Justice Teresita Leonardo-De Castro Cases (2008-2015) : Civil Law

Justice Teresita Leonardo-De Castro Cases (2008-2015) Civil Law
EFFECT AND APPLICATION OF LAWS

CARIDAD MAGKALAS vs. NATIONAL HOUSING AUTHORITY
G.R. No. 138823, September 17, 2008, J. Leonardo-De Castro
There is no irreconcilable conflict or repugnancy between Section 28 of R.A. No. 7279 and P.D.
No. 1315 and No. 1472, rather, they can be read together and harmonized to give effect to their
provision. It should be stressed that Section 28 of R.A. No. 7279 does not totally and absolutely prohibit
eviction and demolition without a judicial order as in fact it provides for exceptions. Pursuant to
established doctrine, the three (3) statutes should be construed in the light of the objective to be
achieved and the evil or mischief to be suppressed by the said laws, and they should be given such
construction as will advance the object, suppress the mischief and secure the benefits intended. It is
worthy to note that the three laws (P.D. No. 1315, P.D. No. 1472 and R.A. No. 7279) have a common
objective to address the housing problems of the country by establishing a comprehensive urban
development and housing program for the homeless. For this reason, the need to harmonize these laws
all the more becomes imperative.
Facts:
Petitioner Caridad Magkalas is one of the informal settlers in Bagong Barrio, Caloocan City,
whose lot was expropriated by virtue of P.D. No. 1315 and following the subdivision project devised
by Respondent NHA, as statutory administrator, the lot occupied by Magkalas was included in the
open space requirement or area center. Magkalas along with two other claimants appealed this
decision designating their lots as part of the area center. The NHA, however, denied their appeal
and afterwards sent a Notice of Lot Assignment to Magkalas recognizing the latter as a censused
owner of a structure with TAG No. 0063-04 which was identified for relocation.
Eventually, Petitioner Magkalas filed a complaint for damages with prayer for TRO/writ of
preliminary injunction against NHA. The RTC of Caloocan dismissed the complaint and ordered
NHA to proceed with the demolition of Magkalas structure. In the meantime, the two other
claimants affected by the area center acceded to their transfer to the allocated lots within the same
subdivision project.
Magkalas is now before the Court asserting that while Presidential Decree Nos. 1315 and
1472 authorized the NHA to eject without the necessity of a judicial order all squatter colonies in
government resettlement projects, R.A. No. 7279 discouraged such eviction and demolition without
court order. She further claims that R.A. No. 7279, being the later law, impliedly repealed the
preceding laws following the legal axiom that when a later law is passed with provisions contrary to
the former law, an implied repeal of the former law takes effect.
Issue:
Whether or not R.A. 7279 impliedly repealed P.D. 1472 and P.D. 1315.
Ruling:
Petitioner Magkalas cites Section 28 of R.A. No. 7279 which provides: Eviction or demolition
as a practice shall be discouraged. Eviction or demolition, however, may be allowed under the
following situations:
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a)
b)
c)
When persons or entities occupy danger areas such as esteros, railroad tracks,
garbage dumps, riverbanks, shorelines, waterways and other public places such as
sidewalks, roads, parks and playgrounds;
When government infrastructure projects with available funding are about to be
implemented; or
When there is a court order for eviction and demolition.
Magkalas asserts that this afore-quoted provision is inconsistent with Section 1 of P.D. No.
1315 and Section 2 of P.D. No. 1472, which state as follows:
Sec. 1 (P.D. No. 1315) xxx. The National Housing Authority hereinafter referred to as the
Authority is designated administrator for the national government and is authorized to immediately
take possession, control and disposition of the expropriated properties with the power of demolition of
their improvements. xxx
Sec. 2 (P.D. No. 1315) xxx. The National Housing Authority shall have the power to
summarily eject, without the necessity of judicial order, any and all squatters colonies on government
resettlement projects, as well as any illegal occupants in any homelot, apartment or dwelling unit
owned or administered by it. xxx.
From a careful reading of the foregoing provisions, the Court holds that R.A. No. 7279 does
not necessarily repeal P.D. No. 1315 and P.D. No. 1472 as it does not contain any provision which
categorically and expressly repeals the provisions of P.D. No. 1315 and P.D. No. 1472. Neither could
there be an implied repeal. It is a well-settled rule of statutory construction that repeals by
implication are not favored. The rationale behind the rule is explained as follows:
Repeal of laws should be made clear and expressed. Repeals by implication are not favoured
as laws are presumed to be passed with deliberation and full knowledge of all laws existing on the
subject. Such repeals are not favored for a law cannot be deemed repealed unless it is clearly manifest
that the legislature so intended it. The failure to add a specific repealing clause indicates that the
intent was not to repeal any existing law, unless an irreconcilable inconsistency and repugnancy exist
in the terms of the new and old laws.
The Court finds that there is no irreconcilable conflict or repugnancy between Section 28 of
R.A. No. 7279 and P.D. No. 1315 and No. 1472, rather, they can be read together and harmonized to
give effect to their provision. It should be stressed that Section 28 of R.A. No. 7279 does not totally
and absolutely prohibit eviction and demolition without a judicial order as in fact it provides for
exceptions. Pursuant to established doctrine, the three (3) statutes should be construed in the light
of the objective to be achieved and the evil or mischief to be suppressed by the said laws, and they
should be given such construction as will advance the object, suppress the mischief and secure the
benefits intended. It is worthy to note that the three laws (P.D. No. 1315, P.D. No. 1472 and R.A. No.
7279) have a common objective to address the housing problems of the country by establishing a
comprehensive urban development and housing program for the homeless. For this reason, the
need to harmonize these laws all the more becomes imperative.
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CONFLICT OF LAWS
BANK OF THE PHILIPPINE ISLANDS SECURITIES CORPORATION vs. EDGARDO V. GUEVARA
G.R. No. 167052, March 11, 2015, J. Leonardo-De Castro
In an action for enforcement of foreign judgment, the Court has limited review over the
decision rendered by the foreign tribunal. The Philippine courts cannot pass upon the merits of the
case pursuant to the incorporation clause of the Constitution, unless there is proof of want of
jurisdiction, want of notice to the party, collusion, fraud, or clear mistake of law or fact.
Facts:
Philsec Investment Corporation (PHILSEC) is a domestic stock brokerage firm and BPI
International Finance Limited (BPI-IFL) (previously called AIFL), both formerly owned by Ayala
Corp but was subsequently bought by BPI. PHILSEC was a member of the Makati Stock Exchange
and the rules of the said organization required that a stockbroker maintain an amount of security
equal to at least 50% of a clients outstanding debt.
Guevara was the President of PHILSEC and one of his obligations was to resolve the
outstanding loans of a certain Ventura O. Ducat (Ducat), which the latter obtained separately from
PHILSEC and AIFL. Although Ducat constituted a pledge of his stock portfolio valued at
approximately US$1.4 million, Ducats loans already amounted to US$3.1 million. Because the
security for Ducats debts fell below the 50% requirement of the Makati Stock Exchange, the trading
privileges of PHILSEC was in peril of being suspended.
Ducat proposed to settle his debts by an exchange of assets and offered his property in
Harris County Texas in the US in partnership with 1488 Inc., a US-based corporation. It was
accepted by Ayala Corp through Enrique Zobel, its CEO. Before the reaching finality of the
agreement, Zobel had the property appraised by sending an employee. The employee of Ayala
communicated to Zobel his estimate which was US$2.9 million. However, Guevara was also tasked
by Ayala Corp to have the property appraised and according to William Craig, the former owner of
the property, the fair market value of the land was US$3,365,000.
An agreement was then perfected where ATHONA, which was also owned by Ayala Corp,
should buy the property for US$2,807,209.02 from 1488, the part of the purchase price of which
(US$2.5million) was loaned from Philsec and AIFL and shall execute a promissory note for the
balance. Also in the agreement was that upon receipt of US$2.5million, 1488 shall fully pay the
obligations of Ducat in Philsec and AIFL and shall become the new owner of Ducats pledged stock
portfolio.
After acquiring the Harris County property, ATHONA had difficulty selling the same. As a
result, ATHONA failed to pay its promissory note for the balance of the purchase price property,
and PHILSEC and AIFL refused to release the remainder of Ducats stock portfolio, claiming that
they were defrauded into believing that the said property had a fair market value higher than it
actually
had.
1488 instituted a suit against PHILSEC, AIFL, and ATHONA for (a) misrepresenting that an
active market existed for two shares of stock included in Ducats portfolio when, in fact, said shares
were to be withdrawn from the trading list; (b) conversion of the stock portfolio; (c) fraud, as
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ATHONA had never intended to abide by the provisions of its promissory note when they signed it;
and (d) acting in concert as a common enterprise or in the alternative, that ATHONA was the alter
ego of PHILSEC and AIFL.
PHILSEC, AIFL, and ATHONA filed counterclaims against 1488, Inc., Daic, Craig, Ducat, and
Guevara, for the recovery of damages and excess payment or, in the alternative, the rescission of the
sale of the property, alleging fraud, negligence, and conspiracy on the part of counter-defendants
who knew or should have known that the value of said property was less than the appraisal value
assigned to it by Craig.
The U.S. District Court dropped Guevara as counter-defendant for lack of evidence to
support the allegations against him. The Court concluded that the counterclaims against Edgardo V.
Guevara are frivolous and brought against him simply to humiliate and embarrass him and ordered
Philsec (aka BPI) and AIFL to pay Guevara $49,450 as reasonable punishment. BPI appealed to the
US Court of Appeals which affirmed the decision of the district court.
Guevara then filed with the RTC an action for the enforcement of foreign judgment which
was opposed by BPI on the grounds that it was rendered upon a clear mistake of law or fact and/or
in violation of its right to due process. The RTC acted in favor of Guevara which was affirmed by the
CA. In its Motion for Reconsideration, BPI asked that the case be re-raffled which was granted by
the CA. It was denied for the second time in another division of the CA. Hence, the present petition.
Issue:
Whether or not the trial court erred in not passing upon the merits of the case on the
ground of clear mistake of law or fact and in violation of due process
Ruling:
No. The Court finds the Petition bereft of merit.
In Mijares v. Raada, the Court extensively discussed the underlying principles for the
recognition and enforcement of foreign judgments in Philippine jurisdiction:
There is no obligatory rule derived from treaties or conventions that requires the
Philippines to recognize foreign judgments, or allow a procedure for the
enforcement thereof. However, generally accepted principles of international law,
by virtue of the incorporation clause of the Constitution, form part of the laws of the
land even if they do not derive from treaty obligations. The classical formulation in
international law sees those customary rules accepted as binding result from the
combination two elements: the established, widespread, and consistent practice on
the part of States; and a psychological element known as the opinion juris sive
necessitates (opinion as to law or necessity). Implicit in the latter element is a belief
that the practice in question is rendered obligatory by the existence of a rule of law
requiring it.
Aside from the widespread practice, it is indubitable that the procedure for recognition and
enforcement is embodied in the rules of law, whether statutory or jurisprudential, adopted in
various foreign jurisdictions. In the Philippines, this is evidenced primarily by Section 48, Rule 39
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of the Rules of Court which has existed in its current form since the early 1900s. Certainly, the
Philippine legal system has long ago accepted into its jurisprudence and procedural rules the
viability of an action for enforcement of foreign judgment, as well as the requisites for such valid
enforcement, as derived from internationally accepted doctrines. Again, there may be distinctions
as to the rules adopted by each particular state, but they all prescind from the premise that there is
a rule of law obliging states to allow for, however generally, the recognition and enforcement of a
foreign judgment. The bare principle, to our mind, has attained the status of opinio juris in
international practice.
This is a significant proposition, as it acknowledges that the procedure and requisites
outlined in Section 48, Rule 39 derive their efficacy not merely from the procedural rule, but by
virtue of the incorporation clause of the Constitution. Rules of procedure are promulgated by the
Supreme Court, and could very well be abrogated or revised by the high court itself. Yet the
Supreme Court is obliged, as are all State components, to obey the laws of the land, including
generally accepted principles of international law which form part thereof, such as those ensuring
the qualified recognition and enforcement of foreign judgments. (Citations omitted.)
An action for the enforcement of a foreign judgment or final order in this jurisdiction is
governed by Rule 39, Section 48 of the Rules of Court, which provides:
SEC. 48. Effect of foreign judgments or final orders. The effect of a judgment or final
order of a tribunal of a foreign country, having jurisdiction to render the judgment
or final order is as follows:
(a) In case of a judgment or final order upon a specific thing, the judgment or final
order is conclusive upon the title to the thing; and
(b) In case of a judgment or final order against a person, the judgment or final order
is presumptive evidence of a right as between the parties and their successors in
interest by a subsequent title.
In either case, the judgment or final order may be repelled by evidence of a want of
jurisdiction, want of notice to the party, collusion, fraud, or clear mistake of law or
fact.
As stated in Section 48, Rule 39, the actionable issues are generally restricted to a review of
jurisdiction of the foreign court, the service of personal notice, collusion, fraud, or mistake of fact or
law. The limitations on review [are] in consonance with a strong and pervasive policy in all legal
systems to limit repetitive litigation on claims and issues. Otherwise known as the policy of
preclusion, it seeks to protect party expectations resulting from previous litigation, to safeguard
against the harassment of defendants, to insure that the task of courts not be increased by neverending litigation of the same disputes, and in a larger sense to promote what Lord Coke in
the Ferrers Case of 1599 stated to be the goal of all law: rest and quietness. If every judgment of a
foreign court were reviewable on the merits, the plaintiff would be forced back on his/her original
cause of action, rendering immaterial the previously concluded litigation. (Emphases supplied,
citations omitted.)
As the foregoing jurisprudence had established, recognition and enforcement of a foreign
judgment or final order requires only proof of fact of the said judgment or final order. In an
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action in personam, as in the case at bar, the foreign judgment or final order enjoys the disputable
presumption of validity. It is the party attacking the foreign judgment or final order that is tasked
with the burden of overcoming its presumptive validity. A foreign judgment or final order may only
be repelled on grounds external to its merits, particularly, want of jurisdiction, want of notice to the
party, collusion, fraud, or clear mistake of law or fact.
Contrary to the claims of BPI, both the RTC and the Court of Appeals carefully considered
the allegations, arguments, and evidence presented by petitioner to repel the Order dated March
13, 1990 of the U.S. District Court in Civil Action No. H-86-440. Worthy of reproducing herein are
the following portions of the RTC judgment:
[Petitioners] contention that the judgment sought to be enforced herein is violative
of its right to due process and contrary to public policy because the Houston Court
relied upon Exhibit 91 (which is [petitioner BPI Securities] Exh. 1 in this case) and
the US Court disregarded the evidence on record in the Houston Action is
unavailing. Whether or not said Exhibit 91 (petitioners Exh. 1) is inadmissible or
is not entitled to any weight is a question which should have been addressed to the
US of Court of Appeals by [petitioner]. To ask a Philippine court to pass upon the
admissibility or weight of Exh. 91 is violative of our public policy not to substitute
our judgment for that of a competent court of another jurisdiction.
Certainly, under these circumstances, the claim of violation of due process cannot be
sustained since [petitioner] was given reasonable opportunity to present its side
before the imposition of sanctions.
The Court is unmoved by petitioners allegations of denial of due process because of its U.S.
counsels exorbitant fees and negligence. As aptly pointed out by respondent in his Memorandum:
On the specific claim that petitioner has been denied legal representation in the
United States in view of the exorbitant legal fees of US counsel, petitioner is now
estopped from asserting that the costs of litigation resulted in a denial of due
process because it was petitioner which impleaded Guevara. If petitioner cannot
prosecute a case to its final stages, then it should not have filed a counterclaim
against Guevara in the first place. Moreover, there is no showing that petitioner
could not find a less expensive counsel. Surely, petitioner could have secured the
services of another counsel whose fees were more affordable.
Moreover, petitioner is bound by the negligence of its counsel. The declarations of the
Court in Gotesco Properties, Inc. v. Moral is applicable to petitioner:
The general rule is that a client is bound by the acts, even mistakes, of his counsel in
the realm of procedural technique. The basis is the tenet that an act performed by
counsel within the scope of a general or implied authority is regarded as an act of
the client. While the application of this general rule certainly depends upon the
surrounding circumstances of a given case, there are exceptions recognized by this
Court: (1) where reckless or gross negligence of counsel deprives the client of due
process of law; (2) when its application will result in outright deprivation of the
clients liberty or property; or (3) where the interests of justice so require.
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The present case does not fall under the said exceptions. In Amil v. Court of Appeals,the
Court held that to fall within the exceptional circumstance relied upon x x x, it must be shown that
the negligence of counsel must be so gross that the client is deprived of his day in court. Thus,
where a party was given the opportunity to defend [its] interests in due course, [it] cannot be said
to have been denied due process of law, for this opportunity to be heard is the very essence of due
process. To properly claim gross negligence on the part of the counsel, the petitioner must show
that the counsel was guilty of nothing short of a clear abandonment of the clients cause. (Citations
omitted.)
HUMAN RELATIONS
UNJUST ENRICHMENT
R.V. SANTOS COMPANY, INC. vs. BELLE CORPORATION,
G.R. Nos. 159561-62, October 3, 2012, J. Leonardo-De Castro
Expounding on this provision in a recent case, we have held that the principle of unjust
enrichment essentially contemplates payment when there is no duty to pay, and the person who
receives the payment has no right to receive it.
In light of the overpayment, it seems specious for petitioner to claim that it has suffered
damages from respondents refusal to pay its Progress Billing, which had been proven to be excessive
and inaccurate. Bearing in mind the law and jurisprudence on unjust enrichment, we hold that
petitioner is indeed liable to return what it had received beyond the actual value of the work it had
done for respondent.
Facts:
Petitioner R.V Santos Company, Inc and Respondent Belle Corporation entered into a
Construction Contract. As stipulated therein, petitioner undertook to construct a detailed
underground electrical network for respondents Tagaytay Woodlands Condominium Project
located in Tagaytay City. Under said contract, respondent advanced to petitioner fifty percent
(50%) of the contract price. The project was supposed to be completed and ready for operation
within 180 calendar days from receipt by petitioner of the notice to commence from respondent,
provided that all civil related works necessary for the execution of the project works were in place.
However, the project was allegedly not completed within the stipulated time frame. Subsequently,
respondent placed additional work orders with petitioner.
Petitioner submitted its Progress Billing to respondent claiming 53.3% accomplishment of
the project. After deducting 50% of the Progress Billing on the main project, the total amount billed
by petitioner was P5,347,608.03. Purportedly relying on petitioners representations, respondents
project engineer recommended approval of the Progress Billing. Subsequently, however,
respondent reputedly made its own assessment of the work accomplished by petitioner and
determined that it was only worth P 4,676,724.64. Respondent supposedly relayed its findings to
petitioner. The parties representatives met and during that meeting petitioner allegedly advised
Belle that it will not return to the site until the outstanding balance due to it is paid.
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Respondent engaged the services of an assessor, R.A. Mojica and Partners (R.A. Mojica), to
determine the value of the work done by petitoner. After it conducted an electrical works audit, R.A.
`Mojica reported to respondent that the work accomplished by petitioner on the main project only
amounted to P4,868,443.59 and not P7,159,216.05 as billed by petitioner.
Thus, relying on the arbitration clause in the Construction Contract, Belle brought the
matter before the CIAC and prayed that petitioner be directed to (a) reimburse Belle the amount of
P 4,940,108.15, and (b) pay Belle the amount of P 2,200,000.00 as liquidated damages CIAC held
that respondent indeed made an overpayment to petitoner. The Court of Appeals issued a Decision
dismissing the petitions and affirming the CIAC Decision.
Issue:
1. Whether or not respondent Belles approval of the Progress Billing is final and binding and
may no longer be withdrawn.
2. Whether or not Respondent Belle should be made liable to RVSCI for damages
Ruling:
Court finds no merit in the Petition.
1. No, it can be withdrawn.
After careful consideration of the contentions of the parties, we agree with the CIACs
finding, as affirmed by the Court of Appeals, that the owners approval of progress billing is merely
provisional. This much can be gleaned from Article VI, Section 6.2(c) of the Construction Contract
which states that "[t]he acceptance of work from time to time for the purpose of making progress
payment shall not be considered as final acceptance of the work under the Contract." There can be
no other interpretation of the said provision but that progress billings are but preliminary
estimates of the value of the periodic accomplishments of the contractor. Otherwise, there would be
no need to include Article VI, Section 6.2(c) in the Contract since final acceptance of the contractors
work would come as a matter of course if progress billings were, as RVSCI contends, final and
binding upon the owner. On the contrary, progress billings and final acceptance of the work were
clearly still subject to review by the owner.
Moreover, we see no reason to disturb the CIAC ruling that the foregoing contractual
provision is consistent with industry practice, as can be deduced from Articles 22.02, 22.04 and
22.09 of CIAP Document 102. Based on these provisions, it is readily apparent that, whether in the
case of progress billings or of turn-over of completed work, the owner has the right to verify the
contractors actual work accomplishment prior to payment.
In all, we approve the CIACs pronouncement that "[t]he owner is, therefore, not estopped
from questioning a prior evaluation of the percentage of accomplishment of the contractor and to
downgrade such accomplishment after re-evaluation. It is the right of every owner to re-evaluate or
re-measure the work of its contractor during the progress of the work."
2. No, Respondents Belle cannot be held liable to petitioner for damages.
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It is apropos to state here that the rationale underlying the owners right to seek an
evaluation of the contractors work is the right to pay only the true value of the work as may be
reasonably determined under the circumstances.
This is consistent with the law against unjust enrichment under Article 22 of the Civil Code
which states that "every person who through an act of performance by another, or any other means,
acquires or comes into possession of something at the expense of the latter without just or legal
ground, shall return the same to him." Expounding on this provision in a recent case, we have held
that "the principle of unjust enrichment essentially contemplates payment when there is no duty to
pay, and the person who receives the payment has no right to receive it."
In the case at bar, we uphold the CIACs factual finding that the value of the total work
accomplished by RVSCI on the main project was P4,868,443.59 while the cost of the additional
work amounted to P1,768,000.00 plus P22,442.27, for a total of P6,658,885.86. On the other hand,
Belle had made payments in the total amount of P11,598,994.44.36 It is thus undeniable that RVSCI
had received payments from Belle in excess of the value of its work accomplishment.
In light of this overpayment, it seems specious for RVSCI to claim that it has suffered
damages from Belles refusal to pay its Progress Billing, which had been proven to be excessive and
inaccurate. Bearing in mind the law and jurisprudence on unjust enrichment, we hold that RVSCI is
indeed liable to return what it had received beyond the actual value of the work it had done for
Belle.
On a related note, this Court cannot grant RVSCIs claim for the value of materials and
equipment allegedly left at the site. As observed by the CIAC, this particular claim was not included
in the Terms of Reference and, hence, could not be litigated upon or proved during the CIAC
proceedings.
PERSONS
PSYCHOLOGICAL INCAPACITY
MARIETTA C. AZCUETA vs. REPUBLIC OF THE PHILIPPINES AND THE COURT OF APPEALS
G.R. No. 180668, May 26, 2009, J. Leonardo- De Castro
There is no requirement that the defendant/respondent spouse should be personally examined
by a physician or psychologist as a condition sine qua non for the declaration of nullity of marriage
based on psychological incapacity.
Facts:
Petitioner Marietta C. Azcueta and Rodolfo Azcueta met in 1993. Less than two months after
their first meeting, they got married. At the time of their marriage, petitioner was 23 years old
while respondent was 28. They separated in 1997 after four years of marriage. They have no
children. On March 2, 2002, Marietta filed with the Regional Trial Court of Antipolo City, Branch 72,
a petition for declaration of absolute nullity of marriage. In her petition and during her testimony,
Marietta claimed that her husband Rodolfo was psychologically incapacitated to comply with the
essential obligations of marriage. According to her, Rodolfo was emotionally immature,
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irresponsible and continually failed to adapt himself to married life and perform the essential
responsibilities and duties of a husband. Rodolfo never bothered to look for a job; every time
Rodolfo would get drunk he became physically violent towards her. Their sexual relationship was
also unsatisfactory. He did not even want to have a child yet because he claimed he was not ready.
In the course of the trial, petitioner presented Dr. Cecilia Villegas, a psychiatrist. She testified that
based on the information gathered from petitioner, she found that Rodolfo showed that he was
psychologically incapacitated to perform his marital duties and responsibilities. Dr. Villegas
concluded that he was suffering from Dependent Personality Disorder associated with severe
inadequacy related to masculine strivings. Based on Mariettas evidence, the RTC rendered a
Decision dated October 25, 2004, declaring the marriage between petitioner and Rodolfo as null
and void ab initio. The Solicitor General appealed the RTC Decision objecting that (a) the psychiatric
report of Dr. Villegas was based solely on the information provided by petitioner and was not based
on an examination of Rodolfo; and (b) there was no showing that the alleged psychological defects
were present at the inception of marriage or that such defects were grave, permanent and
incurable. The CA reversed the RTC and essentially ruled that petitioner failed to sufficiently prove
the psychological incapacity of Rodolfo hence, this petition.
Issue:
Whether or not the totality of the evidence presented is adequate to sustain a finding that
Rodolfo is psychologically incapacitated to comply with his essential marital obligations.
Ruling:
Yes, they are.
In Republic of the Philippines v. Court of Appeals and Molina stringent guidelines in the
interpretation and application of Article 36 of the Family Code, to wit: (1) The burden of proof to
show the nullity of the marriage belongs to the plaintiff. Any doubt should be resolved in favor of
the existence and continuation of the marriage and against its dissolution and nullity. (2) The root
cause of the psychological incapacity must be: (a) medically or clinically identified, (b) alleged in
the complaint, (c) sufficiently proven by experts and (d) clearly explained in the decision. Article 36
of the Family Code requires that the incapacity must be psychological. The evidence must convince
the court that the parties, or one of them, was mentally or psychically ill to such an extent that the
person could not have known the obligations he was assuming, or knowing them, could not have
given valid assumption thereof. (3) The incapacity must be proven to be existing at the time of the
celebration of the marriage. The manifestation of the illness need not be perceivable at such time,
but the illness itself must have attached at such moment, or prior thereto. (4) Such incapacity must
also be shown to be medically or clinically permanent or incurable. Furthermore, such incapacity
must be relevant to the assumption of marriage obligations. (5) Such illness must be grave enough
to bring about the disability of the party to assume the essential obligations of marriage. The illness
must be shown as downright incapacity or inability, not a refusal, neglect or difficulty, much less ill
will. (6) The essential marital obligations must be those embraced by Articles 68 up to 71 of the
Family Code as regards the husband and wife as well as Articles 220, 221 and 225 of the same Code
in regard to parents and their children. (7) Interpretations given by the National Appellate
Matrimonial Tribunal of the Catholic Church in the Philippines, while not controlling or decisive,
should be given great respect by our courts.
After a thorough review of the records of the case, it was found that there was sufficient
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compliance with Molina to warrant the annulment of the parties marriage. More importantly and
contrary to the Solicitor Generals contention, there is no requirement that the
defendant/respondent spouse should be personally examined by a physician or psychologist as a
condition sine qua non for the declaration of nullity of marriage based on psychological incapacity.
What matters is whether the totality of evidence presented is adequate to sustain a finding of
psychological incapacity.
JOSE REYNALDO B. OCHOSA vs. BONA J. ALANO and REPUBLIC OF THE PHILIPPINES
G.R. No. 167459, January 26, 2011, J. Leonardo-De Castro
Article 36 of the Family Code is not to be confused with a divorce law that cuts the marital
bond at the time the causes therefore manifest themselves. It refers to a serious psychological illness
afflicting a party even before the celebration of the marriage. It is a malady so grave and so
permanent as to deprive one of awareness of the duties and responsibilities of the matrimonial bond
one is about to assume. Judicial precedents regarding the evidentiary requirements in psychological
incapacity cases that must be applied.
Facts:
It appears that Jose met Bona in August 1973 when he was a young lieutenant in the AFP
while the latter was a seventeen-year-old first year college drop-out. They had a whirlwind
romance that culminated into sexual intimacy and eventual marriage on 27 October 1973 before
the Honorable Judge Cesar S. Principe in Basilan. The couple did not acquire any property. Neither
did they incur any debts. Their union produced no offspring. In 1976, however, they found an
abandoned and neglected one-year-old baby girl whom they later registered as their daughter,
naming her Ramona Celeste Alano Ochosa.
During their marriage, Jose was often assigned to various parts of the Philippine archipelago
as an officer in the AFP. Bona did not cohabit with him in his posts, preferring to stay in her
hometown of Basilan. Neither did Bona visit him in his areas of assignment, except in one (1)
occasion when Bona stayed with him for four (4) days.
It appears that Bona was an unfaithful spouse. Even at the onset of their marriage when Jose
was assigned in various parts of the country, she had illicit relations with other men. Bona
apparently did not change her ways when they lived together at Fort Bonifacio; she entertained
male visitors in her bedroom whenever Jose was out of their living quarters. On one occasion, Bona
was caught by Demetrio Bajet y Lita, a security aide, having sex with Joses driver, Corporal Gagarin.
Rumors of Bonas sexual infidelity circulated in the military community. When Jose could no longer
bear these rumors, he got a military pass from his jail warden and confronted Bona.
During their confrontation, Bona admitted her relationship with Corporal Gagarin who also
made a similar admission to Jose. Jose drove Bona away from their living quarters. Bona left with
Ramona and went to Basilan. In 1994, Ramona left Bona and came to live with Jose. It is Jose who is
currently supporting the needs of Ramona.
Jose filed a Petition for Declaration of Nullity of Marriage, seeking to nullify his marriage to
Bona on the ground of the latters psychological incapacity to fulfill the essential obligations of
marriage.
Page 11 of 159

Trial on the merits of the case ensued. Petitioner along with his two military aides,
Gertrudes Himpayan Padernal and Demetrio Bajet y Lita, testified about Bonas marital infidelity
during the marriage. The fourth and final witness was Elizabeth E. Rondain, a psychiatrist, who
testified that after conducting several tests, she reached the conclusion that respondent was
suffering from histrionic personality disorder.
According to Rondain, Bonas psychological disorder was traceable to her family history,
having for a father a gambler and a womanizer and a mother who was a battered wife. There was
no possibility of a cure since respondent does not have an insight of what is happening to her and
refused to acknowledge the reality.
The trial court granted the petition and nullified the parties marriage. The Court of Appeals
reversed and set aside the trial court Decision. Jose filed a Motion for Reconsideration but this was
denied by the Court of Appeals. Hence, this Petition.
Issue:
Whether or not Bona should be deemed psychologically incapacitated to comply with the
essential marital obligations.
Ruling:
The petition is without merit.
In the landmark case of Santos v. Court of Appeals, we observed that psychological
incapacity must be characterized by (a) gravity, (b) juridical antecedence, and (c) incurability. The
incapacity must be grave or serious such that the party would be incapable of carrying out the
ordinary duties required in marriage; it must be rooted in the history of the party antedating the
marriage, although the overt manifestations may emerge only after marriage; and it must be
incurable or, even if it were otherwise, the cure would be beyond the means of the party involved.
We are sufficiently convinced, after a careful perusal of the evidence presented in this case,
that Bona had been, on several occasions with several other men, sexually disloyal to her spouse,
Jose. Likewise, we are persuaded that Bona had indeed abandoned Jose. However, we cannot apply
the same conviction to Joses thesis that the totality of Bonas acts constituted psychological
incapacity as determined by Article 36 of the Family Code. There is inadequate credible evidence
that her defects were already present at the inception of, or prior to, the marriage. In other words,
her alleged psychological incapacity did not satisfy the jurisprudential requisite of juridical
antecedence.
Dr. Rondains testimony and psychiatric evaluation report do not provide evidentiary
support to cure the doubtful veracity of Joses one-sided assertion. Even if we take into account the
psychiatrists conclusion that Bona harbors a Histrionic Personality Disorder that existed prior to
her marriage with Jose and this mental condition purportedly made her helplessly prone to
promiscuity and sexual infidelity, the same cannot be taken as credible proof of antecedence since
the method by which such an inference was reached leaves much to be desired in terms of meeting
the standard of evidence required in determining psychological incapacity.
Verily, Dr. Rondain evaluated Bonas psychological condition indirectly from the
information gathered solely from Jose and his witnesses. This factual circumstance evokes the
Page 12 of 159

possibility that the information fed to the psychiatrist is tainted with bias for Joses cause, in the
absence of sufficient corroboration.
Even if we give the benefit of the doubt to the testimonies at issue since the trial court judge
had found them to be credible enough after personally witnessing Jose and the witnesses testify in
court, we cannot lower the evidentiary benchmark with regard to information on Bonas premarital history which is crucial to the issue of antecedence in this case because we have only the
word of Jose to rely on. In fact, Bonas dysfunctional family portrait which brought about her
Histrionic Personality Disorder as painted by Dr. Rondain was based solely on the assumed truthful
knowledge of Jose, the spouse who has the most to gain if his wife is found to be indeed
psychologically incapacitated. No other witness testified to Bonas family history or her behavior
prior to or at the beginning of the marriage. Both Mrs. Padernal and Corporal Bajet came to know
Bona only during their employment in petitioners household during the marriage. It is undisputed
that Jose and Bona were married in 1973 while Mrs. Padernal and Corporal Bajet started to live
with petitioners family only in 1980 and 1986, respectively.
We have previously held that, in employing a rigid and stringent level of evidentiary
scrutiny to cases like this, we do not suggest that a personal examination of the party alleged to be
psychologically incapacitated is mandatory; jurisprudence holds that this type of examination is not
a mandatory requirement. While such examination is desirable, we recognize that it may not be
practical in all instances given the oftentimes estranged relations between the parties. For a
determination though of a partys complete personality profile, information coming from persons
with personal knowledge of the juridical antecedents may be helpful. This is an approach in the
application of Article 36 that allows flexibility, at the same time that it avoids, if not totally
obliterate, the credibility gaps spawned by supposedly expert opinion based entirely on doubtful
sources of information.
However, we have also ruled in past decisions that to make conclusions and generalizations
on a spouses psychological condition based on the information fed by only one side, similar to what
we have pointed out in the case at bar, is, to the Courts mind, not different from admitting hearsay
evidence as proof of the truthfulness of the content of such evidence.
It is apparent from the above-cited testimonies that Bona, contrary to Joses assertion, had
no manifest desire to abandon Jose at the beginning of their marriage and was, in fact, living with
him for the most part of their relationship from 1973 up to the time when Jose drove her away from
their conjugal home in 1988. On the contrary, the record shows that it was Jose who was constantly
away from Bona by reason of his military duties and his later incarceration. A reasonable
explanation for Bonas refusal to accompany Jose in his military assignments in other parts of
Mindanao may be simply that those locations were known conflict areas in the seventies. Any doubt
as to Bonas desire to live with Jose would later be erased by the fact that Bona lived with Jose in
their conjugal home in Fort Bonifacio during the following decade.
In view of the foregoing, the badges of Bonas alleged psychological incapacity, i.e., her
sexual infidelity and abandonment, can only be convincingly traced to the period of time after her
marriage to Jose and not to the inception of the said marriage.
We have stressed time and again that Article 36 of the Family Code is not to be confused
with a divorce law that cuts the marital bond at the time the causes therefore manifest
themselves. It refers to a serious psychological illness afflicting a party even before the celebration
Page 13 of 159

of the marriage. It is a malady so grave and so permanent as to deprive one of awareness of the
duties and responsibilities of the matrimonial bond one is about to assume. These marital
obligations are those provided under Articles 68 to 71, 220, 221 and 225 of the Family Code.
While we are not insensitive to petitioners suffering in view of the truly appalling and
shocking behavior of his wife, still, we are bound by judicial precedents regarding the evidentiary
requirements in psychological incapacity cases that must be applied to the present case.
PROPERTY RELATIONS OF THE SPOUSES (FAMILY CODE)
HEIRS OF DOMINGO HERNANDEZ, SR., namely: SERGIA V. HERNANDEZ (Surviving Spouse),
DOMINGO V. HERNANDEZ, JR., and MARIA LEONORA WILMA HERNANDEZ vs. PLARIDEL
MINGOA, SR., DOLORES CAMISURA, MELANIE MINGOA, AND QUEZON CITY REGISTER OF
DEEDS
G.R. No. 146548, December 18 2009, J. Leonardo-De Castro
When the sale is made before the effectivity of the Family Code, the applicable law is the Civil
Code. Article 173 of the Civil Code provides that the disposition of conjugal property without the wife's
consent is not void but merely voidable.
Facts:
In 1994, a complaint was filed by heirs of Domingo Hernandez, Sr., namely, spouse Sergia
Hernandez and their surviving children Domingo, Jr. and Maria Leonora Wilma, asking for (a) the
annulment and/or declaration of nullity of TCT No. 290121 including all its derivative titles, the
Irrevocable Special Power of Attorney (SPA) in favor of Dolores Camisura, the SPA in favor of
Plaridel Mingoa, Sr., and the Deed of Absolute Sale of Real Estate executed by Plaridel Mingoa, Sr. in
favor of Melanie Mingoa for being products of forgery and falsification; and (b) the reconveyance
and/or issuance to them the certificate of title covering the subject property.
In 1958, Domingo Hernandez, Sr. and his spouse were awarded a piece of real property by
the Philippine Homesite and Housing Corporation (PHHC) by way of salary deduction. In 1963,
having paid in full the entire amount of P6,888.96, a Deed of Absolute Sale of the property was
executed by the PHHC in their favor. Title issued in their name bears an annotation of the retention
period of the property by the awardee (restriction of any unauthorized sale to third persons within
a certain period). Tax payments due on the property were religiously paid as evidenced by receipts
under the Hernandezs name.
Hernandez, Sr. died intestate in 1983 and it was only after his burial that his heirs found out
that the title was already cancelled a year before and in lieu thereof, TCT No. 290121 was issued to
the Melanie Mingoa. The petitioner heirs also allege that because of financial difficulties, they were
only able to file a complaint in 1995 after consulting with several lawyers.
According to respondents, Hernandez, Sr. was awarded by the PHHC the Right to Purchase
the property in question. However, the late Hernandez, Sr. failed to pay all the installments due on
the said property. Afraid that he would forfeit his, Hernandez, Sr. sold to Dolores Camisura his
rights for the sum of P6,500.00 in 1963, through a deed of transfer of rights. Simultaneous to this,
Hernandez, Sr. and his spouse executed an irrevocable special power of attorney, appointing
Page 14 of 159

Dolores Camisura as their attorney-in-fact with express power to sign, execute and acknowledge
any contract of disposition, alienation and conveyance of her right over the aforesaid parcel of land.
This SPA was executed for the purpose of securing her right to transfer the property to a third
person considering that there was a prohibition to dispose of the property by the original
purchaser within one year from full payment.
In 1964, Dolores Camisura sold her right over the said property to Plaridel Mingoa for
P7,000.00. Camisura then executed a similar irrevocable power of attorney and a deed of sale of
right in a residential land and improvements therein in favor of Plaridel Mingoa. Plaridel Mingoa
took possession of the said property and began paying all the installments due on the property to
PHHC. In 1978, Plaridel Mingoa sold to his eldest child, Melanie Mingoa, the property in question
for P18,000.00.It is further claimed that since 1966 until 1982, Plaridel Mingoa religiously paid all
the taxes due on the said property; and that from 1983 up to the present, Melanie Mingoa paid all
the property taxes due thereon aside from having actual possession of the said property.
The trial court ruled in favor of the heirs, declaring the titles and documents null and void.
On appeal, such ruling was reversed and set aside.
Issue:
(1) Whether there was a valid alienation involving the subject property; and
(2) Whether the action impugning the validity of such alienation has prescribed and/or was
barred by laches.
Ruling:
(1) Yes, the sale was voidable and thus, valid until annulled.
The Deed of Transfer of Rights, executed by Hernandez, Sr. in Camisuras favor, expressly
states that the former, in consideration of the amount of P6,500.00, transfers his rights over the
subject property to the latter. Notably, such deed was simultaneously executed with the SPA in
1963. The Court concluded that the SPA executed was, in reality, an alienation involving the subject
property.
The consent of Hernandez, Sr. to the contract is undisputed, thus, the sale of his share in the
conjugal property was valid. With regard to the consent of his wife, the trial court found that it was
lacking because said wifes signature on the SPA was falsified. Notably, even the appellate court
observed that the forgery was so blatant as to be remarkably noticeable to the naked eye of an
ordinary person. The Court affirmed both lower courts' findings regarding the forgery.
However, the wifes lack of consent to the sale did not render the transfer of her share
invalid. Petitioners contend that such lack of consent rendered the SPAs and the deed of sale
fictitious, hence null and void in accordance with Article 1409 of the Civil Code. Petitioners likewise
contend that an action for the declaration of the non-existence of a contract under Article 1410
does not prescribe.
The Court held that Articles 1409 and 1410 are not applicable to the matter. Said property
was awarded in 1958. The assailed SPAs were executed in 1963 and 1964. Title in the name of
Page 15 of 159

Domingo Hernandez, Sr. covering the subject property was issued in 1966. The sale of the property
to Melanie Mingoa and the issuance of a new title in her name happened in 1978. Since all these
events occurred before the Family Code took effect in 1988, the provisions of the New Civil Code
govern these transactions.
In Sps. Alfredo v. Sps. Borras, it was held that when the sale is made before the effectivity of
the Family Code, the applicable law is the Civil Code. Article 173 of the Civil Code provides that the
disposition of conjugal property without the wife's consent is not void but merely voidable.
As provided in Art. 173, the wife may, during the marriage, and within ten years from the
transaction questioned, ask the courts for the annulment of any contract of the husband entered
into without her consent, when such consent is required, or any act or contract of the husband
which tends to defraud her or impair her interest in the conjugal partnership property. Should the
wife fail to exercise this right, she or her heirs, after the dissolution of the marriage, may demand
the value of property fraudulently alienated by the husband.
(2) Yes, it has already prescribed and already barred by laches.
The right of action of the petitioners accrued in 1963. Petitioners filed the action for
reconveyance in 1995. Even if we were to consider that their right of action arose when they
learned of the cancellation and issuance of new title in 1993, still, 12 years have lapsed since such
discovery, and they filed the petition beyond the period allowed by law. Moreover, when
petitioners filed the complaint, the conjugal partnership of property had already been terminated
by virtue of the Hernandez Sr.s death. Clearly, petitioners action has prescribed.
Under Art. 173, an action for the annulment of any contract entered into by the husband
without the wifes consent must be filed (1) during the marriage; and (2) within 10 years from the
transaction questioned. Where any one of these two conditions is lacking, the action will be
considered as having been filed out of time.
Petitioners action has likewise become stale, as it is barred by laches. Laches means the
failure or neglect for an unreasonable and unexplained length of time to do that which, by
observance of due diligence, could or should have been done earlier. It is negligence or omission to
assert a right within a reasonable time, warranting the presumption that the party entitled to assert
his right either has abandoned or declined to assert it. Laches thus operates as a bar in equity.
Petitioners' unreasonably long period of inaction in asserting their purported rights over
the subject property weighs heavily against them. As correctly ruled by the Court of Appeals, there
existed a period of 17 years during which time Hernandez, Sr. never even questioned the
respondents possession of the property; also there was another interval of 12 years after
discovering the cancellation of their title before the Heirs of Hernandez instituted an action for
reconveyance.
The fact that Mingoas were able to take actual possession of the subject property for such a
long period without any form of cognizable protest from Hernandez, Sr. and the petitioners strongly
calls for the application of the doctrine of laches.
PROPERTY
Page 16 of 159
OWNERSHIP
SPS. AMBROSIO DECALENG (substituted by his heirs) and JULIA "WANAY" DECALENG vs.
BISHOP OF THE MISSIONARY DISTRICT OF THE PHILIPPINE ISLANDS OF PROTESTANT
EPISCOPAL CHURCH IN THE UNITED STATES OF AMERICA, otherwise known as THE
PHILIPPINE EPISCOPAL CHURCH
G.R. No. 171209, June 27, 2012, J. Leonardo-De Castro
A Torrens title cannot be attacked collaterally, and the issue on its validity can be raised only
in an action expressly instituted for that purpose. A collateral attack is made when, in another action
to obtain a different relief, the certificate of title is assailed as an incident in said action. Spouses
Decaleng only sought the dismissal of the complaint of PEC-EDNP plus the grant of their counterclaim
for the payment of moral damages, exemplary damages, litigation expenses, and attorneys fees. They
conspicuously did not pray for the annulment or cancellation of Certificate of Title No. 1. Evidently, the
Spouses Decalengs attack on the validity, as well as the existence of Certificate of Title No. 1 is only
incidental to their defense against the accion publiciana and accion reinvindicatoria instituted by
PEC-EDNP, hence, merely collateral.
Facts:
The Bishop of the Missionary District of the Philippine Islands of the Protestant Episcopal
Church in the United States of America, otherwise known as the Philippine Episcopal Church (PEC),
is a religious corporation duly organized and registered under the laws of the Republic of the
Philippines. One of its dioceses is the Episcopal Diocese of Northern Philippines (EDNP).
On, PEC-EDNP filed before the Regional Trial Court a Complaint for Accion Reinvindicatoria
and Accion Publiciana against Ambrosio Decaleng and Fabian Lopez (Lopez). PEC-EDNP alleged
that it is the owner of two parcels of land in the Municipality of Sagada, located in areas of as Kengeka and Ken-gedeng. According to PEC-EDNP, the Ken-geka property is covered by Certificate of
Title No. 1 of the Register of Deeds of Mountain Province, issued on 1915, in the name of U.S.
Episcopal Church. PEC-EDNP asserted that the U.S. Episcopal Church donated the Ken-geka
property, among other real properties, to the PEC by virtue of a Deed of Donation executed on 1974.
Around the second quarter of 1989, Ambrosio Decaleng entered and cultivated a portion of about
1,635 square meters of the Ken-geka property despite the protestations of PEC-EDNP
representatives.
When it comes to the Ken-gedeng property, PEC-EDNP averred that it and its predecessorsin-interest occupied the Ken-gedeng property openly, adversely, continuously, and notoriously in
en concepto de dueo since the American Missionaries arrived in the Mountain Province in 1901.
PEC-EDNP and its predecessors-in-interest have introduced valuable improvements on the Kengedeng property through the years. During the first quarter of 1987, Ambrosio Decaleng illegally
and forcibly entered two portions of the Ken-gedeng property. Ambrosio Decaleng made matters
worse by selling Portion 2 of the Ken-gedeng property to Fabian Lopez.
Ambrosio Decaleng and Lopez filed their Answer alleging that Certificate of Title No. 1 was
inaccurate and depicted a parcel of land much bigger than that generally believed to be owned by
PEC-EDNP and that the properties occupied by Ambrosio Decaleng were outside the properties of
PEC-EDNP. They then moved for the dismissal of the complaint against them.
Page 17 of 159
Issue:
Whether or not PEC- EDNP is the rightful owner of the subject lands.
Ruling:
Yes.
An accion reinvindicatoria is an action to recover ownership over real property. Article 434
of the New Civil Code provides that to successfully maintain an action to recover the ownership of a
real property, the person who claims a better right to it must prove two things: first, the identity of
the land claimed by describing the location, area, and boundaries thereof; and second, his title
thereto. The Court finds that PEC-EDNP was able to successfully prove both requisites by
preponderance of evidence, both documentary and testimonial. The identity of the properties over
which PEC-EDNP asserts ownership is well-established. The Ken-geka property is covered by
Certificate of Title No. 1, while the Ken-gedeng property is identified as Lot 3 of Survey Plan PSU118424.
PEC-EDNP likewise proved its title to the Ken-geka and Ken-gedeng properties. The Kengeka property was registered in the name of the U.S. Episcopal Church under Certificate of Title No.
1. It was conveyed by the U.S. Episcopal Church to PEC through a Deed of Donation dated April 24,
1974. It was also declared by the U.S. Episcopal Church and PEC-EDNP for real property tax
purposes. Although not yet covered by any certificate of title, the Ken-gedeng property had been
occupied under claim of title (en concepto de dueo) by PEC-EDNP and its predecessor-in-interest,
the U.S. Episcopal Church, since the latters arrival in 1901. It was also declared by the U.S.
Episcopal Church and PEC-EDNP for real property tax purposes. PEC-EDNPs officers, priests, and
employees, as well as the Sagada residents testified as to actual possession by PEC-EDNP of the
Ken-geka and Ken-gedeng properties by the introduction of improvements such as permanent
buildings, pine trees, fruit trees, and vegetable gardens thereon.
Finally, Spouses Decalengs contention that Certificate of Title No. 1 does not exist
constitutes a collateral attack of Certificate of Title No. 1. It must be noted that a Torrens title
cannot be attacked collaterally, and the issue on its validity can be raised only in an action expressly
instituted for that purpose. A collateral attack is made when, in another action to obtain a different
relief, the certificate of title is assailed as an incident in said action. In this case, the original
complaint filed by PEC-EDNP before the RTC is for accion publiciana and accion reinvindicatoria
(for recovery of possession and ownership) of the Ken-geka and Ken-gedeng properties. In said
complaint, PEC-EDNP alleged ownership of the Ken-geka property as evidenced by Certificate of
Title No. 1. In their defense, the spouses Decaleng raised issues as to the validity of Certificate of
Title No. 1 (by asserting in their Answer that Certificate of Title No. 1 covered an area much larger
than that actually owned by PEC-EDNP), and as to the existence of Certificate of Title No. 1 (by
presenting Mountain Province Register of Deeds Dailay-Papas certification that Certificate of Title
No. 1 does not appear in the record of registered titles). Nevertheless, the spouses Decaleng only
sought the dismissal of the complaint of PEC-EDNP, plus the grant of their counterclaim for the
payment of moral damages, exemplary damages, litigation expenses, and attorneys fees; and they
conspicuously did not pray for the annulment or cancellation of Certificate of Title No. 1. Evidently,
the spouses Decalengs attack on the validity, as well as the existence of Certificate of Title No. 1 is
Page 18 of 159

only incidental to their defense against the accion publiciana and accion reinvindicatoria instituted
by PEC-EDNP, hence, merely collateral.
ACCESSION
MARIA TORBELA, represented by her heirs, EULOGIO TOSINO, et al. vs. SPOUSES ANDRES T.
ROSARIO, et al.
G.R. No. 140528, December 7, 2011, J. Leonardo-De Castro
The accessory follows the principal. The right of accession is recognized under Article 440 of
the Civil Code which states that the ownership of property gives the right by accession to everything
which is produced thereby, or which is incorporated or attached thereto, either naturally or
artificially.
Facts:
The Torbela sibling inherited the title to the subject property (Lot No. 356-A) from their
parents, the Torbela spouses, who, in turn, acquired the same from the first registered owner of the
lot, Valeriano. Later, the Torbela siblings executed a Deed of Absolute Quitclaim on December 12,
1964 in which they transferred and conveyed Lot No. 356-A to Dr. Rosario for the consideration of
P9.00.
However, the Torbela siblings claimed that they only executed the Deed as an
accommodation so that Dr. Rosario could have Lot No. 356-A registered in his name and use said
property to secure a loan from DBP, the proceeds of which would be used for building a hospital on
Lot No. 356-A. On December 16, 1964, TCT No. 52751, covering Lot No. 356-A, was already issued
in Dr. Rosarios name.
On December 28, 1964, Dr. Rosario executed his own Deed of Absolute Quitclaim, in which
he expressly acknowledged that he only borrowed Lot No. 356-A and was transferring and
conveying the same back to the Torbela siblings for the consideration of P1.00.
On February 21, 1965, Dr. Rosarios loan in the amount of P70,200.00, secured by a
mortgage on Lot No. 356-A, was approved by DBP. Soon thereafter, construction of a hospital
building started on Lot No. 356-A. In the meantime, Dr. Rosario acquired another loan from the
Philippine National Bank (PNB) sometime in 1979-1981.
On December 8, 1981, Dr. Rosario and his wife, Duque-Rosario (spouses Rosario), acquired
a loan from Banco Filipino Savings and Mortgage Bank (Banco Filipino). To secure said loan, the
spouses Rosario again constituted mortgages on Lot No. 356-A among others.
On February 13, 1986, the Torbela siblings filed before the Regional Trial Court (RTC) of
Urdaneta, Pangasinan, a Complaint for recovery of ownership and possession of Lot No. 356-A, plus
damages, against the spouses Rosario. The spouses Rosario afterwards failed to pay their loan from
Banco Filipino. Banco Filipino extrajudicially foreclosed the mortgage on Lot No. 356-A and a
Certificate of Sale in favor of Banco Filipino was later issued.
On December 9, 1987, the Torbela siblings filed before the RTC their Amended Complaint,
impleading Banco Filipino as additional defendant.
Page 19 of 159
Issue:
Should the Torbela siblings submit an accounting of the rents of the improvements on Lot
No. 356-A which they had received and to turn over any balance thereof to Dr. Rosario?
Ruling:
Yes, the rules on accession shall govern the improvements on Lot No. 356-A and the rents
thereof.
The accessory follows the principal. The right of accession is recognized under Article 440
of the Civil Code which states that the ownership of property gives the right by accession to
everything which is produced thereby, or which is incorporated or attached thereto, either
naturally or artificially.
There is no question that Dr. Rosario is the builder of the improvements on Lot No. 356-A.
The Torbela siblings themselves alleged that they allowed Dr. Rosario to register Lot No.
356-A in his name so he could obtain a loan from DBP, using said parcel of land as security; and
with the proceeds of the loan, Dr. Rosario had a building constructed on Lot No. 356-A, initially used
as a hospital, and then later for other commercial purposes. Dr. Rosario supervised the construction
of the building, which began in 1965; fully liquidated the loan from DBP; and maintained and
administered the building, as well as collected the rental income therefrom, until the Torbela
siblings instituted Civil Case No. U-4359 before the RTC on February 13, 1986.
When it comes to the improvements on Lot No. 356-A, both the Torbela siblings (as
landowners) and Dr. Rosario (as builder) are deemed in bad faith. The Torbela siblings were aware
of the construction of a building by Dr. Rosario on Lot No. 356-A, while Dr. Rosario proceeded with
the said construction despite his knowledge that Lot No. 356-A belonged to the Torbela siblings.
This is the case contemplated under Article 453 of the Civil Code, which reads:
ART. 453. If there was bad faith, not only on the part of the person who built, planted or sowed
on the land of another, but also on the part of the owner of such land, the rights of one and the other
shall be the same as though both had acted in good faith.
It is understood that there is bad faith on the part of the landowner whenever the act was done
with his knowledge and without opposition on his part.
When both the landowner and the builder are in good faith, the following rules govern:
Whatever is built, planted, or sown on the land of another, and the improvements or repairs
made thereon, belong to the owner of the land. Where, however, the planter, builder, or sower has
acted in good faith, a conflict of rights arises between the owners and it becomes necessary to
protect the owner of the improvements without causing injustice to the owner of the land. In view
of the impracticability of creating what Manresa calls a state of "forced co-ownership," the law has
provided a just and equitable solution by giving the owner of the land the option to acquire the
Page 20 of 159

improvements after payment of the proper indemnity or to oblige the builder or planter to pay for
the land and the sower to pay the proper rent. It is the owner of the land who is allowed to exercise
the option because his right is older and because, by the principle of accession, he is entitled to the
ownership of the accessory thing.
The landowner has to make a choice between appropriating the building by paying the
proper indemnity or obliging the builder to pay the price of the land. But even as the option lies
with the landowner, the grant to him, nevertheless, is preclusive. He must choose one. He cannot,
for instance, compel the owner of the building to remove the building from the land without first
exercising either option. It is only if the owner chooses to sell his land, and the builder or planter
fails to purchase it where its value is not more than the value of the improvements, that the owner
may remove the improvements from the land. The owner is entitled to such remotion only when,
after having chosen to sell his land, the other party fails to pay for the same.
This case then must be remanded to the RTC for the determination of matters necessary for
the proper application of Article 448, in relation to Article 546, of the Civil Code. Such matters
include the option that the Torbela siblings will choose; the amount of indemnity that they will pay
if they decide to appropriate the improvements on Lot No. 356-A; the value of Lot No. 356-A if they
prefer to sell it to Dr. Rosario; or the reasonable rent if they opt to sell Lot No. 356-A to Dr. Rosario
but the value of the land is considerably more than the improvements. The determination made by
the Court of Appeals in its Decision dated June 29, 1999 that the current value of Lot No. 356-A is
P1,200,000.00 is not supported by any evidence on record.
Should the Torbela siblings choose to appropriate the improvements on Lot No. 356-A, the
following ruling of the Court in Pecson v. Court of Appeals is relevant in the determination of the
amount of indemnity under Article 546 of the Civil Code:
Still following the rules of accession, civil fruits, such as rents, belong to the owner of the
building. Thus, Dr. Rosario has a right to the rents of the improvements on Lot No. 356-A and is
under no obligation to render an accounting of the same to anyone. In fact, it is the Torbela siblings
who are required to account for the rents they had collected from the lessees of the commercial
building and turn over any balance to Dr. Rosario. Dr. Rosarios right to the rents of the
improvements on Lot No. 356-A shall continue until the Torbela siblings have chosen their option
under Article 448 of the Civil Code. And in case the Torbela siblings decide to appropriate the
improvements, Dr. Rosario shall have the right to retain said improvements, as well as the rents
thereof, until the indemnity for the same has been paid
QUIETING OF TITLE
REPUBLIC OF THE PHILIPPINES vs. HON. MAMINDIARA P. MANGOTARA, in his capacity as
Presiding Judge of the Regional Trial Court, Branch 1, Iligan City, Lanao del Norte, and MARIA
CRISTINA FERTILIZER CORPORATION, and the PHILIPPINE NATIONAL BANK,
G.R. No. 170375, July 7, 2010, J. Leonardo-De Castro
Vidal filed an action for quieting of title with regard to the land she inherited from Francisco
Cacho. However, Teofilo opposed contended that there is no title to be disturbed in the first place. The
court ruled that this action indisputably an action for quieting of title, a special proceeding wherein
the court is precisely tasked to determine the rights of the parties as to a particular parcel of land, so
Page 21 of 159

that the complainant and those claiming under him/her may be forever free from any danger of
hostile claim.
Facts:
Demetria Vidal (Vidal) and AZIMUTH filed a Petition for Quieting of Title against Teofilo,
Atty. Cabildo, and the Register of Deeds of Iligan City. She averred that she is the daughter of
Francisco Cacho Vidal (Francisco) and Fidela Arellano Confesor. Francisco was the only child of Don
Dionisio Vidal and Doa Demetria. AZIMUTH, for its part, filed the Petition as Vidals successor-ininterest with respect to a 23-hectare portion of the subject parcels of land pursuant to the
Memorandum of Agreement dated April 2, 1998 and Deed of Conditional Conveyance dated August
13, 2004, which Vidal executed in favor of AZIMUTH. Teofilo opposed the Petition contending that
it stated no cause of action because there was no title being disturbed or in danger of being lost due
to the claim of a third party, and Vidal had neither legal nor beneficial ownership of the parcels of
land in question; that the matter and issues raised in the Petition had already been tried, heard, and
decided by the RTC of Iligan City and affirmed with finality by this Court in the 1997 Cacho case; and
that the Petition was barred by the Statute of Limitations and laches
Issue:
Whether or not the proper remedy is an action for quieting of title and not reconveyance
Ruling:
Yes, the proper remedy is an action for quieting of title
The action for reconveyance is based on Section 55 of Act No. 496, otherwise known as the
Land Registration Act, as amended, which states [t]hat in all cases of registration procured by fraud
the owner may pursue all his legal and equitable remedies against the parties to such fraud, without
prejudice, however, to the rights of any innocent holder for value of a certificate of title. The Court,
in Heirs of Eugenio Lopez, Sr. v. Enriquez, described an action for reconveyance as follows. An action
for reconveyance is an action in personam available to a person whose property has been
wrongfully registered under the Torrens system in anothers name. Although the decree is
recognized as incontrovertible and no longer open to review, the registered owner is not
necessarily held free from liens. As a remedy, an action for reconveyance is filed as an ordinary
action in the ordinary courts of justice and not with the land registration court. Reconveyance is
always available as long as the property has not passed to an innocent third person for value.
On the other hand, Article 476 of the Civil Code lays down the circumstances when a person
may institute an action for quieting of title. ART. 476. Whenever there is a 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 the title. An action may also be brought to prevent a cloud from being cast
upon title to real property or any interest therein.
The Court pronounced in the Agapay and Yaptinchay cases that a declaration of heirship
cannot be made in an ordinary civil action such as an action for reconveyance, but must only be
made in a special proceeding, for it involves the establishment of a status or right. The appropriate
Page 22 of 159

special proceeding would have been the settlement of the estate of the decedent. Nonetheless, an
action for quieting of title is also a special proceeding, specifically governed by Rule 63 of the Rules
of Court on declaratory relief and similar remedies. Actions for declaratory relief and other similar
remedies are distinguished from ordinary civil actions because in declaratory relief, the subjectmatter is a deed, will, contract or other written instrument, statute, executive order or regulation,
or ordinance. The issue is the validity or construction of these documents. The relief sought is
the declaration of the petitioners rights and duties thereunder. The concept of a cause of action
in ordinary civil actions does not apply to declaratory relief as this special civil action presupposes
that there has been no breach or violation of the instruments involved. Consequently, unlike other
judgments, the judgment in an action for declaratory relief does not essentially entail any
executional process as the only relief to be properly granted therein is a declaration of the rights
and duties of the parties under the instrument, although some exceptions have been recognized
under certain situations.
The case at bar could not be considered an action for reconveyance as it is not based on the
allegation that the two parcels of land, Lots 1 and 2, have been wrongfully registered in another
persons name. OCT Nos. 0-1200 (a.f.) and 0-1201 (a.f.), covering the subject properties, are still in
Doa Demetrias name. Vidal and Teofilo each claims to have inherited the two parcels of land from
the late DoaDemetria as said decedents sole heir, but neither Vidal nor Teofilo has been able to
transfer registration of the said properties to her/his name as of yet.
Instead, the case at bar is indisputably an action for quieting of title, a special proceeding
wherein the court is precisely tasked to determine the rights of the parties as to a particular parcel
of land, so that the complainant and those claiming under him/her may be forever free from any
danger of hostile claim. Vidal asserted title to the two parcels of land as Doa Demetrias sole
heir. The cloud on Vidals title, which she sought to have removed, was Teofilos adverse claim of title
to the same properties, also as Doa Demetrias only heir. For it to determine the rights of the parties
in Civil Case No. 4452, it was therefore crucial for the RTC-Branch 3 to squarely make a finding as to
the status, filiation, and heirship of Vidal in relation to those of Teofilo. A finding that one is Doa
Demetrias sole and rightful heir would consequently exclude and extinguish the claim of the other.
Even assuming arguendo that the proscription in the Agapay and Yaptinchay cases against making
declarations of heirship in ordinary civil actions also extends to actions for quieting of title, the
same is not absolute.
It must be borne in mind that the concept of a cause of action in ordinary civil actions does
not apply to quieting of title. In declaratory relief, the subject-matter is a deed, will, contract or
other written instrument, statute, executive order or regulation, or ordinance. The issue is the
validity or construction of these documents. The relief sought is the declaration of the petitioners
rights and duties thereunder. Being in the nature of declaratory relief, this special civil action
presupposes that there has yet been no breach or violation of the instruments involved. In an
action for quieting of title, the subject matter is the title sought to have quieted. Title is not limited
to the certificate of registration under the Torrens System (i.e., OCT or TCT). Pursuant to Article 477
of the Civil Code, the plaintiff must have legal or equitable title to, or interest in, the real property
subject of the action for quieting of title. The plaintiff need not even be in possession of the
property. If she is indeed Doa Demetrias sole heir, Vidal already has equitable title to or interest in
the two parcels of land by right of succession, even though she has not yet secured certificates of
title to the said properties in her name.
IMELDA SYJUCO, et al., vs. FELISA D. BONIFACIO and VSD REALTY & CORPORATION
Page 23 of 159

The Syjucos' title, shows that it originated from OCT No. 994 registered on May 3, 1917 while
Bonficacio's title shows that that it likewise originated from OCT No. 994, but registered on April 19,
1917. This case affirmed the earlier finding that there is only one OCT No. 994, the registration date
of which had already been decisively settled as 3 May 1917 and not 19 April 1917 and categorically
concluded that OCT No. 994 which reflects the date of 19 April 1917 as its registration date is null and
void.
Facts:
Imelda, Leonardo, Fidelino, Azucena, Anita, and Sisa, all surnamed Syjuco are the registered
co-owners of the subject land, located in Caloocan City. They inherited the property from their
father Martin Syjuco. They then leased the property to Manufacturers Bank. They also subleased the
property to Kalayaan Development Corporation (KDC).
Sometime in 1994, they learned that their property was being offered for sale. They found
out that respondent Bonifacio, sub-lessee of KDC, was able to register the said property in her name
in another title. Bonifacios title was issued pursuant to her petition for segregation which was
granted by RTC of Caloocan City, Branch 125.
Thereafter, they filed a declaration of nullity and cancellation of Bonifacios title. It was also
only in 1995 when the Syjucos learned that Bonifacio was able to sell and transfer her title over the
subject land in favor of VSD Realty. According to the Syjucos, the other certificates of title over the
subject land could have only been obtained fraudulently. On January 9, 1998, RTC rendered a
decision the Syjucos declaring VSD as the owner.
The Syjucos' title, shows that it originated from OCT No. 994 registered on May 3, 1917. The
title of Bonifacio shows that it likewise originated from OCT No. 994, but registered on April 19,
1917. Curiously, the title of respondent VSD Realty is supposed to be a direct transfer from the title
of respondent Bonifacio, yet, the certification as to the original registration of its mother title OCT
No. 994 provides the registration date of May 3, 1917.
The Syjucos filed an appeal before the Court of Appeals arguing that Bonifacios title, which
originated from OCT No. 994 registered in 1912, is null and void as the only authentic OCT No. 994
is the one issued pursuant to Decree No. 36455 originally registered on May 3, 1917.
Issue:
1. Whether or not the action to quiet title over the subject land by the Syjucos is proper
2. Whether or not the title of Bonifacio is null and void
Ruling:
1. Yes
The instituted action in this case is clearly a direct attack on a certificate of title to real
property. The relief sought by petitioners is certainly feasible since the objective of an action to
quiet title, as provided under Article 476 of the Civil Code of the Philippines, is precisely to quiet,
remove, invalidate, annul, and/or nullify a cloud on title to real property or any interest therein by
Page 24 of 159

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.
It is an established doctrine in land ownership disputes that the filing of an action to quiet
title is imprescriptible if the disputed real property is in the possession of the plaintiff. One who is
in actual possession of a piece of land claiming to be owner thereof may wait until his possession is
disturbed or his title is attacked before taking steps to vindicate his right, the reason for the rule
being that his undisturbed possession gives him a continuing right to seek the aid of a court of
equity to ascertain and determine the nature of the adverse claim of a third party and its effect on
his own title, which right can be claimed only by one who is in possession. In this case, petitioners
have duly established during the trial that they and/or their predecessors-in-interest have been in
uninterrupted possession of the subject land since 1926.
Moreover, the rule on the incontrovertibility or indefeasibility of title has no application in
this case given the fact that the contending parties claim ownership over the subject land based on
their respective certificates of title thereon which originated from different sources. Certainly, there
cannot be two or even several certificates of title on the same parcel of real property because a
land registration court has no jurisdiction to order the registration of land already decreed in the
name of another in an earlier land registration case and a second decree for the same land would
be null and void, since the principle behind original registration is to register a parcel of land only
once.
2. Yes
The Court reiterates that the validity of OCT No. 994 registered on May 3, 1917, and the
non-existence of a purported OCT No. 994 registered on April 19, 1917, have already been
exhaustively passed upon and settled with finality in in the Resolution[s] dated December 14, 2007
and March 31, 2009 in Manotok Realty, Inc. v. CLT Realty Development Corporation.
Considerig the fact that respondents claim that their respective titles, TCT Nos. 265778 and
285313, are derivatives of OCT No. 994 registered on April 19, 1917, which the Court had already
repeatedly declared to be a non-existent and invalid title, the Court rules in favor of the Syjucos. As
held in Manotok, "[a]ny title that traces its source to OC'f No. 994 dated [19) April 1917 is void, for
such mother title is inexistent."
HERMINIO M. DE GUZMAN, FOR HIMSELF AND AS ATTORNEY-IN-FACT OF: NILO M. DE
GUZMAN, ANGELINO DE GUZMAN, JOSEFINO M. DE GUZMAN, ESTRELLA M. DE GUZMAN,
TERESITA DE GUZMAN, ELSA MARGARITA M. DE GUZMAN, EVELYN M. DE GUZMAN, MA.
NIMIA M. DE GUZMAN, ANTOLIN M. DE GUZMAN, AND FERDINAND M. DE GUZMAN vs.
TABANGAO REALTY INCORPORATED
G.R. No. 154262, February 11, 2015, J. Leonardo-De Castro
For an action to quiet title to prosper, two indispensable requisites must concur: (1) the
plaintiff or complainant has a legal or equitable title or interest in the real property subject of the
action; and (2) the deed, claim, encumbrance, or proceeding claimed to be casting a cloud on his title
must be shown to be in fact invalid or inoperative despite its prima facie appearance of validity or
legal efficacy.
Page 25 of 159

Facts:
The petitioners filed an action for quieting of title of a land they allegedly owned against the
respondent Tabangao Realty Incorporated. They allege that they inherited the subject land from
their parents and that at the time of the death of their parents, the subject land was still on their
parents name and thus, by operation of law they are the alleged owners of the property. In their
complaint they also assert that the right or interest of Tabangao Realty over the subject property
can no longer be asserted by it because it is already barred by prescription and laches. It is the
contention of the petitioners that the failure of Tabangao Realty to cause the consolidation of the
title of the property in their name after the lapse of 13 years from the issuance of the Certificate of
Sherrifs Sale operated to divest Tabangao Realty of any right as to the property and therefore the
title to the property reverted back to their parents and was passed on to them by way of
inheritance.
The Regional Trial Court, however, ruled in favor of Tabangao Realty (it filed a motion to
dismiss the complaint) and dismissed the complaint of the petitioners on the ground that the
complaint states no cause of action. Hence, the current petition.
Issue:
Whether or not the complaint filed by the petitioner states no cause of action.
Ruling:
Yes. The Supreme Court affirmed the order of the RTC dismissing the complaint filed by the
petitioners. It found that the petitioners failed to allege the necessary facts that would constitute a
complaint for quieting of title.
Regarding the nature of the action filed before the trial court, quieting of title is a common
law remedy for the removal of any cloud upon or doubt or uncertainty with respect to title to real
property. Originating in equity jurisprudence, its purpose is to secure x x x an adjudication that a
claim of title to or an interest in property, adverse to that of the complainant, is invalid, so that the
complainant and those claiming under him may be forever afterward free from any danger of
hostile claim. In an action for quieting of title, the competent court is tasked to determine the
respective rights of the complainant and other claimants, x x x not only to place things in their
proper place, to make the one who has no rights to said immovable respect and not disturb the
other, but also for the benefit of both, so that he who has the right would see every cloud of doubt
over the property dissipated, and he could afterwards without fear introduce the improvements he
may desire, to use, and even to abuse the property as he deems best x x x.
For an action to quiet title to prosper, two indispensable requisites must concur: (1) the
plaintiff or complainant has a legal or equitable title or interest in the real property subject of the
action; and (2) the deed, claim, encumbrance, or proceeding claimed to be casting a cloud on his
title must be shown to be in fact invalid or inoperative despite its prima facie appearance of validity
or legal efficacy.9
Petitioners Complaint in Civil Case No. TM-1118 failed to allege these two requisites for an action
to quiet title.
Page 26 of 159

Petitioners alleged in their Complaint that they were the children and only heirs of the
deceased spouses De Guzman and that the subject property was still registered in spouses De
Guzmans names under TCT No. 3531. However, these allegations are insufficient to establish
petitioners title to the subject property.
Equally notable is the absence of any allegation in the Complaint that Serafin and/or
Josefino, as the judgment obligors in Civil Case No. 120680, or their successors-in-interest,
redeemed the subject property from respondent within the one-year redemption period, which,
reckoned from the date of registration of the Sheriffs Certificate of Sale on TCT No. 3531 on April
13, 1988, expired on April 13, 1989.
To start with, petitioners base their claim of legal title not on the strength of any
independent writing in their favor but simply and solely on respondent Republics failure to secure
the Certificate of Final Sale, execute an Affidavit of Consolidation of Ownership and obtain a writ of
possession over the property in dispute within ten (10) years from the registration of the
Certificate of Sale.
Petitioners reliance on the foregoing shortcomings or inactions of respondent Republic
cannot stand.
For one, it bears stressing that petitioners predecessors-in-interest lost whatever right they
had over land in question from the very moment they failed to redeem it during the 1-year period
of redemption. Certainly, the Republics failure to execute the acts referred to by the petitioners
within ten (10) years from the registration of the Certificate of Sale cannot, in any way, operate to
restore whatever rights petitioners predecessors-in-interest had over the same. For sure,
petitioners have yet to cite any provision of law or rule of jurisprudence, and we are not aware of
any, to the effect that the failure of a buyer in a foreclosure sale to secure a Certificate of Final Sale,
execute an Affidavit of Consolidation of Ownership and obtain a writ of possession over the
property thus acquired, within ten (10) years from the registration of the Certificate of Sale will
operate to bring ownership back to him whose property has been previously foreclosed and sold. x
x x.
Quite the contrary, Section 33, Rule 39 of the 1997 Rules of Civil Procedure explicitly
provides that [u]pon the expiration of the right of redemption, the purchaser or redemptioner
shall be substituted to and acquire all the rights, title, interest and claim of the judgment obligor to
the property as of the time of the levy.
Moreover, with the rule that the expiration of the 1-year redemption period forecloses the
obligors right to redeem and that the sale thereby becomes absolute, the issuance thereafter of a
final deed of sale is at best a mere formality and mere confirmation of the title that is already vested
in the purchaser.
Calacala thus settled that Rule 39, Section 33 of the 1997 Rules of Court can be applied
retroactively to cases still pending and undetermined at the time of its passage,12 such as the
present case. By virtue of said provision, the expiration of the one-year redemption period
foreclosed the right to redeem of the spouses De Guzman (as well as petitioners, as their
successors-in-interest) and the sale of the subject property to respondent became absolute, so that
the issuance thereafter of a final deed of sale and/or conveyance is at best a mere formality and
mere confirmation of the title that was already vested in respondent.
Page 27 of 159

The allegations in petitioners Complaint also do not support the second requisite for an
action to quiet title, i.e., that the deed, claim, encumbrance or proceeding alleged to cast cloud on a
plaintiff's title is in fact invalid or inoperative despite its prima facie appearance of validity or legal
efficacy.
POSESSION
VIOLA CAHILIG et al.,vs. HON. EUSTAQUIO G. TERENCIO et al
G.R. No. 164470, November 28, 2011, J. Leonardo-De Castro
It is a time-honored legal precept that after the consolidation of titles in the buyers name, for
failure of the mortgagor to redeem, entitlement to a writ of possession becomes a matter of right.
Facts:
Soterania G. Siel executed deeds of real estate mortgage covering a portion of lot located at
Barangay Balabag, Malay, Aklan, in favor of Moneytrend Lending Corporation, as security for two
promissory notes. Later, Moneytrend Lending Corporation assigned the promissory notes and
deeds of real estate mortgage to Mercantile Credit Resources Corporation (Mercantile Credit).
After Soterania Siel defaulted on her loan payments when they became due under the
promissory notes she had executed, Mercantile Credit caused the extrajudicial foreclosure of the
real estate mortgage pursuant to Section 7 of Act 3135, as amended by Act 4118, over the property
at issue.
Mercantile Credit purchased the same property at the extrajudicial foreclosure sale and, as a
result thereof, a certificate of sale was issued in its favor. Following Soterania Siels failure to
redeem the property within the prescribed period, a final deed of sale was issued by the Sheriff in
the name of Mercantile Credit.
On May 2, 2001, Mercantile Credit filed with the RTC an ex-parte motion for the issuance of
a writ of possession over the subject property which was eventually granted. Viola Cahilig filed a
motion for reconsideration of the order alleging that Mercantile credit is guilty of forum shopping
in view of the pendency of the appeal in a civil case involving the same parties and subject matter.
But after giving due consideration to Cahilig's motion for reconsideration and,
subsequently, to their supposed third-party claim wherein Cahilig allege that they and their other
siblings had already bought the subject property from their mother, the now deceased Soterania
Siel, prior to the constitution of the mortgage and that they were in actual possession of the land in
dispute, the RTC issued the alias writ of possession.
Issue:
Is the issuance of the writ of possession over the property subject of the foreclosure of the
real estate mortgage proper?
Ruling:
Yes, the issuance of a writ of possession is proper.
Page 28 of 159

The SC affirmed the trial courts issuance of a writ of possession in the present case, despite
the pendency of civil proceedings to annul the mortgage and the foreclosure sale and in light of
petitioners own failure to prove (a) their status as third parties to the mortgage, and (b) notice to
the mortgagee of the supposed sale of the subject property in their favor.
It is a time-honored legal precept that after the consolidation of titles in the buyers name,
for failure of the mortgagor to redeem, entitlement to a writ of possession becomes a matter of
right. As the confirmed owner, the purchasers right to possession becomes absolute. There is even
no need for him to post a bond, and it is the ministerial duty of the courts to issue the same upon
proper application and proof of title. To accentuate the writs ministerial character, the SC has
consistently disallowed injunction to prohibit its issuance despite a pending action for annulment
of mortgage or the foreclosure itself.
A writ of possession is an order of the court commanding the sheriff to place a person in
possession of a real or personal property. It may be issued in an extrajudicial foreclosure of a real
estate mortgage under Section 7 of Act 3135, as amended by Act 4118, either 1) within the one-year
redemption period, upon the filing of a bond, or 2) after the lapse of the redemption period, without
need of a bond or of a separate and independent action.
Moreover, it is not disputed that the subject property is unregistered land and is covered by
a tax declaration in the name of Soterania Siel when the same was mortgaged by her in 1997 in
favor of Mercantile Credits predecessor-in-interest, Moneytrend Lending Corporation. Section 113
of Presidential Decree No. 1529 or the Property Registration Decree is applicable and the same
provides that no deed, conveyance, mortgage, lease, or other voluntary instrument affecting land
not registered under the Torrens system shall be valid, except as between the parties thereto,
unless such instrument shall have been recorded in the manner herein prescribed in the office of
the Register of Deeds for the province or city where the land lies.
In the present case, Cahilig failed to adduce evidence showing that the deeds of sale in their
favor were recorded in the office of the Register of Deeds or that they were annotated on the tax
declaration of Soterania Siel in order to affect the subject property insofar as third persons are
concerned, specially Mercantile Credit and its predecessor-in-interest. Cahilig likewise failed to
prove that Mercantile Credit and its predecessor-in-interest had actual or constructive knowledge
of the alleged sale of the subject property in their favor prior to the filing of the third-party claim.
Thus, in light of the foregoing, the alleged sale of the land in dispute, even if true, does not bind
Mercantile Credit.
OBLIGATIONS
EXTINGUISHMENT OF OBLIGATIONS
REPUBLIC OF THE PHILIPPINES, represented by the Chief of the Philippine National Police
vs. THI THU THUY T. DE GUZMAN
In general, a payment in order to be effective to discharge an obligation, must be made to the
proper person. Thus, payment must be made to the obligee himself or to an agent having authority,
express or implied, to receive the particular payment. Hence, absent any showing that the respondent
Page 29 of 159

agreed to the payment of the contract price to another person, or that she authorized Cruz to claim
the check on her behalf, the payment, to be effective must be made to her.
Facts:
De Guzman is the proprietress of Montaguz General Merchandise (MGM), a contractor
accredited by the PNP for the supply of office and construction materials and equipment, and for
the delivery of various services such as printing and rental, repair of various equipment, and
renovation of buildings, facilities, vehicles, tires, and spare parts.
The PNP Engineering Services (PNPES), released a Requisition and Issue Voucher for the
acquisition of various building materials amounting to Two Million Two Hundred Eighty-Eight
Thousand Five Hundred Sixty-Two Pesos and Sixty Centavos (P2,288,562.60) for the construction
of a four-storey condominium building with roof deck at Camp Crame, Quezon City.
MGM and petitioner, represented by the PNP, through its chief, executed a Contract of
Agreement (the Contract) wherein MGM, for the price of P2,288,562.60, undertook to procure and
deliver to the PNP the construction materials itemized in the purchase order. MGM, on March 1,
1996, proceeded with the delivery of the construction materials.
De Guzman, through counsel, sent a letter dated October 20, 1997 to the PNP, demanding
the payment of P2,288,562.60 for the construction materials MGM procured for the PNP under
their December 1995 Contract. PNP, through its Officer-in-Charge, replied, informing that payment
was made to MGM via Land Bank of the Philippines (LBP) Check No. 0000530631. De Guzman,
responded by reiterating her demand and denying having ever received the LBP check, personally
or through an authorized person. Hence, De Guzman filed a complaint for a sum of money.
During trial, Atty. Norman Bueno, petitioners counsel at that time, made the following
stipulations in open court. Counsel presented Edgardo Cruz for the purpose of proving that the
payment respondent was claiming rightfully belonged to Highland Enterprises. Cruz alleged that on,
he and the respondent went to the PNP Finance Center to claim the LBP check due to MGM. Cruz
said that the respondent handed him the already signed Receipt No. 001, which he filled up. He
claimed that the respondent knew that the LBP check was really meant for Highland Enterprises as
she had already been paid her 2% commission for the use of her business name in the concerned
transaction.
The RTC ruled in favor of De Guzman and ordered PNP to pay the contract price with
interest. On appeal, the Court of Appeals affirmed the decision of the RTC.
Issues:
Whether or not there was valid payment to MGM
Ruling:
No, there was no valid payment to MGM.
In general, a payment in order to be effective to discharge an obligation, must be made to
the proper person. Thus, payment must be made to the obligee himself or to an agent having
authority, express or implied, to receive the particular payment.
Page 30 of 159
De Guzman was able to establish that the LBP check was not received by her or by her
authorized personnel. The PNPs own records show that it was claimed and signed for by Cruz, who
is openly known as being connected to Highland Enterprises, another contractor. Hence, absent any
showing that the respondent agreed to the payment of the contract price to another person, or that
she authorized Cruz to claim the check on her behalf, the payment, to be effective must be made to
her.
The respondent has explained her inaction towards Cruz and Highland Enterprises. Since it
was the PNP who owed her money, her actions should be directed towards the PNP and not Cruz or
Highland Enterprises, against whom she has no adequate proof.80 Respondent has also adequately
explained her delay in filing an action against the petitioner, particularly that she did not want to
prejudice her other pending transactions with the PNP.
UNION BANK OF THE PHILIPPINES vs. SPOUSES RODOLFO T. TIU AND VICTORIA N. TIU
G.R. Nos. 173090-91, September 7, 2011, J. Leonardo-De Castro
It is important to note at this point that in the determination of the nullity of a contract based
on the lack of consideration, the debtor has the burden to prove the same. Article 1354 of the Civil
Code provides that "although the cause is not stated in the contract, it is presumed that it exists and is
lawful, unless the debtor proves the contrary."
Facts:
Petitioner Union Bank of the Philippines (Union Bank) and respondent spouses Rodolfo T.
Tiu and Victoria N. Tiu (the spouses Tiu) entered into a Credit Line Agreement (CLA) whereby
Union Bank agreed to make available to the spouses Tiu credit facilities in such amounts as may be
approved. The spouses Tiu took out various loans in the total amount of US$3,632,000.00.
Union Bank advised the spouses Tiu through a letter that, in view of the existing currency
risks, the loans shall be redenominated to their equivalent Philippine peso amount. Union Bank and
the spouses Tiu entered into a Restructuring Agreement. The Restructuring Agreement contains a
clause wherein the spouses Tiu confirmed their debt and waived any action on account thereof.
The restructured amount (P155,364,800.00) is the sum of the following figures: (1)
P150,364,800.00, which is the value of the US$3,632,000.00 loan as redenominated under the
above-mentioned exchange rate of US$1=P41.40; and (2) P5,000,000.00, an additional loan given to
the spouses Tiu to update their interest payments.
As likewise provided in the Restructuring Agreement, the spouses Tiu executed a Real
Estate Mortgage in favor of Union Bank over their "residential property inclusive of lot and
improvements" located at P. Burgos St., Mandaue City.
The spouses Tiu claim to have made the following payments: (1) P15,000,000.00 on August
3, 1999; and (2) another P13,197,546.79 as of May 8, 2001. Adding the amounts paid under the
Deeds of Dation in Payment, the spouses Tiu postulate that their payments added up to
P89,407,546.79.15
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Asserting that the spouses Tiu failed to comply with the payment schemes set up in the
Restructuring Agreement, Union Bank initiated extrajudicial foreclosure proceedings on the
residential property of the spouses Tiu.
The spouses Tiu, together with Juanita T. Tiu, Rosalinda T. King, Rufino T. Tiu, Rosalie T. Young and
Rosenda T. Tiu, filed with the RTC a Complaint seeking to have the Extrajudicial Foreclosure
declared null and void.
The spouses Tiu claim that from the beginning the loans were in pesos, not in dollars; that
the spouses Tiu merely received the peso equivalent of their US$3,632,000.00 loan at the rate of
US$1=P26.00. The spouses Tiu claim that they were forced to sign the Restructuring Agreement
and take up an additional loan of P5,000,000.00, the proceeds of which they never saw because this
amount was immediately applied by Union Bank to interest payments.
The spouses Tiu allege that the foreclosure sale of the mortgaged properties was invalid, as
the loans have already been fully paid. They also allege that they are not the owners of the
improvements constructed on the lot because the real owners thereof are their co-petitioners,
Juanita T. Tiu, Rosalinda T. King, Rufino T. Tiu, Rosalie T. Young and Rosenda T. Tiu.
The spouses Tiu claim that prior to the signing of the Restructuring Agreement, they
entered into a Memorandum of Agreement with Union Bank whereby the former deposited with
the latter several certificates of shares of stock of various companies and four certificates of title of
various parcels of land located in Cebu. The spouses Tiu claim that these properties have not been
subjected to any lien in favor of Union Bank, yet the latter continues to hold on to these properties
and has not returned the same to the former.
On the other hand, Union Bank claims that the Restructuring Agreement was voluntarily
and validly entered into by both parties. Union Bank contends that the foreclosure of the mortgage
on the residential property of the spouses Tiu was valid and that the improvements thereon were
absolutely owned by them.
The RTC issued a Writ of Preliminary Injunction preventing the sale of the residential
property of the spouses Tiu. Subsequently, the RTC rendered its Decision in favor of Union Bank by
dismissing the Complaint and lifting and setting aside the Writ of Preliminary Injunction.
The Court of Appeals ruled in favor of the spouses Tiu. The Court of Appeals held that the
loan transactions were in pesos, since there was no stipulation the loans will be paid in dollars and
since no dollars ever exchanged hands. Considering that the loans were in pesos from the
beginning, there is no need to convert the same. By making it appear that the loans were originally
in dollars, Union Bank overstepped its rights as creditor, and made unwarranted interpretations of
the original loan agreement. The Restructuring Agreement, which purportedly attempts to create a
novation of the original loan, was not clearly authorized by the debtors and was not supported by
any cause or consideration. Since the Restructuring Agreement is void, the original loan of
P94,432,000.00 (representing the amount received by the spouses Tiu of US$3,632,000.00 using
the US$1=P26.00 exchange rate) should subsist.
Issue:
Can the court a quo erred when it ruled that the said Restructuring Agreement is void?
Page 32 of 159
Ruling:
Yes, the court a quo erred when it ruled that the said Restructuring Agreement is void
without taking into considerations the surrounding circumstances.
Validity of the Restructuring Agreement
The Court of Appeals declared that the Restructuring Agreement is void on account of its
being a failed novation of the original loan agreements.
Union Bank does not dispute that the spouses Tiu received the loaned amount of
US$3,632,000.00 in Philippine pesos, not dollars, at the prevailing exchange rate of US$1=P26.53
However, Union Bank claims that this does not change the true nature of the loan as a foreign
currency loan, and proceeded to illustrate in its Memorandum that the spouses Tiu obtained
favorable interest rates by opting to borrow in dollars (but receiving the equivalent peso amount)
as opposed to borrowing in pesos.
We agree with Union Bank on this point. Although the spouses Tiu received peso
equivalents of the borrowed amounts, the loan documents presented as evidence, i.e., the
promissory notes, expressed the amount of the loans in US dollars and not in any other currency.
This clearly indicates that the spouses Tiu were bound to pay Union Bank in dollars, the amount
stipulated in said loan documents. Thus, before the Restructuring Agreement, the spouses Tiu were
bound to pay Union Bank the amount of US$3,632,000.00 plus the interest stipulated in the
promissory notes, without converting the same to pesos.
Such stipulation of payment in dollars is not prohibited by any prevailing law or
jurisprudence at the time the loans were taken. In this regard, Article 1249 of the Civil Code
provides:
Art. 1249. The payment of debts in money shall be made in the currency stipulated, and if it is not
possible to deliver such currency, then in the currency which is legal tender in the Philippines.
Having established that Union Bank and the spouses Tiu validly entered into dollar loans,
the conclusion of the Court of Appeals that there were no dollar loans to novate into peso loans
must necessarily fail.
The Court of Appeals pronouncement that the novation was not supported by any cause or
consideration is likewise incorrect. This conclusion suggests that when the parties signed the
Restructuring Agreement, Union Bank got something out of nothing or that the spouses Tiu
received no benefit from the restructuring of their existing loan and was merely taken advantage of
by the bank. It is important to note at this point that in the determination of the nullity of a contract
based on the lack of consideration, the debtor has the burden to prove the same. Article 1354 of the
Civil Code provides that "although the cause is not stated in the contract, it is presumed that it
exists and is lawful, unless the debtor proves the contrary."
In the case at bar, the Restructuring Agreement was signed at the height of the financial
crisis when the Philippine peso was rapidly depreciating. Since the spouses Tiu were bound to pay
their debt in dollars, the cost of purchasing the required currency was likewise swiftly increasing. If
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the parties did not enter into the Restructuring Agreement in December 1999 and the peso
continued to deteriorate, the ability of the spouses Tiu to pay and the ability of Union Bank to
collect would both have immensely suffered. As shown by the evidence presented by Union Bank,
the peso indeed continued to deteriorate, climbing to US$1=P50.01 on December 2000. Hence, in
order to ensure the stability of the loan agreement, Union Bank and the spouses Tiu agreed in the
Restructuring Agreement to peg the principal loan at P150,364,800.00 and the unpaid interest at
P5,000,000.00.
The spouses Tiu belatedly argue that their consent to the Restructuring Agreement was
vitiated by fraud and mistake, alleging that (1) the Restructuring Agreement did not take into
consideration their substantial payment in the amount of P40,447,185.60 before its execution.
We have painstakingly perused over the records of this case, but failed to find any
documentary evidence of the alleged payment of P40,447,185.60 before the execution of the
Restructuring Agreement.
As pointed out by the trial court, the Restructuring Agreement, being notarized, is a public
document enjoying a prima facie presumption of authenticity and due execution. Clear and
convincing evidence must be presented to overcome such legal presumption. The spouses Tiu, who
attested before the notary public that the Restructuring Agreement "is their own free and voluntary
act and deed," failed to present sufficient evidence to prove otherwise. It is difficult to believe that
the spouses Tiu, veteran businessmen who operate a multi-million peso company, would sign a
very important document without fully understanding its contents and consequences.
This Court therefore rules that the Restructuring Agreement is valid and, as such, a valid
and binding novation of loans of the spouses Tiu entered into from September 22, 1997 to March
26, 1998 which had a total amount of US$3,632,000.00.
Validity of the Foreclosure of Mortgage
The spouses Tiu challenge the validity of the foreclosure of the mortgage on two grounds, claiming
that: (1) the debt had already been fully paid; and (2) they are not the owners of the improvements
on the mortgaged property.
Allegation of full payment of the mortgage debt
We have ruled that the Restructuring Agreement is a valid and binding novation of loans of
the spouses Tiu in the total amount of US$3,632,000.00. In order that the spouses Tiu can be held to
have fully paid their loan obligation, they should present evidence showing their payment of the
total restructured amount under the Restructuring Agreement which was P104,668,741.00.
However, while respondent Rodolfo Tiu appeared to have identified during his testimony a
computation of the alleged payments made to Union Bank, the same was not formally offered in
evidence.
Applying Section 34, Rule 132 of the Rules of Court, such computation cannot be considered
by this Court. We have held that a formal offer is necessary because judges are mandated to rest
their findings of facts and their judgment only and strictly upon the evidence offered by the parties
at the trial. It has several functions: (1) to enable the trial judge to know the purpose or purposes
for which the proponent is presenting the evidence; (2) to allow opposing parties to examine the
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evidence and object to its admissibility; and (3) to facilitate review by the appellate court, which
will not be required to review documents not previously scrutinized by the trial court. Moreover,
even if such computation were admitted in evidence, the same is self-serving and cannot be given
probative weight. In the case at bar, the records do not contain even a single receipt evidencing
payment to Union Bank.
The Court of Appeals, however, held that several payments made by the spouses Tiu had
been admitted by Union Bank. Indeed, Section 11, Rule 8 of the Rules of Court provides that an
allegation not specifically denied is deemed admitted. In such a case, no further evidence would be
required to prove the antecedent facts.
Allegation of third party ownership of the improvements on the mortgaged lot
The Court of Appeals, taking into consideration its earlier ruling that the loan was already
fully paid, permanently enjoined Union Bank from foreclosing the mortgage on the property.
We disagree. Contrary to the ruling of the Court of Appeals, the burden to prove the spouses
Tius allegation that they do not own the improvements on the property, despite having such
improvements included in the mortgage is on the spouses Tiu themselves. The fundamental rule
is that he who alleges must prove. Upon careful examination of the evidence, we find that the
spouses Tiu failed to prove that the improvements were owned by third persons.
This Court sets aside the ruling of the Court of Appeals permanently enjoining Union Bank
from foreclosing the mortgage on property, including the improvements thereon.
Validity of Alleged Rental Payments on the Properties Conveyed to the Bank via Dacion en Pago
The Court of Appeals found the lease contracts over the properties conveyed to Union Bank
via dacion en pago to be void for being against public policy.
The Court of Appeals committed a serious error in this regard. As pointed out by petitioner
Union Bank, the spouses Tiu did not present any proof of the alleged rental payments. Not a single
receipt was formally offered in evidence. The mere stipulation in a contract of the monthly rent to
be paid by the lessee is certainly not evidence that the same has been paid. Since the spouses Tiu
failed to prove their payment to Union Bank of the amount of P5,952,000.00, we are constrained to
reverse the ruling of the Court of Appeals ordering its return.
Order to Return Certificates Allegedly in Union Banks Possession
The spouses Tiu alleged that they delivered several certificates and titles to Union Bank
pursuant to a Memorandum of Agreement. These certificates and titles were not subjected to any
lien in favor of Union Bank, but the latter allegedly continued to hold on to said properties.
The evidence on hand lends credibility to the allegation of Union Bank that the
Memorandum of Agreement did not push through. The copy of the Memorandum of Agreement
attached by the spouses Tiu themselves to their original complaint did not bear the signature of any
representative from Union Bank and was not notarized.
Page 35 of 159
We, however, agree with the finding of the Court of Appeals that despite the failure of the
Memorandum of Agreement to push through, the certificates and titles mentioned therein do
appear to be in the possession of Union Bank.
As regards Union Banks argument that it has the right to retain said documents pursuant to
the Restructuring Agreement.
Assuming arguendo that the Restructuring Agreement indeed allows the retention of the
certificates as security for spouses Tius debt, Union Banks position still cannot be upheld. Insofar
as said provision permits Union Bank to apply properties of the spouses Tiu in its possession to the
full or partial payment of the latters obligations, the same appears to impliedly allow Union Bank to
appropriate these properties for such purpose. However, said provision cannot be validly applied to
the subject certificates and titles without violating the prohibition against pactum commissorium
contained in Article 2088 of the Civil Code, to the effect that "the creditor cannot appropriate the
things given by way of pledge or mortgage, or dispose of them; any stipulation to the contrary is
null and void."
This Court affirms the order of the Court of Appeals for Union Bank to return to the spouses
Tiu all the certificates of shares of stock and titles to real properties that were submitted to it or, in
lieu thereof, to pay the cost for the replacement and issuance of new certificates and new titles over
the said properties.
Validity of the Award of Damages
The Court of Appeals awarded damages in favor of the spouses Tiu based on its taking
judicial notice of the alleged exploitation by many banks of the Asian financial crisis, as well as the
foreclosure of the mortgage of the home of the spouses Tiu despite the alleged full payment by the
latter.
Article 1339 of the New Civil Code provides that the failure to disclose facts, when there is a
duty to reveal them, as when the parties are bound by confidential relations, constitutes fraud.
Undoubtedly, the banks and their clients are bound by confidential relations.
We have already held that the foreclosure of the mortgage was warranted under the
circumstances. As regards the alleged exploitation by many banks of the Asian financial crisis, this
Court rules that the generalization made by the appellate court is unfounded and cannot be the
subject of judicial notice. "It is axiomatic that good faith is always presumed unless convincing
evidence to the contrary is adduced. It is incumbent upon the party alleging bad faith to sufficiently
prove such allegation. Absent enough proof thereof, the presumption of good faith prevails." The
alleged insidious design of many banks to betray their clients during the Asian financial crisis is
certainly not of public knowledge. The deletion of the award of moral and exemplary damages in
favor of the spouses Tiu is therefore in order.
SPOUSES RENATO and FLORINDA DELA CRUZ vs. SPOUSES GIL and LEONILA SEGOVIA
Article 1391 of the Civil Code, which pertinently reads: The action for annulment shall be
brought within four years. In case of mistake or fraud, this period shall begin from the time of the
discovery of the same.
Page 36 of 159
Facts:
Sometime in July 1985, Florinda wanted to purchase two (2) parcels of land located at Sta.
Mesa, Manila, Lot 503 and Lot 505. The two lots were being sold together for P180,000.00.
Inasmuch as Florinda had only P144,000.00 at hand, she asked her sister, Leonila, to contribute
P36,000.00 to complete the purchase price. The sisters agreed that Lot 503 and the apartment unit
thereat would belong to Leonila upon full payment of its purchase price of P80,000.00, while Lot
505 with a residential house would belong to Florinda. The properties were then registered in the
name of Renato dela Cruz married to Florinda. The parties, however, verbally agreed that Leonila
and her family would stay at Lot 505 until she had fully paid for Lot 503.
On September 9, 1991, Florinda and Leonila signed an Agreement embodying the detailed
scheme of payment for the lot covered by the sisters agreement. Leonila continued paying the
balance she owed Florinda. Leonila attempted to pay the remaining balance of P26,444.56 in full
satisfaction of her obligation but Florinda refused to accept the same on the ground that, the ten
year period for the payment of the balance, reckoned from July 1985, the alleged date of the verbal
agreement between them, had already expired. Thereafter Florinda demanded that Leonila and her
family vacate the house at 505.
On March 8, 1996, Renato and Florinda filed with the RTC of Manila, a complaint for Nullity
of Contract/Agreement with Damages on the ground that the Agreement executed on September 9,
1991 did not contain the true intention of the parties because Florindas consent thereto was
vitiated by mistake. Allegedly, Florinda did not know that the agreement provided that the ten year
period for payment of the balance commenced from September 1991 and not from July 1985 which
was her true intention. On May 5, 1999, the RTC rendered a decision dismissing the complaint for
Nullity of Contract/Agreement with Damages and declaring the subject Agreement valid and
subsisting.
RTC ruled that the action for annulment had already lapsed when the Complaint was filed
on March 8, 1996. The CA affirmed the findings of the RTC in its decision.
Issue:
Whether the four (4) year period for filing an action for annulment of the September 9,
1991 Agreement, on ground of vitiated consent, had already lapsed
Ruling:
This is in accordance with Article 1391 of the Civil Code, which pertinently reads: Art.
1391. The action for annulment shall be brought within four years. This period shall begin: x x x In
case of mistake or fraud, from the time of the discovery of the same. x x x.
The complaint for Nullity of Contract/Agreement with Damages was filed on March 7, 1996,
while the agreement subject thereof was entered into on September 9, 1991. The Agreement was
read to the parties before they affixed their signatures thereon. Petitioners were thereafter
furnished a copy of the subject Agreement. Petitioners are presumed to have discovered the alleged
mistake on September 9, 1991. Hence, the action for annulment which was filed four years and six
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months from the time of the discovery of the mistake had already prescribed. Evidently, the
Agreement could no longer be set aside.
CONTRACTS
ESSENTIAL REQUISISTES
MCA-MBF COUNTDOWN CARDS PHILIPPINES INC., AMABLE R. AGUILUZ V, AMABLE C.
AGUILUZ IX, CIELO C. AGUILUZ, ALBERTO L. BUENVIAJE, VICENTE ACSAY and MCA HOLDINGS
AND MANAGEMENT CORPORATION vs. MBf CARD INTERNATIONAL LIMITED and MBf
DISCOUNT CARD LIMITED
When there is as of yet no meeting of the minds as to the subject matter or the cause or
consideration of the contract being negotiated, the same cannot be considered to have been perfected.
Facts:
MBf Card International Limited (MBf Card), a foreign corporation not doing business in the
Philippines, and MCA Holdings, acting through Amable Aguiluz, entered into negotiations for the
execution of a Joint Venture Agreement wherein they would establish a Joint Venture Company
(JVC) in the Philippines wherein 40% of shareholding will belong to MBf Card and 60% of the
capital stock will belong to MCA Holdings and in which said JVC would execute a Countdown
Country License Agreement with MBf Discount Card, under which the JVC would conduct the
business of discount cards in the Philippines under the Countdown mark and use the distinctive
business format and method for such operation.
Furthermore, Aguiluz wrote to MBf Card that he had already incorporated a company
named MBF-MCA Countdown Cards Philippines, Inc. which would later be converted into the
proposed JVC upon the execution and approval of the pertinent agreements.
However, without prior authority of MBf Card, and while the parties were still discussing
and negotiating on the terms and conditions of the joint venture, Aguiluz, began to promote, market
and sell the Countdown Discount Cards to the public through publication in a newspaper, using the
Countdown name, logo and trademark.
Hence, Mbf filed a complaint for recovery of money, unfair competition and damages with
application for Preliminary Injunction.
In their defense, MBF-MCA Countdown Cards Philippines, Inc. claimed that the contract
between the parties had already been perfected.
Issue:
Whether the contract between MBf Card and MCA Holdings had already been perfected?
Ruling:
No.
Page 38 of 159
First, Tan Sri had no authority to bind MBf Card in the alleged oral agreement considering
the admission of Aguiluz that he neither knew nor inquired whether Tan Sri was an officer or
director of the MBf Card.
Second, the remittance of the money given by MBf Card will only be applied to its proposed
shareholdings upon the execution and approval of the Joint Venture Licensing Agreements. Further,
the advice and suggestion of MBf Card for the sale, promotion and marketing discounts are merely
preparatory acts and does not necessarily indicate the existence of a perfected contract.
Lastly, MBf`Card are neither incorporators nor stockholders of MCA-MBF, the company that
was supposedly intended to be converted into the Joint Venture Company. It must be stressed that
MCA-MBF has not yet been converted into the Joint Venture Company as no shares of stock have
been delivered to MBf Card.
KINDS OF CONTRACTS
SALVADOR A. FERNANDEZ vs. CRISTINA D. AMAGNA
When the contract of lease does not provide for a definite period for its duration, the lease
shall be considered month to month if the rentals are paid on a monthly basis and when the lessee
fails to pay the monthly rental, the contract of lease shall be considered terminated.
Facts:
Cristina was a co-owner and administratrix of the property in question and a portion of the
property was leased by Salvador Fernandez on a month-to-month basis at the rate of P1,300.00. In
July 1995, Fernandez failed to pay the monthly rentals, prompting Amagna to send a demand letter
to pay and vacate but the former refused. Amagna then filed an action for unlawful detainer against
Fernandez.
Fernandez averred that he had been renting the premises for over fifty years and that the
monthly rental was only P420.00 and not P1,300.00 and that there was no agreement with
respondent regarding the period for the lease. Lastly, he asseverated that he was surprised to
receive a demand letter as on May 15, 1997, he filed a Petition for Consignation and deposited his
arrears in rent computed at the rate of P420.00 per month.
The MeTC ruled in favor of Amagna which was affirmed by the RTC and CA holding that:
When petitioner-appellant filed a consignation case, a fact was established that
there was really an unpaid rental commencing from July 1995. A closer examination
of the records reveals that the complaint for ejectment was filed on September 23,
1996, while the consignation case was commenced on May 15, 1997. Hence, when
the petitioner-appellant paid the back rentals, the respondent-appellee had already
filed the ejectment case. Case law is to the effect that the acceptance by the lessor of
the payment by lessee of rentals in arrears does not constitute a waiver of the
default of the payment of rentals as a valid cause of action for ejectment. xxx.
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Fernandez moved for reconsideration raising that the City of Manila was in the process of
expropriating the land under the Land-for-the-Landless Act (PD 1517), therefore he cannot be
ejected because he is a beneficiary and covered by the No Eviction Rule. He also contended that the
CA failed to consider the Rent Control Law insofar as allowable increase of rental. The CA denied
the motion as the matters raised by Fernandez were only brought up for the first time. Hence, the
present petition.
Issue:
Whether or not the CA erred in not considering the contentions of Fernandez and that he
should not be ejected from the subject property
Ruling:
We agree with the findings of all the three (3) lower courts that the verbal lease agreement
between petitioner and respondent was on a monthly basis. It is settled that if the rent is paid
monthly, the lease is on a month-to-month basis and may be terminated at the end of each
month. Article 1687 of the Civil Code is in point, thus:
Art. 1687. If the period for the lease has not been fixed, it is understood to be
from year to year, if the rent agreed upon is annual; from month to month, if it is
monthly; from week to week, if the rent is weekly; and from day to day, if the rent is
to be paid daily. However, even though a monthly rent is paid, and no period for the
lease has been set, the courts may fix a longer term for the lease after the lessee has
occupied the premises for over one year. If the rent is weekly, the courts may
likewise determine a longer period after the lessee has been in possession for over
six months. In case of daily rent, the courts may also fix a longer period after the
lessee has stayed in the place for over one month.
In the case at bar, it is undisputed that the lease was verbal, that the period for the lease had
not been fixed, that the rentals were paid monthly, and that proper demand and notice by the lessor
to vacate were given.
A lease on a month-to-month basis provides for a definite period and may be terminated at
the end of any month, hence, by the failure of the lessees to pay the rents due for a particular
month, the lease contract is deemed terminated as of the end of that month. Applying this principle,
the lease contract in the instant case was deemed terminated at the end of the month when the
petitioner, as Fernandez, failed to pay the rents due.
Clearly, grounds for ejectment exist in this case and Amagna could lawfully ask for
petitioners eviction from the premises. As already discussed, the month-to-month lease contract of
the parties expired when petitioner failed to pay the rentals and the lease was not renewed by
respondent. Likewise, respondent sufficiently proved that from July 1995 up to the filing of the
complaint for ejectment, petitioner has failed to pay his monthly rentals for over three (3) months
and even refused to settle his unpaid rentals and vacate the leased premises despite demand to do
so. The subsequent payment by petitioner of his arrears by way of consignation and the acceptance
by respondent of said payments will not operate to bar the eviction of Fernandez.
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Fernandez having failed to prove his claim that the amount of rental starting July 1995 was
just P420.00, the findings of the trial courts, as affirmed by the CA, stand. Likewise, Fernandez
argument that the increase in the monthly rental from P420.00 to P1,300.00 contravenes the
allowable increase, the following disquisition of the CA is relevant:
Further, We cannot allow the petitioner-appellant to belatedly question the
validity of the increase of the rental and issue of payment under
protest. Jurisprudence is replete with the rule that no new issues shall be raised for
the first time on appeal.
We cannot take an opposite stance in the present case. The issue of the validity of the
alleged increase in rent was not a litigated issue in the trial courts. To allow petitioner to do so on
appeal would be utterly unfair to respondent. The CA correctly opted not to resolve the issue in its
decision of May 25, 2001.
In the same vein, the issues concerning petitioners entitlement to the benefits of the
ordinance were raised by petitioner only in his motion for reconsideration of the CA decision, the
effect of which is as if it was never duly raised in that court at all, while the issue on the applicability
of P.D. No. 1517 was only raised before this Court. Nevertheless, even if we delve into the merits of
petitioners contentions on the matter, the same must be rejected.
ROLANDO T. CATUNGAL, JOSE T. CATUNGAL, JR., CAROLYN T. CATUNGAL and ERLINDA
CATUNGAL-WESSEL vs. ANGEL S. RODRIGUEZ
G.R. No. 146839, March 23, 2011, J. LEONARDO-DE CASTRO
This Court has distinguished between a condition imposed on the perfection of a contract and
a condition imposed merely on the performance of an obligation. While failure to comply with the first
condition results in the failure of a contract, failure to comply with the second merely gives the other
party the option to either refuse to proceed with the sale or to waive the condition.
Facts:
Agapita T. Catungal, mother of herein petitioners, owned a parcel of land (Lot 10963)
located in Cebu City. It was alleged that the said property was the exclusive paraphernal property of
Agapita. Subsequently, Agapita, with the consent of her husband Jose Catungal, entered into a
Contract to sell, which was later on upgraded into a Conditional Deed of Sale, with Respondent
Rodriguez. The parties agreed that the price for the property shall be P 25,000,000, the respondent
giving Agapita P 500,000 as downpayment. Thereafter, the parties stipulated in the Conditional
Deed of Sale that respondent shall only pay the remaining balance after he had successfully
negotiated a Road Right of Way in his favor. If however said Road Right of Way could not be
negotiated, respondent shall give notice to Agapita for her to reassess and solve the problem by
taking other options, but should the situation ultimately prove futile, respondent shall take steps to
rescind the Conditional Deed of Sale. Also stipulated in the Deed of Sale is the option of respondent
to rescind the sale.
However, before the respondent even secure a Road Right of Way, the Spouses Catungal
requested an advance of P5,000,000 on the purchase price allegedly for personal reasons.
Respondent, however refused. After his refusal, respondent learned that the Catungals were
offering the property for sale to third parties. Thereafter, respondent received letters from the
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Spouses Catungal demanding him to make up his mind about buying the land or exercising his
option to buy. The Spouses likewise informed respondent that should he fail to exercise his option
to buy the land, they would consider the contract cancelled. Despite respondents objections to the
demands of the Spouses Catungal, the latter still decided to terminate the contract.
Contending that the Catungals unilateral rescission of the Conditional Deed of Sale was
unjustified, arbitrary and unwarranted respondent then filed a complaint against the Spouses with
the trial court praying that the Spouses be enjoined from selling the subject property to third
persons. In their answer the Catungals contended that the respondent did not have an exclusive
right to rescind the contract on the ground that the contract being reciprocal, meant that both
parties had the right to rescind it. The trial court ruled in favor respondent and ordered the
issuance of a writ of preliminary injunction which was later on made permanent.
On appeal, the Catungals argued for the first time that the provision of the Conditional Deed
of Sale making as a condition the securing of the Road Right of Way by the respondent before
payment of the balance of the purchase price as well as the provision giving the respondent the
option to rescind the sale, void for violating the principle of mutuality of contracts under Art. 1308
of the Civil Code making the said contract void ab initio. Their petition having been denied, the
petitioners now file the instant petition.
Issue:
Whether or not the provision of the Conditional Deed of Sale making as a condition the
securing of the Road Right of Way by the respondent before payment of the balance of the purchase
price as well as the provision giving the respondent the option to rescind the sale, void for violating
the principle of mutuality of contracts under Art. 1308 of the Civil Code.
Ruling:
No, the provisions in the Conditional Deed of Sale do not violate the principle of mutuality of
contracts.
In the past, this Court has distinguished between a condition imposed on the perfection of a
contract and a condition imposed merely on the performance of an obligation. While failure to
comply with the first condition results in the failure of a contract, failure to comply with the second
merely gives the other party the option to either refuse to proceed with the sale or to waive the
condition. This principle is evident in Article 1545 of the Civil Code on sales, which provides in part:
Art. 1545. Where the obligation of either party to a contract of sale is subject to any condition which
is not performed, such party may refuse to proceed with the contract or he may waive performance
of the condition x x x.
Paragraph 1(b) of the Conditional Deed of Sale, stating that respondent shall pay the
balance of the purchase price when he has successfully negotiated and secured a road right of way,
is not a condition on the perfection of the contract nor on the validity of the entire contract or its
compliance as contemplated in Article 1308. It is a condition imposed only on respondents
obligation to pay the remainder of the purchase price. In our view and applying Article 1182, such a
condition is not purely potestative as petitioners contend. It is not dependent on the sole will of the
debtor but also on the will of third persons who own the adjacent land and from whom the road
right of way shall be negotiated. In a manner of speaking, such a condition is likewise dependent on
Page 42 of 159

chance as there is no guarantee that respondent and the third party-landowners would come to an
agreement regarding the road right of way. This type of mixed condition is expressly allowed under
Article 1182 of the Civil Code.
INTERPRETATION OF CONTRACTS
HEIRS OF DECEASED CARMEN CRUZ-ZAMORA vs. MULTIWOOD INTERNATIONAL INC.
As mandated by Article 1370 of the Civil Code, if the terms of the contract are clear and leave
no doubt upon the intention of the contracting parties, the literal meaning of its stipulations shall
control. The agreement is clear, plain and simple that it leaves no room for interpretation. It explicitly
provides that for the services of Zamora, as agent under the agreement, Multiwood agreed to pay her
in the amount equivalent to 10% of the face value of the invoice price, covering the letter of credit or
such other instrument representing the actual purchase price for the products sold or shipped by
Multiwood.
Facts:
On November 18, 1993, the late Carmen Cruz-Zamora filed a Complaint against
respondent Multiwood International, Inc. The complaint alleged that sometime in 1987, Zamora
signed a Marketing Agreement to act as an agent of Multiwood. As agent, Zamora claimed that she
obtained certain contracts on behalf of Multiwood and in renumeration for her services, she was to
be paid 10% commission for the said projects. Zamora claimed that Multiwood defaulted in the
payment of her commission for the contracts with Edsa Shangrila, Makati Shangrila and Diamond
Hotel. She was compelled to file an action for the collection of her commission in the amount of
P254,089.52 when her repeated demands for payment remained unheeded.
In its Answer with Counterclaim, Multiwood asserted that Zamora was not entitled to
receive commissions on the ground that those projects were construction contracts while their
Marketing Agreement spoke only of the sale of Multiwood products.
The RTC rendered a decision in favor of Zamora. The trial court interpreted the Marketing
Agreement as to include construction contracts and allowed Zamora to claim the 10% commission
granted in the said agreement. It took into consideration the alleged intention of the contracting
parties purportedly evidenced by Multiwoods contemporaneous and subsequent acts of making
partial payments of the commission on the disputed projects as evidenced by various vouchers
which, however, were not offered in evidence by either party and marked for exhibit only during
the testimony of defense witness. On appeal, the CA rendered its decision reversing and setting
aside the decision of the RTC. The CA ruled that Zamora could not validly claim commissions from
contracts on the basis of the Marketing Agreement because these contracts were limited only to the
solicitation of the products of prospective foreign or local buyers of Multiwood, excluding other
services offered by the latter such as construction services.
Issue:
Whether or not the Zamora is entitled to the claimed commissions.
Ruling:
Page 43 of 159
The Court found that the CA committed no reversible error when it ruled that the
construction projects solicited by Zamora for Multiwood were outside the coverage of the
Marketing Agreement so as preclude the former from claiming a 10% commission. The plain import
of the text of the Marketing Agreement leaves no doubt as to the true intention of the parties in
executing the Marketing Agreement. The pertinent provisions of the said Marketing Agreement are
as follows:
WHEREAS, the principal is engaged in the manufacture and export of
furniture and such other related products using various types of suitable raw
materials;
WHEREAS, the principal needs the services of the agent in soliciting
and finding buyers, customers, or dealers, whether individuals or entities,
for the products of the principal and agent has represented that she has the
capability and competence to provide the said services;
NOW, THEREFORE, for and in consideration of the foregoing and of
the covenants hereinafter specified, the parties hereto have agreed as follows:
1. That principal hereby grants the agent the non-exclusive right to
identify, solicit, find or introduce for negotiation, prospective local and foreign
buyers, dealers, or customers for the products of the principal.
xxx xxx xxx
4. That for the services of the agent under this agreement, the principal
agrees to pay her Ten Percent (10%) of the face value of the invoice price,
covering the letter of credit, or such similar instrument representing the actual
purchase price for the products sold or shipped by the principal. x x x.
(emphasis ours)
The trial courts reliance various vouchers which were not offered in evidence by either
party and marked for exhibit only during the testimony of defense witness is misplaced. It has no
evidentiary value in this case because it was not offered in evidence before the trial court. The rule
is that the court shall not consider any evidence which has not been formally offered. The purpose
for which the evidence is offered must be specified. The offer of evidence is necessary because it is
the duty of the court to rest its findings of fact and its judgment only and strictly upon the evidence
offered by the parties. Unless and until admitted by the court in evidence for the purpose or
purposes for which such document is offered, the same is merely a scrap of paper barren of
probative weight. Mere identification of documents and the markings thereof as exhibits do not
confer any evidentiary weight on documents unless formally offered.
Plainly, the trial court should not have read terms into the Marketing Agreement that were
not expressly in the agreement itself. The agreement is clear, plain and simple that it leaves no
room for interpretation. It explicitly provides that for the services of Zamora, as agent under the
agreement, Multiwood agreed to pay her in the amount equivalent to 10% of the face value of the
invoice price, covering the letter of credit or such other instrument representing the actual
purchase price for the products sold or shipped by Multiwood. In other words, Zamoras
Page 44 of 159

commission under the Marketing Agreement was to be paid only for products sold or supplied by
Multiwood and not for services rendered by the latter. As admitted by Zamora herself during crossexamination, the Edsa Shangrila, Makati Shangrila and Diamond Hotel projects were interior
construction projects and not simply contracts for sale or supply of Multiwood products. As
mandated by Article 1370 of the Civil Code, if the terms of the contract are clear and leave no doubt
upon the intention of the contracting parties, the literal meaning of its stipulations shall control.
Moreover, the parol evidence rule forbids any addition to or contradiction of the terms of a
written instrument by testimony or other evidence purporting to show that, at or before the
execution of the parties written agreement, other or different terms were agreed upon by the
parties, varying the purport of the written contract. When an agreement has been reduced to
writing, the parties cannot be permitted to adduce evidence to prove alleged practices which to all
purposes would alter the terms of the written agreement. Whatever is not found in the writing is
understood to have been waived and abandoned.
DEFECTIVE CONTRACTS
VICENTE MANZANO, JR. vs. MARCELINO GARCIA
The proper basis for the nullity of the forged pacto de retro sale is Article 1318 of the Civil
Code, which enumerates the essential requisites of a valid contract, and not Article 1409 which
enumerates examples of void contracts in relation to Article 1505 which refers to an unenforceable
contract and is applicable only to goods.
Facts:
Marcelino D. Garcia (Garcia) is an owner of a parcel of land and such property was the
subject of a deed of pacto de retro sale dated May 26, 1992 allegedly executed by Garcia in favor of
Constancio Manzano, the predecessor-in-interest and brother of petitioner Vicente Manzano, Jr.
(Vicente). Later, Constancio Manzano passed away but Garcia did not redeem the subject property
within the three-month period. Consequently, Vicente instituted a petition for consolidation of
ownership over the property
Garcia filed an opposition and answer, alleging that the document evidencing the pacto de
retro sale was a forgery. On February 15, 1994, Garcia filed a complaint for annulment of pacto de
retro sale and recovery of the owners title with preliminary injunction against Vicente. The RTC
held that Garcia failed to prove that his signature in the pacto de retro sale was forged. However,
the Court of Appeals concluded that the pacto de retro sale is void ab initio pursuant to Article 1409
in relation to Article 1505 of the Civil Code.
Issue:
Is Art. 1409 in relation to Art. 1505 of the Civil Code the proper basis for the nullity of
forged pacto de retro sale?
Ruling:
No, the proper basis is Art. 1318 of the Civil Code.
Page 45 of 159
The proper basis for the nullity of the forged pacto de retro sale is not Article 1409 (which
enumerates examples of void contracts) in relation to Article 1505 (which refers to an
unenforceable contract and is applicable only to goods) of the Civil Code as stated by the Court of
Appeals, but Article 1318 of the Civil Code, which enumerates the essential requisites of a valid
contract.
Article 1318. There is no contract unless the following requisites concur:
(1)
Consent of the contracting parties;
(2)
Object certain which is the subject matter of the contract;
(3)
Cause of the obligation which is established.
There are two types of void contracts:
(1) those where one of the essential requisites of a valid contract as provided for by Article
1318 of the Civil Code is totally wanting; and
(2) those declared to be so under Article 1409 of the Civil Code. Conveyances by virtue of a
forged signature are void ab initio.
The absence of the essential requisites of consent and cause or consideration in these cases
rendered the contract inexistent.
PHILNICO INDUSTRIAL CORPORATION vs. PRIVATIZATION AND MANAGEMENT OFFICE
G.R. No. 199420, August 27, 2014, J. Leonardo-De Castro
Article 1305 of the Civil Code allows contracting parties to establish such stipulation, clauses,
terms, and conditions as they may deem convenient, provided, however, that they are not contrary to
law, morals, good customs, public order, or public policy.
Pactum commissorium is among the contractual stipulations that are deemed contrary to
law. It is defined as "a stipulation empowering the creditor to appropriate the thing given as guaranty
for the fulfillment of the obligation in the event the obligor fails to live up to his undertakings, without
further formality, such as foreclosure proceedings, and a public sale." It is explicitly prohibited under
Article 2088 of the Civil Code.
Facts:
This case involves the consolidated Petitions for Review on Certiorari under Rule 45 of the
Rules of Court filed by Philnico Industrial Corporation (PIC) and Privatization and Management
Office (PMO).
In 1987, the shares of stock owned by DPB and PNB of Philnico Processing Corporation
(PPC), a corporation engaged in nickel mining and refining business, were transferred to
respondent PMO. Thereafter, PMO, PIC and PPC executed a contract, denominated as the Amended
and Restated Definitive Agreement (ARDA). The contract laid down the terms and conditions of the
purchase and acquisition by PIC from PMO of 22,500,000 shares of stock of PPC (representing 90%
of ownership of PPC), as well as receivables of PMO from PPC. Under the ARDA, PIC agreed to pay
PMO the peso equivalent of US$333,762,000.00 as purchase price, payable in instalments and in
accordance with the schedule also set out in the ARDA.
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Under the ARDA the parties agreed that respondent PMO shall execute and deliver to
petitioner PIC the necessary deed of sale transferring to the latter all of the formers right, title and
interest in and to the Shares and deliver to PIC the stock certificates representing such shares, each
duly endorsed, or with separate stock transfer powers attached, in favor of PIC. Likewise stipulated
in the ARDA is the agreement of the parties that in case PIC defaults in the payment of its
obligations, the shares shall ipso facto revert to respondent PMO without need of any further demand.
The parties further agreed that PIC shall execute and deliver a Pledge Agreement in favor of PMO
covering the PPC Shares.
In accordance with the ARDA, PMO executed and delivered to PIC the necessary documents
to transfer the formers rights, title, and interests in the PPC shares of stock to the latter; and PPC
issued new certificates for the same shares of stock in the name of PIC and/or its nominees. Also, in
accordance with the ARDA, Petitioner and Respondent executed a Pledge Agreement stating therein
that respondent PMO may conduct a public or private sale of the shares of stock, wherein PMO may
opt to buy the same.
Three years later, on account of economic problems, petitioner PIC failed to pay its
obligations. Consequently respondent PMO demanded that petitioner PIC settle its unpaid
amortizations or else respondent PMO would enforce the automatic reversion of the PPC shares
provided under the ARDA. Due to the refusal of respondent PMO to give petitioner PIC an
opportunity to conclude its fund-raising efforts, petitioner PIC filed before the RTC a Complaint
against PMO, PPC and the PPC Corporate Secretary praying that they be enjoined from effecting the
reversion of the PPC shares.
After hearing, the RTC rendered a decision in favor of petitioner and ordered the issuance of
a Writ of Preliminary Injunction restraining PMO, PPC, and the PPC Corporate Secretary from
effecting the reversion of the 22,500,000 shares of stock of PPC. In ruling as such, the RTC
concluded that the provision in the ARDA providing for ipso facto reversion of the shares of stock is
null and void for being a pactum commissorium. The Court of Appeals, however disagreed with the
finding of the RTC that the said provision constitutes pactum commissorium, but still affirmed the
denial by the RTC of the motion of PMO to dissolve the Writ of Preliminary Injunction issued by it.
Hence, the instant petitions.
Issue:
Whether or not Section 8.02 of the ARDA on ipso facto or automatic reversion of the PPC
shares of stock to PMO in case of default by PIC constitutes pactum commissorium.
Ruling:
Yes, Section 8.02 of the ARDA constitutes pactum commissorium and, thus, null and void for
being contrary to Article 2088 of the Civil Code.
Article 1305 of the Civil Code allows contracting parties to establish such stipulation, clauses, terms,
and conditions as they may deem convenient, provided, however, that they are not contrary to law,
morals, good customs, public order, or public policy.
Pactum commissorium is among the contractual stipulations that are deemed contrary to
law. It is defined as "a stipulation empowering the creditor to appropriate the thing given as
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guaranty for the fulfillment of the obligation in the event the obligor fails to live up to his
undertakings, without further formality, such as foreclosure proceedings, and a public sale." It is
explicitly prohibited under Article 2088 of the Civil Code.
There are two elements for pactum commissorium to exist: (1) that there should be a
pledge or mortgage wherein a property is pledged or mortgaged by way of security for the payment
of the principal obligation; and (2) that there should be a stipulation for an automatic appropriation
by the creditor of the thing pledged or mortgaged in the event of non-payment of the principal
obligation within the stipulated period.
Both elements of pactum commissorium are present in the instant case: (1) By virtue of the
Pledge Agreement dated May 2,1997, PIC pledged its PPC shares of stock in favor of PMO as
security for the fulfillment of the formers obligations under the ARDA dated May 10, 1996 and the
Pledge Agreement itself; and (2) There is automatic appropriation as under Section 8.02 of the
ARDA, in the event of default by PIC, title to the PPC shares of stock shall ipso facto revert from PIC
to PMO without need of demand.
The Court of Appeals, in ruling that there is no pactum commissorium, adopted the position
of PMO that the ARDA and the Pledge Agreement are entirely separate and distinct contracts.
Neither contract contains both elements of pactum commissorium: the ARDA solely has the second
element, while the Pledge Agreement only has the first element.
The Court disagrees.
The agreement between PMO and PIC is the sale of the PPC shares of stock by the former to
the latter, to be secured by a pledge on the very same shares of stock. The ARDA and the Pledge
Agreement herein, although executed in separate written instruments, are integral to one another.
On one hand, Section 2.04 of the ARDA explicitly requires the execution of a pledge agreement as
security for the payment by PIC of the purchase price for the PPC shares of stock and receivables,
and even provides the form for said pledge agreement in Annex A thereof. Section 2.07 of the ARDA
also states that the closing of the sale and purchase of the PPC shares of stock and receivables shall
take place on the same date that PIC shall execute and deliver the pledge agreement, together with
the certificates of shares of stock, to PMO. On the other hand, the "Whereas Clauses" of the Pledge
Agreement expressly mentions the ARDA and explains that the Pledge Agreement is being executed
to secure payment by PIC of the purchase price and all other amounts due to PMO under the ARDA,
as well as the performance by PIC of its other obligations under the ARDA and the Pledge
Agreement itself. Clearly, it was the intention of the parties to enter into and execute both contracts
for a complete effectuation of their agreement.
RESCISSION OF CONTRACTS
FONTANA RESORT AND COUNTRY CLUB, INC. AND RN DEVELOPMENT CORP. vs. SPOUSES ROY
S. TAN AND SUSAN C. TAN
The general rule is that he who alleges fraud or mistake in a transaction must substantiate his
allegation as the presumption is that a person takes ordinary care for his concerns and that private
dealings have been entered into fairly and regularly." One who alleges defect or lack of valid consent
to a contract by reason of fraud or undue influence must establish by full, clear and convincing
Page 48 of 159

evidence such specific acts that vitiated a partys consent, otherwise, the latters presumed consent to
the contract prevails.
Facts:
The respondent spouses Tan purchased a class D share of stock of petition Fontana Resort
and Country Club, Inc. (FRCC) through co-petitioner RN Development Corporation (RNDC) upon the
premise that the construction of the Fontana Leisure Park in Pampanga would be completed in
1998 and that the spouses would be granted a free use of the facilities of the leisure park for a
certain number of days. These promises, however, were not fulfilled by FRCC as the construction of
the leisure park was not finished by the year 1998 and that the spouses in numerous times where
not allowed to use the facilities.
Because of this, the spouses Tan filed a complaint for the refund of the amount they paid for
the class D share of stock they bought with the Securities and Exchange Commission. Acting on the
complaint, the SEC rendered a decision in favor of the spouses and ruled that FRCC is guilty of
fraudulent misrepresentation and ordered it to refund the amount of the share of stock bought by
the spouses. On appeal, the SEC en banc affirmed the decision of the SEC Division. Via petition for
review under Rule 43, the Court of Appeals affirmed with modification the decision of the SEC en
banc. It ruled that the FRCC did not commit fraudulent misrepresentation. However, it ruled that
the essence of the SEC en banc decision is annulment and recision. Thus, it ordered FRCC to refund
the amount in favor of the spouses and in turn, it ordered the spouses to return the share of stock to
FRCC. Hence, the current petition.
The FRCC contends that the essence of the SEC en banc decision is not rescission. Moreover,
it alleges that no material misrepresentation or fraudulent misrepresentation was present that is
substantial enough to cause the rescission of the contract in the shares of stock under Article 1390
and Article 1390 of the Civil Code.
Issue:
Whether or not the contract between FRCC and spouses Tan should be rescinded by virtue
of the decision of SEC en banc.
Ruling:
No. The Supreme Court reversed and set aside the decision of the Court of Appeals. It held
that while the Court of Appeals is correct in holding that the SEC en banc decision is one for
annulment/rescission of the contract on the basis of the allegations on the complaint of the
spouses, still the annulment/rescission, given the facts of the case cannot be ordered.
There is fraud when one party is induced by the other to enter into a contract, through and
solely because of the latters insidious words or machinations. But not all forms of fraud can vitiate
consent. "Under Article 1330, fraud refers to dolo causante or causal fraud, in which, prior to or
simultaneous with the execution of a contract, one party secures the consent of the other by using
deception, without which such consent would not have been given." "Simply stated, the fraud must
be the determining cause of the contract, or must have caused the consent to be given."
Page 49 of 159

"[T]he general rule is that he who alleges fraud or mistake in a transaction must
substantiate his allegation as the presumption is that a person takes ordinary care for his concerns
and that private dealings have been entered into fairly and regularly." One who alleges defect or
lack of valid consent to a contract by reason of fraud or undue influence must establish by full, clear
and convincing evidence such specific acts that vitiated a partys consent, otherwise, the latters
presumed consent to the contract prevails.
In this case, respondents have miserably failed to prove how petitioners employed fraud to
induce respondents to buy FRCCI shares. It can only be expected that petitioners presented the FLP
and the country club in the most positive light in order to attract investor-members. There is no
showing that in their sales talk to respondents, petitioners actually used insidious words or
machinations, without which, respondents would not have bought the FRCCI shares. Respondents
appear to be literate and of above-average means, who may not be so easily deceived into parting
with a substantial amount of money. What is apparent to us is that respondents knowingly and
willingly consented to buying FRCCI shares, but were later on disappointed with the actual FLP
facilities and club membership benefits.
Similarly, we find no evidence on record that petitioners defaulted on any of their
obligations that would have called for the rescission of the sale of the FRCCI shares to respondents.
"The right to rescind a contract arises once the other party defaults in the performance of
his obligation." "Rescission of a contract will not be permitted for a slight or casual breach, but only
such substantial and fundamental breach as would defeat the very object of the parties in making
the agreement. In the same case as fraud, the burden of establishing the default of petitioners lies
upon respondents, but respondents once more failed to discharge the same.
Neither can we rescind the contract because construction of FLP facilities were still
unfinished by 1998. Indeed, respondents allegation of unfinished FLP facilities was not disputed by
petitioners, but respondents themselves were not able to present competent proof of the extent of
such incompleteness. Without any idea of how much of FLP and which particular FLP facilities
remain unfinished, there is no way for us to determine whether petitioners were actually unable to
deliver on their promise of a first class leisure park and whether there is sufficient reason for us to
grant rescission or annulment of the sale of FRCCI shares. Apparently, respondents were still able
to enjoy their stay at FLP despite the still ongoing construction works, enough for them to wish to
return and again reserve accommodations at the park.
SALES
EXTINGUISHMENT OF SALE
REPUBLIC OF THE PHILIPPINES vs. MARAWI-MARANTAO GENERAL HOSPITAL INC,
AND ATTY. MACAPANTON K. MANGODADATU
The alleged nullity of the deed of conditional sale because the period of redemption had
expired is wrong. The right of legal redemption must be exercised within specified time limits.
However, the statutory period of redemption can be extended by agreement of the parties. Allowing a
redemption after the lapse of the statutory period, when the buyer at the foreclosure does not object
but even consents to the redemption, will uphold the policy of the law recognized in such cases as
Page 50 of 159

Javellana v. Mirasol and Nuez, and in the more recent case of Tibajia, et al. v. Honorable Court of
Appeals, et al., which is to aid rather than defeat the right of redemption.
Facts:
In 1970, Marawi- Marantao General Hospital, Inc. MMGHI obtained a loan from the Social
Security System (SSS). The loan was secured by a mortgage on the property covered by a Transfer
Certificate of Title (TCT) including the hospital building standing on it. In 1991, for failure of the
MMGHI to pay the monthly amortizations, the subject property was foreclosed by SSS and sold at
public auction, wherein petitioner was declared the winning bidder. Sheriff issued a certificate of
sale on the same date which was registered on October 16, 1991.
In October 1992, MMGHI manifested their intention to repurchase the subject property and
asked for a period of six months within which to repurchase the same. Atty. Godofredo S. Sison,
gave MMGHI s instead a period of sixty (60) days or until December 21, 1992, within which to
repurchase the subject property. As a sign of good faith, Atty. Mangondato tendered P200, 000.00
as partial payment. After further negotiation, the Social Security Commission (SSC) approved Atty.
Mangondatos offer to repurchase/redeem the property during its Regular Meeting No. 42 and
adopted a resolution to that effect.
Consequently, the deed of conditional sale was executed on January 16, 1997 between Atty.
Sison and Atty. Mangondato. Later in the same year, Atty. Mangondato issued in favor of the SSS a
PNB Check representing the full payment of the subject property under the Deed of Conditional
Sale. Thereafter, Atty. Mangondato demanded the SSS to immediately implement the transfer of the
subject property in his favor considering that he had already paid the purchase price in full
However, the SSS informed Atty. Mangondato about the adoption by the SSC of SSC Resolution
declaring the conditional sale a nullity and directing the return of the P2.7 million payment made by
Atty. Mangondato.
Aggrieved by the action of the SSS, the MMGHI and Atty. Mangondato filed a complaint for
specific performance and damages against the SSS. RTC ruled in favor of MMGHI which was
likewise affirmed by the CA. The Republic basically argues in this petition that no valid redemption
could have been effected by entering into the deed of conditional sale as the period of redemption
had already expired.
Issue:
Whether or not MMGHI and Atty. Mangondato validly redeemed the property under the
deed of conditional sale despite the lapse of the period for legal redemption.
Ruling:
The petition is hereby denied.
Yes. Upon careful consideration of the contentions of the parties, this Court answers the
issue affirmatively. The alleged nullity of the deed of conditional sale because the period of
redemption had expired is wrong.
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When SSC Resolution approved the proposal of Atty. Mangondato to redeem/repurchase
the property, the SSC is deemed to have waived, or even agreed to extend, the original limited
period of redemption. As this Court held in Development Bank of the Philippines v. West Negros
College, Inc, the right of legal redemption must be exercised within specified time limits. However,
the statutory period of redemption can be extended by agreement of the parties.
Allowing a redemption after the lapse of the statutory period, when the buyer at the
foreclosure does not object but even consents to the redemption, will uphold the policy of the law
recognized in such cases as Javellana v. Mirasol and Nuez, and in the more recent case of Tibajia, et
al. v. Honorable Court of Appeals, et al., which is to aid rather than defeat the right of redemption.
Furthermore, assuming that Atty. Sison lacked authority when he signed the deed of
conditional sale, the SSS ratified his act when it accepted the P2.7 million payment made by MMGHI
and Atty. Mangondato. In Tacalinar v. Corro, this Court considered the act of a father, whose
children sold his 40-hectare hacienda without his authority, of collecting the purchase price as
ratifying and approving the said sale, and this Court further took such act as a waiver of his right of
action to avoid the contract as it implies the tacit, if not express, confirmation of the said sale.
In view of the validity of the redemption made by MMGHI and Atty. Mangondato through
the contract of conditional sale between the parties, the SSS must faithfully comply with its
obligations under the said contract. This is in accordance with the principle of obligatoriness of
contracts, that obligations arising from contract have the force of law between the parties and
should be complied with in good faith.
The SSS acknowledges that the purchase price of P2.7 million had already been paid in full.
Pursuant to paragraph 12 of the deed of conditional sale and the nature of the parties agreement as
a contract to sell, therefore, the SSS has the obligation to execute a deed of absolute sale in favor of
MMGHI/Atty. Mangondato.
PARTNERSHIP
FEDERICO JARANTILLA, JR. vs. ANTONIETA JARANTILLA, BUENAVENTURA REMOTIGUE,
SUBSTITUTED BY CYNTHIA REMOTIGUE, DOROTEO JARANTILLA and TOMAS JARANTILLA
There is a co-ownership when an undivided thing or right belongs to different persons. It is a
partnership when two or more persons bind themselves to contribute money, property, or industry to a
common fund, with the intention of dividing the profits among themselves. A partner is entitled only to
his share as agreed upon, or in the absence of any such stipulations, then to his share in proportion to
his contribution to the partnership.
Facts:
The present case stems from the amended complaint filed by Antonieta Jarantilla against
Buenaventura Remotigue, Cynthia Remotigue, Federico Jarantilla, Jr., Doroteo Jarantilla and Tomas
Jarantilla, for the accounting of the assets and income of the co-ownership, for its partition and the
delivery of her share corresponding to eight percent (8%), and for damages. Antonieta claimed that
Page 52 of 159

in 1946, she had entered into an agreement with Conchita and Buenaventura Remotigue, Rafael
Jarantilla, and Rosita and Vivencio Deocampo to engage in business. Antonieta alleged that the
initial contribution of property and money came from the heirs inheritance, and her subsequent
annual investment of seven thousand five hundred pesos (P7,500.00) as additional capital came
from the proceeds of her farm. Antonieta also alleged that from 1946-1969, she had helped in the
management of the business they co-owned without receiving any salary. Her salary was
supposedly rolled back into the business as additional investments in her behalf. Antonieta further
claimed co-ownership of certain properties (the subject real properties) in the name of the
defendants since the only way the defendants could have purchased these properties were through
the partnership as they had no other source of income.
The respondents, including petitioner herein, in their Answer, denied having formed a
partnership with Antonieta in 1946. They claimed that she was in no position to do so as she was
still in school at that time. In fact, the proceeds of the lands they partitioned were devoted to her
studies. They also averred that while she may have helped in the businesses that her older sister
Conchita had formed with Buenaventura Remotigue, she was paid her due salary. They did not deny
the existence and validity of the Acknowledgement of Participating Capital and in fact used this as
evidence to support their claim that Antonietas 8% share was limited to the businesses
enumerated therein. With regard to Antonietas claim in their other corporations and businesses,
the respondents said these should also be limited to the number of her shares as specified in the
respective articles of incorporation. The respondents denied using the partnerships income to
purchase the subject real properties and said that the certificates of title should be binding on her.
During the course of the trial at the RTC, petitioner Federico Jarantilla, Jr. (Federico), who
was one of the original defendants, entered into a compromise agreement with Antonieta Jarantilla
wherein he supported Antonietas claims and asserted that he too was entitled to six percent (6%)
of the supposed partnership in the same manner as Antonieta was.
The RTC approved the Joint Motion to Approve Compromise Agreement and decided in
favor of Antonieta. Both the Federico and the respondents appealed this decision to the Court of
Appeals. Federico claimed that the RTC erred in not rendering a complete judgment and ordering
the partition of the co-ownership and giving to him six per centum (6%) of the properties.
While the Court of Appeals agreed to some of the RTCs factual findings, it also established
that Antonieta Jarantilla was not part of the partnership formed in 1946, and that her 8% share
was limited to the businesses enumerated in the Acknowledgement of Participating Capital. The
Court of Appeals rendered the herein challenged decision setting aside the RTCs decision.
Federico filed before us this petition for review. He asserts that he was in a partnership with
the Remotigue spouses, the Deocampo spouses, Rosita Jarantilla, Rafael Jarantilla, Antonieta
Jarantilla and Quintin Vismanos, as evidenced by the Acknowledgement of Participating Capital the
Remotigue spouses executed in 1957. He contends that from this partnership, several other
corporations and businesses were established and several real properties were acquired. In this
petition, he is essentially asking for his 6% share in the subject real properties. He is relying on the
Acknowledgement of Participating Capital, on his own testimony, and Antonieta Jarantillas
testimony to support this contention.
Issue:
Page 53 of 159

Whether or not the Court of Appeals erred in limiting petitioners share to the assets of the
businesses enumerated in the Acknowledgement of Participating Capital.
Ruling:
We find no error in the ruling of the Court of Appeals.
Both the petitioner and Antonieta Jarantilla characterize their relationship with the
respondents as a co-ownership, but in the same breath, assert that a verbal partnership was formed
in 1946 and was affirmed in the 1957 Acknowledgement of Participating Capital.
There is a co-ownership when an undivided thing or right belongs to different persons. It is
a partnership when two or more persons bind themselves to contribute money, property, or
industry to a common fund, with the intention of dividing the profits among themselves.
Under Article 1767 of the Civil Code, there are two essential elements in a contract of
partnership: (a) an agreement to contribute money, property or industry to a common fund; and (b)
intent to divide the profits among the contracting parties. The first element is undoubtedly present in
the case at bar, for, admittedly, all the parties in this case have agreed to, and did, contribute money
and property to a common fund. Hence, the issue narrows down to their intent in acting as they did. It
is not denied that all the parties in this case have agreed to contribute capital to a common fund to
be able to later on share its profits. They have admitted this fact, agreed to its veracity, and even
submitted one common documentary evidence to prove such partnership - the Acknowledgement
of Participating Capital.
The Acknowledgement of Participating Capital is a duly notarized document voluntarily
executed by Conchita Jarantilla-Remotigue and Buenaventura Remotigue in 1957. Petitioner does
not dispute its contents and is actually relying on it to prove his participation in the
partnership. Article 1797 of the Civil Code provides:
Art. 1797. The losses and profits shall be distributed in conformity
with the agreement. If only the share of each partner in the profits has been agreed
upon, the share of each in the losses shall be in the same proportion.
In the absence of stipulation, the share of each partner in the profits
and losses shall be in proportion to what he may have contributed, but the
industrial partner shall not be liable for the losses. As for the profits, the industrial
partner shall receive such share as may be just and equitable under the
circumstances. If besides his services he has contributed capital, he shall also
receive a share in the profits in proportion to his capital.
It is clear from the foregoing that a partner is entitled only to his share as agreed upon, or in
the absence of any such stipulations, then to his share in proportion to his contribution to the
partnership. The petitioner himself claims his share to be 6%, as stated in the Acknowledgement of
Participating Capital. However, petitioner fails to realize that this document specifically
enumerated the businesses covered by the partnership: Manila Athletic Supply, Remotigue Trading
in Iloilo City and Remotigue Trading in Cotabato City. Since there was a clear agreement that the
capital the partners contributed went to the three businesses, then there is no reason to deviate
from such agreement and go beyond the stipulations in the document. Therefore, the Court of
Page 54 of 159

Appeals did not err in limiting petitioners share to the assets of the businesses enumerated in the
Acknowledgement of Participating Capital.
AGENCY
COUNTRY BANKERS INSURANCE CORPORATION vs. KEPPEL CEBU SHIPYARD, UNIMARINE
SHIPPING LINES, INC., PAUL RODRIGUEZ, PETER RODRIGUEZ, ALBERT HONTANOSAS, and
BETHOVEN QUINAIN
Our law mandates an agent to act within the scope of his authority. The scope of an agents
authority is what appears in the written terms of the power of attorney granted upon him. Under
Article 1878(11) of the Civil Code, a special power of attorney is necessary to obligate the principal as
a guarantor or surety. In the case at bar, the principal could be held liable even if the agent exceeded
the scope of his authority only if the agents act of issuing the Surety Bond is deemed to have been
performed within the written terms of the power of attorney he was granted. However, the Special
Power of Attorney accorded to the agent in this case clearly states the limits of his authority and
particularly provides that in case of surety bonds, it can only be issued in favor of the Department of
Public Works and Highways, the National Power Corporation, and other government agencies.
Facts:
Unimarine Shipping Lines, Inc. (Unimarine), a corporation engaged in the shipping industry,
contracted the services of Keppel Cebu Shipyard, formerly known as Cebu Shipyard and
Engineering Works, Inc. (Cebu Shipyard), for dry docking and ship repair works on its vessel. Cebu
Shipyard issued Bill No. 26035 to Unimarine in consideration for its services and the terms of this
agreement were embodied in Cebu Shipyards letter to the President/General Manager of
Unimarine, Paul Rodriguez, who signed his conformity to said letter.
In compliance with the agreement, Unimarine, through Paul Rodriguez, also secured from
Country Bankers Insurance Corp. (CBIC), through the latters agent, Bethoven Quinain (Quinain),
CBIC Surety Bond in the amount of P3,000,000.00. In addition to this, Unimarine obtained another
bond from Plaridel Surety and Insurance Co. (Plaridel) in the amount of P1,620,000.00.
Because Unimarine, despite repeated and several demands, failed to remit the payments for
the repair of its ship when it became due, Cebu Shipyard, through counsel, wrote the sureties CBIC
and Plaridel to inform them of Unimarines nonpayment, and to ask them to fulfill their obligations
as sureties. However, even the sureties failed to discharge their obligations, and so Cebu Shipyard
filed a Complaint before the RTC against Unimarine, CBIC, and Plaridel.
CBIC, in its Answer alleged that the surety bond was issued by its agent, Quinain, in excess
of his authority. It claimed that Cebu Shipyard should have doubted the authority of Quinain to
issue the surety bond because the surety bond can only be issued in favor of the Department of
Public Works and Highways, as stamped on the upper right portion of the face of the bond and that
the issuance of the surety bond was not reported, and the corresponding premiums were not
remitted to CBIC.
Issue:
Page 55 of 159
Whether or not CBIC is bound by the acts of its agent Quinain in entering into a surety
agreement with Unimarine.
Ruling:
No.
Our law mandates an agent to act within the scope of his authority. The scope of an agents
authority is what appears in the written terms of the power of attorney granted upon him. Under
Article 1878(11) of the Civil Code, a special power of attorney is necessary to obligate the principal
as a guarantor or surety.
In the case at bar, CBIC could be held liable even if Quinain exceeded the scope of his
authority only if Quinains act of issuing the Surety Bond is deemed to have been performed within
the written terms of the power of attorney he was granted. However, the Special Power of Attorney
accorded to Quinain clearly states the limits of his authority and particularly provides that in case
of surety bonds, it can only be issued in favor of the Department of Public Works and Highways, the
National Power Corporation, and other government agencies.
Under Articles 1898 and 1910 of the New Civil Code, an agents act, even if done beyond the
scope of his authority, may bind the principal if he ratifies them, whether expressly or tacitly. It
must be stressed though that only the principal, and not the agent, can ratify the unauthorized acts,
which the principal must have knowledge of. Neither Unimarine nor Cebu Shipyard was able to
repudiate CBICs testimony that it was unaware of the existence of Surety Bond. There were no
allegations either that CBIC should have been put on alert with regard to Quinains business
transactions done on its behalf. It is clear, and undisputed therefore, that there can be no
ratification in this case, whether express or implied.
Article 1911 of NCC, on the other hand, is based on the principle of estoppel, which is
necessary for the protection of third persons. It states that the principal is solidarily liable with the
agent even when the latter has exceeded his authority, if the principal allowed him to act as though
he had full powers. This Court cannot agree with the lower courts pronouncement of negligence on
CBICs part. CBIC not only clearly stated the limits of its agents powers in their contracts, it even
stamped its surety bonds with the restrictions, in order to alert the concerned parties. CBIC cannot
be faulted for Quinains deliberate failure to notify it of his transactions with Unimarine.
Furthermore, nowhere in the decisions of the lower courts was it stated that CBIC let the
public, or specifically Unimarine, believe that Quinain had the authority to issue a surety bond in
favor of companies other than the Department of Public Works and Highways, the National Power
Corporation, and other government agencies. Neither was it shown that CBIC knew of the existence
of the surety bond before the endorsement extending the life of the bond, was issued to
Unimarine. For one to successfully claim the benefit of estoppel on the ground that he has been
misled by the representations of another, he must show that he was not misled through his own
want of reasonable care and circumspection.
TRUST
Page 56 of 159

MARIA TORBELA, represented by her heirs, EULOGIO TOSINO et al vs. SPOUSES ANDRES T.
ROSARIO et al
A trust may have a constructive or implied nature in the beginning, but the registered owners
subsequent express acknowledgement in a public document of a previous sale of the property to
another party, had the effect of imparting to the aforementioned trust the nature of an express trust.
Facts:
The Torbela sibling inherited the title to the subject property (Lot No. 356-A) from their
parents, the Torbela spouses, who, in turn, acquired the same from the first registered owner of the
lot, Valeriano. Later, the Torbela siblings executed a Deed of Absolute Quitclaim on December 12,
1964 in which they transferred and conveyed Lot No. 356-A to Dr. Rosario for the consideration of
P9.00.
Lot No. 356-A.
On December 16, 1964, TCT No. 52751, covering Lot No. 356-A, was already issued in Dr.
Rosarios name. On December 28, 1964, Dr. Rosario executed his own Deed of Absolute Quitclaim, in
which he expressly acknowledged that he only borrowed Lot No. 356-A and was transferring and
conveying the same back to the Torbela siblings for the consideration of P1.00.
On February 21, 1965, Dr. Rosarios loan in the amount of P70,200.00, secured by a
mortgage on Lot No. 356-A, was approved by DBP. Soon thereafter, construction of a hospital
building started on Lot No. 356-A. In the meantime, Dr. Rosario acquired another loan from the
Philippine National Bank (PNB) sometime in 1979-1981.
On February 13, 1986, the Torbela siblings filed before the Regional Trial Court (RTC) of
Urdaneta, Pangasinan, a Complaint for recovery of ownership and possession of Lot No. 356-A, plus
damages, against the spouses Rosario.
The spouses Rosario afterwards failed to pay their loan from Banco Filipino. Banco Filipino
extrajudicially foreclosed the mortgage on Lot No. 356-A and a Certificate of Sale in favor of Banco
Filipino was later issued. On December 9, 1987, the Torbela siblings filed before the RTC their
Amended Complaint, impleading Banco Filipino as additional defendant.
Issue:
Is there an express trust between the Torbela siblings and Dr. Rosario?
Ruling:
Page 57 of 159
Yes, Dr. Rosario is merely the trustee of Lot No. 356-A and the Torbela siblings are the true
owners.
Trust is the right to the beneficial enjoyment of property, the legal title to which is vested in
another. It is a fiduciary relationship that obliges the trustee to deal with the property for the
benefit of the beneficiary. Trust relations between parties may either be express or implied. An
express trust is created by the intention of the trustor or of the parties, while an implied trust
comes into being by operation of law.
Express trusts are created by direct and positive acts of the parties, by some writing or
deed, or will, or by words either expressly or impliedly evincing an intention to create a trust.
Under Article 1444 of the Civil Code, no particular words are required for the creation of an express
trust, it being sufficient that a trust is clearly intended. It is possible to create a trust without using
the word trust or trustee. Conversely, the mere fact that these words are used does not necessarily
indicate an intention to create a trust. The question in each case is whether the trustor manifested
an intention to create the kind of relationship which to lawyers is known as trust.
In Tamayo v. Callejo, the Court recognized that a trust may have a constructive or implied
nature in the beginning, but the registered owners subsequent express acknowledgement in a
public document of a previous sale of the property to another party, had the effect of imparting to
the aforementioned trust the nature of an express trust. The same situation exists in this case.
When Dr. Rosario was able to register Lot No. 356-A in his name under TCT No. 52751 on
December 16, 1964, an implied trust was initially established between him and the Torbela siblings
under Article 1451 of the Civil Code, which provides:
ART. 1451. When land passes by succession to any person and he causes the legal title to be put
in the name of another, a trust is established by implication of law for the benefit of the true
owner.
Dr. Rosarios execution of the Deed of Absolute Quitclaim on December 28, 1964, containing
his express admission that he only borrowed Lot No. 356-A from the Torbela siblings, eventually
transformed the nature of the trust to an express one. The express trust continued despite Dr.
Rosario stating in his Deed of Absolute Quitclaim that he was already returning Lot No. 356-A to the
Torbela siblings as Lot No. 356-A remained registered in Dr. Rosarios name under TCT No. 52751
and Dr. Rosario kept possession of said property, together with the improvements thereon.
Therefore, Banco Filipino was ordered to reconvey Lot No. 356-A to the Torbela siblings.
Furthermore, the right of the Torbela siblings to recover Lot No. 356-A has not yet
prescribed. To apply the 10-year prescriptive period, which would bar a beneficiarys action to
recover in an express trust, the repudiation of the trust must be proven by clear and convincing
evidence and made known to the beneficiary.
A trustee who obtains a Torrens title over a property held in trust for him by another
cannot repudiate the trust by relying on the registration.
Page 58 of 159

The registration of Lot No. 356-A by Dr. Rosario in his name under TCT No. 52751 on
December 16, 1964 is not the repudiation that would have caused the 10-year prescriptive period
for the enforcement of an express trust to run. For repudiation of an express trust to be effective,
the unequivocal act of repudiation had to be made known to the Torbela siblings as the cestuis que
trust and must be proven by clear and conclusive evidence.
GOVERNMENT SERVICE INSURANCE SYSTEM (GSIS), et al. vs. COMMISSION ON AUDIT (COA),
AMORSONIA B. ESCARDA, MA. CRISTINA D. DIMAGIBA, and REYNALDO P. VENTURA
G.R. No. 162372, September 11, 2012, J. De Castro
A constructive trust is substantially an appropriate remedy against unjust enrichment. It is
raised by equity in respect of property, which has been acquired by fraud, or where although acquired
originally without fraud, it is against equity that it should be retained by the person holding it. Thus,
the payees, who acquired the retirement benefits under the GSIS RFP, are considered as trustees of the
disallowed amounts, as although they committed no fraud in obtaining these benefits, it is against
equity and good conscience for them to continue holding on to them.
Facts:
Romeo C. Quilatan, in his capacity as one of the petitioners in GSIS, et al. v. Commission on
Audit, et al., and in representation of his fellow Government Service Insurance System (GSIS)
officers and employees who retired under the GSIS RFP (Retirement/Financial Plan), filed a
Manifestation and Motion to Defer Execution of Judgment, alleging that GSIS, the main petitioner in
the case, which no longer contested this Courts October 11, 2011 Decision, had started to send out
demand letters from the payees, asking them to refund the amounts they had received as
retirement benefits under the GSIS RFP.
In essence, the Movants Federico Pascual, et al. are asking this Court to reconsider our
Decision in so far as their liability, as the payees, to return the benefits they had already received,
by applying our rulings in Molen, Jr. v. Commission on Audit,1 De Jesus v. Commission on Audit,2
Magno v. Commission on Audit,3 Baybay Water District v. Commission on Audit,4Barbo v.
Commission on Audit,5 Bases Conversion and Development Authority v. Commission on Audit,6
among others, wherein, despite this Courts disapproval of the allowances and/or benefits the
payees therein received, for being contrary to the law applicable in those cases, this Court did not
require such payees to refund the monies they had received in good faith.
The public respondents, through the Office of the Solicitor General, commented and agreed
with the Movants Federico Pascual, et al. that it would be an injustice if they were ordered to refund
the retirement benefits they had received more than a decade ago.
Issue:
Whether or not the payees should be compelled to return the retirement benefits they had
received under the GSIS RFP.
Ruling: The petition is granted.
While it is true, as claimed by the Movants that based on prevailing jurisprudence,
disallowed benefits received in good faith need not be refunded, the case before us may be
Page 59 of 159

distinguished from all the cases cited by Movants because the monies involved here are retirement
benefits which are given to one who is separated from employment either voluntarily or
compulsorily. Such benefits, subject to certain requisites imposed by law and/or contract, are given
to the employee on the assumption that he can no longer work. They are also given as a form of
reward for the services he had rendered. The purpose is not to enrich him but to help him during
his non-productive years, unlike allowances or fringe benefits which are given in addition to ones
salary, either to reimburse him for expenses he might have incurred in relation to his work, or as a
form of supplementary compensation. On the other hand, retirement benefits
Our Decision dated October 11, 2011 does not preclude Movants from receiving retirement
benefits provided by existing retirement laws. What they are prohibited from getting are the
additional benefits under the GSIS RFP, which we found to have emanated from a void and illegal
board resolution. To allow the payees to retain the disallowed benefits would amount to their
unjust enrichment to the prejudice of the GSIS, whose avowed purpose is to maintain its actuarial
solvency to finance the retirement, disability, and life insurance benefits of its members.
There is no unjust enrichment when the person who will benefit has a valid claim to such
benefit. Because the GSIS RFP, which we repeat, is contrary to law, thus void and of no effect, the
enrichment of the payees is without just or legal ground. Therefore, the payees have no valid claim
to the benefits they received under the GSIS RFP.
The payees received the disallowed benefits with the mistaken belief that they were entitled
to the same under the GSIS RFP. Specifically applicable to the case at bar is the doctrine that a
constructive trust is substantially an appropriate remedy against unjust enrichment. It is raised by
equity in respect of property, which has been acquired by fraud, or where although acquired
originally without fraud, it is against equity that it should be retained by the person holding it.
Thus, the payees, who acquired the retirement benefits under the GSIS RFP, are considered
as trustees of the disallowed amounts, as although they committed no fraud in obtaining these
benefits, it is against equity and good conscience for them to continue holding on to them.
CREDIT TRANSACTIONS
LOAN
PHILIPPINE NATIONAL BANK vs. MERELO B. AZNAR, et al.
G.R. No. 171805, May 30, 2011, J. Leonardo-De Castro
There is no express trust made if there is no clear and manifest intention to create such. If after
careful scrutiny of the document, it is clear that what was intended was the establishment of a lien
over the subject properties as a form of collateral, then the underlying agreement is a loan, not a trust.
Facts:
In 1958, RISCO ceased operation due to business reverses. Due to Merelo B. Aznar, Matias B.
Aznar III, Jose L. Aznar, Rosario T. Barcenilla, Jose B. Enad and Ricardo Gabuyas (Aznar et al)desire
to rehabilitate RISCO, they contributed a total amount of P212,720.00 which was used in the
purchase of the three (3) parcels of land located in various areas in the Cebu Province.
Page 60 of 159
After the purchase of the above lots, titles were issued in the name of RISCO. The amount
contributed by plaintiffs constituted as liens and encumbrances on the aforementioned properties
as annotated in the titles of said lots. Such annotation was made pursuant to the Minutes of the
Special Meeting of the Board of Directors of RISCO stating that;
And that the respective contributions above-mentioned shall constitute as their lien or interest on the
property described above, if and when said property are titled in the name of RURAL INSURANCE &
SURETY CO., INC., subject to registration as their adverse claim in pursuance of the Provisions of Land
Registration Act, (Act No. 496, as amended) until such time their respective contributions are refunded
to them completely.
Thereafter, various subsequent annotations were made on the same titles in favor of PNB.
As a result, a Certificate of Sale was issued in favor of PNB, being the lone and highest bidder of the
three (3) parcels of land and was also issued Transfer Certificate of Title over the said parcels of
land.
This prompted Aznar et. al to file a complaint seeking the quieting of their supposed title to
the subject properties. They alleged that the subsequent annotations on the titles are subject to the
prior annotation of their liens and encumbrances. PNB, on the other hand, countered that plaintiffs
have no right of action for quieting of title since the order of the court directing the issuance of titles
to PNB had already become final and executory and their validity cannot be attacked except in a
direct proceeding for their annulment.
Aznar, et al., filed a Manifestation and Motion for Judgment on the Thus, the trial court
rendered a decision, which ruled against PNB on the basis that there was an express trust created
over the subject properties. On appeal, the CA set aside the ruling of the trial court and ruled that
there was no trust created. The lien is merely an evidence of the loan. Thus, it directed PNB to pay
Aznar, et al., the amount of their contributions plus legal interest from the time of acquisition of the
property until finality of judgment.
Issue:
trust
Whether or not the annotation in the 3 parcels of land was made in pursuance of a loan or a
Ruling:
The annotation was made in pursuance of a loan.
At the outset, the Court agrees with the Court of Appeals that the agreement contained in
the Minutes of the Special Meeting of the RISCO Board of Directors held on March 14, 1961 was a
loan by the therein named stockholders to RISCO.
Careful perusal of the Minutes relied upon by plaintiffs-appellees in their claim, showed that
their contributions shall constitute as "lien or interest on the property" if and when said properties
are titled in the name of RISCO, subject to registration of their adverse claim under the Land
Registration Act, until such time their respective contributions are refunded to them completely.
Page 61 of 159

The term lien as used in the Minutes is defined as "a discharge on property usually for the
payment of some debt or obligation. A lien is a qualified right or a proprietary interest which may
be exercised over the property of another. It is a right which the law gives to have a debt satisfied
out of a particular thing. It signifies a legal claim or charge on property; whether real or personal, as
a collateral or security for the payment of some debt or obligation." Hence, from the use of the word
"lien" in the Minutes, We find that the money contributed by plaintiffs-appellees was in the nature
of a loan, secured by their liens and interests duly annotated on the titles. The annotation of their
lien serves only as collateral and does not in any way vest ownership of property to plaintiffs.
We are not persuaded by the contention of Aznar, et al., that the language of the subject
Minutes created an express trust. The creation of an express trust must be manifested with
reasonable certainty and cannot be inferred from loose and vague declarations or from ambiguous
circumstances susceptible of other interpretations.
No such reasonable certitude in the creation of an express trust obtains in the case at bar. In
fact, a careful scrutiny of the plain and ordinary meaning of the terms used in the Minutes does not
offer any indication that the parties thereto intended that Aznar, et al., become beneficiaries under
an express trust and that RISCO serve as trustor.
REAL MORTGAGE
NATIONAL HOUSING AUTHORITY vs. AUGUSTO BASA, JR., LUZ BASA and EDUARDO S. BASA
G.R. No. 149121, April 20, 2010, J. Leonardo-De Castro
It has been settled that there is effective registration once the registrant has fulfilled all that is
needed of him for purposes of entry and annotation, so that what is left to be accomplished lies solely
on the register of deeds. As such, an entry of the certificate of sale was validly registered even if the
same was only annotated in the owners transfer certificates of titles. Particularly, the purchaser in the
auction sale cannot be faulted for the impossibility of annotation on the transfer certificates of title
which were supposed to be in the custody of the Registrar of Deeds, like in instances when the same
were previously razed in fire. Neither could such purchaser be blamed for the fact that there were no
reconstituted titles available during the time of inscription as it had taken the necessary steps in
having the same reconstituted but to no avail. Hence, the one-year period of redemption commences to
run from the said annotation and the failure of the mortgagors to redeem during the said period
entitles the purchaser to the writ of possession as a matter of right.
Facts:
On April 19, 1983, spouses Augusto and Luz Basa (Spouses Basa) loaned from NHA the
amount of P556,827.10 secured by a real estate mortgage over their properties. They did not pay
the loan despite repeated demands. To collect its credit, the NHA, on August 9, 1990, filed a verified
petition for extrajudicial foreclosure of mortgage before the Sheriffs Office in Quezon City, pursuant
to Act No. 3135, as amended. After notice and publication, the properties were sold at public
auction where NHA emerged as the highest bidder. On April 16, 1991, the sheriffs certificate of sale
was registered and annotated only on the owners duplicate copies of the titles in the hands of
Spouses Basa, since the titles in the custody of the Register of Deeds were among those burned
down when a fire gutted the City Hall of Quezon City. Consequently, on April 16, 1992, the
redemption period expired, without respondents having redeemed the properties. Shortly
thereafter, on April 24, 1992, NHA executed an Affidavit of Consolidation of Ownership over the
Page 62 of 159

foreclosed properties, and the same was inscribed by the Register of Deeds on the certificates of
title in the hand of NHA. The latter eventually filed a petition for the issuance of a Writ of Possession
which was granted by the Regional Trial Court. As such, on March 9, 1993, the RTC ordered Spouses
Basa to vacate the subject lots. The writ, however, remained unserved. This compelled NHA to move
for the issuance of an alias writ of possession. However, before the RTC could resolve of the same,
Spouses Basa and Eduardo Basa, on June 2, 1993, filed a Petition in Intervention praying that the
sale be set aside and the writ of possession be cancelled. They assailed the legality of the
extrajudicial foreclosure of the subject properties and insisted that even assuming arguendo that
such was valid, they were still entitled to redeem the subject properties since the one-year
redemption period from the registration of the sheriffs certificate of foreclosure sale had not yet
prescribed. Citing Bernardez v. Reyes and Bass v. De la Rama, respondents theorized that the
instrument is deemed registered only upon actual inscription on the certificate of title in the
custody of the civil registrar. Since the sheriffs certificate was only inscribed on the owners
duplicate certificate of title, and not on the certificate of title in the possession of the Register of
Deeds, then there was no effective registration and the one-year redemption period had not even
begun to run. Thus, respondents asked the RTC, among others, to declare the foreclosure sale null
and void and to allow them to redeem the mortgaged properties and to cancel the Writ of
Possession dated March 9, 1993.
In its opposition to the said petition for intervention, the NHA countered that the
extrajudicial foreclosure sale was conducted validly and made in accordance with Act No. 3135 as
evidenced by the publication of the Notice of Sheriffs Sale in the Manila Times in its issues dated
July 14, 21 and 28, 1990. It also said that respondents had, in fact, been furnished with a copy of the
Notice of Sheriffs Sale as shown at the bottom portion of said notice. Furthermore, it maintained
that respondents right of redemption had long expired on April 15, 1992 since the certificate of
sale was inscribed on their TCT Nos. 285413 and 287008 a year earlier, or on April 16, 1991.
On January 2, 1995, the RTC issued the first assailed Order with the following directives: 1)
granting the issuance of the alias writ of possession which allowed NHA to take possession of the
subject properties; 2) admitting the Petition in Intervention and "treating the same as the petition
to set aside sale mentioned in [Sec. 8] of Act No. 3155"; and 3) granting the issuance of a Writ of
Preliminary Injunction in favor of respondents that ordered NHA to refrain from selling or
disposing of the contested properties. NHA filed a motion for reconsideration assailing the RTCs
Order insofar as it admitted respondents motion for intervention and issued a writ of preliminary
injunction. However, the same was denied. Undaunted, NHA filed a special civil action for certiorari
and prohibition before the Court of Appeals. The appellate court ruled in favor of the NHA. It
declared null and void the assailed orders of the RTC to the extent that the said orders admitted the
petition in intervention and granted the issuance of the preliminary injunction; but it upheld the
grant of the alias writ of possession. Thereafter, the CA issued an Amended Decision declaring that
the period of redemption had not expired as the certificate of sale had not been registered or
annotated in the original copies of the titles supposedly kept with the Register of Deeds since said
titles were earlier razed by fire. It further ruled that the entry of the certificate of sale in the owners
duplicate of the titles could not have been sufficient to register the same since anyone who would
wish to check with the Register of Deeds would not see any annotation. Thus, entry made on the
owners duplicate of the titles cannot be considered notice that would bind the whole world. Having
been deprived of their right of redemption, the Court of Appeals deemed it proper to allow
respondents to intervene. Aggrieved, the NHA filed a Motion for Reconsideration which was
however denied. Hence, the instant petition.
Page 63 of 159

Issue:
Whether the annotation of the sheriffs certificate of sale on the owners duplicate certificate
of titles, in this case, is sufficient registration and as such, signifies that the one-year period of
redemption commences to run.
Ruling:
Of foremost importance in the case at bar is Development Bank of the Philippines vs. Acting
Register of Deeds of Nueva Ecija where the Court listed cases where the transaction or instrument
was annotated not on the original certificate but somewhere else. In that case, the Court noted that
before the Second World War, particularly in Government of the Philippine Islands vs. Aballe, the
prevailing doctrine was an inscription in the book of entry even without the notation on the
certificate of title was considered as satisfactory and produced all the effects which the law gave to
its registration. During the war, however, the Court observed that there was apparent departure
from said ruling since in Bass v. De la Rama, the holding was that entry of an instrument in the
primary entry book does not confer any legal effect without a memorandum thereof inscribed on
the certificate of title. DBP noted that Bass v. De la Rama, however, survived only for a little while
since "later cases appear to have applied the Aballe ruling. Indeed, as settled in Aballe and in
subsequent cases, the prevailing rule is that there is effective registration once the registrant has
fulfilled all that is needed of him for purposes of entry and annotation, so that what is left to be
accomplished lies solely on the register of deeds.
In the case under consideration, NHA presented the sheriffs certificate of sale to the
Register of Deeds and the same was entered as Entry No. 2873 and said entry was further
annotated in the owners transfer certificate of title. A year later and after the mortgagors did not
redeem the said properties, respondents filed with the Register of Deeds an Affidavit of
Consolidation of Ownership after which the same instrument was presumably entered into in the
day book as the same was annotated in the owners duplicate copy. Just like in the cases aforementioned, NHA followed the procedure in order to have its sheriffs certificate of sale annotated in
the transfer certificates of title. There would be, therefore, no reason not to apply the ruling in said
cases to this one. It was not NHAs fault that the certificate of sale was not annotated on the transfer
certificates of title which were supposed to be in the custody of the Registrar, since the same were
burned. Neither could NHA be blamed for the fact that there were no reconstituted titles available
during the time of inscription as it had taken the necessary steps in having the same reconstituted
as early as July 15, 1988. Clearly, NHA did everything within its power to assert its right. Moreover,
respondents stand on the non-applicability of the DBP case to other cases, absent any statement
that categorically states its pro hac vice character, contravenes the principle of stare decisis which
urges that courts are to apply principles declared in prior decisions that are substantially similar to
a pending case.
Since entry of the certificate of sale was validly registered, the redemption period accruing
to respondents commenced therefrom, since the one-year period of redemption is reckoned from
the date of registration of the certificate of sale. It must be noted that on April 16, 1991, the sheriffs
certificate of sale was registered and annotated only on the owners duplicate copies of the titles
and on April 16, 1992, the redemption period expired, without respondents having redeemed the
properties. In fact, on April 24, 1992, NHA executed an Affidavit of Consolidation of Ownership.
Clearly, respondents have lost their opportunity to redeem the properties in question.
Page 64 of 159

It is a time-honored precept that after the consolidation of titles in the buyers name, for
failure of the mortgagor to redeem, the writ of possession becomes a matter of right. Its issuance to
a purchaser in an extrajudicial foreclosure is merely a ministerial function. The writ of possession
issues as a matter of course upon the filing of the proper motion and the approval of the
corresponding bond. The judge issuing the writ following the express provisions of law neither
exercises his official discretion nor judgment. As such, the court granting the writ cannot be charged
with having acted without jurisdiction or with grave abuse of discretion. To accentuate the writs
ministerial character, the Court disallowed injunction to prohibit its issuance despite a pending
action for annulment of mortgage or the foreclosure itself. As such, applying the ruling in Vaca vs.
Court of Appeals which is on all fours with the present petition, there is no dispute that the subject
properties were not redeemed within one year from the registration of the extrajudicial foreclosure
sale; thus, the NHA acquired an absolute right, as purchaser, to the issuance of the writ of
possession.
CENTURY SAVINGS BANK vs. SPOUSES DANILO T. SAMONTE and ROSALINDA M. SAMONTE
G.R. No. 176212, October 20, 2010, J. Leonardo-De Castro
Foreclosure proceedings enjoy the presumption of regularity and that the mortgagor who
alleges absence of a requisite has the burden of proving such fact.
The publication of the notice of sale in the newspaper of general circulation alone is more than
sufficient compliance with the notice posting requirement of the law. By such publication, a reasonably
wide publicity had been effected such that those interested might attend the public sale, and the
purpose of the law had been thereby subserved.
Facts:
This case involves two loans, in the aggregate amount of P3,500,000.00, extended by
Century Savings Bank (CSB) to Spouses Danilo and Rosalinda Samonte (Sps. Samonte). Each loan
was secured by a promissory note and deed of real estate mortgage executed by respondents in
favor of CSB. The real estate mortgages were constituted on parcels of land, in the name of Sps.
Samonte.
When Sps. Samonte defaulted in the payment of their loans by the latter part of 1999, CSB
initiated before the notary public extrajudicial foreclosure proceedings over the mortgaged
properties, pursuant to Act No. 3135, also known as An Act to Regulate the Sale of Property under
Special Powers Inserted in or Annexed to Real Estate Mortgages, as amended.
Section 3 of Act No. 3135 provides for the following pre-requisites for an extrajudicial sale:
SEC. 3. Notice shall be given by posting notices of the sale for not less than
twenty days in at least three public places of the municipality or city where the
property is situated, and if such property is worth more than four hundred pesos,
such notice shall also be published once a week for at least three consecutive weeks
in a newspaper of general circulation in the municipality or city.
CSB caused the publication of a Notice of Sale, prepared by Notary Public Enriqueto I.
Magpantay (Magpantay), in the Challenger News a weekly newspaper of general circulation on
November 15, 22, and 29, 1999.
Page 65 of 159
The public auction sale took place as scheduled on December 9, 1999, with CSB as the
winning and highest bidder. Notary Public Magpantay subsequently issued a Certificate of Sale,
covering the subject properties, in favor of CSB. This Certificate of Sale mentioned, among other
things, that the extrajudicial foreclosure sale of the mortgaged properties was only a partial
satisfaction of Sps. Samonte total outstanding financial obligations to CSB. Consequently, CSB filed a
complaint against Sps. Samonte for the collection of the deficiency of their loans.
Sometime in 2001, the parties executed a Contract of Lease whereby CSB leased one of the
foreclosed properties to Sps. Samonte for a period of one year. It was acknowledged in said contract
that CSB acquired the real property subject of the lease as the highest and winning bidder in an
extrajudicial foreclosure sale, conducted pursuant to Act No. 3135, as amended. CSB eventually
consolidated its titles to the foreclosed properties. As a result, new certificates of title were issued
in the name of petitioner.
A few months later, Sps. Samonte filed a complaint, seeking the annulment of the
extrajudicial foreclosure sale of their real properties contending that the extrajudicial foreclosure
proceedings initiated by CSB failed to comply with the posting requirements under Section 3 of Act
No. 3135, as amended. On the other hand, CSB insisted that the extrajudicial foreclosure sale was
duly conducted in accordance with law.
The Makati RTC-Branch 58, after trial, dismissed Sps. Samontes complaint. The trial court
found that the Notice of Sale appears to have been posted for 20 days before the scheduled public
auction, as stated in the Notary Publics Certificate of Posting; and that even if the posting
requirement was not complied with, the publication of the Notice of Sale in a newspaper of general
circulation already satisfied the notice requirement under Act No. 3135.
Sps. Samonte appealed before the Court of Appeals.
CA granted the appeal and annulled the extrajudicial foreclosure sale of the said properties
by adjudging that the said foreclosure proceedings were fatally defective because the Certificate of
Posting failed to state that the Notice of Sale was posted for 20 days before the sale in at least 3
public places of the city where the properties sought to be foreclosed were situated.
Hence, CSB filed a Petition for Review on Certiorari of the CAs Decision.
Issue:
Whether or not the extrajudicial foreclosure sale of Sps. Samontes mortgaged properties
was valid.
Ruling:
The Court finds the instant Petition meritorious.
The resolution of said issue, however, is dependent on the answer to the question of
whether the legal requirements on the notice of sale were complied with. Necessarily, the Court
must review the evidence on record, most especially, Notary Public Magpantays Certificate of
Posting, to determine the weight and probative value to accord the same. Non-compliance with the
Page 66 of 159

requirements of notice and publication in an extrajudicial foreclosure sale is a factual issue. The
resolution thereof by the lower courts is binding and conclusive upon this Court. However, this rule
is subject to exceptions, as when the findings of the trial court and the Court of Appeals are in
conflict. Also, it must be noted that non-compliance with the statutory requisites could constitute a
jurisdictional defect that would invalidate the sale.
After a review of the evidence on record, the Court declares that the extrajudicial
foreclosure sale of respondents properties is valid, having complied with the legal requirements for
the same.
It is an elementary rule that the burden of proof is the duty of a party to present evidence on
the facts in issue necessary to establish his claim or defense by the amount of evidence required by
law. In Cristobal v. Court of Appeals, the Court explicitly ruled that foreclosure proceedings enjoy the
presumption of regularity and that the mortgagor who alleges absence of a requisite has the burden
of proving such fact.
In Olizon v. Court of Appeals, the publication of the notice of sale in the newspaper of general
circulation alone is more than sufficient compliance with the notice-posting requirement of the
law. By such publication, a reasonably wide publicity had been effected such that those interested
might attend the public sale, and the purpose of the law had been thereby subserved.
The object of a notice of sale is to inform the public of the nature and condition of the
property to be sold, and of the time, place and terms of the sale. Notices are given for the purpose of
securing bidders and to prevent a sacrifice of the property. If these objects are attained, immaterial
errors and mistakes will not affect the sufficiency of the notice; but if mistakes or omissions occur
in the notices of sale, which are calculated to deter or mislead bidders, to depreciate the value of the
property, or to prevent it from bringing a fair price, such mistakes or omissions will be fatal to the
validity of the notice, and also to the sale made pursuant thereto.
Olizon squarely applies in this case. It is not disputed that the Notice of Sale was duly
published in a newspaper of general circulation once a week for three consecutive weeks.
Respondents did not allege, much less prove, any mistake or omission in the published Notice of
Sale calculated to deter or mislead bidders, depreciate the value of the property, or to prevent it
from bringing a fair price; or sale of the mortgaged properties for a price far below their value as to
insinuate bad faith; or collusion between Notary Public Magpantay, who conducted the sale, and
petitioner. Hence, the alleged non-compliance with the posting requirement, even if true, shall not
justify the setting aside of the foreclosure sale.
BANK OF THE PHILIPPINE ISLANDS, AS SUCCESSOR-IN-INTEREST OF FAR EAST BANK &
TRUST COMPANY vs. CYNTHIA L. REYES
Gross inadequacy of price does not nullify an execution sale. In an ordinary sale, for reason of
equity, a transaction may be invalidated on the ground of inadequacy of price, or when such
inadequacy shocks ones conscience as to justify the courts to interfere; such does not follow when the
law gives the owner the right to redeem as when a sale is made at public auction, upon the theory that
the lesser the price, the easier it is for the owner to effect redemption. When there is a right to redeem,
inadequacy of price should not be material because the judgment debtor may re-acquire the property
or else sell his right to redeem and thus recover any loss he claims to have suffered by reason of the
Page 67 of 159

price obtained at the execution sale. Thus, respondent stood to gain rather than be harmed by the low
sale value of the auctioned properties because it possesses the right of redemption.
Facts:
The respondent Cynthia Reyes obtained a loan from petitioner BPIs predecessor-in-interest
Far East and Trust Company. As a security for the loan, she mortgaged 22 parces of land.
Consequently, Reyes failed to pay the loan obligation. Because of this, BPI extrajudicially foreclosed
the said properties and became the highest bidder at the auction. The properties were sold at Php
9M. However, during the time of the auction sale, the principal obligation ballooned to Php 40M.
Because there was a deficiency with the price, BPI commenced an action for the collection of sum of
money against Reyes for the remaining balance.
The Regional Trial Court ruled in favor of BPI and ordered Reyes to pay the remaining
balance of the principal obligation. However, on appeal, the Court of Appeals reversed and set aside
the decision of the RTC ruling that since the predecessor-in-interest of the petitioner BPI assessed
the value of the mortgaged parcels of land at Php 40M, then regardless of whether or not the
parcels of land was only sold at Php9M, the BPI is already estopped from claiming the remaining
balance of the principal obligation. Hence, the current petition.
The petitioner contends that the appraisal made by its predecessor-in-interest is not
binding upon it and that the law does not disallow mortgagors from claiming the remaining balance
of the obligation after the foreclosure proceedings had been done.
Issue:
Whether or not BPI may still collect the remaining balance of the principal obligation.
Ruling:
Yes. The Supreme Court reversed and set aside the decision of the Court of Appeals and
ruled in favor of BPI declaring that it is not precluded from claiming the remaining balance of the
principal obligation.
In the recent case of BPI Family Savings Bank, Inc. v. Avenido, we reiterated the wellentrenched rule that a creditor is not precluded from recovering any unpaid balance on the
principal obligation if the extrajudicial foreclosure sale of the property subject of the real estate
mortgage results in a deficiency, to wit:
It is settled that if "the proceeds of the sale are insufficient to cover the debt in an
extrajudicial foreclosure of mortgage, the mortgagee is entitled to claim the deficiency from the
debtor. While Act No. 3135, as amended, does not discuss the mortgagees right to recover the
deficiency, neither does it contain any provision expressly or impliedly prohibiting recovery. If the
legislature had intended to deny the creditor the right to sue for any deficiency resulting from the
foreclosure of a security given to guarantee an obligation, the law would expressly so provide.
Absent such a provision in Act No. 3135, as amended, the creditor is not precluded from taking
action to recover any unpaid balance on the principal obligation simply because he chose to
extrajudicially foreclose the real estate mortgage."
Page 68 of 159

Furthermore, we have also ruled in Suico Rattan & Buri Interiors, Inc. v. Court of Appeals
that, in deference to the rule that a mortgage is simply a security and cannot be considered payment
of an outstanding obligation, the creditor is not barred from recovering the deficiency even if it
bought the mortgaged property at the extrajudicial foreclosure sale at a lower price than its market
value notwithstanding the fact that said value is more than or equal to the total amount of the
debtors obligation.
Throughout a long line of jurisprudence, we have declared that unlike in an ordinary sale,
inadequacy of the price at a forced sale is immaterial and does not nullify a sale since, in a forced sale, a
low price is more beneficial to the mortgage debtor for it makes redemption of the property easier.18
In the early case of The National Loan and Investment Board v. Meneses, we also had the
occasion to state that:
As to the inadequacy of the price of the sale, this court has repeatedly held that the fact that
a property is sold at public auction for a price lower than its alleged value, is not of itself sufficient
to annul said sale, where there has been strict compliance with all the requisites marked out by law
to obtain the highest possible price, and where there is no showing that a better price is obtainable.
In Hulst v. PR Builders, Inc., we further elaborated on this principle:
[G]ross inadequacy of price does not nullify an execution sale. In an ordinary sale, for
reason of equity, a transaction may be invalidated on the ground of inadequacy of price, or when
such inadequacy shocks ones conscience as to justify the courts to interfere; such does not follow
when the law gives the owner the right to redeem as when a sale is made at public auction, upon
the theory that the lesser the price, the easier it is for the owner to effect redemption. When there is
a right to redeem, inadequacy of price should not be material because the judgment debtor may reacquire the property or else sell his right to redeem and thus recover any loss he claims to have
suffered by reason of the price obtained at the execution sale. Thus, respondent stood to gain rather
than be harmed by the low sale value of the auctioned properties because it possesses the right of
redemption.
It bears also to stress that the mode of forced sale utilized by petitioner was an extrajudicial
foreclosure of real estate mortgage which is governed by Act No. 3135, as amended. An examination
of the said law reveals nothing to the effect that there should be a minimum bid price or that the
winning bid should be equal to the appraised value of the foreclosed property or to the amount
owed by the mortgage debtor. What is clearly provided, however, is that a mortgage debtor is given
the opportunity to redeem the foreclosed property "within the term of one year from and after the
date of sale." In the case at bar, other than the mere inadequacy of the bid price at the foreclosure
sale, respondent did not allege any irregularity in the foreclosure proceedings nor did she prove
that a better price could be had for her property under the circumstances.
Thus, even if we assume that the valuation of the property at issue is correct, we still hold
that the inadequacy of the price at which it was sold at public auction does not invalidate the
foreclosure sale.
PABLO P. GARCIA vs. YOLANDA VALDEZ VILLAR
Page 69 of 159

While it is true that the annotation of the first mortgage to Villar on Galass TCT contained a
restriction on further encumbrances without the mortgagees prior consent, this restriction was
nowhere to be found in the Deed of Real Estate Mortgage. As this Deed became the basis for the
annotation on Galass title, its terms and conditions take precedence over the standard, stamped
annotation placed on her title. If it were the intention of the parties to impose such restriction, they
would have and should have stipulated such in the Deed of Real Estate Mortgage itself. Moreover,
Villars purchase of the mortgaged property did not violate the prohibition on pactum commissorium.
The power of attorney provision in favor of Villar did not provide that the ownership over the subject
property would automatically pass to Villar upon Galass failure to pay the loan on time. What it
granted was the mere appointment of Villar as attorney-in-fact, with authority to sell or otherwise
dispose of the subject property, and to apply the proceeds to the payment of the loan. Finally, Villar did
not obligate herself to replace the debtor in the principal obligation upon his buying of the mortgaged
property, and could not do so in law without the creditors consent. Therefore, the obligation to pay
the mortgage indebtedness remains with the original debtors Galas and Pingol.
Facts:
Lourdes V. Galas (Galas) was the original owner of a piece of property covered by Transfer
Certificate of Title (TCT). On 1993, Galas, with her daughter, Ophelia G. Pingol (Pingol), as comaker, mortgaged the subject property to Yolanda Valdez Villar (Villar) as security for a loan in the
amount of Two Million Two Hundred Thousand Pesos (P2,200,000.00). On 1994, Galas, again with
Pingol as her co-maker, mortgaged the same subject property to Pablo P. Garcia (Garcia) to secure
her loan of One Million Eight Hundred Thousand Pesos (P1,800,000.00). Both mortgages were
annotated at the back of TCT of the said property.
On 1996, Galas sold the subject property to Villar for One Million Five Hundred Thousand
Pesos (P1,500,000.00). Subsequently, the Deed of Sale was registered and, consequently, a new
TCT was issued in the name of Villar. Both Villars and Garcias mortgages were carried over and
annotated at the back of Villars new TCT.
On 1999, Garcia filed a Petition for Mandamus with Damages against Villar before the RTC..
Garcia subsequently amended his petition to a Complaint for Foreclosure of Real Estate Mortgage
with Damages. Garcia alleged that when Villar purchased the subject property, she acted in bad
faith and with malice as she knowingly and willfully disregarded the provisions on laws on judicial
and extrajudicial foreclosure of mortgaged property. Garcia further claimed that when Villar
purchased the subject property, Galas was relieved of her contractual obligation and the characters
of creditor and debtor were merged in the person of Villar. Therefore, Garcia argued, he, as the
second mortgagee, was subrogated to Villars original status as first mortgagee, which is the
creditor with the right to foreclose.
Villar, in her Answer, claimed that the complaint stated no cause of action and that the
second mortgage was done in bad faith as it was without her consent and knowledge. Villar alleged
that she only discovered the second mortgage when she had the Deed of Sale registered. Villar
blamed Garcia for the controversy as he accepted the second mortgage without prior consent from
her. She averred that there could be no subrogation as the assignment of credit was done with
neither her knowledge nor prior consent. Villar added that Garcia should seek recourse against
Galas and Pingol, with whom he had privity insofar as the second mortgage of property is
concerned.
Page 70 of 159

Issues:
1. Whether or not the second mortgage to Garcia and the sale of the subject property to
Villar were valid;
2. Whether or not the sale of the subject property to Villar was in violation of the
prohibition on pactum commissorium;
3. Whether or not Garcias action for foreclosure of mortgage on the subject property can
prosper.
Ruling:
1. Yes.
While it is true that the annotation of the first mortgage to Villar on Galass TCT contained a
restriction on further encumbrances without the mortgagees prior consent, this restriction was
nowhere to be found in the Deed of Real Estate Mortgage. As this Deed became the basis for the
annotation on Galass title, its terms and conditions take precedence over the standard, stamped
annotation placed on her title. If it were the intention of the parties to impose such restriction, they
would have and should have stipulated such in the Deed of Real Estate Mortgage itself.
Neither did this Deed proscribe the sale or alienation of the subject property during the life
of the mortgages. Garcias insistence that Villar should have judicially or extrajudicially foreclosed
the mortgage to satisfy Galass debt is misplaced. The Deed of Real Estate Mortgage merely
provided for the options Villar may undertake in case Galas or Pingol fail to pay their loan. Nowhere
was it stated in the Deed that Galas could not opt to sell the subject property to Villar, or to any
other person. Such stipulation would have been void anyway, as it is not allowed under Article
2130 of the Civil Code.
2. No.
Garcia claims that the stipulation appointing Villar, the mortgagee, as the mortgagors
attorney-in-fact, to sell the property in case of default in the payment of the loan, is in violation of
the prohibition on pactum commissorium, as stated under Article 2088 of the Civil Code. Villars
purchase of the subject property did not violate the prohibition on pactum commissorium. The
power of attorney provision in favor of Villaw did not provide that the ownership over the subject
property would automatically pass to Villar upon Galass failure to pay the loan on time. What it
granted was the mere appointment of Villar as attorney-in-fact, with authority to sell or otherwise
dispose of the subject property, and to apply the proceeds to the payment of the loan.
3. Yes.
The sale or transfer of the mortgaged property cannot affect or release the mortgage; thus
the purchaser or transferee is necessarily bound to acknowledge and respect the encumbrance. In
fact, under Article 2129 of the Civil Code, the mortgage on the property may still be foreclosed
despite the transfer. While we agree with Garcia that since the second mortgage, of which he is the
mortgagee, has not yet been discharged, we find that said mortgage subsists and is still enforceable.
However, Villar, in buying the subject property with notice that it was mortgaged, only undertook
to pay such mortgage or allow the subject property to be sold upon failure of the mortgage creditor
to obtain payment from the principal debtor once the debt matures. Villar did not obligate herself to
replace the debtor in the principal obligation, and could not do so in law without the creditors
Page 71 of 159

consent. Therefore, the obligation to pay the mortgage indebtedness remains with the original
debtors Galas and Pingol.
BPI FAMILY SAVINGS BANK, INC. vs. MA. ARLYN T. AVENIDO & PACIFICO A. AVENIDO
If the proceeds of the sale are insufficient to cover the debt in an extrajudicial foreclosure of
mortgage, the mortgagee is entitled to claim the deficiency from the debtor. While Act No. 3135, as
amended, does not discuss the mortgagees right to recover the deficiency, neither does it contain any
provision expressly or impliedly prohibiting recovery.
Facts:
On September 20, 2000, BPI Family filed with the RTC a Complaint for Collection of
Deficiency of Mortgage Obligation with Damages against the spouses Avenido. BPI Family alleged in
its Complaint that pursuant to a Mortgage Loan Agreement, the spouses Avenido obtained from the
bank a loan in the amount of P2,000,000.00, secured by a real estate mortgage on a parcel of land
situated in Bais City, (mortgaged/foreclosed property).
The spouses Avenido failed to pay their loan obligation despite demand, prompting BPI
Family to institute before the Sheriff of Bais City extrajudicial foreclosure proceedings over the
mortgaged property, in accordance with Act No. 3135, otherwise known as an Act to Regulate the
Sale of Property under Special Powers Inserted in or Annexed to Real Estate Mortgages.
At the public auction sale held on March 8, 1999, BPI Family was the highest bidder for the
foreclosed property. The bid price of P2,142,616.00 of BPI Family was applied as partial payment of
the mortgage obligation of the spouses Avenido, which had amounted to P2,917,381.43 on the date
of the public auction sale, thus, still leaving an unpaid amount of P794,765.43.
BPI Family prayed that the RTC order the spouses Avenido to pay the deficiency of their
mortgage obligation. The RTC dismissed the Complaint.
The outstanding loan obligation of the spouses Avenido amounted to P2,598,452.80,
inclusive of interests, penalties, and charges, by March 8, 1999. BPI and Avenido differ as to the
value to be attributed to the foreclosed property, which would be applied against the outstanding
loan obligation of the spouses Avenido to BPI Family.
BPI Family insists that it should be P2,142,616.00, its winning bid price for the foreclosed
property at the public auction sale, which, being less than the outstanding loan obligation of the
spouses Avenido, will still leave a deficiency collectible by BPI Family from the spouses Avenido in
the amount of P455,836.80.
The spouses Avenido maintain that, it should be P2,678,270.00, the fair market value of the
foreclosed property, which, being more than the outstanding loan obligation of the spouses
Avenido, will already fully settle their indebtedness.
Issue:
Page 72 of 159

Whether or not BPI Family is still entitled to collect the deficiency mortgage obligation from
the spouses Avenido
Ruling:
Yes, spouses Avenido should pay BPI Family Savings Bank, Inc. the deficiency of their
mortgage obligation.
It is settled that if the proceeds of the sale are insufficient to cover the debt in an
extrajudicial foreclosure of mortgage, the mortgagee is entitled to claim the deficiency from the
debtor. While Act No. 3135, as amended, does not discuss the mortgagees right to recover the
deficiency, neither does it contain any provision expressly or impliedly prohibiting recovery. If the
legislature had intended to deny the creditor the right to sue for any deficiency resulting from the
foreclosure of a security given to guarantee an obligation, the law would expressly so provide.
Absent such a provision in Act No. 3135, as amended, the creditor is not precluded from
taking action to recover any unpaid balance on the principal obligation simply because he chose to
extrajudicially foreclose the real estate mortgage.
Section 4 of Act No. 3135 does not mention any minimum bid at the public auction sale.
There is no legal basis for requiring that the bid should at least be equal to the market value of the
foreclosed property or the outstanding obligation of the mortgage debtor.
We have consistently held in previous cases that unlike in an ordinary sale, inadequacy of
the price at a forced sale is immaterial and does not nullify the sale. In fact, in a forced sale, a low
price is more beneficial to the mortgage debtor for it makes redemption of the property easier.
Section 6 of Act No. 3135 provides for the redemption of an extrajudicially foreclosed property
within a one-year period.
Republic Act No. 337, the General Banking Act, as amended, in force at the time of the
herein transactions, had a specific provision on the redemption of property extrajudicially
foreclosed by banks which is within one year after the sale of the real estate as a result of the
foreclosure of the respective mortgage. If the foreclosed property is registered, the mortgagor has
one year within which to redeem the property from and after registration of sale with the Register
of Deeds.
In Hulst v. PR Builders, Inc., we reiterated that:
Gross inadequacy of price does not nullify an execution sale. In an ordinary sale, for reason
of equity, a transaction may be invalidated on the ground of inadequacy of price, or when
such inadequacy shocks ones conscience as to justify the courts to interfere; such does not
follow when the law gives the owner the right to redeem as when a sale is made at public
auction, upon the theory that the lesser the price, the easier it is for the owner to effect
redemption. When there is a right to redeem, inadequacy of price should not be material
because the judgment debtor may re-acquire the property or else sell his right to redeem
and thus recover any loss he claims to have suffered by reason of the price obtained at the
execution sale. Thus, respondent stood to gain rather than be harmed by the low sale value
of the auctioned properties because it possesses the right of redemption.
Page 73 of 159

In line with the foregoing jurisprudence, we refuse to consider the question of sufficiency of
the winning bid price of BPI Family for the foreclosed property; and affirm the application of said
winning bid in the amount of P2,142,616.00 against the total outstanding loan obligation of the
spouses Avenido by March 8, 1999 in the sum of P2,598,452.80, thus, leaving a deficiency of
P455,836.80. Therefore, BPI Family may still collect the said deficiency.
DRAGNET CLAUSE
RAMONA RAMOS and THE ESTATE OF LUIS T. RAMOS vs. PHILIPPINE NATIONAL BANK, OPAL
PORTFOLIO INVESTMENTS (SPV-AMC), INC. and GOLDEN DRAGON STAR EQUITIES, INC.
As a general rule, a mortgage liability is usually limited to the amount mentioned in the
contract. However, the amounts named as consideration in a contract of mortgage do not limit the
amount for which the mortgage may stand as security if, from the four corners of the instrument, the
intent to secure future and other indebtedness can be gathered. This stipulation is valid and binding
between the parties and is known as the "blanket mortgage clause" also known as the "dragnet clause.
Facts:
In 1973, Luis Ramos obtained a credit line under an agricultural loan account from the
Philippine National Bank (PNB), Balayan Branch, for P83,000.00. To secure the loan, the parties
executed a Real Estate Mortgage.
Ramos principally argue that the scope and coverage of the real estate mortgage excluded
the sugar quedan financing loan. They assert that the mortgage contained a blanket mortgage
clause or a dragnet clause, which stated that the mortgage would secure not only the loans already
obtained but also any other amount that Luis Ramos may loan from PNB. Ramos posit that a
dragnet clause will cover and secure a subsequent loan only if said loan is made in reliance on the
original security containing the dragnet clause. They further state that said condition did not exist
in the instant case, as the sugar quedan financing loan was not obtained in reliance on the
previously executed real estate mortgage. Such fact was supposedly apparent from the documents
pertaining to the sugar quedan financing loans, i.e., the credit line agreement, the various
promissory notes and the contracts of pledge.
PNB asserts that the spouses Ramos consented to the terms of the real estate mortgage that
the real properties subject thereof should be used to secure future and subsequent loans of the
mortgagor. Since the spouses never contested the validity and enforceability of the real estate
mortgage, the same must be respected and should govern the relations of the parties therein.
PNB also avers that the Court of Appeals did not err in ruling that there was no dacion en
pago and/or novation under the circumstances prevailing in the instant case. The Authorization
issued by Luis Ramos in favor of PNB did not terminate the contract of pledge between the parties
as PNB was merely authorized to dispose and sell the sugar quedans to be applied as payment to
the obligation. Hence, no transfer of ownership occurred. Article 2103 of the Civil Code expressly
states that unless the thing pledged is expropriated, the debtor continues to be the owner thereof.
PNB argued that when it accepted the Authorization, it recognized that it was merely being
authorized by Luis Ramos to dispose of the quedans. Therefore, until the spouses Ramos fully settle
Page 74 of 159

their loans from PNB, the latter believes that it has every right to retain possession of the properties
offered as collateral thereto.
According to Ramos, their case requires an application of Article 1371 of the Civil Code,
which provides that in order to judge the intention of the contracting parties, their
contemporaneous and subsequent acts shall be principally considered.
To their mind, the mere fact that the 1989 credit line agreement, the promissory notes and
the contracts of pledge executed in relation to the sugar quedan financing loan contained no
reference to the real estate mortgage is sufficient proof that the parties did not intend the real
estate mortgage to secure the sugar quedan financing loan, but only the agricultural crop loans.
Issue:
Whether or not petitioners Ramos were entitled to the release of the real estate mortgage
that secured their said obligations
Ruling:
No, PNB cannot be compelled to release the real estate mortgage and the titles involved
since the issue of whether the sugar quedan financing loan will be fully paid through the pledged
sugar receipts remains the subject of pending litigation.
Here, it cannot be denied that the real estate mortgage executed by the parties provided
that it shall stand as security for any subsequent promissory note or notes either as a renewal of
the former note, as an extension thereof, or as a new loan, or is given any other kind of
accommodations such as overdrafts, letters of credit, acceptances and bills of exchange, releases of
import shipments on Trust Receipts, etc.
The same real estate mortgage likewise expressly covered any and all other obligations of
the Mortgagor to the Mortgagee of whatever kind and nature whether such obligations have been
contracted before, during or after the constitution of this mortgage. Thus, from the clear and
unambiguous terms of the mortgage contract, the same has application even to future loans and
obligations of the mortgagor of any kind, not only agricultural crop loans.
Such a blanket clause or dragnet clause in mortgage contracts has long been recognized in
our jurisprudence.
Thus, in another case, we held:
As a general rule, a mortgage liability is usually limited to the amount mentioned in
the contract. However, the amounts named as consideration in a contract of mortgage do not
limit the amount for which the mortgage may stand as security if, from the four corners of the
instrument, the intent to secure future and other indebtedness can be gathered. This
stipulation is valid and binding between the parties and is known as the "blanket mortgage
clause" (also known as the "dragnet clause)."
In the present case, the mortgage contract indisputably provides that the subject
properties serve as security, not only for the payment of the subject loan, but also for "such
other loans or advances already obtained, or still to be obtained." The cross-collateral
stipulation in the mortgage contract between the parties is thus simply a variety of a dragnet
clause. After agreeing to such stipulation, the petitioners cannot insist that the subject
Page 75 of 159

properties be released from mortgage since the security covers not only the subject loan but
the two other loans as well.
Ultimately, we likewise find no reason to overturn the assailed ruling of the Court of
Appeals that the contract of pledge between petitioners and PNB was not terminated by the
Authorization letter issued by Luis Ramos in favor of PNB.
The status of PNB as a pledgee of the sugar quedans involved in this case had long been
confirmed by the Court in its Decision dated July 9, 1998 in Philippine National Bank v. Sayo, Jr. and
the same is neither disputed in the instant case.
We reiterate our ruling in Sayo that:
The creditor, in a contract of real security, like pledge, cannot appropriate without
foreclosure the things given by way of pledge. Any stipulation to the contrary, termed pactum
commissorio, is null and void. The law requires foreclosure in order to allow a transfer of title
of the good given by way of security from its pledgor, and before any such foreclosure, the
pledgor, not the pledgee, is the owner of the goods. x x x.
A close reading of the Authorization executed by Luis Ramos reveals that it was nothing
more than a letter that gave PNB the authority to dispose of and sell the sugar quedans after the
maturity date thereof.
As held by the Court of Appeals, the said grant of authority on the part of PNB is a standard
condition in a contract of pledge, in accordance with the provisions of Article 2087 of the Civil Code
that it is also of the essence of these contracts that when the principal obligation becomes due, the
things in which the pledge or mortgage consists may be alienated for the payment to the creditor.
More importantly, Article 2115 of the Civil Code expressly provides that the sale of the thing
pledged shall extinguish the principal obligation, whether or not the proceeds of the sale are equal
to the amount of the principal obligation, interest and expenses in a proper case.
As we adverted to in Sayo, it is the foreclosure of the thing pledged that results in the
satisfaction of the loan liabilities to the pledgee of the pledgors. Thus, prior to the actual foreclosure
of the thing pleged, the sugar quedan financing loan in this case is yet to be settled.
JUST COMPENSATION
LAND BANK OF THE PHILIPPINES vs. EMILIANO R. SANTIAGO, JR.,
When the acquisition process under PD 27 remains incomplete and is overtaken by RA 6657,
the process should be completed under RA 6657, with PD 27 and EO 228 having suppletory effect only.
This means that PD 27 applies only insofar as there are gaps in RA 6657; where RA 6657 is sufficient,
PD 27 is superseded.
Moreover, the Court has allowed the grant of interest in expropriation cases where there is
delay in the payment of just compensation. In fact, the interest imposed in case of delay in payments in
agrarian cases is 12% per annum and not 6% as "the imposition x x x is in the nature of damages for
Page 76 of 159

delay in payment which in effect makes the obligation on the part of the government one of
forbearance."
Finally, the constitutional limitation of "just compensation" is considered to be the sum
equivalent to the market value of the property, broadly described to be the price fixed by the seller in
open market in the usual and ordinary course of legal action and competition or the fair value of the
property as between one who receives, and one who desires to sell, if fixed at the time of the actual
taking by the government. Thus, if property is taken for public use before compensation is deposited
with the court having jurisdiction over the case , the final compensation must include interest on its
just value to be computed from the time the property is taken to the time when compensation is
actually paid or deposited with the court. In fine, between the taking of the property and the actual
payment, legal interests accrue in order to place the owner in a position as good as (but not better
than) the position he was in before the taking occurred.
Facts:
Petitioner is a government financial institution designated under Section 64 of Republic Act
No. 66577 as the financial intermediary of the agrarian reform program of the government.
Respondent is one of the heirs of the registered owner of an 18.5615-hectare parcel of land (subject
property) in Laur, Nueva Ecija. Pursuant to the governments Operation Land Transfer (OLT)
Program under Presidential Decree No. 27,10 the Department of Agrarian Reform (DAR) acquired
17.4613 hectares of the subject property. In determining the just compensation payable to
Respondent, the LBP and the DAR used the following formula under Presidential Decree No. 27 and
Executive Order No. 228.
As Santiago had died earlier on November 1, 1987, petitioner, in 1992, reserved in trust for
his heirs the amount of P 135,482.12, as just compensation computed by petitioner and DAR using
the formula under Presidential Decree No. 27 and Executive Order No. 228. This amount was
released to Santiagos heirs.
However, on November 20, 1998, respondent, as a co-owner and administrator of the
subject property, filed a petition before the RTC of Cabanatuan City, Branch 23, acting as a Special
Agrarian Court (SAC Branch 23), for the "approval and appraisal of just compensation" due on the
subject property and that incremental interest of 6% compounded annually, as per PARC
Resolution No. 94-24-1, should be imposed on the principal amount from 1972 to 1998 or for 26
years.
On January 21, 2000, the SAC Branch 23 rendered its decision ordering petitioner to pay the
plaintiff in the sum of P 1,039,017.88 representing the balance of the land valuation of the plaintiff
with legal interest at 12 % from the year 1998 until the same is fully paid subject to the modes of
compensation under R.A. No. 6657.
On January 28, 2004, the SAC Branch 29 issued a Resolution denying respondents claim
over the 6% compounded annual interest. The SAC Branch 29 explained that the purpose of the
compounded interest was to compensate the landowners for unearned interest, as their money
would have earned if they had been paid in 1972, when the GSP for a cavan of palay was still at P
35.00. The SAC Branch 29 said that since a higher GSP was already used in the computation of the
subject propertys land value, there was no more justification in adding any compounded interest to
the principal amount. The SAC Branch 29 also lowered the legal interest from 12% to 6% on the
Page 77 of 159

ground that respondents claim cannot be considered as a forbearance of money. Furthermore,
since the government only acquired 17.4 hectares of the subject property, it ordered LBP to return
the unacquired portion to respondent. The Court of Appeals, affirmed the SAC Branch 23s Decision
as modified by the SAC Branch 29s Resolution.
Issues:
1. Whether or not the Court of Appeals can disregard the formula prescribed under P.D. 27
and E.O. 228 in fixing the just compensation of subject P.D. 27-acquired land.
2. Whether or not respondent is entitled to 6% interest.
Ruling:
1. Yes, it can.
This Court held that since the amount of just compensation to be paid Domingo had yet to
be settled, then the agrarian reform process was still incomplete; thus, it should be completed
under Republic Ac t No. 6657. Based on the foregoing, when the agrarian reform process is still
incomplete as the just compensation due the landowner has yet to be settled, such just
compensation should be determined and the process concluded under Republic Act No. 6657.
When the acquisition process under PD 27 remains incomplete and is overtaken by RA
6657, the process should be completed under RA 6657, with PD 27 and EO 228 having suppletory
effect only. This means that PD 27 applies only insofar as there are gaps in RA 6657; where RA 6657
is sufficient, PD 27 is superseded. Among the matters where RA 6657 is sufficient is the
determination of just compensation. In Section 17 thereof, the legislature has provided for the
factors that are determinative of just compensation. Petitioner cannot insist on applying PD 27
which would render Section 17 of RA 6657 inutile.
In the case at bar, both the taking and the valuation of the subject property occurred after
Republic Ac t No. 6657 had already become effective. Until now, the issue of just compensation for
the subject property has not been settled and the process has yet to be completed; thus, the
provisions of Republic Act No. 6657 shall apply.
Section 17 of Republic Ac t No. 6657 or the Comprehensive Agrarian Reform Law of 1988
provides:
SEC. 17. Determination of Just compensation. - In determining just compensation, the cost of
acquisition of the land, the current value of like properties, its nature, actual use and
income, the sworn valuation by the owner, the tax declarations, and the assessment made
by government assessors shall be considered. The social and economic benefits contributed
by the farmers and the farm workers and by the Government to the property as well as the
non-payment of taxes or loans secured from any government financing institution on the
said land shall be considered as additional factors to determine its valuation.
That this case, despite the new law, still falls under Section 17 of Republic Ac t No. 6657 is
supported even by Republic Act No. 9700, which states that "previously acquired lands wherein
valuation is subject to challenge shall be completed and resolved pursuant to Section 17 of Republic
Act No. 6657, as amended," viz:
Page 78 of 159

Section 5. Section 7 of Republic Act No. 6657, as amended, is hereby further amended to
read as follows:
SEC. 7. Priorities. - x x x Provided, furthermore, That all previously acquired lands where in
valuation is subject to challenge by landowners s hall be completed and finally resolved
pursuant to Section 17 of Republic Act No. 6657, as amended: x x x. (Emphases supplied.)
SEC. 17. Determination of Just Compensation. In determining just compensation, the cost
of acquisition of the land, the value of the standing crop, the current value of like properties,
its nature, actual use and income, the sworn valuation by the owner, the tax declarations,
the assessment made by government assessors, and seventy percent (70%) of the zonal
valuation of the Bureau of Internal Revenue (BIR), translated into a basic formula by t he
DAR shall be considered, subject to the final decision of the proper court. The social and
economic benefits contributed by the farmers and the farm workers and by the Government
to the property as well as the nonpayment of taxes or loans secured from any government
financing institution on the said land shall be considered as additional factors to determine
its valuation. (Emphases supplied; further amendments made to Section 17 of R.A. N o.
6657, as amended, are italicized.)
DAR AO No. 02-09, the Implementing Rules of Republic Act No. 9700, which DAR
formulated pursuant to Section 3150 of Republic Act No. 9700, makes the above distinction even
clearer, to wit:
With respect to cases where the Master List of ARBs has been finalized on or before July 1,
2009 pursuant to Administrative Order No. 7, Series of 2003, the acquisition and
distribution of landholdings shall continue to be processed under the provisions of R.A. No.
6657 prior to its amendment by R.A. No. 9700.
However, with respect to land valuation, all Claim Folders received by LBP prior to July 1,
2009 shall be valued in accordance with Section 17 of R.A. No. 6657 prior to its amendment
by R.A. No. 9700. (Emphasis supplied.)
Thus, DAR AO No. 02-09 authorizes the valuation of lands in accordance with the old
Section 17 of Republic Act No. 6657, as amended (prior to further amendment by Republic Act No.
9700), so long as the claim folders for such lands have been received by LBP before its amendment
by Republic Act No. 9700 in 2009.51
2. No, respondent is not entitled to 6% interest.
This Court notes that the award of 6% legal interest was not given under DAR AO No. 13, as
the courts a quo explicitly stated that DARAO No. 13 was not applicable, albeit citing a n incorrect
reason, i.e., that this was because a higher GSP was already used. The law and jurisprudence on the
determination of just compensation of agrarian lands are settled and the courts below deviated
from them when they simply used a higher GSP in the computation of respondents just
compensation.
The Court has allowed the grant of interest in expropriation cases where there is delay in
the payment of just compensation. In fact, the interest imposed in case of delay in payments in
agrarian cases is 12% per annum and not 6% as "the imposition x x x is in the nature of damages for
delay in payment which in effect makes the obligation on the part of the government one of
forbearance."
The constitutional limitation of "just compensation" is considered to be the sum equivalent
to the market value of the property, broadly described to be the price fixed by the seller in open
Page 79 of 159

market in the usual and ordinary course of legal action and competition or the fair value of the
property as between one who receives, and one who desires to sell, if fixed at the time of the actual
taking by the government. Thus, if property is taken for public use before compensation is
deposited with the court having jurisdiction over the case , the final compensation must include
interest on its just value to be computed from the time the property is taken to the time when
compensation is actually paid or deposited with the court. In fine, between the taking of the
property and the actual payment, legal interests accrue in order to place the owner in a position as
good as (but not better than) the position he was in before the taking occurred.
This Court therefore deems it proper to impose a 12% legal interest per annum, computed
from the date of the "taking" of the subject property on the just compensation to be determined by
the SAC, due to respondent, less whatever he and his co-owners had already received.
LEASE
LEASE OF RURAL AND URBAN LANDS
CEBU BIONIC BUILDERS SUPPLY, INC. and LYDIA SIA vs. DEVELOPMENT BANK OF THE
PHILIPPINES, JOSE TO CHIP, PATRICIO YAP and ROGER BALILA
The well-entrenched principle is that a lease from month-to-month is with a definite period
and expires at the end of each month upon the demand to vacate by the lessor.
The subsequent acceptance by the lessor of rental payments does not, absent any circumstance
that may dictate a contrary conclusion, legitimize the unlawful character of their possession.
Facts:
Spouses Rudy Robles, Jr. and Elizabeth Robles (Spouses Robles) entered into a mortgage
contract with DBP in order to secure a loan from the said bank in the amount of P500,000.00. The
properties mortgaged were a parcel of land in Tabunoc, Talisay, Cebu, covered by TCT No. T- 47783
of the Register of Deeds of Cebu, together with all the existing improvements, and the commercial
building (subject properties) to be constructed thereon. Upon completion, the commercial building
was named the State Theatre Building.
Rudy Robles executed a contract of lease in favor of petitioner Cebu Bionic Builders Supply,
Inc. (Cebu Bionic), a domestic corporation engaged in the construction business, as well as the sale
of hardware materials. The said contract was not registered by the parties thereto with the Registry
of Deeds of Cebu. Then, spouses Robles failed to settle their loan obligation with DBP. The latter
was prompted to effect extrajudicial foreclosure on the subject properties. DBP was the lone bidder
in the foreclosure sale and thereby acquired ownership of the mortgaged subject properties.
Afterwards, a final Deed of Sale was issued in favor of DBP. DBP sent a letter to Bonifacio Sia, the
husband of petitioner Lydia Sia President of Cebu Bionic, notifying the latter of DBPs acquisition
of the State Theatre Building.
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Thereafter, a Certificate of Time Deposit for P11,395.64 was issued in the name of Bonifacio
Sia and the same was allegedly remitted to DBP as advance rental deposit. However, no written
contract of lease was executed between DBP and Cebu Bionic.
Subsequent to the acquisition of the subject properties, DBP offered the same for sale along
with its other assets. Pursuant thereto, DBP published a series of invitations to bid on such
properties. As no interested bidder came forward, DBP publicized an Invitation on Negotiated
Sale/Offer. In the last day for the acceptance of negotiated offers, petitioners submitted through
their representative, Judy Garces, a letter-offer form, offering to purchase the subject properties
for P1,840,000.00. This offer of petitioners was not accepted by DBP, however, as the
corresponding deposit therefor was allegedly insufficient. After the lapse of the above-mentioned
15-day acceptance period, petitioners did not submit any other offer/proposal to purchase the
subject properties.
Respondents To Chip, Yap and Balila presented their letter-offer to purchase the subject
properties on a cash basis for P1,838,100.00. Said offer was accompanied by a downpayment of
10% of the offered purchase price, amounting to P183,810.00. On even date, DBP acknowledged the
receipt of and accepted their offer. They paid the balance of the purchase price and DBP issued a
Deed of Sale over the subject properties in their favor. The counsel of the said respondents sent a
letter addressed to the proprietor of Cebu Bionic, informing the latter of the transfer of ownership
of the subject properties. Cebu Bionic was ordered to vacate the premises within thirty (30) days
from receipt of the letter and directed to pay the rentals from January 1, 1991 until the end of the
said 30-day period.
On February 15, 1991, To Chip wrote a letter to the counsel of Cebu Bionic, insisting that he
and his co-respondents Yap and Balila urgently needed the subject properties to pursue their
business plans. He also reiterated their demand for Cebu Bionic to vacate the premises.
On February 27, 1991, the counsel of respondents To Chip, Yap and Balila sent its final
demand letter to Cebu Bionic, warning the latter to vacate the subject properties within 7 days from
receipt of the letter, otherwise, a case for ejectment with damages will be filed against it. Despite
the foregoing notice, Cebu Bionic still paid to DBP, on March 22, 1991, the amount of P5,000.00 as
monthly rentals for period of November 1990 to March 1991.
Petitioners filed against respondents DBP, To Chip, Yap and Balila a complaint for specific
performance, cancellation of deed of sale with damages, injunction with a prayer for the issuance of
a writ of preliminary injunction. Petitioners alleged that documents relating to the subject property
were initially accepted by DBP but later returned and the latter advised petitioners that there was
no urgent need for the same since the property will necessarily be sold to Cebu Bionic as a
preferred party. In its answer, DBP denied the existence of a contract of lease between itself and
petitioners.
RTC granted the prayer of petitioners for the issuance of a writ of preliminary injunction
and found meritorious the complaint of the petitioner. It also found that respondents To Chip, Yap
and Balila were aware of the lease contract involving the subject properties before they purchased
the same from DBP. DBP forthwith filed a Notice of Appeal.
The Court of Appeals found nothing erroneous with the judgment rendered by the trial
court.
Page 81 of 159
Petitioners filed Petition for Review on Certiorari under Rule 45 of the Rules of Court
without seeking a reconsideration of the CAs decision.
Issue:
Whether or not there was a contract of lease between the petitioners and DBP.
Ruling:
DBP.
The Court rules that no new contract of lease was ever perfected between petitioners and
In the instant case, the lease contract between petitioners and Rudy Robles was not
registered. During trial, DBP denied having any knowledge of the said lease contract. It asserted
that the lease was merely presumed in view of the existence of tenants in the subject property.
Nevertheless, DBP recognized and acknowledged this lease contract, which was addressed to
Bonifacio Sia, then President of Cebu Bionic. DBP even required Sia to pay the monthly rental for
the month of June 1987, thereby exercising the right of the previous lessor, Rudy Robles, to collect
the rental payments from the lessee. In the same letter, DBP extended an offer to Cebu Bionic to
continue the lease on the subject property, outlining the provisions of the proposed contract and
specifically instructing the latter to come to the bank for the execution of the same. DBP likewise
gave Cebu Bionic a 30-day period within which to act on the said contract execution. Should Cebu
Bionic fail to do so, it would be deemed uninterested in continuing with the lease. In that
eventuality, the letter states that Cebu Bionic should vacate the premises within the said period.
Instead of acceding to the terms of the aforementioned letter, the counsel of Cebu Bionic sent a
counter-offer to DBP suggesting a different mode of payment for the rentals and requesting for a
60-day period within which time the parties will execute a new contract of lease.
The parties, however, failed to execute a written contract of lease. Petitioners put the blame
on DBP, asserting that no contract was signed because DBP did not prepare it for them. DBP, on the
other hand, counters that it was petitioners who did not positively act on the conditions for the
execution of the lease contract. In view of the counter-offer of petitioners, DBP and respondents To
Chip, Yap and Balila argue that there was no meeting of minds between DBP and petitioners, which
would have given rise to a new contract of lease.
In the case at bar, there was no concurrence of offer and acceptance vis-a-vis the terms of
the proposed lease agreement. In fact, after the reply of petitioners counsel, there was no indication
that the parties undertook any other action to pursue the execution of the intended lease
contract. Petitioners even admitted that they merely waited for DBP to present the contract to
them, despite being instructed to come to the bank for the execution of the same. The contention
that the lease contract between petitioners and Rudy Robles did not expire, given that it did not
have a definite term and the parties thereto failed to terminate the same, deserves scant
consideration.
The lease is on a month-to-month basis. Relevantly, the well-entrenched principle is that
a lease from month-to-month is with a definite period and expires at the end of each month upon
the demand to vacate by the lessor. As held by the CA, the above-mentioned lease contract was
duly terminated by DBP. We reiterate that the letter explicitly directed the petitioners to come to
Page 82 of 159

the office of the DBP if they wished to enter into a new lease agreement with the said
bank. Otherwise, if no contract of lease was executed within 30 days from the date of the letter,
petitioners were to be considered uninterested in entering into a new contract and were thereby
ordered to vacate the property. As no new contract was in fact executed between petitioners and
DBP within the 30-day period, the directive to vacate, thus, took effect.
Thusly, petitioners assertion that Article 1670 of the Civil Code is not applicable to the
instant case is correct. The reason, however, is not that the existing contract was continued by DBP,
but because the lease was terminated by DBP, which termination was accompanied by a demand to
petitioners to vacate the premises of the subject property.
Article 1670 states that if at the end of the contract the lessee should continue enjoying the
thing leased for fifteen days with the acquiescence of the lessor, and unless a notice to the contrary
by either party has previously been given, it is understood that there is an implied new lease, not
for the period of the original contract, but for the time established in Articles 1682 and 1687. The
other terms of the original contract shall be revived. In view of the order to vacate in the event that
no new lease contract is entered into, the petitioners continued possession of the subject properties
was without the acquiescence of DBP, thereby negating the constitution of an implied lease.
Contrary to the ruling of the RTC, DBPs acceptance of petitioners rental payments
of P5,000.00 for the period of November 1990 to March 1991 did not likewise give rise to an
implied lease between petitioners and DBP. The subsequent acceptance by the lessor of rental
payments does not, absent any circumstance that may dictate a contrary conclusion, legitimize the
unlawful character of their possession.
MANILA INTERNATIONAL AIRPORT AUTHORITY vs. DING VELAYO SPORTS CENTER, INC
In case the lessee chooses to renew the lease but there are no specified terms and conditions
for the new contract of lease, the same terms and conditions as the original contract of lease shall
continue to govern.
Facts:
On February 15, 1967, Manila International Airport Authority (MIAA) (then still called the
Civil Aeronautics Administration or CAA) and Salem Investment Corporation (Salem) entered into a
Contract of Lease whereby MIAA leased in favor of Salem a parcel of land known as Lot 2-A, with an
area of 76,328 square meters, located in front of the Manila International Airport (MIA) in Pasay
City, and registered under Transfer Certificate of Title (TCT) No. 6735 in the name of the Republic
(Lot 2-A).
Subsequently, in a Transfer of Lease Rights and Existing Improvements, Salem conveyed in
favor of Ding Velayo Export Corporation (Velayo Export), its leasehold rights over a portion of Lot
2-A, measuring about 15,534 square meters, with the improvements thereon, consisting of an
unfinished cinema-theater. Accordingly, MIAA and Velayo Export executed a Contract of Lease
dated November 26, 1974 pertaining to the aforementioned leased portion of Lot 2-A.
In turn, Velayo Export executed a Transfer of Lease Rights dated April 27, 1976 by which it
conveyed to Ding Velayo Sports Center, Inc., its leasehold rights over an 8,481-square meter area
Page 83 of 159

(subject property) out of the 15,534-square meter portion it was leasing from MIAA. As a result,
MIAA and Ding Velayo Sports Center, Inc. executed another Contract of Lease dated May 14, 1976
covering the subject property.
The Contract of Lease dated May 14, 1976 between MIAA (as lessor) and Ding Velayo Sports
Center, Inc (as lessee) specified how Ding Velayo Sports Center, Inc shall develop and use the
subject property:
2. That the LESSEE shall utilize the premises as the site for the construction of a Sports
Complex facilities and shopping centers in line with the Presidential Decree for Sports Development
and Physical Fitness, including the beautification of the premises and providing cemented parking
areas.
3. That the LESSEE shall construct at its expense on the leased premises a parking area
parallel to and fronting the Domestic Airport Terminal to be open to the traveling public free of
charge to ease the problem of parking congestion at the Domestic Airport
Period of the lease and renewal thereof are governed by paragraphs 4 and 17 of the
Contract of Lease that read:
4. That the period of this lease shall take effect from June 1, 1976 up to February 15, 1992
which is equivalent to the unexpired portion of the lease contract executed between [petitioner] and
Ding Velayo Export Corporation.
xxxx
17. The LESSEE, if desirous of continuing his lease, should notify the LESSOR sixty (60) days
prior to expiration of the period agreed upon for the renewal of the Contract of Lease.
More than 60 days prior to the expiration of the lease between MIAA and Ding Velayo
Sports Center, Inc, the latter, through its President, Conrado M. Velayo (Velayo), sent the former a
Letter stating that Ding Velayo Sports Center, Inc was interested in renewing the lease for another
25 years.
MIAA declined to renew the lease, ordered Ding Velayo Sports Center, Inc to vacate the
subject property within five days, and demanded respondent to pay arrears in lease rentals as of
January 1992 in the sum of P15,671,173.75.
MIAA entirely disregarded the claims of respondent and threatened to take-over the subject
property.
On March 30, 1992 , Ding Velayo Sports Center, Inc filed against petitioner before the RTC a
Complaint for Injunction, Consignation, and Damages with a Prayer for a Temporary Restraining
Order.
The Regional Trial Court (RTC) granted the Complaint for Injunction, Consignation, and
Damages with prayer for a Temporary Restraining Order filed by Ding Velayo Sports Center, Inc.
against Manila International Airport Authority (MIAA), and essentially compelled petitioner to
renew the lease of respondent over a parcel of land within the airport premises.
Page 84 of 159
In its Decision dated October 29, 1999, the RTC ruled in favor of respondent ordering MIAA
to grant renewal of the lease contract for the same term as stipulated in the old contract and the
rental to be based on the applicable rate of the time or renewal. The CA affirmed the RTC.
MIAA argues that the renewal of the Contract of Lease cannot be made to depend on the
sole will of Ding Velayo Sports Center, Inc. for the same would then be void for being a potestative
condition.
Issue:
Whether or not MIAA could deny Ding Velayo Sports Center, Inc of the exclusive right to
choose whether or not to renew the lease after having previously agreed to the grant of the same
Ruling:
No, SC cannot now allow MIAA to arbitrarily deny Ding Velayo Sports Center, Inc of said
right after having previously agreed to the grant of the same.
The SC affirmed the decision of RTC and CA.
Paragraph 17 of the Contract of Lease dated May 14, 1976 between MIAA and Ding Velayo
Sports Center, Inc solely granted to Ding Velayo Sports Center, Inc the option of renewing the lease
of the subject property, the only express requirement was for respondent to notify MIAA of its
decision to renew the lease within 60 days prior to the expiration of the original lease term.
It has not been disputed that said Contract of Lease was willingly and knowingly entered
into by MIAA and Ding Velayo Sports Center, Inc. Thus, MIAA freely consented to giving Ding Velayo
Sports Center, Inc the exclusive right to choose whether or not to renew the lease.
As we stated in Allied Banking, the right of renewal constitutes a part of the interest of
respondent, as lessee, in the subject property, and forms a substantial and integral part of the lease
agreement with petitioner.
Records show that Ding Velayo Sports Center, Inc had duly complied with the only condition
for renewal under Section 17 of the Contract of Lease by notifying petitioner 60 days prior to the
expiration of said Contract that it chooses to renew the lease. We cannot now allow MIAA to
arbitrarily deny Ding Velayo Sports Center, Inc of said right after having previously agreed to the
grant of the same.
In case the lessee chooses to renew the lease but there are no specified terms and
conditions for the new contract of lease, the same terms and conditions as the original contract of
lease shall continue to govern.
In sum, the renewed contract of lease of the subject property between petitioner and
respondent shall be based on the same terms and conditions as the original contract of lease. The
original contract of lease does not pertain to the Contract of Lease dated May 14, 1976 between
petitioner and respondent alone, but also to the Contract of Lease dated February 15, 1967 between
petitioner (then still called CAA) and Salem, as well as the Contract of Lease dated November 26,
Page 85 of 159

1974 between petitioner and Velayo Export all three contracts being inextricably connected. Since
the Contract of Lease between petitioner and Salem was for a term of 25 years, then the renewed
contract of lease of between petitioner and respondent shall be for another term of 25 years. This
construction of the renewal clause under paragraph 17 of the Contract of Lease dated May 14, 1976
between petitioner and respondent is most consistent with the intent of the parties at the time of
the execution of said Contract and most effectual in implementing the same.
In addition to challenging the exclusive right of respondent to renew the Contract of Lease
over the subject property, petitioner insists on its right to refuse the renewal because of purported
violations of the said Contract by respondent, particularly: (1) subleasing of the premises; (2)
failure to ease the problems of parking congestion at the Domestic Airport and to provide a
shopping center and sports facilities, such as an oval track and a swimming pool; and (3) failure to
pay monthly lease rentals in the form of royalties equivalent to 1% of the gross income of
respondent or in accordance with the rates fixed in the administrative orders of MIAA.
We find no violations by the respondent of the Contract of Lease dated May 14, 1976 as to
justify the revocation or refusal to renew of said Contract by MIAA.
The RTC is once again correct in its construal that paragraph 16 of the Contract of Lease,
prohibiting the subleasing of the premises, refers only to the subject property. We stress that when
the said Contract was executed on May 14, 1976, the premises leased by petitioner to respondent,
and which respondent was not allowed to sublease, is the subject property, i.e., an idle piece of land
with an area of 8,481 square meters. More importantly, being the builder of the improvements on
the subject property, said improvements are owned by respondent until their turn-over to
petitioner at the end of the 25-year lease in 1992. As respondent is not leasing the improvements
from petitioner, then it is not subleasing the same to third parties.
While the Contract of Lease expressly obligated Ding Velayo Sports Center, Inc to build
certain improvements, such as parking, shopping mall, and sports facilities, the belated insistence
by petitioner on compliance with the same appears to be a mere afterthought.
Article 1235 of the Civil Code states that when the obligee accepts the performance,
knowing its incompleteness or irregularity, and without expressing any protest or objection, the
obligation is deemed fully complied with
As aptly observed by the RTC, paragraphs 9 and 10 of the Contract of Lease likewise
expressly require respondent to submit, for prior approval by petitioner, all construction plans on
the subject property; and to complete the contemplated improvements thereon within a year
The Contract of Lease was executed on May 14, 1976, and the one-year period expired on
May 14, 1977. Yet, petitioner did not register any protest or objection to the alleged incompleteness
of or irregularity in the performance by respondent of its obligation to build and develop
improvements on the subject property. In fact, upon the expiration of the original 25-year lease
period in February 1992, petitioner was already ready and willing to accept and appropriate as its
own the improvements built on the subject property in 1992. Petitioner only raised the issue of the
purported incompleteness/irregularity of the said improvements when it was brought to court by
respondent for refusing to renew the lease.
Just as the RTC adjudged, no fault could be attributed to respondent for deficient payment
of lease rentals. Lease rentals were based on either the rates fixed by AO No. 4, series of 1970, or
Page 86 of 159

1% of the monthly gross income of respondent, whichever is higher. At the very beginning of the
lease, respondent had been paying monthly lease rentals based on the rates fixed by AO No. 4,
series of 1970, which amounted to P2,205.25 per month. When requested, respondent submitted to
petitioner its gross income statements, so petitioner could very well compute the 1% royalty.
However, petitioner continued to charge respondent only P2,205.25 monthly lease rental, which
the latter faithfully paid.
LAND TITLES AND DEEDS
JURISDICTION
PEDRO GABRIEL ET. AL. vs. MURMURAY JAMIAS ET. AL.
It is well-settled that the DAR, through its adjudication arm, i.e., the DARAB and its regional
and provincial adjudication boards, exercises quasi-judicial functions and jurisdiction on all matters
pertaining to an agrarian dispute or controversy and the implementation of agrarian reform laws.
Pertinently, it is provided in the DARAB Revised Rules of Procedure that the DARAB has primary and
exclusive jurisdiction, both original and appellate, to determine and adjudicate all agrarian disputes
involving the implementation of the CARP and related agrarian reform laws. Such jurisdiction shall
extend to cases involving the issuance, correction and cancellation of Certificates of Land Ownership
Award (CLOAs) and Emancipation Patents which are registered with the Land Registration Authority.
Facts:
Spouses Martin and Delfina Jamias owned a large tract of rice land covered by Original
Certificate of Title No. 23299. When the spouses died, their heirs herein respondents inherited and
partitioned this agricultural estate at 1/7 each for which Transfer Certificate of Title No. 36192 was
issued in their names.
In May 1981, the subject estate was covered by Operation Land Transfer (OLT) under P.D.
No. 27 and consequently herein petitioners, as agrarian reform beneficiaries were issued with
Certificates of Land Transfer (CLT) and later emancipation patents. Respondents acted swiftly and
sought for exemption and/or retention of seven (7) hectares each of the estate. This was resolved
by the DAR and eventually affirmed by the Court in favor of the respondents. After which, the
respondents moved for the issuance of a writ of execution with the DAR, though, they were instead
referred to the DARAB for an appropriate action for the cancellation or recall of the emancipation
patents covering the retained areas.
Petitioners assailed the petitions for cancellation and recall of emancipation patents filed by
the respondents on the main ground of lack of jurisdiction of the DARAB Regional Office and later
before the DARAB Central Office. Failing to obtain a favorable ruling, petitioners went to the CA on a
petition for review under Rule 43, which likewise merited denial due to being deficient in form and
substance, having no attached copies of the annexes materially referred to therein in violation of
Section 6(c) in relation to Section 7, both of Rule 43.
Petitioners argue principally, in their petition before this Court, the lack of jurisdiction of
DARAB to cancel and recall emancipation patents and land titles issued consequent thereto.
Page 87 of 159
Issue:
Is cancellation of certificates of title civil in nature, not agrarian, therefore conferring
jurisdiction over the same with the regular courts?
Ruling:
Procedural infirmities aside, the contention of petitioners that cancellation of certify-cates
of title is civil in nature, not agrarian, hardly deserves thorough contemplation.
It is well-settled that the DAR, through its adjudication arm, i.e., the DARAB and its regional
and provincial adjudication boards, exercises quasi-judicial functions and jurisdiction on all matters
pertaining to an agrarian dispute or controversy and the implementation of agrarian reform laws.
Pertinently, it is provided in the DARAB Revised Rules of Procedure that the DARAB has primary
and exclusive jurisdiction, both original and appellate, to determine and adjudicate all agrarian
disputes involving the implementation of the CARP and related agrarian reform laws. Such
jurisdiction shall extend to cases involving the issuance, correction and cancellation of Certificates
of Land Ownership Award (CLOAs) and Emancipation Patents which are registered with the Land
Registration Authority.
This Court has had the occasion to rule that the mere issuance of an emancipation patent
does not put the ownership of the agrarian reform beneficiary beyond attack and scrutiny.
Emancipation patents may be cancelled for violations of agrarian laws, rules and regulations.
Section 12(g) of P.D. No. 946 issued on June 17, 1976 vested the then Court of Agrarian Relations
with jurisdiction over cases involving the cancellation of emancipation patents issued under P.D.
No. 266. Exclusive jurisdiction over such cases was later lodged with the DARAB under Section 1 of
Rule II of the DARAB Rules of Procedure.
For sure, the jurisdiction of the DARAB cannot be deemed to disappear the moment a
certificate of title is issued, for, such certificates are not modes of transfer of property but merely
evidence of such transfer, and there can be no valid transfer of title should the CLOA, on which it
was grounded, be void. The same holds true in the case of a certificate of title issued by virtue of a
void emancipation patent.
BASES CONVERSION DEVELOPMENT AUTHORITY vs. PROVINCIAL AGRARIAN REFORM
OFFICER OF PAMPANGA, REGISTER OF DEEDS OF ANGELES CITY, BENJAMIN POY LORENZO,
LAVERNIE POY LORENZO, DIOSDADO DE GUZMAN, ROSEMARY ENG TAY TAN, LEANDRO DE
GUZMAN, BENJAMIN G. LORENZO, ANTONIO MANALO, AND SOCORRO DE GUZMAN
G.R. Nos. 155322-29, June 27, 2012, J. Leonardo-De Castro
It is a basic rule that jurisdiction is determined by the allegations in the complaint. The
peitioners complaints did not contain any allegation that would, even in the slightest, imply that the
issue to be resolved in this case involved an agrarian dispute which would transfer the jurisdiction to
Department of Agrarian Reform Adjudication Board (DARAB). In the action filed by the petitioner, the
issue to be resolved was who between the petitioner and the private respondents and their purported
predecessors-in-interest, have a valid title over the subject properties in light of the relevant facts and
applicable laws. The case thus involves a controversy relating to the ownership of the subject
Page 88 of 159

properties, which is beyond the scope of the phrase "agrarian dispute." The jurisdiction must then
belong to the Regional Trial Court.
Facts:
Petitioner Bases Conversion Development Authority (BCDA) is a government owned and
controlled corporation (GOCC) created pursuant to the national policy of accelerating the sound
and balanced conversion of the Clark and Subic military reservations and their extensions into
alternative productive uses for the promotion of economic and social development of Central Luzon
and the entire country in general.
On 1993, Executive Order No. 80 was issued, authorizing the establishment of the Clark
Development Corporation (CDC) to act as the operating and implementing arm of the BCDA with
regard to the management of the Clark Special Economic Zone (CSEZ). On the same day, then
President Fidel V. Ramos likewise issued Proclamation No. 163, creating and designating the areas
covered by the CSEZ as those "consisting of the Clark military reservations, including the Clark Air
Base proper and portions of the Clark reverted baselands, and excluding the areas covered by
previous Presidential Proclamations, the areas turned over to the Department of Agrarian Reform
(DAR), and the areas in the reverted baselands for military use." Under Section 2 of Proclamation
No. 163, these lands were transferred to the BCDA, which shall determine how to utilize and
dispose of such lands. As such, the BCDA became the owner of these lands, as registered in the
name of the Republic of the Philippines, and covered by Transfer Certificate of Titles.
On 2000, CSEZ Technical Research Committee was created to conduct a technical research
of properties within CSEZ covered by patents and certificates of title, applications for patent and
title registration, property surveys, and tax declarations and payments. The CSEZ Technical
Research Committee discovered that titles over parcels of land within the CSEZ, which had just
been transferred to the BCDA, had already been issued in the names of private individuals.
In view of the findings, the BCDA filed separate Complaints for Cancellation of Title against
the private respondents, the PARO, and the Register of Deeds of Angeles City, Pampanga before the
Regional Trial Court. In its complaints, the BCDA alleged that since the properties (subject
properties) were outside those allocated to DAR, and were already titled in the name of the
Republic of the Philippines then transferred to the BCDA, they could not be the subject of an award
by the PARO. Moreover, the BCDA claimed that the approval and issuance of Certificates of Land
Ownership Awards (CLOAs) by the PARO, which became the bases for the TCTs issued to private
respondents, were null and void in view of the fact that these subject properties were already titled
in the name of the Republic of the Philippines issued on February 11, 1958.
In their separate Motions to Dismiss, the private respondents and the PARO moved for the
dismissal of the complaints on the ground that the Honorable RTC lacks jurisdiction over the
subject matter and the nature of the action in the instant case. The respondents argued that since
the subject properties, which were part of the landholdings of the National Housing Authority, were
awarded to the private respondents as the bona fide and de jure farmer-beneficiaries under
Republic Act No. 6657 or the Comprehensive Agrarian Reform Law of 1988, jurisdiction over the
cancellation of their titles fall under the DAR through its Adjudication Board known as the
Department of Agrarian Reform Adjudication Board (DARAB).
Issue:
Page 89 of 159
Whether or not the Department of Agrarian reform Adjudication Board (DARAB) has
jurisdiction over the case.
Ruling:
None. This case properly falls within the jurisdiction of the RTC .
This Court agrees with the BCDA that for this case to fall within the ambit of DARABs
jurisdiction, the issue must be one that involves an agrarian dispute, which is not attendant in the
instant case.
Agrarian Dispute refers to any controversy relating to tenurial arrangements, whether
leasehold, tenancy, stewardship or otherwise, over lands devoted to agriculture, including disputes
concerning farmworkers associations or representation of persons in negotiating, fixing,
maintaining, changing or seeking to arrange terms or conditions of such tenurial arrangements. It
includes any controversy relating to compensation of lands acquired under this Act and other terms
and conditions of transfer of ownership from landowners to farmworkers, tenants and other
agrarian reform beneficiaries, whether the disputants stand in the proximate relation of farm
operator and beneficiary, landowner and tenant, or lessor and lessee.
It is a basic rule that jurisdiction is determined by the allegations in the complaint. The
BCDAs complaints did not contain any allegation that would, even in the slightest, imply that the
issue to be resolved in this case involved an agrarian dispute. In the action filed by the BCDA, the
issue to be resolved was who between the BCDA and the private respondents and their purported
predecessors-in-interest, have a valid title over the subject properties in light of the relevant facts
and applicable laws. The case thus involves a controversy relating to the ownership of the subject
properties, which is beyond the scope of the phrase "agrarian dispute."
TORRENS SYSTEM
PHILIPPINE TRUST COMPANY (also known as Philtrust Bank) vs. HON. COURT OF APPEALS
and FORFOM DEVELOPMENT CORPORATION
Banks, their business being impressed with public interest, are expected to exercise more care
and prudence than private individuals in their dealings, even those involving registered lands. The rule
that persons dealing with registered lands can rely solely on the certificate of title does not apply to
banks.
Facts:
Forfom Development Corporation (Forfom) is engaged in agricultural business and real
estate development and owns several parcels of land in Pampanga. It is the registered owner of two
(2) parcels of land subject of the present controversy, situated in Angeles City, Pampanga, under
Transfer Certificate of Title Nos. 10896 and 64884 consisting of 1,126,530 and 571,014 square
meters, respectively. Sometime in 1989, plaintiff received a letter from the Department of Agrarian
Reform with the names Ma. Teresa Limcauco and Ellenora Limcauco as addressees. Upon
verification with the DAR and the Register of Deeds made by Forfom Vice-President at that time,
Page 90 of 159

Mr. Jose Marie L. Ramos, Forfom discovered that the subject properties had already been
transferred in the names of said Ma. Teresa Limcauco and Ellenora Limcauco who were never
known to plaintiff or its employees. Forform Board of Directors decided to seek the assistance of
the National Bureau of Investigation (NBI) to conduct an investigation on the matter. On November
23, 1989, Forfom caused the annotation of its adverse claim on TCT No. 75533 of the Registry of
Deeds of Angeles City.
The results of the NBI Investigation and plaintiffs own inquiry revealed the following acts
through which the subject parcels of land were transferred in the names of Ma. Teresa Limcauco
and Ellenora Vda. De Limcauco, fictitious names which were used by Honorata Dizon in the
questioned transactions:
(1) A Deed of Absolute Sale dated March 6, 1987 was executed over the lot
covered by TCT No. 64884 in favor of Ellenora Vda. De Limcauco. A separate Deed of
Absolute Sale dated October 5, 1987 was likewise executed over the property
covered by TCT No. 10896 in favor of Ma. Teresa Limcauco. In both instruments, the
signature of the plaintiffs President, Felix H. Limcauco was forged.
(2) On July 7, 1987, a petition for issuance of owners duplicate copy was
filed with the Regional Trial Court of Angeles City, Branch 57 by Ellenora Limcauco
who allegedly lost said owners duplicate copy of TCT No. 64884, which was
docketed as Cad. Case No. A-124-160. On January 10, 1989, a separate petition for
the issuance of a new owners duplicate copy was filed with the same court by
counsel for Ma. Teresa Limcauco who allegedly lost the owners duplicate copy of
TCT No. 10896, which was docketed as Cad. Case No. A-124-280. After due hearing,
the court in Cad. Case No. A-124-280 granted the petition in an Order which
directed the Register of Deeds to issue another owners duplicate copy of TCT No.
10896 in place of the lost one.
(3) As a consequence of the courts order in Cad. Case No. A-124-280, TCT
No. 10896 was cancelled and TCT No. 82760/T-414 was issued in the name of Ma.
Teresa Limcauco who had the property covered thereby subdivided into different
lots for which TCT Nos. 85585, 85587, 85589 and 85591 were issued in the name of
said Ma. Teresa Limcauco. As to TCT No. 64884, this was also cancelled by the
Register of Deeds of Angeles City, Honesto G. Guarin, by virtue of a purported court
order issued by Judge Eliodoro B. Guinto of RTC-Branch 57.
(4) As to the property covered by TCT No. 64884, said certificate of title was
cancelled and a new certificate of title, TCT No. 75436/T-378 was issued in the
name of Ellenora Vda. De Limcauco. On September 23, 1987, a Deed of Absolute Sale
was executed by Ellenora Vda. De Limcauco in favor of defendant Raul P. Claveria
whereby the property covered by TCT No. 64884 was supposedly sold to said Raul
P. Claveria for the sum of P5,139,126.00. On September 24, 1987, TCT No. 75436/T378 was cancelled and a new certificate of title, TCT No. 75533 was issued in the
name of Raul P. Claveria. On October 21, 1987, spouses Raul and Elea Claveria
mortgaged the property with the Philippine Trust Company (Philtrust) to guarantee
a loan which mortgage was duly registered and annotated as Entry No. 2858 in TCT
No. 75533.
Page 91 of 159

Formom instituted the present action against the defendants Ma. Teresa Limcauco, Ellenora
D. Limcauco, spouses Raul P. Claveria and Elea R. Claveria, Philippine Trust Company and the
Register of Deeds of Angeles City (Philtrust). The Complaint alleged conspiratorial acts committed
by said defendants who succeeded in causing the fraudulent transfer of registration of plaintiffs
properties in the names of Ma. Teresa Limcauco and Ellenora D. Limcauco and the subdivision of
the land covered by TCT No. 10896 over which separate titles have been issued.
The RTC rendered its Decision in favor Forfom. Philtrust filed a Notice of Appeal, alleging
that the lower court erred in declaring Transfer Certificate of Title No. 75533-Angeles City void and
in concluding that it was a mortgagee in bad faith. The Court of Appeals rendered the assailed
Decision affirming the Decision of the RTC. The Court of Appeals denied Philtrusts Motion for
Reconsideration. Hence, this Petition for Certiorari.
Issue:
Whether Philtrust is a mortgagee in good or bad faith
Ruling:
Philtrust was in bad faith in the execution of the mortgage contract with the spouses
Claveria.
Indeed, the presence of anything which excites or arouses suspicion should prompt the
vendee or mortgagee to look beyond the certificate and investigate the title of the vendor appearing
on the face of said certificate. If the vendee or mortgagee failed to do so before the execution of the
contract, the vendee or mortgagee is deemed to be in bad faith and therefore cannot acquire any
title under the forged instrument.
Philtrust claims that the loans secured by the mortgage on the subject property were
granted to the spouses Claveria after Philtrust was satisfied regarding the spouses credit worthiness
and capacity to pay. In fact, according to Philtrust, the spouses Claveria were able to maintain a
satisfactory record of payment during the early period of their transactions with the bank. Philtrust
insists that prior to the constitution of the mortgage, it followed the standard operating procedures
in accepting property as security, including having investigators visit the subject property and
appraise its value.
It is settled that banks, their business being impressed with public interest, are expected to
exercise more care and prudence than private individuals in their dealings, even those involving
registered lands. The rule that persons dealing with registered lands can rely solely on the
certificate of title does not apply to banks. Consequently, Philtrust should prove that it exercised
extraordinary diligence required of it in approving the mortgage contract in favor of the spouses
Claveria.
It baffles us how Philtrust can argue that the promissory note and Deed of Mortgage
executed by the spouses Claveria, and the TCT of the subject property, can prove its allegations that
(a) the mortgage was granted after it was satisfied of the spouses credit worthiness; (b) the latter
was able to maintain a satisfactory record of payment early on; or (c) it followed the standard
operating procedures in accepting property as security, including having investigators visit the
subject property and appraise its value. The mere fact that Philtrust accepted the subject property
Page 92 of 159

as security most certainly does not prove that it followed the standard operating procedure in doing
so.
Philtrust, therefore, presented no evidence rebutting the badges of bad faith shown in the
records of the case. Even though circumstantial, the following adequately prove by preponderance
of evidence that Philtrust was aware of the fraudulent scheme perpetrated upon Forfom:
1. Within a period of less than one year, Philtrust extended unsecured loans
amounting to P7,300,000.00 to the spouses Claveria.
2. Although the spouses Claveria had declared their residence to be in the plush
subdivision in Ayala Alabang, Philtrust was content to receive as security a land outside
Metro Manila, which was only recently acquired by the said spouses. When asked about this
in the Request for Interrogatories, Philtrust merely responded evasively.
3. It is presumed that evidence willfully suppressed would be adverse if
produced. When pressed in the Request for Interrogatories for details of the investigation of
the bank, and for the names of the persons who allegedly visited the subject property and
the alleged home of the spouses Claveria, and the names of the bank officers who dealt with
said spouses, Philtrust refused to do so
4. Philtrust persistently refused to cooperate with the National Bureau of
Investigation (NBI) in its investigation of the fraudulent scheme perpetrated against Forfom,
as testified by NBI agents Alberto V. Ramos and Pastor T. Pangan.
5. Had Philtrust properly conducted a credit investigation of the spouses Claveria, it
would have easily discovered that they did not reside and never resided in the address
declared by them, as revealed in the investigation by the NBI and declared by the association
of homeowners in the New Alabang subdivision.
All the foregoing considered, we find that the Court of Appeals did not even err in finding
that Philtrust was in bad faith in the execution of the mortgage contract with the spouses Claveria.
MARIA TORBELA, represented by her heirs, EULOGIO TOSINO et al vs. SPOUSES ANDRES T.
ROSARIO et al
Banco Filipino is not an ordinary mortgagee, but is a mortgagee-bank, whose business is
impressed with public interest. A banking institution is expected to exercise due diligence before
entering into a mortgage contract. The ascertainment of the status or condition of a property offered
to it as security for a loan must be a standard and indispensable part of its operations.
Facts:
Torbela sibling inherited the title to the subject property (Lot No. 356-A) from their parents,
the Torbela spouses, who, in turn, acquired the same from the first registered owner of the lot,
Valeriano. Later, the Torbela siblings executed a Deed of Absolute Quitclaim on December 12, 1964
in which they transferred and conveyed Lot No. 356-A to Dr. Rosario for the consideration of P9.00.
Page 93 of 159

Lot No. 356-A.
And upon Dr. Rosarios default on his loan obligations, Banco Filipino foreclosed the
mortgage, acquired Lot No. 356-A as the highest bidder at the foreclosure sale, and consolidated
title in its name under TCT No. 165813.
The Torbela siblings aver that Banco Filipino is not a mortgagee in good faith because as
early as May 17, 1967, they had already annotated Cornelios Adverse Claim dated May 16, 1967 and
Dr. Rosarios Deed of Absolute Quitclaim dated December 28, 1964 on TCT No. 52751 as Entry Nos.
274471-274472, respectively.
On the other hand, Banco Filipino asseverates that it is a mortgagee in good faith because
per Section 70 of Presidential Decree No. 1529, otherwise known as the Property Registration
Decree, the notice of adverse claim, registered on May 17, 1967 by the Torbela siblings under Entry
Nos. 274471-274472 on TCT No. 52751, already lapsed after 30 days or on June 16, 1967.
Additionally, there was an express cancellation of Entry Nos. 274471-274472 by Entry No. 520469
dated March 11, 1981.
So when Banco Filipino approved Dr. Rosarios loan for P1,200,000.00 and constituted a
mortgage on Lot No. 356-A (together with two other properties) on December 8, 1981, the only
other encumbrance on TCT No. 52751 was Entry No. 520099 dated March 6, 1981, i.e., the amended
loan and mortgage agreement between Dr. Rosario and PNB (which was eventually cancelled after
it was paid off with part of the proceeds from Dr. Rosarios loan from Banco Filipino). Hence, Banco
Filipino was not aware that the Torbela siblings adverse claim on Lot No. 356-A still subsisted.
Issue:
Can the Torbela siblings still recover Lot No. 356-A?
Ruling:
Yes, for the reason that Banco Filipino is not a mortgagee and buyer in good faith.
Entry Nos. 274471-274472 were not validly cancelled, and the improper cancellation
should have been apparent to Banco Filipino and aroused suspicion in said bank of some defect in
Dr. Rosarios title.
The purpose of annotating the adverse claim on the title of the disputed land is to apprise
third persons that there is a controversy over the ownership of the land and to preserve and
protect the right of the adverse claimant during the pendency of the controversy. It is a notice to
third persons that any transaction regarding the disputed land is subject to the outcome of the
dispute.
Page 94 of 159
It is a well-settled rule that a purchaser or mortgagee cannot close his eyes to facts which
should put a reasonable man upon his guard, and then claim that he acted in good faith under the
belief that there was no defect in the title of the vendor or mortgagor.
While the defective cancellation of Entry Nos. 274471-274472 by Entry No. 520469 might
not be evident to a private individual, the same should have been apparent to Banco Filipino. Banco
Filipino is not an ordinary mortgagee, but is a mortgagee-bank, whose business is impressed with
public interest. A banking institution is expected to exercise due diligence before entering into a
mortgage contract. The ascertainment of the status or condition of a property offered to it as
security for a loan must be a standard and indispensable part of its operations.
Banco Filipino cannot be deemed a mortgagee in good faith, much less a purchaser in good
faith at the foreclosure sale of Lot No. 356-A. Hence, the right of the Torbela siblings over Lot No.
356-A is superior over that of Banco Filipino; and as the true owners of Lot No. 356-A, the Torbela
siblings are entitled to a reconveyance of said property even from Banco Filipino.
REPUBLIC PHILIPPINES vs. GLORIA JARALVE substituted ALAN .JESS JARALVE DOCUMENTO,
JR., EDGARDO JARALVE, SERAFIN UY, JR., SHELLA UY, LAGNADA, SAY A-ANG, INTERNATIONAL
NIMFA PANTALEON STARG LAD AND DEVELOPMENT CORPORATION, ANNIE TAN, TEOTIMO
CABARRUBIAS, JESSICA DACLAN, MA. EMMA RAMAS, DANILO DEEN, and ERIC ANTHONY
DEEN.
Under the Regalian doctrine embodied in our Constitution, land that has not been acquired
from the government, either by purchase, grant, or any other mode recognized by law, belongs to the
State as part of the public domain. Thus, it is indispensable for a person claiming title to a public land
to show that his title was acquired through such means
It is not enough for the PENRO or CENRO to certify that a land is alienable and disposable. The
applicant for land registration must prove that the DENR Secretary had approved the land
classification and released the land of the public domain as alienable and disposable, and that the land
subject of the application for registration falls within the approved area per verification through
survey by the PENRO or CENRO. In addition, the applicant for land registration must present a copy of
the original classification approved by the DENR Secretary and certified as a true copy by the legal
custodian of the official records. These facts must be established to prove that the land is alienable and
disposable.
Facts:
On October 22, 1996, Repondents Gloria Jaralve,5 Edgardo Jaralve, Serafin Uy, Jr., Shella Uy,
Nimfa Lagnada, Pantaleon Saya-Ang, Starglad International and Development Corporation, Annie
Tan, Teotimo Cabarrubias, Jessica Daclan, and Ma. Emma Ramas filed an Application with Branch
20 of the RTC of Cebu City, for the registration in their names of Lot Sgs-07-000307 (subject
property), under Presidential Decree No. 1529. Respondents declared that they were the co-owners
in fee simple of the subject property, a parcel of land with an area of 731,380 square meters,
belonging to Cadastral Lot 18590, and situated in Barangay Quiot, City of Cebu, and all the
improvements thereon. They alleged that they occupied the subject property and to the best of
their knowledge, there was no mortgage or encumbrance affecting it, and no one was in possession
Page 95 of 159

thereof. The respondents claimed that they had acquired ownership over the subject property by
way of purchase from predecessors-in-interest who had been in continuous, open, adverse, public,
uninterrupted, exclusive, and notorious possession thereof for more than thirty (30) years, or from
June 12, 1945.
The respondents application was opposed by different parties including the Republic of the
Philippines, represented by the Director of Lands, who argued that: a) neither the respondents nor
their predecessors-in-interest had been in open, continuous, exclusive, and notorious possession
and occupation of the subject property since June 12, 1945 or prior thereto.
Finding the testimonial and documentary evidence of the respondents sufficient to show
that they had acquired ownership over the subject property, the RTC ruled in their favor which was
affirmed by the Court of Appeals.
Issues:
1. Whether in land registration proceedings, the applicants have the burden of overcoming the
presumption that the land sought to be registered is inalienable land of the public domain.
2. Whether the respondents successfully established that the land sought to be registered is
inalienable land of the public domain by relying on the CENRO Certificate.
Ruling:
1. Yes. The Public Land Act or Commonwealth Act No. 141, until this day, is the existing general law
governing the classification and disposition of lands of the public domain, except for timber and
mineral lands. Under the Regalian doctrine embodied in our Constitution, land that has not been
acquired from the government, either by purchase, grant, or any other mode recognized by law,
belongs to the State as part of the public domain. Thus, it is indispensable for a person claiming
title to a public land to show that his title was acquired through such means.
Applicants for registration under Section 14(1) of Presidential Decree No. 1529 must
sufficiently establish the following: 1. that the subject land forms part of the disposable and
alienable lands of the public domain; 2. that the applicant and his predecessors-in-interest have
been in open, continuous, exclusive and notorious possession and occupation of the same; and 3.
that it is under a bona fide claim of ownership since June 12, 1945, or earlier.
2. No, unfortunately, respondents were not able to discharge the burden of overcoming the
presumption that the land they sought to be registered forms part of the public domain.
Land classification or reclassification cannot be assumed. It must be proved. To prove that
the subject property is alienable and disposable land of the public domain, respondents presented
the CENRO Certificate dated March 20, 1996 signed by CENR Officer Iluminado C. Lucas and PENR
Officer Isabelo R. Montejo, and verified by Forester Anastacio C. Cabalejo.
However, it is not enough for the PENRO or CENRO to certify that a land is alienable and
disposable. The applicant for land registration must prove that the DENR Secretary had approved
the land classification and released the land of the public domain as alienable and disposable, and
that the land subject of the application for registration falls within the approved area per
Page 96 of 159

verification through survey by the PENRO or CENRO. In addition, the applicant for land registration
must present a copy of the original classification approved by the DENR Secretary and certified as a
true copy by the legal custodian of the official records. These facts must be established to prove that
the land is alienable and disposable. Respondent failed to do so because the certifications presented
by respondent do not, by themselves, prove that the land is alienable and disposable.
Although the survey and certification were done in accordance with Forestry
Administrative Order No. 4-642, issued by the then Secretary of Agriculture and Natural Resources
declaring certain portions of the public domain situated in Cebu City as alienable and disposable, an
actual copy of such classification, certified as true by the legal custodian of the official records, was
not presented in evidence. This was a crucial mistake. What was presented was the certification of
Nicomedes R. Armilla, the Land Evaluation Party Coordinator, that the Cebu CENRO had on file a
certified photocopy of the administrative order. In fact, one of the private oppositors objected to its
submission in evidence for violating the best evidence rule.
Moreover, DENR Administrative Order (DAO) No. 20 dated May 30, 1988,82 delineated the
functions and authorities of the offices within the DENR. Under Section G(1) of the above DAO,
CENROs issue certificates of land classification status for areas below 50 hectares. For those falling
above 50 hectares, the issuance of such certificates is within the function of the PENROs, as per
Section F(1) of the same DAO. This delineation, with regard to the offices authorized to issue
certificates of land classification status, was retained in DAO No. 3883 dated April 19, 1990.
In the case at bar, the subject property has an area of 731,380 square meters or 73.138
hectares. Clearly, under DAO No. 38, series of 1990, the subject property is beyond the authority of
the CENRO to certify as alienable and disposable.
DEOGENES O. RODRIGUEZ vs. HON. COURT OF APPEALS and PHILIPPINE CHINESE
CHARITABLE ASSOCIATION, INC.
The real purpose of the Torrens system is to quiet title to land and to stop forever any question
as to its legality A Torrens title is generally a conclusive evidence of the ownership of the land referred
to therein.
Section 48 of Presidential Decree No. 1529, otherwise known as the Property Registration
Decree, explicitly provides that [a] certificate of title shall not be subject to collateral attack. It cannot
be altered, modified, or cancelled except in a direct proceeding in accordance with law.
Facts:
On January 29, 1965, Purita Landicho (Landicho) filed before the Court of First Instance
(CFI) of Rizal an Application for Registration of a piece of land, measuring 125 hectares, located in
Barrio Patiis, San Mateo, Rizal (subject property), which was docketed as Land Reg. Case No.
N-5098. CFI, on November 16, 1965, confirms the title of Landicho. Thereafter, on December 22,
1965, it ordered the Register of Deeds to issue OCT in favor of Landicho. Accordingly, the Register
of Deeds issued Certificate of Title (TCT) No. 16768111 in Landichos name covering the subject
property. Notably, the Register of Deeds issued TCT instead of OCT as directed by the court. The
subject property was then sold several times, and as the old TCTs of the vendors were cancelled,
new TCTs were accordingly issued to the buyers. The sale of the subject property could be traced
from Landicho to Blue Chips Projects, Inc. (BCPI) then to Winmar Poultry Farm, Inc. (WPFI) and
Page 97 of 159

finally, to herein respondent Philippine Chinese Charitable Association, Inc. (PCCAI) on July 15,
1975.
On November 14, 1996, Landicho executed another Deed of Absolute Sales over the subject
property in favor of herein petitioner Deogenes O. Rodriguez (Rodriguez). Two years later, on June
1, 1998, Landicho died. Seven years hence, or on May 18, 2005, Rodriguez, asserting that he was
Landichos lawful successorininterest, filed an Omnibus Motion before the RTC, Branch 75, of San
Mateo, Rizal, in Land Reg. Case No. N-5098. Rodriguez alleged therein that the Decision dated
November 16, 1965 and Order dated December 22, 1965 of the CFI in Land Reg. Case No. N-5098
which confirmed Landichos title over the subject property has not been executed. Rodriguez
specifically stated that no decree of registration had been issued by the LRC Commissioner (now
the Administrator of the Land Registration Authority [LRA]) and that no OCT had been ever issued
by the ROD in Landichos name. In the course of the proceedings concerning the aforementioned
Omnibus Motion, Rodriguez himself submitted as his Exhibit GG TCT No. 482970 of PCCAI but
alleged that said certificate of title was fictitious.
The RTC favorably acted on Rodriguezs Omnibus Motion in an Order dated April 10, 2007
thereby ordering Register of Deeds to issue OCT in the name of Landicho. The LRA, upon receipt of
a copy of the RTC Order dated April 10, 2007, filed a Manifestation dated February 4, 2008
informing the trial court that it cannot comply with said Order since there were already two
existing titles covering the subject property. Thereafter PCCAI filed a Petition for Certiorari and
Prohibition before the Court of Appeals, assailing the Orders dated April 10, 2007 and November
22, 2007 of the RTC for having been issued without or in excess of jurisdiction and/or with grave
abuse of discretion amounting to lack or excess of jurisdiction. The Court of Appeals, in a Decision
dated May 26, 2008, found merit in the Petition of PCCAI. The appellate court gave great weight and
credence to the Manifestation dated February 8, 2008 of the LRA reporting the double titling and
conflicting claims over the subject property. Aggrieved, Rodriguez sought recourse from this Court
through this Petition.
Issues:
1. Whether Rodriguez has a better title over the subject property
2. Whether Rodriguezs Omnibus Motion is a collateral attack on the title of PCCAI
3. Whether the LRA is correct in not complying with the order of the court directing LRA to
issue OCT in the name of Landicho
Ruling:
1. No. The real purpose of the Torrens system is to quiet title to land and to stop forever any
question as to its legality. Once a title is registered, the owner may rest secure, without the
necessity of waiting in the portals of the court, or sitting on the mirador su casa, to avoid the
possibility of losing his land. A Torrens title is generally a conclusive evidence of the ownership of
the land referred to therein. A strong presumption exists that Torrens titles are regularly issued
and that they are valid.
In this case, PCCAI is the registered owner of the subject property under TCT No. 482970,
which could be traced back to TCT No. 16781 issued to Landicho. As between PCCAI and Rodriguez,
the former is better entitled to the protection of the Torrens system. PCCAI can rely on its TCT No.
482970 until the same has been annulled and/or cancelled.
Page 98 of 159
2. Yes. Section 48 of Presidential Decree No. 1529, otherwise known as the Property Registration
Decree, explicitly provides that [a] certificate of title shall not be subject to collateral attack. It
cannot be altered, modified, or cancelled except in a direct proceeding in accordance with law. In
Decaleng v. Bishop of the Missionary District of the Philippine Islands of Protestant Episcopal Church
in the United States of America, the Court declared that a Torrens title cannot be attacked
collaterally, and the issue on its validity can be raised only in an action expressly instituted for that
purpose.
A collateral attack is made when, in another action to obtain a different relief, the certificate
of title is assailed as an incident in said action. Land Reg. Case No. N-5098 was an application for
registration of the subject property instituted by Landicho before the CFI, which was granted by the
CFI in its Decision dated November 16, 1965. Rodriguez, asserting that he was Landichos lawful
successor-in-interest, filed an Omnibus Motion before the RTC in Land Reg. Case No. N-5098
seeking the issuance of a decree of registration and an OCT in his name for the subject property
pursuant to the said CFI judgment. Rodriguez acknowledged the existence of TCT No. 482970 of
PCCAI for the same property, but he simply brushed aside said certificate of title for allegedly being
spurious. Still, Rodriguez did not pray that TCT No. 482970 be declared void and/or cancelled and
even if he did, the RTC had no jurisdiction to grant such relief in a land registration case.
Rodriguezs Omnibus Motion in Land Reg. Case No. N5098, under the circumstances, is a
collateral attack on said certificate, which is proscribed under Section 48 of the Property
Registration Decree. If Rodriguez wants to have a decree of registration and OCT issued in his (or
even in Landichos name) for the subject property, he should have directly challenged the validity of
the extant TCT No. 482970 of PCCAI for the very same property in an action specifically instituted
for such purpose (i.e., petition for annulment and/or cancellation of title, petition for quieting of
title) and pray the said certificate of title be annulled or canceled. The proper court in an
appropriate action can try the factual and legal issues involving the alleged fatal defects in
Landichos TCT No. 167681 and/or its derivative TCTs, including TCT No. 482970 of PCCAI the
legal effects of Landichos sale of the subject property to BCPI (the predecessorininterest of
PCCAI) in 1971 and also to Rodriguez in 1996 and the good faith or bad faith of PCCAI, as well as
Rodriguez, in purchasing the subject property. The resolution of these issues will ultimately be
determinative of who between Rodriguez and PCCAI is the rightful owner of the subject property.
3. Yes. The LRA exists for the sole purpose of implementing and protecting the Torrens system of
land titling and registration. In particular, it is tasked with the following functions: (1) Issue decrees
of registration pursuant to final judgments of the courts in land registration proceedings and cause
the issuance by the Registrars of Land Titles and Deeds of the corresponding certificates of title (2)
Be the central repository of records relative to original registration of lands titled under the
Torrens system, including subdivision and consolidation plans of titled lands and (3) Extend
assistance to courts in ordinary and cadastral land registration proceedings and to the other
agencies of the government in the implementation of the land reform program.
The LRA, in this case, filed the Manifestation dated February 4, 2008 to inform the RTC that
the subject property is already covered by two TCTs, both uncancelled and extant[] and for this
reason, the LRA cannot comply with the RTC Order dated April 10, 2007, directing the issuance of a
decree of registration and an OCT for the same property in Landichos name, as it would further
aggravate the already existing problem of double titling[.] In filing said Manifestation, the LRA was
Page 99 of 159

only faithfully pursuing its mandate to protect the Torrens system and performing its function of
extending assistance to the RTC as regards Land Reg. Case No. N-5098.
REGISTRATION
DURAWOOD CONSTRUCTION AND LUMBER SUPPLY, INC. vs. CANDICE S. BONA
Current doctrine thus seems to be that entry alone produces the effect of registration, whether
the transaction entered is a voluntary or an involuntary one, so long as the registrant has complied
with all that is required of him for purposes of entry and annotation, and nothing more remains to be
done but a duty incumbent solely on the register of deeds.
Facts:
Petitioner Durawood Construction and Lumber Supply filed a complaint for sum of money
against LBB Construction and Development Corporation. During the pendency of the case,
respondent Candice Bona filed a motion to intervene claiming that the property attached in order to
satisfy the judgment is already transferred in her name through a Deed of Absolute Sale executed
by Durawood Construction.
The Regional Trial Court rendered a decision in favor of Durawood. Because of this,
Durawood filed a Notice of Levy of Attachment. It then found out that after the attachment was
made the Register of Deeds, through Atty. Rutaquio, caused the cancellation of the Transfer of
Certificate of Title and issued a new TCT in the name of Candice Bona. According to Durawood, this
act constitutes an act to defraud a judgment creditor. Acting on the motion of Durawood to
Reinstate the Notice of Levy, the RTC rendered a decision in favor of Durawood and reinstated the
notice of levy. Candice Bona then filed a petition for certiorari and prohibition before the Court of
Appeals. The Court of Appeals ruled that what is determinative in the issue in the case at bar is not
the sequence of the presentation of entries but the it is the registration in the Primary Book of Entry
that establishes the order of reception of instruments affecting registered land. The Court of
Appeals based this decision under Section 56 of PD 1529. Hence, the current petition.
Issue:
Whether or not RTC erred in reinstating the Notice of Levy filed by Durawood Corporation
despite the fact that the land covered by the levy is already transferred in the name of the
respondent.
Ruling:
No. The Supreme Court reversed and set aside the decision of the Court of Appeals and
ruled that RTC correctly reinstated the Notice of Levy filed by Durawood.
Although the reliance of the Court of Appeals in arriving at the decision is generally correct,
a careful reading of Section 56 of PD 1529 would lead to a difference conclusion. Section 56 reads:
SEC. 56. Primary Entry Book; fees; certified copies. Each Register of Deeds shall keep a
primary entry book in which, upon payment of the entry fee, he shall enter, in the order of
Page 100 of 159

their reception, all instruments including copies of writs and processes filed with him
relating to registered land. He shall, as a preliminary process in registration, note in such
book the date, hour and minute of reception of all instruments, in the order in which they
were received. They shall be regarded as registered from the time so noted, and the
memorandum of each instrument, when made on the certificate of title to which it
refers, shall bear the same date: Provided, that the national government as well as the
provincial and city governments shall be exempt from the payment of such fees in advance
in order to be entitled to entry and registration
The consequence of the highlighted portion of the above section is two-fold: (1) in
determining the date in which an instrument is considered registered, the reckoning point is the
time of the reception of such instrument as noted in the Primary Entry Book; and (2) when the
memorandum of the instrument is later made on the certificate of title to which it refers, such
memorandum shall bear the same date as that of the reception of the instrument as noted in the
Primary Entry Book. Pursuant to the second consequence stated above, the Court of Appeals held
that Atty. Rutaquio correctly placed the date of entry in the Primary Entry Book as the date of the
memorandum of the registration of the deed of sale in TCT No. R-17571.
Based on this alone, it appears that the RTC was in error when it considered the registration
of the Absolute Deed of Sale on June 16, 2004 inferior to the registration of the Notice of Levy on
Attachment on June 17, 2004 on the ground that the Attachment was annotated on TCT No. R17571 earlier than the Deed of Sale. As discussed in the above-mentioned cases, the annotation in
the certificate of title is not determinative of the effectivity of the registration of the subject
instrument.
However, a close reading of the above-mentioned cases reveals that for the entry of
instruments in the Primary Entry Book to be equivalent to registration, certain requirements have
to be met. Thus, we held in Levin that:
Do the entry in the day book of a deed of sale which was presented and filed together with
the owner's duplicate certificate of title with the office of the Registrar of Deeds and full payment of
registration fees constitute a complete act of registration which operates to convey and affect the
land? In voluntary registration, such as a sale, mortgage, lease and the like, if the owner's duplicate
certificate be not surrendered and presented or if no payment of registration fees be made within
15 days, entry in the day book of the deed of sale does not operate to convey and affect the land
sold.
Current doctrine thus seems to be that entry alone produces the effect of registration,
whether the transaction entered is a voluntary or an involuntary one, so long as the registrant has
complied with all that is required of him for purposes of entry and annotation, and nothing more
remains to be done but a duty incumbent solely on the register of deeds.
This pronouncement, which was reiterated in National Housing Authority v. Basa, Jr., shows
that for the entry to be considered to have the effect of registration, there is still a need to comply
with all that is required for entry and registration, including the payment of the prescribed fees.
Records in the case at bar reveal that as of June 25, 2004, the date of the letter of Atty.
Santos seeking the opinion of the LRA as regards the registration of the Deed of Sale and the Notice
of Levy on Attachment, the required registration fees for the Deed of Sale has not yet been paid.
Page 101 of 159
Since there was still no compliance of "all that is required x x x for purposes of entry and
annotation" of the Deed of Sale as of June 25, 2004, we are constrained to rule that the registration
of the Notice of Levy on Attachment on June 17, 2004 should take precedence over the former.
Considering that the Notice of Levy on Attachment was deemed registered earlier than the Deed of
Sale, the TCT issued pursuant to the latter should contain the annotation of the Attachment.
In view of the foregoing, we find that the RTC was, in fact, acting properly when it ordered
the reinstatement of the Notice of Levy on Attachment in TCT No. R-22522. Since the RTC cannot be
considered as to have acted in grave abuse of its discretion in issuing such Order, the Petition for
Certiorari assailing the same should have been dismissed.
REPUBLIC OF THE PHILIPPINES vs. LYDIA CAPCO DE TENSUAN, represented by CLAUDIA C.
ARUELO
The Supreme Court had allowed substantial compliance with the requirement that an
applicant for land registration must prove that the DENR Secretary had approved the land
classification and released the land as alienable and disposable and was lenient with the application of
the rule that a CENRO Certification, by itself does not prove that the land is alienable and disposable.
However, such substantial compliance and leniency will not be allowed where the Land Registration
Authority (LRA) or the DENR oppose the application on the ground that the land subject thereof is
inalienable.
Facts:
Respondent Lydia Capco de Tensuan filed with the MeTC an application for registration of
two parcels of land located in Taguig which she inherited from her father, claiming that her
predecessors-in-interest have been in possession of the property even before the Second World
War. The Republic opposed the application, arguing among others that neither Tensuan nor her
predecessors in-interest have been in open, continuous, exclusive, and notorious possession and
occupation of the subject property since June 12, 1945 or prior thereto. The Laguna Lake
Development Authority (LLDA) also opposed the registration, arguing that their findings indicate
that the parcels of land are below the Laguna lake elevation which means that the parcels of land
are part of the bed of the Laguna Lake, and is thus considered public land.
Among the evidence Tensuan presented during trial was Certification from the Community
Environment and Natural Resources Office of the DENR (CENRO-DENR) which states that said land
falls within alienable and disposable land.
The MeTC granted Tensuans application for registration, and the CA affirmed the decision.
Issue:
Should the application for registration of Tensuan be denied?
Ruling:
The petition is granted.
Page 102 of 159
Under the Regalian doctrine, all lands of the public domain belong to the State, and that the
State is the source of any asserted right to ownership of land and charged with the conservation of
such patrimony. The same doctrine also states that all lands not otherwise appearing to be clearly
within private ownership are presumed to belong to the State. Consequently, the burden of proof to
overcome the presumption of ownership of lands of the public domain is on the person applying for
registration. Unless public land is shown to have been reclassified and alienated by the State to a
private person, it remains part of the inalienable public domain.
A positive act declaring land as alienable and disposable is required. In keeping with the
presumption of State ownership, the Court has time and again emphasized that there must be a
positive act of the government, such as an official proclamation, declassifying inalienable public
land into disposable land for agricultural or other purposes. In fact, Section 8 of CA No. 141 limits
alienable or disposable lands only to those lands which have been officially delimited and
classified.
As proof that the subject property is alienable and disposable, Tensuan presented a
Certification dated July 29, 1999 issued by the CENRO-DENR which verified that said land falls
within alienable and disposable land under Project No. 27-B L.C. Map No. 2623 under Forestry
Administrative Order No. 4-1141 dated January 3, 1968. However, we have declared unequivocally
[in Republic v. T.A.N. Properties, Inc.] that a CENRO Certification, by itself, is insufficient proof that a
parcel of land is alienable and disposable. The CENRO is not the official repository or legal
custodian of the issuances of the DENR Secretary declaring public lands as alienable and disposable.
The CENRO should have attached an official publication of the DENR Secretarys issuance declaring
the land alienable and disposable.
While we may have been lenient in some cases and accepted substantial compliance with
the evidentiary requirements set forth in T.A.N. Properties, Inc., we cannot do the same for Tensuan
in the case at bar. We cannot afford to be lenient in cases where the Land Registration Authority
(LRA) or the DENR oppose the application for registration on the ground that the land subject
thereof is inalienable. In the present case, the DENR recognized the right of the LLDA to oppose
Tensuans Application for Registration; and the LLDA, in its Opposition, precisely argued that the
subject property is part of the Laguna Lake bed and, therefore, inalienable public land. We do not
even have to evaluate the evidence presented by the LLDA given the Regalian Doctrine. Since
Tensuan failed to present satisfactory proof that the subject property is alienable and disposable,
the burden of evidence did not even shift to the LLDA to prove that the subject property is part of
the Laguna Lake bed.
CLT REALTY DEVELOPMENT CORPORATION vs. PHIL-VILLE DEVELOPMENT AND HOUSING
CORPORATION, REPUBLIC OF THE PHILIPPINES (through the OFFICE OF THE SOLICITOR
GENERAL), and the REGISTEROF DEEDS OF METRO MANILA DISTRICT III, CALOOCAN
G .R. No. 160728, March 11, 2015, J. Leonardo-De Castro
A party claiming ownership over a parcel of land cannot bank on the weakness and defects of
the title of the adverse party but rely on the strength of his claim.
Facts:
Page 103 of 159

Phil-Ville claimed to be the owner of 16 parcels of land including the property in question,
Lot 26 Maysilo and filed an action of quieting of title. CLT Realty contended that the titles from
where Phil-Ville was deriving its right were null and void. On the other hand, Phil-Ville asseverated
that it was granted to the corporation as beneficiary of the government through the National
Housing Authority. CLT Realty that it is the actual owner of the property by virtue of an absolute
deed of sale with its former owner Estelita Hipolito.
After the investigation of NBI of the parties documents, it was determined that the
documents presented by Phil-Ville are genuine. The RTC ruled in favor of Phil-Ville. CLT Realty
appealed to the CA reiterating that the titles from where Phil-Ville derived its right are null and
void. After due consideration by the CA, it dismissed the appeal. Hence, the present petition.
Issue:
Whether or not the titles of Phil-Ville are null and void
Ruling:
No. The Court of Appeals likewise extensively quoted above, especially as they are
supported by the evidence on record. It has been held in a long string of cases that as a general rule,
findings of fact of the Court of Appeals are deemed final, conclusive, and binding on this Court. The
jurisdiction of this Court in a petition for review on certiorari under Rule 45 of the Rules of Court is
limited to reviewing only errors of law. There are, in fact, exceptions to this general rule, as
explained in Baricuatro, Jr. v. Court of Appeals, but we find that they are not present in this case.
The alleged errors assigned by petitioner to the Court of Appeals are, even at a glance,
factual in nature and are not borne out by the evidence on record.
The Court of Appeals issued the questioned Decision and Resolution based on the evidence
presented on trial even prior to this Courts issuance of the historically-significant en banc
resolutions in the consolidated cases commonly entitled Manotok Realty, Inc. v. CLT Realty
Development Corp., wherein the Court reconsidered and reversed its earlier Decision in the same
case, as well as related, previously-decided cases, referring to OCT No. 994 covering a portion of the
Maysilo Estate. There were two resolutions in said cases, one dated December 15, 2007 (the 2007
Manotok Resolution) and a subsequent one dated March 31, 2009 (the 2009 Manotok Resolution).
Of particular relevance to this present case is the ruling in the 2009 Manotok Resolution
that TCT No. T-177013, the certificate of title of herein petitioner CLT, who is also a party to said
consolidated cases, is null and void. Therefore, the cloud on respondent Phil-Villes 16 titles subject
matter of the complaint had already been removed.
From its Answer in the Complaint filed before the RTC to its Memorandum filed before this
Court, petitioner proudly traces the problematic TCT No. T-177013 to its previous owner, Estelita
Hipolito, who acquired said lot from Jose Dimson. In Manotok, the same title was also the subject
matter of one of the consolidated cases, described as follows: CLT's claim was anchored on Transfer
Certificate of Title (TCT) No. T-177013 issued in its name by the Caloocan City Register of Deeds,
which title in turn was derived from Estelita Hipolito (Hipolito) by virtue of a Deed of Sale with Real
Estate Mortgage dated 10 December 1988. Hipolito's title emanated from Jose Dimsons (Dimson)
TCT No. R- 15169, a title issued pursuant to an order of the Court of First Instance (CFI) of Caloocan
Page 104 of 159

City, Branch 33. Dimsons title appears to have been sourced from OCT No. 994.50 (Citation
omitted.)
In Manotok, it was established that the true date of OCT No. 994 is May 3, 1917, and that
there is only one OCT No. 994. The decree of registration was issued on April 19, 1917, and actually
received for transcription by the Register of Deeds on May 3, 1917. 51 Thus, all the titles that
traced its roots to the spurious OCT No. 994 dated April 19, 1917 were invalidated, including herein
petitioners TCT No. T-177013. As held by the Court: It is evident from all three titles CLT's,
Hipolitos and Dimsons that the properties they purport to cover were originally registered on
the 19th day April, in the year nineteen hundred and seventeen in the Registration Book of the
Office of the Register of Deeds of Rizal. Note, as earlier established, there is no such OCT No. 994
originally registered on 19 April 1917 binding conclusions.
First, there is only one OCT No. 994. As it appears on the record, that mother title was
received for transcription by the Register of Deeds on 3 May 1917, and that should be the date
which should be reckoned as the date of registration of the title. It may also be acknowledged, as
appears on the title, that OCT No. 994 resulted from the issuance of the decree of registration on 17
April 1917, although such date cannot be considered as the date of the title or the date when the
title took effect.
Second. Any title that traces its source to OCT No. 994 dated 17 April 1917 is void, for such
mother title is inexistent. The fact that the Dimson and CLT titles made specific reference to an OCT
No. 994 dated 17 April 1917 casts doubt on the validity of such titles since they refer to an
inexistent OCT. This error alone is, in fact, sufficient to invalidate the Dimson and CLT claims over
the subject property if singular reliance is placed by them on the dates appearing on their
respective titles.
THE HEIRS OF EUGENIO LOPEZ, SR. NAMELY, OSCAR M. LOPEZ, MANUEL M. LOPEZ AND
PRESENTACION L. PSINAKIS vs. THE HONORABLE FRANCISCO QUERUBIN, IN HIS CAPACITY
AS PRESIDING JUDGE OF THE REGIONAL TRIAL COURT OF ANTIPOLO, BRANCH 74, THE
HEIRS OF ALFONSO SANDOVAL AND HIS WIFE ROSA RUIZ, REPRESENTED BY THEIR
ATTORNEY-IN-FACT, MRS. IMELDA RIVERA
1. The buyer of the property does not automatically becomes a party to the land registration case after
complying with the requirements of Sec. 22 of P.D 1529.
2. Section 108 of Presidential Decree No. 1529 authorizes a person having interest in a registered
property to ask for the amendment and alteration of a certificate of title or the entry of a new
certificate if "new interests not appearing upon the certificate have arisen or been created," "an
omission or error was made in entering a certificate or any memorandum thereon," or "upon any
other reasonable ground."
Facts:
Alfonso Sandoval and Roman Ozaeta filed an Application for Registration of Title for two
parcels of land situated in Municipality of Antipolo. On May 31, 1966, the then Court of First
Page 105 of 159

Instance of Rizal granted the registration of title and rendered a decision that the applicants were
the true and absolute owners of the subject properties.
On September 23, 1970, prior to the issuance of decrees of registration, Sandoval and
Ozaeta sold the subject properties to Eugenio Lopez. In the Deed of Absolute Sale executed by
Sandoval and Ozaeta, they warranted that they would file a motion to the court in order that the
original certificates of title over the subject properties will be issue in the name of Eugenio Lopez or
his successors-in-interest. Eugenio Lopez entered into possession of the subject properties.
Subsequently, the decrees remained unissued.
On May 23, 1993, a certain Atty. Dimaano filed in court an Entry of Appearance with Motion
for Issuance of Certificate of finality for and behalf of the applicants Sandoval and Ozaeta. The court
granted the issuance of the decrees of registration.
Upon learning this fact, the heirs of Lopez filed a motion to the land registration case, which
prayed for the declaration of nullity to the decrees of registration in the name of Sandoval and
Oreata. They further asked the court to recognized the Deed of Absolute Sale executed in favor of
Eugenio Lopez.
The trial court denied the case filed by the heirs of Lopez stating among others that the
Lopez heirs should have exerted effort in ensuring that the vendors complied with their obligation
to file the necessary motion for the original certificates of title to issue in the name of Eugenio
Lopez. Consequently the Lopez heirs appealed before the Court of Appeals.
In dismissing their appeal, the Court of Appeals stated that although Section 22 of
Presidential Decree No. 1529 mandates that a person purchasing property from an applicant may
move for the decree to be issued in his name directly, he may not ask for any other positive relief
such as the voiding of a decree already registered in another person's name. The motion filed by the
heirs of Lopez was a collateral attack on the titles to the subject properties, which was prohibited
by Section 48 of Presidential Decree No. 1529.
Hence, the heirs of Lopez filed a Petition for Review to the Supreme Court.
Issue:
1. Whether the Heirs of Lopez are properly parties-litigants in the land registration
proceedings
2. Whether the Motion for Declaration of Nullity is proper for purposed of impugning the
questioned decrees and the corresponding original certificates of title
Ruling:
1. No, the heirs of Lopez did not acquire legal standing as parties-litigants in the land registration
proceedings. However, they have undeniably have a stake in the outcome of the pending litigation
over the subject properties.
Under Sec. 22 of P.D 1529, the law does not require that the application for registration be
amended by substituting the "buyer" or the "person to whom the property has been conveyed" for
the applicant. Neither does it require that the "buyer" or the "person to whom the property has
Page 106 of 159

been conveyed" be a party to the case. He may thus be a total stranger to the land registration
proceedings. The only requirements of the law are: (1) that the instrument be presented to the
court by the interested party together with a motion that the same be considered in relation with
the application; and (2) that prior notice be given to the parties to the case.
Nowhere can it be inferred in Section 22 of Presidential Decree No. 1529 that the buyer of
the property automatically becomes a party to the land registration case after complying with the
requirements of the aforesaid provision of law. Nonetheless, the same provision of law authorizes
the land registration court to accord certain reliefs in favor of the person to whom the property has
been conveyed.
2. No, the heirs of Lopez could have resorted to Sec. 108 of P.D 1529 which is a remedy for
amendment and alteration of certificates, in order to correct the palpable mistakes in the
certificates of title.
Plainly, Section 108 of Presidential Decree No. 1529 authorizes a person having interest in a
registered property to ask for the amendment and alteration of a certificate of title or the entry of a
new certificate if "new interests not appearing upon the certificate have arisen or been created,"
"an omission or error was made in entering a certificate or any memorandum thereon," or "upon
any other reasonable ground."
We distinguish this case from jurisprudence which require the filing of a separate civil
action to cause the cancellation or correction of certificates of title where the relief prayed for is not
germane to the land registration proceedings and require litigation in an ordinary civil case.
Here, the present controversy is clearly a continuation of the original land registration
proceedings as it involved a mere incident therein. To recall, the Lopez heirs' Motion which sought
the consideration of the sale of the subject properties to their predecessor-in-interest in the
issuance of the decrees of registration was allowed under Section 22 of Presidential Decree No.
1529 and was timely filed before the decrees of registration were issued. Indeed, the land
registration court was still hearing said motion when the LRA improvidently and irregularly issued
the decrees of registration and corresponding certificates of title containing patent errors on their
face.
HEIRS OF EUGENIO LOPEZ vs. ALFONSO SANDOVAL AND ROMAN OZAETA, JR.
The ministerial duty of the land registration court to issue a writ of possession ceases with
respect to actual possessors of the property under a claim of ownership.
Facts:
Alfonso Sandoval and Roman Ozaeta filed an Application for Registration of Title for two
parcels of land situated in Municipality of Antipolo. On May 31, 1966, the then Court of First
Instance of Rizal granted the registration of title and rendered a decision that the applicants were
the true and absolute owners of the subject properties.
On September 23, 1970, prior to the issuance of decrees of registration, Sandoval and Ozaeta
sold the subject properties to Eugenio Lopez. In the Deed of Absolute Sale executed by Sandoval and
Page 107 of 159

Ozaeta, they warranted that they would file a motion to the court in order that the original
certificates of title over the subject properties will be issue in the name of Eugenio Lopez or his
successors-in-interest. Eugenio Lopez entered into possession of the subject properties.
Subsequently, the decrees remained unissued.
On May 23, 1993, a certain Atty. Dimaano filed in court an Entry of Appearance with Motion for
Issuance of Certificate of finality for and behalf of the applicants Sandoval and Ozaeta. The court
granted the issuance of the decrees of registration.
Upon learning this fact, the heirs of Lopez filed a motion to the land registration case, which
prayed for the declaration of nullity to the decrees of registration in the name of Sandoval and
Oreata. They further asked the court to recognized the Deed of Absolute Sale executed in favor of
Eugenio Lopez.
Meanwhile, while the motion filed by the heirs of Lopez was still pending, a petition for ex
parte issuance of a writ of possession over the subject properties was filed in the name of the heirs
of Alfonso Sandoval. Representing the Sandoval heirs in the suit was Imelda Rivera, who claimed to
be their attorney-in-fact in accordance with a Special Power Attorney. The trial court issued the
writ of possession directing the sheriff to place the Sandoval heirs in possession of the subject
properties.
The Lopez heirs filed an Urgent Motion for Reconsideration and Motion to Lift Writ of
Possession,pointing out that the subject properties were sold to the late Eugenio Lopez on prior to
the issuance of the decrees of registration. Since the questioned titles were the bases for the
issuance of the writ of possession, the Lopez heirs argued that the writ must be recalled. The Lopez
heirs also impugned the SPA granted to Rivera, saying that it was unclear whether the properties
stated therein were the same as the subject properties and that Rivera's authority did not include
the authority to file a case in court.
Issue:
Whether the petition for the issuance of the Writ of Possession is barred by the pendency of the
appeal to declare the certificate of titles null and void
Ruling:
Yes.
A writ of possession may be issued not only against the person who has been defeated in a
registration case, but also against anyone adversely occupying the land or any portion thereof
during the land registration proceedings. The issuance of the decree of registration is part of the
registration proceedings.
However, the Court ruled that the ministerial duty of the land registration court to issue a writ
of possession ceases with respect to actual possessors of the property under a claim of ownership.
This is in accordance with the provisions of Article 433 of the Civil Code, which states that actual
possession under claim of ownership raises a disputable presumption of ownership. The true
owner must resort to judicial process for the recovery of the property.
Page 108 of 159

Thus, one who claims to be the owner of a property that is possessed by another must bring
the appropriate judicial action for its physical recovery. The term "judicial process" could mean no
less than an ejectment suit or reinvindicatory action in which the ownership claims of the
contending parties may be properly heard and adjudicated.
In this case, the Lopez heirs are precisely claiming ownership of the subject properties as
successors-in-interest of Eugenio Lopez. They have since manifested before the trial court that
Eugenio Lopez previously bought the subject properties from Hacienda Benito, Inc. and Eugenio
Lopez had been in possession thereof even before the execution of the Deed of Absolute Sale
between him and the applicants Sandoval and Ozaeta.
Even without considering the Deed of Absolute Sale in favor of Eugenio Lopez, the Sandoval
heirs are not entitled to a writ of possession to the subject properties disputed in this case on the
strength of OCT Nos. O-1603 and O-1604 since said titles are also registered in the names of the
spouses Ozaeta. It must be emphasized as well that the Ozaeta spouses affirmed that the subject
properties had been sold to Eugenio Lopez.
ANCESTRAL LANDS
THE BAGUIO REGREENING MOVEMENT, INC, vs. ATTY. BRAIN MASWENG,
Although the NCIP has the authority to issue temporary restraining orders and writs of
injunction, it was not convinced that private respondents were entitled to the relief granted by the
Commission. Proclamation No. 15 does not appear to be a definitive recognition of private
respondents ancestral land claim, as it merely identifies the Molintas and Gumangan families
as claimants of a portion of the Busol Forest Reservation, but does not acknowledge vested rights over
the same. Since it is required before the issuance of a writ of preliminary injunction that claimants
show the existence of a right to be protected, this Court, previously, ultimately granted the petition of
the City Government of Baguio and set aside the writ of preliminary injunction issued therein applying
stare decisis
Facts:
Herein private respondents Elizabeth Mat-an et al. claiming that their parents inherited
from their ancestors several parcels of land in what is now known as the Busol Watershed
Reservation, filed before the NCIP a Petition for Injunction, with an application for a Temporary
Restraining Order (TRO), and thereafter a Writ of Preliminary Injunction seeking to enjoin the
Baguio District Engineers Office, the Office of the City Architect and Parks Superintendent, and
petitioners The Baguio Regreening Movement, Inc. and the Busol Task Force from fencing the Busol
Watershed Reservation.
In their Petition before the NCIP, private respondents claim that they are members of the
Ibaloi and Kankanaey tribes of Baguio City. Their ancestors ownership of the properties now
known as the Busol Watershed Reservation was allegedly expressly recognized in Proclamation No.
15 issued by Governor General Leonard Wood. As owners of said properties, their ancestors paid
the realty taxes thereon. The fencing project of petitioners would allegedly impede their access to
and from their residences, farmlands and water sources, and dispossess them of their yard where
tribal rituals and ceremonies are usually held.
Page 109 of 159
NCIP Regional Hearing Officer Brain S. Masweng issued a TRO and writ of injunction which
was affirmed by CA since it involves the protection of private respondents rights to their ancestral
domains in accordance with Section 7(b), (c) and (g)7 of the IPRA, the NCIP clearly has jurisdiction
over the dispute pursuant to Section 66.
Issue:
1. Whether or not Baguio City is beyond the ambit of the IPRA
2. Whether or not issuance of TRO and writ of injunction was proper.
Ruling:
1. No, Baguio City is not beyond the ambit of the IPRA.

On petitioners argument that the City of Baguio is exempt from the provisions of the IPRA
and, consequently, the jurisdiction of the NCIP, this Court ruled before that said exemption
cannot ipso facto be deduced from Section 7821 of the IPRA because the law concedes the validity of
prior land rights recognized or acquired through any process before its effectivity.
2. No. issuance of TRO and writ of injunction was not proper.

Sec 3 of Republic Act No. 8975 provides: Section 3. Prohibition on the Issuance of Temporary
Restraining Orders, Preliminary Injunctions and Preliminary Mandatory Injunctions. No court,
except the Supreme Court, shall issue any temporary restraining order, preliminary injunction or
preliminary mandatory injunction against the government, or any of its subdivisions, officials or
any person or entity, whether public or private, acting under the governments direction, to
restrain, prohibit or compel the following acts:
xxx. It is clear from the foregoing provisions that the prohibition covers only judges, and does not
apply to the NCIP or its hearing officers. Accordingly, we cannot nullify the assailed Orders on the
ground of violation of said laws.
Lastly, however, this Court ruled that although the NCIP has the authority to issue
temporary restraining orders and writs of injunction, it was not convinced that private respondents
were entitled to the relief granted by the Commission. Proclamation No. 15 does not appear to be a
definitive recognition of private respondents ancestral land claim, as it merely identifies the
Molintas and Gumangan families as claimants of a portion of the Busol Forest Reservation, but does
not acknowledge vested rights over the same. Since it is required before the issuance of a writ of
preliminary injunction that claimants show the existence of a right to be protected, this Court,
previously, ultimately granted the petition of the City Government of Baguio and set aside the writ
of preliminary injunction issued therein applying stare decisis
Further, even though the principal action in the case at bar is denominated as a petition for
injunction, the relief prayed for and granted by the NCIP partakes of the nature of a preliminary
injunction in the sense that its effectivity would cease the moment the NCIP issues its decision in an
appropriate action. The conclusions of this Court as regards private respondents' ancestral land
claim should therefore be considered provisional, as they are based merely on the allegations in the
complaint or petition and not on evidence adduced in a full-blown proceeding on the merits by the
proper tribunal. Private respondents are therefore not barred from proving their alleged ancestral
Page 110 of 159

domain claim in the appropriate proceeding, despite the denial of the temporary injunctive relief
prayed for.
INNOCENT PURCHASER FOR VALUE
SPOUSES JESUS CHING AND LEE POE TIN vs. SPOUSES ADOLFO AND ARSENIA ENRILE
The law does not require a person dealing with the owner of registered land to go beyond the
certificate of title as he may rely on the notices of the encumbrances on the property annotated on the
certificate of title or absence of any annotation. Here, petitioners adverse claim is annotated at the
back of the title coupled with the fact that they are in possession of the disputed property. To [the
Court], these circumstances should have put respondents on guard and required them to ascertain the
property being offered to them has already been sold to another to prevent injury to prior innocent
buyers. A person who deliberately ignores a significant fact which would create suspicion in an
otherwise reasonable man is not an innocent purchaser for value. It is a well-settled rule that a
purchaser cannot close his eyes to facts which should put a reasonable man upon his guard, and then
claim that he acted in good faith under the belief that there was no defect in the title of the vendor.
Facts:
In September 1985, Spouses Ching purchased from Raymunda La Fuente a 370-square
meter property covered by TCT No. 83618. The vendor delivered to Spouses Ching a duly notarized
Deed of Absolute Sale with the Owners Duplicate Certificate of Title and consequently they took
physical possession of the subject property. Interestingly, the conveyance was not registered in
accordance with Section 51 of P.D. 1529 and instead Spouses Ching executed an Affidavit of
Adverse Claim which was recorded and annotated at the back of the certificate of title.
In August 1988, Spouses Ching received a Notice of Levy on Attachment and Writ of
Execution issued by the RTC of Pasig in favor of Spouses Enrile, which were both recorded on the
back of certificate of title. This prompted Spouses Ching to file a Petition to Remove Cloud on or
Quiet Title to Real Property asserting ownership of the disputed property.
The trial court rendered judgment in favor of Spouses Ching considering their earlier
registration of an adverse claim while the CA reversed this decision ruling that Spouses Enrile have
a preferential right or valid title over the disputed property as Spouses Ching failed to protect their
interests by not registering outright the sale that took place in 1985.
Spouses Ching assails the decision of the CA on the basis of its erroneous interpretation of
Section 70 of P.D. 1529.
Issue:
1. Is an adverse claim automatically cancelled upon the lapse of the 30-day period?
2. Can an attaching creditor acquire a valid title in good faith over a property in spite the
presence of a prior adverse claim?
Ruling:
Page 111 of 159

1. NO, an adverse claim is not automatically cancelled in spite the lapse of the 30-day period.
The CA erred when it ruled that the annotated adverse claim is deemed prescribed by the
mere lapse of thirty (30) days from its registration. In Sajonas vs. CA, this Court held that a notice of
adverse claim remains valid even after the lapse of the 30-day period under Section 70 of P.D. 1529.
In addition, it was also pronounced that sans any petition for its cancellation and the granting
thereof, the notice of adverse claim remains subsisting taking into account the caveat provided
under the said section. In other words, a notice of adverse does not ipso facto lose force and effect
by mere lapse of the 30-day period since it is expressly provided under the pertinent provision that
an action for its cancellation be commenced and heard.
2. NO, an attaching creditor acquires no valid title in cases where there is a prior inscrip-tion
on the certificate of title, which puts him on notice.
The Court has invariably ruled that in case of conflict between a vendee and an attaching
creditor, an attaching creditor, the latter who registers the order of attachment and sale of the
property to him acquires a valid title to the property against the former who had previously bought
the same property but failed to register the deed of sale. This is because registration is the
operative act that binds or affects the land insofar as third persons are concerned. It is upon
registration that there is notice to the whole world. But where a party has knowledge of a prior
existing interest, as here, which is unregistered at the time he acquired a right to the same land, his
knowledge of that prior unregistered interest has the effect of registration as to him. Knowledge of
an unregistered sale is equivalent to registration.
It is beyond dispute that the property in question had already been sold by La Fuente to
Spouses Ching in September 1985. Spouses Ching immediately took possession thereof. When the
notice of levy on attachment, then the writ of execution and certificate of sale were recorded,
Spouses Ching had been in actual, physical, continuous and uninterrupted possession of the
property, which coupled with the inscribed adverse claim, should have placed Spouses Enrile on
guard and caused them to probe further concerning the title of property. Otherwise, they cannot
claim good faith or being innocent encumbrancers.
The law does not require a person dealing with the owner of registered land to go beyond
the certificate of title as he may rely on the notices of the encumbrances on the property annotated
on the certificate of title or absence of any annotation. Here, petitioners adverse claim is annotated
at the back of the title coupled with the fact that they are in possession of the disputed property. To
[the Court], these circumstances should have put respondents on guard and required them to
ascertain the property being offered to them has already been sold to another to prevent injury to
prior innocent buyers. A person who deliberately ignores a significant fact which would create
suspicion in an otherwise reasonable man is not an innocent purchaser for value. It is a well-settled
rule that a purchaser cannot close his eyes to facts which should put a reasonable man upon his
guard, and then claim that he acted in good faith under the belief that there was no defect in the
title of the vendor.
ADORACION ROSALES RUFLOE, ALFREDO RUFLOE and RODRIGO RUFLOE vs. LEONARDA
BURGOS, ANITA BURGOS, ANGELITO BURGOS, AMY BURGOS, ELVIRA DELOS REYES and
JULIAN C. TUBIG
Page 112 of 159

One can sell only what one owns or is authorized to sell, and the buyer can acquire no more
right than what the seller can transfer legally.
A person dealing with registered land has a right to rely on the Torrens certificate of title and
to dispense with the need of inquiring further except when the party has actual knowledge of facts and
circumstances that would impel a reasonably cautious man to make such inquiry or when the
purchaser has knowledge of a defect or the lack of title in his vendor or of sufficient facts to induce a
reasonably prudent man to inquire into the status of the title of the property in litigation.
Facts:
Petitioner Adoracion Rufloe is the wife of Angel Rufloe, now deceased, while co-petitioners
Alfredo and Rodrigo are their children. During the marriage of Adoracion and Angel, they acquired
a 371-square meter parcel of land located at Barangay Bagbagan, Muntinlupa, and covered by a
Transfer Certificate of Title.
Sometime in 1978, respondent Elvira Delos Reyes forged the signatures of Adoracion and
Angel in a Deed of Sale to make it appear that the disputed property was sold to her by the spouses
Rufloe. On the basis of the said deed of sale, Delos Reyes succeeded in obtaining a title in her name.
Thus, the Rufloes filed a complaint for damages against Delos Reyes with the RTC of Pasay City
alleging that the Deed of Sale was falsified as the signatures appearing thereon were forged because
Angel Rufloe died in 1974, which was four (4) years before the alleged sale in favor of Delos Reyes.
They also filed a notice of adverse claim. During the pendency of the civil case, Delos Reyes sold the
subject property to respondent siblings Anita, Angelina, Angelito and Amy (Burgos siblings). A new
title, TCT No. 135860, was then issued in their names. The Burgos siblings, in turn, sold the same
property to their aunt, Leonarda Burgos. However, the sale in favor of Leonarda was not
registered. Thus, no title was issued in her name. The subject property remained in the name of
the Burgos siblings who also continued paying the real estate taxes thereon. Thereafter, the RTC
declared that the Deed of Sale in favor of Delos Reyes was falsified as the signatures of the spouses
Rufloe had been forged. The trial court ruled that Delos Reyes did not acquire ownership over the
subject property. Said decision had become final and executory.
In 1990, the Rufloes filed their complaint for Declaration of Nullity of Contract and
Cancellation of Transfer Certificate of Titles against respondents Leonarda and the Burgos siblings,
and Delos Reyes. In their Answer, Burgos siblings maintained that they bought the property in good
faith after they were shown a genuine copy of the title of the disputed property by Delos Reyes.
The trial court declared that Leonarda and the Burgos siblings were not innocent
purchasers for value and did not have a better right to the property in question than the true and
legal owners, the Rufloes. On appeal, the CA ruled that the Burgos siblings were innocent purchaser
for value.
Issues:
1. Whether the sale of the subject property by Delos Reyes to the Burgos siblings and the
subsequent sale by the siblings to Leonarda were valid and binding;
2. Whether respondents were innocent purchasers in good faith and for value
Ruling:
Page 113 of 159
1. No. The issue concerning the validity of the deed of sale between the Rufloes and Delos Reyes had
already been resolved with finality in the civil case by the RTC which declared that the signatures of
the alleged vendors, Angel and Adoracion Rufloe, had been forged. It is undisputed that the forged
deed of sale was null and void and conveyed no title. It is a well-settled principle that no one can
give what one does not have, nemo dat quod non habet. One can sell only what one owns or is
authorized to sell, and the buyer can acquire no more right than what the seller can transfer
legally. Due to the forged deed of sale, Delos Reyes acquired no right over the subject property
which she could convey to the Burgos siblings. All the transactions subsequent to the falsified sale
between the spouses Rufloe and Delos Reyes are likewise void, including the sale made by the
Burgos siblings to their aunt, Leonarda.
2. No. An innocent purchaser for value is one who buys the property of another without notice that
some other person has a right to or interest in it, and who pays a full and fair price at the time of the
purchase or before receiving any notice of another persons claim. The burden of proving the status
of a purchaser in good faith and for value lies upon one who asserts that status. This onus
probandi cannot be discharged by mere invocation of the ordinary presumption of good faith.
As a general rule, every person dealing with registered land, as in this case, may safely rely
on the correctness of the certificate of title issued therefor and will in no way oblige him to go
beyond the certificate to determine the condition of the property. However, this rule admits of an
unchallenged exception:
a person dealing with registered land has a right to rely on the Torrens certificate of
title and to dispense with the need of inquiring further except when the party has
actual knowledge of facts and circumstances that would impel a reasonably cautious
man to make such inquiry or when the purchaser has knowledge of a defect or the lack
of title in his vendor or of sufficient facts to induce a reasonably prudent man to
inquire into the status of the title of the property in litigation.
The circumstances surrounding this case point to the absolute lack of good faith on the part
of respondents. The evidence shows that the Rufloes caused a notice of adverse claim to be
annotated on the title of Delos Reyes as early as November 5, 1979. The annotation of an adverse
claim is a measure designed to protect the interest of a person over a piece of real property, and
serves as a notice and warning to third parties dealing with said property that someone is claiming
an interest on the same or may have a better right than the registered owner thereof. Despite the
notice of adverse claim, the Burgos siblings still purchased the property in question.Too, at the time
the Burgos siblings bought the subject property, an action for damages, and criminal case for estafa,
filed by the Rufloes against Delos Reyes, were both pending before the RTC of Pasay City. This
circumstance should have alerted the Burgos siblings as to the validity of Delos Reyes title and her
authority and legal right to sell the property.
In the same vein, Leonarda cannot be categorized as a purchaser in good faith. Since it was
the Rufloes who continued to have actual possession of the property, Leonarda should have
investigated the nature of their possession.
Settled is the rule that a buyer of real property that is in the possession of a person other
than the seller must be wary and should investigate the rights of those in possession. Otherwise,
without such inquiry, the buyer can hardly be regarded as a buyer in good faith.
Page 114 of 159
THE HEIRS OF ROMANA SAVES, et al. vs. THE HEIRS OF ESCOLASTICO SAVES, et al.
It is a well-settled doctrine that one who deals with property registered under the Torrens
system need not go beyond the same, but only has to rely on the certificates of title, he is charged with
notice only of such burdens and claims as are annotated on the certificates. But, a buyer of real
property in possession of persons other than the seller must be wary and should investigate the rights
of those in possession, for without such inquiry the buyer can hardly be regarded as a buyer in good
faith and cannot have any right over the property.
A purchaser in good faith is one who buys property without notice that some other person has
a right to or interest in such property and pays its fair price before he has notice of the adverse claims
and interest of another person in the same property.
Laches is defined as the failure to assert a right for an unreasonable and unexplained length of
time, warranting a presumption that the party entitled to assert it has either abandoned or declined to
assert it.
Facts:
Sometime on January 1921, several persons filed their respective claims before the then,
Court of First Instance of the province of Oriental Negros for the titling of the respective lots they
occupy, among them were Severo Chaves and Benedicta Chaves, who filed their claim for Lot No.
382, to be titled in their names, together with Escolastico Saves, Maximo Saves, Romana Saves,
Rafaela Saves, and Januaria Saves.
A Decision was rendered by the court, adjudicating several parcels of land to different
claimants. Decree No. 177831 was issued by the United States of America for the Court of First
Instance of the Province of Negros ordering the registration of Lot No. 382 in the names of
Benedicta Saves, Escolastica Saves, the sons of Romana Saves, deceased, Rafaela Saves, Januaria
Saves, and the sons of Maximo Saves, deceased.
Thereafter, Severo Saves died intestate, leaving his wife, Teresa Ramirez, his four (4)
surviving children, and the heirs of his two children who predeceased him. Adelaida Martinez and
Felicidad Martinez, who were the heirs of Januaria Saves, who predeceased them, sold their 1/6
share in Lot No. 382 to a certain Gaudencia Valencia in a Motion for the Issuance of Transfer
Certificate of Title, filed by Gaudencia Valencia.
A Deed of Sale was executed by the heirs of Romana Saves, namely: Sinforosa Alimayda,
Juan Alimayda, Vicente Alimayda, Felimon Alimayda and Porferia Alimayda; the sole heir of Rafaela
Saves, Pablo Saves Dizon; and the sole heir of Escolastico Saves, Teodoro Saves, their respective 1/6
share in Lot No. 382, or 3/6 of the property, to Gaudencia Valencia.
Benedicta Saves and Marcela Saves, the sole heir of Maximo Saves, sold their respective 1/6
share in Lot No. 382, also to Gaudencia Valencia, or 2/6 of the property. Considering that all the 1/6
share, rights, and participation of each co-owner in Lot No. 382 were already sold to Gaudencia
Valencia, she initiated the titling of the said property under her name in a Motion for Issuance of
Page 115 of 159

Transfer Certificate of Title before the Court of First Instance of Negros Oriental. Subsequently, TCT
No. 148 was issued by the Register of Deeds for Negros Oriental in the name of Gaudencia Valencia.
Sometime in 1961, Gaudencia Valencia sold the entire property to Enriqueta Chavez Abella,
and Transfer Certificate of Title No. 110 was issued in the name of Enriqueta Chavez, who was
married to Charles Abella.
Meleriana Saves, who was then residing in Cebu, wrote her relatives in Negros Oriental, the
herein appellees, asking them to verify from the Register of Deeds information pertaining to Lot
382, as they were among the heirs entitled to said property.
On March 17, 1981, a case for Reconveyance, Partition, and Damages was filed before the
Regional Trial Court of Negros Oriental by plaintiffs-appellees, alleging, inter alia, that Lot No. 382
was fraudulently acquired by Gaudencia Valencia, and that Gaudencia Valencia fictitiously sold the
lot to her grandchild Enriqueta Chaves Abella.
The complaint was amended twice by plaintiffs considering that the original plaintiffs and
defendants were all deceased. The parties failed to arrive to an amicable settlement during the pretrial stage, but have agreed to exclude Lot 386 in the litigation and limited the issues as to the
ownership of lots 382 and 383, thus, trial ensued.
RTC rendered a Decision in favor of the petitioners and declared the Deed of Sale and Deed
of Absolute Sale null and void ab initio; and being derived from a polluted source, whatever
documents Gaudencia Valencia executed in favor of defendant Enriquita Chavez Abella in relation
to Lot No. 382, Dumaguete Cadastre and the issuance of TCT No. 110 covering said lot, suffers the
same legal infirmity that of a total nullity and ordered Enriquita Chavez Abella to convey and
deliver unto the plaintiffs their shares of Lot No. 382, Dumaguete Cadastre in the proportion of
their respective rights and interests thereto which they are entitled to participate and succeed from
the shares of their predecessors-in-interest who are the original registered owners of the aforesaid
lot.
Respondents appealed the RTC Decision to the Court of Appeals (CA) which reversed and
set aside the same in the herein assailed CAs Decision and declared the TCT No. 110 in the name of
Enriqueta Chaves Abella as valid and subsisting. Petitioners filed a Motion for Reconsideration but
this was denied by CA.
Petitioners put into issue the failure of the CA to consider respondent Enriquita ChavesAbella (Abella) a purchaser and registrant in bad faith as she did not investigate closely the basis of
the ownership of Gaudencia Valencia, her grandmother, over Lot No. 382 which a buyer in good
faith should have done under the circumstances and the reasonableness of its declaration that, even
if petitioners are indeed co-owners of Lot No. 382, they are already barred due to the equitable
principle of estoppel by laches in asserting their rights over the same.
Issues:
1. Whether or not Abella is a purchaser and registrant in bad faith.
2. Whether or not petitioners, in the remote possibility that they are co-owners of Lot No. 382,
are barred from asserting their claims over the same because of estoppel by laches.
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Ruling:
1. The instant petition is without merit.
The Court of Appeals reversed the finding of RTC that Abella is a purchaser in bad faith and
ruled that respondent Abella is an innocent purchaser for value and in good faith because the
records reveal that appellant derived her title of Lot No. 382 from the title of Gaudencia Valencia,
who sold the entire property to the former. Appellant relied on the face of Transfer Certificate of
Title No. 148 in the name of Gaudencia Valencia, which was free from any encumbrances or
annotation. We agree with the Court of Appeals ruling in this regard.
It is a well-settled doctrine that one who deals with property registered under the Torrens
system need not go beyond the same, but only has to rely on the certificates of title. He is charged
with notice only of such burdens and claims as are annotated on the certificates.
In the case at bar, TCT No. 110, which represented proof of respondent Abellas ownership
of Lot No. 382, did not contain any encumbrance or annotation that was transferred from its title of
origin - TCT No. 148. It must be recalled that the plaintiffs called Abella as one of their witnesses
during the trial of this case. It is Abellas unrebutted testimony, elicited as a hostile witness for the
plaintiffs, that her predecessor-in-interests (Valencias) title was clean when she (Abella) purchased
the property. To be sure, the burden to prove that Abella had notice of any defect in the title of her
predecessor lies with the plaintiffs. Plaintiffs failed to substantiate their contention. On the
contrary, their own evidence tended to prove that Abella was a purchaser in good faith of the
property.
Likewise, there is no cogent reason or legal compulsion for respondent Abella to inquire
beyond Valencias title over the property at issue since the latter had been in possession of Lot No.
382 prior to the sale. Settled is the rule that a buyer of real property in possession of persons other
than the seller must be wary and should investigate the rights of those in possession, for without
such inquiry the buyer can hardly be regarded as a buyer in good faith and cannot have any right
over the property. As pointed out by the assailed CA Decision, Valencia had been occupying the
property prior to its sale to respondent Abella. Herein petitioners were never in possession of the
property from the very start, nor did they have any idea that they were entitled to the fruits of the
property not until co-petitioner Meleriana Saves wrote her relatives, co-petitioners in this case,
about the possibility of having a claim to the property.
A purchaser in good faith is one who buys property without notice that some other person
has a right to or interest in such property and pays its fair price before he has notice of the adverse
claims and interest of another person in the same property. Clearly, the factual circumstances
surrounding respondent Abellas acquisition of Lot No. 382 makes her an innocent purchaser for
value or a purchaser in good faith.
2. Even if we grant that petitioners are co-owners of the property at issue, it is only fair and
reasonable for this Court to apply the equitable principle of estoppel by laches against them in
order to avoid an injustice to respondent Abella who is the innocent purchaser for value in this
case.
Page 117 of 159

Laches is defined as the failure to assert a right for an unreasonable and unexplained length
of time, warranting a presumption that the party entitled to assert it has either abandoned or
declined to assert it.
In the case at bar, plaintiffs, assuming that they or their predecessors-in-interest had rights
over the land in question, obviously neglected to exercise these rights by failing to assert any
adverse claim over the property or demand any share of its fruits for many years. Not unlike their
predecessors, petitioners never interposed any challenge to Valencias continued possession under
title of ownership over Lot No. 382 ever since the entire property was sold to her in 1947 which led
to the issuance of TCT No. 148 in her name. Likewise, petitioners and their predecessors-in-interest
did not mount any opposition to the sale of Lot No. 382 by Valencia to respondent Abella in 1961
which prompted the issuance of TCT No. 110. It was not only until 1981, or 34 years from Valencias
acquisition of the entire lot and 20 years from the transfer of ownership over the same to
respondent Abella, that petitioners decided to assert their alleged rights over the property in a
proper action in court.
The evidence thus presented by both parties, as found by the Court of Appeals, would lean
towards the conclusion that petitioners inaction for the past so many years belies any present
conviction on their part that they have any existing interest over the property at all.
REMEDIES
GREGORIO ARANETA UNIVERSITY FOUNDATION vs. THE REGIONAL TRIAL COURT OF
KALOOKAN CITY
Since the indefeasibility of a title does not attach to titles secured by fraud and
misrepresentation, it was as if no title at all was ever issued in this case to the petitioner and therefore
this is hardly the occasion to talk of collateral attack against a title.
Facts:
By virtue of a decision by the then CFI of Rizal in Civil Case No. 131 and affirmed by the
Supreme Court, the Gonzales or Maysilo estate in Malabon, Rizal was expropriated by the Republic
of the Philippines, with the understanding that the Government would resell the property to its
occupants.
For failure of the Government and its instrumentality to implement said decision, the
tenants of the estate filed a complaint in Civil Case No. 6376 (now Civil Case No. C-760) to compel
PHHC to sell to the tenants their respective occupied portions of the Gonzales estate.
Thereafter, the then Araneta Institute of Agriculture, now Gregorio Araneta University
Foundation (GAUF) sought to intervene in Civil Case No. 6376 (Civil Case No. C-760) on the ground
that 52 tenants of the property and Araneta Institute of Agriculture entered into an agreement or
Kasunduan whereby the former conveyed to the latter their priority rights to purchase portion of
the estate. On the basis of this Kasunduan, a compromise agreement was submitted in Civil Case No.
C-760 which was duly approved by the court. Included in this compromise agreement are Lots 75
and 54 awarded to Gregorio Bajamonde. Araneta University was able to register in its name Lots 75
and 54.
Page 118 of 159
However, in Civil Cases Nos. 17347 and 17364, both of the then CFI of Rizal, the
compromise agreement was declared null and void for being a forgery, and the partial decision
rendered in accordance therewith was likewise declared null and void and of no force and effect. On
appeal to the CA sustained the nullity of the Kasunduan. Thus, on motion by the heirs of Gregorio
Bajamonde, the lower court in Civil Case No. C-760 issued the order dated August 29, 1986,
declaring that any transfer of Lots 75 and 54 to Araneta Institute of Agriculture or Gregorio Araneta
University Foundation as rescinded and ordering the Register of Deeds to issue a new Transfer
Certificate of Title over lots 75 and 54 in the name of Gregorio Bajamonde or heirs. An order for the
execution of the aforesaid joint order was issued.
GAUF filed with the CA a petition for annulment of the aforementioned Joint Order alleging
that the twin orders were issued by the trial court without jurisdiction as the same constituted a
collateral attack on its certificate of title in violation of Section 48 of Presidential Decree No. 1529
(P.D. 1529), otherwise known as the Property Registration Decree. The CA denied such petition.
Issue:
Whether or not the joint orders constituted a collateral attack on Aranetas title
Ruling:
No. An action or proceeding is deemed an attack on a title when the object of the action is to
nullify the title, and thus challenge the judgment pursuant to which the title was decreed. The
attack is direct when the object of the action is to annul or set aside such judgment, or enjoin its
enforcement. On the other hand, it is indirect or collateral when, in an action or proceeding to
obtain a different relief, an attack on the judgment is nevertheless made as an incident thereof.
Here, while it may be true that Civil Case No. C-760 was originally an action for specific
performance and damages, nonetheless the case cannot constitute a collateral attack on the
petitioner's title which, to begin with, was irregularly and illegally issued. It bears stressing that the
source of GAUF's title was the Compromise Agreement purportedly executed by Gregorio
Bajamonde, et al. on November 28, 1961. This Compromise Agreement was approved by the trial
court in Civil Case No. C-760 in its Partial Decision dated December 23, 1961. As petitioners own
evidence shows, the subject property was conveyed to it in compliance with and in satisfaction of
the said Partial Decision in Civil Case No. C-760 and the writ of execution issued in connection
therewith. The same Compromise Agreement and Partial Decision, however, were declared null and
void in Civil Cases Nos. 17347 and 17364 and likewise effectively invalidated in CA-G.R. No. 45330R. The rule that a title issued under the Torrens System is presumed valid and, hence, is the best
proof of ownership does not apply where the very certificate itself is faulty as to its purported
origin, as in the present case.
With the reality that the presumption of authenticity and regularity enjoyed by the
petitioners title has been overcome and overturned by the aforementioned decisions nullifying the
aforesaid Compromise Agreement from whence the petitioner's title sprung, that title can never be
indefeasible as its issuance was replete with badges of fraud and irregularities that rendered the
same nugatory. Well-settled is the rule that the indefeasibility of a title does not attach to titles
secured by fraud and misrepresentation. In view of these circumstances, it was as if no title at all
Page 119 of 159

was ever issued in this case to the petitioner and therefore this is hardly the occasion to talk of
collateral attack against a title.
We agree with the CA that the trial court in Civil Case No. C-760 had jurisdiction to annul
petitioners title. It must be emphasized that, notwithstanding the original denomination of the said
action as one for specific performance and damages, it was petitioner GAUF no less which sought to
intervene in Civil Case No. C-760 and claimed that it has rights or interests in the subject matter
being litigated therein. GAUF voluntarily submitted in Civil Case No. C-760 the
purported Kasunduan which, in turn, became the basis of the Compromise Agreement and the
Partial Decision dated December 23, 1961. It is undeniable that petitioners TCT No. C-24153 was
issued in enforcement or execution of a partial decision in Civil Case No. C-760. As it were, the
validity of petitioners title was an issue litigated in Civil Case No. C-760 on account of the
presentation therein of the Compromise Agreement which, to stress, was the springboard of
petitioners title. Hence, when that same Compromise Agreement and the Partial Decision in
connection therewith were eventually nullified, the trial court acted very much within its
jurisdiction in ordering the cancellation of petitioner's title in the same Civil Case No. C-760.
SPOUSES MORRIS CARPO and SOCORRO CARPO vs. AYALA LAND, INCORPORATED
The general rule is that in the case of two certificates of title, purporting to include the same
land, the earlier in date prevails. Applying the principle Primus Tempore, Portior Jure (First in Time,
Stronger in Right), it was found that ALIs title was the valid one having been derived from the earlier
OCT.
Facts:
Spouses Morris and Socorro Carpo filed a Complaint for Quieting of Title against Ayala
Corporation, Ayala Property Ventures Corporation (APVC), and the Register of Deeds of Las Pinas.
In their Complaint, the Carpos claimed to be the owners of a 171,209-square meter parcel of
land covered by TCT No. 296463 issued in their names. They further alleged that Ayala Corporation
was claiming to have titles (specifically, TCT Nos. 125945, T-4366, T-4367 and T-4368) over the
property covered by the Carpos title and that Ayala Corporation had made such property its equity
contribution in APVC to be developed into a residential subdivision.
According to the complaint, TCT Nos. 125945, T-4366, T-4367 and T-4368 and their
derivatives are inherently invalid and enforceable for not being the duly issued derivatives of the
Carpos title.
Carpos then filed an Amended Complaint, impleading respondent Ayala Land, Incorporated
(ALI) in lieu of Ayala Corporation after verifying with the Register of Deeds that the title to the
subject property was registered in the name of ALI and not Ayala Corporation.
ALI alleged that APVC no longer exists having been merged with ALI in 1991. ALI pointed
out that the areas covered by TCT Nos. T-4366, T-4367, and T-4368 do not overlap with the Carpos
claimed property and the dispute pertained only to the land covered by the Carpos TCT No. 296463
and TCT No. T-5333 in the name of Las Pinas Ventures, Inc. (LPVI) which was derived from TCT No.
Page 120 of 159

125945 in the name of Ayala Corporation. It appeared that Ayala Corporation contributed the
property to LPVI and LPVI had, in turn, also merged with ALI.
Further, ALI alleged that it is the true owner of the property covered by TCT No. T-5333 as
it traces back its title to OCT No. 242 issued in 1950 while the Carpos title was derived from OCT
No. 8575 issued only in 1970. During the pendency of the case, ALI secured a title in its own name,
TCT No. T-41262, over the property previously covered by TCT No. T-5333.
ALI then filed a Motion for Summary Judgment on the ground that there was allegedly no
genuine issue as to any material fact and the only issue for the court to resolve was a purely legal
onewhich of the two titles should be accorded priority. According to ALI, the parties were relying
on their respective TCTs. The Carpos filed an opposition to the motion for summary judgment,
arguing that there were genuine issues and controversies to be litigated.
The RTC denied ALIs motion for summary judgment. On appeal, it was granted. Both
parties moved for reconsideration of the CA Decision. ALI filed a motion for partial reconsideration,
entreating the CA itself to render the summary judgment in the interest of judicial economy and on
a claim that the sole issue was legal. Both motions were denied. Both parties elevated it to the
Supreme Court in which both petitions were denied.
RTC rendered a Summary Judgment in favor of the Spouses Carpo, declaring TCT No. T5333, TCT No. 125945, TCT No. T-6055, TCT No. 4366, TCT No. 4367 and TCT No. 4368 and their
derivatives as null and void.
According to the trial court, in original land registration cases, it is mandatory that the
application should be accompanied by a survey plan of the property applied for registration, duly
approved by the Director of the Bureau of Lands. A survey plan without the approval of the Director
of the Bureau of Lands has the character of being of dubious origin and it is not therefore worthy of
being accepted as evidence. The property being claimed by t ALI, allegedly registered under OCT
No. 242, is shown to have been surveyed under SWO and not bearing the approval of the Director of
the Bureau of Lands. Any title issued emanating from a survey plan without the approval of the
Director of the Bureau of Lands is tainted with irregularity and therefore void.
Evidently, the SWO survey of the property which defendant ALI claimed to have been
originated from OCT No. 242 had not been approved by the Director of the Bureau of Lands, but
was apparently prepared and approved by the then Land Registration Commissioner and under the
law, the same is void.
The appellate court reversed this ruling, and ruled in favor of ALI.
Issue:
Whose title is superior and must be upheld?
Ruling:
ALIs title was held to be superior to the Carpos title.
Page 121 of 159

The Court noted that the trial court nullified several titles belonging to ALI and considered it
as grievous error since the property being claimed by the Carpos under their TCT No. 296463 had
an area of only 171,309 square meters and the total area of the properties in the titles invalidated
by the trial court was 799,262 square meters.
Testimony of a Geodetic Engineer indicates the overlapping and identical boundaries
between the private respondents TCT No. 296463 and petitioners TCT No. 125945, (formerly TCT
No. T-5333). There was simply no basis for the trial court to invalidate all the ALI titles mentioned
in the complaint.
It would appear the trial court came to the conclusion that OCT No. 242 was issued without
a duly approved survey plan simply because the notation SWO appeared in the technical
description of the said title which was attached to the answer and due to ALIs failure to allege in its
pleadings that the survey plan submitted in support of the issuance of OCT No. 242 was approved
by the Director of the Bureau of Lands.
The Court disagreed with this conclusion, citing the CAs discussion on the matter. It is
admitted that a survey plan is one of the requirements for the issuance of decrees of registration,
but upon the issuance of such decree, it can most certainly be assumed that said requirement was
complied with by ALIs original predecessor-in-interest at the time the latter sought original
registration of the subject property. Moreover, the land registration court must be assumed to have
carefully ascertained the propriety of issuing a decree in favor of ALIs predecessor-in-interest,
under the presumption of regularity in the performance of official functions by public officers.
The court upon which the law has conferred jurisdiction, is deemed to have all the
necessary powers to exercise such jurisdiction, and to have exercised it effectively. This is as it
should be, because once a decree of registration is made under the Torrens system, and the time
has passed within which that decree may be questioned the title is perfect and cannot later on be
questioned. There would be no end to litigation if every litigant could, by repeated actions, compel a
court to review a decree previously issued by another court 45 years ago. The very purpose of the
Torrens system would be destroyed if the same land may be subsequently brought under a second
action for registration, as what the trial court did when it faulted ALIs failure to allege that its
predecessor-in-interest submitted a survey plan approved by the Director of the Bureau of Lands in
the original land registration case.
It is not for ALI to allege in its pleadings, much less prove, that its predecessor-in-interest
complied with the requirements for the original registration of the subject property. A party dealing
with a registered land need not go beyond the Certificate of Title to determine the true owner
thereof so as to guard or protect his or her interest. Hence, ALI was not required to go beyond what
appeared in the transfer certificate of title in the name of its immediate transferor. It may rely
solely, as it did, on the correctness of the certificate of title issued for the subject property and the
law will in no way oblige it to go behind the certificate of title to determine the condition of the
property.
With the filing of the complaint, the Carpos should already have alleged all the bases of their
cause of action, particularly their allegation that ALIs title is null and void.. All that the complaint
alleged is that ALIs titles should be declared void for not being derivatives of the Carpos title.
Implicit in that allegation is that the Carpos were relying solely on the supposed priority of their
own title over ALIs.
Page 122 of 159
In this jurisdiction, it is settled that "the general rule is that in the case of two certificates of
title, purporting to include the same land, the earlier in date prevails. Applying the principle
Primus Tempore, Portior Jure (First in Time, Stronger in Right) in this case, it was found that ALIs
title was the valid title having been derived from the earlier OCT.
Further, Carpos action is barred by prescription and laches. OCT No. 242 had become
incontrovertible after the lapse of one year from the time a decree of registration was issued, any
action for reconveyance that the Carpos could have availed of is also barred. Although the
complaint was for quieting of title, it is in essence an action for reconveyance based on an implied
or constructive trust, considering that the Carpos were alleging in said complaint that there was a
serious mistake, if not fraud, in the issuance of OCT No. 242 in favor of ALIs predecessor-ininterest. It is now well-settled that an action for reconveyance, which is a legal remedy granted to a
landowner whose property has been wrongfully or erroneously registered in anothers name, must
be filed within ten years from the issuance of the title, since such issuance operates as a
constructive notice. Since ALIs title is traced to an OCT issued in 1950, the ten-year prescriptive
period expired in 1960.
Laches is the negligence or omission to assert a right within a reasonable time, warranting a
presumption that the party entitled to assert it either has abandoned it or declined to assert it. It
does not involve mere lapse or passage of time, but is principally an impediment to the assertion or
enforcement of a right, which has become under the circumstances inequitable or unfair to permit.
In the instant case, the Carpos, as well as their predecessor-in-interest, have not shown that they
have taken judicial steps to nullify OCT No. 242, from which ALIs title was derived, for 45 years. To
allow them to do so now, and if successful, would be clearly unjust and inequitable to those who
relied on the validity of said OCT, the innocent purchasers for value.
EMERITA MUOZ vs. ATTY. VICTORIANO R. YABUT, JR. and SAMUEL GO CHAN
An action for declaration of nullity of title and recovery of ownership of real property, or reconveyance, is a real action but it is an action in personam, for it binds a particular individual only
although it concerns the right to a tangible thing. Any judgment therein is binding only upon the
parties properly impleaded. The effect of the said judgment cannot be extended to BPI Family and the
spouses Chan by simply issuing an alias writ of execution against them. No man shall be affected by
any proceeding to which he is a stranger, and strangers to a case are not bound by any judgment
rendered by the court. In the same manner, a writ of execution can be issued only against a party and
not against one who did not have his day in court.
Facts:
The subject property is a house and lot at No. 48 Scout Madrian St., Diliman, Quezon City,
formerly owned by Yee L. Ching. Yee L. Ching is married to Emilia M. Ching (spouses Ching),
Muozs sister. As consideration for the valuable services rendered by Muoz to the spouses
Chings family, Yee L. Ching agreed to have the subject property transferred to Muoz. By virtue of a
Deed of Absolute Sale, seemingly executed by Yee L. Ching in favor of Muoz, the latter acquired a
Transfer Certificate of Title covering the subject property in her name.
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However, in a Deed of Absolute Sale, Muoz purportedly sold the subject property to her
sister, Emilia M. Ching. As a result, TCT No. 186366 was issued in Emilia M. Chings name. Emilia M.
Ching, in a Deed of Absolute Sale, sold the subject property to spouses Go Song and Tan Sio Kien
(spouses Go), hence, TCT No. 258977 was issued in the spouses Gos names.
Muoz registered her adverse claim to the subject property on TCT No. 258977 of the
spouses Go. Muoz filed a complaint for the annulment of the deeds of absolute sale and the
cancellation of TCT No. 258977 in the spouses Go's names, and the restoration and revival of TCT
No. 186306 in Muoz 's name. Muoz caused the annotation of a notice of lis pendens on TCT No.
258977 of the spouses Go.
The spouses Go obtained a loan of P500,000.00 from BPI Family Savings Bank When the
spouses Go defaulted on the payment of their loan, BPI Family foreclosed the mortgage. BPI Family
executed in favor of the spouses Samuel Go Chan and Aida C. Chan (spouses Chan) a Deed of
Absolute Sale. Consequently, TCT No. RT-54376 (370364) in the name of BPI Family was cancelled
and TCT No. 53297 was issued in the spouses Chan's names on January 28, 1991.
On July 19, 1991, RTC-Branch 95 rendered its Decision in Civil Case No. Q-28580 finding
that Muozs signature on the Deed of Absolute Sale dated December 28, 1972 was forged; that
Muoz never sold the subject property to her sister, Emilia M. Ching; and that the spouses Go were
not innocent purchasers for value of the subject property. On appeal, the appellate court not only
affirmed the appealed judgment, but also ordered the spouses Go and their successors-in-interest
and assigns and those acting on their behalf to vacate the subject property.
More than two months later, on September 20, 1993, the RTC-Branch 95 issued a writ of
execution to implement the judgment in Civil Case No. Q-28580. The spouses Chan, filed before the
RTC-Branch 95 on an Urgent Motion to Stop Execution in Civil Case No. Q-28580. The spouses Chan
asserted ownership and possession of the subject property. The spouses Chan further contended
that the final judgment in Civil Case No. Q-28580 could not be executed against them since they
were not parties to the said case.
The RTC-Branch 95 denied the spouses Chans urgent motion to stop the execution. Further,
the RTC-Branch 95 held that TCT No. RT-54376 (370364) of BPI Family and TCT No. 53297 of the
spouses Chan shall be subject to the reservation under Section 7 of Republic Act No. 26. Thus, the
spouses Chan were deemed to have taken the disputed property subject to the final outcome of Civil
Case No. Q-28580. The RTC-Branch 95 issued an Alias Writ of Execution.27 On January 10, 1994,
the writ was enforced, and possession of the subject property was taken from the spouses Chan and
returned to Muoz.
Muoz instituted before the MeTC on February 4, 1994 a Complaint for Forcible Entry with
Prayer for Preliminary Mandatory Injunction30 against Samuel Go Chan and Atty. Yabut. Samuel Go
Chan and Atty. Yabut denied Muozs allegations, insisting that Samuel Go Chan is the valid, lawful,
and true legal owner and possessor of the subject property. Accordingly, the MeTC granted Muozs
prayer for the issuance of a writ of preliminary mandatory injunction, restoring possession of the
subject property to Muoz.
On appeal with the RTC, the RTC-Branch 88 issued a writ of preliminary injunction to enjoin
the implementation of the MeTC Order. Munoz appealed the said decision with the Court of
Appeals, the appellate court sustained the appealed orders of RTC-Branch 88.
Page 124 of 159
Issue:
Whether or not the decision in Civil Case No. Q-28580 may be implemented against Spouses
Go and BPI Family Savings Bank
Ruling:
No, the decision in Civil Case No. Q-28580 cannot be implemented against the Spouses Go
and BPI Family Savings Bank.
Since they were not impleaded as parties and given the opportunity to participate in Civil
Case No. Q-28580, the final judgment in said case cannot bind BPI Family and the spouses Chan. The
effect of the said judgment cannot be extended to BPI Family and the spouses Chan by simply
issuing an alias writ of execution against them. No man shall be affected by any proceeding to which
he is a stranger, and strangers to a case are not bound by any judgment rendered by the court. In
the same manner, a writ of execution can be issued only against a party and not against one who did
not have his day in court. Only real parties in interest in an action are bound by the judgment
therein and by writs of execution issued pursuant thereto.
We further stress that Section 48 of Property Registration Decree, clearly provides that "[a]
certificate of title shall not be subject to collateral attack. It cannot be altered, modified or cancelled
except in a direct proceeding in accordance with law." Herein, several Torrens titles were already
issued after the cancellation of Muozs. Certificates of title had been successively issued to Emilia
M. Ching, spouses Go, BPI Family, and spouses Chan. Civil Case No. Q-28580, in which a final
judgment had already been rendered, specifically challenged the validity of the certificates of title of
Emilia M. Ching and the spouses Go only. To have the present certificate of title of the spouses Chan
cancelled, Muoz must institute another case directly attacking the validity of the same.
Although the RTC-Branch 95 had declared with finality in Civil Case No. Q-28580 that the
titles of Emilia M. Ching and the spouses Go were null and void, there is yet no similar
determination on the titles of BPI Family and the spouses Chan. As we have previously discussed
herein, Muoz cannot have the spouses Chans TCT No. 53297 cancelled by a mere motion for the
issuance of an alias writ of execution in Civil Case No. Q-28580, when the spouses Chan were not
parties to the case. Civil Case No. Q-28580 was a proceeding in personam, and the final judgment
rendered therein declaring null and void the titles to the subject property of Emilia M. Ching and
the spouses Go should bind only the parties thereto. Furthermore, despite the void titles of Emilia
M. Ching and the spouses Go, the derivative titles of BPI Family and the spouses Chan may still be
valid provided that they had acquired the same in good faith and for value.
JOSE FERNANDO, JR., ZOILO FERNANDO, NORMA FERNANDO BANARES, ROSARIO FERNANDO
TANGKENCGO, HEIRS OF TOMAS FERNANDO, represented by ALFREDO V. FERNANDO, HEIRS
OF GUILLERMO FERNANDO, represented by Ronnie H. Fernando, HEIRS OF ILUMINADA
FERNANDO, represented by Benjamin Estrella and HEIRS OF GERMOGENA FERNANDO vs.
LEON ACUNA, HERMOGENES FERNANDO, HEIRS OF SPOUSES ANTONIO FERNANDO AND
FELISA CAMACHO, represented by HERMOGENES FERNANDO
Page 125 of 159

The rights and claims vested by virtue of a decision of the Cadastral Court, adjudicating said
lot to different persons which was never implemented nor executed despite the lapse of more than
thirty years cannot prescribed for failure to fully execute the same. And an action for reconveyance of
registered land based on implied trust prescribes in ten years, the point of reference being the date of
registration of the deed or the date of the issuance of the certificate of title over the property, however,
the ten-year prescriptive period applies only when the person enforcing the trust is not in possession of
the property.
Facts:
A parcel of land covered by Original Certificate of Title No. RO-487 registered in the names
of Jose A. Fernando, married to Lucila Tinio, and Antonia A. Fernando, married to Felipe Galvez, and
located in San Jose, Baliuag, Bulacan. When they died intestate, the property remained undivided.
Petitioners herein namely, Jose Fernando, Jr., Zoilo Fernando, Norma Fernando Banares, Rosario
Fernando Tangkencgo, the heirs of Tomas Fernando, the heirs of Guillermo Fernando, the heirs of
Iluminada Fernando and the heirs of Germogena Fernando are the heirs and successors-in-interest
of the deceased registered owners. However, petitioners failed to agree on the division of the
subject property amongst themselves, even after compulsory conciliation before the Barangay
Lupon.
Petitioners, except for the heirs of Germogena Fernando, filed a Complaint for partition on
April 17, 1997 against the heirs of Germogena Fernando. In the Complaint, plaintiffs alleged, among
others, that they and defendants are common descendants and compulsory heirs of the late spouses
Jose A. Fernando and Lucila Tinio, and the late spouses Antonia A. Fernando and Felipe Galvez. They
further claimed that their predecessors-in-interest died intestate and without instructions as to the
disposition of the property left. In sum, they prayed that the subject property be partitioned into
eight equal parts, corresponding to the hereditary interest of each group of heirs.
In his Complaint in Intervention filed by Leon Acuna averred that in the November 29, 1929
Decision of the Cadastral Court of Baliuag, Bulacan, the portion of the property identified as Lot
1303 was already adjudicated to: (a) Antonio Fernando, married to Felisa Camacho; (b) spouses
Jose Martinez and Gregoria Sison; (c) spouses Ignacio de la Cruz and Salud Wisco; and (d) Jose
Fernando, married to Lucila Tinio, the petitioners predecessor-in-interest.
Acuna averred that the action for partition cannot prosper since the heirs of the original
owners of the subject property, namely Rosario, Jose Jr., Norma, Tomas, Guillermo, Leopoldo,
Hermogena, Illuminada and Zoilo, all surnamed Fernando, and Lucila Tinio, purportedly had
already sold their respective one-tenth (1/10) share each in the subject property to Ruperta Sto.
Domingo Villasenor for the amount of P35,000.00. He added that he was in possession of the
original copy of OCT No. RO-487. In their Manifestation, petitioners affirmed their execution of a
Deed of Sale in favor of Ruperta Sto. Domingo Villasenor in 1978.
A Motion for Intervention was filed by respondent Hermogenes Fernando and on behalf of
the heirs of the late spouses, Antonio A. Fernando and Felisa Camacho. According to him, in the
Decision of the CFI of Bulacan, their predecessors-in-interest had already been adjudged owners of
Lots covered by OCT No. RO-487 and any adverse distribution of the properties would cause
respondents damage and prejudice.
Page 126 of 159

The trial ensued, petitioner Elizabeth Alarcon testified that they are not claiming the entire
property covered by OCT No. RO-487 but only the area referred to as Lot 1303 and Sapang
Bayan. She also admitted that Lot 1302 had already been divided into ten (10) sublots and allocated
to various owners pursuant to the Decision of the CFI of Baliuag, Bulacan and these owners already
have their own titles. Petitioner Norma Fernando testified and she affirmed that plaintiffs were only
claiming Lot 1303 and Sapang Bayan. She also testified that Sapang Bayan was supposedly included
in Lot 1302 and was previously a river until it dried up. Unlike Lot 1302, the rest of the property
was purportedly not distributed.
During the hearing, respondent Hermogenes made an oral offer of his evidence and rested
his case. On the same date, respondent Acuna, in lieu of his testimony, offered for the parties to
simply stipulate on the due execution and authenticity of the Deeds of Sale dated April 6, 1979 and
December 28, 1980, showing the transfer of Lot 1303-D from Salud Wisco to Acuna. When counsel
for plaintiffs and defendants agreed to the stipulation, the trial court admitted Acunas exhibits and
Acuna rested his case.
The trial court found that the November 29, 1929 Decision of the Cadastral Court,
adjudicating said lot to different persons and limiting Jose Fernandos share to Lot 1303-C, was
never implemented nor executed despite the lapse of more than thirty years. The trial court
ordered the reversion of Lot 1303 to the ownership of spouses Jose A. Fernando and Lucila Tinio
and spouses Antonia A. Fernando and Felipe Galvez under OCT No. RO-487 and allowed the
partition of Lot 1303 among petitioners as successors-in-interest of said registered
owners. Excluded from the partition, however, were the portions of the property which petitioners
admitted had been sold or transferred to third persons. As for the ownership of Sapang Bayan, the
parties failed to clearly show whether Sapang Bayan was previously a dry portion of either Lot
1302 or Lot 1303.
Issue:
Whether or not the ownership of Lot 1303 and the Sapang Bayan portion of the piece of
land covered by O.C.T. No. RO-487 should revert to the descendants and heirs of the late spouses
Jose Fernando and Lucila Tinio and Antonia Fernando, married to Felipe Galvez.
Ruling:
No, the ownership cannot be reverted back.
The trial court found that the November 29, 1929 Decision was never fully implemented in
the sense that the persons named therein merely proceeded to occupy the lots assigned to them
without having complied with the other directives of the cadastral court which would have led to
the titling of the properties in their names. Nonetheless, it is undisputed that the persons named in
the said November 29, 1929 Decision and, subsequently, their heirs and assigns have since been in
peaceful and uncontested possession of their respective lots for more than seventy (70) years until
the filing of the suit for partition on April 17, 1997 by petitioners which is the subject matter of this
case. It is noteworthy that petitioners do not dispute that the November 29, 1929 Decision of the
cadastral court already adjudicated the ownership of Lot 1303 to persons other than the registered
owners thereof.
Page 127 of 159

In the more recent case, we similarly held that while jurisprudence is settled on the
imprescriptibility and indefeasibility of a Torrens title, ruled that registered owners may lose their
right to recover possession of property through the equitable principle of laches. In view of
respondents decades long possession and/or ownership of their respective lots by virtue of a court
judgment and the Petitioners inaction and neglect for an unreasonable and unexplained length of
time in pursuing the recovery of the land, assuming they retained any right to recover the same, it is
clear that respondents possession may no longer be disturbed. The right of the registered owners
as well as their successors-in-interest to recover possession of the property is already a stale
demand and, thus, is barred by laches.
The Court of Appeals correctly held that the title of petitioners ascendants wrongfully
included lots belonging to third persons. And that petitioners ascendants held the property
erroneously titled in their names under an implied trust for the benefit of the true owners. The
party thus aggrieved has the right to recover his or their title over the property by way of
reconveyance while the same has not yet passed to an innocent purchaser for value. The essence of
an action for reconveyance is that the certificate of title is respected as incontrovertible. What is
sought is the transfer of the property, in this case, its title, which has been wrongfully or
erroneously registered in another person's name, to its rightful owner or to one with a better right.
We cannot subscribe to petitioners argument that whatever rights or claims respondents
may have under the November 29, 1929 Decision has prescribed for their purported failure to fully
execute the same. An action for reconveyance of registered land based on implied trust prescribes
in ten (10) years, the point of reference being the date of registration of the deed or the date of the
issuance of the certificate of title over the property. However, this Court has ruled that the ten-year
prescriptive period applies only when the person enforcing the trust is not in possession of the
property. If a person claiming to be its owner is in actual possession of the property, the right to
seek reconveyance, which in effect seeks to quiet title to the property, does not prescribe.
As for the issue of the ownership of Sapang Bayan, we find that the Court of Appeals erred
in ruling that the principle of accretion is applicable. We have held that for Accretion to apply the
following requisites must concur: (1) that the deposit be gradual and imperceptible; (2) that it be
made through the effects of the current of the water; and (3) that the land where accretion takes
place is adjacent to the banks of rivers. The character of the Sapang Bayan property was not shown
to be of the nature that is being referred to in the provision which is an accretion known
as alluvion as no evidence had been presented to support this assertion. Even assuming
that Sapang Bayan was a dried-up creek bed, under Article 420 and Article 502 of the Civil Code,
rivers and their natural beds are property of public dominion. In the absence of any provision of
law vesting ownership of the dried-up river bed in some other person, it must continue to belong to
the State. Therefore, on the basis of the law and jurisprudence on the matter, Sapang Bayan cannot
be adjudged to any of the parties in this case.
REPUBLIC OF THE PHILIPPINES vs. CONCEPTION LORENZO, ET AL
As correctly pointed out by petitioner, we had emphasized in Republic v. Holazo that the term
any other document in paragraph (f) refers to reliable documents of the kind described in the
preceding enumerations and that the documents referred to in Section 2(f) may be resorted to only in
the absence of the preceding documents in the list. Therefore, the party praying for the reconstitution
of a title must show that he had, in fact, sought to secure such documents and failed to find them
Page 128 of 159

before presentation of other documents as evidence in substitution is allowed. Thus, we stated in
Holazo that When Rep. Act No. 26, Section 2(f), or 3(f) for that matter, speaks of any other document,
it must refer to similar documents previously enumerated therein or documents ejusdem generis as the
documents earlier referred to. The documents alluded to in Section 3(f) must be resorted to in the
absence of those preceding in order the petitioner for reconstitution fails to show that he had, in fact,
sought to secure such prior documents (except with respect to the owners duplicate copy of the title
which it claims had been, likewise, destroyed) and failed to find them, the presentation of the
succeeding documents as substitutionary evidence is proscribed.
Facts:
The genesis of the present case can be traced back to the filing before the trial court of a
Petition for the reconstitution of Original Certificate of Title (OCT) No. 3980 covering a parcel of
land situated in Isabela.
In seeking the reconstitution of OCT No. 3980, respondents averred before the trial court
that during the lifetime of Pedro Fontanilla and herein respondent Concepcion Lorenzo, husband
and wife, respectively, they acquired a parcel of residential land. They further averred that the OCT
No. 3980 was handed and delivered unto the spouses Pedro Fontanilla and Concepcion Lorenzo
which they have been keeping only to find out thereafter that it was eaten by white ants. They went
further and averred that the original and office file copy of said OCT No. 3980 kept and to be on file
in the Registry of Deeds of Isabela is not now available, utmost same was included burned and lost
beyond recovery when the office was razed by fire sometime in 1976.
During the trial respondents presented a Deed of Sale and the testimony of co-respondent
Evelyn Fontanilla- Gozum was offered in order to prove the abovementioned allegations in the
petition. In her testimony, she declared that she is the daughter of the late Pedro Fontanilla and corespondent Concepcion Lorenzo who, during their marriage, acquired a parcel of land covered and
embraced by OCT No. 3890 from her grandmother Antonia Pascua as evidenced by a Deed of Sale.
She also averred that the owners duplicate of the said Torrens certificate of title was later dis
covered to have been eaten by termites and that the original copy of the said Torrens certificate of
title on file with the Register of Deeds of Isabela was certified to be burned and lost beyond
recovery when the office was razed by fire of unknown origin in1976 as certified to by the Register
of Deeds. Since both the original copy on file and the owners duplicate copy are nonexistent, she
and her co-heirs, who are also co-respondents in this case, instituted the petition for reconstitution
of lost or destroyed Torrens certificate of title.
The trial court granted respondents petition on the basis of the deed of sale, the technical
description and the sketch plans, and to issue another owners duplicate copy of the said
Torrens certificate of title. CA affirmed the trial courts decision.
Republic appealed before the SC. Petitioner Republic of the Philippines, through the Office
of the Solicitor General, appealed the ruling to the Court of Appeals arguing that the trial court
erred in granting respondents petition for reconstitution of Torrens title since they failed to
present substantial proof that the purported original certificate of title was valid and existing at the
time of its alleged loss or destruction, and that they failed to present sufficient basis or source for
reconstitution. It further argues that the alleged loss or destruction of the owners duplicate copy of
OCT No. 3980 has no evidentiary basis and that there is no sufficient basis for the reconstitution of
OCT No. 3980. Petitioner likewise maintains that the findings of fact of the Court of Appeals are not
Page 129 of 159

supported by the evidence on record. Lastly, petitioner insists that, contrary to respondents
assertion, the government of the Republic of the Philippines is not estopped by the mistakes,
negligence or omission of its agents.
Issues:
1. Whether or not the reconstitution of title is proper.
2. Whether or not the Republic is etopped by the acts of its agents.
Ruling:
1. No. The reconstitution of title is not proper.
The petition is impressed with merit.
In the case at bar, the respondents were unable to discharge the burden of proof prescribed
by law and jurisprudence for the reconstitution of lost or destroyed Torrens certificate of title. The
relevant law that governs the reconstitution of a lost or destroyed Torrens certificate of title is
Republic Act No. 26. Section 2 of said statute enumerates the valid sources for judicial
reconstitution of title.
As borne out by the records of this case, respondents were unable to present any of the
documents mentioned in paragraphs (a) to (e) above. Thus, the only documentary evidence the
respondents were able to present as possible sources for the reconstitution of OCT No. 3980 are
those that they believed to fall under the class of any other document described in paragraph (f).
As correctly pointed out by petitioner, we had emphasized in Republic v. Holazo that the
term any other document in paragraph (f) refers to reliable documents of the kind described in
the preceding enumerations and that the documents referred to in Section 2(f) may be resorted to
only in the absence of the preceding documents in the list. Therefore, the party praying for the
reconstitution of a title must show that he had, in fact, sought to secure such documents and failed
to find them before presentation of other documents as evidence in substitution is allowed. Thus,
we stated in Holazo that When Rep. Act No. 26, Section 2(f), or 3(f) for that matter, speaks of any
other document, it must refer to similar documents previously enumerated therein or documents
ejusdem generis as the documents earlier referred to. The documents alluded to in Section 3(f)
must be resorted to in the absence of those preceding in order. If the petitioner for reconstitution
fails to show that he had, in fact, sought to secure such prior documents (except with respect to the
owners duplicate copy of the title which it claims had been, likewise, destroyed) and failed to find
them, the presentation of the succeeding documents as substitutionary evidence is proscribed.
Furthermore, in a more recent case, this Court enumerated what should be shown before an
order for reconstitution can validly issue, namely: (a) that the certificate of title had been lost or
destroyed (b) that the documents presented by petitioner are sufficient and proper to warrant
reconstitution of the lost or destroyed certificate of title (c) that the petitioner is the registered
owner of the property or had an interest therein (d) that the certificate of title was in force at the
time it was lost or destroyed and (e) that the description, area and boundaries of the property are
substantially the same and those contained in the lost or destroyed certificate of title.
Page 130 of 159

Likewise, the deed of sale purportedly between Antonia Pascua, as seller, and Pedro
Fontanilla, as buyer, which involves OCT No. 3980 cannot be relied upon as basis for reconstitution
of Torrens certificate of title. An examination of the deed of sale would reveal that the number of
the OCT allegedly covering the subject parcel of land is clearly indicated, however, the date when
said OCT was issued does not appear in the document. This circumstance is fatal to respondents
cause as we have reiterated in Republic v. El Gobierno de las Islas Filipinas that the absence of any
document, private or official, mentioning the number of the certificate of title and the date when the
certificate of title was issued, does not warrant the granting of a petition for reconstitution. As we
held in Tahanan Development Corp. v. Court of Appeals, the absence of any document, private or
official, mentioning the number of the certificate of title and the date when the certificate of title
was issued, does not warrant the granting of such petition.
2. No. The republic is not estopped.
Neither is the Republic barred from assailing the decision granting the petition for
reconstitution if, on the basis of the law and the evidence on record, such petition has no merit on
the peripheral issue of whether or not the OSG should be faulted for not filing an opposition to
respondents petition for reconstitution before the trial court, we rule that such an apparent
oversight has no bearing on the validity of the appeal which the OSG filed before the Court of
Appeals.
This Court has reiterated time and again that the absence of opposition from government
agencies is of no controlling significance because the State cannot be estopped by the omission,
mistake or error of its officials or agents
NOTE: Registration of patents is Excluded from the 2015 Bar Examinations
REPUBLIC OF THE PHILIPPINES BUREAU OF FOREST DEVELOPMENT vs. VICENTE ROXAS
AND THE REGISTER OF DEEDS OF ORIENTAL MINDORO
G.R. No. 157988, December 11, 2013
PROVIDENT TREE FARMS vs. VICENTE ROXAS AND THE REGISTER OF DEEDS OF ORIENTAL
MINDORO
A certificate of title issued pursuant to a homestead patent becomes indefeasible after one
year, is subject to the proviso that the land covered by said certificate is a disposable public land
within the contemplation of the Public Land Law. In this case, the subject property is part of the
Matchwood Forest Reserve and is inalienable and not subject to disposition. Being contrary to the
Public Land Law, the Homestead Patent and OCT issued in respondents name are void; and the right
of petitioner Republic to seek cancellation of such void patent/title and reversion of the subject
property to the State is imprescriptible.
Facts:
The case is a consolidated Petitions for Review on Certiorari under Rule 45 of the Rules of
Court filed by petitioners Republic of the Philippines, represented by the Bureau of Forest
Page 131 of 159

Development and Provident Tree Farms Inc. (PTFI) against respondents Vicente Roxas and the
Register of Deeds of Oriental Mindoro.
At the crux of the controversy is Lot which is located in San Teodoro, Oriental Mindoro, with
an area of 6.2820 hectares. On February 5, 1941, President Manuel L. Quezon issued Proclamation
No. 678 which converted forest land measuring around 928 hectares situated in San Teodoro,
Oriental Mindoro as Match Forest Reserve placed under the administration and control of the
Bureau of Forestry. The Bureau of Forestry shall have the authority to regulate the use and
occupancy of the reserve, and the cutting, collection and removal of timber and other forest
products therein in accordance with the Forest Law and Regulations.
On May 12, 1965, petitioner Republic, through the Department of Agriculture and Natural
Resources (DANR) entered into a Matchwood Plantation Lease Agreement with PTFI for a period of
25 years.
In the meantime, On December 29, 1959, Roxas filed with the Bureau of Lands a Homestead
Application covering a parcel of land he initially identified as Lot No. 4 SA-22657, located at
Paspasin, San Teodoro, Oriental Mindoro. The OIC, for and by the authority of the Director of Lands
approved Roxass homestead application. Following the letter issued by the Assistant District
Forester of the Bureau of Forestry, DANR informing the District Land Officer of Calapan, Oriental
Mindoro that the land is no longer within the administrative jurisdiction of the Bureau of Forestry
and has been verified to be within alienable and disposable land, the Director of Lands issued
Homestead Patent No. 111598 to Roxas. Subsequently, OCT No. P-58885 was issued by the ROD in
Roxass name.
On May 2, 1978, petitioner Republic, represented by the BFD, filed with the RTC a complaint
for cancellation of the title and/or reversion against Roxas and ROD over the subject property.
Petitioner Republic alleged that the subject property was within the Matchwood Forest Reserve
and could not be the subject of private appropriation and ownership; and possession of said
property, no matter how long would not convert the same into private property. Petitioner also
averred that Roxas acquired the OCT through fraud and misrepresentation since the latter was
disqualified from acquiring the same under the provisions of the Public Land Act, not having
exercised the acts of possession in the manner and length of time required by law.
On the other hand, Roxas denied that the subject property was within the Matchwood
Forest Reserve. He presented Assistant District Forester Dacanays letter dated July 12, 1965 to the
District Land Officer of Calapan, Oriental Mindoro, verifying that Lot No. 1, GSS-569, was alienable
and disposable, the Blue Print Plan of Land Group Settlement Survey and the Order dated July 19,
1965 of the Director of Lands approving Roxass application for patent. He maintained that the OCT
had been legally and validly issued to him and that he had been in actual, open and continuous
possession of the subject property in the concept of an owner.
In order to determine whether or not the subject property was within the Matchwood
Forest Reserve, the RTC created a committee to conduct a relocation survey. The committee found
that subject property was located inside the Matchwood Forest Reserve and recommended for the
annulment of the OCT issued to Roxas covering the same property.
Despite the committees findings, RTC ruled in favor of Roxas and declared that petitioner
PTFI had no right over the subject property since the latters lease agreement with the Republic had
Page 132 of 159

already expired on June 30, 1990. It also held that mere preponderance of evidence showed that the
subject property was outside the forest reserve and part of the alienable and disposable lands of the
public domain. The Court of Appeals sustained the appreciation of evidence by the RTC, hence the
instant petition.
Issues:
1. Is the subject property part of the public domain, thus inalienable and not subject to disposition?
2. Did Roxas commit fraud in his homestead application over the subject property? In the absence
of fraud or misrepresentation, can the title over the property be cancelled and the property
reverted back to the State?
3. Is the government barred by prescription and estoppel from seeking the cancellation of Roxass
title and reversion of the property?
Ruling:
1. Yes, the subject property is within the Matchwood Forest reserve, thus inalienable and not
subject to disposition.
Under the Regalian doctrine, which is embodied in Article XII, Section 2 of our Constitution,
all lands of the public domain belong to the State, which is the source of any asserted right to any
ownership of land. All lands not appearing to be clearly within private ownership are presumed to
belong to the State. By virtue of Presidential Decree No. 705 (Revised Forestry Code), the President
delegated to the DENR Secretary the power to determine which of the unclassified lands of the
public domain are (1) needed for forest purposes and declare them as permanent forest to form
part of the forest reserves; and (2) not needed for forest purposes and declare them as alienable
and disposable lands. Pursuant to the requirements laid down under Title II, Chapter IV of the
Public Land Act, only alienable and disposable agricultural lands of the public domain can be
acquired by homestead.
In the case at bar, the subject property is not alienable and disposable agricultural land to
begin with. In order to prove that the land subject of an application for registration is alienable, an
applicant must establish the existence of a positive act of the Government such as a presidential
proclamation or an executive order, an administrative action, investigation reports of Bureau of
Lands investigators, and a legislative act or statute.
The applicant for land registration must prove that the DENR Secretary had approved the
land classification and released the land of the public domain as alienable and disposable, and that
the land subject of the application for registration falls within the approved area per verification
through survey by the PENRO or CENRO. In addition, the applicant for land registration must
present a copy of the original classification approved by the DENR Secretary and certified as a true
copy by the legal custodian of the official records.
Assistant District Forester Dacanays Letter dated July 12, 1965 is a mere correspondence; it
is not even a certification. Coupled with the fact that Assistant District Forester Dacanay did not
personally testify before the RTC as to the truth of the contents of his Letter dated July 12, 1965,
said letter carries little evidentiary weight. In stark contrast, more than just the presumption under
the Regalian doctrine, there is actually Presidential Proclamation No. 678 dated February 5, 1941,
Page 133 of 159

declaring around 928 hectares of forest land as Matchwood Forest Reserve, which had been
withdrawn from entry, sale, or settlement.
In sum, the subject property is within the Matchwood Forest Reserve and, therefore,
inalienable and not subject to disposition. Respondent Roxas could not have validly acquired a
homestead patent and certificate of title for the same.
2. No, the Court found no evidence indicating that Roxas committed fraud when he applied for
homestead patent over the subject property. Although there is no evidence of fraud, there is still
reason to cancel OCT No. P-5885 and revert the subject property to the State.
Reversion is an action where the ultimate relief sought is to revert the land back to the
government under the Regalian doctrine. It bears to point out, though, that the Court also allowed
the resort by the Government to actions for reversion to cancel titles that were void for reasons
other than fraud, i.e., violation by the grantee of a patent of the conditions imposed by law; and lack
of jurisdiction of the Director of Lands to grant a patent covering inalienable forest land or portion
of a river, even when such grant was made through mere oversight.
In the case at bar, a mistake or oversight was committed on the part of respondent Roxas, as
well as the Government, resulting in the grant of a homestead patent over inalienable forest land.
Since subject property was unlawfully covered by a homestead patent and OCT in respondent
Roxass name, petitioner Republic is entitled to cancellation of said patent and certificate of title and
the reversion of the subject property to the public domain.
3. No, the government is not barred by prescription and estoppel from seeking the cancellation of
Roxass title and reversion of the subject property to the public domain.
While it is true that once a Homestead Patent is granted in accordance with Public Land Act
and after the expiration of one (1) year period from the issuance of the decree it becomes
indefeasible, the same is subject to the provision that the land covered by said certificate is a
disposable public land within the contemplation of the Public Land Law.
In the case at bar, since subject property is part of Matchwood Forest Reserve and is
inalienable, the homestead patent and certificate of title issued to Roxas are void and the right of
the government to seek cancellation of such void patent/title and reversion of the subject property
to the State is imprescriptible.
Neither can Roxas successfully invoke the doctrine of estoppel against petitioner Republic
since the Government is not estopped from questioning the validity of said homestead patent and
certificate of title. It is, after all, hornbook law that the principle of estoppel does not operate
against the Government for the acts of its agents.
PRESCRIPTION
HEIRS OF DOMINGO VALIENTES vs. HON. REINERIO (ABRAHAM) B. RAMAS,
Acting Presiding Judge, RTC, Branch 29, 9 th Judicial Region,
San Miguel, Zamboanga del Sur and VILMA V. MINOR
When the plaintiff in such action is not in possession of the subject property, the action
prescribes in ten years from the date of registration of the deed or the date of the issuance of the
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certificate of title over the property. When the plaintiff is in possession of the subject property, the
action, being in effect that of quieting of title to the property, does not prescribe.
Facts:
Petitioners claim that they are the heirs of Domingo Valientes who, before his death, was the
owner of a parcel of land in Gabay, Margosatubig, Zamboanga del Sur then covered by Original
Certificate of Title (OCT) No. P-18,208 of the Register of Deeds of Zamboanga del Sur. In 1939,
Domingo Valientes mortgaged the subject property to secure his loan to the spouses Leon Belen and
Brigida Sescon (spouses Belen). In the 1950s, the Valientes family purportedly attempted, but
failed, to retrieve the subject property from the spouses Belen. Through an allegedly forged
document captioned VENTA DEFINITIVA purporting to be a deed of sale of the subject property
between Domingo Valientes and the spouses Belen, the latter obtained Transfer Certificate of Title
(TCT) No. T-5,427 in their name. On February 28, 1970, Maria Valientes Bucoy and Vicente
Valientes, legitimate children of the late Domingo Valientes, had their Affidavit of Adverse
Claim duly entered in the Memorandum of Encumbrances at the back of TCT No. T-5,427. Upon the
death of the spouses Belen, their surviving heirs Brigida Sescon Belen and Maria Lina Belen
executed an extra-judicial settlement with partition and sale in favor of private respondent Vilma
Valencia-Minor, the present possessor of the subject property.
On June 20, 1979, Minor filed with the then Court of First Instance of Pagadian City a
PETITION FOR CANCELLATION OF MEMORANDUM OF ENCUMBRANCE APPEARING IN TCT NO. T5,427 OF THE REGISTRY OF DEEDS OF ZAMBOANGA DEL SUR, which was docketed as SPL Case No.
1861. On July 31, 2000, the Regional Trial Court (RTC) granted Minors prayer to allow the Register
of Deeds to have the title to the subject property transferred to her name.
In the meantime, on August 20, 1998, petitioners filed a Complaint before the RTC of San
Miguel, Zamboanga del Sur for the CANCELLATION OF TRANSFER CERTIFICATE OF TITLE NO. T5,427, RECONVEYANCE, WITH ACCOUNTING, RECEIVERSHIP AND APPLICATION FOR A WRIT OF
PRELIMINARY PROHIBITORY INJUNCTION PLUS DAMAGES. The Complaint was docketed as Civil
Case No. 98-021.
Minor filed an Omnibus Motion to Dismiss Civil Case No. 98-021 on the grounds of forum
shopping and litis pendentia. On August 3, 2000, the RTC issued an order in open court ruling that
forum shopping does not apply. On September 22, 2000, Minor filed a Motion for
Reconsideration of the August 3, 2000 Order. On May 7, 2001, the RTC issued an Order granting the
Motion for Reconsideration by dismissing Civil Case No. 98-021 on the ground of forum
shopping. Petitioners filed a Motion for Reconsideration on May 30, 2001, but the same was denied
by the RTC in its Order dated September 18, 2001.
On November 12, 2001, petitioners filed with the Court of Appeals a Petition
for Certiorari assailing the RTC Orders dated May 7, 2001 and September 18, 2001. Petitioners
raised the sole issue of whether the trial court was correct in finding that Civil Case No. 98-021
constitutes forum shopping, litis pendentia or res judicata with SPL Case No. 186. The Petition was
docketed as CA-G.R. SP No. 68501.
The Court of Appeals rendered its assailed Decision on said petition on August 16,
2002. Despite agreeing with petitioners that there was no forum shopping, litis pendentia or res
judicata in the filing of Civil Case No. 98-021, the Court of Appeals, asserting that it has the
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discretion to review matters not otherwise assigned as errors on appeal if it finds that their
consideration is necessary at arriving at a complete and just resolution of the case, held that Civil
Case No. 98-021 cannot prosper on the grounds of prescription and laches.
Hence, this Petition for Certiorari.
Issue:
021.
Whether or not prescription or laches has already set in to bar the filing of Civil Case No. 98-
Ruling:
Civil Case No. 98-021 was filed more than 28 years from the issuance of TCT No. T5,427. This period is unreasonably long for a party seeking to enforce its right to file the
appropriate case. Thus, petitioners claim that they had not slept on their rights is patently
unconvincing.
Petitioners claim that although the complaint was captioned for CANCELLATION OF
TRANSFER CERTIFICATE OF TITLE NO. T-5,427, RECONVEYANCE, WITH ACCOUNTING,
RECEIVERSHIP, AND APPLICATION FOR A WRIT OF PRELIMINARY PROHIBITORY INJUNCTION
PLUS DAMAGES, the complaint is substantially in the nature of an action to quiet title which
allegedly does not prescribe. Petitioners also allege that the cases cited by the Court of Appeals in
ruling that prescription has set in, particularly that of Declaro v. Court of Appeals, which in turn
cites Tenio-Obsequio v. Court of Appeals, are inapplicable to the case at bar since neither fraud nor
forgery was attendant in said cases.
As regards petitioners claim that the complaint in Civil Case No. 98-021 is really one of
quieting of title which does not prescribe, it appears that petitioners are referring to the doctrine
laid down in the often-cited case of Heirs of Jose Olviga v. Court of Appeals.
The cause of action of petitioners in Civil Case No. 98-021, wherein they claim that Minors
predecessor-in-interest acquired the subject property by forgery, can indeed be considered as that
of enforcing an implied trust.
However, the Court made a clear distinction in Olviga: when the plaintiff in such action is
not in possession of the subject property, the action prescribes in ten years from the date of
registration of the deed or the date of the issuance of the certificate of title over the property. When
the plaintiff is in possession of the subject property, the action, being in effect that of quieting of
title to the property, does not prescribe. In the case at bar, petitioners (who are the plaintiffs in Civil
Case No. 98-021) are not in possession of the subject property. Civil Case No. 98-021, if it were to be
considered as that of enforcing an implied trust, should have therefore been filed within ten years
from the issuance of TCT No. T-5,427 on December 22, 1969. Civil Case No. 98-021 was, however,
filed on August 20, 1998, which was way beyond the prescriptive period.
PUBLIC LAND ACT
BARCELIZA P. CAPISTRANO vs. DARRYL LIMCUANDO and FE S. SUMIRAN
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The ultimate objective of the law is "to promote public policy, that is, to provide home and
decent living for destitutes, aimed at providing a class of independent small landholders which is the
bulwark of peace and order.
Facts:
Petitioner Barceliza Capistrano owned a parcel of land located at Barangay Talaga, Rizal,
Laguna, covered by Original Certificate of Title pursuant to a Free Patent issued on August 23, 1977.
She sold this parcel of land with a right of repurchase in favor of spouses Felimon Zuasola and Anita
Subida on December 31, 1985.
On February 1, 1989, petitioner sold half of the same parcel of land to respondents Darryl
Limcuando and Fe Sumiran for the price of P75,000.00 on the understanding that respondents shall
pay the amount of P10,000.00 as partial payment and the balance to be paid by monthly
installments. Petitioner Capistrano received the partial payment of P10,000.00 but signed a deed of
absolute sale. Subsequently, respondents defaulted on their monthly instalments despite repeated
demands. Respondents learned afterwards that the disputed land had been previously sold by
petitioner Capistrano to the spouses Zuasola and Subida which led respondents to file a criminal
complaint for estafa against petitioner. Petitioner was eventually convicted.
On August 19, 1991, petitioner repurchased the parcel of land from the spouses Zuasola and
Subida. She also offered to repurchase from respondents the portion of the disputed land which she
sold to them but the latter refused. A Transfer Certificate of Title over the disputed land was issued
in the names of respondents.
Petitioner Capistrano filed a complaint for the annulment of the subject deed of sale alleging
that the sale was a nullity from the beginning. As an alternative cause of action, petitioner
Capistrano sought to repurchase the disputed land from respondents based on Section 119 of CA
No. 141 (Public Land Act). The RTC sustained the validity of the subject deed of sale and denied the
right of the petitioner to repurchase the disputed land from the respondents. CA affirmed.
Issue:
Whether or not Petitioner Capistrano should be allowed to repurchase the land from
respondent
Ruling:
No. It is true that Section 118 of the Public Land Act pertains to the prohibition of the sale or
encumbrance of a land acquired through free patent and homestead provision within a period of
five years from the date of the issuance of the patent or grant. On the other hand, Section 119 of the
said law subjects said lands alienation, impliedly after the expiration of the prohibitive period,
upon a right of repurchase by the homesteader, his widow, or heirs, within a period of five years
from the date of its conveyance. Indeed, these provisions complement the intent and purpose of the
law "to preserve and keep in the family of the homesteader that portion of public land which the
State had gratuitously given to him."
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However, it is important to stress that the ultimate objective of the law is "to promote
public policy, that is, to provide home and decent living for destitutes, aimed at providing a class of
independent small landholders which is the bulwark of peace and order." Our prevailing
jurisprudence requires that the motive of the patentee, his widow, or legal heirs in the exercise of
their right to repurchase a land acquired through patent or grant must be consistent with the noble
intent of the Public Land Act. We held in a number of cases that the right to repurchase of a
patentee should fail if his underlying cause is contrary to everything that the Public Land Act stands
for.
To ensure the attainment of said objectives, the law gives the patentee, his widow or his
legal heirs the right to repurchase the property within five years from date of the sale. However, the
patentee, his widow or legal heirs should not be allowed to take advantage of the salutary policy of
the law to enable them to recover the land only to dispose of it again to amass a hefty profit to
themselves. The Court cannot sustain such a transaction which would put a premium on
speculation which is contrary to the philosophy behind Section 119 of Act 141, as amended.
Analogous to the rationale in the foregoing cited cases, we cannot sustain the right to
repurchase of a patentee when such repurchase would reward rather than sanction an act of
injustice committed by her in her fraudulent dealings with land that she acquired from the
government under the Public Land Act. We uphold the CAs finding that petitioner is guilty of bad
faith and that she only made efforts to repurchase the property from the first buyers after an
information for estafa had been filed against her by the second buyers. To be sure, petitioner only
made an effort to enforce her right to repurchase from the second buyers (by filing the complaint
subject of the present petition) during the pendency of the said criminal action for estafa. Indeed,
petitioners successive conveyances of the disputed land for valuable consideration to different
vendees clearly indicate the profit-making motive of petitioner and her lack of intention to preserve
the land for herself and her family. This Court cannot countenance such a betrayal of the ultimate
objective of the law.
RODOLFO MORLA vs. CORAZON NISPEROS BELMONTE, et al.
Nowhere in Commonwealth Act No. 141 does it say that the right to repurchase under Section
119 thereof could not be extended by mutual agreement of the parties involved. Neither would
extending the period in Section 119 be against public policy as the evident purpose of the Public Land
Act, especially the provisions thereof in relation to homesteads, is to conserve ownership of lands
acquired as homesteads in the homesteader or his heirs.
Facts:
Spouses Alfredo Nisperos and Esperanza Urbano (the Nisperos spouses) were the original
homesteaders of an 80,873-square meter tract of public land. Later, the Nisperos spouses executed
a Partial Deed of Absolute Sale, wherein they sold a portion of Lot No. 4353 with an area of 50,000
square meters (subject land) to the brothers Ramon and Rodolfo Morla (the Morla brothers).
The Morla brothers acknowledged and confirmed in writing (the 1988 contract) that they
had bought from the Nisperos spouses the subject land, and that they had agreed to give the
Nisperos spouses a period of ten (10) years within which to repurchase the subject land.
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On June 27, 1994, the Nisperos spouses filed a Complaint for Repurchase and/or Recovery
of Ownership Plus Damages against the Morla brothers. They alleged that the deed of sale was
registered by the Morla brothers only when they had signified their intention to repurchase their
property. Thus, Transfer Certificate of Title (TCT) No. 225544 for the subject land was issued in
favor of the Morla brothers, and TCT No. 225545, for the remaining 30,870 square meters of Lot No.
4353, to the Nisperos spouses.
In response, the Morla brothers claimed that the Nisperos spouses had no cause of action, as
the repurchase of the subject land was improper for being outside the five-year period provided
under Section 119 of Commonwealth Act No. 141.
At the pre-trial conference held on June 19, 1995, the parties settled that the only issue to
be resolved by the RTC was whether the 1988 contract executed by the parties, wherein it was
stipulated that the Nisperos spouses may repurchase the land sold to the Morla brothers within a
period of ten (10) years, was valid or not.
The RTC proclaimed that what was prohibited was the shortening of the five-year
redemption period under Section 119 of Commonwealth Act No. 141, and not its prolongation.
On March 9, 2005, the Court of Appeals affirmed the RTCs decision. It upheld the validity of
the 1988 contract and concurred with the RTCs rationale that the arrangement to prolong the
period for redemption of the subject land was not prohibited by law as it was in line with the intent
of Section 119 to give the homesteader or patentee every chance to preserve for himself and his
family the land that the State had gratuitously given to him as a reward for his labor in cleaning and
cultivating it.
Issue:
May parties to a deed of sale of a land covered by a homestead patent extend or prolong the
5-year period of repurchase under Section 119 of Act 141, under a private writing subsequently
executed by them?
Ruling:
Yes, nowhere in Commonwealth Act No. 141 does it say that the right to repurchase under
Section 119 thereof could not be extended by mutual agreement of the parties involved.
Since the subject land was acquired by the Nisperos spouses pursuant to a homestead
patent, the applicable law is Commonwealth Act No. 141, or the Public Land Act. Section 119
thereof specifically speaks about repurchases of a homestead or free patent land:
Sec. 119. Every conveyance of land acquired under the free patent or homestead provisions,
when proper, shall be subject to repurchase by the applicant, his widow, or legal heirs, within a period
of five years from the date of the conveyance.
Rodolfo Morla does not dispute the existence or validity of the 1988 contract. He simply
argues that the 10-year repurchase period he and his brother Ramon Morla had agreed to grant the
Nisperos spouses, as evidenced by the 1988 contract, was contrary to law and jurisprudence.
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We are in full accord with the clear findings and apt ruling of the lower courts.
Nowhere in Commonwealth Act No. 141 does it say that the right to repurchase under
Section 119 thereof could not be extended by mutual agreement of the parties involved. Neither
would extending the period in Section 119 be against public policy as the evident purpose of the
Public Land Act, especially the provisions thereof in relation to homesteads, is to conserve
ownership of lands acquired as homesteads in the homesteader or his heirs.
What cannot be bartered away is the homesteaders right to repurchase the homestead
within five years from its conveyance, as this is what public policy by law seeks to preserve. This, in
our opinion, is the only logical meaning to be given to the law, which must be liberally construed in
order to carry out its purpose.
Morla does not dispute that the 1988 contract was executed freely and willingly between
him and his late brother, and the Nisperos spouses. The freedom of contract is both a constitutional
and statutory right, and the contracting parties may establish such stipulations, clauses, terms and
conditions as they may deem convenient, provided they are not contrary to law, morals, good
customs, public order, or public policy.
The 1988 contract neither shortens the period provided under Section 119 nor does away
with it. Instead, it gives the Nisperos spouses more time to reacquire the land that the State
gratuitously gave them. The 1988 contract therefore is not contrary to law; instead it is merely in
keeping with the purpose of the homestead law. Since the 1988 contract is valid, it should be given
full force and effect.
In Roxas v. De Zuzuarregui, Jr., we held: It is basic that a contract is the law between the
parties. Obligations arising from contracts have the force of law between the contracting parties
and should be complied with in good faith. Unless the stipulations in a contract are contrary to law,
morals, good customs, public order or public policy, the same are binding as between the parties.
Morla, who freely signed the 1988 contract, cannot now be allowed to renege on his
obligation under it, simply because he changed his mind. Article 1308 of the Civil Code provides:
The contract must bind both contracting parties; its validity or compliance cannot be left to
the will of one of them.
Morla is thus bound by the terms of the 1988 Contract, and must comply with it in good
faith. Since the right to repurchase was exercised by the Nisperos spouses before the expiration of
the time given to them by the Morla brothers, the lower courts correctly ruled in their favor.
ALEJANDRO BINAYUG AND ANA BINAYUG vs. EUGENIO UGADDAN, et al.
In the present case, it is settled that Homestead Patent was issued to Gerardo on January 12,
1951 and the Absolute Deed of Sale between Gerardo and Juan was executed on July 10, 1951, after a
lapse of only six months. Irrefragably, the alienation of the subject properties took place within the
five-year prohibitory period under Section 118 of the Public Land Act, as amended as such, the sale by
Gerardo to Juan is null and void right from the very start. As a void contract, the Absolute Deed of Sale
dated July 10, 1951 produces no legal effect whatsoever in accordance with the principle quod nullum
est nullum producit effectum, thus, it could not have transferred title to the subject properties from
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Gerardo to Juan and there could be no basis for the issuance of TCT in Juans name. A void contract is
also not susceptible of ratification, and the action for the declaration of the absolute nullity of such a
contract is imprescriptible. To reiterate, Section 118 of the Public Land Act, as amended, reads that,
except in favor of the Government or any of its branches, units, or institutions, or legally constituted
banking corporations, lands acquired under free patent or homestead provisions shall not be subject
to encumbrance or alienation from the date of the approval of the application and for a term of five
years from and after the date of issuance of the patent or grant. The provisions of law are clear and
explicit. A contract which purports to alienate, transfer, convey, or encumber an homestead within the
prohibitory period of five years from the date of the issuance of the patent is void from its execution. In
a number of cases, this Court has held that such provision is mandatory.
Facts:
The crux of this controversy are two parcels of land located in Cagayan (subject properties)
covered by Original Certificate of Title (OCT) No. P-311 issued by the Registry of Deeds of Cagayan
in the name of Gerardo Ugaddan (Gerardo). Gerardo acquired title over the subject properties
through the grant of Homestead Patent in his favor on January 12, 1951. Said patent was registered
and OCT No. P-311 was issued in Gerardos name on March 5, 1951.
Upon Gerardos death, respondents discovered that OCT No. P-311 had been cancelled. The
records of the Registry of Deeds show that Gerardo, with the consent of his wife Basilia, sold the
subject properties on July 10, 1951 to Juan Binayug (Juan), the father of herein petitioner Alejandro.
As a result of the sale, OCT No. P-311 in Gerardos name was cancelled and Transfer Certificate of
Title in Juans name was issued. Juan was the father of petitioner Alejandro Binayug (Alejandro)
and the subject properties passed on to him and his wife Ana Ugaddan Binayug (Ana) upon Juans
death.
After conducting their own investigation, respondents filed a complaint for declaration of
nullity of title, annulment of instrument, and declaration of ownership with damages against
spouses Alejandro and Ana.
Eugenio Uggadon, et al argued that OCT No. P311 having been issued pursuant to a
homestead patent cannot be alienated, transferred or conveyed after five (5) years and before
Twenty-five (25) years next following the issuance thereof in the year 1951, without the approval
of the Secretary of Agriculture and Natural Resources.
RTC rendered its decision in favor of Uggadon, et al. The RTC pronounced that it did
not necessarily follow that the Absolute Deed of Sale dated July 10, 1951 was valid or legal. In fact,
the RTC expressly declared that said deed suffered from legal infirmities.
Furthermore, RTC declared that the Absolute Deed of Sale dated July 10, 1951 as null and
void quoting Sec. 118 of the of the Public Land Law, amended by Commonwealth Act No. 456, a
homestead patent cannot be alienated or encumbered within five (5) years from the approval of
application except in favor of the government or any of its branches or institutions. Where a
homestead was sold during the prohibited period, even if the sale is approved by the Director of
Lands subsequently after five (5) years, the approval will not give it any valid curative effect. Such
sale is illegal, inexistent, and null and void ab initio. The action to declare the existence of such
contract will not prescribe. As a matter of fact, the vendor never lost his title or ownership over the
homestead, and there is no need for him or his heirs to repurchase the same from the vendee, or the
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latter to execute a deed of reconveyance. Of course the purchaser may recover the price which he
has paid, and where the homesteader vendor died, the recovery may be pursued as a claim filed
against his estate in the corresponding proceeding.
Hence, this petition going directly before the Supreme Court through a Petition for Review
on Certiorari under Rule 45 of the Rules of Court. Spouses Binayug raise and argue only one issue
in their petition: whether or not Section 118 of the Public Land Act is applicable to their case .
Issues:
1. Whether or not the remedy is proper.
2. Whether or not Section 118 of the Public Land Act is applicable to their case.
3. Whether or not the principle of in pare delicto is applicable in this case.

Ruling:
1. Yes. Petitioners resort directly to this Court via the instant Petition for Review on Certiorari
is in accordance with procedural rules. Petitioners raise and argue only one issue in their Petition:
whether or not Section 118 of the Public Land Act is applicable to their case. They no longer
challenge the appreciation of evidence and factual conclusions of the RTC
According to Rule 41, Section 2(c) of the Rules of Court, a decision or order of the RTC may
be appealed to the Supreme Court by petition for review on certiorari under Rule 45, provided that
such petition raises only questions of law. A question of law exists when the doubt or controversy
concerns the correct application of law or jurisprudence to a certain set of facts or when the issue
does not call for an examination of the probative value of the evidence presented, the truth or
falsehood of facts being admitted. A question of fact exists when the doubt or difference arises as to
the truth or falsehood of facts or when the query invites calibration of the whole evidence
considering mainly the credibility of the witnesses, the circumstances, as well as their relation to
each other and to the whole, and the probability of the situation existence and relevancy of specific
surrounding.
As a final note, although not assigned as an error in their petition, petitioners raise as an
issue and argue extensively in their Memorandum that they had acquired acquisitive prescription
over the subject properties. The issue of prescription involves questions of fact, i.e., when and for
how long petitioners have possessed the subject properties and whether their possession is open,
continuous, exclusive, notorious, and adverse.
To resolve the issue of prescription, the Court must necessarily go through the evidence
presented by the parties, which it cannot do. This Court is not a trier of facts. To reiterate, the Court
only allowed petitioners to come directly before this Court from the RTC through the instant
Petition because they raise a pure question of law, namely, the applicability of Sections 118 and 124
of the Public Land Act, as amended. The Court cannot take cognizance of the issue of acquisitive
prescription.
Nonetheless, the Court finds no merit in the petition and denies the same.
2. Yes. Section 118 of the Public Land Act is applicable to their case.
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To reiterate, Section 118 of the Public Land Act, as amended, reads that, except in favor of
the Government or any of its branches, units, or institutions, or legally constituted banking
corporations, lands acquired under free patent or homestead provisions shall not be subject to
encumbrance or alienation from the date of the approval of the application and for a term of five
years from and after the date of issuance of the patent or grant. The provisions of law are clear and
explicit. A contract which purports to alienate, transfer, convey, or encumber an homestead within
the prohibitory period of five years from the date of the issuance of the patent is void from its
execution. In a number of cases, this Court has held that such provision is mandatory.
In the present case, it is settled that Homestead Patent was issued to Gerardo on January 12,
1951 and the Absolute Deed of Sale between Gerardo and Juan was executed on July 10, 1951, after
a lapse of only six months. Irrefragably, the alienation of the subject properties took place within
the five-year prohibitory period under Section 118 of the Public Land Act, as amended and as such,
the sale by Gerardo to Juan is null and void right from the very start. As a void contract, the
Absolute Deed of Sale dated July 10, 1951 produces no legal effect whatsoever in accordance with
the principle quod nullum est nullum producit effectum, thus, it could not have transferred title to
the subject properties from Gerardo to Juan and there could be no basis for the issuance of TCT in
Juans name. A void contract is also not susceptible of ratification, and the action for the declaration
of the absolute nullity of such a contract is imprescriptible
3. No. The principle of in pari delicto is not applicable in this case.
Petitioners contentions are not novel. In De los Santos v. Roman Catholic Church of
Midsayap, Court ratiocinated: The principles thus invoked by the Church, et al. are correct and
cannot be disputed. They are recognized not only by our law but by our jurisprudence. Section 124
of the Public Land Act indeed provides that any acquisition, conveyance or transfer executed in
violation of any of its provisions shall be null and void and shall produce the effect of annulling and
cancelling the grant or patent and cause the reversion of the property to the State, and the principle
of pari delicto has been applied by this Court in number of cases wherein the parties to a
transaction have proven to be guilty of having effected the transaction with knowledge of the cause
of its invalidity. But we doubt if these principles can now be invoked considering the philosophy
and the policy behind the approval of the Public Land Act. The principle underlying pari delicto as
known here and in the United States is not absolute in its application. It recognizes certain
exceptions one of them being when its enforcement or application runs counter to an avowed
fundamental policy or to public interest. As stated by us in the Rellosa case, this doctrine is subject
to one important limitation, namely, whenever public policy is considered advanced by allowing
either party to sue for relief against the transaction. The case under consideration comes within the
exception above adverted to. Here De Los Santos desires to nullify a transaction which was done in
violation of the law. Ordinarily the principle of pari delicto would apply to her because her
predecessor-in-interest has carried out the sale with the presumed knowledge of its illegality, but
because the subject of the transaction is a piece of public land, public policy requires that she, as
heir, be not prevented from reacquiring it because it was given by law to her family for her home
and cultivation. This is the policy on which our homestead law is predicated. This right cannot be
waived. It is not within the competence of any citizen to barter away what public policy by law
seeks to preserve. We are, therefore, constrained to hold that [De Los Santos] can maintain the
present action it being in furtherance of this fundamental aim of our homestead law.
TENANCY
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LEONARDO TARONA, EUGENIA TARONA, NITA TARONA, LUIS TARONA, ROSALINDA TARONA,
APOLONIA TARONA, CARLOS TARONA, LOURDES TARONA and ROGELIO TARONA vs. COURT
OF APPEALS (NINTH DIVISION), GAY T. LEAO, LEMUEL T. LEAO, NOEL T. LEAO, JEDD
ANTHONY LEAO CUISON and JASON ANTHONY LEAO CUISON
G.R. No. 170182, June 18, 2009, J. Leonardo- De Castro
While a tenant is not required to be physically present in the land at all hours of the day and
night, such doctrine cannot be stretched to apply to a case wherein the supposed tenant has chosen to
reside in another place so far from the land to be cultivated that it would be physically impossible to be
present therein with some degree of constancy as to allow the tenant to cultivate the same.
Facts:
The instant case stemmed from a complaint for recovery of possession of the subject
landholding filed with the Agrarian Reform Provincial Adjudication Board by the Leanos against the
Taronas. Essentially, the Leanos alleged that they are co-owners of the land subject of the case
which they inherited from their late mother whose name said property is titled. They likewise
assert that the Taronas are not lawful and bona fide tenants of the subject landholding because they
have no legal or valid document evidencing tenancy or any proof of rental payments. According to
them, the purported lease agreement executed by their father in favor of one Juanito Tarona was
void for their father had no authority to deal with their mothers paraphernal property. The
Taronas for their part averred that as nephews and nieces and the lawful heirs of the original
agricultural lessee, Juanito Tarona, they have succeeded to the latters tenancy rights and are,
therefore, bona fide leasehold tenants.
Issue:
Whether there exist tenancy relations between the parties.
Ruling:
There is none.
In order to establish a tenancy relationship, the following essential requisites must concur:
(1) the parties are the landowner and the tenant or agricultural lessee; (2) the subject matter of the
relationship is an agricultural land; (3) there is consent between the parties to the relationship; (4)
the purpose of the relationship is to bring about agricultural production; (5) there is personal
cultivation on the part of the tenant or agricultural lessee; and (6) the harvest is shared between
the landowner and the tenant or agricultural lessee. All these requisites are necessary to create a
tenancy relationship and the absence of one or more will not make the alleged tenant a de facto
tenant. In the case at bar, the CA is correct in ruling that there is no tenancy relationship between
the respondents and petitioners due to the absence of personal cultivation of the subject
landholding by the latter. The Taronas are not residents of the locality where the subject
landholding is and neither are they tenants of any lot thereat. There was likewise not any allegation
made nor evidence presented proving that the Taronas cultivated the land even through the aid of
labor from members of their immediate farm household. While a tenant is not required to be
physically present in the land at all hours of the day and night, such doctrine cannot be stretched to
apply to a case wherein the supposed tenant has chosen to reside in another place so far from the
land to be cultivated that it would be physically impossible to be present therein with some degree
Page 144 of 159

of constancy as to allow the tenant to cultivate the same. It has been held that personal cultivation
is an important factor in determining the existence of an agricultural lease relationship such that in
its absence, an occupant of a tract of land, or a cultivator thereof, or planter thereon, cannot qualify
as a de jure lessee.
TORTS AND DAMAGES
TORTFEASOR
VALLACAR TRANSIT vs. JOCELYN CATUBIG
G.R. No. 175512, May 30, 2011, J. Leonardo-De Castro
When the proximate cause of the accident is the lack of the due care and prudence of the
deceased, the doctrine of vicarious liability will not apply. Absent any showing that the employer failed
to exercise due care and diligence in the selection and supervision of its employees, liability will not
attach to it.
Facts:
Vallacar Transit is engaged in the business of transportation and the franchise owner of a
Ceres Bulilit bus. Quirino C. Cabanilla (Cabanilla) is employed as a regular bus driver of petitioner.
On January 27, 1994, Jocelyn Catubigs husband, Quintin Catubig, Jr. (Catubig), was on his
way home from Dumaguete City riding in tandem on a motorcycle with his employee, Teddy
Emperado (Emperado). Catubig was the one driving the motorcycle. While approaching a curve at
kilometers 59 and 60, Catubig tried to overtake a slow moving ten-wheeler cargo truck by crossingover to the opposite lane, which was then being traversed by the Ceres Bulilit bus driven by
Cabanilla, headed for the opposite direction. When the two vehicles collided, Catubig and Emperado
were thrown from the motorcycle. Catubig died on the spot where he was thrown, while Emperado
died while being rushed to the hospital.
Cabanilla was charged with reckless imprudence resulting in double homicide. The MCTC
ruled that Cabanilla was not criminally liable for the deaths of Catubig and Emperado, because
there was no negligence, not even contributory, on Cabanillas part.
Thereafter, Jocelyn filed before the RTC a Complaint for Damages against petitioner. She
alleged that Vallacar Transit is civilly liable because the latters employee driver, Cabanilla, was
reckless and negligent in driving the bus which collided with Catubigs motorcycle.
Vallacar Transit countered that the proximate cause of the vehicular collision, which
resulted in the deaths of Catubig and Emperado, was the sole negligence of Catubig when he
imprudently overtook another vehicle at a curve and traversed the opposite lane of the road.
On January 26, 2000, the RTC promulgated its Decision favoring petitioner. Jocelyn
appealed to the Court of Appeals. The appellate court held that both Catubig and Cabanilla were
negligent in driving their respective vehicles. Catubig, on one hand, failed to use reasonable care for
his own safety and ignored the hazard when he tried to overtake a truck at a curve. Cabanilla, on the
other hand, was running his vehicle at a high speed of 100 kilometers per hour.
Page 145 of 159
Issue:
Whether or not Vallacar Transit is liable for damages
Ruling:
No. Vallacar Transit is not liable for damages.
The Court agrees with petitioner, nonetheless, that respondent was unable to prove
imputable negligence on the part of petitioner.
There is merit in the argument of the petitioner that Article 2180 of the Civil Code
imputing fault or negligence on the part of the employer for the fault or negligence of its employee
does not apply to petitioner since the fault or negligence of its employee driver, Cabanilla, which
would have made the latter liable for quasi-delict under Article 2176 of the Civil Code, has never
been established by respondent. To the contrary, the totality of the evidence presented during trial
shows that the proximate cause of the collision of the bus and motorcycle is attributable solely to
the negligence of the driver of the motorcycle, Catubig.
The RTC concisely articulated and aptly concluded that Catubigs overtaking of a slowmoving truck ahead of him, while approaching a curve on the highway, was the immediate and
proximate cause of the collision which led to his own death, to wit:
Based on the evidence on record, it is crystal clear that the immediate and proximate cause of the
collision is the reckless and negligent act of Quintin Catubig, Jr. and not because the Ceres Bus was
running very fast. Even if the Ceres Bus is running very fast on its lane, it could not have caused the
collision if not for the fact that Quintin Catubig, Jr. tried to overtake a cargo truck and encroached
on the lane traversed by the Ceres Bus while approaching a curve. As the driver of the motorcycle,
Quintin Catubig, Jr. has not observed reasonable care and caution in driving his motorcycle which
an ordinary prudent driver would have done under the circumstances. Recklessness on the part of
Quintin Catubig, Jr. is evident when he tried to overtake a cargo truck while approaching a curve.
The evidence shows that the driver of the bus, Cabanilla, was driving his vehicle along the
proper lane, while the driver of the motorcycle, Catubig, had overtaken a vehicle ahead of him as he
was approaching a curvature on the road, in disregard of the provision of the law on reckless
driving, at the risk of his life and that of his employee, Emperado.
The presumption that employers are negligent under Article 2180 of the Civil Code flows
from the negligence of their employees. Having adjudged that the immediate and proximate cause
of the collision resulting in Catubigs death was his own negligence, and there was no fault or
negligence on Cabanillas part, then such presumption of fault or negligence on the part of
petitioner, as Cabanillas employer, does not even arise. Thus, it is not even necessary to delve into
the defense of petitioner that it exercised due diligence in the selection and supervision of Cabanilla
as its employee driver.
MORAL DAMAGES
PEOPLE OF THE PHILIPPINES vs. ROGER TEJERO
Page 146 of 159

Moral damages are awarded to rape victims without need of proof other than the fact of rape
under the assumption that the victim suffered moral injuries from the experience she underwent. On
the other hand, when a crime is committed with an aggravating circumstance either as qualifying or
generic, an award of exemplary damages is justified under Article 2230 of the New Civil Code.
Facts:
Private complainant herself, [AAA] was only fourteen years old when the accused raped her
on three different occasions in the year 2004. She directly identified accused Roger Tejero as the
man who raped her repeatedly. She regarded him as her stepfather since he has been cohabiting
with her mother in their home when the criminal acts were committed by him. She claimed that she
was first raped by the accused on a Sunday February 1, 2004 at their living room. She stated that
this happened at 3:00 oclock in the afternoon when her mother was out selling vegetables and
while her two siblings went to the family house of their maternal grandparents. She narrated that
she was suddenly pulled by her stepfather, removed her clothes and then raped her. He then
warned her not to tell anybody or else he would kill all of them. On February 8, 2004, the next
Sunday, the accused again raped her at their living room in the same house. At that time, her
mother was selling vegetables again in another barangay while the accused fended off her sisters to
the family house of their maternal grandparents again. For the third time, the accused again raped
her on April 4, 2004 at about 5:00 oclock in the afternoon now inside a room at their house while
her mother was out selling vegetables again. In her sworn statement, she also revealed that she did
not report all the incidents to anyone because of her fear of her stepfathers repeated threats that he
would kill all of them if she did. Her mother [BBB] only came to know that she has been repeatedly
ravaged by him when she was hospitalized for three weeks due to her appendicitis. During her
check-up, her attending doctor discovered that she was already about five months pregnant. She
said that her pregnancy was a result of the rape. She eventually gave birth to a baby boy.
Issue:
Whether or not the victim is entitled to both moral and exemplary damages.
Ruling:
Yes.
The award of civil indemnity to the rape victim is mandatory upon the finding that rape
took place. Moral damages, on the other hand, are awarded to rape victims without need of proof
other than the fact of rape under the assumption that the victim suffered moral injuries from the
experience she underwent. Based on prevailing jurisprudence, the award of P50,000.00 as civil
indemnity and another P50,000.00 as moral damages for each count of simple rape are proper.
Conformably with the ruling in People v. Esperanza, when either one of the qualifying
circumstances of relationship or minority (for qualified rape under Article 266-B of the Revised
Penal Code) is omitted or lacking, that which is pleaded in the Information and proved by the
evidence may be considered as an aggravating circumstance. As such, AAAs minority may be
considered as an aggravating circumstance. When a crime is committed with an aggravating
circumstance either as qualifying or generic, an award of exemplary damages is justified under
Page 147 of 159

Article 2230 of the New Civil Code. Consequently, AAA is entitled to the additional award of
exemplary damages in the amount of P30,000.00 for each count of simple rape.
EXEMPLARY OR CORRECTIVE DAMAGES
PEOPLE OF THE PHILIPPINES vs. GARY ALINAO
The award of exemplary damages is justified if an aggravating circumstance, either qualifying
or generic, accompanies the crime. In the case at bar, the qualifying circumstance of evident
premeditation was duly alleged in the Information and proved during the trial. Therefore, the trial
court's award of the amount of P30,000.00 as exemplary damages to heirs of the victim, must be
reinstated.
Facts:
Accused-appellant Gary Alinao, together with his son Jocel Alinao, was charged with
murder with the use of illegally possessed firearm. The prosecution witnesses testified that they
saw Gary and Jocel poured gasoline and set on fire the house of Garys brother-in-law, Antonio
Ardet. Nestor Ardet, brother of the victim, was peeping through a window when he saw Antonio try
to escape, but Gary shot him with a shotgun. This made Antonio fall back inside the burning house.
Gary denied the accusation and presented witnesses who testified that Gary was attending a
wake at the time of the incident, and arrived at the scene of the crime only when the body of
Antonio was already placed meters away from his burning house. It was also impossible for Nestor
to see him and his son because of the narrow gap in the window through which he allegedly saw
Gary and his son, and that there are obstructions to that view. Nestor and some witnesses also
failed to immediately execute an affidavit to implicate Gary.
With Jocel still at large, the RTC found Gary guilty of murder with evident premeditation as
the qualifying circumstance, and was ordered to pay the aggrieved party damages, including
exemplary damages in the amount of THIRTY THOUSAND PESOS (P30,000.00).
The CA affirmed with modification the RTC decision, which included among others the
deletion of the award of P30,000.00 as exemplary damages.
Issue:
Was the CA correct in deleting the award for exemplary damages?
Ruling:
The Court of Appeals deleted the trial court's award of exemplary damages on the ground
that no aggravating circumstance was established in evidence. This Court, however, has ruled that
an award of exemplary damages is justified if an aggravating circumstance, either qualifying or
generic, accompanies the crime. In the case at bar, the qualifying circumstance of evident
premeditation was duly alleged in the Information and proved during the trial. Therefore, in line
with current jurisprudence, we reinstate the trial court's award of the amount of P30,000.00 as
exemplary damages to heirs of the victim, Antonio Ardet.
Page 148 of 159
ATTORNEYS FEES
THE LAW FIRM OF RAYMUNDO A. ARMOVIT vs. COURT OF APPEALS and BENGSON
COMMERCIAL BUILDING, INC.
While the body of the Decision quoted the agreement of the parties stating the compensation
as 20% contingent fee computed on the value to be recovered by favorable judgment on the cases. It is
basic that when there is a conflict between the dispositive portion or fallo of a Decision and the
opinion of the court contained in the text or body of the judgment, the former prevails over the latter.
This rule rests on the theory that the fallo is the final order while the opinion in the body is merely a
statement ordering nothing.
Facts:
Bengson Commercial Building, Inc. obtained loans from the Government Service Insurance
System in the total amount of P4,250,000.00, secured by real estate and chattel mortgages. When
BCBI defaulted in the payment of the amortizations, GSIS extrajudicially foreclosed the mortgaged
properties and sold them at public auction where it emerged as the highest bidder.
BCBI, with the Armovit Law Firm as its counsel filed an action to annul the extrajudicial
foreclosure on with the then Court of First Instance of La Union. After trial, the CFI rendered a
Decision: (1) nullifying the foreclosure of BCBIs mortgaged properties; (2) ordering the cancellation
of the titles issued to GSIS and the issuance of new ones in the name of BCBI; (3) ordering BCBI to
pay GSIS P900,000.00 for the debenture bonds; and (4) directing GSIS to (a) restore to BCBI full
possession of the foreclosed properties, (b) restructure the P4.25 Million worth of loans at the legal
rate of interest from the finality of the judgment, (c) pay BCBI P1.9 Million representing accrued
monthly rentals and P20,000.00 rental monthly until the properties are restored to BCBIs
possession, and (d) pay the costs.
GSIS appealed to the Court of Appeals. It appears that the Armovit Law Firm ceased to be
the counsel of BCBI sometime before the appeal of GSIS. The said law firm and BCBI dispute the
legality of the replacement, with BCBI claiming that the Armovit Law Firm had been remiss in its
duties as BCBIs counsel. On January 19, 1988, the Court of Appeals affirmed the RTC Decision with
modification. The GSIS did not file a Motion for Reconsideration or an appeal therefrom.
It appears that when Atty. Armovit sought execution with the court a quo, he was informed
by Romualdo Bengzon, president of the respondent corporation, that the firm had retained the
services of Atty. Pacifico Yadao. He was also informed that the company would pay him the agreed
compensation and that Atty. Yadao's fees were covered by a separate agreement. The private
respondent, however, later ignored his billings and over the phone, directed him allegedly not to
take part in the execution proceedings. Forthwith, he sought the entry of an attorney's lien in the
records of the case.
This Court rendered its Decision in the foregoing case on September 27, 1991 that the
private respondent is ORDERED to pay the petitioner the sum of P252,000.00. Neither party filed a
Motion for Reconsideration from the Decision of this Court. Thus, the Decision became final and
executory. On February 24, 1993, the RTC issued the first assailed Order denying the Armovit Law
Page 149 of 159

Firms Omnibus Motion. The RTC held that the issue regarding attorneys fees had already been
resolved by this Court in G.R. No. 90983, whereby this Court ordered BCBI to pay the Armovit Law
Firm the sum of P252,000.00, in addition to the P300,000.00 already paid. On September 9, 2002,
the Armovit Law Firm filed the present action captioned Petition and/or Motion for Execution, a
joint Petition for Certiorari and Motion for Execution.
Issue:
Whether or not the appellate and trial courts erred in defying the Supreme Court in its final
and executory decision awarding petitioner a contingent fee of twenty percent of all recoveries only
to the rentals and excluding the rest of the recoveries made by the Bengsons.
Ruling:
No, the appellate and trial court did not erred.
While the body of the Decision quoted the agreement of the parties stating the
compensation as 20% contingent fee computed on the value to be recovered by favorable judgment
on the cases, this Court specifically ordered BCBI to pay the Armovit Law Firm the aforementioned
sum only, in addition to the P300,000.00 already paid. BCBI was therefore held to be liable for the
total amount of P552,000.00, representing 20% of the P2,760,000.00 received by BCBI as rental
payments from GSIS. The Armovit Law Firm did not file a Motion for Reconsideration of the
Decision in G.R. No. 90983 to protest the exclusion in the dispositive portion of several items it
specifically prayed for in its pleadings. The Decision thus became final and executory. The Armovit
Law Firm cannot now ask the trial court, or this Court, to execute the Decision in G.R. No. 90983 as
if these items prayed for were actually granted.
The Armovit Law Firm, in insisting on its claim, pins its entire case on the statement in the
body of the Decision that we do not find Atty. Armovits claim for twenty percent of all recoveries to
be unreasonable. It is basic that when there is a conflict between the dispositive portion or fallo of a
Decision and the opinion of the court contained in the text or body of the judgment, the former
prevails over the latter. An order of execution is based on the disposition, not on the body, of the
Decision. This rule rests on the theory that the fallo is the final order while the opinion in the body
is merely a statement ordering nothing. The foregoing rule is not without an exception. We have
held that 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.
Applying this ruling to the case at bar, it is clear that the statement in the body of our 1991
Decision is not an order which can be the subject of execution. Neither can we ascertain from the
body of the Decision an inevitable conclusion clearly showing a mistake in the dispositive
portion. The confusion created in the case at bar shows yet another reason why mere
pronouncements in bodies of Decisions may not be the subject of execution: random statements can
easily be taken out of context and are susceptible to different interpretations. When not enshrined
in a clear and definite order, random statements in bodies of Decisions can still be the subject of
another legal debate, which is inappropriate and should not be allowed in the execution stage of
litigation.
DEVELOPMENT BANK OF THE PHILIPPINES vs. TRAVERSE DEVELOPMENT CORPORATION
and CENTRAL SURETY AND INSURANCE COMPANY
Page 150 of 159

Both the RTC and the Court of Appeals held DBP liable for attorneys fees and costs of suit
because said courts believed that DBP should have been more aggressive in pursuing its claim against
Central. In the absence of stipulation, attorneys fees may be recovered as actual or compensatory
damages under any of the circumstances provided for in Article 2208 of the Civil Code. Even if it were
true that DBP had a hand in the transfer of Traverses insurance coverage to Central, such act is not
sufficient to hold it solidarily liable with Central for the payment of attorneys fees and cost of
litigation under the above provision of the Civil Code.
Facts:
The Development of the Philippines-Tarlac Branch granted a Real Estate Loan
of 910,000.00 to Traverse Development Corporation for the construction of its three-storey
commercial building at Taedo St., Tarlac City. Traverse constituted a mortgage on the land on which
the building was to be built on July 21, 1980. Among the conditions imposed by DBP in the
mortgage contract was Traverses acquisition of an insurance coverage for an amount not less than
the loan, to be endorsed in DBPs favor. From 1980 to 1981, Traverse submitted to DBP three
policies in accordance with the insurance condition in the mortgage contract. The last of these three
was FGU Policy No. 6246, in the amount of 1 Million, for the period of one year.
FGU Insurance Corporation renewed Traverses Fire Insurance Policy for another year, for
the same amount. However, as DBP had already transferred the buildings insurance to Central
Surety & Insurance Company, for the same terms, under Fire Insurance Policy, it returned the FGU
Policy to Traverse. On August 9, 1982, during the effectivity of the Fire Insurance Policy a fire of
undetermined origin razed and gutted Traverses building. The following day, Traverse informed
Central of the mishap and requested it to immediately conduct the necessary inspection, evaluation,
and investigation.
Traverse submitted to Central written proof of the loss sustained by its building, together
with its claim in the amount of 1 Million. Central proposed to settle Traverses claim on the basis
of cost of repairs of the affected parts of the building for 230,748.00. Traverse denied such
proposal. Traverse filed a Complaint] before the RTC, against Central and DBP for payment of its
claim and damages. Traverse impleaded DBP as a co-defendant because of its alleged failure or
refusal to convince Central to pay Traverses claims, considering that it transferred Traverses
insurance to Central without Traverses knowledge.
The RTC held that total loss did not require that the building be annihilated and turned into
rubble, as long as the property was destroyed to such an extent as to deprive it of the character in
which it was insured. In holding Central liable for damages, interests, penalties, attorneys fees, and
costs of suit, the RTC noted how Central had tried to evade Traverses claims. The RTC adjudged
DBP to be solidarily liable with Central for damages, attorneys fees, and costs of suit in view of its
refusal or failure to pursue the claim against Central.
On February 1, 1999, the RTC partially granted DBPs motion ordering defendant CENTRAL
SURETY to pay the DBP one million pesos (1,000,000.00) representing the amount for which Fire
Insurance Policy was issued, plus interest thereon. DBP filed its own Motion for Partial
Reconsideration, seeking the setting aside of the order making DBP solidarily liable with Central for
Page 151 of 159

the payment of attorneys fees and costs of suit. DBP filed a petition for review of its case before this
Court.
Issue:
Whether or not the court of appeals erred in holding petitioner DBP solidarily liable with
respondent central for attorneys fees in the amount of P50,000.00 plus cost of litigation, in light of
the fact that it was the one that facilitated the transfer of Traverses insurance coverage from FGU to
Central.
Ruling:
No, DBP is not solidarily liable.
Both the RTC and the Court of Appeals held DBP liable for attorneys fees and costs of suit
because said courts believed that DBP should have been more aggressive in pursuing its claim
against Central. In the absence of stipulation, attorneys fees may be recovered as actual or
compensatory damages under any of the circumstances provided for in Article 2208 of the Civil
Code When the defendant's act or omission has compelled the plaintiff to litigate with third
persons or to incur expenses to protect his interest
Even if it were true that DBP had a hand in the transfer of Traverses insurance coverage to
Central, such act is not sufficient to hold it solidarily liable with Central for the payment of
attorneys fees and cost of litigation under the above provision of the Civil Code. Records show that
during the testimony of the former insurance examiner of DBP-Tarlac, Victoria Punzalan she
claimed that she had repeatedly reminded Mrs. Lourdes Roxas, Traverses President, of the
impending expiration of Traverses insurance coverage with FGU. Subsequently, Atty. Ruperto
Zamora of Central called up Punzalan, upon the supposed instruction of Mrs. Roxas, to draw up
Traverses insurance coverage. DBP only came to know that Traverse had already renewed its
insurance policy with FGU after Central had already drawn up its Insurance policy.
We thus find that DBP could not be blamed for facilitating such transfer in light of the
previous delays in Traverses submission of its insurance policy. It is worthy to note that Centrals
Policy was drawn on the date that Traverses previous FGU policy was set to expire. This Court also
cannot sustain the insinuation that DBPs lax attitude in pursuing its claim against Central was
tantamount to bad faith as to make it liable for attorneys fees and costs of suit. Even a resort to the
principle of equity will not justify making DBP liable. It was not DBPs act of facilitating the transfer
of Traverses insurance policy from FGU to Central that compelled Traverse to litigate its claims, but
rather Centrals persistent refusal to pay such claims. Thus, only Central should be held liable for the
payment of attorneys fees and costs of suit.
SOLEDAD LEONOR PEA SUATENGCO AND ANTONIO
ESTEBAN SUATENGCO vs. CARMENCITA O. REYES
The stipulation on attorneys fees contained in the said Promissory Note constitutes what is
known as a penal clause. A penalty clause, expressly recognized by law, is an accessory undertaking to
assume greater liability on the part of the obligor in case of breach of an obligation. The obligor
would then be bound to pay the stipulated indemnity without the necessity of proof on the existence
Page 152 of 159

and on the measure of damages caused by the breach. It is well-settled that so long as such stipulation
does not contravene law, morals, or public order, it is strictly binding upon the obligor. The attorneys
fees so provided are awarded in favor of the litigant, not his counsel. It is improper for both the RTC
and the CA to increase the award of attorneys fees despite the express stipulation contained in the
said Promissory Note since it is not intended to be compensation for respondents counsel but was
rather in the nature of a penalty or liquidated damages.
Facts:
An action for Sum of Money with Damages was filed by respondent Carmencita O. Reyes
against petitioners Spouses Soledad Leonor Pea and Antonio Esteban Suatengco, wherein
respondent claimed that Soledad approached her for the purpose of borrowing a sum of money in
order to pay her obligation to Philippine Phosphate Fertilizer Corporation (Philphos). Respondent
paid Philphos the amount ofP1,336,313.00 and by reason thereof petitioners executed Promissory
Note binding themselves jointly and severally to pay respondent the said amount in 31 monthly
instalments. Of the amount, however, only one (1) payment in the amount of P15,000.00 have been
made by petitioners. In the Promissory Note, petitioners have unequivocally waived the necessity
of demand to be made upon them to pay as well as a Notice of Dishonor and presentation with
acceleration clause. Hence a collection suit with prayer for moral damages and attorneys fees was
filed against the petitioners.
Petitioners were granted several extensions of time to file their answer, but they failed to do
the same. The RTC declared the petitioners in default for failure to file their Answer to the
complaint. Thereafter, trial ex parte was delegated to the Clerk of Court to receive respondents
evidence. Testimonial and documentary evidence were all admitted. The lower court rendered a
decision ordering the petitioners to pay the defendant (1) actual damages in the amount of
P1,321,313.00 plus interest at 12% per annum from May 31, 1994 representing the total
outstanding balance of defendants indebtedness; (2) moral damages in the amount of
P1,000,000.00; (3) attorneys fees in the amount of 20% of the sum collected; and (4) costs of
suit.
In their appeal to the CA, petitioners did not question the amount of the judgment debt for
which they were held liable but limited the issue to the award of attorneys fees. The CA upheld the
award of attorneys fees equivalent to 20% of the balance of petitioners obligation and modified the
decision of the trial court by lowering the award of moral damages from P1,000,000.00 to
P200,000.00. Hence, this petition. Petitioners only seek a modification of the decision of the CA
insofar as it upheld the RTCs award of attorneys fees equivalent to 20% of their total
indebtedness/obligation and the 12% per annum interest of the said obligation.
Issues:
1. Whether or not the award of attorneys fees equivalent to 20% of the total obligation is
valid.
2. Whether or not the 12% per annum interest imposed was valid.
Ruling:
1. Petitioners point to the unqualified rate of 5% stipulated in the promissory note as the
stipulated amount which was way lower than the 20% as awarded by the RTC.
Page 153 of 159
There is a contractual stipulation in the Promissory Note that in case of petitioners default
on the terms and conditions of the said Promissory Note by failing to pay any installment due, then
this will render the entire balance of the obligation immediately due and payable. The total
obligation of petitioners amounted to P1,321,313.00 (P1,336,313.00 less P15,000.00) plus the 12%
interest per annum of the said balance, as well as attorneys fees equivalent to 5% of the total
outstanding indebtedness. The Promissory Note was signed by both parties voluntarily, thus the
stipulation therein has the force of law between the parties and should be complied with by them in
good faith. The RTC and CA, in awarding attorneys fees equivalent to 20% of petitioners total
obligation, disregarded the stipulation expressly agreed upon in the Promissory Note and instead
increased the award of attorneys fees. It is undeniable from the evidence submitted by respondent
herself to the trial court that the agreement of the parties with respect to attorneys fees is only 5%
of the total obligation and the trial court granted the 20% rate based on the testimony of
respondents counsel who opined that the same is the reasonable amount of attorneys fees, despite
the unequivocal agreement of the parties.
2. On the matter of interest, the Court affirms the amount of interest awarded by the two
courts, there being a written stipulation as to its rate. The stipulated interest in this case is
12% per annum. As of July 1994, the total indebtedness of petitioners amounted
to P1,321,313.00. From then on, theP1,321,313.00 should have earned the stipulated
interest of 12% per annum plus attorneys fees equivalent to 5% of the total outstanding
indebtedness. However, once the judgment becomes final and executory and the amount
adjudged is still not satisfied, legal interest at the rate of 12% applies until full payment. The
rate of 12% per annum is proper because the interim period from the finality of judgment,
awarding a monetary claim and until payment thereof, is deemed to be equivalent to a
forbearance of credit. The actual base for the computation of this 12% interest is the
amount due upon finality of this decision.
GRADUATION OF DAMAGES
PEOPLE OF THE PHILIPPINES vs. ARNOLD GARCHITORENA Y CAMBA A.KA. JUNIOR; JOEY
PAMPLONA A.K.A. NATO AND JESSIE GARCIA Y ADORINO
G. R. No. 175605, August 28, 2009, J. Leonardo-De Castro
The increase in the award of damages is predicated on the qualifying circumstances present in
the case and not on the penalty imposed. In case of moral damages, it need not be alleged and proved
as the emotional suffering of the heirs from the vicious killing of the victim cannot be denied. As to the
loss of earning capacity, the same need not be proved, as an exception, when the victim is selfemployed and earning less than the minimum wage under current labor laws or when employed as a
daily wage worker earning less than the minimum wage under current labor laws.
Facts:
Arnold Garchitorena, Joey Pamplona and Jessie Garcia were charged of the crime of murder
for the killing of Mauro Biay. During the trial, the prosecution presented Dulce Borero, the sister of
the accused, the forensic expert who conducted the autopsy over the victim and the victims widow,
Amelia Biay.
Page 154 of 159

According to her, Dulce Borero was selling balut with her brother Mauro Biay. She was
about 7 arms length from her brother when he was called by Jessie Garcia. When Biay approached
Garcia, the latter twisted the formers hand behind his back and Garcias companions, Joey
Pamplona and Arnold Garchitorena, repeatedly stabbed Biay. Biay tried to free himself from the
three but failed to do so. Borero went home to call her elder brother Teodoro, but when they
returned to the scene, the Biay was no longer there as he had already been brought to the hospital
where he was pronounced dead on arrival.
According to the autopsy report, Biays death was caused by multiple stab wounds. Dr.
Poblete, who conducted the autopsy, specified the victim suffered eight (8) stab wounds and the
nature of stab wounds indicated that it may have been caused by more than one bladed instrument.
Amelia Biay, testified that she incurred burial expenses amounting to P16,700.00 due to the
death of her husband and alleged that her husband earned a minimum of P300.00 a day as a balut
vendor and P100.00 occasionally as a part-time carpenter.
Pamplona denied that he participated in the stabbing of Mauro Bay while Garcia interposed
the defense of alibi, and Garchitorena raised the defense of insanity. The respective defenses of the
accused were:
Pamplona claimed that he was seated on a bench when co-accused Arnold came along. Then
the balut vendor arrived and Joey saw Arnold stand up, pull something from the right side of his
pocket and stab the balut vendor and that due to fear that Arnold might also stab him, he also ran
away from the scene. A certain Danilo Garados testified that Garcia was not there and Pamplona
allegedly ran away when Arnold stabbed Mauro. Garcia also took the stand and claimed that he was
still riding a bus from his work in Blumentritt when the incident happened. With respect to
Garchitorena, Dr. Evelyn Belen, Medical Officer III and resident physician of the National Center for
Mental Health, testified that she examined the accused Arnold and based on the history of the
patient, it was found that he had been using prohibited drugs two (2) years prior to the stabbing
incident and that he was allegedly suffering from schizophrenia. However, Dr. Belen also testified
that the accused Garchitorena had remissions and understands what he was doing and was aware
of his murder case in court.
The trial court found that Garchitorena, Pamplona and Garcia were in conspiracy and used
superior strength in killing Mauro Biay and therefore, guilty of the crime of murder and were
sentenced to death. Further, they were ordered to pay jointly and severally Amelia Biay, widow of
the victim Mauro Biay, the following sums: a) 50,000.00 as and for civil indemnity, b) 50,000.00 as
and for moral damages, c) 50,000.00 as and for exemplary damages, d) 16,700.00 as and for actual
damages, e) 408,000.00 as and for loss of the earning capacity of Mauro Biay; and, f) To pay the
costs of suit.
The accused appealed to the CA but the appellate court affirmed the decision of the trial
court in toto. Hence, the automatic review. The accused-appellants are questioning the propriety of
awarding of moral and exemplary damages absent any proof from the prosecution and in lieu of the
passage of the law prohibiting the imposition of death penalty.
Issue:
Whether or not the award of damages are proper
Page 155 of 159
Ruling:
Yes. While the new law prohibits the imposition of the death penalty, the penalty provided
for by law for a heinous offense is still death and the offense is still heinous. Consequently, the civil
indemnity for the victim is still P75,000.00. In People v. Quiachon, we explained that even if the
penalty of death was not to be imposed on appellant because of the prohibition in Republic Act No.
9346, the civil indemnity of P75,000.00 was still proper. Following the ratiocination in People v.
Victor, the said award is not dependent on the actual imposition of the death penalty, but on the fact
that qualifying circumstances warranting the imposition of the death penalty attended the
commission of the crime.
Hence, we modify the award of civil indemnity by the trial court from P50,000.00
to P75,000.00. Civil indemnity is mandatory and granted to the heirs of the victim without need of
proof other than the commission of the crime. Likewise the award of P50,000.00 for moral damages
is modified and increased to P75,000.00, consistent with recent jurisprudence on heinous crimes
where the imposable penalty is death, it is reduced to reclusion perpetua pursuant to R.A. 9346. The
award of moral damages does not require allegation and proof of the emotional suffering of the
heirs, since the emotional wounds from the vicious killing of the victim cannot be denied. The trial
courts award of exemplary damages in the amount of P50,000.00 shall, however, be reduced
to P30,000.00, also pursuant to the latest jurisprudence on the matter.
As to the award of actual damages amounting to P16,700.00, we modify the same. In People
v. Villanueva, this Court declared that when actual damages proven by receipts during the trial
amount to less than P25,000.00, as in this case, the award of temperate damages for P25,000.00 is
justified in lieu of actual damages of a lesser amount. In the light of such ruling, the victims heirs in
the present case should, therefore, be awarded temperate damages in the amount of P25,000.00.
The award of P408,000.00 for loss of earning capacity is justified. As a rule, documentary
evidence should be presented to substantiate the claim for damages for loss of earning capacity. By
way of exception, damages for loss of earning capacity may be awarded despite the absence of
documentary evidence when (1) the deceased is self-employed and earning less than the minimum
wage under current labor laws, in which case judicial notice may be taken of the fact that in the
deceaseds line of work no documentary evidence is available; or (2) the deceased is employed as a
daily wage worker earning less than the minimum wage under current labor laws. It cannot be
disputed that the victim, at the time of his death, was self-employed and earning less than the
minimum wage under current labor laws. The computation arrived at by the trial court was in
accordance with the formula for computing the award for loss of earning capacity. Thus,
Award for = 2/3 [80-age at time of death] x [gross annual income 50% (GAI)]
lost earnings
= 2/3 [80-29] x P24,000.00 P12,000.00
= (34) x (P12,000.00)
= P408,000.00
PEOPLE OF THE PHILIPPINES vs. RICHARD O. SARCIA
Page 156 of 159

In criminal cases, the basis of the increase in the award of damages is the heinousness of the
offense and does not depend on the penalty that the convict shall suffer, therefore, the existence of the
mitigating circumstance of minority shall not produce the effect of reduction of damages.
Facts:
In 1996, AAA, a 5-year old girl, played with her cousin (7 years old) and other children
when Richard Sarcia (presumed by the court to be below 18 years old at the time of the commission
of the offense since the prosecution only established the year when the offense was committed)
invited her to go to the backyard of a certain Saling Crisologo. Unknown to the accused, AAAs
cousin followed them. There, Sarcia pulled down the shorts and panties of AAA and succeeded to
have carnal knowledge with her. AAAs cousin saw the said act and proceeded to tell AAAs mother
what happened but the latter disregarded the story of AAAs cousin stating that they were too
young to understand those matters. AAAs father was, at the time, working in Manila.
Almost after four years, Sarcia was charged by AAAs father with rape. Sarcia denied the
allegations and contended that the rape case was only instituted to bolster the arguments in
another case where he was charged of murder of a certain Christine Camu. In the said murder case,
Sarcia was accused of Christines grandmother of the said and even helped AAAs family to pursue
the rape case against him.
During the trial, the testimonies of AAA, AAAs cousin and AAAs father were presented, as
well as the medical examination report which contained that AAA had no scars nor healed wounds
inside but the hymen showed signs of trauma caused by a blunt object which could be a medical
instrument or a penis. Sarcia asseverated that the absence of scars and healed wounds negated the
allegations of rape against him and that the testimonies of the AAA and AAAs cousin were
inconsistent as to the time and place of commission of the offense and failed to establish his guilt.
Sarcia also noted that the rape charge was only instituted almost four years from the alleged time of
commission and that the delay of filing affected the credibility of the witnesses.
The RTC found Sarcia guilty of the crime of rape and sentenced him to suffer the penalty of
reclusion perpetua. The CA affirmed the decision but modified the penalty to death and was
ordered to pay the victim, [AAA], the amount of (1) P75,000.00 as civil indemnity; (2) P50,000.00 as
moral damages, and (3)P25,000.00 as exemplary damages. Hence, the present petition.
Issue:
Sarcia
Whether or not the damages awarded should be reduced on the ground of minority of
Ruling:
No. A review of the nature and purpose of the damages imposed on the convicted offender
is in order. Article 107 of the Revised Penal Code defines the term indemnification, which is
included in the civil liability prescribed by Article 104 of the same Code, as follows:
Art. 107. Indemnification-What is included. Indemnification for consequential
damages shall include not only those caused the injured party, but also those
suffered by his family or by a third person by reason of the crime.
Page 157 of 159
Relative to civil indemnity, People v. Victor ratiocinated as follows:

The lower court, however, erred in categorizing the award of P50,000.00 to
the offended party as being in the nature of moral damages. We have heretofore
explained in People v. Gementiza that the indemnity authorized by our criminal law
as civil liability ex delicto for the offended party, in the amount authorized by the
prevailing judicial policy and aside from other proven actual damages, is itself
equivalent to actual or compensatory damages in civil law. It is not to be considered
as moral damages thereunder, the latter being based on different jural foundations
and assessed by the court in the exercise of sound discretion.
One other point of concern has to be addressed. Indictments for rape
continue unabated and the legislative response has been in the form of higher
penalties. The Court believes that, on like considerations, the jurisprudential path on
the civil aspect should follow the same direction. Hence, starting with the case at
bar, if the crime of rape is committed or effectively qualified by any of the
circumstances under which the death penalty is authorized by the present amended
law, the indemnity for the victim shall be in the increased amount of not less
than P75,000.00. This is not only a reaction to the apathetic societal perception of
the penal law, and the financial fluctuations over time, but also an expression of the
displeasure of the Court over the incidence of heinous crimes against chastity.
(Emphasis Supplied)
The Court has had the occasion to rule that moral damages are likewise compensatory in
nature. In San Andres v. Court of Appeals, we held:
x x x Moral damages, though incapable of pecuniary estimation, are in the
category of an award designed to compensate the claimant for actual injury suffered
and not to impose a penalty on the wrongdoer. (Emphasis Supplied)
In another case, this Court also explained:
What we call moral damages are treated in American jurisprudence
as compensatory damages awarded for mental pain and suffering or mental anguish
resulting from a wrong (25 C.J.S. 815). (Emphasis Supplied)
Thus, according to law and jurisprudence, civil indemnity is in the nature of actual and
compensatory damages for the injury caused to the offended party and that suffered by her family,
and moral damages are likewise compensatory in nature. The fact of minority of the offender at the
time of the commission of the offense has no bearing on the gravity and extent of injury caused to
the victim and her family, particularly considering the circumstances attending this case. Here, the
accused-appellant could have been eighteen at the time of the commission of the rape. He was
accorded the benefit of the privileged mitigating circumstance of minority because of a lack of proof
regarding his actual age and the date of the rape rather than a moral or evidentiary certainty of his
minority.
In any event, notwithstanding the presence of the privileged mitigating circumstance of
minority, which warrants the lowering of the public penalty by one degree, there is no justifiable
Page 158 of 159

ground to depart from the jurisprudential trend in the award of damages in the case of qualified
rape, considering the compensatory nature of the award of civil indemnity and moral damages.
The principal consideration for the award of damages, under the ruling in People v.
Salome and People v. Quiachon is the penalty provided by law or imposable for the offense
because of its heinousness, not the public penalty actually imposed on the offender.
The litmus test therefore, in the determination of the civil indemnity is the heinous
character of the crime committed, which would have warranted the imposition of the death penalty,
regardless of whether the penalty actually imposed is reduced to reclusion perpetua.
As to the award of exemplary damages, Article 2229 of the Civil Code provides that
exemplary or corrective damages are imposed in addition to the moral, temperate, liquidated or
compensatory damages. Exemplary damages are not recoverable as a matter of right. The
requirements of an award of exemplary damages are: (1) they may be imposed by way of example
in addition to compensatory damages, and only after the claimants right to them has been
established; (2) they cannot be recovered as a matter of right, their determination depending upon
the amount of compensatory damages that may be awarded to the claimant; (3) the act must be
accompanied by bad faith or done in a wanton, fraudulent, oppressive or malevolent manner. Since
the compensatory damages, such as the civil indemnity and moral damages, are increased when
qualified rape is committed, the exemplary damages should likewise be increased in accordance
with prevailing jurisprudence.
In sum, the increased amount of P75,000.00 each as civil indemnity and moral damages
should be maintained. It is also proper and appropriate that the award of exemplary damages be
likewise increased to the amount of P30,000.00 based on the latest jurisprudence on the award of
damages on qualified rape. Thus, the CA correctly awarded P75,000.00 as civil indemnity. However
the award of P50,000.00 as moral damages is increased to P75,000.00 and that of P25,000.00 as
exemplary damages is likewise increased to P30,000.00.
Page 159 of 159

Justice Teresita Leonardo-De Castro Cases (2008-2015) : Civil Law

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Justice Teresita Leonardo-De Castro Cases (2008-2015) Civil Law

EFFECT AND APPLICATION OF LAWS