VOL.

467, AUGUST 18, 2005 377

Philippine National Bank vs. Heirs of Estanislao Militar
and Deogracias Militar

*
G.R. No. 164801. August 18, 2005.

PHILIPPINE NATIONAL BANK, petitioner, vs. HEIRS OF

ESTANISLAO MILITAR AND DEOGRACIAS MILITAR,
represented by TRANQUILINA MILITAR, respondents.

G.R. No. 165165. August 18, 2005.

SPOUSES JOHNNY LUCERO AND NONA ARIETE,

petitioners, vs. HEIRS OF ESTANISLAO MILITAR,
DEOGRACIAS MILITAR, and TRANQUILINA MILITAR
(deceased), now represented by AZUCENA MILITAR,
FREDDIE MILITAR, EDUARDO MILITAR, ROMEO L.
MILITAR, NELLY LY BOLANIO, LETICIA LY and DELIA
LY SI ASOYCO, respondents.

_______________

* FIRST DIVISION.

378

378 SUPREME COURT REPORTS ANNOTATED

Philippine National Bank vs. Heirs of Estanislao Militar
and Deogracias Militar

Actions; Pleadings and Practice; Indispensable Party; An

indispensable party is one whose interest will be affected by the
courts action in the litigation, and without whom no final
determination of the case can be had.An indispensable party is
one whose interest will be affected by the courts action in the
litigation, and without whom no final determination of the case can
be had. The partys interest in the subject matter of the suit and in
the relief sought are so inextricably intertwined with the other
parties that his legal presence as a party to the proceeding is an
absolute necessity. In his absence there cannot be a resolution of the
dispute of the parties before the court which is effective, complete,
or equitable. Conversely, a party is not indispensable to the suit if
his interest in the controversy or subject matter is distinct and
divisible from the interest of the other parties and will not
necessarily be prejudiced by a judgment which does complete justice
to the parties in court. He is not indispensable if his presence would
merely permit complete relief between him and those already
parties to the action or will simply avoid multiple litigation.
Same; Same; Same; There are two essential tests of an
indispensable party.There are two essential tests of an
indispensable party: (1) can relief be afforded the plaintiff without
the presence of the other party?; and, (2) can the case be decided on
the merits without prejudicing the rights of the other party? There
is, however, no fixed formula for determining who is an
indispensable party; this can only be determined in the context and
by the facts of the particular suit or litigation.
Same; Same; Reconveyance; In a co-ownership, the act of one
benefits all the co-owners, unless the former repudiates the co-
ownershipthus, if the appellants herein prevail in the case for
reconveyance, it will also redound to the benefit of the other co-
owners or co-heirs.It should be remembered, nevertheless, that
the ultimate issue herein is the propriety of reconveyance and not
the shares of the respective heirs of the co-owners, the latter being
determined in a case for partition. An action for partition is the
action where co-ownership is declared and the segregation and
conveyance of a determinate portion of the property is made. The
heirs of the co-owners, (Glicerio, Tomas and Caridad), if there are
any, including the appellants herein may claim their respective
shares in an action for partition. Any claim of interest, by way of
succession, from the co-

379

VOL. 467, AUGUST 18, 2005 379

Philippine National Bank vs. Heirs of Estanislao Militar and

Deogracias Militar

owners may be severed and proceeded with separately and a final

determination in the action for recoveyance can be had despite the
non-inclusion of other heirs because the interest of the respective
heirs of the co-owners, may be severed. Corollary, the instant case,
may proceed without the other heirs, if there are any, because they
are mere necessary parties. Moreover, in a co-ownership, the act of
one benefits all the co-owners, unless the former repudiates the co-
ownership. Thus, if the appellants herein prevail in the case for
reconveyance, it will also redound to the benefit of the other co-
owners or co-heirs.
Same; Same; Appeals; Certiorari; Whether petitioners are
innocent mortgagee or purchasers in good faith and for value, is a
factual matter, which cannot be raised in a petition for review on
certiorari under Rule 45.Whether petitioners are innocent
mortgagee or purchasers in good faith and for value, is a factual
matter, which cannot be raised in a petition for review on certiorari
under Rule 45. Settled is the rule that this Court is not a trier of
facts and does not normally embark on a re-examination of the
evidence adduced by the parties during trial. In Heirs of the Late
Spouses Aurelio and Esperanza Balite v. Lim, we held that factual
findings of the Court of Appeals are binding and conclusive upon us.
These findings may be reviewed only under exceptional
circumstances such as when the inference is manifestly mistaken;
the judgment is based on a misapprehension of facts; findings of the
trial court contradict those of the appellate court; or the latter
manifestly overlooked relevant and undisputed facts that, if
properly considered, would justify a different conclusion.
Same; Same; Laches; Laches cannot be set up to resist the
enforcement of an imprescriptible legal right; thus, respondents can
validly vindicate their inheritance despite the lapse of time.Laches
is a doctrine in equity which has been aptly described as justice
outside legality, and applied only in the absence of, and never
against, statutory law. Aequetas nunguam contravenit legis. The
positive mandate of Art. 1410 of the Civil Code conferring
imprescriptibility to actions or defense for the declaration of the
inexistence of a contract should pre-empt and prevail over all
abstract arguments based only on equity. Certainly, laches cannot
be set up to resist the enforcement of an imprescriptible legal right;
thus, respondents can validly vindicate their inheritance despite
the lapse of time.

380

380 SUPREME COURT REPORTS ANNOTATED

Philippine National Bank vs. Heirs of Estanislao Militar
and Deogracias Militar
PETITIONS for review on certiorari of the decision and
resolution of the Court of Appeals.

The facts are stated in the opinion of the Court.

The Chief Legal Counsel for PNB.
Norberto J. Posecion for Sps. Lucero.
Banzon, Gloria & Gumban Law Offices collaborating
counsel for Sps. Lucero.
Alfredo M. Baares for Heirs of Militar, etc.

YNARES-SANTIAGO, J.:

These consolidated petitions for review under Rule 45 of

the Revised Rules
1
of Civil Procedure assail the June 4,
2004 decision of the Court of Appeals in CA-G.R. CV No.
54831, which reversed the decision of the Regional Trial
Court of Iloilo City, Branch 38, in Civil Case No. 18836, and
its August 4, 2004 resolution denying reconsideration
thereof.
The facts are as follows:
Deogracias, Glicerio, Tomas and Caridad, all surnamed
Militar, were heirs of Estanislao Militar and the registered
co-owners of Lot Nos. 3011 and 3017 covered by OCT No. T-
8238-A (0-16879) and OCT No. 94-(0-16878).
On August 16, 1941, Deogracias sold his undivided
share in Lot No. 3011 to Pedro Golez, and in Lot No. 3017
to spouses Sofronio and Lourdes Lumagbas. Golez
annotated the sale at the back of the title thereof while
spouses Lumagbas caused the subdivision of Lot No. 3017
into Lot No. 3017-A and Lot No. 3017-B, with Lot No. 3017-
A registered in their names under TCT No. 8239.

_______________

1 Rollo in G.R. No. 164801, pp. 35-47. Penned by Associate Justice

Mercedes Gozo-Dadole and concurred in by Associate Justices Monina
Arevalo Zenarosa and Vicente L. Yap.

381

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Philippine National Bank vs. Heirs of Estanislao Militar
and Deogracias Militar

Notwithstanding the sale, Deogracias continued to occupy a

portion of Lot No. 3011 and Lot No. 3017-B until his death
on March 17, 1964. Glicerio died on March 22, 1939, Tomas
on August 20, 1959 and Caridad on April 29, 1957. Glicerio
and Caridad died without issue. Deogracias was survived
by Teodorico and Remedios, while Tomas was survived by
Wenceslao and Ladislao.
However, in a Deed of Absolute Sale dated April 24,
1975, Deogracias, Glicerio, Tomas and Caridad purportedly
sold Lot No. 3011 to spouses Rodolfo and Nilda Jalbuna. In
another Deed of Sale dated April 25, 1975, Glicerio, Tomas
and Caridad purportedly sold Lot No. 3017-B to the same
spouses. Consequently, titles to Lot Nos. 3011 and 3017-B
were cancelled and new titles, TCT Nos. 39083 and 39082,
respectively, were issued to spouses Jalbuna.
Subsequently, Lot No. 3011 was subdivided into Lot No.
3011-A and Lot No. 3011-B, with Lot No. 3011-A registered
in the name of spouses Jalbuna and Lot No. 3011-B in the
name of Golez.
On June 5, 1975, spouses Jalbuna mortgaged Lot No.
3017-B to Philippine National Bank (PNB) as security for a
loan. When they defaulted, PNB extrajudicially foreclosed
the mortgage and sold Lot No. 3017-B at public auction,
with PNB as the highest bidder. Title thereto was
consolidated in the name of PNB and was issued TCT No.
T-61465.
Thereafter, PNB sold the lot to spouses Johnny and
Nona Lucero, who were issued TCT No. 76938. As the new
owners of Lot No. 3017-B, they filed an ejectment case
against Tranquilina, Azucena, Freddie and Eduardo, all
surnamed Militar, the actual occupants therein.
On October 2, 1989, Tranquilina, Azucena, Freddie and
Eduardo as surviving heirs of Teodorico and Deogracias
Militar, filed a complaint against spouses Jalbuna, PNB,
and spouses Lucero for Reconveyance of Title, Annulment
of Sale, Cancellation of Titles and Damages. Other heirs of
Deogracias on the side of Remedios filed a complaint-in-
intervention

382

382 SUPREME COURT REPORTS ANNOTATED

Philippine National Bank vs. Heirs of Estanislao Militar
and Deogracias Militar

to join the plaintiffs. They prayed for: 1) the declaration of

nullity of the two (2) deeds of sale dated April 24, 1975 and
April 25, 1975 covering Lot No. 3011 and Lot No. 3017-B,
respectively; 2) the cancellation of title covering Lot No.
3017-B in the name of spouses Lucero; 3) the cancellation
of title covering Lot No. 3011-A in the name of spouses
Jalbuna; 4) the reconveyance of Lot 3011-A and Lot No.
3017-B to the heirs of Deogracias 2
Militar; and 5) actual,
exemplary and moral damages.
Spouses Jalbuna invoked prescription, non-inclusion of
indispensable parties and lack of cause of action since their
predecessor, Deogracias, no longer had interest over the
properties having sold them to third parties.
PNB claimed that it was a mortgaee in good faith and
for value; that the title of spouses Jalbuna was free from all
liens and encumbrances when they secured the loan; and
that it conducted verification and inspection of the property
before granting the loan.
Spouses Lucero alleged that the complaint was
commenced without the real party in interest; that the
cause of action has prescribed; and that they were innocent
purchasers in good faith and for value. 3
The trial court rendered a decision dated October 18,
1995, dismissing the complaint, complaint-in-intevention,
as well as the cross claim of PNB. It held that the case was
not brought in the name of all indispensable parties and
although the two (2) deeds of sale were void for being
simulated or fictitious, their nullity cannot be invoked
against PNB and spouses Lucero because they were buyers
in good faith. It found that the action for reconveyance had
prescribed as it was filed more than fourteen (14) years
from the execution of the Deeds of Sale covering the
disputed properties. An action for recon-

_______________

2 Rollo in G.R. No. 165165, pp. 93-94.

3 Rollo in G.R. No. 164801, pp. 51-61. Penned by Presiding Judge
David A. Alfeche, Jr.

383

VOL. 467, AUGUST 18, 2005 383

Philippine National Bank vs. Heirs of Estanislao Militar
and Deogracias Militar
veyance prescribes after ten (10) years from the issuance of
title, which operates as a constructive notice.
On appeal, the Court of Appeals reversed the decision of
the trial court. It held that ultimate issue is the propriety
of reconveyance and not the shares of the respective heirs
which is proper in a case for partition. Thus, a final
determination of the case can be had despite non-inclusion
of other heirs because their interests may be severed and
proceeded with separately. Further, it held that PNB and
spouses Lucero were not buyers in good faith; and that the
action for reconveyance based on implied trust does not
prescribe. The dispositive portion reads as follows:

WHEREFORE, premises considered, the Decision dated October

18, 1995, of the Regional Trial Court of Iloilo City, Sixth Judicial
Region, Branch 38, in Civil Case No. 18836, is hereby REVERSED
and SET ASIDE. The Certificate of Title covering Lot 3011-A in the
names of Spouses Jalbuna and the Certificate of Title covering Lot
3017-B in the names of Spouses Lucero-Ariete are hereby declared
null and void. Spouses Jalbuna and Spouses Lucero-Ariete are
directed to reconvey the subject properties to its original owners,
namely Glicerio, Tomas and Caridad, as the undivided property, of
the aforestated co-owners.
4
SO ORDERED.

Hence, the instant consolidated petitions, the resolution of

which hinges on three pivotal questions: 1) whether or not
the case was brought by all indispensable parties; 2)
whether or not petitioners PNB and spouses Lucero were
mortgagee and purchasers in good faith, respectively; and
3) whether or not action for reconveyance has prescribed or
is barred by laches.
We are not persuaded by PNBs claim that the case was
not brought by all indispensable parties as other heirs of
Glicerio, Tomas and Caridad have not been named as
parties therein.

_______________

4 Id., at p. 47. 383

384

384 SUPREME COURT REPORTS ANNOTATED

Philippine National Bank vs. Heirs of Estanislao Militar
and Deogracias Militar
An indispensable party is one whose interest will be
affected by the courts action in the litigation, and without
whom no final determination of the case can be had. The
partys interest in the subject matter of the suit and in the
relief sought are so inextricably intertwined with the other
parties that his legal presence as a party to the proceeding
is an absolute necessity. In his absence there cannot be a
resolution of the dispute of the parties5 before the court
which is effective, complete, or equitable.
Conversely, a party is not indispensable to the suit if his
interest in the controversy or subject matter is distinct and
divisible from the interest of the other parties and will not
necessarily be prejudiced by a judgment which does
complete justice to the parties in court. He is not
indispensable if his presence would merely permit complete
relief between him and those already parties
6
to the action
or will simply avoid multiple litigation.
There are two essential tests of an indispensable party:
(1) can relief be afforded the plaintiff without the presence
of the other party?; and, (2) can the case be decided on the
merits without prejudicing the rights of the other party?
There is, however, no fixed formula for determining who is
an indispensable party; this can only be determined in the 7
context and by the facts of the particular suit or litigation.
In the case at bar, the ultimate relief sought by the
action is the reconveyance of titles to their rightful owners.
The records reveal that prior to the forgery, the disputed
properties were registered in the names of the co-owners,
Glicerio, Tomas and Caridad, whose interests remained
undivided. Thus, if reconveyance of the titles is granted,
the titles will

_______________

5 Bank of the Philippine Islands v. Court of Appeals, 450 Phil. 532,

541; 402 SCRA 449, 455 (2003).
6 Id.
7 Republic v. Sandiganbayan, G.R. No. 152154, 15 July 2003, 406
SCRA 190, 269-270.

385

VOL. 467, AUGUST 18, 2005 385

Philippine National Bank vs. Heirs of Estanislao Militar
 and Deogracias Militar

revert back to the estates of the deceased co-owners and

not to their individual heirs, whose interests are divisible
and may properly be ventilated in another proceeding.
Therefore, a co-heir may bring such action without
necessarily joining all the other co-heirs as co-plaintiffs
because the suit is deemed to be instituted for the benefit of
all. As correctly held by the Court of Appeals:

It should be remembered, nevertheless, that the ultimate issue

herein is the propriety of reconveyance and not the shares of the
respective heirs of the co-owners, the latter being determined in a
case for partition. An action for partition is the action where co-
ownership is declared and the segregation and conveyance of a
determinate portion of the property is made. The heirs of the co-
owners, (Glicerio, Tomas and Caridad), if there are any, including
the appellants herein may claim their respective shares in an action
for partition. Any claim of interest, by way of succession, from the
co-owners may be severed and proceeded with separately and a
final determination in the action for recoveyance can be had despite
the non-inclusion of other heirs because the interest of the
respective heirs of the co-owners, may be severed. Corollary, the
instant case, may proceed without the other heirs, if there are any,
because they are mere necessary parties. Moreover, in a co-
ownership, the act of one benefits all the co-owners, unless the
former repudiates the co-ownership. Thus, if the appellants herein
prevail in the case for reconveyance, it will also redound to the
8
benefit of the other co-owners or co-heirs.

PNB next argues that since Deogracias sold his shares in

the disputed lots, his heirs, herein respondents, do not have
a cause of action against it, spouses Jalbuna and spouses
Lucero.
This argument is proper had Deogracias died ahead of
the other co-owners. However, records show that Glicerio,
Tomas and Caridad predeceased Deogracias. Glicerio died
on March 22, 1939, Tomas on August 20, 1959, Caridad on
April 29, 1957, while Deogracias died on March 17, 1964.

_______________

8 Rollo in G.R. No. 164801, pp. 43-44; citations omitted.

386
386 SUPREME COURT REPORTS ANNOTATED
Philippine National Bank vs. Heirs of Estanislao Militar
and Deogracias Militar

Article 1003 of the Civil Code provides:

Art. 1003. If there are no descendants, ascendants, illegitimate

children, or a surviving spouse, the collateral relatives shall succeed
to the entire estate of the deceased in accordance with the following
articles.

Clearly, when Glicerio and Caridad died intestate and

without issue, their shares in the disputed properties were
inherited by Deogracias and Tomas. It is this portion that
respondents, as heirs of Deogracias, have an interest on
and which vested them with personality to institute the
present case.
PNB and spouses Lucero claim to be mortgagee and
buyers in good faith, respectively, since title to Lot No.
3017-B appeared to be free from any encumbrance. They
argue that a person dealing with a registered land may rely
on the correctness of the certificate of title and is not
required to go beyond it to determine the condition of the
property.
Whether petitioners are innocent mortgagee or
purchasers in good faith and for value, is a factual matter,
which cannot be 9
raised in a petition for review on certiorari
under Rule 45. Settled is the rule that this Court is not a
trier of facts and does not normally embark on a re-
examination
10
of the evidence adduced by the parties during
trial. In Heirs11
of the Late Spouses Aurelio and Esperanza
Balite v. Lim, we held that factual findings of the Court of
Appeals are binding and conclusive upon us. These findings
may be reviewed only under exceptional circumstances
such as when the inference is manifestly mistaken; the
judgment is based on a misapprehension of facts; findings
of the trial court contradict those of

_______________

9 Sps. Uy v. Court of Appeals, 411 Phil. 788, 798; 359 SCRA 262, 268
(2001).
10 Sampayan v. Court of Appeals, G.R. No. 156360, 14 January 2005,
448 SCRA 220.
11 G.R. No. 152168, 10 December 2004, 446 SCRA 56, 72-73.
 387

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Philippine National Bank vs. Heirs of Estanislao Militar
and Deogracias Militar

the appellate court; or the latter manifestly overlooked

relevant and undisputed facts that, if properly considered,
would justify a different conclusion.
The Court of Appeals reversed the decision of the trial
court based on its findings of facts which are in accord with
the documents on record. Thus, we affirm the Court of
Appeals finding that petitioners were not mortgagee or
buyers in good faith.
Moreover, the burden of proving the status of a
purchaser in good faith
12
and for value lies upon him who
asserts that status. In discharging the burden, it is not 13
enough to invoke the ordinary presumption of good faith.
The rule is settled 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.
Without such inquiry, the buyer can hardly be regarded as
buyer in 14good faith and cannot have any right over the
property.
PNB claims that it conducted the necessary inquiry and
investigation on the subject lot and was convinced that
Nilda Jalbuna, as one of the heirs of Estanislao Militar,
had every right to mortgage the same, even if she was not
in actual possession thereof.
However, considering that the land was in the
possession of persons other than the mortgagors, PNB
should have inquired whether the possessors knew that the
lot is being mortgaged, and the circumstances surrounding
the acquisition of the lot by the mortgagors. Indeed, while
PNB is not expected to conduct an exhaustive investigation
on the history of the mortgagors title, it cannot be excused
from the duty of

_______________

12 Spouses Rayos v. Reyes, 446 Phil. 32, 50-51; 398 SCRA 24, 36 (2003).
13 Potenciano v. Reynoso, 449 Phil. 396, 410; 401 SCRA 391, 401
(2003).
14 Occea v. Esponilla, G.R. No. 156973, 4 June 2004, 431 SCRA 116,
124-125.

388

388 SUPREME COURT REPORTS ANNOTATED

Philippine National Bank vs. Heirs of Estanislao Militar
and Deogracias Militar

exercising the due diligence required15

of a banking
institution. In Tomas v. Tomas, we noted that it is
standard practice for banks, before approving a loan, to
send representatives to the property offered as collateral to
assess its actual condition and to investigate who are the
real owners thereof. We held that banks are expected to
exercise more care and prudence than private individuals
in their dealings, even those involving registered lands, for
their business is affected with public interest. Verily, PNB
was remiss in the exercise of due diligence required of a
banking institution, hence it cannot be considered as
mortgagee in good faith.
Neither could spouses Lucero be considered buyers in
good faith. As respondents neighbors, they could have
verified the status of the property they were buying by
inquiring from the possessors thereof. This, they failed to
do; hence they cannot be considered buyers in good faith.
As to whether the action for 16reconveyance has
prescribed,
17
we held in Santos v. Santos, citing Lacsamana
v. CA, that the right to file an action for reconveyance on
the ground that the certificate of title was obtained by
means of a fictitious deed of sale is virtually an action for
the declaration of its nullity, which does not prescribe.
In the case at bar, the complaint filed was for the
reconveyance of the properties in question to the estates of
Deogracias, Glicerio, Tomas and Caridad, considering that
the deeds of sale were simulated and fictitious. The
complaint thus amounts to an action for declaration of
nullity of a void contract, which does not prescribe.
Neither could laches be successfully invoked. Laches is a
doctrine in equity which has been aptly described as
justice

_______________

15 G.R. No. L-36897, 25 June 1980, 98 SCRA 280, cited in Cavite

Development Bank v. Spouses Lim, 381 Phil. 355, 368-369; 324 SCRA
346, 359 (2000).
16 418 Phil. 681, 691; 366 SCRA 395, 405 (2001).
17 351 Phil. 526, 533; 288 SCRA 287, 292 (1998).

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Philippine National Bank vs. Heirs of Estanislao Militar
and Deogracias Militar

outside legality, and applied only in the absence of, and

never against, statutory law. Aequetas nunguam
contravenit legis. The positive mandate of Art. 1410 of the
Civil Code conferring imprescriptibility to actions or
defense for the declaration of the inexistence of a contract
should pre-empt and prevail over all abstract arguments
based only on equity. Certainly, laches cannot be set up to
resist the enforcement of an imprescriptible legal right;
thus, respondents can validly
18
vindicate their inheritance
despite the lapse of time.
Finally, while certificates of title are indefeasible,
unassailable and binding against the whole world, they
merely confirm or record title already existing and vested.
They cannot be used to protect a usurper from the true
owner, nor can they be used for the perpetration of fraud;
neither do19 they permit one to enrich himself at the expense
of others.
WHEREFORE, the petitions are DENIED. The decision
of the Court of Appeals dated June 4, 2004 in CA-G.R. CV
No. 54831 and its resolution dated August 4, 2004, are
hereby AFFIRMED in toto.
SO ORDERED.

Davide, Jr. (C.J., Chairman), Quisumbing, Carpio

and Azcuna, JJ., concur.

Petitions denied, judgment and resolution affirmed in

toto.

Note.For an action for reconveyance to prosper, the

property should not have passed into the hands of an
innocent purchaser for value. (Philippine Economic Zone
Authority vs. Fernandez, 358 SCRA 489 [2001])

o0o
 _______________

18 Heirs of Ingjug-Tiro v. Spouses Casals, 415 Phil. 665, 673-674; 363

SCRA 435, 442-443 (2001).
19 Consolidated Rural Bank (Cagayan Valley), Inc. v. Court of Appeals,
G.R. No. 132161, 17 January 2005, 448 SCRA 347.

390

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