Land Titles and Deeds Sec .
51-77 answered affirmatively, whether he could sign the proposed annotation, having
UDK No. 7671 June 23, 1988
DEVELOPMENT BANK OF THE PHILIPPINES, registrant-appellant,
vs.
THE ACTING REGISTER DEEDS OF NUEVA ECIJA, respondent-appellee.
NARVASA, J.:
This case, rather cut-and-dried as far as factual background is concerned, turns upon a
determination of the true meaning and intendment of Section 56 of Presidential Decree
No. 1529, 1 which in part reads:
Sec. 56. Primary Entry Book; fees, certified copies. — Each Register of Deeds shall keep a
primary entry book in which, upon payment of the entry fee, he shall enter, in the order
of their reception, all instruments including copies of writs and processes filed with him
relating to registered land. He shall, as a preliminary process in registration, note in such
book the date, hour and minute of reception of all instruments, in the order in which
they were received. They shall be regarded as registered from the time so noted, and
the memorandum of each instrument, when made on the certificate of title to which it
refers, shall bear the same date: Provided, that the national government as well as the
provincial and city governments shall be exempt from the payment of such fees in
advance in order to be entitled to entry and registration.
xxx xxx xxx
The facts are few and undisputed. On June 13, 1980, the Development Bank of the
Philippines (hereafter, DBP) presented for registration to the Register of Deeds of Nueva
Ecija, Cabanatuan City, a sheriff's certificate of sale in its favor of two parcels of land
covered by Transfer Certificates of Title Nos. NT-149033 and NT-149034, both in the
names of the spouses Andres Bautista and Marcelina Calison, which said institution had
acquired as the highest bidder at an extrajudicial foreclosure sale. The transaction was
entered as Entry No. 8191 in the Registry's Primary Entry Book and DBP paid the requisite
registration fees on the same day. Annotation of the sale on the covering certificates of
title could not, however be effected because the originals of those certificates were
found to be missing from the files of the Registry, where they were supposed to be kept,
and could not be located. 2 On the advice of the Register of Deeds, DBP instituted
proceedings in the Court of First Instance of Nueva Ecija to reconstitute said certificates,
and reconstitution was ordered by that court in a decision rendered on June 15,
1982. 3For reasons not apparent on the record, the certificates of title were reconstituted
only on June 19,1984. 4
On June 25, 1984, DBP sought annotation on the reconstituted titles of the certificate of
sale subject of Entry No. 8191 on the basis of that same four-year-old entry. The Acting
Register of Deeds, being in doubt of the proper action to take on the solicitation, took
the matter to the Commissioner of Land Registration by consulta raising two questions:
(a) whether the certificate of sale could be registered using the old Entry No. 8191
made in 1980 notwithstanding the fact that the original copies of the reconstituted
certificates of title were issued only on June 19, 1984; and (b) if the first query was
assumed his duties only in July 1982.5
The resolution on the consulta held that Entry No. 8191 had been rendered "...
ineffective due to the impossibility of accomplishing registration at the time the
document was entered because of the non-availability of the certificate (sic) of title
involved. For said certificate of sale to be admitted for registration, there is a need for it
to be re-entered now that the titles have been reconstituted upon payment of new
entry fees," and by-passed the second query as having been rendered moot and
academic by the answer to the first. 6
Unwilling to accept that result, the DBP appealed the resolution to the Court of Appeals
(then the Intermediate Appellate Court) 7 which, after reviewing the record, certified
the appeal to this Court as involving a question purely of law. 8
The appealed resolution appears to be based upon a reading of the cited Section 56 of
PD No. 1529, and particularly of the provision therein referring to the Register's act of
making a primary entry as " ... a preliminary process in registration ...," as depriving of any
effect a primary entry without a corresponding annotation thereof on the certificate of
title to which the instrument subject of said entry refers.
That view fails to find support from a consideration of entire context of said Section 56
which in another part also provides that the instrument subject of a primary entry "...
shall be regarded as registered from the time so noted ...," and, at the very least, gives
such entry from the moment of its making the effect of putting the whole world on
notice of the existence the instrument on entered. Such effect (of registration) clearly
attaches to the mere making of the entry without regard to the subsequent step of
annotating a memorandum of the instrument subject of the entry on the certificate of
title to which it refers. Indeed, said Section, in also providing that the annotation, "...
when made ... shall bear the same date ..." as the entry, may be said to contemplate
unspecified intervals of time occurring between the making of a primary entry and that
of the corresponding annotation on the certificate of title without robbing the entry of
the effect of being equivalent to registration. Neither, therefore, is the implication in the
appealed resolution that annotation must annotation entry immediately or in short order
justified by the language of Section 56.
Furthermore, it is amply clear that the four-year hiatus between primary entry and
proposed annotation in this case has not been of DBP's making. Though it was under no
necessity to present the owner's duplicates of the certificates of title affected for
purposes of primary entry, since the transaction sought to be recorded was an
involuntary transaction, 9 and the record is silent as to whether it presented them or not,
there is nonetheless every probability that it did so. It was the mortgagee of the lands
covered by those titles and it is usual in mortgage transactions that the owner's
duplicates of the encumbered titles are yielded into the custody of the mortgage until
the mortgage is discharged. Moreover, the certificates of title were reconstituted from
the owner's duplicates, 10 and again it is to be presumed that said duplicates were
presented by DBP, the petitioner in the reconstitution proceedings.
It is, furthermore, admitted that the requisite registration fees were fully paid and that
the certificate of sale was registrable on its face. 11 DBP, therefore, complied with all that
was required of it for purposes of both primary entry and annotation of the certificate of
sale. It cannot be blamed that annotation could not be made contemporaneously with
the entry because the originals of the subject certificates of title were missing and could
not be found, since it had nothing to do with their safekeeping. If anyone was
responsible for failure of annotation, it was the Register of Deeds who was chargeable
with the keeping and custody of those documents.
It does not, therefore, make sense to require DBP to repeat the process of primary entry,
paying anew the entry fees as the appealed resolution disposes, in order to procure
annotation which through no fault on its part, had to be deferred until the originals of
the certificates of title were found or reconstituted. That it is hardly just or equitable to
do so also seems to have occurred to the Solicitor General, who dilutes his argument in
support of the appealed resolution with the suggestion that "... the making of a new
entry ... would be the more orderly procedure," and that DBP should not be made to
pay filing fees anew.12
Jurisprudence on the subject, while it has not been entirely consistent, is not wanting.
In Government vs. Aballe, 13this Court ruled that " ... (a)lthough a notice of attachment
has not been noted on the certificate of title, its notation in the book of entry of the
register of deeds produces all the effects which the law gives to its registration or
inscription." Seemingly, that ruling was abandoned in the wartime case of Basa vs. De la
Rama, 14 where it was held that the entry of an instrument in the primary entry book
produces no legal effect unless a memorandum thereof is noted on the certificate of
title. Villasor vs. Camon, 15 however, clarified that Aballe was never really abandoned or
reversed insofar as it applied to involuntary transactions. Said the Court in that case,
which involved a voluntary transactions — a deed of assignment of rights in a parcel of
land and its improvements:
The appellant cannot invoke in support of her contention, the ruling laid down in the
case of Government of the Philippine Islands vs. Aballe, 60 Phil., 986, which was followed
in Director of Lands vs. Abad, 61 Phil. 479, to the effect that an attachment entered
upon the entry book is duly registered although the duplicate certificate is not
presented at the time of registration to the register of deeds. Appellant cannot invoked
said ruling, not because it has been abandoned by the Supreme Court during the
Japanese occupation in the case of Bass VS. De la Rama, et al., ... in which it was said
that "we are constrained to abandon the ruling in said two cases,"- it was not
abandoned for the decision was concurred by only two justices or less than a majority,
and said statement was not necessary or an obiter dictum and against the law, as
correctly stated by the two associate justices who dissented and only concurred in the
result, but because said ruling, subsisting and in force, does not support appellant's
contention, for it is only applicable to registration of involuntary instruments, such as
attachment, or other liens and adverse claims of any description. This ruling is correct or
in conformity with the provisions of section 72 of Act No. 496, which do not require the
production by the registrant of the duplicate certificate of the land to be affected, ...
(emphasis supplied)
The decision in Villasor also quoted with approval the following excerpt from an earlier
case, Philippine National Bank vs. Fernandez. 16
Coming now to the second ground on which the appellant bases his claims, we find
that when Simona Fausa executed the document, Exhibit 3, on October 17, 1928,
conveying her interest in the land to the appellant, her interest therein had already
been attached by the provincial sheriff and also by him at public auction to the
Philippine National Bank, and the certificate of sale filed in the office of the register of
deeds in accordance with the law (sections 429 and 450 of the Code of Civil
Procedure). It was not necessary for the sheriff to present the owner's duplicate of the
certificate of title when he filed notice of attachment with the register of deeds, nor was
it necessary for the Philippine National Bank to present the owner's duplicate when the
bank filed its certificate of sale for registration (sections 71 and 72 of Act No. 496).
Later cases appear to have applied the Aballe ruling that entry in the day book, even
without the corresponding annotation on the certificate of title, is equivalent to, or
produces the effect of, registration to voluntary transactions, provided the requisite fees
are paid and the owner's duplicates of the certificates of title affected are presented.
Thus, in Levin vs. Bass, et al., 17 it was held:
... Under the Torrens system the act of registration is the operative act to convey and
affect the land. Do the entry in the day book of a deed of sale which was presented
and filed together with owner's duplicate certificate of title which the office of the
Registrar of Deeds and full payment of registration fees constitute a complete act of
registration which operates to convey and affect the land? In voluntary registration,
such as a sale, mortgage, lease and the like, if the owner's duplicate certificate be not
surrendered and presented or if no payment of registration fees be made within 15
days, entry in the day book of the deed of sale does not operate to convey and affect
the land sold. In involuntary registration, such as an attachment, levy upon execution, lis
pendens and the like entry thereof in the day book is a sufficient notice to all persons of
such adverse claim. ... The pronouncement of the court below is to the effect that an
innocent purchaser for value has no right to the property because he is not a holder of
a certificate of title to such property acquired by him for value and in good faith. It
amounts to holding that for failure of the Registrar of Deeds to comply and perform his
duty, an innocent purchaser for value loses that character-he is not an "innocent holder
for value of a certificate of title." ... Neither violence to, nor stretching of the meaning of,
the law would be done, if we should hold that an innocent purchaser for value of
registered land becomes the registered owner and in contemplation of law the holder
of a certificate thereof the moment he presents the owner's duplicate certificate of title
to the property sold and pays the full amount of registration fees, because what remains
to be done lies not within his power to perform. The Registrar of Deeds is in duty bound
to perform it. We believe that is a reasonable and practical interpretation of the law
under considerations-a construction which would lead to no inconsistency and
injustice. (emphasis supplied)
A similar ruling was made in Potenciano vs. Dineros, et al., 18 concerning land a deed of
sale of which was entered in the day book upon payment of the corresponding fees
and presentation of the owner's duplicate of the covering certificate of title, on
November 4, 1944. However, due to the confusion arising from the bombing of Manila
(this having happened during the final months of the Japanese Occupation), the
papers presented by the registrant were either lost or destroyed, no certificate of title
was issued to him and as far as the records of the Register of Deeds showed, the
property remained in the name of the vendor. Another party later sued the vendor,
obtained judgment against him and purchased the property on execution sale. In
affirming judgment annulling the execution sale in an action brought by the original
purchaser, this Court held:
The judgment creditor contends that entry of the deed in the day book is not sufficient
registration. Both upon law and authority this contention must be rejected. Section 56 of
the Land Registration Act says that deeds relating to registered land shall, upon
payment of the filing fees, be entered in the entry book — also called day book in the
same section — with notation of the year, month, day, hour, and minute of their
reception and that "they shall be regarded as registered from the moment so
noted." And applying this provision in the cases of Levin vs. Bass, etc., G.R. Nos. L-4340 to
4346, decided on May 28, 1952, this Court held that "an innocent purchaser for value of
registered land becomes the registered owner and in contemplation of law the holder
of a certificate thereof the moment he presents and files a duly notarized and lawful
deed of sale and the same is entered on the day book and at the same time he
surrenders or presents the owner's duplicate certificate of title to the property sold and
pays the full amount of registration fees, because what remains to be done lies not
within his power to perform."
Current doctrine thus seems to be that entry alone produces the effect of registration,
whether the transaction entered is a voluntary or an involuntary one, so long as the
registrant has complied with all that is required of him for purposes of entry and
annotation, and nothing more remains to be done but a duty incumbent solely on the
register of deeds.
Therefore, without necessarily holding that annotation of a primary entry on the original
of the certificate of title may be deferred indefinitely without prejudice to the legal
effect of said entry, the Court rules that in the particular situation here obtaining,
annotation of the disputed entry on the reconstituted originals of the certificates of title
to which it refers is entirely proper and justified. To hold said entry "ineffective," as does
the appealed resolution, amounts to declaring that it did not, and does not, protect the
registrant (DBP) from claims arising, or transactions made, thereafter which are adverse
to or in derogation of the rights created or conveyed by the transaction thus entered.
That, surely, is a result that is neither just nor can, by any reasonable interpretation of
Section 56 of PD 1529, be asserted as warranted by its terms.
The qualms implicit in the query of the respondent (and present appellee) register of
deeds about making annotation of an entry effected before he assumed that office
are more imagined than real. He would only be making a memorandum of an
instrument and of its entry based on or reciting details which are already of indubitable
record and, pursuant to the express command of the law, giving said memorandum the
same date as the entry. No part of that function is exclusive to the incumbent of the
office at the time entry was made or is forbidden to any of his successors.
WHEREFORE, the appealed resolution of the Acting Commissioner of Land Registration is
SET ASIDE. The respondent-appellee Register of Deeds of Nueva Ecija, or his successor, is
ordered to annotate on the originals of the reconstituted Transfer Certificates of Title
Nos. NT-149033 and NT-149034 of his Registry a memorandum of the certificate of sale in
favor of appellant Development Bank of the Philippines as entered under Entry No. 8191
dated June 13, 1980 of the Primary Entry (Day) Book of said Registry. No pronouncement
as to costs.
SO ORDERED.
NATIONAL HOUSING AUTHORITY, G.R. No. 149121
Petitioner,
Present:
PUNO, C.J.,
- versus - Chairperson,
CARPIO,*
LEONARDO-DE CASTRO,
BERSAMIN, and
AUGUSTO BASA, JR., LUZ BASA and VILLARAMA, JR., JJ.
EDUARDO S. BASA,
Respondents.
Promulgated:
April 20, 2010
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
DECISION
LEONARDO-DE CASTRO, J.
This Petition for Review on Certiorari under Rule 45 of the Rules of Court seeks to set aside
the Amended Decision[1] of the Court of Appeals dated November 27, 2000and its
Resolution dated July 19, 2001 denying the motion for reconsideration of the National
Housing Authority (NHA).
On April 19, 1983, spouses Augusto and Luz Basa loaned from NHA the amount
of P556,827.10 secured by a real estate mortgage over their properties covered by
Transfer Certificates of Title (TCTs) Nos. 287008 and 285413, located at No. 30 San
Antonio St., San Francisco del Monte, Quezon City.[2] Spouses Basa did not pay the loan
despite repeated demands. To collect its credit, the NHA, on August 9, 1990, filed a
verified petition for extrajudicial foreclosure of mortgage before the Sheriffs Office
in Quezon City, pursuant to Act No. 3135, as amended.[3]
After notice and publication, the properties were sold at public auction where NHA
emerged as the highest bidder.[4] On April 16, 1991, the sheriffs certificate of sale was
registered and annotated only on the owners duplicate copies of the titles in the hands
of the respondents, since the titles in the custody of the Register of Deeds were among
those burned down when a fire gutted the City Hall of Quezon City on June 11, 1988.[5]
On April 16, 1992, the redemption period expired, [6] without respondents having
redeemed the properties. Shortly thereafter, on April 24, 1992, NHA executed an
Affidavit of Consolidation of Ownership [7] over the foreclosed properties, and the same
was inscribed by the Register of Deeds on the certificates of title I n the hand of NHA
under Entry No. 6572/T-287008-PR-29207.[8]
On June 18, 1992, NHA filed a petition for the issuance of a Writ of Possession. The said
petition was granted by the Regional Trial Court (RTC) in an Order [9] dated August 4,
1992.
A Writ of Possession[10] was issued on March 9, 1993 by the RTC, ordering spouses
Augusto and Luz Basa to vacate the subject lots. The writ, however, remained
unserved.This compelled NHA to move for the issuance of an alias writ of possession
on April 28, 1993.
Before the RTC could resolve the motion for the issuance of an alias writ of possession,
respondents spouses Basa and Eduardo Basa, on June 2, 1993, filed a Motion for Leave
to Intervene and Petition in Intervention (with Prayer for Temporary Restraining Order
and/or Writ of Preliminary Injunction).[11] Respondents anchored said petition for
intervention on Section 8 [12] of Act No. 3135, as amended, which gives the
debtor/mortgagor the remedy to petition that the sale be set aside and the writ of
possession be cancelled. In the said petition for intervention, respondents averred that
the extrajudicial foreclosure of the subject properties was a nullity since notices were not
posted and published, written notices of foreclosure were not given to them, and
notices of sale were not tendered to the occupants of the sold properties, thereby
denying them the opportunity to ventilate their rights. [13] Respondents likewise insisted
that even assuming arguendo that the foreclosure sale were valid, they were still
entitled to redeem the same since the one-year redemption period from the registration
of the sheriffs certificate of foreclosure sale had not yet prescribed. [14] Citing Bernardez
v. Reyes[15] and Bass v. De la Rama, [16] respondents theorized that the instrument is
deemed registered only upon actual inscription on the certificate of title in the custody
of the civil registrar.[17]Since the sheriffs certificate was only inscribed on the owners
duplicate certificate of title, and not on the certificate of title in the possession of the
Register of Deeds, then there was no effective registration and the one-year
redemption period had not even begun to run. Thus, respondents asked the RTC,
among others, to declare the foreclosure sale null and void, to allow the respondents to
redeem the mortgaged properties in the amount of P21,160.00, and to cancel the Writ
of Possession dated March 9, 1993.
NHA opposed respondents petition for intervention. [18] It countered that the extrajudicial
foreclosure sale was conducted validly and made in accordance with Act No. 3135 as
evidenced by the publication of the Notice of Sheriffs Sale in the Manila Times in its
issues dated July 14, 21 and 28, 1990.[19] NHA also said that respondents had been
furnished with a copy of the Notice of Sheriffs Sale as shown at the bottom portion of
said notice. [20] NHA maintained that respondents right of redemption had long expired
on April 15, 1992 since the certificate of sale was inscribed on their TCT Nos. 285413 and
287008 a year earlier, or on April 16, 1991. It pointed out that the RTC, via its Order
dated August 4, 1992, had already ruled that respondents right of redemption was
already gone without them exercising said right. Since said order had already attained
finality, the ruling therein could no longer be disturbed.
On January 2, 1995, the RTC issued the first assailed Order [21] with the following directives:
1) granting the issuance of the alias writ of possession which allowed NHA to take
possession of the subject properties; 2) admitting the Petition in Intervention and treating
the same as the petition to set aside sale mentioned in [Sec. 8] of Act No. 3155; and 3)
granting the issuance of a Writ of Preliminary Injunction in favor of respondents that
ordered NHA to refrain from selling or disposing of the contested properties. The
pertinent portion of the order reads:
After examining the record and following precedents x x x this Court hereby orders:
1. The issuance of an alias writ of possession;
2. Admission of the Petition in Intervention, treating the same as the petition to set aside
sale, etc., mentioned in [Sec. 8] of Act No. 3155;
3. The issuance of a writ of preliminary injunction, after a BOND in the amount
of P20,000.00 had been duly filed by intervenors, ordering movant National Housing
Authority, its agents and/or any other person acting under its command, to desist and
refrain from selling or in any manner from disposing of the subject properties covered by
TCT Nos. 287008 and 285413 and located at No. 30, San Antonio Street, San Francisco
del Monte, Quezon City, pending the termination of this proceeding and/or unless a
contrary order is issued by this Court;
4. Setting the hearing of the petition in intervention (to set aside) on March 17, 1995,
at 8:30 a.m.[22]
NHA filed a motion for reconsideration [23] assailing the RTCs Order insofar as it admitted
respondents motion for intervention and issued a writ of preliminary injunction. NHA
argued that respondents should have assailed the foreclosure sale during the hearing in
the petition for the issuance of a Writ of Possession, and not during the hearing in the
petition for the issuance of an alias writ of possession since the petition referred to in
Section 8 of Act No. 3135 pertains to the original petition for the issuance of the Writ of
Possession and not the Motion for the Issuance of an Alias Writ of Possession. NHA
stressed that another reason why the petition for intervention should be denied was the
finality of the Order dated August 4, 1992 declaring respondents right of redemption
barred by prescription. Lastly, NHA asserted that the writ of possession was issued as a
matter of course upon filing of the proper motion and thereby, the court was bereft of
discretion.
In the second assailed Order[24] dated September 4, 1995, the RTC denied NHAs motion
for reconsideration reasoning that the admission of the intervention was sanctioned by
Section 8 of Act No. 3135. As to the grant of preliminary injunction, the RTC made the
justification that if the NHA was not restrained, the judgment which may be favorable to
respondents would be ineffectual. The order partly provides:
The motion is without merit. The admission of the intervention is sanctioned by Sec. 8 of
Act No. 3135. And, because, otherwise or if no preliminary injunction is issued, the
movant NHA may, before final judgment, do or continue the doing of the act with the
intervenor asks the court to restrain, and thus make ineffectual the final judgment
rendered afterwards which may grant the relief sought by the intervenor.
ACCORDINGLY, the motion for reconsideration is DENIED. [25]
Undaunted, NHA filed on November 24, 1995, a special civil action for certiorari and
prohibition before the Court of Appeals.
The Court of Appeals rendered a Decision[26] dated February 24, 2000, in favor of the
NHA. It declared null and void the assailed orders of the RTC dated January 2,
1995 and September 4, 1995, to the extent that the said orders admitted the petition in
intervention and granted the issuance of the preliminary injunction; but it upheld the
grant of the alias writ of possession, thus:
WHEREFORE, the petition is GRANTED, and the assailed order of January 2, 1995 is
declared NULL AND VOID except for the portion directing the issuance of an alias writ of
possession. Likewise declared NULL AND VOID is the second assailed order of September
4, 1995 denying the petitioners motion for reconsideration. Let an alias writ of possession
be issued and executed/implemented by the public respondent without further
delay.[27]
The Court of Appeals defended its affirmation of the RTCs grant of the alias writ of
possession in NHAs favor by saying that it was a necessary consequence after the earlier
writ was left unserved to the party. It further explained that NHA was entitled to the writ
of possession as a matter of course after the lapse of the redemption period.
As to the RTCs admission of respondents petition for intervention, the appellate court
opined that it was improperly and erroneously made. The Court of Appeals believed
that the only recourse available to a mortgagor, in this case the respondents, in a
foreclosure sale is to question the validity of the sale through a petition to set aside the
sale and to cancel the writ of possession, a summary procedure provided for under
Section 112 of the Land Registration Act. It also observed that the grant of the
preliminary injunction by the RTC was uncalled for as it would effectively defeat the right
of NHA to possession, the latter having been entitled by virtue of the grant of the alias
writ of possession.
Respondents filed a motion for reconsideration.[28] They alleged that since they raised
the issue that their right of redemption had not prescribed, said fact should have
changed the whole scenario such that the issuance of a writ of possession ceased to be
summary in nature and was no longer ministerial. Respondents then concluded that
their right to redeem the properties against NHAs right to the writ of possession must be
threshed out in a hearing of the case on its merits.
With regard to the RTC Order dated August 4, 1992 granting the writ of possession which,
according to the NHA, became final and executory, respondents argued that said
order did not constitute res judicata so as to bar the filing of the petition for intervention
since the said order was not a judgment on the merits that could attain finality.
Also, respondents would like the Court of Appeals to treat the petition for intervention
not only as an opposition to the issuance of the alias writ of possession, but also as a
proper remedy under Section 8 of Act No. 3135, as amended, in view of the various
issues raised.
On November 27, 2000, the Court of Appeals, in its Amended Decision, reconsidered its
earlier stance. It declared that the period of redemption had not expired as the
certificate of sale had not been registered or annotated in the original copies of the
titles supposedly kept with the Register of Deeds since said titles were earlier razed by
fire. Taking its cue from Bass v. De la Rama where the Court purportedly made a ruling
that entry of a document, such as sale of real property, in the entry book is insufficient to
treat such document as registered, unless the same had been annotated on the
certificate of title; the Court of Appeals went on to say that the entry of the certificate
of sale in the owners duplicate of the titles could not have been sufficient to register the
same since anyone who would wish to check with the Register of Deeds would not see
any annotation. Thus, entry made on the owners duplicate of the titles cannot be
considered notice that would bind the whole world. Having been deprived of their right
of redemption, the Court of Appeals deemed it proper to allow respondents to
intervene. The dispositive part of the amended decision decrees:
WHEREFORE, the motion for reconsideration is GRANTED. Our decision dated February
24, 2000, is RECONSIDERED and SET ASIDE and the petition DISMISSED.[29]
Unfazed, NHA filed a motion for reconsideration, which the Court of Appeals denied in
its July 19, 2001 Resolution, to wit:
ACCORDINGLY, the Motion for Reconsideration dated February 24, 2000 is DENIED for
lack of merit.[30]
Hence, the instant petition.
In its memorandum, NHA tendered the following issues:
1. WHETHER OR NOT THE ANNOTATION OF THE SHERIFFS CERTIFICATE OF SALE IN THE
PRIMARY ENTRY BOOK OF THE REGISTER OF DEEDS AND ON THE OWNERS DUPLICATE TITLE
IS SUFFICIENT COMPLIANCE WITH THE REQUIREMENT OF LAW ON REGISTRATION.
2. WHETHER OR NOT THE CASE OF BASS VS. DE LA RAMA HAS BEEN SUPERSEDED.[31]
Respondents, on the other hand, offered the following as issues:
I
WHETHER OR NOT THE COURT OF APPEALS ERRED IN FINDING THAT THE LOWER
COURT DID NOT ACT WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF
JURISDICTION IN ADMITTING THE RESPONDENTS INTERVENTION AND GRANTING THE
EQUITABLE WRIT OF INJUNCTION THEREBY DISMISSING THE PETITION FOR CERTIORARI AND
PROHIBITION.
II
WHETHER OR NOT THE INSTANT PETITION COMPLIES WITH THE REQUIREMENTS OF RULE 45
OF THE RULES OF COURT. [32]
On the procedural aspect, respondents question NHAs alleged failure to include in its
petition copies of material portions of the record such as pleadings filed in the RTC and
the Court of Appeals as required under Section 4, Rule 45 of the Rules of
Court. Respondents also pointed out the purported defective verification of NHA in view
of the fact that it merely stated that the one verifying had read the allegations of the
petition and that the same were true and correct to the best of his
knowledge. According to respondents, such declarations were not in accordance with
the rules which require that a verified pleading must state that the affiant had read the
pleading and that the allegations therein were true and correct based on his personal
knowledge and not only to the best of his knowledge.
As to the merits, NHA stresses that the annotation and entry in the owners duplicate
certificate of titles of the sheriffs certificate of sale are sufficient compliance with the
requirement of law on registration. To support this, NHA refers to Land Registration
Administration Circular No. 3 dated December 6, 1988, entitled Entry and Provisional
Registration of Instruments Pending Reconstitution of Title which allegedly authorized all
Registers of Deeds to accept for entry and provisional registration instruments affecting
lost or destroyed certificates of title pending reconstitution of the original. The legality
and validity of the disputed registration on its duplicate copies of the sheriffs certificate
of sale, NHA insists, are backed by this Courts ruling in Development Bank of the
Philippines v. Acting Register of Deeds of Nueva Ecija,[33] where purportedly, this Court
made a favorable interpretation of Section 56 of Presidential Decree No. 1529. NHA says
that the inscription of the sheriffs certificate of sale only to the owners duplicate copies,
but not to those in the custody of the register of deeds is justified as the latter were
burned down. Thus, it could not be blamed for the non-registration of the sale in the
original copies.
NHA faults the Court of Appeals reliance on Bass v. De la Rama since the ruling therein
stating that entry and annotation of a sale instrument on the owners duplicate copy
only as insufficient registration, was already abandoned in Development Bank of the
Philippines v. Acting Register of Deeds of Nueva Ecija, where it was allegedly ruled that
the primary entry alone of the transaction produces the effect of registration so long as
the registrant has complied with all that is required of him for purposes of entry and
annotation.
In contrast, respondents submit that annotation of the sheriffs certificate of sale on the
owners copy is inadequate to propel the running of the redemption period. They firmly
believe that for the sale instrument to be considered as registered, the inscription must
be made on the reconstituted titles.
Respondents disagree with NHAs opinion that Bass v. De la Rama was superceded
by Development Bank of the Philippines v. Acting Register of Deeds of Nueva Ecija. They
are of the persuasion that the ruling in DBP pertains exclusively to the unique factual
milieu and the issues attendant therein, but not to the instant case
where Bass purportedly applies. Respondents also assail NHAs citation of Sta. Ignacia
Rural Bank, Inc. v. Court of Appeals.[34] According to them, said case finds no
application to the instant controversy because the issue involved in the former was
whether the redemption period should be reckoned from the date of the auction sale
or the registration of the certificate of sale, which ostensibly is not the bone of
contention in this case.
Ascribing NHAs inaction to have the burned titles reconstituted, respondents assert that
such neglect should not be used as a justification for the non-inscription in the original
titles of the certificate of sale. Additionally, respondents insist that the question of
whether the redemption period should be reckoned from the inscription on the owners
duplicate copies is a factual and legal issue that is appropriately adjudicated in a
hearing on the merits of their petition in intervention, and not in the instant special civil
action for certiorari and prohibition which is limited in scope, namely, whether the RTC
committed grave abuse of discretion amounting to lack of jurisdiction in admitting their
petition in intervention.
Respondents reiterate that the issuance of the writ of possession prayed for by NHA
before the RTC is no longer ministerial since it raised the issue of whether their period of
redemption has already expired. They cite Barican v. Intermediate Appellate Court [35] as
the authority to this argument.
We dwell first with the procedural issues before the main controversy. Respondents
contend that the instant petition is dismissible on the ground that NHA failed to attach
pleadings filed in the RTC and the Court of Appeals as required under Section 4, Rule 45
of the Rules of Court which partly provides:
SEC. 4. Contents of petition. The petition shall be filed in eighteen (18) copies, with the
original copy intended for the court being indicated as such by the petitioner, and shall
x x x (d) be accompanied by a clearly legible duplicate original, or a certified true copy
of the judgment or final order or resolution certified by the clerk of court of the court a
quo and the requisite number of plain copies thereof, and such material portions of the
record as would support the petition; x x x.
In its petition, NHA attached the February 24, 2000 Decision, the November 27,
2000 Amended Decision, and the July 19, 2001 Resolution all of the Court of Appeals;
copies of the transfer certificates of title of the disputed properties; and the June 13,
1994 Order of the Quezon City RTC ordering the reconstitution of the said titles. This
Court finds that NHA substantially complied with the requirements under Section 4 of
Rule 45. The same conclusion was arrived at by this Court in Development Bank of the
Philippines v. Family Foods Manufacturing Co., Ltd.[36] when it was faced with the same
procedural objection, thus:
As held by this Court in Air Philippines Corporation v. Zamora:
[E]ven if a document is relevant and pertinent to the petition, it need not be appended
if it is shown that the contents thereof can also [be] found in another document already
attached to the petition. Thus, if the material allegations in a position paper are
summarized in a questioned judgment, it will suffice that only a certified true copy of the
judgment is attached.
Third, a petition lacking an essential pleading or part of the case record may still be
given due course or reinstated (if earlier dismissed) upon showing that petitioner later
submitted the documents required, or that it will serve the higher interest of justice that
the case be decided on the merits.
Nevertheless, even if the pleadings and other supporting documents were not attached
to the petition, the dismissal is unwarranted because the CA records containing the
promissory notes and the real estate and chattel mortgages were elevated to this
Court. Without a doubt, we have sufficient basis to actually and completely dispose of
the case.
We must stress that cases should be determined on the merits, after all parties have
been given full opportunity to ventilate their causes and defenses, rather than on
technicalities or procedural imperfections. In that way, the ends of justice would be
served better. Rules of procedure are mere tools designed to expedite the decision or
resolution of cases and other matters pending in court. A strict and rigid application of
rules, resulting in technicalities that tend to frustrate rather than promote substantial
justice, must be avoided. In fact, Section 6 of Rule 1 states that the Rules shall be liberally
construed in order to promote their objective of ensuring the just, speedy and
inexpensive disposition of every action and proceeding.
Contrary to respondents assertion, NHAs verification conforms to the rule. Section 4, Rule
7 of the Rules of Court states:
SEC. 4. Verification. Except when otherwise specifically required by law or rule,
pleadings need not be under oath, verified or accompanied by affidavit.
A pleading is verified by an affidavit that the affiant has read the pleading and that the
allegations therein are true and correct of his personal knowledge or based on
authentic records.
A pleading required to be verified which contains a verification based on information
and belief, or upon knowledge, information and belief, or lacks a proper verification,
shall be treated as an unsigned pleading.
The reason for requiring verification in the petition is to secure an assurance that the
allegations of a pleading are true and correct; are not speculative or merely imagined;
and have been made in good faith. [37] To achieve this purpose, the verification of a
pleading is made through an affidavit or sworn statement confirming that the affiant
has read the pleading whose allegations are true and correct of the affiant's personal
knowledge or based on authentic records.[38]
The General Manager of NHA verified the petition as follows:
3. I have read the allegations contained therein and that the same are true and correct
to the best of my own personal knowledge.[39]
A reading of the above verification reveals nothing objectionable about it. The affiant
confirmed that he had read the allegations in the petition which were true and correct
based on his personal knowledge. The addition of the words to the best before the
phrase of my personal knowledge did not violate the requirement under Section 4 of
Rule 7, it being sufficient that the affiant declared that the allegations in the petition are
true and correct based on his personal knowledge.
Now, as to the merits of the case. The main issue before us is whether the annotation of
the sheriffs certificate of sale on the owners duplicate certificate of titles is sufficient
registration considering that the inscription on the original certificates could not be
made as the same got burned.
Jurisprudence is replete with analogous cases. Of foremost importance is Development
Bank of the Philippines v. Acting Register of Deeds of Nueva Ecija [40] where the Court
listed cases where the transaction or instrument was annotated not on the original
certificate but somewhere else. In that case, DBP, following the extrajudicial foreclosure
sale where it emerged as the highest bidder, registered with the Register of Deeds the
sheriffs certificate of sale in its favor. After it had paid the required fees, said transaction
was entered in the primary entry book. However, the annotation of the said transaction
to the originals of the certificates of title could not be done because the same titles
were missing from the files of the Registry. This prompted DBP to commence
reconstitution proceedings of the lost titles. Four years had passed before the missing
certificates of title were reconstituted. When DBP sought the inscription of the four-year
old sale transaction on the reconstituted titles, the Acting Register of Deeds, being in
doubt of the proper action to take, referred the matter to the Commissioner of the Land
Registration Authority by consulta, the latter resolved against the annotation of the sale
transaction and opined that said entry was ineffective due to the impossibility of
accomplishing registration at the time the document was entered because of the non-
availability of the certificate (sic) of title involved. [41] In other words, annotation on the
primary book was deemed insufficient registration. The Court disagreed with this
posture. Considering that DBP had paid all the fees and complied with all the
requirements for purposes of both primary entry and annotation of the certificate of
sale, the Court declared that mere entry in the primary book was considered sufficient
registration since [DBP] cannot be blamed that annotation could not be made
contemporaneously with the entry because the originals of the subject certificates of
title were missing and could not be found, since it had nothing to do with their
safekeeping. If anyone was responsible for failure of annotation, it was the Register of
Deeds who was chargeable with the keeping and custody of those documents. [42] To
buttress its conclusion, the Court reviewed the relevant jurisprudence starting from
1934.The Court noted that before the Second World War, particularly in Government of
the Philippine Islands v. Aballe, [43] the prevailing doctrine was an inscription in the book
of entry even without the notation on the certificate of title was considered as
satisfactory and produced all the effects which the law gave to its registration. During
the war, however, the Court observed that there was apparent departure from said
ruling since in Bass v. De la Rama, the holding was that entry of an instrument in the
primary entry book does not confer any legal effect without a memorandum thereof
inscribed on the certificate of title.[44] DBP noted that Bass v. De la Rama, however,
survived only for a little while since later cases appear to have applied the Aballe ruling
that entry in the day book, even without the corresponding annotation on the
certificate of title, is equivalent to, or produces the effect of, registration to voluntary
transactions, provided the requisite fees are paid and the owners duplicates of the
certificates of title affected are presented. [45]
These later cases are Levin v. Bass[46] and Potenciano v. Dineros, [47] both of which involve
the issue of whether entry in the day book of a deed of sale, payment of the fees, and
presentation of the owners duplicate certificate of title constitute a complete act of
registration.[48]
Simply, respondents resort to Bass v. De la Rama is futile as the same was abandoned by
the later cases, i.e., Bass, Potenciano and DBP.
In the recent case of Autocorp Group v. Court of Appeals, [49] the respondent was
awarded the foreclosed parcels of land. A sheriffs certificate of sale was thereafter
issued in its favor. Thereafter, petitioners in that case filed a complaint before the RTC
with a prayer for the issuance of an ex parte TRO aimed at preventing the Register of
Deeds from registering the said certificate of sale in the name of the respondent and
from taking possession of the subject properties.[50] Before the RTC could issue a TRO,
respondent presented the sheriffs certificate of sale to the Register of Deeds who
entered the same certificate in the primary book, even if the registration fee was paid
only the following day.Four days after, the RTC issued a TRO directing the Register of
Deeds to refrain from registering the said sheriffs certificate of sale. A preliminary
injunction was thereafter issued as the TRO was about to expire. The preliminary
injunction was questioned by therein respondent. One of the main issues raised there
was whether the entry of the certificate of sale in the primary book was equivalent to
registration such that the TRO and the preliminary injunction issues would not lie
anymore as the act sought to be restrained had become an accomplished act. The
Court held that the TRO and the preliminary injunction had already become moot and
academic by the earlier entry of the certificate of sale in the primary entry book which
was tantamount to registration, thus:
In fine, petitioners prayer for the issuance of a writ of injunction, to prevent the register of
deeds from registering the subject certificate of sale, had been rendered moot and
academic by the valid entry of the instrument in the primary entry book. Such entry is
equivalent to registration. Injunction would not lie anymore, as the act sought to be
enjoined had already become a fait accompli or an accomplished act.[51]
Indeed, the prevailing rule is that there is effective registration once the registrant has
fulfilled all that is needed of him for purposes of entry and annotation, so that what is left
to be accomplished lies solely on the register of deeds. The Court thus once held:
Current doctrine thus seems to be that entry alone produces the effect of registration,
whether the transaction entered is a voluntary or an involuntary one, so long as the
registrant has complied with all that is required of him for purposes of entry and
annotation, and nothing more remains to be done but a duty incumbent solely on the
register of deeds.[52]
In the case under consideration, NHA presented the sheriffs certificate of sale to the
Register of Deeds and the same was entered as Entry No. 2873 and said entry was
further annotated in the owners transfer certificate of title. [53] A year later and after the
mortgagors did not redeem the said properties, respondents filed with the Register of
Deeds an Affidavit of Consolidation of Ownership [54]after which the same instrument was
presumably entered into in the day book as the same was annotated in the owners
duplicate copy.[55] Just like in DBP, Levin, Potenciano and Autocorp, NHA followed the
procedure in order to have its sheriffs certificate of sale annotated in the transfer
certificates of title. There would be, therefore, no reason not to apply the ruling in said
cases to this one. It was not NHAs fault that the certificate of sale was not annotated on
the transfer certificates of title which were supposed to be in the custody of the
Registrar, since the same were burned. Neither could NHA be blamed for the fact that
there were no reconstituted titles available during the time of inscription as it had taken
the necessary steps in having the same reconstituted as early as July 15, 1988. [56] NHA
did everything within its power to assert its right.
While it may be true that, in DBP, the Court ruled that in the particular situation here
obtaining, annotation of the disputed entry on the reconstituted originals of the
certificates of title to which it refers is entirely proper and justified, this does not mean, as
respondents insist, that the ruling therein applies exclusively to the factual milieu and the
issue obtaining in said case, and not to similar cases. There is nothing in the subject
declaration that categorically states its pro hac vice character. For in truth, what the
said statement really conveys is that the current doctrine that entry in the primary book
produces the effect of registration can be applied in the situation obtaining in that case
since the registrant therein complied with all that was required of it, hence, it was fairly
reasonable that its acts be given the effect of registration, just as the Court did in the
past cases. In fact the Court there continued with this pronouncement:
To hold said entry ineffective, as does the appealed resolution, amounts to declaring
that it did not, and does not, protect the registrant (DBP) from claims arising, or
transactions made, thereafter which are adverse to or in derogation of the rights
created or conveyed by the transaction thus entered. That, surely, is a result that is
neither just nor can, by any reasonable interpretation of Section 56 of Presidential
Decree No. 1529 be asserted as warranted by its terms. [57]
What is more, in Autocorp Group v. Court of Appeals, [58] the pertinent DBP ruling was
applied, thereby demonstrating that the said ruling in DBP may be applied to other
cases with similar factual and legal issues, viz:
Petitioners contend that the aforecited case of DBP is not apropos to the case at bar.
Allegedly, in DBP, the bank not only paid the registration fees but also presented the
owners duplicate certificate of title. We find no merit in petitioners posture x x x.
xxxx
Like in DBP v. Acting Register of Deeds of Nueva Ecija, the instrument involved in the
case at bar, is a sheriffs certificate of sale, We hold now, as we held therein, that the
registrant is under no necessity to present the owners duplicates of the certificates of
title affected, for purposes of primary entry, as the transaction sought to be recorded is
an involuntary transaction.
xxxx
x x x Such entry is equivalent to registration. Injunction would not lie anymore, as the act
sought to be enjoined had already become a fait accompli or an accomplished act. [59]
Moreover, respondents stand on the non-applicability of the DBP case to other cases,
absent any statement thereof to such effect, contravenes the principle of stare
decisis which urges that courts are to apply principles declared in prior decisions that
are substantially similar to a pending case.[60]
Since entry of the certificate of sale was validly registered, the redemption period
accruing to respondents commenced therefrom, since the one-year period of
redemption is reckoned from the date of registration of the certificate of sale. [61] It must
be noted that on April 16, 1991, the sheriffs certificate of sale was registered and
annotated only on the owners duplicate copies of the titles and on April 16, 1992, the
redemption period expired, without respondents having redeemed the properties. In
fact, on April 24, 1992, NHA executed an Affidavit of Consolidation of
Ownership. Clearly, respondents have lost their opportunity to redeem the properties in
question.
As regards respondents allegation on the defect in the publication and notice
requirements of the extrajudicial foreclosure sale, the same is unavailing. The rule is
that it is the mortgagor who alleges absence of a requisite who has the burden of
establishing such fact. [62] This is so because foreclosure proceedings have in their favor
the presumption of regularity and the burden of evidence to rebut the same is on the
party who questions it.[63] Here, except for their bare allegations, respondents failed to
present any evidence to support them. In addition, NHA stated in its Comment to
Motion for Leave of Court to Intervene that it had complied with the publication of the
Notice of Sheriffs Sale in the Manila Times in the latters issues dated July 14, 21 and 28,
1990.[64] It also claimed that an Affidavit of Publication of said newspaper was attached
as Annex B in the said comment.[65] NHA also said that respondents had been furnished
with a copy of the Notice of Sheriffs Sale as shown at the bottom portion of said
notice.[66] From all these, it would tend to show that respondents aspersion of non-
compliance with the requirements of foreclosure sale is a futile attempt to salvage its
statutory right to redeem their foreclosed properties, which right had long been lost by
inaction.
Considering that the foreclosure sale and its subsequent registration with the Register of
Deeds were done validly, there is no reason for the non-issuance of the writ of
possession. A writ of possession is an order directing the sheriff to place a person in
possession of a real or personal property, such as when a property is extrajudicially
foreclosed.[67] Section 7 of Act No. 3135 provides for the rule in the issuance of the writ of
possession involving extrajudicial foreclosure sales of real estate mortgage, to wit:
Sec. 7. In any sale made under the provisions of this Act, the purchaser may petition the
[Regional Trial Court] of the province or place where the property or any part thereof is
situated, to give him possession thereof during the redemption period, furnishing bond in
an amount equivalent to the use of the property for a period of twelve months, to
indemnify the debtor in case it be shown that the sale was made without violating the
mortgage or without complying with the requirements of this Act. Such petition shall be
made under oath and filed in the form of an ex parte motion in the registration or
cadastral proceedings if the property is registered, or in special proceedings in the case
of property registered under the Mortgage Law or under section one hundred and
ninety-four of the Administrative Code, or of any other real property encumbered with a
mortgage duly registered in the office of any register of deeds in accordance with any
existing law, and in each case the clerk of the court shall, upon the filing of such
petition, collect the fees specified in paragraph eleven of section one hundred and
fourteen of Act Numbered Four Hundred and ninety-six, as amended by Act Numbered
Twenty-eight hundred and sixty-six, and the court shall, upon approval of the bond,
order that a writ of possession issue, addressed to the sheriff of the province in which the
property is situated, who shall execute said order immediately.
This provision of law authorizes the purchaser in a foreclosure sale to apply for a writ of
possession during the redemption period by filing an ex parte motion under oath for that
purpose in the corresponding registration or cadastral proceeding in the case of
property with Torrens title.[68] Upon the filing of such motion and the approval of the
corresponding bond, the law also in express terms directs the court to issue the order for
a writ of possession.[69]
The time-honored precept is that after the consolidation of titles in the buyers name, for
failure of the mortgagor to redeem, the writ of possession becomes a matter of
right.[70]Its issuance to a purchaser in an extrajudicial foreclosure is merely a ministerial
function.[71] The writ of possession issues as a matter of course upon the filing of the
proper motion and the approval of the corresponding bond. The judge issuing the writ
following these express provisions of law neither exercises his official discretion nor
judgment.[72] As such, the court granting the writ cannot be charged with having acted
without jurisdiction or with grave abuse of discretion. [73] To accentuate the writs
ministerial character, the Court disallowed injunction to prohibit its issuance despite a
pending action for annulment of mortgage or the foreclosure itself.[74]
Believing that the instant case does not come within the penumbra of the foregoing
rule, respondents resort to the ruling in Barican v. Intermediate Appellate
Court.[75]Unfortunately for them, the instant case does not even come close to the cited
case. There, the Court deemed it inequitable to issue a writ of possession in favor of the
purchaser in the auction sale considering that the property involved was already in the
possession of a third person by virtue of a deed of sale with assumption of mortgage
even before the purchaser could register the sheriffs certificate of sale. Also, the auction
buyer therein unreasonably deferred to exercise its right to acquire possession over the
property. These circumstances are not present in the instant case.
Moreover, in Fernandez v. Espinoza,[76] the Court refused to apply the ruling in Barican v.
Intermediate Appellate Court [77] and Cometa v. Intermediate Appellate Court,[78] two
cases which are exemptions to the stated rule, reasoning that:
In Cometa, which actually involved execution of judgment for the prevailing party in a
damages suit, the subject properties were sold at the public auction at an unusually
lower price, while in Barican, the mortgagee bank took five years from the time of
foreclosure before filing the petition for the issuance of writ of possession. We have
considered these equitable and peculiar circumstances in Cometa and Barican to
justify the relaxation of the otherwise absolute rule. None of these exceptional
circumstances, however, attended herein so as to place the instant case in the same
stature as that of Cometa and Barican. Instead, the ruling in Vaca v. Court of Appeals is
on all fours with the present petition. In Vaca, there is no dispute that the property was
not redeemed within one year from the registration of the extrajudicial foreclosure sale;
thus, the mortgagee bank acquired an absolute right, as purchaser, to the issuance of
the writ of possession. Similarly, UOB, as the purchaser at the auction sale in the instant
case, is entitled as a matter of right, to the issuance of the writ of possession.
Just as in Fernandez, this Court does not see any compelling reason to veer away from
the established rule.
In fine, this Court finds that the Court of Appeals committed reversible error in ruling that
the annotation of NHAs sheriffs certificate of sale on the duplicate certificates of title
was not effective registration and in holding that respondents redemption period had
not expired.
WHEREFORE, premises considered, the instant petition is hereby GRANTED. The Amended
Decision of the Court of Appeals dated November 27, 2000 is SET ASIDE.
SO ORDERED.
[ GR No. 179884, Jan 25, 2012 ]
DURAWOOD CONSTRUCTION v. CANDICE S. BONA +
DECISION
LEONARDO-DE CASTRO, J.:
This is a Petition for Review on Certiorari assailing the Decision[1] of the Court of Appeals
in CA-G.R. SP No. 94479 dated April 18, 2007 and its Resolution[2] dated September 18,
2007.
On June 3, 2004, petitioner Durawood Construction and Lumber Supply, Inc.
(Durawood) filed an action for sum of money plus damages with a prayer for the
issuance of a writ of preliminary attachment against LBB Construction and Development
Corporation (LBB Construction) and its president Leticia Barber (Barber) before the
Regional Trial Court (RTC) of Antipolo. In said suit, which was docketed as Civil Case No.
04-7240, Durawood prayed for the sum of P665,385.50 as payment for construction
materials delivered to LBB Construction.
On June 14, 2004, the RTC issued an Order granting Durawood's prayer for the issuance
of a writ of attachment. On June 16, 2004, the corresponding writ was issued.
On June 17, 2004, Sheriff Rolando C. Leyva (Sheriff Leyva) levied on a 344-square meter
parcel of land in Richdale Subdivision, Antipolo City covered by Transfer Certificate of
Title (TCT) No. R-17571 in the name of LBB Construction. A Notice of Levy on Attachment
was annotated in TCT No. R-17571's Memorandum of Encumbrances on the same day,
June 17, 2004.
On July 13, 2004, respondent Candice S. Bona (Candice) filed a Motion seeking leave
to intervene in Civil Case No. 04-7240. Attached to said Motion was Candice's Answer
in Intervention, her Third Party Claim addressed to Sheriff Leyva, and a copy of TCT No.
R-17571. Candice claimed therein that she is a co-owner of the property covered by
TCT No. R-17571. She alleged that LBB Construction had sold the property to her and her
siblings, Michael Angelo S. Bona, Diane Sheila S. Bona, Glenda May S. Bona and Johann
Louie Sebastian S. Bona, through a Deed of Absolute Sale dated June 2, 2004. Candice
asserted that the sale is the subject of Entry No. 30549 dated June 16, 2004 in the books
of the Registry of Deeds of Antipolo City, while the levy on attachment is only Entry No.
30590 dated June 17, 2004. What was attached to the Motion was a copy of TCT No. R-
17571, and not a title in Candice and her co-owners' names.
3. To pay the costs of suit.[4]
The Decision became final and executory. On September 12, 2005, Durawood filed a
Motion for the Issuance of a Writ of Execution. On November 15, 2005, the RTC issued a
Writ of Execution. It was when this Writ was about to be enforced that Durawood
discovered the cancellation of TCT No. R-17571 and the issuance of TCT No. R-22522 in
the name of Candice and her siblings.
It would appear from the records that on June 16, 2004, the supposed Register of Deeds
of Antipolo City, Atty. Randy A. Rutaquio (Atty. Rutaquio), cancelled TCT No. R-17571
and issued TCT No. R-22522 in the name of Candice and her co-owners. The parties,
however, do not dispute that said cancellation of the old TCT and issuance of the new
one was antedated, since Atty. Rutaquio was still the Register of Deeds of Malabon on
said date. [5] According to a certification of the Land Registration Authority, [6] it was a
certain Atty. Edgar D. Santos (Atty. Santos) who was the Acting Register of Deeds of
Antipolo City on June 16, 2004.
Durawood filed a Motion to Reinstate Notice of Levy on Attachment in TCT No. R-22522
and Cite Atty. Randy A. Rutaquio for Contempt[7] on the following grounds:
5. The cancellation of TCT No. R-17571 and the issuance of TCT No. R-22522 was made
by Atty. Randy A. Rutaquio who, on June 2004, was not the Register of Deeds of
Antipolo City. As evidence of such fact, plaintiff corporation was issued a certification
by LRA Human Resource Management Officer IV Loreto I. Orense that Atty. Edgar D.
Santos was the Acting Register of Deeds of Antipolo City from June 1-30, 2004.

On August 11, 2004, the RTC issued an Order granting Candice's Motion to Intervene. 6. While the Deed of Sale annotated in TCT No. R-17571 appears to have been made
on June 16, 2004, the fact of its inscription was made after that of the levy on
LBB Construction and Barber filed their Answer in Civil Case No. 04-7240, but failed to attachment as it obviously appears below and next to it.
attend the scheduled hearings, including the pre-trial. Consequently, Durawood was
allowed to present its evidence ex parte. 7. The records of this case reveal that in the Third Party Claim filed by Candice Bona
sometime in July 2004, there was never any mention of any recording about a Deed of
On July 21, 2005, the RTC rendered its Decision [3] in Civil Case No. 04-7240 in favor of Absolute Sale in the Memorandum of Encumbrances in TCT No. R-17571. It is difficult to
Durawood. The dispositive portion of the Decision reads: comprehend that Atty. Hernando U. Salvador, Bona's lawyer, would miss mentioning
that a Deed of Absolute Sale was inscribed ahead of the notice of levy on attachment
if ever such sale was made on June 16, 2004.

WHEREFORE, in view of the foregoing consideration, judgment is rendered in favor of the 8. Thus, under the circumstances, plaintiff corporation cannot help speculate that [the]
plaintiff and against the defendants, viz: Deed of Sale between LBB Construction and the Bonas was made to appear to have
been recorded a day before the attachment.

1. Ordering the defendants to pay plaintiff the sum of Six Hundred Sixty[-]Five
Thousand Three Hundred Eighty[-]Five Pesos and Fifty Centavos (P665,385.50)
plus two percent (2%) interest per month from May 11, 2004 up to the present;
9. While the Notice of Levy on Attachment was inscribed in TCT No. R-17571 ahead and
before of the Deed of Sale between LBB Construction Co., Inc. and the Bonas, the said
notice was not carried over in TCT No. R-22522 despite the fact that there was no order
coming from this Honorable Court dissolving the Writ of Preliminary Attachment dated
June 16, 2004.

2. Ordering the defendants to pay plaintiff twenty-five percent (25%) of the
amount due to the plaintiff by way of attorney's fees; and
10. Randy Rutaquio's unauthorized acts of cancelling TCT No. R-17571 and issuing TCT
No. R-22522 without inscribing the Notice of Levy on Attachment despite the absence of
a court order dissolving the writ of Preliminary Attachment constitute improper conduct
tending to directly or indirectly to impede, obstruct or degrade the administration of
justice. [8]

Atty. Rutaquio filed a Manifestation alleging that the sale was entered in the Primary
Entry Book prior to the Levy on Attachment. The two transactions were assigned to
different examiners and it just so happened that the examiner to whom the levy on
attachment was assigned was able to inscribe the memorandum ahead of the sale,
although the inscription of the sale was entered ahead of the levy. The levy on
attachment was not inscribed on TCT No. R-22522 because allegedly the sale should
have priority and preference. The cancellation of TCT No. R-17571 and the issuance of
TCT No. R-22522 was already completed when he took over the position of Atty. Santos
as Acting Register of Deeds and was therefore already clothed with the authority to
issue and sign TCT No. R-22522.
Atty. Rutaquio also submitted a letter dated June 25, 2004 from Atty. Santos to Land
Registration Authority (LRA) Administrator Benedicto B. Ulep (Administrator Ulep)
consulting the latter as regards the registration of the Deed of Absolute Sale and the
Notice of Levy on Attachment. [9] In said letter received by the LRA on July 1, 2004, Atty.
Santos stated that he had not acted on the Deed of Absolute Sale since the required
registration fees were not paid therefor.[10] Administrator Ulep was able to reply to said
letter on October 6, 2004, when Atty. Rutaquio was already the Acting Register of
Deeds. Administrator Ulep stated that since the Deed of Sale was considered registered
on June 16, 2004, the same shall take precedence over the Notice of Levy on
Attachment registered on June 17, 2004. [11]
Acting on the Motion to Reinstate Notice of Levy on Attachment in TCT No. R-22522 and
Cite Atty. Randy A. Rutaquio for Contempt, the RTC issued an Order [12] dated March 2,
2006, ruling in favor of Durawood. The RTC gave great weight to the certification by LRA
Human Resource Management Officer IV Loreto I. Orense that Atty. Santos was the
Acting Register of Deeds from June 1-30, 2004, and held that this proves the fact that
Atty. Santos was the only person authorized to sign and approve all the transactions
with the Registry of Deeds of Antipolo City at the time. Moreover, according to the RTC,
the alienation of LBB Construction in favor of the Bonas without leaving sufficient
property to pay its obligation is considered by law in fraud of creditor under Articles
1381[13] and 1387[14] of the Civil Code.
The RTC did not rule on Durawood's prayer to cite Atty. Rutaquio for contempt. The
dispositive portion of the March 2, 2006 Order reads:
WHEREFORE, premises considered, the instant motion to reinstate notice of levy on
attachment in TCT No. R-22522 now in the name of the intervenors is hereby GRANTED its
non-inscription therein having been made without order of this Court.
The Register of Deeds of Antipolo City is directed to reinstate the notice of levy on
attachment in TCT No. R-22522 in the names of intervenors immediately upon receipt of
this Order. [15]
Candice filed a Motion for Reconsideration of the above Order. In the meantime, on
March 13, 2006, Sheriff Leyva issued a Notice of Sheriff's Sale setting the sale of the
property covered by TCT No. R-22522 at public auction on April 11, 2006 at 10:00 a.m.,
pursuant to the November 15, 2005 Writ of Execution. Candice filed an Urgent Ex-Parte
Motion to Order the Branch Sheriff to Desist from the Sale of Intervenor's Property for
Being Premature, which was granted by the RTC in an Order dated March 29, 2006.
On March 8, 2006, the new Acting Register of Deeds Jose S. Loriega, Jr. complied with
the March 6, 2006 Order of the RTC by reinstating in TCT No. R-22522 the Notice of Levy
on Attachment in favor of Durawood.
On April 7, 2006, the RTC issued an Order denying Candice's Motion for
Reconsideration. In said Order, the RTC highlighted its observation that in TCT No. R-
17571, the inscription of the levy on attachment by Atty. Santos dated June 17, 2004
was in page A (the dorsal portion) of the title, while the supposedly earlier inscription of
the Deed of Sale by Atty. Rutaquio dated June 16, 2004 was found in page B (a
separate page) of the title. The RTC found this fact, as well as the above-mentioned
certification that Atty. Santos was the Acting Register of Deeds of Antipolo City from
June 1 to 30, 2004, sufficient proof of the irregularity of the June 16, 2004 inscription of
the Deed of Sale.
On April 11, 2006, Sheriff Leyva sold the subject property at public auction for
P1,259,727.90 with Durawood being the lone bidder, and issued the corresponding
Certificate of Sale. The sale was inscribed in TCT No. R-22522 on the same date. [16]
Candice filed with the Court of Appeals a Petition for Certiorari and Prohibition assailing
the March 2, 2006 and April 7, 2006 Orders of the RTC.
On April 18, 2007, the Court of Appeals rendered the assailed Decision in favor of
Candice. According to the Court of Appeals, the sequence of presentation of the
entries in the TCT cannot control the determination of the rights of the claimants over a
disputed property. It is the registration in the Primary Entry Book (also referred to in other
cases as the day book) that establishes the order of reception of instruments affecting
registered land. As explained by Atty. Rutaquio, the entry in the day book is only the
preliminary step in the registration. The inscription of the levy on attachment on TCT No.
R-17571 (which was made before the inscription of the Deed of Sale on said title)
retroacts to the date of entry in the Primary Entry Book, which is June 17, 2004. However,
the inscription of the Deed of Sale on TCT No. R-17571, although made after the
inscription of the levy on attachment, retroacts to the earlier date of entry in the Primary
Entry Book, which is June 16, 2004.
As regards the issuance by Atty. Rutaquio of TCT No. R-22522 on June 16, 2004 despite
the fact that he was not yet the Register of Deeds of Antipolo City at that time, the
Court of Appeals held that there was substantial compliance with the National Land
Titles and Deeds Registration Administration (NALTDRA; now the Land Registration
Authority [LRA]) Circular No. 94 on "Certificates of title and documents left unsigned by
former Register of Deeds," which provides:
It has been brought to the attention of this Registration that, in some Registries, there are
certificates of title with the full transcriptions and inscriptions, including the volume and
page numbers, the title number, the date and the name of the former Register of
Deeds, already typewritten thereon but which, for some reasons, cannot anymore be
signed by the former official. In such cases and to resolve this problem, the present
Register of Deeds may, without changing or altering the transcriptions and inscriptions,
affix his signature below the name of the former Register of Deeds but placing the
actual date and time of signing enclosed in parenthesis below his signature. [17]
The Court of Appeals accepted Atty. Rutaquio's manifestation that he signed TCT No. R-
22522 subsequent to June 16, 2004, on a date when he was already the Acting Register
of Deeds of Antipolo City. Since the entry in the Primary Entry Book was made at the
time of the incumbency of Atty. Santos, the name of the latter still appears on the
document. According to the Court of Appeals, Candice cannot be made to suffer for
the failure of Atty. Rutaquio to affix the date when he signed the document.
Furthermore, a certificate of title, once registered, cannot be impugned, altered,
changed, modified, enlarged or diminished except in a direct proceeding permitted by
law. Finally, an action for rescission of contracts entered into in fraud of creditors cannot
be instituted except when the party suffering damage has no other legal means to
obtain reparation for the
The dispositive portion of the Decision
WHEREFORE, in view of the foregoing, the assailed Orders of public respondent judge
ordering the reinstatement of the subject notice of levy on attachment in TCT No. R-
22522 are hereby ANNULLED and SET ASIDE. As a result thereof, the public auction sale
carried out pursuant to said levy is also declared null and void. [19]
THE COURT OF APPEALS OVERLOOKED THE FACT THAT THE REAL PROPERTY COVERED BY
TCT NO. R-17571 AND SUBSEQUENTLY BY TCT NO. R-22522 HAS ALREADY BEEN ATTACHED
BUT WAS UNILATERALLY RELEASED FROM THE COURT'S JURISDICTION BY A USURPER. [20]
All these allegations are specific matters to be resolved by this Court in determining the
overriding issue of the case at bar: whether the Court of Appeals correctly granted
same. [18] Candice's Petition for Certiorari and Prohibition on its finding that the RTC committed
grave abuse of discretion in issuing its March 2, 2006 and April 7, 2006 Orders. In other
reads: words, the main issue to be determined by this Court is whether or not there was grave
abuse of discretion in the RTC's order to reinstate the notice of levy on attachment in
TCT No. R-22522. "Grave abuse of discretion" signifies "such capricious and whimsical
exercise of judgment that is equivalent to lack of jurisdiction. The abuse of discretion
must be grave as where the power is exercised in an arbitrary or despotic manner by
reason of passion or personal hostility, and must be so patent and gross as to amount to
an evasion of positive duty or to a virtual refusal to perform the duty enjoined by or to
act all in contemplation of law."[21]

The Court of Appeals, in considering the date of entry in the day book of the Registry of
Durawood filed a Motion for Reconsideration, but the same was denied by the Court of Deeds as controlling over the presentation of the entries in TCT No. R-17571, relied on
Appeals in its Resolution dated September 18, 2007. Section 56 of Presidential Decree No. 1529 which provides that:

Durawood filed the instant Petition for Review, with the following Assignment of Errors:

I.
THE COURT OF APPEALS IGNORED THE FACT THAT NON-PAYMENT OF THE REQUIRED
REGISTRATION FEES BY CANDICE S. BONA AND HER SIBLINGS DID NOT COMPLETE THE
REGISTRATION OF THE DEED OF ABSOLUTE SALE ON JUNE 16, 2004.
SEC. 56. Primary Entry Book; fees; certified copies. - Each Register of Deeds shall keep a
primary entry book in which, upon payment of the entry fee, he shall enter, in the order
of their reception, all instruments including copies of writs and processes filed with him
relating to registered land. He shall, as a preliminary process in registration, note in such
book the date, hour and minute of reception of all instruments, in the order in which
they were received. They shall be regarded as registered from the time so noted, and
the memorandum of each instrument, when made on the certificate of title to which it
refers, shall bear the same date: Provided, that the national government as well as the
provincial and city governments shall be exempt from the payment of such fees in
advance in order to be entitled to entry and registration. (Emphasis supplied.)

II.
The consequence of the highlighted portion of the above section is two-fold: (1) in
determining the date in which an instrument is considered registered, the reckoning
THE COURT OF APPEALS GRAVELY ERRED WHEN IT DISREGARDED THE FACT THAT NALTDRA point is the time of the reception of such instrument as noted in the Primary Entry Book;
CIRCULAR NO. 94 WAS NOT COMPLIED WITH BY ATTY. RANDY RUTAQUIO. and (2) when the memorandum of the instrument is later made on the certificate of title
to which it refers, such memorandum shall bear the same date as that of the reception
of the instrument as noted in the Primary Entry Book. Pursuant to the second
consequence stated above, the Court of Appeals held that Atty. Rutaquio correctly
III. placed the date of entry in the Primary Entry Book as the date of the memorandum of
the registration of the deed of sale in TCT No. R-17571.

THE COURT OF APPEALS GRAVELY ERRED WHEN IT FAILED TO CONSIDER THAT THE ENTRIES As regards the first consequence, this Court has applied the same in several cases. Thus,
IN TCT NO. R-17571 (THE PREDECESSOR OF TCT NO. R-22522) ARE EVIDENCES OF THE in the old cases of Levin v. Bass,[22] Potenciano v. Dineros,[23] and Development Bank of
FACTS STATED THEREIN. the Philippines v. Acting Register of Deeds of Nueva Ecija,[24] as well as in the fairly recent
cases of Autocorp Group v. Court of Appeals,[25] Armed Forces and Police Mutual
Benefit Association, Inc. v. Santiago,[26] and National Housing Authority v. Basa, Jr.,[27] we
upheld the entry of instruments in the Primary Entry Book to be equivalent to registration
IV. despite even the failure to annotate said instruments in the corresponding certificates of
title.
Based on this alone, it appears that the RTC was in error when it considered the
registration of the Absolute Deed of Sale on June 16, 2004 inferior to the registration of
the Notice of Levy on Attachment on June 17, 2004 on the ground that the Attachment
was annotated on TCT No. R-17571 earlier than the Deed of Sale. As discussed in the
above-mentioned cases, the annotation in the certificate of title is not determinative of
the effectivity of the registration of the subject instrument.
However, a close reading of the above-mentioned cases reveals that for the entry of
instruments in the Primary Entry Book to be equivalent to registration, certain
requirements have to be met. Thus, we held in Levin that:
Do the entry in the day book of a deed of sale which was presented and filed together
with the owner's duplicate certificate of title with the office of the Registrar of Deeds
and full payment of registration fees constitute a complete act of registration which
operates to convey and affect the land? In voluntary registration, such as a sale,
mortgage, lease and the like, if the owner's duplicate certificate be not surrendered
and presented or if no payment of registration fees be made within 15 days, entry in the
day book of the deed of sale does not operate to convey and affect the land sold. x x
x.[28]
Levin, which was decided in 1952, applied Section 56 of the Land Registration
Act[29] which provides:
Sec. 56. Each register of deeds shall keep an entry book in which, upon payment of the
filing fee, he shall enter in the order of their reception all deeds and other voluntary
instruments, and all copies of writs or other process filed with him relating to registered
land. He shall note in such book the year, month, day, hour, and minute of reception of
all instruments in the order in which they were received. They shall be regarded as
registered from the time so noted, and the memorandum of each instrument when
made on the certificate of title to which it refers shall bear the same date; Provided,
however, That no registration, annotation, or memorandum on a certificate of title shall
be made unless the fees prescribed therefor by this Act are paid within fifteen days' time
after the date of the registration of the deed, instrument, order or document in the entry
book or day book, and in case said fee is not paid within the time above mentioned,
such entry shall be null and void:Provided further, That the Insular Government and the
provincial and municipal governments need not pay such fees in advance in order to
be entitled to entry or registration. (Emphasis supplied.)
This provision is the precursor of the aforequoted Section 56 of Presidential Decree No.
1529, which seems to have dispensed with the provision nullifying the registration if the
required fees are not paid:
SEC. 56. Primary Entry Book; fees; certified copies. - Each Register of Deeds shall keep a
primary entry book in which, upon payment of the entry fee, he shall enter, in the order
of their reception, all instruments including copies of writs and processes filed with him
relating to registered land. He shall, as a preliminary process in registration, note in such
book the date, hour and minute of reception of all instruments, in the order in which
they were received. They shall be regarded as registered from the time so noted, and
the memorandum of each instrument, when made on the certificate of title to which it
refers, shall bear the same date: Provided, that the national government as well as the
provincial and city governments shall be exempt from the payment of such fees in
advance in order to be entitled to entry and registration.
In Development Bank of the Philippines v. Acting Register of Deeds of Nueva Ecija,[30] this
Court applied the provisions of Presidential Decree No. 1529 and modified the doctrine
as follows:
Current doctrine thus seems to be that entry alone produces the effect of registration,
whether the transaction entered is a voluntary or an involuntary one, so long as the
registrant has complied with all that is required of him for purposes of entry and
annotation, and nothing more remains to be done but a duty incumbent solely on the
register of deeds.[31]
This pronouncement, which was reiterated in National Housing Authority v. Basa,
Jr.,[32] shows that for the entry to be considered to have the effect of registration, there is
still a need to comply with all that is required for entry and registration, including the
payment of the prescribed fees. Thus, in Autocorp Group v. Court of Appeals,[33] this
Court compared the date when the required fees were paidwith the therein assailed
writ of preliminary injunction:
Petitioners contend that payment of the entry fee is a condition sine qua non before
any valid entry can be made in the primary entry book. Allegedly, the Court of Appeals
resorted to judicial legislation when it held that the subsequent payment of the entry fee
was curative and a substantial compliance with the law. Petitioners claim that the ruling
in DBP vs. Acting Register of Deeds of Nueva Ecija does not apply to this case. As there
was no valid registration, petitioners conclude that the order of the trial court issuing a
writ of preliminary injunction was proper, considering the irregularities present in the
conduct of the extrajudicial foreclosure x x x.
We find the petition bereft of merit.
First. The objection as to the payment of the requisite fees is unavailing. There is no
question that the fees were paid, albeitbelatedly. Respondent bank presented the
certificate of sale to the Office of the Register of Deeds of Cebu City for registration
on January 21, 1999 at 4:30 p.m. As the cashier had already left, the Office could not
receive the payment for entry and registration fees, but still, the certificate of sale was
entered in the primary entry book. The following day, respondent bank paid the
requisite entry and registration fees. Given the peculiar facts of the case, we agree with
the Court of Appeals that the payment of respondent bank must be deemed to be
substantial compliance with the law; and, the entry of the instrument the day before,
should not be invalidated. In any case, even if we consider the entry to have been
made on January 22, the important fact is that the entry in the primary entry book was
done prior to the issuance of the writ of injunction [on February 15, 1999; TRO issued THIRD DIVISION
on January 25, 1999] by the trial court. [34] (Emphases supplied.)
G.R. No. 199180, July 27, 2016

Records in the case at bar reveal that as of June 25, 2004, the date of the letter of Atty. THELMA RODRIGUEZ, JOINED BY HER HUSBAND, Petitioners, v. SPOUSES JAIME SIOSON
Santos seeking the opinion of the LRA as regards the registration of the Deed of Sale AND ARMI SIOSON, ET AL., Respondents.
and the Notice of Levy on Attachment, the required registration fees for the Deed of
Sale has not yet been paid: DECISION

REYES, J.:

25 June 2004 Before the Court is a petition for review1 under Rule 45 of the Rules of Court assailing
[received by the LRA: July 01, 2004] the Decision2dated May 26, 2011 and Resolution3 dated October 21, 2011 of the Court
of Appeals (CA) in CA-G.R. CV No. 94867, which nullified the Joint Decision4 dated
August 13, 2009 of the Regional Trial Court (RTC) of Bataan, Branch 3.
HON. BENEDICTO B. ULEP
Administrator The Facts
This Authority

Sir: This petition is the aftermath of a series of sales transactions entered into by Neri delos
Reyes (Neri) over a portion of a property formerly identified as Lot 398, with an area of
This has reference to the TCT No. R-17571/T-87 registered under the name of LBB 22,398 square meters, covered by Transfer Certificate of Title (TCT) No. T-86275 and
Construction and Development Corporation relative to the Deed of Absolute Sale with registered in the name of "Neri delos Reyes, married to Violeta Lacuata."5
Entry No. 30549, which was sought to be registered on 16 June 2004 at 11:20 a.m. (a
photocopy of which is hereto attached as Annex "A"). Sometime in 1997, the Municipality of Orani, Bataan (Municipality) purchased from Neri
an area of about 1.7 hectare of Lot 398, to be used for the extension of the
However, on 17 June 2004 at 11:45 a.m. a Notice of Levy on Attachment (a photocopy Municipality's public market. Among other things, it was agreed that upon full payment
of which is hereto attached as Annex "B") with Entry No. 30590 was filed and annotated of the purchase price, Neri will surrender the mother title to the Municipality for
against TCT No. R-17571/T-87. subdivision of the property on the condition that Neri will equitably share in the expense
thereof.6
In view of the foregoing, we are now in a quandary as to what proper steps should be Lot 398 was subsequently subdivided into 5 lots: Lot 398-A, Lot 398-B, Lot 398-C, Lot 398-
taken. It should be noted further that the required registration fees of the D, and Lot 398-E. Lots 398-C and 398-D pertain to the portions that were sold to the
abovementioned sale was not paid the reason for which the same was not immediately Municipality, while Lot 398-E is a road lot. Consequently, only Lots 398-A and 398-B were
acted upon by the undersigned.[35] left as the remaining portions over which Neri retained absolute title. TCT Nos. T-209894
and T-209895 were then respectively issued over Lots 398-A and 398-B and were both
registered in the name of "Neri delos Reyes, married to Violeta Lacuata." The owner's
Since there was still no compliance of "all that is required x x x for purposes of entry and duplicate copies of TCT Nos. T-209894 and T-209895, however, were retained by the
annotation"[36] of the Deed of Sale as of June 25, 2004, we are constrained to rule that Municipality pending Neri's payment of his share in the expenses incurred for the
the registration of the Notice of Levy on Attachment on June 17, 2004 should take subdivision of Lot 398. These were placed under the custody of the Municipal Treasurer,
precedence over the former. Considering that the Notice of Levy on Attachment was where they continue to remain.7
deemed registered earlier than the Deed of Sale, the TCT issued pursuant to the latter
should contain the annotation of the Attachment. Neri, however, alleged that then Municipal Mayor Mario Zuñiga suggested that he sell
Lot 398-A to his aunt, petitioner Thelma Rodriguez (Thelma). The Municipality would then
In view of the foregoing, we find that the RTC was, in fact, acting properly when it expropriate the same from Thelma. Neri agreed to the suggestion. 8
ordered the reinstatement of the Notice of Levy on Attachment in TCT No. R-22522.
Since the RTC cannot be considered as to have acted in grave abuse of its discretion in After agreeing to the amount of P1,243,000.00 as the selling price, Thelma, on March 20,
issuing such Order, the Petition for Certiorari assailing the same should have been 1997, issued a check for said amount payable to Neri. When it fell due, no sufficient
dismissed. funds were available to cover the check. Consequently, it was agreed that Thelma
would pay the purchase price in installments from March 20, 1997 to September 4, 1997.
WHEREFORE, premises considered, the instant Petition for Review on Certiorari is Thelma, however, was only able to pay P442,293.50. 9
hereby GRANTED. The Decision of the Court of Appeals in CA-G.R. SP No. 94479 dated On November 12, 2001, Thelma caused the annotation of an adverse claim on TCT No.
April 18, 2007 and its Resolution dated September 18, 2007 are REVERSED and SET ASIDE. T-209894.10 At about the same time, Thelma saw an announcement that a new Orani
Common Terminal would be built on Lot 398-A. As she has not yet entered into any
SO ORDERED. agreement regarding the utilization of said lot, Thelma filed a Complaint for
Injunction docketed as Civil Case No. 7394 against then incumbent mayor Efren
Pascual, Jr. (Mayor Pascual), and the Municipality under claim of ownership. To support
her claim, Thelma incorporated in her complaint a copy of an undated and
unnotarized deed of absolute sale allegedly executed by Neri in her favor.11
In their joint verified answer, Mayor Pascual and the Municipality acknowledged that
Thelma became the owner of Lot 398-A by way of purchase from Neri.12
In 2002, Neri executed an affidavit claiming that the owner's copies of TCT No. T-209894
(covering Lot 398-A) and TCT No. T-209895 (covering Lot 398-B) were lost, which was
annotated on the original copy of TCT No. T-209894 on May 8, 2002.13 Two days after, or
on May 10, 2002, Neri caused the cancellation of Thelma's adverse claim.14 Neri also
caused the reconstitution of new owner's copies of TCT Nos. T-209894 and T-
209895.15 Thereafter, new copies of TCT Nos. T-209894 and T-209895 were issued, and Neri
then sold Lot 398-A to Spouses Jaime and Armi Sioson, Spouses Joan and Joseph
Camacho, and Agnes Samonte (respondents) - in a deed of sale dated November 27,
2002. A special power of attorney was executed by Violeta delos Reyes (Violeta) in
favor of Neri for the purpose. Consequently, TCT No. T-209894 was cancelled, and TCT
No. T-226775 was thus issued in the respondents' names. 16
Upon the issuance of TCT No. T-226775, the respondents declared Lot 398-A for tax
purposes and paid them accordingly. They sought to take actual possession thereof by
filling it; however, after they filled said lot with about 40 truckloads of soil/fillings, Thelma
sent two armed blue guards who entered the premises and set up a tent therein. The
respondents brought the matter to the attention of barangay authorities who referred
them to the municipal mayor. As the municipal mayor did not take any action, the
respondents filed a forcible entry case against Thelma before the Municipal Circuit Trial
Court of Orani-Samal, Bataan, docketed as Civil Case No. 843. The said ejectment case
is still pending.17
After Thelma learned of the second sale of Lot 398-A, she filed against the respondents
a complaint for the Declaration of Nullity of the Second Sale and TCT No. T-226775 on
February 11, 2003, docketed as Civil Case No. 7664. In support of her claim, Thelma
once again presented a deed of absolute sale executed by Neri in her favor. This time,
the deed of sale she presented was duly signed by her and Neri, witnessed, notarized
and dated April 10, 1997.18
The respondents countered that they are innocent purchasers for value having bought
Lot 398-A at the time when Thelma's adverse claim was already cancelled. While they
admit Thelma's possession of the subject property, they, however, qualify that possession
is being contested in a separate action for forcible entry.19
The respondents also filed a verified answer-in-intervention in Civil Case No. 7394
(injunction case) contending that they are the present registered owners of Lot 398-A,
and as such, Thelma is not entitled to any relief. 20
Ruling of the RTC
The RTC jointly heard Civil Case No. 7394 and Civil Case No. 7664 and after trial,
rendered judgment in favor of Thelma. The dispositive portion of the
Joint Decision21 dated August 13, 2009 reads:
WHEREFORE, judgment is hereby rendered declaring that:
1) [Thelma] is entitled to the relief of permanent injunction prayed for in Civil Case No.
7394 against the respondents. Insofar as defendants [Mayor Pascual] and the
[Municipality] are concerned, not only did they acknowledge expressly the ownership
of [Thelma] of Lot 398-A, they have disowned the commission of any act in derogation
of [Thelma's] right of ownership of the lot and did not contest anymore the action of
[Thelma] in said case;
2) Insofar as Civil Case No. 7664 is concerned, the second deed of sale entered into by
[Neri] with the [respondents] is hereby declared null and void, and [TCT] No. T-226775 of
the Registry of Deeds of Bataan which was issued by defendant Register of Deeds
pursuant to said second deed of sale is likewise declared null and void, and
accordingly, the Register of Deeds for the Province of Bataan is ordered to cancel said
certificate of title and to reinstate [TCT] No. T-209894 in the name of [Neri], married to
[Violeta];
3) The new owner's copy of [TCT] No. T-209894 is hereby declared null and void as the
original owner's copy is not lost but actually exists and is presently in the custody of the
Municipal Treasurer of Orani, Bataan. In consequence, defendant Register of Deeds of
Bataan is directed to cancel said new owner's copy of [TCT] No. T-209894; and
4) [The respondents] are hereby ordered to jointly and severally pay to [Thelma]
attorney's fees in the amount of Twenty[-]Five Thousand Pesos (P25,000.00).
All counterclaims of [the respondents] are denied for lack of basis in fact and in law.
No pronouncement as to costs.
SO ORDERED.22
The RTC concluded that by Neri's admission that he sold the subject lot to Thelma for a
consideration of P1,243,000.00, and his acknowledgement receipt of P442,293.50 as
partial payment from the latter, the transaction between Thelma and Neri should be
regarded as an executed contract of sale. Hence, Lot 398-A was subjected to a double
sale when Neri sold the same property to the respondents.23 The RTC further ruled that
the contract of sale between Neri and the respondents is null and void because it was
transacted and executed at the time when Neri was no longer the owner of Lot 398-A. It
was legally inexistent for lack of object certain. Thereupon, the fact that the
respondents were able to register their acquisition first is of no moment. Registration
does not legitimize a void contract and thus, TCT No. T-226775 should be cancelled.24
The respondents moved for reconsideration but it was denied by the RTC per Order 25
dated January 13, 2010. Hence, they elevated their case to the CA.
Ruling of the CA
On May 26, 2011, the CA promulgated the assailed Decision,26 with the following
dispositive portion:ChanRoblesVirtualawlibrary
WHEREFORE, the instant Appeal is GRANTED. The Joint Decision dated August 13, 2009
and the Order dated January 13, 2010 of the [RTC] of Bataan are hereby
declared NULLand VOID insofar as it (1) granted permanent injunction in favor of
[Thelma] in Civil Case No. 7394 against [the respondents];T2) declared null and void the
deed of sale between [Neri] and [the respondents] in Civil Case No. 7664; (3) declared
null and void the [TCT] No. T-226775; (4) ordered the cancellation of [TCT] No. T-226775
and reinstatement of [TCT] No. T-209894 in the name of [Neri], married to [Violeta]; and
(5) ordered the payment of attorney's fees.
Consequently, the following are hereby declared VALID: (1) the Deed of Sale between
[Neri] and [the respondents]; and (2) the [TCT] No. T-226775 in the names of [the
respondents].
This Decision is without prejudice to any right which [Thelma] may have against [Neri] for
the refund of the amount of Four Hundred Forty-Two Thousand Two Hundred Ninety-
Three and 50/100 Pesos (P442,293.50).
The Complaints in Civil Cases Nos. 7394 and 7664 are hereby DISMISSED.
SO ORDERED.27 (Emphasis in the original)
Contrary to the findings of the RTC, the CA found that the contract between Neri and
Thelma was a mere contract to sell and not a contract of sale; hence, there was no
double sale of Lot 93 8-A. According to the CA, the question of whether or not the
respondents are buyers in good faith is unavailing since the concept of a "buyer in good
faith" finds relevance only in cases of double sale. The CA further stated that even if it is
assumed that the contract between Neri and Thelma was an absolute contract of sale,
the same is nonetheless void for lack of consent of Neri's wife, Violeta, insofar as the
object of the transaction is a conjugal property.
Thelma moved for reconsideration of the CA decision, which was denied for lack of
merit in Resolution28dated October 21, 2011.
Hence this petition.
Thelma argues that there was double sale and the CA erred in reversing the
RTC decision: (1) by interpreting the sale between Thelma and Neri as a mere contract
to sell; (2) by declaring the deed of sale in favor of Thelma as null and void due to lack
of Violeta's consent or conformity; and (3) by declaring the respondents as buyers in
good faith despite prior registration of Thelma's notice of adverse claim in TCT No. T-
209894, and her actual possession of the subject property. 29
Ruling of the Court
The resolution of this case basically rests on the determination of whether the
transaction between Neri and Thelma is a contract of sale or a contract to sell. The rule
on double sale, as provided in Article 1544 of the Civil Code, 30 does not apply to a case
where there was a sale to one party of the land itself while the other contract was a
mere promise to sell the land or at most an actual assignment of the right to repurchase
the same land.31
Both the RTC and the CA concur in the finding that Neri agreed to sell Lot 398-A to
Thelma for an agreed price of P1,243,000.00. The RTC, however, concluded that by
Neri's admission that he sold the subject lot to Thelma for a consideration of
P1,243,000.00, and that he acknowledged receipt of P442,293.50 as partial payment
from the latter, the transaction between Thelma and Neri should be regarded as an
executed contract of sale, and not a merely executory one. The RTC likewise took into
consideration Thelma's alleged possession of the property and Neri's failure to rescind
the contract as indicative of the nature of their agreement as one of
sale.32chanrobleslaw
On the other hand, the CA ruled that "the contract between Thelma and Neri was a
mere contract to sell, the transfer of ownership over Lot 398-A being conditioned on
Thelma's full payment of the purchase price."33 As regards the existence of the two
contracts of sale, the CA concluded that Thelma admitted on trial that the first deed of
sale was only meant to be an acknowledgment receipt for the down payment she
made on the subject lot, and the second deed of sale was allegedly executed after
Thelma pays in full the purchase price of the lot.
A review of this case shows that the CA ruled in accord with existing jurisprudence.
"The real character of the contract is not the title given, but the intention of the
parties."34 In this case, there exist two deeds of absolute sale. Though identically worded,
the first contract was undated, not notarized, signed only by Neri, and was presented in
Civil Case No. 7394 for Injunction,35 while the second deed was dated April 10, 1997,
notarized on September 5, 1997, signed by both Neri and Thelma, and was presented in
Civil Case No. 7664 for Declaration of Nullity of Deed of Sale and Title. 36
In determining the nature of the agreement between Thelma and Neri, the CA took
note of these two documents, and, coupled with Thelma's own admissions, correctly
found that it was a mere contract to sell. According to the CA:
During trial, Thelma explained the apparent disparity between the two (2) "deeds of
absolute sale" by testifying that the undated and unnotarized deed of sale served only
as a "receipt" which was signed by Neri when the latter received the downpayment for
the lot. The dated and notarized deed of sale, on the other hand, was signed by both
Thelma and Neri upon Thelma's alleged full payment of the purchase price:
xxxx
Second, the execution of the "deed of absolute sale" dated August 10, 1997 and the
transfer and delivery of the title to Thelma's name covering Lot No. 398-A were
conditioned upon full payment of the purchase price.
Thelma testified that the "deed of absolute sale" dated August 10, 1997 and which was
attached to Thelma's complaint in Civil Case No. 7664 was signed by her, Neri and their
witnesses only upon full payment of the purchase price. Thelma further testified that she
and Neri agreed to place the amount of the purchase price on the deed of absolute
sale only at the time when Thelma had fully paid the same: x x x 37 (Italics ours and
emphasis deleted)
Despite the denomination of their agreement as one of sale, the circumstances tend to
show that Neri agreed to sell the subject property to Thelma on the condition that title
and ownership would pass or be transferred upon the full payment of the purchase
price. This is the very nature of a contract to sell, which is a "bilateral contract whereby
the prospective seller, while expressly reserving the ownership of the property despite
delivery thereof to the prospective buyer, binds himself to sell the property exclusively to
the prospective buyer upon fulfillment of the condition agreed upon, i.e., the full
payment of the purchase price."38 As stated by the Court, the agreement to execute a
deed of sale upon full payment of the purchase price "shows that the vendors reserved
title to the subject property until full payment of the purchase price." 39chanrobleslaw
It was likewise established that Thelma was not able to pay the full purchase price, and
that she was only able to pay P442,293.50 of the agreed selling price of P1,243,000.00.
The RTC, in fact, made the following findings: (1) the consideration for Lot 398-A was SO ORDERED.
P1,243,000.00; (2) Thelma issued a check on March 20, 1997 for said amount, payable to
Neri; (3) the agreement was that the check would only be held by Neri for safekeeping
as it was yet unsure if there was ample funds to cover the check; (4) the check was not
covered by sufficient funds when presented for payment, so Thelma subsequently paid
Neri in installments starting from March 20, 1997 to September 4, 1997; and (5) Neri
acknowledged receipt from Thelma the total amount of P442,293.50. 40 CECILIA AMODIA VDA. DE MELENCION, VENERANDA AMODIA, FELIPE AMODIA, G.R. No. 148846
EUTIQUIO AMODIA and GO KIM CHUAN,
To bolster her claim, Thelma insists that she now holds title over the subject property after
Neri allegedly delivered the subject lot to her right after the execution of the Petitioners,
sale.41 There is, however, nothing on record to support this claim aside from her bare
assertions. There was no testimony or any proof on her part showing when and how she
took possession of the property. At best, what is extant from the records is that Thelma Present:
paid taxes on the property for the years 2000 and 2001, which was three years after the
alleged sale. "But tax declarations, by themselves, are not conclusive evidence of
ownership of real property."42 Aside from this, the tax receipts showed that the property
was still declared in the name of Neri.43 YNARES-SANTIAGO, J.,
- versus -
Moreover, the alleged delivery of the property, even if true, is irrelevant considering that Chairperson,
in a contract to sell, ownership is retained by the registered owner in spite of the partial
payment of the purchase price and delivery of possession of the property. Thus, AUSTRIA-MARTINEZ,
in Roque v. Aguado,44 the Court ruled that since the petitioners have not paid the final
installment of the purchase price, the condition which would have triggered the parties' CHICO-NAZARIO,
obligation to enter into and thereby perfect a contract of sale cannot be deemed to
have been fulfilled; consequently, they "cannot validly claim ownership over the subject NACHURA, and
portion even if they had made an initial payment and even took possession of the HONORABLE COURT OF APPEALS and
same."45 REYES, JJ.
AZNAR BROTHERS REALTY COMPANY,
Accordingly, the CA did not commit any reversible error in concluding that "the
contract between Thelma and Neri was a mere contract to sell, the transfer of Respondents.
ownership over Lot 398-A being conditioned on Thelma's full payment of the purchase
price. Having failed to pay the purchase price in full, Thelma cannot claim ownership
over Lot 398-A and Neri is not legally proscribed from alienating the same lot to other Promulgated:
buyers."46

Finally, while the CA correctly ruled that the agreement was a contract to sell, the
Court, however, does not share its position that the subject property is a conjugal September 25, 2007
property, and as such, the absence of Violeta's consent should be held as among the
factors which could have adversely affected the validity of the purported contract of x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x
sale between Neri and Thelma. This is due to the following reasons: first, the subject
property, Lot 398-A, is registered in the name of "Neri delos Reyes, married to Violeta
Lacuata," and so was its mother lot, Lot 398. In Metropolitan Bank and Trust Company v.
Tan,47 it was held that such form of registration is determinative of the property's nature
as paraphemal. That the only import of the title is that Neri is the owner of the subject
property, it being registered in his name alone, and that he is married to Violeta;
DECISION
and second, the record is bereft of proof that said property was acquired during Neri
and Violeta's marriage - such that, the presumption under Article 116 of the Family
NACHURA, J.:
Code that properties acquired during the marriage are presumed to be conjugal
cannot apply.
Before this Court is a Petition for Review on Certiorari [1] under Rule 45 of the Rules of Civil
Procedure seeking the reversal of the Court of Appeals (CA) Decision[2] dated March 30,
WHEREFORE, the petition is DENIED for lack of merit. Accordingly, the Decision dated
2001 and praying that the Decision[3] of the Regional Trial Court (RTC) of Lapu-Lapu City,
May 26, 2011 and Resolution dated October 21, 2011 of the Court of Appeals in CA-G.R.
dated February 18, 1993, be upheld.
CV No. 94867 are AFFIRMED.
The Facts
The subject property is a 30,351 square meter parcel of land (subject property)
particularly denominated as Lot No. 3368, located at Suba-basbas, Marigondon, Lapu-
Lapu City, Cebu, and part of a total area of 30,777 square meters covered by Transfer
Certificate of Title (TCT) No. 20626 [4] (entire property) in the name of the late petitioner
Go Kim Chuan (Go Kim Chuan).[5]
The entire property was originally owned by Esteban Bonghanoy[6] who had only one
child, Juana Bonghanoy-Amodia,[7] mother of the late Leoncia Amodia and petitioners
Cecilia Amodia Vda. de Melencion, Veneranda Amodia, Felipe Amodia, and Eutiquio
Amodia[8] (the Amodias). The entire property was brought under the operation of the
Torrens System.[9] However, the title thereto was lost during the Second World War.
On July 10, 1964, the Amodias allegedly executed an Extra-Judicial Partition of Real
Estate with Deed of Absolute Sale[10] whereby they extra-judicially settled the estate of
Esteban Bonghanoy and conveyed the subject property to respondent Aznar Brothers
Realty Company (AZNAR) for a consideration of P10,200.00. On August 10, 1964, the said
Extra-Judicial Partition of Real Estate with Deed of Absolute Sale was registered under
Act 3344[11] as there was no title on file at the Register of Deeds of Lapu-Lapu
City (Register of Deeds). Thereafter, AZNAR made some improvements and constructed
a beach house thereon.
On February 18, 1989, petitioners Cecilia Amodia Vda. de Melencion, Veneranda
Amodia, Felipe Amodia and Eutiquio Amodia [12] (petitioners Amodias) executed a Deed
of Extra-Judicial Settlement with Absolute Sale,[13] conveying the subject property in
favor of Go Kim Chuan for and in consideration of P70,000.00. The lost title covering the
subject property was reconstituted pursuant to Republic Act (RA) No. 26. [14] A
reconstituted title particularly designated as Original Certificate of Title (OCT) No. RO-
2899 was issued in the name of Esteban Bonghanoy[15] and, subsequently, a derivative
title (TCT No. 20626) was issued in the name of Go Kim Chuan on December 1, 1989.
Thereafter, Go Kim Chuan exercised control and dominion over the subject property in
an adverse and continuous manner and in the concept of an owner.
On February 14, 1990, AZNAR wrote a letter [16] to petitioners Amodias asking the latter to
withdraw and/or nullify the sale entered into between them and Go Kim Chuan. On the
same date, a Notice of Adverse Claim [17] was annotated by AZNAR on TCT No. 20626.
Because petitioners did not heed AZNAR's demand, on April 25, 1990, AZNAR filed a
case against petitioners Amodias and Go Kim Chuan for Annulment of Sale and
Cancellation of TCT No. 20626[18] alleging that the sale to Go Kim Chuan was an invalid
second sale of the subject property which had earlier been sold to it. Petitioners
Amodias denied that they executed the Extra-Judicial Partition of Real Estate with Deed
of Absolute Sale in favor of AZNAR, claiming that their purported signatures thereon
were forged.[19] Trial on the merits ensued.
The RTC's Decision
On February 18, 1993, the RTC dismissed AZNAR's complaint and declared Go Kim
Chuan as the real owner of the subject property. The RTC ratiocinated that the
signatures of the Amodias in the Extra-Judicial Partition of Real Estate with Deed
of Absolute Sale executed in favor of AZNAR were found by the document examiner of
the Philippine Constabulary (PC) Crime Laboratory to be forged, thus, the said deed did
not convey anything in favor of AZNAR. Moreover, the subject property had been
brought under the Land Registration Act; hence, all transactions involving the same
should have complied with the said law. Finally, the RTC held that AZNAR failed to show
that Go Kim Chuan acquired the subject property in bad faith.
Aggrieved, AZNAR appealed the RTC Decision to the CA.[20]
The CA's Decision
On March 30, 2001, the CA rendered a Decision holding that the Extra-Judicial Partition
of Real Estate with Deed of Absolute Sale executed by the Amodias in favor of AZNAR
was registered ahead of the Deed of Extra-Judicial Settlement with Absolute Sale in
favor of Go Kim Chuan, thus, pursuant to Article 1544 of the New Civil Code, the former
deed should be given preference over the latter; that AZNAR's adverse claim was
annotated earlier than the execution of the Deed of Extra-Judicial Settlement with
Absolute Sale in favor of Go Kim Chuan; hence, the latter should have respected said
adverse claim and should have made inquiries as to possible defects that may exist in
the title over the subject property; and that in the absence of a final determination by a
court of proper jurisdiction on the alleged forged signatures of the Amodias in the Extra-
Judicial Partition of Real Estate with Deed of Absolute Sale, the finding of the document
examiner was insufficient for the RTC to rule in favor of the petitioners.
The CA disposed of the case in this wise:
WHEREFORE, premises considered, the assailed decision dated February 18, 1993 of the
Regional Trial Court of Lapu-Lapu City, Branch 27, in Civil Case No. 2254-L is
hereby REVERSED and SET ASIDE and a new one is hereby entered as follows:
(1) Declaring plaintiff-appellant Aznar Brothers Realty Company as the real owner of the
land in question;
(2) Declaring both the Deed of Extra-judicial Settlement with Absolute
Sale dated February 1, 1989 executed by Felipe Amodia, Cecilia Amodia, Veneranda
A. Ibag and Eustaquio Amodia in favor of Go Kim Chuan and the Transfer Certificate of
Title No. 20626 in the name of Go Kim Chuan as NULL AND VOID;
(3) Ordering Go Kim Chuan to deliver to the aforesaid plaintiff-appellant the possession
of the land in question and to execute a registrable deed of conveyance of the subject
property to the said plaintiff-appellant.
No costs.
SO ORDERED.[21]
Petitioners filed a Motion for Reconsideration [22] which the CA denied in its
Resolution[23] dated June 5, 2001.
Hence, this Petition based on the following grounds:
I
Lot 3368 was already a registered land under Act 496, thus, the registration by
respondent of the Deed of Sale in 1964 under Act 3344 produces no legal effect
whatsoever;
II
Even assuming arguendo that the lot in question was duly registered under Act 3344 as
an unregistered land, it is without prejudice to better rights and the provision of Article
1544 of the New Civil Code would be inapplicable;
III
The Honorable Court of Appeals erred in holding that an adverse claim was already
existing at the time the subject land was sold to petitioner Go Kim Chuan; on the
contrary, the latter had purchased the said land in good faith and for value, without
notice of any fact that would reasonably impel a closer inquiry as to the possibility of a
defect in the vendor's title; and
IV
The Court of Appeals has misapplied the case of Heirs of Severa Gregorio v. CA, 300
SCRA 565, cited in support of its ruling that the court a quo committed error in
appreciating the testimony of an expert witness as to the forgery of the first Deed of
Sale.[24]
In its Comment[25] dated September 18, 2001, AZNAR argued, among others, that the
Petition is dismissible because the Verification and Certification of Non-forum Shopping
were not signed by all the petitioners, invoking this Court's Decision in the case
of Loquias v. Office of the Ombudsman, [26] and that the same were signed only by one
April Socorro Go, daughter of the late Go Kim Chuan, who did not even appear to be
authorized to file the instant case in behalf of the other petitioners.
In their Reply[27] dated October 22, 2001, petitioners contended that April Socorro Go is
one of the legitimate children and an heir of the late Go Kim Chuan and, as such, she
has personal knowledge of the truth of the facts alleged in the Petition. Petitioners
submitted that they substantially complied with the Rules of Court by attaching the
required Verification and Certification of Non-Forum Shopping and since the same are
required simply to facilitate and promote the orderly administration of justice,
compliance therewith should not be imposed with absolute literalness.
On December 19, 2001, petitioners, through counsel, filed a Motion[28] for Leave to Admit
Amended Petition[29] for Review on Certiorari (Amended Petition). Petitioners manifested
that they were seeking to correct a defect in the designation of parties and prayed that
the Heirs of Go Kim Chuan, namely, Estrella S. Go, Sonia Beth Go-Reynes, Daryl Go, and
April Socorro Go be impleaded as petitioners instead of the earlier designated
petitioners, Cecilia Amodia Vda. de Melencion, Veneranda Amodia, Felipe Amodia,
Eutiquio Amodia, and Go Kim Chuan. Counsel for petitioners admitted that he
inadvertently included the petitioners Amodias in the initial Petition for Review
on Certiorari(Original Petition), as they were parties before the RTC and CA. The counsel
also manifested that he was only representing the Heirs of Go Kim Chuan in this case.
Lastly, he claimed that other than the substitution of the original petitioners, both the
Original Petition and Amended Petition uniformly raised the same issues and should be
given due course in the greater interest of justice and that the instant Motion was not
interposed for delay.
Per directive of the Court,[30] AZNAR filed its Comment[31] on the said motion wherein
AZNAR manifested that it had no serious objection to the admission of the Amended
Petition if the same was intended merely to implead the Heirs of Go Kim Chuan as
petitioners. However, AZNAR interposed strong opposition to the Amended Petition's
admission since the names of the petitioners Amodias were deleted without their written
consent.
In their Reply,[32] the Heirs of Go Kim Chuan, through counsel, claimed that petitioners
Amodias were excluded from the Amended Petition because they can no longer be
located despite diligent efforts exerted by counsel. The counsel claims that after the
rendition of the assailed CA Decision, he sent several letters to petitioners Amodias but
they did not reply; hence, the Heirs of Go Kim Chuan, left with no choice, filed the
instant case before this Court on their own.
The Court issued a Resolution[33] dated September 16, 2002 giving due course to the
Petition and requiring the parties to submit their respective Memoranda.
In their Memorandum, [34] petitioners Heirs of Go Kim Chuan reiterate the same issues
raised in the Original Petition and the Amended Petition. They argue that Act 3344 only
refers to transactions affecting lands or interests therein not previously registered under
the Spanish Mortgage Law or under the Torrens system; that if AZNAR could not have
registered the sale in 1964 under Act 496 because the title over the subject property was
lost, AZNAR should have availed itself of the remedy of reconstitution; that registration
under Act 3344 is without legal effect and could not operate as constructive notice to
petitioners and third persons, hence, may not be used as basis for the application of Art.
1544 of the New Civil Code; that the Notice of Adverse Claim of AZNAR was annotated
on TCT No. 20626 only on February 14, 1990 after the execution of the Deed of Extra-
Judicial Settlement with Absolute Sale in favor of Go Kim Chuan on February 18, 1989,
hence, the CA erred when it held that Go Kim Chuan was not a buyer in good faith for
supposedly having knowledge of such adverse claim; and that the doctrine laid down
in Heirs of Severa Gregorio v. CA[35] is inapplicable since it referred to a case wherein the
original copy of the document under review was not produced in evidence while in the
instant case, the original copy of the Extra-Judicial Partition of Real Estate with Deed of
Absolute Sale executed by the Amodias in favor of AZNAR was presented before the
trial court judge.
On the other hand, in its Memorandum,[36] AZNAR maintains that the Original Petition is
dismissible because the Verification and Certification of Non-Forum Shopping thereof
were not signed by all the petitioners. AZNAR further claims that the Amended Petition
was filed in order to cure a fatal defect which should not be countenanced by this
Court. AZNAR also contends that Go Kim Chuan was a buyer in bad faith as he had
prior constructive notice that the subject property was sold to AZNAR because the sale
was registered with the Register of Deeds under Act 3344; that the 1964 sale was
registered under Act 3344 because the subject property was not actually covered by a
Torrens title at the time; that there was no other mode of registration except under Act
3344; that Go Kim Chuan had to wait for the reconstitution of the lost title, hence,
it could not be said that he examined any certificate of title and could feign ignorance
of the sale in favor of AZNAR; that the second sale did not transfer the subject property
to Go Kim Chuan since it was no longer within the vendors' power to convey; that with
respect to the issue of forgery, the finding of the document examiner is not conclusive;
and that such issue was belied by petitioner Veneranda Amodia herself when she
declared that the negotiated sale in 1964 between AZNAR and the Amodias was not
consummated because the latter did not receive the full consideration for the subject
property.
Before resolving the main issues raised, the Court shall first deal with an apparent
procedural lapse in this case.
Counsel for petitioners filed a Motion for Leave to Admit Amended Petition for Review
on Certiorari in order to implead the Heirs of the late Go Kim Chuan as the new
petitioners and to delete the names of petitioners Amodias because they could no
longer be located. Said petitioners sought the relaxation of the rules so that in the
interest of justice, the case can be decided on the merits. AZNAR opposes the
Amended Petition because it was allegedly filed to cure a fatal defect in the original
petition ─ non-compliance with the rules on Verification and Certification of Non-Forum
Shopping.
In this regard, the case of Iglesia ni Cristo v. Ponferrada [37] is instructive, viz.:
The purpose of verification is simply to secure an assurance that the allegations of the
petition (or complaint) have been made in good faith; or are true and correct, not
merely speculative. This requirement is simply a condition affecting the form of
pleadings, and noncompliance therewith does not necessarily render it fatally
defective. Indeed, verification is only a formal, not a jurisdictional requirement.
The issue in the present case is not the lack of verification but the sufficiency of one
executed by only one of plaintiffs. This Court held in Ateneo de Naga University v.
Manalo, that the verification requirement is deemed substantially complied with when,
as in the present case, only one of the heirs-plaintiffs, who has sufficient knowledge and
belief to swear to the truth of the allegations in the petition (complaint), signed the
verification attached to it. Such verification is deemed sufficient assurance that the
matters alleged in the petition have been made in good faith or are true and correct,
not merely speculative.
The same liberality should likewise be applied to the certification against forum
shopping. The general rule is that the certification must be signed by all plaintiffs in a
case and the signature of only one of them is insufficient. However, the Court has also
stressed in a number of cases that the rules on forum shopping were designed to
promote and facilitate the orderly administration of justice and thus should not be
interpreted with such absolute literalness as to subvert its own ultimate and legitimate
objective. The rule of substantial compliance may be availed of with respect to the
contents of the certification. This is because the requirement
of strict compliance with the provisions merely underscores its mandatory
nature in that the certification cannot be altogether dispensed with or its requirements
completely disregarded.
Thus, we held in Iglesia ni Cristo that the commonality of interest is material and crucial
to relaxation of the Rules.
In the case at bench, the petitioners in the Amended Petition are Heirs of the late Go
Kim Chuan. They represent their predecessor-in-interest in whose favor a title was issued
covering the subject property and said title is sought to be canceled by AZNAR. Clearly,
there is presence of the commonality of interest referred to in Iglesia ni Cristo. Under the
circumstances, the rules may be reasonably and liberally construed to avoid a patent
denial of substantial justice, because it cannot be denied that the ends of justice are
better served when cases are determined on the merits after all parties are given full
opportunity to ventilate their causes and defenses rather than on technicality or some
procedural imperfections.[38]
The Issues
We now proceed to the merits of the case. From the issues raised, there are ultimately
two questions that require resolution:
First, did the CA misapply the doctrine in Heirs of Severa Gregorio v. CA in ruling that the
RTC committed an error in appreciating the testimony of an expert witness as to the
forgery of the Extra-Judicial Partition of Real Estate with Deed of Absolute Sale?
Second, who between Go Kim Chuan and AZNAR has the better right over the subject
property?
We resolve the first question in the negative.
Forgery cannot be presumed. It must be proved by clear, positive and convincing
evidence and the burden of proof rests on the party alleging forgery. Handwriting
experts are usually helpful in the examination of forged documents because of the
technical procedure involved in analyzing them. But 1resort to these experts is not
mandatory or indispensable. A finding of forgery does not depend entirely on the
testimonies of handwriting experts, because the judge must conduct an independent
examination of the questioned signature in order to arrive at a reasonable conclusion as
to its authenticity.[39]
The RTC's finding with respect to the issue of forgery reads:
After a thorough study of the pleadings and evidence of the parties, the court finds that
preponderance of evidence heavily tilts in favor of the defendants. The document
relied upon by the plaintiff in its claim of ownership over the land in question, the
extrajudicial partition and sale, has been found by the document examiner of the PC
Crime Laboratory to be a forgery. Being a forgery, said document conveyed nothing in
favor of the plaintiff. Hence, plaintiff's claim of ownership over the same has no more leg
to stand on. x x x[40]
While it is true that the original document was produced before the RTC, the finding of
forgery relies wholly on the testimony of the document examiner. It falls short of the
required independent examination to be conducted by the trial court judge. Other
than the statement of the document examiner, the RTC decision contains no other basis
to support its conclusion
of the existence of forgery. Accordingly, the CA was correct in rejecting the RTCs finding
and in applying the doctrine laid down in the case of Heirs of Severa Gregorio v. CA.
However, we resolve the second question in favor of Go Kim Chuan.
Without doubt, we have here a case of double sale of registered land. Apropos is Article
1544 of the New Civil Code which provides:
ART. 1544. If the same thing should have been sold to different vendees, the ownership
shall be transferred to the person who may have first taken possession thereof in good
faith, if it should be movable property.
Should it be immovable property, the ownership shall belong to the person acquiring it
who in good faith first recorded it in the Registry of Property.
Should there be no inscription, the ownership shall pertain to the person who in good
faith was first in the possession; and, in the absence thereof, to the person who presents
the oldest title, provided there is good faith.
We have already ruled that the registration contemplated in this provision refers to
registration under the Torrens System, which considers the act of registration as the
operative act[41] that gives validity to the transfer or creates a lien upon the land. [42] This
rule precisely applies to cases involving conflicting rights over registered property and
those of innocent transferees who relied on the clean title of the properties. [43] Thus, we
held that registration must be done in the proper registry in order to bind the same. [44]
In the case at bench, it is uncontroverted that the subject property was under the
operation of the Torrens System even before the respective conveyances to AZNAR and
Go Kim Chuan were made. AZNAR knew of this, and admits this as fact. Yet, despite this
knowledge, AZNAR registered the sale in its favor under Act 3344 on the contention that
at the time of sale, there was no title on file. We are not persuaded by such a lame
excuse.
Act 3344 provides for the system of recording of transactions or claims over unregistered
real estate[45] without prejudice to a third party with a better right.[46] But if the land is
registered under the Land Registration Act (and therefore has a Torrens Title), and it is
sold and the sale is registered not under the Land Registration Act but under Act 3344,
as amended, such sale is not considered registered, as the term is used under Art. 1544
of the New Civil Code.[47]
In this case, since the Extra-Judicial Partition of Real Estate with Deed of Absolute Sale in
favor of AZNAR was registered under Act No. 3344 and not under Act No. 496, the said
document is deemed not registered.[48] Rather, it was the sale in favor of Go Kim Chuan
which was registered under Act No. 496.
AZNAR insists that since there was no Torrens title on file in 1964, insofar as the vendors,
AZNAR, and the Register of Deeds are concerned, the subject property was
unregistered at the time. The contention is untenable. The fact that the certificate of
title over the registered land is lost does not convert it into unregistered land. After all, a
certificate of title is merely an evidence of ownership or title over the particular property
described therein.[49] This Court agrees with the petitioners that AZNAR should have
availed itself of the legal remedy of reconstitution of the lost certificate of title, instead
of registration under Act 3344. We note that in Aznar Brothers Realty Company v.
Aying,[50] AZNAR, beset with the similar problem of a lost certificate of title over a
registered land, sought the reconstitution thereof. It is unfortunate that, in the instant
case, despite the sale of the subject property way back in 1964 and the existence of
the remedy of reconstitution at that time, AZNAR opted to register the same under the
improper registry (Act 3344) and allowed such status to lie undisturbed. From 1964 to
1989, AZNAR did not bother to have the lost title reconstituted or even have the subject
property declared under its name for taxation purposes. Vigilantibus, non dormientibus,
jura subveniunt. Laws must come to the assistance of the vigilant, not of the sleepy. [51]
Although it is obvious that Go Kim Chuan registered the sale in his favor under Act 496
while AZNAR did not, we still cannot make an outright award of the subject property to
the petitioners solely on that basis. For the law is clear: mere registration of title is not
enough. Good faith must accompany the registration
Thus, to be able to enjoy priority status, the second purchaser must be in good faith, i.e.,
he must have no knowledge of the previous alienation of the property by the vendor to
another. Notably, what is important for this purpose is not whether the second buyer is a
buyer in good faith, but whether he registers the second sale in good faith, meaning, he
does so without knowledge of any defect in the title over the property sold. [52]
To fully resolve the second question, therefore, it is imperative that we determine
whether Go Kim Chuan was a registrant in good faith.
The CA found that AZNAR registered its Notice of Adverse Claim ahead of the Deed of
Extra-Judicial Settlement with Absolute Sale in favor of Go Kim Chuan. Because of this,
the CA declared that Go Kim Chuan was not a buyer in good faith, because he should
have respected such adverse claim or, at least, inquired into the validity thereof.
We do not agree.
While factual issues are not within the province of this Court, as it is not a trier of facts
and is not required to examine the oral and documentary evidence de novo, this Court
has the authority to review and, in proper cases, reverse the factual findings of lower
courts in the following instances: (a) when the findings of fact of the trial court are in
conflict with those of the appellate court; (b) when the judgment of the appellate court
is based on a misapprehension of facts; and, (c) when the appellate court manifestly
overlooked certain relevant facts which, if properly considered, would justify a different
conclusion. [53]
The instant case falls squarely within the foregoing exceptions.
Concededly, inscription of an adverse claim serves as a warning to third parties dealing
with a piece of real property that someone claims an interest therein or that there is a
right superior to that of the titled owner. [54] However, as pointed out by petitioners and
as admitted by AZNAR, the Notice of Adverse Claim was annotated on TCT No. 20626
only on February 4, 1990, after the lost certificate of title was reconstituted and after the
issuance of said TCT in the name of Go Kim Chuan on December 1, 1989. It is, therefore,
absurd to say that Go Kim Chuan should be bound by
an adverse claim which was not previously annotated on the lost title or on the new
one, or be shackled by a claim which he did not have any knowledge of.
Citing Santiago v. Court of Appeals,[55] AZNAR contends that even if the adverse claim
was annotated on TCT No. 20626 only on February 4, 1990, the prior registration of the
sale in its favor under Act 3344 served as constructive notice to Go Kim Chuan and thus Present:
negates the latter's claim of good faith, since the Court held in that case, Registration,
however, by the first buyer under Act 3344 can have the effect of constructive notice to - versus -
the second buyer that can defeat his right as such buyer in good faith.
QUISUMBING, J., Chairperson,
AZNAR's reliance on Santiago is misplaced. In Santiago, the first buyers registered the
sale under the Torrens System, as can be inferred from the issuance of the TCT in their CARPIO,
names. There was no registration under Act 3344. Conversely, in the instant case, AZNAR
registered the sale in its favor under Act 3344 despite its full knowledge that the subject CARPIO MORALES,
property is under the operation of the Torrens System. To repeat, there can be no
constructive notice to the second buyer through registration under Act 3344 if the SPS. SOFRONIO SANTOS & AURORA SANTOS, SPS. LUIS TINGA, and
property is registered under the Torrens system.[56] LIBERATO & ANGELINA LIBERATO and SPS. MARIO CRUZ
& VICTORIA CRUZ, VELASCO, JR., JJ.
Moreover, before buying the subject property, Go Kim Chuan made verifications with
the Office of the City Assessor of Lapu-Lapu City and the Register of Deeds. He likewise
visited the premises of the subject property and found that nobody interposed any
adverse claim against the Amodias. After he decided to buy the subject property, he Promulgated:
paid all taxes in arrears, caused the publication of the Deed of Extra-Judicial Settlement
with Absolute Sale in a newspaper of general circulation, caused the reconstitution of
the lost certificate of title and caused the issuance of the assailed TCT in his
name.[57] Given these antecedents, good faith on the part of Go Kim Chuan cannot be November 22, 2007
doubted.
Respondents.
We also note that AZNAR's complaint for cancellation of title contains no allegation that
the (second) purchaser was aware of defects in his title. In the absence of such an x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
allegation and proof of bad faith, it would be grossly inappropriate for this Court to
render judgment against the purchaser who had already acquired title not only RESOLUTION
because of lack of evidence, but also because of the indefeasibility and conclusiveness
of such title.[58] QUISUMBING, J.:

Finally, it is worth stressing that the Torrens system was adopted in this country because it
was believed to be the most effective measure to guarantee the integrity of land titles
and to insure their indefeasibility once the claim of ownership is established and
recognized. If a person purchases a piece of land on the assurance that the seller's title
thereto is valid, he should not run the risk of losing his acquisition. If this were permitted,
public confidence in the system would be eroded and land transactions would have to
be attended by complicated and not necessarily conclusive investigations and proof of
ownership.[59]
This is an appeal from the Decision[1] dated July 31, 2001 of the Court of Appeals in CA-
G.R. CV No. 58246, affirming, with modification, the Decision[2] dated October 7, 1997 of
Branch 72, Regional Trial Court (RTC) in Antipolo, Rizal in Civil Case No. 1261-A. The RTC
had dismissed the complaint for Reconveyance, Annulment of Title and Damages filed
by petitioner Sixto Antonio against respondents.
The antecedent facts, culled from the records, are as follows:
On September 19, 1988, petitioner Sixto Antonio filed before Branch 72,
RTC, Antipolo, Rizal, a complaint for Reconveyance, Annulment of Title and Damages
against respondents spouses Sofronio and Aurora Santos, Luis and Angelina Liberato,
and Mario and Victoria Cruz. The complaint was docketed as Civil Case No. 1261-A.

WHEREFORE, the instant petition for review is GRANTED. The Decision of the Court of
Appeals in CA-G.R. CV No. 51814 is REVERSED and SET ASIDE. The Decision of
the Regional Trial Court of Lapu-Lapu City, Branch 27, in Civil Case No. 2254-L,
is REINSTATED. No costs.
SIXTO ANTONIO, Petitioner, G.R. No. 149238
In his complaint,[3] Antonio alleged that he is the absolute owner of a 13,159-square
meter parcel of land denominated as Lot No. 11703, CAD 688-D, Cainta-Taytay
Cadastre, situated in Barangay San Juan, Cainta, Rizal. He averred that, as evidenced
by certificates of payment of realty taxes for the years 1918 and 1919, the property was
previously owned by his father and that in 1984, he filed before Branch 71,
RTC, Antipolo, Rizal, an application for the registration of two parcels of land, one of
which was Lot No. 11703, CAD 688-D, situated in Barangay San Juan, Cainta, Rizal. His
application was docketed as Land Registration Case No. 142-A (LRC No. 142-A).

Although the RTC, Branch 71, declared him the true and absolute owner in fee simple of
the two parcels of land he applied for, it set aside its decision with respect to Lot No.
11703, CAD 688-D in an Order dated August 21, 1986, to avoid duplication of issuance
of titles.
Antonio said that after investigation, he discovered that Lot No. 11703, CAD 688-D was
already titled in the name of respondents. He then filed the complaint for
Reconveyance, Annulment of Title and Damages against respondents, averring that
respondents committed fraud in their application for titling because they made it
appear in their application for registration that the subject property was located in
Pinagbuhatan, Pasig, Rizal, when in fact, the property is located in Barangay San Juan,
Cainta, Rizal. He added, respondents also made it appear in their application for
registration that the subject property is bound on the North East by the Pasig River when
in fact it is bound on the North East by the Tapayan River. Furthermore,
the Pasig River does not traverse any portion of the jurisdiction of Cainta, Rizal. He
argued that Original Certificate of Title No. 108 (OCT No. 108) in respondents names,
insofar as it included Lot No. 11703, CAD 688-D, is, therefore, null and void because it
was obtained through fraudulent misrepresentations and machinations.
In their Answer[4] dated July 26, 1989, respondents averred that OCT No. 108 was duly
issued to them by the Register of Deeds for Metro Manila, District II, on May 20,
1977. They alleged that prior to the issuance of OCT No. 108, they, as registered owners,
had always been in peaceful possession of the property and at no time had Antonio
possessed the property, nor did he ever make any claim against the said property.
The RTC of Antipolo, Rizal, Branch 72, in a Decision dated October 7, 1997 dismissed the
complaint and ordered Antonio to pay respondents moral damages and attorneys
fees. The dispositive portion of the decision reads:
WHEREFORE, premises considered, judgment is hereby rendered DISMISSING the instant
complaint, and orders plaintiff as follows:
1. To pay defendants Sofronio Santos, Aurora Santos, Sps. Luis Liberato and Angelina
Santos, the amount of P100,000.00 each, by way of moral damages;
2. To pay defendants the amount of P60,000.00, by way of attorneys fees, and costs of
suit.
SO ORDERED.[5]
The Court of Appeals in a Decision dated July 31, 2001 affirmed with modification the
abovementioned decision by deleting the award of moral damages and attorneys
fees. The dispositive portion of the decision of the Court of Appeals states:
WHEREFORE, with modification deleting [or] setting aside the award for moral damages
and attorneys fees, the decision appealed from is AFFIRMED with costs against the
plaintiff-appellant.
SO ORDERED.[6]
Hence, the instant petition, raising the following issues:
I.
THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN NOT HOLDING THAT THE
DECISION IN LAND REGISTRATION CASE NO. 142-A, LRC RECORD NO.
58707, REGIONAL TRIAL COURT OF ANTIPOLO CITY, BRANCH 71, IS SUFFICIENT BASIS OF
PETITIONERS CLAIM OF RIGHT OF OWNERSHIP OVER THE PROPERTY SUBJECT OF ACTION
FOR RECONVEYANCE.
II.
THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN TREATING PETITIONERS ACTION
FOR RECONVEYANCE AS ONE FOR TITLING OF A PARCEL OF LAND.
III.
THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN NOT HOLDING THAT
RESPONDENTS HAVE FRAUDULENTLY REGISTERED AND TITLED SUBJECT PROPERTY IN THEIR
NAMES.
IV.
THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN HOLDING THAT RESPONDENTS
MOTHER ACQUIRED SUBJECT PROPERTY FROM HER FATHER, GAVINO SANTOS, WHICH THE
LATTER ALLEGEDLY PURCHASED FROM LADISLAO RIVERA.
V.
THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN AFFIRMING THE DECISION OF
THE COURT A QUO DISMISSING PETITIONERS ACTION FOR RECONVEYANCE. [7]
Simply put, the issues raised are: (1) Did the Court of Appeals err in not holding that the
decision in LRC No. 142-A was sufficient basis of petitioners claim of ownership over the
subject property? (2) Did the Court of Appeals and RTC erroneously treat petitioners
action for reconveyance as one for titling of a parcel of land? (3) Did respondents
fraudulently title the subject property in their names? (4) Did the Court of Appeals err in
finding that respondents mother acquired the subject property from her father, Gavino
Santos, who purchased it from Ladislao Rivera? and (5) Did the Court of Appeals err in
affirming the decision of the RTC dismissing petitioners action for reconveyance?
Petitioner argues that the Court of Appeals erred in not holding that the decision in LRC
No. 142-A is sufficient basis for his claim of ownership over the property; in treating his
action for reconveyance as one for titling; in not holding that respondents had
fraudulently registered the property in their names; and in holding that respondents
mother had acquired the subject property from her father, Gavino Santos, who
allegedly bought the property from Ladislao Rivera.
Respondents, on the other hand, in their Comments, [8] contend that they have proved
they have a better title to the property. They argue that petitioners attempt to register
Lot No. 11703, CAD 688-D in his name is tainted with fraud, and that petitioner had
failed to adduce any evidence of fraud on their part. They assert that their
documentary and testimonial evidence which were unrebutted by petitioner show
original ownership of the land by Ladislao Rivera from whom their grandfather bought
the property.
After serious consideration, we find that petitioners arguments lack merit.
On the first issue, petitioner argues that in LRC No. 142-A, the RTC of Antipolo, Branch 71,
rendered a Decision on January 7, 1986 adjudicating ownership of two lots, including
Lot No. 11703, CAD 688-D, in his favor. He adds that on February 19, 1986, after said
decision has become final and executory, the said RTC issued a certification for
issuance of decree, directing the Land Registration Commission to issue the
corresponding decree of registration. Hence, he argues, his right of ownership over the
land has already been fully established, but no certificate of title was issued to him only
because the property was already registered in the name of respondents.
But we agree with respondents that petitioner cannot rely on the decision in LRC No.
142-A. As pointed out by the Court of Appeals, even if a title had been issued to
petitioner based on said decision, his title would be of a later date than the title of
respondents, hence inefficacious and ineffective. This Court has ruled that, when two
certificates of title are issued to different persons covering the same land in whole or in
part, the earlier in date must prevail; and in case of successive registrations where more
than one certificate is issued over the same land, the person holding a prior certificate is
entitled to the land as against a person who relies on a subsequent certificate. [9]
On the second issue, petitioner contends that it is very apparent the RTC and Court of
Appeals had the notion that his case a quo was not an action for reconveyance, but
rather an application for registration of land where the applicant and oppositor had to
prove their respective registrable titles. This, he adds, could be gleaned from the RTCs
findings that the claim of plaintiff on the basis of said documents cannot prevail over
the adverse, public, open, peaceful and continuous possession by the defendants over
the subject property, and that it was indubitably shown that the defendants have
occupied said property since time immemorial while plaintiff has never at anytime
taken possession of said property.
We find petitioners contentions unconvincing. For an action for reconveyance based
on fraud to prosper, this Court has held that the party seeking reconveyance must
prove by clear and convincing evidence his title to the property and the fact of
fraud.[10] The RTC, in making the abovementioned findings, was not treating petitioners
action for reconveyance as one for titling of property. But it was weighing whether
petitioner has, by clear and convincing evidence, proven his title to the
property. Moreover, the RTC, in its decision, discussed the merits of petitioners ground for
his action for reconveyance, i.e. whether or not respondents committed fraud in titling
the subject property in their names. The RTC held that as shown by public records in the
custody of the RTC, Pasig City and the Land Registration Authority, petitioners claim that
the property was fraudulently titled in the names of respondents is baseless. Thus,
petitioners contention that the RTC and the Court of Appeals treated his action for
reconveyance as one for titling of property lacks any persuasive basis.
On the third and fourth issues, we find them to be factual issues, hence beyond our
jurisdiction to resolve. In a petition for review under Rule 45 of the 1997 Rules of Civil
Procedure, this Courts power of review is limited to questions of law only. [11]
Note, however, should be taken of the established doctrine that an action for
reconveyance resulting from fraud prescribes four years from the discovery of the
fraud. Such discovery is deemed to have taken place upon the issuance of the
certificate of title over the property. Registration of real property is considered a
constructive notice to all persons, thus, the four-year period shall be counted
therefrom.[12] It appears that OCT No. 108 was issued to respondents by the Register of
Deeds for Metro Manila on May 20, 1977. From the time of registration of the land in the
name of respondents on May 20, 1977 to the filing of the complaint on September 19,
1988, more than four years had already elapsed. Hence, it cannot be denied that
petitioners action had already prescribed.
Based on the foregoing considerations, we find that the Court of Appeals did not err in
affirming the decision of the RTC dismissing petitioners action for reconveyance.
Finally, concerning the deletion of moral damages and attorneys fees, we agree with
the ruling of the Court of Appeals that here an award of moral damages is not
warranted since the record is bereft of any proof that Antonio acted maliciously or in
bad faith in filing the action.[13] Neither should attorneys fees be awarded. The
accepted rule is that the reason for the award of attorneys fees must be stated in the
text of the trial courts decision; otherwise, if it is stated only in the dispositive portion of
the decision, the same must be disallowed. [14] In this case, we find that the trial courts
decision failed to show the reason for the award of attorneys fees, hence it was properly
deleted by the appellate court.
WHEREFORE, the petition is DENIED for lack of merit. The assailed Decision dated July 31,
2001 of the Court of Appeals in CA-G.R. CV No. 58246 is AFFIRMED.No pronouncement
as to costs.
SO ORDERED.
G.R. No. 196577 February 25, 2013
LAND BANK OF THE PHILIPPINES, Petitioner,
vs.
BARBARA SAMPAGA POBLETE, Respondent.
DECISION
CARPIO, J.:
The Case
This Petition for Review on Certiorari 1 seeks to reverse the Court of Appeals'
Decision2 dated 28 September 20 I 0 and its Resolution3 dated 19 April 2011 in C A-G.R.
CV No. 91666. The Court of Appeals (C A) affirmed in toto the Decision4 of the Regional
Trial Court (RTC) of San Jose, Occidental Mindoro, Branch 46, in Civil Case No. R-1331.
The Facts
The facts, as culled from the records, are as follows:
Petitioner Land Bank of the Philippines (Land Bank) is a banking institution organized and
existing under Philippine laws. Respondent Barbara Sampaga Poblete (Poblete) is the
registered owner of a parcel of land, known as Lot No. 29, with an area of 455 square
meters, located in Buenavista, Sablayan, Occidental Mindoro, under Original Certificate
of Title (OCT) No. P-12026. In October 1997, Poblete obtained a ₱300,000.00 loan from
Kabalikat ng Pamayanan ng Nagnanais Tumulong at Yumaman Multi-Purpose
Cooperative (Kapantay). Poblete mortgaged Lot No. 29 to Kapantay to guarantee
payment of the loan. Kapantay, in turn, used OCT No. P-12026 as collateral under its
Loan Account No. 97-CC-013 with Land Bank-Sablayan Branch.
In November 1998, Poblete decided to sell Lot No. 29 to pay her loan. She instructed her
son-in-law Domingo Balen (Balen) to look for a buyer. Balen referred Angelito Joseph
Maniego (Maniego) to Poblete. According to Poblete, Maniego agreed to buy Lot No.
29 for ₱900,000.00, but Maniego suggested that a deed of absolute sale for ₱300,000.00
be executed instead to reduce the taxes. Thus, Poblete executed the Deed of Absolute
Sale dated 9 November 1998 (Deed dated 9 November 1998) with ₱300,000.00 as
consideration.5 In the Deed dated 9 November 1998, Poblete described herself as a
"widow." Poblete, then, asked Balen to deliver the Deed dated 9 November 1998 to
Maniego and to receive the payment in her behalf. Balen testified that he delivered the
Deed dated 9 November 1998 to Maniego. However, Balen stated that he did not
receive from Maniego the agreed purchase price. Maniego told Balen that he would
pay the amount upon his return from the United States. In an Affidavit dated 19
November 1998, Poblete stated that she agreed to have the payment deposited in her
Land Bank Savings Account.6
Based on a Certification issued by Land Bank-Sablayan Branch Department Manager
Marcelino Pulayan on 20 August 1999,7 Maniego paid Kapantay’s Loan Account No. 97-
CC-013 for ₱448,202.08. On 8 June 2000, Maniego applied for a loan of ₱1,000,000.00
with Land Bank, using OCT No. P 12026 as collateral. Land Bank alleged that as a
condition for the approval of the loan, the title of the collateral should first be transferred
to Maniego.
On 14 August 2000, pursuant to a Deed of Absolute Sale dated 11 August 2000 (Deed
dated 11 August 2000),8 the Register of Deeds of Occidental Mindoro issued Transfer
Certificate of Title (TCT) No. T-20151 in Maniego’s name. On 15 August 2000, Maniego
and Land Bank executed a Credit Line Agreement and a Real Estate Mortgage over
TCT No. T- 20151. On the same day, Land Bank released the ₱1,000,000.00 loan
proceeds to Maniego. Subsequently, Maniego failed to pay the loan with Land Bank.
On 4 November 2002, Land Bank filed an Application for Extra-judicial Foreclosure of
Real Estate Mortgage stating that Maniego’s total indebtedness amounted to
₱1,154,388.88.
On 2 December 2002, Poblete filed a Complaint for Nullification of the Deed dated 11
August 2000 and TCT No. T-20151, Reconveyance of Title and Damages with Prayer for
Temporary Restraining Order and/or Issuance of Writ of Preliminary Injunction. Named
defendants were Maniego, Land Bank, the Register of Deeds of Occidental Mindoro
and Elsa Z. Aguirre in her capacity as Acting Clerk of Court of RTC San Jose, Occidental
Mindoro. In her Complaint, Poblete alleged that despite her demands on Maniego, she
did not receive the consideration of ₱900,000.00 for Lot No. 29. She claimed that without
her knowledge, Maniego used the Deed dated 9 November 1998 to acquire OCT No. P-
12026 from Kapantay. Upon her verification with the Register of Deeds, the Deed dated
11 August 2000 was used to obtain TCT No. T-20151. Poblete claimed that the Deed
dated 11 August 2000 bearing her and her deceased husband’s, Primo Poblete,
supposed signatures was a forgery as their signatures were forged. As proof of the
forgery, Poblete presented the Death Certificate dated 27 April 1996 of her husband
and Report No. 294-502 of the Technical Services Department of the National Bureau of
Investigation showing that the signatures in the Deed dated 11 August 2000 were
forgeries. Accordingly, Poblete also filed a case for estafa through falsification of public
document against Maniego and sought injunction of the impending foreclosure
proceeding.
On 7 January 2003, Land Bank filed its Answer with Compulsory Counterclaim and Cross-
claim. Land Bank claimed that it is a mortgagee in good faith and it observed due
diligence prior to approving the loan by verifying Maniego’s title with the Office of the
Register of Deeds. Land Bank likewise interposed a cross-claim against Maniego for the
payment of the loan, with interest, penalties and other charges. Maniego, on the other
hand, separately filed his Answer. Maniego denied the allegations of Poblete and
claimed that it was Poblete who forged the Deed dated 11 August 2000. He also
alleged that he paid the consideration of the sale to Poblete and even her loans from
Kapantay and Land Bank.
The Ruling of the Regional Trial Court
On 28 December 2007, the RTC of San Jose, Occidental Mindoro, Branch 46, rendered a
Decision in favor of Poblete, the dispositive portion of which reads:
WHEREFORE, by preponderance of evidence, judgment is hereby rendered in favor of
the plaintiff and against the defendants, as follows:
1. Declaring the Deed of Sale dated August 11, 2000 over O.C.T. No. P-12026, as null and
void;
2. Declaring Transfer of Certificate of Title No. T-20151 as null and void, it having been
issued on the basis of a spurious and forged document;
3. The preliminary [i]njunction issued directing the defendants to refrain from
proceedings [sic] with the auction sale of the plaintiff’s properties, dated February 10,
2002, is hereby made permanent;
4. Ordering defendant Angelito Joseph Maniego to return to the plaintiff O.C.T. No. P-
12026; and
5. Ordering defendant Angelito Joseph Maniego to pay plaintiff the amount of
₱50,000.00, as and for reasonable attorney’s fees.
Judgment is furthermore rendered on the cross-claim of defendant Land Bank of the
Philippines against defendant Angelito Joseph Maniego, as follows:
A. Ordering defendant Angelito Joseph Maniego to pay his co-defendant [L]and Bank
of the Philippines his loan with a principal of ₱1,000,000.00, plus interests, penalties and
other charges thereon; and
B. Ordering defendant Angelito Joseph Maniego to pay the costs of this suit.
SO ORDERED.9
The RTC ruled that the sale between Poblete and Maniego was a nullity. The RTC found
that the agreed consideration was ₱900,000.00 and Maniego failed to pay the
consideration. Furthermore, the signatures of Poblete and her deceased husband were
proven to be forgeries. The RTC also ruled that Land Bank was not a mortgagee in good
faith because it failed to exercise the diligence required of banking institutions. The RTC
explained that had Land Bank exercised due diligence, it would have known before
approving the loan that the sale between Poblete and Maniego had not been
consummated. Nevertheless, the RTC granted Land Bank’s cross-claim against
Maniego.
In an Order dated 17 March 2008, the RTC denied the Motion for Reconsideration filed
by Land Bank for want of merit. Thereafter, Land Bank and Maniego separately
challenged the RTC’s Decision before the CA.
The Ruling of the Court of Appeals
On 28 September 2010, the CA promulgated its Decision affirming in toto the Decision of
the RTC.10 Both Land Bank and Maniego filed their Motions for Reconsideration but the
CA denied both motions on 19 April 2011.11
In a Resolution dated 13 July 2011,12 the Second Division of this Court denied the Petition
for Review on Certiorari filed by Maniego. This Resolution became final and executory
on 19 January 2012.
On the other hand, Land Bank filed this petition.
The Issues
Land Bank seeks a reversal and raises the following issues for resolution:
1. THE COURT OF APPEALS (FORMER SPECIAL ELEVENTH DIVISION) ERRED IN UPHOLDING
THE FINDING OF THE TRIAL COURT DECLARING TCT NO. T-20151 AS NULL AND VOID. THE
COURT OF APPEALS MISCONSTRUED AND MISAPPRECIATED THE EVIDENCE AND THE LAW
IN NOT FINDING TCT NO. T-20151 REGISTERED IN THE NAME OF ANGELITO JOSEPH
MANIEGO AS VALID.
2. THE COURT OF APPEALS (FORMER SPECIAL ELEVENTH DIVISION) MISCONSTRUED THE
EVIDENCE AND THE LAW IN NOT FINDING LAND BANK A MORTGAGEE IN GOOD FAITH.
3. THE COURT OF APPEALS (FORMER SPECIAL ELEVENTH DIVISION) MISCONSTRUED THE
EVIDENCE AND THE LAW IN NOT FINDING THE RESPONDENT AND ANGELITO JOSEPH
MANIEGO AS IN PARI DELICTO.
4. THE COURT OF APPEALS (FORMER SPECIAL ELEVENTH DIVISION) ERRED IN NOT
APPLYING THE PRINCIPLE OF ESTOPPEL OR LACHES ON RESPONDENT IN THAT THE
PROXIMATE CAUSE OF HER LOSS WAS HER NEGLIGENCE TO SAFEGUARD HER RIGHTS
OVER THE SUBJECT PROPERTY, THEREBY ENABLING ANGELITO JOSEPH MANIEGO TO
MORTGAGE THE SAME WITH LAND BANK.13
The Ruling of the Court
We do not find merit in the petition.
A petition for review under Rule 45 of the Rules of Court specifically provides that only
questions of law may be raised, subject to exceptional circumstances 14 which are not
present in this case. Hence, factual findings of the trial court, especially if affirmed by
the CA, are binding on us.15 In this case, both the RTC and the CA found that the
signatures of Poblete and her deceased husband in the Deed dated 11 August 2000
were forged by Maniego. In addition, the evidence is preponderant that Maniego did
not pay the consideration for the sale. Since the issue on the genuineness of the Deed
dated 11 August 2000 is essentially a question of fact, we are not dutybound to analyze
and weigh the evidence again.16
It is a well-entrenched rule, as aptly applied by the CA, that a forged or fraudulent
deed is a nullity and conveys no title.17 Moreover, where the deed of sale states that the
purchase price has been paid but in fact has never been paid, the deed of sale is
void ab initio for lack of consideration.18 Since the Deed dated 11 August 2000 is void,
the corresponding TCT No. T-20151 issued pursuant to the same deed is likewise void.
In Yu Bun Guan v. Ong,19 the Court ruled that there was no legal basis for the issuance of
the certificate of title and the CA correctly cancelled the same when the deed of
absolute sale was completely simulated, void and without effect. In Ereña v. Querrer-
Kauffman,20 the Court held that when the instrument presented for registration is forged,
even if accompanied by the owner’s duplicate certificate of title, the registered owner
does not thereby lose his title, and neither does the mortgagee acquire any right or title
to the property. In such a case, the mortgagee under the forged instrument is not a
mortgagee protected by law.21
The issue on the nullity of Maniego’s title had already been foreclosed when this Court
denied Maniego’s petition for review in the Resolution dated 13 July 2011, which
became final and executory on 19 January 2012. 22 It is settled that a decision that has
acquired finality becomes immutable and unalterable and may no longer be modified
in any respect, even if the modification is meant to correct erroneous conclusions of
fact or law and whether it will be made by the court that rendered it or by the highest
court of the land.23 This is without prejudice, however, to the right of Maniego to recover
from Poblete what he paid to Kapantay for the account of Poblete, otherwise there will
be unjust enrichment by Poblete.
Since TCT No. T-20151 has been declared void by final judgment, the Real Estate
Mortgage constituted over it is also void. In a real estate mortgage contract, it is
essential that the mortgagor be the absolute owner of the property to be mortgaged;
otherwise, the mortgage is void.24
Land Bank insists that it is a mortgagee in good faith since it verified Maniego’s title, did
a credit investigation, and inspected Lot No. 29. The issue of being a mortgagee in
good faith is a factual matter, which cannot be raised in this petition.25 However, to
settle the issue, we carefully examined the records to determine whether or not Land
Bank is a mortgagee in good faith.1âwphi1
There is indeed a situation where, despite the fact that the mortgagor is not the owner
of the mortgaged property, his title being fraudulent, the mortgage contract and any
foreclosure sale arising therefrom are given effect by reason of public policy. 26 This is the
doctrine of "the mortgagee in good faith" based on the rule that buyers or mortgagees
dealing with property covered by a Torrens Certificate of Title are not required to go
beyond what appears on the face of the title. 27 However, it has been consistently held
that this rule does not apply to banks, which are required to observe a higher standard
of diligence.28 A bank whose business is impressed with public interest is expected to
exercise more care and prudence in its dealings than a private individual, even in cases
involving registered lands.29 A bank cannot assume that, simply because the title
offered as security is on its face free of any encumbrances or lien, it is relieved of the
responsibility of taking further steps to verify the title and inspect the properties to be
mortgaged.30
Applying the same principles, we do not find Land Bank to be a mortgagee in good
faith.
Good faith, or the lack of it, is a question of intention. 31 In ascertaining intention, courts
are necessarily controlled by the evidence as to the conduct and outward acts by
which alone the inward motive may, with safety, be determined.32
Based on the evidence, Land Bank processed Maniego’s loan application upon his
presentation of OCT No. P-12026, which was still under the name of Poblete. Land Bank
even ignored the fact that Kapantay previously used Poblete’s title as collateral in its
loan account with Land Bank.33 In Bank of Commerce v. San Pablo, Jr.,34 we held that
when "the person applying for the loan is other than the registered owner of the real
property being mortgaged, [such fact] should have already raised a red flag and which
should have induced the Bank x x x to make inquiries into and confirm x x x [the]
authority to mortgage x x x. A person who deliberately ignores a significant fact that
could create suspicion in an otherwise reasonable person is not an innocent purchaser
for value."
The records do not even show that Land Bank investigated and inspected the property
to ascertain its actual occupants. Land Bank merely mentioned that it inspected Lot No.
29 to appraise the value of the property. We take judicial notice of the standard
practice of banks, before approving a loan, to send representatives to the premises of
the land offered as collateral to investigate its real owners. 35 In Prudential Bank v. Kim
Hyeun Soon,36 the Court held that the bank failed to exercise due diligence although its
representative conducted an ocular inspection, because the representative
concentrated only on the appraisal of the property and failed to inquire as to who were
the then occupants of the property.
Land Bank claims that it conditioned the approval of the loan upon the transfer of title
to Maniego, but admits processing the loan based on Maniego’s assurances that title
would soon be his.37 Thus, only one day after Maniego obtained TCT No. T-20151 under
his name, Land Bank and Maniego executed a Credit Line Agreement and a Real
Estate Mortgage. Because of Land Bank’s haste in granting the loan, it appears that
Maniego’s loan was already completely processed while the collateral was still in the
name of Poblete. This is also supported by the testimony of Land Bank Customer
Assistant Andresito Osano.38
Where the mortgagee acted with haste in granting the mortgage loan and did not
ascertain the ownership of the land being mortgaged, as well as the authority of the
supposed agent executing the mortgage, it cannot be considered an innocent
mortgagee.39
Since Land Bank is not a mortgagee in good faith, it is not entitled to protection. The
injunction against the foreclosure proceeding in the present case should be made
permanent. Since Lot No. 29 has not been transferred to a third person who is an
innocent purchaser for value, ownership of the lot remains with Poblete. This is without
prejudice to the right of either party to proceed against Maniego.
On the allegation that Poblete is in pari delicto with Maniego, we find the principle
inapplicable. The pari delicto rule provides that "when two parties are equally at fault,
the law leaves them as they are and denies recovery by either one of them." 40 We
adopt the factual finding of the RTC and the CA that only Maniego is at fault.
Finally, on the issues of estoppel and laches, such were not raised before the trial
court.1âwphi1 I fence, we cannot rule upon the same. It is settled that an issue which
was neither alleged in the complaint nor raised during the trial cannot be raised for the
tirst time on appeal, as such a recourse would be offensive to the basic rules of t}1ir
play, justice and due process, since the opposing party would be deprived of the
opp01iunity to introduce evidence rebutting such new issue. 41
WHEREFORE, we DENY the petition. We AFFIRM the 28 September 2010 Decision and the
19 April 2011 Resolution of the Court of Appeals in CA-Ci.R. CV No. 91666. The injunction
against the foreclosure proceeding, issued by the Regional Trial Court of San Jose,
Occidental Mindoro, Branch 46, is made permanent. Costs against Land Bank.
SO ORDERED.
[G.R. No. 94457. October 16, 1997]
VICTORIA LEGARDA, petitioner, vs. THE HONORABLE COURT OF APPEALS, NEW CATHAY
HOUSE, INC., THE HONORABLE REGIONAL TRIAL COURT OF QUEZON CITY, BRANCH
94, respondents.
RESOLUTION
ROMERO, J.:
For our resolution is the motion for reconsideration of the March 18, 1991, decision of the
Courts's First Division, filed by private respondents New Cathay House, Inc. (Cathay). A
brief narration of facts is in order.
The parties hereto entered into a lease agreement over a certain Quezon City property
owned by petitioner Victoria Legarda. For some reason or another, she refused to sign
the contract although respondent lessee, Cathay, made a deposit and a down
payment of rentals, prompting the latter to file before the Regional Trial Court of Quezon
City, Branch 94 a complaint[1] against the former for specific performance with
preliminary injunction and damages. The court a quo issued the injunction. In the
meantime, Legardas counsel, noted lawyer Dean Antonio Coronel, requested a 10-day
extension of time to file an answer which the court granted. Atty. Coronel, however,
failed to file an answer within the extended period. His client was eventually declared in
default, Cathay was allowed to present evidence ex-parte, and on March 25, 1985, a
judgment by default was reached by the trial court ordering Legarda to execute the
lease contract in favor of, and to pay damages to, Cathay.
On April 9, 1985, a copy of said decision was served on Atty. Coronel but he took no
action until the judgment became final and executory. A month later, the trial court
issued a writ of execution and a public auction was held where Cathays manager,
Roberto V. Cabrera, Jr., as highest bidder, was awarded the property for P376,500.00 in
satisfaction of the judgment debt.Consequently, a Certificate of Sale was issued by the
sheriff on June 27, 1985. Upon failure of Legarda to redeem her property within the one-
year redemption period, a Final Deed of Sale was issued by the sheriff on July 8, 1986,
which was registered by Cabrera with the Register of Deeds three days later. Hence,
Legardas Transfer Certificate of Title (TCT) No. 270814 was cancelled with the issuance of
TCT No. 350892 in the name of Cabrera.
Despite the lapse of over a year since the judgment by default became final and
executory, Atty. Coronel made no move on behalf of his client. He did not even inform
her of all these developments. When Legarda did learn of the adverse decision, she
nevertheless did not lose faith in her counsel [2] and prevailed upon him to seek
appropriate relief. Thus, on October 23, 1986, he filed a petition for annulment of
judgment with prayer for the issuance of a writ of preliminary mandatory injunction
before the Court of Appeals.[3]
On November 29, 1989, the appellate court rendered a decision affirming the March 25,
1985, decision of the trial court, dismissing the petition for annulment of judgment, and
holding Legarda bound by the negligence of her counsel. It considered her allegation
of fraud by Cathay to be improbable, and added that there was pure and simple
negligence on the part of petitioners counsel who failed to file an answer and, later, a
petition for relief from judgment by default. Upon notice of the Court of Appeals
decision, Atty. Coronel again neglected to protect his clients interest by failing to file a
motion for reconsideration or to appeal therefrom until said decision became final on
December 21, 1989.
Sometime in March 1990, Legarda learned of the adverse decision of the Court of
Appeals dated November 29, 1989, not from Atty. Coronel but from his secretary. She
then hired a new counsel for the purpose of elevating her case to this Court. The new
lawyer filed a petition for certiorari praying for the annulment of the decision of the trial
and appellate courts and of the sheriffs sale, alleging, among other things, that Legarda
lost in the courts below because her previous lawyer was grossly negligent and
inefficient, whose omissions cannot possibly bind her because this amounted to a
violation of her right to due process of law. She, therefore, asked Cathay (not Cabrera)
to reconvey the subject property to her.
On March 18, 1991, a decision[4] was rendered in this case by Mr. Justice Gancayco,
ruling, inter alia, as follows: (a) granting the petition; (b) nullifying the trial courts decision
dated March 25, 1985, the Court of Appeals decision dated November 29, 1989, the
Sheriffs Certificate of Sale dated June 27, 1985, of the property in question, and the
subsequent final deed of sale covering the same property; and (c) ordering Cathay to
reconvey said property to Legarda, and the Register of Deeds to cancel the registration
of said property in the name of Cathay (not Cabrera) and to issue a new one in
Legardas name.
The Court then declared that Atty. Coronel committed, not just ordinary or simple
negligence, but reckless, inexcusable and gross negligence, which deprived his client of
her property without due process of law. His acts, or the lack of it, should not be allowed
to bind Legarda who has been consigned to penury because her lawyer appeared to
have abandoned her case not once but repeatedly. Thus, the Court ruled against
tolerating such unjust enrichment of Cathay at Legardas expense, and noted that
counsels lack of devotion to duty is so gross and palpable that this Court must come to
the aid of his distraught client.
Aggrieved by this development, Cathay filed the instant motion for reconsideration,
alleging, inter alia, that reconveyance is not possible because the subject property had
already been sold by its owner, Cabrera, even prior to the promulgation of said
decision.
By virtue of the Gancayco decision, Cathay was duty bound to return the subject
property to Legarda. The impossibility of this directive is immediately apparent, for two
reasons: First, Cathay neither possessed nor owned the property so it is in no position to
reconvey the same; second, even if it did, ownership over the property had already
been validly transferred to innocent third parties at the time of promulgation of said
judgment.
There is no question that the highest bidder at the public auction was Cathays
manager. It has not been shown nor even alleged, however, that Roberto Cabrera had
all the time been acting for or in behalf of Cathay. For all intents and purposes, Cabrera
was simply a vendee whose payment effectively extinguished Legardas liability to
Cathay as the judgment creditor.No proof was ever presented which would reveal that
the sale occurred only on paper, with Cabrera acting as a mere conduit for
Cathay. What is clear from the records is that the auction sale was conducted regularly,
that a certificate of sale and, subsequently, a final deed of sale were issued to Cabrera
which allowed him to consolidate his ownership over the subject property, register it and
obtain a title in his own name, and sell it to Nancy Saw, an innocent purchaser for value,
at a premium price. Nothing on record would demonstrate that Cathay was the
beneficiary of the sale between Cabrera and Saw. Cabrera himself maintained that he
was acting in his private (as distinct from his corporate) capacity [5] when he
participated in the bidding.
Since the decision of the Court of Appeals gained finality on December 21, 1989, the
subject property has been sold and ownership thereof transferred no less than three
times, viz.: (a) from Cabrera to Nancy Saw on March 21, 1990, four months after the
decision of the Court of Appeals became final and executory and one year before the
promulgation of the March 18, 1991, decision under reconsideration; (b) from Nancy
Saw to Lily Tanlo Sy Chua on August 7, 1990, more than one year before the Court issued
a temporary restraining order in connection with this case; and (c) from the spouses
Victor and Lily Sy Chua to Janet Chong Luminlun on April 3, 1992. With these transfers,
Cabreras TCT No. 350892 gave way to Saws TCT No. 31672, then to Chuas TCT No. 31673,
and finally to Luminluns TCT No. 99143, all issued by the Register of Deeds of Quezon City
on April 3, 1990, August 8, 1990, and November 24, 1993, respectively.
We do not have to belabor the fact that all the successors-in-interest of Cabrera to the
subject lot were transferees for value and in good faith, having relied as they did on the
clean titles of their predecessors. The successive owners were each armed with their
own indefeasible titles which automatically brought them under the aegis of the Torrens
System. As the Court declared in Sandoval v. Court of Appeals,[6] (i)t is settled doctrine
that one who deals with property registered under the Torrens system need not go
beyond the same, but only has to rely on the title. He is charged with notice only of such
burdens and claims as are annotated on the title. [7] In the case at bar, it is not disputed
that no notice of lis pendens was ever annotated on any of the titles of the subsequent
owners. And even if there were such a notice, it would not have created a lien over the
property because the main office of a lien is to warn prospective buyers that the
property they intend to purchase is the subject of a pending litigation. Therefore, since
the property is already in the hands of Luminlun, an innocent purchaser for value, it can
no longer be returned to its original owner by Cabrera, much less by Cathay itself.
Another point to consider, though not raised as an issue in this case, is the fact that
Cabrera was impleaded as a party-respondent only on August 12, 1991, after the
promulgation of the Gancayco decision.[8] The dispositive portion itself ordered Cathay,
instead of Cabrera to reconvey the property to Legarda. Cabrera was never a party to
this case, either as plaintiff-appellee below or as respondent in the present
action. Neither did he ever act as Cathays representative. As we held in the recent
case of National Power Corporation v. NLRC, et al., [9](j)urisdiction over a party is
acquired by his voluntary appearance or submission to the court or by the coercive
process issued by the court to him, generally by service of summons. [10] In other words,
until Cabrera was impleaded as party respondent and ordered to file a comment in the
August 12, 1991, resolution, the Court never obtained jurisdiction over him, and to
command his principal to reconvey a piece of property which used to be HIS would not
only be inappropriate but would also constitute a real deprivation of ones property
without due process of law.
Assuming arguendo that reconveyance is possible, that Cathay and Cabrera are one
and the same and that Cabreras payment redounded to the benefit of his principal,
reconveyance, under the facts and evidence obtaining in this case, would still not
address the issues raised herein
The application of the sale price to Legardas judgment debt constituted a payment
which extinguished her liability to Cathay as the party in whose favor the obligation to
pay damages was established.[11] It was a payment in the sense that Cathay had to
resort to a court-supervised auction sale in order to execute the judgment. [12] With the
fulfillment of the judgment debtors obligation, nothing else was required to be done.
Under the Gancayco ruling, the order of reconveyance was premised on the alleged
gross negligence of Legardas counsel which should not be allowed to bind her as she
was deprived of her property without due process of law.
It is, however, basic that as long as a party was given the opportunity to defend her
interests in due course, she cannot be said to have been denied due process of law, for
this opportunity to be heard is the very essence of due process. The chronology of
events shows that the case took its regular course in the trial and appellate courts but
Legardas counsel failed to act as any ordinary counsel should have acted, his
negligence every step of the way amounting to abandonment, in the words of the
Gancayco decision. Yet, it cannot be denied that the proceedings which led to the
filing of this case were not attended by any irregularity. The judgment by default was
valid, so was the ensuing sale at public auction. If Cabrera was adjudged highest
bidder in said auction sale, it was not through any machination on his part. All of his
actuations that led to the final registration of the title in his name were aboveboard,
untainted by any irregularity.
The fact that Cabrera is an officer of Cathay does not make him a purchaser in bad
faith. His act in representing the company was never questioned nor disputed by
Legarda. And while it is true that he won in the bidding, it is likewise true that said
bidding was conducted by the book. There is no call to be alarmed that an official of
the company emerges as the winning bidder since in some cases, the judgment
creditor himself personally participates in the bidding.
There is no gainsaying that Legarda is the judgment debtor here. Her property was sold
at public auction to satisfy the judgment debt. She cannot claim that she was illegally
deprived of her property because such deprivation was done in accordance with the
rules on execution of judgments. Whether the money used to pay for said property
came from the judgment creditor or its representative is not relevant. What is important
is that it was purchased for value. Cabrera parted with real money at the auction. In his
Sheriffs Certificate of Sale dated June 27, 1985, [13] Deputy Sheriff Angelito R. Mendoza
certified, inter alia, that the highest bidder paid to the Deputy Sheriff the said amount
of P376,500.00, the sale price of the levied property. If this does not constitute payment,
what then is it? Had there been no real purchase and payment below, the subject
property would never have been awarded to Cabrera and registered in his name, and
the judgment debt would never have been satisfied. Thus, to require either Cathay or
Cabrera to reconvey the property would be an unlawful intrusion into the lawful
exercise of his proprietary rights over the land in question, an act which would constitute
an actual denial of property without due process of law.
It may be true that the subject lot could have fetched a higher price during the public
auction, as Legarda claims, but the fail to betray any hint of a bid higher than Cabreras
which was bypassed in his favor. Certainly, he could not help it if his bid of
only P376,500.00 was the highest. Moreover, in spite of this allegedly low selling price,
Legarda still failed to redeem her property within the one-year redemption period. She
could not feign ignorance of said sale on account of her counsels failure to so inform
her, because such auction sales comply with requirements of notice and publication
under the Rules of Court. In the absence of any clear and convincing proof that such
requirements were not followed, the presumption of regularity stands. Legarda also
claims that she was in the United States during the redemption period, but she admits
that she left the Philippines only on July 13, 1985, or sixteen days after the auction sale of
June 27, 1985. Finally, she admits that her mother Ligaya represented her during her
absence.[14] In short, she was not totally in the dark as to the fate of her property and she
could have exercised her right of redemption if she chose to, but she did not.
Neither Cathay nor Cabrera should be made to suffer for the gross negligence of
Legardas counsel. If she may be said to be innocent because she was ignorant of the
acts of negligence of her counsel, with more reason are respondents truly innocent. As
between two parties who may lose due to the negligence or incompetence of the
counsel of one, the party who was responsible for making it happen should suffer the
consequences. This reflects the basic common law maxim, so succinctly stated by
Justice J.B.L. Reyes, that . . . (B)etween two innocent parties, the one who made it
possible for the wrong to be done should be the one to bear the resulting loss. [15] In this
case, it was not respondents, Legarda, who misjudged and hired the services of the
lawyer who practically abandoned her case and who continued to retain him even
after his proven apathy and negligence.
The Gancayco decision makes much of the fact that Legarda is now consigned to
penury and, therefore, this Court must come to the aid of the distraught client. It must
be remembered that this Court renders decisions, not on the basis of emotions but on its
sound judgment, applying the relevant, appropriate law. Much as it may pity Legarda,
or any losing litigant for that matter, it cannot play the role of a knight in shining armor
coming to the aid of someone, who through her weakness, ignorance or misjudgment
may have been bested in a legal joust which complied with all the rules of legal
proceedings.
In Vales v. Villa,[16] this Court warned against the danger of jumping to the aid of a
litigant who commits serious error of judgment resulting in his own loss:
x x x Courts operate not because one person has been defeated or overcome by
another, but because he has been defeated or overcome illegally. Men may do foolish
things, make ridiculous contracts, use miserable judgment, and lose money by them -
indeed, all they have in the world; but not for that alone can the law intervene and
restore. There must be, in addition, a violation of law, the commission of what the law
knows as an actionable wrong, before the courts are authorized to lay hold of the
situation and remedy it."
Respondents should not be penalized for Legardas mistake. If the subject property was
at all sold, it was only after the decisions of the trial and appellate courts had gained
finality.These twin judgments, which were nullified by the Gancayco decision, should be
respected and allowed to stand by this Court for having become final and executory.
A judgment may be broadly defined as the decision or sentence of the law given by a
court or other tribunal as the result of proceedings instituted therein. [17] It is a judicial act
which settles the issues, fixes the rights and liabilities of the parties, and determines the
proceeding, and it is regarded as the sentence of the law pronounced by the court on
the action or question before it.[18]
In the case at bar, the trial courts judgment was based on Cathays evidence after
Legarda was declared in default. Damages were duly awarded to Cathay, not
whimsically, but upon proof of its entitlement thereto. The issue of whether the plaintiff
(Cathay) deserved to recover damages because of the defendants (Legardas) refusal
to honor their lease agreement was resolved. Consequently, the right of Cathay to be
vindicated for such breach and the liability incurred by Legarda in the process were
determined.
This judgment became final when she failed to avail of remedies available to her, such
as filing a motion for reconsideration or appealing the case. At the time, the issues
raised in the complaint had already been determined and disposed of by the trial
court. [19] This is the stage of finality which judgments must at one point or another
reach. In our jurisdiction, a judgment becomes ipso facto final when no appeal is
perfected or the reglementary period to appeal therefrom expires. The necessity of
giving finality to judgments that are not void is self-evident.The interests of society
impose it. The opposite view might make litigations more unendurable than the wrongs
(they are) intended to redress. It would create doubt, real or imaginary, and controversy
would constantly arise as to what the judgment or order was. Public policy and sound
practice demand that, at the risk of occasional errors, judgments of courts should
become final at some definite date fixed by law. The very object for which courts were
instituted was to put an end to controversies. [20] When judgments of lower courts gain
finality, they, too, become inviolable, impervious to modification. They may, then, no
longer be reviewed, or in any way modified directly or indirectly, by a higher court, not
even by the Supreme Court.[21] In other words, once a judgment becomes final, the only
errors that may be corrected are those which are clerical. [22]
From the foregoing precedents, it is readily apparent that the real issue that must be
resolved in this motion for reconsideration is the alleged illegality of the final judgments
of the trial and appellate courts.
Void judgments may be classified into two groups: those rendered by a court without
jurisdiction to do so and those obtained by fraud or collusion. [23] This case must be tested
in light of the guidelines governing the latter class of judgments. In this regard, an action
to annul a judgment on the ground of fraud will not lie unless the fraud is extrinsic or
collateral and facts upon which it is based (have) not been controverted or reso lved in
the case where (the) judgment was rendered. [24] Where is the fraud in the case at
bar? Was Legarda unlawfully barred from the proceedings below? Did her counsel sell
her out to the opponent?
It must be noted that, aside from the fact that no extrinsic fraud attended the trial and
resolution of this case, the jurisdiction of the court a quo over the parties and the subject
matter was never raised as an issue by Legarda. Such being the case, the decision of
the trial court cannot be nullified. Errors of judgment, if any, can only be reviewed on
appeal, failing which the decision becomes final and executory, valid and binding
upon the parties in the case and their successors in interest.[25]
At this juncture, it must be pointed out that while Legarda went to the Court of Appeals
claiming precisely that the trial courts decision was fraudulently obtained, she grounded
her petition before the Supreme Court upon her estranged counsels negligence. This
could only imply that at the time she filed her petition for annulment of judgment, she
entertained no notion that Atty. Coronel was being remiss in his duties. It was only after
the appellate courts decision had become final and executory, a writ of execution
issued, the property auctioned off then sold to an innocent purchasers for value, that
she began to protest the alleged negligence of her attorney. In most cases, this would
have been dismissed outright for being dilatory and appearing as an act of desperation
on the part of a vanquished litigant. The Gancayco ruling, unfortunately, ruled
otherwise.
Fortunately, we now have an opportunity to rectify a grave error of the past.
WHEREFORE, the Motion for Reconsideration of respondent New Cathay House, Inc. is
hereby GRANTED. Consequently, the decision dated March 18, 1991, of the Courts First
Division is VACATED and SET ASIDE. A new judgment is hereby entered DISMISSING the
instant petition for review and AFFIRMING the November 29, 1989, decision of the Court
of Appeals in CA-G.R. No. SP-10487. Costs against petitioner Victoria Legarda.
SO ORDERED.
[ GR Nos. 185857-58, Jun 29, 2016 ]
TRIFONIA D. GABUTAN v. DANTE D. NACALABAN
JARDELEZA, J.:
Before us are consolidated petitions questioning the Court of Appeals' (CA)
Decision[1] dated December 11, 2008 and Resolution [2] dated August 17, 2010 in CA-G.R.
CV No. 68960-MIN and CA-G.R. SP No. 53598-MIN.[3] In G.R. Nos. 185857-58, the heirs of
Trifonia D. Gabutan and Tirso Dalondonan, Buna D. Actub, Felisia Trocio and Crisanta D.
Ubaub (Gabutan, et al.) filed a partial appeal by way of a petition for review
on certiorari,[4] seeking to reverse the portion of the CA Decision declaring Cagayan
Capital College (the College) as a buyer in good faith. The other petition, G.R. Nos.
194314-15, is one for certiorari [5] filed by Dante D. Nacalaban, Helen N. Maandig, and
Susan N. Siao as heirs of Baldomera D. Vda. De Nacalaban (Nacalaban, et al.). It seeks
to annul the CA Decision and Resolution which sustained the action for reconveyance
filed by Gabutan, et al.
The Antecedents
On January 25, 1957, Godofredo Nacalaban (Godofredo) purchased an 800-square
meter parcel of prime land (property) in Poblacion, Cagayan de Oro City from Petra,
Fortunata, Francisco and Dolores, all surnamed Daamo.[6] Pursuant to the sale, Transfer
Certificate of Title (TCT) No. T-2259[7] covering the property was issued in the name of
Godofredo. He thereafter built a house on it.[8]
Godofredo died on January 7, 1974.[9] ITe was survived by his wife, Baldomera, and their
children, Dante, Helen, and Susan. On March 19, 1979, Baldomera issued a
Certification [10] in favor of her mother, Melecia. It provided, in effect, that Baldomera
was allowing her mother to build and occupy a house on the portion of the
property. [11] Accordingly, the house was declared for taxation purposes. The tax
declaration[12] presented in evidence showed that Melecia owned the building on the
land owned by Godofredo.[13]
Baldomera died on September 11, 1994.[14] On July 3, 1996, her children executed an
Extrajudicial Settlement of Estate of Deceased Person with Sale [15] (Extrajudicial
Settlement with Sale) where they adjudicated unto themselves the property and sold it
to the College. On August 22, 1996, TCT No. T-2259 was cancelled and TCT No. T-
111846[16] covering the property was issued in the name of the College. [17]
Melecia died on April 20, 1997[18] and was survived by her children, Trifonia, Buna, Felisia,
Crisanta, and Tirso.
In a letter[19] dated May 5, 1997, the College demanded Trifonia D. Gabutan, Mary Jane
Gilig, Allan Ubaub, and Evelyn Dailo, the heirs of Melecia who were occupying the
house on the property, to vacate the premises. [20]
On July 7, 1997, Gabutan, et al. filed a Complaint for Reconveyance of Real Property,
Declaration of Nullity of Contracts, Partition and Damages with Writ of Preliminary
Attachment and Injunction[21] against Nacalaban, et al. and the College. They alleged
that: (1) Melecia bought the property using her own money but Godofredo had the
Deed of Absolute Sale executed in his name instead of his mother-in-law;[22] (2)
Godofredo and Baldomera were only trustees of the property in favor of the real owner
and beneficiary, Melecia;[23] (3) they only knew about the Extrajudicial Settlement with
Sale upon verification with the Registry of Deeds; [24] and (4) the College was a buyer in
bad faith, being aware they were co-owners of the property.[25]
In its Answer with Affirmative Defenses, [26] the College claimed that it is a buyer in good
faith and for value, having "made exhaustive investigations and verifications from all
reliable sources" that Melecia and her heirs were staying in the property by mere
tolerance.[27] It alleged that: (1) in the tax declaration[28] of the residential house,
Melecia admitted that the lot owner is Godofredo; [29] (2) the occupancy permit of
Melecia was issued only after Godofredo issued a certification [30] to the effect that
Melecia was allowed to occupy a portion of the property; [31] and (3) the Extrajudicial
Settlement with Sale was published in three consecutive issues of Mindanao Post, a
newspaper of general circulation.[32]
In their Answer with Counterclaim,[33] Nacalaban, et al. denied the allegations of
Gabutan, et al. They claimed to have acquired the property by intestate succession
from their parents, who in their lifetime, exercised unequivocal and absolute ownership
over the property.[34] Nacalaban, et al. also set up the defenses of laches and
prescription, and asserted that the action for reconveyance was improper because the
property had already been sold to an innocent purchaser for value. [35]
On September 10, 1997, the College filed a separate Complaint for Unlawful Detainer
and Damages[36] with the Municipal Trial Court in Cities (MTCC) against Trifonia, Mary
Jane, Allan, Evelyn and Nicolas Dailo (Heirs of Melecia). In their Answer with Affirmative
and/or Negative Defenses with Compulsory Counterclaim, [37] the Heirs of Melecia
claimed that they own and possess the property in co-ownership with Nacalaban, et al.
and Gabutan, et al. because it was purchased by Melecia, their common
predecessor.[38] They also claimed that the house in which they reside was constructed
at her expense.[39] The College had prior knowledge of this co-ownership, and hence,
was a purchaser in bad faith.[40] The Heirs of Melecia also raised the defense of forum-
shopping in view of the pendency of the action for reconveyance. [41] They then
concluded that in view of the issues and the value of the property, as well, the MTCC
had no jurisdiction over the case. [42]
The MTCC found it had jurisdiction to hear the case and ruled in favor of the College: [43]
WHEREFORE, JUDGMENT is hereby rendered ordering each of the defendants to:
a.) Immediately vacate the property of the plaintiff;
b.) Pay the plaintiff the monthly use compensation for the continued use of the property
at the rate of P500.00 per month from MAY 5, 1997 until the property is actually vacated;
c.) Pay the plaintiff Attorney's fees amounting to P5,000.00 per defendant;
d.) Pay for litigation expenses at the rate of P1,000.00 per defendant.
SO ORDERED.[44]
On appeal, the Regional Trial Court (RTC) affirmed the MTCC's Decision [46] in all respects,
except that the Heirs of Melecia were given 30 days from notice to vacate the
property. [47] They filed a motion for reconsideration, but it was denied. [49] Thus, the Heirs
of Melecia filed a petition for review [50] before the CA, docketed as CA-G.R. SP No.
53598.[51]
Meanwhile, in the reconveyance case, the RTC rendered a Decision[52] in favor of
Gabutan, et al. The RTC found the testimonies of their witnesses credible, in that the
money of Melecia was used in buying the property but the name of Godofredo was
used when the title was obtained because Godofredo lived in Cagayan de Oro City
while Melecia lived in Bornay, Gitagum, Misamis Oriental. [53] Thus, the RTC held that a
trust was established by operation of law pursuant to Article 1448 of the Civil
Code.[54] The dispositive portion of the RTC's Decision reads:
WHEREFORE, judgment is hereby rendered, and this Court hereby:
1. Declares that the Spouses Godofredo and Baldomera Nacalaban held the
land covered by Transfer Certificate of Title No. T-2259 issued in the name of
Godofredo Nacalaban married to Baldomera Dalondonan issued on January
13, 1959 in trust for Melecia Vda. de Dalondonan with the Spouses as the
trustees and Melecia Vda. de Dalondonan as the cestui que trust;
2. Declares that upon the death of Melecia Vda. de Dalondonan on August 20,
1997, the ownership and beneficial interest of the foregoing Land passed to
the plaintiffs and individual defendants by operation of law as legal heirs of
Melecia Vda. de Dalondonan;
 3. Nullifies the Extrajudicial Settlement of Estate of Deceased Person with Sale
executed by the individual defendants on July 30, 1996 and known as Doc.
No. 326; Page No. 67; Book No. XX; Series of 1996 in the Notarial Register of
Notary Public Victoriano M. Jacot with respect to the Extrajudicial settlement
by the individual defendants of the land referred to above;
4. Declares that defendant Cagayan Capitol College was a buyer in good faith
and for value of the land referred to above, and, accordingly, declares that
said defendant now owns the land;
5. Orders defendant Cagayan Capitol College to inform this Court in writing
within thirty (30) days from receipt of this decision the amount of the purchase
price of the land referred to above bought by it from the individual
defendants the amount of which should approximate the prevailing market
value of the land at the time of the purchase;
6. Orders the individual defendants namely, Dante D. Nacalaban, Helen N.
Maandig, and Susan N. Siao, jointly and severally, to deliver and turn over to
the plaintiffs, within thirty (30) days from receipt of this decision, plaintiffs' shares
of the proceeds of the sale of the land referred to above the amount of which
is equivalent to live-sixth (5/6) of said proceeds with the remaining one-sixth
(1/6) to be retained by the individual defendants as their share by virtue of
their being the legal heirs of Baldomera D. Nacalaban;
SO ORDERED.[55]
Both parties filed separate appeals from this Decision before the CA. [57] In a
Resolution[58] dated October 7, 2004, the CA consolidated both appeals.
The C A rendered its Decision[59] on December 11, 2008 dismissing the consolidated
appeals and affirming in toto the RTC Decisions in the unlawful detainer case and the
action for reconveyance. The CA held that: (1) the defense of co-ownership based on
an implied trust by a defendant in an unlawful detainer case shall not divest the MTCC
of jurisdiction over the case; [60] (2) the dead man's statute does not apply because
Gabutan, et al.'s counsel did not interpose any objection when the testimony of
Crisanta Ubaub was offered and Gabutan, et al.'s counsel even examined her; [61] (3)
Nacalaban, et al.'s claim that Gabutan, et al.'s witnesses are not competent to testify
on matters which took place before the death of Godofredo and Melecia is without
merit because Gabutan, et al. have not specified these witnesses and such hearsay
evidence alluded to; [62] (4) the parole evidence rule does not apply because Melecia
and Nacalaban, et al. were not parties to the Deed of Conditional Sale;[63] (5) the
action for reconveyance has not yet prescribed because Gabutan, et al. are in
possession of the property; [64] and (6) the College is a buyer in good faith. [65]
Nacalaban, et al. filed their motion for reconsideration of the CA Decision, but it was
denied in a Resolution[66] dated August 17, 2010. Hence, they filed the present petition
for certiorari [67] under Rule 65, where they allege that: (1) the action for reconveyance
already expired;[68] (2) for an action for reconveyance to prosper, the property should
not have passed into the hands of another who bought the property in good faith and
for value;[69] and (3) the title of Godofredo under TCT No. T-2259 which was issued on
January 13, 1959 could not be attacked collaterally. [70]
On the other hand, Gabutan, et al. filed the present petition for review on
certiorari[71] under Rule 45, seeking a partial appeal of the CA Decision. In their petition,
Gabutan, et al. allege that the College is not a buyer in good faith because it did not
buy the property from the registered owner. [72] Since Godofredo was the registered
owner of the property and not Nacalaban, et al., the College should have exercised a
higher degree of prudence in establishing their capacity to sell it. [73] Further, despite
knowing that other persons possessed the property, the College did not inquire with
Gabutan, et al. the nature of their stay on the property.[74] Under Section 1, paragraph 2,
Rule 74 of the Rules of Court, the publication of the Extrajudicial Settlement with Sale
was also without prejudice to claims of other persons who had no notice or
participation thereof.[75] Finally, Gabutan, et al. argue that they cannot be ejected from
the property because there is no evidence to show that their stay was by mere
tolerance, and that Melecia was a builder in good faith.[76]
Considering that the petitions assail the same CA Decision and involve the same parties,
we issued a Resolution[77] dated December 13, 2010 consolidating them.
The Issues
The issues for resolution are:
1. Whether the petition for certiorari of Nacalaban, et al. shall prosper;
2. Whether the action for reconveyance was proper; and
3. Whether the College is a buyer in good faith.
Our Ruling
I. The petition for certiorari of
Nacalaban, et al. is a wrong
remedy
Pursuant to Section 1, Rule 45 of the Rules of Court,[78] the proper remedy to obtain a
reversal of judgment on the merits, final order or resolution is an appeal. The Resolution
dated August 17, 2010 of the CA, which affirmed its Decision dated December 11, 2008,
was a final resolution that disposed of the appeal by Nacalaban, et al. and left nothing
more to be done by the CA in respect to the said case. Thus, Nacalaban, et al. should
have filed an appeal in the form of a petition for review on certiorari and not a petition
for certiorari under Rule 65, which is a special civil action.
Rule 65 is a limited form of review and is a remedy of last recourse. This extraordinary
action lies only where there is no appeal nor plain, speedy and adequate remedy in the
ordinary course of law.[79] In Malayang Manggagawa ng Stayfast Phils., Inc. v. National
Labor Relations Comission,[80] we held that appeal would still be the proper remedy from
a judgment on the merits, final order or resolution even if the error ascribed to the court
rendering the judgment is its lack of jurisdiction over the subject matter, or the exercise
of power in excess thereof, or grave abuse of discretion in the findings of fact or of law
set out in the decision, order or resolution. The existence and availability of the right of
appeal prohibits the resort to certiorari because one of the requirements for the latter
remedy is that there should be no appeal.[81] We have always declared that a petition
for certiorari is not a substitute for an appeal where the latter remedy is available but
was lost through fault or negligence.[82]
Here, Nacalaban, et al. received the assailed Resolution dated August 17, 2010 on
September 7, 2010.[83] Under the Rules of Court, they had 15 days or until September 22,
2010 to file an appeal before us. Nacalaban, et al. allowed this period to lapse without
doing so and, instead, filed a petition for certiorari on November 5, 2010. [84] Being the
wrong remedy, the petition of Nacalaban, et al. is, therefore, dismissible. Although there
are exceptions[85] to this general rule, none applies in this case.
In spite of the consolidation we have ordered, we cannot treat the petition of
Nacalaban, et al. as one under Rule 45. We have the discretion to treat a Rule 65
petition for certiorari as a Rule 45 petition for review on certiorari if (1) the petition is filed
within the reglementary period for filing a petition for review; (2) when errors of
judgment are averred; and (3) when there is sufficient reason to justify the relaxation of
the rules. [86] The first and third requisites are absent in this case. To reiterate, the petition
was filed beyond the 15-day reglementary period of filing a petition for review
on certiorari. As will be discussed, we also find no compelling reason to relax the rules.
II. The action for reconveyance
filed by Gabutan, et al.
is proper
a. An implied resulting trust was
created between Melecia and
Godofredo
We stress at the outset that the question of existence of an implied trust is factual,
hence, ordinarily outside the purview of Rule 45.[87]The resolution of factual issues is the
function of the lower courts whose findings, when aptly supported by evidence, bind us.
This is especially true when the CA affirms the lower court's findings, as in this cas e. While
we, under established exceptional circumstances, had deviated from this rule, we do
not find this case to be under any of the exceptions. [88] Even if we were to disregard
these established doctrinal rules, we would still affirm the assailed CA rulings.
Article 1448 of the Civil Code provides in part that there is an implied trust when
property is sold, and the legal estate is granted to one party but the price is paid by
another for the purpose of having the beneficial interest of the property. The former is
the trustee, while the latter is the beneficiary. The trust created here, which is also
referred to as a purchase money resulting trust, [89] occurs when there is (1) an actual
payment of money, property or services, or an equivalent, constituting valuable
consideration; (2) and such consideration must be furnished by the alleged beneficiary
of a resulting trust.[90] These two elements are present here.
Gabutan, et al., through the testimonies of Felisia, Crisanta, and Trifonia, established that
Melecia's money was used in buying the property, but its title was placed in
Godofredo's name. She purchased the property because Felisia wanted to build a
pharmacy on it.[91]On one occasion in Melecia's house, and when the entire family was
present, Melecia gave Godofredo the money to purchase the property. [92] Melecia
entrusted the money to Godofredo because he was in Cagayan de Oro, and per
Melecia's instruction, the deed of sale covering the property was placed in his
name.[93] It was allegedly her practice to buy properties and place them in her children's
name, but it was understood that she and her children co-own the properties. [94]
Melecia built a residential building on the property, where her daughter Crisanta and
some of her grandchildren resided.[95] Godofredo also thereafter built a house on the
property. Twice, he also mortgaged the property to secure loans. Melecia allowed him
to do so because she trusted him.[96] After Godofredo's death, and when Baldomera fell
ill, there were family discussions to transfer the title in Melecia's name so Melecia's
children can divide it together with the rest of Melecia's properties. The plans, however,
always fell through. [97]
Both the RTC and CA found credence on these pieces of testimonial evidence that an
implied resulting trust exists. Reliance on these testimonies will not violate the parol
evidence rule, as Nacalaban, et al. once raised. In Tong v. Go Tiat Kun, [98] we ruled that
since an implied trust is neither dependent upon an express agreement nor required to
be evidenced by writing, Article 1457 of our Civil Code authorizes the admission of parol
evidence to prove their existence. What is crucial is the intention to create a trust. [99] We
cautioned, however, that the parol evidence that is required to establish the existence
of an implied trust necessarily has to be trustworthy and it cannot rest on loose,
equivocal or indefinite declarations. [100] The testimonies of Felisia, Crisanta, and Trifonia
satisfy these requirements. They are consistent and agree in all material points in
reference to the circumstances behind the arrangement between Melecia and
Godofredo. We agree with the RTC when it said that this arrangement among family
members is not unusual, especially in the 1950s. [101]
Nacalaban, et al., on the other hand, denied the arrangement between Melecia and
Godofredo, and maintained that it was really the latter who purchased the property
from its original owners, as evidenced by their possession of the Deed of Conditional
Sale and the title being in Godofredo's name.[102] It is telling, however, that
Nacalaban, et al. failed to provide the details of the sale, specifically with regard to
how Godofredo could have been able to afford the purchase price himself, which
would have directly refuted the allegation that Melecia's money was used in the
purchase. As the RTC aptly observed, if Godofredo really bought the property with his
own money, it was surprising that Baldomera did not transfer the title of the property to
her name when Godofredo died in 1974. Baldomera did not do so until her death in
1994 despite being pressed by her siblings to partition the property. The RTC correctly
deduced that this only meant that Baldomera acknowledged that the property
belongs to Melecia.[103]
Having established the creation of an implied resulting trust, the action for
reconveyance filed by Gabutan, et al., the heirs of Melecia in whose benefit the trust
was created, is proper. An action for reconveyance is a legal and equitable remedy
granted to the rightful landowner, whose land was wrongfully or erroneously registered
in the name of another, to compel the registered owner to transfer or reconvey the land
to him.[104] It will not amount to a collateral attack on the title, contrary to the allegation
of Nacalaban, et al.[105] We explained in Hortiznela v. Tagufa:[106]

x x x As a matter of fact, an action for reconveyance is a recognized remedy, an
action in personam, available to a person whose property has been wrongfully
registered under the Torrens system in another's name. In an action for reconveyance,
the decree is not sought to be set aside. It does not seek to set aside the decree but,
respecting it as incontrovertible and no longer open to review, seeks to transfer or
reconvey the land from the registered owner to the rightful owner. Reconveyance is
always available as long as the property has not passed to an innocent third person for
value.
There is no quibble that a certificate of title, like in the case at bench, can only be
questioned through a direct proceeding. The MCTC and the CA, however, failed to
take into account that in a complaint for reconveyance, the decree of registration is
respected as incontrovertible and is not being questioned. What is being sought is the
transfer of the property wrongfully or erroneously registered in another's name to its
rightful owner or to the one with a better right. If the registration of the land is fraudulent,
the person in whose name the land is registered holds it as a mere trustee, and the real
owner is entitled to file an action for reconveyance of the property. [107]
The fact that the property was already titled in Godofredo's name, and later transferred
to the College, is not a hindrance to an action for reconveyance based on an implied
trust. The title did not operate to vest ownership upon the property in favor of the
College. As held inNaval v. Court of Appeals:[108]
xxx Registration of a piece of land under the Torrens System does not create or vest title,
because it is not a mode of acquiring ownership. A certificate of title is merely an
evidence of ownership or title over the particular property described therein. It cannot
be used to protect a usurper from the true owner; nor can it be used as a shield for the
commission of fraud; neither does it permit one to enrich himself at the expense of
others. Its issuance in favor of a particular person does not foreclose the possibility that
the real property may be co-owned with persons not named in the certificate, or that it
may be held in trust for another person by the registered owner. [109]
Moreover, the body of the Complaint filed by Gabutan, et al. shows that it is not only for
the reconveyance of the property but also for the annulment of TCT No. T-111846 issued
in the name of the College. [110] Gabutan, et al. questioned the validity of the sale to the
College and claimed co-ownership over the property. Thus, we can rule on the validity
of TCT No. T-111846 since the Complaint is a direct attack on the title of the College.
b. The action for reconveyance is imprescriptible
because the plaintiffs are in possession of
the property
An action for reconveyance based on an implied or a constructive trust prescribes 10
years from the alleged fraudulent registration or date of issuance of the certificate of
title over the property. However, an action for reconveyance based on implied or
constructive trust is imprescriptible if the plaintiff or the person enforcing the trust is in
possession of the property. In effect, the action for reconveyance is an action to quiet
the property title, which does not prescribe.[111] The reason is that the one who is in
actual possession of the land claiming to be its owner may wait until his possession is
disturbed or his title is attacked before taking steps to vindicate his right. His undisturbed
possession gives him a continuing right to seek the aid of a court of equity to ascertain
and determine the nature of the adverse claim of a third party and its effect on his own
title, which right can be claimed only by one who is in possession. [112]
The fact of actual possession of Gabutan, et al. of the property, during the lifetime of
Melecia and even after her death, is an undisputed and established fact. The College
has even filed an ejectment case against the Heirs of Melecia for this reason. [113] Thus,
their complaint for reconveyance is imprescriptible. It follows, with more reason, that
Gabutan, et al. cannot be held guilty of laches as the said doctrine, which is one in
equity, cannot be set up to resist the enforcement of an imprescriptible legal right. [114]
III.The property shall be reconveyed to the estate of Melecia
a. The Extrajudicial Settlement with Sale executed
between Nacalaban, et al. and the College is void
Having established the creation of an implied resulting trust between Melecia and
Godofredo, the law thereby creates the obligation of the trustee to reconvey the
property and its title in favor of the true owner.[115] The true owner, Melecia, died in 1997
and was succeeded by her children and grandchildren. The property, therefore, must
be reconveyed to her estate.
The execution of the Extrajudicial Settlement with Sale between Godofredo's heirs and
the College will not defeat the legal obligation to reconvey the property because at
the time of its execution in 1996, Melecia was still alive. Hence, Nacalaban, et al. did not
have the right or authority to sell the property. Nemo dat quod non habet. One can sell
only what one owns or is authorized to sell, and the buyer can acquire no more right
than what the seller can transfer legally.[116] Nacalaban, et al. cannot find refuge in their
argument that the property was registered in their father's name and that after his
death, his rights passed to them as his legal heirs. To repeat, title to property does not
vest ownership but is a mere proof that such property has been registered. [117]
b. The College is a buyer in bad faith
Despite the finding that the property was owned by Melecia and upon her death, by
her heirs, the lower courts still sustained the ownership of the College of the property on
the ground that it is an innocent purchaser for value.[118] The lower courts' findings are
grounded on the following: (i) Gabutan, et al.'s claim was never annotated on
Godofredo's title; (ii) the Extrajudicial Settlement with Sale was duly published and the
College was able to effect the transfer of the title in its name; (iii) Baldomera issued a
certification in favor of Melecia allowing her to occupy a portion of the lot; and (iv) the
tax declaration showed that Melecia owned only the building on the land owned by
Godofredo.[119]
The RTC reiterated the rule that the buyer of a land registered under the Torrens System
may rely upon the face of the certificate of title and does not have to look beyond
it. [120] The CA, on the other hand, held that when taken together, these facts would
reasonably constitute enough reason for the College or any buyer to conclude that the
property is free from any adverse claim, thereby making any further investigation
unnecessary. Absent any showing that the College knew of the actual arrangement
between Godofredo and Melecia, it must be deemed a buyer in good faith.[121]
Gabutan, et al. alleged that the lower courts erred in ruling that the College is a buyer
in good faith, raising the following: (1) Nacalaban, et al. are not the registered owners of
the property; Godofredo is the registered owner who died on January 7, 1974; [122] (2) not
being the registered owners, the College, as buyer, is expected to examine not only the
certificate of title but all factual circumstances necessary for him to determine if there
are any flaws in the title of the transferor, or in his capacity to transfer the
property; [123] and (3) the College knew that other persons possessed the property so it
should have first established the capacity of the Nacalaban children to sell the
property. [124]
Whether one is a buyer in good faith and whether due diligence and prudence were
exercised are questions of fact.[125] As we have already mentioned, only questions of
law may be raised in a petition for review on certiorari under Rule 45 of the Rules of
Court. We see an exception, however, to this general rule relative to the finding that the
College is a buyer in good faith. We hold that the RTC's finding that the College is a
buyer in good faith, which finding was upheld by the CA, was based on an obvious
misapprehension of facts and was clearly not supported by law and jurisprudence.
In Bautista v. Silva, [126] we reiterated the requisites for one to be considered a purchaser
in good faith:
A buyer for value in good Faith is one who buys property of another, without notice that
some other person has a right to, or interest in, such property and pays full and fair price
for the same, at the time of such purchase, or before he has notice of the claim or
interest of some other persons in the property. He buys the property with the welt-
founded belief that the person from whom he receives the thing had title to the
property and capacity to convey it.
To prove good faith, a buyer of registered and titled land need only show that he relied
on the face of the title to the property. He need not prove that he made further inquiry
for he is not obliged to explore beyond the four corners of the title. Such degree of proof
of good faith, however, is sufficient only when the following
conditions concur: first, the seller is the registered owner of the land; second, the latter is
in possession thereof; and third, at the time of the sale, the buyer was not aware of any
claim or interest of some other person in the property, or of any defect or restriction in
the title of the seller or in his capacity to convey title to the property.
Absent one or two of the foregoing conditions, then the law itself puts the buyer on
notice and obliges the latter to exercise a higher degree of diligence by scrutinizing the
certificate of title and examining all factual circumstances in order to determine the
seller's title and capacity to transfer any interest in the property. Under such
circumstance, it is no longer sufficient for said buyer to merely show that he relied on the
face of the title; he must now also show that he exercised reasonable precaution by
inquiring beyond the title. Failure to exercise such degree of precaution makes him a
buyer in bad faith. [127] (Emphasis supplied.)
Thus, the College, which has the burden to prove the status of being a purchaser in
good faith, is required to prove the concurrence of the above conditions. This onus
probandi cannot be discharged by mere invocation of the legal presumption of good
faith.[128] We find that the College failed to discharge this burden.
Firstly, as correctly pointed out by Gabutan, et al., Nacalaban, et al. are not the
registered owners of the property, but Godofredo. In Bautista v. Court of Appeals, [129] we
held:
However, it is important to note that petitioners did not buy the land from the registered
owner, Dionisio Santiago. They bought it from his heirs, Maria dcla Cruz and Jose
Santiago.
Where a purchaser buys from one who is not the registered owner himself, the law
requires a higher degree of prudence even if the land object of the transaction is
registered. One who buys from one who is not the registered owner is expected to
examine not only the certificate of title but all factual circumstances necessary for him
to determine if there are any flaws in the title of the transferor, or in his capacity to
transfer the land.[130]
Secondly, the College was aware that aside from Nacalaban, et al., the Heirs of
Melecia, were also in possession of the property. The College cited the tax declaration
which bore an annotation that Melecia owned a residential building and Godofredo
owned the lot.[131]Also, apart from filing an ejectment case against the Heirs of Melecia,
the College retained part of the purchase price for the demolition of Melecia's building
as well.[132]
In Occeña v. Esponilla,[133] we held that petitioner-spouses were not purchasers in good
faith when they merely relied on the representation of the seller regarding the nature of
possession of the occupants of the land:
In the case at bar, we find that petitioner-spouses failed to prove good faith in their
purchase and registration of the land, x x x At the trial, Tomas Occena admitted that he
found houses built on the land during its ocular inspection prior to his purchase. He relied
on the representation of vendor Arnold that these houses were owned by squatters and
that he was merely tolerating their presence on the land. Tomas should have verified
from the occupants of the land the nature and authority of their possession instead of
merely relying on the representation of the vendor that they were squatters, having seen
for himself that the land was occupied by persons other than the vendor who was not in
possession of the land at that time, x x x[134] (Emphasis supplied.)
Although the College in its Answer alleged that it made an exhaustive investigation and
verification from all reliable sources and found that the possession of Melecia and her
heirs was merely tolerated,[135] it failed to specify who or what these sources were. There
is no evidence that the College did inquire from Melecia or her heirs themselves, who
were occupying the property, the nature and authority of their possession. It is not far-
fetched to conclude, therefore, that the College merely relied on the representations of
the sellers and the documents they presented. In this regard, the College is not a buyer
in good faith.
The "honesty of intention" which constitutes good faith implies a freedom from
knowledge of circumstances which ought to put a person on inquiry.[136] If the land
purchased is in the possession of a person other than the vendor, the purchaser must be
wary and must investigate the rights of the actual possessor. [137] Without such inquiry, the
purchaser cannot be said to be in good faith and cannot have any right over the
property. [138]
We are aware that in the ejectment case, the MTCC and RTC ruled in favor of the
College. We emphasize, though, that the ruling on the College's better right of
possession was without prejudice to the eventual outcome of the reconveyance case
where the issue of ownership was fully threshed out. We have held that the sole issue for
resolution in an unlawful detainer case is physical or material possession of the property
involved, independent of any claim of ownership by any of the parties. When the
defendant, however, raises the defense of ownership in his pleadings and the question
of possession cannot be resolved without deciding the issue of ownership, the issue of
ownership shall be resolved only to determine the issue of possession. [139] Thus, the ruling
on the ejectment case is not conclusive as to the issue of ownership. [140]
WHEREFORE, in view of the foregoing, the petition for certiorari in G.R. Nos. 194314-14
is DENIED and the petition for review on certiorari in G.R. Nos. 185857-58 is GRANTED. The
Decision of the Court of Appeals dated December 11, 2008 and its Resolution dated
August 17, 2010 are AFFIRMED with the following MODIFICATIONS:
1. Cagayan Capitol College is hereby declared a buyer in bad faith, who has no
right to possession and ownership of the property;
2. Nacalaban, et al. are ordered to return the purchase price paid on the
property to the College, plus interest at the rate of six percent (6%) per annum
computed from July 23, 1997141 until the date of finality of this judgment. The
total amount shall thereafter earn interest at the rate of six percent (6%) per
annum from the finality of judgment until its satisfaction;142 and
3. The Register of Deeds is ordered to cancel TCT No. T-l 11846 in the name of the
College.
4. The property should be reconveyed to the Estate of the late Melecia
Dalondonan with the institution of the proper proceedings for its partition and
titling.
SO ORDERED.
G.R. No. 195825 February 27, 2013
SPOUSES ALFONSO AND MARIA ANGELES CUSI, Petitioners,
vs.
LILIA V. DOMINGO, Respondent.
x-----------------------x
G.R. No. 195871
RAMONA LIZA L. DE VERA, Petitioner,
vs
LILIA V. DOMINGO AND SPOUSES RADELIA AND ALFRED SY, Respondents.
DECISION
BERSAMIN, J.:
Under the Torrens system of land registration, the registered owner of realty cannot be
deprived of her property through fraud, unless a transferee acquires the property as an
innocent purchaser for value. A transferee who acquires the property covered by a
reissued owner's copy of the certificate of title without taking the ordinary precautions of
honest persons in doing business and examining the records of the proper Registry of
Deeds, or who fails to pay the full market value of the property is not considered an
innocent purchaser for value.
Under review in these consolidated appeals is the Decision promulgated on July 16,
2010,1 whereby the Court of Appeals (CA) in CA-G.R. CV No. 90452 affirmed the revised
decision rendered on March 1, 2007 by the Regional Trial Court in Quezon City (RTC)
against the petitioners and their seller.2
Antecedents
The property in dispute was a vacant unfenced lot situated in White Plains, Quezon City
and covered by Transfer Certificate of Title (TCT) No. N-165606 issued in the name of
respondent Lilia V. Domingo by the Registry of Deeds of Quezon City. It had an area of
658 square meters.3 In July 1999, Domingo learned that construction activities were
being undertaken on her property without her consent. She soon unearthed the series of
anomalous transactions affecting her property.
On July 18, 1997, one Radelia Sy (Sy),4 representing herself as the owner of the property,
petitioned the RTC for the issuance of a new owner’s copy of Domingo’s TCT No. N-
165606, appending to her petition a deed of absolute sale dated July 14, 1997
purportedly executed in her favor by Domingo; 5 and an affidavit of loss dated July 17,
1997,6 whereby she claimed that her bag containing the owner’s copy of TCT No. N-
165606 had been snatched from her on July 13, 1997 while she was at the SM City in
North EDSA, Quezon City. The RTC granted Sy’s petition on August 26, 1997. 7 The Registry
of Deeds of Quezon City then issued a new owner’s duplicate copy of TCT No. N-
165606, which was later cancelled by virtue of the deed of absolute sale dated July 14,
1997, and in its stead the Registry of Deeds of Quezon City issued TCT No. 186142 in Sy’s
name.8
Sy subsequently subdivided the property into two, and sold each half by way of
contract to sell to Spouses Edgardo and Ramona Liza De Vera and to Spouses Alfonso
and Maria Angeles Cusi. The existence of the individual contracts to sell was annotated
on the dorsal portion of Sy’s TCT No. 186142 as Entry No. PE-8907/N-186142,9stating that
the consideration of the sale was ₱1,000,000.00 for each set of buyers, or for a total of
₱2,000,000.00 for the entire property that had an actual worth of not less than
₱14,000,000.00. TCT No. 186142 in the name of Sy was then cancelled by virtue of the
deeds of sale executed between Sy and Spouses De Vera, and between Sy and
Spouses Cusi, to whom were respectively issued TCT No. 189568 10 and TCT No.
189569.11 All the while, the transactions between Sy and the De Veras, and between Sy
and the Cusis were unknown to Domingo, whose TCT No. N-165606 remained in her
undisturbed possession.12
It turned out that the construction activities taking place on the property that Domingo
learned about were upon the initiative of the De Veras in the exercise of their dominical
and possessory rights.
Domingo commenced this action against Sy and her spouse, the De Veras and the
Cusis in the RTC, the complaint being docketed as Civil Case No. Q-99-39312 and
entitled Lilia V. Domingo v. Spouses Radelia and Alfred Sy, Spouses Alfonso G. and Maria
Angeles S. Cusi, Spouses Edgardo M. and Ramona Liza L. De Vera, BPI Family Savings
Bank and The Register of Deeds of Quezon City, seeking the annulment or cancellation
of titles, injunction and damages. Domingo applied for the issuance of a writ of
preliminary prohibitory and mandatory injunction, and a temporary restraining order
(TRO).13 The RTC granted Domingo’s application for the TRO enjoining the defendants
from proceeding with the construction activities on the property. The RTC later granted
her application for the writ of preliminary injunction.
Ruling of the RTC
On September 30, 2003, the RTC rendered a decision,14 disposing:
WHEREFORE, in view of all the foregoing judgment is hereby rendered:
(a) declaring the sale between Lilia V. Domingo and Radella Sy void and of (sic) effect;
(b) declaring the Sps. Edgardo and Ramona Liza De Vera and Sps. Alfonso and Maria
Angeles Cusi to be purchasers in good faith and for value;
(c) lifting the writ of preliminary injunction;
(d) finding defendant Radella Sy liable to the plaintiff Lilia Domingo liable (sic) for
damages, as follows:
1. Fourteen Million Pesos (₱14,000,000.00) representing the value of the property
covered by TCT No. 165606 plus legal rate of interest until fully paid;
2. One Million Pesos (₱1,000,000.00) representing moral damages;
3. Five Hundred Thousand Pesos (₱500,000.00) representing exemplary damages;
4. Five Hundred Thousand Pesos (₱500,000.00) representing attorney’s fees;
5. Two Hundred Thousand Pesos (₱200,000.00) representing litigation expenses; and
6. Costs of Suit.
IT IS SO ORDERED.
Acting on the motions for reconsideration separately filed by Sy and Domingo, 15 the RTC
reconsidered and set aside its September 30, 2003 decision, and allowed the
presentation of rebuttal and sur-rebuttal evidence.
On March 1, 2007, the RTC rendered a new decision, 16 ruling:
WHEREFORE, in view of the foregoing, Judgment is hereby rendered:
(a) Declaring the sale between Lilia Domingo and Radelia Sy void and of no effect;
(b) Declaring the Sps. Edgardo and Ramona Liza De Vera and Sps. Alfonso and Maria
Angeles Cusi not purchasers in good faith and for value;
(c) TCT Nos. 189568 and 189569 are hereby cancelled and declared Null and Void Ab
Initio;
(d) Directing the Register of Deeds of Quezon City to annotate this Order on TCT No.
189568 and 189569;
(e) TCT No. 165606 in the name of Lilia Domingo is hereby revalidated; and,
(f) Finding defendant Radelia Sy liable to the plaintiff Lilia V. Domingo liable (sic) for
damages, as follows:
1. One Million Pesos (₱1,000,000.00) representing moral damages;
2. Five Hundred Thousand Pesos (₱500,000.00) representing exemplary damages;
3. Five Hundred Thousand Pesos (₱500,000.00) representing attorney’s fees;
4. Two Hundred Thousand Pesos (₱200,000.00) representing litigation expenses; and,
5. Costs of suit.
This Decision is without prejudice to whatever civil action for recovery and damages,
the defendants Sps. De Vera and Sps. Cusi may have against defendant Spouses
Radelia and Alfred Sy.
SO ORDERED.
Ruling of the CA
On appeal, the assignment of errors each set of appellants made was as follows:
Spouses Cusi
a) THE REGIONAL TRIAL COURT GRAVELY ERRED IN FINDING THAT DEFENDANTS SPOUSES
ALFONSO AND MARIA ANGELES CUSI ARE NOT PURCHASERS IN GOOD FAITH AND FOR
VALUE.
b) THE REGIONAL TRIAL COURT GRAVELY ERRED IN FAILING TO RESOLVE THE ISSUE OF
WHETHER OR NOT CODEFENDANTS SPOUSES RADELIA SY AND ALFRED SY ARE LIABLE FOR
SPOUSES CUSI’S CROSS-CLAIM.
c) THE REGIONAL TRIAL COURT ERRED IN FAILING TO AWARD DAMAGES AND
ATTORNEY’S FEES TO DEFENDANTS SPOUSES CUSI.17
Spouses Sy
a) THE TRIAL COURT A QUO ERRED IN HOLDING THAT THE SALE BETWEEN LILIA DOMINGO
AND RADELIA SY VOID AND OF NO EFFECT AND WAS PROCURRED (sic) THROUGH
FRAUDULENT MEANS.
b) THAT THE HONORABLE COURT ERRED IN AWARDING ACTUAL MORAL DAMAGES,
EXEMPLARY DAMAGES AND ATTORNEY’S FEES AND LITIGATION EXPENSES THE SAME BEING
NULL AND VOID FOR BEING CONTRARY TO LAW.
c) THAT THE SAID DECISION IS CONTRARY TO LAW AND JURISPRUDENCE AND IS NOT
SUPPORTED BY EVIDENCE, AS THE SAME CONTAIN SERIOUS REVERSIBLE ERRORS WHEN THE
COURT A QUO DECLARED THAT TCT NOS. 189568 AND 189569 CANCELLED AND
DECLARED NULL AND VOID AB INITIO.
d) THE INSTANT ASSAILED DECISION OF THE HONORABLE COURT HAVE (sic) DEPRIVED
DEFENDANT[S] SPOUSES SY OF THEIR BASIC CONSTITUTIONAL RIGHT TO DUE PROCESS OF
LAW.18
Spouses De Vera
a) THE LOWER COURT ERRED IN HOLDING THAT THE DE VERA SPOUSES ARE NOT
PURCHASERS IN GOOD FAITH AND NOT ENTITLED TO THE POSSESSION OF THE PROPERTY
COVERED BY TCT NO. N-189568.
b) THE LOWER COURT ALSO ERRED IN NOT AWARDING DEFENDANT-APPELLANT DE VERA
HER COUNTERCLAIMS AGAINST PLAINTIFF-APPELLEE.19
As stated, the CA promulgated its decision on July 16, 2010, affirming the RTC with
modification of the damages to be paid by the Sys to Domingo, viz:
WHEREFORE, premises considered, the instant appeal is denied. Accordingly, the
Decision dated March 1, 2007 of the Regional Trial Court is hereby AFFIRMED with the
modification on the award of damages to be paid by defendants-appellants Spouses
Radelia and Alfred Sy in favor of the plaintiff-appellee Lilia V. Domingo, to wit;
1. ₱500,000.00 by way of moral damages;
2. ₱200,000.00 by way of exemplary damages;
3. ₱100,000.00 as attorney’s fees and litigation expenses.
SO ORDERED.20
The CA held that the sale of the property from Domingo to Sy was null and void and
conveyed no title to the latter for being effected by forging the signature of Domingo;
that Sy thereby acquired no right in the property that she could convey to the Cusis and
De Veras as her buyers; that although acknowledging that a purchaser could rely on
what appeared on the face of the certificate of title, the Cusis and De Veras did not
have the status of purchasers in good faith and for value by reason of their being aware
of Sy’s TCT No. 186142 being a reconstituted owner’s copy, thereby requiring them to
conduct an inquiry or investigation into the status of the title of Sy in the property, and
not simply rely on the face of Sy’s TCT No. 186142; and that the Cusis and De Veras were
also aware of other facts that should further put them on guard, particularly the several
nearly simultaneous transactions respecting the property, and the undervaluation of the
purchase price from ₱7,000,000.00/half to only ₱1,000,000.00/half to enable Sy to pay a
lesser capital gains tax.
The CA later on denied the motions for reconsideration. 21
Issues
Hence, this appeal via petitions for review on certiorari by the Cusis (G.R. No. 195825)
and Ramona Liza L. De Vera 22 (G.R. No. 195871).
In G.R. No. 195825, the Cusis submit the following issues: 23
I
WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN FINDING THAT
TRANSFER CERTIFICATE OF TITLE NO. 186142 REGISTERED IN THE NAME OF RADELIA SY IS A
RECONSTITUTED TITLE.
II
WHETHER OR NOT THE PETITIONERS ARE BUYERS IN GOOD FAITH AND FOR VALUE.
III
GRANTING, WITHOUT ADMITTING, THAT THE DECISION OF THE HONORABLE COURT OF
APPEALS IS CORRECT WITH RESPECT TO THE SECOND ISSUE, WHETHER OR NOT PETITIONERS
ARE ENTITLED TO REIMBURSEMENT OF ALL THE PAYMENTS MADE BY PETITIONERS TO THEIR
CODEFENDANTS SPOUSES ALFRED AND RADELIA SY IN ADDITION TO DAMAGES AND
ATTORNEY’S FEES.
In G.R. No. 195871, De Vera asserts that the primordial issue is whether or not she was an
innocent purchaser for value and in good faith.
Ruling of the Court
The petitions for review are bereft of merit.
Firstly, now beyond dispute is the nullity of the transfer of Domingo’s property to Sy
because both lower courts united in so finding. The unanimity in findings of both the RTC
and the CA on this all-important aspect of the case is now conclusive on the Court in
view of their consistency thereon as well as by reason of such findings being fully
supported by preponderant evidence. We consider to be significant that the Sys no
longer came to the Court for further review, thereby rendering the judgment of the CA
on the issue of nullity final and immutable as to them.
Secondly, the Cusis and De Vera commonly contend that the CA gravely erred in not
considering them to be purchasers in good faith and for value. They argue that Sy’s TCT
No. 186142 was free of any liens or encumbrances that could have excited their
suspicion; and that they nonetheless even went beyond the task of examining the face
of Sy’s TCT No. 186142, recounting every single detail of their quest to ascertain the
validity of Sy’s title, but did not find anything by which to doubt her title.
The Court concurs with the finding by the CA that the Cusis and De Vera were not
purchasers for value and in good faith. The records simply do not support their common
contention in that respect.
Under the Torrens system of land registration, 24 the State is required to maintain a register
of landholdings that guarantees indefeasible title to those included in the register. The
system has been instituted to combat the problems of uncertainty, complexity and cost
associated with old title systems that depended upon proof of an unbroken chain of
title back to a good root of title. The State issues an official certificate of title to attest to
the fact that the person named is the owner of the property described therein, subject
to such liens and encumbrances as thereon noted or what the law warrants or
reserves.25
One of the guiding tenets underlying the Torrens system is the curtain principle, in that
one does not need to go behind the certificate of title because it contains all the
information about the title of its holder. This principle dispenses with the need of proving
ownership by long complicated documents kept by the registered owner, which may
be necessary under a private conveyancing system, and assures that all the necessary
information regarding ownership is on the certificate of title. Consequently, the avowed
objective of the Torrens system is to obviate possible conflicts of title by giving the public
the right to rely upon the face of the Torrens certificate and, as a rule, to dispense with
the necessity of inquiring further; on the part of the registered owner, the system gives
him complete peace of mind that he would be secured in his ownership as long as he
has not voluntarily disposed of any right over the covered land. 26
The Philippines adopted the Torrens system through Act No. 496, 27 also known as
the Land Registration Act, which was approved on November 6, 1902 and took effect
on February 1, 1903. In this jurisdiction, therefore, "a person dealing in registered land has
the right to rely on the Torrens certificate of title and to dispense with the need of
inquiring further, except when the party has actual knowledge of facts and
circumstances that would impel a reasonably cautious man to make such inquiry". 28
To obtain a grasp of whether a person has actual knowledge of facts and
circumstances that would impel a reasonably cautious man to make such inquiry, an
internal matter, necessitates an analysis of evidence of a person’s conduct. 29 That
renders the determination of intent as a factual issue, 30 something that the Court does
not normally involve itself in because of its not being a trier of facts. Indeed, as a rule,
the review function of the Court is limited to a review of the law involved.
But the Court now delves into the facts relating to the issue of innocence of the
petitioners in their purchase of the property, considering that the RTC, through its original
decision, at first regarded them to have been innocent purchasers who were not aware
of any flaw or defect in Sy’s title based on the fact that the property had been
unfenced and vacant. The RTC also regarded the petitioners’ making of reasonable
verifications as their exercise of the due diligence required of an ordinary buyer. 31 The
RTC later completely turned around through another decision, however, and it was such
decision that the CA affirmed subject to the modifications of the damages granted to
Domingo.
There is no question that the petitioners exerted some effort as buyers to determine
whether the property did rightfully belong to Sy. For one, they did not find any
encumbrance, like a notice of lis pendens, being annotated on the TCT of Sy.
Nonetheless, their observance of a certain degree of diligence within the context of the
principles underlying the Torrens system
was not their only barometer under the law and jurisprudence by which to gauge the
validity of their acquisition of title. As the purchasers of the property, they also came
under the clear obligation to purchase the property not only in good faith but also for
value.
Therein lay the problem. The petitioners were shown to have been deficient in their
vigilance as buyers of the property. It was not enough for them to show that the
property was unfenced and vacant; otherwise, it would be too easy for any registered
owner to lose her property, including its possession, through illegal occupation. Nor was
it safe for them to simply rely on the face of Sy’s TCT No. 186142 in view of the fact that
they were aware that her TCT was derived from a duplicate owner’s copy reissued by
virtue of the loss of the original duplicate owner’s copy. That circumstance should have
already alerted them to the need to inquire beyond the face of Sy’s TCT No. 186142.
There were other circumstances, like the almost simultaneous transactions affecting the
property within a short span of time, as well as the gross undervaluation of the property
in the deeds of sale, ostensibly at the behest of Sy to minimize her liabilities for the
capital gains tax, that also excited suspicion, and required them to be extra-cautious in
dealing with Sy on the property.
To the Court, the CA’s treatment of Sy’s TCT No. 186142 as similar to a reconstituted
copy of a Torrens certificate of title was not unwarranted. In doing so, the CA cited the
ruling in Barstowe Philippines Corporation v. Republic,32where the Court, quoting from
precedents, opined that "the nature of a reconstituted Transfer Certificate of Title of
registered land is similar to that of a second Owner’s Duplicate Transfer Certificate of
Title," in that "both are issued, after the proper proceedings, on the representation of the
registered owner that the original of the said TCT or the original of the Owner’s Duplicate
TCT, respectively, was lost and could not be located or found despite diligent efforts
exerted for that purpose;"33 and that both were "subsequent copies of the originals
thereof," a fact that a "cursory examination of these subsequent copies would show"
and "put on notice of such fact [anyone dealing with such copies who is] thus warned
to be extracareful."34
Verily, the Court has treated a reissued duplicate owner’s copy of a TCT as merely a
reconstituted certificate of title. In Garcia v. Court of Appeals,35 a case with striking
similarities to this one, an impostor succeeded in tricking a court of law into granting his
petition for the issuance of a duplicate owner’s copy of the supposedly lost TCT. The
impostor then had the TCT cancelled by presenting a purported deed of sale between
him and the registered owners, both of whom had already been dead for some time,
and another TCT was then issued in the impostor’s own name. This issuance in the
impostor’s own name was followed by the issuance of yet another TCT in favor of a third
party, supposedly the buyer of the impostor. In turn, the impostor’s transferee (already
the registered owner in his own name) mortgaged the property to Spouses Miguel and
Adela Lazaro, who then caused the annotation of the mortgage on the TCT. All the
while, the original duplicate owner’s copy of the TCT remained in the hands of an heir of
the deceased registered owners with his co-heirs’ knowledge and consent.
The inevitable litigation ensued, and ultimately ended up with the Court.1âwphi1 The
Lazaros, as the mortgagees, claimed good faith, and urged the Court to find in their
favor. But the Court rebuffed their urging, holding instead that they did not deal on the
property in good faith because: (a) "the title of the property mortgaged to the Lazaros
was a second owner’s duplicate TCT, which is, in effect a reconstituted title. This
circumstance should have alerted them to make the necessary investigation, but they
did not;" and (b) their argument, that "because the TCT of the property on which their
mortgage lien was annotated did not contain the annotation: "Reconstituted title," the
treatment of the reissued duplicate owner’s copy of the TCT as akin to a reconstituted
title did not apply, had no merit considering that: "The nature of a reconstituted Transfer
Certificate of Title of registered land is similar to that of a second Owner's Duplicate
Transfer Certificate of Title. Both are issued, after the proper proceedings, on the
representation of the registered owner that the original of the said TCT or the original of
the Owner's Duplicate TCT, respectively, was lost and could not be located or found
despite diligent efforts exerted for that purpose. Both, therefore, are subsequent copies
of the originals thereof. A cursory examination of these subsequent copies would show
that they are not the originals. Anyone dealing with such copies are put on notice of
such fact and thus warned to be extra-careful. This warning the mortgagees Lazaros did
not heed, or they just ignored it."36
The fraud committed in Garcia paralleled the fraud committed here.1âwphi1 The
registered owner of the property was Domingo, who remained in the custody of her TCT
all along; the impostor was Sy, who succeeded in obtaining a duplicate owner’s copy;
and the Cusis and the De Veras were similarly situated as the Spouses Lazaro, the
mortgagees in Garcia. The Cusis and the De Veras did not investigate beyond the face
of Sy’s TCT No. 186142, despite the certificate derived from the reissued duplicate
owner’s copy being akin to a reconstituted TCT. Thereby, they denied themselves the
innocence and good faith they supposedly clothed themselves with when they dealt
with Sy on the property.
The records also show that the forged deed of sale from Domingo to Sy appeared to be
executed on July 14, 1997; that the affidavit of loss by which Sy would later on support
her petition for the issuance of the duplicate owner’s copy of Domingo’s TCT No. 165606
was executed on July 17, 1997, the very same day in which Sy registered the affidavit of
loss in the Registry of Deeds of Quezon City; that Sy filed the petition for the issuance of
the duplicate owner’s copy of Domingo’s TCT No. 165606; that the RTC granted her
petition on August 26, 1997; and that on October 31, 1997, a real estate mortgage was
executed in favor of one Emma Turingan, with the mortgage being annotated on TCT
No. 165606 on November 10, 1997.
Being the buyers of the registered realty, the Cusis and the De Veras were aware of the
aforementioned several almost simultaneous transactions affecting the property. Their
awareness, if it was not actual, was at least presumed, and ought to have put them on
their guard, for, as the CA pointed out, the RTC observed that "[t]hese almost
simultaneous transactions, particularly the date of the alleged loss of the TCT No. 165606
and the purported Deed of Sale, suffice[d] to arouse suspicion on [the part of] any
person dealing with the subject property."37 Simple prudence would then have impelled
them as honest persons to make deeper inquiries to clear the suspiciousness haunting
Sy’s title. But they still went on with their respective purchase of the property without
making the deeper inquiries. In that regard, they were not acting in good faith.
Another circumstance indicating that the Cusis and the De Veras were not innocent
purchasers for value was the gross undervaluation of the property in the deeds of sale
at the measly price of ₱1,000,000.00 for each half when the true market value was then
in the aggregate of at least ₱14,000,000.00 for the entire property. Even if the
undervaluation was to accommodate the request of Sy to enable her to minimize her
liabilities for the capital gains tax, their acquiescence to the fraud perpetrated against
the Government, no less, still rendered them as parties to the wrongdoing. They were
not any less guilty at all. In the ultimate analysis, their supposed passivity respecting the
arrangement to perpetrate the fraud was not even plausible, because they knew as the
buyers that they were not personally liable for the capital gains taxes and thus had
nothing to gain by their acquiescence. There was simply no acceptable reason for
them to have acquiesced to the fraud, or for them not to have rightfully insisted on the
declaration of the full value of the realty in their deeds of sale. By letting their respective
deeds of sale reflect the grossly inadequate price, they should suffer the consequences,
including the inference of their bad faith in transacting the sales in their favor.
De Vera particularly insists that she and her late husband did not have any hand in the
undervaluation; and that Sy, having prepared the deed of sale, should alone be held
responsible for the undervaluation that had inured only to her benefit as the seller.
However, such insistence was rendered of no consequence herein by the fact that
neither she nor her late husband had seen fit to rectify the undervaluation. It is notable
that the De Veras were contracting parties who appeared to have transacted with full
freedom from undue influence from Sy or anyone else.
Although the petitioners argue that the actual consideration of the sale was nearly
₱7,000,000.00 for each half of the property, the Court rejects their argument as devoid
of factual basis, for they did not adduce evidence of the actual payment of that
amount to Sy. Accordingly, the recitals of the deeds of sale were controlling on the
consideration of the sales.
Good faith is the honest intention to abstain from taking unconscientious advantage of
another. It means the "freedom from knowledge and circumstances which ought to put
a person on inquiry."38
Given this notion of good faith, therefore, a purchaser in good faith is one who buys the
property of another without notice that some other person has a right to, or interest in,
such property and pays full and fair price for the same. 38As an examination of the
records shows, the petitioners were not innocent purchasers in good faith and for value.
Their failure to investigate Sy's title despite the nearly simultaneous transactions on the
property that ought to have put them on inquiry manifested their awareness of the flaw
in Sy's title. That they did not also appear to have paid the full price for their share of the
property evinced their not having paid true value.39
Resultantly, the Court affirms the lower courts, and restores to Domingo her rights of
dominion over the propetiy.
WHEREFORE, the Court AFFIRMS the decision of the Court of Appeals promulgated on
July 16, 201 0; and ORDERS the petitioners to pay the costs of suit.
SO ORDERED.
G.R. No. 192669 April 21, 2014
RAUL SABERON, JOAN F. SABERON and JACQUELINE SABERON, Petitioners,
vs.
OSCAR VENTANILLA, JR., and CARMEN GLORIA D. VENTANILLA, Respondents.
RESOLUTION
MENDOZA, J.:
For resolution of the Court is a motion for reconsideration of the Court's January 19, 2011
Resolution1 which denied the petition of Raul F. Saberon, Jr., Joan F. Saberon and
Jacqueline F. Saberon (Saberons). In effect, it affirmed the March 12, 2010
Decision2 and the June 18, 2010 Resolution3 of the Court of Appeals (CA) in CA-G.R. CV
No. 85520, holding that the June 21, 2005 Decision of the Regional Trial Court, Branch 80,
Quezon City (RTC) in Civil Case No. 96-26486, was correct in, among others, ordering the
cancellation of Transfer Certificate of Title (TCT) Nos. 55396 and 55397 in the name of the
Saberons and Samuel Marquez (Marquez).
This case is an offshoot of two (2) cases involving the same property, docketed as G.R.
No. 82978 and G.R. No. 107282, which had been decided by the Court with finality on
November 22, 1990 and March 16, 1994, respectively.
Antecedent Facts
In the earlier cases, Manila Remnant Co., Inc. (MRCI) was the petitioner, being the
owner of several parcels of land situated in Quezon City, constituting the subdivision
known as Capitol Homes Subdivision Nos. I and II. On July 25, 1972, MRCI entered into a
contract with A.U. Valencia & Co. Inc. (AUVC) entitled "Confirmation of Land
Development and Sales Contract," whereby for a consideration, including sales
commission and management fee, the latter was to develop the aforesaid subdivision
with authority to manage the sales thereof; execute contracts to sell to lot buyers; and
issue official receipts. At that time, the president of AUVC, was Artemio U. Valencia
(Valencia).
On March 3, 1970, MRCI and AUVC executed two (2) contracts to sell covering Lots 1
and 2 of Block 17, in favor of Oscar C. Ventanilla, Jr. and Carmen Gloria D. Ventanilla
(Ventanillas), for the combined contract price of ₱66,571.00 payable monthly for ten
(10) years. The Ventanillas paid the down payment as stipulated in the two (2)
contracts.
On March 13, 1970, Valencia, holding out himself as president of MRCI, and without the
knowledge of the Ventanillas, resold the same property to Carlos Crisostomo
(Crisostomo), without any consideration. Valencia transmitted the fictitious contract with
Crisostomo to MRCI while he kept the contracts to sell with the Ventanillas in his private
office files. All the amounts paid by the latter were deposited in Valencia’s bank
account and remitted to MRCI as payments of Crisostomo. The Ventanillas continued to
pay the monthly installment.
Thereafter, MRCI terminated its business relationship with AUVC on account of
irregularities discovered in its collection and remittances. Consequently, Valencia was
removed as president by the Board of Directors of MRCI. He then stopped transmitting
the Ventanillas’ monthly installments which at that time, already amounted to
₱17,925.40 for Lot 1 and ₱18,141.95 for Lot 2 (appearing in MRCI’s records as credited
under the name of Crisostomo).
On June 8, 1973, AUVC sued MRCI to impugn the abrogation of their agency
agreement before the Court of First Instance, Branch 19, Manila (CFI Manila), which
eventually ordered all lot buyers to deposit their monthly amortizations with the court.
On July 17, 1973, AUVC informed the Ventanillas that it was still authorized by the trial
court to collect the monthly amortizations and requested them to continue remitting
their payment, with the assurance that said payments would be deposited later in
court.
For AUVC’s failure to forward its collections to the trial court as ordered, MRCI caused
the publication of a notice cancelling the contracts to sell of some lot buyers including
those of Crisostomo in whose name the payments of the Ventanillas had been credited.
It was not until March 1978 when the Ventanillas discovered Valencia’s deception.
Believing that they had already remitted the total amount of ₱73,122.35 for the two lots,
the Ventanillas offered to pay the balance to MRCI. To their shock, their names as lot
buyers did not appear in MRCI’s records. Instead, MRCI showed them a copy of the
contract to sell signed by Valencia, in favor of Crisostomo. MRCI refused the Ventanillas’
offer to pay for the remainder of the contract price.
Aggrieved, the Ventanillas commenced an action for specific performance, annulment
of deeds and damages against MRCI, AUVC, and Crisostomo with the Court of First
Instance, Branch 17-B, Quezon City (CFI Quezon City) docketed as Civil Case No. 26411,
where Crisostomo was declared in default for his failure to file an answer.
On November 17, 1980, the CFI Quezon City rendered a decision declaring the
contracts to sell in favor of the Ventanillas as valid and subsisting, and annulling the
contract to sell in favor of Crisostomo. It ordered the MRCI to execute an absolute deed
of sale in favor of the Ventanillas, free from all liens and encumbrances. Damages and
attorney's fees in the total amount of ₱210,000.00 were also awarded to the Ventanillas
for which the MRCI, AUVC, and Crisostomo were held solidarily liable. The CFI Quezon
City ruled further that if for any reason the transfer of the lots could not b e effected,
MRCI, AUVC and Crisostomo would be solidarily liable to the Ventanillas for the
reimbursement of the sum of ₱73,122.35, representing the amount they paid for the two
(2) lots, and the legal interest thereon from March 1970, plus the decreed damages and
attorney's fees. Valencia was also held liable to MRCI for moral and exemplary
damages and attorney's fees.
On separate appeals filed by AUVC and MRCI, the CA sustained the CFI Quezon City’s
decision in toto.
The 1990 Case
MRCI then filed before this Court a petition for certiorari docketed as G.R. No. 82978, to
review the decision of the CA upholding the solidary liability of MRCI, AUVC and
Crisostomo for the payment of moral and exemplary damages and attorney's fees to
the Ventanillas.
On November 22, 1990, this Court affirmed the decision of the CA and declared the
judgment of the CFI Quezon City immediately executory.
Encouraged by the seeming triumph of their cause, the Ventanillas moved for the
issuance of a writ of execution in Civil Case No. 26411. The writ was issued on May 3,
1991, and served upon MRCI on May 9, 1991. A notice of levy was annotated in the titles
of MRCI on May 31, 1991.
In a manifestation and motion, however, MRCI alleged that the subject properties could
not longer be delivered to the Ventanillas because they had already been sold to
Samuel Marquez (Marquez) on February 7, 1990, while its petition was pending before
this Court. Nevertheless, MRCI offered to reimburse the amount paid by the Ventanillas,
including legal interest plus damages. MRCI also prayed that its tender of payment be
accepted and that all garnishments on their accounts lifted.
The Ventanillas accepted the amount of ₱210,000.00 as damages and attorney’s fees
but rejected the reimbursement offered by MRCI in lieu of the execution of the absolute
deed of sale. They contended that the alleged sale to Marquez was void, fraudulent,
and in contempt of court and that no claim of ownership over the properties in question
had ever been made by Marquez.
On July 19, 1991, the CFI Quezon City ordered that the garnishment made by the Sheriff
upon the bank account of MRCI could be lifted only upon the deposit to the Court of
the amount of ₱500,000.00 in cash.
MRCI then moved for reconsideration praying that it be ordered to reimburse the
Ventanillas in the amount of ₱263,074.10 and that the garnishment of its bank deposit
be lifted. This plea was denied twice by the trial court prompting MRCI to file another
petition for certiorari with the CA, which ruled that the contract to sell in favor of
Marquez did not constitute a legal impediment to the immediate execution of the
judgment. Furthermore, it held that the cash bond fixed by the trial court for the lifting of
the garnishment was fair and reasonable because the value of the lot in question had
considerably increased.
The 1994 Case
From the CA, the case was elevated to this Court as G.R. No. 107282 where MRCI
argued that the sale of the properties to Marquez was valid because at the time of the
sale, the issue of the validity of the sale to the Ventanillas had not yet been resolved.
Further, there was no specific injunction against it re-selling the property. As a buyer in
good faith, Marquez had a right to rely on the recitals in the certificate of title. The
subject matter of the controversy having been passed to an innocent purchaser for
value, the execution of the absolute deed of sale in favor of the Ventanillas could not
be ordered by the trial court.
The Ventanillas countered that the validity of the sale to them had already been
established even while the previous petition was still awaiting resolution. The petition
only questioned the solidary liability of MRCI to the Ventanillas. Hence, the portion of the
decision ordering MRCI to execute an absolute deed of sale in their favor had already
become final and executory when MRCI failed to appeal it to the Court. Thus, an order
enjoining MRCI from reselling the property in litigation was unnecessary. Besides, the
unusual lack of interest, on the part of Marquez, to protect and assert his right over the
disputed property was, to the Ventanillas, a clear indication that the alleged sale to him
was merely a ploy of MRCI to evade the execution of the absolute deed of sale in their
favor.
On March 16, 1994, the Court settled the controversy in this wise:
The validity of the contract to sell in favor of the Ventanilla spouses is not disputed by
the parties. Even in the previous petition, the recognition of that contract was not
assigned as error of either the trial court or appellate court. The fact that the MRCI did
not question the legality of the award for damages to the Ventanillas also shows that it
even then already acknowledged the validity of the contract to sell in favor of the
private respondents.
On top of all this, there are other circumstances that cast suspicion on the validity, not
to say the very existence, of the contract with Marquez.
First, the contract to sell in favor of Marquez was entered into after the lapse of almost
ten years from the rendition of the judgment of the trial court upholding the sale to the
Ventanillas.
Second, the petitioner did not invoke the contract with Marquez during the hearing on
the motion for the issuance of the writ of execution filed by the private respondents. It
disclosed the contract only after the writ of execution had been served upon it.
Third, in its manifestation and motion dated December 21, 1990, the petitioner said it
was ready to deliver the titles to the Ventanillas provided that their counterclaims
against private respondents were paid or offset first. There was no mention of the
contract to sell with Marquez on February 7, 1990.
Fourth, Marquez has not intervened in any of these proceedings to assert and protect
his rights to the subject property as an alleged purchaser in good faith.
At any rate, even if it be assumed that the contract to sell in favor of Marquez is valid, it
cannot prevail over the final and executory judgment ordering MRCI to execute an
absolute deed of sale in favor of the Ventanillas. No less importantly, the records do not
show that Marquez has already paid the supposed balance amounting to ₱616,000.00
of the original price of over ₱800,000.00. (Emphasis supplied)
As it turned out, the execution of the judgment in favor of the Ventanillas was yet far
from fruition. Samuel Cleofe, Register of Deeds for Quezon City (ROD Cleofe) revealed
to them, that on March 11, 1992, MRCI registered a deed of absolute sale to Marquez
who eventually sold the same property to the Saberons, which conveyance was
registered in July 1992. ROD Cleofe opined that a judicial order for the cancellation of
the titles in the name of the Saberons was essential before he complied with the writ of
execution in Civil Case No. 26411. Apparently, the notice of levy, through inadvertence,
was not carried over to the title issued to Marquez, the same being a junior
encumbrance which was entered after the contract to sell to Marquez had already
been annotated.
Civil Case No. Q-96-26486
Once again, the Ventanillas were constrained to go to court to seek the annulment of
the deed of sale executed between MRCI and Marquez as well as the deed of sale
between Marquez and the Saberons, as the fruits of void conveyances. The case was
docketed as Civil Case No. Q-96-26486 with the Regional Trial Court, Branch 80, Quezon
City (RTC).
During the trial, all the defendants, including Edgar Krohn Jr. (Krohn) as President of
MRCI, and Bede Tabalingcos (Tabalingcos) as its legal counsel, filed their respective
answers, except Marquez who was declared in default.
On June 21, 2005, the RTC rendered its decision, the dispositive portion of which reads:
Wherefore, premises considered, judgment is hereby rendered in favour of plaintiffs, the
spouses Oscar and Carmen Ventanilla, and against defendants MRCI, Krohn,
Tabalingcos, Marquez and Saberon, as follows:
(1) Declaring the Transfer Certificated of Title Nos. 55396 and 55397 in the na me of
Samuel Marquez, and Transfer Certificates of Title Nos. 63140 and 63141 in the names of
Raul, Jr., Joan and Jacqueline Saberon as null and void;
(2) Ordering defendant MRCI to receive payment of the balance of the purchase price
to be paid by the plaintiffs and to execute a Deed of Absolute Sale in favour of the
plaintiffs, and in case of failure thereof, ordering plaintiffs to consign the amount with this
Court;
(3) Ordering the Register of Deeds to cancel the titles in the name of Marquez and the
Saberons, and to issue new certificates of title in the name of the spouses Ventanillas
upon registration of the Deed of Absolute Sale in favour of the plaintiffs or proof of their
consignment;
(4) Ordering defendant MRCI, Krohn, Tabalingcos and Marquez to pay plaintiffs, jointly
and severally, the sums of:
a. ₱100,000.00, as moral damages; and
b. ₱50,000.00, as attorney’s fees.
(5) Ordering defendant MRCI, Krohn, Tabalingcos and Marquez to pay defendants
Saberon, jointly and severally, the sum of ₱7,118,155.88 representing the value of the
properties in dispute and the value of the improvements introduced by defendants
Saberon; and
(6) Ordering the defendants to pay the costs of the suit.
Defendants’ counterclaims are hereby dismissed for lack of merit.
Separate appeals were instituted by MRCI and Tabalingcos, on one hand, and the
Saberons, on the other. The former contended that no fraudulent act could be
attributed to them for the sale of the property to the title of Marquez, considering that
ROD Cleofe was the one who inadvertently omitted the carrying over of the notice of
levy to Marquez who consequently secured a clean title to the lot. MRCI Tabalingcos
further claimed that the sale to Marquez was effected while the previous case was still
pending, at a time when they had every liberty to believe in the legality of their position.
Meanwhile, the Saberons relied on one central argument—that they were purchasers in
good faith, having relied on the correctness of the certificates of title covering the lots in
question; and therefore, holders of a valid and indefeasible title.
In the assailed decision, the CA made its conclusion hinged on the following findings:
When MRCI executed a Contract to Sell in favor of Marquez in February 1990, it was in
the throes of an appeal from the Decision in Civil Case No. 26411 where its very first
Contracts to Sell to the Ventanillas were upheld over those of Crisostomo. The Marquez
Contract to Sell was in fact the third in a row, and registered a year later, on May 21,
1991, appears as the first recorded entry in MRCI’s titles. The notice of levy in Civil Case
No. 26411 came ten days later, on May 31, 1991. Then, in February 1992, MRCI executed
a deed of absolute sale to Marquez and when the new titles were issued in Marquez’
name, the notice of levy was not carried over. A few months later, these titles were
cancelled by virtue of a deed of sale to the Saberons and, on the same day, TCT 63140
and 63141 were issued clean to them.
According to the CA, the arguments espoused by MRCI and Tabalingcos were
untenable. The said parties were found guilty of bad faith for selling the lots to Marquez
at a time when litigation as to the validity of the first sale to the Ventanillas was still
pending. In other words, MRCI was sufficiently aware of the Court decision confirming its
failure to supervise and control the affairs of its authorized agent, AUVC, which led to
the explicit pronouncement that the first sale to the Ventanillas was valid. This should
have served as a warning to MRCI that it could no longer deal with the property in
deference to the Court’s ruling and affirmation of the trial court’s order to execute the
deed of sale in favor of the Ventanillas. Obviously, MRCI took no heed of this caveat.
The titles had been transferred yet again to the Saberons, who claimed to be
purchasers in good faith. Unfortunately, there was an exception to the general rule. The
CA cited AFP Mutual Benefit Association Inc. v. Santiago, 4 where the Court ruled that
with respect to involuntary liens, an entry of a notice of levy and attachment in the
primary entry or day book of the Registry of Deeds was considered as sufficient notice to
all persons that the land was already subject to attachment. Resultantly, attachment
was duly perfected and bound the land.
The Present Petition
Aggrieved by this CA ruling, the Saberons filed the present petition. They claimed that in
1992, a certain Tiks Bautista offered the lots to Raul Saberon, who, after being given
photocopies of the titles to the land, inquired with the Registry of Deeds for Quezon City
(ROD-QC) to verify the authenticity of the same. He found no encumbrances or
annotations on the said titles, other than restrictions for construction and negotiation. As
agreed upon, he paid Marquez the amount of Two Million One Hundred Thousand
Pesos (₱2,100,000.00) as purchase price for the lots. Upon payment of the real property
taxes, a certification was issued by the Office of the City Treasurer for the purpose of
transferring the title over the property.
Thereafter, Marquez executed the Deed of Absolute Sale in favor of the Saberons. The
ROD-QC then issued TCT Nos. 63140 and 63141 in their names.
Unknown to the Saberons, the former owner of the properties had entered into
contracts to sell with the Ventanillas, way back in 1970. It was only upon receipt of the
summons in the case filed by the Ventanillas with the RTC that they learned of the
present controversy.
With the RTC and the CA rulings against their title over the properties, the Saberons now
come to the Court with their vehement insistence that they were purchasers in good
faith and for value. Before purchasing the lots, they exercised due diligence and found
no encumbrance or annotations on the titles. At the same time, the Ventanillas also
failed to rebut the presumption of their good faith as there was no showing that they
confederated with MRCI and its officers to deprive the Ventanillas of their right over the
subject properties.
According to the Saberons, the CA likewise erred in ruling that there was no
constructive notice of the levy made upon the subject lands. They claimed that the
appellate court could not solely rely on AFP Mutual Benefit Association Inc. v.
Santiago.5 Instead, they urged the Court to interpret
Sections 52 and 42 of Presidential Decree (P.D.) No. 1529 which cover the effects of
registration and the manner thereof; and to examine Section 54 which shows that, in
addition to the filing of the instrument creating, transferring or claiming interest in
registered land less than ownership, a brief memorandum of such shall be made by the
Register of Deeds on the certificate of title and signed by him. Hence, the ruling in AFP,
that an entry of a notice of levy and attachment in the primary entry or day book of the
Registry of Deeds was sufficient notice to all persons that the land was already subject
to such attachment, would be rendered as a superfluity in light of the mandatory
character of the said provision.
The Saberons further pointed that the claim of the Ventanillas over the subject
properties never ripened into ownership as they failed to consign the balance on the
purchase price stipulated on the contracts to sell, thus preventing the obligatory force
of the contract from taking effect.
On October 4, 2010, the Court required the Ventanillas to file their comment to the
petition.6 On January 19, 2011, the Court resolved to deny the Saberons’ petition for
failure to sufficiently show any reversible error in the assailed judgment by the CA. 7 In its
June 15, 2011 Resolution,8 the Court required the Ventanillas to comment on the motion
for reconsideration filed by the Saberons.
Resolution of the Court
At first glance, it would seem that the case involves convoluted issues brought about by
the number of times the Ventanillas were impelled by circumstances to seek judicial
action. Nonetheless, the antecedents would readily reveal that the essential facts are
not disputed: 1) that the subject properties have indeed been the objects of various
transfers effected by MRCI leading to the current controversy between the Saberons
and the Ventanillas; and 2) that prior to the sale to the Saberons, a notice of levy as an
encumbrance was already in existence.
Sections 51 and 52 of P.D. No. 1529 explain the purpose and effects of registering both
voluntary and involuntary instruments, to wit:
Section 51. Conveyance and other dealings by registered owner. An owner of
registered land may convey, mortgage, lease, charge or otherwise deal with the same
in accordance with existing laws. He may use such forms of deeds, mortgages, leases or
other voluntary instruments as are sufficient in law. But no deed, mortgage, lease, or
other voluntary instrument, except a will purporting to convey or affect registered land
shall take effect as a conveyance or bind the land, but shall operate only as a contract
between the parties and as evidence of authority to the Register of Deeds to make
registration.
The act of registration shall be the operative act to convey or affect the land insofar as
third persons are concerned, and in all cases under this Decree, the registration shall be
made in the office of the Register of Deeds for the province or city where the land lies.
Section 52. Constructive notice upon registration. Every conveyance, mortgage, lease,
lien, attachment, order, judgment, instrument or entry affecting registered land shall, if
registered, filed or entered in the office of the Register of Deeds for the province or city
where the land to which it relates lies, be constructive notice to all persons from the time
of such registering, filing or entering.
These provisions encapsulate the rule that documents, like the certificates of title do not
effect a conveyance of or encumbrances on a parcel of land. Registration is the
operative act that conveys ownership or affects the land insofar as third persons are
concerned. By virtue of registration, a constructive notice to the whole world of such
voluntary or involuntary instrument or court writ or processes, is thereby created.
The question of utmost relevance to this case, then, is this: whether or not the registration
of the notice of levy had produced constructive notice that would bind third persons
despite the failure of the ROD-QC to annotate the same in the certificates of title?
In answering these questions, the Court is beckoned to rule on two conflicting rights over
the subject properties: the right of the Ventanillas to acquire the title to the registered
land from the moment of inscription of the notice of levy on the day book (or entry
book), on one hand; and the right of the Saberons to rely on what appears on the
certificate of title for purposes of voluntary dealings with the same parcel of land, on the
other.
The Saberons maintain that they had no notice of any defect, irregularity or
encumbrance in the titles of the property they purchased. In its decision, however, the
RTC pointed out that their suspicion should have been aroused by the circumstance
that Marquez, who was not engaged in the buy-and-sell business and had the property
for only a few months, would offer the same for sale. Although the RTC found that the
Saberons may not be considered as innocent purchasers for value because of this
circumstance, it, nonetheless, ruled that they, who might well be unwilling victims of the
fraudulent scheme employed by MRCI and Marquez, were entitled to actual and
compensatory damages.
To this latter finding, the Court agrees. The Saberons could not be said to have authored
the entanglement they found themselves in. No fault can be attributed to them for
relying on the face of the title presented by Marquez. This is bolstered by the fact that
the RTC decision shows no categorical finding that the Saberons’ purchase of the lots
from Marquez was tainted with bad faith. That the Saberons should have harbored
doubts against Marquez is too high a standard to impose on a buyer of titled land. This is
in consonance to the rule that the one who deals with property registered under the
Torrens system is charged with notice only of such burdens and claims as are annotated
on the title.9 "All persons dealing with property covered by Torrens certificate of title are
not required to explore further than what the Torrens title upon its face indicates in quest
for any hidden defect or inchoate right that may subsequently defeat his right
thereto."10 These rules remain as essential features of the Torrens system. The present
case does not entail a modification or overturning of these principles.
Be that as it may, no fault can likewise be imputed to the Ventanillas.
In ultimately ruling for the Ventanillas, the courts a quo focused on the superiority of their
notice of levy and the constructive notice against the whole world which it had
produced and which effectively bound third persons including the Saberons.
It has already been established in the two previous cases decided by the Court that the
contracts to sell executed in favor of the Ventanillas are valid and subsisting. Clearly, it
has been acknowledged, even by MRCI, as can be seen in the latter’s own choice to
only question their solidary liability in the 1990 case and its failure to assign the same as
an error in the 1994 case. In the same vein, the issue on Marquez’s title had already
been passed upon and settled in the 1994 case. That he purchased the lots prior to the
annotation of the notice of levy in MRCI’s title was of no moment. In fact, the Court
explicitly declared that MRCI’s transaction with Marquez "cannot prevail over the final
and executory judgment ordering MRCI to execute an absolute deed of sale in favor of
the Ventanillas."
These favorable findings prompted the Ventanillas to register the notice of levy on the
properties. The records show that on the strength of a final and executory decision by
the Court, they successfully obtained a writ of execution from the RTC and a notice of
levy was then entered, albeit on the primary entry book only. The contract to sell to
Marquez was registered on May 21, 1991, while the notice of levy was issued ten (10)
days later, or on May 31, 1991. In February 1992, MRCI executed the Deed of Sale with
Marquez, under whose name the clean titles, sans the notice of levy, were issued. A
year later, or on March 11, 1992, MRCI registered the deed of sale to Marquez who later
sold the same property to the Saberons.
This complex situation could have been avoided if it were not for the failure of ROD
Cleofe to carry over the notice of levy to Marquez’s title, serving as a senior
encumbrance that might have dissuaded the Saberons from purchasing the properties.
The Court agrees with the position of the RTC in rejecting ROD Cleofe’s theory.
Distinctions between a contract to sell and a contract of sale are well-established in
urisprudence.1âwphi1 In a contract of sale, the title to the property passes to the
vendee upon the delivery of the thing sold; in a contract to sell, ownership is, by
agreement, reserved in the vendor and is not to pass to the vendee until full payment of
the purchase price. Otherwise stated, in a contract of sale, the vendor loses ownership
over the property and cannot recover it until and unless the contract is resolved or
rescinded; whereas, in a contract to sell, title is retained by the vendor until full payment
of the price. In the latter contract, payment of the price is a positive suspensive
condition, failure of which is not a breach but an event that prevents the obligation of
the vendor to convey title from becoming effective.11
It is undeniable, therefore, that no title was transferred to Marquez upon the annotation
of the contract to sell on MRCI’s title. As correctly found by the trial court, the contract
to sell cannot be substituted by the Deed of Absolute Sale as a "mere conclusion" of the
previous contract since the owners of the properties under the two instruments are
different.12
Considering that the deed of sale in favor of Marquez was of later registration, the
notice of levy should have been carried over to the title as a senior encumbrance.
Corollary to this is the rule that a levy of a judgment debtor creates a lien, which nothing
can subsequently destroy except the very dissolution of the attachment of the levy
itself.13 Prior registration of the lien creates a preference, since the act of registration is
the operative act to convey and affect the land.14 Jurisprudence dictates that the said
lien continues until the debt is paid, or the sale is had under an execution issued on the
judgment or until the judgment is satisfied, or the attachment is discharged or vacated
in the same manner provided by law. Under no law, not even P.D. No. 1529, is it stated
that an attachment shall be discharged upon sale of the property other than under
execution.15
Additionally, Section 59 of P.D. No. 1529 provides that, "[i]f, at the time of the transfer,
subsisting encumbrances or annotations appear in the registration book, they shall be
carried over and stated in the new certificate or certificates, except so far as they may
be simultaneously released or discharged." This provision undoubtedly speaks of the
ministerial duty on the part of the Register of Deeds to carry over existing encumbrances
to the certificates of title.
From the foregoing, ROD Cleofe’s theory that a deed of sale, as a mere conclusion of a
contract to sell, turns into a senior encumbrance which may surpass a notice of levy,
has no leg to stand on. It was, in fact, properly rejected by the courts a quo. Verily, the
controversy at hand arose not from the Ventanillas’ fault, but from ROD Cleofe’s
misplaced understanding of his duty under the law.
Surely, the Ventanillas had every right to presume that the Register of Deeds would carry
over the notice of levy to subsequent titles covering the subject properties. The notice
was registered precisely to bind the properties and to serve as caution to third persons
who might potentially deal with the property under the custody of the law. In DBP v.
Acting Register of Deeds of Nueva Ecija, 16 the Court ruled that entry alone produced
the effect of registration, whether the transaction entered was a voluntary or involuntary
one, so long as the registrant had complied with all that was required of him for
purposes of entry and annotation, and nothing more remained to be done but a duty
incumbent solely on the Register of Deeds.
While the Court is not unmindful that a buyer is charged with notice only of such
burdens and claims as are annotated on the title, the RTC and the CA are both correct
in applying the rule as to the effects of involuntary registration. In cases of voluntary
registration of documents, an innocent purchaser for value of registered land becomes
the registered owner, and, in contemplation of law the holder of a certificate of title,
the moment he presents and files a duly notarized and valid deed of sale and the same
is entered in the day book and at the same time he surrenders or presents the owner's
duplicate certificate of title covering the land sold and pays the registration fees,
because what remains to be done lies not within his power to perform. The Register of
Deeds is duty bound to perform it.17 In cases of involuntary registration, an entry thereof
in the day book is a sufficient notice to all persons even if the owner's duplicate
certificate of title is not presented to the register of deeds. Therefore, in the registration
of an attachment, levy upon execution, notice of lis pendens, and the like, the entry
thereof in the day book is a sufficient notice to all persons of such adverse claim. 18
This rule was reiterated in the more recent case of Armed Forces and Police Mutual
Benefit Association, Inc., v. Santiago,19 as relied upon by the CA. In AFP, the Notice of
Levy was presented for registration in the Registry of Deeds of Pasig City. The Notice was
entered in the Primary Entry Book, but was not annotated on the TCT because the
original copy of the said title on file in the Registry of Deeds was not available at that
time. Six (6) days after the presentation of the Notice of Levy, the Deed of Absolute Sa le
involving the same parcel of land was presented for registration and likewise entered.
The deed of sale was examined by the same employee who examined the notice of
levy, but she failed to notice that the title subject of the sale was the same title which
was the subject of the notice of levy earlier presented. Unaware of the previous
presentation of the notice of levy, the Register of Deeds issued a certificate of title in the
name of the vendee on the basis of the deed of sale. The Register of Deeds in AFP
immediately requested the vendee to surrender the documents in light of the mistake
discovered so that he could take appropriate rectification or correction. Settling the
issue on whether the notice of levy could be annotated in the certificate of title, the
Court ruled in the affirmative on the ground that the preference created by the levy on
attachment was not diminished by the subsequent registration of the prior sale.
Superiority and preference in rights were given to the registration of the levy on
attachment; although the notice of attachment had not been noted on the certificate
of title, its notation in the book of entry of the Register of Deeds produced all the effects
which the law gave to its registration or inscription, to wit:
…Under the rule of notice, it is presumed that the purchaser has examined every
instrument of record affecting the title. Such presumption is irrebuttable. He is charged
with notice of every fact shown by the record and is presumed to know every fact
shown by the record and to know every fact which an examination of the record would
have disclosed. This presumption cannot be overcome by proof of innocence or good
faith. Otherwise, the very purpose and object of the law requiring a record would be
destroyed. Such presumption cannot be defeated by proof of want of knowledge of
what the record contains any more than one may be permitted to show that he was
ignorant of the provisions of the law. The rule that all persons must take notice of the
facts which the public record contains is a rule of law. The rule must be absolute; any
variation would lead to endless confusion and useless litigation. For these reasons, a
declaration from the court that respondent was in bad faith is not necessary in order
that the notice of levy on attachment may be annotated on TCT No. PT-94912.
The fact that the notice of levy on attachment was not annotated on the original title
on file in the Registry of Deeds, which resulted in its non-annotation on the title TCT No.
PT-94912, should not prejudice petitioner. As long as the requisites required by law in
order to effect attachment are complied with and the appropriate fees duly paid,
attachment is duly perfected. The attachment already binds the land. This is because
what remains to be done lies not within the petitioner’s power to perform but is a duty
incumbent solely on the Register of Deeds. (Emphasis supplied)
In the case at bench, the notice of levy covering the subject property was annotated in
the entry book of the ROD QC prior to the issuance of a TCT in the name of the
Saberons. Clearly, the Ventanillas’ levy was placed on record prior to the sale. This
shows the superiority and preference in rights of the Ventanillas over the property as
against the Saberons. In AFP, the Court upheld the registration of the levy on
attachment in the primary entry book as a senior encumbrance despite the mistake of
the ROD, the Court must, a fortiori, sustain the notice of levy registered by the
Ventanillas notwithstanding the nonfeasance of ROD Cleofe. Again, the prevailing rule
is that there is effective registration once the registrant has fulfilled all that is needed of
him for purposes of entry and annotation, so that what is left to be accomplished lies
solely on the Register of Deeds.20
Suffice it to say, no bad faith can be ascribed to the parties alike. Nevertheless, the
equal footing of the parties necessarily tilts in favor of the superiority of the Ventanillas’
notice of levy, as discussed.
The Court also sees no reason to dwell in the contention that the rights or interests of the
Ventanillas in the subject properties never ripened into ownership. It bears stressing that
the previous decisions discussed herein already sealed the validity of the contract to sell
issued to the Ventanillas decades ago. As found by the RTC, it was MRCI’s obstinate
refusal to accept their tender of payment, not to mention the devious transfer of the
property, which caused the decade-long delay of the execution of the deed of sale in
their favor. This is a finding that the Court, which is not a trier of facts, will have to
respect.
In the same vein, the attribution of laches against the Ventanillas is flawed. Their failure
to learn about the structures being built on the subject lands and the payment of real
property taxes by the Saberons is not sufficient justification to withhold the declaration
of their ownership over it. Against a different factual milieu, laches may be said to have
set it but not so in this case. While the Ventanillas may have been unaware that
improvements were being erected over the lots, this obliviousness can, by no means, be
treated as a lack of vigilance on their part. It bears stressing that the Ventanillas are now
of advanced age and retired as university professors. Considering the length of litigation
which they had to endure in order to assert their right over the property which they have
painstakingly paid for decades ago, to hold now that they have been remiss in the
protection of their rights would be the height of impropriety, if not injustice. To exact
from them an obligation to visit the land in litigation every so often, lest they be held to
have slept on their rights, is iniquitous and unreasonable. All told, the Ventanillas remain
as innocent victims of deception.
The Court deems it significant to note that the amount of ₱7,118,115.88 awarded to the
Saberons by the RTC is to be satisfied by MRCI, Krohn, Tabalingcos, and Marquez, who
have not been impleaded as parties to the present petition, thus, rendering the said
award final and executory. The said amount, however, is separate and distinct from
those provided under Article 44821 in relation to Article 54622 of the Civil Code. In the
petition, the Saberons invoked the said provisions, claiming that they are entitled to
reimbursement of all the expenses incurred in the introduction of improvements on the
subject lands amounting to ₱23,058,822.79.
The Court finds the Saberons to be builders in good faith.
No less than the court a quo observed that "no actual evidence that the Saberons
connived with the MRCI and Marquez to have the titles registered in their names to the
prejudice of the (Ventanillas)" and that what was obvious was that "the Saberons dealt
with clean certificates of titles." Also quite telling on this point is the finding that MRCI,
Krohn, Tabalingcos, and Marquez are liable to the Saberons. The RTC reasoned out in
the following wise:
This Court is not convinced, however that defendants Saberon took part in the
fraudulent scheme employed by the other defendants against the plaintiffs. Although
they may not be considered as innocent purchasers for value shown in the discussion
above, this Court is not ready to conclude that the Saberons joined the other
defendants in their efforts to frustrate plaintiffs’ rights over the disputed properties. On
the contrary, they may be considered victims of the same fraudulent employed by
defendants MRCI and Marquez, and thus can rightfully claim damages from the same. 23
Consequently, Article 448 in relation to Article 546 of the Civil Code will
apply.1âwphi1 The provisions respectively read:
Article 448. The owner of the land on which anything has been built, sow or planted in
good faith, shall have the right to appropriate, as his own the works, sowing, or planting,
after payment of the indemnity provided for in Article 546 and 548, or to oblige the one
who built or planted to pay the price of the land, and the one who sowed, the proper
rent. However, the builder or planter cannot be obliged to buy the land and if its value is
considerably more than that of the building or trees. In such case, he shall pay
reasonable rent, if the owner of the land does not choose to appropriate the building or
trees after proper indemnity. The parties shall agree upon the terms of the lease and in
case disagreement, the court shall fix the terms thereof.
Article 546. Necessary expenses shall be refunded to every possessor; but only the
possessor in good faith may retain the thing until he has been reimbursed therefore.
Useful expenses shall be refunded only to the possessor in good faith with the same right
of retention, the person who has defeated him in the possession having the option of
refunding the amount of the expenses or of paying the increase in value which the
thing may have acquired by reason thereof.
Thus, the two options available to the Ventanillas: 1) they may exercise the right to
appropriate after payment of indemnity representing the value of the improvements
introduced and the necessary and useful expenses defrayed on the subject lots; or 2)
they may forego payment of the said indemnity and instead, oblige the Saberons to
pay the price of the land.
Should the Ventanillas elect to appropriate the improvements, the trial court is ordered
to determine the value of the improvements and the necessary and useful expenses
after hearing and reception of evidence. Should the Ventanillas, however, pursue the
option to oblige the Saberons to pay the "price of the land," the trial court is ordered to
determine said price to be paid to the V entanillas.
WHEREFORE, the Motion for Reconsideration is PARTIALLY GRANTED. The appealed
March 12, 2010 Decision and the June 18, 2010 Resolution of the Court of Appeals in CA-
G.R. CV No. 85520 are AFFIRMED with modification in that the Ventanillas are given a
period of sixty ( 60) days from finality of this Resolution to decide whether to pay the
Saberons the value of the improvements and the necessary and useful expenses
defrayed on the 2 lots or to oblige the Saberons to pay them the "price" of said lots.
Depending on the option exercised by the Ventanillas, the case is hereby remanded to
the court of origin for further proceedings as to the determination of reimbursement due
to the petitioners or of the "price" of the subject lots due to the Ventanillas.
SO ORDERED.
[G.R. No. 128354. April 26, 2005]
HOME BANKERS SAVINGS & TRUST CO., petitioner, vs. THE HONORABLE COURT OF
APPEALS, PABLO N. AREVALO, FRANCISCO A. UY, SPOUSES LEANDRO A. SORIANO, JR.
and LILIAN SORIANO, ALFREDO LIM and FELISA CHI LIM/ALFREDO LIM, respondents.
DECISION
AUSTRIA-MARTINEZ, J.:
Before us is a petition for review on certiorari under Rule 45 of the Rules of Court seeking
to annul the Decision[1] of the Court of Appeals (CA) dated November 28, 1996 in CA-
G.R. SP No. 40892 and its Resolution dated February 19, 1997 denying petitioners motion
for reconsideration.
Each of private respondents entered into separate contracts to sell with TransAmerican
Sales and Exposition (TransAmerican) through the latters Owner/General Manager, Engr.
Jesus Garcia, involving certain portions of land covered by Transfer Certificate of Title
(TCT) No. 19155, located at No. 45 Gen. Lim Street, Heroes Hill, Quezon City, together
with one unit three-storey townhouse to be built on each portion, as follows:
Respondent Pablo N. Arevalo purchased the portion of land denominated as Unit No.
5[2] for the amount of P750,000.00 on August 21, 1988 and had already fully paid the
purchase price on September 3, 1988;
Respondent Alfredo Lim purchased the portion of land denominated as Unit No. 1 [3] for
the amount of P800,000.00 on December 22, 1988 and fully paid the same upon
execution of the agreement on the same day;
Respondent Francisco A. Uy purchased the portion of land denominated as Unit No.
6[4] on October 29, 1988 in the amount of P800,000.00 payable in installments and had
allegedly made a total payment of P581,507.41. He ordered to stop the payment of all
[postdated] checks from September 1990 to November 1995 on the ground of non-
completion of his unit and had later learned of the foreclosure of the property;
Respondent spouses Leandro A. Soriano, Jr. and Lilian Soriano purchased the portion of
land denominated as Unit No. 3 [5] on February 15, 1990 in the amount of P1,600,000.00
and had allegedly made a payment of P669,960.00. They had stopped paying because
of non-completion of the project and had later learned of the foreclosure of the
property;
Respondents Alfredo Lim and Santos Lim purchased the portion of land denominated as
Unit No. 7 [6] for P700,000.00 on October 1988 and had been fully paid as of March 18,
1989; Santos Lim subsequently sold and assigned his share of the property to private
respondent Felisa Chi Lim on May 12, 1989.
It is stipulated in their respective contracts that their individual townhouses will be fully
completed and constructed as per plans and specifications and the respective titles
thereto shall be delivered and transferred to private respondents free from all liens and
encumbrances upon their full payment of the purchase price. However, despite
repeated demands, Garcia/TransAmerican failed to comply with their undertakings.
On May 30, 1989, Engr. Garcia and his wife Lorelie Garcia obtained from petitioner
Home Bankers Savings and Trust Company (formerly Home Savings Bank and Trust
Company) a loan in the amount of P4,000,000.00 and without the prior approval of the
Housing and Land Use Regulatory Board (HLURB), the spouses mortgaged [7] eight lots
covered by TCT Nos. 3349 to 3356 as collateral. Petitioner registered its mortgage on
these titles without any other encumbrance or lien annotated therein. The proceeds of
the loan were intended for the development of the lots into an eight-unit townhouse
project. However, five out of these eight titles turned out to be private respondents
townhouses subject of the contracts to sell with Garcia/TransAmerican.
When the loan became due, Garcia failed to pay his obligation to petitioner.
Consequently, petitioner instituted an extrajudicial foreclosure[8] on the subject lots and
being the highest bidder in the public auction, a certificate of sale [9] in its favor was
issued by the sheriff on February 26, 1990. Subsequently, the sheriffs certificate of sale
was registered and annotated on the titles of the subject lots in the Register of Deeds of
Quezon City.
On November 8, 1990, private respondents filed a complaint with the Office of Appeals,
Adjudication and Legal Affairs (OAALA), HLURB, against Garcia/TransAmerican as
seller/developer of the property and petitioner, as indispensable party, for non-delivery
of titles and non-completion of the subdivision project. [10] They prayed for the
completion of the units, annulment of the mortgage in favor of petitioner, release of the
mortgage on the lots with fully paid owners and delivery of their titles, and for petitioner
to compute individual loan values of amortizing respondents and to accept payments
from them and damages.
Petitioner filed its Answer contending that private respondents have no cause of action
against it; that at the time of the loan application and execution of the promissory note
and real estate mortgage by Garcia, there were no known individual buyers of the
subject land nor annotation of any contracts, liens or encumbrances of third persons on
the titles of the subject lots; that the loan was granted and released without notifying
HLURB as it was not necessary.
Private respondents filed their Reply and a motion for the judgment on the pleadings.
Petitioner did not file a rejoinder. Private respondents filed a manifestation reiterating for
a judgment on their pleadings and asked that the reliefs prayed for be rendered as far
as petitioner was concerned. Upon motion of private respondents, the case against
Garcia/TransAmerican was archived for failure to serve summons on him/it despite
efforts to locate his whereabouts or its office. The case was then considered submitted
for decision.
On August 16, 1991, OAALA rendered its Decision,[11] the dispositive portion of which
reads:
WHEREFORE, Judgment is hereby rendered as follows:
1. Declaring the mortgage executed by and between respondents Engr. Jesus
Garcia/TransAmerican Sales and Exposition and Home Bankers Savings and Trust
Company (formerly Home Savings Bank and Trust Company) to be unenforceable as
against all the complainants;
2. Ordering the Register of Deeds of Quezon City to cancel the annotations of the
mortgage indebtedness between respondents Engr. Jesus Garcia and Home Bankers
Savings and Trust Company (formerly Home Savings Bank and Trust Company);
3. Ordering, likewise the Register of Deeds of Quezon City to cancel the annotation of
the Certificate of Sale in favor of the respondent Home Bankers Savings and Trust
Company on the following Transfer Certificates of Title to wit:
1) TCT No. 3350
2) TCT No. 3351
3) TCT No. 3352
4) TCT No. 3354
5) TCT No. 3356
4. Ordering respondent Home Bankers Savings and Trust Company (formerly Home
Savings Bank and Trust Company) to:
4.1. AS TO THE FIRST CAUSE OF ACTION
Deliver to Complainant Pablo N. Arevalo TCT No. 3352 free from all liens and
encumbrances.
4.2. AS TO THE SECOND CAUSE OF ACTION
Deliver to Complainant Alfredo Lim TCT No. 3356 free from all liens and encumbrances.
4.3. AS TO THE THIRD CAUSE OF ACTION
To compute and/or determine the loan value of complainant Francisco A. Uy who was
not able to complete or make full payment and to accept payment and/or receive
amortization from said complainant Francisco A. Uy and upon full payment to deliver
TCT No. 3351 free from all liens and encumbrances.
4.4. AS TO THE FOURTH CAUSE OF ACTION
To compute and/or determine the loan value of Complainant Spouses Leandro A.
Soriano, Jr. and Lilian Soriano who were not able to complete or make full payment and
to accept and/or receive amortization from said Complainants Soriano and upon full
payment to deliver TCT No. 3354 free from all liens and encumbrances.
4.5. AS TO THE FIFTH CAUSE OF ACTION
Deliver to complainant Alfredo Lim and Felisa Chi Lim TCT No. 3350 free from all liens and
encumbrances.
without prejudice to its right to require respondent Engr. Jesus Garcia/TransAmerican to
constitute new collaterals in lieu of the said titles sufficient in value to cover the
mortgage obligation. [12]
Petitioner filed an appeal with the Board of Commissioners of the HLURB which dismissed
the same in a decision dated June 15, 1992.[13] Petitioner then elevated the case to the
Office of the President which rendered a decision dated June 30, 1995[14] dismissing the
appeal and affirming the June 15, 1992 decision of the HLURB. Petitioners motion for
reconsideration was also denied in a Resolution dated May 7, 1996. [15]
Petitioner filed a petition for review with the CA which, in the herein
assailed decision dated November 28, 1996, denied the petition and affirmed
the decision of the Office of the President. The CA applied the case of Union Bank of
the Philippines vs. HLURB, et al.,[16] where it was held that the act of a subdivision
developer of mortgaging the subdivision without the knowledge and consent of a unit
buyer and without the approval of the National Housing Authority (NHA, now HLURB) is
violative of Section 18 of P.D. No. 957 thus, falling under the exclusive jurisdiction of
HLURB.
The CA upheld the findings of the OAALA, HLURB that private respondents had already
entered into separate contracts to sell with TransAmerican as early as 1988 while it was
only in 1989 that spouses Garcia applied for a loan with petitioner and executed a
mortgage contract over the subject lots; that the proceeds of the loan were purposely
intended for the development of a property which was the same property subject of
the contracts to sell; that despite the contracts to sell, Garcia/TransAmerican did not
apprise petitioner of the existence of these contracts nor did petitioner exhaust any
effort to inquire into their existence since petitioner merely relied on the purported clean
reconstituted titles in the name of Garcia; that the mortgage of the subject lots without
the consent of the buyers and the authorization of the HLURB is a clear violation of P.D.
No. 957; that the mortgage contract is void and unenforceable against private
respondents.
Petitioners motion for reconsideration was denied by the CA in its Resolution dated
February 19, 1997. [17]
Petitioner is now before us raising the following grounds in support of its petition:
A. THE OFFICE OF THE PRESIDENT ERRED IN RULING THAT THE HLURB HAS JURISDICTION TO
NULLIFY OR DECLARE UNENFORCEABLE THE REAL ESTATE MORTGAGE VALIDLY
CONSTITUTED BY THE OWNER.
B. ASSUMING ARGUENDO THAT THE HLURB HAS JURISDICTION, RESPONDENT COURT
MANIFESTLY ERRED IN FINDING THE REAL ESTATE MORTGAGE IN FAVOR OF HOME AS
INVALID AND UNENFORCEABLE AGAINST RESPONDENTS.
C. IN THE EVENT THAT THE DECISION OF THE RESPONDENT COURT FINDING THE REAL
ESTATE MORTGAGE IN FAVOR OF HOME AS INVALID AND UNENFORCEABLE AGAINST
RESPONDENTS IS UPHELD, THE UNREGISTERED CONTRACTS TO SELL IN FAVOR OF
RESPONDENTS SHOULD ALSO BE HELD VALID ONLY AS TO THE PARTIES THERETO BUT
UNENFORCEABLE AGAINST PETITIONER.
Private respondents filed their Comment and petitioner filed its Reply thereto.
In a Resolution dated February 23, 2004, we gave due course to the petition and
required the parties to submit their respective memoranda which they complied with.
The petition is devoid of merit.
Notably, the issues raised are mere rehash of the issues already passed upon by the
HLURB, the Office of the President and the CA which we uphold as we find no reversible
errors committed.
Petitioner claims that HLURB has no power to declare the mortgage contract over real
property executed between a real estate developer and petitioner, a banking
institution, void or unenforceable, as it is properly within the jurisdiction of the Regional
Trial Court. Petitioner asserts that being a mortgagee of the subject lots and a purchaser
in good faith, it is not a project owner, developer, or dealer contemplated under P.D.
No. 1344, the law which expanded the jurisdiction of the NHA; and that since there is no
seller-buyer relationship existing between it and private respondents, HLURB has no
jurisdiction to rule on the validity of the mortgage and to annul foreclosure proceedings.
The argument is untenable.
The CA did not err in affirming the decision of the Office of the President that HLURB has
jurisdiction to declare invalid the mortgage contract executed between
Garcia/TransAmerican and petitioner over the subject lots insofar as private
respondents are concerned. It correctly relied on Union Bank of the Philippines vs.
HLURB, et al.[18] where we squarely ruled on the question of HLURBs jurisdiction to hear
and decide a condominium buyers complaint for: (a) annulment of a real estate
mortgage constituted by the project owner without the consent of the buyer and
without the prior written approval of the NHA; (b) annulment of the foreclosure sale; and
(c) annulment of the condominium certificate of title that was issued to the highest
bidder at the foreclosure sale, thus:
. . . The issue in HLURB Case No. REM-062689-4077 is the validity of the real estate
mortgage of Davids condominium unit that FRDC executed in favor of the Union Bank
and Far East Bank without prior approval of the National Housing Authority and the
legality of the title which the mortgage banks acquired as highest bidder therefore in
the extrajudicial foreclosure sale. The applicable provisions of P.D. No. 957, otherwise
known as The Subdivision and Condominium Buyers Protective Decree are quoted
hereunder as follows:
Sec. 3. NATIONAL HOUSING AUTHORITY. The National Housing Authority shall have
exclusive jurisdiction to regulate the real estate trade and business in accordance with
the provisions of this Decree.
Section 18. Mortgages No mortgage on any unit or lot shall be made by the owner or
developer without prior written approval of the authority. Such approval shall not be
granted unless it is shown that the proceeds of the mortgage loan shall be used for the
development of the condominium or subdivision project and effective measures have
been provided to ensure such utilization. The loan value of each lot or unit covered by
the mortgage shall be determined and the buyer thereof if any shall be notified before
the release of the loan. The buyer may, at his option, pay his installment for the lot or unit
directly to the mortgagee who shall apply the payments to the corresponding
mortgage indebtedness secured by the particular lot or unit being paid for, with a view
to enabling said buyer to obtain title over the lot or unit promptly after full payment
thereof.
P.D. No. 1344 of April 2, 1978 expanded the jurisdiction of the National Housing Authority
to include the following:
Sec. 1. In the exercise of its function to regulate the real estate trade and business and
in addition to its powers provided for in Presidential Decree No. 957, the National
Housing Authority shall have exclusive jurisdiction to hear and decide cases of the
following nature:
A. Unsound real estate business practices;
B. Claims involving refund and any other claims filed by subdivision lot or condominium
unit buyer against the project owner, developer, dealer, broker or salesman; and
C. Cases involving specific performance of contractual and statutory obligations filed
by buyers of subdivision lot or condominium unit against the owner, developer, broker or
salesman.
On February 7, 1981, Executive Order No. 648 transferred the regulatory and quasi-
judicial functions of the NHA to the Human Settlements Regulatory Commission.
Sec. 8. TRANSFER OF FUNCTIONS. The regulatory functions of the National Housing
Authority pursuant to Presidential Decree Nos. 957, 1216, 1344 and other related laws
are hereby transferred to the Commission, together with such applicable personnel,
appropriation, records, equipment and property necessary for the enforcement and
implementation of such functions. Among these regulatory functions are:
1. Regulation of the real estate trade and business:
...
7. Approval of mortgage on any subdivision lot or condominium unit made by the
owner or developer;
...
11. Hear and decide cases on unsound real estate business practices; claims involving
refund filed against project owners, developers, dealers, brokers, or salesmen; and
cases of specific performance.
Executive Order No. 90 dated December 17, 1986 changed the name of the Human
Settlements Regulatory Commission to Housing and Land Use Regulatory Board (HLURB).
Clearly, FRDCs act of mortgaging the condominium project to Bancom and FEBTC,
without the knowledge and consent of David as buyer of a unit therein, and without the
approval of the NHA (now HLURB) as required by P.D. No. 957, was not only an unsound
real estate business practice but also highly prejudicial to the buyer. David, who has a
cause of action for annulment of the mortgage, the mortgage foreclosure sale, and the
condominium certificate of title that was issued to the UBP and FEBTC as the highest
bidders at the sale. The case falls within the exclusive jurisdiction of the NHA (now HLURB)
as provided in P.D. No. 957 of 1976 and P.D. No. 1344 of 1978.
...
We hold that the jurisdiction of the HLURB to regulate the real estate trade is broad
enough to include jurisdiction over complaints for specific performance of the sale, or
annulment of the mortgage, of a condominium unit, with damages. [19]
Petitioner avers that the Union Bank ruling is not applicable in its case, since it had no
knowledge of any buyer of the subject lots at the time the mortgage was constituted;
that there was no construction in the subject lots at the time petitioner accepted the
same as collateral; that the title to the subject property was still in the process of being
reconstituted and the loan was in fact meant for the development of the subject lots
into an eight-unit townhouse project.
We are not persuaded.
Contrary to petitioners claim that there were no buyers of the subject lots at the time of
the constitution of the mortgage, records show that private respondents Arevalo, Uy,
Alfredo Lim and Santos Lim had entered into contracts to sell with
Garcia/TransAmerican as early as 1988 for their respective lots. In fact, they, except for
Uy, had already fully paid their townhouse units in 1988 without the certificates of title
being delivered to them. Garcia mortgaged the subject lots without their knowledge
and consent.
While private respondents spouses Soriano bought the subject lots after the constitution
of the mortgage in favor of petitioner, the subject lots are, as early as 1988, subdivision
lots which as defined under Section 2(e) of P.D. No. 957 to mean any of the lots,
whether residential, commercial, industrial, or recreational in a subdivision project [20] are
entitled to the protection of P.D. No. 957.
Under Section 18 of P.D. No. 957, it is provided that no mortgage on any unit or lot shall
be made by the owner or developer without prior written approval of the authority.
Such approval shall not be granted unless it is shown that the proceeds of the mortgage
loan shall be used for the development of the condominium or subdivision project and
effective measures have been provided to ensure such utilization. As in the Union Bank,
the mortgage was constituted on the subject lots in favor of petitioner without the prior
written approval from the HLURB, thus HLURB has jurisdiction to rule on the validity of the
mortgage.
Notwithstanding that petitioner became the owner of the subject lots by being the
highest bidder in the extrajudicial foreclosure sale, it must be remembered that it was
first a mortgagee of the same. Since the lot was mortgaged in violation of Section 18 of
P.D. No. 957, HLURB has jurisdiction to declare the mortgage void insofar as private
respondents are concerned and to annul the foreclosure sale. In Far East Bank and Trust
Co. vs. Marquez,[21] we held that Section 18 of P.D. No. 957 is a prohibitory law, and acts
committed contrary to it are void. We said:
In determining whether a law is mandatory, it is necessary to ascertain the legislative
intent, as stated by Sen. Arturo M. Tolentino, an authority on civil law:
There is no well-defined rule by which a mandatory or prohibitory law may, in all
circumstances, be distinguished from one which is directory, suppletory, or permissive. In
the determination of this question, the prime object is to ascertain the legislative
intention. Generally speaking, those provisions which are mere matter of form, or which
are not material, do not affect any substantial right, and do not relate to the essence of
the thing to be done, so that compliance is a matter of convenience rather than
substance, are considered to be directory. On the other hand, statutory provisions
which relate to matters of substance, affect substantial rights and are the very essence
of the thing required to be done, are regarded as mandatory.
In Philippine National Bank vs. Office of the President, we had occasion to mull over the
intent of P.D. No. 957 thus:
. . . [T]he unmistakable intent of the law [is] to protect innocent lot buyers from scheming
subdivision developers. As between these small lot buyers and the gigantic financial
institutions which the developers deal with, it is obvious that the law as an instrument of
social justice must favor the weak. Indeed, the petitioner Bank had at its disposal vast
resources with which it could adequately protect its loan activities, and therefore is
presumed to have conducted the usual due diligence checking and ascertaining
(whether thru ocular inspection or other modes of investigation) the actual status,
condition, utilization and occupancy of the property offered as collateral, . . . On the
other hand, private respondents obviously were powerless to discover attempt of the
land developer to hypothecate the property being sold to them. It was precisely in
order to deal with this kind of situation that P.D. No. 957 was enacted, its very essence
and intendment being to provide a protective mantle over helpless citizens who may
fall prey to the razzmatazz of what P.D. No. 957 termed unscrupulous subdivision and
condominium sellers.
Concededly, P.D. No. 957 aims to protect innocent lot buyers. Section 18 of the decree
directly addresses the problem of fraud committed against buyers when the lot they
have contracted to purchase, and which they have religiously paid for, is mortgaged
without their knowledge. The avowed purpose of P.D. No. 957 compels the reading of
Section 18 as prohibitory acts committed contrary to it are void. Such construal ensures
the attainment of the purpose of the law: to protect lot buyers, so that they do not end
up still homeless despite having fully paid for their home lots with their hard-earned
cash.[22]
Since the mortgage is void, HLURBs orders of the cancellation of the sheriffs certificate of
sale, release of the mortgaged lots and delivery of the corresponding titles to
respondents who had fully paid the purchase price of the units are but the necessary
consequences of the invalidity of the mortgage for the protection of private
respondents.
Anent the second issue, petitioner contends that since the titles on their face were free
from any claims, liens and encumbrances at the time of the mortgage, it is not obliged
under the law to go beyond the certificates of title registered under the Torrens system
and had every reason to rely on the correctness and validity of those titles.
We are not convinced.
While the cases[23] cited by petitioner held that the mortgagee is not under obligation to
look beyond the certificate of title when on its face, it was free from lien or
encumbrances, the mortgagees therein were considered in good faith as they were
totally innocent and free from negligence or wrongdoing in the transaction. In this case,
petitioner knew that the loan it was extending to Garcia/TransAmerican was for the
purpose of the development of the eight-unit townhouses. Petitioners insistence that
prior to the approval of the loan, it undertook a thorough check on the property and
found the titles free from liens and encumbrances would not suffice. It was incumbent
upon petitioner to inquire into the status of the lots which includes verification on
whether Garcia had secured the authority from the HLURB to mortgage the subject lots.
Petitioner failed to do so. We likewise find petitioner negligent in failing to even ascertain
from Garcia if there are buyers of the lots who turned out to be private respondents.
Petitioners want of knowledge due to its negligence takes the place of registration, thus
it is presumed to know the rights of respondents over the lot. The conversion of the status
of petitioner from mortgagee to buyer-owner will not lessen the importance of such
knowledge.[24]Neither will the conversion set aside the consequence of its negligence as
a mortgagee.[25]
Judicial notice can be taken of the uniform practice of banks to investigate, examine
and assess the real estate offered as security for the application of a loan. We cannot
overemphasize the fact that the Bank cannot barefacedly argue that simply because
the title or titles offered as security were clean of any encumbrances or lien, that it was
thereby relieved of taking any other step to verify the over-reaching implications should
the subdivision be auctioned on foreclosure. [26] We find apropos to cite our ruling in Far
East Bank and Trust Co. vs. Marquez, thus: [27]
Petitioner argues that it is an innocent mortgagee whose lien must be respected and
protected, since the title offered as security was clean of any encumbrances or lien. We
do not agree.
. . . As a general rule, where there is nothing on the certificate of title to indicate any
cloud or vice in the ownership of the property, or any encumbrance thereon, the
purchaser is not required to explore further than what the Torrens Title upon its face
indicates in quest for any hidden defect or inchoate right that may subsequently defeat
his right thereto. This rule, however, admits of an exception as where the purchaser or
mortgagee has knowledge of a defect or lack of title in the vendor, or that he was
aware of sufficient facts to induce a reasonably prudent man to inquire into the status
of the property in litigation.
Petitioner bank should have considered that it was dealing with a [townhouse] project
that was already in progress. A reasonable person should have been aware that, to
finance the project, sources of funds could have been used other than the loan, which
was intended to serve the purpose only partially. Hence, there was need to verify
whether any part of the property was already the subject of any other contract
involving buyers or potential buyers. In granting the loan, petitioner bank should not
have been content merely with a clean title, considering the presence of
circumstances indicating the need for a thorough investigation of the existence of
buyers like respondent. Having been wanting in care and prudence, the latter cannot
be deemed to be an innocent mortgagee.
Petitioner cannot claim to be a mortgagee in good faith. Indeed it was negligent, as
found by the Office of the President and by the CA. Petitioner should not have relied
only on the representation of the mortgagor that the latter had secured all requisite
permits and licenses from the government agencies concerned. The former should
have required the submission of certified true copies of those documents and verified
their authenticity through its own independent effort.
Having been negligent in finding out what respondents rights were over the lot,
petitioner must be deemed to possess constructive knowledge of those rights.
As to the third issue, petitioner contends that private respondents were negligent in
failing to register their contracts to sell in accordance with Section 17 of P.D. No. 957;
that private respondents unregistered contracts to sell are binding only on them and
Garcia/TransAmerican but not on petitioner which had no actual or constructive notice
of the sale at the time the mortgage was constituted.
We disagree.
Section 17 of P.D. No. 957[28] provides that the seller shall register the contracts to sell with
the Register of Deeds of Quezon City. Thus, it is Garcias responsibility as seller to register
the contracts and petitioner should not blame private respondents for not doing so. As
we have said earlier, considering petitioners negligence in ascertaining the existence or
absence of authority from HLURB for Garcia/TransAmerican to mortgage the subject
lots, petitioner cannot claim to be an innocent purchaser for value and in good faith.
Petitioner is bound by private respondents contracts to sell executed with
Garcia/TransAmerican.
The last paragraph of Section 18 of P.D. No. 957 provides that respondents who have
not yet paid in full have the option to pay their installment for the lot directly to the
mortgagee (petitioner) who is required to apply such payments to the corresponding
mortgage indebtedness secured by the particular lot or unit being paid for, with a view
to enabling said buyer to obtain title over the lot or unit promptly after full payment
thereof. Thus, petitioner is obliged to accept the payment of remaining unpaid
amortizations, without prejudice to petitioner banks seeking relief against the subdivision
developer.[29]
Notably, although no issue was taken on the fact that the case against
Garcia/TransAmerican, the developer/seller and mortgagor of the subject lots, was
archived for failure to serve summons on him/it as his whereabouts or the office could
not be located, it must be stated that Garcia/TransAmerican is not an indispensable
party since a final determination on the validity of the mortgage over the subject lots
can be rendered against petitioner. Thus, the absence of Garcia/TransAmerican did not
hamper the OAALA from resolving the dispute between private respondents and
petitioner.
In China Bank vs. Oliver,[30] we held that the mortgagor, who allegedly misrepresented
herself to be Mercedes M. Oliver, the registered owner of TCT No. S-50195, is not an
indispensable party in a case filed by a person claiming to be the true registered owner,
for annulment of mortgage and cancellation of title against the mortgagee, China
Bank. We found therein that even without the mortgagor, the true Mercedes Oliver can
prove in her complaint that she is the real person referred in the title and she is not the
same person using the name who entered into a deed of mortgage with the
mortgagee, China Bank.
In the present case, private respondents, in their complaint, alleged that the mortgage
was constituted without the prior written approval of the HLURB which is in violation of
Section 18 of P.D. No. 957. Petitioners admission that it granted and released the loan
without notifying the HLURB because of its belief that it was not necessary to do so, is
fatal to petitioners defense. As a consequence thereof, the mortgage constituted in
favor of petitioner can be declared invalid as against private respondents even without
the presence of Garcia/TransAmerican. It is worthy to mention that the
assailed decision was rendered merely against petitioner and had not made any
pronouncement as to Garcia/TransAmericans liability to private respondents for the
non-completion of the projects; or to herein petitioner, as mortgagee.
The present case merely involves the liability of petitioner bank to private respondents as
buyers of the lots and townhouse units.
WHEREFORE, the petition is DISMISSED for lack of merit.
SO ORDERED.
[G.R. No. 140398. September 11, 2001]
COL. FRANCISCO DELA MERCED, substituted by his heirs, namely, BLANQUITA E. DELA
MERCED, LUIS CESAR DELA MERCED, BLANQUITA E. DELA MERCED (nee MACATANGAY)
and MARIA OLIVIA M. PAREDES, petitioners, vs. GOVERNMENT SERVICE INSURANCE
SYSTEM (GSIS) and SPOUSES VICTOR and MILAGROS MANLONGAT, respondents.
DECISION
YNARES-SANTIAGO, J.:
This is a petition for review under Rule 45 of the Rules of Court, seeking to set aside the
decision of the Court of Appeals dated May 21, 1999 in CA-G.R. CV No. 55034,[1] which
reversed the decision of the Regional Trial Court of Pasig, Metro Manila, Branch 160, in
Civil Cases Nos. 51410 and 51470.[2]
The antecedent facts, as culled from the records, are as follows:
Governor Jose C. Zulueta and his wife Soledad Ramos were the owners of parcels of
land consisting of 100,986 square meters, known as the Antonio Village Subdivision,
Orambo, Pasig City. The parcels of land were registered in their names under Transfer
Certificates of Title Nos. 26105, [3] 37177[4] and 50256[5] of the Registry of Deeds of the
Province of Rizal.
On September 25, 1956, the Zuluetas obtained a loan of P520,000.00 from the
Government Service Insurance System, as security for which they mortgaged the lands
covered by TCT No. 26105. It was expressly stipulated in the mortgage deed that certain
lots within TCT No. 26105 shall be excluded from the mortgage because they have been
either previously sold to third parties or donated to the government.
The Zulueta spouses obtained an additional loan from the GSIS on March 6, 1957 in the
amount of P190,000.00, as security for which they mortgaged the land covered by TCT
No. 50256. On April 4, 1957, the Zuluetas obtained another loan from GSIS this time in the
amount of P1,000,000.00, which they secured by mortgaging parcels of land included in
TCT Nos. 26105 and 37177.
On September 3, 1957, the Zulueta spouses executed a contract to sell whereby they
undertook to sell to Francisco dela Merced and Evarista Mendoza lots identified as Lots
6, 7, 8 and 10, Block 2 (formerly Block 4), Antonio Subdivision covered by TCT No.
26105.[6] On October 26, 1972, after full payment by Col. dela Merced of the purchase
price, a Deed of Absolute Sale was executed by the Zuluetas in his favor.
On October 15, 1957, another loan was extended by GSIS to the Zulueta spouses in the
amount of P1,398,000.00, secured by a mortgage on the properties included in TCT Nos.
26105 and 50256.
The Zuluetas defaulted in the payment of their loans. Thus, GSIS extrajudicially foreclosed
the mortgages and, at the foreclosure sale held on August 16, 1974, GSIS was awarded
the mortgaged properties as the highest bidder. Since the Zuluetas did not redeem the
properties within the reglementary period, title to the properties was consolidated to
GSIS.
Later, on March 25, 1982, GSIS held a sale at public auction of its acquired
assets. Elizabeth D. Manlongat and Ma. Therese D. Manlongat, the children of Victor
and Milagros Manlongat, purchased Lot 6, Block 2 of Antonio Village.[7]
On August 22, 1984, a complaint for declaratory relief, injunction and damages,
docketed as Civil Case No. 51410, was filed with the Regional Trial Court of Pasig,
Branch 160, by Victor Lemonsito and several others, [8] against Benjamin Cabusao, in his
capacity as In-Charge of the Municipal Task Force on Squatters of the Municipal
Engineers Office of Pasig, spouses Domini and Olivia Suarez and spouses Victor and
Milagros Manlongat.[9] Plaintiffs therein averred that they were owners of houses in
various lots in Antonio Village, having constructed the same with the permission of the
late Jose C. Zulueta before the same was foreclosed by GSIS; that defendants Suarez
and Manlongat claimed to be vendees of lots in Antonio Village; and that defendant
Cabusao was threatening to demolish plaintiffs houses on the alleged ground that they
were squatters on the lots.
On September 7, 1984, Col. dela Merced also instituted Civil Case No. 51470 with the
Regional Trial Court of Pasig, Branch 154, against GSIS and the spouses Zulueta, praying,
among others, that the foreclosure sale, insofar as his lots were concerned, be declared
null and void.[10]
Meanwhile, Col. dela Merced filed a complaint-in-intervention in Civil Case No.
51410,[11] wherein he prayed that plaintiffs complaint be dismissed and defendants titles
to lots 6, 7 and 8, Block 2 be declared null and void.
The complaint in Civil Case No. 51410 was dismissed for failure of plaintiffs to prosecute,
but the complaint-in-intervention of Col. dela Merced was allowed to proceed against
defendants Suarez and Manlongat. [12]
On September 5, 1986, upon motion of plaintiff Col. dela Merced, the trial court ordered
the consolidation of Civil Case No. 51470 with Civil Case No. 51410.[13]
On October 23, 1987, the Regional Trial Court of Pasig, Branch 160, rendered its decision,
the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered in Civil Case No. 51410:
1. Declaring Lots 6, 7, 8 and 10 of Block 2, and Lot 8 of Block 8 which are the subject of
the action, as the exclusive property of the intervenor. Consequently, the certificates of
Title of the defendants covering said property lots are declared null and void;
and in Civil Case No. 51470:
1. Declaring the foreclosure proceedings conducted by defendant GSIS, insofar as they
affected the lots in question, as null and void, including the consolidation of ownership
thereof by the GSIS, and the sale of the lots to defendant Manlongat spouses;
2. Declaring the certificates of title issued to GSIS covering the aforesaid lots, as well as
those issued to defendant Manlongat spouses by virtue of the sale executed by the
former in favor of the latter, as null and void; and directing the Office of the Register of
Deeds of Pasig, Metro Manila, to issue a new one in the name of the plaintiff Francisco
Mendoza dela Merced;
3. Ordering the defendants, jointly and severally, to pay the plaintiff the sums of
P100,000.00 as moral damages; P50,000.00 as exemplary damages; and P50,000.00 by
way of attorneys fees; plus costs.
SO ORDERED.[14]
The GSIS and Manlongat spouses filed separate appeals. The Court of Appeals held that
the trial court erred in declaring defendants as having waived their right to present
evidence. Thus, on April 19, 1994, the Court of Appeals set aside the decision of the trial
court and remanded the case to the lower court for the reception of evidence of
defendants Manlongat and GSIS.[15]
In the meantime, on March 19, 1988, Col. dela Merced passed away and was
substituted by his heirs.
On December 27, 1996, the Regional Trial Court of Pasig, Branch 160, rendered a
decision, the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered:
1. Declaring the foreclosure sale of Lot Nos. 6, 7, 8 and 10 of Block 2, and Lot 8 of Block 8
and certificate of Titles issued to GSIS covering the aforesaid lots as well as those issued
to defendant Manlongat spouses as null and void;
2. Declaring plaintiff-intervenor as the true and lawful owner of the aforesaid lots;
3. Ordering the Register of Deeds of Pasig, Metro Manila to issue new titles in the name
of plaintiff-intervenor or his substituted heirs namely Blanquita dela Merced-
Macatangay, Blanquita Errea dela Merced, Luis dela Merced and Maria Olivia dela
Merced Paredes;
4. Ordering defendants GSIS and spouses Manlongat jointly and severally to pay
attorneys fees of P20,000.00 and to pay the costs.
SO ORDERED.[16]
The trial court made the following findings:
The mortgage contract signed by the Zulueta spouses of the property covered by TCT
No. 26105 in favor of GSIS (Exh. C-C-1 Merced) contained the following provisions:
Note:
The following lots which form part of TCT No. 26105 are not covered by this mortgage
contract due to sale to third parties and donation to government.
1. Lots No. 1 to 13, Block No. 1 - 6,138 sq.m.
2. Lots Nos. 1 to 11, Block No. 2 - 4,660 sq.m.
3. Lot No. 15, Block No. 3 ------ 487 sq.m.
4. Lot No. 17, Block No. 4 ------ 263 sq.m.
5. Lot No. 1, Block No. 7 -------- 402 sq.m.
6. Road Lots Nos. 1, 2, 3 & 4 -- 22,747 sq.m.
Evidently, lot numbers 1 to 11, Block 2 to include plaintiff-intervenors lots were excluded
from the mortgage. In fact, in a letter dated October 1, 1956, defendant GSIS
confirmed that portions of the subdivision such as lots Nos. 1 to 11, Block 2 x x x have
already been sold x x x. (Exh. B-1 Merced) The intent of the parties was clear to exclude
from the mortgage the properties claimed by plaintiff-intervenor, among others, where
he introduced improvements since 1955. On October 26, 1972, the spouses Zulueta
executed the corresponding deed of sale in favor of plaintiff-intervenor (Exh. C).
The contention of defendant GSIS and defendants Victor and Milagros Manlongat that
Lot Nos. 6, 7, 8 & 10 are not the lots excluded from the mortgage by the spouses Zulueta
to the GSIS cannot be given credence. Evidence reveal that lots 6, 7, 8 and 10, Block 2,
with a total area of 1,405 square meters of the Antonio Village Subdivision were
excluded from the September 25, 1956 mortgage contract executed by defendants in
favor of GSIS. (Exh. C, C-1 Merced, 9-1-95) Defendant GSIS in fact had admitted in its
answer, the letter to plaintiff acknowledging that there has been no problem with
respect to Lot 8, Block 8 of the said property. Obviously, defendant recognized the
ownership of intervenor of the mentioned lots. It is further to be noted that plan Pcs-5889
was not yet in existence when the mortgage was executed in 1956. Besides defendant
GSIS had knowledge of the possession of intervenor. While the deed of sale between
the Zuluetas and plaintiff-intervenor was never registered nor annotated in the title and
executed only after one (1) year, defendant GSIS had knowledge of the possession of
intervenor of the lots; that defendant GSIS was not acting in good faith when it
accepted the mortgage of the questioned lots. Plaintiff-intervenor in 1957 built a house
and introduced improvement and built a house of strong structure on lots 6 & 7 and with
the other lots serving as backyard and for 28 years had paid dues on the lots. [17]
Respondents appealed the decision to the Court of Appeals, where the same was
docketed as CA-G.R. CV No. 55034. On May 21, 1999, the Court of Appeals reversed
the decision of the trial court.Petitioners filed a Motion for Reconsideration which was
denied on October 4, 1999.
Hence, the instant petition for review, raising the following assignments of error:
FIRST ASSIGNMENT OF ERROR
THE COURT A QUO ACTED CONTRARY TO LAW AND JURISPRUDENCE IN TOTALLY
DISREGARDING THE ADMISSION OF DEFENDANT GSIS THAT THE LOTS IN QUESTION WERE
EXCLUDED FROM THE MORTGAGE
SECOND ASSIGNMENT OF ERROR
THE COURT A QUO ACTED CONTRARY TO LAW AND JURISPRUDENCE IN NOT RULING THAT
(A) PLAINTIFF HAS BEEN IN POSSESSION OF THE SUBJECT LOTS SINCE 1955 CONTINUOUSLY
UNTIL THE PRESENT AND (B) GSIS HAD KNOWLEDGE OF PLAINTIFFS POSSESSION
THIRD ASSIGNMENT OF ERROR
THE COURT A QUO ACTED CONTRARY TO LAW AND JURISPRUDENCE IN ITS FAILURE TO
APPRECIATE THE SIGNIFICANCE OF PLAINTIFFS CONTINUOUS OPEN AND ADVERSE
POSSESSION IN THE CONCEPT OF OWNER FOR 28 YEARS AND THE ACTUAL KNOWLEDGE
OF GSIS OF SUCH POSSESSION
FOURTH ASSIGNMENT OF ERROR
THE COURT A QUO ACTED CONTRARY TO LAW AND JURISPRUDENCE IN RULING THAT NO
JUDGMENT CAN BE RENDERED AGAINST THE SPOUSES MANLONGAT WITHOUT VIOLATING
THEIR RIGHT TO DUE PROCESS OF LAW[18]
In essence, petitioners allege that the foreclosure sale was null and void because the
mortgage executed by the parties, insofar as the properties previously sold to petitioners
were concerned, was also void from the beginning. Petitioners had been in continuous
and open possession thereof before and during the time of the mortgage, more
specifically, since 1955 continuously up to the present, and GSIS had knowledge
thereof. Furthermore, respondent GSIS admitted that the lots in questions were excluded
from the mortgage. Finally, under Presidential Decree No. 957, also known as The
Subdivision and Condominium Buyers Protective Decree, petitioners are entitled to the
issuance of their corresponding title over the lots after having completed their payments
to the subdivision owner.[19]
Petitioners aver that when the Zuluetas mortgaged their properties to GSIS on October
15, 1957, they were no longer the owners of the lots subject of this litigation, the same
having been sold to Francisco dela Merced by virtue of the contract to sell executed on
September 3, 1957. Hence, the mortgage was void from its inception and GSIS, as
mortgagee, acquired no better right notwithstanding the registration of the
mortgage. Petitioners also argued that GSIS was a mortgagee in bad faith as it had
been negligent in ascertaining and investigating the condition of the subject lots
mortgaged to it as well as the rights of petitioners who were already in possession
thereof at the time of mortgage. Furthermore, petitioners cite the judicial admission of
respondent GSIS in its answer before the trial court, wherein it recognized the rights of
ownership of Francisco dela Merced over Lot 8, Block 8 and of Eva Mendoza dela
Merced over Lot 10, Block 2 of TCT 26105.
Respondent GSIS countered that it cannot be legally presumed to have acknowledged
petitioners rights over Lot 8, Block 8 of TCT 26105. With regard to the possession of
petitioners, respondent GSIS invoked the ruling of the Court of Appeals that the mere
possession of petitioner cannot stand against the registered titles of GSIS and its buyers,
Elizabeth and Ma. Therese Manlongat. Moreover, Lot 6, Block 2 (formerly Block 4) of the
Antonio Village Subdivision was acquired by Elizabeth Manlongat in a public bidding, as
a consequence of which TCT No. PT-94007 was issued to her. Respondent GSIS also
maintained that the lots being claimed by petitioners were included in the real estate
mortgage executed by the Zuluetas in favor of GSIS; and that the inclusion of the
subject lots in the mortgage was confirmed by Manuel Ibabao, an employee of the
Acquired Assets Department of GSIS.
For their part, respondent spouses Manlongat alleged that since Francisco dela Merced
never registered the contract to sell and deed of absolute sale with the Register of
Deeds, the same cannot affect the rights of third persons such as their daughter,
Elizabeth Manlongat, who dealt in good faith with GSIS as the prior registered owner.
The petition is impressed with merit.
Petitioners rights of ownership over the properties in dispute, albeit unregistered, are
superior to the registered mortgage rights of GSIS over the same. The execution and
validity of the contract to sell dated September 3, 1957 executed by the Zulueta
spouses, as the former subdivision owner, in favor of Francisco dela Merced, are beyond
cavil. There is also no dispute that the contract to sell was entered into by the parties
before the third mortgage was constituted on October 15, 1957 by the Zuluetas in favor
of GSIS on the property covered by TCT No. 26105, which included the subject
lots. Francisco dela Merced was able to fully pay the purchase price to the vendor, who
later executed a deed of absolute sale in his favor. However, the Zuluetas defaulted on
their loans; hence, the mortgage was foreclosed and the properties were sold at public
auction to GSIS as the highest bidder.
In the case of State Investment House, Inc. v. Court of Appeals,[20] it was held that:
STATEs registered mortgage right over the property is inferior to that of respondents-
spouses unregistered right. The unrecorded sale between respondents-spouses and
SOLID is preferred for the reason that if the original owner (SOLID, in this case) had
parted with his ownership of the thing sold then he no longer had ownership and free
disposal of that thing so as to be able to mortgage it again. Registration of the
mortgage is of no moment since it is understood to be without prejudice to the better
right of third parties.
In the same vein, therefore, the registered right of GSIS as mortgagee of the property is
inferior to the unregistered right of Francisco dela Merced. The unrecorded sale
between Francisco dela Merced as the vendee of the property and the Zuluetas, the
original owners, is preferred for the same reason stated above.
Respondents cannot even assert that as mortgagee of land registered under the Torrens
system, GSIS was not required to do more than rely upon the certificate of title. As a
general rule, where there is nothing on the certificate of title to indicate any cloud or
vice in the ownership of the property, or any encumbrance thereon, the purchaser is
not required to explore further than what the Torrens Title upon its face indicates in quest
for any hidden defect or inchoate right that may subsequently defeat his right
thereto. This rule, however, admits of an exception as where the purchaser or
mortgagee has knowledge of a defect or lack of title in the vendor, or that he was
aware of sufficient facts to induce a reasonably prudent man to inquire into the status
of the property in litigation. [21]
In the case at bar, GSIS is admittedly a financing institution. In its answer to the
complaint filed with the trial court, GSIS admitted knowledge that the spouses Jose C.
Zulueta and Soledad B. Ramos owned the Antonio Subdivision when they mortgaged
the same with GSIS. In Sunshine Finance and Investment Corp. v. Intermediate
Appellate Court,[22] we held that when the purchaser or mortgagee is a financing
institution, the general rule that a purchaser or mortgagee of land is not required to look
further than what appears on the face of the title does not apply. Further:
Nevertheless, we have to deviate from the general rule because of the failure of
petitioner in this case to take the necessary precautions to ascertain if there was any
flaw in the title of the Nolascos and to examine the condition of the property they
sought to mortgage. The petitioner is an investment and financing corporation. We
presume it is experienced in its business. Ascertainment of the status and condition of
properties offered to it as security for the loans it extends must be a standard and
indispensable part of its operations. Surely it cannot simply rely on an examination of a
Torrens certificate to determine what the subject property looks like as its condition is not
apparent in the document. The land might be in a depressed area. There might be
squatters on it. It might be easily inundated. It might be an interior lot without
convenient access. These and other similar factors determine the value of the property
and so should be of practical concern to the petitioner. [23]
There is nothing in the records of this case to indicate that an ocular inspection report
was conducted by GSIS, or whether it investigated, examined and assessed the
subdivision lots when they were offered as security for the loans by the original
owners. The only inventory made by GSIS based on its documentary evidence was
prepared by its officers employed with the Acquired Assets Department, but that was
after the foreclosure sale was already conducted and not before the mortgage was
constituted over the property. The constructive knowledge of GSIS of the defect in the
title of the subject property, or lack of such knowledge due to its negligence, takes the
place of registration of the rights of petitioners.
Likewise, in Philippine National Bank v. Office of the President, [24]24 we held that ---
As between these small lot buyers and the gigantic financial institutions which the
developers deal with, it is obvious that the law --- as an instrument of social justice ---
must favor the weak. Indeed, the petitioner Bank had at its disposal vast resources with
which it could adequately protect its loan activities, and therefore is presumed to have
conducted the usual due diligence checking and ascertained (whether thru ocular
inspection or other modes of investigation) the actual status, condition, utilization and
occupancy of the property offered as collateral. It could not have been unaware that
the property had been built on by small lot buyers. On the other hand, private
respondents obviously were powerless to discover the attempt of the land developer to
hypothecate the property being sold to them. It was precisely in order to deal with this
kind of situation that P.D. 957 was enacted, its very essence and intendment being to
provide a protective mantle over helpless citizens who may fall prey to the razzmatazz
of what P.D. 957 termed unscrupulous subdivision and condominium sellers.[25]
In the case at bar, GSIS admitted in its answer that it received a letter from Francisco
dela Merced on August 27, 1981, stating that he had acquired the subject lots by virtue
of a deed of absolute sale executed in his favor by the Zulueta spouses. [26] GSIS also
admitted the fact that on October 17, 1980, its Deputy General Counsel wrote Francisco
dela Merced stating that his claim of ownership over Block 8, Lot 8, of TCT No. 26105 had
no problem; but his claim to Lots 6, 7, 10 and 11 of Block 2, of the same title, was not
very clear. [27] Clearly, therefore, GSIS had full knowledge of the claim of ownership of
dela Merced over the aforementioned lots even before their sale at public auction to
Elizabeth Manlongat.
Coming now to the last issue --- whether Elizabeth Manlongat, as purchaser of Lot 6,
Block 2 at an auction sale conducted by GSIS, had a better right than petitioners --- we
must rule in the negative. It should be borne in mind that the title of Manlongat was
derived through sale or transfer from GSIS, whose acquisition over the property
proceeded from a foreclosure sale that was null and void. Nemo potest plus juris ad
alium transferre quam ipse habet. No one can transfer a greater right to another than
he himself has. [28] In other words, the subsequent certificates of title of GSIS and of
Manlongat over the property are both void, because of the legal truism that the spring
cannot rise higher than the source.
Further, Manlongat cannot claim that she was a purchaser in good faith. The records
categorically reflect that neither Manlongat nor her predecessor-in-interest, GSIS,
possessed the property prior to or after the former bought the same at an auction
sale. In fact, at the time the lots were sold to Manlongat, petitioners were not only in
actual possession thereof, but their father, Francisco dela Merced, had already built a
house thereon. Again, a cautious and prudent purchaser would usually make an ocular
inspection of the premises, this being standard practice in the real estate
industry. Should such prospective buyer find out that the land she intends to buy is being
occupied by anybody other than the seller, who, in this case, was not in actual
possession, it would then be incumbent upon her to verify the extent of the occupants
possessory rights. The failure of a prospective buyer to take such precautionary steps
would mean negligence on her part and would thereby preclude her from claiming or
invoking the rights of a purchaser in good faith.
WHEREFORE, in view of the foregoing, the petition is GRANTED. The decision of the Court
of Appeals is REVERSED AND SET ASIDE. The decision of the Regional Trial Court of Pasig
City, Branch 160, in Civil Cases Nos. 51410 and 51470, is REINSTATED. The foreclosure sale
of Lot Nos. 6, 7, 8 and 10 of Block 2 and Lot 8 of Block 8 of the property originally
covered by TCT 26105, and the subsequent certificates of titles issued to GSIS as well as
TCT No. PT-94007 in the name of Elizabeth Manlongat, are declared NULL AND VOID. The
Register of Deeds of Pasig City is ordered to CANCEL all present certificates of title in the
name of GSIS and Elizabeth Manlongat covering the above-mentioned properties, and
to ISSUE new certificates of title over the same in the name of petitioners as co-owners
thereof. Respondents GSIS and spouses Victor and Milagros Manlongat are ORDERED to
pay, jointly and severally, attorneys fees in the increased amount of P50,000.00, and to
pay the costs.
SO ORDERED.
G.R. No. 204280, November 09, 2016
EVELYN V. RUIZ, Petitioner, v. BERNARDO F. DIMAILIG, Respondent.
DECISION
DEL CASTILLO, J.:
This Petition for Review on Certiorari assails the October 22, 2012 Decision1 of the Court
of Appeals(CA) in CA-GR. CV No. 95046 which reversed and set aside the November
26,2009 Decision2 and the March 19, 2010 Order3 of the Regional Trial Court (RTC) of
Cavite City, Branch 16 in Civil Case No. N-7573. The CA declared void the Real Estate
Mortgage (REM) constituted on the property covered by Transfer Certificate of title
(TCT) No. T-361747.
Factual Antecedents
Respondent Bernardo F. Dimailig (Bernardo) was the registered owner of a parcel of
land covered by TCT No. T-361747 located in Alapan, Imus, Cavite.4 In October 1997, he
entrusted the owner's copy of the said TCT to his brother, Jovannie, 5 who in turn gave
the title to Editha Sanggalang (Editha), a broker, for its intended sale. However, in
January 1998, the property was mortgaged to Evelyn V. Ruiz(Evelyn) as evidenced by a
Deed of REM6 without Bernardo's knowledge and consent. Hence, Bernardo instituted
this suit for annulment of the Deed of REM.7
In her Answer,8 Evelyn contended that she met Jovannie when she inspected the
subject property and assured her that Bernardo owned the property and his title thereto
was genuine. She further claimed that Jovannie mortgaged the property to her. She
also insisted that as a mortgagee in good faith and for value, the REM cannot be
annulled and that she had the right to keep the owner's copy of TCT No. T-361747 until
the loan was fully paid to her.
During pre-trial the parties arrived at the following stipulations: 9
1. That x x x it was not [Bernardo] who signed as mortgagor in the subject Deed of Real
Estate Mortgage.
2. That there was a demand letter sent to [Evelyn] x x x to cause a release of mortgage
on the subject property.
3. The x x x controversy [was referred] to the Barangay for conciliation and mediation.
[4.] That Jovannie x x x is the brother of [Bernardo].chanroblesvirtuallawlibrary
Thereafter, trial on the merits ensued.
Bernardo testified that when he went abroad on October 19, 1997, he left the owner's
copy of the TCT of the subject property to Jovannie as they intended to sell the subject
property.10 However, on January 26, 1998, a REM was executed on the subject property.
Bernardo argued that his alleged signature appearing therein was merely forged 11 as he
was still abroad at that time. When he learned in September or November 1998 that
Editha mortgaged the subject property, he personally told Evelyn that the REM was fake
and demanded the return of his title. Not heeding his request, he filed a complaint for
estafa through falsification of public document against Editha and Evelyn. The criminal
case against Evelyn was dismissed 12 while Editha was found guilty as charged.13
Jovannie also took the witness stand. He testified that sometime in December 1997,
Editha convinced him to surrender the owner's copy of TCT No. T-361747 which she
would show her buyer.14Subsequently, however, Editha informed him that she misplaced
the title. Hence, he executed in August 199815 an affidavit of loss and registered it with
the Register of Deeds (RD).16 In September 1998, Editha finally admitted that the title was
not lost but was in Evelyn's possession because of the REM. 17Upon learning this, Jovannie
inquired from Evelyn if Editha mortgaged Bernardo's property to her. Purportedly, Evelyn
confirmed said mortgage and told him that she would not return the owner's copy of
TCT No. T-361747 unless Editha pay the loan,18 Jovannie also alleged that he told Evelyn
that Bernardo's alleged signature in the REM was not genuine since he was abroad at
the time of its execution.19
On the other hand, Evelyn maintained that she was a mortgagee in good faith. She
testified that sales agents - Editha, Corazon Encarnacion, and a certain Parani, - and a
person introducing himself as ''Bernardo" mortgaged the subject property to her for
P300,000.00 payable within a period of three months. 20 She asserted that even after the
expiration of said period, "Bernardo" failed to pay the loan.21
Evelyn narrated that before accepting the mortgage of the subject property, she, the
sales agents, her aunt, and “Bernardo," visited the property. She pointed out that her
companions inspected it while she stayed in the vehicle as she was still recuperating
from an operation.22 She admitted that she neither verified from the neighborhood the
owner of the property nor approached the occupant thereof. 23
Moreover, Evelyn asserted that when the Deed of REM was executed, the person who
introduced himself as Bernardo presented a community tax certificate and his picture
as proof of identity.24 She admitted that she did not ask for any identification card from
"Bernardo."25cralawred
Contrary to the allegation in her Answer that Jovannie mortgaged the property, Evelyn
clarified that she met Jovannie for the first time when he went to her house and told her
that Bernardo could not have mortgaged the property to her as he was abroad. 26
Corazon Abella Ruiz (Corazon), the sister-in-law of Evelyn, was presented to corroborate
her testimony. Corazon averred that in January 1998, she accompanied Evelyn and
several others in inspecting the subject property. 27 The day after the inspection, Evelyn
and "Bernardo'' executed the Deed of REM in the office of a certain Atty. Ignacio;
Evelyn handed P300,000.00 to Editha, not to "Bernardo;" 28 in turn, Editha handed to
Evelyn the owner's copy of TCT No. T-361747.29
Ruling of the Regional Trial Court
On November 26, 2009, the RTC dismissed the Complaint. It held that while Bernardo
was the registered owner of the subject property, Evelyn was a mortgagee in good faith
because she was unaware that the person who represented himself as Bernardo was an
impostor. It noted that Evelyn caused the verification of the title of the property with the
RD and found the same to be free from any lien or encumbrance. Evelyn also inspected
the property and met Jovannie during such inspection. Finally, the RTC declared that
there was no showing of any circumstance that would cause Evelyn to doubt the
validity of the title or the property covered by it. In fine, Evelyn did all that was necessary
before parting with her money and entering Into the REM.
On March 19, 2010, the RTC denied Bernardo's Motion for Reconsideration. Thus,
he appealed to the CA.
Ruling of the Court of Appeals
On October 22, 2012, the CA rendered the assailed Decision reversing and setting aside
the RTC Decision. The decretal portion of the
CA Decision reads: ChanRoblesVirtualawlibrary
WHEREFORE, the appeal is GRANTED. The assailed dispositions of the RTC are REVERSED
and SET ASIDE. Tile complaint of Bernardo F. Dimailig is GRANTED. The Deed of Real
Estate Mortgage constituted on the real property covered by TCT No. T-361747 of the
Registry of Deeds for the Province of Cavite, registered in his name, is DECLARED null
and void. Evelyn V. Ruiz is ORDERED to reconvey or return to him the owner's duplicate
copy of the said title. His claims for the payment of attorney's fees and costs of suits are
DENIED. Costs against Evelyn V. Ruiz.
SO ORDERED.30
The CA held that the "innocent purchaser (mortgagor in this case) for value protected
by law is one who purchases a titled land by virtue of a deed executed by the
registered owner himself, not by a forged deed." 31 Since the Deed of REM was forged,
and the title to the subject property is still in the name of the rightful owner, and the
mortgagor is a different person who only pretended to be the owner, then Evelyn
cannot seek protection from the cloak of the principle of mortgagee in good faith. The
CA held that in this case, ''the registered owner will not personally lose his title." 32
The CA further decreed that Evelyn's claim of good faith cannot stand as she failed to
verify the real identity of the person introduced by Editha as Bernardo. It noted that the
impostor did not even exhibit any identification card to prove his identity; and, by
Evelyn's admission, she merely relied on the representation of Editha relative to the
identity of "Bernardo." It also held that Evelyn transacted only with Editha despite the
fact that the purported owner was present during the inspection of the property, and
during the execution of the REM.
In sum, the CA ruled that for being a forged instrument, the Deed of REM was a nullity,
and the owner's copy of TCT No. T-361747 must be returned to its rightful owner,
Bernardo.
Issue
Hence, Evelyn filed this Petition raising the sole assignment of error as
follows: ChanRoblesVirtualawlibrary
[T]he Court of Appeals erred in holding that petitioner is not a mortgagee in good faith
despite the presence of substantial evidence to support such conclusion of fact. 33
Petitioner’s Arguments
Petitioner insists that she is a mortgagee in good faith. She claims that she was totally
unaware of the fraudulent acts employed by Editha, Jovannie, and the impostor to
obtain a loan from her. She stresses that a person dealing with a property covered by a
certificate of title is not required to look beyond what appears on the face of the title.
Respondent's Arguments
Bernardo, on his end, contends that since the person who mortgaged the property was
a mere impostor, then Evelyn cannot claim that she was a mortgagee in good faith. This
is because a mortgage is void where the mortgagor has no title at all to the property
subject of such mortgage.
Bernardo asserts that there were circumstances that should have aroused suspicion on
the part of Evelyn relative to the mortgagor's title over the property. He specifies that
throughout the negotiation of the mortgage, Evelyn transacted only with Editha, not
with "Bernardo," despite the fact that Editha and the other real estate agents who
assisted Evelyn in the mortgage transaction were not armed with a power of attorney.
Bernardo likewise stresses that although Evelyn caused the inspection of the subject
property, she herself admitted that she did not alight from the vehicle during the
inspection, and she failed to verify the actual occupant of the property.
Our Ruling
The Petition is without merit.
As a rule, the issue of whether a person is a mortgagee in good faith is not within the
ambit of a Rule 45 Petition. The determination of presence or absence of good faith,
and of negligence factual matters, which are outside the scope of a petition for review
on certiorari.34 Nevertheless, this rule allows certain exceptions including cases where
the RTC and the CA arrived at different or conflicting factual findings,35 as in the case at
bench. As such, the Court deems it necessary to re-examine and re-evaluate the
factual findings of the CA as they differ with those of the RTC.
No valid mortgage will arise unless the mortgagor has a valid title or ownership over the
mortgaged property. By way of exception, a mortgagee can invoke that he or she
derived title even if the mortgagor's title on the property is defective, if he or she acted
in good faith. In such instance, the mortgagee must prove that no circumstance that
should have aroused her suspicion on the veracity of the mortgagor's title on the
property was disregarded.36
Such doctrine of mortgagee in good faith presupposes "that the mortgagor, who is not
the rightful owner of the property, has already succeeded in obtaining a Torrens title
over the property in his name and that, after obtaining the said title, he succeeds in
mortgaging the property to another who relies on what appears on the said title." 37 In
short, the doctrine of mortgagee in good faith assumes that the title to the subject
property had already been transferred or registered in the name of the impostor who
thereafter transacts with a mortgagee who acted in good faith. In the case at bench, it
must be emphasized that the title remained to be registered in the name of Bernardo,
the rightful and real owner, and not in the name of the impostor.
The burden of proof that one is a mortgagee in good faith and for value lies with the
person who claims such status. A mortgagee cannot simply ignore facts that should
have put a reasonable person on guard, and thereafter claim that he or she acted in
good truth under the belief that the mortgagor's title is not defective. 38 And, such good
faith entails an honest intention to refrain from taking unconscientious advantage of
another.39
In other words, in order for a mortgagee to invoke the doctrine of mortgagee in good
faith, the impostor must have succeeded in obtaining a Torrens title in his name and
thereafter in mortgaging the property. Where the mortgagor is an impostor who only
pretended to be the registered owner, and acting on such pretense, mortgaged the
property to another, the mortgagor evidently did not succeed in having the property
titled in his or her name, and the mortgagee cannot rely on such pretense as what
appears on the title is not the impostor's name but that of the registered owner. 40
In this case, Evelyn insists that she is a mortgagee in good faith and for value. Thus, she
has the burden to prove such claim and must provide necessary evidence to support
the same. Unfortunately, Evelyn failed to discharge her burden.
First, the Deed of REM was established to be a forged instrument. As aptly discussed by
the CA, Bernardo did not and could not have executed it as he was abroad at the time
of its execution, to wit: ChanRoblesVirtualawlibrary
Verily, Bernardo could not have affixed his signature on the said deed on January 26,
1998 for he left the Philippines on October 19, 1997, x x x and only returned to the
Philippines on March 21, 1998. Not only that, his signature on his Seafarer's Identification
and Record Book is remarkably different from the signature on the assailed mortgage
contract. The variance is obvious even to the untrained eye. This is further bolstered by
Evelyn's admission that Bernardo was not the one who represented himself as the
registered owner of the subject property and was not the one who signed the
questioned contract. Thus, there can be no denying the fact that the signature on the
Deed of Real Estate Mortgage was not affixed or signed by the same person. 41
In fact, during pre-trial, both parties agreed that it was not Bernardo who signed as the
mortgagor in the Deed of REM. It was only an impostor - representing himself as
Bernardo - who mortgaged the property. This impostor is not only without rightful
ownership on the mortgaged property, he also has no Torrens title in his own name
involving said property.
Simply put, for being a forged instrument, the Deed of REM is a nullity and conveys no
title.42
Second, Evelyn cannot invoke the protection given to a mortgagee in good faith. As
discussed, the title to the subject property remained registered in the name of Bernardo.
It was not transferred to the impostor's name when Evelyn transacted with the latter.
Hence, the principle of mortgagee in good faith finds no application; correspondingly,
Evelyn cannot not seek refuge therefrom.
Third, even assuming that the impostor has caused the property to be titled in his name
as if he had rightful ownership thereof, Evelyn would still not be deemed a mortgagee in
good faith. This is because Evelyn did not take the necessary steps to determine any
defect in the title of the alleged owner of the mortgaged property. She deliberately
ignored pertinent facts that should have aroused suspicion on the veracity of the title of
the mortgagor "Bernardo."43
One, while ''Bernardo" introduced himself to Evelyn as the owner of the property, he did
not present any proof of identification. To recall, he only exhibited his community tax
certificate and a picture when he introduced himself to Evelyn. “Bernardo's" failure to
sufficiently establish his identity should have aroused suspicion on the part of Evelyn
whether the person she was transacting with is the real Bernardo or a mere impostor.
She should have investigated further and verified the identity of "Bernardo" but she
failed to do so. She even admitted that she did not at all ask for any identification card
from "Bernardo."
Two, Evelyn also ignored the fact that "Bernardo" did not participate in the
negotiations/transactions leading to the execution of the Deed of REM. Notably, no
power of attorney was given to Editha who supposedly transacted in behalf of
Bernardo. Despite "Bernardo's" presence during the ocular inspection of the property
and execution of the mortgage contract, it was Editha who transacted with Evelyn. As
gathered from the testimony of Corazon, after the execution of the deed, Evelyn
handed the loan amount of P300,000.00 to Editha, not to "Bernardo," and it was Editha
who handed to Evelyn the owner's copy of TCT No. T-361747.
Three, Evelyn likewise failed to ascertain the supposed title of "Bernardo" over the
property. Evelyn admitted that during the ocular inspection, she remained in the
vehicle. She did not inquire from the subject property's occupant or from the occupants
of the surrounding properties if they knew "Bernardo" and whether or not he owned the
subject property.
Notably, the RTC misapprehended certain facts when it held that Evelyn inspected the
property and met Jovannie during the inspection. By her own account, Evelyn clarified
that she met Jovannie for the first time only when the latter visited her house to inform
her that an impostor mortgaged Bernardo's property to her.
Four, the Court observes that Evelyn hastily granted the loan and entered into the
mortgage contract. As also testified by Corazon, a day after the supposed ocular
inspection on the property, Evelyn and "Bernardo" executed the Deed of REM even
without Evelyn verifying the identity of the property's occupant as well as the right of the
mortgagor, if any, over the same. Indeed, where the mortgagee acted with haste in
granting the loan, without first determining the ownership of the property being
mortgaged, the mortgagee cannot be considered as an innocent mortgagee in good
faith.44
Thus, considering that the mortgage contract was forged as it was entered into by
Evelyn with an impostor, the registered owner of the property, Bernardo,
correspondingly did not lose his title thereon, and Evelyn did not acquire any right or title
on the property and cannot invoke that she is a mortgagee in good faith and for
value.45
WHEREFORE, the Petition is DENIED. Accordingly, the October 22, 2012 Decision of the
Court of Appeals in CA-G.R. CV No. 95046 is AFFIRMED.
SO ORDERED.
G.R. No. 169890 March 12, 2007
FELICIANO ESGUERRA, CANUTO ESGUERRA, JUSTA ESGUERRA, ANGEL ESGUERRA, FIDELA
ESGUERRA, CLARA ESGUERRA, and PEDRO ESGUERRA, Petitioners,
vs.
VIRGINIA TRINIDAD, PRIMITIVA TRINIDAD, and THE REGISTER OF DEEDS OF MEYCAUAYAN,
BULACAN, Respondents.
DECISION
CARPIO MORALES, J.:
Involved in the present controversy are two parcels of land located in Camalig,
Meycauayan, Bulacan.
Felipe Esguerra and Praxedes de Vera (Esguerra spouses) were the owners of several
parcels of land in Camalig, Meycauayan, Bulacan – among them a 35,284-square
meter parcel of land covered by Tax Declaration No. 10374, half of which (17,642
square meters) they sold to their grandchildren, herein petitioners Feliciano, Canuto,
Justa, Angel, Fidela, Clara and Pedro, all surnamed Esguerra; and a 23,989-square
meter
parcel of land covered by Tax Declaration No. 12080, 23,489 square meters of which
they also sold to petitioners, and the remaining 500 square meters they sold to their
other grandchildren, the brothers Eulalio and Julian Trinidad (Trinidad brothers).
Also sold to the Trinidad brothers were a 7,048-square meter parcel of land covered by
Tax Declaration No. 9059, a 4,618-square meter parcel of land covered by Tax
Declaration No. 12081, and a 768-square meter parcel of land covered by Tax
Declaration No. 13989.
The Esguerra spouses executed the necessary Deed of Sale in favor of petitioners on
August 11, 1937,1 and that in favor of the Trinidad brothers on August 17, 1937. 2 Both
documents were executed before notary public Maximo Abaño.
Eulalio Trinidad later sold his share of the land to his daughters-respondents herein, via a
notarized Kasulatan ng Bilihang Tuluyan ng Lupa 3 dated October 13, 1965. A portion of
the land consisting of 1,693 square meters was later assigned Lot No. 3593 during a
cadastral survey conducted in the late 1960s.
On respondents’ application for registration of title, the then Court of First Instance (CFI)
of Bulacan, by Decision4 of February 20, 1967, awarded Lot No. 3593 in their favor in
Land Registration Case No. N-323-V. Pursuant to the Decision, the Land Registration
Commission (LRC, now the Land Registration Authority [LRA]) issued Decree No. N-
114039 by virtue of which the Register of Deeds of Bulacan issued OCT No. 0-36315 in the
name of respondents.
Meanwhile, under a notarized Bilihan ng Lupa6 dated November 10, 1958, petitioners
sold to respondents’ parents Eulalio Trinidad and Damiana Rodeadilla (Trinidad spouses)
a portion of about 5,000 square meters of the 23,489-square meter of land which they
previously acquired from the Esguerra spouses.7
During the same cadastral survey conducted in the late 1960s, it was discovered that
the about 5,000-square meter portion of petitioners’ parcel of land sold to the Trinidad
spouses which was assigned Lot No. 3591 actually measured 6,268 square meters.
In a subsequent application for registration of title over Lot No. 3591, docketed as Land
Registration Case No. N-335-V, the CFI, by Decision8 of August 21, 1972, awarded Lot No.
3591 in favor of Eulalio Trinidad. Pursuant to the Decision, the LRC issued Decree No. N-
149491 by virtue of which the Register of Deeds of Bulacan issued OCT No. 0-64989 in the
name of Trinidad.
Upon the death of the Trinidad spouses, Lot No. 3591 covered by OCT No. 0-6498 was
transmitted to respondents by succession.
Petitioners, alleging that upon verification with the LRA they discovered the issuance of
the above-stated two OCTs, filed on August 29, 1994 before the Regional Trial Court
(RTC) of Malolos, Bulacan two separate complaints for their nullification on the ground
that they were procured through fraud or misrepresentation.
In the first complaint, docketed as Civil Case No. 737-M-94, petitioners sought the
cancellation of OCT No. 0-3631.
In the other complaint, docketed as Civil Case No. 738-M-94, petitioners sought the
cancellation of OCT No. 0-6498.
Both cases were consolidated and tried before Branch 79 of the RTC which, after trial,
dismissed the cases by Joint Decision10 of May 15, 1997.
Their appeal with the Court of Appeals having been dismissed by Decision of February
28, 2005, a reconsideration of which was, by Resolution of October 3, 2005, 11 denied,
petitioners filed the instant petition.
Petitioners fault the appellate court
1. . . . in misappreciating the fact that the act of the respondent Eulalio Trinidad in
acquiring the property from Felipe Esguerra constituted fraud.
2. . . . in the [i]nterpretation and application of the provisions of Article 1542 of the New
Civil Code.
3. . . . in ruling that there is prescription, res judicata, and violation of the non-[forum]
shopping.12
In their Comment, respondents assailed the petition as lacking verification and
certification against forum shopping and failing to attach to it an affidavit of service
and material portions of the record in support thereof. Petitioners counter that the
procedural deficiencies have been mooted by the filing of a Compliance.
A check of the rollo shows that attached to the petition are an Affidavit of Service
dated November 21, 2005 and the appellate court’s Decision of February 28, 2005 and
Resolution of October 3, 2005; and that on January 16, 2006 or almost three months
following the last day to file the petition, petitioners submitted, not at their own
instance,13 a Verification and Sworn Certification on Non-Forum Shopping signed by
petitioner Pedro Esguerra who cited honest and excusable mistake behind the omission
to submit the same.
This Court has strictly enforced the requirement of verification and certification,
obedience to which and to other procedural rules is needed if fair results are to be
expected therefrom.14 While exceptional cases have been considered to correct
patent injustice concomitant to a liberal application of the rules of procedure, there
should be an effort on the part of the party invoking liberality to advance a reasonable
or meritorious explanation for his failure to comply with the rules. 15 In petitioners’ case, no
such explanation has been advanced.
With regard to petitioners’ failure to attach material portions of the record in support of
the petition, this requirement is not a mere technicality but an essential requisite for the
determination of prima facie basis for giving due course to the petition.16 As a rule, a
petition which lacks copies of essential pleadings and portions of the case record may
be dismissed. Much discretion is left to the reviewing court, however, to determine the
necessity for such copies as the exact nature of the pleadings and portions of the case
record which must accompany a petition is not specified. 17
At all events, technicality aside, the petition must be denied.
It is settled that fraud is a question of fact and the circumstances constituting the same
must be alleged and proved in the court below.18
In the present cases, as did the trial court, the appellate court found no fraud in
respondents’ acquisition and registration of the land, viz:
. . . Appellant Pedro Esguerra even testified that he does not know how appellees were
able to secure a title over the lot in question and that they never sold Lot No. 3593 to
Virginia Trinidad since it is part of the whole lot of 23,489 square meters. The said
testimony is a mere conclusion on the part of appellants. On the other hand, the
evidence shows that appellees acquired title over the subject property by virtue of a
deed of sale executed by their father Eulalio Trinidad in their favor.
xxxx
[T]hey failed to establish that appellees’ acquisition of the certificate of title is
fraudulent. In fact, in their two complaints, appellants acknowledged that appellees
observed and took the initial procedural steps in the registration of the land, thus ruling
out fraud in the acquisition of the certificate of title. . . .19
Factual findings of the trial court, when affirmed by the Court of Appeals, are final,
conclusive and binding on this Court,20 which is not a trier of facts,21 hence, bereft of
function under Rule 45 to examine and weigh the probative value of the evidence
presented,22 its jurisdiction being limited only to the review and revision of errors of
law.23Albeit there are exceptions24 to this rule, the cases at bar do not fall thereunder,
there being no showing that the trial and appellate courts overlooked matters which, if
considered, would alter their outcome.
Under the Torrens System, an OCT enjoys a presumption of validity, which correlatively
carries a strong presumption that the provisions of the law governing the registration of
land which led to its issuance have been duly followed. 25 Fraud being a serious charge,
it must be supported by clear and convincing proof.26 Petitioners failed to discharge the
burden of proof, however.
On the questioned interpretation and application by the appellate court of Article 1542
of the Civil Code reading:
In the sale of real estate, made for a lump sum and not at the rate of a certain sum for a
unit of measure or number, there shall be no increase or decrease of the price,
although there be a greater or less areas or number than that stated in the contract.
The same rule shall be applied when two or more immovables are sold for a single price;
but if, besides mentioning the boundaries, which is indispensable in every conveyance
of real estate, its area or number should be designated in the contract, the vendor shall
be bound to deliver all that is included within said boundaries, even when it exceeds
the area or number specified in the contract; and, should he not be able to do so, he
shall suffer a reduction in the price, in proportion to what is lacking in the area or
number, unless the contract is rescinded because the vendee does not accede to the
failure to deliver what has been stipulated. (Emphasis and underscoring supplied),
while petitioners admittedly sold Lot No. 3591 to the Trinidad spouses, they contend that
what they sold were only 5,000 square meters and not 6,268 square meters, and thus
claim the excess of 1,268 square meters.
In sales involving real estate, the parties may choose between two types of pricing
agreement: a unit price contract wherein the purchase price is determined by way of
reference to a stated rate per unit area (e.g., ₱1,000 per square meter), or a lump sum
contract which states a full purchase price for an immovable the area of which may be
declared based on an estimate or where both the area and boundaries are stated
(e.g., ₱1 million for 1,000 square meters, etc.). In Rudolf Lietz, Inc. v. Court of
Appeals,27 the Court discussed the distinction:
. . . In a unit price contract, the statement of area of immovable is not conclusive and
the price may be reduced or increased depending on the area actually delivered. If
the vendor delivers less than the area agreed upon, the vendee may oblige the vendor
to deliver all that may be stated in the contract or demand for the proportionate
reduction of the purchase price if delivery is not possible. If the vendor delivers more
than the area stated in the contract, the vendee has the option to accept only the
amount agreed upon or to accept the whole area, provided he pays for the additional
area at the contract rate.
xxxx
In the case where the area of the immovable is stated in the contract based on an
estimate, the actual area delivered may not measure up exactly with the area stated in
the contract. According to Article 1542 of the Civil Code, in the sale of real estate,
made for a lump sum and not at the rate of a certain sum for a unit of measure or
number, there shall be no increase or decrease of the price, although there be a
greater or less areas or number than that stated in the contract. . . .
xxxx
Where both the area and the boundaries of the immovable are declared, the area
covered within the boundaries of the immovable prevails over the stated area. In cases
of conflict between areas and boundaries, it is the latter which should prevail. What
really defines a piece of ground is not the area, calculated with more or less certainty,
mentioned in its description, but the boundaries therein laid down, as enclosing the land
and indicating its limits. In a contract of sale of land in a mass, it is well established that
the specific boundaries stated in the contract must control over any statement with
respect to the area contained within its boundaries. It is not of vital consequence that a
deed or contract of sale of land should disclose the area with mathematical accuracy.
It is sufficient if its extent is objectively indicated with sufficient precision to enable one to
identify it. An error as to the superficial area is immaterial. Thus, the obligation of the
vendor is to deliver everything within the boundaries, inasmuch as it is the entirety
thereof that distinguishes the determinate object. 28 (Emphasis and underscoring
supplied)
The courts below correctly characterized the sale of Lot No. 3591 as one involving a
lump sum contract. The Bilihan ng Lupa shows that the parties agreed on the purchase
price of ₱1,000.00 on a predetermined, albeit unsurveyed, area of 5,000 square meters
and not on a particular rate per unit area. As noted by the Court of Appeals, the
identity of the realty was sufficiently described as riceland:
It is clear from the afore-quoted Bilihan ng Lupa that what appellants sold to Eulalio was
the "bahaging palayan." Though measured as 5,000 square meters, more or less, such
measurement is only an approximation, and not an exact measurement. Moreover, we
take note of the fact that the said deed of sale mentioned the boundaries covering the
whole area of 33,489 square meters, including the "bahaging palayan." Had appellants
intended to sell only a portion of the "bahaging palayan," they could have stated the
specific area in the deed of sale and not the entire "bahaging palayan" . . . .29
In fine, under Article 1542, what is controlling is the entire land included within the
boundaries, regardless of whether the real area should be greater or smaller than that
recited in the deed. This is particularly true since the area of the land in OCT No. 0-6498
was described in the deed as "humigit kumulang," that is, more or less.30
A caveat is in order, however. The use of "more or less" or similar words in designating
quantity covers only a reasonable excess or deficiency. A vendee of land sold in gross
or with the description "more or less" with reference to its area does not thereby ipso
facto take all risk of quantity in the land.31
Numerical data are not of course the sole gauge of unreasonableness of the excess or
deficiency in area. Courts must consider a host of other factors. In one case,32 the Court
found substantial discrepancy in area due to contemporaneous circumstances. Citing
change in the physical nature of the property, it was therein established that the excess
area at the southern portion was a product of reclamation, which explained why the
land’s technical description in the deed of sale indicated the seashore as its southern
boundary, hence, the inclusion of the reclaimed area was declared unreasonable.
In OCT No. 0-6498, the increase by a fourth of a fraction of the area indicated in the
deed of sale cannot be considered as an unreasonable excess. Most importantly, the
circumstances attendant to the inclusion of the excess area bare nothing atypical or
significant to hint at unreasonableness. It must be noted that the land was not yet
technically surveyed at the time of the sale. As vendors who themselves executed
the Bilihan ng Lupa, petitioners may rightly be presumed to have acquired a good
estimate of the value and area of the bahaging palayan.
As for the last assigned error, the appellate court, in finding that the complaints were
time-barred, noted that when the complaints were filed in 1994, more than 27 years had
elapsed from the issuance of OCT No. 0-3631 and more than 20 years from the issuance
of OCT No. 0-6498. The prescriptive period of one (1) year had thus set in.1awphi1.nét
Petitioners’ reliance on Agne v. Director of Lands33 is misplaced since the cancellation
of title was predicated not on the ground of fraud but on want of jurisdiction. Even
assuming that petitioners’ actions are in the nature of a suit for quieting of title, which is
imprescriptible, the actions still necessarily fail since petitioners failed to establish the
existence of fraud.
A word on Republic Act No. 716034 which was raised by petitioners in their petition. It
expressly requires the parties to undergo a conciliation process under the Katarungang
Pambarangay, as a precondition to filing a complaint in court, 35 non-compliance with
this condition precedent does not prevent a court of competent jurisdiction from
exercising its power of adjudication over a case unless the defendants object thereto.
The objection should be seasonably made before the court first taking cognizance of
the complaint, and must be raised in the Answer or in such other pleading allowed
under the Rules of Court.36
While petitioners admittedly failed to comply with the requirement of barangay
conciliation, they assert that respondents waived such objection when they failed to
raise it in their Answer. Contrary to petitioners’ claim, however, the records reveal that
respondents raised their objection in their Amended Answers 37 filed in both cases.
IN FINE, it is a fundamental principle in land registration that a certificate of title serves as
evidence of an indefeasible and incontrovertible title to the property in favor of the
person whose name appears therein. Such indefeasibility commences after the lapse or
expiration of one year from the date of entry of the decree of registration when all
persons are considered to have a constructive notice of the title to the property. After
the lapse of one year, therefore, title to the property can no longer be contested. This
system was so effected in order to quiet title to land.38
WHEREFORE, the petition is DENIED. The assailed Decision and Resolution of the Court of
Appeals are AFFIRMED.
Costs against petitioners.
SO ORDERED.
G.R. No. 148225 March 3, 2010
CARMEN DEL PRADO, Petitioner,
vs.
SPOUSES ANTONIO L. CABALLERO and LEONARDA CABALLERO, Respondents.
DECISION
NACHURA, J.:
This is a petition for review on certiorari of the decision 1 of the Court of Appeals (CA)
dated September 26, 2000 and its resolution denying the motion for reconsideration
thereof.
The facts are as follows:
In a judgment rendered on February 1, 1985 in Cadastral Case No. N-6 (LRC Rec. No. N-
611), Judge Juan Y. Reyes of the Regional Trial Court (RTC) of Cebu City, Branch 14,
adjudicated in favor of Spouses Antonio L. Caballero and Leonarda B. Caballero
several parcels of land situated in Guba, Cebu City, one of which was Cadastral Lot No.
11909, the subject of this controversy.2 On May 21, 1987, Antonio Caballero moved for
the issuance of the final decree of registration for their lots. 3 Consequently, on May 25,
1987, the same court, through then Presiding Judge Renato C. Dacudao, ordered the
National Land Titles and Deeds Registration Administration to issue the decree of
registration and the corresponding titles of the lots in favor of the Caballeros.4
On June 11, 1990, respondents sold to petitioner, Carmen del Prado, Lot No. 11909 on
the basis of the tax declaration covering the property. The pertinent portion of the deed
of sale reads as follows:
That we, Spouses ANTONIO L. CABALLERO and LEONARDA B. CABALLERO, Filipinos, both
of legal age and residents of Talamban, Cebu City, Philippines, for and in consideration
of the sum of FORTY THOUSAND PESOS (₱40,000.00), Philippine Currency, paid by
CARMEN DEL PRADO, Filipino, of legal age, single and a resident of Sikatuna St., Cebu
City, Philippines, the receipt of which is full is hereby acknowledged, do by these
presents SELL, CEDE, TRANSFER, ASSIGN & CONVEY unto the said CARMEN DEL PRADO,
her heirs, assigns and/or successors-in-interest, one (1) unregistered parcel of land,
situated at Guba, Cebu City, Philippines, and more particularly described and
bounded, as follows:
"A parcel of land known as Cad. Lot No. 11909, bounded as follows:
North : Lot 11903
East : Lot 11908
West : Lot 11910
South : Lot 11858 & 11912
containing an area of 4,000 square meters, more or less, covered by Tax Dec. No. 00787
of the Cebu City Assessor’s Office, Cebu City." of which parcel of land we are the
absolute and lawful owners.
Original Certificate of Title (OCT) No. 1305, covering Lot No. 11909, was issued only on
November 15, 1990, and entered in the "Registration Book" of the City of Cebu on
December 19, 1990.5 Therein, the technical description of Lot No. 11909 states that said
lot measures about 14,457 square meters, more or less. 6
On March 20, 1991, petitioner filed in the same cadastral proceedings a "Petition for
Registration of Document Under Presidential Decree (P.D.) 1529" 7 in order that a
certificate of title be issued in her name, covering the whole Lot No. 11909. In the
petition, petitioner alleged that the tenor of the instrument of sale indicated that the
sale was for a lump sum or cuerpo cierto, in which case, the vendor was bound to
deliver all that was included within said boundaries even when it exceeded the area
specified in the contract. Respondents opposed, on the main ground that only 4,000 sq
m of Lot No. 11909 was sold to petitioner. They claimed that the sale was not for a
cuerpo cierto. They moved for the outright dismissal of the petition on grounds of
prescription and lack of jurisdiction.
After trial on the merits, the court found that petitioner had established a clear and
positive right to Lot No. 11909. The intended sale between the parties was for a lump
sum, since there was no evidence presented that the property was sold for a price per
unit. It was apparent that the subject matter of the sale was the parcel of land, known
as Cadastral Lot No. 11909, and not only a portion thereof. 8
Thus, on August 2, 1993, the court a quo rendered its decision with the following
dispositive portion:
WHEREFORE, premises considered, the petition is hereby granted and judgment is
hereby rendered in favor of herein petitioner. The Register of Deeds of the City of Cebu
is hereby ordered and directed to effect the registration in his office of the Deed of
Absolute Sale between Spouses Antonio Caballero and Leonarda Caballero and
Petitioner, Carmen del Prado dated June 11, 1990 covering Lot No. 11909 after
payment of all fees prescribed by law. Additionally, the Register of Deeds of the City of
Cebu is hereby ordered to cancel Original Certificate No. 1305 in the name of Antonio
Caballero and Leonarda Caballero and the Transfer Certificate of Title be issued in the
name of Petitioner Carmen del Prado covering the entire parcel of land known as
Cadastral Lot No. 11909.9
An appeal was duly filed. On September 26, 2000, the CA promulgated the assailed
decision, reversing and setting aside the decision of the RTC.
The CA no longer touched on the character of the sale, because it found that petitioner
availed herself of an improper remedy. The "petition for registration of document" is not
one of the remedies provided under P.D. No. 1529, after the original registration has
been effected. Thus, the CA ruled that the lower court committed an error when it
assumed jurisdiction over the petition, which prayed for a remedy not sanctioned under
the Property Registration Decree. Accordingly, the CA disposed, as follows:
IN VIEW OF ALL THE FOREGOING, the appealed decision is REVERSED and SET ASIDE and
a new one entered dismissing the petition for lack of jurisdiction. No pronouncement as
to costs.10
Aggrieved, petitioner filed the instant petition, raising the following issues:
I. WHETHER OR NOT THE COURT OF APPEALS COMMITTED GRAVE ERROR IN MAKING
FINDINGS OF FACT CONTRARY TO THAT OF THE TRIAL COURT[;]
II. WHETHER OR NOT THE COURT OF APPEALS COMMITTED GRAVE ERROR IN FAILING TO
RULE THAT THE SALE OF THE LOT IS FOR A LUMP SUM OR CUERPO CIERTO[;]
III. WHETHER OR NOT THE COURT A QUO HAS JURISDICTION OVER THE PETITION FOR
REGISTRATION OF THE DEED OF ABSOLUTE SALE DATED 11 JUNE 1990 EXECUTED BETWEEN
HEREIN PETITIONER AND RESPONDENTS[.] 11
The core issue in this case is whether or not the sale of the land was for a lump sum or
not.
Petitioner asserts that the plain language of the Deed of Sale shows that it is a sale of a
real estate for a lump sum, governed under Article 1542 of the Civil Code. 12 In the
contract, it was stated that the land contains an area of 4,000 sq m more or less,
bounded on the North by Lot No. 11903, on the East by Lot No. 11908, on the South by
Lot Nos. 11858 & 11912, and on the West by Lot No. 11910. When the OCT was issued,
the area of Lot No. 11909 was declared to be 14,475 sq m, with an excess of 10,475 sq
m. In accordance with Article 1542, respondents are, therefore, duty-bound to deliver
the whole area within the boundaries stated, without any corresponding increase in the
price. Thus, petitioner concludes that she is entitled to have the certificate of title,
covering the whole Lot No. 11909, which was originally issued in the names of
respondents, transferred to her name.
We do not agree.
In Esguerra v. Trinidad,13 the Court had occasion to discuss the matter of sales involving
real estates. The Court’s pronouncement is quite instructive:
In sales involving real estate, the parties may choose between two types of pricing
agreement: a unit price contract wherein the purchase price is determined by way of
reference to a stated rate per unit area (e.g., ₱1,000 per square meter), or a lump sum
contract which states a full purchase price for an immovable the area of which may be
declared based on the estimate or where both the area and boundaries are stated
(e.g., ₱1 million for 1,000 square meters, etc.). In Rudolf Lietz, Inc. v. Court of Appeals
(478 SCRA 451), the Court discussed the distinction:
"…In a unit price contract, the statement of area of immovable is not conclusive and
the price may be reduced or increased depending on the area actually delivered. If
the vendor delivers less than the area agreed upon, the vendee may oblige the vendor
to deliver all that may be stated in the contract or demand for the proportionate
reduction of the purchase price if delivery is not possible. If the vendor delivers more
than the area stated in the contract, the vendee has the option to accept only the
amount agreed upon or to accept the whole area, provided he pays for the additional
area at the contract rate.
xxxx
In the case where the area of an immovable is stated in the contract based on an
estimate, the actual area delivered may not measure up exactly with the area stated in
the contract. According to Article 1542 of the Civil Code, in the sale of real estate,
made for a lump sum and not at the rate of a certain sum for a unit of measure or
number, there shall be no increase or decrease of the price, although there be a
greater or less areas or number than that stated in the contract. . . .
xxxx
Where both the area and the boundaries of the immovable are declared, the area
covered within the boundaries of the immovable prevails over the stated area. In cases
of conflict between areas and boundaries, it is the latter which should prevail. What
really defines a piece of ground is not the area, calculated with more or less certainty,
mentioned in its description, but the boundaries therein laid down, as enclosing the land
and indicating its limits. In a contract of sale of land in a mass, it is well established that
the specific boundaries stated in the contract must control over any statement with
respect to the area contained within its boundaries. It is not of vital consequence that a
deed or contract of sale of land should disclose the area with mathematical accuracy.
It is sufficient if its extent is objectively indicated with sufficient precision to enable one to
identify it. An error as to the superficial area is immaterial. Thus, the obligation of the
vendor is to deliver everything within the boundaries, inasmuch as it is the entirety
thereof that distinguishes the determinate object.14
The Court, however, clarified that the rule laid down in Article 1542 is not hard and fast
and admits of an exception. It held:
A caveat is in order, however. The use of "more or less" or similar words in designating
quantity covers only a reasonable excess or deficiency. A vendee of land sold in gross
or with the description "more or less" with reference to its area does not thereby ipso
facto take all risk of quantity in the land..
Numerical data are not of course the sole gauge of unreasonableness of the excess or
deficiency in area. Courts must consider a host of other factors. In one case (see Roble
v. Arbasa, 414 Phil. 343 [2001]), the Court found substantial discrepancy in area due to
contemporaneous circumstances. Citing change in the physical nature of the property,
it was therein established that the excess area at the southern portion was a product of
reclamation, which explained why the land’s technical description in the deed of sale
indicated the seashore as its southern boundary, hence, the inclusion of the reclaimed
area was declared unreasonable.15
In the instant case, the deed of sale is not one of a unit price contract. The parties
agreed on the purchase price of ₱40,000.00 for a predetermined area of 4,000 sq m,
more or less, bounded on the North by Lot No. 11903, on the East by Lot No. 11908, on
the South by Lot Nos. 11858 & 11912, and on the West by Lot No. 11910. In a contract of
sale of land in a mass, the specific boundaries stated in the contract must control over
any other statement, with respect to the area contained within its
boundaries.161avvphi1
Black’s Law Dictionary17 defines the phrase "more or less" to mean:
About; substantially; or approximately; implying that both parties assume the risk of any
ordinary discrepancy. The words are intended to cover slight or unimportant
inaccuracies in quantity, Carter v. Finch, 186 Ark. 954, 57 S.W.2d 408; and are ordinarily
to be interpreted as taking care of unsubstantial differences or differences of small
importance compared to the whole number of items transferred.
Clearly, the discrepancy of 10,475 sq m cannot be considered a slight difference in
quantity. The difference in the area is obviously sizeable and too substantial to be
overlooked. It is not a reasonable excess or deficiency that should be deemed included
in the deed of sale.
We take exception to the avowed rule that this Court is not a trier of facts. After an
assiduous scrutiny of the records, we lend credence to respondents’ claim that they
intended to sell only 4,000 sq m of the whole Lot No. 11909, contrary to the findings of
the lower court. The records reveal that when the parties made an o cular inspection,
petitioner specifically pointed to that portion of the lot, which she preferred to
purchase, since there were mango trees planted and a deep well thereon. After the
sale, respondents delivered and segregated the area of 4,000 sq m in favor of petitioner
by fencing off the area of 10,475 sq m belonging to them. 18
Contracts are the law between the contracting parties. Sale, by its very nature, is a
consensual contract, because it is perfected by mere consent. The essential elements of
a contract of sale are the following: (a) consent or meeting of the minds, that is,
consent to transfer ownership in exchange for the price; (b) determinate subject matter;
and (c) price certain in money or its equivalent. All these elements are present in the
instant case.19
More importantly, we find no reversible error in the decision of the CA. Petitioner’s
recourse, by filing the petition for registration in the same cadastral case, was improper.
It is a fundamental principle in land registration that a certificate of title serves as
evidence of an indefeasible and incontrovertible title to the property in favor of the
person whose name appears therein. Such indefeasibility commences after one year
from the date of entry of the decree of registration. 20 Inasmuch as the petition for
registration of document did not interrupt the running of the period to file the
appropriate petition for review and considering that the prescribed one-year period
had long since expired, the decree of registration, as well as the certificate of title issued
in favor of respondents, had become incontrovertible. 21
WHEREFORE, the petition is DENIED.
SO ORDERED.
THIRD DIVISION
 G.R. No. 170540
Present:
EUFEMIA BALATICO VDA. DE AGATEP,
QUISUMBING,** J.,
Petitioner,
CARPIO, J., Chairperson,
CHICO-NAZARIO,
PERALTA, and
- versus -
ABAD,*** JJ.
ROBERTA* L. RODRIGUEZ and NATALIA AGUINALDO VDA.
DE LIM, Promulgated:
Respondents. October 28, 2009
x---------------------------------------------------x
DECISION
PERALTA, J.
Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court
seeking the reversal and setting aside of the Decision [1] of the Court of Appeals (CA)
dated September 9, 2005 in CA-G.R. CV No. 83163 which affirmed the May 12, 2004
Decision of the Regional Trial Court (RTC) of Aparri, Cagayan, Branch 8, in Civil Case No.
08-298. Petitioner also assails the CA Resolution [2] dated November 16, 2005 denying her
motion for reconsideration.
The factual and procedural antecedents of the case are as follows:
The present case arose from a dispute involving a parcel of land located at
Zinundungan, Lasam, Cagayan with an area of 1,377 square meters and covered by
Transfer Certificate of Title (TCT) No. T-10759 of the Register of Deeds of
the Province of Cagayan.[3]
The subject property was previously owned by herein respondent Natalia Aguinaldo
Vda. de Lim. On July 18, 1975, Lim mortgaged the lot to the Philippine National Bank
(PNB), Tuguegarao Branch, to secure a loan of P30,000.00 which she obtained from the
said bank. The mortgage contract was duly annotated on TCT No. T-10759. Lim was not
able to pay her loan prompting PNB to foreclose the property. On April 13, 1983, the
subject parcel of land was sold at public auction to PNB as the highest bidder. [4] Lim
failed to redeem the property. After the expiration of the one-year redemption period
allowed by law, PNB consolidated its ownership over the disputed land. [5] As a
consequence, TCT No. T-10759 in the name of Lim was canceled and a new certificate
of title (TCT No. T-65894) was issued in the name of PNB on November 8, 1985.[6]
Meanwhile, on August 18, 1976, while the mortgage was still in effect, Lim sold the
subject property to herein petitioner's husband, Isaac Agatep (Agatep), for a sum
of P18,000.00. [7] However, the sale was not registered. Neither did Lim deliver the title to
petitioner or her husband. Nonetheless, Agatep took possession of the same, fenced it
with barbed wire and introduced improvements thereon. Subsequently, Agatep died in
1978. Despite his death, his heirs, including herein petitioner, continued to possess the
property.
In July 1992, the subject lot was included among PNB's acquired assets for sale. Later on,
an invitation to bid was duly published. On April 20, 1993, the disputed parcel of land
was sold to herein respondent Roberta L. Rodriguez (Rodriguez), who is the daughter of
respondent Lim.[8] Subsequently, TCT No. T-65894, in the name of PNB, was canceled
and a new title (TCT No. T-89400) was issued in the name of Rodriguez. [9]
On January 27, 1995, herein petitioner filed a Complaint [10] for reconveyance and/or
damages with the RTC of Aparri, Cagayan against herein respondents.
Later, the complaint was amended to implead PNB as a party-defendant. [11]
On January 20, 2000, the RTC dismissed the amended complaint for failure of herein
petitioner (then plaintiff) to file her Pre-Trial Brief.[12] Petitioner filed a motion for
reconsideration but the RTC denied it. Thereafter, trial ensued.
On May 12, 2004, the RTC rendered judgment in favor of herein respondents. [13] The
dispositive portion of the Decision reads as follows:
WHEREFORE, the Court hereby renders judgment to wit:
1. Dismiss the instant complaint for reconveyance for lack of merit;
2. Sustain the legality of TCT No. 10559 [14] in the name of defendant Roberta Rodriguez;
and
3. Award actual damages in favor of plaintiff Eufemia Balatico Vda. de Agatep against
defendant Natalia Aguinaldo Vda. de Lim in the amount of Php18,000.00 with legal
interest to be computed from the filing of the instant case up to the full completion of its
payment.
SO DECIDED.[15]
In awarding damages in favor of herein petitioner, the RTC ruled that Lim enriched
herself at the expense of petitioner and her husband by benefiting from the proceeds of
the sale but failing to deliver the object of such sale. Hence, on grounds of justice and
equity, petitioner should be awarded an adequate compensation for the value of the
loss suffered.
Herein petitioner filed an appeal with the CA contending that the RTC erred in not
considering the merit of the evidence and arguments proven and submitted by
petitioner on the issues defined and agreed upon by the parties. Petitioner also averred
that the RTC erred in deciding the case on issues different from those defined and
agreed upon by the parties during the pre-trial conference and that the trial court
further erred in dismissing the amended complaint.
On September 9, 2005, the CA rendered its Decision dismissing herein petitioner's appeal
for lack of merit and affirming the assailed Decision of the RTC.
Petitioner filed a motion for reconsideration, but the CA denied it in its Resolution
dated November 16, 2005.
Hence, the present petition with the following assignment of errors:
IV.1. IN AFFIRMING THE DECISION OF THE TRIAL COURT IN DISMISSING THE AMENDED
COMPLAINT AGAINST THE PNB, THE APPELLATE COURT COMMITTED A REVERSIBLE ERROR;
IV.2. IN HOLDING THAT NOTWITHSTANDING THE DISMISSAL OF THE AMENDED COMPLAINT
AS AGAINST PNB, THE TRIAL COURT IN ITS DECISION NONETHELESS FULLY PASSED UPON
THE MERITS OF APPELLANT'S CAUSE OF ACTION AGAINST THE SAID MORTGAGEE BANK,
THE APPELLATE COURT COMMITTED A REVERSIBLE ERROR;
IV.3. AS A NECESSARY CONSEQUENCE OF THE ERROR IV.2, THE RULING OF THE APPELLATE
COURT THAT PNB IS A MORTGAGEE, BUYER AND LATER SELLER IN GOOD FAITH, IS A
REVERSIBLE ERROR;
IV.4. THE DECISION, ANNEX A, ERRED IN REJECTING PETITIONER'S ARGUMENTS THAT PNB
DID NOT ACQUIRE OWNERSHIP OVER THE PROPERTY IN QUESTION;
IV.5. THE DECISION, ANNEX A, ERRED IN RULING THAT PETITIONER'S CONTENTION THAT THE
TRIAL COURT DECIDED THE CASE UPON SUCH ISSUES DIFFERENT FROM THOSE AGREED
UPON DURING THE PRE-TRIAL CONFERENCE DESERVES SCANT CONSIDERATION; AND
IV.6. THE DECISION, ANNEX A, ERRED IN RULING THAT PETITIONER IS NOT ENTITLED TO HER
CAUSE OF ACTION OF RECONVEYANCE.[16]
In her first assigned error, petitioner contends that Section 6, Rule 18 of the Rules of Court
does not require another pre-trial, as well as the filing of another pre-trial brief, when the
complaint is amended to implead another defendant.
The Court does not agree.
In Tiu v. Middleton,[17] the Court, giving emphasis on the importance of a pre-trial, held
that:
Pre-trial is an answer to the clarion call for the speedy disposition of cases. Although it
was discretionary under the 1940 Rules of Court, it was made mandatory under the 1964
Rules and the subsequent amendments in 1997. Hailed as the most important
procedural innovation in Anglo-Saxon justice in the nineteenth century, pre-trial seeks to
achieve the following:
(a) The possibility of an amicable settlement or of a submission to alternative modes of
dispute resolution;
(b) The simplification of the issues;
(c) The necessity or desirability of amendments to the pleadings;
(d) The possibility of obtaining stipulations or admissions of facts and of documents to
avoid unnecessary proof;
(e) The limitation of the number of witnesses;
(f) The advisability of a preliminary reference of issues to a commissioner;
(g) The propriety of rendering judgment on the pleadings, or summary judgment, or of
dismissing the action should a valid ground therefor be found to exist;
(h) The advisability or necessity of suspending the proceedings; and
(i) Such other matters as may aid in the prompt disposition of the action. [18]
In consonance with these objectives, Section 6, Rule 18 of the Rules of Court, as
amended, provides:
SEC. 6. Pre-trial brief. The parties shall file with the court and serve on the adverse party,
in such manner as shall ensure their receipt thereof at least three (3) days before the
date of the pre-trial, their respective pre-trial briefs which shall contain, among others:
(a) A statement of their willingness to enter into amicable settlement or alternative
modes of dispute resolution, indicating the desired terms thereof;
(b) A summary of admitted facts and proposed stipulation of facts;
(c) The issues to be tried or resolved;
(d) The documents or exhibits to be presented, stating the purpose thereof;
(e) A manifestation of their having availed, or their intention to avail, themselves of
discovery procedures or referral to commissioners; and
(f) The number and names of the witnesses, and the substance of their respective
testimonies.
Failure to file the pre-trial brief shall have the same effect as failure to appear at the pre-
trial.
The pre-trial brief serves as a guide during the pre-trial conference so as to simplify,
abbreviate and expedite the trial if not to dispense with it. It is a devise essential to the
speedy disposition of disputes, and parties cannot brush it aside as a mere
technicality.[19] In addition, pre-trial rules are not to be belittled or dismissed, because
their non-observance may result in prejudice to a partys substantive rights. Like all rules,
they should be followed except only for the most persuasive of reasons when they may
be relaxed to relieve a litigant of an injustice not commensurate with the degree of his
thought[less]ness in not complying with the procedure.[20]
Petitioner posits that even if an amended complaint is filed for the purpose of
impleading another party as defendant, where no additional cause of action was
alleged and the amount of prayer for damages in the original complaint was the same,
another pre-trial is not required and a second pre-trial brief need not be filed.
It must be pointed out, however, that in the cases [21] cited by petitioner to support her
argument, the Court found no need for a second pre-trial precisely because there are
no additional causes of action alleged and the impleaded defendants merely adopted
and repleaded all the pleadings of the original defendants. Petitioner's reliance on the
above-cited cases is misplaced because, in the present case, the RTC correctly found
that petitioner had a separate cause of action against PNB. A separate cause of action
necessarily means additional cause of action. Moreover, the defenses adopted by PNB
are completely different from the defenses of Lim and Rodriguez, necessitating a
separate determination of the matters enumerated under Section 6, Rule 18 of the Rules
of Court insofar as PNB and petitioner are concerned. On these bases, we find no error
in the ruling of the CA which sustained the trial court's dismissal of the amended
complaint against PNB for failure of petitioner to file her pre-trial brief.
Corollarily, Sections 4 and 5 of the same Rule state:
Sec. 4. Appearance of parties. It shall be the duty of the parties and their counsel to
appear at the pre-trial. The non-appearance of a party may be excused only if a valid
cause is shown therefor or if a representative shall appear in his behalf fully authorized in
writing to enter into an amicable settlement, to submit to alternative modes of dispute
resolution, and to enter into stipulations or admissions of facts and of documents.
Sec. 5. Effect of failure to appear. The failure of the plaintiff to appear when so required
pursuant to the next preceding section shall be cause for dismissal of the action. The
dismissal shall be with prejudice, unless otherwise ordered by the court. x x x
In the present case, the Court observes that in the Order of the RTC dated June 6,
2000,[22] the trial court noted the absence of both the petitioner and her counsel during
the scheduled pre-trial conference with respect to the amended complaint impleading
PNB. Under the above-quoted Rules, such absence is an additional ground to dismiss
the action against PNB.
Whether an order of dismissal should be maintained under the circumstances of a
particular case or whether it should be set aside depends on the sound discretion of the
trial court. [23] Considering the circumstances established on record in the instant case,
the Court finds no cogent reason to set aside the order of the RTC dismissing the
complaint of petitioner against PNB.
With respect to the second and third assignment of errors, petitioner argues that the CA
erred in sustaining the RTC when it passed upon the merits of petitioner's cause of action
against PNB notwithstanding the fact that the complaint against the latter was already
dismissed. Petitioner contends that a person who was not impleaded in a case could
not be bound by the decision rendered therein. Petitioner then proceeds to conclude
that the CA erred in sustaining the trial court's finding that PNB was a mortgagee, buyer
and seller in good faith.
The Court is not persuaded.
It is true that the judgment of the trial and appellate courts in the present case could
not bind the PNB for the latter is not a party to the case. However, this does not mean
that the trial and appellate courts are precluded from making findings which are
necessary for a just, complete and proper resolution of the issues raised in the present
case. The Court finds no error in the determination by the trial and appellate courts of
the question of whether or not PNB was a mortgagee, buyer and, later on, seller in good
faith as this would bear upon the ultimate issue of whether petitioner is entitled to
reconveyance.
Petitioner insists that PNB is not a mortgagee in good faith asserting that, if it only
exercised due diligence, it would have found out that petitioner and her husband were
already in adverse possession of the subject property as early as two years before the
same was sold to them. This claim, however, is contradicted by no less than petitioner's
averments in her Brief filed with the CA wherein she stated that [i]mmediately after the
sale, the land was delivered to Isaac Agatep x x x Since that time up to the present,
Isaac Agatep and after his death, the Appellant have been in continuous,
uninterrupted, adverse and public possession of the said parcel of land. [24] The foregoing
assertion only shows that petitioner's husband took possession of the subject lot only
after the same was sold to him.
In any case, the Court finds no error in the findings of both the RTC and the CA that PNB
is indeed an innocent mortgagee for value. When the lots were mortgaged to PNB by
Lim, the titles thereto were in the latter's name, and they showed neither vice nor
infirmity. In accepting the mortgage, PNB was not required to make any further
investigation of the titles to the properties being given as security, and could rely entirely
on what was stated in the aforesaid title. The public interest in upholding the
indefeasibility of a certificate of title, as evidence of the lawful ownership of the land or
of any encumbrance thereon, protects a buyer or mortgagee who, in good faith, relies
upon what appears on the face of the certificate of title. [25]
In her fourth assigned error, petitioner contends that PNB did not acquire ownership over
the disputed lot because the said property was not delivered to it. Petitioner asserts that
the execution of a public document does not constitute sufficient delivery to PNB,
considering that the subject property is in the adverse possession, under claim of
ownership, of petitioner and her predecessor-in-interest. Petitioner further assails the
ruling of the CA that PNB, who was the buyer in the foreclosure sale, became the
absolute owner of the property purchased when it consolidated its ownership thereof
for failure of the mortgagor Lim to redeem the subject property during the period of one
year after the registration of the sale.
The Court finds petitioner's arguments untenable.
The Court's ruling in Manuel R. Dulay Enterprises, Inc. v. Court of Appeals [26] is instructive,
to wit:
Petitioner's contention that private respondent Torres never acquired ownership over
the subject property since the latter was never in actual possession of the subject
property nor was the property delivered to him is also without merit.
Paragraph 1, Article 1498 of the New Civil Code provides:
When the sale is made through a public instrument, the execution thereof shall be
equivalent to the delivery of the thing which is the object of the contract, if from the
deed the contrary does not appear or cannot clearly be inferred.
Under the aforementioned article, the mere execution of the deed of sale in a public
document is equivalent to the delivery of the property. Likewise, this Court had held
that:
It is settled that the buyer in a foreclosure sale becomes the absolute owner of the
property purchased if it is not redeemed during the period of one year after the
registration of the sale. As such, he is entitled to the possession of the said property and
can demand it at any time following the consolidation of ownership in his name and the
issuance to him of a new transfer certificate of title. The buyer can, in fact, demand
possession of the land even during the redemption period except that he has to post a
bond in accordance with Section 7 of Act No. 3133, as amended. No such bond is
required after the redemption period if the property is not redeemed. Possession of the
land then becomes an absolute right of the purchaser as confirmed owner.
Therefore, prior physical delivery or possession is not legally required since the execution
of the Deed of Sale is deemed equivalent to delivery. [27]
This ruling was reiterated in Spouses Sabio v. The International Corporate Bank,
Inc.[28] wherein it was held that:
Notwithstanding the presence of illegal occupants on the subject property, transfer of
ownership by symbolic delivery under Article 1498 can still be effected through the
execution of the deed of conveyance. As we held in Power Commercial and Industrial
Corp. v. Court of Appeals [274 SCRA 597, 610], the key word is control, not possession, of
the subject property. Considering that the deed of conveyance proposed by
respondents did not stipulate or infer that petitioners could not exercise control over said
property, delivery can be effected through the mere execution of said deed.
x x x It is sufficient that there are no legal impediments to prevent petitioners from
gaining physical possession of the subject property. As stated above, prior physical
delivery or possession is not legally required and the execution of the deed of sale or
conveyance is deemed equivalent to delivery. This deed operates as a formal or
symbolic delivery of the property sold and authorizes the buyer or transferee to use the
document as proof of ownership. Nothing more is required. [29]
Thus, the execution of the Deed of Sale in favor of PNB, after the expiration of the
redemption period, is deemed equivalent to delivery.
As to petitioner's contention that the execution of a public document in favor of PNB
did not constitute sufficient delivery to it because the property involved is in the actual
and adverse possession of petitioner and her husband, it must be noted that petitioner
and her husband's possession of the disputed lot is derived from their right as buyers of
the subject parcel of land. As buyers or transferees, petitioner and her husband simply
stepped into the shoes of Lim, who, prior to selling the subject property to them,
mortgaged the same to PNB. As Lim's successors-in-interest, their possession could not
be said to be adverse to that of Lim. Thus, they are also bound to recognize and respect
the mortgage entered into by the latter. Their possession of the disputed lot could not,
therefore, be considered as a legal impediment which could prevent PNB from
acquiring ownership and possession thereof.

It bears to reiterate the undisputed fact, in the instant case, that Lim mortgaged the
subject property to PNB prior to selling the same to petitioner's husband. Settled is the
rule that a mortgage is an accessory contract intended to secure the performance of
the principal obligation. One of its characteristics is that it is inseparable from the
property. It adheres to the property regardless of who its owner may subsequently be. [30]
This is true even in the case of a real estate mortgage because, pursuant to Article 2126
of the Civil Code, the mortgage directly and immediately subjects the property upon
which it is imposed, whoever the possessor may be, to the fulfillment of the obligation for
whose security it was constituted. It is inseparable from the property mortgaged as it is a
right in rem - a lien on the property whoever its owner may be. It subsists notwithstanding
a change in ownership; in short, the personality of the owner is disregarded. Thus, all
subsequent purchasers must respect the mortgage whether the transfer to them be with
or without the consent of the mortgagee, for such mortgage until discharged follows
the property.[31]
Petitioner avers that she and her husband were not aware of the mortgage contract
which was executed between PNB and Lim prior to the sale of the subject property by
the latter to her husband. The fact remains, however, that the mortgage was registered
and annotated on the certificate of title covering the subject property.
It is settled that registration in the public registry is notice to the whole world. [32] Every
conveyance, mortgage, lease, lien, attachment, order, judgment, instrument or entry
affecting registered land shall, if registered, filed or entered in the Office of the Register
of Deeds of the province or city where the land to which it relates lies, be constructive
notice to all persons from the time of such registering, filing or entering.[33] Under the rule
of notice, it is presumed that the purchaser has examined every instrument of record
affecting the title. Such presumption may not be rebutted. He is charged with notice of
every fact shown by the record and is presumed to know every fact shown by the
record and to know every fact which an examination of the record would have
disclosed. This presumption cannot be overcome by any claim of innocence or good
faith. Otherwise, the very purpose and object of the law requiring a record would be
destroyed. Such presumption cannot be defeated by proof of want of knowledge of
what the record contains any more than one may be permitted to show that he was
ignorant of the provisions of the law. The rule that all persons must take notice of the
facts which the public record contains is a rule of law. The rule must be absolute; any
variation would lead to endless confusion and useless litigation.[34] In the present case,
since the mortgage contract was registered, petitioner may not claim lack of
knowledge thereof as a valid defense. The subsequent sale of the property to
petitioner's husband cannot defeat the rights of PNB as the mortgagee and,
subsequently, the purchaser at the auction sale whose rights were derived from a prior
mortgage validly registered.
In her fifth assignment of error, petitioner contends that the trial court deviated from the
issues identified in the Pre-Trial Order and that the case was decided on issues different
from those agreed upon during the pre-trial. Settled is the rule that a pre-trial order is not
meant to be a detailed catalogue of each and every issue that is to be or may be
taken up during the trial. Issues that are impliedly included therein or may be inferable
therefrom by necessary implication are as much integral parts of the pre-trial order as
those that are expressly stipulated.[35] In the case before us, a cursory reading of the
issues enumerated in the Pre-Trial Order of the RTC would readily show that the
complete and proper resolution of these issues would necessarily include all other
matters pertinent to determining whether herein petitioner is the lawful owner of the
subject property and is, therefore, entitled to reconveyance. It would be illogical not to
touch on the question of whether the mortgage contract between Lim and PNB is
binding on petitioner and her husband or whether PNB lawfully foreclosed and acquired
ownership of the subject property because a resolution of these issues is d eterminative
of whether there are no impediments in petitioner and her husband's acquisition of
ownership of the disputed lot.
Coming to the last assigned error, the Court agrees with the disquisition of the CA that
an action for reconveyance is one that seeks to transfer property, wrongfully registered
by another, to its rightful and legal owner. [36] From the foregoing discussions, the Court
finds no sufficient reason to depart from the findings of the RTC and the CA that, based
on the evidence on record, there was no wrongful registration of the property, first in the
name of PNB as the purchaser when the property was auctioned and, subsequently, in
the name of respondent Rodriguez who bought the subject property when the same
was offered for sale by PNB. Hence, the CA did not commit error in affirming the RTC's
dismissal of herein petitioner's complaint for reconveyance.
WHEREFORE, the petition is DENIED. The assailed Decision and Resolution of the Court of
Appeals, dated September 9, 2005 and November 16, 2005, respectively, in CA-G.R. CV
No. 83163 are AFFIRMED.
SO ORDERED.
THIRD DIVISION
JOSEPH L. SY, NELSON GOLPEO and JOHN TAN, G.R. No. 154450 This is a petition for review on certiorari under Rule 45 of the Rules of Court of the
Decision of the Court of Appeals (CA) dated July 23, 2002 in CA-G.R. CV No. 53314.
Petitioners,

- versus -
NICOLAS CAPISTRANO, JR., substituted by JOSEFA B. CAPISTRANO,
REMEDIOS TERESITA B. CAPISTRANO and MARIO GREGORIO B.
CAPISTRANO; NENITA F. SCOTT; SPS. JUANITO JAMILAR and
JOSEFINA JAMILAR; SPS. MARIANO GILTURA and ADELA GILTURA,
Respondents.
The case originated from an action for reconveyance of a large tract of land
in Caloocan City before the Regional Trial Court (RTC), Branch 129, Caloocan City,
entitled Nicolas Capistrano, Jr. v. Nenita F. Scott, Spouses Juanito and Josefina Jamilar,
Present: Joseph L. Sy, Nelson Golpeo and John Tan, and the Register of
Deeds, Caloocan City. Said case was docketed as Civil Case No. C-15791.
YNARES-SANTIAGO, J.,
The antecedents are as follows:
Chairperson,
AUSTRIA-MARTINEZ,
Sometime in 1980, Nenita Scott (Scott) approached respondent Nicolas Capistrano, Jr.
CHICO-NAZARIO, (Capistrano) and offered her services to help him sell his 13,785 square meters of land
covered by Transfer Certificate of Title (TCT) No. 76496 of the Register of Deeds of
NACHURA, and Caloocan City. Capistrano gave her a temporary authority to sell which expired without
any sale transaction being made. To his shock, he discovered later that TCT No. 76496,
REYES, JJ. which was in his name, had already been cancelled on June 24, 1992 and a new one,
TCT No. 249959, issued over the same property on the same date to Josefina A.
Jamilar. TCT No. 249959 likewise had already been cancelled and replaced by three (3)
TCTs (Nos. 251524, 251525, and 251526), all in the names of the Jamilar spouses. TCT Nos.
Promulgated: 251524 and 251526 had also been cancelled and replaced by TCT Nos. 262286 and
262287 issued to Nelson Golpeo and John B. Tan, respectively.

July 28, 2008

Upon further inquiries, Capistrano also discovered the following:

1. The cancellation of his TCT No. 76496 and the issuance of TCT No. 249959 to
x------------------------------------------------------------------------------------x Jamilar were based upon two (2) deeds of sale, i.e., a Deed of Absolute Sale
purportedly executed by him in favor of Scott on March 9, 1980 and a Deed of Absolute
Sale allegedly executed by Scott in favor of Jamilar on May 17, 1990.

2. The supposed 1980 sale from him to Scott was for P150,000.00; but despite
the lapse of more than 10 years thereafter, the alleged 1990 sale from Scott to Jamilar
RESOLUTION was also for P150,000.00.

NACHURA, J.: 3. Both deeds were presented for registration simultaneously on June 24, 1992.

4. Although the deed in favor of Scott states that it was executed on March 9,
1980, the annotation thereof at the back of TCT No. 76496 states that the date of the
instrument is March 9, 1990.

5. Even if there was no direct sale from Capistrano to Jamilar, the transfer of
title was made directly to the latter. No TCT was issued in favor of Scott.
6. The issuance of TCT No. 249959 in favor of Jamilar was with the help of
Joseph Sy, who provided for (sic) money for the payment of the capital gains tax,
documentary stamps, transfer fees and other expenses of registration of the deeds of
sale.
7. On July 8, 1992, an Affidavit of Adverse Claim was annotated at the back of
Jamilars TCT No. 249959 at the instance of Sy, Golpeo, and Tan under a Contract to Sell
in their favor by the Jamilar spouses. Said contract was executed sometime in May, 1992
when the title to the property was still in the name of Capistrano.
8. Around July 28, 1992, upon request of the Jamilar spouses, TCT No. 249959
was cancelled and three (3) new certificates of title (TCT Nos. 251524, 251525, and
251526) all in the name of Jamilar on the basis of an alleged subdivision plan (No. Psd-
13-011917) without Capistranos knowledge and consent as registered owner. The notice
of adverse claim of Sy, Golpeo, and Tan was carried over to the three new titles.
9. Around August 18, 1992, Sy, Golpeo, and Tan filed Civil Case No. C-15551
against the Jamilars and another couple, the Giltura spouses, for alleged violations of
the Contract to Sell.They caused a notice of lis pendens to be annotated on the three
(3) TCTs in Jamilars name. Said civil case, however, was not prosecuted.
10. On January 26, 1993, a Deed of Absolute Sale was executed by the Jamilars
and the Gilturas, in favor of Golpeo and Tan. Thus, TCT Nos. 251524 and 251526 were
cancelled and TCT Nos. 262286 and 262287 were issued to Golpeo and Tan,
respectively. TCT No. 251525 remained in the name of Jamilar.[1]
Thus, the action for reconveyance filed by Capistrano, alleging that his and his wifes
signatures on the purported deed of absolute sale in favor of Scott were forgeries; that
the owners duplicate copy of TCT No. 76496 in his name had always been in his
possession; and that Scott, the Jamilar spouses, Golpeo, and Tan were not innocent
purchasers for value because they all participated in defrauding him of his
property. Capistrano claimed P1,000,000.00 from all defendants as moral
damages, P100,000.00 as exemplary damages; and P100,000.00 as attorneys fees.
In their Answer with Counterclaim, the Jamilar spouses denied the allegations in the
complaint and claimed that Capistrano had no cause of action against them, as there
was no privity of transaction between them; the issuance of TCT No. 249959 in their
names was proper, valid, and legal; and that Capistrano was in estoppel. By way of
counterclaim, they sought P50,000.00 as actual damages, P50,000.00 as moral
damages, P50,000.00 as exemplary damages, and P50,000.00 as attorneys fees.
In their Answer, Sy, Golpeo, and Tan denied the allegations in the complaint and
alleged that Capistrano had no cause of action against them; that at the time they
bought the property from the Jamilars and the Gilturas as unregistered owners, there
was nothing in the certificates of title that would indicate any vice in its ownership; that
a buyer in good faith of a registered realty need not look beyond the Torrens title to
search for any defect; and that they were innocent purchasers of the land for value. As
counterclaim, they sought P500,000.00 as moral damages and P50,000.00 as attorneys
fees.
In her Answer with Cross-claim, Scott denied the allegations in the complaint and
alleged that she had no knowledge or any actual participation in the execution of the
deeds of sale in her favor and the Jamilars; that she only knew of the purported
conveyances when she received a copy of the complaint; that her signatures
appearing in both deeds of sale were forgeries; that when her authority to sell the land
expired, she had no other dealings with it; that she never received any amount of
money as alleged consideration for the property; and that, even if she were the owner,
she would never have sold it at so low a price.
By way of Cross-claim against Sy, Golpeo, Tan, and the Jamilars, Scott alleged that
when she was looking for a buyer of the property, the Jamilars helped her locate the
property, and they became conversant with the details of the ownership and other
particulars thereof; that only the other defendants were responsible for the seeming
criminal conspiracy in defrauding Capistrano; that in the event she would be held liable
to him, her other co-defendants should be ordered to reimburse her of whatever
amount she may be made to pay Capistrano; that she was entitled to P50,000.00 as
moral damages and P50,000.00 as attorneys fees from her co-defendants due to their
fraudulent conduct.
Later, Sy, Golpeo, and Tan filed a third-party complaint against the Giltura spouses who
were the Jamilars alleged co-vendors of the subject property.
Thereafter, trial on the merits ensued.
Subsequently, the trial court decided in favor of Capistrano. In its Decision dated May 7,
1996, adopting the theory of Capistrano as presented in his memorandum, the trial
court rendered judgment as follows:
1. Declaring plaintiff herein as the absolute owner of the parcel of land
located at the Tala Estate, Bagumbong, Caloocan City and covered by TCT No. 76496;
2. Ordering defendant Register of Deeds to cause the cancellation of TCT No.
251525 registered in the name of defendant Josefina Jamilar;
3. Ordering defendant Register of Deeds to cause the cancellation of TCT Nos.
262286 and 262287 registered in the names of defendants Nelson Golpeo and John B.
Tan;
4. Ordering defendant Register of Deeds to cause the issuance to plaintiff of
three (3) new TCTs, in replacement of the aforesaid TCTs Nos. 251525, 262286 and
262287;
5. Ordering all the private defendants in the above-captioned case to pay
plaintiff, jointly and severally, the reduced amount of P400,000.00 as moral damages;
6. Ordering all the private defendants in the above-captioned case to pay to
plaintiff, jointly and severally, the reduced sum of P50,000.00 as exemplary damages;
7. Ordering all the private defendants in the above-captioned case to pay
plaintiffs counsel, jointly and severally, the reduced amount of P70,000.00 as attorneys
fees, plus costs of suit;
8. Ordering the dismissal of defendants Sy, Golpeo and Tans Cross-Claim
against defendant spouses Jamilar;
9. Ordering the dismissal of defendants Sy, Golpeo and Tans Third-Party
Complaint against defendant spouses Giltura; and
10. Ordering the dismissal of the Counterclaims against plaintiff.
SO ORDERED.[2]
On appeal, the CA, in its Decision dated July 23, 2002, affirmed the Decision of the trial
court with the modification that the Jamilar spouses were ordered to return to Sy,
Golpeo, and Tan the amount of P1,679,260.00 representing their full payment for the
property, with legal interest thereon from the date of the filing of the complaint until full
payment.
Hence, this petition, with petitioners insisting that they were innocent purchasers for
value of the parcels of land covered by TCT Nos. 262286 and 262287. They claim that
when they negotiated with the Jamilars for the purchase of the property, although the
title thereto was still in the name of Capistrano, the documents shown to them the court
order directing the issuance of a new owners duplicate copy of TCT No. 76496, the new
owners duplicate copy thereof, the tax declaration, the deed of absolute sale between
Capistrano and Scott, the deed of absolute sale between Scott and Jamilar, and the
real estate tax receipts there was nothing that aroused their suspicion so as to compel
them to look beyond the Torrens title. They asseverated that there was nothing wrong in
financing the cancellation of Capistranos title and the issuance of titles to the Jamilars
because the money they spent therefor was considered part of the purchase price they
paid for their property.
In their Comment, the heirs of Capistrano, who were substituted after the latters death,
reiterated the factual circumstances which should have alerted the petitioners to
conduct further investigation, thus
(a) Why the Deed of Absolute Sale supposedly executed by Capistrano had
remained unregistered for so long, i.e., from March 9, 1980 up to June 1992, when they
were negotiating with the Jamilars and the Gilturas for their purchase of the subject
property;
(b) Whether or not the owners copy of Capistranos certificate of title had really
been lost;
(c) Whether Capistrano really sold his property to Scott and whether Scott
actually sold it to the Jamilars, which matters were easily ascertainable as both
Capistrano and Scott were still alive and their names appear on so many documents;
(d) Why the consideration for both the March 9, 1980 sale and the May 17,
1990 sale was the same (P150,000.00), despite the lapse of more than 10 years;
(e) Why the price was so low (P10.88 per square meter, both in 1980 and in
1990) when the petitioners were willing to pay and actually paid P150.00 per square
meter in May 1992; and
(f) Whether or not both deeds of sale were authentic. [3]
In addition, the heirs of Capistrano pointed out that petitioners entered into negotiations
over the property, not with the registered owner thereof, but only with those claiming
ownership thereof based on questionable deeds of sale.
The petition should be denied. The arguments proffered by petitioners all pertain to
factual issues which have already been passed upon by both the trial court and the
CA.
Findings of facts of the CA are final and conclusive and cannot be reviewed on appeal,
as long as they are based on substantial evidence. While, admittedly, there are
exceptions to this rule such as: (a) when the conclusion is a finding grounded entirely on
speculations, surmises or conjectures; (b) when the inference made is manifestly
mistaken, absurd or impossible; (c) when there is grave abuse of discretion; (d) when
the judgment is based on a misapprehension of facts; (e) when the findings of facts are
conflicting; (f) when the CA, in making its findings, went beyond the issues of the case
and the same were contrary to the admissions of both the appellant and
appellee.[4] Not one of these exceptional circumstances is present in this case.
First. The CA was correct in upholding the finding of the trial court that the purported
sale of the property from Capistrano to Scott was a forgery, and resort to a handwriting
expert was not even necessary as the specimen signature submitted by Capistrano
during trial showed marked variance from that found in the deed of absolute sale. The
technical procedure utilized by handwriting experts, while usually helpful in the
examination of forged documents, is not mandatory or indispensable to the
examination or comparison of handwritings.[5]
By the same token, we agree with the CA when it held that the deed of sale between
Scott and the Jamilars was also forged, as it noted the stark differences between the
signatures of Scott in the deed of sale and those in her handwritten letters to Capistrano.
Second. In finding that the Jamilar spouses were not innocent purchasers for value of
the subject property, the CA properly held that they should have known that the
signatures of Scott and Capistrano were forgeries due to the patent variance of the
signatures in the two deeds of sale shown to them by Scott, when Scott presented to
them the deeds of sale, one allegedly executed by Capistrano in her favor covering his
property; and the other allegedly executed by Scott in favor of Capistrano over her
property, the P40,000.00 consideration for which ostensibly constituted her initial and
partial payment for the sale of Capistranos property to her.
The CA also correctly found the Gilturas not innocent purchasers for value, because
they failed to check the veracity of the allegation of Jamilar that he acquired the
property from Capistrano.
In ruling that Sy was not an innocent purchaser for value, we share the observation of
the appellate court that Sy knew that the title to the property was still in the name of
Capistrano, but failed to verify the claim of the Jamilar spouses regarding the transfer of
ownership of the property by asking for the copies of the deeds of absolute sale
between Capistrano and Scott, and between Scott and Jamilar. Sy should have likewise
inquired why the Gilturas had to affix their conformity to the contract to sell by asking for
a copy of the deed of sale between the Jamilars and the Gilturas. Had Sy done so, he
would have learned that the Jamilars claimed that they purchased the property from
Capistrano and not from Scott.
We also note, as found by both the trial court and the CA, Tans testimony that he,
Golpeo and Sy are brothers, he and Golpeo having been adopted by Sys father. Tan
also testified that he and Golpeo were privy to the transaction between Sy and the
Jamilars and the Gilturas, as shown by their collective act of filing a complaint for
specific performance to enforce the contract to sell.
Also noteworthy and something that would have ordinarily aroused suspicion is the fact
that even before the supposed execution of the deed of sale by Scott in favor of the
Jamilars, the latter had already caused the subdivision of the property into nine (9) lots,
with the title to the property still in the name of Capistrano.
Notable likewise is that the owners duplicate copy of TCT No. 76496 in the name of
Capistrano had always been in his possession since he gave Scott only a photocopy
thereof pursuant to the latters authority to look for a buyer of the property. On the other
hand, the Jamilars were able to acquire a new owners duplicate copy thereof by filing
an affidavit of loss and a petition for the issuance of another owners duplicate copy of
TCT No. 76496. The minimum requirement of a good faith buyer is that the vendee of the
real property should at least see the owners duplicate copy of the title.[6] A person who
deals with registered land through someone who is not the registered owner is expected
to look beyond the certificate of title and examine all the factual circumstances thereof
in order to determine if the vendor has the capacity to transfer any interest in the
land. He has the duty to ascertain the identity of the person with whom he is dealing
and the latters legal authority to convey.[7]
Finally, there is the questionable cancellation of the certificate of title of Capistrano
which resulted in the immediate issuance of a certificate of title in favor of the Jamilar
spouses despite the claim that Capistrano sold his property to Scott and it was Scott
who sold the same to the Jamilars.
In light of the foregoing disquisitions, based on the evidence on record, we find no error
in the findings of the CA as to warrant a discretionary judicial review by this Court.
WHEREFORE, the petition is DENIED DUE COURSE for failure to establish reversible error on
the part of the Court of Appeals. Costs against petitioners.
SO ORDERED.
DOMINGO REALTY, INC. G.R. No. 126236
and AYALA STEEL
MANUFACTURING CO., INC.,
Petitioners,
Present:
QUISUMBING, J., Chairperson,
- versus - CARPIO,
CARPIO MORALES,
TINGA, and
VELASCO, JR., JJ.
COURT OF APPEALS and Promulgated:
ANTONIO M. ACERO,
Respondents. January 26, 2007
x-----------------------------------------------------------------------------------------x
DECISION
VELASCO, JR., J.:
Good judgment comes from experience, and often experience comes from bad
judgment.
Rita Mae Brown
The Case
This Petition for Review on Certiorari, under Rule 45 of the Revised Rules of Court, seeks
the reversal of the October 31, 1995 Decision [1] of the Court of Appeals (CA) in CA-G.R.
SP No. 33407, entitled Antonio M. Acero v. Hon. Sofronio G. Sayo, et al., which annulled
the December 7, 1987 Decision based on a Compromise Agreement among petitioner
Domingo Realty, Inc. (Domingo Realty), respondent Antonio M. Acero, and defendant
Luis Recato Dy in Civil Case No. 9581-P before the Pasay City Regional Trial Court (RTC),
Branch CXI; and the August 28, 1996 Resolution [2] of the CA which denied petitioners
Motion for Reconsideration of its October 31, 1995 Decision.
The Facts
On November 19, 1981, petitioner Domingo Realty filed its November 15, 1981
Complaint[3] with the Pasay City RTC against Antonio M. Acero, who conducted
business under the firm name A.M. Acero Trading, [4] David Victorio, John Doe, and Peter
Doe, for recovery of possession of three (3) parcels of land located in Cupang,
Muntinlupa, Metro Manila, covered by (1) Transfer Certificate of Title (TCT) No. (75600) S-
107639-Land Records of Rizal; (2) TCT No. (67006) S-107640-Land Records of Rizal; and (3)
TCT No. (67007) S-107643-Land Records of Rizal (the subject properties). The said lots
have an aggregate area of 26,705 square meters, more or less, on a portion of which
Acero had constructed a factory building for the manufacture of hollow blocks, as
alleged by Domingo Realty.
On January 4, 1982, defendants Acero and Victorio filed their December 21, 1981
Answer [5] to the Complaint in Civil Case No. 9581-P. Acero alleged that he merely
leased the land from his co-defendant David Victorio, who, in turn, claimed to own the
property on which the hollow blocks factory of Acero stood. In the Answer, Victorio
assailed the validity of the TCTs of Domingo Realty, alleging that the said TCTs
emanated from spurious deeds of sale, and claimed that he and his predecessors-in-
interest had been in possession of the property for more than 70 years.
On December 3, 1987, Mariano Yu representing Domingo Realty, Luis Recato Dy [6], and
Antonio M. Acero, all assisted by counsels, executed a Compromise Agreement, which
contained the following stipulations, to wit:
1. That defendants admit and recognize the ownership of the plaintiff over the property
subject of this case, covered by TCT No. S-107639 (75600), S-107643 (67007), and S-
107640 (67006) with a total area of 26,705 square meters;
2. That defendant Luis Recato Dy admits and recognizes that his title covered by TCT
No. 108027 has been proven not to be genuine and that the area indicated therein is
inside the property of the plaintiff;
3. That defendant Acero admits that the property he is presently occupying by way of
lease is encroaching on a portion of the property of the plaintiff and assume[s] and
undertakes to vacate, remove and clear any and all structures erected insid e the
property of the plaintiff by himself and other third parties, duly authorized and/or who
have an existing agreement with defendant Acero, and shall deliver said portion of the
property of the plaintiff free and clear of any unauthorized structures, shanties,
occupants, squatters or lessees within a period of sixty (60) days from date of signing of
this compromise agreement. Should defendant Acero fail in his obligation to vacate,
remove and clear the structures erected inside the property of the plaintiff within the
period of 60 days afore-mentioned, plaintiff shall be entitled to a writ of execution for
the immediate demolition or removal of said structure to fully implement this agreement;
and ejectment of all squatters and occupants and lessees, including the dependents to
fully implement this agreement;
4. That plaintiff admits and recognizes that defendant Luis Recato Dy bought and
occupied the property in good faith and for value whereas defendant Acero leased
the portion of said property likewise in good faith and for value hereby waives
absolutely and unconditionally all claims including attorneys fees against both
defendants in all cases pending in any court whether by virtue of any judgment or
under the present complaint and undertake to withdraw and/or move to dismiss the
same under the spirit of this agreement;
5. That defendants likewise waive all claims for damages including attorneys fees
against the plaintiff;
6. That plaintiff acknowledges the benefit done by defendant Luis Recato Dy on the
property by incurring expenses in protecting and preserving the property by way of
construction of perimeter fence and maintaining a caretaker therein and plaintiff has
agreed to pay Luis Recato Dy the amount of P100,000.00 upon approval of this
agreement by this Honorable Court.[7]
Acting on the Compromise Agreement, the Pasay City RTC rendered the December 7,
1987 Decision which adopted the aforequoted six (6) stipulations and approved the
Compromise Agreement.
To implement the said Decision, Domingo Realty filed its January 21,
1988 Motion[8] asking the trial court for permission to conduct a re-survey of the subject
properties, which was granted in the January 22, 1988 Order. [9]
On February 2, 1988, respondent Acero filed his January 29, 1988 Motion to Nullify the
Compromise Agreement,[10] claiming that the January 22, 1988 Order authorizing the
survey plan of petitioner Domingo Realty as the basis of a resurvey would violate the
Compromise Agreement since the whole area he occupied would be adjudged as
owned by the realty firm.
On March 18, 1988, Acero filed a Motion to Resurvey, [11] whereby it was alleged that the
parties agreed to have the disputed lots re-surveyed by the Bureau of Lands. Thus, the
trial court issued the March 21, 1988 Order [12] directing the Director of Lands to conduct
a re-survey of the subject properties.
In his June 9, 1989 Report, Elpidio T. De Lara, Chief of the Technical Services Division of
the Lands Management Section of the National Capital Region - Department of
Environment and Natural Resources, submitted to the trial court Verification Survey Plan
No. Vs-13-000135. In the said Verification Survey Plan, petitioners TCTs covered the entire
land occupied by the respondents hollow block factory. [13]
On April 10, 1990, petitioner Ayala Steel Manufacturing Co., Inc. (Ayala Steel) filed its
March 30, 1990 Motion for Substitution alleging that it had purchased the subject lots,
attaching to the motion TCT Nos. 152528, 152529, and 152530 all in its name, as proof of
purchase. [14]
The said motion was opposed by Acero claiming that this case has already been
terminated in accordance with the compromise agreement of the parties, hence,
substitution will no longer be necessary and justified under the circumstances. [15] The
motion was not resolved which explains why both transferor Domingo Realty and
transferee Ayala Steel are co-petitioners in the instant petition.
In its December 28, 1990 Order,[16] the trial court directed Acero to conduct his own re-
survey of the lots based on the technical description appearing in the TCTs of Domingo
Realty and to have the re-survey plans approved by the Bureau of Lands. The Order
resulted from Aceros contention that he occupied only 2,000 square meters of
petitioners property.
Acero employed the services of Engr. Eligio L. Cruz who came up with Verification
Survey Plan No. Vs-13-000185. However, when the said Verification Survey Plan was
presented to the Bureau of Lands for approval, it was rejected because Engr. Cruz
failed to comply with the requirements of the Bureau. [17]
On April 8, 1991, petitioners filed a Manifestation with Motion praying for the denial of
respondents Motion to Nullify the Compromise Agreement and for the approval of
Verification Survey Plan No. Vs-13-000135 prepared by Engr. Lara of the Bureau of
Lands. The Pasay City RTC issued the December 6, 1991 Order[18] denying respondent
Aceros Motion to Nullify the Compromise Agreement. As a consequence, petitioners
filed a Motion for Execution on December 10, 1991.[19]
On January 6, 1992, respondent filed an undated Manifestation [20] claiming, among
others, that it was on record that the Compromise Agreement was only as to a portion
of the land being occupied by respondent, which is about 2,000 square meters, more or
less. He reiterated the same contentions in his December 21, 1991 Manifestation.[21]
On January 13, 1992, respondent filed a Motion to Modify Order Dated 6 December
91,[22] claiming that the said Order modified the Compromise Agreement considering
that it allegedly involved only 1,357 square meters and not the entire lot;[23] and if not
amended, the Order would deviate from the principle that no man shall enrich himself
at the expense of the other.
In its January 15, 1992 Order, [24] the trial court approved the issuance of a Writ of
Execution to enforce the December 7, 1987 Decision. On February 3, 1992, respondent
Acero subsequently filed a Motion for Reconsideration[25] of the January 15, 1992 Order
arguing that the Order was premature and that Verification Survey Plan No. Vs-13-
000135 violated the Compromise Agreement.
On January 18, 1992, the Pasay City Hall was gutted by fire, destroying the records of
the lower court, including those of this case. Thus, after reconstituting the records, the
trial court issued the October 6, 1992 Order,[26] reiterating its January 15, 1992 Order and
ordering the issuance of a Writ of Execution.
On October 23, 1992, respondent filed a Manifestation and Compliance,[27] alleging
that Verification Survey Plan No. Vs-13-000185 had been approved by the Regional
Director of the DENR; thus, he moved for the annulment of the October 6, 1992 Order
granting the Writ of Execution in favor of petitioners.
Given the conflicting Verification Survey Plans of the parties, the trial court issued
the October 11, 1993 Order [28] requiring the Bureau of Lands Director to determine which
of the two survey plans was correct.
Subsequently, Regional Technical Director Eriberto V. Almazan of the Land Registration
Authority issued the November 24, 1993 Order [29] cancelling Verification Survey Plan No.
Vs-13-000185, submitted by Engineer Eligio Cruz, who was hired by respondent Acero,
and declared Verification Survey Plan No. Vs-13-000135, submitted by Engineer Lara of
the Bureau of Lands, as the correct Plan.
Thereafter, petitioners filed their January 12, 1994 Ex-parte Manifestation with
Motion,[30] praying for the implementation of the Writ of Execution against the disputed
lands, which was granted in the January 12, 1994 Order. [31]
Respondents Motion for Reconsideration[32] of the January 12, 1994 Order was denied in
the February 1, 1994 Order[33] of the Pasay City RTC.
Aggrieved, respondent Acero filed before the CA his February 23, 1994 Petition for
Certiorari and Mandamus with Urgent Prayer for Issuance of a Temporary Restraining
Order,[34] under Rule 65 of the Rules of Court, against petitioners and Judge Sofronio G.
Sayo as presiding judge of the lower court. In the petition, respondent sought to nullify
and set aside the RTC Orders dated December 6, 1991, January 15, 1992, October 6,
1992, January 12, 1994, and February 1, 1994, all of which pertain to the execution of the
December 7, 1987 Decision on the Compromise Agreement. Significantly, respondent
did not seek the annulment of said judgment but merely reiterated the issue that under
the Compromise Agreement, he would only be vacating a portion of the property he
was occupying.
The Ruling of the Court of Appeals
On October 31, 1995, the CA promulgated the assailed Decision, the fallo of which
reads:
IN VIEW OF THE FOREGOING, the petition for certiorari is GRANTED and the Orders of
respondent court dated December 6, 1991, January 15, 1992, October 6, 1992,
and January 12, 1994, and February 1, 1994 are SET ASIDE. In the interest of justice, and
consistent with the views expressed by this Court, the Compromise Judgment dated
December 7, 1987 of respondent court is likewise SET ASIDE. Respondent Court is likewise
directed to proceed with the hearing of Civil Case No. 9581-P on the merits and
determine, once and for all, the respective proprietary rights of the litigants thereto.
SO ORDERED.[35]
In discarding the December 7, 1987 Decision based on the Compromise Agreement,
the appellate court ratiocinated that David Victorio, the alleged lessor of Acero, was
not a party to the Compromise Agreement; thus, there would always remain the
probability that he might eventually resurface and assail the Compromise Agreement,
giving rise to another suit. Moreover, the CA found the Compromise Agreement vague,
not having stipulated a mutually agreed upon surveyor, who would survey the
properties using as a basis, survey plans acceptable to both, and to thereafter submit a
report to the court.[36]
Likewise, the CA sustained Aceros belief that he would only have to vacate a portion of
the property he was presently occupying, which was tantamount to a mistake that
served as basis for the nullification of the Compromise Agreement entered into.
On January 17, 1996, petitioners filed a Motion for Reconsideration [37] of the adverse
Decision, which was consequently rejected in the CAs August 28, 1996 Resolution.
Thus, the instant petition is in our hands.
The Issues
The issues as stated in the petition are as follows:
1. THE RESPONDENT COURT OF APPEALS ERRED IN NULLIFYING AND SETTING ASIDE
JUDGMENT ON COMPROMISE AGREEMENT AND THE COMPROMISE AGREEMENT ITSELF AS
WELL AS THE SUBSEQUENT ORDERS OF THE COURT A QUO THOUGH THERE IS NO MOTION
TO SET ASIDE THE JUDGMENT ON THE COMPROMISE AGREEMENT BEFORE THE COURT A
QUO ON THE GROUND OF FRAUD, MISTAKE OR DURESS;
2. THE RESPONDENT COURT OF APPEALS ERRED IN NULLIFYING AND SETTING ASIDE THE
JUDGMENT ON COMPROMISE AGREEMENT AND THE COMPROMISE AGREEMENT ITSELF AS
WELL AS THE SUBSEQUENT ORDERS OF THE COURT OF QUO [SIC] THOUGH IN THE PE TITION
FOR CERTIORARI AND MANDAMUS BEFORE RESPONDENT COURT OF APPEALS, PRIVATE
RESPONDENT ARGUED THAT JUDGMENT ON COMPROMISE AGREEMENT IS FINAL,
EXECUTORY, IMMUTABLE AND UNALTERABLE;
3. THE RESPONDENT COURT OF APPEALS ERRED IN NULLIFYING AND SETTING ASIDE
JUDGMENT ON COMPROMISE AGREEMENT AND THE COMPROMISE AGREEMENT ITSELF AS
WELL AS THE SUBSEQUENT ORDERS OF THE COURT A QUO BASED ON FRAUD OR MISTAKE
THOUGH SAID ISSUES WERE NOT RAISED BEFORE THE COURT A QUO, AND NO EVIDENCE
WAS INTRODUCED TO SUBSTANTIATE FRAUD OR MISTAKE BEFORE THE COURT A QUO;
4. THE RESPONDENT COURT OF APPEALS ERRED WHEN IT RULED THAT THE NON-INCLUSION
OF ONE OF THE PARTIES IN THIS CASE, AND THE VAGUENESS OF THE COMPROMISE
AGREEMENT ARE GROUNDS TO NULLIFY AND SET ASIDE THE COMPROMISE AGREEMENT;
AND
5. THE RESPONDENT COURT OF APPEALS ERRED WHEN IT ENTERTAINED THE PETITION FOR
CERTIORARI AND MANDAMUS THOUGH IT WAS FILED BEYOND REASONABLE TIME IF NOT
BARRED BY LACHES.[38]
Restated, the issues are:
I.
WHETHER THE PETITION BEFORE THE COURT OF APPEALS WAS FILED OUT OF TIME OR
BARRED BY LACHES;
II.
WHETHER THE NON-INCLUSION OF DAVID VICTORIO WOULD NULLIFY THE COMPROMISE
AGREEMENT;
III.
WHETHER THE JUDGMENT ON COMPROMISE AGREEMENT SHOULD BE SET ASIDE ON THE
GROUND OF VAGUENESS; AND
IV.
WHETHER THE JUDGMENT ON COMPROMISE AGREEMENT SHOULD BE SET ASIDE ON THE Procedure, the aggrieved party can no longer appeal from the order denying the
GROUND OF MISTAKE. petition since this is proscribed under Section 1 of Rule 41. The remedy of the party is to
file a special civil action for certiorari under Rule 65 from the order rejecting the petition
The Courts Ruling for relief from judgment.

The petition is meritorious.

The records of the case reveal the following:

The preliminary issue involves the query of what proper remedy is available to a party
who believes that his consent in a compromise agreement was vitiated by mistake
upon which a judgment was rendered by a court of law. 1. December 3, 1987 the parties signed the Compromise Agreement;

There is no question that a contract where the consent is given through mistake,
violence, intimidation, undue influence, or fraud is voidable under Article 1330 of the
Civil Code. If the contract assumes the form of a Compromise Agreement between the 2. December 7, 1987 a decision/judgment was rendered based on the December 3,
parties in a civil case, then a judgment rendered on the basis of such covenant is final, 1987 Compromise Agreement;
unappealable, and immediately executory. If one of the parties claims that his consent
was obtained through fraud, mistake, or duress, he must file a motion with the trial court
that approved the compromise agreement to reconsider the judgment and nullify or set
aside said contract on any of the said grounds for annulment of contract within 15 days 3. February 2, 1988 Acero filed a Motion to Nullify the Compromise Agreement;
from notice of judgment. Under Rule 37, said party can either file a motion for new trial
or reconsideration. A party can file a motion for new trial based on fraud, accident or
mistake, excusable negligence, or newly discovered evidence.
4. December 6, 1991 the trial court denied Aceros Motion to Nullify the Compromise
Agreement;

On the other hand, a party may decide to seek the recall or modification of the 5. December 11, 1991 defendant Acero received the December 6, 1991 Order which
judgment by means of a motion for reconsideration on the ground that the decision or denied said motion;[42]
final order is contrary to law if the consent was procured through fraud, mistake, or
duress. Thus, the motion for a new trial or motion for reconsideration is the readily 6. December 26, 1991 the 15-day period to appeal to the CA expired by the failure of
available remedy for a party to challenge a judgment if the 15-day period from receipt defendant Acero to file an appeal with said appellate court;
of judgment for taking an appeal has not yet expired. This motion is the most plain,
speedy, and adequate remedy in law to assail a judgment based on a compromise
agreement which, even if it is immediately executory, can still be annulled for vices of
consent or forgery.[39] 7. January 15, 1992 the trial court issued the Order which granted petitioners motion for
the issuance of a Writ of Execution;
Prior to the effectivity of the 1997 Rules of Civil Procedure on July 1, 1997, an order
denying a motion for new trial or reconsideration was not appealable since the 8. October 6, 1992 the trial court reiterated its January 15, 1992 Order directing the
judgment in the case is not yet final. The remedy is to appeal from the challenged issuance of a Writ of Execution after the records of the case were lost in a fire that
decision and the denial of the motion for reconsideration or new trial is assigned as an gutted the Pasay City Hall;
error in the appeal. [40] Under the present [1997] Rules of Civil Procedure, the same rule
was maintained that the order denying said motion is still unappealable and the rule is 9. January 12, 1994 the trial court issued the Order which directed the implementation of
still to appeal from the judgment and not from the order rejecting the motion for the Writ of Execution prayed for by petitioners;
reconsideration/new trial.
10. February 1, 1994 the trial court issued the Order which denied respondents Motion for
If the 15-day period for taking an appeal has lapsed, then the aggrieved party can Reconsideration of its January 12, 1994 Order; and
avail of Rule 38 by filing a petition for relief from judgment which should be done within
60 days after the petitioner learns of the judgment, but not more than six (6) months
after such judgment or final order was entered. Prior to the effectivity of the 1997 Rules
of Civil Procedure in 1997, if the court denies the petition under Rule 38, the remedy is to 11. April 4, 1994 Acero filed with the CA a petition for certiorari in CA-G.R. SP No. 33407
appeal from the order of denial and not from the judgment since said decision has entitled Antonio M. Acero v. Domingo Realty, Inc., et al.
already become final and already unappealable. [41] However, in the appeal from said
order, the appellant may likewise assail the judgment. Under the 1997 Rules of Civil
In his undated Manifestation, respondent Acero admitted having received a copy of
the December 7, 1987 Decision on December 11, 1987. However, it was only
on February 2, 1988 when he filed a Motion to Nullify the Compromise Agreement which
was discarded for lack of merit by the trial court on December 6, 1991. If the Motion to
Nullify the Compromise Agreement is treated as a motion for reconsideration and/or for
new trial, then Acero should have filed an appeal from the December 7, 1987 Decision
and assigned as error the December 6, 1991 Order denying said motion pursuant to the
rules existing prior to the 1997 Rules of Civil Procedure. He failed to file such appeal but
instead filed a petition for certiorari under Rule 65 with the CA on April 4, 1994. This is
prejudicial to respondent Acero as the special civil action of certiorari is not the proper
remedy. If the aggrieved party does not interpose a timely appeal from the adverse
decision, a special civil action for certiorari is not available as a substitute for a lost
appeal.[43]
What respondent Acero should have done was to file a petition for relief from judgment
when he became aware that he lost his right of appeal on December 26, 1991. Even
with this approach, defendant Acero was also remiss.
In sum, the petition for certiorari instituted by respondent Acero with the CA is a wrong
remedy; a simple appeal to the CA would have sufficed. Since the certiorari action is an
improper legal action, the petition should have been rejected outright by the CA.
Assuming arguendo that a petition for certiorari with the CA is the appropriate remedy,
still, said petition was filed out of time.
The petition before the CA was filed prior to the effectivity of the 1997 Rules of Court
when there was still no prescribed period within which to file said petition, unlike in the
present Section 4 of Rule 65 wherein a Petition for Certiorari and Mandamus must be
filed within 60 days from notice of the judgment, final order, or resolution appealed
from, or of the denial of the petitioners motion for new trial or reconsideration after
notice of judgment.
Section 4, Rule 65 previously read:
Section 4. Where petition filed.The petition may be filed in the Supreme Court, or, if it
relates to the acts or omissions of an inferior court, or of a corporation, board or officer
or person, in a Court of First Instance having jurisdiction thereof. It may also be filed in
the Court of Appeals if it is in aid of its appellate jurisdiction.
Petitions for certiorari under Rules 43, 44 and 45 shall be filed with the Supreme Court.
Before the 1997 Rules of Civil Procedure became effective on July 1, 1997, the yardstick
to determine the timeliness of a petition for certiorari under Rule 65 was the
reasonableness of the time that had elapsed from receipt of notice of the assailed
order/s of the trial court up to the filing of the appeal with the CA. [44] In a number of
cases, the Court ruled that reasonable time can be pegged at three (3) months. [45]
In the present case, the Order denying the Motion to Nullify the Compromise
Agreement was issued on December 6, 1991. The petition for certiorari was filed on April
4, 1994.The period of two (2) years and four (4) months cannot be considered fair and
reasonable. With respect to the January 15, 1992 Order granting the writ of execution
and the October 6, 1992 Order directing the issuance of the writ, it is evident that the
petition before the CA was filed more than three (3) months after the receipt by
respondent Acero of said orders and the filing of the petition is likewise unreasonably
delayed.
On the second issue, petitioners assail the ruling of the appellate court that David
Victorio who is claimed to be the lessor of Acero, and who is impleaded as a defendant
in Civil Case No. 9581-P, was not made a party to the Compromise Agreement and
hence, he may later assail the compromise agreement as not binding upon him,
thereby giving rise to another suit.[46]
We find merit in petitioners position.
The CA was unable to cite a law or jurisprudence that supports the annulment of a
compromise agreement if one of the parties in a case is not included in the
settlement. The only legal effect of the non-inclusion of a party in a compromise
agreement is that said party cannot be bound by the terms of the agreement. The
Compromise Agreement shall however be valid and binding as to the parties who
signed thereto. [47]
The issue of ownership between petitioners and David Victorio can be threshed out by
the trial court in Civil Case No. 9581-P. The proper thing to do is to remand the case for
continuation of the proceedings between petitioners and defendant David Victorio but
not to annul the partial judgment between petitioners and respondent Acero which has
been pending execution for 20 years.
With regard to the third issue, petitioners assail the ruling of the CA that the Compromise
Agreement is vague as there is still a need to determine the exact metes and bounds of
the encroachment on the petitioners lot.
The object of a contract, in order to be considered as certain, need not specify such
object with absolute certainty. It is enough that the object is determinable in order for it
to be considered as certain. Article 1349 of the Civil Code provides:
Article 1349. The object of every contract must be determinate as to its kind. The fact
that the quantity is not determinate shall not be an obstacle to the existence of the
contract, provided it is possible to determine the same, without the need of a new
contract between the parties.
In the instant case, the title over the subject property contains a technical description
that provides the metes and bounds of the property of petitioners. Such technical
description is the final determinant of the extent of the property of petitioners. Thus, the
area of petitioners property is determinable based on the technical descriptions
contained in the TCTs.
Notably, the determination made by the Bureau of Landsthat Verification Survey Plan
No. Vs-13-000135 is the correct Planis controlling and shall prevail over Verification
Survey Plan No. Vs-13-000185 submitted by Acero. Findings of fact by administrative
agencies, having acquired expertise in their field of specialization, must be given grea t
weight by this Court.[48] Even if the exact area of encroachment is not specified in the
agreement, it can still be determined from the technical description of the title of
plaintiff which defendant Acero admitted to be correct. Thus, the object of the
Compromise Agreement is considered determinate and specific.
Moreover, vagueness is defined in Blacks Law Dictionary as: indefinite, uncertain; not
susceptible of being understood.
A perusal of the entire Compromise Agreement will negate any contention that there is
vagueness in its provisions. It must be remembered that in the interpretation of
contracts, an instrument must be construed so as to give effect to all the provisions of
these contracts.[49] Thus, the Compromise Agreement must be considered as a whole.
The alleged vagueness revolves around the term portion in paragraph three (3) of the
Compromise Agreement,[50] taken together with paragraph one (1) which we quote:
1. That defendants admit and recognize the ownership of the plaintiff over the property
subject of this case, covered by TCT No. S-107639 (75600), S-107643 (67007), and S-
107640 (67006) with a total area of 26,705 square meters;
xxxx
3. That defendant Acero admits that the property he is presently occupying by way of
lease is encroaching on a portion of the property of the plaintiff and assume and
undertakes to vacate, remove and clear any and all structures erected inside the
property of the plaintiff by himself and other third parties, duly authorized and/or who
have an existing agreement with defendant Acero, and shall deliver said portion of the
property of the plaintiff free and clear of any unauthorized structures, shanties,
occupants, squatters or lessees within a period of sixty (60) days from date of signing of
this compromise agreement. Should defendant Acero fail in his obligation to vacate,
remove and clear the structures erected inside the property of the plaintiff within the
period of 60 days afore-mentioned, plaintiff shall be entitled to a writ of execution for
the immediate demolition or removal of said structure to fully implement this agreement;
and ejectment of all squatters and occupants and lessees, including the dependents to
fully implement this agreement. (Emphasis supplied.)
Respondent harps on their contention that the term portion in paragraph 3 of the
Compromise Agreement refers to the property which they are occupying. Respondents
interpretation of paragraph 3 of the Compromise Agreement is mistaken as it is
anchored on his belief that the encroachment on the property of petitioners is only a
portion and not the entire lot he is occupying. This is apparent from his Supplement to his
Petition for Certiorari and Mandamus where he explained:
Petitioner [Acero] entered into this agreement because of his well-founded belief and
conviction that a portion of the property he is occupying encroaches only a portion of
the property of private respondent. In fine, only a portion of the property petitioner is
occupying (not all of it) encroaches on a portion of the property of private
respondent.[51]
This contention is incorrect. The agreement is clear that respondent Acero admitted that
the property he is presently occupying by way of lease is encroaching on a portionof
the property of the plaintiff. Thus, whether it is only a portion or the entire lot Acero is
leasing that will be affected by the agreement is of no importance. What controls is the
encroachment on the lot of petitioner Domingo Realty regardless of whether the entire
lot or only a portion occupied by Acero will be covered by the encroachment.
While it may be the honest belief of respondent Acero that only a portion of the lot he is
occupying encroaches on the 26,705-square meter lot of petitioner Domingo Realty
and later, Ayala Steel, the Court finds that the true and real agreement between the
parties is that any encroachment by respondent Acero on the lot of petitioners will be
surrendered to the latter. This is apparent from the undertaking in paragraph 3 that
defendant Acero undertakes to vacate, remove and clear any and all structures
erected inside the property of the plaintiff. This prestation results from the admission
against the interest of respondent Acero that he admits and recognizes the ownership
of the plaintiff (Domingo Realty) over the subject lot. The controlling word therefore
is encroachmentwhether it involves a portion of or the entire lot claimed by defendant
David Victorio. To reiterate, the word portion refers to petitioners lot and not that of
Aceros. Contrary to the disposition of the CA, we rule that the terms of the Compromise
Agreement are clear and leave no doubt upon the intent of the parties that respondent
Acero will vacate, remove, and clear any and all structures erected inside petitioners
property, the ownership of which is not denied by him. The literal meaning of the
stipulations in the Compromise Agreement will control under Article 1370 of the Civil
Code. Thus, the alleged vagueness in the object of the agreement cannot be made an
excuse for its nullification.
Finally, with regard to the fourth issue, petitioners question the finding of the CA that the
compromise judgment can be set aside on the ground of mistake under Article 2038 of
the Civil Code, because respondent Acero gave his consent to the Compromise
Agreement in good faith that he would only vacate a portion of his lot in favor of
petitioner Domingo Realty.
We rule otherwise.
Articles 2038 and 1330 of the Civil Code allow a party to a contract, on the ground of
mistake, to nullify a compromise agreement, viz:
Article 2038. A compromise in which there is mistake, fraud, violence, intimidation,
undue influence, or falsity of documents, is subject to the provisions of Article 1330 of this
Code.
Article 1330. A contract where the consent is given through mistake, violence,
intimidation, undue influence, or fraud is voidable (emphasis supplied).
Mistake has been defined as a misunderstanding of the meaning or implication of
something or a wrong action or statement proceeding from a faulty judgment x x x. [52]
Article 1333 of the Civil Code of the Philippines however states that there is no mistake if
the party alleging it knew the doubt, contingency or risk affecting the object of the
contract.
Under this provision of law, it is presumed that the parties to a contract know and
understand the import of their agreement. Thus, civil law expert Arturo M. Tolentino
opined that:
To invalidate consent, the error must be excusable. It must be real error, and not one
that could have been avoided by the party alleging it. The error must arise from facts
unknown to him. He cannot allege an error which refers to a fact known to him, or
which he should have known by ordinary diligent examination of the facts. An error so
patent and obvious that nobody could have made it, or one which could have been
avoided by ordinary prudence, cannot be invoked by the one who made it in order to
annul his contract. A mistake that is caused by manifest negligence cannot invalidate a
juridical act. [53] (Emphasis supplied.)
Prior to the execution of the Compromise Agreement, respondent Acero was already
aware of the technical description of the titled lots of petitioner Domingo Realty and
more so, of the boundaries and area of the lot he leased from David Victorio. Before
consenting to the agreement, he could have simply hired a geodetic engineer to
conduct a verification survey and determine the actual encroachment of the area he
was leasing on the titled lot of petitioner Domingo Realty. Had he undertaken such a
precautionary measure, he would have known that the entire area he was occupying
intruded into the titled lot of petitioners and possibly, he would not have signed the
agreement.
In this factual milieu, respondent Acero could have easily averted the alleged mistake in
the contract; but through palpable neglect, he failed to undertake the measures
expected of a person of ordinary prudence. Without doubt, this kind of mistake cannot
be resorted to by respondent Acero as a ground to nullify an otherwise clear, legal, and
valid agreement, even though the document may become adverse and even ruinous
to his business.
Moreover, respondent failed to state in the Compromise Agreement that he intended
to vacate only a portion of the property he was leasing. Such provision being beneficial
to respondent, he, in the exercise of the proper diligence required, should have made
sure that such matter was specified in the Compromise Agreement. Respondent Aceros
failure to have the said stipulation incorporated in the Compromise Agreement is
negligence on his part and insufficient to abrogate said agreement.
In Torres v. Court of Appeals,[54] which was also cited in LL and Company Development
and Agro-Industrial Corporation v. Huang Chao Chun,[55] it was held that:
Under Article 1315 of the Civil Code, contracts bind the parties not only to what has
been expressly stipulated, but also to all necessary consequences thereof, as follows:
ART. 1315. Contracts are perfected by mere consent, and from that moment the parties
are bound not only to the fulfillment of what has been expressly stipulated but also to all
the consequences which, according to their nature, may be in keeping with good faith,
usage and law.
It is undisputed that petitioners are educated and are thus presumed to have
understood the terms of the contract they voluntarily signed. If it was not in consonance
with their expectations, they should have objected to it and insisted on the provisions
they wanted.
Courts are not authorized to extricate parties from the necessary consequences of their
acts, and the fact that the contractual stipulations may turn out to be financially
disadvantageous will not relieve parties thereto of their obligations. They cannot now
disavow the relationship formed from such agreement due to their supposed
misunderstanding of its terms.
The mere fact that the Compromise Agreement favors one party does not render it
invalid. We ruled in Amarante v. Court of Appeals that:
Compromises are generally to be favored and cannot be set aside if the parties acted
in good faith and made reciprocal concessions to each other in order to terminate a
case. This holds true even if all the gains appear to be on one side and all the sacrifices
on the other (emphasis supplied).[56]
One final note. While the Court can commiserate with respondent Acero in his sad
plight, nonetheless we have no power to make or alter contracts in order to save him
from the adverse stipulations in the Compromise Agreement. Hopefully this case will
serve as a precaution to prospective parties to a contract involving titled lands for them
to exercise the diligence of a reasonably prudent person by undertaking measures to
ensure the legality of the title and the accurate metes and bounds of the lot embraced
in the title. It is advisable that such parties (1) verify the origin, history, authenticity, and
validity of the title with the Office of the Register of Deeds and the Land Registration
Authority; (2) engage the services of a competent and reliable geodetic engineer to
verify the boundary, metes, and bounds of the lot subject of said title based on the
technical description in the said title and the approved survey plan in the Land
Management Bureau; (3) conduct an actual ocular inspection of the lot; (4) inquire
from the owners and possessors of adjoining lots with respect to the true and legal
ownership of the lot in question; (5) put up signs that said lot is being purchased, leased,
or encumbered; and (6) undertake such other measures to make the general public
aware that said lot will be subject to alienation, lease, or encumbrance by the
parties. Respondent Acero, for all his woes, may have a legal recourse against lessor
David Victorio who inveigled him to lease the lot which turned out to be owned by
another.
WHEREFORE, the petition is hereby GRANTED and the assailed Decision and Resolution of
the CA are REVERSED. The questioned Orders of the Pasay City RTC dated December 6,
1991, January 15, 1992, October 6, 1992, January 12, 1994, and February 1, 1994,
including the Decision dated December 7, 1987, are AFFIRMED. The case is remanded
to the Pasay RTC, Branch III for further proceedings with respect to petitioner Domingo
Realtys November 15, 1981 Complaint[57] against one of the defendants, David
Victorio. No costs.
SO ORDERED.
THIRD DIVISION
G.R. No. 204369 September 17, 2014
ENRIQUETA M. LOCSIN, Petitioner,
vs.
BERNARDO HIZON, CARLOS HIZON, SPS. JOSE MANUEL & LOURDES
GUEVARA, Respondents.
DECISION
VELASCO, JR., J.:
Nature of the Case
Before Us is a Petition for Review on Certiorari under Rule 45 assailing the Decision 1 and
Resolution of the Court of Appeals (CA), dated June 6, 2012 and October 30, 2012,
respectively, in CA-G.R. CV No. 96659 entitled Enriqueta M Locsin v. Marylou Bolos, et al.
In reversing the ruling of the trial court, the CA held that respondents are innocent
purchasers in good faith and for value of the subject property.
The Facts
Petitioner Enriqueta M. Locsin (Locsin) was the registered owner of a 760-sq.m. lot
covered by Transfer Certificate of Title (TCT) No. 235094, located at 49 Don Vicente St.,
Don Antonio Heights Subdivision, Brgy. Holy Spirit, Capitol, Quezon City. In 1992, she filed
an ejectment case, Civil Case No. 38-6633,2 against one Billy Aceron (Aceron) before
the Metropolitan Trial Court, Branch 3 8 in Quezon City (MTC) to recover possession over
the land in issue. Eventually, the two entered into a compromise agreement, which the
MTC approved on August 6, 1993.3
Locsin later went to the United States without knowing whether Aceron has complied
with his part of the bargain under the compromise agreement. In spite of her absence,
however, she continued to pay the real property taxes on the subject lot.
In 1994, after discovering thather copy of TCT No. 235094 was missing, Locsin filed a
petition for administrative reconstruction in order to secure a new one, TCT No. RT-97467.
Sometime in early 2002, she then requested her counsel to check the status of the
subject lot. It was then that they discovered the following:
1. One Marylou Bolos (Bolos) had TCT No. RT-97467 cancelled on February 11, 1999, and
then secured a new one, TCT No. N-200074, in her favor by registering a Deed of
Absolute Sale dated November 3, 1979 allegedly executed by Locsin with the Registry
of Deeds;
2. Bolos later sold the subject lot to Bernardo Hizon (Bernardo) for PhP 1.5 million, but it
was titled under Carlos Hizon’s (Carlos’) name on August 12, 1999. Carlos is Bernardo’s
son;
3. On October 1, 1999, Bernardo, claiming to be the owner of the property, filed a
Motion for Issuance of Writ of Execution for the enforcement of the court-approved
compromise agreement in Civil Case No. 38-6633;
4. The property was already occupied and was, in fact, up for sale.
On May 9, 2002, Locsin, through counsel, sent Carlos a letter requesting the return of the
property since her signature in the purported deed of sale in favor of Bolos was a
forgery. In a letter-reply dated May 20, 2002, Carlos denied Locsin’s request, claiming
that he was unaware of any defect or flaw in Bolos’ title and he is, thus, an innocent
purchaser for value and good faith. On June 13, 2002, 4 Bernardo met with Locsin’s
counsel and discussed the possibility of a compromise. He ended the meeting with a
promise to come up with a win-win situation for his son and Locsin, a promise which
turned out to be deceitful, for, on July 15, 2002, Locsin learned that Carlos had already
sold the property for PhP 1.5 million to his sister and her husband, herein respondents
Lourdes and Jose Manuel Guevara (spouses Guevara), respectively, who, as early as
May 24, 2002, had a new certificate of title, TCT No. N-237083, issued in their names. The
spouses Guevara then immediately mortgaged the said property to secure a PhP 2.5
million loan/credit facility with Damar Credit Corporation (DCC).
It was against the foregoing backdrop of events that Locsin filed an action for
reconveyance, annulment ofTCT No. N-237083, the cancellation of the mortgage lien
annotated thereon, and damages, against Bolos, Bernardo, Carlos, the Sps. Guevara,
DCC, and the Register of Deeds, Quezon City, docketed as Civil Case No. Q-02-47925,
which was tried by the Regional Trial Court, Branch 77 in Quezon City (RTC). The charges
against DCC, however, weredropped on joint motion ofthe parties. This is in view of the
cancellation of the mortgage for failure of the spouses Guevara to avail of the
loan/credit facility DCC extended in their favor. 5
Ruling of the Trial Court
On November 19, 2010, the RTC rendered a Decision 6 dismissing the complaint and
finding for respondents,as defendants thereat, holding that: (a) there is insufficient
evidence to showthat Locsin’s signature in the Deed of Absolute Sale between her and
Bolos is a forgery; (b) the questioned deed is a public document, having been
notarized; thus, it has, in its favor, the presumption of regularity; (c) Locsin cannot simply
rely on the apparent difference of the signatures in the deed and in the documents
presented by her to prove her allegation of forgery; (d) the transfers of title from Bolos to
Carlos and from Carlos to the spouses Guevara are valid and regular; (e) Bernardo,
Carlos, and the spouses Guevara are all buyers in good faith. Aggrieved, petitioner
appealed the case to the CA.
Ruling of the Court of Appeals
The CA, in its assailed Decision, ruled that it was erroneous for the RTC to hold that Locsin
failed to prove that her signature was forged. In its appreciation of the evidence, the
CA found that, indeed, Locsin’s signature in the Deed of Absolute Sale in favor of Bolos
differs from her signatures in the other documents offered as evidence.
The CA, however, affirmed the RTC’s finding that herein respondents are innocent
purchasers for value. Citing Casimiro Development Corp. v. Renato L. Mateo,7 the
appellate court held that respondents, having dealt with property registered under the
Torrens System, need not go beyond the certificate of title, but only has to rely on the
said certificate. Moreover, as the CA added, any notice of defect or flaw in the title of
the vendor should encompass facts and circumstances that would impel a reasonably
prudent man to inquire into the status of the title of the property in order to amount to
bad faith.
Accordingly, the CA ruled that Locsin can no longer recover the subject lot. 8 Hence, the
insant petition.
Arguments
Petitioner Locsin insists that Bernardo was well aware, at the time he purchased the
subject property, of a possible defect in Bolos’ title since he knew that another person,
Aceron, was then occupying the lot in issue. 9 As a matter of fact, Bernardo even moved
for the execution of the compromise agreement between Locsin and Aceron inCivil
Case No. 38-6633 in order to enforce to oust Aceron of his possession over the
property.10
Thus, petitioner maintains that Bernardo, knowing as he did the incidents involving the
subject property,should have acted as a reasonably diligent buyer in verifying the
authenticity of Bolos’title instead of closing his eyes to the possibility of a defecttherein.
Essentially, petitioner argues that Bernardo’s stubborn refusal to make an inquiry beyond
the face of Bolos’ title is indicative of his lack of prudence in protecting himself from
possible defects or flaws therein, and consequently bars him from interposing the
protection accorded toan innocent purchaser for value.
As regards Carlos and the Sps. Guevara’s admissions and testimonies, petitioner points
out that when these are placed side-by-side with the concurrent circumstances in the
case, it is readily revealed that the transfer from the former to the latter was only
simulated and intended to keep the property out of petitioner’s reach.
For their part, respondents maintain that they had the right to rely solely upon the face
of Bolos’ clean title, considering that it was free from any lien or encumbrance. They are
not even required, so they claim, to check on the validity of the sale from which they
derived their title.11 Too, respondents claim that their knowledge of Aceron’s possession
cannot be the basis for an allegation of bad faith, for the property was purchased on
an "asis where-is" basis. The Issue
Considering that the finding of the CAthat Locsin’s signature in the Deed of Absolute
Sale in favor of Bolos was indeed bogus commands itself for concurrence, the resolution
of the present petition lies on this singular issue––whether or not respondents are
innocent purchasers for value.12
The Court’s Ruling
The petition is meritorious.
Procedural issue
As a general rule, only questions of law may be raised in a petition for review on
certiorari.13 This Court is not a trier offacts; and in the exercise of the power of review, we
do not normally undertake the re-examination of the evidence presented by the
contending parties during the trial of the case. 14 This rule, however, admits of
exceptions.For one, the findings of fact of the CA will not bind the parties in cases where
the inference made on the evidence is mistaken, as here. 15
That being said, we now proceed to the core of the controversy.
Precautionary measures for buyers of real property
An innocent purchaser for value is one who buys the property of another without notice
that some other person has a right to or interest in it, and who pays a full and fair price
atthe time of the purchase or before receiving any notice of another person’s
claim.16 As such, a defective title–– or one the procurement of which is tainted with
fraud and misrepresentation––may be the source of a completely legal and valid title,
provided that the buyer is an innocent third person who, in good faith, relied on the
correctness of the certificate of title, or an innocent purchaser for value.17
Complementing this is the mirror doctrine which echoes the doctrinal rule that every
person dealing with registered land may safely rely on the correctness of the certificate
of title issued therefor and is in no way obliged to go beyond the certificate to
determine the condition of the property.18 The recognized exceptions to this rule are
stated as follows:
[A] person dealing with registeredland has a right to rely on the Torrens certificate of title
and to dispense with the need of inquiring further except when the party has actual
knowledge of facts and circumstances that would impel a reasonably cautious man to
make such inquiry or when the purchaser has knowledge of a defect or the lack of title
in his vendor or of sufficient facts to induce a reasonably prudent man to inquire into the
status of the title of the property in litigation. The presence of anything which excites or
arouses suspicion should then prompt the vendee to look beyond the certificate and
investigate the title of the vendor appearing on the face of said certificate. One who
falls within the exception can neither be denominated an innocent purchaser for value
nor a purchaser in good faith and, hence, does not merit the protection of the
law.19 (emphasis added)
Thus, in Domingo Realty, Inc. v. CA,20 we emphasized the need for prospective parties to
a contract involving titled lands to exercise the diligence of a reasonably prudent
person in ensuring the legality of the title, and the accuracy of the metes and bounds of
the lot embraced therein, by undertaking precautionary measures, such as:
1. Verifying the origin, history, authenticity, and validity of the title with the Office of the
Register of Deeds and the Land Registration Authority;
2. Engaging the services of a competent and reliable geodetic engineer to verify the
boundary,metes, and bounds of the lot subject of said title based on the technical
description in the said title and the approved survey plan in the Land Management
Bureau;
3. Conducting an actual ocular inspection of the lot;
4. Inquiring from the owners and possessors of adjoining lots with respect to the true and
legal ownership of the lot in question;
5. Putting up of signs that said lot is being purchased, leased, or encumbered; and
6. Undertaking such other measures to make the general public aware that said lot will
be subject to alienation, lease, or encumbrance by the parties.
In the case at bar, Bolos’ certificate of title was concededly free from liens and
encumbrances on its face. However, the failure of Carlos and the spouses Guevara to
exercise the necessary level ofcaution in light of the factual milieu surrounding the
sequence of transfers from Bolos to respondents bars the application of the mirror
doctrine and inspires the Court’s concurrence withpetitioner’s proposition.
Carlos is not an innocent purchaser for value
Foremost, the Court is of the view that Bernardo negotiated with Bolos for the property
as Carlos’ agent. This is bolstered by the fact that he was the one who arranged for the
saleand eventual registration of the property in Carlos’ favor. Carlos testified during the
May 27, 2009 hearing:21
Q: Are you privy with the negotiations between your father, Mr. Bernardo Hizon, and
your co-defendant, Marylou Bolos, the alleged seller?
A: No, Ma’am.
Q: Do you remember having signed a Deed of Absolute Sale, dated August 12, 1999?
A: Yes, Ma’am.
Q: And, at that time that you have signed the Deed, was Marylou Bolos present?
A: No, Ma’am.
Q: Who negotiated and arranged for the sale of the property between Marylou Bolos
and you? A: It was my father. (emphasis ours)
Consistent with the rule that the principal is chargeable and bound by the knowledge
of, or notice to, his agent received in that capacity, 22 any information available and
known to Bernardo is deemed similarly available and known to Carlos, including the
following:
1. Bernardo knew that Bolos, from whom he purchased the subject property, never
acquired possession over the lot. As a matter of fact, in his March 11, 2009 direct
testimony,23 Bernardo admitted having knowledge of Aceron’s lot possession as well as
the compromise agreement between petitioner and Aceron.
2. Bolos’ purported Deed of Sale was executed on November 3, 1979 but the ejectment
case commenced by Locsin against Aceron was in 1992, or thirteen (13)years after the
property was supposedly transferred to Bolos.
3. The August 6, 1993 Judgment,24 issued by the MTC on the compromise agreement
between Locsin and Aceron, clearly stated therein that "[o]n August 2, 1993,the parties
[Aceron and Locsin] submitted to [the MTC] for approval a Compromise Agreement
dated July 28, 1993." It further indicated that "[Aceron] acknowledges [Locsin’s] right of
possessionto [the subject property], being the registered owner thereof."
Having knowledge of the foregoing facts, Bernardo and Carlos, to our mind, should
have been impelled to investigate the reason behind the arrangement. They should
have been pressed to inquire into the status of the title of the property in litigation in
order to protect Carlos’ interest. It should have struck them as odd that it was Locsin, not
Bolos, who sought the recovery of possession by commencing an ejectment case
against Aceron, and even entered into a compromiseagreement with the latter years
afterthe purported sale in Bolos’ favor. Instead, Bernardo and Carlos took inconsistent
positions when they argued for the validity of the transfer of the property in favor of
Bolos, but in the same breath prayed for the enforcement of the compromise
agreement entered into by Locsin.
At this point it is well to emphasize that entering into a compromise agreement is an act
of strict dominion.25 If Bolos already acquired ownership of the property as early as 1979,
it should have been her who entered into a compromise agreement with Aceron in
1993, not her predecessor-in-interest, Locsin, who, theoretically, had already divested
herself of ownership thereof.
The spouses Guevara are not innocent purchasers for value
As regards the transfer of the property from Carlos to the spouses Guevara, We find the
existence of the sale highly suspicious. For one, there is a dearth of evidence to support
the respondent spouses’ position that the sale was a bona fide transaction. Evenif we
repeatedly sift through the evidence on record, still we cannot findany document,
contract, or deed evidencing the sale in favor of the spouses Guevara. The same goes
for the purported payment of the purchase price of the property in the amount of PhP
1.5 million in favor of Carlos. As a matter of fact, the only documentary evidence that
they presented were as follows:
1. Deed of Sale between Locsin and Bolos;
2. TCT No. 200074 issued in Bolos’ name;
3. TCT No. N-205332 in Carlos’ name;
4. TCT No. N-237083 in the nameof the Sps. Guevara.
To bridge the gap in their documentary evidence, respondents proffer their own
testimonies explaining the circumstances surrounding the alleged sale. 26 However, basic
is the rule that bare and self-serving allegations, unsubstantiated by evidence, are not
equivalent to proof under the Rules.27 As such, we cannot give credence to their
representations that the sale between them actually transpired.
Furthermore, and noticeably enough,the transfer from Carlos to the spouses Guevara
was effected only fifteen(15) days after Locsin demanded the surrender of the property
fromCarlos. Reviewing the timeline:
May 9, 2002: Locsin’s counsel sent a letter to Carlos, requesting that he return the
property to Locsin since the latter’s signature in the purported deed of sale between her
and Bolos was a forgery.
May 20, 2002:Carlos’ counsel replied to Locsin’s May 9, 2002 letter, claiming that Carlos
was unaware of any defect or flaw in Bolos’ title, making him an innocent purchaserof
the subject property.
May 24, 2002: The Sps. Guevara allegedly purchased the property from Carlos.
When Bernardo met with Locsin’scounsel on June 13, 2002, and personally made a
commitment to comeup with a win-win situation for his son and Locsin, he knew fully
well, too,that the property had already been purportedly transferred to his daughter
and son-in-law, the spouses Guevara, for he, no less, facilitated the same. This, to us,
isglaring evidence of bad faith and an apparent intention to mislead Locsin into
believing that she could no longer recover the subject property.
Also, the fact that Lourdes Guevara and Carlos are siblings, and that Carlos’ agent in his
dealings concerning the property is his own father, renders incredible the argument
thatLourdes had no knowledge whatsoever of Locsin’s claim of ownership atthe time of
the purported sale.
Indeed, the fact that the spouses Guevara never intended to be the owner in good
faith and for value of the lot is further made manifest by their lack of interest in
protecting themselvesin the case. It does not even appear in their testimonies that they,
at the very least, intended to vigilantly protect their claim over the property and prevent
Locsin take it away from them. What they did was to simply appoint Bernardo as their
attorney-in-fact to handle the situation and never bothered acquainting themselves
with the developments in the case.28 To be sure, respondent Jose Manuel Guevara was
not even presented asa witness in the case.
There is also strong reason to believethat even the mortgage in favor of DCC was a
mere ploy tomake it appear that the Sps. Guevara exercised acts of dominion over the
subject property. This is so considering the proximity between the property’s registration
in their names and its being subjected to the mortgage. Most telling is that the credit
line secured by the mortgage was never used by the spouses, resulting in the
mortgage’s cancellation and the exclusion of DCC as a party in Civil Case No. Q-02-
47925.1âwphi1
These circumstances, taken altogether, strongly indicate that Carlos and the spouses
Guevara failed to exercise the necessary level of caution expected of a bona fide
buyer and even performed acts that are highly suspect. Consequently, this Court could
not give respondents the protection accorded to innocent purchasers in good faith
and for value.
Locsin is entitled to nominal damages
We now delve into petitioner’s prayer for exemplary damages, attorney’s fees, and
costs of suit. Here, the Court notes that petitioner failed to specifically pray that moral
damages be awarded. Additionally, she never invoked any of the grounds that would
have warranted the award of moral damages. As can be gleaned from the records,
lacking from her testimony is any claim that she suffered any form of physical suffering,
mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral
shock, social humiliation, or any other similar circumstance. 29 Thus, we are constrained
to refrain from awarding moral damages in favor of petitioner.
In the same vein, exemplary damages cannot be awarded in favor of petitioner. Well-
settled that this species of damages is allowed only in addition to moral damages such
that no exemplary damages can be awarded unless the claimant first establishes his
clear right to moral damages.30 Consequently, despite our finding that respondents
acted in a fraudulent manner, petitioner’s claim for exemplary damages is unavailing at
this point.
Nevertheless, we find an award for nominal damages to be in order. Under prevailing
jurisprudence, nominal damages are "recoverable where a legal right is technically
violated and must be vindicated against an invasion that has produced no actual
present loss of any kind or where there has been a breach of contract and no
substantial injury or actual damages whatsoever have been or can be shown." 31 As
expounded in Almeda v. Cariño,32 a violation of the plaintiff’s right, even if only
technical, is sufficient to support an award of nominal damages. So long as there is a
showing of a violation of the right of the plaintiff, as herein petitioner, an award of
nominal damages is proper.33
In the case at bar, this Court recognizes that petitioner was unduly deprived of her
ownership rights overthe property, and was compelled to litigate for its recovery, for
almost ten (10) years. Clearly, this could have entitled her to actual or compensatory
damages had she quantified and proved, during trial, the amounts which could have
accrued in her favor, including commercial fruits such as reasonable rent covering the
pendency of the case. Nonetheless, petitioner’s failure to prove actual or
compensatory damages does not erase the fact that her property rights were
unlawfully invaded by respondents, entitling her to nominal damages.
As to the amount to be awarded, it bears stressing that the same is addressed to the
sound discretion ofthe court, taking into account the relevant
circumstances.34 Considering the length of time petitioner was deprived of her property
and the bad faith attending respondents’ actuations in the extant case, we find the
amount of seventy-five thousand pesos (PhP 75,000) as sufficient nominal damages.
Moreover, respondents should be held jointly and severally liable for the said amount,
attorney’s fees in the amount of an additional seventy-fivethousand pesos (PhP 75,000),
and the costs of the suit.
WHEREFORE, in light of the foregoing, the Petition is hereby GRANTED. The assailed
Decision of the Court of Appeals dated June 6, 2012 in CA-G.R. CV No. 96659 affirming
the Decision of the Regional Trial Court, Branch 77, Quezon City, in Civil Case No. Q-02-
47925; as well as its Resolution dated October 30, 2012, denying reconsideration thereof,
are hereby REVERSED and SET ASIDE. TCT No. N-200074 in the name of Marylou Bolos,
and the titles descending therefrom, namely, TCT Nos. N-205332 and N-237083 in the
name of Carlos Hizon, and the Spouses Jose Manuel & Lourdes Guevara, respectively,
are hereby declared NULL and VOID. Respondents and all other persons acting under
their authority are hereby DIRECTED to surrender possession of the subject property in
favor of petitioner. Respondents Bernardo Hizon, Carlos Hizon, and the spouses Jose
Manuel and Lourdes Guevara shall jointly and severally pay petitioner PhP 75,000 as
nominal damages, PhP 75,000 as attorney's fees, and costs of suit.
The Register of Deeds of Quezon City is hereby ORDERED to (1) cancel TCT No. N-
237083; (2) reinstate TCT No. RT-97467; and (3) reissue TCT No. RT-97467 in favor of
petitioner, without requiring from petitioner payment for any and all expenses in
performing the three acts.
SO ORDERED.
[G. R. No. 102377. July 5, 1996]
ALFREDO SAJONAS and CONCHITA SAJONAS, petitioners, vs. THE COURT OF APPEALS,
DOMINGO A. PILARES, SHERIFF ROBERTO GARCIA OF QUEZON CITY and REGISTER OF
DEEDS OF MARIKINA, respondents.
DECISION
TORRES, JR., J.:
A word or group of words conveys intentions. When used truncatedly, its meaning
disappears and breeds conflict. Thus, it is written - By thy words shalt thou be justified,
and by thy words shalt thou be condemned. (Matthew, 12:37)
Construing the new words of a statute separately is the raison detre of this appeal.
Essentially, the case before us is for cancellation of the inscription of a Notice of Levy on
Execution from a certificate of Title covering a parcel of real property. The inscription
was caused to be made by the private respondent on Transfer Certificate of Title No. N-
79073 of the Register of Deeds of Marikina, issued in the name of the spouses Ernesto B.
Uychocde and Lucita Jarin, and was later carried over to and annotated on Transfer
Certificate of Title No. N-109417 of the same registry, issued in the name of the spouses
Alfredo Sajonas and Conchita R. Sajonas, who purchased the parcel of land from the
Uychocdes, and are now the petitioners in this case.
The facts are not disputed, and are hereby reproduced as follows:
On September 22, 1983, the spouses Ernesto Uychocde and Lucita Jarin agreed to sell a
parcel of residential land located in Antipolo, Rizal to the spouses Alfredo Sajonas and
Conchita R. Sajonas on installment basis as evidenced by a Contract to Sell dated
September 22, 1983. The property was registered in the names of the Uychocde spouses
under TCT No. N-79073 of the Register of Deeds of Marikina, Rizal. On August 27, 1984,
the Sajonas couple caused the annotation of an adverse claim based on the said
Contract to Sell on the title of the subject property, which was inscribed as Entry No.
116017. Upon full payment of the purchase price, the Uychocdes executed a Deed of
Sale involving the property in question in favor of the Sajonas couple on September 4,
1984. The deed of absolute sale was registered almost a year after, or on August 28,
1985.
Meanwhile, it appears that Domingo Pilares (defendant-appellant) filed Civil Case No.
Q-28850 for collection of sum of money against Ernesto Uychocde. On June 25, 1980, a
Compromise Agreement was entered into by the parties in the said case under which
Ernesto Uychocde acknowledged his monetary obligation to Domingo Pilares
amounting to P27,800 and agreed to pay the same in two years from June 25, 1980.
When Uychocde failed to comply with his undertaking in the compromise agreement,
defendant-appellant Pilares moved for the issuance of a writ of execution to enforce
the decision based on the compromise agreement, which the court granted in its order
dated August 3, 1982. Accordingly, a writ of execution was issued on August 12, 1982 by
the CFI of Quezon City where the civil case was pending. Pursuant to the order of
execution dated August 3, 1982, a notice of levy on execution was issued on February
12, 1985. On February 12, 1985, defendant sheriff Roberto Garcia of Quezon City
presented said notice of levy on execution before the Register of Deeds of Marikina and
the same was annotated at the back of TCT No. 79073 as Entry No. 123283.
When the deed of absolute sale dated September 4 1984 was registered on August 28,
1985, TCT No. N-79073 was cancelled and in lieu thereof, TCT No. N-109417 was ssued in
the name of the Sajonas couple. The notice of levy on execution annotated by
defendant sheriff was carried over to the new title. On October 21, 1985, the Sajonas
couple filed a Third Party Claim with the sheriff of Quezon City, hence the auction sale
of the subject property did not push through as scheduled.
On January 10, 1986, the Sajonas spouses demanded the cancellation of the notice of
levy on execution upon defendant-appellant Pilares, through a letter to their lawyer,
Atty. Melchor Flores. Despite said demand, defendant-appellant Pilares refused to
cause the cancellation of said annotation. In view thereof, plaintiffs-appellees filed this
complaint dated January 11, 1986 on February 5, 1986.[1]
The Sajonases filed their complaint[2] in the Regional Trial Court of Rizal, Branch 71,
against Domingo Pilares, the judgment creditor of the Uychocdes. The relevant portion
of the complaint alleges:
7. That at the time the notice of levy was annotated by the defendant, the Uychocde
spouses, debtors of the defendant, have already transferred, conveyed and assigned
all their title, rights and interests to the plaintiffs and there was no more title, rights or
interests therein which the defendant could levy upon;
8. That the annotation of the levy on execution which was carried over to the title of
said plaintiffs is illegal and invalid and was made in utter bad faith, in view of the
existence of the Adverse Claim annotated by the plaintiffs on the corresponding title of
the Uychocde spouses;
9. That a demand was made by the plaintiffs upon the defendant Domingo A. Pilares, to
cause the cancellation of the said notice of levy but the latter, without justifiable reason
and with the sole purpose of harassing and embarrassing the plaintiffs ignored and
refused plaintiffs demand;
10. That in view of the neglect, failure and refusal of the defendant to cause the
cancellation of the notice of levy on execution, the plaintiffs were compelled to litigate
and engage the services of the undersigned counsel, to protect their rights and
interests, for which they agreed to pay attorneys fees in the amount of P10,000 and
appearance fees of P500 per day in court.[3]
Pilares filed his answer with compulsory counterclaim[4] on March 8, 1986, raising special
and affirmative defenses, the relevant portions of which are as follows:
10. Plaintiff has no cause of action against herein defendants;
11. Assuming, without however admitting that they filed an adverse claim against the
property covered by TCT No. 79073 registered under the name of spouses Ernesto
Uychocde on August 27, 1984, the same ceases to have any legal force and effect (30)
days thereafter pursuant to Section 70 of P.D. 1529;
12. The Notice of Levy annotated at the back of TCT No. 79073 being effected pursuant
to the Writ of Execution dated August 31, 1982, duly issued by the CFI (now RTC) of
Quezon City proceeding from a decision rendered in Civil Case No. 28859 in favor of
herein defendant against Ernesto Uychocde, is undoubtedly proper and appropriate
because the property is registered in the name of the judgment debtor and is not
among those exempted from execution;
13. Assuming without admitting that the property subject matter of this case was in fact
sold by the registered owner in favor of the herein plaintiffs, the sale is the null and void
(sic) and without any legal force and effect because it was done in fraud of a
judgment creditor, the defendant Pilares.[5]
Pilares likewise sought moral and exemplary damages in a counterclaim against the
Sajonas spouses. The parties appeared at pre-trial proceedings on January 21,
1987,[6] after which, trial on the merits ensued.
The trial court rendered its decision on February 15, 1989. [7] It found in favor of the
Sajonas couple, and ordered the cancellation of the Notice of Levy from Transfer
Certificate of Title No. N-109417.
The court a quo stated, thus:
After going over the evidence presented by the parties, the court finds that although
the title of the subject matter of the Notice of Levy on Execution was still in the name of
the Spouses Uychocde when the same was annotated on the said title, an earlier
Affidavit of Adverse Claim was annotated on the same title by the plaintiffs who earlier
bought said property from the Uychocdes.
It is a well settled rule in this jurisdiction (Guidote vs. Maravilla, 48 Phil. 442) that actual
notice of an adverse claim is equivalent to registration and the subsequent registration
of the Notice of Levy could not have any legal effect in any respect on account of prior
inscription of the adverse claim annotated on the title of the Uychocdes.
xxx xxx xxx
On the issue of whether or not plaintiffs are buyers in good faith of the property of the
spouses Uychocde even notwithstanding the claim of the defendant that said sale
executed by the spouses was made in fraud of creditors, the Court finds that the
evidence in this instance is bare of any indication that said plaintiffs as purchasers had
notice beforehand of the claim of the defendant over said property or that the same is
involved in a litigation between said spouses and the defendant. Good faith is the
opposite of fraud and bad faith, and the existence of any bad faith must be established
by competent proof.[8] (Cai vs. Henson, 51 Phil 606)
xxx xxx xxx
In view of the foregoing, the Court renders judgment in favor of the plaintiffs and
against the defendant Pilares, as follows:
1. Ordering the cancellation of the Notice of Levy on Execution annotated on Transfer
Certificate of Title No. N-109417.
2. Ordering said defendant to pay the amount of P5,000 as attorneys fees.
3. Dismissing the Counterclaim interposed by said defendant.
Said defendant is likewise ordered to pay the costs.
Dissatisfied, Pilares appealed to the Court of Appeals [9], assigning errors on the part of
the lower court. The appellate court reversed the lower courts decision, and upheld the
annotation of the levy on execution on the certificate of title, thus:
WHEREFORE, the decision of the lower court dated February 15, 1989 is reversed and set
aside and this complaint is dismissed.
Costs against the plaintiffs-appellees." [10]
The Sajonas couple are now before us, on a Petition for Review on Certiorari [11],
praying inter alia to set aside the Court of Appeals decision, and to reinstate that of the
Regional Trial Court.
Private respondent filed his Comment[12] on March 5, 1992, after which, the parties were
ordered to file their respective Memoranda. Private respondent complied thereto on
April 27, 1994[13], while petitioners were able to submit their Memorandum on September
29, 1992.[14]
Petitioner assigns the following as errors of the appellate court, to wit:
I
THE LOWER COURT ERRED IN HOLDING THAT THE RULE ON THE 30-DAY PERIOD FOR
ADVERSE CLAIM UNDER SECTION 70 OF P.D. NO. 1529 IS ABSOLUTE INASMUCH AS IT
FAILED TO READ OR CONSTRUE THE PROVISION IN ITS ENTIRETY AND TO RECONCILE THE
APPARENT INCONSISTENCY WITHIN THE PROVISION IN ORDER TO GIVE EFFECT TO IT AS A
WHOLE.
II
THE LOWER COURT ERRED IN INTERPRETING SECTION 70 OF P.D. NO. 1529 IN SUCH WISE
ON THE GROUND THAT IT VIOLATES PETITIONERS SUBSTANTIAL RIGHT TO DUE PROCESS.
Primarily, we are being asked to ascertain who among the parties in suit has a better
right over the property in question. The petitioners derive their claim from the right of
ownership arising from a perfected contract of absolute sale between them and the
registered owners of the property, such right being attested to by the notice of adverse
claim[15] annotated on TCT No. N-79073 as early as August 27, 1984. Private respondent
on the other hand, claims the right to levy on the property, and have it sold on
execution to satisfy his judgment credit, arising from Civil Case No. Q-28850[16] against
the Uychocdes, from whose title, petitioners derived their own.
Concededly, annotation of an adverse claim is a measure designed to protect the
interest of a person over a piece of real property where the registration of such interest
or right is not otherwise provided for by the Land Registration Act or Act 496 (now P.D.
1529 or the Property Registration Decree), and serves a warning to third parties dealing
with said property that someone is claiming an interest on the same or a better right
than that of the registered owner thereof. Such notice is registered by filing a sworn
statement with the Register of Deeds of the province where the property is located,
setting forth the basis of the claimed right together with other dates pertinent thereto. [17]
The registration of an adverse claim is expressly recognized under Section 70 of P.D. No.
1529.*
Noting the changes made in the terminology of the provisions of the law, private
respondent interpreted this to mean that a Notice of Adverse Claim remains effective
only for a period of 30 days from its annotation, and does not automatically lose its
force afterwards. Private respondent further maintains that the notice of adverse claim
was annotated on August 27, 1984, hence, it will be effective only up to September 26,
1984, after which it will no longer have any binding force and effect pursuant to Section
70 of P.D. No. 1529. Thus, the sale in favor of the petitioners by the Uychocdes was made
in order to defraud their creditor (Pilares), as the same was executed subsequent to their
having defaulted in the payment of their obligation based on a compromise
agreement. [18]
The respondent appellate court upheld private respondents theory when it ruled:
The above stated conclusion of the lower court is based on the premise that the
adverse claim filed by plaintiffs-appellees is still effective despite the lapse of 30 days
from the date of registration. However, under the provisions of Section 70 of P.D. 1529,
an adverse claim shall be effective only for a period of 30 days from the date of its
registration. The provision of this Decree is clear and specific.
xxx xxx xxx
It should be noted that the adverse claim provision in Section 110 of the Land
Registration Act (Act 496) does not provide for a period of effectivity of the annotation
of an adverse claim. P.D. No. 1529, however, now specifically provides for only 30
days. If the intention of the law was for the adverse claim to remain effective until
cancelled by petition of the interested party, then the aforecited provision in P.D. No.
1529 stating the period of effectivity would not have been inserted in the law.
Since the adverse claim was annotated On August 27, 1984, it was effective only until
September 26, 1984. Hence, when the defendant sheriff annotated the notice of levy
on execution on February 12, 1985, said adverse claim was already ineffective. It
cannot be said that actual or prior knowledge of the existence of the adverse claim on
the Uychocdes title is equivalent to registration inasmuch as the adverse claim was
already ineffective when the notice of levy on execution was annotated. Thus, the act
of defendant sheriff in annotating the notice of levy on execution was proper and
justified.
The appellate court relied on the rule of statutory construction that Section 70 is specific
and unambiguous and hence, needs no interpretation nor construction. [19] Perforce, the
appellate court stated, the provision was clear enough to warrant immediate
enforcement, and no interpretation was needed to give it force and effect. A fortiori,
an adverse claim shall be effective only for a period of thirty (30) days from the date of
its registration, after which it shall be without force and effect. Continuing, the court
further stated;
. . . clearly, the issue now has been reduced to one of preference- which should be
preferred between the notice of levy on execution and the deed of absolute sale. The
Deed of Absolute Sale was executed on September 4, 1984, but was registered only on
August 28, 1985, while the notice of levy on execution was annotated six (6) months
prior to the registration of the sale on February 12, 1985.
In the case of Landig vs. U.S. Commercial Co., 89 Phil 638 it was held that where a sale is
recorded later than an attachment, although the former is of an earlier date, the sale
must give way to the attachment on the ground that the act of registration is the
operative act to affect the land. A similar ruling was restated in Campillo vs. Court of
Appeals (129 SCRA 513).
xxx xxx xxx
The reason for these rulings may be found in Section 51 of P.D. 1529, otherwise known as
the Property Registration Decree, which provides as follows:
Section 51. Conveyance and other dealings by the registered owner.- An owner of
registered land may convey, mortgage, lease, charge, or otherwise deal with the same
in accordance with existing laws. He may use such forms of deeds, mortgages, leases or
other voluntary instruments as are sufficient in law. But no deed, mortgage, lease or
other voluntary instrument, except a will purporting to convey or affect registered land
shall take effect as a conveyance or bind the land, but shall operate only as a contract
between the parties and as evidence of authority to the Register of Deeds to make
registration.
The act of registration shall be the operative act to convey or affect the land in so far as
third persons are concerned, and in all cases under the Decree, the registration shall be
made in the office of the Register of Deeds for the province or city where the land
lies. (Italics supplied by the lower court.)
Under the Torrens system, registration is the operative act which gives validity to the
transfer or creates a lien upon the land. A person dealing with registered land is not
required to go behind the register to determine the condition of the property. He is only
charged with notice of the burdens on the property which are noted on the face of the
register or certificate of title. [20]
Although we have relied on the foregoing rule, in many cases coming before us, the
same, however, does not fit in the case at bar. While it is the act of registration which is
the operative act which conveys or affects the land insofar as third persons are
concerned, it is likewise true, that the subsequent sale of property covered by a
Certificate of Title cannot prevail over an adverse claim, duly sworn to and annotated
on the certificate of title previous to the sale. [21] While it is true that under the provisions
of the Property Registration Decree, deeds of conveyance of property registered under
the system, or any interest therein only take effect as a conveyance to bind the land
upon its registration, and that a purchaser is not required to explore further than what
the Torrens title, upon its face, indicates in quest for any hidden defect or inchoate right
that may subsequently defeat his right thereto, nonetheless, this rule is not
absolute. Thus, one who buys from the registered owner need not have to look behind
the certificate of title, he is, nevertheless, bound by the liens and encumbrances
annotated thereon.One who buys without checking the vendors title takes all the risks
and losses consequent to such failure.[22]
In PNB vs. Court of Appeals, we held that the subsequent sale of the property to the De
Castro spouses cannot prevail over the adverse claim of Perez, which was inscribed on
the banks certificate of title on October 6, 1958. That should have put said spouses on
notice, and they can claim no better legal right over and above that of Perez. The TCT
issued in the spouses names on July, 1959 also carried the said annotation of adverse
claim. Consequently, they are not entitled to any interest on the price they paid for the
property.[23]
Then again, in Gardner vs. Court of Appeals, we said that the statement of respondent
court in its resolution of reversal that until the validity of an adverse claim is determined
judicially, it cannot be considered a flaw in the vendors title contradicts the very object
of adverse claims. As stated earlier, the annotation of an adverse claim is a measure
designed to protect the interest of a person over a piece of real property, and serves as
a notice and warning to third parties dealing with said property that someone is
claiming an interest on the same or has a better right than the registered owner
thereof. A subsequent sale cannot prevail over the adverse claim which was previously
annotated in the certificate of title over the property. [24]
The question may be posed, was the adverse claim inscribed in the Transfer Certificate
of Title No. N-109417 still in force when private respondent caused the notice of levy on
execution to be registered and annotated in the said title, considering that more than
thirty days had already lapsed since it was annotated? This is a decisive factor in the
resolution of this instant case.
If the adverse claim was still in effect, then respondents are charged with knowledge of
pre-existing interest over the subject property, and thus, petitioners are entitled to the
cancellation of the notice of levy attached to the certificate of title.
For a definitive answer to this query, we refer to the law itself. Section 110 of Act 496 or
the Land Registration Act reads:
Sec. 110. Whoever claims any part or interest in registered lands adverse to the
registered owner, arising subsequent to the date of the original registration, may, if no
other provision is made in this Act for registering the same, make a statement in writing
setting forth fully his alleged right or interest, and how or under whom acquired, and a
reference to the volume and page of the certificate of title of the registered owner, and
a description of the land in which the right or interest is claimed.
The statement shall be signed and sworn to, and shall state the adverse claimants
residence, and designate a place at which all notices may be served upon him. The
statement shall be entitled to registration as an adverse claim, and the court, upon a
petition of any party in interest, shall grant a speedy hearing upon the question of the
validity of such adverse claim and shall enter such decree therein as justice and equity
may require. If the claim is adjudged to be invalid, the registration shall be cancelled. If
in any case, the court after notice and hearing shall find that a claim thus registered
was frivolous or vexatious, it may tax the adverse claimant double or treble the costs in
its discretion.
The validity of the above-mentioned rules on adverse claims has to be reexamined in
the light of the changes introduced by P.D. 1529, which provides:
Sec. 70 Adverse Claim- Whoever claims any part or interest in registered land adverse to
the registered owner, arising subsequent to the date of the original registration, may, if
no other provision is made in this decree for registering the same, make a statement in
writing setting forth fully his alleged right or interest, and how or under whom acquired, a
reference to the number of certificate of title of the registered owner, the name of the
registered owner, and a description of the land in which the right or interest is claimed.
The statement shall be signed and sworn to, and shall state the adverse claimants
residence, and a place at which all notices may be served upon him. This statement
shall be entitled to registration as an adverse claim on the certificate of title. The
adverse claim shall be effective for a period of thirty days from the date of registration.
After the lapse of said period, the annotation of adverse claim may be cancelled upon
filing of a verified petition therefor by the party in interest: Provided, however, that after
cancellation, no second adverse claim based on the same ground shall be registered
by the same claimant.
Before the lapse of thirty days aforesaid, any party in interest may file a petition in the
Court of First Instance where the land is situated for the cancellation of the adverse
claim, and the court shall grant a speedy hearing upon the question of the validity of
such adverse claim, and shall render judgment as may be just and equitable. If the
adverse claim is adjudged to be invalid, the registration thereof shall be ordered
cancelled. If, in any case, the court, after notice and hearing shall find that the adverse
claim thus registered was frivolous, it may fine the claimant in an amount not less than
one thousand pesos, nor more than five thousand pesos, in its discretion. Before the
lapse of thirty days, the claimant may withdraw his adverse claim by filing with the
Register of Deeds a sworn petition to that effect. (Italics ours)
In construing the law aforesaid, care should be taken that every part thereof be given
effect and a construction that could render a provision inoperative should be avoided,
and inconsistent provisions should be reconciled whenever possible as parts of a
harmonious whole.[25] For taken in solitude, a word or phrase might easily convey a
meaning quite different from the one actually intended and evident when a word or
phrase is considered with those with which it is associated. [26] In ascertaining the period
of effectivity of an inscription of adverse claim, we must read the law in its
entirety. Sentence three, paragraph two of Section 70 of P.D. 1529 provides:
The adverse claim shall be effective for a period of thirty days from the date of
registration.
At first blush, the provision in question would seem to restrict the effectivity of the
adverse claim to thirty days. But the above provision cannot and should not be treated
separately, but should be read in relation to the sentence following, which reads:
After the lapse of said period, the annotation of adverse claim may be cancelled upon
filing of a verified petition therefor by the party in interest.
If the rationale of the law was for the adverse claim to ipso facto lose force and effect
after the lapse of thirty days, then it would not have been necessary to include the
foregoing caveat to clarify and complete the rule. For then, no adverse claim need be
cancelled. If it has been automatically terminated by mere lapse of time, the law would
not have required the party in interest to do a useless act.
A statutes clauses and phrases must not be taken separately, but in its relation to the
statutes totality. Each statute must, in fact, be construed as to harmonize it with the pre-
existing body of laws. Unless clearly repugnant, provisions of statutes must be
reconciled. The printed pages of the published Act, its history, origin, and its purposes
may be examined by the courts in their construction.[27] An eminent authority on the
subject matter states the rule candidly:
A statute is passed as a whole and not in parts or sections, and is animated by one
general purpose and intent. Consequently, each part or section should be construed in
connection with every other part or section so as to produce a harmonious whole. It is
not proper to confine its intention to the one section construed. It is always an unsafe
way of construing a statute or contract to divide it by a process of etymological
dissection, into separate words, and then apply to each, thus separated from the
context, some particular meaning to be attached to any word or phrase usually to be
ascertained from the context.[28]
Construing the provision as a whole would reconcile the apparent inconsistency
between the portions of the law such that the provision on cancellation of adverse
claim by verified petition would serve to qualify the provision on the effectivity
period. The law, taken together, simply means that the cancellation of the adverse
claim is still necessary to render it ineffective, otherwise, the inscription will remain
annotated and shall continue as a lien upon the property. For if the adverse claim has
already ceased to be effective upon the lapse of said period, its cancellation is no
longer necessary and the process of cancellation would be a useless ceremony. [29]
It should be noted that the law employs the phrase may be cancelled, which obviously
indicates, as inherent in its decision making power, that the court may or may not order
the cancellation of an adverse claim, notwithstanding such provision limiting the
effectivity of an adverse claim for thirty days from the date of registration. The court
cannot be bound by such period as it would be inconsistent with the very authority
vested in it. A fortiori, the limitation on the period of effectivity is immaterial in
determining the validity or invalidity of an adverse claim which is the principal issue to
be decided in the court hearing. It will therefore depend upon the evidence at a
proper hearing for the court to determine whether it will order the cancellation of the
adverse claim or not. [30]
To interpret the effectivity period of the adverse claim as absolute and without
qualification limited to thirty days defeats the very purpose for which the statute
provides for the remedy of an inscription of adverse claim, as the annotation of an
adverse claim is a measure designed to protect the interest of a person over a piece of
real property where the registration of such interest or right is not otherwise provided for
by the Land Registration Act or Act 496 (now P.D. 1529 or the Property Registration
Decree), and serves as a warning to third parties dealing with said property that
someone is claiming an interest or the same or a better right than the registered owner
thereof. [31]
The reason why the law provides for a hearing where the validity of the adverse claim is
to be threshed out is to afford the adverse claimant an opportunity to be heard,
providing a venue where the propriety of his claimed interest can be established or
revoked, all for the purpose of determining at last the existence of any encumbrance
on the title arising from such adverse claim. This is in line with the provision immediately
following:
Provided, however, that after cancellation, no second adverse claim shall be registered
by the same claimant.
Should the adverse claimant fail to sustain his interest in the property, the adverse
claimant will be precluded from registering a second adverse claim based on the same
ground.
It was held that validity or efficaciousness of the claim may only be determined by the
Court upon petition by an interested party, in which event, the Court shall order the
immediate hearing thereof and make the proper adjudication as justice and equity
may warrant. And it is only when such claim is found unmeritorious that the registration
of the adverse claim may be cancelled, thereby protecting the interest of the adverse
claimant and giving notice and warning to third parties. [32]
In sum, the disputed inscription of adverse claim on the Transfer Certificate of Title No. N-
79073 was still in effect on February 12, 1985 when Quezon City Sheriff Roberto Garcia
annotated the notice of levy on execution thereto. Consequently, he is charged with
knowledge that the property sought to be levied upon on execution was encumbered
by an interest the same as or better than that of the registered owner thereof. Such
notice of levy cannot prevail over the existing adverse claim inscribed on the certificate
of title in favor of the petitioners.This can be deduced from the pertinent provision of the
Rules of Court, to wit:
Section 16. Effect of levy on execution as to third persons- The levy on execution shall
create a lien in favor of the judgment creditor over the right, title and interest of the
judgment debtor in such property at the time of the levy, subject to
liens or encumbrances then existing. (Italics supplied)
To hold otherwise would be to deprive petitioners of their property, who waited a long
time to complete payments on their property, convinced that their interest was amply
protected by the inscribed adverse claim.
As lucidly observed by the trial court in the challenged decision:
True, the foregoing section provides that an adverse claim shall be effective for a
period of thirty days from the date of registration. Does this mean however, that the
plaintiffs thereby lost their right over the property in question? Stated in another, did the
lapse of the thirty day period automatically nullify the contract to sell between the
plaintiffs and the Uychocdes thereby depriving the former of their vested right over the
property?
It is respectfully submitted that it did not.[33]
As to whether or not the petitioners are buyers in good faith of the subject property, the
same should be made to rest on the findings of the trial court. As pointedly observed by
the appellate court, there is no question that plaintiffs-appellees were not aware of the
pending case filed by Pilares against Uychocde at the time of the sale of the property
by the latter in their favor. This was clearly elicited from the testimony of Conchita
Sajonas, wife of plaintiff, during cross-examination on April 21, 1988.[34]
ATTY. REYES
Q - Madam Witness, when Engr. Uychocde and his wife offered to you and your
husband the property subject matter of this case, they showed you the owners transfer
certificate, is it not?
A - Yes, sir.
Q - That was shown to you the very first time that this lot was offered to you for sale?
A - Yes.
Q - After you were shown a copy of the title and after you were informed that they are
desirous in selling the same, did you and your husband decide to buy the same?
A - No, we did not decide right after seeing the title. Of course, we visited...
Q - No, you just answer my question. You did not immediately decide?
A - Yes.
Q - When did you finally decide to buy the same?
A - After seeing the site and after verifying from the Register of Deeds in Marikina that it
is free from encumbrances, that was the time we decided.
Q - How soon after you were offered this lot did you verify the exact location and the
genuineness of the title, as soon after this was offered to you?
A - I think its one week after they were offered.[35]
A purchaser in good faith and for value is one who buys property of another without
notice that some other person has a right to or interest in such property and pays a full
and fair price for the same, at the time of such purchase, or before he has notice of the
claims or interest of some other person in the property. [36] Good faith consists in an
honest intention to abstain from taking any unconscientious advantage of
another. [37] Thus, the claim of the private respondent that the sale executed by the
spouses was made in fraud of creditors has no basis in fact, there being no evidence
that the petitioners had any knowledge or notice of the debt of the Uychocdes in favor
of the private respondents, nor of any claim by the latter over the Uychocdes properties
or that the same was involved in any litigation between said spouses and the private
respondent. While it may be stated that good faith is presumed, conversely, bad faith
must be established by competent proof by the party alleging the sa me. Sans such
proof, the petitioners are deemed to be purchasers in good faith, and their interest in
the subject property must not be disturbed.
At any rate, the Land Registration Act (Property Registration Decree) guarantees to
every purchaser of registered land in good faith that they can take and hold the same
free from any and all prior claims, liens and encumbrances except those set forth on the
Certificate of Title and those expressly mentioned in the ACT as having been preserved
against it. Otherwise, the efficacy of the conclusiveness of the Certificate of Title which
the Torrens system seeks to insure would be futile and nugatory. [38]
ACCORDINGLY, the assailed decision of the respondent Court of Appeals dated
October 17, 1991 is hereby REVERSED and SET ASIDE. The decision of the Regional Trial
Court dated February 15, 1989 finding for the cancellation of the notice of levy on
execution from Transfer Certificate of Title No. N-109417 is hereby REINSTATED.
The inscription of the notice of levy on execution on TCT No. N-109417 is hereby
CANCELLED.
Costs against private respondent.
SO ORDERED.
G.R. No. 142687 July 20, 2006
SPOUSES FRANCISCO and BERNARDINA RODRIGUEZ, petitioners,
vs.
HON. COURT OF APPEALS, SPOUSES CHRISTOPHER and MA. ANGELICA BARRAMEDA, and
SPOUSES ANTONIO and MARIDEL CALINGO, respondents.
DECISION
PUNO, J.:
This is a petition for review of the decision of the Court of Appeals dated September 7,
1999 in CA-G.R. CV No. 48772 and its resolution dated March 31, 2000. The Court of
Appeals reversed the decision of the Regional Trial Court of Makati in Civil Case No. 92-
3524.
The facts show that herein respondent Spouses Antonio and Maridel Calingo
(respondents Calingo) were the registered owners of a house and lot located at No.
7903 Redwood Street, Marcelo Green Village, Parañaque, Metro Manila. The property
was mortgaged to the Development Bank of the Philippines, which mortgage was later
absorbed by the Home Mutual Development Fund (HMDF) or Pag-ibig.
On April 27, 1992, respondents Calingo and respondent Spouses Christopher and Ma.
Angelica Barrameda (respondents Barrameda) entered into a contract of sale with
assumption of mortgage where the former sold to the latter the property in question and
the latter assumed to pay the outstanding loan balance to the Development Bank of
the Philippines.1 Respondents Barrameda issued two checks in the amounts
of P150,000.00 and P528,539.76, for which respondents Calingo issued a receipt dated
April 24, 1992.2
In a letter dated April 23, 1992, respondent Antonio S. Calingo informed HMDF/Pag-ibig
about the sale of the property with assumption of mortgage. Said letter, however,
together with an affidavit by respondents Calingo, was served upon HMDF/Pag-ibig on
October 2, 1992.3
On May 29, 1992, respondents Barrameda filed with the Register of Deeds of Parañaque
an affidavit of adverse claim on the property. The adverse claim was inscribed at the
back of the certificate of title as Entry No. 3439. 4
On June 1, 1992, respondent Ma. Angelica Paez-Barrameda wrote HMDF, Mortgage
and Loans Division informing the office that they have purchased the subject property
from the Calingo spouses and that they filed a notice of adverse claim with the Register
of Deeds of Parañaque. They also sought assistance from said office as regards the
procedure for the full settlement of the loan arrearages and the transfer of the property
in their names.5
Respondents Barrameda moved into the property on June 2, 1992.
On July 13, 1992, a notice of levy with attachment on real property by virtue of a writ of
execution was annotated at the back of the certificate of title of the property in
question. The writ of execution was issued by Judge Salvador Abad Santos, Regional
Trial Court of Makati, Branch 65 in connection with Civil Case No. 88-2159 involving a
claim by herein petitioners, Spouses Francisco and Bernardina Rodriguez, against
respondents Calingo. Judge Abad Santos issued the writ in favor of petitioners
Rodriguez.6
On July 21, 1992, petitioners’ counsel, Atty. Nelson A. Loyola, sent a letter to respondents
Barrameda inquiring about the basis of their occupation of the property in question.
On August 21, 1992, respondents Barrameda remitted to respondents Calingo the
amount of P364,992.07 to complete the payment of the agreed purchase price.
Respondents Calingo acknowledged receipt of said amount and waived all their rights
to the property in favor of the Barrameda spouses. They also guaranteed that the
property was clear and free from any liens and encumbrances, except the real estate
mortgage assumed by respondents Barrameda.7
On October 7, 1992, respondents Barrameda executed a joint affidavit stating that they
are the owners of the property in question by virtue of a deed of sale with assumption of
mortgage; that they registered an affidavit of adverse claim with the Register of Deeds
of Parañaque; that the Sheriff of the Regional Trial Court, Branch 65, Makati, Sheriff
Manuel C. Dolor, levied said property despite their adverse claim; and that they have
acquired the property long before the levy was made, and therefore, said levy was
illegal. They served a copy of the affidavit on petitioners’ counsel, Atty. Loyola, who
made a reply thereto on October 15, 1992.
In his letter to Christopher Barrameda dated October 15, 1992, Atty. Loyola pointed out
that the alleged deed of sale with assumption of mortgage was not registered with the
Register of Deeds and that the records of the HMDF show that the property is owned by
the Calingo spouses. He urged the Barrameda spouses to confer with the petitioners to
amicably settle the controversy.8
On November 9, 1992, respondents Barrameda found a Notice of Sheriff’s Sale posted
on their front gate, announcing the auction sale of their house and lot on December 3,
1992 at 10:00 in the morning.9
On November 20, 1992, pursuant to Rule 39, Section 17 of the Revised Rules of Court,
respondents Barrameda served a Notice of Third Party Claim upon Sheriff Manuel C.
Dolor, accompanied by their affidavit of title.
On December 2, 1992, respondents Barrameda filed with the Regional Trial Court of
Makati a petition for quieting of title with prayer for preliminary injunction. The petition
prayed, among others, that the execution sale of the property be enjoined, the notice
of levy and attachment inscribed on the certificate of title be cancelled, and that
respondents Barrameda be declared the lawful and sole owners of the property in
question.10
The trial court ruled in favor of herein petitioners and dismissed respondents Barrameda’s
petition for quieting of title. It ruled that the annotation of respondents Barrameda’s
adverse claim at the back of the certificate of title was insufficient to establish their
claim over the property. It said that respondents Barrameda, as buyers of the property,
should have registered the title in their names. Furthermore, respondents Barrameda’s
adverse claim had lost its efficacy after the lapse of thirty days in accordance with the
provisions of the Land Registration Act. The trial court also found that there was collusion
between respondents Barrameda and respondents Calingo to transfer the property to
defraud third parties who may have a claim against the Calingos. 11
The Court of Appeals, however, reversed the decision of the trial court. Citing the ruling
in Sajonas v. Court of Appeals,12 the appellate court held that respondents Barrameda’s
adverse claim inscribed on the certificate of title was still effective at the time the
property was levied on execution. It said:
Therefore, the disputed inscription of adverse claim on TCT No. 83612/57286 was still in
effect on July 13, 1992 when the Rodriguezes caused the annotation of the notice of
levy on execution thereto. Consequently, they are charged with knowledge that the
property sought to be levied upon on execution was encumbered by an interest the
same as or better than that of the registered owner thereof. Such notice of levy cannot
prevail over the existing adverse claim inscribed on the certificate of title in favor of the
Barramedas. xxx
The court held, therefore, that the notice of levy could not prevail over respondents
Barrameda’s adverse claim.
Petitioners moved for a reconsideration of the appellate court’s ruling, but the motion
was denied.
Hence, this petition. Petitioners essentially argue that the remedy of a petition for
quieting of title was not available to respondents Barrameda as they did not have a
valid title to the property in question; that the affidavit of adverse claim inscribed by
respondents Barrameda at the back of the certificate of title was not sufficient to
establish their claim to the property; and there was collusion between respondents
Barrameda and respondents Calingo.
The principal issue that needs to be resolved in this case is whether respondents
Barrameda’s adverse claim on the property should prevail over the levy on execution
issued by another court in satisfaction of a judgment against respondents Calingo.
We hold that it cannot.
Respondents Barrameda anchor their claim on the property on the deed of sale with
assumption of mortgage executed by them and respondents Calingo on April 27, 1992.
The Property Registration Decree13 requires that such document be registered with the
Register of Deeds in order to be binding on third persons. The law provides:
Sec. 51. Conveyance and other dealings by registered owner. An owner of registered
land may convey, mortgage, lease, charge or otherwise deal with the same in
accordance with existing laws. He may use such forms of deeds, mortgages, leases or
other voluntary instruments as are sufficient in law. But no deed, mortgage, lease, or
other voluntary instrument, except a will purporting to convey or affect registered land
shall take effect as a conveyance or bind the land, but shall operate only as a contract
between the parties and as evidence of authority to the Register of Deeds to make
registration.
The act of registration shall be the operative act to convey or affect the land insofar as
third persons are concerned, and in all cases under this Decree, the registration shall be
made in the office of the Register of Deeds for the province or city where the land lies.
(emphasis supplied)
It is admitted in this case that the deed of sale with assumption of mortgage was not
registered, but instead, respondents Barrameda filed an affidavit of adverse claim with
the Register of Deeds. The question now is whether the adverse claim is sufficient to bind
third parties such as herein petitioners.
In L.P. Leviste and Company, Inc. v. Noblejas,14 we explained when an inscription of an
adverse claim is sufficient to affect third parties, thus:
The basis of respondent Villanueva’s adverse claim was an agreement to sell executed
in her favor by Garcia Realty. An agreement to sell is a voluntary instrument as it is a
wilful act of the registered owner. As such voluntary instrument, Section 50 of Act No.
496 [now Presidential Decree No. 1529] expressly provides that the act of registration
shall be the operative act to convey and affect the land. And Section 55 of the same
Act requires the presentation of the owner’s duplicate certificate of title for the
registration of any deed or voluntary instrument. As the agreement to sell involves an
interest less than an estate in fee simple, the same should have been registered by fi ling
it with the Register of Deeds who, in turn, makes a brief memorandum thereof upon the acquired, a reference to the number of the certificate of title of the registered owner,
original and owner’s duplicate certificate of title. The reason for requiring the production the name of the registered owner, and a description of the land in which the right or
of the owner’s duplicate certificate in the registration of a voluntary instrument is that, interest is claimed. xxx
being a wilful act of the registered owner, it is to be presumed that he is interested in
registering the instrument and would willingly surrender, present or produce his duplicate The deed of sale with assumption of mortgage executed by respondents Calingo and
certificate of title to the Register of Deeds in order to accomplish such Barrameda is a registrable instrument. In order to bind third parties, it must be registered
registration. However, where the owner refuses to surrender the duplicate certificate for with the Office of the Register of Deeds. It was not shown in this case that there was
the annotation of the voluntary instrument, the grantee may file with the Register of justifiable reason why the deed could not be registered. Hence, the remedy of adverse
Deeds a statement setting forth his adverse claim, as provided for in Section 110 of Act claim cannot substitute for registration.
No. 496. In such a case, the annotation of the instrument upon the entry book is
sufficient to affect the real estate to which it relates, although Section 72 of Act No. 496 IN VIEW WHEREOF, the petition is GRANTED. The assailed decision and resolution of the
imposes upon the Register of Deeds the duty to require the production by the Court of Appeals are SET ASIDE and the decision of the Regional Trial Court, Makati in
[r]egistered owner of his duplicate certificate for the inscription of the adverse Civil Case No. 92-3524 is REINSTATED. No cost.
claim. The annotation of an adverse claim is a measure designed to protect the interest
of a person over a piece of real property where the registration of such interest or right is SO ORDERED.
not otherwise provided for by the Land Registration Act, and serves as a notice and
warning to third parties dealing with said property that someone is claiming an interest
on the same or a better right than the registered owner thereof. (emphases supplied)
SECOND DIVISION
In the case at bar, the reason given for the non-registration of the deed of sale with
assumption of mortgage was that the owner’s duplicate copy of the certificate of title G.R. No. 187824 November 17, 2010
was in the possession of HMDF. It was not shown, however, that either respondents
Barrameda or respondents Calingo exerted any effort to retrieve the owner’s duplicate FILINVEST DEVELOPMENT CORPORATION, Petitioner,
copy from the HMDF for the purpose of registering the deed of sale with assumption of vs.
mortgage. In fact, the parties did not even seek to obtain the consent of, much less GOLDEN HAVEN MEMORIAL PARK, INC., Respondent.
inform, the HMDF of the sale of the property. This, despite the provision in the contract of
mortgage prohibiting the mortgagor (respondents Calingo) from selling or disposing the x - - - - - - - - - - - - - - - - - - - - - - -x
property without the written consent of the mortgagee.15 Respondents Calingo, as party
to the contract of mortgage, are charged with the knowledge of such provision and G.R. No. 188265
are bound to comply therewith. Apparently, there was haste in disposing the property
that respondents Calingo informed HMDF of the sale only on October 2, 1992 when they GOLDEN HAVEN MEMORIAL PARK, INC. Petitioner,
served a copy of their letter to said office regarding the transfer of the property to vs.
respondents Barrameda. There was no reason for the parties’ failure to seek the FILINVEST DEVELOPMENT CORPORATION, Respondent.
approval of the HMDF to the sale as it appears from the letter of respondent Angelica
Paez-Barrameda to HMDF that they were ready to pay in full the balance of the loan DECISION
plus interest. What is more suspect is that the judgment against respondents Calingo
ordering them to pay the petitioners the sum of P1,159,355.90 was rendered on January ABAD, J.:
28, 1992, before the sale of the property on April 27, 1992. We also find it unsettling that
respondents Barrameda, without any reservation or inquiry, readily remitted to These cases are about which of two real estate developers, both buyers of the same
respondents Calingo the full payment for the property on August 21, 1992 despite lands, acted in good faith and has a better title to the same.
knowledge of the levy on execution over the property in July of the same year. Any
prudent buyer of real property, before parting with his money, is expected to first ensure The Facts and the Case
that the title to the property he is about to purchase is clear and free from any liabilities
and that the sellers have the proper authority to deal on the property. Petronila Yap (Yap), Victoriano and Policarpio Vivar (the Vivars), Benjamin Cruz (Cruz),
Juan Aquino (Aquino), Gideon Corpuz (Corpuz), and Francisco Sobremesana
Again, we stress that the annotation of an adverse claim is a measure designed to (Sobremesana), and some other relatives inherited a parcel of land in Las Piñas City
protect the interest of a person over a piece of property where the registration of such covered by Transfer Certificate of Title (TCT) 67462 RT-1. Subsequently, the heirs had the
interest or right is not otherwise provided for by the law on registration of real land divided into 13 lots and, in a judicial partition, the court distributed four of the lots
property. Section 70 of Presidential Decree No. 1529 is clear: as follows: a) Lots 1 and 12 to Aquino; b) Lot 2 to Corpuz and Sobremesana; and (c) Lot
6 to Yap, Cruz, and the Vivars. The other lots were distributed to the other heirs.
Sec. 70. Adverse claim. Whoever claims any part or interest in registered land adverse
to the registered owner, arising subsequent to the date of the original registration, On March 6, 1989 Yap, acting for herself and for Cruz and the Vivars, executed an
may, if no other provision is made in this Decree for registering the same, make a agreement to sell Lot 6 in favor of Golden Haven Memorial Park, Inc. (GHM), payable in
statement in writing setting forth his alleged right or interest, and how or under whom three installments. On July 31, 1989 another heir, Aquino, acting for himself and for
Corpuz and Sobremesana, also executed an agreement to sell Lots 1, 2, and 12 in favor
of GHM, payable in the same manner. In both instances, GHM paid the first installment
upon execution of the contract.
On August 4, 1989 GHM caused to be annotated a Notice of Adverse Claim on TCT
67462 RT-1. On September 20, 1989 the sellers of the four lots wrote GHM that they were
still working on the titling of the lots in their names and wanted to know if GHM was still
interested in proceeding with their agreements. GHM replied in the affirmative on
September 21, 1989 and said that it was just waiting for the sellers’ titles so it can pay the
second installments.
Sometime in August of 1989, Filinvest Development Corporation (Filinvest) applied for the
transfer in its name of the titles over Lots 2, 4, and 5 but the Las Piñas Register of Deeds
declined its application. Upon inquiry, Filinvest learned that Lot 8, a lot belonging to
some other heir or heirs and covered by the same mother title, had been sold to
Household Development Corporation (HDC), a sister company of GHM, and HDC held
the owner’s duplicate copy of that title. Filinvest immediately filed against HDC a
petition for the surrender and cancellation of the co-owners’ duplicate copy of TCT
67462 RT-1. Filinvest alleged that it bought Lots 1, 2, 6, and 12 of the property from their
respective owners as evidenced by three deeds of absolute sale in its favor dated
September 10, November 18, and December 29, 1989 and that Filinvest was entitled to
the registrations of such sales.
On January 14, 1991 GHM filed against the sellers and Filinvest a complaint for the
annulment of the deeds of sale issued in the latter’s favor before the Regional Trial Court
(RTC) of Las Piñas City in Civil Case 91-098. On March 16, 2006 the RTC rendered a
decision after trial, declaring the contracts to sell executed by some of the heirs in
GHM’s favor valid and enforceable and the sale in favor of Filinvest null and void. Only
Filinvest appealed among the defendants.
On November 25, 2008 the Court of Appeals (CA) affirmed the RTC decision with
respect to the validity of the contract to sell Lot 6 in GHM’s favor. But the CA declared
the contracts to sell Lots 1, 2, and 12 in GHM’s favor void and the sale of the same lots in
favor of Filinvest valid.
Both parties filed their petitions for review before this Court, Filinvest in G.R. 187824, and
GHM in G.R. 188265.
The Issue Presented
The issue presented in these cases is whether or not the contracts to sell that the sellers
executed in GHM’s favor covering the same lots sold to Filinvest are valid and
enforceable.
The Court’s Ruling
To prove good faith, the rule is that the buyer of registered land needs only show that he
relied on the title that covers the property. But this is true only when, at the time of the
sale, the buyer was unaware of any adverse claim to the property. 1 Otherwise, the law
requires the buyer to exercise a higher degree of diligence before proceeding with his
purchase. He must examine not only the certificate of title, but also the seller’s right and
capacity to transfer any interest in the property. 2 In such a situation, the buyer must
show that he exercised reasonable precaution by inquiring beyond the four corners of
the title.3 Failing in these, he may be deemed a buyer in bad faith.4
Here, Filinvest was on notice that GHM had caused to be annotated on TCT 67462 RT-1,
the mother title, as early as August 4, 1989 a notice of adverse claim covering Lot 6. This
notwithstanding, Filinvest still proceeded to buy Lots 1, 2, 6, and 12 on September 10,
November 18, and December 29, 1989.
Filinvest of course contends that, although the title carried a notice of adverse claim,
that notice was only with respect to seller Yap’s interest in Lot 6 and it did not affect Lots
1, 2, 12, and the remaining interests in Lot 6. The Court disagrees.
The annotation of an adverse claim is intended to protect the claimant’s interest in the
property.1avvphi1 The notice is a warning to third parties dealing with the property that
someone claims an interest in it or asserts a better right than the registered owner. 5 Such
notice constitutes, by operation of law, notice to the whole world. 6 Here, although the
notice of adverse claim pertained to only one lot and Filinvest wanted to acquire
interest in some other lots under the same title, the notice served as warning to it that
one of the owners was engaged in double selling.
What is more, upon inquiry with the Register of Deeds of Las Piñas, Filinvest also learned
that the heirs of Andres Aldana sold Lot 8 to HDC and turned over the co-owner’s
duplicate copy of TCT 67462 RT-1 to that company which had since then kept the title.
Filinvest (referred to below as FDC) admits this fact in its petition, 7 thus:
Sometime in August 1989, FDC applied with the Register of Deeds of Las Piñas for the
transfer and registration of Lots 2, 4, and 5 in its name and surrendered the co-owners
duplicate copy of TCT No. (67462) RT-1 given to it by the Vivar family, but the Register of
Deeds of Las Piñas City refused to do the transfer of title in the name of FDC and instead
demanded from FDC to surrender as well the other co-owner's duplicate copy of TCT
No. (67462) RT-1 which was issued to the heirs of Andres Aldana. Upon further inquiry,
FDC came to know that the heirs of Andres Aldana sold Lot 8 and delivered their co-
owner's duplicate copy of TCT No. (67462) RT-1 to Household Development Corporation,
a sister company of respondent GHMPI. FDC made representations to Household
Development Corporation for the surrender of said co-owner's duplicate copy of TCT
No. (67462) RT-1 to the Register of Deeds of Las Piñas City, but Household Development
Corporation refused to do so.
Filinvest’s knowledge that GHM, a competitor, had bought Lot 6 in which Filinvest was
interested, that GHM had annotated an adverse claim to that Lot 6, and that GHM had
physical possession of the title, should have put Filinvest on its toes regarding the
prospects it faced if it bought the other lots covered by the title in question. Filinvest
should have investigated the true status of Lots 1, 2, 6, and 12 by asking GHM the size
and shape of its interest in the lands covered by the same title, especially since both
companies were engaged in the business of developing lands. One who has
knowledge of facts which should have put him upon such inquiry and investigation
cannot claim that he has acquired title to the property in good faith as against the true
owner of the land or of an interest in it.8
The Court upholds the validity of the contracts between GHM and its sellers. As the trial
court aptly observed, GHM entered into valid contracts with its sellers but the latter
simply and knowingly refused without just cause to honor their obligations. The sellers
apparently had a sudden change of heart when they found out that Filinvest was willing
to pay more.
As to the award of exemplary damages, the Court sustains the CA ruling. This species of
damages is allowed only in addition to moral damages such that exemplary damages
cannot be awarded unless the claimant first establishes a clear right to moral
damages.9 Here, since GHM failed to prove that it is entitled to moral damages, the
RTC’s award of exemplary damages had no basis. But the grant of attorney’s fees is
proper. As the RTC noted, this case has been pending since 1991, or for 19 years now.
GHM was forced to litigate and incur expenses in order to protect its rights and interests.
WHEREFORE, the Court GRANTS the petition in G.R. 188265 and DISMISSES the petition in
G.R. 187824. The Court likewise REVERSES and SETS ASIDE the decision of the Court of
Appeals dated November 25, 2008 in CA-G.R. CV 89448, and REINSTATES the decision of
the Regional Trial Court in Civil Case 91-098 dated March 16, 2006 with the
MODIFICATION that the award of exemplary damages is DELETED.
SO ORDERED.
FLOR MARTINEZ, represented by MACARIO MARTINEZ,
authorized representative and Attorney-in-Fact,
Petitioner,
- versus -
ERNESTO G. GARCIA and EDILBERTO M. BRUA,
Respondents.
x-----------------------------------------------------------------------------------------x
DECISION
PERALTA, J.:
Before us is a special civil action for certiorari under Rule 65 of the Rules of Court to
annul and set aside the Decision[1] dated August 12, 2004 and the Resolution [2] dated
November 18, 2004 of the Court of Appeals (CA) in CA-G.R. CV No. 61591, which
reversed and set aside the Decision[3] dated April 15, 1998 and Order[4] dated August 11,
1998 of the Regional Trial Court (RTC) of Pasig, Branch 267, in Special Civil Action No.
574.
The factual antecedents are as follows:
Respondent Edilberto Brua was the registered owner of a parcel of land located in
Mandaluyong, Rizal, covered by Transfer Certificate of Title (TCT) No. 346026 of the
Registry of Deeds of Rizal, which is the subject matter of this case. The property was first
mortgaged to the Government Service Insurance System (GSIS), and such mortgage
was annotated at the back of TCT No. 346026 as Entry No. 91370, inscribed on June 5,
G.R. No. 166536 1974.[5] On February 5, 1980, respondent Brua obtained a loan from his brother-in-law,
respondent Ernesto Garcia, in the amount of One Hundred Fifty Thousand Pesos
(P150,000.00) and, to secure the payment of said loan, respondent Brua mortgaged the
subjectproperty to respondent Garcia, as evidenced by a Deed of Real Estate
Present: Mortgage[6] executed in respondent Garcia's favor. Since the title to the subject
property was in the possession of the GSIS and respondent Garcia could not register the
Deed of Real Estate Mortgage, he then executed an Affidavit of Adverse Claim[7] and
registered it with the Registry of Deeds of Rizal on June 23, 1980 as Entry No. 49853/T-
CARPIO,* J., 346026,[8] which remained uncanceled up to this time.
CORONA, J., Chairperson,
VELASCO, JR., Sometime in October 1991, respondent Brua requested respondent Garcia to pay the
former's loan with the GSIS, so that the title to the subject property would be released to
NACHURA, and the latter. Respondent Garcia then paid GSIS the amount of P400,000.00 and, thus, the
title to the subject property was released to him.
PERALTA, JJ.
On October 22, 1991, a Deed of Absolute Sale[9] was executed between respondents
Promulgated: Garcia and Brua over the subject property, where respondent Brua sold the property in
the amount of P705,000.00. In the same deed, it was stated that the subject property
was only a partial payment of respondent Brua's mortgage indebtedness to respondent
Garcia, which he could no longer redeem from the latter. Respondent Garcia then
February 4, 2010 registered the Deed of Sale with the Registry of Deeds of Rizal on October 24 1991, and
a new TCT No. 5204[10] was issued in the names of respondent Garcia and his
wife. However, the annotations at the back of the previous title were carried over to the
new title, to wit: Entry No. 56837, a Notice of Levy on Attachment and/or Levy inscribed
on January 8, 1981;[11] Entry No. 2881 showing a Notice of Levy on Execution in favor
of petitioner Flor Martinez, which was inscribed on July 11, 1988; [12] Entry No. 3706, which
was a Certificate of Sale in favor of petitioner inscribed on September 2, 1988; [13] Entry
No. 72854,which was a Notice of Levy on Execution in favor of Pilipinas Bank inscribed
on December 8, 1981;[14] and Entry No. 16611 inscribed on October 24, 1991, which was
the cancellation of respondent Brua's mortgage with GSIS. [15]

It appeared that the annotations found at the back of the title of the subject property in
favor of petitioner, i.e., Notice of Levy on Attachment and/or Levy, Notice of Levy on
Execution, and Certificate of Sale, were all made in connection with petitioner's action
for Collection of Sum of Money, which she filed against respondent Brua at the RTC of
Makati City, Branch 60, docketed as Civil Case No. 39633. In that case, a decision was
rendered in favor of petitioner, where the RTC ordered respondent Brua to pay the
former the amount of P244,594.10, representing the value of the dishonored checks plus
12% interest per annum as damages and the premium paid by petitioner for the
attachment bond. The decision became final and executory as respondent Brua failed
to appeal the same, and a notice of levy on execution was issued. A public auction
was subsequently conducted, where the subject property was awarded to petitioner as
the sole bidder in the amount of P10,000.00, and a Certificate of Sale was issued in her
favor.
The annotation of Pilipinas Bank's Notice of Levy on Execution annotated as Entry No.
72854 on the title of the subject property was by virtue of a civil case filed by Filipinas
Manufacturers Bank, now known as Pilipinas Bank, against respondent Brua.
On February 9, 1994, respondents Garcia and Brua filed with the RTC of Pasig, Branch
267, an Action to Quiet Title, initially against petitioner due to the encumbrances/liens
annotated on respondent Garcia's new title. They contended that these
encumbrances/liens were registered subsequent to the annotation of respondent
Garcia's adverse claim made in 1980, and prayed that these be canceled.
Subsequently, the complaint was amended to include Pilipinas Bank as an additional
defendant. Petitioner and Pilipinas Bank filed their respective Answers thereto.
Trial thereafter ensued.
On April 15, 1998, the RTC rendered its decision dismissing respondent Garcia's action for
quieting of title, the dispositive portion of which reads:
WHEREFORE, PREMISES CONSIDERED, the instant complaint is hereby dismissed for lack of
merit and judgment is hereby rendered in favor of defendants Flor Martinez and Pilipinas
Bank as against plaintiffs Ernesto Garcia and Edilberto Brua who are further directed to
pay both defendants attorney's fees in the amount of P50,000.00 each.
Accordingly, the judicial inscriptions particularly, Entry No. 3706/T-346026, annotation of
certificate of sale and Entry No. 72854/T-346026 are held to be valid, subsisting liens
which do not constitute a cloud on Transfer Certificate of Title No. 5204. [16]
In so ruling, the RTC found that the adverse claim which respondent Garcia caused to
be annotated on the previous title of the subject property, i.e, TCT No. 346026, on June
23, 1980 was predicated on his interest as a mortgagee of a loan of P150,000.00, which
he extended to respondent Brua; that respondent Garcia's adverse interest was merely
that of a second mortgagee, as he was not yet the purchaser of the subject property as
of said date; that when the judicial liens, i.e., Notice of Levy on Attachment and/or Levy
and Notice of Levy on Execution, were caused to be registered by petitioner on
respondent Brua's title on January 8, 1981 and July 8, 1998, respectively, by virtue
of petitioner being adjudged judgment creditor by Branch 60 of RTC Makati,
respondent Garcia's claim became inferior to that of petitioner. The RTC said that
respondent Garcia's inaction to preserve his adverse claim as a second mortgagee,
which was inscribed on June 23, 1980, and his sudden decision to redeem and
purchase the subject property from the GSIS in October 1991 -- when petitioner's Notice
of Levy on Attachment and/or Levy, Notice of Levy on Execution and Certificate of Sale
were already inscribed at the back of respondent Brua's title -- showed bad faith on the
part of respondent Garcia; that respondent Brua did not even testify or participate in
the case, except when he was impleaded as a plaintiff in the case. The RTC did not
give credit to respondent Garcia's claim that he and respondent Brua had no prior
knowledge of the occurrence of a public auction and the consequent annotation of
the certificate of sale, and found respondent Garcia to be a buyer in bad faith of the
subject property.
The RTC also ruled that the Notice of Levy on Execution, which was annotated on
December 8, 1981 as Entry No. 72854 on respondent Brua's title arising from Civil Case
No. 7262 entitled Pilipinas Bank v. Edilberto Brua, was a valid levy on the subject property
in favor of Pilipinas Bank. The levy could not be canceled, as this would impair the
interest of the bank which had been decided upon by a co-equal court. The RTC found
that the sale between respondents appeared to be tainted with bad faith, which
constrained petitioner and Pilipinas Bank from engaging the services of lawyers; thus,
the award of attorney's fees in the latter's favor.
Respondents' motion for reconsideration was denied by the RTC on August 11, 1998.
Respondents filed their appeal with the CA. However, respondent Brua failed to file his
appellant's brief; thus, his appeal was considered abandoned and dismissed. Petitioner
and Pilipinas Bank filed their respective appellees' briefs.
On August 12, 2004, the CA reversed and set aside the RTC decision, the dispositive
portion of which reads:
WHEREFORE, the appealed Decision dated April 15, 1998 is REVERSED and SET
ASIDE. Granting the instant appeal, Entry No. 72854 (Notice of Levy on Execution in favor
of Pilipinas Bank), Entry No. 2881 (Notice of Levy on Execution in favor of Flor Martinez)
and Entry No. 3706 (Certificate of Sale in favor of Flor Martinez) inscribed in TCT No.
346026 and carried over to TCT No. 5204, are hereby CANCELLED. [17]
The CA said that a subsequent sale of property covered by a certificate of title cannot
prevail over an adverse claim, duly sworn to and annotated on the certificate of title
previous to the sale; that while one who buys a property from the registered owner
need not have to look behind the title, he is nevertheless bound by the liens and
encumbrances annotated thereon; and, thus, one who buys without checking the
vendor's title takes all the risks and losses consequent to such failure. The CA found that
in order to protect his interest, respondent Garcia executed an Affidavit of Adverse
Claim on June 23, 1980, annotated it on the title of the subject property under Entry No.
49853 and it has remained uncanceled up to this time; that such adverse claim was
registered prior to the inscription of the Certificate of Sale in favor of petitioner under
Entry No. 3706 and Pilipinas Bank's Notice of Levy on Execution under Entry No. 72854;
that the prior registration of respondent Garcia's adverse claim effectively gave
petitioner and Pilipinas Bank notice of the former's right to the subject property and,
thus, petitioner was deemed to have knowledge of respondent Garcia's claim and
could not be considered as a buyer in good faith at the time she purchased the subject
property in the public auction; that petitioner could not claim that she was a purchaser
in good faith, since respondent Garcia's adverse claim was entered on June 23, 1980,
eight years ahead of petitioner's Certificate of Sale on September 2, 1988; that when
the Notice of Levy on Execution in favor of Pilipinas Bank was annotated on respondent
Brua's title, the sheriff who caused the annotation was charged with knowledge that the
property sought to be levied upon on execution was encumbered by an interest, which
was the same if not better than that of the registered owner thereof; and that such
notice of levy could not prevail over the existing adverse claim of respondent Garcia
inscribed on the title as can be deduced from Section 12, Rule 39 of the Rules of Court.
The CA found that the RTC erred in concluding that respondent Garcia was a purchaser
in bad faith, since his adverse claim was entered in respondent Brua's title in 1980, and
respondent Garcia could not have foretold at the time he caused such annotation of
adverse claim that petitioner would purchase the same property eight years thereafter;
and that while good faith is presumed, bad faith must be established by competent
proof by the party alleging the same; and, thus, in the absence of respondent Garcia's
bad faith, he is deemed to be a purchaser in good faith, and his interest in the property
must not be disturbed.
The CA also found that a Notice of Adverse Claim remains valid even after the lapse of
30 days, as provided for in Sec. 70 of Presidential Decree No. (PD) 1529 pursuant to our
ruling in Sajonas v. CA; that since no petition was filed by petitioner for the cancellation
of respondent Garcia's Notice of Adverse Claim, the adverse claim subsisted and his
rights over the subject property must consequently be upheld.
Petitioners motion for reconsideration was denied by the CA in a Resolution dated
November 18, 2004.
Petitioner is now before us via a petition for certiorari under Rule 65, alleging grave
abuse of discretion amounting to lack or excess of jurisdiction committed by the CA in
issuing its assailed decision and resolution.
Petitioner contends that respondent Garcia's adverse claim is nothing but a notice that
he has an interest adverse to that of respondent Brua to the extent of P150,000.00,
which was the amount of the loan secured by a Deed of Real Estate Mortgage
executed by respondent Brua in favor of respondent Garcia; that the adverse claim
cannot be said to be superior to a final sale conducted by the sheriff by authority of the
court pursuant to a judgment that has attained finality; that Sajonas v. CA, on which the
CA anchored its decision, differs from this case, since the adverse claim made in the
title by therein petitioner Sajonas was by virtue of a contract to sell; that unlike in this
case, respondent Garcia caused the annotation of his adverse claim as a mortgagee
of respondent Brua in the amount of P150,000.00 in 1980; and respondent Garcia's
payment of the GSIS loan in 1991, upon the request of respondent Brua, was presumably
for the reason that respondent Brua could no longer discharge the GSIS obligation; and
to avoid the foreclosure of the property by the GSIS, respondent Brua asked Garcia to
redeem it; that respondent Garcia's adverse claim in 1980 was not as a vendee of the
property like in Sajonas, but merely as a mortgagee.
Petitioner admits that respondent Garcia, as a mortgagee on the basis of which an
adverse claim was inscribed on the title of the subject property, is protected by Sec. 12,
Rule 39 of the Rules of Court; and, thus, petitioner knows that she is obliged as a vendee
in the public sale to pay liens and encumbrances then existing at the time of the sale on
September 2, 1988, which necessarily included the adverse claim of respondent Garcia
in the amount of P150,000.00.
In his Comment, respondent Garcia claims that the petition faces outright dismissal,
since the appropriate remedy of the petitioner should have been a petition for review
under Rule 45 which had already lapsed; that when the CA reversed the RTC decision,
such action did not constitute grave abuse of discretion since it had legal basis; that
any lien or adverse claim earlier inscribed prevails over those liens or adverse claims
inscribed subsequent thereto.
Respondent Brua did not file his comment. Thus, we dispensed with the filing of the
same in a Resolution dated June 19, 2006.
Petitioner filed her Reply, arguing that a petition for certiorari may be availed of where
appeal is inadequate and ineffectual.
The parties submitted their respective memoranda as required in Our Resolution dated
August 30, 2006.
We dismiss the petition.
Petitioner should have filed a petition for review under Rule 45 of the Rules of Court
instead of a petition for certiorari under Rule 65, since she is assailing the CA decision
and resolution which are final judgments. Rule 45 clearly provides that decisions, final
orders or resolutions of the CA in any case, i.e., regardless of the nature of the action or
proceedings involved, may be appealed to us by filing a petition for review, which is just
a continuation of the appellate process over the original case. [18] And the petition for
review must be filed within fifteen (15) days from notice of the judgment or final order or
resolution appealed from, or of the denial of petitioner's motion for a new trial or
reconsideration filed in due time after notice of the judgment.[19]
In this case, petitioner received a copy of the CA Resolution denying her motion for
reconsideration on November 24, 2004; and, thus, under Rule 45, she has 15 days from
receipt of such resolution, or until December 9, 2004, to file a petition for
review. However, petitioner did not file a petition for review; instead, she filed a petition
for certiorariunder Rule 65 on January 24, 2005.[20] Hence, the CA decision and resolution
have already attained finality, and petitioner has lost her right to appeal.

A petition for certiorari under Rule 65 is proper if a tribunal, a board or an officer
exercising judicial or quasi-judicial functions has acted without or in excess of jurisdiction
or with grave abuse of discretion amounting to lack or excess of jurisdiction and there is
no appeal, or any plain, speedy and adequate remedy in the ordinary course of
law.[21] In this case, petitioner had the remedy of appeal, and it was the speedy and
adequate remedy in the ordinary course of law. Thus, a special civil action
for certiorari cannot be used as a substitute for an appeal that the petitioner has
already lost. Certiorari cannot be allowed when a party to a case fails to appeal a
judgment to the proper forum despite the availability of that remedy, certiorari not
being a substitute for a lost appeal. [22] Certiorari will not be a cure for failure to timely file
a petition for review on certiorari underRule 45.[23]
While there are instances where the extraordinary remedy of certiorari may be resorted
to despite the availability of an appeal, the long line of decisions denying the special
civil action for certiorari, either before appeal was availed of or in instances where the
appeal period had lapsed, far outnumber the instances where certiorari was given due
course. [24] The few significant exceptions are: (1) when public welfare and the
advancement of public policy dictate; (2) when the broader interests of justice so
require; (3) when the writs issued are null; (4) when the questioned order amounts to an
oppressive exercise of judicial authority, [25] which we find to be not present in this
case. Notably, petitioner did not even fail to advance an explanation why appeal was
not availed of, nor was there any showing that the issue raised in the petition
for certiorari could not be raised on appeal. Concomitant to a liberal application of the
rules of procedure should be an effort on the part of the party invoking liberality to
adequately explain his failure to abide by the rules. [26]
In fact, the argument raised by petitioner, i.e., that the Court of Appeals had no legal
authority to vary the findings of the trial court and substitute its own conclusion, which
were patently contrary to the trial court's findings, and conclusion, relates to the wisdom
and soundness of the assailed CA decision and resolution. Where the issue or question
involved affects the wisdom or legal soundness of the decision not the jurisdiction of the
court to render said decision the same is beyond the province of a special civil action
for certiorari.[27] Erroneous findings and conclusions do not render the appellate court
vulnerable to the corrective writ of certiorari, for where the court has jurisdiction over the
case, even if its findings are not correct, these would, at the most, constitute errors of
law and not abuse of discretion correctible by certiorari.[28] For if every error committed
by the trial court or quasi-judicial agency were to be the proper subject of review
by certiorari, then trial would never end, and the dockets of appellate courts would be
clogged beyond measure.[29]
Even if we consider this petition for certiorari under Rule 65, it must be shown that the CA
committed grave abuse of discretion equivalent to lack or excess of jurisdiction, and not
mere errors of judgment, for the petition to be granted. [30] As we said, certiorari is not a
remedy for errors of judgment, which are correctible by appeal. By grave abuse of
discretion is meant such capricious and whimsical exercise of judgment as is equivalent
to lack of jurisdiction, and mere abuse of discretion is not enough -- it must be grave.[31]
Petitioner contends that the adverse claim of respondent Garcia inscribed on the title of
the subject property is but a notice that the latter has an interest adverse to respondent
Brua's title, to the extent of P150,000.00 secured by a real estate mortgage, and such
adverse claim cannot be considered superior to that of a final sale conducted by the
sheriff by virtue of a court judgment that has attained finality.
Sec. 12, Rule 39 of the Rules of Court provides:
SEC. 12. Effect of levy on execution as to third persons. The levy on execution shall
create a lien in favor of the judgment obligee over the right, title and interest of the
judgment obligor in such property at the time of the levy, subject to liens and
encumbrances then existing.
Clearly, the levy does not make the judgment creditor the owner of the property levied
upon. He merely obtains a lien. [32] Such levy on execution is subject and subordinate to
all valid claims and liens existing against the property at the time the execution lien
attached, such as real estate mortgages. [33]
Respondent Garcia's adverse claim, which refers to the deed of mortgage executed by
respondent Brua in his favor, was annotated on respondent Brua's title registered with
the Registry of Deeds of Rizal on June 23, 1980 as Entry No. 49853. The adverse claim was
already existing when the Notice of Levy on Execution, as well as the Certificate of Sale
in favor of petitioner, was inscribed on July 11, 1988 and September 2, 1988,
respectively; and, hence, the adverse claim is sufficient to constitute constructive notice
to petitioner regarding the subject property. When petitioner registered her Notice of
Levy on Execution on the title of the subject property, she was charged with the
knowledge that the subject property sought to be levied upon on execution was
encumbered by an interest the same as or better than that of the registered owner
thereof. [34] Thus, no grave abuse of discretion was committed by the CA when it held
that the notice of levy and subsequent sale of the subject property could not prevail
over respondent Garcia's existing adverse claim inscribed on respondent Brua's
certificate of title
The annotation of an adverse claim is a measure designed to protect the interest of a
person over a piece of real property, where the registration of such interest or right is not
otherwise provided for by the Land Registration Act or Act No. 496 (now P.D. No.1529 or
the Property Registration Decree), and serves a warning to third parties dealing with said
property that someone is claiming an interest on the same or a better right than that of
the registered owner thereof.[35]
Petitioner cannot be considered as a buyer in good faith. A purchaser in good faith
and for value is one who buys the property of another without notice that some other
person has a right to or interest in such property and pays a full and fair price for the
same at the time of such purchase, or before he has notice of the claims or interest of
some other person in the property.[36] Here, petitioner admitted on cross-examination
that when she registered her notice of attachment in 1981 and the levy on execution on
July 11, 1988, she already saw respondent Garcia's adverse claim inscribed on
respondent Brua's title on June 23, 1980.[37]
Petitioner claims that Sajonas v. CA[38] is not applicable, since the adverse claim
registered on the title of the subject property made by the Sajonases in 1984 was by
virtue of a contract to sell, so that when the full purchase price was eventually paid on
September 4, 1984, a deed of sale of the property was subsequently executed and
registered in the Registry of Deeds of Marikina on August 28, 1985; that when the
respondent therein registered his notice levy on execution on February 12, 1985, such
notice of levy could not have precedence over the adverse claim, because there was ESTANISLAO PADILLA, JR. G.R. No. 141256
no more property to levy upon. In this case, however, respondent Garcia caused the
annotation of his adverse claim only as a mortgagee of respondent Brua in the amount Petitioner,
of P150,000.00 in 1980. The subsequent deed of sale was executed in 1991 between
respondents Garcia and Brua after the former paid the latter's loan from with the Present:
GSIS. When a new title was issued in respondent Garcia's name, the notice of levy on
execution and the certificate of sale were already annotated on the title of the subject PANGANIBAN, J., Chairman
property; and, thus, the sale in favor of respondent Garcia could not prevail over the
previous auction sale in petitioner's favor. SANDOVAL-GUTIERREZ,

- v e r s u s - CORONA,

We are not impressed. CARPIO MORALES and GARCIA, JJ.

The issue posed in Sajonas was whether the adverse claim inscribed on TCT No. N-
190417 was still in force when private respondent therein caused the annotation of the
notice of levy on execution on the title; if the adverse claim was still in effect, then PHILIPPINE PRODUCERS
respondent therein was charged with the knowledge of pre-existing interest over the
subject property and, thus, the Sajonases were entitled to the cancellation of the notice COOPERATIVE MARKETING
of levy inscribed on the title.
ASSOCIATION, INC.,
We ruled in Sajonas that the inscription of the adverse claim on the title of the subject
property was still in effect on February 12, 1985, when the sheriff annotated the notice of Respondent. Promulgated:
levy on execution in favor of respondent therein; that respondent therein was charged
with knowledge that the subject property sought to be levied upon on execution was
encumbered by an interest the same as or better than that of the registered owner
thereof. We then said that such notice of levy could not prevail over the existing July 15, 2005
adverse claim inscribed on the certificate of title in favor of the Sajonases.

As in that case, the adverse claim of respondent Garcia based on the Deed of
Mortgage executed by respondent Brua over the subject land in the formers favor was x----------------------------------------------x
existing when the Notice of Levy on Execution was inscribed in favor of
petitioner. Although the deed of sale between respondents Brua and Garcia was done DECISION
after the notice of levy on execution and certificate of sale were inscribed on the title, it
was clearly stated in the deed that the subject property was only a partial payment for
respondent Brua's mortgage indebtedness to respondent Garcia, which the former
could no longer redeem from the latter. Thus, the sale of the subject property by CORONA, J.:
respondent Brua to respondent Garcia was by reason of respondent Brua's prior loan
from respondent Garcia, which was secured by a mortgage on the subject property; In implementing the involuntary transfer of title of real property levied and sold on
and this mortgage was registered and already existing on the title of the subject execution, is it enough for the executing party to file a motion with the court which
property when the Notice of Levy on Execution and Certificate of Sale in favor of rendered judgment, or does he need to file a separate action with the Regional Trial
petitioner were inscribed thereon. Thus, petitioner's claim over the subject property must Court?
yield to the earlier encumbrance registered by respondent Garcia.
This is a petition for review on certiorari[1] from a decision
WHEREFORE, the petition is DISMISSED. The Decision dated August 12, 2004 and
Resolution dated November 18, 2004 of the Court of Appeals in CA-G.R. CV No. 61591 of the Court of Appeals in CA-G.R. CV No. 53085,[2] and its resolution denying
are AFFIRMED. reconsideration,[3] both of which affirmed the orders of the Regional Trial Court of
Bacolod City, Branch 51.[4]
SO ORDERED.
The undisputed facts of the case follow. [5]

Petitioner and his wife are the registered owners of the following real properties: Lot Nos.
2904-A (covered by TCT No. T-36090), 2312-C-5 (covered by TCT No. T-3849), and 2654
(covered by TCT No. T-8053), all situated in Bago City.
Respondent is a marketing cooperative which had a money claim against petitioner.
On April 24, 1987, respondent filed a civil case against petitioner for collection of a sum
of money in the Regional Trial Court of Bacolod City.[6] Despite receipt of summons on
May 18, 1987, petitioner (then defendant) opted not to file an answer. [7] On March 3,
1988, respondent (then plaintiff) moved to have petitioner-defendant declared in
default, which the trial court granted on April 15, 1988. [8] Respondent presented its
evidence on October 9, 1989. [9] On November 28, 1989, the trial court rendered
a decision in respondents favor.[10] Petitioner was furnished a copy of this decision by
mail on November 29, 1989 but, because of his failure to claim it, the copy was
returned. [11]
On May 31, 1990, the Court issued a writ of execution. On June 4, 1990, the three lots
(Lot 2904-A, Lot 2312-C-5 and Lot 2654), all of the Bago Cadastre and registered in
petitioners name, were levied by virtue of that writ. On July 4, 1990, sheriff Renato T.
Arimas auctioned off the lots to satisfy the judgment, with respondent as the only
bidder. On July 10, 1990, ex-officio provincial sheriff and clerk of court Antonio Arbis
executed a certificate of sale in favor of respondent. On August 13, 1990, the certificate
of sale was recorded in the Register of Deeds.[12]
When petitioner failed to exercise his right of redemption within the 12-month period
allowed by law, the court, on motion of respondent, ordered on February 5, 1992 the
issuance of a writ of possession for the sheriff to cause the delivery of the physical
possession of the properties in favor of respondent. [13]
On May 17, 1995, respondent filed a motion to direct the Register of Deeds to issue new
titles over the properties in its name, alleging that the Register of Deeds (RD) of Bago
City would not issue new titles (in respondents name) unless the owners copies were first
surrendered to him. Respondent countered that such surrender was impossible because
this was an involuntary sale and the owners copies were with petitioner. [14]
On July 3, 1995, the trial court issued an order granting the motion. In a subsequent
order dated August 8, 1995, it denied petitioners motion for reconsideration. Petitioner
appealed. Four years later, the Court of Appeals rendered the
assailed decision affirming the order of the trial court.
Petitioner contends that respondents motion for the RD to cancel the existing
certificates of title and issue new ones in its name was in fact a real action and that the
motion was procedurally infirm because respondent did not furnish him a copy. [15] He
also claims that under Section 6 of Rule 39 of the 1997 Rules of Civil Procedure, the
execution of the judgment was barred by prescription, given that the motion was filed
more than 5 years after the writ of execution was issued on March 23, 1990. [16] He also
argues that respondent failed to follow the correct procedure for the cancellation of a
certificate of title and the issuance of a new one, which is contained in Section 107 of
PD 1529.[17]
In its comment, [18] respondent claims that the motion dated May 15, 1995 to direct the
RD to issue new certificates of title was but a continuation of the series of events that
began with the decision in its favor on November 28, 1989, and from there, the auction
of the properties and the issuance of a certificate of sale in 1990.
The two principal issues for consideration are:
(1) whether or not respondents right to have new titles issued in its name is now barred
by prescription and
(2) whether or not the motion in question is the proper remedy for cancelling petitioners
certificates of title and new ones issued in its name.
On the first issue, we rule that the respondents right to petition the court for the issuance
of new certificates of title has not yet prescribed.
In Heirs of Blancaflor vs. Court of Appeals, [19] Sarmiento Trading Corporation,
predecessor-in-interest of the private respondent Greater Manila Equipment Marketing
Corporation, secured a writ of execution in 1968 by virtue of which it levied real property
belonging to petitioners predecessor-in-interest, Blancaflor. When the property was
auctioned, Sarmiento Trading bid successfully and, in 1970, after the lapse of the one-
year redemption period, consolidated its ownership over the lot.
Sarmiento Trading then filed a petition with the Court of First Instance to order the
cancellation of Blancaflors title and the issuance of a new one in its name. In 1972,
Sarmiento Trading sold the lot to private respondent which, at the time, went by the
name Sarmiento Distributors Corporation.
In 1988, the Deputy Register of Deeds of Iloilo wrote to Blancaflor requesting him to
surrender his owners duplicate copy of the TCT. Blancaflor did not comply and the RD
refused to issue a new title. On May 25, 1989, private respondent filed a petition in the
Regional Trial Court praying that the petitioners be ordered to surrender the owners
duplicate copy of the title. The petitioners refused, claiming that respondents cause of
action had already prescribed. Ruling otherwise, we stated:
It is settled that execution is enforced by the fact of levy and sale. The result of such
execution salewith Sarmiento Trading Corporation as the highest bidderwas that title to
Lot No. 22 of TCT No. 14749 vested immediately in the purchaser subject only to the
judgment debtors right to repurchase. Therefore, upon Sarmiento Trading Corporations
purchase of Lot No. 22 covered by TCT No. 14749 at the auction sale, private
respondents successor-in-interest had acquired a right over said title.
The right acquired by the purchaser at an execution sale is inchoate and does not
become absolute until after the expiration of the redemption period without the right of
redemption having been exercised. But inchoate though it be, it is like any other right,
entitled to protection and must be respected until extinguished by
redemption. Gaudencio Blancaflor was not able to redeem his property after the
expiration of the redemption period, which was 12 months after the entry or annotation
of the certificate of sale made on the back of TCT No. 14749. Consequently, he had
been divested of all his rights to the property. (underscoring ours)
In this case, the rule being invoked by petitioner[20] states:
SEC. 6. Execution by motion or by independent action.A final and executory judgment
or order may be executed on motion within five (5) years from the date of its entry. After
the lapse of such time, and before it is barred by the statute of limitations, a judgment
may be enforced by action. The revived judgment may also be enforced by motion
within five (5) years from the date of its entry and thereafter by action before it is barred
by the statute of limitations.
As should be evident from Blancaflor, petitioner Padillas reliance on Section 6 of Rule 39
of the 1997 Revised Rules of Civil Procedure is misplaced. The fact of levy and sale
constitutes execution, and not the action for the issuance of a new title. Here, because
the levy and sale of the properties took place in June and July of 1990, respectively, or
less than a year after the decision became final and executory, the respondent clearly
exercised its rights in timely fashion.
In addition, petitioner himself admits his failure to redeem the properties within the one-
year period by adopting the facts stated in the Court of Appeals decision.[21] There is
thus no doubt he had been divested of his ownership of the contested lots.
Respondents position hinges on petitioners failure to redeem the properties 12 months
after the certificate of sale was recorded in the Register of Deeds on August 13, 1990.
There is no uncertainty about respondents having become the new lawful owner of the
lots in question by virtue of the levy and the execution sale.
On the other hand, the issue of whether to acquire new titles by mere motion or through
a separate petition is an entirely different matter.
Petitioner is correct in assailing as improper respondents filing of a mere motion for the
cancellation of the old TCTs and the issuance of new ones as a result of petitioners
refusal to surrender his owners duplicate TCTs.
Indeed, this called for a separate cadastral action initiated via petition.
Section 107 of PD 1529,[22] formerly Section 111 of Act 496,[23] provides:
Sec. 107. Surrender of withheld duplicate certificates.Where it is necessary to issue a
new certificate of title pursuant to any involuntary instrument which divests the title of
the registered owner against his consent or where a voluntary instrument cannot be
registered by reason of the refusal or failure of the holder to surrender the owners
duplicate certificate of title, the party in interest may file a petition in court to compel
the surrender of the same to the Register of Deeds. The court, after hearing, may order
the registered owner or any person withholding the duplicate certificate to surrender
the same, and direct the entry of a new certificate or memorandum upon such
surrender. If the person withholding the duplicate certificate is not amenable to the
process of the court, or if for any reason the outstanding owners duplicate certificate
cannot be delivered, the court may order the annulment of the same as well as the
issuance of a new certificate of title in lieu thereof. Such new certificate and all
duplicates thereof shall contain a memorandum of the annulment of the outstanding
duplicate.
Respondent alleges that it resorted to filing the contested motion because it could not
obtain new certificates of title, considering that petitioner refused to surrender his
owners duplicate TCTs. This contention is incorrect. The proper course of action was to
file a petition in court, rather than merely move, for the issuance of new titles. This was
the procedure followed in Blancaflor by Sarmiento Trading which was in more or less the
same situation as the respondent in this case: [24]
Petitioners reliance on prescription and laches is unavailing in this instance. It was proper
for Sarmiento Trading Corporation to file a petition with the Court of First Instance of Iloilo,
acting as a cadastral court, for the cancellation of TCT No. 14749 in the name of
Gaudencio Blancaflor and the issuance of another in its name. This is a procedure
provided for under Section 78 of Act No. 496 and Section 75 of PD No. 1529
Section 78 of Act 496 reads:
Sec. 78. Upon the expiration of the time, if any allowed by law for redemption after
registered land has been sold on any execution, or taken or sold for the enforcement of
any lien of any description, the person claiming under the execution or under any deed
or other instrument made in the course of the proceedings to levy such execution or
enforce any lien, may petition the court for the entry of a new certificate to him, and
the application may be granted: Provided, however, That every new certificate
entered under this section shall contain a memorandum of the nature of the
proceeding on which it is based: Provided, further, That at any time prior to the entry of
a new certificate the registered owner may pursue all his lawful remedies to impeach or
annul proceedings under execution or to enforce liens of any description.
Section 75 of PD 1529 provides:
Sec. 75. Application for new certificate upon expiration of redemption period.Upon the
expiration of the time, if any, allowed by law for redemption after the registered land
has been sold on execution, or taken or sold for the enforcement of a lien of any
description, except a mortgage lien, the purchaser at such sale or anyone claiming
under him may petition the court for the entry of a new certificate to him.
Before the entry of a new certificate of title, the registered owner may pursue all legal
and equitable remedies to impeach or annul such proceedings.
It is clear that PD 1529 provides the solution to respondents quandary. The reasons
behind the law make a lot of sense; it provides due process to a registered landowner
(in this case the petitioner) and prevents the fraudulent or mistaken conveyance of
land, the value of which may exceed the judgment obligation. Petitioner contends that
only his interest in the subject lots, and not that of his wife who was not a party to the
suit, should have been subjected to execution, and he should have had the opportunity Respondents. December 14, 2011
to prove as much.
x-------------------------------------------------------------------------------------------x
While we certainly will not condone any attempt by petitioner to frustrate the ends of
justice ― the only way to describe his refusal to surrender his owners duplicates of the
certificates of title despite the final and executory judgment against him ― respondent,
on the other hand, cannot simply disregard proper procedure for the issuance to it of DECISION
new certificates of title. There was a law on the matter and respondent should have
followed it.

In any event, respondent can still file the proper petition with the cadastral court for the PEREZ, J.:
issuance of new titles in its name.

WHEREFORE, the instant petition is hereby GRANTED. The decision of the Court of
Appeals in CA-G.R. CV No. 53085 is hereby REVERSED. The order of the Regional Trial
Court of Bacolod City ordering the Register of Deeds of Bago City to issue new
certificates of title in favor of respondent is ANULLED.
SO ORDERED.
Challenged in this petition for review on certiorari under Rule 45 of the Rules of Court is
the Decision[1] of the Court of Appeals in CA-G.R. SP No. 96913 annulling and setting
aside the Orders[2] of the Regional Trial Court (RTC), Branch 7, Malolos, Bulacan which
denied respondents Tang Soat Ings (Joanna Tangs) and Ando Sys Opposition (To MFR
Farm, Inc.s Motion dated 25 April 2006) and Motion (To declare void the sale of the
property covered by TCT No. 198753) dated May 23, 2006.

The controversy arose from a complaint for Enforcement of Easement and Damages
RUBEN C. REYES, G.R. No. 185620 with Prayer for Preliminary Injunction and Restraining Order filed by MFR Farms, Inc. (MFR)
against respondents docketed as Civil Case No. 1245-M. MFR complained of
Petitioner, respondents commercial and industrial use of their property covered by Transfer
Certificate of Title (TCT) No. T-198753, and sought the enforcement of the encumbrance
contained in their title. MFR likewise asked for the payment of damages suffered by its
pig farm resulting from respondents illegal use of their property.
Present:

After trial, the RTC granted MFRs complaint and specifically held that:
CARPIO, J.,

Chairperson,
x x x [Respondents] have defied the clear undertaking stated in the title to the subject
- versus - BRION, property to limit the use thereof to purposes not commercial or industrial in character. x
x x [U]sing the land as a chemical processing site and as a storage facility for chemicals
PEREZ, is devoting it to industrial purposes, which is not allowed under the subsisting
encumbrance on the property.
SERENO, and
x x x [R]elief is owing to [MFR], but the grant thereof is rendered all the more imperative
REYES, JJ. in light of the manifestly injurious effects which the business of [respondents] is causing to
the neighboring estate, if not to the entire locality. x x x By more than mere
preponderance of evidence has it been established that the gaseous by-products of
the chemical manufacturing process are outright pollutants which cause direct and
manifest harm to humans and animals alike, not to mention other living things.

TANG SOAT ING (JOANNA TANG) Promulgated:

and ANDO G. SY, xxxx


WHEREFORE, judgment is hereby rendered: (a) ordering [respondents] to desist from the
further conduct of industrial or commercial activities on the parcel of land covered by
TCT No. T-198753 of the Registry of Deeds of Bulacan, particularly the manufacture and
storage of chemicals thereat, including the construction of buildings intended for
purposes prohibited by the title to the property; (b) making permanent the injunctions
issued by this Courts orders of May 3, 1982 and December 7, 1983; (c) ordering
[respondents] to pay [MFR] actual damages in the amount of Six hundred Thirty-Nine
Thousand Six hundred Fifty (P639,650.00) Pesos, with legal rate of Twelve (12%)
percent interest from the filing of the complaint on January 15, 1982, until the same is
fully paid; (d) ordering [respondents] to pay [MFR] exemplary damages in the amount
One Hundred Thousand (P100,000.00) Pesos by way of example of correction for the
public good; (e) ordering [respondents] to pay MFR attorneys fees in the amount of One
Hundred Thousand (P100,000.00) Pesos and to pay the costs of suit. [3]
On appeal by respondents docketed as CA G.R. CV No. 37808, the Court of Appeals
affirmed with modification the ruling of the RTC: the Court of Appeals reduced the rate
of interest to six percent (6%) and deleted the award of exemplary damages and
attorneys fees.[4]
MFR and respondents filed separate appeals by certiorari [5] to this Court questioning the
appellate courts ruling. Unfortunately for the parties, we dismissed both appeals for late
payment of legal fees and late filing of the petition. [6] By December 1, 1997, the decision
of the Court of Appeals in CA G.R. CV No. 37808 became final and executory, and was
recorded in the Book of Entries of Judgment. [7]
On September 28, 1998, upon motion of MFR, the RTC issued a Writ of
Execution.[8] Pursuant thereto, the Branch Clerk of Court commanded the Sheriff of RTC,
Branch 7, Malolos, Bulacan, Mr. Leovino Legaspi (Sheriff Legaspi), to execute the
Decision dated September 12, 1991 as modified by the Court of Appeals. [9] Sheriff
Legaspi was likewise ordered to accomplish a return of the proceedings taken thereon
in accordance with Section 14, Rule 39 of the Rules of Court.
On January 4, 1999, Sheriff Legaspi submitted a Sheriffs Report manifesting:
That on October 2, 1998[,] the undersigned was in receipt of the Writ of Execution issued
by Hon. Danilo A. Manalastas for service thereof;
That on October 9, 1998[,] the undersigned served copy of the Writ of Execution and
copy of the Notice dated October 9, 1998 to [respondent] Tang Soat Ing giving him five
(5) days to comply [with] his obligations under the Writ of Execution, thru Rodolfo
Mendez, caretaker of the [respondents], at Tungkong Mangga, San Jose del Monte,
Bulacan. The undersigned inquired from the said caretaker about the personal
properties of Tang Soat Ing but he was told that Tang Soat Ing has no more properties
and the factory located in the compound is being leased to other people;
That on December 10, 1998[,] the undersigned went back to Tang Soat Ing at Tungkong
Mangga, Sa Jose del Monte, Bulacan but said person was not there and also Rodolfo
Mendez was not around because he was in Manila;
That on December 28, 1998[,] the undersigned went back to Tungkong Mangga, San
Jose del Monte, Bulacan and talked to the caretaker[,] Rodolfo Mendez[,] and asked
him what happened to the papers he gave to [respondent] Tang Soat Ing. The
caretaker said that [respondent Tang Soat Ing] called his lawyer and informed [the
latter] about the papers he received. The caretaker also told the undersigned that he
[did] not know what the lawyer said.[10]
A few days thereafter, on January 7, 1999, Sheriff Legaspi presented the Writ of
Execution and the Notice of Levy on Execution of Real Property [11] covering TCT No. T-
198753 to the Register of Deeds of Bulacan Province.
On February 4, 1999, the Notice of Levy was inscribed on TCT No. T-198753.[12]
On May 7, 1999, Sheriff Legaspi issued a Notice of Sale on Execution of Real
Property[13] which he likewise posted on the following places:
(a) The Bulletin Board of Municipal Hall of San Jose del Monte, Bulacan;
(b) The Bulletin Board of the Church of San Jose del Monte, Bulacan;
(c) The Bulletin Board of the Chapel of Gaya-gaya, San Jose del Monte, Bulacan;
(d) The Bulletin Board of the main entrance of the Provincial Capitol Building of Malolos,
Bulacan; and
(e) The Posting Board of the Office of the Ex-Officio Sheriff located at the back of the
Bulwagan ng Katarungan Building, Malolos, Bulacan.[14]
On June 12, 19 & 26, 1999, the Notice of Sale on Execution of Real Property was
published in The Times Newsweekly.[15]
On July 19, 1999, at the public auction of the subject property covered by TCT No. T-
198753, MFR was declared as the highest bidder. On even date, Sheriff Legaspi issued a
Certificate of Sale[16] which was registered with the Register of Deeds of Bulacan
Province.
After more than five (5) years, on September 17, 2004, with respondents failing to
exercise their right of redemption, MFR filed a Motion [17] asking the RTC to issue an order
directing the Register of Deeds of Bulacan Province to cancel TCT No. T-198753 in the
name of respondents, and issue a new certificate of title in the name of MFR.
On September 28, 2004, the RTC denied the Motion holding that a mere motion is not
sufficient for the cancellation of a certificate of title. The RTC ruled that under Section
107[18] of Presidential Decree No. 1529, the Property Registration Decree, a petition and
a hearing are required for the issuance of a new certificate of title.
On December 1, 2004, MFR filed a Petition [19] in the same case, under the same docket
number, Civil Case No. 1245-M, before the same execution court. In this new petition,
MFR impleaded the Register of Deeds as additional defendant and prayed for the
same reliefs as those prayed for in their previous motion with an additional prayer for the
issuance of an order directing respondents to immediately surrender the Owners
Duplicate Copy of TCT No. T-198753.
On three separate occasions, December 9, 2004 and February 8 and 17, 2005,
respondents, through their counsel of record, Atty. T. J. Sumawang (Atty. Sumawang),
received a copy of the Petition.[20]
Respondents failed to file an Answer or any responsive pleading to MFRs
Petition. Consequently, MFR moved to declare respondents in default. The Motion to
Declare Respondents in Default was served on Atty. Sumawang on June 11, 2005.
The RTC granted MFRs Motion to Declare Respondents in Default: thereafter, MFR
presented evidence ex-parte.
During presentation of evidence ex-parte, MFR filed a Motion for Substitution of Party
Petitioner attaching thereto a Deed of Transfer of Interest declaring petitioner Ruben C.
Reyes (Reyes) acquisition of MFRs rights over the subject property. On January 2, 2006,
the RTC issued an Order granting this latest motion: MFR was substituted by Reyes as
party-petitioner.
In an Order dated January 10, 2006, the RTC granted the Petition, thus:
WHEREFORE, finding merit in the instant petition, the same is hereby granted.
Accordingly, defendant/private respondent Tang Soat Ing (Joanna Tang) is hereby
directed to surrender to the Court her duplicate owners copy of TCT No. T-198753 within
thirty (30) days from receipt of this Order. In [the event said] defendant/private
respondent fails to surrender such owners duplicate copy as directed hereinabove, the
Register of Deeds of Bulacan is hereby directed to cancel TCT No. T-198753 and issue in
lieu thereof a new owners duplicate certificate of title in the name of Ruben C. Reyes,
who has substituted [MFR] by virtue of a Deed of Transfer of Interest and pursuant to the
order of this court dated January 02, 2006.[21]
Copies of the Order were separately served on Atty. Sumawang, Atty. Anacleto Diaz
(Reyes counsel) and the Register of Deeds of Bulacan Province on January 20
and February 2, 2006, respectively. [22] However, service thereof to respondents counsel
was returned and rendered impossible. Apparently, Atty. Sumawang had already died
in December 2005.[23]
On April 27, 2006, Reyes filed another Motion praying that the Register of Deeds of
Bulacan Province be directed to cancel TCT No. T-198753 in the name of respondents
and to issue a new one in his (Reyes) name.
On May 19, 2006, new counsel for respondents entered its appearance. Forthwith,
on May 23, 2006, respondents, through their new counsel, filed the previously adverted
to Opposition and Motion, [24] opposing Reyes April 27, 2006 Motion and moving to
declare void the sale of the subject property.
After an exchange of pleadings from the parties, the RTC issued the Order denying
respondents Opposition and Motion for lack of merit. The RTC ruled that, Section 107 of
PD 1529 does not categorically state that the petition x x x should be in the form of a
separate, distinct and original action to be filed in another court, as otherwise it will
create a situation in which the final judgment of a court, and its enforcement, may be
subject to a review of, or even reversal by another court of co-equal jurisdiction.[25] As
regards the motion to declare void the execution sale of the subject property covered
by TCT No. T-198753, the RTC noted that there was substantial compliance with the
requirements of [Section 15, Rule 39 of the Rules of Court evidenced] in the Sheriffs
Report dated January 4, 1999, as well as the publication and posting requirements,
extant in the records of this case. [26] In conclusion, the RTC ruled that respondents are
estopped from questioning the proceedings, after keeping silent thereon for a long
time, despite notice thereof.
Respondents filed a Motion for Reconsideration which the RTC denied in its Order
dated October 20, 2006.
Gaining no reprieve from the RTC, respondents filed a petition for certiorari before the
Court of Appeals seeking to: (1) nullify the trial courts twin Orders dated July 17, 2006
and October 20, 2006, respectively; and (2) declare void the execution proceedings
relating to the sale of the subject property and the cancellation of TCT No. T-198753.
In yet another turn of events, the appellate court annulled and set aside the July 17,
2006 and October 20, 2006 Orders of the RTC:
WHEREFORE, the Petition is GRANTED and the Orders issued on July 17 and October 20,
2006 are ANNULLED and SET ASIDE. The public auction sale of the property held on July
19, 1999 is declared invald and the Certificate of Sale issued by Sheriff Leovino G.
Legaspi on July 19, 1999 in favor of [petitioner Reyes, substituting MFR] covering the
parcel of land embraced in Transfer Certificate of Title No. T-198753 is likewise declared
null and void.[27]
Aggrieved, Reyes filed a Motion for Reconsideration which resulted in another
exchange of pleadings between the parties. On December 9, 2008, the Court of
Appeals denied the motion.
Hence, this impasse with the following issues for our resolution:
1. Whether the execution sale of the subject property covered by TCT No. T-198753 is
void;
2. Proceeding from the validity of the execution sale and the consolidation of Reyes
ownership over the subject property, whether Section 107 of Presidential Decree No.
1529 contemplates the filing of a separate cadastral case before the RTC acting as a
land registration court.
The petition is partially impressed with merit.
In declaring void the execution sale, the appellate court noted that petitioner did not
strictly comply with the requirements of Section 15, Rule 39 of the Rules of Court. The
Court of Appeals relied on our holding in Villaceran v. Beltejar,[28] an administrative case
finding therein respondent Sheriff guilty of simple neglect of duty for failure
to strictly comply with the rules on execution sale. The Court of Appeals ruled that the
deficiencies in the notice of execution sale were substantial and of such nature as to
prevent the court from applying the presumption of regularity in the performance of
official functions by Sheriff Legaspi at the time of the execution sale. On this score, the
Court of Appeals pointed out that it was incumbent upon Reyes part to prove that the
requirements of the law on execution sale have been fully complied with.
We disagree.
Contrary to the Court of Appeals holding, the burden of evidence to prove lack of
compliance with Section 15, Rule 39 of the Rules of Court rests on the party claiming
lack thereof i.e., respondents.
In Venzon v. Spouses Juan,[29] we declared that the judgment debtor, as herein
respondents, alleging lack of compliance with the posting and publication requirements
of the auction sale in accordance with the rules, is behooved to prove such
allegation. We held, thus:
x x x. Whoever asserts a right dependent for its existence upon a negative, must
establish the truth of the negative by a preponderance of the evidence. This must be the
rule, or it must follow that rights, of which a negative forms an essential element, may be
enforced without proof. Thus, whenever the [partys] right depends upon the truth of a
negative, upon him is cast the onus probandi, except in cases where the matter is
peculiarly within the knowledge of the adverse party.
It was error, therefore, for the trial court to hold that:
Defendants did not present evidence to rebut the no notice allegation of the plaintiff.
Although in the defendant spouses pre-trial brief, there is that general allegation that
the auction sale was made in accordance with law, however, there is no showing in the
record that the requirements with respect to publication/posting of notices were
complied with by the defendants.
Deliberating on the absence of notice, the fact that the plaintiff did not come to know
that Lot 12 was being subjected to an auction sale proves two things: one, that no
notice was posted in the place where the property is located [and, two, that] there was
no auction sale that took place on March 30, 1992. . . .
Further, the defendants, particularly defendant sheriff, who is the most competent
person to testify that a written notice of sale was made and posted in accordance with
law, was not presented to the witness stand. Neither was a document presented like
Sheriffs Certificate of Posting to attest to the fact that a written notice of sale was
posted before the property was allegedly sold at public auction. In fact, the record is
silent as (to) where the auction sale was conducted.
By ruling in the foregoing manner, the trial court incorrectly shifted the plaintiffs burden
of proof to the defendants. It is true that the fact of posting and publication of the notices
is a matter peculiarly within the knowledge of the Deputy Sheriff. However, the trial court
did not acquire jurisdiction over him, as he was not served with summons. At the time of
the filing of the complaint, he was no longer connected with the Caloocan RTC, Branch
126, which issued the writ of execution. Hence, he could not testify in his own behalf.
x x x [T]he duty imposed by Section [18] (c) is reposed upon the sheriff, who is charged
with the enforcement of the writ. Respondent spouses had a right to presume that he
had regularly performed his duty. It was not incumbent upon them to present him as a
witness for, in the absence of the sheriff, the burden to prove lack of posting
and publication remained with petitioner.[30] (Emphasis supplied)
Respondents made no attempt to meet this burden of evidence, simply maintaining
lack of notice of the entire proceedings (execution and issuance of a new title over the
subject property) before the trial court.
We cannot subscribe to respondents belated posturing. The disputable presumption
that official duty has been regularly performed was not overcome by
respondents.[31]The documents on record lead us to the inevitable conclusion that
respondents had constructive, if not actual, notice of the execution proceedings from
the issuance of the Writ of Execution, the levy on the subject property,[32] its subjection to
execution sale, up to and until the proceedings in the RTC relating to the issuance of a
new certificate of title over the subject property. Certainly, respondents are precluded
from feigning ignorance of MFR (substituted by Reyes) staking a claim thereon.
There was substantial compliance with Section 15, Rule 39 of the Rules of Court: the
documents in support thereof, i.e., the Certificate of Posting issued by Sheriff Legaspi
and the Affidavit of Publication executed by the publisher of The Times Newsweekly,
appear to be in order. [33] In this case, the purpose of giving notice through posting and
publication under Section 15(c) of the same ruleto let the public know of the sale to the
end that the best price or a better bid may be made possible to minimize prejudice to
the judgment debtorwas realized.
Another thing militates against respondents claim of lack of knowledge of the
encumbrance on their propertythe separate registrations of: (1) the Notice of Levy on
TCT No. T-198753; (2) the Certificate of Sale.
In this jurisdiction, we adhere to the doctrine that registration in a public registry works as
constructive notice to the whole world.[34] Section 51 of Act No. 496, as amended by
Section 52 of Presidential Decree No. 1529, provides:
SECTION 52. Constructive notice upon registration.Every conveyance, mortgage,
lease, lien, attachment, order, judgment, instrument or entry affecting registered land
shall, if registered, filed or entered in the Office of the Register of Deeds for the province
or city where the land to which it relates lies, be constructive notice to all persons from
the time of such registering, filing, or entering.
And, quite undeniably, respondents had constructive notice that their property is
subject of execution proceedings arising from their judgment debt and in danger of
forfeiture to their judgment creditor.
Respondents consistently flouted the judgment in Civil Case No. 1245-M, as amended
by the Decision of the Court of Appeals in CA G.R. CV No. 37808, which became final
and executory on December 1, 1997, by their utter failure to respond to the processes of
the RTC in the execution proceedings despite their receipt of notice at each stage
thereof. At the very least, respondents attack on the validity of the execution
proceedings, culminating in the execution sale of the subject property, is barred by
laches.
Laches is the failure or neglect, for an unreasonable and unexplained length of time, to
do that which by exercising due diligence could or should have been done earlier; it is
negligence or omission to assert a right within a reasonable time, warranting a
presumption that the party entitled to assert it either has abandoned it or declined to
assert it.[35]Laches thus operates as a bar in equity. [36]
We hearken to the time-honored rule anchored on public policy:
[R]elief will be denied to a litigant whose claim or demand has become "stale," or who
has acquiesced for an unreasonable length of time, or who has not been vigilant or
who has slept on his rights either by negligence, folly or inattention. In other words,
public policy requires, for peace of society, the discouragement of claims grown stale
for non-assertion; thus laches is an impediment to the assertion or enforcement of a right
which has become, under the circumstances, inequitable or unfair to
permit.[37] (Emphasis supplied)
The records bear out that as of October 9, 1998, and on two occasions thereafter,
December 10 & 28, 1998, Sheriff Legaspi served a copy of the Writ of Execution on
respondents, and followed up thereon. With no action forthcoming from respondents,
who are ostensibly evading payment of their judgment debt, the Sheriff correctly levied
on the subject property. For more than five (5) years from the execution sale thereof,
with respondents not exercising their right of redemption, up to the filing of a Motion,
and subsequently, a Petition for the issuance of a new certificate of title over the
property in Reyes name, respondents made no effort to settle their judgment debt,
much less, to ascertain the status of the execution proceedings against them and the
levy on, and consequent sale of, their property. Truly significant is the fact that eight (8)
years had lapsed, from the time respondents received a copy of the Writ of Execution in
October 1998 until they, through their new counsel, filed the Opposition and Motion in
May 2006, before respondents were prodded into action.
We find obvious respondents brazen ploy to forestall and thwart the execution of a final
and executory judgment against them. The death of their counsel, Atty. Sumawang,
and their engagement of a new one, does not minimize the hard fact that respondents
had notice of, not only the execution proceedings, but also, the proceedings on the
issuance of a new title over the subject property. Yet, respondents did not act on any of
these notices which were duly received by Atty. Sumawang. Respondents Motion to
nullify the execution proceedings, from the levy on the subject property and sale
thereof, is an afterthought, a last-ditch effort to evade payment of their judgment
debt. Their claim of ignorance of the execution proceedings flies in the face of the
documents on record. This bare-faced claim cannot trump the disputable presumption
that a person takes ordinary care of his concerns. [38] Consequently, respondents are
estopped and barred from assailing the execution proceedings before the RTC.
Time and again, we have held that once a judgment becomes final and executory, the
prevailing party should not be denied the fruits of his victory by some subterfuge
devised by the losing party.[39] We completely agree with the RTCs disquisition, thus:
Finally, after [MFR] had filed the petition in question pursuant to and in compliance wi th
the order of this court dated September 28, 2004, to which no answer or any responsive
pleading was filed by respondents or thru their lawyer, as the latter was certainly notified
of the proceedings in said petition, respondents cannot now assail said proceedings
after keeping silent thereon for a long time, and if indeed there was neglect on the part
of their lawyer in informing them of or in taking part in said proceedings, such
negligence of their counsel binds them as client. There is likewise an evident lack of
prudence and due diligence on the part of the respondents by their failure to inform this
court of the withdrawal of their former counsel for a long period of time, and they
cannot now, by feigning ignorance of the proceedings had in the petition in question,
assail the same thru a new counsel. In other words, respondents cannot be allowed to
keep silent on or refuse to participate in proceedings that they know were taking place
in connection with a final judgment rendered against them and then suddenly, after
said proceedings were long terminated, come to court to question the same through a
new counsel. The respondents are clearly in estoppel. Also, the court finds no practical
purpose and benefit in sustaining the theory posited by respondents which, aside from
the reasons advanced earlier, will have no other effect than to further unduly delay the
execution of a judgment that had long acquired finality. [40]
xxxx
Respondents are clearly estopped from assailing the proceedings in question by their
failure or refusal to participate therein despite their or their counsels knowledge thereof,
and it would be unjust for the plaintiff to allow respondents to put in issue the validity of
said proceedings at this late stage, thru another counsel, as they are bound by the
action or inaction of their former counsel.[41]
The Court of Appeals reliance on Villaceran v. Beltejar[42] is misplaced. Villaceran is an
administrative case finding the Sheriff guilty of simple neglect of duty for failure to strictly
comply with the rules on execution sale. We held therein that there was no substantial
compliance by the Sheriff with Section 15(c), Rule 39 of the Rules of Court. Our
declaration that [n]o reason exists not to apply the principle in the extrajudicial
foreclosure sales of real property (statutory requirements of posting and publication
must be strictly complied with since non-compliance could constitute a jurisdictional
defect that would invalidate the sale) to execution sales of real property under Rule 39
of the Rules of Court[43] is an obiter which should not be definitive of the facts obtaining
herein.
The facts of this case demonstrate respondents stubborn refusal to comply with the
judgment against them by claiming lack of notice of the execution proceedings. We
reiterate that this claim is belied by the evidence on record and cannot invalidate the
enforcement and execution of a final and executory judgment of this Court. On the
whole, respondents silence and inaction for eight (8) years from the time the subject
property was validly levied upon by the RTC, bars them from claiming invalidity of the
execution proceedings.
Notwithstanding the validity of the execution sale and Reyes consolidation of ownership
over the subject property upon the lapse of the redemption period, we hold that
Section 107 of Presidential Decree No. 1529 contemplates the filing of a separate and
original action before the RTC, acting as a land registration court.
Reyes argues that to require him to file his petition in another court would unduly divest
the RTC of its jurisdiction to enforce its final and executory decision. Reyes invokes our
ruling in Natalia Realty, Inc. v. Court of Appeals [44] where we declared that jurisdiction of
the court to execute its judgment continues even after the judgment has become final
for the purpose of enforcement of judgment.[45]
Reyes reasoning is off tangent. Natalia is inapplicable because the execution
proceedings in this case have been completed and was terminated upon the
execution sale of the subject property. Reyes already consolidated ownership over the
subject property; as owner, he has a right to have the same registered in his name. This
transfer of title to the subject property in Reyes name is no longer part of the execution
proceedings: the fact of levy and sale constitutes execution, not so is the action for the
issuance of a new title.[46]

Indeed, the subsequent filing of a separate and original action for the titling of the
subject property in Reyes name, no longer involves the execution of the judgment in
Civil Case No. 1245-M.
Section 107 of the Property Registration Decree falls under PETITIONS AND ACTIONS
AFTER ORIGINAL REGISTRATION, Chapter X thereof. The provision reads:
SECTION 107. Surrender of withhold duplicate certificates. Where it is necessary to issue
a new certificate of title pursuant to any involuntary instrument which divests the title of
the registered owner against his consent or where a voluntary instrument cannot be
registered by reason of the refusal or failure of the holder to surrender the owner's
duplicate certificate of title, the party in interest may file a petition in court to compel
surrender of the same to the Register of Deeds. The court, after hearing, may order the
registered owner or any person withholding the duplicate certificate to surrender the
same, and direct the entry of a new certificate or memorandum upon such surrender. If
the person withholding the duplicate certificate is not amenable to the process of the
court, or if not any reason the outstanding owner's duplicate certificate cannot be
delivered, the court may order the annulment of the same as well as the issuance of a
new certificate of title in lieu thereof. Such new certificate and all duplicates thereof
shall contain a memorandum of the annulment of the outstanding duplicate.
That a succeeding registration of property in anothers name, after its original
registration, contemplates a separate original action is reinforced by our ruling in Padilla
v. Philippine Producers Cooperative Marketing Association, Inc. [47] Answering the
question: In implementing the involuntary transfer of title of real property levied and sold
on execution, is it enough for the executing party to file a motion with the court which
rendered judgment, or does he need to file a separate action with the Regional Trial
Court, we unequivocally declared, thus:
Petitioner is correct in assailing as improper respondents filing of a mere motion for the
cancellation of the old TCTs and the issuance of new ones as a result of petitioners
refusal to surrender his owners duplicate TCTs.
Indeed, this called for a separate cadastral action initiated via petition.
Section 107 of PD 1529, formerly Section 111 of Act 496, provides:
xxxx
Respondent alleges that it resorted to filing the contested motion because it could not
obtain new certificates of title, considering that petitioner refused to surrender his
owners duplicate TCTs. This contention is incorrect. The proper course of action was to
file a petition in court, rather than merely move, for the issuance of new titles. This was
the procedure followed in Blancaflor by Sarmiento Trading which was in more or less the
same situation as the respondent in this case:
Petitioners reliance on prescription and laches is unavailing in this instance. It was proper
for Sarmiento Trading Corporation to file a petition with the Court of First Instance of Iloilo,
acting as a cadastral court, for the cancellation of TCT No. 14749 in the name of
Gaudencio Blancaflor and the issuance of another in its name. This is a procedure
provided for under Section 78 of Act No. 496 and Section 75 of PD No. 1529. . . .
Section 78 of Act 496 reads:
Sec. 78. Upon the expiration of the time, if any allowed by law for redemption after
registered land has been sold on any execution, or taken or sold for the enforcement of
any lien of any description, the person claiming under the execution or under any deed
or other instrument made in the course of the proceedings to levy such execution or
enforce any lien, may petition the court for the entry of a new certificate to him, and
the application may be granted: Provided, however, That every new certificate
entered under this section shall contain a memorandum of the nature of the
proceeding on which it is based: Provided, further, That at any time prior to the entry of
a new certificate the registered owner may pursue all his lawful remedies to impeach or
annul proceedings under execution or to enforce liens of any description.
Section 75 of PD 1529 provides:
Sec. 75. Application for new certificate upon expiration of redemption period. ─ Upon
the expiration of the time, if any, allowed by law for redemption after the registered
land has been sold on execution, or taken or sold for the enforcement of a lien of any
description, except a mortgage lien, the purchaser at such sale or anyone claiming
under him may petition the court for the entry of a new certificate to him.
Before the entry of a new certificate of title, the registered owner may pursue all legal
and equitable remedies to impeach or annul such proceedings.
It is clear that PD 1529 provides the solution to respondents quandary. The reasons
behind the law make a lot of sense; it provides due process to a registered landowner
(in this case the petitioner) and prevents the fraudulent or mistaken conveyance of
land, the value of which may exceed the judgment obligation. x x x.
While we certainly will not condone any attempt by petitioner to frustrate the ends of
justice − the only way to describe his refusal to surrender his owners duplicates of the
certificates of title despite the final and executory judgment against him − respondent,
on the other hand, cannot simply disregard proper procedure for the issuance to it of
new certificates of title. There was a law on the matter and respondent should have
followed it.
In any event, respondent can still file the proper petition with the cadastral court for the
issuance of new titles in its name.[48] (Emphasis supplied).
Plainly, Reyes must institute a separate cadastral action initiated via petition.
WHEREFORE, the petition is PARTLY GRANTED. The Decision of the Court of Appeals in CA
G.R. SP No. 96913 annulling and setting aside the Orders dated July 17, 2006 and
October 20, 2006 issued by the Regional Trial Court, Branch 7, Malolos, Bulacan in Civil
Case No. 1245-M is MODIFIED:
1. The public auction sale of the subject property covered by TCT No. T-198753 on July
19, 1999 is declared VALID;
2. The Certificate of Sale issued by Sheriff Leovino Legaspi on July 19, 1999 in favor of
MFR Farms, Inc. (substituted by petitioner Ruben C. Reyes) covering the parcel of land
embraced in Transfer Certificate of Title No. T-198753 is likewise declared VALID; and
3. The Petition[49] dated October 29, 2004 filed by MFR Farms, Inc. (substituted by Ruben
C. Reyes) is DISMISSED without prejudice to re-filing as a separate original action
pursuant to Section 107 of Presidential Decree No. 1529. SO ORDERED.
[G.R. No. 136283. February 29, 2000]
VIEWMASTER CONSTRUCTION CORPORATION, petitioner, vs. HON. REYNALDO Y. MAULIT in
his official capacity as administrator of the Land Registration Authority; and EDGARDO
CASTRO, acting register of deeds of Las Pias, Metro Manila; respondents.
DECISION
PANGANIBAN, J.:
A notice of lis pendens may be registered when an action or a proceeding directly
affects the title to the land or the buildings thereon; or the possession, the use or the
occupation thereof. Hence, the registration of such notice should be allowed if the
litigation involves the enforcement of an agreement for the co-development of a
parcel of land. h Y
Statement of the Case
Before us is a Petition for Review on Certiorari [1] assailing the February 27, 1998
Decision[2] of the Court of Appeals (CA)[3] in CA- GR SP No. 39649 and its November 12,
1998 Resolution[4] denying reconsideration. The assailed Decision affirmed the
Resolution[5] of the Land Registration Authority (LRA) in Consulta No. 2381, which ruled as
follows:
"PREMISES CONSIDERED, this Authority is of the considered view and so holds that the
Notice of Lis Pendens subject of this consulta is not registrable." [6]
The Facts
The undisputed facts were summarized by the Court of Appeals as follows:
"The subject property is known as the Las Pias property registered in the name of Peltan
Development Inc. (now State Properties Corporation) covered by Transfer Certificate of
Title No. (S-17992) 12473-A situated in Barrio Tindig na Manga, Las Pias, Rizal.
"The Chiong/Roxas family collectively owns and controls State Investment Trust, Inc.
(formerly State Investment House, Inc.) and is the major shareholder of the following
corporations, namely: State Land Investment Corporation, Philippine Development and
Industrial Corporation and Stronghold Realty Development.
"Sometime in 1995, the said family decided to give control and ownership over the said
corporations to only one member of the family, through the process of bidding among
the family members/stockholders of the said companies. It was agreed that the bidder
who acquires 51% or more of the said companies shall be deemed the winner.
"Defendant Allen Roxas, one of the stockholders of State Investment Trust, Inc. applied
for a loan with First Metro Investment, Inc. (First Metro for brevity) in the amount
of P36,500,000.00 in order to participate in the bidding. Es msc
"First Metro granted Allen Roxas' loan application without collateral provided, however,
that he procure a guarantor/surety/solidary co-debtor to secure the payment of the
said loan.
"Petitioner Viewmaster agreed to act as guarantor for the aforementioned loan in
consideration for its participation in a Joint Venture Project to co-develop the real
estate assets of State Investment Trust, Inc.
"After a series of negotiations, petitioner Viewmaster and defendant Allen Roxas agreed
that should the latter prevail and win in the bidding, he shall sell to petitioner fifty
percent (50%) of the total eventual acquisitions of shares of stock in the State
Investment Trust, Inc., at a purchase price equivalent to the successful bid price per
share plus an additiona1 ten percent (10%) per share.
"As a result of the loans granted by First Metro in consideration of and upon the
guaranty of petitioner Viewmaster, defendant Allen Roxas, eventually gained control
and ownership of State Investment Trust, Inc.
"However, notwithstanding the lapse of two (2) years since defendant Allen Roxas
became the controlling stockholder of State Investment Trust, Inc., he failed to take the
necessary action to implement the Joint Venture Project with petitioner Viewmaster to
co-develop the subject properties.
"Thus, petitioner's counsel wrote defendant Allen Roxas, reiterating petitioner's demand
to comply with the agreement to co-develop the Las Pias Property and to set in
operation all the necessary steps towards the realization of the said project.
"On September 8, 1995, petitioner Viewmaster filed a Complaint for Specific
Performance, Enforcement of Implied Trust and Damages against State Investment Trust,
Inc. Northeast Land Development, Inc., State Properties Corporation (formerly Peltan
Development, Inc.) and defendant Allen Roxas, in his capacity as Vice-Chairman of
State Investment Trust, Inc., and Chairman of Northeast Land Development, Inc., State
Properties Corporation, which was docketed as Civil Case No.65277. Esmm is
"On September 11,1995, petitioner Viewmaster filed a Notice of Lis Pendens with the
Register of Deeds of Quezon City and Las Pias for the annotation of a Notice of Lis
Pendens on Transfer Certificate of Title No. (S-17992) 12473- A, registered in the name of
Peltan Development, Inc. (now State Properties Corporation).
"In a letter dated September 15, 1995, the respondent Register of Deeds of Las Pias
denied the request for annotation of the Notice of Lis Pendens on the following grounds:
1. the request for annotation and the complaint [do] not contain an adequate
description of the subject property;
2. petitioner's action only has an incidental effect on the property in question. Esmso
"On September 20, 1995, petitioner filed an appeal to the respondent Land Registration
Authority, which was docketed as Consulta No. 2381.
"On December 14, 1995, the Respondent Land Registration Authority issued the assailed
Resolution holding that petitioner's 'Notice of Lis Pendens' was not registrable."[7]
Ruling of the Court of Appeals
In affirming the ruling of the LRA, the Court of Appeals held that petitioner failed to
adequately describe the subject property in the Complaint and in the application for
the registration of a notice of lis pendens. The CA noted that while Transfer Certificate of
Title No. (S-17992) 12473-A indicated six parcels of land, petitioner's application
mentioned only one parcel.
Moreover, the CA also ruled that a notice of lis pendens may be registered only when
an action directly affects the title to or possession of the real property. In the present
case, the proceedings instituted by petitioner affected the title or
possession incidentally only, not directly.
Hence, this Petition.[8]
Issues
Petitioner submits for the consideration of the Court the following issues:
"I
Whether or not the petitioner failed to adequately describe the subject property in its
complaint and in the notice of lis pendens Mse sm
II
Whether or not the Las Pias property is directly involved in Civil Case No. 65277." [9]
The Court's Ruling
The Petition is meritorious.
First Issue: Description of Property
Petitioner contends that the absence of the property's technical description in either the
notice of lis pendens or the Complaint is not a sufficient ground for rejecting its
application, because a copy of TCT No. (S-17992) 12473-A specifically describing the
property was attached to and made an integral part of both documents.
On the other hand, respondents argue that petitioner failed to provide an accurate
description of the Las Pias property, which was merely referred to as a "parcel of land ."
The notice of lis pendens described the property as follows:
"A parcel of land situated in the Barrio of Tindig na Manga, Municipality of Las Pias,
Province of Rizal x x x containing an area of Seven Hundred Eighty Six Thousand One
Hundred Sixty Seven (786,167) square meters, more or less."
By itself, the above does not adequately describe the subject property, pursuant to
Section 14 of Rule 13 of the Rules of Court and Section 76 of Presidential Decree (PD)
No.1529. It does not distinguish the said property from other properties similarly located
in the Barrio of Tindig na Manga, Municipality of Las Pias, Province of Rizal. Indeed, by
the above description alone, it would be impossible to identify the property.
In the paragraph directly preceding the description quoted above, however, petitioner
specifically stated that the property referred to in the notice of lis pendens was the
same parcel of land covered by TCT No. (S-17992) 12473-A:
"Please be notified that on 08 September 1995, the [p]laintiff in the above-entitled case
filed an action against the above-named [d]efendants for specific performance,
enforcement of an implied trust and damages, now pending in the Regional Trial Court
of Pasig, Branch 166, which action involves a parcel of land covered by Transfer
Certificate Title (TCT) No. (S-17992) 12473-A, registered in the name of Peltan
Development Incorporated which changed its corporate name to State Properties
Corporation, one of the [d]efendants in the aforesaid case. The said parcel of land is
more particu1arly described as follows: Ex sm
'A parcel of land situated in the Barrio of Tindig na Manga, Municipality of Las Pias,
Province of Rizal x x x containing an area of Seven Hundred Eighty Six Thousand One
Hundred Sixty Seven (786,167) square meters, more or less.'
"Request is therefore made [for] your good office to record this notice of pendency of
the aforementioned action in TCT No. (S-17992) 12473-A for all legal purposes." [10]
As earlier noted, a copy of the TCT was attached to and made an integral part of both
documents. Consequently, the notice of lis pendens submitted for registration, taken as
a whole, leaves no doubt as to the identity of the property, the technical description of
which appears on the attached TCT. We stress that the main purpose of the
requirement that the notice should contain a technical description of the property is to
ensure that the same can be distinguished and readily identified. In this case, we agree
with petitioner that there was substantial compliance with this requirement.
Second Issue: Property Directly Involved
In upholding the LRA, the Court of Appeals held that "the doctrine of lis pendens has no
application to a proceeding in which the only object sought is the recovery of [a]
money judgment, though the title [to] or right or possession [of] a property may be
incidentally affected. It is thus essential that the property be directly affected where the
relief sought in the action or suit includes the recovery of possession, or the enforcement
[thereof], or an adjudication between the conflicting claims of title, possession or right of
possession to specific property, or requiring its transfer or sale." [11]
On the other hand, petitioner contends that the civil case subject of the notice of lis
pendens directly involved the land in question, because it prayed for the enforcement
of a prior agreement between herein petitioner and Defendant Allen Roxas to co-
develop the latter's property.
We agree with the petitioner. A notice of lis pendens, which literally means "pending
suit," may involve actions that deal not only with the title or possession of a property, but
even with the use or occupation thereof. Thus, Section 76 of PD 1529 reads: Jjjuris
"Sec. 76. Notice of lis pendens. -- No action to recover possession of real estate, or to
quiet title thereto, or to remove clouds upon the title thereof, or for partition, or other
proceedings of any kind in court directly affecting the title to land or the use or
occupation thereof or the buildings thereon, and no judgment, and no proceeding to
vacate or reverse any judgment, shall have any effect upon registered land as against
persons other than the parties thereto, unless a memorandum or notice stating the
institution of such action or proceeding and the court wherein the same is pending, as
well as the date of the institution thereof, together with a reference to the number of
the certificate of title, and an adequate description of the land affected and the
registered owner thereof, shall have been filed and registered."
In Magdalena Homeowners Association, Inc. v. Court of Appeals, [12] the Court did not
confine the availability of lis pendens to cases involving the title to or possession of real
property. Thus, it held:
"According to Section 24, Rule 14[13] of the Rules of Court and Section 76 of Presidential
Decree No.1529, a notice of lis pendens is proper in the following cases, viz.:
a).......An action to recover possession of real estate;
b).......An action to quiet title thereto;
c).......An action to remove clouds thereon;
d).......An action for partition; and
e).......Any other proceedings of any kind in Court directly affecting the title to the land
or the use or occupation hereof or the buildings thereon."
In Villanueva v. Court of Appeals,[14] this Court further declared that the rule of lis
pendens applied to suits brought "to establish an equitable estate, interest, or right in
specific real property or to enforce any lien, charge, or encumbrance against it x x x."
Thus, this Court observed that the said notice pertained to the following: Sjcj
"x x x all suits or actions which directly affect real property and not only those which
involve the question of title, but also those which are brought to establish an equitable
estate, interest, or right, in specific real property or to enforce any lien, charge, or
encumbrance against it, there being in some cases a lis pendens, although at the
commencement of the suit there is no present vested interest, claim, or lien in or on the
property which it seeks to charge. It has also been held to apply in the case of a
proceeding to declare an absolute deed of mortgage, or to redeem from a foreclosure
sale, or to establish a trust, or to suits for the settlement and adjustment of partnership
interests."
In the present case, petitioner's Complaint docketed as Civil Case No. 65277 clearly
warrants the registration of a notice of lis pendens. The Complaint prayed for the
following reliefs: Scjj
"1. Render judgment ordering the Defendant Allen Roxas to sell fifty percent (50%) of his
shareholdings in Defendant State Investment to Plaintiff at the price equivalent to the
successful bid price per share plus an additional ten percent (10%) per share
and directing Defendants to co-develop with the Plaintiff the subject real properties;
2. Render judgment ordering the Defendant Allen Roxas to:
a. Pay the Plaintiff the amount of at least Twenty Million Pesos (P20,000,000.00) and/or
such other amounts as may be proven during the course of the trial, by way of actual
damages;
b. Pay the Plaintiff the amount of at least One Million Pesos (P1,000,000.00), by way of
moral damages;
c. Pay the Plaintiff the amount of at least One Million Pesos (P1,000,000.00), by way of
exemplary damages;
d. Pay the Plaintiff the amount of Two Hundred Fifty Thousand Pesos (P250,000.00) by
way of attorney's fees; and
e. Pay expenses of litigation and costs of suit." [15]
Undeniably, the prayer that Defendant Allen Roxas be ordered to sell 50 percent of his
shareholdings in State Investment does not directly involve title to the property and is
therefore not a proper subject of a notice of lis pendens. Neither do the various
amounts of damages prayed for justify such annotation.
We disagree, however, with the Court of Appeals and the respondents that the prayer
for the co-development of the land was merely incidental to the sale of shares of
defendant company.Jjsc
The Complaint shows that the loan obtained by Allen Roxas (one of the defendants in
the civil case) from First Metro was guaranteed by petitioner for
two distinct considerations: (a) to enable it to purchase 50 percent of the stocks that the
said defendant may acquire in State Investment and (b) to co-develop with the
defendants the Quezon City and the Las Pias properties of the corporation. In other
words, the co-development of the said properties is a separate undertaking that did not
arise from petitioner's acquisition of the defendant's shares in the corporation. To repeat,
the co-development is not merely auxiliary or incidental to the purchase of the shares; it
is a distinct consideration for Viewmaster's guaranty. [16]
Hence, by virtue of the alleged agreement with Allen Roxas, petitioner has a direct --
not merely incidental -- interest in the Las Pias property. Contrary to respondents'
contention, [17] the action involves not only the collection of a money judgment, but also
the enforcement of petitioner's right to co-develop and use the property.
The Court must stress that the purpose of lis pendens is (1) to protect the rights of the
party causing the registration thereof[18] and (2) to advise third persons who purchase or
contract on the subject property that they do so at their peril and subject to the result of
the pending litigation.[19] One who deals with property subject of a notice of lis
pendens cannot acquire better rights than those of his predecessors-in-interest.[20] In
Tanchoco v. Aquino, [21] the Court held:
"x x x. _ The doctrine of lis pendens is founded upon reason of public policy and
necessity, the purpose of which is to keep the subject matter of the litigation within the
power of the court until the judgment or decree shall have been entered; otherwise, by
successive alienations pending the litigation, its judgment or decree shall be rendered
abortive and impossible of execution. Purchasers pendente lite of the property subject
of the litigation after the notice of lis pendens is inscribed in the Office of the Register of
Deeds are bound by the judgment against their predecessors. x x x."
Without a notice of lis pendens, a third party who acquires the property after relying
only on the Certificate of Title would be deemed a purchaser in good faith. Against
such third party, the supposed rights of petitioner cannot be enforced, because the
former is not bound by the property owner's undertakings not annotated in the
TCT.[22] Kyle
Likewise, there exists the possibility that the res of the civil case would leave the control
of the court and render ineffectual a judgment therein. Indeed, according to petitioner,
it was not even informed when Allen Roxas exchanged the Quezon City property for
shares of stock in Northeast Land Development, Inc. [23] Hence, it maintains that there is a
clear risk that the same thing would be done with the Las Pias property.
In this light, the CA ruling left unprotected petitioner's claim of co-development over the
Las Pias property. Hence, until the conflicting rights and interests are threshed out in the
civil case pending before the RTC, it will be in the best interest of the parties and the
public at large that a notice of the suit be given to the whole world.
The Court is not here saying that petitioner is entitled to the reliefs prayed for in its
Complaint pending in the RTC. Verily, there is no requirement that the right to or the
interest in the property subject of a lis pendens be proven by the applicant. The Rule
merely requires that an affirmative relief be claimed. [24] A notation of lis pendens neither
affects the merits of a case nor creates a right or a lien. [25] It merely protects the
applicant's rights, which will be determined during the trial.
WHEREFORE, the Petition is hereby GRANTED and the assailed Decision of the Court of
Appeals REVERSED and SET ASIDE. The Las Pias Register of Deeds is directed to cause the
annotation of lis pendens in TCT No. (S-17992) 12473-A. No costs.
SO ORDERED.
[G.R. No. 148568. March 20, 2003]
ATLANTIC ERECTORS, INC., petitioner, vs. HERBAL COVE REALTY
CORPORATION, respondent.
DECISION
PANGANIBAN, J.:
The pendency of a simple collection suit arising from the alleged nonpayment of
construction services, materials, unrealized income and damages does not justify the
annotation of a notice of lis pendens on the title to a property where construction has
been done.
Statement of the Case
Before the Court is a Petition for Review on Certiorari [1] under Rule 45 of the Rules of
Court, challenging the May 30, 2000 Decision[2] of the Court of Appeals (CA) in CA-GR
SP No. 56432. The dispositive portion of the Decision is reproduced as follows:
WHEREFORE, the petition is granted and the assailed November 4, 1998 and October 22,
1999 orders annulled and set aside. The July 30, 1998 order of respondent judge is
reinstated granting the cancellation of the notices of lis pendens subject of this
petition.[3]
In its July 21, 2001 Resolution,[4] the CA denied petitioners Motion for Reconsideration.
The Facts
The factual antecedents of the case are summarized by the CA in this wise:
On June 20, 1996, [respondent] and [petitioner] entered into a Construction Contract
whereby the former agreed to construct four (4) units of [townhouses] designated as 16-
A, 16-B, 17-A and 17-B and one (1) single detached unit for an original contract price
of P15,726,745.19 which was late[r] adjusted to P16,726,745.19 as a result of additional
works. The contract period is 180 days commencing [on] July 7, 1996 and to terminate
on January 7, 1997. [Petitioner] claimed that the said period was not followed due to
reasons attributable to [respondent], namely: suspension orders, additional works, force
majeure, and unjustifiable acts of omission or delay on the part of said
[respondent]. [Respondent], however, denied such claim and instead pointed to
[petitioner] as having exceeded the 180 day contract period aggravated by defective
workmanship and utilization of materials which are not in compliance with
specifications.
xxxxxxxxx
On November 21, 1997, [petitioner] filed a complaint for sum of money with damages
(Civil Case No. 97-2707) with the Regional Trial Court of Makati entitled Atlantic Erectors,
Incorporated vs. Herbal Cove Realty Corp. and Ernest C. Escal[e]r. This case was raffled
to Branch 137, x x x Judge Santiago J. Ranada presiding. In said initiatory pleading,
[petitioner] AEI asked for the following reliefs:
AFTER DUE NOTICE AND HEARING, to order x x x defendant to:
1. Pay plaintiff the sum of P4,854,229.94 for the unpaid construction services already
rendered;
2. To x x x pay plaintiff the sum of P1,595,551.00 for the construction materials, equipment
and tools of plaintiff held by defendant;
3. To x x x pay plaintiff the sum of P2,250,000.00 for the [loss] x x x of expected income
from the construction project;
4. [T]o x x x pay plaintiff the sum of P800,000.00 for the cost of income by way of rental
from the equipment of plaintiff held by defendants;
5. To x x x pay plaintiff the sum of P5,000,000.00 for moral damages;
6. To x x x pay plaintiff the sum of P5,000,000.00 for exemplary damages;
7. To x x x pay plaintiff the sum equivalent of 25% of the total money claim
plus P200,000.00 acceptance fee and P2,500.00 per court appearance;
8. To x x x pay the cost of suit.
On the same day of November 21, 1997, [petitioner] filed a notice of lis pendens for
annotation of the pendency of Civil Case No. 97-707 on titles TCTs nos. T-30228, 30229,
30230, 30231 and 30232. When the lots covered by said titles were subsequently
subdivided into 50 lots, the notices of lis pendens were carried over to the titles of the
subdivided lots, i.e., Transfer Certificate of Title Nos. T-36179 to T-36226 and T-36245 to T-
36246 of the Register of Deeds of Tagaytay City.
On January 30, 1998, [respondent] and x x x Ernest L. Escaler, filed a Motion to Dismiss
[petitioners] Complaint for lack of jurisdiction and for failure to state a cause of
action. They claimed [that] the Makati RTC has no jurisdiction over the subject matter of
the case because the parties Construction Contract contained a clause requiring them
to submit their dispute to arbitration.
xxxxxxxxx
On March 17, 1998, [RTC Judge Ranada] dismissed the Complaint as against
[respondent] for [petitioners] failure to comply with a condition precedent to the filing of
a court action which is the prior resort to arbitration and as against x x x Escaler for
failure of the Complaint to state a cause of action x x x.
[Petitioner] filed a Motion for Reconsideration of the March 17, 1998 dismissal
order. [Respondent] filed its Opposition thereto.
On April 24, 1998, [respondent] filed a Motion to Cancel Notice of Lis Pendens. It argued
that the notices of lis pendens are without basis because [petitioners] action is a purely
personal action to collect a sum of money and recover damages and x x x does not
directly affect title to, use or possession of real property.
In his July 30, 1998 Order, [Judge Ranada] granted [respondents] Motion to Cancel
Notice of Lis Pendens x x x:
[Petitioner] filed a Motion for Reconsideration of the aforesaid July 30, 1998 Order to
which [respondent] filed an Opposition.
In a November 4, 1998 Order, [Judge Ranada,] while finding no merit in the grounds
raised by [petitioner] in its Motion for Reconsideration, reversed his July 30, 1998 Order
and reinstated the notices of lis pendens, as follows:
1. The Court finds no merit in plaintiffs contention that in dismissing the above-entitled
case for lack of jurisdiction, and at the same time granting defendant Herbal Coves
motion to cancel notice of lis pendens, the Court [took] an inconsistent posture. The
Rules provide that prior to the transmittal of the original record on appeal, the court
may issue orders for the protection and preservation of the rights of the parties which do
not involve any matter litigated by the appeal (3rd par., Sec. 10, Rule 41). Even as it
declared itself without jurisdiction, this Court still has power to act on incidents in this
case, such as acting on motions for reconsideration, for correction, for lifting of lis
pendens, or approving appeals, etc.
As correctly argued by defendant Herbal Cove, a notice of lis pendens serves only as a
precautionary measure or warning to prospective buyers of a property that there is a
pending litigation involving the same.
The Court notes that when it issued the Order of 30 July 1998 lifting the notice of lis
pendens, there was as yet no appeal filed by plaintiff. Subsequently, on 10 September
1998, after a notice of appeal was filed by plaintiff on 4 September 1998, the Branch
Clerk of Court was ordered by the Court to elevate the entire records of the above-
entitled case to the Court of Appeals. It therefore results that the above-entitled case is
still pending. After a careful consideration of all matters relevant to the lis pendens, the
Court believes that justice will be better served by setting aside the Order of 30 July
1998.
On November 27, 1998, [respondent] filed a Motion for Reconsideration of the
November 4, 1998 Order arguing that allowing the notice of lis pendens to remain
annotated on the titles would defeat, not serve, the ends of justice and that equitable
considerations cannot be resorted to when there is an applicable provision of law.
xxxxxxxxx
On October 22, 1999, [Judge Ranada] issued an order denying [respondents] Motion for
Reconsideration of the November 4, 1998 Order for lack of sufficient merit. [5]
Thereafter, Respondent Herbal Cove filed with the CA a Petition for Certiorari.
Ruling of the Court of Appeals
Setting aside the Orders of the RTC dated November 4, 1998 and October 22, 1999, the
CA reinstated the formers July 30, 1998 Order [6] granting Herbal Coves Motion to Cancel
the Notice of Lis Pendens. According to the appellate court, the re-annotation of those
notices was improper for want of any legal basis. It specifically cited Section 76 of
Presidential Decree No. 1529 (the Property Registration Decree). The decree provides
that the registration of such notices is allowed only when court proceedings directly
affect the title to, or the use or the occupation of, the land or any building thereon.
The CA opined that the Complaint filed by petitioner in Civil Case No. 97-2707 was
intended purely to collect a sum of money and to recover damages. The appellate
court ruled that the Complaint did not aver any ownership claim to the subject land or
any right of possession over the buildings constructed thereon. It further declared that
absent any claim on the title to the buildings or on the possession thereof, the notices
of lis pendens had no leg to stand on.
Likewise, the CA held that Judge Ranada should have maintained the notice
cancellations, which he had directed in his July 30, 1998 Order. Those notices were no
longer necessary to protect the rights of petitioner, inasmuch as it could have procured
protective relief from the Construction Industry Arbitral Commission (CIAC), where
provisional remedies were available.The CA also mentioned petitioners admission that
there was already a pending case before the CIAC, which in fact rendered a decision
on March 11, 1999.
The appellate court further explained that the re-annotation of the Notice of Lis
Pendens was no longer warranted after the court a quo had ruled that the latter had
no jurisdiction over the case. The former held that the rationale behind the principle of lis
pendens -- to keep the subject matter of the litigation within the power of the court until
the entry of final judgment -- was no longer applicable. The reason for such
inapplicability was that the Makati RTC already declared that it had no jurisdiction or
power over the subject matter of the case.
Finally, the CA opined that petitioners Complaint had not alleged or claimed, as basis
for the continued annotation of the Notice of Lis Pendens, the lien of contractors and
laborers under Article 2242 of the New Civil Code. Moreover, petitioner had not even
referred to any lien of whatever nature. Verily, the CA ruled that the failure to allege
and claim the contractors lien did not warrant the continued annotation on the
property titles of Respondent Herbal Cove.
Hence, this Petition.[7]
The Issues
Petitioner raises the following issues for our consideration:
I. Whether or not money claims representing cost of materials [for] and labor [on] the
houses constructed on a property [are] a proper lien for annotation of lis pendens on
the property title[.]
II. Whether or not the trial court[,] after having declared itself without jurisdiction to try
the case[,] may still decide on [the] substantial issue of the case. [8]
This Courts Ruling
The Petition has no merit.
First Issue:
Proper Basis for a
Notice of Lis Pendens
Petitioner avers that its money claim on the cost of labor and materials for the
townhouses it constructed on the respondents land is a proper lien that justifies the
annotation of a notice of lis pendens on the land titles. According to petitioner, the
money claim constitutes a lien that can be enforced to secure payment for the said
obligations. It argues that, to preserve the alleged improvement it had made on the
subject land, such annotation on the property titles of respondent is necessary.
On the other hand, Respondent Herbal Cove argues that the annotation is bereft of any
factual or legal basis, because petitioners Complaint[9] does not directly affect the title
to the property, or the use or the possession thereof. It also claims that petitioners
Complaint did not assert ownership of the property or any right to possess it. Moreover,
respondent attacks as baseless the annotation of the Notice of Lis Pendens through the
enforcement of a contractors lien under Article 2242 of the Civil Code. It points out that
the said provision applies only to cases in which there are several creditors carrying on a
legal action against an insolvent debtor.
As a general rule, the only instances in which a notice of lis pendens may be availed of
are as follows: (a) an action to recover possession of real estate; (b) an action for
partition; and (c) any other court proceedings that directly affect the title to the land or
the building thereon or the use or the occupation thereof. [10] Additionally, this Court has
held that resorting to lis pendens is not necessarily confined to cases that involve title to
or possession of real property. This annotation also applies to suits seeking to establish a
right to, or an equitable estate or interest in, a specific real property; or to enforce a lien,
a charge or an encumbrance against it.[11]
Apparently, petitioner proceeds on the premise that its money claim involves the
enforcement of a lien. Since the money claim is for the nonpayment of materials and
labor used in the construction of townhouses, the lien referred to would have to be that
provided under Article 2242 of the Civil Code. This provision describes a contractors lien
over an immovable property as follows:
Art. 2242. With reference to specific immovable property and real rights of the debtor,
the following claims, mortgages and liens shall be preferred, and shall constitute an
encumbrance on the immovable or real right:
xxxxxxxxx
(3) Claims of laborers, masons, mechanics and other workmen, as well as of architects,
engineers and contractors, engaged in the construction, reconstruction or repair of
buildings, canals or other works, upon said buildings, canals or other works;
(4) Claims of furnishers of materials used in the construction, reconstruction, or repair of
buildings, canals or other works, upon said buildings, canals or other works[.] (Emphasis
supplied)
However, a careful examination of petitioners Complaint, as well as the reliefs it seeks,
reveals that no such lien or interest over the property was ever alleged. The Complaint
merely asked for the payment of construction services and materials plus damages,
without mentioning -- much less asserting -- a lien or an encumbrance over the
property. Verily, it was a purely personal action and a simple collection case. It did not
contain any material averment of any enforceable right, interest or lien in connection
with the subject property.
As it is, petitioners money claim cannot be characterized as an action that involves the
enforcement of a lien or an encumbrance, one that would thus warrant the annotation
of the Notice of Lis Pendens. Indeed, the nature of an action is determined by the
allegations of the complaint.[12]
Even assuming that petitioner had sufficiently alleged such lien or encumbrance in its
Complaint, the annotation of the Notice of Lis Pendens would still be unjustified,
because a complaint for collection and damages is not the proper mode for the
enforcement of a contractors lien.
In J.L. Bernardo Construction v. Court of Appeals,[13] the Court explained the concept of
a contractors lien under Article 2242 of the Civil Code and the proper mode for its
enforcement as follows:
Articles 2241 and 2242 of the Civil Code enumerates certain credits which enjoy
preference with respect to specific personal or real property of the debtor. Specifically,
the contractors lien claimed by the petitioners is granted under the third paragraph of
Article 2242 which provides that the claims of contractors engaged in the construction,
reconstruction or repair of buildings or other works shall be preferred with respect to the
specific building or other immovable property constructed.
However, Article 2242 finds application when there is a concurrence of credits, i.e.,
when the same specific property of the debtor is subjected to the claims of several
creditors and the value of such property of the debtor is insufficient to pay in full all the
creditors. In such a situation, the question of preference will arise, that is, there will be a
need to determine which of the creditors will be paid ahead of the others. Fundamental
tenets of due process will dictate that this statutory lien should then only be enforced in
the context of some kind of a proceeding where the claims of all the preferred creditors
may be bindingly adjudicated, such as insolvency proceedings.[14] (Emphasis supplied)
Clearly then, neither Article 2242 of the Civil Code nor the enforcement of the lien
thereunder is applicable here, because petitioners Complaint failed to satisfy the
foregoing requirements. Nowhere does it show that respondents property was subject to
the claims of other creditors or was insufficient to pay for all concurring debts. Moreover,
the Complaint did not pertain to insolvency proceedings or to any other action in which
the adjudication of claims of preferred creditors could be ascertained.
Another factor negates the argument of petitioner that its money claim involves the
enforcement of a lien or the assertion of title to or possession of the subject property: the
fact that it filed its action with the RTC of Makati, which is undisputedly bereft of any
jurisdiction over respondents property in Tagaytay City. Certainly, actions affecting title
to or possession of real property or the assertion of any interest therein should be
commenced and tried in the proper court that has jurisdiction over the area, where the
real property involved or a portion thereof is situated. [15] If petitioner really intended to
assert its claim or enforce its supposed lien, interest or right over respondents subject
properties, it would have instituted the proper proceedings or filed a real action with the
RTC of Tagaytay City, which clearly had jurisdiction over those properties. [16]
Narciso Pea, a leading authority on the subject of land titles and registration, gives an
explicit exposition on the inapplicability of the doctrine of lis pendens to certain actions
and proceedings that specifically include money claims. He explains in this wise:
By express provision of law, the doctrine of lis pendens does not apply to attachments,
levies of execution, or to proceedings for the probate of wills, or for administration of the
estate of deceased persons in the Court of First Instance. Also, it is held generally
that the doctrine of lis pendens has no application to a proceeding in which the only
object sought is the recovery of a money judgment, though the title or right of
possession to property be incidentally affected. It is essential that the property
be directly affected, as where the relief sought in the action or suit includes the
recovery of possession, or the enforcement of a lien, or an adjudication between
conflicting claims of title, possession, or the right of possession to specific property, or
requiring its transfer or sale[17] (Emphasis supplied)
Pea adds that even if a party initially avails itself of a notice of lis pendens upon the filing
of a case in court, such notice is rendered nugatory if the case turns out to be a purely
personal action. We quote him as follows:
It may be possible also that the case when commenced may justify a resort to lis
pendens, but during the progress thereof, it develops to be purely a personal action for
damages or otherwise. In such event, the notice of lis pendens has become functus
officio.[18] (Emphasis supplied)
Thus, when a complaint or an action is determined by the courts to be in personam, the
rationale for or purpose of the notice of lis pendens ceases to exist. To be sure, this Court
has expressly and categorically declared that the annotation of a notice of lis
pendens on titles to properties is not proper in cases wherein the proceedings instituted
are actions in personam. [19]
Second Issue:
Jurisdiction of the Trial Court
Petitioner argues that the RTC had no jurisdiction to issue the Order canceling the
Notice of Lis Pendens as well as the Order reinstating it. Supposedly, since both Orders
were issued by the trial court without jurisdiction, the annotation made by the Register of
Deeds of Tagaytay City must remain in force.
Petitioner avers that the trial court finally declared that the latter had no jurisdiction over
the case on July 27, 1998, in an Order denying the formers Motion for Reconsideration of
the March 17, 1998 Order dismissing the Complaint. Petitioner insists that the subsequent
July 30, 1998 Order cancelling the subject Notice of Lis Pendens is void, because it was
issued by a court that had no more jurisdiction over the case.
Rule 41 of the 1997 Rules on Civil Procedure, which governs appeals from regional trial
courts, expressly provides that RTCs lose jurisdiction over a case when an appeal is
filed. The rule reads thus:
SEC. 9. Perfection of appeal; effect thereof. -- A partys appeal by notice of appeal is
deemed perfected as to him upon the filing of the notice of appeal in due time.
xxxxxxxxx
In appeals by notice of appeal, the court loses jurisdiction over the case upon the
perfection of the appeals filed in due time and the expiration of the time to appeal of
the other parties. (Emphasis supplied)
On the basis of the foregoing rule, the trial court lost jurisdiction over the case only
on August 31, 1998, when petitioner filed its Notice of Appeal. [20] Thus, any order issued
by the RTC prior to that date should be considered valid, because the court still had
jurisdiction over the case. Accordingly, it still had the authority or jurisdiction to issue the
July 30, 1998 Order canceling the Notice of Lis Pendens. On the other hand,
the November 4, 1998 Order that set aside the July 30, 1998 Order and reinstated that
Notice should be considered without force and effect, because it was issued by the trial
court after it had already lost jurisdiction.
In any case, even if we were to adopt petitioners theory that both the July 30, 1998 and
the November 4, 1998 Orders were void for having been issued without jurisdiction, the
annotation is still improper for lack of factual and legal bases.
As discussed previously, erroneously misplaced is the reliance of petitioner on the
premise that its money claim is an action for the enforcement of a contractors
lien. Verily, the annotation of the Notice of Lis Pendens on the subject property titles
should not have been made in the first place. The Complaint filed before the Makati
RTC -- for the collection of a sum of money and for damages -- did not provide sufficient
legal basis for such annotation.
Finally, petitioner vehemently insists that the trial court had no jurisdiction to cancel the
Notice. Yet, the former filed before the CA an appeal, docketed as CA-GR CV No.
65647,[21]questioning the RTCs dismissal of the Complaint for lack of
jurisdiction. Moreover, it must be remembered that it was petitioner which had initially
invoked the jurisdiction of the trial court when the former sought a judgment for the
recovery of money and damages against respondent. Yet again, it was also petitioner
which assailed that same jurisdiction for issuing an order unfavorable to the formers
cause. Indeed, parties cannot invoke the jurisdiction of a court to secure affirmative
relief, then repudiate or question that same jurisdiction after obtaining or failing to
obtain such relief.[22]
WHEREFORE, the Petition is hereby DENIED and the assailed Decision AFFIRMED. Costs
against petitioner.
SO ORDERED.
G.R. No. 189477 February 26, 2014
HOMEOWNERS SAVINGS AND LOAN BANK, Petitioner-Appellant,
vs.
ASUNCION P. FELONIA and LYDIA C. DE GUZMAN, represented by MARIBEL
FRIAS, Respondents-Appellees.
MARIE MICHELLE P. DELGADO, REGISTER OF DEEDS OF LAS PINAS CITY and RHANDOLFO B.
AMANSEC, in his capacity as Clerk of Court Ex-Officio Sheriff, Office of the Clerk of Court,
Las Piñas City,Respondents-Defendants.
DECISION
PEREZ, J.:
Assailed in this Petition for Review on Certiorari is the Decision 1 and Resolution2 of the
Court of Appeals (CA), in CA-G.R. CV No. 87540, which affirmed with modifications, the
Decision3 of the Regional Trial Court (RTC), reinstating the title of respondents Asuncion
Felonia (Felonia) and Lydia de Guzman (De Guzman) and cancelling the title of Marie
Michelle Delgado (Delgado).
The facts as culled from the records are as follows:
Felonia and De Guzman were the registered owners of a parcel of land consisting of 532
square meters with a five-bedroom house, covered by Transfer of Certificate of Title
(TCT) No. T-402 issued by the register of deeds of Las Piñas City.
Sometime in June 1990, Felonia and De Guzman mortgaged the property to Delgado to
secure the loan in the amount of ₱1,655,000.00. However, instead of a real estate
mortgage, the parties executed a Deed of Absolute Sale with an Option to
Repurchase.4
On 20 December 1991, Felonia and De Guzman filed an action for Reformation of
Contract (Reformation case), docketed as Civil Case No. 91-59654, before the RTC of
Manila. On the findings that it is "very apparent that the transaction had between the
parties is one of a mortgage and not a deed of sale with right to repurchase," 5 the RTC,
on 21 March 1995 rendered a judgment favorable to Felonia and De Guzman. Thus:
WHEREFORE, judgment is hereby rendered directing the [Felonia and De Guzman] and
the [Delgado] to execute a deed of mortgage over the property in question taking into
account the payments made and the imposition of the legal interests on the principal
loan.
On the other hand, the counterclaim is hereby dismissed for lack of merit.
No pronouncements as to attorney’s fees and damages in both instances as the parties
must bear their respective expenses incident to this suit. 6
Aggrieved, Delgado elevated the case to the CA where it was docketed as CA-G.R.
CV No. 49317. The CA affirmed the trial court decision. On 16 October 2000, the CA
decision became final and executory.7
Inspite of the pendency of the Reformation case in which she was the defendant,
Delgado filed a "Petition for Consolidation of Ownership of Property Sold with an Option
to Repurchase and Issuance of a New Certificate of Title" (Consolidation case) in the
RTC of Las Piñas, on 20 June 1994.8 After an ex-parte hearing, the RTC ordered the
issuance of a new title under Delgado’s name, thus:
WHEREFORE, judgment is rendered-
1. Declaring [DELGADO] as absolute owner of the subject parcel of land covered by
Transfer Certificate of Title No. T-402 of the Register of Deeds of Las Piñas, Metro Manila;
2. Ordering the Register of Deeds of Las Piñas, Metro Manila to cancel Transfer
Certificate of Title No. T-402 and issue in lieu thereof a new certificate of title and
owner’s duplicate copy thereof in the name of [DELGADO]. 9
By virtue of the RTC decision, Delgado transferred the title to her name. Hence, TCT No.
T-402, registered in the names of Felonia and De Guzman, was canceled and TCT No.
44848 in the name of Delgado, was issued.
Aggrieved, Felonia and De Guzman elevated the case to the CA through a Petition for
Annulment of Judgment.10
Meanwhile, on 2 June 1995, Delgado mortgaged the subject property to Homeowners
Savings and Loan Bank (HSLB) using her newly registered title. Three (3) days later, or on
5 June 1995, HSLB caused the annotation of the mortgage.
On 14 September 1995, Felonia and De Guzman caused the annotation of a Notice of
Lis Pendens on Delgado’s title, TCT No. 44848. The Notice states:
Entry No. 8219/T-44848 – NOTICE OF LIS PENDENS – filed by Atty. Humberto A. Jambora,
Counsel for the Plaintiff, that a case been commenced in the RTC, Branch 38, Manila,
entitled ASUNCION P. FELONIA and LYDIA DE GUZMAN thru VERONICA P. BELMONTE, as
Atty-in-fact (Plaintiffs) v.s. MARIE MICHELLE DELGADO defendant in Civil Case No. 91-
59654 for Reformation of Instrument.
Copy on file in this Registry.
Date of Instrument – Sept. 11, 1995
Date of Inscription – Sept. 14, 1995 at 9:55 a.m.11
On 20 November1997, HSLB foreclosed the subject property and later consolidated
ownership in its favor, causing the issuance of a new title in its name, TCT No. 64668.
On 27 October 2000, the CA annulled and set aside the decision of the RTC, Las Piñas
City in the Consolidation case. The decision of the CA, declaring Felonia and De
Guzman as the absolute owners of the subject property and ordering the cancellation
of Delgado’s title, became final and executory on 1 December 2000.12 Thus:
WHEREFORE, the petition is GRANTED and the subject judgment of the court a quo is
ANNULLED and SET ASIDE.13
On 29 April 2003, Felonia and De Guzman, represented by Maribel Frias (Frias), claiming
to be the absolute owners of the subject property, instituted the instant complaint
against Delgado, HSLB, Register of Deeds of Las Piñas City and Rhandolfo B. Amansec
before the RTC of Las Piñas City for Nullity of Mortgage and Foreclosure Sale, Annulment
of Titles of Delgado and HSLB, and finally, Reconveyance of Possession and Ownership
of the subject property in their favor.
As defendant, HSLB asserted that Felonia and De Guzman are barred from laches as
they had slept on their rights to timely annotate, by way of Notice of Lis Pendens, the
pendency of the Reformation case. HSLB also claimed that it should not be bound by
the decisions of the CA in the Reformation and Consolidation cases because it was not
a party therein.
Finally, HSLB asserted that it was a mortgagee in good faith because the mortgage
between Delgado and HSLB was annotated on the title on 5 June 1995, whereas the
Notice of Lis Pendens was annotated only on 14 September 1995.
After trial, the RTC ruled in favor of Felonia and De Guzman as the absolute owners of
the subject property. The dispositive portion of the RTC decision reads:
WHEREFORE, premises considered, the Court hereby finds for the [Felonia and De
Guzman] with references to the decision of the Court of Appeals in CA-G.R. CV No.
49317 and CA-G.R. SP No. 43711 as THESE TWO DECISIONS CANNOT BE IGNORED and
against [Delgado] and [HSLB], Register of Deeds of Las Piñas City ordering the (sic) as
follows:
1. The Register of Deeds of Las Piñas City to cancel Transfer Certificate of Title Nos. 44848
and T-64668 as null and void and reinstating Transfer Certificate of Title No. T-402 which
shall contain a memorandum of the fact and shall in all respect be entitled to like faith
and credit as the original certificate of title and shall, thereafter be regarded as such for
all intents and purposes under the law;
2. Declaring the Mortgage Sheriff’s Sale and the Certificate of Sale issued in favor of
HSLB null and void, without prejudice to whatever rights the said Bank may have against
[Delgado];
3. Ordering [Delgado] to pay [Felonia and De Guzman] the amount of PH₱500,000.00
for compensatory damages;
4. Ordering [Delgado] to pay [Felonia and De Guzman] the amount of PH₱500,000.00
for exemplary damages;
5. Ordering [Delgado] to pay [Felonia and De Guzman] the amount of PH₱500,000.00
for moral damages;
6. Ordering [Delgado] to pay 20% of the total obligations as and by way of attorney’s
fees;
7. Ordering [Delgado] to pay cost of suit.14
On appeal, the CA affirmed with modifications the trial court decision. The dispositive
portion of the appealed Decision reads:
WHEREFORE, in the light of the foregoing, the decision appealed from is AFFIRMED with
the MODIFICATIONS that the awards of actual damages and attorney’s fees ar e
DELETED, moral and exemplary damages are REDUCED to ₱50,000.00 each, and
Delgado is ordered to pay the appellees ₱25,000.00 as nominal damages.15
Hence, this petition.
Notably, HSLB does not question the affirmance by the CA of the trial court’s ruling that
TCT No. 44848, the certificate of title of its mortgagor-vendor, and TCT No. 64668, the
certificate of title that was secured by virtue of the Sheriff’s sale in its favor, should be
cancelled "as null and void" and that TCT No. T-402 in the name of Felonia and De
Guzman should be reinstated.
Recognizing the validity of TCT No. T-402 restored in the name of Felonia and De
Guzman, petitioners pray that the decision of the CA be modified "to the effect that the
mortgage lien in favor of petitioner HSLB annotated as entry No. 4708-12 on TCT No.
44848 be [ordered] carried over on TCT No. T-402 after it is reinstated in the name of
[Felonia and De Guzman]."16
Proceeding from the ruling of the CA that it is a mortgagee in good faith, HSLB argues
that a denial of its prayer would run counter to jurisprudence giving protection to a
mortgagee in good faith by reason of public policy.
We cannot grant the prayer of petitioner. The priorly registered mortgage lien of HSLB is
now worthless.
Arguably, HSLB was initially a mortgagee in good faith. In Bank of Commerce v. San
Pablo, Jr.,17 the doctrine of mortgagee in good faith was explained:
There is, however, a situation where, despite the fact that the mortgagor is not the
owner of the mortgaged property, his title being fraudulent, the mortgage contract and
any foreclosure sale arising there from are given effect by reason of public policy. This is
the doctrine of "the mortgagee in good faith" based on the rule that all persons dealing
with property covered by the Torrens Certificates of Title, as buyers or mortgagees, are
not required to go beyond what appears on the face of the title. The public interest in
upholding indefeasibility of a certificate of title, as evidence of lawful ownership of the
land or of any encumbrance thereon, protects a buyer or mortgagee who, in good
faith, relied upon what appears on the face of the certificate of title.
When the property was mortgaged to HSLB, the registered owner of the subject
property was Delgado who had in her name TCT No. 44848. Thus, HSLB cannot be
faulted in relying on the face of Delgado’s title. The records indicate that Delgado was
at the time of the mortgage in possession of the subject property and Delgado’s title did
not contain any annotation that would arouse HSLB’s suspicion. HSLB, as a mortgagee,
had a right to rely in good faith on Delgado’s title, and in the absence of any sign that
might arouse suspicion, HSLB had no obligation to undertake further investigation. As
held by this Court in Cebu International Finance Corp. v.
CA:18
The prevailing jurisprudence is that a mortgagee has a right to rely in good faith on the
certificate of title of the mortgagor of the property given as security and in the absence
of any sign that might arouse suspicion, has no obligation to undertake further
investigation. Hence, even if the mortgagor is not the rightful owner of, or does not have
a valid title to, the mortgaged property, the mortgagee or transferee in good faith is
nonetheless entitled to protection.
However, the rights of the parties to the present case are defined not by the
determination of whether or not HSLB is a mortgagee in good faith, but of whether or
not HSLB is a purchaser in good faith. And, HSLB is not such a purchaser.
A purchaser in good faith is defined as one who buys a property without notice that
some other person has a right to, or interest in, the property and pays full and fair price
at the time of purchase or before he has notice of the claim or interest of other persons
in the property.19
When a prospective buyer is faced with facts and circumstances as to arouse his
suspicion, he must take precautionary steps to qualify as a purchaser in good faith. In
Spouses Mathay v. CA,20 we determined the duty of a prospective buyer:
Although it is a recognized principle that a person dealing on a registered land need
not go beyond its certificate of title, it is also a firmly settled rule that where there are
circumstances which would put a party on guard and prompt him to investigate or
inspect the property being sold to him, such as the presence of occupants/tenants
thereon, it is of course, expected from the purchaser of a valued piece of land to
inquire first into the status or nature of possession of the occupants, i.e., whether or not
the occupants possess the land en concepto de dueño, in the concept of the owner.
As is the common practice in the real estate industry, an ocular inspection of the
premises involved is a safeguard a cautious and prudent purchaser usually takes. Should
he find out that the land he intends to buy is occupied by anybody else other than the
seller who, as in this case, is not in actual possession, it would then be incumbent upon
the purchaser to verify the extent of the occupant’s possessory rights. The failure of a
prospective buyer to take such precautionary steps would mean negligence on his part
and would thereby preclude him from claiming or invoking the rights of a purchaser in
good faith.
In the case at bar, HSLB utterly failed to take the necessary precautions.1âwphi1 At the
time the subject property was mortgaged, there was yet no annotated Notice of Lis
Pendens. However, at the time HSLB purchased the subject property, the Notice of Lis
Pendens was already annotated on the title.21
Lis pendens is a Latin term which literally means, "a pending suit or a pending litigation"
while a notice of lis pendens is an announcement to the whole world that a real
property is in litigation, serving as a warning that anyone who acquires an interest over
the property does so at his/her own risk, or that he/she gambles on the result of the
litigation over the property.22 It is a warning to prospective buyers to take precautions
and investigate the pending litigation.
The purpose of a notice of lis pendens is to protect the rights of the registrant while the
case is pending resolution or decision. With the notice of lis pendens duly recorded and
remaining uncancelled, the registrant could rest secure that he/she will not lose the
property or any part thereof during litigation.
The doctrine of lis pendens is founded upon reason of public policy and necessity, the
purpose of which is to keep the subject matter of the litigation within the Court’s
jurisdiction until the judgment or the decree have been entered; otherwise, by
successive alienations pending the litigation, its judgment or decree shall be rendered
abortive and impossible of execution.23
Indeed, at the time HSLB bought the subject property, HSLB had actual knowledge of
the annotated Notice of Lis Pendens. Instead of heeding the same, HSLB continued with
the purchase knowing the legal repercussions a notice of lis pendens entails. HSLB took
upon itself the risk that the Notice of Lis Pendens leads to.1âwphi1 As correctly found by
the CA, "the notice of lis pendens was annotated on 14 September 1995, whereas the
foreclosure sale, where the appellant was declared as the highest bidder, took place
sometime in 1997. There is no doubt that at the time appellant purchased the subject
property, it was aware of the pending litigation concerning the same property and thus,
the title issued in its favor was subject to the outcome of said litigation." 24
This ruling is in accord with Rehabilitation Finance Corp. v. Morales, 25 which underscored
the significance of a lis pendens, then defined in Sec. 24, Rule 7 now Sec. 14 of Rule 13
in relation to a mortgage priorly annotated on the title covering the property. Thus:
The notice of lis pendens in question was annotated on the back of the certificate of
title as a necessary incident of the civil action to recover the ownership of the property
affected by it. The mortgage executed in favor of petitioner corporation was annotated
on the same title prior to the annotation of the notice of lis pendens; but when petitioner
bought the property as the highest bidder at the auction sale made as an aftermath of
the foreclosure of the mortgage, the title already bore the notice of lis pendens. Held:
While the notice of lis pendens cannot affect petitioner’s right as mortgagee, because
the same was annotated subsequent to the mortgage, yet the said notice affects its
right as purchaser because notice of lis pendens simply means that a certain property is
involved in a litigation and serves as a notice to the whole world that one who buys the
same does so at his own risk.26
The subject of the lis pendens on the title of HSLB’s vendor, Delgado, is the "Reformation
case" filed against Delgado by the herein respondents. The case was decided with
finality by the CA in favor of herein respondents. The contract of sale in favor of
Delgado was ordered reformed into a contract of mortgage. By final decision of the
CA, HSLB’s vendor, Delgado, is not the property owner but only a mortgagee. As it
turned out, Delgado could not have constituted a valid mortgage on the property. That
the mortgagor be the absolute owner of the thing mortgaged is an essential requisite of
a contract of mortgage. Article 2085 (2) of the Civil Code specifically says so:
Art. 2085. The following requisites are essential to the contracts of pledge and
mortgage:
xxxx
(2) That the pledgor or mortagagor be the absolute owner of the thing pledged or
mortgaged.
Succinctly, for a valid mortgage to exist, ownership of the property is an essential
requisite.27
Reyes v. De Leon28 cited the case of Philippine National Bank v. Rocha 29 where it was
pronounced that "a mortgage of real property executed by one who is not an owner
thereof at the time of the execution of the mortgage is without legal existence." Such
that, according to DBP v. Prudential Bank,30 there being no valid mortgage, there could
also be no valid foreclosure or valid auction sale.
We go back to Bank of Commerce v. San Pablo, Jr. 31 where the doctrine of mortgagee
in good faith, upon which petitioner relies, was clarified as "based on the rule that all
persons dealing with property covered by the Torrens Certificate of Title, as buyers or
mortgagees, are not required to go beyond what appears on the face of the title. In
turn, the rule is based on "x x x public interest in upholding the indefeasibility of a
certificate of title, as evidence of lawful ownership of the land or of any encumbrance
thereon."32
Insofar as the HSLB is concerned, there is no longer any public interest in upholding the
indefeasibility of the certificate of title of its mortgagor, Delgado. Such title has been
nullified in a decision that had become final and executory. Its own title, derived from
the foreclosure of Delgado's mortgage in its favor, has likewise been nullified in the very
same decision that restored the certificate of title in respondents' name. There is
absolutely no reason that can support the prayer of HSLB to have its mortgage lien
carried over and into the restored certificate of title of respondents.
WHEREFORE, the Petition is DENIED. The Decision of the Court of Appeals in CA-G.R. CV
No. 87540 is AFFIRMED.
SO ORDERED.
G.R. No. 168655 July 2, 2010
J. CASIM CONSTRUCTION SUPPLIES, INC., Petitioner,
vs.
REGISTRAR OF DEEDS OF LAS PIÑAS, Respondent.
INTESTATE ESTATE OF BRUNEO F. CASIM, (Purported) Intervenor.
DECISION
PERALTA, J.:
This is a petition for review under Rule 45 of the Rules of Court, taken directly on a pure
question of law from the April 14, 2005 Resolution 1 and June 24, 2005 Order2 issued by
the Regional Trial Court (RTC) of Las Piñas City, Branch 253 in Civil Case No. LP-04-
00713
for lack of jurisdiction the petition filed by J. Casim Construction Supplies Inc. for
cancellation of notice of lis pendens annotated on its certificate of title, whereas the
assailed Order denied reconsideration.
The facts follow.
Petitioner, represented herein by Rogelio C. Casim, is a duly organized domestic
corporation4 in whose name Transfer Certificate of Title (TCT) No. 49936, 5 covering a
10,715-square meter land was registered. Sometime in 1982, petitioner acquired the
covered property by virtue of a Deed of Absolute Sale 6 and as a result the mother title,
TCT No. 30459 was cancelled and TCT No. 49936 was issued in its stead. 7
On March 22, 2004, petitioner filed with the RTC of Las Piñas City, Branch 253 an original
petition for the cancellation of the notice of lis pendens, as well as of all the other entries
of involuntary encumbrances annotated on the original copy of TCT No. 49936. Invoking
the inherent power of the trial court to grant relief according to the petition, petitioner
prayed that the notice of lis pendens as well as all the other annotations on the said title
be cancelled. Petitioner claimed that its owner's duplicate copy of the TCT was clean at
the time of its delivery and that it was surprised to learn later on that the original copy of
its TCT, on file with the Register of Deeds, contained several entries which all signified
that the covered property had been subjected to various claims. The subject notice of
lis pendens is one of such entries.8 The notations appearing on the title's memorandum
of encumbrances are as follows:
Entry No. 81-8334/T-30459 - ADVERSE CLAIM - In an affidavit duly subscribed and sworn
to, BRUNO F. CASIM claims, among other things, that he has the right and interest over
the property described herein in accordance with Doc. No. 336; Page No. 69; Book No.
1; s. of 1981 of Not. Pub. of Makati, M.M., Romarie G. Villonco, dated August 4, 1981.
Date of inscription - Aug. 5, 1981 - 2:55 p.m.
(Sgd) VICTORIANO S. TORRES, Actg. Reg. of Deeds
Entry No. 82-4676/T-49936 - CANCELLATION OF ADVERSE CLAIM inscribed hereon under
Entry No. 81-8334/T-30459 in accordance with Doc. No. 247; Page 50; Book No. CXLI; s.
of 1982 of Not. Pub. of Pasay City, M.M., Julian G. Tubig, dated April 21, 1982.
Date of inscription - April 21, 1982 - 8:40 a.m.
(Sgd) VICTORIANO S. TORRES, Actg. Reg. of Deeds
Entry No. 82-4678/T-49936 - AFFIDAVIT - In accordance with the affidavit duly executed
by the herein registered owners, this title is hereby cancelled and in lieu thereof TCT No.
49936/T-228 has been issued in accordance with Doc. No. 249; Page No. 80; Book No.
CXLI; s. of 1982 of Not. Pub. of Pasay City, M.M., Julian G. Tubig, dated April 21, 1982.
Date of inscription - April 21, 1982 - 8:44 a.m.
(Sgd) VICTORIANO S. TORRES, Actg. Reg. of Deeds
Entry No. 81-12423/T-30459 - NOTICE OF LIS PENDENS: By virtue of the notice of Lis
Pendens presented and filed by CESAR P. MANALAYSAY, counsel for the plaintiff, notice
is hereby given that a petition for review has been commenced and now pending in
the Court of First Instance of Rizal, Branch XXIX, Pasay, M.M, in Civil Case No. LP-9438-P,
BRUNEO F. CASIM, Plaintiff, vs. SPS. JESUS A. CASIM & MARGARITA CHAVEZ and Sps.
Urbano Nobleza and Cristita J. Nobleza, and Filomena C. Antonio, Defendants,
involving the property described herein.
Date of the instrument - Sept. 17, 1981
Date of the inscription - Sept. 18, 1981 - 3:55 p.m.
(Sgd) VICTORIANO S. TORRES, Actg. Reg. of Deeds9
To justify the cancellation, petitioner alleged that the notice of lis pendens, in particular,
was a forgery judging from the inconsistencies in the inscriber's signature as well as from
the fact that the notice was entered non-chronologically, that is, the date thereof is
much earlier than that of the preceding entry. In this regard, it noted the lack of any
transaction record on file with the Register of Deeds that would support the notice of lis
pendens annotation.10
Petitioner also stated that while Section 59 of Presidential Decree (P.D.) No. 1529 requires
the carry-over of subsisting encumbrances in the new issuances of TCTs, petitioner's
duplicate copy of the title did not contain any such carry-over, which means that it was
an innocent purchaser for value, especially since it was never a party to the civil case
referred to in the notice of lis pendens. Lastly, it alludes to the indefeasibility of its title
despite the fact that the mother title, TCT No. 30459, might have suffered from certain
defects and constraints.11
The Intestate Estate of Bruneo F. Casim, representing Bruneo F. Casim, intervened in the
instant case and filed a Comment/Opposition 12 in which it maintained that the RTC of
Las Piñas did not have jurisdiction over the present action, because the matter of
canceling a notice of lis pendens lies within the jurisdiction of the court before which the
main action referred to in the notice is pending. In this regard, it emphasized that the
case referred to in the said notice had already attained finality as the Supreme Court
had issued an entry of judgment therein and that the RTC of Makati City had ordered
execution in that case.13 It cited the lack of legal basis for the petition in that nothing in
the allegations hints at any of the legal grounds for the cancellation of notice of lis
pendens.14 And, as opposed to petitioner's claim that there was no carry-over of
encumbrances made in TCT No. 49936 from the mother title TCT No. 30459, the latter
would show that it also had the same inscriptions as those found in TCT No. 49936 only
that they were entered in the original copy on file with the Register of Deeds. Also, as
per Certification15 issued by the Register of Deeds, petitioner's claim of lack of
transaction record could not stand, because the said certification stated merely that
the corresponding transaction record could no longer be retrieved and might,
therefore, be considered as either lost or destroyed.
On April 14, 2005, the trial court, ruling that it did not have jurisdiction over the action,
resolved to dismiss the petition and declared that the action must have been filed
before the same court and in the same action in relation to which the annotation of the
notice of lis pendens had been sought. Anent the allegation that the entries in the TCT
were forged, the trial court pointed out that not only did petitioner resort to the wrong
forum to determine the existence of forgery, but also that forgery could not be
presumed merely from the alleged non-chronological entries in the TCT but instead must
be positively proved. In this connection, the trial court noted petitioner's failure to name
exactly who had committed the forgery, as well as the lack of evidence on which the
allegation could be based.16 The petition was disposed of as follows:
IN VIEW OF THE FOREGOING, the instant petition is hereby DISMISSED.
SO ORDERED.17
Petitioner moved for reconsideration,18 but it was denied in the trial court's June 24, 2005
Order.19
Now, raising the purely legal question of whether the RTC of Las Piñas City, Branch 253
has jurisdiction in an original action to cancel the notice of lis pendens annotated on
the subject title as an incident in a previous case, petitioner, in this present petition,
ascribes error to the trial court in dismissing its petition for cancellation. An action for
cancellation of notice of lis pendens, petitioner believes, is not always ancillary to an
existing main action because a trial court has the inherent power to cause such
cancellation, especially in this case that petitioner was never a party to the litigation to
which the notice of lis pendens relates.20 Petitioner further posits that the trial court has
committed an error in declining to rule on the allegation of forgery, especially since
there is no transaction record on file with the Register of Deeds relative to said entries. It
likewise points out that granting the notice of lis pendens has been properly annotated
on the title, the fact that its owner's duplicate title is clean suggests that it was never a
party to the civil case referred to in the notice. 21 Finally, petitioner posits that TCT No.
49936 is indefeasible and holds it free from any liens and encumbrances which its
mother title, TCT No. 30459, might have suffered. 22
The Intestate Estate of Bruneo F. Casim (intervenor), in its Comment on the present
petition, reiterates that the court a quo does not have jurisdiction to order the
cancellation of the subject notice of lis pendens because it is only the court exercising
jurisdiction over the main action in relation to which the registration of the notice has
been sought. Also, it notes that even on the assumption that the trial court had such
jurisdiction, the petition for cancellation still has no legal basis as petitioner failed to
establish the grounds therefor. Also, the subject notice of lis pendens was validly carried
over to TCT No. 49936 from the mother title, TCT No. 30459.
In its Reply,23 petitioner, in a semantic slur, dealt primarily with the supposed
inconsistencies in intervenor's arguments. Yet the core of its contention is that the non-
chronological annotation of the notice stands to be the best evidence of forgery. From
this, it advances the notion that forgery of the notice of lis pendens suffices as a ground
for the cancellation thereof which may be availed of in an independent action by the
aggrieved party.
The petition is utterly unmeritorious.
Lis pendens
control which a court acquires over the property involved in a suit, pending the
continuance of the action, and until final judgment. 24Founded upon public policy and
necessity, lis pendens is intended to keep the properties in litigation within the power of
the court until the litigation is terminated, and to prevent the defeat of the judgment or
decree by subsequent alienation.25 Its notice is an announcement to the whole world
that a particular property is in litigation and serves as a warning that one who acquires
an interest over said property does so at his own risk, or that he gambles on the r esult of
the litigation over said property.26
A notice of lis pendens, once duly registered, may be cancelled by the trial court
before which the action involving the property is pending. This power is said to be
inherent in the trial court and is exercised only under express provisions of
law.27 Accordingly, Section 14, Rule 13 of the 1997 Rules of Civil Procedure authorizes the
trial court to cancel a notice of lis pendens where it is properly shown that the purpose
of its annotation is for molesting the adverse party, or that it is not necessary to protect
the rights of the party who caused it to be annotated. Be that as it may, the power to
cancel a notice of lis pendens is exercised only under exceptional circumstances, such
as: where such circumstances are imputable to the party who caused the annotation;
where the litigation was unduly prolonged to the prejudice of the other party because
of several continuances procured by petitioner; where the case which is the basis for
the lis pendens notation was dismissed for non prosequitur on the part of the plaintiff; or
where judgment was rendered against the party who caused such a notation. In such
instances, said notice is deemed ipso facto cancelled.28
In theorizing that the RTC of Las Piñas City, Branch 253 has the inherent power to cancel
the notice of lis pendens that was incidentally registered in relation to Civil Case No.
2137, a case which had been decided by the RTC of Makati City, Branch 62 and
affirmed by the Supreme Court on appeal, petitioner advocates that the cancellation
of such a notice is not always ancillary to a main action.
The argument fails.
From the available records, it appears that the subject notice of lis pendens had been
recorded at the instance of Bruneo F. Casim (Bruneo) in relation to Civil Case No.
213729
before the RTC of Makati City, Branch 62 against the spouses Jesus and Margarita
Casim, predecessors-in-interest and stockholders of petitioner corporation. That case
involved the property subject of the present case, then covered by TCT No. 30459. At
the close of the trial on the merits therein, the RTC of Makati rendered a decision
adverse to Bruneo and dismissed the complaint for lack of merit. 30 Aggrieved, Bruneo
lodged an appeal with the Court of Appeals, docketed as CA-G.R. CV No. 54204,
which reversed and set aside the trial court's decision. 31 Expectedly, the spouses Jesus
and Margarita Casim elevated the case to the Supreme Court, docketed as G.R. No.
151957, but their appeal was dismissed for being filed out of time. 32
A necessary incident of registering a notice of lis pendens is that the property covered
thereby is effectively placed, until the litigation attains finality, under the power and
control of the court having jurisdiction over the case to which the notice relates. 33 In this
sense, parties dealing with the given property are charged with the knowledge of the
existence of the action and are deemed to take the property subject to the outcome
of the litigation.34 It is also in this sense that the power possessed by a trial court to
cancel the notice of lis pendens is said to be inherent as the same is merely ancillary to
the main action.351avvphi1
Thus, in Vda. de Kilayko v. Judge Tengco,36 Heirs of Maria Marasigan v. Intermediate
Appellate Court37 and Tanchoco v. Aquino,38 it was held that the precautionary notice
of lis pendens may be ordered cancelled at any time by the court having jurisdiction
over the main action inasmuch as the same is merely an incident to the said action. The
pronouncement in Heirs of Eugenio Lopez, Sr. v. Enriquez, citing Magdalena
Homeowners Association, Inc. v. Court of Appeals,39
The notice of lis pendens x x x is ordinarily recorded without the intervention of the court
where the action is pending. The notice is but an incident in an action, an extrajudicial
one, to be sure. It does not affect the merits thereof. It is intended merely to
constructively advise, or warn, all people who deal with the property that they so deal
with it at their own risk, and whatever rights they may acquire in the property in any
voluntary transaction are subject to the results of the action, and may well be inferior
and subordinate to those which may be finally determined and laid down therein. The
cancellation of such a precautionary notice is therefore also a mere incident in the
action, and may be ordered by the Court having jurisdiction of it at any given time. x x
x40
Clearly, the action for cancellation of the notice of lis pendens in this case must have
been filed not before the court a quo via an original action but rather, before the RTC
of Makati City, Branch 62 as an incident of the annulment case in relation to which its
registration was sought. Thus, it is the latter court that has jurisdiction over the main case
referred to in the notice and it is that same court which exercises power and control
over the real property subject of the notice.
But even so, the petition could no longer be expected to pursue before the proper
forum inasmuch as the decision rendered in the annulment case has already attained
finality before both the Court of Appeals and the Supreme Court on the appellate level,
unless of course there exists substantial and genuine claims against the parties relative
to the main case subject of the notice of lis pendens. 41 There is none in this case. It is thus
well to note that the precautionary notice that has been registered relative to the
annulment case then pending before the RTC of Makati City, Branch 62 has served its
purpose. With the finality of the decision therein on appeal, the notice has already been
rendered functus officio. The rights of the parties, as well as of their successors-in-interest,
petitioner included, in relation to the subject property, are hence to be decided
according the said final decision.
To be sure, petitioner is not altogether precluded from pursuing a specific remedy, only
that the suitable course of action legally available is not judicial but rather
administrative. Section 77 of P.D. No. 1529 provides the appropriate measure to have a
notice of lis pendens cancelled out from the title, that is by presenting to the Register of
Deeds, after finality of the judgment rendered in the main action, a certificate
executed by the clerk of court before which the main action was pending to the effect
that the case has already been finally decided by the court, stating the manner of the
disposal thereof. Section 77 materially states:
SEC. 77. Cancellation of lis pendens. - Before final judgment, a notice of lis pendens may
be cancelled upon order of the court, after proper showing that the notice is for the
purpose of molesting the adverse party, or that it is not necessary to protect the rights of
the party who caused it to be registered. It may also be cancelled by the Register of
Deeds upon verified petition of the party who caused the registration thereof.
At any time after final judgment in favor of the defendant, or other disposition of the
action such as to terminate finally all rights of the plaintiff in and to the land and/or
buildings involved, in any case in which a memorandum or notice of lis pendens has
been registered as provided in the preceding section, the notice of lis pendens shall be
deemed cancelled upon the registration of a certificate of the clerk of court in which JULIE C. ARCALAS,
the action or proceeding was pending stating the manner of disposal thereof. 42
Respondent. Promulgated:
Lastly, petitioner tends to make an issue out of the fact that while the original TCT on file
with the Register of Deeds does contain the annotations and notice referred to in this
petition, its owner's duplicate copy of the title nevertheless does not reflect the same
non-chronological inscriptions. From this, petitioner submits its puerile argument that the November 23, 2007
said annotations appearing on the original copy of the TCT are all a forgery, and goes
on to assert the indefeasibility of its Torrens title as well as its supposed status as an x-------------------------------------------------x
innocent purchaser for value in good faith. Yet we decline to rule on these assumptions
principally because they raise matters that call for factual determination which certainly
are beyond the competence of the Court to dispose of in this petition.

All told, we find that the RTC of Las Piñas City, Branch 253 has committed no reversible
error in issuing the assailed Resolution and Order dismissing for lack of jurisdiction the DECISION
petition for cancellation of notice of lis pendens filed by petitioner, and in denying
reconsideration.

WHEREFORE, the petition is DENIED. The April 14, 2005 Resolution and the June 24, 2005
Order issued by the Regional Trial Court of Las Piñas City, Branch 253, in Civil Case No.
LP-04-0071, are hereby AFFIRMED. CHICO-NAZARIO, J.:

SO ORDERED.

This is a Special Civil Action for Certiorari under Rule 65 of the Rules of Court, assailing the
Resolution[1] dated 25 January 2005, rendered by the Court of Appeals in C.A. G.R. CV
No. 82872, dismissing the appeal filed by petitioner Arlyn Pineda (Pineda) for failure to
file her appellants brief. Under the assailed Resolution, the Order [2]promulgated by
Branch 27 of the Regional Trial Court of Santa Cruz, Laguna (Laguna RTC), on 2 February
2004, granting the petition of respondent Julie Arcalas (Arcalas) for the cancellation of
ARLYN* PINEDA, G.R. No. 170172 the Affidavit of Adverse Claim annotated at the back of Transfer Certificate of Title (TCT)
No. T-52319 under Entry No. 324094, became final.
Petitioner,

Present:
The subject property consists of three parcels of land, which are described as Lot No.
3762-D with an area of 42,958 square meters, Lot No. 3762-E with an area of 4,436
square meters, and Lot No. 3762-F with an area of 2,606 square meters, the total area of
YNARES-SANTIAGO, J., which consists of 50,000 square meters. These three lots are portions of Lot No. 3762,
registered in the name of Spouses Mauro Lateo and Encarnacion Evangelista
Chairperson, (spouses Lateo) under TCT No. T-52319, with a total area of 74,708 square meters,
located at Barrios Duhat and Labuin, Santa Cruz, Laguna. A certain
- versus - AUSTRIA-MARTINEZ, Victoria Tolentino bought the said property from the Spouses Lateo. Sometime later, Civil
Case No. Q-96-27884, for Sum of Money, was instituted by Arcalas against
CHICO-NAZARIO, Victoria Tolentino. This case stemmed from an indebtedness evidenced by a promissory
note and four post-dated checks later dishonored, which
NACHURA, and Victoria Tolentino owed Arcalas. [3]

REYES, JJ. On 9 September 1997, Branch 93 of the Quezon City RTC, rendered judgment in favor
of Arcalas and against Victoria Tolentino.[4]
On 15 December 1997, Pineda bought the subject property from Victoria
L. Tolentino.[5] Pineda alleged that upon payment of the purchase price, she took
possession of the subject property by allowing a tenant, Rodrigo Bautista to cultivate the
same. However, Pineda failed to register the subject property under her name. [6]
To execute the judgment, the Quezon City RTC levied upon the subject property and
the Notice of Levy on Alias Writ of Execution dated 12 January 1999 was annotated as
Entry No. 315074, in relation to Entry No. 319362, at the back of TCT No. T-52319.[7]
Asserting ownership of the subject property, Pineda filed with the Deputy Sheriff of
the Quezon City RTC an Affidavit of Title and Third Party Claim. Arcalas filed a motion to
set aside Pinedas Affidavit of Title and Third Party Claim, which on 3 November 1999,
the Quezon City RTC granted, to wit:
[Arcalas] showed that her levies on the properties were duly registered while the
alleged Deed of Absolute Sale between the defendant Victoria
L. Tolentino and Analyn G. Pineda was not. The levies being superior to the sale claimed
by Ms. Pineda, the court rules to quash and set aside her Affidavit of Title and Third Party
Claim.
ACCORDINGLY, the motion is granted. The Affidavit of Title and Third-Party Claim is set
aside to allow completion of execution proceedings. [8]
On 2 February 2000, after the finality[9] of the Order of the Quezon City RTC quashing
Pinedas third-party claim, Pineda filed with the Office of the Register of Deeds of
Laguna another Affidavit of Third Party Claim and caused the inscription of a notice of
adverse claim at the back of TCT No. T-52319 under Entry No. 324094. [10]
On 3 February 2000, Arcalas and Leonardo Byron P. Perez, Jr. purchased Lot No. 3762 at
an auction sale conducted by the Deputy Sheriff of Quezon City. The sale was
evidenced by a Sheriffs Certificate of Sale issued on the same day and registered as
Entry No. 324225 at the back of TCT No. T-52319.[11]
Arcalas then filed an action for the cancellation of the entry of Pinedas adverse claim
before the Laguna RTC. The Laguna RTC ordered the cancellation of the Notice of
Adverse Claim annotated as Entry No. 324094 at the back of TCT No. 52319 on the
ground of res judicata:
The court order emanating from Branch 91 of the Regional Trial Court of Quezon City
having become final and executory and no relief therefrom having been filed by
[Pineda], the said order granting the [Arcalass] Motion to Set Aside Affidavit of Title and
3rd Party Claim should be given due course and the corresponding annotation at the
back of TCT No. T-52319 as Entry No. 324094 dated February 2, 2000 should be expunged
accordingly.[12]
Pineda appealed the Order of the Laguna RTC before the Court of Appeals under Rule
44 of the Rules of Court. In a Resolution dated 25 January 2005,[13] the appellate court
dismissed the appeal and considered it abandoned when Pineda failed to file her
appellants brief.
Pineda filed a Motion for Reconsideration, wherein it was plainly stated that Pinedas
counsel overlooked the period within which he should file the appellants brief. [14] The
said motion was denied in a Resolution dated 26 May 2005. Pineda filed a Second
Motion for Reconsideration, which was denied on 7 October 2005.[15] No appellants brief
was attached to either motion for reconsideration.
Hence, the present Petition raising the following issues: [16]
I.
WHETHER THE LEVY ON ALIAS WRIT OF EXECUTION ISSUED BY THE REGIONAL TRIAL COURT
OF QUEZON CITY IN CIVIL CASE NO. Q-96-27884 MAY EXEMPT THE PORTION BOUGHT BY
[PINEDA] FROM VICTORIA TOLENTINO; [and]
II.
WHETHER THE POSSESSION OF [PINEDA] OF THE 5 HECTARES PORTION OF LOT 3762 IS
ALREADY EQUIVALENT TO A TITLE DESPITE THE ABSENCE OF REGISTRATION.
This petition must be dismissed.
The Court of Appeals properly dismissed the case for Pinedas failure to file an appellants
brief. This is in accordance with Section 7 of Rule 44 of the Rules of Court, which imposes
upon the appellant the duty to file an appellants brief in ordinary appealed cases
before the Court of Appeals, thus:
Section 7. Appellants brief.It shall be the duty of the appellant to file with the court,
within forty-five (45) days from receipt of the notice of the clerk that all the evidence,
oral and documentary, are attached to the record, seven (7) copies of his legibly
typewritten, mimeographed or printed brief, with proof of service of two (2) copies
thereof upon the appellee.
In special cases appealed to the Court of Appeals, such as certiorari,
prohibition, mandamus, quo warranto and habeas corpus cases, a memorandum of
appeal must be filed in place of an appellants brief as provided in Section 10 of Rule 44
of the Rules of Court
Section 10. Time of filing memoranda in special cases.In certiorari, prohibition,
mandamus, quo warranto and habeas corpus cases, the parties shall file, in lieu of
briefs, their respective memoranda within a non-extendible period of thirty (30) days
from receipt of the notice issued by the clerk that all the evidence, oral and
documentary, is already attached to the record.
The failure of the appellant to file his memorandum within the period therefor may be a
ground for dismissal of the appeal.
Non-filing of an appellants brief or a memorandum of appeal is one of the explicitly
recognized grounds of dismissal of the appeal in Section 1 of Rule 50 of the Rules of
Court
Section 1. Grounds for dismissal of appeal. - An appeal may be dismissed by the Court
of Appeals, on its own motion or on that of the appellee, on the following grounds:
xxxx
(e) Failure of the appellant to serve and file the required number of copies of his brief or
memorandum within the time provided by these Rules;
This Court provided the rationale for requiring an appellants brief in Enriquez v. Court of
Appeals[17]:
[T]he appellants brief is mandatory for the assignment of errors is vital to the decision of
the appeal on the merits. This is because on appeal only errors specifically assigned and
properly argued in the brief or memorandum will be considered, except those affecting
jurisdiction over the subject matter as well as plain and clerical errors. Otherwise stated,
an appellate court has no power to resolve an unassigned error, which does not affect
the courts jurisdiction over the subject matter, save for a plain or clerical error.
Thus, in Casim v. Flordeliza,[18] this Court affirmed the dismissal of an appeal, even when
the filing of an appellants brief was merely attended by delay and fell short of some of
the requirements of the Rules of Court. The Court, in Gonzales v. Gonzales,[19] reiterated
that it is obligatory on the part of the appellant to submit or file a memorandum of
appeal, and that failing such duty, the Rules of Court unmistakably command the
dismissal of the appeal.
In this case, Pineda did not even provide a proper justification for her failure to file her
appellants brief. It was merely alleged in her Motion for Reconsideration that her
counsel overlooked the period within which to file the appellants brief. Although Pineda
filed no less than two motions for reconsideration, Pineda had not, at any time, made
any attempt to file her appellants brief. Nor did she supply any convincing argument to
establish her right to the subject property for which she seeks vindication.
Thus, this Court cannot reverse or fault the appellate court for duly acting in faithful
compliance with the rules of procedure and established jurisprudence that it has been
mandated to observe, nor turn a blind eye and tolerate the transgressions of these rules
and doctrines.[20] An appealing party must strictly comply with the requisites laid down in
the Rules of Court since the right to appeal is a purely statutory right. [21]
Even when this Court recognized the importance of deciding cases on the merits to
better serve the ends of justice, it has stressed that the liberality in the application of
rules of procedure may not be invoked if it will result in the wanton disregard of the rules
or cause needless delay in the administration of justice. [22] The Court eyes with disfavor
the unjustified delay in the termination of cases; once a judgment has become final, the
winning party must not be deprived of the fruits of the verdict, through a mere
subterfuge. The time spent by the judiciary, more so of this Court, in taking cognizance
and resolving cases is not limitless and cannot be wasted on cases devoid of any right
calling for vindication and are merely reprehensible efforts to evade the operation of a
decision that is final and executory.[23]
In the present case, there is a clear intent on the part of Pineda to delay the termination
of the case, thereby depriving Arcalas of the fruits of a just verdict. The Quezon City RTC
already quashed Pinedas third party claim over the subject property, yet she filed
another adverse claim before the Office of the Register of Deeds of Laguna based on
the same allegations and arguments previously settled by the Quezon City RTC. Arcalas,
thus, had to file another case to cause the cancellation of Pinedas notice of adverse
claim on TCT No. T-52319 before the Laguna RTC. After the Laguna RTC gave due
course to Arcalass petition, Pineda filed a dilatory appeal before the Court of Appeals,
where she merely let the period for the filing of the appellants brief lapse without
exerting any effort to file one. The two motions for reconsideration and even the petition
before this Court fail to present new issues. They raised the very same issues which had
been consistently resolved by both the Quezon City RTC and the Laguna RTC in favor
of Arcalas, upholding the superiority of her lien over that of Pinedas unregistered
sale. Considering all these circumstances, there is no basis for the lenient application of
procedural rules in this case; otherwise, it would result in a manifest injustice and the
abuse of court processes.
As a rule, the negligence or mistake of counsel binds the client. [24] The only exception to
this rule is when the counsels negligence is so gross that a party is deprived of due
process and, thus, loses life, honor or property on mere technicalities. [25] The exception
cannot apply to the present case, where Pineda is merely repeating arguments that
were already heard and decided upon by courts of proper jurisdiction, and the
absolute lack of merit of the petition is at once obvious.
Pineda avers that she is not a party to Civil Case No. Q-96-27884, heard before
the Quezon City RTC, and that the levy on the alias writ of execution issued in Civil Case
No. Q-96-27884 cannot affect her purchase of subject property. Such position runs
contrary to law and jurisprudence.
Sections 51 and 52 of Presidential Decree No. 1529, otherwise known as the Property
Registration Decree, provide that:
Section 51. Conveyance and other dealings by registered owner.An owner of registered
land may convey, mortgage, lease, charge or otherwise deal with the same in
accordance with existing laws. He may use such forms of deeds, mortgages, leases or
other voluntary instruments as are sufficient in law. But no deed, mortgage, lease, or
other voluntary instrument, except a will purporting to convey or affect registered land
shall take effect as a conveyance or bind the land, but shall operate only as a contract
between the parties and as evidence of authority to the Register of Deeds to make
registration.
The act of registration shall be the operative act to convey or affect the land insofar as
third persons are concerned, and in all cases under this Decree, the registration shall be
made in the office of the Register of Deeds for the province or the city where the land
lies. (Emphasis provided.)
Section 52. Constructive notice upon registration.Every conveyance, mortgage, lease,
lien, attachment, order, judgment, instrument or entry affecting registered land shall, if
registered, filed or entered in the office of the Register of Deeds for the province or city
where the land to which it relates lies, be constructive notice to all persons from the time
of such registering, filing or entering. (Emphasis provided.)
It is clear from these provisions that before a purchaser of land causes the registration of
the transfer of the subject property in her favor, third persons, such as Arcalas, cannot
be bound thereby. Insofar as third persons are concerned, what validly transfers or
conveys a persons interest in real property is the registration of the deed. As the deed of
sale was unrecorded, it operates merely as a contract between the parties, namely
Victoria Tolentino as seller and Pineda as buyer, which may be enforceable against
Victoria Tolentino through a separate and independent action. On the other
hand, Arcalass lien was registered and annotated at the back of the title of the subject
property and accordingly amounted to a constructive notice thereof to all persons,
whether or not party to the original case filed before the Quezon City RTC.
The doctrine is well settled that a levy on execution duly registered takes preference
over a prior unregistered sale.[26] A registered lien is entitled to preferential
consideration.[27] In Valdevieso v. Damalerio,[28] the Court held that a registered writ of
attachment was a superior lien over that on an unregistered deed of sale and
explained the reason therefor:
This is so because an attachment is a proceeding in rem. It is against the particular
property, enforceable against the whole world. The attaching creditor acquires a
specific lien on the attached property which nothing can subsequently destroy except
the very dissolution of the attachment or levy itself. Such a proceeding, in effect, means
that the property attached is an indebted thing and a virtual condemnation of it to pay
the owners debt. The lien continues until the debt is paid, or sale is had under execution
issued on the judgment, or until the judgment is satisfied, or the attachment discharged
or vacated in some manner provided by law.
Thus, in the registry, the attachment in favor of respondent appeared in the nature of a
real lien when petitioner had his purchase recorded. The effect of the notation of said
lien was to subject and subordinate the right of petitioner, as purchaser, to the lien.
Petitioner acquired ownership of the land only from the date of the recording of his title
in the register, and the right of ownership which he inscribed was not absolute but a
limited right, subject to a prior registered lien of respondent, a right which is preferred
and superior to that of petitioner.
Pineda also contends that her possession of the subject property cures the defect
caused by her failure to register the subject property in her name. This contention is
inaccurate as well as inapplicable.
True, that notwithstanding the preference given to a registered lien, this Court has made
an exception in a case where a party has actual knowledge of the claimants actual,
open, and notorious possession of the disputed property at the time the levy or
attachment was registered. In such situations, the actual notice and knowledge of a
prior unregistered interest, not the mere possession of the disputed property, was held to
be equivalent to registration.[29]
Lamentably, in this case, Pineda did not even allege, much less prove, that Arcalas had
actual knowledge of her claim of ownership and possession of the property at the time
the levy was registered. The records fail to show that Arcalas knew of Pinedas claim of
ownership and possession prior to Pinedas filing of her third party claim before
the Quezon City RTC. Hence, the mere possession of the subject property by Pineda,
absent any proof that Arcalas had knowledge of her possession and adverse claim of
ownership of the subject property, cannot be considered as equivalent to registration.
IN VIEW OF THE FOREGOING, the instant Petition is DISMISSED and the assailed Decision
of the Court of Appeals in C.A. G.R. CV No. 82872, promulgated on 25 January 2005,
is AFFIRMED. The Order of Branch 27 of the Regional Trial Court of Sta. Cruz, Laguna,
directing the Register of Deeds of Laguna to cancel the Notice of Adverse Claim
inscribed at the back of TCT No. T-52319 as Entry No. 324094 is SUSTAINED. No costs.
SO ORDERED.
[G.R. No. 133303. February 17, 2005]
BERNARDO VALDEVIESO, petitioner, vs. CANDELARIO DAMALERIO AND AUREA C.
DAMALERIO, respondents.
DECISION
CHICO-NAZARIO, J.:
Before this Court is a Petition for Review under Rule 45 of the Rules of Court, seeking to
set aside the 25 September 1997 Decision and the 10 February 1998 Resolution of the
Court of Appeals in CA-G.R. SP No. 43082 entitled, Candelario Damalerio and Aurea
Damalerio v. Honorable Antonio S. Alano, et al.[1]
There is no dispute as to the following facts:
On 05 December 1995, Bernardo Valdevieso (petitioner) bought from spouses Lorenzo
and Elenita Uy a parcel of land consisting of 10,000 square meters, more or less, located
at Bo. Tambler, General Santos City, and covered by Transfer Certificate of Title (TCT)
No. T-30586.[2]
The deed of sale was not registered, nor was the title of the land transferred to
petitioner. [3]
On 07 December 1995, the said property was immediately declared by petitioner for
taxation purposes as Tax Declaration No. l6205 with the City Assessors Office. [4]
It came to pass that on 19 April 1996, spouses Candelario and Aurea Damalerio
(respondents) filed with the Regional Trial Court (RTC) of General Santos City, a
complaint for a sum of money against spouses Lorenzo and Elenita Uy docketed as Civil
Case No. 5748 with application for the issuance of a Writ of Preliminary Attachment. [5]
On 23 April 1996, the trial court issued a Writ of Preliminary Attachment by virtue of which
the property, then still in the name of Lorenzo Uy but which had already been sold to
petitioner, was levied. The levy was duly recorded in the Register of Deeds of General
Santos City and annotated upon TCT No. T-30586.[6]
On 06 June 1996, TCT No. T-30586 in the name of Lorenzo Uy was cancelled and, in lieu
thereof, TCT No. T-74439 was issued in the name of petitioner. [7] This new TCT carried with
it the attachment in favor of respondents.
On 14 August 1996, petitioner filed a third-party claim in Civil Case No. 5748 to discharge
or annul the attachment levied on the property covered by TCT No. T-74439 on the
ground that the said property belongs to him and no longer to Lorenzo and Elenita Uy. [8]
In a resolution dated 21 October 1996, the trial court ruled for the
petitioner. [9] Citing Manliguez v. Court of Appeals[10] and Santos v. Bayhon,[11] it held that
the levy of the property by virtue of attachment is lawful only when the levied property
indubitably belongs to the defendant. Applying the rulings in the cited cases, it opined
that although defendant Lorenzo Uy remained the registered owner of the property
attached, yet the fact was that he was no longer the owner thereof as it was already
sold earlier to petitioner, hence, the writ of attachment was unlawful.
Respondents sought reconsideration thereof which was denied by the trial court in a
resolution dated 03 January 1997.[12]
From the unfavorable resolution of the trial court in the third-party claim, respondents
appealed to the Court of Appeals. The appellate court reversed the resolution and by
judgment promulgated on 25 September 1997, it declared that an attachment or levy
of execution, though posterior to the sale, but if registered before the sale is registered,
takes precedence over the sale.[13] The writ of attachment in favor of the respondents,
being recorded ahead of the sale to petitioner, will therefore take precedence.
Petitioner moved for reconsideration but this was denied by the Court of Appeals in its
Resolution of 10 February 1998. [14]
Hence, this Petition for Review on Certiorari.
The sole issue in this case is whether or not a registered writ of attachment on the land is
a superior lien over that of an earlier unregistered deed of sale.
Petitioner maintains that he has a superior right over the questioned property because
when the same was attached on 23 April 1996, this property was no longer owned by
spouses Uy against whom attachment was issued as it was already sold to petitioner on
05 December 1995. The ownership thereof was already transferred to petitioner pursuant
to Article 1477[15] in relation to Article 1498[16] of the Civil Code.
Dismissing the allegation that he slept on his rights by not immediately registering at least
an adverse claim based on his deed of sale, petitioner avers that he promptly worked
out for the transfer of registration in his name. The slight delay in the registration, he
claims was not due to his fault but attributable to the process involved in the registration
of property such as the issuance of the Department of Agrarian Reform clearance
which was effected only after compliance with several requirements.
Considering the peculiar facts and circumstances obtaining in this case, petitioner
submits it would be in accord with justice and equity to declare him as having a superior
right to the disputed property than the respondents.
Respondents maintain the contrary view. They aver that registration of a deed of sale is
the operative act which binds the land and creates a lien thereon. Before the
registration of the deed, the property is not bound insofar as third persons are
concerned. Since the writ of attachment in favor of respondents was registered earlier
than the deed of sale to petitioner, respondents were of the belief that their registered
writ of attachment on the subject property enjoys preference and priority over
petitioners earlier unregistered deed of sale over the same property. They also contend
that Articles 1477 and 1498 of the Civil Code as cited by petitioner are not applicable to
the case because said provisions apply only as between the parties to the deed of sale.
These provisions do not apply to, nor bind, third parties, like respondents, because what
affects or binds third parties is the registration of the instrument in the Register of Deeds.
Furthermore, respondents argue that petitioner cannot invoke equity in his favor unless
the following conditions are met: (a) the absence of specific provision of a law on the
matter; and (b) if the person who invokes it is not guilty of delay. Both conditions have
not been met, however, since there is a law on the subject matter, i.e., Section 51 of
Presidential Decree No. 1529, and that petitioner allegedly slept on his rights by not
immediately registering an adverse claim based on his deed of sale.
We agree with the respondents.
The law applicable to the facts of this case is Section 51 of P.D. No. 1529. Said Section
provides:
Sec. 51. Conveyance and other dealings by registered owner. - An owner of registered
land may convey, mortgage, lease, charge, or otherwise deal with the same in
accordance with existing laws. He may use such forms of deeds, mortgages, leases or
other voluntary instruments as are sufficient in law. But no deed, mortgage, lease, or
other voluntary instrument, except a will purporting to convey or affect registered land,
shall take effect as a conveyance or bind the land, but shall operate only as a contract
between the parties and as evidence of authority to the Register of Deeds to make
registration.
The act of registration shall be the operative act to convey or affect the land insofar as
third persons are concerned, and in all cases under this Decree, the registration shall be
made in the office of the Register of Deeds for the province or city where the land lies.
It is to be noted that though the subject land was deeded to petitioner as early as 05
December 1995, it was not until 06 June 1996 that the conveyance was registered, and,
during that interregnum, the land was subjected to a levy on attachment. It should also
be observed that, at the time of the attachment of the property on 23 April 1996, the
spouses Uy were still the registered owners of said property. Under the cited law, the
execution of the deed of sale in favor of petitioner was not enough as a succeeding
step had to be taken, which was the registration of the sale from the spouses Uy to him.
Insofar as third persons are concerned, what validly transfers or conveys a persons
interest in real property is the registration of the deed. Thus, when petitioner bought the
property on 05 December 1995, it was, at that point, no more than a private transaction
between him and the spouses Uy. It needed to be registered before it could bind third
parties, including respondents. When the registration finally took place on 06 June 1996,
it was already too late because, by then, the levy in favor of respondents, pursuant to
the preliminary attachment ordered by the General Santos City RTC, had already been
annotated on the title.
The settled rule is that levy on attachment, duly registered, takes preference over a prior
unregistered sale.[17] This result is a necessary consequence of the fact that the property
involved was duly covered by the Torrens system which works under the fundamental
principle that registration is the operative act which gives validity to the transfer or
creates a lien upon the land. [18]
The preference created by the levy on attachment is not diminished even by the
subsequent registration of the prior sale. This is so because an attachment is a
proceeding in rem.[19] It is against the particular property, enforceable against the whole
world. The attaching creditor acquires a specific lien on the attached property which
nothing can subsequently destroy except the very dissolution of the attachment or levy
itself.[20] Such a proceeding, in effect, means that the property attached is an indebted
thing and a virtual condemnation of it to pay the owners debt. [21] The lien continues until
the debt is paid, or sale is had under execution issued on the judgment, or until the
judgment is satisfied, or the attachment discharged or vacated in some manner
provided by law.

Thus, in the registry, the attachment in favor of respondents appeared in the nature of a
real lien when petitioner had his purchase recorded. The effect of the notation of said
lien was to subject and subordinate the right of petitioner, as purchaser, to the lien.
Petitioner acquired ownership of the land only from the date of the recording of his title
in the register, and the right of ownership which he inscribed was not absolute but a
limited right, subject to a prior registered lien of respondents, a right which is preferred
and superior to that of petitioner.[22]

Anent petitioners reliance on the rulings laid down in Manliguez v. Court of

Appeals and Santos v. Bayhon, we find the same to be misplaced. These cases did not
deal at all with the dilemma at hand, i.e. the question of whether or not a registered writ
of attachment on land is superior to that of an earlier unregistered deed of sale.
In Santos, what was involved were machinery and pieces of equipment which were
executed upon pursuant to the favorable ruling of the National Labor Relations
Commission. A third party claimed that the machinery were already sold to her, but it
does not appear in the facts of the case if such sale was ever registered. Manliguez is
similar to Santos, except that the former involved buildings and improvements on a
piece of land. To stress, in both cited cases, the registration of the sale, if any, of the
subject properties was never in issue.

As to petitioners invocation of equity, we cannot, at this instance, yield to such principle

in the presence of a law clearly applicable to the case. We reiterate that this Court,
while aware of its equity jurisdiction, is first and foremost, a court of law. [23] While equity
might tilt on the side of one party, the same cannot be enforced so as to overrule
positive provisions of law in favor of the other. [24] Equity cannot supplant or contravene
the law.[25] The rule must stand no matter how harsh it may seem. Dura lex sed lex.

WHEREFORE, the appealed Decision of the Court of Appeals in CA-G.R. SP No. 43082
dated 25 September 1997, and its Resolution dated 10 February 1998, are hereby
AFFIRMED. No costs.

SO ORDERED.