: As registered owners of the lots in question, the private respondents have a right to eject any person illegally occupying their property. This right is imprescriptible. Even if it be supposed that they were aware of the petitioners' occupation of the property, and regardless of the length of that possession, the lawful owners have a right to demand the return of their property at any time as long as the possession was unauthorized or merely tolerated, if at all. This right is never barred by laches.

Since respondent's occupation of the subject lot is by mere tolerance or permission of the petitioners, without any contract between them, respondent is bound by an implied promise that she will vacate the same upon demand, failing which a summary action for ejectment is the proper remedy against her. [21]

In respondent's Answer filed before the MCTC, she claimed that since she was able to build a structure on the subject lot with the prior permission from the owner, she is a builder in good faith and thus entitled to be reimbursed the necessary and useful expenses under Articles 546 and 548 of the Civil Code of the Philippines. Without such reimbursement, she has the right of retention over the property and she cannot just be ejected from the premises.

Respondent's argument does not hold water. Since respondent's occupation of the subject property was by mere tolerance, she has no right to retain its possession under Article 448 of the Civil Code. She is aware that her tolerated possession may be terminated any time and she cannot be considered as builder in good faith.[22] It is well settled that both Article 448[23] and Article 546[24] of the New

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Civil Code, which allow full reimbursement of useful improvements and retention of the premises until reimbursement is made, apply only to a possessor in good faith, i.e., one who builds on land with the belief that he is the owner thereof. Verily, persons whose occupation of a realty is by sheer tolerance of its owners are not possessors in good faith.[25] At the time respondent built the improvements on the premises in 1945, she knew that her possession was by mere permission and tolerance of the petitioners; hence, she cannot be said to be a person who builds on land with the belief that she is the owner thereof.

Respondent's reliance on her payment of realty taxes on the property is unavailing. She started paying taxes only in 1984 despite her claim that she bought the property in 1962. Further, aside from the rule that tax declarations and corresponding tax receipts cannot be used to prove title to or ownership of a real property inasmuch as they are not conclusive evidence of the same,[26] the RTC found that although the payment for said taxes were received from respondent, the declared owner was petitioner Victoria.

It must be stressed, however, that the court's adjudication of ownership in an ejectment case is merely provisional, and affirmance of the RTC's decision would not bar or prejudice an action between the same parties involving title to the property, if and when such action is brought seasonably before the proper forum. [27]

WHEREFORE, the petition is GRANTED. The Decision and the Resolution of the Court of Appeals, dated April 6, 2001 and February 15, 2002, respectively, in CAG.R. SP No. 49994, affirming the Decision of the 2nd Municipal Circuit Trial Court in Civil Case No. 1875, are REVERSED and SET ASIDE. The Decision of the Regional Trial Court of Santa Cruz, Laguna, Branch 26, in Civil Case No. SC-3580, is REINSTATED.

SO ORDERED.

DIOSDADO M. PERALTA Associate Justice WE CONCUR: ANTONIO T. CARPIO Associate Justice Chairperson

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ANTONIO EDUARDO B. NACHURA Associate Justice

ROBERTO A. ABAD Associate Justice

JOSE CATRAL MENDOZA Associate Justice

ATTESTATION I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division.

ANTONIO T. CARPIO Associate Justice Second Division, Chairperson

CERTIFICATION Pursuant to Section 13, Article VIII of the Constitution and the Division Chairpersons Attestation, I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division.

RENATO C. CORONA Chief Justice

[1]

Penned by Associate Justice Alicia L. Santos, with Associate Justice Ramon A. Barcelona and Associate Justice Rodrigo V. Cosico, concurring; rollo, pp. 43-49. [2] Rollo, pp. 51-52. [3] Records, pp. 7-11. [4] Rollo, pp. 97-102. [5] Id. at. 137. [6] Records, pp. 226-227. [7] CA rollo, pp. 7-22. [8] Rollo, pp. 51-52. [9] Id. at 21. [10] Estate of Soledad Manantan v. Somera, G.R. No. 145867, April 7, 2009, 584 SCRA 81, 89. [11] Barias v. Heirs of Bartolome Boneo, G.R. No. 166941, December 14, 2009, 608 SCRA 169, 174. [12] Records, p. 14. [13] Id. at 41. [14] Caa v. Evangelical Free Church of the Philippines, G.R. No. 157573, February 11, 2008, 544 SCRA 225, 238-239. [15] Soriente v. Estate of the Late Arsenio E. Concepcion, G.R. No. 160239, November 25, 2009, 605 SCRA 315, 330. [16] G.R. No. 175720, September 11, 2007, 532 SCRA 642, 652-653. [17] G.R. No. 149912, January 29, 2004, 421 SCRA 455. [18] Fangonil-Herrera v. Fangonil, G.R. No. 169356, August 28, 2007, 531 SCRA 486, 511. [19] Id. [20] G.R. No. 173900, August 9, 2010. (Emphasis supplied.) [21] Arambulo v. Gungab, 508 Phil. 612, 621-622 (2005).

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[22] [23]

Id. at 622, citing Del Rosario v. Manuel, 420 SCRA 128, 131 (2004). Art. 448. The owner of the land on which anything has been built, sown or planted in good faith, shall have the right to appropriate as his own the works, sowing or planting, after payment of the indemnity provided for in articles 546 and 548, or to oblige the owner who built or planted to pay the price of the land, and the one who sowed, the proper rent. However, the builder or planter cannot be obliged to buy the land if its value is considerably more than that of the building or trees. In such case, he shall pay reasonable rent, if the owner of the land does not choose to appropriate the building or trees after proper indemnity. The parties shall agree upon the terms of the lease and in case of disagreement, the court shall fix the terms thereof. [24] Art. 546. Necessary expenses shall be refunded to every possessor; but only the possessor in good faith may retain the thing until he has been reimbursed therefor. Useful expenses shall be refunded only to the possessor in good faith with the same right of retention, the person who has defeated him in the possession having the option of refunding the amount of the expenses or of paying the increase in value which the thing may have acquired by reason thereof. [25] Pada-Kilario v. Court of Appeals, 379 Phil. 515, 529-530 (2000). [26] Castillo v. Escutin, G.R. No. 171056, March 13, 2009, 581 SCRA 258, 285. [27] Soriente v. Estate of the Late Arsenio E. Concepcion, supra note 15.

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