#21
It further appears that the down payment of PhP70,000 and the PhP230,000
THIRD DIVISION
June 19, 2017
G.R. No. 206114
DOLORES ALEJO, Petitioner
vs.
SPOUSES ERNESTO CORTEZ and PRISCILLA SAN PEDRO, SPOUSES JORGE
LEONARDO and JACINTA LEONARDO and THE REGISTER OF DEEDS OF
BULACAN, Respondents
DECISION
TIJAM, J.:
Assailed in this Petition for Review1 under Rule 45 are the Decision2 dated
October 3, 2012 and Resolution3 dated February 26, 2013 of the Court of Appeals4
(CA) in CA-G.R. CV No. 95432, which reversed the Decision5 of the Regional Trial
Court (R TC), 6 Branch 19 in the City of Malolos, Bulacan. In its assailed Decision
and Resolution, the CA declared void the parties' agreement for the sale of a
conjugal property for lack of written consent of the husband.
The Facts and Antecedent Proceedings
At the heart of the instant controversy is a parcel of land measuring 255 square
meters located .at Cut-cot, Pulilan, Bulacan and covered by Transfer Certificate of
Title No. T-118170. The property belonged to the conjugal property/absolute
community of property7 of the respondent Spouses Jorge and Jacinta Leonardo
(Spouses Leonardo) and upon which their residential house was built.
It appears that sometime in March 1996, Jorge's father, Ricardo, approached his
sister, herein petitioner Dolores Alejo (Dolores), to negotiate the sale of the
subject property.8 Accordingly, on March 29, 1996, Jacinta executed a Kasunduan
with Dolores for the sale of the property. for a purchase price of PhP500,000.
Under the Kasunduan, Dolores was to pay PhP70,000 as down payment,, while
PhP230,000 is to be paid on April 30, 1996 and the remaining balance of
PhP200,000 was to be paid before the end of the year 1996.9 The Kasunduan was
signed by Jacinta and Ricardo as witness. Jorge, however, did not sign the
agreement.
were paid by Dolores10 on the dates agreed upon and thereafter, Dolores was
allowed to possess the property and introduce improvements thereon. 11
However, 9n July 3, 1996, Jorge wrote a letter to Dolores denying knowledge and
consent to the Kasunduan. Jorge further informed Dolores that Jacinta was
retracting her consent to the Kasunduan due to Dolores' failure to comply with
her obligations. This was followed by another letter dated September 29, 1996
from Jorge to Dolores demanding that the latter pay the balance of PhP200,000
on or before October 5, 1996, otherwise the purchase price shall be increased to
PhP700,000. 12 According to Dolores, she was being compelled by Jorge to sign
the agreement but that she refused to do so. As a result, Jorge went to her house,
destroyed its water pump and disconnected the electricity. Before· the officials of
the Barangay, Dolores tendered the balance of PhP200,000 but Jorge refused to
accept the same. Instead, Jorge filed cases for ejectment13 and annulment of sale,
reconveyance and recovery of possession14 against her. 15 These cases were later
on dismissed by the trial court on technical grounds.
However, during the pendency of said cases, the subject property was sold by
Jorge and Jacinta to respondents Spouses Ernesto Cortez and Priscilla San Pedro
(Spouses Cortez) under a Deed of Absolute Sale dated September 4, 1998 for a
purchase price of PhP700,000. A new transfer certificate of title was Issued in the
latter's names. At the time of said sale, Dolores was in possession of the subject
property. 16
Consequently, Dolores filed the case a quo for annulment of deed of sale and
damages against the Spouses Cortez and the Spouses Leonardo.
The Ruling of the RTC
In its Decision, the RTC noted that while the Kasunduan patently lacks the written
consent of Jorge, the latter's acts reveal that he later on acquiesced and accepted
the same. In particular, the RTC observed that Jorge did not s~asonably and
~xpressly repudiate the Kasunduan but instead demanded from Dolores
compliance therewith and that he allowed Dolores to take possession of the
property. Further, the RTC noted that the case for annulment of sale,
reconveyance and recovery of possession filed by Jorge. against Dolores had been
dismissed and said dismissal attained finality. As such, res judicata set in
preventing Jorge from further assailing the Kasunduan. 17
Accordingly, the RTC declared the Kasunduan as a perfected contract and Dolores
as the rightful owner of the property. It further ordered the cancellation of titles
issued in the names of the Spouses Leonardo and the Spouses Cortez and the
issuance of a new title in the name of Dolores. Finally, the RTC ordered Dolores
to pay the balance of PhP200,000 and the Spouses Leonardo to pay moral
damages, attorney's fees, litigation expenses and costs of suit. 18
In disposal, the RTC pronounced:
WHEREFORE, judgment is hereby rendered in favor of plaintiff Dolores Alejo and
against defendants [S]pouses Leonardo and Cortez, as follows:
1.) Declaring the "Kasunduan" dated March 29, 1996 a perfected contract, legal,
binding and subsisting having been accepted by defendant Jorge Leonardo;
2.) Declaring the plaintiff the true, legal and rightful owner of the subject
property;
3.) Declaring TCT Nb. 18170 in the names of Spouses Jorge Leonardo, Jacinta
Leonardo cancelled and of no legal force and effect;
4.) Declaring TCT No. 121491 in the names of Spouses Ernesto Cortez and
Priscilla San Pedro null and void and therefore should be ordered cancelled and
of no legal force and effect;
5.) In lieu thereof, ordering the Register of Deeds of the Province of Bulacan to
issue a new title in the name of plaintiff Dolores Alejo;
6.) Ordering plaintiff Dolores Alejo to pay defendants Spouses Leonardo the
sum of Php200,000.00 to complete her obligation under the "Kasunduan";
7.) Ordering defendants Spouses Leonardo to pay plaintiff the sum of
Phpl00,000.00 as and by way of moral damages;
8.) Ordering defendants Spouses Leonardo to pay plaintiff the sum of
Php50,000.00, as and by way of attorney's fees and litigation expenses;
9.) Ordering defendants Spouses Leonardo to pay the cost of suit.
The claim of Php500,000.00 actual damages as well as Php 100,000.00 as
exemplary damages are denied for lack of legal as well as factual basis.· All other
claims and counterclaim are denied for lack of merit.
SO ORDERED. 19
The Spouses Leonardo and the Spouses Cortez seasonably appealed.
The Ruling of the CA
The CA granted the appeal. 20 Contrary to the findings of the R TC, the CA held that
Jorge, by imposing a new period within which Dolores was to pay the remaining
balance and by increasing the purchase price, only qualifiedly accepted the
Kasunduan. Being a qualified acceptance, the same partakes of a counter-offer
and is a rejection of the original offer. Consequently, the CA declared the
Kasunduan as void absent Jorge's consent and acceptance. Nevertheless, the CA
found Dolores to be a possessor in good faith who is entitled to reimbursement
for the useful improvements introduced on the land or to the increase in the value
thereof, at the option of the Spouses Leonardo.
The CA accordingly disposed:
WHEREFORE, the appeal is hereby GRANTED. The assailed 14 January 2010
Decision of the Regional Trial Court, Branch 19 of Malolos City, Bulacan is
her.eby REVERSED and SET ASIDE. The Kasunduan dated 29 March 1996 is
hereby declared VOID. TCT No. 121491 in the names of Spouses Cortez and San
Pedro is hereby declared VALID and SUBSISTING. Appellants Spouses Leonardo
are ORDERED to reimburse Dolores Alejo the amount of Php300,000.00 that the
latter paid to Jacinta Leonardo, with legal interest until fully paid. Appellants
Spouses Leonardo are likewise ORDERED, at their option, to indemnify Dolores
Alejo with her expenses for introducing useful improvements on the subject
land or pay the increase in value which it may have acquired by reason of those
improvements, with Alejo entitled to the right of retention of the land until the
indemnity is made. Finally, the Regional Trial Court of Malolos City, Bulacan
from which this case originated is DIRECTED to receive evidence and determine
the amount of indemnity to which appellee Dolores Alejo is entitled.
SO ORDERED.21
Dolores' motion for reconsideration was denied, hence the instant petition.
The Issues
Dolores argues that the Spouses Leonardo's and Spouses Cortez' appeals ought
to have been outrightly dismissed for failure to comply with the requirements of
Section 13, Rule 44. On the substantive issue, Dolores · maintains that the
Kasunduan is a perfected and binding contract as it was accepted by Jorge
through his overt acts. She also argues that the dismissal of Jorge's complaint for
annulment of sale constitutes res judicata thus preventing Jorge from further
questioning the validity of the Kasunduan. Finally, she contends that the Spouses
Cortez were not buyers in good faith as they knew that the property was being
occupied by other persons.
 The Ruling of this Court
The petition is denied.
Dismissal of Appeal Lies within the Sound Discretion of the Appellate Court
Technically, the CA may dismiss the appeal for failure to comply with the
requirements under Sec. 13, Rule 44. Thus, Section 1, Rule 50 provides that an
appeal may be dismissed by the Court of Appeals, on its own motion or on that of
the appellee upon the ground, among others, of absence of specific assignment of
errors in the appellant's brief, or of page references to the record.
Nevertheless, it has been consistently held that such provision confers a power,
not a duty, on the appellate court.22 The dismissal is directory, not mandatory,
and as such, not a ministerial duty of the appellate court.23 In other words, the CA
enjoys ample discretion to dismiss or not to dismiss the appeal. What is more, the
exercise of such discretion is presumed to have been sound and regular and it is
thus incumbent upon Dolores to offset such presumption. Yet, the records before
this Court do not satisfactorily show that the CA has gravely abused its discretion
in not dismissing the Spouses Leonardo's and Spouses Cortez' appeals.
On the contrary, We are of the view that the ends of justice will be better served
if the instant case is determined on the merits, after full opportunity to ventilate
their respective claims and defenses is afforded to all parties. After all, it is far
better to decide a case on the merits, as the ultimate end, rather on a technicality.
The key issue in this case is whether the Kasunduan for the sale of a conjugal real
property between Jacinta and Dolores as a continuing offer has been converted
to a perfected and binding contract. For, if Jorge has not accepted or consented to
the said sale, the Kasunduan is considered void rendering the other issues raised
herein merely academic.
Sale by one Spouse of Conjugal Real Property is Void Without the Written Consent
of the other Spouse
Any alienation or encumbrance of conjugal property made during the effectivity
of the Family Code is governed by Article 124 thereof which provides:
Article 124. The administration and enjoyment of the conjugal partnership
property shall belong to both spouses jointly. In case of disagreement, the
husband's decision shall prevail, subject to recourse to the court by the wife for
proper remedy, which must be availed of within five years from the date of the
contract implementing such decision.
In the event that one spouse is incapacitated or otherwise unable to participate
in the administration of the conjugal properties, the other spouse may assume
sole powers of administration. These powers do not include disposition or
encumbrance without authority of the court or the written consent of the other
spouse. In the absence of such authority or consent, the disposition or
encumbrance shall be void. However, the transaction shall be construed as a
continuing offer on the part of the consenting spouse and the third person, and
may be perfected as a binding contract upon the acceptance by the other spouse
or authorization by the court before the offer is withdrawn by either or both
offerors. (Emphasis supplied.)
The law is therefore unequivocal when it states that the disposition of conjugal
property of one spouse sans the written consent of the other is void. Here, it is an
established fact that the Kasunduan was entered into solely by Jacinta and signed
by her alone. By plain terms of the law therefore, the Kasunduan is void.
Nevertheless, We agree with the RTC and the CA when it held that the void
Kasunduan constitutes a continuing offer from Jacinta and Dolores and that Jorge
had the option of either accepting or rejecting the offer before it was withdrawn
by either, or both, Jacinta and Dolores.
The point of contention is whether Jorge accepted such continuing offer. If so,
then the Kasunduan is perfected as a binding contract; otherwise, the Kasunduan
remains void .
The RTC opined that Jorge's failure to expressly repudiate the Kasunduan and his
demand that Dolores comply with her undertakings therein show Jorge's
acceptance of the sale of the conjugal property. On the other hand, the CA noted
that in varying the terms of the Kasunduan, i.e., in the time of payment and the
purchase price, Jorge is deemed to have only qualifiedly accepted the
same.1âwphi1
We agree with the CA.
It is undisputed that after the execution of the Kasunduan, Jorge sent two letters
to Dolores: one, in forming her that he did not consent to the sale; and the other,
demanding that' Dolores pay the balance of the purchase price on or before
October 5, 1996 and failing which, the purchase price shall be increased to
PhP700,000.
Clearly, Jorge's first letter was an outright and express repudiation of the
Kasunduan. The second letter, while ostensibly a demand for compliance with
Dolores' obligation under the Kasunduan, varied its terms on material points, i.e.,
the date of payment of the balance and the purchase price. Consequently, such
counter-offer cannot be construed as evidencing Jorge's consent to or acceptance
of the Kasunduan for it is settled that where the other spouse's putative consent
to the sale of the conjugal property appears in a separate document which does
not contain the same terms and conditions as in the first document signed by the
other spouse, a valid transaction could not have arisen.24
Neither can Jorge's subsequent letters to Dolores be treated as a ratification of
the Kasunduan for the basic reason that a void contract is not susceptible to
ratification. Nor can Jorge's alleged participation in the negotiation for the sale of
the property or his acquiescence to Dolores' transfer to and possession of the
subject property be treated as converting· such continuing offer into a binding
contract as the law distinctly requires nothing less than a written consent to the
sale for its validity. Suffice to say that participation in or awareness of the
negotiations is not consent. 25
As above intimated, a determination that the Kasunduan is void renders the other
issues raised by Dolores academic, i.e., whether the doctrine of res judicata
applies and whether the Spouses Cortez are buyers in bad faith; hence they merit
no further discussion .
The CA Correctly Ruled that Dolores is a Possessor in Good Faith
While the Kasunduan was void from the beginning, Dolores is, in all fairness,
entitled to recover from the Spouses Leonardo the amount of PhP300,000 with
legal Interest until fully paid.
Moreover, the CA correctly appreciated Dolores' standing as a possessor in good
faith. It appears that Dolores acted in good faith in entering the subject property
and building improvements on it. Ricardo represented that "Jacinta and Jorge
wanted to sell the subject property. Dolores had no reason to believe that Ricardo
and Jacinta were lying. Indeed, upon her own brother's prodding, Dolores
willingly parted with her money and paid the down payment on the selling price
and later, a portion of the remaining balance. The signatures of Jacinta and of
Ricardo (as witness) as well as her successful entry to the property appear to
have comforted Dolores that everything was in order. Article 526 of the Civil Code
provides that she is deemed a possessor in good faith, who is not aware that there
exists in her title or mode of acquisition any flaw that invalidates it.
Likewise, as correctly held by the CA, Dolores, as possessor in good faith, is under
no obligation to pay for her stay on the property prior to its legal interruption by
a final judgment. She is further entitled under Article 448 to indemnity for the
improvements introduced on the property with a right of retention until
reimbursement is made. The Spouses Leonardo have the option under Article
546 of the Civil Code of indemnifying Dolores for the cost of the improvements or
paying the increase in value which the property may have acquired by reason of
such improvements. 26
WHEREFORE, the petition is DENIED. The Decision dated October 3, 2012 and
Resolution dated February 26, 2013 of the Court of Appeals in CA G.R. CV No.
95432 which (1) declared void the Kasunduan dated 29 March 1996; (2) declared
valid the title issued in the names of Spouses Cortez and San Pedro; (3) ordered
the reimbursement of PhP300,000 with legal interest to Dolores Alejo; (3)
ordered the Spouses
Leonardo, at their option, to indemnify Dolores Alejo of her expenses on the
useful improvements or pay the increase in value on the subject property, with
retention rights until indemnity is made; and (4) remanded the case to the RTC
for purposes of receiving evidence and determining the amount of said indemnity
are AFFIRMED in toto.
SO ORDERED.
#22
SECOND DIVISION
June 5, 2017
G.R. No. 194152
MAKILITO B. MAHINAY, Petitioner
vs.
DURA TIRE & RUBBER INDUSTRIES, INC., Respondent
DECISION
LEONEN, J.:
The period to redeem a property sold in an extrajudicial foreclosure sale is not
extendible. A pending action to annul the foreclosure sale does not toll the
running of the one (1 )-year period of redemption under Act No. 3135.1
This resolves a Petition for Review on Certiorari2 directly filed before this Court,
assailing the Judgment on the Pleadings3 dated April 13, 2010 and Order4 dated
September 2, 2010 rendered by Branch 20 of the Regional Trial Court of Cebu
City in Civil Case No. CEB-33639. The trial court dismissed the Complaint filed by
Makilito B. Mahinay (Mahinay), declaring that he already lost his right to redeem
a parcel of land sold in an extrajudicial foreclosure sale.5
The parcel of land, with an area of 3,616 square meters and located in Barrio Kiot,
Cebu City, was covered by Transfer Certificate of Title (TCT) No. 111078 under
the name of A&A Swiss International Commercial, Inc. (A&A Swiss).6 The
property was mortgaged to Dura Tire and Rubber Industries, Inc. (Dura Tire), a
corporation engaged in the supply of raw materials for tire processing and
recapping, as security for credit purchases to be made by Move Overland Venture
and Exploring, Inc. (Move Overland).7 Under the mortgage agreement, Dura Tire
was given the express authority to extrajudicially foreclose the property should
Move Overland fail to pay its credit purchases.8
On June 5, 1992, A&A Swiss sold the property to Mahinay for the sum of
₱540,000.00.9 In the Deed of Absolute Sale, 10 Mahinay acknowledged that the
property had been previously mortgaged by A&A Swiss to Dura Tire, holding
himself liable for any claims that Dura Tire may have against Move Overland. 11
On August 21, 1994, Mahinay wrote Dura Tire, requesting a statement of account
of Move Overland's credit purchases. Mahinay sought to pay Move Overland's
obligation to release the property from the mortgage. 12 Dura Tire, however,
ignored Mahinay's request. 13
For Move Overland's failure to pay its credit purchases, Dura Tire applied for
extrajudicial foreclosure of the property on January 6, 1995.14 Mahinay protested
the impending sale and filed a third-party claim before the Office of the Provincial
Sheriff of Cebu.15
Despite the protest, Sheriff Romeo Laurel (Sheriff Laurel) proceeded with the sale
and issued a Certificate of Sale in favor of Dura Tire, the highest bidder at the sale.
16 The property was purchased at ₱950,000.00, and the Certificate of Sale was
registered on February 20, 1995.17
On March 23, 1995, Mahinay filed a Complaint18 for specific performance and
annulment of auction sale before the Regional Trial Court of Cebu City. According
to Mahinay, there was no proof that Dura Tire supplied raw materials to Move
Overland after the property was mortgaged.19 Mahinay added that Dura Tire
allegedly deprived him of the opportunity to release the property from the
mortgage by failing to furnish him with Move Overland's statement of account. 20
Dura Tire, therefore, had no right to foreclose the mortgage and the foreclosure
sale was void.
In its Answer,21 Dura Tire mainly argued that Mahinay had no cause of action to
file the Complaint to annul the foreclosure sale since he was not privy to the
mortgage agreement. 22
Acting on Dura Tire's affirmative defense, Branch 15 of the Regional Trial Court
of Cebu City initially dismissed the Complaint.23 However, on mandamus and
certiorari, the Court of Appeals set aside the order of the trial court and remanded
the case for further proceedings.24 The case was then re-raffled to Branch 12 of
the Regional Trial Court of Cebu City.25
After pre-trial proceedings, the trial court again ordered the dismissal of the
Complaint due to Mahinay' s failure to prosecute the case. However, upon
Mahinay's Motion for Reconsideration, the case was reinstated.26
The case was again re-raffled, this time to Branch 58.27 After due proceedings, the
trial court ultimately dismissed Mahinay' s Complaint in the Decision28 dated July
29, 2004. The trial court held that Dura Tire was entitled to foreclose the property
because of Move Overland's unpaid credit /} purchases. 29
Mahinay's appeal was dismissed by the Court of Appeals in the Decision 30 dated
June 16, 2006. The Court of Appeals held that Mahinay had no right to question
the foreclosure of the property.31 Mahinay, as "substitute mortgagor,"32 was fully
aware that the property he purchased from A&A Swiss was previously mortgaged
to Dura Tire to answer for Move Overland's obligation. Considering that Move
Overland failed to pay for its credit purchases, Dura Tire had every right to
foreclose the property.33
Mahinay filed a Petition for Review on Certiorari34 before this Court. In G.R. No.
173117, this Court denied Mahinay's Petition as well as his Motion for
Reconsideration. 35 The June 16, 2006 Decision of the Court of Appeals thus
became final and executory on August 8, 2007, 15 days after Mahinay received a
copy of the Resolution denying his Motion for Reconsideration filed before this
Court. 36
Relying on the Court of Appeals' finding that he was a "substitute mortgagor,"
Mahinay filed a Complaint37 for judicial declaration of right to redeem on August
24, 2007. "As the admitted owner of the [property] at the time of the
foreclosure,"38 Mahinay argued that he "must have possessed and still continues
to possess the absolute right to redeem the [property]. "39
Dura Tire answered40 the Complaint, raising the affirmative defense of res
judicata. Dura Tire argued that the Complaint for judicial declaration of right to
redeem had identical parties, subject matter, and causes of action with that of the
Complaint for annulment of foreclosure sale.41 Furthermore, the period of
Mahinay' s right of redemption had already lapsed. Therefore, Mahinay could not
be allowed to belatedly redeem the property. 42
During the hearing on October 27, 2008, Mahinay and Dura Tire jointly moved
for a judgment on the pleadings. The trial court granted the motion and deemed
the case submitted for decision after the filing of memoranda.43
Mahinay having acquired the property from A&A Swiss before Dura Tire
foreclosed the property, the trial court ruled that Mahinay became a "successor-
in-interest" to the property even before the foreclosure sale. Therefore, by
operation of law, Mahinay was legally entitled to redeem the property.44
However, considering that one (1) year period of redemption had already lapsed,
Mahinay could no longer exercise his right of redemption.45
Despite Dura Tire's refusal to accept his offer to pay Move Overland' s unpaid
credit purchases, the trial court said that "there was nothing to stop [Mahinay]
from redeeming the property as soon as he became aware of the foreclosure sale.
[Mahinay] could have ... filed an action to compel [Dura Tire] to accept payment
by way of redemption." 46
Hence, in the Judgment on the Pleadings47 dated April 13, 2010, Branch 20 of the
Regional Trial Court of Cebu City dismissed Mahinay's Complaint for judicial
declaration of right to redeem. The dispositive portion of the Judgment read:
Upon the foregoing considerations, the court finds no factual and legal basis to
grant the plaintiffs plea to be allowed to redeem the foreclosed property subject
of this case.
IN CONSEQUENCE, Judgment is hereby rendered DISMISSING the plaintiffs
Complaint.
SO ORDERED.48 (Emphasis in the original)
Mahinay filed a Motion for Reconsideration, which the trial court denied in the
Order49 dated September 2, 2010.
On a pure question of law, Mahinay directly filed a Petition for Review on
Certiorari50 before this Court. Dura Tire filed its Comment,51 to which Mahinay
filed a Reply.52
Mahinay maintains that he should be allowed to redeem the property he bought
from A&A Swiss despite the lapse of one (1) year from the registration of the
Certificate of Sale on February 20, 1995. Mahinay primarily argues that the one
(1)-year period of redemption was tolled when he filed the Complaint for
annulment of foreclosure sale on March 23, 1995 and resumed when the June 16,
2006 Decision of the Court of Appeals became final and executory on August 8,
2007. 53 As basis, Mahinay cites Consolidated Bank & Trust Corp. v. Intermediate
Appellate Court. 54
In the alternative, Mahinay contends that the one (1)-year period of redemption
should be counted from the time the June 16, 2006 Decision of the Court of
Appeals became final and executory on August 8, 2007. Mahinay theorizes that
his right of redemption only arose when he was judicially declared "entitled to
redeem the property" in this decision. 55
Since he filed his Complaint for judicial declaration of right to redeem on August
24, 2007, only 16 days after August 8, 2007, Mahinay claims that he exercised his
right of redemption within the one (1)-year period under Act No. 3135.56
Dura Tire counters that nothing prevented Mahinay from exercising his right of
redemption within one (1) year from the registration of the Certificate of Sale. 57
Dura Tire argues that Mahinay's filing of an action for annulment of foreclosure
sale did not toll the running of the redemption period because the law does not
allow its extension. 58 Since the one (1)-year period of redemption already lapsed,
Dura Tire maintains that Mahinay can no longer redeem the property at the bid
price paid by the purchaser.
The sole issue for this Court's resolution is whether the one (1)-year period of
redemption was tolled when Mahinay filed his Complaint for annulment of
foreclosure sale.
This Petition must be denied.
Contrary to Mahinay's claim, his right to redeem the mortgaged property did not
arise from the Court of Appeals' "judicial declaration" that he was a "substitute
mortgagor" of A&A Swiss. By force of law, specifically, Section 6 of Act No. 3135,
Mahinay's right to redeem arose when the mortgaged property was
extrajudicially foreclosed and sold at public auction.1âwphi1 There is no dispute
that Mahinay had a lien on the property subsequent to the mortgage.
Consequently, he had the right to buy it back from the purchaser at the sale, Dura
Tire in this case, "from and at any time within the term of one year from and after
the date of the sale." Section 6 of Act No. 313559 provides:
Section 6. In all cases in which an extrajudicial sale is made under the special
power hereinbefore referred to, the debtor, his successors in interest or any
judicial creditor or judgment creditor of said debtor, or any person having a lien
on the property subsequent to the mortgage or deed of trust under which the
property is sold, may redeem the same at any time within the term of one year
from and after the date of the sale; and such redemption shall be governed by the
provisions of sections four hundred and sixty-four to four hundred and sixty-six,
inclusive, of the Code of Civil Procedure, in so far as these are not inconsistent
with the provisions of this Act.
The "date of the sale" referred to in Section 6 is the date the certificate of sale is
registered with the Register of Deeds. This is because the sale of registered land
does not '"take effect as a conveyance, or bind the land' until it is registered."60
The right of redemption being statutory,61 the mortgagor may compel the
purchaser to sell back the property within the one (1 )-year period under Act No.
3135. If the purchaser refuses to sell back the property, the mortgagor may
tender payment to the Sheriff who conducted the foreclosure sale. 62 Here,
Mahinay should have tendered payment to Sheriff Laurel instead of insisting on
directly paying Move Overland's unpaid credit purchases to Dura Tire.
As early as 1956, this Court held in Mateo v. Court of Appeals63 that "the right of
redemption ... must ... be exercised iri the mode prescribed by the statute." 64 The
one (1)-year period of redemption is fixed, hence, non-extendible, to "avoid
prolonged economic uncertainty over the ownership of the thing sold." 65
Since the period of redemption is fixed, it cannot be tolled or interrupted by the
filing of cases to annul the foreclosure sale or to enforce the right of redemption.
"To rule otherwise ... would constitute a dangerous precedent. A likely offshoot
of such a ruling is the institution of frivolous suits for annulment of mortgage
intended merely to give the mortgagor more time to redeem the mortgaged
property." 66
In CMS Stock Brokerage, Inc. v. Court of Appeals, 67 Rosario Sandejas (Sandejas)
mortgaged two (2) parcels of land in favor of the Bank of the Philippine Islands.
She subsequently mortgaged the same parcels of land to CMS Stock Brokerage,
Inc. In 1971, CMS Stock Brokerage, Inc. extrajudicially foreclosed the properties,
which were sold at a public auction. The certificate of sale was registered on May
19, 1971.68
More than a year after the registration of the Certificate of Sale, or on November
15, 1972, Sandejas wrote the president of the CMS Stock Brokerage, Inc.,
requesting for three (3) years within which to redeem the properties she
mortgaged to it. 69 The president allegedly agreed, even giving her five (5) more
years to redeem the properties.70
However, on February 2, 1973, first mortgagee Bank of the Philippine Islands
extrajudicially foreclosed the properties.71 Despite the third-party claim and
action for quieting of title filed by Sandejas, the Sheriff proceeded with the public
auction with Carolina Industries, Inc. emerging as the highest bidder. 72 The
certificate of sale was issued to Carolina Industries, Inc. and was registered on
December 16, 1983.73
The action for quieting of title was ultimately resolved in favor of CMS Stock
Brokerage, Inc. In G.R. No. 101351, this Court held that CMS Stock Brokerage, Inc.
was "the real owner" of the properties, not Sandejas.74
Nine (9) years after the registration of the Certificate of Sale in favor of Carolina
Industries, or on December 15, 1992, CMS Stock Brokerage, Inc. tendered
₱2,341,166.48 as redemption money with the Clerk of Court. It then filed with the
trial court a motion to require the Sheriff to execute a certificate of redemption.75
The trial court, however, denied the motion, reasoning the right of redemption of
CMS Stock Brokerage, Inc. had already lapsed.76
This Court affirmed the trial court's decision. On whether the quieting of title
action filed by Sandejas tolled the running of the one (1)year period of
redemption, this Court ruled in the negative. According to this Court, "the issue
of ownership insofar as [CMS Stock Brokerage, Inc.' s] right of redemption as
judgment debtor is concerned, has no bearing whatsoever, so as have the effect
of tolling or interrupting the running of the 12-month redemption period."77 This
Court noted that the decision on the quieting of title case would only affect
Sandejas' title to the property.
In Spouses Pahang v. Judge Vestil,78 where spouses Antonio and Lolita Pahang (the
Spouses Pahang) were represented by Mahinay's law firm,79 the Spouses Pahang
loaned ₱l,500,000.00 from Metrobank and mortgaged a parcel of land as security
for the mortgage.80 When the Spouses Pahang failed to pay their loan, Metrobank
extrajudicially foreclosed the property. At the public sale, Metrobank emerged as
the highest bidder and a corresponding certificate of sale was issued to it. The
Certificate of Sale was registered on January 27, 1998.81
On December 29, 1998, Metrobank wrote the Spouses Pahang to remind them of
the expiration of their right of redemption on January 27, 1999.82 Ignoring
Metrobank's note, the Spouses Pahang instead filed an action for annulment of
extrajudicial sale, contending that Metrobank charged them excessive interests
and other fees. They likewise prayed in their Complaint that they be allowed to
redeem their mortgaged property.83
The right of redemption of the Spouses Pahang thus expired on January 27, 1999.
Metrobank consolidated its ownership over the properties, and a transfer
certificate of title was issued in its name. It subsequently filed a petition for
issuance of a writ of possession.84
The Spouses Pahang opposed the petition, arguing that their pending action for
annulment of extra judicial sale tolled the running of the one (1)year period of
redemption. 85
Rejecting the argument of the Spouses Pahang, this Court held that the "filing of
an action by the redemptioner to enforce his right to redeem does not suspend
the running of the statutory period to redeem the property." 86 This Court added
that upon the lapse of the one (1)-year period of redemption, it is the trial court's
ministerial duty to issue a writ of possession to the purchaser at the foreclosure
sale. 87
Here, the Certificate of Sale in favor of Dura Tire was registered on February 20,
1995. Mahinay, as the successor-in-interest of previous owner A&A Swiss, had
one (1) year from February 20, 1995, or on February 20, 1996, 88 to exercise his
right of redemption and buy back the property from Dura Tire at the bid price of
₱950,000.00.
With Mahinay failing to redeem the property within the one (1)-year period of
redemption, his right to redeem had already lapsed. As discussed, the pendency
of an action to annul the foreclosure sale or to enforce the right to redeem does
not toll the running of the period of redemption. The trial court correctly
dismissed the Complaint for judicial declaration of right to redeem.
Mahinay nevertheless cites Consolidated Bank & Trust Corp. v. Intermediate
Appellate Court89 in arguing that the one (1)-year period of redemption was tolled
when he filed the Complaint for annulment of foreclosure sale. In Consolidated
Bank, Nicos Industrial Corporation mortgaged parcels of land to Consolidated
Bank to secure loans totalling ₱4,076,5 l 8.64. When the corporation failed to pay,
Consolidated Bank applied for the extrajudicial foreclosure of the properties. 90
Writs of attachment were issued in favor of Consolidated Bank and Notices of
Levy were annotated on the transfer certificates of title covering the mortgaged
properties. However, a year later, the properties weresubsequently foreclosed by
first mortgagee United ·Coconut Planters Bank, and a certificate of sale was
issued to the latter on September 6, 1983. A month later, the United Coconut
Planters Bank sold the properties to Manuel Go, who, in tum, sold the properties
to Golden Star Industrial Corporation. Nicos then executed a Waiver of Right of
Redemption in favor of Golden Star.91
Golden Star then filed a petition for issuance of a writ of possession over the
properties. The writ of possession was issued, allowing Golden Star to seize the
properties under the custody of the Sheriff ofManila.92
Consolidated Bank then filed a motion to annul the writ of possession on
November 21, 1983. On a petition for review ·on certiorari before this Court,
Golden Star argued, among others, that Consolidated Bank had no right to possess
the properties. At that time, one (1) year from the registration of the certificate
of sale had already lapsed.93
This Court held that Consolidated Bank's filing of the motion to annul the writ of
possession tolled the running of the one (1)-year period of redemption.94 This
Court found that Nicos and Golden Star "conspired to defeat [Consolidated
Bank's] lien on the attached properties and to deny the latter its right of
redemption."95 Considering that Consolidated Bank filed its motion to annul the
writ of possession on November 21, 1983, just two (2) months after the
certificate of sale was registered on September 6, 1983, this Court held that
Consolidated Bank may still redeem the properties from Golden Star. 96
Consolidated Bank is not precedent for the present case.
Consolidated Bank cited Ong Chua v. Carr,97 an inapplicable case, as basis for
ruling that "the pendency of an action tolls the term of the right of redemption."98
Ong Chua involved a sale with right to repurchase,99 and the period of the "right
of redemption" referred to in that case was governed by the provisions of the Civil
Code on conventional redemption, specifically, Articles 1601 and 1606.100 On the
other hand, the present case involves the redemption of an extrajudicially
foreclosed property. The right of redemption involved in this case is governed by
Section 6 of Act No. 3135.
The respondents in Consolidated Bank actively denied the petitioner its right of
redemption. 101 This Court, therefore, held that the petitioner in Consolidated
Bank was a victim of fraud. 102 No such fraud exists in the present case.
Moreover, the previously discussed cases of CMS Stock Brokerage103 and Spouses
Pahang104 were promulgated later than Consolidated Bank. 105 That the pendency
of an action questioning the legality of the foreclosure sale or enforcing the right
of redemption does not toll the running of the period of redemption must be the
controlling doctrine.
All told, the trial court correctly dismissed Mahinay's Complaint for judicial
declaration of right to redeem. To grant the Complaint would have extended the
period of redemption for Mahinay, in contravention of the fixed one (1)-year
period provided in Act No. 3135.
WHEREFORE, the Petition for Review on Certiorari is DENIED. The Judgment on
the Pleadings dated April 13, 2010 and Order dated September 2, 2010 rendered
by Branch 20 of the Regional Trial Court of Cebu City in Civil Case No. CEB-33639
are AFFIRMED.
SO ORDERED.
#23
THIRD DIVISION
October 4, 2017
G.R. No. 196419
PILIPINAS MAKRO, INC., Petitioner
vs.
COCO CHARCOAL PHILIPPINES, INC. and LIM KIM SAN, Respondents
DECISION
MARTIRES, J.:
This Petition for Review on Certiorari seeks to reverse and set aside the 30
December 2010 Decision1 and 7 April 2011 Resolution2 of the Court of Appeals
(CA) in CA-G.R. CV No. 83836 which reversed the 16 August 2004 Decision3 of the
Regional Trial Court, Branch 276, Muntinlupa City {RTC).
Petitioner Pilipinas Makro, Inc. (Makro) is a duly registered domestic
corporation. In 1999, it was in need of acquiring real properties in Davao City to
build on and operate a store to establish its business presence in the city. After
conferring with authorized real estate agents, Makro found two parcels of land
suitable for its purpose.4
On 26 November 1999, Makro and respondent Coco Charcoal Phils., Inc. (Coco
Charcoal)5 executed a notarized Deed of Absolute Sale6 wherein the latter would
sell its parcel of land, with a total area of 1,000 square meters and covered by
Transfer Certificate of Title (TCT) No. 208776, to the former for the amount of
₱8,500,000.00. On the same date, Makro entered into another notarized Deed of
Absolute Sale7 with respondent Lim Kim San (Lim) for the sale of the latter's land,
with a total area of 1,000 square meters and covered by TCT No. 282650, for the
same consideration of ₱8,500,000.00.
Coco Charcoal and Lim's parcels of land are contiguous and parallel to each other.
Aside from the technical descriptions of the properties in question, both deeds of
sale contained identical provisions, similar terms, conditions, and warranties.8
In December 1999, Makro engaged the services of Engineer Josefina M. Vedua
(Engr. Vedua), a geodetic engineer, to conduct a resurvey and relocation of the
two adjacent lots. As a result of the resurvey, it was discovered that 131 square
meters of the lot purchased from Coco Charcoal had been encroached upon by
the Department of Public Works and Highways (DPWH) for its road widening
project and construction of a drainage canal to develop and expand the Davao-
Cotabato National Highway. On the other hand, 130 square meters of the land
bought from Lim had been encroached upon by the same DPWH project.
Meanwhile, TCT Nos. T-321199 and T-321049 were issued in January 2000 in
favor of Makro after the deeds of sale were registered and the titles of the
previous owners were cancelled.9
Makro informed the representatives of Coco Charcoal and Lim about the
supposed encroachment on the parcels of land due to the DPWH project. Initially,
Makro offered a compromise agreement in consideration of a refund of 75% of
the value of the encroached portions. Thereafter, Makro sent a final demand letter
to collect the refund of the purchase price corresponding to the area encroached
upon by the road widening project, seeking to recover ₱1,113,500.00 from Coco
Charcoal and ₱1,105,000.00 from Lim. Failing to recover such, Makro filed
separate complaints against Coco Charcoal and Lim to collect the refund sought.
The RTC Decision
In its 16 August 2004 Decision, the RTC granted Makro's complaint and ordered
respondents to refund the amount corresponding to the value of the encroached
area.1âwphi1 The trial court ruled that the DPWH project encroached upon the
purchased properties, such that Makro had to adjust its perimeter fences. It noted
that Makro was constrained to bring legal action after its demand for refund
remained unheeded. The trial court expounded that the road right of way
includes not only the paved road, but also the shoulders and gutters. It
highlighted that the unpaved portion of the right of way was well within the area
Makro had purchased.
The RTC also found respondents in bad faith because they had concealed from
Makro the fact that the DPWH had already taken possession of a portion of the
lands they had sold, respectively, considering that drainage pipes had already
been installed prior to the sale. It noted that DPWH could not have undertaken
the diggings and subsequent installation of drainage pipes without Coco Charcoal
and Lim's consent, being the previous owners of the lots in question. The
dispositive portion reads:
PREMISES CONSIDERED, judgment is rendered for the plaintiff and defendants
LIM KIM SAN directed to return and reimburse to plaintiff the sum of ONE
MILLION FIVE HUNDRED THOUSAND (Phpl,500,000.00) PESOS, Philippine
Currency, with interest at 12% per annum, attorney's fees of Php200,000.00,
exemplary damages of Php200,000.00 to deter anybody similarly prone;
Coco Charcoal Philippines, Inc. is likewise directed to pay a refund and return to
plaintiff corporation the value of ONE MILLION FIVE HUNDRED THOUSAND
(Phpl,500,000.00) PESOS, Philippine Currency, with interest at 12% per annum,
representing the 131 square meters parcel of land it cannot occupy and to pay
attorney's fees in the sum of Php200,000.00 and exemplary damages of
Php200,000.00 to deter anybody similarly inclined;
Both Defendants are directed to pay the cost of this litigation.
It is SO ORDERED.10
Aggrieved, Coco Charcoal and Lim appealed before the CA.
The CA Ruling
In its 30 December 2010 Decision, the CA reversed the RTC decision. While the
appellate court agreed that the DPWH project encroached upon the frontal
portions of the properties, it ruled that Makro was not entitled to a refund. It
explained that the warranty expressed in Section 4(i)11 of the deeds of sale is
similar to the warranty against eviction set forth under Article 1548 of the Civil
Code. As such, the CA posited that only a buyer in good faith may sue to a breach
of warranty against eviction. It averred that Makro could not feign ignorance of
the ongoing road widening project. The appellate court noted Makro's actual
knowledge of the encroachment before the execution of the sale constitutes its
recognition that Coco Charcoal and Lim's warranty against liens, easements, and
encumbrances does not include the respective 131 and 130 square meters
affected by the DPWH project, but covers only the remainder of the property. It
ruled:
WHEREFORE, premises considered, the instant appeal is GRANTED.
Accordingly, the herein assailed August 16, 2004 Decision of the trial court is
REVERSED and SET ASIDE, and the action instituted by appellee MAKRO against
appellants Coco Charcoal and Lim Kim San for collection of sum of money by
way of refund is hereby DISMISSED for lack of cause of action.
SO ORDERED.12
Makro moved for reconsideration, but the same was denied by the CA in its
assailed 7 April 2011 Resolution.
Hence, this present petition raising the following:
ISSUES
I
WHETHER THE COURT OF APPEALS ERRED IN DENYING MAKRO'S MOTION
FOR EXTENSION TO FILE A MOTION FOR RECONSIDERATION; AND
II
WHETHER THE COURT OF APPEALS ERRED IN DENYING MAKRO A REFUND
ON THE GROUND OF BAD FAITH.
THE COURT'S RULING
The petition is meritorious.
Non-extendible period to file motion for reconsideration; exceptions
Makro filed two motions for extension to file a motion for reconsideration. On the
first motion, it sought an extension after its former lawyer, Atty. Edwin Lacierda,
withdrew as a counsel in view of his appointment as press secretary for former
President Benigno Aquino III. Makro again asked for an extension after its
present counsel was confined for dengue and typhoid fever. Eventually, it filed its
motion for reconsideration on 7 March 2011.
In its 7 April 2011 Resolution, the CA denied Makro's motions for extension to file
a motion for reconsideration, explaining that the 15-day period for the filing of
such is non-extendible and that a motion for extension is prohibited.
It must be remembered that procedural rules are set not to frustrate the ends of
substantial justice, but are tools to expedite the resolution of cases on their
merits. The Court reminds us in Gonzales v. Serrano 13that the prohibition on
motion for extension to file a motion for reconsideration is not absolute, to wit:
The Court shall first delve on the procedural issue of the case. In Imperial v.
Court of Appeals, 14 the Court ruled:
In a long line of cases starting with Habaluyas Enterprises v. Japson, 15 we have
laid down the following guideline:
Beginning one month after the promulgation of this Resolution, the rule shall be
strictly enforced that no motion for extension of time to file a motion for new
trial or reconsideration may be filed with the Metropolitan or Municipal Trial
Courts, the Regional Trial Courts, and the Intermediate Appellate Court. Such a
motion may be filed only in cases pending with the Supreme Court as the court
of last resort, which may in its sound discretion either grant or deny the
extension requested.
Thus, the general rule is that no motion for extension of time to file a motion for
reconsideration is allowed. This rule is consistent with the rule in the 2002
Internal Rules of the Court of Appeals that unless an appeal or a motion for
reconsideration or new trial is filed within the 15-day reglementary period, the
CA's decision becomes final. Thus, a motion for extension of time to file a motion
for reconsideration does not stop the running of the 15-day period for the
computation of a decision's finality. At the end of the period, a CA judgment
becomes final, immutable and beyond our power to review.
This rule, however, admits of exceptions based on a liberal reading of the rule,
so long as the petitioner is able to prove the existence of cogent reasons to
excuse its non-observance. xxx
While the CA was correct in denying his Urgent Motion for Extension to File
Motion for Reconsideration for being a prohibited motion, the Court, in the
interest of justice, looked into the merits of the case, and opted to suspend the
prohibition against such motion for extension after it found that a modification
of the CA Decision is warranted by the law and the jurisprudence on
administrative cases involving sexual harassment. The emerging trend of
jurisprudence, after all, is more inclined to the liberal and flexible application of
procedural rules. Rules of procedure exist to ensure the orderly, just and speedy
dispensation of cases; to this end, inflexibility or liberality must be weighed.
Thus, the relaxation or suspension of procedural rules, or exemption of a case
from their operation is warranted only by compelling reasons or when the
purpose of justice requires it. (emphases and underscoring supplied)
The Court finds that cogent reason exists to justify the relaxation of the rules
regarding the filing of motions for extension to file a motion for reconsideration.
The explanation put forth by Makro in filing its motions for extension clearly were
not intended to delay the proceedings but were caused by reasons beyond its
control, which cannot be avoided even with the exercise of appropriate care or
prudence. Its former counsel had to withdraw in the light of his appointment as
a cabinet secretary and its new lawyer was unfortunately afflicted with a serious
illness. Thus, it would have been more prudent for the CA to relax the procedural
rules so that the substantive issues would be thoroughly ventilated.
More importantly, the liberal application of the rules becomes more imperative
considering that Makro's position is meritorious.
Express Warranty vis-a vis Implied Warranty
In addressing the issues of the present case, the following provisions of the deeds
of sale between Makro and respondents are pertinent:
Section 2. General Investigation and Relocation
Upon the execution of this Deed, the BUYER shall undertake at its own expense
a general investigation and relocation of their lots which shall be conducted by a
surveyor mutually acceptable to both parties. Should there be any discrepancy
between the actual areas of the lots as resurveyed and the areas as indicated in
their Transfer Certificates of Title, the Purchase Price shall be adjusted
correspondingly at the rate of PESOS: EIGHT THOUSAND FIVE HUNDRED
(Php8,500.000) per square meter. In the event that the actual area of a lot is
found to be in excess of the area specified in the Titles, the Purchase Price shall
be increased on the basis of the rate specified herein. Conversely, in the event
that the actual area of a lot is found to be less than the area specified in the
Titles, the BUYER shall deduct a portion of the Purchase Price corresponding to
the deficiency in the area on the basis of the rate specified herein. In any case of
discrepancy, be it more or less than the actual area of the Property as specified
in the Titles, the SELLER agrees to make the necessary correction of the title
covering the lots before the same is transferred to the BUYER.16
Section 4. Representations and Warranties
The SELLER hereby represents and warrants to the BUYER that:
1. The Property is and shall continue to be free and clear of all easements, liens
and encumbrances of any nature whatsoever, and is, and shall continue to be,
not subject to any claim set-off or defense which will prevent the BUYER from
obtaining full and absolute ownership and possession over the Property or from
developing or using it as a site for its store building.17
Pursuant to Section 2 of the deeds of sale, Makro engaged the services of a
surveyor which found that the DPWH project had encroached upon the
properties purchased. After demands for a refund had failed, it opted to file the
necessary judicial action for redress.
The courts a quo agree that the DPWH project encroached upon the properties
Makro had purchased from respondents.1âwphi1 Nevertheless, the CA opined
that Makro was not entitled to a refund because it had actual knowledge of the
ongoing road widening project. The appellate court likened Section 4(i) of the
deeds of sale as a warranty against eviction, which necessitates that the buyer be
in good faith for it to be enforced.
A warranty is a collateral undertaking in a sale of either real or personal property,
express or implied; that if the property sold does not possess certain incidents or
qualities, the purchaser may either consider the sale void or claim damages for
breach of warranty.18 Thus, a warranty may either be express or implied.
An express warranty pertains to any affirmation of fact or any promise by the
seller relating to the thing, the natural tendency of which is to induce the buyer
to purchase the same.19 It includes all warranties derived from the language of
the contract, so long as the language is express-it may take the form of an
affirmation, a promise or a representation.20 On the other hand, an implied
warranty is one which the law derives by application or inference from the nature
of transaction or the relative situation or circumstances of the parties,
irrespective of any intention of the seller to create it.21 In other words, an express
warranty is different from an implied warranty in that the former is found within
the very language of the contract while the latter is by operation of law.
Thus, the CA erred in treating Section 4(i) of the deeds of sale as akin to an implied
warranty against eviction. First, the deeds of sale categorically state that the
sellers assure that the properties sold were free from any encumbrances which
may prevent Makro from fully and absolutely possessing the properties in
question. Second, in order for the implied warranty against eviction to be
enforceable, the following requisites must concur: (a) there must be a final
judgment; (b) the purchaser has been deprived of the whole or part of the thing
sold; (c) said deprivation was by virtue of a prior right to the sale made by the
vendor; and (d) the vendor has been summoned and made co-defendant in the
suit for eviction at the instance of the vendee.22 Evidently, there was no final
judgment and no opportunity for the vendors to have been summoned precisely
because no judicial action was instituted.
Further, even if Section 4(i) of the deeds of sale was to be deemed similar to an
implied warranty against eviction, the CA erred in concluding that Makro acted
in bad faith. It is true that the warranty against eviction cannot be enforced if the
buyer knew of the risks or danger of eviction and still assumed its
consequences.23 The CA highlights that Makro was aware of the encroachments
even before the sale because the ongoing road widening project was visible
enough to inform the buyer of the diminution of the land area of the property
purchased.
The Court disagrees.
It is undisputed that Makro's legal counsel conducted an ocular inspection on the
properties in question before the execution of the deeds of sale and that there
were noticeable works and constructions going on near them. Nonetheless, these
are insufficient to charge Makro with actual knowledge that the DPWH project
had encroached upon respondents' properties. The dimensions of the properties
in relation to the DPWH project could have not been accurately ascertained
through the naked eye. A mere ocular inspection could not have possibly
determined the exact extent of the encroachment. It is for this reason that only
upon a relocation survey performed by a geodetic engineer, was it discovered
that 131 square meters and 130 square meters of the lots purchased from Coco
Charcoal and Lim, respectively, had been adversely affected by the DPWH project.
To reiterate, the fact of encroachment is settled as even the CA found that the
DPWH project had disturbed a portion of the properties Makro had purchased.
The only reason the appellate court denied Makro recompense was because of its
purported actual knowledge of the intrusion which is not reason enough to deny
Makro a refund of the proportionate amount pursuant to Section 2 of the deeds
of sale.
Nevertheless, the RTC errs in ordering respondents to pay ₱l,500,00.00 each to
Makro. Under Section 2 of the deeds of sale, the purchase price shall be adjusted
in case of increase or decrease in the land area at the rate of ₱8,500.00 per square
meter. In the case at bar, 131 square meters and 130 square meters of the
properties of Coco Charcoal and Lim, respectively, were encroached upon by the
DPWH project. Applying the formula set under the deeds of sale, Makro should
be entitled to receive ₱l,113,500.00 from Coco Charcoal and ₱l,105,000.00 from
Lim. It is noteworthy that Makro's complaint against respondents also prayed for
the same amounts. The RTC awarded ₱l,500,00.00 without sufficient factual basis
or justifiable reasons.
Exemplary damages and attorney's fees may be awarded only for cause provided
for by law.
In finding for Makro, the RTC also awarded attorney's fees and exemplary
damages in its favor. The trial court ruled that Makro was entitled to attorney's
fees because it was forced to bring the matter before the court assisted by
counsel. It found the grant of exemplary damages in order because respondents
were in bad faith for concealing from Makro the fact that the DPWH had already
dispossessed a portion of the lots purchased.
In ABS-CBN Broadcasting Corporation v. Court of Appeals, 24 the Court cautioned SO ORDERED.
that the fact that a party was compelled to litigate his cause does not necessarily
warrant the award of attorney's fees, to wit:
#24
As regards attorney's fees, the law is clear that in the absence of stipulation,
attorney's fees may be recovered as actual or compensatory damages under any
of the circumstances provided for in Article 2208 of the Civil Code.

The general rule is that attorney's fees cannot be recovered as part of damages
because of the policy that no premium should be placed on the right to litigate.
They are not to be awarded every time a party wins a suit. The power of the
court to award attorney's fees under Article 2208 demands factual, legal, and
equitable justification. Even when a claimant is compelled to litigate with third
persons or to incur expenses to protect his rights, still attorney's fees may not
be awarded where no sufficient showing of bad faith could be reflected in a
party's persistence in a case other than an erroneous conviction of the
righteousness of his cause. (emphasis supplied)
Other than the bare fact that Makro was compelled to hire the services of counsel
to prosecute its case, the RTC did not provide compelling reasons to justify the
award of attorney's fees. Thus, it is but right to delete the award especially since
there is no showing that respondents had acted in bad faith in refusing Makro's
demand for refund. It is in consonance with the policy that there is no premium
on the right to litigate.25
On the other hand, exemplary damages may be awarded if the defendant had
acted in a wanton, fraudulent, reckless, oppressive or malevolent manner. 26 The
RTC found the award of exemplary damages warranted because respondents
allegedly concealed the fact the DPWH had already taken possession of a portion
of the land they had sold to Makro. Bad faith, however, involves a state of mind
dominated by ill will or motive implying a conscious and intentional design to do
a wrongful act for a dishonest purpose or moral obliquity. 27 Here, there is
insufficient evidence to definitively ascertain that respondents' omission to
mention the ongoing DPWH projects was impelled by a conscious desire to
defraud Makro. This is especially true since the road widening project was
already in progress even before the time of the sale, and which would have been
noticeable when Makro conducted its ocular inspection.
WHEREFORE, the petition is GRANTED. The 30 December 2010 Decision and 7
April 2011 Resolution of the Court of Appeals in CA-G.R. CV No. 83836 are
REVERSED and SET ASIDE. Petitioner Pilipinas Makro, Inc. is entitled to recover
₱l,113,500.00 from respondent Coco Charcoal Phils., Inc. and ₱l,105,000.00 from
respondent Lim Kim San.
First DIVISION
November 20, 2017
G.R. No. 211564
BENJAMIN EVANGELISTA, Petitioner
vs.
SCREENEX,1 INC., represented by ALEXANDER G, YU, Respondent
DECISION
SERENO, CJ.:
This is a Petition2 for Review on Certiorari seeking to set aside the Decision3 and
Resolution4 rendered by the Court of Appeals (CA) Manila, Fifth Division, in CA-
G.R. SP No. 110680.
ANTECEDENT FACTS
The facts as summarized by the CA are as follows:
Sometime in 1991, [Evangelista] obtained a loan from respondent Screenex, Inc.
which issued two (2) checks to [Evangelista]. The first check was UCPB Check No.
275345 for ₱l,000,000 and the other one is China Banking Corporation Check No.
BDO 8159110 for ₱500,000. There were also vouchers of Screenex that were
signed by the accused evidencing that he received the 2 checks in acceptance of
the loan granted to him.
As security for the payment of the loan, [Evangelista] gave two (2) open-dated
checks: UCPB Check Nos. 616656 and 616657, both pay to the order of Screenex,
Inc. From the time the checks were issued by [Evangelista], they were held in safe
keeping together with the other documents and papers of the company by Philip
Gotuaco, Sr., father-in-law of respondent Alexander Yu, until the former's death
on 19 November 2004.
Before the checks were deposited, there was a personal demand from the family
for [Evangelista] to settle the loan and likewise a demand letter sent by the family
lawyer.5
On 25 August 2005, petitioner was charged with violation of Batas Pambansa
(BP) Blg. 22 in Criminal Case Nos. 343615-16 filed with the Metropolitan Trial
Court (MeTC) of Makati City, Branch 61.6 The Information reads:
That sometime in 1991, in the City of Makati, Metro Manila, Philippines, a place
within the jurisdiction of this Honorable Court, the above-named accused, did
then and there, willfully, unlawfully and feloniously make out, draw, and issue to
SCREENEX INC., herein represented by ALEXANDER G. YU, to apply on account
or for value the checks described below:
Check No.
Date
Amount
United Coconut
AGR 616656
12-22-04
₱l ,000,000.00
Planters Bank
AGR 616657
12-22-04
500,000.00
said accused well knowing that at the time of issue thereof, said accused did not
have sufficient funds in or credit with the drawee bank for the payment in full of
the face amount of such check upon its presentment which check when presented
for payment within ninety (90) days from the date thereof, was subsequently
dishonored by the drawee bank for the reason "ACCOUNT CLOSED" and despite
receipt of notice of such dishonor, the said accused failed to pay said payee the
face amount of said checks or to make arrangement for full payment thereof
within five (5) banking days after receiving notice.
CONTRARY TO LAW.7
Petitioner pleaded not guilty when arraigned, and trial proceeded.8
THE RULING OF THE METC
The MeTC found that the prosecution had indeed proved the first two elements
of cases involving violation of BP 22: i.e. the accused makes, draws or issues any
check to apply to account or for value, and the check is subsequently dishonored
by the drawee bank for insufficiency of funds or credit; or the check would have
been dishonored for the same reason had not the drawer, without any valid
reason, ordered the bank to stop payment. The trial court pointed out, though,
that the prosecution failed to prove the third element; i.e. at the time of the
issuance of the check to the payee, the latter did not have sufficient funds in, or
credit with, the drawee bank for payment of the check in full upon its
presentment.9 In the instant case, the court held that while prosecution witness
Alexander G. Yu declared that the lawyer had sent a demand letter to Evangelista,
Yu failed to prove that the letter had actually been received by addressee. Because
there was no way to determine when the five-day period should start to toll, there
was a failure to establish prima facie evidence of knowledge of the insufficiency
of funds on the part of Evangelista.10 Hence, the court acquitted him of the
criminal charges.
Ruling on the civil aspect of the cases, the court held that while Evangelista
admitted to having issued and delivered the checks to Gotuaco and to having fully
paid the amounts indicated therein, no evidence of payment was presented.11 It
further held that the creditor's possession of the instrument of credit was
sufficient evidence that the debt claimed had not yet been paid.12 In the end,
Evangelista was declared liable for the corresponding civil obligation.13
The dispositive portion of the Decision14 reads:
WHEREFORE, judgment is rendered acquitting the accused BENJAMIN
EVANGELISTA for failure of the prosecution to establish all the elements
constituting the offense of Violation of B.P. 22 for two (2) counts. However,
accused is hereby ordered to pay his civil obligation to the private complainant
in the total amount of ONE MILLION FIVE HUNDRED THOUSAND PESOS
(₱l,500,000) plus twelve (12%) percent interest per annum from the date of the
filing of the two sets of Information until fully paid and to pay the costs of suit.
SO ORDERED.15
THE RULING OF THE RTC
Evangelista filed a timely Notice of Appeal16 and raised two errors of the MeTC
before the Regional Trial Court (RTC) of Makati City, Branch 147. Docketed
therein as Criminal Case Nos. 08-1723 and 08-1724, the appeal posed the
following issues: (1) the lower court erred in not appreciating the fact that the
prosecution failed to prove the civil liability of Evangelista to private
complainant; and (2) any civil liability attributable to Evangelista had been
extinguished and/or was barred by prescription.17
After the parties submitted their respective Memoranda,18 the R TC ruled that
the checks should be taken as evidence of Evangelista's indebtedness to Gotuaco,
such that even if the criminal aspect of the charge had not been established, the
obligation subsisted.19 Also, the alleged payment by Evangelista was an
affirmative defense that he had the burden of proving, but that he failed to
discharge.20 With respect to the defense of prescription, the RTC ruled in this
wise:
As to the defense of prescription, the same cannot be successfully invoked in this
appeal. The 10-year prescriptive period of the action under Art. 1144 of the New
Civil Code is computed from the time the right of action accrues. The terms and
conditions of the loan obligation have not been shown, as only the checks
evidence the same. It has not been shown when the loan obligation was to mature
such that there is no basis to show or from which to infer, when the cause of
action (non-payment of the loan) which would give the obligee the right to seek
redress for the non-payment of the obligation, accrued. In other words, the
reckoning point of prescription has not been established.
Prosecution witness Alexander G. Yu was not competent to state that the loan was
contracted in 1991 as in fact, Yu admitted that it was a few months before his
father-in-law (Philip Gotuaco) died when the latter told him about accused's
failure to pay his obligation. That was a few months before November 19, 2004,
date of death of his father-in-law.
At any rate, the right of action in this case is not upon a written contract, for which
reason, Art. 1144, New Civil Code, on prescription does not apply.21
In a Decision22 dated 18 December 2008, the R TC dismissed the appeal and
affirmed the MeTC decision in toto.23 The Motion for Reconsideration24 was
likewise denied in an Order25 dated 19 August 2009.
THE RULING OF THE CA
Evangelista filed a petition for review26 before the CA insisting that the lower
court erred in finding him liable to pay the sum with interest at 12% per annum
from the date of filing until full payment. He further alleged that witness Yu was
not competent to testify on the loan transaction; that the insertion of the date on
the checks without the knowledge of the accused was an alteration that avoided
the checks; and that the obligation had been extinguished by prescription.27
Screenex, Inc., represented by Yu, filed its Comment.28 Yu claimed that he had
testified on the basis of his personal dealings with his father-in-law, whom
Evangelista dealt with in obtaining the loan. He further claimed that during the
trial, petitioner never raised the competence of the witness as an issue.29
Moreover, Yu argued that prescription set in from the accrual of the obligation;
hence, while the loan was transacted in 1991, the demand was made in February
2005, which was within the 10-year prescriptive period.30 Yu also argued that
while Evangelista claimed under oath that the loan had been paid in 1992, he was
not able to present any proof of payment.31 Meanwhile, Yu insisted that the
material alteration invoked by Evangelista was unavailing, since the checks were
undated; hence, nothing had been altered.32 Finally, Yu argued that Evangelista
should not be allowed to invoke prescription, which he was raising for the first
time on appeal, and for which no evidence was adduced in the court of origin.33
The CA denied the petition.34 It held that (1) the reckoning time for the
prescriptive period began when the instrument was issued and the
corresponding check returned by the bank to its depositor;35 (2) the issue of
prescription was raised for the first time on appeal with the RTC;36 (3) the
writing of the date on the check cannot be considered as an alteration, as the
checks were undated, so there was nothing to change to begin with;37 (4) the
loan obligation was never denied by petitioner, who claimed that it was settled in
1992, but failed to show any proof of payment.38 Quoting the MeTC Decision, the
CA declared:
[t]he mere possession of a document evidencing an obligation by the person in
whose favor it was executed, merely raises a presumption of nonpayment which
may be overcome by proof of payment, or by satisfactory explanation of the fact
that the instrument is found in the hands of the original creditor not inconsistent
with the fact of payment.39
The dispositive portion reads:
WHEREFORE, premises considered, the petition is DENIED. The assailed August
19, 2009 Order of the Regional Trial Court, Branch 147, Makati City, denying
petitioner's Motion for Reconsideration of the Court's December 18, 2008
Decision in Crim. Case Nos. 08-1723 and 08- 1724 are AFFIRMED.
SO ORDERED.40
Petitioner filed a Motion for Reconsideration,41 which was similarly denied in a
Resolution42 dated 27 February 2014.
Hence, this Petition,43 in which petitioner contends that the lower court erred in
ordering the accused to pay his alleged civil obligation to private complainant. In
particular, he argues that the court did not consider the prosecution's failure to
prove his civil liability to respondent, and that any civil liability there might have
been was already extinguished and/or barred by prescription.44
Meanwhile, respondent filed its Comment,45 arguing that the date of
prescription was reckoned from the date of the check, 22 December 2004. So
when the complaint was filed on 25 August 2005, it was supposedly well within
the prescriptive period of ten (10) years under Article 1144 of the New Civil
Code.46
OUR RULING
With petitioner's acquittal of the criminal charges for violation of BP 22, the only
issue to be resolved in this petition is whether the CA committed a reversible
error in holding that petitioner is still liable for the total amount of ₱l.5 million
indicated in the two checks.
We rule in favor of petitioner.
A check is discharged by any other
act which will discharge a simple
contract for the payment of money.
In BP 22 cases, the action for the corresponding civil obligation is deemed
instituted with the criminal action.47 The criminal action for violation of BP 22
necessarily includes the corresponding civil action, and no reservation to file such
civil action separately shall be allowed or recognized.48
The rationale for this rule has been elucidated in this wise: Generally, no filing
fees are required for criminal cases, but because of the inclusion of the civil action
in complaints for violation of B.P. 22, the Rules require the payment of docket fees
upon the filing of the complaint. This rule was enacted to help declog court
dockets which are filled with B.P. 22 cases as creditors actually use the courts as
collectors. Because ordinarily no filing fee is charged in criminal cases for actual
damages, the payee uses the intimidating effect of a criminal charge to collect his
credit gratis and sometimes. upon being paid, the trial court is not even informed
thereof. The inclusion of the civil action in the criminal case is expected to
significantly lower the number of cases filed before the courts for collection based
on dishonored checks. It is also expected to expedite the disposition of these
cases. Instead of instituting two separate cases, one for criminal and another for
civil, only a single suit shall be filed and tried. It should be stressed that the policy
laid down by the Rules is to discourage the separate filing of the civil action. The
Rules even prohibit the reservation of a separate civil action, which means that
one can no longer file a separate civil case after the criminal complaint is filed in
court. The only instance when separate proceedings are allowed is when the civil
action is filed ahead of the criminal case. Even then, the Rules encourage the
consolidation of the civil and criminal cases. We have previously observed that a
separate civil action for the purpose of recovering the amount of the dishonored
checks would only prove to be costly, burdensome and time-consuming for both
parties and would further delay the final disposition of the case. This multiplicity
of suits must be avoided.49 (Citations omitted)
This notwithstanding, the civil action deemed instituted with the criminal action
is treated as an "independent civil liability based on contract."50
By definition, a check is a bill of exchange drawn on a bank 'payable on demand.51
It is a negotiable instrument - written and signed by a drawer containing an
unconditional order to pay on demand a sum certain in money.52 It is an
undertaking that the drawer will pay the amount indicated thereon. Section 119
of the NIL, however, states that a negotiable instrument like a check may be
discharged by any other act which will discharge a simple contract for the
payment of money, to wit:
Sec. 119. Instrument; how discharged. - A negotiable instrument is discharged:
(a) By payment in due course by or on behalf of the principal debtor;
(b) By payment in due course by the party accommodated, where the instrument
is made or accepted for his accommodation;
(c) By the intentional cancellation thereof by the holder;
(d) By any other act which will discharge a simple contract for the payment of
money;
(e) When the principal debtor becomes the holder of the instrument at or after
maturity in his own right. (Emphasis supplied)
A check therefore is subject to prescription of actions upon a written contract.
Article 1144 of the Civil Code provides:
Article 1144. The following actions must be brought within ten years from the
time the right of action accrues:
1) Upon a written contract;
2) Upon an obligation created by law;
3) Upon a judgment. (Emphasis supplied)
Barring any extrajudicial or judicial demand that may toll the 10-year
prescription period and any evidence which may indicate any other time when
the obligation to pay is due, the cause of action based on a check is reckoned from
the date indicated on the check.
If the check is undated, however, as in the present petition, the cause of action is
reckoned from the date of the issuance of the check. This is so because regardless
of the omission of the date indicated on the check, Section 1753 of the Negotiable
Instruments Law instructs that an undated check is presumed dated as of the
time of its issuance.
While the space for the date on a check may also be filled, it must, however, be
filled up strictly in accordance with the authority given and within a reasonable
time.54 Assuming that Yu had authority to insert the dates in the checks, the fact
that he did so after a lapse of more than 10 years from their issuance certainly
cannot qualify as changes made within a reasonable time.
Given the foregoing, the cause of action on the checks has become stale, hence,
time-barred. No written extrajudicial or judicial demand was shown to have been
made within 10 years which could have tolled the period. Prescription has indeed
set in.
Prescription allows the court to
dismiss the case motu proprio.
We therefore have no other recourse but to grant the instant petition on the
ground of prescription. Even if that defense was belatedly raised before the RTC
for the first time on appeal from the ruling of the Me TC, we nonetheless dismiss
the complaint, seeking to enforce the civil liability of Evangelista based on the
undated checks, by applying Section 1 of Rule 9 of the Rules of Court, to wit:
Section 1. Defenses and objections not pleaded. - Defenses and objections not
pleaded either in a motion to dismiss or in the answer are deemed waived.
However, when it appears from the pleadings or the evidence on record that the
court has no jurisdiction over the subject matter, that there is another action
pending between the same parties for the same cause, or that the action is barred
by a prior judgment or by statute of limitations, the court shall dismiss the claim.
While it was on appeal before the RTC that petitioner invoked the defense of
prescription, we find that the pleadings and the evidence on record indubitably
establish that the action to hold petitioner liable for the two checks has already
prescribed.
The delivery of the check produces
the effect of payment when through
the fault of the creditor they have
been impaired
It is a settled rule that the creditor's possession of the evidence of debt is proof
that the debt has not been discharged by payment.55 It is likewise an established
tenet that a negotiable instrument is only a substitute for money and not money,
and the delivery of such an instrument does not, by itself, operate as payment.56
Thus, in BPI v. Spouses Royeca,57 we ruled that despite the lapse of three years
from the time the checks were issued, the obligation still subsisted and was
merely suspended until the payment by commercial document could actually be
realized.58
However, payment is deemed effected and the obligation for which the check was
given as conditional payment is treated discharged, if a period of 10 years or more
has elapsed from the date indicated on the check until the date of encashment or
presentment for payment. The failure to encash the checks within a reasonable
time after issue, or more than 10 years in this instance, not only results in the
checks becoming stale but also in the obligation to pay being deemed fulfilled by
operation of law.
Art. 1249 of the Civil Code specifically provides that checks should be presented
for payment within a reasonable period after their issuance, to wit:
Art. 1249. The payment of debts in money shall be made in the currency
stipulated, and if it is not possible to deliver such currency, then in the currency
which is legal tender in the Philippines.
The delivery of promissory notes payable to order, or bills of exchange or other
mercantile documents shall produce the effect of payment only when they have
been cashed, or when through the fault of the creditor they have been impaired.
In the meantime, the action derived from the original obligation shall be held in
the abeyance. (Emphasis supplied)
This rule is similarly stated in the Negotiable Instruments Law as follows:
Sec. 186. Within what time a check must be presented. - A check must be
presented for p:iyment within a reasonable time after its issue or the drawer will
be discharged from liability thereon to the extent of the loss caused by the delay.
(Emphasis supplied)
These provisions were the very same ones we cited when we discharged a check
by reason of the creditor's unreasonable or unexplained delay in encashing it. In
Papa v. Valencia,59 the respondents supposedly paid the petitioner the purchase
price of the lots in cash and in check. The latter disputed this claim and argued
that he had never encashed the checks, and that he could no longer recall the
transaction that happened 10 years earlier. This Court ruled:
Granting that petitioner had never encashed the check, his failure to do so for
more than ten (10) years undoubtedly resulted in the impairment of the check
through his unreasonable and unexplained delay.
While it is true that the delivery of a check produces the effect of payment only
when it is cashed, pursuant to Art. 1249 of the Civil Code, the rule is otherwise if
the debtor is prejudiced by the creditor's unreasonable delay in presentment. The
acceptance of a check implies an undertaking of due diligence in presenting it for
payment, and if he from whom it is received sustains loss by want of such
diligence, it will be held to operate as actual payment of the debt or obligation for
which it was given. It has, likewise, been held that if no presentment is made at
all, the drawer cannot be held liable irrespective of loss or injury unless
presentment is otherwise excused. This is in harmony with Article 1249 of the
Civil Code under which payment by way of check or other negotiable instrument
is conditioned on its being cashed, except when through the fault of the creditor,
the instrument is impaired. The payee of a check would be a creditor under this
provision and if its no-payment is caused by his negligence, payment will be
deemed effected and the obligation for which the check was given as conditional
payment will be discharged.60 (Citations omitted and emphasis supplied)
Similarly in this case, we find that the delivery of the checks, despite the
subsequent failure to encash them within a period of 10 years or more, had the
effect of payment. Petitioner is considered discharged from his obligation to pay
and can no longer be pronounced civilly liable for the amounts indicated thereon.
WHEREFORE, the instant Petition is GRANTED. The Decision dated 1 October
2013 and Resolution dated 27 February 2014 in CA-G.R. SP No. 110680 are SET
ASIDE. The Complaint against petitioner is hereby DISMISSED.
SO ORDERED.
#25
FIRST DIVISION
G.R. No. 204289, November 22, 2017
FERNANDO MANCOL, JR., Petitioner, v. DEVELOPMENT BANK OF THE
PHILIPPINES, Respondent.
DECISION
TIJAM, J.:
Assailed in this Petition for Review on Certiorari1 is the Decision2 dated February
22, 2012 and Resolution3 dated September 27, 2012 of the Court of Appeals (CA),
Visayas Station in CA-G.R. CEB-CV No. 03030, affirming the Orders dated June 13,
2008,4 November 4, 20085 and April 17, 20096 of the Regional Trial Court (RTC)
of Calbayog City, Branch 31 in Civil Case No. 923.
Factual Antecedents
Respondent Development Bank of the Philippines (DBP), scheduled an Invitation
to Bid for Negotiated Sale on October 13, 2004 at the Mezzanine Floor, over a
residential lot with a two-storey building (subject property) covered by TCT No.
2041 located at Navarro Street, Calbayog City, and with Tax Declaration (TD) Nos.
9901006009317 and 9901006004798 with a purchase price of P1,326,000.9
In line with this, Fernando Mancol, Jr. (petitioner) executed a Special Power of
Attorney (SPA)10 appointing his father, Fernando Mancol, Sr. (Mancol, Sr.), to
represent and negotiate, on his behalf, the sale of the subject property. Pursuant
to the SPA, Mancol, Sr. signed the Negotiated Offer to Purchase 11 and Negotiated
Sale Rules and Procedures/Disposition of Assets on a First-Come First Served
Basis.12 DBP then issued an Official Receipt (O.R.) No. 344001813 dated October
13, 2004, in the name of Fernando R. Mancol, Jr., paid by Fernando M. Mancol, Sr.,
in the amount of P265,200, as initial payment for the purchase price of the subject
property. During the negotiations, DBP officials allegedly agreed, albeit verbally,
to: (1) arrange and effect the transfer of title of the lot in petitioner's name,
including the payment of capital gains tax (CGT); and (2) to get rid of the
occupants of the subject property.14
Petitioner paid the balance in the amount of P1,060,800, as evidenced by O.R. No.
344045115 dated December 10, 2004. Thereafter, DBP, through its Branch
Manager Jorge B. Albarillo, executed a Deed of Absolute Sale, 16 in petitioner's
favor.
On December 21, 2004, petitioner made a deposit with DBP for the payment of
the CGT and documentary stamp tax (DST) in the amount of P99,450. DBP
acknowledged the deposit and issued O.R. No. 3440537.17
Sometime in 2006, DBP reneged on its undertaking based on the oral agreement.
DBP returned to the petitioner all the pertinent documents of the sale and issued
a Manager's Check (MC) No. 000095647518 in the amount of P99,450.19
In a Letter20 dated February 21, 2006, petitioner through its counsel demanded
from DBP to comply with its verbal undertaking. He returned the MC and all
pertinent documents affecting the sale of the subject property to DBP.
DBP, through its Letter21 dated April 22, 2006, disregarded the subsequent oral
agreement and reminded petitioner that DBP has no obligation to eject the
occupants and to cause the transfer of title of the lot in petitioner's name.
Meanwhile, Mancol, Sr. wrote a Letter22 dated May 15, 2006 to the Bureau of
Internal Revenue (BIR) requesting for a detailed computation of the CGT and DST
with penalties and surcharges thereof affecting the sale of the subject property.
The BIR, through its Letter23 dated May 24, 2006 came out with a detailed
computation in the total of P160,700.88.
In aLetter24 dated June 2, 2006, petitioner proposed to DBP that he will facilitate
the payment of the CGT and DST but DBP should shoulder the penalties and
surcharges. The proposal, however, was turned down. As of March 7, 2007, the
total amount to be paid which is necessary for the transfer of the title in
petitioner's name ballooned to P183,553.61 and counting.25
On August 24, 2006, petitioner filed a Complaint26 for damages for breach of
contract against DBP before the RTC of Calbayog City, Branch 31. He prayed that
DBP be found to have breached its obligation with petitioner; that DBP be held
liable to pay the aggregate amount of P160,700.88 and surcharges which may be
imposed by the BIR at the time of payment; that DBP be ordered to pay damages
and attorney's fees; and that DBP be ordered to return the MC dated February 8,
2006 for P99,450.
In its Answer with Counter-Claim,27 DBP alleged that the terms of the Deed of
Absolute Sale stated no condition that DBP will work on the document of transfer
and to eject the occupants thereon.28 Assuming that DBP's officials made such a
promise, DBP alleged that the same would not be possible since the petitioner did
not give any money to DBP for other expenses in going to and from Calbayog City.
DBP likewise alleged that it is not the bank's policy to work for the registration of
the instrument of sale of properties.29 DBP further claimed that petitioner's
unilateral act in issuing a check to DBP does not constitute as evidence to prove
that DBP assumed the responsibility of registering the instrument of sale. By way
of counterclaim, DBP averred that petitioner grossly violated the terms and
conditions of the agreement of sale.30 Petitioner failed to pay, reimburse or
assume the financial obligation consequent to the initiation and filing of the writ
of possession by DBP against the occupants. Petitioner's failure was contrary to
his promise and assurance that he will pay. Petitioner did not comply with the
clear and express provisions of the Deed of Absolute Sale and of the rules and
procedures of sale on negotiation. DBP, thus, prayed that the complaint be
dismissed for lack of jurisdiction and that petitioner be ordered to assume the
burden of initiating the ejectment suit and to pay DBP damages, attorney's fees
and cost of suit amounting to P200,000.
On February 20, 2007, the RTC issued an Orde31 declaring DBP in default by
reason of its counsel's failure to appear during the pre-trial and to file its pre-trial
brief.
Trial ensued.
During the trial, Rodel Villanueva testified32 that he was the one commissioned
or ordered by a certain Atty. Mar De Asis (Atty. De Asis) of DBP, to go to BIR-
Catbalogan, and to bring the following documents: a check worth PhP99,450.00,
the amount for the CGT, the title, the TD, and the deed of sale. 33
Mancol, Sr. testified34 that he signed the Negotiated Offer to Purchase and
Negotiated Sale Rules and Procedures/Disposition of Assets on a First-Come First
Served Basis on behalf of his son, by virtue of the SPA.35 He stated that after the
execution and delivery of the Deed of Absolute Sale, DBP verbally agreed to
facilitate the transfer of the title, the payment of the CGT, and to cause the
vacation of the occupants of the house and lot. Although he admitted that the
verbal agreement contradicted the negotiated rules and agreement. 36 He stated
that DBP undertook to get rid of the occupants, when its lawyer filed an Ex-Parte
Motion for Issuance of a Writ of Possession37 dated January 11, 2005, which is
pending in the RTC.38
On April 14, 2008, the RTC Decision39 ruled in favor of the petitioner, and ordered
DBP to return to petitioner the amount of P99,450 deposited to it for payment of
the CGT and DST; to pay the surcharges and/or interests on the CGT and DST as
may be determined by the BIR from June 12, 2005 up to the date of payment; and
to pay the petitioner attorney's fees in the amount of P15,000. The RTC likewise
dismissed DBP's counterclaim.40
Thereafter, DBP moved for the reconsideration41 of the RTC's Decision. DBP
alleged, among others, that the testimonies of Villanueva and Mancol, Sr. were
hearsay because their statements were based on facts relayed to them by other
people and not based on their personal knowledge.
On June 13, 2008, the RTC Order42 granted DBP's motion and dismissed
petitioner's complaint.
Petitioner moved for the reconsideration43 of the June 13, 2008 Order. For the
first time, petitioner alleged that through his father, Mancol, Sr., he entered into a
contemporaneous verbal agreement with DBP. He argued that since his father
was his attorney-in-fact, then his father had personal knowledge of all
transactions involving the sale of the subject property. The motion, however, was
denied in the RTC Order44 dated November 4, 2008. The RTC affirmed with
modification its June 13, 2008 Order, to read thus:
WHEREFORE, this court finds no reason to disturb its order dated June 13, 2008, II. UNDISPUTED RELEVANT AND MATERIAL EVIDENCE ON
subject only to a modification that [DBP] is directed to return to the [petitioner], RECORD ESTABLISHED THE EXISTENCE AND VALIDITY OF
the total amount of P99,450.00 deposited to it for the payment of the [CGT] and THE SUBSEQUENT ORAL AGREEMENT BETWEEN MANCOL, JR.
[DST], with interest of six percent (6%) per annum from December 21, 2004 until AND DBP, AND THAT TO IGNORE THEM IS TO SANCTION
its return to the [petitioner]. VIOLATION OF MANCOL. JR.'S DUE PROCESS RIGHTS[; AND]

SO ORDERED.45 III. [PETITIONER] IS ENTITLED TO THE PAYMENT OF MORAL AND

DBP sought reconsideration46 of the RTC Order dated November 4, 2008, which EXEMPLARY DAMAGES, ATTORNEY'S FEES AND COSTS OF
however, was denied by the RTC in its Order47 dated April 17, 2009. The RTC SUIT.55
ruled that DBP has waived its right to question the return of P99,450 to the
petitioner since DBP failed to refute such an issue in the RTC Decision dated April The petition fails.
14, 2008.
The above assignment of errors make it evident that the only issue involved in
Both petitioner48 and DBP49 appealed the RTC Order dated June 13, 2008 and this appeal is one of fact: whether or not the testimonies of petitioner's witnesses,
November 4, 2008, respectively, with the CA. Villanueva and Mancol, Sr., should be given probative value to establish the
alleged contemporaneous verbal agreement in the sale contract, i.e., that DBP
On February 22, 2012, the CA in its Decision,50 denied both appeals, the bound itself to arrange and effect the transfer of title of the lot in petitioner's
dispositive portion of which reads, thus: name; and, get rid of the occupants of the subject property.
WHEREFORE, in view of the foregoing premises, the appeals filed in this case are
hereby DENIED. The assailed Orders dated June 13, 2008, November 4, 2008 and We answer in the negative.
April 17, 2009 of the [RTC], Branch 31 of Calbayog City in Civil Case No. 923 are
AFFIRMED. Costs to be shouldered equally by both parties. "The parol evidence rule forbids any addition to, or contradiction of, the terms of
a written agreement by testimony or other evidence purporting to show that
SO ORDERED.51 different terms were agreed upon by the parties, varying the purport of the
written contract."56
Thereafter, petitioner filed a Motion for Partial Reconsideration, 52 while DBP
filed a Motion for Reconsideration,53 seeking the reversal of the CA Decision dated This, however, is merely a general rule. Provided that a party puts in issue in its
February 22, 2012. Both motions, however, were denied in the CA Resolution54 pleading any of the exceptions in the second paragraph of Rule 130, Section 9 57
dated September 27, 2012. of the Revised Rules on Evidence, a party may present evidence to modify, explain
or add to the terms of the agreement. Moreover, as with all possible objections to
Henceforth, only the petitioner filed the instant appeal anchored on the following the admission of evidence, a party's failure to timely object is deemed a waiver,
arguments: and parol evidence may then be entertained.58

I. THE TESTIMONIES OF [PETITIONER'S] WITNESSES,
[VILLANUEVA] AND [MANCOL, SR.] ARE BASED ON PERSONAL
KNOWLEDGE AND NOT HEARSAY EVIDENCE, AND THAT THEY
SUFFICIENTLY ESTABLISHED THE EXISTENCE AND VALIDITY
OF A SUBSEQUENT ORAL AGREEMENT BETWEEN
[PETITIONER] AND DBP TO (1) ARRANGE AND EFFECT THE
TRANSFER OF THE TORRENS TITLE IN THE NAME OF
[PETITIONER], INCLUDING PAYMENT OF [CGT] AND [DSTs],
AND (2) TO GET RID OF THE OCCUPANTS IN THE SUBJECT
PROPERTY[;]
In the case of Maunlad Savings & Loan Assoc., Inc. v. CA,59 the Court held that:
The rule is that objections to evidence must be made as soon as the grounds
therefor become reasonably apparent. In the case of testimonial evidence, the
objection must be made when the objectionable question is asked or after the
answer is given if the objectionable features become apparent only by reason of
such answer, otherwise the objection is waived and such evidence will form part
of the records of the case as competent and complete evidence and all parties are
thus amenable to any favorable or unfavorable effects resulting from the
evidence.60 (Citations omitted)
Here, in order to prove the verbal agreement allegedly made by DBP, petitioner
invoked the fourth exception under the parol evidence rule, i.e., the existence of
other terms agreed to by the parties or their successors-in-interest after the
execution of the written agreement, by offering the testimonies of Villanueva and
Mancol, Sr.
The bank, however, failed to make a timely objection against the said testimonies
during the trial since DBP was declared in default. Thus, DBP waived the
protection of the parol evidence rule.
This notwithstanding, We stress that the admissibility of the testimonial evidence
as an exception to the parol evidence rule does not necessarily mean that it has
weight. Admissibility of evidence should not be confounded with its probative
value.
"The admissibility of evidence depends on its relevance and competence, while
the weight of evidence pertains to evidence already admitted and its tendency to
convince and persuade."61 The admissibility of a particular item of evidence has
to do with whether it meets various tests by which its reliability is to be
determined, so as to be considered with other evidence admitted in the case in
arriving at a decision as to the truth.62 The weight of evidence is not determined
mathematically by the numerical superiority of the witnesses testifying to a given
fact, but depends upon its practical effect in inducing belief on the part of the
judge trying the case.63 "Admissibility refers to the question of whether certain
pieces of evidence are to be considered at all, while probative value refers to the
question of whether the admitted evidence proves an issue."64 "Thus, a particular
item of evidence may be admissible, but its evidentiary weight depends on
judicial evaluation within the guidelines provided by the rules of evidence." 65
It is a basic rule in evidence that a witness can testify only on the facts that he
knows of his own personal knowledge, i.e., those which are derived from his own
perception.66 A witness may not testify on what he merely learned, read or heard
from others because such testimony is considered hearsay and may not be
received as proof of the truth of what he has learned, read or heard. 67 Hearsay
evidence is evidence, not of what the witness knows himself but, of what he has
heard from others; it is not only limited to oral testimony or statements but
likewise applies to written statements.68
The personal knowledge of a witness is a substantive prerequisite for accepting
testimonial evidence that establishes the truth of a disputed fact. 69 A witness
bereft of personal knowledge of the disputed fact cannot be called upon for that
purpose because his testimony derives its value not from the credit accorded to
him as a witness presently testifying but from the veracity and competency of the
extrajudicial source ofhis information.70
Guided by these precepts, Villanueva's testimony falls within the category of
hearsay evidence. Contrary to petitioner's claim, Villanueva had no personal
inkling as to the contemporaneous verbal agreement between petitioner and
DBP. In fact, there was no such verbal agreement. As admitted by the petitioner,
the alleged verbal agreement was entered into between DBP and MancoI, Sr., by
virtue of the SPA. Villanueva has no personal knowledge of such fact. His
testimony related only to the fact that Atty. De Asis ordered him to go to BIR-
Catbalogan, and bring the following documents: a check worth P99,450, the
amount for the CGT, title, TD, and the deed of sale. None of Villanueva's acts would
suggest, even remotely, that he personally knew about the verbal agreement.
As correctly pointed out by the CA:
[Villanueva] did not personally witness the perfection of the alleged
contemporaneous agreement between Mancol, Jr. and DBP. Furthermore, he had
no personal knowledge of its existence. His testimony merely touched on the
alleged denial by the Revenue Office of the payment of the [CGT] on the subject
property and the subsequent execution of a new deed of conveyance by the DBP.
It is clear then that his testimony did not bolster [petitioner's] allegation to any
degree.71
The same conclusion can be drawn from Mancol, Sr.'s testimony. Although the
records show that by virtue of an SPA executed by the petitioner, Mancol, Sr.
signed the Negotiated Offer to Purchase, including the Negotiated Sale Rules and
Procedures/Disposition of Assets on a First Come First Served Basis, and that he
made the initial payment for the sale, there is dearth of evidence to prove that
indeed, he personally entered into a verbal agreement with DBP. Upon being
asked what transpired after the delivery of the Deed of Absolute Sale, Mancol, Sr.
simply answered that DBP agreed to undertake the transfer of title of the lot, and
to oust the occupants. There was no mention as to who actually and personally
appeared before DBP or any of its officials in order to forge the alleged verbal
agreement. Thus:
(DIRECT EXAMINATION by Atty. Elino Chin, counsel for Witness: [Mancol,
Sr.])
xxxx
ATTY. CHIN
Q After the delivery of this Exh. "H", what transpired?
A The bank agreed to facilitate the transfer of the title and the payment of
the [CGT] to get rid of the present occupants of the house and lot.
Q You said that the bank agreed, is that in writing?
 A Only verbal. INVITATION TO BID FOR NEGOTIATED SALE scheduled on October 13, 2004 at
the Mezzanine Floor, the subject Residential Lot with two storey building (TCT
No. 2041) located at Navarro Street, Calbayog City; and
Q That does not contradict the negotiated rules and agreement? 2. To sign, or execute and receive any paper or document necessary for the above
A Yes, but there was a verbal undertaking for them to do what was agreed purpose.
upon.
x x x x.74
There is nothing in the language of the SPA from which We could deduce the
x x x x.72 intention of petitioner to authorize Mancol, Sr. to enter into a verbal agreement
with DBP. Indeed, it has been held that "[w]here powers and duties are specified
Additionally, the RTC aptly observed that:
and defined in an instrument, all such powers and duties are limited and are
[N]owhere in the records would also reveal that the agreement to arrange and
confined to those which are specified and defined, and all other powers and
effect the transfer of title over the subject lot was entered into between [DBP] and
duties are excluded."75 Clearly, the power to enter into a verbal agreement with
[Mancol, Sr.], for and on behalf of the [petitioner].
DBP is conspicuously inexistent in the SPA.
x x x The [SPA] authorizes [Mancol, Sr.] to represent the [petitioner] and
To adopt the intent theory advanced by petitioner, in the absence of clear and
negotiate before the DBP, Catarman Branch on the invitation to bid on he sale of
convincing evidence to that effect, would run afoul of the express tenor of the SPA.
the lot covered by TCT No. 2041 scheduled on October 13, 2004, as well as to sign
It would likewise be contrary to "the rule that a power of attorney must be strictly
or execute and receive any paper or document necessary for said purposes. This
construed and pursued. The instrument will be held to grant only those powers
explains why it was Mancol, Sr. who signed the Negotiated Offer to Purchase and
which are specified therein, and the agent may neither go beyond nor deviate
the Negotiated Sale Rules and Procedure, and who paid to DBP the initial
from the power of attorney."76
payment of the purchase price on October 13, 2004 in [petitioner's] behalf. It was
not established however whether the subsequent payments and other
It is axiomatic that this Court will not review, much less reverse, the factual
transactions, including the act of entering into an oral agreement with [DBP] that
findings of the CA, especially where, as in this case, such findings coincide with
it will effect the transfer of the subject title, were also carried out by Fernando
those of the trial court, since this Court is not a trier of facts.
Mancol, Sr. in behalf of [petitioner].
All told, therefore, the Court finds no reason or basis to grant the petition.
The [petitioner] fails [sic] to show with whom the [DBP] agreed to arrange and
effect the transfer of the title in his name. Thus, as there is no showing that it was
WHEREFORE, the petition is DENIED. The Decision dated February 22, 2012 and
[Mancol, Sr.] who entered into such agreement with [DBP] or that he was
Resolution dated September 27, 2012 of the Court of Appeals, Visayas Station in
personally present during the perfection of the agreement and witnessed the
CA-G.R. CEB-CV No. 03030 are AFFIRMED.
same, any statement from the latter as to the circumstances relative to the
perfection of such oral agreement would indeed be hearsay.73
SO ORDERED.
Assuming for argument's sake that Mancol, Sr., on behalf of petitioner, entered
into a verbal agreement with DBP, such agreement would remain unenforceable.
Despite petitioner's insistence, the act of entering into a verbal agreement was
not stipulated in the SPA. The authority given to Mancol, Sr. was limited to
representing and negotiating, on petitioner's behalf, the invitation to bid on the
sale of the subject lot, which is specifically worded as follows:
I, FERNANDO R. MANCOL, JR., x x x by these presents do hereby name, constitute
and appoint my father Fernando M. Manco, Sr., as true and lawful attorney-in-
fact, for me, in my name, place and to do and perform the following:

1. To represent and negotiate before the DBP Catarman Branch regarding the