Republic of the Philippines SUPREME COURT Manila FIRST DIVISION

G.R. No. 118114 December 7, 1995

TEODORO ACAP, petitioner, vs. COURT OF APPEALS and EDY DE LOS REYES, respondents.

PADILLA, J.: This is a petition for review on certiorari of the decision 1 of the Court of Appeals, 2nd Division, in CA-G.R. No. 36177, which affirmed the decision 2 of the Regional Trial Court of Himamaylan, Negros Occidental holding that private respondent Edy de los Reyes had acquired ownership of Lot No. 1130 of the Cadastral Survey of Hinigaran, Negros Occidental based on a document entitled "Declaration of Heirship and Waiver of Rights", and ordering the dispossession of petitioner as leasehold tenant of the land for failure to pay rentals. The facts of the case are as follows: The title to Lot No. 1130 of the Cadastral Survey of Hinigaran, Negros Occidental was evidenced by OCT No. R-12179. The lot has an area of 13,720 sq. meters. The title was issued and is registered in the name of spouses Santiago Vasquez and Lorenza Oruma. After both spouses died, their only son Felixberto inherited the lot. In 1975, Felixberto executed a duly notarized document entitled "Declaration of Heirship and Deed of Absolute Sale" in favor of Cosme Pido. The evidence before the court a quo established that since 1960, petitioner Teodoro Acap had been the tenant of a portion of the said land, covering an area of nine thousand five hundred (9,500) meters. When ownership was transferred in 1975 by Felixberto to Cosme Pido, Acap continued to be the registered tenant thereof and religiously paid his leasehold rentals to Pido and thereafter, upon Pido's death, to his widow Laurenciana. The controversy began when Pido died intestate and on 27 November 1981, his surviving heirs executed a notarized document denominated as "Declaration of Heirship and Waiver of Rights of Lot No. 1130 Hinigaran Cadastre," wherein they declared; to quote its pertinent portions, that: . . . Cosme Pido died in the Municipality of Hinigaran, Negros Occidental, he died intestate and without any known debts and obligations which the said parcel of land is (sic) held liable.

That Cosme Pido was survived by his/her legitimate heirs, namely: LAURENCIANA PIDO, wife, ELY, ERVIN, ELMER, and ELECHOR all surnamed PIDO; children; That invoking the provision of Section 1, Rule 74 of the Rules of Court, the above-mentioned heirs do hereby declare unto [sic] ourselves the only heirs of the late Cosme Pido and that we hereby adjudicate unto ourselves the above-mentioned parcel of land in equal shares.
Now, therefore, We LAURENCIANA 3, ELY, ELMER, ERVIN and ELECHOR all surnamed PIDO, do hereby waive, quitclaim all our rights, interests and participation over the said parcel of land in favor of EDY DE LOS REYES, of legal age, (f)ilipino, married to VIRGINIA DE LOS REYES, and resident of Hinigaran, Negros Occidental, Philippines. . . . 4 (Emphasis supplied)

The document was signed by all of Pido's heirs. Private respondent Edy de los Reyes did not sign said document. It will be noted that at the time of Cosme Pido's death, title to the property continued to be registered in the name of the Vasquez spouses. Upon obtaining the Declaration of Heirship with Waiver of Rights in his favor, private respondent Edy de los Reyes filed the same with the Registry of Deeds as part of a notice of an adverse claimagainst the original certificate of title. Thereafter, private respondent sought for petitioner (Acap) to personally inform him that he (Edy) had become the new owner of the land and that the lease rentals thereon should be paid to him. Private respondent further alleged that he and petitioner entered into an oral lease agreement wherein petitioner agreed to pay ten (10) cavans of palay per annum as lease rental. In 1982, petitioner allegedly complied with said obligation. In 1983, however, petitioner refused to pay any further lease rentals on the land, prompting private respondent to seek the assistance of the then Ministry of Agrarian Reform (MAR) in Hinigaran, Negros Occidental. The MAR invited petitioner to a conference scheduled on 13 October 1983. Petitioner did not attend the conference but sent his wife instead to the conference. During the meeting, an officer of the Ministry informed Acap's wife about private respondent's ownership of the said land but she stated that she and her husband (Teodoro) did not recognize private respondent's claim of ownership over the land. On 28 April 1988, after the lapse of four (4) years, private respondent filed a complaint for recovery of possession and damages against petitioner, alleging in the main that as his leasehold tenant, petitioner refused and failed to pay the agreed annual rental of ten (10) cavans of palay despite repeated demands. During the trial before the court a quo, petitioner reiterated his refusal to recognize private respondent's ownership over the subject land. He averred that he continues to recognize Cosme Pido as the owner of the said land, and having been a registered tenant therein since 1960, he never reneged on his rental obligations. When Pido died, he continued to pay rentals to Pido's widow. When the latter left for abroad, she instructed him to stay in the landholding and to pay the accumulated rentals upon her demand or return from abroad. Petitioner further claimed before the trial court that he had no knowledge about any transfer or sale of the lot to private respondent in 1981 and even the following year after Laurenciana's departure for abroad. He denied having entered into a verbal lease tenancy

contract with private respondent and that assuming that the said lot was indeed sold to private respondent without his knowledge, R.A. 3844, as amended, grants him the right to redeem the same at a reasonable price. Petitioner also bewailed private respondent's ejectment action as a violation of his right to security of tenure under P.D. 27. On 20 August 1991, the lower court rendered a decision in favor of private respondent, the dispositive part of which reads: WHEREFORE, premises considered, the Court renders judgment in favor of the plaintiff, Edy de los Reyes, and against the defendant, Teodoro Acap, ordering the following, to wit: 1. Declaring forfeiture of defendant's preferred right to issuance of a Certificate of Land Transfer under Presidential Decree No. 27 and his farmholdings; 2. Ordering the defendant Teodoro Acap to deliver possession of said farm to plaintiff, and;
3. Ordering the defendant to pay P5,000.00 as attorney's fees, the sum of P1,000.00 as expenses of litigation and the amount of P10,000.00 as actual damages. 5

In arriving at the above-mentioned judgment, the trial court stated that the evidence had established that the subject land was "sold" by the heirs of Cosme Pido to private respondent. This is clear from the following disquisitions contained in the trial court's six (6) page decision:
There is no doubt that defendant is a registered tenant of Cosme Pido. However, when the latter died their tenancy relations changed since ownership of said land was passed on to his heirs who, by executing a Deed of Sale, which defendant admitted in his affidavit, likewise passed on their ownership of Lot 1130 to herein plaintiff (private respondent). As owner hereof, plaintiff has the right to demand payment of rental and the tenant is obligated to pay rentals due from the time demand is made. . . . 6

xxx xxx xxx

Certainly, the sale of the Pido family of Lot 1130 to herein plaintiff does not of itself extinguish the relationship. There was only a change of the personality of the lessor in the person of herein plaintiff Edy de los Reyes who being the purchaser or transferee, assumes the rights and obligations of the former landowner to the tenant Teodoro Acap, herein defendant. 7

Aggrieved, petitioner appealed to the Court of Appeals, imputing error to the lower court when it ruled that private respondent acquired ownership of Lot No. 1130 and that he, as tenant, should pay rentals to private respondent and that failing to pay the same from 1983 to 1987, his right to a certificate of land transfer under P.D. 27 was deemed forfeited. The Court of Appeals brushed aside petitioner's argument that the Declaration of Heirship and Waiver of Rights (Exhibit "D"), the document relied upon by private respondent to prove his ownership to the lot, was excluded by the lower court in its order dated 27 August 1990.

The order indeed noted that the document was not identified by Cosme Pido's heirs and was not registered with the Registry of Deeds of Negros Occidental. According to respondent court, however, since the Declaration of Heirship and Waiver of Rights appears to have been duly notarized, no further proof of its due execution was necessary. Like the trial court, respondent court was also convinced that the said document stands as prima facie proof of appellee's (private respondent's) ownership of the land in dispute. With respect to its non-registration, respondent court noted that petitioner had actual knowledge of the subjectsale of the land in dispute to private respondent because as early as 1983, he (petitioner) already knew of private respondent's claim over the said land but which he thereafter denied, and that in 1982, he (petitioner) actually paid rent to private respondent. Otherwise stated, respondent court considered this fact of rental payment in 1982 as estoppel on petitioner's part to thereafter refute private respondent's claim of ownership over the said land. Under these circumstances, respondent court ruled that indeed there was deliberate refusal by petitioner to pay rent for a continued period of five years that merited forfeiture of his otherwise preferred right to the issuance of a certificate of land transfer. In the present petition, petitioner impugns the decision of the Court of Appeals as not in accord with the law and evidence when it rules that private respondent acquired ownership of Lot No. 1130 through the aforementioned Declaration of Heirship and Waiver of Rights. Hence, the issues to be resolved presently are the following: 1. WHETHER OR NOT THE SUBJECT DECLARATION OF HEIRSHIP AND WAIVER OF RIGHTS IS A RECOGNIZED MODE OF ACQUIRING OWNERSHIP BY PRIVATE RESPONDENT OVER THE LOT IN QUESTION. 2. WHETHER OR NOT THE SAID DOCUMENT CAN BE CONSIDERED A DEED OF SALE IN FAVOR OF PRIVATE RESPONDENT OF THE LOT IN QUESTION. Petitioner argues that the Regional Trial Court, in its order dated 7 August 1990, explicitly excluded the document marked as Exhibit "D" (Declaration of Heirship, etc.) as private respondent's evidence because it was not registered with the Registry of Deeds and was not identified by anyone of the heirs of Cosme Pido. The Court of Appeals, however, held the same to be admissible, it being a notarized document, hence, a prima facie proof of private respondents' ownership of the lot to which it refers. Petitioner points out that the Declaration of Heirship and Waiver of Rights is not one of the recognized modes of acquiring ownership under Article 712 of the Civil Code. Neither can the same be considered a deed of sale so as to transfer ownership of the land to private respondent because no consideration is stated in the contract (assuming it is a contract or deed of sale). Private respondent defends the decision of respondent Court of Appeals as in accord with the evidence and the law. He posits that while it may indeed be true that the trial court excluded his Exhibit "D" which is the Declaration of Heirship and Waiver of Rights as part of his evidence, the trial court declared him nonetheless owner of the subject lot based on other evidence adduced during the trial, namely, the notice of adverse claim (Exhibit "E") duly registered by him with the Registry of Deeds, which contains the questioned Declaration of Heirship and Waiver of Rights as an integral part thereof.

We find the petition impressed with merit. In the first place, an asserted right or claim to ownership or a real right over a thing arising from a juridical act, however justified, is not per se sufficient to give rise to ownership over the res. That right or title must be completed by fulfilling certain conditions imposed by law. Hence, ownership and real rights are acquired only pursuant to a legal mode or process. While title is the juridical justification, mode is the actual process of acquisition or transfer of ownership over a thing in question. 8 Under Article 712 of the Civil Code, the modes of acquiring ownership are generally classified into two (2) classes, namely, the original mode (i.e., through occupation, acquisitive prescription, law or intellectual creation) and thederivative mode (i.e., through succession mortis causa or tradition as a result of certain contracts, such as sale, barter, donation, assignment or mutuum). In the case at bench, the trial court was obviously confused as to the nature and effect of the Declaration of Heirship and Waiver of Rights, equating the same with a contract (deed) of sale. They are not the same. In a Contract of Sale, one of the contracting parties obligates himself to transfer the ownership of and to deliver a determinate thing, and the other party to pay a price certain in money or its equivalent. 9 Upon the other hand, a declaration of heirship and waiver of rights operates as a public instrument when filed with the Registry of Deeds whereby the intestate heirs adjudicate and divide the estate left by the decedent among themselves as they see fit. It is in effect an extrajudicial settlement between the heirs under Rule 74 of the Rules of Court. 10 Hence, there is a marked difference between a sale of hereditary rights and a waiver of hereditary rights. The first presumes the existence of a contract or deed of sale between the parties. 11 The second is, technically speaking, a mode of extinction of ownership where there is an abdication or intentional relinquishment of a known right with knowledge of its existence and intention to relinquish it, in favor of other persons who are co-heirs in the succession. 12 Private respondent, being then a stranger to the succession of Cosme Pido, cannot conclusively claim ownership over the subject lot on the sole basis of the waiver document which neither recites the elements of either a sale, 13 or a donation, 14 or any other derivative mode of acquiring ownership. Quite surprisingly, both the trial court and public respondent Court of Appeals concluded that a "sale" transpired between Cosme Pido's heirs and private respondent and that petitioner acquired actual knowledge of said sale when he was summoned by the Ministry of Agrarian Reform to discuss private respondent's claim over the lot in question. This conclusion has no basis both in fact and in law. On record, Exhibit "D", which is the "Declaration of Heirship and Waiver of Rights" was excluded by the trial court in its order dated 27 August 1990 because the document was neither registered with the Registry of Deeds nor identified by the heirs of Cosme Pido. There is no showing that private respondent had the same document attached to or made part of the record. What the trial court admitted was Annex "E", a notice of adverse claim filed with the Registry of Deeds which contained the Declaration of Heirship with Waiver of rights and was annotated at the back of the Original Certificate of Title to the land in question.

A notice of adverse claim, by its nature, does not however prove private respondent's ownership over the tenanted lot. "A notice of adverse claim is nothing but a notice of a claim adverse to the registered owner, the validity of which is yet to be established in court at some future date, and is no better than a notice of lis pendenswhich is a notice of a case already pending in court." 15 It is to be noted that while the existence of said adverse claim was duly proven, there is no evidence whatsoever that a deed of sale was executed between Cosme Pido's heirs and private respondent transferring the rights of Pido's heirs to the land in favor of private respondent. Private respondent's right or interest therefore in the tenanted lot remains an adverse claim which cannot by itself be sufficient to cancel the OCT to the land and title the same in private respondent's name. Consequently, while the transaction between Pido's heirs and private respondent may be binding on both parties, the right of petitioner as a registered tenant to the land cannot be perfunctorily forfeited on a mere allegation of private respondent's ownership without the corresponding proof thereof. Petitioner had been a registered tenant in the subject land since 1960 and religiously paid lease rentals thereon. In his mind, he continued to be the registered tenant of Cosme Pido and his family (after Pido's death), even if in 1982, private respondent allegedly informed petitioner that he had become the new owner of the land. Under the circumstances, petitioner may have, in good faith, assumed such statement of private respondent to be true and may have in fact delivered 10 cavans of palay as annual rental for 1982 to private respondent. But in 1983, it is clear that petitioner had misgivings over private respondent's claim of ownership over the said land because in the October 1983 MAR conference, his wife Laurenciana categorically denied all of private respondent's allegations. In fact, petitioner even secured a certificate from the MAR dated 9 May 1988 to the effect that he continued to be the registered tenant of Cosme Pido and not of private respondent. The reason is that private respondent never registered the Declaration of Heirship with Waiver of Rights with the Registry of Deeds or with the MAR. Instead, he (private respondent) sought to do indirectly what could not be done directly,i.e., file a notice of adverse claim on the said lot to establish ownership thereover. It stands to reason, therefore, to hold that there was no unjustified or deliberate refusal by petitioner to pay the lease rentals or amortizations to the landowner/agricultural lessor which, in this case, private respondent failed to establish in his favor by clear and convincing evidence. 16 Consequently, the sanction of forfeiture of his preferred right to be issued a Certificate of Land Transfer under P.D. 27 and to the possession of his farmholdings should not be applied against petitioners, since private respondent has not established a cause of action for recovery of possession against petitioner. WHEREFORE, premises considered, the Court hereby GRANTS the petition and the decision of the Court of Appeals dated 1 May 1994 which affirmed the decision of the RTC of Himamaylan, Negros Occidental dated 20 August 1991 is hereby SET ASIDE. The private respondent's complaint for recovery of possession and damages against petitioner Acap is hereby DISMISSED for failure to properly state a cause of action, without prejudice to private respondent taking the proper legal steps to establish the legal mode by which he claims to have acquired ownership of the land in question.

SO ORDERED. Davide, Jr., Bellosillo, Kapunan and Hermosisima, Jr., JJ., concur.

Republic of the Philippines SUPREME COURT Manila THIRD Division G.R. No. 165748 September 14, 2011

HEIRS OF POLICRONIO M. URETA, SR., namely: CONRADO B. URETA, MACARIO B. URETA, GLORIA URETA-GONZALES, ROMEO B. URETA, RITA URETA-SOLANO, NENA URETA-TONGCUA, VENANCIO B. URETA, LILIA URETA-TAYCO, and HEIRS OF POLICRONIO B. URETA, JR., namely: MIGUEL T. URETA, RAMON POLICRONIO T. URETA, EMMANUEL T. URETA, and BERNADETTE T. URETA, Petitioners, vs. HEIRS OF LIBERATO M. URETA, namely: TERESA F. URETA, AMPARO URETACASTILLO, IGNACIO F. URETA, SR., EMIRITO F. URETA, WILKIE F. URETA, LIBERATO F. URETA, JR., RAY F. URETA, ZALDY F. URETA, and MILA JEAN URETA CIPRIANO; HEIRS OF PRUDENCIA URETA PARADERO, namely: WILLIAM U. PARADERO, WARLITO U. PARADERO, CARMENCITA P. PERLAS, CRISTINA P. CORDOVA, EDNA P. GALLARDO, LETICIA P. REYES; NARCISO M. URETA; VICENTE M. URETA; HEIRS OF FRANCISCO M. URETA, namely: EDITA T. URETA-REYES and LOLLIE T. URETA-VILLARUEL; ROQUE M. URETA; ADELA URETA-GONZALES; HEIRS OF INOCENCIO M. URETA, namely: BENILDA V. URETA, ALFONSO V. URETA II, DICK RICARDO V. URETA, and ENRIQUE V. URETA; MERLINDA U. RIVERA; JORGE URETA; ANDRES URETA, WENEFREDA U. TARAN; and BENEDICT URETA, Respondents. x - - - - - - - - - - - - - - - -x G.R. No. 165930 HEIRS OF LIBERATO M. URETA, namely: TERESA F. URETA, AMPARO URETACASTILLO, IGNACIO F. URETA, SR., EMIRITO F. URETA, WILKIE F. URETA, LIBERATO F. URETA, JR., RAY F. URETA, ZALDY F. URETA, and MILA JEAN URETA CIPRIANO; HEIRS OF PRUDENCIA URETA PARADERO, namely: WILLIAM U. PARADERO, WARLITO U. PARADERO, CARMENCITA P. PERLAS, CRISTINA P. CORDOVA, EDNA P. GALLARDO, LETICIA P. REYES; NARCISO M. URETA; VICENTE M. URETA; HEIRS OF FRANCISCO M. URETA, namely: EDITA T. URETA-REYES and LOLLIE T. URETA-VILLARUEL; ROQUE M. URETA; ADELA URETA-GONZALES; HEIRS OF INOCENCIO M. URETA, namely: BENILDA V. URETA, ALFONSO V. URETA II, DICK RICARDO V. URETA, and ENRIQUE V. URETA; MERLINDA U. RIVERA; JORGE URETA; ANDRES URETA, WENEFREDA U. TARAN; and BENEDICT URETA,Petitioners, vs. HEIRS OF POLICRONIO M. URETA, SR., namely: CONRADO B. URETA, MACARIO B. URETA, GLORIA URETA-GONZALES, ROMEO B. URETA, RITA URETA-SOLANO, NENA URETA-TONGCUA, VENANCIO B. URETA, LILIA URETA-TAYCO, and HEIRS OF POLICRONIO B. URETA, JR., namely: MIGUEL T. URETA, RAMON POLICRONIO T. URETA, EMMANUEL T. URETA, and BERNADETTE T. URETA, Respondents. DECISION MENDOZA, J.:

These consolidated petitions for review on certiorari under Rule 45 of the 1997 Revised Rules of Civil Procedure assail the April 20, 2004 Decision1 of the Court of Appeals (CA), and its October 14, 2004 Resolution2 in C.A.-G.R. CV No. 71399, which affirmed with modification the April 26, 2001 Decision3 of the Regional Trial Court, Branch 9, Kalibo, Aklan (RTC) in Civil Case No. 5026. The Facts In his lifetime, Alfonso Ureta (Alfonso) begot 14 children, namely, Policronio, Liberato, Narciso, Prudencia, Vicente, Francisco, Inocensio, Roque, Adela, Wenefreda, Merlinda, Benedicto, Jorge, and Andres. The children of Policronio (Heirs of Policronio), are opposed to the rest of Alfonsos children and their descendants (Heirs of Alfonso). Alfonso was financially well-off during his lifetime. He owned several fishpens, a fishpond, a sari-sari store, a passenger jeep, and was engaged in the buying and selling of copra. Policronio, the eldest, was the only child of Alfonso who failed to finish schooling and instead worked on his fathers lands. Sometime in October 1969, Alfonso and four of his children, namely, Policronio, Liberato, Prudencia, and Francisco, met at the house of Liberato. Francisco, who was then a municipal judge, suggested that in order to reduce the inheritance taxes, their father should make it appear that he had sold some of his lands to his children. Accordingly, Alfonso executed four (4) Deeds of Sale covering several parcels of land in favor of Policronio,4Liberato,5 Prudencia,6 and his common-law wife, Valeriana Dela Cruz.7 The Deed of Sale executed on October 25, 1969, in favor of Policronio, covered six parcels of land, which are the properties in dispute in this case. Since the sales were only made for taxation purposes and no monetary consideration was given, Alfonso continued to own, possess and enjoy the lands and their produce. When Alfonso died on October 11, 1972, Liberato acted as the administrator of his fathers estate. He was later succeeded by his sister Prudencia, and then by her daughter, Carmencita Perlas. Except for a portion of parcel 5, the rest of the parcels transferred to Policronio were tenanted by the Fernandez Family. These tenants never turned over the produce of the lands to Policronio or any of his heirs, but to Alfonso and, later, to the administrators of his estate. Policronio died on November 22, 1974. Except for the said portion of parcel 5, neither Policronio nor his heirs ever took possession of the subject lands. On April 19, 1989, Alfonsos heirs executed a Deed of Extra-Judicial Partition,8 which included all the lands that were covered by the four (4) deeds of sale that were previously executed by Alfonso for taxation purposes. Conrado, Policronios eldest son, representing the Heirs of Policronio, signed the Deed of Extra-Judicial Partition in behalf of his co-heirs. After their fathers death, the Heirs of Policronio found tax declarations in his name covering the six parcels of land. On June 15, 1995, they obtained a copy of the Deed of Sale executed on October 25, 1969 by Alfonso in favor of Policronio. Not long after, on July 30, 1995, the Heirs of Policronio allegedly learned about the Deed of Extra-Judicial Partition involving Alfonsos estate when it was published in the July 19, 1995 issue of the Aklan Reporter.

Believing that the six parcels of land belonged to their late father, and as such, excluded from the Deed of Extra-Judicial Partition, the Heirs of Policronio sought to amicably settle the matter with the Heirs of Alfonso. Earnest efforts proving futile, the Heirs of Policronio filed a Complaint for Declaration of Ownership, Recovery of Possession, Annulment of Documents, Partition, and Damages9 against the Heirs of Alfonso before the RTC on November 17, 1995 where the following issues were submitted: (1) whether or not the Deed of Sale was valid; (2) whether or not the Deed of Extra-Judicial Partition was valid; and (3) who between the parties was entitled to damages. The Ruling of the RTC On April 26, 2001, the RTC dismissed the Complaint of the Heirs of Policronio and ruled in favor of the Heirs of Alfonso in a decision, the dispositive portion of which reads: WHEREFORE, the Court finds that the preponderance of evidence tilts in favor of the defendants, hence the instant case is hereby DISMISSED. The counterclaims are likewise DISMISSED. With costs against plaintiffs. SO ORDERED. The RTC found that the Heirs of Alfonso clearly established that the Deed of Sale was null and void. It held that the Heirs of Policronio failed to rebut the evidence of the Heirs of Alfonso, which proved that the Deed of Sale in the possession of the former was one of the four (4) Deeds of Sale executed by Alfonso in favor of his 3 children and second wife for taxation purposes; that although tax declarations were issued in the name of Policronio, he or his heirs never took possession of the subject lands except a portion of parcel 5; and that all the produce were turned over by the tenants to Alfonso and the administrators of his estate and never to Policronio or his heirs. The RTC further found that there was no money involved in the sale. Even granting that there was, as claimed by the Heirs of Policronio, 2,000.00 for six parcels of land, the amount was grossly inadequate. It was also noted that the aggregate area of the subject lands was more than double the average share adjudicated to each of the other children in the Deed of Extra-Judicial Partition; that the siblings of Policronio were the ones who shared in the produce of the land; and that the Heirs of Policronio only paid real estate taxes in 1996 and 1997. The RTC opined that Policronio must have been aware that the transfer was merely for taxation purposes because he did not subsequently take possession of the properties even after the death of his father. The Deed of Extra-Judicial Partition, on the other hand, was declared valid by the RTC as all the heirs of Alfonso were represented and received equal shares and all the requirements of a valid extra-judicial partition were met. The RTC considered Conrados claim that he did not understand the full significance of his signature when he signed in behalf of his co-heirs, as a gratutitous assertion. The RTC was of the view that when he admitted to have signed all the pages and personally appeared before the notary public, he was presumed to have understood their contents.

Lastly, neither party was entitled to damages. The Heirs of Alfonso failed to present testimony to serve as factual basis for moral damages, no document was presented to prove actual damages, and the Heirs of Policronio were found to have filed the case in good faith. The Ruling of the CA Aggrieved, the Heirs of Policronio appealed before the CA, which rendered a decision on April 20, 2004, the dispositive portion of which reads as follows: WHEREFORE, the appeal is PARTIALLY GRANTED. The appealed Decision, dated 26 April 2001, rendered by Hon. Judge Dean R. Telan of the Regional Trial Court of Kalibo, Aklan, Branch 9, is hereby AFFIRMED with MODIFICATION: 1.) The Deed of Sale in favor of Policronio Ureta, Sr., dated 25 October 1969, covering six (6) parcels of land is hereby declared VOID for being ABSOLUTELY SIMULATED; 2.) The Deed of Extra-Judicial Partition, dated 19 April 1989, is ANNULLED; 3.) The claim for actual and exemplary damages are DISMISSED for lack of factual and legal basis. The case is hereby REMANDED to the court of origin for the proper partition of ALFONSO URETAS Estate in accordance with Rule 69 of the 1997 Rules of Civil Procedure. No costs at this instance. SO ORDERED. The CA affirmed the finding of the RTC that the Deed of Sale was void. It found the Deed of Sale to be absolutely simulated as the parties did not intend to be legally bound by it. As such, it produced no legal effects and did not alter the juridical situation of the parties. The CA also noted that Alfonso continued to exercise all the rights of an owner even after the execution of the Deed of Sale, as it was undisputed that he remained in possession of the subject parcels of land and enjoyed their produce until his death. Policronio, on the other hand, never exercised any rights pertaining to an owner over the subject lands from the time they were sold to him up until his death. He never took or attempted to take possession of the land even after his fathers death, never demanded delivery of the produce from the tenants, and never paid realty taxes on the properties. It was also noted that Policronio never disclosed the existence of the Deed of Sale to his children, as they were, in fact, surprised to discover its existence. The CA, thus, concluded that Policronio must have been aware that the transfer was only made for taxation purposes. The testimony of Amparo Castillo, as to the circumstances surrounding the actual arrangement and agreement between the parties prior to the execution of the four (4) Deeds of Sale, was found by the CA to be unrebutted. The RTCs assessment of the credibility of her testimony was accorded respect, and the intention of the parties was given the primary consideration in determining the true nature of the contract. Contrary to the finding of the RTC though, the CA annulled the Deed of Extra-Judicial Partition due to the incapacity of one of the parties to give his consent to the contract. It held

that before Conrado could validly bind his co-heirs to the Deed of Extra-Judicial Partition, it was necessary that he be clothed with the proper authority. The CA ruled that a special power of attorney was required under Article 1878 (5) and (15) of the Civil Code. Without a special power of attorney, it was held that Conrado lacked the legal capactiy to give the consent of his co-heirs, thus, rendering the Deed of Extra-Judicial Partition voidable under Article 1390 (1) of the Civil Code. As a consequence, the CA ordered the remand of the case to the RTC for the proper partition of the estate, with the option that the parties may still voluntarily effect the partition by executing another agreement or by adopting the assailed Deed of Partition with the RTCs approval in either case. Otherwise, the RTC may proceed with the compulsory partition of the estate in accordance with the Rules. With regard to the claim for damages, the CA agreed with the RTC and dismissed the claim for actual and compensatory damages for lack of factual and legal basis. Both parties filed their respective Motions for Reconsideration, which were denied by the CA for lack of merit in a Resolution dated October 14, 2004. In their Motion for Reconsideration, the Heirs of Policronio argued that the RTC violated the best evidence rule in giving credence to the testimony of Amparo Castillo with regard to the simulation of the Deed of Sale, and that prescription had set in precluding any question on the validity of the contract. The CA held that the oral testimony was admissible under Rule 130, Section 9 (b) and (c), which provides that evidence aliunde may be allowed to explain the terms of the written agreement if the same failed to express the true intent and agreement of the parties thereto, or when the validity of the written agreement was put in issue. Furthermore, the CA found that the Heirs of Policronio waived their right to object to evidence aliunde having failed to do so during trial and for raising such only for the first time on appeal. With regard to prescription, the CA ruled that the action or defense for the declaration of the inexistence of a contract did not prescribe under Article 1410 of the Civil Code. On the other hand, the Heirs of Alfonso argued that the Deed of Extra-Judicial Partition should not have been annulled, and instead the preterited heirs should be given their share. The CA reiterated that Conrados lack of capacity to give his co-heirs consent to the extrajudicial settlement rendered the same voidable. Hence, the present Petitions for Review on Certiorari. The Issues The issues presented for resolution by the Heirs of Policronio in G.R. No. 165748 are as follows: I. Whether the Court of Appeals is correct in ruling that the Deed of Absolute Sale of 25 October 1969 is void for being absolutely fictitious and in relation therewith, may parol evidence be entertained to thwart its binding effect after the parties have both died?

Assuming that indeed the said document is simulated, whether or not the parties thereto including their successors in interest are estopped to question its validity, they being bound by Articles 1412 and 1421 of the Civil Code? II. Whether prescription applies to bar any question respecting the validity of the Deed of Absolute Sale dated 25 October 1969? Whether prescription applies to bar any collateral attack on the validity of the deed of absolute sale executed 21 years earlier? III. Whether the Court of Appeals correctly ruled in nullifying the Deed of Extrajudicial Partition because Conrado Ureta signed the same without the written authority from his siblings in contravention of Article 1878 in relation to Article 1390 of the Civil Code and in relation therewith, whether the defense of ratification and/or preterition raised for the first time on appeal may be entertained? The issues presented for resolution by the Heirs of Alfonso in G.R. No. 165930 are as follows: I. Whether or not grave error was committed by the Trial Court and Court of Appeals in declaring the Deed of Sale of subject properties as absolutely simulated and null and void thru parol evidence based on their factual findings as to its fictitious nature, and there being waiver of any objection based on violation of the parol evidence rule. II. Whether or not the Court of Appeals was correct in holding that Conrado Uretas lack of capacity to give his co-heirs consent to the Extra-Judicial Partition rendered the same voidable. III. Granting arguendo that Conrado Ureta was not authorized to represent his coheirs and there was no ratification, whether or not the Court of Appeals was correct in ordering the remand of the case to the Regional Trial Court for partition of the estate of Alfonso Ureta. IV. Since the sale in favor of Policronio Ureta Sr. was null and void ab initio, the properties covered therein formed part of the estate of the late Alfonso Ureta and was correctly included in the Deed of Extrajudicial Partition even if no prior action for nullification of the sale was filed by the heirs of Liberato Ureta.

V. Whether or not the heirs of Policronio Ureta Sr. can claim that estoppel based on Article 1412 of the Civil Code as well as the issue of prescription can still be raised on appeal. These various contentions revolve around two major issues, to wit: (1) whether the Deed of Sale is valid, and (2) whether the Deed of Extra-Judicial Partition is valid. Thus, the assigned errors shall be discussed jointly and inseriatim. The Ruling of the Court Validity of the Deed of Sale Two veritable legal presumptions bear on the validity of the Deed of Sale: (1) that there was sufficient consideration for the contract; and (2) that it was the result of a fair and regular private transaction. If shown to hold, these presumptions infer prima facie the transactions validity, except that it must yield to the evidence adduced.10 As will be discussed below, the evidence overcomes these two presumptions. Absolute Simulation First, the Deed of Sale was not the result of a fair and regular private transaction because it was absolutely simulated. The Heirs of Policronio argued that the land had been validly sold to Policronio as the Deed of Sale contained all the essential elements of a valid contract of sale, by virtue of which, the subject properties were transferred in his name as evidenced by the tax declaration. There being no invalidation prior to the execution of the Deed of Extra-Judicial Partition, the probity and integrity of the Deed of Sale should remain undiminished and accorded respect as it was a duly notarized public instrument. The Heirs of Policronio posited that his loyal services to his father and his being the eldest among Alfonsos children, might have prompted the old man to sell the subject lands to him at a very low price as an advance inheritance. They explained that Policronios failure to take possession of the subject lands and to claim their produce manifests a Filipino family practice wherein a child would take possession and enjoy the fruits of the land sold by a parent only after the latters death. Policronio simply treated the lands the same way his father Alfonso treated them - where his children enjoyed usufructuary rights over the properties, as opposed to appropriating them exclusively to himself. They contended that Policronios failure to take actual possession of the lands did not prove that he was not the owner as he was merely exercising his right to dispose of them. They argue that it was an error on the part of the CA to conclude that ownership by Policronio was not established by his failure to possess the properties sold. Instead, emphasis should be made on the fact that the tax declarations, being indicia of possession, were in Policronios name. They further argued that the Heirs of Alfonso failed to appreciate that the Deed of Sale was clear enough to convey the subject parcels of land. Citing jurisprudence, they contend that there is a presumption that an instrument sets out the true agreement of the parties thereto and that it was executed for valuable consideration,11 and where there is no doubt as to the

intention of the parties to a contract, the literal meaning of the stipulation shall control.12 Nowhere in the Deed of Sale is it indicated that the transfer was only for taxation purposes. On the contrary, the document clearly indicates that the lands were sold. Therefore, they averred that the literal meaning of the stipulation should control. The Court disagrees. The Court finds no cogent reason to deviate from the finding of the CA that the Deed of Sale is null and void for being absolutely simulated. The Civil Code provides: Art. 1345. Simulation of a contract may be absolute or relative. The former takes place when the parties do not intend to be bound at all; the latter, when the parties conceal their true agreement. Art. 1346. An absolutely simulated or fictitious contract is void. A relative simulation, when it does not prejudice a third person and is not intended for any purpose contrary to law, morals, good customs, public order or public policy binds the parties to their real agreement. Valerio v. Refresca13 is instructive on the matter of simulation of contracts: In absolute simulation, there is a colorable contract but it has no substance as the parties have no intention to be bound by it. The main characteristic of an absolute simulation is that the apparent contract is not really desired or intended to produce legal effect or in any way alter the juridical situation of the parties. As a result, an absolutely simulated or fictitious contract is void, and the parties may recover from each other what they may have given under the contract. However, if the parties state a false cause in the contract to conceal their real agreement, the contract is relatively simulated and the parties are still bound by their real agreement. Hence, where the essential requisites of a contract are present and the simulation refers only to the content or terms of the contract, the agreement is absolutely binding and enforceable between the parties and their successors in interest. Lacking, therefore, in an absolutely simulated contract is consent which is essential to a valid and enforceable contract.14 Thus, where a person, in order to place his property beyond the reach of his creditors, simulates a transfer of it to another, he does not really intend to divest himself of his title and control of the property; hence, the deed of transfer is but a sham.15 Similarly, in this case, Alfonso simulated a transfer to Policronio purely for taxation purposes, without intending to transfer ownership over the subject lands. The primary consideration in determining the true nature of a contract is the intention of the parties. If the words of a contract appear to contravene the evident intention of the parties, the latter shall prevail. Such intention is determined not only from the express terms of their agreement, but also from the contemporaneous and subsequent acts of the parties.16 The true intention of the parties in this case was sufficiently proven by the Heirs of Alfonso. The Heirs of Alfonso established by a preponderance of evidence17 that the Deed of Sale was one of the four (4) absolutely simulated Deeds of Sale which involved no actual monetary consideration, executed by Alfonso in favor of his children, Policronio, Liberato, and Prudencia, and his second wife, Valeriana, for taxation purposes. Amparo Castillo, the daughter of Liberato, testified, to wit:

Q: Now sometime in the year 1969 can you recall if your grandfather and his children [met] in your house? A: Yes sir, that was sometime in October 1969 when they [met] in our house, my grandfather, my late uncle Policronio Ureta, my late uncle Liberato Ureta, my uncle Francisco Ureta, and then my auntie Prudencia Ureta they talk[ed] about, that idea came from my uncle Francisco Ureta to [sell] some parcels of land to his children to lessen the inheritance tax whatever happened to my grandfather, actually no money involved in this sale. Q: Now you said there was that agreement, verbal agreement. [W]here were you when this Alfonso Ureta and his children gather[ed] in your house? A: I was near them in fact I heard everything they were talking [about] xxx Q: Were there documents of sale executed by Alfonso Ureta in furtherance of their verbal agreement? A: Yes sir. Q: To whom in particular did your grandfather Alfonso Ureta execute this deed of sale without money consideration according to you? A: To my uncle Policronio Ureta and to Prudencia Ureta Panadero. Q: And who else? A: To Valeriana dela Cruz. Q: How about your father? A: He has.18 The other Deeds of Sale executed by Alfonso in favor of his children Prudencia and Liberato, and second wife Valeriana, all bearing the same date of execution, were duly presented in evidence by the Heirs of Alfonso, and were uncontested by the Heirs of Policronio. The lands which were the subject of these Deeds of Sale were in fact included in the Deed of ExtraJudicial Partition executed by all the heirs of Alfonso, where it was expressly stipulated: That the above-named Amparo U. Castillo, Prudencia U. Paradero, Conrado B. Ureta and Merlinda U. Rivera do hereby recognize and acknowledge as a fact that the properties presently declared in their respective names or in the names of their respective parents and are included in the foregoing instrument are actually the properties of the deceased Alfonso Ureta and were transferred only for the purpose of effective administration and development and convenience in the payment of taxes and, therefore, all instruments conveying or affecting the transfer of said properties are null and void from the beginning.19 As found by the CA, Alfonso continued to exercise all the rights of an owner even after the execution of the Deeds of Sale. It was undisputed that Alfonso remained in possession of the

subject lands and enjoyed their produce until his death. No credence can be given to the contention of the Heirs of Policrionio that their father did not take possession of the subject lands or enjoyed the fruits thereof in deference to a Filipino family practice. Had this been true, Policronio should have taken possession of the subject lands after his father died. On the contrary, it was admitted that neither Policronio nor his heirs ever took possession of the subject lands from the time they were sold to him, and even after the death of both Alfonso and Policronio. It was also admitted by the Heirs of Policronio that the tenants of the subject lands never turned over the produce of the properties to Policronio or his heirs but only to Alfonso and the administrators of his estate. Neither was there a demand for their delivery to Policronio or his heirs. Neither did Policronio ever pay real estate taxes on the properties, the only payment on record being those made by his heirs in 1996 and 1997 ten years after his death. In sum, Policronio never exercised any rights pertaining to an owner over the subject lands. The most protuberant index of simulation of contract is the complete absence of an attempt in any manner on the part of the ostensible buyer to assert rights of ownership over the subject properties. Policronios failure to take exclusive possession of the subject properties or, in the alternative, to collect rentals, is contrary to the principle of ownership. Such failure is a clear badge of simulation that renders the whole transaction void. 20 It is further telling that Policronio never disclosed the existence of the Deed of Sale to his children. This, coupled with Policronios failure to exercise any rights pertaining to an owner of the subject lands, leads to the conclusion that he was aware that the transfer was only made for taxation purposes and never intended to bind the parties thereto. As the above factual circumstances remain unrebutted by the Heirs of Policronio, the factual findings of the RTC, which were affirmed by the CA, remain binding and conclusive upon this Court.21 It is clear that the parties did not intend to be bound at all, and as such, the Deed of Sale produced no legal effects and did not alter the juridical situation of the parties. The Deed of Sale is, therefore, void for being absolutely simulated pursuant to Article 1409 (2) of the Civil Code which provides: Art. 1409. The following contracts are inexistent and void from the beginning: xxx (2) Those which are absolutely simulated or fictitious; xxx For guidance, the following are the most fundamental characteristics of void or inexistent contracts: 1) As a general rule, they produce no legal effects whatsoever in accordance with the principle "quod nullum est nullum producit effectum." 2) They are not susceptible of ratification.

3) The right to set up the defense of inexistence or absolute nullity cannot be waived or renounced. 4) The action or defense for the declaration of their inexistence or absolute nullity is imprescriptible. 5) The inexistence or absolute nullity of a contract cannot be invoked by a person whose interests are not directly affected.22 Since the Deed of Sale is void, the subject properties were properly included in the Deed of Extra-Judicial Partition of the estate of Alfonso. Absence and Inadequacy of Consideration The second presumption is rebutted by the lack of consideration for the Deed of Sale. In their Answer,23 the Heirs of Alfonso initially argued that the Deed of Sale was void for lack of consideration, and even granting that there was consideration, such was inadequate. The Heirs of Policronio counter that the defenses of absence or inadequacy of consideration are not grounds to render a contract void. The Heirs of Policronio contended that under Article 1470 of the Civil Code, gross inadequacy of the price does not affect a contract of sale, except as it may indicate a defect in the consent, or that the parties really intended a donation or some other act or contract. Citing jurisprudence, they argued that inadequacy of monetary consideration does not render a conveyance inexistent as liberality may be sufficient cause for a valid contract, whereas fraud or bad faith may render it either rescissible or voidable, although valid until annulled.24 Thus, they argued that if the contract suffers from inadequate consideration, it remains valid until annulled, and the remedy of rescission calls for judicial intervention, which remedy the Heirs of Alfonso failed to take. It is further argued that even granting that the sale of the subject lands for a consideration of 2,000.00 was inadequate, absent any evidence of the fair market value of the land at the time of its sale, it cannot be concluded that the price at which it was sold was inadequate.25 As there is nothing in the records to show that the Heirs of Alfonso supplied the true value of the land in 1969, the amount of 2,000.00 must thus stand as its saleable value. On this issue, the Court finds for the Heirs of Alfonso. For lack of consideration, the Deed of Sale is once again found to be void. It states that Policronio paid, and Alfonso received, the 2,000.00 purchase price on the date of the signing of the contract: That I, ALFONSO F. URETA, x x x for and in consideration of the sum of TWO THOUSAND (2,000.00) PESOS, Philippine Currency, to me in hand paid by POLICRONIO M. URETA, x x x, do hereby CEDE, TRANSFER, and CONVEY, by way of absolute sale, x x x six (6) parcels of land x x x.26 [Emphasis ours] Although, on its face, the Deed of Sale appears to be supported by valuable consideration, the RTC found that there was no money involved in the sale.27 This finding was affirmed by

the CA in ruling that the sale is void for being absolutely simulated. Considering that there is no cogent reason to deviate from such factual findings, they are binding on this Court. It is well-settled in a long line of cases that where a deed of sale states that the purchase price has been paid but in fact has never been paid, the deed of sale is null and void for lack of consideration.28 Thus, although the contract states that the purchase price of 2,000.00 was paid by Policronio to Alfonso for the subject properties, it has been proven that such was never in fact paid as there was no money involved. It must, therefore, follow that the Deed of Sale is void for lack of consideration. Given that the Deed of Sale is void, it is unnecessary to discuss the issue on the inadequacy of consideration. Parol Evidence and Hearsay The Heirs of Policronio aver that the rules on parol evidence and hearsay were violated by the CA in ruling that the Deed of Sale was void. They argued that based on the parol evidence rule, the Heirs of Alfonso and, specifically, Amparo Castillo, were not in a position to prove the terms outside of the contract because they were not parties nor successors-in-interest in the Deed of Sale in question. Thus, it is argued that the testimony of Amparo Castillo violates the parol evidence rule. Stemming from the presumption that the Heirs of Alfonso were not parties to the contract, it is also argued that the parol evidence rule may not be properly invoked by either party in the litigation against the other, where at least one of the parties to the suit is not a party or a privy of a party to the written instrument in question and does not base a claim on the instrument or assert a right originating in the instrument or the relation established thereby.29 Their arguments are untenable. The objection against the admission of any evidence must be made at the proper time, as soon as the grounds therefor become reasonably apparent, and if not so made, it will be understood to have been waived. In the case of testimonial evidence, the objection must be made when the objectionable question is asked or after the answer is given if the objectionable features become apparent only by reason of such answer.30 In this case, the Heirs of Policronio failed to timely object to the testimony of Amparo Castillo and they are, thus, deemed to have waived the benefit of the parol evidence rule. Granting that the Heirs of Policronio timely objected to the testimony of Amparo Castillo, their argument would still fail. Section 9 of Rule 130 of the Rules of Court provides: Section 9. Evidence of written agreements. When the terms of an agreement have been reduced to writing, it is considered as containing all the terms agreed upon and there can be, between the parties and their successors in interest, no evidence of such terms other than the contents of the written agreement. However, a party may present evidence to modify, explain or add to the terms of written agreement if he puts in issue in his pleading:

(a) An intrinsic ambiguity, mistake or imperfection in the written agreement; (b) The failure of the written agreement to express the true intent and agreement of the parties thereto; (c) The validity of the written agreement; or (d) The existence of other terms agreed to by the parties or their successors in interest after the execution of the written agreement. The term "agreement" includes wills. [Emphasis ours] Paragraphs (b) and (c) are applicable in the case at bench. The failure of the Deed of Sale to express the true intent and agreement of the parties was clearly put in issue in the Answer31 of the Heirs of Alfonso to the Complaint. It was alleged that the Deed of Sale was only made to lessen the payment of estate and inheritance taxes and not meant to transfer ownership. The exception in paragraph (b) is allowed to enable the court to ascertain the true intent of the parties, and once the intent is clear, it shall prevail over what the document appears to be on its face.32 As the true intent of the parties was duly proven in the present case, it now prevails over what appears on the Deed of Sale. The validity of the Deed of Sale was also put in issue in the Answer, and was precisely one of the issues submitted to the RTC for resolution.33 The operation of the parol evidence rule requires the existence of a valid written agreement. It is, thus, not applicable in a proceeding where the validity of such agreement is the fact in dispute, such as when a contract may be void for lack of consideration.34 Considering that the Deed of Sale has been shown to be void for being absolutely simulated and for lack of consideration, the Heirs of Alfonso are not precluded from presenting evidence to modify, explain or add to the terms of the written agreement. The Heirs of Policronio must be in a state of confusion in arguing that the Heirs of Alfonso may not question the Deed of Sale for not being parties or successors-in-interest therein on the basis that the parol evidence rule may not be properly invoked in a proceeding or litigation where at least one of the parties to the suit is not a party or a privy of a party to the written instrument in question and does not base a claim on the instrument or assert a right originating in the instrument or the relation established thereby. If their argument was to be accepted, then the Heirs of Policronio would themselves be precluded from invoking the parol evidence rule to exclude the evidence of the Heirs of Alfonso. Indeed, the applicability of the parol evidence rule requires that the case be between parties and their successors-in-interest.35 In this case, both the Heirs of Alfonso and the Heirs of Policronio are successors-in-interest of the parties to the Deed of Sale as they claim rights under Alfonso and Policronio, respectively. The parol evidence rule excluding evidence aliunde, however, still cannot apply because the present case falls under two exceptions to the rule, as discussed above. With respect to hearsay, the Heirs of Policronio contended that the rule on hearsay was violated when the testimony of Amparo Castillo was given weight in proving that the subject

lands were only sold for taxation purposes as she was a person alien to the contract. Even granting that they did not object to her testimony during trial, they argued that it should not have been appreciated by the CA because it had no probative value whatsoever.36 The Court disagrees. It has indeed been held that hearsay evidence whether objected to or not cannot be given credence for having no probative value.37 This principle, however, has been relaxed in cases where, in addition to the failure to object to the admissibility of the subject evidence, there were other pieces of evidence presented or there were other circumstances prevailing to support the fact in issue. In Top-Weld Manufacturing, Inc. v. ECED S.A.,38 this Court held: Hearsay evidence alone may be insufficient to establish a fact in an injunction suit (Parker v. Furlong, 62 P. 490) but, when no objection is made thereto, it is, like any other evidence, to be considered and given the importance it deserves. (Smith v. Delaware & Atlantic Telegraph & Telephone Co., 51 A 464). Although we should warn of the undesirability of issuing judgments solely on the basis of the affidavits submitted, where as here, said affidavits are overwhelming, uncontroverted by competent evidence and not inherently improbable, we are constrained to uphold the allegations of the respondents regarding the multifarious violations of the contracts made by the petitioner. In the case at bench, there were other prevailing circumstances which corroborate the testimony of Amparo Castillo. First, the other Deeds of Sale which were executed in favor of Liberato, Prudencia, and Valeriana on the same day as that of Policronios were all presented in evidence. Second, all the properties subject therein were included in the Deed of Extra-Judicial Partition of the estate of Alfonso. Third, Policronio, during his lifetime, never exercised acts of ownership over the subject properties (as he never demanded or took possession of them, never demanded or received the produce thereof, and never paid real estate taxes thereon). Fourth, Policronio never informed his children of the sale. As the Heirs of Policronio failed to controvert the evidence presented, and to timely object to the testimony of Amparo Castillo, both the RTC and the CA correctly accorded probative weight to her testimony. Prior Action Unnecessary The Heirs of Policronio averred that the Heirs of Alfonso should have filed an action to declare the sale void prior to executing the Deed of Extra-Judicial Partition. They argued that the sale should enjoy the presumption of regularity, and until overturned by a court, the Heirs of Alfonso had no authority to include the land in the inventory of properties of Alfonsos estate. By doing so, they arrogated upon themselves the power of invalidating the Deed of Sale which is exclusively vested in a court of law which, in turn, can rule only upon the observance of due process. Thus, they contended that prescription, laches, or estoppel have set in to militate against assailing the validity of the sale. The Heirs of Policronio are mistaken. A simulated contract of sale is without any cause or consideration, and is, therefore, null and void; in such case, no independent action to rescind or annul the contract is necessary, and it may be treated as non-existent for all purposes.39 A void or inexistent contract is one which has no force and effect from the beginning, as if it has never been entered into, and which cannot be validated either by time or ratification. A void contract produces no effect

whatsoever either against or in favor of anyone; it does not create, modify or extinguish the juridical relation to which it refers.40 Therefore, it was not necessary for the Heirs of Alfonso to first file an action to declare the nullity of the Deed of Sale prior to executing the Deed of Extra-Judicial Partition. Personality to Question Sale The Heirs of Policronio contended that the Heirs of Alfonso are not parties, heirs, or successors-in-interest under the contemplation of law to clothe them with the personality to question the Deed of Sale. They argued that under Article 1311 of the Civil Code, contracts take effect only between the parties, their assigns and heirs. Thus, the genuine character of a contract which personally binds the parties cannot be put in issue by a person who is not a party thereto. They posited that the Heirs of Alfonso were not parties to the contract; neither did they appear to be beneficiaries by way of assignment or inheritance. Unlike themselves who are direct heirs of Policronio, the Heirs of Alfonso are not Alfonsos direct heirs. For the Heirs of Alfonso to qualify as parties, under Article 1311 of the Civil Code, they must first prove that they are either heirs or assignees. Being neither, they have no legal standing to question the Deed of Sale. They further argued that the sale cannot be assailed for being barred under Article 1421 of the Civil Code which provides that the defense of illegality of a contract is not available to third persons whose interests are not directly affected. Again, the Court disagrees. Article 1311 and Article 1421 of the Civil Code provide: Art. 1311. Contracts take effect only between the parties, their assigns and heirs, x x x Art. 1421. The defense of illegality of contracts is not available to third persons whose interests are not directly affected. The right to set up the nullity of a void or non-existent contract is not limited to the parties, as in the case of annullable or voidable contracts; it is extended to third persons who are directly affected by the contract. Thus, where a contract is absolutely simulated, even third persons who may be prejudiced thereby may set up its inexistence.41 The Heirs of Alfonso are the children of Alfonso, with his deceased children represented by their children (Alfonsos grandchildren). The Heirs of Alfonso are clearly his heirs and successors-ininterest and, as such, their interests are directly affected, thereby giving them the right to question the legality of the Deed of Sale. Inapplicability of Article 842 The Heirs of Policronio further argued that even assuming that the Heirs of Alfonso have an interest in the Deed of Sale, they would still be precluded from questioning its validity. They posited that the Heirs of Alfonso must first prove that the sale of Alfonsos properties to Policronio substantially diminished their successional rights or that their legitimes would be unduly prejudiced, considering that under Article 842 of the Civil Code, one who has compulsory heirs may dispose of his estate provided that he does not contravene the provisions of the Civil Code with regard to the legitime of said heirs. Having failed to do so, they argued that the Heirs of Alfonso should be precluded from questioning the validity of the Deed of Sale.

Still, the Court disagrees. Article 842 of the Civil Code provides: Art. 842. One who has no compulsory heirs may dispose by will of all his estate or any part of it in favor of any person having capacity to succeed. One who has compulsory heirs may dispose of his estate provided he does not contravene the provisions of this Code with regard to the legitime of said heirs. This article refers to the principle of freedom of disposition by will. What is involved in the case at bench is not a disposition by will but by Deed of Sale. Hence, the Heirs of Alfonso need not first prove that the disposition substantially diminished their successional rights or unduly prejudiced their legitimes. Inapplicability of Article 1412 The Heirs of Policronio contended that even assuming that the contract was simulated, the Heirs of Alfonso would still be barred from recovering the properties by reason of Article 1412 of the Civil Code, which provides that if the act in which the unlawful or forbidden cause does not constitute a criminal offense, and the fault is both on the contracting parties, neither may recover what he has given by virtue of the contract or demand the performance of the others undertaking. As the Heirs of Alfonso alleged that the purpose of the sale was to avoid the payment of inheritance taxes, they cannot take from the Heirs of Policronio what had been given to their father. On this point, the Court again disagrees. Article 1412 of the Civil Code is as follows: Art. 1412. If the act in which the unlawful or forbidden cause consists does not constitute a criminal offense, the following rules shall be observed: (1) When the fault is on the part of both contracting parties, neither may recover what he has given by virtue of the contract, or demand the performance of the others undertaking; (2) When only one of the contracting parties is at fault, he cannot recover what he has given by reason of the contract, or ask for the fulfillment 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. Article 1412 is not applicable to fictitious or simulated contracts, because they refer to contracts with an illegal cause or subject-matter.42 This article presupposes the existence of a cause, it cannot refer to fictitious or simulated contracts which are in reality nonexistent.43 As it has been determined that the Deed of Sale is a simulated contract, the provision cannot apply to it. Granting that the Deed of Sale was not simulated, the provision would still not apply. Since the subject properties were included as properties of Alfonso in the Deed of Extra-Judicial Partition, they are covered by corresponding inheritance and estate taxes. Therefore, tax evasion, if at all present, would not arise, and Article 1412 would again be inapplicable.

Prescription From the position that the Deed of Sale is valid and not void, the Heirs of Policronio argued that any question regarding its validity should have been initiated through judicial process within 10 years from its notarization in accordance with Article 1144 of the Civil Code. Since 21 years had already elapsed when the Heirs of Alfonso assailed the validity of the Deed of Sale in 1996, prescription had set in. Furthermore, since the Heirs of Alfonso did not seek to nullify the tax declarations of Policronio, they had impliedly acquiesced and given due recognition to the Heirs of Policronio as the rightful inheritors and should, thus, be barred from laying claim on the land. The Heirs of Policronio are mistaken. Article 1410 of the Civil Code provides: Art. 1410. The action for the declaration of the inexistence of a contract does not prescribe. This is one of the most fundamental characteristics of void or inexistent contracts.44 As the Deed of Sale is a void contract, the action for the declaration of its nullity, even if filed 21 years after its execution, cannot be barred by prescription for it is imprescriptible. Furthermore, the right to set up the defense of inexistence or absolute nullity cannot be waived or renounced.45 Therefore, the Heirs of Alfonso cannot be precluded from setting up the defense of its inexistence. Validity of the Deed of Extra-Judicial Partition The Court now resolves the issue of the validity of the Deed of Extra-Judicial Partition. Unenforceability The Heirs of Alfonso argued that the CA was mistaken in annulling the Deed of Extra-Judicial Partition due to the incapacity of Conrado to give the consent of his co-heirs for lack of a special power of attorney. They contended that what was involved was not the capacity to give consent in behalf of the co-heirs but the authority to represent them. They argue that the Deed of Extra-Judicial Partition is not a voidable or an annullable contract under Article 1390 of the Civil Code, but rather, it is an unenforceable or, more specifically, an unauthorized contract under Articles 1403 (1) and 1317 of the Civil Code. As such, the Deed of ExtraJudicial Partition should not be annulled but only be rendered unenforceable against the siblings of Conrado. They further argued that under Article 1317 of the Civil Code, when the persons represented without authority have ratified the unauthorized acts, the contract becomes enforceable and binding. They contended that the Heirs of Policronio ratified the Deed of Extra-Judicial Partition when Conrado took possession of one of the parcels of land adjudicated to him and his siblings, and when another parcel was used as collateral for a loan entered into by some of the Heirs of Policronio. The Deed of Extra-Judicial Partition having been ratified and its benefits accepted, the same thus became enforceable and binding upon them. The Heirs of Alfonso averred that granting arguendo that Conrado was not authorized to represent his co-heirs and there was no ratification, the CA should not have remanded the

case to the RTC for partition of Alfonsos estate. They argued that the CA should not have applied the Civil Code general provision on contracts, but the special provisions dealing with succession and partition. They contended that contrary to the ruling of the CA, the extrajudicial parition was not an act of strict dominion, as it has been ruled that partition of inherited land is not a conveyance but a confirmation or ratification of title or right to the land.46 Therefore, the law requiring a special power of attorney should not be applied to partitions. On the other hand, the Heirs of Policronio insisted that the CA pronouncement on the invalidity of the Deed of Extra-Judicial Partition should not be disturbed because the subject properties should not have been included in the estate of Alfonso, and because Conrado lacked the written authority to represent his siblings. They argued with the CA in ruling that a special power of attorney was required before Conrado could sign in behalf of his co-heirs. The Heirs of Policronio denied that they ratified the Deed of Extra-Judicial Partition. They claimed that there is nothing on record that establishes that they ratified the partition. Far from doing so, they precisely questioned its execution by filing a complaint. They further argued that under Article 1409 (3) of the Civil Code, ratification cannot be invoked to validate the illegal act of including in the partition those properties which do not belong to the estate as it provides another mode of acquiring ownership not sanctioned by law. Furthermore, the Heirs of Policronio contended that the defenses of unenforceability, ratification, and preterition are being raised for the first time on appeal by the Heirs of Alfonso. For having failed to raise them during the trial, the Heirs of Alfonso should be deemed to have waived their right to do so. The Court agrees in part with the Heirs of Alfonso. To begin, although the defenses of unenforceability, ratification and preterition were raised by the Heirs of Alfonso for the first time on appeal, they are concomitant matters which may be taken up. As long as the questioned items bear relevance and close relation to those specifically raised, the interest of justice would dictate that they, too, must be considered and resolved. The rule that only theories raised in the initial proceedings may be taken up by a party thereto on appeal should refer to independent, not concomitant matters, to support or oppose the cause of action.47 In the RTC, the Heirs of Policronio alleged that Conrados consent was vitiated by mistake and undue influence, and that he signed the Deed of Extra-Judicial Partition without the authority or consent of his co-heirs. The RTC found that Conrados credibility had faltered, and his claims were rejected by the RTC as gratuitous assertions. On the basis of such, the RTC ruled that Conrado duly represented his siblings in the Deed of Extra-Judicial Partition. On the other hand, the CA annulled the Deed of Extra-Judicial Partition under Article 1390 (1) of the Civil Code, holding that a special power of attorney was lacking as required under Article 1878 (5) and (15) of the Civil Code. These articles are as follows: Art. 1878. Special powers of attorney are necessary in the following cases: xxx

(5) To enter into any contract by which the ownership of an immovable is transmitted or acquired either gratuitously or for a valuable consideration; xxx (15) Any other act of strict dominion. Art. 1390. The following contracts are voidable or annullable, even though there may have been no damage to the contracting parties: (1) Those where one of the parties is incapable of giving consent to a contract; (2) Those where the consent is vitiated by mistake, violence, intimidation, undue influence or fraud. These contracts are binding, unless they are annulled by a proper action in court. They are susceptible of ratification. This Court finds that Article 1878 (5) and (15) is inapplicable to the case at bench. It has been held in several cases48 that partition among heirs is not legally deemed a conveyance of real property resulting in change of ownership. It is not a transfer of property from one to the other, but rather, it is a confirmation or ratification of title or right of property that an heir is renouncing in favor of another heir who accepts and receives the inheritance. It is merely a designation and segregation of that part which belongs to each heir. The Deed of ExtraJudicial Partition cannot, therefore, be considered as an act of strict dominion. Hence, a special power of attorney is not necessary. In fact, as between the parties, even an oral partition by the heirs is valid if no creditors are affected. The requirement of a written memorandum under the statute of frauds does not apply to partitions effected by the heirs where no creditors are involved considering that such transaction is not a conveyance of property resulting in change of ownership but merely a designation and segregation of that part which belongs to each heir.49 Neither is Article 1390 (1) applicable. Article 1390 (1) contemplates the incapacity of a party to give consent to a contract. What is involved in the case at bench though is not Conrados incapacity to give consent to the contract, but rather his lack of authority to do so. Instead, Articles 1403 (1), 1404, and 1317 of the Civil Code find application to the circumstances prevailing in this case. They are as follows: Art. 1403. The following contracts are unenforceable, unless they are ratified: (1) Those entered into in the name of another person by one who has been given no authority or legal representation, or who has acted beyond his powers; Art. 1404. Unauthorized contracts are governed by Article 1317 and the principles of agency in Title X of this Book. 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. Such was similarly held in the case of Badillo v. Ferrer: The Deed of Extrajudicial Partition and Sale is not a voidable or an annullable contract under Article 1390 of the New Civil Code. Article 1390 renders a contract voidable if one of the parties is incapable of giving consent to the contract or if the contracting partys consent is vitiated by mistake, violence, intimidation, undue influence or fraud. x x x The deed of extrajudicial parition and sale is an unenforceable or, more specifically, an unauthorized contract under Articles 1403(1) and 1317 of the New Civil Code.50 Therefore, Conrados failure to obtain authority from his co-heirs to sign the Deed of ExtraJudicial Partition in their behalf did not result in his incapacity to give consent so as to render the contract voidable, but rather, it rendered the contract valid but unenforceable against Conrados co-heirs for having been entered into without their authority. A closer review of the evidence on record, however, will show that the Deed of Extra-Judicial Partition is not unenforceable but, in fact, valid, binding and enforceable against all the Heirs of Policronio for having given their consent to the contract. Their consent to the Deed of Extra-Judicial Partition has been proven by a preponderance of evidence. Regarding his alleged vitiated consent due to mistake and undue influence to the Deed of Extra-Judicial Partition, Conrado testified, to wit: Q: Mr. Ureta you remember having signed a document entitled deed of extra judicial partition consisting of 11 pages and which have previously [been] marked as Exhibit I for the plaintiffs? A: Yes sir. Q: Can you recall where did you sign this document? A: The way I remember I signed that in our house. Q: And who requested or required you to sign this document? A: My aunties. Q: Who in particular if you can recall? A: Nay Pruding Panadero. Q: You mean that this document that you signed was brought to your house by your Auntie Pruding Pa[r]adero [who] requested you to sign that document? A: When she first brought that document I did not sign that said document because I [did] no[t] know the contents of that document.

Q: How many times did she bring this document to you [until] you finally signed the document? A: Perhaps 3 times. Q: Can you tell the court why you finally signed it? A: Because the way she explained it to me that the land of my grandfather will be partitioned. Q: When you signed this document were your brothers and sisters who are your co-plaintiffs in this case aware of your act to sign this document? A: They do not know. xxx Q: After you have signed this document did you inform your brothers and sisters that you have signed this document? No I did not. 51 xxx Q: Now you read the document when it was allegedly brought to your house by your aunt Pruding Pa[r]adero? A: I did not read it because as I told her I still want to ask the advise of my brothers and sisters. Q: So do I get from you that you have never read the document itself or any part thereof? A: I have read the heading. xxx Q: And why is it that you did not read all the pages of this document because I understand that you know also how to read in English? A: Because the way Nay Pruding explained to me is that the property of my grandfather will be partitioned that is why I am so happy. xxx Q: You mean to say that after you signed this deed of extra judicial partition up to the present you never informed them? A: Perhaps they know already that I have signed and they read already the document and they have read the document. Q: My question is different, did you inform them?

A: The document sir? I did not tell them. Q: Even until now? A: Until now I did not inform them.52 This Court finds no cogent reason to reverse the finding of the RTC that Conrados explanations were mere gratuitous assertions not entitled to any probative weight. The RTC found Conrados credibility to have faltered when he testified that perhaps his siblings were already aware of the Deed of Extra-Judicial Partition. The RTC was in the best position to judge the credibility of the witness testimony. The CA also recognized that Conrados consent was not vitiated by mistake and undue influence as it required a special power of attorney in order to bind his co-heirs and, as such, the CA thereby recognized that his signature was binding to him but not with respect to his co-heirs. Findings of fact of the trial court, particularly when affirmed by the CA, are binding to this Court.53 Furthermore, this Court notes other peculiarities in Conrados testimony. Despite claims of undue influence, there is no indication that Conrado was forced to sign by his aunt, Prudencia Paradero. In fact, he testified that he was happy to sign because his grandfathers estate would be partitioned. Conrado, thus, clearly understood the document he signed. It is also worth noting that despite the document being brought to him on three separate occasions and indicating his intention to inform his siblings about it, Conrado failed to do so, and still neglected to inform them even after he had signed the partition. All these circumstances negate his claim of vitiated consent. Having duly signed the Deed of ExtraJudicial Partition, Conrado is bound to it. Thus, it is enforceable against him. Although Conrados co-heirs claimed that they did not authorize Conrado to sign the Deed of Extra-Judicial Partition in their behalf, several circumstances militate against their contention. First, the Deed of Extra-Judicial Partition was executed on April 19, 1989, and the Heirs of Policronio claim that they only came to know of its existence on July 30, 1995 through an issue of the Aklan Reporter. It is difficult to believe that Conrado did not inform his siblings about the Deed of Extra-Judicial Partition or at least broach its subject with them for more than five years from the time he signed it, especially after indicating in his testimony that he had intended to do so. Second, Conrado retained possession of one of the parcels of land adjudicated to him and his co-heirs in the Deed of Extra-Judicial Partition. Third, after the execution of the partition on April 19, 1989 and more than a year before they claimed to have discovered the existence of the Deed of Extra-Judicial Partition on July 30, 1995, some of the Heirs of Policronio, namely, Rita Solano, Macario Ureta, Lilia Tayco, and Venancio Ureta executed on June 1, 1994, a Special Power of Attorney54 in favor of their sister Gloria Gonzales, authorizing her to obtain a loan from a bank and to mortgage one of the parcels of land adjudicated to them in the Deed of Extra-Judicial Partition to secure payment of the loan. They were able to obtain the loan using the land as collateral, over which a Real Estate Mortgage55 was constituted. Both the Special Power of Attorney and the Real Estate Mortgage were presented in evidence in the RTC, and were not controverted or denied by the Heirs of Policronio. Fourth, in the letter dated August 15, 1995, sent by the counsel of the Heirs of Policronio to the Heirs of Alfonso requesting for amicable settlement, there was no mention that

Conrados consent to the Deed of Extra-Judicial Partition was vitiated by mistake and undue influence or that they had never authorized Conrado to represent them or sign the document on their behalf. It is questionable for such a pertinent detail to have been omitted. The body of said letter is reproduced hereunder as follows: Greetings: Your nephews and nieces, children of your deceased brother Policronio Ureta, has referred to me for appropriate legal action the property they inherited from their father consisting of six (6) parcels of land which is covered by a Deed of Absolute Sale dated October 25, 1969. These properties ha[ve] already been transferred to the name of their deceased father immediately after the sale, machine copy of the said Deed of Sale is hereto attached for your ready reference. Lately, however, there was published an Extra-judicial Partition of the estate of Alfonso Ureta, which to the surprise of my clients included the properties already sold to their father before the death of said Alfonso Ureta. This inclusion of their property is erroneous and illegal because these properties were covered by the Deed of Absolute Sale in favor of their father Policronio Ureta no longer form part of the estate of Alfonso Ureta. Since Policronio Ureta has [sic] died in 1974 yet, these properties have passed by hereditary succession to his children who are now the true and lawful owners of the said properties. My clients are still entitled to a share in the estate of Alfonso Ureta who is also their grandfather as they have stepped into the shoes of their deceased father Policronio Ureta. But this estate of Alfonso Ureta should already exclude the six (6) parcels of land covered by the Deed of Absolute Sale in favor of Policronio Ureta. My clients cannot understand why the properties of their late father [should] be included in the estate of their grandfather and be divided among his brothers and sisters when said properties should only be divided among themselves as children of Policronio Ureta. Since this matter involves very close members of the same family, I have counseled my clients that an earnest effort towards a compromise or amicable settlement be first explored before resort to judicial remedy is pursued. And a compromise or amicable settlement can only be reached if all the parties meet and discuss the problem with an open mind. To this end, I am suggesting a meeting of the parties on September 16, 1995 at 2:00 P.M. at B Place Restaurant at C. Laserna St., Kalibo, Aklan. It would be best if the parties can come or be represented by their duly designated attorney-in-fact together with their lawyers if they so desire so that the problem can be discussed unemotionally and intelligently. I would, however, interpret the failure to come to the said meeting as an indication that the parties are not willing to or interested in amicable settlement of this matter and as a go signal for me to resort to legal and/or judicial remedies to protest the rights of my clients. Thank you very much.56 Based on the foregoing, this Court concludes that the allegation of Conrados vitiated consent and lack of authority to sign in behalf of his co-heirs was a mere afterthought on the part of the Heirs of Policronio. It appears that the Heirs of Policronio were not only aware of the existence of the Deed of Extra-Judicial Partition prior to June 30, 1995 but had, in fact, given Conrado authority to sign in their behalf. They are now estopped from questioning its

legality, and the Deed of Extra-Judicial Partition is valid, binding, and enforceable against them. In view of the foregoing, there is no longer a need to discuss the issue of ratification. Preterition The Heirs of Alfonso were of the position that the absence of the Heirs of Policronio in the partition or the lack of authority of their representative results, at the very least, in their preterition and not in the invalidity of the entire deed of partition. Assuming there was actual preterition, it did not render the Deed of Extra-Judicial Partition voidable. Citing Article 1104 of the Civil Code, they aver that a partition made with preterition of any of the compulsory heirs shall not be rescinded, but the heirs shall be proportionately obliged to pay the share of the person omitted. Thus, the Deed of Extra-Judicial Partition should not have been annulled by the CA. Instead, it should have ordered the share of the heirs omitted to be given to them. The Heirs of Alfonso also argued that all that remains to be adjudged is the right of the preterited heirs to represent their father, Policronio, and be declared entitled to his share. They contend that remand to the RTC is no longer necessary as the issue is purely legal and can be resolved by the provisions of the Civil Code for there is no dispute that each of Alfonsos heirs received their rightful share. Conrado, who received Policronios share, should then fully account for what he had received to his other co-heirs and be directed to deliver their share in the inheritance. These arguments cannot be given credence. Their posited theory on preterition is no longer viable. It has already been determined that the Heirs of Policronio gave their consent to the Deed of Extra-Judicial Partition and they have not been excluded from it. Nonetheless, even granting that the Heirs of Policronio were denied their lawful participation in the partition, the argument of the Heirs of Alfonso would still fail. Preterition under Article 854 of the Civil Code is as follows: Art. 854. The preterition or omission of one, some, or all of the compulsory heirs in the direct line, whether living at the time of the execution of the will or born after the death of the testator, shall annul the institution of heir; but the devises and legacies shall be valid insofar as they are not inofficious. If the omitted compulsory heirs should die before the testator, the institution shall be effectual, without prejudice to the right of representation. Preterition has been defined as the total omission of a compulsory heir from the inheritance. It consists in the silence of the testator with regard to a compulsory heir, omitting him in the testament, either by not mentioning him at all, or by not giving him anything in the hereditary property but without expressly disinheriting him, even if he is mentioned in the will in the latter case.57 Preterition is thus a concept of testamentary succession and requires a will. In the case at bench, there is no will involved. Therefore, preterition cannot apply.
1wphi1

Remand Unnecessary

The Deed of Extra-Judicial Partition is in itself valid for complying with all the legal requisites, as found by the RTC, to wit: A persual of the Deed of Extra-judicial Partition would reveal that all the heirs and children of Alfonso Ureta were represented therein; that nobody was left out; that all of them received as much as the others as their shares; that it distributed all the properties of Alfonso Ureta except a portion of parcel 29 containing an area of 14,000 square meters, more or less, which was expressly reserved; that Alfonso Ureta, at the time of his death, left no debts; that the heirs of Policronio Ureta, Sr. were represented by Conrado B. Ureta; all the parties signed the document, was witnessed and duly acknowledged before Notary Public Adolfo M. Iligan of Kalibo, Aklan; that the document expressly stipulated that the heirs to whom some of the properties were transferred before for taxation purposes or their children, expressly recognize and acknowledge as a fact that the properties were transferred only for the purpose of effective administration and development convenience in the payment of taxes and, therefore, all instruments conveying or effecting the transfer of said properties are null and void from the beginning (Exhs. 1-4, 7-d).58 Considering that the Deed of Sale has been found void and the Deed of Extra-Judicial Partition valid, with the consent of all the Heirs of Policronio duly given, there is no need to remand the case to the court of origin for partition.
1vvph!1

WHEREFORE, the petition in G.R. No. 165748 is DENIED. The petition in G.R. No. 165930 is GRANTED. The assailed April 20, 2004 Decision and October 14, 2004 Resolution of the Court of Appeals in CA-G.R. CV No. 71399, are hereby MODIFIED in this wise: (1) The Deed of Extra-Judicial Partition, dated April 19, 1989, is VALID, and (2) The order to remand the case to the court of origin is hereby DELETED. SO ORDERED. JOSE CATRAL MENDOZA Associate Justice

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. 166838 June 15, 2011

STA. LUCIA REALTY & DEVELOPMENT, Inc., Petitioner, vs. CITY OF PASIG, Respondent, MUNICIPALITY OF CAINTA, PROVINCE OF RIZAL, Intervenor. DECISION LEONARDO-DE CASTRO, J.: For review is the June 30, 2004 Decision1 and the January 27, 2005 Resolution2 of the Court of Appeals in CA-G.R. CV No. 69603, which affirmed with modification the August 10, 1998 Decision3 and October 9, 1998 Order4of the Regional Trial Court (RTC) of Pasig City, Branch 157, in Civil Case No. 65420. Petitioner Sta. Lucia Realty & Development, Inc. (Sta. Lucia) is the registered owner of several parcels of land with Transfer Certificates of Title (TCT) Nos. 39112, 39110 and 38457, all of which indicated that the lots were located in Barrio Tatlong Kawayan, Municipality of Pasig5 (Pasig). The parcel of land covered by TCT No. 39112 was consolidated with that covered by TCT No. 518403, which was situated in Barrio Tatlong Kawayan, Municipality of Cainta, Province of Rizal (Cainta). The two combined lots were subsequently partitioned into three, for which TCT Nos. 532250, 598424, and 599131, now all bearing the Cainta address, were issued. TCT No. 39110 was also divided into two lots, becoming TCT Nos. 92869 and 92870. The lot covered by TCT No. 38457 was not segregated, but a commercial building owned by Sta. Lucia East Commercial Center, Inc., a separate corporation, was built on it.6 Upon Pasigs petition to correct the location stated in TCT Nos. 532250, 598424, and 599131, the Land Registration Court, on June 9, 1995, ordered the amendment of the TCTs to read that the lots with respect to TCT No. 39112 were located in Barrio Tatlong Kawayan, Pasig City.7 On January 31, 1994, Cainta filed a petition8 for the settlement of its land boundary dispute with Pasig before the RTC, Branch 74 of Antipolo City (Antipolo RTC). This case, docketed as Civil Case No. 94-3006, is still pending up to this date. On November 28, 1995, Pasig filed a Complaint,9 docketed as Civil Case No. 65420, against Sta. Lucia for the collection of real estate taxes, including penalties and interests, on the lots covered by TCT Nos. 532250, 598424, 599131, 92869, 92870 and 38457, including the improvements thereon (the subject properties).

Sta. Lucia, in its Answer, alleged that it had been religiously paying its real estate taxes to Cainta, just like what its predecessors-in-interest did, by virtue of the demands and assessments made and the Tax Declarations issued by Cainta on the claim that the subject properties were within its territorial jurisdiction. Sta. Lucia further argued that since 1913, the real estate taxes for the lots covered by the above TCTs had been paid to Cainta.10 Cainta was allowed to file its own Answer-in-Intervention when it moved to intervene on the ground that its interest would be greatly affected by the outcome of the case. It averred that it had been collecting the real property taxes on the subject properties even before Sta. Lucia acquired them. Cainta further asseverated that the establishment of the boundary monuments would show that the subject properties are within its metes and bounds.11 Sta. Lucia and Cainta thereafter moved for the suspension of the proceedings, and claimed that the pending petition in the Antipolo RTC, for the settlement of boundary dispute between Cainta and Pasig, presented a "prejudicial question" to the resolution of the case.12 The RTC denied this in an Order dated December 4, 1996 for lack of merit. Holding that the TCTs were conclusive evidence as to its ownership and location,13 the RTC, on August 10, 1998, rendered a Decision in favor of Pasig: WHEREFORE, in view of the foregoing, judgment is hereby rendered in favor of [Pasig], ordering Sta. Lucia Realty and Development, Inc. to pay [Pasig]: 1) P273,349.14 representing unpaid real estate taxes and penalties as of 1996, plus interest of 2% per month until fully paid; 2) P50,000.00 as and by way of attorneys fees; and 3) The costs of suit. Judgment is likewise rendered against the intervenor Municipality of Cainta, Rizal, ordering it to refund to Sta. Lucia Realty and Development, Inc. the realty tax payments improperly collected and received by the former from the latter in the aggregate amount of P358, 403.68.14 After Sta. Lucia and Cainta filed their Notices of Appeal, Pasig, on September 11, 1998, filed a Motion for Reconsideration of the RTCs August 10, 1998 Decision. The RTC, on October 9, 1998, granted Pasigs motion in an Order15 and modified its earlier decision to include the realty taxes due on the improvements on the subject lots: WHEREFORE, premises considered, the plaintiffs motion for reconsideration is hereby granted. Accordingly, the Decision, dated August 10, 1998 is hereby modified in that the defendant is hereby ordered to pay plaintiff the amount of P5,627,757.07 representing the unpaid taxes and penalties on the improvements on the subject parcels of land whereon real estate taxes are adjudged as due for the year 1996.16 Accordingly, Sta. Lucia filed an Amended Notice of Appeal to include the RTCs October 9, 1998 Order in its protest.

On October 16, 1998, Pasig filed a Motion for Execution Pending Appeal, to which both Sta. Lucia and Cainta filed several oppositions, on the assertion that there were no good reasons to warrant the execution pending appeal.17 On April 15, 1999, the RTC ordered the issuance of a Writ of Execution against Sta. Lucia. On May 21, 1999, Sta. Lucia filed a Petition for Certiorari under Rule 65 of the Rules of Court with the Court of Appeals to assail the RTCs order granting the execution. Docketed as CAG.R. SP No. 52874, the petition was raffled to the First Division of the Court of Appeals, which on September 22, 2000, ruled in favor of Sta. Lucia, to wit: WHEREFORE, in view of the foregoing, the instant petition is hereby GIVEN DUE COURSE and GRANTED by this Court. The assailed Order dated April 15, 1999 in Civil Case No. 65420 granting the motion for execution pending appeal and ordering the issuance of a writ of execution pending appeal is hereby SET ASIDE and declared NULL and VOID.18 The Court of Appeals added that the boundary dispute case presented a "prejudicial question which must be decided before x x x Pasig can collect the realty taxes due over the subject properties."19 Pasig sought to have this decision reversed in a Petition for Certiorari filed before this Court on November 29, 2000, but this was denied on June 25, 2001 for being filed out of time.20 Meanwhile, the appeal filed by Sta. Lucia and Cainta was raffled to the (former) Seventh Division of the Court of Appeals and docketed as CA-G.R. CV No. 69603. On June 30, 2004, the Court of Appeals rendered its Decision, wherein it agreed with the RTCs judgment: WHEREFORE, the appealed Decision is hereby AFFIRMED with the MODIFICATION that the award of P50,000.00 attorneys fees is DELETED.21 In affirming the RTC, the Court of Appeals declared that there was no proper legal basis to suspend the proceedings.22 Elucidating on the legal meaning of a "prejudicial question," it held that "there can be no prejudicial question when the cases involved are both civil."23 The Court of Appeals further held that the elements of litis pendentia and forum shopping, as alleged by Cainta to be present, were not met. Sta. Lucia and Cainta filed separate Motions for Reconsideration, which the Court of Appeals denied in a Resolution dated January 27, 2005. Undaunted, Sta. Lucia and Cainta filed separate Petitions for Certiorari with this Court. Caintas petition, docketed as G.R. No. 166856 was denied on April 13, 2005 for Caintas failure to show any reversible error. Sta. Lucias own petition is the one subject of this decision.24 In praying for the reversal of the June 30, 2004 judgment of the Court of Appeals, Sta. Lucia assigned the following errors: ASSIGNMENT OF ERRORS I

THE HONORABLE COURT OF APPEALS ERRED IN AFFIRMING [WITH MODIFICATION] THE DECISION OF THE REGIONAL TRIAL COURT IN PASIG CITY II. THE HONORABLE COURT OF APPEALS ERRED IN NOT SUSPENDING THE CASE IN VIEW OF THE PENDENCY OF THE BOUNDARY DISPUTE WHICH WILL FINALLY DETERMINE THE SITUS OF THE SUBJECT PROPERTIES III. THE HONORABLE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE PAYMENT OF REALTY TAXES THROUGH THE MUNICIPALITY OF CAINTA WAS VALID PAYMENT OF REALTY TAXES IV. THE HONORABLE COURT OF APPEALS ERRED IN NOT HOLDING THAT IN THE MEANTIME THAT THE BOUNDARY DISPUTE CASE IN ANTIPOLO CITY REGIONAL TRIAL COURT IS BEING FINALLY RESOLVED, THE PETITIONER STA. LUCIA SHOULD BE PAYING THE REALTY TAXES ON THE SUBJECT PROPERTIES THROUGH THE INTERVENOR CAINTA TO PRESERVE THE STATUS QUO.25 Pasig, countering each error, claims that the lower courts correctly decided the case considering that the TCTs are clear on their faces that the subject properties are situated in its territorial jurisdiction. Pasig contends that the principles of litis pendentia, forum shopping, and res judicata are all inapplicable, due to the absence of their requisite elements. Pasig maintains that the boundary dispute case before the Antipolo RTC is independent of the complaint for collection of realty taxes which was filed before the Pasig RTC. It avers that the doctrine of "prejudicial question," which has a definite meaning in law, cannot be invoked where the two cases involved are both civil. Thus, Pasig argues, since there is no legal ground to preclude the simultaneous hearing of both cases, the suspension of the proceedings in the Pasig RTC is baseless. Cainta also filed its own comment reiterating its legal authority over the subject properties, which fall within its territorial jurisdiction. Cainta claims that while it has been collecting the realty taxes over the subject properties since way back 1913, Pasig only covered the same for real property tax purposes in 1990, 1992, and 1993. Cainta also insists that there is a discrepancy between the locational entries and the technical descriptions in the TCTs, which further supports the need to await the settlement of the boundary dispute case it initiated. The errors presented before this Court can be narrowed down into two basic issues: 1) Whether the RTC and the CA were correct in deciding Pasigs Complaint without waiting for the resolution of the boundary dispute case between Pasig and Cainta; and 2) Whether Sta. Lucia should continue paying its real property taxes to Cainta, as it alleged to have always done, or to Pasig, as the location stated in Sta. Lucias TCTs.

We agree with the First Division of the Court of Appeals in CA-G.R. SP No. 52874 that the resolution of the boundary dispute between Pasig and Cainta would determine which local government unit is entitled to collect realty taxes from Sta. Lucia.26 The Local Government Unit entitled To Collect Real Property Taxes The Former Seventh Division of the Court of Appeals held that the resolution of the complaint lodged before the Pasig RTC did not necessitate the assessment of the parties evidence on the metes and bounds of their respective territories. It cited our ruling in Odsigue v. Court of Appeals27 wherein we said that a certificate of title is conclusive evidence of both its ownership and location.28 The Court of Appeals even referred to specific provisions of the 1991 Local Government Code and Act. No. 496 to support its ruling that Pasig had the right to collect the realty taxes on the subject properties as the titles of the subject properties show on their faces that they are situated in Pasig.29 Under Presidential Decree No. 464 or the "Real Property Tax Code," the authority to collect real property taxes is vested in the locality where the property is situated: Sec. 5. Appraisal of Real Property. All real property, whether taxable or exempt, shall be appraised at the current and fair market value prevailing in the locality where the property is situated. xxxx Sec. 57. Collection of tax to be the responsibility of treasurers. The collection of the real property tax and all penalties accruing thereto, and the enforcement of the remedies provided for in this Code or any applicable laws, shall be the responsibility of the treasurer of the province, city or municipality where the property is situated. (Emphases ours.) This requisite was reiterated in Republic Act No. 7160, also known as the 1991 the Local Government Code, to wit: Section 201. Appraisal of Real Property. All real property, whether taxable or exempt, shall be appraised at the current and fair market value prevailing in the locality where the property is situated. The Department of Finance shall promulgate the necessary rules and regulations for the classification, appraisal, and assessment of real property pursuant to the provisions of this Code. Section 233. Rates of Levy. A province or city or a municipality within the Metropolitan Manila Area shall fix a uniform rate of basic real property tax applicable to their respective localities as follows: x x x. (Emphases ours.) The only import of these provisions is that, while a local government unit is authorized under several laws to collect real estate tax on properties falling under its territorial jurisdiction, it is imperative to first show that these properties are unquestionably within its geographical boundaries. Accentuating on the importance of delineating territorial boundaries, this Court, in Mariano, Jr. v. Commission on Elections30 said:

The importance of drawing with precise strokes the territorial boundaries of a local unit of government cannot be overemphasized. The boundaries must be clear for they define the limits of the territorial jurisdiction of a local government unit. It can legitimately exercise powers of government only within the limits of its territorial jurisdiction. Beyond these limits, its acts are ultra vires. Needless to state, any uncertainty in the boundaries of local government units will sow costly conflicts in the exercise of governmental powers which ultimately will prejudice the people's welfare. This is the evil sought to be avoided by the Local Government Code in requiring that the land area of a local government unit must be spelled out in metes and bounds, with technical descriptions.31 (Emphasis ours.) The significance of accurately defining a local government units boundaries was stressed in City of Pasig v. Commission on Elections,32 which involved the consolidated petitions filed by the parties herein, Pasig and Cainta, against two decisions of the Commission on Elections (COMELEC) with respect to the plebiscites scheduled by Pasig for the ratification of its creation of two new Barangays. Ruling on the contradictory reliefs sought by Pasig and Cainta, this Court affirmed the COMELEC decision to hold in abeyance the plebiscite to ratify the creation of Barangay Karangalan; but set aside the COMELECs other decision, and nullified the plebiscite that ratified the creation of Barangay Napico in Pasig, until the boundary dispute before the Antipolo RTC had been resolved. The aforementioned case held as follows: 1. The Petition of the City of Pasig in G.R. No. 125646 is DISMISSED for lack of merit; while 2. The Petition of the Municipality of Cainta in G.R. No. 128663 is GRANTED. The COMELEC Order in UND No. 97-002, dated March 21, 1997, is SET ASIDE and the plebiscite held on March 15, 1997 to ratify the creation of Barangay Napico in the City of Pasig is declared null and void. Plebiscite on the same is ordered held in abeyance until after the courts settle with finality the boundary dispute between the City of Pasig and the Municipality of Cainta, in Civil Case No. 94-3006.33 Clearly therefore, the local government unit entitled to collect real property taxes from Sta. Lucia must undoubtedly show that the subject properties are situated within its territorial jurisdiction; otherwise, it would be acting beyond the powers vested to it by law. Certificates of Title as Conclusive Evidence of Location While we fully agree that a certificate of title is conclusive as to its ownership and location, this does not preclude the filing of an action for the very purpose of attacking the statements therein. In De Pedro v. Romasan Development Corporation,34 we proclaimed that: We agree with the petitioners that, generally, a certificate of title shall be conclusive as to all matters contained therein and conclusive evidence of the ownership of the land referred to therein. However, it bears stressing that while certificates of title are indefeasible, unassailable and binding against the whole world, including the government itself, they do not create or vest title. They merely confirm or record title already existing and vested. They cannot be used to protect a usurper from the true owner, nor can they be used as a shield for the commission of fraud; neither do they permit one to enrich himself at the expense of other.35

In Pioneer Insurance and Surety Corporation v. Heirs of Vicente Coronado,36 we set aside the lower courts ruling that the property subject of the case was not situated in the location stated and described in the TCT, for lack of adequate basis. Our decision was in line with the doctrine that the TCT is conclusive evidence of ownership and location. However, we refused to simply uphold the veracity of the disputed TCT, and instead, we remanded the case back to the trial court for the determination of the exact location of the property seeing that it was the issue in the complaint filed before it.37 In City Government of Tagaytay v. Guerrero,38 this Court reprimanded the City of Tagaytay for levying taxes on a property that was outside its territorial jurisdiction, viz: In this case, it is basic that before the City of Tagaytay may levy a certain property for sale due to tax delinquency, the subject property should be under its territorial jurisdiction. The city officials are expected to know such basic principle of law. The failure of the city officials of Tagaytay to verify if the property is within its jurisdiction before levying taxes on the same constitutes gross negligence.39 (Emphasis ours.) Although it is true that "Pasig" is the locality stated in the TCTs of the subject properties, both Sta. Lucia and Cainta aver that the metes and bounds of the subject properties, as they are described in the TCTs, reveal that they are within Caintas boundaries.40 This only means that there may be a conflict between the location as stated and the location as technically described in the TCTs. Mere reliance therefore on the face of the TCTs will not suffice as they can only be conclusive evidence of the subject properties locations if both the stated and described locations point to the same area. The Antipolo RTC, wherein the boundary dispute case between Pasig and Cainta is pending, would be able to best determine once and for all the precise metes and bounds of both Pasigs and Caintas respective territorial jurisdictions. The resolution of this dispute would necessarily ascertain the extent and reach of each local governments authority, a prerequisite in the proper exercise of their powers, one of which is the power of taxation. This was the conclusion reached by this Court in City of Pasig v. Commission on Elections,41 and by the First Division of the Court of Appeals in CA-G.R. SP No. 52874. We do not see any reason why we cannot adhere to the same logic and reasoning in this case. The "Prejudicial Question" Debate It would be unfair to hold Sta. Lucia liable again for real property taxes it already paid simply because Pasig cannot wait for its boundary dispute with Cainta to be decided. Pasig has consistently argued that the boundary dispute case is not a prejudicial question that would entail the suspension of its collection case against Sta. Lucia. This was also its argument in City of Pasig v. Commission on Elections,42 when it sought to nullify the COMELECs ruling to hold in abeyance (until the settlement of the boundary dispute case), the plebiscite that will ratify its creation of Barangay Karangalan. We agreed with the COMELEC therein that the boundary dispute case presented a prejudicial question and explained our statement in this wise: To begin with, we agree with the position of the COMELEC that Civil Case No. 94-3006 involving the boundary dispute between the Municipality of Cainta and the City of Pasig presents a prejudicial question which must first be decided before plebiscites for the creation of the proposed barangays may be held.

The City of Pasig argues that there is no prejudicial question since the same contemplates a civil and criminal action and does not come into play where both cases are civil, as in the instant case. While this may be the general rule, this Court has held in Vidad v. RTC of Negros Oriental, Br. 42, that, in the interest of good order, we can very well suspend action on one case pending the final outcome of another case closely interrelated or linked to the first. In the case at bar, while the City of Pasig vigorously claims that the areas covered by the proposed Barangays Karangalan and Napico are within its territory, it can not deny that portions of the same area are included in the boundary dispute case pending before the Regional Trial Court of Antipolo. Surely, whether the areas in controversy shall be decided as within the territorial jurisdiction of the Municipality of Cainta or the City of Pasig has material bearing to the creation of the proposed Barangays Karangalan and Napico. Indeed, a requisite for the creation of a barangay is for its territorial jurisdiction to be properly identified by metes and bounds or by more or less permanent natural boundaries. Precisely because territorial jurisdiction is an issue raised in the pending civil case, until and unless such issue is resolved with finality, to define the territorial jurisdiction of the proposed barangays would only be an exercise in futility. Not only that, we would be paving the way for potentially ultra viresacts of such barangays. x x x.43 (Emphases ours.) It is obvious from the foregoing, that the term "prejudicial question," as appearing in the cases involving the parties herein, had been used loosely. Its usage had been more in reference to its ordinary meaning, than to its strict legal meaning under the Rules of Court.44 Nevertheless, even without the impact of the connotation derived from the term, our own Rules of Court state that a trial court may control its own proceedings according to its sound discretion: POWERS AND DUTIES OF COURTS AND JUDICIAL OFFICERS Rule 135 SEC. 5. Inherent powers of courts. Every court shall have power: xxxx (g) To amend and control its process and orders so as to make them comformable to law and justice. Furthermore, we have acknowledged and affirmed this inherent power in our own decisions, to wit: The court in which an action is pending may, in the exercise of a sound discretion, upon proper application for a stay of that action, hold the action in abeyance to abide the outcome of another pending in another court, especially where the parties and the issues are the same, for there is power inherent in every court to control the disposition of causes (sic) on its dockets with economy of time and effort for itself, for counsel, and for litigants. Where the rights of parties to the second action cannot be properly determined until the questions raised in the first action are settled the second action should be stayed. The power to stay proceedings is incidental to the power inherent in every court to control the disposition of the cases on its dockets, considering its time and effort, that of counsel and the litigants. But if proceedings must be stayed, it must be done in order to avoid multiplicity

of suits and prevent vexatious litigations, conflicting judgments, confusion between litigants and courts. It bears stressing that whether or not the RTC would suspend the proceedings in the SECOND CASE is submitted to its sound discretion.45
1avvphil

In light of the foregoing, we hold that the Pasig RTC should have held in abeyance the proceedings in Civil Case No. 65420, in view of the fact that the outcome of the boundary dispute case before the Antipolo RTC will undeniably affect both Pasigs and Caintas rights. In fact, the only reason Pasig had to file a tax collection case against Sta. Lucia was not that Sta. Lucia refused to pay, but that Sta. Lucia had already paid, albeit to another local government unit. Evidently, had the territorial boundaries of the contending local government units herein been delineated with accuracy, then there would be no controversy at all. In the meantime, to avoid further animosity, Sta. Lucia is directed to deposit the succeeding real property taxes due on the subject properties, in an escrow account with the Land Bank of the Philippines. WHEREFORE, the instant petition is GRANTED. The June 30, 2004 Decision and the January 27, 2005 Resolution of the Court of Appeals in CA-G.R. CV No. 69603 are SET ASIDE. The City of Pasig and the Municipality of Cainta are both directed to await the judgment in their boundary dispute case (Civil Case No. 94-3006), pending before Branch 74 of the Regional Trial Court in Antipolo City, to determine which local government unit is entitled to exercise its powers, including the collection of real property taxes, on the properties subject of the dispute. In the meantime, Sta. Lucia Realty and Development, Inc. is directed to deposit the succeeding real property taxes due on the lots and improvements covered by TCT Nos. 532250, 598424, 599131, 92869, 92870 and 38457 in an escrow account with the Land Bank of the Philippines. SO ORDERED. TERESITA J. LEONARDO-DE CASTRO Associate Justice WE CONCUR:

Republic of the Philippines SUPREME COURT Baguio SECOND DIVISION G.R. No. 163125 April 18, 2012

JOSE ABELGAS, JR. and LETECIA JUSAYAN DE ABELGAS, Petitioners, vs. SERVILLANO COMIA, RURAL BANK OF SOCORRO INC. And RURAL BANK OF PINAMALAYAN, INC.Respondents. DECISION SERENO, J.: Before this Court is a Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court, seeking to review the Court of Appeals (CA) 20 March 2003 Decision and 31 March 2004 Resolution in CA-G.R. CV No. 46241. The assailed Decision nullified the Deed of Relinquishment, Renunciation of Rights and Quitclaim executed by respondent Servillano Comia in favor of petitioner spouses Jose Abelgas, Jr. and Letecia Jusayan de Abelgas, as well as the encumbrances executed by the spouses in favor of respondent banks. The pertinent facts are as follows: On 4 April 1971, Comia obtained a free patent over Lot No. 919-B situated in Pinamalayan, Oriental Mindoro with an area of 6,790 square meters.1 Pursuant to this free patent, Lot No. 919-B was originally registered on 26 April 1976 as Original Certificate of Title (OCT) No. P8553. Subsequently, on 1 May 1971, by virtue of a notarized Deed of Relinquishment, Renunciation of Rights and Quitclaim, Comia voluntarily conveyed a 3,000-square-meter (3,000-sqm) portion of Lot No. 919-B to the spouses Abelgas. It was stated in the said Deed that the subject portion was the sole property of the spouses; and that it had only been included in the title of Comia for it adjoined his land. Indeed, based on the Subdivision Survey, the 3,000-sqm portion of Lot No. 919-B bordered Lot No. 919-E owned by Jose Abelgas, Jr.2 By virtue of this subsequent voluntary dealing over the property, the Register of Deeds cancelled OCT No. P-8553 in the name of Comia and Transfer Certificate of Title (TCT) No. T-460303 was issued on 3 May 1971 in the names of "CO-OWNERS, (1) SERVILLANO COMIA, married to Estelita Amaria, and (2) SPS. JOSE ABELGAS, JR. AND LETECIA JUSAYAN DE ABELGAS"4 as co-owners of Lot No. 919-B. There is no explanation in the records on how TCT No. T-46030 came about to be recorded in the names of these people when the subject portion should have been, as a consequence of the 1971 Deed of Relinquishment, Renunciation of Rights and Quitclaim, in the name of the spouses Abelgas only. Thereafter, the spouses subdivided their 3,000-sqm portion into twelve (12) lots as evidenced by TCT Nos. T-46374 to 46375.5 Using their TCTs, they used the lots to secure

their loan obligations with Rural Bank of Pinamalayan, Inc. (RBPI), Rural Bank of Socorro, Inc. (RBSI), and the Philippine National Bank (PNB). Specifically, on 6 July 1971, the spouses Abelgas constituted a mortgage on TCT No. 46366 to secure a loan forP 1,000. Then, to secure another loan for P 600, the spouses mortgaged on 23 August 1971 the lot covered by TCT No. T-46367. Petitioners defaulted on their obligations and hence, the lots were sold at a public auction, wherein RBPI prevailed as the winning bidder.6 After the lapse of the redemption period, TCT Nos. T-17448 and T-17445 were issued in the name of RBPI.7 As for the remaining lots, the spouses mortgaged most8 of these to RBSI in 1971 to 1972 as security for the spouses various loans. Petitioners defaulted on their obligations, and, thus, the mortgagee bank foreclosed the securities wherein it emerged as the winning bidder. Thus:9 TCT Nos. 46364 46365 Security Date Auction Date Loan (P )

04 September 1971 19 December 1974 800 15 June 1971 26 January 1976 1,000

46369 & 46370 13 November 1971 46372 & 46373 19 April 1972

21 December 1973 1,000 21 December 1973 2,000

Of these properties, lots covered by TCT Nos. 46369 and 46370 had certificates that were cancelled and a new one, TCT No. 71198,10 was issued in RBSIs name. Comia contested the issuance of these titles. He claimed that he was the sole owner of Lot No. 919-B; and that the Deed of Relinquishment, Renunciation of Rights and Quitclaim, which resulted in the issuance of TCT Nos. T-46030, and T-4634 to 46375, is fictitious and nonexisting.11 Thus, Comia demanded the recovery of Lot No. 919-B under OCT No. P-8553 and the cancellation of the subsequent titles.12 He pursued his action before the Regional Trial Court (RTC) by filing a Complaint for cancellation and recovery of, and/or quieting of title to real property and damages against the Abelgas spouses, RBPI, RBSI, and PNB.13 For their answer, the spouses asserted that they had been in possession of the 3,000-sqm portion of Lot No. 919-B.14 During trial, Jose Abelgas Jr. testified that before 1971, he had already purchased the said portion from respondent.15 In turn, the mortgagee banks, RBPI and RBSI, filed cross-claims against the spouses for them to pay their obligations in the event that the TCTs offered as security for their loans would be declared as null and void. Respondent assailed the encumbrances in favor of the mortgagee banks as void ab initio and obtained in bad faith as these were executed within the period of prohibition to dispose lands subject of a free patent under Section 118 of the Public Land Act (CA 141). Claiming lack of notice of any defect in the certificates, both banks denied Comias allegations. Section 118 of CA 14116 prohibits the alienation of lands subject to a free patent within five years from the issuance of the grant. Additionally, any disposition made after the prohibited period must be with the consent of the Secretary of Environment and Natural Resources.

Evidently, the Deed and the mortgages were executed within the prohibited period and without the Secretarys consent. The RTC dismissed the Complaint of Comia.17 It found that the Deed as signed by him voluntarily relinquished the subject parcel of land in favor of its rightful owner and possessors the spouses Abelgas.18 The trial court also upheld the validity of the mortgages, since encumbrances made in favor of banks are exempted according to the amendatory laws of the Public Land Act.19 Moreover, based on Decolongon v. CA,20 the approval of the Secretary of Environment and Natural Resources is only directory. Accordingly, the dispositive portion reads:21 WHEREFORE, premises considered, judgment is hereby rendered in favor of defendants spouses JOSE ABELGAS, Jr. and LETECIA JUSAYAN DE ABELGAS; RURAL BANKS OF SOCORRO, INC. and RURAL BANK OF PINAMALAYAN, INC., against plaintiff SERVILLANO COMIA, as follows: 1. Dismissing plaintiffs Amended Complaint; 2. Declaring Transfer Certificate of Title No. T-46030, and Transfer Certificates of Title Nos. T-46364 to T-46375 and subsequent certificates of title thereto in the name of defendants Rural Bank of Socorro, Inc. or defendant Rural Bank of Pinamalayan, Inc. as valid and existing; 3. Ordering the plaintiff to pay the following: (a) Defendants spouse (sic) Jose Abelgas, Jr. and Letecia Jusayan de Abelgas the sum of P5,000.00 as attorneys fees; (b) Defendant Rural Bank of Socorro, Inc., the sum of P 50,000.00 as damages for besmirched reputation being a bank institution with good standing; P 2,000.00 as attorneys fee, and P 1,000.00 as litigation expenses; (c) Defendant Rural Bank of Pinamalayan, Inc., the sum of P 50,000.00 as damages for besmirched reputation being a bank institution with good standing; P 2,000.00 as attorneys fee, and P 1,000.00 as litigation expenses; and 4. The costs. SO ORDERED. Comia appealed to the CA, which modified the RTCs Decision. While the appellate court sustained the due execution of the Deed of Relinquishment, Renunciation of Rights and Quitclaim, it construed the document as an alienation prohibited by CA 141. The CA pronounced that in an attempt to circumvent the law, it was made to appear that the 3,000 square meters adjoining the land of Comia was owned by the spouses. However, based on testimonial evidence, Abelgas purchased the said portion contrary to law.22 Likewise, the CA nullified the mortgages, as the exemption of the banks had been removed by Commonwealth Act 45623 amending Section 118 of Commonwealth Act 141, which took

effect on 8 June 1939.24 Nevertheless, the banks may recover the value of the loans with interest.25 In view of the Deeds nullity, and in the absence of escheat proceedings, the CA restored to Comia Lot No. 919-B. The appellate court ruled thus:26 WHEREFORE, the Decision appealed from is REVERSED and SET ASIDE, and another one entered as follows: 1. Declaring the deed of relinquishment and renunciation of rights and quitclaim as null and void; 2. Declaring the deeds of real estate mortgage executed by defendants-appellees Jose Abelgas, Jr. and Letecia Jusayan de Abelgas in favor of Rural Bank Pinamalayan, Inc. and Rural Bank of Socorro, Inc., as well as the foreclosure proceedings and certificates of sale, null and void; 3. Ordering the Register of Deeds of the Province of Oriental Mindoro to cancel TCT nos. T-46030, 465364 to 465375, 46821, 71171 and 71198 and to reinstate OCT No. P-8553 in the name of plaintiff-appellant Servillano Comia; 4. Ordering defendants-appellees Jose Abelgas, Jr. and Letecia Jusayan de Abelgas to pay Rural Bank of Pinamalayan, Inc., their indebtedness in the total amount of P 1,600.00 plus interest thereon at the legal rate from the date of maturity of promissory notes, attached as Annexes "1-A", and "2-A" to its cross-claim, and the amount of P 3,000.00 as attorneys fees. 5. Ordering defendants-appellees Jose Abelgas, Jr. and Letecia Jusayan de Abelgas to pay Rural Bank of Socorro, Inc. their indebtedness in the total amount of P 5,600.00, plus interest thereon at the legal rate from the date of maturity of the promissory notes, attached as Annexes "1", "2," "3" and "4" to its cross-claim, and the amount of P 3,000.00 as attorneys fees. SO ORDERED. Hence, the central issue in this Petition filed by the aggrieved spouses is whether the CA gravely erred in declaring the Deed of Relinquishment, Renunciation of Rights and Quitclaim and the mortgages in favor of mortgagee banks, as null and void for being contrary to the provisions of CA 141 and its amendatory laws. Section 118 of CA 14127 requires that before the five year prohibition applies, there should be an alienation or encumbrance of the land acquired under free patent or homestead. Section 118. Except in favor of the Government or any of its branches, units, or institutions, lands acquired under free patent or homestead provisions shall not be subject to encumbrance or alienation from the date of the approval of the application and for a term of five years from and after the date of issuance of the patent 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.

No alienation, transfer, or conveyance of any homestead after five years and before twentyfive years after issuance of title shall be valid without the approval of the Secretary of Agriculture and Commerce, which approval shall not be denied except on constitutional and legal grounds. Thus, to ascertain the correctness of the CAs Decision, there is a need to verify whether in executing the Deed of Relinquishment, Renunciation of Rights and Quitclaim, Comia alienated the 3,000-sqm portion after the grant of the free patent. Although this is a finding of fact generally beyond this Courts jurisdiction,28 this Court will consider the issue, considering the conflicting factual and legal conclusions of the lower courts. In real property law, alienation is defined as the transfer of the property and possession of lands, tenements, or other things from one person to another. It is the "act by which the title to real estate is voluntarily resigned by one person to another and accepted by the latter, in the forms prescribed by law."29 In this case, Comia did not transfer, convey or cede the property; but rather, he relinquished, renounced and "quitclaimed" the property considering that the property already belonged to the spouses. The voluntary renunciation by Comia of that portion was not an act of alienation, but an act of correcting the inclusion of the property in his free patent. The evidence on record reveals that prior the grant of the free patent, the spouses already owned the property. This fact can be inferred from the following testimony of Jose Abelgas, Jr.:30
1wphi1

A: It was in 1971 when he (Servillano Comia) went to our house bringing with him an Original Certificate of Title issued to him by the Bureau of Lands. Q: What was his purpose of bringing to you Original Certificate of Title (sic) issued by the Bureau of Lands? A: He wants to segregate the 3,000 square meters out of 6,790 square meters from the Original Certificate of Title which I bought from him, sir. (Emphasis supplied.) This testimony was not contested or objected to by Comia. Neither did he put in evidence that he sold the property during the period of the prohibition as he would have been deemed to be in violation of the law. Rather, his argument has always been the non-existence of the said Deed which both lower courts have already concluded otherwise.31 More important, Comia failed to dispute by clear and convincing evidence32 the presumption that the spouses owned the property prior to the grant of his free patent. This presumption is present in this case since the Deed of Relinquishment and Renunciation of Right was annotated in a public document, specifically, the original certificate of title. Documents consisting of entries in public records made in the performance of a duty by a public officer are prima facie evidence of the facts therein stated. 33 Entry No. 81908 annotating OCT No. P-8553 reads as:34 MEMORANDUM OF INCUMBRANCES (sic) Entry No. 81908; Doc. No. xxx [not legible] RENUNCIATION OF RIGHTS AND QUITCLAIMS In favor of the espouses (sic): JOSE ABELGAS JR. AND LETECIA JUSAYAN DE ABELGAS, of legal age, filipinos, (sic) and residing at Poblacion, Gloria, Oriental Mindoro, Philippines, - covering this Original Certificate of Title No. P-8553, in

conformity with the conditions stipulated in the Deed of Renunciation of Rights and Quitclaim executed by SERVILLANO COMIA married to ESTELITA AIMARIA, of legal age, filipino, (sic) and residing at Socorro, Oriental Mindoro, Philippines, on file in this registry. Date of Instrument ------------------------- May 1, 1971 Date of Inscription ------------------------- May 3, 1971 at 8:10 a.m. (Sgd.) REYNALDO M. MAMBIL REGISTER OF DEEDS The Deed of Relinquishment, Renunciation of Rights and Quitclaim, as referred in the title, recognizes the ownership of the spouses. Comia explicitly declared in the said Deed that the subject portion belonging to the spouses Abelgas had been included in his title for it adjoins his land. The Deed reads thus: 35 That I hereby relinquish, renounce, and quitclaim, and by these presents have RELINQUISHED, RENOUNCED, and QUITCLAIMED, all my rights, interests, possession, occupation, and participation of a portion of THREE THOUSAND (3,000) SQUARE METERS, of the parcel of land described above, free from all liens and encumbrances, together with all its existing improvements that may be found there unto the ESPOUSES (sic) JOSE A. ABELGAS Jr. and LETECIA JUSAYAN DE ABELGAS, likewise of legal ages, filipinos (sic) and a resident of Poblacion, Gloria, Province of Oriental Mindoro, Philippines, their heirs, executors, administrators, and assigns, and agreeing further to warrant and forever defend the title and peaceful possession of the herein espouses (sic): JOSE A. ABELGAS JR. and LETECIA JUSAYAN DE ABELGAS, their heirs, executors, administrators, and assigns against the just and lawful claims of any or all persons whomsoever. That the above described property, with an area of THREE THOUSAND (3000) SQ. METERS, is the sole property of the above described espouses (sic) and it had only been included in my title for it adjoins my land situated in the barrio of Quinabigan, Pinamalayan Oriental Mindoro and it was not my fault therefore so it being not mine (sic). I have voluntarily renounced the area of three thousand (3000) square meters, in favor of the said Jose Abelgas Jr. and LETECIA JUSAYAN DE ABELGAS. (Emphasis and underscoring in the original). In support of the fact that the alienation transpired prior to the grant of a free patent, it is remarkable that Comia never contested that the spouses had been in actual possession of the subject portion even before his patent application. The private ownership of land as when there is a prima facie proof of ownership like a duly registered possessory information or a clear showing of open, continuous, exclusive, and notorious possession is not affected by the issuance of a free patent over the same land.36 A prima facie proof of ownership is not necessarily defeated by a free patent, especially if the title covers a portion not belonging to the grantee. Where an applicant has illegally included portions of an adjoining land that does not form part of the applicants homestead, the title issued by virtue thereof should be cancelled.37 In Angeles v. Samia38, this Court explained that:

The Land Registration Act as well as the Cadastral Act protects only the holders of a title in good faith and does not permit its provisions to be used as a shield for the commission of fraud, or that one should enrich himself at the expense of another (Gustilo vs. Maravilla, 48 Phil., 442; Angelo vs. Director of Lands, 49 Phil., 838). The above-stated Acts do not give anybody, who resorts to the provisions thereof, a better title than he really and lawfully has. If he happened to obtain it by mistake or to secure, to the prejudice of his neighbor, more land than he really owns, with or without bad faith on his part, the certificate of title, which may have been issued to him under the circumstances, may and should be cancelled or corrected (Legarda and Prieto vs. Saleeby, 31 Phil., 590). (Emphasis supplied.) Seeing that there is no alienation to begin with, this Court finds that the prohibition is not applicable. Thus, the Deed of Relinquishment, Renunciation of Rights and Quitclaim is not null and void for being contrary to the Public Land Act. In a similar case, in Heirs of Manlapat v. Court of Appeals, this Court held that where the alienation or transfer took place before the filing of a free patent application, the prohibition should not be applied. In that situation, "neither the prohibition nor the rationale therefor which is to keep in the family of the patentee that portion of the public land which the government has gratuitously given him, by shielding him from the temptation to dispose of his landholding, could be relevant."39 Consequently, this Court rules against the cancellation of TCT Nos. T-46030, and T-46364 to 46375. Indeed, these subsequent certificates were issued based on a duly executed instrument sanctioned by law. As for the encumbrances, Comia also unsuccessfully assailed the mortgages by virtue of an alleged violation of the Public Land Act. For the prohibition in Section 118 of CA 141 to apply, the subject property must be acquired by virtue of either a free patent or a homestead patent. In this case, the 3,000-sqm portion subdivided into twelve (12) lots as evidenced by TCT Nos. T-4634 to 46375 has not been shown to be under a free patent. As it appears, what was submitted to the mortgagee banks were TCTs not derived from a free patent. Thus, the encumbrances thereon are not null and void, as these do not fall within the ambit of the prohibition. This being the case, it cannot be said that the banks were in bad faith for accepting the encumbered properties that did not originate from a free patent. In any event, at the time of the mortgage, the Rural Banks Act (Republic Act No. 720), as amended by Republic Act No. 5939,40 already allows banks to accept free patents as security for loan obligations.41 Absent any finding of nullity, we sustain the RTCs ruling that the alienation and encumbrances are valid. Consequently, there is no cause to cancel the subsequent TCTs and the resulting mortgages thereon. IN VIEW THEREOF, the Petition is GRANTED and the assailed 20 March 2003 Decision and 31 March 2004 Resolution of the Court of Appeals are REVERSED and SET ASIDE. SO ORDERED. MARIA LOURDES P. A. SERENO Associate Justice

Republic of the Philippines SUPREME COURT Baguio FIRST DIVISION G.R. No. 175763 April 11, 2012

HEIRS OF BIENVENIDO AND ARACELI TANYAG, namely: ARTURO TANYAG, AIDA T. JOCSON AND ZENAIDA T. VELOSO, Petitioners, vs. SALOME E. GABRIEL, NESTOR R. GABRIEL, LUZ GABRIEL-ARNEDO married to ARTURO ARNEDO, NORA GABRIEL-CALINGO married to FELIX CALINGO, PILAR M. MENDIOLA, MINERVA GABRIEL-NATIVIDAD married to EUSTAQUIO NATIVIDAD, and ERLINDA VELASQUEZ married to HERMINIO VELASQUEZ,Respondents. DECISION VILLARAMA, JR., J.: This is a petition for review under Rule 45 which seeks to reverse the Decision1 dated August 18, 2006 and Resolution2 dated December 8, 2006 of the Court of Appeals (CA) in CA-G.R. CV No. 81224. The CA affirmed the Decision3 dated November 19, 2003 of the Regional Trial Court of Pasig City, Branch 267 in Civil Case No. 67846 dismissing petitioners complaint for declaration of nullity of Original Certificate of Title (OCT) No. 1035, reconveyance and damages, as well as respondents counterclaims for damages and attorneys fees. Subject of controversy are two adjacent parcels of land located at Ruhale, Barangay Calzada, Municipality of Taguig (now part of Pasig City, Metro Manila). The first parcel ("Lot 1") with an area of 686 square meters was originally declared in the name of Jose Gabriel under Tax Declaration (TD) Nos. 1603 and 6425 issued for the years 1949 and 1966, while the second parcel ("Lot 2") consisting of 147 square meters was originally declared in the name of Agueda Dinguinbayan under TD Nos. 6418 and 9676 issued for the years 1966 and 1967.4 For several years, these lands lined with bamboo plants remained undeveloped and uninhabited. Petitioners claimed that Lot 1 was owned by Benita Gabriel, sister of Jose Gabriel, as part of her inheritance as declared by her in a 1944 notarized instrument ("Affidavit of Sale") whereby she sold the said property to spouses Gabriel Sulit and Cornelia Sanga. Said document states: DAPAT MALAMAN NG LAHAT NG MAKABABASA Na, akong Benita Gabriel, balo sa nasirang Calixto Lontoc, Filipina may karapatang gulang naninirahan sa nayon ng Palingon, Tagig, Rizal, x x x sa pamamaguitan nitoy ISINASAYSAY KO AT PINAGTITIBAY

1.) Na, sarili ko at tunay na pagaari ang isang lagay na lupang kawayanan na sapagkat itoy kabahagui ko sa aking kapatid na [J]ose Gabriel, na itoy mana ko sa aking nasirang ama Mateo Gabriel sa kami lamang dalawa ng aking kapatid na binabanguit ko na Jose Gabriel siyang mga anak at tagapagmana ng aming amang nasirang Mateo Gabriel, maliban sa amin ay wala nang iba, kayat kami ay naghati sa mga ari-arian na na iwan sa amin ng nasirang ama namin na Mateo Gabriel, na ang lupang kawayanang itoy may nakatanim na walong (8) punong kawayan at na sa pook na kung pamagatan ay Ruhale nayon ng Calzada, Tagig, Rizal, at na sa loob ng mga kahanganan at sukat na sumusunod[:] Na, ang kahangan sa Hilagaan Sapang Ruhale at Vicente Bunye, sa Amihanan Felipe Pagkalinawan, sa Timugan Juan Flores, at sa Habagatan Apolonio Ocol may sukat na 6 areas at 85 centiareas may halagan amillarada na P80.00) Pesos alinsunod sa Tax Blg. 20037, sa pangalan ng aking kapatid na Jose Gabriel. Na, ang lupang itoy hindi natatala sa bisa ng batas Blg. 496 ni sa susog gayon din sa Hipotecaria Espaola itoy may mga mojon bato ang mga panulok at walang bakod. 2.) Na, alang-alang sa halagang SIYAMNAPO AT ANIM (P96.00) na Pisong salaping guinagamit dito sa Filipinas na bago dumating ang mga sandaling itoy tinaggap ko at ibinayad sa akin ng boong kasiyahang loob ko ng magasawang GABRIEL SULIT AT CORNELIA SANGA, mga Filipinos may mga karapatang gulang mga naninirahan sa nayon ng Calzada, Tagig, Rizal, ngayon ay inilipat ko at ipinagbili ng bilihang tuluyan (Venta real soluta) ang isinasaysay kong lupang kawayanan sa itaas nito ng nasabi halagang SIYAMNAPO AT ANIM (P96.00) na Piso at sa nabanguit na magasawang GABRIEL SULIT AT CORNELIA SANGA, gayon din sa lahat ng mga tagapagmana nila, ngayong mga arao na ito ay ang may hawak at namamahala ng lupang itoy ang mga nakabili sa akin na magasawang GABRIEL SULIT AT CORNELIA SANGA. 3.) Na, ang kasulatang itoy ng bilihan ay nais na itala sa bisa ng batas Blg. 3344. NA SA KATUNAYAN NG LAHAT NG ITOY ako ay lumagda sa kasulatang ito dito sa Tagig, Rizal, ngayong ika - 28 ng Junio 1944. (Nilagdaan) BENITA GABRIEL5 Lot 1 allegedly came into the possession of Benita Gabriels own daughter, Florencia Gabriel Sulit, when her father-in-law Gabriel Sulit gave it to her as part of inheritance of his son, Eliseo Sulit who was Florencias husband. Florencia Sulit sold the same lot to Bienvenido S. Tanyag, father of petitioners, as evidenced by a notarized deed of sale dated October 14, 1964.6 Petitioners then took possession of the property, paid the real estate taxes due on the land and declared the same for tax purposes, as shown by TD No. 11445 issued in 1969 in the name of Bienvenidos wife, Araceli C. Tanyag; TD No. 11445 cancelled TD No. 6425 in the name of Jose Gabriel. TD Nos. 3380 and 00486 also in the name of Araceli Tanyag were issued in the years 1974 and 1979.7 As to Lot 2, petitioners averred that it was sold by Agueda Dinguinbayan to Araceli Tanyag under Deed of Sale executed on October 22, 1968. Thereupon, petitioners took possession of said property and declared the same for tax purposes as shown by TD Nos. 11361, 3395, 120-014-00482, 120-00-014-20-002-000, C-014-00180 and D-014-00182 issued for the years 1969, 1974, 1979, 1985, 1991 and 1994.8 Petitioners claimed to have continuously,

publicly, notoriously and adversely occupied both Lots 1 and 2 through their caretaker Juana Quinones9; they fenced the premises and introduced improvements on the land.10 Sometime in 1979, Jose Gabriel, father of respondents, secured TD No. 120-014-01013 in his name over Lot 1 indicating therein an increased area of 1,763 square meters. Said tax declaration supposedly cancelled TD No. 6425 over Lot 1 and contained the following inscription11: Note: Portions of this Property is Also Declared in the name of Araceli C. Tanyag under T.D.#120-014-00858 686 sq. m. Also inscribed on TD No. 120-014-0085812 (1979) in the name of Araceli Tanyag covering Lot 1 are the following: This property is also covered by T.D. #120-014-01013 in the name of Jose P. Gabriel 1-8-80 which notation was carried into the 1985, 1990 and 1991 tax declarations, all in the name of Araceli Tanyag. On March 20, 2000, petitioners instituted Civil Case No. 67846 alleging that respondents never occupied the whole 686 square meters of Lot 1 and fraudulently caused the inclusion of Lot 2 in TD No. 120-014-01013 such that Lot 1 consisting of 686 square meters originally declared in the name of Jose Gabriel was increased to 1,763 square meters. They contended that the issuance of OCT No. 1035 on October 28, 1998 over the subject land in the name of respondents heirs of Jose Gabriel was null and void from the beginning.13 On the other hand, respondents asserted that petitioners have no cause of action against them for they have not established their ownership over the subject property covered by a Torrens title in respondents name. They further argued that OCT No. 1035 had become unassailable one year after its issuance and petitioners failed to establish that it was irregularly or unlawfully procured.14 Respondents evidence showed that the subject land was among those properties included in the Extrajudicial Settlement of Estate of Jose P. Gabriel15 executed on October 5, 1988, covered by TD No. B-014-00643 (1985) in the name of Jose Gabriel. Respondents declared the property in their name but the tax declarations (1989, 1991 and 1994) carried the notation that portions thereof (686 sq. ms.) are also declared in the name of Araceli Tanyag. On October 28, 1998, OCT No. 103516 was issued to respondents by the Register of Deeds of Pasig, Metro Manila under Decree No. N-219177 pursuant to the Decision dated September 20, 1996 of the Land Registration Court in LRC Case No. N-11260, covering Lot 1836 MCadm-590-D, Taguig Cadastral Mapping, Plan Ap-04-002253, with an area of 1,560 square meters. On the other hand, respondents TD Nos. D-014-00839 and D-014-01923 issued in 1993 and 1999 respectively, showed that respondents sold 468 square meters of Lot 1 to Jayson Sta. Barbara.17 The segregation of said 468 square meters pertaining to Jayson Sta. Barbara was reflected in the approved survey plan of Lot 1836 prepared by respondents surveyor on March 18, 2000.18

At the trial, petitioners presented their witness Arturo Tanyag, son of Bienvenido Tanyag and Araceli Tanyag who died on March 30, 1968 and October 30, 1993, respectively. He testified that according to Florencia Sulit, Benita Gabriel-Lontoc and her family were the ones in possession of Lot 1 since 1944; Benita Gabriel had executed an Affidavit of Sale declaring said property as her inheritance and conveying the same to spouses Gabriel and Cornelia Sulit. He affirmed that they had been in possession of Lot 1 from the time Bienvenido Tanyag bought the land from Florencia Sulit in 1964. Based on the boundaries indicated in the tax declaration, they fenced the property, installed Juana Quinones as their caretaker who also attended to the piggery, put up an artesian well and planted some trees. From 1964 up to 1978, nobody disturbed them in their possession or claimed ownership of the land; four years after acquiring Lot 1, they also purchased the adjacent property (Lot 2) to expand their piggery. Lot 2 was also separately declared for tax purposes after their mother purchased it from Agueda Dinguinbayan. He had personally witnessed the execution of the 1968 deed of sale including its notarization, and was also present during the physical turn over of Lot 2 by the seller. In fact, he was one of the instrumental witnesses to the deed of sale and identified his signature therein. He further described the place as inaccessible at that time as there were no roads yet and they had to traverse muddy tracks to reach their property.19 Arturo further testified that the first time they met Jose Gabriel was when the latter borrowed from their mother all the documents pertaining to their property. Jose Gabriel came looking for a piece of property which he claims as his but he had no documents to prove it and so they showed him their documents pertaining to the subject property; out of the goodness of her mothers heart, she lent those documents to her brother Jose Gabriel. During the cadastral survey conducted in 1976, they had both lots surveyed in preparation for their consolidation under one tax declaration. However, they did not succeed in registering the consolidated lots as they discovered that there was another tax declaration covering the same properties and these were applied for titling under the name of Jose Gabriel sometime in 1978 or 1980, which was after the time said Jose Gabriel borrowed the documents from their mother. No notice of the hearings for application of title filed by Jose Gabriel was received by them. They never abandoned the property and their caretaker never left the place except to report to the police when she was being harassed by the respondents. He also recalled that respondents had filed a complaint against them before the barangay but since no agreement was reached after several meetings, they filed the present case.20 The next witness for petitioners was Juana Quinones, their caretaker who testified that she had been staying on petitioners property since 1964 or for 35 years already. She had built a nipa hut and artesian well, raised piggery and poultry and planted some root crops and vegetables on the land. At first there was only one parcel but later the petitioners bought an additional lot; Arturo Tanyag gave her money which she used for the fencing of the property. During all the time she occupied the property there was nobody else claiming it and she also had not received any notice for petitioners concerning the property, nor the conduct of survey on the land. On cross-examination, she admitted that she was living alone and had no Voters ID or any document evidencing that she had been a resident there since 1964. Although she was living alone, she asks for help from other persons in tending her piggery.21 Angelita Sulit-delos Santos, cousin of petitioners and also of respondents, testified that she came to know the subject property because according to her paternal grandfather Gabriel Sta. Ana Sulit, her maternal grandmother Benita Gabriel-Lontoc mortgaged the property to him. It was Benita Gabriel Lontoc who took care of her, her siblings and cousins; they lived with her until her death. She identified the signature of Benita Gabriel in the 1944 Affidavit of Sale in favor of Gabriel Sulit. Lot 1 consisting of 600 square meters was vacant property at that time but her family was in possession thereof when it was sold to Gabriel Sulit; it was her father Eliseo Sulit and uncle Hilario Sulit, who were incharge of their property. On cross-

examination, she was asked details regarding the supposed mortgage of Lot 1 to Gabriel Sulit but she admitted she does not know anything as she was still very young then.22 Respondents first witness was Roberto Gabriel Arnedo, son of Luz Gabriel-Arnedo. He testified that when he was about 5 or 6 years old (1953 or 1954), his grandfather Jose Gabriel used to bring him along to visit the subject property consisting of 1,763 square meters based on the tax declaration and OCT. They had picnics and celebrate his grandfathers birthday there. He recalled accompanying his grandfather in overseeing the planting of gumamela which served as the perimeter fence. Jose Gabriel had not mentioned anything about the claim of petitioners over the same land; Jose Gabriel handed the documents pertaining to the land to his eldest aunt and hence it now belongs to them.23 On cross-examination, he claimed that during those years he had visited the land together with his grandfather, he did not see Florencia Sulit and her family.24 Virginia Villanueva, daughter of Salome Gabriel, testified that they acquired the subject property from their grandfather Jose Gabriel who had a tax declaration in his name. Her mother furnished them with documents such as tax declarations and the extrajudicial settlement of the estate of Jose Gabriel; they also have an approved survey plan prepared for Salome Gabriel. She does not know the petitioners in this case.25 On cross-examination, she said that the subject property was inherited by Jose Gabriel from his father Mateo Gabriel; Jose Gabriel was the sole owner of the land while Benita Gabriel has separate properties in Palingon and Langkokak.26 Though they are not actually occupying the property, they visit the place and she does not know anybody occupying it, except for the portion (486 square meters) which petitioners sold to Sta. Barbara. A nine-door apartment was built on the said portion without their permission. She had talked to both Sta. Barbara and with Arturo Tanyag they had meetings before the barangay; however, petitioners filed the present case in court. She insisted that there is nobody residing in the subject property; there is still the remaining 901 square meters which is owned by their mother. She admitted there were plants on the land but she does not know who actually planted them; it was her grandfather who built a wooden fence and gumamela in the 1960s. As to the hearings on the application for title, she had not attended the same; she does not know whether the petitioners were notified of the said hearings. She also caused the preparation of the survey plan for Salome Gabriel. On the increased area of the property indicated in the later tax declarations, she admitted the discrepancy but said there were barangay roads being built at the time.27 Esmeraldo Ramos, Municipal Assessor of Taguig, testified that he was formerly a Land Appraiser in the Office of the Municipal Assessor of Taguig and in the course of his duties had certified one of the tax declarations in the name of respondents (TD No. EL-014-10585). He identified and verified said document and the other tax declarations submitted in court by the respondents. He admitted that on January 10, 1980, they made the entry on TD No. 6425 in the name of Jose Gabriel that the same was cancelled by TD No. 120-014-01013 also in the name of Jose Gabriel who presented a supposed deed of sale in favor of Araceli Tanyag which caused the earlier cancellation of TD No. 6425 in his name. However, upon investigation they found out that the seller Florencia Sulit was not the owner because the declared owner was Jose Gabriel; even the deed of sale recognized that the property was declared in the name of Jose Gabriel. They also discovered from the cadastral survey and tax mapping of Taguig that the property is in the name of Jose Gabriel both in the Bureau of Lands and Municipal Assessors Office. As far as he knows, it was Jose Gabriel who owned the subject property which he usually visited; he recalled that around the late 70s and 80s, he ordered the fencing of barbed wire and bamboo stalks on the land which is just 3 lots away from his own property. As to the discrepancy in the area of the property as originally declared by Jose Gabriel, he explained that the boundaries in the original tax declaration do

not change but after the land is surveyed, the boundaries naturally would be different because the previous owner may have sold his property or the present owner inherits the property from his parents. He admitted that the tax declaration is just for tax purposes and not necessarily proof of ownership or possession of the property it covers.28 Respondents last witness was Antonio Argel who testified that he had resided for 52 years on a land near the subject property and as far as he knows it was Jose Gabriel who owns it and planted thereon. On cross-examination, he admitted that Jose Gabriel was not in physical possession of the property. He just assumed that the present occupants of the property were allowed by Jose Gabriel to stay therein because he is the owner. There is an apartment and three small houses existing on the property, and about five families are living there. He confirmed that there is a piggery being maintained by a certain Juana who had been residing there maybe for fifteen years already.29 In rebuttal, petitioners presented two witnesses who are owners of properties adjoining that of the subject land. Rodante Domingo testified that it was only now did he learn that the property of Arturo Tanyag is already titled in the name of respondents. He was not aware of the titling proceeding because he never received any notice as adjoining owner. His own property is already titled in his name and he even asked Arturo Tanyag to act as a witness in his application for titling.30 On the other hand, Dado Dollado testified that he acquired his property in 1979. He likewise affirmed that he did not receive any notice of the proceedings for application for titling filed by respondents and it was only now that he learned from Arturo Tanyag that the subject property was already titled in the names of respondents.31 The last rebuttal witness for petitioners was Dominador Dinguinbayan Ergueza, son of Agueda Dinguinbayan. He testified that the subject property was formerly owned by his mother and the present owner is Araceli Tanyag who bought the same from his mother in 1968. He described the boundaries of the property in relation to the adjoining owners at that time; presently, the left portion is already a street (Rujale St.) going towards the sea. He admitted that his wife, Livina Ergueza was an instrumental witness in the 1968 deed of sale in favor of Araceli Tanyag.32 In its decision, the trial court dismissed the complaint as well as the counterclaim, holding that petitioners failed to establish ownership of the subject property and finding the respondents to be the declared owners and legal possessors. It likewise ruled that petitioners were unable to prove by preponderance of evidence that respondents acquired title over the property through fraud and deceit. Petitioners appealed to the CA which affirmed the trial courts ruling. The CA found that apart from the Affidavit executed by Benita Gabriel in 1944 claiming that she inherited Lot 1 from their father, Mateo Gabriel, there is no evidence that she, not Jose Gabriel, was the true owner thereof. It noted that just four years after Benita Gabriels sale of the subject property to the Sulit spouses, Jose Gabriel declared the same under his name for tax purposes, paying the corresponding taxes. The appellate court stressed that petitioners allegation of bad faith was not proven. Petitioners motion for reconsideration was likewise denied by the CA. Hence, this petition. Petitioners assail the CA in not finding that the respondents obtained OCT No. 1035 in their names fraudulently and in bad faith. They also claim to have acquired ownership of the subject lots by virtue of acquisitive prescription.

The issues presented are: (1) whether respondents committed fraud and bad faith in registering the subject lots in their name; and (2) whether petitioners acquired the property through acquisitive prescription. Registration of a piece of land under the Torrens System does not create or vest title, because it is not a mode of acquiring ownership. A certificate of title is merely an evidence of ownership or title over the particular property described therein.33 Thus, notwithstanding the indefeasibility of the Torrens title, the registered owner may still be compelled to reconvey the registered property to its true owners. The rationale for the rule is that reconveyance does not set aside or re-subject to review the findings of fact of the Bureau of Lands. In an action for reconveyance, the decree of registration is respected as incontrovertible. What is sought instead is the transfer of the property or its title which has been wrongfully or erroneously registered in another persons name, to its rightful or legal owner, or to the one with a better right.34 An action for annulment of title or reconveyance based on fraud is imprescriptible where the plaintiff is in possession of the property subject of the acts.35 The totality of the evidence on record established that it was petitioners who are in actual possession of the subject property; respondents merely insinuated at occasional visits to the land. However, for an action for reconveyance based on fraud to prosper, this Court has held that the party seeking reconveyance must prove by clear and convincing evidence his title to the property and the fact of fraud.36 The CA correctly observed that the only evidence of Benita Gabriels supposed title was the 1944 Affidavit of Sale whereby Benita Gabriel claimed sole ownership of Lot 1 as her inheritance from their father, Mateo Gabriel. The property until 1949 was still declared in the name Jose Gabriel despite the 1944 sale executed by Benita Gabriel in favor of spouses Gabriel and Cornelia Sulit. As to the alleged fraud perpetrated by Jose Gabriel and respondents in securing OCT No. 1035 in their name, this was clearly not proven as Arturo Tanyag testified merely that Jose Gabriel borrowed their documents pertaining to the property. No document or testimony was presented to show that Jose Gabriel employed deceit or committed fraudulent acts in the proceedings for titling of the property. However, the CA did not address the issue of acquisitive prescription raised by the petitioners. In their Complaint before the lower court, petitioners alleged 15. Defendants never occupied the whole area of the lot covered by Tax Declaration No. 1603 (686 sq. m.) neither were they able to set foot on the property covered by Tax Declaration No. 6542 [sic] for the reason that those lots had been in actual, open continuous, adverse and notorious possession of the plaintiffs against the whole world for more than thirty years which is equivalent to title. x x x x37 Such character and length of possession of a party over a parcel of land subject of controversy is a factual issue. Settled is the rule that questions of fact are not reviewable in petitions for review on certiorari under Rule 45 of the Rules of Court, as only questions of law shall be raised in such petitions. While this Court is not a trier of facts, if the inference drawn by the appellate court from the facts is manifestly mistaken, it may, in the interest of justice, review the evidence in order to arrive at the correct factual conclusions based on the record.38

In this case, the CA was mistaken in concluding that petitioners have not acquired any right over the subject property simply because they failed to establish Benita Gabriels title over said property. The appellate court ignored petitioners evidence of possession that complies with the legal requirements of acquiring ownership by prescription. Acquisitive prescription is a mode of acquiring ownership by a possessor through the requisite lapse of time. In order to ripen into ownership, possession must be in the concept of an owner, public, peaceful and uninterrupted.39 Possession is open when it is patent, visible, apparent, notorious and not clandestine.40 It is continuous when uninterrupted, unbroken and not intermittent or occasional; exclusive when the adverse possessor can show exclusive dominion over the land and an appropriation of it to his own use and benefit; and notorious when it is so conspicuous that it is generally known and talked of by the public or the people in the neighborhood. The party who asserts ownership by adverse possession must prove the presence of the essential elements of acquisitive prescription.41 On the matter of prescription, the Civil Code provides: Art. 1117. Acquisitive prescription of dominion and other real rights may be ordinary or extraordinary. Ordinary acquisitive prescription requires possession of things in good faith and with just title for the time fixed by law. Art. 1134. Ownership and other real rights over immovable property are acquired by ordinary prescription through possession of ten years. Art. 1137. Ownership and other real rights over immovables also prescribe through uninterrupted adverse possession thereof for thirty years, without need of title or of good faith. (Emphasis supplied.) Petitioners adverse possession is reckoned from 1969 with the issuance of TD No. 1145 in the name of Araceli Tanyag, which tax declaration cancelled TD No. 6425 in the name of Jose Gabriel.42 It is settled that tax receipts and declarations are prima facie proofs of ownership or possession of the property for which such taxes have been paid. Coupled with proof of actual possession of the property, they may become the basis of a claim for ownership.43 Petitioners caretaker, Juana Quinones, has since lived in a nipa hut, planted vegetables and tended a piggery on the land. Aside from paying taxes due on the property, petitioners also exercised other acts of ownership such as selling the 468-square meter portion to Sta. Barbara who had constructed thereon a nine-door apartment building. It was only in 1979 that respondents began to assert a claim over the property by securing a tax declaration in the name of Jose Gabriel albeit over a bigger area than that originally declared. In 1998, they finally obtained an original certificate of title covering the entire 1,763 square meters which included Lot 1. Did these acts of respondents effectively interrupt the possession of petitioners for purposes of prescription? We answer in the negative. In the case of Heirs of Marcelina Azardon-Crisologo v. Raon44 this Court citing Article 1123 of the Civil Code45held that civil interruption takes place with the service of judicial summons to the possessor and not by filing of a mere Notice of Adverse Claim. Thus:

Article 1123 of the Civil Code is categorical. Civil interruption is produced by judicial summons to the possessor. Moreover, even with the presence of judicial summons, Article 1124 sets limitations as to when such summons shall not be deemed to have been issued and shall not give rise to interruption, to wit: 1) if it should be void for lack of legal solemnities; 2) if the plaintiff should desist from the complaint or should allow the proceedings to lapse; or 3) if the possessor should be absolved from the complaint. Both Article 1123 and Article 1124 of the Civil Code underscore the judicial character of civil interruption. For civil interruption to take place, the possessor must have received judicial summons. None appears in the case at bar. The Notice of Adverse Claim which was filed by petitioners in 1977 is nothing more than a notice of claim which did not effectively interrupt respondents possession. Such a notice could not have produced civil interruption. We agree in the conclusion of the RTC, which was affirmed by the Court of Appeals, that the execution of the Notice of Adverse Claim in 1977 did not toll or interrupt the running of the prescriptive period because there remains, as yet, a necessity for a judicial determination of its judicial validity. What existed was merely a notice. There was no compliance with Article 1123 of the Civil Code. What is striking is that no action was, in fact, filed by petitioners against respondents. As a consequence, no judicial summons was received by respondents. As aptly held by the Court of Appeals in its affirmance of the RTCs ruling, the Notice of Adverse Claim cannot take the place of judicial summons which produces the civil interruption provided for under the law. In the instant case, petitioners were not able to interrupt respondents adverse possession since 1962. The period of acquisitive prescription from 1962 continued to run in respondents favor despite the Notice of Adverse Claim. (Emphasis supplied.)
1wphi1

From 1969 until the filing of this complaint by the petitioners in March 2000, the latter have been in continuous, public and adverse possession of the subject land for 31 years. Having possessed the property for the period and in the character required by law as sufficient for extraordinary acquisitive prescription, petitioners have indeed acquired ownership over the subject property. Such right cannot be defeated by respondents acts of declaring again the property for tax purposes in 1979 and obtaining a Torrens certificate of title in their name in 1998. This notwithstanding, we uphold petitioners right as owner only with respect to Lot 1 consisting of 686 square meters. Petitioners failed to substantiate their claim over Lot 2 by virtue of a deed of sale from the original declared owner, Agueda Dinguinbayan. Respondents asserted that the 147 square meters covered by the tax declarations of Dinguinbayan being claimed by petitioners is not the same lot included in OCT No. 1035. Under Article 434 of the Civil Code, to successfully maintain an action to recover the ownership of a real property, the person who claims a better right to it must prove two (2) things: first, the identity of the land claimed; and second, his title thereto. In regard to the first requisite, in an accion reinvindicatoria, the person who claims that he has a better right to the property must first fix the identity of the land he is claiming by describing the location, area and boundaries thereof.46 In this case, petitioners failed to identify Lot 2 by providing evidence of the metes and bounds thereof, so that the same may be compared with the technical description contained in OCT No. 1035, which would have shown whether Lot 2 consisting of 147 square meters was erroneously included in respondents title. The testimony of Agueda Dinguinbayans son would not suffice because said witness merely stated the boundary owners as indicated in the 1966 and 1967 tax declarations of his mother. On his part, Arturo Tayag claimed that he had the lots surveyed in the 1970s in preparation for the consolidation of the two parcels. However, no such plan was presented in court.

WHEREFORE, the petition is PARTLY GRANTED. The Decision dated August 18, 2006 of the Court of Appeals in CA-G.R. CV No. 81224 is MODIFIED in that petitioners heirs of Bienvenido and Araceli Tanyag are hereby declared the owners of 686 square meters previously declared under Tax Declaration Nos. 11445, 120-014-00486, 120-014-0085, B014-00501, E-014-01446, C-014-00893 and D-014-00839 all in the name of Araceli Tanyag, which lot is presently covered by OCT No. 1035 issued by the Register of Deeds of Pasig, Metro Manila in the name of respondents Salome Gabriel, Nestor R. Gabriel, Luz GabrielArnedo, Nora Gabriel-Calingo, Pilar Gabriel-Mendiola, Minerva Gabriel-Natividad and Erlinda Gabriel-Velasquez. Respondents are ORDERED to RECONVEY the said 686-square meter portion to the petitioners. No pronouncement as to costs. SO ORDERED. MARTIN S. VILLARAMA, JR. Associate Justice