18 CASES
appointing Milflores Cooperative as attorney-in-fact in obtaining a loan from and
#1 AGENCY
THIRD DIVISION
January 18, 2017
G.R. No. 192602
SPOUSES MAY S. VILLALUZ and JOHNNY VILLALUZ, JR., Petitioners vs.
LAND BANK OF THE PHILIPPINES and the REGISTER OF DEEDS FOR DAVAO
CITY, Respondents
DECISION
JARDELEZA, J.:
The Civil Code sets the default rule that an agent may appoint a substitute if the
principal has not prohibited him from doing so. The issue in this petition for
review on certiorari, 1 which seeks to set aside the Decision2 dated September 22,
2009 and Resolution3 dated May 26, 2010 of the Court of Appeals (CA) in CA-G.R.
CV No. 01307, is whether the mortgage contract executed by the substitute is
valid and binding upon the principal.
I
Sometime in 1996, Paula Agbisit (Agbisit), mother of petitioner May S. Villaluz
(May), requested the latter to provide her with collateral for a loan. At the time,
Agbisit was the chairperson of Milflores Cooperative and she needed ₱600,000 to
₱650,000 for the expansion of her backyard cut flowers business.4 May convinced
her husband, Johnny Villaluz (collectively, the Spouses Villaluz), to allow Agbisit
to use their land, located in Calinan, Davao City and covered by Transfer
Certificate of Title (TCT) No. T-202276, as collateral. 5 On March 25, 1996, the
Spouses Villaluz executed a Special Power of Attorney 6 in favor of Agbisit
authorizing her to, among others, "negotiate for the sale mortgage, or other forms
of disposition a parcel of land covered by Transfer Certificate of Title No. T-
202276" and "sign in our behalf all documents relating to the sale, loan or
mortgage, or other disposition of the aforementioned property. " 7 The one-page
power of attorney neither specified the conditions under which the special
powers may be exercised nor stated the amounts for which the subject land may
be sold or mortgaged.
On June 19, 1996, Agbisit executed her own Special Power of Attorney, 8
executing a real mortgage in favor of Land Bank of the Philippines (Land Bank).
On June 21, 1996, Milflores Cooperative, in a representative capacity, executed a
Real Estate Mortgage9 in favor of Land Bank in consideration of the ₱3,000,000
loan to be extended by the latter. On June 24, 1996, Milflores Cooperative also
executed a Deed of Assignment of the Produce/Inventory 10 as additional
collateral for the loan. Land Bank partially released one-third of the total loan
amount, or ₱995,500, to Milflores Cooperative on June 25, 1996. On the same day,
Agbisit borrowed the amount of ₱604,750 from Milflores Cooperative. Land Bank
released the remaining loan amount of ₱2,000,500 to Milflores Cooperative on
October 4, 1996. 11
Unfortunately, Milflorcs Cooperative was unable to pay its obligations to Land
Bank. Thus, Land Bank filed a petition for extra-judicial foreclosure sale with the
Office of the Clerk of Court of Davao City. Sometime in August, 2003, the Spouses
Villaluz learned that an auction sale covering their land had been set for October
2, 2003. Land Bank won the auction sale as the sole bidder. 12
The Spouses Villaluz filed a complaint with the Regional Trial Court (RTC) of
Davao City seeking the annulment of the foreclosure sale. The sole question
presented before the RTC was whether Agbisit could have validly delegated her
authority as attorney-in-fact to Milflores Cooperative. Citing Article 1892 of the
Civil Code, the RTC held that the delegation was valid since the Special Power of
Attorney executed by the Spouses Villaluz had no specific prohibition against
Agbisit appointing a substitute. Accordingly, the RTC dismissed the complaint. 13
On appeal, the CA affirmed the RTC Decision. In its Decision14 dated September
22, 2009, the CA similarly found Article 1892 to be squarely applicable. According
to the CA, the rule is that an agent is allowed to appoint a sub-agent in the absence
of an express agreement to the contrary and that "a scrutiny of the Special Power
of Attorney dated March 25, 1996 executed by appellants in favor of [Agbisit]
contained no prohibition for the latter to appoint a sub-agent." 15 Therefore,
Agbisit was allowed to appoint Milflores Cooperative as her sub-agent.
After the CA denied their motion for reconsideration, the Spouses Villaluz filed
this petition for review. They argue that the Real Estate Mortgage was void
because there was no loan yet when the mortgage contract was executed and that
the Special Power of Attorney was extinguished when Milflores Cooperative
assigned its produce and inventory to Land Bank as additional collateral. 16 In
response, Land Bank maintains that the CA and RTC did not err in applying Article
1892, that the Real Estate Mortgage can only be extinguished after the amount of
the secured loan has been paid, and that the additional collateral was executed
because the deed of assignment was meant to cover any deficiency in the Real
Estate Mortgage. 17
 II
Articles 1892 and 1893 of the Civil Code provide the rules regarding the
appointment of a substitute by an agent:
Art. 1892. The agent may appoint a substitute if the principal has not prohibited
him from doing so; but he shall be responsible for the acts of the substitute:
(1) When he was not given the power to appoint one;
(2) When he was given such power, but without designating the person, and the
person appointed was notoriously incompetent or insolvent.
All acts of the substitute appointed against the prohibition of the principal shall
be void.
Art. 1893. In the cases mentioned in Nos. 1 and 2 of the preceding article, the
principal may furthermore bring an action against the substitute with respect to
the obligations which the latter has contracted under the substitution.
The law creates a presumption that an agent has the power to appoint a
substitute. The consequence of the presumption is that, upon valid appointment
of a substitute by the agent, there ipso jure arises an agency relationship between
the principal and the substitute, i.e., the substitute becomes the agent of the
principal. As a result, the principal is bound by the acts of the substitute as if these
acts had been performed by the principal's appointed agent. Concomitantly, the
substitute assumes an agent's obligations to act within the scope of authority, 18
to act in accordance with the principal's instructions, 19 and to carry out the
agency, 20 among others. In order to make the presumption inoperative and
relieve himself from its effects, it is incumbent upon the principal to prohibit the
agent from appointing a substitute.
Although the law presumes that the agent is authorized to appoint a substitute, it
also imposes an obligation upon the agent to exercise this power conscientiously.
To protect the principal, Article 1892 allocates responsibility to the agent for the
acts of the substitute when the agent was not expressly authorized by the
principal to appoint a substitute; and, if so authorized but a specific person is not
designated, the agent appoints a substitute who is notoriously incompetent or
insolvent. In these instances, the principal has a right of action against both the
agent and the substitute if the latter commits acts prejudicial to the principal.
The case of Escueta v. Lim21illustrates the prevailing rule. In that case, the father,
through a special power of attorney, appointed his daughter as his attorney-in-
fact for the purpose of selling real properties. The daughter then appointed a
substitute or sub-agent to sell the properties. After the properties were sold, the
father sought to nullify the sale effected by the subagent on the ground that he
did not authorize his daughter to appoint a subagent. We refused to nullify the
sale because it is clear from the special power of attorney executed by the father
that the daughter is not prohibited from appointing a substitute. Applying Article
1892, we held that the daughter "merely acted within the limits of the authority
given by her father, but she will have to be 'responsible for the acts of the sub-
agent,' among which is precisely the sale of the subject properties in favor of
respondent."22
In the present case, the Special Power of Attorney executed by the Spouses
Villaluz contains no restrictive language indicative of an intention to prohibit
Agbisit from appointing a substitute or sub-agent. Thus, we agree with the
findings of the CA and the RTC that Agbisit's appointment of Milflores
Cooperative was valid.
III
Perhaps recognizing the correctness of the CA and the RTC's legal position, the
Spouses Villaluz float a new theory in their petition before us. They now seek to
invalidate the Real Estate Mortgage for want of consideration. Citing Article
1409(3), which provides that obligations "whose cause or object did not exist at
the time of the transaction" are void ab initio, the Spouses Villaluz posit that the
mortgage was void because the loan was not yet existent when the mortgage was
executed on June 21, 1996. Since the loan was released only on June 25, 1996, the
mortgage executed four days earlier was without valuable consideration.
Article 1347 provides that "[a]ll things which are not outside the commerce of
men, including future things, may be the object of a contract." Under Articles 1461
and 1462, things having a potential existence and "future goods," i.e., those that
are yet to be manufactured, raised, or acquired, may be the objects of contracts
of sale.1âwphi1 The narrow interpretation advocated by the Spouses Villaluz
would create a dissonance between Articles 1347, 1461, and 1462, on the one
hand, and Article 1409(3), on the other. A literal interpretation of the phrase "did
not exist at the time of the transaction" in Article 1409(3) would essentially
defeat the clear intent and purpose of Articles 1347, 1461, and 1462 to allow
future things to be the objects of contracts. To resolve this apparent conflict,
Justice J.B.L. Reyes commented that the phrase "did not exist" should be
interpreted as "could not come into existence" because the object may legally be
a future thing.23 We adopt this interpretation.
One of the basic rules in statutory interpretation is that all parts of a statute are
to be harmonized and reconciled so that effect may be given to each and every
part thereof, and that conflicting intentions in the same statute are never to be
supposed or so regarded.24 Thus, in order to give effect to Articles 134 7, 1461,
and 1462, Article 1409(3) must be interpreted as referring to contracts whose
cause or object is impossible of existing at the time of the transaction. 25
The cause of the disputed Real Estate Mortgage is the loan to be obtained by
Milflores Cooperative. This is clear from the terms of the mortgage document,
which expressly provides that it is being executed in "consideration of certain
loans, advances, credit lines, and other credit facilities or accommodations
obtained from [Land Bank by Milflores Cooperative] x x x in the principal amount
of [₱3,000,000]."26 The consideration is certainly not an impossible one because
Land Bank was capable of granting the ₱3,000,000 loan, as it in fact released one-
third of the loan a couple of days later. Although the validity of the Real Estate
Mortgage is dependent upon the validity of the loan,27 what is essential is that the
loan contract intended to be secured is actually perfected,28 not at the time of the
execution of the mortgage contract vis-a-vis the loan contract. In loan
transactions, it is customary for the lender to require the borrower to execute the
security contracts prior to initial drawdown. This is understandable since a
prudent lender would not want to release its funds without the security
agreements in place. On the other hand, the borrower would not be prejudiced
by mere execution of the security contract, because unless the loan proceeds are
delivered, the obligations under the security contract will not arise. 29 In other
words, the security contract-in this case, the Real Estate Mortgage-is conditioned
upon the release of the loan amount. This suspensive condition was satisfied
when Land Bank released the first tranche of the ₱3,000,000 loan to Milflores
Cooperative on June 25, 1996, which consequently gave rise to the Spouses
Villaluz's obligations under the Real Estate Mortgage.1awp++i1
IV
The Spouses Villaluz claim that the Special Power of Attorney they issued was
mooted by the execution of the Deed of Assignment of the Produce/Inventory by
Milflores Cooperative in favor of Land Bank. Their theory is that the additional
security on the same loan extinguished the agency because the Deed of
Assignment "served as payment of the loan of the [Milflores] Cooperative."30
The assignment was for the express purpose of "securing the payment of the
Line/Loan, interest and charges thereon."31 Nowhere in the deed can it be
reasonably deduced that the collaterals assigned by Milflores Cooperative were
intended to substitute the payment of sum of money under the loan. It was an
accessory obligation to secure the principal loan obligation.
The assignment, being intended to be a mere security rather than a satisfaction
of indebtedness, is not a elation in payment under Article 1245 32 and did not
extinguish the loan obligation. 33 "Dation in payment extinguishes the obligation
to the extent of the value of the thing delivered, either as agreed upon by the
parties or as may be proved, unless the parties by agreement-express or implied,
or by their silence-consider the thing as equivalent to the obligation, in which
case the obligation is totally extinguished."34 As stated in the second condition of
the Deed of Assignment, the "Assignment shall in no way release the ASSIGNOR
from liability to pay the Line/Loan and other obligations, except only up to the
extent of any amount actually collected and paid to ASSIGNEE by virtue of or
under this Assignment."35 Clearly, the assignment was not intended to substitute
the payment of sums of money. It is the delivery of cash proceeds, not the
execution of the Deed of Assignment, that is considered as payment. Absent any
proof of delivery of such proceeds to Land Bank, the Spouses Villaluz' s claim of
payment is without basis.
Neither could the assignment have constituted payment by cession under Article
125536 for the plain and simple reason that there was only one creditor, Land
Bank. Article 1255 contemplates the existence of two or more creditors and
involves the assignment of all the debtor's property. 37
The Spouses Villaluz understandably feel shorthanded because their property
was foreclosed by reason of another person's inability to pay. However, they were
not coerced to grant a special power of attorney in favor of Agbisit. Nor were they
prohibited from prescribing conditions on how such power may be exercised.
Absent such express limitations, the law recognizes Land Bank's right to rely on
the terms of the power of attorney as written.38 "Courts cannot follow one every
step of his life and extricate him from bad bargains, protect him from unwise
investments, relieve him from one-sided contracts, or annul the effects of
[unwise] acts."39 The remedy afforded by the Civil Code to the Spouses Villaluz is
to proceed against the agent and the substitute in accordance with A1iicles 1892
and 1893.
WHEREFORE, the petition is DENIED. The Decision dated September 22, 2009
and Resolution dated May 26, 2010 of the Court of Appeals in CA-G.R. CV No.
01307 are AFFIRMED.
SO ORDERED.

#2 PROPERTY: QUIETING OF TITLES
FIRST DIVISION
January 18, 2017
G.R. No. 193156
IVQ LANDHOLDINGS, INC.,, Petitioner vs. REUBEN BARBOSA, Respondent
RESOLUTION
LEONARDO-DE CASTRO, J.:
In this petition for review on certiorari1 under Rule 45 of the Rules of Court,
petitioner IVQ Landholdings, Inc. (IVQ) assails the Decision2 dated December 9,
2009 and the Resolution3 dated July 30, 2010 of the Court of Appeals in CA-G.R.
CV No. 90609. The decision of the appellate court affirmed the Decision 4 dated
June 15, 2007 of the Regional Trial Court (RTC) of Quezon City, Branch 222 in
Civil Case No. Q04-52842, which adjudicated in favor of herein respondent
Reuben Barbosa (Barbosa) the ownership of the property subject of this case and
ordered the cancellation of IVQ's certificate of title thereto. The resolution of the
appellate court denied the Motion for Reconsideration 5 and the Supplemental
Motion for Reconsideration6 filed by IVQ regarding the Court of Appeals' decision.
The Facts
On June 10, 2004, Barbosa filed a Petition for Cancellation and Quieting of
Titles7 against Jorge Vargas III, Benito Montinola, IVQ, and the Register of Deeds
of Quezon City, which case was docketed as Civil Case No. Q04-52842 in the RTC
of Quezon City, Branch 222.
Barbosa averred that on October 4, 1978, he bought from Therese Vargas a parcel
of land identified as Lot 644-C-5 located on Visayas Avenue, Culiat, Quezon City
(subject property). Thereafter, Therese Vargas surrendered to Barbosa the
owner's duplicate copy of her title, Transfer Certificate of Title (TCT) No. 159487.
In the Deed of Absolute Sale in favor of Barbosa and in the copy of Therese
Vargas's TCT No. 159487, the subject property was described as:
A parcel of land (Lot 644-C-5 of the subdivision plan, LRC, Psd- 14038, being a
portion of Lot 644-C, Fls-2544-D, LRC, Record No. 5975); situated in the District
of Culiat, Quezon City, Island of Luzon. x x x containing an area of THREE
THOUSAND FOUR HUNDRED FIFTYTWO (3,452) square meters, more or less.8
Barbosa said that he took possession of the subject property and paid real estate
taxes thereon in the name of Therese Vargas. Sometime in 2003, Barbosa learned
that Therese Vargas's name was cancelled and replaced with that of IVQ in the
tax declaration of the subject property. Upon investigation, Barbosa found out
that the subject property was previously registered in the name of Kawilihan
Corporation under TCT No. 71507. Therese Vargas acquired the subject property
from Kawilihan Corporation and the date of entry of her TCT No. 159487 was
November 6, 1970. On the other hand, IVQ supposedly bought the subject
property from Jorge Vargas III who, in turn, acquired it also from Kawilihan
Corporation. The date of entry of Jose Vargas Ill's TCT No. 223019 was October
14, 1976. This title was later reconstituted and re-numbered as TCT No. RT-
76391. The title of IVQ, TCT No. 253434, was issued on August 6, 2003.
Barbosa argued that even without considering the authenticity of Jorge Vargas
Ill's title, Therese Vargas's title bore an earlier date. Barbosa, thus, prayed for the
trial court to issue an order directing the Office of the Register of Deeds of Quezon
City to cancel Jorge Vargas Ill's TCT No. 223019 and IVQ's TCT No. 253434 and
adjudicating ownership of the subject property to him.9
In their Answer10 to the above petition, Jose Vargas III, Benito Montinola, and IVQ
(respondents in the court a quo) countered that the alleged title from where
Barbosa's title was allegedly derived from was the one that was fraudulently
acquired and that Barbosa was allegedly part of a syndicate that falsified titles for
purposes of "land grabbing." They argued that it was questionable that an alleged
lot owner would wait for 30 years before filing an action to quiet title. They
prayed for the dismissal of the petition and, by way of counterclaim, sought the
award of moral and exemplary damages, attorney's fees and costs of suit.
The Register of Deeds of Quezon City neither filed an answer to Barbosa's petition
nor participated in the trial of the case.
During trial, Barbosa testified, inter alia, that he is the owner of the subject
property that he bought from Therese Vargas. The property was at that time
registered in her name under TCT No. 159487. Barbosa took possession of the
subject property seven days after he bought the same and he employed a
caretaker to live therein. Before Therese Vargas, the owner of the property was
Kawilihan Corporation, which company was owned by Jorge Vargas.11 Barbosa
stated that the subject property remained registered in the name of Therese
Vargas as he entrusted her title to another person for custody but the said person
went to Canada. Barbosa paid real estate taxes on the subject property in the
name of Kawilihan Corporation from 1978 until 2002. From 2003 to 2006, he
paid real estate taxes thereon in the name of Therese Vargas. 12
Barbosa added that in the year 2000, Santiago Sio Soy Une, allegedly the
president of Lisan Realty and Development Corporation (Lisan Realty), presented
to Barbosa's caretaker a Deed of Sale with Assumption of Mortgage,13 which was
allegedly executed by Jorge Vargas III and Lisan Realty involving the subject
property. Barbosa then went on to compile documents on the transactions
relating to the subject property.
Barbosa testified that in the Deed of Sale with Assumption of Mortgage of Jorge
Vargas III and Santiago Sio Soy Une, the Friar Land Survey (FLS) number was
denominated as FLS-2554-D, while in the title of Therese Vargas it was FLS-2544-
D. Barbosa obtained a certification from the Lands Management Bureau that FLS-
2554-D was not listed in their electronic data processing (EDP) listing, as well as
a certification from the DENR that FLS-2554-D had no records in the Land Survey
Records Section of said office. On the other hand, he obtained a certification from
the Lands Management Bureau that Lot 644 subdivided under FLS-2544-D was
listed in their records. 14 Barbosa also learned that IVQ was registered with the
Securities and Exchange Commission only on June 5, 1998. Moreover, on January
7, 2004, IVQ filed Civil Case No. Q-17499(04), which is a petition for the
cancellation of an adverse claim filed by Santiago Sio Soy Une (Exhibit "RR"). In a
portion of the transcript of stenographic notes (TSN) in said case, it was stated
that IVQ bought the property from Therese Vargas, not from Jorge Vargas III. 15
Barbosa furthermore secured a certification from the EDP Division of the Office
of the City Assessor in Quezon City that there were no records of real property
assessments in the name of Jorge Vargas III as of August 15, 2006. Moreover,
Barbosa stated that Atty. Jesus C. Apelado, Jr., the person who notarized the
March 3, 1986 Deed of Absolute Sale between Jorge Vargas III and IVQ, was not
authorized to do so as Atty. Apelado was only admitted as a member of the
Philippine Bar in 1987. Also, the notarial register entries, i.e., the document
number, page number, book number and series number, of the Deed of Absolute
Sale in favor of IVQ were exactly the same as those in the special power of
attorney (SPA) executed by Jorge Vargas III in favor of Benito Montinola, who
signed the Deed of Absolute Sale on behalf of Jorge Vargas III. The Deed of
Absolute Sale and the SPA were notarized by different lawyers but on the same
date. 16
On the part of the respondents in the court a quo, they presented a lone witness,
Atty. Erlinda B. Espejo. Her testimony was offered to prove that she was the legal
consultant of IVQ; that IVQ's TCT No. 253434 was acquired from Jorge Vargas III
through TCT No. RT-76391; that Jorge Vargas Ill's title was mortgaged at
Philippine National Bank (PNB), Bacolod; that Benito Montinola, the attorney-in-
fact of Jorge Vargas III, sold the subject property to Lisan Realty who in tum
assigned its rights to IVQ and; that IVQ redeemed the property from PNB.
Barbosa's counsel offered to stipulate on the offer so that the witness' testimony
could already be dispensed with. 17
As to the supposed sale to Lisan Realty and Lisan Realty's assignment of rights to
IVQ, the counsel for Barbosa agreed to stipulate on the same if the transactions
were annotated in Jorge Vargas Ill's title. The counsel for IVQ said that they were
so annotated. Upon inquiry of the trial court judge, the counsel for IVQ clarified
that the transfers or assignment of rights were done at the time that the subject
property was mortgaged with PNB. The property was then redeemed by IVQ on
behalf of Jorge Vargas III. 18
The Decision of the RTC
On June 15, 2007, the RTC granted Barbosa's petition and ordered the
cancellation of IVQ's TCT No. 253434.19 The trial court noted that while the
original copy of the Deed of Absolute Sale in favor of Barbosa was not presented
during trial, Barbosa presented secondary evidence by submitting to the court a
photocopy of said deed and the deed of sale in favor of his predecessor-in-interest
Therese Vargas, as well as his testimony. The RTC ruled that Barbosa was able to
establish the existence and due execution of the deeds of sale in his favor and that
of Therese Vargas.
The Certification20 dated February 12, 2004 from the Office of the Clerk of Court
and Ex-Officio Sheriff of the RTC, Manila stated that the page on which the Deed
of Sale dated October 4, 1978 in favor of Barbosa might have been probably
entered was tom. This, however, did not discount the possibility that said deed
was actually notarized and recorded in the missing notarial records page.
Moreover, the RTC found that Barbosa adduced evidence that proved the
payment21 of Therese Vargas to Jorge Vargas, as well as the payment of Barbosa
to Therese Vargas.
The RTC further observed that Therese Vargas's TCT No. 159487 and Jorge
Vargas Ill's TCT No. 223019 bear more or less identical technical descriptions of
Lot 644-C-5, except for their friar survey plan numbers. However, the Lands
Management Bureau and Land Survey Records Section of the DENR, NCR issued
certifications attesting that their respective offices had no record of FLS-2554-D,
the land survey number in the certificates of title held by Jorge Vargas III and IVQ.
On the other hand, Barbosa presented a certified true copy of the subdivision
survey plan FLS-2544-D from the Lands Management Bureau, thereby bolstering
his claim that the title of Therese Vargas was an authentic transfer of the title of
Kawilihan Corporation.
Therese Vargas's TCT No. 159487 was also issued earlier in time than Jorge
Vargas Ill's TCT No. 223019. Not only was the original of Therese Vargas's TCT
No. 159487 presented in court, but the same was also proven to have existed
according to the Certification from the LRA dated October 6, 2003 that Judicial
Form No. 109-D with Serial No. 1793128 - pertaining to TCT No. 159487 - was
issued by an authorized officer of the Register of Deeds of Quezon City.
In contrast, the RTC noted that IVQ was not able to prove its claim of ownership
over the subject property. The deed of sale in favor of IVQ, which was supposedly
executed in 1986, was inscribed only in 2003 on Jorge Vargas III's TCT No. RT-
76391 that was reconstituted back in 1993. Instead of substantiating their
allegations, respondents in the court a quo opted to offer stipulations, such as on
the matter of Lisan Realty's assignment of its rights of ownership over the subject
property in favor of IVQ. However, the said assignment was not reflected in the
title of Jorge Vargas III. The RTC likewise found it perplexing that when IVQ filed
a petition for cancellation of encumbrance in Jorge Vargas Ill's title, docketed as
LRC No. Q-17499 (04), it alleged therein that it acquired the subject property
from Therese Vargas, not Jorge Vargas III.
The trial court added that while there is no record of tax declarations and
payment of real estate taxes in the name of Jorge Vargas III, Therese Vargas
declared the subject property for taxation purposes in her name and, thereafter,
Barbosa paid real estate taxes thereon in her name. On the other hand, the only
tax declaration that IVQ presented was for the year 2006. The RTC also opined
that while Barbosa was not able to sufficiently establish his possession of the
subject property as he failed to put on the witness stand the caretaker he had
authorized to occupy the property, IVQ also did not gain control and possession
of the subject property because the same continued to be in the possession of
squatters.
To impugn the above decision of the trial court, IVQ, alone, filed a Motion for
Reconsideration/New Trial/Reopening of Triat22 under the representation of
a new counsel.23 In its Motion for Reconsideration, IVQ argued that the RTC erred
in concluding that Barbosa's title is superior to its title. 24 IVQ alleged that Barbosa
submitted forged and spurious evidence before the trial court. On the other hand,
in its Motion for New Trial, IVQ alleged that it was defrauded by its former
counsel, Atty. Leovigildo Mijares, which fraud prevented it from fully presenting
its case in court. IVQ also averred that it found newly-discovered evidence, which
it could not have discovered and produced during trial.
In an Order25 dated November 28, 2007, the trial court denied IVQ's Motion for
Reconsideration/New Trial/Reopening of Trial for lack of merit.
IVO's Appeal in the Court of Appeals
IVQ interposed an appeal26 to the Court of Appeals. In its Appellant's Brief, IVQ
first laid down its version of the facts, to wit:
On 12 March 1976, Kawilihan Corporation, represented by its President and
Chairman of the Board Jorge B. Vargas, executed a Deed of Absolute Sale x x x,
whereby he sold the subject property to appellant Vargas, III.
On 14 October 1976, TCT No. 71507 was cancelled and in lieu thereofTCT No.
223019 x x x was issued in the name of appellant Vargas, III who on 23 December
1976 executed a Special Power of Attorney x x x in favor of appellant Benito C.
Montinola, Jr. with power among other things to mortgage the subject property
for and in behalf of appellant Vargas, III.
On 25 December 1976, appellant Vargas, III mortgaged the subject property to
the Philippine National Bank (PNB), Victorias Branch, Negros Occidental as
security for a loan in the principal amount of ₱506,000.00.
On 04 October 1978, Therese Vargas executed a Deed of Absolute Sale x x x
wherein she sold the subject property to appellee Barbosa who however did not
register the said sale with the Registry of Deeds of Quezon City. It appears that
Therese Vargas was able to secure TCT No. 159487 x x x in her name on 06
November 1970 covering the subject property.
Meanwhile, appellant Vargas, III executed another Special Power of Attorney x x
x in favor of appellant Montinola, Jr. with power among other things to sell the
subject property for and in behalf of appellant Vargas, III. Thus, on 03 March
1986, during the effectivity of the mortgage contract with PNB, appellant
Montinola sold the subject property to af pellant IVQ for and in consideration of
the amount of ₱450,000.00.27
After the alleged sale of the subject property to IVQ, the following incidents
transpired:
When appellant Vargas, III failed to pay his loan, PNB foreclosed the mortgage
and in the public auction that followed, the subject property was sold to PNB. A
Certificate of Sale was issued in favor of PNB but the latter did not cause the
registration of the certificate of sale right away.
Sometime in 1991, appellant Montinola, Jr. caused the filing of a Petition for
Reconstitution of TCT No. 223019 which was granted in 1993. Consequently, TCT
No. RT-76391 was issued, in the name of appellant Vargas, III, in lieu of TCT No.
223019. On 13 July 1993, the Certificate of Sale in favor of PNB was inscribed on
appellant Vargas, III' s new title.
On 17 February 1994, appellant Vargas, III executed a Deed of Sale with
Assumption of Mortgage x x x wherein he sold to Lisan Realty and Development
Corporation (Lisan Realty) the subject property with the latter assuming the loan
balance with PNB.
On 23 June 1994, appellant IVQ, for and in behalf of defendant Vargas, III,
redeemed the subject property from PNB and on 24 June 1994, the Certificate of
Redemption was annotated at the dorsal portion of TCT No. RT-76390.
On 21 August 2000, Lisan Realty caused the annotation of an Affidavit of Adverse
Claim x x x on TCT No. RT-76390.
Thereafter, appellant IVQ filed a Petition for Cancellation of Encumbrance x x x
with the Regional Trial Court of Quezon City, Branch 220, docketed as LRC Case
No. Q-17499 (04).
On 06 August 2003, the Register of Deeds of Quezon City cancelled TCT No. RT-
76390 and in lieu thereof TCT No. 253434 was issued in the name of appellant
IVQ.
On 11 February 2004, the Regional Trial Court of Quezon City, Branch 220
rendered a Decision x x x granting appellant IVQ's Petition for Cancellation of
Encumbrance and ordering the cancellation of the annotation of the adverse
claim on TCT No. 253434.
In August 2004, appellant IVQ instituted [a] Complaint x x x for unlawful detainer
with the Metropolitan Trial Court of Quezon City, Branch 38 against several
persons who were occupying the subject property without any right whatsoever.
The case was docketed as Civil Case No. 38-33264.
On 26 October 2004, the Metropolitan Trial Court of Quezon City, Branch 38
rendered a Decision x xx in favor of appellant IVQ ordering the defendants therein
to vacate the subject property.28
The Court of Appeals, however, paid no heed to IVQ's appeal as it affirmed the
ruling of the RTC. The appellate court held that Barbosa was able to prove his
ownership over the subject property, while IVQ presented a rather flimsy account
on the transfer of the subject property to its name.
IVQ filed a Motion for Reconsideration and a Supplemental Motion for
Reconsideration on the above judgment, but the Court of Appeals denied the
same in its assailed Resolution dated July 30, 2010.
IVQ's Petition for Review on Certiorari
IVQ instituted before this Court the instant petition for review on certiorari on
August 20, 2010, which prayed for the reversal of the above rulings of the Court
of Appeals. In a Resolution[[29]] dated September 29, 2010, the Court initially
denied IVQ's petition for its failure to show that the Court of Appeals committed
any reversible error in its assailed rulings.
IVQ filed a Motion for Reconsideration30 on the denial of its petition. To prove
that its title to the subject property is genuine, IVQ averred that the Deed of
Absolute Sale in favor of Jorge Vargas III was notarized by Atty. Jejomar C. Binay,
then a notary public for Mandaluyong. IVQ attached to its motion for
reconsideration, among others, a photocopy of a Certification31 dated October 8,
2010 from the Office of the Clerk of Court of the RTC of Pasig City that "ATTY.
JEJOMAR C. BINA Y was appointed Notary Public for and in the Province of Rizal
for the year 1976" and that he "submitted his notarial reports for the period
January, 1976 up to December, 1976." IVQ also attached a photocopy of the Deed
of Absolute Sale in favor of Jorge Vargas III obtained from the records of the
National Archives on October 14, 2010.32
To prove that Barbosa's claim of ownership is spurious, IVQ attached to its
motion for reconsideration the following documents:
(1) a photocopy of a Certification dated October 27, 2010 from
the Office of the Bar Confidant of the Supreme Court that
Espiridion J. Dela Cruz, the notary public who supposedly
notarized the Deed of Absolute Sale in favor of Therese Vargas,
is not a member of the Philippine Bar;33
(2) a photocopy of the Certification dated October 19, 2010 from
the National Archives of the Philippines that a copy of the Deed
of Absolute Sale in favor of Therese Vargas is not extant in the
files of said office;34
(3) a Certification dated October 12, 2010 from the Office of the
Clerk of Court and Ex-Officio Sheriff of the RTC of Manila, stating
that the notarial entries of Atty. Santiago R. Reyes in the Deed of
Absolute Sale between Therese Vargas and Barbosa - Doc. No.
1947, Page 92, Book No. XIV, Series of 1978 - actually pertained
to a different deed of sale;35
(4) photocopies of pages 90, 91 and 92, Book XIV, Series of 1978
of Atty. Santiago R. Reyes's notarial records, which were
reproduced from the National Archives on October 14,2010,
showing that the Deed of Absolute Sale between Therese Vargas
and Barbosa was not found therein;36
(5) a photocopy of a Certification dated October 14, 2010 of the
City Treasurer's Office of the City of Manila, stating that
 Residence Certificate No. A-423263 - the residence certificate
number of Therese Vargas in the Deed of Absolute Sale in favor
of Barbosa - was not among those allotted to the City of Manila;37
and
(6) a letter dated October 20, 2010 from Director Porfirio R.
Encisa, Jr. of the LRA Department on Registration, explaining
that the land survey number of FLS-2554-D in IVQ's TCT No.
253434 was a mere typographical error and it should have been
FLS-2544-D.38
In a Resolution39 dated December 15, 2010, the Court denied IVQ's Motion for
Reconsideration.
Undaunted, IVQ filed a Second Motion for Reconsideration, 40arguing that it was
able to submit new pieces of documentary evidence that surfaced for the first
time when its Motion for Reconsideration was submitted by its new counsel. IVQ
entreated the Court to consider the same in the higher interest of justice.
Barbosa opposed41 the above motion, countering that the same is a prohibited
pleading. Barbosa maintained that it was impossible for IVQ to acquire
ownership over the subject property as the latter was only incorporated on June
5, 1998. Thus, IVQ could not have bought the property from Jorge Vargas III on
March 3, 1986 or subsequently redeemed the property in 1994.
In a Resolution42 dated June 6, 2011, the Court reinstated IVQ's petition and
required Barbosa to comment thereon.
Barbosa moved for a reconsideration43 of the said resolution, citing IVQ's lack of
legal personality when it supposedly purchased the subject property and IVQ's
inconsistent statements as to how it acquired the same. The Court treated the
above motion of Barbosa as his comment to IVQ's petition and required IVQ to
file a reply thereto.44
In its Reply,45 IVQ primarily argued that Barbosa did not bother to refute the
allegations and the evidence on the spuriousness of his title and instead sought
to divert the issue by attacking IVQ's corporate existence.
The Court, thereafter, gave due course to the petition and required the parties to
submit their respective memoranda.46
In its memorandum,47 IVQ avers that while the evidence supporting its case
surfaced for the first time after its petition was filed with this Court, peculiar
circumstances involving the actuations of IVQ's former counsel and Barbosa' s
introduction of spurious documents warrant the suspension of procedural rules
in the interest of justice. IVQ insists that Barbosa was not able to prove his claim
by preponderance of evidence.
Upon the other hand, Barbosa contends that IVQ could not legally claim
ownership of the subject property as this claim is anchored on a Deed of Absolute
Sale executed by Jorge Vargas III on March 3, 1986 while IVQ was incorporated
only on June 5, 1998. Barbosa also points out that the Deed of Absolute Sale in
favor of IVQ was signed only by Jorge Vargas Ill's representative, Benito
Montinola. There is no corresponding signature on the part of the vendee.
Barbosa adopts entirely the findings of the R TC and the Court of Appeals that the
sale in favor of Therese Vargas is the one to be legally sustained.
The Ruling of the Court
Without ruling on the merits of this case, the Court finds that there is a need to
reassess the evidence adduced by the parties to this case and thereafter
reevaluate the findings of the lower courts.
To recall, Barbosa initiated this case before the trial court via a petition for
cancellation and quieting of titles. As held in Secuya v. De Selma,48
In an action to quiet title, the plaintiffs or complainants must demonstrate
a legal or an equitable title to, or an interest in, the subject real property.
Likewise, they must show that the deed, claim, encumbrance or proceeding
that purportedly casts a cloud on their title is in fact invalid or inoperative
despite its prima facie appearance of validity or legal efficacy. This point is
clear from Article 476 of the Civil Code, which reads:
"Whenever there is cloud on title to real property or any interest therein, by
reason of any instrument, record, claim, encumbrance or proceeding which is
apparently valid or effective but is in truth and in fact invalid, ineffective, voidable
or unenforceable, and may be prejudicial to said title, an action may be brought
to remove such cloud or to quiet title."
"An action may also be brought to prevent a cloud from being cast upon title to
real property or any interest therein." (Emphasis supplied; citations omitted.)
The Court also stressed in Santiago v. Villamor49 that in civil cases, the plaintiff
must establish his cause of action by preponderance of evidence; otherwise, his
suit will not prosper.
In the instant case, the trial court and the Court of Appeals adjudicated the subject
property in favor of Barbosa and directed the cancellation of IV Q's certificate of
title.
The trial court found that Barbosa was able to substantiate the transfer of
ownership of the subject property from Kawilihan Corporation to Therese Vargas
and then to Barbosa. Specifically, Barbosa established the existence and
execution of the Deed of Absolute Sale dated September 11, 1970 between
Kawilihan Corporation and Therese Vargas, as well as the Deed of Absolute Sale
dated October 4, 1978 between Therese Vargas and Barbosa. In like manner, the
trial court ruled that Barbosa adduced evidence that purportedly proved the
payment of Therese Vargas to Kawilihan Corporation, and the payment of
Barbosa to Therese Vargas. Also, the trial court found that Barbosa was able to
prove the validity of Therese Vargas's TCT No. 159487. Moreover, the friar land
survey number in Therese Vargas's TCT No. 159487 - FLS-2544-D - was the one
found to be extant in the records of Lands Management Bureau, not FLS-2554-D,
the survey number in the certificates of title of Jorge Vargas III and IVQ.
On the other hand, the trial court found that IVQ failed to establish its claim of
ownership over the subject property, given the inconsistent statements on how
the property was transferred from Kawilihan Corporation to Jorge Vargas III and
eventually to IVQ.
Before this Court, however, IVQ adduced new pieces of documentary evidence
that tended to cast doubt on the veracity of Barbosa's claim of ownership.
To impugn the validity of the Deed of Absolute Sale between Kawilihan
Corporation and Therese Vargas, IVQ submitted a copy of the Certification from
the Office of the Bar Confidant that Espiridion J. Dela Cruz, the notary public who
supposedly notarized the said deed, is not a member of the Philippine Bar. IVQ
also submitted a copy of the Certification from the National Archives, stating that
the Deed of Absolute Sale in favor of Therese Vargas was not found in their
records.
Anent the Deed of Absolute Sale between Therese Vargas and Barbosa, IVQ
presented a Certification from the Office of the Clerk of Court and Ex-Officio
Sheriff of the RTC of Manila, stating that the notarial entries of Atty. Santiago R.
Reyes in said deed, i.e., Doc. No. 1947, Page 92, Book No. XIV, Series of 1978,
pertained to a deed of sale between other individuals. Also, the Deed of Absolute
Sale in favor of Barbosa was not found in the photocopies of pages 90, 91, and 92
of the aforesaid notarial records of Atty. Santiago R. Reyes, which pages were
reproduced from the National Archives. IVQ also submitted a Certification from
the City Treasurer's Office of the City of Manila, stating that Therese Vargas's
Residence Certificate No. A-423263 in the Deed of Absolute Sale in favor of
Barbosa was not among those allotted to the City of Manila.
Furthermore, IVQ submitted a letter from Director Porfirio R. Encisa, Jr. of the
LRA Department of Registration, stating that the survey number FLS-2554-D in
IVQ's TCT No. 253434 was a typographical error and the same should have been
FLS-2544-D.
On the other hand, to bolster its claim of ownership over the subject property,
IVQ presented a copy of the Deed of Absolute Sale50 dated March 12, 197 6
between Kawilihan Corporation and Jorge Vargas III that was obtained from the
records of the National Archives. IVQ also submitted a copy of the Certification
from the Office of the Clerk of Court of the RTC of Pasig City that Atty. Jejomar C.
Binay, the officer who notarized the said deed, was indeed appointed as a notary
public for the province of Rizal for the year 1976 and the latter submitted his
notarial reports for the said year.
Interestingly, despite the claim of both parties that their respective titles could
be traced to TCT No. 71507 in the name of Kawilihan Corporation, neither of them
thought to submit a certified true copy of the cancelled TCT No. 71507, which
would have indicated to whom the subject property had in fact been transferred.
The parties likewise admit in their pleadings that there is an on-going
investigation being conducted by the LRA on the authenticity and genuineness of
the certificates of title involved in the present case and to date, the LRA has not
issued any official report pertaining to said investigation.
After reviewing the factual and procedural antecedents of this case, the Court
deems it appropriate that further proceedings be undertaken in order to verify
the authenticity and veracity of the parties' certificates of title and other
documentary evidence.
For sure, the Court is aware that the aforesaid evidence belatedly introduced by
IVQ are not technically newly-discovered evidence, given that the same could
have been discovered and produced at the trial of the case had IVQ exercised
reasonable diligence in obtaining them.51 Nonetheless, we find that the above
evidence cannot simply be brushed aside on this ground alone. The same are too
material to ignore and are relevant in ultimately resolving the question of
ownership of the subject property. In Mangahas v. Court of Appeals, 52 we
recognized the long line of jurisprudence that:
[I]t is always in the power of this Court to suspend its own rules, or to except a
particular case from its operation, whenever the purposes of justice require it.
This Court is mindful of the policy of affording litigants the amplest opportunity
for the determination of their cases on the merits and of dispensing with
technicalities whenever compelling reasons so warrant or when the purpose of
justice requires it. (Citations omitted.)
Indeed, the alleged defects in the notarization of the Deed of Absolute Sale dated
September 11, 1970 between Kawilihan Corporation and Therese Vargas and the
Deed of Absolute Sale dated October 4, 1978 between Therese Vargas and
Barbosa are by no means trivial.
As the Court stressed in V da. De Rosales v. Ramos53 :
The importance attached to the act of notarization cannot be overemphasized.
Notarization is not an empty, meaningless, routinary act. It is invested with
substantive public interest, such that only those who are qualified or authorized
may act as notaries public. Notarization converts a private document into a public
document thus making that document admissible in evidence without further
proof of its authenticity. A notarial document is by law entitled to full faith and
credit upon its face. Courts, administrative agencies and the public at large must
be able to rely upon the acknowledgment executed by a notary public and
appended to a private instrument.
xxxx
The notary public is further enjoined to record in his notarial registry the
necessary information regarding the document or instrument notarized and
retain a copy of the document presented to him for acknowledgment and
certification especially when it is a contract. The notarial registry is a record of
the notary public's official acts. Acknowledged documents and instruments
recorded in it are considered public document. If the document or instrument
does not appear in the notarial records and there is no copy of it therein, doubt is
engendered that the document or instrument was not really notarized, so that it
is not a public document and cannot bolster any claim made based on this
document.x x x. (Citations omitted.)
Furthermore, in Bitte v. Jonas,54 the Court had occasion to discuss the
consequence of an improperly notarized deed of absolute sale. Thus –
Article 1358 of the New Civil Code requires that the form of a contract
transmitting or extinguishing real rights over immovable property should be in a
public document. x x x.
xxxx
Not having been properly and validly notarized, the deed of sale cannot be
considered a public document. It is an accepted rule, however, that the failure
to observe the proper form does not render the transaction invalid. It has been
settled that a sale of real property, though not consigned in a public instrument
or formal writing is, nevertheless, valid and binding among the parties, for the
time-honored rule is that even a verbal contract of sale or real estate produces
legal effects between the parties.
Not being considered a public document, the deed is subject to the requirement
of proof under Section20,
Rule 132, which reads:
Section 20. Proof of private document. - Before any private document offered as
authentic is received in evidence its due execution and authenticity must be
proved either:
(a) By anyone who saw the document executed or written; or
(b) By evidence of the genuineness of the signature or handwriting of the maker.
Any other private document need only be identified as that which it is claimed to
be.
Accordingly, the party invoking the validity of the deed of absolute sale had
the burden of proving its authenticity and due execution.x x x. (Emphasis
supplied; citations omitted.)
In the instant case, should the Deeds of Absolute Sale in favor of Therese Vargas
and Barbosa, respectively, be found to be indeed improperly notarized, the trial
court would have erred in admitting the same in evidence without proof of their
authenticity and in relying on the presumption regarding the regularity of their
execution. Barbosa would then have the additional burden of proving the
authenticity and due execution of both deeds before he can invoke their validity
in establishing his claim of ownership. Therefore, IVQ should be allowed to
formally offer in evidence the documents it belatedly submitted to this Court and
that Barbosa should equally be given all the opportunity to refute the same or to
submit controverting evidence.
Given that the Court is not a trier of facts and there still are factual matters that
need to be evaluated, the proper recourse is to remand the case to the Court of
Appeals for the conduct of further proceedings.
In Manotok IV v. Heirs of Homer L. Barque,55 the Court explained the propriety of
resorting to the above procedure in this wise:
At the same time, the Court recognizes that there is not yet any sufficient evidence
for us to warrant the annulment of the Manotok title. All that the record indicates
thus far is evidence not yet refuted by clear and convincing proof that the
Manotok's claim to title is flawed. To arrive at an ultimate determination, the
formal reception of evidence is in order. This Court is not a trier of fact or
otherwise structurally capacitated to receive and evaluate evidence de
novo. However, the Court of Appeals is sufficiently able to undertake such
function.
The remand of cases pending with this Court to the Court of Appeals for reception
of further evidence is not a novel idea. It has been undertaken before - in Republic
v. Court of Appeals and more recently in our 2007 Resolution in Manotok v. Court
of Appeals. Our following explanation in Manotok equally applies to this case:
Under Section 6 of Rule 46, which is applicable to original cases for certiorari, the
Court may, whenever necessary to resolve factual issues, delegate the reception
of the evidence on such issues to any of its members or to an appropriate court,
agency or office. The delegate need not be the body that rendered the assailed
decision.
The Court of Appeals generally has the authority to review findings of fact.
Its conclusions as to findings of fact are generally accorded great respect by
this Court. It is a body that is fully capacitated and has a surfeit of
experience in appreciating factual matters, including documentary
evidence.
In fact, the Court had actually resorted to referring a factual matter pending
before it to the Court of Appeals. In Republic v. Court of Appeals, this Court
commissioned the former Thirteenth Division of the Court of Appeals to hear and
receive evidence on the controversy, x x x. The Court of Appeals therein received
the evidence of the parties and rendered a "Commissioner's Report" shortly
thereafter. Thus, resort to the Court of Appeals is not a deviant procedure.
The provisions of Rule 32 should also be considered as governing the grant of
authority to the Court of Appeals to receive evidence in the present case. Under
Section 2, Rule 32 of the Rules of Court, a court may, motu proprio, direct a
reference to a commissioner when a question of fact, other than upon the
pleadings, arises upon motion or otherwise, in any stage of a case, or for carrying
a judgment or order into effect. The order of reference can be limited exclusively
to receive and report evidence only, and the commissioner may likewise rule
upon the admissibility of evidence. The commissioner is likewise mandated to
submit a report in writing to the court upon the matters submitted to him by the
order of reference. In Republic, the commissioner's report formed the basis of the
final adjudication by the Court on the matter. The same result can obtain herein.
(Emphasis supplied; citations omitted.)
Aside from receiving and evaluating evidence relating to the pieces of
documentary evidence submitted by IVQ to this Court, the Court of Appeals may
likewise receive any other additional evidence that the parties herein may submit
on their behalf.
The Court, in particular, deems it necessary for the parties to submit a certified
true copy of TCT No. 71507 that is registered in the name of Kawilihan
Corporation, if possible. As previously discussed, neither of the parties submitted
the same before the trial court and no explanation was likewise offered for this
omission. As TCT No. 71507 is ultimately the title from which the certificates of
title of Therese Vargas and Jorge Vargas III supposedly emanated, the same may
indicate which of the two subsequent titles cancelled it.
It would likewise be expedient for the parties to submit evidence as to the
character of their possession of the subject property, given that the trial court
ruled that neither of them were able to prove their possession thereof.1âwphi1
The Court further reiterates its directive to the parties to submit information as
to the results of the investigation of the Task Force Titulong Malinis of the LRA
regarding the authenticity of TCT No. 159487 registered in the name of Therese
Vargas and TCT No. 223019 registered in the name of Jorge Vargas III.
After the conclusion of its proceedings, the Court of Appeals is directed to submit
to this Court a detailed Report on its findings and conclusions within three
months from notice of this Resolution. Said report, along with all the additional
evidence that will be offered by the parties, shall be thoroughly considered in
order to determine with finality the issue of ownership of the subject property.
WHEREFORE, the case is REMANDED to the Court of Appeals for the purpose of
hearing and receiving evidence, including but not limited to, those specifically
required by the Court in this Resolution. The Court of Appeals is directed to
conclude the proceedings and submit to this Court a Report on its findings and
recommended conclusions within three (3) months from notice of this
Resolution. The Court of Appeals is further directed to raffle this case
immediately upon receipt of this Resolution.
This Resolution is immediately executory.
SO ORDERED.
#3 OWNERSHIP
THIRD DIVISION
January 30, 2017
G.R. No. 181596
JENESTOR B. CALDITO and MARIA FILOMENA T. CALDITO, Petitioner
vs.
ISAGANI V. OBANDO and GEREON V. OBANDO, Respondent
DECISION
REYES, J.:
Assailed in this petition for review on certiorari1 under Rule 45 of Reversed Rules
of Court are the Decision2 dated July 17, 2007 and the Resolution3 dated January
29, 2008 of the Court of Appeals (CA) in CA-G.R. CV No. 87021, which reversed
and set aside the Decision4 dated December 23, 2005 of the Regional Trial Court
(RTC) of Laoag City, Ilocos Norte, Branch 12, in Civil Case No. 12932-12.
The Facts
This petition stemmed from a complaint5 for quieting of ownership over a parcel
of land covering the 272.33 square meters eastern portion of Lot No. 1633
situated at Barangay No. 5, San Vicente, Sarrat, Ilocos Norte, filed by Spouses
Jenestor B. Caldito and Ma. Filomena Tejada Caldito (Filomena) (petitioners)
against Isagani V. Obado (Isagani) and Gereon V. Obado (respondents).
The record showed that as early as 1921, Lot No. 1633 was declared for taxation
purposes in the name of Felipe Obado (Felipe). After Felipe's death, Paterno
Obado (Paterno), whom Felipe treated like his own son, subsequently occupied
Lot No. 1633 and continued to pay the realty taxes of the same.6
Sometime in 1995, Antonio Ballesteros (Antonio) executed an Affidavit of
Ownership dated February 23, 1995 narrating his claim over the subject parcel
of land.· In his affidavit, Antonio claimed that Lot No. 1633 was co-owned by
Felipe with his five siblings, namely: Eladia, Estanislao, Maria, Severino and
Tomasa, all surnamed Obado.7
On the next day following the execution of the said affidavit or on February 24,
1995, Antonio and Elena Ballesteros (Spouses Ballesteros) sold the subject parcel
of land to the petitioners for the sum of P70,000.000 evidenced by a Deed of
Absolute Sale. Thereafter, the petitioners declared the subject lot for taxation
purposes and paid the realty taxes thereon.8
In 2002, the petitioners attempted to build a house on the subject parcel of land
but the respondents prevented them from completing the same. The respondents
then filed a complaint before the barangay but no amicable settlement was
reached between the parties.9 Hence, on December 8, 2003, the petitioners
instituted a complaint for quieting of ownership against the respondents before
the RTC, as well as an injunctive writ to prevent the respondents from interfering
with the construction of their house.10
For their part, the respondents averred that the Spouses Ballesteros were not the
owners and possessors of the subject parcel of land. They maintained that Lot No.
1633 was inherited by their father, Paterno, from its original owner Felipe, and
they have been paying the real property taxes for the entire property. They
asserted that the petitioners are buyers in bad faith since their family had been
in possession of the entire Lot No. 1633 since 1969 and had been in. open,
peaceful and uninterrupted possession of the whole property up to the present
or for more than 30 years in the concept of an owner. 11
After trial, the court a quo rendered its judgment in favor of the petitioners. The
trial court upheld the validity of the sale between the petitioners and the Spouses
Ballesteros and dismissed the respondents' claim of ownership over Lot No.
1633. The trial court held that the petitioners presented convincing evidence of
ownership over the subject parcel of land which consists of the following: (a) the
Deed of Absolute Sale executed between the petitioners and the Spouses
Ballesteros; (b) the tax declarations all paid by the petitioners only; and (c) the
Affidavit of Ownership allegedly executed by Antonio. The trial court also found
that the respondents have no successional rights over the property of Felipe
based on the governing law and on the order of intestate succession at that time
and the established facts. Thus, the RTC disposed as follows:
WHEREFORE, IN VIEW OF ALL THE FOREGOING PREMISES, the
preponderance of evidence having substantially and sufficiently tilted in favor
of the [petitioners] herein and against the [respondents] herein named and
their siblings, this Court hereby renders judgment declaring the validity of the
272.33 square meters eastern portion of Lot No. 1633 in favor of the
[petitioners] and, the [respondents] are hereby ordered to do the following:
1. to respect, recognize and not to molest the lawful ownership and
possession of the [petitioners] over the 272.33 square meters located at the
eastern portion of Lot No. 1633 of the Sarrat Cadastre;
2. to pay jointly and severally to the /petitioners} the total sum of:
2.a. PJJB,453.50- as and/or actual damages;
2.h. P400,000.00- as and/or moral damages;
2.c. PJ00,000.00- as and/or nominal damages;
2.d. P200,000.00- as and/or temperate damages; and
2.e. P300,000.00- as and/or exemplary damages or corrective.
With costs against the /respondents].
SO ORDERED.12 (Emphasis and italics in the original)
On appeal, the CA reversed and set aside the RTC decision upon finding that: (1)
the petitioners failed to prove the title of their immediate predecessors-in-
interest, the Spouses Ballesteros; (2) the petitioners failed to support their claim
that Felipe and his siblings, Eladia, Estanislao, Maria, Severino and Tomasa, co-
owned Lot No. 1633; (3) Antonio should have been called to the witness stand to
testify on the contents of his Affidavit of Ownership; (4) the Deed of Absolute Sale
is not a sufficient and convincing evidence that the petitioners' predecessors-in-
interest have a title on the subject parcel of land. which they can transfer; (5) the
petitioners are not innocent purchasers for value since the subject lot is not
registered and is in the possession of another person, other than the Spouses
Ballesteros; (6) nothing in the record could establish the relationship between
Felipe and his supposed legal heirs; and (7) the respondents enjoy a legal
presumption of just title in their favor since they are in possession of the entire
Lot No. 1633. The CA then ruled that:
For a party seeking to quiet their "ownership" of the portion in litigation, [the
petitioners] have, for starters, miserably failed to prove the title of their
immediate predecessors-in-interest, the [Spouses' Ballesteros]. Except for the
February 23, 1995 Affidavit of Ownership I executed by [Antonio], there is, in
fact, no evidence on record to support the claim that the subject parcel was,
indeed, co-owned by [Felipe] [and]:1 his siblings, Eladia, Estanislao, Maria,
Severino and Tomasa, all surnamed Obado. To our mind, the fact that [Antonio]
was not even called to the witness stand to testify on the contents of his
Affidavit of Ownership '~should have immediately impelled the trial court to
discount its probative value and, with it, the very foundation of [the
respondents'] supposed cause of action.
xxxx
With even greater reason are we disposed towards the reversal of the trial
court's holding that, pursuant to the provisions of the Spanish Civil Code of
1889 on intestate succession, Eladia, Estanislao, Maria, s~verino and Tomasa,
all surnamed Obado were the ones who have rightfully inherited the subject
parcel from their brother, [Felipe]. Except for the aforesaid February 23, 1995
Affidavit of Ownership executed by [Antonio], [the respondents] correctly
argue that there is nothing on record from which the relationship of said
decedent and his supposed legal heirs may be reasonably deduced. Even if said
relationship were, moreover, assumed, the absence of evidence showing that
[Felipe] predeceased all of his supposed siblings impel us to regard, with
considerable askance, the trial court's disposition of the case by application of
said rules on intestate succession. Litigations cannot be properly resolved by
suppositions, deductions, or presumptions, with no basis in evidence for the
truth must have 1 to be determined by the hard rules on admissibility and
proof. This is particularly true. of the case at bench where the successional
rights determined by the trial court are diametrically opposed to [Antonio's]
Affidavit of Ownership which dubiously claimed that the subject parcel was, in
fact, co-owned by [Felipe] and his ostensible siblings and had already been
partitioned by and among them. 13
The petitioners moved for reconsideration14 but the same was denied. 15 Hence,
this petition.
The Issue
WHETHER OR NOT THE PETITIONERS WERE ABLE TO PROVE OWNERSHIP
OVER THE SUBJECT PARCEL OF LAND.
Ruling of the Court
The petition has no merit.
At the outset, it bears to emphasize that there is no dispute with respect to the
fact that Felipe was the original owner of the entire parcel of unregistered land
known as Lot No. 1633 which he started declaring as his property for taxation
purposes as early as 1921. When Felipe died without issue, Lot No. 1633 was
subsequently occupied by Paterno who then declared the same for taxation
purposes and paid the realty taxes thereon.
The petitioners' complaint styled as being for the "quieting of ownership" is in
fact an action for quieting of title. The petitioners anchor their cause of action
upon the Deed of Sale and the Affidavit of Ownership executed by Antonio. On the
other hand, the respondents countered that: (1) they inherited from their father,
Paterno, Lot No. 1633, of which the herein disputed subject parcel of land is part;
and (2) they have been in possession of the same for more than 30 years in the
concept of an owner.
Essentially, the issues raised center on the core question of whether the
petitioners were able to prove ownership over the subject parcel of land.1âwphi1
In resolving this issue, the pertinent point of inquiry is whether the petitioners'
predecessors-in-interest, the Spouses Ballesteros, have lawful title over the
subject parcel of land.
While the question raised is essentially one of fact, of which the Court normally
abstains from, yet, considering the incongruent factual conclusions of the courts
below, the Court is constrained to go by the exception to the general rule and
proceed to reassess the factual circumstances of the case and make its own
assessment of the evidence and documents on record. But even if the Court were
to re-evaluate the evidence presented, there is still no reason to depart from 'the
CA' s ruling that Lot No. 1633 is owned by the respondents.
The Court concurs with the disquisition of the CA that the petitioners failed to:
(1) prove the title of their immediate predecessors-in-interest, the Spouses
Ballesteros; and (2) present evidence supporting the claim that Lot No. 1633 was
co-owned by Felipe and his siblings, Eladia, Estanislao, Maria, Severino and
Tomasa. Also, the Court finds that the RTC mistakenly relied upon the Affidavit of
Ownership, executed by Antonio, to conclude that the petitioners were
possessors in good faith and with just title who acquired the subject parcel of land
through a valid deed of sale.
In this case, the petitioners' cause of action relates to an action to quiet title which
has two indispensable requisites, namely: (1) the plaintiff or complainant has a
legal or an equitable title to or interest in the real property subject of the action;
find (2) the deed, claim, encumbrance or proceeding claimed to be casting cloud
on his title must be shown to be in fact invalid or inoperative despite its
primafacie appearance of validity or legal efficacy. 16
From the foregoing provisions, it is clear that the petitioners' cause of action must
necessarily fail mainly in view of the absence of the first requisite since the
petitioners were not able to prove equitable title or ownership over the subject
parcel of land.
The petitioners' claim of legal title over the subject parcel of land by virtue of the
Deed of Sale and Affidavit of Ownership issued by Antonio cannot stand because
they failed to prove the title of their immediate predecessors-in-interest, the
Spouses Ballesteros. The Court cannot give full credence to Antonio's Affidavit of
Ownership for he simply made general and self-serving statements therein which
were favorable to him, and which were not supported with documentary
evidence, with no specifics as to when their predecessors-in-interest acquired the
subject parcel of land, and when the Donations Propter Nuptias were made.
Indeed, such is hardly the well-nigh incontrovertible evidence required in cases
of this nature. The petitioners must present proof of specific acts of ownership to
substantiate his claim and cannot just offer general statements which are mere
conclusions of law than factual evidence of possession.17 Moreso, Antonio was not
even called to the witness stand to testify on the contents of his Affidavit of
Ownership, thus, making the affidavit hearsay evidence and its probative value
questionable. Accordingly, this affidavit must be excluded from the judicial
proceedings being inadmissible hearsay evidence.
Furthermore, the said affidavit was executed by Antonio only a day before the
subject parcel of land was sold to the petitioners.18 The trial court should have
considered this in evaluating the value of the said affidavit in relation to the
ownership of the subject parcel of land. The trial court's reliance on the Affidavit
of Ownership executed by Antonio that the entire Lot No. 1633 was co- owned by
Felipe and his siblings, Eladia, Estanislao, Maria, Severino and Tomasa is
misplaced, considering that nothing on record shows the relationship between
Felipe and his supposed legal heirs. It also indicates the fact that there is no
evidence showing Felipe predeceasing all his supposed siblings. 19 Moreover, no
other piece of evidence was ever presented to prove that Lot No. 1633 was ever
subdivided. In fact, the petitioners admitted that the subject lot has always been
declared for taxation purposes in the name of Felipe and that the Spouses
Ballesteros or the siblings of Felipe have never declared the same for taxation
purposes in their names.
While the petitioners submitted official receipts and tax declarations to prove
payment of taxes, nowhere in the evidence was it shown that Spouses Ballesteros
dEclared the subject parcel of land in their name for taxation purposes or paid
taxes due thereon. True, a tax declaration by itself is not sufficient to prove
ownership. Nonetheless, it may serve as sufficient basis for inferring
possession.20 In fact, what the petitioners presented as their pieces of evidence
are receipts and tax declarations which they, as the new owners of the subject
parcel of land, have paid. Thus, the petitioners could not also rely on these tax
declarations and receipts because those are of recent vintage and do not reflect
the fact that their predecessors-in-interest have been paying realty taxes for the
subject parcel of land.
Be that as it may, the rights of the respondents as owners of Lot No. 1633 were
never alienated from them despite the sale of the subject parcel of land by the
Spouses Ballesteros to the petitioners nor does the fact that the petitioners
succeeded in paying the real property taxes of the subject parcel of land. Besides,
it seems that the petitioners knew of the fact that they did not have a title to the
subject parcel of land and could not, therefore, have validly registered the Same,
because of the respondents' possession of the entire property.
The respondents also presented the following pieces of evidence: (1) old certified
photocopies of declarations of real property and original copy of tax receipts from
year 1921 to 1944 in the name of Felipe, covering payments by the latter for Lot
No. 1633 from which the subject parcel of land was taken; 21 (2) original copy of
tax receipts from year 1961 to year 1989 in the name of the respondents' father
Paterno, covering payments by the latter for Lot No. 1633; 22 (3) original copy of
tax receipt dated July 21, 2004 in the name of Isagani, covering payments by the
latter for Lot No. 1633 ; 23 (4) original copy of the Certification issued by the
Municipal Treasurer of Sarrat, Ilocos Norte that Lot No. 1633 covered by Tax
Declaration No. 03-001-00271 declared in the name of Felipe is not delinquent in
the payment of realty taxes. 24
Although tax declarations or realty tax payment of property are not conclusive
evidence of ownership, as in the instant case, they are good indicia of possession
in the concept of owner, for no one in his right mind would be paying taxes for a
property that is not in his actual or constructive possession. 25 They constitute
evidence of great weight in support of the claim of title of ownership by
prescription when considered with the actual possession of the property by the
applicant.26
Indeed, the respondents' presentation of the tax declarations and tax receipts
which all are of ancient era indicates possession in the concept of an owner by
the respondents and their predecessors-in-interests. The tax declarations in the
name of Paterno take on great significance because the respondents can tack
their claim of ownership to that of their father. It is worthy to note that the
respondents' father Paterno to whom they inherited the entire Lot No. 1633 paid
the taxes due under his name from 1961 to 1989; and subsequently, the
respondents paid the taxes due after the death of Paterno in 2003. 27 Granting
without admitting that Felipe's possession of Lot No. 1633 cannot be tacked with
the respondents' possession, the latter's possession can be tacked with that of
Paterno. Thus, from 1961 to the time of the filing of the quieting of title by the
petitioners in 2003, the respondents have been in possession of the entire Lot No.
1633 in the concept of an owner for almost 42 years. This period of time is
sufficient to vest extraordinary acquisitive prescription over the property on the
respondents. As such, it is immaterial now whether the respondents possessed
the property in good faith or not.
Admittedly, the respondents built their house at the western portion of Lot No:
1633, and Isagani has declared that the eastern part was their family's garden.
Thus, it was fenced with bamboo and was planted with banana trees and different
vegetables. Clearly, there is no doubt that the respondents did not only pay the
taxes due for the whole Lot No. 1633, in which the eastern portion is a part, but
rather, the respondents were able to prove that they have possession of the whole
lot.
While the findings of the CA that the petitioners were a buyer in bad faith is in
accord with the evidence on record, it must be pointed out, however, that they
overlooked the fact that Lot No. 1633 is an unregistered • piece of land. The Court
had already ruled that the issue of good faith or bad faith of a buyer is relevant
only where the subject of the sale is a registered land but not where the property
is an unregistered land. One who purchases an unregistered land does so at his
peril. His claim of having bought the land in good faith, i.e. without notice that
some other person has a right to, or interest in, the property, would not protect
him if it turns out that the seller does not actually own the property. 28 All the
same, the application of this doctrine will not affect the outcome of this case.
Obviously, the petitioners cannot benefit from the deed of sale of the subject
parcel of land, executed by the Spouses Ballesteros in their favor, to support their
claim of possession in good faith and with just title. The Court noted that in
Filomena's testimony, she even admitted that the respondents own the bigger
portion of Lot No. 1633.29 Thus, it is clear that the petitioners chose to close their
eyes to facts which should have put a reasonable man on his guard. The
petitioners failed to ascertain whether the Spouses Ballesteros were the lawful
owner of the subject parcel of land being sold. Far from being prudent, the
petitioners placed full faith on the Affidavit of Ownership that Antonio executed.
Hence, when the subject parcel of land was bought by the petitioners, they merely
stepped into the shoes of the Spouses Ballesteros and acquired whatever rights
and obligations appertain thereto.
It is also worthy to note of the respondents' reaction when the petitioners tried
to construct a house in the subject parcel of land in 2002. Upon learning that a
house was being built on the eastern portion of Lot No. 1633, the respondents
went to the barangay to file a complaint.30 Clearly, this indicates the respondents'
vigilance to protect their property. The Court also notes that in the respondent's
possession of the entire Lot No. 1633 for almost 42 years, there was no instance
during this time that the petitioners or their predecessors-in-interest, for that
matter, questioned the respondents' right over Lot No. 1633.
From the foregoing disquisitions, it is clear that the petitioners were not able to
prove equitable title or ownership over the subject parcel of land. Except for their
claim that they merely purchased the same from the Spouses Ballesteros, the
petitioners presented no other justification to disprove the ownership of the
respop.dents. Since the Spouses Ballesteros had no right to sell the subject parcel
of land, the petitioners cannot be deemed to have been the lawful owners of the
same.
WHEREFORE, the petition is DENIED. The Decision dated July 17, 2007 and the
Resolution dated January 29, 2008 of the Court of Appeals. in CA-G.R. CV No.
87021 are AFFIRMED.
SO ORDERED.

#4 PSYCHOLOGICAL INCAPACITY
FIRST DIVISION
February 15, 2017
G.R. No. 222541
RACHEL A. DEL ROSARIO, Petitioner vs. JOSE O. DEL ROSARIO and COURT
OF APPEALS, Respondents
DECISION
PERLAS-BERNABE, J.:
Before the Court is this petition for review on certiorari1 assailing the Decision2
dated May 29, 2015 and the Resolution3 dated December 1, 2015 of the Court of
Appeals (CA) in CA-G.R. CV No. 102745, which reversed the Decision4 dated April
23, 2014 of the Regional Trial Court of Makati City, Branch 136 (RTC) in Civil Case
No. 11-891 declaring the marriage of Jose O. Del Rosario (Jose) and Rachel A. Del
Rosario (Rachel) void on the ground of psychological incapacity pursuant to
Article 365 of the Family Code, as amended.6
The Facts
Rachel, then fifteen (15) years old, met Jose, then seventeen (17) years old,
sometime in December 1983 at a party in Bintawan, Bagabag, Nueva Vizcaya. 7
Very soon, they became romantically involved.8
Sometime in 1988, Rachel went to Hongkong to work as a domestic helper.
During this period, Rachel allegedly provided for Jose's tuition fees for his college
education. Rachel and Jose eventually decided to get married on December 28,
1989 in a civil rites ceremony held in San Jose City, Nueva Ecija, and were blessed
with a son, named Wesley, on December 1, 1993. On February 19, 1995, they
renewed their vows in a church ceremony held in the Philippine Independent
Church, Bagabag, Nueva Vizcaya.9
In 1998, Rachel went back to Hongkong to work as domestic helper/caregiver
and has been working there ever since, only returning to the Philippines every
year for a vacation. Through her efforts, she was able to acquire a house and lot
in Rufino Homes Subdivision, San Jose, Nueva Ecija.10
In September 2011, Rachel filed a petition11 for declaration of nullity of marriage
before the RTC, docketed as Civil Case No. 11-891, alleging that Jose was
psychologically incapacitated to fulfill his essential marital obligations. In
support of her petition, Rachel claimed that: during their marriage, Jose
conspicuously tried to avoid discharging his duties as husband and father.
According to Rachel, Jose was hot tempered and violent; he punched her in the
shoulder a few days before their church wedding, causing it to swell, when she
refused to pay for the transportation expenses of his parents; he hit his own
father with a pipe, causing the latter to fall unconscious, which forced them to
leave Jose's parents' house where they were then staying; and he even locked her
out of their house in the middle of the night sometime in December 2007 when
she fetched her relatives from the bus terminal, which he refused to perform.
Rachel added that Jose would represent himself as single, would flirt openly, and
had an extra-marital affair which she discovered when Jose mistakenly sent a text
message to her sister, Beverly A. Juan (Beverly), stating: "love, kung ayaw mo na
akong magpunta diyan, pumunta ka na lang dito."12 Another text message read:
"Dumating lang ang asawa mo, ayaw mo na akong magtext at tumawag sa 'yo." On
one occasion, she, together with Wesley and Beverly, caught Jose and the other
woman with their child inside their conjugal dwelling. Finally, she claimed that
Jose would refuse any chance of sexual intimacy between them as they slowly
drifted apart.13
Rachel, however, admitted that their married life ran smoothly during its early
years, and it was only later in their marriage that Jose started frequenting bars
and engaging in drinking sessions.14
Rachel also presented the testimonies of Wesley 15 and her sisters, Beverly and
Jocelyn Cabusora,16 which corroborated her allegations, as well as the
testimony17 of Dr. Nedy L. Tayag (Dr. Tayag), who prepared the Psychological
Report18 (Report) on Rachel. The remarks section of Dr. Tayag's Report, which
was primarily based on her interview with Rachel and Wesley, stated that Jose
suffered from Antisocial Personality Disorder (APD) characterized by: (a) his lack
of empathy and concern for Rachel; (b) his irresponsibility and his pleasure-
seeking attitude that catered only to his own fancies and comfort; (c) his
selfishness marked by his lack of depth when it comes to his marital
commitments; and (d) his lack of remorse for his shortcomings.19
For his part, Jose denied all the allegations in the petition. Jose maintained that:
(a) he had dutifully performed all of his marital and parental duties and
obligations to his family; (b) he had provided for his family's financial and
emotional needs; and (c) he contributed to the building and maintenance of their
conjugal home. He claimed that although they occasionally had
misunderstandings, they nevertheless had a blissful relationship, pointing out
that their first major argument was when Rachel decided to go to Hongkong to
work; that they continued to communicate through mail during her stay
overseas; and that he remained supportive of Rachel and would advise her to give
her family the financial aid that they need so long as she would not sacrifice her
well-being. Finally, he denied the alleged extra-marital affair and having laid hand
on Rachel and their son.20 Jose presented as well the testimony of Faustino Rigos
to support his allegations.21
The RTC Ruling
In a Decision22 dated April 23, 2014, the RTC declared the marriage between Jose
and Rachel void on the ground of psychological incapacity. It relied on the
findings and testimony of Dr. Tayag, declaring that Jose's APD interferes with his
capacity to perform his marital and paternal duties, as he in fact even refused to
take responsibility for his actions, notwithstanding the overwhelming evidence
against him.23
Jose appealed24 to the CA, arguing that his alleged refusal to seek employment,
squandering of their money on vices, violent nature, and infidelity are not the
serious, grave, and permanent psychological condition that incapacitates him to
perform his marital obligations required by Article 36 of the Family Code, as
amended. At most, they are personality defects, i.e., immaturity, irresponsibility,
and unfaithfulness, which may be considered as grounds for legal separation
under Article 5525 of the same code.26
The CA Ruling
In a Decision27 dated May 29, 2015, the CA reversed the ruling of the RTC,28
holding that the totality of the evidence Rachel presented was not enough to
sustain a finding that Jose is psychologically incapacitated to comply with the
essential obligations of marriage.29 Particularly, the CA declared that Jose's
alleged infidelity, his refusal to seek employment, his act of squandering their
money on his vices, and his temper and alleged propensity for violence were not
so grave and permanent as to deprive him of awareness of the duties and
responsibilities of the matrimonial bond sufficient to nullify the marriage under
Article 36 of the Family Code; at best, they showed that Jose was irresponsible,
insensitive, or emotionally immature which nonetheless do not amount to the
downright incapacity that the law requires. Additionally, the CA pointed out that
the root cause of the alleged psychological incapacity, its incapacitating nature,
and the incapacity itself were not sufficiently explained as Dr. Tayag's Report
failed to show the relation between Jose's "deprived childhood" and "poor home
condition," on one hand, and grave and permanent psychological malady, on the
other. Finally, it observed that while Dr. Tayag's testimony was detailed, it only
offered a general evaluation on the supposed root cause of Jose's personality
disorder.30
Rachel moved for reconsideration,31 which was, however, denied by the CA in a
Resolution32 dated December 1, 2015; hence, this petition.
The Issue Before the Court
The essential issue for the Court's resolution is whether or not the CA erred in
reversing the RTC's finding of psychological incapacity.
The Court's Ruling
The petition lacks merit.
The policy of the Constitution is to protect and strengthen the family as the basic
social institution,33 and marriage as the foundation of the family.34 Because of
this, the Constitution decrees marriage as legally inviolable and protects it from
dissolution at the whim of the parties. In this regard, psychological incapacity as
a ground to nullify the marriage under Article 3635 of the Family Code, as
amended, should refer to the most serious cases of personality disorders clearly
demonstrative of an utter insensitivity or inability to give meaning and
significance to the marriage.36 It should refer to no less than a mental - not merely
physical - incapacity that causes a party to be truly incognitive of the basic marital
covenants that concomitantly must be assumed and discharged by the parties to
the marriage, which, as provided under Article 6837 of the Family Code, among
others,38 include their mutual obligations to live together, observe love, respect
and fidelity, and render help and support.39 In other words, it must be a malady
that is so grave and permanent as to deprive one of awareness of the duties and
responsibilities of the matrimonial bond one is about to assume.40
In Santos v. CA,41 the Court declared that psychological incapacity under Article
36 of the Family Code must be characterized by: (a) gravity, i.e., it must be grave
and serious such that the party would be incapable of carrying out the ordinary
duties required in a marriage; (b) juridical antecedence, i.e., it must be rooted in
the history of the party antedating the marriage, although the overt
manifestations may emerge only after the marriage; and (c) incurability, i.e., it
must be incurable, or otherwise the cure would be beyond the means of the party
involved.42 The Court laid down more definitive guidelines in the interpretation
and application of Article 36 in Republic v. Molina43 (Molina) whose salient points
are footnoted below,44 that incorporated the basic requirements the Court
established in Santos.
Notwithstanding the Molina guidelines, note, however, that an expert opinion is
not absolutely necessary and may be dispensed with in a petition under Article
36 of the Family Code if the totality of the evidence shows that psychological
incapacity exists and its gravity, juridical antecedence, and incurability can be
duly established.45 The evidence need not necessarily come from the allegedly
incapacitated spouse, but can come from persons intimately related to the
spouses, i.e., relatives and close friends, who could clearly testify on the allegedly
incapacitated spouse's condition at or about the time of the marriage.46 In other
words, the Molina guidelines continue to apply but its application calls for a more
flexible approach in considering petitions for declaration of nullity of marriages
based on psychological incapacity.47 To be clear, however, the totality of the
evidence must still establish the characteristics that Santos laid down: gravity,
incurability, and juridical antecedence.
Thus, in Dedel v. CA,48 the Court declared that therein respondent's emotional
immaturity and irresponsibility could not be equated with psychological
incapacity as it was not shown that these acts are manifestations of a disordered
personality which make her completely unable to discharge the essential
obligations of the marital state, not merely due to her youth, immaturity, or
sexual promiscuity.49 In Taring v. Taring,50 the Court emphasized that
"irreconcilable differences, sexual infidelity or perversion, emotional immaturity
and irresponsibility, and the like, do not by themselves warrant a finding of
psychological incapacity, as [these] may only be due to a person's difficulty,
refusal, or neglect to undertake the obligations of marriage that is not rooted in
some psychological illness that Article 36 of the Family Code addresses."51 The
Court equally did not consider as tantamount to psychological incapacity the
emotional immaturity, irresponsibility, sexual promiscuity, and other behavioral
disorders invoked by the petitioning spouses in Pesca v. Pesca,52 Republic v.
Encelan,53 Republic v. De Gracia,54 and Republic v. Romero,55 to name a few, and
thus dismissed their petitions for declaration of nullity of marriage.
The Court maintains a similar view in this case and, thus, denies the petition.
Based on the totality of the evidence presented, there exists insufficient factual
or legal basis to conclude that Jose's immaturity, irresponsibility, or infidelity
amount to psychological incapacity.
Particularly, the Court notes that Rachel's evidence merely showed that Jose: (1)
would often indulge in drinking sprees; (2) tends to become violent when he gets
drunk; (2) avoids discharging his duties as a father to Wesley and as a husband
to Rachel, which includes sexual intimacy; (3) flirts openly and represented
himself as single; and (4) engaged in an extra-marital affair with a bar girl who
he brought to the conjugal dwelling on several occasions. Significantly, Rachel
admitted that their married life ran smoothly in its early years. Dr. Tayag's
findings, on the other hand, simply summarized Rachel and Wesley's narrations
as she diagnosed Jose with APD and proceeded to conclude that Jose's
"personality flaw is deemed to be severe, grave, and have become deeply
embedded within his adaptive systems since early childhood years, thereby
rendering such to be a permanent component of his life [and] [t]herefore x x x
incurable and beyond repair despite any form of intervention." 56
It should be pointed out that Dr. Tayag's Report does not explain in detail how
Jose's APD could be characterized as grave, deeply rooted in his childhood, and
incurable within the jurisprudential parameters for establishing psychological
incapacity. Particularly, the Report did not discuss the concept of APD which Jose
allegedly suffers from, i.e., its classification, cause, symptoms, and cure, or show
how and to what extent Jose exhibited this disorder or how and to what extent
his alleged actions and behavior correlate with his APD, sufficiently clear to
conclude that Jose's condition has no definite treatment, making it incurable
within the law's conception. Neither did the Report specify the reasons why and
to what extent Jose's APD is serious and grave, and how it incapacitated him to
understand and comply with his marital obligations.1awp++i1 Lastly, the Report
hastily concluded that Jose had a "deprived childhood" and "poor home
condition" that automatically resulted in his APD equivalent to psychological
incapacity without, however, specifically identifying the history of Jose's
condition antedating the marriage, i.e., specific behavior or habits during his
adolescent years that could explain his behavior during the marriage.
Moreover, Dr. Tayag did not personally assess or interview Jose to determine, at
the very least, his background that could have given her a more accurate basis for
concluding that his APD is rooted in his childhood or was already existing at the
inception of the marriage. To be sure, established parameters do not require that
the expert witness personally examine the party alleged to be suffering from
psychological incapacity provided corroborating evidence are presented
sufficiently establishing the required legal parameters. 57 Considering that her
Report was based solely on Rachel's side whose bias cannot be doubted, the
Report and her testimony deserved the application of a more rigid and stringent
standards which the RTC failed to apply.
In sum, Dr. Tayag's assessment, even when taken together with the various
testimonies, failed to show that Jose's immaturity, irresponsibility, and infidelity
rise to the level of psychological incapacity that would justify the nullification of
the parties' marriage. To reiterate and emphasize, psychological incapacity must
be more than just a "difficulty," "refusal" or "neglect" in the performance of the
marital obligations; it is not enough that a party prove that the other failed to
meet the responsibility and duty of a married person.58 There must be proof of a
natal or supervening disabling factor in the person - an adverse integral element
in the personality structure that effectively incapacitates the person from really
accepting and thereby complying with the obligations essential to marriage -
which must be linked with the manifestations of the psychological incapacity. 59
A final note. It is well to reiterate that Article 36 of the Family Code, as amended,
is not a divorce law that cuts the marital bond at the time the grounds for divorce
manifest themselves;60 a marriage, no matter how unsatisfactory, is not a null and
void marriage. Thus, absent sufficient evidence establishing psychological
incapacity within the context of Article 36, the Court is compelled to uphold the
indissolubility of the marital tie.
WHEREFORE, the petition is DENIED. The Decision dated May 29, 2015 and the
Resolution dated December 1, 2015 of the Court of Appeals in CA-G.R. CV No.
102745 are hereby AFFIRMED. Accordingly, the petition for declaration of nullity
of marriage filed under Article 36 of the Family Code, as amended, is DISMISSED.
SO ORDERED.
#5 POSSESSION
THIRD DIVISION
March 15, 2017
G.R. No. 185627
SPOUSES BERNARDITO AND ARSENIA GAELA (DECEASED), SUBSTITUTED
BY HER HEIRS NAMELY: BERNARDITO GAELA AND JOSELINE E.
PAGUIRIGAN, Petitioners
vs
SPOUSES TAN TIAN HEANG AND SALLY TAN,, Respondents
DECISION
REYES, J.:
Assailed in this Petition for Review on Certiorari1 under Rule 45 of the Rules of
Court are the Decision2 dated April 28, 2008 and Resolution3 dated September 4,
2008 of the Court of Appeals (CA) in CA-G.R. SP No. 101375, which affirmed the
Decision4 dated October 2, 2007 of the Regional Trial Court (RTC) of Pasig City,
Branch 157, in S.C.A. Case No. 3083. The RTC decision reversed and set aside the
Decision5 dated February 12, 2007 of the Metropolitan Trial Court (MeTC) of
Pasig City, Branch 68, in Civil Case No. 11369 for Ejectment.
The Facts
This petition stemmed from a complaint for ejectment over two parcels of land
both situated in Barrio Rosario, Municipality of Pasig, covered by Transfer
Certificates of Title (TCT) Nos. PT-1264466 and PT-1264507 filed by Spouses Tan
Tian Heang and Sally Tan (respondents) against Spouses Bernardito and Arsenia
Gaela (petitioners).8
The petitioners claimed that they are the lawful owners of the subject properties.
They said that sometime in 2002, their daughter Bemardita Gaela (Bemardita)
took the certificates of title registered in their names and forged their signatures
in the Real Estate Mortgage9 that Bemardita executed in favor of Alexander Tam
Wong (Wong). Thus, their certificates of title were cancelled and new ones were
issued to Wong, who then sold the subject properties to the respondents on
December 20, 2004. Afterwards, they sought the annulment of sale of the subject
properties and cancellation of TCT Nos. PT-126446 and PT-126450 in the name
of the respondents in Civil Case No. 70250 before the RTC of Pasig City, Branch
71. They averred that before the transfer of title from Wong to the respondents,
they were able to cause the annotation of a notice of lis pendens on the
respondents' titles.10
For their part, the respondents countered that they are the lawful and legal
owners of the subject properties which they acquired in good faith from its
former owner Wong. They narrated that the subject properties were mortgaged
by the petitioners to Wong for ₱2,000,000.00, and said mortgage was annotated
at the back of the petitioners' titles. However, the petitioners ceased to pay the
real property tax due on the subject properties. Thereafter, new titles were issued
in favor of Wong. On December 18, 2004, they bought the subject properties and
paid the taxes due thereon as early as January 13, 2005. Nonetheless, while they
were waiting for the transfer and release of new titles in their names, the
petitioners filed Civil Case No. 70250 against Wong and caused its annotation on
the latter's titles. This annotation was then carried over and appeared in their
titles. Subsequently, they made demands to the petitioners to vacate the subject
properties but the latter refused to do so.11
On February 12, 2007, the MeTC rendered its Decision12 in favor of the
petitioners, dismissing the complaint on the ground of lack of cause of action. The
MeTC ruled, among others, that:
In the instant case, [the respondents] have indeed made a formal demand upon
the [petitioners] to vacate the premises. However, such demand cannot be used
as the point to determine the unlawfulness of [the petitioners'] possession for
the reason that even before [the respondents] could make a formal demand
upon the [petitioners], let alone, have the premises titled in their names, [the
petitioners] have already filed an action to assert their ownership over the
premises which is even annotated to the title of [Wong] and is likewise
annotated on [the respondents'] title. Thus, the Court unreservedly finds it
difficult to determine from the evidentiary records the point where [the
petitioners'] possession became unlawful as [the respondents] were never in
possession of the premises.13
Aggrieved, the respondents filed an appeal before the RTC.14
In a Decision15 dated October 2, 2007, the RTC granted the appeal and set aside
the MeTC's ruling. The dispositive portion of the decision reads:
WHEREFORE, the instant appeal is hereby GRANTED. The assailed Decision
dated February 12, 2007, rendered by the [MeTC] of Pasig City, is set aside and
judgment is rendered as follows:
1. Declaring [the petitioners'] possession of the subject parcels of land unlawful,
and ordering them to vacate the subject parcels of land;
2. Ordering [the petitioners] to pay reasonable monthly rentals of ₱l0,000[.00]
starting from March 16, 2005, until they fully vacate and turn over to [the
respondents] the subject properties; and 3. Pay the cost of suit.
SO ORDERED.16
In overturning the MeTC's ruling, the RTC held that the respondents have the
better right to possess the subject properties since they are the registered owners
of the same. The respondents' lack of prior physical possession over the subject
properties is of no moment since it is enough that they have a better right of
possession over the petitioners. The RTC further said that the case for annulment
of title and the annotation of a notice of lis pendens on the respondents' TCTs did
not in any way legitimize the petitioners' continued possession of the subject
properties.17
On appeal,18 the CA, in its Decision19 dated April 28, 2008, denied the petition and
affirmed the RTC's judgment in toto. The CA held that the allegation in the
respondents' complaint make out a case for unlawful detainer and it was filed
well within the one-year reglementary period.20
Upset by the foregoing disquisition, the petitioners moved for reconsideration21
but it was denied by the CA in its Resolution22 dated September 4, 2008. Hence,
the present petition for review on certiorari.
The Issue
WHO BETWEEN THE PARTIES HAS A BETTER RIGHT TO POSSESS THE SUBJECT
PROPERTIES.
Ruling of the Court
The petition is bereft of merit.
At the outset, the Court noted that the issue of ownership between the parties
herein is already the subject of a pending litigation before the RTC of Pasig City,
Branch 71. Hence, the only matter to be resolved in this case is the issue of
possession over the subject properties.
To begin with, it is perceptible from the arguments of the petitioners that they
are calling for the Court to reassess the evidence presented by the parties. The
petitioners are, therefore, raising questions of facts beyond the ambit of the
Court's review. In a petition for review under Rule 45 of the Rules of Court, the
jurisdiction of this Court in cases brought before it from the CA is limited to the
review and revision of errors of law allegedly committed by the appellate court. 23
However, the conflicting findings of facts and rulings of the MeTC on one hand,
and the RTC and the CA on the other, compel this Court to revisit the records of
this case. But even if the Court were to re-evaluate the evidence presented,
considering the divergent positions of the courts below, the petition would still
fail.
In the instant case, the petitioners mainly dispute the respondents' ownership of
the subject properties by contending that they are the true owners of the same.
They aver that the allegations of the respondents do not sufficiently show a cause
of action for unlawful detainer. They claim that the respondents failed to prove
that they had prior physical possession of the subject properties before they were
unlawfully deprived of it. The respondents, however, only sought to recover the
physical possession of the subject properties. The respondent rebuts the
petitioners' claims by contending that they acquired the subject properties in
good faith and have registered the same under their names and have been issued
certificates of title. The respondents assert their ownership over the subject
properties to lay the basis for their right to possess the same that was unlawfully
withheld from them by the petitioners.
After reviewing the records of this case, the Court sustains the findings of the RTC
and the CA that the nature of action taken by the respondents is one for unlawful
detainer.
Unlawful detainer is an action to recover possession of real property from one
who unlawfully withholds possession after the expiration or termination of his
right to hold possession under any contract, express or implied. The possession
of the defendant in an unlawful detainer case is originally legal but becomes
illegal due to the expiration or termination of the right to possess. The sole issue
for resolution in an unlawful detainer case is physical or material possession of
the property involved, independent of any claim of ownership by any of the
parties.24
For the action to come under the exclusive original jurisdiction of the MeTC, the
complaint must allege that: (a) the defendant originally had lawful possession of
the property, either by virtue of a contract or by tolerance of the plaintiff; (b) the
defendant's possession of the property eventually became illegal or unlawful
upon notice by the plaintiff to the defendant of the expiration or the termination
of the defendant's right of possession; (c) the defendant thereafter remained in
possession of the property and thereby deprived the plaintiff the enjoyment
thereof; and (d) the plaintiff instituted the action within one year from the
unlawful deprivation or withholding of possession.25
Guided by the foregoing norms, the allegations of the respondents' complaint
made out a case of unlawful detainer, vesting the MeTC with exclusive original
jurisdiction over the complaint. The record showed that the respondents' TCTs
were issued on February 21, 2005.26 Thereafter, the demand to vacate was made
against the petitioners on March 16, 2005, which is the reckoning point of the
petitioners' unlawful possession. Thus, the filing of the ejectment complaint on
April 21, 2005 is within the one-year reglementary period.27
Indeed, the cause of action of the respondents was to recover possession of the
subject properties from the petitioners upon the latter's failure to comply with
the former's demand to vacate the subject properties after the latter's right to
remain thereon terminated. The respondents initiated the ejectment suit in the
MeTC well within the one-year period from the date of the last demand. Thus, the
possession of the petitioners, although lawful at its commencement, became
unlawful upon its non-compliance with the respondents' demand to vacate.
Also, the petitioners erroneously argued that the respondents' prior physical
possession is necessary for an action for unlawful detainer to prosper.1âwphi1
Contrary to the petitioners' argument, nowhere does it appear in Section 128 of
Rule 70 of the Rules of Court that, in an action for unlawful detainer, the plaintiff
must be in prior physical possession of the property. The Court has repeatedly
ruled that prior physical possession by the plaintiff is not an indispensable
requirement in an unlawful detainer case brought by a vendee or other person
against whom the possession of any land is unlawfully withheld after the
expiration or termination of a right to hold possession.29
There is no dispute with the fact that the petitioners were the previous owners
of the subject properties. However, the respondents were able to prove by
preponderance of evidence that they are now the new owners and the rightful
possessors of the subject properties being its registered owners under TCT Nos.
PT-126446 and PT-126450.1âwphi1 The TCTs of the respondents are, therefore,
evidence of indefeasible title over the subject properties and, as its holders, they
are entitled to its possession as a matter of right.
Conversely, aside from their bare allegation of bad faith on the part of the
respondents, the petitioners presented nothing to support their claim. They
failed to submit any piece of evidence showing their right to possess the subject
properties. Thus, their unsubstantiated arguments are not, by themselves,
enough to offset the respondents' right as the registered owners.
In this case, the evidence showed that as between the parties, it is the
respondents who have a Torrens title to the subject properties. The RTC and the
CA relied on the Torrens title in the name of the respondents to support their
finding that the respondents are the owners of the subject properties.
The Court also noted that in assailing the respondents' right over the subject
properties, the petitioners contended that the respondents obtained their
certificates of title through forgery. Obviously, this argument is equivalent to a
collateral attack against the Torrens title of the respondents - an attack that the
Court cannot allow in the instant unlawful detainer case.
Time and again, the Court had emphasized that when the property is registered
under the Torrens system, the registered owner's title to the property is
presumed legal and cannot be collaterally attacked, especially in a mere action
for unlawful detainer, and it does not even matter if the party's title to the
property is questionable.30
At any rate, it is fundamental that a certificate of title serves as evidence of an
indefeasible and incontrovertible title to the property in favor of the person
whose name appears therein. The title holder is entitled to all the attributes of
ownership of the property, including possession. Thus, the Court must uphold the
age-old rule that the person who has a Torrens title over a land is entitled to its
possession.31
Lastly, it must be underscored that this award of possession de facto over the
subject properties in favor of the respondents will not constitute res judicata or
will not bar or prejudice the action between the parties involving their claim of
ownership over the subject properties which are already the subject of a pending
litigation.
In fine, this Court finds no cogent reason to annul the findings and conclusions of
the CA. The respondents, as the title holders of the subject properties, are the
recognized owners of the same and consequently have the better right to its
possession.
WHEREFORE, the appeal is DENIED. The Decision dated April 28, 2008 and
Resolution dated September 4, 2008 of the Court of Appeals in CA-G.R. SP No.
101375 are AFFIRMED.
SO ORDERED.

#6 EASEMENT OF RIGHT OF WAY
SECOND DIVISION
March 15, 2017
G.R. No. 207146
SPOUSES LARRY AND ROSARITA WILLIAMS, Petitioners vs RAINERO A.
ZERDA, Respondent
DECISION
MENDOZA, J.:
This is a petition for review on certiorari assailing the November 28, 2012
Decision1 and the April 16, 2013 Resolution2 of the Court of Appeals (CA) in CA-
G.R. CV No. 01115-MIN, which reversed and set aside the September 11, 2006
Decision3 and the February 8, 2007 Order4 of the Regional Trial Court, Branch 30,
Surigao City, (RTC) in Civil Case No. 6285, a case for easement of right of way.
The Facts
Respondent Rainero A. Zerda (Zerda) was the owner of a parcel of land, known
as Lot No. 1177-B (dominant estate) of the Surigao Cadastre, situated in Barangay
Lipata, Surigao City, with an area of 16,160 square meters (sq. m.), and covered
by Transfer Certificate of Title (TCT) No. T- 18074. Immediately behind the
dominant estate was Lot No. 7298, a swampy mangrove area owned by the
Republic of the Philippines. On both sides were Lot No. 1177-C, registered under
the name of Woodridge Properties, Inc. and Lot No. 1206, in the name of Luis G.
Dilag. In front was Lot No. 1201-A owned by petitioner-spouses Larry and
Rosarita Williams (Spouses Williams), where the national highway ran along.5
On July 28, 2004, Zerda filed a complaint against Spouses Williams for easement
of right of way. The complaint alleged that Zerda's lot was without adequate
outlet to a public highway, that it could not be accessed except by passing through
Spouses Williams' property; that the isolation of Zerda's property was not due to
his own acts, as it was the natural consequence of its location; that the right of
way he was claiming was at a point least prejudicial to Spouses Williams'
property; and that on January 27, 2004, Zerda wrote to Spouses Williams
formally asking them to provide him with right of way, for which he was willing
to pay its reasonable value or to swap a portion of his property, but Spouses
Williams refused.6
Spouses Williams countered that the complaint should be dismissed for lack of
cause of action because Zerda failed to establish the requisites for the existence
of right of way. They claimed that sometime in May 2003, they were in
negotiation with Agripina Sierra (Sierra), the former owner of the dominant
estate, for its sale to them but the sale did not materialize due to the intervention
of Zerda. Spouses Williams further averred that they undertook visible
development projects on their property as early as May 2003 amounting to
₱6,619,678.00; that the isolation of the dominant estate was Zerda's fault; and
that his requested right of way would cause great damage and prejudice to them.7
The RTC Ruling
In its September 11, 2006 Decision, the RTC ruled in favor of Spouses Williams. It
found that the isolation of Zerda's lot was due to his own acts because when he
bought the said property, he was aware that Spouses Williams had already
started introducing improvements on their own property. It stated that Spouses
Williams were able to prove that while they were in negotiation with Sierra for
the purchase of the dominant estate, Zerda intervened and bought the land
himself, knowing full well that the land was surrounded by other immovables. 8
The RTC also noted that the right of way requested by Zerda was not the shortest
distance from the dominant estate to the public highway. It observed that the
shortest distance began "from the northeastern corner of Lot 1177-B, the
dominant estate, following the northern boundary of Lot 1201-A, the servient
estate, and running across the southeastern portion of Lot 1177-C straight up to
the public highway."9
Finally, the RTC granted the claim of Spouses Williams for moral damages and
exemplary damages. The fallo reads:
WHEREFORE, premises considered, let the herein complaint be DISMISSED
without pronouncement as to costs. However, on the compulsory counterclaim,
plaintiff is hereby ordered to pay defendants moral damages in the sum of
₱30,000.00 and exemplary damages of ₱20,000.00.
SO ORDERED.10
Zerda filed a motion for reconsideration. In its February 8, 2007 Order,11 the RTC
partially granted the motion by deleting the award of moral damages.
Aggrieved, Zerda appealed before the CA.
The CA Ruling
In its assailed November 28, 2012 Decision, the CA reversed and set aside the
ruling of the RTC. It explained that the isolation of Zerda's property was not due
to his own acts, and to deny the right of way to a purchaser of an enclosed estate
simply because of his prior knowledge that the same was surrounded by
immovables would render the law on easements nugatory. "In effect, the
purchaser would only be filling into the shoe[s] of the previous owner of the
isolated property in the exercise of his right to demand an easement of right of
way. The new owner did not do anything that would have caused the deliberate
isolation of the property."12
Further, the CA declared that Zerda was not in bad faith when he intervened in
the negotiation for the sale of the dominant estate between Sierra, the previous
owner and Spouses Williams. It noted that Sierra himself denied knowing Larry
Williams, thereby negating the spouses' claim of a negotiation. The CA added that
even if there was a prior negotiation, Sierra could not be deprived of his right to
sell his property to a buyer of his own choosing.13
The CA also found that the right of way, proposed by Zerda, was the shortest
distance to the national highway and the least prejudicial to the servient estate.
It laid emphasis on Spouses Williams' admission that they had no intention to
build houses in the area sought and that the 705.20 sq. m. long pathway would
only affect a small portion of their lot which had a total area of 12,200 sq. m. The
dispositive portion of the CA ruling reads:
WHEREFORE, the appeal is GRANTED. The September 11, 2006 Decision and
February 8, 2007 Order of the Regional Trial Court, Branch 30, Surigao City is
REVERSED and SET ASIDE.
We hereby order (a) appellees to allow the right of passage by the appellant
thru their Lot 1201-A; and (b) appellant to pay private respondent the
indemnity therefor to be determined by the trial court. The case is hereby
REMANDED to the trial court for the determination of the proper amount of
indemnity for the easement of right of way under Article 649.
SO ORDERED.14
Spouses Williams moved for reconsideration, but their motion was denied by the
CA in its assailed resolution, dated April 16, 2013.
Hence, this petition.
ISSUE
WHETHER RESPONDENT ZERDA IS ENTITLED TO AN EASEMENT OF RIGHT
OF WAY.
Spouses Williams argue that the respondent caused the isolation of his property
because he bought the lot with notice that it had no access to the national highway
and was surrounded by other immovables; that the respondent was in bad faith
because he was aware that they were negotiating with Sierra over the purchase
of the dominant estate when he intervened and bought the property himself; that
the shortest distance from the dominant estate to the public highway began from
the northeastern corner of Lot No. 1177-B (the dominant estate) following the
northern boundary of Lot No. 1201-A, then passing through the southeastern
portion of Lot No. 1171-C; and that the right of way requested by the respondent
was not the least prejudicial in view of the developments introduced by them
thereon.
Zerda was ordered by the Court to file his comment on the petition of Spouses
Williams. Despite several opportunities granted to him, he failed to file his
comment.1avvphi1 Thus, his right to file a comment on the petition for review
was deemed waived.
The Court's Ruling
The conferment of the legal easement of right of way is governed by Articles 649
and 650 of the Civil Code:
ART. 649. The owner, or any person who by virtue of a real right may cultivate
or use any immovable, which is surrounded by other immovables pertaining to
other persons and without adequate outlet to a public highway, is entitled to
demand a right of way through the neighboring estates, after payment of the
proper indemnity.
Should this easement be established in such a manner that its use may be
continuous for all the needs of the dominant estate, establishing a permanent
passage, the indemnity shall consist of the value of the land occupied and the
amount of the damage caused to the servient estate.
In case the right of way is limited to the necessary passage for the cultivation of
the estate surrounded by others and for the gathering of its crops through the
servient estate without a permanent way, the indemnity shall consist in the
payment of the damage caused by such encumbrance.
This easement is not compulsory if the isolation of the immovable is due to the
proprietor's own acts.
ART. 650. The easement of right of way shall be established at the point least
prejudicial to the servient estate, and, insofar as consistent with this rule, where
the distance from the dominant estate to a public highway may be the shortest.
In summary, an entitlement to the easement of right of way requires that the
following requisites must be met.
1. The dominant estate is surrounded by other immovables and has no adequate
outlet to a public highway (Art. 649, par. 1);
2. There is payment of proper indemnity (Art. 649, par. 1);
3. The isolation is not due to the acts of the proprietor of the dominant estate
(Art. 649, last par.); and
4. The right of way claimed is at the point least prejudicial to the servient estate;
and insofar as consistent with this rule, where the distance from the dominant
estate to a public highway may be the shortest (Art. 650).15
All the above requisites are present in this case.
As regards the first requisite, there is no dispute that the respondent's property
was surrounded by other immovables owned by different individuals, including
Spouses Williams. The isolation was further shown in the Sketch Plan16 prepared
by Honorato R. Bisnar, the geodetic engineer deputized by the parties. Moreover,
contrary to Spouses Williams' claim that there was a barangay road closest to the
dominant estate, the R TC, during the ocular inspection, observed that "there was
no existing barangay road xxx."17
The second requisite of payment of indemnity was also complied with by the
respondent when he wrote Spouses Williams on January 27, 2004, formally
asking them to provide him with a right of way, for which he was willing to pay a
reasonable value or to swap a portion of his property.18
Anent the third requisite, the isolation of the dominant estate was not due to the
respondent's own acts. The property he purchased was already surrounded by
other immovables leaving him no adequate ingress or egress to a public highway.
Spouses Williams refused to grant a right of way and averred that the isolation of
the dominant estate was attributable to the respondent's own acts. They pointed
out that when the respondent purchased the dominant estate, he knew that Sierra
was in negotiation with them for the sale of the dominant estate, thus, he was in
bad faith. Nonetheless, it cannot be used to defeat the respondent's claim for a
right of way. Sierra had every right to sell his property to anybody. Further, when
the respondent bought the dominant estate there could have been no existing
contract of sale yet considering that Spouses Williams and Sierra were still in
negotiation.
Hence, consent, one of the essential requisites for a valid contract, was lacking.
As to the fourth requisite, the Court finds that the right of way sought by the
respondent is at the point least prejudicial to the servient estate and it is the
shortest distance to the national highway. This is evident in the Sketch Plan 19
showing that the requested right of way was alongside the perimeter of Spouses
Williams' property. Moreover, during the ocular inspection, the RTC observed
that the right of way, which the respondent was seeking was alongside a
precipice.20 Spouses Williams insisted that they intended to build structures on
the portion claimed by the respondent, but at a safe distance from the precipice,
not immediately beside it. In addition, the 705.20 sq. m long pathway would only
affect a small portion of the 12,200 sq. m. property of Spouses Williams, and for
which the respondent expressed willingness to pay.
Even assuming that the right of way being claimed by the respondent is not the
shortest distance from the dominant estate to the public highway, it is well-
settled that "[t]he criterion of least prejudice to the servient estate must prevail
over the criterion of shortest distance although this is a matter of judicial
appreciation. xxx In other words, where the easement may be established on any
of several tenements surrounding the dominant estate, the one where the way is
shortest and will cause the least damage should be chosen. If having these two (2)
circumstances do not concur in a single tenement, the way which will cause the
least damage should be used, even if it will not be the shortest." 21 As previously
discussed, the right of way claimed by the respondent is at a point least
prejudicial to the servient estate.
WHEREFORE, the petition is DENIED. The November 28, 2012 Decision and the
April 16, 2013 Resolution of the Court of Appeals in CAG. R. CV No. 01115-MIN,
are AFFIRMED in toto.
SO ORDERED.
#7 ACTION FOR RECONVEYANCE OF PROPERTY
THIRD DIVISION
March 20, 2017
G.R. No. 200285
FELIX B. TIU, Petitioner
vs
SPOUSES JACINTO JANGAS AND PETRONILA MERTOJANGAS, MARIA G.
ORTIZ, MELENCIO ORTIZ, MERLA M. KITANE, PACITO KITANE,
CANDELARIA RUSIANA, RODRIGO RUSIANA, JUANA T. JALANDONI,
ADELAIDA P. RAGAY and TEOFISTO RAGAY, SR., Respondents
DECISION
REYES, J.:
Before this Court is a petition for review oncertiorari1 seeking to annul and set
aside the Decision2 dated August 31, 2010 and the Resolution3 dated December
6, 2011 of the Court of Appeals (CA) in CA-G.R. CV No. 00284, which affirmed the
Decision4 dated June 21, 2004 of the Regional Trial Court (RTC) of Dumaguete
City, Negros Oriental, Branch 35, in Civil Case No. 10278.
Facts of the Case
This case stemmed from a Complaint5 dated August 6, 1992 for reconveyance of
property filed by Spouses Jacinto and Petronila Merto-Jangas (Spouses Jangas)
against Felix Tiu (petitioner) and Rural Bank of Amlan, Inc. (RBAI).
The subject of this petition is a parcel of land designated as Lot No. 480-A,
originally owned by Gregorio Pajulas (Gregorio), with an area of 25,340 square
meters, located in Salag, Siaton, Negros Oriental.6
The records of the case show the following sequence of events:
a) During Gregorio's lifetime, he owned a parcel of land known as Lot No.
480. He then gave a portion of the land (Lot No. 480-B) to his
granddaughter Lulihala Pajulas who took care of him;7
b) In 1956, Gregorio died and was survived by his three daughters,·
namely, Adelaida, Bruna and Isabel (Pajulas sisters), who adjudicated in
1958 the remaining portion of the land (Lot No. 480-A) unto themselves
and declared the same in their names under Tax Declaration (TD) No.
17560;8
c) In 1962, the Pajulas sisters agreed to divide Lot No. 480-A equally
among themselves;9 d) Upon the death of Isabel, her share was inherited
by her heirs, namely: her husband and children Iluminada Gadiane
(Iluminada), Norma Gadiane (Norma) and Maria Gadiane-Ortiza (Maria)
(Gadiane sisters);10 e) On August 5, 1974, Norma sold to Spouses Jangas
a portion of her share with an area of 1,462 sq m, which the latter
declared in the name of Petronila under TD No. 21-827;11
f) On December 31, 1981, Iluminada and Norma sold to the Spouses
Jangas another portion with an area of 912 sq m, which was later also
declared in the name of Petronila under TD No. 21-1064;12
g) Thereafter, Iluminada made subsequent sales as follows: (1) 288 sq m
to Candelaria Rusiana (Candelaria); (2) 3,243 sq m to Merla Macalipay-
Kitane (Merla); and (3) 288 sq m to Juana Jalandoni (Juana);13
h) Sometime in 1962, Bruna sold her one-third-share of Lot No. 480-A to
Spouses Gaudencio Delayco (Gaudencio) and Lucia Amigo-Delayco
(Spouses Delayco);14
i) On January 8, 1980, the heirs of Gaudencio, represented by Bridiana
Delayco (Bridiana), applied for and was ·granted a free patent over the
entire Lot No. 480-A. Consequently, Original Certificate of Title (OCT) No.
FV- 29932 under Free Patent (FP) No. (VII-3) 9852 was issued in the
name of the heirs of Gaudencio;15
j) Subsequently, Bridiana transferred the title over Lot No. 480-A to her
name alone, and was issued Transfer Certificate of Title (TCT) No. FT-
4925 on September 26, 1985. She also declared the subject property
under her name for taxation purposes evidenced by TD No. 21-1031;16
k) In March of 1990, Bridiana sold the subject property to the
petitioner;17 and
l) On August 24, 1990, TCT No. FT-5683 was issued to Spouses Felix and
Evelyn Tiu (Spouses Tiu), who also had the subject property declared in
their names under TD No. 21-1097 (A). Then, in 1991, the Spouses Tiu
mortgaged the subject property with the RBAI.18
A summary of the transfer of the property is as follows:

The aforementioned events prompted the Spouses Jangas to file a complaint19 for
reconveyance and damages against the petitioner and RBAI on August 6, 1992.
A motion for leave to intervene and complaints in intervention was filed, on
March 31, 1993, by Spouses Maria and Melencio Ortiz (Spouses Ortiz), Spouses
Merla and Pacito Kitane (Spouses Kitane ), Spouses Candelaria and Rodrigo
Rusiana (Spouses Rusiana) and Juana, who contended that they are now the
owners of different portions of Lot No. 480-A, having bought the same from the
Gadiane sisters. The complaints in interventiqn were later amended to include
Spouses Adelaida and Teopisto Ragay, Sr. (Spouses Ragay), who assailed that
they owned one-third-share of Lot No. 480-A, since Adelaida is the daughter of
Gregorio.20
After trial, the court a quo rendered its judgment in favor of Spouses Jangas,
Spouses Ortiz, Spouses Kitane, Spouses Rusiana, Juana and Spouses Ragay
(collectively, the respondents). The trial court dismissed the petitioner's claim of
ownership over the subject property taking note that the sale and transfer
effected by Bruna in favor of the Spouses Delayco was merely her one-third-share
of the subject property. Thus:
WHEREFORE, premises considered, judgment is hereby rendered:
1. Declaring [Spouses Jangas] part owners of Lot 480-A of Plan Csd-07-
03-000548 to the extent of 2,374 square meters located at the eastern
portion;
2. Declaring [Spouses Tiu] as owners of one-third portion of the same Lot
No. 480-A located in between the shares of Adelaida and Isabel, both
surnamed Pajulas as indicated in the rough sketch plan (Exh. "B") [and]
which portion is the only portion being mortgaged by them to [RBAI];
3. Declaring the Heirs of [Adelaida], namely intervenors Marilyn Ragay,
married to Casiano Palamos and a resident of Bondo Siaton, Negros
Oriental; Melyn Ragay married to Judy Taganile and a resident of
Guihulngan, Negros Oriental; Carolina Ragay, married to Efren
Bangcairen and a resident of Piapi, Dumaguete City; Teopisto Ragay, Jr.,
married to Gerfrodes Pahulas and a resident of Mantuyop, Siaton, Negros
Oriental, and Susan Ragay, married to Isabelito Guevara, a resident of
Siaton, Negros [Oriental], all Filipinos and of legal ages as owners of one-
third portion of the same .Lot No. [480]-A, which portion is located on
the western side of the land;
4. Declaring the Heirs of [Isabel] as owners to the extent of 6,099 square
meters plus over the same land and which share is located at the eastern
portion; [and]
5. As a consequence, TCT No. FT-5683 covering said Lot No. [480]-A has
to be cancelled partially in order to reflect the foregoing lawful and
legitimate owners of the said parcel of land and the Register of Deeds for
the Province of Negros Oriental, Dumaguete City is directed to effect such
partial cancellation.
Plaintiffs' claim for damages as well as defendants' counter-claim is ordered
dismissed.
No pronouncement as to costs.
SO ORDERED.21
On August 31, 2010, the CA, in its Decision22 denied the petitioner's appeal and
affirmed in toto the findings of the RTC. In sustaining the RTC's decision, the
appellate court ratiocinated:
In the instant case, Bruna owned 1/3 of Lot 480-A, the same 1/3 share is what
she can validly transfer to [S]pouses Delayco and not the whole lot. Nemo dat
quad non habet - no one can give what one does not have. Accordingly, one can
sell only what one owns or is authorized to sell, and the buyer can acquire no
more than what the seller can transfer legally. Such being the case, the Delaycos
could not validly transfer the whole of
Lot 480-A to themselves and sell the same to [S]pouses Tiu.
Although the fact of sale of Bruna's share to the [S]pouses Delaycos was not an
issue, this Court however, could not actually determine the extent of the property
sold by Bruna to them as there was no deed of sale found in the records. Even
assuming arguendo that Bruna sold the entire Lot 480-A to the Delaycos, the said
sale is not null and void. This only made the Delaycos co-owner of the property
which pertains to the share of Bruna.23
Aggrieved by the foregoing disquisition, the petitioner moved for reconsideration
but it was denied by the CA in its Resolution24 dated
December 6, 2011. Hence, he filed this petition for review.
The Issue Presented·
WHETHER THE PETITIONER IS ENTITLED TO THE RECONVEY ANCE OF THE
SUBJECT PROPERTY.
Ruling of the Court
The petition lacks merit.
In this case, the petitioner's cause of action for reconveyance is grounded on his
alleged ownership of the subject property which he merely purchased from
Bridiana. He mainly argues that he acquired the subject property in good faith
and for value, and had it recorded in the Registry of Property, since he was
unaware of any prior sale over the subject property, and Bridiaha's title was free
from any liens or encumbrances that could have aroused his· suspicion.
The respondents, however, rebut this claim by contending that: (1) Lot No. 480-
A was adjudicated among the heirs of Gregorio, who declared the same in their
names under TD No. 17560 and later orally partitioned the same; (2) the heirs of
Isabel sold an equivalent of 2,374 sq m to Spouses Jangas, in separate notarized
deeds of sale while the other respondents also claimed that portions of the share
of Isabel had been sold to them by Isabel's heirs; (3) the Spouses Jangas alleged
that they had been in possession of the land since 1972; and (4) Bruna sold her
one-third-share to the Spouses Delayco, however, the latter caused the titling of
the whole Lot No. 480-A in their name.25
The main issue to be discussed is whether the petitioner is entitled to
reconveyance of the subject property. Consequently, the bone of contention is
whether the petitioner is a buyer in good faith.
The determination of whether the petitioner is a buyer in good faith is a factual
issue, which generally is outside the province of this Court to determine in a
petition for review. Although this rule admits of exceptions, none of these apply
to this case. There is no conflict between the factual findings and legal conclusions
of the RTC and the CA, both of which found the petitioner to be a buyer in bad
faith and not entitled to reconveyance of the subject property.
It is undisputed that the subject property was originally owned by Gregorio, and
upon his death, the subject property was transmitted by succession to his heirs,
as confirmed by the issuance of TD No. 17560 issued in 1961 where the owner
described therein were Gregorio's daughters, Adelaida, Bruna and Isabel.
Thereafter, the Pajulas sisters equally partitioned the subject property among
themselves. Thus, Bruna is entitled to only one-third of the subject property.
A scrutiny of the records established the fact that the property sold to the Spouses
Delayco was the one-third share only of Bruna over Lot No. 480-A. However, it
was clearly ascertained that the heirs of Spouses , Delayco, represented by
Bridiana, applied for and was granted an FP over the whole Lot No. 480-A as
evidenced by OCT No. FV-29932. Furthermore, Bridiana transferred the title to
her name alone and was then issued TCT No. FT-4925.
As correctly emphasized by the lower courts, the petitioner's right in the subject
property is limited only to Bruna's share in the co-owned property. When the
subject property was sold to the Spouses Delayco, they merely stepped into the
shoes of Bruna and acquired whatever rights and obligations appertain thereto.
The petitioner mistakenly relied upon the title of Bridiana to conclude that the
latter was a possessor in good faith and with just title who acquired the subject
property through a valid deed of sale. Neither can the petitioner benefit from the
contract of sale of the subject property, executed by
Bridiana in his favor, to support his claim of possession in good faith and with just
title.
Be that as it may, the rights of the respondents as owners of their respective
shares of the subject property were never alienated from them despite having the
whole Lot No. 480-A titled under Bridiana's name. Neither does the fact that the
petitioner had bought the subject property from Bridiana and having a new title
issued in his name displaced the existing ownership of the respondents. Besides,
it seems that the petitioner knew of the fact that there were other occupants of
the subject property. In fact, during cross examination, the petitioner testified
that when he visited the subject property for surveying he already saw two
structures that were built thereon, thus, he already knew that someone else
besides his seller has possession over the same. As the appellate court expressly
pointed out:
In, the instant case, We found that [the petitioner] had actual knowledge that
other persons were in actual possession of the lot. [The petitioner] testified
during his cross examination that he saw two (2) structures (nipa hut/house) in
Lot 480-A during his relocation survey. He admittedly knew the owner of the first
structure as a certain Botit Bangay but he did not know the owner of the second
one. [The petitioner] admitted that he did not inquire who is the owner thereof.
The mere fact that [the petitioner] did not investigate as to the ownership of the
land after he knew that other persons other than the seller were in possession
thereof only means that he was not an innocent purchaser for value of said land.26
The Court has repeatedly emphasized that one who purchases real estate with
knowledge of a defect or lack of title in his vendor cannot claim that he has
acquired title thereto in good faith as against the true owner of the land or of an
interest therein; and the same rule must be applied to one who has knowledge of
facts which should have put him upon such inquiry and investigation as might be
necessary to acquaint him with the defects in the title of his vendor.27
When a piece of land is in the actual possession of persons other than the seller,
the buyer must be wary and should investigate the rights of those in possession.
Without making such inquiry, one cannot claim that he is a buyer in good faith. 28
As in this case, the failure of buyer to take the ordinary precautions which a
prudent man would have taken under the circumstances, especially in buying a
piece of land in the actual, visible and public possession· of another person, other
than the vendor, constitutes gross negligence amounting to bad faith.29
Far from being prudent, it is clear that the petitioner chose to close his eyes to
facts which should have put a reasonable man on his guard. Consequently, he
cannot now claim that he acted in good faith on the belief that there was no defect
in the title of his predecessor-in-interest. The fact that Bridiana was the first to
apply for an FP over the subject property will not help the petitioner's cause.
not named in the certificate, or that it may be held in trust for another person by
the registered owner.31
The petitioner's reliance on the doctrine that mere possession cannot defeat the
right of a holder of a registered Torrens title over property is misplaced,
considering that the respondents were almost deprived of their rights over the
subject property through fraud and with evident bad faith. The petitioner and
Bridiana's failure and intentional omission to disclose the fact of actual physical
possession by another person during registration proceedings constitutes actual
fraud.32 Hence, the alleged incontrovertibility of title cannot be successfully
invoked by the petitioner because certificates of title. merely confirm or record
title already existing and cannot be used as a shield for the commission of fraud.
Applying these parameters, the Court is convinced that the petitioner cannot be
considered a buyer and registrant in good faith and for value. It is apparent from
the records of this case that the respondents have been in actual possession and
occupation of the subject property at the time that it was sold by Bridiana to the
petitioner. Thus, the petitioner did not acquire any right from Bridiana over two-
thirds of the subject property since the latter was no longer the owner of the same
at the time the sale was made to the petitioner. The ownership over the two-
thirds-portion of the subject property had already been vested to the
respondents prior to such sale. Hence, reconveyance of the subject property to
the petitioner is nwarranted.
WHEREFORE, the petition is DENIED. The Decision dated August 31, 2010 and
the Resolution dated December 6, 2011 of the Court of Appeals in CA-G.R. CV No.
00284 are AFFIRMED.
SO ORDERED.

Moreover, the petitioner cannot rely on his TCT No. FT-5683 as an

incontrovertible evidence of his ownership over the subject property. The fact
that he was able to secure a title in his name does not operate to vest ownership
upon him of the subject property. As the Court reiterated in Hortizuela v.
Tagufa;30

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.1âwphi1 A certificate of title
is merely an evidence of ownership or title over the particular property described
therein. It cannot be used to protect a usurper from the true owner; nor can it be
used as a shield for the commission of fraud; neither does it permit one to enrich
himself at the expense of others. Its issuance in favor of a particular person does·
not foreclose the possibility that the real property may be co-owned with persons
#8 DONATION
SECOND DIVISION
March 29, 2017
G.R. No. 206103
LYDIA LAVAREZ, MARGARITA LAVAREZ, WILFREDO LAV AREZ, GREGORIO
LAV AREZ, LOURDES LAV AREZSAL V ACION, NORLIE LAVAREz,* G.J.
LAVAREZ, GIL LAV AREZ, and GAY NATALIE LA VAREZ, GODOFREDO LAV
AREZ, LETICIA LAV AREZ, LUIS LAV AREZ, REMEDIOS V. ZABALLERO,
JOSEPHINE V. ZABALLERO FERNANDO V. ZABALLERO, VALENTA V.
ZABALLERO, MILAGROS Z. VERGARA, VALETA Z. REYES, AMADO R.
ZABALLERO, EMMANUEL R. ZABALLERO, and FLORENTINO R. ZABALLERO,
Petitioners
vs
ANGELES S. GUEVARRA, AUGUSTO SEVILLA, JR., ASTERIA S. YRA, ANTONIO
SEVILLA, ALBERTO SEVILLA, ADELINA S. ALVAREZ, ARISTEO SEVILLA and
the REGISTER OF DEEDS OF LUCENA CITY, Respondents
DECISION
PERALTA, J.:
This is a Petition for Review on Certiorari assailing the Decision1 of the Court of
Appeals (CA) dated August 15, 2012 and its Resolution2 dated February 25, 2013
in CA-G.R. CV No. 95543 which partly granted the appeal from the Decision 3 of
the Regional Trial Court (RTC) of Lucena City, Branch 53, dated May 26, 2010 in
Civil Case No. 1996-159.
The facts of the case at bar, as shown in the records, are as follows:
Rebecca Zaballero, Romulo Zaballero, Amando Zaballero, Raquel Zaballero-
Sevilla, and Ramon Lavarez are siblings, the latter being a son from a former
marriage. On June 7, 1996, Rebecca died intestate and without any issue, leaving
several properties to be settled among her nearest kins - the sons and daughters
of her siblings - who later became the parties in this case.
On October 16, 1996, Lydia Lavarez, Godofredo Lavarez, Lourdes Lavarez, Guido
Lavarez, Norlie Bibiera, Gregorio Lavarez, Leticia Lavarez, Margarita Lavarez,
Wilfredo Lavarez, Luis Lavarez, Remedios V. Zaballero, Josephine V. Zaballero,
Fernando V. Zaballero, Valenta V. Zaballero, Milagros Z. Vergara, Valeta Z. Reyes,
Amado R. Zaballero, Emmanuel R. Zaballero, and Florentino Zaballero filed an
action for reconveyance, partition, accounting, and nullification of documents,
with damages, against respondents Angeles S. Guevarra, Augusto Sevilla, Jr.,
Asteria S. Yra, Antonio Sevilla, Alberto Sevilla, Adelina S. Alvarez, and Aristeo
Sevilla.
For their defense, respondents alleged that there was nothing to pa11ition since
they were not aware of any real or personal properties which their aunt Rebecca
had left behind. Said properties which were included in the complaint had
already been validly donated to them by Rebecca, resulting to new Certificates of
Title being issued in their names. Also, Guevarra claimed that she never took over
the management and administration of Rebecca's properties so she could not be
compelled to render an accounting of the income of said properties.
On May 26, 2010, the Lucena RTC granted the complaint, thus:
WHEREFORE, of the foregoing, the Court orders:
1. Defendant Angeles S. Guevarra, as the administratrix of the late Rebecca
Zaballero's property, to render an accounting how she managed the said
properties of her principal, including but not limited, to income and expenses
therefrom, bank deposits, from the time it came to her possession up to the
filing of this case in Court on October 16, 1996.
2. Declaring the deeds of donation enumerated under page 3 of this decision,
executed by Rebecca Zaballero, in favor of the defendants, a nullity for being
tainted with vices of consent and reverting the same to the estate of the late
Rebecca Zaballero.
3. Defendant Register of Deeds of Lucena City to cancel the said titles thereon
under the names of the defendants to be partitioned by and between the parties
in this case in accordance with law.
SO ORDERED.4
Therefore, respondents elevated the case to the CA. On August 15, 2012, the
appellate court partly granted the appeal and sustained the validity of the subject
Deeds of Donation, to wit:
WHEREFORE, premises considered, the instant appeal is PARTLY GRANTED.
The assailed Deeds of Donation executed in May 1993 by deceased Rebecca
Zaballero in favor of defendants-appellants are declared valid.
Defendant-appellant Angeles S. Guevarra is ordered to render an accounting on
how she managed the real and personal properties of Rebecca Zaballero, from
the time she took possession of the same up to the filing of the case on October
16, 1996.
SO ORDERED.5
Petitioners filed a motion for partial reconsideration, but the same was denied. 6
Of the original plaintiffs, only Lydia Lavarez, Margarita Lavarez, Wilfredo
Lavarez, Gregorio Lavarez, Lourdes Lavarez-Salvacion, Norlie Lavarez, G.J.
Lavarez, Gil Lavarez, and Gay Natalie Lavarez filed the instant petition.
The sole question in the instant case is whether or not Rebecca, on May 12, 1993,
possessed sufficient mentality to make the subject deeds of donation which
would meet the legal test regarding the required capacity to dispose.
Basic is the rule of actori incumbit onus probandi, or the burden of proof lies with
the plaintiff. In other words, upon the plaintiff in a civil case, the burden of proof
never parts. Therefore, petitioners must establish their case by a preponderance
of evidence, that is, evidence that has greater weight, or is more convincing than
that which respondents offered in opposition to it. In civil cases, the one who
alleges a fact has the burden of proving it and a mere allegation is not evidence. 7
A donation is an act of liberality whereby a person disposes a thing or right
gratuitously in favor of another, who, in turn, accepts it. Like any other contract,
agreement between the paiiies must exist. Consent in contracts presupposes the
following requisites: (1) it should be intelligent or with an exact notion of the
matter to which it refers; (2) it should be free; and (3) it should be spontaneous.
The parties' intention must be clear and the attendance of a vice of consent, like
any contract, renders the donation voidable. In order for a donation of property
to be valid, what is crucial is the donor's capacity to give consent at the time of
the donation. Certainly, there lies no doubt in the fact that insanity or
unsoundness of the disposing mind impinges on consent freely given. However,
the burden of proving such incapacity rests upon the person who alleges it. If no
sufficient proof to this effect is presented, capacity will be presumed. 8 Here,
however, petitioners succeeded in discharging said heavy burden.
It is the contention of respondents that Rebecca still had full control of her mind
during the execution of the deeds. The fact that she was already of advanced age
at that time or that she had to rely on respondents' care did not necessarily prove
that she could no longer give consent to a contract.1âwphi1
To determine the intrinsic validity of the deed of donation subject of the action
for annulment, Rebecca's mental state/condition at the time of its execution must
be taken into account. Factors such as age, health, and environment, and the
intricacy of the document in question, among others, should be considered.
Rebecca's doctor during her lifetime, Dr. Bernardo Jorge Conde, who was
presented as an expert witness, testified that Rebecca had been suffering from
dementia, which was more or less permanent, and had been taking medications
for years. The records would show that Rebecca lived in the family's ancestral
house with respondents, and the old lady was dependent on their care,
specifically that of Guevarra. During the execution of the deeds in question on
May 12, 1993, Rebecca was already 75 years old, and was confined at the
Philippine Heart Center in Quezon City. On June 7, 1996, she finally passed away.
The Deeds of Donation in favor of respondents likewise cover several properties
of varying sizes, to wit:
1. a land (483 square meters) at Barangay (Brgy.) Gulang Gulang, Lucena under
Transfer Certificate of Title (TCT) No. T-79056;
2. a property (33,424 square meters) at Brgy. Dumacaa, Lucena under TCT No.
T-80090;
3. a land (4,611 square meters) in Lucena under TCT No. T- 80091;
4. a land (9,456 square meters) in Lucena under TCT No. T- 80092;
5. a property (34,376 square meters) in Lucena under TCT No. T- 80086;
6. a property (17,448 square meters) under TCT No. T-80087;
7. a land (2,672 square meters) in Lucena under TCT No. T- 80088;
8. a land (25,469 square meters) in Lucena under TCT No. T- 80089;
9. a property (36,677 square meters) in Lucena under TCT No. T- 80093; and
10. a land (13,488 square meters) in Lucena under TCT No. T- 82430.
Putting together the abovementioned circumstances, that at the time of the
execution of the Deeds of Donation covering numerous properties, Rebecca was
already at an advanced age of 75, afflicted with dementia, not necessarily in the
pinkest of health since she was then, in fact, admitted to the hospital, it can be
reasonably assumed that the same had the effects of impairing her brain or
mental faculties so as to considerably affect her consent, and that fraud or undue
influence would have been employed in order to procure her signature on the
questioned deeds. The correctness of the trial court's findings therefore stands
untouched, since respondents never provided any plausible argument to have it
reversed, the issue of the validity of donation being fully litigated and passed
upon by the trial court.9
Petitioners claim, as confirmed by Dr. Conde, that the unsoundness of the mind
of the donor was the result of senile dementia. This is the form of mental decay
of the aged upon which wills or donations are most often contested. Senile
dementia, usually called childishness, has various forms and stages. To constitute
complete senile dementia, there must be such failure of the mind as to deprive
the donor of intelligent action. In the first stages of the disease, a person may still
possess reason and have will power.10 It is a form of mental disorder in which
cognitive and intellectual functions of the mind are prominently affected;
impairment of memory is early sign. Total recovery is not possible since organic
cerebral disease is involved.11 It is likewise the loss, usually progressive, of
cognitive and intellectual functions, without impairment of perception or
consciousness, caused by a variety of disorders including severe infections and
toxins, but most commonly associated with structural brain disease. It is
characterized by disorientation, impaired memory, judgment and intellect, and a
shallow labile effect.12
As to Dr. Conde's expert opinion, it is settled that the testimony of expert
witnesses must be construed to have been presented not to sway the court in
favor of any of the parties, but to assist the court in the determination of the issue
before it.13 Although. courts are not ordinarily bound by expert testimonies, they
may place whatever weight they may choose upon such testimonies in
accordance with the facts of the case. The relative weight and sufficiency of expert
testimony is peculiarly within the province of the trial court to decide,
considering the ability and character of the witness, his actions upon the witness
stand, the weight and process of the reasoning by which he has supported his
opinion, his possible bias in favor of the side for whom he testifies, the fact that
he might be a paid witness, the relative opportunities for study and observation
of the matters about which he testifies, and any other matters which deserve to
illuminate his statements. The opinion of the expert may not be arbitrarily
rejected; it is to be considered by the court in view of all the facts and
circumstances in the case and when common knowledge utterly fails, the expert
opinion may be given controlling effect. The problem of the credibility of the
expert witness and the evaluation of his testimony is left to the discretion of the
trial court whose ruling on such is not reviewable in the absence of abuse of
discretion.14
Findings of fact made by a trial court are accorded the highest degree of respect
by an appellate tribunal and, without a clear disregard of the evidence before it
that can otherwise affect the results of the case, those findings should not be
ignored. Absent any clear showing of abuse, arbitrariness, or capriciousness
committed by the lower court, its findings of facts are binding and conclusive
upon the Court.18 Settled is the rule that in assessing the credibility of witnesses,
the Court gives great respect to the evaluation of the trial court for it had the
unique, opportunity to observe the demeanor of witnesses and their deportment
Ion the witness stand, an opportunity that is unavailable to the appellate courts,
which simply rely on the cold records of the case. The assessment by the trial
court is even conclusive and binding if not tainted with arbitrariness or oversight
of some fact or circumstance of weight and influence. 19 Here, the CA failed to
show any presence of abuse, arbitrariness, or any clear disregard of evidence on
the part of the trial court when it gave full credence to Dr. Conde's expert opinion.
Thus, after an extensive examination of the records of the instant case, the Court
finds no cogent reason to depart from the lower court's conclusion that Rebecca
Zaballero, on May 12, 1993, could not have had full control over her mental
faculties so as to render her completely capable of executing a valid Deed of
Donation.
WHEREFORE, IN VIEW OF THE FOREGOING, the Court GRANTS the petition
and REINSTATES the Decision of the Regional Trial Court of Lucena City, Branch
53, dated May 26, 2010 in Civil Case No. 1996-159.
SO ORDERED.

To support its ruling in favor of the validity of the deeds of donation, the CA cited
the cases of Catalan v. Basa15 and Carrillo v. Jaojoco.16 In Catalan, the Court upheld
the validity of the donation although the donor had been suffering from
schizophrenia. In Carrillo, the contract of sale was upheld despite the seller
having been declared mentally incapacitated after only nine (9) days from the
execution of said contract. It is important to note, however, that in both cases, the
Court merely sustained the rulings of the trial courts, which had been in a better
position to appreciate the weight and value of the evidence and testimonies of the
witnesses who had personally appeared before them.17
#9 SALES: WARRANTY
FIRST DIVISION
April 19, 2017
G.R. No. 194533
PHILIPPINE STEEL COATING CORP., Petitioner, vs. EDUARD QUINONES,
Respondent.
DECISION
SERENO, CJ:
Before us is a Petition for Review on Certiorari under Rule 45 of the Rules of Court
assailing the Court of Appeals (CA) Decision 1 and Resolution 2 The CA affirmed
in toto the Regional Trial Court (R TC) Decision in Civil Case No. A-1708 for
damages. 3
THE FACTS
This case arose from a Complaint for damages filed by respondent Quinones
(owner of Amianan Motors) against petitioner PhilSteel. The Complaint alleged
that in early 1994, Richard Lopez, a sales engineer of PhilSteel, offered Quinones
their new product: primer-coated, long-span, rolled galvanized iron (G.I.) sheets.
The latter showed interest, but asked Lopez if the primer-coated sheets were
compatible with the Guilder acrylic paint process used by Amianan Motors in the
finishing of its assembled buses. Uncertain, Lopez referred the query to his
immediate superior, Ferdinand Angbengco, PhilSteel's sales manager.
Angbengco assured Quinones that the quality of their new product was superior
to that of the non-primer coated G.l. sheets being used by the latter in his
business. Quinones expressed reservations, as the new product might not be
compatible with the paint process used by Amianan Motors.
Angbengco fmiher guaranteed that a laboratory test had in fact been conducted
by PhilSteel, and that the results proved that the two products were compatible;
hence, Quinones was induced to purchase the product and use it in the
manufacture of bus units.
However, sometime in 1995, Quinones received several complaints from
customers who had bought bus units, claiming that the paint or finish used on the
purchased vehicles was breaking and peeling off. Quinones then sent a letter-
complaint to PhilSteel invoking the warranties given by the latter. According to
respondent, the damage to the vehicles was attributable to the hidden defects of
the primer-coated sheets and/or their incompatibility with the Guilder acrylic
paint process used by Amianan Motors, contrary to the prior evaluations and
assurances of PhilSteel. Because of the barrage of complaints, Quinones was
forced to repair the damaged buses.
PhilSteel counters that Quinones himself offered to purchase the subject product
directly from the former without being induced by any of PhilSteel's
representatives. According to its own investigation, PhilSteel discovered that the
breaking and peeling off of the paint was caused by the erroneous painting
application done by Quinones.
The RTC rendered a Decision 4 in favor of Quinones and ordered PhilSteel to pay
damages. The trial court found that Lopez's testimony was damaging to
PhilSteel's position that the latter had not induced Quinones or given him
assurance that his painting system was compatible with PhilSteel's primer-
coated G.I. sheets. The trial court concluded that the paint blistering and peeling
off were due to the incompatibility of the painting process with the primer-coated
G .I. sheets. The RTC also found that the assurance made by Angbengco
constituted an express warranty under Article 1546 of the Civil Code. Quinones
incurred damages from the repair of the buses and suffered business reverses. In
view thereof, PhilSteel was held liable for damages.
THE RULING OF THE CA
The CA affirmed the ruling of the RTC in toto.
The appellate court ruled that PhilSteel in fact made an express warranty that the
primer-coated G.I. sheets were compatible with the acrylic paint process used by
Quinones on his bus units. The assurances made by Angbengco were confirmed
by PhilSteel's own employee, Lopez.
The CA further held that the cause of the paint damage to the bus units of
Quinones was the incompatibility of the primer-coated sheet with the acrylic
paint process used by Amianan Motors. The incompatibility was in fact
acknowledged through a letter dated 29 June 1996 from Angbengco himself. 5
The CA also agreed with the R TC that PhilSteel was liable for both actual and
moral damages. For actual damages, the appellate court reasoned that PhilSteel
committed a breach of duty against Quinones when the company made
assurances and false representations that its primer-coated sheets were
compatible with the acrylic paint process of Quinones. The CA awarded moral
damages, ruling that PhilSteel's almost two years of undue delay in addressing
the repeated complaints about paint blisters constituted bad faith.
In addition, the CA concurred with the RTC that attorney's fees were in order
since Quinones was forced to file a case to recover damages.
Accordingly, the CA dismissed the appeal of PhilSteel.
Petitioner sought a reversal of the Decision in its Motion for Reconsideration. The
motion was, however, denied by the CA in its Resolution dated 19 November
2010.
Hence, this Petition.
ISSUES
Petitioner raises the following issues:
1. Whether vague oral statements made by seller on the characteristics
of a generic good can be considered warranties that may be invoked to
warrant payment of damages;
2. Whether general warranties on the suitability of products sold
prescribe in six (6) months under Article 1571 of the Civil Code;
3. Assuming that statements were made regarding the characteristics of
the product, whether respondent as buyer is equally negligent; and
4. Whether non-payment of price is justified on allegations of breach of
warranty.6
OUR RULING
We DENY the Petition.
This Court agrees with the CA that this is a case of express warranty under Article
1546 of the Civil Code, which provides:
Any affirmation of fact or any promise by the seller relating to the thing is an
express warranty if the natural tendency of such affirmation or promise is to
induce the buyer to purchase the same, and if the buyer purchases the thing
relying thereon. No affirmation of the value of the thing, nor any statement
purporting to be a statement of the seller's opinion only, shall be construed as a
warranty, unless the seller made such affirmation or statement as an expert and
it was relied upon by the buyer.
As held in Carrascoso, Jr. v. CA, 7 the following requisites must be established in
order to prove that there is an express warranty in a contract of sale: (1) the
express warranty must be an affirmation of fact or any promise by the seller
relating to the subject matter of the sale; (2) the natural effect of the affirmation
or promise is to induce the buyer to purchase the thing; and (3) the buyer
purchases the thing relying on that affirmation or promise.
An express warranty can be oral
when it is a positive affirmation of a
fact that the buyer relied on.
Petitioner argues that the purported warranties by mere "vague oral statements"
cannot be invoked to warrant the payment of damages.
A warranty is a statement or representation made by the seller of goods -
contemporaneously and as part of the contract of sale - that has reference to the
character, quality or title of the goods; and is issued to promise or undertake to
insure that ce1iain facts are or shall be as the seller represents them. 8 A warranty
is not necessarily written. It may be oral as long as it is not given as a mere opinion
or judgment. Rather, it is a positive affirmation of a fact that buyers rely upon,
and that influences or induces 9 them to purchase the product.
Contrary to the assertions of petitioner, the finding of the CA was that the former,
through Angbengco, did not simply make vague oral statements on purported
warranties. 10 Petitioner expressly represented to respondent that the primer-
coated G .I. sheets were compatible with the acrylic paint process used by the
latter on his bus units. This representation was made in the face of respondent's
express concerns regarding incompatibility. Petitioner also claimed that the use
of their product by Quinones would cut costs. Angbengco was so certain of the
compatibility that he suggested to respondent to assemble a bus using the
primer-coated sheet and have it painted with the acrylic paint used in Amianan
Motors.
At the outset, Quinones had reservations about the compatibility of his acrylic
paint primer with the primer-coated G.I. sheets of PhilSteel. But he later
surrendered his doubts about the product after 4 to 5 meetings with Angbengco,
together with the latter's subordinate Lopez. Only after several meetings was
Quinones persuaded to buy their G.I. sheets. On 15 April 1994, he placed an initial
order for petitioner's product and, following Angbengco's instructions, had a bus
painted with acrylic paint. The results of the painting test turned out to be
successful. Satisfied with the initial success of that test, respondent made
subsequent orders of the primer-coated product and used it in Amianan Motors'
mass production of bus bodies. 11
Thus, it was not accurate for petitioner to state that they had made no warranties.
It insisted that at best, they only gave "'assurances" of possible savings Quinones
might have if he relied on PhilSteel's primer-coated G.I. sheets and eliminated the
need to apply an additional primer. 12
All in all, these "vague oral statements" were express affirmations not only of the
costs that could be saved if the buyer used PhilSteel's G.I. sheets, but also of the
compatibility of those sheets with the acrylic painting process customarily used
in Amianan Motors. Angbengco did not aimlessly utter those "vague oral
statements" for nothing, but with a clear goal of persuading Quinones to buy
PhilSteel's product.
Taken together, the oral statements of Angbengco created an express warranty.
They were positive affirmations of fact that the buyer relied on, and that induced
him to buy petitioner's primer-coated G .I. sheets.
Under Article 1546 of the Civil Code, "'[ n ]o affirmation of the value of the thing,
nor any statement purporting to be a statement of the seller's opinion only, shall
be construed as a warranty, unless the seller made such affirmation or statement
as an expert and it was relied upon by the buyer."
Despite its claims to the contrary, petitioner was an expert in the eyes of the
buyer Quinones. The latter had asked if the primer-coated G.I. sheets were
compatible with Amianan Motors' acrylic painting process. Petitioner's former
employee, Lopez, testified that he had to refer Quinones to the former's
immediate supervisor, Angbengco, to answer that question. As the sales manager
of PhilSteel, Angbengco made repeated assurances and affirmations and even
invoked laboratory tests that showed compatibility. 13 In the eyes of the buyer
Quinones, PhilSteel - through its representative, Angbengco - was an expert
whose word could be relied upon.
This Court cannot subscribe to petitioner's stand that what they told Quinones
was mere dealer's talk or an exaggeration in trade that would exempt them from
liability for breach of warranty. Petitioner cites Gonzalo Puyat & Sons v. Arco
Amusement Company, 14 in which this Court ruled that the contract is the law
between the parties and should include all the things they agreed to. Therefore,
what does not appear on the face of the contract should be regarded merely as
"dealer's" or "trader's talk," which cannot Bind either party. 15
Contrary however to petitioner's position, the so-called dealer's or trader's talk
cannot be treated as mere exaggeration in trade as defined in Article 1340 of the
Civil Code. 16 Quinones did not talk to an ordinary sales clerk such as can be found
in a department store or even a sari-sari store. If Lopez, a sales agent, had made
the assertions of Angbengco without true knowledge about the compatibility or
the authority to warrant it, then his would be considered dealer's talk. But
sensing that a person of greater competence and knowledge of the product had
to answer Quinones' concerns, Lopez wisely deferred to his boss, Angbengco.
Angbengco undisputedly assured Quinones that laboratory tests had been
undertaken, and that those tests showed that the acrylic paint used by Quinones
was compatible with the primer-coated G.I. sheets of Philsteel. Thus, Angbengco
was no longer giving a mere seller's opinion or making an exaggeration in trade.
Rather, he was making it appear to Quinones that Phil Steel had already subjected
the latter's primed G.I. sheets to product testing. PhilSteel, through its
representative, was in effect inducing in the mind of the buyer the belief that the
former was an expert on the primed G.I. sheets in question; and that the
statements made by petitioner's representatives, particularly Angbengco (its
sales manager), 17 could be relied on. Thus, petitioner did induce the buyer to
purchase the former's G.I. sheets.
The prescription period of the
express warranty applies to the
instant case.
Neither the CA nor the RTC ruled on the prescription period applicable to this
case. There being an express warranty, this Court holds that the prescription
period applicable to the instant case is that prescribed for breach of an express
warranty. The applicable prescription period is therefore that which is specified
in the contract; in its absence, that period shall be based on the general rule on
the rescission of contracts: four years (see Article 1389, Civil Code). 18 In this case,
no prescription period specified in the contract between the parties has been put
forward. Quinones filed the instant case on 6 September 199619 or several
months after the last delivery of the thing sold. 20 His filing of the suit was well
within the prescriptive period of four years; hence, his action has not prescribed.
The buyer cannot be held negligent
in the instant case.
Negligence is the absence of reasonable care and caution that an ordinarily
prudent person would have used in a given situation. 21 Under Article 11 73 of the
Civil Code, 22 where it is not stipulated in the law or the contract, the diligence
required to comply with one's obligations is commonly referred to as
paterfamilias; or, more specifically, as bonos paterfamilias or "a good father of a
family." A good father of a family means a person of ordinary or average diligence.
To determine the prudence and diligence that must be required of all persons, we
must use as basis the abstract average standard corresponding to a normal
orderly person. Anyone who uses diligence below this standard is guilty of
negligence. 23
Respondent applied acrylic primers, which are stronger than epoxy primers. The
G.I. sheets of PhilSteel were primer-coated with epoxy primer. By applying the
acrylic over the epoxy primer used on the G.I. sheets, the latter primer was either
dissolved or stripped off the surface of the iron sheets. 24
Petitioner alleges that respondent showed negligence by disregarding what it
calls a "chemical reaction so elementary that it could not have escaped
respondent Quinones who has been in the business of manufacturing,
assembling, and painting motor vehicles for decades." 25 For this supposed
negligence, petitioner insists that respondent cannot hide behind an allegation of
breach of warranty as an excuse for not paying the balance of the unpaid
purchase price.
It bears reiteration that Quinones had already raised the compatibility issue at
the outset. He relied on the manpower and expertise of PhilSteel, but at the same
time reasonably asked for more details regarding the product. It was not an
impulsive or rush decision to buy. In fact, it took 4 to 5 meetings to convince him
to buy the primed G .I. sheets. And even after making an initial order, he did not
make subsequent orders until after a painting test, done upon the instructions of
Angbengco proved successful. The test was conducted using their acrylic paint
over PhilSteel's primer-coated G.I. sheets. Only then did Quinones make
subsequent orders of the primer-coated product, which was then used in the
mass production of bus bodies by Amianan Motors. "26
This Court holds that Quinones was not negligent and should therefore not be
blamed for his losses.
The nonpayment of the unpaid
purchase price was justified, since a
breach of warranty was proven.
Petitioner takes issue with the nonpayment by Quinones to PhilSteel of a balance
of ₱448,041.50, an amount that he has duly admitted. 27 It is the nonpayment of
the unpaid balance of the purchase price, of the primer-coated G.I. sheets that is
at the center of the present controversy.
Quinones, through counsel, sought damages against petitioner for breach of
implied warranty arising from hidden defects under Article 156 l of the Civil Code,
which provides:
The vendor shall be responsible for warranty against the hidden defects which
the thing sold may have, should they render it unfit for the use for which it is
intended, or should they diminish its fitness for such use to such an extent that,
had the vendee been aware thereof he would not have acquired it or would have
given a lower price for it; but said vendor shall not be answerable for patent
defects or those which may be visible, or for those which are not visible if the
vendee is an expert who, by reason of his trade or profession, should have known
them.
In seeking a remedy from the trial court, Quinones opted not to pay the balance
of the purchase price, in line with a proportionate reduction of the price under
Article 1567 Civil Code, which states:
In the cases of articles 1561, 1562, 1564, 1565 and 1566, the vendee may elect
between withdrawing from the contract and demanding a proportionate
reduction of the price, with damages in either case.
Petitioner reasons that since the action of respondent is based on an implied
warranty, the action has already prescribed under Article 1571 28 of the Civil
Code. According to petitioner, Quinones can no longer put up the defense of
hidden defects in the product sold as a basis for evading payment of the balance.
29
We agree with petitioner that the nonpayment of the balance cannot be premised
on a mere allegation of nonexisting warranties. This Court has consistently ruled
that whenever a breach of warranty is not proven, buyers who refuse to pay the
purchase price - or even the unpaid balance of the goods they ordered - must be
held liable therefor.30
However, we uphold the finding of both the CA and the RTC that petitioner's
breach of warranty was proven by respondent.
Since what was proven was express warranty, the remedy for implied warranties
under Article 1567 of the Civil Code does not apply to the instant case. Instead,
following the ruling of this Court in Harrison Motors
Corporation v. Navarro,31 Article 1599 of the Civil Code applies when an express
warranty is breached.1awp++i1 The provision reads:
Where there is a breach of warranty by the seller, the buyer may, at his election:
(l) Accept or keep the goods and set up against the seller, the breach of
warranty by way of recoupment in diminution or extinction of the
price;
(2) Accept or keep the goods and maintain an action against the seller
for damages for the breach of warranty;
(3) Refuse to accept the goods, and maintain an action against the seller
for damages for the breach of warranty;
(4) Rescind the contract of sale and refuse to receive the goods or if the
goods have already been received, return them or offer to return them
to the seller and recover the price or any part thereof which has been
paid.
When the buyer has claimed and been granted a remedy in
anyone of these ways, no other remedy can thereafter be
granted, without prejudice to the provisions of the second
paragraph of article 1191.
Where the goods have been delivered to the buyer, he cannot
rescind the sale if he knew of the breach of warranty when he
accepted the goods without protest, or if he fails to notify the
seller within a reasonable time of the election to rescind, or if
he fails to return or to offer to return the goods to the seller in
substantially as good condition as they were in at the time the
ownership was transferred to the buyer. But if deterioration or
injury of the goods is due to the breach or warranty, such
deterioration or injury shall not prevent the buyer from
returning or offering to return the goods to the seller and
rescinding the sale.
Where the buyer is entitled to rescind the sale and elects to do
so, he shall cease to be liable for the price upon returning or
offering to return the goods. If the price or any part thereof has
already been paid, the seller shall be liable to repay so much
thereof as has been paid, concurrently with the return of the
goods, or immediately after an offer to return the goods in
exchange for repayment of the price.
Where the buyer is entitled to rescind the sale and elects to do
so, if the seller refuses to accept an offer of the buyer to return
the goods, the buyer shall thereafter be deemed to hold the
goods as bailee for the seller, but subject to a lien to secure the
payment of any portion of the price which has been paid, and
with the remedies for the enforcement of such lien allowed to
an unpaid seller by article 1526.
(5) In the case of breach of warranty of quality, such loss, in the absence
of special circumstances showing proximate damage of a greater
amount, is the difference between the value of the goods at the time of
delivery to the buyer and the value they would have had if they had
answered to the warranty.
Quinones has opted for a reduction in price or nonpayment of the unpaid balance
of the purchase price. Applying Article 1599 (1), this Court grants this remedy.
The above provisions define the remedy of recoupment in the diminution or
extinction of price in case of a seller's breach of warranty. According to the
provision, recoupment refers to the reduction or extinction of the price of the
same item, unit, transaction or contract upon which a plaintiffs claim is founded.
32
In the case at bar, Quinones refused to pay the unpaid balance of the purchase
price of the primer-coated G.I. sheets PhilSteel had delivered to him.1âwphi1 He
took this action after complaints piled up from his customers regarding the
blistering and peeling-off of the paints applied to the bus bodies they had
purchased from his Amianan Motors. The unpaid balance of the purchase price
covers the same G .I. sheets. Further, both the CA and the RTC concurred in their
finding that the seller's breach of express warranty had been established.
Therefore, this Court finds that respondent has legitimately defended his claim
for reduction in price and is no longer liable for the unpaid balance of the
purchase price of ₱448,04l.50.
The award of attorney's fees is deleted.
Contrary to the finding of the CA and the RTC, this Court finds that attorney's fees
are not in order. Neither of these courts cited any specific factual basis to justify
the award thereof. Records merely show that
Quinones alleged that he had agreed to pay 25% as attorney's fees to his counsel.
33 Hence, if the award is based on a mere allegation or testimony that a party has
agreed to pay a certain percentage for attorney's fees, the award is not in order.
34
WHEREFORE, in view of the foregoing, the instant Petition is DENIED. The Court
of Appeals Decision dated 17 March 2010 and Resolution dated 19 November
20l0 denying petitioner's Motion for Reconsideration are hereby AFFIRMED,
except for the award of attorney's fees, which is hereby DELETED.
SO ORDERED.
#10 PROPERTY: QUIETING OF TITLE
FIRST DIVISION
April 24, 2017
G.R. No. 189950*
BERNADETTE S. BILAG, ERLINDA BILAGSANTILLAN, DIXON BILAG,
REYNALDO B. SUELLO, HEIRS OF LOURDES S. BILAG, HEIRS OF LETICIA
BILAG-HANAOKA, and HEIRS OF NELLIE BILAG, Petitioners,
vs.
ESTELA AY-AY, ANDRES ACOP, JR., FELICITAS AP-AP, SERGIO AP-AP, JOHN
NAPOLEON A. RAMIREZ, JR., and MA. TERESA A. RAMIREZ, Respondents
DECISION
PERLAS-BERNABE, J.:
Assailed in this petition for review on certiorari1 are the Decision2 dated March
19, 2009 and the Resolution3 dated September 3, 2009 of the Court of Appeals
(CA) in CA-G.R. CV No. 86266, which set aside the Order4 dated October 10, 2005
of the Regional Trial Court of Baguio City, Branch 61 (RTC Br. 61), and
consequently, remanded the case to the latter court for trial.
The Facts
The instant case stemmed from a Complaint5 dated August 12, 2004 for Quieting
of Title with Prayer for Preliminary Injunction filed by respondents Estela Ay-Ay,
Andres Acop, Jr., Felicitas Ap-Ap, Sergio ApAp, John Napoleon A. Ramirez, Jr., and
Ma. Teresa A. Ramirez (respondents) against petitioners Bernadette S. Bilag,
Erlinda BilagSantillan, Dixon Bilag, Reynaldo B. Suello, Heirs of Lourdes S. Bilag,
Heirs of Leticia Bilag-Hanaoka, and Heirs of Nellie Bilag before the RTC Br. 61,
docketed as Civil Case No. 5881-R. Essentially, respondents alleged that Iloc Bilag,
petitioners' predecessor-in-interest, sold to them separately various portions of
a 159,496-square meter parcel of land designated by the Bureau of Lands as
Approved Plan No. 544367, Psu 189147 situated at Sitio Benin, Baguio City
(subject lands), and that they registered the corresponding Deeds of Sale6 with
the Register of Deeds of Baguio City. According to respondents, Iloc Bilag not only
acknowledged full payment and guaranteed that his heirs, successors-in-interest,
and executors are to be bound by such sales, but he also caused the subject lands
to be removed from the Ancestral Land Claims. Respondents further alleged that
they have been in continuous possession of the said lands since 1976 when they
were delivered to them and that they have already introduced various
improvements thereon. Despite the foregoing, petitioners refused to honor the
foregoing sales by asserting their adverse rights on the subject lands. Worse, they
continued to harass respondents, and even threatened to demolish their
improvements and dispossess them thereof. Hence, they filed the instant
complaint to quiet their respective titles over the subject lands and remove the
cloud cast upon their ownership as a result of petitioners' refusal to recognize the
sales.7
For their part, petitioners filed a Motion to Dismiss 8 dated November 4, 2004 on
the grounds of lack of jurisdiction, prescription/laches/estoppel, and res judicata.
Anent the first ground, petitioners averred that the subject lands are untitled,
unregistered, and form part of the Baguio Townsite Reservation which were long
classified as lands of the public domain. As such, the RTC has no jurisdiction over
the case as it is the Land Management Bureau (formerly the Bureau of Lands)
which is vested with the authority to determine issues of ownership over
unregistered public lands.9
As to the second ground, petitioners argued that it is only now, or more than 27
years from the execution of the Deeds of Sale, that respondents seek to enforce
said Deeds; thus, the present action is already barred by prescription and/or
laches. 10
Regarding the final ground, petitioners pointed out that on January 27, 1998,
respondents had already filed a complaint against them for injunction and
damages, docketed as Civil Case No. 3934-R before the Regional Trial Court of
Baguio City, Branch 5 (RTC Br. 5), wherein they principally asserted their
ownership over the subject lands. However, RTC Br. 5 dismissed Civil Case No.
3934-R for lack of merit on the ground of respondents' failure to show convincing
proof of ownership over the same, 11 which Order of dismissal was then affirmed
by the CA on appeal. 12 Eventually, the Court issued a Resolution dated January
21, 200413 declaring the case closed and terminated for failure to file the intended
petition subject of the Motion for Extension to file the same. In view of the
foregoing, petitioners contended that due to the final and executory ruling in Civil
Case No. 3934-R, the filing of Civil Case No. 5881-R seeking to establish the
ownership thereof is already barred by res judicata. 14
The RTC Br. 61 Ruling
In an Order 15 dated October 10, 2005, the RTC Br. 61 ruled in petitioners' favor,
and consequently, ordered the dismissal of Civil Case No. 5881-R on the following
grounds: (a) it had no authority to do so; (b) the Deeds of Sale in respondents'
favor could not as yet be considered title to the subject lands, noting the failure
of respondents to perfect their title or assert ownership and possession thereof
for the past 27 years; and (c) the filing of the instant case is barred by res judicata
considering the final and executory Decision dismissing the earlier filed Civil Case
No. 3934-R where respondents similarly sought to be declared the owners of the
subject lands.16
Aggrieved, respondents appealed to the CA. 17
The CA Ruling
In a Decision18 dated March 19, 2009, the CA set aside the dismissal of Civil Case
No. 5881-R, and accordingly, remanded the case to the court a quo for trial. 19 It
held that Civil Case No. 3934-R was an action for injunction where respondents
sought to enjoin petitioners' alleged entry into the subject lands and their
introduction of improvements thereat; whereas Civil Case No. 5881-R is an action
to quiet title where respondents specifically prayed, inter alia, for the removal of
the cloud upon their ownership and possession of the subject lands. In this light,
the CA concluded that while these cases may involve the same properties, the
nature of the action differs; hence, res judicata is not a bar to the present suit. On
the issue of laches, prescription or estoppel, the CA pointed out that in view of
respondents' allegation that they have been in possession of the subject lands
since 1976, their action to quiet title is imprescriptible.20
Dissatisfied, petitioners moved for reconsideration which was, however,
21
denied in a Resolution22 dated September 3, 2009; hence, this petition.
The Issue Before the Court
The petition is meritorious.
At the outset, it must be stressed that in setting aside the Order of dismissal of
Civil Case No. 5881-R due to the inapplicability of the grounds of res judicata and
prescription/laches, the CA notably omitted from its discussion the first ground
relied upon by petitioners, which is lack of jurisdiction.
Jurisprudence has consistently held that "[j]urisdiction is defined as the power
and authority of a court to hear, try, and decide a case. In order for the court or
an adjudicative body to have authority to dispose of the case on the merits, it must
acquire, among others, jurisdiction over the subject matter. It is axiomatic that
jurisdiction over the subject matter is the power to hear and determine the
general class to which the proceedings in question belong; it is conferred by law
and not by the consent or acquiescence of any or all of the parties or by erroneous
belief of the court that it exists. Thus, when a court has no jurisdiction over the
subject matter, the only power it has is to dismiss the action." 23 Perforce, it is
important that a court or tribunal should first determine whether or not it has
jurisdiction over the subject matter presented before it, considering that any act
that it performs without jurisdiction shall be null and void, and without any
binding legal effects. The Court's pronouncement in Tan v. Cinco,24 is instructive
on this matter, to wit:
A judgment rendered by a court without jurisdiction is null and void and may be
attacked anytime. It creates no rights and produces no effect.1âwphi1 It remains
a basic fact in law that the choice of the proper forum is crucial, as the decision of
a court or tribunal without jurisdiction is a total nullity. A void judgment for want
of jurisdiction is no judgment at all. All acts performed pursuant to it and all
claims emanating from it have no legal effect. 25
Now, on the issue of jurisdiction, a review of the records shows that the subject
lands form part of a 159,496-square meter parcel of land designated by the
Bureau of Lands as Approved Plan No. 544367, Psu 189147 situated at Sitio
Benin, Baguio City. Notably, such parcel of land forms part of the Baguio Townsite
Reservation, a portion of which, or 146, 428 square meters, was awarded to Iloc
Bilag due to the reopening of Civil Reservation Case No. 1, GLRO Record No. 211,
as evidenced by a Decision 26 dated April 22, 1968 promulgated by the then-Court
of First Instance of Baguio City.
In a catena of cases, 27 and more importantly, in Presidential Decree No. (PD)
1271,28 it was expressly declared that all orders and decisions issued by the Court
of First Instance of Baguio and Benguet in connection with the proceedings for
the reopening of Civil Reservation Case No. 1, GLRO Record 211, covering lands
within the Baguio Town site Reservation are null and void and without force and
effect. While PD 1271 provides for a means to validate ownership over lands
forming part of the Baguio Town site Reservation, it requires, among others, that
a Certificate of Title be issued on such lands on or before July 31, 1973. 29 In this
case, records reveal that the subject lands are unregistered and untitled, as
petitioners' assertion to that effect was not seriously disputed by respondents.
Clearly, the award of lots 2 and 3 of the 159,496-square meter parcel of land
designated by the Bureau of Lands as Approved Plan No. 544367, Psu 189147 -
which includes the subject lands - to Iloc Bilag by virtue of the reopening of Civil
Reservation Case No. 1, GLRO Record 211, is covered by the blanket nullification
provided under PD 1271, and consistently affirmed by the prevailing case law. In
view of the foregoing, it is only reasonable to conclude that the subject lands
should be properly classified as lands of the public domain as well.
Therefore, since the subject lands are untitled and unregistered public lands, then
petitioners correctly argued that it is the Director of Lands who has the authority
to award their ownership.30 Thus, the RTC Br. 61 correctly recognized its lack of
power or authority to hear and resolve respondents' action for quieting oftitle. 31
In Heirs of Pocdo v. Avila,32 the Court ruled that the trial court therein correctly
dismissed an action to quiet title on the ground of lack of jurisdiction for lack of
authority to determine who among the parties have better right over the disputed
property, which is admittedly still part of public domain for being within the
Baguio Townsite Reservation, viz.:
The DENR Decision was affirmed by the Office of the President which held that
lands within the Baguio Townsite Reservation belong to the public domain
and are no longer registrable under the Land Registration Act. The Office of
the President ordered the disposition of the disputed property in accordance
with the applicable rules of procedure for the disposition of alienable public lands
within the Baguio Townsite Reservation, particularly Chapter X of
Commonwealth Act No. 141 on Townsite Reservations and other applicable rules.
Having established that the disputed property is public land, the trial court
was therefore correct in dismissing the complaint to quiet title for lack of
jurisdiction. The trial court had no jurisdiction to determine who among
the parties have better right over the disputed property which is admittedly
still part of the public domain. As held in Dajunos v. Tandayag:
x x x The Tarucs' action was for "quieting of title" and necessitated determination
of the respective rights of the litigants, both claimants to a free patent title, over
a piece of property, admittedly public land. The law, as relied upon by
jurisprudence, lodges "the power of executive control, administration,
disposition and alienation of public lands with the Director of Lands subject, of
course, to the control of the Secretary of Agriculture and Natural Resources."
In sum, the decision rendered in civil case 1218 on October 28, 1968 is a patent
nullity. The court below did not have power to determine who (the Firmalos
or the Tarucs) were entitled to an award of free patent title over that piece
of property that yet belonged to the public domain. Neither did it have power
to adjudge the Tarucs as entitled to the "true equitable ownership" thereof, the
latter's effect being the same: the exclusion of the Firmalos in favor of the Tarucs.
documents, namely the "Catulagan" and the Deed of Waiver of Rights. However,
the records reveal that petitioners do not have legal or equitable title over
the disputed property, which forms part of Lot 43, a public land within the
Baguio Townsite Reservation. It is clear from the facts of the case that
petitioners' predecessors-in-interest, the heirs of Pocdo Pool, were not
even granted a Certificate of Ancestral Land Claim over Lot 43, which
remains public land. Thus, the trial court had no other recourse but to
dismiss the case. 33 (Emphases and underscoring supplied)
In conclusion, RTC Br. 61 has no jurisdiction over Civil Case No. 5881-R as the
plaintiffs therein (herein respondents) seek to quiet title over lands which belong
to the public domain. Necessarily, Civil Case No. 5881- R must be dismissed on
this ground. It should be stressed that the court a quo's lack of subject matter
jurisdiction over the case renders it without authority and necessarily obviates
the resolution of the merits of the case. To reiterate, when a court has no
jurisdiction over the subject matter, the only power it has is to dismiss the action,
as any act it performs without jurisdiction is null and void, and without any
binding legal effects. In this light, the Court finds no further need to discuss the
other grounds relied upon by petitioners in this case.
WHEREFORE, the petition is GRANTED. The Decision dated March 19, 2009 and
the Resolution dated September 3, 2009 of the Court of Appeals in CA-G.R. CV No.
86266 are hereby REVERSED and SET ASIDE. Accordingly, Civil Case No. 5881-
R is DISMISSED on the ground of lack of jurisdiction on the part of the Regional
Trial Court of Baguio City, Branch 61.
SO ORDERED.

In an action for quieting of title, the complainant is seeking for "an adjudication
that a claim of title or interest in property adverse to the claimant is invalid, to
free him from the danger of hostile claim, and to remove a cloud upon or quiet
title to land where stale or unenforceable claims or demands exist." Under
Articles 476 and 477 of the Civil Code, the two indispensable requisites in an
action to quiet title are: (1) that the plaintiff has a legal or equitable title to or
interest in the real property subject of the action; and (2) that there is a cloud on
his title by reason of any instrument, record, deed, claim, encumbrance or
proceeding, which must be shown to be in fact invalid or inoperative despite its
prima facie appearance of validity.

In this case, petitioners, claiming to be owners of the disputed property, allege

that respondents are unlawfully claiming the disputed property by using void
#11 TORTS: NEGLIGENCE
THIRD DIVISION
April 26, 2017
G.R. No. 178467
SPS. CRISTINO & EDNA CARBONELL, Petitioners, vs. METROPOLITAN BANK
AND TRUST COMPANY, Respondent.
DECISION
BERSAMIN, J.:
The petitioners assail the decision promulgated on December 7, 2006, 1 whereby
the Court of Appeals (CA) affirmed with modification the decision rendered on
May 22, 19982 by the Regional Trial Court, Branch 157, in Pasig City (RTC)
dismissing the petitioners' complaint in Civil Case No. 65725 for its lack of merit,
and awarded attorney's fees under the respondent's counterclaim.
Antecedents
The petitioners initiated against the respondent Civil Case No. 65725, an action
for damages, alleging that they had experienced emotional shock, mental anguish,
public ridicule, humiliation, insults and embarrassment during their trip to
Thailand because of the respondent's release to them of five US$ 100 bills that
later on turned out to be counterfeit. They claimed that they had travelled to
Bangkok, Thailand after withdrawing US$ l ,000.00 in US$ 100 notes from their
dollar account at the respondent's Pateros branch; that while in Bangkok, they
had exchanged five US$ 100 bills into Baht, but only four of the US$ 100 bills had
been accepted by the foreign exchange dealer because the fifth one was "no
good;" that unconvinced by the reason for the rejection, they had asked a
companion to exchange the same bill at Norkthon Bank in Bangkok; that the bank
teller thereat had then informed them and their companion that the dollar bill
was fake; that the teller had then confiscated the US$ 100 bill and had threatened
to report them to the police if they insisted in getting the fake dollar bill back; and
that they had to settle for a Foreign Exchange Note receipt.3
The petitioners claimed that later on, they had bought jewelry from a shop owner
by using four of the remaining US$100 bills as payment; that on the next day,
however, they had been confronted by the shop owner at the hotel lobby because
their four US$ 100 bills had turned out to be counterfeit; that the shop owner had
shouted at them: "You Filipinos, you are all cheaters!;" and that the incident had
occurred within the hearing distance of fellow travelers and several foreigners.
The petitioners continued that upon their return to the Philippines, they had
confronted the manager of the respondent's Pateros branch on the fake dollar
bills, but the latter had insisted that the dollar bills she had released to them were
genuine inasmuch as the bills had come from the head office; that in order to put
the issue to rest, the counsel of the petitioners had submitted the subject US$ 100
bills to the Bangko Sentral ng Pilipinas (BSP) for examination; that the BSP had
certified that the four US$100 bills were near perfect genuine notes; 4 and that
their counsel had explained by letter their unfortunate experience caused by the
respondent's release of the fake US dollar bills to them, and had demanded moral
damages of ₱10 Million and exemplary damages.5
The petitioners then sent a written notice to the respondent, attaching the BSP
certification and informing the latter that they were giving it five days within
which to comply with their demand, or face court action.6 In response, the
respondent's counsel wrote to the petitioners on March 1996 expressing
sympathy with them on their experience but stressing that the respondent could
not absolutely guarantee the genuineness of each and every foreign currency
note that passed through its system; that it had also been a victim like them; and
that it had exercised the diligence required in dealing with foreign currency notes
and in the selection and supervision of its employees.7
Prior to the filing of the suit in the RTC, the petitioners had two meetings with the
respondent's representatives. In the course of the two meetings, the latter's
representatives reiterated their sympathy and regret over the troublesome
experience that the petitioners had encountered, and offered to reinstate US$500
in their dollar account, and, in addition, to underwrite a round-trip all-expense-
paid trip to Hong Kong, but they were adamant and staged a walk-out.8
In its judgment rendered on May 22, 1998,9 the RTC ruled in favor of the
respondent, disposing as follows:
WHEREFORE, in the light of all the foregoing, judgment is hereby rendered:
1. Dismissing plaintiff’s complaint for lack of merit;
2. On the counterclaim, awarding Metrobank the amount of ₱20,000.00
as attorney's fees.
SO ORDERED.10
The petitioners appealed, but the CA ultimately promulgated its assailed decision
on December 7, 2006 affirming the judgment of the RTC with the modification of
deleting the award of attorney's fees, 11 to wit:
As to the award of attorneys fees, we agree with appellants that there is simply
no factual and legal basis thereto.
Unquestionably, appellants filed the present case for the humiliation and
embarrassment they suffered in Bangkok. They instituted the complaint in their
honest belief that they were entitled to damages as a result of appellee's issuance
of counterfeit dollar notes. Such being the case, they should not be made
answerable to attorney's fees. It is not good public policy to put a premium on the
right to litigate where such right is exercised in good faith, albeit erroneously.
WHEREFORE, the appealed decision is AFFIRMED with modification that the
award of attorney's fees is deleted.
SO ORDERED.
Issues
Hence, this appeal, with the petitioners contending that the CA gravely erred in
affirming the judgment of the RTC. They insist that inasmuch as the business of
banking was imbued with public interest, the respondent's failure to exercise the
degree of diligence required in handling the affairs of its clients showed that it
was liable not just for simple negligence but for misrepresentation and bad faith
amounting to fraud; that the CA erred in giving weight and relying on the news
clippings allegedly showing that the "supernotes" had deceived even the U.S.
Secret Service and Central Intelligence Agency, for such news were not based on
facts. 12
Ruling of the Court
The appeal is partly meritorious.
The General Banking Act of 2000 demands of banks the highest standards of
integrity and performance. As such, the banks are under obligation to treat the
accounts of their depositors with meticulous care. 13 However, the banks'
compliance with this degree of diligence is to be determined in accordance with
the particular circumstances of each case.
The petitioners argue that the respondent was liable for failing to observe the
diligence required from it by not doing an act from which the material damage
had resulted by reason of inexcusable lack of precaution in the performance of its
duties. 14 Hence, the respondent was guilty of gross negligence,
misrepresentation and bad faith amounting to fraud.
The petitioners' argument is unfounded.
Gross negligence connotes want of care in the performance of one's duties; it is a
negligence characterized by the want of even slight care, acting or omitting to act
in a situation where there is duty to act, not inadvertently but wilfully and
intentionally, with a conscious indifference to consequences insofar as other
persons may be affected. It evinces a thoughtless disregard of consequences
without exe1iing any effort to avoid them. 15
In order for gross negligence to exist as to warrant holding the respondent liable
therefor, the petitioners must establish that the latter did not exert any effort at
all to avoid unpleasant consequences, or that it wilfully and intentionally
disregarded the proper protocols or procedure in the handling of US dollar notes
and in selecting and supervising its employees.
The CA and the RTC both found that the respondent had exercised the diligence
required by law in observing the standard operating procedure, in taking the
necessary precautions for handling the US dollar bills in question, and in selecting
and supervising its employees. 16 Such factual findings by the trial court are
entitled to great weight and respect especially after being affirmed by the
appellate court, and could be overturned only upon a showing of a very good
reason to warrant deviating from them.
In this connection, it is significant that the BSP certified that the falsity of the US
dollar notes in question, which were "near perfect genuine notes," could be
detected only with extreme difficulty even with the exercise of due diligence. Ms.
Nanette Malabrigo, BSP's Senior Currency Analyst, testified that the subject dollar
notes were "highly deceptive" inasmuch as the paper used for them were similar
to that used in the printing of the genuine notes. She observed that the security
fibers and the printing were perfect except for some microscopic defects, and that
all lines were clear, sharp and well defined. 17
Nonetheless, the petitioners contend that the respondent should be liable for
moral and exemplary damages18 on account of their suffering the unfortunate
experience abroad brought about by their use of the fake US dollar bills
withdrawn from the latter.
The contention cannot be upheld.
The relationship existing between the petitioners and the respondent that
resulted from a contract of loan was that of a creditor-debtor. 19 Even if the law
imposed a high standard on the latter as a bank by vi1iue of the fiduciary nature
of its banking business, bad faith or gross negligence amounting to bad faith was
absent. Hence, there simply was no legal basis for holding the respondent liable
for moral and exemplary damages. In breach of contract, moral damages may be
awarded only where the defendant acted fraudulently or in bad faith. That was
not true herein because the respondent was not shown to have acted fraudulently
or in bad faith. This is pursuant to Article 2220 of the Civil Code, to wit:
Article 2220. Willful injury to property may be a legal ground for awarding moral
damages if the court should find that, under the circumstances, such damages are
justly due. The same rule applies to breaches of contract where defendant
acted fraudulently or in bad faith.
With the respondent having established that the characteristics of the subject
dollar notes had made it difficult even for the BSP itself as the country's own
currency note expert to identify the counterfeiting with ease despite adhering to
all the properly laid out standard operating procedure and precautions in the
handling of US dollar bills, holding it liable for damages in favor of the petitioners
would be highly unwarranted in the absence of proof of bad faith, malice or fraud
on its part. That it formally apologized to them and even offered to reinstate the
USD$500.00 in their account as well as to give them the all-expense-paid round
trip ticket to Hong Kong as means to assuage their inconvenience did not
necessarily mean it was liable. In civil cases, an offer of compromise is not an
admission of liability, and is inadmissible as evidence against the offeror. 20
Even without taking into consideration the news clippings to the effect that the
US Secret Service and Central Intelligence Agency had themselves been deceived
by the 1990 series of the US dollar notes infamously known as the "supernotes,"
the record had enough to show in that regard, not the least of which was the
testimony of Ms. Malabrigo as BSP's Senior Currency Analyst about the highly
deceptive nature of the subject US dollar notes and the possibility for them to
pass undetected.
Also, the petitioners' allegation of misrepresentation on the part of the
respondent was factually unsupported.1âwphi1 They had been satisfied with the
services of the respondent for about three years prior to the incident in
question.21 The incident was but an isolated one. Under the law, moral damages
for culpa contractual or breach of contract are recoverable only if the defendant
acted fraudulently or in bad faith, or is found guilty of gross negligence amounting
to bad faith, or in wanton disregard of his contractual obligations. 22 The breach
must be wanton, reckless, malicious or in bad faith, oppressive or abusive. 23 In
order to maintain their action for damages, the petitioners must establish that
their injury resulted from a breach of duty that the respondent had owed to them,
that is, there must be the concurrence of injury caused to them as the plaintiffs
and legal responsibility on the part of the respondent. Underlying the award of
damages is the premise that an individual was injured in contemplation of law. In
this regard, there must first be a breach of some duty and the imposition of
liability for that breach before damages may be awarded; and the breach of such
duty should be the proximate cause of the injury. 24 That was not so in this case.
It is true that the petitioners suffered embarrassment and humiliation in
Bangkok. Yet, we should distinguish between damage and injury. In The Orchard
Golf & Country Club, Inc. v. Yu, 25 the Court has fittingly pointed out the distinction,
viz.:
x x x Injury is the illegal invasion of a legal right, damage is the loss, hurt, or harm
which results from the injury; and damages are the recompense or compensation
awarded for the damage suffered. Thus, there can be damage without injury in
those instances in which the loss or harm was not the result of a violation of a
legal duty. These situations are often called dmimum absque injuria. 26
In every situation of damnum absque injuria, therefore, the injured person alone
bears the consequences because the law affords no remedy for damages resulting
from an act that does not amount to a legal injury or wrong. For instance, in BP I
Express Card Corporation v. Court of Appeals ,27 the Court turned down the claim
for damages of a cardholder whose credit card had been cancelled after several
defaults in payment, holding therein that there could be damage without injury
where the loss or harm was not the result of a violation of a legal duty towards
the plaintiff. In such situation, the injured person alone should bear the
consequences because the law afforded no remedy for damages resulting from
an act that did not
amount to a legal injury or wrong.28 Indeed, the lack of malice in the conduct
complained of precluded the recovery of damages.29
Here, although the petitioners suffered humiliation resulting from their
unwitting use of the counterfeit US dollar bills, the respondent, by virtue of its
having observed the proper protocols and procedure in handling the US dollar
bills involved, did not violate any legal duty towards them. Being neither guilty of
negligence nor remiss in its exercise of the degree of diligence required by law or
the nature of its obligation as a banking institution, the latter
was not liable for damages. Given the situation being one of damnum absque
injuria, they could not be compensated for the damage sustained.
WHEREFORE, the Court AFFIRMS the decision promulgated on December 7,
2006; and ORDERS the petitioners to pay the costs of suit.
SO ORDERED.
#12 PROPERTY: RECOVERY OF POSSESSION A and 5667-B. Then in 1994, Villanueva obtained a Free Patent over Lot No. 5667-
B and later, was issued Original Certificate of Title (OCT) No. P- 38444.
SECOND DIVISION
June 5, 2017
The heirs of Syquia asserted that Villanueva had no registrable right over Lot No.
G.R. No. 209132
5667-B and that she obtained the free patent through fraud and
misrepresentation.
HEIRS OF TERESITA VILLANUEVA, substituted by her legal heirs, namely:
ELSA ANA VILLANUEVA, LEONILA VILLANUEVA, TERESITA VILLANUEVA-
On December 14, 2006, the Regional Trial Court (RTC) of Vigan City, Ilocos Sur in
SIPIN, FERDINAND VILLANUEVA, and MARISSA VILLANUEV A-MADRIAGA,
Civil Case No. 5649-V dismissed the abovementioned complaint, the decretal
Petitioners
portion of which states:
vs.
HEIRS OF PETRONILA SYQUIA MENDOZA, represented by MILAGROS PACIS,
and the co-heirs of PETRONILA SYQUIAMENDOZA, namely, TOMAS S. WHEREFORE, for failure of the plaintiffs to prove their cause of action by
QUIRINO, represented by SOCORRO QUIRINO, VICTORIA Q. DEGADO, CESAR preponderant evidence and/or, for being barred by !aches, judgment is hereby
SYQUIA, JUAN J. SYQUIA, represented by CARLOTA (NENITA) C. SYQUIA, and rendered DISMISSING the Complaint in favor of substituted defendant heirs of
HECTOR SYQUIA, JR., acting through their Attorney-in-fact CARLOS C. Teresita C. Villanueva, namely: Elsa Ana Villanueva, Leonila Villanueva, Teresita
SYQUIA, Respondents Villanueva-Sipin, Ferdinand Villanueva and Marissa Villanueva-Madriaga.

DECISION The Complaint against defendants Provincial Environment and Natural

PERALTA, J.:
This is an appeal from the Amended Decision 1 of the Court of Appeals (CA) dated
August 29, 2013 in CA-G.R. CV No. 88873, which reversed and set aside its original
Decision2 promulgated on November 29, 2011.
Resources Officer (PENRO) and the Register of Deeds of Ilocos Sur is also
DISMISSED.
The Register of Deeds of !locos Sur is ordered to cancel the Notice of Lis Pendens
dated September 7, 2001 annotated on Transfer Certificate of Title Nos. T-
37973, T-37974, T-38278, T-38279, T-38280, T-38281, T- 38282 and T-38283,
all in the name of Teresita C. Villanueva.
There is no pronouncement as to costs.

The factual and procedural antecedents, as culled from the records of the case,
SO ORDERED.3
are as follows:
Undeterred, the heirs of Syquia elevated the case to the CA. On November 29,
The case at bar resulted from a dispute between the heirs of Petronila Syquia
2011, the appellate court denied the appeal and affirmed the" December 14, 2006
Mendoza and the heirs of Teresita Villanueva over a lot in Tamag, Vigan, Ilocos
RTC Decision.
Sur.
Consequently, the heirs of Syquia filed a Motion for Reconsideration. And, on
On September 7, 2001, the heirs of Syquia filed a Complaint for declaration of
August 29, 2013, they finally obtained a favorable decision when the CA reversed
nullity of free patent, reconveyance, and damages against Teresita Villanueva
itself and ruled against the heirs of Villanueva, to wit:
(Villanueva). They claimed that they are co-owners of Lot No. 5667 in Tamag,
Vigan City, supposedly with an area of around 5,913 square meters. They likewise
alleged that their title originated from their predecessors-in-interest, Gregorio WHEREFORE, premises considered, the Decision promulgated on November
and Concepcion Syquia, through a partition in 1950, and that they have been in 29, 2011 is RECONSIDERED and SET ASIDE, and another one PROMULGATED
open, peaceful, and uninterrupted possession of said parcel of land in the concept as follows:
of an owner for more than thirty (30) years. However, sometime in 1992,
Villanueva caused the survey and subdivision of the property into Lot Nos. 5667-
1. Declaring the Free Patent, OCT No. 38444, issued in the name of defendant-
appellee Teresita C. Villanueva, and all other derivative titles issued therefrom,
null and void ab initio;
2. Ordering the Register of Deeds of Ilocos Sur, Vigan City Station to cancel
Transfer Certificates of Title No. T-37973, T-37974, T-37976, T-37977, T-38277,
T- 38278, T-38279, T-38280, T-38281, T-38282 and T- 38283, issued in the
name of defendant-appellee Teresita C. Villanueva, and all other derivative titles
issued therefrom; and
3. Ordering defendants-appellees to pay the costs of suit.
SO ORDERED.4
Hence, the present petition.
The sole issue in this case is whether or not the heirs of Syquia are entitled to
validly recover the subject property from the heirs of Villanueva.
The Court rules in the negative.
It is a settled rule that the Supreme Court is not a trier of facts. The function of the
Court in petitions for review on certiorari under Rule 45 of the Rules of Court is
limited to reviewing errors of law that may have been committed by the lower
courts. As a matter of sound practice and procedure, the Court defers and accords
finality to the factual findings of trial courts. To do otherwise would defeat the
very essence of Rule 45 and would convert the Court into a trier of facts, which is
not its intended purpose under the law. Here, the issue is essentially factual in
nature, the determination of which is best left to the courts below, especially the
trial court.5
A petition for review under Rule 45 should only cover questions of law since
questions of fact are generally not reviewable. A question of law exists when the
doubt centers on what the law is on a certain set of facts while a question of fact
results when the issue revolves around the truth or falsity of the alleged facts. 6
For a question to be one of law, the question must not involve an examination of
the probative value of the evidence presented by any of the litigants. The
resolution of the issue must solely depend on what the law provides on the given
set of circumstances. Once it is obvious that the issue invites a review of the
evidence presented, the question posed is one of fact. 7
Thus, the test of whether a question is one of law or of fact is not the appellation
given to such question by the party raising the same; rather, it is whether the
appellate court can determine the issue raised without reviewing or evaluating
the evidence, in which case, it is a question of law; otherwise, it is a question of
fact. And it is only in exceptional circumstances that the Court admits and reviews
questions of fact.8
The rule admits of exceptions, which includes, but not limited to: (1) where the
conclusion is a finding grounded entirely on speculation, surmise, and
conjectures; (2) where the inference made is manifestly mistaken; (3) where
there is grave abuse of discretion; (4) where the judgment is based on
misapprehension of facts; and (5) the findings of fact are premised on the absence
of evidence and are contradicted by evidence on record. 9
Here, the CA's amended judgment after granting the Syquias' motion for
reconsideration is clearly based on a misapprehension of facts. Upon an
exhaustive review, the Court is compelled to yield to the findings of fact by the
trial court, as affirmed by the CA in its original decision. Here, the heirs of Syquia
filed a complaint against the Villanuevas for the reconveyance of the subject
property. From the allegations of the complaint itself, there is already serious
doubt as to the identity of the land sought to be recovered, both in area as well as
in its boundaries. Under Article 43410 of the Civil Code, to successfully maintain
an action to recover the ownership of a real property, the person who claims of
having a better right to it must prove two (2) things: first, the identity of the land
claimed and second, his title to the same. 11
While the complaint identified the land as Lot No. 5667, Cad 313-D, Vigan
Cadastre located in Tamag, Vigan, Ilocos Sur, it cited Tax Declaration No. 39-
013194-A as part of the supporting evidence. Based on the records, however, Lot
No. 5667 has an area of 9,483 square meters, while the riceland mentioned in the
tax declaration has an area of only 5,931 square meters. As to why the area in the
tax declaration had suddenly increased to almost twice its original size, the heirs
of Syquia failed to sufficiently justify during the trial. In fact, the trial court
wondered why the Syquias never tried to offer an explanation for said substantial
discrepancy. But what is more perplexing is the fact that Lot No. 5667-B, the
actual property covered by Villanueva's free patent which the heirs of Syquia
have been trying to recover, is only 4,497 square meters in area. Thus, the Court
is placed in a serious quandary as to what the Syquias are really seeking to
recover, the 9,483-square-meter lot in their complaint (the whole of Lot No.
5667), the 5,931-square-meter riceland in their supporting document (tax
declaration), or the 4,497-square-meter property covered by the free patent
which they are attacking as null and void (Lot No. 5667-B)?
They likewise failed to prove with sufficient definiteness that the boundaries of
the property covered by Tax Declaration No. 39-013194-A are the exact same
boundaries surrounding Lot No. 5667-B or even those around Lot No. 5667. Lot
No. 5667 has the following boundaries:
Lot No. 5663, North
Lot No. 5666, South
Quirino Boulevard, East
Lot No. 6167, West
Lot No. 5667-B has the same aforementioned boundaries, except for the South,
which shows Lot No. 5667-A. On the other hand, the tax declaration states the
following:
Maria Angco, North
Heirs of Esperanza Florentino, South
Provincial Road, East
Colun Americano, West
The heirs of Syquia never adduced evidence tending to prove that Lot No. 5663
refers to Maria Angco, that Lot No. 5666 or that Lot No. 5667-A pertains to the
heirs of Esperanza Florentino, that Quirino Boulevard is Provincial Road, and that
Lot No. 6167 is Colun Americano.
The CA, in its Amended Decision, tried to justify its new ruling by explaining that
since Lot No. 5667 had already been subdivided into two (2) lots, the boundaries
and size of the property, as reflected in the tax declaration, would no longer
match the boundaries and size of the lot covered by the free patent, which is Lot
No. 5667-B, to wit:
x x x Resultantly, with the subdivision of plaintiffs-appellants' Lot No. 5667 into
two (2) lots, the boundaries and area as stated in plaintiffs-appellants' Tax
Declaration would no longer match with the boundaries and area as stated in
the Free Patent No. 38444 subsequently issued in favor of defendant-appellee
Villanueva. 12
What the CA failed to mention, however, was if said boundaries and area in the
tax declaration had actually matched those of either Lot No. 5667-B or Lot No.
5667 prior to its subdivision.
The appellate court heavily relied on the following documents which the heirs of
Syquia submitted: (a) B.L. Form No. V-37 of Lot No. 5667; (b) the Sketch Plan of
Lot No. 5667, Cad 313-D; and (c) the Relocation Plan of Lot No. 5667, all of which
the CA found to have adequately established Lot No. 5667's metes and bounds.
The Syquias also presented the Final Project of Partition dated June 13, 1950 in
the settlement of the estate of Concepcion J. Vda. de Syquia, which mentioned the
exact same boundaries of the property in the tax declaration. Based on the same,
the CA concluded that "the above-described property in the said Final Project of
Partition pertains to plaintiffs-appellants' Lot No. 5667, which is the subject
property in this case." 13 But as to how it arrived at said conclusion, despite the
blatantly differing boundaries and lot areas, the appellate court was deafeningly
silent.
The CA went further and stated that while the tax declaration was issued in 1949,
it was only in 1981 when the Cadastral Survey of Tamag, Vigan, Ilocos Sur was
approved. In those thirty-two (32) years of interregnum, "it is possible that the
names of the boundary owners and metes, pertaining not only to plaintiffs-
appellants' Lot No. 5667 but also to other unregistered lots in Tamag, Vigan,
Ilocos Sur which were also covered by early tax declarations, would have already
changed."14 While such pronouncement seems logical and reasonable, it remains
hypothetical since the same is merely based on mere surmises or conjectures.
The harsh truth still stands that the heirs of Syquia failed to justify the substantial
disparities in the boundaries and sizes with sufficient evidence. No actual proof
was ever offered to show that said possibility had actually turned out to become
a reality.
The CA itself stated that" the tax declaration could not be expected to be as
accurate, in terms of boundaries and actual area, as compared to those found in
the Vigan Cadastral Survey, since the latter was the result of an actual and
methodological survey and plotting of all unregistered lands situated in Tamag,
Vigan, Ilocos Sur." 15 However, as aptly observed by the RTC, even after the
survey, there was no indication that the heirs of Syquia ever tried to have the data
in the tax declaration corrected so as to conform with the supposedly more
accurate information in the cadastral survey. Neither was there any explanation
to warrant the lack of attempt to make said necessary corrections.
To recapitulate, the heirs of Syquia failed to adequately prove that the area of
their property in the tax declaration coincides with the area of either Lot 5667-B
which is 4,497 square meters or Lot 5667 which is 9,483 square meters. They
likewise failed to show, based on the boundaries, that the lot they claim to have
inherited is actually either Lot 5667-B, the property in dispute, or Lot 5667, the
cadastral survey of which lists the Syquias as claimants. Certainly, the Syquias
were not able to identify their land with that degree of certainty required to
support their affirmative allegation of ownership.
Simply put, the party who alleges a fact has the burden of proving it. Section 1,
Rule 131 of the Rules of Court provides that the burden of proof is the duty of a
party to prove the truth of his claim or defense, or any fact in issue by the amount
of evidence required by law. 16 In civil cases, the burden of proof rests upon the
plaintiff, who is required to establish his case by a preponderance of evidence. 17
Section 1, Rule 133 of the Rules of Court provides for the quantum of evidence for
civil actions, and delineates how preponderance of evidence is determined, viz.:
Section 1. In civil cases, the party having the burden of proof must establish his
case by a preponderance of evidence. In determining where the preponderance
or superior weight of evidence on the issues involved lies, the court may
consider all the facts and circumstances of the case, the witnesses' manner of
testifying, their intelligence, their means and opportunity of knowing the facts
to which they are testifying, the nature of the facts to which they testify, the
probability or improbability of their testimony, their interest or want of
interest, and also their personal credibility so far as the same may legitimately
appear upon the trial. The court may also consider the number of witnesses,
though the preponderance is not necessarily with the greater number.
As the rule indicates, preponderant evidence refers to evidence that is of greater
weight, or more convincing, than the evidence offered in opposition to it. It is
proof that leads the trier of facts to find that the existence of the contested fact is
more probable than its non-existence. 18
In the instant case, aside from the tax declarations covering an unirrigated
riceland in Tamag, Vigan, the Syquia heirs failed to present any other proof of
either ownership or actual possession of the lot in question, or even a mere
indication that they exercised any act of dominion over the property. In fact, they
were not able to show that they have been in actual possession of the property
since they allegedly inherited the same in 1992. The Syquias' own evidence would
reveal that several houses have been constructed on the lot and third persons
have actually been occupying the subject property, despite the presence of their
supposed caretaker.
Well settled is the rule that tax declarations and receipts are not conclusive
evidence of ownership or of the right to possess a land when not supported by
any other evidence. The fact that the disputed property may have been declared
for taxation purposes in the names of the applicants for registration or of their
predecessors-in-interest does not necessarily amount to ownership. These are
merely indicia of a claim of ownership. 19
Findings of fact made by a trial court are accorded the highest degree of respect
by an appellate tribunal and, absent a clear disregard of the evidence before it
that can otherwise affect the results of the case, those findings should not simply
be ignored. Absent any clear showing of abuse, arbitrariness, or capriciousness
committed on the part of the lower court, its findings of facts are binding and
conclusive upon the Court.20 The reason for this is because the trial court was in
a much better position to determine which party was able to present evidence
with greater weight.21
The Court gives the highest respect to the RTC's evaluation of the testimony of
the witnesses, considering its unique position in directly observing the demeanor
of the witnesses on the stand. From its vantage point, the trial court is in the best
position to determine the truthfulness of witnesses. It is established that the
evaluation of the credibility of witnesses and their testimonies is a matter best
undertaken by the trial court because of its unique opportunity to observe the
witnesses firsthand and to note their demeanor, conduct, and attitude under
grueling examination. These are important in determining the truthfulness of
witnesses and in unearthing the truth, especially in the face of conflicting
testimonies. Indeed, the emphasis, gesture, and inflection of the voice are potent
aids in ascertaining the witness's credibility, and the trial court has the best
opportunity to take advantage of the same. Said aids, unfortunately, cannot be
incorporated in the records. Therefore, all that is left for the appellate courts to
utilize are the cold words of the witnesses contained in a transcript, with the risk
that some of what the witnesses actually said may have been lost in the process
of transcribing. As stated by an American court, there is an inherent impossibility
of determining with any degree of accuracy what credit is justly due to a witness
from merely reading the words spoken by him, even if there were no doubt as to
the identity of the words. However artful a corrupt witness may be, there is
generally, under the pressure of a skillful cross-examination, something in his
manner or bearing on the stand that betrays him, and thereby destroys the force
of his testimony. Many of the real tests of truth by which the artful witness is
exposed, in the very nature of things, cannot be transcribed upon the record, and
hence, they can never be appreciated and considered by the appellate courts.22
Here, based on the evidence presented during the trial, the R TC found nothing
that would bare any grave abuse of discretion on the part of the Department of
Environment and Natural Resources (DENR) when it issued the free patent in
Villanueva's favor. The records show that Villanueva submitted, in compliance
with the requirements of the DENR, a Waiver of Right by the former owner of the
property. Likewise, the Syquias' own evidence, through Imelda Tabil, Land
Management Officer of the DENR, established that at the time Villanueva filed her
application, the land was investigated upon and there was no other claimant over
the lot. As regards the Syquias' apprehension that Villanueva's free patent title
was based on a verification survey of another lot rather than of the lot applied
for, Engineer Raymundo Gayo, then Officer-in-Charge at the Laoag Community
Environment and Natural Resources Office, testified that an applicant may also
present a verification survey of the adjacent lot which is already titled as long as
an approved technical description would likewise be submitted. Also, the
erasures in the technical description would not affect the subject lot since it is the
approved survey plan which must prevail in case of erasures.

Even assuming, without admitting, that Villanueva's evidence to support her title
is weak, the heirs of Syquia could not successfully capitalize on the same. The
Court reiterates for emphasis that in an action to recover, the plaintiff must rely
on the strength of his title and not harp on the weakness of the defendant's
claim.23 Again, in civil cases, the burden of proof rests upon the plaintiff, who is
required to establish his case by a preponderance of evidence. 24 Here,
unfortunately for the heirs of Syquia, they miserably failed in discharging the
heavy burden required of them.

After a review of the records of the case, the Court finds the totality of evidence
submitted by the heirs of Syquia insufficient to establish the crucial facts that
would justify a judgment in their favor. 25 Thus, the Court finds no justifiable
reason to deviate from the findings and ruling of the trial court.

WHEREFORE, IN VIEW OF THE FOREGOING, the Court GRANTS the petition,

and REVERSES and SETS ASIDE the Amended Decision of the Court of Appeals
dated August 29, 2013 in CA-G.R. CV No. 88873 and REINSTATES its original
Decision dated November 29, 2011, which affirmed the December 14, 2006
Decision 26 of Regional Trial Comi, Branch 21, of Vigan City, Ilocos Sur.

SO ORDERED.
#13 PROPERTY ACCION PUBLICIANA
THIRD DIVISION
June 7, 2017
G.R. No. 205283
ABIGAIL L. MENDIOLA, Petitioner vs. VENERANDO P. SANGALANG,
Respondent
DECISION
TIJAM, J.:
Assailed in this Petition for Review 1 under Rule 45 are the Decision 2 dated March
23, 2012 and Resolution 3 dated January 15, 2013 of the Court of Appeals 4 (CA)
in CA-G.R. CV No. 91072 which affirmed the Decision5 of the Regional Trial Court
(RTC) 6 , Branch 218 in Quezon City, dismissing petitioner's accion publiciana for
failure to prove the better right of possession.
The Antecedent Facts
The property subject of the instant controversy is a parcel of land located at No.
104 Maginhawa Street, Brgy. Teachers Village East, Diliman, Quezon City, on
which a residential house and a four-door, one-storey commercial building were
built. Said property was originally registered in the name ofHonorata G.
Sangalang (Honorata). 7
Honorata had two siblings, Sinforosa and Angel. Sinforosa had three children,
petitioner Abigail Mendiola, Vilma Aquino (Vilma) and Azucena De Leon; while
Angel begot four children, respondent V enerando, Ma. Lourdes, AngeFno and
Fernando, all surnamed Sangalang. Sinforosa and Angel predeceased Honorata,
and on May 31, 1994, Honorata herself died intestate without any issue. 8
While Honorata was still alive, one-half of the residential house of the subject
property was being used by petitioner and the other half by Vilma's son. The
commercial building, on the other hand, was being leased to third persons. This
set-up continued until after Honorata's death. 9
In 2003, respondent and his siblings discovered that the subject property was
already registered in the names of petitioner and Vilma. Upon verification, they
discovered that the title over the property had been transferred in favor of
petitioner and Vilma by virtue of a Deed of Sale dated January 29, 1996
purportedly executed by Honorata in their favor. Consequently, a new title, TCT
No. N-148021 10 , was issued in the names 11 of petitioner and Vilma.
It was around this time, or in July 2003, after Vilma's son left the residential
house, that respondent, allegedly without asking permission from the petitioner
or Vilma and with the use of force and violence upon things, broke open the door
of the unit and had since detained the same. 12
On April 11, 2005, petitioner and Vilma demanded that respondent vacate the
unit but the latter refused to do so. 13 the dispute was referred to the barangay
for conciliation but no settlement was reached. 14 consequently, on October 18,
2005, petitioner and Vilma commenced their complaint 15 for accion publiciana
against respondent for the latter to return the illegally occupied unit and to pay
reasonable rental therefor.
The Ruling of the RTC
On November 15, 2007, the RTC rendered its Decision 17 dismissing the
complaint. The trial court noted that since respondent raised the defense of co-
ownership, the case was converted from accion publiciana to accion
reivindicatoria. It further noted that since it is undisputed that the parties are all
heirs of Honorata, then they all have an equal right thereto. Finally, the trial court
noted that the resolution of the criminal complaint for falsification lodged by
respondent against the petitioner and Vilma constitutes a prejudicial question to
the complaint. 18
The RTC thus disposed:
WHEREFORE, finding that the plaintiffs failed to discharge their burden of proof
that they have better right to the property in dispute, the complaint is hereby
DISMISSED. However, plaintiffs are ordered to pay, jointly and severally, the
defendant, the amount of ₱l0,000.00 as and by way of attorney's fees.
SO ORDERED. 19
Petitioner and Vilma's motion for reconsideration was similarly rebuffed by the
trial court. 20 Undaunted, they elevated the case to the CA on appeal raising as
sole error the trial court's conversion of the complaint from accion publiciana to
accion reivindicatoria and in consequently ruling in favor of respondent. They'
insisted that they do not seek to recover ownership of the subject property but
merely its possession. 21
The Ruling of the CA
The CA denied the appeal. 22 While the appellate court disagreed with the trial
court when it converted the complaint to accion reivindicatoria, it nevertheless
agreed with the trial court when it dismissed the complaint for accion publiciana,
for failure to prove the better right of possession. In provisionally passing upon
the issue of ownership to resolve the issue of possession, the CA held that the
parties, being co-owners pro indiviso of the subject property, have equal right to
possess the same. 23
Accordingly, the CA disposed:
WHEREFORE, premises considered, the instant appeal is DISMISSED. The
decision of the RTC of Quezon City, Branch 218 dated 15 November 2007 is
AFFIRMED, not because the case was deemed converted to an accion
reivindicatoria but for the reason that plaintiffs-appellants failed to prove that
they have the better right of possession over the property.
SO ORDERED. 24
Petitioner and Vilma's motion for reconsideration suffered the same rejection
from the CA. 25 Hence, the instant petition filed solely by the petitioner.
The Issue
The point of inquiry is whether the petitioner has the better right of possession
over the subject property as to successfully evict respondent.
The Ruling of this Court
The petition is devoid of merit.
In arriving at its identical pronouncement that petitioner failed to prove her
better right of possession, the RTC and the CA passed upon the parties' respective
claim of ownership, a procedure that is sanctioned under Section 16, 26 Rule 70.
It is settled that the issue of ownership may be resolved only to determine the
issue of possession.
To prove their right of possession, petitioner and Vilma harp on their claim as
registered owners while respondent claims entitlement thereto as a co-
heir.1âwphi1 We find no error when the RTC and the CA decided the case in favor
of respondent.
In this case, it is undisputed that the Deed of Sale, through which ownership over
the property had been purportedly transferred to the petitioner and Vilma, was
executed in 1996. However, it is perfectly obvious that Honorata could not have
signed the same as she passed away as early as 1994. If any, Honorata's signature
thereon could only be a product of forgery. This makes the Deed of Sale void and
as such, produces no civil effect; and it does not create, modify, or extinguish a
juridical relation:
The Court cannot simply close its eyes against such patent defect on the argument
that registered owners of a property are entitled to its possession.
While it is true that petitioner and Vilma have in their favor a Torrens title over
the property, it is nonetheless equally true that they acquired no right under the
void Deed of Sale. Indeed, when the instrument presented is forged, even if
accompanied by the owner's duplicate certificate of title, the registered owner
does not thereby lose his title, and neither does the assignee in the forged deed
acquire any right or title to the property. 27
In Spouses Reyes v. Montemayor, 28 the Court explains:
Insofar as a person who fraudulently obtained a property is concerned, the
registration of the property in said person's name would not be sufficient to vest
in him or her the title to the property. A certificate of title merely confirms or
records title already existing and vested. The in defeasibility of the Torrens"title
should not be used as a means to perpetrate fraud against the rightful owner of
real property. Good faith must concur with registration because, otherwise,
registration would be an exercise in futility. A Torrens title does not furnish a
shield for fraud, notwithstanding the longstanding rule that registration is a
constructive notice of title binding upon the whole world. The legal principle is
that if the registration of the land is fraudulent, the person in whose name the
land is registered holds it as a mere trustee. 29 Neither can the argument that a
certificate of title is not subject to collateral attack would persuade us to rule
otherwise. With the determination that petitioner and Vilma's title is void, the
issue as to whether it is subject to direct or collateral attack is no longer relevant.
Settled is the rule that an action to declare the nullity of a void title does not
prescribe and is susceptible to direct, as well as to collateral attack. 30 Hence,
respondent is not precluded from questioning the validity of the petitioner and
Vilma's title in the accion publiciana. 31 A necessary and logical consequence of
the foregoing pronouncements is that, title over the property remained in the
name of Honorata as original registered owner thereof. By theory of succession,
petitioner and respondent are co-owners of the property and equally entitled to
possession thereof, either de facto or de Jure. As such, petitioner and Vilma had
no right to exclude respondent from enjoying possession thereof through a
possessory action. Finally, there being no further argument against the award of
attorney's fees,We have no resort but to affirm the same.
WHEREFORE, the petition is DENIED. The Decision dated March 23, 2012 and
Resolution dated January 15, 2013 of the Court of Appeals in CA G.R. CV No. 91072
dismissing petitioner's complaint for accion publiciana and awarding attorney's
fees in respondent's favor are AFFIRMED in toto.

SO ORDERED.
#14 TORTS: MORAL AND EXEMPLARY DAMAGES
THIRD DIVISION
June 21, 2017
G.R. No. 190043
SANTOS-YLLANA REALTY CORPORATION, Petitioner vs. SPOUSES RICARDO
DEANG and FLORENTINA DEANG, Respondents
DECISION
VELASCO, JR., J.:
Nature of the Case
This petition for review under Rule 45 of the Rules of Court seeks to reverse and
set aside the June 17, 2009 Decision 1 and October 13, 2009 Resolution 2 of the
Court of Appeals (CA) in CA-G.R. CV No. 65768 entitled "Sps. Ricardo Deang and
Florentina Deang v. Santos-Yllana Realty Corp., et. al.," which affirmed, with
modification, the September 16, 1999 Decision 3 of the Regional Trial Court (RTC)
of Manila, Branch 44 in Civil Case No. 98-90087, finding petitioner Santos-Yllana
Realty Corporation liable for damages to the respondents spouses Ricardo Deang
and Florentina Deang.
Factual Antecedents
Respondent Florentina Deang (Florentina), doing business under the name and
style of "Rommel Dry Goods," is a former lessee of Stall No. H-6 at Santos-Yllana
Shopping Center, which is located on Miranda Street, Angeles City, Pampanga,
and owned and operated by petitioner since 197 5. Respondent Florentina Deang
(Florentina), doing business under the name and style of "Rommel Dry Goods," is
a former lessee of Stall No. H-6 at Santos-Yllana Shopping Center, which is located
on Miranda Street, Angeles City, Pampanga, and owned and operated by
petitioner since 197 5.
Due to Florentina's failure to pay her rents and other charges due on the rented
stall, petitioner filed a Complaint for Ejectment with Damages against
respondents before the Metropolitan Trial Court (MTC) of Angeles City on August
11, 1997. The case was raffled to Branch 1 of the Angeles City MTC and docketed
as Civil Case No. 97-311. On October 16, 1997, the MTC rendered a Decision based
on a Compromise Agreement that the parties executed. 4
On January 16, 1998, petitioner filed a Motion for Execution of the October 16,
1997 Decision due to Florentina' s failure to comply with the terms of the
Compromise Agreement. Respondents objected, alleging that the amount due to
petitioner had already been paid in full. After resolving the objections, the
Angeles City MTC issued an Order on February 20, 1998 granting the issuance of
the Writ of Execution, and the same was accordingly issued. 5
Respondents moved to quash the Writ of Execution on February 26, 1998. On
even date, Sheriff Allen Sicat (Sheriff Sicat) of the Regional Trial Court (RTC) of
Angeles City implemented the Writ of Execution and padlocked respondents'
stall. The stall, however, was ordered reopened by the MTC within the same day
due to the pendency of the Motion for Reconsideration. 6
During the hearings on the Motion for Reconsideration, respondents reiterated
their claim that they had already paid the rental arrearages and other fees and
charges due to petitioner; hence, the Motion for Execution should be rendered
moot and academic.7 On June 3, 1998, the Angeles MTC issued an Order upholding
the Writ of Execution and commanding the sheriff to immediately implement the
same. Consequently, on June 5, 1998, Daniel Pangan, Sheriff III of the MTC (Sheriff
Pangan), implemented the writ and padlocked respondents' stall, viz:
Whereas, on June 5, 1998, the undersigned implemented the said Writ of
Execution by padlocking the subject premises in question located at H-6 Santos-
Yllana Shopping Center, Miranda St., Angeles City, together with the
representative of the [petitioner] on the same date (June 5, 1998) the
undersigned officially turned-over the subject premises to the plaintiff, duly
acknowledged receipt by the plaintiff's representative, Juanita de Nucum. 8
Aggrieved by the implementation of the Writ of Execution, respondents filed a
Complaint for Damages with Prayer for Injunctive Relief against petitioner and
Sheriffs Sicat and Pangan before the Manila R TC, Branch 44, alleging that the Writ
of Execution was illegally implemented. They claim to have suffered damages as
a result of the illegal closure of their stall since important documents, checks,
money, and bank books, among others, were locked inside the stall and could not
be retrieved, thereby preventing them from operating their business, and causing
their business to suffer and their goodwill to be tarnished. Respondents, thus,
prayed that judgment be rendered ordering petitioner to pay them ₱500,000 as
actual damages, P250,000 as moral damages, ₱250,000 as exemplary damages,
and ₱l00,000 as attorney's fees, plus ₱3,000 per appearance fee per hearing. 9
Ruling of the RTC
The trial court observed that the undue haste by which the Angeles MTC issued
the Writ of Execution violated respondents' right to due process and to question
the propriety of the issuance of the Writ. Consequently, it held that the
enforcement of the Writ was tainted with malice and bad faith on the part of
petitioner. 10 Due to the illegal closure of their business, respondents' personal
properties were detained inside the stall, causing them to incur actual damages
and unrealized profit derived from daily sales of ₱l,000 or a total amount of
₱500,000. Accordingly, the RTC of Manila, Branch 44 rendered a Decision, 11
finding for respondents and adjudged petitioner, as well as Sheriffs Sicat and
Pangan, jointly and severally liable for the damages being claimed. The trial court
disposed of the case in this wise:
WHEREFORE, in view of the foregoing, and the case having been proved by
preponderance of evidence, this Court renders judgment by ordering the
defendants jointly and severally, to pay plaintiffs the following, to wit:
1. Actual damages in the amount of Five Hundred Thousand
(₱500,000.00) Pesos;
2. Moral Damages in the amount of Two Hundred Fifty Thousand
(₱250,000.00) Pesos; 3. Exemplary Damages in the amount of Two
Hundred Fifty Thousand (₱250,000.00) Pesos;
4. Attorney's Fees in the amount of ₱l00,000.00, plus ₱3,000.00
appearance fee;
5. Plus costs of suit.
SO ORDERED. 12
Dissatisfied, petitioner elevated the ruling on appeal.
Ruling of the CA
Echoing the observation of the R TC, the CA found that the sheriffs failed to
observe the notice requirement mandated under Section 10(c) 13 of Rule 39 in the
implementation of the Writ of Execution. The CA ruled that regardless of whether
petitioner was adjudged rightfully entitled to the possession of the stall, the
sheriffs are mandated to observe due process prescribed in the afore-stated Rule
in ejecting respondents. 14 The appellate court, however, relieved petitioner from
any fault arising out of the manner of implementation of the Writ of Execution.
Aside from being the successful party-litigant in the ejectment case, the CA noted
that there was no showing that petitioner was complicit with the sheriffs'
implementation of the Writ. 15
Despite the foregoing findings, the CA adjudged petitioner liable for damages to
respondents. Except for the actual damages awarded, which were found to be
unsubstantiated, the CA sustained the rest of the damages awarded by the trial
court. The decretal portion of the CA Decision reads:
WHEREFORE, in view of the foregoing, the September 16, 1999 Decision of the
Regional Trial Court (RTC) of Manila, Branch 44, in Civil Case No. 98-90087 is
AFFIRMED with MODIFICATION in that the award for actual damages is hereby
DELETED for insufficiency of evidence and the award for moral damages is
reduced from ₱250,000.00 to ₱l00,000.00; the exemplary damages, from
₱250,000.00 to ₱100,000.00 and the attorney's fees, from ₱100,00.00 to
₱50,000.00
SO ORDERED.
Petitioner moved for, but was denied, reconsideration in the CA's October 13,
2009 Resolution.1âwphi1 Hence, this petition.
Relying on the CA' s pronouncement in the adverted Decision that it "cannot
ascribe any fault on the part of [petitioner] as to the manner of implementing the
writ," and that "records is bereft of any showing that the defendant-appellant
corporation has a hand in the non-compliance with the notice requirement
mandated by law,"16 petitioner asserts that it cannot be charged jointly and
severally with Sheriffs Sicat and Pangan for any damage caused upon
respondents due to the implementation of the Writ of Execution. Prescinding
from this conclusion, the damages awarded, according to petitioner, do not find
support in the body of the decision.
In their Comment 17 on the petition, respondents assert that the sheriffs' acts
were upon the order and/or instruction of petitioner, who later benefited from
them.
Respondents further appeal for the Court to reinstate the award of actual
damages and reimpose the amounts of moral and exemplary damages and
attorney's fees fixed in the RTC's Decision.
Petitioner, in its Reply 18 to respondents' Comment, reiterates its earlier
asseverations that it did not have a hand in the implementation of the writ of
execution, and further argues that the CA's Decision as to damages had become
final and can no longer be modified or altered as nowhere in the records does it
show that respondents moved for reconsideration or filed an appeal of the said
Decision.
Issue
Succinctly, the sole issue for the resolution of this Court is whether or not the CA
erred in sustaining the moral and exemplary damages awarded, including
attorney's fees, despite its finding that petitioner had no participation in the
implementation of the Writ of Execution.
Ruling of the Court
The petition is meritorious. The joint and solidary liability of petitioner has no
factual and legal basis.
It is undisputed that petitioner succeeded in securing a favorable judgment in the
ejectment case; therefore, it was well within its right to move for the execution of
the MTC's Decision pursuant to Sec. 19, Rule 70 of the Rules of Court. The rule
allows for the immediate execution of judgment in the event that judgment is
rendered against the defendant in an unlawful detainer or forcible entry case,
provided that certain conditions are met, viz:
Section 19. Immediate execution of judgment; how to stay same. - If judgment is
rendered against the defendant, execution shall issue immediately upon motion
unless an appeal has been perfected and the defendant to stay execution files a
sufficient supersedeas bond, approved by the Municipal Trial Court and executed
in favor of the plaintiff to pay the rents, damages, and costs accruing down to the
time of the judgment appealed from, and unless, during the pendency of the
appeal, he deposits with the appellate court the amount of rent due from time to
time under the contract, if any, as determined by the judgment of the Municipal
Trial Court. In the absence of a contract, he shall deposit with the Regional Trial
Court the reasonable value of the use and occupation of the premises for the
preceding month or period at the rate determined by the judgment of the lower
court on or before the tenth day of each succeeding month or period. The
supersedeas bond shall be transmitted by the Municipal Trial Court, with the
papers, to the clerk of the Regional Trial Court to which the action is appealed.
Petitioner clearly elected to exercise its right under the aforestated provision;
thus, its move to execute the MTC judgment enjoys the disputable presumption
under Sec. 3(ff), 19 Rule 131 of the Revised Rules on Evidence that it obeyed the
applicable law and rules in doing so.
We have, in Philippine Agila Satellite Inc. v. Usec. TrinidadLichauco, 20 elucidated
that "a civil complaint for damages necessarily alleges that the defendant
committed a wrongful act or omission that would serve as basis for the award of
damages." As such, it was incumbent upon respondents to overcome the
aforestated presumption and to prove that petitioner abused its rights and
willfully intended to inflict damage upon them before they can claim damages
from the former. Otherwise, having the sole prerogative to move to execute the
judgment, the disputable presumption that petitioner is innocent of wrongdoing
against respondents prevails.
A reading of the RTC's judgment shows that it was not conclusively proved that
petitioner committed bad faith or connived with the sheriffs in the
implementation of the Writ. Moreover, no less than the CA, in the body of its
Decision, absolved petitioner from any fault and participation in the injury
inflicted upon respondents by reason of the haphazard implementation of the
Writ of Execution. The CA said:
Having enforced the writ of execution with undue haste and without giving
[respondents] the required prior notice and reasonable time to vacate the subject
stall, it is then safe to say that defendants-appellants sheriffs had indeed [run]
afoul to the mandate of Section 10 (c) of Rule 3 9 of the Rules of Court. As a result,
[respondents] suffered damages and the reputation of the judicial system is
sullied by the isolated acts of a few (Deang vs. Sicat, 446 SCRA 22, 32 [2004]).
On this score, we cannot ascribe any fault on the part of [petitioner] corporation
as to the manner of implementing the writ. As it is, the said corporation is the
winning party in the ejectment case. Just like any others, it only desired the
immediate execution of the judgment of the court, which was rendered favorable
to them. Records is bereft of any showing that defendant-appellant [had] a hand
in the non-compliance with the notice requirement mandated by law. 21
(emphasis supplied)
The CA's pronouncement is manifestly incongruent with the disposition of the
case as stated in the fallo of the assailed Decision. The Court is not unmindful of
the rule that "the operative part in every decision is the dispositive portion or the
fallo, and where there is conflict between the fallo and the body of the decision,
the fallo controls.22 However, the rule is not without exception. Where the
inevitable conclusion from the body of the decision is so clear as to show that
there was a mistake in the dispositive portion, the body of the decision will
prevail. 23
This case falls squarely under the exception. The CA's own categorical finding, as
embodied and discussed in the body of the adverted decision, negates any
liability on the part of petitioner to compensate respondents for the injuries they
suffered due to the misconduct and culpability of Sheriffs Sicat and Pangan, for
which they were accordingly administratively charged and disciplined. 24 To hold
petitioners liable for damages, despite having been categorically absolved, is
manifestly unjust and inequitable.
Applying the foregoing disquisition in the present case,We cannot sustain the
judgment affirming petitioner's liability for damages to respondents.
Moral damages are awarded to enable the injured party to obtain means,
diversions, or amusements that will serve to alleviate the moral suffering he has
undergone, by reason of the defendant's culpable action. 25 For a claim for moral
damages to prosper, the claimant must prove that: (1) first, there must be an
injury, whether physical, mental or psychological, clearly sustained by the
claimant; (2) second, there must be culpable act or omission factually
established; (3) third, the wrongful act or omission of the defendant is the
proximate cause of the injury sustained by the claimant; and (4) fourth, the award
of damages is predicated on any of the cases stated in Article 2219 26 of the Civil
Code. 27

As discussed, the culpable act or omission on the part of petitioner that resulted
in injury to respondents was not factually established.

The Court likewise cannot affirm petitioner's liability for exemplary damages,
attorney's fees, and cost of suit. The award of exemplary damages is proper only
if respondents showed their entitlement to moral, temperate or compensatory
damages; yet, similar to the moral damages claimed, respondents were not able
to establish their entitlement. Anent the liability of petitioners for attorney's fees
and cost of suit, the same must similarly be deleted in light of the reversal of
judgment as to them.

Regrettably, the execution of the MTC judgment was tainted with irregularities
that resulted in damage to respondents. Nevertheless, under the principle of
damnum absque injuria, the legitimate exercise of a person's rights, even if it
causes loss to another, does not automatically result in an actionable injury. 28
Petitioner must not bear the brunt of the sheriffs' misconduct in the absence of
evidence that the latter acted upon its instructions to ignore the rules of
procedure in implementing the Writ.

Anent the liability of Sheriffs Sicat and Pangan to respondents, records do not
disclose if the former questioned the Decision of the CA before this Court. As such,
the judgment against them stands.

WHEREFORE, the petition is hereby GRANTED. The June 17, 2009 Decision and
October 13, 2009 Resolution of the Court of Appeals in CA-G.R. CV No. 65768 are
hereby AFFIRMED with MODIFICATION. The joint and solidary liability of
petitioner Santos-Yllana Realty Corporation is hereby DELETED.

No pronouncement as to costs.

SO ORDERED.
#15 OBLICON: LOAN
SECOND DIVISION
JUN 21, 2017
G.R. No. 228435
KT CONSTRUCTION SUPPLY, INC., represented by WILLIAM GO, Petitioner
vs.< PHILIPPINE SAVINGS BANK, Respondent
DECISION
MENDOZA, J.:
This petition for review on certiorari seeks to reverse and set aside the April 22,
2016 Decision1 and November 23, 2016 Resolution 2 of the Court of Appeals (CA)
in CA-G.R. CV No. 103037, which affirmed with modification the June 11, 2014
Decision 3 of the Regional Trial Court, Branch 133, Makati(RTC)City.
On October 12, 2006, petitioner KT Construction Supply, Inc. (KTConstruction)
obtained a loan from respondent Philippine Savings Bank (PSBank) in the amount
of ₱2.5 million. The said loan was evidenced by aPromissory Note4 executed on
the same date. The said note was signed by William K. Go (Go) and Nancy Go-Tan
(Go-Tan) as Vice-President/General Manager and Secretary/Treasurer of KT
Construction, respectively. In addition, both Go and Go-Tan signed the note in
their personal capacities.
The promissory note stipulated that the loan was payable within a period of sixty
(60) months from November 12, 2006 to October 12, 2011. In addition, the said
note provided for the payment of attorney's fees in case of litigation.
On January 3, 2011, PSBank sent a demand letter to KT Construction asking the
latter to pay its outstanding obligation in the amount of ₱725,438.81, excluding
interest, penalties, legal fees, and other charges. For its failure to pay despite
demand, PSBank filed a complaint for sum of money against KT Construction.
The RTC Ruling
In its June 11, 2014 Decision, the RTC ruled in favor of PSBank. It opined that the
promissory note expressly declared that the entire obligation shall immediately
become due and payable upon default in payment of any installment. The trial
court, nevertheless, reduced the interest rate and stipulated interest fees for
being unconscionable. Thus, it declared KT Construction, Go and Go-Tan solidary
liable and it ordered them to pay PSBank the loan in the amount of ₱725,438.81
subject to twelve percent (12%) interest per annum and ₱50,000.00 as attorney's
fees. The fallo reads:
WHEREFORE, judgment is hereby rendered in favor of the plaintiff Philippine
Savings Bank and against the defendant KT Construction Supply, Inc.,
represented by William Go and Nancy Go Tan, ordering the defendant to pay the
plaintiff, jointly and severally, the following:
1.) The amount of Seven Hundred Twenty Five Thousand Four Hundred Thirty
Eight Pesos and 81/100 (Php725,438.81) plus twelve percent (12%) interest per
annum from January 13, 2011 until fully paid.
2.) Php50,ooo.oo as and for attorney's fees.
SO ORDERED.5
Aggrieved, KT Construction appealed before the CA.
The CA Ruling
In its April 22, 2016 Decision, the CA affirmed the R TC decision. It explained that
due to the acceleration clause, the loan became due and demandable upon KT
Construction's failure to pay an installment. In addition, the CA disagreed that the
promissory note was a contract of adhesion because KT Construction was not in
any way compelled to accept the terms of the promissory note.
The CA held that the trial court rightfully awarded attorney's fees as the same
was stipulated in the promissory note. It stated that the award of attorney's fees
was in the nature of a penal clause, which was valid and binding between the
parties. Likewise, the CA agreed that Go and Go-Tan were solidarily liable with
KT Construction for the judgment amount because, when they signed the
promissory note in their personal capacities, they became co-makers thereof. It
added that the parties themselves stipulated in the promissory note that their
liability was solidary. The CA disposed the case in this wise:
WHEREFORE, in view of the foregoing premises, the instant appeal is DENIED.
The Decision of Branch 133 of the Regional Trial Court, Makati City, National
Capital Judicial Region dated June 11, 2014 in Civil Case No. 11-060, is hereby
AFFIRMED with the MODIFICATION that KT Construction, represented by
William K. Go and Nancy Go-Tan, is ordered to pay PS Bank the amount equivalent
to 6% per annum of the total of the monetary awards from the finality of this
Decision until full payment thereof, as legal interest. In addition, the Clerk of
Court of Branch 133 of the Regional Trial Court in Makati City, or his duly
authorized deputy is DIRECTED to assess and collect the additional docket fees
from Philippine Savings Bank as fees in lien in accordance with Section 2, Rule
141 of the Rules of Court.
SO ORDERED.6
KT Construction moved for reconsideration, but its motion was denied by the CA
in its November 23, 2016 resolution.
Hence, this appeal instituted by KT Construction raising the following errors:
ISSUES
I
THE COURT OF APPEALS GRAVELY AND PALPABLY ERRED, AS DID THE LOWER
COURT, IN HOLDING WILLIAM GO AND NANCY GO TAN JOINTLY AND
SEVERALLY LIABLE WITH THE PETITIONER TO THE RESPONDENT BANK;
II
THE COURT OF APPEALS ERRED, AS DID THE LOWER COURT, IN NOT FINDING
THAT THE COMPLAINT IN THIS CASE WAS PREMATURELY FILED;
III
THE COURT OF APPEALS ERRED, AS DID THE LOWER COURT, IN FAILING TO
DECLARE THE PROMISSORY NOTE IN QUESTION AS NULL AND VOID FOR BEING
A CONTRACT OF ADHESION; AND
IV
THE COURT OF APPEALS ERRED, AS DID THE LOWER COURT, IN AWARDING
ATTORNEY'S FEES IN FAVOR OF THE RESPONDENT BANK.7
KT Construction insists that Go and Go-Tan could not be held solidarily liable for
the judgment award because they were neither impleaded nor served with
summons. Moreover, they did not voluntarily appear before the court. Thus, the
courts never acquired jurisdiction over their persons.
KT Construction further asserts that the complaint was premature because it was
not alleged that it had defaulted in paying any of the installments due and that it
had received a demand letter from PSBank. It reiterates that the promissory note
was null and void for being a contract of adhesion. KT Construction also argues
that the award of attorney's fees was improper because it was contrary to the
policy that no premium should be placed on the right to litigate.
In its Comment,8 dated March 3, 2017, PSBank countered that Go and Go-Tan
were solidarily liable with KT Construction because they signed the promissory
note in favor of PSBank as officers of the corporation and in their personal
capacities. It averred that the obligation was already due and demandable in view
of the acceleration clause in the promissory note. Further, PSBank pointed out
that the promissory note was consensual as the parties voluntarily signed the
same. Finally, it claimed that attorney's fees were rightfully awarded because the
same formed part of the terms and conditions of the loan agreement.
The Court's Ruling
The petition is partly meritorious.
It has long been settled that an acceleration clause is valid and produces legal
effects.9 In the case at bench, the promissory note explicitly stated that default in
any of the installments shall make the entire obligation due and demandable
notice even without or demand. Thus, KT Construction was erroneous in saying
that PSBank's complaint was premature on the ground that the loan was due only
on October 12, 2011. KT Construction's entire loan obligation became due and
demandable when it failed to pay an installment pursuant to the acceleration
clause.
Moreover, KT Construction could not evade responsibility by claiming that it had
not received any demand letter for the payment of the loan. PSBank had sent a
demand letter, 10 dated February 3, 2011, asking KT Construction to pay the
remaining obligation within five (5) days from receipt of the letter. More
importantly, even granting that KT Construction did not receive the demand
letter, the loan still became due and demandable because the parties expressly
waived the necessity of demand. 11
Further, KT Construction is mistaken that it could not be held liable for the entire
loan obligation because PSBank failed to prove how many installments it had
failed to pay. In Bognot v.RR!Lending Corporation, 12 the Court explained that once
the indebtedness had been established, the burden is on the debtor to prove
payment, wit:
Jurisprudence tells us that one who pleads payment has the burden of proving it;
the burden rests on the defendant to prove payment, rather than on the plaintiff
to prove non-payment. Indeed, once the existence of an indebtedness is duly
established by evidence, the burden of showing with legal certainty that the
obligation has been discharged by payment rests on the debtor. 13
In the case at bench, KT Construction admitted that it obtained a loan with
PSBank. It, nevertheless, averred that it had been regularly paying the loan. Thus,
KT Construction could have easily provided deposit slips and other documentary
evidence to prove the fact of payment. It, however, merely alleged that it
religiously paid its obligation without presenting any the evidence to
substantiate said obligation.
In a further attempt to absolve itself from the loan obligation, KT Construction
argued that the promissory note was null and void because it was a contract of
adhesion. It may be true that KT Construction had no hand in its preparation. Still,
it has been ruled in a plethora of cases that a contract of adhesion is not invalid
per se. 14 Contracts of adhesion, where one party imposes a ready-made form of
contract on the other, are not entirely prohibited. The one who adheres to the
contract is, in reality, free to reject it entirely; if he adheres, he gives his consent.
15
KT Construction also claimed that attorney's fees should not be awarded for lack
of legal basis. The promissory note, however, categorically provided for the
payment of attorney's fees in case of default. The said stipulation constituted a
penal clause to which the parties were bound, it being part of the contract
between the parties. 16 KT Construction was mistaken in relying on Article 2208
of the Civil Code because the same applies only when there is no stipulation as to
the payment of attorney's fees in case of default.
In the case at bench, Go and Go-Tan were neither impleaded in the Civil case nor
served with summons. They merely acted as representatives of KT Construction,
which was impleaded as the defendant in the complaint. It is for this reason that
only KT Construction filed an answer to the complaint. Thus, it is clear that the
trial court never acquired jurisdiction over Go and Go-Tan.
Consequently, it was improper for the trial court to declare in its dispositive
portion that Go and Go-Tan were jointly and severally liable with KT Construction
for the judgment award. It is noteworthy that their liability as co-makers was
never discussed in the body of the decision and that their solidary liability was a
mere conclusion in the dispositive portion.
WHEREFORE, the April 22, 2016 Decision and November 23, 2016 Resolution of
the Court of Appeals in CA-G.R. CV No. 103037, are AFFIRMED with
MODIFICATION, in that, only petitioner KT Construction Supply, Inc. is bound by
the judgment award.
SO ORDERED.

Only parties to the case may be bound bythe court's decision

The courts a quo, however, erred in holding Go and Go-Tan solidarily liable for
the judgment award in PSBank's favor. In Guy v. Gacott, 17 the Court ruled that a
judgment binds only those who were made parties in the case, to wit:

In relation to the rules of civil procedure, it is elementary that a judgment of a

court is conclusive and binding only upon the parties and their successors-in-
interest after the commencement of the action in court. A decision rendered on a
complaint in a civil action or proceeding does not bind or prejudice a person not
impleaded therein, for no person shall be adversely affected by the outcome of a
civil action or proceeding in which he is not a party. The principle that a person
cannot be prejudiced by a ruling rendered in an action or proceeding in which he
has not been made a party conforms to the constitutional guarantee of due
process of law.

In short, jurisdiction over the person of the parties must be acquired so that the
decision of the court would be binding upon them. It is a fundamental rule that
jurisdiction over a defendant is acquired in a civil caseeither through service of
summons or voluntary appearance in court and submission to its authority. 18
#16 LEASE
FIRST DIVISION
June 28, 2017
G.R. No. 224022
TEODORICO A. ZARAGOZA, Petitioner vs. ILOILO SANTOS TRUCKERS, INC.,
Respondent
DECISION
PERLAS-BERNABE, J.:
Assailed in this petition for review on certiorari1 are the Decision2 dated July 22,
2015 and the Resolution3 dated April 8, 2016 of the Court of Appeals (CA) in CA-
G.R. CEB-SP No. 07839 which affirmed the Decision4 dated July 5, 2013 of the
Regional Trial Court of Iloilo City, Branch 23 (RTC-Br. 23) in Civil Case No. 12-
31294, and accordingly, held, inter alia, that petitioner Teodorico A. Zaragoza
(petitioner) could not eject respondent Iloilo Santos Truckers, Inc. (respondent)
from the leased premises as the latter complied with its obligation to pay monthly
rent thru consignation.
The Facts
On June 26, 2003, petitioner Teodorico A. Zaragoza (petitioner) bought a 3,058-
square meter (sq. m.) parcel of land located at Cabatuan, Iloilo, denominated as
Lot No. 937-A, from his parents, Florentino and Erlinda Zaragoza,5 and
eventually, had the same registered under his name in Transfer Certificate of Title
No. 090-2010009190.6 Petitioner claimed that unknown to him, his father leased7
a 1,000-sq. m. portion of Lot 937-A (subject land) to respondent Iloilo Santos
Truckers, Inc. (respondent), for a period of eight (8) years commencing on
December 5, 2003 and renewable for another eight (8) years at the sole option of
respondent. 8 This notwithstanding, petitioner allowed the lease to subsist and
respondent had been diligent in paying its monthly rent amounting to Pl 0,000.00
per month9 (Pl 1,200.0010 including value added tax11 ) pursuant to the lease
contract.
Petitioner claimed that when Florentino died, respondent stopped paying rent.
On the other hand, respondent maintained that it was willing to pay rent, but was
uncertain as to whom payment should be made as it received separate demands
from Florentino's heirs, including petitioner. 12 Thus, respondent filed an
interpleader case before the Regional Trial Court of Iloilo City, Branch 24 (RTC-
Br. 24), docketed as Civil Case No. 07- 29371. After due proceedings, RTC-Br. 24
issued: (a) Order13 dated June 22, 2010 dismissing the action for interpleader, but
at the same time, stating that respondent may avail of the remedy of consignation;
and (b) Order14 dated August 17, 2010 which, inter alia, reiterated that
respondent may consign the rental amounts with it in order to do away with
unnecessary expenses and delay. Pursuant thereto, respondent submitted a
Consolidated Report15 dated January 26, 2011 and a Manifestation and Notice 16
dated May 30, 2011 informing petitioner that it had consigned the aggregate
amount of ₱521,396.8917 before RTC-Br. 24. 18
This notwithstanding, petitioner sent respondent a letter19 dated May 24, 2011,
stating that granting without conceding the propriety of consignation, the same
did not extinguish the latter's obligation to pay rent because the amount
consigned was insufficient to cover the unpaid rentals plus interests from
February 2007 to May 2011 in the amount of ₱752,878. 72. In this regard,
petitioner demanded that respondent pay said amount and at the same time,
vacate the subject land within fifteen (15) days from receipt of the letter. In its
reply, 20 respondent reiterated that it had already paid rent by consigning the
amount of P521,396.89 with RTC-Br. 24 representing monthly rentals from
February 2007 to March 2011, and maintained that it is not obligated to pay
interests under the lease contract. In a letter21 dated June 9, 2011, petitioner
clarified that the aforesaid amount consigned by respondent was insufficient to
cover monthly rentals from February 2007 to March 2011 which already
amounted to ₱562,125.00 without interest. He likewise reiterated that his earlier
demand to pay was for the period of February 2007 to May 2011. Thus, petitioner
posited that respondent had continuously failed and refused to comply with the
terms and conditions of the lease contract concerning the payment of monthly
rental, with or without consignation. 22 As his demands went unheeded,
petitioner filed on June 21, 2011 a suit23 for unlawful detainer against respondent
before the Municipal Trial Court in Cities, Iloilo City, Branch 10 (MTCC), docketed
as Civil Case No. 32-11.24
In its defense, respondent maintained, inter alia, that its consignation of rental
amounts with RTC-Br. 24 constituted compliance with the provisions of the lease
contract concerning the monthly rental payments. As such, petitioner has no
cause of action against it, and accordingly, it cannot be ejected from the subject
land.25
Pending the unlawful detainer suit, respondent sent petitioner a letter 26 dated
September 29, 2011 expressing its intention to renew the lease contract. In
response, petitioner sent letters dated October 10, 2011 27 and October 11, 2011
28 rejecting respondent's intent to renew in view of the latter's failure to timely
pay its monthly rentals.
The MTCC Ruling
In a Decision 29 dated December 29, 2011, the MTCC ruled in petitioner's favor,
and accordingly, ordered respondent to: (a) vacate the subject land; and (b) pay
petitioner back rentals in the amount of ₱l0,000.00 a month from February 2007
and the succeeding months thereafter until it vacates the subject land, plus legal
interest of twelve percent (12%) per annum from extrajudicial demand until full
payment, ₱20,000.00 as attorney's fees, ₱50,000.00 as litigation expenses, and
the costs of suit.30
The MTCC found that petitioner's complaint properly makes out a case for
unlawful detainer as it alleged that respondent defaulted in its rental payments
from February 2007 to May 2011 in the total amount of ₱752,878.72 and that the
latter failed to pay the same and to vacate the subject land despite demands to do
so. 31 Further, the MTCC opined that respondent's consignation with RTC-Br. 24
is void, and thus, did not serve to release respondent from paying its obligation
to pay rentals. As there was no valid consignation, respondent was held liable to
pay unpaid rentals and that petitioner was justified in terminating the lease
contract. 32
Aggrieved, respondent appealed 33 to the RTC-Br. 23, docketed as Civil Case No.
12-31294.
The RTC-Br. 23 Ruling
In a Decision34 dated July 5, 2013, the RTC-Br. 23 reversed and set aside the MTCC
ruling, and accordingly, dismissed petitioner's complaint. Contrary to the MTCC's
findings, the RTC-Br. 23 ruled, inter alia, that respondent's consignation of the
rental amounts was proper, considering that: (a) it was made pursuant to RTC-
Br. 24's order, which had jurisdiction over the interpleader case, consignation
being an ancillary remedy thereto; (b) it was made even before petitioner's filing
of the unlawful detainer case and that petitioner knew of such fact; and (c)
petitioner even withdrew the consigned amounts. Thus, the consignation
effectively released respondent from its obligation to pay rent, and hence,
petitioner's complaint for unlawful detainer must necessarily fail. 35
Dissatisfied, petitioner appealed to the CA via a petition for review,36 docketed as
CA-G.R. CEB-SP No. 07839.
The CA Ruling
In a Decision37 dated July 22, 2015, the CA affirmed the RTC-Br. 23 ruling. It held,
inter alia, that while petitioner's complaint for unlawful detainer sufficiently
states a cause of action on its face, petitioner, however, failed to substantiate his
allegation that respondent violated the terms and conditions of the lease contract
by intentionally failing to pay the monthly rentals. 38 In this regard, the CA found
that respondent was actually ready and willing to comply with its obligation to
pay rent, but was in a quandary as to whom it should remit its payment. 39 Hence,
it showed good faith by consigning its rental payments to RTC-Br. 24, which was
properly made and was acknowledged by petitioner by withdrawing the
consigned amounts in court. There being no violation of the lease contract,
petitioner could not validly eject respondent from the subject land.40
Undaunted, petitioner moved for reconsideration, 41 which was, however, denied
in a Resolution42 dated April 8, 2016; hence, this petition. The Issue Before the
Court The issue for the Court's resolution is whether or not the CA correctly ruled
that petitioner could not eject respondent from the subject land as the latter fully
complied with its obligation to pay monthly rent thru consignation.
The Issue Before the Court
The issue for the Court's resolution is whether or not the CA correctly ruled that
petitioner could not eject respondent from the subject land as the latter fully
complied with its obligation to pay monthly rent thru consignation.
The Court's Ruling
The petition is meritorious.
In Spouses Manzanilla v. Waterfields Industries Corporation, 43 the Court discussed
the requisites of an unlawful detainer suit in instances where there is a subsisting
lease contract between the plaintiff-lessor and defendant-lessee, to wit:
For the purpose of bringing an unlawful detainer suit, two requisites must
concur: (1) there must be failure to pay rent or comply with the conditions of
the lease, and (2) there must be demand both to pay or to comply and vacate.
The first requisite refers to the existence of the cause of action for unlawful
detainer, while the second refers to the jurisdictional requirement of demand in
order that said cause of action may be pursued. Implied in the first requisite,
which is needed to establish the cause of action of the plaintiff in an unlawful
detainer suit, is the presentation of the contract of lease entered into by the
plaintiff and the defendant, the same being needed to establish the lease
conditions alleged to have been violated. Thus, in Bachrach Corporation v. Court
of Appeals [(357 Phil. 483, 492 [1998])], the Court held that the evidence
needed to establish the cause of action in an unlawful detainer case is (1) a lease
contract and (2) the violation of that lease by the defendant.44 (Emphases and
underscoring supplied)
In other words, for an unlawful detainer suit to prosper, the plaintiff-lessor must
show that: first, initially, the defendant-lessee legally possessed the leased
premises by virtue of a subsisting lease contract; second, such possession
eventually became illegal, either due to the latter's violation of the provisions of
the said lease contract or the termination thereof; third, the defendant-lessee
remained in possession of the leased premises, thus, effectively depriving the
plaintiff-lessor enjoyment thereof; and fourth, there must be a demand both to
pay or to comply and vacate and that the suit is brought within one (1) year from
the last demand.45
In this case, the first, third, and fourth requisites have been indubitably complied
with, considering that at the time the suit was instituted on June 21, 2011: (a)
there was a subsisting lease contract 46 between petitioner and respondent; (b)
respondent was still in possession of the subject land; and (c) the case was filed
within one (1) year from petitioner's letter47 dated May 24, 2011 demanding that
respondent pay monthly rentals and at the same time, vacate the subject land.
Thus, the crux of the controversy is whether or not the second requisite has been
satisfied, that is, whether or not respondent violated the terms and conditions of
the lease contract, specifically with regard to the payment of monthly rentals.
According to the RTC-Br. 23 and the CA, respondent did not breach its obligation
to pay rent as its consignation of its monthly rentals with RTCBr. 24 constitutes
sufficient compliance thereof.
The RTC-Br. 23 and the CA are mistaken.
To recapitulate, in its letter 48 dated May 24, 2011, petitioner demanded payment
for, among others, monthly rentals for the period of February 2007 to May 2011.
In response thereto,49 respondent claimed that it had already complied with its
obligation to pay monthly rentals via consignation with RTC-Br. 24, as evidenced
by the Manifestation and Notice50 dated May 30, 2011 it filed before said court.
However, a closer reading of such letter-reply and Manifestation and Notice
reveals that the amount consigned with RTC-Br. 24 represents monthly rentals
only for the period of February 2007 to March 2011, which is two (2) whole
months short of what was being demanded by petitioner. In fact, petitioner
pointed out such fact in his letter51 dated June 9, 2011 to respondent, but the
latter still refused to make any additional payments, by either making further
consignations with RTC-Br. 24 or directly paying petitioner.
Considering that all the requisites of a suit for unlawful detainer have been
complied with, petitioner is justified in ejecting respondent from the subject land.
Thus, the rulings of the RTC-Br. 23 and the CA must be reversed and set aside,
and accordingly, the MTCC ruling must be reinstated. However, in light of
prevailing jurisprudence, the rental arrearages due to petitioner shall earn legal
interest of twelve percent (12%) per annum, computed from first demand on May
24, 2011 to June 30, 2013, and six percent (6%) per annum from July 1, 2013 until
fully paid. The other amounts awarded by the MTCC, i.e., ₱20,000.00 as attorney's
fees, ₱50,000.00 as litigation expenses, and the costs of suit) shall likewise earn
legal interest of six percent (6%) per annum from finality of the Decision until
fully paid. 52
WHEREFORE, the petition is GRANTED. The Decision dated July 22, 2015 and
the Resolution dated April 8, 2016 of the Court of Appeals in CA-G.R. CEB-SP No.
07839 are hereby REVERSED and SET ASIDE. Accordingly, the Decision dated
December 29, 2011 of the Municipal Trial Court in Cities, Iloilo City, Branch 10 in
Civil Case No. 32-11 is hereby REINSTATED with MODIFICATION in that the
rental arrearages due to petitioner Teodorico A. Zaragoza shall earn legal interest
of twelve percent (12%) per annum, computed from first demand on May 24,
2011 to June 30, 2013, and six percent (6%) per annum from July 1, 2013 until
full satisfaction. The other amounts awarded in favor of petitioner Teodorico A.
Zaragoza, such as the ₱20,000.00 as attorney's fees, ₱50,000.00 as litigation
expenses, and the costs of suit shall also earn legal interest of six percent (6%)
per annum from finality of the decision until fully paid.
SO ORDERED.

From the foregoing, it appears that even assuming arguendo that respondent's
consignation of its monthly rentals with RTC-Br. 24 was made in accordance with
law, it still failed to comply with its obligation under the lease contract to pay
monthly rentals. It is apparent that at the time petitioner filed the unlawful
detainer suit on June 21, 2011, respondent was not updated in its monthly rental
payments, as there is no evidence of such payment for the months of April, May,
and even June 2011. Irrefragably, said omission constitutes a violation of the
lease contract on the part of respondent.
#17 PROPERTY: POSSESSION
FIRST DIVISION
July 3, 2017
G.R. No. 224515
REMEDIOS V. GEÑORGA, Petitioner
vs.
HEIRS OF JULIAN MELITON, Represented by ROBERTO MELITON as
Attorney-in-Fact, IRENE MELITON, HENRY MELITON, ROBERTO MELITON,
HAIDE* MELITON, and MARIA FE MELITON ESPINOSA, Respondents
DECISION
PERLAS-BERNABE, J.:
Before the Court is a Petition for Review1 on certiorari assailing the Decision2
dated October 7, 2015 and the Resolution3 dated April 12, 2016 of the Court of
Appeals (CA) in CA-G.R. CV No. 103591, which affirmed the Decision4 dated July
28, 2014 of the Regional Trial Court (RTC) of Naga City, Branch 24 (court a quo)
in Civil Case No. 2013-0036, directing petitioner and/or the Register of Deeds of
Naga City (RD-Naga) to deliver or surrender possession of the owner's duplicate
copy of Transfer Certificate of Title (TCT) No. 8027 to respondents.
The Facts
Julian Meliton (Julian), Isabel Meliton, and respondents Irene, Henry, Roberto,
Haide, all surnamed Meliton, and Ma. Fe Meliton Espinosa (Ma. Fe; respondents)
are the registered owners of a 227,270-square meter parcel of land, identified as
Lot No. 1095-C located in Concepcion Pequeña, Naga City, covered by TCT No.
80275 (subject land).6 Julian owns 8/14 portion of the land, while the rest of the
co-owners own 1114 each.7 During his lifetime, Julian sold portions of the subject
land to various persons, among others, to petitioner Remedios V. Geñorga's
(petitioner) husband,8 Gaspar Geñorga, who took possession and introduced
improvements on the portions respectively sold to them. 9
However, Julian failed to surrender the owner's duplicate copy of TCT No. 8027
to enable the buyers, including petitioner's husband, to register their respective
deeds of sale, which eventually led to the filing of a Petition10 for the surrender of
the owner's duplicate copy of TCT No. 8027 and/or annulment thereof, and the
issuance of new titles pursuant to Section 107 of Presidential Decree No. (PD)
152911 before Branch 23 of the RTC of Naga City, docketed as Civil Case No. RTC
'96-3526.
In a Decision12 dated July 17, 1998, the RTC of Naga City decided in favor of the
buyers. Accordingly, it ordered the administratrix of the estate of Julian, Ma. Fe,
or any of Julian's heirs or any person holding the owner's duplicate of TCT No.
8027 (holder) to surrender possession thereof to the RD-Naga; and the RD-Naga
to enter on the said title the buyers' respective deeds of sale, and to issue the
corresponding certificates of title after compliance with the requirements of the
law.13 It further held that should the holder fail or refuse to comply with the
court's directive: (a) TCT No. 8027 shall be declared null and void; and (b) the
RD-Naga shall issue a new certificate of title in lieu thereof, enter the deeds of
sale, and issue certificates of title in favor of the buyers.14
The said decision became final and executory on September 10, 2006 but
remained unexecuted due to the sheriff's failure to locate and serve the writ of
execution on Ma. Fe despite diligent efforts.15 Thus, in an Order16 dated October
2, 2008, the RTC declared TCT No. 8027 null and void, resulting in the issuance of
a new one, bearing annotations of the buyers' adverse claims. The new owner's
duplicate copy of TCT No. 8027 (subject owner's duplicate title) was given to
petitioner in 2009.17
On April 22, 2013, respondents filed a Complaint18 against petitioner before the
court a quo, seeking the surrender of the subject owner's duplicate title with
damages, docketed as Civil Case No. 2013-0036. They claimed that they are
entitled to the possession thereof as registered owners, and suffered damages as
a consequence of its unlawful withholding, compelling them to secure the
services of counsel to protect their interests.19
In her Answer,20 petitioner averred that she and the other buyers are in the
process of completing all the requirements for the registration of the sales in their
favor, and have paid the estate taxes thereon. They had likewise caused the
survey of the land but the first geodetic engineer they hired to conduct the same
failed to deliver his services, prompting them to file a complaint against him, and
to hire another geodetic engineer. Considering that their possession of the
subject owner's duplicate title was by virtue of a court decision, and for the
legitimate purpose of registering the sales in their favor and the issuance of titles
in their names, they should be allowed to retain possession until the completion
of the requirements therefor.21 The said title was eventually submitted to the RD-
Naga22 on September 13, 2013.23
The RTC Ruling
In a Decision24 dated July 28, 2014, the RTC granted respondents' petition, and
ordered petitioner and/or the RD-Naga to deliver or surrender possession of the
subject owner's duplicate title to respondents, considering the long period of
time that had lapsed for the annotation of the buyers' deeds of sale.25
Dissatisfied, petitioner filed a motion for reconsideration26 which was denied in
an Order27 dated September 11, 2014, and, thereafter, appealed to the CA,
docketed as CA-G.R. CV No. 103591.
The CA Ruling
In a Decision28 dated October 7, 2015, the CA affirmed the RTC ruling. It noted the
long length of time that had lapsed for the annotation of the buyers' deeds of sale
and the issuance of the corresponding certificates of title, and found no valid and
plausible reason to further withhold custody and possession of the subject
owner's duplicate title from respondents. Thus, it adjudged respondents to have
the preferential right to the possession of the said title, considering that the
bigger portion of the subject property belongs to them.29
Petitioner moved for reconsideration30 but the same was denied in a Resolution31
dated April 12, 2016; hence, this petition.
The Issue Before the Court
The essential issue for the Court's resolution is whether or not the CA correctly
affirmed the court a quo’s Decision directing the surrender and delivery of
possession of the subject owner's duplicate title to respondents.
The Court's Ruling
The petition lacks merit.
Preliminarily, it is well to point out that the subject land was an undivided co-
owned property when Julian sold different portions thereof to various
persons.1âwphi1 However, a perusal of the pertinent deeds of absolute sale32
reveals that definite portions of the subject land were eventually sold, and the
buyers took possession and introduced improvements thereon,33 declared the
same in their names, and paid the realty taxes thereon,34 all without any objection
from respondents who never disputed the sales in favor of the buyers.
Consequently, the Court finds that there is, in this case, a partial factual partition
or termination of the co-ownership, which entitles the buyers to the segregation
of their respective portions, and the issuance of new certificates of title in their
names35 upon compliance with the requirements of law.
Section 58 of PD 1529, otherwise known as the "Property Registration Decree,"
provides the procedure for the registration of deeds or conveyances, and the
issuance of new certificates of titles involving only certain portions of a registered
land, as in this case. Said provision reads:
Section 58. Procedure Where Conveyance Involves Portion of Land. - If a deed or
conveyance is for a part only of the land described in a certificate of title, the
Register of Deeds shall not enter any transfer certificate to the grantee until a
plan of such land showing all the portions or lots into which it has been
subdivided and the corresponding technical descriptions shall have been verified
and approved pursuant to Section 50 of this Decree. Meanwhile, such deed may
only be annotated by way of memorandum upon the grantor's certificate of title,
original and duplicate, said memorandum to serve as a notice to third persons of
the fact that certain unsegregated portion of the land described therein has been
conveyed, and every certificate with such memorandum shall be effectual for the
purpose of showing the grantee's title to the portion conveyed to him, pending
the actual issuance of the corresponding certificate in his name.
Upon the approval of the plan and technical descriptions, the original of the plan,
together with a certified copy of the technical descriptions shall be filed with the
Register of Deeds for annotation in the corresponding certificate of title and
thereupon said officer shall issue a new certificate of title to the grantee for the
portion conveyed, and at the same time cancel the grantor's certificate partially
with respect only to said portion conveyed, or, if the grantor so desires, his
certificate may be cancelled totally and a new one issued to him describing
therein the remaining portion: Provided, however, that pending approval of said
plan, no further registration or annotation of any subsequent deed or other
voluntary instrument involving the unsegregated portion conveyed shall be
effected by the Register of Deeds, except where such unsegregated portion was
purchased from the Government or any of its instrumentalities. If the land has
been subdivided into several lots, designated by numbers or letters, the Register
of Deeds may, if desired by the grantor, instead of cancelling the latter's certificate
and issuing a new one to the same for the remaining unconveyed lots, enter on
said certificate and on its owner's duplicate a memorandum of such deed of
conveyance and of the issuance of the transfer certificate to the grantee for the
lot or lots thus conveyed, and that the grantor's certificate is canceled as to such
lot or lots. (Emphases supplied)
In this relation, Section 5336 of PD 1529 requires the presentation of the owner's
duplicate title for the annotation of deeds of sale.
Records show that the subject owner's duplicate title had already been
surrendered to the RD-Naga on September 13, 2013, and some of the buyers had
secured Certificates Authorizing Registration37 and paid the corresponding fees38
for the registration of the sales in their favor. Nonetheless, while the rights of the
buyers over the portions respectively sold to them had already been recognized
by the RTC of Naga City in its July 17, 1998 Decision in Civil Case No. RTC '96-
3526 which had attained finality on September 10, 2006,39 there is no showing
that the other affected buyers have similarly complied with the necessary
registration requirements.
Notably, from the time petitioner received possession of the subject owner's
duplicate title in 2009, a considerable amount of time had passed until she
submitted the same to the RD-Naga on September 13, 2013. But even up to the
time she filed the instant petition before the Court on May 6, 2016,40 she failed to
show any sufficient justification for the continued failure of the concerned buyers
to comply with the requirements for the registration of their respective deeds of
sale and the issuance of certificates of title in their names to warrant a
preferential right to the possession of the subject owner's duplicate title as
against respondents who undisputedly own the bigger portion of the subject
land. Consequently, the Court finds no reversible error on the part of the CA in
affirming the RTC Decision directing petitioner or the RD-Naga to deliver or
surrender the subject owner's duplicate title to respondents.

Moreover, it bears to stress that the function of a Register of Deeds with reference
to the registration of deeds is only ministerial in nature. 41 Thus, the RD-Naga
cannot be expected to retain possession of the subject owner's duplicate title
longer than what is reasonable to perform its duty. In the absence of a verified
and approved subdivision plan and technical description duly submitted for
registration on TCT No. 8027, it must return the same to the presenter, in this
case, petitioner who, as aforesaid, failed to establish a better right to the
possession of the said owner's duplicate title as against respondents.

As a final point, it must, however, be clarified that the above-pronounced delivery

or surrender is without prejudice to the rights of the concerned buyers who
would be able to subsequently complete the necessary registration requirements
and thereupon, duly request the surrender of the subject owner's duplicate title
anew to the RD-Naga.

WHEREFORE, the petition is DENIED. The Decision dated October 7, 2015 and
the Resolution dated April 12, 2016 of the Court of Appeals (CA) in CA-G.R. CV No.
103591 are AFFIRMED. Petitioner Remedios V. Geñorga or the Register of Deeds
of Naga City is hereby DIRECTED to deliver or surrender the owner's duplicate
copy of Transfer Certificate of Title No. 8027 to respondents Heirs of Julian
Meliton, through their attorney-in-fact, Roberto Meliton, within sixty (60) days
from notice of this Decision.

Let a copy of this Decision be furnished the Register of Deeds of Naga City.

SO ORDERED.
#19 CONTRACTS; REFORMATION
FIRST DIVISION
September 6, 2017
G.R. No. 212731
SPOUSES FIRMO S. ROSARIO AND AGNES ANNABELLE DEAN-ROSARIO,
Petitioners vs. PRISCILLA P. ALVAR, Respondent
DECISION
DEL CASTILLO, J.:
"Under the doctrine of conclusiveness of judgment, facts and issues actually and
directly resolved in a former suit cannot again be raised in any future case
between the same parties, even if the latter suit may involve a different claim or
cause of action."1
This Petition for Review on Certiorar2 under Rule 45 of the Rules of Court assails
the May 27, 2014 Decision3 of the Court of Appeals (CA) in CAG.R. CV No. 98928.
Factual Antecedents
On separate dates in 1989, petitioner Agnes Annabelle Dean-Rosario (Agnes)
borrowed from respondent Priscilla Alvar (Priscilla) a total of ₱600,000.00,
secured by real estate mortgages over two parcels of land covered by Transfer
Certificates of Title Nos. 167438 (residence of petitioner spouses Agnes and
Firmo Roario) and 167439 (a five-door rental apartment).4
In December 1990, the mortgages were discharged.5
On March 16, 1992 and July 17, 1992, Agnes executed two Deeds of Absolute Sale
over the two lots in favor of Priscilla's daughter, Evangeline Arceo (Evangeline),
for the amount of P900,000.00 each.6 Evangeline later sold the lots to Priscilla
also for the price of P900,000.00 each.7
On April 27, 1994, Priscilla sent a demand letter to petitioner spouses Rosario
asking them to vacate Lot 1.8 This prompted petitioner spouses Rosario to file
before the Regional Trial Court (RTC) of Makati City a Complaint for Declaration
of Nullity of Contract of Sale and Mortgage, Cancellation of Transfer Certificates
of Title and Issuance of new TCTs with Damages, docketed as Civil Case No. 94-
1797, against Priscilla.9 Petitioner spouses Rosario alleged that Priscilla deceived
Agnes into signing the Deeds of Absolute Sale in favor of Evangeline, as Agnes
merely intended to renew the mortgages over the two lots.10
Priscilla, in turn, filed with the RTC a Complaint for Recovery of Possession,
docketed as Civil Ca5e No. 96-135.11 She claimed that she is the absolute owner
of the subject lots and that Agnes sold the lots because she was in dire need of
money.12
The cases were consolidated and on April 4, 2003, the RTC rendered a Decision
granting Priscilla's complaint for recovery of possession while denying petitioner
spouses Rosario's complaint for declaration of nullity of contract of sale. 13 The
dispositive portion of the Decision reads:
WHEREFORE, premises considered, Civil Case No. 94-1797 is ordered dismissed
for lack of merit. Defendants' counterclaims are also ordered dismissed.
[Respondent] having proven her claim in Civil Case No. 96-135, [petitioner
apouses Rosario] are hereby ordered to vacate the house and lot located at No.
2703 Apolinario corner General Capinpin Streets, Bangkal, Makati City, covered
by TCT No. 188995 and restore posession thereof to its rightful owner,
[respondent].
SO ORDERED.14
On appeal, the CA reversed the April 4, 2003 Decision of the RTC. In its November
15, 2006 Decision,15 the CA ruled that although the transfers from Agnes to
Priscilla were identified as absolute sales, the contracts are deemed equitable
mortgages pursuant to Article 160216 of the Civil Code.17 Thus, the CA disposed
of the case in this wise:
In view of these, We resolve [petitioner spouses'] prayers in the following
manner:
Anent their prayer for the issuance of new certificates of titles, We hold the
cancellation of [petitioner Agnes'] title over the 2 lots was void. Titles to the
subject lots, which had supposedly been transferred to [Evangeline] and later to
[Priscilla], actually remained with [petitioner Agnes], as owner-mortgagor,
conformably with the well-established doctrine that the mortgagee does not
automatically become the owner of the mortgaged property as the ownership
thereof remains with the mortgagor. Hence, it is not necessary for Us to order the
issuance of new titles under the name of [petitioner Agnes]. Accordingly, TCT No.
167438 and TCT No. 167439 issued under the name of [petitioner Agnes] must
be reinstated, while TCT No. 188920 and TCT No. 188995 issued in the name of
[Priscilla] must be nullified.
Anent their prayer for the nullification of the Deeds of Absolute Sale and the
Mortgage, We resolve to deny the same. Although the subject deeds of sale in
favor of [Evangeline] were actually for mortgage, said type of simulation of
contracts does not result in the nullification of the deeds but requires the
reformation of the instrument, pursuant to Article 1365 of the Civil Code.
Moreover, as [petitioner spouses Rosario] admitted they mortgaged the 2 lots to
[Priscilla] as security for the payment of their loans. Absent any proof that
[petitioner spouses Rosario] had fully paid their loans to [Priscilla], [Priscilla]
may seek the foreclosure of the 2 lots if [petitioner spouses Rosario] failed to pay
their loans of ₱l.8 Million, the amounts appearing in the Deeds of Absolute Sale.
WHEREFORE, the Appeal is GRANTED. The assailed Decision dated April 4, 2003
of the Regional Trial Court of Makati City, Branch 150, in Civil Cases Nos. 94-1797
& 96-135, is hereby REVERSED and SET ASIDE.
A new one is hereby entered ordering the reinstatement of TCT No. 167438 and
TCTNo. 167439 issued under the name of [petitioner] Agnes DeanRosario and
ordering the cancellation of TCT No. 188920 and TCT No. 188995 issued under
the name of [Priscilla ].18
Since the parties did not file a motion for reconsideration or an appeal, the CA
Decision became final and executory.19
On October 17, 2007, Priscilla sent a letter to Agnes demanding the payment of
her outstanding obligation amounting to Pl.8 million.20 Due to the failure or
refusal of petitioner spouses Rosario to heed the demand, Priscilla filed before
the RTC ofMakati, Branch 148, a Complaint21 for Judicial Foreclosure of Real
Estate Mortgage, docketed as Civil Case No. 07-997.22
Petitioner spouses Rosario moved for the dismissal of the Complaint, but the RTC
denied the same.23
They then filed a Petition for Certiorari before the CA, docketed as CAG.R. SP No.
107484, questioning the denial of their Motion to Dismiss.24
On May 25, 2010, the CA rendered a Decision dismissing the Petition for lack of
merit.25
On September 5, 2011, the Supreme Court issued a Resolution denying the
Petition for Review on Certiorari filed by petitioner spouses Rosario.26
Meanwhile, on May 5, 2009, Priscilla filed a Motion to Declare Defendants in
Default for the failure of petitioner spouses Rosario to file an answer within the
reglementary period, which the RTC granted.27
Ruling of the Regional Trial Court
On January 25, 2012, the RTC rendered a Decision28 in favor of Priscilla, the
dispositive portion of which reads:
WHEREFORE, premises considered, decision is hereby rendered ordering
[petitioner] Spouses Firmo S. Rosario and Agnes Annabelle DeanRosario to pay
the [respondent] Priscilla Alvar, jointly and severally, the following sums:
1. Phpl,800,000.00 as the aggregate amount of [petitioner spouses Agnes and
Firmo Rosario's] obligation to [Priscilla], plus 12% legal interest per annum from
the time of demand on October 18, 2007 until the obligation is fully paid;
2. Php62,903.88 as reimbursement for payment of real property taxes due on the
subject lots;
3. Php200,000.00 as attorney's fees and litigation expenses in the amount of
Php200,000.00
All the above must be paid within a period of not less than ninety (90) days nor
more than one hundred twenty (120) days from the entry of judgment. In default
of such payment, the two (2) parcels of land covered by TCT Nos. 167438 and
167439 subject matter of the suit including its improvements shall be sold to
realize the mortgage debt and costs, in the manner and under the regulations that
govern sales of real estate under execution.
SO ORDERED.29
Aggrieved, petitioner spouses Rosario appealed to the CA.
Ruling of the Court of Appeals
On May 27, 2014, the CA affirmed the January 25, 2012 Decision of the RTC with
modification that: (1) the interest rate imposed shall be 6% per annum in
accordance with Bangko Sentral ng Pilipinas (BSP) Circular No. 799, Series of
2013; and (2) the attorney's fees and litigation expenses shall be reduced to
₱50,000.00.30
Issues
Hence, petitioner spouses Rosario filed the instant Petition with the following
issues:
I. Respondent's Arguments

WHETHER THE HONORABLE [CA] COMMITTED GRAVE ABUSE OF DISCRETION
IN HOLDING THAT A REFORMATION OF INSTRUMENT BETWEEN THE PARTIES
IS NO LONGER NECESSARY DESPITE AN EARLIER RULING BY THE HONORABLE
[CA] THAT REFORMATION IS REQUIRED ESPECIALLY BECAUSE:
A) [Respondent] had no personality to file a complaint for judicial foreclosure. To
allow this would violate the ruling of this Honorable Court in Borromeo v. Court
of Appeals, 550 SCRA 269 and Article 1311 of the New Civil Code.
B) Tbe obligation of the petitioner [spouses Rosario] in the amount of
₱1,800,000.00 has no legal and factual basis.1âwphi1
Priscilla, on the other hand, maintains that she has a legal personality to institute
the foreclosure proceedings pursuant to the November 15, 2006 Decision. 35 The
indebtedness of petitioner spouses Rosario was also established in the said
Decision, which has long attained finality.36 She asseverates that the loan has not
been paid and that the judicial foreclosure is not based on the old mortgages that
have been discharged, but on the Deeds of Absolute Sale, which were considered
as equitable mortgages in the November 15, 2006 Decision. 37 As to the
reformation of the instruments, Priscilla asserts that there is no need for such
reformation as the declaration in the November 15, 2006 Decision is sufficient.38
Our Ruling

C) The original real estate mortgages between the parties have been cancelled or The Petition lacks merit.
discharged. The alleged new Deeds of Sale to the daughter of the [respondent]
are fake and simulated. There is conclusiveness of judgment as
to the issues pertaining to. the existence
II. of the loan and the legal personality of
Priscilla to file a case for judicial
WHETHER THE RULING OF THE [CA] IS CONTRARY TO THE CASE OF GOV.
BACARON, 472 SCRA 339. foreclosure.

III.
WHETHER THE HONORABLE [CA] COMMITTED GRAVE ABUSE OF DISCRETION
IN NOT HOLDING THAT A REFORMATION OF THE INSTRUMENTS CAN BE MADE
PRIOR TO FORECLOSURE PROCEEDINGS (AS A RESULT OF THE RULING THAT
THE CONTRACT BETWEEN THE PARTIES SHOULD BE TREATED AS AN
EQUITABLE MORTGAGE).31
Simply put, the issue is whether the CA erred in dismissing the appeal.
Petitioner spouses Rosario's Arguments
Petitioner spouses Rosario contend that Priscilla had no legal personality to
institute the judicial foreclosure proceedings as the Deeds of Absolute Sale, which
were deemed equitable mortgages, were executed by them in favor of Evangeline,
not Priscilla.32 They also claim that the obligation in the amount of ₱1.8 million
has no legal and factual bases as the only loan they obtained was in the amount
of ₱600,000.00.33 Lastly, they insist that before the subject lots can be judicially
foreclosed, a reformation of the fake and simulated Deeds of Absolute Sale must
first be done to enable them to present documentary and parol evidence. 34
At the outset, it must be pointed out that the November 15, 2006 Decision of the
CA in CA-G.R. CV No. 81350, from which this case arose, has attained finality due
to the failure of the parties to file a motion for reconsideration or an appeal. As
such, the factual findings and conclusions in the November 15, 2006 Decision may
no longer be disputed by petitioner spouses Rosario as res judicata by
conclusiveness of judgment, which bars them from challenging the same issues.
Unlike res judicata by prior judgment, where there is identity of parties, subject
matter, and causes of action, there is only identity of parties and subject matter
in res judicata by conclusiveness of judgment.39 Since there is no identity of cause
of action, the judgment in the first case is conclusive only as to those matters
actually and directly controverted and determined.40 Thus, there is res judicata
by conclusiveness of judgment when all the following elements are present:
(1) the judgment sought to bar the new action must be final;
(2) the decision must have been rendered by a court having jurisdiction over the
subject matter and the parties;
(3) the disposition of the case must be a judgment on the merits; and
(4) there must be as between the first and second action, identity of parties, but
not identity of causes of action.41
In this case, all the elements are present: first, the November 15, 2006 Decision
has attained finality; second, the said decision was rendered by a court having
jurisdiction over the subject matter and the parties; third, the said decision
disposed of the case on the merits; and fourth, there is, as between the previous
case and the instant case, an identity of parties.
Since there is conclusiveness of judgment in this case, petitioner spouses Rosario
are estopped from raising issues that were already adjudged in the November 15,
2006 Decision as "the dictum laid down in the earlier final judgment is conclusive
and continues to be binding between the parties, their privies and successors-in-
interest, as long as the facts on which that judgment was predicated continue to
be the facts of the case or incident before the court in a later case x x x."42 In short,
"the binding effect and enforceability of that earlier dictum can no longer be re-
litigated in a later case since the issue has already been resolved and finally laid
to rest in the earlier case."43
Consequently, there is no need for Us to delve into the issues raised by petitioner
spouses Rosario pertaining to the existence of the loan and the legal personality
of Priscilla to file a case for judicial foreclosure as the November 15, 2006
Decision already established the existence of the loan in the amount of ₱1.8
million44 and recognized the legal personality of Priscilla to foreclose the subject
property, as she was the one who loaned spouses Rosario the amount of ₱1.8
million.45
In the November 15, 2006 Decision, the CA denied petitioner spouses' Complaint
for declaration of nullity of contract of sale on the ground that what was required
was the reformation of the instruments, pursuant to Article 1365 48 of the Civil
Code.49 In ruling that the Deeds of Absolute Sale were actually mortgages, 50 the
CA, in effect, had reformed the instruments based on the true intention of the
parties. Thus, the filing of a separate complaint for reformation of instrument is
no longer necessary because it would only be redundant and a waste of time.
Besides, in the November 15, 2006 Decision, the CA already declared that absent
any proof that petitioner spouses Rosario had fully paid their obligation,
respondent may seek the foreclosure of the subject lots.51
In view of the foregoing, we find no error on the part of the CA in ruling that a
separate action for reformation of instrument is no longer necessary as the
declaration in the November 15, 2006 Decision that the parties' intention was to
execute an equitable mortgage is sufficient reformation of such instrument.
WHEREFORE, the Petition is hereby DENIED. The assailed May 27, 2014
Decision of the Court of Appeals in CA-GR CV No. 98928 is hereby AFFIRMED.
SO ORDERED.

The pronouncement in the November

15, 2006 Decision that the parties'
intention was to execute an equitable
mortgage is sufficient reformation of
such instrument.

The only issue left for us to determine is whether a reformation of the contract is
required before the subject lots may be foreclosed.

We rule in the negative.

Reformation of an instrument is a remedy in equity where a written instrument

already executed is allowed by law to be reformed or construed to express or
conform to the real intention of the parties.46 The rationale of the doctrine is that
it would be unjust and inequitable to allow the enforcement of a written
instrument that does not express or reflect the real intention of the parties. 47