G.R. No.

111141 March 6, 1998

MARIO Z. TITONG, petitioner,

vs.
THE HONORABLE COURT OF APPEALS (4th Division), VICTORICO LAURIO and ANGELES
LAURIO, respondents.

ROMERO, J.:

Like a priceless treasure coveted by many, but capable of ownership by only one, this 20,592
square-meter parcel of land located at Barrio Titong, Masbate, Masbate is claimed by two
contestants in this petition for review on certiorari. Unfortunately, legal title over the property can be
vested in only one of them.

The case originated from an action for quieting of title filed by petitioner Mario Titong. The Regional
Trial Court of Masbate, Masbate, Branch 44 1 ruled in of private respondents, Victorico Laurio and
Angeles Laurio, adjudging them the true and lawful owners of the disputed land. Affirmed on appeal
to the Court, of Appeals, petitioner comes to us for a favorable reversal.

Petitioner alleges that he is the owner of an unregistered parcel of land with an area of 3.2800
hectares, more or less, surveyed as Lot No. 3918, and declared for taxation purposes in his name.
He claims that on three separate occasions in September 1983, private respondents, with their hired
laborers, forcibly entered a portion of the land containing an area of approximately two (2) hectares;
and began plowing the same under pretext of ownership. Private respondents denied this allegation,
and averred that the disputed property formed part of the 5.5-hectare agricultural land which they
had purchased from their predecessor-in-interest, 2 Pablo Espinosa on August 10, 1981.

In his testimony, petitioner identified Espinosa as his adjoining owner 3, asserting that no
controversy had sprouted between them for twenty years until the latter sold Lot No. 3479 to private
respondent Victorico Laurio. 4 This was corroborated by Ignacio Villamor, who had worked on the
land even before its sale to Espinosa in 1962. The boundary between the land sold to Espinosa and
what of petitioner's property was the old Bugsayon river. When petitioner employed Bienvenido Lerit
as his tenant in 1962, he instructed Lerit to change the course of the old river and direct the flow of
water to the lowland at the southern of petitioner' s property, thus converting the old river into a
riceland. 5

For his part, private respondent anchors his defense on the following facts: He denied petitioner's
claim of ownership, recounting that the area and boundaries of the disputed land remained unaltered
during the series of conveyances prior to its coming into his hands. According to him, petitioner first
declared the land for taxation purposes under Tax Declaration No. 2916, 6 which showed that the
land had an area of 5.5 hectares and was bounded on the North by the Bugsayon River; on the East
by property under the ownership of Lucio Lerit; on the South by property owner by Potenciano
Zaragoza; and on the West by property owned by Agapito de la Cruz. 7 Private Respondent then
alleges that, on December 21, 1960, petitioner sold this property to Concepcion Verano vda. de
Cabug, after which Tax Declaration No. 5339 8 was issued in her favor. In compliance with their
mutual agreement to repurchase the same, petitioner reacquired the property by way of sale 9 on
August 24, 1962 and then declared it for taxation purposes in his name under Tax Declaration No.
5720. 10 However, the property remained in petitioner's hands for only four (4) days because, on
August 28, 1962, he sold it to Espinosa 11 who then declared it in his name under Tax Declaration
No. 12311. 12 Consequently, the property became a part of the estate of Pablo Espinosa's wife, the
late Segundina Liao Espinosa. On August 10, 1981, her heirs executed an instrument denominated
as "Extrajudicial Settlement of Estate with Simultaneous Sale" whereby the 5.5-hectare property
under Tax Declaration No. 12311 was sold to private respondent 13 in consideration of the amount of
P5,000.00. Thereafter, Tax Declaration No. 12738 was issued in the name of private respondent. In
all these conveyances, the area and boundaries of the property remained exactly the same as those
appearing in Tax Declaration No. 2916 under petitioner's name.

It was proved at the proceedings in the court a quo that two (2) surveys were made of the disputed
property. The first survey 14 was made for petitioner, while the second was the relocation survey
ordered by the lower court. As anticipated, certain discrepancies between the two surveys surfaced.
Thus, contrary to petitioner's allegation in his complaint that he is the owner of only 3.2800 hectares,
he was actually claiming 5.9789 hectares, the total areas of Lot Nos. 3918, 3918-A and 3606. On the
other hand, Lot No. 3479 pertaining to Espinosa, was left with only an area of 4.1841 hectares
instead of the 5.5 hectares sold by petitioner to him. Apprised of the discrepancy, private respondent
filed a protest 15 before the Bureau of Lands against the first survey, likewise filing a case for
alteration of boundaries before the municipal trial court, the proceedings of which, however, were
suspended of the instant case. 16

Private respondent testified that petitioner is one of the four heirs of his mother, Leonida Zaragoza.
In the Extrajudicial Settlement with Sale of Estate of the deceased Leonida Zaragoza, 17 the heirs
adjudicated unto themselves the 3.6-hectare property of the deceased. The property involved is
described in the instrument as having been declared under Tax Declaration No. 3301 18 and as
bounded on the North by Victor Verano, on the East by Benigno Titong, on the South by the
Bugsayon River and on the West by Benigno Titong. On September 9, 1969, Tax Declaration No.
8723 was issued to petitioner for his corresponding share in the estate.

However, instead of reflecting only .9000 hectare as his rightful share in the extrajudicial
settlement 19 petitioner's share was bloated to 2.4 hectares. It therefore appeared to private
respondent that petitioner encroached upon his (Laurio's) property and declared it a part of his
inheritance. 20 The boundaries were likewise altered so that it was bounded on the North by Victor
Verano, on the East by Benigno Titong, on the South by property owner Espinosa, and on the West
by property owner Adolfo Titong. 21 Private respondent accordingly denied that petitioner had
diverted the course of the Bugsayon River after he had repurchased the land from Concepcion
Verano vda. de Cabug 22 because the land was immediately sold to Espinosa shortly thereafter. 23

The lower court rendered a decision in favor of private respondents, declaring him as the true and
absolute owner of the litigated property and ordering petitioner to respect private respondents' title
and ownership over the property and to pay attorney's fees, litigation expenses, costs and moral
damages.

Petitioner appealed to the Court of Appeals, which affirmed the decision. On motion for
reconsideration, the same was denied for lack of merit. Hence, this petition for review on certiorari.

At the outset, we hold that the instant petition must be denied for the reason that the lower court
should have outrightly dismissed the complaint for quieting of title. The remedy of quieting of title
may be availed of under the circumstances enumerated in the Civil Code:

Art. 476. Whenever there is a cloud on title to real property or any interest therein, by
reason of any instrument, record, claim, encumbrance or proceeding which is
apparently valid or effective but is in truth and in fact invalid, ineffective, voidable, or
unenforceable, and may be prejudicial to said title, an action may be brought to
remove such cloud or to quiet the title.
An action may also be brought to prevent a cloud from being cast upon title to real property or any
interest therein.

Under this provision, a claimant must show that there is an instrument, record, claim, encumbrance
or proceeding which constitutes or casts a cloud, doubt, question or shadow upon the owner's title to
or interest in real property. 24 The ground or reason for filing a complaint for quieting of title must
therefore be "an instrument, record, claim, encumbrance or proceeding." Under the maxim expresio
mius est exclusio alterius, these grounds are exclusive so that other reasons outside of the purview
of these reasons may not be considered valid for the same action. 25

Had the lower court thoroughly considered the complaint filed, it would have had no other course of
action under the law but to dismiss it. The complaint failed to allege that an "instrument, record,
claim, encumbrance or proceeding" beclouded the plaintiff's title over the property involved.
Petitioner merely alleged that the defendants (respondents herein), together with their hired laborers
and without legal justification, forcibly entered the southern portion of the land of the plaintiff and
plowed the same.

He then proceeded to claim damages and attorney's fees. He prayed that, aside from issuing a writ
or preliminary injunction enjoining private respondents and their hired laborers from intruding into the
land, the court should declare him "the true and absolute owner" thereof. Hence, through his
allegations, what petitioner imagined as clouds cast on his title to the property were private
respondents' alleged acts of physical intrusion into his purported property. Clearly, the acts alleged
may be considered grounds for an action for forcible entry but definitely not one for quieting of title.

When the issues were joined by the filing of the answer to the complaint, it would have become
apparent to the court that the case was a boundary dispute. The answer alleged, among other
matters, that petitioner, "in bad faith, surreptitiously, maliciously and fraudulently had the land in
question included in the survey of his land which extends to the south only as far as the Bugsayon
River which is the visible and natural and common boundary between the properties." 26 Moreover,
during the hearing of the case, petitioner proved that it was actually a boundary dispute by evidence
showing what he considered as the boundary of his property which private respondents perceived as
actually encroaching on their property. In this regard, the following pronouncements of the Court are
apropos:

. . . (T)he trial court (and likewise the respondent Court) cannot, in an action for
quieting of title, order the determination of the boundaries of the claimed property, as
that would be tantamount to awarding to one or some of the parties the disputed
property in an action where the sole issue is limited to whether the instrument,
record, claim, encumbrance or proceeding involved constitutes a cloud upon the
petitioners' interest or title in and to said property. Such determination of boundaries
is appropriate in adversarial proceedings where possession or ownership may
properly be considered and where evidence aliunde, other than the "instrument,
record, claim, encumbrance or proceeding" itself, may be introduced. An action for
forcible entry, whenever warranted by the period prescribed in Rule 70, or for
recovery of possession de facto, also within the prescribed period, may be availed of
by the petitioners, in which proceeding the boundary dispute may be fully threshed
out. 27

Nonetheless, even if the complaint below were to be considered as a valid one for quieting of title,
still, the instant petition for review on certiorari must fail.
As a general rule, findings of fact of the Court of Appeals are binding and conclusive upon this Court.
Such factual findings shall not be disturbed normally unless the same are palpably unsupported by
the evidence on record or the judgment itself is based on a misapprehension of facts. 28 Upon an
examination of the records, the Court finds no evident reason to depart from the general rule.

The courts below correctly held that when petitioner "sold, ceded, transferred and conveyed" the 5.5-
hectare land in favor of Pablo Espinosa, his rights of ownership and possession pertaining thereto
ceased and these were transferred to the latter. In the same manner, Espinosa's rights of ownership
over the land ceased and were transferred to private respondent upon its sale to the latter. This finds
justification in the Civil Code, as follows:

Art. 1458. By the contract of sale one of the contracting parties obligates himself to
transfer the ownership of and to deliver a determinate thing, and the other to pay
therefor a price certain in money or its equivalent.

A contract of sale may be absolute or conditional.

In other words, a sale is a contract transferring dominion and other real rights in the thing sold. 29 In
the case at bar, petitioner's claim of ownership must of necessary fail because he has long abdicated
his rights over the land when he sold it to private respondent's predecessor-in-interest.

Petitioner's claim that he acquired ownership over the disputed land through possession for more
than twenty (20) years is likewise unmeritorious. While Art. 1134 of the Civil Code provides that
"(o)wnership and other real rights over immovable property are acquired by ordinary prescription
through possession of ten years," this provision of law must be read in conjunction with Art. 1117 of
the same Code. This article states that ". . . (o)rdinary acquisitive prescription of things requires
possession in good faith and with just title for the time fixed by law." Hence, a prescriptive title to real
estate is not acquired by mere possession thereof under claim of ownership for a period of tea years
unless such possession was acquired con justo tilulo y buena fe (with color of title and good
faith). 30 The good faith of the possessor consists in the reasonable belief that the person from
whom he received the thing was the owner thereof, and could transmit his ownership. 31 For
purposes of prescription, there is just title when the adverse claimant came into possession of the
property through one of the modes recognized by law for the acquisition of ownership or other real
rights but the grantor was not the owner or could not transmit any right. 32

Petitioners have not satisfactorily met the requirements of good faith and just title. As aptly observed
by the trial court, the plaintiff's admitted acts of converting boundary line (Bugsayon River) into a
ricefield and thereafter claiming ownership thereof were acts constituting deprivation of the rights of
others and therefore "tantamount to bad faith." 33 To allow petitioner to benefit from his own wrong
would run counter to the maxim ex dolo malo non oritur actio (no man can allowed to found a claim
upon his own wrongdoing). Extraordinary acquisitive prescription cannot similarly vest ownership
over the property upon petitioner. Art. 1137 of the Civil Code states that "(o)wnership and other real
rights over immovables prescribe through uninterrupted adverse possession thereof for thirty years,
without need of title or of good faith." Petitioner's alleged possession in 1962 up to September 1983
when private respondents entered the property in question spanned twenty-one (21) years. This
period of time is short of the thirty-year requirement mandated by Art. 1137.

Petitioner basically anchors his claim over the property on the survey plan prepared upon his
request, 34 the tax declaration in his name, 35 the commissioner's report on the relocation
survey, 36 and the survey plan. 37 Respondent court correctly held that these documents do not
conclusively demonstrate petitioner's title over Lot Nos. 3918-A and 3606.
A survey is the act by which the quantity of a parcel of land is ascertained and so a paper containing
a statement of courses, distances, and quantity of
land. 38 A survey under a proprietary title is not a conveyance. It is an instrument sui generis in the
nature of a partition; a customary mode in which a proprietor has set off to himself in severalty a part
of the common estate. 39 Therefore, a survey, not being a conveyance, is not a mode of acquiring
ownership. A fortiori, petitioner cannot found his claim on the survey plan reflecting a subdivision of
land because it is not conclusive as to ownership as it may refer only to a delineation of
possession. 40

Furthermore, the plan was not verified and approved by the Bureau of Lands in accordance with
Sec. 28, paragraph 5 of Act No. 2259, the Cadastral Act, as amended by Sec. 1862 of Act No. 2711.
Said law ordains that private surveyors send their original field notes, computations, reports,
surveys, maps and plots regarding a piece of property to the Bureau of Lands for verification and
approval. 41 A survey plan not verified and approved by said Bureau is nothing more than a private
writing, the due execution and authenticity of which must be proven in accordance with Sec. 20 of
Rule 132 of the Rules of Court. The circumstance that the plan was admitted in evidence without any
objection as to its due execution and authenticity does not signify that the courts shall give probative
value therefor. To admit evidence and not to believe it subsequently are not contradictory to each
other. This Court cannot alter the conclusions of
the Court of Appeals on the credibility accorded to evidence presented by the parties. 42

Similarly, petitioner's tax declaration issued under his name is not even persuasive evidence of his
claimed ownership over the land in dispute. A tax declaration, by itself, is not considered conclusive
evidence of ownership. 43 It is merely an indicium of a claim of ownership. 44 Because it does not
by itself give title, it is of little value in proving one's ownership. 45 Moreover, the incompatibility in
petitioner's tax declaration and the commissioner's report as regards the area of his claimed property
is much too glaring to be ignored. Tax Declaration No. 8717 states that petitioner's property has an
area of 3.2800 hectares while the totality of his claim according to the commissioned geodetic
engineer's survey amounts to 4.1385 hectares. There is therefore a notable discrepancy of 8,585
square meters. On the other hand, private respondent's claimed property, as borne out by Tax
Declaration No. 12738, totals 5.5 hectares, a more proximate equivalent of the 5.2433-hectare
property as shown by the commissioner's report.

There is also nothing in the commissioner's report that substantiates petitioner's claim that the
disputed land was inside his property. Petitioner capitalizes on the lower court's statement in its
decision 46 that "as reflected in the commissioner's report dated May 23, 1984 (Exhibit 3-3-A), the
area claimed is inside lot 3918 of the defendants (Exhibit 2)" 47 or the private respondents. A careful
reading of the decision would show that this statement is found in the summary of defendants'
(herein private respondents) evidence. Reference to Lot No. 3918 may, therefore, be attributed to
mere oversight as the lower court even continues to state the defendants' assertion that the 2-
hectare land is part of their 5.5-hectare property. Hence, it is not amiss to conclude that either
petitioner misapprehended the lower court's decision or he is trying to contumaciously mislead or
worse, deceive this Court.

With respect to the awards of moral damages of P10,000.00 and attorney's fees of P2,000.00, the
Court finds no cogent reason to delete the same. Jurisprudence is replete with rulings to the effect
that where fraud and bad faith have been established, the award of moral damages is in
order. 48 This pronouncement finds support in Art. 2219 (10) of the Civil Code allowing the recovery
of moral damages for acts enumerated in Art. 21 of the same Code. This article states that "(a)ny
person who wilfully causes loss or injury to another in a manner that is contrary to morals, good
customs or public policy shall compensate the latter for the damage." The moral damages are
hereby increased to P30,000.00. We agree with the respondent court in holding that the award of
attorney's fees is justified because petitioner filed a clearly unfounded civil action. 49

WHEREFORE, the instant petition for review on certiorari is hereby DENIED and the questioned
Decision of the Court of Appeals AFFIRMED. This Decision is immediately executory. Costs against
petitioner.

SO ORDERED.
G.R. No. 201248 March 11, 2015

LETICIA NAGUIT AQUINO, MELVIN NAGUIT, ROMMEL NAGUIT, ELMA NAGUIT TAYAG, YSSEL
L. NAGUIT, ROSALINA NAGUIT AUMENTADO, RIZEL NAGUIT CUNANAN, CARIDAD NAGUIT
PARAJAS, MILLIE NAGUIT FLORENDO, MARNEL NAGUIT, EDUARDO NAGUIT, JOSE NAGUIT,
ZOILO NAGUIT, AND AMELIA NAGUIT DIZON, represented by YSSEL L. NAGUIT, Petitioners,
vs.
CESAR B. QUIAZON, AMANDA QUIAZON, JOSE B. QUIAZON AND REYNALDO B. QUIAZON,
represented by JAIME B. QUIAZON, Respondents.

DECISION

MENDOZA, J.:

Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court assailing
the March 13, 2012 Decision of the Court of Appeals (CA), in CA-G.R. CV No. 92887, which
1

affirmed the Orders of the Regional Trial Court (RTC), Angeles City, Branch 59, in SP Civil Case No.
2

05-076, dismissing the complaint for quieting of title filed by the petitioners.

The Facts

On December 16, 2005, a complaint for Annulment and Quieting of Title was filed before the RTC-
3

Branch59 by the petitioners, namely, Leticia Naguit Aquino, Melvin Naguit, Rommel Naguit, Elma
Naguit Tayag, Yssel L. Naguit, Rosalina Naguit Aumentado, Rizel Naguit Cunanan, Caridad Naguit
Parajas, Millie Naguit Florendo, Marnel Naguit, Eduardo Naguit, Jose Naguit, Zoilo Naguit, and
AmeliaNaguit Dizon, represented by Yssel L. Naguit (petitioners). They alleged that they were the
heirs of the late Epifanio Makam and Severina Bautista, who acquired a house and lot situated in
Magalang, Pampanga, consisting of 557 square meters, by virtue of a Deed of Sale, dated April 20,
1894; that since then, they and their predecessors-in-interest had been in open, continuous,
adverse, and notorious possession for more than a hundred years, constructing houses and paying
real estate taxes on the property;that sometime in June 2005, they received various demand letters
from the respondents, namely, Cesar B. Quiazon, Amanda Quiazon, Jose B. Quiazon, and Reynaldo
B. Quiazon, represented by Jaime B. Quiazon (respondents), claiming ownership over the subject
property and demanding that they vacate the same; that upon inquiry with the Register of Deeds of
San Fernando, Pampanga, they confirmed that the property had been titled in the name of
respondents under Transfer Certificate of Title (TCT) No. 213777-R; that the said title was invalid,
ineffective, voidable or unenforceable; and that they were the true owners of the property.

Hence, they prayed that the title be cancelled and a new title be issued in their favor.

In their Answer, respondents asserted that they were the absolute owners of the subject land as per
4

TCT No. 213777-R; that they had inherited the same from their predecessor-in-interest, Fausta
Baluyut, one of the registered owners under Original Certificate of Title (OCT) No. RO-1138 (11376),
as per the Project of Partition and Deed of Agreement, dated January 2, 1974; and that petitioners
had been occupying the property by mere tolerance. They denied the allegations in the complaint
and proffered affirmative defenses with counterclaims.

They argued that: First, the petitioners "have no valid, legal and sufficient cause of action" against
5

them, because their deed of sale was spurious and could not prevail over Land Registration Decree
No. 122511 issued on June 28, 1919 in Land Registration Case No. 5, LRC Records No. 128, by the
Court of First Instance of Pampanga, in favor of their predecessor-in-interest. The predecessors-in-
interest of petitioners were among the oppositors in the land registration proceeding but,
nevertheless, after the trial, the subject lot was awarded, decreed and titled in favor of respondents
predecessor-in-interest, as per OCT No. RO-1138 (11376) of the Registry of Deeds of Pampanga.
Second, the action was barred by prescription and that petitioners were guilty of laches in asserting
their interest over the subject lot, considering that Land Registration Decree No. 122511 was issued
on June 28, 1919 and OCT No. RO-1138 (11376) was issued on May 12, 1922. Hence, it was much
too late for petitioners to institute the action after more than 80 years. They also raised the settled
rule that a title registered under the Torrens system could not be defeated by adverse, open and
notorious possession, or by prescription. Third, the action was also barred by res judicata and
violated the prohibition against forum shopping, considering that petitioners had earlier filed a similar
case for quieting of title against respondents, docketed as Civil Case No. 5487, which the RTC-Br.
56 dismissed. Petitioners filed their Comment to Defendants Affirmative Defenses. Anent the alleged
6

lack of cause of action due to the spurious deed of sale, petitioners argued that this contention was a
matter of evidence which might only be resolved in a full-blown trial. They insisted that the deed of
sale was genuine and authentic and was issued and certified by the Deputy Clerk of Court of the
RTC. They added that the settled rule was that to determine the sufficiency of the cause of action,
only the facts alleged in the complaint should be considered, and that the allegations in their
complaint sufficiently stated a cause of action.

As regards the allegation of prescription, the petitioners countered that an action to quiet title did not
prescribe if the plaintiffs were in possession of the property in question. They argued that they were
neither guilty of laches nor were they in possession of the property by mere tolerance, their
possession being in the concept of owner for more than a hundred years.

Lastly, regarding the argument on res judicata, petitioners explained that they were not the same
plaintiffs in Civil Case No. 5487 and that the case was dismissed without prejudice.

The RTC set a preliminary hearing on the affirmative defenses.

Respondents presented Atty. Charlemagne Tiqui Calilung, RTC Clerk of Court of San Fernando,
Pampanga, who presented the record of Cadastral Case No. 5, dated June 28, 1919, as well as
Decree No. 122511. They also presented Luis Samuel Ragodon, the Registration Examiner of the
Registry of Deeds of San Fernando, Pampanga, who presented the original copy of OCT No. 11376,
reconstituted as RO-1138, and testified that the title was derived from Decree No. 122511. He further
testified that the original title had been cancelled pursuant to a project of partition, which was
registered on December 17, 1984, and in lieu thereof, TCT Nos. 213775, 213776, 213777, 213778,
213779, 213780, and 213781 were issued. He presented the original copy of TCT No. 213777-R
issued in the names of respondents.

Henry Y. Bituin, the court interpreter who translated the June 28, 1919 decision of the Court of First
Instance of Pampanga in Land Registration Case No. 5 from Spanish to English, also testified.

Petitioners manifested that they were opting to submit the incident for resolution without presenting
evidence, relying on their position that only the facts alleged in the complaint should be considered.

In their formal offer of evidence, respondents offered the following documents: (1) the June 28, 1919
7

Decision and its English translation; (2) Transmittal Letter, dated May 6, 1922; (3) Decree No.
122511; (4) OCT No. RO-1138; (5) TCT No. 213777-R; (6) the petition, dated July 29, 1988, and its
annexes in Civil Case No. 5487;(7) the September 7, 1990 Order dismissing Civil Case No. 5487,
without prejudice; and (8) the July 29, 1916 Decision in Expediente No. 132, G.L.R.O. Record No.
11958 and its English translation.

In their comment/opposition to the formal offer of evidence, petitioners argued (1) that the claims of
8

Epifanio Makam and Severina Bautista, their predecessors-in-interest, were not adjudicated in the
June 28, 1919 decision and, thus, res judicata was inapplicable; (2) that Civil Case No. 5487 was
dismissed without prejudice and that they were not the plaintiffs therein; (3) that the allegedly
spurious nature of the deed of sale and the supposed in defeasibility of respondents title were
matters of evidence to be resolved in a full-blown trial and the trial court was only confined to the
allegations in the complaint; (4) that their action was not barred by prescription because an action
toquiet title did not prescribe if the plaintiffs were in possession of the subject property and that they
had been in possession in the concept of owner for more than 100 years; and (5) that respondents
were guilty of laches having taken more than 80 years to attempt to enforce their claimed title to the
property.

Ruling of the RTC

On July 14, 2008, the RTC-Br. 59 issued the Order dismissing petitioners complaint. It found that
based on the decision, dated June 28, 1919, in Cadastral Case No. 5, the Baluyut siblings,
respondents predecessors-in-interest, were declared the absolute owners of the subject property,
over the claim of Jose Makam, the predecessor-in-interest of petitioners, who was one of the
oppositors in the said case. From this decision, OCT No. RO-1138 (11376) was derived, which later
became the subject of a project of partition and deed of agreement among the Baluyut siblings,
dated January 2, 1972, which, in turn, was annotated on the OCT as Entry No. 8132. TCT No.
213777-R, covering the subject lot, was later derived from the partition. The RTC-Br. 59 also noted
that it was stated in the said decision that in 1907, a warehouse was constructed on the subject lot
by virtue of an agreement between the Chairman of Magalang and Enrique Baluyut, with no
objection from the Makams. It was further noted that the deed of sale being asserted by petitioners
was not mentioned in the 1919 decision despite the claim of their predecessors-in-interest.

The RTC-Br. 59, thus, ruled that the deed of sale had become invalid by virtue of the June 28, 1919
decision. It held that although the deed of sale dated, April 20, 1894, was never challenged, it was
nevertheless unenforceable by virtue of the June 28, 1919 decision. It found that petitioners had lost
whatever right they had on the property from the moment the said decision was rendered and an
OCT was issued. Finding that petitioners were not holders of any legal title over the property and
were bereft of any equitable claim thereon, the RTC-Branch 59 stated that the first requisite of an
action to quiet title was miserably wanting. It also found the second requisite to be wanting because
respondents had proved that the TCT registered in their names was valid.

Anent petitioners argument that only the complaint may be considered in determining the sufficiency
of the cause of action, the RTC Br. 59 ruled that under Section 2 in relation to Section 6, Rule 16 of
the Rules of Court, a preliminary hearing on the affirmative defense in the answer might be had at
the discretion of the court, during which the parties could present their arguments and their
evidence.

On December 22, 2008, the RTC-Br. 59 denied petitioners motion for reconsideration. It stated that
the court may consider evidence presented in hearings related to the case, which was an exception
to the general rule that only the complaint should be taken into consideration. It stated that
petitioners were without legal or equitable title to the subject property, thus, lacking the legal
personality to file an action for quieting of title and, therefore, "the complaint was properly dismissed
for failing to state a cause of action."
9
 Ruling of the CA

In the assailed Decision, dated March 13, 2012, the CA dismissed petitioners appeal. It explained
that under Section 6, Rule 16 of the Rules of Court, a court is allowed to conduct a preliminary
hearing, motu proprio, on the defendants affirmative defenses, including the ground of "lack of
cause of action or failure to state a cause of action." It gave the reason that because the rule spoke
10

in general terms, its manifest intention was to apply it to all grounds for a motion to dismiss under the
rules which were pleaded as affirmative defenses in the responsive pleading. Thus, it held that the
trial court might consider other evidence aside from the averments in the complaint in determining
the sufficiency of the cause of action. The CA explained:

But as shown in the foregoing rule, the holding of a preliminary hearing on any of the grounds for a
motion to dismiss which is pleaded as an affirmative defense is within the full discretion of the trial
court. The rule speaks of affirmative defenses that are grounds for a motion to dismiss. Indubitably,
lack of cause of action or failure to state a cause of action, being one of the grounds for a motion to
dismiss, is included thereby.

Since the rule allows the trial court to conduct a preliminary hearing on this kind of an affirmative
defense, it follows then that evidence could be submitted and received during the proceedings which
the court may consider in forming its decision. It would be plain absurdity if the evidence already
presented therein would not be allowed to be considered in resolving whether the case should be
dismissed or not. To rule otherwise would render nugatory the provision of Section 6, Rule 16 and
would make the holding of a preliminary hearing a plain exercise in futility. No well-meaning judge
would hold a preliminary hearing and receive evidence only to disregard later the evidence gathered
in the course thereof. If the intention of the rule is for the trial court to confine itself to the allegations
in the complaint in determining the sufficiency of the cause of action, as the plaintiffs-appellants
would want to impress upon this Court, then it should have been so expressly stated by barring the
court from conducting a preliminary hearing based on the said ground. The fact, however, that the
said rule speaks in general terms, it is its manifest intention to apply it in all grounds for a motion to
dismiss under the rules which are pleaded as an affirmative defense in the responsive pleading.
Thus, we find that that trial court did not err in considering the evidence already presented and in not
confining itself to the allegations in the plaintiffs-appeallants complaint. 11

The CA gave credence to the evidence presented by respondents and noted that, except for
petitioners bare allegation that respondents title was invalid, there was nothing more to support the
same. It further noted that the deed of sale was written in a local dialect without the translation and
with no ascertainable reference to the area of the property being conveyed. The CA, therefore, found
that petitioners did not have the title required to avail of the remedy of quieting of title, while
respondents had sufficiently proven the validity of their Torrens title. Hence, the subject petition.

ISSUE

Whether the CA erred in affirming the dismissal of

petitioners complaint on the ground of lack of cause of

action or failure to state a cause of action.

Petitioners argue that the CA gravely erred in considering external factors beyond the allegations in
the petition. They aver that it is a settled rule that to determine the sufficiency of a cause of action,
only facts alleged in the complaint shall be considered, and it is error for the court to take cognizance
of external facts or hold a preliminary hearing to determine their existence. Respondents, on the
other hand, echo the ruling of the CA that it was within the disrection of the trial court to conduct a
preliminary hearing on the affirmative defense of lack of cause of action or failure to state a cause of
action, where both parties were given the chance to submit arguments and evidence for or against
the dismissal of the complaint. Furthermore, they argue that the Court has previously upheld cases
where the court took into account external factors in the dismissal of the complaint on the ground of
lack of cause of action. They assert that since petitioners were given reasonable opportunity to
present evidence to prove their cause of action, they are now estopped from invoking the rule that
only allegations in the complaint should be considered. 12

Petitioners reiterate that they have been in possession of the property in the concept of owner for
more than 119 years, where they built their houses, reared their families, and paid realty taxes
thereon. They point out that their possession was never disputed by respondents, and that
respondents had only attempted to enforce their supposed rights over the property in 2005, or 86
years after the purported decree awarding the property to them. Petitioners argue that respondents
had abandoned their right to the subject property which, thus, rendered invalid whatever title they
might have had. They argue that it has been held that a registered owners right to recover
possession and title to property may be converted into a stale demand by virtue of laches. They also
claim that the allegations contained in their complaint sufficiently state a cause of action, and that it
was an error for the trial court to declare it unenforceable considering that the deed of sale should be
considered hypothetically admitted when determining whether the complaint sufficiently states a
cause of action.13

Ruling of the Court

Preliminary matters

The Court notes that respondents raised the affirmative defense in their Answer that petitioners
"have no valid, legal and sufficient cause of action," raising factual matters, which is effectively the
14

ground of "lack of cause of action." Respondents arguments made no assertion that the complaint
failed to state a cause of action. The ground of "lack of cause of action" has been frequently
confused with the ground of "failure to state a cause of action," and this is the situation prevailing in
the present case. The terms were, in fact, used interchangeably by both the respondents and the
lower courts.

The distinction between the grounds of "failure to state a cause of action" and "lack of cause of
action" was aptly discussed in Dabuco vs. Court of Appeals, to wit:

As a preliminary matter, we wish to stress the distinction between the two grounds for dismissal of
an action: failure to state a cause of action, on the one hand, and lack of cause of action, on the
other hand. The former refers to the insufficiency of allegation in the pleading, the latter to the
insufficiency of factual basis for the action. Failure to state a cause may be raised in a Motion to
Dismiss under Rule 16, while lack of cause may be raised any time. Dismissal for failure to state a
cause can be made at the earliest stages of an action. Dismissal for lack of cause is usually made
after questions of fact have been resolved on the basis of stipulations, admissions or evidence
presented. 15

Although the two grounds were used interchangeably, it can be gleaned from the decisions of both
the trial court and the CA that respondents defense of "lack of cause of action" was actually treated
as a "failure to state a cause of action," which is a ground for a motion to dismiss under Rule 16.
This is apparent from their reliance on Section 6 of Rule 16, which pertains to grounds of a motion to
dismiss raised as affirmative defenses; as well as the doctrines cited in resolving the case. The CA
even referred to both as one and the same ground for a motion to dismiss when it stated that:
"Indubitably, lack of cause of action or failure to state a cause of action, being one of the grounds for
a motion to dismiss, is included thereby."16

Also confused, respondents, on their part, asserted that "it is within the discretion of the Court a quo
to conduct a preliminary hearing on the affirmative defense of lack of cause of action or failure to
state a cause of action," the very basis of their argument being hinged on the application of Section
17

6. They also insisted on the applicability of the exceptions to the general rule that only averments in
the complaint must be considered, which pertains to the ground of "failure to state a cause of
action."

The trial court held a preliminary hearing resolving the ground of "lack of cause of action" pursuant to
Section 6 of Rule 16, which allows the court to hold a preliminary hearing on grounds for dismissal
provided in the same rule that have been raised as an affirmative defense in the answer. The18

ground of "lack of cause of action," as already explained, however, is not one of the grounds for a
motion to dismiss under Rule 16, and hence, not proper for resolution during a preliminary hearing
held pursuant to Section 6. On this point alone, the trial court clearly erred in receiving evidence on
the ground of "lack of cause of action" during the preliminary hearing. The factual matters raised by
respondents in their affirmative defense arguing the non-existence of a cause of action, should have
been duly resolved during a trial on the merits of the case.

In any case, even if the Court were to treat respondents argument as a "failure to state a cause of
action," their defense would still fail. Court limited to averments in the complaint

Rule 16 of the Rules of Court enumerates the grounds for a motion to dismiss. The pertinent ground
is found under Section 1(g), which reads as follows:

xxxx

(g) That the pleading asserting the claim states no cause of action; xxxx (Emphasis supplied) The
test for determining the existence of a cause of action was amply discussed in Insular Investment
and Trust Corporation v. Capital One Equities Corporation, citing Perpetual Savings Bank v.
19

Fajardo, to wit:
20

The familiar test for determining whether a complaint did or did not state a cause of action against
the defendants is whether or not, admitting hypothetically the truth of the allegations of fact made in
the complaint, a judge may validly grant the relief demanded in the complaint. In Rava Development
Corporation v. Court of Appeals, the Court elaborated on this established standard in the following
manner:

"The rule is that a defendant moving to dismiss a complaint on the ground of lack of cause of action
is regarded as having hypothetically admitted all the averments thereof. The test of the sufficiency of
the facts found in a petition as constituting a cause of action is whether or not, admitting the facts
alleged, the court can render a valid judgment upon the same in accordance with the prayer thereof
(Consolidated Bank and Trust Corp. v. Court of Appeals, 197 SCRA 663 [1991]).

In determining the existence of a cause of action, only the statements in the complaint may properly
be considered. It is error for the court to take cognizance of external facts or hold preliminary
hearings to determine their existence. If the allegation in a complaint furnish sufficient basis by which
the complaint may be maintained, the same should not be dismissed regardless of the defenses that
may be assessed by the defendants (supra). 21
Thus, in determining the existence of a cause of action, only the allegations in the complaint may
properly be considered. For the court to do otherwise would be a procedural error and a denial of the
plaintiffs right to due process.
22

In the case at bench, petitioners cause of action relates to an action to quiet title under Article 476 of
the Civil Code, which provides:

Article 476. Whenever there is a cloud on title to real property or any interest therein, by reason of
any instrument, record, claim, encumbrance or proceeding which is apparently valid or effective but
is in truth and in fact invalid, ineffective, voidable, or unenforceable, and may be prejudicial to said
title, an action may be brought to remove such cloud or to quiet title.

An action may also be brought to prevent a cloud from being cast upon title to real property or any
interest therein.

A "cloud on title" is an outstanding instrument, record, claim, encumbrance or proceeding which is

actually invalid or inoperative, but which may nevertheless impair or affect injuriously the title to
property. The matter complained of must have a prima facie appearance of validity or legal efficacy.
The cloud on title is a semblance of title which appears in some legal form but which is in fact
unfounded. The invalidity or in operativeness of the instrument is not apparent on the face of such
instrument, and it has to be proved by extrinsic evidence. 23

In order that an action for quieting of title may prosper, two requisites must concur: (1) the plaintiff or
complainant has a legal or equitable title or interest in the real property subject of the action; and (2)
the deed, claim, encumbrance, or proceeding claimed to be casting cloud on his title must be shown
to be in fact invalid or inoperative despite its prima facie appearance of validity or legal efficacy.
24

Turning then to petitioners complaint, the relevant allegations as to the cause of action for quieting
of title read as follows:

3. Plaintiffs are the heirs of the late Epifanio Makam and Severina Bautista who acquired a
house and lot on 20 April 1894 situated in Magalang, Pampanga, consisting of Five Hundred
Seventy Seven (577) square meters more or less, by virtue of a Deed of Sale, hereby quoted
for ready reference:

xxx

4. From 1894 and up to the present, plaintiffs and through their predecessors-in-interest
have been in open, continuous, adverse and notorious possession for more than a hundred
years of the piece of property mentioned above, constructed their houses thereon and
dutifully and faithfully paid the real estate taxes on the said property;

5. That sometime in June 2005, plaintiffs received various demand letters from defendants
demanding plaintiffs to vacate the premises, claiming ownership of the subject property;

6. That when plaintiffs inquired from the Office of the Register of Deeds of San Fernando,
Pampanga, they were able to confirm that their property had been titled in the name of
herein defendants under TCT No. 213777-R;
 7. That the said title is in fact invalid, ineffective, voidable or unenforceable, the existence of
which is pre-judicial to the ownership and possession of plaintiffs who are the true owners
and actual possessors of the above described real property;

8. That equity demands that the said title be surrendered by defendants and cancelled as it
is a cloud upon the legal or equitable title to or interest of plaintiffs over the subject property. 25

It is readily apparent from the complaint that petitioners alleged that (1) they had an interest over the
subject property by virtue of a Deed of Sale, dated April 20, 1894; and that (2) the title of
respondents under TCT No. 213777-R was invalid, ineffective, voidable or unenforceable.
Hypothetically admitting these allegations as true, as is required in determining whether a complaint
fails to state a cause of action, petitioners may be granted their claim. Clearly, the complaint
sufficiently stated a cause of action. In resolving whether or not the complaint stated a cause of
action, the trial court should have limited itself to examining the sufficiency of the allegations in the
complaint. It was proscribed from inquiring into the truth of the allegations in the complaint or the
authenticity of any of the documents referred or attached to the complaint, as these were deemed
hypothetically admitted by the respondents. 26

Evangelista v. Santiago elucidates:

The affirmative defense that the Complaint stated no cause of action, similar to a motion to dismiss
based on the same ground, requires a hypothetical admission of the facts alleged in the Complaint.
In the case of Garcon v. Redemptorist Fathers, this Court laid down the rules as far as this ground
for dismissal of an action or affirmative defense is concerned:

It is already well-settled that in a motion to dismiss a complaint based on lack of cause of action, the
question submitted to the court for determination is the sufficiency of the allegations of fact made in
the complaint to constitute a cause of action, and not on whether these allegations of fact are true,
for said motion must hypothetically admit the truth of the facts alleged in the complaint; that the test
of the sufficiency of the facts alleged in the complaint is whether or not, admitting the facts alleged,
the court could render a valid judgment upon the same in accordance with the prayer of said
complaint. Stated otherwise, the insufficiency of the cause of action must appear in the face of the
1wphi1

complaint in order to sustain a dismissal on this ground, for in the determination of whether or not a
complaint states a cause of action, only the facts alleged therein and no other matter may be
considered, and the court may not inquire into the truth of the allegations, and find them to be false
before a hearing is had on the merits of the case; and it is improper to inject in the allegations of the
complaint facts not alleged or proved, and use these as basis for said motion. (Emphasis and
27

underscoring supplied)

Exceptions and Section 6 of Rule 16 not applicable

The Court does not discount, however, that there are exceptions to the general rule that allegations
are hypothetically admitted as true and inquiry is confined to the face of the complaint. First, there is
no hypothetical admission of (a) the veracity of allegations if their falsity is subject to judicial notice;
(b) allegations that are legally impossible; (c) facts inadmissible in evidence; and (d) facts which
appear, by record or document included in the pleadings, to be unfounded. Second, inquiry is not
28

confined to the complaint if culled (a) from annexes and other pleadings submitted by the
parties; (b) from documentary evidence admitted by stipulation which disclose facts sufficient to
29

defeat the claim; or (c) from evidence admitted in the course of hearings related to the case. 30

Pointing to the exception that inquiry was not confined to the complaint if evidence had been
presented in the course of hearings related to the case, the CA ruled that it was within the trial
courts discretion to receive and consider other evidence aside from the allegations in the complaint
in resolving a partys affirmative defense. It held that this discretion was recognized under Section 6
of Rule 16 of the Rules of Court, which allowed the court to conduct a preliminary hearing, motu
proprio, on the defendants affirmative defense if no corresponding motion to dismiss was filed. This
section reads in part:

Section 6. Pleading grounds as affirmative defenses. If no motion to dismiss has been filed, any of
the grounds for dismissal provided for in this Rule may be pleaded as an affirmative defense in the
answer and, in the discretion of the court, a preliminary hearing may be had thereon as if a motion to
dismiss had been filed.

In their answer, respondents raised the affirmative defenses of "lack of cause of action, prescription,
and res judicata," stated in the following manner:
31

xxxx

6. Plaintiffs have no valid, legal and sufficient cause of action against the defendants. The alleged
"deed of sale" (Annex "B" Amended Complaint) is spurious and the same cannot prevail over the
Land Registration Decree No. 122511 issued on June 28, 1919 in Land Registration Case No. 5,
LRC Record No. 128, by the Court of First Instance of Pampanga, in favor of defendants
predecessor-in-interest. In fact, plaintiffs predecessors-in-interest were among the oppositors in that
land registration proceeding but after trial the lot in question was awarded, decreed and titled in favor
and in the names of defendants predecessors-in-interest, as per Original Certificate of Title No. RO-
1138 (11376) of the Registry of Deeds of Pampanga;

7. The instant action, which is actually an action of reconveyance, is already barred by prescription.
Moreover, plaintiffs are guilty of laches in asserting their alleged title or interest over the subject lot.
Said Land Registration Decree No. 122511 was issued on June 28, 1919 and OCT No. RO 1138
(11376) was issued on May 12, 1922. Clearly, it is much too late for the plaintiffs, after more than
eighty (80) long years to institute this action against the defendants;

xxxx

9. The present action is also barred by res judicata and violates the prohibition against forum
shopping. There was already a prior similar case for quieting of title filed by plaintiffs predecessor-in-
interest against defendant Jaime Quiazon and his co-owners, before Branch 56 of this Honorable
Court, docketed as Civil Case No. 5487, which was dismissed; x x x x (Emphases supplied)
32

A review of the first ground under paragraph 6 of the answer reveals that respondents alleged that
"[p]laintiffs have no valid, legal and sufficient cause of action against the defendants." It is at this
point that it must again be emphasized that it is not "lack or absence of cause of action" that is a
ground for dismissal of the complaint under Rule 16, but rather, that "the complaint states no cause
of action." The issue submitted to the court was, therefore, the determination of the sufficiency of
33

the allegations in the complaint to constitute a cause of action and not whether those allegations of
fact were true, as there was a hypothetical admission of facts alleged in the complaint. An 34

affirmative defense, raising the ground that there is no cause of action as against the defendants
poses a question of fact that should be resolved after the conduct of the trial on the merits. A 35

reading of respondents arguments in support of this ground readily reveals that the arguments relate
not to the failure to state a cause of action, but to the existence of the cause of action, which goes
into the very crux of the controversy and is a matter of evidence for resolution after a full-blown
hearing.
The trial court may indeed elect to hold a preliminary hearing on affirmative defenses as raised in the
answer under Section 6 of Rules 16 of the Rules of Court. It has been held, however, that such a
hearing is not necessary when the affirmative defense is failure to state a cause of action, and that
36

it is, in fact, error for the court to hold a preliminary hearing to determine the existence of external
facts outside the complaint. The reception and the consideration of evidence on the ground that the
37

complaint fails to state a cause of action, has been held to be improper and impermissible. Thus, in
38

a preliminary hearing on a motion to dismiss or on the affirmative defenses raised in an answer, the
parties are allowed to present evidence except when the motion is based on the ground of
insufficiency of the statement of the cause of action which must be determined on the basis only of
the facts alleged in the complaint and no other. Section 6, therefore, does not apply to the ground
39

that the complaint fails to state a cause of action. The trial court, thus, erred in receiving and
considering evidence in connection with this ground.

The lower courts also relied on the exception that external evidence may be considered when
received "in the course of hearings related to the case," which is rooted in the case of Tan v. Director
of Forestry (Tan). In said case, a hearing was conducted on the prayer for preliminary injunction
40

where evidence was submitted by the parties. In the meantime, a motion to dismiss was filed by the
defendant, citing as one of the grounds that the petition did not state a cause of action. The trial
court resolved the prayer for the issuance of a writ of preliminary injunction simultaneously with the
motion to dismiss. It dismissed the petition for failure to state a cause of action on the basis of the
evidence presented during the hearing for preliminary injuction. On appeal, this Court ruled that the
trial court was correct in considering the evidence already presented and in not confining itself to the
allegations in the petition.

Tan, however, is not on all fours with the present case. First, the trial court therein considered
evidence presented during a preliminary hearing on an injunction and not during a hearing on a
motion to dismiss. As discussed, a preliminary hearing on a motion to dismiss is proscribed when the
ground is failure to state a cause of action. The exception of "hearings related to the case,"
therefore, pertains to hearings other than the hearing on a motion to dismiss on the ground of failure
to state a cause of action. To reiterate, the ground that the complaint fails to state a cause of action
should be tested only on the allegations of facts contained in the complaint, and no other. If the
allegations show a cause of action, or furnish sufficient basis by which the complaint can be
maintained, the complaint should not be dismissed regardless of the defenses averred by the
defendants. The trial court may not inquire into the truth of the allegations, and find them to be false
41

before a hearing is conducted on the merits of the case. If the court finds the allegations to be
42

sufficient but doubts their veracity, the veracity of the assertions could be asserted during the trial on
the merits.43

Second, Tan noted that the plaintiff had readily availed of his opportunity to introduce evidence
during the hearing and, as a result, was estopped from arguing that the court is limited to the
allegations in the complaint. This is in contrast to the present case, where petitioners steadfastly
44

argued from the beginning that the trial court was limited to the allegations in the complaint.
Petitioners maintained their stance during the preliminary hearing on the affirmative defenses, opting
not to file rebuttal evidence and opposing respondents formal offer of evidence on the same ground.
Having been consistent in their position from the start, petitioners cannot be estopped from arguing
that the trial court was precluded from considering external evidence in resolving the motion to
dismiss.

Third, it was noted in Tan that the documentary evidence given credence by the trial court had
effectively been admitted by stipulation during the hearing, and another had been an annex to the
45

complaint, both of which are exceptions to the general rule that external facts cannot be
46

considered. Neither of the said exceptions is availing in the present case. The Court notes that only
the OCT of respondents was attached as an annex to their answer. The June 28, 1919 Decision in
the Cadastral case, which was given considerable weight by the trial court, was not attached and
was only presented during the preliminary hearing.

Fourth, Tanruled that the rigid application of the rules could not be countenanced considering the
overriding public interest involved, namely, the welfare of the inhabitants of the province whose lives
and properties would be directly and immediately imperilled by forest denudation. There appears to
47

be no overriding public interest in the present case to justify a similar relaxation of the rules.

It is of note that although the trial court might not have erred in holding a preliminary hearing on the
affirmative defenses of prescription and res judicata, it is readily apparent from the decisions of the
lower courts that no disquisition whatsoever was made on these grounds. It cannot be denied that
evidence in support of the ground of "lack of cause of action" was received and given great weight
by the trial court. In fact, all the evidence given credence by the trial court were only in support of the
ground of "lack of cause of action." This all the more highlights that the trial court erred in receiving
evidence to determine whether the complaint failed to state a cause of action.

Although neither the RTC or the CA ruled on the affirmative defenses of prescription and res
judicata, it appears that this case could not have been dismissed on these grounds. First, an action
to quiet title is imprescriptible if the plaintiffs are in possession of the property, which is the situation
48

prevailing in the present case. Second, there appears to be no res judicata nor a violation of the
prohibition against forum shopping considering that Civil Case No. 5487 had been dismissed,
without prejudice, years before petitioners initiated their complaint for quieting of title.

In sum, the trial court erred in dismissing the complaint on the ground of failure to state a cause of
action. Evidence should have been received not during a preliminary hearing under Section 6 of
Rule 16, but should have been presented during the course of the trial. The case should, thus, be
remanded to the RTC-Br. 59 for trial on the merits.

WHEREFORE, the petition is GRANTED. The March 13, 2012 Decision of the Court of Appeals, in
CA-G.R. CV No. 92887 is REVERSED and SET ASIDE. The case is ordered REMANDED to the
Regional Trial Court for trial on the merits of the case.

SO ORDERED.
G.R. No. 104813 October 21, 1993

HEIRS OF JOSE OLVIGA, NAMELY: PLACIDA S. OLVIGA, VIRGILIO OLVIGA, LOLITA OLVIGA,
CARMENCITA O. ALPUERTO and JEANETTE OLILA, petitioners,
vs.
THE HON. COURT OF APPEALS, ANGELITA R. GLOR, SERILINA G. JAMON, EMELITA G.
MADELA, EMAN G. MANALO, MYRNA GLOR, FELIPE GLOR, GAUDENCIO GLOR and
CORNELIO GLOR, respondents.

Natalio T. Paril, Jr. for petitioners.

Leovigildo L. Cerilla for private respondents.

GRIO-AQUINO, J.:

This is a petition to review the decision of the Court of Appeals in CA-G.R. CV No. 30542,
affirming in toto the decision of the Regional Trial Court of Calauag, Quezon ordering the
defendants, heirs of Jose Olviga (petitioners herein), to reconvey the land in dispute to the plaintiffs,
heirs of Cornelia Glor (now private respondents),and to pay attorney's fees and the costs of suit.

This case started as an action (Civil Case No. C-883) filed in the Regional Trial Court of Calauag,
Quezon by Angelita Glor and her children against the heirs of Jose Olviga for reconveyance of a
parcel of land, measuring 54,406 square meters (5.44 has), more or less, known as Lot 13, Pls-84 of
the Guinayangan Public Land Subdivision.

The court, after due trial, rendered judgment in favor of the private respondents, the dispositive
portion of which reads:

WHEREFORE, and considering the foregoing judgment is hereby rendered in favor

of the PLAINTIFFS and against the defendants as heirs of Jose Olviga to reconvey
the land in dispute to the plaintiffs as heirs of Cornelio Glor Sr.; condemning the
defendants jointly and severally to pay the plaintiffs attorneys fees of P5,000.00 plus
the costs of the suit. The counterclaim interposed by defendants is dismissed. ( p.
12, Rollo.)

The judgment was appealed to the Court of Appeals by the defendants who raised several factual
issues regarding possession and fraud, as well as legal issues involving prescription and purchaser
in good faith, but the appellate court dismissed the appeal and affirmed in toto the decision of the
trial court.

It was established by the evidence on record that the land in question was, in 1950, still forest land
when Eutiquio Pureza, then only twelve years old, and his father cleared and cultivated it. In 1954,
they introduced improvements such as, coconut trees, jackfruit, mangoes, avocado and bananas.
When the area was released for disposition, the Bureau of Lands surveyed the same in 1956 in the
name of Eutiquio Pureza. Since then, the land has been known as Lot 13, Pls-84 of the
Guinayangan Public Land Subdivision. Godofredo Olviga, a son of Jose Olviga then living with the
latter, protested the survey but without respect to a one-half-hectare portion "sa dakong panulukan
ng Amihanan-Silanganan." This protest or "tutol" (Exh. B) of Godofredo Olviga, brother of petitioners
Virgilio Olviga and Lolita Olviga Olila, is of public record in the Bureau of Lands (Exh. B). In said
document, Godofredo Olviga expressly admitted that the lot belonged to Eutiquio Pureza, except the
1/2 hectare portion claimed by him (Godofredo) which was included in the survey of Pureza's Lot 13.

In 1960, Eutiquio Pureza filed a homestead application over Lot 13. Without his application having
been acted upon, he transferred his rights in said lot to Cornelia Glor in 1961. Neither the homestead
application of Eutiquio nor the proposed transfer of his rights to Cornelio Glor was acted upon by the
Director of Lands for reasons that the records of the Bureau of Lands do not disclose.

In 1967, Jose Olviga obtained a registered title for said lot in a cadastral proceeding, in fraud of the
rights of Pureza and his transferee, Cornelio Glor and his family who were the real and actual
occupants of the land.

What must have happened as found by the Court of Appeals, is that since Cornelio Glor, Sr. was
sickly, and his wife (now widowed) Angelita Glor, was unschooled, they failed to follow up Pureza's
homestead application over Lot 13 in the cadastral proceedings in the Municipal Court of
Guinayangan Public Land Subdivision, Pls-84, Case 1 (Philcusa-Foa). In fact, they were not aware
of the proceedings. Angelita Glor testified that no notice was ever posted on Lot 13 about the
proceedings nor did the barangay captain, tell her about them. Neither did she receive any notice
from the court sheriff or any court employee. This non-posting of the hearing of the cadastral hearing
on the land, or in the barangay hall, was confirmed by petitioner Virgilio Olviga himself who testified
that he did not notice any papers posted on the property in question (tsn, October 18, 1990, pp. 83-
84). On the other hand, petitioner's father Jose Olviga, claimed both Lots 12 and 13, which are
adjoining lots, in the same cadastral proceedings. He falsely omitted in his answer mention of the
fact that other persons were in possession of, and claiming adverse interest in, Lot 13 and that the
land had been surveyed for Eutiquio Pureza, the former occupant who sold his interests to private
respondents' parent. Cornelio Glor, in 1961. Glor was Olviga's neighbor. As a result, both Lots 12
and 13 were declared as uncontested in the name of Jose Olviga (Exh. 7), and were registered in
his name in 1967 in Original Certificate of Title, No. 0-12713 (Exh. 5). In 1971, Olviga requested that
OCT No. 0-12713 be split into two (2) TCT's, one each for the two (2) lots. TCT Nos. T-103823 and
T-103824 were issued for lots 12 and 13, respectively. Jose Olviga later transferred Lot 13 to his
son-in-law, Jaime Olila and daughter, Lolita Olviga resulting in the cancellation of TCT. No. 241314 in
the names of the spouses (Exh. 3).

It was also established that the spouses Jaime Olila and Lolita Olviga Olila, were not innocent
purchasers for value of the land from their father, and have never been in the possession. The Glors
and their predecessor-in-interest (Cornelio Glor Sr., and Eutiquio Pureza) were the ones found to be
in possession of the property.

From said finding, and conclusions, the appellate court in its decision dated January 13, 1992,
resolved the issues presented, thus:

. . ., whether or not plaintiffs' action is really one for quieting of title that does not
prescribe; or assuming that their demand for reconveyance of the lot in question
prescribes in ten years, being based on an implied trust, whether their cause of
action should be counted from the date of the issuance of the late Jose Olviga's title
over said lot in 1967 and has, therefore, already prescribed, or whether the
prescriptive period should be counted from the date plaintiffs acquired knowledge of
said title sometime in 1988.

The first question should be answered in the affirmative. . . .

 xxx xxx xxx

But even assuming that plaintiffs' action for reconveyance, being based on an implied
or constructive trust, prescribes in ten years, the lower court again correctly ruled that
their cause of action should be considered to have accrued not from the date of
registration of the title of Jose Olviga, defendants' predecessor-in-interest, over the
lot in question in 1967, but only from the time the plaintiffs learned of such title in
1988. . . . .

xxx xxx xxx

All in all, therefore, the court a quo did not err in holding that plaintiffs' action against
defendants-appellants for the reconveyance of the lot in question filed on April 10,
1989, or in less than a year after they learned of the issuance of a title over said lot to
Jose Olviga, predecessor-in-interest of defendants, has not yet prescribed.

WHEREFORE, the decision appealed from herein is AFFIRMED in toto, with costs
against defendants-appellants. (pp. 48-51, Rollo.)

Petitioners now seek a review of the above decision. They allege that the present action has already
prescribed; (2) the Court of Appeals erred when it ruled that the private respondents' cause of action
accrued not in 1967 but in 1988; (3) that the Court of Appeals erred when it failed to consider that
private respondents as mere homestead transferees cannot maintain an action for reconveyance;
(4) that the Faja and Caragay-Layno cases have no bearing and direct application to the case at bar;
and (5) that private respondents have not proven by preponderance of evidence their ownership and
possession of the disputed land.

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

In Sapto vs. Fabiana, 103 Phil. 683, 686-687, appellants' predecessors sold to appellees in 1931 a
parcel of land. The sale was approved by the Provincial Governor of Davao but was never
registered. Possession of the land was, however, transferred to Fabiana and the latter has been in
possession thereof from 1931 up to the present. The widow and children of Samuel Sapto filed an
action to recover the land. This Court in affirming the validity of the sale in favor of appellee
(Fabiana) held:

No enforcement of the contract is in fact needed, since the delivery of possession of

the land sold had consummated, the sale and transferred title to the purchaser,
registration of the contract not being indispensable as between the parties. Actually
the action for conveyance was one to quiet title, i.e., to remove the cloud cast upon
appellee's ownership by the refusal of the appellants to recognize the sale made by
their predecessors. This action accrued only when appellants initiated their suit to
recover the land in 1954. Furthermore, it is an established rule of American
jurisprudence (made applicable in this jurisdiction by Art. 480 of the New Civil Code)
that actions to quiet title to property in the possession of the plaintiff are
 imprescriptible (44 Am. Jur. p. 47; Cooper vs. Rhea, 39 L.R.A. 930; Inland Empire
Land Co. vs. Grant County, 138 Wash. 439 245 Pac. 14).

In Faja vs. Court of Appeals, 75 SCRA 441, 446, this Court likewise reiterated the ruling that:

. . . There is settled jurisprudence that one who is in actual possession of a piece of

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

In the case at bar, private respondents and their predecessors-in-interest were in actual possession
of the property since 1950. Their undisturbed possession gave them the continuing right to seek the
aid of a court of equity to determine the nature of the adverse claim of petitioners, who in 198
disturbed their possession.

The other issues raised in the petition are factual.

The Court of Appeals and the trial court correctly based their findings of tact on the testimonies of
the parties and their witnessess. It can be said therefore that those conclusions are based on
substantial evidence. No cogent reason exists to disturb them. As reiterated in a long line of
decisions, it is beyond the province of this Court to make its own findings of facts different from those
of the trial court as affirmed by the Court of Appeals (Vda. de Cailles vs. Mayuga 170 SCRA 347;
New Owners/Management of TML Garments, Inc. vs. Zaragosa, 170 SCRA 563). In petitions for
review of decisions of the Court of Appeals, the jurisdiction of this Court is confined to a review of
questions of law, except when the findings of fact are not supported by the records or are so
glaringly erroneous as to constitute a serious abuse of discretion (Lim vs. Court of Appeals, 158
SCRA 307; Samson vs. CA, 141 SCRA 194; Republic vs. IAC, 144 SCRA 705). The case at bar
does not fall under the exceptions.

WHEREFORE, finding no reversible error in the decision of the Court of Appeals, the petition for
review is DENIED, with costs against the petitioners.

SO ORDERED.
G.R. No. 181359 August 5, 2013

SPOUSES CLEMENCIO C. SABITSANA, JR. and MA. ROSARIO M. SABITSANA, Petitioners,

vs.
JUANITO F. MUERTEGUI, represented by his Attorney-in-Fact DOMINGO A. MUERTEGUI,
JR., Respondent.

DECISION

DEL CASTILLO, J.:

A lawyer may not, for his own personal interest and benefit, gamble on his client's word, believing it
at one time and disbelieving it the next. He owes his client his undivided loyalty.

Assailed in this Petition for Review on Certiorari1 are the January 25, 2007 Decision2 of the Court of
Appeals (CA) which denied the appeal in CA-G.R. CV No. 79250, and its January 11, 2008
Resolution3 denying petitioners Motion for Reconsideration.4

Factual Antecedents

On September 2, 1981, Alberto Garcia (Garcia) executed an unnotarized Deed of Sale 5 in favor of
respondent Juanito Muertegui6 (Juanito) over a 7,500-square meter parcel of unregistered land (the
lot) located in Dalutan Island, Talahid, Almeira, Biliran, Leyte del Norte covered by Tax Declaration
(TD) No. 1996 issued in 1985 in Garcias name. 7

Juanitos father Domingo Muertegui, Sr. (Domingo Sr.) and brother Domingo Jr. took actual
possession of the lot and planted thereon coconut and ipil-ipil trees. They also paid the real property
taxes on the lot for the years 1980 up to 1998.

On October 17, 1991, Garcia sold the lot to the Muertegui family lawyer, petitioner Atty. Clemencio C.
Sabitsana, Jr. (Atty. Sabitsana), through a notarized deed of absolute sale. 8 The sale was registered
with the Register of Deeds on February 6, 1992.9 TD No. 1996 was cancelled and a new one, TD
No. 5327,10 was issued in Atty. Sabitsanas name. Although Domingo Jr. and Sr. paid the real estate
taxes, Atty. Sabitsana also paid real property taxes in 1992, 1993, and 1999. In 1996, he introduced
concrete improvements on the property, which shortly thereafter were destroyed by a typhoon.

When Domingo Sr. passed away, his heirs applied for registration and coverage of the lot under the
Public Land Act or Commonwealth Act No. 141. Atty. Sabitsana, in a letter 11 dated August 24, 1998
addressed to the Department of Environment and Natural Resources CENRO/PENRO office in
Naval, Biliran, opposed the application, claiming that he was the true owner of the lot. He asked that
the application for registration be held in abeyance until the issue of conflicting ownership has been
resolved.

On April 11, 2000, Juanito, through his attorney-in-fact Domingo Jr., filed Civil Case No. B-1097 12 for
quieting of title and preliminary injunction, against herein petitioners Atty. Sabitsana and his wife,
Rosario, claiming that they bought the lot in bad faith and are exercising acts of possession and
ownership over the same, which acts thus constitute a cloud over his title. The Complaint 13 prayed,
among others, that the Sabitsana Deed of Sale, the August 24, 1998 letter, and TD No. 5327 be
declared null and void and of no effect; that petitioners be ordered to respect and recognize Juanitos
title over the lot; and that moral and exemplary damages, attorneys fees, and litigation expenses be
awarded to him.

In their Answer with Counterclaim, 14 petitioners asserted mainly that the sale to Juanito is null and
void absent the marital consent of Garcias wife, Soledad Corto (Soledad); that they acquired the
property in good faith and for value; and that the Complaint is barred by prescription and laches.
They likewise insisted that the Regional Trial Court (RTC) of Naval, Biliran did not have jurisdiction
over the case, which involved title to or interest in a parcel of land the assessed value of which is
merely P1,230.00.

The evidence and testimonies of the respondents witnesses during trial reveal that petitioner Atty.
Sabitsana was the Muertegui familys lawyer at the time Garcia sold the lot to Juanito, and that as
such, he was consulted by the family before the sale was executed; that after the sale to Juanito,
Domingo Sr. entered into actual, public, adverse and continuous possession of the lot, and planted
the same to coconut and ipil-ipil; and that after Domingo Sr.s death, his wife Caseldita, succeeded
him in the possession and exercise of rights over the lot.

On the other hand, Atty. Sabitsana testified that before purchasing the lot, he was told by a member
of the Muertegui family, Carmen Muertegui Davies (Carmen), that the Muertegui family had bought
the lot, but she could not show the document of sale; that he then conducted an investigation with
the offices of the municipal and provincial assessors; that he failed to find any document, record, or
other proof of the sale by Garcia to Juanito, and instead discovered that the lot was still in the name
of Garcia; that given the foregoing revelations, he concluded that the Muerteguis were merely
bluffing, and that they probably did not want him to buy the property because they were interested in
buying it for themselves considering that it was adjacent to a lot which they owned; that he then
proceeded to purchase the lot from Garcia; that after purchasing the lot, he wrote Caseldita in
October 1991 to inform her of the sale; that he then took possession of the lot and gathered ipil-ipil
for firewood and harvested coconuts and calamansi from the lot; and that he constructed a rip-rap on
the property sometime in 1996 and 1997.

Ruling of the Regional Trial Court

On October 28, 2002, the trial court issued its Decision 15 which decrees as follows:

WHEREFORE, in view of the foregoing considerations, this Court finds in favor of the plaintiff and
against the defendants, hereby declaring the Deed of Sale dated 2 September 1981 as valid and
preferred while the Deed of Absolute Sale dated 17 October 1991 and Tax Declaration No. 5327 in
the name of Atty. Clemencio C. Sabitsana, Jr. are VOID and of no legal effect.

The Provincial Assessor and the Municipal Assessor of Naval are directed to cancel Tax Declaration
No. 5327 as void and done in bad faith.

Further, Atty. Clemencio C. Sabitsana, Jr. is ordered to pay plaintiff Juanito Muertigui, represented by
his attorney-in-fact Domingo Muertigui, Jr. the amounts of:

a) P30,000.00 as attorneys fees;

b) P10,000.00 as litigation expenses; and

c) Costs.
SO ORDERED.16

The trial court held that petitioners are not buyers in good faith. Petitioner Atty. Sabitsana was the
Muertegui familys lawyer, and was informed beforehand by Carmen that her family had purchased
the lot; thus, he knew of the sale to Juanito. After conducting an investigation, he found out that the
sale was not registered. With this information in mind, Atty. Sabitsana went on to purchase the same
lot and raced to register the sale ahead of the Muerteguis, expecting that his purchase and prior
registration would prevail over that of his clients, the Muerteguis. Applying Article 1544 of the Civil
Code,17 the trial court declared that even though petitioners were first to register their sale, the same
was not done in good faith. And because petitioners registration was not in good faith, preference
should be given to the sale in favor of Juanito, as he was the first to take possession of the lot in
good faith, and the sale to petitioners must be declared null and void for it casts a cloud upon the
Muertegui title.

Petitioners filed a Motion for Reconsideration18 but the trial court denied19 the same.

Ruling of the Court of Appeals

Petitioners appealed to the CA20 asserting that the sale to Juanito was null and void for lack of
marital consent; that the sale to them is valid; that the lower court erred in applying Article 1544 of
the Civil Code; that the Complaint should have been barred by prescription, laches and estoppel;
that respondent had no cause of action; that respondent was not entitled to an award of attorneys
fees and litigation expenses; and that they should be the ones awarded attorneys fees and litigation
expenses.

The CA, through its questioned January 25, 2007 Decision, 21 denied the appeal and affirmed the trial
courts Decision in toto. It held that even though the lot admittedly was conjugal property, the
absence of Soledads signature and consent to the deed did not render the sale to Juanito
absolutely null and void, but merely voidable. Since Garcia and his wife were married prior to the
effectivity of the Family Code, Article 173 of the Civil Code22should apply; and under the said
provision, the disposition of conjugal property without the wifes consent is not void, but merely
voidable. In the absence of a decree annulling the deed of sale in favor of Juanito, the same remains
valid.

The CA added that the fact that the Deed of Sale in favor of Juanito was not notarized could not
affect its validity. As against the notarized deed of sale in favor of petitioners, the CA held that the
sale in favor of Juanito still prevails. Applying Article 1544 of the Civil Code, the CA said that the
determining factor is petitioners good faith, or the lack of it. It held that even though petitioners were
first to register the sale in their favor, they did not do so in good faith, for they already knew
beforehand of Garcias prior sale to Juanito. By virtue of Atty. Sabitsanas professional and
confidential relationship with the Muertegui family, petitioners came to know about the prior sale to
the Muerteguis and the latters possession of the lot, and yet they pushed through with the second
sale. Far from acting in good faith, petitioner Atty. Sabitsana used his legal knowledge to take
advantage of his clients by registering his purchase ahead of them.

Finally, the CA declared that Juanito, as the rightful owner of the lot, possessed the requisite cause
of action to institute the suit for quieting of title and obtain judgment in his favor, and is entitled as
well to an award for attorneys fees and litigation expenses, which the trial court correctly held to be
just and equitable under the circumstances.

The dispositive portion of the CA Decision reads:

WHEREFORE, premises considered, the instant appeal is DENIED and the Decision dated October
28, 2002 of the Regional Trial Court, 8th Judicial Region, Branch 16, Naval, Biliran, is hereby
AFFIRMED. Costs against defendants-appellants.

SO ORDERED.23

Issues

Petitioners now raise the following issues for resolution:

I. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE REGIONAL TRIAL
COURT DID NOT HAVE JURISDICTION OVER THE CASE IN VIEW OF THE FACT THAT
THE ASSESSED VALUE OF THE SUBJECT LAND WAS ONLY P1,230.00 (AND STATED
MARKET VALUE OF ONLY P3,450.00).

II. THE COURT OF APPEALS ERRED IN APPLYING ART. 1544 OF THE CIVIL CODE
INSTEAD OF THE PROPERTY REGISTRATION DECREE (P.D. NO. 1529) CONSIDERING
THAT THE SUBJECT LAND WAS UNREGISTERED.

III. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE COMPLAINT WAS
ALREADY BARRED [BY] LACHES AND THE STATUTE OF LIMITATIONS.

IV. THE COURT OF APPEALS ERRED IN AFFIRMING THE DECISION OF THE REGIONAL
TRIAL COURT ORDERING THE PETITIONERS TO PAY ATTORNEYS FEES AND
LITIGATION EXPENSES TO THE RESPONDENT.24

Petitioners Arguments

Petitioners assert that the RTC of Naval, Biliran did not have jurisdiction over the case. They argue
that since the assessed value of the lot was a mere P1,230.00, jurisdiction over the case lies with
the first level courts, pursuant to Republic Act No. 7691, 25 which expanded their exclusive original
jurisdiction to include "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."26 Petitioners thus conclude that the Decision in Civil
Case No. B-1097 is null and void for lack of jurisdiction.

Petitioners next insist that the lot, being unregistered land, is beyond the coverage of Article 1544 of
the Civil Code, and instead, the provisions of Presidential Decree (PD) No. 1529 should apply. This
being the case, the Deed of Sale in favor of Juanito is valid only as between him and the seller
Garcia, pursuant to Section 113 of PD 1529;27 it cannot affect petitioners who are not parties thereto.

On the issue of estoppel, laches and prescription, petitioners insist that from the time they informed
the Muerteguis in writing about their purchase of the lot, or in October 1991, the latter did not notify
them of their prior purchase of the lot, nor did respondent interpose any objection to the sale in their
favor. It was only in 1998 that Domingo Jr. showed to petitioners the unnotarized deed of sale.
According to petitioners, this seven-year period of silence and inaction on the Muerteguis part
should be taken against them and construed as neglect on their part to assert their rights for an
unreasonable length of time. As such, their action to quiet title should be deemed barred by laches
and estoppel.
Lastly, petitioners take exception to the award of attorneys fees and litigation expenses, claiming
that since there was no bad faith on their part, such award may not be considered just and equitable
under the circumstances. Still, an award of attorneys fees should remain the exception rather than
the rule; and in awarding the same, there must have been an express finding of facts and law
justifying such award, a requirement that is absent in this case.

Petitioners thus pray for the reversal of the questioned CA Decision and Resolution; the dismissal of
the Complaint in Civil Case No. B-1097; the deletion of the award of attorneys fees and litigation
expenses in respondents favor; and a declaration that they are the true and rightful owners of the
lot.

Respondents Arguments

Respondent, on the other hand, counters that a suit for quieting of title is one whose subject matter
is incapable of pecuniary estimation, and thus falls within the jurisdiction of the RTC. He likewise
insists that Article 1544 applies to the case because there is a clear case of double sale of the same
property to different buyers, and the bottom line thereof lies in petitioners lack of good faith in
entering into the subsequent sale. On the issue of laches/estoppel, respondent echoes the CAs view
that he was persistent in the exercise of his rights over the lot, having previously filed a complaint for
recovery of the lot, which unfortunately was dismissed based on technicality.

On the issue of attorneys fees and litigation expenses, respondent finds refuge in Article 2208 of the
Civil Code,28 citing three instances which fortify the award in his favor petitioners acts compelled
him to litigate and incur expenses to protect his interests; their gross and evident bad faith in
refusing to recognize his ownership and possession over the lot; and the justness and equitableness
of his case.

Our Ruling

The Petition must be denied.

The Regional Trial Court has jurisdiction over the suit for quieting of title.

On the question of jurisdiction, it is clear under the Rules that an action for quieting of title may be
instituted in the RTCs, regardless of the assessed value of the real property in dispute. Under Rule
63 of the Rules of Court,29 an action to quiet title to real property or remove clouds therefrom may be
brought in the appropriate RTC.

It must be remembered that the suit for quieting of title was prompted by petitioners August 24, 1998
letter-opposition to respondents application for registration. Thus, in order to prevent 30 a cloud from
being cast upon his application for a title, respondent filed Civil Case No. B-1097 to obtain a
declaration of his rights. In this sense, the action is one for declaratory relief, which properly falls
within the jurisdiction of the RTC pursuant to Rule 63 of the Rules.

Article 1544 of the Civil Code does not apply to sales involving unregistered land.

Both the trial court and the CA are, however, wrong in applying Article 1544 of the Civil Code. Both
courts seem to have forgotten that the provision does not apply to sales involving unregistered land.
Suffice it to state that the issue of the buyers good or bad faith is relevant only where the subject of
the sale is registered land, and the purchaser is buying the same from the registered owner whose
title to the land is clean. In such case, the purchaser who relies on the clean title of the registered
owner is protected if he is a purchaser in good faith for value. 31

Act No. 3344 applies to sale of unregistered lands.

What applies in this case is Act No. 3344,32 as amended, which provides for the system of recording
of transactions over unregistered real estate. Act No. 3344 expressly declares that any registration
made shall be without prejudice to a third party with a better right. The question to be resolved
therefore is: who between petitioners and respondent has a better right to the disputed lot?

Respondent has a better right to the lot.

The sale to respondent Juanito was executed on September 2, 1981 via an unnotarized deed of
sale, while the sale to petitioners was made via a notarized document only on October 17, 1991, or
ten years thereafter. Thus, Juanito who was the first buyer has a better right to the lot, while the
subsequent sale to petitioners is null and void, because when it was made, the seller Garcia was no
longer the owner of the lot. Nemo dat quod non habet.

The fact that the sale to Juanito was not notarized does not alter anything, since the sale between
him and Garcia remains valid nonetheless. Notarization, or the requirement of a public document
under the Civil Code,33 is only for convenience, and not for validity or enforceability. 34 And because it
remained valid as between Juanito and Garcia, the latter no longer had the right to sell the lot to
petitioners, for his ownership thereof had ceased.

Nor can petitioners registration of their purchase have any effect on Juanitos rights. The mere
registration of a sale in ones favor does not give him any right over the land if the vendor was no
longer the owner of the land, having previously sold the same to another even if the earlier sale was
unrecorded.35 Neither could it validate the purchase thereof by petitioners, which is null and void.
Registration does not vest title; it is merely the evidence of such title. Our land registration laws do
not give the holder any better title than what he actually has. 36

Specifically, we held in Radiowealth Finance Co. v. Palileo 37 that:

Under Act No. 3344, registration of instruments affecting unregistered lands is without prejudice to a
third party with a better right. The aforequoted phrase has been held by this Court to mean that the
mere registration of a sale in ones favor does not give him any right over the land if the vendor was
not anymore the owner of the land having previously sold the same to somebody else even if the
earlier sale was unrecorded.

Petitioners defense of prescription, laches and estoppel are unavailing since their claim is based on
a null and void deed of sale. The fact that the Muerteguis failed to interpose any objection to the sale
in petitioners favor does not change anything, nor could it give rise to a right in their favor; their
purchase remains void and ineffective as far as the Muerteguis are concerned.

The award of attorneys fees and litigation expenses is proper because of petitioners bad faith.

Petitioners actual and prior knowledge of the first sale to Juanito makes them purchasers in bad
faith. It also appears that petitioner Atty. Sabitsana was remiss in his duties as counsel to the
Muertegui family. Instead of advising the Muerteguis to register their purchase as soon as possible to
forestall any legal complications that accompany unregistered sales of real property, he did exactly
the opposite: taking advantage of the situation and the information he gathered from his inquiries
and investigation, he bought the very same lot and immediately caused the registration thereof
ahead of his clients, thinking that his purchase and prior registration would prevail. The Court cannot
tolerate this mercenary attitude. Instead of protecting his clients interest, Atty. Sabitsana practically
preyed on him.

Petitioner Atty. Sabitsana took advantage of confidential information disclosed to him by his client,
using the same to defeat him and beat him to the draw, so to speak. He rushed the sale and
registration thereof ahead of his client. He may not be afforded the excuse that he nonetheless
proceeded to buy the lot because he believed or assumed that the Muerteguis were simply bluffing
when Carmen told him that they had already bought the same; this is too convenient an excuse to
be believed. As the Muertegui family lawyer, he had no right to take a position, using information
disclosed to him in confidence by his client, that would place him in possible conflict with his duty. He
may not, for his own personal interest and benefit, gamble on his clients word, believing it at one
time and disbelieving it the next. He owed the Muerteguis his undivided loyalty. He had the duty to
protect the client, at all hazards and costs even to himself. 38

Petitioner Atty. Sabitsana is enjoined to "look at any representation situation from the point of view
that there are possible conflicts, and further to think in terms of impaired loyalty, that is, to evaluate if
his representation in any way will impair his loyalty to a client." 39

Moreover, as the Muertegui familys lawyer, Atty. Sabitsana was under obligation to safeguard his
client's property, and not jeopardize it. Such is his duty as an attorney, and pursuant to his general
agency.40

Even granting that Atty. Sabitsana has ceased to act as the Muertegui family's lawyer, he still owed
them his loyalty. The termination of attorney-client relation provides no justification for a lawyer to
1wphi1

represent an interest adverse to or in conflict with that of the former client on a matter involving
confidential information which the lawyer acquired when he was counsel. The client's confidence
once reposed should not be divested by mere expiration of professional employment. 41 This is
underscored by the fact that Atty. Sabitsana obtained information from Carmen which he used to his
advantage and to the detriment of his client.

from the foregoing disquisition, it can be seen that petitioners are guilty of bad faith in pursuing the
sale of the lot despite being apprised of the prior sale in respondent's favor. Moreover, petitioner Atty.
Sabitsana has exhibited a lack of loyalty toward his clients, the Muerteguis, and by his acts,
jeopardized their interests instead of protecting them. Over and above the trial court's and the CA's
findings, this provides further justification for the award of attorney's fees, litigation expenses and
costs in favor of the respondent.

Thus said, judgment must be rendered in favor of respondent to prevent the petitioners' void sale
from casting a cloud upon his valid title.

WHEREFORE, premises considered, the Petition is DENIED. The January 25, 2007 Decision and
the January 11, 2008 Resolution of the Court of Appeals in CA-G.R. CV No. 79250 are AFFIRMED.
Costs against petitioners.

SO ORDERED.
G.R. No. 102909 September 6, 1993

SPOUSES VICENTE and LOURDES PINGOL, petitioners,

vs.
HON. COURT OF APPEALS and HEIRS OF FRANCISCO N. DONASCO, namely: MELINDA D.
PELAYO, MARIETTA D. SINGSON, MYRNA D. CUEVAS, NATIVIDAD D. PELAYO, YOLANDA D.
CACERES and MARY DONASCO, respondents.

Bernardo S. Chan for petitioners.

Orlando A. Galope for respondents.

DAVIDE, JR., J.:

An action denominated as one for specific performance and damages was brought by the private
respondents against the petitioners before the Regional Trial Court (RTC) of Caloocan City which,
after due trial, rendered a decision in favor of the petitioners. On appeal, the respondent Court
reversed the trial court's decision.

It is from this judgment that the petitioners have appealed to this Court by way of a petition for review
on certiorari.

The material facts of this case are simple and undisputed.

Petitioner Vicente Pingol is the owner of Lot No. 3223 of the Cadastral Survey of Caloocan, with an
area of 549 square meters, located at Bagong Barrio, Caloocan City and more particularly described
in Transfer Certificate of Title (TCT) No. 7435 of the Registry of Deeds of Caloocan City. On 17
February 1969, he executed a "DEED OF ABSOLUTE SALE OF ONE-HALF OF (1/2) [OF] AN
UNDIVIDED PORTION OF A PARCEL OF LAND" in favor of Francisco N. Donasco which was
acknowledged before a notary public. The parcel of land referred to herein is Lot No. 3223 and the
pertinent portions of the document read as follows:

That for and in consideration of the sum of TWENTY THOUSAND AND FIVE
HUNDRED THIRTY (P20,530.00) PESOS, Philippine Currency, the VENDOR hereby
these presents SELL, CONVEY AND CONVEY by way of Absolute Sale the one-half
(1/2) portion, equivalent to Two Hundred Seventy Four and point Fifty (274.50)
square meters, to VENDEE, the above-mentioned property, his heirs, assigns and
successors-in- interest;

That the VENDOR hereby confesses and acknowledges the receipt of TWO
THOUSAND (P2,000.00) PESOS from VENDEE as advanced (sic) and partial
payment to the above-cited consideration of the Sale herein mentioned, leaving
therefor a balance of Eighteen Thousand and Five Hundred Thirty (P18,530) Pesos
to be paid in several equal installments within a period of six (6) years, beginning
January, 1970;
 That after computing the above-mentioned equal installments, the VENDEE agrees
and undertakes to pay unto the VENDOR a monthly amount equivalent to Two
Hundred Fifty Seven (sic) and Thirty Six Centavos (P257.36) within a period of
Seventy One (71) months and on the Seven Two [sic] (72) month, the amount of
(P257.44) as the last and final installment thereof;

That the VENDEE agrees that in case of default in the payment of the installment
due the same shall earn a legal rate of interest, and to which the VENDOR likewise
agrees;

That the VENDEE undertakes to pay unto the VENDOR the herein monthly
installment within the first five (5) days of each month and the same shall be made
available and to be paid at the residence of the VENDOR, payment to be made
either directly to the VENDOR, his wife or his authorized representative or factor;

That in case of partition of the above-described property between herein VENDOR

and VENDEE the same shall be divided into two (2) equal parts, the VENDOR gets
the corner facing J. De Jesus and Malolos Avenue and the VENDEE shall get the
portion with fifteen 15 meters frontage facing J. De Jesus Street only. 1

Pursuant to the contract, Donasco paid P2,000.00 to Pingol. The one-half portion, designated as Lot
No. 3223-A, was then segregated from the mother lot, and the parties prepared a subdivision plan
(Exhibit "C") which was approved by the Land Registration Commission. 2

Francisco immediately took possession of the subject lot and constructed a house thereon. In
January 1970, he started paying the monthly installments but was able to pay only up to 1972.

On 13 July 1984, Francisco Donasco died. At the time of his demise, he had paid P8,369.00, plus
the P2,000.00 advance payment, leaving a balance of P10,161.00 on the contract price. 3 Lot No.
3223-A remained in the possession of Donasco's heirs.

On 19 October 1988, the heirs of Francisco Donasco filed an action for "Specific Performance and
Damages, with Prayer for Writ of Preliminary Injunction" against the spouses Vicente and Lourdes
Pingol (petitioners herein) before the RTC of Caloocan City. The action was docketed as Civil Case
No. 13572 and raffled off to Branch 125 of the said court.

In their complaint, 4 the plaintiffs (private respondents herein) averred that after the death of their father,
they offered to pay the balance of P10,161.00 plus the stipulated legal rate of interest thereon to Vicente
Pingol but the latter rebuffed their offer and has "been demanding for a bigger and unreasonable amount,
in complete variance to what is lawfully due and payable." They stated that they had "exerted earnest
efforts to forge or reach an amicable and peaceful settlement with the defendants" for the payment of the
property in question but to no avail. They further alleged that the defendants were committing "acts of
forcible entry and encroachment" upon their land and asked that a writ of preliminary injunction be issued
to restrain the defendants from the acts complained of.

Plaintiffs then prayed that the defendants be ordered, inter alia:

a. . . . to accept the amount of P10,161.00, more or less, plus the stipulated legal rate
of interest due thereon, as full and complete payment of the balance for the agreed
price/consideration on the one- half (1/2) portion of the parcel of land . . .; [and]
 b. . . . to execute the final deed of sale on the one-half (1/2) portion of the lot . . . in
accordance with the partition reflected in the survey and subdivision plan, . . . . 5

In their answer with counterclaim, 6 defendants admitted the execution of the aforementioned deed of
sale, the segregation of the portion sold and the preparation and approval of the subdivision plan, but set
up the following special and affirmative defenses: (1) plaintiffs' cause of action had already prescribed; (2)
the deed of sale embodied a conditional contract of sale "as the consideration is to be paid on installment
basis within a period of six years beginning January, 1970"; (3) the subdivision plan was prepared on the
assumption that Francisco Donasco would be able to comply with his obligation; (4) when Francisco died,
he had not fully paid the total consideration agreed upon; and (5) considering the breach by Francisco of
his contractual obligation way back in 1976, the sale was deemed to have been cancelled and the
continuous occupancy of Francisco after 1976 and by his heirs thereafter was by mere tolerance of
Vicente Pingol. They then asked that the plaintiffs be ordered to vacate the premises and to pay them
attorney's fees and a reasonable compensation for the use of the land.

In their Reply and Answer to Counterclaim, 7 the plaintiffs pointed out that there is no provision in the
deed of sale for its cancellation in case of default in the payment of the monthly installments and invoked
Article 1592 of the New Civil Code. They specifically denied the allegations in the counterclaim.

The issues having been joined, the case was then tried on the merits.

On 22 January 1990, the trial court rendered a decision 8 dismissing the complaint and ordering the
plaintiffs to pay the defendants P350.00 as reasonable monthly rental for the use of the premises from the
filing of the complaint, P10,000.00 by way of attorney's fees, and the costs of the suit. It held that: (1) the
deed of absolute sale in question, marked and offered in evidence as Exhibit "A," is a contract to sell, not
a contract of sale, since Vicente Pingol had no intention to part with the ownership of the loan unless the
full amount of the agreed price had been paid; (2) the contract was deemed to have been cancelled from
the moment the late father of the plaintiffs defaulted in the payment of the monthly installments; (3) title
and ownership over the lot did not pass to Francisco Donasco and his heirs since the contract to sell was
never consummated; and (5) assuming, arguendo, that the plaintiffs have a cause of action for specific
performance, such action had already prescribed since the complaint was filed only on 19 October 1988
or more than ten years from the time that they could have lawfully demanded performance. 9

Plaintiffs elevated the case to the Court of Appeals where the appeal was docketed as CA-G.R. CV
No. 25967. On 12 November 1991, the said court rendered a decision 10 reversing the appealed
decision and decreeing as follows:

WHEREFORE, the decision appealed from is hereby REVERSED and SET ASIDE
and another one is rendered:

(1) Ordering appellee-vendor Vicente Pingol to accept the sum of P10,161.00, plus
the legal interest due thereon from the date of institution of this action on October 19,
1988;

(2) Upholding the validity of the "DEED OF ABSOLUTE SALE OF ONE- HALF (1/2)
(of) AN UNDIVIDED PORTION OF A PARCEL OF LAND" (Exh. A), and by virtue and
on the strength of which declaring the "Heirs of the Deceased Francisco N. Domingo"
as the owners of the 274.50 sq. m. land, denominated as Lot 3223-A, (LRC) Psd-
146255 under the technical description (exh. D) and reflected in the Plan of
Subdivision Survey which was approved By Commissioner of Land Registration on
August 13, 1971 (exh. C), representing one-half portion [of] lot 3223, situated at the
corner of Malolos Avenue and G. de Jesus St., Bagong Barrio, Caloocan City, and
covered by TCT No. 7435 of the Registry of Deeds of Caloocan City (exh. B); and
 (3) Ordering the defendants-appellees to pay the costs.

SO ORDERED. 11

The Court of Appeals ruled that the deed of sale in question reveals the clear intention of Vicente
Pingol to part with the ownership of the one-half portion of the land by way of an absolute sale; that
the failure to fully pay the agreed price was not a ground for the cancellation of the sale; and that the
plaintiffs' action is imprescriptible since it is akin to an action to quiet title to property in one's
possession. 12

Dissatisfied with the decision of the Court of Appeals, the defendants, hereinafter referred to as the
petitioners, filed this petition for certiorari on 9 January 1992. Plaintiffs, hereinafter referred to as the
private respondents, filed their comment thereto on 10 September 1992 to which the petitioners filed
a reply 11 November 1992. We gave due course to the petition and required the parties to submit
their respective memoranda, 13 which they subsequently complied with.

Petitioners contend that the Court of Appeals erred:

IN HOLDING THAT THE DOCUMENT (EXHIBIT "A") DENOMINATED AS

"ABSOLUTE DEED OF SALE OF ONE-HALF () OF AN UNDIVIDED PORTION OF
A PARCEL OF LAND" IS AN ABSOLUTE DEED OF SALE SUFFICIENT TO
CONFER OWNERSHIP ON THE VENDEE AND HIS SUCCESSORS-IN-INTEREST,
DESPITE THE FACT THAT BY ITS TERMS AND CONDITIONS, LIKE THE PRICE
BEING PAYABLE ON INSTALLMENTS WITHIN A FIXED PERIOD, THE SAME IS A
CONDITIONAL DEED OF SALE.

II

IN HOLDING THAT NOTWITHSTANDING THE FACT THAT THE VENDEE FAILED

TO COMPLY WITH THE TERMS OF THE CONTRACT (EXHIBIT "A")
SPECIFICALLY TO COMPLETE THE PAYMENT OF THE CONSIDERATION ON
THE DATE STIPULATED IN THE CONTRACT WHICH WAS SUPPOSED TO BE
IN JANUARY 1976, COMPLETE PAYMENT THEREOF CAN STILL BE ENFORCED
IN AN ACTION INSTITUTED BY THE HEIRS OF THE VENDEE FILED
ON OCTOBER 19, 1988 OR A PERIOD OF MORE THAN TWELVE (12) YEARS
FROM THE TIME COMPLETE PAYMENT SHOULD HAVE BEEN MADE;

III

IN HOLDING THAT THE PRIVATE RESPONDENTS' ACTION IS ONE WHICH IS AN

OFFER TO COMPLETE THE PAYMENT LEFT UNPAID BY PRIVATE
RESPONDENTS' FATHER WHICH DOES NOT PRESCRIBE;

IV

IN HOLDING THAT PRIVATE RESPONDENTS' CAUSE OF ACTION HAS NOT

PRESCRIBE. 14
The decisive issue in this case is whether Exhibit "A" embodies a contract of sale or a contract to
sell. The distinction between the two is important for in a contract of sale, the title passes to the
vendee upon the delivery of the thing sold, whereas in a contract to sell, by agreement, ownership is
reserved in the vendor and is not to pass until the full payment of the price. In a contract of sale, the
vendor has lost and cannot recover ownership until and unless the contract is resolved or rescinded,
whereas in a contract to sell, title is retained by the vendor until the full payment of the price, such
payment being a positive suspensive condition, failure of which is not a breach but an event that
prevented the obligation of the vendor to convey title from becoming
effective. 15

A perusal of Exhibit "A" leads to no other conclusion than that it embodies a contract of sale. The
plain and clear tenor of the "DEED OF ABSOLUTE SALE OF ONE-HALF (1/2) [OF] AN UNDIVIDED
PORTION OF A PARCEL OF LAND" is that "the VENDOR hereby . . . SELL, CONVEY AND
CONVEY by way Absolute Sale the one-half (1/2) portion . . . to the VENDEE . . . his heirs, assigns
and successors-in-interest." That the vendor, petitioner Vicente Pingol, had that clear intention was
further evidenced by his failure to reserve his title thereto until the full payment of the price.

In Dignos vs. Court of Appeals, 16 we held that a deed of sale is absolute in nature although
denominated as a "Deed of Conditional Sale" where there is no stipulation in the deed that title to the
property sold is reserved in the seller until the full payment of the price, nor is there a stipulation giving the
vendor the right to unilaterally resolve the contract the moment the buyer fails to pay within a fixed period.
Exhibit "A" contains neither stipulation. What is merely stated therein is that "the VENDEE agrees that in
case of default in the payment of the installments due the same shall earn a legal rate of interest, and to
which the VENDOR likewise agrees."

Furthermore, as found by the Court of Appeals, the acts of the parties, contemporaneous and
subsequent to the contract, clearly show that an absolute deed of sale was intended, by the parties
and not a contract to sell:

[P]ursuant to the deed, the vendor delivered actual and constructive possession of
the property to the vendee, who occupied and took such possession, constructed a
building thereon, had the property surveyed and subdivided and a plan of the
property was prepared and submitted to the Land Registration Commission
which approved it preparatory to segregating the same and obtaining the
corresponding TCT in his name. Since the sale, appellee continuously possessed
and occupied the property as owner up to his death on July 13, 1984 and his heirs,
after his death, continued the occupancy and possession of the property up to the
present. Those contemporaneous and subsequent events are demonstrative acts
that the vendor since the sale recognized the vendee as the absolute owner of the
property sold. All those attributes of ownership are admitted by defendants in their
answer, specifically in paragraphs 7 and 9 of their special and affirmative defenses. 17

The contract here being one of absolute sale, the ownership of the subject lot was transferred to the
buyer upon the actual and constructive delivery thereof. The constructive delivery of the subject lot
was made upon the execution of the deed of sale 18 while the actual delivery was effected when the
private respondents took possession of and constructed a house on Lot No. 3223-A.

The delivery of the object of the contract divested the vendor of the ownership over the same and he
cannot recover the title unless the contract is resolved or rescinded pursuant to Article 1592 of the
New Civil Code which provides that:
 In the sale of immovable property, even though it may have been stipulated that upon
failure to pay the price at the time agreed upon the rescission of the contract shall of
right take place, the vendee may pay, even after the expiration of the period, as long
as no demand for rescission of the contract has been made upon him either judicially
or by a notarial act. After the demand, the court may not grant him a new term.

Both the trial court and the Court of Appeals did not find that a notarial or judicial rescission of the
contract had been made. Although Vicente Pingol asserts that he had declared to Francisco
Donasco that he was cancelling the contract, he did not prove that his demand for rescission was
made either judicially or by a notarial act.

Petitioners fault the respondent Court for holding that the action of the petitioners is not barred by
the statute of limitations. They argue that the private respondents' action, being based upon a written
contract, has prescribed since it was brought only in 1988 or more than ten years from the time
when the latter could have lawfully demanded performance. 19

We disagree.

Although the private respondents' complaint before the trial court was denominated as one for
specific performance, it is in effect an action to quiet title. In this regard, the following excerpt
from Bucton vs. Gabar 20 is apropos:

The real and ultimate basis of petitioners' action is their ownership of one- half of the
lot coupled with their possession thereof, which entitles them to a conveyance of the
property. In Sapto, et al. v. Fabiana [103 Phil. 683, 686-87 (1958)], this Court,
speaking thru Mr. Justice J.B.L. Reyes, explained that under the circumstances no
enforcement of the contract is needed, since the delivery of possession of the land
sold had consummated the sale and transferred title to the purchaser, and that,
actually, the action for conveyance is one to quiet title, i.e., to remove the cloud upon
the appellee's ownership by the refusal of the appellants to recognize the sale made
by their predecessors.

That a cloud has been cast on the title of the private respondents is indubitable. Despite the fact that
the title had been transferred to them by the execution of the deed of sale and the delivery of the
object of the contract, the petitioners adamantly refused to accept the tender of payment by the
private respondents and steadfastly insisted that their obligation to transfer title had been rendered
ineffective.

A vendee in an oral contract to convey land who had made part payment thereof, entered upon the
land and had made valuable improvements thereon, is entitled to bring suit to clear his title against
the vendor who had refused to transfer the title to him. It is not necessary that the vendee has an
absolute title, an equitable title being sufficient to clothe him with personality to bring an action to
quiet title. 21

Prescription thus cannot be invoked against the private respondents for it is aphoristic that an action
to quiet title to property in one's possession is
imprescriptible. 22 The rationale for this rule has been aptly stated thus:

The owner of real property who is in possession thereof may wait until his
possession is invaded or his title is attacked before taking steps to vindicate his right.
A person claiming title to real property, but not in possession thereof, must act
affirmatively and within the time provided by the statute. Possession is a continuing
 right as is the right to defend such possession. So it has been determined that an
owner of real property in possession has a continuing right to invoke a court of equity
to remove a cloud that is a continuing menace to his title. Such a menace is
compared to a continuing nuisance or trespass which is treated as successive
nuisances or trespasses, not barred by statute until continued without interruption for
a length of time sufficient to affect a change of title as a matter of law. 23

Private respondents shall, however, be liable to pay the legal rate of interest on the unpaid balance
of the purchase price from the date default or on 6 January 1976, when the entire balance should
have been paid, pursuant to the provision in the deed of sale.

WHEREFORE, except as above modified, the Decision appealed from is hereby AFFIRMED. As
modified, the interest on the unpaid balance of P10,161.00, at the legal rate, shall be computed from
6 January 1976. Upon the payment by the private respondents to the petitioners of the said amount
and the interest thereon, the latter are ordered to deliver Transfer Certificate of Title No. 7435 to the
Register of Deeds of Caloocan City who shall cancel the same and issue two new transfer
certificates of title in lieu thereof, one of which shall be in the name of the herein private respondents
covering Lot No. 3223-A and the other in the name of the petitioners covering the remainder of the
lot.

SO ORDERED.

G.R. No. 156171 April 22, 2005

Spouses RICARDO and FERMA PORTIC, Petitioners,

vs.
ANASTACIA CRISTOBAL, Respondent,

DECISION

PANGANIBAN, J.:

An agreement in which ownership is reserved in the vendor and is not to pass to the vendee until full
payment of the purchase price is known as a contract to sell. The absence of full payment suspends
the vendors obligation to convey title. This principle holds true between the parties, even if the sale
has already been registered. Registration does not vest, but merely serves as evidence of, title to a
particular property. Our land registration laws do not give title holders any better ownership than
what they actually had prior to registration.

The Case

Before us is a Petition for Review1 under Rule 45 of the Rules of Court, challenging the January 29,
2002 Decision2 and the November 18, 2002 Resolution3 of the Court of Appeals (CA) in CA-GR CV
No. 66393. The assailed Decision disposed as follows:
"WHEREFORE, foregoing considered, the appealed decision is hereby REVERSED and SET
ASIDE. A new one is hereby entered ORDERING defendant-appellant to pay the unpaid balance
of P55,000.00 plus legal interest of 6% per annum counted from the filing of this case. The
ownership of defendant-appellant over the subject property is hereby confirmed.

"No pronouncement as to costs."4

In the challenged Resolution, 5 the CA denied petitioners Motion for Partial Reconsideration.

The Facts

The facts were summarized by the appellate court as follows:

"Spouses Clodualdo Alcantara and Candelaria Edrosalam were the original registered owners of a
parcel of land with three-door apartment, located at No. 9, 1st Street BBB, Marulas, Valenzuela City.
Transfer Certificate of Title No. T-71316 was issued in the names of spouses Clodualdo Alcantara
and Candelaria Edrosalam.

"On October 2, 1968, spouses Clodualdo Alcantara and Candelaria Edrosalam sold the subject
property in favor of [petitioners] with the condition that the latter shall assume the mortgage executed
over the subject property by spouses Clodualdo Alcantara and Candelaria Edrosalam in favor of the
Social Security System.

"[Petitioners] defaulted in the payment of the monthly amortizations due on the mortgage. The Social
Security System foreclosed the mortgage and sold the subject property at public auction with the
Social Security System as the highest bidder.

"On May 22, 1984, before the expiration of the redemption period, [petitioners] sold the subject
property in favor of [respondent] in consideration of P200,025.89. Among others, the parties agreed
that [respondent] shall pay the sum of P45,025.89 as down payment and the balance
of P155,000.00 shall be paid on or before May 22, 1985. The parties further agreed that in case
[respondent] should fail to comply with the conditions, the sale shall be considered void and
[petitioners] shall reimburse [respondent] of whatever amount already paid.

"On the same date, [petitioners] and [respondent] executed a Deed of Sale with Assumption of
Mortgage whereby [petitioners] sold the subject property in favor of [respondent] in consideration
of P80,000.00, P45,000.00 thereof shall be paid to the Social Security System.

"On July 30, 1984, spouses Clodualdo Alcantara and Candelaria Edrosalam, the original owners of
the subject property, sold the subject property in favor of [respondent] for P50,000.00.

"On the same date, [respondent] executed a Deed of Mortgage whereby [respondent] constituted a
mortgage over the subject property to secure a P150,000.00 indebtedness in favor of [petitioners].

"[Respondent] paid the indebtedness due over the subject property to the Social Security System.

"On August 6, 1984, Transfer Certificate of Title No. T-71316 in the names of spouses Clodualdo
Alcantara and Candelaria Edrosalam was cancelled and in lieu thereof Transfer Certificate of Title
No. T-113299 was issued in the name of [respondent].
"On May 20, 1996, [petitioners] demanded from [respondent] the alleged unpaid balance
of P55,000.00. [Respondent] refused to pay.

"On June 6, 1996, [petitioners] filed this instant civil case against [respondent] to remove the cloud
created by the issuance of TCT No. T-113299 in favor of [respondent]. [Petitioners] claimed that they
sold the subject property to [respondent] on the condition that [respondent] shall pay the balance on
or before May 22, 1985; that in case of failure to pay, the sale shall be considered void and
[petitioners] shall reimburse [respondent] of the amounts already paid; that [respondent] failed to
fully pay the purchase price within the period; that on account of this failure, the sale of the subject
property by [petitioners] to [respondent] is void; that in spite of this failure, [respondent] required
[petitioners] to sign a lease contract over the apartment which [petitioners] occupy; that [respondent]
should be required to reconvey back the title to the subject property to [petitioners].

"[Respondent] on her part claimed that her title over the subject property is already indefeasible; that
the true agreement of the parties is that embodied in the Deed of Absolute Sale with Assumption of
Mortgage; that [respondent] had fully paid the purchase price; that [respondent] is the true owner of
the subject property; that [petitioners] claim is already barred by laches." 6

After trial, the Regional Trial Court (RTC) of Valenzuela City rendered this judgment in favor of
petitioners:

"WHEREFORE, premises considered, this Court hereby adjudicates on this case as follows:

1.) The Court hereby orders the quieting of title or removal of cloud over the [petitioners] parcel of
land and three (3) door apartment now covered by Transfer Certificate of Title No. T-113299 of the
Registry of Deeds for Caloocan City and Tax Declaration Nos. C-018-00235 & C-031-012077
respectively, of Valenzuela City;

2.) The Court hereby orders the [respondent] to reconvey in favor of the [petitioners] the parcel of
land and three (3) door apartment now covered by Transfer Certificate of Title No. T-113299 of the
Registry of Deeds of Caloocan City after reimbursement by the [petitioners] of the amount actually
paid by the [respondent] in the total amount of P145,025.89;

3.) The Court hereby DENIES damages as claimed by both parties." 7

Ruling of the Court of Appeals

The Court of Appeals opined that the first Memorandum of Agreement (MOA) embodied the real
agreement between the parties, and that the subsequent Deeds were executed merely to secure
their respective rights over the property.8 The MOA stated that Cristobal
had not fully paid the purchase price. Although this statement might have given rise to a cause of
action to annul the Deed of Sale, prescription already set in because the case had been filed beyond
the ten-year reglementary period,9 as observed by the CA. Nonetheless, in conformity with the
principle of unjust enrichment, the appellate court ordered respondent to pay petitioners the
remaining balance of the purchase price.10

In their Motion for Partial Reconsideration, petitioners contended that their action was not one for the
enforcement of a written contract, but one for the quieting of title -- an action that was imprescriptible
as long as they remained in possession of the premises. 11 The CA held, however, that the agreement
between the parties was valid, and that respondents title to the property was amply supported by
the evidence.12 Therefore, their action for the quieting of title would not prosper, because they failed
to show the invalidity of the cloud on their title.

Hence, this Petition.13

The Issue

In its Memorandum, petitioners raise the following issues for our consideration:

"(1) Whether or not the [petitioners] cause of action is for quieting of title.

"(2) Whether or not the [petitioners] cause of action has prescribed." 14

The main issue revolves around the characterization of the parties agreement and the viability of
petitioners cause of action.

This Courts Ruling

The Petition has merit.

Main Issue:

Nature of the Action: Quieting of Title or

Enforcement of a Written Contract

Petitioners argue that the action they filed in the RTC was for the quieting of title. Respondents
demand that they desist from entering into new lease agreements with the tenants of the property
allegedly attests to the fact of their possession of the subject premises. 15 Further, they point to the
existence of Civil Case No. 7446, an action for unlawful detainer that respondent filed against
them,16 as further proof of that fact. Being in continuous possession of the property, they argue that
their action for the quieting of title has not prescribed. 17

On the other hand, respondent joins the appellate court in characterizing the action petitioners filed
in the RTC as one for the enforcement of the MOA. Being based on a written instrument, such action
has already prescribed, respondent claims.18 She adds that petitioners could not have been in
continuous possession of the
subject property because, under a duly notarized lease agreement, they have been paying her a
monthly rental fee of P500, which was later increased to P800.

Two questions need to be answered to resolve the present case; namely, (1) whether Cristobals title
to the property is valid; and (2) whether the Portics are in possession of the premises, a fact that
would render the action for quieting of title imprescriptible.

Validity of Title

The CA held that the action for the quieting of title could not prosper, because Cristobals title to the
property was amply supported by evidence.

Article 476 of the Civil Code provides as follows:

"Whenever there is a cloud on title to real property or any interest therein, by reason of any
instrument, record, claim, encumbrance or proceeding which is apparently valid or effective but is in
truth and in fact invalid, ineffective, voidable, or unenforceable, and may be prejudicial to said title,
an action may be brought to remove such cloud or to quiet the title.

"An action may also be brought to prevent a cloud from being cast upon title to real property or any
interest therein."

Suits to quiet title are characterized as proceedings quasi in rem.19 Technically, they are neither in
rem nor in personam. In an action quasi in rem, an individual is named as defendant.20 However,
unlike suits in rem, a quasi in rem judgment is conclusive only between the parties. 21

Generally, the registered owner of a property is the proper party to bring an action to quiet title.
However, it has been held that this remedy may also be availed of by a person other than the
registered owner because, in the Article reproduced above, "title" does not necessarily refer to the
original or transfer certificate of title. 22 Thus, lack of an actual certificate of title to a property does not
necessarily bar an action to quiet title. As will be shown later, petitioners have not turned over and
have thus retained their title to the property.

On the other hand, the claim of respondent cannot be sustained. The transfer of ownership of the
premises in her favor was subject to the suspensive condition stipulated by the parties in
paragraph 3 of the MOA, which states as follows:

"3. That while the balance of P155,000.00 has not yet been fully paid the FIRST PARTY OWNERS
shall retain the ownership of the above described parcel of land together with its improvements but
the SECOND PARTY BUYER shall have the right to collect the monthly rentals due on the first door
(13-A) of the said apartment;"23

The above-cited provision characterizes the agreement between the parties as a contract to sell, not
a contract of sale. Ownership is retained by the vendors, the Portics; it will not be passed to the
vendee, the Cristobals, until the full payment of the purchase price. Such payment is a positive
suspensive condition, and failure to comply with it is not a breach of obligation; it is merely an event
that prevents the effectivity of the obligation of the vendor to convey the title. 24 In short, until the full
price is paid, the vendor retains ownership.

The mere issuance of the Certificate of Title in favor of Cristobal did not vest ownership in her.
Neither did it validate the
alleged absolute purchase of the lot. Time and time again, this Court has stressed that registration
does not vest, but merely serves as evidence of, title. Our land registration laws do not give the
holders any better title than that which they actually have prior to registration. 25

Under Article 1544 of the Civil Code, mere registration is not enough to acquire a new title. Good
faith must concur.26 Clearly, respondent has not yet fully paid the purchase price. Hence, as long as it
remains unpaid, she cannot feign good faith. She is also precluded from asserting ownership against
petitioners. The appellate courts finding that she had a valid title to the property must, therefore, be
set aside.

Continuous Possession

The issue of whether the Portics have been in actual, continuous possession of the premises is
necessarily a question of fact. Well-entrenched is the rule that findings of fact of the Court of
Appeals, when supported by substantial evidence, are final and conclusive and may not be reviewed
on appeal.27 This Court finds no cogent reason to disturb the CAs findings sustaining those of the
trial court, which held that petitioners had been in continuous possession of the premises. For this
reason, the action to quiet title has not prescribed.

WHEREFORE, the Petition is GRANTED. The challenged Decision and Resolution of the Court of
Appeals are REVERSED and SET ASIDE. The Decision of the RTC of Valenzuela City in Civil Case
No. 4935-V-96, dated September 23, 1999, is hereby REINSTATED. No pronouncement as to costs.

SO ORDERED.