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G.R. No.

200558 Aurora was shocked to learn that the subject property


was already transferred to Conrado and sold for a
meager amount. On October 30, 1995, she sent a
CONSUELO V. PANGASINAN and ANNABELLA V.
letter to the heirs of Conrado demanding the delivery
BORROMEO, Petitioners,
of the payment they received for the sale of the
vs.
subject property; but it was unheeded.
CRISTINA DISONGLOALMAZORA, RENILDA
ALMAZORA-CASUBUAN, RODOLFO CASUBUAN,
SUSANA ALMAZORAMENDIOLA, CARLOS On May 9, 1996, Aurora together with her husband,
MENDIOLA, CECILIO ALMAZORA and NENITA Arturo, filed a complaint for damages7 against Cristina
ALMAZORA, Respondents. and the other heirs of Conrado (respondents) before
the RTC. They contended that the owner’s duplicate
copy of TCT No. T-18729 was only given to Conrado
DECISION
for safekeeping. The complaint, however, admitted
that the family of Conrado had been staying on, and
MENDOZA, J.: using, the subject property since 1912 with the
permission and generosity of Aquilina and Leoncia.8
The present case demonstrates the legal principle that
the law aids the vigilant, not those who slumber on Aurora asserted that, through the years, she
their rights. Vigilantibus, sed non dormientibus Jura repeatedly asked Conrado to return the owner’s copy
subverniunt. of the title but the latter procrastinated, giving all
kinds of excuses, until he died in 1972; that
This is a petition for review on certiorari seeking to thereafter, Aurora asked Cristina for the copy of the
reverse and set aside the July 28, 2011 Decision1 and title but the latter also ignored her request; that the
the February 3, 2012 Resolution2 of the Court of subsequent sale of the subject property to Fullway
Appeals (CA), in CA-G.R. CV 84529, which affirmed was without Aurora’s authorization, and, thus, the
the June 29, 2004 Decision3 of the Regional Trial payment received by respondents for the sale of the
Court, Branch 259, Parañaque City (RTC) in Civil Case subject property should be turned over to her; and
No. 96-0206, a case for damages. that she prayed for moral and exemplary damages.9

The Facts On June 24, 1996, respondents filed their answer with
compulsory counterclaim. They countered that the
subject property was properly transferred to Conrado
The subject property is a parcel of land with an area under TCT No. 35282, and, thereafter, in the names
of 572 square meters located in Brgy. Sto. Domingo, of the heirs of Conrado under TCT No. T-114352.
Biñan, Laguna. It was registered in the name of Respondents averred that the imputation of fraud on
Aquilina Martinez (Aquilina) under Transfer Certificate the part of Conrado in the registration of the subject
of Title (TCT) No. T-18729 by the Register of Deeds of property was baseless and this assertion of fraud was
Laguna on July 29, 1939.4 not transmissible from Conrado to his heirs, who
merely acquired the property through succession.10
After the liberation of Manila from the Japanese
military occupation in 1945, Aquilina and her maternal Respondents raised some special and affirmatives
grandmother, Leoncia Almendral (Leoncia), learned defenses, among others, that the complaint stated no
that their house on Zabala Street, Tondo, Manila, was cause of action and was barred by prescription. A
ruined by the war. To rebuild their house, they preliminary hearing for the said defenses was set by
borrowed money from their relative, Conrado the RTC.11 In the Order,12 dated May 27, 1999, the
Almazora (Conrado). Thus, their house was RTC ruled that the complaint stated a cause of action.
reconstructed. In return, Leoncia entrusted to
Contrado the owner’s duplicate copy of TCT No. T-
18729 covering the subject property in Biñan, Laguna. Respondents filed a petition for certiorari 13 to assail
Consequently, Conrado and his family remained in the the said interlocutory order of the RTC before the CA.
said property. In its Decision,14 dated February 24, 1999, the CA
denied the same and held that the complaint stated a
cause of action, which was an action for damages
Following the death of Aquilina on July 19, 1949, the arising from fraud committed by Conrado, as trustee,
title of the subject property was transferred to Aurora against Aurora, as cestui que trust. The CA further
Morales-Vivar (Aurora), as her sole heir. Accordingly, held that the complaint, on its face, did not show that
TCT No. T-35280 was issued in the name of the action had prescribed.
Aurora5 after TCT No. T-18729 was cancelled. On
February 7, 1972, Conrado passed away.
Meanwhile, the RTC continued the proceedings and
set the case for trial on the merits. After the parties
Sometime in 1994, Aurora learned from Cristina adduced their respective pieces of evidence, the RTC
Almazora (Cristina), the widowed spouse of Conrado, required them to submit their memoranda. Only
that the title of the subject property had long been respondents filed a memorandum.15
transferred in the name of Conrado and that the
subject property had been sold to Fullway
Development Corporation (Fullway) by the heirs of The RTC Ruling
Conrado in consideration of P4,000,000.00.6
In its Decision, dated June 29, 2004, the RTC
dismissed the complaint. The trial court held that,
after a thorough evaluation of the records, Aurora Branch 259 in Civil Case No. 96-0206 is hereby
miserably failed to prove her right to the subject AFFIRMED.
property. It explained that even if Aurora had a claim
on the subject property, she was guilty of laches. For
SO ORDERED.20
many years, Aurora slept on her right over the
questioned property and failed to exhaust all means,
legal or administrative, to retrieve what was rightfully Petitioners moved for reconsideration, but their
hers at the earliest possible time. motion was denied by the CA in the assailed
Resolution, dated February 3, 2012.
The RTC determined that Conrado was able to transfer
the title of the subject property in his name on June Hence, this petition, raising the following
17, 1965 by virtue of a document denominated as
"Adjudication and Absolute Sale of a Parcel of ISSUES
Registered Land,"16dated January 9, 1949, signed by
Aurora and her husband. The signatures of Aurora and
her husband, affixed on the deed of sale, were not I
properly controverted by her. The trial court found
that her allegations of repeated pleas to Conrado to THE COURT OF APPEALS GRAVELY ERRED IN
return the copy of the title deserved scant AFFIRMING THE DECISION OF THE LOWER
consideration. It concluded that Aurora was not COURT DISMISSING THE COMPLAINT FOR
entitled to damages because there were no clear and DAMAGES FILED BY AURORA MORALESVIVAR,
cogent grounds to award the same. The decretal WHICH DECISIONS ARE ALL CONTRARY TO LAW;
portion of the decision reads:
II
WHEREFORE, premises considered, plaintiffs having
failed to prove its case for damages, the same is
hereby ordered DISMISSED for lack of merit. THE COURT OF APPEALS SERIOUSLY ERRED IN
NOT RULING THAT THE ACQUISITION OF
CONRADO ALMAZORA, RESPONDENTS’
SO ORDERED.17 PREDECESSOR-IN-INTEREST, OF THE SUBJECT
PROPERTY, IS INVALID AND PRODUCED NO
Aggrieved, Aurora appealed to the CA. On June 4, EFFECT WHATSOEVER BECAUSE NOT ALL THE
2009, the children of Aurora, namely, Consuelo V. ELEMENTS OF LACHES, AS TO DEPRIVE AURORA
Pangasinan, Lucio M. Vivar and Annabella V. MORALES-VIVAR OF HER OWNERSHIP, ARE
Borromeo (petitioners), filed a motion for substitution PRESENT IN THE CASE AT BAR.21
of party18 after her death on March 26, 2008. In its
Resolution,19 dated July 15, 2010, the CA granted the Petitioners assert that they are not guilty of laches.
motion. When Aurora was told that the subject property was
already in the name of Conrado in April 1994, she
The CA Ruling immediately filed a complaint for damages on May 2,
1996. Petitioners also claim that prescription is not a
valid defense to defeat the title of Aurora. Section 47
In the assailed Decision, dated July 28, 2011, the CA of Presidential Decree (P.D.) No. 1529 states that no
denied the appeal of petitioners. It held that it took title to registered land in derogation of the title of the
Aurora more than 50 years to act on Conrado’s registered owner shall be acquired by prescription or
withholding of the title covering the subject property. adverse possession.
As early as 1945, the title was already in the
possession of Conrado. The CA ruled that petitioners
were barred by laches as Aurora should have been On September 24, 2012, respondents filed their
impervious in asserting her ownership and made Comment,22 arguing that petitioners’ assertions were
judicial demands to return the title and the property. tenuous. Aurora slept on her rights for more than 50
years, impervious in asserting her ownership of the
subject property, thereby losing the same by laches.
The appellate court added that even on the aspect of
prescription of actions, the case would not prosper
either. It explained that the prescriptive period to On December 11, 2012, petitioners filed their
recover property obtained through fraud or mistake Reply,23 claiming that the CA observed that
giving rise to an implied trust under Article 1456 of respondents might have manipulated the said title to
the Civil Code was 10 years, pursuant to Article 1144. their benefit and advantage. Respondents’ hands were
This 10-year prescriptive period began from the time unclean because of their bad faith and
the land was registered on June 17, 1965. misrepresentation.
Accordingly, Aurora had only until June 17, 1975
within which to file her action. Evidently, the suit was The Court’s Ruling
commenced only on May 12, 1996, beyond its
prescription period. The dispositive portion of the
decision states: The petition is bereft of merit.

WHEREFORE, premises considered, the instant The petition raises


petition is DENIED and the Decision dated June 29, questions of fact
2004 of the Regional Trial Court of Parañaque City,
As a general rule, the Court’s jurisdiction in a Rule 45 (4) injury or prejudice to the defendant in the
petition is limited to the review of pure questions of event relief is accorded to the complainant,
law. A question of law arises when the doubt or or the suit is not held to be barred.29
difference exists as to what the law is on a certain
state of facts. Negatively put, Rule 45 does not allow
In the case at bench, the CA correctly held that all the
the review of questions of fact. A question of fact
elements of laches were present. First, Aurora and her
exists when the doubt or difference arises as to the
family entrusted to Conrado the owner’s duplicate of
truth or falsity of the alleged facts.24
the certificate of title of the subject property in 1945.
In their complaint, petitioners even admitted that
Petitioners challenge the findings of laches, Conrado’s family had been staying in the subject
prescription and lack of bad faith by the CA. To answer property since 1912.30Second, it took five decades,
these questions, the Court must review the records to from 1945 to 1996, before Aurora and petitioners
determine whether the lower courts properly decided to enforce their right
appreciated the evidence in concluding its findings. thereon. Third, respondents who lived all their lives in
Clearly, the questions raised are factual. On this the disputed property apparently were not aware that
ground alone, the present petition under Rule 45 is Aurora would one day come out and claim ownership
dismissible. In the interest of substantial justice, thereon. Fourth, there was no question that
however, the Court deems it proper to reevaluate the respondents would be prejudiced in the event that the
records. suit would be allowed to prosper.1avvphi1

Petitioners are barred by The contention of petitioners that they were not in
laches delay in claiming their rights over the subject property
is specious. For 50 years, Aurora and her heirs did not
take any legal step to uphold their claim over the
Laches is defined as the failure or neglect for an
subject property, despite being fully aware that
unreasonable and unexplained length of time to do
Conrado and his family were occupying the same for
that which, by exercising due diligence, could or
a very long time. Even petitioner Consuelo Vivar-
should have been done earlier; it is negligence or
Pangasinan testified that Conrado had been using the
omission to assert a right within a reasonable time,
property for 30 years31 and that Aurora had never
warranting a presumption that the party entitled to
shown her any evidence of ownership of the
assert it either has abandoned it or declined to assert
property.32
it.25

In their complaint, Aurora claimed that she repeatedly


The principle of laches is a creation of equity which,
reminded Conrado to return the copy of the title. This,
as such, is applied not really to penalize neglect or
however, is a self-serving allegation without any
sleeping upon one's right, but rather to avoid
evidentiary substantiation. The two belated demand
recognizing a right when to do so would result in a
letters, dated October 30, 1995 and March 5, 1996,
clearly inequitable situation.26 The time-honored rule
sent by Aurora’s lawyer before the institution of the
anchored on public policy is that relief will be denied
present action, are the only tangible assertions of their
to a litigant whose claim or demand has become
claim to the property.33 Indeed, not a scintilla of proof
"stale," or who has acquiesced for an unreasonable
was presented by Aurora and her heirs to establish
length of time, or who has not been vigilant or who
that, for 50 years, they actively manifested to reclaim
has slept on his rights either by negligence, folly or
the title and possession of the subject property.
inattention. In other words, public policy requires, for
peace of society, the discouragement of claims grown
stale for non-assertion; thus laches is an impediment A person, endowed with properties and entitlements,
to the assertion or enforcement of a right which has but chose to lie quietly as decades passed by,
become, under the circumstances, inequitable or watching his property wither away, allowing innocent
unfair to permit.27 bystanders to pick the fruits of his unguarded trees,
instead of safeguarding his rights through the
accessibly and necessary legal means, does not
The four (4) elements of laches, as first prescribed by
deserve the protection of equity. The law aids the
this Court in Go Chi Gun v. Co Cho28 are as follows:
vigilant, not those who slumber on their rights.

(1) conduct on the part of the defendant, or


The action has prescribed
of one under whom he claims, giving rise to
the situation of which complaint is made for
which the complaint seeks a remedy; On the basis of prescription of actions, the pending
petition must also be denied. Petitioners argue that
prescription shall not lie against their action because
(2) delay in asserting the complainant’s
a registered land under Section 47 of P.D. No. 1529
rights, the complainant having had
cannot be acquired through prescription.34 The
knowledge or notice, of the defendant’s
argument is patently erroneous.
conduct and having been afforded an
opportunity to institute a suit;
There are two kinds of prescription provided in the
Civil Code. One is acquisitive, that is, the acquisition
(3) lack of knowledge or notice on the part of
of a right by the lapse of time as expounded in
the defendant that the complainant would
paragraph 1, Article 1106.35 Acquisitive prescription is
assert the right on which he bases his suit;
also known as adverse possession and usucapcion.
and
The other kind is extinctive prescription whereby
rights and actions are lost by the lapse of time as it must still fail on its merits. The basis of the action
defined in paragraph 2, Article 1106 and Article for damages of petitioners would be the fraud, bad
1139.36 Another name for extinctive prescription is faith and misrepresentation allegedly committed by
litigation of action. These two kinds of prescription Conrado in transferring the title of the subject
should not be interchanged.37 property to his name. Petitioners, however, drastically
failed to prove the fact of fraud with clear and
convincing evidence.
In a plethora of cases,38 the Court has held that
Section 47 of P.D. No. 1529 covers acquisitive
prescription. A registered land therein can never be Fraud must be proven by clear and convincing
acquired by adverse possession. In the case at bench, evidence and not merely by a preponderance
however, it was extinctive prescription, and not thereof.46 Clear and convincing proof is more than
acquisitive prescription, which barred the action of mere preponderance, but not to extent of such
petitioners. As the CA correctly held, the action must certainty as is required beyond reasonable doubt as in
fail, not because respondents adversely occupied the criminal cases.47 The imputation of fraud in a civil case
property, but because petitioners failed to institute requires the presentation of clear and convincing
their suit within the prescriptive period under Article evidence. Mere allegations will not suffice to sustain
1144 of the Civil Code. the existence of fraud. The burden of evidence rests
on the part of the plaintiff or the party alleging fraud.48
To determine the applicable period of extinctive
prescription, the nature and circumstances of the case Here, the Adjudication and Absolute Sale of a Parcel
should be considered. According to petitioners, the of Registered Land, which was signed by Aurora and
owner’s duplicate certificate of title was given to her husband, transferred the ownership of the subject
Conrado for safekeeping in 1945. Allegedly, Conrado property from Aurora to Conrado. Petitioners,
employed fraud and bad faith when he drafted the however, failed to assail the validity of such deed. As
Adjudication and Absolute Sale of a Parcel of written by the RTC, petitioners could have questioned
Registered Land39 on January 9, 1949, and transferred the authenticity of the document and submitted the
the title of the land to his name with the issuance of same to the National Bureau of Investigation for
TCT No. 3528240 on June 17, 1965; and because of comparison of the signatures. This, they failed to do.49
the purported fraud committed by Conrado against
petitioners, an implied constructive trust was created
In fine, the Adjudication and Absolute Sale of a Parcel
by operation of law, with Conrado as trustee and
of Registered Land, being a notarized document,
Aurora as cestui que trust.
enjoys the presumption of regularity. Even assuming
that Conrado truly employed fraud, no proof was
Constructive trusts are created by the construction of presented that respondents, as heirs of Conrado, were
equity in order to satisfy the demands of justice and in privy and had knowledge of the misrepresentations.
prevent unjust enrichment.41 Article 1456 of the Civil In the absence of evidence of fraud, the transfer to
Code provides that a person acquiring property Conrado of the title of the subject property, and the
through fraud becomes, by operation of law, a trustee subsequent transfer to respondents by virtue of
of an implied trust for the benefit of the real owner of succession,50 must be upheld.
the property.42 It is now well-settled that the
prescriptive period to recover property obtained by
Even on the subject of ownership, petitioners failed to
fraud or mistake, giving rise to an implied trust under
substantiate their claim. Petitioners had nothing,
Article 1456 of the Civil Code, is 10 years pursuant to
other than their bare allegations, that they
Article 1144.43 The prescriptive period to enforce the
continuously owned the subject property. For
constructive trust shall be counted from the alleged
decades, petitioners lacked the possession and
fraudulent registration or date of issuance of the
interest to 'recover the subject property. The trial
certificate of title over the property.44 The ten-year
court even noted that petitioners could not present a
prescriptive period applies only if there is an actual
single tax declaration receipt as an indicia of their
need to reconvey the property as when the plaintiff is
ownership. Based on the foregoing, petitioners are
not in possession of the property.45
certainly not entitled to damages on the basis of their
misplaced claim of ownership over the subject
In this case, the ten-year prescriptive period is property.
squarely applicable because Conrado and his family,
not petitioners, were in possession of the property.
WHEREFORE, the petition is DENIED. The July 28,
The subject property was registered in the name of
2011 Decision and the February 3, 2012 Resolution of
Conrado on June 17, 1965, and this should be the
the Court of Appeals in CA-G.R. CV No. 122153
starting point of the ten-year period. Petitioners, thus,
are AFFIRMED in toto.
had until June 17, 1975 to enforce the implied trust
and assert their claim over the land. As properly held
by the CA, petitioners belatedly instituted their judicial SO ORDERED.
claim over the land on May 9, 1996. Indeed, with the
lapse of the prescriptive period to file an action,
[ GR Nos. 170746-47, Mar 07, 2016 ]
petitioners could no longer seek relief from the courts.

Fraud was not proven CALTEX LIMITED v. MA. FLOR A. SINGZON


AGUIRRE +

Granting, for the sake of argument, that the present


case was not barred by laches and had not prescribed, DECISION
also stated in the judgment that the Louisiana Court
will allow the reinstatement of the case if the
Philippine court "is unable to assume jurisdiction over
REYES, J.: the parties or does not recognize such cause of action
or any cause of action arising out of the same
transaction or occurrence."[12]
Facts Following the Louisiana Court's order, the respondents
filed a motion for intervention on May 6, 2002, and a
Dubbed as the Asia's Titanic,[1] the M/V Dona Paz was complaint in intervention on May 13, 2002 with the
an inter-island passenger vessel owned and operated pending consolidated cases before the RTC of Manila.
by Sulpicio Lines, Inc. (Sulpicio) traversing its Leyte Also, co-defendants in the consolidated cases, Sulpicio
to Manila route on the night of December 20, 1987, and Steamship were furnished with a copy of the
when it collided with M/T Vector, a commercial tanker respondents' motion to intervene.
owned and operated by Vector Shipping Corporation,
Inc., (Vector Shipping). On that particular voyage, In their Manifestation[13] dated April 24, 2002, the
M/T Vector was chartered by Caltex (Philippines) petitioners unconditionally waived the defense of
Inc., et al.[2] (petitioners) to transport petroleum prescription of the respondents' cause of action. The
products. The collision brought forth an inferno at sea petitioners also reiterated a similar position in their
with an estimate of about 4,000 casualties, and was Comment/Consent to Intervention[14] dated May 16,
described as the "world's worst peace time maritime 2002. Likewise, Sulpicio and Steamship filed their
disaster."[3] It precipitated the filing of numerous Manifestation of No Objection dated May 30, 2002 and
lawsuits, the instant case included. Manifestation dated June 20, 2002 with the RTC of
Manila, expressing concurrence with the
In December 1988, the heirs of the victims of the petitioners.[15]
tragedy (respondents), instituted a class action with
the Civil District Court for the Parish of Orleans, State On July 2, 2002, the RTC of Manila issued its
of Louisiana, United States of America (Louisiana Order[16] denying the respondents' motion to
Court), docketed as Civil Case No. 88-24481 entitled intervene for lack of merit. The RTC of Manila ruled
"Sivirino Carreon, et al. v. Caltex (Philippines), Inc., that the RTC of Catbalogan had already dismissed the
et al."[4] On November 30, 2000, the Louisiana Court case with finality; that a final and executory prior
entered a conditional judgment dismissing the said judgment is a bar to the filing of the complaint in
case on the ground of forum non-conveniens.[5] This intervention of the respondents; and that the waivers
led the respondents, composed of 1,689 claimants, to of the defense of prescription made by the petitioners,
file on March 6, 2001 a civil action for damages for Sulpicio and Steamship are of no moment.[17] The
breach of contract of carriage and quasi-delict with motion for reconsideration filed by the petitioners,
the Regional Trial Court (RTC) of Catbalogan, Samar, Sulpicio and Steamship was denied as well on August
Branch 28 (RTC of Catbalogan), against the herein 30, 2002.[18]
petitioners, Sulpicio, Vector Shipping, and Steamship
Mutual Underwriting Association, Bermuda Limited On September 25, 2002, the petitioners instituted a
(Steamship). This was docketed as Civil Case No. petition for certiorari before the Court of Appeals (CA)
7277 entitled "Ma. Flor Singzon-Aguirre, et al. v. docketed as CA-G.R. SP No. 72994. On November 12,
Sulpicio Lines, Inc., et al."[6] 2002, Sulpicio and Steamship also filed a separate
petition docketed as CA-G.R. SP No. 73793. These
In its Order[7] dated March 28, 2001, the RTC of petitions were consolidated in an order of the CA dated
Catbalogan, motu proprio dismissed the complaint March 31, 2004.[19]
pursuant to Section 1, Rule 9 of the 1997 Rules of Civil
Procedure as the respondents' cause of action had On April 27, 2005, the CA dismissed[20] the
already prescribed. In an unusual turn of events consolidated petitions in this wise:
however, the petitioners as defendants therein, who
were not served with summons, filed a motion for
reconsideration, alleging that they are waiving their WHEREFORE, premises considered, the consolidated
defense of prescription, among others. The RTC of petitions under consideration are hereby DISMISSED.
Catbalogan, however, merely noted the petitioners' Accordingly, the assailed orders of the [RTC of Manila]
motion.[8] dated July 2, 2002 and August 30, 2002 are
AFFIRMED. No pronouncement as to costs.
The dismissal of the complaint prompted the
respondents to have the case reinstated with the SO ORDERED.[21]
Louisiana Court. The petitioners, as defendants,
however argued against it and contended that the
Philippines offered a more convenient forum for the The CA concurred with the RTC of Manila that the
parties, specifically the RTC of Manila, Branch 39 (RTC finality of the Order dated March 28, 2001 issued by
of Manila), where three consolidated the RTC of Catbalogan has the effect of res judicata,
cases[9] concerning the M/V Dona Paz collision were which barred the respondents' motion to intervene
pending.[10] and complaint-in-intervention with the RTC of
Manila.[22] The CA also considered the filing of motion
In its Judgment[11] dated March 27, 2002, the for reconsideration by the petitioners before the RTC
Louisiana Court once again conditionally dismissed the of Catbalogan as tantamount to voluntary submission
respondents' action, ordering the latter to bring their to the jurisdiction of the said court over their
claims to the RTC of Manila by intervening in the person.[23] The CA rationalized that "[i]t is basic that
consolidated cases filed before the latter court. It was as long as the party is given the opportunity to defend
his interests in due course, he would have no reason ON THE GROUND OF BAR BY PRIOR
to complain, for it is this opportunity to be heard that JUDGMENT.[37]
makes up the essence of due process."[24]

The motions for reconsideration having been denied


by the CA in its Order[25] dated December 8, 2005,
Ruling of the Court
only the petitioners elevated the matter before this
Court by way of petition for review
on certiorari[26] under Rule 45.
The petition lacks merit.

The petitioners cannot be permitted to assert their


The Parties' Arguments
right to waive the defense of prescription when they
had foregone the same through their own omission,
The petitioners contended that not all the elements
as will be discussed below.
of res judicata are present in this case which would
warrant its application as the RTC of Catbalogan did
The Court shall first discuss the prescription of the
not acquire jurisdiction over their persons and that the
respondents' cause of action against the petitioners.
judgment therein is not one on the merits.[27] It was
Article 1106 of the Civil Code provides that "[b]y
also adduced that only the respondents were heard in
prescription, one acquires ownership and other real
the RTC of Catbalogan because when the petitioners
rights through the lapse of time in the manner and
filed their motion for reconsideration, the order of
under the conditions laid down by law. In the same
dismissal was already final and executory.[28] The
way, rights and conditions are lost by prescription."
petitioners also bewailed that other complaints were
The first sentence refers to acquisitive prescription,
accepted by the RTC of Manila in the consolidated
which is a mode of "acquisition of ownership and other
cases despite prescription of the cause of
real rights through the lapse of time in the manner
action[29] and that the real issue of merit is whether
and under the conditions provided by law." The second
the defense of prescription that has matured can be
sentence pertains to extinctive prescription "whereby
waived.[30] They explained that they were not able to
rights and actions are lost by the lapse of time."[38] It
file for the annulment of judgment or order of the RTC
is also called limitation of action.[39]
of Catbalogan since the respondents precluded them
from seeking such remedy by filing a motion for
This case involves the latter type of prescription, the
intervention in the consolidated cases before the RTC
purpose of which is to protect the diligent and vigilant,
of Manila.[31]
not the person who sleeps on his rights, forgetting
them and taking no trouble of exercising them one
On the other side, the respondents maintained that
way or another to show that he truly has such
the waiver on prescription is not the issue but bar by
rights.[40] The rationale behind the prescription of
prior judgment is, because when they filed their
actions is to suppress fraudulent and stale claims from
motion for intervention, the dismissal meted out by
springing up at great distances of time when all the
the RTC of Catbalogan was already final.[32]According
proper vouchers and evidence are lost or the facts
to the respondents, if the petitioners intended to have
have become obscure from the lapse of time or
the dismissal reversed, the latter should have
defective memory or death or removal of
appealed from the order of the RTC of Catbalogan or
witnesses.[41]
filed a petition for certiorari against the said order or
an action to nullify the same.[33]The respondents also
There is no dispute that the respondents' cause of
elucidated that they could not have precluded the
action against the petitioners has prescribed under the
petitioners from assailing the RTC of Catbalogan's
Civil Code.[42] In fact, the same is evident on the
orders because it was not until May 6, 2002 when the
complaint itself. The respondents brought their claim
respondents filed a motion for intervention with the
before a Philippine court only on March 6, 2001, more
consolidated cases before the RTC of Manila[34] and
than 13 years after the collision occurred.[43] Article
only in deference to the 2nd order of dismissal of the
1139 of the Civil Code states that actions prescribe by
Louisiana Court.[35] Finally, for the respondents, the
the mere lapse of time fixed by law. Accordingly, the
CA correctly held that the petitioners cannot
RTC of Catbalogan cannot be faulted for the motu
collaterally attack the final order of the RTC of
proprio dismissal of the complaint filed before it. It is
Catbalogan, the reason being that a situation wherein
settled that prescription may be considered by the
there could be two conflicting rulings between two co-
courts motu proprio if the facts supporting the ground
equal courts must be avoided.[36]
are apparent from the pleadings or the evidence on
record.[44]
Essentially, the issues can be summed up as follows:
The peculiarity in this case is that the petitioners, who
were the defendants in the antecedent cases before
the RTCs of Catbalogan and Manila, are most adamant
I. WHETHER THE CA ERRED IN RULING THAT in invoking their waiver of the defense of prescription
THE ORDERS OF THE RTC OF CATBALOGAN while the respondents, to whom the cause of action
BARRED THE FILING OF THE MOTION AND belong, have acceded to the dismissal of their
COMPLAINT FOR INTERVENTION BEFORE complaint. The petitioners posit that there is a conflict
THE RTC OF MANILA; and between a substantive law and procedural law in as
much as waiver of prescription is allowed under Article
II. WHETHER THE CA ERRED IN AFFIRMING THE 1112 of the Civil Code, a substantive law even though
RTC OF MANILA'S DISREGARD OF THE the motu proprio dismissal of a claim that has
PETITIONERS' WAIVER OF PRESCRIPTION prescribed is mandated under Section 1, Rule 9 of the
Rules of Court.[45]
jurisdiction of the RTC of Catbalogan by filing such a
The Court has previously held that the right to belated motion.[51]
prescription may be waived or renounced pursuant to
Article 1112 of the Civil Code:[46] But the petitioners cannot capitalize on the supposed
finality of the Order dated March 28, 2001 to repudiate
their submission to the jurisdiction of the RTC of
Art. 1112. Persons with capacity to alienate property Catbalogan. It must be emphasized that before the
may renounce prescription already obtained, but not filing of their motion for reconsideration, the
the right to prescribe in the future. petitioners were not under the RTC of Catbalogan's
jurisdiction. Thus, although the order was already final
Prescription is deemed to have been tacitly renounced and executory with regard to the respondents; it was
when the renunciation results from acts which imply not yet, on the part of the petitioners. As opposed to
the abandonment of the right acquired. the conclusion reached by the CA, the Order dated
March 28, 2001 cannot be considered as final and
executory with respect to the petitioners. It was only
In the instant case, not only once did the petitioners on July 2, 2001, when the petitioners filed a motion
expressly renounce their defense of prescription. for reconsideration seeking to overturn the
Nonetheless, the Court cannot consider such waiver aforementioned order, that they voluntarily submitted
as basis in order to reverse the rulings of the courts themselves to the jurisdiction of the court. On
below as the dismissal of the complaint had become September 4, 2001, the RTC of Catbalogan noted the
final and binding on both the petitioners and the petitioners' motion for reconsideration on the flawed
respondents. impression that the defense of prescription cannot be
waived.[52]
It is not contested that the petitioners were not served
with summons by the RTC of Catbalogan prior to Consequently, it was only after the petitioners' failure
the motu proprio dismissal of the respondents' to appeal or seek any other legal remedy to challenge
complaint. It is basic that courts acquire jurisdiction the subsequent Order dated September 4, 2001, that
over the persons of defendants or respondents, by a the dismissal became final on their part. It was from
valid service of summons or through their voluntary the date of the petitioners' receipt of this particular
submission.[47] Not having been served with order that the reglementary period under the Rules of
summons, the petitioners were not initially considered Court to assail it commenced to run for the petitioners.
as under the jurisdiction of the court. However, the But neither the petitioners nor the respondents
petitioners voluntarily submitted themselves under resorted to any action to overturn the orders of the
the jurisdiction of the RTC of Catbalogan by filing their RTC of Catbalogan, which ultimately led to their
motion for reconsideration. finality. While the RTC of Catbalogan merely noted the
motion for reconsideration in its Order dated
Section 20, Rule 14 of the 1997 Rules of Court states: September 4, 2001, the effect is the same as a denial
thereof, for the intended purpose of the motion, which
is to have the complaint reinstated, was not realized.
Sec. 20. Voluntary appearance. - The defendant's This should have prompted the petitioners to explore
voluntary appearance in the action shall be equivalent and pursue other legal measures to have the dismissal
to service of summons. The inclusion in a motion to reversed. Instead, nothing more was heard from the
dismiss of other grounds aside from lack of jurisdiction parties until a motion for intervention was filed by the
over the person of the defendant shall not be deemed respondents before the RTC of Manila, in conformity
a voluntary appearance. with the order of the Louisiana Court. As the CA
espoused in its decision:
In Philippine Commercial International Bank v.
Spouses Dy Hong Pi, et al.,[48] the Court explained the We concur with the observation of the [RTC of Manila]
following: that the petitioners' predicament was of their own
making. The petitioners should have exhausted the
other available legal remedies under the law after the
(1) Special appearance operates as an exception to [RTC of Catbalogan] denied their motion for
the general rule on voluntary appearance; reconsideration. Under Section 9, Rule 37 of the
[Rules of Court], the remedy against an order denying
(2) Accordingly, objections to the jurisdiction of the a motion for reconsideration is not to appeal the said
court over the person of the defendant must be order of denial but to appeal from the judgment or
explicitly made, i.e., set forth in an unequivocal final order of the court. Moreover, the petitioners
manner; and could have availed of an action for annulment of
judgment for the very purpose of having the final and
(3) Failure to do so constitutes voluntary submission executory judgment be set aside so that there will be
to the jurisdiction of the court, especially in instances a renewal of litigation. An action for annulment of
where a pleading or motion seeking affirmative relief judgment is grounded only on two justifications: (1)
is filed and submitted to the court for resolution.[49] extrinsic fraud; and (2) lack of jurisdiction or denial of
due process. All that herein petitioners have to prove
was that the trial court had no jurisdiction; that they
Previous to the petitioners' filing of their motion for
were prevented from having a trial or presenting their
reconsideration, the RTC of Catbalogan issued an
case to the trial court by some act or conduct of the
Entry of Final Judgment[50] stating that its Order dated
private respondents; or that they have been denied
March 28, 2001 became final and executory on April
due process of law. Seasonably, the petitioners could
13, 2001. The petitioners claimed that for this reason,
have also interposed a petition for certiorari under
they could not have submitted themselves to the
Rule 65 of the Rules [of Court] imputing grave abuse REPUBLIC OF THE PHILIPPINES, Petitioner,
of discretion on the part of the trial court judge in vs.
issuing the said order of dismissal. For reasons DOMINGO ESPINOSA, Respondent.
undisclosed in the records, the petitioners did not
bother to mull over and consider the said legal
DECISION
avenues, which they could have readily availed of
during that time.[53]
REYES, J.:

The RTC of Manila denied the respondents' motion for


This is a petition for review on certiorari from the
intervention on the ground of the finality of the order
Decision1 dated November 11, 2004 and
of the RTC of Catbalogan, there being no appeal or
Resolution2 dated February 13, 2006 of the Court of
any other legal remedy perfected in due time by either
Appeals in CA-G.R. CV No. 72456.
the petitioners or the respondents. Since the dismissal
of the complaint was already final and executory, the
RTC of Manila can no longer entertain a similar action On March 3, 1999, respondent Domingo Espinosa
from the same parties. The bone of contention is not (Espinosa) tiled with the Municipal Trial Court (MTC)
regarding the petitioners' execution of waivers of the of Consolacion, Cebu an application3 for land
defense of prescription, but the effect of finality of an registration covering a parcel of land with an area of
order or judgment on both parties. 5,525 square meters and situated in Barangay
Cabangahan, Consolacion, Cebu. In support of his
"Settled is the rule that a party is barred from assailing application, which was docketed as LRC Case No. N-
the correctness of a judgment not appealed from by 81, Espinosa alleged that: (a) the property, which is
him" because the "presumption [is] that a party who more particularly known as Lot No. 8499 of Cad. 545-
did not interject an appeal is satisfied with the D (New), is alienable and disposable; (b) he
adjudication made by the lower court."[54]Whether the purchased the property from his mother, Isabel
dismissal was based on the merits or technicality is Espinosa (Isabel), on July 4, 1970 and the latter’s
beside the point. "[A] dismissal on a technicality is no other heirs had waived their rights thereto; and (c) he
different in effect and consequences from a dismissal and his predecessor-in-interest had been in
on the merits."[55] possession of the property in the concept of an owner
for more than thirty (30) years.
The petitioners attempted to justify their failure to file
an action to have the orders of the RTC of Catbalogan Espinosa submitted the blueprint of Advanced Survey
annulled by ratiocinating that the respondents Plan 07-0008934 to prove the identity of the land. As
precluded them from doing so when the latter filed proof that the property is alienable and disposable, he
their complaint anew with the RTC of Manila. This is marked as evidence the annotation on the advance
untenable, as it is clear that the respondents filed the survey plan made by Cynthia L. Ibañez, Chief of the
said complaint-in-intervention with the RTC of Manila Map Projection Section, stating that "CONFORMED
more than a year after the case was ordered PER L.C. MAP NOTATION L.C. Map No. 2545 Project
dismissed by the RTC of Catbalogan.[56] Aside from No. 28 certified on June 25, 1963, verified to be within
this, the petitioners offered no other acceptable Alienable & Disposable Area".5 Espinosa also
excuse on why they did not raise their oppositions presented two (2) tax declarations for the years 1965
against the orders of the RTC of Catbalogan when they and 1974 in Isabel’s name – Tax Declaration Nos.
had the opportunity to do so. Thus, the only logical 013516 and 06137 – to prove that she had been in
conclusion is that the petitioners abandoned their possession of the property since 1965. To support his
right to waive the defense of prescription. claim that he had been religiously paying the taxes
due on the property, Espinosa presented a
Lastly, the Court takes judicial notice of its ruling Certification6 dated December 1, 1998 issued by the
in Vector Shipping Corporation, et al. v. Macasa, et Office of the Treasurer of Consolacion, Cebu and three
al.[57] and Caltex (Philippines) Inc., v. Sulpicio Lines, (3) tax declarations for the years 1978, 1980 and
Inc.[58]wherein the petitioners, as a mere voyage 1985 – Tax Declaration Nos. 14010, 17681 and
charterer, were exonerated from third party liability in 010717 .8
the M/V Doña Paz collision. Should this Court allow the
reinstatement of the complaint against the
petitioners, let the trial proceedings take its course, Petitioner opposed Espinosa’s application, claiming
and decide the same on the merits in favor of the that: (a) Section 48(b) of Commonwealth Act No. 141
respondents, then it would have led to the otherwise known as the "Public Land Act" (PLA) had
promulgation of conflicting decisions. On the other not been complied with as Espinosa’s predecessor-in-
hand, if this Court were to decide this matter on the interest possessed the property only after June 12,
merits in favor of the petitioners, then the same result 1945; and (b) the tax declarations do not prove that
would be obtained as with a dismissal now. his possession and that of his predecessor-in-interest
are in the character and for the length of time required
WHEREFORE, the petition is denied for lack of merit. by law.

SO ORDERED. On August 18, 2000, the MTC rendered a


Judgment9 granting Espinosa’s petition for
registration, the dispositive portion of which states:
G.R. No. 171514 July 18, 2012
WHEREFORE, and in view of all the foregoing,
judgment is hereby rendered ordering for the
registration and the confirmation of title of Espinosa The contention of petitioner is not meritorious on the
over Lot No. 8499, Cad 545-D (New), situated at following grounds:
Barangay Cabangahan, Consolacion, Cebu,
Philippines, containing an area of 5,525 square meters
a) The record of the case will show that Espinosa has
and that upon the finality of this decision, let a
successfully established valid title over the subject
corresponding decree of registration be issued in favor
land and that he and his predecessor-in-interest have
of the herein applicant in accordance with Section 39,
been in continuous, adverse, public and undisturbed
P.D. 1529.
possession of said land in the concept of an owner for
more than 30 years before the filing of the application.
SO ORDERED.10 Established jurisprudence has consistently
pronounced that "open, continuous and exclusive
possession for at least 30 years of alienable public
According to the MTC, Espinosa was able to prove that
land ipso jure converts the same into private property
the property is alienable and disposable and that he
(Director of Lands vs. Intermediate Appellate Court,
complied with the requirements of Section 14(1) of
214 SCRA 604). This means that occupation and
Presidential Decree (P.D.) No. 1529. Specifically:
cultivation for more than 30 years by applicant and his
predecessor-in-interest vests title on such applicant
After a careful consideration of the evidence presented so as to segregate the land from the mass of public
in the above-entitled case, the Court is convinced, and land (National Power Corporation vs. Court of Appeals,
so holds, that Espinosa was able to establish his 218 SCRA 41); and
ownership and possession over the subject lot which
is within the area considered by the Department of
b) It is true that the requirement of possession since
Environment and Natural Resources (DENR) as
June 12, 1945 is the latest amendment of Section
alienable and disposable land of the public domain.
48(b) of the Public Land Act (C.A. No. 141), but a strict
implementation of the law would in certain cases
The Court is likewise convinced that the applicant and result in inequity and unfairness to Espinosa. As wisely
that of predecessor-in-interest have been in open, stated by the Supreme Court in the case of Republic
actual, public, continuous, adverse and under claim of vs. Court of Appeals, 235 SCRA 567:
title thereto within the time prescribed by law (Sec.
14, sub-par. 1, P.D. 1529) and/or in accordance with
"Following the logic of the petitioner, any transferee is
the Land Registration Act.11
thus foreclosed to apply for registration of title over a
parcel of land notwithstanding the fact that the
Petitioner appealed to the CA and pointed Espinosa’s transferor, or his predecessor-in-interest has been in
failure to prove that his possession and that of his open, notorious and exclusive possession thereof for
predecessor-in-interest were for the period required thirty (30) years or more."17
by law. As shown by Tax Declaration No. 013516,
Isabel’s possession commenced only in 1965 and not
The CA also ruled that registration can be based on
on June 12, 1945 or earlier as required by Section
other documentary evidence, not necessarily the
48(b) of the PLA. On the other hand, Espinosa came
original tracing cloth plan, as the identity and location
into possession of the property only in 1970 following
of the property can be established by other competent
the sale that transpired between him and his mother
evidence.
and the earliest tax declaration in his name was for
the year 1978. According to petitioner, that Espinosa
and his predecessor-in-interest were supposedly in Again, the aforesaid contention of [the petitioner] is
possession for more than thirty (30) years is without merit. While the best evidence to identify a
inconsequential absent proof that such possession piece of land for registration purposes may be the
began on June 12, 1945 or earlier.12 original tracing cloth plan from the Land Registration
Commission, the court may sufficiently order the
issuance of a decree of registration on the basis of the
Petitioner also claimed that Espinosa’s failure to
blue print copies and other evidence (Republic of the
present the original tracing cloth of the survey plan or
Philippines vs. Intermediate Appellate Court, G.R. No.
a sepia copy thereof is fatal to his application. Citing
L-70594, October 10, 1986). The said case provides
Del Rosario v. Republic of the Philippines13 and
further:
Director of Lands v. Judge Reyes,14 petitioner argued
that the submission of the original tracing cloth is
mandatory in establishing the identity of the land "The fact that the lower court finds the evidence of the
subject of the application.15 applicant sufficient to justify the registration and
confirmation of her titles and did not find it necessary
to avail of the original tracing cloth plan from the Land
Further, petitioner claimed that the annotation on the
Registration Commission for purposes of comparison,
advance survey plan is not the evidence admissible to
should not militate against the rights of the applicant.
prove that the subject land is alienable and
Such is especially true in this case where no clear,
disposable.16
strong, convincing and more preponderant proof has
been shown by the oppositor to overcome the
By way of the assailed decision, the CA dismissed correctness of said plans which were found both by
petitioner’s appeal and affirmed the MTC Decision the lower court and the Court of Appeals as conclusive
dated August 18, 2000. The CA ruled that possession proofs of the description and identities of the parcels
for at least thirty (30) years, despite the fact that it of land contained therein."
commenced after June 12, 1945, sufficed to convert
the property to private. Thus:
There is no dispute that, in case of Del Rosario vs. a. whether the blueprint of the advanced
Republic, supra¸ the Supreme Court pronounced that survey plan substantially complies with
the submission in evidence of the original tracing cloth Section 17 of P.D. No. 1529; and
plan, duly approved by the Bureau of Lands, in cases
for application of original registration of land is a
b. whether the notation on the blueprint copy
mandatory requirement, and that failure to comply
of the plan made by the geodetic engineer
with such requirement is fatal to one’s application for
who conducted the survey sufficed to prove
registration. However, such pronouncement need not
that the land applied for is alienable and
be taken as an iron clad rule nor to be applied strictly
disposable.
in all cases without due regard to the rationale behind
the submission of the tracing cloth plan.
Our Ruling
x x x:
The lower courts were unanimous in holding that
Espinosa’s application is anchored on Section 14(1) of
xxxx
P.D. No. 1529 in relation to Section 48(b) of the PLA
and the grant thereof is warranted in view of evidence
As long as the identity of and location of the lot can supposedly showing his compliance with the
be established by other competent evidence like a requirements thereof.
duly approved blueprint copy of the advance survey
plan of Lot 8499 and technical description of Lot 8499,
This Court is of a different view.
containing and identifying the boundaries, actual area
and location of the lot, the presentation of the original
tracing cloth plan may be excused.18 Based on Espinosa’s allegations and his supporting
documents, it is patent that his claim of an imperfect
title over the property in question is based on Section
Moreover, the CA ruled that Espinosa had duly proven
14(2) and not Section 14(1) of P.D. No. 1529 in
that the property is alienable and disposable:
relation to Section 48(b) of the PLA. Espinosa did not
allege that his possession and that of his predecessor-
Espinosa has established that Lot 8499 is alienable in-interest commenced on June 12, 1945 or earlier as
and disposable. In the duly approved Advance Survey prescribed under the two (2) latter provisions. On the
Plan As-07-0000893 (sic) duly approved by the Land contrary, Espinosa repeatedly alleged that he acquired
Management Services, DENR, Region 7, Cebu City, it title thru his possession and that of his predecessor-
is certified/verified that the subject lot is inside the in-interest, Isabel, of the subject property for thirty
alienable and disposable area of the disposable and (30) years, or through prescription. Therefore, the
alienable land of the public domain.19 rule that should have been applied is Section 14(2) of
P.D. No. 1529, which states:
Petitioner moved for reconsideration but this was
denied by the CA in its Resolution20 dated February 13, Sec. 14. Who may apply. – The following persons may
2006. file in the proper Court of First Instance an application
for registration of title to land, whether personally or
through their duly authorized representatives:
Petitioner’s Case

xxxx
Petitioner entreats this Court to reverse and set aside
the CA’s assailed decision and attributes the following
errors: (a) Espinosa failed to prove by competent (2) Those who have acquired ownership of private
evidence that the subject property is alienable and lands by prescription under the provision of existing
disposable; (b) jurisprudence dictates that a survey laws.
plan identifies the property in preparation for a judicial
proceeding but does not convert the property into
Obviously, the confusion that attended the lower
alienable, much less, private; (c) under Section 17 of
courts’ disposition of this case stemmed from their
P.D. No. 1529, the submission of the original tracing
failure to apprise themselves of the changes that
cloth plan is mandatory to determine the exact metes
Section 48(b) of the PLA underwent over the years.
and bounds of the property; and (d) a blueprint copy
Section 48(b) of the PLA originally states:
of the survey plan may be admitted as evidence of the
identity and location of the property only if it bears the
approval of the Director of Lands. Sec. 48. The following described citizens of the
Philippines, occupying lands of the public domain or
claiming to own any such lands or an interest therein,
Issues
but whose titles have not been perfected or
completed, may apply to the Court of First Instance of
The resolution of the primordial question of whether the province where the land is located for confirmation
Espinosa has acquired an imperfect title over the of their claims and the issuance of a certificate of title
subject property that is worthy of confirmation and therefor, under the Land Registration Act, to wit:
registration is hinged on the determination of the
following issues:
xxxx

(b) Those who by themselves or through their


predecessors-in-interest have been in the open,
continuous, exclusive and notorious possession and However, as petitioner Abejaron’s 30-year period of
occupation of agricultural lands of the public domain, possession and occupation required by the Public Land
under a bona fide claim of acquisition or ownership, Act, as amended by R.A. 1942 ran from 1945 to 1975,
except as against the Government, since July twenty- prior to the effectivity of P.D. No. 1073 in 1977, the
sixth, eighteen hundred and ninety-four, except when requirement of said P.D. that occupation and
prevented by war or force majeure. These shall be possession should have started on June 12, 1945 or
conclusively presumed to have performed all the earlier, does not apply to him. As the Susi doctrine
conditions essential to a Government grant and shall holds that the grant of title by virtue of Sec. 48(b)
be entitled to a certificate of title under the provisions takes place by operation of law, then upon Abejaron’s
of this chapter. satisfaction of the requirements of this law, he would
have already gained title over the disputed land in
1975. This follows the doctrine laid down in Director
Thus, the required possession and occupation for
of Lands v. Intermediate Appellate Court, et al., that
judicial confirmation of imperfect title was since July
the law cannot impair vested rights such as a land
26, 1894 or earlier.
grant. More clearly stated, "Filipino citizens who by
themselves or their predecessors-in-interest have
On June 22, 1957, Republic Act (R.A.) No. 1942 been, prior to the effectivity of P.D. 1073 on January
amended Section 48(b) of the PLA by providing a 25, 1977, in open, continuous, exclusive and
thirty (30)-year prescriptive period for judicial notorious possession and occupation of agricultural
confirmation of imperfect title. Thus: lands of the public domain, under a bona fide claim of
acquisition of ownership, for at least 30 years, or at
(b) Those who by themselves or through their least since January 24, 1947" may apply for judicial
predecessors-in-interest have been in the open, confirmation of their imperfect or incomplete title
continuous, exclusive and notorious possession and under Sec. 48(b) of the Public Land Act.22 (Citations
occupation of agricultural lands of the public domain, omitted)
under a bona fide claim of acquisition or ownership,
for at least thirty years immediately preceding the Consequently, for one to invoke Section 48(b) and
filing of the application for confirmation of title except claim an imperfect title over an alienable and
when prevented by war or force majeure. These shall disposable land of the public domain on the basis of a
be conclusively presumed to have performed all the thirty (30)-year possession and occupation, it must be
conditions essential to a Government grant and shall demonstrated that such possession and occupation
be entitled to a certificate of title under the provisions commenced on January 24, 1947 and the thirty (30)-
of this chapter. year period was completed prior to the effectivity of
P.D. No. 1073.
On January 25, 1977, P.D. No. 1073 was issued,
changing the requirement for possession and There is nothing in Section 48(b) that would suggest
occupation for a period of thirty (30) years to that it provides for two (2) modes of acquisition. It is
possession and occupation since June 12, 1945 or not the case that there is an option between
earlier. Section 4 of P.D. No. 1073 states: possession and occupation for thirty (30) years and
possession and occupation since June 12, 1945 or
Sec. 4. The provisions of Section 48(b) and Section earlier. It is neither contemplated under Section 48(b)
48(c), Chapter VIII of the Public Land Act are hereby that if possession and occupation of an alienable and
amended in the sense that these provisions shall apply disposable public land started after June 12, 1945, it
only to alienable and disposable lands of the public is still possible to acquire an imperfect title if such
domain which have been in open, continuous, possession and occupation spanned for thirty (30)
exclusive and notorious possession and occupation by years at the time of the filing of the application.
the applicant himself or thru his predecessor-in-
interest, under a bona fide claim of acquisition of In this case, the lower courts concluded that Espinosa
ownership, since June 12, 1945. complied with the requirements of Section 48(b) of
the PLA in relation to Section 14(1) of P.D. No. 1529
On June 11, 1978, P.D. No. 1529 was enacted. based on supposed evidence that he and his
Notably, the requirement for possession and predecessor-in-interest had been in possession of the
occupation since June 12, 1945 or earlier was adopted property for at least thirty (30) years prior to the time
under Section 14(1) thereof. he filed his application. However, there is nothing on
record showing that as of January 25, 1977 or prior to
the effectivity of P.D. No. 1073, he or Isabel had
P.D. No. 1073, in effect, repealed R.A. No. 1942 such already acquired title by means of possession and
that applications under Section 48(b) of the PLA filed occupation of the property for thirty (30) years. On
after the promulgation of P.D. No. 1073 should allege the contrary, the earliest tax declaration in Isabel’s
and prove possession and occupation that dated back name was for the year 1965 indicating that as of
to June 12, 1945 or earlier. However, vested rights January 25, 1977, only twelve (12) years had lapsed
may have been acquired under Section 48(b) prior to from the time she first came supposedly into
its amendment by P.D. No. 1073. That is, should possession.
petitions for registration filed by those who had
already been in possession of alienable and disposable
lands of the public domain for thirty (30) years at the The CA’s reliance on Director of Lands v. Intermediate
time P.D. No. 1073 was promulgated be denied Appellate Court23 is misplaced considering that the
because their possession commenced after June 12, application therein was filed on October 20, 1975 or
1945? In Abejaron v. Nabasa,21 this Court resolved before the effectivity of P.D. No. 1073. The same can
this legal predicament as follows: be said with respect to National Power Corporation v.
Court of Appeals.24 The petition for registration therein Accordingly, there must be an express declaration by
was filed on August 21, 1968 and at that time, the the State that the public dominion property is no
prevailing rule was that provided under Section 48(b) longer intended for public service or the development
as amended by R.A. No. 1942. of the national wealth or that the property has been
converted into patrimonial. Without such express
declaration, the property, even if classified as
In Republic v. Court of Appeals,25 the applicants
alienable or disposable, remains property of the public
therein entered into possession of the property on
dominion, pursuant to Article 420(2), and thus
June 17, 1978 and filed their application on February
incapable of acquisition by prescription. It is only
5, 1987. Nonetheless, there is evidence that the
when such alienable and disposable lands are
individuals from whom the applicant purchased the
expressly declared by the State to be no longer
property, or their predecessors-in-interest, had been
intended for public service or for the development of
in possession since 1937. Thus, during the effectivity
the national wealth that the period of acquisitive
of Section 48(b) as amended by R.A. No. 1942, or
prescription can begin to run. Such declaration shall
while the prevailing rule was possession and
be in the form of a law duly enacted by Congress or a
occupation for thirty (30) years, or prior to the
Presidential Proclamation in cases where the President
issuance of P.D. No. 1073, the thirty (30)-year
is duly authorized by law.27
prescriptive period was already completed.

Thus, granting that Isabel and, later, Espinosa


Thus, assuming that it is Section 48(b) of the PLA in
possessed and occupied the property for an aggregate
relation to Section 14(1) of P.D. No. 1529 that should
period of thirty (30) years, this does not operate to
apply in this case, as the lower courts held, it was
divest the State of its ownership. The property, albeit
incumbent upon Espinosa to prove, among other
allegedly alienable and disposable, is not patrimonial.
things, that Isabel’s possession of the property dated
As the property is not held by the State in its private
back at least to June 12, 1945. That in view of the
capacity, acquisition of title thereto necessitates
established fact that Isabel’s alleged possession and
observance of the provisions of Section 48(b) of the
occupation started much later, the lower courts should
PLA in relation to Section 14(1) of P.D. No. 1529 or
have dismissed Espinosa’s application outright.
possession and occupation since June 12, 1945. For
prescription to run against the State, there must be
In sum, the CA, as well as the MTC, erred in not proof that there was an official declaration that the
applying the present text of Section 48(b) of the PLA. subject property is no longer earmarked for public
That there were instances wherein applications were service or the development of national wealth.
granted on the basis of possession and occupation for Moreover, such official declaration should have been
thirty (30) years was for the sole reason discussed issued at least ten (10) or thirty (30) years, as the
above. Regrettably, such reason does not obtain in case may be, prior to the filing of the application for
this case. registration. The period of possession and occupation
prior to the conversion of the property to private or
Being clear that it is Section 14(2) of P.D. No. 1529 patrimonial shall not be considered in determining
that should apply, it follows that the subject property completion of the prescriptive period. Indeed, while a
being supposedly alienable and disposable will not piece of land is still reserved for public service or the
suffice. As Section 14(2) categorically provides, only development of national wealth, even if the same is
private properties may be acquired thru prescription alienable and disposable, possession and occupation
and under Articles 420 and 421 of the Civil Code, only no matter how lengthy will not ripen to ownership or
those properties, which are not for public use, public give rise to any title that would defeat that of the
service or intended for the development of national State’s if such did not commence on June 12, 1945 or
wealth, are considered private. In Heirs of Mario earlier.
Malabanan v. Republic,26 this Court held that there
must be an official declaration to that effect before the At any rate, as petitioner correctly pointed out, the
property may be rendered susceptible to prescription: notation on the survey plan does not constitute
incontrovertible evidence that would overcome the
Nonetheless, Article 422 of the Civil Code states that presumption that the property belongs to the
"property of public dominion, when no longer intended inalienable public domain.
for public use or for public service, shall form part of
the patrimonial property of the State." It is this All lands of the public domain belong to the State,
provision that controls how public dominion property which is the source of any asserted right to any
may be converted into patrimonial property ownership of land. All lands not appearing to be clearly
susceptible to acquisition by prescription. After all, within private ownership are presumed to belong to
Article 420(2) makes clear that those property "which the State. Accordingly, public lands not shown to have
belong to the State, without being for public use, and been reclassified or released as alienable agricultural
are intended for some public service or for the land, or alienated to a private person by the State,
development of the national wealth" are public remain part of the inalienable public domain. The
dominion property. For as long as the property burden of proof in overcoming the presumption of
belongs to the State, although already classified as State ownership of the lands of the public domain is
alienable or disposable, it remains property of the on the person applying for registration (or claiming
public dominion if when it is "intended for some public ownership), who must prove that the land subject of
service or for the development of the national wealth." the application is alienable or disposable. To overcome
(Emphasis supplied) this presumption, incontrovertible evidence must be
established that the land subject of the application (or
claim) is alienable or disposable.28
In Republic v. Sarmiento,29 this Court reiterated the Therefore, even if Espinosa’s application may not be
earlier ruling in Menguito v. Republic30 that the dismissed due to his failure to present the original
notation made by a surveyor-geodetic engineer that tracing cloth of the survey plan, there are numerous
the property surveyed is alienable and disposable is grounds for its denial. The blueprint copy of the
not the positive government act that would remove advanced survey plan may be admitted as evidence of
the property from the inalienable domain. Neither it is the identity and location of the subject property if: (a)
the evidence accepted as sufficient to controvert the it was duly executed by a licensed geodetic engineer;
presumption that the property is inalienable: (b) it proceeded officially from the Land Management
Services (LMS) of the DENR; and (c) it is accompanied
by a technical description of the property which is
To discharge the onus, respondent relies on the blue
certified as correct by the geodetic surveyor who
print copy of the conversion and subdivision plan
conducted the survey and the LMS of the DENR. As
approved by the DENR Center which bears the
ruled in Republic v. Guinto-Aldana,32 the identity of
notation of the surveyor-geodetic engineer that "this
the land, its boundaries and location can be
survey is inside the alienable and disposable area,
established by other competent evidence apart from
Project No. 27-B. L.C. Map No. 2623, certified on
the original tracing cloth such as a duly executed
January 3, 1968 by the Bureau of Forestry."
blueprint of the survey plan and technical description:

Menguito v. Republic teaches, however, that reliance


Yet if the reason for requiring an applicant to adduce
on such a notation to prove that the lot is alienable is
in evidence the original tracing cloth plan is merely to
insufficient and does not constitute incontrovertible
provide a convenient and necessary means to afford
evidence to overcome the presumption that it remains
certainty as to the exact identity of the property
part of the inalienable public domain.
applied for registration and to ensure that the same
does not overlap with the boundaries of the adjoining
"To prove that the land in question formed part of the lots, there stands to be no reason why a registration
alienable and disposable lands of the public domain, application must be denied for failure to present the
petitioners relied on the printed words which read: original tracing cloth plan, especially where it is
"This survey plan is inside Alienable and Disposable accompanied by pieces of evidence—such as a duly
Land Area, Project No. 27-B as per L.C. Map No. 2623, executed blueprint of the survey plan and a duly
certified by the Bureau of Forestry on January 3, executed technical description of the property—which
1968," appearing on Exhibit "E" (Survey Plan No. may likewise substantially and with as much certainty
Swo-13-000227). prove the limits and extent of the property sought to
be registered.33
This proof is not sufficient. Section 2, Article XII of the
1987 Constitution, provides: "All lands of the public However, while such blueprint copy of the survey plan
domain, waters, minerals, coal, petroleum, and other may be offered as evidence of the identity, location
mineral oils, all forces of potential energy, fisheries, and the boundaries of the property applied for, the
forests or timber, wildlife, flora and fauna, and other notation therein may not be admitted as evidence of
natural resources are owned by the State. . . ." alienability and disposability. In Republic v. Heirs of
Juan Fabio,34 this Court enumerated the documents
For the original registration of title, the applicant that are deemed relevant and sufficient to prove that
(petitioners in this case) must overcome the the property is already outside the inalienable public
presumption that the land sought to be registered domain as follows:
forms part of the public domain. Unless public land is
shown to have been reclassified or alienated to a In Republic v. T.A.N. Properties, Inc., we ruled that it
private person by the State, it remains part of the is not enough for the Provincial Environment and
inalienable public domain. Indeed, "occupation Natural Resources Office (PENRO) or CENRO to certify
thereof in the concept of owner, no matter how long, that a land is alienable and disposable. The applicant
cannot ripen into ownership and be registered as a for land registration must prove that the DENR
title." To overcome such presumption, Secretary had approved the land classification and
incontrovertible evidence must be shown by the released the land of the public domain as alienable
applicant. Absent such evidence, the land sought to and disposable, and that the land subject of the
be registered remains inalienable. application for registration falls within the approved
area per verification through survey by the PENRO or
In the present case, petitioners cite a surveyor CENRO. In addition, the applicant must present a copy
geodetic engineer’s notation in Exhibit "E" indicating of the original classification of the land into alienable
that the survey was inside alienable and disposable and disposable, as declared by the DENR Secretary,
land. Such notation does not constitute a positive or as proclaimed by the President. Such copy of the
government act validly changing the classification of DENR Secretary’s declaration or the President’s
the land in question. proclamation must be certified as a true copy by the
legal custodian of such official record.1âwphi1 These
facts must be established to prove that the land is
Verily, a mere surveyor has no authority to reclassify alienable and disposable.35 (Citation omitted)
lands of the public domain. By relying solely on the
said surveyor’s assertion, petitioners have not
sufficiently proven that the land in question has been Based on the foregoing, it appears that Espinosa
declared alienable."31 (Citations omitted and cannot avail the benefits of either Section 14(1) of
underscoring supplied) P.O. No. 1529 in relation to Section 48(b) of the PLA
or Section 14(2) of P.O. No. 1529. Applying Section
14(1) of P.O. No. 1529 and Section 48(b) of the PLA,
albeit improper, Espinosa failed to prove that: (a) In a Complaint for "Payment of Parcel(s) of Land and
Isabel's possession of the property dated back to June Improvements and Damages"5 the Delfin Spouses
12, 1945 or earlier; and (b) the property is alienable claimed that they were the owners of a 28,800 square
and disposable. On the other hand, applying Section meter parcel of land in Townsite, Suarez, Iligan City
14(2) of P.O. No. 1529, Espinosa failed to prove that (the "Iligan Property").6 They allegedly bought the
the property is patrimonial. As to whether Espinosa property in 1951 from Felix Natingo and Carlos
was able to prove that his possession and occupation Carbonay, who, allegedly, had been in actual
and that of Isabel were of the character prescribed by possession of the property since time
law, the resolution of this issue has been rendered immemorial.7 The Delfin Spouses had been declaring
unnecessary by the foregoing considerations. the Iligan Property in their names for tax purposes
since 1952,8 and had been planting it with mangoes,
coconuts, corn, seasonal crops, and vegetables.9
WHEREFORE, premises considered, the petition is
GIVEN DUE COURSE and GRANTED. The Decision
They farther alleged that, sometime in 1982,
dated November 11, 2004 and Resolution dated
respondent National Housing Authority forcibly took
February 13, 2006 of the Court of Appeals in CA-G.R.
possession of a 10,798 square meter portion of the
CV No. 72456 are REVERSED and SET ASIDE and
property.10 Despite their repeated demands for
Domingo Espinosa's application for registration of title
compensation, the National Housing Authority failed
over Lot No. 8499 of Cad. 545-D (New) located at
to pay the value of the property.11 The Delfin Spouses
Barangay Cabangahan, Consolacion, Cebu is hereby
thus, filed their Complaint.12
DENIED for lack of merit. No pronouncement as to
costs.
They asserted that the property's reasonable market
value was not less than P40 per square meter13 and
SO ORDERED. that its improvements consisting of fruit-bearing trees
should be valued at P13,360.00 at the time of
taking.14 They similarly claimed that because the
National Housing Authority occupied the property,
they were deprived of an average net yearly income
G.R. No. 193618, November 28, 2016 of P10,000.00.15

HEIRS OF LEOPOLDO DELFIN AND SOLEDAD In its Answer,16 the National Housing Authority alleged
DELFIN, NAMELY EMELITA D. FABRIGAR AND that the Delfin Spouses' property was part of a military
LEONILO C. DELFIN, Petitioners, v. NATIONAL reservation area.17 It cited Proclamation No. 2151
HOUSING AUTHORITY, Respondent. (actually, Proclamation No. 2143, the National
Housing Authority made an erroneous citation) as
having supposedly reserved the area in which
DECISION property is situated for Iligan City's slum improvement
and resettlement program, and the relocation of
LEONEN, J.: families who were dislocated by the National Steel
Corporation's five-year expansion program.18
Under Commonwealth Act No. 141, a claimant may
According to the National Housing Authority,
acquire alienable and disposable public land upon
Proclamation No. 2151 also mandated it to determine
evidence of exclusive and notorious possession of the
the improvements' valuation.19 Based on the study of
land since June 12, 1945. The period to acquire public
the committee it created, the value of the property
land by acquisitive prescription under Presidential
was supposedly only P4.00 per square meter,
Decree No. 1529 begins to run only after the
regardless of the nature of the improvements on it.20
promulgation of a law or a proclamation by the
President stating that the land is no longer intended
It emphasized that among all claimants, only the
for public use or the development of national wealth.
Delfin Spouses and two others remained unpaid
because of their disagreement on the property's
This resolves a Petition for Review on Certiorari1 under
valuation.21
Rule 45 of the 1997 Rules of Civil Procedure praying
that the assailed February 26, 2010 Decision2 and July
The National Housing Authority failed to appear during
2, 2010 Resolution3 of the Court of Appeals in CA-G.R.
the pre-trial conference.22 Upon the Delfin Spouses'
CV No. 80017 be reversed, and that the May 20, 2002
motion, the Regional Trial Court declared the National
Decision4 of the Regional Trial Court in Civil Case No.
Housing Authority in default.23 The case was set for
II-1801 be reinstated.
the ex-parte reception of the Delfin Spouses'
evidence.24
The Regional Trial Court's May 20, 2002 Decision
awarded compensation to Leopoldo and Soledad
On May 20, 2002, the Regional Trial Court rendered a
Delfin (Delfin Spouses) for an Iligan City property
Decision in favor of the Delfin
subsequently occupied by respondent National
Spouses.25cralawred The dispositive portion of the
Housing Authority.
Decision read:
chanRoblesvirtualLawlibrary
The assailed Court of Appeals Decision reversed the
Regional Trial Court's May 20, 2002 Decision and
dismissed the Delfin Spouses' complaint seeking WHEREFORE, premises considered, and by virtue of
compensation. The assailed Court of Appeals the existence of preponderance of evidence, the Court
Resolution denied their Motion for Reconsideration. hereby enters a judgment in favor of spouses-
plaintiffs Leopoldo Delfin and Soledad Delfin against
defendant National Housing Authority, its agents or
representative/s ordering to pay the former the National Housing Authority already conceded that the
following, to wit: property is disposable public land by citing
Proclamation No. 2151, which characterized the
property as "a certain disposable parcel of public
1) P400,000.00 representing the reasonable land."31However, the Delfin Spouses supposedly failed
market value of a portion of the land taken to establish their possession of the property since June
by the defendant containing an area of 12, 1945, as required in Section 48(b) of the Public
10,000 square meters at the rate of P40.00 Land Act.32
per square meters plus legal interest per
annum from the filing in Court of the During the pendency of their petition before the Court
complaint until fully paid; of Appeals. Both Leopoldo and Soledad Delfin both
passed away. Lepoldo passed away on February 3,
2005 and Soledad on June 22, 2004. Their surviving
heirs, Emelita D. Fabrigar and Leonilo C. Delfin filed a
Motion for Substitution before the Court of Appeals,
2) P13,360.00 representing the value of the
which was not acted upon.33
permanent improvements that were
damaged and destroyed plus legal interest
In its assailed July 2, 2010 Resolution,34 the Court of
per annum from the time of the filing of this
Appeals denied the Motion for Reconsideration filed by
case until fully paid;
the heirs of the Delfin Spouses.

Hence, this petition which was filed by the surviving


heirs of the Delfin Spouses, Emelita D. Fabrigar and
3) P10,000.00, representing attorney's fees; Leonilo C. Delfin (petitioners).35

For resolution is the issue of whether petitioners are


entitled to just compensation for the Iligan City
4) The costs of this suit.26 property occupied by respondent National Housing
Authority.chanroblesvirtuallawlibrary
The Regional Trial Court stated that it had no reason
to doubt the evidence presented by the Delfin I
Spouses:
chanRoblesvirtualLawlibrary The right to be justly compensated whenever private
On this regards (sic), the Court finds no reason to property is taken for public use cannot be disputed.
doubt the veracity of the plaintiff['s evidence], there Article III, Section 9 of the 1987 Constitution states
being none to controvert the same. If said. evidence that
did not ring true, the defendant should have and could Section 9. Private property shall not be taken for
have easily destroyed their probatory value. Such public use without just
indifference can only mean that defendant had not compensation.ChanRoblesVirtualawlibrary
(sic) equitable rights to protect or assert over the
disputed property together with all the improvements The case now hinges on whether the petitioners and
existing thereon. This, the defendant did not do so and their predecessors-in-interests have been in
the Court finds no cogent reasons to disbelieve or possession of the Iligan Property for such duration and
reject the plaintiffs categorical declarations on the under such circumstances as will enable them to claim
witness stand under a solemn oath, for the same are ownership.
entitled to full faith and credence. Indeed, if the
defendant National Housing Authority have been Petitioners argue that they and their predecessors-in-
blinded with the consequence of their neglect and interests' open, continuous, exclusive, and notorious
apathy, then defendant have no right to pass on to possession of the Iligan Property for more than 30
the spouses-plaintiffs of their negligence and expect years converted the property from public to
the Court to come to their rescue. For it is now much private.36 They then posit that they acquired
too late in the day to assail the decision which has ownership of the property through acquisitive
become final and prescription under Section 14(2) of Presidential
executory.27ChanRoblesVirtualawlibrary Decree No. 1529.37

The National Housing Authority filed a Motion for Petitioners also assert that the Court of Appeals
Reconsideration, but this was denied in the Regional disregarded certifications and letters from
trial Court's September 10, 2002 Resolution.28 government agencies, which support their claims,
particularly, their and their predecessors-in-interest's
On the National Housing Authority's appeal, the Court possession since June 12, 1945.38
of Appeals rendered the assailed February 26, 2010
Decision reversing the Regional Trial Court:29 Respondent counters, citing the Court of Appeals
WHEREFORE, the appeal is GRANTED. The assailed Decision, that petitioners cannot rely on'Section 14(2)
Decision is REVERSED and SET ASIDE. Consequently, of Presidential Decree No. 1529 because the property
appellees' complaint for compensation is DISMISSED was not yet declared private land when they filed their
for lack of merit. The property taken by appellant NHA Complaint.39chanroblesvirtuallawlibrary
and for which compensation is sought by appellees is
hereby DECLARED land of the public
II
domain.30ChanRoblesVirtualawlibrary
The Court of Appeals ruled that the characterization of Petitioners are erroneously claiming title based on
the property is no longer an issue because the acquisitive prescription under Section 14(2) of
Presidential Decree No. 1529. public service or for the development of the national
wealth, is patrimonial property;42 it is property owned
Section 14 reads in full: by the State in its private capacity. Provinces, cities,
chanRoblesvirtualLawlibrary and municipalities may also hold patrimonial lands.43
Section 14. Who may apply. The following persons
may file in the proper Court of First Instance an Private property "consists of all property belonging to
application for registration of title to land, whether private persons, either individually or
personally or through their duly authorized collectively,"44 as well as "the patrimonial property of
representatives: the State, provinces, cities, and municipalities."45

Accordingly, only publicly owned lands which are


(1) Those who by themselves or through their patrimonial in character are susceptible to prescription
predecessors-in-interest have been in open, under Section 14(2) of Presidential Decree No. 1529.
continuous, exclusive and notorious Consistent with this, Article 1113 of Civil Code
possession and occupation of alienable and demarcates properties of the state, which are not
disposable lands of the public domain under patrimonial in character, as being not susceptible to
a bona fide claim of ownership since June prescription:
12, 1945, or earlier. chanRoblesvirtualLawlibrary
Art. 1113. All things which are within the commerce
of men are susceptible of prescription, unless
provided. Property of the State or any of its
(2) Those who have acquired ownership of subdivisions not patrimonial in character shall not be
private lands by prescription under the the object of prescription.ChanRoblesVirtualawlibrary
provision of existing laws. Contrary to petitioners' theory then, for prescription
to be viable, the publicly-owned land must be
patrimonial or private in character at the onset.
Possession for thirty (30) years does not convert it
(3) Those who have acquired ownership of into patrimonial property.
private lands or abandoned river beds by
right of accession or accretion under the For land of the public domain to be converted into
existing laws. patrimonial property, there must be an express
declaration - "in the form of a law duly enacted by
Congress or a Presidential Proclamation in cases
where the President is duly authorized by law"46 - that
(4) Those who have acquired ownership of land "the public dominion property is no longer intended
in any other manner provided for by law. for public service or the development of the national
wealth or that the property has been converted into
patrimonial."47
Where the land is owned in common, all the co-owners
shall file the application jointly. This Court's 2009 Decision in Heirs of Malabanan v.
Republic48 explains:
Where the land has been sold under pacto de retro, chanRoblesvirtualLawlibrary
the vendor a retro may file an application for the Nonetheless, Article 422 of the Civil Code states that
original registration of the land, provided, however, "[p]roperty of public dominion, when no longer
that should the period for redemption expire during intended for public use or for public service, shall form
the pendency of the registration proceedings and part of the patrimonial property of the State". It is this
ownership to the property consolidated in the vendee provision that controls how public dominion property
a retro, the latter shall be substituted for the applicant may be converted into patrimonial properly
and may continue the proceedings. susceptible to acquisition by prescription. After all,
Article 420 (2) makes clear that those property "which
A trustee on behalf of his principal may apply for belong to the State, without being for public use, and
original registration of any land held in trust by him, are intended for some public service or for the
unless prohibited by the instrument creating the trust. development of the national wealth" are public
[Emphasis supplied]ChanRoblesVirtualawlibrary dominion property. For as long as the property
belongs to the State, although already classified as
For acquisitive prescription to set in pursuant to alienable or disposable, it remains property of the
Section 14(2) of Presidential Decree No. 1529, two (2) public dominion if when * it is "intended for some
requirements must be satisifled: first, the property is public service or for the development of the national
established to be private in character; and second the wealth".
applicable prescriptive period under existing laws had
passed. Accordingly, there must be an express declaration by
the State that the public dominion property is no
Property - such as land - is either of public dominion longer intended for public service or the development
or private ownership.40 of the national wealth or that the property has been
converted into patrimonial. Without such express
"Land is considered of public dominion if it either: (a) declaration, the property, even if classified as
is intended for public use; or (b) belongs to the State, alienable or disposable, remains property of the public
without being for public use, and is intended for some dominion, pursuant to Article 420 (2), and thus
public service or for the development of the national incapable of acquisition by prescription. It is only
wealth."41 Land that belongs to the state but which is when such alienable and disposable lands are
not or is no longer intended for public use, for some
expressly declared by the State to be no longer therefor under the Land Registration Act, to wit:
intended for public service or for the development of
the national wealth that the period of acquisitive
prescription can begin to run. Such declaration shall (b) Those who by themselves or through their
be in the form of a law duly enacted by Congress or a predecessors-in-interest have been in open,
Presidential Proclamation in cases where the President continuous, exclusive, and notorious
is duly authorized by possession and, occupation of agricultural
law.49ChanRoblesVirtualawlibrary lands of the public domain, under a bona fide
This was reiterated in this Court's 2013 Resolution claim of acquisition or ownership, since June
in Heirs of Malabanan v. Republic:50 12, 1945, immediately preceding the filing
[W]hen public land is no longer intended for public of the application for confirmation of title,
service or for the development of the national wealth, except when prevented by war or force
thereby effectively removing the land from the ambit majeure. These shall be conclusively
of public dominion, a declaration of such conversion presumed to have performed all the
must be made in the form of a law duly enacted by conditions essential to a government grant
Congress or by a Presidential proclamation in cases and shall be entitled to a certificate of title
where the President is duly authorized by law to that under the provisions of this chapter. (As
effect.51ChanRoblesVirtualawlibrary amended by PD 1073.)

Attached to the present Petition was a copy of a May Section 48(b) of the Public Land Act therefore requires
18, 1988 supplemental letter to the Director of the that two (2) requisites be satisfied before claims of
Land Management Bureau.52 This referred to an title to public domain lands may be confirmed: first,
executive order, which stated that petitioners' that the land subject of the claim is agricultural land;
property was no longer needed for any public or quasi- and second, open, continuous, notorious, and
public purposes: exclusive possession of the land since June 12, 1945.
chanRoblesvirtualLawlibrary
That it is very clear in the 4th Indorsement of the The need for the land subject of the claim to have
Executive Secretary dated April 24, 1954 the portion been classified as agricultural is in conformity with the
thereof that will not be needed for any public or quasi- constitutional precept that "[a]lienable lands of the
public purposes, be disposed in favor of the actual public domain shall be limited to agricultural
occupants under the administration of the Bureau of lands."54As explained in this Court's 2013 Resolution
Lands (copy of the Executive Order is herewith in Heirs of Malabanan v. Republic:
attached for ready chanRoblesvirtualLawlibrary
reference)53ChanRoblesVirtualawlibrary Whether or not land of the public domain is alienable
and disposable primarily rests on the classification of
However, a mere indorsement of the executive
public lands made under the Constitution. Under the
secretary is not the law or presidential proclamation
1935 Constitution, lands of the public domain were
required for converting land of the public domain into
classified into three, namely, agricultural, timber and
patrimonial property and rendering it susceptible to
mineral. Section 10, Article XTV of the 1973
prescription. There then was no viable declaration
Constitution classified lands of the public domain into
rendering the Iligan property to have been patrimonial
seven, specifically, agricultural, industrial or
property at the onset. Accordingly, regardless of the
commercial, residential, resettlement, mineral, timber
length of petitioners' possession, no title could vest on
or forest, and grazing land, with the reservation that
them by way of
the law might provide other classifications. The 1987
prescription.chanroblesvirtuallawlibrary
Constitution adopted the classification under the 1935
Constitution into agricultural, forest or timber, and
III mineral, but added national parks. Agricultural lands
may be further classified by law according to the uses
While petitioners may not claim title by prescription, to which they may be devoted. The identification of
they may, nevertheless, claim title pursuant to lands according to their legal classification is done
Section 48 (b) of Commonwealth Act No. 141 (the exclusively by and through a positive act of the
Public Land Act). Executive Department.

Section 48 enabled the confirmation of claims and Based on the foregoing, the Constitution places a limit
issuance of titles in favor of citizens occupying or on the type of public land that may be alienated.
claiming to own lands of the public domain or an Under Section 2, Article XII of the 1987 Constitution,
interest therein. Section 48 (b) specifically pertained only agricultural lands of the public domain may be
to those who "have been in open, continuous, alienated; all other natural resources may not be.
exclusive, and notorious possession and, occupation
of agricultural lands of the public domain, under a Alienable and disposable lands of the State fall into
bona fide claim of acquisition or ownership, since June two categories, to wit: (a) patrimonial lands of the
12, 1945": State, or those classified as lands of private ownership
chanRoblesvirtualLawlibrary under Article 425 of the Civil Code, without limitation;
Sec. 48. The following-described citizens of the and (b) lands of the public domain, or the public lands
Philippines, occupying lands of the public domain or as provided by the Constitution, but with the limitation
claiming to own any such lands or an interest therein, that the lands must only be agricultural.
but whose titles have not been perfected or Consequently, lands classified as forest or timber,
completed, may apply to the Court of First Instance of mineral, or national parks are not susceptible of
the province where the land is located for confirmation alienation or disposition unless they are reclassified as
of their claims and the issuance of a certificate of title agricultural. A positive act of the Government is
necessary to enable such reclassification, and the
exclusive prerogative to classify public lands under compensated for the value of their respective portions
existing laws is vested in the Executive Department, and existing improvements thereon, as may be
not in the courts.55ChanRoblesVirtualawlibrary determined by the National Housing
Authority.61ChanRoblesVirtualawlibrary
As the Court of Appeals emphasized, respondent has
conceded that the Iligan property was alienable and Whatever rights petitioners (and their predecessors-
disposable land: in-interest) may have had over the Iligan property
chanRoblesvirtualLawlibrary was, thus, not obliterated by Proclamation No. 2143.
As to the first requirement: There was no need for On the contrary, the Proclamation itself facilitated
appellees to establish that the property involved was compensation.
alienable and disposable public land. This
characterization of the property is conceded by More importantly, there is documentary evidence to
[respondent] who cites Proclamation No. 2151 as the effect that the Iligan Property was not even within
declaring that the disputed property was a certain the area claimed by respondent. In a letter62 to the
disposable parcel of public Director of Lands, dated December 22, 1987, Deputy
land.56ChanRoblesVirtualawlibrary Public Land Inspector Pio Lucero, Jr. noted that:
chanRoblesvirtualLawlibrary
That the Iligan property was alienable and disposable,
That this land known as Lot No. 5258, Cad. 292, Iligan
agricultural land, has been admitted. What is claimed
Cadastre which portion was claimed also by the
instead is that petitioners' possession is debunked by
Human Settlement and/or National Housing
how the Iligan Property was supposedly part of a
Authority; but the area applied for by Leopoldo Delfin
military reservation area57 which was subsequently
is outside the claim of the said agency as per
reserved for Iligan City's slum improvement and
certification issued dated June 10, 1988; copy of
resettlement program, and the relocation of families
which is herewith attached for ready
who were dislocated by the National Steel
reference;63ChanRoblesVirtualawlibrary
Corporation's five-year expansion program.58
The same letter likewise indicated that the Iligan
Indeed, by virtue of Proclamation No. 2143 Property was already occupied by June 1945 and that
(erroneously referred to by respondent as it had even been released for agricultural purposes in
Proclamation No. 2151) certain parcels of land in favor of its occupants.64 Accordingly, the Deputy
Barrio Suarez, Iligan City were reserved for slum- Public Land Inspector recommended the issuance of a
improvement and resettlement program patent in favor of petitioner Leopoldo Delfin:65
purposes.59 The proclamation characterized the Upon investigation conducted by the undersigned in
covered area as "disposable parcel of public land": the premises of the land, it was found and ascertained
chanRoblesvirtualLawlibrary that the land applied for by Leopoldo Delfrn was first
WHEREAS, a certain disposable parcel of public land entered, occupied, possessed and cultivated by him
situated at Barrio Suarez, Iligan City consisting of one since the year June, 1945 up to the present; he have
million one hundred seventy-four thousand eight already well improved the land and introduced some
hundred fifty-three (1,174,853) square meters, more considerable improvements such as coconut trees and
or less, has been chosen by National Steel Corporation different kinds of fruit trees which are presently all
and the City Government of Iligan with the conformity fruit bearing trees; declared the same for taxation
of the National Housing/Authority, as the most purposes and taxes have been paid every year; and
suitable site for the relocation of the families to be that there is no other person or persons who bothered
affected/dislocated as a result of National Steel him in his peaceful occupation and cultivation
Corporation's program and for the establishment of a thereof;chanrobleslaw
slum improvement and resettlement project in the
City of Iligan;60ChanRoblesVirtualawlibrary Records of this Office show that said land was
surveyed and claimed by the Military Reservation, but
However, even if the Iligan Property was subsumed by
the portion of which has been released in favor of the
Proclamation No. 2143, the same proclamation
actual occupants and the area of Leopoldo Delfin is
recognized private rights, which may have already
one of the portions released for agricultural
attached, and the rights of qualified free patent
purposes;chanrobleslaw
applicants:
chanRoblesvirtualLawlibrary
....
NOW, THEREFORE, I, FERDINAND E. MARCOS,
President of the Philippines, by virtue of the powers
That the applicant caused the survey of the land under
vested in me by law, do hereby reserve for relocation
Sgs-12-000099, approved by the Regional Land
of the families to be affected/dislocated by the 5-year
Director, Region XII, Bureau of Lands, Cotabato City
expansion program of the National Steel Corporation
on April 3, 1979 (see approved plan attached
and for the slum improvement and resettlement
hereof);chanrobleslaw
project of the City of Iligan under the administration
and disposition of the National Housing Authority,
In view hereof, it is therefore respectfully
subject to private rights, if any there be, Lot 5258
recommended that the entry of the application be now
(portion) of the Iligan Cadastre, which parcel of land
confirmed and that patent be yes issued in favor of
is of the public domain, situated in Barrio Suarez, City
Leopoldo Delfin.66ChanRoblesVirtualawlibrary
of Iligan and more particularly described as follows:
A May 18, 1988 supplemental letter to the Director of
.... the Land Management Bureau further stated:
chanRoblesvirtualLawlibrary
This Proclamation is subject to the condition that the That the land applied for by Leopoldo Delfin is a
qualified free patent applicants occupying portions of portion of Lot No. 5258, Cad. 292, Iligan Cadastre
the aforedescribed parcel of land, if any, may be which was entered, occupied and possessed by the
said applicant since the year June 1945 up to the
present; well improved the same and introduced some
considerable improvements such as different kinds of
fruit trees, coconut trees and other permanent Facts
improvements thereon;chanrobleslaw

.... The subject of this case is a parcel of land located in


Barangay Bangan, Botolan, Zambales, which was
That is very clear in the 4th Indorsement of the originally possessed by Macaria De
Executive Secretary dated April 24, 1954 the portion Ocampo (Macaria). Macaria's nephew, Hermogenes
thereof that will not be needed for any public or quasi- Yambao (Hermogenes), acted as the administrator of
public purposes, be disposed in favor of the actual the property and paid realty taxes therefor.
occupants under the administration of the Bureau of
Hermogenes has eight children, namely: Ulpiano,
Lands[.]67ChanRoblesVirtualawlibrary
Dominic, Teofilo, Feliciano, Asesclo, Delia, Amelia, and
Clearly then, petitioners acquired title over the Iligan Melinda, all surnamed Yambao.[3]
Property pursuant to Section 48(b) of the Public Land
Act. After Hermogenes died, it was claimed that all of his
heirs were free to pick and harvest from the fruit-
First, there is no issue that the Iligan Property had bearing trees planted on the subject property. Eleanor
already been declared to be alienable and disposable
Yambao (Eleanor), Ulpiano's daughter, even
land. Respondent has admitted this and Deputy Public
constructed a house on the subject property.
Land Inspector Pio Lucero, Jr.'s letters to the Director
of Land attest to this. However, sometime in 2005, the communal and
mutual use of the subject property by the heirs of
Second, although the Delfin Spouses' testimonial Hermogenes ceased when the heirs of Feliciano,
evidence and tax declarations showed that their herein petitioners, prohibited them from entering the
possession went only as far back as 1952, Deputy property. The heirs of Feliciano even ejected Eleanor
Public Land Inspector Pio Lucero, Jr.'s letters to the from the subject property.[4]
Director of Land nevertheless attest to a previous
finding that the property had already been occupied This prompted the heirs of Hermogenes, herein
as early as June 1945. respondents, to file with the RTC a complaint for
partition, declaration of nullity of title/documents, and
Having shown that the requisites of Section 48(b) of
damages against the heirs of Feliciano. The heirs of
the Public Land Act have been satisfied and having
Hermogenes alleged that they and the heirs of
established their rights to the Iligan Property, it
follows that petitioners must be compensated for its Feliciano are co-owners of the subject property,
taking. having inherited the right thereto from Hermogenes.[5]

WHEREFORE, the Petition is GRANTED. The assailed The heirs of Feliciano denied the allegations of the
Court of Appeals Decision dated February 26, 2010 heirs of Hermogenes and claimed that their father,
and Resolution dated July 2, 2010 in CA-G.R. CV No. Feliciano, was in possession of the subject property in
80017 are REVERSED and SET ASIDE. The Regional the concept of owner since time immemorial.
Trial Court's Decision dated May 20, 2002 in Civil Case Accordingly, Feliciano was awarded a free patent
No. II-1801 is REINSTATED. thereon for which Original Certificate of Title (OCT)
No. P-10737 was issued. They also averred that the
SO ORDERED.cralawlawlibrary cause of action in the complaint filed by the heirs of
Hermogenes, which questioned the validity of OCT No.
[ GR No. 194260, Apr 13, 2016 ] P-10737, prescribed after the lapse of one year from
its issuance on November 29, 1989.[6]
HEIRS OF FELICIANO YAMBAO v. HEIRS OF
HERMOGENES YAMBAO +
Ruling of the RTC
RESOLUTION

On December 23, 2008, the RTC rendered a Decision


dismissing the complaint filed by the heirs of
Hermogenes. The RTC opined that the heirs of
Hermogenes failed to show that the subject property
REYES, J.: is owned by Macaria, stating that tax declarations and
receipts in Macaria's name are not conclusive evidence
This is a petition for review on certiorari[1] under Rule of ownership. The RTC further held that even if
45 of the Rules of Court seeking to annul and set aside Macaria owned the subject property, the heirs of
the Decision[2] dated October 22, 2010 issued by the Hermogenes failed to show that Hermogenes had the
Court of Appeals (CA) in CA-G.R. CV No. 92755, which right to succeed over the estate of Macaria.
reversed and set aside the Decision dated December
23, 2008 of the Regional Trial Court (RTC) of Iba,
Zambales, Branch 69, in SP. Civil Case No. RTC-88-I.
Ruling of the CA
absent a clear repudiation of the co-ownership. An
On appeal, the CA, in its Decision[7] dated October 22, action to demand partition among co-owners is
2010, reversed and set aside the RTC's Decision dated imprescriptible, and each co-owner may demand at
December 23, 2008. The CA found that the RTC, in any time the partition of the common property.[11]
hastily dismissing the complaint for partition, failed to
determine first whether the subject property is indeed Prescription may nevertheless run against a co-owner
co-owned by the heirs of Hermogenes and the heirs of if there is adverse, open, continuous and exclusive
Feliciano. The CA pointed out that: possession of the co-owned property by the other co-
owner/s. In order that a co-owners possession may be
deemed adverse to the cestui que trust or other co-
[A] review of the records of the case shows that in owners, the following requisites must concur: (1) that
Feliciano's application for free patent, he he has performed unequivocal acts of repudiation
acknowledged that the source of his claim of amounting to an ouster of the cestui que trust or other
possession over the subject property was co-owners; (2) that such positive acts of repudiation
Hermogenes's possession of the real property in have been made known to the cestui que trust or
peaceful, open, continuous, and adverse manner and other co-owners; and (3) that the evidence thereon
more importantly, in the concept of an owner, since must be clear and convincing.[12]
1944. Feliciano's claim of sole possession in his
application for free patent did not therefore extinguish The issuance of the certificate of title would constitute
the fact of co-ownership as claimed by the children of an open and clear repudiation of any trust.[13] In such
Hermogenes.[8] (Citation omitted and emphasis a case, an action to demand partition among co-
deleted) owners prescribes in 10 years, the point of reference
being the date of the issuance of certificate of title
Accordingly, the CA, considering that the parties are
over the property. But this rule applies only when the
co-owners of the subject property, ruled that the RTC
plaintiff is not in possession of the property, since if a
should have conducted the appropriate proceedings
person claiming to be the owner thereof is in actual
for partition.[9]
possession of the property, the right to demand
partition does not prescribe.[14]
Aggrieved, the heirs of Feliciano filed with the Court
this petition for review alleging that the CA erred in
Although OCT No. P-10737 was registered in the name
ruling that there is co-ownership between them and
of Feliciano on November 29, 1989, the prescriptive
the heirs of Hermogenes. The heirs of Feliciano
period within which to demand partition of the subject
likewise averred that the CA also erred in ordering the
property, contrary to the claim of the heirs of
partition of the subject property since it amounts to a
Feliciano, did not begin to run. At that time, the heirs
collateral attack on the validity of OCT No. P-10737.[10]
of Hermogenes were still in possession of the
property. It was only in 2005 that the heirs of Feliciano
expressly prohibited the heirs of Hermogenes from
Ruling of the Court entering the property. Thus, as aptly ruled by the CA,
the right of the heirs of Hermogenes to demand the
partition of the property had not yet prescribed.
The petition is denied. Accordingly, the RTC committed a reversible error
when it dismissed the complaint for partition that was
As pointed out by the CA, the RTC overlooked the fact filed by the heirs of Hermogenes.
that the subject property is co-owned by the parties
herein, having inherited the same from Hermogenes. There is likewise no merit to the claim that the action
Feliciano's free patent application indicated that he for partition filed by the heirs of Hermogenes
merely tacked his possession of the subject property amounted to a collateral attack on the validity of OCT
from Hermogenes, his father, who held the property No. P-10737. The complaint for partition filed by the
in peaceful, open, continuous, and adverse manner in heirs of Hermogenes seeks first, a declaration that
the concept of an owner since 1944. This is an implicit they are a co-owners of the subject property, and
recognition of the fact that Feliciano merely co-owns second, the conveyance of their lawful shares. The
the subject property with the other heirs of heirs of Hermogenes do not attack the title of
Hermogenes. Indeed, the heirs of Feliciano have not Feliciano; they alleged no fraud, mistake, or any other
presented any evidence that would show that irregularity that would justify a review of the
Hermogenes bequeathed the subject property solely registration decree in their favor. Their theory is that
to Feliciano. although the subject property was registered solely in
Feliciano's name, they are co-owners of the property
A co-ownership is a form of trust, with each owner and as such is entitled to the conveyance of their
being a trustee for each other. Mere actual possession shares. On the premise that they are co-owners, they
by one will not give rise to the inference that the can validly seek the partition of the property in co-
possession was adverse because a co-owner is, after ownership and the conveyance to them of their
all, entitled to possession of the property. Thus, as a respective shares.[15]
rule, prescription does not run in favor of a co-heir or
co-owner as long as he expressly or impliedly Moreover, when Feliciano registered the subject
recognizes the co-ownership; and he cannot acquire property in his name, to the exclusion of the other
by prescription the share of the other co-owners, heirs of Hermogenes, an implied trust was created by
force of law and he was considered a trustee of the
undivided shares of the other heirs of Hermogenes in
the property. As trustees, the heirs of Feliciano cannot - versus -
be permitted to repudiate the trust by relying on the
registration.[16] "A trustee who obtains a Torrens title Pro
over a property held in trust for him by another cannot
repudiate the trust by relying on the registration."[17] HEIRS OF VICENTE TORIO, namely: PUBLIO TORIO,
LIBORIO TORIO, VICTORINA TORIO, ANGEL TORIO, De
WHEREFORE, in light of the foregoing disquisitions, LADISLAO TORIO, PRIMO TORIO and NORBERTO
the petition is hereby DENIED. The Decision dated TORIO,
October 22, 2010 issued by the Court of Appeals in
CA-G.R. CV No. 92755 is AFFIRMED.
Respondents.

SO ORDERED.

Velasco, Jr., (Chairperson), Perez, and Jardeleza, JJ., x----------------------------------------------------------


concur. -------------------------------x
Peralta, J., on official leave.

DECISION

PERALTA, J.:
April 29, 2016

Before the Court is a petition for review

on certiorari seeking to set aside the Decision1 dated

June 30, 2006 and Resolution2 dated November 13,


NOTICE OF JUDGMENT
2006 by the Court of Appeals (CA) in CA-G.R. SP No.

91887. The assailed Decision reversed and set aside


Sirs / Mesdames:
the Decision3 dated June 14, 2005 of the Regional
Please take notice that on April 13, 2016 a
Trial Court (RTC) of Lingayen, Pangasinan, Branch 69,
Resolution, copy attached hereto, was rendered by
the Supreme Court in the above-entitled case, the while the questioned Resolution denied petitioners'
original of which was received by this Office on April
29, 2016 at 1:47 p.m. Motion for Reconsideration.

Very truly yours,


The factual and procedural antecedents of the case
(SGD)WILFREDO V. LAPITAN
Division Clerk of Court are as follows:

JAIME ABALOS and SPOUSES FELIX SALAZAR and


G.R. No. 175444
CONSUELO SALAZAR, GLICERIO ABALOS, HEIRS OF
AQUILINO ABALOS, namely: SEGUNDA BAUTISTA,
ROGELIO ABALOS, DOLORES A. ROSARIO, FELICIDAD
On Present:
July 24, 1996, herein respondents filed a
ABALOS, ROBERTO ABALOS, JUANITO ABALOS, TITA
ABALOS, LITA A. DELA CRUZ AND HEIRS OF AQUILINA
Complaint for Recovery of Possession and Damages
ABALOS, namely: ARTURO BRAVO, PURITA B.
MENDOZA, LOURDES B. AGANON, CONSUELO B. with the Municipal Trial Court (MTC) of Binmaley,
SALAZAR, PRIMA B. DELOS SANTOS, THELMA VELASCO, JR., J., Chairperson,
APOSTOL and GLECERIO ABALOS, Pangasinan against Jaime Abalos (Jaime) and the
PERALTA,

Petitioners, spouses Felix and Consuelo Salazar. Respondents


ABAD,
MENDOZA,
contended andare the children and heirs of one
that: they
PERLAS-BERNABE, JJ.
Vicente Torio (Vicente) who died intestate on
September 11, 1973; at the time of the death of On the same date as the filing of defendants' Answer

Vicente, he left behind a parcel of land measuring with Counterclaim, herein petitioners filed their

2,950 square meters, more or less, which is located Answer in Intervention with Counterclaim. Like the

at San Isidro Norte, Binmaley, Pangasinan; during the defendants, herein petitioners claimed that their

lifetime of Vicente and through his tolerance, Jaime predecessors-in-interest were the absolute and

and the Spouses Salazar were allowed to stay and exclusive owners of the land in question; that

build their respective houses on the subject parcel of petitioners and their predecessors had been in

land; even after the death of Vicente, herein possession of the subject lot since time immemorial

respondents allowed Jaime and the Spouses Salazar up to the present; they have paid real property taxes

to remain on the disputed lot; however, in 1985, and introduced improvements thereon.6

respondents asked Jaime and the Spouses Salazar to

vacate the subject lot, but they refused to heed the

demand of respondents forcing respondents to file the


After the issues were joined, trial ensued.
complaint.4

On December 10, 2003, the MTC issued a Decision,


Jaime and the Spouses Salazar filed their Answer with
the dispositive portion of which reads as follows:
Counterclaim, denying the material allegations in the

Complaint and asserting in their Special and

Affirmative Defenses that: respondents' cause of WHEREFORE, in view of the


foregoing consideration[s], the
action is barred by acquisitive prescription; the court a Court adjudged the case in favor of
the plaintiffs and against the
quo has no jurisdiction over the nature of the action
defendants and defendants-
and the persons of the defendants; the absolute and intervenors are ordered to turn over
the land in question to the plaintiffs
exclusive owners and possessors of the disputed lot (Lot Nos. 869 and 870, Cad. 467-D.
Binmaley Cadastre located in Brgy.
are the deceased predecessors of defendants; San Isidro Norte, Binmaley,
Pangasinan with an area of 2,950
defendants and their predecessors-in-interest had sq. m., more or less, bounded and
described in paragraph 3 of the
been in actual, continuous and peaceful possession of Complaint[)]; ordering the
defendants and defendants-
the subject lot as owners since time immemorial; intervenors to remove their
respective houses standing on the
defendants are faithfully and religiously paying real
land in dispute; further ordering the
property taxes on the disputed lot as evidenced by defendants and defendants-
intervenors, either singly or jointly
Real Property Tax Receipts; they have continuously to pay the plaintiffs land rent in the
amount of P12,000.00 per year to
introduced improvements on the said land, such as be reckoned starting the year 1996
until defendants and defendants-
houses, trees and other kinds of ornamental plants intervenors will finally vacate the
premises; furthermore, defendants
which are in existence up to the time of the filing of and defendants-intervenors are also
ordered to pay, either singly or
their Answer.5 jointly, the amount of P10,000.00
as and by way of attorney's fees and
costs of suit.

SO ORDERED.7
Jaime and the Spouses Salazar appealed the Decision Hence, the instant petition based on a sole assignment

of the MTC with the RTC of Lingayen, of error, to wit:

Pangasinan.8Herein petitioners, who were


THE COURT OF APPEALS ERRED IN
intervenors, did not file an appeal. NOT APPRECIATING THAT THE
PETITIONERS HEREIN ARE NOW
THE ABSOLUTE AND EXCLUSIVE
OWNERS OF THE LAND IN
QUESTION BY VIRTUE OF
ACQUISITIVE PRESCRIPTION.10
In its Decision dated June 14, 2005, the RTC ruled in

favor of Jaime and the Spouses Salazar, holding that


The main issue raised by petitioners is whether they
they have acquired the subject property through
and their predecessors-in-interest possessed the
prescription. Accordingly, the RTC dismissed herein
disputed lot in the concept of an owner, or whether
respondents' complaint.
their possession is by mere tolerance of respondents

and their predecessors-in-interest. Corollarily,

petitioners claim that the due execution and

Aggrieved, herein respondents filed a petition for authenticity of the deed of sale upon which

review with the CA assailing the Decision of the RTC. respondents' predecessors-in-interest derived their

ownership were not proven during trial.

On June 30, 2006, the CA promulgated its questioned The petition lacks merit.

Decision, the dispositive portion of which reads, thus:

Preliminarily, the Court agrees with the observation of


WHEREFORE, the petition is
respondents that some of the petitioners in the instant
GRANTED. The Decision dated June
14, 2005 of the Regional Trial Court, petition were the intervenors11 when the case was
Branch 69, Lingayen, Pangasinan is
hereby REVERSED and SET ASIDE. filed with the MTC. Records would show that they did
In its stead, a new one is entered
reinstating the Decision dated not appeal the Decision of the MTC.12 The settled rule
December 10, 2003 of the Municipal
Trial Court of Binmaley, Pangasinan. is that failure to perfect an appeal renders the

judgment final and executory.13 Hence, insofar as the


SO ORDERED.9
intervenors in the MTC are concerned, the judgment

of the MTC had already become final and executory.

Jaime and the Spouses Salazar filed a Motion for


It also bears to point out that the main issue raised in
Reconsideration, but the same was denied by the CA
the instant petition, which is the character or nature
in its Resolution dated November 13, 2006.
of petitioners' possession of the subject parcel of land,

is factual in nature.
(k) When the CA manifestly
Settled is the rule that questions of fact are not overlooked certain relevant
facts not disputed by the
reviewable in petitions for review on certiorari under parties, which, if properly
considered, would justify a
Rule 45 of the Rules of Court.14 Section 1 of Rule 45
different conclusion.15
states that petitions for review on certiorari shall raise

only questions of law which must be distinctly set


In the present case, the findings of fact of the MTC and
forth.
the CA are in conflict with those of the RTC.

Doubtless, the issue of whether petitioners possess

the subject property as owners, or whether they After a review of the records, however, the Court finds
occupy the same by mere tolerance of respondents, is that the petition must fail as it finds no error in the
a question of fact. Thus, it is not reviewable. findings of fact and conclusions of law of the CA and

the MTC.

Nonetheless, the Court has, at times, allowed

exceptions from the abovementioned restriction. Petitioners claim that they have acquired ownership
Among the recognized exceptions are the following: over the disputed lot through ordinary acquisitive

prescription.

(a) When the findings are grounded


Acquisitive prescription of dominion and other real
entirely on speculation,
surmises, or conjectures; rights may be ordinary or extraordinary.16 Ordinary
(b) When the inference made is
manifestly mistaken, absurd, acquisitive prescription requires possession in good
or impossible;
faith and with just title for ten (10) years.17 Without
(c) When there is grave abuse of
discretion; good faith and just title, acquisitive prescription can

(d) When the judgment is based on only be extraordinary in character which requires
a misapprehension of facts;
uninterrupted adverse possession for thirty (30)
(e) When the findings of facts are
conflicting; years.18
(f) When in making its findings the
CA went beyond the issues of
the case, or its findings are
contrary to the admissions of
Possession in good faith consists in the reasonable
both the appellant and the
appellee;
belief that the person from whom the thing is received
(g) When the CAs findings are
contrary to those by the trial has been the owner thereof, and could transmit his
court;
ownership.19 There is just title when the adverse
(h) When the findings are
conclusions without citation of claimant came into possession of the property through
specific evidence on which
they are based; one of the modes recognized by law for the acquisition

(i) When the facts set forth in the of ownership or other real rights, but the grantor was
petition as well as in the
petitioners main and reply not the owner or could not transmit any right.20
briefs are not disputed by the
respondent;
(j) When the findings of fact are
premised on the supposed In the instant case, it is clear that during their
absence of evidence and
contradicted by the evidence possession of the property in question, petitioners
on record; or
acknowledged ownership thereof by the immediate petitioners' possession upon service of summons on

predecessor-in-interest of respondents. This is clearly them.24 Thus, petitioners possession also did not ripen

shown by the Tax Declaration in the name of Jaime for into ownership, because they failed to meet the

the year 1984 wherein it contains a statement required statutory period of extraordinary

admitting that Jaime's house was built on the land of prescription.

Vicente, respondents' immediate predecessor-in-

interest.21 Petitioners never disputed such an


This Court has held that the evidence relative to the
acknowledgment. Thus, having knowledge that they
possession upon which the alleged prescription is
nor their predecessors-in-interest are not the owners
based, must be clear, complete and conclusive in
of the disputed lot, petitioners' possession could not
order to establish the prescription.25 In the present
be deemed as possession in good faith as to enable
case, the Court finds no error on the part of the CA in
them to acquire the subject land by ordinary
holding that petitioners failed to present competent
prescription. In this respect, the Court agrees with the
evidence to prove their alleged good faith in neither
CA that petitioners' possession of the lot in question
possessing the subject lot nor their adverse claim
was by mere tolerance of respondents and their
thereon. Instead, the records would show that
predecessors-in-interest. Acts of possessory character
petitioners' possession was by mere tolerance of
executed due to license or by mere tolerance of the
respondents and their predecessors-in-interest.
owner are inadequate for purposes of acquisitive

prescription.22 Possession, to constitute the Finally, as to the issue of whether the due execution

foundation of a prescriptive right, must be en and authenticity of the deed of sale upon which

concepto de dueo, or, to use the common law respondents anchor their ownership were not proven,

equivalent of the term, that possession should be the Court notes that petitioners did not raise this

adverse, if not, such possessory acts, no matter how matter in their Answer as well as in their Pre-Trial

long, do not start the running of the period of Brief. It was only in their Comment to respondents'

prescription.23 Petition for Review filed with the CA that they raised

this issue. Settled is the rule that points of law,

theories, issues, and arguments not adequately


Moreover, the CA correctly held that even if the
brought to the attention of the trial court need not be,
character of petitioners' possession of the subject
and ordinarily will not be, considered by a reviewing
property had become adverse, as evidenced by their
court.26 They cannot be raised for the first time on
declaration of the same for tax purposes under the
appeal. To allow this would be offensive to the basic
names of their predecessors-in-interest, their
rules of fair play, justice and due process.27
possession still falls short of the required period of

thirty (30) years in cases of extraordinary acquisitive

prescription. Records show that the earliest Tax Even granting that the issue of due execution and

Declaration in the name of petitioners was in 1974. authenticity was properly raised, the Court finds no

Reckoned from such date, the thirty-year period was cogent reason to depart from the findings of the CA,

completed in 2004. However, herein respondents' to wit:


xxxx
complaint was filed in 1996, effectively interrupting
BERNARDO, AND THOSE PERSONS CLAIMING
RIGHTS UNDER THEM, Respondent.
Based on the foregoing,
respondents [Jaime Abalos and the
Spouses Felix and Consuelo DECISION
Salazar] have not inherited the
disputed land because the same BRION, J.:
was shown to have already been
validly sold to Marcos Torio, who,
thereupon, assigned the same to his We resolve the petition for review on certiorari1 filed
son Vicente, the father of by petitioners Esperanza Supapo and Romeo
petitioners [herein respondents]. A Supapo2 (Spouses Supapo) to assail the February 25,
valid sale was amply established 2011 decision3 and August 25, 2011 resolution4 of the
and the said validity subsists Court of Appeals (CA) in CA-G.R. SP No. 111674.
because the deed evidencing the
same was duly notarized. Factual Antecedents

The Spouses Supapo filed a complaint5 for accion


There is no doubt that the deed of publiciana against Roberto and Susan de Jesus
sale was duly acknowledged before (Spouses de Jesus), Macario Bernardo (Macario), and
a notary public. As a notarized persons claiming rights under them (collectively,
document, it has in its favor the the respondents), with the Metropolitan Trial Court
presumption of regularity and it (MeTC) of Caloocan City.
carries the evidentiary weight
conferred upon it with respect to its The complaint sought to compel the respondents to
due execution. It is admissible in vacate a piece of land located in Novaliches, Quezon
evidence without further proof of its City, described as Lot 40, Block 5 (subject lot). The
authenticity and is entitled to full subject lot is covered by Transfer Certificate of Title
faith and credit upon its face.28 (TCT) No. C-284416 registered and titled under the
Spouses Supapo's names. The land has an assessed
value of thirty-nine thousand nine hundred eighty
pesos (39,980.00) as shown in the Declaration of Real
Property Value (tax declaration) issued by the Office
of the City Assessor of Caloocan.7
Indeed, settled is the rule in our jurisdiction that a

notarized document has in its favor the presumption The Spouses Supapo did not reside on the subject lot.
They also did not employ an overseer but they made
of regularity, and to overcome the same, there must sure to visit at least twice a year.8 During one of their
visits in 1992, they saw two (2) houses built on the
be evidence that is clear, convincing and more than subject lot. The houses were built without their
knowledge and permission. They later learned that the
merely preponderant; otherwise, the document Spouses de Jesus occupied one house while Macario
occupied the other one.9
should be upheld. 29
In the instant case, petitioners'
The Spouses Supapo demanded from the respondents
bare denials will not suffice to overcome the
the immediate surrender of the subject lot by bringing
presumption of regularity of the assailed deed of sale. the dispute before the appropriate Lupong
Tagapamayapa. The Lupon issued a Katibayan Upang
Makadulog sa Hukuman (certificate to file action) for
failure of the parties to settle amicably.10

WHEREFORE, the petition is DENIED. The assailed The Spouses Supapo then filed a criminal
case11 against the respondents for violation of
Decision and Resolution of the Court of Appeals in CA- Presidential Decree No. 772 or the Anti-Squatting
Law.12 The trial court convicted the respondents. The
G.R. SP No. 91887 are AFFIRMED. dispositive portion of the decision reads:

WHEREFORE, in view of all the foregoing, this Court


finds accused ROBERTO DE JESUS, SUSAN DE JESUS
SO ORDERED.
and MACARIO BERNARDO, GUILTY beyond reasonable
doubt for Violation of Presidential Decree No. 772, and
each accused is hereby ordered to pay a fine of ONE
THOUSAND PESOS (P1,000.00), and to vacate the
G.R. No. 198356, April 20, 2015
subject premises.

ESPERANZA SUPAPO AND THE HEIRS OF ROMEO SO ORDERED.13 (Emphasis supplied.)


SUPAPO, NAMELY: ESPERANZA, REX EDWARD,
RONALD TROY, ROMEO, JR., SHEILA LORENCE,
ALL SURNAMED SUPAPO, AND SHERYL FORTUNE The respondents appealed their conviction to the
SUPAPO-SANDIGAN, Petitioners, v. SPOUSES CA.14 While the appeal was pending, Congress
ROBERTO AND SUSAN DE JESUS, MACARIO enacted Republic Act (RA) No. 8368, otherwise known
as "An Act Repealing Presidential Decree No. 772,"
which resulted to the dismissal of the criminal case.15 (ii) accion publiciana falls within the exclusive
jurisdiction of the RTC.
On April 30, 1999, the CA's dismissal of the criminal
case became final.16 It held that in cases where the only issue involved is
possession, the MeTC has jurisdiction if the action for
Notwithstanding the dismissal, the Spouses Supapo forcible entry or unlawful detainer is filed within one
moved for the execution of the respondents' civil (1) year from the time to demand to vacate was
liability, praying that the latter vacate the subject lot. made. Otherwise, the complaint for recovery of
The Regional Trial Court (RTC) granted the motion and possession should be filed before the RTC.
issued the writ of execution. The respondents moved
for the quashal of the writ but the RTC denied the The dispositive portion of the RTC decision reads:
same. The RTC also denied the respondents' motion
for reconsideration. WHEREFORE, premises considered, the instant
petition is hereby GRANTED.
The respondents thus filed with the CA a petition
for certiorari to challenge the RTC's orders denying The Orders dated October 24, 2008 and February 23,
the quashal of the writ and the respondent's motion 2009 are hereby declared NULL and VOID.
for reconsideration.17 The CA granted the petition and
held that with the repeal of the Anti-Squatting Law, The Public Respondent is hereby directed
the respondents' criminal and civil liabilities were to DISMISS Civil Case No. 08-29245 for lack of
extinguished.18 The dispositive portion of the decision jurisdiction.
reads:
SO ORDERED.26
WHEREFORE, premises considered, the petition for
certiorari with prayer for injunction is GRANTED. The
In their motion for reconsideration,27 the Spouses
orders dated June 5, 2003 and July 24, 2003 of Branch
Supapo emphasized that the court's jurisdiction over
131 of the Regional Trial Court of Caloocan City in
an action involving title to or possession of land is
Criminal Case No. C-45610 are REVERSED and SET
determined by its assessed value; that the RTC does
ASIDE. Said court is hereby
not have an exclusive jurisdiction on all complaints
permanently ENJOINED from further executing or
for accion publiciana; and that the assessed value of
implementing its decision dated March 18, 1996.
the subject lot falls within MeTC's jurisdiction.
SO ORDERED.
The RTC denied the petitioners' motion for
reconsideration.
The CA, however, underscored that the repeal of
the Anti-Squatting Law does not mean that people It held that although the MeTC had jurisdiction based
now have unbridled license to illegally occupy lands on the assessed value of the subject lot, the Spouses
they do not own, and that it was not intended to Supapos' cause of action had already prescribed, the
compromise the property rights of legitimate action having been filed beyond the ten (l0)-year
landowners.19 In cases of violation of their property prescriptive period under Article 555 of the Civil
rights, the CA noted that recourse may be had in court Code.28 As it was not proven when the actual demand
by filing the proper action for recovery of possession. to vacate was made, the RTC ruled that the reckoning
period by which the ejectment suit should have been
The Spouses Supapo thus filed the complaint filed is counted from the time the certificate to file
for action publiciana.20 action was issued. The certificate to file action was
issued on November 25, 1992, while the complaint
After filing their Answer,21 the respondents moved to for accion publiciana was filed only on March 7, 2008,
set their affirmative defenses for preliminary or more than ten (10) years thereafter.
hearing22 and argued that: (1) there is another action
pending between the same parties; (2) the complaint Dissatisfied with the RTC ruling, the Spouses Supapo
for accion publiciana is barred by statute of appealed to the CA.29
limitations; and (3) the Spouses Supapo's cause of
action is barred by prior judgment. The CA Ruling30

The MeTC Ruling23 The CA dismissed the appeal and held that the
complaint for accion publiciana should have been
The MeTC denied the motion to set the affirmative lodged before the RTC and that the period to file the
defenses for preliminary hearing. It ruled that the action had prescribed.
arguments advanced by the respondents are
evidentiary in nature, which at best can be utilized in The dispositive portion of the CA decision reads:
the course of the trial. The MeTC likewise denied the
respondents' motion for reconsideration. WHEREFORE, the appeal is DENIED. The Decision
dated June 30, 2009 and Order dated October 19,
From the MeTC's ruling, the respondents filed a 2009 are AFFIRMED.
petition for certiorari with the RTC.24
SO ORDERED
The RTC Ruling25
The Spouses Supapo moved31 but failed32 to secure a
The RTC granted the petition for certiorari on two
grounds, viz.: (i) the action has prescribed; and
reconsideration of the CA decision; hence, they came resolving the issue of possession, where the issue of
to us through the present petition. ownership is inseparably linked to the issue of
possession. The adjudication of the issue of
The Petition ownership, being provisional, is not a bar to an action
between the same parties involving title to the
In seeking reversal of the CA's ruling, the Spouses property. The adjudication, in short, is not conclusive
Supapo essentially argue that: on the issue of ownership.36

Thus, while we will dissect the Spouses Supapo's claim


(1) the MeTC exercises exclusive original jurisdiction
of ownership over the subject property, we will only
over accion publiciana where the assessed value
do so to determine if they or the respondents should
of the property does not exceed P20,000.00, or
have the right of possession.
P50,000.00 if the property is located in Metro
Manila; and that
Having thus determined that the dispute involves
(2) prescription had not yet set in because their
possession over a real property, we now resolve which
cause of action is imprescriptible under the
court has the jurisdiction to hear the case.
Torrens system.
Under Batas Pambansa Bilang 129,37 the jurisdiction
The Respondents' Case33
of the RTC over actions involving title to or possession
of real property is plenary.38
The respondents argue that the complaint for accion
publiciana was (1) filed in the wrong court; (2) barred
RA No. 7691,39 however, divested the RTC of a portion
by prescription; and (3) barred by res judicata.
of its jurisdiction and granted the Metropolitan Trial
Courts, Municipal Trial Courts and Municipal Circuit
Issues Trial Courts the exclusive and original jurisdiction to
hear actions where the assessed value of the property
The issues for resolution are: does not exceed Twenty Thousand Pesos
(P20,000.00), or Fifty Thousand Pesos (P50,000.00),
I. Whether the MeTC properly acquired if the property is located in Metro Manila.
jurisdiction;
II. Whether the cause of action has prescribed; Section 1 of RA No. 7691 states:
and
III. Whether the complaint for accion Section 1. Section 19 of Batas Pambansa Blg. 129,
publiciana is barred by res judicata. otherwise known as the "Judiciary Reorganization Act
of 1980," is hereby amended to read as follows:
Section. 19. Jurisdiction in civil cases. - Regional
Our Ruling Trial Courts shall exercise exclusive original
jurisdiction:
The petition is meritorious.
(2) In all civil actions which involve the title to,
We hold that: (1) the MeTC properly acquired or possession of, real property, or any interest
jurisdiction; (2) the cause of action has not therein, where the assessed value of the property
prescribed; and (3) the complaint is not barred by res involved exceeds Twenty thousand pesos
judicata. (P20,000.00) or, for civil actions in Metro
Manila, where such value exceeds Fifty thousand
Accion Publiciana and pesos (P50,000.00) x x x. (Emphasis supplied.)
the Jurisdiction of the
MeTC Section 3 of the same law provides:
Section. 3. Section 33 of the same law is hereby
Accion publiciana is an ordinary civil proceeding to amended to read as follows:
determine the better right of possession of realty Section. 33. Jurisdiction of Metropolitan Trial Courts,
independent of title. It refers to an ejectment suit filed Municipal Trial Courts and Municipal Circuit Trial
after the expiration of one year from the accrual of the Courts in Civil Cases. - Metropolitan Trial Courts,
cause of action or from the unlawful withholding of Municipal Trial Courts, and Municipal Circuit
possession of the realty.34 Trial Courts shall exercise:

In the present case, the Spouses Supapo filed an xxxx


action for the recovery of possession of the subject lot
but they based their better right of possession on a (3) Exclusive original jurisdiction in all civil actions
claim of ownership. which involve title to, or possession of, real
property, or any interest therein where the assessed
This Court has held that the objective of the plaintiffs value of the property or interest therein does not
in accion publiciana is to recover possession only, not exceed Twenty thousand pesos (P20,000.00) or,
ownership. However, where the parties raise the issue in civil actions in Metro Manila, where such
of ownership, the courts may pass upon the issue to assessed value does not exceed Fifty thousand
determine who between the parties has the right to pesos (P50,000.00) exclusive of interest, damages
possess the property.35 of whatever kind, attorney's fees, litigation expenses
and costs x x x. (Emphasis supplied.)
This adjudication is not a final determination of the
issue of ownership; it is only for the purpose of
to file action was issued on November 25, 1992. The
In view of these amendments, jurisdiction over respondents contend that the Spouses Supapo may
actions involving title to or possession of real property no longer recover possession of the subject property,
is now determined by its assessed value.40 The the complaint having been filed beyond the period
assessed value of real property is its fair market value provided by law.
multiplied by the assessment level. It is synonymous
to taxable value.41 Further, while the respondents concede that the
Spouses Supapo hold a TCT over the subject property,
In Quinagoran v. Court of Appeals,42 we explained: and assuming a Torrens title is imprescriptible and
indefeasible, they posit that the latter have lost their
[D]oes the RTC have jurisdiction over all cases of right to recover possession because of laches.
recovery of possession regardless of the value of the
property involved? On their part, the Spouses Supapo admit that they
filed the complaint for accion publiciana more than ten
The answer is no. The doctrine on which the RTC (10) years after the certificate to file action was
anchored its denial of petitioner's Motion to Dismiss, issued. Nonetheless, they argue that their cause of
as affirmed by the CA — that all cases of recovery of action is imprescriptible since the subject property is
possession or accion publiciana lies with the regional registered and titled under the Torrens system.
trial courts regardless of the value of the property —
no longer holds true. As tilings now stand, a We rule that the Spouses Supapo's position is legally
distinction must be made between those correct.
properties the assessed value of which is below
P20,000.00, if outside Metro Manila; and At the core of this controversy is a parcel of land
P50,000.00, if within.43 (Emphasis supplied.) registered under the Torrens system. The Spouses
Supapo acquired the TCT on the subject lot in
1979.46 Interestingly, the respondents do not
In this regard, the complaint must allege the assessed challenge the existence, authenticity and
value of the real property subject of the complaint or genuineness of the Supapo's TCT.47
the interest thereon to determine which court has
jurisdiction over the action. This is required because In defense, the respondents rest their entire case on
the nature of the action and the court with original and the fact that they have allegedly been in actual, public,
exclusive jurisdiction over the same is determined by peaceful and uninterrupted possession of the subject
the material allegations of the complaint, the type of property in the concept of an owner since 1992. The
relief prayed for by the plaintiff, and the law in effect respondents contend that they built their houses on
when the action is filed, irrespective of whether the the subject lot in good faith. Having possessed the
plaintiffs are entitled to some or all of the claims subject lot for more than ten (10) years, they claim
asserted therein.44 that they can no longer be disturbed in their
possession.48
In the present case, the Spouses Supapo alleged that
the assessed value of the subject lot, located in Metro Under the undisputed facts of this case, we find that
Manila, is P39,980.00. This is proven by the tax the respondents' contentions have no legal basis.
declaration45 issued by the Office of the City Assessor
of Caloocan. The respondents do not deny the In a long line of cases, we have consistently ruled
genuineness and authenticity of this tax declaration. that lands covered by a title cannot be acquired
by prescription or adverse possession. We have
Given that the Spouses Supapo duly complied with the also held that a claim of acquisitive prescription is
jurisdictional requirements, we hold that the MeTC of baseless when the land involved is a registered land
Caloocan properly acquired jurisdiction over the because of Article 112649 of the Civil Code in relation
complaint for accion publiciana. to Act 496 [now, Section 47 of Presidential Decree
(PD) No. 152950].51
The cause of action
has not prescribed The Spouses Supapo (as holders of the TCT) enjoy a
panoply of benefits under the Torrens system. The
The respondents argue that the complaint for accion most essential insofar as the present case is
publiciana is dismissible for being filed out of time. concerned is Section 47 of PD No. 1529 which states:

They invoke Article 555 of the Civil Code, which Section 47. Registered land not subject to
states: Art. 555. A possessor may lose his possession: prescriptions. No title to registered land in derogation
of the title of the registered owner shall be acquired
xxxx by prescription or adverse possession.

(4) By the possession of another, subject to the


In addition to the imprescriptibility, the person who
provisions of Article 537, if the new possession has
holds a Torrens Title over a land is also entitled to the
lasted longer than one year. But the real right of
possession thereof.52 The right to possess and occupy
possession is not lost till after the lapse of ten
the land is an attribute and a logical consequence of
years. (Emphasis supplied.)
ownership.53 Corollary to this rule is the right of the
holder of the Torrens Title to eject any person illegally
The respondents point out that the Spouses Supapo occupying their property. Again, this right is
filed the complaint for accion publiciana on March 7, imprescriptible.54
2008 or more than ten (10) years after the certificate
In Bishop v. CA,55 we held that even if it be supposed
that the holders of the Torrens Title were aware of the With these as premises, we cannot but rule that the
other persons' occupation of the Spouses Supapo's right to recover possession of the
property, regardless of the length of that subject lot is not barred by prescription.
possession, the lawful owners have a right to
demand the return of their property at any time as The action is not barred
long as the possession was unauthorized or merely by prior judgment
tolerated, if at all.56
As a last-ditch effort to save their case, the
Even if the defendant attacks the Torrens Title respondents invoke res judicata. They contend that
because of a purported sale or transfer of the the decision of the CA in CA-G.R. SP No. 78649 barred
property, we still rule in favor of the holder of the the filing of the action publiciana.
Torrens Title if the defendant cannot adduce, in
addition to the deed of sale, a duly-registered To recall, CA-G.R. SP No. 78649 is the petition
certificate of title proving the alleged transfer or sale. for certiorari filed by the respondents to challenge the
RTC's issuance of the writ enforcing their civil liability
A case in point is Umpoc v. Mercado57 in which we (i.e., to vacate the subject property) arising from their
gave greater probative weight to the plaintiffs TCT vis- conviction under the Anti-Squatting Law. The CA
a-vis the contested unregistered deed of sale of the granted the petition and permanently enjoined the
defendants. Unlike the defendants in Umpoc, execution of the respondents' conviction because their
however, the respondents did not adduce a single criminal liability had been extinguished by the repeal
evidence to refute the Spouses Supapo's TCT. With of the law under which they were tried and convicted.
more reason therefore that we uphold the It follows that their civil liability arising from the crime
indefeasibility and imprescriptibility of the Spouses had also been erased.
Supapo's title.
The respondents' reliance on the principle of res
By respecting the imprescriptibility and indefeasibility judicata is misplaced.
of the Spouses Supapo's TCT, this Court merely
recognizes the value of the Torrens System in Res judicata embraces two concepts: (1) bar by prior
ensuring the stability of real estate transactions and judgment as enunciated in Rule 39, Section 47(b) of
integrity of land registration. the Rules of Civil Procedure; and (2) conclusiveness of
judgment in Rule 39, Section 47(c).62
We reiterate for the record the policy behind the
Torrens System, viz.: "Bar by prior judgment" means that when a right or
fact had already been judicially tried on the merits and
The Government has adopted the Torrens system due determined by a court of competent jurisdiction, the
to its being the most effective measure to guarantee final judgment or order shall be conclusive upon the
the integrity of land titles and to protect their parties and those in privity with them and constitutes
indefeasibility once the claim of ownership is an absolute bar to subsequent actions involving the
established and recognized. If a person purchases a same claim, demand or cause of action.63
piece of land on the assurance that the seller's title
thereto is valid, he should not run the risk of being The requisites64 for res judicata under the concept of
told later that his acquisition was ineffectual after all, bar by prior judgment are:
which will not only be unfair to him as the purchaser,
but will also erode public confidence in the system and (1) The former judgment or order must be final;
will force land transactions to be attended by
complicated and not necessarily conclusive (2) It must be a judgment on the merits;
investigations and proof of ownership. The further
consequence will be that land conflicts can be even (3) It must have been rendered by a court having
more abrasive, if not even violent.58 jurisdiction over the subject matter and the parties;
and
With respect to the respondents' defense59 of laches,
(4) There must be between the first and second
suffice it to say that the same is evidentiary in nature
actions, identity of parties, subject matter, and
and cannot be established by mere allegations in the
cause of action.
pleadings.60 In other words, the party alleging laches
must adduce in court evidence proving such
allegation. This Court not being a trier of facts cannot Res judicata is not present in this case.
rule on this issue; especially so since the lower courts
did not pass upon the same. While requisites one to three may be present, it is
obvious that the there is no identity of subject matter,
Thus, without solid evidentiary basis, laches cannot be parties and causes of action between the criminal
a valid ground to deny the Spouses Supapo's case prosecuted under the Anti-Squatting Law and
petition.61 On the contrary, the facts as culled from the civil action for the recovery of the subject
the records show the clear intent of the Spouses property.
Supapo to exercise their right over and recover
possession of the subject lot, viz.: (1) they brought First, there is no identity of parties. The criminal
the dispute to the appropriate Lupon; (2) they complaint, although initiated by the Spouses Supapo,
initiated the criminal complaint for squatting; and (3) was prosecuted in the name of the people of the
finally, they filed the action publiciana. To our mind, Philippines. The accion publiciana, on the other hand,
these acts negate the allegation of laches. was filed by and in the name of the Spouses Supapo.
Second, there is no identity of subject matter. Carpio, (Chairperson), Del Castillo,
The criminal case involves the prosecution of a crime Mendoza, and Leonen, JJ., concur.
under the Anti-Squatting Law while the accion
publiciana is an action to recover possession of the
G.R. No. 170671, August 19, 2015
subject property.

And third, there is no identity of causes of FILADELFA T. LAUSA, LORETA T. TORRES,


action. The people of the Philippines filed the criminal PRIMITIVO TUGOT AND ANACLETO T.
case to protect and preserve governmental interests CADUHAY, Petitioners, v. MAURICIA QUILATON,
by prosecuting persons who violated the statute. The RODRIGO Q. TUGOT, PURIFICACION T.
Spouses Supapo filed the accion publiciana to protect CODILLA, TEOFRA T. SADAYA, ESTRELLITA T.
their proprietary interests over the subject property GALEOS AND ROSITA T. LOPEZ, Respondents.
and recover its possession.
DECISION
Even casting aside the requirement of identity of
causes of action, the defense of res judicata has still
no basis. BRION, J.:

The concept of "conclusiveness of judgment" does not Before us is a Petition for review on certiorari assailing
require that there is identity of causes of action the Court of Appeals (CA) Decision in CA-G.R. CV No.
provided that there is identity of issue and identity of 63248. The CA reversed the decision of the Regional
parties.65 Trial Court (RTC) of Cebu City, Branch 15 in Civil Case
No. CEB - 17857, and. upheld the validity of Transfer
Under this particular concept of res judicata, any Certificate Title (TCT) No. 571.
right, fact, or matter in issue directly adjudicated or
necessarily involved in the determination of an action Factual Antecedents
before a competent court in which judgment is
rendered on the merits is conclusively settled by the The main issue in the present case involves the title
judgment therein and cannot again be litigated to Lot No. 557, a parcel of land situated in V. Ranudo
between the parties and their privies, whether or not and D. Jakosalem Streets, Cogon Central, Cebu City.
the claim, demand, purpose, or subject matter of the
two actions is the same.66 The petitioners and the respondents are relatives
residing in Lot No. 557.
As already explained, there is no identity of parties
between the criminal complaint under the Anti- Petitioners Filadelfa T. Lausa, Loreta T. Torres,
Squatting law and the civil action for accion Primitivo Tugot, and Anacleto T. Caduhay are the
publiciana. For this reason alone, "collusiveness of cousins of respondents Rodrigo Tugot, Purificacion
judgment" does not apply. Codilla, Teofra Sadaya, and Estrellita Galeos; while
Mauricia Quilaton is the respondents' mother and the
Even if we assume, for the sake of argument, that petitioners' aunt-in-law.
there is identity of parties, "conclusiveness of
judgment" still does not apply because there is no The respondent Rosita T. Lopez, on the other hand,
identity of issues. The issue in the criminal case is acquired the rights of Rodrigo when he mortgaged Lot
whether the respondents (accused therein) committed No. 557-A, a portion of Lot No. 557, to her. Rodrigo
the crime alleged in the information, while the only subsequently defaulted on his loan.
issue in accion publiciana is whether the Spouses
Supapo have a better right than the respondents to The petitioners and respondents, with the exception
possess and occupy the subject property. of Mauricia and Rosita, are all grandchildren of
Alejandro Tugot. Alejandro had possessed Lot No. 557
For all these reasons, the defense of res judicata is since September 13, 1915, after it was assigned to
baseless. him by Martin Antonio.

Final Note Lot No. 557 formed part of the Banilad Friar Estate
Lands, which had been bought by the government
As a final note, we stress that our ruling in this case through Act No. 1120 for distribution to its occupants.
is limited only to the issue of determining who Antonio had initially been Lot No. 557's beneficiary,
between the parties has a better right to possession. but subsequently assigned his rights over Lot No. 557
This adjudication is not a final and binding to Alejandro.
determination of the issue of ownership. As such, this
is not a bar for the parties or even third persons to file Since then, Alejandro possessed Lot No. 557 until his
an action for the determination of the issue of death; thereafter, his children and grandchildren
ownership. continued to reside in the lot. The present controversy
arose when the respondents, claiming to be its
WHEREFORE, premises considered, we GRANT the registered owners, attempted to eject the petitioners
petition, and consequently REVERSE and SET from Lot No. 557.
ASIDE the February 25, 2011 decision and August
25, 2011 resolution of the Court of Appeals in CA-G.R. On January 1993, Mauricia filed before the RTC of
SP No. 111674. Cebu City Branch 17 a petition for the issuance of a
new owner's duplicate of TCT No. 571, which
SO ORDERED. purportedly covers Lot No. 557. Mauricia claimed to
own TCT No. 571, but lost her owner's duplicate for the issuance of a new owner's duplicate, even as
during a strong typhoon sometime in 1946. The RTC, she claimed to have owned the lot since 1946.
after due hearing, granted Quilaton's petition and
directed the issuance of a new owner's duplicate of Fourth, Mauricia failed to present evidence showing
TCT No. 571. how she acquired title to Lot No. 557. If indeed the
land was purchased from Martin Antonio, she could
On September 27, 1994, Mauricia donated Lot No. 557 have secured a copy of its document of sale from the
to her children Rodrigo, Purificacion, Teofra and Archives Office, Manila.
Estrellita. Thus, TCT No. 571 was cancelled, and re-
issued as TCT Nos. 130517, 130518, 130519, 130520 Additionally, the RTC held that the petitioners had
and 130521 in the names of Mauricia's better title to Lot No. 557 than the respondents. The
children.1cralawrednad RTC found that Lot No. 557 had been in the possession
of Alejandro since September 13, 1915, when the lot's
Mauricia's children subsequently performed several owner, Martin Antonio, executed a Deed of
acts of ownership over Lot 571: first, Rodrigo, on Assignment in favor of Alejandro. This conveyance,
March 23, 1995, mortgaged TCT No. 130517 to Lopez together with Alejandro and his heirs' continuous
as security for a loan he obtained from the latter. payment of Lot No. 557's real estate taxes since 1928,
Rodrigo subsequently defaulted on his loan, amounts to more than thirty years of adverse
prompting the foreclosure of TCT No. 130517. The possession, so that ownership over the lot vested in
land covered by TCT No. 130517 was thereafter sold him.
by public auction to Lopez, for which she was issued
TCT No. 143511 on March 31, 1997. As Alejandro's heirs, both the petitioners and
respondents are entitled to a share in Lot No. 557.
Second, Mauricia's children filed a complaint for
ejectment against the petitioners, docketed as Civil Lastly, the RTC declared Lopez's TCT No. 143511,
Case No. R-35137, on August 4, 1995. which she acquired when she purchased TCT No.
130517, to be null and void. TCT No. 130517 covers
In response, the petitioners filed Civil Case No. CEB- Lot No. 557-A, and had been annotated with a Notice
17857 for the annulment of TCT No. 571 and the of Lis Pendens at the time Lopez purchased it. Thus,
subsequent titles that originate from TCT No. 571, as Lopez had knowledge of the dispute over the
well as criminal complaints2 for falsification and ownership of the lot she bought, and could not claim
perjury against the respondents. the defense of a purchaser in good faith. She acquired
no greater title to the lot than Rodrigo, who
The Regional Trial Court's ruling mortgaged TCT No. 130517.

The RTC found TCT No. 571 to be a forgery, and The respondents filed a motion for reconsideration
declared it and all titles originating from it to be null contesting the RTC's decision. After the RTC denial of
and void ab initio. The RTC gave the following reasons the motion, the respondents appealed to the CA.
as basis for this
conclusion:ChanRoblesvirtualLawlibrary The Court of Appeals' ruling

First, the RTC noted several discrepancies in TCT No. The CA reversed the RTC's decision, and upheld the
571 indicating that it is a validity of TCT No. 571 and all the titles originating
forgery, viz.:ChanRoblesvirtualLawlibrary from it.

(i) The TCTs issued before and after TCT No. 571, that In upholding the validity of TCT No. 571 (and all the
is, TCT No. 570 and TCT No. 572, both use a titles originating from it), the CA emphasized the
different and more recent form than TCT No. 571. existence of a copy of TCT No. 571 in the custody of
TCT Nos. 570 and 572 use Judicial Form No. 109, the Office of the Register of Deeds of Cebu City, and
which was issued in June 1945, while TCT No. 571 noted that it is presumed by law to have been issued
uses Judicial Form No. 140-D, which was issued in in a regular manner. The application of this
April 1936. presumption is called for by the purpose of the Torrens
system, which is to promote the stability and integrity
(ii) TCT Nos. 570 and 572 was signed by Martina L. of land titles.
Arnoco as Register of Deeds, while TCT No. 571
was signed by Gervasio Lavilles as Acting Register According to the CA, the petitioners have failed to
of Deeds. disprove this presumption of regularity. The pieces of
evidence that the petitioners presented (i.e., the tax
(iii)There are distinct differences in Lavilles' signature receipts and Antonio's Deed of Assignment of Lot No.
as it appears in TCT No. 571 from his signatures in 557 to Alejandro) do not prove with clear, positive,
other TCTs, such as TCT Nos. 525 and 526. and convincing evidence that TCT No. 571 had been
fraudulently issued. The payment of real estate taxes
Second, Mauricia's previous acts show that she over Lot No. 557 does not prove ownership. The Deed
acknowledged Alejandro's ownership over Lot No. of Assignment, on the other hand, had been
557. Prior to instituting a petition for issuance of a new subsequently cancelled, as shown by the Friar Lands
owner's duplicate in 1993, Mauricia had been paying Sale Certificate Register on file with the DENR. It
Alejandro (and subsequently Aurea) contributions for proves that the lot had been earlier assigned to
the real estate taxes due on Lot No. 557. Alejandro, but because the assignment was canceled,
the ownership of Lot No. 557 remained with Antonio.
Third, Mauricia exercised acts of full ownership over
Lot No. 557 only in 1994, after she had filed a petition The CA also noted that the lot that Alejandro appears
to have owned was not Lot No. 557 but Lot No. 357. although earlier tax declarations indicated the areas
The description of Lot No. 557 - as set forth by the of the lot to be Lot No. 357. This error was corrected
petitioners in their original complaint - substantially in subsequent tax declarations by the City of Cebu
varies from the actual and precise technical Assessor's Office in 1997.
description of Lot No. 557. Additionally, some of the
documentary evidence in the case (such as tax Third, the CA erred in holding that Lopez is an
declarations, tax receipts and notices of tax innocent purchaser in good faith, as she knew that the
delinquency) show that what Alejandro owned was Lot portion of Lot No. 557 being mortgaged to her was in
No. 357, not Lot No. 557. the possession of Filadelfa, and not Rodrigo. She knew
of this possession before she executed the real estate
The CA also pointed out that Alejandro could not have mortgage contract over the property with Rodrigo.
acquired Lot 557 through acquisitive prescription for
two reasons: first, Mauricia had been in possession of Fourth, the CA erred in finding the petitioners' cause
the property since 1946; and second, a lot registered of action barred by prescription and laches, as they
under the Torrens system cannot be acquired through discovered the existence of TCT No. 571 only in
acquisitive prescription. Records show that the lands August 1995, when Mauricia and her children
comprising the Banilad Friar Lands Estate, of which Lot instituted ejectment proceedings against them.
No. 557 was a part, had been brought under the
operation of the Torrens system on September 23, In response, the respondents argue that the
1913. petitioners have no cause of action against them
because Alejandro's tax declarations cover Lot No.
The CA found Lopez to be an innocent purchaser for 357, and not Lot No. 557, which is covered by their
value. Applying the Court's ruling in Bank of the TCTs. They also cited the CA's decision, and argued
Philippine Islands v. Noblejas, the CA held that Lopez's that the CA committed no error of law in upholding the
good faith as a mortgagee extends to her eventual validity of their TCTs.
purchase of the lot during its foreclosure. Since TCT
No. 130517 had no notice of any adverse claim at the Lopez, on the other hand, asserted that her status as
time it was mortgaged to Lopez, then the subsequent an innocent purchaser or mortgagor in good faith had
annotation of Notice of Lis Pendensprior to TCT No. not been included in the petitioners' amended
130517's foreclosure should not affect her status as a complaint including her as an indispensible party, and
mortgagee-in-good-faith. The clean title presented to should thus not have been considered as an issue in
Lopez at the time TCT No. 130517 was mortgaged to the case. In any case, Lopez asserts that her title to
her maintains this status at the time of its foreclosure, Lot No. 557-A is valid because she is an innocent
and cannot be prejudiced by the subsequent purchaser in good faith.
annotation of a claim to it before the lot is foreclosed.
Issues:
Lastly, the CA found that the RTC erred when it did
not immediately dismiss the petitioners' complaint, as The issues, having been properly joined, present to us
their cause of action had been barred by prescription the following questions:ChanRoblesvirtualLawlibrary
and laches. An action for the annulment of title to land
prescribes in ten years. The petitioners filed their
(1)Whether the CA erred in finding that the lot that
complaint only on September 20, 1995, almost fifty
the petitioners claim to own covers Lot No. 357,
years after Mauricia had been issued TCT No. 571 on
and not Lot No. 557;
July 16, 1946. Thus, the petitioners had slept on their
claimed right over Lot 557; consequently, they are
(2)Whether the CA erred in finding that the
now barred by laches from seeking redress before the
respondents, and not the petitioners, are the
courts.
owners and possessors of Lot No. 557;
The petitioners filed a motion for reconsideration
(3)Whether the CA erred in finding Lopez an innocent
assailing the CA's decision, which motion the CA
purchaser in good faith; and
denied. The denial opened the way for the present
petition for review on certiorari before this Court.
(4)Whether the CA erred in finding the petitioners'
cause of action to have been barred by prescription
The present petition
and laches.
In their present petition, the petitioners seek the
The Court's Ruling
reversal of the CA's decision through their assertion
that they have acquired ownership over Lot No. 557
We find the petition meritorious.
by acquisitive prescription.
We note at the outset that the Court is not a trier of
The petitioners claim that the CA committed the
facts, and our jurisdiction in cases brought before us
following errors:ChanRoblesvirtualLawlibrary
from the appellate court is limited to the review of
errors of law.
First, the CA erred in upholding the validity of TCT No.
571, which is a fake and fabricated title;
We have, however, recognized several exceptional
situations that call for a re-evaluation of the CA's
Second, the CA erred in finding that Mauricia owned
factual conclusions, among them, the situation when
and possessed Lot No. 557, as it was Alejandro who
the CA's findings are contrary to that of the trial court,
exercised acts of exclusive ownership and possession
and when the CA manifestly overlooks relevant facts
over the lot since it was assigned to him in 1915. The
not disputed by the parties and which, if properly
lot Antonio assigned to Alejandro covered Lot No. 557,
considered, would lead to a different
conclusion.3cralawrednad executed in Alejandro's favor in 1915. The identity of
the addresses in these two documents show that what
We find these circumstances in the present case, the petitioners intended to pay real property tax for,
prompting us to re-examine the records of the case was the lot covered in the Deed of Assignment, which
and to reverse the CA's decision after due was Lot No. 557. Thus, the tax declarations that
consideration of the records. placed Lot No. 357 under Alejandro's name actually
pertained to the lot covered by Lot No. 557; its
The CA erred in finding that the lot that the designation as covered by Lot No. 357 was an error
petitioners claim to own is Lot No. 357, and not that the Cebu City Assessor's Office eventually
Lot No. 557 discovered and corrected.

The CA, in upholding the validity of Mauricia's title and In the same vein, the court-approved subdivision plan
ownership over Lot No. 557, pointed out that the lot for Lot No. 557 indicated it to be found along
that Alejandro claimed to own was not Lot No. 557, Jakosalem Street, the address of the lot covered by
but Lot No. 357. Alejandro and Aurea's tax declarations. The plan was
commissioned for Alejandro and his children, including
The CA based this conclusion on several tax Romualdo (Mauricia's husband and the father of her
documents in the name of Alejandro Tugot, which children), in 1960. That the address of Lot No. 557 in
indicate that the lot covered is Lot No. 357, and not the subdivision plan is identical to the address in
Lot No. 557. Alejandro and Aurea's tax declarations establishes
that what they actually claim to own is Lot No. 557,
In so doing, the CA overlooked several key pieces of and not Lot No. 357.
evidence presented before the RTC, which had led the
latter to conclude that the designation of Lot No. 357 With this foundation established, we now resolve the
in Alejandro's tax declarations actually pertained to issue of who among them have the better right over
Lot No. 557. These pieces of evidence are as Lot No. 557.
follows:ChanRoblesvirtualLawlibrary
The CA erred in finding that the petitioners failed
First, the testimony of Mr. Antonio Abellana of the to prove that TCT No. 571 is a fabricated title
City of Cebu Assessor's Office established that he
issued a Certification of Correction to change In upholding the validity of Mauricia's TCT No. 571,
Alejandro's tax declarations, which initially covered the CA held that the petitioners failed to overcome the
Lot No. 357, to Lot No. 557. presumption of regularity that attended its issuance.
The CA emphasized that a copy of TCT No. 571 is
According to Abellana, Lot No. 357 is located in a currently with the Register of Deeds, and that the
barangay different from the address found in documents that the petitioners presented do not
Alejandro's tax declaration. The base map of Cebu prove their ownership over the lot.
locates Lot No. 357 to be in Barangay Day-as, almost
five meters from Sikatuna Street, while the address in The CA's conclusion, however, overlooked the
Alejandro's erroneous tax declaration indicates that evidence that the petitioners presented before the
Lot No. 357 is located in Jakosalem Street. RTC to prove that TCT No. 571 is a fabricated title.
These pieces of evidence include the TCTs issued
Second, records of the Cebu City Assessor's Office immediately before and after TCT No. 571; TCT No.
show that Lot No. 357 is covered by another tax 16534 (the TCT from which TCT No. 571 allegedly
declaration with an address corresponding to the city's originated); and several TCTs that contain the
base map. In this tax declaration, Lot No. 357 is signature of the Acting Register of Deeds who signed
owned by a certain Antonio Yap. TCT No. 571. Taken together, all these pieces of
evidence sufficiently prove, by preponderance of
Third, the deed of donation4 of Lot No. 558, which evidence, that TCT No. 571 is a fabricated title.
adjoins Lot Nos. 557 and 559, recognized Alejandro
Tugot as the owner of Lot No. 557. We cite with approval the RTC's factual observations
and conclusions, viz:ChanRoblesvirtualLawlibrary
We find that these pieces of evidence sufficiently
explain that the lot in Alejandro and Aurea's tax First, the text of TCT No. 571 contains glaring
declarations actually covered Lot No. 557, and its discrepancies with TCT No. 16534, the title indicated
initial designation as Lot No. 357 was an error. The in TCT No. 571 as its precursor.
Assessor's Office of Cebu City, which had the
responsibility of classifying, appraising, and assessing TCT No. 16534 covered a different area from TCT No.
real property in Cebu, had acknowledged this 571. TCT No. 16534 covered Lot 7005-E-2, which has
designation to be erroneous, and subsequently made an area of 3,311 square meters, while TCT No. 571
rectification. This acknowledgment is not only entitled covers Lot No. 557 with an area of 525 square meters.
to the presumption of regularity; it is also Too, TCT No. 16534 was issued in September 1957,
corroborated by the Deed of Donation of an adjoining or almost ten years after the title it supposedly gave
lot. rise to was issued in 1946.

Additionally, we also found other pieces of evidence Second, TCT No. 571 contains discrepancies when
supporting the conclusion of the Cebu City Assessor's compared with TCT Nos. 570 and 572, the TCTs that
Office. The tax declarations in Alejandro and were supposedly issued before and after TCT No. 571.
(subsequently) Aurea's names indicate that they These discrepancies are as
covered the same address as the Lot No. 557 follows:ChanRoblesvirtualLawlibrary
described in the Deed of Assignment that Antonio
(i) TCT Nos. 570 and 572 had both been issued on under the Torrens system, in Registry Book No. A-3.
February 26, 1947, almost a year after TCT No.
571 was issued on July 16, 1946. Since TCT No. Registry Book No. A-3 refers to the registry book
571 was an intervening title between TCT No. 570 where OCT No. 251-253 is registered, as indicated in
and 572, then it should have also been issued on TCT No. 571. Thus, the CA concluded that Lot No. 557
February 26, 1947. has been brought under the Torrens system because
TCT No. 571 is already covered by the system. But as
(ii) TCT No. 571 used an old form, Judicial Form No. TCT No. 571 is a fabricated title, the CA erred in
140-D, which was revised in June 1945 by Judicial relying on its contents to conclude that Lot No. 557
Form No. 109. Since TCT No. 571 shows that it was has already been brought under the Torrens system.
issued in 1946, then it should have used Judicial
Form No. 109. Notably, both TCT Nos. 570 and 572 Alejandro Tugot did not acquire Lot No. 557
used the updated Judicial Form No. 109, as they through acquisitive prescription
were issued in 1947.
We agree with the CA's conclusion that Lot No. 557
(iv)TCT Nos. 570 and 572 were signed by Martina L. cannot be acquired through prescription, but for a
Arnoco as Register of Deeds, while TCT No. 571 different reason.
was signed by Gervasio Lavilles as Acting Register
of Deeds. In the present case, the Deed of Assignment between
Antonio and Alejandro was cancelled three months
(v) There are distinct differences in Lavilles' signature after it was executed. The Deed, executed on
as it appears in TCT No. 571, compared with his September 13, 1915, was inscribed with the phrase:
signatures in other TCTs, such as TCT Nos. 525 "Cancelled December 21, 1915. See letter # 12332."
and 526.
Both the trial court and the CA found this inscription
Additionally, we note that Mauricia's claim that she to be sufficient proof that the Deed of Assignment had
bought Lot No. 557 from Antonio is contradicted by been cancelled three months after its execution. As a
the contents of TCT No. 16534. consequence, the Deed of Assignment could not have
vested Antonio's rights over Lot No. 557 to Alejandro.
For a new TCT to be issued, the owner's duplicate of
the seller should have been surrendered to the Thus, Lot No. 557 reverted to its original status after
Registry of Deeds, along with a copy of the TCT's Deed the Deed of Assignment was cancelled. It remained
of Sale. Thus, the seller's TCT would be cancelled, and subject to the conditional sale5 between the
the new TCT of the buyer would indicate the seller's government and Antonio; under the Certificate of Sale
TCT as its TCT of origin. between the Bureau of Lands and Antonio, the
government should transfer title to Lot No. 557 to
The text of TCT No. 571 shows that it originated from Antonio upon full payment of the lot's purchase price.
TCT No. 16534. If indeed TCT No. 571 was issued to
Mauricia because the latter bought Lot No. 557 from The nature of the contract of sale between Antonio
Antonio, then TCT No. 16534 should have reflected and the government is in line with Section 15 of Act
this transaction. No. 1120, which provides for the administration,
temporary lease, and sale of friar lands that the
However, instead of reflecting Antonio's title to Lot No. government bought through sections 63 to 65 of "An
557, TCT No. 16534 shows that it pertained to Act temporarily to provide for the administration of
a different lot, and had been issued ten years the affairs of civil government in the Philippine
after the issuance of TCT No. 571 to a certain Islands, and for other purposes." These friar lands
Crispina Lopez. included the Banilad Estate Friar Lands, from where
Lot No. 557 originated.
The original certificate of title from which TCT No. 571
and TCT No. 16534 originated are also different: TCT Section 15 of Act No. 1120 that applied to Lot No. 557
No. 571 originated from Original Certificate of Title provides:cralawlawlibrary
(OCT) No. 251-253, while TCT No. 16534 originated Sec. 15. The Government hereby reserves the
fromOCTNo. 11375. title to each and every parcel of land sold under
the provisions of this Act until the full payment
These discrepancies, taken together with its variations of all installments or purchase money and
from the other titles issued around the same time and interest by the purchaser has been made, and
Mauricia's failure to present proof of how she acquired any sale or encumbrance made by him shall be invalid
the lot from Antonio, reasonably establish that TCT as against the Government of the Philippine Islands
No. 571 is a fabricated title. and shall be in all respects subordinate to its prior
claim.
We now proceed to determine whether Alejandro was
Lot No. 557's rightful owner. xxxx

The CA erred in relying on a fabricated title as According to jurisprudence, Section 15 of Act No. 1120
basis to deny Alejandro's claim to acquisitive reserves to the government the naked title to the friar
prescription lands, until its beneficiaries have fully paid their
purchase price. Since the intent of Act No. 1120 was
The CA, in reversing the RTC's decision recognizing to transfer ownership of the friar lands to its actual
Alejandro's ownership over Lot No. 571, held that Lot occupants, the equitable and beneficial title to the
No. 557 could no longer be acquired through land passes to them the moment the first installment
prescription because it had already been brought is paid and a certificate of sale is issued. This right is
subject to the resolutory condition that the sale may price, it would have been registered under the Torrens
be rescinded if the agreed price shall not be paid in system, through Section 122 of Act No. 496.
full.
Land registered under the Torrens system cannot be
When the Certificate of Sale was executed, Antonio acquired through prescription. As early as 1902,
obligated himself to pay P9.00 as the final installment Section 46 of Act No. 496 categorically declared that
to purchase Lot No. 557. His previous lease payments lands registered under the Torrens system cannot be
to the lot were applied as initial installments for the acquired by prescription, viz:cralawlawlibrary
payment of the lot's purchase price of PI5.16. Upon Section 46. No title to registered land in derogation to
full payment of the installment and its annual 4% that of the registered owner shall be acquired by
interest, the government was bound to transfer full prescription or adverse possession.
ownership of Lot No. 557 to Antonio under Section 122
Second, Antonio could have failed to complete
of Act No. 496.
payment of Lot No. 557's purchase price; thus, the
naked title to Lot No. 557 remains with the
While the records of the case do not show any
government.
documents or paper trail showing the actions of the
parties to the Certificate of Sale after the Deed of
Under Act No. 1120, the Chief of the Bureau of Public
Assignment was cancelled, we can, with certainty, rule
Lands is required to register title to the friar lands
out the possibility that Alejandro acquired title to it
acquired by the government through Act No. 496.
through prescription.
Section 6 of Act No. 1120, in particular,
provides:cralawlawlibrary
Three scenarios could have happened after the Deed
SECTION 6. The title, deeds and instruments of
of Assignment was cancelled - all of which forego the
conveyance pertaining to the lands in each province,
possibility of acquisitive prescription.
when executed and delivered by said grantors to the
Government and placed in the keeping of the Chief of
First, Antonio could have completed payment of the
the Bureau of Public Lands, as above provided, shall
purchase price of Lot No. 557. Upon full payment, the
be by him transmitted to the register of deeds of each
lot would have then been registered in Antonio's
province in which any part of said lands lies, for
name.
registration in accordance with law. But before
transmitting the title, deeds, and instruments of
The Certificate of Sale between Antonio and the
conveyance in this section mentioned to the register
government requires registration under Section 122 of
of deeds of each province for registration, the Chief of
Act No. 496, or the Land Registration Act of 1902, for
the Bureau of Public Lands shall record all such deeds
the ownership over Lot No. 557 to be transferred to
and instruments at length in one or more books to be
Antonio. Section 122 of Act No. 496
provided by him for that purpose and retained in the
provides:cralawlawlibrary
Bureau of Public Lands, when duly certified by him
Section 122. Whenever public lands in the Philippine
shall be received in all courts of the Philippine Islands
Islands belonging to the Government of the United
as sufficient evidence of the contents of the
States or to the Government of the Philippine Islands
instrument so recorded whenever it is not practicable
are alienated, granted, or conveyed to persons or to
to produce the originals in court.
public or private corporations, the same shall be
brought forthwith under the operation of this Act and The law on land registration at that time was Act No.
shall become registered lands. It shall be the duty of 496, which established the Torrens system in the
the official issuing the instrument of alienation, grant, Philippines. As earlier pointed out, a piece of land,
or conveyance in behalf of the Government to cause once registered under the Torrens system, can no
such instrument, before its delivery to the grantee, to longer be the subject of acquisitive prescription.
be filed with the register of deeds for the province
where the land lies and to be there registered like No certificate of title pertaining to the government's
other deeds and conveyances, whereupon a certificate transfer of ownership of Lot No. 557 was ever
shall be entered as in other cases of registered land, presented in evidence. Assuming, however, that the
and an owner's duplicate certificate issued to the Chief of the Bureau of Public Lands failed to register
grantee. The deed, grant, or instrument of Lot No. 557, the lot could not have been acquired by
conveyance from the Government to the grantee Alejandro through prescription, under the rule that
shall not take effect as a conveyance or bind the prescription does not lie against the government.
land, but shall operate as a contract between the
Government and the grantee and as evidence of Third, Antonio could have sold his rights to Lot No.
authority to the clerk or register of deeds to 557 to another person. Assuming he did, only that
make registration. The act of registration shall person could have stepped into his shoes, and could
be the operative act to convey and affect the have either completed payment of the purchase price
lands, and in all cases under this Act registration of Lot No. 557 and had it registered in his name; or,
shall be made in the office of the register of he could have failed to pay the purchase price in full,
deeds for the province where the land lies. The in which case the naked title to the lot remains
fees for registration shall be paid by the grantee. After government property.
due registration and issue of the certificate and
owner's duplicate such land shall be registered land In all three scenarios, Alejandro could not have
for all purposes under this Act. acquired ownership over Lot No. 557 through
prescription.
Thus, the government could have registered the title
to Lot No. 557 in Antonio's name only after he had
Republic Act No. 9443 and the friar lands
paid the purchase price in full. Had Antonio eventually
completed the payment of Lot No. 557's purchase
The Court is not unaware of the enactment of Republic
Act No. 9443, which confirms the validity of titles Jurisprudence defines innocent purchaser for value as
covering any portion of the Banilad Friar Lands with "one who buys the property of another, without
Certificates of Sale and Assignment of Sale that do not notice that some other person has a right or
contain the signature of the then Secretary of the interest in such property and pays a full price for
Interior and/or Chief of the Bureau of Public Lands. It the same, at the time of such purchase or before
does not apply to TCTs that have been fraudulently he has notice of the claims or interest of some other
issued and registered. person in the property."

Republic Act No. 9443, however, does not validate any PD 1529 has expanded the definition of an innocent
of the parties' claims of ownership over Lot No. 557. purchaser for value to include an innocent lessee,
mortgagee, or other encumbrancer for value.
Mauricia's title, as earlier established, is fabricated;
thus, her situation falls within the exception expressed Neither PD 1529 nor jurisprudence, however, has
under Section 1 of RA No. 9443, viz:cralawlawlibrary included an innocent donee to the definition, and for
This confirmation and declaration of validity shall in all good reason. An innocent purchaser for value pays for
respects be entitled to like effect and credit as a the full price of the property, while a donee receives
decree of registration, binding the land and quieting the property out of the donor's liberality. Additionally,
the title thereto and shall be' conclusive upon and what the law does not include, it excludes, and a
against all persons, including the national government donee is not included in the expansion of the term
and all branches thereof; except when, in a given innocent purchaser for value.
case involving a certificate of title or a
reconstituted certificate of title, there is a clear Applying these principles of law in the case at hand,
evidence that such certificate of title or we hold that the Deed of Donation Mauricia issued in
reconstituted certificate of title was obtained favor of her children immediately after getting a copy
through fraud, in which case the solicitor general or of TCT No. 571 could not have transferred ownership
his duly designated representative shall institute the over Lot No. 557 to her children. Since TCT No. 571 is
necessary judicial proceeding to cancel the certificate a fabricated title, it does not indicate ownership over
of title or reconstituted certificate of title as the case Lot No. 557; thus, the Deed of Donation involving TCT
may be, obtained through such fraud. No. 571 could not have conveyed the ownership of Lot
No. 557 to Mauricia's children.
With respect to Alejandro, his claim to Lot No. 557
rests on the Deed of Assignment executed between
Neither could her children claim the status of an
him and Antonio, which had been cancelled; hence, it
innocent purchaser in good faith, as they received the
cannot be confirmed through Republic Act No. 9443.
property through donation.
Effects of the nullity of TCT No. 571
The TCTs issued to Mauricia's children pursuant to the
donation should thus be cancelled, as they do not
After establishing that neither Mauricia nor Alejandro
signify ownership over Lot No. 557.
has title over Lot No. 557, we now resolve the validity
of the TCTs that originated from TCTNo. 571.
We also note several circumstances that cast doubt
over the ignorance of Mauricia's children regarding the
As a general rule, a person transmits only the rights
fabricated nature of TCT No. 571, viz: (1) the
that he possesses. When innocent third persons,
petitioners are their close relatives, who have been
however, purchase or acquire rights over the property
residing in Lot No. 557 as early as 1928; (2) their
relying on the correctness of its certificate of title,
father, Romualdo, signed and recognized a
courts cannot disregard the rights they acquired and
subdivision plan of Lot No. 557 that would divide the
order the cancellation of the certificate. As the third
lot among all of Alejandro's heirs, including the
paragraph of section 53 of Presidential Decree No.
petitioners; (3) their mother executed the deed of
1529, otherwise known as the Property Registration
donation as soon as she acquired a copy of TCT No.
Decree, provides:cralawlawlibrary
571; (4) their mother's nonpayment of taxes due Lot
Section 53. xxx
No. 557 since 1946; and (5) the payment of real
xxxx
property taxes only to facilitate the subdivision of Lot
No. 557 among them.
In all cases of registration procured by fraud, the
owner may pursue all his legal and equitable remedies
Lopez is not an innocent purchaser for value of
against the parties to such fraud without prejudice,
Lot 5 57-A
however, to the rights of any innocent holder for
value of a certificate of title. After the entry of the
We now determine Lopez's claim that she is an
decree of registration on the original petition or
innocent purchaser for value of Lot No. 557-A, and
application, any subsequent registration procured by
should thus be allowed to keep her title over it.
the presentation of a forged duplicate certificate of
title, or a forged deed or other instrument, shall be
The CA, in affirming Lopez's title over Lot No. 557-A,
null and void.
held that she was an innocent mortgagee for value.
Thus, innocent purchasers in good faith may safely According to the CA, TCT No. 130517 had no
rely on the correctness of the certificate of title issued encumbrances and liens at the time it was mortgaged
therefor, and neither the law nor the courts can oblige to Lopez, and this status extended to the time that
them to go behind the certificate and investigate again TCT No. 130517 was foreclosed to answer for
the true condition of the property. They are only Rodrigo's loan.
charged with notice of the liens and encumbrances on
the property that are noted on the certificate. We cannot agree with the CA's conclusion.
As a general rule, a person dealing with registered That Filadelfa - and not Rodrigo - resided in Lot No.
land has a right to rely on the Torrens certificate of 557-A should have prompted Lopez to make further
title and to dispense with the need of further inquiring inquiries over its status. Further inquiries with the lot
over the status of the lot. owners of surrounding property could have informed
her of its actual status. Instead, she contented herself
Jurisprudence has established exceptions to the with checking the copy of the title to Lot No. 557-A
protection granted to an innocent purchaser for value, against the copy in the Registry of Deeds of Cebu,
such as when the purchaser has actual knowledge of which she had done prior to the actual inspection of
facts and circumstances that would compel a Lot No. 557-A. The law cannot protect Lopez's rights
reasonably cautious man to inquire into the status of to Lot 557-A given her complacency.
the lot; or of a defect or the lack of title in his vendor;
or of sufficient facts to induce a reasonably prudent Further, the status of an innocent-purchaser for value
man to inquire into the status of the title of the or innocent mortgagor for value is established by the
property in litigation. person claiming it, an onus probandi that Lopez failed
to meet.
The presence of anything that excites or arouses
suspicion should then prompt the vendee to look In her memorandum, Lopez urged the Court to
beyond the certificate and investigate the title of the acknowledge her rights over Lot No. 557-A, arguing
vendor appearing on the face of the certificate. One that the declaration of her status as an innocent-
who falls within the exception can neither be purchaser and innocent mortgagor is a non-issue
denominated as innocent purchaser for value nor a because it was never pleaded in her co-respondents'
purchaser in good faith, and hence does not merit the amended complaint. She also pointed out that a valid
protection of the law. title can emerge from a fabricated title, and essentially
invoked the innocent purchaser for value doctrine.
In particular, the Court has consistently held that that
a buyer of a piece of land that is in the actual The amended complaint alleges that Lopez's status as
possession of persons other than the seller must be current owner of Lot 557-A prejudices the rights of the
wary and should investigate the rights of those in petitioners, who are its true owners. The
possession. Without such inquiry, the buyer can circumstances regarding how Lopez acquired
hardly be regarded as a buyer in good faith. ownership over Lot No. 557-A had also been pleaded
therein.
We find that Lopez knew of circumstances that should
have prodded her to further investigate the Lot No. Verily, the amended complaint does not need to allege
557-A's status before she executed a mortgage Lopez's status as an innocent purchaser or mortgagor
contract over it with Rodrigo. in good faith precisely because it was incumbent upon
her to allege and prove this to defend her title to Lot
In the pre-trial brief she submitted before the trial No. 557-A. It merely needed to allege a cause of
court, Lopez made the following action against Lopez, (which it did by alleging the
admissions:cralawlawlibrary circumstances surrounding Lopez's ownership of Lot
xxx Only after these checking did an actual inspection No. 557-A) and that it prejudices the petitioners'
of the properties took (sic) place, but on this occasion, rights as its true owners.
unfortunately, none of the plaintiffs, especially
plaintiff Filadelfa T. Lausa, who is found lately to be Further, Lopez chose to ignore in her Memorandum
residing nearby, furnished her the information of the the petitioners' contention that she knew that Filadelfa
present claims. Lausa, and not Rodrigo, resided in Lot No. 557-A. To
reiterate, Lopez has the burden of proving her status
She likewise made the same admission in an
as an innocent purchaser for value in order to invoke
affidavit, viz:cralawlawlibrary
its application. Failing in this, she cannot avail of the
6. The properties which were mortgaged were
protection the law grants to innocent purchasers for
checked and no one at that time, even plaintiff
value.
Filadelfa T. Lausa who is just residing nearby, disputed
that the absolute owners thereof were the spouses
The CA erred in finding that the petitioners'
Rodrigo and Ligaya Tugot.
claim of ownership over Lot No. 557 had been
While these admissions pertain to the petitioners' act barred by prescription and laches
of not telling Lopez of the status of Lot No. 557-A, it
implies that she had inspected the property, and The outcome of the present case dispenses with the
accordingly found that Rodrigo did not reside in Lot need for a discussion regarding extinctive prescription
No. 557-A. and laches.

Records of the case show that Filadelfa resided in Lot We note, however, that the CA erred in applying the
No. 557-A at the time Lopez executed the real estate principle of prescription and laches to the petitioners'
mortgage with Rodrigo. In August 1995, Rodrigo and cause of action involving Lot No. 557.
his siblings filed an ejectment case against the
petitioners Filadelfa Lausa and Anacleto Caduhay - An action for annulment of title or reconveyance based
Filadelfa resides in Lot No. 557-A while Anacleto's in on fraud is imprescriptible where the plaintiff is in
Lot 557-B. Notably, this ejectment case was filed five possession of the property subject of the fraudulent
months after Lopez had entered into the real estate acts. One who is in actual possession of a piece of land
mortgage contract. Thus, at the time Lopez inspected on a claim of ownership thereof may wait until his
Lot No. 557, she would have found Filadelfa residing possession is disturbed or his title is attacked before
in it, and not Rodrigo. taking steps to vindicate his right.
The records of the case show that the petitioners GRANTED. The Court of Appeals Decision in CA-G.R.
resided in the property at the time they learned about CV No. 63248 is MODIFIED, and the following titles
TCT No. 571. Being in possession of Lot No. 557, their are declared null and void: (1) TCT No. 571 issued to
claim for annulment of title had not expired. Their Mauricia Quilaton; (2) TCT No. 130517 issued to
ownership of Lot No. 571, however, is a different Rodrigo Tugot; (3) TCT No. 130518 issued to
matter. Purificacion Codilla; (4) TCT No. 130519 issued to
Teofra Sadaya; (5) TCT No. 130520 issued to Estrellita
Effects of the Court's decision Galeos; (5) TCT No. 130521 issued to Rodrigo Tugot;
and (6) TCT No. 143511 issued to Rosita Lopez.
Our decision in the present case does not settle the
ownership of Lot No. 557. To recapitulate, our The claim of the petitioners Filadelfa T. Lausa, Loreta
examination of the records and the evidence T. Torres, Primitivo Tugot and Anacleto T. ]Caduhay
presented by the petitioners and the respondents lead for recognition of their ownership over Lot No. 557
us to conclude that neither of them own Lot No. 557. is DENIED.

Despite the intent of Act No. 1120 and Republic Act We DIRECT that a copy of the records of the case be
No. 9443 to transfer ownership of the Banilad Friar transmitted to the Land Management Bureau and the
Estate Lands to its occupants, we cannot settle the Ombudsman for further investigation and appropriate
ownership of Lot No. 557 in the present case. action.

Indeed, the petitioners and the respondents are the SO ORDERED.chanrobles virtuallawlibrary
actual occupants of Lot No. 557, and they and their
families (with the exception of Rosita Lopez) have Carpio, (Chairperson), Del Castillo, Mendoza,
resided in the lot since 1915. and Leonen, JJ., concur.ChanRoblesVirtualawlibrary

However, as we have discussed above, neither party


Endnotes:
had been able to establish their right of ownership,
much less possession, of Lot No. 557. The petitioners
anchor their claim on acquisitive prescription, which
does not lie against registered land or the
1
TCT No. 130517 was issued in Rodrigo's name; TCT
government. The respondents, on the other hand, No. 130518 in Purificacion's name; TCT No. 130519 in
presented spurious TCTs. Thus, no amount of liberal Teofra's name; TCT No. 130520 in Estrellita's name;
interpretation of Act No. 1120 or Republic Act No. and TCT No. 130521 in Rodrigo's name.
9443 could give either party the right over the lot.
2
A criminal complaint for falsification of TCT No. 571
Neither can we ignore the evidence showing that none against the respondents Rodrigo, Purificacion, Teofra,
of them could rightfully own Lot No. 557. The Estrellita and Mauricia. They also filed a criminal
petitioners' cancelled deed of assignment and tax complaint for three counts of perjury against Mauricia
declarations cannot establish their ownership over Lot for perjuring statements in her petition for issuance of
No. 557; especially since the operation of pertinent a new owner's duplicate of TCT No. 571.
laws prevented the possibility of acquisitive
prescription. The respondents' TCT No. 571, on the
3
G.R. No. 171982, August 18, 2010, 628 SCRA 404.
other hand, had several discrepancies indicating that
it was a fake.
4
This Deed of Donation, whereby Sotero Codilla
donated Lot No. 558 to Encarnacion Codilla in 1934,
The exercise of the Court's judicial power settles included Lot No. 557 as one of Lot No. 558's
actual controversies between parties, through which boundaries.
the Court establishes their legally enforceable and
demandable rights. We determine the parties' rights
5
In the sale of friar lands, upon execution of the
based on the application of the law to the facts contract to sell, a certificate of sale is delivered to the
established through the pieces of evidence submitted vendee and such act is considered as a conveyance of
by the parties. The application of the law on the facts ownership, subject only to the resolutory condition
of the present case establishes that neither party has that the sale may be rescinded if the agreed price shall
a legally enforceable right over Lot No. 557. not be paid in full.

Given this situation, we direct that the records of the


6
The Land Management Bureau is the government
case be transmitted to the Land Management agency responsible for administering, surveying,
Bureau6 for further investigation and appropriate managing, and disposing alienable and disposable
action over Lot No. 557 of the Banilad Friar Estate lands of the government.
Lands.
G.R. No. 76564 May 25, 1990
Additionally, we direct that a copy of the records of
the case be transmitted to the Ombudsman, for
further investigation regarding how the fake TCTs SOUTH CITY HOMES, INC., petitioner,
covering Lot No. 557 ended up in the Registry of vs.
Deeds of Cebu City, and for the criminal and REPUBLIC OF THE PHILIPPINES and COURT OF
administrative investigation of government officials APPEALS, respondents.
liable for them.
Jose S. Santos, Jr. for petitioner.
WHEREFORE, premises considered, the instant
Petition for Review on Certiorari is PARTIALLY
manner and length, to justify judicial confirmation of
title in its name.
CRUZ, J.:
The parties also differ on the nature of the disputed
lot. The petitioner insists it is patrimonial property of
The subject of this dispute is a strip of land between
the State, being part of the so-called Friar Lands,
two lots owned by the petitioner. It has an area of 613
while the Republic maintains it is part of the public
square meters and is situated in Calabuso, Biñan,
domain and cannot therefore be acquired by a private
Laguna. It was discovered only in 1983 after a survey
corporation. But this disagreement is irrelevant, as
conducted by the Bureau of Lands and is now
will appear later.
identified as Lot No. 5005 of the Binan
Estate.1 Registration thereof in the name of the
petitioner was decreed in 1984 by the trial court The Court has considered the issues and the
pursuant to the Property Registration Law. 2 On arguments of the parties and finds that the petition
appeal, the order was reversed by a special division of has no merit .
the respondent court, with two members
dissenting.3 The petitioner is now before us, claiming
To argue that Lot No. 5005 is really a part of the other
that the reversal was erroneous.
two lots owned by the petitioner is to oppose the
obvious. What is obvious is the technical descriptions
The two lots bordering the subject property are Lot of the two lots whose areas do not include the strip of
No. 2381, containing an area of 36,672 square land between them. The petitioner points to the
meters, and Lot No. 2386- A, containing an area of original survey of the lands in 1906 which states that
32,011 square meters. Both are now registered in the the two lots adjoin each other, without mention of
name of the petitioner. The history of these lots is what is now Lot No. 5005. But it forgets that it has
described by the trial court as follows: itself suggested that the old surveys were inaccurate,
which could explain the omission.
The record shows that Lot 2381 was purchased on
installment basis by Basilia Dimaranan, and Lot 2386 If it is true that there was no canal between the two
was acquired under similar condition by Fernando lots at the time of their survey, then the disputed strip
Guico, both from the Friar Lands Division of the of land should have been included as part of either of
Bureau of Lands (Exhs. "S" and "R") in the year 1910. the two adjoining lots. It was not. The petitioner itself
Eight (8) years thereafter, installment-payment for insists that the canal, if there ever was one, had
Lot 2386 was completed in favor of Basilia Dimaranan. disappeared after it had been filled with silt and dirt.
On the other hand, Lot 2381 was on September 12, The result was the segregation of a third and separate
1911 assigned to Bartolome Peña who continued and lot, now known as Lot No. 5005. Notably, the area of
completed the installment payments culminating into that dried-up canal is not negligible as to come under
the issuance in his name of Patent No. 19138 on what the petitioner calls the allowable margin of error
September 26,1919. From Bartolome Pena, Lot 2381 in the original survey.
was acquired by Fidel M. Cabrera, Sr. and the title was
transferred to his name (Exh. "F") while Lot 2386 was
The Republic submits that the petitioner and its
acquired by the Garcias (Exh. "J-2") On August
predecessors-in-interest could not have appropriated
27,1981, Lot 2386-A was sold by the Garcias to the
the strip of land because it used to be a canal over
applicant South City Homes, Inc. (Exh. "J"). Lot 2381
which they could not have acquired any exclusive
was on February 25,1977 sold by Fidel M. Cabrera, Sr.
right. The applicable law is Act No. 1120, otherwise
to Koo Jun Eng (Exh. "G") who in turn assigned the
known as the Friar Lands Act, providing in its Section
property to the applicant in February of 1981 (Exh.
19 as follows:
"H"). 4

No purchaser or lessee under this Act shall acquire any


It is the position of the petitioner that Lot No. 5005
exclusive rights to any canal, ditch, reservoir, or other
should be registered in its name for either of two
irrigation works, or to any water supply upon which
reasons. The first is that the disputed strip of land
such irrigation works are or may be dependent, but all
really formed part of Lots 2381 and 2386-A but was
of such irrigation works and water supplies shall
omitted therefrom only because of the inaccuracies of
remain under the exclusive control of the Government
the old system of cadastral surveys. The second is that
of the Philippine Islands and be administered under
it had acquired the property by prescription through
the direction of the Chief of the Bureau of Public Lands
uninterrupted possession thereof in concept of owner,
for the common benefit of those interest dependent
by itself and its predecessors-in-interest, for more
upon them. And the Government reserves as a part of
than forty years.
the contract of sale in each instance the right to levy
an equitable contribution or tax for the maintenance
For its part, the Republic of the Philippines argues that of such irrigation works, the assessment of which shall
the elongated piece of land between the two lots now be based upon the amount of benefits received, and
owned by the petitioner used to be a canal which could each purchaser under this Act, by accepting the
not have been appropriated by the purchasers of the certificate of sale or deed herein provided to be given,
adjacent lots or their successors-in-interest. Neither shall be held to assent thereto. And it is further
could it be deemed included in the lots now owned by provided that all lands leased or conveyed under this
the petitioner because their respective technical Act shall remain subject to the right of such irrigation
descriptions indicate otherwise. Prescription is also canals, ditches, and reservoirs as now exist or as the
not applicable because the petitioner has not Government may hereafter see fit to construct.
established the requisite possession of the lot, as to
According to the respondent court, the fact that the of land that you
canal had been filled up did not change its nature as were working
a canal; it was still a canal although it had dried up. then, there is a
We do not think so. A canal without water is not a strip of land
canal. The status of a canal is not perpetual. included in the
Consequently, the above provision is not applicable area you were
and cannot defeat the petitioner's claim to the working which is
disputed property either as part of two other lots or as not included in
a separate lot. the title to the
two parcels of
riceland?
As we have already rejected the contention that the
third lot was part of the other two lots, the petitioner
must fall back on its claim of acquisitive prescription A Yes, sir, I came
over it as a separate lot. Its submission is that its to know that. As a
possession of the lot dates back to "time immemorial," matter of fact,
by which tired phrase it is intended to convey the idea when I became
that the start of such possession can no longer be tenant, my
recollected. Indeed, it can be. The petitioner's predecessor used
possession does not in fact go back to "time to tell me that
immemorial," but only to the recent remembered there is a strip in
past. between the two
parcels of riceland
which I was
The petitioner presented only two witnesses whose
working on. They
testimony regarding its supposed possession of Lot
even told me that
No. 5005 is essentially hearsay and inherently
the owners of the
inadequate. Thus, Rogelio Constantino, an employee
adjoining Lots
of the petitioner, declared on the stand:
2381 and 2386
were lucky
A. Yes sir, as a matter of fact we because there
were duly informed that since the was added to
beginning even from the time of their property a
their predecessors-in-interest, such strip of land which
strip of land was believed to be they produced
forming part of the two parcels of also rice but
land and since the beginning they which is not
have been cultivating the same and included in their
treating the said strip of land as title.
their own, publicly, notoriously and
in the concept of owner. 5
According to them, it happened this way that from
time immemorial, there was an irrigation canal
The other witness, Meliton Casunuran, was more constructed on this strip of land. After the cadastral
explicit but his testimony is largely hearsay also, let survey of the lots in Biñan, this canal gradually
alone the fact that the possession he sought to disappeared by the filing up of dirt and silt until such
establish is likewise insufficient. According to him, he time that no one could notice anymore a canal on this
worked as a tenant on the land for the previous strip of land, such that the same was taken possession
owners of the other two lots before these were of by both the owners of Lot 2381 and Lot 2386 and
acquired by the petitioner and that the subject had it planted with rice in the same way that the two
property was regarded as part of their lots by their parcels of riceland were planted at that time. And I
respective owners. Thus he declared: was likewise informed by my predecessor that I have
also to till the strip of land, the same having been
Q Now, since you considered as properly owned and forming part and
testified that you parcel of Lots 2381 and 2386 and owned by the
worked both on respective owners. 6
Lot 2381 and Lot
2386-A as tenant The underscored portions stress the unreliableness of
thereof, did you these declarations, which, in the case of Constantino,
as a tenant recall is also suspect as self-serving.
that you
cultivated these
The testimony falls short of establishing the manner
two particular
and length of possession required by law to vest
parcels of land in
prescriptive title in the petitioner to Lot No. 5005. For
its entirety?
one thing, as the Solicitor General points out in his
Comment, the claim of adverse ownership to the strip
A Yes, sir. of land between their respective lots was not exclusive
but shared by the predecessors-in-interest of the
Q Do you know petitioner. For another, and more importantly, the
that between length of possession claimed by the petitioner is not
these two parcels sufficient to vest prescriptive title in it.
Casunurans allegation that the claim of the (1) The present possessor may complete the period
petitioner's predecessors-in- interest to the disputed necessary for prescription by tacking his possession to
strip of land was "in the concept of owner, open, public that of his grantor or predecessor- in interest.
and adversely against the whole world" was fed to him
with a leading question during the ex parte hearing,
However, tacking of possession is allowed only when
thus:
there is a privity of contract or relationship between
the previous and present possessors. In the absence
MENDOZA of such privity, the possession of the new occupant
should be counted only from the time it actually began
and cannot be lengthened by connecting it with the
Q So you mean to convey to this
possession of the former possessors. Thus it has been
Honorable Court that from the time
held:
of your predecessor up to your time
as tenant, the owners of Lots 2381
and 2386-A have been in A deed, in itself, creates no privity as to land outside
possession of this strip of land its calls. Nor is privity created by the bare taking of
containing an area of 613 square possession of land previously occupied by the grantor.
meters more or less in the concept It is therefore the rule, although sharply limited,
of owner, open, public and that a deed does not of itself create privity between
adversely against the whole world? the grantor and the grantee as to land not described
in the deed but occupied by the grantor in connection
therewith, although the grantee enters into
A Yes, sir.7
possession of the land not described and uses it in
connection with that conveyed. 9
The witness was a farmer and could hardly be
expected to understand the legal significance of the
Where a grantor conveys a specific piece of property,
question, to which he could have give only the short
the grantee may not tack onto the period of his
and simple answer "Yes." He did not and was not
holding of an additional piece of property the period of
asked to elaborate. The statement was also not
his grantor's occupancy thereof to make up the
corroborated by other witnesses or supported by
statutory period. His grantor has not conveyed such
documents showing that, indeed, the former owners
property or his interest therein, and there is no
of the two lots also asserted claims of ownership over
privity. 10
the land in question. In fact, the only other evidence
of such claim is the tax declaration on the said lot,
which was made only in 1980. 8 It is said, in Hanlon v. Ten Hove supra, that this rule
is not harsh, the court using the following language:
"If A purchases and by adverse possession obtains
But the more telling consideration, as the Court sees
title to an adjoining 40 acres, it would hardly be
it, is this. By the testimony of the two witnesses, the
contended that a conveyance by him of the 40
petitioner obviously meant to tack the possession of
acquired by deed would carry with it title to the 40
the two lots by the previous owners to its own
acquired by adverse possession. So if A acquires by
possession. There was no need for this because the
deed a 40 acres and obtains an adjoining strip 2 rods
petitioner acquired ownership of Lot No. 2381 by
wide or some interest in it, his conveyance of the 40
assignment and Lot No. 2386-A by purchase; and
acquired by deed does not carry with it his interest in
such ownership includes the right of possession. The
the adjoining strip. If the sole defense here was that
petitioner is not claiming prescriptive rights to these
of adverse possession, we would be obliged to hold
two lots, which had previously been registered in the
that it had not been made out.11
name of the transferors The lot it is claiming by
prescription is Lot No. 5005, which it did not acquire
from the owner of the other two lots, or from any It should also be noted that, according to Article 1135
previous private registered owner of the lot, as there of the Civil Code:
was none.
In case the adverse claimant possesses by mistake an
Neither of the owners of Lots Nos. 2381 or 2386-A, in area greater, or less, than that expressed in his title,
their respective deeds, transferred Lot No. 5005 to the prescription shall be based on the possession.
petitioner; as already explained, Lot No. 5005 was not
part of either of the two lots. The petitioner merely
This possession, following the above quoted rulings,
occupied the disputed strip of land believing it to be
should be limited only to that of the successor-in-
included in the two lots it had acquired from Koo Jun
interest; and in the case of the herein petitioner, it
Eng and the Garcia spouses. However, even if it be
should begin from 1981 when it acquired the two
conceded that the previous owners of the other two
adjacent lots and occupied as well the lot in question
lots possessed the disputed lot, their possession
thinking it to be part of the other two.
cannot be tacked to the possession of the
petitioner. The simple reason is that the possession of
the said lot was not and could not have been It follows that when the application for registration of
transferred to the petitioner when it acquired Lots the lot in the name of the petitioner was filed in 1983,
Nos. 2381 and 2386-A because these two lots did not the applicant had been in possession of the property
include the third lot. Article 1138 of the Civil Code for less than three years. This was far too short of the
provides that — prescriptive period required for acquisition of
immovable property, which is ten years if the
possession is in good faith and thirty years if in bad Reconsideration of the Resolution dated November 5,
faith, or if the land is public. 2009, with Leave of Court to Admit Appellant's Brief
for the Intervenor-Third Party
Plaintiff."4chanrobleslaw
The weakness of the petitioner's position prevents this
Court from affirming the claim to the lot in question
The Antecedents
either as part of the two other lots or by virtue of
acquisitive prescription. And having made this ruling,
The present controversy began when the spouses
we find it unnecessary to determine whether the land
Danilo Ocial and Davidica Bongcaras-Ocial (Spouses
is patrimonial in nature or part of the public domain.
Ocial), represented by their Attorney-in-Fact,
Marcelino Bongcaras, filed an action for the
The case of Director of Lands v. Intermediate declaration of validity of partition and sale, recovery
Appellate Court, 12 on which the petitioner relied so of ownership and possession and damages against
strongly (to the point of simply invoking it in a Flavio Fudalan (Flavio) and Cristobal Fudalan
supplemental petition instead of filing its (Cristobal) before the Regional Trial Court, Branch 3,
memorandum), is not applicable. That decision, which Tagbilaran City (RTC), docketed as Civil Case No.
reversed the case of Manila Electric Co. v. Castro- 6672.
Bartolome, 13 involved a situation where the public
land automatically became private as a result of Later, Baldomera, the wife of Flavio and mother of
prescription clearly and indubitably established by the Cristobal, intervened as 3rd party plaintiff against
claimant. In the case at bar, the petitioner's claim is third-party defendants, Heirs of Pedro and Ulpiano
rejected not because it is a private corporation barred Fuderanan (the Fuderanans), the predecessors-in-
from acquiring public land but because it has failed to interest of Spouses Ocial.
establish its title to the disputed lot, whatever its
nature. The subject of the said action was a parcel of land
designated as Cad. Lot No. 56-A located at Tangnan,
WHEREFORE, the petition is DENIED, with costs Panglao, Bohol, which was a portion of Lot No. 56, Cad
against the petitioner. 705-D, Panglao Cadastre, in the name of Juana
Fuderanan (Juana).

SO ORDERED. Spouses Ocial alleged in their complaint5 that on


March 13, 2001, the heirs of Juana executed the
G.R. No. 194516, June 17, 2015 Extrajudicial Settlement Among Heirs with
Simultaneous Deed of Absolute Sale over Lot 56-A
including two (2) fruit bearing mango trees in their
BALDOMERA FOCULAN- favor as lawful vendees; that as the new owners of
FUDALAN, Petitioner, v. SPOUSES DANILO OCIAL the subject land, they caused the planting of thirty
AND DAVIDICA BONGCARAS-OCIAL, EVAGRIA F. (30) gemelina seedlings, twenty (20) mahogany
BAGCAT, CRISTINA G. DOLLISEN, EULALIA F. seedlings, and two (2) mango seedlings, and in
VILLACORA, TEOFREDO FUDERANAN, JAIME October 2001, they claimed the landowner's share of
FUDERANAN, MARIANO FUDERANAN, the mango produce from Maximo Bolongaita who had
FILADELFO FUDERANAN, MUSTIOLA F. been taking care of the two (2) fruit-bearing mango
MONTEJO, CORAZON LOGMAO, DIONESIO trees; that in October 2001, they caused the
FUDERANAN, EUTIQUIA FUDERANAN, ASTERIA placement of a "no-trespassing" sign on one of the
FUDERANAN, ANTONIO FUDERANAN, ROMEO mango trees; that they also caused the processing of
FUDERANAN, FLORENTINO FUDERANAN, the Deed of Extrajudicial Settlement Among Heirs with
DOMECIANO FUDERANAN, ERLINDA Simultaneous Sale for the cancellation of Tax
SOMONTAN, FELICIANA FUDERANAN, Declaration No. 93-009-00247 and the issuance of a
BONIFACIO FUDERANAN, QUIRINO new tax declaration in their favor; that in June 2001,
FUDERANAN, MA. ASUNCION FUDERANAN, the Fudalans, without any lawful right or
MARCELINA ARBUTANTE, SALOME GUTUAL, authorization, surreptitiously planted "ubi" on a
LEONARDO LUCILLA, IMELDA L. ESTOQUE, portion of Lot No. 56-A and they also claimed the
CIRILA OLANDRIA, TITA G. BONGAY AND landowner's share of the mango produce from Maximo
MUNICIPAL ASSESSOR OF PANGLAO, Bolongaita who refused to give the same and instead
BOHOL, Respondents. deposited the amount in a bank in Tagbilaran City;
that in November 2001, the Fudalans illegally placed
DECISION two "no-trespassing" signs inside the questioned
property; that for this reason, they complained to the
barangay captain of Tangnan, Panglao, Bohol, who
MENDOZA, J.:
conducted conciliation proceedings on November 14
and 29, 2001; that no settlement was reached
Before this Court is a petition for review under Rule 45 between the parties; that the Office of the Lupong
of the Rules of Court assailing the November 5, 2009 Tagapamayapa later on issued the Certification to File
Resolution1 of the Court of Appeals (CA), in CA-G.R. Action; and that they learned that on December 14
CEB-CV No. 01733, which granted the respondents' and 15, 2001, while the Lupong Tagapamayapa had
"Urgent Motion to Dismiss Appeal,"2 dated September not yet issued the required Certification to File Action,
23, 2009, on the ground that petitioner Baldomera the Fudalans unjustifiably caused the installation of a
Foculan-Fudalan (Baldomera) failed to file her fence consisting of barbed wires with cemented posts
appellant's brief within the non-extendible period of around Lot No. 56-A, without the necessary permit
forty-five (45) days; and the October 26, 2010 from the barangay captain of Tangnan and the
Resolution3 which denied her "Omnibus Motion for municipal officials of Panglao, Bohol.6chanrobleslaw
After a perusal of the evidence, the Court
The Fudalans, on the other hand, claimed that they acknowledges the right of third party defendants Heirs
were the rightful owners of the subject land having of Pedro and Ulpiano Fuderanan to sell the land in
purchased the same from the Fuderanans on question to plaintiffs Ocial spouses and upholds the
November 4, 1983; that the sale was evidenced by a validity of the sale. The claim of intervenor Baldomera
private document printed in a blue paper; that as Fucolan-Fudalan that the land was purchased by her
owners, they planted "ubi," posted two "no- parents from Juana Fuderanan in 1935 is not only
trespassing" signs and installed a barb wire fence doubtful being oral but more than that, it is
around the land; that since their purchase, they had unenforceable under the Statute of Frauds as provided
been in possession of the land in the concept of in Art. 1403 (e) of the Civil Code, as
owners and had been paying the real property taxes follows:chanRoblesvirtualLawlibrary
religiously; and that it was for this reason that they "Art. 1403. The following contracts are unenforceable,
insisted that if there was any deed of extrajudicial unless they are ratified:ChanRoblesVirtualawlibrary
settlement of estate and simultaneous sale of the land
by the Fuderanans, the same was null and void for xxxx
being without legal basis.7chanrobleslaw
(e) An agreement for the leasing for a longer period
On May 6, 2002, Baldomera filed, with leave of court, than one year, or for the sale of real property or of an
an Answer in Intervention with Third-Party interest therein;
Complaint against the Fuderanans for specific
No efforts were exerted by the intervenor and her
performance, quieting of title and nullification of the
predecessor parents for the ratification of the sale
deed of extra-judicial settlement with simultaneous
despite the lapse of considerable time so that their
sale in favor of Spouses Ocial. She alleged therein
failure and neglect to do it amounts to laches and
that, although still declared in the name of the late
equitable estoppel on their part to lay claim of
Juana Fuderanan, the property was absolutely owned
ownership of the land. Furthermore, upon a perusal of
by her parents, the late Spouses Eusebio Fucolan and
the tax declarations of the land from 1940 to 1985 the
Catalina Bolias,8 who acquired the property in 1935
administrators mentioned therein were Modesta
and thereafter took actual possession of the land. She
Bongcaras, Ulpiano Fuderanan and Leoncia Estoreras,
averred that the possession was continuous, peaceful,
who took turn in its administration. There was no
open, public, adverse, and in the concept of an owner
mention of the predecessor parents of Baldomera as
which was never disturbed by any person until
one of the administrators which would only fairly
Spouses Ocial, through their Attorney-in-Fact,
suggest that they were never in possession of the
informed the Fudalans and Baldomera that they had
land. It was only in 1994 when Flavio Fudalan
already bought the land from the
came to be named as its administrator per TD-
Fuderanans.9chanrobleslaw
93-009-00247 evidently after the execution of
the blue paper receipt of P1,000.00 by Teofredo
Baldomera also claimed that sometime in 1983, two
and Teofista Fuderanan in their favor. And it was
of the Fuderanans, Teofredo and Eutiquia, approached
also only then that the Fudalans started paying
her and her husband. They represented themselves as
taxes thereto, as shown by the numerous
the duly authorized representatives of their coheirs
receipts submitted. Thus, the parents of
and agreed to settle their claims over the subject lot
Baldomera could not have paid taxes to the land
in their favor for the amount of P1,000.00. This
before that period for being not in actual
agreement was evidenced by a memorandum, dated
possession of the land contrary to their claim. It
November 4, 1983.10chanrobleslaw
could be for this reason that defendants and
intervenor agreed to buy the land from the heirs
Baldomera further claimed that in the year 2000, a
of Pedro and Ulpiano Fuderanan to whom the
certain Salome Getual, supposedly another heir of
land was adjudicated which act was tantamount
Juana, told her that all the heirs of Juana were
to an abandonment of their claim.
claiming their rights of inheritance over the land but
were willing to enter into a settlement if the price
xxx Besides, it is to be noted from the testimony of
would be acceptable. Unfortunately, no agreement
Baldomera Fucolan-Fudalan in her direct examination
was reached which prompted Spouses Ocial to file an
on July 13, 2005 when she acknowledged that the
action before the barangay chairman of the place
amount of P1,000.00 as mentioned in the blue paper
where the property was situated. A mediation
receipt was not actually a payment of the land but was
proceeding was conducted between the parties where
given to Toribio and Juana Fuderanan as a
an amicable settlement was reached. Baldomera
consideration for them to prepare the deed of sale for
agreed to pay the Fuderanans the amount of
the land in their favor but to which the latter did not
P50,000.00 as purchase price of the lot. The latter,
comply. Instead, they filed a complaint along with the
however, did not comply with their obligation in the
other heirs before the barangay captain of Tangnan,
agreed settlement. Instead, they sold the land to
Panglao, Bohol for the repossession and partition of
Spouses Ocial for P20,000.00.11chanrobleslaw
the property among the heirs. This admission of
Baldomera Fucolan-Fudalan is credible for the amount
The RTC Decision
of P1,000.00 is grossly inadequate to be a
consideration for the sale of the whole lot of 7,334 sq.
On August 22, 2006, the RTC rendered a
m. or even for the combined shares of Teofredo and
Decision,12 confirming the validity of the extrajudicial
Teofista of their common property of 1,018 sq. m.
settlement with simultaneous sale, thus, recognizing
Furthermore, the alleged agreement was not signed
the right of the third-party defendants, the
by the parties as required by the Local Government
Fuderanans, to sell the land in question to the Spouses
Code for its validity and no time or period was set for
Ocial. The trial court explained its conclusion in this
its compliance, thus, leaving it to the Fudalans the
wise:chanRoblesvirtualLawlibrary
choice as to when they would pay the purchase price
of the land which is against the provision of Art. 1308 In their Urgent Motion to Dismiss Appeal, dated
of the Civil Code on the qualifications of a valid September 23, 2009, Spouses Ocial prayed for the
contract. dismissal of the appeal for failure of the appellants to
file the required appellants' brief within the prescribed
On the alleged promise of the heirs of Pedro and non-extendible period of 45 days.
Ulpiano Fuderanan to sell the property to defendants
Fudalan for P50,000.00 as shown in the minutes of the Acting thereon, the CA granted the motion and
mediation proceedings before the barangay captain of dismissed the appeal in its November 5, 2009
Tangnan, Panglao, Bohol of which they did not Resolution, which in its entirety
comply, there is no evidence of tender of payment reads:chanRoblesvirtualLawlibrary
made by the defendants. In fact, in the testimony of Finding merit in appellee's Urgent Motion to Dismiss
Maria Salome Gutual in the witness stand during her Appeal dated September 23, 2009, citing as ground
cross-examination on March 10, 2003 which was not therein appellants' failure to file their respective
refuted by defendants, the Fudalans did not allegedly appeal briefs within the non-extendible period
comply with their promise to buy the land, and required under Resolution, dated March 18, 2009, the
instead, they even signified refusal to pay it claiming court resolves to grant the same. Accordingly, the
that they had already bought it from Teofredo and case is considered closed and terminated.
Teofista Fuderanan so that the heirs of Pedro and
Ulpiano Fuderanan were forced to sell the land to SO ORDERED.16
herein plaintiffs Ocial spouses. Their act of selling the
Baldomera filed her Omnibus Motion for
land to the plaintiffs was therefore justified as it was
Reconsideration of the Resolution dated November 5,
the defendants who first reneged from their
2009 with Leave of Court to Admit Appellant's Brief for
agreement. Moreover, as there was no tender of
the Intervenor-Third Party Plaintiff. On October 26,
payment or earnest money given by defendants as a
2010, however, the CA issued another resolution
consideration therefor, no contract to sell was
denying her motion, to
perfected that would bind the parties to it (Art. 1479,
wit:chanRoblesvirtualLawlibrary
par. 2, Civil Code) nor is there any basis for an action
WHEREFORE, the Omnibus Motion for
of specific performance which defendants only
Reconsideration of the Resolution dated November 5,
initiated lately upon the filing of the third-party
2009 with Leave of Court to Admit Appellant's Brief for
complaint.13chanrobleslaw
the Intervenor-Third Party Plaintiff is DENIED.

[Emphasis Supplied] SO ORDERED.17


Consequently, the Fudalans and Baldomera were According to the CA, "[b]laming the failure to file the
ordered to vacate the subject land. Thus, the decretal required brief on counsel's heavy workload, on the
portion of the decision mistake or ignorance of his client, and excusable
reads:chanRoblesvirtualLawlibrary neglect on his part is not acceptable."18 What
WHEREFORE, in view of all the foregoing, the Court happened was simply the negligence of the counsel in
hereby confirms the Deed of Extra-Judicial Settlement the monitoring of notices and resolutions from the
with Simultaneous Sale executed by the Heirs of Pedro courts. The attendant circumstances did not make a
Fuderanan and Ulpiano Fuderanan of Lot 56-A to case of gross negligence that would fall under the
herein plaintiffs Danilo Ocial and Davidica Bongcaras- exception to the rule that the inadvertence of counsel
Ocial as one valid and enforceable. Consequently, could be considered as an adequate excuse to call for
herein defendants Flavio Fudalan, Cristobal Fudalan the court's leniency. The CA further stated that "the
and Intervenor Baldomera Fucolan-Fudalan are delay in the filing of the brief, 206 days after the last
hereby ordered to vacate from the premises of Lot 56- day to file the same which is May 22, 2009, is
A CAD 705-D of Panglao Cadastre which is located at unreasonably long."19chanrobleslaw
barangay Tangnan, Panglao, Bohol having an area of
6,316 sq. m. Furthermore, defendants and intervenor Hence, this petition.
are hereby ordered to pay jointly and severally
reasonable attorney's fee in the amount of P30,000.00 Petitioner Baldomera states, among others, that the
and the costs of the proceedings which shall earn legal main reason for the late filing of the appellant's brief
interest from the filing of the complaint until the same was both her mistake and simple negligence and that
shall have been fully paid. The landowner shares of of her counsel; and that the CA should have been
the fruits of the two mango trees which are deposited lenient in the application of technical rules in resolving
in the bank are hereby adjudicated to plaintiffs if the the appeal considering their peculiar situation.
same are found to be within Lot 56-A.
Spouses Ocial, on the other hand, counter that the CA
SO ORDERED.14 was correct in denying the omnibus motion for
Not in conformity, the Fudalans and Baldomera filed reconsideration because the records were bereft of
their respective notices of appeal with the trial court. any factual justification for Baldomera's failure to file
the required appellant's brief. Furthermore, even
The CA Decision granting arguendo, that the CA gravely abused its
discretion in promulgating the November 5, 2009 and
On March 18, 2009, upon receipt of the records, the October 26, 2010 Resolutions, still the subject petition
CA issued a Resolution,15 requiring the Fudalans and must be dismissed because abuse of discretion is not
Baldomera, as well as Spouses Ocial; and Evagra F. among the allowable grounds for a petition for review
Bagcat, as third-party defendants, to file their under Rule 45 to prosper.
respective briefs within the non-extendible period of
forty-five (45) days. The Court's Ruling
procedural rules.24chanrobleslaw
The Court finds the petitioner's contention wanting in
merit. Although the authority of the CA to dismiss an appeal
for failure to file the appellant's brief is a matter of
There was inexcusable negligence where a brief was judicial discretion, a dismissal based on this ground is
filed 206 days late neither mandatory nor ministerial; the fundamentals
of justice and fairness must be observed, bearing in
It appears from the record that the counsel for mind the background and web of circumstances
Baldomera received a copy of the March 18, 2009 CA surrounding the case.25chanrobleslaw
Resolution on April 7, 2009, thus, giving him until May
22, 2009 to file the appellant's brief; that he did not Petitioner's assertion that her counsel is partly to be
file any motion for extension of the period to file the blamed for her legal predicament is not persuasive.
brief; that he did not file either a comment or Indeed, there have been myriad of instances when the
opposition to the Urgent Motion to Dismiss Appeal, Court has relaxed the rule on the binding effect of
filed by Spouses Ocial on September 24, 2009, a copy counsel's negligence and allowed a litigant another
of which he was furnished by mail; and that he filed chance to present his case, to wit: (1) where the
the brief for his client only at the time he filed the reckless or gross negligence of counsel deprives the
omnibus motion for reconsideration on December 14, client of due process of law; (2) when application of
2009, or 206 days late.20chanrobleslaw the rule will result in outright deprivation of the client's
liberty or property; or (3) where the interests of
In this regard, Section 1 (e), Rule 50 of the Rules of justice so require. Unfortunately, none of these
Court succinctly provides exceptions obtain here.26chanrobleslaw
that:chanRoblesvirtualLawlibrary
Section l. Grounds for dismissal of appeal. - An appeal For a claim of counsel's gross negligence to prosper,
may be dismissed by the Court of Appeals, on its own nothing short of clear abandonment of the client's
motion or on that of the appellee, on the following cause must be shown. Here, petitioner's counsel failed
grounds:ChanRoblesVirtualawlibrary to file the appellant's brief. While this omission can
plausibly qualify as simple negligence, it does not
x x x x amount to gross negligence to justify the annulment
of the proceeding.27chanrobleslaw
(e) Failure of the appellant to serve and file the
required number of copies of his brief or memorandum Baldomera herself should have exerted some efforts
within the time provided by these Rules; x x x to inquire as to the status of her appeal. She should
not have been complacent. "While this Court has
Baldomera posits that it was erroneous for the CA to
recognized that a non-lawyer litigant is not expected
dismiss her appeal on the ground that she failed to file
to be familiar with the intricacies of the legal
her appellant's brief on time. She cited the case
procedures, a layman nonetheless must not be
of Sebastian v. Morales21 where it was written that
allowed to conveniently profit from his improvident
liberal construction of the rules is the controlling
mistakes. Thus, it has been equally stressed that
principle to effect substantial justice.
litigants represented by counsel should not expect
that all they need to do is sit back, relax and await the
Nevertheless, the Court in the same case made
outcome of the case; instead, they should give the
qualifications with respect to the application of the
necessary assistance to their counsel for what is at
said principle. It was held therein,
stake is ultimately their interest."28chanrobleslaw
Litigation is not a game of technicalities, but every
case must be prosecuted in accordance with the
Even on the merits, the petition must fail
prescribed procedure so that issues may be properly
presented and justly resolved. Hence, rules of
Even on the merits, the petitioner's quest must fail.
procedure must be faithfully followed except only
when for persuasive reasons, they may be
In essence, Baldomera claims that because they have
relaxed to relieve a litigant of an injustice not
been in adverse possession for the requisite period,
commensurate with his failure to comply with
their possession has now ripened into ownership
the prescribed procedure. Concomitant to a liberal
through acquisitive prescription.
application of the rules of procedure should be an
effort on the part of the party invoking liberality
Baldomera's argument fails to convince the Court.
to explain his failure to abide by the
rules.22chanrobleslaw
Prescription, as a mode of acquiring ownership and
other real rights over immovable property, is
[Emphases and Underscoring Supplied] concerned with lapse of time in the manner and under
In other words, procedural rules are not to be belittled conditions laid down by law, namely, that the
or dismissed simply because their non-observance possession should be in the concept of an owner,
may have resulted in prejudice to a party's public, peaceful, uninterrupted, and adverse.
substantive rights. Like all rules, they are required to Acquisitive prescription of real rights may be ordinary
be followed except only for the most persuasive of or extraordinary. Ordinary acquisitive prescription
reasons when they may be relaxed to relieve a litigant requires possession in good faith and with just title for
of an injustice not commensurate with the degree of 10 years.29 When the Court speaks of possession in
his thoughtlessness in not complying with the "good faith," it consists in the reasonable belief that
procedure prescribed.23 Besides, as the oft quoted the person from whom the thing is received has been
quip would put it, the bare invocation of "in the the owner thereof, and can transmit his ownership.
interest of substantial justice" is not a magic wand There is "just title," on the other hand, when the
that will automatically compel this Court to suspend adverse claimant comes into possession of the
property through one of the modes recognized by law intervenor agreed to buy the land from the heirs of
for the acquisition of ownership or other real rights, Pedro and Ulpiano Fuderanan to whom the land was
but the grantor is not the owner or cannot transmit adjudicated which act was tantamount to an
any right.30chanrobleslaw abandonment of their claim.35
Taking cue from the foregoing, Baldomera's alleged
In the present controversy, aside from Baldomera's
possession could not have amounted to an ownership
bare allegation that her family had been in possession
by way of extraordinary acquisitive prescription.
of the subject property since it was sold to her
According to the factual findings of the trial court, it
parents, no other evidence, documentary or
was only in 1994 that her husband, Flavio was named
otherwise, showing that the title to the subject
administrator; that it was also then that they started
property was indeed transferred from Juana to her
paying taxes; and that it was also then that they
parents was presented. In fact, she never denied that
started occupying the subject property. This
the tax declaration of the property was still in the
observation of the trial court was contrary to her
name of Juana Fuderanan. As such, for lack of "just
assertion that they had been paying taxes and had
title," she could not have acquired the disputed
been in possession of the land even before the said
property by ordinary prescription through possession
period. On this note, the thirty-year period would only
often (10) years. Occupation or use alone, no matter
be completed in the year 2024. Also, the records
how long, cannot confer title by prescription or
would reveal that as early as November 2001, her
adverse possession unless coupled with the element
possession was effectively interrupted when Spouses
of hostility towards the true owner, that is, possession
Ocial filed a complaint before the barangay captain of
under the claim of title.31chanrobleslaw
Tangnan, Panglao, Bohol, where conciliation
proceedings were held although no settlement was
Even the allegation that sometime on November 4,
reached.36chanrobleslaw
1983, a blue paper was executed wherein Teofredo
and Eutiquia, allegedly the duly authorized
Finally, Baldomera also assails the jurisdiction of the
representatives of the heirs of Juana to settle their
RTC over the case. According to her, since the action
claims over the land, acknowledged to have received
involves ownership and possession of real property,
the sum of P1,000.00,32 cannot be considered a valid
jurisdiction is determined by the assessed value of the
basis for a possession in good faith and just title. The
property in contention. Considering that the assessed
alleged agreement which is, at best, a compromise
value of Lot 56-A was only P1,930.00 as indicated in
agreement cannot be made as the foundation of a
Tax Declaration No. 93-009-00247, it should have
conclusion that Baldomera is a possessor in good faith
been the first level court, and not the RTC, which
and with just title who acquired the property through
should have exercised jurisdiction to hear actions
ordinary acquisitive prescription. By the nature of a
involving title to, or possession of real property or any
compromise agreement, which brings the parties to
interest in it, as provided in Sections 19 and 33
agree to something that neither of them may actually
of Batas Pambansa (B.P.) 129, as
want, but for the peace it will bring them without a
amended.37chanrobleslaw
protracted litigation, no right can arise therefrom
because the parties executed the same only to buy
This argument cannot be sustained.
peace and to write finis to the controversy. It did not
create or transmit ownership rights over the subject
Even if the Court would treat the complaint filed by
property.33chanrobleslaw
Spouses Ocial as falling under the jurisdiction of the
first level court under Sec. 33 of B.P. 129, as the
That being settled, the next question now is: Can
assessed value was way below the P20,000.00
Baldomera acquire the property through extraordinary
threshold, still Baldomera's postulation that it is the
acquisitive prescription?
first level court, and not the RTC, which has
jurisdiction, would not hold water. As observed,
The Court is still constrained to rule in the negative.
Baldomera had voluntarily participated in the
proceedings before the RTC and aggressively
In extraordinary prescription, ownership and other
defended her position. Although she questioned the
real rights over immovable property are acquired
jurisdiction of the trial court as early as in the trial
through uninterrupted adverse possession for 30
level, she actively participated in the proceeding when
years even without need of title or of good
she filed an ANSWER IN INTERVENTION WITH THIRD-
faith.34chanrobleslaw
PARTY COMPLAINT38 where she interposed
counterclaims, and asked for affirmative reliefs.
As observed by the trial court,
Simply put, considering the extent of her participation
There was no mention of the predecessor parents of
in the case, she is estopped from invoking lack of
Baldomera as one of the administrators which would
jurisdiction as a ground for the dismissal of the
only fairly suggest that they were never in possession
action.39chanrobleslaw
of the land. It was only in 1994 when Flavio
Fudalan came to be named as its administrator
WHEREFORE, the petition is DENIED. The assailed
per TD-93-009-00247 evidently after the
November 5, 2009 and October 26, 2010 Resolutions
execution of the blue paper receipt of P1,000.00
of the Court of Appeals in CA-G.R. CV No. 01733
by Teofredo and Teofista Fuderanan in their
are AFFIRMED.
favor. And it was only then that the Fudalans
started paying taxes thereto, as shown by the
SO ORDERED.cralawlawlibrary
numerous receipts submitted. Thus, the parents
of Baldomera could not have paid taxes to the
Carpio, (Chairperson), Brion, Del Castillo,
land before that period for being not in actual
and Jardeleza,*JJ., concur.
possession of the land contrary to their claim. It
could be for this reason that defendants and
G.R. No. 201405, August 24, 2015 meters from the subject property all the way to
another subdivision that he co-owns, Victoria Village,
which in turn, leads to Col. Guido Street.9 He claimed
LIWAYWAY ANDRES, RONNIE ANDRES, AND
that the prevailing market value of lands in the area
PABLO B. FRANCISCO, Petitioners, v. STA. LUCIA
is about P600.00 per square meter. Pablo also
REALTY & DEVELOPMENT,
explained that the subject property is still not
INCORPORATED, Respondent.
registered under the Land Registration Act since no
tax declaration over the same has been issued to them
DECISION despite application with the Municipal Assessor of
Binangonan.10 When required by the court to submit
DEL CASTILLO, J.: documents regarding the said application,11 Pablo
attached in his Compliance,12 among others, Carlos'
letter13 of Maty 18, 1998 to the Municipal Assessor of
Not all may demand for an easement of right-of-way. Binangonan requesting for the issuance of a tax
Under the law, an easement of right-of-way may only declaration and the reply thereto dated August 5,
be demanded by the owner of an immovable property 199814 of the Provincial Assessor of Rizal. In the
or by any person who by virtue of a real right may aforesaid reply, the Provincial Assessor denied the
cultivate or use the same. request on the ground that the subject property was
already declared for taxation purposes under the
This Petition for Review on Certiorari assails the name of Juan Diaz and later, in the name of
November 17, 2011 Decision1 of the Court of Appeals Juanito15Blanco, et al. (the Blancos).
in CA-G.R. CV No. 87715, which reversed and set
aside the May 22, 2006 Decision2 of the Regional Trial Liwayway testified next. According to her, she and her
Court (RTC), Binangonan, Rizal, Branch 68 granting children Ronnie and Liza are the surviving heirs of the
petitioners Pablo B. Francisco (Pablo), Liwayway late Carlos who owned the subject property.16 Carlos
Andres (Liwayway), Ronnie Andres (Ronnie) and their acquired ownership over the same after he had been
co-plaintiff Liza Andres (Liza) a 50-square meter right- in continuous, public and peaceful possession thereof
of-way within the subdivision of respondent Sta. Lucia for 50 years,17 the circumstances of which he narrated
Realty and Development, Incorporated (respondent). in a Sinumpaang Salaysay18 that he executed while he
was still alive. Carlos stated therein that even before
Likewise assailed is the March 27, 2012 CA he was born in 1939, his father was already in
Resolution3 which denied petitioners and Liza's Motion possession and working on the subject property; that
for Reconsideration thereto. in 1948, he started to help his father in tilling the land;
that when his father became weak and eventually
Factual Antecedents died, he took over the land; and, that he already
sought to register his ownership of the property with
Petitioners and Liza filed a Complaint4 for Easement of the Department of Environment and Natural
Right-of-Way against respondent before the RTC on Resources (DENR) and to declare the same for
November 28,2000. They alleged that they are co- taxation purposes.
owners and possessors for more than 50 years of
three parcels of unregistered agricultural land in Pag- For its part, respondent presented as a lone witness
asa, Binangonan, Rizal with a total area of more or the then Municipal Assessor of Binangonan, Virgilio
less 10,500 square meters (subject property). A few Flordeliza (Flordeliza). Flordeliza confirmed that
years back, however, respondent acquired the lands Carlos wrote him a letter-request for the issuance of
surrounding the subject property, developed the same a tax declaration.19 He, however, referred the matter
into a residential subdivision known as the to the Provincial Assessor of Rizal since the property
Binangonan Metropolis East, and built a concrete for which the tax declaration was being applied for was
perimeter fence around it such that petitioners and already declared for taxation purposes in the name of
Liza were denied access from subject property to the one Juan Diaz.20 Later, the tax declaration of Juan
nearest public road and vice versa. They thus prayed Diaz was cancelled and in lieu thereof, a tax
for a right-of-way within Binangonan Metropolis East declaration in the name of the Blancos was
in order for them to have access to Col. Guido Street, issued.21 For this reason, the Provincial Assessor of
a public road. Rizal denied Carlos' application for issuance of tax
declaration.22cralawrednad
In its Answer,5 respondent denied knowledge of any
property adjoining its subdivision owned by Ruling of the Regional Trial Court
petitioners and Liza. At any rate, it pointed out that
petitioners and Liza failed to sufficiently allege in their The RTC rendered its Decision23 on May 22, 2006. It
complaint the existence of the requisites for the grant observed that petitioners and Liza's allegation in their
of an easement of right-of-way. Complaint that they were in possession of the subject
property for more than 50 years was not denied by
During trial, Pablo testified that he bought a 4,000- respondent in its Answer. Thus, the same is deemed
square meter-portion of the subject property from to have been impliedly admitted by the latter. It then
Carlos Andres (Carlos), the husband of Liwayway and ratiocinated that based on Article 113724 of the Civil
father of Ronnie and Liza.6 According to Pablo, he and Code, petitioners and Liza are considered owners of
his co-plaintiffs are still in possession of the subject the subject property through extraordinary
property as evidenced by an April 13, 1998 prescription. Having real right over the same,
Certification7 issued by the Barangay Chairman of therefore, they are entitled to demand an easement
Pag-asa.8 Further, Pablo clarified that the easement of of right-of-way under Article 64925cralawred of the
right-of-way that they are asking from respondent Civil Code.
would traverse the latter's subdivision for about 50
The RTC further held that Pablo's testimony
sufficiently established: (1) that the subject property The Petition has no merit.
was surrounded by respondent's property; (2) the
area and location of the right-of-way sought; (3) the Under Article 649 of the Civil Code, an easement of
value of the land on which the right-of-way is to be right-of-way may be demanded by the owner of an
constituted which was P600.00 per square meter; and immovable or by any person who by virtue of a real
(4) petitioners and Liza's possession of the subject right may cultivate or use the same.
property up to the present time.
Here, petitioners argue that they are entitled to
In the ultimate, said court concluded that petitioners demand an easement of right-of-way from respondent
and Liza are entitled to an easement of right-of-way, because they are the owners of the subject property
thus:cralawlawlibrary intended to be the dominant estate. They contend that
they have already acquired ownership of the subject
property through ordinary acquisitive
WHEREFORE, judgment is hereby rendered giving the
prescription.33 This is considering that their
plaintiffs a right of way of 50 square meters to reach
possession became adverse as against the Blancos
Victoria Village towards Col. Guido Street. Defendant
(under whose names the subject property is declared
Sta. Lucia is hereby ordered to grant the right of way
for taxation) when Carlos formally registered his claim
to the plaintiffs as previously described upon payment
of ownership with the DENR and sought to declare the
of an indemnity equivalent to the market value of the
subject property for taxation purposes in 1998. And
[50-square meter right of way].
since more than 10 years34 had lapsed from that time
without the Blancos doing anything to contest their
SO ORDERED.26
continued possession of the subject property,
Respondent filed a Notice of Appeal27 which was given petitioners aver that ordinary acquisitive prescription
due course by the RTC in an Order28 dated June 27, had already set in their favor and against the Blancos.
2006.
In the alternative, petitioners assert that they have
Ruling of the Court of Appeals already become owners of the subject property
through extraordinary acquisitive prescription since
On appeal, respondent argued mat petitioners and (1) they have been in open, continuous and peaceful
Liza were neither able to prove that they were owners possession thereof for more than 50 years; (2) the
nor that they have any real right over the subject subject property, as depicted in the Survey Plan they
property intended to be the dominant estate. Hence, caused to be prepared is alienable and disposable; (3)
they are not entitled to demand an easement of right- Carlos filed a claim of ownership over the property
of-way. At any rate, they likewise failed to establish with the DENR, the agency charged with the
that the only route available from their property to administration of alienable public land; and (4) Carlos'
Col. Guido Street is through respondent's subdivision. manifestation of willingness to declare the property for
taxation purposes not only had the effect of giving
In a Decision29 dated November 17, 2011, the CA held notice of his adverse claim on the property but also
that the evidence adduced by petitioners and Liza strengthened his bona fide claim of ownership over
failed to sufficiently establish their asserted ownership the same.
and possession of the subject property. Moreover, it
held that contrary to the RTC's observation, It must be stressed at the outset that contrary to
respondent in fact denied in its Answer the allegation petitioners' allegations, there is no showing that
of petitioners and Liza that they have been in Carlos filed a claim of ownership over the subject
possession of subject property for more than 50 years. property with the DENR. His April 13, 1998 letter35 to
In view of these, the CA concluded that petitioners and the said office which petitioners assert to be an
Liza have no right to demand an easement of right-of- application for the registration of such claim is actually
way from respondent, thus:cralawlawlibrary just a request for the issuance of certain documents
WHEREFORE, in view of the foregoing, the appeal is and nothing more. Moreover, while Carlos indeed
hereby GRANTED. Accordingly, the May 22, 2006 attempted to declare the subject property for taxation
Decision of the Regional Trial Court of Binangonan, purposes, his application, as previously mentioned,
Rizal, Branch 68 is REVERSED and SET ASIDE. Civil was denied because a tax declaration was already
Case No. 00-037-B is ordered DISMISSED. issued to the Blancos.

SO ORDERED.30 Anent petitioners' invocation of ordinary acquisitive


prescription, the Court notes that the same was raised
Petitioners and Liza's Motion for
for the first time on appeal. Before the RTC,
Reconsideration31 was denied in the CA
petitioners based their claim of ownership on
Resolution32 dated March 27, 2012.
extraordinary acquisitive prescription under Article
1137 of the Civil Code36 such that the said court
Hence, petitioners seek recourse to this Court through
declared them owners of the subject property by
this Petition for Review on Certiorari.
virtue thereof in its May 22, 2006 Decision.37 Also with
the CA, petitioners initially asserted ownership
Issue through extraordinary acquisitive prescription.38 It
was only later in their Motion for
Whether petitioners are entitled to demand an Reconsideration39 therein that they averred that their
easement of right-of-way from respondent. ownership could also be based on ordinary acquisitive
prescription.40 "Settled is the rule that points of law,
Our Ruling theories, issues and arguments not brought to the
attention of the lower court need not be considered by
a reviewing court, as they cannot be raised for the first G.R. No. 213014, October 14, 2015
time at that late stage. Basic considerations of fairness
and due process impel this rule."41cralawrednad
MAYBANK PHILIPPINES, INC. (FORMERLY PNB-
REPUBLIC BANK1), Petitioner, v. SPOUSES OSCAR
Even if timely raised, such argument of petitioners, as
AND NENITA TARROSA, Respondents.
well as with respect to extraordinary acquisitive
prescription, fails. "Prescription is one of the modes of
acquiring ownership under the Civil Code."42 There are DECISION
two modes of prescription through which immovables
may be acquired - ordinary acquisitive prescription PERLAS-BERNABE, J.:
which requires possession in good faith and just title
for 10 years and, extraordinary prescription wherein
ownership and other real rights over immovable Assailed in this petition for review on certiorari2 are
property are acquired through uninterrupted adverse the Decision3 dated November 29, 2013 and the
possession for 30 years without need of title or of good Resolution4 dated May 13, 2014 of the Court of
faith.43 However, it was clarified in the Heirs of Mario Appeals (CA) in CA-G.R. CV No. 02211, which affirmed
Malabanan v. Republic of the Philippines,44 that only the Decision5 dated June 16, 2005 of the Regional
lands of the public domain subsequently classified or Trial Court of Bacolod City, Branch 41 (RTC) in Civil
declared as no longer intended for public use or for Case No. 98-10451 declaring the extrajudicial
the development of national wealth, or removed from foreclosure sale of the property covered by Transfer
the sphere of public dominion and are considered Certificate of Title (TCT) No. T-5649 as null and void
converted into patrimonial lands or lands of private for being barred by prescription.
ownership, may be alienated or disposed through any
of the modes of acquiring ownership under the Civil The Facts
Code.45 And if the mode of acquisition is prescription,
whether ordinary or extraordinary, it must first be On December 15, 1980, respondents-spouses Oscar
shown that the land has already been converted to and Nenita Tarrosa (Sps. Tarrosa) obtained from then
private ownership prior to the requisite acquisitive PNB-Republic Bank, now petitioner Maybank
prescriptive period. Otherwise, Article 1113 of the Philippines, Inc. (Maybank), a loan in the amount of
Civil Code, which provides that property of the State P91,000.00. The loan was secured by a Real Estate
not patrimonial in character shall not be the subject of Mortgage6 dated January 5, 1981 (real estate
prescription, applies.46cralawrednad mortgage) over a 500-square meter parcel of land
situated in San Carlos City, Negros Occidental (subject
Sifting through petitioners' allegations, it appears that property), covered by TCT No. T-5649,7 and the
the subject property is an unregistered public improvements thereon.8
agricultural land. Thus, being a land of the public
domain, petitioners, in order to validly claim After paying the said loan, or sometime in March
acquisition thereof through prescription, must first be 1983, Sps. Tarrosa obtained another loan from
able to show that the State has - Maybank in the amount of P60,000.00 (second
expressly declared through either a law enacted by loan),9 payable on March 11, 1984.10 However, Sps.
Congress or a proclamation issued by the President Tarrosa failed to settle the second loan upon
that the subject [property] is no longer retained for maturity.11
public service or the development of the national
wealth or that the property has been converted into Sometime in April 1998, Sps. Tarrosa received a Final
patrimonial. Consequently, without an express Demand Letter12 dated March 4, 1998 (final demand
declaration by the State, the land remains to be a letter) from Maybank requiring them to settle their
property of public dominion and hence, not outstanding loan in the aggregate amount of
susceptible to acquisition by virtue of prescription.47 P564,579.91, inclusive of principal, interests, and
penalty charges.13 They offered to pay a lesser
In the absence of such proof of declaration in this
amount, which Maybank refused.14 Thereafter, or on
case, petitioners' claim of ownership over the subject
June 25, 1998, Maybank commenced extrajudicial
property based on prescription necessarily crumbles.
foreclosure proceedings15 before the office of Ex-
Conversely, they cannot demand an easement of
Officio Provincial Sheriff Ildefonso Villanueva, Jr.
right-of-way from respondent for lack of personality.
(Sheriff Villanueva). The subject property was
eventually sold in a public auction sale held on July
All told, the Court finds no error on the part of the CA
29, 199816 for a total bid price of P600,000.00, to the
in reversing and setting aside the May 22, 2006
highest bidder, Philmay Property, Inc. (PPI), which
Decision of the RTC and in ordering the dismissal of
was thereafter issued a Certificate of Sale17 dated July
petitioners' Complaint for Easement of Right-of-Way
30, 1998.18
against respondent.
On September 7, 1998, Sps. Tarrosa filed a
WHEREFORE, the Petition is DENIED. The
complaint19 for declaration of nullity and invalidity of
November 17, 2011 Decision and March 27, 2014
the foreclosure of real estate and of public auction sale
Resolution of the Court of Appeals in CA-G.R. CV No.
proceedings and damages with prayer for preliminary
87715 are AFFIRMED.
injunction against Maybank, PPI, Sheriff Villanueva,
and the Registry of Deeds of San Carlos City, Negros
SO ORDERED.chanrobles virtuallawlibrary
Occidental (RD-San Carlos), before the RTC, docketed
as Civil Case No. 98-10451. They averred, inter
Carpio, (Chairperson), Mendoza, and Jardeleza,*JJ.,
alia, that: (a) the second loan was a clean or
concur.ChanRoblesVirtualawlibrary
unsecured loan; (b) after receiving the final demand
Leonen, J., see separate concurring opinion.
letter, they tried to pay the second loan, including the
agreed interests and charges, but Maybank unjustly An action to enforce a right arising from a
refused their offers of payment; and (c) Maybank's mortgage should be enforced within ten (10)
right to foreclose had prescribed or is barred by years from the time the right of action
laches.20 accrues, i.e., when the mortgagor defaults in the
payment of his obligation to the mortgagee;
On the other hand, Maybank and PPI countered21 that: otherwise, it will be barred by prescription and
(a) the second loan was secured by the same real the mortgagee will lose his rights under the
estate mortgage under a continuing security provision mortgage.34 However, mere delinquency in payment
therein; (b) when the loan became past due, Sps. does not necessarily mean delay in the legal concept.
Tarrosa promised to pay and negotiated for a To be in default is different from mere delay in the
restructuring of their loan, but failed to pay despite grammatical sense, because it involves the beginning
demands; and (c) Sps. Tarrosa's positive of a special condition or status which has its own
acknowledgment and admission of their indebtedness peculiar effects or results.35
controverts the defense of prescription.
In order that the debtor may be in default, it is
The RTC Ruling necessary that: (a) the obligation be demandable and
already liquidated; (b) the debtor delays
In a Decision23 dated June 16, 2005, the RTC held that performance; and (c) the creditor requires the
the second loan was subject to the continuing security performance judicially or extrajudicially,36unless
provision in the real estate mortgage.24 However, it demand is not necessary - i.e., when there is an
ruled that Maybank's right to foreclose, reckoned from express stipulation to that effect; where the law so
the time the mortgage indebtedness became due and provides; when the period is the controlling motive or
payable on March 11, 1984, had already prescribed, the principal inducement for the creation of the
considering the lack of any timely judicial action, obligation; and where demand would be useless.
written extrajudicial demand or written Moreover, it is not sufficient that the law or obligation
acknowledgment by the debtor of his debt that could fixes a date for performance; it must further state
interrupt the prescriptive period.25Accordingly, it expressly that after the period lapses, default will
declared the extrajudicial foreclosure proceedings commence. Thus, it is only when demand to pay is
affecting the subject property as null and void, and unnecessary in case of the aforementioned
ordered Maybank to pay Sps. Tarrosa moral and circumstances, or when required, such demand
exemplary damages, as well as attorney's fees and is made and subsequently refused that the
litigation expenses.26 mortgagor can be considered in default and the
mortgagee obtains the right to file an action to
Maybank filed a motion for reconsideration27 which collect the debt or foreclose the mortgage.38
was, however, denied in an Order28 dated December
9, 2005, prompting it to appeal29 to the CA. In the present case, both the CA and the RTC
reckoned the accrual of Maybank's cause of action to
foreclose the real estate mortgage over the subject
The CA Ruling
property from the maturity of the second loan on May
11, 1984. The CA further held that demand was
In a Decision30 dated November 29, 2013, the CA
unnecessary for the accrual of the cause of action in
affirmed the RTC ruling that Maybank's right to
light of paragraph 5 of the real estate mortgage, which
foreclose the real estate mortgage over the subject
pertinently provides:
property is already barred by prescription. It held that
the prescriptive period should be reckoned from March
11, 1984 when the second loan had become past due 5. In the event that the Mortgagor herein should fail
and remained unpaid since demand was not a or refuse to pay any of the sums of money secured by
condition sine qua non for the accrual of the latter's this mortgage, or any part thereof, in accordance with
right to foreclose under paragraph 5 of the real estate the terms and conditions herein set forth, or should
mortgage. It observed that Maybank failed to present he/it fail to perform any of the conditions stipulated
evidence of any timely written extrajudicial demand or herein, then and in any such case, the Mortgagee shall
written acknowledgment by the debtors of their debt have the right, at its election to foreclose this
that could have effectively interrupted the running of mortgage, [x x x].39
the prescriptive period.31
However, this provision merely articulated Maybank's
Undaunted, Maybank moved for right to elect foreclosure upon Sps. Tarrosa's failure
reconsideration,32 which was denied in a or refusal to comply with the obligation secured, which
Resolution33 dated May 13, 2014; hence this petition. is one of the rights duly accorded to mortgagees in a
similar situation.40 In no way did it affect the general
The Issues Before the Court parameters of default, particularly the need of prior
demand under Article 116941 of the Civil Code,
The essential issue for the Court's resolution is considering that it did not expressly declare: (a) that
whether or not the CA committed reversible error in demand shall not be necessary in order that the
finding that Maybank's right to foreclose the real mortgagor may be in default; or (b) that default shall
estate mortgage over the subject property was barred commence upon mere failure to pay on the maturity
by prescription.chanrobleslaw date of the loan. Hence, the CA erred in construing the
above provision as one through which the parties had
The Court's Ruling dispensed with demand as a condition sine qua
non for the accrual of Maybank's right to foreclose the
The petition is meritorious. real estate mortgage over the subject property, and
thereby, mistakenly reckoned such right from the
maturity date of the loan on March 11, 1984. In the performance, annulment of conditional sale and
absence of showing that demand is unnecessary for damages with prayer for writ of injunction against
the loan obligation to become due and demandable, petitioners Yolanda Rosello-Bentir and the spouses
Maybank's right to foreclose the real estate mortgage Samuel and Charito Pormida. The case was docketed
accrued only after the lapse of the period indicated in as Civil Case No. 92-05-88 and raffled to Judge Pedro
its final demand letter for Sps. Tarrosa to pay, i.e., S. Espina, RTC, Tacloban City, Branch 7. Respondent
after the lapse of five (5) days from receipt of the final corporation alleged that it entered into a contract of
demand letter dated March 4, 1998.42 Consequently, lease of a parcel of land with petitioner Bentir for a
both the CA and the RTC committed reversible error period of twenty (20) years starting May 5, 1968.
in declaring that Maybank's right to foreclose the real According to respondent corporation, the lease was
estate mortgage had already prescribed. extended for another four (4) years or until May 31,
1992. On May 5, 1989, petitioner Bentir sold the
Thus, considering that the existence of the loan had leased premises to petitioner spouses Samuel
been admitted, the default on the part of the debtors- Pormada and Charito Pormada. Respondent
mortgagors had been duly established, and the corporation questioned the sale alleging that it had a
foreclosure proceedings had been initiated within the right of first refusal. Rebuffed, it filed Civil Case No.
prescriptive period as afore-discussed, the Court finds 92-05-88 seeking the reformation of the expired
no reason to nullify the extrajudicial foreclosure sale contract of lease on the ground that its lawyer
of the subject property. inadvertently omitted to incorporate in the contract of
lease executed in 1968, the verbal agreement or
WHEREFORE, the petition is GRANTED. The understanding between the parties that in the event
Decision dated petitioner Bentir leases or sells the lot after the
expiration of the lease, respondent corporation has
November 29, 2013 and the Resolution dated May 13, the right to equal the highest offer. Ncm
2014 of the Court of Appeals in CA-G.R. CV No. 02211
are hereby REVERSED AND SET ASIDE. The
In due time, petitioners filed their answer alleging that
complaint in Civil Case No. 98-10451 is DISMISSED.
the inadvertence of the lawyer who prepared the lease
contract is not a ground for reformation. They further
SO ORDERED.
contended that respondent corporation is guilty of
laches for not bringing the case for reformation of the
Sereno, C.J., (Chairperson), Leonardo-De Castro,
lease contract within the prescriptive period of ten
Bersamin, and Perez, JJ., concur.
(10) years from its execution.

[G.R. No. 128991. April 12, 2000]


Respondent corporation then filed its reply and on
November 18, 1992, filed a motion to admit amended
YOLANDA ROSELLO-BENTIR, SAMUEL PORMIDA complaint. Said motion was granted by the lower
and CHARITO court.[4]
PORMIDA, petitioners, vs. HONORABLE MATEO
M. LEANDA, in his capacity as Presiding Judge of
Thereafter, petitioners filed a motion to dismiss
RTC, Tacloban City, Branch 8, and LEYTE GULF
reiterating that the complaint should be dismissed on
TRADERS, INC., respondents.
the ground of prescription.

DECISION
On December 15, 1995, the trial court through Judge
Pedro S. Espina issued an order dismissing the
KAPUNAN, J.: complaint premised on its finding that the action for
reformation had already prescribed. The order
reads: Scjuris
Reformation of an instrument is that remedy in equity
by means of which a written instrument is made or
construed so as to express or conform to the real ORDER
intention of the parties when some error or mistake
has been committed.[1] It is predicated on the
Resolved here is the defendants
equitable maxim that equity treats as done that which
MOTION TO DISMISS PLAINTIFFS
ought to be done.[2] The rationale of the doctrine is
complaint on ground of prescription
that it would be unjust and unequitable to allow the
of action.
enforcement of a written instrument which does not
reflect or disclose the real meeting of the minds of the
parties.[3] However, an action for reformation must be It is claimed by plaintiff that he and
brought within the period prescribed by law, defendant Bentir entered into a
otherwise, it will be barred by the mere lapse of time. contract of lease of a parcel of land
The issue in this case is whether or not the complaint on May 5, 1968 for a period of 20
for reformation filed by respondent Leyte Gulf years (and renewed for an
Traders, Inc. has prescribed and in the negative, additional 4 years thereafter) with
whether or not it is entitled to the remedy of the verbal agreement that in case
reformation sought.Oldmiso the lessor decides to sell the
property after the lease, she shall
give the plaintiff the right to equal
On May 15, 1992, respondent Leyte Gulf Traders, Inc.
the offers of other prospective
(herein referred to as respondent corporation) filed a
buyers. It was claimed that the
complaint for reformation of instrument, specific
lessor violated this right of first
refusal of the plaintiff when she the action for reformation had not yet prescribed and
sureptitiously (sic) sold the land to the dismissal was "premature and precipitate",
co-defendant Pormida on May 5, denying respondent corporation of its right to
1989 under a Deed of Conditional procedural due process. The order reads: Suprema
Sale. Plaintiffs right was further
violated when after discovery of the
ORDER
final sale, plaintiff ordered to equal
the price of co-defendant Pormida
was refused and again defendant Stated briefly, the principal
Bentir surreptitiously executed a objectives of the twin motions
final deed of sale in favor of co- submitted by the plaintiffs, for
defendant Pormida in December 11, resolution are:
1991.
(1) for the reconsideration of the
The defendant Bentir denies that Order of 15 December 1995 of the
she bound herself to give the Court (RTC, Br. 7), dismissing this
plaintiff the right of first refusal in case, on the sole ground of
case she sells the property. But prescription of one (1) of the five (5)
assuming for the sake of argument causes of action of plaintiff in its
that such right of first refusal was complaint for "reformation" of a
made, it is now contended that contract of lease; and,
plaintiffs cause of action to reform
the contract to reflect such right of (2) for issuance by this Court of an
first refusal, has already prescribed Order prohibiting the defendants
after 10 years, counted from May 5, and their privies-in-interest, from
1988 when the contract of lease taking possession of the leased
incepted. Counsel for defendant premises, until a final court order
cited Conde vs. Malaga, L-9405 July issues for their exercise of dominical
31, 1956 and Ramos vs. Court of or possessory right thereto.
Appeals, 180 SCRA 635, where the
Supreme Court held that the
prescriptive period for reformation The records of this case reveal that
of a written contract is ten (10) co-defendant BENTER (Yolanda)
years under Article 1144 of the Civil and plaintiff Leyte Gulf Traders
Code. Incorporation, represented by
Chairman Benito Ang, entered into
a contract of lease of a parcel of
This Court sustains the position of land, denominated as Lot No. 878-
the defendants that this action for D, located at Sagkahan District,
reformation of contract has Tacloban City, on 05 May 1968, for
prescribed and hereby orders the a period of twenty (20) years, (later
dismissal of the case. renewed for an additional two (2)
years). Included in said covenant of
SO ORDERED.[5] lease is the verbal understanding
and agreement between the
contracting parties, that when the
On December 29, 1995, respondent corporation filed
defendant (as lessor) will sell the
a motion for reconsideration of the order dismissing
subject property, the plaintiff as
the complaint. Juris
(lessee) has the "right of first
refusal", that is, the right to equal
On January 11, 1996, respondent corporation filed an the offer of any other prospective
urgent ex-parte motion for issuance of an order third-party buyer. This agreement
directing the petitioners, or their representatives or (sic) is made apparent by paragraph
agents to refrain from taking possession of the land in 4 of the lease agreement stating:
question.
"4. IMPROVEMENT. The
Considering that Judge Pedro S. Espina, to whom the lessee shall have the right
case was raffled for resolution, was assigned to the to erect on the leased
RTC, Malolos, Bulacan, Branch 19, Judge Roberto A. premises any building or
Navidad was designated in his place. Manikan structure that it may desire
without the consent or
approval of the Lessor x x
On March 28, 1996, upon motion of herein petitioners,
x provided that any
Judge Navidad inhibited himself from hearing the
improvements existing at
case. Consequently, the case was re-raffled and
the termination of the
assigned to RTC, Tacloban City, Branch 8, presided by
lease shall remain as the
herein respondent judge Mateo M. Leanda.
property of the Lessor
without right to
On May 10, 1996, respondent judge issued an order reimbursement to the
reversing the order of dismissal on the grounds that
Lessee of the cost or value Let, therefore, the motion of
thereof." plaintiff to reconsider the Order
admitting the amended answer and
the Motion to Dismiss this case
That the foregoing provision has
(ibid), be set for hearing on May 24,
been included in the lease
1996, at 8:30 oclock in the morning.
agreement if only to convince the
Service of notices must be effected
defendant-lessor that plaintiff
upon parties and counsel as early as
desired a priority right to acquire
possible before said scheduled date.
the property (ibid) by purchase,
upon expiration of the effectivity of
the deed of lease. Concomitantly, the defendants and
their privies-in-interest or agents,
are hereby STERNLY WARNED not
In the course of the interplay of
to enter, in the meantime, the
several procedural moves of the
litigated premises, before a final
parties herein, the defendants filed
court order issues granting them
their motion to admit their amended
dominical as well as possessory
answer to plaintiffs amended
right thereto.
complaint. Correspondingly, the
plaintiff filed its opposition to said
motion. The former court branch To the motion or petition for
admitted the amended answer, to contempt, filed by plaintiff, thru
which order of admission, the Atty. Bartolome C. Lawsin, the
plaintiff seasonably filed its motion defendants may, if they so desire,
for reconsideration. But, before the file their answer or rejoinder
said motion for reconsideration was thereto, before the said petition will
acted upon by the court, the latter be set for hearing. The latter are
issued an Order on 15 December given ten (10) days to do so, from
1995, DISMISSING this case on the the date of their receipt of a copy of
lone ground of prescription of the this Order.
cause of action of plaintiffs
complaint on "reformation" of the
SO ORDERED.[6]
lease contract, without anymore
considering the remaining cause of
action, viz.: (a) on Specific On June 10, 1996, respondent judge issued an order
Performance; (b) an Annulment of for status quo ante, enjoining petitioners to desist
Sale and Title; (c) on Issuance of a from occupying the property.[7]
Writ of Injunction, and (d) on
Damages. Aggrieved, petitioners herein filed a petition
for certiorari to the Court of Appeals seeking the
With due respect to the judicial annulment of the order of respondent court with
opinion of the Honorable Presiding prayer for issuance of a writ of preliminary injunction
Judge of Branch 7 of this Court, the and temporary restraining order to restrain
undersigned, to whom this case was respondent judge from further hearing the case and
raffled to after the inhibition of to direct respondent corporation to desist from further
Judge Roberto Navidad, as acting possessing the litigated premises and to turn over
magistrate of Branch 7, feels not possession to petitioners.
necessary any more to discuss at
length that even the cause of action On January 17, 1997, the Court of Appeals, after
for "reformation" has not, as yet, finding no error in the questioned order nor grave
prescribed. abuse of discretion on the part of the trial court that
would amount to lack, or in excess of jurisdiction,
To the mind of this Court, the denied the petition and affirmed the questioned
dismissal order adverted to above, order.[8] A reconsideration of said decision was,
was obviously premature and likewise, denied on April 16, 1997.[9]
precipitate, thus resulting denial
upon the right of plaintiff that Thus, the instant petition for review based on the
procedural due process. The other following assigned errors, viz:
remaining four (4) causes of action
of the complaint must have been
deliberated upon before that court 6.01 THE COURT OF APPEALS
acted hastily in dismissing this case. ERRED IN HOLDING THAT AN
ACTION FOR REFORMATION IS
PROPER AND JUSTIFIED UNDER
WHEREFORE, in the interest of THE CIRCUMSTANCES OF THE
substantial justice, the Order of the PRESENT CASE;
court, (Branch 7, RTC) dismissing
this case, is hereby ordered
RECONSIDERED and SET ASIDE. 6.02 THE COURT OF APPEALS
ERRED IN HOLDING THAT THE
ACTION FOR REFORMATION HAS Article 1670 of the Civil Code,[14] under which
NOT YET PRESCRIBED; provision, the other terms of the original contract
were deemed revived in the implied new lease.
6.03 THE COURT OF APPEALS
ERRED IN HOLDING THAT AN We do not agree. First, if, according to respondent
OPTION TO BUY IN A CONTRACT OF corporation, there was an agreement between the
LEASE IS REVIVED FROM THE parties to extend the lease contract for four (4) years
IMPLIED RENEWAL OF SUCH after the original contract expired in 1988, then Art.
LEASE; AND, 1670 would not apply as this provision speaks of an
implied new lease (tacita reconduccion) where at the
end of the contract, the lessee continues to enjoy the
6.04 THE COURT OF APPEALS
thing leased "with the acquiescence of the lessor", so
ERRED IN HOLDING THAT A
that the duration of the lease is "not for the period of
STATUS QUO ANTE ORDER IS NOT
the original contract, but for the time established in
AN INJUNCTIVE RELIEF THAT
Article 1682 and 1687." In other words, if the
SHOULD COMPLY WITH THE
extended period of lease was expressly agreed upon
PROVISIONS OF RULE 58 OF THE
by the parties, then the term should be exactly what
RULES OF COURT.[10]
the parties stipulated, not more, not less. Second,
even if the supposed 4-year extended lease be
The petition has merit. Scsdaad considered as an implied new lease under Art. 1670,
"the other terms of the original contract"
The core issue that merits our consideration is contemplated in said provision are only those terms
whether the complaint for reformation of instrument which are germane to the lessees right of continued
has prescribed. Sdaad enjoyment of the property leased.[15] The prescriptive
period of ten (10) years provided for in Art.
1144[16] applies by operation of law, not by the will of
The remedy of reformation of an instrument is the parties. Therefore, the right of action for
grounded on the principle of equity where, in order to reformation accrued from the date of execution of the
express the true intention of the contracting parties, contract of lease in 1968.
an instrument already executed is allowed by law to
be reformed. The right of reformation is necessarily
an invasion or limitation of the parol evidence rule Even if we were to assume for the sake of argument
since, when a writing is reformed, the result is that an that the instant action for reformation is not time-
oral agreement is by court decree made legally barred, respondent corporations action will still not
effective.[11] Consequently, the courts, as the agencies prosper. Under Section 1, Rule 64 of the New Rules of
authorized by law to exercise the power to reform an Court,[17] an action for the reformation of an
instrument, must necessarily exercise that power instrument is instituted as a special civil action for
sparingly and with great caution and zealous care. declaratory relief. Since the purpose of an action for
Moreover, the remedy, being an extraordinary one, declaratory relief is to secure an authoritative
must be subject to limitations as may be provided by statement of the rights and obligations of the parties
law. Our law and jurisprudence set such limitations, for their guidance in the enforcement thereof, or
among which is laches. A suit for reformation of an compliance therewith, and not to settle issues arising
instrument may be barred by lapse of time. The from an alleged breach thereof, it may be entertained
prescriptive period for actions based upon a written only before the breach or violation of the law or
contract and for reformation of an instrument is ten contract to which it refers.[18] Here, respondent
(10) years under Article 1144 of the Civil corporation brought the present action for reformation
Code.[12] Prescription is intended to suppress stale and after an alleged breach or violation of the contract was
fraudulent claims arising from transactions like the already committed by petitioner Bentir. Consequently,
one at bar which facts had become so obscure from the remedy of reformation no longer lies. Ncmmis
the lapse of time or defective memory.[13] In the case
at bar, respondent corporation had ten (10) years We no longer find it necessary to discuss the other
from 1968, the time when the contract of lease was issues raised considering that the same are predicated
executed, to file an action for reformation. Sadly, it upon our affirmative resolution on the issue of the
did so only on May 15, 1992 or twenty-four (24) years prescription of the action for reformation.
after the cause of action accrued, hence, its cause of
action has become stale, hence, time-
WHEREFORE, the petition is hereby GRANTED. The
barred. Sdaamiso
Decision of the Court of Appeals dated January 17,
1997 is REVERSED and SET ASIDE. The Order of the
In holding that the action for reformation has not Regional Trial Court of Tacloban City, Branch 7, dated
prescribed, the Court of Appeals upheld the ruling of December 15, 1995 dismissing the action for
the Regional Trial Court that the 10-year prescriptive reformation is REINSTATED. Scncm
period should be reckoned not from the execution of
the contract of lease in 1968, but from the date of the
SO ORDERED.
alleged 4-year extension of the lease contract after it
expired in 1988. Consequently, when the action for
reformation of instrument was filed in 1992 it was Davide, Jr., C.J., (Chairman), Puno,
within ten (10) years from the extended period of the Pardo, and Ynares-Santiago, JJ., concur.
lease. Private respondent theorized, and the Court of
Appeals agreed, that the extended period of lease was
an "implied new lease" within the contemplation of
conveyances of real property shall be executed
by the co-owners in favor of CRC or its
assignee/s and the same delivered to the latter
G.R. No. 169442, October 14, 2015
together with the original certificate of title upon
payment of the purchase price less the advances
REPUBLIC OF THE PHILIPPINES, REPRESENTED made by CRC in accordance with Paragraphs 2 and 3
BY THE PRIVATIZATION AND MANAGEMENT above; provided, that payment shall be made by
OFFICE (PMO), Petitioner, v. ANTONIO V. BAÑEZ, CRC only upon presentation by the co-owners to
LUISITA BAÑEZ VALERA, NENA BAÑEZ HOJILLA, CRC of certificate/s and/or clearances, with
AND EDGARDO B. HOJILLA, JR., Respondents. corresponding receipts, issued by the
appropriate government office/s or agency/ies
DECISION to the effect that capital gains tax, real estate
taxes on the Property and local transfer tax and
other taxes, fees or charges due on the
PEREZ, J.: transaction and/or on the Property have been
paid.
Assailed and sought to be annulled in this Petition for
Review on Certiorari under Rule 45 of the 1997 Rules 9. This option shall be effective from [the] date of your
of Civil Procedure is the Decision1 of the Court of acceptance as indicated by your conformity below and
Appeals dated 23 August 2005 in CA-G.R. CV No. for a period of one (1) month from and after CRC shall
70137, entitled "Cellophil Resources Corporation v. have been notified in writing by the co-owners that an
Antonio V. Bañez, Luisita Bañez Valera, Nena Bañez original certificate of title has been issued in their
Hojilla and Edgar do B. Hojilla, Jr.," which affirmed the names and that they are ready to execute the xxx
Order2 of the Regional Trial Court (RTC), Branch 1, deed of sale.3
Bangued, Abra, dated 16 August 2000, that dismissed
the complaint of petitioner Republic of the Philippines, Respondents asked for several cash advances which
represented by Privatization and Management Office reached the total amount of, more or less, Two
(PMO), for specific performance, recovery of Hundred Seventeen Thousand Pesos (P217,000.00),
possession, and damages against respondents to be deducted from the purchase price of Four
Antonio V. Bañez, Luisita Bañez Valera, Nena Bañez Hundred Thousand Pesos (P400,000.00). After paying
Hojilla and Edgardo B. Hojilla, Jr., docketed as Civil cash advances to respondents, CRC constructed staff
Case No. 1853. houses and introduced improvements on the subject
property. As respondents would be staying abroad for
The facts as culled from the records are as follows: a time, they executed a Special Power of Attorney
(SPA) in favor of Edgardo B. Hojilla (Hojilla). The SPA
In 1976, Antonio V. Bañez, Luisita Bañez Valera, and authorized Hojilla to perform the following:
Nena Bañez Hojilla (collectively, respondents) offered
for sale a parcel of land (subject property), with an
1. To take all steps necessary to cause a portion of the
area of 20,000 sq m in Barangay Calaba, Bangued,
lot covered by Tax Declaration No. 40185 in the name
Abra to Cellophil Resources Corporation (CRC).
of Urbano Bañez which is the subject of our "Offer to
Pursuant to the offer to sell on 7 December 1981,
Sell" to Cellophil Resources Corporation containing an
respondents executed a Letter Agreement irrevocably
area xxx to be brought under the operation of Republic
giving CRC the option to purchase the subject
Act No. 496, as amended, and to cause the issuance
property, which CRC accepted. The pertinent portion
in our name of the corresponding original certificate of
of the Letter Agreement (hereinafter referred to as
title.
Contract), to wit:
2. To do all acts and things and to execute all papers
1. The purchase price shall be Twenty Pesos xxx per and documents of whatever nature or kind required
square meter or a total amount of Four Hundred for the accomplishments of the aforesaid purpose.
Thousand Pesos (P400,000.00).
HEREBY GRANTING AND GIVING unto our said
2. The co-owners shall take all necessary steps attorney full power and authority whatsoever requisite
to cause the CRC Portion to be brought under the or necessary or proper to be done in or about the
operation of Republic Act No. 496, as amended, premises as fully to all intents and purposes as we
and to cause the issuance in their name of the might or could lawfully do if personally present (with
corresponding original certificate of title, all of power of substitution and revocation), and hereby
the foregoing to be accomplished within a ratifying and confirming all that our said attorney shall
reasonable time from date hereof. xxx do or cause to be done under and by virtue of these
presents.4ChanRoblesVirtualawlibrary
x x x x

7. The co-owners hereby confirm their agreement and However, CRC stopped its operation. The
permission to CRC's entry into, construction of Development Bank of the Philippines and National
building[s] and improvements, and occupancy of, any Development Company took over CRC's operation and
portion of the Property, and xxx waive any right of turned over CRC's equity to Asset Privatization Trust
action they may have against CRC respecting such (APT), which is a government agency created by
entry, construction, or occupancy by the latter of any virtue of Proclamation No. 50, as amended. The APT's
Portion of the Property. function is to take title to and possession of,
provisionally manage and dispose of nonperforming
8. An absolute deed of sale containing the above assets of government financial institutions. Upon the
provisions and standard warranties on expiration of APT's term on 31 December 2000, the
government issued Executive Order (E.O.) No. 323, time, the plaintiff should have demanded compliance
which created the Privatization and Management of defendants' undertakings or initiated any other
Office (PMO). By virtue of E.O. No. 323, the powers, action to protect its interest without waiting for the
functions, and duties of APT were transferred to the statute of limitations to bar their claim.6
PMO. Thus, the original party, CRC, is now
represented by the Republic of the Philippines through
The RTC resolved that because the written contract
the PMO (hereinafter referred to as petitioner), the
was executed on 7 December 1981, then the
successor of the defunct APT.
complaint that was filed more than eighteen (18)
years since the contract was executed was beyond the
As alleged by petitioner, respondents declared
10-year prescriptive period. Within that 18-year
afterwards the subject property as Urbano Bañez
period, there was no act on the part of petitioner,
property, rented out to third parties the staff houses
whether judicial or extrajudicial, to interrupt
petitioner constructed, and ordered its guards to
prescription.
prohibit the petitioner from entering the compound,
which impelled petitioner to file a complaint for
While petitioner paid cash advances to respondents
specific performance, recovery of possession, and
for the processing of the registration of the title,
damages against respondents, including Hojilla, on 10
"which totaled to more or less P217,000.00 as of
April 2000. Among others, the complaint prayed for
September 7, 1984 xxx to the filing of this suit,
respondents to surrender and deliver the title of the
[petitioner] has not demanded compliance by
subject property, and execute a deed of absolute sale
[respondents] of their obligation, that is, the
in favor of petitioner upon full payment. It mentioned
execution of the absolute deed of sale and the delivery
three letters sent to respondents on 29 May 1991, 24
of the Original Certificate of Title to the property to
October 1991, and 6 July 1999.
[petitioner] upon payment of the purchase price
stipulated. There were letters addressed to
In the Complaint, it was alleged that:
[respondents] but these were not demands for
compliance of [respondents'] obligation and which is
"[t]here is no justification, legal or otherwise for the not sufficient under the law to interrupt the
[respondents] to dispossess (sic) the [petitioner] from prescriptive period."7
the subject property. [Petitioner] is more than willing
and able to pay the [respondents] the balance of the The RTC further stated that:
purchase price of the subject parcel of land but its
inability to do so was due to the [respondents'] failure
"[t]he parties could not have contemplated that the
to produce the original certificate of title of the subject
delivery of the property and the payment thereof
parcel of land and to execute the pertinent deed of
could be made indefinitely and render uncertain the
sale, as well as the unjustified occupation by the
status of the land. The failure of either [of the] parties
[respondents] of the property and [of] the staff
to demand performance of the obligation of the other
houses built by [petitioner and that] such actions of
for an unreasonable length of time renders the
the [respondents] are contrary to their undertaking
contract ineffective."8
under condition no. 7 of the subject letter agreement,
that is, for [respondents] to permit [petitioner's] entry
into and occupancy of any portion of the subject The motion for reconsideration was likewise denied in
property and their waiver of any right of action they an Order dated 5 January 2001.
may have against [petitioner] respecting such entry
and occupancy of any portion of the property. And On appeal, petitioner argued that the RTC erred when
despite repeated demands made by [petitioner] upon it dismissed the complaint. Petitioner averred that: (1)
the [respondents] for them to vacate and turnover the its claim was not yet barred by prescription; (2) the
subject parcel of land and the staff houses to period of prescription had been interrupted by
[petitioner], the last of which was in a letter dated July extrajudicial demand; (3) the Statute of Limitation did
6, 1999, the said [respondents] have failed and not run against the State; (4) petitioner's claim not
neglected and still fail and neglect to do so up to the having prescribed, laches could not have set in; (5)
present time."5ChanRoblesVirtualawlibrary the laches of one nullified the laches of the other; and
(6) laches cannot be used to defeat justice or to
perpetuate fraud and injustice.chanrobleslaw
Ruling of the RTC

On 23 June 2000, Hojilla filed a Motion to Dismiss on Ruling of the Court of Appeals
the grounds that he was not a real party-in-interest
and that the action was barred by the Statute of The Court of Appeals affirmed the ruling of the RTC in
Limitations, which Motion the RTC granted in an Order a Decision dated 23 August 2005 on the ground that
dated 16 August 2000 based on Article 1144(1) of the the complaint was barred by the Statute of
Civil Code, which bars actions filed beyond ten (10) Limitations. Contrary to petitioner's arguments, the
years upon the execution of the written contract. Court of Appeals found that the extrajudicial demand
According to the RTC, the letters petitioner sent to to respondents did not serve to toll the running of the
respondents were not demands for respondents to prescriptive period. The Court of Appeals ruled that
comply with their obligation to deliver the title as to the record is bereft of evidence that would attest that
interrupt the running of the prescriptive period. The written extrajudicial demands were sent to
pertinent portion of the RTC Order reads: respondents. While petitioner sent demand letters
dated 29 May 1991 and 24 October 1991, these
demand letters were not considered as demand letters
In the instant case, the defendants were given
because the letters simply called the attention of
[enough] time from December 7, 1981 to comply with
Hojilla to return the properties and unlock the gates.
their obligation, hence, after a reasonable period of
As regards the letter dated 6 July 1999, the Court of Petitioner's Arguments
Appeals ruled that because the letter was addressed
to Hojilla, who was only an attorney-in-fact authorized The petitioner argues that although there is a 10-year
to register the property, it was not binding upon the limitation within which to file a case based on a written
respondents. The Court of Appeals also gave no contract, the period was interrupted due to a written
probative value to the 6 July 1999 letter for having no acknowledgment of respondents' obligation and
proof of service. demand by petitioner. The argument is based on
Article 1155 of the Civil Code, which provides that the
With regard to the issue of running of prescriptive running of the prescriptive period is interrupted when
period against the State, the Court of Appeals opined there is a written extrajudicial demand by the
that because the subject property is a patrimonial creditors, and when there is any written
property of the State when APT became the controlling acknowledgment of the debt by the debtor.
stockholder of CRC, prescription may run against the
State. Thus, the reasonable period within which to The petitioner referred to the letter sent by Hojilla to
register the property is three (3) years. According to the former dated 15 August 1984, and letters given
the Court of Appeals, the cause of action of petitioner by petitioner to Hojilla dated 29 May 1991, 24 October
accrued three (3) years from the time the Contract 1991, and 6 July 1999. In the letter dated 15 August
was executed on 7 December 1981 or, to say the 1984, respondents affirmed their undertaking that
least, on 15 August 1984 when Hojilla sent the they will claim full payment of the property upon
acknowledgment letter dated 15 August 1984, at presentation of a clean title and the execution of the
which time it became clear that respondents could no Absolute Deed of Sale, which reads, "[t]he Bañez heirs
longer fulfill their obligation. will only claim for the full payment of the property
upon presentation of a clean title and execution of a
Hence, petitioner is before us raising the following Deed of Sale signed by the heirs."10
arguments:
Based on Hojilla's representation as stated in the
letter dated 15 August 1984, petitioner argues that
A. The Court of Appeals erred in ruling
Hojilla is estopped by his own acts and for misleading
that the running of the prescriptive
petitioner because "respondents not only failed to
period was not interrupted when
comply with their commitment to deliver a certificate
respondents acknowledged their
of title but where [sic] they also [misled] petitioner
still unfulfilled obligation to initiate
into believing that they were working on the title of
proceedings for the registration of
subject property even as they had[,] at the back of
title of the subject property and at
their mind[s], the running of the statute of limitations
the same time committed that they
as an arsenal once petitioner demands the fulfillment
will only claim the full payment of
of their obligation."11
the property upon presentation of a
clean title and execution of a Deed
The petitioner further added that because there was
of Sale signed by the heirs as stated
no period fixed for the fulfillment or performance of
in the letter dated August 15, 1984.
the obligation to deliver the title, the least the court
should have done was to fix the period pursuant to
B. The Court of Appeals erred in Article 1197 of the Civil Code.
affirming the outright dismissal of
petitioner's suit for specific Finally, the petitioner posits that pursuant to
performance, recovery of paragraph 9 of the Contract, its obligation is
possession and damages on the conditioned upon respondents' obligation, which is to
basis of prescription even as it is deliver the title. Thus, because the respondents failed
evident that there is a need to fix a to deliver such, the obligation of petitioner never
period considering that the ripened.chanrobleslaw
performance of the condition or
obligation is dependent upon the
Respondents' Arguments
will of respondents.
The arguments of respondents, which are aligned with
C. The Court of Appeals erred in the reasons of the lower courts, rely on Article 1144
ignoring certain manifest equitable of the Civil Code, which provides that actions upon a
considerations which militate written contract must be brought within ten (10) years
against a resort to a purely from execution. Because the complaint was filed
mathematical computation of the beyond the 10-year prescriptive period, the action
prescriptive period and in was already barred by the Statute of Limitations.
disregarding the provision of the Further, during such period, petitioner failed to act
irrevocable offer that the option either judicially or extrajudicially to effectively
remains effective for a period of one interrupt the running of the prescriptive period. Thus,
month from and after notice that a the complaint must be dismissed for having been
certificate of title has been issued.9 extinguished by the Statute of
Limitations.chanrobleslaw

The main issue is whether or not the complaint for Our Ruling
specific performance was filed beyond the prescriptive
period.chanrobleslaw We rule in favor of the petitioner.

We deem material, for the resolution of the issues in


this case, the letters that were exchanged by the constrained to institute the necessary action to
parties. protect the interest of APT-CRC.15 (Emphasis and
underscoring ours)
We shall discuss each letter in seriatim.
In the same vein, the letter dated 24 October 1991
Hojilla 's letter dated 15 August 1984
demanded respondents to discontinue the
construction, repair, demolition, and occupancy of
In Hojilla's letter to petitioner dated 15 August 1984,
several staff houses. A pertinent portion of the 24
Hojilla updated petitioner of the status of the subject
October 1991 letter reads:
property's title, in this wise:

Considering that these action (sic) are unauthorized,


The preparation of the advance survey plan, technical
they constitute violations of the irrevocable option to
description and Engineer's Certificate pursuant to
purchase dated December 7, 1981, which remains
Land Administrative Order No. 10-4 has been
valid, binding and effective to this day. Demand is
submitted to the Regional Land Office, and approved
hereby made upon you to discontinue such
by the Regional Director.
unauthorized acts and vacate the premises
within fifteen (15) days from receipt hereof.16 x
Atty. Valera is now in the process of preparing the
x x (Emphasis and underscoring ours)
petition papers of the Calaba property for submission
to the local court.12
We do not agree with the lower courts. Clearly, the 29
May 1991 and 24 October 1991 letters demanded
There is no other logical conclusion but that the 15
respondents to return the properties, discontinue the
August 1984 letter is an acknowledgment of
construction, repair, demolition and occupancy of
respondents' commitment under the Contract. The
several staff houses, and unlock the gates, which is to
letter served to update petitioner of the status of the
enforce respondents' obligations pursuant to
subject property's title, an obligation agreed upon by
paragraph 7 of the Contract which reads:
the parties in the Contract. It would be specious to
argue that respondents did not acknowledge the
existence of the Contract and yet, send 7. The co-owners hereby confirm their agreement and
correspondence to petitioner updating it of the status permission to CRC's entry into, construction of
of the application for title on the subject property. building and improvements, and occupancy of, any
Therefore, the letter dated 15 August 1984 served as portion of the Property, and hereby accordingly waive
a written acknowledgment of debt or obligation of any right of action they may have against CRC
respondents. respecting such entry, construction, or occupancy by
the latter of any Portion of the Property.17
In Philippine National Railways v. NLRC,13 it was
stated that a written acknowledgment of debt or The letters dated 29 May 1991 and 24 October 1991
obligation effectively interrupts the running of the are deemed demand letters as contemplated under
prescriptive period and sets the same running Article 1155. They are demand letters to enforce
anew.14Hence, because Hojilla's letter dated 15 respondents' obligation under the Contract, which is
August 1984 served as a written acknowledgement of to cede possession to petitioner. The letters
the respondents' debt or obligation, it interrupted the interrupted the running of the prescriptive period
running of the prescriptive period and set the same which commenced to run anew.
running anew with a new expiry period of 15 August
1994. Petitioner's letter dated 6 July 1999

Petitioner's letters dated 29 May Compared to the letters dated 29 May and 24 October
1991 and 24 October 1991 1991, which demanded Hojilla to surrender
possession of the subject property, this time, in
With regard to the letters petitioner sent to Hojilla petitioner's letter to Hojilla dated 6 July 1999,
dated 29 May 1991 and 24 October 1991, the RTC petitioner demanded Hojilla to produce the title of the
ruled that these letters were insufficient under the law subject property. However, despite the fact that the
to interrupt the prescriptive period because these letter was a clear demand of the nature contemplated
were not demand letters. We lift the pertinent portion by law that would interrupt the prescriptive period, the
from the letter dated 29 May 1991, which demanded Court of Appeals found that (1) the letter did not
respondents to return the properties and to unlock the effectively interrupt the prescriptive period because
gates: the complaint had long prescribed; (2) the letter was
addressed to the wrong party; and, finally, (3) the
Under the agreement to purchase the lot, APT-CRC letter did not bear any proof of service or receipt.
shall pay the whole of the purchase price thereof when
the certificate of title and other documents We do not agree.
enumerated therein are presented to it. Clearly, the
consummation of the sale is within your control, x x x Hojilla's SPA

In view of the foregoing, demand is hereby We refer to the SPA, which granted the authority of
made upon you and your principals, the heirs of Hojilla.
Urbano Bañez, to return the properties
withdrawn and to unlock the gates leading to the When respondents went abroad pending the
staffhouses (sic), within fifteen (15) days from performance of their obligations in the Contract, they
receipt thereof, otherwise we will be authorized Hojilla to register the subject property— a
single obligation in the whole range of obligations in principal, who are herein respondents, with the
the Contract. The SPA appeared to have left no latter's express consent or authority.19 In a contract of
representative to fulfill respondents' obligations in the agency, the agent acts for and in behalf of the
Contract on their behalf except for Hojilla's authority principal on matters within the scope of the authority
to register the subject property. The pertinent portion conferred upon him, such that, the acts of the agent
of the SPA reads: have the same legal effect as if they were personally
done by the principal.20 Because there is an express
1. To take all steps necessary to cause a portion authority granted upon Hojilla to represent the
of the lot covered by Tax Declaration No. 40185 respondents as evidenced by the SPA, Hojilla's actions
in the name of Urbano Baflez which is the bind the respondents.
subject of our "Offer to Sell" to Cellophil
Resources Corporation containing an area xxx to As agent, the representations and guarantees of
be brought under the operation of Republic Act Hojilla are considered representations and guarantees
No. 496, as amended, and to cause the issuance of the principal. This is the principle of agency by
in our name of the corresponding original promissory estoppel. We refer to the evidence on
certificate of title. record. It was Hojilla who administered and/or
managed the subject property.21 Based on Hojilla's
2. To do all acts and things and to execute all papers letter dated 15 August 1984 to petitioner, Hojilla made
and documents of whatever nature or kind required the representation that besides being the attorney-in-
for the accomplishments of the aforesaid purpose. fact of the respondents with limited authority to
register the property, he was also their agent with
HEREBY GRANTING AND GIVING unto our said regard to respondents' other obligations related to the
attorney full power and authority whatsoever requisite Contract. The pertinent portion of the 15 August 1984
or necessary or proper to be done in or about the letter of Hojilla to petitioner reads:
premises as fully to all intents and purposes as we
might or could lawfully do if personally present (with Regarding our loan with the National Electrification
power of substitution and revocation), and hereby Administration (NEA), Hon. Mel Mathay who is helping
ratifying and confirming all that our said attorney shall the Bafiez heirs has initiated negotiations with NEA for
do or cause to be done under and by virtue of these Abreco to purchase our lot in front of the Provincial
presents.18 (Emphasis and underscoring ours) Jail to offset our loan with NEA.22

This was read simply by the lower courts as limiting Also, one glaring fact that cannot escape us is Hojilla's
Hojilla's authority to the registration of the subject representation and guarantee that petitioner's
property under the name of his principal, and all the obligation will only arise upon presentation of a clean
necessary acts for such purpose. It observed that title and execution of a Deed of Sale signed by the
nowhere in the SPA was Hojilla authorized as respondents' heirs, which reads, "[t]he Bañez heirs
administrator or agent of respondents with respect to will only claim for the full payment of the
the execution of the Contract. property upon presentation of a clean title and
execution of a Deed of Sale signed by the
In the case at bar, the reliefs prayed for by petitioner heirs."23
include the execution of the Contract such as delivery
of the subject title, recovery of possession of the If Hojilla knew that he had no authority to execute the
subject property, execution of the deed of sale or Contract and receive the letters on behalf of
transfer of absolute ownership upon full payment of respondents, he should have opposed petitioner's
the balance, and damages for alleged violation of demand letters. However, having received the several
respondents of the Contract for non-delivery of the demand letters from petitioner, Hojilla continuously
title and refusal to vacate the subject property. represented himself as the duly authorized agent of
Indeed, following the reading of the lower courts of respondents, authorized not only to administer and/or
the scope of Hojilla's authority, Hojilla is neither the manage the subject property, but also authorized to
proper party to execute the Contract nor the proper register the subject property and represent the
party to receive the demand letters on behalf of respondents with regard to the latter's obligations in
respondents. the Contract. Hojilla also assured petitioner that
petitioner's obligation to pay will arise only upon
This strict construction of the tenor of the SPA will presentation of the title.
render the obligatory force of the Contract ineffective.
Construction is not a tool to prejudice or commit fraud Clearly, the respondents are estopped by the acts and
or to obstruct, but to attain justice. Ea Est Accipienda representations of their agent. Falling squarely in the
Interpretatio Quae Vitio Caret. To favor the lower case at bar is our pronouncement in Philippine
court's interpretation of the scope of Hojilla's power is National Bank v. IAC (First Civil Cases
to defeat the juridical tie of the Contract— Div.),24 "[h]aving given that assurance, [Hojilla] may
the vinculum juris of the parties. As no one was not turn around and do the exact opposite of what
authorized to represent respondents in the Contract, [he] said [he] would do. One may not take
then petitioner cannot enforce the Contract, as it inconsistent positions. A party may not go back on his
were. This is an absurd interpretation of the SPA. It own acts and representations to the prejudice of the
renders the Contract ineffective for lack of a party to other party who relied upon them."25cralawred
execute the Contract.
Assuming further that Hojilla exceeded his authority,
Contrary to the findings of the lower court, the present the respondents are still solidarity liable because they
case is a case of an express agency, where, Hojilla, allowed Hojilla to act as though he had full powers by
the agent, binds himself to represent another, the impliedly ratifying Hojilia's actions—through action by
omission.26 This is the import of the principle of
agency by estoppel or the doctrine of apparent In the case at bar, the findings of the RTC and the
authority. Court of Appeals are contradictory: the RTC did not
make any finding on the receipt of the demand letters
In an agency by estoppel or apparent authority, "[t]he by Hojilla, while the Court of Appeals resolved that
principal is bound by the acts of his agent with the assuming arguendo that the letters were demand
apparent authority which he knowingly permits the letters contemplated under Article 1155 of the Civil
agent to assume, or which he holds the agent out to Code, the same are unavailing because the letters do
the public as possessing."27 not bear any proof of service of receipt by
respondents.
The respondents' acquiescence of Hojilla's acts was
made when they failed to repudiate the latter's acts. A perusal of the records reveals that only the 24
They knowingly permitted Hojilla to represent them October 1991 letter has no proof of receipt.30 The
and petitioners were clearly misled into believing demand letters dated 29 May 199131 and 6 July
Hojilla's authority. Thus, the respondents are now 199932 contain proofs of receipt.
estopped from repudiating Hojilla's authority, and
Hojilla's actions are binding upon the respondents. Thus, the core issue of whether or not the action has
prescribed.
Receipt of the Letters
An action based on a written contract must be brought
Time and time again, this Court has reiterated it is not within ten (10) years from the time the right of action
a trier of facts and parties may raise only questions of accrued. Accordingly, a cause of action on a written
law. The jurisdiction of the Court is limited to contract accrues only when an actual breach or
reviewing errors of law and findings of fact of the violation thereof occurs.33 A cause of action has three
Court of Appeals are conclusive because it is not the elements, to wit: (1) a right in favor of the plaintiff by
Court's function to review, examine, and evaluate or whatever means and under whatever law it arises or
weigh the evidence all over again.28 The rule, is created; (2) an obligation on the part of the named
however, is not without exceptions, viz.: defendant to respect or not to violate such right; and
(3) an act or omission on the part of such defendant
(1) [W]hen the [conclusion is a finding] grounded violative of the right of the plaintiff or constituting a
entirely on speculations, surmises [and] breach of the obligation of the defendant to the
conjectures;cralawlawlibrary plaintiff.34

(2) [W]hen the inference made is manifestly By the contract between the herein parties, the cause
mistaken, absurd or impossible;cralawlawlibrary of action accrued at the point when the reasonable
time within which to present the title lapsed. The
(3) [W]hen there is grave abuse of parties did not determine the date when the
discretion;cralawlawlibrary respondents must present the title and other
documents to the petitioner. The parties only agreed
(4) [W]hen the judgment is based on a that the respondents must present the same within a
misapprehension of facts;cralawlawlibrary "reasonable time." Reasonable time means "so much
time as is necessary under the circumstances for a
(5) [W]hen the findings of fact are conflicting; reasonably prudent and diligent man to do,
conveniently, what the contract or duty requires that
(6) [W]hen xxx the Court of Appeals[, in making its should be done, having a regard for the rights and
findings,] went beyond the issues of the case [and the possibility of loss, if any, to the other party."35 Such
same is] contrary to the admissions of both the reasonable time was determined by the respondents
appellant and the appellee;cralawlawlibrary through the letter dated 15 August 1984. The
respondents acknowledged their obligation to deliver
(7) [W]hen the findings are contrary to [those] the title and asked for a new period to do so. It states:
of the trial court;
The preparation of the advance survey plan, technical
(8) [W]hen the findings [of fact] are conclusions description and Engineer's Certificate pursuant to
without citation of specific evidence on which they are Land Administrative Order No. 10-4 has been
based;cralawlawlibrary submitted to the Regional Land Office, and approved
by the Regional Director.
(9) [W]hen the facts set forth in the petition as well
as in the petitioner's main and reply briefs are not Arty. Valera is now in the process of preparing the
disputed by the respondents;cralawlawlibrary petition papers of the Calaba property for submission
to the local court.
(10) [w]hen the findings of fact [of the Court of
Appeals] are premised on the supposed absence x x x x
of evidence and contradicted by the evidence on
record and The Bañez heirs will only claim for the full payment of
the property upon presentation of a clean title and
(11) [When] the Court of Appeals manifestly execution of a Deed of Sale signed by the heirs.36
overlooked certain irrelevant facts not disputed by the
parties, which, if properly considered, would justify a
The accrual of the cause of action to demand the titling
different conclusion.29
of the land cannot be earlier than 15 August 1984. So
that, the petitioner can sue on the contract until 15
August 1994. Prior to the expiration of the aforesaid prescribed, is reversed and set aside. Let the records
period, the petitioner sent a demand letter to Hojilla of this case be REMANDED to the court of origin,
dated 29 May 1991. A few months thereafter, which is DIRECTED to admit the Answer with
petitioner sent another demand letter to Hojilla dated Counterclaim of the petitioner for further trial on the
24 October 1991.37 The prescriptive period was merits. The respondents are further ordered to return
interrupted on 29 May 1991. possession of the subject property to petitioner. No
pronouncement as to costs.
The consequence is stated in Article 1155 of the Civil
Code. It states, "[t]he prescription of actions is SO ORDERED.chanroblesvirtuallawlibrary
interrupted when they are filed before the court, when
there is a written extrajudicial demand by the
creditors, and when there is any written
acknowledgment of the debt by the debtor."
[G.R. No. 165420. June 30, 2005]
Following the law, the new ten-year period for the
filing of a case by the petitioner should be counted
from 29 May 1991, ending on 29 May 2001. The
complaint at bar was filed on 10 April 2000, well within CONCEPCION R. AINZA, substituted by her legal
the required period. heirs, DR. NATIVIDAD A. TULIAO,
CORAZON A. JALECO and LILIA A.
Notably, before the expiration of the new prescriptive OLAYON, petitioners, vs. SPOUSES
period, the petitioner again sent a new demand letter ANTONIO PADUA and EUGENIA
on 6 July 1999, which again caused the same to run PADUA, respondents.
anew, which will expire on 6 July 2009. The complaint
filed on 10 April 2000 was timely.
DECISION
The Contract and True Intent of the Parties
YNARES-SANTIAGO, J.:
Based on the stipulation in the Contract, the parties
agreed that payment shall be made only upon This petition for review on certiorari assails the
presentation of the title and other documents of the February 24, 2004 decision of the Court of Appeals in
subject property to petitioner. Paragraph 8 of the CA-G.R. CV No. 70239,[1] and its September 28, 2004
Contract reads: resolution, denying reconsideration thereof.[2]

8. An absolute deed of sale containing the above In her complaint for partition of real property,
provisions and standard warranties on conveyances of annulment of titles with damages,[3] Concepcion Ainza
real property shall be executed by the co-owners in (Concepcion) alleged that respondent-spouses
favor of CRC or its assignee/s and the same delivered Eugenia (Eugenia) and Antonio Padua (Antonio)
to the latter together with the original certificate of owned a 216.40 sq. m. lot with an unfinished
title upon payment of the purchase price less the residential house located at No. 85-A Durian corner
advances made by CRC in accordance with Paragraphs Pajo Sts., Barangay Quirino 2-C, Project 2, Quezon
2 and 3 above; provided, that payment shall be City, covered by Transfer Certificate of Title No.
made by CRC only upon presentation by the co- 271935. Sometime in April 1987, she bought one-half
owners to CRC of certificate/s and/or of an undivided portion of the property from her
clearances, with corresponding receipts, issued daughter, Eugenia and the latters husband, Antonio,
by the appropriate government office/s or for One Hundred Thousand Pesos (P100,000.00).
agency/ies to the effect that capital gains tax, No Deed of Absolute Sale was executed to
real estate taxes on the Property and local evidence the transaction, but cash payment was
transfer tax and other taxes, fees or charges due received by the respondents, and ownership was
on the transaction and/or on the Property have transferred to Concepcion through physical delivery to
been paid.38 (Emphasis and underscoring ours) her attorney-in-fact and daughter, Natividad Tuliao
(Natividad). Concepcion authorized Natividad and the
The true intent of the parties is further enunciated in latters husband, Ceferino Tuliao (Ceferino) to occupy
Hojilla's letter to petitioner dated 15 August 1984, the premises, and make improvements on the
which stated, "[t]he Bañez heirs will only claim for unfinished building.
the full payment of the property upon
Thereafter, Concepcion alleged that without her
presentation of a clean title and execution of a
consent, respondents caused the subdivision of the
Deed of Sale signed by the heirs."39
property into three portions and registered it in their
names under TCT Nos. N-155122, N-155123 and N-
To rule in favor of respondents despite their failure to
155124 in violation of the restrictions annotated at the
perform their obligations is the height of injustice.
back of the title.
Respondents cannot benefit from their own inaction
and failure to comply with their obligations in the On the other hand, Antonio averred that he
Contract and let the petitioner suffer from bought the property in 1980 and introduced
respondents' own default. improvements thereon. Between 1989 and 1990, he
and his wife, Eugenia, allowed Natividad and Ceferino
WHEREFORE, the petition is GRANTED. The to occupy the premises temporarily. In 1994, they
Decision of the Court of Appeals dated 23 August 2005 caused the subdivision of the property and three (3)
in CA-G.R. CV No. 70137, affirming the Order of the separate titles were issued.
Regional Trial Court, which ruled that the action has
Thereafter, Antonio requested Natividad to property to Concepcion, who accepted the offer and
vacate the premises but the latter refused and claimed agreed to pay P100,000.00 as consideration. The
that Concepcion owned the property. Antonio thus contract of sale was consummated when both parties
filed an ejectment suit on April 1, 1999. Concepcion, fully complied with their respective obligations.
represented by Natividad, also filed on May 4, 1999 a Eugenia delivered the property to Concepcion, who in
civil case for partition of real property and annulment turn, paid Eugenia the price of One Hundred Thousand
of titles with damages. Pesos (P100,000.00), as evidenced by the receipt
which reads:
Antonio claimed that his wife, Eugenia, admitted
that Concepcion offered to buy one third (1/3) of the
property who gave her small amounts over several RECEIPT
years which totaled P100,000.00 by 1987 and for
which she signed a receipt. Received the amount of ONE HUNDRED THOUSAND
PESOS (P100,000.00) as payment for the lot on 85-A
On January 9, 2001, the Regional Trial Court of Durian St., Project 2, Quezon City, from Mrs.
Quezon City, Branch 85, rendered judgment[4] in favor Concepcion R. Ainza, on April, 1987.
of Concepcion, the dispositive portion of which states:

____
WHEREFORE, premises considered, judgment is ___(
hereby rendered in favor of the plaintiff and against Sgd.
the defendants and ordering: )___
___
1. the subdivision of the subject property
between the said plaintiff and Mrs..
defendants in equal shares with one- Euge
half of the property, including the nia
portion occupied by the spouses A.
Severino and Natividad Tuliao to be Padu
awarded to the plaintiff; a[8]
2. the cancellation of Transfer Certificates
of Title Nos. N-155122, N-155123, N- The verbal contract of sale between Eugenia and
155124 of the Registry of Deeds of Concepcion did not violate the provisions of the
Quezon City; Statute of Frauds that a contract for the sale of real
property shall be unenforceable unless the contract or
3. the defendants to pay to the plaintiff some note or memorandum of the sale is in writing
P50,000.00 as attorneys fees. and subscribed by the party charged or his
agent.[9] When a verbal contract has been completed,
SO ORDERED.[5] executed or partially consummated, as in this case, its
enforceability will not be barred by the Statute of
Frauds, which applies only to an executory
The trial court upheld the sale between Eugenia
agreement.[10] Thus, where one party has performed
and Concepcion. It ruled that the sale was
his obligation, oral evidence will be admitted to prove
consummated when both contracting parties complied
the agreement.[11]
with their respective obligations. Eugenia transferred
possession by delivering the property to Concepcion In the instant case, the oral contract of sale
who in turn paid the purchase price. It also declared between Eugenia and Concepcion was evidenced by a
that the transfer of the property did not violate the receipt signed by Eugenia. Antonio also stated that his
Statute of Frauds because a fully executed contract wife admitted to him that she sold the property to
does not fall within its coverage. Concepcion.
On appeal by the respondents, the Court of It is undisputed that the subject property was
Appeals reversed the decision of the trial court, and conjugal and sold by Eugenia in April 1987 or prior to
declared the sale null and void. Applying Article 124 the effectivity of the Family Code on August 3, 1988,
of the Family Code, the Court of Appeals ruled that Article 254 of which repealed Title V, Book I of the
since the subject property is conjugal, the written Civil Code provisions on the property relations
consent of Antonio must be obtained for the sale to be between husband and wife. However, Article 256
valid. It also ordered the spouses Padua to return the thereof limited its retroactive effect only to cases
amount of P100,000.00 to petitioners plus interest.[6] where it would not prejudice or impair vested or
acquired rights in accordance with the Civil Code or
The sole issue for resolution in this petition for
other laws. In the case at bar, vested rights of
review is whether there was a valid contract of sale
Concepcion will be impaired or prejudiced by the
between Eugenia and Concepcion.
application of the Family Code; hence, the provisions
A contract of sale is perfected by mere consent, of the Civil Code should be applied.
upon a meeting of the minds on the offer and the
In Felipe v. Heirs of Aldon, et al.,[12] the legal
acceptance thereof based on subject matter, price and
effect of a sale of conjugal properties by the wife
terms of payment.[7]
without the consent of the husband was clarified, to
In this case, there was a perfected contract of wit:
sale between Eugenia and Concepcion. The records
show that Eugenia offered to sell a portion of the
The legal ground which deserves attention is the legal The consent of both Eugenia and Antonio is
effect of a sale of lands belonging to the conjugal necessary for the sale of the conjugal property to be
partnership made by the wife without the consent of valid. Antonios consent cannot be
the husband. presumed.[13] Except for the self-serving testimony of
petitioner Natividad, there is no evidence that Antonio
participated or consented to the sale of the conjugal
It is useful at this point to re-state some elementary
property. Eugenia alone is incapable of giving consent
rules: The husband is the administrator of the
to the contract. Therefore, in the absence of Antonios
conjugal partnership. (Art. 165, Civil Code) Subject to
consent, the disposition made by Eugenia is
certain exceptions, the husband cannot alienate or
voidable.[14]
encumber any real property of the conjugal
partnership without the wifes consent. (Art. The contract of sale between Eugenia and
166, Idem.) And the wife cannot bind the conjugal Concepcion being an oral contract, the action to annul
partnership without the husbands consent, except in the same must be commenced within six years from
cases provided by law. (Art. 172, Idem.). the time the right of action accrued.[15] Eugenia sold
the property in April 1987 hence Antonio should have
In the instant case, Gimena, the wife, sold lands asked the courts to annul the sale on or before April
belonging to the conjugal partnership without the 1993. No action was commenced by Antonio to annul
consent of the husband and the sale is not covered by the sale, hence his right to seek its annulment was
the phrase except in cases provided by law. The Court extinguished by prescription.
of Appeals described the sale as invalid a term which
is imprecise when used in relation to contracts Even assuming that the ten (10)-year
because the Civil Code uses specific names in prescriptive period under Art. 173 should apply,
designating defective contracts, Antonio is still barred from instituting an action to
namely: rescissible (Arts. 1380 et annul the sale because since April 1987, more than
seq.), voidable (Arts. 1390 et ten (10) years had already lapsed without any such
seq.), unenforceable (Arts. 1403, et seq.), and void action being filed.
or inexistent (Arts. 1409 et seq.). In sum, the sale of the conjugal property by
Eugenia without the consent of her husband is
The sale made by Gimena is certainly a defective voidable. It is binding unless annulled. Antonio failed
contract but of what category? The answer: it is to exercise his right to ask for the annulment within
a voidable contract. the prescribed period, hence, he is now barred from
questioning the validity of the sale between his wife
and Concepcion.
According to Art. 1390 of the Civil Code, among the
voidable contracts are [T]hose where one of the WHEREFORE, the petition is GRANTED. The
parties is incapable of giving consent to the contract. decision dated February 24, 2004 of the Court of
(Par. 1.) In the instant case Gimena had no capacity Appeals in CA-G.R. CV No. 70239 and its resolution
to give consent to the contract of sale. The capacity to dated September 28, 2004 are REVERSED and SET
give consent belonged not even to the husband alone ASIDE. The decision dated January 9, 2001 of the
but to both spouses. Regional Trial Court of Quezon City, Branch 85, in Civil
Case No. Q-99-37529, is REINSTATED.
The view that the contract made by Gimena is a
SO ORDERED.
voidable contract is supported by the legal
provision that contracts entered by the husband
without the consent of the wife when such
consent is required, are annullable at her
instance during the marriage and within ten [ GR No. 190828, Mar 16, 2015 ]
years from the transaction questioned. (Art.
173, Civil Code).
ONOFRE V. MONTERO v. TIMES TRANSPORTATION
CO. +
Gimenas contract is not rescissible for in such a
contract all the essential elements are untainted but
Gimenas consent was tainted. Neither can the DECISION
contract be classified as unenforceable because it does
not fit any of those described in Art. 1403 of the Civil
Code. And finally, the contract cannot be void or
inexistent because it is not one of those mentioned in
Art. 1409 of the Civil Code. By process of elimination,
it must perforce be a voidable contract. REYES, J.:

This appeal by petition for review[1] seeks to annul and


The voidable contract of Gimena was subject to
annulment by her husband only during the marriage set aside the Decision[2] dated August 28, 2009 and
because he was the victim who had an interest in the Resolution[3] dated December 11, 2009 of the Court of
contract. Gimena, who was the party responsible for Appeals (CA) in CA-G.R. SP No. 106260, which
the defect, could not ask for its annulment. Their affirmed the Decision[4] dated March 31, 2008 of the
children could not likewise seek the annulment of the National Labor Relations Commission (NLRC) in NLRC
contract while the marriage subsisted because they CA No. 046325-05 (08), and its Resolution[5] dated
merely had an inchoate right to the lands sold. September 5, 2008, denying the petitioner's Motion
(Emphasis supplied) for Reconsideration. The NLRC decision vacated and
set aside the Decision[6] dated June 29, 2005 of the
Labor Arbiter (LA) on the ground that the consolidated For a second time, on October 17, 1997, TEU declared
complaints for illegal dismissal, unfair labor practice a strike against TTCI, but the latter merely reiterated
and money claims have already prescribed. the earlier return-to-work order of the Labor
Secretary. For disregarding the said return-to-work
order, Santiago issued two notices of termination
dated October 26, 1997[12] terminating some 106
The Facts workers and a revised list dated November 24,
1997[13] increasing the number of dismissed
employees to 119, for participating in the illegal
Respondent Times Transportation Co., Inc., (TTCI) is
strike.[14]
a company engaged in the business of land
transportation for passengers and goods serving the
On December 4, 1997, Santiago served to the
Ilocos Region to Metro Manila route. TTCI employed
Department of Labor and Employment Regional Office
the herein 21 petitioners as bus drivers, conductors,
I a notice that TTCI would be closing its operations
mechanics, welders, security guards and utility
due to heavy business losses.[15]
personnel, namely: Onofre V. Montero (Montero),
Edgardo N. Estrañero (Estrañero), Rening P. Padre
On May 14, 1998, petitioners Estrañero, Pajarillo,
(Padre), Gabriel A. Madera (Madera), Herminio T.
Padre, Avila, Avila, Jr., Tupasi, Cuenta, Dulay, Yago,
Tacla, Nelson C. Viloria, Demetrio Q. Pajarillo
and Aganon filed several complaints against TTCI and
(Pajarillo), Alfredo R. Aganon (Aganon), Reynaldo
MENCORP before the NLRC. The complaints were
Avila (Avila), Albert T. Ruiz, Nestor Y. Yago (Yago),
thereafter consolidated under the case entitled
Harty M. Tupasi (Tupasi), Agustin R. Avila, Jr. (Avila,
"Malana v. TTCI" docketed as NLRC RAB-I-01-
Jr.), Bonifacio B. Gaano (Gaano), Joselito D. Cuenta
1007.[16] However, this case was withdrawn on March
(Cuenta), Jonas P. Estilong (Estilong), Dominador C.
4, 1999 upon motion by the TEU's counsel which was
Canaria (Canaria), Genaro C. Rondaris (Genaro),
given due course on March 22, 1999.[17]
Herardo M. Dulay (Dulay), Franklin A. Ravina, Jr.
(Ravina), and Ruben C. Cabello (Cabello)
Four years later, several complaints for unfair labor
(petitioners).[7]
practice, illegal dismissal with money claims, damages
and attorney's fees were filed against TTCI, Santiago,
Sometime in 1995, the rank-and-file employees of
MENCORP and its General Manager Virginia Mendoza,
TTCI formed a union named as Times Employees
including the latter's husband Reynaldo Mendoza
Union (TEU) which was later certified as the sole and
(collectively called the respondents), before the LA
exclusive bargaining unit within TTCI.[8]
from June to July 2002.[18] Accordingly, these
complaints were consolidated.
In March 1997, members of TEU went on strike; but
when former Labor Secretary Leonardo A. Quisimbing
In response, TTCI asserted that the petitioners' cause
assumed jurisdiction over the labor dispute and
of action had already been barred by prescription
certified the same for compulsory arbitration, a
because the complaints were filed only in June 2002
return-to-work Order dated March 10, 1997 was
or after almost five years from the date of their
issued which ended the strike and enjoined the parties
dismissal. MENCORP, on the other hand, raised the
from committing any other act that may intensify the
defense of lack of employer-employee relationship
situation.[9]
since it never engaged the services of the petitioners
when TTCI sold to them its buses and the Certificates
On August 23, 1997, TTCI Board of Directors approved
of Public Convenience.[19]
a resolution confirming the authority given to
respondent Santiago Rondaris (Santiago), TTCI
On June 9, 2005, the LA rendered a Decision
President and Chairman of the Board of Directors, to
dismissing the petitioners' claim for unfair labor
gradually dispose the assets of the TTCI as a result of
practice and money claims on the ground of
its unabated increase of the cost of operations and
prescription. However, with regard to the issue of
losses for the last two years. TTCI also adopted a
illegal dismissal, only the complaints of Montero,
company-wide retrenchment program, which will take
Ravina, Cabello, Genaro, Madera, Gaano, Arsenio
effect on October 1, 1997, where Santiago was given
Donato and Estilong were dismissed for having been
the authority to determine the number of excess
barred by prescription.[20]
employees who would be the subject of
retrenchment.[10]
The LA found that petitioners Estrañero, Pajarillo,
Aganon, Padre, Dulay, Cuenta, Canaria, Yago, Avila
The sale of 25 buses of TTCI, as well as the Certificates
and Avila, Jr. were illegally dismissed and were
of Public Convenience for the operation of the buses,
awarded their separation pay and backwages.
were likewise approved and subsequently transferred
According to the LA, the complaints of these 10
to respondent Mencorp Transport Systems, Inc.,
petitioners were timely filed in June 2002 because the
(MENCORP) by virtue of a Deed of Sale dated
eight-month period during which their cases were
December 12, 1997. Thereafter, several union
pending should be excluded from the four-year
members received notices that they were being
prescriptive period.[21]
retrenched effective 30 days from September 16,
1997.[11]
Disagreeing with the LA decision, all parties
interposed an appeal before the NLRC. However, said filed at all. This was clarified in the case
appeals have both been denied for non-perfection, of Intercontinental Broadcasting Corporation vs.
particularly for failure of the petitioners to verify their Panganiban, where the Supreme Court held that
appeal, and for failure of the respondent to post the although the commencement of an action stops the
required cash or surety bond. In a Decision[22] dated running of the statute of prescription or limitations, its
March 31, 2008, the NLRC vacated and set aside the dismissal or voluntary abandonment by plaintiff leaves
findings of the LA, upon finding that the petitioners' the parties in exactly the same position as though no
complaints had already been barred by prescription. action had been commenced at all. x x x.[30]
The dispositive part of which reads:
Aggrieved by the foregoing disquisition, the
petitioners moved for reconsideration[31]but it was
WHEREFORE, IN VIEW OF THE FOREGOING, the denied by the CA.[32] Hence, the present petition for
decision appealed from is hereby VACATED and SET review on certiorari.[33]
ASIDE, and the complaints dismissed on ground of
prescription.

SO ORDERED.[23] The Issue

The NLRC observed that the LA had ignored the rule


on prescription, and chose to be selective in awarding The main issue in this case is whether or not the
relief to the 10 complainants by stating in his decision petitioners' complaints for illegal dismissal have
that the period during which the labor cases were already prescribed.
pending should be deducted from the period of
prescription. According to the NLRC:

Ruling of the Court


We have thoroughly examined the records and find no
justification for the [LA] to rule that the pendency of
The petition is bereft of merit.
the cases has worked in favor of the complainants to
whom he awarded separation pay and backwages.
"It should be emphasized at the outset that as a rule,
The [LA] has not at all indicated in his decision when
this Court is not a trier of facts and this applies with
the eight (8)[-]month period of pendency he alluded
greater force in labor cases. Hence, factual findings of
to commenced and when it ended. As a matter of fact,
quasi-judicial bodies like the NLRC, particularly when
these cases took almost three (3) years from filing of
they coincide with those of the [LA] and if supported
the complaints to the rendition of the appealed
by substantial evidence, are accorded respect and
decision.[24]
even finality by this Court. But where the findings of
The NLRC added that the application of the principle the NLRC and the [LA] are contradictory, as in the
of prescription should not be done on a selective basis, present case, this Court may delve into the records
especially when the dates of accrual of the causes of and examine for itself the questioned findings."[34]
action and the filing of the complaints readily show
that prescription has set in.[25] Nevertheless, the Court has thoroughly reviewed the
records in this case and finds that the NLRC did not
The petitioners filed a motion for commit any grave abuse of its discretion amounting
reconsideration[26] dated May 16, 2008, but it was to lack or in excess of jurisdiction in rendering its
denied.[27] Hence, they filed a petition for decision in favor of the respondents. The CA acted in
certiorari[28] before the CA. accord with the evidence on record and case law when
it dismissed the petition and affirmed the assailed
On August 28, 2009, the CA Decision dismissed the decision and resolution of the NLRC.
petition.[29] In sustaining the NLRC decision, the
appellate court ratiocinated: In the case at bar, October 26, 1997 and November
24, 1997 appear on record to be the dates when the
petitioners' employment were terminated by TTCI.
Here, the illegal dismissal case was filed only in June The antecedent facts that gave rise to the petitioners'
2002 or for more than four (4) years and seven (7) dismissal from employment are not disputed in this
months from the time petitioners received the notices case. There is no question about the fact that the
of their dismissal in November and October 1997. petitioners' complaints for unfair labor practice and
Clearly, the four-year prescriptive period has already money claims have already prescribed. The
elapsed. petitioners however argue that their complaints for
illegal dismissal were duly filed within the four-year
Moreover, there is likewise no merit in petitioners' prescriptive period since the period during which their
contention that the period when they filed a complaint cases were pending should be deducted from the
on May 14, 1998 but withdrawn on March 30, 1998 period of prescription. On the other hand, the
should be excluded from the computation of the four- respondents insist that said complaints have already
year prescriptive [period] for illegal dismissal cases. prescribed. Hence, the pivotal question in resolving
The prescriptive period continues even after the the issues hinges on the resolution of whether the
withdrawal of the case as though no action has been period during which the petitioners' cases were
pending should be excluded from the period of labor. The management also has its own rights. Out
prescription. of concern for the less privileged in life, this Court, has
more often than not inclined, to uphold the cause of
Settled is the rule that when one is arbitrarily and the worker in his conflict with the employer. Such
unjustly deprived of his job or means of livelihood, the leaning, however, does not blind the Court to the rule
action instituted to contest the legality of one's that justice is in every case for the deserving, to be
dismissal from employment constitutes, in essence, dispensed in the light of the established facts and
an action predicated upon an injury to the rights of applicable law and doctrine.[42]
the plaintiff, as contemplated under Article 1146[35] of
the New Civil Code, which must be brought within four WHEREFORE, the Decision dated August 28, 2009
years.[36] and Resolution dated December 11, 2009 of the Court
of Appeals in CA-G.R. SP No. 106260 are AFFIRMED.
The petitioners contend that the period when they
filed a labor case on May 14, 1998 but withdrawn on SO ORDERED.
March 22, 1999 should be excluded from the
computation of the four-year prescriptive period for
illegal dismissal cases. However, the Court had
already ruled that the prescriptive period continues G.R. No. 175949, January 30, 2017
even after the withdrawal of the case as though no
action has been filed at all. The applicability of Article UNITED ALLOY PHILIPPINES CORPORATION,
1155[37] of the Civil Code in labor cases was upheld in SPOUSES DAVID C. CHUA AND LUTEN
the case of Intercontinental Broadcasting Corporation CHUA, Petitioners, v. UNITED COCONUT
v. Panganiban[38] where the Court held that "although PLANTERS BANK, Respondent.
the commencement of a civil action stops the running
of the statute of prescription or limitations, its DECISION
dismissal or voluntary abandonment by plaintiff leaves
the parties in exactly the same position as though no
PERALTA, J.:
action had been commenced at all."[39]

In like manner, while the filing of the complaint for Before the Court is a petition for review
illegal dismissal before the LA interrupted the running on certiorari seeking the reversal and setting aside of
of the prescriptive period, its voluntary withdrawal left the Decision1 and Resolution2 of the Court of
the petitioners in exactly the same position as though Appeals (CA), dated September 21, 2006 and
December 11, 2006, respectively, in CA-G.R. CV No.
no complaint had been filed at all. The withdrawal of
81079. The assailed Decision affirmed the Decision of
their complaint effectively erased the tolling of the
the Regional Trial Court (RTC) of Makati City, Branch
reglementary period. 135, in Civil Case No. 01-1332, while the questioned
Resolution denied petitioners' Motion for
A prudent review of the antecedents of the claim Reconsideration.
reveals that it has in fact prescribed due to the
petitioners' withdrawal of their labor case docketed as The pertinent factual and procedural antecedents of
NLRC RAB-I-01-1007.[40] Hence, while the filing of the the case are as follows:chanRoblesvirtualLawlibrary
said case could have interrupted the running of the
four-year prescriptive period, the voluntary On December 18, 2000, herein petitioner corporation,
withdrawal of the petitioners effectively cancelled the United Alloy Philippines
tolling of the prescriptive period within which to file Corporation (UNIALLOY) applied for and was granted
a credit accommodation by herein respondent United
their illegal dismissal case, leaving them in exactly the
Coconut Planters Bank (UCPB) in the amount of
same position as though no labor case had been filed
PhP50,000,000.00, as evidenced by a Credit
at all. The running of the four-year prescriptive period Agreement.3 Part of UNIALLOY's obligation under the
not having been interrupted by the filing of NLRC RAB- Credit Agreement was secured by a Surety
I-01-1007, the petitioners' cause of action had already Agreement,4 dated December 18, 2000, executed by
prescribed in four years after their cessation of UNIALLOY Chairman, Jakob Van Der Sluis (Van Der
employment on October 26, 1997 and November 24, Sluis), UNIALLOY President, David Chua and his
1997. Consequently, when the petitioners filed their spouse, Luten Chua (Spouses Chua), and one Yang
complaint for illegal dismissal, separation pay, Kim Eng (Yang). Six (6) Promissory Notes,5were later
retirement benefits, and damages in 2002, their executed by UNIALLOY in UCPB's favor, to
claim, clearly, had already been barred by wit:chanRoblesvirtualLawlibrary
prescription.[41]
1) #8111-00-20031-1, executed on December 18,
Sadly, the petitioners have no one but themselves to 2000, in the amount of US$110,000.00;
blame for their own predicament. By their own 2) #8111-00-00110-6, executed on December 18,
allegations in their respective complaints, they have 2000, in the amount of PhP6,000,000.00;
3) #8111-00-00112-2, executed on December 27,
barred their remedy and extinguished their right of
2000, in the amount of PhP3,900,000.00;
action. Although the Constitution is committed to the
4) #8111-01-20005-6, executed on February 7, 2001,
policy of social justice and the protection of the in the amount of US$320,000.00;
working class, it does not necessary follow that every 5) #8111-01-00009-0, executed on February 26,
labor dispute will be automatically decided in favor of 2001, in the amount of PhP1,600,000.00;
6) #8111-01-00030-8, executed on April 30, 2001, in
the amount of PhP16,029,320.88. SO ORDERED.11

In addition, as part of the consideration for the credit Thereafter, on motion, the RTC of CDO issued an
accommodation, UNIALLOY and UCPB also entered Order of Execution, dated September 14, 2001,
into a "lease-purchase" contract wherein the former directing UNIALLOY to tum over to UCPB the property
assured the latter that it will purchase several real subject of their lease-purchase agreement.
properties which UCPB co-owns with the Development
Bank of the Philippines. UNIALLOY then filed a petition
for certiorari and mandamus with the CA questioning
Subsequently, UNIALLOY failed to pay its loan the September 13 and September 14, 2001 Orders of
obligations. As a result, UCPB filed against UNIALLOY, the RTC of CDO. UNIALLOY also prayed for the
the spouses Chua, Yang and Van Der Sluis an action issuance of a writ of preliminary injunction. The case
for Sum of Money with Prayer for Preliminary was docketed as CA G.R. SP. No. 67079.
Attachment6 on August 27, 2001. The collection case
was filed with the Regional Trial Court of Makati On February 18, 2002, the CA promulgated a
City (RTC of Makati) and docketed as Civil Case No. Resolution12 granting UNIALLOY's prayer for the
01-1332. Consequently, UCPB also unilaterally issuance of a writ of preliminary injunction. UCPB
rescinded its lease-purchase contract with UNIALLOY. questioned the above CA Resolution by filing a petition
for certiorariwith this Court, which was docketed as
On the other hand, on even date, UNIALLOY filed G.R. No. 152238. On March 18, 2002, this Court
against UCPB, UCPB Vice-President Robert Chua and issued a Resolution which restrained the CA from
Van Der Sluis a complaint for Annulment and/or enforcing its February 18, 2002 Resolution.
Reformation of Contract with Damages, with Prayer
for a Writ of Preliminary Injunction or Temporary On January 28, 2005, this Court, rendered its Decision
Restraining Order.7 Claiming that it holds office and in G.R. No. 152238 denying UCPB's petition
conducts its business operations in Tagoloan, Misamis for certiorari and affirming the CA Resolution granting
Oriental, UNIALLOY filed the case with the Regional the writ of preliminary injunction.
Trial Court of Cagayan De Oro City (RTC of CDO) and
was docketed as Civil Case No. 2001-219. UNIALLOY Thereafter, on August 17, 2007, the CA promulgated
contended that Van Der Sluis, in cahoots with UCPB a Decision dismissing UNIALLOY's certiorari petition
Vice-President Robert Chua, committed fraud, and affirming the September 13 and September 14,
manipulation and misrepresentation to obtain the 2001 Orders of the RTC of CDO. UNIALLOY then filed
subject loan for their own benefit. UNIALLOY prayed, a petition for review on certiorari challenging the
among others, that three (3) of the six (6) Promissory above CA Decision. The case was docketed as G.R. No.
Notes it executed be annulled or reformed or that it 179257.
be released from liability thereon.
On November 23, 2015, this Court promulgated a
On September 12, 2001, UNIALLOY filed an Urgent Decision in G.R. No. 179257 denying UNIALLOY's
Motion to Dismiss8 the collection case (Civil Case No. petition. This Court held that the CA did not err in
01-1332) filed by UCPB on the ground of litis affirming the dismissal of UNIALLOY's complaint on
pendentia and forum shopping. UNIALLOY contended the grounds of improper venue, forum shopping and
that its complaint for annulment of contract (Civil Case for being a harassment suit. This Court also ruled that
No. 2001-219) and the collection case filed by UCPB the August 17, 2007 Decision of the CA neither
involves the same parties and causes of action. On violated this Court's January 28, 2005 Decision in G.R.
October 31, 2001, the RTC of Makati issued an No. 152238 nor contradicted the CA's February 18,
Order9denying UNIALLOY's motion to dismiss. 2002 Resolution granting the preliminary injunction
prayed for by UNIALLOY because the dismissal of
In the meantime, UCPB and its co-defendants also UNIALLOY's main action carried with it the dissolution
filed a Motion to Dismiss UNIALLOY's complaint for of any ancillary relief previously granted in the said
annulment of contract on the grounds of improper case, such as the abovementioned preliminary
venue, forum shopping, litis pendentia, and injunction. Subsequently, this Court's Decision in G.R.
harassment or nuisance suit. On September 13, 2001, No. 179257 became final and executory per Entry of
the RTC of CDO issued an Order10 dismissing Judgment dated January 20, 2016.
UNIALLOY's complaint for annulment of contract. The
dispositive portion of the Order reads, Meanwhile, on March 15, 2002, UNIALLOY filed with
thus:chanRoblesvirtualLawlibrary the RTC of Makati an omnibus motion praying for the
suspension of the proceedings of the collection case in
ACCORDINGLY, finding meritorious that the venue is the said court on the ground of pendency of
improperly laid and the complain[ant] engaged in the certiorari petition it filed with this
forum-shopping and harassment of defendant Jakob Court.13 However, the RTC denied UNIALLOY's motion
Van Der Sluis, this case is hereby DISMISSED in its Order14dated August 19, 2002.
rendering the prayer for issuance of a writ of
preliminary injunction moot and academic, and Subsequently, on June 17, 2003, the RTC of Makati
ordering plaintiff to turn over possession of the subject rendered Judgment in the collection case in favor of
premises of the properties in question at Barangay UCPB. The dispositive portion of the RTC Decision
Gracia, Tagoloan, Misamis Oriental to defendant reads, thus:chanRoblesvirtualLawlibrary
United Coconut Planters Bank.
WHEREFORE, premises considered, judgment is the instant petition basically hinges on the outcome of
hereby rendered in favor of plaintiff. Defendants are the petition filed under G.R. No. 179257. Considering
hereby ordered to pay plaintiff the that the promissory notes subject of G.R. No. 179257
following:chanRoblesvirtualLawlibrary are among the promissory notes which are also
involved in the present case, petitioner contends that
a. The sum of US DOLLARS: (US$435,494.44) with a judgment by this Court in G.R. No. 179257 that
interest and penalty charges from August 1, 2001 until reverses the Decision of the RTC of Cagayan de Oro
fully paid. City, which in effect would declare the nullity of the
subject promissory notes, may conflict with the
b. The sum of P26,940,950.80 with interest and Decision of this Court in the present petition, which
penalty charges from August 1, 2001 until fully paid. involves the collection of the sum being represented
in the same promissory notes. Thus, petitioner prays
c. Attorney's fees in the amount of P1,000,000.00. for the dismissal of the collection case (Civil Case No.
01-1332) filed by UCPB or the suspension of
d. Costs of suit. proceedings therein pending resolution of its petition
in G.R. No. 179257.
SO ORDERED.15
However, as mentioned above, on November 23,
2015, the 2nd Division of this Court already came up
with a Decision in G.R. No. 179257 which affirmed the
UNIALLOY appealed the above RTC Decision with the
RTC's dismissal of UNIALLOY's complaint. Pertinent
CA.
portions of the said Decision read as
follows:chanRoblesvirtualLawlibrary
On September 21, 2006, the CA rendered its assailed
judgment denying UNIALLOY's appeal and affirming
the questioned RTC Decision. CA CDO did not err in affirming the
dismissal of UniAiloy's Complaint on the
Hence, the instant petition raising the following grounds of improper venue, forum shopping
issues:chanRoblesvirtualLawlibrary and for being a harassment suit

The RTC was correct in dismissing UniAlloy's


5.01 THE HONORABLE COURT OF APPEALS
Complaint on the ground of improper venue. In
COMMITTED A SERIOUS, REVERSIBLE ERROR, IF NOT
general, personal actions must be commenced and
GRAVE ABUSE OF DISCRETION, IN REFUSING TO
tried (i) where the plaintiff or any of the principal
RESOLVE AS TO –
plaintiffs resides, (ii) where the defendant or any of
the principal defendants resides, or (III) in the case of
I a resident defendant where he may be found, at the
WHETHER OR NOT THE TRIAL COURT ERRED IN election of the plaintiff. Nevertheless, the parties may
DENYING PETITIONERS' URGENT MOTION TO agree in writing to limit the venue of future actions
DISMISS between them to a specified place.

II In the case at bench, paragraph 18 of the LPA


WHETHER OR NOT THE TRIAL COURT ERRED IN expressly provides that "[a]ny legal action arising out
DENYING PETITIONERS' OMNIBUS MOTION TO of or in connection with this Agreement shall be
SUSPEND PROCEEDINGS AND TO LIFT WRIT OF brought exclusively in the proper courts of Makati
PRELIMINARY ATTACHMENT City, Metro Manila." Hence, UniAlloy should have filed
its complaint before the RTC of Makati City, and not
III with the RTC of Cagayan de Oro City.
WHETHER OR NOT THE TRIAL COURT ERRED AND/OR
COMMITTED GRAVE ABUSE OF DISCRETION But to justify its choice of venue, UniAlloy insists that
AMOUNTING TO LACK OR IN EXCESS OF the subject matter of its Complaint in Civil Case No.
JURISDICTION IN RENDERING THE ASSAILED 2001-219 is not the LPA, but the fictitious loans that
QUESTIONED DECISION WHEN THERE IS A PENDING purportedly matured on April 17, 2001.
CIVIL ACTION BEFORE THE REGIONAL TRIAL COURT
OF CAGAYAN DE ORO, BRANCH 40, INVOLVING THE UniAlloy's insistence lacks merit. Its Complaint
SAME PARTIES AND SUBJECT MATTER WHICH CASE, unequivocally sought to declare "as null and void the
IS NOW PENDING AND ASSAILED BY THE PLAINTIFF- unilateral rescission made by defendant UCPB of its
APPELLEE VIA PETITION BEFORE THE HONORABLE subsisting Lease Purchase Agreement with
SUPREME COURT. [UniAlloy]." What UCPB unilaterally rescinded is the
LPA and without it there can be no unilateral rescission
to speak of. Hence, the LPA is the subject matter or at
least one of the subject matters of the Complaint.
5.02 THE HONORABLE COURT OF APPEALS Moreover, and to paraphrase the aforecited paragraph
COMMITTED A SERIOUS, REVERSIBLE ERROR IF NOT 18 of the LPA, as long as the controversy arises out of
GRAVE ABUSE OF DISCRETION, IN DENYING or is connected therewith, any legal action should be
PETITIONERS' URGENT MOTION FOR filed exclusively before the proper courts of Makati
RECONSIDERATION WITHOUT STATING CLEARLY City. Thus, even assuming that the LPA is not the main
AND DISTINCTLY THE FACTUAL AND LEGAL BASIS subject matter, considering that what is being sought
THEREOF.16 to be annulled is an act connected and inseparably
related thereto, the Complaint should have been filed
before the proper courts in Makati City.
Petitioners' basic argument is that the resolution of
With regard forum-shopping, our review of the whereby they bound themselves jointly and severally
records of this case revealed that UniAlloy did not with UNIALLOY, to pay the latter's loan obligations
disclose in the Verification/Certification of the with UCPB. Pertinent portions of the said Surety
Complaint the pendency of Civil Case No. 2001-156 Agreement are reproduced hereunder, to
entitled "Ernesto Paraiso and United Alloy Philippines wit:chanRoblesvirtualLawlibrary
Corporation v. Jakob Van Der Sluis." The trial court
took judicial notice of its pendency as said case is also x x x x
assigned and pending before it. Thus, we adopt the
following unrebutted finding of the ARTICLE I
RTC:chanRoblesvirtualLawlibrary
LIABILITIES OF SURETIES
These two civil cases have identical causes of action
or issues against defendant Jakob Van Der Sluis for
having misrepresented to plaintiff and its stockholders Section 1.01. The SURETIES, jointly and severally
that he can extend financial assistance in running the with the PRINCIPAL, hereby unconditionally and
operation of the corporation, such that on April 6, irrevocably guarantee the full and complete payment
2001 plaintiff adopted a Stockholders Resolution when due, whether at stated maturity, by acceleration
making defendant Jakob chairman of the corporation or otherwise, of all sums payable by
for having the financial capability to provide the the PRINCIPAL under the Credit Agreement, the
financial needs of plaintiff and willing to finance the Note/s and other related documents or instruments
operational needs thereof; that a Memorandum of referred to therein (hereinafter referred to collectively
Agreement was subsequently entered between the as the "Loan Documents") the terms and conditions
parties whereby defendant Jakob obligated to provide of which are hereby deemed incorporated by
sufficient financial loan to plaintiff to make it reference.
profitable; that Jakob maliciously and willfiilly reneged
[on] his financial commitments to plaintiff prompting The liability of the SURETIES shall not be limited to
the stockholders to call his attention and warned him the aggregate principal amount of FIFTY MILLION
of avoiding the said agreement; that defendant who PESOS (P50,000,000.00), Philippine Currency,
had then complete control of plaintiffs bank account or its foreign currency equivalent, but shall
with defendant UCPB, through fraudulent include such interest, fees, penalties and other
machinations and manipulations, was able to charges due thereon, as well as any and all renewals,
maliciously convince David C. Chua to pre-sign several extensions, restructurings or conversions of
checks; that defendant Jakob facilitated several huge the Accommodation or any portion thereof, as may
loans purportedly obtained by plaintiff which appear in the books and records of account of
defendant himself could not even account and did not the BANK.
even pay the debts of the corporation but instead
abused and maliciously manipulated plaintiffs Such extension/s, renewal/s, restructuring/s, or
account. conversion/s of the Accommodation or any portion
thereof, including any increase in the principal amount
Forum-shopping indeed exists in this case, for both thereof, or the imposable interest rates and other
actions involve the same transactions and same bank charges, shall be binding upon
essential facts and circumstances as well as identical the SURETIES under the terms of this SURETY
causes of action, subject matter and issues, x x x AGREEMENT, without need of any further notice to
or consent or conformity of the SURETIES, all of
which are hereby expressly waived.
As mentioned above, this Court's Decision m the
Section 1.02. This SURETY AGREEMENT is a
above case has become final and executory on
guarantee of payment and not merely of collection
January 20, 2016.
and is intended to be a perfect and continuing
indemnity in favor of the BANK for the amounts and
Thus, contrary to petitioners' position, there is no
to the extent stated above. For this purpose,
longer any possibility that the Decision of the RTC of
the SURETIES hereby commit that for as long as
CDO may conflict with the disposition of the present
this SURETY AGREEMENT is in effect,
case because UNIALLOY's complaint for annulment of
the SURETIES shall not sell, lease, transfer, assign or
contract has already been dismissed with finality. This
encumber any of its present and future properties
Court will, thus, proceed to resolve the merits of the
without the written consent of the BANK, which
instant case.
consent will not be unreasonably withheld.
The fundamental issue here is whether or not herein
The liability of the SURETIES shall be absolute,
petitioners, together with their co-defendants Van Der
irrevocable, unconditional, direct, immediate and not
Sluis and Yang, are liable to pay respondent the
contingent upon the pursuit by the BANK of whatever
amounts awarded by the RTC of Makati City in its June
remedies it may have against the PRINCIPAL or the
17, 2003 Decision.17
other sureties for the Accommodation, and shall be
performed by the SURETIES strictly in accordance
The Court rules in the affirmative.
with the terms hereof and under any and all
circumstances, including the existence of any claim,
As ruled upon by both the RTC and the CA, UNIALLOY
set-off, defense or other rights which
failed to pay its obligations under the above
the SURETIES or any person or entity may have at
promissory notes and that herein petitioner Spouses
any time against the BANK for any reason
Chua, together with their co-defendants Van Der Sluis
whatsoever, whether or not related to this SURETY
and Yang freely executed a Surety Agreement
AGREEMENT, the Loan Documents or under such
other documents executed in relation thereto, or complied with in good faith." The RTC as well as the
contemplated hereunder. CA found nothing which would justify or excuse
petitioners from non-compliance with their obligations
ARTICLE II under the contract they have entered into. Thus, it
becomes apparent that petitioners are merely
TERM attempting to evade or, at least, delay the inevitable
performance of their obligation to pay under the
Surety Agreement and the subject promissory notes
Section 2.01. This SURETY AGREEMENT shall which were executed in respondent's favor.
remain in full force and effect until payment in full of
all amount for which the PRINCIPAL is or may be The Court notes, however, that the interest rates
liable as set forth in ARTICLE I hereof, regardless of imposed on the subject promissory notes were made
the absence of any further or other assent or subject to review and adjustment at the sole
conformity of, or notice to the SURETIES, or any discretion and under the exclusive will of UCPB.
circumstance, or provision of law which might Moreover, aside from the Consolidated Statement of
otherwise constitute a defense or discharge of Account attached to the demand letters addressed to
the SURETIES, all of which are hereby expressly petitioner spouses Chua and their co-defendants,19 no
waived. other competent evidence was shown to prove the
total amount of interest due on the above promissory
notes. In fact, based on the attached Consolidated
ARTICLE III
Statement of Account, UCPB has already imposed a
24% interest rate on the total amount due on
DEFAULT
respondents' peso obligation for a short period of six
months. Settled is the rule that any contract which
appears to be heavily weighed in favor of one of the
Section 3.01. If the BANK shall declare the obligation
parties so as to lead to an unconscionable result is
of the PRINCIPAL to be due and payable because of
void.19 Any stipulation regarding the validity or
the happening of any of the event of default as defined
compliance of the contract which is left solely to the
in the Credit Agreement, the SURETIES, upon
will of one of the parties, is likewise, invalid.20
receipt of written notice from the BANK, shall
forthwith pay to the BANK the full amount of the said
Moreover, courts have the authority to strike down or
obligations, without need of demand, protest or notice
to modify provisions in promissory notes that grant
of any kind, other than the notice provided herein, all
the lenders unrestrained power to increase interest
of which are likewise expressly waived by
rates, penalties and other charges at the latter's sole
the SURETIES.
discretion and without giving prior notice to and
securing the consent of the borrowers.21 This
In this connection, the BANK is hereby given full
unilateral authority is anathema to the mutuality of
power and authority to apply whatever moneys or
contracts and enable lenders to take undue advantage
things of value belonging to the SURETIES which
of borrowers.22 Although the Usury Law has been
may be in the possession or control of the BANK in
effectively repealed, courts may still reduce iniquitous
payment of the obligations mentioned above.
or unconscionable rates charged for the use of
money.23 Furthermore, excessive interests, penalties
ARTICLE IV and other charges not revealed in disclosure
statements issued by banks, even if stipulated in the
BINDING EFFECT promissory notes, cannot be given effect under the
Truth in Lending Act.24

Section 4.01. This SURETY AGREEMENT shall The Court, thus, finds it proper to modify the interest
except upon the other SURETIES, if any whose rates imposed on respondents' obligation. Pursuant to
liability(ies) is/are extinguished by way of compromise the ruling in Nacar v. Gallery Frames, et. al.,25 the
or otherwise be binding upon the SURETIES, their sums of US$435,494.44 and PhP26,940,950.80 due
heirs and successors in interest and shall inure to the to UCPB shall earn interest at the rate of 12% per
benefit of and be enforceable by the BANK, its assigns annum from the date of default, on August, 1, 2001,
and successors in interest. For this purpose, until June 30, 2013 and thereafter, at the rate of 6%
the SURETIES have agreed, as they hereby agree, per annum, from July 1, 2013 until finality of this
that an extinguishment of liability(ies) of any of Decision. The total amount owing to UCPB as set forth
the SURETIES shall not be an obstacle to in this Decision shall further earn legal interest at the
the BANK from demanding payment from the rate of 6% per annum from its finality until full
other SURETIES, if any, so long as payment thereof, this interim period being deemed to
the Accommodation has not been fully collected. be by then an equivalent to a forbearance of credit.

x x x x18 Finally, pursuant to the parties' Credit Agreement as


well as the subject Promissory Notes, respondents are
also liable to pay a penalty charge at the rate of 1%
Petitioners do not deny their liability under the per month or 12% per annum.
abovequoted Surety Agreement.
WHEREFORE, the instant petition is DENIED. The
As correctly held by both the RTC and the CA, Article Decision and Resolution of the Court of Appeals, dated
1159 of the Civil Code expressly provides that September 21, 2006 and December 11, 2006,
"[o]bligations arising from contracts have the force of respectively, in CA-G.R. CV No. 81079,
law between the contracting parties and should be are AFFIRMED with MODIFICATION by directing
petitioners and their co-defendants to pay respondent Damages9 against Spouses Montealegre, PNB, the
UCPB the following:chanRoblesvirtualLawlibrary Register of Deeds of Bacolod City and the Ex-Officio
Provincial Sheriff of Negros Occidental. The complaint,
(1) the principal amounts of US$435,494.44 and docketed as Civil Case No. 7213, alleged that Spouses
PhP26,940,950.80;chanrobleslaw Marañon are the true registered owners of the subject
lot by virtue of TCT No. T-129577 which was illegally
(2) legal interest of 12% per annum on the above cancelled by TCT No. T-156512 under the name of
principal amounts reckoned from August 1, 2001 until Emilie who used a falsified Deed of Sale bearing the
June 30, 2013;chanrobleslaw forged signatures of Spouse Marañon10 to effect the
transfer of title to the property in her name.
(3) penalty charge of 12% per annum from August 1,
2001 until fully paid; and
In its Answer,11 PNB averred that it is a mortgagee in
good faith and for value and that its mortgage lien on
(4) an interest of 6% from July 1, 2013 until fully paid.
the property was registered thus valid and binding
against the whole world.
SO ORDERED.chanroblesvirtuallawlibrary

As reflected in the Pre-trial Order12 dated March 12,


1996, the parties stipulated, among others, that the
G.R. No. 189316 June 1, 2013 period for legal redemption of the subject lot has
already expired.

PHILIPPINE NATIONAL BANK, Petitioner,


vs. While the trial proceedings were ongoing, Paterio
SPOUSES BERNARD and CRESENCIA Tolete (Tolete), one of the tenants of the building
MARANON, Respondents. erected on the subject lot deposited his rental
payments with the Clerk of Court of Bacolod City
which, as of October 24, 2002, amounted to
RESOLUTION ₱144,000.00.

REYES, J.: On June 2, 2006, the RTC rendered its Decision13 in


favor of the respondents after finding, based on the
This is a petition for review on certiorari1 under Rule expert testimony of Colonel Rodolfo Castillo, Head of
45 of the Rules of Court, assailing the Decision2 dated the Forensic Technology Section of Bacolod City
June 18, 2008 and Resolution3 dated August 10, 2009 Philippine National Police, that the signatures of
of the Court of Appeals (CA) in CA-G.R. SP No. 02513, Spouses Marañon in the Deed of Sale presented by
which affirmed in toto the Orders dated September 8, Spouses Montealegre before the Register of Deeds to
20064 and December 6, 20065 of the Regional Trial cause the cancellation of TCT No. T-129577 were
Court (RTC) of Bacolod City, Branch 54, directing forged. Hence, the RTC concluded the sale to be null
petitioner Philippine National Bank (PNB) to release in and void and as such it did not transfer any right or
favor of Spouses Bernard and Cresencia Marafion title in law. PNB was adjudged to be a mortgagee in
(Spouses Marafion) the rental fees it received good faith whose lien on the subject lot must be
amounting to Thirty Thousand Pesos (₱30,000.00). respected. Accordingly, the Decision disposed as
follows:
The Facts
WHEREFORE, judgment is hereby rendered in favor of
the plaintiffs herein respondents:
The controversy at bar involves a 152-square meter
parcel of land located at Cuadra-Smith Streets,
Downtown, Bacolod (subject lot) erected with a 1. The cancellation of TCT No. 129577 over
building leased by various tenants. The subject lot was Lot 177-A-1 Bacolod Cadastre in the name of
among the properties mortgaged by Spouses Rodolfo Bernard Marañon and the issuance of new
and Emilie Montealegre (Spouses Montealegre) to PNB TCT No. 156512 in the name of defendant
as a security for a loan. In their transactions with PNB, Emilie Montealegre are hereby declared null
Spouses Montealegre used Transfer Certificate of Title and void;
(TCT) No. T-156512 over the subject lot purportedly
registered in the name of Emilie Montealegre 2. The defendant Emilie Montealegre is
(Emilie).6 ordered to reconvey the title over Lot No.
177-A-1, Bacolod Cadastre back to the
When Spouses Montealegre failed to pay the loan, PNB plaintiffs Marañon herein respondents;
initiated foreclosure proceedings on the mortgaged
properties, including the subject lot. In the auction 3. The Real Estate Mortgage lien of the
sale held on August 16, 1991, PNB emerged as the Philippine National Bank registered on the
highest bidder. It was issued the corresponding title of Lot No. 177-A-1 Bacolod Cadastre
Certificate of Sale dated December 17, 19917 which shall stay and be respected; and
was subsequently registered on February 4, 1992.8

4. The defendants - Emilie Montealegre and


Before the expiration of the redemption period or on spouse are ordered to pay attorney’s fees in
July 29, 1992, Spouses Marañon filed before the RTC the sum of Php50,000.00, and to pay the
a complaint for Annulment of Title, Reconveyance and costs of the suit.
SO ORDERED.14 Cadastre shall stay and be respected." PNB also
contended that it is an innocent mortgagee.
Neither of the parties sought a reconsideration of the
above decision or any portion thereof nor did they In its Decision23 dated June 18, 2008, the CA denied
elevate the same for appellate review. the petition and affirmed the RTC’s judgment
ratiocinating that not being parties to the mortgage
transaction between PNB and Spouses Montealegre,
What precipitated the controversy at hand were the
Spouses Marañon cannot be deprived of the fruits of
subsequent motions filed by Spouses Marañon for
the subject lot as the same will amount to deprivation
release of the rental payments deposited with the
of property without due process of law. The RTC
Clerk of Court and paid to PNB by Tolete.
further held that PNB is not a mortgagee in good faith
because as a financial institution imbued with public
On June 13, 2006, Spouses Marañon filed an Urgent interest, it should have looked beyond the certificate
Motion for the Withdrawal of Deposited of title presented by Spouses Montealegre and
Rentals15 praying that the ₱144,000.00 rental fees conducted an inspection on the circumstances
deposited by Tolete with the Clerk of Court be released surrounding the transfer to Spouses Montealegre. The
in their favor for having been adjudged as the real decretal portion of the Decision thus read:
owner of the subject lot. The RTC granted the motion
in its Order16 dated June 28, 2006.
WHEREFORE, in view of the foregoing, the petition is
hereby DISMISSED. The Orders dated September 8,
On September 5, 2006, Spouses Marañon again filed 2006 and December 6, 2006, rendered by the
with the RTC an Urgent Ex-Parte Motion for respondent Presiding Judge of the Regional Trial
Withdrawal of Deposited Rentals17 praying that the Court, Branch 54, Bacolod City, in Civil Case NO. 7213
₱30,000.00 rental fees paid to PNB by Tolete on directing the release of the deposited rental in the
December 12, 1999 be released in their favor. The amount of THIRTY THOUSAND PESOS ([P]30,000.00)
said lease payments were for the five (5)-month to private respondents are hereby AFFIRMED.
period from August 1999 to December 1999 at the
monthly lease rate of ₱6,000.00.
SO ORDERED.24

The RTC granted the motion in its Order18 dated


PNB moved for reconsideration25 but the motion was
September 8, 2006 reasoning that pursuant to its
denied in the CA Resolution dated August 10,
Decision dated June 2, 2006 declaring Spouses
2009.26 Hence, the present recourse whereby PNB
Marañon to be the true registered owners of the
argues that the RTC Decision dated June 2, 2006
subject lot, they are entitled to its fruits.
lapsed into finality when it was not appealed or
submitted for reconsideration. As such, all conclusions
The PNB differed with the RTC’s ruling and moved for therein are immutable and can no longer be modified
reconsideration averring that as declared by the RTC by any court even by the RTC that rendered the same.
in its Decision dated June 2, 2006, its mortgage lien The CA however erroneously altered the RTC Decision
should be carried over to the new title reconveying the by reversing the pronouncement that PNB is a
lot to Spouses Marañon. PNB further argued that with mortgagee-in-good-faith.
the expiration of the redemption period on February
4, 1993, or one (1) year from the registration of the
PNB further asseverates that its mortgage lien was
certificate of sale, PNB is now the owner of the subject
carried over to the new title issued to Spouses
lot hence, entitled to its fruits. PNB prayed that (1)
Marañon and thus it retained the right to foreclose the
the Order dated September 8, 2006 be set aside, and
subject lot upon non-payment of the secured debt.
(2) an order be issued directing Spouses Marañon to
PNB asserts that it is entitled to the rent because it
turn over to PNB the amount of ₱144,000.00 released
became the subject lot’s new owner when the
in their favor by the Clerk of Court.19
redemption period expired without the property being
redeemed.
On November 20, 2006, the RTC issued an Order
again directing PNB to release to Spouses Marañon the
Ruling of the Court
₱30,000.00 rental payments considering that they
were adjudged to have retained ownership over the
property.20 We deny the petition.

On December 6, 2006, the RTC issued another Order It is readily apparent from the facts at hand that the
denying PNB’s motion for reconsideration and status of PNB’s lien on the subject lot has already been
reiterating the directives in its Order dated September settled by the RTC in its Decision dated June 2, 2006
8, 2006.21 where it was adjudged as a mortgagee in good faith
whose lien shall subsist and be respected. The
decision lapsed into finality when neither of the parties
Aggrieved, PNB sought recourse with the CA via a
moved for its reconsideration or appealed.
petition for certiorari and mandamus22 claiming that
as the lawful owner of the subject lot per the RTC’s
judgment dated June 2, 2006, it is entitled to the fruits Being a final judgment, the dispositions and
of the same such as rentals paid by tenants hence, the conclusions therein have become immutable and
ruling that "the real estate mortgage lien of the PNB unalterable not only as against the parties but even
registered on the title of Lot No. 177-A-1 Bacolod the courts. This is known as the doctrine of
immutability of judgments which espouses that a
judgment that has acquired finality becomes simply resolved on the basis of such pronouncement.
immutable and unalterable, and may no longer be However, the application of related legal principles
modified in any respect even if the modification is ought to be clarified in order to settle the intervening
meant to correct erroneous conclusions of fact or law right of PNB as a mortgagee in good faith.
and whether it will be made by the court that rendered
it or by the highest court of the land.27 The
The protection afforded to PNB as a mortgagee in good
significance of this rule was emphasized in Apo Fruits
faith refers to the right to have its mortgage lien
Corporation v. Court of Appeals,28 to wit:
carried over and annotated on the new certificate of
title issued to Spouses Marañon35 as so adjudged by
The reason for the rule is that if, on the application of the RTC. Thereafter, to enforce such lien thru
one party, the court could change its judgment to the foreclosure proceedings in case of non-payment of the
prejudice of the other, it could thereafter, on secured debt,36 as PNB did so pursue. The principle,
application of the latter, again change the judgment however, is not the singular rule that governs real
and continue this practice indefinitely. The equity of a estate mortgages and foreclosures attended by
particular case must yield to the overmastering need fraudulent transfers to the mortgagor.
of certainty and unalterability of judicial
pronouncements.
Rent, as an accessory follow the principal.37 In fact,
when the principal property is mortgaged, the
The doctrine of immutability and inalterability of a mortgage shall include all natural or civil fruits and
final judgment has a two-fold purpose: (1) to avoid improvements found thereon when the secured
delay in the administration of justice and thus, obligation becomes due as provided in Article 2127 of
procedurally, to make orderly the discharge of judicial the Civil Code, viz:
business and (2) to put an end to judicial
controversies, at the risk of occasional errors, which
Art. 2127. The mortgage extends to the natural
is precisely why courts exist. Controversies cannot
accessions, to the improvements, growing fruits, and
drag on indefinitely. The rights and obligations of
the rents or income not yet received when the
every litigant must not hang in suspense for an
obligation becomes due, and to the amount of the
indefinite period of time. The doctrine is not a mere
indemnity granted or owing to the proprietor from the
technicality to be easily brushed aside, but a matter
insurers of the property mortgaged, or in virtue of
of public policy as well as a time-honored principle of
expropriation for public use, with the declarations,
procedural law.29 (Citations omitted)
amplifications and limitations established by law,
whether the estate remains in the possession of the
Hence, as correctly argued by PNB, the issue on its mortgagor, or it passes into the hands of a third
status as a mortgagee in good faith have been person.
adjudged with finality and it was error for the CA to
still delve into and, worse, overturn, the same. The CA
Consequently, in case of non-payment of the secured
had no other recourse but to uphold the status of PNB
debt, foreclosure proceedings shall cover not only the
as a mortgagee in good faith regardless of its defects
hypothecated property but all its accessions and
for the sake of maintaining stability of judicial
accessories as well. This was illustrated in the early
pronouncements. "The main role of the courts of
case of Cu Unjieng e Hijos v. Mabalacat Sugar
justice is to assist in the enforcement of the law and
Co.38 where the Court held:
in the maintenance of peace and order by putting an
end to judiciable controversies with finality. Nothing
better serves this role than the long established That a mortgage constituted on a sugar central
doctrine of immutability of judgments."30 includes not only the land on which it is built but also
the buildings, machinery, and accessories installed at
the time the mortgage was constituted as well as the
Further, it must be remembered that what reached
buildings, machinery and accessories belonging to the
the CA on certiorari were RTC resolutions issued long
mortgagor, installed after the constitution thereof x x
after the finality of the Decision dated June 2, 2006.
x .39
The RTC Orders dated September 8, 2006 and
December 6, 2006 were implements of the
pronouncement that Spouses Marañon are still the Applying such pronouncement in the subsequent case
rightful owners of the subject lot, a matter that has of Spouses Paderes v. Court of Appeals,40 the Court
been settled with finality as well. This declared that the improvements constructed by the
notwithstanding, the Court agrees with the ultimate mortgagor on the subject lot are covered by the real
outcome of the CA’s assailed resolutions. estate mortgage contract with the mortgagee bank
and thus included in the foreclosure proceedings
instituted by the latter.41
Rent is a civil fruit31 that belongs to the owner of the
property32 producing it by right of accession33.34 The
rightful recipient of the disputed rent in this case However, the rule is not without qualifications. In
should thus be the owner of the subject lot at the time Castro, Jr. v. CA42 the Court explained that Article
the rent accrued. It is beyond question that Spouses 2127 is predicated on the presumption that the
Marañon never lost ownership over the subject lot. ownership of accessions and accessories also belongs
This is the precise consequence of the final and to the mortgagor as the owner of the principal. After
executory judgment in Civil Case No. 7213 rendered all, it is an indispensable requisite of a valid real estate
by the RTC on June 3, 2006 whereby the title to the mortgage that the mortgagor be the absolute owner
subject lot was reconveyed to them and the cloud of the encumbered property, thus:
thereon consisting of Emilie’s fraudulently obtained
title was removed. Ideally, the present dispute can be
All improvements subsequently introduced or owned judgment. This is the clear import of the ruling in
by the mortgagor on the encumbered property are Unionbank of the Philippines v. Court of Appeals:45
deemed to form part of the mortgage. That the
improvements are to be considered so incorporated
This is because as purchaser at a public auction,
only if so owned by the mortgagor is a rule that can
UNIONBANK is only substituted to and acquires the
hardly be debated since a contract of security,
right, title, interest and claim of the judgment debtors
whether, real or personal, needs as an indispensable
or mortgagors to the property at the time of levy.
element thereof the ownership by the pledgor or
Perforce, the judgment in the main action for
mortgagor of the property pledged or mortgaged. x x
reconveyance will not be rendered ineffectual by the
x.43 (Citation omitted)
consolidation of ownership and the issuance of title in
the name of UNIONBANK.46 (Citation omitted)
Otherwise stated, absent an adverse claimant or any
evidence to the contrary, all accessories and
Nonetheless, since the present recourse stemmed
accessions accruing or attached to the mortgaged
from a mere motion claiming ownership of rent and
property are included in the mortgage contract and
not from a main action for annulment of the
may thus also be foreclosed together with the
foreclosure sale or of its succeeding incidents, the
principal property in case of non-payment of the debt
Court cannot proceed to make a ruling on the bearing
secured.
of the CA's Decision dated June 18, 2008 to PNB's
standing as a purchaser in the public auction. Such
Corollary, any evidence sufficiently overthrowing the matter will have to be threshed out in the proper
presumption that the mortgagor owns the mortgaged forum.
property precludes the application of Article 2127.
Otherwise stated, the provision is irrelevant and
All told, albeit the dispositive portions of the assailed
inapplicable to mortgages and their resultant
CA decision and resolution are differently premised,
foreclosures if the mortgagor is later on found or
they ought to be upheld as they convey the similar
declared to be not the true owner of the property, as
conclusion that Spouses Marañon are the rightful
in the instant case.1âwphi1
owners of the rent earned by the building on the
subject lot.
It is beyond question that PNB’s mortgagors, Spouses
Montealegre, are not the true owners of the subject
WHEREFORE, foregoing considered, the petition is
lot much less of the building which produced the
hereby DENIED. The Decision dated June 18, 2008
disputed rent. The foreclosure proceedings on August
and Resolution dated August 10, 2009 of the Court of
16, 1991 caused by PNB could not have, thus,
Appeals in CA-G.R. SP No. 02513 are AFFIRMED.
included the building found on the subject lot and the
rent it yields. PNB’s lien as a mortgagee in good faith
pertains to the subject lot alone because the rule that SO ORDERED.
improvements shall follow the principal in a mortgage
under Article 2127 of the Civil Code does not apply
under the premises. Accordingly, since the building
was not foreclosed, it remains a property of Spouses
Marañon; it is not affected by non-redemption and is [ G.R. No. 187013, April 22, 2015 ]
excluded from any consolidation of title made by PNB
over the subject lot. Thus, PNB’s claim for the rent
SPOUSES MAGDALINO AND CLEOFE BADILLA,
paid by Tolete has no basis.
PETITIONERS, VS. FE BRAGAT, RESPONDENT.

It must be remembered that there is technically no DECISION


juridical tie created by a valid mortgage contract that
PERALTA, J.:
binds PNB to the subject lot because its mortgagor
was not the true owner. But by virtue of the This is a petition for review on certiorari, under Rule
mortgagee in good faith principle, the law allows PNB 45 of the Rules of Court, assailing the Decision dated
to enforce its lien. We cannot, however, extend such October 9, 2008 and Resolution dated February 12,
principle so as to create a juridical tie between PNB
2009 of the Court of Appeals rendered in CA-G.R. CV
and the improvements attached to the subject lot
No. 70423-MIN.
despite clear and undeniable evidence showing that
no such juridical tie exists.
The case involves the issue of ownership of the subject
real property.
Lastly, it is worthy to note that the effects of the
foreclosure of the subject lot is in fact still contentious
The facts follow.
considering that as a purchaser in the public sale, PNB
was only substituted to and acquired the right, title,
interest and claim of the mortgagor to the property as Azur Pastrano and his wife Profitiza Ebaning (Spouses
of the time of the levy.44 There being already a final Pastrano) were the original owners of Lot No. 19986
judgment reconveying the subject lot to Spouses (subject property), located at Tablon, Cagayan de Oro
Marañon and declaring as null and void Emilie's City. Its Original Certificate of Title (OCT) No. P-2035,
purported claim of ownership, the legal consequences consisting of 1,015 sq. m. was issued on November
of the foreclosure sale, expiration of the redemption 18, 1980.[1] The OCT was in the name of Azur
period and even the consolidation of the subject lot's Pastrano.[2]
title in PNB's name shall be subjected to such final
Before the issuance of the OCT, however, the Spouses Pastrano, on May 5, 1984. This led to the cancellation
Pastrano, on November 18, 1968, sold the lot to of Pastrano's OCT No. P-2035 and the issuance of
Eustaquio P. Ledesma, Jr. (Ledesma), as evidenced by Bragat's TCT No. T-47759. Thus, she prays for the
a Deed of Definite Sale of Unregistered Coconut and Spouses Badilla to be ordered to vacate the around
Residential Land.[3] 149-square-meter portion that they occupy in the
property.[14]
The petitioners, the spouses Magdalino and Cleofe
Badilla (Spouses Badilla) claimed that in 1970, Just six days later, on June 11, 1992, the Spouses
Ledesma sold to them, "on installment" basis, a Badilla filed their own Complaint for Quieting of Title,
portion amounting to 200 sq. m. of Lot No. 19986 Declaration of Nullity of TCT No. T-47759 and
(subject property). The sale was not reduced in Damages against Bragat, claiming that the Spouses
writing, however, possession of the portion sold was Badilla are the lawful owners and possessors of Lot
transferred to the Badillas, which portion the Badillas No. 19986-B (a portion of Lot No. 19986), having
claim was designated as Lot No. 19986-B.[4] acquired it in 1970 from Ledesma. The latter, on his
part, allegedly bought the bigger Lot No. 19986 from
On April 18, 1978, the spouses Florito Bragat and Fe Pastrano earlier on November 18, 1968. The Spouses
Bragat (Spouses Bragat) bought 991 sq. m. of the Badilla alleged that they took possession of and built
property from Ledesma and his wife, via a Deed of a house on the property upon their purchase thereof
Absolute Sale of a Residential Lot.[5] Two (2) tax from Ledesma and has since remained in possession.
declarations were allegedly issued as a result of the However, they claimed that Pastrano was
sale: one designated a lot as Lot No. 19986-A with an subsequently able to obtain a free patent and a title,
area of 642 sq. m.,[6] while another designated the OCT No. P-2035, over Lot No. 19986. According to the
other lot as Lot No. 19986-B with an area of 349 sq. Badillas, Pastrano made a sale to Bragat on October
m.[7] 2, 1987, but such sale is not valid since Pastrano was
no longer the owner of the property on that date.
On May 5, 1984, the Spouses Pastrano executed Consequently, the Spouses Badilla prayed that TCT
another Deed of Absolute Sale of Registered Land in No. T-47759 issued to Bragat pursuant to that sale be
favor of herein petitioner Fe Bragat (Bragat), covered declared null and void.[15]
by OCT No. P-2035 and with an area of 1,015 sq.
m.[8] On the same date, Azur Pastrano executed an After Answers were filed for both complaints, the two
Affidavit of Loss reporting the loss of the owner's cases were consolidated and heard by one court,
duplicate copy of OCT No. P-2035.[9] Branch 25 of the RTC of Cagayan de Oro City, as they
involved exactly the same parties and subject lot.
It was Bragat, however, who petitioned the court for
the issuance of a new owner's duplicate copy of OCT After trial, the RTC found for Bragat, noting that the
No. P-2035. Thus, on July 24, 1987, the RTC ordered sketch map shows the 152-square-meter portion
the issuance of a new owner's copy of OCT No. P- occupied by the Spouses .Badilla is within the titled
2035.[10] property of Bragat.[16] It also found Bragat's title as
valid for what it saw as the result of a purchase in
On October 2, 1987, the Spouses Pastrano executed good faith and. for value.[17] In contrast, the trial court
yet another Deed of Sale of Registered Land in favor observed a lack of evidence of the Spouses Badilla.
of Bragat, which land is again covered by OCT No. P- The latter allegedly presented handwritten and
2035 with an area of 1,015 sq. m.[11] As a result, OCT typewritten receipts which were purportedly signed by
No. P-2035 was canceled and TCT No. T-47759 was Ledesma, dated March 5, 1989, March 1, 1991 and
issued in the name of Bragat.[12] March 23, 1991 acknowledging Ledesma's receipt of
certain amounts, but the court claimed that it found
On March 7, 1991, Bragat, through her counsel, made no evidence of (Ledesma's) absolute ownership on
a written demand to vacate against the Spouses these dates. The court noted that Ledesma had sold
Badilla. In response, the Spouses Badilla, also through previously to the Spouses Bragat via a Deed of
their counsel's letter, refused the demand and raised Absolute Sale of Residential Land dated April 18,
the earlier sale made by the Spouses Pastrano to 1978. Hence, in the trial court's view, on March 5,
Ledesma and the subsequent sale by Ledesma to the 1989, March 1, 1991 and March 23, 1991, Ledesma
Badillas.[13] no longer owned the land and transferred nothing to
the Badillas.[18] The dispositive portion of the RTC
Hence, the parties filed their respective complaints decision states:
within days of each other.

Bragat filed her Complaint for Recovery of Posession IN THE LIGHT OF THE FOREGOING, by preponderance
and Damages against the spouses Magdalino and of evidence, judgment is hereby rendered in favor of
Cleofe Badilla on June 5, 1992, alleging therein that Spouses Fe Bragat and Florito Bragat and against
she is the absolute owner of Lot No. 19986, covered Spouses Magdalino and Cleofe Badilla and dismissing
by TCT No. T-47759. She claimed to have purchased Civil Case No. 92-287 for failure of Spouses Magdalino
the property, first, from Eustaquio Ledesma, Jr., but and Cleofe Badilla to substantiate their complaint and
later, when she found out that Ledesma was for lack of merit and ordering defendants Cleofe
"unauthorized" to sell, she again allegedly made Badilla and Magdalino Badilla in Civil Case No. 92-273:
another purchase of the same property from Azur
to vacate immediately the 152-square-meter 1985.[25]
a) property they are occupying as shown in Exh. N-2-
A, P; In her Comment, Bragat claims that the sale of
October 2, 1987 was only a "re-execution" of the sale
to pay Twenty Thousand Pesos (P20,000.00) by of May 5, 1984, in order to avoid tax
b)
way of moral damages; surcharges.[26] Further, she alleges that the Badillas1
documentary evidence were all executed only after
to pay a reasonable rental of One Hundred Pesos
she had the property titled to her name.[27]
c) (P100.00) a month from March 1, 1991 at 6% legal
interest until they vacate the premises;
The Court resolves to GRANT the petition.
to reimburse Ten Thousand Pesos (P10,000.00)
attorney's fees and Five Thousand Pesos The issue is one of ownership of the subject property.
d)
(P5,000.00) as expenses for litigation as part of
consequential damages; and This Court notes that the arguments raised call for a
re-examination of the factual findings of the trial court
e) pay the costs. and the appellate court. It must be stressed that it is
a time-honored rule that in a petition for review
SO ORDERED.[19] on certiorari under Rule 45, only questions of law may
be raised.[28] Certainly, it is equally observed that
Upon appeal to the CA, the appellate court affirmed
factual findings of the Court of Appeals, affirming
the RTC's decision but modified the same on a finding
those of the trial court, are binding on this Court.[29]
that Ledesma sold only 991 sq. of the property to
Bragat in 1978; hence, it held that the remaining 24
However, these rules admit of certain exceptions,
sq. of the 1,015-sq.-m. property was validly sold to
such as when the judgment of the Court of Appeals is
the Badillas in 1991 and, therefore, must be
premised on a misapprehension of facts, or is belied
reconveyed to the latter.[20] It also removed the award
by the evidence on record, or fails to notice certain
of damages. The dispositive portion of the CA's
relevant facts which, if properly considered, will justify
decision is as follows:
a different conclusion.[30] After a thorough
examination of the findings of the trial court and Court
WHEREFORE, the instant appeal is PARTIALLY of Appeals, this Court concludes that the case falls
GRANTED. The January 14, 2001 Judgment (of the under these exceptional situations. Such findings
RTC) is MODIFIED in that: must be reversed.

The error of the courts below is in misapprehending


appellants are ordered to VACATE 128 square the fact that ownership' passed to the Spouses Badilla
meters of the disputed lot and appellee is ordered upon their purchase of the subject property from
a)
to RECONVEY 24 square meters of the disputed lot Eustaquio Ledesma.
to appellants, and
It is not disputed that the spouses Azur and Profitiza
Pastrano had previously sold on November 18, 1968,
via a Deed of Definite Sale of Unregistered Coconut
the reimbursement of attorney's fees and expenses and Residential Land, the property to Eustaquio
b)
of litigation and the payment of costs are DELETED. Ledesma.[31] Therefore, as early as such date, it is
established that the Pastranos no longer had
This case is REMANDED to the court of origin for the
ownership over the property.
purpose of determining the 24-square-meter lot to be
reconveyed to appellants.
Then, as Ledesma subsequently sold, in 1970, a
portion of the property to the petitioner Spouses
SO ORDERED. [21]
Badilla, who immediately took delivery and
Hence, this petition. possession, ownership of this portion had also been
transferred to the said spouses. Although that sale
Petitioners Spouses Badijla contend that ownership of appears to be merely verbal, and payment therefor
the 200-sq.-m. portion was transferred to them when was to be made on installment, it is a partially
they purchased the same and possession was consummated sale, with the Badillas paying the initial
delivered to them by Ledesma in 1970.[22] They also purchase price and Ledesma surrendering
contend that when OCT No. P-2035 was actually possession.[32] That the parties intended for ownership
issued in 1980, it was first delivered by Pastrano to to be transferred may be inferred from their lack of
Ledesma and, the latter delivered the same to them any agreement stipulating that ownership of the
(the Badillas).[23] Thus, Bragat allegedly falsely property is reserved by the seller and shall not pass
claimed the "loss" of the title when she petitioned the to the buyer until the latter has fully paid the purchase
court for a new duplicate original, because such title price.[33] The fact is, Ledesma even delivered to the
was not lost but had been with the Badillas all Badillas the owner's duplicate copy of OCT No. P-
along.[24] Another fraud that Bragat allegedly 2035.[34] The Civil Code states that ownership of the
committed was the Deed of Sale dated October 2, thing sold is transferred to the vendee upon the actual
1987, in which Profitiza Pastrano signed (in marital or constructive delivery of the same.[35] And the thing
consent) although she had been dead since March 30, is understood as delivered when it is placed in the
control and possession of the vendee.[36] Payment of
the purchase price is not essential to the transfer of Therefore, Fe Bragat is entitled to a new transfer
ownership as long as the property sold has been certificate of title issued in her name, but on the basis
delivered; and such delivery (traditio) operated to of the Deed of Absolute Sale dated April 18, 1978, and
divest the vendor of title to the property which may excluding the 152 sq. m. in area that the Spouses
not be regained or recovered until and unless the Badilla have already bought and have been occupying
contract is resolved or rescinded in accordance with since 1970, but which are currently covered by
law.[37] Bragat's existing title, TCT No. T-47759. Hence,
Bragat's TCT No. T-47759 (which canceled OCT No. P-
The same is true even if the sale is a verbal one, 2035), covering 1,015 sq. m., should be declared void
because it is held that when a verbal contract has been and cancelled and, in its place, two (2) new ones
completed, executed or partially consummated, its should be issued: (1) in the name of the spouses
enforceability will not be barred by the Statute of Magdalino and Cleofe Badilla, covering the 152 sq. m.
Frauds, which applies only to an executory that they are occupying, and (2) in the name of Fe
agreement.[38] Thus, where a party has performed his Bragat, covering [the remaining 863 sq. m. The metes
obligation, oral evidence will be admitted to prove the and bounds of these two lots are to be based on the
agreement. And, where it was proven that one party survey plans already submitted by appointed
had delivered the thing sold to another, then the commissioners to the lower court during trial, which
contract was partially executed and the Statute of are: the Commissioner's Relocation Survey Report
Frauds does not apply.[39] (Exhibit "N")[45] signed by Engr. Benigno B.
Manlangiti et al., as well as the accompanying
Therefore, with the Spouses Bad ilia owning and Relocation Sketch Plan (Exhibit "N-2")[46] prepared by
occupying the said 152-square-meter portion since the same commissioner.
1970, it may be concluded that TCT No. T-47759
(which canceled OCT No. P-2035) covering the said This ruling is compelled by the involvement in this
portion has been wrongfully issued.[40] case of not just one instance of double sales but a
series of such sales made by two different
In addition, TCT No. T-47759 was issued to Fe Bragat vendors. First, it is admitted that Pastrano sold the
on the strength of a Deed of Sale of Registered Land property to Ledesma in 1968; then, Pastrano sold it
dated October 2, 1987.[41] This deed of sale, however, again to Bragat in 1984 and 1987. But Ledesma, too,
is void for being simulated, since both the vendor sold part of the property to the Spouses Badilla in
(Pastrano) and the vendee (Bragat) knew at the time 1970 and then the entire lot to the Spouses; Bragat in
of its execution of the vendor's lack of ownership over 1978. In such a situation of multiple sales, Article
Lot No. 19986, the property being sold. At that time, 1544 of the Civil Code relates that ownership shall
it was not Pastrano but Ledesma who was absolute belong to the person acquiring the property who, in
owner of the property by virtue of the latter's earlier good faith, first recorded such
purchase of Lot No. 19986 from the Spouses Pastrano acquisition.[47] Presently, however, it cannot be said
on November 18, 1968, via a Deed of Definite Sale of that Bragat's recording of her 1987 purchase was in
Unregistered Coconut and Residential Land.[42] Bragat good faith because that sale was simulated and Bragat
herself knew this, as she and her husband themselves was aware of other persons who have an interest on
first bought the property from Ledesma through a the property. That the 1987 sale is void is further
Deed of Absolute Sale of Residential Land dated April revealed by evidence to show that one of its
18, 1978.[43] signatories, Profitiza Pastrano was already dead when
it was executed.[48] Bragat herself also admitted that
In fact, it is from this sale in 1978 that Fe Bragat she knew of the Spouses Badillas' occupation prior to
derives title on the property and not from tjhe Deeds her purchase.[49] In that case, the same Article 1544
of Sale dated May 5, 1984 and October 2, 1987 of the Civil Code provides that when neither buyer
executed between her as vendee and Pastrano as registered, in good faith, the sale of the properties
vendor. Pastrano could no longer sell any part of the with the register of deeds, the one who took prior
property to Bragat on such later dates since he had possession of the properties shall be the lawful owner
already sold the same as early as November 18, 1968 thereof.[50] Such prior possessors, at least with
to Ledesma. Well-settled is the rule that no one can respect to the 152-sq.-m. portion, are indisputably
give what one does not have - nemodat quod non the Spouses Badilla.
habet - and, accordingly, one can sell only what one
owns or is authorized to sell, and the buyer acquires WHEREFORE, premises considered, the petition
no better title than the seller.[44]Thus, the sales made is GRANTED. The assailed Decision dated October 9,
on the dates May 5, 1984 and October 2, 1987 are 2008 and Resolution dated February 12, 2009 of the
void for being [simulated and for lack of a subject Court of Appeals in CA-G.R. CV No. 70423 -MM are
matter. On these sales, Bragat cannot clajim good hereby REVERSED and SET ASIDE. Transfer
faith as she herself knew of Pastrano's lack of Certificate of Title No. T-47759 is DECLARED VOID,
ownership. and, in its place, two (2) new transfer certificates of
titles are ORDERED ISSUED, namely: (1) in the
It needs emphasis, however, that Bragat's property name of the Spouses Magdalino and Cleofe Badilla,
bought from Ledesma in 1978 does not include the covering the 152 sq. m. that they are occupying, and
152-sq.-m. portion that was already bought by the (2) in the name of Fe Bragat, covering the remaining
Badillas. 863 sq. m. of the property, of which measurements
are to be based on Exhibits "N"[51] and Exhibit "N- (P107,750.00) as the total purchase price of the lot.
2".[52] The manner of paying the total purchase price was as
follows:
SO ORDERED.
"The sum of TEN THOUSAND SEVEN
Velasco, Jr., (Chairperson), Villarama, Jr., Reyes, HUNDRED SEVENTY FIVE (P10,775.00)
and Jardeleza, JJ., concur. PESOS, shall be paid at the signing of this
contract as DOWN PAYMENT, the balance of
NINETY SIX THOUSAND NINE HUNDRED
SEVENTY FIVE PESOS (P96,975.00) shall be
paid within a period of TEN (10) years at a
monthly amortization of P1,747.30 to begin
from December 7, 1985 with interest at
eighteen per cent (18%) per annum based
on balances."4
August 20, 2015
The contract also provided for a grace period of one
month within which to make payments, together with
the one corresponding to the month of grace. Should
the month of grace expire without the installments for
both months having been satisfied, an interest of 18%
NOTICE OF JUDGMENT per annum will be charged on the unpaid
installments.5

Should a period of ninety (90) days elapse from the


Sirs / Mesdames:
expiration of the grace period without the overdue and
unpaid installments having been paid with the
Please take notice that on April 22, 2015 a Decision,
corresponding interests up to that date, respondent
copy attached hereto, was rendered by the Supreme
Fernando, as vendor, was authorized to declare the
Court in the above-entitled case, the original of which
contract cancelled and to dispose of the parcel of land,
was received by this Office on August 20, 2015 at
as if the contract had not been entered into. The
10:58 a.m.
payments made, together with all the improvements
made on the premises, shall be considered as rents
paid for the use and occupation of the premises and
as liquidated damages.6
G.R. No. 129018 November 15, 2001
After the execution of the contract, Carmelita Leaño
CARMELITA LEAÑO, assisted by her husband made several payments in lump sum.7 Thereafter, she
GREGORIO CUACHON, petitioner, constructed a house on the lot valued at
vs. P800,000.00.8 The last payment that she made was
COURT OF APPEALS and HERMOGENES on April 1, 1989.
FERNANDO, respondents.
On September 16, 1991, the trial court rendered a
PARDO, J.: decision in an ejectment case9 earlier filed by
respondent Fernando ordering petitioner Leaño to
The Case vacate the premises and to pay P250.00 per month by
way of compensation for the use and occupation of the
property from May 27, 1991 until she vacated the
The case is a petition for review on certiorari of the premises, attorney's fees and costs of the suit.10 On
decision1 of the Court of Appeals affirming that of the August 24, 1993, the trial court issued a writ of
Regional Trial Court, Malolos, Branch 72 ordering execution which was duly served on petitioner Leaño.
petitioner Leaño to pay respondent Hermogenes
Fernando the sum of P183,687.70 corresponding to
her outstanding obligations under the contract to sell, On September 27, 1993, petitioner Leaño filed with
with interest and surcharges due thereon, attorney's the Regional Trial Court of Malolos, Bulacan a
fees and costs.1âwphi1.nêt complaint for specific performance with preliminary
injunction.11 Petitioner Leaño assailed the validity of
the judgment of the municipal trial court12 for being
The Facts violative of her right to due process and for being
contrary to the avowed intentions of Republic Act No.
On November 13, 1985, Hermogenes Fernando, as 6552 regarding protection to buyers of lots on
vendor and Carmelita Leaño, as vendee executed a installments. Petitioner Leaño deposited P18,000.00
contract to sell involving a piece of land, Lot No. 876- with the clerk of court, Regional Trial Court, Bulacan,
B, with an area of 431 square meters, located at Sto. to cover the balance of the total cost of Lot 876-B.13
Cristo, Baliuag, Bulacan.3
On November 4, 1993, after petitioner Leaño posted
In the contract, Carmelita Leaño bound herself to pay a cash bond of P50,000.00,14 the trial court issued a
Hermogenes Fernando the sum of one hundred seven writ of preliminary injunction15 to stay the
thousand and seven hundred and fifty pesos
enforcement of the decision of the municipal trial specifies that the purchase price shall be
court.16 payable in monthly installments for which the
corresponding penalty shall be imposed in
case of default. The plaintiff certainly cannot
On February 6, 1995, the trial court rendered a
ignore the binding effect of such stipulation
decision, the dispositive portion of which reads:
by merely asserting that the ten-year period
for payment of the whole purchase price has
"WHEREFORE, judgment is hereby rendered not yet lapsed. In other words, the plaintiff
as follows: has clearly defaulted in the payment of the
amortizations due under the contract as
"1. The preliminary injunction issued by this recited in the statement of account (Exhibit
court per its order dated November 4, 1993 "2") and she should be liable for the payment
is hereby made permanent; of interest and penalties in accordance with
the stipulations in the contract pertaining
thereto."21
"2. Ordering the plaintiff to pay to the
defendant the sum of P103,090.70
corresponding to her outstanding obligations The trial court disregarded petitioner Leaños claim
under the contract to sell (Exhibit "A" – that she made a downpayment of P10,000.00, at the
Exhibit "B") consisting of the principal of said time of the execution of the contract.
obligation together with the interest and
surcharges due thereon as of February 28, The trial court relied on the statement of
1994, plus interest thereon at the rate of account22 and the summary23 prepared by respondent
18% per annum in accordance with the Fernando to determine petitioner Leaño's liability for
provision of said contract to be computed the payment of interests and penalties.
from March 1, 1994, until the same becomes
fully paid;
The trial court held that the consignation made by
petitioner Leaño in the amount of P18,000.00 did not
"3. Ordering the defendant to pay to plaintiff produce any legal effect as the same was not done in
the amount of P10,000 as and by way of accordance with Articles 1176, 1177 and 1178 of the
attorney's fees; Civil Code.

"4. Ordering the defendant to pay to plaintiff In time, petitioner Leaño appealed the decision to the
the costs of the suit in Civil Case No. 1680 Court of Appeals.24 On January 22, 1997, Court of
aforementioned. Appeals promulgated a decision affirming that of the
Regional Trial Court in toto.25 On February 11, 1997,
"SO ORDERED. petitioner Leaño filed a motion for
reconsideration.26 On April 18, 1997, the Court of
Appeals denied the motion.27
"Malolos, Bulacan, February 6, 1995.

Hence, this petition.28

The Issues
"(sgd.) DANILO A. MANALASTAS
Judge"17
The issues to be resolved in this petition for review are
(1) whether the transaction between the parties in an
On February 21, 1995, respondent Fernando filed a absolute sale or a conditional sale; (2) whether there
motion for reconsideration18 and the was a proper cancellation of the contract to sell; and
supplement thereto. The trial court increased the
19
(3) whether petitioner was in delay in the payment of
amount of P103,090.70 to P183,687.00 and ordered the monthly amortizations.
petitioner Leaño ordered to pay attorney's fees.20

The Court's Ruling


According to the trial court, the transaction between
the parties was an absolute sale, making petitioner
Leaño the owner of the lot upon actual and Contrary to the findings of the trial court, the
constructive delivery thereof. Respondent Fernando, transaction between the parties was a conditional sale
the seller, was divested of ownership and cannot not an absolute sale. The intention of the parties was
recover the same unless the contract is rescinded to reserve the ownership of the land in the seller until
pursuant to Article 1592 of the Civil Code which the buyer has paid the total purchase price.
requires a judicial or notarial demand. Since there had
been no rescission, petitioner Leaño, as the owner in Consider the following:
possession of the property, cannot be evicted.
First, the contract to sell makes the sale, cession and
On the issue of delay, the trial court held: conveyance "subject to conditions" set forth in the
contract to sell.29
"While the said contract provides that the
whole purchase price is payable within a ten- Second, what was transferred was the possession of
year period, yet the same contract clearly the property, not ownership. The possession is even
limited by the following: (1) that the vendee may The decision in the ejectment case37 operated as the
continue therewith "as long as the VENDEE complies notice of cancellation required by Sec. 3(b). As
with all the terms and conditions mentioned, and (2) petitioner Leaño was not given then cash surrender
that the buyer may not sell, cede, assign, transfer or value of the payments that she made, there was still
mortgage or in any way encumber any right, interest no actual cancellation of the contract. Consequently,
or equity that she may have or acquire in and to the petitioner Leaño may still reinstate the contract by
said parcel of land nor to lease or to sublease it or give updating the account during the grace period and
possession to another person without the written before actual cancellation.38
consent of the seller.30
Should petitioner Leaño wish to reinstate the contract,
Finally, the ownership of the lot was not transferred she would have to update her accounts with
to Carmelita Leaño. As the land is covered by a torrens respondent Fernando in accordance with the
title, the act of registration of the deed of sale was the statement of account39 which amount was
operative act that could transfer ownership over the P183,687.00.40
lot.31 There is not even a deed that could be registered
since the contract provides that the seller will execute
On the issue of whether petitioner Leaño was in delay
such a deed "upon complete payment by the VENDEE
in paying the amortizations, we rule that while the
of the total purchase price of the property" with the
contract provided that the total purchase price was
stipulated interest.32
payable within a ten-year period, the same contract
specified that the purchase price shall be paid in
In a contract to sell real property on installments, the monthly installments for which the corresponding
full payment of the purchase price is a positive penalty shall be imposed in case of default. Petitioner
suspensive condition, the failure of which is not Leaño cannot ignore the provision on the payment of
considered a breach, casual or serious, but simply an monthly installments by claiming that the ten-year
event that prevented the obligation of the vendor to period within which to pay has not elapsed.
convey title from acquiring any obligatory force.33 The
transfer of ownership and title would occur after full
Article 1169 of the Civil Code provides that in
payment of the price.34
reciprocal obligations, neither party incurs in delay if
the other does not comply or is not ready to comply
In the case at bar, petitioner Leaño's non-payment of in a proper manner with what is incumbent upon him.
the installments after April 1, 1989, prevented the From the moment one of the parties fulfills his
obligation of respondent Fernando to convey the obligation, delay by the other begins.1âwphi1.nêt
property from arising. In fact, it brought into effect
the provision of the contract on cancellation.
In the case at bar, respondent Fernando performed
his part of the obligation by allowing petitioner Leaño
Contrary to the findings of the trial court, Article 1592 to continue in possession and use of the property.
of the Civil Code is inapplicable to the case at Clearly, when petitioner Leaño did not pay the
bar.35 However, any attempt to cancel the contract to monthly amortizations in accordance with the terms
sell would have to comply with the provisions of of the contract, she was in delay and liable for
Republic Act No. 6552, the "Realty Installment Buyer damages.41 However, we agree with the trial court
Protection Act." that the default committed by petitioner Leaño in
respect of the obligation could be compensated by the
interest and surcharges imposed upon her under the
R.A. No. 6552 recognizes in conditional sales of all
contract in question.42
kinds of real estate (industrial, commercial,
residential) the right of the seller to cancel the
contract upon non-payment of an installment by the It is a cardinal rule in the interpretation of contracts
buyer, which is simply an event that prevents the that if the terms of a contract are clear and leave no
obligation of the vendor to convey title from acquiring doubt upon the intention of the contracting parties,
binding force.36 The law also provides for the rights of the literal meaning of its stipulation shall
the buyer in case of cancellation. Thus, Sec. 3 (b) of control.43 Thus, as there is no ambiguity in the
the law provides that: language of the contract, there is no room for
construction, only compliance.
"If the contract is cancelled, the seller shall
refund to the buyer the cash surrender value The Fallo
of the payments on the property equivalent
to fifty percent of the total payments made
IN VIEW WHEREOF, we DENY the petition
and, after five years of installments, an
and AFFIRM the decision of the Court of Appeals44 in
additional five percent every year but not to
toto.
exceed ninety percent of the total payment
made: Provided, That the actual cancellation
of the contract shall take place after thirty No costs.
days from receipt by the buyer of the notice
of cancellation or the demand for rescission SO ORDERED.
of the contract by a notarial act and upon full
payment of the cash surrender value to the
buyer." [Emphasis supplied]
[G.R. No. 127695. December 3, 2001] Glauber, a bank client, arrangements were being
made to allow Faustino Duray to borrow funds of
approximately P700,000 to enable him to meet his
obligations under the contract with Luis Bacus.[5]

HEIRS OF LUIS BACUS, namely: CLARA RESMA Having failed to reach an agreement before
BACUS, ROQUE R. BACUS, SR., the Lupon, on April 27, 1990, private respondents
SATURNINO R. BACUS, PRISCILA VDA. filed a complaint for specific performance with
DE CABANERO, CARMELITA B. SUQUIB, damages against petitioners before the Regional Trial
BERNARDITA B. CARDENAS, RAUL R. Court, praying that the latter, (a) execute a deed of
BACUS, MEDARDO R. BACUS, ANSELMA sale over the subject property in favor of private
B. ALBAN, RICARDO R. BACUS, respondents; (b) receive the payment of the purchase
FELICISIMA B. JUDICO, and price; and (c) pay the damages.
DOMINICIANA B. TANGAL, petitioners,
vs. HON. COURT OF APPEALS and On the other hand, petitioners alleged that
SPOUSES FAUSTINO DURAY and before Luis Bacus death, private respondents
VICTORIANA DURAY, respondents. conveyed to them the formers lack of interest to
exercise their option because of insufficiency of funds,
but they were surprised to learn of private
DECISION respondents demand. In turn, they requested private
respondents to pay the purchase price in full but the
QUISUMBING, J.:
latter refused. They further alleged that private
respondents did not deposit the money as required by
This petition assails the decision dated the Lupon and instead presented a bank certification
November 29, 1996, of the Court of Appeals in CA- which cannot be deemed legal tender.
G.R. CV No. 37566, affirming the decision dated
August 3, 1991, of the Regional Trial Court of Cebu On October 30, 1990, private respondents
City, Branch 6, in Civil Case No. CEB-8935. manifested in court that they caused the issuance of
a cashiers check in the amount of P650,000[6] payable
The facts, as culled from the records, are as to petitioners at anytime upon demand.
follows:
On August 3, 1991, the Regional Trial Court
On June 1, 1984, Luis Bacus leased to private ruled in favor of private respondents, the dispositive
respondent Faustino Duray a parcel of agricultural portion of which reads:
land in Bulacao, Talisay, Cebu.Designated as Lot No.
3661-A-3-B-2, it had an area of 3,002 square meters,
Premises considered, the court finds for the plaintiffs
covered by Transfer Certificate of Title No. 48866. The
and orders the defendants to specifically perform their
lease was for six years, ending May 31, 1990. The
obligation in the option to buy and to execute a
contract contained an option to buy clause. Under said
document of sale over the property covered by
option, the lessee had the exclusive and irrevocable
Transfer Certificate of Title # T-63269 upon payment
right to buy 2,000 square meters of the property
by the plaintiffs to them in the amount of Six Hundred
within five years from a year after the effectivity of
Seventy-Five Thousand Six Hundred Seventy-Five
the contract, at P200 per square meter. That rate shall
(P675,675.00) Pesos within a period of thirty (30)
be proportionately adjusted depending on the peso
days from the date this decision becomes final.
rate against the US dollar, which at the time of the
execution of the contract was fourteen pesos. [1]
SO ORDERED.[7]
Close to the expiration of the contract, Luis
Bacus died on October 10, 1989. Thereafter, on March
15, 1990, the Duray spouses informed Roque Bacus, Unsatisfied, petitioners appealed to the
one of the heirs of Luis Bacus, that they were willing respondent Court of Appeals which denied the appeal
and ready to purchase the property under the option on November 29, 1996, on the ground that the private
to buy clause. They requested Roque Bacus to prepare respondents exercised their option to buy the leased
the necessary documents, such as a Special Power of property before the expiration of the contract of
Attorney authorizing him to enter into a contract of lease. It held:
sale,[2] on behalf of his sisters who were then abroad.
... After a careful review of the entire records of this
On March 30, 1990, due to the refusal of case, we are convinced that the plaintiffs-appellees
petitioners to sell the property, Faustino Durays validly and effectively exercised their option to buy the
adverse claim was annotated by the Register of Deeds subject property. As opined by the lower court, the
of Cebu, at the back of TCT No. 63269, covering the readiness and preparedness of the plaintiff on his part,
segregated 2,000 square meter portion of Lot No. is manifested by his cautionary letters, the prepared
3661-A-3-B-2-A.[3] bank certification long before the date of May 31,
Subsequently, on April 5, 1990, Duray filed a 1990, the final day of the option, and his filing of this
complaint for specific performance against the heirs of suit before said date. If the plaintiff-appellee Francisco
Luis Bacus with the Lupon Tagapamayapa of Duray had no intention to purchase the property, he
Barangay Bulacao, asking that he be allowed to would not have bothered to write those letters to the
purchase the lot specifically referred to in the lease defendant-appellants (which were all received by
contract with option to buy. At the hearing, Duray them) and neither would he be interested in having
presented a certification[4] from the manager of his adverse claim annotated at the back of the T.C.T.
Standard Chartered Bank, Cebu City, addressed to of the subject property, two (2) months before the
Luis Bacus, stating that at the request of Mr. Lawrence expiration of the lease. Moreover, he even went to the
extent of seeking the help of the Lupon 45, the same must be denied for the Court of Appeals
Tagapamayapa to compel the defendants-appellants has correctly determined that they had validly
to recognize his right to purchase the property and for exercised their option to buy the leased property
them to perform their corresponding obligation.[8] before the contract expired.

In response, petitioners state that private


xxx respondents erred in initially classifying the instant
petition as one under Rule 65 of the Rules of
We therefore find no merit in this appeal. Court. They argue that the petition is one under Rule
45 where errors of the Court of Appeals, whether
evidentiary or legal in nature, may be reviewed.
WHEREFORE, the decision appealed from is hereby
AFFIRMED.[9] We agree with private respondents that in a
petition for review under Rule 45, only questions of
Hence, this petition where petitioners aver that law may be raised.[11] However, a close reading of
the Court of Appeals gravely erred and abused its petitioners arguments reveal the following legal issues
discretion in: which may properly be entertained in the instant
petition:
I. ...UPHOLDING THE TRIAL COURTS
RULING IN THE SPECIFIC a) When private respondents opted to buy
PERFORMANCE CASE BY ORDERING the property covered by the lease
PETITIONERS (DEFENDANTS THEREIN) contract with option to buy, were they
TO EXECUTE A DOCUMENT OF SALE already required to deliver the money
OVER THE PROPERTY IN QUESTION or consign it in court before petitioner
(WITH TCT NO. T-63269) TO THEM IN executes a deed of transfer?
THE AMOUNT OF P675,675.00 WITHIN
b) Did private respondents incur in delay
THIRTY (30) DAYS FROM THE DATE THE
when they did not deliver the purchase
DECISION BECOMES FINAL;
price or consign it in court on or before
II. ...DISREGARDING LEGAL PRINCIPLES, the expiration of the contract?
SPECIFIC PROVISIONS OF LAW AND
On the first issue, petitioners contend that
JURISPRUDENCE IN UPHOLDING THE
private respondents failed to comply with their
DECISION OF THE TRIAL COURT TO
obligation because there was neither actual delivery
THE EFFECT THAT PRIVATE
to them nor consignation in court or with the
RESPONDENTS HAD EXERCISED THEIR
Municipal, City or Provincial Treasurer of the purchase
RIGHT OF OPTION TO BUY ON TIME;
price before the contract expired. Private respondents
THUS THE PRESENTATION OF THE
bank certificate stating that arrangements were being
CERTIFICATION OF THE BANK
made by the bank to release P700,000 as a loan to
MANAGER OF A BANK DEPOSIT IN THE
private respondents cannot be considered as legal
NAME OF ANOTHER PERSON FOR LOAN
tender that may substitute for delivery of payment to
TO RESPONDENTS WAS EQUIVALENT
petitioners nor was it a consignation.
TO A VALID TENDER OF PAYMENT AND
A SUFFICIENT COMPLAINCE (SIC) OF A Obligations under an option to buy are reciprocal
CONDITION FOR THE EXERCISE OF THE obligations.[12] The performance of one obligation is
OPTION TO BUY; AND conditioned on the simultaneous fulfillment of the
other obligation.[13] In other words, in an option to
III UPHOLDING THE TRIAL COURTS
buy, the payment of the purchase price by the creditor
RULING THAT THE PRESENTATION OF
is contingent upon the execution and delivery of a
A CASHERS (SIC) CHECK BY THE
deed of sale by the debtor. In this case, when private
RESPONDENTS IN THE AMOUNT OF
respondents opted to buy the property, their
P625,000.00 EVEN AFTER THE
obligation was to advise petitioners of their decision
TERMINATION OF THE TRIAL ON THE
and their readiness to pay the price. They were not
MERITS WITH BOTH PARTIES ALREADY
yet obliged to make actual payment. Only upon
HAVING RESTED THEIR CASE, WAS
petitioners actual execution and delivery of the deed
STILL VALID COMPLIANCE OF THE
of sale were they required to pay. As earlier stated,
CONDITION FOR THE PRIVATE
the latter was contingent upon the former. In Nietes
RESPONDENTS (PLAINTIFFS THEREIN)
vs. Court of Appeals, 46 SCRA 654 (1972), we held
EXERCISE OF RIGHT OF OPTION TO
that notice of the creditors decision to exercise his
BUY AND HAD A FORCE OF VALID AND
option to buy need not be coupled with actual
FULL TENDER OF PAYMENT WITHIN
payment of the price, so long as this is delivered to
THE AGREED PERIOD.[10]
the owner of the property upon performance of his
Petitioners insist that they cannot be compelled part of the agreement. Consequently, since the
to sell the disputed property by virtue of the obligation was not yet due, consignation in court of
nonfulfillment of the obligation under the option the purchase price was not yet required.
contract of the private respondents.
Consignation is the act of depositing the thing
Private respondents first aver that petitioners due with the court or judicial authorities whenever the
are unclear if Rule 65 or Rule 45 of the Rules of Court creditor cannot accept or refuses to accept payment
govern their petition, and that petitioners only raised and it generally requires a prior tender of payment. In
questions of facts which this Court cannot properly instances, where no debt is due and owing,
entertain in a petition for review. They claim that even consignation is not proper.[14] Therefore, petitioners
assuming that the instant petition is one under Rule contention that private respondents failed to comply
with their obligation under the option to buy because
they failed to actually deliver the purchase price or On July 7, 1995, petitioner Megaworld Globus Asia,
consign it in court before the contract expired and
before they execute a deed, has no leg to stand on. Inc. (Megaworld) and respondent Mila S. Tanseco

Corollary, private respondents did not incur in (Tanseco) entered into a Contract to Buy and Sell[1] a
delay when they did not yet deliver payment nor make
a consignation before the expiration of the 224 square-meter (more or less) condominium unit at
contract. In reciprocal obligations, neither party
a pre-selling project, The Salcedo Park, located along
incurs in delay if the other does not comply or is not
ready to comply in a proper manner with what is Senator Gil Puyat Avenue, Makati City.
incumbent upon him. Only from the moment one of
the parties fulfills his obligation, does delay by the
other begin.[15]
The purchase price was P16,802,037.32, to be paid as
In this case, private respondents, as early as
March 15, 1990, communicated to petitioners their follows: (1) 30% less the reservation fee of P100,000,
intention to buy the property and they were at that
time undertaking to meet their obligation before the or P4,940,611.19, by postdated check payable on July
expiration of the contract on May 31, 1990. However,
petitioners refused to execute the deed of sale and it 14, 1995; (2) P9,241,120.50 through 30 equal
was their demand to private respondents to first
deliver the money before they would execute the monthly installments of P308,037.35 from August 14,
same which prompted private respondents to institute
a case for specific performance in the Lupong 1995 to January 14, 1998; and (3) the balance
Tagapamayapa and then in the RTC. On October 30,
of P2,520,305.63 on October 31, 1998, the stipulated
1990, after the case had been submitted for decision
but before the trial court rendered its decision, private delivery date of the unit; provided that if the
respondents issued a cashiers check in petitioners
favor purportedly to bolster their claim that they were construction is completed earlier, Tanseco would pay
ready to pay the purchase price. The trial court
considered this in private respondents favor and we the balance within seven days from receipt of a notice
believe that it rightly did so, because at the time the
check was issued, petitioners had not yet executed a of turnover.
deed of sale nor expressed readiness to do so.
Accordingly, as there was no compliance yet with what
was incumbent upon petitioners under the option to
Section 4 of the Contract to Buy and Sell provided for
buy, private respondents had not incurred in delay
when the cashiers check was issued even after the the construction schedule as follows:
contract expired.

WHEREFORE, the instant petition is


4. CONSTRUCTION
DENIED. The decision dated November 29, 1996 of
SCHEDULE The construction of the
the Court of Appeals is hereby AFFIRMED.
Project and the unit/s herein
Costs against petitioners. purchased shall be completed and
delivered not later than October 31,
SO ORDERED. 1998 with additional grace period of
six (6) months within which to
complete the Project and the
unit/s, barring delays due to fire,
MEGAWORLD GLOBUS ASIA, INC., G.R. No. 181206
earthquakes, the elements, acts of
Petitioner,
God, war, civil disturbances, strikes
Present:
or other labor disturbances,
* government and economic controls
CORONA, J.,
making it, among others,
- versus - CARPIO MORALES,**
impossible or difficult to obtain the
Acting Chairperson,
necessary materials, acts of third
NACHURA,***
person, or any other cause or
BRION, and
conditions beyond the control of the
MILA S. TANSECO, ABAD, JJ.
SELLER. In this event, the
Respondent.
completion and delivery of the unit
Promulgated:
are deemed extended accordingly
October 9, 2009
without liability on the part of the
x---------------------------------
SELLER. The foregoing
-----------------x
notwithstanding, the SELLER
reserves the right to withdraw from
DECISION
this transaction and refund to the
BUYER without interest the
amounts received from him under
CARPIO MORALES, J.: this contract if for any reason not
attributable to SELLER, such as but
not limited to fire, storms, floods,
earthquakes, rebellion, demand for delivery before receipt of the notice of
insurrection, wars, coup de etat,
civil disturbances or for other turnover.[6]
reasons beyond its control, the
Project may not be completed or it
can only be completed at a financial By Decision of May 28, 2003,[7] the HLURB Arbiter
loss to the SELLER. In any event, all
construction on or of the Project dismissed Tansecos complaint for lack of cause of
shall remain the property of the
SELLER. (Underscoring supplied) action, finding that Megaworld had effected delivery

by the notice of turnover before Tanseco made a

demand. Tanseco was thereupon ordered to pay


Tanseco paid all installments due up to January, 1998,
Megaworld the balance of the purchase price,
leaving unpaid the balance of P2,520,305.63 pending
plus P25,000 as moral damages, P25,000 as
delivery of the unit.[2] Megaworld, however, failed to
exemplary damages, and P25,000 as attorneys fees.
deliver the unit within the stipulated period on October

31, 1998 or April 30, 1999, the last day of the six-
On appeal by Tanseco, the HLURB Board of
month grace period.
Commissioners, by Decision of November 28,

2003,[8] sustained the HLURB Arbiters Decision on the


A few days shy of three years later, Megaworld, by
ground of laches for failure to demand rescission when
notice dated April 23, 2002 (notice of turnover),
the right thereto accrued. It deleted the award of
informed Tanseco that the unit was ready for
damages, however. Tansecos Motion for
inspection preparatory to delivery.[3] Tanseco replied
Reconsideration having been denied,[9] she appealed
through counsel, by letter of May 6, 2002, that in view
to the Office of the President which dismissed the
of Megaworlds failure to deliver the unit on time, she
appeal by Decision of April 28, 2006[10] for failure to
was demanding the return of P14,281,731.70
show that the findings of the HLURB were tainted with
representing the total installment payment she had
grave abuse of discretion. Her Motion for
made, with interest at 12% per annum from April 30,
Reconsideration having been denied by Resolution
1999, the expiration of the six-month grace
dated August 30, 2006,[11] Tanseco filed a Petition for
period. Tanseco pointed out that none of the excepted
Review under Rule 43 with the Court of Appeals.[12]
causes of delay existed.[4]

By Decision of September 28, 2007,[13] the


Her demand having been unheeded, Tanseco filed on
appellate court granted Tansecos petition, disposing
June 5, 2002 with the Housing and Land Use
thus:
Regulatory Boards (HLURB) Expanded National

Capital Region Field Office a complaint against WHEREFORE, premises


considered, petition is
Megaworld for rescission of contract, refund of hereby GRANTED and the assailed
May 28, 2003 decision of the HLURB
payment, and damages.[5] Field Office, the November 28, 2003
decision of the HLURB Board of
Commissioners in HLURB Case No.
In its Answer, Megaworld attributed the delay to the REM-A-030711-0162, the April 28,
2006 Decision and August 30,
1997 Asian financial crisis which was beyond its 2006 Resolution of the Office of the
President in O.P. Case No. 05-I-
control; and argued that default had not set in, 318, are
hereby REVERSED and SET
Tanseco not having made any judicial or extrajudicial ASIDE and a new one entered:
(1) RESCINDING, as prayed for by
TANSECO, the aggrieved party, the Tanseco, on the other hand, maintained her position
contract to buy and sell;
(2) DIRECTING MEGAWORLD TO too, and citing Megaworlds bad faith which became
PAY TANSECO the amount she had
evident when it insisted on making the delivery
paid totaling P14,281,731.70
with Twelve (12%) Percent interest despite the long delay,[16] insisted that she deserved
per annum from October 31, 1998;
(3) ORDERINGMEGAWORLD TO the award of damages and attorneys fees.
PAY TANSECO P200,000.00 by
way of exemplary damages;
(4) ORDERING MEGAWORLD TO
PAY TANSECO P200,000.00 as Article 1169 of the Civil Code provides:
attorneys fees; and
(5) ORDERING MEGAWORLD TO
PAY TANSECO the cost of Art. 1169. Those obliged
suit.(Emphasis in the to deliver or to do something incur
original; underscoring supplied) in delay from the time the obligee
judicially or extrajudicially demands
from them the fulfillment of their
obligation.

The appellate court held that under Article 1169 of the However, the demand by
the creditor shall not be necessary
Civil Code, no judicial or extrajudicial demand is in order that delay may exist:
needed to put the obligor in default if the contract, as (1) When the obligation or
the law expressly so declares; or
in the herein parties contract, states the date when

the obligation should be performed; that time was of (2) When from the nature
and the circumstances of the
the essence because Tanseco relied on Megaworlds obligation it appears that the
designation of the time when the
promise of timely delivery when she agreed to part thing is to be delivered or the
service is to be rendered was a
with her money; that the delay should be reckoned controlling motive for the
establishment of the contract; or
from October 31, 1998, there being no force
(3) When demand would
majeure to warrant the application of the April 30,
be useless, as when the obligor has
1999 alternative date; and that specific performance rendered it beyond his power to
perform.
could not be ordered in lieu of rescission as the right

to choose the remedy belongs to the aggrieved party. In reciprocal obligations,


neither party incurs in delay if the
other does not comply or is not
ready to comply in a proper manner
The appellate court awarded with what is incumbent upon
him. From the moment one of the
Tanseco exemplary damages on a finding of bad faith parties fulfills his obligation, delay
by the other begins. (Underscoring
on the part of Megaworld in forcing her to accept its
supplied)
long-delayed delivery; and attorneys fees, she having

been compelled to sue to protect her rights.


The Contract to Buy and Sell of the parties

Its Motion for Reconsideration having been denied by contains reciprocal obligations, i.e., to complete and

Resolution of January 8, 2008,[14] Megaworld filed the deliver the condominium unit on October 31, 1998 or

present Petition for Review on Certiorari, echoing its six months thereafter on the part of Megaworld, and

position before the HLURB, adding that Tanseco had to pay the balance of the purchase price at or about

not shown any basis for the award of damages and the time of delivery on the part of

attorneys fees.[15] Tanseco. Compliance by Megaworld with its obligation

is determinative of compliance by Tanseco with her


obligation to pay the balance of the purchase obligation to deliver within the stipulated period. A

price. Megaworld having failed to comply with its circumspect weighing of equitable considerations thus

obligation under the contract, it is liable therefor.[17] tilts the scale of justice in favor of Tanseco.

That Megaworlds sending of a notice of Pursuant to Section 23 of Presidential Decree

turnover preceded Tansecos demand for refund does No. 957 [21]
which reads:

not abate her cause.For demand would have


Sec. 23. Non-Forfeiture of
been useless, Megaworld admittedly having failed in Payments. - No installment
payment made by a buyer in a
its obligation to deliver the unit on the agreed date. subdivision or condominium project
for the lot or unit he contracted to
buy shall be forfeited in favor of the
Article 1174 of the Civil Code provides: owner or developer when the buyer,
after due notice to the owner or
developer, desists from further
Art. 1174. Except in cases payment due to the failure of the
expressly specified by the law, or owner or developer to develop the
when it is otherwise declared by subdivision or condominium project
stipulation, or when the nature of according to the approved plans
the obligation requires the and within the time limit for
assumption of risk, no person shall complying with the same.
be responsible for those events Such buyer may, at his option,
which could not be foreseen, or be reimbursed the total amount
which, though foreseen, were paid including amortization int
inevitable.[18] erests but excluding delinquency
interests, with interest thereon a
t the legal rate. (Emphasis and
underscoring supplied),

The Court cannot generalize the 1997 Asian financial

crisis to be unforeseeable and beyond the control of a


Tanseco is, as thus prayed for, entitled to be
business corporation. A real estate enterprise
reimbursed the total amount she paid Megaworld.
engaged in the pre-selling of condominium units is

concededly a master in projections on commodities


While the appellate court correctly
and currency movements, as well as business
awarded P14,281,731.70 then, the interest rate
risks. The fluctuating movement of the Philippine peso
should, however, be 6% per annum accruing from the
in the foreign exchange market is an everyday
date of demand on May 6, 2002, and then 12% per
occurrence, hence, not an instance of caso
annum from the time this judgment becomes final and
fortuito.[19]Megaworlds excuse for its delay does not
executory, conformably with Eastern Shipping Lines,
thus lie.
Inc. v. Court of Appeals.[22]

The award of P200,000 attorneys fees and of


As for Megaworlds argument that Tansecos
costs of suit is in order too, the parties having
claim is considered barred by laches on account of her
stipulated in the Contract to Buy and Sell that these
belated demand, it does not lie too. Laches is a
shall be borne by the losing party in a suit based
creation of equity and its application is controlled by
thereon,[23] not to mention that Tanseco was
equitable considerations.[20] It bears noting that
compelled to retain the services of counsel to protect
Tanseco religiously paid all the installments due up to
her interest. And so is the award of exemplary
January, 1998, whereas Megaworld reneged on its
damages. With pre-selling ventures mushrooming in
the metropolis, there is an increasing need to correct

the insidious practice of real estate companies of


SO ORDERED.
proffering all sorts of empty promises to entice

innocent buyers and ensure the profitability of their


CONCHITA CARPIO MORALES
projects. Associate Justice

The Court finds the appellate courts award

of P200,000 as exemplary damages excessive,

however. Exemplary damages are imposed not to

enrich one party or impoverish another but to serve


WE CONCUR:
as a deterrent against or as a negative incentive to

curb socially deleterious actions.[24] The Court finds

that P100,000 is reasonable in this case. RENATO C. CORONA ANTONIO EDUARDO B. N


Associate Justice Associate Justice

Finally, since Article 1191[25] of the Civil Code

does not apply to a contract to buy and sell,ARTURO


the D. BRION ROBERTO
Associate Justice Associate J
suspensive condition of full payment of the purchase

price not having occurred to trigger the obligation to

convey title, cancellation,not rescission, of the ATTESTATION

contract is thus the correct remedy in the premises.[26]

I attest that the conclusions in the above Decision had

WHEREFORE, the challenged Decision of the been reached in consultation before the case was

Court of Appeals is, in light of the foregoing, assigned to the writer of the opinion of the Courts

AFFIRMED with MODIFICATION. Division.

CONCHITA CARPIO MORALES


Associate Justice
As modified, the dispositive portion of the Acting Chairperson

Decision reads:

CERTIFICATION
The July 7, 1995 Contract
to Buy and Sell between the parties
is cancelled. Petitioner, Megaworld
Globus Asia, Inc., is directed to pay Pursuant to Section 13, Article VIII of the Constitution,
respondent, Mila S. Tanseco, the
amount of P14,281,731.70, to and the Division Chairpersons Attestation, I certify
bear 6% interest per annum
starting May 6, 2002 and 12% that the conclusions in the above decision had been
interest per annum from the time
the judgment becomes final and reached in consultation before the case was assigned
executory; and to pay P200,000
attorneys to the writer of the opinion of the Courts Division.
fees, P100,000 exemplary
damages, and costs of suit.

ANTONIO T. CARPIO
Acting Chief Justice

Costs against petitioner.


period being deemed to be by then an equivalent
*
Additional member per Special Order No. 718 dated to a forbearance of credit.
October 2, 2009. xxxx
**
Designated Acting Chairperson per Special Order [23]
HLURB records, p. 166.
No. 690 dated September 4, 2009. [24]
Bataan Seedling Association, Inc. v. Republic of
***
Additional member per Special Order No. 730 the Philippines, G.R. No. 141009, July 2, 2002,
dated October 5, 2009. 383 SCRA 590, 600-601.
[1]
HLURB records, pp. 164-169. [25]
Article 1191. The power to rescind obligations is
[2]
Id. at 148-163. implied in reciprocal ones in case one of the
[3]
Id. at 22. obligors should not comply with what is
[4]
Id. at 146-147. incumbent upon him.
[5]
Id. at 13-19. The injured party may choose between
[6]
Id. at 24-31. the fulfillment and the rescission of the obligation,
[7]
Id. at 136-139. with the payment of damages in either case. He
[8]
Id. at 247-250. may also seek rescission, even after he has
[9]
Id. at 304-305. chosen fulfillment, if the latter should become
[10]
Rollo, pp. 260-263. possible.
[11]
Id. at 264. The court shall decree the rescission
[12]
CA rollo, pp. 8-55. claimed, unless there be just cause authorizing
[13]
Penned by Associate Justice Vicente Q. Roxas, with the fixing of a period.
the concurrence of Associate Justices Josefina This is understood to be without
Guevara-Salonga and Ramon R. Garcia; prejudice to the rights of third persons who have
CA rollo, pp. 692-714. acquired the thing, in accordance with Articles
[14]
Id. at 816. 1385 and 1388 and the Mortgage Law.
[15]
Vide Petition, rollo, pp. 29-74.
[16]
Vide Comment, id. at 432-465.
[17]
Vide Leao v. Court of Appeals, 420 Phil. 836, 848
GENERAL MILLING CORPORATION, G.R. No.
(2001). Article 1170 of the Civil Code provides:
Petitioner,
Art. 1170. Those who in the
Present:
performance of their obligations are
guilty of fraud, negligence, or delay, and
CARPIO,
those who in any manner contravene
- versus - VELASCO
the tenor thereof, are liable for
LEONARD
damages.
ABAD, an
[18]
Mondragon Leisure and Resorts Corporation v.
MENDOZA
Court of Appeals, 499 Phil. 268, 279 (2005).
SPS. LIBRADO RAMOS and REMEDIOS RAMOS,
[19]
Fil-Estate Properties, Inc., v. Go, G.R. No.
Respondents. Promulga
165164, August 17, 2007, 530 SCRA 621, 628.
[20]
Heirs of Tranquilino Labiste v. Heirs of Jose
July 20, 2
Labiste, G.R. No. 162033, May 8, 2009.
[21]
REGULATING THE SALE OF SUBDIVISION LOTS x----------------------------------------------------------
AND CONDOMINIUMS, PROVIDING PENALTIES -------------------------------x
FOR VIOLATIONS THEREOF.
[22]
G.R. No. 97412, July 12, 1994, 234 SCRA 78, 96-
97. The Court, in this case, suggested rules on
the award of interest, viz: DECISION
xxxx
VELASCO, JR., J.:
2. When an obligation, not constituting a loan or
forbearance of money, is breached, an interest on
the amount of damages awarded may be imposed
at the discretion of the court at the rate of 6% per The Case
annum. No interest, however, shall be adjudged
on unliquidated claims or damages except when
or until the demand can be established with This is a petition for review of the April 15, 2010
reasonable certainty. Accordingly, where the
demand is established with reasonable certainty, Decision of the Court of Appeals (CA) in CA-G.R. CR-
the interest shall begin to run from the time the
claim is made judicially or extrajudicially (Art. H.C. No. 85400 entitled Spouses Librado Ramos &
1169, Civil Code) but when such certainty cannot Remedios Ramos v. General Milling Corporation, et
be so reasonably established at the time the
demand is made, the interest shall begin to run al., which affirmed the May 31, 2005 Decision of the
only from the date the judgment of the court is
made (at which time the quantification of Regional Trial Court (RTC), Branch 12 in Lipa City, in
damages may be deemed to have been
Civil Case No. 00-0129 for Annulment and/or
reasonably ascertained). The actual base for the
computation of legal interest shall, in any case, Declaration of Nullity of Extrajudicial Foreclosure Sale
be on the amount finally adjudged.
3. When the judgment of the court awarding a with Damages.
sum of money becomes final and executory, the
rate of legal interest . . . shall be 12% per annum
from such finality until its satisfaction, this interim
The Facts

On March 31, 1997, the counsel for GMC notified

On August 24, 1989, General Milling Corporation Spouses Ramos that GMC would institute foreclosure

(GMC) entered into a Growers Contract with spouses proceedings on their mortgaged property.[4]

Librado and Remedios Ramos (Spouses Ramos).

Under the contract, GMC was to supply broiler On May 7, 1997, GMC filed a Petition for Extrajudicial

chickens for the spouses to raise on their land Foreclosure of Mortgage. On June 10, 1997, the

in Barangay Banaybanay, Lipa City, Batangas. [1]


To property subject of the foreclosure was subsequently

guarantee full compliance, the Growers Contract was sold by public auction to GMC after the required

accompanied by a Deed of Real Estate Mortgage over posting and publication.[5] It was foreclosed for PhP

a piece of real property upon which their conjugal 935,882,075, an amount representing the losses on

home was built. The spouses further agreed to put up chicks and feeds exclusive of interest at 12% per

a surety bond at the rate of PhP 20,000 per 1,000 annum and attorneys fees.[6] To complicate matters,

chicks delivered by GMC. The Deed of Real Estate on October 27, 1997, GMC informed the spouses that

Mortgage extended to Spouses Ramos a maximum its Agribusiness Division had closed its business and

credit line of PhP 215,000 payable within an indefinite poultry operations.[7]

period with an interest of twelve percent (12%) per

annum.[2] On March 3, 2000, Spouses Ramos filed a Complaint

The Deed of Real Estate Mortgage contained the for Annulment and/or Declaration of Nullity of the

following provision: Extrajudicial Foreclosure Sale with Damages. They

contended that the extrajudicial foreclosure sale on


WHEREAS, the MORTGAGOR/S
has/have agreed to guarantee and June 10, 1997 was null and void, since there was no
secure the full and faithful compliance with the requirements of posting and
compliance of
[MORTGAGORS] obligation/s with publication of notices under Act No. 3135, as
the MORTGAGEE by a First Real
Estate Mortgage in favor of the amended, or An Act to Regulate the Sale of Property
MORTGAGEE, over a 1 parcel of
under Special Powers Inserted in or Annexed to Real
land and the improvements existing
thereon, situated in the Barrio/s Estate Mortgages. They likewise claimed that there
of Banaybanay, Municipality of Lipa
City, Province of Batangas, was no sheriffs affidavit to prove compliance with the
Philippines, his/her/their title/s
requirements on posting and publication of notices. It
thereto being evidenced by Transfer
Certificate/s No./s T-9214 of the was further alleged that the Deed of Real Estate
Registry of Deeds for the Province of
Batangas in the amount of TWO Mortgage had no fixed term. A prayer for moral and
HUNDRED FIFTEEN THOUSAND (P
215,000.00), Philippine Currency, exemplary damages and attorneys fees was also
which the maximum credit line included in the complaint.[8] Librado Ramos alleged
payable within a x x x day term and
to secure the payment of the same that, when the property was foreclosed, GMC did not
plus interest of twelve percent
(12%) per annum. notify him at all of the foreclosure.[9]

During the trial, the parties agreed to limit the issues


Spouses Ramos eventually were unable to
to the following: (1) the validity of the Deed of Real
settle their account with GMC. They alleged that they
Estate Mortgage; (2) the validity of the extrajudicial
suffered business losses because of the negligence of
foreclosure; and (3) the party liable for damages.[10]
GMC and its violation of the Growers Contract. [3]
Corporation is ordered to pay
In its Answer, GMC argued that it repeatedly reminded Spouses Librado and Remedios
Spouses Ramos of their liabilities under the Growers Ramos attorneys fees in the total
amount of P 57,000.00 representing
Contract. It argued that it was compelled to foreclose acceptance fee of P30,000.00 and
P3,000.00 appearance fee for nine
the mortgage because of Spouses Ramos failure to (9) trial dates or a total appearance
fee of P 27,000.00;
pay their obligation. GMC insisted that it had observed

all the requirements of posting and publication of 4. The claims for moral
and exemplary damages are denied
notices under Act No. 3135.[11] for lack of merit.
The Ruling of the Trial Court
IT IS SO ORDERED.[13]
Holding in favor of Spouses Ramos, the trial court

ruled that the Deed of Real Estate Mortgage was valid

even if its term was not fixed. Since the duration of The Ruling of the Appellate Court

the term was made to depend exclusively upon the

will of the debtors-spouses, the trial court cited On appeal, GMC argued that the trial court erred in:

jurisprudence and said that the obligation is not due (1) declaring the extrajudicial foreclosure proceedings

and payable until an action is commenced by the null and void; (2) ordering GMC to pay Spouses

mortgagee against the mortgagor for the purpose of Ramos attorneys fees; and (3) not awarding damages

having the court fix the date on and after which the in favor of GMC.

instrument is payable and the date of maturity is fixed

in pursuance thereto.[12] The CA sustained the decision of the trial court but

anchored its ruling on a different ground. Contrary to

The trial court held that the action of GMC in moving the findings of the trial court, the CA ruled that the

for the foreclosure of the spouses properties was requirements of posting and publication of notices

premature, because the latters obligation under their under Act No. 3135 were complied with. The CA,

contract was not yet due. however, still found that GMCs action against Spouses

Ramos was premature, as they were not in default

The trial court awarded attorneys fees because of the when the action was filed on May 7, 1997.[14]

premature action taken by GMC in filing extrajudicial

foreclosure proceedings before the obligation of the

spouses became due.

The CA ruled:

In this case, a careful scrutiny of the


The RTC ruled, thus: evidence on record shows that
defendant-appellant GMC made no
demand to spouses Ramos for the
WHEREFORE, premises considered, full payment of their obligation.
judgment is rendered as follows: While it was alleged in the Answer
as well as in the Affidavit
1. The Extra-Judicial constituting the direct testimony of
Foreclosure Proceedings under Joseph Dominise, the principal
docket no. 0107-97 is hereby witness of defendant-appellant
declared null and void; GMC, that demands were sent to
spouses Ramos, the documentary
2. The Deed of Real Estate evidence proves otherwise. A
Mortgage is hereby declared valid perusal of the letters presented and
and legal for all intents and offered as evidence by defendant-
puposes; appellant GMC did not demand but
only request spouses Ramos to go
3. Defendant- to the office of GMC to discuss the
corporation General Milling settlement of their account.[15]
The Ruling of this Court

According to the CA, however, the RTC erroneously Can the CA consider matters not alleged?

awarded attorneys fees to Spouses Ramos, since the

presumption of good faith on the part of GMC was not GMC asserts that since the issue on the existence of

overturned. the demand letter was not raised in the trial court, the

CA, by considering such issue, violated the basic


The CA disposed of the case as follows: requirements of fair play, justice, and due process.[18]

WHEREFORE, and in view of the


foregoing considerations, the In their Comment,[19] respondents-spouses aver that
Decision of
the Regional Trial Court of Lipa City the CA has ample authority to rule on matters not
, Branch 12, dated May 21, 2005 is
assigned as errors on appeal if these are indispensable
hereby AFFIRMED with
MODIFICATION by deleting the or necessary to the just resolution of the pleaded
award of attorneys fees to plaintiffs-
appellees spouses Librado Ramos issues.
and Remedios Ramos.[16]

In Diamonon v. Department of Labor and


Hence, We have this appeal. Employment, [20]
We explained that an appellate court

has a broad discretionary power in waiving the lack of


The Issues assignment of errors in the following instances:

(a) Grounds not assigned


A. WHETHER [THE CA] MAY as errors but affecting the
CONSIDER ISSUES NOT jurisdiction of the court over the
subject matter;
ALLEGED AND DISCUSSED IN
THE LOWER COURT AND (b) Matters not assigned as
LIKEWISE NOT RAISED BY THE errors on appeal but are evidently
plain or clerical errors within
PARTIES ON APPEAL,
contemplation of law;
THEREFORE HAD DECIDED THE
CASE NOT IN ACCORD WITH (c) Matters not assigned as
LAW AND APPLICABLE errors on appeal but consideration
of which is necessary in arriving at
DECISIONS OF THE SUPREME a just decision and complete
COURT. resolution of the case or to serve the
interests of a justice or to avoid
dispensing piecemeal justice;
B. WHETHER [THE CA] ERRED IN
RULING THAT PETITIONER (d) Matters not specifically
GMC MADE NO DEMAND TO assigned as errors on appeal but
raised in the trial court and are
RESPONDENT SPOUSES FOR
matters of record having some
THE FULL PAYMENT OF THEIR bearing on the issue submitted
OBLIGATION CONSIDERING which the parties failed to raise or
THAT THE LETTER DATED which the lower court ignored;

MARCH 31, 1997 OF (e) Matters not assigned as


PETITIONER GMC TO errors on appeal but closely related
RESPONDENT SPOUSES IS to an error assigned;
TANTAMOUNT TO A FINAL
(f) Matters not assigned as
DEMAND TO PAY, THEREFORE errors on appeal but upon which the
IT DEPARTED FROM THE determination of a question
properly assigned, is dependent.
ACCEPTED AND USUAL
COURSE OF JUDICIAL
PROCEEDINGS.[17] Paragraph (c) above applies to the instant case, for

there would be a just and complete resolution of the


appeal if there is a ruling on whether the Spouses

Ramos were actually in default of their obligation to


As the contract in the instant case carries no such
GMC.
provision on demand not being necessary for delay to

exist, We agree with the appellate court that GMC


Was there sufficient demand?
should have first made a demand on the spouses

before proceeding to foreclose the real estate


We now go to the second issue raised by GMC. GMC
mortgage.
asserts error on the part of the CA in finding that no

demand was made on Spouses Ramos to pay their


Development Bank of the Philippines v. Licuanan finds
obligation. On the contrary, it claims that its March 31,
application to the instant case:
1997 letter is akin to a demand.

The issue of whether


We disagree. demand was made before the
foreclosure was effected is
essential. If demand was made and
duly received by the respondents
There are three requisites necessary for a finding of and the latter still did not pay, then
they were already in default and
default. First, the obligation is demandable and
foreclosure was proper.However, if
liquidated; second, the debtor delays performance; demand was not made, then the
loans had not yet become due and
and third, the creditor judicially or extrajudicially demandable. This meant that
respondents had not defaulted in
requires the debtors performance.[21]
their payments and the foreclosure
by petitioner was
premature. Foreclosure is valid
According to the CA, GMC did not make a demand on only when the debtor is in
default in the payment of his
Spouses Ramos but merely requested them to go to obligation.[22]
GMCs office to discuss the settlement of their account.

In spite of the lack of demand made on the spouses, In turn, whether or not demand was made is a
however, GMC proceeded with the foreclosure question of fact.[23] This petition filed under Rule 45 of
proceedings. Neither was there any provision in the the Rules of Court shall raise only questions of law.
Deed of Real Estate Mortgage allowing GMC to For a question to be one of law, it must not involve an
extrajudicially foreclose the mortgage without need of examination of the probative value of the evidence
demand. presented by the litigants or any of them. The

resolution of the issue must rest solely on what the

law provides on the given set of circumstances. Once

it is clear that the issue invites a review of the


Indeed, Article 1169 of the Civil Code on delay evidence presented, the question posed is one of
requires the following: fact.[24] It need not be reiterated that this Court is not

Those obliged to deliver or to do a trier of facts.[25] We will defer to the factual findings
something incur in delay from the
time the obligee judicially or of the trial court, because petitioner GMC has not
extrajudicially demands from them
shown any circumstances making this case an
the fulfilment of their obligation.
However, the demand by the exception to the rule.
creditor shall not be necessary in
order that delay may exist:

(1) When the obligation


or the law expressly so
declares; x x x
Leonardo died during the pendency of the case and
WHEREFORE, the petition is DENIED. The was substituted by his widow, Esperanza. Meanwhile,
CA Decision in CA-G.R. CR-H.C. No. 85400 Gruspe sold the wrecked car for ₱130,000.00.

is AFFIRMED. In a decision dated September 27, 2004, the RTC


ruled in favor of Gruspe and ordered Cruz and
Leonardo to pay ₱220,000.00,6 plus 15% per annum
SO ORDERED. from November 15, 1999 until fully paid, and the cost
of suit.

G.R. No. 191431 March 13, 2013 On appeal, the CA affirmed the RTC decision, but
reduced the interest rate to 12% per annum pursuant
to the Joint Affidavit of Undertaking.7 It declared that
RODOLFO G. CRUZ and ESPERANZA
despite its title, the Joint Affidavit of Undertaking is a
IBIAS, Petitioners,
contract, as it has all the essential elements of
vs.
consent, object certain, and consideration required
ATTY. DELFIN GRUSPE, Respondent.
under Article 1318 of the Civil

DECISION
Code. The CA further said that Cruz and Leonardo
failed to present evidence to support their contention
BRION, J.: of vitiated consent. By signing the Joint Affidavit of
Undertaking, they voluntarily assumed the obligation
Before the Court is the petition for review on for the damage they caused to Gruspe’s car;
certiorari1 filed under Rule 45 of the Rules of Court, Leonardo, who was not a party to the incident, could
assailing the decision2 dated July 30, 2009 and the have refused to sign the affidavit, but he did not.
resolution3 dated February 19, 2010 of the Court of
Appeals (CA) in CA-G.R. CV No. 86083. The CA rulings THE PETITION
affirmed with modification the decision dated
September 27, 2004 of the Regional Trial Court (RTC)
In their appeal by certiorari with the Court, Cruz and
of Bacoor, Cavite, Branch 19, in Civil Case No. BCV-
Esperanza assail the CA ruling, contending that the
99-146 which granted respondent Atty. Delfin Grupe’s
Joint Affidavit of Undertaking is not a contract that can
claim for payment of sum of money against petitioners
be the basis of an obligation to pay a sum of money
Rodolfo G. Cruz and Esperanza Ibias.4
in favor of Gruspe. They consider an affidavit as
different from a contract: an affidavit’s purpose is
THE FACTUAL BACKGROUND simply to attest to facts that are within his knowledge,
while a contract requires that there be a meeting of
The claim arose from an accident that occurred on the minds between the two contracting parties.
October 24, 1999, when the mini bus owned and
operated by Cruz and driven by one Arturo Davin Even if the Joint Affidavit of Undertaking was
collided with the Toyota Corolla car of Gruspe; considered as a contract, Cruz and Esperanza claim
Gruspe’s car was a total wreck. The next day, on that it is invalid because Cruz and Leonardo’s consent
October 25, 1999, Cruz, along with Leonardo Q. Ibias thereto was vitiated; the contract was prepared by
went to Gruspe’s office, apologized for the incident, Gruspe who is a lawyer, and its contents were never
and executed a Joint Affidavit of Undertaking explained to them. Moreover, Cruz and Leonardo were
promising jointly and severally to replace the Gruspe’s simply forced to affix their signatures, otherwise, the
damaged car in 20 days, or until November 15, 1999, mini van would not be released.
of the same model and of at least the same quality;
or, alternatively, they would pay the cost of Gruspe’s
Also, they claim that prior to the filing of the complaint
car amounting to ₱350,000.00, with interest at
for sum of money, Gruspe did not make any demand
upon them. Hence, pursuant to Article 1169 of the
12% per month for any delayed payment after Civil Code, they could not be considered in default.
November 15, 1999, until fully paid.5 When Cruz and Without this demand, Cruz and Esperanza contend
Leonardo failed to comply with their undertaking, that Gruspe could not yet take any action.
Gruspe filed a complaint for collection of sum of
money against them on November 19, 1999 before
THE COURT’S RULING
the RTC.

The Court finds the petition partly meritorious and


In their answer, Cruz and Leonardo denied Gruspe’s
accordingly modifies the judgment of the CA.
allegation, claiming that Gruspe, a lawyer, prepared
the Joint Affidavit of Undertaking and forced them to
affix their signatures thereon, without explaining and Contracts are obligatory no matter what their forms
informing them of its contents; Cruz affixed his may be, whenever the essential requisites for their
signature so that his mini bus could be released as it validity are present. In determining whether a
was his only means of income; Leonardo, a barangay document is an affidavit or a contract, the Court looks
official, accompanied Cruz to Gruspe’s office for the beyond the title of the document, since the
release of the mini bus, but was also deceived into denomination or title given by the parties in their
signing the Joint Affidavit of Undertaking. document is not conclusive of the nature of its
contents.8 In the construction or interpretation of an
instrument, the intention of the parties is primordial that the debtor delays performance; and (3) that the
and is to be pursued. If the terms of the document are creditor requires the performance judicially and
clear and leave no doubt on the intention of the extrajudicially."13 Default generally begins from the
contracting parties, the literal meaning of its moment the creditor demands the performance of the
stipulations shall control. If the words appear to be obligation. In this case, demand could be considered
contrary to the parties’ evident intention, the latter to have been made upon the filing of the complaint on
shall prevail over the former.9 November 19, 1999, and it is only from this date that
the interest should be computed.
A simple reading of the terms of the Joint Affidavit of
Undertaking readily discloses that it contains Although the CA upheld the Joint Affidavit of
stipulations characteristic of a contract. As quoted in Undertaking, we note that it imposed interest rate on
the CA decision,10 the Joint Affidavit of Undertaking a per annum basis, instead of the per month basis that
contained a stipulation where Cruz and Leonardo was stated in the Joint Affidavit of Undertaking
promised to replace the damaged car of Gruspe, 20 without explaining its reason for doing so.14 Neither
days from October 25, 1999 or up to November 15, party, however, questioned the change. Nonetheless,
1999, of the same model and of at least the same the Court affirms the change in the interest rate from
quality. In the event that they cannot replace the car 12% per month to 12% per annum, as we find the
within the same period, they would pay the cost of interest rate agreed upon in the Joint Affidavit of
Gruspe’s car in the total amount of ₱350,000.00, with Undertaking excessive.15
interest at 12% per month for any delayed payment
after November 15, 1999, until fully paid. These, as
WHEREFORE, we AFFIRM the decision dated July 30,
read by the CA, are very simple terms that both Cruz
2009 and the resolution dated February 19, 2010 of
and Leonardo could easily understand.
the Court of Appeals in CA-G.R. CV No. 86083, subject
to the Modification that the twelve percent (12%) per
There is also no merit to the argument of vitiated annum interest imposed on the amount due shall
consent.1âwphi1 An allegation of vitiated consent accrue only from November 19, 1999, when judicial
must be proven by preponderance of evidence; Cruz demand was made.
and Leonardo failed to support their allegation.
SO ORDERED.
Although the undertaking in the affidavit appears to
be onerous and lopsided, this does not necessarily
G.R. No. 125536 March 16, 2000
prove the alleged vitiation of consent. They, in fact,
admitted the genuineness and due execution of the
Joint Affidavit and Undertaking when they said that PRUDENTIAL BANK, petitioner,
they signed the same to secure possession of their vs.
vehicle. If they truly believed that the vehicle had COURT OF APPEALS and LETICIA TUPASI-
been illegally impounded, they could have refused to VALENZULA joined by husband Francisco
sign the Joint Affidavit of Undertaking and filed a Valenzuela,respondents.
complaint, but they did not. That the release of their
mini bus was conditioned on their signing the Joint QUISUMBING, J.:
Affidavit of Undertaking does not, by itself, indicate
that their consent was forced – they may have given
it grudgingly, but it is not indicative of a vitiated This appeal by certiorari under Rule 45 of the Rules of
consent that is a ground for the annulment of a Court seeks to annul and set aside the Decision dated
contract. January 31, 1996, and the Resolution dated July 2,
1997, of the Court of Appeals in CA G.R. CV No.
35532, which reversed the judgment of the Regional
Thus, on the issue of the validity and enforceability of Trial Court of Valenzuela, Metro Manila, Branch 171,
the Joint Affidavit of Undertaking, the CA did not in Civil Case No. 2913-V-88, dismissing the private
commit any legal error that merits the reversal of the respondent's complaint for damages.1
assailed decision.

In setting aside the trial court's decision, the Court of


Nevertheless, the CA glossed over the issue of Appeals disposed as follows:
demand which is material in the computation of
interest on the amount due. The RTC ordered Cruz and
Leonardo to pay Gruspe "₱350,000.00 as cost of the WHEREFORE, the appealed decision is hereby
car xxx plus fifteen percent (15%) per annum from REVERSED and SET ASIDE and, another
November 15, 1999 until fully paid."11 The 15% rendered ordering the appellee bank to pay
interest (later modified by the CA to be 12%) was appellant the sum of P100,000.00 by way of
computed from November 15, 1999 – the date moral damages; P50,000.00 by way of
stipulated in the Joint Affidavit of Undertaking for the exemplary damages, P50,000.00 for and as
payment of the value of Gruspe’s car. In the absence attorney's fees; and to pay the costs.
of a finding by the lower courts that Gruspe made a
demand prior to the filing of the complaint, the SO ORDERED.2
interest cannot be computed from November 15, 1999
because until a demand has been made, Cruz and
Leonardo could not be said to be in default.12 "In order The facts of the case on record are as follows:
that the debtor may be in default, it is necessary that
the following requisites be present: (1) that the Private respondent Leticia Tupasi-Valenzuela opened
obligation be demandable and already liquidated; (2) Savings Account No. 5744 and Current Account No.
01016-3 in the Valenzuela Branch of petitioner appellate court rendered a decision in her favor,
Prudential Bank, with automatic transfer of funds from setting aside the trial court's decision and ordering
the savings account to the current account. herein petitioner to pay private respondent the sum of
P100,000.00 by way of moral damages; P50,000.00
exemplary damages; P50,000.00 for and as attorney's
On June 1, 1988, herein private respondent deposited
fees; and to pay the costs.3
in her savings account Check No. 666B (104561 of
even date) the amount of P35,271.60, drawn against
the Philippine Commercial International Bank (PCIB). Petitioner filed a timely motion for reconsideration but
Taking into account that deposit and a series of it was denied. Hence, this petition, raising the
withdrawals, private respondent as of June 21, 1988 following issues:
had a balance of P35,993.48 in her savings account
and P776.93 in her current account, or total deposits
I. WHETHER OR NOT THE RESPONDENT
of P36,770.41, with petitioner.
COURT OF APPEALS ACTED WITH GRAVE
ABUSE OF DISCRETION AMOUNTING TO
Thereafter, private respondent issued Prudential Bank LACK OF JURISDICTION IN DEVIATING
Check No. 983395 in the amount of P11,500.00 post- FROM ESTABLISHED JURISPRUDENCE IN
dated June 20, 1988, in favor of one Belen Legaspi. It REVERSING THE DISMISSAL JUDGMENT OF
was issued to Legaspi as payment for jewelry which THE TRIAL COURT AND INSTEAD AWARDED
private respondent had purchased. Legaspi, who was MORAL DAMAGES, EXEMPLARY DAMAGES
in jewelry trade, endorsed the check to one Philip AND ATTORNEY'S FEES.
Lhuillier, a businessman also in the jewelry business.
When Lhuillier deposited the check in his account with
II. WHETHER OR NOT THE RESPONDENT
the PCIB, Pasay Branch, it was dishonored for being
COURT OF APPEALS ACTED IN GRAVE ABUSE
drawn against insufficient funds. Lhuillier's secretary
OF DISCRETION AMOUNTING TO LACK OF
informed the secretary of Legaspi of the dishonor. The
JURISDICTION WHERE, EVEN IN THE
latter told the former to redeposit the check, Legaspi's
ABSENCE OF EVIDENCE AS FOUND BY THE
secretary tried to contact private respondent but to no
TRIAL COURT, AWARDED MORAL DAMAGES
avail.
IN THE AMOUNT OF P100,000.00.

Upon her return from the province, private respondent


III. WHETHER OR NOT THE RESPONDENT
was surprised to learn of the dishonor of the check.
COURT OF APPEALS ACTED IN GRAVE ABUSE
She went to the Valenzuela Branch of Prudential Bank
OF DISCRETION AMOUNTING TO LACK OF
on July 4, 1988, to inquire why her check was
JURISDICTION, WHERE, EVEN IN THE
dishonored. She approached one Albert Angeles
ABSENCE OF EVIDENCE AS FOUND BY THE
Reyes, the officer in charge of current account, and
TRIAL COURT, AWARDED P50,000.00 BY
requested him for the ledger of her current account.
WAY OF EXEMPLARY DAMAGES.
Private respondent discovered a debit of P300.00
penalty for the dishonor of her Prudential Check No.
983395. She asked why her check was dishonored IV. WHETHER OR NOT THE RESPONDENT
when there were sufficient funds in her account as COURT OF APPEALS ACTED WITH GRAVE
reflected in her passbook. Reyes told her that there ABUSE OF DISCRETION WHERE EVEN IN THE
was no need to review the passbook because the bank ABSENCE OF EVIDENCE, AWARDED
ledger was the best proof that she did not have ATTORNEY'S FEES.
sufficient funds. Then, he abruptly faced his typewriter
and started typing. Simply stated, the issue is whether the respondent
court erred and gravely abused its discretion in
Later, it was found out that the check in the amount awarding moral and exemplary damages and
of P35,271.60 deposited by private respondent on attorney's fees to be paid by petitioner to private
June 1, 1988, was credited in her savings account only respondent.
on June 24, 1988, or after a period of 23 days. Thus
the P11,500.00 check was redeposited by Lhuillier on Petitioner claims that generally the factual findings of
June 24, 1988, and properly cleared on June 27, 1988. the lower courts are final and binding upon this Court.
However, there are exceptions to this rule. One is
Because of this incident, the bank tried to mollify where the trial court and the Court of Appeals had
private respondent by explaining to Legaspi and arrived at diverse factual findings.4 Petitioner faults
Lhuillier that the bank was at fault. Since this was not the respondent court from deviating from the basic
the first incident private respondent had experienced rule that finding of facts by the trial court is entitled
with the bank, private respondent was unmoved by to great weight, because the trial court had the
the bank's apologies and she commenced the present opportunity to observe the deportment of witness and
suit for damages before the RTC of Valenzuela. the evaluation of evidence presented during the trial.
Petitioner contends that the appellate court gravely
abused its discretion when it awarded damages to the
After trial, the court rendered a decision on August 30,
plaintiff, even in the face of lack of evidence to prove
1991, dismissing the complaint of private respondent,
such damages, as found by the trial court.
as well as the counterclaim filed by the defendant,
now petitioner.
Firstly, petitioner questions the award of moral
damages. It claims that private respondent did not
Undeterred, private respondent appealed to the Court
suffer any damage upon the dishonor of the check.
of Appeals. On January 31, 1996, respondent
Petitioner avers it acted in good faith. It was an honest In the recent case of Philippine National Bank vs.
mistake on its part, according to petitioner, when Court of Appeals,8 we held that "a bank is under
misposting of private respondent's deposit on June 1, obligation to treat the accounts of its depositors with
1988, happened. Further, petitioner contends that meticulous care whether such account consists only of
private respondent may not "claim" damages because a few hundred pesos or of millions of pesos.
the petitioner's manager and other employees had Responsibility arising from negligence in the
profusely apologized to private respondent for the performance of every kind of obligation is
error. They offered to make restitution and apology to demandable. While petitioner's negligence in this case
the payee of the check, Legaspi, as well as the alleged may not have been attended with malice and bad
endorsee, Lhuillier. Regrettably, it was private faith, nevertheless, it caused serious anxiety,
respondent who declined the offer and allegedly said, embarrassment and humiliation". Hence we ruled that
that there was nothing more to it, and that the matter the offended party in said case was entitled to recover
had been put to rest.5 reasonable moral damages.

Admittedly, as found by both the respondent appellate Even if malice or bad faith was not sufficiently proved
court and the trial court, petitioner bank had in the instant case, the fact remains that petitioner
committed a mistake.1âwphi1.nêt It misposted has committed a serious mistake. It dishonored the
private respondent's check deposit to another account check issued by the private respondent who turned
and delayed the posting of the same to the proper out to have sufficient funds with petitioner. The bank's
account of the private respondent. The mistake negligence was the result of lack of due care and
resulted to the dishonor of the private respondent's caution required of managers and employees of a firm
check. The trial court found "that the misposting of engaged in so sensitive and demanding business as
plaintiff's check deposit to another account and the banking. Accordingly, the award of moral damages by
delayed posting of the same to the account of the the respondent Court of Appeals could not be said to
plaintiff is a clear proof of lack of supervision on the be in error nor in grave abuse of its discretion.
part of the defendant bank."6 Similarly, the appellate
court also found that "while it may be true that the
There is no hard-and-fast rule in the determination of
bank's negligence in dishonoring the properly funded
what would be a fair amount of moral damages since
check of appellant might not have been attended with
each case must be governed by its own peculiar facts.
malice and bad faith, as appellee [bank] submits,
The yardstick should be that it is not palpably and
nevertheless, it is the result of lack of due care and
scandalously excessive. In our view, the award of
caution expected of an employee of a firm engaged in
P100,000.00 is reasonable, considering the reputation
so sensitive and accurately demanding task as
and social standing of private respondent Leticia T.
banking."7
Valenzuela.9

In Simex International (Manila), Inc. vs. Court of


The law allows the grant of exemplary damages by
Appeals, 183 SCRA 360, 367 (1990), and Bank of
way of example for the public good. 10 The public relies
Philippine Islands vs. IAC, et al., 206 SCRA 408, 412-
on the banks' sworn profession of diligence and
413 (1992), this Court had occasion to stress the
meticulousness in giving irreproachable service. The
fiduciary nature of the relationship between a bank
level of meticulousness must be maintained at all
and its depositors and the extent of diligence expected
times by the banking sector. Hence, the Court of
of the former in handling the accounts entrusted to its
Appeals did not err in awarding exemplary damages.
care, thus:
In our view, however, the reduced amount of
P20,000.00 is more appropriate.
In every case, the depositor expects the bank
to treat his account with the utmost fidelity,
The award of attorney's fees is also proper when
whether such account consists only of a few
exemplary damages are awarded and since private
hundred pesos or of millions. The bank must
respondent was compelled to engage the services of
record every single transaction accurately,
a lawyer and incurred expenses to protect her
down to the last centavo, and as promptly as
interest. 11 The standards in fixing attorney's fees are:
possible. This has to be done if the account
(1) the amount and the character of the services
is to reflect at any given time the amount of
rendered; (2) labor, time and trouble involved; (3) the
money the depositor can dispose of as he
nature and importance of the litigation and business
sees fit, confident that the bank will deliver it
in which the services were rendered; (4) the
as and to whomever he directs. A blunder on
responsibility imposed; (5) the amount of money and
the part of bank, such as the dishonor of a
the value of the property affected by the controversy
check without good reason, can cause the
or involved in the employment; (6) the skill and the
depositor not a little embarrassment if not
experience called for in the performance of the
also financial loss and perhaps even civil and
services; (7) the professional character and the social
criminal litigation.
standing of the attorney; (8) the results secured, it
being a recognized rule that an attorney may properly
The paint is that as a business affected with charge a much larger fee when it is contingent than
public interest and because of the nature of when it is not. 12 In this case, all the aforementioned
its functions, the bank is under obligation to weighed, and considering that the amount involved in
treat the accounts of its depositors with the controversy is only P36,770.41, the total deposit
meticulous care, always having in mind the of private respondent which was misposted by the
fiduciary nature of their relationship. . . . bank, we find the award of respondent court of
P50,000.00 for attorney's fees, excessive and reduce
the same to P30,000.00.
WHEREFORE, the assailed DECISION of the Court of amount ofP453,329.64 as reservation fee for a
Appeals is hereby AFFIRMED, with MODIFICATION. 41.1050-square meter unit in said condominium,
The petitioner is ordered to pay P100,000.00 by way particularly designated as Unit 2308-B2,[6] and
of moral damages in favor of private respondent covered by Condominium Certificate of Title (CCT) No.
Leticia T. Valenzuela. It is further ordered to pay her 2383 in the name of Golden Dragon.[7]
exemplary damages in the amount of P20,000.00 and
P30,000.00, attorney's fees. On September 13, 1995, the Bank extended a loan to
Golden Dragon amounting to P50,000,000.00[8] to be
utilized by the latter as additional working
Costs against petitioner.
capital.[9] To secure the loan, Golden Dragon executed
a Mortgage Agreement in favor of the Bank, which had
SO ORDERED. the effect of constituting a real estate mortgage over
several condominium units owned and registered
under Golden Dragon's name. Among the units
subject of the Mortgage Agreement was Unit 2308-
B2.[10] The mortgage was annotated on CCT No. 2383
[ GR No. 191636, Jan 16, 2017 ] on September 13, 1995.[11]

On May 21, 1996, Rapanot and Golden Dragon


PRUDENTIAL BANK v. RONALD RAPANOT +
entered into a Contract to Sell covering Unit 2308-B2.
On April 23, 1997, Rapanot completed payment of the
DECISION full purchase price of said unit amounting to
P1,511,098.97.[12] Golden Dragon executed a Deed of
Absolute Sale in favor of Rapanot of the same
date.[13] Thereafter, Rapanot made several verbal
demands for the delivery of Unit 2308-B2.[14]
CAGUIOA, J: Prompted by Rapanot's verbal demands, Golden
Dragon sent a letter to the Bank dated March 17,
Only questions of law may be raised in petitions for
1998, requesting for a substitution of collateral for the
review on certiorari brought before this Court under
purpose of replacing Unit 2308-B2 with another unit
Rule 45, since this Court is not a trier of facts. While
with the same area. However, the Bank denied Golden
there are recognized exceptions which warrant review
Dragon's request due to the latter's unpaid
of factual findings, mere assertion of these exceptions
accounts.[15] Because of this, Golden Dragon failed to
does not suffice. It is incumbent upon the party
comply with Rapanot's verbal demands.
seeking review to overcome the burden of
demonstrating that review is justified under the
Thereafter, Rapanot, through his counsel, sent several
circumstances prevailing in his case.
demand letters to Golden Dragon and the Bank,
formally demanding the delivery of Unit 2308-B2 and
its corresponding CCT No. 2383, free from all liens and
The Case
encumbrances.[16] Neither Golden Dragon nor the
Bank complied with Rapanot's written demands.[17]
Before the Court is an Appeal by Certiorari[1] under
Rule 45 of the Rules of Court (Petition) of the
Proceedings before the HLURB
Decision[2] dated November 18, 2009 (questioned
Decision) rendered by the Court of Appeals - Seventh
On April 27, 2001, Rapanot filed a Complaint with the
Division (CA). The questioned Decision stems from a
Expanded National Capital Region Field Office of the
complaint filed by herein private respondent Ronald
HLURB.[18] The Field Office then scheduled the
Rapanot (Rapanot) against Golden Dragon Real Estate
preliminary hearing and held several conferences with
Corporation (Golden Dragon), Golden Dragon's
a view of arriving at an amicable settlement. However,
President Ma. Victoria M. Vazquez[3] and herein
no settlement was reached.[19]
petitioner, Bank of the Philippine Islands, formerly
known as Prudential Bank[4] (Bank) for Specific
Despite service of summons to all the defendants
Performance and Damages (Complaint) before the
named in the Complaint, only the Bank filed its
Housing and Land Use Regulatory Board (HLURB).[5]
Answer.[20] Thus, on April 5, 2002, the Arbiter issued
an order declaring Golden Dragon and its President
The Petition seeks to reverse the questioned Decision
Maria Victoria Vazquez in default, and directing
insofar as it found that the Bank (i) was not deprived
Rapanot and the Bank to submit their respective
of due process when the Housing and Land Use Arbiter
position papers and draft decisions (April 2002
(Arbiter) issued his Decision dated July 3, 2002
Order).[21] Copies of the April 2002 Order were served
without awaiting submission of the Bank's position
on Rapanot and the Bank via registered
paper and draft decision, and (ii) cannot be deemed a
mail.[22] However, the envelope bearing the copy sent
mortgagee in good faith with respect to Unit 2308-B2
to the Bank was returned to the Arbiter, bearing the
mortgaged by Golden Dragon in its favor as
notation "refused to receive".[23]
collateral.[5-a]
Rapanot complied with the April 2002 Order and
personally served copies of its position paper and draft
The Facts
decision on the Bank on May 22, 2002 and May 24,
2002, respectively.[24] In the opening statement of
Golden Dragon is the developer of Wack-Wack Twin
Rapanot's position paper, Rapanot made reference to
Towers Condominium, located in Mandaluyong City.
the April 2002 Order.[25]
On May 9, 1995, Rapanot paid Golden Dragon the
Subsequently, the Bank received a copy of Rapanot's
On July 3, 2002, the Arbiter rendered a decision Motion for Execution dated September 2, 2002,[29] to
(Arbiter's Decision) in favor of Rapanot, the which it filed an Opposition dated September 4,
dispositive portion of which reads: 2002.[30]

WHEREFORE, premises considered, judgment is Meanwhile, the Bank's Manifestation and Motion for
hereby rendered as follows: Clarification remained unresolved despite the lapse of
five (5) months from the date of filing. This prompted
the Bank to secure a certified true copy of the Arbiter's
Decision from the HLURB.[31]
1. Declaring the mortgage over the
condominium unit No. 2308-B2 covered by
On January 16, 2003, the Bank filed a Petition for
Condominium Certificate of Title No. 2383 in
Review with the HLURB Board of Commissioners
favor of respondent Bank as null and void for
(HLURB Board) alleging, among others, that it had
violation of Section 18 of Presidential Decree
been deprived of due process when the Arbiter
No. 957[;]
rendered a decision without affording the Bank the
opportunity to submit its position paper and draft
2. Ordering respondent Bank to cancel the
decision.
mortgage on the subject condominium unit,
and accordingly, release the title thereof to
The HLURB Board modified the Arbiter's Decision by:
the complainant;
(i) reducing the award for moral damages from
P100,000.00 to P50,000.00, (ii) deleting the award for
3. Ordering respondents to pay jointly and
exemplary damages, (iii) reducing the award for
severally the complainant the following
attorney's fees from P50,000.00 to P20,000.00, and
sums:
(iv) directing Golden Dragon to pay the Bank all the
damages the latter is directed to pay thereunder, and
settle the mortgage obligation corresponding to Unit
a. P100,000.00 as moral damages,
2308-B2.[32]
b. P100,000.00 as exemplary
Anent the issue of due process, the HLURB Board held,
damages,
as follows:
c. P50,000.00 as attorney's fees,
x x x x
d. The costs of litigations (sic), and
With respect to the first issue, we find the same
untenable. Records show that prior to the rendition of
e. An administrative fine of TEN
its decision, the office below has issued and duly sent
THOUSAND PESOS (P10,000.00)
an Order to the parties declaring respondent GDREC
payable to this Office fifteen (15)
in default and directing respondent Bank to submit its
days upon receipt of this decision,
position paper. x x x[33] (Underscoring omitted)
for violation of Section 18 in relation
to Section 38 of PD 957; Proceedings before the Office of the President

The Bank appealed the decision of the HLURB Board


to the Office of the President (OP). On October 10,
2005, the OP issued a resolution denying the Bank's
4. Directing the Register of Deeds of
appeal. In so doing, the OP adopted the BLURB's
Mandaluyong City to cancel the aforesaid
findings.[34] The Bank filed a Motion for
mortgage on the title of the subject
Reconsideration, which was denied by the OP in an
condominium unit; and
Order dated March 3, 2006.[35]
5. Immediate[ly] upon receipt by the
Proceedings before the CA
complainant of the owner's duplicate
Condominium Certificate of Title of Unit
The Bank filed a Petition for Review with the CA on
2308-B2, delivery of CCT No. 2383 over Unit
April 17, 2006 assailing the resolution and subsequent
2308-B2 in favor of the complainant free
order of the OP. The Bank argued, among others, that
from all liens and encumbrances.
the OP erred when it found that the Bank (i) was not
denied due process before the HLURB, and (ii) is
SO ORDERED.[26] jointly and severally liable with Golden Dragon for
damages due Rapanot.[36]
On July 25, 2002, the Bank received a copy of
Rapanot's Manifestation dated July 24, 2002, stating After submission of the parties' respective
that he had received a copy of the Arbiter's memoranda, the CA rendered the questioned Decision
Decision.[27] On July 29, 2002, the Bank filed a dismissing the Bank's Petition for Review. On the issue
Manifestation and Motion for of due process, the CA held:
Clarification,[28] requesting for the opportunity to file
its position paper and draft decision, and seeking Petitioner asserts that it was denied due process
confirmation as to whether a decision had indeed been because it did not receive any notice to file its position
rendered notwithstanding the fact that it had yet to paper nor a copy of the Housing Arbiter's Decision.
file such submissions. Rapanot, meanwhile, contends that the Housing
Arbiter sent petitioner a copy of the April 5, 2002
Order to file position paper by registered mail, as exhaustive investigation of the mortgagor's title, it
evidenced by the list of persons furnished with a copy cannot be excused from the duty of exercising the due
thereof. However, according to Rapanot, petitioner diligence required of banking institutions, for banks
"refused to receive" it. are expected to exercise more care and prudence than
private individuals in their dealings, even those
x x x x involving registered property, for their business is
affected with public interest.
In the instant case, there is no denial of due process.
Petitioner filed its Answer where it was able to explain As aforesaid, petitioner should have ascertained that
its side through its special and affirmative defenses. the required authority to mortgage the condominium
Furthermore, it participated in the preliminary hearing units was obtained from the HLURB before it approved
and attended scheduled conferences held to resolve Golden Dragon's loan. It cannot feign lack of
differences between the parties. Petitioner was also knowledge of the sales activities of Golden Dragon
served with respondent's position paper and draft since, as an extender of credit, it is aware of the
decision. Having received said pleadings of practices, both good or bad, of condominium
respondent, petitioner could have manifested before developers. Since petitioner was negligent in its duty
the Housing Arbiter that it did not receive, if correct, to investigate the status of the properties offered to it
its order requiring the submission of its pleadings and as collateral, it cannot claim that it was a mortgagee
therefore prayed that it be given time to do so. Or, it in good faith.[38]
could have filed its position paper and draft decision
without awaiting the order to file the same. Under the The Bank filed a Motion for Reconsideration, which
circumstances, petitioner was thus afforded and was denied by the CA in a Resolution dated March
availed of the opportunity to present its side. It cannot 17,2010.[39] The Bank received a copy of the
make capital of the defense of denial of due process resolution on March 22, 2010.[39-a]
as a screen for neglecting to avail of opportunities to
file other pleadings.[37] On April 6, 2010, the Bank filed with the Court a
motion praying for an additional period of 30 days
With respect to the Bank's liability for damages, the within which to file its petition for review
CA held thus: on certiorari.[39-b]

Section 18 of PD 957, requires prior written authority On May 6, 2010, the Bank filed the instant Petition.
of the HLURB before the owner or developer of a
subdivision lot or condominium unit may enter into a Rapanot filed his Comment to the Petition on
contract of mortgage. Hence, the jurisdiction of the September 7, 2010.[40] Accordingly, the Bank filed its
HLURB is broad enough to include complaints for Reply on January 28, 2011.[41]
annulment of mortgage involving violations of PD 957.

Petitioner argues that, as a mortgagee in good faith Issues


and for value, it must be accorded protection and
should not be held jointly and severally liable with Essentially, the Bank requests this Court to resolve
Golden Dragon and its President, Victoria Vasquez. the following issues:

It is true that a mortgagee in good faith and for value


is entitled to protection, as held in Rural Bank of
1. Whether or not the CA erred when it affirmed
Compostela vs. Court of Appeals but petitioner's
the resolution of the OP finding that the Bank
dependence on this ruling is misplaced as it cannot be
had been afforded due process before the
considered a mortgagee in good faith.
HLURB; and
The doctrine of "mortgagee in good faith" is based on
2. Whether or not the CA erred when it affirmed
the rule that all persons dealing with property covered
the resolution of the OP holding that the Bank
by a certificate of title, as mortgagees, are not
cannot be considered a mortgagee in good
required to go beyond what appears on the face of the
faith.
title.

However, while a mortgagee is not under obligation to The Court's Ruling


look beyond the certificate of title, the nature of
petitioner's business requires it to take further steps In the instant Petition, the Bank avers that the CA
to assure that there are no encumbrances or liens on misappreciated material facts when it affirmed the
the mortgaged property, especially since it knew that OP's resolution which denied its appeal. The Bank
it was dealing with a condominium developer. It contends that the CA committed reversible error when
should have inquired deeper into the status of the it concluded that the Bank was properly afforded due
properties offered as collateral and verified if the process before the HLURB, and when it failed to
HLURB's authority to mortgage was in fact previously recognize the Bank as a mortgagee in good faith. The
obtained. This it failed to do. Bank concludes that these alleged errors justify the
reversal of the questioned Decision, and ultimately
It has been ruled that a bank, like petitioner, cannot call for the dismissal of the Complaint against it.
argue that simply because the titles offered as
security were clean of any encumbrances or lien, it The Court disagrees.
was relieved of taking any other step to verify the
implications should the same be sold by the Time and again, the Court has emphasized that review
developer. While it is not expected to conduct an of appeals under Rule 45 is "not a matter of right, but
of sound judicial discretion."[42] Thus, a petition for without having considered the Bank's position paper
review on certiorari shall only be granted on the basis and draft decision is of no moment. An examination of
of special and important reasons.[43] the 1996 Rules of Procedure of the HLURB[51] then
prevailing shows that the Arbiter merely acted in
As a general rule, only questions of law may be raised accordance therewith when he rendered his decision
in petitions filed under Rule 45.[44] However, there are on the basis of the pleadings and records submitted
recognized exceptions to this general rule, namely: by the parties thus far. The relevant rules provide:

(1) when the findings are grounded entirely on RULE VI - PRELIMINARY CONFERENCE AND
speculation, surmises or conjectures; (2) when the RESOLUTION
inference made is manifestly mistaken, absurd
or impossible; (3) when there is grave abuse of x x x x
discretion; (4) when the judgment is based on a
misapprehension of facts; (5) when the findings of Section 4. Position Papers. - If the parties fail to settle
facts are conflicting; (6) when in making its findings within the period of preliminary conference, then
the Court of Appeals went beyond the issues of the they will be given a period of not more than
case, or its findings are contrary to the admissions of thirty (30) calendar days to file their respective
both the appellant and the appellee; (7) when the verified position papers, attaching thereto the
findings are contrary to the trial court; (8) when the affidavits of their witnesses and documentary
findings are conclusions without citation of specific evidence.
evidence on which they are based; (9) when the facts
set forth in the petition as well as in the petitioner's In addition, as provided for by Executive Order
main and reply briefs are not disputed by the No. 26, Series of 1992, the parties shall be
respondent; (10) when the findings of fact are required to submit their respective draft
premised on the supposed absence of evidence and decisions within the same thirty (30)-day
contradicted by the evidence on record; and period.
(11) when the Court of Appeals manifestly
overlooked certain relevant facts not disputed Said draft decision shall state clearly and distinctly the
by the parties, which, if properly considered, findings of facts, the issues and the applicable law and
would justify a different conclusion. x x jurisprudence on which it is based. The arbiter may
x[45] (Emphasis supplied) adopt in whole or in part either of the parties' draft
decision, or reject both and prepare his own decision.
The Bank avers that the second, fourth and eleventh
exceptions above are present in this case. However, The party who fails to submit a draft decision shall be
after a judicious examination of the records of this fined P2,000.00.
case and the respective submissions of the parties,
the Court finds that none of these exceptions apply. Section 5. Summary Resolution - With or without
the position paper and draft decision[,] the
The Bank was not deprived of due process before the Arbiter shall summarily resolve the case on the
HLURB. basis of the verified pleadings and pertinent
records of the Board.(Emphasis and underscoring
The Bank asserts that it never received the April2002 supplied)
Order. It claims that it was taken by surprise on July
25, 2002, when it received a copy of Rapanot's Clearly, the Arbiter cannot be faulted for rendering his
Manifestation alluding to the issuance of the Arbiter's Decision, since the rules then prevailing required him
Decision on July 3, 2002. Hence, the Bank claims that to do so.
it was deprived of due process, since it was not able
to set forth its "valid and meritorious" defenses for the The Bank cannot likewise rely on the absence of proof
Arbiter's consideration through its position paper and of service to further its cause. Notably, while the Bank
draft decision.[46] firmly contends that it did not receive the copy of the
April 2002 Order, it did not assail the veracity of the
The Court finds these submissions untenable. notation "refused to receive" inscribed on the
envelope bearing said order. In fact, the Bank only
"The essence of due process is to be heard."[47] In offered the following explanation respecting said
administrative proceedings, due process entails "a fair notation:
and reasonable opportunity to explain one's side, or
an opportunity to seek a reconsideration of the action 9. The claim that the Bank "refused to receive" the
or ruling complained of. Administrative due process envelope that bore the Order cannot be given
cannot be fully equated with due process in its strict credence and is belied by the Bank's act of
judicial sense, for in the former a formal or trial-type immediately manifesting before the Housing Arbiter
hearing is not always necessary, and technical rules of that it had not yet received an order for filing the
procedure are not strictly applied."[48] position paper and draft decision.[52]

As correctly pointed out by the CA in the questioned This is specious, at best. More importantly, the
Decision, the Bank was able to set out its position by records show that the Bank gained actual notice of the
participating in the preliminary hearing and the Arbiter's directive to file their position papers and draft
scheduled conferences before the Arbiter.[49] The Bank decisions as early as May 22, 2002, when it was
was likewise able to assert its special and affirmative personally served a copy of Rapanot's position paper
defenses in its Answer to Rapanot's Complaint.[50] which made reference to the April 2002 Order.[53] This
shows as mere pretense the Bank's assertion that it
The fact that the Arbiter's Decision was rendered learned of the Arbiter's Decision only through
Rapanot's Manifestation.[54] Worse, the Bank waited Philippines, Inc. v. Board of Commissioners-HLURB.[61]
until the lapse of five (5) months before it took steps
to secure a copy of the Arbiter's Decision directly from Thus, the Mortgage Agreement cannot have the effect
the HLURB for the purpose of assailing the same of curtailing Rapanot's right as buyer of Unit 2308-B2,
before the OP. precisely because of the Bank's failure to comply with
PD 957.
The Mortgage Agreement is null and void as against
Rapanot, and thus cannot be enforced against him. Moreover, contrary to the Bank's assertions, it cannot
be considered a mortgagee in good faith. The Bank
The Bank avers that contrary to the CA's conclusion in failed to ascertain whether Golden Dragon secured
the questioned Decision, it exercised due diligence HLURB's prior written approval as required by PD 957
before it entered into the Mortgage Agreement with before it accepted Golden Dragon's properties as
Golden Dragon and accepted Unit 2308-B2, among collateral. It also failed to ascertain whether any of the
other properties, as collateral.[55] The Bank stressed properties offered as collateral already had
that prior to the approval of Golden Dragon's loan, it corresponding buyers at the time the Mortgage
deployed representatives to ascertain that the Agreement was executed.
properties being offered as collateral were in order.
Moreover, it confirmed that the titles corresponding to The Bank cannot harp on the fact that the Mortgage
the properties offered as collateral were free from Agreement was executed before the Contract to Sell
existing liens, mortgages and other and Deed of Absolute Sale between Rapanot and
encumbrances.[56]Proceeding from this, the Bank Golden Dragon were executed, such that no amount
claims that the CA overlooked these facts when it of verification could have revealed Rapanot's right
failed to recognize the Bank as a mortgagee in good over Unit 2308-B2.[62] The Court particularly notes
faith. that Rapanot made his initial payment for Unit 2308-
B2 as early as May 9, 1995, four (4) months prior to
The Court finds the Bank's assertions indefensible. the execution of the Mortgage Agreement. Surely, the
Bank could have easily verified such fact if it had
First of all, under Presidential Decree No. 957 (PD simply requested Golden Dragon to confirm if Unit
957), no mortgage on any condominium unit may be 2308-B2 already had a buyer, given that the nature of
constituted by a developer without prior written the latter's business inherently involves the sale of
approval of the National Housing Authority, now condominium units on a commercial scale.
HLURB.[57] PD 957 further requires developers to
notify buyers of the loan value of their corresponding It bears stressing that banks are required to exercise
mortgaged properties before the proceeds of the the highest degree of diligence in the conduct of their
secured loan are released. The relevant provision affairs. The Court explained this exacting requirement
states: in the recent case of Philippine National Bank v.
Vila,[63] thus:
Section 18. Mortgages. - No mortgage on any unit or
lot shall be made by the owner or developer without In Land Bank of the Philippines v. Belle Corporation,
prior written approval of the Authority. Such approval the Court exhorted banks to exercise the highest
shall not be granted unless it is shown that the degree of diligence in its dealing with properties
proceeds of the mortgage loan shall be used for the offered as securities for the loan obligation:
development of the condominium or subdivision
project and effective measures have been provided to When the purchaser or the mortgagee is a bank, the
ensure such utilization. The loan value of each lot or rule on innocent purchasers or mortgagees for value
unit covered by the mortgage shall be determined and is applied more strictly. Being in the business of
the buyer thereof, if any, shall be notified before the extending loans secured by real estate mortgage,
release of the loan. The buyer may, at his option, pay banks are presumed to be familiar with the rules on
his installment for the lot or unit directly to the land registration. Since the banking business is
mortgagee who shall apply the payments to the impressed with public interest, they are expected to
corresponding mortgage indebtedness secured by the be more cautious, to exercise a higher degree of
particular lot or unit being paid for, with a view to diligence, care and prudence, than private individuals
enabling said buyer to obtain title over the lot or unit in their dealings, even those involving registered
promptly after full payment thereof. lands. Banks may not simply rely on the face of the
certificate of title. Hence, they cannot assume that, x
In Far East Bank & Trust Co. v. Marquez,[58] the Court x x the title offered as security is on its face free of
clarified the legal effect of a mortgage constituted in any encumbrances or lien, they are relieved of the
violation of the foregoing provision, thus: responsibility of taking further steps to verify the title
and inspect the properties to be mortgaged. As
The lot was mortgaged in violation of Section 18 of PD expected, the ascertainment of the status or condition
957. Respondent, who was the buyer of the property, of a property offered to it as security for a loan must
was not notified of the mortgage before the release of be a standard and indispensable part of the bank's
the loan proceeds by petitioner. Acts executed against operations. x x x (Citations omitted)
the provisions of mandatory or prohibitory laws shall
be void. Hence, the mortgage over the lot is null We never fail to stress the remarkable
and void insofar as private respondent is significance of a banking institution to
concerned.[59] (Emphasis supplied) commercial transactions, in particular, and to
the country's economy in general. The banking
The Court reiterated the foregoing pronouncement in system is an indispensable institution in the
the recent case of Philippine National Bank v. modern world and plays a vital role in the
Lim[60] and again in United Overseas Bank of the economic life of every civilized nation. Whether
as mere passive entities for the safekeeping and representation of the mortgagor that the latter
saving of money or as active instruments of had secured all requisite permits and licenses
business and commerce, banks have become an from the government agencies concerned. The
ubiquitous presence among the people, who former should have required the submission of
have come to regard them with respect and even certified true copies of those documents and
gratitude and, most of all, confidence. verified their authenticity through its own
Consequently, the highest degree of diligence is independent effort.
expected, and high standards of integrity and
performance are even required, of Having been negligent in finding out what
it.[64] (Emphasis and underscoring supplied) respondent's rights were over the lot, petitioner
must be deemed to possess constructive
In loan transactions, banks have the particular knowledge of those rights. (Emphasis supplied)
obligation of ensuring that clients comply with all the
documentary requirements pertaining to the approval The Court can surely take judicial notice of the fact
of their loan applications and the subsequent release that commercial banks extend credit accommodations
of their proceeds.[65] to real estate developers on a regular basis. In the
course of its everyday dealings, the Bank has surely
If only the Bank exercised the highest degree of been made aware of the approval and notice
diligence required by the nature of its business as a requirements under Section 18 of PD 957. At this
financial institution, it would have discovered that (i) juncture, this Court deems it necessary to stress that
Golden Dragon did not comply with the approval a person who deliberately ignores a significant fact
requirement imposed by Section 18 of PD 957, and (ii) that could create suspicion in an otherwise reasonable
that Rapanot already paid a reservation fee and had person cannot be deemed a mortgagee in good
made several installment payments in favor of Golden faith.[68] The nature of the Bank's business precludes
Dragon, with a view of acquiring Unit 2308-B2.[66] it from feigning ignorance of the need to confirm that
such requirements are complied with prior to the
The Bank's failure to exercise the diligence required of release of the loan in favor of Golden Dragon, in view
it constitutes negligence, and negates its assertion of the exacting standard of diligence it is required to
that it is a mortgagee in good faith. On this point, this exert in the conduct of its affairs.
Court's ruling in the case of Far East Bank & Trust Co.
v. Marquez[67] is instructive: Proceeding from the foregoing, we find that neither
mistake nor misapprehension of facts can be ascribed
Petitioner argues that it is an innocent mortgagee to the CA in rendering the questioned Decision. The
whose lien must be respected and protected, since the Court likewise finds that contrary to the Bank's claim,
title offered as security was clean of any encumbrance the CA did not overlook material facts, since the
or lien. We do not agree. questioned Decision proceeded from a thorough
deliberation of the facts established by the
"x x x As a general rule, where there is nothing on the submissions of the parties and the evidence on record.
certificate of title to indicate any cloud or vice in the
ownership of the property, or any encumbrance For these reasons, we resolve to deny the instant
thereon, the purchaser is not required to explore Petition for lack of merit.
further than what the Torrens Title upon its face
indicates in quest for any hidden defect or inchoate WHEREFORE, premises considered, the Petition for
right that may subsequently defeat his right thereto. Review on Certiorari is DENIED. The Decision dated
This rule, however, admits of an exception as where November 18, 2009 and Resolution dated March 17,
the purchaser or mortgagee has knowledge of a defect 2010 of the Court of Appeals in CA-G.R. SP No. 93862
or lack of title in the vendor, or that he was aware of are hereby AFFIRMED.
sufficient facts to induce a reasonably prudent man to
inquire into the status of the property in litigation." SO ORDERED.

Petitioner bank should have considered that it was


dealing with a town house project that was already in NOTE: THE NEXT 2 CASES, I DON’T KNOW WHICH
progress. A reasonable person should have been ONE BUT THE TITLE IS PAL VS CA AND BOTH
aware that, to finance the project, sources of funds CONTAIN FORTUITOUS EVENT SO PLEASE CLARIFY
could have been used other than the loan, which was THANKS!
intended to serve the purpose only partially. Hence,
there was need to verity whether any part of the
property was already the subject of any other contract
involving buyers or potential buyers. In granting the
G.R. No. L-82619 September 15, 1993
loan, petitioner bank should not have been
content merely with a clean title, considering
the presence of circumstances indicating the PHILIPPINE AIRLINES, INC., petitioner,
need for a thorough investigation of the vs.
existence of buyers like respondent.Having been COURT OF APPEALS and PEDRO
wanting in care and prudence, the latter cannot be ZAPATOS, respondents.
deemed to be an innocent mortgagee.
Leighton R. Liazon for petitioner.
Petitioner cannot claim to be a mortgagee in
good faith. Indeed it was negligent, as found by
the Office of the President and by the CA. Balmes L. Ocampo for private respondent.
Petitioner should not have relied only on the
filing a case against PAL.7 In Iligan City, private
respondent hired a car from the airport to
Kolambugan, Lanao del Norte, reaching Ozamiz City
BELLOSILLO, J.:
by crossing the bay in a launch.8 His personal effects
including the camera, which were valued at P2,000.00
This petition for review in certiorari seeks to annul and were no longer recovered.
set aside the decision of the then Intermediate
Appellant Court,1 now Court of Appeals, dated 28
On 13 January 1977, PAL filed its answer denying that
February 1985, in AC-G.R. CV No. 69327 ("Pedro
it unjustifiably refused to accommodate private
Zapatos v. Philippine Airlines, Inc.") affirming the
respondent.9It alleged that there was simply no more
decision of the then Court of first Instance, now
seat for private respondent on Flight 560 since there
Regional Trial Court, declaring Philippine Airlines, Inc.,
were only six (6) seats available and the priority of
liable in damages for breach of contract.
accommodation on Flight 560 was based on the
check-in sequence in Cebu; that the first six (6)
On 25 November 1976, private respondent filed a priority passengers on Flight 477 chose to take Flight
complaint for damages for breach of contract of 560; that its Station Agent explained in a courteous
carriage2 against Philippine Airlines, Inc. (PAL), before and polite manner to all passengers the reason for
the then Court of First Instance, now Regional Trial PAL's inability to transport all of them back to Cebu;
Court, of Misamis Occidental, at Ozamiz City. that the stranded passengers agreed to avail of the
According to him, on 2 August 1976, he was among options and had their respective tickets exchanged for
the twenty-one (21) passengers of PAL Flight 477 that their onward trips; that it was
took off from Cebu bound for Ozamiz City. The routing only the private respondent who insisted on being
of this flight was Cebu-Ozamiz-Cotabato. While on given priority in the accommodation; that pieces of
flight and just about fifteen (15) minutes before checked-in baggage and had carried items of the
landing at Ozamiz City, the pilot received a radio Ozamiz City passengers were removed from the
message that the airport was closed due to heavy aircraft; that the reason for their pilot's inability to
rains and inclement weather and that he should land at Ozamis City airport was because the runway
proceed to Cotabato City instead. was wet due to rains thus posing a threat to the safety
of both passengers and aircraft; and, that such reason
Upon arrival at Cotabato City, the PAL Station Agent of force majeure was a valid justification for the pilot
informed the passengers of their options to return to to bypass Ozamiz City and proceed directly to
Cebu on flight 560 of the same day and thence to Cotabato City.
Ozamiz City on 4 August 1975, or take the next flight
to Cebu the following day, or remain at Cotabato and On 4 June 1981, the trial court rendered its
take the next available flight to Ozamiz City on 5 decision 10 the dispositive portion of which states:
August 1975.3 The Station Agent likewise informed
them that Flight 560 bound for Manila would make a
WHEREFORE, judgment is hereby
stop-over at Cebu to bring some of the diverted
rendered in favor of the plaintiff and
passengers; that there were only six (6) seats
against the defendant Philippine
available as there were already confirmed passengers
AirLines, Inc. ordering the latter to
for Manila; and, that the basis for priority would be
pay:
the check-in sequence at Cebu.

(1) As actual damages, the sum of


Private respondent chose to return to Cebu but was
Two Hundred Pesos (P200.00)
not accommodated because he checked-in as
representing plaintiff's expenses for
passenger No. 9 on Flight 477. He insisted on being
transportation, food and
given priority over the confirmed passengers in the
accommodation during his stranded
accommodation, but the Station Agent refused private
stay at Cotabato City; the sum of
respondent's demand explaining that the latter's
Forty-Eight Pesos (P48.00)
predicament was not due to PAL's own doing but to be
representing his flight fare from
a force majeure.4
Cotabato City to Iligan city; the sum
of Five Hundred Pesos (P500.00)
Private respondent tried to stop the departure of Flight representing plaintiff's
560 as his personal belongings, including a package transportation expenses from Iligan
containing a camera which a certain Miwa from Japan City to Ozamiz City; and the sum of
asked him to deliver to Mrs. Fe Obid of Gingoog City, Five Thousand Pesos (P5,000.00) as
were still on board. His plea fell on deaf ears. PAL then loss of business opportunities
issued to private respondent a free ticket to Iligan city, during his stranded stay in Cotabato
which the latter received under protest.5 Private City;
respondent was left at the airport and could not even
hitch a ride in the Ford Fiera loaded with PAL
(2) As moral damages, the sum of
personnel.6 PAL neither provided private respondent
Fifty Thousand Pesos (P50,000.00)
with transportation from the airport to the city proper
for plaintiff's hurt feelings, serious
nor food and accommodation for his stay in Cotabato
anxiety, mental anguish and unkind
City.
and discourteous treatment
perpetrated by defendant's
The following day, private respondent purchased a employees during his stay as
PAL ticket to Iligan City. He informed PAL personnel stranded passenger in Cotabato
that he would not use the free ticket because he was City;
(3) As exemplary damages, the sum amount of thirty thousand
of Ten Thousand Pesos (P30,000.00) Pesos.
(P10,000.00) to set a precedent to
the defendant airline that it shall
To substantiate this aspect of apathy, private
provide means to give comfort and
respondent testified 15
convenience to stranded
passengers;
A I did not even
notice that I was I
(4) The sum of Three Thousand
think the last
Pesos (P3,000.00) as attorney's
passenger or the
fees;
last person out of
the PAL
(5) To pay the costs of this suit. employees and
army personnel
that were left
PAL appealed to the Court of Appeals which on 28
there. I did not
February 1985, finding no reversible error, affirmed
notice that when I
the judgment of the court a quo. 11
was already
outside of the
PAL then sought recourse to this Court by way of a building after our
petition for review on certiorari 12 upon the following conversation.
issues: (1) Can the Court of Appeals render a decision
finding petitioner (then defendant-appellant in the
Q What did you do
court below) negligent and, consequently, liable for
next?
damages on a question of substance which was
neither raised on a question nor proved at the trial?
(2) Can the Court of Appeals award actual and moral A I banished (sic)
damages contrary to the evidence and established because it seems
jurisprudence? 13 that there was a
war not far from
the airport. The
An assiduous examination of the records yields no
sound of guns and
valid reason for reversal of the judgment on appeal;
the soldiers were
only a modification of its disposition.
plenty.

In its petition, PAL vigorously maintains that private


Q After that what
respondent's principal cause of action was its alleged
did you do?
denial of private respondent's demand for priority over
the confirmed passengers on Flight 560. Likewise, PAL
points out that the complaint did not impute to PAL A I tried to look
neglect in failing to attend to the needs of the diverted for a
passengers; and, that the question of negligence was transportation
not and never put in issue by the pleadings or proved that could bring
at the trial. me down to the
City of Cotabato.
Contrary to the above arguments, private
respondent's amended complaint touched on PAL's Q Were you able
indifference and inattention to his predicament. The to go there?
pertinent portion of the amended complaint 14 reads:
A I was at about
10. That by virtue of the refusal of 7:00 o'clock in
the defendant through its agent in the evening more
Cotabato to accommodate (sic) and or less and it was
allow the plaintiff to take and board a private jeep
the plane back to Cebu, and by that I boarded. I
accomodating (sic) and allowing was even
passengers from Cotabato for Cebu questioned why I
in his stead and place, thus forcing and who am (sic)
the plaintiff against his will, to be I then. Then I
left and stranded in Cotabato, explained my side
exposed to the peril and danger of that I am (sic)
muslim rebels plundering at the stranded
time, the plaintiff, as a passenger. Then
consequence, (have) suffered they brought me
mental anguish, mental torture, downtown at
social humiliation, bismirched Cotabato.
reputation and wounded feeling, all
amounting to a conservative
Q During your
conversation with
the Manager were were in Cotabato,
you not offered is that right?
any vehicle or
transportation to
Private
Cotabato airport
respondent:
downtown?

A Yes.
A In fact I told
him (Manager)
now I am by- Q Did you ask
passed passenger them to help you
here which is not regarding any
my destination offer of
what can you transportation or
offer me. Then of any other
they answered, matter asked of
"it is not my fault. them?
Let us forget
that." A Yes, he (PAL
PERSONNEL) said
Q In other words what is? It is not
when the our fault.
Manager told you
that offer was Q Are you not
there a vehicle aware that one
ready? fellow passenger
even claimed that
A Not yet. Not he was given
long after that the Hotel
Ford Fiera loaded accommodation
with PAL because they
personnel was have no money?
passing by going
to the City of xxx xxx xxx
Cotabato and I
stopped it to take
me a ride because A No, sir, that was
there was no never offered to
more available me. I said, I tried
transportation to stop them but
but I was not they were already
accommodated. riding that PAL
pick-up jeep, and
I was not
Significantly, PAL did not seem to mind the accommodated.
introduction of evidence which focused on its alleged
negligence in caring for its stranded passengers. Well-
settled is the rule in evidence that the protest or Having joined in the issue over the alleged lack of care
objection against the admission of evidence should be it exhibited towards its passengers, PAL cannot now
presented at the time the evidence is offered, and that turn around and feign surprise at the outcome of the
the proper time to make protest or objection to the case. When issues not raised by the pleadings are
admissibility of evidence is when the question is tried by express or implied consent of the parties, they
presented to the witness or at the time the answer shall be treated in all respects as if they had been
thereto is given. 16 There being no objection, such raised in the pleadings. 19
evidence becomes property of the case and all the
parties are amenable to any favorable or unfavorable With regard to the award of damages affirmed by the
effects resulting from the evidence. 17 appellate court, PAL argues that the same is
unfounded. It asserts that it should not be charged
PAL instead attempted to rebut the aforequoted with the task of looking after the passengers' comfort
testimony. In the process, it failed to substantiate its and convenience because the diversion of the flight
counter allegation for want of concrete proof 18 — was due to a fortuitous event, and that if made liable,
an added burden is given to PAL which is over and
beyond its duties under the contract of carriage. It
Atty. Rubin O. submits that granting arguendo that negligence
Rivera — PAL's exists, PAL cannot be liable in damages in the absence
counsel: of fraud or bad faith; that private respondent failed to
apprise PAL of the nature of his trip and possible
Q You said PAL business losses; and, that private respondent himself
refused to help is to be blamed for unreasonably refusing to use the
you when you free ticket which PAL issued.
The contract of air carriage is a peculiar one. Being accommodated. It appears that
imbued with public interest, the law requires common plaintiff had to leave on the next
carriers to carry the passengers safely as far as flight 2 days later. If the cause of
human care and foresight can provide, using the non-fulfillment of the contract is due
utmost diligence of very cautious persons, with due to a fortuitous event, it has to be the
regard for all the circumstances. 20 In Air France sole and only cause (Art. 1755 CC.,
v. Carrascoso, 21 we held that — Art. 1733 C.C.) Since part of the
failure to comply with the obligation
of common carrier to deliver its
A contract to transport passengers
passengers safely to their
is quite different in kind and degree
destination lay in the defendant's
from any other contractual relation.
failure to provide comfort and
And this, because of the relation
convenience to its stranded
which an air carrier sustains with
passengers using extra-ordinary
the public. Its business is mainly
diligence, the cause of non-
with the travelling public. It invites
fulfillment is not solely and
people to avail of the comforts and
exclusively due to fortuitous event,
advantages it offers. The contract of
but due to something which
air carriage, therefore, generates a
defendant airline could have
relation attended with a public duty
prevented, defendant becomes
. . . . ( emphasis supplied).
liable to plaintiff. 23

The position taken by PAL in this case clearly


While we find PAL remiss in its duty of extending
illustrates its failure to grasp the exacting standard
utmost care to private respondent while being
required by law. Undisputably, PAL's diversion of its
stranded in Cotabato City, there is no sufficient basis
flight due to inclement weather was a fortuitous event.
to conclude that PAL failed to inform him about his
Nonetheless, such occurrence did not terminate PAL's
non-accommodation on Flight 560, or that it was
contract with its passengers. Being in the business of
inattentive to his queries relative thereto.
air carriage and the sole one to operate in the country,
PAL is deemed equipped to deal with situations as in
the case at bar. What we said in one case once again On 3 August 1975, the Station Agent reported to his
must be stressed, i.e., the relation of carrier and Branch Manager in Cotabato City that —
passenger continues until the latter has been landed
at the port of destination and has left the carrier's
3. Of the fifteen stranded
premises. 22 Hence, PAL necessarily would still have to
passengers two pax elected to take
exercise extraordinary diligence in safeguarding the
F478 on August 05, three pax opted
comfort, convenience and safety of its stranded
to take F442 August 03. The
passengers until they have reached their final
remaining ten (10) including subject
destination. On this score, PAL grossly failed
requested that they be instead
considering the then ongoing battle between
accommodated (sic) on F446 CBO-
government forces and Muslim rebels in Cotabato City
IGN the following day where they
and the fact that the private respondent was a
intended to take the surface
stranger to the place. As the appellate court correctly
transportation to OZC. Mr. Pedro
ruled —
Zapatos had by then been very
vocal and boiceterous (sic) at the
While the failure of plaintiff in the counter and we tactfully managed
first instance to reach his to steer him inside the Station
destination at Ozamis City in Agent's office. Mr. Pedro Zapatos
accordance with the contract of then adamantly insisted that all the
carriage was due to the closure of diverted passengers should have
the airport on account of rain and been given priority over the
inclement weather which was originating passengers of F560
radioed to defendant 15 minutes whether confirmed or otherwise. We
before landing, it has not been explained our policies and after
disputed by defendant airline that awhile he seemed pacified and
Ozamis City has no all-weather thereafter took his ticket (in-lieued
airport and has to cancel its flight to (sic) to CBO-IGN, COCON basis), at
Ozamis City or by-pass it in the the counter in the presence of five
event of inclement weather. other passengers who were waiting
Knowing this fact, it becomes the for their tickets too. The rest of the
duty of defendant to provide all diverted pax had left earlier after
means of comfort and convenience being assured their tickets will be
to its passengers when they would ready the following day. 24
have to be left in a strange place in
case of such by-passing. The steps
Aforesaid Report being an entry in the course of
taken by defendant airline company
business is prima facie evidence of the facts therein
towards this end has not been put
stated. Private respondent, apart from his testimony,
in evidence, especially for those 7
did not offer any controverting evidence. If indeed PAL
others who were not accommodated
omitted to give information about the options
in the return trip to Cebu, only 6 of
available to its diverted passengers, it would have
the 21 having been so
been deluged with complaints. But, only private xxx xxx xxx
respondent complained —
A There were
Atty. Rivera (for plenty of
PAL) argument and I
was one of those
talking about my
Q I understand
case.
from you Mr.
Zapatos that at
the time you were Q Did you hear
waiting at anybody
Cotabato Airport complained (sic)
for the decision of that he has not
PAL, you were not been informed of
informed of the the decision
decision until before the plane
after the airplane left for Cebu?
left is that
correct?
A No. 25

A Yes.
Admittedly, private respondent's insistence on being
given priority in accommodation was unreasonable
COURT: considering the fortuitous event and that there was a
sequence to be observed in the booking, i.e., in the
order the passengers checked-in at their port of
Q What do you
origin. His intransigence in fact was the main cause
mean by "yes"?
for his having to stay at the airport longer than was
You meant you
necessary.
were not
informed?
Atty. Rivera:
A Yes, I was not
informed of their Q And, you were
decision, that saying that
they will only despite the fact
accommodate that according to
few passengers. your testimony
there were at
least 16
Q Aside from you
passengers who
there were many
were stranded
other stranded
there in Cotabato
passengers?
airport according
to your
A I believed, yes. testimony, and
later you said that
Q And you want there were no
us to believe that other people left
PAL did not there at that
explain (to) any time, is that
of these correct?
passengers about
the decision A Yes, I did not
regarding those see anyone there
who will board the around. I think I
aircraft back to was the only
Cebu? civilian who was
left there.
A No, Sir.
Q Why is it that it
Q Despite these took you long
facts Mr. Zapatos time to leave that
did any of the place?
other passengers
complained (sic) A Because I was
regarding that arguing with the
incident? PAL personnel. 26
Anent the plaint that PAL employees were Antonio N. Gerona for private respondents.
disrespectful and inattentive toward private
respondent, the records are bereft of evidence to
Romeo N. Gumba for Sto. Tomas.
support the same. Thus, the ruling of respondent
Court of Appeals in this regard is without basis. 27 On
the contrary, private respondent was attended to not
only by the personnel of PAL but also by its
Manager." 28 REGALADO, JR.:

In the light of these findings, we find the award of Petitioner seeks the review of the decision of the Court
moral damages of Fifty Thousand Pesos (P50,000.00) of Appeals, 1 promulgated on April 25, 1979 in CA-
unreasonably excessive; hence, we reduce the same G.R. Nos. 58345-46-R, affirming with modifications
to Ten Thousand Pesos (P10,000.00). Conformably the decision of the Court of First Instance of
herewith, the award of exemplary damages is also Camarines Sur, Branch 1, under the following decretal
reduced to five Thousand Pesos (5,000.00). Moral portion:
damages are not intended to enrich the private
respondent. They are awarded only to enable the
injured party to obtain means, diversion or WHEREFORE, the dispositive part of
amusements that will serve to alleviate the moral the decision appealed from is
suffering he has undergone by reason of the modified as follows:
defendant's culpable action. 29
WHEREFORE, judgment is hereby
With regard to the award of actual damages in the rendered:
amount of P5,000.00 representing private
respondent's alleged business losses occasioned by (A) Defendant Philippine Airlines,
his stay at Cotabato City, we find the same Inc. in Civil Case No. 7047, is
unwarranted. Private respondent's testimony that he ordered to pay the plaintiffs, Adelina
had a scheduled business "transaction of shark liver Bagadiong and Rosario Sto. Tomas,
oil supposedly to have been consummated on August the sum of P30,000.00, Philippine
3, 1975 in the morning" and that "since (private Currency, each, as moral damages
respondent) was out for nearly two weeks I missed to and exemplary damages; and the
buy about 10 barrels of shark liver oil,"30 are purely sum of P6,000.00, Philippine
speculative. Actual or compensatory damages cannot Currency, as attorney's fees;
be presumed but must be duly proved with reasonable
degree of certainty. A court cannot rely on
speculation, conjecture or guesswork as to the fact (B) Defendant Philippine Airlines,
and amount of damages, but must depend upon Inc. in Civil Case No. 7307 is
competent proof that they have suffered and on ordered to pay the plaintiff Ladislao
evidence of the actual amount thereof. 31 Santos the sum of P30,000.00,
Philippine Currency, as moral
damages and exemplary damages;
WHEREFORE the decision appealed from is AFFIRMED and the sum of P6,000.00,
with modification however that the award of moral Philippine Currency, as attorney's
damages of Fifty Thousand Pesos (P50,000.00) is fees;
reduced to Ten Thousand Pesos (P10,000.00) while
the exemplary damages of Ten Thousand Pesos
(P10,000.00) is also reduced to Five Thousand Pesos (C) To pay the plaintiffs the interest
(P5,000.00). The award of actual damages in the at the legal rate of 6% per annum
amount Five Thousand Pesos (P5,000.00) on moral and exemplary damages
representing business losses occasioned by private aforestated, from the date of this
respondent's being stranded in Cotabato City is amended decision until said
deleted. damages are fully paid;

SO ORDERED. (D) Defendants are further ordered


to pay the costs of these suits. The
counter-claim(s) of defendant in
both cases are dismissed.

G.R. No. 50504-05 August 13, 1990 SO ORDERED 2

PHILIPPINE AIRLINES, INC., petitioner, On December 11, 1970, private respondents Adelina
Bagadiong and Rosario Sto. Tomas, filed an action for
vs. damages against petitioner in the Court of First
Instance of Camarines Sur, docketed therein as Civil
Case No. 7047. On May 18, 1972, a similar action,
COURT OF APPEALS, ADELINA BAGADIONG and Civil Case No. 7307, was filed in the same court by the
ROSARIO STO. TOMAS, respondents. other private respondent, Ladislao Santos. On
February 9, 1973, considering that these two cases
Ricardo V. Puno, Jr., Wilfredo M. Chato & Marceliano arose from the same incident and involved the same
C. Calica for petitioner. defendant and counsel for plaintiffs in both cases, a
joint hearing of these cases was ordered and expenses of litigation including
conducted by the lower court upon motion of both attorney's fees.
parties. 3
In Civil Case No. 7307, the
Considering the significant role of evidentially- complaint alleges, among others,
supported factual findings of the lower courts in the that on November 24, 1970, when
decisional processes of appellate courts, we find it plaintiff Ladislao Santos, now
necessary to reproduce the same, as reported in these appellee, bought a plane ticket at
cases by respondent court, together with the the branch station of defendant in
proceedings in the court a quo: Naga City for Flight 296 from Naga
to Manila scheduled on the
afternoon of November 26, 1970,
The amended complaint in Civil
he was assured by the employees of
Case No. 7047 alleges, inter alia,
defendant that his reservation for
that on November 16, 1970,
the flight was confirmed; that at two
plaintiffs Adelina Bagadiong and
o'clock in the afternoon of
Rosario Sto. Tomas, now appellees,
November 29, 1970, one hour and
made reservations with, and bought
forty minutes before the scheduled
two plane tickets from, defendant
departure time of Fligth 296,
(Naga City branch station), now
plaintiff checked in at the Pili airport
appellant, a common carrier
counter and then and there the
engaged in the business of
employees of defendant asked for
transporting passengers by air for
his ticket, allegedly for the purpose
compensation, for Naga-Manila
of issuing to him a boarding pass;
flight on November 26, 1970; that
that about three minutes before
on November 24, 1970, plaintiffs
departure of Flight 296, the ticket
went back to defendant Naga City
was returned to plaintiff by
branch station and paid the fare for
defendants employee, informing
two round trip tickets; that plaintiffs
him that there was no more seat
were not only issued their round
available and he could not ride on
trips tickets, but also their
that flight to Manila; that the
reservation in defendant's 3:40
employees of the defendant acted
o'clock afternoon Naga-Manila flight
rudely and discourteously to his
on November 26, 1970 were
embarrassment in the presence of
expressly confirmed by the Naga
so many people who were at the
City branch station; that at three
airport at that time; that it was very
o'clock in the afternoon of
important and urgent for plaintiff to
November 26, 1970, or forty-five
be in Manila on the afternoon of
minutes before the scheduled
November 26, 1970, because he
departure time of the Naga-Manila
had an appointment with an eye
flight, plaintiffs checked in at the Pili
specialist for medical treatment of
airport counter of defendant and
his eye and he and his brother were
there the latter's agent or
"to close a contract they entered
employees got the tickets of the
into to supply shrimps to some
plaintiffs allegedly for the purpose
restaurants and market vendors in
of issuing to them a boarding pass;
Manila; and that he and his brother
that few minutes before departure
failed to close the contract to supply
time, plaintiffs' luggage was loaded
shrimps, as it was on December 1,
to (sic) the plane, but plaintiffs were
1970, that he was finally able to
not given back their tickets and
reach Manila by train.
were not allowed by defendant's
agent or employees to board the
plane; and that after the plane had Likewise, claiming that defendant
taken off from the Pili airport with acted in bad faith in the breach of
the luggage of plaintiffs, in spite of its contract with him, plaintiff
their complaint, all that defendant's Ladislao Santos has claimed for
agent or employees did at the Naga moral damages "in the amount of no
City branch station was to refined less than P70,000.00," exemplary
plaintiffs' fares. damages and actual damages in
"the sum of P20,000.00 . . . which
include(s) attorney's fees and
Contending that defendant common
expenses of litigation."
carrier acted in bad faith in the
breach of its contract with them,
plaintiffs claimed for moral damages In its answer to the amended
"in the amount of no less than complaint, as well as to the
P10,000.00 each," exemplary complaint of other plaintiff-
damages and actual damages. It is appellee, defendant-appellant
prayed that defendant be ordered to common carrier interposed, among
pay plaintiffs, among others, "the others, the following common
sum of P20,000.00 for moral special and affirmative defenses:
damages" and P6,000.00 by way of that the aircraft used for Flight
296R/26 November 1970 (Virac- the defendant the same would still
Naga-Manila) is a 44-seater; that amount to negligence so gross and
due to the cancellation of its reckless as to amount to malice
morning flight from Virac, some of and/or bad faith.
its passengers for said flight took
Flight 296R; that on the
(d) Due to the acts of the employees
representations of Governor Alberto
of the defendant in "bumping off the
of Catanduanes, one of those
plaintiffs, the latter suffered
manifested in the cancelled morning
embarrassment and humiliations,
flight, its (defendant's) employees
thereby causing them mental
at its Virac station were constrained
anguish, serious anxiety, wounded
"to allow the Governor to take Flight
feeling and social humiliation,
296R together with several
resulting in moral damages.
companions" with the assurance of
the Governor that two (2) of his
companions would deplane in Naga; WHEREFORE, judgment is hereby
that on arrival in Naga, the two entered:
companions of the Governor refused
to deplane despite repeated pleas (a) Ordering the defendant in Civil
and entreaties of its employees; Case No. 7047 to pay plaintiff
that unable to persuade the two Adelina Bagadiong the sum of
Virac passengers to deplane in Naga P10,000.00, as moral damages; to
and "compelled by a reasonable and pay plaintiff Rosario Sto. Tomas the
well-grounded fear that an sum of P10,000.00 as moral
untoward incident may ensue damages; to pay each plaintiff the
should the two (2) be forced to sum of P10,000.00 by way of
leave the aircraft," its employee exemplary damages, and the sum
"had to act in a manner dictated by of P6,000.00 as attorney's fees;
the circumstances and by reasons of
safety both of the passenger and
the aircraft and crew;" that its (b) Ordering the defendant in Civil
failure to carry plaintiffs on board Case No. 7307 to pay plaintiff
the plane "was necessitated by Ladislao Santos the sum of
reason of safety and/or compliance P60,000.00 for moral damages;
with applicable lawsregulations, or P20,000.00 by way of actual
orders, and the same are valid damages; the sum of P10,000.00 as
grounds for refusal to carry plaintiffs exemplary damages and P6,000.00
in accordance with its Domestic for attorney's fees;
Passenger Tariff No. 2 (Section A,
Rule 8[a]) which is incorporated by (c) Interest at the legal rate of 6%
reference into the conditions of per annum on the moral and
carriage as expressly provided for in exemplary damages aforestated,
plaintiffs" plane tickets; and that from the date of this decision until
the error of its employees was an said damages are fully paid;
honest mistake or constitutes
excusable negligence.
(d) Ordering the defendant to pay
the costs of these suits.
After trial on the merits, specifically Counterclaim of the defendant in
on June 25, 1975, the lower court both cases are hereby dismissed.
rendered a decision which, in part,
is herein reproduced as follows:
SO ORDERED.

From the foregoing, the Court is of


the opinion that: Under date of July 19, 1975,
plaintiffs in Civil Case No. 7047 filed
a Motion for Reconsideration of the
(a) There was a contract of carriage decision, . . .
to furnish plaintiffs passage from
Naga (Pili airport) to Manila on
Flight 296R on the afternoon of xxx xxx xxx
November 26, 1970.
On July 30, 1975, the lower court
(b) The said contract was breached granted the motion for
when defendant failed to reconsideration in its order which, in
accommodate plaintiffs in Flight part states:
296R.
In the case of Ortigas vs. Lufthansa
(c) The breach of contract of (Case Digest of the Bulletin issue of
carriage was in bad faith even July 19, 1975), the Supreme Court,
granting the mistakes advanced by speaking thru Mr. Justice Antonio P.
Barredo, increased the moral on moral and exemplary damages
damages awarded to Ortigas by the aforestated, from the date of this
CFI of Manila from P100,000.00 to amended decision until said
P150,000.00 and the exemplary damages are fully paid.
damages from P30,000.00 to
P100,000.00. The ground of the
(D) Defendants are further ordered
Supreme Court in ordering the
to pay the coasts of these suits. The
increase of the exemplary damages
counter-claims of defendant in both
from P30,000.00 to P100,000.00,
cases are dismissed.
was that, "the airline should be
made to pay an amount that can
really serve as a deterrent against a SO ORDERED 4

seeming pattern of indifference and


unconcern, and what is worse, of As earlier stated, on appeal respondent court affirmed
discrimination for racial reasons, with modifications said decision of the lower court.
discernible in the treatment of air Hence, this petition raising the following questions:
passengers."

1. Is a passenger in a contract of air transportation


In the present case, this Court entitled to moral damages when the failure of the
found clear evidence of carrier to accommodate the passenger resulted from
discrimination by employees of the unlawful acts of third parties against the carrie's
Philippine Airlines (PAL) when for personnel?
unexplained and unwarranted
reasons — evidently the desire to
cater to the good graces of a 2. Are respondents entitled to exemplary damages
"politico" — they unceremoniously when there is no sufficient evidence to show, and
"bumped off herein plaintiffs from neither the appellate court nor the trial court found
the flight. facts showing reckless, oppressive or malevolent
conduct by the carrier?

xxx xxx xxx


3. Can a passenger in a contract of air transportation
validly claim damages when she could have taken the
The dispositive part of the decision flight had she not instead opted, of her own volition,
of this Court on these Civil Cases to give her confirmed seat to another passenger who
Nos. 7047 and 7304 dated July 1, was accommodated by the carrier in her place?
1975 is hereby amended and to
read as follows, to wit:
4. May a trial court, in a motion for reconsideration,
increase the damages it awarded in the original
Wherefore, decision to an amount drastically over that it initially
judgment is found to be warranted and significantly more than
hereby rendered: claimed by plaintiffs themselves? 5

(A) Defendant Philippine Airlines, We have constantly ruled in a number of cases that
Inc., in Civil Case No. 7047, is moral damages are recoverable in a breach of contract
ordered to pay the plaintiffs, Adelina of carriage where the air carrier through its agents
Bagadiong and Rosario Sto. Tomas, acted fraudulently or in bad faith. 6 In the case at bar,
the sum of P60,000.00, Philippine the trial court and the Court of Appeals are in
Currency, each as moral damages; agreement that petitioner through its agents acted in
the sum of P60,000.00, Philippine bad faith in "bumping off" private respondents. As
Currency, each, by way of aptly found by the Court of Appeals, the failure of
exemplary damages, and the sum petitioner to accommodate private respondents was
of P10,000.00, Philippine Currency, not the result of an honest mistake, because its
as attorney's fees; employees knew and were aware that what they were
doing was wrong. Hence, respondent court held that
(B) Defendant Philippine Airlines, there was a "dishonest purpose" and "conscious doing
Inc., in Civil Case No. 7307 is of wrong" on the part of petitioner's employees in
ordered to pay the plaintiff Ladislao "bumping off" private respondents from the flight; and
Santos the sum of P60,000.00, that the lower court did not err in holding that the
Philippine Currency, as moral failure of petitioner to accommodate private
damages; the sum of P20,000.00, respondents on Flight 296R was attended by bad
Philippine Currency, by way of faith. 7
actual damages; the sum of
P60,000.00, Philippine Currency, as The said pronouncement was based on the following
exemplary damages, and the sum findings in the decision of the trial court, which we are
of P10,000.00, Philippine Currency, not inclined to disturb, the same having evidentiary
as attorney's fees; foundation:

(C) To pay the plaintiffs the interest The employees of the defendant
at the legal rate of 6% per annum knew that there was a heavy
booking of passengers on November defendant had with the plaintiffs.
26, 1970 because of the coming of Even granting all the mistakes
the Pope. Why did the Virac station advanced by the defendant, still
overbooked (sic) two passengers, there would at least be negligence
Gov. Alberto and Mayor Antonio, on so gross and reckless that it
Flight 296R, knowing all the time amounts to malice or bad faith in its
that these two passengers could not breach of contract with the plaintiffs
possibly obtain confirmed (Lopez, et al. versus Pan American
reservations in Naga? Knowing World Airways, No. L-22415, March
further the political stature of Gov. 30, 1966, citing Fores vs. Miranda
Alberto, Mr. Borjal, the branch L-12163, March 4, 1959; Necesito
supervisor of Virac, should had (sic) vs. Paras, L-10605, June 30, 1958
foreseen that should Gov. Alberto 16 SCRA 431).
and Mayor Antonio refuse to
deplane in Naga, should they failed
The argument that the Sorsogon
to obtain confirmed reservations he,
passengers arrived first and
(Borjal) would create a situation
checked in earlier than the plaintiffs
wherein the defendant would be
at the airport ticket counter of the
placed in a position to violate its
defendant is not a valid reason to
contract of carriage with passengers
give them preference over the
with confirmed reservations who
plaintiffs considering that the latter
would not be accommodated
had confirmed reservations and
because of Gov. Alberto and Mayor
they arrived on time at the airport
Antonio. This whole incident could
and checked in at the defendant's
have been avoided had Borjal not
ticket counter. If issuance of tickets
recklessly took (sic) a chance on the
duly paid for and with confirmed
two overbooked passengers in
reservations is no guarantee that
getting confirmed reservation in
the passengers to whom it is (sic)
Naga.
issued would be accommodated,
then air passengers would be placed
The situation was, however, in the hollow of the hands of the
aggravated by the employees of the airlines and its employees. What
defendant at Pili airport, particularly security then can a passenger have?
Mr. Azuela who seemed to be the . . .8
one who was making decisions at
the airport. Knowing already that
In the case of Korean Airlines, Co., Ltd. vs. Hon. Court
Flight 296R was overbooked by two
of Appeals, et al., 9 with a similar factual setting, we
passengers and the allocations in
held:
Legaspi and Naga were also fully
booked of passengers with
confirmed reservations and We are satisfied from the findings of
plaintiffs were begging and pleading the respondent court (and of the
to be allowed to take Flight 296R as trial court) that the private
they had confirmed reservations respondent was, in the language of
and the luggage of Mrs. Bagadiong the airline industry, "bumped off".
and Miss Sto. Tomas were already She had a confirmed ticket. She
loaded in the plane, Mr. Azuela and arrived at the airport on time.
his co- employees still allowed and However, she was not allowed to
gave preference to the two board because her seat had already
passengers (Fr. Laban and Miss been given to another passenger.
Franca) to board and take Flight As a result, she suffered damages
296R notwithstanding the fact that for which the petitioner should be
Mr. Azuela and his co-employees at held liable.
the airport knew and was (sic)
aware at that time that the A contract to transport passengers is quite different in
Sorsogon branch had no allocation kind and degree from any other contractual relation.
in Flight 296R and that the flight of And this, because of the relation which an air-carrier
the Sorsogon passengers was with the public. Its business is mainly with the
already cancelled earlier. The travelling public. It invites people to avail of the
employees of the defendant comforts and advantages it offers. The contract of air
knowingly and deliberately carriage, therefore, generates a relation attended with
disregarded the rights of the a public duty. Neglect or malfeasance of the carrier's
plaintiffs to board the plane and employees naturally could give ground for an action
took (sic) Flight 296R by virtue of for damages. 10
their being holders of tickets duly
issued and paid for with confirmed
reservations on Flight 296R. The The operation of a common carrier is a business
employees of the defendant knew affected with public interest and must be directed to
that by not allowing the plaintiffs to serve the comfort and convenience of the passengers.
take Flight 296R they were violating In case of breach in bad faith of a contract of carriage,
the contract of carriage the award of damages is in order. We have ruled that bad
faith which would justify an award of moral and violence they employed is sufficient
exemplary damages for breach of contract of carriage to produce in the mind of their
means a breach of a known duty through some motive victims real, imminent or
of interest or illwill. 11 That pronouncement is reasonable fear. As correctly
applicable to these cases. observed by the lower court from
the evidence of record, defendant-
appellant's employees "bumped off
The contention of petitioner that its failure to
plaintiffs from the flight in their
accommodate private respondents was due to the
desire" "to cater to the good graces
unlawful acts of third persons and, constitutes caso
of a politico" (Governor Alberto). 14
fortuito, is untenable. To constitute a caso
fortuito that would exempt a person from
responsibility, it is essential that (a) the event must Petitioner's agents, by giving permission to board
be independent of the will of the obligor; (b) it must Flight 296R to persons who were not among those
be either unforseeable or inevitable; (c) its occurrence with valid confirmations and who consequently had no
renders it impossible for the obligor to fulfill his right to be given preference in taking said flight,
obligation in a normal manner; and (d) the obligor deliberately created a situation that would place, as it
must be free from any participation in the aggravation did place, petitioner in arrant violation of its contract
of the injury resulting to the obligee or creditor. 12 with private respondents who were "bumped off" by
reason thereof. Petitioner, having unlawfully deprived
private respondents of their seats, without any regard
One essential characteristic of a fortuitous event is
at all to their feelings and convenience just so it could
that it was independent of the will of the obligor or of
accommodate other persons who had no better right
his employees, which fact is lacking in this case. The
thereto, cannot now relieve itself from liability by
alleged fortuitous event, supposedly consisting of the
invoking a fortuitous event, a defense as erroneous as
unlawful acts of Governor Alberto and Mayor Antonio,
it is contrived.
is not independent of the will of herein petitioner as
the obligor but was caused by the very act of its
agents in allowing the governor and the mayor to As we stressed in Ortigas, Jr. vs. Lufthansa German
board Flight 296R in excess of the number of Airlines.15
passengers allotted to them and with full knowledge
that the said flight for Manila was fully booked. The
. . . Nobody, much less a common
impossibility of their being accommodated was
carrier who is under constant
necessarily forseeable. The claim of petitioner that
special obligation to give utmost
there was a prior arrangement between its agent in
consideration to the convenience of
Virac and the governor and the mayor that the latter
its customers, may be permitted to
would be accommodated only up to Naga is belied by
relieve itself from any difficult
the passengers' manifest wherein it is stated that the
situation created by its own lack of
place of destination of both the governor and the
diligence in the conduct of its affairs
mayor was Manila . 13
in a manner prejudicial to such
customers. It is Our considered view
Again, we quote respondent Court of Appeals: that when it comes to contracts of
common carriage, inattention and
lack of care on the part of the carrier
The fear spoken of by witness
resulting in the failure of the
Azuela is speculative, fanciful and
passengers to be accommodated in
remote. The statement attributed to
the class contracted for amounts to
Governor Alberto and/or the
bad faith or fraud which entitles the
mayors, that "if we cannot board
passengers to the award of moral
the plane there will be something
damages in accordance with Article
that will happen," is vague. The
2220 of the Civil Code. . . .
threat, if ever it was, was not of
such a serious character and
imminence as to create in the mind We, therefore, find no error on the part of respondent
of defendant-appellant's employees Court of Appeals in awarding moral and exemplary
fear of greater injury if they would damages as well as attorney's fees. The findings that
not allow Governor Alberto and the petitioner had breached its contract of carriage in bad
mayors to remain in the plane which faith and in wanton disregard of private respondents'
was then scheduled to fly to Manila. rights as passengers lay the basis and justification for
It is difficult to believe that such awards. The imposition of exemplary damages is
Governor Alberto and the mayors necessary to deter petitioner or other airlines from
would make any threat or committing similar breaches of contract in the future,
intimidation to keep their seats in although there are still reported instances thereof.
the plane. They were provincial and
municipal executives with a
With respect to the third issue, we also find the same
common duty to maintain peace
to be without merit for being based on specious and
and order and to prevent the
strained reasoning. The fact that respondent
commission of crimes. The cited
Bagadiong relinquished her seat in favor of her son is
cases involving Hukbalahaps and
of no moment, considering that her son was also a
robbers are misplaced, because
confirmed passenger who had a right to demand
they are known to be ruthless
accommodation from petitioner. As noted by
killers, whose intimidation or the
respondent court, the act of respondent Bagadiong
was motivated solely by her concern for her son who [G.R. No. 126389. July 10, 1998]
also risked being denied accommodation but who was
then returning to school in Manila. Such sacrifice was
not voluntary on her part, and her inability to take the
fligth was the consequence of the wrongful act of
petitioner's employees for which it has to answer. 16 SOUTHEASTERN COLLEGE, INC., petitioner,
vs. COURT OF APPEALS, JUANITA DE
JESUS VDA. DE DIMAANO, EMERITA
On the last issue regarding the propriety of the lower DIMAANO, REMEDIOS DIMAANO,
court's increasing the award of damages it awarded in CONSOLACION DIMAANO and
the original decision, petitioner's allegation that MILAGROS DIMAANO, respondents.
respondent court passed upon the matter sub
silentio is not correct.
DECISION

Respondent court precisely resolved said issue by PURISIMA, J.:


modifying the decision of the lower court, awarding
each respondent instead an aggregate amount of
Petition for review under Rule 45 of the Rules of
P30,000.00 as moral and exemplary damages, plus
Court seeking to set aside the Decision[1] promulgated
P6,000.00 as attorney's fees. The award of moral and
on July 31, 1996, and Resolution[2] dated September
exemplary damages in an aggregate amount may not
12, 1996 of the Court of Appeals[3] in CA-G.R. No.
be the usual way of awarding said damages. However,
41422, entitled Juanita de Jesus vda. de Dimaano, et
there can be no question that the entitlement to moral
al. vs. Southeastern College, Inc., which reduced the
damages having been established, exemplary
moral damages awarded below from P1,000,000.00
damages may be awarded; and exemplary damages
to P200,000.00.[4] The Resolution under attack denied
may be awarded even though not so expressly
petitioners motion for reconsideration.
pleaded in the complaint nor proved . 17
Private respondents are owners of a house at
Nor can petitioner accurately claim that the award 326 College Road, Pasay City, while petitioner owns a
made by respondent court exceeded the amounts four-storey school building along the same College
prayed for by respondents Bagadiong and Sto. Tomas Road. On October 11, 1989, at about 6:30 in the
in their complaint. A reading of said complaint shows morning, a powerful typhoon Saling hit Metro
that only their claims for moral damages and Manila. Buffeted by very strong winds, the roof of
attorney's fees were limited to P20,000.00 and petitioners building was partly ripped off and blown
P6,000.00, respectively; the award of exemplary away, landing on and destroying portions of the
damages was left to the discretion of the lower roofing of private respondents house. After the
court. 18 typhoon had passed, an ocular inspection of the
destroyed buildings was conducted by a team of
engineers headed by the city building official, Engr.
The amount of exemplary damages need not be Jesus L. Reyna. Pertinent aspects of the latters
pleaded in the complaint because the same cannot be Report[5] dated October 18, 1989 stated, as follows:
predetermined. 19 One can merely ask that it be
determined by the court as the evidence may warrant
and be awarded at its discretion. This is exactly what 5. One of the factors that may have led to this
private respondents did. Awards for moral and calamitous event is the formation of the buildings in
exemplary damages, as well as attorney's fees are left the area and the general direction of the
to the sound discretion of the court. 20 Such wind. Situated in the peripheral lot is an almost U-
discretion, if wen exercised, will not be disturbed on shaped formation of 4-storey building. Thus, with the
appeal.21 strong winds having a westerly direction, the general
formation of the buildings becomes a big funnel-like
structure, the one situated along College Road,
Parenthetically, in a special appearance "only for the receiving the heaviest impact of the strong winds.
purpose of the filing of this notice of death of party' Hence, there are portions of the roofing, those located
received by the Court on May 22, 1990, 22 Atty. on both ends of the building, which remained intact
Romeo M. Gumba submitted a certified true copy of after the storm.
the death certificate of private respondent Rosario
Sto. Tomas, attesting to her death on January 20,
1988, with said counsel informing the Court that 6. Another factor and perhaps the most likely reason
decedent's surviving heirs are Salvacion Sto. Tomas for the dislodging of the roofings structural trusses is
Gerona and Cecilia Sto. Tomas Pardo, both with the improper anchorage of the said trusses to the roof
addresses at Monterey Subdivision, Naga City. This beams. The 1/2 diameter steel bars embedded on the
matter should be taken into account in the executory concrete roof beams which serve as truss anchorage
processes consequent to this decision. are not bolted nor nailed to the trusses. Still, there are
other steel bars which were not even bent to the
trusses, thus, those trusses are not anchored at all to
WHEREFORE, the assailed decision of respondent the roof beams.
Court of Appeals is hereby AFFIRMED in toto, with
costs against petitioner.
It then recommended that to avoid any further loss
and damage to lives, limbs and property of persons
SO ORDERED. living in the vicinity, the fourth floor of subject school
building be declared as a structural hazard.
In their Complaint[6] before the Regional Trial OF DEFENDANTS SCHOOL BUILDING WAS
Court of Pasay City, Branch 117, for damages based FAULTY NOTWITHSTANDING THE
on culpa aquiliana, private respondents alleged that ADMISSION THAT THERE WERE
the damage to their house rendered the same TYPHOONS BEFORE BUT NOT AS GRAVE
uninhabitable, forcing them to stay temporarily in AS TYPHOON SALING WHICH IS THE
others houses. And so they sought to recover from DIRECT AND PROXIMATE CAUSE OF THE
petitioner P117,116.00, as actual INCIDENT.
damages, P1,000,000.00, as moral
damages, P300,000.00, as exemplary damages III
and P100,000.00, for and as attorneys fees; plus
THE TRIAL COURT ERRED IN
costs.
AWARDING ACTUAL AND MORAL
In its Answer, petitioner averred that subject DAMAGES AS WELL AS ATTORNEYS FEES
school building had withstood several devastating AND LITIGATION EXPENSES AND COSTS
typhoons and other calamities in the past, without its OF SUIT TO DIMAANOS WHEN THEY HAVE
roofing or any portion thereof giving way; that it has NOT INCURRED ACTUAL DAMAGES AT ALL
not been remiss in its responsibility to see to it that AS DIMAANOS HAVE ALREADY SOLD
said school building, which houses school children, THEIR PROPERTY, AN INTERVENING
faculty members, and employees, is in tip-top EVENT THAT RENDERS THIS CASE MOOT
condition; and furthermore, typhoon Saling was an AND ACADEMIC.
act of God and therefore beyond human control such
IV
that petitioner cannot be answerable for the damages
wrought thereby, absent any negligence on its part. THE TRIAL COURT ERRED IN
ORDERING THE ISSUANCE OF THE WRIT
The trial court, giving credence to the ocular
OF EXECUTION INSPITE OF THE
inspection report to the effect that subject school
PERFECTION OF SOUTHEASTERNS APPEAL
building had a defective roofing structure, found that,
WHEN THERE IS NO COMPELLING REASON
while typhoon Saling was accompanied by strong
FOR THE ISSUANCE THERETO.
winds, the damage to private respondents house
could have been avoided if the construction of the roof As mentioned earlier, respondent Court of
of [petitioners] building was not faulty. The dispositive Appeals affirmed with modification the trial courts
portion of the lower courts decision[7] reads thus: disposition by reducing the award of moral damages
from P1,000,000.00 to P200,000.00. Hence,
WHEREFORE, in view of the foregoing, the Court petitioners resort to this Court, raising for resolution
renders judgment (sic) in favor of the plaintiff (sic) the issues of:
and against the defendants, (sic) ordering the latter
to pay jointly and severally the former as follows: 1. Whether or not the award of actual damage [sic] to
respondent Dimaanos on the basis of speculation or
a) P117,116.00, as actual damages, plus litigation conjecture, without proof or receipts of actual
expenses; damage, [sic] legally feasible or justified.

b) P1,000,000.00 as moral damages; 2. Whether or not the award of moral damages to


respondent Dimaanos, without the latter having
suffered, actual damage has legal basis.
c) P100,000.00 as attorneys fees;

3. Whether or not respondent Dimaanos who are no


d) Costs of the instant suit. longer the owner of the property, subject matter of
the case, during its pendency, has the right to pursue
The claim for exemplary damages is denied for the their complaint against petitioner when the case was
reason that the defendants (sic) did not act in a already rendered moot and academic by the sale of
wanton fraudulent, reckless, oppressive or malevolent the property to third party.
manner.
4. Whether or not the award of attorneys fees when
In its appeal to the Court of Appeals, petitioner the case was already moot and academic [sic] legally
assigned as errors,[8] that: justified.

I
5. Whether or not petitioner is liable for damage
THE TRIAL COURT ERRED IN HOLDING caused to others by typhoon Saling being an act of
THAT TYPHOON SALING, AS AN ACT OF God.
GOD, IS NOT THE SOLE AND ABSOLUTE
REASON FOR THE RIPPING-OFF OF THE 6. Whether or not the issuance of a writ of execution
SMALL PORTION OF THE ROOF OF pending appeal, ex-parte or without hearing, has
SOUTHEASTERNS FOUR (4) STOREY support in law.
SCHOOL BUILDING.

II The pivot of inquiry here, determinative of the


other issues, is whether the damage on the roof of the
THE TRIAL COURT ERRED IN HOLDING building of private respondents resulting from the
THAT THE CONSTRUCTION OF THE ROOF impact of the falling portions of the school buildings
roof ripped off by the strong winds of typhoon Saling, exoneration from liability must not be guilty of
was, within legal contemplation, due to fortuitous negligence. Negligence, as commonly understood, is
event? If so, petitioner cannot be held liable for the conduct which naturally or reasonably creates undue
damages suffered by the private respondents. This risk or harm to others. It may be the failure to observe
conclusion finds support in Article 1174 of the that degree of care, precaution, and vigilance which
Civil Code, which provides: the circumstances justly demand,[17] or the omission
to do something which a prudent and reasonable man,
guided by considerations which ordinarily regulate the
Art 1174. Except in cases expressly specified by the
conduct of human affairs, would do.[18] From these
law, or when it is otherwise declared by stipulation, or
premises, we proceed to determine whether petitioner
when the nature of the obligation requires the
was negligent, such that if it were not, the damage
assumption of risk, no person shall be responsible for
caused to private respondents house could have been
those events which could not be foreseen, or which,
avoided?
though foreseen, were inevitable.
At the outset, it bears emphasizing that a person
The antecedent of fortuitous event or caso claiming damages for the negligence of another has
fortuito is found in the Partidas which defines it as an the burden of proving the existence of fault or
event which takes place by accident and could not negligence causative of his injury or loss. The facts
have been foreseen.[9] Escriche elaborates it as an constitutive of negligence must be affirmatively
unexpected event or act of God which could neither be established by competent evidence,[19] not merely by
foreseen nor resisted.[10] Civilist Arturo M. Tolentino presumptions and conclusions without basis in
adds that [f]ortuitous events may be produced by two fact. Private respondents, in establishing the
general causes: (1)by nature, such as earthquakes, culpability of petitioner, merely relied on the
storms, floods, epidemics, fires, etc. and (2) by the aforementioned report submitted by a team which
act of man, such as an armed invasion, attack by made an ocular inspection of petitioners school
bandits, governmental prohibitions, robbery, etc.[11] building after the typhoon. As the term imparts, an
ocular inspection is one by means of actual sight or
In order that a fortuitous event may exempt a viewing.[20] What is visual to the eye though, is not
person from liability, it is necessary that he be free always reflective of the real cause behind. For
from any previous negligence or misconduct by reason instance, one who hears a gunshot and then sees a
of which the loss may have been occasioned.[12] An act wounded person, cannot always definitely conclude
of God cannot be invoked for the protection of a that a third person shot the victim. It could have been
person who has been guilty of gross negligence in not self-inflicted or caused accidentally by a stray
trying to forestall its possible adverse bullet. The relationship of cause and effect must be
consequences.When a persons negligence concurs clearly shown.
with an act of God in producing damage or injury to
another, such person is not exempt from liability by In the present case, other than the said ocular
showing that the immediate or proximate cause of the inspection, no investigation was conducted to
damage or injury was a fortuitous event. When the determine the real cause of the partial unroofing of
effect is found to be partly the result of the petitioners school building. Private respondents did
participation of man whether it be from active not even show that the plans, specifications and
intervention, or neglect, or failure to act the whole design of said school building were deficient and
occurrence is hereby humanized, and removed from defective. Neither did they prove any substantial
the rules applicable to acts of God.[13] deviation from the approved plans and
specifications. Nor did they conclusively establish that
In the case under consideration, the lower court the construction of such building was basically
accorded full credence to the finding of the flawed.[21]
investigating team that subject school buildings
roofing had no sufficient anchorage to hold it in On the other hand, petitioner elicited from one
position especially when battered by strong of the witnesses of private respondents, city building
winds. Based on such finding, the trial court imputed official Jesus Reyna, that the original plans and design
negligence to petitioner and adjudged it liable for of petitioners school building were approved prior to
damages to private respondents. its construction. Engr. Reyna admitted that it was a
legal requirement before the construction of any
After a thorough study and evaluation of the building to obtain a permit from the city building
evidence on record, this Court believes otherwise, official (city engineer, prior to the passage of the
notwithstanding the general rule that factual findings Building Act of 1977). In like manner, after
by the trial court, especially when affirmed by the construction of the building, a certification must be
appellate court, are binding and conclusive upon this secured from the same official attesting to the
Court.[14] After a careful scrutiny of the records and readiness for occupancy of the edifice. Having
the pleadings submitted by the parties, we find obtained both building permit and certificate of
exception to this rule and hold that the lower courts occupancy, these are, at the very least, prima
misappreciated the evidence proffered. facie evidence of the regular and proper construction
of subject school building.[22]
There is no question that a typhoon or storm is
a fortuitous event, a natural occurrence which may be Furthermore, when part of its roof needed
foreseen but is unavoidable despite any amount of repairs of the damage inflicted by typhoon Saling, the
foresight, diligence or care.[15] In order to be exempt same city official gave the go-signal for such repairs
from liability arising from any adverse consequence without any deviation from the original design and
engendered thereby, there should have been no subsequently, authorized the use of the entire fourth
human participation amounting to a negligent floor of the same building. These only prove that
act.[16] In other words, the person seeking subject building suffers from no structural defect,
contrary to the report that its U-shaped form was trial court a quo is ordered DISMISSED and the writ of
structurally defective. Having given his execution issued on April 1, 1993 in said case is SET
unqualified imprimatur, the city building official is ASIDE. Accordingly, private respondents are
presumed to have properly performed his duties[23] in ORDERED to return to petitioner any amount or
connection therewith. property received by them by virtue of said writ. Costs
against the private respondents.
In addition, petitioner presented its vice
president for finance and administration who testified SO ORDERED.
that an annual maintenance inspection and repair of
subject school building were regularly
undertaken. Petitioner was even willing to present its
maintenance supervisor to attest to the extent of such
regular inspection but private respondents agreed to
dispense with his testimony and simply stipulated that
it would be corroborative of the vice presidents [G.R. No. 147324. May 25, 2004]
narration.

Moreover, the city building official, who has been


in the city government service since 1974, admitted
in open court that no complaint regarding any defect PHILIPPINE COMMUNICATIONS SATELLITE
on the same structure has ever been lodged before his CORPORATION, petitioner, vs. GLOBE
office prior to the institution of the case at bench. It is TELECOM, INC. (formerly and Globe
a matter of judicial notice that typhoons are common Mckay Cable and Radio
occurrences in this country. If subject school buildings Corporation), respondents.
roofing was not firmly anchored to its trusses,
obviously, it could not have withstood long years and
several typhoons even stronger than Saling.

In light of the foregoing, we find no clear and [G.R. No. 147334. May 25, 2004]
convincing evidence to sustain the judgment of the
appellate court. We thus hold that petitioner has not
been shown negligent or at fault regarding the
construction and maintenance of its school building in
question and that typhoon Saling was the proximate GLOBE TELECOM, INC., petitioner,
cause of the damage suffered by private respondents vs. PHILIPPINE COMMUNICATION
house. SATELLITE CORPORATION, respondent.

With this disposition on the pivotal issue, private


DECISION
respondents claim for actual and moral damages as
well as attorneys fees must fail.[24] Petitioner cannot TINGA, J.:
be made to answer for a purely fortuitous
event.[25] More so because no bad faith or willful act
to cause damage was alleged and proven to warrant Before the Court are two Petitions for
moral damages. Review assailing the Decision of the Court of Appeals,
dated 27 February 2001, in CA-G.R. CV No. 63619.[1]
Private respondents failed to adduce adequate
and competent proof of the pecuniary loss they The facts of the case are undisputed.
actually incurred.[26] It is not enough that the damage
For several years prior to 1991, Globe Mckay
be capable of proof but must be actually proved with
Cable and Radio Corporation, now Globe Telecom, Inc.
a reasonable degree of certainty, pointing out specific
(Globe), had been engaged in the coordination of the
facts that afford a basis for measuring whatever
provision of various communication facilities for the
compensatory damages are borne.[27] Private
military bases of the United States of America (US) in
respondents merely submitted an estimated amount
Clark Air Base, Angeles, Pampanga and Subic Naval
needed for the repair of the roof of their subject
Base in Cubi Point, Zambales. The said
building. What is more, whether the necessary repairs
communication facilities were installed and configured
were caused ONLY by petitioners alleged negligence
for the exclusive use of the US Defense
in the maintenance of its school building, or included
Communications Agency (USDCA), and for security
the ordinary wear and tear of the house itself, is an
reasons, were operated only by its personnel or those
essential question that remains indeterminable.
of American companies contracted by it to operate
The Court deems unnecessary to resolve the said facilities. The USDCA contracted with said
other issues posed by petitioner. American companies, and the latter, in turn,
contracted with Globe for the use of the
As regards the sixth issue, however, the writ of communication facilities. Globe, on the other hand,
execution issued on April 1, 1993 by the trial court is contracted with local service providers such as the
hereby nullified and set aside. Private respondents are Philippine Communications Satellite Corporation
ordered to reimburse any amount or return to (Philcomsat) for the provision of the communication
petitioner any property which they may have received facilities.
by virtue of the enforcement of said writ.
On 07 May 1991, Philcomsat and Globe entered
WHEREFORE, the petition is GRANTED and the into an Agreement whereby Philcomsat obligated itself
challenged Decision is REVERSED. The complaint of to establish, operate and provide an IBS Standard B
private respondents in Civil Case No. 7314 before the earth station (earth station) within Cubi Point for the
exclusive use of the USDCA.[2] The term of the event. Either party is thus precluded from performing
contract was for 60 months, or five (5) years.[3] In its obligation until such force majeure or fortuitous
turn, Globe promised to pay Philcomsat monthly event shall terminate. For the purpose of this
rentals for each leased circuit involved.[4] paragraph, force majeure shall mean circumstances
beyond the control of the party involved including, but
At the time of the execution of the Agreement, not limited to, any law, order, regulation, direction or
both parties knew that the Military Bases Agreement request of the Government of the Philippines, strikes
between the Republic of the Philippines and the US or other labor difficulties, insurrection riots, national
(RP-US Military Bases Agreement), which was the emergencies, war, acts of public enemies, fire, floods,
basis for the occupancy of the Clark Air Base and Subic typhoons or other catastrophies or acts of God.
Naval Base in Cubi Point, was to expire in 1991. Under
Section 25, Article XVIII of the 1987 Constitution,
foreign military bases, troops or facilities, which Philcomsat sent a reply letter dated 10 August
include those located at the US Naval Facility in Cubi 1992 to Globe, stating that we expect [Globe] to know
Point, shall not be allowed in the Philippines unless a its commitment to pay the stipulated rentals for the
new treaty is duly concurred in by the Senate and remaining terms of the Agreement even after [Globe]
ratified by a majority of the votes cast by the people shall have discontinue[d] the use of the earth station
in a national referendum when the Congress so after November 08, 1992.[7] Philcomsat referred to
requires, and such new treaty is recognized as such Section 7 of the Agreement, stating as follows:
by the US Government.
7. DISCONTINUANCE OF SERVICE
Subsequently, Philcomsat installed and
established the earth station at Cubi Point and the
USDCA made use of the same. Should [Globe] decide to discontinue with the use of
the earth station after it has been put into operation,
On 16 September 1991, the Senate passed and a written notice shall be served to PHILCOMSAT at
adopted Senate Resolution No. 141, expressing its least sixty (60) days prior to the expected date of
decision not to concur in the ratification of the Treaty termination. Notwithstanding the non-use of the earth
of Friendship, Cooperation and Security and its station, [Globe] shall continue to pay PHILCOMSAT for
Supplementary Agreements that was supposed to the rental of the actual number of T1 circuits in use,
extend the term of the use by the US of Subic Naval but in no case shall be less than the first two (2) T1
Base, among others.[5] The last two paragraphs of the circuits, for the remaining life of the
Resolution state: agreement. However, should PHILCOMSAT make use
or sell the earth station subject to this agreement, the
FINDING that the Treaty constitutes a defective obligation of [Globe] to pay the rental for the
framework for the continuing relationship between the remaining life of the agreement shall be at such
two countries in the spirit of friendship, cooperation monthly rate as may be agreed upon by the parties.[8]
and sovereign equality: Now, therefore, be it
After the US military forces left Subic Naval
Resolved by the Senate, as it is hereby resolved, To Base, Philcomsat sent Globe a letter dated 24
express its decision not to concur in the ratification of November 1993 demanding payment of its
the Treaty of Friendship, Cooperation and Security outstanding obligations under the Agreement
and its Supplementary Agreements, at the same time amounting to US$4,910,136.00 plus interest and
reaffirming its desire to continue friendly relations attorneys fees.However, Globe refused to heed
with the government and people of the United States Philcomsats demand.
of America.[6] On 27 January 1995, Philcomsat filed with the
Regional Trial Court of Makati a Complaint against
On 31 December 1991, the Philippine Globe, praying that the latter be ordered to pay
Government sent a Note Verbale to the US liquidated damages under the Agreement, with legal
Government through the US Embassy, notifying it of interest, exemplary damages, attorneys fees and
the Philippines termination of the RP-US Military Bases costs of suit. The case was raffled to Branch 59 of said
Agreement. The Note Verbale stated that since the court.
RP-US Military Bases Agreement, as amended, shall
terminate on 31 December 1992, the withdrawal of all Globe filed an Answer to the Complaint, insisting
US military forces from Subic Naval Base should be that it was constrained to end the Agreement due to
completed by said date. the termination of the RP-US Military Bases
Agreement and the non-ratification by the Senate of
In a letter dated 06 August 1992, Globe notified the Treaty of Friendship and Cooperation, which
Philcomsat of its intention to discontinue the use of events constituted force majeure under the
the earth station effective 08 November 1992 in view Agreement. Globe explained that the occurrence of
of the withdrawal of US military personnel from Subic said events exempted it from paying rentals for the
Naval Base after the termination of the RP-US Military remaining period of the Agreement.
Bases Agreement. Globe invoked as basis for the
letter of termination Section 8 (Default) of the On 05 January 1999, the trial court rendered
Agreement, which provides: its Decision, the dispositive portion of which reads:

Neither party shall be held liable or deemed to be in WHEREFORE, premises considered, judgment is
default for any failure to perform its obligation under hereby rendered as follows:
this Agreement if such failure results directly or
indirectly from force majeure or fortuitous
1. Ordering the defendant to pay the withdrawal of all US military forces and personnel
plaintiff the amount of Ninety from Cubi Point, which prevented further use of the
Two Thousand Two Hundred earth station under the Agreement.
Thirty Eight US Dollars
(US$92,238.00) or its However, the Court of Appeals ruled that
equivalent in Philippine although Globe sought to terminate Philcomsats
Currency (computed at the services by 08 November 1992, it is still liable to pay
exchange rate prevailing at rentals for the December 1992, amounting to
the time of compliance or US$92,238.00 plus interest, considering that the US
payment) representing rentals military forces and personnel completely withdrew
for the month of December from Cubi Point only on 31 December 1992.[10]
1992 with interest thereon at
Both parties filed their respective Petitions for
the legal rate of twelve percent
Review assailing the Decision of the Court of Appeals.
(12%) per annum starting
December 1992 until the In G.R. No. 147324,[11] petitioner Philcomsat
amount is fully paid; raises the following assignments of error:
2. Ordering the defendant to pay the
plaintiff the amount of Three A. THE HONORABLE COURT OF APPEALS ERRED
Hundred Thousand IN ADOPTING A DEFINITION OF FORCE
(P300,000.00) Pesos as and MAJEURE DIFFERENT FROM WHAT ITS
for attorneys fees; LEGAL DEFINITION FOUND IN ARTICLE
1174 OF THE CIVIL CODE, PROVIDES,
3. Ordering the DISMISSAL of SO AS TO EXEMPT GLOBE TELECOM
defendants counterclaim for FROM COMPLYING WITH ITS
lack of merit; and OBLIGATIONS UNDER THE SUBJECT
AGREEMENT.
4. With costs against the defendant.

B. THE HONORABLE COURT OF APPEALS ERRED


SO ORDERED.[9]
IN RULING THAT GLOBE TELECOM IS
NOT LIABLE TO PHILCOMSAT FOR
Both parties appealed the trial courts Decision to RENTALS FOR THE REMAINING TERM OF
the Court of Appeals. THE AGREEMENT, DESPITE THE CLEAR
TENOR OF SECTION 7 OF THE
Philcomsat claimed that the trial court erred in AGREEMENT.
ruling that: (1) the non-ratification by the Senate of
the Treaty of Friendship, Cooperation and Security
and its Supplementary Agreements constitutes force C. THE HONORABLE OCURT OF APPEALS ERRED
majeure which exempts Globe from complying with its IN DELETING THE TRIAL COURTS
obligations under the Agreement; (2) Globe is not AWARD OF ATTORNEYS FEES IN FAVOR
liable to pay the rentals for the remainder of the term OF PHILCOMSAT.
of the Agreement; and (3) Globe is not liable to
Philcomsat for exemplary damages. D. THE HONORABLE COURT OF APPEALS ERRED
IN RULING THAT GLOBE TELECOM IS
Globe, on the other hand, contended that the NOT LIABLE TO PHILCOMSAT FOR
RTC erred in holding it liable for payment of rent of EXEMPLARY DAMAGES.[12]
the earth station for December 1992 and of attorneys
fees. It explained that it terminated Philcomsats
services on 08 November 1992; hence, it had no Philcomsat argues that the termination of the
reason to pay for rentals beyond that date. RP-US Military Bases Agreement cannot be considered
a fortuitous event because the happening thereof was
On 27 February 2001, the Court of Appeals foreseeable. Although the Agreement was freely
promulgated its Decision dismissing Philcomsats entered into by both parties, Section 8 should be
appeal for lack of merit and affirming the trial courts deemed ineffective because it is contrary to Article
finding that certain events constituting force 1174 of the Civil Code. Philcomsat posits the view that
majeure under Section 8 the Agreement occurred and the validity of the parties definition of force majeure in
justified the non-payment by Globe of rentals for the Section 8 of the Agreement as circumstances beyond
remainder of the term of the Agreement. the control of the party involved including, but not
limited to, any law, order, regulation, direction or
The appellate court ruled that the non- request of the Government of the Philippines, strikes
ratification by the Senate of the Treaty of Friendship, or other labor difficulties, insurrection riots, national
Cooperation and Security, and its Supplementary emergencies, war, acts of public enemies, fire, floods,
Agreements, and the termination by the Philippine typhoons or other catastrophies or acts of God, should
Government of the RP-US Military Bases Agreement be deemed subject to Article 1174 which defines
effective 31 December 1991 as stated in the Philippine fortuitous events as events which could not be
Governments Note Verbale to the US Government, foreseen, or which, though foreseen, were
are acts, directions, or requests of the Government of inevitable.[13]
the Philippines which constitute force majeure. In
addition, there were circumstances beyond the control Philcomsat further claims that the Court of
of the parties, such as the issuance of a formal order Appeals erred in holding that Globe is not liable to pay
by Cdr. Walter Corliss of the US Navy, the issuance of for the rental of the earth station for the entire term
the letter notification from ATT and the complete of the Agreement because it runs counter to what was
plainly stipulated by the parties in Section 7 December 1992; and (3) whether Philcomsat is
thereof. Moreover, said ruling is inconsistent with the entitled to attorneys fees and exemplary damages.
appellate courts pronouncement that Globe is liable to
pay rentals for December 1992 even though it No reversible error was committed by the Court
terminated Philcomsats services effective 08 of Appeals in issuing the assailed Decision; hence the
November 1992, because the US military and petitions are denied.
personnel completely withdrew from Cubi Point only
There is no merit is Philcomsats argument that
in December 1992. Philcomsat points out that it was
Section 8 of the Agreement cannot be given effect
Globe which proposed the five-year term of the
because the enumeration of events constituting force
Agreement, and that the other provisions of the
majeure therein unduly expands the concept of a
Agreement, such as Section 4.1[14] thereof, evince the
fortuitous event under Article 1174 of the Civil Code
intent of Globe to be bound to pay rentals for the
and is therefore invalid.
entire five-year term.[15]
In support of its position, Philcomsat contends
Philcomsat also maintains that contrary to the