G.R. No. 138953. June 6, 2002.* The facts are stated in the opinion of the Court.

CASTORIO ALVARICO, petitioner, vs. AMELITA L. SOLA, respondent. Alejandro V. Peregrino for petitioner.

Land Registration; Notarial Law; The execution of public documents, as in Eduardo P. Gabriel, Jr. for respondent.
the case of Affidavits of Adjudication, is entitled to the presumption of regularity,
hence convincing evidence is required to assail and controvert them; It requires QUISUMBING, J.:
more than a party’s bare allegation to defeat the Original Certificate of Title which
on its face enjoys the legal presumption of regularity of issuance.—Petitioner This is a petition for review on certiorari of the decision dated March 23, 1999 of
claims that respondent was in bad faith when she registered the land in her name the Court of Appeals in CA-G.R. CV No. 54624, reversing the decision of the
and, based on the abovementioned rules, he has a better right over the property Regional Trial Court of Cebu City, Branch 10, for reconveyance. Also sought to be
because he was first in material possession in good faith. However, this allegation reversed is the CA resolution dated June 8, 1999 denying petitioner’s motion for
of bad faith on the part of Amelita Sola in acquiring the title is devoid of reconsideration.
evidentiary support. For one, the execution of public documents, as in the case of
Affidavits of Adjudication, is entitled to the presumption of regularity, hence
The facts of this case are as follows:
convincing evidence is required to assail and controvert them. Second, it is
undisputed that OCT No. 3439 was issued in 1989 in the name of Amelita. It
requires more than petitioner’s bare allegation to defeat the Original Certificate Petitioner Castorio Alvarico is the natural father of respondent Amelita Sola
of Title which on its face enjoys the legal presumption of regularity of issuance. A while Fermina Lopez is petitioner’s aunt, and also Amelita’s adoptive mother.
Torrens title, once registered, serves as notice to the whole world. All persons
must take notice and no one can plead ignorance of its registration. On June 17, 1982, the Bureau of Lands approved and granted the
Miscellaneous Sales Application (MSA) of Fermina over Lot 5, SGS-3451, with an
Same; Actions; Reversion; Only the State can institute reversion proceedings area of 152 sq. m. at the Waterfront, Cebu City.1
under Section 101 of the Public Land Act.—Even assuming that respondent
Amelita Sola acquired title to the disputed property in bad faith, only the State On May 28, 1983,2 Fermina executed a Deed of Self-Adjudication and
can institute reversion proceedings under Sec. 101 of the Public Land Act. Thus: Transfer of Rights3 over Lot 5 in favor of Amelita, who agreed to assume all the
Sec. 101.—All actions for reversion to the Government of lands of the public obligations, duties, and conditions imposed upon Fermina under MSA Application
domain or improvements thereon shall be instituted by the Solicitor General or No. V-81066. The document of transfer was filed with the Bureau of Lands.4 The
the officer acting in his stead, in the proper courts, in the name of the Republic of pertinent portions of the deed provide:
the Philippines.
xxx
Same; Same; Same; A private individual may not bring an action for
reversion or any action which would have the effect of canceling a free patent and
That I, FERMINA A. LOPEZ, of legal age, Filipino, widow of Pedro C. Lopez
the corresponding certificate of title issued on the basis thereof, such that the land
and a resident of Port San Pedro, Cebu City, Philippines, am the AWARDEE of
covered thereby will again form part of the public domain.—In other words, a
Lots Nos. 4, 5, 3-B, 3-C and 6-B, Sgs-3451 And being the winning bidder at the
private individual may not bring an action for reversion or any action which
auction sale of these parcels by the Bureau of Lands held on May 12, 1982, at the
would have the effect of canceling a free patent and the corresponding certificate
price of P150.00 per square meter taking a purchase price of P282,900.00 for the
of title issued on the basis thereof, such that the land covered thereby will again
tract; That I have made as my partial payment the sum of P28,290.00 evidenced
form part of the public domain. Only the Solicitor General or the officer acting in
by Official Receipt No. 1357764-B representing ten (10%) per cent of my bid,
his stead may do so. Since Amelita Sola’s title originated from a grant by the
leaving a balance of P254,610.00 that shall be in not more than ten (10) years at
government, its cancellation is a matter between the grantor and the grantee.
an equal installments of P25,461.00 beginning June 17, 1983 until the full
Clearly then, petitioner has no standing at all to question the validity of Amelita’s
amount is paid.
title. It follows that he cannot “recover” the property because, to begin with, he
has not shown that he is the rightful owner thereof.
. . . the Transferee Mrs. Amelita L. Sola, agrees to assume, all the obligations,
duties and conditions imposed upon the Awardee in relation to the MSA
PETITION for review on certiorari of a decision and resolution of the Court of
Application No. V-81066 entered in their records as Sales Entry No. 20476.
Appeals.
 . . . [I] hereby declare that I accept this Deed of Self-Adjudication and Transfer
of Rights and further agree to all conditions provided therein.5
Amelita assumed payment of the lot to the Bureau of Lands. She paid a total
amount of P282,900.6
On April 7, 1989, the Bureau of Lands issued an order approving the transfer
of rights and granting the amendment of the application from Fermina to
Amelita.7On May 2, 1989, Original Certificate of Title (OCT) No. 3439 was issued
in favor of Amelita.8
On June 24, 1993,9 herein petitioner filed Civil Case No. CEB1419110 for
reconveyance against Amelita. He claimed that on January 4, 1984, Fermina
donated the land to him11and immediately thereafter, he took possession of the
same. He averred that the donation to him had the effect of withdrawing the
earlier transfer to Amelita.12
For her part, Amelita maintained that the donation to petitioner is void
because Fermina was no longer the owner of the property when it was allegedly
donated to petitioner, the property having been transferred earlier to her. 13 She
added that the donation was void because of lack of approval from the Bureau of
Lands, and that she had validly acquired the land as Fermina’s rightful heir. She
also denied that she is a trustee of the land for petitioner.14
After trial, the RTC rendered a decision in favor of petitioner, the decretal
portion of which reads:
“WHEREFORE, premises considered, judgment is hereby rendered in favor of
plaintiff and against the defendant. Lot 5, Sgs-3451, is hereby declared as
lawfully owned by plaintiff and defendant is directed to reconvey the same to the
former.
No pronouncement as to damages and attorney’s fees, plaintiff having opted to
forego such claims.
SO ORDERED.”15
On appeal, the Court of Appeals in its decision dated March 23, 1999 reversed the
RTC. Thus:
“WHEREFORE, foregoing considered, the appealed decision is hereby
REVERSED and SET ASIDE. The complaint filed by plaintiff-appellee against
defendant-appellant is hereby DISMISSED.
Costs against plaintiff-appellee.
SO ORDERED.”16
Petitioner sought reconsideration, but it was denied by the CA.17
Hence, the instant petition for certiorari seasonably filed on the following
grounds:
I.
THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS ERROR, REFLECTIVE OF
UNMINDFUL RECKLESSNESS WHICH IS THE VERY OPPOSITE OF JUDICIAL
CIRCUMSPECTION, IN DECLARING THAT THE DEED OF DONATION DATED JANUARY 4, 1984
(ANNEX “C”) IN FAVOR OF PETITIONER WAS EMBODIED ONLY IN A PRIVATE DOCUMENT
(Page 6, Decision, Annex “A”), ALTHOUGH, BY A MERE CASUAL LOOK AT THE DOCUMENT, IT
CAN BE READILY DISCERNED THAT IT IS NOTARIZED;
II.
THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS ERROR IN APPLYING ON
THE CASE AT BAR THE PRINCIPLE IN LAW THAT IT IS REGISTRATION OF THE SALES PATENT
THAT CONSTITUTE THE OPERATIVE ACT THAT WOULD CONVEY OWNERSHIP OF THE LAND
TO THE APPLICANT (Pp. 3-6, Decision, Annex “A”) BECAUSE THE LEGAL CONTROVERSY
BETWEEN PETITIONER AND RESPONDENT DOES NOT INVOLVE CONFLICTING CLAIMS ON
SALES PATENT APPLICATIONS;
III.
THE HONORABLE COURT OF APPEALS GRAVELY ABUSED ITS DISCRETION AND
COMMITTED SERIOUS ERROR IN MAKING A FINDING THAT RESPONDENT ACQUIRED THE
LAND IN QUESTION, IN GOOD FAITH (Page 7, Decision, Annex “A”), ALTHOUGH THERE IS NO
BASIS NOR NEED TO MAKE SUCH A FINDING; and
IV.
THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS ERROR IN ENUNCIATING
THAT POSSESSION MENTIONED IN ARTICLE 1544 OF THE NEW CIVIL CODE INCLUDE
SYMBOLIC POSSESSION, UPON WHICH THE APPELLATE COURT BASED ITS CONCLUSION
THAT RESPONDENT WAS FIRST IN POSSESSION BECAUSE THE DEED OF SELF-
ADJUDICATION AND TRANSFER OF RIGHTS IN FAVOR OF RESPONDENT DATED MAY 28, 1983
WAS EXECUTED MUCH EARLIER THAN THE DEED OF DONATION IN FAVOR OF PETITIONER
DATED JANUARY 4, 1984 (Pages 7-8, Decision, Annex “A”).18
The crucial issue to be resolved in an action for reconveyance is: Who between
petitioner and respondent has a better claim to the land?
To prove she has a better claim, respondent Amelita Sola submitted a copy of
OCT No. 3439 in her name and her husband’s,19 a Deed of Self-Adjudication and
Transfer of Rights20 over the property dated 1983 executed by Fermina in her
favor, and a certification from the municipal treasurer that she had been
declaring the land as her and her husband’s property for tax purposes since
1993.21
 For his part, petitioner Castorio Alvarico presented, a Deed of
Donation22 dated January 4, 1984, showing that the lot was given to him by
Fermina and according to him, he immediately took possession in 1985 and
continues in possession up to the present.23
Petitioner further contests the CA ruling that declared as a private document
said Deed of Donation dated January 4, 1984, despite the fact that a certified true
and correct copy of the same was obtained from the Notarial Records Office,
Regional Trial Court, Cebu City on June 11, 1993 and acknowledged before Atty.
Numeriano Capangpangan, then Notary Public for Cebu.24
Given the circumstances in this case and the contentions of the parties, we
find that no reversible error was committed by the appellate court in holding that
herein petitioner’s complaint against respondent should be dismissed. The
evidence on record and the applicable law indubitably favor respondent.
Petitioner principally relies on Articles 744 and 1544 of the New Civil Code,
which provide:
Art. 744. Donations of the same thing to two or more different donees shall be
governed by the provisions concerning the sale of the same thing to two or more
different persons.
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. (Emphasis supplied.)
Petitioner claims that respondent was in bad faith when she registered the land
in her name and, based on the abovementioned rules, he has a better right over
the property because he was first in material possession in good faith. However,
this allegation of bad faith on the part of Amelita Sola in acquiring the title is
devoid of evidentiary support. For one, the execution of public documents, as in
the case of Affidavits of Adjudication, is entitled to the presumption of regularity,
hence convincing evidence is required to assail and controvert them. 25Second, it is
undisputed that OCT No. 3439 was issued in 1989 in the name of Amelita. It
requires more than petitioner’s bare allegation to defeat the Original Certificate
of Title which on its face enjoys the legal presumption of regularity of
issuance.26 A Torrens title, once registered, serves as notice to the whole world.
All persons must take notice and no one can plead ignorance of its registration. 27
Even assuming that respondent Amelita Sola acquired title to the disputed
property in bad faith, only the State can institute reversion proceedings under
Sec. 101 of the Public Land Act.28 Thus:
Sec. 101.—All actions for reversion to the Government of lands of the public
domain or improvements thereon shall be instituted by the Solicitor General or
the officer acting in his stead, in the proper courts, in the name of the Republic of
the Philippines.
In other words, a private individual may not bring an action for reversion or any
action which would have the effect of canceling a free patent and the
corresponding certificate of title issued on the basis thereof, such that the land
covered thereby will again form part of the public domain. Only the Solicitor
General or the officer acting in his stead may do so.29 Since Amelita Sola’s title
originated from a grant by the government, its cancellation is a matter between
the grantor and the grantee.30 Clearly then, petitioner has no standing at all to
question the validity of Amelita’s title. It follows that he cannot “recover” the
property because, to begin with, he has not shown that he is the rightful owner
thereof.
Anent petitioner’s contention that it was the intention of Fermina for Amelita
to hold the property in trust for him, we held that if this was really the intention
of Fermina, then this should have been clearly stated in the Deed of Self-
Adjudication executed in 1983, in the Deed of Donation executed in 1984, or in a
subsequent instrument. Absent any persuasive proof of that intention in any
written instrument, we are not prepared to accept petitioner’s bare allegation
concerning the donor’s state of mind.
WHEREFORE, the appealed decision of the Court of Appeals in CA-G.R. CV
No. 54624 is hereby AFFIRMED. The complaint filed by herein petitioner against
respondent in Civil Case No. CEB-14191 is declared properly DISMISSED. Costs
against petitioner.
SO ORDERED.
Bellosillo (Actg. C.J., Chairman), Mendoza, De Leon, Jr. and Corona,
JJ., concur.
Judgment affirmed, complaint dismissed.
Notes.—Even after the lapse of one year, the State may still bring an action
under §101 of the Public Land Act for the reversion to the public domain of lands
which have been fraudulently granted to private individuals. (Republic vs. Court
of Appeals, 255 SCRA 335 [1996])
It is only the State which may institute reversion proceedings under Sec. 101
of the Public Land Act. (Urquiaga vs. Court of Appeals, 301 SCRA 738 [1999])
 G.R. No. 172720. September 14, 2015.* the action be filed by the Office of the Solicitor General, being the real party-in-
interest.
PETITION for review on certiorari of the decision and resolution of the Court of Appeals.
ELISEO MALTOS and ROSITA P. MALTOS, petitioners, vs. HEIRS OF The facts are stated in the opinion of the Court.
Sansaet-Masendo-Cadiz Bañosia Law Offices for petitioners.
EUSEBIO BORROMEO, respondents. Miguel Padilla Paderanga for respondents.
LEONEN, J.:

Civil Law; Property; Homestead; The five (5)-year period prohibiting the sale The sale of a parcel of agricultural land covered by a free patent during the five-
of land obtained under homestead or free patent is provided under Section 118 of year prohibitory period under the Public Land Act is void. Reversion of the parcel
the Public Land Act (PLA).—The five-year period prohibiting the sale of land of land is proper. However, reversion under Section 101 of the Public Land Act is
obtained under homestead or free patent is provided under Section 118 of the not automatic. The Office of the Solicitor General must first file an action for
Public Land Act, which states: SECTION 118. Except in favor of the Government reversion.
or any of its branches, units, or institutions, or legally constituted banking
corporations, lands acquired under free patent or homestead provisions shall not On February 13, 1979, Eusebio Borromeo was issued Free Patent No. 586681 over
be subject to encumbrance or alienation from the date of the approval of the a piece of agricultural land located in San Francisco, Agusan del Sur, covered by
application and for a term of five years from and after the date of issuance of the Original Certificate of Title No. P-9053.[1]
patent or grant, nor shall they become liable to the satisfaction of any debt
contracted prior to the expiration of said period; but the improvements or crops on On June 15, 1983, well within the five-year prohibitory period, Eusebio Borromeo
the land may be mortgaged or pledged to qualified persons, associations, or sold the land to Eliseo Maltos.[2]
corporations.
Eusebio Borromeo died on January 16, 1991. His heirs claimed that prior to his
Remedial Law; Civil Procedure; Counterclaims; The general rule is that “a death, he allegedly told his wife, Norberta Borromeo, [3]and his children to nullify
compulsory counterclaim . . . not set up shall be barred.”—The general rule is that the sale made to Eliseo Maltos and have the Transfer Certificate of Title No. T-
“[a] compulsory counterclaim . . . not set up shall be barred.” Further, the 5477 cancelled because the sale was within the five-year prohibitory period.[4]
computation of the value of the improvements on the land entails findings of fact.
In any case, the Court of Appeals did not err when it stated in its Resolution On June 23, 1993, Norberta Borromeo and her children (heirs of Borromeo) filed a
dated April 7, 2006 that: With respect to Appellees’ claim for the reimbursement Complaint for Nullity of Title and Reconveyance of Title against Eliseo Maltos,
of the improvements on the land in question, they are hereby declared to have lost Rosita Maltos, and the Register of Deeds of Agusan del Sur. [5] The case was
and forfeited the value of the necessary improvements that they made thereon in docketed as Civil Case No. 946.[6]
the same manner that Appellants should lose the value of the products gathered
by the Appellees from the said land. Eliseo Maltos and Rosita Maltos (Maltos Spouses) filed their Answer, arguing
that the sale was made in good faith and that in purchasing the property, they
relied on Eusebio Borromeo's title. Further, the parties were in pari delicto. Since
Same; Same; Reversion; The purpose of reversion is “to restore public land
the sale was made during the five-year prohibitory period, the land would revert
fraudulently awarded and disposed of to private individuals or corporations to the
to the public domain and the proper party to institute reversion proceedings was
mass of public domain.”—The purpose of reversion is “to restore public land
the Office of the Solicitor General.[7]
fraudulently awarded and disposed of to private individuals or corporations to the
mass of public domain.” The general rule is that reversion of lands to the state is
The Register of Deeds of Agusan del Sur also filed an Answer, arguing that the
not automatic, and the Office of the Solicitor General is the proper party to file an
deed of sale was presented for Registration after the five-year prohibitory period,
action for reversion.
thus, it was ministerial on its part to register the deed.[8]

Same; Same; Same; Since an action for reversion presupposes that the The heirs of Borromeo countered that good faith was not a valid defense because
property in dispute is owned by the state, it is proper that the action be filed by the the prohibitory period appeared on the face of the title of the property. [9]
Office of the Solicitor General (OSG), being the real party-in-interest.—We clarify
that the remedy of reversion is not the same as the remedy of declaration of The Regional Trial Court[10] of Prosperidad, Agusan del Sur narrowed down the
nullity of free patents and certificate of title. In reversion, the “allegations in the issues to the following:
complaint would admit State ownership of the disputed land[,]” while in an action
for the declaration of nullity of free patent and certificate of title, the allegations
would include “plaintiff’s ownership of the contested lot prior to the issuance of 1. Whether or not the herein plaintiffs are the legal heirs of the late Eusebio
[the] free patent and certificate of title[.]” Since an action for reversion Borromeo.
presupposes that the property in dispute is owned by the state, it is proper that
2. Whether or not the sale of the disputed property within the prohibitory period action for reversion because "reversion is not automatic."[30] While there is yet no
is valid or binding.[11] action for reversion instituted by the Office of the Solicitor General, the property
should be returned to the heirs of Borromeo.[31] The dispositive portion of the
The trial court dismissed the Complaint on the ground of failure to state a cause Court of Appeals' Decision states:
of action.[12] Also, the heirs of Borromeo did not have a right of action because
they were unable to establish their status as heirs of the late Eusebio
Borromeo.[13] They may have declared themselves the legal heirs of Eusebio WHEREFORE, premises considered, the instant Appeal is GRANTED. The Decision of the court a
quo in Civil Case No. 946 is hereby SET ASIDE and another one is entered (1) ordering Appellee ELISEO
Borromeo, but they did not present evidence to prove their allegation. [14] Further, MALTOS to reconvey the property subject matter of this litigation to Appellants upon the refund by the
the determination of their rights to succession must be established in special latter to Appellee ELISEO MALTOS the sum of P36,863.00, all expenses for the reconveyance to be borne
proceedings.[15] by the buyer, ELISEO MALTOS, herein Appellee and (2) ordering the Register of Deeds of Prosperidad,
Agusan del Sur to cancel TCT No. T-5477 and revive OCT No. P-9053.

The trial court also ruled that "[t]he sale was null and void because it was within Let a copy of this Decision be furnished! the Office of the Solicitor General (OSG) for its information and
the five (5) year prohibitionary [sic] period"[16] under the Public Land Act.[17] The appropriate action and to inform this court within a period of thirty (30) days from receipt hereof of the
defense of indefeasibility of title was unavailing because the title to the property action done under the premises.
stated that it was "subject to the provisions of Sections 118, 119, 121, 122 and SO ORDERED.[32] (Emphasis supplied)
124"[18] of the Public Land Act.[19] Since the property was sold within the five-year
prohibitory period, such transfer "result[ed] in the cancellation of the grant and The Maltos Spouses filed a Motion for Reconsideration, arguing that since the
the reversion of the land to the public domain."[20] prohibition on transfers of property is provided by law, only the heirs of Borromeo
should be punished.[33] Punishment, in this case, would come in the form of
As to the defense of in pari delicto, the trial court ruled against its preventing the heirs of Borromeo from re-acquiring the land.[34] Instead, the land
applicability,[21] citing Egao v. Court of Appeals (Ninth Division).[22] should revert back to the state.[35] The Maltos Spouses also prayed that they be
reimbursed for the improvements they introduced on the land.[36] Assuming that
they would be found to be also at fault, the principle of in pari delicto should
The rule of pari delicto non oritur action (where two persons are equally at fault apply.[37]
neither party may be entitled to relief under the law), admits of exceptions and
does not apply to an inexistent contract, such as, a sale void ab initio under the The Court of Appeals[38] denied the Motion for Reconsideration,[39] reasoning that
Public Land Act, when its enforcement or application runs counter to the public it could not rule on the issue of who between the parties had the better right to
policy of preserving the grantee's right to the land under the homestead the property.[40] Also, it was the government who should decide whether the heirs
law.[23] (Citation omitted) of Borromeo "should retain ownership of the land."[41] With regard to the
applicability of the in pari delicto doctrine, the Court of Appeals held that in pari
The trial court further held that since the sale was null and void, no title passed delicto does not apply in cases where its application will violate the policy of the
from Eusebio Borromeo to Eliseo Maltos.[24] The dispositive portion of the trial state.[42]
court's Decision states:
On May 10, 2006, the Maltos Spouses |filed a Petition[43] for Review before this
court, questioning the Decision and Resolution of the Court of Appeals in CA-G.R.
WHEREFORE, for lack of merit, the complaint under consideration is hereby ordered DISMISSED. No
pronouncement as to costs. CV No. 77142.[44]

SO ORDERED.[25] This court, in a Resolution[45] dated July 5, 2006, required the heirs of Borromeo
to file their Comment.
On appeal, the heirs of Borromeo argued that they were able to prove their status
as heirs through the testimony of their mother, Norberta Borromeo.[26] The heirs of Borromeo filed their Comment,[46] which was noted by this court in a
Resolution[47] dated September 25, 2006. In the same Resolution, this court
The heirs of Borromeo also argued that the trial court should have ordered the required the Maltos Spouses to file their Reply.[48]
"revival of [Original Certificate of Title] No. P-9053 in the name of the Heirs of
EUSEBIO BORROMEO."[27] In a Resolution dated March 28, 2007, this court required Attys. Ma. Cherell L.
De Castro and Gener C. Sansaet, counsels for the Maltos Spouses, to show cause
The Court of Appeals[28] reversed the Decision of the trial court and held that why they should not be disciplinarily dealt with for their failure to file a Reply.
since Eusebio Borromeo sold his property within the five-year prohibitory period, They were also required to comply with the Resolution dated September 25,
the property should revert to the state.[29] However, the government has to file an 2006.[50]

Counsels for the Maltos Spouses filed a] Compliance,[51] together with the
Reply.[52] In a Resolution[53] dated August 15, 2007, this court noted and accepted
the Compliance, and also noted the Reply.
I their
The Maltos Spouses argue that the heirs of Borromeo did not present evidence to
prove that they are indeed the heirs of Eusebio Borromeo. The heirs of Borromeo
did not present the death certificate of Eusebio Borromeo, the marriage certificate
of Eusebio Borromeo and Norberta Borromeo, or any of the birth certificates of
the children of Eusebio.[54] While Norberta Borromeo and two of her children
testified,[55] their testimonies should be considered as self-serving.[56] The Maltos
Spouses cite Article 172[57] of the Family Code, which enumerates how filiation
may be established.[58]
The Maltos Spouses also contest the Court of Appeals' ruling stating that they did
not rebut the testimonies of the heirs of Borromeo because they continuously
argued that the heirs of Borromeo were unable to prove their status as heirs.[59]
The Maltos Spouses further argue that it was error for the Court of Appeals not to
apply the in pari delicto rule, considering that the sale violated Section 118 [60] of
the Public Land Act.[61] Since both parties are at fault, it follows that Article
1412[62] of the Civil Code applies.[63]
In addition, the Maltos Spouses pray for the reimbursement of the value of the
improvements on the property to prevent unjust enrichment on the part of the
heirs of Borromeo.[64] The Maltos Spouses enumerate the following circumstances
to show why they should be reimbursed:
a. EUSEBIO has already long received and enjoyed the amount of the purchase
price of the subject land from petitioners.
b. The value of the purchase price of PHP36,863.00 paid in 1983 have since then
greatly depreciated. If petitioners had deposited that money in bank or loaned it
to another person instead of purchasing EUSEBIO's property, it would have at
least earned some interest. However, the Court of Appeals incorrectly assumed
that the return of the purchase price would be sufficient compensation to the
petitioners.
c. The value of the improvements introduced by petitioners on the subject
property is much greater than the purchase price that they initially paid on the
land. Petitioners estimate the value of the improvements, including hundreds of
various fruit-bearing trees and four residential houses, to be at least
PHP900,000.00. Because of these improvements, not only can respondents sell the
land at a much higher price, they can even sell the improvements and profit from
them. It would be the height of injustice if all the petitioners would receive in
turning over the subject property to the respondents is the purchase price that
was previously paid EUSEBIO under the deed of sale.[65]
On the other hand, the heirs of Borromeo argue that the testimonies of Norberta
Borromeo and Susan Borromeo Morales on their relationship to Eusebio
Borromeo were not refuted by the Malios Spouses. Thus, they were able to prove
status as heirs.[66]
The heirs of Borromeo also argue that the in pari delicto rule is not applicable
because in Santos v. Roman Catholic Church of Midsayap, et al.,[67] this court
stated that the in pari delicto rule does not apply if its application will have the
effect of violating public policy.[68]
With regard to the claim for reimbursements, the heirs of Borromeo argue that
the Maltos Spouses did not raise their claim for reimbursement in their Answer to
the Complaint. They are now barred from claiming reimbursement since this was
not raised at the first instance.[69]
Based on the arguments of the parties, the issues for resolution are:
First, whether the Court of Appeals erred in reversing the Decision of the trial
court and ordering the reconveyance of the property from petitioners Spouses
Eliseo Maltos and Rosita Maltos to respondents heirs of Eusebio Borromeo;
Second, whether the Court of Appeals erred in not applying the doctrine of in pari
delicto; and
Finally, whether the Court of Appeals erred in ruling that petitioners Spouses
Eliseo Maltos and Rosita Maltos are not entitled to reimbursement for the
improvements they introduced on the land.
II
The five-year period prohibiting the sale of land obtained under homestead or free
patent is provided under Section 118 of the Public Land Act, which states:
SECTION 118. Except in favor of the Government or any of its branches, units, or institutions, or legally
constituted banking corporations, lands acquired under free patent or homestead provisions shall not be
subject to encumbrance or alienation from the date of the approval of the application and for a term of
five years from and after the date of issuance1 of the patent or grant, nor shall they become liable to the
satisfaction of any debt contracted prior to the expiration of said period; but the improvements or crops
on the land may be mortgaged] or pledged to qualified persons, associations, or corporations.
The reason for prohibiting the alienation or encumbrance of properties covered by
patent or grant was explained in Metropolitan Bank and Trust Company v.
Viray.[70]
In Metropolitan Bank, Edgardo D. Viray and his wife contracted several loans
with Metrobank which they failed to pay.[71] Metrobank filed a Complaint for sum
of money before the Regional Trial Court in Manila. [72] In 1982, during the
pendency of the case, free patents over three parcels of land were issued in favor
of Viray.[73] The Complaint for sum of money was decided in 1983 in favor of
Metrobank.[74] In 1984, the trial court issued a writ of execution over the parcels
of land.[75] An auction sale was held, and Metrobank emerged as the winning
bidder.[76] Viray filed an action for annulment of sale.[77] This court ruled that the
auction sale was made within the five-year prohibitory period[78] and explained
that:
[T]he main purpose in the grant of a freq patent of homestead is to preserve and
keep in the family of the homesteader that portion of public land which the State
has given to him so he may have a place to live with his family and become a
repurchase exists not only when the original homesteader makes the conveyance,
but also when it is made by his widow or heirs. This construction is clearly
deducible from the terms of the statute.
The effect of violating the five-year prohibitory period is provided under Section
124 of the Public Land Act, which provides:
SECTION 124. Any acquisition, conveyance, alienation, transfer, or other contract made or executed in
violation of any of the provisions of sections one hundred and eighteen, one hundred and twenty, one
hundred and twenty-one, one hundred and twenty-two, and one hundred and twenty-three of this. Act
shall be unlawful and null and void from its execution and shall produce the effect of annulling and
cancelling the grant, title, patent, or permit originally issued, recognized or confirmed, actually or
presumptively, and cause the reversion of the property and its improvements to the State.

happy citizen and a useful member of the society. In Jocson v. Soriano, we held
that the conservation of a family home is the purpose of homestead laws. The In this case, Section 101[87] of the Public Land Act is applicable since title already
policy of the state is to foster, families as the foundation of society, and thus vested in Eusebio Borromeo's name. Both the trial court and the Court of Appeals
promote general welfare. . . . found that the sale was made within the five-year prohibitory period. Thus, there
is sufficient cause to revert the property in favor of the state. However, this court
Section 118 of CA 141, therefore, is predicated on public policy. Its violation gives cannot declare reversion of the property in favor of the state in view of the
rise to the cancellation of the grant and the reversion of the land and its limitation imposed by Section 101 that an action for reversion must first be filed
improvements to the government at the instance of the latter. The provision that by the Office of the Solicitor General.
"nor shall they become liable to the satisfaction of any debt contracted prior to
that expiration of the five-year period" is mandatory and any sale made in
violation of such provision is void and produces no effect whatsoever, just like III
what transpired in this case. Clearly, it is not within the competence of any
citizen to barter away what public policy by law seeks to preserve. [79] (Citations The doctrine of in pari delicto non oritur actio is inapplicable when public policy
omitted) will be violated.

In Republic v. Court of Appeals,[80] Josefina L. Morato applied for free patent over constitute criminal offenses.
a parcel which was granted.[81] Morato mortgaged and leased a portion of the land
within the five-year prohibitory period.[82] Later on, it would also be discovered The in pari delicto rule is provided under Articles 1411 and 1412 of the Civil
that Morato's land formed part of Calauag Bay.[83] The Republic filed a Complaint Code. Article 1411 pertains to acts that constitute criminal offenses, while Article
for cancellation of title and reversion of the parcel of land.[84] This court held that 1412 pertains to acts that do not These provisions state:
"lease" and "mortgage" were encumbrances on the parcel of land. [85] This court
also discussed the policy behind the five-year prohibitory period:
ART. 1411. When the nullity proceeds from the illegality of the cause or object of the contract, and the
act constitutes a criminal offense, both parties being in pari delicto, they shall have no action against
each other, and both shall be prosecuted. Moreover, the provisions of the Penal Code relative to the
It is well-known that the homestead laws were designed to distribute disposable disposal of effects or instruments of a crime shall be applicable to the things or the price of the contract.
agricultural lots of the State to land-destitute citizens for their home and
cultivation. Pursuant to such benevolent intention the State prohibits the sale or This rule shall be applicable when only one of the parties is guilty; but the
encumbrance of the homestead (Section 116) within five years after the grant of innocent one may claim what he has given, and shall not be bound to comply with
the patent. After that five-year period the law impliedly permits alienation of the his promise.
homestead; but in line with the primordial purpose to favor the homesteader and
ART. 1412. If the act in which the unlawful or forbidden cause consists does not constitute a criminal
his family the statute provides that such alienation or conveyance (Section 117) offense, the following rules shall be observed:
shall be subject to the right of repurchase by the homesteader, his widow or heirs
within five years. This section 117 is undoubtedly a complement of Section 116. It (1) When the fault is on the part of both contracting parties, neither may recover what he has given by
aims to preserve and keep in the family of the homesteader that portion of public virtue of the contract, or demand the performance of the other's undertaking;

land which the State had gratuitously given to him. It would, therefore, be in (2) When only one of the contracting parties is at fault, he cannot recover what he has given by reason of
keeping with this fundamental idea to hold, as we hold, that the right to the contract, or ask for the fulfilment of what has been promised him. The other, who is not at fault, may
demand the return of what he has given without any obligation to comply with his promise.

Santos involved the sale of a parcel of land within the five-year prohibitory
period.[88] The Roman Catholic Church raised the defense of in pari delicto.[89] It
was also argued by the Rornan Catholic Church that the effect of the sale would
be the reversion of the] property to the state.[90] This court held that:
Section 124 of the Public Land Act indeed provides that any acquisition,
conveyance or transfer executed in violation of any of its provisions shall be null
and void and shall produce the effect of annulling and cancelling the grant or
patent and cause the reversion of the property to the State, and the principle
of pari delicto has been applied by this Court in a number of cases wherein the
parties to a transaction have proven to be guilty of effected the transaction with
knowledge of the cause of its invalidity. But we doubt if these principles can now
be invoked considering the philosophy and the policy behind the approval of the
Public Land Act. The principle underlying pari delicto as known here and in the
United States is not absolute in its application. It recognizes certain exceptions
one of them being when its enforcement or application runs counter to an avowed
fundamental policy or to public interest. As stated by us in the Rellosa case, "This
doctrine is subject to one important limitation, namely, [']whenever public policy is
considered advanced by allowing either party to sue for relief against the
transaction[']"
The case under consideration comes within the exception above adverted to. Here
appellee desires to nullify a transaction which was done in violation of the
law. Ordinarily the principle of pari delicto would apply to her because her
predecessor-in-interest has carried out the sale with the presumed knowledge of its
illegality, but because the subject of the transaction is a piece of public land, public
policy requires that she, as heir, be not prevented from re-acquiring it because it
was given by law to her family for her home and cultivation. This is the policy on
which our homestead law is predicated. This right cannot be waived. "It is not
within the competence of any citizen to barter away what public policy by law seeks
to preserve." We are, therefore, constrained to hold that appellee can maintain the
present action it being in furtherance of this fundamental aim of our homestead
law.[91] (Emphasis supplied, citations omitted)
The non-application of the in pari delicto rule where public policy would be
violated has also been applied in other cases.
In Pajuyo v. Court of Appeals,[92] this court held that in pari delicto "is not
[applicable to [e]jectment [c]ases"[93] and cited Drilon v. Gaurana,[94] which
discussed the policy behind ejectment cases:
It must be stated that the purpose of an action of forcible entry and detainer is
that, regardless of the actual condition of the title to the property, the party in
peaceable quiet possession shall not be turned out by strong hand, violence or
terror. In affording this remedy of restitution the object of the statute is to
prevent breaches of the peace and criminal disorder which would ensue from the
withdrawal of the remedy, and the reasonable hope such withdrawal would create
that some advantage must accrue to those persons who, believing themselves
entitled to the possession of property, resort to force to gain possession rather
than to some appropriate action in the courts to assert their claims.[95]
This court elucidated that:
Clearly, the application of the principle of pari delicto to a case of ejectment
between squatters is fraught with danger. To shut out relief to squatters on the
ground of pari delicto would openly invite mayhem and lawlessness. A squatter
would oust another squatter from possession of the lot that the latter had illegally
occupied, emboldened by the knowledge that the courts would leave them where
they are. Nothing would then stand in the way of the ousted squatter from re-
claiming his prior possession at all cost.
Petty warfare over possession of properties is precisely what ejectment cases or
actions for recovery of possession seek to prevent. Even the owner who has title
over the disputed property cannot take the law into his own hands to regain
possession of his property. The owner must go to court.[96] (Citation omitted)
In Loria v. Muñoz, Jr.,[97] Carlos Loria asked Ludolfo Muñoz, Jr. "to advance
[P]2,000,000.00 for a subcontract of a [P]50,000,000.00 river-dredging project in
Guinobatan."[98] Loria informed Muñoz that the project would be awarded to
Sunwest Construction and Development Corporation, and Sunwest would
subcontract to Muñoz.[99] Muñoz agreed to Loria's proposal.[100] When the river-
dredging project was finished, Loria did not return the P2,000,000.00 despite
Muñoz's demand.[101] Complaint for sum of money.[102]Loria raised the argument
that Muñoz "should not be allowed to recover the money"[103] since they were in
pari delicto.[104] This court held that under the principle of unjust enrichment, the
sum of money should be returned.[105] In so ruling, this court cited Gonzalo v.
Tarnate, Jr.[106] where it was explained that:
. . . the application of the doctrine of in pari delicto is not always rigid. An
accepted exception arises when its application contravenes well-established public
policy. In this jurisdiction, public policy has been defined as "that principle of the
law which holds that no subject or citizen can lawfully do that which has a
tendency to hi injurious to the public or against the public good."
Unjust enrichment exists, according to Hulst v. PR Builders, Inc., "when a person
unjustly retains a benefit at the loss of another, or when a person retains money
or property of another against the fundamental principles of justice, equity and
good conscience." The prevention of unjust enrichment is a recognized public
policy of the State, for Article 22 of the Civil Code explicitly provides that "[e]very
person who through an act of performance by another, or any other meins,
acquires or comes into possession of something at the expense of the latter
without just or legal ground, shall return the same to him." It is wel I to note that
Article 22 "is part of the chapter of the Civil Code on Human Relations, the
provisions of which were formulated as basic principles to be observed for the
rightful relationship between human beings and for the stability of the social
order; designed to indicate certain norms that spring from the fountain of good
conscience; guides for human conduct that should run as golden threads through
society to the end that law may approach its supreme ideal which is the sway and
dominance of justice."[107]
As the in pari delicto rule is not applicable, the question now arises as to who
between the parties have a better right to possess the subject parcel of land. This
issue was addressed in Santos:
What is important to consider now is who of the parties is the better entitled to
the possession of the land while the government does not take steps to assert its
title to the homestead. Upon annulment of the sale, the purchaser's claim is
reduced to the purchase price and its interest. As against the vendor or his heirs,
the purchaser is no more entitled to keep the land than any intruder. Such is the
situation of the appellants. Their right to remain in possession of the land is no
better than that of appellee and, therefore, they should not be allowed to remain
in it to the prejudice of appellee during and until the government takes steps
toward its reversion to the State.[108] (Emphasis supplied, citation omitted)
The allegation that the late Eusebio Borrjomeo and his wife went to Bayugan II,
San Francisco, Agusan del Sur in order to sell the land to the defendant Eliseo
Maltos has no factual basis, the truth of the matter is that the late Eusebio
Borromeo, together with defendant Eliseo Maltos went to Esperanza, Sultan
Kudarat to secure the signature of the wife.[113]
In addition, when petitioner Eliseo Maltos was presented in court, he identified
the signatures of the witnesses on the deed of sale as the signatures of Eusebio
Borromeo's children, namely, Susan, Ana, and Nicolas Borromeo.[114]
Respondents' allegation that they are the heirs of Borromeo is admitted by
petitioners. Thus, the Court of Appeals did not err in ruling that "the fact that
Appellants [referring to respondents] are the spouse and children of the late
EUSEBIO remains unrebutted."[115]
IV

In Binayug v. Ugaddan,[109] which involved the sale of two properties covered by a With regard to the claim for reimbursement, respondents argue that it was not
homestead patent,[110] this court cited jurisprudence showing that in cases raised as a counterclaim in the Answer to the Complaint.
involving the sale of a property covered by the five-year prohibitory period, the
property should be returned to the grantee.[111] During trial, petitioner Eliseo Maltos testified that when he entered the land,
there were around 100 trees, including coconut trees and a few banana trees. He
Applying the ruling in Santos and Binayug, this court makes it clear that then planted additional coconut trees which, at the time of the trial, were already
petitioners have no better right to remain in possession of the property against bearing fruit.[116] Petitioner Eliseo Maltos' testimony was not rebutted by
respondents. respondents.

Hence, the Court of Appeals did not err in ruling that while there is yet no action The general rule is that "[a] compulsory counterclaim . . . not set up shall be
for reversion filed by the Office of the Solicitor General, the property should be barred."[117] Further, the computation of the value of the improvements on the
conveyed by petitioners to respondents. land entails findings of fact.

In any case, the Court of Appeals did not err when it stated in its Resolution
III dated April 7, 2006 that:

Petitioners' argument that respondents failed to establish their status as heirs is

belied by their admissions during trial and in their pleadings. Petitioners t know With respect to Appellees' claim for the reimbursement of the improvements on
the identity of Eusebio Borromeo's wife. As quoted in the trial court's Decision, the land in question, they are hereby declared to have lost and forfeited the value
petitioners alleged in their Answer that: of the necessary improvements that they made thereon in the same manner that
Appellants should lose the value of the products gathered by the Appellees from
the said land.[118]
[I]t was the late Eusebio Borromeo and his wife who came along in Bayugan 2,
San Francisco, Agusan del Sur, requesting the said defendants to purchase their The Court of Appeals cited Angeles, et at v. Court of Appeals, et al.[119] and Arsenal
land because they badly need money and notwithstanding the fact that they have v. Intermediate Appellate Court.[120] In Angeles, this court discussed that:
a little amount and out of pity bought the said land.[112]

In the Reply, respondents alleged: The question that now poses is whether the return of the value of the products
gathered from the land by the defendants and the expenses incurred in the
construction of the dike—all useful and necessary expenses—should be ordered to
be returned by the defendants to the plaintiffs. While we believe that the rule of
in pari delicto should not apply to the sale of the homestead, because such sale is
contrary to the public policy enunciated in the homestead law, the loss of the
products realized by the defendants and the value of the necessary
improvements made by them on the land should not be excepted from the
application of the said rule because no cause or reason can be cited to justify an
exception. It has been held that the rule of in pari delicto is inapplicable only
where the same violates a well-established public policy.
. . . .
We are constrained to hold that the heirs of the homesteader should be declared
to have lost and forfeited the value of the products gathered from the land, and so
should the defendants lose the value of the necessary improvements that they
have made thereon.[121]
In Arsenal, the property covered by a homestead patent had been sold to Suralta
in 1957,[122] while the Complaint was filed before the trial court in 1974.[123] The
case was decided by this court in 1986.[124] Thus, Suralta had been in possession of
the property for approximately 17 years before a Complaint was filed. This court
held that:
The value of any improvements made on the land and the interests on the
purchase price are compensated by the fruits the respondent Suralta and his
heirs received from their long possession of the homestead.[125]
Angeles and Arsenal both involved the sale of a parcel of land covered by a
homestead patent within the five-year prohibitory period. These cases also
involved the introduction of improvements on the parcel of land by the buyer.
Restating the rulings in Angeles and Arsenal, this court finds that while the rule
on in pari delicto does not apply policy, if its effect is to violate public policy it is
applicable with regard to value of the improvements introduced by petitioner
Eliseo Maltos. Petitioners had been in possession of the land for 20 years before
the heirs of Borromeo filed a Complaint. The expenses incurred by petitioners in
introducing improvements on the land for which they seek reimbursement should
already be compensated by the fruits they received from the improvements.
V
Reversion is a remedy provided under Section 101 of the Public Land Act:
SECTION 101. All actions for the reversion to the Government of lands of the
public domain or improvements thereon shall be instituted by the Solicitor-
General or the officer acting in his stead, in the proper courts, in the name of
Commonwealth of the Philippines.
The purpose of reversion is "to restore public land fraudulently awarded and
disposed of to private individuals or corporations to the mass of public
domain."[126]
The general rule is that reversion of lands to the state is not automatic, and the
Office of the Solicitor General is the proper party to file an action for reversion.
In Villacorta v. Ulanday,[127] defendant-appellee Vicente Ulanday admitted that
his purchase of a parcel of land covered by a homestead patent was made within
the five-year prohibitory period, but argued that since the sale was in violation of
law,[128] the property should automatically revert to the state. [129] This court held
that reversion was not automatic, and government must file an appropriate action
so that the land may be reverted to the state. [130]
Ortega v. Tan[131] involved the sale and mortgage of a parcel of land covered by a
free patent.[132] The series of transactions for the sale and mortgage of the
property had been initiated within the five-year prohibitory period but was
finalized after the prohibitory period.[133]This court held that the sale and
mortgage violated Section 118 of the Public Land Act and that reversion was
proper.[134] This court also clarified that:
[Reversion] is not automatic. The government has to take action to cancel the
patent and the certificate of title in order that the land involved may be reverted
to it. Correspondingly, any new transaction would be subject to whatever steps
the government may take for the reversion to it.[135] (Citation omitted)
Alvarico v. Solau[136] involved a miscellaneous sales application over a parcel of
land by Fermina Lopez.[137] Subsequently, Lopez executed a deed of self-
adjudication and transfer of rights in favor of Amelita Sola. [138] The Bureau of
Lands approved the transfer of rights, and title was issued in Sola's
name.[139] Castorio Alvarico then filed an action for reconveyance, claiming that
the parcel of land was donated to him.[140] He also alleged that Sola acquired the
property in bad faith.[141] This court held that Alvarico's allegation of bad faith
was not supported by evidence and that in any case, "only the State can institute
reversion proceedings under Sec[tion] 101 of the Public Land Act."[142] This court
restated Section 101 of the Public Land Act:
[A] private individual may not bring an action for reversion or any action which would have the effect of
canceling a free patent and the corresponding certificate of title issued on the basis thereof, such that the
land covered thereby will again form part of the public domain. Only the Solicitor General or the officer
acting in his stead may do so. Since [the] title originated from a grant by the government, its cancellation
is a matter between the grantor and the grantee.[143] (Citations omitted)
The rule in Alvarico was cited in Cawis, et al. v. Hon. Cerilles, et al.[144] In Cawis,
the validity of a sales patent and original certificate of title over a parcel of land
in Baguio was questioned.[145] This court denied the Petition[146] and ruled that
the Complaint was actually a reversion suit, which can be filed only by the Office
of the Solicitor General or a person acting in its stead. [147]
It was also discussed in Cawis that:
The objective of an action for reversion of public land is the cancellation of the
certificate of title an|l the resulting reversion of the land covered by the title to
the State| This is why an action for reversion is oftentimes designated asj an
annulment suit or a cancellation suit.[148]
We clarify that the remedy of reversion is not the same as the remedy of
declaration of nullity of free patents and certificate of title. In reversion, the
"allegations in the complaint would admit State ownership of the disputed
land[,]"[149] while in an action for the declaration of nullity of free patent and
certificate of title, the allegations would include "plaintiffs ownership of the
contested lot prior to the issuance of [the] free patent and certificate of title[.]" [150]
Since an action for reversion presupposes that the property in dispute is owned by
the state, it is proper that the action be filed by the Office of the Solicitor General,
being the real party-in-interest.
There is, however, an exception to the rule that reversion is not automatic.
Section 29 of the Public Land Act provides:
SECTION 29. After the cultivation of the land has begun, the purchaser, with the approval of the
Secretary of Agriculture and Commerce, may convey or encumber his rights to any person, corporation,
or association legally qualified under this Act to purchase agricultural public lands, provided such
conveyance or encumbrance does not affect any right or interest of the Government in the land: And
provided, further, That the transferee is not delinquent in the payment of any installment due and
payable. Any sale and encumbrance made without the previous approval of the Secretary of Agriculture
and Commerce shall be null and void and shall produce the effect of annulling the acquisition and
reverting the property and all rights to the State, and all payments on the purchase price theretofore made
to the Government shall be forfeited. After the sale has been approved, the vendor shall not lose his right
to acquire agricultural public lands under the provisions of this Act, provided he has the necessary
qualifications. (Emphasis supplied)
In Francisco v. Rodriguez, et al,[151] this court differentiated reversion under
Sections 29 and 101 of the Public Land Act.[152] This court explained that
reversion under Section 29 is self-operative, unlike Section 101 which requires the
Office of the Solicitor General to institute reversion proceedings. [153] Also, Section
101 applies in cases where "title has already vested in the individual[.]" [154] The
Director of Lands sought to execute the Decision in Francisco v. Rodriguez which
petitioner Ursula Francisco opposed, arguing that only 29 hectares were reverted
to the state since she was in possession of the remaining four hectares.[155] This
court held that the entire property reverted to the state. [156] This court also
explained why Francisco v. Rodriguez was covered by Section 29 and not Section
101 of the Public Land Act:
By transgressing the law, i.e., allowing herself to be a dummy in the acquisition of
the land and selling the same without the previous approval of the Secretary of
Agriculture and Natural Resources, plaintiff-appellant herself [referring to
Ursula Francisco] has eliminated the very source (Sales Application) of her claim
to Lot No. 595, as a consequence of which, she cannot later assert any right or
interest thereon. This is the imperative import of the pronouncements in G.R. No.
L-8263 and in G.R. No. L-15605 that the invalidity of the conveyance by plaintiff-
appellant "produced as a consequence the reversion of the property with all rights
thereto to the State." As a matter of fact, Section 29 of the Public Land Law
(Commonwealth Act No. 141) expressly ordains that any sale and encumbrance
made without the previous approval of the Secretary of Agriculture and Natural
Resources "shall be null and void and shall produce the effect of annulling the
acquisition and reverting property and all rights thereto to the State, and all
payments on the purchase price theretofore made to the Government shall be
forfeited." . . . .
In fact, even if a sales application were already given due course by the Director
of Lands, the applicant is not thereby conferred any right over the land covered by
the application. It is the award made by the Director to the applicant (if he is the
highest bidder) that confers upon him a certain right over the land, namely, "to
take possession of the land so that he could comply with the requirements
prescribed by law." It is at this stage, when the award is made, that the land can
be considered "disposed of by the Government," since the aforestated right of the
applicant has the effect of withdrawing the land from the public domain that is
"disposable" by the Director of Lands under the provisions of the Public Land Act.
. . . However, the disposition is merely provisional because the applicant has still
to comply with the requirements prescribed by law before . . . . any patent is
issued. After the requisites of the law are complied with by the applicant to the
satisfaction of the Director [of] Lands, the patent is issued. It is then that the
land covered by the application may be considered "permanently disposed of by
the Government."[157] (Citations omitted)
In this case, a free patent over the subject parcel of land was issued to Eusebio
Borromeo. This shows that he already had title to the property when he sold it to
petitioner Eliseo Maltos. Thus, Section 101 of the Public Land Act applies.
WHEREFORE, the Petition is denied, and the Decision and Resolution of the
Court of Appeals in CA-G.R. CV No. 77142 are AFFIRMED, without prejudice to
the appropriate institution of a case for reversion.
Let a copy of this Decision be furnished the Office of the Solicitor General for its
appropriate action with respect to the reversion of the land in question.
SO ORDERED.
G.R. No. 147148. January 13, 2003.*
PILAR GOYENA, petitioner, vs. AMPARO LEDESMA-GUSTILO, respondent.
Remedial Law; Certiorari; Questions of fact are not proper subjects of appeal
by certiorari under Rule 45 of the Rules of Court as this mode of appeal is confined
to questions of law.—It is well-entrenched doctrine that questions of fact are not
proper subjects of appeal by certiorari under Rule 45 of the Rules of Court as this
mode of appeal is confined to questions of law. The test of whether the question is
one of law or of fact is whether the appellate court can determine the issue
raised without reviewing or evaluating the evidence, in which case it is a question
of law; otherwise, it is a question of fact.
Same; Same; Court cannot be tasked to go over the proofs presented by the
parties and analyze, assess and weigh them to ascertain if the trial court and
appellate court were correct in according them superior credit.—Clearly, the issues
raised and arguments in support of petitioner’s position require a review of the
evidence, hence, not proper for consideration in the petition at bar. This Court
cannot thus be tasked to go over the proofs presented by the parties and analyze,
assess, and weigh them to ascertain if the trial court and appellate court were
correct in according them superior credit.
Same; Guardianship; In the selection of a guardian, a large discretion must
be allowed the judge who deals directly with the parties.—In the selection of a
guardian, a large discretion must be allowed the judge who deals directly with the
parties. As this Court said: As a rule, when it appears that the judge has
exercised care and diligence in selecting the guardian, has given due
consideration to the reasons for and against his action which are urged by the
interested parties, his action should not be disturbed unless it is made very clear
that he has fallen into grievous error. In the case at bar, petitioner has not shown
that the lower courts committed any error.
PETITION for review on certiorari of a decision of the Court of Appeals.
The facts are stated in the opinion of the Court.
Cayetano, Sebastian, Ata, Dado & Cruz for petitioner.
Castillo, Laman, Tan, Pantaleon & San Jose for private respondent.
Raphael A. Diaz collaborating counsel for private respondent.
CARPIO-MORALES, J.:
From the Court of Appeals June 19, 2000 Decision which affirmed that of the
Regional Trial Court (RTC) of Makati, Branch 149 in Special Proceeding No. N-
4375 appointing herein respondent Amparo Ledesma Gustilo as guardian over
the person and property of her sister Julieta Ledesma, Pilar Y. Goyena, Julietas
close friend and companion of more than 60 years, comes to this Court on petition
for review on certiorari.
On July 8, 1996, respondent filed at the RTC of Makati a PETITION FOR
LETTERS OF GUARDIANSHIP[1] over the person and properties of her sister
Julieta, the pertinent allegations of which read:
2. That for the most part during the year 1995 and 1996, Julieta Ledesma has
been a patient in the Makati Medical Center where she is under medical
attention for old age, general debility, and a mini-stroke which she suffered in the
United States in early 1995;
3. That Julieta Ledesma is confined to her bed and can not get up from bed
without outside assistance, and she has to be moved by wheel chair;
4. That Julieta Ledesma owns real estate and personal properties in Metro
Manila and in Western Visayas, with an aggregate estimated assessed and par
value of P1 Million Pesos[;]
5. That Julieta Ledesma is not in a position to care for herself, and that she needs
the assistance of a guardian to manage her interests in on-going corporate and
agricultural enterprises;
6. That the nearest of kin of Julieta Ledesma are her sisters of the full blood,
namely, petitioner Amparo Ledesma Gustilo, Teresa Ledesma (aka. Sister
Cristina of the Religious of the Assumption, and Loreto Ledesma Mapa, all of
whom have given their consent to the filing of this petition as shown by their
signatures at the bottom of this petition[;]
7. That petitioner has extensive experience in business management of
commercial, agricultural and corporate enterprises, many of which are in the
same entities where Julieta Ledesma holds an interest, and that she is in a
position to monitor and supervise the delivery of vitally needed medical services
to Julieta Ledesma whether in the Metro Manila area, or elsewhere.
Petitioner filed an Opposition to the petition for letters of guardianship. She
later filed an Amended Opposition on August 15, 1996 reading in part:
2.03 The petition lacked factual and legal basis in that Julieta Ledesma is
competent and sane and there is absolutely no need to appoint a guardian to take
charge of her person/property. She is very able to take charge of her affairs, and
this is clearly evident from her letters to the petitioner. Copies of her recent
letters are herewith attached as Annexes A to E.
xxx
2.05 Petitioner is not fit to be appointed as the guardian of Julieta Ledesma since
their interests are antagonistic (Sudler v. Sudler, 121 Md. 46. 49 L.R.A. 800, as
cited in vol. V-B Francisco Revised Rules of Court, Rule 93, Section 4, p. 414).
xxx
3.01 The above captioned petition should be dismissed for utter lack of legal
and/or factual basis.
3.02 In the remote event that this Honorable Court should find that Julieta
Ledesma is incompetent and resolve that there is need to appoint a guardian over
her person and property, this Honorable Court should appoint as such guardian:
1. Oppositor Goyena;
2. Bart Lacson;
3. Fely Montelibano;
4. Jose T. Revilla; or
5. a qualified and reputable person as may be determined fit by
this Honorable Court.
By Decision[2] of October 4, 1996, the trial court found Julieta incompetent
and incapable of taking care of herself and her property and appointed
respondent as guardian of her person and properties, ratiocinating as follows:
A perusal of the records shows that petitioner (Amparo) is 72 years of age, the
youngest sister of Julieta. Admittedly, the Oppositor Pilar Goyena, 90 years of age
has been the close friend and companion of Julieta for 61 years. Julieta was with
Oppositor when she suffered her first stroke in Makati in 1991 which was the
reason why Julieta had to give up the management of their hacienda in Bacolod.
It is also not disputed that Julieta was with Pilar when she had her second stroke
in the U.S. In short, the special bond of friendship existing between Julieta and
the Oppositor cannot be denied. Now that Julieta is unable to manage her
personal life and business concerns due to senility and vascular dementia, the
oppositor wants to be appointed her guardian or else Bart Lacson, Fely
Montelibano and Jose T. Revilla.
It is interesting to note that the oppositor has interposed her objection to the
appointment of Amparo as guardian because she thinks that the latter dislikes her.
She further added that there were a number of letters allegedly written by Julieta
to Amparo which showed Julietas sentiments regarding certain matters.
Nevertheless, not one of the nearest of kin of Julieta opposed the petition. As a
matter of fact, her sisters signified their conformity thereto. Thus, Ms. Goyenas
mere conjecture that Amparo dislikes her is no sufficient reason why the petition
should be denied. Neither does it make Amparo unsuitable and unfit to perform
the duties of a guardian. On the contrary, it is Ms. Goyena who could be
considered as to have an adverse interest to that of Julieta if it is true that 50% of
Julietas holdings at the Makati Medical Center has been transferred to her as
alleged in Exhibit 1 and Exhibit A.
By and large, the qualification of Amparo to act as guardian over the person and
properties of Julieta has been duly established. As a sister, she can best take care
of Julietas concerns and well being. Now that Julieta is in the twilight of her life,
her family should be given the opportunity to show their love and affection for her
without however denying Pilar Goyena access to her considering the special bond
of friendship between the two. Needless to say, the oppositor at 90 years of age
could not be said to be physically fit to attend to all the needs of Julieta.
WHEREFORE, petitioner Amparo Gustilo, is hereby appointed guardian over the
person and property of Julieta Ledesma, an incompetent with all the powers and
duties specified under the law.
Accordingly, let letters of guardianship issue to petitioner upon her filing of a
bond in the amount of P200,000.00 to guarantee the performance of the
obligations prescribed for general guardians.
SO ORDERED. (Emphasis supplied)
Petitioners Motion for Reconsideration of the trial courts decision was, by
Order of November 4, 1996[3], denied in this wise:
Acting on the Motion for Reconsideration filed by the Oppositor thru counsel, and
finding no merits on the ground stated therein, considering that petitioner
appears to be most qualified and suitable to act as Julieta Ledesmas guardian
after taking into consideration the qualifications of the oppositor and her other
recomendees [sic], aside from the fact that petitioners appointment as such was
not objected to by any of her nearest kin, in contrast to the hostile interest of
oppositor, the same is hereby DENIED.
SO ORDERED.
On appeal of petitioner, the Court of Appeals affirmed the trial courts
decision on the following ratiocination:[4]
Indeed, oppositor-appellant (Pilar) has not shown the authenticity and due
execution of the letters which purport to show the existence of a rift between
Julieta and her family and dissatisfaction as to how the businesses were
managed. At any rate, while it is correct to say that no person should be
appointed guardian if his interest conflict with those of the ward (Guerrero vs.
Teran, 13 Phil. 212), there are really no antagonistic interests to speak of between
petitioner [Amparo] and Julieta, they being co-owners of certain properties. There
is also no showing that petitioners business decisions in the past had resulted in
the prejudice of Julieta.
While the oppositor may have been very close to Julieta, there is no sufficient
showing that petitioner is hostile to the best interests of the latter. On the
contrary, it was the petitioner who, realizing the need for the appointment of a
person to guard her sisters interests, initiated the petition for guardianship. We
see no indication that petitioner is animated by a desire to prejudice
Julietas health as well as financial interests. In point of fact, it was
oppositor-appellant who had initially concealed the deteriorating state
of mind of Julieta from the court. Oppositors advanced age of 90 years also
militate against her assuming the guardianship of the incompetent. The
oppositor has declared that she is not interested to be appointed legal
guardian (p.21[,] Appellants Brief, Rollo, p. 59). But the persons that she
points to as being better choices as Julietas guardian over the appellee have not
acted, nor even indicated, their desire to act as such. In any case, We see no
cogent reason why We should reverse the well-reasoned disquisition of the trial
court.
WHEREFORE, finding no error in the appealed decision, the same is
hereby AFFIRMED.
SO ORDERED. (Emphasis supplied)
Petitioners Motion for Reconsideration of the Court of Appeals decision
having been denied, she filed the present petition which proffers that:
THE COURT OF APPEALS HAS DECIDED A QUESTION OF SUBSTANCE IN A WAY NOT IN
ACCORD WITH LAW AND APPLICABLE DECISIONS OF THIS HONORABLE COURT.
THE COURT OF APPEALS HAS DEPARTED FROM THE ACCEPTED AND USUAL COURSE OF
JUDICIAL PROCEEDINGS IN AFFIRMING THE TRIAL COURTS DECISION DATED OCTOBER 4,
1996 AND IN ISSUING THE RESOLUTIONS DATED JUNE 29, 2000 AND FEBRUARY 9, 2001.
The petition fails.
It is well-entrenched doctrine that questions of fact are not proper subjects of
appeal by certiorari under Rule 45 of the Rules of Court as this mode of appeal is
confined to questions of law.[5] The test of whether the question is one of law or of
fact is whether the appellate court can determine the issue raised without
reviewing or evaluating the evidence, in which case it is a question of law;
otherwise, it is question of fact.[6]
In the case at bar, the only issue before this Court is whether or not the
appellate court and the trial court erred in finding that respondent is not
unsuitable for appointment as guardian of the person and properties of Julieta. In
support of an affirmative answer, petitioner posits as follows:
1. The Court of Appeals basis for its decision that there are no
antagonistic interests between [her] and [respondent] is contrary to
the evidence on record,[7]
2. The Court of Appeals erred in holding that there is no showing that
[respondent] is hostile to the best interest of Julieta,[8] and
3. Julieta Ledesmas appointed representatives are most suitable to be
appointed as her guardian.[9]
Clearly, the issues raised and arguments in support of petitioners position
require a review of the evidence, hence, not proper for consideration in the
petition at bar. This Court cannot thus be tasked to go over the proofs presented
by the parties and analyze, assess, and weigh them to ascertain if the trial court
and appellate court were correct in according them superior credit.[10]
That the issues raised are factual is in fact admitted by petitioner in her
Reply dated August 30, 2001:[11]
Although the general rule is that this Honorable Court is not a trier of facts, its
jurisdiction being limited to reviewing and revising only errors of law, it is
nonetheless subject to the following exceptions which have been laid down in a
number of decisions of this Honorable Court:
(1) When the conclusion is a finding grounded entirely on speculation, surmises
and conjectures; (2) When the inference made is manifestly mistaken, absurd or
impossible; (3) When there is grave abuse of discretion; (4) When the judgment is
based on a misapprehension of facts; (5) When the findings of facts are conflicting;
(6) When the Court of Appeals, in making its findings, went beyond the issues of
the case and the same is contrary to the admissions of both appellants and
appellee; (7) When the findings of the Court of Appeals are contrary to those of
the trial court; (8) When the findings of facts are conclusions without citation of
specific evidence on which they are based; (9) When the facts set forth in the
petition as well as in the petitioners main and reply briefs are not disputed by the
respondents; and (10) When the findings of fact of the Court of Appeals is
premised on the supposed absence of evidence and is contradicted by the evidence
on record (Emphasis supplied); (Rollo, 350-351)
Petitioner claims that there is no doubt that the instant petition falls within
the above-stated exceptions because the findings of the Court of Appeals are
clearly belied by the evidence on record.[12]
In the selection of a guardian, a large discretion must be allowed the judge
who deals directly with the parties.[13] As this Court said:
As a rule, when it appears that the judge has exercised care and diligence in
selecting the guardian, and has given due consideration to the reasons for and
against his action which are urged by the interested parties, his action should
not be disturbed unless it is made very clear that he has fallen into
grievous error.[14]
In the case at bar, petitioner has not shown that the lower courts committed
any error.
Petitioner cannot rely on Garchitorena v. Sotelo[15] with respect to the
existence of antagonistic interests between respondent and Julieta. In that case,
the interest of Perfecto Gabriel as creditor and mortgagee of the minor-wards
properties (a house and lot) is antagonistic to the interest of the wards as
mortgagors, hence, Gabriels appointment as guardian was erroneous. For while
he sought to foreclose the wards properties as creditor and mortgagee on one
hand, he had to, on the other hand, endeavor to retain them for the wards as their
guardian. Added to that was Gabriels appointment as guardian without him
informing the guardianship court that he held a mortgage on the
properties. Furthermore, he deliberately misinformed the said court that the first
mortgagee was the Santa Clara Monastery when it was him. None of the said
circumstances obtain in the present case.
Petitioner can neither rely on certain letters of Julieta to establish her claim
that there existed[16] a rift between the two which amounts to antagonistic
interests. The first letter[17] sent by Julieta to respondent which reads:
x x x So if you (appellee) do not agree with me (Julieta) my decision is right to let
us divide as soon as possible, so we will have capital each of us to work, and keep
the Hda, for [sic] generation to generation.
xxx
For the last time I will repeat even if I have to kneel before you and Carlos I have
no interest anymore in any future investment due to my age and being single and
alone in life. I would like to be able to enjoy whatever monies that correspond to
me. I would like to have enough money as a reserve for any future need that I
might have like hospitalization, travel, buying whatever I like, etc. etc. (Letter to
appellee; Exhibit 2)
merely shows Julietas lack of interest in future investments, not necessarily
a business disagreement, and certainly not per se amounting to antagonistic
interests between her and respondent to render the latter unsuitable for
appointment as guardian.
The second letter[18] which reads:
My mind is still clear to tell you about Fortuna when I had my stroke I was confined in
MMC for one month. If I am not mistaken you did not visit me. One day Carlos came
to visit me and asked me this question. Do you think you will be able to continue managing
the Hda? I answered him I dont know it all depends on my sickness. Carlos said who do you
want to take your place? I said I want Cheling Zabaljauregui. Then Carlos said O.K. He
asked Pilar can you contact Cheling? Tell him to call me or see me. The nephew of Cheling
was a resident in MMC through him Pilar was able to contact Cheling and gave him Carlos
message. So I thought all the time it was agreeable. I left for USA for treatment. To my
surprise when I came back from USA it was not Cheling, but you (appellee) took
over the management as you requested. Carlos did not tell me but decided in your
favor. x x x (Letter to appellee; Exhibit 3; emphasis supplied)
shows that: 1) respondent did not visit Julieta when she was confined at the
Makati Medical Center on account of her stroke, 2) there was disagreement as to
who should run the hacienda, with Julieta favoring a certain Cheling
Zabaljaurigue, and 3) respondent took over management of the hacienda with
their brother Carlos (Ledesma) supporting her. No inference as to the existence of
antagonistic interests between respondent and Julieta can thus be made.
The third letter[19] which reads:
x x x Carlos went to the house before I left and asked from me twenty thousand
(20,000) shares of San Carlos Milling which you gave because I wanted to sell
all.xxx If he does not sell or cannot sell, just arrange to send them back to
me. Amparing since I came here to America and Vancouver my requests have been
ignored. Everyone is suspecting that Pilar is the one ordering or commanding me
that is not true. What I asked from Julio is just to report to me or send me reports
so I can follow up from here. But up to now he has ignored my requests x x x.
(Letter to appellee Exhibit 4)
has no relevance to the issue of whether or not the lower courts erred in
finding that respondent is not unsuitable for appointment as guardian. The letter
in fact discloses, that it was Julietas nephew Julio Ledesma, and not respondent,
who ignored the request.
As for the fourth letter[20] which reads:
I want all of you to know that whatever decision now and in the future I want to
do nobody can stop me especially regarding my properties, money, etc. I will be
the only one to dispose of it because it is mine. You said to Raul you are going to
court, you are most welcome x x x. (Letter to Connie, Exhibit 5)
it has also no relevance to the issue in the case at bar. The letter is not even
addressed to respondent but to a certain Connie (a sister-in-law of Julieta).
Petitioners assertion that respondents intent in instituting the guardianship
proceedings is to take control of Julietas properties and use them for her own
benefit[21] is purely speculative and finds no support form the records.
The claim that respondent is hostile to the best interests of Julieta also lacks
merit. That respondent removed Julieta from the Makati Medical Center where
she was confined after she suffered a stroke does not necessarily show her
hostility towards Julieta, given the observation by the trial court, cited in the
present petition, that Julieta was still placed under the care of doctors[22] after she
checked out and was returned to the hospital when she suffered another stroke.
Finally, this Court notes two undisputed facts in the case at bar, to wit: 1)
Petitioner opposed the petition for the appointment of respondent as guardian
before the trial court because, among other reasons, she felt she was disliked by
respondent,[23] a ground which does not render respondent unsuitable for
appointment as guardian, and 2) Petitioner concealed the deteriorating state of
mind of Julieta before the trial court,[24] which is reflective of a lack of good faith.
Discussion of the third argument is unnecessary, the suitability of Amparo
for appointment as guardian not having been successfully contested.
ACCORDINGLY, for lack of merit, the petition is hereby DISMISSED.
SO ORDERED.
G.R. No. 110427. February 24, 1997.*
The Incompetent, CARMEN CAÑIZA, represented by her legal guardian,
AMPARO EVANGELISTA, petitioner, vs. COURT OF APPEALS (SPECIAL
FIRST DIVISION), PEDRO ESTRADA and his wife, LEONORA ESTRADA,
respondents.
Actions; Pleadings and Practice; What determines the nature of an action as
well as which court has jurisdiction over it are the allegations of the complaint and
the character of the relief sought.—It is axiomatic that what determines the
nature of an action as well as which court has jurisdiction over it, are the
allegations of the complaint and the character of the relief sought. An inquiry into
the averments of the amended complaint in the Court of origin is thus in order.
Same; Same; Ejectment; Unlawful Detainer; A complaint for unlawful
detainer is sufficient if it alleges that the withholding of possession or the refusal
to vacate is unlawful without necessarily employing the terminology of the law.—
Undoubtedly, a cause of action for desahucio has been adequately set out. It is
settled that in an action for unlawful detainer, to allege that the defendant is
unlawfully withholding possession from the plaintiff is deemed sufficient, and a
complaint for unlawful detainer is sufficient if it alleges that the withholding of
possession or the refusal to vacate is unlawful without necessarily employing the
terminology of the law.
Same; Same; Same; Same; An owner’s act of allowing another to occupy her
house, rent-free, does not create a permanent and indefeasible right of possession
in the latter’s favor.—The argument is arrant sophistry. Cañiza’s act of allowing
the Estradas to occupy her house, rent-free, did not create a permanent and
indefeasible right of possession in the latter’s favor. Common sense, and the most
rudimentary sense of fairness clearly require that that act of liberality be
implicitly, but no less certainly, accompanied by the necessary burden on the
Estradas of returning the house to Cañiza upon her demand. More than once has
this Court adjudged that a person who occupies the land of another at the latter’s
tolerance or permission without any contract between them is necessarily bound
by an implied promise that he will vacate upon demand, failing which a summary
action for ejectment is the proper remedy against him. The situation is not much
different from that of a tenant whose lease expires but who continues in
occupancy by tolerance of the owner, in which case there is deemed to be an
unlawful deprivation or withholding of possession as of the date of the demand to
vacate. In other words, one whose stay is merely tolerated becomes a deforciant
illegally occupying the land or property the moment he is required to leave.
Same; Same; Same; Same; Where there had been more than one demand to
vacate, the one-year period for filing the complaint for unlawful detainer must be
reckoned from the date of the last demand, the reason being that the lessor has the
option to waive his right of action based on previous demands and let the lessee
remain meanwhile in the premises.—It may not be amiss to point out in this
connection that where there had been more than one demand to vacate, the one-
year period for filing the complaint for unlawful detainer must be reckoned from
the date of the last demand, the reason being that the lessor has the option to
waive his right of action based on previous demands and let the lessee remain
meanwhile in the premises. Now, the complaint filed by Cañiza’s guardian alleges
that the same was “filed within one (1) year from the date of the first letter of
demand dated February 3, 1990.” Although this averment is not in accord with
law because there is in fact a second letter of demand to vacate, dated February
27, 1990, the mistake is inconsequential, since the complaint was actually filed on
September 17, 1990, well within one year from the second (last) written demand
to vacate.
Same; Same; Same; Same; Guardianship; A judicial guardian is clothed
with authority to withdraw the ward’s earlier express permission given to third
persons to occupy a certain property.—The Estradas’ possession of the house
stemmed from the owner’s express permission. That permission was subsequently
withdrawn by the owner, as was her right; and it is immaterial that the
withdrawal was made through her judicial guardian, the latter being indisputably
clothed with authority to do so. Nor is it of any consequence that Carmen Cañiza
had executed a will bequeathing the disputed property to the Estradas; that
circumstance did not give them the right to stay in the premises after demand to
vacate on the theory that they might in the future become owners thereof, that
right of ownership being at best inchoate, no transfer of ownership being possible
unless and until the will is duly probated.
Same; Same; Same; Same; Where the issue is possession de facto, not de jure,
the proper remedy is ejectment, not accion publiciana.—In any case, the only issue
that could legitimately be raised under the circumstances was that involving the
Estradas’ possession by tolerance, i.e., possession de facto, not de jure. It is
therefore incorrect to postulate that the proper remedy for Cañiza is not
ejectment but accion publiciana, a plenary action in the RTC or an action that is
one for recovery of the right to possession de jure.
Wills and Succession; A will is essentially ambulatory—at any time prior to
the testator’s death, it may be changed or revoked, and until admitted to probate, it
has no effect whatever and no right can be claimed thereunder; An owner’s
intention to confer title in the future to persons possessing property by his tolerance
is not inconsistent with the former’s taking back possession in the meantime for
any reason deemed sufficient.—A will is essentially ambulatory; at any time prior
to the testator’s death, it may be changed or revoked; and until admitted to
probate, it has no effect whatever and no right can be claimed thereunder, the law
being quite explicit: “No will shall pass either real or personal property unless it
is proved and allowed in accordance with the Rules of Court” (ART. 838, id.). An
owner’s intention to confer title in the future to persons possessing property by
his tolerance, is not inconsistent with the former’s taking back possession in the
meantime for any reason deemed sufficient. And that in this case there was
sufficient cause for the owner’s resumption of possession is apparent: she needed
to generate income from the house on account of the physical infirmities afflicting
her, arising from her extreme age.
 Guardianship; The ward has no right to possession or control of his property
during his or her incompetency.—Amparo Evangelista was appointed by a
competent court the general guardian of both the person and the estate of her
aunt, Carmen Cañiza. Her Letters of
Guardianship dated December 19, 1989 clearly installed her as the
“guardian over the person and properties of the incompetent CARMEN CAÑIZA
with full authority to take possession of the property of said incompetent in any
province or provinces in which it may be situated and to perform all other acts
necessary for the management of her properties **.” By that appointment, it
became Evangelista’s duty to care for her aunt’s person, to attend to her physical
and spiritual needs, to assure her well-being, with right to custody of her person
in preference to relatives and friends. It also became her right and duty to get
possession of, and exercise control over, Cañiza’s property, both real and personal,
it being recognized principle that the ward has no right to possession or control of
his property during her incompetency. That right to manage the ward’s estate
carries with it the right to take possession thereof and recover it from anyone who
retains it, and bring and defend such actions as may be needful for this purpose.
Actions; Ejectment; Even when, in forcible entry and unlawful detainer
cases, the defendant raises the question of ownership in his pleadings and the
question of possession cannot be resolved without deciding the issue of ownership,
the Metropolitan Trial Courts, Municipal Trial Courts, and Municipal Circuit
Trial Courts nevertheless have the undoubted competence to resolve the issue of
ownership only to determine the issue of possession.—It may be pointed out in
relation to the Estrada’s defenses in the ejectment action, that as the law now
stands, even when, in forcible entry and unlawful detainer cases, the defendant
raises the question of ownership in his pleadings and the question of possession
cannot be resolved without deciding the issue of ownership, the Metropolitan
Trial Courts, Municipal Trial Courts, and Municipal Circuit Trial Courts
nevertheless have the undoubted competence to resolve “the issue of ownership **
only to determine the issue of possession.”
Same; Same; Parties; An ejectment case survives the death of a party.—To be
sure, an ejectment case survives the death of a party. Cañiza’s demise did not
extinguish the desahucio suit instituted by her through her guardian. That
action, not being a purely personal one, survived her death; her heirs have taken
her place and now represent her interests in the appeal at bar.
PETITION for review on certiorari of a decision of the Court of Appeals.
The facts are stated in the opinion of the Court.
Priscilla A. Villacorta for petitioner.
Montilla Law Office for private respondents.
NARVASA, C.J.:
On November 20, 1989, being then ninety-four (94) years of age, Carmen
Caiza, a spinster, a retired pharmacist, and former professor of the College of
Chemistry and Pharmacy of the University of the Philippines, was declared
incompetent by judgment[1] of the Regional Trial Court of Quezon City, Branch
107,[2] in a guardianship proceeding instituted by her niece, Amparo A.
Evangelista.[3] She was so adjudged because of her advanced age and physical
infirmities which included cataracts in both eyes and senile dementia. Amparo A.
Evangelista was appointed legal guardian of her person and estate.
Caiza was the owner of a house and lot at No. 61 Tobias St., Quezon City. On
September 17, 1990, her guardian Amparo Evangelista commenced a suit in the
Metropolitan Trial Court (MetroTC) of Quezon City (Branch 35) to eject the
spouses Pedro and Leonora Estrada from said premises. [4] The complaint was
later amended to identify the incompetent Caiza as plaintiff, suing through her
legal guardian, Amparo Evangelista.
The amended Complaint[5] pertinently alleged that plaintiff Caiza was the
absolute owner of the property in question, covered by TCT No. 27147; that out of
kindness, she had allowed the Estrada Spouses, their children, grandchildren and
sons-in-law to temporarily reside in her house, rent-free; that Caiza already had
urgent need of the house on account of her advanced age and failing health, "so
funds could be raised to meet her expenses for support, maintenance and medical
treatment;" that through her guardian, Caiza had asked the Estradas verbally
and in writing to vacate the house but they had refused to do so; and that "by the
defendants' act of unlawfully depriving plaintiff of the possession of the house in
question, they ** (were) enriching themselves at the expense of the incompetent,
because, while they ** (were) saving money by not paying any rent for the house,
the incompetent ** (was) losing much money as her house could not be rented by
others." Also alleged was that the complaint was "filed within one (1) year from
the date of first letter of demand dated February 3, 1990."
In their Answer with Counterclaim, the defendants declared that they had
been living in Caiza's house since the 1960's; that in consideration of their faithful
service they had been considered by Caiza as her own family, and the latter had
in fact executed a holographic will on September 4, 1988 by which she
"bequeathed" to the Estradas the house and lot in question.
Judgment was rendered by the MetroTC on April 13, 1992 in Caiza's
favor,[6] the Estradas being ordered to vacate the premises and pay
Caiza P5,000.00 by way of attorney's fees.
But on appeal,[7] the decision was reversed by the Quezon City Regional
Trial Court, Branch 96.[8] By judgment rendered on October 21, 1992,[9] the RTC
held that the "action by which the issue of defendants' possession should be
resolved is accion publiciana, the obtaining factual and legal situation **
demanding adjudication by such plenary action for recovery of possession
cognizable in the first instance by the Regional Trial Court."
Caiza sought to have the Court of Appeals reverse the decision of October 21,
1992, but failed in that attempt. In a decision[10] promulgated on June 2, 1993, the
Appellate Court[11] affirmed the RTC's judgment in toto. It ruled that (a) the
proper remedy for Caiza was indeed an accion publiciana in the RTC, not
an accion interdictal in the MetroTC, since the "defendants have not been in the
subject premises as mere tenants or occupants by tolerance, they have been there
as a sort of adopted family of Carmen Caiza," as evidenced by what purports to be
the holographic will of the plaintiff; and (b) while "said will, unless and until it
has passed probate by the proper court, could not be the basis of defendants' claim
to the property, ** it is indicative of intent and desire on the part of Carmen
Caiza that defendants are to remain and are to continue in their occupancy and
possession, so much so that Caiza's supervening incompetency can not be said to
have vested in her guardian the right or authority to drive the defendants out."[12]
Through her guardian, Caiza came to this Court praying for reversal of the
Appellate Court's judgment. She contends in the main that the latter erred in (a)
holding that she should have pursued an accion publiciana, and not an accion
interdictal; and in (b) giving much weight to "a xerox copy of an alleged
holographic will, which is irrelevant to this case."[13]
In the responsive pleading filed by them on this Court's requirement, [14] the
Estradas insist that the case against them was really not one of unlawful
detainer; they argue that since possession of the house had not been obtained by
them by any "contract, express or implied," as contemplated by Section 1, Rule 70
of the Rules of Court, their occupancy of the premises could not be deemed one
"terminable upon mere demand (and hence never became unlawful) within the
context of the law." Neither could the suit against them be deemed one of forcible
entry, they add, because they had been occupying the property with the prior
consent of the "real owner," Carmen Caiza, which "occupancy can even ripen into
full ownership once the holographic will of petitioner Carmen Caiza is admitted to
probate." They conclude, on those postulates, that it is beyond the power of
Caiza's legal guardian to oust them from the disputed premises.
Carmen Caiza died on March 19, 1994,[15] and her heirs -- the
aforementioned guardian, Amparo Evangelista, and Ramon C. Nevado, her niece
and nephew, respectively -- were by this Court's leave, substituted for her.[16]
Three issues have to be resolved: (a) whether or not an ejectment action is
the appropriate judicial remedy for recovery of possession of the property in
dispute; (b) assuming desahucio to be proper, whether or not Evangelista, as
Caiza's legal guardian had authority to bring said action; and (c) assuming an
affirmative answer to both questions, whether or not Evangelista may continue to
represent Caiza after the latter's death.
I
It is axiomatic that what determines the nature of an action as well as which
court has jurisdiction over it, are the allegations of the complaint and the
character of the relief sought.[17] An inquiry into the averments of the amended
complaint in the Court of origin is thus in order.[18]
The amended Complaint alleges:[19]
"6. That the plaintiff, Carmen Caiza, is the sole and absolute owner of a house
and lot at No. 61 Scout Tobias, Quezon City, which property is now the subject of
this complaint;
** ** **
9. That the defendants, their children, grandchildren and sons-in-law, were
allowed to live temporarily in the house of plaintiff, Carmen Caiza, for free, out of
her kindness;
10. That the plaintiff, through her legal guardian, has duly notified the
defendants, for them to vacate the said house, but the two (2) letters of demand
were ignored and the defendants refused to vacate the same. **
11. That the plaintiff, represented by her legal guardian, Amparo Evangelista,
made another demand on the defendants for them to vacate the premises, before
Barangay Captain Angelina A. Diaz of Barangay Laging Handa, Quezon City, but
after two (2) conferences, the result was negative and no settlement was reached.
A photocopy of the Certification to File Action dated July 4, 1990; issued by said
Barangay Captain is attached, marked Annex "D" and made an integral part
hereof;
12. That the plaintiff has given the defendants more than thirty (30) days to
vacate the house, but they still refused to vacate the premises, and they are up to
this time residing in the said place;
13. That this complaint is filed within one (1) year from the date of first letter of
demand dated February 3, 1990 (Annex "B") sent by the plaintiff to the
defendants, by her legal guardian -- Amparo Evangelista;
14. By the defendants' act of unlawfully depriving the plaintiff of the possession of
the house in question, they are enriching themselves at the expense of the
incompetent plaintiff, because, while they are saving money by not paying any
rent for the house, the plaintiff is losing much money as her house could not be
rented by others;
15. That the plaintiff's health is failing and she needs the house urgently, so that
funds could be raised to meet her expenses for her support, maintenance and
medical treatment;
16. That because of defendants' refusal to vacate the house at No. 61 Scout
Tobias, Quezon City, the plaintiff, through her legal guardian, was compelled to
go to court for justice, and she has to spend P10,000.00 as attorney's fees."
Its prayer[20] is quoted below:
"WHEREFORE, in the interest of justice and the rule of law, plaintiff, Carmen Caiza, represented by her
legal guardian. Amparo Evangelista, respectfully prays to this Honorable Court, to render judgment in
favor of plaintiff and against the defendants as follows:
1. To order the defendants, their children, grandchildren, sons-in-law and other persons claiming under
them, to vacate the house and premises at No. 61 Scout Tobias, Quezon City, so that its possession can be
restored to the plaintiff, Carmen Caiza: and
2. To pay attorney's fees in the amount of P10,000.00;
3. To pay the costs of the suit."
In essence, the amended complaint states:
1) that the Estradas were occupying Caiza's house by tolerance -- having been
"allowed to live temporarily ** (therein) for free, out of ** (Caiza's) kindness;"
2) that Caiza needed the house "urgently" because her "health ** (was) failing and
she ** (needed) funds ** to meet her expenses for her support, maintenance and
medical treatment;"
3) that through her general guardian, Caiza requested the Estradas several
times, orally and in writing, to give back possession of the house;
4) that the Estradas refused and continue to refuse to give back the house to
Caiza, to her continuing prejudice; and
5) that the action was filed within one (1) year from the last demand to vacate.
Undoubtedly, a cause of action for desahucio has been adequately set out. It
is settled that in an action for unlawful detainer, it suffices to allege that the
defendant is unlawfully withholding possession from the plaintiff is deemed
sufficient,[21] and a complaint for unlawful detainer is sufficient if it alleges that
the withholding of possession or the refusal to vacate is unlawful without
necessarily employing the terminology of the law.[22]
The Estradas' first proffered defense derives from a literal construction of
Section 1, Rule 70 of the Rules of Court which inter alia authorizes the institution
of an unlawful detainer suit when "the possession of any land or building is
unlawfully withheld after the expiration or termination of the right to hold
possession, by virtue of any contract, express or implied." They contend that since
they did not acquire possession of the property in question "by virtue of any
contract, express or implied" -- they having been, to repeat, "allowed to live
temporarily ** (therein) for free, out of ** (Caiza's) kindness" -- in no sense could
there be an "expiration or termination of ** (their) right to hold possession, by
virtue of any contract, express or implied." Nor would an action for forcible entry
lie against them, since there is no claim that they had "deprived (Caiza) of the
possession of ** (her property) by force, intimidation, threat, strategy, or stealth."
The argument is arrant sophistry. Caiza's act of allowing the Estradas to
occupy her house, rent-free, did not create a permanent and indefeasible right of
possession in the latter's favor. Common sense, and the most rudimentary sense
of fairness clearly require that act of liberality be implicitly, but no less certainly,
accompanied by the necessary burden on the Estradas of returning the house to
Caiza upon her demand. More than once has this Court adjudged that a person
who occupies the land of another at the latter's tolerance or permission without
any contract between them is necessarily bound by an implied promise that he
will vacate upon demand, failing which a summary action for ejectment is the
proper remedy against him.[23] The situation is not much different from that of a
tenant whose lease expires but who continues in occupancy by tolerance of the
owner, in which case there is deemed to be an unlawful deprivation or
withholding of possession as of the date of the demand to vacate. [24] In other
words, one whose stay is merely tolerated becomes a deforciant illegally occupying
the land or property the moment he is required to leave. [25] Thus, in Asset
Privatization Trust vs. Court of Appeals,[26] where a company, having lawfully
obtained possession of a plant upon its undertaking to buy the same, refused to
return it after failing to fulfill its promise of payment despite demands, this Court
held that "(a)fter demand and its repudiation, ** (its) continuing possession **
became illegal and the complaint for unlawful detainer filed by the ** (plant's
owner) was its proper remedy."
It may not be amiss to point out in this connection that where there had
been more than one demand to vacate, the one-year period for filing the complaint
for unlawful detainer must be reckoned from the date of the last demand,[27] the
reason being that the lessor has the option to waive his right of action based on
previous demands and let the lessee remain meanwhile in the premises.[28] Now,
the complaint filed by Caiza's guardian alleges that the same was "filed within
one (1) year from the date of the first letter of demand dated February 3, 1990."
Although this averment is not in accord with law because there is in fact a second
letter of demand to vacate, dated February 27, 1990, the mistake is
inconsequential, since the complaint was actually filed on September 17, 1990,
well within one year from the second (last) written demand to vacate.
The Estradas' possession of the house stemmed from the owner's express
permission. That permission was subsequently withdrawn by the owner, as was
her right; and it is immaterial that the withdrawal was made through her judicial
guardian, the latter being indisputably clothed with authority to do so. Nor is it of
any consequence that Carmen Caiza had executed a will bequeathing the
disputed property to the Estradas; that circumstance did not give them the right
to stay in the premises after demand to vacate on the theory that they might in
future become owners thereof, that right of ownership being at best inchoate, no
transfer of ownership being possible unless and until the will is duly probated.
Thus, at the time of the institution of the action of desahucio, the Estradas
had no legal right to the property, whether as possessors by tolerance or
sufferance, or as owners. They could not claim the right of possession by
sufferance, that had been legally ended. They could not assert any right of
possession flowing from their ownership of the house; their status as owners is
dependent on the probate of the holographic will by which the property had
allegedly been bequeathed to them -- an event which still has to take place; in
other words; prior to the probate of the will, any assertion of possession by them
would be premature and inefficacious.
In any case, the only issue that could legitimately be raised under the
circumstances was that involving the Estradas' possession by tolerance, i.e.,
possession de facto, not de jure. It is therefore incorrect to postulate that the
proper remedy for Caiza is not ejectment but accion publiciana, a plenary action
in the RTC or an action that is one for recovery of the right to possession de jure.
II
The Estradas insist that the devise of the house to them by Caiza clearly
denotes her intention that they remain in possession thereof, and legally
incapacitated her judicial guardian, Amparo Evangelista, from evicting them
therefrom, since their ouster would be inconsistent with the ward's will.
A will is essentially ambulatory; at any time prior to the testator's death, it
may be changed or revoked;[29] and until admitted to probate, it has no effect
whatever and no right can be claimed thereunder, the law being quite explicit:
"No will shall pass either real or personal property unless it is proved and allowed
in accordance with the Rules of Court" (ART. 838, id.).[30] An owner's intention to
confer title in the future to persons possessing property by his tolerance, is not
inconsistent with the former's taking back possession in the meantime for any
reason deemed sufficient. And that in this case there was sufficient cause for the
owner's resumption of possession is apparent: she needed to generate income from
the house on account of the physical infirmities afflicting her, arising from her
extreme age.
Amparo Evangelista was appointed by a competent court the general
guardian of both the person and the estate of her aunt, Carmen Caiza. Her
Letters of Guardianship[31]dated December 19, 1989 clearly installed her as the
"guardian over the person and properties of the incompetent CARMEN CAIZA
with full authority to take possession of the property of said incompetent in any
province or provinces in which it may be situated and to perform all other acts
necessary for the management of her properties ** "[32] By that appointment, it
became Evangelista's duty to care for her aunt's person, to attend to her physical
and spiritual needs, to assure her well-being, with right to custody of her person
in preference to relatives and friends.[33] It also became her right and duty to get
possession of, and exercise control over, Caiza's property, both real and personal,
it being recognized principle that the ward has no right to possession or control of
his property during her incompetency.[34] That right to manage the ward's estate
carries with it the right to take possession thereof and recover it from anyone who
retains it,[35] and bring and defend such actions as may be needful for this
purpose. [36]
Actually, in bringing the action of desahucio, Evangelista was merely
discharging the duty to attend to "the comfortable and suitable maintenance of
the ward" explicitly imposed on her by Section 4, Rule 96 of the Rules of
Court, viz.:
"SEC. 4. Estate to be managed frugally, and proceeds applied to maintenance of
ward. A guardian must manage the estate of his ward frugally and without
waste, and apply the income and profits thereof, so far as maybe necessary, to the
comfortable and suitable maintenance of the ward and his family, if there be any;
and if such income and profits be insufficient for that purpose, the guardian may
sell or encumber the real estate, upon being authorized by order to do so, and
apply to such of the proceeds as may be necessary to such maintenance."
Finally, it may be pointed out in relation to the Estradas's defenses in the
ejectment action, that as the law now stands, even when, in forcible entry and
unlawful detainer cases, the defendant raises the question of ownership in his
pleadings and the question of possession cannot be resolved without deciding the
issue of ownership, the Metropolitan Trial Courts, Municipal Trial Courts, and
Municipal Circuit Trial Courts nevertheless have the undoubted competence to
resolve. "the issue of ownership ** only to determine the issue of possession." [37]
III
As already stated, Carmen Caiza passed away during the pendency of this
appeal. The Estradas thereupon moved to dismiss the petition, arguing that
Caiza's death automatically terminated the guardianship, Amaparo Evangelista
lost all authority as her judicial guardian, and ceased to have legal personality to
represent her in the present appeal. The motion is without merit.
While it is indeed well-established rule that the relationship of guardian and
ward is necessarily terminated by the death of either the guardian or the
ward,[38] the rule affords no advantage to the Estradas. Amparo Evangelista, as
niece of Carmen Caiza, is one of the latter's only two (2) surviving heirs, the other
being Caiza's nephew, Ramon C. Nevado. On their motion and by Resolution of
this Court[39] of June 20, 1994, they were in fact substituted as parties in the
appeal at bar in place of the deceased, in accordance with Section 17, Rule 3 of the
Rules of Court, viz.:[40]
"SEC. 18. Death of a party. After a party dies and the claim is not thereby
extinguished, the court shall order, upon proper notice, the legal representative of
the deceased to appear and be substituted for the deceased within a period of
thirty (30) days, or within such time as may be granted. If the legal
representative fails to appear within said time, the court may order the opposing
party to procure the appointment of a legal representative of the deceased within
a time to be specified by the court, and the representative shall immediately
appear for and on behalf of the interest of the deceased. The court charges
involved in procuring such appointment, if defrayed by the opposing party, may
be recovered as costs. The heirs of the deceased may be allowed to be substituted
for the deceased, without requiring the appointment of an executor or
administrator and the court may appoint guardian ad litem for the minor heirs.
To be sure, an ejectment case survives the death of a party. Caiza's demise
did not extinguish the desahucio suit instituted by her through her
guardian.[41] That action, not being a purely personal one, survived her death; her
heirs have taken her place and now represent her interests in the appeal at bar.
WHEREFORE, the petition is GRANTED. The Decision of the Court of
Appeals promulgated on June 2, 1993 -- affirming the Regional Trial Court's
judgment and dismissing petitioner's petition for certiorari -- is REVERSED and
SET ASIDE, and the Decision dated April 13, 1992 of the Metropolitan Trial
Court of Quezon City, Branch 35, in Civil Case No. 3410 is REINSTATED and
AFFIRMED. Costs against private respondents.SO ORDERED.
 G.R. No. 194366. October 10, 2012.*
NAPOLEON D. NERI, ALICIA D. NERI-MONDEJAR, VISMINDA D. NERI-
CHAMBERS, ROSA D. NERI-MILLAN, DOUGLAS D. NERI, EUTROPIA D.
ILLUT-COCKINOS and VICTORIA D. ILLUT-PIALA, petitioners, vs. HEIRS OF
HADJI YUSOP UY and JULPHA** IBRAHIM UY, respondents.
Civil Law; Succession; Legitimate Children; Legitimate children from the
first and second marriages are entitled to inherit pursuant to Articles 979 and 980
of the Civil Code.―It bears to stress that all the petitioners herein are
indisputably legitimate children of Anunciacion from her first and second
marriages with Gonzalo and Enrique, respectively, and consequently, are entitled
to inherit from her in equal shares, pursuant to Articles 979 and 980 of the Civil
Code which read: ART. 979. Legitimate children and their descendants succeed
the parents and other ascendants, without distinction as to sex or age, and even if
they should come from different marriages. xxx ART. 980. The children of the
deceased shall always inherit from him in their own right, dividing the
inheritance in equal shares.
Same; Extrajudicial Settlement of Estates; No extrajudicial settlement shall
be binding upon any person who has not participated therein or had no notice
thereof.―In the execution of the Extra-Judicial Settlement of the Estate with
Absolute Deed of Sale in favor of spouses Uy, all the heirs of Anunciacion should
have participated. Considering that Eutropia and Victoria were admittedly
excluded and that then minors Rosa and Douglas were not properly represented
therein, the settlement was not valid and binding upon them and consequently, a
total nullity. Section 1, Rule 74 of the Rules of Court provides: SECTION
1. Extrajudicial settlement by agreement between heirs.―x x x The fact of the
extrajudicial settlement or administration shall be published in a newspaper of
general circulation in the manner provided in the next succeeding section; but no
extrajudicial settlement shall be binding upon any person who has not
participated therein or had no notice thereof.
Same; Guardianship; A father or mother, as the natural guardian of the
minor under parental authority, does not have the power to dispose or encumber
the property of the latter. Such power is granted by law only to a judicial guardian
of the ward’s property and even then only with courts’ prior approval secured in
accordance with the proceedings set forth by the Rules of Court.―Administration
includes all acts for the preservation of the property and the receipt of fruits
according to the natural purpose of the thing. Any act of disposition or alienation,
or any reduction in the substance of the patrimony of child, exceeds the limits of
administration. Thus, a father or mother, as the natural guardian of the minor
under parental authority, does not have the power to dispose or encumber the
property of the latter. Such power is granted by law only to a judicial guardian of
the ward’s property and even then only with courts’ prior approval secured in
accordance with the proceedings set forth by the Rules of Court.
Same; Ratification; Words and Phrases; Ratification means that one under
no disability voluntarily adopts and gives sanction to some unauthorized act or
defective proceeding, which without his sanction would not be binding on
him.―Ratification means that one under no disability voluntarily adopts and
gives sanction to some unauthorized act or defective proceeding, which without
his sanction would not be binding on him. It is this voluntary choice, knowingly
made, which amounts to a ratification of what was theretofore unauthorized, and
becomes the authorized act of the party so making the ratification. Once ratified,
expressly or impliedly such as when the person knowingly received benefits from
it, the contract is cleansed from all its defects from the moment it was constituted,
as it has a retroactive effect.
Same; Sales; A person can only sell what he owns, or is authorized to sell
and the buyer can as a consequence acquire no more than what the seller can
legally transfer.―“A person can only sell what he owns, or is authorized to sell
and the buyer can as a consequence acquire no more than what the seller can
legally transfer.” On this score, Article 493 of the Civil Code is relevant, which
provides: Each co-owner shall have the full ownership of his part and of the fruits
and benefits pertaining thereto, and he may therefore alienate, assign or
mortgage it, and even substitute another person in its enjoyment, except when
personal rights are involved. But the effect of the alienation or the mortgage, with
respect to the co-owners, shall be limited to the portion which may be allotted to
him in the division upon the termination of the co-ownership.
Same; Prescription; An action or defense for the declaration of the inexistence
of a contract does not prescribe in accordance with Article 1410 of the Civil
Code.―On the issue of prescription, the Court agrees with petitioners that the
present action has not prescribed in so far as it seeks to annul the extrajudicial
settlement of the estate. Contrary to the ruling of the CA, the prescriptive period
of 2 years provided in Section 1 Rule 74 of the Rules of Court reckoned from the
execution of the extrajudicial settlement finds no application to petitioners
Eutropia, Victoria and Douglas, who were deprived of their lawful participation in
the subject estate. Besides, an “action or defense for the declaration of the
inexistence of a contract does not prescribe” in accordance with Article 1410 of the
Civil Code.
Same; Same; The action to recover property held in trust prescribes after 10
years from the time the cause of action accrues, which is from the time of actual
notice in case of unregistered deed.―The action to recover property held in trust
prescribes after 10 years from the time the cause of action accrues, which is from
the time of actual notice in case of unregistered deed. In this case, Eutropia,
Victoria and Douglas claimed to have knowledge of the extrajudicial settlement
with sale after the death of their father, Enrique, in 1994 which spouses Uy failed
to refute. Hence, the complaint filed in 1997 was well within the prescriptive
period of 10 years.
PETITION for review on certiorari of the decision and resolution of the Court of Appeals.
The facts are stated in the opinion of the Court.
Cesar M. Dureza for petitioners.
Batacan, Montejo & Vicencio Law Firm for respondents.
PERLAS-BERNABE, J.:
In this Petition for Review on Certiorari1 under Rule 45 of the Rules of Court,
petitioners Napoleon D. Neri (Napoleon), Alicia D. Neri-Mondejar (Alicia),
Visminda D. Neri-Chambers (Visminda), Rosa D. Neri-Millan (Rosa), Douglas D.
Neri (Douglas), Eutropia D. Illut-Cockinos (Eutropia), and Victoria D. Illut-Piala
(Victoria) seek to reverse and set aside the April 27, 2010 Decision 2 and October
18, 2010 Resolution3 of the Court of Appeals (CA) in CA-G.R. CV No. 01031-MIN
which annulled the October 25, 2004 Decision4 of the Regional Trial Court (RTC)
of Panabo City, Davao del Norte and instead, entered a new one dismissing
petitioners’ complaint for annulment of sale, damages and attorney’s feesagainst
herein respondents heirs of spouses Hadji Yusop Uy and Julpha Ibrahim Uy
(heirs of Uy).
The Facts
During her lifetime, Anunciacion Neri (Anunciacion) had seven children, two (2)
from her first marriage with Gonzalo Illut (Gonzalo), namely: Eutropia and
Victoria, and five (5) from her second marriage with Enrique Neri (Enrique),
namely: Napoleon, Alicia, Visminda, Douglas and Rosa. Throughout the marriage
of spouses Enrique and Anunciacion, they acquired several homestead properties
with a total area of 296,555 square meters located in Samal, Davao del Norte,
embraced by Original Certificate of Title (OCT) Nos. (P-7998) P-21285 , (P-14608)
P-51536and P-20551 (P-8348)7 issued on February 15, 1957, August 27, 1962 and
July 7, 1967, respectively.
On September 21, 1977, Anunciacion died intestate. Her husband, Enrique, in his
personal capacity and as natural guardian of his minor children Rosa and
Douglas, together with Napoleon, Alicia, and Vismindaexecuted an Extra-Judicial
Settlement of the Estate with Absolute Deed of Sale 8 on July 7, 1979, adjudicating
among themselves the said homestead properties, and thereafter, conveying
themto the late spouses Hadji Yusop Uy and Julpha Ibrahim Uy (spouses Uy)for a
consideration of ₱ 80,000.00.
On June 11, 1996, the children of Enrique filed a complaint for annulment of
saleof the said homestead properties against spouses Uy (later substituted by
their heirs)before the RTC, docketed as Civil Case No.96-28, assailing the validity
of the sale for having been sold within the prohibited period. Thecomplaint was
later amended to include Eutropia and Victoriaas additional plaintiffs for having
been excluded and deprived of their legitimes as childrenof Anunciacion from her
first marriage.
In their amended answer with counterclaim, the heirs of Uy countered that the
sale took place beyond the 5-year prohibitory period from the issuance of the
homestead patents. They also denied knowledge of Eutropia and Victoria’s
exclusionfrom the extrajudicial settlement and sale of the subject properties, and
interposed further the defenses of prescription and laches.
The RTC Ruling
On October 25, 2004, the RTC rendered a decision ordering, among others, the
annulment of the Extra-Judicial Settlement of the Estate with Absolute Deed of
Sale. It ruled that while the sale occurred beyond the 5-year prohibitory period,
the sale is still void because Eutropia and Victoria were deprived of their
hereditary rights and that Enrique had no judicial authority to sell the shares of
his minor children, Rosa and Douglas.
Consequently, it rejected the defenses of laches and prescription raised by spouses
Uy, who claimed possession of the subject properties for 17 years, holding that co-
ownership rights are imprescriptible.
The CA Ruling
On appeal, the CAreversed and set aside the ruling of the RTC in its April 27,
2010 Decision and dismissed the complaint of the petitioners. It held that, while
Eutropia and Victoria had no knowledge of the extrajudicial settlement and sale
of the subject properties and as such, were not bound by it, the CA found it
unconscionable to permit the annulment of the sale considering spouses Uy’s
possession thereof for 17 years, and thatEutropia and Victoriabelatedlyfiled their
actionin 1997, ormore than two years fromknowledge of their exclusion as heirs in
1994 when their stepfather died. It, however, did not preclude the excluded heirs
from recovering their legitimes from their co-heirs.
Similarly, the CA declared the extrajudicial settlement and the subsequent saleas
valid and binding with respect to Enrique and hischildren, holding that as co-
owners, they have the right to dispose of their respective shares as they consider
necessary or fit.While recognizing Rosa and Douglas to be minors at that time,
they were deemed to have ratified the sale whenthey failed to question it upon
reaching the age of majority.Italso found laches to have set in because of their
inaction for a long period of time.
The Issues
In this petition, petitioners imputeto the CA the following errors:
I. WHEN IT UPHELDTHE VALIDITY OF THE "EXTRA JUDICIAL
SETTLEMENT OF THE ESTATE WITH ABSOLUTE DEED OF SALE" AS FAR
AS THE SHARES OF EUTROPIA AND VICTORIA WERE CONCERNED,
THEREBY DEPRIVING THEM OF THEIR INHERITANCE;
II. WHEN IT DID NOT NULLIFY OR ANNUL THE "EXTRA JUDICIAL
SETTLEMENT OF THE ESTATE WITH ABSOLUTE DEED OF SALE" WITH
RESPECT TO THE SHARESOF ROSA AND DOUGLAS, THEREBY
DEPRIVING THEM OF THEIR INHERITANCE; and
III. WHEN IT FOUND THAT LACHES OR PRESCRIPTION HAS SET IN.
The Ruling of the Court
The petitionis meritorious.
It bears to stress that all the petitioners herein are indisputably legitimate
children of Anunciacion from her first and second marriages with Gonzalo and
Enrique, respectively, and consequently, are entitled to inherit from her in equal
shares, pursuant to Articles 979 and 980 of the Civil Code which read:
ART. 979. Legitimate children and their descendants succeed the parents and
other ascendants, without distinction as to sex or age, and even if they should
come from different marriages.
xxx
ART. 980. The children of the deceased shall always inherit from him in their own
right, dividing the inheritance in equal shares.
As such, upon the death of Anunciacion on September 21, 1977, her children and
Enrique acquired their respective inheritances,9 entitling them to their pro
indiviso shares in her whole estate, as follows:
Enrique 9/16 (1/2 of the conjugal assets + 1/16)
Eutropia 1/16
The fact of the extrajudicial settlement or administration shall be published in a
newspaper of general circulation in the manner provided in the next succeeding
section; but no extrajudicial settlement shall be binding upon any person who has
not participated therein or had no notice thereof. (Underscoring added)
The effect of excluding the heirs in the settlement of estate was further elucidated
in Segura v. Segura,10 thus:
It is clear that Section 1 of Rule 74 does not apply to the partition in question
which was null and void as far as the plaintiffs were concerned. The rule covers
only valid partitions. The partition in the present case was invalid because it
excluded six of the nine heirs who were entitled to equal shares in the partitioned
property. Under the rule "no extrajudicial settlement shall be binding upon any
person who has not participated therein or had no notice thereof." As the partition
was a total nullity and did not affect the excluded heirs, it was not correct for the
trial court to hold that their right to challenge the partition had prescribed after
two years from its execution…
However, while the settlement of the estate is null and void, the subsequent sale
of the subject propertiesmade by Enrique and his children, Napoleon, Alicia and
Visminda, in favor of the respondents isvalid but only with respect to their
proportionate shares therein.It cannot be denied that these heirs have acquired
their respective shares in the properties of Anunciacion from the moment of her
death11 and that, as owners thereof, they can very well sell their undivided share
in the estate.12

Victoria 1/16
With respect to Rosa and Douglas who were minors at the time of the execution of
Napoleon 1/16 the settlement and sale, their natural guardian and father, Enrique, represented
Alicia 1/16
them in the transaction. However, on the basis of the laws prevailing at that time,
Enrique was merely clothed with powers of administration and bereft of any
Visminda 1/16
authority to dispose of their 2/16 shares in the estate of their mother,
Rosa 1/16 Anunciacion.
Douglas 1/16
Articles 320 and 326 of the Civil Code, the laws in force at the time of the
execution of the settlement and sale, provide:
Hence, in the execution of the Extra-Judicial Settlement of the Estate with
Absolute Deed of Sale in favor of spouses Uy, all the heirs of Anunciacionshould
ART. 320. The father, or in his absence the mother, is the legal administrator of
have participated. Considering that Eutropia and Victoria were admittedly
the property pertaining to the child under parental authority. If the property is
excluded and that then minors Rosa and Douglas were not properly represented
worth more than two thousand pesos, the father or mother shall give a bond
therein, the settlement was not valid and binding uponthem and consequently, a
subject to the approval of the Court of First Instance.
total nullity.

ART. 326. When the property of the child is worth more than two thousand pesos,
Section 1, Rule 74 of the Rules of Court provides:
the father or mother shall be considered a guardian of the child’s property, subject
to the duties and obligations of guardians under the Rules of Court.
SECTION 1. Extrajudicial settlement by agreement between heirs. – x x x
Corollarily, Section 7, Rule 93 of the Rules of Court also provides:
SEC. 7. Parents as Guardians. – When the property of the child under parental
authority is worth two thousand pesos or less, the father or the mother, without
the necessity of court appointment, shall be his legal guardian. When the
property of the child is worth more than two thousand pesos, the father or the
mother shall be considered guardian of the child’s property, with the duties and
obligations of guardians under these Rules, and shall file the petition required by
Section 2 hereof. For good reasons, the court may, however, appoint another
suitable persons.
Administration includes all acts for the preservation of the property and the
receipt of fruits according to the natural purpose of the thing. Any act of
disposition or alienation, or any reduction in the substance of the patrimony of
child, exceeds the limits of administration.13 Thus, a father or mother, as the
natural guardian of the minor under parental authority, does not have the power
to dispose or encumber the property of the latter. Such power is granted by law
only to a judicial guardian of the ward’s property and even then only with courts’
prior approval secured in accordance with the proceedings set forth by the Rules
of Court.14
Consequently, the disputed sale entered into by Enrique in behalf of his minor
children without the proper judicial authority, unless ratified by them upon
reaching the age of majority,15 is unenforceable in accordance with Articles 1317
and 1403(1) of the Civil Code which provide:
ART. 1317. No one may contract in the name of another without being authorized
by the latter or unless he has by law a right to represent him.
A contract entered into in the name of another by one who has no authority or
legal representation, or who has acted beyond his powers, shall be unenforceable,
unless it is ratified, expressly or impliedly, by the person on whose behalf it has
been executed, before it is revoked by the other contracting party.
ART. 1403. The following contracts are unenforceable, unless they are ratified:
(1) Those entered into the name of another person by one who has been given no
authority or legal representation, or who has acted beyond his powers;
xxx
Ratification means that one under no disability voluntarily adopts and gives
sanction to some unauthorized act or defective proceeding, which without his
sanction would not be binding on him. It is this voluntary choice, knowingly
made, which amounts to a ratification of what was theretofore unauthorized, and
becomes the authorized act of the party so making the ratification. 16 Once ratified,
expressly or impliedly such as when the person knowingly received benefits from
it, the contract is cleansed from all its defects from the moment it was
constituted,17 as it has a retroactive effect.
Records, however, show that Rosa had ratified the extrajudicial settlement of the
estate with absolute deed of sale. In Napoleon and Rosa’s Manifestation 18 before
the RTC dated July 11, 1997,they stated:
"Concerning the sale of our parcel of land executed by our father, Enrique Neri
concurred in and conformed to by us and our other two sisters and brother (the
other plaintiffs), in favor of Hadji Yusop Uy and his spouse Hadja Julpa Uy on
July 7, 1979, we both confirmed that the same was voluntary and freely made by
all of us and therefore the sale was absolutely valid and enforceable as far as we
all plaintiffs in this case are concerned;" (Underscoring supplied)
In their June 30, 1997 Joint-Affidavit,19 Napoleon and Rosa also alleged:
"That we are surprised that our names are included in this case since we do not
have any intention to file a case against Hadji Yusop Uy and Julpha Ibrahim Uy
and their family and we respect and acknowledge the validity of the Extra-
Judicial Settlement of the Estate with Absolute Deed of Sale dated July 7, 1979;"
(Underscoring supplied)
Clearly, the foregoing statements constitutedratification of the settlement of the
estate and the subsequent sale, thus, purging all the defects existing at the time
of its execution and legitimizing the conveyance of Rosa’s 1/16 share in the estate
of Anunciacion to spouses Uy. The same, however, is not true with respect to
Douglas for lack of evidence showing ratification.
Considering, thus, that the extrajudicial settlement with sale is invalid and
therefore, not binding on Eutropia, Victoria and Douglas, only the shares
ofEnrique, Napoleon, Alicia, Visminda and Rosa in the homestead properties have
effectivelybeen disposed in favor of spouses Uy. "A person can only sell what he
owns, or is authorized to sell and the buyer can as a consequence acquire no more
than what the sellercan legally transfer."20 On this score, Article 493 of the Civil
Codeis relevant, which provides:
Each co-owner shall have the full ownership of his part and of the fruits and
benefits pertaining thereto, and he may therefore alienate, assign or mortgage it,
and even substitute another person in its enjoyment, except when personal rights
are involved. But the effect of the alienation or the mortgage, with respect to the
co-owners, shall be limited to the portion which may be allotted to him in the
division upon the termination of the co-ownership.
Consequently, spouses Uy or their substituted heirs became pro indiviso co-
owners of the homestead properties with Eutropia, Victoria and Douglas, who
retained title to their respective 1/16 shares. They were deemed to be holding the
3/16 shares of Eutropia, Victoria and Douglas under an implied constructive trust
for the latter’s benefit, conformably with Article 1456 of the Civil Code which
states:"if property is acquired through mistake or fraud, the person obtaining it
is, by force of law, considered a trustee of an implied trust for the benefit of the
person from whom the property comes." As such, it is only fair, just and equitable No pronouncement as to costs.
that the amount paid for their shares equivalent to ₱ 5,000.0021 each or a total of
₱ 15,000.00 be returned to spouses Uy with legal interest. SO ORDERED.

On the issue of prescription, the Court agrees with petitioners that the present
action has not prescribed in so far as it seeks to annul the extrajudicial settlement
of the estate. Contrary to the ruling of the CA, the prescriptive period of 2 years
provided in Section 1 Rule 74 of the Rules of

Court reckoned from the execution of the extrajudicial settlement finds no

application to petitioners Eutropia, Victoria and Douglas, who were deprived of
their lawful participation in the subject estate. Besides, an "action or defense for
the declaration of the inexistence of a contract does not prescribe" in accordance
with Article 1410 of the Civil Code.

However, the action to recover property held in trust prescribes after 10 years
from the time the cause of action accrues,22 which is from the time of actual notice
in case of unregistered deed.23 In this case, Eutropia, Victoria and Douglas
claimed to have knowledge of the extrajudicial settlement with sale after the
death of their father, Enrique, in 1994 which spouses Uy failed to refute. Hence,
the complaint filed in 1997 was well within the prescriptive period of 10 years.

WHEREFORE, the instant petition is GRANTED. The April 27, 2010 Decision
and October 18, 2010 Resolution of the Court of Appeals
are REVERSED and SET ASIDE and a new judgment is entered:

1. Declaring the Extra-Judicial Settlement of the Estate of Anunciacion

Neri NULL and VOID;

2. Declaring the Absolute Deed of Sale in favor of the late spouses Hadji
Yusop Uy and Julpha Ibrahim Uy as regards the 13/16 total shares of the
late Enrique Neri, Napoleon Neri, Alicia D. Neri-Mondejar, Visminda D.
Neri-Chambers and Rosa D. Neri-Millan VALID;

3. Declaring Eutropia D. Illut-Cockinos, Victoria D. Illut-Piala and

Douglas D. Neri as the LAWFUL OWNERSof the 3/16 portions of the
subject homestead properties, covered by Original Certificate of Title
Nos. (P-7998) P-2128, (P-14608) P-5153 and P-20551 (P-8348); and

4. Ordering the estate of the late Enrique Neri, as well as Napoleon Neri,
Alicia D. Neri-Mondejar, Visminda D. Neri-Chambers and Rosa D. Neri-
Millan to return to the respondents jointly and solidarily the amount
paid corresponding to the 3/16 shares of Eutropia, Victoria and Douglas
in the total amount of ₱ 15,000.00, with legal interest at 6% per annum
computed from the time of payment until finality of this decision and
12% per annum thereafter until fully paid.
G.R. No. 184528. April 25, 2012.*
NILO OROPESA, petitioner, vs. CIRILO OROPESA, respondent.
Remedial Law; Special Proceedings; Guardianship; A guardianship is a
trust relation of the most sacred character, in which one person, called a
“guardian” acts for another called the “ward” whom the law regards as incapable
of managing his own affairs.—In Francisco v. Court of Appeals, 127 SCRA 371
(1984), we laid out the nature and purpose of guardianship in the following wise:
A guardianship is a trust relation of the most sacred character, in which one
person, called a “guardian” acts for another called the “ward” whom the law
regards as incapable of managing his own affairs. A guardianship is designed to
further the ward’s well-being, not that of the guardian. It is intended to preserve
the ward’s property, as well as to render any assistance that the ward may
personally require. It has been stated that while custody involves immediate care
and control, guardianship indicates not only those responsibilities, but those of
one in locoparentis as well. In a guardianship proceeding, a court may appoint a
qualified guardian if the prospective ward is proven to be a minor or an
incompetent.
Same; Same; Same; Incompetents; A reading of Section 2, Rule 92 of the
Rules of Court tells us that persons who, though of sound mind but by reason of
age, disease, weak mind or other similar causes, are incapable of taking care of
themselves and their property without outside aid are considered as incompetents
who may properly be placed under guardianship.—A reading of Section 2, Rule 92
of the Rules of Court tells us that persons who, though of sound mind but by
reason of age, disease, weak mind or other similar causes, are incapable of taking
care of themselves and their property without outside aid are considered as
incompetents who may properly be placed under guardianship. The full text of the
said provision reads: Sec. 2. Meaning of the word “incompetent.”—Under this rule,
the word “incompetent” includes persons suffering the penalty of civil interdiction
or who are hospitalized lepers, prodigals, deaf and dumb who are unable to read
and write, those who are of unsound mind, even though they have lucid intervals,
and persons not being of unsound mind, but by reason of age, disease, weak mind,
and other similar causes, cannot, without outside aid, take care of themselves and
manage their property, becoming thereby an easy prey for deceit and exploitation.
Same; Civil Procedure; Petition for Review on Certiorari; Appeals; As a
general rule, “only questions of law may be raised in a petition for review on
certiorari because the Court is not a trier of facts.”—It is axiomatic that, as a
general rule, “only questions of law may be raised in a petition for review
on certiorari because the Court is not a trier of facts.” We only take cognizance of
questions of fact in certain exceptional circumstances; however, we find them to
be absent in the instant case. It is also long settled that “factual findings of the
trial court, when affirmed by the Court of Appeals, will not be disturbed by this
Court. As a rule, such findings by the lower courts are entitled to great weight
and respect, and are deemed final and conclusive on this Court when supported
by the evidence on record.” We therefore adopt the factual findings of the lower
court and the Court of Appeals and rule that the grant of respondent’s demurrer
to evidence was proper under the circumstances obtaining in the case at bar.
Same; Same; Demurrer to Evidence; A demurrer to evidence is defined as “an
objection by one of the parties in an action, to the effect that the evidence which his
adversary produced is insufficient in point of law, whether true or not, to make out
a case or sustain the issue.”—A demurrer to evidence is defined as “an objection by
one of the parties in an action, to the effect that the evidence which his adversary
produced is insufficient in point of law, whether true or not, to make out a case or
sustain the issue.” We have also held that a demurrer to evidence “authorizes a
judgment on the merits of the case without the defendant having to submit
evidence on his part, as he would ordinarily have to do, if plaintiff’s evidence
shows that he is not entitled to the relief sought.”
PETITION for review on certiorari of the decision and resolution of the Court of Appeals.
The facts are stated in the opinion of the Court.176
Paras & Manlapaz Lawyers for petitioner.
Adaza, Adaza & Adaza for respondent.
LEONARDO-DE CASTRO, J.:
This is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil
Procedure of the Decision1 dated February 29, 2008, as well as the
Resolution2 dated September 16, 2008, both rendered by the Court of Appeals in
CA-G.R. CV No. 88449, entitled "NILO OROPESA vs. CIRILO OROPESA." The
Court of Appeals’ issuances affirmed the Order3 dated September 27, 2006 and
the Order4 dated November 14, 2006 issued by the Regional Trial Court (RTC) of
Parañaque City, Branch 260 in SP. Proc. Case No. 04-0016, which dismissed
petitioner Nilo Oropesa’s petition for guardianship over the properties of his
father, respondent Cirilo Oropesa (a widower), and denied petitioner’s motion for
reconsideration thereof, respectively.
The facts of this case, as summed in the assailed Decision, follow:
On January 23, 2004, the (petitioner) filed with the Regional Trial Court of
Parañaque City, a petition for him and a certain Ms. Louie Ginez to be appointed
as guardians over the property of his father, the (respondent) Cirilo Oropesa. The
case was docketed as SP Proc. No. 04-0016 and raffled off to Branch 260.
In the said petition, it is alleged among others that the (respondent) has been
afflicted with several maladies and has been sickly for over ten (10) years already
having suffered a stroke on April 1, 2003 and June 1, 2003, that his judgment and
memory [were] impaired and such has been evident after his hospitalization; that
even before his stroke, the (respondent) was observed to have had lapses in
memory and judgment, showing signs of failure to manage his property properly;
that due to his age and medical condition, he cannot, without outside aid, manage
his property wisely, and has become an easy prey for deceit and exploitation by
people around him, particularly Ms. Ma. Luisa Agamata, his girlfriend.
In an Order dated January 29, 2004, the presiding judge of the court a quo set the
case for hearing, and directed the court social worker to conduct a social case
study and submit a report thereon.
Pursuant to the abovementioned order, the Court Social Worker conducted her
social case study, interviewing the (petitioner) and his witnesses. The Court
Social Worker subsequently submitted her report but without any finding on the
(respondent) who refused to see and talk to the social worker.
On July 6, 2004, the (respondent) filed his Opposition to the petition for
guardianship. On August 3, 2004, the (respondent) filed his Supplemental
Opposition.
Thereafter, the (petitioner) presented his evidence which consists of his
testimony, and that of his sister Gianina Oropesa Bennett, and the (respondent’s)
former nurse, Ms. Alma Altaya.
After presenting evidence, the (petitioner) filed a manifestation dated May 29,
2006 resting his case. The (petitioner) failed to file his written formal offer of
evidence.
Thus, the (respondent) filed his "Omnibus Motion (1) to Declare the petitioner to
have waived the presentation of his Offer of Exhibits and the presentation of his
Evidence Closed since they were not formally offered; (2) To Expunge the
Documents of the Petitioner from the Record; and (3) To Grant leave to the
Oppositor to File Demurrer to Evidence.
In an Order dated July 14, 2006, the court a quo granted the (respondent’s)
Omnibus Motion. Thereafter, the (respondent) then filed his Demurrer to
Evidence dated July 23, 2006.5 (Citations omitted.)
The trial court granted respondent’s demurrer to evidence in an Order dated
September 27, 2006. The dispositive portion of which reads:
WHEREFORE, considering that the petitioner has failed to provide sufficient
evidence to establish that Gen. Cirilo O. Oropesa is incompetent to run his
personal affairs and to administer his properties, Oppositor’s Demurrer to
Evidence is GRANTED, and the case is DISMISSED.6
Petitioner moved for reconsideration but this was denied by the trial court in an
Order dated November 14, 2006, the dispositive portion of which states:
WHEREFORE, considering that the Court record shows that petitioner-movant
has failed to provide sufficient documentary and testimonial evidence to establish
that Gen. Cirilo Oropesa is incompetent to run his personal affairs and to
administer his properties, the Court hereby affirms its earlier Order dated 27
September 2006.
Accordingly, petitioner’s Motion for Reconsideration is DENIED for lack of merit. 7
Unperturbed, petitioner elevated the case to the Court of Appeals but his appeal
was dismissed through the now assailed Decision dated February 29, 2008, the
dispositive portion of which reads:
WHEREFORE, premises considered the instant appeal is DISMISSED. The
assailed orders of the court a quo dated September 27, 2006 and November 14,
2006 are AFFIRMED.8
A motion for reconsideration was filed by petitioner but this was denied by the
Court of Appeals in the similarly assailed Resolution dated September 16, 2008.
Hence, the instant petition was filed.
Petitioner submits the following question for consideration by this Court:
WHETHER RESPONDENT IS CONSIDERED AN "INCOMPETENT" PERSON
AS DEFINED UNDER SECTION 2, RULE 92 OF THE RULES OF COURT WHO
SHOULD BE PLACED UNDER GUARDIANSHIP9
After considering the evidence and pleadings on record, we find the petition to be
without merit.
Petitioner comes before the Court arguing that the assailed rulings of the Court of
Appeals should be set aside as it allegedly committed grave and reversible error
when it affirmed the erroneous decision of the trial court which purportedly
disregarded the overwhelming evidence presented by him showing respondent’s
incompetence.
In Francisco v. Court of Appeals,10 we laid out the nature and purpose of
guardianship in the following wise:
A guardianship is a trust relation of the most sacred character, in which one
person, called a "guardian" acts for another called the "ward" whom the law
regards as incapable of managing his own affairs. A guardianship is designed to
further the ward’s well-being, not that of the guardian. It is intended to preserve
the ward’s property, as well as to render any assistance that the ward may
personally require. It has been stated that while custody involves immediate care
and control, guardianship indicates not only those responsibilities, but those of
one in loco parentis as well.11
In a guardianship proceeding, a court may appoint a qualified guardian if the
prospective ward is proven to be a minor or an incompetent.
A reading of Section 2, Rule 92 of the Rules of Court tells us that persons who,
though of sound mind but by reason of age, disease, weak mind or other similar
causes, are incapable of taking care of themselves and their property without
outside aid are considered as incompetents who may properly be placed under
guardianship. The full text of the said provision reads:
Sec. 2. Meaning of the word "incompetent." – Under this rule, the word
"incompetent" includes persons suffering the penalty of civil interdiction or who
are hospitalized lepers, prodigals, deaf and dumb who are unable to read and
write, those who are of unsound mind, even though they have lucid intervals, and
persons not being of unsound mind, but by reason of age, disease, weak mind, and
other similar causes, cannot, without outside aid, take care of themselves and
manage their property, becoming thereby an easy prey for deceit and exploitation.
We have held in the past that a "finding that a person is incompetent should be
anchored on clear, positive and definite evidence."12 We consider that evidentiary
standard unchanged and, thus, must be applied in the case at bar.
In support of his contention that respondent is incompetent and, therefore, should
be placed in guardianship, petitioner raises in his Memorandum13 the following
factual matters:
a. Respondent has been afflicted with several maladies and has been
sickly for over ten (10) years already;
b. During the time that respondent was hospitalized at the St. Luke’s
Medical Center after his stroke, he purportedly requested one of his
former colleagues who was visiting him to file a loan application with the
Armed Forces of the Philippines Savings and Loan Association, Inc.
(AFPSLAI) for payment of his hospital bills, when, as far as his children
knew, he had substantial amounts of money in various banks sufficient
to cover his medical expenses;
c. Respondent’s residence allegedly has been left dilapidated due to lack
of care and management;
d. The realty taxes for respondent’s various properties remain unpaid
and therefore petitioner and his sister were supposedly compelled to pay
the necessary taxes;
e. Respondent allegedly instructed petitioner to sell his Nissan Exalta
car for the reason that the former would be purchasing another vehicle,
but when the car had been sold, respondent did not procure another
vehicle and refused to account for the money earned from the sale of the
old car;
f. Respondent withdrew at least $75,000.00 from a joint account under
his name and his daughter’s without the latter’s knowledge or consent;
g. There was purportedly one occasion where respondent took a kitchen
knife to stab himself upon the "orders" of his girlfriend during one of
their fights;
h. Respondent continuously allows his girlfriend to ransack his house of
groceries and furniture, despite protests from his children.14
Respondent denied the allegations made by petitioner and cited petitioner’s lack
of material evidence to support his claims. According to respondent, petitioner did
not present any relevant documentary or testimonial evidence that would attest
to the veracity of his assertion that respondent is incompetent largely due to his
alleged deteriorating medical and mental condition. In fact, respondent points out
that the only medical document presented by petitioner proves that he is indeed
competent to run his personal affairs and administer his properties. Portions of
the said document, entitled "Report of Neuropsychological Screening,"15 were
quoted by respondent in his Memorandum16 to illustrate that said report in fact
favored respondent’s claim of competence, to wit:
General Oropesa spoke fluently in English and Filipino, he enjoyed and
participated meaningfully in conversations and could be quite elaborate in his
responses on many of the test items. He spoke in a clear voice and his articulation
was generally comprehensible. x x x.
xxxx
General Oropesa performed in the average range on most of the domains that
were tested. He was able to correctly perform mental calculations and keep track
of number sequences on a task of attention. He did BEST in visuo-constructional
tasks where he had to copy geometrical designs using tiles. Likewise, he was able
to render and read the correct time on the Clock Drawing Test. x x x.
xxxx
x x x Reasoning abilities were generally intact as he was able to suggest effective
solutions to problem situations. x x x.17
With the failure of petitioner to formally offer his documentary evidence, his proof
of his father’s incompetence consisted purely of testimonies given by himself and
his sister (who were claiming interest in their father’s real and personal
properties) and their father’s former caregiver (who admitted to be acting under
their direction). These testimonies, which did not include any expert medical
testimony, were insufficient to convince the trial court of petitioner’s cause of
action and instead lead it to grant the demurrer to evidence that was filed by
respondent.
Even if we were to overlook petitioner’s procedural lapse in failing to make a
formal offer of evidence, his documentary proof were comprised mainly of
certificates of title over real properties registered in his, his father’s and his
sister’s names as co-owners, tax declarations, and receipts showing payment of
real estate taxes on their co-owned properties, which do not in any way relate to
his father’s alleged incapacity to make decisions for himself. The only medical
document on record is the aforementioned "Report of Neuropsychological
Screening" which was attached to the petition for guardianship but was never
identified by any witness nor offered as evidence. In any event, the said report, as
mentioned earlier, was ambivalent at best, for although the report had negative
findings regarding memory lapses on the part of respondent, it also contained
findings that supported the view that respondent on the average was indeed
competent.
In an analogous guardianship case wherein the soundness of mind of the
proposed ward was at issue, we had the occasion to rule that "where the sanity of
a person is at issue, expert opinion is not necessary [and that] the observations of
the trial judge coupled with evidence establishing the person’s state of mental
sanity will suffice."18
Thus, it is significant that in its Order dated November 14, 2006 which denied
petitioner’s motion for reconsideration on the trial court’s unfavorable September
27, 2006 ruling, the trial court highlighted the fatal role that petitioner’s own
documentary evidence played in disproving its case and, likewise, the trial court
made known its own observation of respondent’s physical and mental state, to
wit:
The Court noted the absence of any testimony of a medical expert which states
that Gen. Cirilo O. Oropesa does not have the mental, emotional, and physical
capacity to manage his own affairs. On the contrary, Oppositor’s evidence
includes a Neuropsychological Screening Report which states that Gen. Oropesa,
(1) performs on the average range in most of the domains that were tested; (2) is
capable of mental calculations; and (3) can provide solutions to problem
situations. The Report concludes that Gen. Oropesa possesses intact cognitive
functioning, except for mildly impaired abilities in memory, reasoning and
orientation. It is the observation of the Court that oppositor is still sharp,
alert and able.19 (Citation omitted; emphasis supplied.)
Section 1, Rule 33 of the Rules of Court provides:
Section 1. Demurrer to evidence. – After the plaintiff has completed the
presentation of his evidence, the defendant may move for dismissal on the ground
that upon the facts and the law the plaintiff has shown no right to relief. If his
motion is denied, he shall have the right to present evidence. If the motion is
granted but on appeal the order of dismissal is reversed he shall be deemed to
have waived the right to present evidence.
A demurrer to evidence is defined as "an objection by one of the parties in an
action, to the effect that the evidence which his adversary produced is insufficient
in point of law, whether true or not, to make out a case or sustain the issue." 23 We
have also held that a demurrer to evidence "authorizes a judgment on the merits
of the case without the defendant having to submit evidence on his part, as he
would ordinarily have to do, if plaintiff’s evidence shows that he is not entitled to
the relief sought."24 1âwphi1
There was no error on the part of the trial court when it dismissed the petition for
guardianship without first requiring respondent to present his evidence precisely
because the effect of granting a demurrer to evidence other than dismissing a
cause of action is, evidently, to preclude a defendant from presenting his evidence
since, upon the facts and the law, the plaintiff has shown no right to relief.
WHEREFORE, premises considered, the petition is hereby DENIED. The
assailed Decision dated February 29, 2008 as well as the Resolution dated
September 16, 2008 of the Court of Appeals in CA-G.R. CV No. 88449 are
AFFIRMED.
SO ORDERED.

It is axiomatic that, as a general rule, "only questions of law may be raised in a

petition for review on certiorari because the Court is not a trier of facts." 20 We
only take cognizance of questions of fact in certain exceptional
circumstances;21 however, we find them to be absent in the instant case. It is also
long settled that "factual findings of the trial court, when affirmed by the Court of
Appeals, will not be disturbed by this Court. As a rule, such findings by the lower
courts are entitled to great weight and respect, and are deemed final and
conclusive on this Court when supported by the evidence on record." 22 We
therefore adopt the factual findings of the lower court and the Court of Appeals
and rule that the grant of respondent’s demurrer to evidence was proper under
the circumstances obtaining in the case at bar.
G.R. No. 191993. December 5, 2012.*
EDUARDO T. ABAD, petitioner, vs. LEONARDO BIASON and GABRIEL A.
MAGNO, respondents.
Remedial Law; Civil Procedure; Moot and Academic; An issue or a case
becomes moot and academic when it ceases to present a justiciable controversy, so
that a determination of the issue would be without practical use and value.―An
issue or a case becomes moot and academic when it ceases to present a justiciable
controversy, so that a determination of the issue would be without practical use
and value. In such cases, there is no actual substantial relief to which the
petitioner would be entitled and which would be negated by the dismissal of the
petition.
Same; Special Proceedings; Guardianship; The relationship of guardian and
ward is necessarily terminated by the death of either the guardian or the ward.―It
is a well-established rule that the relationship of guardian and ward is
necessarily terminated by the death of either the guardian or the ward. The
supervening event of death rendered it pointless to delve into the propriety of
Biason’s appointment since the juridical tie between him and Maura has already
been dissolved. The petition, regardless of its disposition, will not afford Abad, or
anyone else for that matter, any substantial relief.
PETITION for review on certiorari of the decision and resolution of the Court of
Appeals.
The facts are stated in the resolution of the Court.
Luis Manuel U. Bugayong for petitioner.
Jaime A. Paredes, Jr. for movant Maura B. Abad.
Cesar M. Cariño for respondent L. Biason.
Leoncio M. Pausanos for respondent Atty. G. Magno.
RESOLUTION
REYES, J.:
Before this Court is a Petition for Review on Certiorari under Rule 45 of the Rules
of Court seeking to annul and set aside the Decision 1 dated August 28, 2009 and
Resolution2 dated April 19, 2010 of the Court of Appeals (CA) in CA-G.R. CV No;
90145.
The facts show that on March 19, 2007, petitioner Eduardo Abad (Abad) filed a
petition for guardianship over the person and properties of Maura B. Abad
(Maura) with the Regional Trial Court (RTC), Dagupan City, Branch 42, which
was docketed as Sp. Proc. No. 2007-0050-D. In support thereof, Abad alleged that
he maintains residence at No. 14 B St. Paul Street, Horseshoe Village, Quezon
City and that he is Maura’s nephew. He averred that Maura, who is single, more
than ninety (90) years old and a resident of Rizal Street, Poblacion, Mangaldan,
Pangasinan, is in dire need of a guardian who will look after her and her business
affairs. Due to her advanced age, Maura is already sickly and can no longer
manage to take care of herself and her properties unassisted thus becoming an
easy prey of deceit and exploitation.3
Finding the petition sufficient in form and substance, the RTC gave due course to
the same and scheduled it for hearing. When the petition was called for hearing
on April 27, 2007, nobody entered an opposition and Abad was allowed to present
evidence ex parte. After Abad formally offered his evidence and the case was
submitted for decision, Atty. Gabriel Magno filed a Motion for Leave to Intervene,
together with an Oppositionin- Intervention. Subsequently, on June 14, 2007,
Leonardo Biason (Biason) filed a Motion for Leave to File Opposition to the
Petition and attached therewith his Opposition to the Appointment of Eduardo
Abad as Guardian of the Person and Properties of Maura B. Abad. Specifically,
Biason alleged that he is also a nephew of Maura and that he was not notified of
the pendency of the petition for the appointment of the latter’s guardian. He
vehemently opposed the appointment of Abad as Maura’s guardian as he cannot
possibly perform his duties as such since he resides in Quezon City while Maura
maintains her abode in Mangaldan, Pangasinan. Biason prayed that he be
appointed as Maura’s guardian since he was previously granted by the latter with
a power of attorney to manage her properties.4
On September 26, 2007, the RTC rendered a Decision,5 denying Abad’s petition
and appointing Biason as Maura’s guardian. The RTC disposed thus:
WHEREFORE, the petition is hereby denied. Petitioner Eduardo T. Abad is found
to be disqualified to act as guardian of incompetent Maura B. Abad. Oppositor
Leonardo A. Biason is established by this Court to be in a better position to be the
guardian of said incompetent Maura B. Abad.
The Court hereby fixes the guardianship bond at [P]500,000.00 and the letters of
guardianship shall be issued only upon the submission of the bond, conditioned on
the following provisions of the Rule 94[,] Section 1, of the 1997 Rules of Civil
Procedure:
a. To make and return to the Court within three (3) months true and
complete inventory of all the estate, real and personal, of his ward which
shall come to his possession or knowledge or to the possession or
knowledge of any other person for him;
b. To faithfully execute the duties of his trust, to manage and dispose of
the estate according to these rules for the best interests of the ward, and
to provide for the proper care, custody x x x of the ward;
c. To render a true and just account of all the estate of the ward in his
hands, and of all proceeds or interest derived therefrom, and of the
management and disposition of the same, at the time designated by these
rules and such other times as the court directs, and at the expiration of
his trust to settle his accounts with the court and deliver and pay over all
 the estate, effects, and moneys remaining in his hands, or due from him
on such settlement, to the person lawfully entitled thereto;
d. To perform all orders of the court by him to be performed.
SO ORDERED.6
Unyielding, Abad filed a motion for reconsideration of the foregoing decision but
the RTC denied the same in an Order dated December 11, 2007.
Abad filed an appeal to the CA. He argued that the RTC erred in disqualifying
him from being appointed as Maura’s guardian despite the fact that he has all the
qualifications stated under the Rules. That he was not a resident of Mangaldan,
Pangasinan should not be a ground for his disqualification as he had actively and
efficiently managed the affairs and properties of his aunt even if he is residing in
Metro Manila. Moreover, he was expressly chosen by Maura to be her guardian. 7
Abad further averred that no hearing was conducted to determine the
qualifications of Biason prior to his appointment as guardian. He claimed that the
RTC also overlooked Maura’s express objection to Biason’s appointment.8
On August 28, 2009, the CA issued a Decision,9 affirming the decision of the RTC,
the pertinent portions of which read:
The petitioner-appellant may have been correct in arguing that there is no legal
requirement that the guardian must be residing in the same dwelling place or
municipality as that of the ward or incompetent, and that the Vancil vs.
Belmes case cited by the court a quo which held that "courts should not appoint as
guardians persons who are not within the jurisdiction of our courts" pertains to
persons who are not residents of the country.
However, we do not find that the court a quo, by deciding to appoint the
oppositor-appellee as guardian, has fallen into grievous error.
For one, the oppositor-appellee, like petitioner-appellant, is also a relative, a
nephew of the incompetent. There are no vices of character which have been
established as to disqualify him from being appointed as a guardian.
xxxx
Anent the claim of the petitioner-appellant that he has been expressly chosen by
her aunt to be her guardian as evidenced by her testimony, although it could be
given weight, the same could not be heavily relied upon, especially considering
the alleged mental state of the incompetent due to her advanced age.
xxxx
WHEREFORE, premises considered, the instant petition is DISMISSED for
lack of merit. The assailed decision of the Regional Trial Court of Dagupan City,
Branch 42 is AFFIRMED IN TOTO.
SO ORDERED.[10
Dissatisfied, Abad filed a motion for reconsideration but the CA denied the same
in a Resolution11 dated April 19, 2010, the dispositive portion of which reads:
WHEREFORE, premises considered, the Motion for Reconsideration is DENIED
for lack of merit.
SO ORDERED.12
On June 7, 2010, Abad filed a Petition for Review on Certiorari with this Court.
Subsequently, Maura filed a Motion for Leave to Intervene, 13 together with a
Petition-in-Intervention.14
The instant petition raises the following assignment of errors:
I
THE HONORABLE COURT OF APPEALS GRAVELY ERRED WHEN
IT DENIED THE PETITIONER’S APPEAL AND AFFIRMED THE
TRIAL COURT’S DECISION DESPITE VERY CLEAR VIOLATIONS OF
DUE PROCESS, DISREGARD OF THE RULES, AND
IRREGULARITIES IN THE APPOINTMENT OF RESPONDENT
BIASON AS GUARDIAN;
II
THE HONORABLE COURT OF APPEALS GRAVELY ERRED WHEN
IT DENIED THE PETITIONER’S APPEAL AND ERRONEOUSLY
UPHELD RESPONDENT BIASON’S APPOINTMENT AS GUARDIAN
BASED ON SOLE GROUND OF RESIDENCE, AND FAILED TO
CONSIDER THE REQUIREMENTS AND QUALIFICATIONS
PRESCRIBED BY THE SUPREME COURT FOR THE APPOINTMENT
OF GUARDIAN.15
Abad contends that that CA erred in affirming the RTC’s decision despite the fact
that it did not hold any hearing to determine whether Biason possessed all the
qualifications for a guardian as provided by law. Further, he was not given the
opportunity to submit evidence to controvert Biason’s appointment.16
Abad also bewails his disqualification as guardian on the sole basis of his
residence. He emphasizes that it is not a requirement for a guardian to be a
resident of the same locality as the ward, or to be living with the latter under the
same roof in order to qualify for the appointment. The more significant
considerations are that the person to be appointed must be of good moral
character and must have the capability and sound judgment in order that he may
be able to take care of the ward and prudently manage his assets.17
Moreover, Abad, in his Comment, shared Maura’s belief that the petition has lost
its purpose and even consented to Maura’s prayer for the dismissal of the petition.
WHEREFORE, in consideration of the foregoing disquisitions, the petition is
hereby DISMISSED.

Unfortunately, pending the resolution of the instant petition, Biason died. On SO ORDERED.
May 11, 2012, Maura filed a Manifestation and Motion, 18 informing this Court
that Biason passed away on April 3, 2012 at SDS Medical Center, Marikina City
due to multiple organ failure, septic shock, community acquired pneumonia high
risk, prostate CA with metastasis, and attached a copy of his Death
Certificate.19 Maura averred that Biason’s death rendered moot and academic the
issues raised in the petition. She thus prayed that the petition be dismissed and
the guardianship be terminated.

On June 20, 2012, this Court issued a Resolution,20 requiring Abad to comment on
the manifestation filed by Maura. Pursuant to the Resolution, Abad filed his
Comment21 on August 9, 2012 and expressed his acquiescence to Maura’s motion
to dismiss the petition. He asseverated that the issues raised in the petition
pertain to the irregularity in the appointment of Biason as guardian which he
believed had been rendered moot and academic by the latter’s death. He also
supported Maura’s prayer for the termination of the guardianship by asseverating
that her act of filing of a petition-in-intervention is indicative of the fact that she
is of sound mind and that she can competently manage her business affairs.

We find Maura’s motion meritorious.

An issue or a case becomes moot and academic when it ceases to present a

justiciable controversy, so that a determination of the issue would be without
practical use and value. In such cases, there is no actual substantial relief to
which the petitioner would be entitled and which would be negated by the
dismissal of the petition.22

In his petition, Abad prayed for the nullification of the CA Decision dated August
28, 2009 and Resolution dated April 19, 2010, which dismissed his appeal from
the Decision dated September 26, 2007 of the RTC and denied his motion for
reconsideration, respectively. Basically, he was challenging Biason’s
qualifications and the procedure by which the RTC appointed him as guardian for
Maura. However, with Biason’s demise, it has become impractical and futile to
proceed with resolving the merits of the petition. It is a well-established rule that
the relationship of guardian and ward is necessarily terminated by the death of
either the guardian or the ward.23 The supervening event of death rendered it
pointless to delve into the propriety of Biason’s appointment since the juridical tie
between him and Maura has already been dissolved. The petition, regardless of
its disposition, will not afford Abad, or anyone else for that matter, any
substantial relief.1âwphi1
G.R. No. 183050. January 25, 2012.*
ADVENT CAPITAL AND FINANCE CORPORATION, petitioner, vs. NICASIO I.
ALCANTARA and EDITHA I. ALCANTARA, respondents.
Mercantile Law; Banks and Banking; Trusts; The practice in the case of
banks is that they automatically collect their management fees from the funds that
their clients entrust to them for investment or lending to others.—The practice in
the case of banks is that they automatically collect their management fees from
the funds that their clients entrust to them for investment or lending to others.
But the banks can freely do this since it holds or has control of their clients’
money and since their trust agreement authorized the automatic collection. If the
depositor contests the deduction, his remedy is to bring an action to recover the
amount he claims to have been illegally deducted from his account.
Same; Same; Same; The real owner of the trust property is the trustor-
beneficiary.—The real owner of the trust property is the trustor-beneficiary. In
this case, the trustors-beneficiaries are the Alcantaras. Thus, Advent Capital
could not dispose of the Alcantaras’ portfolio on its own. The income and principal
of the portfolio could only be withdrawn upon the Alcantaras’ written instruction
or order to Advent Capital. The latter could not also assign or encumber the
portfolio or its income without the written consent of the Alcantaras. All these are
stipulated in the Trust Agreement.
Same; Same; Corporation Law; Rehabilitation Proceedings; Rehabilitation
proceedings are summary and non-adversarial in nature, and do not contemplate
adjudication of claims that must be threshed out in ordinary court proceedings.—
Rehabilitation proceedings are summary and non-adversarial in nature, and do
not contemplate adjudication of claims that must be threshed out in ordinary
court proceedings. Adversarial proceedings similar to that in ordinary courts are
inconsistent with the commercial nature of a rehabilitation case. The latter must
be resolved quickly and expeditiously for the sake of the corporate debtor, its
creditors and other interested parties. Thus, the Interim Rules “incorporate the
concept of prohibited pleadings, affidavit evidence in lieu of oral testimony,
clarificatory hearings instead of the traditional approach of receiving evidence,
and the grant of authority to the court to decide the case, or any incident, on the
basis of affidavits and documentary evidence.”
PETITION for review on certiorari of the decision and resolution of the Court of
Appeals.
The facts are stated in the opinion of the Court.
Jacqueline C.L. Verano for petitioner.
Picazo, Buyco, Tan, Fider & Santos for respondents.
ABAD, J.:
This case is about the validity of a rehabilitation court’s order that compelled a
third party, in possession of money allegedly belonging to the debtor of a company
under rehabilitation, to deliver such money to its court-appointed receiver over
the debtor’s objection.
The Facts and the Case
On July 16, 2001 petitioner Advent Capital and Finance Corporation (Advent
Capital) filed a petition for rehabilitation1 with the Regional Trial Court (RTC) of
Makati City.2 Subsequently, the RTC named Atty. Danilo L. Concepcion as
rehabilitation receiver.3 Upon audit of Advent Capital’s books, Atty. Concepcion
found that respondents Nicasio and Editha Alcantara (collectively, the
Alcantaras) owed Advent Capital ₱27,398,026.59, representing trust fees that it
supposedly earned for managing their several trust accounts.4
Prompted by this finding, Atty. Concepcion requested Belson Securities, Inc.
(Belson) to deliver to him, as Advent Capital’s rehabilitation receiver, the
₱7,635,597.50 in cash dividends that Belson held under the Alcantaras’ Trust
Account 95-013. Atty. Concepcion claimed that the dividends, as trust fees,
formed part of Advent Capital’s assets. Belson refused, however, citing the
Alcantaras’ objections as well as the absence of an appropriate order from the
rehabilitation court.5
Thus, Atty. Concepcion filed a motion before the rehabilitation court to direct
Belson to release the money to him. He said that, as rehabilitation receiver, he
had the duty to take custody and control of Advent Capital’s assets, such as the
sum of money that Belson held on behalf of Advent Capital’s Trust Department. 6
The Alcantaras made a special appearance before the rehabilitation court7 to
oppose Atty. Concepcion’s motion. They claimed that the money in the trust
account belonged to them under their Trust Agreement8 with Advent Capital. The
latter, they said, could not claim any right or interest in the dividends generated
by their investments since Advent Capital merely held these in trust for the
Alcantaras, the trustors-beneficiaries. For this reason, Atty. Concepcion had no
right to compel the delivery of the dividends to him as receiver. The Alcantaras
concluded that, under the circumstances, the rehabilitation court had no
jurisdiction over the subject dividends.
On February 5, 2007 the rehabilitation court granted Atty. Concepcion’s
motion.9 It held that, under Rule 59, Section 6 of the Rules of Court, a receiver
has the duty to immediately take possession of all of the corporation’s assets and
administer the same for the benefit of corporate creditors. He has the duty to
collect debts owing to the corporation, which debts form part of its assets.
Complying with the rehabilitation court’s order and Atty. Concepcion’s demand
letter, Belson turned over the subject dividends to him.
Meanwhile, the Alcantaras filed a special civil action of certiorari before the Court
of Appeals (CA), seeking to annul the rehabilitation court’s order. On January 30,
2008 the CA rendered a decision,10 granting the petition and directing Atty.
Concepcion to account for the dividends and deliver them to the Alcantaras. The
CA ruled that the Alcantaras owned those dividends. They did not form part of
Advent Capital’s assets as contemplated under the Interim Rules of Procedure on
Corporate Rehabilitation (Interim Rules).
The CA pointed out that the rehabilitation proceedings in this case referred only
to the assets and liabilities of the company proper, not to those of its Trust
Department which held assets belonging to other people. Moreover, even if the
Trust Agreement provided that Advent Capital, as trustee, shall have first lien on
the Alcantara’s financial portfolio for the payment of its trust fees, the cash
dividends in Belson’s care cannot be summarily applied to the payment of such
charges. To enforce its lien, Advent Capital has to file a collection suit. The
rehabilitation court cannot simply enforce the latter’s claim by ordering Belson to
deliver the money to it.11
The CA denied Atty. Concepcion and Advent Capital’s motion for
reconsideration,12 prompting the filing of the present petition for review under
Rule 45.
The Issue Presented
The sole issue in this case is whether or not the cash dividends held by Belson
and claimed by both the Alcantaras and Advent Capital constitute corporate
assets of the latter that the rehabilitation court may, upon motion, require to be
conveyed to the rehabilitation receiver for his disposition.
Ruling of the Court
Advent Capital asserts that the cash dividends in Belson’s possession formed part
of its assets based on paragraph 9 of its Trust Agreement with the Alcantaras,
which states:
9. Trust Fee: Other Expenses – As compensation for its services hereunder, the
TRUSTEE shall be entitled to a trust or management fee of 1 (one) % per annum
based on the quarterly average market value of the Portfolio or a minimum
annual fee of ₱5,000.00, whichever is higher. The said trust or management fee
shall automatically be deducted from the Portfolio at the end of each calendar
quarter. The TRUSTEE shall likewise be reimbursed for all reasonable and
necessary expenses incurred by it in the discharge of its powers and duties under
this Agreement, and in all cases, the TRUSTEE shall have a first lien on the
Portfolio for the payment of the trust fees and other reimbursable expenses.
According to Advent Capital, it could automatically deduct its management fees
from the Alcantaras’ portfolio that they entrusted to it. Paragraph 9 of the Trust
Agreement provides that Advent Capital could automatically deduct its trust fees
from the Alcantaras’ portfolio, "at the end of each calendar quarter," with the
corresponding duty to submit to the Alcantaras a quarterly accounting report
within 20 days after.13
But the problem is that the trust fees that Advent Capital’s receiver was claiming
were for past quarters. Based on the stipulation, these should have been deducted
as they became due. As it happened, at the time Advent Capital made its move to
collect its supposed management fees, it neither had possession nor control of the
money it wanted to apply to its claim. Belson, a third party, held the money in the
Alcantaras’ names. Whether it should deliver the same to Advent Capital or to
the Alcantaras is not clear. What is clear is that the issue as to who should get
the same has been seriously contested.
The practice in the case of banks is that they automatically collect their
management fees from the funds that their clients entrust to them for investment
or lending to others. But the banks can freely do this since it holds or has control
of their clients’ money and since their trust agreement authorized the automatic
collection. If the depositor contests the deduction, his remedy is to bring an action
to recover the amount he claims to have been illegally deducted from his account.
Here, Advent Capital does not allege that Belson had already deducted the
management fees owing to it from the Alcantaras’ portfolio at the end of each
calendar quarter. Had this been done, it may be said that the money in Belson’s
possession would technically be that of Advent Capital. Belson would be holding
such amount in trust for the latter. And it would be for the Alcantaras to institute
an action in the proper court against Advent Capital and Belson for misuse of its
funds.
But the above did not happen. Advent Capital did not exercise its right to cause
the automatic deduction at the end of every quarter of its supposed management
fee when it had full control of the dividends. That was its fault. For their part, the
Alcantaras had the right to presume that Advent Capital had deducted its fees in
the manner stated in the contract. The burden of proving that the fees were not in
fact collected lies with Advent Capital.
Further, Advent Capital or its rehabilitation receiver cannot unilaterally decide to
apply the entire amount of cash dividends retroactively to cover the accumulated
trust fees. Advent Capital merely managed in trust for the benefit of the
Alcantaras the latter’s portfolio, which under Paragraph 2 14 of the Trust
Agreement, includes not only the principal but also its income or proceeds. The
trust property is only fictitiously attributed by law to the trustee "to the extent
that the rights and powers vested in a nominal owner shall be used by him on
behalf of the real owner."15
The real owner of the trust property is the trustor-beneficiary. In this case, the
trustors-beneficiaries are the Alcantaras. Thus, Advent Capital could not dispose
of the Alcantaras’ portfolio on its own. The income and principal of the portfolio
could only be withdrawn upon the Alcantaras’ written instruction or order to SO ORDERED.
Advent Capital.16 The latter could not also assign or encumber the portfolio or its
income without the written consent of the Alcantaras.17 All these are stipulated in
the Trust Agreement.

Ultimately, the issue is what court has jurisdiction to hear and adjudicate the
conflicting claims of the parties over the dividends that Belson held in trust for
their owners. Certainly, not the rehabilitation court which has not been given the
power to resolve ownership disputes between Advent Capital and third parties.
Neither Belson nor the Alcantaras are its debtors or creditors with interest in the
rehabilitation.

Advent Capital must file a separate action for collection to recover the trust fees
that it allegedly earned and, with the trial court’s authorization if warranted, put
the money in escrow for payment to whoever it rightly belongs. Having failed to
collect the trust fees at the end of each calendar quarter as stated in the contract,
all it had against the Alcantaras was a claim for payment which is a proper
subject for an ordinary action for collection. It cannot enforce its money claim by
simply filing a motion in the rehabilitation case for delivery of money belonging to
the Alcantaras but in the possession of a third party.

Rehabilitation proceedings are summary and non-adversarial in nature, and do

not contemplate adjudication of claims that must be threshed out in ordinary
court proceedings. Adversarial proceedings similar to that in ordinary courts are
inconsistent with the commercial nature of a rehabilitation case. The latter must
be resolved quickly and expeditiously for the sake of the corporate debtor, its
creditors and other interested parties. Thus, the Interim Rules "incorporate the
concept of prohibited pleadings, affidavit evidence in lieu of oral testimony,
clarificatory hearings instead of the traditional approach of receiving evidence,
and the grant of authority to the court to decide the case, or any incident, on the
basis of affidavits and documentary evidence."18

Here, Advent Capital’s claim is disputed and requires a full trial on the
merits.1âwphi1 It must be resolved in a separate action where the Alcantaras’
claim and defenses may also be presented and heard. Advent Capital cannot say
that the filing of a separate action would defeat the purpose of corporate
rehabilitation. In the first place, the Interim Rules do not exempt a company
under rehabilitation from availing of proper legal procedure for collecting debt
that may be due it. Secondly, Court records show that Advent Capital had in fact
sought to recover one of its assets by filing a separate action for replevin involving
a car that was registered in its name.19

WHEREFORE, the petition is DENIED for lack of merit and the assailed decision
and resolution of the Court of Appeals in CA-G.R. SP 98692 are AFFIRMED,
without prejudice to any action that petitioner Advent Capital and Finance Corp.
or its rehabilitation receiver might institute regarding the trust fees subject of
this case.
 G.R. No. 166884. June 13, 2012.*
LAND BANK OF THE PHILIPPINES, petitioner, vs. LAMBERTO C. PEREZ,
NESTOR C. KUN, MA. ESTELITA P. ANGELES-PANLILIO, and NAPOLEON
O. GARCIA, respondents.
Civil Law; Trusts; Under the Trust Receipts Law, intent to defraud is
presumed when (1) the entrustee fails to turn over the proceeds of the sale of goods
covered by the trust receipt to the entruster; or (2) when the entrustee fails to return
the goods under trust, if they are not disposed of in accordance with the terms of
the trust receipts.—There are two obligations in a trust receipt transaction.
The first is covered by the provision that refers to money under the obligation to
deliver it (entregarla) to the owner of the merchandise sold. The second is covered
by the provision referring to merchandise received under the obligation to return
it (devolvera) to the owner. Thus, under the Trust Receipts Law, intent to defraud
is presumed when (1) the entrustee fails to turn over the proceeds of the sale of
goods covered by the trust receipt to the entruster; or (2) when the entrustee fails
to return the goods under trust, if they are not disposed of in accordance with the
terms of the trust receipts.
Same; Same; In all trust receipt transactions, both obligations on the part of
the trustee exist in the alternative—the return of the proceeds of the sale or the
return or recovery of the goods, whether raw or processed.—In all trust receipt
transactions, both obligations on the part of the trustee exist in the alternative—
the return of the proceeds of the sale or the return or recovery of the goods,
whether raw or processed. When both parties enter into an agreement knowing
that the return of the goods subject of the trust receipt is not possible even
without any fault on the part of the trustee, it is not a trust receipt transaction
penalized under Section 13 of P.D. 115; the only obligation actually agreed upon
by the parties would be the return of the proceeds of the sale transaction. This
transaction becomes a mere loan, where the borrower is obligated to pay the bank
the amount spent for the purchase of the goods.
Same; Contracts; Article 1371 of the Civil Code provides that “[i]n order to
judge the intention of the contracting parties, their contemporaneous and
subsequent acts shall be principally considered.”—Article 1371 of the Civil Code
provides that “[i]n order to judge the intention of the contracting parties, their
contemporaneous and subsequent acts shall be principally considered.” Under
this provision, we can examine the contemporaneous actions of the parties rather
than rely purely on the trust receipts that they signed in order to understand the
transaction through their intent.
Criminal Law; Estafa; Trust Receipts Law; Elements of estafa under Article
315, paragraph 1(b) of the Revised Penal Code, in relation with Section 13 of the
Trust Receipts Law.—In order that the respondents “may be validly prosecuted
for estafa under Article 315, paragraph 1(b) of the Revised Penal Code, in relation
with Section 13 of the Trust Receipts Law, the following elements must be
established: (a) they received the subject goods in trust or under the obligation to
sell the same and to remit the proceeds thereof to [the trustor], or to return the
goods if not sold; (b) they misappropriated or converted the goods and/or the
proceeds of the sale; (c) they performed such acts with abuse of confidence to the
damage and prejudice of Metrobank; and (d) demand was made on them by [the
trustor] for the remittance of the proceeds or the return of the unsold goods.”
Office of the Government Corporate Counsel (OGCC); The mandate given to
the Office of the Government Corporate Counsel is limited to the civil liabilities
arising from the crime, and is subject to the control and supervision of the public
prosecutor.—If we look at the mandate given to the Office of the Government
Corporate Counsel, we find that it is limited to the civil liabilities arising from the
crime, and is subject to the control and supervision of the public prosecutor.
Section 2, Rule 8 of the Rules Governing the Exercise by the Office of the
Government Corporate Counsel of its Authority, Duties and Powers as Principal
Law Office of All Government Owned or Controlled Corporations, filed before the
Office of the National Administration Register on September 5, 2011,
reads: Section 2. Extent of legal assistance—The OGCC shall represent the
complaining GOCC in all stages of the criminal proceedings. The legal assistance
extended is not limited to the preparation of appropriate sworn statements but
shall include all aspects of an effective private prosecution including recovery of
civil liability arising from the crime, subject to the control and supervision of the
public prosecutor. Based on jurisprudence, there are two exceptions when a
private party complainant or offended party in a criminal case may file a petition
with this Court, without the intervention of the OSG: (1) when there is denial of
due process of law to the prosecution, and the State or its agents refuse to act on
the case to the prejudice of the State and the private offended party; and (2) when
the private offended party questions the civil aspect of a decision of the lower
court.
PETITION for review on certiorari of a decision of the Court of Appeals.
The facts are stated in the opinion of the Court.
Office of the Government Corporate Counsel for petitioner.
Benedictine Law Center for respondents.
BRION, J.:
Before this Court is a petition for review on certiorari, 1 under Rule 45 of the Rules
of Court, assailing the decision2dated January 20, 2005 of the Court of Appeals in
CA-G.R. SP No. 76588. In the assailed decision, the Court of Appeals dismissed
the criminal complaint for estafa against the respondents, Lamberto C. Perez,
Nestor C. Kun, Ma. Estelita P. Angeles-Panlilio and Napoleon Garcia, who
allegedly violated Article 315, paragraph 1(b) of the Revised Penal Code, in
relation with Section 13 of Presidential Decree No. (P.D.) 115 – the "Trust
Receipts Law."
Petitioner Land Bank of the Philippines (LBP) is a government financial
institution and the official depository of the Philippines.3 Respondents are the
officers and representatives of Asian Construction and Development Corporation
(ACDC), a corporation incorporated under Philippine law and engaged in the
construction business.4
On June 7, 1999, LBP filed a complaint for estafa or violation of Article 315,
paragraph 1(b) of the Revised Penal Code, in relation to P.D. 115, against the
respondents before the City Prosecutor’s Office in Makati City. In the affidavit-
complaint5 of June 7, 1999, the LBP’s Account Officer for the Account
Management Development, Edna L. Juan, stated that LBP extended a credit
accommodation to ACDC through the execution of an Omnibus Credit Line
Agreement (Agreement)6 between LBP and ACDC on October 29, 1996. In various
instances, ACDC used the Letters of Credit/Trust Receipts Facility of the
Agreement to buy construction materials. The respondents, as officers and
representatives of ACDC, executed trust receipts7 in connection with the
construction materials, with a total principal amount of ₱52,344,096.32. The trust
receipts matured, but ACDC failed to return to LBP the proceeds of the
construction projects or the construction materials subject of the trust receipts.
LBP sent ACDC a demand letter,8 dated May 4, 1999, for the payment of its
debts, including those under the Trust Receipts Facility in the amount of
₱66,425,924.39. When ACDC failed to comply with the demand letter, LBP filed
the affidavit-complaint.
The respondents filed a joint affidavit9 wherein they stated that they signed the
trust receipt documents on or about the same time LBP and ACDC executed the
loan documents; their signatures were required by LBP for the release of the
loans. The trust receipts in this case do not contain (1) a description of the goods
placed in trust, (2) their invoice values, and (3) their maturity dates, in violation
of Section 5(a) of P.D. 115. Moreover, they alleged that ACDC acted as a
subcontractor for government projects such as the Metro Rail Transit, the Clark
Centennial Exposition and the Quezon Power Plant in Mauban, Quezon. Its
clients for the construction projects, which were the general contractors of these
projects, have not yet paid them; thus, ACDC had yet to receive the proceeds of
the materials that were the subject of the trust receipts and were allegedly used
for these constructions. As there were no proceeds received from these clients, no
misappropriation thereof could have taken place.
On September 30, 1999, Makati Assistant City Prosecutor Amador Y. Pineda
issued a Resolution10 dismissing the complaint. He pointed out that the evidence
presented by LBP failed to state the date when the goods described in the letters
of credit were actually released to the possession of the respondents. Section 4 of
P.D. 115 requires that the goods covered by trust receipts be released to the
possession of the entrustee after the latter’s execution and delivery to the
entruster of a signed trust receipt. He adds that LBP’s evidence also fails to show
the date when the trust receipts were executed since all the trust receipts are
undated. Its dispositive portion reads:
WHEREFORE, premises considered, and for insufficiency of evidence, it is
respectfully recommended that the instant complaints be dismissed, as upon
approval, the same are hereby dismissed.11
LBP filed a motion for reconsideration which the Makati Assistant City
Prosecutor denied in his order of January 7, 2000.12
On appeal, the Secretary of Justice reversed the Resolution of the Assistant City
Prosecutor. In his resolution of August 1, 2002,13 the Secretary of Justice pointed
out that there was no question that the goods covered by the trust receipts were
received by ACDC. He likewise adopted LBP’s argument that while the subjects of
the trust receipts were not mentioned in the trust receipts, they were listed in the
letters of credit referred to in the trust receipts. He also noted that the trust
receipts contained maturity dates and clearly set out their stipulations. He
further rejected the respondents’ defense that ACDC failed to remit the payments
to LBP due to the failure of the clients of ACDC to pay them. The dispositive
portion of the resolution reads:
WHEREFORE, the assailed resolution is REVERSED and SET ASIDE. The City Prosecutor
of Makati City is hereby directed to file an information for estafa under Art. 315 (1) (b) of
the Revised Penal Code in relation to Section 13, Presidential Decree No. 115 against
respondents Lamberto C. Perez, Nestor C. Kun, [Ma. Estelita P. Angeles-Panlilio] and
Napoleon O. Garcia and to report the action taken within ten (10) days from receipt hereof. 14
The respondents filed a motion for reconsideration of the resolution dated August
1, 2002, which the Secretary of Justice denied.15 He rejected the respondents’
submission that Colinares v. Court of Appeals16 does not apply to the case. He
explained that in Colinares, the building materials were delivered to the accused
before they applied to the bank for a loan to pay for the merchandise; thus, the
ownership of the merchandise had already been transferred to the entrustees
before the trust receipts agreements were entered into. In the present case, the
parties have already entered into the Agreement before the construction
materials were delivered to ACDC.
Subsequently, the respondents filed a petition for review before the Court of
Appeals.
After both parties submitted their respective Memoranda, the Court of Appeals
promulgated the assailed decision of January 20, 2005. 17 Applying the doctrine in
Colinares, it ruled that this case did not involve a trust receipt transaction, but a
mere loan. It emphasized that construction materials, the subject of the trust
receipt transaction, were delivered to ACDC even before the trust receipts were
executed. It noted that LBP did not offer proof that the goods were received by
ACDC, and that the trust receipts did not contain a description of the goods, their
invoice value, the amount of the draft to be paid, and their maturity dates. It also
adopted ACDC’s argument that since no payment for the construction projects
had been received by ACDC, its officers could not have been guilty of
misappropriating any payment. The dispositive portion reads:
WHEREFORE, in view of the foregoing, the Petition is GIVEN DUE COURSE. The assailed Resolutions
of the respondent Secretary of Justice dated August 1, 2002 and February 17, 2003, respectively in I.S.
No. 99-F-9218-28 are hereby REVERSED and SET ASIDE.18
LBP now files this petition for review on certiorari, dated March 15, 2005, raising
the following error:
THE COURT OF APPEALS GRAVELY ERRED WHEN IT REVERSED AND SET ASIDE THE
RESOLUTIONS OF THE HONORABLE SECRETARY OF JUSTICE BY APPLYING THE RULING IN
THE CASE OF COLINARES V. COURT OF APPEALS, 339 SCRA 609, WHICH IS NOT APPLICABLE
IN THE CASE AT BAR.19
On April 8, 2010, while the case was pending before this Court, the respondents
filed a motion to dismiss.20 They informed the Court that LBP had already
assigned to Philippine Opportunities for Growth and Income, Inc. all of its rights,
title and interests in the loans subject of this case in a Deed of Absolute Sale
dated June 23, 2005 (attached as Annex "C" of the motion). The respondents also
stated that Avent Holdings Corporation, in behalf of ACDC, had already settled
ACDC’s obligation to LBP on October 8, 2009. Included as Annex "A" in this
motion was a certification21 issued by the Philippine Opportunities for Growth
and Income, Inc., stating that it was LBP’s successor-in-interest insofar as the
trust receipts in this case are concerned and that Avent Holdings Corporation had
already settled the claims of LBP or obligations of ACDC arising from these trust
receipts.
We deny this petition.
The disputed transactions are not trust receipts.
Section 4 of P.D. 115 defines a trust receipt transaction in this manner:
Section 4. What constitutes a trust receipt transaction. A trust receipt transaction, within
the meaning of this Decree, is any transaction by and between a person referred to in this
Decree as the entruster, and another person referred to in this Decree as entrustee, whereby
the entruster, who owns or holds absolute title or security interests over certain specified
goods, documents or instruments, releases the same to the possession of the entrustee upon
the latter's execution and delivery to the entruster of a signed document called a "trust
receipt" wherein the entrustee binds himself to hold the designated goods, documents or
instruments in trust for the entruster and to sell or otherwise dispose of the goods,
documents or instruments with the obligation to turn over to the entruster the proceeds
thereof to the extent of the amount owing to the entruster or as appears in the trust receipt
or the goods, documents or instruments themselves if they are unsold or not otherwise
disposed of, in accordance with the terms and conditions specified in the trust receipt, or for
other purposes substantially equivalent to any of the following:
1. In the case of goods or documents, (a) to sell the goods or procure their sale; or (b) to
manufacture or process the goods with the purpose of ultimate sale: Provided, That, in the
case of goods delivered under trust receipt for the purpose of manufacturing or processing
before its ultimate sale, the entruster shall retain its title over the goods whether in its
original or processed form until the entrustee has complied fully with his obligation under
the trust receipt; or (c) to load, unload, ship or tranship or otherwise deal with them in a
manner preliminary or necessary to their sale[.]
There are two obligations in a trust receipt transaction. The first is covered by the
provision that refers to money under the obligation to deliver it (entregarla) to the
owner of the merchandise sold. The second is covered by the provision referring to
merchandise received under the obligation to return it (devolvera) to the owner.
Thus, under the Trust Receipts Law,22 intent to defraud is presumed when (1) the
entrustee fails to turn over the proceeds of the sale of goods covered by the trust
receipt to the entruster; or (2) when the entrustee fails to return the goods under
trust, if they are not disposed of in accordance with the terms of the trust
receipts.23
In all trust receipt transactions, both obligations on the part of the trustee exist in
the alternative – the return of the proceeds of the sale or the return or recovery of
the goods, whether raw or processed.24 When both parties enter into an agreement
knowing that the return of the goods subject of the trust receipt is not possible
even without any fault on the part of the trustee, it is not a trust receipt
transaction penalized under Section 13 of P.D. 115; the only obligation actually
agreed upon by the parties would be the return of the proceeds of the sale
transaction. This transaction becomes a mere loan,25 where the borrower is
obligated to pay the bank the amount spent for the purchase of the goods.
Article 1371 of the Civil Code provides that "[i]n order to judge the intention of
the contracting parties, their contemporaneous and subsequent acts shall be
principally considered." Under this provision, we can examine the
contemporaneous actions of the parties rather than rely purely on the trust
receipts that they signed in order to understand the transaction through their
intent.
We note in this regard that at the onset of these transactions, LBP knew that
ACDC was in the construction business and that the materials that it sought to
buy under the letters of credit were to be used for the following projects: the
Metro Rail Transit Project and the Clark Centennial Exposition Project.26 LBP
had in fact authorized the delivery of the materials on the construction sites for
these projects, as seen in the letters of credit it attached to its
complaint.27 Clearly, they were aware of the fact that there was no way they could
recover the buildings or constructions for which the materials subject of the
alleged trust receipts had been used. Notably, despite the allegations in the
affidavit-complaint wherein LBP sought the return of the construction
materials,28 its demand letter dated May 4, 1999 sought the payment of the
balance but failed to ask, as an alternative, for the return of the construction
materials or the buildings where these materials had been used.29
The fact that LBP had knowingly authorized the delivery of construction
materials to a construction site of two government projects, as well as unspecified
construction sites, repudiates the idea that LBP intended to be the owner of those
construction materials. As a government financial institution, LBP should have
been aware that the materials were to be used for the construction of an
immovable property, as well as a property of the public domain. As an immovable
property, the ownership of whatever was constructed with those materials would
presumably belong to the owner of the land, under Article 445 of the Civil Code
which provides:
Article 445. Whatever is built, planted or sown on the land of another and the
improvements or repairs made thereon, belong to the owner of the land, subject to
the provisions of the following articles.
Even if we consider the vague possibility that the materials, consisting of cement,
bolts and reinforcing steel bars, would be used for the construction of a movable
property, the ownership of these properties would still pertain to the government
and not remain with the bank as they would be classified as property of the public
domain, which is defined by the Civil Code as:
Article 420. The following things are property of public dominion:
(1) Those intended for public use, such as roads, canals, rivers, torrents, ports and bridges constructed by
the State, banks, shores, roadsteads, and others of similar character;
(2) Those which belong to the State, without being for public use, and are intended for some public service
or for the development of the national wealth.
In contrast with the present situation, it is fundamental in a trust receipt
transaction that the person who advanced payment for the merchandise becomes
the absolute owner of said merchandise and continues as owner until he or she is
paid in full, or if the goods had already been sold, the proceeds should be turned
over to him or to her.30
Thus, in concluding that the transaction was a loan and not a trust receipt, we
noted in Colinares that the industry or line of work that the borrowers were
engaged in was construction. We pointed out that the borrowers were not
importers acquiring goods for resale.31 Indeed, goods sold in retail are often within
the custody or control of the trustee until they are purchased. In the case of
materials used in the manufacture of finished products, these finished products –
if not the raw materials or their components – similarly remain in the possession
of the trustee until they are sold. But the goods and the materials that are used
for a construction project are often placed under the control and custody of the
clients employing the contractor, who can only be compelled to return the
materials if they fail to pay the contractor and often only after the requisite legal
proceedings. The contractor’s difficulty and uncertainty in claiming these
materials (or the buildings and structures which they become part of), as soon as
the bank demands them, disqualify them from being covered by trust receipt
agreements.
Based on these premises, we cannot consider the agreements between the parties
in this case to be trust receipt transactions because (1) from the start, the parties
were aware that ACDC could not possibly be obligated to reconvey to LBP the
materials or the end product for which they were used; and (2) from the moment
the materials were used for the government projects, they became public, not
LBP’s, property.
Since these transactions are not trust receipts, an action for estafa should not be
brought against the respondents, who are liable only for a loan. In passing, it is
useful to note that this is the threat held against borrowers that Retired Justice
Claudio Teehankee emphatically opposed in his dissent in People v.
Cuevo,32 restated in Ong v. CA, et al.:33
The very definition of trust receipt x x x sustains the lower court’s rationale in
dismissing the information that the contract covered by a trust receipt is merely a
secured loan. The goods imported by the small importer and retail dealer through
the bank’s financing remain of their own property and risk and the old capitalist
orientation of putting them in jail for estafa for non-payment of the secured loan
(granted after they had been fully investigated by the bank as good credit risks)
through the fiction of the trust receipt device should no longer be permitted in
this day and age.
As the law stands today, violations of Trust Receipts Law are criminally
punishable, but no criminal complaint for violation of Article 315, paragraph 1(b)
of the Revised Penal Code, in relation with P.D. 115, should prosper against a
borrower who was not part of a genuine trust receipt transaction.
Misappropriation or abuse of confidence is absent in this case.
Even if we assume that the transactions were trust receipts, the complaint
against the respondents still should have been dismissed. The Trust Receipts Law
punishes the dishonesty and abuse of confidence in the handling of money or
goods to the prejudice of another, regardless of whether the latter is the owner or
not. The law does not singularly seek to enforce payment of the loan, as "there can
be no violation of [the] right against imprisonment for non-payment of a debt."34
In order that the respondents "may be validly prosecuted for estafa under Article
315, paragraph 1(b) of the Revised Penal Code,35 in relation with Section 13 of the
Trust Receipts Law, the following elements must be established: (a) they received
the subject goods in trust or under the obligation to sell the same and to remit the
proceeds thereof to [the trustor], or to return the goods if not sold; (b) they
misappropriated or converted the goods and/or the proceeds of the sale; (c) they
performed such acts with abuse of confidence to the damage and prejudice of
Metrobank; and (d) demand was made on them by [the trustor] for the remittance
of the proceeds or the return of the unsold goods."36
In this case, no dishonesty or abuse of confidence existed in the handling of the
construction materials.
In this case, the misappropriation could be committed should the entrustee fail to
turn over the proceeds of the sale of the goods covered by the trust receipt
transaction or fail to return the goods themselves. The respondents could not
have failed to return the proceeds since their allegations that the clients of ACDC
had not paid for the projects it had undertaken with them at the time the case
was filed had never been questioned or denied by LBP. What can only be
attributed to the respondents would be the failure to return the goods subject of
the trust receipts.
We do not likewise see any allegation in the complaint that ACDC had used the
construction materials in a manner that LBP had not authorized. As earlier
pointed out, LBP had authorized the delivery of these materials to these project
sites for which they were used. When it had done so, LBP should have been aware
that it could not possibly recover the processed materials as they would become
part of government projects, two of which (the Metro Rail Transit Project and the
Quezon Power Plant Project) had even become part of the operations of public
utilities vital to public service. It clearly had no intention of getting these
materials back; if it had, as a primary government lending institution, it would be
guilty of extreme negligence and incompetence in not foreseeing the legal
complications and public inconvenience that would arise should it decide to claim
the materials. ACDC’s failure to return these materials or their end product at
the time these "trust receipts" expired could not be attributed to its volition. No
bad faith, malice, negligence or breach of contract has been attributed to ACDC,
its officers or representatives. Therefore, absent any abuse of confidence or
misappropriation on the part of the respondents, the criminal proceedings against
them for estafa should not prosper.
In Metropolitan Bank,37 we affirmed the city prosecutor’s dismissal of a complaint
for violation of the Trust Receipts Law. In dismissing the complaint, we took note
of the Court of Appeals’ finding that the bank was interested only in collecting its
money and not in the return of the goods. Apart from the bare allegation that
demand was made for the return of the goods (raw materials that were
manufactured into textiles), the bank had not accompanied its complaint with a
demand letter. In addition, there was no evidence offered that the respondents
therein had misappropriated or misused the goods in question.
The petition should be dismissed because the OSG did not file it and the civil
liabilities have already been settled.
The proceedings before us, regarding the criminal aspect of this case, should be
dismissed as it does not appear from the records that the complaint was filed with
the participation or consent of the Office of the Solicitor General (OSG). Section
35, Chapter 12, Title III, Book IV of the Administrative Code of 1987 provides
that:
Section 35. Powers and Functions. — The Office of the Solicitor General shall
represent the Government of the Philippines, its agencies and instrumentalities
and its officials and agents in any litigation, proceedings, investigation or matter
requiring the services of lawyers. x x x It shall have the following specific powers
and functions:
(1) Represent the Government in the Supreme Court and the Court of Appeals in
all criminal proceedings; represent the Government and its officers in the
Supreme Court, the Court of Appeals and all other courts or tribunals in all civil
actions and special proceedings in which the Government or any officer thereof in
his official capacity is a party. (Emphasis provided.)
In Heirs of Federico C. Delgado v. Gonzalez,38 we ruled that the preliminary
investigation is part of a criminal proceeding. As all criminal proceedings before
the Supreme Court and the Court of Appeals may be brought and defended by
only the Solicitor General in behalf of the Republic of the Philippines, a criminal
action brought to us by a private party alone suffers from a fatal defect. The
present petition was brought in behalf of LBP by the Government Corporate
Counsel to protect its private interests. Since the representative of the "People of
the Philippines" had not taken any part of the case, it should be
dismissed.1âwphi1
On the other hand, if we look at the mandate given to the Office of the
Government Corporate Counsel, we find that it is limited to the civil liabilities
arising from the crime, and is subject to the control and supervision of the public
prosecutor. Section 2, Rule 8 of the Rules Governing the Exercise by the Office of
the Government Corporate Counsel of its Authority, Duties and Powers as
Principal Law Office of All Government Owned or Controlled Corporations, filed
before the Office of the National Administration Register on September 5, 2011,
reads:
Section 2. Extent of legal assistance – The OGCC shall represent the complaining GOCC in all stages
of the criminal proceedings. The legal assistance extended is not limited to the preparation of appropriate
sworn statements but shall include all aspects of an effective private prosecution including recovery of
civil liability arising from the crime, subject to the control and supervision of the public prosecutor.
Based on jurisprudence, there are two exceptions when a private party
complainant or offended party in a criminal case may file a petition with this
Court, without the intervention of the OSG: (1) when there is denial of due
process of law to the prosecution, and the State or its agents refuse to act on the
case to the prejudice of the State and the private offended party;39 and (2) when
the private offended party questions the civil aspect of a decision of the lower
court.40
In this petition, LBP fails to allege any inaction or refusal to act on the part of the
OSG, tantamount to a denial of due process. No explanation appears as to why
the OSG was not a party to the case. Neither can LBP now question the civil
aspect of this decision as it had already assigned ACDC’s debts to a third person,
Philippine Opportunities for Growth and Income, Inc., and the civil liabilities
appear to have already been settled by Avent Holdings Corporation, in behalf of
ACDC. These facts have not been disputed by LBP. Therefore, we can reasonably
conclude that LBP no longer has any claims against ACDC, as regards the subject
matter of this case, that would entitle it to file a civil or criminal action.
WHEREFORE, we DENY the petition and AFFIRM the January 20, 2005
decision of the Court of Appeals in CA-G.R. SP No. 76588. No costs.SO
ORDERED.