FIRST DIVISION

[G.R. No. 194189. September 14, 2017.]

RAFAEL ALMEDA, EMERLINA ALMEDA-LIRIO, ALODIA ALMEDA-TAN, LETICIA ALMEDA-MAGNO, NORMA

ALMEDA-MATIAS and PUBLIO TIBI, petitioners, vs. HEIRS OF PONCIANO ALMEDA in substitution of original
defendant PONCIANO ALMEDA, INTESTATE ESTATE OF SPOUSES PONCIANO and EUFEMIA PEREZ-ALMEDA
and THE REGISTER OF DEEDS OF TAGAYTAY CITY, respondents, CESAR SANTOS, ROSANA SANTOS, NORMAN
SANTOS and FERDINAND SANTOS, unwilling plaintiffs/petitioners.

DECISION

TIJAM, J p:

This Petition for Review on Certiorari 1 assails the May 25, 2010 Decision 2 of the Court of Appeals (CA) in CA-G.R.
CV No. 86953, denying Rafael Almeda (Rafael), Emerlina Almeda-Lirio (Emerlina), Alodia Almeda-Tan (Alodia), Leticia
Almeda-Magno (Leticia), Norma Almeda-Matias (Norma) and Publio Tibi's (Publio) (collectively, the petitioners) appeal from
the Order 3 dated September 2, 2004 of the Regional Trial Court (RTC) of Tagaytay City, Branch 18, in Civil Case No. TG-1643,
which dismissed their Complaint for Nullity of Contracts, Partition of Properties and Reconveyance of Title with Damages,
and the CA Resolution 4 dated October 13, 2010 denying petitioners' Motion for Reconsideration.

The Facts

Spouses Venancio Almeda (Venancio) and Leonila Laurel-Almeda (Leonila) were the parents of nine children:
Ponciano L. Almeda (Ponciano), Rafael, Emerlina, Alodia, Leticia, Norma, Benjamin Almeda and Severina Almeda-Santos
(Severina) and Rosalina Almeda-Tibi (Rosalina), Publio's deceased wife. 5
On May 19, 1976, a Power of Attorney 6 was executed by Venancio and Leonila, who were then 80 and 81 years old
respectively, 7 granting Ponciano, among others, the authority to sell the parcels of land covered by Original Certificate of
Title (OCT) Nos. O-197 and O-443 of the Office of the Register of Deeds for Tagaytay City, which Leonila inherited 8 from her
parents.
OCT Nos. O-197 and O-443 were registered in the name of "Leonila L. Almeda married to Venancio Almeda." OCT
No. O-197 9 embraced four (4) parcels of land with an aggregate area of 95,205 square meters more or less, to wit: Lot 10
(48,512 sq m), Lot 17 (37,931 sq m), Lot 30 (8,047 sq m) and Lot 32 (715 sq m); and OCT No. O-443 10 covered Lot 9
measuring 33,946 sq m, more or less.
Venancio died at the age of 90 on February 27, 1985; Leonila died eight years later on April 3, 1993, aged
97. 11 Within the year of Leonila's death on April 17, 1993, 12 Rafael, Emerlina, Alodia, Leticia and Norma filed a notice of
adverse claim with the Register of Deeds of Tagaytay City over their parents' properties. 13
On October 10, 1996, a Complaint for Nullity of Contracts, Partition of Properties and Reconveyance of Titles with
Damages, 14 docketed as Civil Case No. TG-1643, was filed before the RTC of Tagaytay City by the petitioners against
Ponciano and his wife Eufemia Perez Almeda (Eufemia) and the Register of Deeds of Tagaytay City, with Severina's surviving
spouse, Cesar Santos and children, Rosana, Norman and Ferdinand, as unwilling plaintiffs. 15 Petitioners alleged that the
parties were the only heirs of the late spouses Venancio and Leonila who died without leaving any will and without any legal
obligation. 16
In support of their Complaint, petitioners claimed that Ponciano, taking advantage of his being the eldest child and
his close relationship with their parents, caused the simulation and forgery of the following documents: 17
(1) Deed of Absolute Sale dated June 9, 1976, over Lot 30 under OCT No. O-197, executed by
Ponciano as Venancio and Leonila's attorney-in-fact, in favor of Julian Y. Pabiloña, Virginia Go, Gemma Tan
Ongking, Arthur C. Chua and Lee Hiong Wee (Pabiloña, et al.), for the price of P160,940.00; 18 and

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 (2) Deed of Absolute Sale dated October 3, 1978, executed by Venancio and Leonila in favor of
Ponciano, over the remaining lots under OCT No. O-197 and Lot 9 under OCT No. O-443, and over Lots 6, 4
and 9-A with a total area 71,520 sq m which then had no technical description, for the total consideration
of P704,243.77. 19
By virtue of the aforesaid Deeds of Absolute Sale, OCT Nos. O-197 and O-443 were cancelled, the former with
respect only to Lots 10 and 17. Resultantly, Transfer Certificate of Title (TCT) Nos. T-15125, T-24806, T-24807, T-24808 and T-
24809, 20 all of the Registry of Deeds for Tagaytay City, were issued to Ponciano, 21 while TCT No. T-10330 of the same
Registry 22 was issued to Julian Y. Pabiloña, Virginia Go, Gemma Tan Ongking, Arthur C. Chua and Lee Hiong Wee. 23
According to petitioners, their parents did not sign the October 3, 1978 Deed of Absolute Sale (1978 Deed) in favor
of Ponciano and their signatures may have been forged. They also averred that their parents did not receive due
consideration for the transaction, and if Ponciano succeeded in making them sign said 1978 Deed, they did so without
knowledge of its import. Petitioners, however, would not claim rights and interest legally transferred to third parties. 24
Petitioners further alleged that Ponciano withheld from them the existence of the 1978 Deed in his favor, and when
they learned of it and demanded partition, Ponciano merely promised to cause the same at a proper time. When petitioners
could no longer wait, they filed their notice of adverse claim with the Register of Deeds. 25
Petitioners, thus, prayed that the 1978 Deed in favor of Ponciano be declared null and void; that OCT No. O-197 be
partitioned among the heirs of Venancio and Leonila; that the derivative titles obtained by Ponciano under his name be
reconveyed to petitioners; that the Register of Deeds for Tagaytay City be ordered to cancel said derivative titles and to
restore title to the property in the name of Venancio and Leonila; that the unwilling plaintiffs be ordered to share in the
expenses of the suit; and that Ponciano and his wife be ordered to pay moral and exemplary damages, attorney's fees and
the costs of litigation. 26
In their Answer, 27 Ponciano and his wife, Eufemia, denied that the 1978 Deed was simulated or forged, asserting
its genuineness and execution for valuable consideration from which some of the petitioners, including Rafael, received
substantial pecuniary benefits. They asserted that Ponciano no longer participated in the division of the estate of Venancio
and Leonila whose assets amounted to millions of pesos. They accused petitioners of not coming to court with clean hands,
claiming the latter may have themselves resorted to falsification of documents to transfer said assets in their names and
subsequently to other persons. Ponciano and Eufemia also averred that petitioners were guilty of laches.
Ponciano died on October 16, 1997 and was substituted by his wife and children. 28
Petitioners presented the lone testimony of Emerlina. 29 After Ponciano's heirs/substitutes (private respondents)
failed to present their evidence despite several opportunities given them, the RTC considered the case submitted for
decision. 30
In the course of the trial, two other documents figured in the dispute, which petitioners likewise impugned,
showing:
(1) an Agreement to Sell 31 dated November 9, 1976 whereby Venancio and Leonila agreed to sell
to Ponciano the parcels of land covered by OCT Nos. O-197 and O-443, as well as Lots 6, 4 and 9-A, for the
total price of P1 Million with P200,000.00 as down payment and the balance payable in one year without
interest; and
(2) a Deed of Sale with Mortgage 32 (Deed with Mortgage) dated November 11, 1977, which
expressly superseded the Agreement to Sell dated November 9, 1976, whereby Venancio and Leonila sold
to Ponciano the parcels of land covered by OCT Nos. O-197 and O-443, as well as Lots 6, 4 and 9-A, for P1
Million, with the payment of the P700,000.00 balance secured by the said properties. This Deed with
Mortgage was expressly superseded by the 1978 Deed in favor of Ponciano.
On September 2, 2004, the RTC issued an Order 33 dismissing petitioners' complaint. The dispositive portion of the
order reads:
WHEREFORE, premises considered, the same is hereby ordered DISMISSED.
SO ORDERED. 34
The RTC held that the questioned documents, having been notarized and executed in the presence of two
instrumental witnesses, enjoy the presumption of regularity, and petitioners failed to overcome this presumption by clear
and convincing evidence. It stressed that petitioners failed to present any proof of simulation or forgery of the subject
documents.
In an Order 35 dated November 29, 2005, the RTC denied petitioners' Motion for Reconsideration.
Petitioners brought the case to the CA on appeal which was denied in the assailed Decision 36 dated May 25, 2010,
the dispositive portion of which reads:
2
 IN VIEW OF ALL THESE, the Appeal is DENIED. The Order a quo is AFFIRMED.
SO ORDERED. 37
The CA held that petitioners failed to discharge their burden of proving the purported forgery with clear and
convincing evidence. The CA stressed that such evidence was especially needed in this case given that the assailed
documents, being notarized, enjoy the presumption of regularity and of due execution and authenticity. The CA noted that
petitioner merely relied on Emerlina's testimony that the questioned signatures were forged. 38
The CA further stressed that mere variance in the genuine and disputed signatures is not proof of forgery. 39 To
establish forgery, said the appellate court, presentation of documents bearing the genuine signatures of Venancio and
Leonila was required, for comparison with the alleged false signatures. 40 The CA held that petitioners' failure to submit
such documents was fatal as it was necessary for petitioners to show not only the material differences between the
signatures, but also (1) the extent, kind and significance of the variation; (2) that the variation was due to the operation of a
different personality and not merely an expected and inevitable variation found in the genuine writing of the same writer;
and (3) that the resemblance was the result of a more or less skillful imitation and not merely a habitual and characteristic
resemblance which naturally appears in genuine writing. 41
Petitioner's Motion for Reconsideration 42 was subsequently denied in the Resolution 43 dated October 13, 2010.
Dissatisfied with the outcome of its appeal, petitioners filed the instant petition, asserting that the CA's ruling was
contrary the evidence, the law and existing jurisprudence.

The Court's Ruling

The petition lacks merit.

Factual findings of the RTC, as
affirmed by the CA, deserve a high
degree of respect

Well-entrenched is the rule that the Supreme Court's role in a petition under Rule 45 is limited to reviewing or
reversing errors of law allegedly committed by the appellate court. 44 Equally settled is the rule that this Court is not a trier
of facts. 45
In Spouses Villaceran, et al. v. De Guzman, 46 the Court held that:
The issue of the genuineness of a deed of sale is essentially a question of fact. It is settled that this
Court is not duty-bound to analyze and weigh again the evidence considered in the proceedings below.
This is especially true where the trial court's factual findings are adopted and affirmed by the CA as in the
present case. Factual findings of the trial court, affirmed by the CA, are final and conclusive and may not
be reviewed on appeal. 47
At any rate, to remove any doubt as to the e correctness of the assailed ruling, We have examined the records and,
nonetheless, reached the same conclusion. 48
Notarized documents enjoy the
presumption of regularity

A notarized Deed of Absolute Sale has in its favor the presumption of regularity, and it carries the evidentiary
weight conferred upon it with respect to its due execution. 49 It is admissible in evidence without further proof of its
authenticity and is entitled to full faith and credit upon its face. 50 Thus, a notarial document must be sustained in full force
and effect so long as he who impugns it does not present strong, complete and conclusive proof of its falsity or nullity on
account of some flaws or defects. 51
Absent evidence of falsity so clear, strong and convincing, and not merely preponderant, the presumption of
regularity must be upheld. 52 The burden of proof to overcome the presumption of due execution of a notarial document
lies on the party contesting the same. 53
Forgery is not presumed

Furthermore, as a rule, forgery cannot be presumed. 54 An allegation of forgery must be proved by clear, positive
and convincing evidence, and the burden of proof lies on the party alleging forgery. 55
Petitioners failed to overcome the
presumption of due execution
3
 Since petitioners are assailing the genuineness of the 1978 Deed, they evidently have the burden of making out a
clear-cut case that the questioned document is bogus. 56 Both the trial and appellate courts concluded that petitioners
failed to discharge this burden. We agree.
The Complaint, at the outset, did not allege in definite terms that Venancio and Leonila's signatures on the 1978
Deed were forged. It stated:
VIII
That [petitioners'] parents did not sign said documents of sale purportedly to transfer rights, titles
and interest in favor of defendants, and, in fact their signatures thereon may have been forged, and, that
they did not receive due consideration thereof, and, said documents are merely simulated if ever
defendant [Ponciano] succeeded in making them [sign] the same without knowledge of the import
thereof, likewise, in making them appear as having executed and affixed their signatures on said
controversial documents although the transactions were inexistent. 57 (Emphasis ours)
Likewise, Emerlina's testimony, upon which petitioners' case was built, is unclear and uncertain as to the supposed
forgery. Emerlina testified that the vendors' signatures appearing on the 1978 Deed did not belong to her parents, Venancio
and Leonila. 58 Subsequently, however, she testified that if the latter did affix their signatures, they did not know what they
signed. 59 Still further to her testimony, Emerlina declared that she could not say if the signatures indeed belonged to her
parents. 60 Eventually, she conceded to having two alternative answers to the question of forgery: first, that Venancio and
Leonila did not sign the document, and second, that it is possible that they signed it but without knowing the consequences
of their action. 61
The uncertainty in petitioners' stance, as echoed in Emerlina's testimony, clearly militates against their claim of
forgery.
Furthermore, it is undeniable that Emerlina stands to benefit from a judgment annulling the 1978 Deed. Her
testimony denying the validity of the sale, having been made by a party who has an interest in the outcome of the case, is
not as reliable as written or documentary evidence. Moreover, self-serving statements are inadequate to establish one's
claims. Proof must be presented to support the same. 62
To establish forgery, the extent, kind and significance of the variation in the standard and disputed signatures must
be demonstrated; it must be proved that the variation is due to the operation of a different personality and not merely an
expected and inevitable variation found in the genuine writing of the same writer; and it should be shown that the
resemblance is a result of a more or less skillful imitation and not merely a habitual and characteristic resemblance which
naturally appears in a genuine writing. 63 Emerlina's uncorroborated testimony failed to demonstrate, based on the
foregoing criteria, that the questioned signatures were forgeries.
Indeed, petitioners failed to present the requisite proof of falsity and forgery of the notarized 1978 Deed to
overcome the presumption of regularity and due execution.
Visual comparison of the questioned
and admittedly genuine signatures
reveal prominent similarities

Section 22, Rule 132 of the Rules of Court explicitly authorizes the court, by itself, to make a comparison of the
disputed handwriting with writings admitted or treated as genuine by the party against whom the evidence is offered, or
proved to be genuine to the satisfaction of the judge. 64
Petitioners assert that the 1976 Power of Attorney 65 executed in favor of Ponciano, which bore the true and
genuine signatures of Venancio and Leonila, could have been used as basis for comparison with the questioned signatures to
determine their authenticity. 66
Comparing these two sets of signatures, the Court finds prominent similarities as to indicate the habitual and
characteristic writing of Venancio and Leonila. Leonila's signature on the 1978 Deed, in particular, appears almost the same
as her signature on the 1976 Power of Attorney. Venancio's signature on the 1978 Deed was not as smooth as his signature
on the 1976 Power of Attorney, but the similarities in the angles and slants cannot be ignored.
To support their claim of forgery, petitioners described the questioned signatures as "wiri-wiri," or containing "wild
strokes." 67 The Court, however, does not find such wild strokes in the questioned signatures. Leonila's was nearly as
smooth as her signature on the 1976 Power of Attorney. Venancio's signature gives the impression that it had been affixed
by a less than steady but determined hand, and though not as fluid as his previous signature, reveals the characteristic
imprint of his handwriting. Indeed, the resemblance in the questioned and standard signatures are more prominent or
pronounced than the apparent variance which could be attributed to the signatories' old age.

4
 In fine, the apparent dissimilarities in the signatures are overshadowed by the striking similarities and, therefore,
fail to overcome the presumption of validity in favor of a notarized document. 68
Presumption of competence was not adequately refuted

"The law presumes that every person is fully competent to enter into a contract until satisfactory proof to the
contrary is presented." 69 The party claiming absence of capacity to contract has the burden of proof and discharging this
burden requires that clear and convincing evidence be adduced. 70
Petitioners have not satisfactorily shown that their parents' mental faculties were impaired as to deprive them of
reason or hinder them from freely exercising their own will or from comprehending the provisions of the sale in favor of
Ponciano.
Petitioners assert that their parents were "uliyanin" or forgetful, of advanced age and "at times" sickly during the
time of the execution of the 1978 Deed in favor of Ponciano. 71
Mere forgetfulness, however, without evidence that the same has removed from a person the ability to intelligently
and firmly protect his property rights, will not by itself incapacitate a person from entering into contracts.
In Mendezona v. Ozamiz, 72 the Court affirmed a vendor's capacity to contract despite a doctor's revelation that the
former was afflicted with certain infirmities and was, at times, forgetful, holding that:
The revelation of Dr. Faith Go did not also shed light on the mental capacity of Carmen Ozamiz on
the relevant day — April 28, 1989 when the Deed of Absolute Sale was executed and notarized. At best,
she merely revealed that Carmen Ozamiz was suffering from certain infirmities in her body and at times,
she was forgetful, but there was no categorical statement that Carmen Ozamiz succumbed to what
respondents suggest as her alleged "second childhood" as early as 1987. The petitioners' rebuttal
witness, Dr. William Buot, a doctor of neurology, testified that no conclusion of mental incapacity at the
time the said deed was executed can be inferred from Dr. Faith Go's clinical notes nor can such fact be
deduced from the mere prescription of a medication for episodic memory loss. 73 (Emphasis ours)
In this case, petitioners' claim that Venancio and Leonila were forgetful and at times sickly was not even supported
by medical evidence. It was based solely on Emerlina's testimony, which failed to demonstrate that Venancio and Leonila's
mental state had prevented them from freely giving their consent to the 1978 Deed or from understanding the nature and
effects of their disposition.
It is settled that a person is not incapacitated to enter into a contract merely because of advanced years or by
reason of physical infirmities, unless such age and infirmities impair his mental faculties to the extent that he is unable to
properly, intelligently and fairly understand the provisions of said contract, or to protect his property rights. 74
Petitioners' reliance on the case of Domingo v. CA 75 is misplaced. There, the Court declared a deed of sale null and
void given that the seller was already of advanced age and senile at the time of its execution, thus:
The unrebutted testimony of Zosima Domingo shows that at the time of the alleged execution of the deed,
Paulina was already incapacitated physically and mentally. She narrated that Paulina played with her waste
and urinated in bed. Given these circumstances, there is in our view sufficient reason to seriously doubt
that she consented to the sale of and the price for her parcels of land. x x x. 76
No similar circumstances, indicating senility and clear incapacity to contract, have been alleged or proved in the
instant case.
"A person is presumed to be of sound mind at any particular time and the condition is presumed to exist, in the
absence of proof to the contrary." 77 In this case, petitioners failed to discharge their burden of proving, by clear and
convincing evidence, that their parents were mentally incompetent to execute the 1978 Deed in favor of Ponciano.
Undue influence was not proved

"There is undue influence when a person takes improper advantage of his power over the will of another, depriving
the latter of a reasonable freedom of choice." 78
Other than petitioners' general allegation that Ponciano unduly took advantage of his being the eldest child and his
close relationship with their parents, no other circumstance or evidence has been presented to show how Ponciano exerted
his undue influence or how Venancio and Leonila were thereby deprived of the freedom to exercise sufficient judgment in
selling the subject properties to Ponciano.
"[U]ndue influence that vitiated a party's consent must be established by full, clear and convincing evidence,
otherwise, the latter's presumed consent to the contract prevails." 79

5
Lack or inadequacy of consideration
was not established

While maintaining that the 1978 Deed was a forgery, petitioners also insist that the deed was simulated. The
incompatibility of these two contentions does not help petitioners' case. Forgery suggests that no consent was given to the
transaction, while simulation indicates a mutual agreement albeit to deceive third persons.
Simulation has been defined as the declaration of a fictitious will, made deliberately by mutual agreement of the
parties, in order to produce the appearances of a juridical act which does not exist or is different from that which was really
executed, for the purpose of deceiving third persons. Accordingly, simulation exists when: (a) there is an outward declaration
of will different from the will of the parties; (b) the false appearance was intended by mutual agreement of the parties; and
(c) their purpose is to deceive third persons. 80
None of the foregoing requisites have been shown to exist in this case.
In claiming that the 1978 Deed was simulated, petitioners assert that there was no consideration and the vouchers
supposedly showing Ponciano's payment of P704,243.77 should not be considered as evidence since private respondents
failed to offer them, having been deemed to have waived their presentation of evidence. Petitioners likewise argue that the
price, in said amount, was unconscionable. 81
That the vouchers were not offered in evidence will not serve to strengthen petitioners' theory of simulation. The
notarized 1978 Deed shows on its face that the properties were sold for the price of P704,243.77. The 1978 Deed also
appears to have gone through the procedure of registration, leading to the issuance of TCT in Ponciano's name.
In Mendezona, 82 the appellate court ruled that the assailed deed of absolute sale was a simulated contract since
the petitioners therein, in whose favor the deed was executed, failed to prove that the consideration was actually paid. This
Court disagreed with the CA's ruling, holding that:
Contrary to the erroneous conclusions of the appellate court, a simulated contract cannot be
inferred from the mere non-production of the checks. It was not the burden of the petitioners to prove
so. It is significant to note that the Deed of Absolute Sale dated April 28, 1989 is a notarized document
duly acknowledged before a notary public. As such, it has in its favor the presumption of regularity, and it
carries the evidentiary weight conferred upon it with respect to its due execution. It is admissible in
evidence even without further proof of its authenticity and is entitled to full faith and credit upon its face.
Payment is not merely presumed from the fact that the notarized Deed of Absolute Sale dated
April 28, 1989 has gone through the regular procedure as evidenced by the transfer certificates of title
issued in petitioners' names by the Register of Deeds. In other words, whosoever alleges the fraud or
invalidity of a notarized document has the burden of proving the same by evidence that is clear,
convincing, and more than merely preponderant. Therefore, with this well-recognized statutory
presumption, the burden fell upon the respondents to prove their allegations attacking the validity and
due execution of the said Deed of Absolute Sale. Respondents failed to discharge that burden; hence, the
presumption in favor of the said deed stands. But more importantly, that notarized deed shows on its
face that the consideration of One Million Forty Thousand Pesos (P1,040,000.00) was acknowledged to
have been received by Carmen Ozamiz.
xxx xxx xxx
Considering that Carmen Ozamiz acknowledged, on the face of the notarized deed, that she
received the consideration at One Million Forty Thousand Pesos (P1,040,000.00), the appellate court
should not have placed too much emphasis on the checks, the presentation of which is not really
necessary. Besides, the burden to prove alleged non-payment of the consideration of the sale was on the
respondents, not on the petitioners. Also, between its conclusion based on inconsistent oral testimonies
and a duly notarized document that enjoys presumption of regularity, the appellate court should have
given more weight to the latter. Spoken words could be notoriously unreliable as against a written
document that speaks a uniform language. 83 (Citations omitted and emphasis ours)
Contending that the price paid by Ponciano for the properties was unconscionably low, petitioners point to the
alleged sale of Lot 30, measuring 8,047 sq m, by Pabiloña, et al. 84 to Cityland, Inc., on September 18, 1992 for
P12,070,500.00. 85
Petitioners, however, have not demonstrated how the alleged selling price for Lot 30 in 1992 proves that the price
paid by Ponciano under the 1978 Deed was unconscionable.
Furthermore, it is beyond dispute that the Deed of Absolute Sale in favor of Ponciano was executed in 1978, or
nearly 14 years before the alleged sale of Lot 30 to Cityland, Inc. Given the obvious difference in the time of transaction, the

6
prevailing market conditions, and the size of the properties, petitioners cannot sweepingly conclude that the price paid by
Ponciano in 1978 was unconscionable on the basis of the 1992 sale of Lot 30.
In Ceballos v. Intestate Estate of the Late Mercado, 86 the Court had occasion to rule:
Harping on the alleged unconscionably low selling price of the subject land, petitioner points out
that it is located in a tourist area and golf haven in Cebu. Notably, she has failed to prove that on February
13, 1982, the date of the sale, the area was already the tourist spot and golf haven that she describes it to
be. In 1990, the property might have been worth ten million pesos, as she claimed; however, at the time of
the sale, the area was still undeveloped. Hence, her contention that the selling price was unconscionably
low lacks sufficient substantiation. 87 (Citations omitted)
With more reason should the Court, in this case, hold that petitioners failed to substantiate their claim of an
unconscionable selling price, considering that they have not shown any evidence of either the condition of the subject
properties in 1978 or other factors affecting their valuation, which may possibly indicate the gross inadequacy of the price
paid by Ponciano.
Petitioners would have this Court appreciate, as additional indications of simulation of the 1978 Deed, the alleged
late registration thereof in 1993 or 15 years after the sale, and the Tax Declarations that were allegedly still in Leonila's name
up to the time the Complaint was filed. 88 These contentions, however, do not suffice to constitute the strong, positive and
convincing evidence that will overcome the presumption of due execution of a notarized document.
In any event, records show that the 1978 Deed was in fact registered in 1984, during Venancio and Leonila's
lifetime. Both OCT No. O-197 89 and OCT No. O-443 90 bear an annotation referring to the 1978 Deed, inscribed on
November 12, 1984, and based on such annotation, new transfer certificates of title were issued in lieu of OCT No. O-197
and OCT No. O-443 in Ponciano's name; TCT No. 15125, 91 in particular, appears to have been issued on November 12,
1984. By such registration and by obtaining certificates of title in his name, Ponciano had clearly asserted his ownership over
the properties. Thus, that the Tax Declarations were still in Leonila's name cannot be the basis to conclude that the 1978
Deed was a simulation.
A contract or conduct apparently honest and lawful must be treated as such until it is shown to be otherwise by
either positive or circumstantial evidence. A duly executed contract enjoys the presumption of validity, and the party
assailing its regularity has the burden to prove its simulation. Indeed, it is settled that notarized documents carry the
presumption of due execution, lending truth to the statements therein contained and to the authenticity of the signatures
thereto affixed. 92 Petitioners have failed to adduce the requisite clear and convincing evidence to overturn this
presumption.
Alleged defects in the notarization
were raised only before this Court

Petitioners argue that the parties' Acknowledgment of the 1978 Deed before the Notary Public, Federico
Magdangal, whose notarial commission was for Makati City, was done outside the latter's "territorial limits" because the
property is in Tanauan, Batangas. Furthermore, while the Acknowledgment was done in Makati City, its printed text
expressly states that the parties personally appeared before the Notary Public in Tanauan, Batangas. 93 Petitioners also
assert that their parents were residents of Tanauan, Batangas, and given their advanced age, would not have gone to Makati
on the same day that the 1978 Deed was executed, to have the same notarized. 94
Petitioners further assert that while the Acknowledgment indicated that Ponciano exhibited his residence
certificate to the Notary Public, it did not reflect any identification document from Venancio and Leonila. They argue that the
absence of such document contravened the Notary Public's statement that Venancio and Leonila were known to him. 95
As private respondents have pointed out, however, these claims were only raised for the first time before this
Court. 96
"It is well-settled that issues not raised in the court a quo cannot be raised for the first time on appeal in the
Supreme Court without violating the basic rules of fair play, justice and due process." 97 Due process dictates that when a
party who adopts a certain theory upon which the case is tried and decided by the lower court, he should not be allowed to
change his theory on appeal. The reviewing court will not consider a theory of the case which has not been brought to the
lower court's attention; a new theory cannot be raised for the first time at such late stage. 98 Thus, We cannot bend
backwards to examine the issue belatedly raised by petitioners at this late stage in the proceedings.
Granting the Acknowledgment was defective, the same will merely strip the document of its public character and
reduce it to a private instrument. 99 It remains incumbent upon petitioners to prove, by preponderance of evidence, their
allegation that the deed of sale was forged even though that document no longer enjoys any significantly weighted
presumption as to its validity. 100
The Court has explained "preponderance of evidence" thus:
7
 "Preponderance of evidence" is the weight, credit, and value of the aggregate evidence on either
side and is usually considered to be synonymous with the term "greater weight of the evidence" or
"greater weight of the credible evidence." Preponderance of evidence is a phrase which, in the last
analysis, means probability of the truth. It is evidence which is more convincing to the court as worthy of
belief than that which is offered in opposition thereto. 101 (Italics ours)
Petitioners have argued that their evidence is of greater weight since private respondents did not at all present any
evidence, particularly, to prove the notarization of the 1978 Deed and the genuineness of their parents' signatures
thereon. 102
We are not convinced. Time and again, this Court has ruled that:
In civil cases, it is a basic rule that the party making allegations has the burden of proving them
by a preponderance of evidence. The parties must rely on the strength of their own evidence and not
upon the weakness of the defense offered by their opponent. This rule holds true especially when the
latter has had no opportunity to present evidence because of a default order. Needless to say, the extent
of the relief that may be granted can only be so much as has been alleged and proved with
preponderant evidence required under Section 1 of Rule 133. 103 (Citations omitted and emphasis ours)
The same principle applies here where private respondents were considered to have waived the presentation of
their evidence at trial. "Ei incumbit probatio qui dicit, non qui negat. He who asserts, not he who denies, must
prove." 104 "We have consistently applied the ancient rule that if the plaintiff, upon whom rests the burden of proving his
cause of action, fails to show in a satisfactory manner facts on which he bases his claim, the defendant is under no obligation
to prove his exception or defense." 105
Thus, petitioners' evidence must stand on its own merit and must be scrutinized for veracity and probative value. It
is not rendered conclusive simply because it was not met with evidence from the defense.
Section 1, Rule 133 of the Revised Rules of Court states how preponderance of evidence is determined, viz.:
In determining where the preponderance or superior weight of evidence on the issues involved lies, the
court may consider all the facts and circumstances of the case, the witnesses' manner of testifying, their
intelligence, their means and opportunity of knowing the facts to which [they] are testifying, the nature
of the facts to which they testify, the probability or improbability of their testimony, their interest or
want of interest, and also their personal credibility so far as the same may legitimately appear upon the
trial. The court may also consider the number of witnesses, though the preponderance is not necessarily
with the greater number. (Emphasis ours)
Considering all the circumstances of this case and all evidence adduced in support of the complaint, We find that
even by the standard of preponderance of evidence, petitioners have failed to establish the alleged simulation or forgery of
the 1978 Deed.
As previously explained, petitioners' claim of forgery is built on Emerlina's testimony which we have found to be
both uncertain and self-serving. More importantly, a visual comparison of the disputed and admittedly genuine signatures of
Venancio and Leonila has led this Court to find striking similarities that negate petitioners' claim of forgery. Petitioners have
likewise failed to substantiate their claims that their parents were mentally incapable of executing the 1978 Deed, that
Ponciano exerted undue influence on their parents, and that there was no consideration for the sale or that it was
unconscionable.
All told, We find that the CA did not err in upholding the RTC's decision to dismiss petitioners' complaint.
WHEREFORE, the petition is DENIED. The Decision dated May 25, 2010 and Resolution dated October 13, 2010 of
the Court of Appeals in CA-G.R. CV No. 86953 are AFFIRMED.
SO ORDERED.
Sereno, C.J., Leonardo-de Castro, Del Castillo and Jardeleza, JJ., concur.
||| (Almeda v. Heirs of Almeda, G.R. No. 194189, [September 14, 2017])

8
 SECOND DIVISION

[G.R. No. 208638. January 24, 2018.]

SPOUSES FRANCISCO ONG and BETTY LIM ONG, and SPOUSES JOSEPH ONG CHUAN and ESPERANZA ONG
CHUAN, petitioners, vs. BPI FAMILY SAVINGS BANK, INC., respondent.

DECISION

REYES, JR., J p:

This is a Petition for Review under Rule 45 of the Rules of Court, as amended, seeking to reverse and set aside the
Decision 1 dated January 31, 2013 and Resolution 2 dated August 16, 2013 of the Court of Appeals (CA) in CA-G.R. CV No.
92348. SaCIDT

The Facts

Spouses Francisco Ong and Betty Lim Ong and Spouses Joseph Ong Chuan and Esperanza Ong Chuan (collectively
referred to as the petitioners) are engaged in the business of printing under the name and style "MELBROS PRINTING
CENTER." 3
Sometime in December 1996, Bank of Southeast Asia's (BSA) managers, Ronnie Denila and Rommel Nayve, visited
petitioners' office and discussed the various loan and credit facilities offered by their bank. In view of petitioners' business
expansion plans and the assurances made by BSA's managers, they applied for the credit facilities offered by the latter.
Sometime in April 1997, they executed a real estate mortgage (REM) over their property situated in Paco, Manila,
covered by Transfer Certificate of Title No. 143457, in favor of BSA as security for a P15,000,000.00 term loan and
P5,000,000.00 credit line or a total of P20,000,000.00.
With regard to the term loan, only P10,444,271.49 was released by BSA (the amount needed by the petitioners to
pay out their loan with Ayala life assurance, the balance was credited to their account with BSA).
With regard to the P5,000,000.00 credit line, only P3,000,000.00 was released. BSA promised to release the
remaining P2,000,000.00 conditioned upon the payment of the P3,000,000.00 initially released to petitioners.
Petitioners acceded to the condition and paid the P3,000,000.00 in full. However, BSA still refused to release the
P2,000,000.00. Petitioners then refused to pay the amortizations due on their term loan.
Later on, BPI Family Savings Bank (BPI) merged with BSA, thus, acquired all the latter's rights and assumed its
obligations. BPI filed a petition for extrajudicial foreclosure of the REM for petitioners' default in the payment of their term
loan.
In order to enjoin the foreclosure, petitioners instituted an action for damages with Temporary Restraining Order
and Preliminary Injunction against BPI praying for P23,570,881.32 as actual damages; P1,000,000.00 as moral damages;
P500,000.00 as attorney's fees, litigation expenses and costs of suit.
On November 10, 2008, the trial court rendered its Decision, 4 disposing, thus:
WHEREFORE, in view of all the foregoing, the Court hereby resolves in favor of the plaintiffs and
against the defendant bank for the latter to pay the former the above-cited sum of Php20,469,498.00 by
way of actual damages and Php500,000.00 by way of attorney's fees.
No pronouncement as to costs.
SO ORDERED. 5
BPI thereafter appealed to the CA averring that the court a quo erred when it ruled that petitioners were entitled to
damages. BPI posited that petitioners are liable to them on the principal balance of the mortgage loan agreement.
9
 The CA reversed the decision of the lower court and ruled in favor of BPI, the dispositive portion of which states:
WHEREFORE, in the light of the foregoing, the assailed Decision dated 10 November 2008 of the
Regional Trial Court, Branch 49, Manila, in Civil Case No. 02-105189 is hereby REVERSED and SET ASIDE.
The Complaint for Damages below is DISMISSED for lack of merit.
SO ORDERED.
Petitioners filed a Motion for Reconsideration but the same was denied by the CA in a Resolution dated August 16,
2013, viz.:
Finding no new matter of substance which would warrant the modification much less the reversal
of the assailed decision, plaintiffs-appellees' motion for reconsideration is hereby DENIED for lack of merit.
SO ORDERED. 6
Aggrieved, petitioners filed the present petition.

The Issues

I. WHETHER OR NOT THERE WAS ALREADY AN EXISTING AND BINDING CONTRACT BETWEEN PETITIONERS AND BSA
WITH REGARD TO THE OMNIBUS CREDIT LINE; cHECAS
II. WHETHER OR NOT BSA INCURRED DELAY IN THE PERFORMANCE OF ITS OBLIGATIONS;
III. WHETHER OR NOT PETITIONERS ARE ENTITLED TO DAMAGES; and
IV. WHETHER OR NOT BPI CAN FORECLOSE THE MORTGAGE ON THE LAND OF HEREIN PETITIONERS. 7

Ruling of the Court

The Court finds merit in the petition.

In fine, petitioners contend that the CA in its assailed decision erred in ruling that that there was no perfected
contract between the parties with respect to the omnibus credit line and that being so, no delay could be attributed to BPI,
the successor-in-interest of BSA. Petitioners likewise pointed out that it was error for the CA to delve into the matter
regarding existence or perfection of a contract, especially when such issue was never raised by BPI in any of its pleadings or
proceedings in the lower court.
As a rule, a contract is perfected upon the meeting of the minds of the two parties. It is perfected by mere consent,
that is, from the moment that there is a meeting of the offer and acceptance upon the thing and the cause that constitute
the contract. 8
In the case of Spouses Palada v. Solidbank Corporation, et al., 9 this Court held that under Article 1934 of the Civil
Code, a loan contract is perfected only upon the delivery of the object of the contract. In that case, although therein
petitioners applied for a P3,000,000.00 loan, only the amount of P1,000,000.00 was approved by therein respondent bank
because petitioners became collaterally deficient. Nonetheless, the loan contract was deemed perfected on March 17, 1997,
the date when petitioners received the P1,000,000.00 loan, which was the object of the contract and the date when the
REM was constituted over the property. 10
Applying this to the case at bench, there is no iota of doubt that when BSA approved and released the
P3,000,000.00 out of the original P5,000,000.00 credit facility, the contract was perfected.
The conclusion reached by the appellate court that only the term loan of P15,000,000.00 was proved to have
materialized into an actual contract while the P5,000,000.00 omnibus line credit remained non-existent is ludicrous. A
careful perusal of the records reveal that the credit facility that BSA extended to petitioners was a credit line of
P20,000,000.00 consisting of a term loan in the sum of P15,000,000.00 and a revolving omnibus line of P3,000,000.00 to be
used in the petitioner's printing business. In separate Letters both dated January 31, 1997, BSA approved the term loan and
the credit line. Such approval and subsequent release of the amounts, albeit delayed, perfected the contract between the
parties.
Loan is a reciprocal obligation, as it arises from the same cause where one party is the creditor and the other the
debtor. 11 The obligation of one party in a reciprocal obligation is dependent upon the obligation of the other, and the
performance should ideally be simultaneous. This means that in a loan, the creditor should release the full loan amount and
the debtor repays it when it becomes due and demandable. 12

10
 In this case, BSA did not only incur delay in releasing the pre-agreed credit line of P5,000,000.00 but likewise
violated the terms of its agreement with petitioners when it deliberately failed to release the amount of P2,000,000.00 after
petitioners complied with their terms and paid the first P3,000,000.00 in full. The default attributed to petitioners when they
stopped paying their amortizations on the term loan cannot be sustained by this Court because long before they sent a
Letter to BSA informing the latter of their refusal to continue paying amortizations, BSA had already reneged on its obligation
to release the amount previously agreed upon, i.e., the P5,000,000.00 covered by the credit line.
Article 1170 of the Civil Code enumerates the instances when parties to a contract may be held liable for
damages, viz.:
Article 1170. Those who in the performance of their obligations are guilty of fraud, negligence, or delay,
and those who in any manner contravene the tenor thereof, are liable for damages.
It bears stressing that petitioners entered into a credit agreement with BSA to enable them to buy machineries and
equipment for their printing business. On its face, it can be gleaned that the purpose of the credit agreement with BSA was
indeed to assist and finance petitioner's business by way of providing additional funds as working capital or revolving
fund. 13 AHDacC
The direct consequences therefore of the acts of BSA are: the machinery and equipment that were essential to
petitioners' business and requisite for its operations had to be procured so late in time and had crippled the printing of
school supplies, hence, petitioners were constrained to cancel purchase orders of their clients to petitioners' damage. 14
BSA claims that the release of the amount covered by the credit line was subject to the "availability of funds" thus
only a part of the proceeds of the entire omnibus line was released.
Assuming for the sake of discussion that the funds at the time were insufficient to cover the entire P5,000,000.00,
BSA should have at least informed petitioners in advance so that the latter could have resorted to other means to secure the
amount needed for their printing business. The omnibus line was approved and became effective on January 1997 yet BSA
did not allow petitioners to draw from the line until November 1997. Moreover, BSA downgraded petitioners' drawdown to
only P3,000,000.00 despite the clear wordings of their credit agreement whereby petitioners were allowed to draw any
portion or all of the omnibus line not to exceed P5,000,000.00. The almost 10 months delay in releasing the amount applied
for by petitioners negates good faith on the part of BSA.
BPI insists that it acted in good faith when it sought extrajudicial foreclosure of the mortgage and that it was not
responsible for acts committed by its predecessor, BSA. Good faith, however, is not an excuse to exempt BPI from the effects
of a merger or consolidation, viz.:
Section 80. Effects of merger or consolidation. — The merger or consolidation shall have the
following effects:
1. The constituent corporations shall become a single corporation which, in case of merger, shall
be the surviving corporation designated in the plan of merge; and, in case of consolidation, shall be the
consolidated corporation designated in the plan of consolidation;
xxx xxx xxx
4. The surviving or the consolidated corporation shall thereupon and thereafter possess all the
right, privileges, immunities and franchises of each of the constituent corporations; and all property, real
or personal, and all receivable due on whatever account, including subscriptions to shares and other
choses in action, and all and every other interest of, or belonging to, or due to each constituent
corporation, shall be deemed transferred to and vested in such surviving or consolidated corporation
without further act or deed; and
5. The surviving or consolidated corporation shall be responsible and liable for all the liabilities
and obligations of each of the constituent corporations in the same manner as if such surviving or
consolidated corporation had itself incurred such liabilities or obligations; and any pending claim, action,
or proceeding brought by or against any of such constituent corporations may be prosecuted by or against
the surviving or consolidated corporation. The rights of creditors or liens upon the property of any of such
constituent corporations shall not be impaired by such merger or consolidation.
Applying the pertinent provisions of the Corporation Code, BPI did not only acquire all the rights, privileges and
assets of BSA but likewise acquired the liabilities and obligations of the latter as if BPI itself incurred it.
Moreover, Section 1 (e) of the Articles of Merger dated November 21, 2001 provides that all liabilities and
obligations of BSA shall be transferred to and become the liabilities and obligations of BPI in the same manner as if it had
itself incurred such liabilities or obligations. 15

11
 Pursuant to such merger and consolidation, BPI's right to foreclose the mortgage on petitioner's property depends
on the status of the contract and the corresponding obligations of the parties originally involved, that is, the agreement
between its predecessor BSA and petitioner.
Since BSA incurred delay in the performance of its obligations and subsequently cancelled the omnibus line without
petitioners' consent, its successor BPI cannot be permitted to foreclose the loan for the reason that its successor BSA
violated the terms of the contract even prior to petitioners' justified refusal to continue paying the amortizations.
The trial court pointed out that based on the evidence presented by petitioners, the latter conformed to the
acquisition of the loan precisely because BSA promised them working capital for the expansion of their business, viz.:
Clear from the plaintiffs' evidence actually presented and marked is the fact that plaintiffs
conformed to the acquisition of the loan principally upon the promise by BSA that the working capital
would be made available to plaintiffs on time for the opening of classes, for plaintiffs to be able to secure
their machineries and meet the orders of their clients. 16 IDSEAH
The subsequent refusal of BSA in releasing the maximum amount agreed upon, transgressed the very purpose of
petitioners in availing the credit facility. Clearly, given the nature of petitioners' business, time is of the essence as they
needed to have the orders ready before opening of classes.
To emphasize the injury caused to the petitioners due to the bank's delay and subsequent refusal to release the
omnibus loan, the petitioners testified as follows:
Q  The fact that the bank did not allow you to avail of the omnibus line, what is the effect to your business?
A  Because I have already manufactured the notebooks for St. Michael and I already sent them to
supermarkets and family stores like SM and Gaisano and they have PO coming, I cannot deliver the
goods because of lack of funds. They kept calling and confirming about their PO. Because of this my
reputation is going down.
(TSN dated November 28, 2002 pp. 28-29)
Witness:
  And the 4.2 was released . . . When we originally received the Php4.2 Million, we could not push through
with our plan in our business, sir.
Court:
Why?
Witness:
  Because it was not sufficient and money came to us very late with the lines of our plans, because we are
supposed to manufacture notebooks, school items in time for the school opening in June, and it was
delayed, your Honor. We continued paying our amortization for two years. We paid almost 7 million.
(TSN dated September 24, 2007 pp. 13 and 14)
Q: How important is your working capital to your business?
A: The omnibus line is the most important in the business.
Court:
  The question is, why is it important?
A: Because I need capital for my business to replenish my supply and to pay the labor and materials.
Atty. Cinco:
  And when you said the proceeds of the omnibus line was released only on November 10, 1997, how did
this affect your business?
A: My business suffered badly because I already got the orders from the department stores and book stores.
(TSN dated September 17, 2004 pp. 43-44) 17
The CA, on the other hand, is of the opinion that the delay and damages claimed by the petitioners are mere cloaks
to hide their obligations in the mortgage loan agreement.
The Court disagrees.

12
 No evidence was ever presented in the lower courts showing that the petitioners defaulted in paying their
amortizations on the term loan prior to their refusal which was mainly grounded on BSA's failure to release the amount
covered by the omnibus line. Petitioners' continuous payment of amortizations even during the period between January
1997 and November 1997 (when BSA incurred delay in releasing the omnibus line credit) is inconsistent with the appellate
court's finding that petitioners intended to hide their obligations in the mortgage loan agreement. Petitioners' refusal to
continue paying was only prompted by BSA's refusal to abide by the terms of the contract. Thus, it would be the height of
injustice to allow BPI to foreclose on the mortgage despite violation of its predecessor BSA of its principal obligation.
In the case of Development Bank of the Philippines v. Guariña Agricultural and Realty Development Corp., 18 the
Court ruled that a debtor cannot incur delay unless the creditor has fully performed its reciprocal obligation, viz.:
It is true that loans are often secured by a mortgage constituted on real or personal property to
protect the creditor's interest in case of the default of the debtor. By its nature, however, a mortgage
remains an accessory contract dependent on the principal obligation, such that enforcement of the
mortgage contract will depend on whether or not there has been a violation of the principal obligation.
While a creditor and a debtor could regulate the order in which they should comply with their reciprocal
obligations, it is presupposed that in a loan the lender should perform its obligation — the release of the
full loan amount — before it could demand that the borrower repay the loaned amount. In other words,
Guariña Corporation would not incur in delay before DBP fully performed its reciprocal obligation. 19
Since the credit facility that BSA extended to petitioners was a credit line total of P20,000,000.00, its refusal to
release the balance on the omnibus line prevented full performance of its obligation to petitioners. There being no release
of the full loan amount, no default could be attributed to petitioners. In other words, foreclosure was premature. aCIHcD
In Metropolitan Bank v. Wong, 20 the Court declared:
While the law recognizes the right of a bank to foreclose a mortgage upon the mortgagor's failure
to pay his obligation, it is imperative that such right be exercised according to its clear mandate. Each and
every requirement of the law must be complied with, lest, the valid exercise of the right would end. It must
be remembered that the exercise of a right ends when the right disappears, and it disappears when it is
abused especially to the prejudice of others. 21
BPI was remiss in its duty of looking into the transaction involving the mortgage it sought to foreclose. As BSA's
successor-in-interest, it cannot feign ignorance of transactions entered into by the former especially when it seeks to benefit
from the same by foreclosing the mortgage thereon.
Anent the propriety of awarding damages, the Court upholds the ruling of the trial court that actual damages in the
amount of P2,772,000.00 is proper. Said amount is the computed total difference in interest paid to other sources and that
which should have only been paid to BSA had the latter complied with the terms of the agreement. However, with regard to
the claim of damages representing petitioners' unrealized profits of P23,570,881.32, the Court agrees with the CA that
petitioners failed to prove with a reasonable degree of certainty, premised upon competent proof and on the best evidence
obtainable, the actual amount of loss. Although petitioners were able to present in evidence purchase orders, company
records and checks, the Court agrees with the appellate court that these are insufficient as they are self-serving. Although
petitioners claimed that these orders were cancelled, no other evidence was adduced to prove such fact of cancellation.
The law allows the grant of exemplary damages to set an example for the public good. The banking system has
become an indispensable institution in the modern world and plays a vital role in the economic life of every civilized society.
Whether as mere passive entities for the safe-keeping and saving of money or as active instruments of business and
commerce, banks have attained an ubiquitous presence among the people, who have come to regard them with respect and
even gratitude and most of all, confidence. For this reason, banks should guard against injury attributable to negligence or
bad faith on its part. 22 Thus, the Court finds it proper to likewise award exemplary damages in the amount of P100,000.00.
Finally, as to the matter concerning attorney's fees, the Court finds the P500,000.00 awarded by the trial court to be
excessive and should accordingly be reduced to P300,000.00.
WHEREFORE, in light of the foregoing, the petition is hereby GRANTED. The Decision dated January 31, 2013 of the
Court of Appeals in CA-G.R. CV No. 92348 is hereby REVERSED and SET ASIDE. The questioned extrajudicial foreclosure of
real estate mortgage is likewise declared VOID. Respondent BPI Family Savings Bank, Inc. is hereby ORDERED to pay
petitioners Spouses Francisco Ong and Betty Lim Ong and Spouses Joseph Ong Chuan and Esperanza Ong Chuan the amount
of P2,772,000.00 as actual or compensatory damages; P100,000.00 as exemplary damages; P300,000.00 as attorney's fees;
and interest of six percent (6%) per annum on all the amounts of damages reckoned from the finality of this decision.
SO ORDERED.
Carpio, Bersamin, * Perlas-Bernabe and Caguioa, JJ., concur.
||| (Spouses Ong v. BPI Family Savings Bank, Inc., G.R. No. 208638, [January 24, 2018])

13
 SECOND DIVISION

[G.R. No. 220517. June 20, 2018.]

LOLITA ESPIRITU SANTO MENDOZA and SPS. ALEXANDER and ELIZABETH GUTIERREZ, petitioners, vs. SPS.
RAMON, SR. and NATIVIDAD PALUGOD, respondents.

DECISION

CAGUIOA, J p:

Before the Court is a petition for review on certiorari (Petition) under Rule 45 of the Rules of Court assailing the
Decision 1 dated April 29, 2015 (Decision) of the Court of Appeals 2 (CA) in CA-G.R. CV No. 102904, denying the appeal of
petitioners for lack of merit, and the CA 3 Resolution 4 dated September 10, 2015, denying petitioners' motion for
reconsideration. The CA Decision affirmed the Decision 5 dated March 14, 2013 in favor of respondents and Order 6 dated
May 8, 2014, denying petitioners' motion for reconsideration, of the Regional Trial Court of Bacoor, Cavite, Branch 19 (RTC)
in Civil Case No. BCV 2004-217.

The Facts and Antecedent Proceedings

The CA Decision's brief narration of facts and proceedings before the RTC follows:
[Petitioner] Lolita Espiritu Santo Mendoza (Lolita, for brevity) and Jasminia Palugod (Jasminia, for
brevity) were close friends. Lolita was a businesswoman engaged in selling commodities and houses and
lots, while Jasminia was then working as a Supervisor in the Philippine Long Distance Telephone Company
(PLDT). In 1991, Lolita and Jasminia bought the subject lot [with an area of 120 sq. m.] 7 on installment for
one (1) year until they decided to pay the balance in full. [The lot is located in Sagana Remville 8 Homes,
Habay, Bacoor, Cavite.] 9 In 1995, Jasminia became afflicted with breast cancer. Sometime in 1996, Lolita
and Jasminia constructed a residential house on the subject lot. Although Lolita has no receipts, she shared
in the cost of the construction of the house from her income in the catering business and selling of various
products. [Jasminia, based on a certification, 10 was separated from employment on December 30, 1998,
and on January 18, 1999, she received her retirement pay 11 in the amount of P1,383,773.59. 12 ] On May
11, 2004, Jasminia executed a Deed of [Absolute] Sale in favor of Lolita, who eventually mortgaged [on
November 19, 2004 13 ] the subject property to [petitioner] Elizabeth Gutierrez as a security for a loan in
the amount of Php800,000.00.
On the other hand, [respondents spouses Ramon, Sr. and Natividad Palugod] alleged that their
daughter, the late Jasminia, acquired the property located in Sagana Homes, Habay, Bacoor[,] Cavite. Prior
to and after the said acquisition of the subject property, Jasminia was living with [petitioner] Lolita, a
lesbian. Jasminia was an employee of PLDT who rose to the rank of Traffic Supervisor before her separation
from service. [Petitioner] Lolita has no work or means of livelihood of her own and was fully dependent on
Jasminia. Unfortunately, Jasminia was afflicted with Stage IV breast cancer with multiple bone metastasis.
When she was nearing her death, she told her mother, [respondent] Natividad Palugod, that her house
and lot shall go to her brother Ramonito Palugod, but [petitioner] shall be allowed to stay therein.
[Jasminia died on September 26, 2004 at the Philippine General Hospital. 14 ] Meanwhile, Lolita, taking
advantage of her relationship with Jasminia, caused the latter to sign a Deed of Absolute Sale in her favor.
Thereafter, Lolita, aided by her brother Wilfredo Mendoza as witness, entered it for registration with the
Office of the Registry of Deeds. Thus, TCT (Torrens [sic] Certificate of Title) No. T-308560 in the name of
Jasminia was cancelled and TCT No. T-1077041 was issued in the name of Lolita.
[Respondents], upon learning from the Office of the Registry of Deeds that Jasminia's certificate
of title has been cancelled, executed an Affidavit of Adverse Claim of their right and interest over the
property as the only compulsory and legitimate heirs of Jasminia. However, [petitioner] Lolita, knowing

14
 fully well of the impending suit, made it appear that she mortgaged the property to [petitioners] Spouses
Gutierrez as a security for a loan amounting to Php800,000.00.
Thus, [respondents] filed a complaint for Declaration of Nullity of the Deed of Absolute Sale and
the Deed of Real Estate Mortgage with the RTC of Bacoor[,] Cavite.
On March 14, 2013, the RTC of Bacoor, Cavite, Branch 19, rendered the assailed Decision in favor
of [respondents]. The RTC declared that there can be no contract unless the following concur: (a) consent;
(2) object certain; and (3) cause of the obligation. [Respondents] were able to prove by preponderance of
evidence that the Deed of Sale involved no actual monetary consideration. [Petitioner] Lolita, in her
testimony, admitted that the sale was without monetary consideration. The RTC ruled that the Deed of
Sale is void for being simulated, hence, the Deed of Real Estate Mortgage executed therein by [petitioner]
Lolita in favor of [petitioners] Spouses Gutierrez is likewise void, since, in a real estate mortgage, it is
essential that the mortgagor be the absolute owner of the property to be mortgaged.
[The dispositive portion of the RTC Decision states:
WHEREFORE, premises considered, the judgment is hereby rendered in favor of
the [respondents] Sps. Ramon, Sr. and Natividad Palugod and against the [petitioners]
Lolita Espiritu Santo Mendoza and Sps. Alexander and Elizabeth Gutierrez as follows:
1. That the Deed of Absolute Sale dated May 11, 2004 purportedly executed by x x x
Jasminia Palugod in favor of [petitioner] Lolita Espiritu Santo Mendoza as null and
void;
2. That the Deed of Real Estate Mortgage dated November 19, 2004 executed by
[petitioner] Lolita Espiritu Santo Mendoza in favor of [petitioners] Spouses
Alexander and Elizabeth Gutierrez as null and void;
3. To cancel the Transfer Certificate of Title No. T-1077041 in the name of [petitioner] Lolita
Espiritu Santo Mendoza and to reinstate Transfer Certificate of Title No. 308560 in
the name of Jasminia P. Palugod;
4. Declaring [respondents] as the lawful owner[s] of the subject property by succession as
the only and compulsory heirs of the late Jasminia P. Palugod; and
5. Ordering [petitioners], jointly and severally, to pay [respondents] the amount of
Php200,000.00 in attorney's fees.
SO ORDERED. 15 ]
[Petitioners] filed [a] motion for reconsideration, but the RTC, in the assailed Order dated May 8,
2014, denied the same for lack of merit.
Aggrieved, [petitioners] interposed [an] appeal [before the CA]. 16
The CA Ruling

The CA denied petitioners' appeal for lack of merit. The CA ruled that respondents, being the only surviving heirs of
Jasminia 17 Paloma Palugod (Jasminia), have the legal personality to question the validity of the deed of sale between
Jasminia and petitioner Lolita Espiritu Santo Mendoza (petitioner Lolita). 18 The CA found no cogent reason to deviate from
the finding of the RTC that the deed of sale is null and void for being absolutely simulated since it did not involve any actual
monetary consideration. 19 The CA likewise agreed with the RTC's finding that the real estate mortgage between petitioner
Lolita and petitioners spouses Alexander and Elizabeth Gutierrez is null and void because the mortgagor was not the
absolute owner of the mortgaged property. 20 The dispositive portion of the CA Decision reads as follows:
WHEREFORE, the appeal is DENIED for lack of merit. The assailed March 14, 2013 Decision and
May 8, 2014 Order of the RTC of Bacoor, Cavite, Branch 19, in Civil Case No. BCV 2004-217, are AFFIRMED.
SO ORDERED. 21
Petitioners filed a motion for reconsideration, which was denied by the CA in its Resolution 22 dated September 10,
2015.
Hence, the present Petition. The Court in its Resolution 23 dated January 13, 2016 denied the Petition for failure to
sufficiently show any reversible error in the challenged CA Decision and Resolution as to warrant the exercise of the Court's
appellate jurisdiction. Petitioners filed a Motion for Reconsideration 24 dated March 28, 2016. Respondents opposed the
Motion for Reconsideration and filed an Opposition/Comment 25 dated April 20, 2016. In its Resolution 26 dated October 3,
2016, the Court granted petitioners' Motion for Reconsideration, reinstated the Petition and required respondents to

15
comment on the Petition. Respondents filed their Comment 27 dated February 4, 2017. Petitioners filed a Reply 28 dated
July 10, 2017.

Issues

The Petition raises the following issues:

1. Whether the CA erred in not upholding as applicable to the case the legal principle that a written contract
is for a valuable consideration despite the utter failure to prove beyond a selective appreciation of
the transcript of stenographic notes that there was indeed no consideration;
2. Whether the CA erred in not upholding as applicable to this case the legal principle that inadequacy of
monetary consideration does not render a conveyance null and void; and
3. Whether the CA erred when it affirmed the finding of the RTC that petitioners-mortgagees are jointly
liable with petitioner-mortgagor despite the lack of evidence against their innocence contrary to the
legal principle that innocent parties must not be held liable for damages. 29

The Court's Ruling

The Petition is meritorious.

While petitioners couch the issues based on erroneous application of certain legal principles — presumption and
adequacy of consideration of contracts, they inherently involve a determination of the correctness of the finding by both the
CA and the RTC that respondents have established by preponderance of evidence the lack of consideration of the disputed
deed of sale. Necessarily, questions of fact must be hurdled in the resolution of the issues raised by petitioners.
As a rule, the factual findings of the CA affirming those of the RTC are final and conclusive, and they cannot be
reviewed by the Court which has jurisdiction to rule only on questions of law in Rule 45 petitions to review. 30
The Court in Pascual v. Burgos 31 reiterated that:
A question of fact requires this [C]ourt to review the truthfulness or falsity of the allegations of
the parties. 32 This review includes assessment of the "probative value of the evidence
presented." 33 There is also a question of fact when the issue presented before this [C]ourt is the
correctness of the lower courts' appreciation of the evidence presented by the parties. 34
There are, however, recognized exceptions where the Court may review questions of fact. These are: (1) when the
factual conclusion is a finding grounded entirely on speculations, surmises and conjectures; (2) when the inference is
manifestly mistaken, absurd or impossible; (3) when there is abuse of discretion; (4) when the judgment is based on a
misapprehension of facts; (5) when the findings of fact are conflicting; (6) when the CA went beyond the issues of the case in
making its findings, which are further contrary to the admissions of both the appellant and the appellee; (7) when the CA's
findings are contrary to those of the trial court; (8) when the conclusions do not cite the specific evidence on which they are
based; (9) when the facts set forth in the petition as well as in the petitioner's main and reply briefs are not disputed by the
respondents; (10) when the CA's findings of fact, supposedly premised on the absence of evidence, are contradicted by the
evidence on record; 35 or (11) when the CA manifestly overlooked certain relevant facts not disputed by the parties, which,
if properly considered, would justify a different conclusion. 36
As will be demonstrated below, the Court's review of the factual findings of the courts below is justified by the
fourth, tenth and eleventh exceptions — the assailed judgments of the CA and the RTC are based on a misapprehension of
facts; the findings of fact of the CA and the RTC, supposedly premised on the absence of evidence, are contradicted by the
evidence on record; and the CA as well as the RTC manifestly overlooked certain relevant facts not disputed by the parties,
which, if properly considered, would justify a different conclusion.
At the heart of the present controversy between respondents spouses Ramon, Sr. (respondent Ramon) and
Natividad Palugod (respondent Natividad), the parents of the late Jasminia and her "close friend" 37 petitioner Lolita is the
(unilateral) Deed of Absolute Sale 38 (DAS) notarized on May 11, 2004 executed by Jasminia in favor of petitioner Lolita, the
validity of which is the central issue in this case. The DAS partly states:
I, JASMINIA PALOMA PALUGOD x x x hereinafter referred to as the VENDOR, FOR AND IN
CONSIDERATION of the sum of FOUR HUNDRED THOUSAND PESOS (P400,000.00) Philippine Currency,
receipt of which is hereby acknowledged and confessed, have SOLD, TRANSFERRED, and CONVEYED,
absolutely and perpetually to LOLITA ESPIRITU SANTO MENDOZA x x x hereinafter referred to as

16
 the VENDEE, her heirs, successors, and assigns, my ONE HUNDRED TWENTY (120) SQUARE METERS lot
located at Habay, Bacoor, Cavite, including all improvements found therein x x x. 39
Both the RTC and the CA declared the DAS void on the ground that it was fictitious or simulated on account of lack
of consideration. According to the RTC, petitioner Lolita "admitted that she has no receipts showing the staggered payment
of P400,000.00 or any agreement made between her and Jasminia as to the consideration of the subject property." 40 On
the other hand, the CA stated that:
Although, on its face, the Deed of Sale appears to be supported by valuable consideration, since it
states that Lolita paid the purchase price of Php400,000.00 for the subject property. However, based on
the testimony of [petitioner] Lolita, it has been proven that she gave no consideration therefor. Having
proven that the price, as reflected in the Deed of Sale is simulated, it is beyond doubt that the sale is null
and void. Article 1471 of the New Civil Code provides that "If the price is simulated, the sale is void, x x x."
Thus, [respondents] are the lawful owners of the subject property by intestate succession as the only and
compulsory heirs of the late Jasminia. 41
Both the RTC and the CA relied on the following testimony of petitioner Lolita:
ATTY. ARANDIA:
  Also, in the presence of Atty. Bongon [the notary public], did you pay Jasminia the consideration on the
Deed of Absolute Sale?
WITNESS:
  No, sir.
ATTY. ARANDIA:
  There was none?
WITNESS:
  Yes, sir. 42
To the lower courts, the above-quoted testimony of petitioner Lolita, plus the absence of receipts, is the unrebutted
proof of the DAS' lack of consideration.
In their motion for reconsideration before the CA and in their Petition, petitioners argue, however, that petitioner
Lolita's principal proof that she did purchase the subject property is the DAS itself while the evidence against her by
respondents are all verbal averments, which are mere conjectures and even hearsay. 43
While petitioner Lolita concedes that she did not pay the consideration for the purchase of the subject property
before Notary Public Atty. Jesus Bongon, 44 she asserts that the payment was made prior to the notarization of the DAS as
shown in her testimony taken on February 23, 2010. 45 She likewise argued this point before the CA in petitioners' motion
for reconsideration. 46
The lower courts, as will be explained below, failed to properly consider the foregoing argument and evidence that
petitioner Lolita raised and adduced. The outcome of the case would have been different had the lower courts given them
the due consideration they deserved.
As correctly pointed out by petitioner Lolita, the DAS is itself the proof that the sale of the property is supported by
sufficient consideration. This is anchored on the disputable presumption of consideration inherent in every contract. Thus,
Article 1354 of the Civil Code provides: "Although the cause is not stated in the contract, it is presumed that it exists and is
lawful, unless the debtor proves the contrary."
This disputable presumption is reiterated in the Rules of Court (Rules). Section 3, Rule 131 of the Rules provides:
SEC. 3. Disputable presumptions. — The following presumptions are satisfactory if uncontradicted,
but may be contradicted and overcome by other evidence:
xxx xxx xxx
(r) That there was a sufficient consideration for a contract[.]
In Mangahas v. Brobio, 47 the Court explained how the presumption of sufficient consideration can be overcome,
to wit:
A contract is presumed to be supported by cause or consideration. 48 The presumption that a
contract has sufficient consideration cannot be overthrown by a mere assertion that it has no
consideration. To overcome the presumption, the alleged lack of consideration must be shown by

17
 preponderance of evidence. 49 The burden to prove lack of consideration rests upon whoever alleges it,
which, in the present case, is respondent. 50
Guided by the above provisions of the Civil Code and the Rules as well as jurisprudence, petitioners stand to benefit
from the disputable presumption of consideration with the presentation of the DAS. Indeed, they can rely on the DAS as
proof that it has consideration — "FOR AND IN CONSIDERATION of the sum of FOUR HUNDRED THOUSAND PESOS
(P400,000.00) Philippine Currency, receipt of which is hereby acknowledged and confessed." 51
With the presumption in favor of petitioner Lolita who is the vendee, it became incumbent upon respondents to
present preponderant evidence to prove lack of consideration. Respondents' mere assertion that the DAS has no
consideration is inadequate.
Regarding the determination of preponderance of evidence, Section 1, Rule 133 of the Rules provides:
SECTION 1. Preponderance of evidence, how determined. — In civil cases, the party having the
burden of proof must establish his case by a preponderance of evidence. In determining where the
preponderance or superior weight of evidence on the issues involved lies, the court may consider all the
facts and circumstances of the case, the witnesses' manner of testifying, their intelligence, their means
and opportunity of knowing the facts to which they are testifying, the nature of the facts to which they
testify, the probability or improbability of their testimony, their interest or want of interest, and also their
personal credibility so far as the same may legitimately appear upon the trial. The court may also consider
the number of witnesses, though the preponderance is not necessarily with the greater number.
The basic rule in civil cases is:
x x x that "the party having the burden of proof must establish his case by a preponderance of
evidence." 52 By "preponderance of evidence is meant simply evidence which is of greater weight, or
more convincing than that which is offered in opposition to it." 53 x x x
xxx xxx xxx
"Where the evidence on an issue of fact is in equipoise or there is doubt on which side the
evidence preponderates[,] the party having the burden of proof fails upon that issue." 54 Therefore, as
"neither party was able to make out a case, neither side could establish its cause of action and prevail with
the evidence it had. They are thus no better off than before they proceeded to litigate, and, as a
consequence thereof, the courts can only leave them as they are. In such cases, courts have no choice but
to dismiss the complaints/petitions." 55
While the RTC ruled that "[respondents] established by a preponderance of evidence that the Deed of Sale dated
May 11, 2004 involved no actual monetary consideration, executed by Jasminia in favor of [petitioner] Lolita," 56 it relied not
on the testimony of the lone witness for respondents, respondent Natividad, but on the testimony of petitioner Lolita
admitting that "in the presence of the Notary Public, Atty. Bongon, the sale was in fact without consideration" 57 and "she
has no receipts showing the staggered payment of P400,000.00 or any agreement made between her and Jasminia as to the
consideration of the subject property." 58 Thus, the RTC Decision made no mention of the pertinent testimony of
respondent Natividad wherein she controverted the presumption of consideration.
The CA echoed the finding of the RTC and stated: "A perusal of the records of the case reveals that [respondents]
were able to establish by a preponderance of evidence that the Deed of Sale is absolutely simulated, since, it did not
involved (sic) any actual monetary consideration." 59 The CA then quoted the testimony of petitioner Lolita where she
admitted that the consideration of the DAS was not paid in the presence of Atty. Bongon. The CA, like the RTC, did not advert
to the testimonial evidence adduced by respondents through respondent Natividad.
Since preponderance of evidence is the required quantum of proof in this case, the evidence of respondents, who
are the plaintiffs before the RTC, must be weighed against the petitioners' evidence, and a determination of which one has
superior weight must be made.
As mentioned earlier, respondents relied solely on the testimony of respondent Natividad. A careful reading of the
testimony of respondent Natividad, the mother of Jasminia, reveals that respondents' evidence on the lack of consideration
of the DAS can be inferred from the following:
[Atty. Edgardo Arandia, respondents' counsel, to witness respondent Natividad]
ATTY. ARANDIA
Q Why did you say that they were living as if they were husband and wife?
WITNESS
A They were living in that house and Lolita Mendoza is a lesbian "tomboy," sir.

18
 ATTY. ARANDIA
Q And who was spending for their everyday living?
WITNESS
A Jasminia, sir.
ATTY. ARANDIA
Q Why? Was (sic) Lolita has no income of her own?
WITNESS
A No, sir. She has none.
ATTY. ARANDIA
Q What was the occupation or job of Jasminia at that time?
WITNESS
A My daughter is a Supervisor at the PLDT, sir.
ATTY. ARANDIA
Q You are telling us that Lolita was purely dependent from Jasminia?
WITNESS
A Yes, sir.
xxx xxx xxx
ATTY. ARANDIA
Q What did you talk about?
WITNESS
A She [Jasminia] told me that the house and lot is for Ramonito and she requested not to evict Lolita from
the house and I said "yes" we will not asked (sic) Lolita to leave the house, sir. 60
Respondent Natividad further testified as follows:
ATTY. ARANDIA:
  Mrs. Palugod, what can you say on this Deed of Absolute Sale marked as Exhibit "F"?
WITNESS:
  That's not true because in fact my daughter when she's still alive had been telling me that the said house
and lot will be given to her brother Ronnie and we will not ask Lolita Mendoza to vacate or to leave
the place, sir.
xxx xxx xxx
ATTY. ARANDIA:
  Mrs. Palugod, what else did you discover with the Office of the Register of Deeds for the Province of
Cavite in connection with this property of Jasmiña in addition to its transfer from the name of your
daughter to the name of Lolita?
WITNESS:
  We also discovered that the Deed of Sale is not true and that is a fake "gawa-gawa lang po," sir. 61
In fine, respondent Natividad simply reiterated the allegations in the "Sinumpaang Salaysay ng Paghahabol
(Affidavit of Adverse Claim)" dated November 24, 2004 that she and her husband, respondent Ramon, executed, to wit:
Nalagay sa pangalan ni Lolita Espiritu Santo Mendoza ang titulong lupa't-bahay sang-ayon sa isang
Deed of Absolute Sale na lumalabas ay binili niya iyon sa aming namayapang anak na si Jasminia sa
halagang P400,000.00 piso daw;
Wala pong katotohanan ang nasabing bilihan sapagkat iyon ay isang hindi totoo at isang simulated
or fictitious na bilihan lamang dahil imposibleng bayaran [ni] Lolita ang anak [namin] dahil sila ay
nagsasama bilang mag-asawa (tomboy po si Lolita) at si Lolita ay walang hanap-buhay at umaasa lamang

19
 sa aming anak na si Jasminia. Ang katotohanan pa nga, ay na[n]g magkasakit ang aming anak, lahat ng
ginagastos sa pagpapagamot sa kanya ay galing sa kanyang mga kapatid na ibinibigay [namin] kay Lolita.
Bukod pa doon, bago siya namatay ay ibinilin niya sa amin n[a] huwag paaalisin si Lolita sa bahay kung iyon
ay manahin [namin] at hindi kailanman iyon ay ipinagbili sa kanya;
Kung kaya[']t bilang tanging tagapagmana at sa ilalim ng batas ay kami na ang may-ari ng nasabing
lupa[']t bahay, ay aming isinasagawa ang sinumpaang salaysay na ito upang patunayang lahat ang
nakasaad sa itaas x x x. 62
On the other hand, petitioner Lolita disputed the assertion that she has no income and means of livelihood, and
presented documents in support thereof, to wit:
[Atty. Lawrence 63 Rubio, petitioners' counsel, to petitioner Lolita]
ATTY. RUBIO:
  Miss witness, can you tell us your occupation?
WITNESS:
  I am a businesswoman, sir.
ATTY. RUBIO:
  Can you tell us what kind of business are you engaged into?
WITNESS:
  I am engaged in selling food, catering services. I am also engaged in selling house and lot, sir.
ATTY. RUBIO:
  Your (sic) are telling us that you are engaged into selling as agent. Do you have any proof to show that you
are engaged in such business?
WITNESS:
  Yes sir, I have.
ATTY. RUBIO:
  What are those documents, madame witness?
WITNESS:
  I have documents coming from the offices wherein I was able to sell house and lot and also documents
coming from other offices wherein I transacted business catering with them, sir.
ATTY. RUBIO:
  Madame witness, I am showing to you Exhibit "3["] 64 and "3-A", 65 is this the one that I
am (sic) referring to?
WITNESS:
  Yes sir.
xxx xxx xxx
ATTY. RUBIO:
  When we say occupation, we are talking of income. Can you tell us if you receive any income from this
occupation?
WITNESS:
  Yes sir.
ATTY. RUBIO:
  Can you show us any proof that you had received any income from this business or occupation that you
mentioned?
WITNESS:
  I have a statement of account, I invested the money with the bank. I also bought a house and lot and I
invested money with MMG, sir.
20
 ATTY. RUBIO:
  I am showing to you a document previously marked as Exhibit "4". 66 Can you tell us if you are referring to
this document that you mentioned?
WITNESS:
  Yes sir.
ATTY RUBIO:
  How about Exhibits "5" 67 & "6" 68 ?
WITNESS:
  Yes sir.
xxx xxx xxx
COURT:
  By the way, what are those properties owned by the defendants?
ATTY. RUBIO:
  Your honor, these are savings accounts from banks.
COURT:
  How many savings accounts does she have?
ATTY. RUBIO:
  She has one from China Bank and the Memorandum of Agreement which the witness identified were
investments from holdings company which she has invested, your honor.
COURT:
  How much was her investments in those companies and what are those companies? She mentioned that
she invested with the MMG, is it not? So, how much was she invested (sic) with MMG?
WITNESS:
  Four Hundred Thousand Pesos (PhP400,000.00) and another Two Hundred Thousand pesos
(PhP200,00.00) (sic), your honor.
COURT:
  What else? Aside from MMG, do you invest your money to other investing company?
WITNESS:
  At China Bank, your honor.
COURT:
  Was it investment or deposit?
WITNESS:
  Deposit, your honor. 69
The foregoing testimony of petitioner Lolita and the documentary evidence in support thereof show that she had
income and the means to pay the consideration stated in the DAS. These documentary evidence — (1) Certification from E.B.
Loredo Realty Corporation dated January 6, 2005 that petitioner Lolita had been a sales agent of the said realty corporation
from January 2001 up to December 2002 (Exh. "3"); (2) Certification from Cesar C. Cruz & Partners Law Offices dated
December 22, 2004 that petitioner Lolita was supplying food consisting of lunch and snacks to the employees of the said law
office from 1982 to 1988 (Exh. "3-A"); (3) Certification from Chinabank, SM City Bacoor Branch dated December 16, 2004
that since 1998 petitioner Lolita maintained accounts with the said bank under TD#168020017540, TD#168020018239,
SA#2680029315 and SA#2680873817 (Exh. "4"); (4) Notarized Memorandum of Agreement between MMG International
Holdings Co., Ltd. (MMG) and Jasminia Palugod &/or Lolita Mendoza (Capitalist) dated June 26, 2002 wherein the Capitalist
turned over P800,000.00 for MMG to use as capital for six months at 2.5% monthly compensation, expiring on December 26,
2002 (Exh. "5"); and (6) Notarized Memorandum of Agreement between MMG and Lolita Mendoza (Capitalist) dated June
26, 2002 wherein the Capitalist turned over P200,000.00 for MMG to use as capital for six months at 2.5% monthly

21
compensation, expiring on December 26, 2002 (Exh. "6") — were all unrebutted by respondents. For their part, both the CA
and the RTC totally ignored them.
As to the consideration of the DAS, both the RTC and the CA concluded that since Lolita admitted in her testimony,
as quoted earlier, that she did not pay the consideration of the DAS before the notary public, the DAS lacks consideration.
However, petitioner Lolita offered the following explanation:
RE-DIRECT-EXAMINATION:
[Atty. Rubio to petitioner Lolita]
ATTY. RUBIO:
  During the hearing last June 30, 2009 you were asked by the counsel or (sic) the plaintiff "Did you pay
Jasminia for the consideration of the Deed of Absolute Sale? You answered, No, sir." As appearing
on the Transcript of Stenographic Notes of the same date. My question madame witness is, can you
clarify why you were not able to pay the consideration?
xxx xxx xxx
ATTY. RUBIO:
  My question madame witness is, since you were not able to pay her at that time, when did you pay her?
xxx xxx xxx
WITNESS:
  I paid in 2002, sir.
xxx xxx xxx
ATTY. RUBIO:
  Madame witness, you answered 2002, can you tell us when the Deed of Absolute Sale was executed?
WITNESS:
  May 11, 2004, sir.
ATTY. RUBIO:
  You paid Jasminia the consideration of the property before the execution of the Deed of Absolute Sale?
WITNESS:
  Yes sir.
ATTY. RUBIO:
  Can you tell us the circumstances how you paid Jasminia the consideration of the property subject of this
case?
xxx xxx xxx
ATTY. RUBIO:
  Can you tell us the manner of payment, madame witness?
xxx xxx xxx
WITNESS:
  Whenever Jasminia needs money since she's having her treatment so I gave her the amount of TWENTY
THOUSAND PESOS (Php20,000.00) sometimes FORTY THOUSAND PESOS (Php40,000.00) until it
reached the amount of TWO HUNDRED THOUSAND PESOS (Php200,000.00), sir.
xxx xxx xxx
ATTY. RUBIO:
  You only paid Php200,000.00 that time[.]
WITNESS:
  Because that's the only money left with me and the other Php200,000.00 was borrowed by Jasminia from
my sister in Australia, sir.

22
 xxx xxx xxx
COURT:
  What transpired during the meeting between your sister and Jasminia when you said you were present?
WITNESS:
  That my sister will lend money to Jasminia, you honor.
COURT:
  Do you know how much money is she going to lend to Jasminia?
WITNESS:
  Two Hundred Thousand Pesos (Php200,000.00), your honor.
xxx xxx xxx
ATTY. RUBIO:
  After agreeing to let Jasminia borrow money from your sister, what happened next?
WITNESS:
  She was given first Fifty thousand Pesos (Php50,000.00), sir.
COURT:
  When was that?
WITNESS:
  That was also in the year 2002, you honor.
COURT:
  Was it during the meeting wherein Jasminia and your sister talked about this loan?
WITNESS:
  Yes your honor.
COURT:
  So, immediately your sister lend her Php50,000.00?
WITNESS:
  Yes your honor.
ATTY. RUBIO:
  What about the balance of Php150,000.00?
WITNESS:
  When she returned to Australia she's sending money to my mother including the money that Jasmin[ia]
is (sic) asking, sir.
xxx xxx xxx
COURT:
  By the way, when your sister gave Jasminia the amount of Php50,000.00, was there any receipt prepared
to show that your sister indeed lend (sic) money in the amount of Php50,000.00?
WITNESS:
  There's none, your honor.
COURT:
  How about the other money that your sister sent to your mother in order to give to Jasminia, were there
any receipts?
WITNESS:
  None also you honor.
23
 xxx xxx xxx
RE-CROSS EXAMINATION:
[Atty. Arandia to petitioner Lolita]
ATTY. ARANDIA:
  Miss. (sic) Mendoza, you mentioned that you paid Jasminia Palugod Php200,000.00 in partial payment of
the property the subject matter in this case and according to you the payment was on a staggered
basis way back in 2002. Now, my question is, do you have receipts showing that you paid Jasminia
Php200,000.00 on staggered basis?
WITNESS:
None, sir. 70
From the foregoing, it is evident to the Court that petitioner Lolita's proof of payment of the DAS' consideration was
her sworn testimony. Testimony, given under oath, and subjected to cross-examination is proof. 71 Unfortunately, both the
CA and the RTC brushed this aside only because the RTC zeroed in on the lack of receipts.
Since the evidence of the parties are mainly testimonial, it behooved the RTC, as well as the CA, to weigh the
version of respondents against that of petitioners. The Court is called upon to do the same in order to determine which
evidence preponderates.
Before the narrations of respondent Natividad and petitioner Lolita are pitted against each other to determine
which one preponderates over the other, the Court notes the glaring inconsistencies in respondent Natividad's testimony:
1. According to respondent Natividad, Jasminia used her retirement pay to buy the lot and constructed the house in
Sagana Remville, Habay, Bacoor, Cavite, to wit:
[Atty. Arandia to respondent Natividad]
ATTY. ARANDIA
Q Was Jasminia able to retire from PLDT before her death?
WITNESS
A Yes, sir.
xxx xxx xxx
ATTY. ARANDIA
xxx xxx xxx
Q Do you know if Jasminia able (sic) to get her retirement benefit from PLDT?
xxx xxx xxx
WITNESS
A Yes, sir. She was able to receive it.
ATTY. ARANDIA
Q Do you know what Jasminia did on her retirement benefit?
WITNESS
A Yes, sir.
ATTY. ARANDIA
Q What?
WITNESS
A She bought a lot and constructed a house, sir.
ATTY. ARANDIA
Q And that property or lot you are saying now is the same property located in Sagana Remville, Habay,
Bacoor, Cavite?
WITNESS

24
 A Yes, sir. 72
Respondent Natividad's account could not have happened because Jasminia received her retirement pay equivalent
to P1,383,773.59 on January 18, 1999 based on the Receipt, Release and Quitclaim (Exh. "8") 73 that Jasminia executed on
even date, which was after the purchase of the subject lot and the construction of the subject house.
Indeed, petitioner Lolita disputed respondent Natividad's version, to wit:
[Atty. Rubio to petitioner Lolita]
ATTY. RUBIO:
  x x x Madame witness, during the hearing dated November 27, 2007, when the plaintiff testified you were
present in Court?
WITNESS:
  Yes sir.
ATTY. RUBIO:
  So, when the witness was asked: "Do you know what Jasminia did on her retirement benefit?["] And the
witness answered: "Yes, sir." "What?["], asked by counsel and the witness answered: "She bought a
lot and constructed a house, sir." Can you tell us, what can you say about this testimony?
WITNESS:
  That's not true, sir.
ATTY. RUBIO:
  Why?
WITNESS:
  Because we bought that lot in 1991 and the house was constructed in February of 1996, sir. 74
2. According to respondent Natividad, Jasminia's retirement pay was used by Jasminia and petitioner Lolita for their
trips to Hong Kong, Norway and Australia, to wit:
[Atty. Arandia to respondent Natividad]
ATTY. ARANDIA
Q Do you know if Jasminia and Lolita went abroad from that retirement benefit?
xxx xxx xxx
WITNESS
A They went to Hong Kong, Australia and Norway, sir.
COURT
Q Why do you know that they went to those places?
WITNESS
A Because we were living in the same house and I was with them when they went to Hong Kong, Your Honor.
COURT
Q So, do you mean to say that you were living with Lolita and Jasminia in their house at Sagana Remville,
Habay, Bacoor, Cavite?
WITNESS
A Not me, only the two of them, Your Honor. 75
On the other hand, petitioner Lolita's version is as follows:
ATTY. ARANDIA:
  And from this separation benefit which Jasminia received from PLDT you even went wither (sic) in Europe,
in Hong Kong and in Australia?
WITNESS:

25
  That's not true, sir. At the time we went to Europe and Hong Kong, Jasminia had not yet separated from
PLDT and in fact we went together with her mother at the time we went in those places, sir.
COURT:
  Do you still recall what year was that when you, Jasminia and together with her mother went to Europe?
WITNESS:
  In Europe, that was May, 1997, you honor.
COURT:
  How about in Hong Kong?
WITNESS:
  In Hong Kong, that was September, 1995, your honor.
COURT:
  How about in Australia?
WITNESS:
  In Australia, that was in March, 1999, your honor.
COURT:
  So, that was after her separation?
WITNESS:
  Yes your honor.
ATTY. ARANDIA:
  With all these tours and trips with these countries which you mentioned, it was Jasminia who spent for
the travel?
WITNESS:
  In Hong Kong, it was her mother who paid. In Norway, the three (3) tickets were sent by her brother
because we had an invitation to go to Norway so that we will (sic) be able to get a Visa.
COURT:
  In other words, the expenses came from the brother of Jasminia?
WITNESS:
  Yes you honor, but I paid my ticket when we reached Norway.
ATTY. ARANDIA:
  And what is the name of the brother of Jasminia in Norway?
WITNESS:
  Ramonito Palugod, sir.
ATTY. ARANDIA:
  And according to you, you reimbursed the ticket given to you upon arrival in Norway?
WITNESS:
  Yes sir, I paid it in dollar.
ATTY. ARANDIA:
  To whom did you pay?
WITNESS:
  To Ramonito, sir.
ATTY. ARANDIA:
  How much did you pay Ramonito?
26
 WITNESS:
  One Thousand Dollars ($1,000.00), sir.
ATTY. ARANDIA:
  Do you have receipt that you have actually reimbursed Ramonito for that ticket?
WITNESS:
  None, sir. 76
3. According to respondent Natividad, her daughter Jasminia could not possibly travel from Bacoor to Pasay City
where the DAS was notarized because she had a brace and her bone is "napupulbos na." 77 Her testimony in this aspect is
reproduced below:
ATTY. ARANDIA:
  On the second page of this Exhibit "F" is the acknowledgment portion wherein it is stated here that it was
allegedly acknowledged before the Notary Public in Pasay City and this Deed of Absolute Sale
appears to have been executed on May 11, 2004. My question is, during the time, May 11, 2004 can
Jasmiña travel from Bacoor to Pasay City to acknowledge this Deed of Sale before a Notary Public?
xxx xxx xxx
WITNESS:
  On the said date and time my daughter cannot possibly travel from Bacoor in going to Pasay City because
during that time she already had a bone cancer and she had a brace and her bone is " napupulbos
na," sir. 78
To dispute respondent Natividad's account, petitioner Lolita presented Dr. Teresa Sy Ortin (Dr. Ortin), a Radiation
Oncologist at Makati Medical Center, who issued a Medical Certificate 79 dated December 20, 2004. Dr. Ortin's testimony
follows:
[Atty. Lawrence Rubio to Dr. Ortin]
ATTY. RUBIO:
  Madam witness, can you recall your employment in the year May 11, 2004? Where were you employed at
that time?
WITNESS:
  I'm a Radiation Oncologist at Makati Medical Center. I'm a cancer specialist, sir.
xxx xxx xxx
ATTY RUBIO:
  x x x Can you remember a patient by the name of Jasminia Palugod?
WITNESS:
  Yes, sir. I have her records with me.
ATTY. RUBIO:
  Can you tell us what is the nature of her illness?
WITNESS:
  She had breast cancer. I treated her for several times and the last treatment was on April 16, 2004 for
which she received treatment for the period April 16 to May 13, 2004, sir.
ATTY. RUBIO:
  I have here a Medical Certificate dated December 20, 2004. I am showing to you this document. Can you
tell us what is the relation of this document to the one you have mentioned?
WITNESS:
  Actually, I have a copy of that on my record and this certifies that she came to us for treatment, in my
clinic.
xxx xxx xxx

27
ATTY. RUBIO:
  x x x During that time, madam witness, April 16, 2004 to May 13, 2004, how often does (sic) your patient
Jasminia Palugod came (sic) to Makati Medical Center?
WITNESS:
  She was treated daily, because our schedule of radiation therapy is everyday, from 8:00 to 5:00. So, it's a
total of eighteen (18) treatments. So, that is over four (4) weeks.
ATTY. RUBIO:
  During that time, do you know who was with her?
WITNESS:
I remember as her companion. . . I don't know her name but I recognize her face.
ATTY. RUBIO:
  For the record, your Honor, may I state that the witness is pointing to the defendant Lolita Mendoza as
the companion of patient Jasminia Palugod at the time the patient is being assisted at the Makati
Medical Center.
COURT:
  Noted. 80
On cross-examination, Dr. Ortin further testified:
[Atty. Arandia to Dr. Ortin]
ATTY ARANDIA:
  How long is the radiation treatment being conducted for each exposure?
WITNESS:
  About fifteen (15) minutes, sir.
ATTY. ARANDIA:
  After exposing the patient on radiation therapy, what is the effect thereof on her physical condition?
WITNESS:
  Radiation therapy is a local treatment, so the side effect should end on where the radiation is directed.
For example, there were exposure on the arms, other parts of the body would not have any
significant side effect.
ATTY. ARANDIA:
  In the case of Ms. Palugod, who was according to you, afflicted with cancer which has metastasized. So
what part of her body was subjected to radiation exposure therapy?
WITNESS:
  According to the records, it was in the thoraxic spine.
ATTY. ARANDIA:
  What would be the effect of that radiation on the patient after exposure?
WITNESS:
  The side effect is very minimal. You may feel a little weak but as you can see most of our patients are
treated in my clinic as out patient. They don't need to be confined. Most of our patients can walk
around and able to do their other duties after treatment.
ATTY. ARANDIA:
  Will they feel weakness after the therapy?
WITNESS:
  Yes, but not very significant for us to require them to stay in the hospital.
ATTY. ARANDIA:
28
  In the case of Ms. Palugod considering that her cancer has already metastasized. I will assume that during
those times, Ms. Palugod was weak already?
xxx xxx xxx
WITNESS:
  I remember she was coming on a wheelchair and her main problem at that time, the reason for the
radiation, is that because she was in pain.
ATTY. ARANDIA:
  On wheelchair. Meaning to say that she was weak to walk by herself?
WITNESS:
  Yes, sir.
ATTY. ARANDIA:
  And that her weakness will be aggravated after weeks of radiation therapy?
WITNESS:
  Not significantly.
ATTY. ARANDIA:
  What do you mean, "not significantly["]?
WITNESS:
  It's not going to be extremely weak that you need to confine her because of the problem?
COURT:
  What would be the end result of that radiation treatment to a person afflicted by cancer? Would she be
cured or would she be strong after each treatment?
WITNESS:
  The main problem why she was referred to us was because she was in extreme pain, and radiation is
supposed to regress the pain and makes her to feel better.
COURT:
  During this treatment, and you said that it was on a daily basis, after being treated for at least fifteen (15)
minutes of radiation, what should be the effect to Ms. Palugod?
WITNESS:
  After few days of treatment, we expect her to be relieved. . . .
COURT:
  From the pain that she is suffering.
WITNESS:
  Yes. Her treatment started on April 16 and on April 30, she claimed that she felt some relief from her back
pain.
xxx xxx xxx
ATTY. ARANDIA:
  x x x Ordinarily, if the patient like Ms. Palugod, who has been suffering from cancer which has
metastasized and who was undergoing radiation therapy, would it be natural for that patient like
Ms. Palugod to go to a notary public to acknowledge a document?
xxx xxx xxx
WITNESS:
  I don't think there's problem with that. For patients who are terminally ill, we advise them to take care of
things, important decisions that they have to decide on. So, I don't think that should be a problem
for patients who are suffering from illness with that concern.

29
 ATTY. ARANDIA:
  For all the treatments that you had been undertaken to Ms. Palugod, was she always accompanied by
somebody?
WITNESS:
  Yes, as far as I can remember.
ATTY. ARANDIA:
  So in other words, she cannot come to your office without being assisted by another person?
WITNESS:
  Probably, not.
ATTY. ARANDIA:
  What do you mean, "probably, not"?
WITNESS:
  Because she has a very advance disease, I don't think, anybody would want her to go for treatment by
herself, especially because of her disease, it affected her bone, and she was in pain, probably, she
would not be able to travel by herself.
ATTY. ARANDIA:
  What about the mental capacity of the witness, in your assessment, how was Ms. Palugod during that
time? Was her mental capacity affected by her illness?
xxx xxx xxx
WITNESS:
  In my clinical assessment, there is no reason to prove that her mental capacity has been affected. If we
notice something, the usual is we talk to the patient and we would request additional test, and
there is no such evaluation in our record, so I would think that at that time, in our clinical judgment,
her disease does not affect her mental capacity or function. 81
Based on Dr. Ortin's clear, categorical and compelling testimony, Jasminia was not physically incapable of traveling
from Bacoor, Cavite to Makati Medical Center and to Pasay City for the acknowledgment of the DAS before the Notary Public
and she was not mentally incapacitated to know the import thereof.
Given the significant inconsistencies in the testimony of respondent Natividad, the credibility of her testimony is, to
the Court, doubtful. To be sure, a witness' credibility is determined by the probability or improbability of his testimony. As
well, the witness' means and opportunity of knowing the facts that he is testifying to are relevant. The improbability of
respondent Natividad's assertions is demonstrated by the evidence, both documentary and testimonial, that petitioner
Lolita adduced to rebut the same. Put simply, respondent Natividad's observations are those of an outsider because she was
not living with her daughter during the period at issue and cannot be relied upon.
The RTC and the CA also did not even mention the glaring inconsistencies noted above, which if properly
considered, would have seriously affected the outcome of the case.
In addition, the lower courts misapprehended the admission by petitioner Lolita that she did not pay the
consideration before the Notary Public. They excised from their judgments petitioner Lolita's sworn testimony as to how the
consideration was paid by her. The portion of petitioner Lolita's testimony that the lower courts quoted in their respective
Decisions does not even indubitably show that no consideration had been paid. What petitioner Lolita admitted was that the
consideration was not paid "before the Notary Public," and, as correctly pointed out by her, there is no legal requirement
that the consideration of a sale be paid in the very presence of the Notary Public before whom the deed of sale is
acknowledged.
Given the foregoing, contrary to the findings of the CA and the RTC, which evidently arose from
their misapprehension and non-consideration of relevant facts, respondents have not discharged their burden of proof to
rebut either the presumption of sufficient consideration of the DAS or the evidence of petitioner Lolita. In fine, respondents
failed to establish their cause of action by preponderance of evidence.
All told, petitioners' evidence has superior weight. While petitioner Lolita could not present receipts to show her
payments to the late Jasminia, her sworn testimony which in certain portions were corroborated by pertinent documents,
remains more credible than that of respondent Natividad. Indeed, the lack of receipts may be explained by the "close
friendship" between petitioner Lolita and Jasminia. The non-admission by petitioner Lolita of the "husband and wife"
30
 relationship that she shared with Jasminia and her being a "lesbian or tomboy," as respondent Natividad claimed, is of no
moment. Whatever transpired between her and Jasminia is a private matter, which the Court would not even speculate on.
As to the gender identity and sexual preference of petitioner Lolita, that is likewise a private matter.
Even from a pure evaluation of only the parties' testimonial evidence, wherein doubts on the truthfulness of their
respective narrations of the relevant facts are perceived and there may be difficulty in determining who between
respondent Natividad and petitioner Lolita is the more credible witness and in which side the testimonial evidence
preponderates, the evidence of the parties should, at the very least, be held to be in equipoise. That being the situation,
respondents, who have the burden of proof in the present case, fail upon their cause of action. Following Rivera v.
CA 82 quoted above, as neither party was able to make out a case, neither side having established his/her cause of action,
the Court can only leave them where they are and it has no choice but to dismiss the complaint, as the lower courts should
have done.
Consequently, the DAS executed by Jasminia in favor of petitioner Lolita over the subject property is valid, the
presumption that it has sufficient consideration not having been rebutted. The same holds true regarding the Real Estate
Mortgage between petitioner Lolita and petitioners spouses Alexander and Elizabeth Gutierrez.
WHEREFORE, the Petition is hereby GRANTED. The Decision of the Court of Appeals dated April 29, 2015 and its
Resolution dated September 10, 2015 in CA-G.R. CV No. 102904 as well as the Decision dated March 14, 2013 and Order
dated May 8, 2014 of the Regional Trial Court of Bacoor, Cavite, Branch 19 in Civil Case No. BCV 2004-217 are REVERSED
AND SET ASIDE. The complaint filed in Civil Case No. BCV 2004-217 is DISMISSED for lack of cause of action.
SO ORDERED.
Carpio, Peralta, Perlas-Bernabe and Reyes, Jr., JJ., concur.
||| (Mendoza v. Spouses Palugod, G.R. No. 220517, [June 20, 2018])

31
 FIRST DIVISION

[G.R. No. 215387. April 23, 2018.]

NORTHERN MINDANAO INDUSTRIAL PORT and SERVICES CORPORATION, petitioner, vs. ILIGAN CEMENT
CORPORATION, respondent.

DECISION

DEL CASTILLO, J p:

Assailed in this Petition for Review on Certiorari 1 are the March 18, 2014 Decision 2 of the Court of Appeals (CA) in
CA-G.R. SP No. 03789-MIN, which set aside the August 6, 2009 Order 3 of the Regional Trial Court of Iligan City, Branch 3
(RTC) in Civil Case No. 7201, and the CA's October 17, 2014 Resolution 4 denying herein petitioner's motion for
reconsideration. HTcADC
Factual Antecedents

As narrated by the CA, the facts are as follows:

x x x Iligan Cement Corporation (ICC) is a domestic corporation x x x engaged in the manufacturing
and distribution of cement and other building materials.
x x x Northern Mindanao Industrial & Port Services Corporation (NOMIPSCO) is likewise a
domestic corporation x x x involved, among others, in the arrastre or stevedoring business.
On 27 June 2007, ICC invited NOMIPSCO to a pre-bidding conference for a two-year cargo
handling contract. Apart from NOMIPSCO, RC Barreto Enterprises, MN Seno Marketing, VIRLO Stevedoring
and Oroport also joined the conference.
In the course of the conference, ICC, through Nestor Camus (Camus), required the participants to
submit their respective technical proposals and commercial bids on or before 5 July 2007. x x x
NOMIPSCO thereafter submitted its proposal in which it offered the lowest bid of P1.788 per
a [sic] 40 kilogram bag.
ICC awarded the cargo handling contract to Europort Logistics and Equipment Incorporated
(Europort).
On 2 September 2008, NOMIPSCO filed a Complaint 5 for Damages and Attorney's fees against
ICC [alleging] that, as per information from an ICC employee, its bid folder was marked as 'no bid
submitted'[;] that Camus, upon inquiry, revealed that the bid award was based on x x x the
recommendation of the end-user; and x x x a new company policy x x x to prioritize new contractors
[which] were never made known to the bidders. x x x NOMIPSCO further claimed that ICC was guilty of bad
faith when it still invited NOMIPSCO to join the pre-bidding conference despite prior knowledge of its
status as an old contractor. NOMIPSCO, this contended that the acts of ICC amounted to an abuse of its
rights or authority, the same acts that led NOMIPSCO to suffer great losses and unearned income.
On 9 October 2008, ICC filed an Answer with Compulsory Counterclaims 6 herein it x x x
countered that NOMIPSCO had no cause of action since its complaint failed to state a cause of action. ICC
stressed that 'for abuse of right to exist there must be: 1) an act which is legal; 2) but which is contrary to
morals, good customs, public order, or public policy; and 3) it is done with intent to injure.' ICC argued that
in the instant controversy the last two requisites were wanting. x x x
On 6 August 2009, the RTC rendered an Order denying ICC's affirmation and special defenses —
complaint failed to state a cause of action and defective verification. The dispositive portion of the order
reads —
WHEREFORE, premises considered, the prayer for the dismissal of the complaint
as it states no cause of action is denied for lack of merit.

32
 The acting clerk of Court is directed to set the case for pre-trial and referral of
the case to the mediation center.
SO ORDERED.
On 29 September 2009, [ICC] filed a Motion for Reconsideration. 7 In its Motion, [ICC] maintained
that NOMIPSCO lacked a cause of action and that the Complaint 1) failed to state a cause of action; x x x
On 24 May 2010, the RTC issued an Order 8 denying [ICC's] Motion for Reconsideration, x x x 9
Ruling of the Court of Appeals

Respondent ICC instituted an original Petition for Certiorari 10 before the CA, docketed as CA-G.R. SP No. 03789-
MIN, arguing that the RTC committed grave abuse of discretion in not dismissing Civil Case No. 7201 for failure to state a
cause of action and lack of cause of action.
On March 18, 2014, the CA rendered the assailed Decision, declaring as follows:
The petition is meritorious.
xxx xxx xxx
Considering exclusively the allegations of the above Complaint, the Court finds that NOMIPSCO
has no legal right to impute to ICC an abuse of its right or authority in the bidding selection or to impugn
the validity of the cargo handling contract executed between the latter and Europort.
In its Complaint, NOMIPSCO mainly anchored its right to institute this action on the fact that it
won the bidding had it not for the alleged abuse of rights of ICC. However, as correctly argued by ICC,
'NOMIPSCO's right as a bidder is only to be considered in the evaluation of the entity to handle the
stevedoring requirements' and that it has no right to dictate as to whom the award should be granted. It
bears stressing that an advertisement to possible bidders is simply an invitation to make proposals, and
that an advertiser is not bound to accept the [lowest] bidder unless the contrary appears. Moreover, ICC
has the unprecedented right to reject bids and it cannot be compelled by a party who called the bids to
accept its proposal and execute a contract in its favor. Considering that NOMIPSCO was not selected as the
winner and that ICC cannot be legally obliged to accept its bid, the former therefore has no legal right
against the latter. Considering that the existence of a legal right is wanting, it is thus ineluctable that the 2
September 2008 Complaint failed to state a cause of action. aScITE
The above disquisitions render a discussion on the second issue of ICC unnecessary.
All told, this Court finds grave abuse of discretion on the part of the RTC in denying the dismissal
of NOMIPSCO's complaint. x x x
WHEREFORE, the instant petition for certiorari is GRANTED.
Accordingly, the assailed Order dated 6 August 2009 of the Regional Trial Court, 12th Judicial
Region, Branch 3, Iligan City, is hereby ordered SET ASIDE.
SO ORDERED. 11 (Citations omitted)
Petitioner sought to reconsider but to no avail. Hence, the present Petition.
Meanwhile, the proceedings continued on to trial. Petitioner's key witnesses testified in court.

Issues

In an April 18, 2016 Resolution, 12 this Court resolved to give due course to the Petition, which contains the
following assignment of errors:
1. WHETHER x x x THE COURT OF APPEALS ERRED IN FINDING THAT RTC-03 COMMITTED GRAVE
ABUSE OF DISCRETION AMOUNTING TO LACK OF JURISDICTION WHEN IT (RTC-03) DENIED THE MOTION
TO DISMISS AND MOTION FOR RECONSIDERATION OF ICC, BOTH RAISING THE ISSUE THAT NOMIPSCO HAS
NO CAUSE OF ACTION AGAINST ICC.
1.1. WHETHER x x x THE ISSUE RAISED BY ICC TO SUPPORT THE DISMISSAL OF
THE COMPLAINT INVOLVES EVIDENTIARY ISSUE THAT SHOULD BE VENTILATED DURING
THE TRIAL OF THE CASE.

33
 1.2. WHETHER x x x ICC WAIVED THE ISSUE ON CAUSE OF ACTION WHEN IT
PARTICIPATED IN THE TRIAL.
2. WHETHER x x x AN ISSUE NOT PRESENTED BEFORE RTC-03 (IN RESOLVING THE MOTION TO
DISMISS AND MOTION FOR RECONSIDERATION) BE BROUGHT BEFORE, AND CONSIDERED BY, THE COURT
OF APPEALS IN RESOLVING THE ISSUE OF GRAVE ABUSE OF DISCRETION. 13
Petitioner's Arguments

In praying that the assailed CA dispositions be set aside and that Civil Case No. 7201 be instead reinstated,
petitioner basically argues in its Petition and Reply 14 that while respondent had the right to accept or reject bids for its
project, it exercised said right in bad faith to petitioner's prejudice, in that the bidding process was a mere ruse for
respondent to secure petitioner's lowest bid in order to use it as basis or leverage for setting its contract price with Europort;
respondent had no intention to award the contract to the bid participants, but to Europort, and the bidding process was
intended merely to elicit the lowest bid which respondent would use to set its contract price with Europort.
Petitioner argues that respondent's bad faith can be seen from the fact that respondent made it appear that
petitioner did not submit its bid, the folder in which the commercial and technical bids were kept was stamped with "No Bid
Submitted" as to petitioner; that Europort, which eventually won the project, was not a participant in the bidding process;
that respondent awarded the project on the basis of criteria, parameters, and policies that were not disclosed to petitioner
prior to the bidding; and that Europort had no corporate and legal personality when it executed the cargo handling contract
with respondent.
Petitioner further contends that under Article 19 of the Civil Code 15 which enunciates the principle of abuse of
rights, when a right is exercised in a manner that disregards legal norms and standards, thus resulting in damage to another,
a legal wrong is committed for which the guilty party may be held accountable; that respondent abused its rights and thus
violated Article 19 and other laws; that petitioner thus has a cause of action against respondent; and that the issue of bad
faith as a component of petitioner's cause of action requires proof and thus may only be resolved after trial on the merits.
Respondent's Arguments

Respondent, on the other hand, counters in its Comment 16 that petitioner remains without cause of action, which
makes its case dismissible; that petitioner's claim that respondent made it appear that the former did not submit a bid is
pure hearsay and speculation as no documentary or testimonial evidence was attached to the complaint/pleadings, nor was
any submitted in court, to prove this allegation; that for the same foregoing reasons, petitioner's claim that the bid was
grounded on policies that were not disclosed to the bidders has no basis; that even if preference is given to new contractors
as a matter of policy, this does not constitute an abuse of respondent's right since "preference" does not mean exclusion of
other contractors; that petitioner's argument that Europort was not a corporate entity at the time and that respondent used
the bidding for the sole purpose of obtaining the optimum contract price are unfounded and have no legal basis; that
petitioner has no right to dictate who should be the winning bidder for respondent's cargo handling contract, since
advertisements for bidders are simply invitations to make proposals, and an advertiser is not bound to accept the highest or
lowest bidder unless the contrary appears; that there was thus no abuse of respondent's rights; and that respondent's
participation in the trial does not result in waiver of its right to seek dismissal of the case on the basis of lack or absence of
cause of action. HEITAD

Our Ruling

The Court denies the Petition.

Petitioner's cause of action in Civil Case No. 7201 rests on the theory that respondent, in bad faith, used the bidding
process for the cargo handling contract as a mere ruse to elicit the lowest bid which it would use to set its contract price
with Europort; that respondent made it appear that petitioner did not submit a bid, when in fact it did; that respondent
awarded the project on the basis of criteria, parameters, and policies that were not disclosed to petitioner prior to the
bidding; and that respondent awarded the contract to Europort, which did not participate in the bidding and had no
corporate and legal personality when it executed the cargo handling contract with respondent.
A review of the record and the evidence, however, reveals that petitioner's allegations do not reconcile with the
facts and evidence on record; on the contrary, it appears that petitioner is twisting and inventing facts, circumstances, and
documents that did not in fact take place nor exist.
Contrary to what petitioner would have this Court believe, it appears that there was a bona fide bidding process for
respondent's designated cargo handling contract, and the project or contract was awarded to one of the participating
bidders, which — for whatever reason — eventually changed its corporate name during the bidding process, prompting the

34
execution of the awarded cargo handling contract under its new corporate name instead of the old one used during the
submission of bids.
Thus, it appears that one of the five bidders that participated in the subject bidding, Oroport, was eventually
chosen by respondent — although it did not necessarily submit the lowest bid. At or about the time that Oroport and
respondent were consummating the cargo handling contract, Oroport changed its corporate name to Europort Logistics and
Equipment Incorporated, or Europort. As a result, the cargo handling contract executed was between respondent and
Europort, the new name of Oroport. This is not proscribed by law. The fact that the original bidder and winner was Oroport,
and the resulting cargo handling contract was between respondent and Europort — Oroport's derivative — has no bearing;
in legal contemplation, Oroport and Europort are one and the same.
x x x. The effect of the change of name was not a change of the corporate being, for, as well stated
in Philippine First Insurance Co., Inc. v. Hartigan: 'The changing of the name of a corporation is no more the
creation of a corporation than the changing of the name of a natural person is begetting of a natural
person. The act, in both cases, would seem to be what the language which we use to designate it imports
— a change of name, and not a change of being.'
xxx xxx xxx
x x x. A change in the corporate name does not make a new corporation,
whether effected by a special act or under a general law. It has no effect on the identity
of the corporation, or on its property, rights, or liabilities. The corporation, upon the
change in its name, is in no sense a new corporation, nor the successor of the original
corporation. It is the same corporation with a different name, and its character is in no
respect changed. 17
As to the claim that respondent made it appear that petitioner did not submit a bid when in fact it did, the evidence
and testimonies of the witnesses do not bear this out. Thus, while petitioner claims that its bid folder was marked as "no bid
submitted," it did not attach a copy of said bid folder to its complaint below. Nor was the bid folder document introduced
during trial. And an examination of the transcripts of the testimonies of its witnesses 18 equally fails to elicit even a faint
shadow of truth to its claim of being deliberately excluded from the bidding process; indeed, the opposite is true: petitioner
participated in the bidding process and its bid was considered, along with the others' bids.
On the claim that respondent awarded the project on the basis of criteria, parameters, and policies that were not
disclosed to petitioner prior to the bidding, particularly that the award would be given to a new contractor and will be based
on the recommendation of the end-user, the evidence does not bear this out. On the contrary, one of the witnesses, Alex
Sagario, who worked for the end-user component of the contract as Pack House Manager of ICC, testified that there was no
consultation prior to the award, 19 which thus belies petitioner's claim that undisclosed policies became the basis for the
award. ATICcS
On the claim that it became the policy of respondent to award the contract to a new contractor, the Court finds
nothing wrong with this. This is the prerogative of respondent, and petitioner had no right to interfere in the exercise
thereof. The CA is correct in saying that an advertisement to possible bidders is simply an invitation to make proposals, and
that an advertiser is not bound to accept the lowest bidder unless the contrary appears; respondent had the right to reject
bids, and it cannot be compelled to accept a bidder's proposal and execute a contract in its favor. Indeed, under Article 1326
of the Civil Code, "advertisements for bidders are simply invitations to make proposals, and the advertiser is not bound to
accept the highest or lowest bidder, unless the contrary appears." "[A]s the discretion to accept or reject bids and award
contracts is of such wide latitude, courts will not interfere, unless it is apparent that such discretion it exercised arbitrarily, or
used as a shield to a fraudulent award. The exercise of that discretion is a policy decision that necessitates prior inquiry,
investigation, comparison, evaluation, and deliberation." 20
Article 1326 of the Civil Code, which specifically tackles offer and acceptance of bids, provides
that advertisements for bidders are simply invitations to make proposals, and that an advertiser is not
bound to accept the highest bidder unless the contrary appears. In the present case, Section 4.3 of the
ASBR explicitly states that APT reserves the right to reject any or all bids, including the highest bid.
Undoubtedly, APT has a legal right to reject the offer of Dong-A Consortium, notwithstanding that it
submitted the highest bid.
In Leoquinco v. The Postal Savings Bank and C & C Commercial Corporation v. Menor, we
explained that this right to reject bids signifies that the participants of the bidding process cannot compel
the party who called for bids to accept the hid or execute a deed of sale in the former's favor. x x
x 21 (Citations omitted)
Finally, the insistence on Europort's ineligibility on account of its supposed non-participation in the bidding process,
despite petitioner's knowledge and admission of the fact that Europort underwent a change of corporate name during the
period material to this case — which explains why the entity to which the cargo handling contract was awarded appears to
35
 be a total stranger to the bidding process, is a clear attempt to muddle the issues and confuse this Court in the vain hope of
influencing its judgment — by stretching an irrelevant issue and capitalizing on a perceived technicality that has no material
hearing whatsoever in the resolution of the case.
Thus, far from having a cause of action upon which to base its claim for damages, petitioner's complaint is based on
false assumptions and non-existent facts, tending to deceive and mislead this Court to the belief that respondent committed
a so-called 'abuse of rights' against it, when in fact there is none. This is certainly contemptible, and petitioner is warned that
any more attempt at stretching this case and manipulating the facts will be dealt with severely. It has wasted the Court's
time enough. Its claim is illusory, to say the least; this has become evident not only from a reading of the allegations of the
complaint and its annexes as well as the other pleadings, but also from the testimonial and documentary evidence
presented by petitioner itself during trial.
WHEREFORE, the Petition is DENIED. The March 18, 2014 Decision and October 17, 2014 Resolution of the Court of
Appeals in CA-G.R. SP No. 03789-MIN are AFFIRMED in toto.
SO ORDERED.
Leonardo-de Castro, ** Jardeleza and Tijam, JJ., concur.
Sereno, * C.J., is on leave.
||| (Northern Mindanao Industrial Port and Services Corp. v. Iligan Cement Corp., G.R. No. 215387, [April 23, 2018])

36
 THIRD DIVISION

[G.R. No. 191652. September 13, 2017.]

TEAM IMAGE ENTERTAINMENT, INC., AND FELIX S. CO, petitioners, vs. SOLAR TEAM ENTERTAINMENT,
INC., respondent.

[G.R. No. 191658. September 13, 2017.]

SOLAR TEAM ENTERTAINMENT, INC., petitioner, vs. TEAM IMAGE ENTERTAINMENT, INC., AND FELIX S.
CO, respondents.

DECISION

LEONEN, J p:

A judgment upon a compromise is rendered based on the parties' reciprocal concessions. With all the more reason
should a judgment upon a compromise be complied with in good faith considering that the parties themselves crafted its
terms. CAIHTE
These are consolidated Petitions for Review on Certiorari assailing the December 10, 2009 Decision 1 and March 17,
2010 Resolution 2 of the Court of Appeals in CA-G.R. SP No. 104961. The Court of Appeals held that both parties — Team
Image Entertainment, Inc. (Team Image) and Solar Team Entertainment, Inc. (Solar Team) — violated the Compromise
Agreement they had entered into in connection with a civil case for accounting 3 filed before Branch 59, Regional Trial Court,
Makati City. Team Image was specifically ordered to pay Solar Team P2,000,000.00 in liquidated damages for failing to settle
its monetary obligation to Solar Team within the period provided in the Compromise Agreement. 4 Further, the Court of
Appeals allowed Team Image to suspend payments under the Compromise Agreement because Solar Team failed to
withdraw the complaint-in-intervention it had earlier filed against Team Image's President, Felix S. Co (Co), contrary to their
agreement to dismiss all actions they had filed against each other. 5
Solar Team owned movies, films, telenovelas, television series, programs, and coverage specials that it aired over
block times in several television stations. 6 It derived profits by selling advertising spots to interested business enterprises. 7
On April 24, 1996, Solar Team entered into a Marketing Agreement with Team Image, 8 which agreed to act as Solar
Team's exclusive marketing agent by selling advertising spots to business enterprises on behalf of Solar Team. 9
According to Solar Team, Team Image breached their Marketing Agreement by failing to disclose the names of the
entities to which Team Image sold advertising spots. Further, Team Image allegedly represented itself as the owner of Solar
Team's television programs, series, and telenovelas, hence collecting the proceeds of the sale without remitting them to
Solar Team. For these reasons, Solar Team demanded that Team Image render an accounting of all the transactions the latter
had entered into pursuant to the Marketing Agreement and that it remit all the proceeds it had received in selling Solar
Team's television programs, series, and telenovelas. 10
When Team Image refused to render an accounting, Solar Team filed against Team Image and its President, Co, a
Complaint for Accounting and Damages before the Regional Trial Court of Makati. 11 The case was raffled to Branch 59,
presided by Judge Winlove M. Dumayas (Judge Dumayas). 12
On January 17, 2002, the trial court rendered a Decision, 13 finding that Team Image breached the Marketing
Agreement. According to the trial court, Team Image only had the authority to sell advertisement spots on behalf of Solar
Team, not to collect any sales proceeds. Thus, it ordered Team Image to render an accounting of all its transactions and
collections under the Marketing Agreement. The dispositive portion of this Decision read:
WHEREFORE, judgment is hereby rendered in favor of [Solar Team] and against [Team Image and
Felix S. Co], as follows:

37
 a. Ordering [Team Image and Felix S. Co] jointly and severally to immediately render an accounting
within fifteen (15) days from receipt of this decision, on all its sales and collections on the
television properties of [Solar Team] mentioned in Annex "A" of the complaint, from date
of the agency agreement (Exhibit "A") on April 24, 1996 until the filing of the complaint;
b. Directing [Team Image and Felix S. Co] jointly and severally to make available to [Solar Team] or
its authorized representatives, accountant[s] or auditors, within fifteen (15) days from
receipt hereof, all their books of accounts and records on all their sales and collections on
[Solar Team's] aforesaid television properties[; and]
c. Ordering [Team Image and Felix S. Co] jointly and severally to pay [Solar Team] the sum of
Php50,000.00 for attorney's fee; and Php200,000.00 for moral, exemplary[,] nominal and
temperate damages; and cost[s] of suit.
SO ORDERED. 14
More than a year after or on April 28, 2003, Solar Team and Team Image entered into a Compromise
Agreement, 15 submitting it to the trial court for approval. In essence, the parties agreed on the payment terms and their
division of receivables from the media company VTV Corporation, which had purchased advertising spots from Team Image
as Solar Team's marketing agent. For purposes of accounting and auditing these receivables, the parties hired SyCip Gorres
Velayo and Company (SGV and Co.) as auditor. DETACa
With respect to other business ventures that the parties may have jointly undertaken, paragraph 18 of the
Compromise Agreement stated that the parties must submit a certification of the existence of these receivables:
18. To further assure each one of them, both parties shall within ten (10) days from the date of
execution of this agreement, submit to one another, certification and/or reasonable and available proof of
the existence of said receivables. 16
The parties likewise agreed to waive all their claims against each other and to cause the provisional dismissal of all
the criminal and civil actions that they had filed against each other. Paragraphs 21 and 22 of the Compromise Agreement
provided:
21. This agreement constitutes the final repository of all the prior understanding agreements and
contracts of the parties and shall operate as total waiver and discharge of any or all claims, counterclaims,
causes of action, claims and demands of whatever kind and nature which each may have against the other,
including their respective heirs[,] assigns[,] and successors-in-interest arising out of any of all matters,
cause or thing, whether directly or indirectly, related with the Marketing Agency Agreement dated 24 April
1996.
22. By virtue hereof, the parties have agreed, as they hereby agree to immediately provisionally
dismiss all actions, whether civil or criminal, they may have filed against the other, and after SGV shall have
finally completed the audit and accounting tasked upon it, the results of which is final and binding upon
the parties, all said civil and/or criminal actions shall be permanently dismissed by the parties. 17
Further, the parties agreed to the immediate issuance of a writ of execution and payment of liquidated damages in
case of breach of the Compromise Agreement. Paragraph 24 of the Compromise Agreement stated:
24. In the event SGV shall have made a final determination of the respective accountability of the
parties and any of the parties fail to comply with the same, or in the event any of the parties is remiss or
reneges from [its] commitment/s as specified in this Agreement or breaches the warranties and/or
representation as contained herein, then the aggrieved party shall be entitled to an immediate issuance of
a writ of execution to enforce compliance thereof and the guilty party shall pay the innocent party the sum
of P2 Million Pesos by way of liquidated damages and/or penalty and shall, likewise, shoulder all the
expenses in enforcing this compromise agreement by a writ of execution. Moreover, the innocent party
shall have the right to invoke the principle of reciprocity of obligations in contracts as provided for by
law. 18
Finding the provisions of the Compromise Agreement not contrary to law, morals, or public policy, the trial court
approved and rendered judgment based on the Compromise Agreement in its Decision 19 dated April 30, 2003.
The parties subsequently filed motions for issuance of a writ of execution on account of the other's alleged
violation of the Compromise Agreement.
The first motion for issuance of a writ of execution was filed by Team Image on April 26, 2004. 20 Team Image
prayed that the trial court allow it to suspend payments to Solar Team under the Compromise Agreement due to the alleged
failure of Solar Team's Chief Executive Officer, William Tieng (Tieng), to collect receivables from VTV Corporation. In addition,

38
Solar Team allegedly failed to submit to Team Image a certification on the existence of the receivables from VTV Corporation,
in violation of paragraph 18 of the Compromise Agreement.
In its Order 21 dated April 29, 2004, the trial court allowed Team Image to suspend payments to Solar Team "until
after [the trial court] shall have resolved [the April 26, 2004 motion for issuance of a writ of execution]." 22 The trial court
subsequently issued a Writ of Execution on May 28, 2004. 23 However, in its Order 24 dated November 23, 2004, the trial
court granted Solar Team's Motion for Reconsideration; thus, it set aside its previous order allowing suspension of payment
and quashed the writ of execution. The dispositive portion of the November 23, 2004 Order read:
ORDER
Finding the Motion for Reconsideration filed by [Solar Team] to be impressed with merit, the
same is hereby GRANTED.
Accordingly, the Order of the Court dated April 30, 2004 is hereby RECONSIDERED and set aside
and the Writ of Execution dated May 28, 2004 is hereby QUASHED. 25
Team Image moved to reconsider the November 23, 2004 Order. 26
In the meantime, on October 6, 2005, Team Image filed a second motion 27 for issuance of a writ of execution and
suspension of payments (October 6, 2005 Motion) due to Solar Team's alleged violation of paragraphs 21 and 22 of the
Compromise Agreement. According to Team Image, Solar Team failed to cause the dismissal of its complaint-in-intervention
in a collection case filed against Team Image, 28 with Solar Team actively participating in the civil case after the execution of
the Compromise Agreement. aDSIHc
In its Order 29 dated November 3, 2005, the trial court granted the October 6, 2005 Motion, issuing a writ of
execution to enforce payment by Solar Team of P2,000,000.00 in liquidated damages and allowing Team Image to suspend
payments to Solar Team. The dispositive portion of the November 3, 2005 Order read:
WHEREFORE, premises considered, the Court hereby . . . GRANTS [Team Image's] motion for the
issuance of a writ of execution along with their prayer for an order allowing suspension of payment and
Orders [Solar Team] to comply with paragraphs 21 and 22 of the compromise agreement executed by the
parties herein.
Accordingly, let a writ of execution be issued against [Solar Team] to enforce payment of the sum
of P2 Million Pesos as liquidated damages pursuant to paragraph 24 of the compromise agreement.
SO ORDERED. 30
Solar Team moved for a partial reconsideration of the November 3, 2005 Order. 31
On December 6, 2005, Solar Team filed its own motion 32 for issuance of a writ of execution due to Team Image's
alleged violation of paragraph 20 of the Compromise Agreement. 33 Solar Team claimed that Team Image failed to submit
documents necessary for the auditing and accounting of receivables to SGV and Co., the appointed auditor under the
Compromise Agreement.
Meanwhile, in its Order 34 dated April 7, 2006, the trial court denied both Team Image's Motion for
Reconsideration of the November 23, 2004 Order and Solar Team's Motion for Partial Reconsideration of the November 3,
2005 Order. The trial court found that Team Image filed the Motion for Reconsideration beyond the reglementary period. As
for Solar Team, the trial court found that it had failed to comply with its obligation to cause the dismissal of all pending cases
that it had filed against Team Image. Hence, Solar Team was ordered to pay Team Image P2,000,000.00 in liquidated
damages per paragraph 24 of the Compromise Agreement. The dispositive portion of the April 7, 2006 Order read:
WHEREFORE, premises considered, this Court resolves to DENY [Team Image's] Motion for
Reconsideration dated August 22, 2005 from the Order of this Court dated November 23, 2004. [Solar
Team's] Motion for Partial Reconsideration dated November 19, 2005 from the Order of this Court dated
November 3, 2005 is, likewise, DENIED for lack of merit.
SO ORDERED. 35
On December 5, 2007, Team Image filed before the trial court its third motion 36 for issuance of writ of execution
with prayer for suspension of payments (December 5, 2007 Motion). Team Image argued that Solar Team's Tieng violated
anew paragraphs 21 and 22 of the Compromise Agreement by failing to cause the dismissal of the criminal cases he had
earlier filed against Team Image's Co. On December 18, 2007, Team Image filed an Omnibus Motion 37 with prayer for
issuance of a writ of execution and suspension of payments (December 18, 2007 Omnibus Motion), this time, for Solar
Team's Tieng to return to Team Image a total of P25,862,750.00. This amount allegedly included the collections in excess of
the P26,000,000.00 fixed in the Compromise Agreement; the P2,891,226.97 supposedly collected by a certain Ma. Fe
Barreiro (Barreiro) 38 without Solar Team's authority but actually redounded to Tieng's benefit; and a total of P8,500,000.00

39
in post-dated checks still in possession of Tieng. Thus, Team Image reiterated its prayer for the trial court to implement the
November 3, 2005 Order directing Solar Team to pay Team Image liquidated damages. 39
In its Order 40 dated January 9, 2008, the trial court ordered the implementation of the November 3, 2005 Order to
enforce payment of liquidated damages by Solar Team for failure to cause the dismissal of its complaint-in-intervention in
the collection case filed against Team Image. A Writ of Execution 41 was subsequently issued on January 16, 2008, directing
the sheriff to implement the November 3, 2005 Order.
Two (2) days after or on January 18, 2008, Solar Team filed a motion to defer the implementation of the January 16,
2008 Writ of Execution. 42 Solar Team likewise filed a motion to hold in abeyance the implementation of the Letters of
Garnishment issued pursuant to the January 16, 2008 Writ of Execution. 43
Acting on Team Image's December 5, 2007 Motion and December 18, 2007 Omnibus Motion in the Order 44 dated
January 21, 2008, the trial court directed Solar Team, through Tieng, to cause the dismissal of the criminal cases filed against
Co pursuant to paragraphs 21 and 22 of the Compromise Agreement.
Further, the trial court found that Tieng indeed had excess collections from VTV Corporation. In his complaint for
sum of money filed against VTV Corporation, Tieng allegedly admitted that he had collected P22,971,572.03 from VTV
Corporation, an amount which exceeded the P10,275,547.48 disclosed in paragraph 4 of the Compromise Agreement. 45
The trial court likewise found that contrary to Solar Team's representation in paragraph 5 of the Compromise
Agreement, 46 the P2,891,226.97 supposedly collected by Barreiro without Solar Team's authority actually redounded to
Tieng's benefit. 47
Based on these findings, the trial court ordered Solar Team to return the excess amounts and incorrect charges and
to pay Team Image a total of P8,000,000.00 in liquidated damages for breaching four (4) warranties made in the
Compromise Agreement. The dispositive portion of the January 21, 2008 Order read:
WHEREFORE, PREMISES CONSIDERED, this Court hereby grants [Team Image and Felix S.
Co's] 1) Motion for the issuance of writ of execution for violation of paragraphs 21 and 22 of the
compromise agreement with prayer for an order allowing continuance of suspension of payment of
obligation/s, if any, as per paragraph 24 thereof dated December 5, 2007; and 2) Omnibus motion for the
issuance of an order directing William Tieng to return to [Team Image and Felix S. Co]; (a) overpayment
under the compromise agreement (b) marketing commission falsely charged against the share of [Team
Image and Felix S. Co] in the VTV operations and (c) for writ of execution and suspension of payment, if
any dated December 18, 2007. ETHIDa
Accordingly, [Team Image and Felix S. Co] are hereby authorized to suspend payment of their
obligation, if any, pursuant to paragraph 24 of the compromise agreement and that:
ON THE FIRST MOTION
a) William Tieng is hereby ordered to dismiss and/or cause the dismissal of Criminal Case Nos. 07-1235 and
07-1236 now pending before the Regional Trial Court of Parañaque City, Metro Manila; and
b) Let a writ of execution issue to enforce the payment to [Team Image and Felix S. Co] the sum of TWO
MILLION (PhP2,000,000.00) PESOS as liquidated damages on account of William Tieng's breach of
warranties and representations under paragraphs 21 and 22 of the compromise agreement.
ON THE SECOND MOTION
a) William Tieng is hereby ordered to pay/return to [Team Image and Felix S. Co] the sum of TWENTY[-]FIVE
MILLION EIGHT HUNDRED SIXTY[-]TWO THOUSAND SEVEN HUNDRED FIFTY and 00/100
(PhP25,862,750.00) PESOS broken down as: PhP17,362,750.00 cash amount received by William
Tieng and PhP8,500,000.00, total amount of checks still in the possession of William Tieng;
b) William Tieng is hereby ordered to turn over to [Solar Team] the amount of TWO MILLION EIGHT
HUNDRED NINETY[-]ONE THOUSAND TWO HUNDRED TWENTY[-]SIX and 97/100 (Php2,891,226.97)
PESOS and for SGV to pay [Team Image and Felix S. Co's] share thereon;
c) Let a writ of execution issue to enforce payment of the sum of FOUR MILLION (Php4,000,000.00) PESOS by
way of liquidated damages on account of TIENG's aforesaid two (2) breaches of warranty and
representation under the first ground hereof and; and another FOUR MILLION (PhP4,000,000.00)
PESOS by way of liquidated damages on account of TIENG's aforesaid two (2) branches of warranty
and representation under the second ground hereof or a total of EIGHT MILLION (PhP8,000,000.00)
PESOS, all pursuant to paragraph 24 of the Compromise Agreement.
SO ORDERED. 48

40
 A Motion for Reconsideration of the January 21, 2008 Order was filed by Solar Team. 49 When the trial court
ordered the deputy sheriff to deliver the garnished amount to Team Image through a certified bank check, Solar Team
likewise filed a Motion for Reconsideration. 50
In its Omnibus Order 51 dated May 19, 2008, the trial court acted on Team Image's December 18, 2007 Omnibus
Motion. According to the trial court, the only remedy allowed under the Compromise Agreement is the filing of a motion for
issuance of a writ of execution and that the orders allowing Team Image to suspend payments were merely temporary and
did not exonerate or release Team Image and Co from their obligation. 52 It then found that Team Image and Co were
"clearly in default in the payment of their obligation" 53 under the Compromise Agreement. Therefore, the trial court set
aside all its previous orders that allowed Team Image to suspend payments, i.e., the November 3, 2005 and January 21, 2008
Orders.
Furthermore, acting on Solar Team's Motion for Reconsideration, the trial court reversed and set aside its January
21, 2008 Order where it declared that Solar Team made excess collections from VTV Corporation. The trial court reversed
itself, and said that it was "premature to declare that there was overpayment made to [Solar Team] or William
Tieng" 54 because the appointed auditor, SGV and Co., had not yet finalized the required audit.
Nevertheless, the trial court reiterated that Solar Team violated the Compromise Agreement when it failed to cause
the dismissal of the complaint-in-intervention it had filed against Team Image. The trial court ordered Solar Team to pay
Team Image P2,000,000.00 in liquidated damages and to deposit the amount before the Office of the Clerk of Court of the
Regional Trial Court of Makati.
The dispositive portion of the May 19, 2008 Omnibus Order read:
WHEREFORE, PREMISES CONSIDERED, this Court hereby resolves the parties' motions, as follows:
1. [Solar Team's] Urgent Omnibus Motion dated January 18, 2008 praying that: cSEDTC
1) the implementation of the Writ of Execution dated January 10, 2008 be held in abeyance is
hereby DENIED for being moot and academic;
2) a Writ of Execution be issued against [Team Image] to enforce payment of the sum of TWO
MILLION (Php2,000,000.00) PESOS and the unpaid obligation of [Team Image] pursuant to
paragraph 24 of the compromise agreement is GRANTED. The previous Orders of this Court
allowing suspension of payment are hereby RECONSIDERED AND SET ASIDE;
2. [Solar Team's] Urgent Motion dated January 21, 2008 praying that the Letters of Garnishment be recalled
and/or their implementation be held in abeyance is hereby DENIED for being moot and academic;
3. [Solar Team's] Motion for Reconsideration dated January 28, 2008 is hereby GRANTED. The Order dated
January 21, 2008 is hereby RECONSIDERED and SET ASIDE;
4. [Solar Team's] Omnibus Motion dated March 27, 2008 seeking that [Solar Team] be allowed to deposit the
amount of P2 Million Pesos to the Office of the Clerk of Court — Regional Trial Court of Makati City
is GRANTED.
5. Finally, [Team Image and Felix S. Co's] prayer to cite [Solar Team's William Tieng] and his counsels for direct
contempt is hereby DENIED for lack of merit.
Accordingly, [Solar Team] is hereby ordered to deposit the amount of P2 Million Pesos to the
Office of the Clerk of Court — Regional Trial Court of Makati City within ten (10) days from receipt of this
Order, the same will be released only after final determination of the obligations of [Team Image and Felix
S. Co] pursuant to the compromise agreement and after the issue on the violation of the same agreement
by [Solar Team] for its failure to cause the dismissal of Civil Case No. 97-024 has been resolved with finality.
On the other hand, [Team Image and Felix S. Co] are hereby ordered to pay [Solar Team] as
follows:
1) the sum of TWO MILLION (Php2,000,000.00) PESOS as liquidated damages for their failure to
pay [Solar Team] the value of the dishonored checks despite its demand after the April 30, 2004 Order
allowing the suspension of payment to [Solar Team] was set aside by the November 23, 2004 Order of this
Court.
2) the sum of EIGHT MILLION FIVE HUNDRED THOUSAND (P8,500,000.00) PESOS representing the
value of the seventeen (17) dishonored checks which has remained unpaid as provided under paragraph 7
of the compromise agreement.
Let a writ of execution issue against [Team Image and Felix S. Co] to enforce the payment of the
sum of TWO MILLION (Php2,000,000.00) PESOS as liquidated damages and EIGHT MILLION FIVE HUNDRED
THOUSAND (P8,500,000.00) PESOS representing the value of the said seventeen (17) dishonored checks or
41
 a total of TEN MILLION FIVE HUNDRED THOUSAND (P10,500,000.00), pursuant to paragraphs 7 and 24 of
the compromise agreement.
SO ORDERED. 55
Team Image filed a Motion for Reconsideration of the May 19, 2008 Omnibus Order, which the trial court denied in
its August 8, 2008 Order, 56 the dispositive portion of which read:
WHEREFORE, premises considered, this Court resolves to DENY [Solar Team's] Motion to Consider
[Team Image and Felix S. Co's] Motion for Reconsideration as Not Filed dated July 2, 2008. [Team Image
and Felix S. Co's] Motion for Reconsider[a]tion dated June 17, 2008 is likewise DENIED for utter lack of
merit.
Accordingly, let the Writ as ordered by this Court to be issued per its Order dated May 19, 2008
be now issued and implemented in the manner provided for under Rule 39, Section 8 of the Rules of
Court and according to its aforesaid terms.
SO ORDERED. 57
Team Image filed a Petition for Certiorari before the Court of Appeals to assail the May 19, 2008 and August 8, 2008
Orders of the trial court. 58
The issue for the Court of Appeals' resolution was whether or not the trial court gravely abused its
discretion: SDAaTC
First, in ordering the Clerk of Court to keep in the trial court's custody the deposited P2,000,000.00 in liquidated
damages instead of ordering Solar Team Entertainment, Inc. to pay the amount directly to Team Image Entertainment, Inc.;
Second, in disallowing Team Image Entertainment, Inc. from suspending payments because the Compromise
Agreement allegedly did not allow suspension of payments;
Third, in ruling that a criminal case cannot be the subject of a compromise;
Fourth, in refusing to rule on whether or not Solar Team Entertainment, Inc.'s William Tieng made excess
collections from VTV Corporation; and
Finally, in holding that only a maximum of P2,000,000.00 in liquidated damages may be claimed under the
Compromise Agreement regardless of the number of violations. 59
On the first action, the Court of Appeals held that the trial court gravely abused its discretion in ordering the Clerk
of Court to keep in custodia legis the P2,000,000.00 liquidated damages deposited by Solar Team for its failure to dismiss the
complaint-in-intervention it had filed against Team Image. By keeping this amount in court custody instead of ordering the
Clerk of Court to deliver it to Team Image, the trial court allegedly stayed the execution of a final and executory judgment. 60
On the second action, the Court of Appeals ruled that the Compromise Agreement allowed for suspension of
payments, paragraph 24 61 of which stated that the "principle of reciprocity" under the Civil Code applied to the parties. The
Court of Appeals stated that Team Image was not obliged to pay its monetary obligations under the Compromise Agreement
since Solar Team violated several of its provisions such as submitting the required certification of receivables and dismissing
the cases earlier filed against Team Image. 62
Nevertheless, the Court of Appeals found that the trial court November 23, 2004 Order which allowed the
suspension of Team Image's payments was merely temporary. When the trial court set aside this Order, Team Image should
have resumed paying its obligations to Solar Team until November 3, 2005, when the trial court granted Team Image's
second motion to suspend payments. By failing to resume its payment in the interim, Team Image and Co were in default
from November 23, 2004 to November 3, 2005. 63
On the third action, the Court of Appeals said that criminal liability cannot be the subject of a compromise; hence,
Solar Team cannot be deemed to have violated the Compromise Agreement when it failed to cause the dismissal of the
criminal cases against Co. 64
On the fourth action, the Court of Appeals refused to resolve the issue of grave abuse of discretion because doing
so would allegedly preempt the proceedings before Branch 57, Regional Trial Court, Makati City where Solar Team sued VTV
Corporation for P18,617,915.81 in advertising spot fees. 65
On the last action, the Court of Appeals held that only a maximum of P2,000,000.00 in liquidated damages may be
paid under the Compromise Agreement, paragraph 24 66 of which still maintained that liquidated damages are payable in
case of failure to comply with "commitments" and in case of "breaches [of] warranties." The use of plural "commitments"
and "breaches," observed the Court of Appeals, meant that P2,000,000.00 is payable for collective breaches of the
Compromise Agreement. In the words of the Court of Appeals, "the totality of infractions or the number of violations would
not be relevant and liquidated damages would be pegged at Two Million (P2,000,000.00) Pesos for the total violations." 67
42
 In its December 10, 2009 Decision, 68 the Court of Appeals partly granted Team Image's Petition for Certiorari,
disposing the case in this wise:
WHEREFORE, premises considered, the petition is PARTLY GRANTED and resolved as follows:
The implementation of the Writ of Execution dated January 10, 2008 is AFFIRMED.
The payment by [Team Image] of TWO MILLION (Php2,000,000.00) PESOS pursuant to paragraph
24 of the Compromise Agreement for its failure to settle its obligation within the period from November
23, 2004 to November 3, 2005 is AFFIRMED.
The suspension of payment granted in the Order dated November 3, 2005 STAYS until respondent
Solar Team Entertainment, Inc. withdraws the complaint-in-intervention in Civil Case No. 97-024 before
Branch 137, Regional Trial Court of Makati City. acEHCD
The denial of the recall of the issued Letters of Garnishment is AFFIRMED.
The order to deposit the amount of P2 Million Pesos to the Office of the Clerk of Court —
Regional Trial Court of Makati City is REVERSED and SET ASIDE. The garnished amount of Two (P2M)
Million pesos representing liquidated damages is ordered released from the custody of the Clerk of Court
of the Regional Trial Court of Makati City and delivered to [Team Image].
The reversal of the order which requires [Solar Team's] William Tieng to cause the dismissal of
Criminal Case Nos. 07-1235 and 07-1236 is AFFIRMED.
The reversal of the order requiring [Solar Team's] William Tieng to pay the sum of TWO MILLION
(Php2,000,000.00) PESOS as liquidated damages on account of its failure to dismiss Crim. Case Nos. 07-
1235 and 07-1236 is AFFIRMED.
The reversal of the order requiring [Solar Team's] William Tieng to return the sum of
TWENTY[-]FIVE MILLION EIGHT HUNDRED SIXTY[-]TWO THOUSAND SEVEN HUNDRED FIFTY and 00/100
PESOS (PhP25,862,750.00) on account of [Solar Team's] alleged admission in its pleading in Civil Case No.
05-603 despite the pendency of the SGV audit is AFFIRMED.
The reversal of the order requiring [Solar Team's] William Tieng to turn over the amount of TWO
MILLION EIGHT HUNDRED NINETY[-]ONE THOUSAND TWO HUNDRED TWENTY[-]SIX and 97/100
(Php2,891,226.97) PESOS to [Solar Team] is AFFIRMED.
The reversal of the order requiring [Solar Team's] William Tieng to pay a total of EIGHT MILLION
PESOS (PhP8,000,000.00) PESOS, pursuant to paragraph 24 of the Compromise Agreement for alleged
breaches of warranty and representation is AFFIRMED.
SO ORDERED. 69
Team Image and Solar Team filed their separate Motions for Reconsideration, 70 both of which were denied in the
Resolution 71 dated March 17, 2010.
Separate Petitions for Review on Certiorari were filed by Team Image and Co 72 and Solar Team. 73 The Petitions
were thereafter consolidated. 74 Comments 75 and Replies 76 had likewise been filed by the parties.
The issues for this Court's resolution are the following:
First, whether or not the Court of Appeals erred in finding no grave abuse of discretion on the part of the trial court
when the latter declared Team Image Entertainment, Inc. in default for failing to resume payments from November 23, 2004
to November 3, 2005;
Second, whether or not the Court of Appeals erred in finding no grave abuse of discretion on the part of the trial
court when the latter declared Solar Team Entertainment, Inc. to have violated the Compromise Agreement for failing to
withdraw the complaint-in-intervention it had earlier filed in a collection case against Team Image Entertainment, Inc.;
Third, whether or not the Court of Appeals erred in finding no grave abuse of discretion on the part of the trial
court when the latter declared that Solar Team Entertainment, Inc. did not violate the Compromise Agreement for failing to
cause the dismissal of the criminal cases for estafa filed by Solar Team Entertainment, Inc.'s William Tieng against Team
Image Entertainment, Inc.'s Felix S. Co;
Fourth, whether or not the Court of Appeals erred in finding no grave abuse of discretion in the trial court's reversal
of its earlier order that required Solar Team Entertainment, Inc.'s William Tieng to turn over P25,862,750.00 to Team Image
Entertainment, Inc. as overpayments and P2,891,226.97 to Solar Team Entertainment, Inc. as amounts collected by William
Tieng from VTV Corporation; and,

43
 Finally, whether or not only a maximum of P2,000,000.00 in liquidated damages may be awarded under the
Compromise Agreement.
On the first issue, Team Image argues that the Court of Appeals erred in affirming the trial court's May 19, 2008
Order declaring Team Image to have defaulted in paying its obligation under the Compromise Agreement. Team Image
maintains that the trial court, in its own November 3, 2005 Order, stated that Team Image was entitled to suspend payments
under the Compromise Agreement because Solar Team did not withdraw the complaint-in-intervention it had earlier filed
against Team Image. Team Image's liability under the Compromise Agreement, if any, only became due and demandable on
April 7, 2006 when the trial court set aside the November 3, 2005 Order, not on February 19, 2005 as erroneously found by
the trial court in its subsequent May 19, 2008 Order. 77 SDHTEC
On the second issue, Team Image maintained that Solar Team violated the Compromise Agreement because the
latter failed to withdraw the complaint-in-intervention it had filed in ABC v. Team Image, a collection case against Team
Image. The trial court's November 3, 2005 and April 7, 2006 Orders that ordered Solar Team to withdraw its complaint-in-
intervention were affirmed on certiorari by the Court of Appeals in CA-G.R. SP No. 94102 and on appeal by this Court in G.R.
No. 183848. While Solar Team filed a Motion for Reconsideration in G.R. No. 183848, the Motion was already denied with
finality. Thus, Solar Team's argument that it cannot withdraw its complaint-in-intervention pending the resolution of its
Motion for Reconsideration "rest[s] on a shaky and slim foundation[.]" 78
On the third issue, Team Image argues that the Court of Appeals erred in declaring that criminal liability cannot be
the subject of a compromise. Team Image maintains that there was nothing in the Compromise Agreement which was
contrary to law, morals, or public policy. Further, courts encourage judgments based on compromise, the only exceptions
being matters relating to: (a) civil status of persons; (b) the validity of a marriage or a legal separation; (c) any ground for
legal separation; (d) future support; (e) the jurisdiction of courts; and, (f) future legitime. 79 Paragraph 24 of the
Compromise Agreement that required Solar Team to dismiss all cases it had filed against Team Image and Co does not fall
within these exceptions. Consequently, Solar Team must cause the dismissal of the criminal cases it filed against Team Image
and Co per paragraph 24 of the Compromise Agreement. 80
On the fourth issue, Team Image maintains that the Court of Appeals erred in affirming the reversal of trial court's
earlier Orders requiring Solar Team's Tieng to turn over a total of P25,862,750.00 in excess collections from VTV Corporation
to Team Image for equal division among the parties. Team Image argues that contrary to Solar Team and Tieng's
representation in paragraph 4 of the Compromise Agreement, Tieng collected more than P10,275,547.48 from VTV
Corporation. Specifically, Tieng received P22,971,527.03 from VTV Corporation as he alleged in his Complaint in Civil Case
No. 05-603 pending before Branch 57 of the trial court. In addition, the P2,891,226.97 supposedly collected by Barreiro
without Solar Team's authority actually redounded to the benefit of Tieng; hence, the amount should likewise be returned
for equal distribution between Solar Team and Team Image. 81
On the fifth issue, Team Image argues that the Court of Appeals erred in affirming the reversal by the trial court of
its earlier Order for Solar Team to pay a total of P8,000,000.00 in liquidated damages. According to Team Image, it is clear
from paragraph 24 of the Compromise Agreement that a writ of execution may issue for every violation of the Compromise
Agreement. Hence, for every writ of execution, a corresponding award of liquidated damages to the aggrieved party must be
paid. Team Image contends that the maximum amount of P2,000,000.00 in liquidated damages allowed to be awarded
would "result in a serious crisis whereby one party will contravene and/or breach with impunity any of [its] representations
and warranties, and worst, even all of them, with only a relatively small amount of penalty compared [to] the actual amount
which is the subject matter of the entire compromise agreement." 82
Arguing on the first issue, Solar Team counters that Team Image defaulted in its payments under the Compromise
Agreement as was earlier found by the trial court. Between November 23, 2004, when the trial court set aside its initial
order allowing suspension of payments, and November 3, 2005, when the trial court again allowed suspension of payments,
there was an almost one (1)-year period when Team Image should have resumed its payments to Solar Team. Team Image,
thus, defaulted in its payments during this almost one (1)-year period and the Court of Appeals correctly affirmed the
November 3, 2005 and April 7, 2006 Orders directing Team Image to pay Solar Team P2,000,000.00 in liquidated damages for
violation of the Compromise Agreement. 83
On the second issue, Solar Team maintains that it did not violate the Compromise Agreement when it failed to
withdraw the complaint-in-intervention it had filed in ABC v. Team Image. Solar Team alleges that the issue of whether or
not it indeed violated the Compromise Agreement is currently pending before this Court in a Petition for Review docketed
as Solar Team v. Hon. Dumayas, G.R. No. 183848. Consequently, the Court of Appeals should not have resolved this issue in
deference to this Court's "supreme authority." 84 AScHCD
On the third issue, Solar Team echoes the Court of Appeals' pronouncement that criminal liability cannot be the
subject of a compromise. A crime being a violation of public law, the aggrieved party is the public in general, not a private
individual. Consequently, neither Team Image nor Solar Team, both being private entities, may agree to cause the dismissal
of the criminal cases they filed against each other because they are both mere witnesses, not parties, in the criminal
cases. 85
44
 On the fourth issue, Solar Team maintains that Team Image's claim of overpayments is premature considering that
the appointed auditing firm, SGV and Co., has not yet finalized its accounting report as required under paragraph 24 of the
Compromise Agreement. Further, Tieng's supposed admission that he received P22,971,572.03 from VTV Corporation was,
at best, an extrajudicial admission not made in the present case. This admission cannot be used against him and the Court of
Appeals correctly affirmed the trial court orders that set aside the earlier directives for Solar Team to return Team Image's
alleged overpayments. 86
On the fifth issue, Solar Team reiterates the Court of Appeals' pronouncement that only a maximum of
P2,000,000.00 in liquidated damages may be awarded based on the Compromise Agreement. Solar Team argues that
nothing in the Compromise Agreement provided that each breach would correspond to an award of liquidated damages.
Furthermore, paragraph 24 used "breaches of warranties" and "commitments," meaning, "there can be as many orders of
compliance as there are proven breaches," 87 but only a maximum of P2,000,000.00 in liquidated damages, regardless of
the number of supposed breaches, may be awarded. 88
This Court partially grants the respective Petitions for Review on Certiorari filed by Team Image and Solar Team.

Under the Compromise Agreement, Team Image acknowledged and agreed to pay a total of P26,000,000.00
representing marketing commissions collectible from VTV Corporation. Team Image also agreed to pay half of the
professional fees of SGV and Co., the auditing firm hired to determine the final amounts payable by the parties under the
Compromise Agreement. The specific payment terms were provided in paragraphs 6 to 9 of the Compromise Agreement:
6. After crediting for the moment the amount of P7,384,320.51 mentioned in paragraph 4 hereof,
as having been collected by William Tieng from VTV, the parties agree that there remains, for the moment,
a balance of EIGHTEEN MILLION SIX HUNDRED FIFTEEN THOUSAND SIX HUNDRED SEVENTY[-]NINE AND
49/100 PESOS (P18,615,679.49) which Felix Co [and/or Team Image] agree to jointly and severally pay
William Tieng in the following manner and schedule:
P3,267,000.00 — by a 50[-]day postdated check from date of signing, which amount Felix Co
[and/or Team Image] represent to be his own collectibles from Duty Free Philippines, Inc.
The encashment of said check shall not be dependent upon Felix Co's/[Team Image's]
ability to collect from Duty Free Philippines, Inc.
P349,428.37 — to be withdrawn from the joint account of William Tieng and Felix S. Co with
Philippine Bank of Communications; Provided, That, Felix S. Co shall jointly sign a
withdrawal slip or document to effect or authorize the withdrawal thereof.
P983,826.06 — to be taken from the earlier collections of SGV deposited with International
Exchange Bank; Provided, That Felix S. Co and William Tieng shall jointly sign a withdrawal
slip or document for the withdrawal of the same.
The total of the above sums is FOUR MILLION SIX HUNDRED THOUSAND TWO HUNDRED FIFTY[-]FOUR
AND 43/100 (P4,600,254.43).
7. Felix Co/[Team Image] shall jointly and severally pay and liquidate the remaining balance of
FOURTEEN MILLION FIFTEEN THOUSAND FOUR HUNDRED TWENTY[-]FIVE AND 06/100 PESOS
(P14,015,425.06) in the following manner:
P1,015,425.06 — on or before 60 days from date of signing this agreement; Provided, That, Felix Co/
[Team Image] shall issue the corresponding postdated check therefor; and AcICHD
P13,000,000.00 — to be paid in twenty[-]six (26) equal monthly installments of P500,000.00 each
beginning 30 July 2003 and every 30th of the month thereafter until fully
liquidated, Provided, That, Felix Co/[Team Image] shall issue the corresponding postdated
checks therefor.
8. Felix Co/[Team Image] likewise agree, to jointly and severally immediately reimburse William
Tieng, upon the execution of this agreement, fifty percent (50%) of the amount of TWO HUNDRED
SEVENTY[-]EIGHT THOUSAND SIX HUNDRED SEVENTY PESOS (P278,670.00) which the latter had paid to
Sycip Gorres & Velayo (SGV), by way of the latter's professional fee or the sum of One Hundred
Thirty[-]Nine Thousand Three Hundred Thirty[-]Five (P139,335) Pesos.
9. Felix Co further agrees to recompense William Tieng the amount of P600,000.00, subject
matters of I.S. No. 99-F-3526 and P2,225,244.59, subject matter of I.S. No. 99-F-3525, both of the Office of

45
 the City Prosecutor, Parañaque City, Metro Manila, or the total amount of P2,825,244.59 by way of
postdated checks in five (5) equal monthly installments of P565,048.92 each installments, the same to
commence on 15 July 2003 and every 15th day of the month thereafter, Provided, That, the parties agree
to submit these accounts to SGV for the final determination of the nature of the consideration of these
checks, i.e., whether or not the same represent over-payment on the capital contribution of Felix S. Co into
Solar Team Entertainment, Inc. (STEI) to purchase TV programs/materials owned by Solar Entertainment
Corporation and/or from other suppliers and/or personal indebtedness of Felix S. Co to William
Tieng, Provided, That, SGV shall finish said accounting or on before 01 July 2003, and, Provided, Finally,
that, in the event SGV shall determine before the due date of any of the five (5) postdated checks herein
mentioned, that said amounts of the two (2) aforementioned checks are over-payment on the capital
contribution of Felix Co, then Felix S. Co shall have the right to stop the payment of the checks which have
not been presented for payment and William Tieng shall immediately return to Felix S. Co the amount/s of
the check/s so far encashed. 89
The table below summarizes Team Image's monetary obligations and the periods or conditions required for their
performance:

Basis under the

Period or condition required for
Obligation Compromise
performance of obligation
Agreement

Payment of P3,267,000.00 Fifty (50) days from date of Paragraph 6

through a postdated check signing the Compromise
Agreement

Withdrawal of P349,428.37 No period or condition Paragraph 6

from the joint account of provided, i.e., a pure obligation
William Tieng and Felix S. Co demandable at once 90

Withdrawal of P983,826.06 Upon the joint signing of a Paragraph 6

from earlier collections of withdrawal slip by William Tieng
SGV and Co. and Felix S. Co or any document
authorizing the withdrawal

Payment of P1,015,425.06 On or before 60 days from date Paragraph 7

of signing the Compromise
Agreement

Payment of P13,000,000.00 To be paid in twenty-six (26) Paragraph 7

equal monthly installments of
P500,000.00 each beginning 30
July 2003 and every 30th of the
month thereafter until fully
liquidated

Reimburse William Tieng Immediately, i.e., upon the Paragraph 8

P139,335.00 representing execution of the Compromise
50% of SGV and Co.'s Agreement on April 28, 2003
professional fees

A total of P2,825,244.59 By way of postdated checks in Paragraph 9

representing the amounts
subject matters of I.S. No. 99-
F-3526 and I.S. No. 99-F-
3525, both of the Office of
the City Prosecutor,
Parañaque City, Metro Manila
five (5) equal monthly
installments of P565,048.92 each
installments, the same to
commence on 15 July 2003 and
every 15th day of the month
thereafter

46
 Based on the periods and conditions provided in paragraphs 6 to 9, except for the payment of P13,000,000.00,
Team Image should have already performed its monetary obligations under the Compromise Agreement by April 26, 2004,
when it filed its first motion for issuance of writ of execution and suspension of payment. For instance, 50 days from the
signing of the Compromise Agreement on April 28, 2003 would fall on June 17, 2003. Hence, by June 17, 2003, Team Image
should have already paid Solar Team P3,267,000.00 in post-dated checks. Another obligation would be for Team Image to
pay Solar Team P1,015,425.06 within 60 days from the signing of the Compromise Agreement, the 60th day being June 27,
2003. 91 There is no proof, however, that Team Image complied with these obligations within the required periods. That
Team Image filed a motion for suspension of payments further demonstrates that it had not fully paid its obligations under
the Compromise Agreement. TAIaHE
While it is true that the trial court granted the Motion for Suspension of Payments in its April 29, 2004 Order, this
Order was subsequently set aside on November 23, 2004. Until the trial court granted Team Image's second motion for
suspension of payments on November 3, 2005, Team Image had almost a year to resume payments. However, Team Image
did not do so. The Court of Appeals, therefore, correctly held that Team Image was in default for failure to resume payments
under the Compromise Agreement. Team Image violated paragraphs 6 to 9 of the Compromise Agreement.

II

Paragraphs 21 and 22 of the Compromise Agreement are again provided below:

21. This agreement constitutes the final repository of all the prior understanding agreements and
contracts of the parties and shall operate as total waiver and discharge of any or all claims, counterclaims,
causes of action, claims and demands of whatever kind and nature which each may have against the other,
including their respective heirs[,] assigns[,] and successors-in-interest arising out of any of all matters,
cause or thing, whether directly or indirectly, related with the Marketing Agency Agreement dated 24 April
1996.
22. By virtue hereof, the parties have agreed, as they hereby agree to immediately provisionally
dismiss all actions, whether civil or criminal, they may have filed against the other, and after SGV shall have
finally completed the audit and accounting tasked upon it, the results of which is final and binding upon
the parties, all said civil and/or criminal actions shall be permanently dismissed by the parties.
Paragraph 22 requires both Team Image and Solar Team to "immediately provisionally dismiss all actions, whether
civil or criminal, they may have filed against each other." They shall cause the permanent dismissal of the actions "after [SGV
and Co.] shall have finally completed the audit and accounting tasked upon it."
When the Compromise Agreement was executed on April 28, 2003, there was a pending collection case filed by
ABC Television against Team Image when Solar Team filed a complaint-in-intervention. It does not appear that Solar Team
filed a motion to dismiss the complaint-in-intervention it had filed against Team Image; hence, Solar Team violated
paragraph 22 of the Compromise Agreement.
That the term "provisional dismissal," in its technical sense, only applies to criminal cases 92 is not an argument for
Solar Team to refuse to withdraw the complaint-in-intervention. It does not appear that Team Image and Solar Team meant
to use the term in its technical sense. Considering that the parties agreed in paragraph 21 that the Compromise Agreement
"shall operate as total waiver and discharge of any or all claims, counterclaims, causes of action, claims and demands of
whatever kind and nature which each may have against the other," the parties intended to terminate all the cases they filed
against each other.
The pendency of the Motion for Reconsideration filed by Solar Team in Solar Team v. Hon. Dumayas, G.R. No.
183848, may no longer be invoked because it had already been denied with finality. Even if G.R. No. 183848 remained active,
it originated from a Petition for Certiorari questioning the interlocutory Order of November 3, 2005, a suit that can proceed
separately from the main case. 93 It merely continued the certiorari proceedings before the Court of Appeals; hence, this
Court need not await the resolution of G.R. No. 183848 before resolving whether or not Solar Team violated the
Compromise Agreement for failing to withdraw its complaint-in-intervention against Team Image.

III

However, despite paragraphs 21 and 22 of the Compromise Agreement, Solar Team cannot be deemed to have
violated it for failing to cause the dismissal of the criminal cases for estafa Tieng filed against Co. It is settled that criminal
liability cannot be the subject of a compromise. 94 "[A] criminal case is committed against the People, and the offended
party may not waive or extinguish the criminal liability that the law imposes for its commission." 95 This explains why "a

47
compromise is not one of the grounds prescribed by the Revised Penal Code for the extinction of criminal
liability." 96 cDHAES
None of the cases cited by Team Image supports its argument that criminal liability may be subject of a
compromise. Chavez v. Presidential Commission on Good Government 97 and Benedicto v. Board of
Administrators, 98 ironically cited by Team Image, are both clear that compromise is encouraged only
in civil cases. Chavez explicitly stated that "[w]hile a compromise in civil suits is expressly authorized by law, there is no
similar general sanction as regards criminal liability." 99
Team Image confused the Presidential Commission on Good Government's power to grant criminal
immunity 100 with the act of compromising criminal liability. Granting criminal immunity is allowed because no criminal
case has yet been filed in court, and therefore, there is no criminal liability to compromise. On the other hand,
compromising criminal liability presupposes that a criminal case has already been filed in court, the dismissal of which is
already based on the sound discretion of the trial court. 101 In other words, the dismissal cannot be automatic, regardless of
the agreement between the private complainant and the accused to dismiss the case. As discussed, the real offended party
in a criminal case is the State and the outcome of the criminal case cannot be based on the will of the private complainant
who is a mere witness for the prosecution.
The cases involved here are cases not under the jurisdiction of the Presidential Commission on Good
Government. Chavez and Benedicto, therefore, do not apply.
All told, the Court of Appeals correctly found no grave abuse of discretion on the part of the trial court when it held
that Team Image and Solar Team cannot agree on the dismissal of the criminal cases. Solar Team did not violate the
Compromise Agreement when Tieng failed to cause the dismissal of the criminal cases for estafa he had filed against Co.

IV

Furthermore, it was premature for Team Image to claim that it made overpayments to Solar Team when Tieng
allegedly admitted to receiving from VTV Corporation the amount of P22,971,572.03, significantly more than the
P10,275,547.48 provided in paragraph 4 of the Compromise Agreement.
Paragraphs 3, 4, and 5 of the Compromise Agreement provide:
3. The parties agree that William Tieng is entitled to initially receive the amount of TWENTY[-]SIX
MILLION PESOS (P26,000,000.00), Philippine Currency, as stipulated and embodied in their handwritten
memorandum of agreement executed on 05 May 1998, out of the sales and collections made by [Team
Image]/Felix S. Co as marketing agent of [Solar Team]. This is so because, [Team Image]/Felix S. Co have
admitted having earlier collected at least the sum of at least P26M, hence, to equalize the sharing of Felix
S. Co and William Tieng on the proceeds of the sales. William Tieng should also receive the sum of at least
P26M.
4. William Tieng acknowledges that VTV had made payments in the total sum of TEN MILLION
TWO HUNDRED SEVENTY[-]FIVE THOUSAND FIVE HUNDRED FORTY[-]SEVEN AND 48/100 PESOS
(10,275,547[.]48) Philippine Currency, from the contracts with VTV for the airing over IBC-13 of the TV
programs/materials belonging to either Solar Entertainment Corporation, or Solar Films, Inc., or Solar
Team Entertainment, Inc., out of which, TWO MILLION EIGHT HUNDRED NINETY[-]ONE THOUSAND TWO
HUNDRED TWENTY[-]SIX AND 97/100 (P2,891,226.97) was collected and paid to Ma. Fe Barriero as what
she represented to be marketing commissions, thus leaving a balance of SEVEN MILLION THREE HUNDRED
EIGHTY[-]FOUR THOUSAND THREE HUNDRED TWENTY AND 51/100 (P7,384,320.51). An accounting shall
be made by VTV to determine how much of this amount of P7,384,320.51, pertain to programs/materials
owned by [Solar Team]. Upon such determination, the amount pertaining to the programs/materials
owned by [Solar Team] (which company is owned 50/50 by Felix Co and William Tieng) shall be credited to
it and shall be credited to William Tieng as part of the amount he is entitled to receive stated and referred
to in paragraph 3 hereof.
5. William Tieng represents and warrants that the aforesaid sum of P2,891,226.97 which is
charged as marketing commissions are unauthorized collections which, did not redound to the benefit of
the parties from their joint operation as stated in the paragraph immediately preceding, but to the
personal gain and advantage of their marketing agent, Maria Fe Barriero, hence, earnest efforts shall be
exerted by said William Tieng to collect the same from the offending party. After said collection or in the
event that said amount shall be proved to have redounded to the benefit of said William Tieng, then
William Tieng shall turn-over the said amount to [Solar Team] and thereafter SGV shall determine the
share of Felix S. Co thereon which shall be paid immediately to the latter. 102 ASEcHI

48
 Under paragraphs 4 and 5 of the Compromise Agreement, there must first be an audit and accounting by SGV and
Co. before there can be a final determination of the share of Team Image from the collectibles from VTV Corporation. There
is no showing that SGV and Co. had already completed its audit and accounting when Team Image filed a motion for the
issuance of a writ of execution.
The supposed admission of Tieng in Civil Case No. 05-603 that he received P22,971,572.03 is not a judicial
admission contemplated under Rule 129, Section 4 of the Rules of Court. 103 Rule 129, Section 4 requires that the admission
be made in the same case. The admission of Tieng was made in a different case. Therefore, the admission in Civil Case No.
05-603 cannot be made basis to contend that Tieng misrepresented the amounts he stated in paragraph 4 of the
Compromise Agreement. The Court of Appeals correctly held that it was premature for Team Image to claim overpayments.

Paragraph 24 of the Compromise Agreement is reiterated below:

24. In the event SGV shall have made a final determination of the respective accountability of the
parties and any of the parties fail to comply with the same, or in the event any of the parties is remiss or
reneges from [its] commitment/s as specified in this Agreement or breaches the warranties and/or
representation as contained herein, then the aggrieved party shall be entitled to an immediate issuance of
a writ of execution to enforce compliance thereof and the guilty party shall pay the innocent party the sum
of P2 Million Pesos by way of liquidated damages and/or penalty and shall, likewise, shoulder all the
expenses in enforcing this compromise agreement by a writ of execution. Moreover, the innocent party
shall have the right to invoke the principle of reciprocity of obligations in contracts as provided for by
law. 104
Paragraph 24 of the Compromise Agreement gives two (2) classifications of the possible violations of the
Compromise Agreement. The first is "in the event" where the appointed auditing firm, SGV and Co., would have made a final
determination of the accountabilities of the parties and any of the parties fails to pay its respective accountabilities based on
the audit. The second is "in the event" where "any of the parties is remiss or reneges from [its] commitment/s as specified in
this Agreement or breaches the warranties and/or representation as contained herein." That these are the only two (2)
classifications of violations is inferable from the use of the phrase "in the event," a comma, and the word "or" to separate
these two (2) instances. In other words, all obligations that require SGV and Co.'s final accounting fall under the first
classification. All other obligations fall under the second classification.
Given the foregoing, the payment of liquidated damages is based on these two (2) "events" or classifications of
violation. Since there are only two (2) classifications of violations immediately preceding the provision on the payment of
P2,000,000.00 liquidated damages, only a maximum of P4,000,000.00 may be paid under paragraph 24.
The obligations under the Compromise Agreement that require SGV and Co.'s final determination are found in
paragraphs 9, 105 13, 106 15, 107 16, 108 17, 109 19, 110 22, 111 and 24. 112 Violations of these paragraphs fall under the
first "event" or classification. Violations of all other paragraphs fall under the second "event" or classification.
As previously discussed, Team Image violated paragraphs 6 and 7 of the Compromise Agreement by failing to pay its
monetary obligations under these paragraphs. For these violations, Team Image must pay Solar Team P2,000,000.00 in
liquidated damages. As for Solar Team, it violated paragraph 22 of the Compromise Agreement for failure to withdraw the
complaint-in-intervention it had earlier filed against Team Image. Hence, Solar Team must pay Team Image P2,000,000.00 in
liquidated damages.

VI

Articles 1279 and 1281 of the Civil Code provide:

Article 1279. In order that compensation may be proper, it is necessary:
(1) That each one of the obligors be bound principally, and that he be at the same time a
principal creditor of the other;
(2) That both debts consist in a sum of money, or if the things due are consumable, they
be of the same kind, and also of the same quality if the latter has been stated;
(3) That the two debts be due;
(4) That they be liquidated and demandable; ITAaHc

49
 (5) That over neither of them there be any retention or controversy, commenced by third
persons and communicated in due time to the debtor.
xxx xxx xxx
Article 1281. Compensation may be total or partial. When the two debts are of the same amount,
there is a total compensation.
Considering that the parties are equally liable to each other in the amount of P2,000,000.00, this Court confirms
that the amounts are set off by operation of law. 113

VII

However, this Court recalls that in the May 19, 2008 Omnibus Order, Judge Dumayas directed Solar Team to deposit
with Office of the Clerk of Court-Regional Trial Court of Makati City the amount of P2,000,000.00 representing liquidated
damages for Solar Team's failure to withdraw the complaint-in-intervention it had filed against Team Image. Judge Dumayas
added that the amount "will be released only after final determination of the obligations of [Team Image and Co] pursuant
to the compromise agreement and after the issue on the violation of the same agreement by [Solar Team] for its failure to
[withdraw the complaint-in-intervention] has been resolved with finality." 114
As held by the Court of Appeals, it was grave abuse of discretion for Judge Dumayas to keep the P2,000,000.00
in custodia legis. Upon approval, a judgment upon a compromise is immediately executory, not even subject to
appeal. 115 Ordering the deposit of the P2,000,000.00 with the Office of the Clerk of Court effectively stayed the execution
of an immediately executory judgment. It is highly irregular. Nowhere in the law or the Rules of Court is such deposit
allowed.
Additionally, the complexity of resolving the present petitions could have been avoided had Judge Dumayas
properly managed the case for accounting. For this reason, adding the highly irregular order of deposit, this matter is
referred to the Office of the Court Administrator to be docketed as a separate administrative matter against Judge Dumayas.
Judge Dumayas is to show cause why he should not be disciplinarily dealt with for: first, in issuing the May 19, 2008 Omnibus
Order which directed the deposit of P2,000,000.00 before the Office of the Clerk of Court-Regional Trial Court, Makati City;
and, second, for reversing himself, on several occasions, on the issues of whether or not Team Image was entitled to suspend
payments to Solar Team and whether or not the criminal cases may be dismissed based on the Compromise Agreement.
WHEREFORE, the Petitions for Review on Certiorari filed by Team Image Entertainment, Inc. and Solar Team
Entertainment, Inc. are PARTIALLY GRANTED and the Court of Appeals December 10, 2009 Decision in CA-G.R. SP No,
104961 is MODIFIED as follows:
The implementation of the Writ of Execution dated January 10, 2008 is AFFIRMED;
Team Image Entertainment, Inc. is LIABLE to Solar Team Entertainment, Inc. in the amount of P2,000,000.00
pursuant to paragraph 24 of the Compromise Agreement for its failure to settle its obligation within the period from
November 23, 2004 to November 3, 2005;
Solar Team Entertainment, Inc. is LIABLE to Team Image Entertainment, Inc. in the amount of P2,000,000.00
pursuant to paragraph 24 of the Compromise Agreement for its failure to withdraw earlier the complaint-in-intervention it
filed in Civil Case No. 97-024 pending before Branch 137, Regional Trial Court of Makati City;
Considering that Team Image Entertainment, Inc. and Solar Team Entertainment, Inc. are concurrently liable to each
other in equal amounts, the compensation of their liabilities takes effect by operation of law. The order for Solar Team
Entertainment, Inc. to deposit the amount of P2,000,000.00 to the Office of the Clerk of Court — Regional Trial Court of
Makati City is REVERSED and SET ASIDE. The garnished amount of P2,000,000.00 representing liquidated damages is
ordered released from the custody of the Clerk of Court of the Regional Trial Court of Makati City and must be returned to
Solar Team Entertainment, Inc.;
The reversal of the order which requires William Tieng to cause the dismissal of Criminal Case Nos. 07-1235 and 07-
1236 is AFFIRMED;
The reversal of the order requiring William Tieng to pay the sum of P2,000,000.00 as liquidated damages on
account of his failure to dismiss Criminal Case Nos. 07-1235 and 07-1236 is AFFIRMED; CHTAIc
The reversal of the order requiring William Tieng to return the sum of P25,862,750.00 on account of Solar Team
Entertainment, Inc.'s alleged admission in its pleading in Civil Case No. 05-603 despite the pendency of the SyCip Gorres
Velayo and Co. audit is AFFIRMED;

50
 The reversal of the order requiring William Tieng to turn over the amount of P2,891,226.97 to Solar Team
Entertainment, Inc. is AFFIRMED;
The reversal of the order requiring William Tieng to pay a total of P8,000,000.00 as liquidated damages for alleged
breaches of warranty and representation is AFFIRMED; and
Finally, the issuance of the May 19, 2008 Omnibus Order is REFERRED to the Office of the Court Administrator to be
docketed as a regular administrative matter against Presiding Judge Winlove M. Dumayas of Branch 59, Regional Trial Court,
Makati City.
SO ORDERED.
Velasco, Jr., Bersamin, Martires and Gesmundo, JJ., concur.
||| (Team Image Entertainment, Inc. v. Solar Team Entertainment, Inc., G.R. Nos. 191652 & 191658, [September 13, 2017])

51
 THIRD DIVISION

[G.R. No. 185530. April 18, 2018.]

MAKATI TUSCANY CONDOMINIUM CORPORATION, petitioner, vs. MULTI-REALTY DEVELOPMENT

CORPORATION, respondent.

DECISION

LEONEN, J p:

Reformation of an instrument may be allowed if subsequent and contemporaneous acts of the parties show that
their true intention was not accurately reflected in the written instrument. HTcADC
This resolves the Petition for Review on Certiorari 1 filed by Makati Tuscany Condominium Corporation (Makati
Tuscany), assailing the April 28, 2008 Amended Decision 2 and December 4, 2008 Resolution 3 of the Court of Appeals in CA-
G.R. CV No. 44696.
In 1974, Multi-Realty Development Corporation (Multi-Realty) built Makati Tuscany, a 26-storey condominium
building located at the corner of Ayala Avenue and Fonda Street, Makati City. 4
Makati Tuscany had a total of 160 units, with 156 ordinary units from the 2nd to the 25th floors and four (4)
penthouse units on the 26th floor. 5 It also had 270 parking slots which were apportioned as follows: one (1) parking slot for
each ordinary unit; two (2) parking slots for each penthouse unit; and the balance of 106 parking slots were allocated as
common areas. 6
On July 30, 1975, Multi-Realty, through its president Henry Sy, Sr., executed and signed Makati Tuscany's Master
Deed and Declaration of Restrictions (Master Deed), 7 which was registered with the Register of Deeds of Makati in 1977. 8
Sometime in 1977, pursuant to Republic Act No. 4726, or the Condominium Act, Multi-Realty created and
incorporated Makati Tuscany Condominium Corporation (MATUSCO) to hold title over and manage Makati Tuscany's
common areas. That same year, Multi-Realty executed a Deed of Transfer of ownership of Makati Tuscany's common areas
to MATUSCO. 9
On April 26, 1990, Multi-Realty filed a complaint for damages and/or reformation of instrument with prayer for
temporary restraining order and/or preliminary injunction against MATUSCO. This complaint was docketed as Civil Case No.
90-1110 and raffled to Branch 59 of Makati Regional Trial Court. 10
Multi-Realty alleged in its complaint that of the 106 parking slots designated in the Master Deed as part of the
common areas, only eight (8) slots were actually intended to be guest parking slots; thus, it retained ownership of the
remaining 98 parking slots. 11
Multi-Realty claimed that its ownership over the 98 parking slots was mistakenly not reflected in the Master Deed
"since the documentation and the terms and conditions therein were all of first impression," 12 considering that Makati
Tuscany was one of the first condominium developments in the Philippines. 13
On October 29, 1993, the Regional Trial Court 14 dismissed Multi-Realty's complaint. It noted that Multi-Realty
itself prepared the Master Deed and Deed of Transfer; therefore, it was unlikely that it had mistakenly included the 98
parking slots among the common areas transferred to MATUSCO. It also emphasized that Multi-Realty's prayer for the
reformation of the Master Deed could not be granted absent proof that MATUSCO acted fraudulently or inequitably towards
Multi-Realty. Finally, it ruled that Multi-Realty was guilty of estoppel by deed. 15 The fallo of its Decision read:
Premises considered, this case is dismissed. [MATUSCO's] counterclaim is likewise dismissed the
same not being compulsory and no filing fee having been paid. [Multi-Realty] is however ordered to pay
[MATUSCO's] attorney's fees in the amount of P50,000.00.
Cost against plaintiff.
SO ORDERED. 16

52
 Both parties appealed the Regional Trial Court Decision to the Court of Appeals. On August 21, 2000, the Court of
Appeals 17 dismissed both appeals on the ground of prescription.
In dismissing Multi-Realty's appeal, the Court of Appeals held that an action for reformation of an instrument must
be brought within 10 years from the execution of the contract. As to the dismissal of MATUSCO's appeal, the Court of
Appeals ruled that its claim was based on a personal right to collect a sum of money, which had a prescriptive period of four
(4) years, and not based on a real right, with a prescriptive period of 30 years. 18
The fallo of the Court of Appeals August 21, 2000 Decision read:
WHEREFORE, foregoing premises considered, the appeal having no merit in fact and in law is
hereby ORDERED DISMISSED, and the judgment of the trial court is MODIFIED by deleting the award of
attorney's fees not having been justified but AFFIRMED as to its Order dismissing both the main complaint
of [Multi-Realty] and the counterclaim of [MATUSCO]. With costs against both parties. aScITE
SO ORDERED. 19
Multi-Realty moved for reconsideration, 20 but its motion was denied in the Court of Appeals January 18, 2001
Resolution. 21 It then filed a petition for review 22 before this Court.
On June 16, 2006, this Court in Multi-Realty Development Corporation v. The Makati Tuscany Condominium
Corporation 23 granted Multi-Realty's petition, set aside the assailed Court of Appeals August 21, 2000 Decision, and
directed the Court of Appeals to resolve Multi-Realty's appeal.
Multi-Realty Development Corporation ruled that the Court of Appeals should have resolved the appeal on the
merits instead of motu proprio resolving the issue of whether or not the action had already prescribed, as the issue of
prescription was never raised by the parties before the lower courts. 24
Nonetheless, Multi-Realty Development Corporation held that even if prescription was raised as an issue, the Court
of Appeals still erred in dismissing the case because Multi-Realty's right to file an action only accrued in 1989 when
MATUSCO denied Multi-Realty's ownership of the 98 parking slots. The Court of Appeals ruled that it was only then that
Multi-Realty became aware of the error in the Master Deed, thereafter seeking its reformation to reflect the true agreement
of the parties. Thus, prescription had not yet set in when Multi-Realty filed its complaint for reformation of instrument in
1990. 25
The fallo in Multi-Realty Development Corporation read:
IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The Decision of the Court of Appeals
in CA-G.R. CV No. 44696 is SET ASIDE. The Court of Appeals is directed to resolve [Multi-Realty's] appeal
with reasonable dispatch. No costs.
ORDERED. 26 (Emphasis in the original)
On November 5, 2007, the Court of Appeals 27 denied both appeals.
Regarding Multi-Realty's appeal, the Court of Appeals held that the Master Deed could only be read to mean that
the 98 parking slots being claimed by Multi-Realty belonged to MATUSCO. It highlighted that the language of the Master
Deed, as prepared by Multi-Realty, was clear and not susceptible to any other interpretation. 28
The Court of Appeals upheld the Regional Trial Court's finding that Multi-Realty was guilty of estoppel by deed and
likewise declared that MATUSCO was not estopped from questioning Multi-Realty's claimed ownership over and sales of the
disputed parking slots. 29
The fallo of the Court of Appeals November 5, 2007 Decision read:
WHEREFORE, the instant appeals are hereby DENIED. The assailed Decision dated October 29,
1993 of the Regional Trial Court (Branch 65), Makati, Metro Manila (now Makati City), in Civil Case No. 90-
1110 is MODIFIED — in that: (1) the counterclaim of The Makati Tuscany Condominium Corporation
is DISMISSED — not on the ground of non-payment of docket fees but on ground of prescription; and, (2)
the award of attorney's fees in favor of The Makati Tuscany Condominium Corporation is DELETED for not
having been justified. We however AFFIRM in all other aspects. Costs against both parties.
SO ORDERED. 30 (Emphasis in the original)
Multi-Realty moved for the reconsideration of the Court of Appeals November 5, 2007 Decision and on April 28,
2008, the Court of Appeals promulgated an Amended Decision, 31 reversing its November 5, 2007 Decision and directing the
reformation of the Master Deed and Deed of Transfer.
In reversing its November 5, 2007 Decision, the Court of Appeals ruled that the Master Deed and Deed of Transfer
did not reflect the true intention of the parties on the ownership of the 98 parking slots. 32

53
 The Court of Appeals stated that in reformation cases, the party asking for reformation had the burden to overturn
the presumption of validity accorded to a written contract. It held that Multi-Realty was able to discharge this burden. 33
The fallo of the Court of Appeals April 28, 2008 Amended Decision read:
WHEREFORE, premises considered, the present Motion for Reconsideration is PARTLY GRANTED.
Our Decision dated November 05, 2007 is hereby MODIFIED — in that We ORDER the reformation of
the Master Deed and Declaration of Restrictions of the Makati Tuscany Condominium Project and
the Deed of Transfer — to clearly provide that the ownership over the ninety[-]eight (98) extra parking lots
be retained by Multi-Realty Development Corporation. We however DENY the damages and attorney's
fees prayed for by Multi-Realty Development Corporation. We AFFIRM in all other respects. No costs.
SO ORDERED. 34 (Emphasis in the original)
MATUSCO moved for the reconsideration 35 of the Amended Decision, but its motion was denied in the Court of
Appeals December 4, 2008 Resolution. 36
On February 5, 2009, MATUSCO filed its Petition for Review 37 on Certiorari before this Court.
In its Petition, petitioner claims that the Court of Appeals erred in granting Multi-Realty's appeal because there was
no basis to reform the Master Deed and Deed of Transfer. It asserts that there was no mistake, fraud, inequitable conduct, or
accident which led to the execution of an instrument that did not express the true intentions of the parties. It avers that the
instruments clearly expressed what the parties agreed upon. 38
Petitioner also assails the Court of Appeals' ruling that it was estopped from questioning respondent's sales of 26
out of the 98 contested parking slots and from claiming ownership of the remaining unsold parking slots because it was
supposedly fully aware of respondent's ownership of them and did not oppose its sales for 9 years. 39
Petitioner maintains that estoppel cannot apply because the sales made by respondent were patently illegal as they
went against the stipulations in the Master Deed. Furthermore, petitioner contends that it never misled respondent
regarding ownership of the 98 parking slots since it was respondent itself which drafted the Master Deed and Deed of
Transfer that turned over ownership of the common areas, including the 98 parking slots, to MATUSCO. 40 HEITAD
In its Comment, 41 respondent insists that it never intended to include the 98 parking slots among the common
areas transferred to MATUSCO. It avers that due to its then inexperience with the condominium business, with Makati
Tuscany being one of the Philippines' first condominium projects, the Master Deed and Deed of Transfer failed to reflect the
original intention to exclude the 98 parking slots from Makati Tuscany's common areas. 42
Respondent points to the parties' subsequent acts that led to the only conclusion that it was always the intention to
exclude the 98 parking slots from the common areas, and that this was known and accepted by petitioner from the
beginning. 43
Respondent maintains that the Petition raises factual findings and prays that this Court take a second look at the
evidence presented and come up with its own factual findings, in derogation of the purpose of an appeal under Rule 45 of
the Rules of Court, which generally limits itself to questions of law. 44
Respondent also points out that in Multi-Realty Development Corporation, this Court, in its recital of material facts,
acknowledged that it retained ownership over the 98 parking slots, but that its ownership over them was not reflected in the
Master Deed and Deed of Transfer. Thus, respondent asserts that the issue of ownership can no longer be threshed out on
appeal on the ground of res judicata. 45
In its Reply, 46 petitioner claims that just like respondent, it also committed a mistake in good faith and "also
labored under a mistaken appreciation of the nature and ownership of the ninety[-]eight (98) parking slots" 47 when it failed
to object to respondent's sales of some of the parking slots from 1977 to 1986 and when it issued Certificates of
Management over the sold parking slots. It was only later that petitioner realized the extent of its legal right over the 98
parking slots; consequently, it exerted effort to exercise its dominion over them. Petitioner argues that this cannot be
characterized as bad faith on its part. 48
Petitioner adds that the Master Deed and Deed of Transfer are public documents, being duly registered with the
Register of Deeds of Makati City, ergo, their terms, conditions, and restrictions are valid and binding in rem. It opines that for
the Court of Appeals to change the clear and categorical wordings of the Master Deed more than 30 years after its
registration goes against public policy and the Condominium Act. 49
Petitioner insists that if respondent merely made a mistake in including the 98 parking slots among the common
areas transferred to petitioner, this mistake must be construed in petitioner's favor as respondent is owned by one of the
wealthiest family corporations in the country while petitioner is merely an association of innocent purchasers for value. 50
The issues raised for this Court's resolution are as follows:

54
 First, whether or not there is a need to reform the Master Deed and the Deed of Transfer; and
Second, whether or not this Court is bound by the factual findings in Multi-Realty Development Corporation v. The
Makati Tuscany Condominium Corporation on the ground of conclusiveness of judgment.

Reformation of an instrument is a remedy in equity where a valid existing contract is allowed by law to be revised to
express the true intentions of the contracting parties. 51 The rationale is that it would be unjust to enforce a written
instrument which does not truly reflect the real agreement of the parties. 52 In reforming an instrument, no new contract is
created for the parties, rather, the reformed instrument establishes the real agreement between the parties as intended, but
for some reason, was not embodied in the original instrument. 53
An action for reformation of an instrument finds its basis in Article 1359 of the Civil Code which provides:
Article 1359. When, there having been a meeting of the minds of the parties to a contract, their true
intention is not expressed in the instrument purporting to embody the agreement, by reason of mistake,
fraud, inequitable conduct or accident, one of the parties may ask for the reformation of the instrument to
the end that such true intention may be expressed.
If mistake, fraud, inequitable conduct, or accident has prevented a meeting of the minds of the
parties, the proper remedy is not reformation of the instrument but annulment of the contract. ATICcS
The National Irrigation Administration v. Gamit 54 stated that there must be a concurrence of the following
requisites for an action for reformation of instrument to prosper:
(1) there must have been a meeting of the minds of the parties to the contract; (2) the instrument does
not express the true intention of the parties; and (3) the failure of the instrument to express the true
intention of the parties is due to mistake, fraud, inequitable conduct or accident. 55
The burden of proof then rests upon the party asking for the reformation of the instrument to overturn the
presumption that a written instrument already sets out the true intentions of the contracting parties. 56
It is not disputed that the parties entered into a contract regarding the management of Makati Tuscany's common
areas. A Master Deed and a Deed of Transfer were executed to contain all the terms and conditions on the individual
ownership of Makati Tuscany's units and the co-ownership over the common areas. The question to be resolved is whether
the provisions in the Master Deed and Deed of Transfer over the 98 parking slots, as part of the common areas, expressed
the true intentions of the parties, and if not, whether it was due to mistake, fraud, inequitable conduct, or accident.
Sections 5 and 7 (d) of the Master Deed provide as follows:
SEC. 5. Accessories to Units. — To be considered as part of each unit and reserved for the exclusive use of
its owner are the balconies adjacent thereto and the parking lot or lots which are to be assigned to each
unit.
xxx xxx xxx
SEC. 7. The Common Areas. — The common elements or areas of The Makati Tuscany shall comprise all
the parts of the project other than the units, including without limitation the following:
xxx xxx xxx
(d) All driveways, playgrounds, garden areas and parking areas other than those assigned to each unit under
Sec. 5 above[.] 57
A plain and literal reading of Section 7 (d) in relation to Section 5 shows that all parking areas which are not
assigned to units come under petitioner's authority because they are part of the common areas.
Respondent argues that what was written in the Master Deed and Deed of Transfer failed to fully capture what was
actually intended by the parties. However, intentions involve a state of mind, making them difficult to decipher; therefore,
the subsequent and contemporaneous acts of the parties must be presented into evidence to reflect the parties'
intentions. 58
To substantiate its claim that there was a difference between the written terms in the Master Deed and Deed of
Transfer and the parties' intentions, respondent refers to their prior and subsequent acts.
First, respondent points out that in the color-coded floor plans for the ground floor, upper basement, and lower
basement, only eight (8) guest parking slots were indicated as part of the common areas. However, respondent alleges that

55
due to its inexperience with documenting condominium developments, it failed to reflect the correct number of guest
parking slots in the Master Deed and Deed of Transfer. 59
Second, acting under the honest belief that it continued to own the 98 parking slots, respondent sold 26 of them to
Makati Tuscany's unit owners from 1977 to 1986, without any hint of a complaint or opposition from petitioner. Respondent
also states that petitioner repeatedly cooperated and supported its sales by issuing Certificates of Management for the
condominium units and parking slots sold by respondent. 60
Third, petitioner's Board of Directors made repeated offers to purchase the parking slots from respondent,
signifying petitioner's recognition of respondent's retained ownership over the disputed parking slots. This was made
evident in an excerpt from the minutes of the June 14, 1979 meeting of MATUSCO's Board of Directors:
UNASSIGNED PARKING SLOTS
Mr. Jovencio Cinco informed the Board of the final proposal of Multi-Realty Development Corp. to
sell the condominium corp. all of the unassigned parking lots at a discounted price of P15,000.00 per lot,
or some 50% lower than their regular present price of P33,000.00 each.
After discussion, it was agreed to hold in abeyance any decision on the matter for all the members
of the Board in attendance to pass upon. 61 TIADCc
Finally, respondent highlights that it was only in September 1989, when the value of the 72 remaining unallocated
parking slots had risen to approximately P250,000.00 each or approximately P18,000,000.00 for the 72 parking slots, that
petitioner first claimed ownership of the remaining parking slots. 62
At this juncture, it must be pointed out that petitioner never rebutted any of respondent's statements regarding the
subsequent acts of the parties after the execution and registration of the Master Deed and Deed of Transfer. Petitioner even
adopted the narration of facts in Multi-Realty Development Corporation and declared in its Reply that:
1. The Petition does not raise questions of fact because no doubt or difference exists between the parties'
appreciation of the truth or falsehood of alleged facts, nor does it require the Honorable Court to evaluate
the credibility of witnesses or their testimonies. The resolution of the instant controversy rests solely upon
the correct application of principles of law and pertinent jurisprudence, as well as hallowed ideals of
fairness and public policy which are specific or germane to the undisputed facts. These facts have already
been framed by this Honorable Court in a related case brought before it by the same parties, albeit limited
to the sole issue of prescription of the action for reformation of instruments initiated by [Multi-Realty]. For
the avoidance of doubt, these facts are reproduced hereunder as follows:
xxx xxx xxx
1.3 Makati Tuscany consisted of 160 condominium units, with 156 units from the 2nd to the 25th
floors, and 4 penthouse units in the 26th floor. Two hundred seventy (270) parking slots were built therein
for appointment among its unit owners. One hundred sixty-four (164) of the parking slots were so allotted,
with each unit at the 2nd to the 25th floors being allotted one (1) parking slot each, and each penthouse
unit with two slots. Eight (8) other parking slots, found on the ground floor of the Makati Tuscany were
designated as guest parking slots, while the remaining ninety[-]eight (98) were to be retained by Multi-
Realty for sale to unit owners who would want to have additional slots.
xxx xxx xxx
1.7. The Master Deed was filed with the Register of Deeds in 1977. Multi-Realty executed a Deed
of Transfer in favor of Makati Tuscany over these common areas. However, the Master Deed and the Deed
of Transfer did not reflect or specify the ownership of the 98 parking slots. Nevertheless, Multi-Realty sold
26 of them in 1977 to 1986 to condominium unit buyers who needed additional parking slots. Makati
Tuscany did not object, and certificates of title were later issued by the Register of Deeds in favor of the
buyers. Makati Tuscany issued Certificates of Management covering the condominium units and parking
slots which Multi-Realty has sold.
1.8 At a meeting of Makati Tuscany's Board of Directors on 13 March 1979, a resolution was
approved, authorizing its President, Jovencio Cinco, to negotiate terms under which Makati Tuscany would
buy 36 of the unallocated parking slots from Multi-Realty. During another meeting of the Board of
Directors on 14 June 1979, Cinco informed the Board members of Multi-Realty's proposal to sell all of the
unassigned parking lots at a discounted price of P15,000.00 per lot, or some 50% lower than the then
prevailing price of P33,000.00 each. The Board agreed to hold in abeyance any decision on the matter to
enable all its members to ponder upon the matter. 63 (Emphasis supplied, citations omitted)

56
 Just like respondent, petitioner invokes mistake in good faith to explain its seeming recognition of respondent's
ownership of the 72 remaining parking slots, showing its acquiescence to respondent's sale of the 26 parking slots and its
issuance of the Certificates of Management for the sold condominium units and parking slots. 64
Petitioner fails to convince.
The totality of the undisputed evidence proving the parties' acts is consistent with the conclusion that the parties
never meant to include the 98 parking slots among the common areas to be transferred to petitioner. The evidence is
consistent to support the view that petitioner was aware of this fact.
From 1977 to 1986, respondent sold 26 of the 98 parking lots now under contention without protest from
petitioner. Petitioner recognized respondent's ownership of the disputed, parking lots on at least two (2) occasions when its
Board of Directors made known its intention to purchase them from respondent.
In its Manifestation Ad Cautelam, 65 petitioner asked to be allowed to file a reply to respondent's comment to
rectify the "erroneous statements of fact and conclusions of law" 66 contained in it. However, petitioner in its Reply 67 did
not contradict any of the subsequent acts of the parties narrated by respondent, showing petitioner's repeated
acquiescence to respondent's acts of dominion over the parking slots. Petitioner even adopted this Court's narration of facts
in Multi-Realty Development Corporation where this Court stated that "[e]ight (8) other parking slots, found on the ground
floor of the Makati Tuscany were designated as guest parking slots, while the remaining 98 were to be retained by Multi-
Realty for sale to unit owners who would want to have additional slots." 68 AIDSTE
Petitioner claims that it was confusion and not bad faith that caused its belated assertion of ownership over the
parking slots. 69 However, the facts show that it was the intention of the parties all along for Multi-Realty to retain
ownership of the 98 parking slots and then sell them to unit owners who wanted additional parking slots.
Petitioner argues its lack of bad faith in claiming ownership over the 98 parking slots. Whether or not it acted in bad
faith was never in issue. Instead, the issue to be resolved was whether or not respondent committed a mistake in drafting
and executing the Master Deed and Deed of Transfer, thereby leading to the inadvertent inclusion of the 98 parking slots
among the common areas transferred to petitioner.
Further, it is difficult to impute confusion and bad faith, which are states of mind appropriate for a natural individual
person, to an entire corporation. The fiction where corporations are granted both legal personality separate from its owners
and a capacity to act should not be read as endowing corporations with a single mind. In truth, a corporation is a hierarchical
community of groups of persons both in the governing board and in management. Corporations have different minds
working together including its lawyers, auditors, and, in some cases, their compliance officers.
To grant the argument that a corporation, like a natural person, was confused or not in bad faith is to extend to it
too much analogy and to endow it more of the human characteristics beyond its legal fiction. This Court is not endowed with
such god-like qualities of a creator or should allow illicit extensions of legal fiction to cause injustice.
Respondent, through a preponderance of evidence, was able to prove its claim that the Master Deed and Deed of
Transfer failed to capture the true intentions of the parties; hence, it is but right that the instruments be reformed to
accurately reflect the agreement of the parties.
Petitioner asserts that respondent's admission of committing a mistake in drafting the Master Deed and Deed of
Transfer makes it liable to suffer the consequences of its mistake and should be bound by the plain meaning and import of
the instruments. It contends that respondent should be estopped from claiming that the Master Deed and Deed of Transfer
failed to show the parties' true intentions.
Again, petitioner fails to convince.
In Philippine National Bank v. Court of Appeals, 70 this Court held:
"The doctrine of estoppel is based upon the grounds of public policy, fair dealing, good faith and justice,
and its purpose is to forbid one to speak against his own act, representations, or commitments to the
injury of one to whom they were directed and who reasonably relied thereon. The doctrine of estoppel
springs from equitable principles and the equities in the case. It is designed to aid the law in the
administration of justice where without its aid injustice might result." It has been applied by this Court
wherever and whenever special circumstances of a case so demand. 71
In this case, except for the words in the contract, all of respondent's acts were consistent with its position in the
case.
Petitioner does not deny that it stayed silent when respondent sold the parking slots on several occasions or that it
offered to buy the parking slots from respondent on at least two (2) occasions. It excuses itself by saying that just like
respondent, it "also labored under a mistaken appreciation of the nature and ownership of the ninety[-]eight (98) parking
slots in question." 72

57
 Both parties recognized respondent's ownership of the parking slots. Petitioner initially respected respondent's
ownership despite the Master Deed's and Deed of Transfer's stipulations. It was petitioner that changed its position decades
after it acted as if it accepted respondent's ownership.
Petitioner cannot claim the benefits of estoppel. It was never made to rely on any false representations. It knew
from its inception as a corporation that ownership of the parking slots remained with respondent. Its dealings with
respondent and the actuations of its Board of Directors convincingly show that it was aware of and respected respondent's
ownership. The Court of Appeals ruled as follows:
Not even the registration of the Master Deed with the Makati City Register of Deeds renders
Multi-Realty guilty of estoppel by deed. For one, [MATUSCO] was not made to believe that it shall be the
owner of the questioned extra parking lots. And for another, [MATUSCO] was not made to rely on any false
representation. As we have earlier discussed — evidence is replete that both parties knew at the outset
that ownership over the said extra parking lots were to be retained by Multi-Realty. It is sad to note,
however, that such fact was not clearly reflected in the Master Deed and the Deed of Transfer. Besides, it
was only after the issue of ownership cropped up that Multi-Realty realized that, indeed, there was a
mistake in the drafting of the Master Deed. 73 AaCTcI

II

Despite petitioner's adoption of this Court's recital of facts in Multi-Realty Development Corporation, this Court
deems it proper to address respondent's claim that this Court upheld its ownership of the disputed parking slots, as Multi-
Realty Development Corporation supposedly contained final factual findings on this very issue, which ought to be respected
on the ground of res judicata. 74
Respondent is mistaken.
There is res judicata when the following concur:
a) the former judgment must be final;
b) the court which rendered judgment had jurisdiction over the parties and the subject matter;
c) it must be a judgment on the merits;
d) and there must be between the first and second actions identity of parties, subject matter, and cause of
action. 75 (Emphasis in the original, citation omitted)
Multi-Realty Development Corporation did not take on the merits of the case but only tackled the issue of
prescription raised to this Court on appeal. After finding that the action had not yet prescribed and was mistakenly dismissed
by the Court of Appeals because of a supposedly stale claim, this Court directed that it be remanded to the Court of Appeals
for a resolution of the appeal:
Nevertheless, given the factual backdrop of the case, it was inappropriate for the CA, motu
proprio, to delve into and resolve the issue of whether [Multi-Realty's] action had already prescribed. The
appellate court should have proceeded to resolve [Multi-Realty's] appeal on its merits instead of
dismissing the same on a ground not raised by the parties in the RTC and even in their pleadings in the CA.
xxx xxx xxx
IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The Decision of the Court of Appeals
in CA-G.R. CV No. 44696 is SET ASIDE. The Court of Appeals is directed to resolve petitioner's appeal with
reasonable dispatch. No costs.
ORDERED. 76
Clearly, res judicata had not yet set in and this Court was not precluded from evaluating all of the evidence vis-à-
vis the issues raised by both parties.
WHEREFORE, premises considered, the Petition for Review on Certiorari is DENIED. The Court of Appeals April 28,
2008 Amended Decision and December 4, 2008 Resolution in CA-G.R. CV No. 44696 are AFFIRMED.
SO ORDERED.
Velasco, Jr., Bersamin, Martires and Gesmundo, JJ., concur.

58
||| (Makati Tuscany Condominium Corp. v. Multi-Realty Development Corp., G.R. No. 185530, [April 18, 2018])

59
 SECOND DIVISION

[G.R. No. 226213. September 27, 2017.]

G. HOLDINGS, INC., petitioner, vs. CAGAYAN ELECTRIC POWER AND LIGHT COMPANY, INC. (CEPALCO) and
FERROCHROME PHILIPPINES, INC., respondents.

DECISION

CAGUIOA, J p:

This is a petition for review on certiorari 1 (Petition) under Rule 45 of the Rules of Court assailing the
Decision 2 dated April 14, 2016 of the Court of Appeals 3 (CA) in CA-G.R. CV No. 03366-MIN and the Resolution 4 dated July
25, 2016 denying the motion for reconsideration filed by petitioner, G. Holdings, Inc. (GHI). The CA Decision denied the
appeal and affirmed the Decision 5 dated July 22, 2013 of the Regional Trial Court of Misamis Oriental, 10th Judicial Region,
Branch 38, Cagayan de Oro City (RTC-CDO) in Civil Case No. 2004-111. AIDSTE
Facts and Antecedent Proceedings
From March 1990, Cagayan Electric Power and Light Company, Inc. (CEPALCO), which operates a light and power
distribution system in Cagayan de Oro City, supplied power to the ferro-alloy smelting plant of Ferrochrome Philippines,
Inc. 6 (FPI) at the PHIVIDEC Industrial Estate in Tagoloan, Misamis Oriental. 7 When FPI defaulted in the payment of its
electric power bills amounting to P16,301,588.06 as of March 1996, CEPALCO demanded payment thereof. 8 FPI paid
CEPALCO on three separate dates the total amount of P13,161,916.44, leaving a balance of P2,899,859.15. 9 FPI failed again
to pay its subsequent electricity bills, thereby increasing its unpaid electric bills to P29,509,240.89 as of May 1996. 10 For
failure to pay FPI's outstanding bills, CEPALCO disconnected the electric power supply to FPI in May 1996. 11 After sending a
statement of account with P30,147,835.65 unpaid bills plus 2% monthly surcharge, CEPALCO filed a collection suit (Civil Case
No. 65789) against FPI in July 1996 before the Regional Trial Court of Pasig City, Branch 264 (RTC-Pasig). 12
RTC-Pasig rendered a Decision (Partial Summary Judgment) dated April 22, 1999 in favor of CEPALCO, ordering FPI
to pay CEPALCO P25,608,579.98. 13 On January 19, 2004, RTC-Pasig rendered its Decision 14 in favor of CEPALCO, affirming
the P25,608,579.98 award for basic cost of energy consumed (given in the Partial Summary Judgment), and ordering the
payment of P2,364,703.80 for contracted energy or energy differential and surcharges, PHIVIDEC royalty and franchise
tax. 15
On February 27, 2004, FPI appealed the Decision of the RTC-Pasig to the CA (CA G.R. CV No. 86228 [CEPALCO
collection case]). 16
CEPALCO moved for execution pending appeal, which was granted by RTC-Pasig. 17 The writ of execution was
issued on March 30, 2004. 18 FPI filed before the CA a certiorari petition with prayer for temporary restraining order (TRO)
and preliminary injunction (CA G.R. SP No. 83224 [CEPALCO execution case]). 19
In the meantime, Sheriff Renato B. Baron (Baron) of RTC-Pasig issued notices of levy upon personal and real
properties dated April 1 and 2, 2004 and notices of sale on execution of personal and real properties dated April 1, 2004. 20
In CA G.R. SP No. 83224 (CEPALCO execution case), the CA issued an initial TRO in its Resolution dated April 6, 2004
and then a writ of preliminary injunction in its Resolution dated June 11, 2004, enjoining the implementation of the Order
granting execution pending appeal. 21
On April 5, 2004, GHI filed a case (Civil Case No. 2004-111) against Sheriff Baron, CEPALCO and FPI for Nullification
of Sheriff's Levy on Execution and Auction Sale, Recovery of Possession of Properties and Damages before the RTC-
CDO. 22 GHI claimed that the levied ferro-alloy smelting facility, properties and equipment are owned by it as evidenced by a
Deed of Assignment 23 dated March 11, 2003 (the Deed of Assignment) executed by FPI in consideration of
P50,366,926.71. 24
In the unilateral Deed of Assignment, FPI, as the assignor, through its stockholders and Board of Directors' duly
authorized representative and Acting President, Juanito E. Figueroa, in consideration of obligations amounting to
P50,366,926.71 as of December 31, 2002, inclusive of the interest charges, assigned, transferred, ceded and
60
conveyed absolutely in favor of GHI, as the assignee, "all of the [assignor's] properties, equipment and facilities, located in
Phividec Industrial Estate, Tagoloan, Misamis Oriental and more particularly described in the attached schedules as
Annexes 'I', II', 'III', 'IV['] and 'V'." 25
Prior to the Deed of Assignment, FPI sent to GHI a letter 26 dated February 28, 2003 wherein the manner by which
the obligation of FPI amounting to P50,366,926.71 (as of December 31, 2002) would be addressed per their earlier
discussions was confirmed, to wit:
1. The obligation of FPI to G. Holdings amounting to P50,366,926.71 (as of December 31, 2002) shall be
covered by assignment of certain FPI assets sufficient to cover the obligations even at today's
depressed metal prices.
2. The right to the work process owned by FPI shall be made available to G. Holdings under the following
options[:]
Option A
As soon as metal prices and major costs justify, FPI shall at its capital and expense operate the plant including
the assets transferred to G. Holdings. Revenue shall be shared with G. Holdings at the rate of 20%
of EBITDA (Earnings Before Interest[,] Taxes, Depreciation and Amortization.)
A minimum of P10.0 million annually shall be shared by G. Holdings. The [c]ost of maintenance and upkeep
of assets shall be covered by FPI.
Option B
[G.] Holdings shall be the entity to operate the plant and business with its capital and expense.
As owner of the rights to the work process, FPI shall be entitled to a share of 10% in the EBITDA with a
minimum of P7.5 million per year.
This arrangement shall be for a minimum of 8 years after which G. Holdings can acquire the rights for an
amount equal to P36.0 M. AaCTcI
All financial requirements shall be shouldered by G. Holdings x x x.
3. The option shall be decided by G. Holdings within a three[-]year period beyond which the choice shall be
made by FPI within a 3[-]year period. The cycle will be repeated if the plant has not operated for six
years from assignment. 27
The letter bears the conformity of GHI. 28

CEPALCO filed its answer with compulsory counterclaim and cross-claim. 29 In its counterclaim, CEPALCO assailed
the validity of the Deed of Assignment executed by FPI in favor of GHI in payment of alleged advances from GHI (sister
company of FPI) from 1998 to 2002 amounting to P50,366,926.71, inclusive of interest, as of December 2002. CEPALCO
contended that the Deed of Assignment was null and void for being absolutely simulated and, as a dacion en pago, it did not
bear the conformity of the creditor. GHI and FPI have substantially the same directors. The Deed of Assignment was in fraud
of FPI's creditors as it was made after the RTC-Pasig had already rendered a partial judgment in favor of CEPALCO and was,
therefore, rescissible. 30
In the meantime, the CA rendered its Decision dated August 14, 2008 in CA G.R. CV No. 86228 (CEPALCO collection
case) granting FPI's appeal in part and the RTC-Pasig Decision was affirmed but modified by deleting the award of the
PHIVIDEC royalty of 1%. 31 FPI elevated the CA Decision to the Court and was docketed as G.R. No. 185892. 32 In April 2010,
the Court denied FPI's petition in its Resolution dated April 21, 2010 for failure of FPI to sufficiently show that the CA
committed any reversible error in the challenged decision and resolution to warrant the Court's discretionary appellate
jurisdiction. 33
In CA G.R. SP No. 83224 (CEPALCO execution case), the CA dismissed FPI's petition for lack of merit and affirmed the
assailed orders of the RTC-Pasig, and FPI's motion for reconsideration was likewise denied. 34
The RTC-CDO Ruling

Going back to the RTC-CDO case (Civil Case No. 2004-111), the origin of the present case, a Decision 35 dated July
22, 2013 was rendered in favor of CEPALCO and against GHI: (1) rescinding the Deed of Assignment; (2) ordering GHI to pay
CEPALCO actual and exemplary damages as well as attorney's fees; and (3) lifting the writ of preliminary injunction. 36
The rescission of the Deed of Assignment by the RTC-CDO was anchored on the presence of several badges of
fraud, to wit: (a) the consideration of the assignment was P50 million while the value of the assets of FPI amounted to P280
million; (b) the existence of the "Outokumpo" work process of smelting (which was allegedly more valuable than the

61
smelting facility subject of the assignment and without which the smelting facility could not be operated), as well as its
value, were not sufficiently established; (c) the assignment of all or substantially all of FPI's assets was made when FPI was
suffering financially and after the rendition of the partial judgment in favor of CEPALCO; and (d) GHI did not take exclusive
possession of the assets assigned to it. 37
The dispositive portion of the RTC-CDO Decision states:
WHEREFORE, judgment is hereby rendered in favor of defendant CEPALCO against G. Holdings,
Inc. as follows:
1. Rescinding the Deed of Assignment dated March 11, 2003 between G. Holdings, Inc. in favor of
Ferrochrome Philippines, Inc.;
2. Ordering G. [H]oldings, Inc. to pay defendant CEPALCO the following:
2.a Actual damages in the amount of Php256,587.48;
2.b Exemplary damages in the amount of Php1,000,000.00; and
2.c Attorney's Fees in the amount of Php500,000.00
3. Lifting the Writ of Preliminary Injunction and finding G. [H]oldings, Inc. and Oriental Assurance
Corporation liable on the Php1 Million Preliminary Injunction Bond to partially satisfy the
foregoing sums.
4. Costs against G. Holdings, Inc.
SO ORDERED. 38
GHI appealed the RTC-CDO Decision to the CA. 39 The appeal was docketed as CA-G.R. CV No. 03366-MIN. 40
The CA Ruling

In its Decision 41 dated April 14, 2016, the CA denied the appeal and affirmed the RTC-CDO Decision. The CA ruled
that the RTC-CDO correctly found the existence of fraud or deliberate intent on the part of FPI and GHI to defraud CEPALCO.
The agreement between GHI and FPI where GHI was given the option to operate the smelting facility using the alleged
"Outokumpo" work process which FPI retained, subject to payment of an agreed amount to FPI as owner of the rights of the
work process, was designed to keep the melting facility intact and insulated against execution in satisfaction of CEPALCO's
judgment credit. The CA also ruled that the Deed of Assignment was absolutely simulated and having been executed after
the Partial Summary Judgment rendered by the RTC-Pasig, it was done in anticipation of the adverse final outcome of the
RTC-Pasig case. Regarding GHI's contention that CEPALCO failed to pay the filing fees, the CA noted that CEPALCO filed its
Answer with Compulsory Counterclaim and Cross-claim on April 26, 2004. At that time, the CA reasoned that CEPALCO was
not yet liable to pay filing fees. Under Rule 141, Section 7, as amended by A.M. No. 04-2-04-SC, docket fees were required to
be paid for compulsory counterclaims and cross-claims effective only on August 16, 2004. 42 EcTCAD
The dispositive portion of the CA Decision states:
WHEREFORE, the instant appeal is DENIED. The Decision dated 22 July 2013 of the Regional Trial
Court, 10th Judicial Region, Branch 38, Cagayan de Oro City, in Civil Case No. 2004-111 is
hereby AFFIRMED.
SO ORDERED. 43
GHI filed a motion for reconsideration, which was denied in a Resolution 44 dated July 25, 2016.
Hence, this Petition. CEPALCO filed its Comment 45 dated May 12, 2017.
Issues
Whether the CA erred in not dismissing CEPALCO's permissive counterclaim for non-payment of docket fees.
Whether the CA erred in holding that the Deed of Assignment was absolutely simulated.
Whether the CA erred in rescinding the Deed of Assignment absent an independent action for rescission.
Whether the CA erred in holding that the Deed of Assignment was done in fraud of creditors and badges of fraud
accompanied its execution.
Whether GHI is entitled to its claims for damages. 46
The Court's Ruling

62
Filing Fees of CEPALCO's
Counterclaim

In justifying the non-payment of filing fees on the counterclaim of CEPALCO, the CA ruled:
As for the absence of filing fees, it is noteworthy that CEPALCO filed its Answer with Compulsory
Counterclaim and Cross-Claim on 26 April 2004. At that time, CEPALCO was not yet liable to pay filing fees.
The Supreme Court stressed, however, that effective 16 August 2004 under Rule 141, Section 7, as
amended by A.M. No. 04-2-04-SC, docket fees are required to be paid for compulsory counterclaims and
cross-claims. 47
As to the cause of action of GHI in its Complaint in Civil Case No. 2004-111 (RTC-CDO case), the caption states that it
is for: "FOR INJUNCTION AND NULLIFICATION OF SHERIFF'S LEVY ON EXECUTION AND AUCTION SALE; RECOVERY OF
POSSESSION OF PROPERTIES; AND DAMAGES, WITH PRAYER FOR ISSUANCE OF TEMPORARY RESTRAINING ORDER AND WRIT
OF PRELIMINARY INJUNCTION." 48 In its second cause of action, GHI alleges that it is "entitled to the immediate return and
restitution of said [transportation and] mobile equipment." 49 In the Complaint's prayer, GHI seeks the return of the
possession of such properties to GHI, "the rightful owner thereof " 50 As basis of its claim of ownership, GHI alleges in the
Complaint that:
x x x The smelter facility/properties subject of sheriff's Notice of Levy Upon Personal Property and
Notice of Levy Upon Real Property are owned by GHI, having acquired the same through a Deed of
Assignment of March 11, 2003 executed by FPI in favor of GHI, in consideration of x x x [P]50,366,926.71 x
x x paid by GHI. x x x 51
In light of the foregoing, CEPALCO's counterclaim and prayer for rescission of the Deed of Assignment can only be
viewed, as it is indeed, a compulsory counterclaim because it "arises out of or is connected with the transaction or
occurrence constituting the subject matter of the opposing party's claim and does not require for its adjudication the
presence of third parties of whom the court cannot acquire jurisdiction." 52 Being a compulsory counterclaim, the CA was
correct when it ruled that as of the filing of CEPALCO's Answer with Compulsory Counterclaim and Cross-Claim on April 26,
2004, it was not liable to pay filing fees on its compulsory counterclaim. Thus, on the first issue, the CA committed no
reversible error when it did not order the dismissal of CEPALCO's counterclaim, which is compulsory, for non-payment of
docket fees.
Efficacy of the Deed of Assignment

Since the second, third and fourth issues concern the legal effect or efficacy, if any, of the Deed of Assignment
between GHI and FPI, they will be discussed together. It is noted, however, that the legality or efficacy of the Deed of
Assignment is attacked in the second issue as being absolutely simulated, while, in the third and fourth issues, it is claimed
to be rescissible for having been undertaken in fraud of creditors, given the presence of badges of fraud in its
execution. HSAcaE
Under the Civil Code, there are four defective contracts, namely: (1) rescissible contracts; (2) voidable contracts; (3)
unenforceable contracts; and (4) void or inexistent contracts. However, it has been opined that, strictly speaking, only the
voidable and unenforceable contracts are defective contracts and are the only ones susceptible of ratification unlike the
rescissible ones which suffer from no defect and the void or inexistent contracts which do not exist and are absolute
nullity. 53 Thus, the four may be more appropriately categorized as species or forms of the inefficacy of contracts. 54
Since the Deed of Assignment is being questioned for being both rescissible and, at the same time, an absolute
simulation, it may be apropos to compare rescissible contracts with void or inexistent contracts.
Rescission has been defined as a remedy to make ineffective a contract validly entered into and which is obligatory
under normal conditions by reason of external causes resulting in a pecuniary prejudice to one of the contracting parties or
their creditors. 55 Rescission, which is a specie or form of the inefficacy of contracts and operates by law and not through
the will of the parties, requires the following: (1) a contract initially valid and (2) a lesion or pecuniary prejudice to
someone. 56
Under Article 1381 of the Civil Code, the following contracts are rescissible: (1) those which are entered into by
guardians whenever the wards whom they represent suffer lesion by more than one-fourth of the value of the things which
are the object thereof; (2) those agreed upon in representation of absentees, if the latter suffer the lesion stated in the
preceding number; (3) those undertaken in fraud of creditors when the latter cannot in any manner collect the claims due
them; (4) those which refer to things under litigation if they have been entered into by the defendant without the
knowledge and approval of the litigants or of competent judicial authority; and (5) all other contracts specially declared by
law to be subject to rescission.
It is further provided under Article 1383 that the action for rescission is a subsidiary one, and cannot thus be
instituted except when the party suffering damage has no other legal means to obtain reparation for the same.
63
 On the other hand, void or inexistent contracts are those which are ipso jure prevented from producing their effects
and are considered as inexistent from the very beginning because of certain imperfections. 57
Under Article 1409 of the Civil Code, the following contracts are inexistent and void from the beginning: (1) those
whose cause, object or purpose is contrary to law, morals, good customs, public order or public policy; (2) those which are
absolutely simulated or fictitious; (3) those whose cause or object did not exist at the time of the transaction; (4) those
whose object is outside the commerce of men; (5) those which contemplate an impossible service; (6) those where the
intention of the parties relative to the principal object of the contract cannot be ascertained; and (7) those expressly
prohibited or declared void by law.
These contracts cannot be ratified and the right to set up the defense of illegality cannot be waived. 58 Further, the
action or defense for the declaration of the inexistence of a contract does not prescribe.
Rescission and nullity can be distinguished in the following manner: (a) by reason of the basis — rescission is based
on prejudice, while nullity is based on a vice or defect of one of the essential elements of a contract; (2) by reason of
purpose — rescission is a reparation of damages, while nullity is a sanction; (3) by reason of effects — rescission affects
private interest while nullity affects public interest; (4) by reason of nature of action — rescission is subsidiary while nullity is
a principal action; (5) by reason of the party who can bring action — rescission can be brought by a third person while nullity
can only be brought by a party; and (6) by reason of susceptibility to ratification — rescissible contracts need not be ratified
while void contracts cannot be ratified. 59
They can likewise be distinguished as follows: (1) as to defect: In rescissible contracts, there is damage or injury
either to one of the contracting parties or to third persons; while in void or inexistent contracts, one or some of the essential
requisites of a valid contract are lacking in fact or in law; (2) As to effect: The first are considered valid and enforceable until
they are rescinded by a competent court; while the latter do not, as a general rule, produce any legal effect; (3) As to
prescriptibility of action or defense: In the first, the action for rescission may prescribe; while in the latter, the action for
declaration of nullity or inexistence or the defense of nullity or inexistence does not prescribe; (4) As to susceptibility of
ratification: The first are not susceptible of ratification, but are susceptible of convalidation; while the latter are not
susceptible of ratification; (5) As to who may assail contracts: The first may be assailed not only by a contracting party but
even by a third person who is prejudiced or damaged by the contract; while the latter may be assailed not only by a
contracting party but even by a third party whose interest is directly affected; (6) As to how contracts may be assailed: the
first may be assailed directly, and not collaterally; while the latter may be assailed directly or collaterally. 60
The enumerations and distinctions above indicate that rescissible contracts and void or inexistent contracts belong
to two mutually exclusive groups. A void or inexistent contract cannot at the same time be a rescissible contract, and vice
versa. The latter, being valid and until rescinded, is efficacious while the former is invalid. There is, however, a distinction
between inexistent contracts and void ones as to their effects. Inexistent contracts produce no legal effect whatsoever in
accordance with the principle "quod nullum est nullum producit effectum." 61 In case of void contracts where the nullity
proceeds from the illegality of the cause of object, when executed (and not merely executory) they have the effect of barring
any action by the guilty to recover what he has already given under the contract. 62
The RTC-CDO ruled the Deed of Assignment as a rescissible contract and ordered its rescission. However, the CA,
while affirming the RTC-CDO Decision, stated that it "agree[d] with the RTC[-CDO] that the Deed of Assignment was
absolutely simulated" 63 and, at the same time, noted that "the RTC-CDO correctly found the existence of fraud or
deliberate intent on the part of FPI and GHI to defraud CEPALCO." 64 Unfortunately, however, and contrary to what the CA
declared, nowhere is it ruled in the RTC-CDO Decision that the Deed of Assignment was absolutely simulated. HESIcT
Given a seemingly conflicting finding or ruling by the RTC-CDO and the CA as to the classification of the Deed of
Assignment — whether rescissible or inexistent, it behooves the Court to resolve the conflict.
Under Article 1345 of the Civil Code, simulation of a contract may be absolute, when the parties do not intend to be
bound at all, or relative, when the parties conceal their true agreement. The former is known as contracto simulado while
the latter is known as contracto disimulado. 65 An absolutely simulated or fictitious contract is void while a relatively
simulated contract when it does not prejudice a third person and is not intended for any purpose contrary to law, morals,
good customs, public order or public policy binds the parties to their real agreement. 66
In Vda. de Rodriguez v. Rodriguez, 67 the Court, speaking through the renowned civilist, Justice J.B.L. Reyes, stated
that:
x x x the characteristic of simulation is the fact that the apparent contract is not really desired or
intended to produce legal effects or in any way alter the juridical situation of the parties. Thus, where a
person, in order to place his property beyond the reach of his creditors, simulates a transfer of it to
another, he does not really intend to divest himself of his title and control of the property; hence, the deed
of transfer is but a sham. x x x 68
The Court, in Heirs of Spouses Intac v. CA, 69 reiterated that:
64
 In absolute simulation, there is a colorable contract but it has no substance as the parties have no
intention to be bound by it. "The main characteristic of an absolute simulation is that the apparent
contract is not really desired or intended to produce legal effect or in any way alter the juridical situation of
the parties." "As a result, an absolutely simulated or fictitious contract is void, and the parties may recover
from each other what they may have given under the contract." 70
In the Deed of Assignment, did FPI intend to divest itself of its title and control of the properties assigned therein?
The lack of intention on the part of FPI to divest its ownership and control of "all of [its] properties, equipment and
facilities, located in Phividec Industrial Estate, Tagoloan, Misamis Oriental" 71 — in spite of the wordings in the Deed of
Assignment that FPI "assigned, transferred, ceded and conveyed [them] x x x absolutely in favor of [GHI]" 72 — is evident
from the letter dated February 28, 2003 which reveals the true intention of FPI and GHI.
In the letter dated February 28, 2003, it is there provided that the right to the work process, otherwise known as
"Outokumpo," was to be retained by FPI and would only be made available to GHI under two options. One option even gave
FPI the option to operate the assigned assets with the obligation to pay GHI a guaranteed revenue. While GHI was given the
first crack to choose which of the two options to take, such chosen option would only last for three years, and subsequently,
FPI would make the choice and the option chosen by FPI would last for the next three years. The cycle would then be
repeated if the ferro-alloy plant would not be operated for six years from assignment. 73 What is evident, therefore, in the
delineation of the different options available to FPI and GHI in the settlement of FPI's obligations to the latter is that FPI did
not intend to really assign its assets "absolutely" to GHI. Stated differently, this letter belies the wordings of the Deed of
Assignment that, it should be emphasized, was executed a mere 11 days after the letter, that is, on March 11, 2003.
That there was no intention to absolutely assign to GHI all of FPI's assets was confirmed by the finding of the RTC-
CDO that, according to FPI's Acting President, Juanito E. Figueroa, "GHI cannot operate the [equipment, machinery and
smelting facilities] without the patented 'Outokumpo' process and GHI has not been operating the same." 74 Moreover, the
equipment and machinery remain physically in the plant premises, slowly depreciating with the passage of time, and, worse,
there also appears to be no effective delivery as the premises on which these are located remain under the control of FPI
which continues to employ the security and skeletal personnel in the plant premises. 75
Thus, in executing the Deed of Assignment, FPI's intention was not to transfer absolutely the assigned assets
(admittedly valued at about P280 Million) 76 to GHI in payment of FPI's obligations to GHI amounting to
P50,366,926.71. 77 FPI, as shown above, did not really intend to divest itself of its title and control of the assigned
properties. FPI's real intention was, borrowing the words of Justice J.B.L Reyes in Rodriguez, to place them beyond the reach
of its creditor CEPALCO. This was astutely observed by the CA Decision, viz.:
x x x The Deed of Assignment was executed while Civil Case No. 65789 was already pending with
the RTC-Pasig and after the Partial Summary Judgment was rendered on 22 April 1999. In anticipation of
the adverse final outcome of Civil Case No. 65789 as promulgated in the 19 January 2004 Decision of the
RTC-Pasig, GHI and FPI executed the Deed of Assignment. Hence, the presumption of fraud set in by
operation of the law against the sister companies, FPI, then already the judgment debtor, and GHI. 78
As to the presence of badges of fraud, which the RTC-CDO found to have existed and affirmed by the CA, they do, in
fact, confirm the intention of FPI to defraud CEPALCO. But these findings do not thereby render as rescissible the Deed of
Assignment under Article 1381 (3). Rather, they fortify the finding that the Deed of Assignment was "not really desired or
intended to produce legal effects or in any way alter the juridical situation of the parties" or, put differently, that the Deed of
Assignment was a sham, or a contracto simulado.
Thus, given the foregoing, the Deed of Assignment is declared inexistent for being absolutely simulated or fictitious.
Accordingly, the CA correctly ruled that the Deed of Assignment was absolutely simulated, although it was in error in
affirming the rescission ordered by the RTC-CDO because, as explained above, rescissible contracts and void or inexistent
contracts belong to two mutually exclusive groups. This error, however, does not justify the granting of the Petition.
Entitlement to Damages

The Court's declaration of the inexistence of the Deed of Assignment renders the resolution of the fifth issue — on
GHI's entitlement to damages — superfluous. Instead, the dismissal of its complaint for lack of cause of action is warranted.
WHEREFORE, the Petition is hereby DENIED for lack of merit. The Court of Appeals' Decision dated April 14, 2016
and Resolution dated July 25, 2016 in CA-G.R. CV No. 03366-MIN as well as the Decision dated July 22, 2013 of the Regional
Trial Court of Cagayan de Oro City, Branch 38 in Civil Case No. 2004-111 are hereby AFFIRMED with MODIFICATIONS. The
Deed of Assignment dated March 11, 2003 executed by respondent Ferrochrome Philippines, Inc. in favor of petitioner G.
Holdings, Inc. is declared inexistent for being absolutely simulated; the complaint of petitioner G. Holdings, Inc. is dismissed
for lack of cause of action; and pursuant to Nacar v. Gallery Frames, 79 the total amount awarded in the RTC-CDO Decision
shall earn 6% interest per year from the date of finality of this Decision until fully paid. caITAC

65
 SO ORDERED.
Peralta, ** Perlas-Bernabe and Reyes, Jr., JJ., concur.
Carpio, * J., is on official leave.
||| (G. Holdings, Inc. v. Cagayan Electric Power and Light Co., Inc., G.R. No. 226213, [September 27, 2017])

66
 THIRD DIVISION

August 16, 2017

G.R. No. 215999

SPS. FELIX A. CHUA and CARMEN L. CHUA, JAMES B. HERRERA, EDUARDO L. ALMENDRAS, MILA NG ROXAS, EUGENE C. LEE,
EDICER H. ALMENDRAS, BENEDICT C. LEE, LOURDES C. NG, LUCENA INDUSTRIAL CORPORATION, LUCENA GRAND CENTRAL
TERMINAL, INC., represented by FELIX A. CHUA, Petitioners,
vs.
UNITED COCONUT PLANTERS BANK, ASSET POOL A (SPVAMC), REVERE REALTY AND DEVELOPMENT CORPORATION, JOSE C.
GO and the REGISTRAR OF DEEDS OF LUCENA CITY,, Respondents.

DECISION

BERSAMIN, J.:

This appeal assails the decision promulgated on March 25, 2014 1 and the resolution promulgated on December 23,
2014,2 whereby, the Court of Appeals (CA) respectively reversed and set aside the decision 3 rendered on January 6, 2009 by the
Regional Trial Court (RTC), Branch 59, in Lucena City and granted the appeal of respondent United Coconut Planters Bank (UCPB),
Revere Realty and Development Corporation (Revere), Jose Go and The Register of Deeds of Lucena City; and denied the
petitioners' motion for reconsideration.

Antecedents

On March 3, 1997, petitioner Spouses Felix and Carmen Chua, for themselves and representing their co-petitioners, entered into
a Joint Venture Agreement (JVA) with Gotesco Properties, Inc. (Gotesco) for the development of their 44-hectare property
situated in Ilayang Dupay, Lucena City into a mixed use, residential and commercial subdivision. Gotesco was then represented
by respondent Jose Go.4 It appears, however, that the development project under this JVA did not ultimately materialize. 5

Pursuant to the JVA, several deeds of absolute sale were executed over petitioners’ 12 parcels of land situated in Lucena City in
favor of Revere, a corporation controlled and represented by Jose Go. The deeds of absolute sale were complemented by a deed
of trust dated April 30, 19986 under which it was confirmed that Revere did not part with any amount in its supposed acquisition
of the 12 parcels of land. The deed of trust further confirmed petitioners' absolute ownership of the properties. Also on the
same date, Gotesco, also represented by Jose Go, and petitioners, represented by Felix Chua, executed another deed of trust
covering 20 parcels of land distinct from the 12 parcels of land already covered by the first deed of trust. 7

Prior to the execution of the JVA, petitioners and Jose Go had separate outstanding loan obligations with UCPB.

On June 2, 1997, the Spouses Chua executed a real estate mortgage (REM) in favor of UCPB involving several parcels of land
registered in the names of petitioners to secure the loans obtained in their personal capacities and in their capacities as
corporate officers and stockholders of the Lucena Grand Central Terminal, Inc. (LGCTI). 8

On March 21, 2000, petitioners entered into a Memorandum of Agreement (MOA) with UCPB to consolidate the obligations of
the Spouses Chua and LGCTI, which was determined at ₱204,597,177.04 as of November 30, 1999. The parties thereby agreed to
deduct the sum of ₱103,893,450.00 from said total in exchange for 30 parcels of land including the improvements thereon; 9 and
that the remaining balance of ₱68,000,000.00 would be converted by UCPB into equity interest in LGCTI.

To implement the March 21, 2000 MOA, UCPB drafted a REM covering the properties listed in the MOA, which petitioners signed
to secure a credit accommodation for ₱404,597,177.04. Under its terms, this REM covered the payment of all loans, overdrafts,
credit lines and other credit facilities or accommodations obtained or hereinafter obtained by the mortgagors, LGCTI, Spouses
Chua and Jose Go.10

On even date, Jose Go, acting in behalf of Revere, and UCPB executed another REM (Revere REM) involving the properties held in
trust by Revere for petitioners. The execution of the Revere REM was unknown to petitioners. 11 Revere submitted a secretary's

67
certificate signed by Lourdes Ortiga to the effect that the Board of Directors had approved the mortgage of various corporate
properties situated in Ilayang Dupay, Lucena City to secure any and all obligation of the Spouses Chua, LGCTI, and Jose Go.

Enforcing petitioners' REM as well as the Revere REM, UCPB foreclosed the mortgages, and the properties were sold for a total
bid price of ₱227,700,000.00.

On February 14, 2003, UCPB and LGCTI executed a deed of assignment of liabilities whereby LGCTI would issue 680,000 preferred
shares of its stocks to UCPB to offset its remaining obligations totaling ₱68,000,000.00.

On September 4, 2003, UCPB wrote a letter to the Spouses Chua and LGCTI regarding the transfer of LGCTI shares of stock to its
favor pursuant to the deed of assignment of liabilities.12

On November 11, 2003, Spouses Chua wrote UCPB to request an accounting of Jose Go's liabilities that had been mistakenly
secured by the mortgage of petitioners' properties, as well as to obtain a list of all the properties subject of their REM as well as
of the Revere REM for reappraisal by an independent appraiser. The Spouses Chua further requested that the proceeds of the
foreclosure sale of the properties be applied only to petitioners' obligation of ₱204,597, l 77.04; and that the rest of the
properties or any excess of their obligations should be returned to them. 13 However, UCPB did not heed petitioners' requests.

Thus, on February 3, 2004, petitioners filed their complaint against UCPB, Revere, Jose Go, and the Register of Deeds of Lucena
City in the RTC in Lucena City.14 The RTC issued a writ of preliminary injunction at the instance of petitioners.

On October 4, 2004, the RTC declared Jose Go and Revere in default. On February 22, 2005, the RTC denied the motion for
reconsideration of Jose Go and Revere.15

Rulings of the RTC

On September 6, 2005, the RTC, through Judge Virgilio C. Alpajora, rendered a partial judgment against Jose Go and Revere, viz.:

WHEREFORE, premises considered, judgment is hereby rendered in favor of plaintiffs and against defendants JOSE C. GO and
REVERE REALTY DEVELOPMENT CORPORATION, as follows:

a) Declaring as legal and binding the Deeds of Trust dated April 30, 1998 and holding the properties held in trust for
plaintiff by defendants REVERE and GO.

b) Declaring that defendants REVERE and GO are not the owners of the properties covered by the deeds of trust and did
not have any authority to constitute a mortgage over them to secure their personal and corporate obligations, for which
they should be liable.

c) Nullifying the Deed of Real Estate Mortgage dated March 21, 2000 executed by defendants REVERE and GO in favor of
co-defendant UNITED COCONUT PLANTERS BANK.

d) Ordering defendants REVERE and GO to reconvey in favor of the plaintiff the thirty-two (32) real properties listed in
the deeds of trust and originally registered in the names of the plaintiffs under the following titles, to wit: TCT Nos. T-
40450, 40452, 40453, 64488, 71021, 71022, 71023, 71024, 71025, 71136,55033,55287, 58945, 58946,58947, 58948,
54186, 54187, 54189,54190, 54191, 55288, 54186, 54187, 54188, 55030, 55031, 50426, 50427, 50428, 50429,and
50430.

e) Ordering defendants REVERE and GO to pay plaintiffs the amount of Php1,000,000.00 and as by way of moral
damages, and Php200,000.00 and by way of attorney's fees.

SO ORDERED.16

On November 9, 2005, the RTC modified the partial judgment upon UCPB's motion for reconsideration, but otherwise affirmed it
as against Revere and Jose Go, disposing thusly:

WHEREFORE, premises considered, the Partial Judgment dated September 6, 2005 is reconsidered and clarified as to United
Coconut Planters Bank, as follows:

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 a) The contested portion of the Partial Judgment ordering reconveyance is directed at defendants Revere Realty and
Development Corp. and Jose Go and not at defendant United Coconut Planters Bank; and

b) The resolution of the issue of whether or not defendant UCPB is obliged to reconvey the properties listed in the
Partial Judgment in favor of the plaintiffs, as well as the other issues between UCPB and the plaintiffs, shall be
determined after the parties shall have presented their evidence.

SO ORDERED.17

Meanwhile, Asset Pool A moved to be substituted for UCPB as a party-defendant on February 15, 2006 on the basis that UCPB
had assigned to it the rights over petitioners’ ₱68,000,000.00 obligation. The RTC approved the substitution on March 14, 2006. 18

On January 6, 2009, the RTC rendered judgment in favor of petitioners, thusly:

WHEREFORE, premises considered, judgment is hereby rendered in favor of plaintiffs and against defendants UNITED COCONUT
PLANTERS BANK, ASSET POOL A, REGISTRAR OF DEEDS OF LUCENA CITY and EX-OFFICIO SHERIFF OF LUCENA CITY, thus:

a) Declaring that the loan obligations of plaintiffs to defendant UNITED COCONUT PLANTERS BANK under the
Memorandum of Agreement dated March 21, 2000 have been fully paid;

b) Declaring as legal and binding the Deeds of Trust dated April 30, 1998 and holding the properties listed therein were
merely held-in-trust for plaintiffs by defendants REVERE and JOSE GO and/or corporations owned or associated with
him;

c) Nullifying the Deed of Real Estate Mortgage dated March 21, 2000 executed by defendants REVERE and JOSE GO in
favor of codefendant UNITED COCONUT PLANTERS BANK and the Deed of Assignment of Liability dated February 14,
2003 executed by plaintiffs in favor of UNITED COCONUT PLANTERS BANK;

d) Ordering defendant REGISTRAR OF DEEDS of Lucena City to cancel any and all titles derived or transferred from TCT
Nos. T-40452 (89339), 40453 (89340), 84488 (89342), 71021 (89330), 71022 (89331), 71023 (89332), 71025 (95580-
95581), 71136 (95587-95590), 55033 (89384) and issue new ones returning the ownership and registration of these
titles of the plaintiffs. For this purpose, defendant UNITED COCONUT PLANTERS BANK is directed to execute the
appropriate Deeds of Reconveyance in favor of the plaintiffs over the eighteen (18) real properties listed in the Real
Estate Mortgage dated March 21, 2000 executed by defendants Revere Realty and JOSE GO and originally registered in
the names of the plaintiffs.

e) Ordering defendant UNITED COCONUT PLANTERS BANK to return so much of the plaintiffs titles, of their choice,
equivalent to Php200,000,000.00 after applying so much of the mortgaged properties, including those presently or
formerly in the name of REVERE, to the payment of plaintiffs' consolidated obligation to the bank in the amount of
Php204,597,177.04.

f) Declaring the Real Estate Mortgage dated June 02, 1997 as having been extinguished by the Memorandum of
Agreement date March 21, 2000, and converting the writ of preliminary injunction issued on March 22, 2004 to a
permanent one, forever prohibiting UNITED COCONUT PLANTERS BANK and ASSET POOL A and all persons/ entities
deriving rights under them from foreclosing on TCT Nos. T54182, T-54184, T-54185, T-54192, and T-71135. The court
hereby orders said defendants, or whoever is in custody of the said certificates of title, to return the same to plaintiffs
and to execute the appropriate release of mortgage documents.

g) Finally, ordering defendant UNITED COCONUT PLANTERS BANK, to pay plaintiffs:

(i) The excess of the foreclosure proceeds in the amount of Php23,102,822.96, as actual damages;

(ii) Legal interest on the amount of Php223,102,822.96 at the rate of 6% per annum from February 3, 2004 until
finality of judgment. Once the judgment becomes final and executor, the interest of 12% per annum, should be
imposed, to be computed from the time the judgment becomes final and executor until fully satisfied, as
compensatory damages;

(iii)Php1,000,000.00 as moral damages;

69
 (iv)Php100,000.00 as exemplary damages;

(v) Php2,000,000.00 as attorney's fees; and

(vi) costs of suit;

SO ORDERED.19

The R TC declared the Revere REM as null and void for having been entered into outside the intent of the JV A; and opined that
the Revere REM did not even bear any of herein petitioners' signatures. It ruled that the application of the proceeds of the
foreclosure sale of petitioners' properties to settle Jose Go's liabilities was improper, invalid and contrary to the intent of the
March 21, 2000 MOA, the principal contract of the parties. 20

The R TC observed that UCPB 's claim that it had no knowledge of the trust nature of the properties covered by the deeds of
trust, which were also included in the MOA was belied by the letter signed by its First Vice President Enrique L. Gana addressed
to Spouses Chua wherein he stated that UCPB had undertaken to obtain from Jose Go the certificates of title necessary for the
execution of the mortgages, and that should there be any excess or residual value, the same would be applied to any outstanding
obligations that Jose Go would have in favor of UCPB; and that, accordingly, it was an error on the part of UCPB to apply any
portion of the proceeds to settle the obligations of Jose Go without first totally extinguishing petitioners' obligations.

Decision of the CA

Respondents appealed to the CA.

In the decision promulgated on March 25, 2014,21 the CA reversed and set aside the judgment of the RTC, disposing instead as
follows:

WHEREFORE, the assailed January 6, 2009 Decision of the Regional Trial Court of Lucena City, Branch 59, as well as its September
6, 2005 Partial Judgment are REVERSED and SETASIDE. In its stead, judgment is hereby rendered:

a) Declaring the Real Estate Mortgage dated June 2, 1997 as valid and subsisting - accordingly, the writ of preliminary
injunction issued on March 22, 2004 by the Regional Trial Court of Lucena City, Branch 59 is hereby lifted;

b) Declaring as legal and binding the March 21, 2000 Deed of Real Estate Mortgage of defendants REVERE REAL TY AND
DEVELOPMENT CORPORATION and/or JOSE GO in favor of defendant-appellant UNITED COCONUT PLANTERS BANK;

c) Declaring, pursuant to the parties' March 21, 2000 Deed of Real Estate Mortgage, that the loan obligations of
defendant JOSE GO to defendant-appellant UNITED COCONUT PLANTERS BANK have been satisfied up to
₱123,806,550.00; and

d) Declaring that the loan obligations of plaintiffs-appellees SPOUSE CHUA, ET AL. to defendant-appellant UNITED
COCONUT PLANTERS BANK under the first Memorandum of Agreement dated March 21, 2000 have been paid up to
₱103,893,450.00.

SO ORDERED.22

The CA made reference to three REMs: the first, executed on June 2, 1997, would secure the Spouses Chua' s obligations with
UCPB; the second, executed on March 21, 2000, was petitioners' REM in connection with the March 21, 2000 MOA; and the
Revere REM, executed also on March 21, 2000. It opined that the first REM remained outstanding and was not extinguished as
claimed by petitioners; that the Revere REM was valid based on the application of the complementary contracts construed
together doctrine whereby the accessory contract must be read in its entirety and together with the principal contract between
the parties; that it was the intention of the parties to extend the benefits of the two REMs under the first MOA in favor of Jose
Go and/or his group of companies; and that petitioners' obligations with UCPB under the first MOA had not been fully settled.

Issues

Petitioners raise the following issues:

70
A. THE COURT OF APPEALS COMMITTED SERIOUS ERROR OF LAW IN REFUSING TO HOLD THAT THE OBLIGATIONS EVIDENCED BY
THE 1997 AND 1998 PROMISSORY NOTES AND SECURED BY THE 1997 REM HAD BEEN EXTINGUISHED BY NOV A TION IN TE
FORM OF CONSOLIDATION OF ALL OF PETITIONERS' LOANS UNDER THE 21 MARCH 2000 MOA.

B. THE COURT OF APPEALS COMMITTED PALPABLE ERROR OF LAW AND ACTED WITH GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OR EXCESS OF JURISDICTION IN REFUSING TO DELARE THE REVERE REM VOID AB INJTJO DESPITE THE
FACT THAT THE MORTGAGOR WAS ADMITTEDLY MERE TRUSTEE OF THE MORTGAGED PROPERTIES BUT THE TRUE AND
ABSOLUTE OWNERS GA VE NO CONSENT TO THE MORTGAGE.

C. THE COURT OF APPEALS COMMITTED PALPABLE ERROR OF LAW AND ACTED WITH GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OR EXCESS OF JURISDICTION IN APPL YING PART OF THE PROCEEDS OF THE FORECLOSURE OF THE OTHER
PLAINTIFFS' AND REVERE REMS TO JOSE GO'S ALLEGED BUT UNPROVEN OBLIGATION, INSTEAD OF APPL YING THE PROCEEDS
AGAINST THE REMAINING OBLIGATION OF PETITIONERS, AND DELIVERING THE EXCESS TO THEM.

D. THE COURT OF APPEALS COMMITTED PALPABLE ERROR OF LAW AND ACTED WITH GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OR EXCESS OF JURISDICTION IN REFUSING TO HOLD THAT THE RESTRUCTURED LOAN OF THE PETITIONERS
HAD BEEN FULLY SATISFIED.23

Did the CA commit reversible errors in finding that the Revere REM was valid and binding on petitioners, and in upholding the
propriety of applying the proceeds of the foreclosure sale to settle the obligations of Jose Go and his group of companies before
fully satisfying the liabilities of petitioners?

Ruling of the Court

The petition for review on certiorari is meritorious.

While the RTC and the CA both dealt with and examined the same set of facts and agreements of the parties, they ended up with
totally opposing factual findings. The Court's review jurisdiction is generally limited to reviewing errors of law because the Court
is not a trier of facts and is not the proper venue to settle and determine factual issues. Nevertheless, this rule is not ironclad,
and a departure therefrom may be warranted where the findings of fact of the CA as the appellate court are contrary to the
factual findings and conclusions of the trial court, like now. In this regard, there is a need to review the records to determine
which findings by the lower courts should be preferred for being conformable with the records.

It is undisputed that petitioners Spouses Chua and LGCTI as well as respondents Jose Go, had existing loan obligations with UCPB
prior to the March 1997 JV A. As an offshoot of the JVA, two deeds of trust were executed by the parties involving petitioners'
44-hectare property covered by 32 titles. The deeds of trust were neither expressly cancelled not rescinded despite the fact that
the project under the NA never came to fruition.

On March 21, 2000, UCPB and petitioners entered into the MOA consolidating the outstanding obligations of the Spouses Chua
and LGCTI. The relevant portions of the MOA are reproduced:

WITNESSETH:

(A) As of 30 November 1999, the BORROWER has outstanding obligations due in favor of the BANK in the aggregate
amount of Two Hundred Four Million Five Hundred Ninety Seven Thousand One Hundred Seventy Seven and 041100
Pesos (₱204,597,177.04), Philippine currency, inclusive of all interest, charges and fees (the "Obligation").

(B) To partially satisfy the Obligation to the extent of ONE HUNDRED THREE MILLION EIGHT HUNDRED NINETY THREE
THOUSAND FOUR HUNDRED FIFTY PESOS (₱103,893,450.00), Philippine currency, the BORROWER has agreed that the
BANK shall acquire title to the real property enumerated and described in the schedule attached hereto and made an
integral part hereof as Annex "A", together with all the improvements thereon, if any (collectively called, the
"Property").

(C) The balance of the Obligation, in the total amount of Sixty Eight Million Pesos (₱68,000,000.00), Philippine currency,
shall be converted by the BANK to equity interest in LGCTI, with conformity of the BORROWER.

(D) The Spouses Chua have requested the BANK to grant the Spouses Chua: (i) a continuing option to re-purchase the
Property and (ii) develop the Property, under a joint-venture arrangement with the BANK.

71
 (E) The BANK has acceded to the aforementioned request of the Spouses Chua, subject to the terms and conditions of
this Agreement.

In consideration of the foregoing premises, and the mutual covenants and agreements contained herein, the parties hereto
agree as follows:

SECTION 1.0.

CONTRACTUAL INTENT

Section 1.1. Intent of the Parties - Subject to the provisions of this Agreement, and the satisfactory performance by the
BORROWER of the obligations and undertakings set forth herein, the parties hereto declare, confirm and agree that:

(a) title to the Property shall be transferred and conveyed to the BANK; the BANK shall have the sole discretion to determine and
implement the appropriate actions for the conveyance of such title in favor of the BANK;

(b) the BANK shall: (i) grant the Spouses Chua a continuing right of first refusal over the Property and (ii) consider entering into
and concluding with the Spouses Chua a contractual arrangement for the development of the Property; and

(c) the parties shall implement the appropriate acts and deeds necessary or required for the execution, delivery and
performance of this Agreement and the completion of the transactions contemplated herein, conformably with the terms and
conditions set forth hereunder.

xxxx

SECTION 5.0.

MISCELLANEOUS PROVISIONS

Section 5 .1. Binding Effect - This Agreement shall take effect upon its execution and the rights and obligation contained
hereunder shall be valid and binding on the parties and their respective successors-in-interest.

Section 5.2. Governing Law - The provisions of this Agreement shall be governed, and be construed in all respects, by the laws of
the Philippines.

Section 5.3. Further Assurance - LGCTI and the Spouses Chua warrant that they shall execute and deliver any and all additional
documents or instruments and do such acts and deeds as may be necessary to fully implement and consummate the
transactions contemplated under this Agreement.

Section 5.4. Entire Agreement - This Agreement constitutes the entire, complete and exclusive statement of the terms and
conditions of the agreement between the parties with respect to the subject matter referred to herein. No statement or
agreement, oral or written, made prior to the signing hereof and no prior conduct or practice by either party shall vary or modify
the written terms embodied hereof, and neither party shall claim any modification of any provision set forth herein unless such
modification is in writing and signed by both parties. 24

It is clear that petitioners exchanged their 30 parcels of land to effectively reduce their total unpaid obligations to only
₱68,000,000.00. To settle the balance, they agreed to convert it into equity in LGCTI in case they would default in their payment.
To implement the MOA, they signed the REM drafted by UCPB, which included the properties listed in the MOA as security for
the credit accommodation of ₱404,597,177.04. Unknown to them, however, Jose Go, acting in behalf of Revere, likewise
executed another REM covering the properties that Revere was holding in trust for them. When UCPB foreclosed the mortgages,
it applied about P75.09 million out of the ₱227,700,000.00 proceeds of the foreclosure sale to the obligations of Revere and Jose
Go. Moreover, UCPB pursued petitioners for their supposed deficiency amounting to ₱68,000,000.00, which was meanwhile
assigned to respondent Asset Pool A by UCPB.

We cannot subscribe to the CA's declaration that the 1997 REM still subsisted separately from the consolidated obligations of
petitioners as stated in the March 21, 2000 MOA. As early as the latter part of 1999, correspondence and negotiation on the
matter were already occurring between UCPB, on one hand, and the Spouses Chua and LGCTI, on the other. Specifically, in its
November 10, 1999 letter to petitioners, UCPB wrote: "This will formalize our earlier discussions on the manner of settlement of

72
your personal and that of LGCTI's outstandingobligations. "25 The outstanding obligations adverted to referred to the Spouses
Chua's unsettled, unpaid and remaining debt with UCPB. In discussing how the Spouses Chua could settle their obligations, there
was no distinction whatsoever between the loans obtained in 1997 and those made in subsequent years. To be readily inferred
from the tenor of the correspondence was that the Spouses Chua's obligations were already consolidated.

The MOA referred to the outstanding obligations of LGCTI and the Spouses Chua as being in the amount of ₱204,597,177.04 as
of November 30, 1999. This meant that all of the Spouses Chua's obligations with UCPB on or prior to November 30, 1999 had
already been combined. It was plain enough to see that the MOA constituted the entire, complete and exclusive agreement
between the parties. Its Section 5 .4 of the MOA expressly stipulated that: "xxxx No statement or agreement, oral or written,
made prior to the signing hereof and no prior conduct or practice by either party shall vary or modify the written terms
embodied hereof, and neither party shall claim any modification of any provision set forth herein unless such modification is in
writing and signed by both parties. "26 Furthermore, the REM executed by petitioners in support of the MOA indicated that the
mortgage would secure the payment of all loans, overdrafts, credit lines and other credit facilities or accommodations obtained
or hereinafter to be obtained by the mortgagors. In light of the pertinent provisions of the MOA, the only rational interpretation
was that the parties agreed to consolidate the Spouses Chua's past and future obligations, which would be secured by the REM
executed between the parties.

There is no question about the validity of the March 21, 2000 MOA as well as the REM executed by petitioners in support of this
MOA. However, much controversy attended the Revere REM. Nonetheless, the RTC pointed out in its decision:

The Court therefore affirms the nullity of the Revere REM dated March 21, 2000 (Exhibit "1", Exhibit "7-APA) executed by Revere
in favor of defendant UCPB. There is no proof that plaintiffs have consented to the application of the properties listed in Annex
"B" thereof to the loan obligation of defendant Jose Go. UCPB is therefore lawfully bound to return to plaintiffs TCT Nos. T-
40452 (89339), 40453 (89340), 84488 (89342), 71021 (89330), 71022 (89331), 71023 (89332), 71025 (95580-95581), 71136
(95587-95590), 55033 (89384), conformably with this court's disquisition in the Partial Judgment rendered on September 6,
2005.27

We have to note that the REM was executed by Revere through Jose Go purportedly in connection with the March 21, 2000 MOA
on the very same day that petitioners' REM were executed. Yet, petitioners disclaimed any knowledge or conformity to the
Revere REM. With the two deeds of trust executed in favor of Revere not having been expressly cancelled or rescinded, the
properties mortgaged by Revere to UCPB were still owned by petitioners for all intents and purposes.

For clarity, we excerpt relevant portions of the deeds of trust, to wit:

DEED OF TRUST28

KNOW ALL MEN BY THESE PRESENTS:

This DEED OF TRUST made, executed, and entered into by and between:

SPOUSES FELIX and CARMEN CHUA, both of legal age, Filipinos and with postal address at Ilayang Dupay, Lucena City and ADELA
C. CHUA, of legal age, Filipino, married to Luis A. Chua and a resident of LIC Bldg., Brgy. Gulang-gulang, Lucena City, hereinafter
called the TRUSTORS:

-and-

REVERE REALTY AND DEVELOPMENT CORPORATION, a corporation duly organized and existing under the laws of the Philippines
with office address at 2478 Agatha St., San Andres Bukid, Manila, herein represented by the President, MRS. LYDIA SEVILLA and
hereinafter called the TRUSTEE.

WITNESSETH

WHEREAS, the TRUSTORS are the lawful and absolute owners of twelve (12) parcels of land situated at Lucena City and
previously covered by the following transfer Certificates of Title and may be described as follows:

xxxx

73
WHEREAS, by virtue of several Deeds of Absolute Sale executed by the TRUSTOR in favor of the TRUSTEE, the twelve (12) parcels
of land were transferred in the name of the TRUSTEE and are now covered by the following Transfer Certificates of Title:

xxxx

WHEREAS, the TRUSTEE hereby acknowledges and confirms that it did not pay the TRUSTORS the consideration stated in the
Deeds of Absolute Sale covering the twelve (12) parcels of land and said Deeds of Absolute Sale were executed by the TRUSTORS
in compliance with the terms and conditions stated in the Joint Venture Agreement dated March 3, 1997 executed by and
between the TRUSTORS and GOTESCO PROPERTIES, INC.;

WHEREAS, the TRUSTEE hereby acknowledges and confirms that she is the authorized representative of GOTESCO PROPERTIES,
INC., with respect to the said Joint Venture Agreement and the transfer of the twelve (12) parcels of land in her name is
necessary for the consolidation and subdivision of the properties in connection with the preparation of the plans and designs of
the project of the said Joint Venture Agreement;

NOW THEREFORE, for and in consideration of the foregoing premises and mutual covenants hereinafter set forth:

1. The TRUSTEE hereby acknowledges and confirms:

1.1 The absolute title and ownership of the TRUSTORS over the twelve (12) parcels of land above described;

1.2 Its role as TRUSTEE, to have and hold the said twelve (12) parcels of land for the sole and exclusive use,
benefit, enjoyment of the TRUSTORS;

2. The TRUSTEE hereby acknowledges and obliges itself not to dispose of, sell, transfer, convey, lease or mortgage the
said twelve (12) parcels of land without the written consent of the TRUSTORS first obtained; (bold emphasis added)

3. The TRUSTEE hereby covenants and agrees to execute, deliver and perform any and all arrangements, and acts, which
in the opinion of the TRUSTEES are necessary, required and/or appropriate for the exercise by the TRUSTORS of their
rights, title and interests over the said twelve (12) parcels ofland. (Emphasis supplied)

The deeds of trust expressly provided that: "The TRUSTEE hereby acknowledges and obliges itself not to dispose of, sell, transfer,
convey, lease or mortgage the said twelve (12) parcels of land without the written consent of the TRUSTORS first obtained." By
entering into the Revere REM, therefore, Revere openly breached its undertakings under the deeds of trust in contravention of
the express prohibition therein against the disposition or mortgage of the properties. It is also worth mentioning that the records
are bereft of any allegation that Revere had obtained the approval of petitioners or that the latter had acquiesced to the
mortgage of the properties in favor of UCPB. Absent proof showing that petitioners had transferred the ownership of some or all
of the properties covered by the deeds of trust in favor or Revere or Jose Go, the deeds of trust remained as the controlling
documents as to the parcels of land therein covered.

Additionally, UCPB could not now feign ignorance of the deeds of trust. As the RTC aptly pointed out, UCPB's own Vice President
expressly mentioned in writing that UCPB would secure from Jose Go the titles necessary for the execution of the mortgages. As
such, UCPB's actual knowledge of the deeds of trust became undeniable. In addition, UCPB, being a banking institution whose
business was imbued with public interest, was expected to exercise much greater care and due diligence in its dealings with the
public. Any failure on its part to exercise such degree of caution and diligence would invariably stigmatize its dealings with bad
faith. It should be customary and prudent for UCPB, therefore, to adopt certain standard operating procedures to ascertain and
verify the genuineness of the titles to determine the real ownership of real properties involved in its dealings, particularly in
scrutinizing and approving loan applications. By approving the loan application of Revere obviously without making prior
verification of the mortgaged properties' real owners, UCPB became a mortgagee in bad faith. 29

The CA pronounced that the parties had intended to extend the benefits of the two REMs under the first MOA to Jose Go and/or
his group of companies. It premised its pronouncement on the express stipulation in petitioners' REM to the effect that it was
"the intention of the parties to secure as well the payment of all loans, overdrafts xxxx by the MORTGAGORS and/or by LGCTI,
Spouses Chua, and Jose Go." In addition, it cited the Spouses Chua's conformity to UCPB's letter dated November 10, 1999 to the
effect that should there be any excess or residual value after the settlement of the Spouses Chua and LGCTI's obligations, said
excess would be applied to any outstanding obligations that Jose Go might have with UCPB. We must point out, however, that
the statements adverted to by the CA had been supplied by UCPB itself - the first being contained in the REM drafted by UCPB,
and the second being written by UCPB in its letter to the Spouses Chua. Assuming that petitioners were not just misled into

74
signing or agreeing to the stipulations in said documents, it was still error for the CA to hold that Revere's or Jose Go's obligations
enjoyed a primacy or precedence over the ₱68,000,000.00 obligation of petitioners.

The discussion of the RTC in its decision on this aspect, being apt and in point, is reiterated with approval:

The conformity of the plaintiffs through Felix A. Chua only appears on the Plaintiffs' REM dated March 21, 2000 (Exhibit "G",
Exhibit "6-APA"). By virtue of this Plaintiffs' REM, there is basis to apply the properties listed in Annex "A" thereof to the
obligations of both plaintiffs and defendant Jose Go, but subject to the condition that plaintiffs’ obligations be totally
extinguished first. However, up to the termination of the trial of this case, neither defendant UCPB nor APA presented any
evidence to prove the precise amount of Jose Go's loan obligations with the bank. It must be emphasized that the Plaintiffs'
REM refers to Jose Go's obligations to the bank, not the obligations of any of the corporations owned by him in the majority.

The Apportionment of Bid Price signed by UCPB's own witness Milagros Alcabao (Exhibit "S", Exhibit "10-APA) does not show
Jose Go's obligations, if any. What the Apportionment reveals is the amount of Php75,093,180.00 was set aside for "Revere
Realty & Development Corporation and Lucena Industrial Corporation." While the name of plaintiff Lucena Industrial
Corporation ("LIC") and Revere Realty and Development Corporation appears in said Apportionment, it has not been shown
that there was any loan contracted by LIC and Revere to which the amount of Php75,093,180.00 may be applied. Because the
twenty-three (23) properties listed in favor of Revere and LIC were sourced from the two (2) Deeds of Trust and partly from
the null and void Revere REM dated March 21, 2000 (Exhibit "I", Exhibit "7-APA "), it is only proper that this particular
apportionment valued by the bank at Php75,093,180.00 should likewise be struck down. 30 (Bold underscoring supplied for
emphasis)

On the other hand, the CA maintained that petitioners' obligations to UCPB under the March 21, 2000 MOA had not been fully
satisfied, viz.:

The plaintiffs-appellees concede in their First MOA that the outstanding obligations of Spouses Chua and LGCTI to UCPB
were restructured and fixed at the aggregate amount of ₱204,597,177.04; that part of this restructured debts (of up to
₱103,893,450.00) will be settled by transferring the titles of the properties listed in Annex "A" to the Bank; and the remaining
balance (in the amount of P68 million) will be converted into equity interest in LGCTI. Since the contract is the law between the
parties, it necessarily follows that only by adhering to the terms of the First MOA would the entire obligations of Spouses Chua
and LGCTI be deemed fully paid.

In pursuance of the foregoing conceded terms, and in accordance with the provisions of Plaintiffs’ REM and Revere's REM, UCPB
foreclosed the REM on all of the properties listed in Annex "A" of the First MOA for a total bid price of ₱227,700,000.00. The
foreclosure and auction sale were deemed to cover not only plaintiffs-appellees’ obligations and REM, they covered as well the
REM of Jose Go and Revere as again, in UCPB's conformed upon November 10, 1999 letter to Spouses Chua, et al., the latter
undertook the following obligations:

xxxx

The imperatives of the parties' obligations under their contracts as above-discussed therefore require the proceeds of the
foreclosure in the total amount of ₱227,700,000.00 be applied, first, to plaintiffs-appellees’ ₱103,893,450.00, as agreed upon in
the First MOA, and the remaining balance of ₱123,806,550.00 to Jose Go's outstanding obligations with UCPB.31

This disquisition of the CA would have resulted in an absurd situation wherein a considerable portion of petitioners' properties
were to be used to settle Jose Go's personal liabilities, which were ₱20,000,000.00 more than what were to be applied to
petitioners' own obligations. Aside from enabling this ludicrous interpretation of the agreements, petitioners were still left with a
hefty ₱68,000,000.00 balance in their obligations with UCPB. This absurd situation does not find support in their contracts as
well as in the course of ordinary human experience. To reiterate, the ₱68,000,000.00 obligation was not separate and distinct
from the outstanding obligations consolidated by the March 21, 2000 MOA. In fact, the February 14, 2003 MOA involving the
transfer of 680,000 preferred shares of stock to UCPB provided that:

4. This Agreement shall take effect upon execution hereof provided however, that in the event the assignment of liabilities in
exchange for the Preferred Shares does not materialize for any cause whatsoever, this Agreement shall be cancelled and
automatically cease to have any force and effect, thereby restoring to each of the parties hereto whatever rights and liabilities
they may each have in relation to the other parties prior to this Agreement. 32 (Bold emphasis supplied)

75
Considering that such issuance of preferred shares in favor of UCPB did not take place despite the execution of the second MOA
in 2003, the February 14, 2003 MOA was deemed cancelled and the ₱68,000,000.00 must perforce revert as part of petitioners'
outstanding balance that was now fully and completely settled.

A review of the MOA dated March 21, 2000 would reveal that petitioners' outstanding obligation referred to, after deducting the
amount of the thirty properties, was reduced to only ₱68,000,000.00. To settle this balance, petitioners agreed to convert this
into equity in LGCTI in case they defaulted in their payment.1âwphi1 In this case, what prompted the foreclosure sale of the
mortgaged properties was petitioners' failure to pay their obligations. When the proceeds of the foreclosure sale were applied to
their outstanding obligations, the payment of the balance of the ₱68,000,000.00 was deliberately left out, and the proceeds
were conveniently applied to settle ₱75,000,000.00 of Revere and/or Jose Go's unpaid obligations with UCPB. This application
was in blatant contravention of the agreement that Revere's or Jose Go's obligations would be paid only if there were excess in
the application of the foreclosure proceeds. Accordingly, the CA should have applied the proceeds to the entire outstanding
obligations of petitioners, and only the excess, if any, should have been applied to pay off Revere and/or Jose Go's obligations.

Based on the foregoing, therefore, we conclude that the deed of assignment of liabilities covering the deficiency in its obligation
to UCPB in the amount of ₱68,000,000.00 was null and void. According to the apportionment of bid price executed by UCPB's
account officer, the bid amounting to ₱227,700,000.00 far exceeded the indebtedness of the Spouses Chua and LGCTI in the
amount of ₱204,597,177.04, which was inclusive of the ₱68,000,000.00 subject of the deed of assignment of liabilities as well as
the ₱32,703,893,450.00 corresponding to the interests and penalties that UCPB waived in favor of petitioners. 33

It can be further concluded that UCPB could not have validly assigned to Asset Pool A any right or interest in the ₱68,000,000.00
balance because the proper application of the proceeds of the foreclosure sale would have necessarily resulted in the full
extinguishment of petitioners' entire obligation. Otherwise, unjust enrichment would ensue at the expense of petitioners. There
is unjust enrichment when a person unjustly retains a benefit to the loss of another, or when a person retains money or property
of another against the fundamental principles of justice, equity and good conscience. The principle of unjust enrichment requires
the concurrence of two conditions, namely: (1) that a person is benefited without a valid basis or justification; and (2) that such
benefit is derived at the expense of another. 34 The main objective of the principle against unjust enrichment is to prevent a
person from enriching himself at the expense of another without just cause or consideration. This principle against unjust
enrichment would be infringed if we were to uphold the decision of the CA despite its having no basis in law and in equity.

The Court notes that one of the parcels of land covered by the Revere REM was that registered under Transfer Certificate of Title
(TCT) No. 89334 of the Registry of Deeds of Lucena City. According to the decision of the CA, 35 the parcel of land registered under
TCT No. 89334 had been subdivided into Lot No. 3852 (TCT No. 95582 and TCT No. 95583) and Lot No. 3854 (TCT No. 95580 and
TCT No. 95581). However, the judgment of the RTC did not include TCT No. 89334 although it should have. To rectify the
omission, which was obviously inadvertent, we should include TCT No. 89334 due to its being admittedly one of the parcels of
land of petitioners covered by the Revere REM.

Finally, the interest of 6% per annum on the judgment upon its finality shall be imposed in accordance with the pronouncement
of the Court in Nacar v. Gallery Frames.36

WHEREFORE, the Court GRANTS the petition for review on certiorari; SETSASIDE the decision of the Court of Appeals
promulgated on March 25, 2014 in CA-G.R. No. 93644; REINSTATES the judgment rendered on January 6, 2009 by the Regional
Trial Court, Branch 59, in Lucena City, with the addition of TCT No. 89334, to wit:

WHEREFORE, premises considered, judgment is hereby rendered in favor of plaintiffs and against defendants UNITED COCONUT
PLANTERS BANK, ASSET POOL A, REGISTRAR OF DEEDS OF LUCENA CITY and EX-OFFICIO SHERIFF OF LUCENA CITY, thus:

a. Declaring that the loan obligations of plaintiffs to defendant UNITED COCONUT PLANTERS BANK under the Memorandum of
Agreement dated March 21, 2000 have been fully paid;

b. Declaring as legal and binding the Deeds of Trust dated April 30, 1998 and holding the properties listed therein were merely
held-in-trust for plaintiffs by defendants REVERE and JOSE GO and/or corporations owned or associated with him;

c. Nullifying the Deed of Real Estate Mortgage dated March 21, 2000 executed by defendants REVERE and JOSE GO in favor of
codefendant UNITED COCONUT PLANTERS BANK and the Deed of Assignment of Liability dated February 14, 2003 executed by
plaintiffs in favor of UNITED COCONUT PLANTERS BANK;

d. Ordering defendant REGISTRAR OF DEEDS of Lucena City to cancel any and all titles derived or transferred from TCT Nos. T-
40452 (89339), 40453 (89340), 84488 (89342), 71021 (89330), 71022 (89331), 71023 (89332), 71025 (95580-95581), 71136
76
(95587-95590), 55033 (89384), 89334 and issue new ones returning the ownership and registration of these titles of the
plaintiffs. For this purpose, defendant UNITED COCONUT PLANTERS BANK is directed to execute the appropriate Deeds of
Reconveyance in favor of the plaintiffs over the eighteen (18) real properties listed in the Real Estate Mortgage dated March 21,
2000 executed by defendants Revere Realty and JOSE GO and originally registered in the names of the plaintiffs.

e. Ordering defendant UNITED COCONUT PLANTERS BANK to return so much of the plaintiffs titles, of their choice, equivalent to
Php200,000,000.00 after applying so much of the mortgaged properties, including those presently or formerly in the name of
REVERE, to the payment of plaintiffs' consolidated obligation to the bank in the amount of Php204,597,177.04.

f. Declaring the Real Estate Mortgage dated June 02, 1997 as having been extinguished by the Memorandum of Agreement date
March 21, 2000, and converting the writ of preliminary injunction issued on March 22, 2004 to a permanent one, forever
prohibiting UNITED COCONUT PLANTERS BANK and ASSET POOL A and all persons/ entities deriving rights under them from
foreclosing on TCT Nos. T54182, T-54184, T-54185, T-54192, and T-71135. The court hereby orders said defendants, or whoever is
in custody of the said certificates of title, to return the same to plaintiffs and to execute the appropriate release of mortgage
documents.

g. Finally, ordering defendant UNITED COCONUT PLANTERS BANK, to pay plaintiffs:

i. The excess of the foreclosure proceeds in the amount of Php23,102,822.96, as actual damages;

ii Legal interest on the amount of Php223,102,822.96 at the rate of 6% per annum from February 3, 2004 until finality of
judgment. Once the judgment becomes final and executory, the interest of 6% per annum, should be imposed, to be
computed from the time the judgment becomes final and executory until fully satisfied, as compensatory damages;

iii. Php1,000,000.00 as moral damages;

iv. Phpl00,000.00 as exemplary damages;

v. Php2,000,000.00 as attorney's fees; and

vi. Costs of suit;

SO ORDERED.

and DIRECTS respondents, except the Registrar of Deeds of Lucena City and the Ex-Officio Sheriff of Lucena City, to pay the costs
of suit.

77
 FIRST DIVISION

[G.R. No. 205912. October 18, 2017.]

ROGELIA R. GATAN and THE HEIRS OF BERNARDINO GATAN, namely: RIZALINO GATAN AND FERDINAND
GATAN, petitioners, vs. JESUSA VINARAO, and SPOUSES MILDRED CABAUATAN and NOMAR
CABAUATAN, respondents.

DECISION

LEONARDO-DE CASTRO, J p:

Petitioners Rogelia Gatan (Rogelia) and her sons, Rizalino Gatan (Rizalino) and Ferdinand Gatan (Ferdinand) — the
latter two as heirs of Bernardino Gatan (Bernardino), Rogelia's late husband — filed the present Petition for Review
on Certiorari, under Rule 45 of the Rules of Court, assailing (a) the Decision 1 dated September 7, 2012 of the Court of
Appeals in CA-G.R. CV No. 94340, which affirmed the Decision 2 dated October 1, 2009 of the Regional Trial Court (RTC) of
Cabagan, Isabela, Branch 22, dismissing petitioners' Complaint in Civil Case No. 22-1061; and (b) the Resolution 3 dated
February 11, 2013 of the appellate court in the same case denying petitioners' Motion for Reconsideration.
Petitioners filed before the RTC on January 3, 2007 a Complaint 4 for Nullity of Document and Recovery of
Possession with Damages against respondents Jesusa Vinarao (Jesusa) and spouses Nomar and Mildred Cabauatan (spouses
Cabauatan), which was docketed as Civil Case No. 22-1061.
Petitioners alleged in their Complaint that Bernardino and his wife, petitioner Rogelia (spouses Gatan), acquired a
parcel of land in Casibarag Sur, Cabagan, Isabela, with an area of around 406 square meters (spouses Gatan's property). The
said property was surveyed in Bernardino's name under LMB Form No. 23-37-R of the Department of Environment and
Natural Resources dated October 26, 1964. 5 Bernardino passed away on March 19, 2000 and was survived by petitioner
Rogelia and their seven children, including petitioners Rizalino and Ferdinand.
According to petitioners, sometime in January 2002, respondent spouses Cabauatan asked petitioner Rogelia if they
could temporarily erect a house on the spouses Gatan's property. Petitioner Rogelia agreed since respondent Mildred
Cabauatan (Mildred) was Bernardino's relative. 6
Petitioners recounted that more than four years later, or sometime in March 2006, petitioner Rogelia learned of a
Deed of Absolute Sale 7 supposedly executed by Bernardino on December 30, 1989 conveying a portion of the spouses
Gatan's property, measuring around 245 square meters (subject property), in favor of respondent Mildred's parents, namely,
Sostones Vinarao (Sostones) and his wife, respondent Jesusa (spouses Vinarao), for the consideration of P4,000.00.
Petitioner Rogelia questioned the Deed of Absolute Sale, averring that Bernardino could not have signed the said Deed
because he was illiterate; and that the Deed of Absolute Sale lacked her marital consent since it was signed not by her, but
by a certain Aurelia Ramos Gatan. Petitioner Rogelia then confronted the spouses Vinarao regarding the falsified Deed of
Absolute Sale and demanded that the respondent spouses Cabauatan vacate the subject property.
The parties appeared before the barangay to try to settle their dispute amicably, but to no avail. A Certificate to File
Action 8 dated April 10, 2006 was issued by the appropriate barangay officials to the parties.
Thereafter, petitioners instituted Civil Case No. 22-1061 against respondents 9 before the RTC.
In their Answer 10 to the Complaint, respondents countered that the subject property was previously owned by
Pedro Gatan, 11 the father of Bernardino and Carmen Gatan (Carmen). Carmen, the mother and grandmother of Sostones
and respondent Mildred, respectively, had always been in actual possession of the subject property.
While respondents admitted that the spouses Gatan eventually came to own the subject property, respondents
asserted that the spouses Gatan sold the subject property to the spouses Vinarao by virtue of the Deed of Absolute Sale
dated December 30, 1989, which was notarized by Atty. Alfredo C. Mabbayad (Mabbayad). Soon after, on June 15, 1990, the
spouses Vinarao declared the subject property in Sostones' name for real property tax purposes under Tax Declaration (TD)
No. 99-06-008-0343-R. 12 Respondents had been paying the real property taxes for the subject property as evidenced by Tax

78
Receipt No. 5285880 13 dated January 11, 1990, Tax Receipt No. 2871484V 14 dated January 26, 2005, and Tax Receipt No.
5667116V 15 dated March 15, 2006.
Respondents denied that they falsified Bernardino's signature on the Deed of Absolute Sale and insisted that
Bernardino could write his own name. Respondents also claimed that petitioner Rogelia signed the Deed of Absolute Sale in
her real name, which is Aurelia Ramos Gatan.
Respondents further narrated that petitioner Rogelia previously filed a complaint for falsification of public
document and use of falsified document against respondents Jesusa and Mildred before the Office of the Provincial
Prosecutor in Ilagan, Isabela, docketed as I.S. No.. 2006E-637, but said complaint was dismissed in a Resolution 16 dated
September 26, 2006 due to lack of probable cause. Likewise, when the parties appeared before the barangay, petitioners
supposedly demanded that respondents pay an additional P50,000.00 for the subject property, but respondents refused
because they had already fully paid the consideration for the said property. 17
Consequently, respondents prayed for the dismissal of petitioners' Complaint in Civil Case No. 22-1061.
After trial on the merits, the RTC rendered a Decision on October 1, 2009, dismissing petitioners' Complaint in Civil
Case No. 22-1061. The dispositive portion of the RTC judgment reads:
WHEREFORE, premises considered, judgment is rendered in favor of the [respondents] and
against the [petitioners], upholding the validity of the Deed of Absolute Sale, dated December 30, 1989
and accordingly dismissing the complaint. The counterclaim is likewise ordered dismissed for lack of
evidence to substantiate the same. 18
Petitioners filed a Notice of Appeal, which was given due course by the RTC in its Order 19 dated October 26, 2009.
Petitioners' appeal before the Court of Appeals was docketed as CA-G.R. CV No. 94340. In its Decision dated
September 7, 2012, the Court of Appeals affirmed the RTC Decision. The appellate court denied petitioners' Motion for
Reconsideration in its Resolution dated February 11, 2013.
Hence, petitioners filed the instant Petition, raising the sole issue of:
WHETHER THE HONORABLE COURT OF APPEALS ERRED IN AFFIRMING THE TRIAL COURT'S DECISION
UPHOLDING THE VALIDITY OF THE SUBJECT DEED OF SALE. 20
The core of petitioners' argument is that the Deed of Absolute Sale dated December 30, 1989 is void and inexistent
absent the spouses Gatan's consent, considering that Bernardino's signature on said Deed was forged and the same Deed
lacked petitioner Rogelia's marital consent. Petitioners maintain that Bernardino, who was unschooled, could not have
affixed his signature on the Deed of Absolute Sale without the assistance of petitioner Rogelia, who signed for and in behalf
of Bernardino whenever the latter's signature was needed. Moreover, petitioner Rogelia disavows giving her marital consent
to the sale by affixing her signature on the Deed of Absolute Sale as Aurelia Ramos Gatan. Petitioners also asseverate that
Bernardino was never married to one Aurelia Ramos Gatan.
The Petition at bar is without merit.
A cursory reading of the present Petition for Review on Certiorari under Rule 45 of the Rules of Court reveals that it
is a reiteration of factual issues and arguments raised by petitioners in their appeal, which had already been fully passed
upon by the Court of Appeals. Whether or not the signatures of Bernardino and petitioner Rogelia appearing on the Deed of
Absolute Sale are forgeries is a question of fact which is beyond this Court's jurisdiction under the present Petition for
Review on Certiorari. Questions of fact, which would require a re-evaluation of the evidence, are inappropriate under Rule
45 of the Rules of Court. The jurisdiction of the Court under Rule 45, Section 1 21 is limited only to errors of law as the Court
is not a trier of facts. While Rule 45, Section 1 is not absolute, none of the recognized exceptions, 22 which allow the Court
to review factual issues, exists in the instant case. The following discussion in Miro v. Vda. de Erederos 23 is particularly
instructive on this matter:
Parameters of a judicial review
under a Rule 45 petition
a. Rule 45 petition is limited to questions of law
Before proceeding to the merits of the case, this Court deems it necessary to emphasize that a
petition for review under Rule 45 is limited only to questions of law. Factual questions are not the proper
subject of an appeal by certiorari. This Court will not review facts, as it is not our function to analyze or
weigh all over again evidence already considered in the proceedings below. As held in Diokno v. Hon.
Cacdac, a re-examination of factual findings is outside the province of a petition for review on certiorari, to
wit:
It is aphoristic that a re-examination of factual findings cannot be done through
a petition for review on certiorari under Rule 45 of the Rules of Court because as earlier

79
 stated, this Court is not a trier of facts[.] x x x. The Supreme Court is not duty-bound to
analyze and weigh again the evidence considered in the proceedings below. This is
already outside the province of the instant Petition for Certiorari.
There is a question of law when the doubt or difference arises as to what the law is on a certain
set of facts; a question of fact, on the other hand, exists when the doubt or difference arises as to the truth
or falsehood of the alleged facts. Unless the case falls under any of the recognized exceptions, we are
limited solely to the review of legal questions.
b. Rule 45 petition is limited to errors of the appellate court
Furthermore, the "errors" which we may review in a petition for review on certiorari are those of
the CA, and not directly those of the trial court or the quasi-judicial agency, tribunal, or officer which
rendered the decision in the first instance. It is imperative that we refrain from conducting further scrutiny
of the findings of fact made by trial courts, lest we convert this Court into a trier of facts. As held in Reman
Recio v. Heirs of the Spouses Aguedo and Maria Altamirano, etc., et al., our review is limited only to the
errors of law committed by the appellate court, to wit:
Under Rule 45 of the Rules of Court, jurisdiction is generally limited to the
review of errors of law committed by the appellate court. The Supreme Court is not
obliged to review all over again the evidence which the parties adduced in the court a
quo. Of course, the general rule admits of exceptions, such as where the factual findings
of the CA and the trial court are conflicting or contradictory. (Citations omitted.)
At any rate, the Deed of Absolute Sale dated December 30, 1989 is notarized, and it is a well-settled principle that a
duly notarized contract enjoys the prima facie presumption of authenticity and due execution, as well as the full faith and
credence attached to a public instrument. To overturn this legal presumption, evidence must be clear, convincing, and more
than merely preponderant to establish that there was forgery that gave rise to a spurious contract. 24
On proving forgery, the Court expounded in Gepulle-Garbo v. Garabato 25 that:
As a rule, forgery cannot be presumed and must be proved by clear, positive and convincing
evidence, the burden of proof lies on the party alleging forgery. One who alleges forgery has the burden to
establish his case by a preponderance of evidence, or evidence which is of greater weight or more
convincing than that which is offered in opposition to it. The fact of forgery can only be established by a
comparison between the alleged forged signature and the authentic and genuine signature of the person
whose signature is theorized to have been forged. (Citations omitted.)
On one hand, herein petitioners presented petitioner Rogelia's testimony 26 that Bernardino was unschooled;
Bernardino had always asked petitioner Rogelia to sign his name for him; Bernardino did not authorize petitioner Rogelia to
sign the Deed of Absolute Sale; petitioner Rogelia was not the one who affixed the signature appearing above Bernardino's
name in the Deed of Absolute Sale; petitioner Rogelia did not know Aurelia Ramos Gatan whose name and signature
appeared in the space for marital consent in the Deed of Absolute Sale; and petitioner Rogelia did not sign in the name of
Aurelia Ramos Gatan on the Deed of Absolute Sale. Petitioners also submitted specimens of petitioner Rogelia's signature
and Bernardino's name in petitioner Rogelia's handwriting. 27
On the other hand, respondents called to the witness stand Carlos Vinarao (Carlos), 28 who personally saw
Bernardino and petitioner Rogelia sign the Deed of Absolute Sale before Atty. Mabbayad, the notary public; Nenita Gatan
(Nenita), 29 Bernardino's sister, who stated that she knew her brother's wife by both names "Rogelia" and "Aurelia;" and
respondent Jesusa, 30 who essentially affirmed in open court the respondents' allegations in their Answer to the Complaint
in Civil Case No. 22-1061. Respondents offered as documentary evidence the Deed of Absolute Sale dated December 30,
1989, Tax Declarations covering the subject property in Sostones' name, and Tax Receipts for real property taxes on the
subject property in the names of respondents Jesusa or Mildred.
Weighing the evidence submitted by both sides, the RTC ruled in favor of the validity of the Deed of Absolute of
Sale. The RTC ratiocinated that:
This court has carefully, studiously and judiciously looked into and assessed the grounds
relied (sic) which by [petitioners] towards sustaining their allegation of invalidity of the Deed of Absolute
Sale, dated December 30, 1989, and it cannot find any valid reason to agree with the stand of the
[petitioners]. For one, Rogelia Gatan's testimony is uncorroborated and is self-serving such that it cannot
inspire credence in the light of and viewed against the testimony of Carlos Vinarao, who is clearly an
instrumental witness to the execution of the contested document. The bare denial of Rogelia Gatan that
her husband Bernardino Gatan signed the Deed of Absolute Sale and her [further] claim that the latter is
illiterate and did not sign it as he does not know how to sign his name, to the court's view is a negative
evidence which is overwhelmed by the positive assertion of the instrumental witness who himself affixed
80
his signature thereto, that Bernardino Gatan together with his wife Rogelia Gatan both signed the
contested Deed of Absolute Sale before the instrumental witness and prior to its signing by the notary
public, Atty. Alfredo Mabbayad. It is trite to state in this regard, that jurisprudence recognizes that the
authenticity and due execution of a document may be proven by testimonial evidence and on this point,
the testimony of Carlos Vinarao is credible and worthy of positive appreciation. The Supreme Court has
said:
"We likewise sustain the trial Court and the Court of Appeals concerning the testimonies
of Verma Domingo, Leonora and Jose to the effect that they saw Bruno affixing his
signature to the questioned deed. They were unrebutted. Genuineness of a handwriting
may be proven, under Rule 132, Section 22, by anyone who actually saw the person write
or affix his signature on the document"
Appropriately, Section 22 of Rule 132 of the Rules of Court states:
"Section 22. How genuineness of handwriting proved. The handwriting of a person may
be proved by any witness who believes it to be the handwriting of such person because
he has seen the person write x x x and had thus acquired knowledge of the handwriting
of such person."
Going by the force of jurisprudence and consonant with the aforecited Rule 132, Section 22, of
the Rules of Court, the court considers the testimonies of Carlos Vinarao, who is an instrumental witness
and saw the execution of the contested document, the Deed of Absolute Sale, dated December 30, 1989,
to be preponderant vis a vis the testimony of the [petitioner] Rogelia Gatan, to prove the genuineness and
due execution [of] the Deed of Sale herein contested by the [petitioners].
But more importantly, and this heavily bears against the [petitioners] and in favor of
[respondents], is the proven fact that the Deed of Absolute Sale, dated December 30, 1989, is a duly
notarized document. As such, notarized document, the contested Deed of Absolute Sale enjoys the
presumption of its genuineness and due execution, which the [petitioners] have failed to rebut. In a
plethora of cases, the Supreme Court has repeatedly upheld the validity of notarized documents on the
ground of the unrebutted presumption of their genuineness and due execution. x x x
xxx xxx xxx
In conclusion, the Deed of Absolute Sale dated December 30, 1989 executed by Bernardino Gatan
in favor of Sostones Vinarao is valid and binding on the [petitioners] who failed to show convincing and
clear proof of its invalidity. 31
The Court of Appeals subsequently sustained the findings and appreciation of evidence by the RTC, thus:
The pivotal issue in this case revolves on the validity of the Deed of Absolute Sale.
It is a hornbook doctrine that the findings of fact of the trial court are entitled to great weight on
appeal and should not be disturbed except for strong and valid reasons, because the trial court is in a
better position to examine the demeanor of the witnesses while testifying (Tayco vs. Heirs of Concepcion
Tayco-Flores, 637 SCRA 742, 750 [2010]). We see no such reason to deviate from the findings of the RTC in
this case.
It bears to stress that the questioned Deed of Absolute Sale is one that was acknowledged before
a Notary Public. It is well-settled that a document acknowledged before a Notary Public is a public
document that enjoys the presumption of regularity. It is a prima facie evidence of the truth of the facts
stated therein and a conclusive presumption of its existence and due execution. (Ocampo vs. Land Bank of
the Philippines, 591 SCRA 562, 571 [2009]). Otherwise stated, public or notarial documents, or those
instruments duly acknowledged or proved and certified as provided by law, may be presented in evidence
without further proof, the certificate of acknowledgment being prima facie evidence of the execution of
the instrument or document involved (Alfacero vs. Sevilla, 411 SCRA 387, 393 [2003]). In order to
contradict the presumption of regularity of a public document, evidence must be clear, convincing, and
more than merely preponderant (ibid.). In the case at bar, [petitioners] failed to present evidence to
overcome the presumptive authenticity and due execution of the said Deed of Absolute Sale.
[Petitioner] Rogelia Gatan claimed that the signature of her husband in the questioned Deed of
Absolute Sale is forged. She maintained that the signature of the purported vendor appearing in the Deed
of Absolute Sale cannot possibly belong to Bernardino Gatan for the reason that the latter is unschooled,
unlettered and cannot write.

81
 As a general rule, forgery cannot be presumed and must be proved by clear, positive and
convincing evidence (Bautista vs. Court of Appeals, 436 SCRA 141, 146 [2004]). The burden of proof lies on
the party alleging forgery (ibid.). Hence, it was incumbent upon [petitioners] to prove the fact of forgery
and the inability of Bernardino Gatan to sign his name. [Petitioners], in this case failed to present any other
clear and convincing evidence to substantiate their bare allegations. Then again, bare allegations,
unsubstantiated by evidence, are not equivalent to proof (Domingo vs. Robles, 453 SCRA 812, 818 [2005]).
Neither did [petitioner] Rogelia Gatan sufficiently prove that her signature appearing on the Deed
was likewise forged. She merely dwelt on her argument that she was not Aurelia Gatan but nothing was
presented to substantiate her allegation that the signature therein was not hers. She did not even present
corroborating witnesses much less an independent expert witness who could declare with authority and
objectivity that the questioned signatures are forged. As held by the Supreme Court:
"x x x he who disavows the authenticity of his signature on a public document
bears the responsibility to present evidence to that effect. Mere disclaimer is not
sufficient. At the very least, he should present corroborating witnesses to prove his
assertion. At best, he should present an expert witness (Pan Pacific Industrial Sals Co.,
Inc. vs. Court of Appeals, 482 SCRA 164, 176 [2006])
At most, according to the RTC, the assertion made by [petitioners] that the signatures therein are
not of Bernardino Gatan's nor hers is a bare denial that cannot prevail over the direct evidence of
[respondents'] witness who testified affirmatively that he was physically present at the signing of the deed
and who had personal knowledge thereof. Indeed, We affirm the credence accorded by the RTC on the
testimony of [respondents'] witness, Carlos Vinarao who acted as the instrumental witness in the
execution of the questioned Deed of Absolute Sale. He testified that during the execution of the said
document, he was with the seller, Bernardino Gatan, his wife Aurelia Gatan and the buyer, Sostones
Vinarao and he personally witnessed all the said parties affix their signatures before Notary Public Atty.
Alfredo Mabbayad (See: TSN dated November 10, 2008, pp. 10-11.) [Section] 22 of Rule 132 of the Rules of
Court provides:
Section 22. How genuineness of handwriting proved. — The handwriting of a
person may be proved by any witness who believes it to be the handwriting of such
person because he has seen the person write, or has seen writing purporting to be his
upon which the witness has acted or been charged, and has thus acquired knowledge of
the handwriting of such person. Evidence respecting the handwriting may also be given
by a comparison, made by the witness or the court, with writings admitted or treated as
genuine by the party against whom the evidence is offered, or proved to be genuine to
the satisfaction of the judge.
As records would show, Carlos Vinarao, the instrumental witness to the Deed of Absolute Sale has
testified in open court, confirming the authenticity and due execution of the Deed of Absolute Sale. Having
been physically present to see the seller Bernardino Gatan, his wife Aurelia Gatan and the buyer Sostones
Vinarao affix their signatures on the document, the weight of evidence preponderates in favor of
[respondents].
Considering the validity of the subject Deed of Absolute Sale, all parties, including their respective
heirs, are directed to comply with the terms and conditions set forth therein. 32
The aforequoted findings of fact of the RTC, affirmed by the Court of Appeals, are binding and conclusive upon this
Court.
The Court has always accorded great weight and respect to the findings of fact of trial courts, especially in their
assessment of the credibility of witnesses. In this case, the RTC gave much credence to Carlos's testimony, and there is no
cogent reason for the Court to disturb the same. As the Court pronounced in People v. Regaspi: 33
When it comes to credibility, the trial court's assessment deserves great weight, and is even
conclusive and binding, unless the same is tainted with arbitrariness or oversight of some fact or
circumstance of weight and influence. Since it had the full opportunity to observe directly the deportment
and the manner of testifying of the witnesses before it, the trial court is in a better position than the
appellate court to properly evaluate testimonial evidence. The rule finds an even more stringent
application where the CA sustained said findings, as in this case. (Citations omitted.)
In Bank of the Philippine Islands v. Leobrera, 34 the Court further stressed that:

82
 Indeed, it is settled that when the factual findings of the trial court are confirmed by the Court of Appeals,
said facts are final and conclusive on this Court, unless the same are not supported by the evidence on
record.
x x x findings of fact of the trial court, when affirmed by the Court of Appeals,
are binding upon the Supreme Court. This rule may be disregarded only when the
findings of fact of the Court of Appeals are contrary to the findings and conclusions of
the trial court, or are not supported by the evidence on record. But there is no ground to
apply this exception to the instant case. This Court will not assess all over again the
evidence adduced by the parties particularly where as in this case the findings of both
the trial court and the Court of Appeals completely coincide.
As a last note, the Court states its observations as regards the signatures of Bernardino (Exhibit "B-1") and Aurelia
Ramos Gatan (Exhibit "B-2") on the Deed of Absolute Sale as compared to the specimen signatures of Bernardino (Exhibit
"B-4") and petitioner Rogelia (Exhibit "B-3") submitted by petitioners, since the RTC and the Court of Appeals did not
elaborate on the same. While there are marked differences between Bernardino's signature on the Deed and the specimen
signature submitted by petitioners, these do not necessarily prove that Bernardino's signature on the Deed is a forgery. The
differences are explainable by the fact that Bernardino's signature on the Deed was affixed by Bernardino himself, as
witnessed by Carlos; while the specimen signature submitted by petitioners was Bernardino's name in petitioner Rogelia's
handwriting. As for the signatures of Aurelia Ramos Gatan and petitioner Rogelia, visual comparison reveals that they
actually look similar, especially the way the surname "Gatan" is written. Two of respondents' witnesses, Nenita and
respondent Jesusa, testified that they know petitioner Rogelia, Bernardino's wife, also by the name "Aurelia." Therefore,
even taking into consideration the submitted specimen signatures, petitioners still failed to present clear, positive,
convincing, and more than preponderant evidence to overcome the presumption of authenticity and due execution of the
notarized Deed of Absolute Sale and to prove that the signatures of Bernardino and his wife appearing on said Deed are
forgeries.
WHEREFORE, premises considered, the instant Petition for Review on Certiorari is DENIED for lack of merit. The
Decision dated September 7, 2012 and Resolution dated February 11, 2013 of the Court of Appeals in CA-G.R. CV No. 94340
are AFFIRMED.
SO ORDERED.
Sereno, C.J., Del Castillo and Jardeleza, JJ., concur.
Tijam, * J., is on official leave.
||| (Gatan v. Vinarao, G.R. No. 205912, [October 18, 2017])

83
 EN BANC

[G.R. No. 210669. August 1, 2017.]

HI-LON MANUFACTURING, INC., petitioner, vs. COMMISSION ON AUDIT, respondent.

DECISION

PERALTA, J p:

This Petition for Certiorari under Rule 64, in relation to Rule 65 of the 1997 Rules of Civil Procedure, seeks to annul
and set aside the Commission on Audit (COA) Decision No. 2011-003 1 dated January 20, 2011, which denied HI-LON
Manufacturing, Inc.'s (HI-LON) petition for review, and affirmed with modification the Notice of Disallowance (ND) No. 2004-
032 dated January 29, 2004 of COA's Legal and Adjudication Office-National Legal and Adjudication Section (LAO-N). The
LAO-N disallowed the amount of P9,937,596.20, representing the difference between the partial payment of P10,461,338.00
by the Department of Public Works and Highways (DPWH) and the auditor's valuation of P523,741.80, as just compensation
for the 29,690-square-meter road right-of-way taken by the government in 1978 from the subject property with a total area
of 89,070 sq. m. supposedly owned by HI-LON. The dispositive portion of the assailed COA Decision No. 2011-003 reads:
WHEREFORE, premises considered, the instant petition for review is hereby DENIED for lack of
merit. Accordingly, ND No. 2004-32 dated January 29, 2004 amounting to P9,937,596.20 is
hereby AFFIRMED with modification on the reason thereof that the claimant is not entitled thereto.
On the other hand, the Special Audit Team constituted under COA Office Order No. 2009-494
dated July 16, 2009 is hereby instructed to issue a ND for the P523,741.80 payment to Hi-Lon not covered
by ND No. 2004-032 without prejudice to the other findings to be embodied in the special audit report. 2
This Petition likewise assails COA's Decision 3 No. 2013-212 dated December 3, 2013 which denied HI-LON's motion
for reconsideration, affirmed with finality COA Decision No. 2011-003, and required it to refund payment made by DPWH in
the amount of P10,461,338.00. The dispositive portion of the assailed COA Decision No. 2013-212 reads:
WHEREFORE, the instant Motion for Reconsideration is hereby DENIED for lack of merit.
Accordingly, Commission on Audit Decision No. 2011-003 dated January 20, 2011 is hereby AFFIRMED
WITH FINALITY. Hi-Lon Manufacturing Co., Inc. is hereby required to refund the payment made by the
Department of Public Works and Highways in the amount of P10,461,338.00. 4
The antecedent facts are as follows:
Sometime in 1978, the government, through the then Ministry of Public Works and Highways (now
DPWH), converted to a road right-of-way (RROW) a 29,690 sq. m. portion of the 89,070 sq. m. parcel of land (subject
property) located in Mayapa, Calamba, Laguna, for the Manila South Expressway Extension Project. The subject property
was registered in the name of Commercial and Industrial Real Estate Corporation (CIREC) under Transfer Certificate of
Title (TCT) No. T-40999.
Later on, Philippine Polymide Industrial Corporation (PPIC) acquired the subject property, which led to the
cancellation of TCT No. T-40999 and the issuance of TCT No. T-120988 under its name. PPIC then mortgaged the subject
property with the Development Bank of the Philippines (DBP), a government financing institution, which later acquired the
property in a foreclosure proceeding on September 6, 1985. TCT No. T-120988, under PPIC's name, was then cancelled, and
TCT No. T-151837 was issued in favor of DBP. CAIHTE
Despite the use of the 29,690 sq. m. portion of the property as RROW, the government neither annotated its claim
or lien on the titles of CIREC, PPIC and DBP nor initiated expropriation proceedings, much less paid just compensation to the
registered owners.
Upon issuance of Administrative Order No. 14 dated February 3, 1987, entitled "Approving the Identification of and
Transfer to the National Government of Certain Assets and Liabilities of the Development Bank of the Philippines and the
Philippine National Bank," the DBP submitted all its acquired assets, including the subject property, to the Asset Privatization
Trust (APT) for disposal, pursuant to Proclamation No. 50 dated 8 December 1986.
84
 On June 30, 1987, APT disposed of a portion of the subject property in a public bidding. The Abstract of
Bids 5 indicated that Fibertex Corporation (Fibertex), through Ester H. Tanco, submitted a P154,000,000.00 bid for the asset
formerly belonging to PPIC located in Calamba, Laguna, i.e., "Land (5.9 hectares) TCT 4099, buildings & improvements,
whole mill," while TNC Philippines, Inc. and P. Lim Investment, Inc. submitted a bid of P106,666,000.00 and P138,000,000.00,
respectively. With respect to the former assets of Texfiber Corporation (Texfiber) in Taytay, Rizal i.e., "Land (214,062 sq. m.
TCT (493917) 506665, buildings & improvements, whole mill"), only Fibertex submitted a bid of P210,000,000.00.
In a Certification 6 dated July 1, 1987, APT certified that Fibertex was the highest bidder of PPIC and Texfiber assets
for P370,000,000.00, and recommended to the Committee on Privatization to award said assets to Fibertex. In a
Letter 7 dated November 10, 1988, APT certified that Fibertex paid APT P370,000,000.00 for the purchase of the said assets
formerly belonging to PPIC and Texfiber.
Meanwhile, Fibertex allegedly requested APT to exclude separate deeds of sale for the parcel of land and for
improvements under the subject property covered by TCT No. 151837 in the name of DBP. Having been paid the full bid
amount, APT supposedly agreed with Fibertex that the land would be registered in the name of TG Property, Inc. (TGPI) and
the improvements to Fibertex. Thus, APT executed two (2) separate Deeds of Sale with TGPI and Fibertex with regard to the
property, namely:
a. Deed of Sale between APT and TGPI executed on October 29, 1987 for the sale of a parcel of land covered by TCT
No. T-151837 for a consideration of P2,222,967.00.
b. Deed of Sale between APT and Fibertex executed on 19 August 1987 for the sale of improvements (machinery,
equipment and other properties) on the same property for a consideration of P154,315,615.39.
Upon complete submission of the required documents and proof of tax payments on December 9, 1987, the
Register of Deeds of Calamba, Laguna, cancelled DBP's TCT No. 151837 and issued TCT No. T-158786 in the name of TGPI,
covering the entire 89,070 sq. m. subject property, including the 29,690 sq. m. RROW. From 1987 to 1996, TGPI had paid real
property taxes for the entire 89,070 sq. m. property, as shown by the Tax Declarations and the Official Receipt issued by the
City Assessor's Office and Office of the City Treasurer of Calamba, Laguna, respectively.
On April 16, 1995, TGPI executed a Deed of Absolute Sale in favor of HI-LON over the entire 89,070 sq. m. subject
property for a consideration of P44,535,000.00. HI-LON registered the Deed with the Register of Deeds of Calamba, Laguna,
which issued in its name TCT No. 383819.
Sometime in 1998, Rupert P. Quijano, Attorney-in-Fact of HI-LON, requested assistance from the Urban Road Project
Office (URPO) DPWH for payment of just compensation for the 29,690 sq. m. portion of the subject property converted to a
RROW. The DPWH created an Ad Hoc Committee which valued the RROW at P2,500/sq. m. based on the 1999 Bureau of
Internal Revenue (BIR) zonal valuation.
On December 21, 2001, a Deed of Sale was executed between HI-LON and the Republic of the Philippines,
represented by Lope S. Adriano, URPO-PMO Director, by authority of the DPWH Secretary, covering the 29,690 sq. m. parcel
of land converted to RROW for a total consideration of P67,492,500.00. On January 23, 2002, the Republic, through the
DPWH, made the first partial payment to HI-LON in the amount of P10,461,338.00.
On post audit, the Supervising Auditor of the DPWH issued Audit Observation Memorandum No. NGS VIII-A-03-001
dated April 2, 2003 which noted that the use of the 1999 zonal valuation of P2,500.00/sq. m. as basis for the determination
of just compensation was unrealistic, considering that as of said year, the value of the subject property had already been
"glossed over by the consequential benefits" it has obtained from the years of having been used as RROW. The auditor
pointed out that the just compensation should be based on the value of said property at the time of its actual taking in 1978.
Taking into account the average value between the 1978 and 1980 Tax Declarations covering the subject land, the Auditor
arrived at the amount of P19.40/sq. m. as reasonable compensation and, thus, recommended the recovery of excess
payments. DETACa
Upon review of the auditor's observations, the Director of the LAO-N issued on January 29, 2004 ND No. 2004-32 in
the amount of P9,937,596.20, representing the difference between the partial payment of P10,461,338.00 to HI-LON and
the amount of P532,741.80, which should have been paid as just compensation for the conversion of the RROW.
Acting on the request of Dir. Lope S. Adriano, Project Director (URPO-PMO) for the lifting of ND No. 2004-032 dated
January 29, 2004, the LAO-N rendered Decision No. 2004-172 dated May 12, 2004, affirming the same ND, and stating the
value of the property must be computed from the time of the actual taking.
Resolving (1) the motions for reconsideration and request for exclusion from liability of former DPWH Secretary
Gregorio R. Vigilar, et al.; (2) the request for lifting of Notice of Disallowance No. 2004-032 of OIC Director Leonora J. Cuenca;
(3) the motion to lift the disallowance and/or exclusion as person liable of Ms. Teresita S. de Vera, Head, Accounting Unit,
DPWH; and (4) the appeal from ND No. 2004-032 of former Assistant Secretary Joel C. Altea and of Mr. Rupert P. Quijano,
Attorney-in-Fact of HI-LON, the LAO-N issued Decision No. 2008-172-A dated June 25, 2008, which denied the appeal and
affirmed the same ND with modification that payment of interest is appropriate under the circumstances.
85
 Aggrieved, HI-LON filed a petition for review before the COA. In its regular meeting on June 9, 2009, the COA
deferred the resolution of the petition, and instructed its Legal Service Section to create a Special Audit Team from the Fraud
Audit and Investigation Office to investigate and validate HI-LON's claim.
In its assailed Decision No. 2011-003 dated January 20, 2011, the COA denied for lack of merit HI-LON's petition for
review of the LAO-N Decision No. 2008-172-A, and affirmed ND No. 2004-032 dated July 29, 2004 with modification
declaring the claimant not entitled to just compensation. The COA also instructed the Special Audit Team to issue an ND for
the P523,741.80 payment to HI-LON not covered by ND No. 2004-032, without prejudice to the other findings embodied by
the special audit report.
On the issue of whether or not HI-LON is entitled to just compensation for the 29,690 sq. m. portion of the subject
property, the COA found that the evidence gathered by the Special Audit Team are fatal to the claim for such compensation.
First, the COA noted that the transfer of the subject property in favor of TGPI, the parent corporation of HI-LON,
was tainted with anomalies because records show that TGPI did not participate in the public bidding held on June 30, 1987,
as only three (3) bidders participated, namely: Fibertex Corporation, TNC Philippines, Inc., and P. Lim Investment, Inc.
Second, the COA pointed out that the Deed of Sale between APT and Fibertex has a disclosure that "The subject of
this Deed of Absolute Sale, therefore, as fully disclosed in the APT Asset Catalogue, is the total useable area of 59,380 sq.
m.," 8 excluding for the purpose the 29,690 sq. m. converted to RROW. The COA added that such exclusion was corroborated
by the Abstract of Bids duly signed by the then APT Executive Assistant and Associate Executive Trustee, showing that the
land covered by TCT No. T-151387 was offered to the public bidding for its useable portion of 5.9 hectares only, excluding the
subject 29,690 sq. m. converted to RROW.
Third, the COA observed that HI-LON is a mere subsidiary corporation which cannot acquire better title than its
parent corporation TGPI. The COA stressed that for more than (7) seven years that the subject property was under the name
of TGPI from its registration on December 9, 1987 until it was transferred to HI-LON on April 16, 1995, TGPI did not attempt
to file a claim for just compensation because it was estopped to do so as the Deed of Sale executed between APT and TGPI
clearly stated that the 29,690 sq. m. RROW was excluded from the sale and remains a government property. Applying the
principle of piercing the veil of corporate fiction since TGPI owns 99.9% of HI-LON, the COA ruled that HI-LON cannot claim
ignorance that the 29,690 sq. m. RROW was excluded from the public auction.
Having determined that HI-LON or its predecessor-in-interest TGPI does not own the RROW in question, as it has
been the property of the Republic of the Philippines since its acquisition by the DBP up to the present, the COA concluded
that the proper valuation of the claim for just compensation is irrelevant as HI-LON is not entitled thereto in the first place.
Dissatisfied, HI-LON filed a Motion for Reconsideration of COA Decision No. 2011-003 and a Supplement thereto.
On December 3, 2013, the COA issued the assailed Decision No. 2013-212 denying HI-LON's motion for
reconsideration, affirming with finality its assailed Decision No. 2011-003, and requiring HI-LON to refund the payment made
by DPWH in the amount of P10,461,338.00. aDSIHc
In this Petition for Certiorari, HI-LON argues that the COA committed grave abuse of discretion, amounting to lack or
excess of jurisdiction when it held (1) that there was no property owned by HI-LON that was taken by the government for
public use; (2) that the 89,070-sq. m. subject parcel of land, including the 29,690 sq. m. portion used as RROW by the
government, had been the property of the Republic of the Philippines; (3) that HI-LON is not entitled to payment of just
compensation; and (4) that it collaterally attacked HI-LON's ownership of the subject land, including the RROW. 9
The Office of the Solicitor General (OSG) counters that the COA acted within its jurisdiction when it evaluated and
eventually disallowed what it found to be an irregular, anomalous and unnecessary disbursement of public funds. The OSG
agrees with the COA that HI-LON is not entitled to payment of just compensation because the 29,690 sq. m. portion used as
RROW is already owned by the Republic since 1987 when DBP transferred the entire 89,070 sq. m. subject property to APT,
pursuant to Administrative Order No. 14. The OSG emphasizes that the Deed of Absolute Sale dated October 29, 1987
between the Republic (through APT) and TGPI clearly stated that the subject thereof, as fully disclosed in the APT Asset
Specific Catalogue, is the total useable area of 59,380 sq. m., hence, the 29,690 sq. m. portion used as RROW was expressly
excluded from the sale. Besides, the OSG notes that the COA aptly found that there were only three bidders who
participated in APT's public bidding of the subject property and TGPI was not one of the bidders. There being an anomaly in
the transfer of the property from APT to TGPI, the OSG posits that HI-LON, as TGPI's successor-in-interest, is not entitled to
just compensation.
Stating that the intention of Proclamation No. 50 was to transfer the non-performing assets of DBP to the national
government, the OSG maintains that APT has no authority to offer for sale the said portion because it is a performing asset,
having been used by the government as RROW for the Manila South Expressway since 1978. Considering that the said
29,690 sq. m. portion was not sold and transferred by APT to TGPI, the OSG submits that TGPI cannot also transfer the same
portion to its subsidiary, HI-LON. The OSG concludes that HI-LON is not entitled to payment of just compensation as it is not
the owner of the said portion, and that the COA properly ordered full disallowance of the P10,461,338.00 paid to HI-LON.
86
 HI-LON's Petition for Certiorari is devoid of merit.
In support of its claim of entitlement to just compensation, HI-LON relies on the Deed of Sale dated October 29,
1987, and insists that its predecessor-in-interest (TGPI) acquired from the national government, through APT, the entire
89,070 sq. m. property, which was previously registered in the name of DBP under TCT No. 151837. HI-LON asserts that the
29,690 sq. m. RROW was not excluded from the sale because: (1) APT referred to the entire property in the Whereas Clauses
as one of the subject of the sale; (2) APT made an express warranty in the said Deed that the properties sold are clear of
liens and encumbrances, which discounts the need to investigate on the real status of the subject property; and (3) the title
registered in the name of DBP, as well as the titles of the previous owners, CIREC and PPIC, contains no annotation as regards
any government's claim over the RROW.
HI-LON's assertions are contradicted by the clear and unequivocal terms of the Deed of Sale 10 dated 29 October
1987 between APT and TGPI, which state that the subject thereof is the total usable area of 59,380 sq. m. of the subject
property. Contrary to HI-LON's claim, nothing in the Whereas Clauses of the Deed indicates that the object of the sale is the
entire 89,070 sq. m. property, considering that the 29,690 sq. m. portion thereof had been used as road right-of-way (RROW)
for the South Expressway, to wit:
xxx xxx xxx
WHEREAS, the Development Bank of the Philippines (DBP) was the mortgagee of a parcel of land
(hereafter to be referred to as the "PROPERTY") covered by Transfer Certificate of Title No. T-151837 of the
Registry of Deeds for the Province of Laguna (Calamba Branch), more particularly described as follows:
A parcel of land (Lot 2-D-I-J of the subd. Plan Psd-39402, being a portion of Lot
2-D-1, described on plan Psd-18888, LRC (GLRO Rec. No. 9933, situated in the Bo. of
Mayapa & San Cristobal, Municipality of Calamba, Province of Laguna. Bounded on the
N.E. by Lot No. 2-D-1-I; of the subd. Plan; on the S., by the Provincial Road; on the SW.,
by Lot 2-D-1-K of the subd. plan and on the NW., by Lot No. 2-B of plan Psd-925.
Beginning at a point marked "1" on plan, being S. 62 deg. 03'W., 1946.22 from L.M. 5,
Calamba Estate; Thence — N. 64 deg. 35'E., 200.27 m. to point 2; S.21 deg. 03'E. 166.82
m. to point 3; S. 12 deg. 30'E, 141.01 m. to point 4; S. 10 deg. 25'E, 168.29 m. to point 5;
N. 84 deg. 47'W, 215.01 m. to point 6; N. 13 deg. 44'W., 150.99 m. Thence — to point 7;
N. 13 deg. 45'W., 27.66 m. to the point of beginning; containing an area of EIGHTY-NINE
THOUSAND SEVENTY (89,070) SQUARE METERS, more or less. All points referred to are
indicated on the plan and are marked on the ground by PLS. cyl. conc. mons. bearings
true detloop deg. 03'E., date of original survey Jan. 1906 — Jan. 1908 and Sept. 1913 and
that of subd. survey, Aug. 23-25, 1953. ETHIDa
[As per Tax Declaration No. 9114, an area of 29,690 sq. m. had been used (road-right-of-
way) for the South Expressway. The subject of this Deed of Absolute Sale, therefore, as
fully disclosed in the APT Asset Specific Catalogue, is the total useable area of 59,380 sq.
m.] 11
WHEREAS, the PROPERTY was subsequently acquired by DBP at public auction in a foreclosure
sale as evidenced by a Sheriff's Certificate of Sale dated September 6, 1985 issued by Mr. Godofredo E.
Quiling, Deputy Provincial Sheriff, Office of the Provincial Sheriff of Laguna, Philippines, x x x
WHEREAS, pursuant to Administrative Order No. 14 issued on February 3, 1987 [Approving the
Identification of and Transfer to the National Government of Certain Assets and Liabilities of the
Development Bank of the Philippines and the Philippine National Bank], DBP's ownership and interest over
the PROPERTY were transferred to the National Government through the ASSET PRIVATIZATION TRUST
(APT), a public trust created under Proclamation No. 50 dated December 8, 1986.
WHEREAS, in the public bidding conducted by the APT on June 30, 1987, the VENDEE [TGPI] made
the highest cash bid for the PROPERTY and was declared the winning bidder.
WHEREAS, the sale of the PROPERTY has been authorized by the COMMITTEE ON PRIVATIZATION
under Notice of Approval dated July 21, 1987 of the APT;
WHEREAS, the VENDEE [TGPI] has fully paid the VENDOR [Government of the Republic of the
Philippines, through APT] the purchase price of the PROPERTY in the amount of PESOS: TWO MILLION
TWO HUNDRED TWENTY-TWO THOUSAND NINE HUNDRED SIXTY-SEVEN (P2,222,967.00).
NOW, THEREFORE, for and in consideration of the above premises and for the sum of PESOS: TWO
MILLION TWO HUNDRED TWENTY-TWO THOUSAND NINE HUNDRED SIXTY-SEVEN (P2,222,967.00),
Philippine Currency, paid by the VENDEE to the VENDOR, the VENDOR does by these presents sell, transfer

87
 and convey the PROPERTY hereinabove described unto the VENDEE, its successors and assigns, subject to
the following conditions:
1. The VENDOR hereby warrant that the PROPERTIES shall be sold and transferred free
and clear of liens and encumbrances accruing before August 18, 1987, and that all taxes
or charges accruing or becoming due on the PROPERTIES before said date have or shall
be fully paid by the VENDOR;
2. Documentary Stamp Taxes, Transfer Taxes. Registration fees, and all other expenses
arising out of or relating to the execution and delivery of this Deed shall be for the
account of and paid by the VENDEE;
3. Capital gains tax, if any, payable on or in respect of the transfer of the PROPERTY to
the VENDEE shall be for the account of and paid by the VENDOR.
IN WITNESS WHEREOF, the parties hereto have caused these presents to be signed at Makati,
Metro Manila this [29th] day of [October], 1987. 12
As the Deed of Sale dated October 29, 1987 is very specific that the object of the sale is the 59,380. sq. m. portion
of the subject property, HI-LON cannot insist to have acquired more than what its predecessor-in-interest (TGPI) acquired
from APT. Article 1370 of the New Civil Code provides that if the terms of a contract are clear and leave no doubt upon the
intention of the contracting parties, the literal meaning of its stipulations shall control. Every contracting party is presumed
to know the contents of the contract before signing and delivering it, 13 and that the words used therein embody the will of
the parties. Where the terms of the contract are simple and clearly appears to have been executed with all the solemnities
of the law, clear and convincing evidence is required to impugn it. 14 Perforce, HI-LON's bare allegation that the object of the
Deed of Sale is the entire 89,070 sq. m. area of the subject property, is self-serving and deserves short shrift.
The Court thus agrees with the COA in rejecting HI-LON's claim of ownership over the 29,690 sq. m. RROW portion
of the subject property in this wise:
xxx xxx xxx
As clearly shown in the Abstract of Bids, the subject of the bidding was 59,380 sq. m. only. The
Deed of Sale expressly states that — cSEDTC
[As per Tax Declaration No. 9114, an area of 29,690 sq. m. had been used (road-right-of-
way) for the South Expressway. The subject of this Deed of Absolute Sale, therefore, as
fully disclosed in the APT Asset Specific Catalogue, is the total useable area of 59,380
sq. m.]
The government cannot enter into a contract with the highest bidder and incorporate substantial
provisions beneficial to the latter which are not included or contemplated in the terms and specifications
upon which the bids were solicited. It is contrary to the very concept of public bidding to permit an
inconsistency between the terms and conditions under which the bids were solicited and those under
which the bids were solicited and those under which proposals are submitted and accepted. Moreover, the
substantive amendment of the terms and conditions of the contract bid out, after the bidding process had
been concluded, is violative of the principles in public bidding and will render the government vulnerable
to the complaints from the losing bidders.
Thus, since the area of [29,690 sq. m. which later became] 26,997 sq. m. covered by the ROW was
not subject of the public bidding, Hi-Lon cannot validly acquire and own the same. The owner of this
property is still the Republic of the Philippines.
xxx xxx xxx. 15
Citing Bagatsing v. Committee on Privatization 16 where it was held that Proclamation No. 50 does not prohibit APT
from selling and disposing other kinds of assets whether they are performing or non-performing, necessary or appropriate,
HI-LON contends that regardless of whether or not the RROW is a performing or non-performing asset, it could not have
been excluded in the sale of the entire 89,070 sq. m. property pursuant to the said Proclamation.
Concededly, the 29,690 sq. m. portion of the subject property is not just an ordinary asset, but is being used as a
RROW for the Manila South Expressway Extension Project, a road devoted for a public use since it was taken in 1978. Under
the Philippine Highway Act of 1953, "right-of-way" is defined as the land secured and reserved to the public for highway
purposes, whereas "highway" includes rights-of-way, bridges, ferries, drainage structures, signs, guard rails, and protective
structures in connection with highways. 17 Article 420 of the New Civil Code considers as property of public dominion those
intended for public use, such as roads, canals, torrents, ports and bridges constructed by the state, banks, shores,
roadsteads, and others of similar character.

88
 Being of similar character as roads for public use, a road right-of-way (RROW) can be considered as a property of
public dominion, which is outside the commerce of man, and cannot be leased, donated, sold, or be the object of a
contract, 18 except insofar as they may be the object of repairs or improvements and other incidental matters. However, this
RROW must be differentiated from the concept of easement of right of way under Article 649 19 of the same Code, which
merely gives the holder of the easement an incorporeal interest on the property but grants no title thereto, 20 inasmuch as
the owner of the servient estate retains ownership of the portion on which the easement is established, and may use the
same in such a manner as not to affect the exercise of the easement. 21
As a property of public dominion akin to a public thoroughfare, a RROW cannot be registered in the name of private
persons under the Land Registration Law and be the subject of a Torrens Title; and if erroneously included in a Torrens Title,
the land involved remains as such a property of public dominion. 22 In Manila International Airport Authority v. Court of
Appeals, 23 the Court declared that properties of public dominion, being for public use, are not subject to levy,
encumbrance or disposition through public or private sale. "Any encumbrance, levy on execution or auction sale of any
property of public dominion is void for being contrary to public policy. Essential public services will stop if properties of
public dominion are subject to encumbrances, foreclosures and auction sale." 24
It is, therefore, inconceivable that the government, through APT, would even sell in a public bidding the 29,690 sq.
m. portion of the subject property, as long as the RROW remains as property for public use. Hence, HI-LON's contention that
the RROW is included in the Deed of Absolute Sale dated 29 October 1987, regardless whether the property is a performing
or non-performing asset, has no legal basis.
Neither can HI-LON harp on the express warranty in the Deed of Sale that the subject property is clear from any
encumbrance, and the lack of annotation of the government's claim of RROW on the TCTs of CIREC, PPIC and DBP covering
the subject property, to bolster its claim of having acquired ownership of such property in good faith.
There is no dispute as to the finding of COA Commissioner Juanito G. Espino and DPWH Officer-in-Charge Manuel
M. Bonoan based on the examination of land titles of the subject property that the entire 89,070 sq. m. area thereof was
never reduced in the process of seven (7) transfers of ownership from Emerito Banatin, et al., in 1971 to HI-LON in 1996, nor
was there an annotation of a RROW encumbrance on the TCTs of CIREC, PPIC, DBP and TGPI. Be that as it may, HI-LON
cannot overlook the fact that the RROW was taken upon the directive of the Ministry of Public Works and Highways in 1978
for the construction of the Manila South Expressway Extension project. Such public highway constitutes as a statutory lien
on the said TCTs, pursuant to Section 39 of the Land Registration Act (Act No. 496) and Section 44 of the Property
Registration Decree (Presidential Decree No. 1529): SDAaTC
Section 39. Every applicant receiving a certificate of title in pursuance of a decree of registration,
and every subsequent purchaser of registered land who takes a certificate of title for value in good faith,
shall hold the same free of all encumbrance except those noted on said certificate, and any of the
following encumbrances which may be subsisting, namely:
First. Liens, claims, or rights arising or existing under the laws or Constitution of the United States
or of the Philippine Islands which the statutes of the Philippine Islands cannot require to appear of record
in the registry.
Second. Taxes within two years after the same have become due and payable.
Third. Any public highway, way, or private way established by law, where the certificate of title
does not state that the boundaries of such highway or way have been determined. But if there are
easements or other rights appurtenant to a parcel of registered land which for any reason have failed to be
registered, such easements or rights shall remain so appurtenant notwithstanding such failure, and shall
be held to pass with the land until cut off or extinguished by the registration of the servient estate, or in
any other manner.
xxx xxx xxx
SECTION 44. Statutory Liens Affecting Title. — Every registered owner receiving a certificate of title in
pursuance of a decree of registration, and every subsequent purchaser of registered land taking a
certificate of title for value and in good faith, shall hold the same free from all encumbrances except those
noted in said certificate and any of the following encumbrances which may be subsisting, namely:
First. Liens, claims or rights arising or existing under the laws and Constitution of the
Philippines which are not by law required to appear of record in the Registry of Deeds in order to be valid
against subsequent purchasers or encumbrancers of record.
Second. Unpaid real estate taxes levied and assessed within two years immediately preceding the
acquisition of any right over the land by an innocent purchaser for value, without prejudice to the right of
the government to collect taxes payable before that period from the delinquent taxpayer alone.

89
 Third. Any public highway or private way established or recognized by law, or any government
irrigation canal or lateral thereof, if the certificate of title does not state that the boundaries of such
highway or irrigation canal or lateral thereof have been determined.
Fourth. Any disposition of the property or limitation on the use thereof by virtue of, or pursuant
to, Presidential Decree No. 27 or any other law or regulations on agrarian reform. 25
Section 39 of Act No. 496 and Section 44 of P.D. No. 1529 provide for statutory liens which subsist and bind the
whole world, even without the benefit of registration under the Torrens System. Thus, even if the TCTs of CIREC, PPIC, DBP
and TGPI contain no annotation of such encumbrance, HI-LON can hardly feign lack of notice of the government's claim of
ownership over the public highway built along the RROW, and claim to be an innocent purchaser for value of the entire
89,070 sq. m. subject property because such highway prompts actual notice of a possible claim of the government on the
RROW.
Given that prospective buyers dealing with registered lands are normally not required by law to inquire further than
what appears on the face of the TCTs on file with the Register of Deeds, it is equally settled that purchasers cannot close
their eyes to known facts that should have put a reasonable person on guard. 26 Their mere refusal to face up to that
possibility will not make them innocent purchasers for value, if it later becomes apparent that the title was defective, and
that they would have discovered the fact, had they acted with the measure of precaution required of a prudent person in a
like situation. 27 Having actual notice of a public highway built on the RROW portion of the subject property, HI-LON cannot
afford to ignore the possible claim of encumbrance thereon by the government, much less fail to inquire into the status of
such property.
Invoking the principle of estoppel by laches, HI-LON posits that the government's failure to assert its right of
ownership over the RROW by registering its claim on the titles of CIREC, PPIC, and DBP since the 29,690 sq. m. portion of the
property was converted to a RROW way back in 1978 until the purported sale of the entire 89,070 sq. m. property to TGPI in
1987, bars it from claiming ownership of the RROW because it slept over its rights for almost nine (9) years. HI-LON states
that if it were true that the government was convinced that it acquired the RROW, it would have lost no time in registering
its claim before the Register of Deeds, instead of surrendering to TGPI the owner's duplicate of TCT No. 151837 in the name
of DBP, to facilitate the issuance of a new title over the entire 89,070 sq. m. property, which includes the 29,690 sq. m.
RROW. HI-LON further claims that the government is estopped from claiming its alleged right of ownership of the RROW
because the DPWH itself offered to buy and, in fact, executed a Deed of Sale, thereby acknowledging that the RROW is a
private property owned by HI-LON. acEHCD
The failure of the government to register its claim of RROW on the titles of CIREC, PPIC, DBP and TGPI is not fatal to
its cause. Registration is the ministerial act by which a deed, contract, or instrument is inscribed in the records of the Office
of the Register of Deeds and annotated on the back of the TCT covering the land subject of the deed, contract, or
instrument. 28 It creates a constructive notice to the whole world and binds third persons. 29 Nevertheless, HI-LON cannot
invoke lack of notice of the government's claim over the 29,690 sq. m. RROW simply because it has actual notice of the
public highway built thereon, which constitutes as a statutory lien on its title even if it is not inscribed on the titles of its
predecessors-in-interest, CIREC, PPIC, DBP, and TGPI. Indeed, actual notice is equivalent to registration, because to hold
otherwise would be to tolerate fraud and the Torrens System cannot be used to shield fraud. 30
Meanwhile, the mistake of the government officials in offering to buy the 29,690 sq. m. RROW does not bind the
State, let alone vest ownership of the property to HI-LON. As a rule, the State, as represented by the government, is not
estopped by the mistakes or errors of its officials or agents, especially true when the government's actions are sovereign in
nature. 31 Even as this rule admits of exceptions in the interest of justice and fair play, none was shown to obtain in this
case. Considering that only 59,380 sq. m. of the subject property was expressly conveyed and sold by the government
(through APT) to HI-LON's predecessor-in-interest (TGPI), HI-LON has no legal right to claim ownership over the entire 89,070
sq. m. property, which includes the 29,690 sq. m. RROW taken and devoted for public use since 1978.
In arguing that the government had no legal title over the RROW, HI-LON points out that the government acquired
title thereto only in 2001 when a Deed of Sale was executed between HI-LON and the DPWH. HI-LON claims that when the
government used the 29,690 sq. m. portion of the subject property as RROW in 1978, it never acquired legal title because it
did not institute any expropriation proceeding, let alone pay the registered owner just compensation for the use thereof.
HI-LON's claim of ownership over the said RROW has been duly rejected by the COA in this manner:
xxx xxx xxx
By virtue of Administrative Order No. 14, s. 1987, pursuant to Section 23 of Proclamation No. 50,
the 89,070 sq. m. subject parcel of land, including the 29,690 sq. m. which had been used as ROW by the
Government, was transferred to and owned by the National Government. TG Property, Inc. cannot acquire
a portion of the parcel of land without authority and consent of the Philippine Government, being the
owner and seller of the said property. Hi-Lon cannot even claim ownership on the portion of the subject
land without the said deed of sale executed by the Government in favor of TG Property, Inc. The facts
90
 would show that the ROW has been the property of the Republic of the Philippines since its transfer
from DBP in 1987.
xxx xxx xxx 32
It bears emphasis that the right to claim just compensation for the 29,690 sq. m. portion which was not exercised
by CIREC or PPIC, ceased to exist when DBP acquired the entire 89,070 sq. m. property in a foreclosure sale and later
transferred it to the national government (through APT) in 1987, pursuant to Proclamation No. 50. Having consolidated its
title over the entire property, there is no more need for the government to initiate an action to determine just compensation
for such private property which it previously took for public use sans expropriation proceedings.
Citing Section 48 of P.D. 1529 which bars collateral attack to certificates of title, HI-LON asserts that COA erred in
ruling that there was no property owned by HI-LON that was taken by the government for public use, despite the fact that:
(a) the ownership of the subject property was not raised before the Commission Proper of the COA; and (b) COA has no
jurisdiction over issues of ownership and entitlement to just compensation. HI-LON stresses that the titles issued to TGPI and
HI-LON conclusively show that they are the registered owners of the entire 89,070 sq. m. property in Calamba, Laguna,
including the 29,690 sq. m. RROW. Absent any proceeding directly assailing the said titles, the ownership of the said
property by HI-LON and TGPI is beyond dispute. HI-LON further states that Leoncio Lee Tek Sheng v. Court of Appeals 33 cited
by the OSG is inapplicable because a notice of lis pendens was annotated on the title subject of the case, unlike the titles of
TGPI and HI-LON which contain no annotation of claims of ownership by the Republic.
Suffice it to state that there is no merit in HI-LON's argument that the TCTs issued in its name and that of its
predecessor-in-interest (TGPI) have become incontrovertible and indefeasible, and can no longer be altered, cancelled or
modified or subject to any collateral attack after the expiration of one (1) year from the date of entry of the decree of
registration, pursuant to Section 32 of P.D. No. 1529. In Heirs of Clemente Ermac v. Heirs of Vicente Ermac, 34 the Court
clarified the foregoing principle, viz.:
x x x While it is true that Section 32 of PD 1529 provides that the decree of registration becomes
incontrovertible after a year, it does not altogether deprive an aggrieved party of a remedy in law. The
acceptability of the Torrens System would be impaired, if it is utilized to perpetuate fraud against the real
owners. SDHTEC
Furthermore, ownership is not the same as a certificate of title. Registering a piece of land under
the Torrens System does not create or vest title, because registration is not a mode of acquiring ownership.
A certificate of title is merely an evidence of ownership or title over the particular property described
therein. Its issuance in favor of a particular person does not foreclose the possibility that the real property
may be co-owned with persons not named in the certificate, or that it may be held in trust for another
person by the registered owner. 35
In Lacbayan v. Samoy, Jr., 36 the Court noted that what cannot be collaterally attacked is the certificate of title, and
not the title itself:
x x x The certificate referred to is that document issued by the Register of Deeds known as the
TCT. In contrast, the title referred to by law means ownership which is, more often than not, represented
by that document. x x x Title as a concept of ownership should not be confused with the certificate of title
as evidence of such ownership although both are interchangeably used.
In Mallilin, Jr. v. Castillo, 37 the Court defined collateral attack on the title, as follows:
x x x When is an action an attack on a title? It is when the object of the action or proceeding is to
nullify the title, and thus challenge the judgment pursuant to which the title was decreed. The attack is
direct when the object of an action or proceeding is to annul or set aside such judgment, or enjoin its
enforcement. On the other hand, the attack is indirect or collateral when, in an action to obtain a different
relief, an attack on the judgment is nevertheless made as an incident thereof. 38
In this case, what is being assailed by the COA when it sustained the Notice of Disallowance for payment of just
compensation is HI-LON's claim of ownership over the 29,690 sq. m. portion of the property, and not the TCT of TGPI from
which HI-LON derived its title. Granted that there is an error in the registration of the entire 89,070 sq. m. subject property
previously in the name of TGPI under TCT No. 156786 39 and currently in the name of HI-LON under TCT No. T-
383819 40 because the 29,690 sq. m. RROW portion belonging to the government was mistakenly included, a judicial
pronouncement is still necessary in order to have said portion excluded from the Torrens title. 41
HI-LON's assertion that the titles issued to TGPI and HI-LON conclusively show that they are the registered owners
of the entire 89,070 sq. m. property in Calamba, Laguna, including the 29,690 sq. m. RROW is anathema to the purpose of
the Torrens System, which is intended to guarantee the integrity and conclusiveness of the certificate of registration, but
cannot be used for the perpetration of fraud against the real owner of the registered land. 42 On point is the case
of Balangcad v. Court of Appeals 43 where it was held that "the system merely confirms ownership and does not create it.
91
Certainly, it cannot be used to divest the lawful owner of his title for the purpose of transferring it to another who has not
acquired it by any of the modes allowed or recognized by law. Where such an erroneous transfer is made, as in this case, the
law presumes that no registration has been made and so retains title in the real owner of the land."
It is also not amiss to cite Ledesma v. Municipality of Iloilo 44 where it was ruled that "if a person obtains title,
under the Torrens system, which includes, by mistake or oversight, lands which cannot be registered under the Torrens
system, he does not, by virtue of said certificate alone, become the owner of the land illegally included." Inasmuch as the
inclusion of public highways in the certificate of title under the Torrens system does not thereby give to the holder of such
certificate said public highways, 45 the same holds true with respect to RROWs which are of similar character as roads for
public use.
Assuming arguendo that collateral attack of said titles are allowed, HI-LON claims that its right of ownership of the
subject RROW can no longer be assailed by the COA because it never questioned such right until after it denied the petition
for review. HI-LON notes that ND No. 2004-032 was issued and it was denied payment of just compensation for the RROW
solely on the ground that such compensation should be based on the value of the lot at the time of the actual taking by the
government in 1978. HI-LON avers that it was surprised to find out that in the Decision dated 20 January 2011, the COA
Commission Proper assailed for the first time TGPI's and HI-LON's right of ownership over the RROW, instead of merely
finding whether or not the valuation of the property should be based on the value at the time of the taking in 1978 or the
value of the P2,500.00/sq. m.
HI-LON's arguments fail to persuade.
COA may delve into the question of ownership although this was not an original ground for the issuance of the
Notice of Disallowance, but only the proper valuation of the just compensation based on the date of actual taking of the
property. In Yap v. Commission on Audit, 46 the Court ruled that "COA is not required to limit its review only to the grounds
relied upon by a government agency's auditor with respect to disallowing certain disbursements of public funds. In
consonance with its general audit power, respondent COA is not merely legally permitted, but is also duty-bound to make its
own assessment of the merits of the disallowed disbursement and not simply restrict itself to reviewing the validity of the
ground relied upon by the auditor of the government agency concerned. To hold otherwise would render the COA's vital
constitutional power unduly limited and thereby useless and ineffective." Tasked to be vigilant and conscientious in
safeguarding the proper use of the government's, and ultimately the people's property, the COA is endowed with enough
latitude to determine, prevent, and disallow irregular, unnecessary, excessive, extravagant or unconscionable expenditures
of government funds. 47 AScHCD
It is the policy of the Court to sustain the decisions of administrative authorities, especially one that was
constitutionally created like herein respondent COA, not only on the basis of the doctrine of separation of powers, but also
of their presumed expertise in the laws they are entrusted to enforce. 48 Considering that findings of administrative
agencies are accorded not only respect but also finality when the decision and order are not tainted with unfairness or
arbitrariness amounting to grave abuse of discretion, it is only when the COA acted with such abuse of discretion that the
Court entertains a petition for certiorari under Rule 65 of the Rules of Court. 49
Grave abuse of discretion implies such capricious and whimsical exercise of judgment as is equivalent to lack of
jurisdiction or, in other words, the exercise of the power in an arbitrary manner by reason of passion, prejudice, or personal
hostility; and it must be so patent or gross as to amount to an evasion of a positive duty or to a virtual refusal to perform the
duty enjoined or to act at all in contemplation of law. 51 No grave abuse of discretion can be imputed against the COA when
it affirmed the Notice of Disallowance issued by the LAO-N in line with its constitutional authority 52 and jurisdiction over
cases involving "disallowance of expenditures or uses of government funds and properties found to be illegal, irregular,
unnecessary, excessive, extravagant or unconscionable." 53 Having determined that HI-LON does not own the disputed
RROW, the COA correctly ruled that HI-LON is not entitled to payment of just compensation and must accordingly refund the
partial payment made by the DPWH in the amount of P10,461,338.00. To stress, even if HI-LON is the registered owner of
the subject property under TCT No. T-383819 with an area of 89,070 sq. m., the Deed of Absolute Sale dated 29 October
1987 clearly shows that only the 59,380 sq. m. portion of the subject property, and not 29,690 sq. m. portion used as RROW,
was sold and conveyed by the government (through APT) to HI-LON's immediate predecessor-in-interest (TGPI).
In light of the foregoing disquisition, HI-LON's prayer for issuance of Temporary Restraining Order and/or Writ of
Injunction must necessarily be denied for lack of clear and unmistakable right over the disputed 29,690 sq. m. portion of the
subject property.
Lastly, from the finality of the Court's decision until full payment, the total amount to be refunded by HI-LON shall
earn legal interest at the rate of six percent (6%) per annum pursuant to Bangko Sentral ng Pilipinas Monetary Board Circular
No. 799, Series of 2013, because such interest is imposed by reason of the Court's decision and takes the nature of a judicial
debt. 54
WHEREFORE, premises considered, the Petition for Certiorari is DENIED for lack of merit, and the Commission on
Audit Decision No. 2011-003 dated January 20, 2011 and Decision No. 2013-212 dated December 3, 2013 are AFFIRMED
92
 with MODIFICATION that a legal interest of six percent (6%) per annum from the finality of this Decision until fully paid, is
imposed on the amount of P10,461,338.00 that HI-LON Manufacturing Co., Inc. is required to refund to the Department of
Public Works and Highways.
SO ORDERED.
||| (Hi-Lon Manufacturing, Inc. v. Commission on Audit, G.R. No. 210669, [August 1, 2017])

93
 THIRD DIVISION

[G.R. No. 231053. April 4, 2018.]

DESIDERIO DALISAY INVESTMENTS, INC., petitioner, vs. SOCIAL SECURITY SYSTEM, respondent.

DECISION

VELASCO, JR., J p:

The Case

This Petition for Review on Certiorari under Rule 45 of the Rules of Court seeks the reversal and setting aside of the
August 12, 2016 Decision 1 and March 10, 2017 Resolution of the Court of Appeals (CA) in CA-G.R. CV No. 03233-MIN.

The Facts

Involved is a parcel of land covered by Transfer Certificate of Title (TCT) Nos. T-18203, T-18204, T-255986, and T-
255985, with an aggregate area of 2,450 sq.m., including the building erected thereon, situated in Agdao, Davao City.
Sometime in the year 1976, respondent Social Security System (SSS) filed a case before the Social Security
Commission (SSC) against the Dalisay Group of Companies (DGC) for the collection of unremitted SSS premium contributions
of the latter's employees. The said cases are: (1) SSS v. Desiderio Dalisay Investments, Inc. (SSC Case No. 6414); (2) SSS v.
Desidal Fruits Corporation (SSC Case No. 6415); and (3) SSS v. Davao Stevedore Terminal Co., Inc. (SSC Case No. 6416). 2
On March 11, 1977, Desiderio Dalisay, then President of petitioner Desiderio Dalisay Investments, Inc. (DDII), sent a
Letter to SSS offering the subject land and building to offset DGC's liabilities subject of the aforementioned cases at
P3,500,000. 3 The parties, however, failed to arrive at an agreement as to the appraised value thereof. Thus, no negotiation
took place.
Later, or on December 15, 1981, Desiderio Dalisay sent another Letter seeking further negotiation with SSS by
recommending that the appraisal be done by Asian Appraisal, Co., Inc. 4 SSC agreed, but it later turned out that Asian
Appraisal, Inc. did not respond to Dalisay's request. Thus, Atty. Honesto Cabarroguis, DGC's lawyer, suggested that the
appraisal be done by Joson, Capili and Associates instead. The suggestion was later approved. 5
On July 24, 1982, DDII's Special Board of Directors issued a Resolution stating that the properties covered by TCT
Nos. T-18204 and T-8227 6 together with all improvements thereon be sold to SSS in order to settle the unremitted
premiums and penalty obligations of DDII, Davao Stevedore Terminal Co., and Desidal Fruits, Inc. In the same Board
Resolution, Desiderio Dalisay, or in his absence, Veronica Dalisay-Tirol (Dalisay-Tirol), was authorized to sign in behalf of the
corporation any and all papers pertinent to effect full and absolute transfer of said properties to the SSS. 7
On May 21, 1982, the real estate appraisers Joson, Capili and Associates, whose services Dalisay engaged for the
purpose of appraising the value of the properties being offered to SSS, sent a letter 8 to him informing him that the total
value of the lots is One Million Nine Hundred Fifty Four Thousand Seven Hundred Seventy-Seven & 78/100 (P1,954,777.78),
rounded to P1,955,000. 9 This Appraisal Report was then indorsed to the SSC. 10 CAIHTE
On May 27, 1982, during a meeting (1982 Meeting) of the SSS' Committee on Buildings, Supplies and Equipment
(Committee) attended by Atty. Cabarroguis, the latter, representing DGC, explained that the DGC is in financial distress and is
in no way capable of settling its obligation in cash. 11 When asked what the DGC's offer is, he stated that he has "the
authority to offer [the properties] in the amount of 2 million pesos." 12 He also assured them that that they will turn the
properties over to SSS free of liens and encumbrances. 13 The offer for dación was accepted at the appraised value of
P2,000,000. As regards the implementation of the dación, Atty. Cabarroguis stated that "[t]he Legal Department of the SSS
can prepare the Deed of Sale or whatever documents that have to be prepared. My clients are ready to vacate the premises

94
and you can have it occupied anytime." 14 During the same Meeting, Atty. Cabarroguis likewise relayed to SSS that they are
requesting that the P2,000,000 amount be applied first to the unpaid premiums and the excess be used to settle part of the
penalties due. 15
On May 28, 1982, DDII's total liabilities with SSS covering unpaid premium contributions, inclusive of penalties and
salary/calamity loan amortizations, amounted to P4,421,321.62. 16
On June 9, 1982, the SSC issued Resolution No. 849-s. 82. 17 In said Resolution, it accepted DDII's proposed dacion
en pago pegged at the appraised value of P2,000,000. Said Resolution reads:
On motion duly seconded,
RESOLVED, that the acceptance of the offer of the Dalisay Group of Companies to offset their
outstanding liabilities with the SSS with their lot and building at Davao City valued at 2M, as recommended
by the SSC Committee on Building, Supplies and Equipment, be, as it is hereby, approved and confirmed,
subject to the terms and conditions contained in the Memorandum, dated June 8, 1982, of the Executive
Officer of the said Committee.
RESOLVED FURTHER, That the following additional conditions be, as they are hereby, imposed:
1. That part of tge (sic) 2M is to be applied to its outstanding educational/salary loans obligations;
2. That the criminal cases against the Dalisay Group of companies shall not be withdrawn as the
penalties are not being paid in full and it is up to them to make the necessary
representations with the Fiscal's Office. 18
The SSC then informed DDII of its acceptance of the proposed dation in payment, including its specified terms and
conditions, via a Letter dated June 17, 1982. 19 Said Letter 20 reads:
We are pleased to inform you that pursuant to Resolution No. 849 dated June 9, 1982, the Social
Security Commission approved and confirmed the acceptance of the offer of your client, the Dalisay Group
of Companies, that they be allowed to offset their outstanding liabilities with the SSS with their property
(lot and building), as described in the offer, at Davao City valued at P2 million, subject to the following
terms and conditions:
1. The P2 million consideration in this transaction shall be applied first to the premium contribution
in arrears which amounts to P1.5 million, more or less, and whatever amount in excess of
the P2 million after premium contribution shall then be applied to the payment of
penalties.
2. Part of the P2 million shall also be applied to its outstanding education/salary loan obligations.
3. The criminal cases against the Dalisay Group of Companies shall not be withdrawn as the
penalties have not as yet been valid (sic) in full and it is up to them to make the necessary
representations with the Fiscal's Office.
May we invite you, therefore, to sit down with us for the preparation of the documents
preparatory to the final transfer of the titles of the properties to the SSS.
On July 8, 1982, Dalisay-Tirol, then Acting President and General Manager of Dalisay Investment, informed SSS that
the company is preparing the subject property, especially the building, for its turnover on August 15, 1982. 21 Said Letter
reads:
We are pleased to advise you that by August 15, 1982, we will already transfer to the next
building. Desidal Building will already be available for you to prepare for you own transfer. The delay is
cause by the preparation we have to make for the transfer of our office equipment and records.
Kindly, send somebody on August 15th, so we can effect the proper turnover of the building to
you. 22
Later, or on July 31, 1982, An Affidavit of Consent for the Sale of Real Property was executed by the surviving heirs
of the late Regina L. Dalisay, stating that in order to settle the companies' obligations to SSS, they expressly agree to the sale
thereof to the SSS for its partial settlement. 23 DETACa
On September 18, 1989, Desiderio Dalisay passed away.
As of November 30, 1995, the company's total obligations allegedly amounted to P15,689,684.93. 24
Later, or on December 29, 1995, the Philippine National Bank (PNB) executed a Deed of Confirmatory Sale in favor
of DDII for properties that it reacquired, including the property subject of the present dispute.

95
 On March 20, 1998, Eddie A. Jara (Jara), Assistant Vice-President of the SSS-Davao I Branch, executed an Affidavit of
Adverse Claim 25 over the properties subject of the instant case because of the companies' failure to turn over the
certificates of title to SSS.
Then, on April 2, 1998, Jara sent a letter to Dalisay-Tirol, formally demanding the certificates of title over the
properties subject of the dación. 26 In said letter, Jara stated that "[t]he mortgage with PNB has already been settled by
Desiderio Dalisay Investments, Inc. last January 20, 1994, but the titles were not delivered to the SSS in violation of the
express terms in the dation in payment that the Dalisay group should deliver the titles after the release of the mortgage with
the PNB." 27
In her reply dated May 5, 1998 to the April 2, 1998 Letter, Dalisay-Tirol, who was then the President of DDII, stated
that the corporation could not at that time give due course to and act on the matter because of several issues that need to
be resolved first, including two cases involving the subject properties, to wit: (1) the properties are being claimed by the
estate of Desiderio F. Dalisay, Sr. and included in the inventory already filed by the executrix, where the corporation's
stockholders are contesting said inclusion; and (2) the SSS' pending petition covering the properties where the accuracy and
propriety of the amount of P15,605,079.25 contained therein has yet to be substantiated and verified. 28 She likewise
pointed out that the "Board Resolution covers only two (2) parcels of land which were proposed and submitted for the
purpose of a negotiated sale to settle unremitted premiums and penalties." 29
On November 18, 1999, DDII, through its Managing Director Edith L. Dalisay-Valenzuela (Dalisay-Valenzuela), wrote
a letter addressed to SSS President and Chief Executive Officer Carlos A. Arellano, requesting the reevaluation and
reconsideration of their problem. 30 In said Letter, DDII requested the following:
1) Condonation of penalties and interest or accrual of rentals for offsetting against the penalties, interest and
principal;
2) Payment of original liabilities for unpaid premiums of P4,421,321.62;
3) Return of the property to DDII; and
4) Withdrawal of claim against the Estate of Desiderio F. Dalisay, Sr. 31
On January 18, 2000, DDII issued a Letter to SSS proposing the "offset of SSS obligations with back rentals on
occupied land and building of the obligor." It alleged that SSS is bound to pay back rentals totaling P34,217,988.19 32 for its
use of the subject property from July 1982 up to the present. It likewise demanded for the return of the said property. 33
Meanwhile, despite repeated written and verbal demands made by SSS for DDII to deliver the titles of the subject
property, free from all liens and encumbrances, DDII still failed to comply.
On October 8, 2002, DDII filed a complaint for Quieting of Title, Recovery of Possession and Damages against SSS
with the Regional Trial Court (RTC), Branch 14, in Davao City, docketed as Civil Case No. 29, 353-02.
In said complaint, DDII asserted that it is the owner of the subject property. It averred that when SSS filed the
abovementioned cases, the late Desiderio Dalisay, during his lifetime and as president of the company, offered the property
appraised at P3,500,000 to SSS for the offsetting of said amount against DGC's total liability to SSS. SSS accepted such but
only in the amount of P2,000,000 and subject to certain conditions. It also insists that while negotiations with SSS were still
ongoing, it decided to vacate the subject property in favor of SSS to show goodwill on its part. Unfortunately, the
negotiations were not fruitful as they failed to agree on the terms and conditions set forth by SSS. Furthermore, DDII insists
that Atty. Cabarroguis' alleged acceptance of the proposals of SSS was not covered by any Board Resolution or Affidavit of
Consent by the corporate and individual owners of the properties. Thus, according to DDII, there was no meeting of the
minds between the parties. Consequently, there was no dation in payment to speak of, contrary to the claim of SSS. With
these, DDII asserted that SSS owes it P43,208,270.99 as back rentals for its use of the property from 1982 onwards. It also
prayed for attorney's fees and costs of litigation. 34
In its Answer, SSS argued that the offer for dacion was categorically accepted by SSS, thereby perfecting such. 35

RTC Judgment

On July 22, 2010, the RTC resolved the case in favor of DDII, holding that there was no perfected dation in payment
between the parties. Consequently, SSS has no legal personality to own, possess, and occupy the property. The dispositive
portion thereof reads: aDSIHc
WHEREFORE, judgment is hereby rendered as follows:

96
 a) Declaring [DDII] as the true and absolute owner of the properties covered by TCT Nos. T-18203, T-
18204, T-255986 and T-255985, free from all liens and encumbrances, and that [SSS] has no
right or interest over the same whatsoever;
b) Ordering the Registrar, Registry of Deeds, Davao City, to cancel the adverse claims caused by [SSS]
to be annotated on the foregoing [TCTs];
c) Ordering [SSS] to pay [DDII] the reasonable amount of P50,000.00 a month for the use and
continued occupation by [SSS] of the subject properties reckoned from the date of [DDII's]
demand to vacate on June 6, 2002 until [SSS] vacates the subject properties;
d) Ordering [SSS] to turn over the possession and occupation of the properties to [DDII] in peace,
there being no perfected dation in payment or dacion en pago;
e) Ordering [SSS] to reimburse [DDII] the sum of P100,000.00 as attorney's fees; and
f) To pay the cost.
SO ORDERED. 36
Ruling in favor of DDII, the RTC found that the June 8, 1982 Memorandum is not an acceptance of DDII's offer for
the reason that it contained terms and conditions — a qualified acceptance which amounts to a counter-offer. 37 The RTC
further noted that there is no iota of proof that said counter-offer was accepted by DDII. 38
As to the contention of SSS that the turnover of the properties in its favor shows that there was, indeed, a perfected
dation in payment, the RTC ruled that said transfer of possession was not tantamount to delivery as an element of a contract
of sale which transmits ownership of the thing from the vendor to the vendee. The RTC likewise noted that the June 8, 1982
Memorandum included a provision on automatic cancellation of its supposed acceptance of Dalisay's offer if, for any reason,
the offsetting cannot be implemented. Correlating this with SSS' non-receipt of the certificates of title to the property, the
RTC ruled that SSS' supposed acceptance was thereby automatically cancelled effective June 8, 1982 — the date of the
Memorandum containing the provision on automatic cancellation. This being the case, the trial court held, SSS' occupation
of the property on July 24, 1982, a month after its acceptance was automatically cancelled, has no leg to stand on. 39 It was,
therefore, only by mere tolerance which tolerance ended when DDII made a demand for SSS to vacate the premises on June
6, 2002. 40
Its motion for reconsideration having been denied by the RTC in its September 20, 2010 Order, 41 SSS appealed the
case to the CA.

CA Ruling

Finding merit in the appeal, the CA reversed the RTC's ruling, disposing of the appeal in this wise:
WHEREFORE, the appealed Decision of the [RTC], Branch 14, Davao City, in Civil Case No. 29,353-
02 is REVERSED and SET ASIDE insofar as it granted the complaint for quieting of title, recovery of
possession and damages in favor of [DDII], and the said complaint is hereby DISMISSED for lack of merit.
No pronouncement as to costs.
SO ORDERED. 42
According to the CA, the pivotal issue in the appeal is whether there was a perfected dation in payment, in which it
ruled in the affirmative.
The CA held that the records establish that DGC has an outstanding obligation in favor of SSS that it proposed to pay
the amount via dacion en pago, said offer was categorically accepted by SSS, and the agreement was consummated by DDII's
delivery of the property to SSS. 43
As to DDII's argument that the acceptance by SSS included certain conditions, this, according to the appellate court,
is inconsequential because its acceptance was unequivocal and absolute. In this respect, it held that dation in payment being
in the nature of a contract of sale, the principle that a deed of sale is considered absolute where there is neither a
stipulation in the deed that title to the property sold is reserved in the seller until full payment thereof, nor one giving the
vendor the right to unilaterally resolve the contract the moment the buyer fails to pay within a fixed period, applies to the
instant dispute. The CA, thus, concluded that applying said principle, the contract of sale or dacion between the parties is
absolute, not conditional. To be sure, the CA said, there is no reservation of ownership of the subject property or a
stipulation providing for unilateral rescission by either party. In fact, according to the CA, the sale was consummated upon
the delivery of the subject property to SSS. 44

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 Anent the stipulations in the June 17, 1982 letter of the SSS according to the CA, the conditions were not of a
nature that would affect the efficacy of the contract of sale. It, the CA said, merely provided the manner by which the full
consideration is to be applied to DDII's liability and the implication of the payment vis-à-vis the pending criminal cases filed
against DDII. 45
The CA, thus, ruled that all the requisites for a valid dation are present. The sale and transfer of the subject
property in favor of SSS are valid and binding against DDII.
The CA went on to state that even assuming that the dation is defective, said defect is immaterial due to DDII's
inaction which lasted for 20 years. 46 Applying the principle of laches, DDII's failure to assert its rights over the property
against SSS for 20 years since its consummation bars it from recovering the subject property. 47
With respect to the award of attorney's fees, the CA held that such is improper, 48 there being no factual, legal, or
equitable justification for the award of attorney's fees in favor of DDII. As regards the award of litigation expenses, the CA
likewise deleted such for lack of factual or legal justification therefor. 49
Its Motion for Reconsideration having been denied by the CA in its March 10, 2017 Resolution, 50 DDII now comes
before this Court for relief.

The Issues

I. Whether or not there was a perfected "Dacion en Pago"

II. Whether or not the fact that the Transfer Certificates of Title over the subject properties remained in the name of
the petitioner is a strong indicium that the parties remained in the preparatory stage of contract-making
III. Whether or not the prescriptive period to file the action had already prescribed
IV. Whether or not petitioner slept on its rights that would warrant the imposition of laches.
The pivotal issue in the instant case is whether or not there was a perfected dacion en pago; and if answered in the
affirmative, whether or not SSS validly acquired title or interest over the subject properties. This is so since if there was a
perfected dación and if title or interest over the property was transferred to SSS, then an action for quieting of title filed by
DDII would not prosper since SSS has a legitimate interest and claim over the properties subject of the case.
In the present petition, DDII argues that its offer to SSS contained in the December 15, 1981 letter was never
categorically accepted by the latter. 51 For DDII, the seemingly unambiguous language of the SSS' Memorandum is, in truth,
a rejection of its offer, it being a qualified acceptance thereof. It maintains that for there to be an acceptance of the offer, it
should be identical in all respects and must not contain any modification or variation from the terms of the offer. 52
Furthermore, petitioner claims, no document or instrument proving that it accepted SSS' counter-offer exists, as it,
in fact, remains unaddressed. 53
Moreover, DDII points out that in SSS' Brief, it admitted that it indeed made a counter-offer to DDII, although it
insists that DDII accepted said counter-offer. 54 In this respect, DDII maintains that contrary to SSS' position that it impliedly
accepted the counter-offer by turning over to SSS the possession and occupation of the property, said turnover was done
not because it is accepting the counter-offer but to show goodwill in the negotiations. 55
To further bolster its claim, DDII argues that the fact that the TCTs over the property remain in the name of the
original owner clearly indicates that no dation in payment ever occurred. 56 ETHIDa
As to the CA's ruling that DDII's claim is barred by laches, it posits that the cause of action did not arise when the
possession of the property was transferred to SSS. 57 According to it, the transfer being a show of goodwill, there was, at
that time, no threat against its title over the property that would prompt DDII to seek redress from the courts and
commence the running of the prescriptive period. DDII maintains that the reason why it took a long time before it sought
the removal of a cloud in its title is because it was under the impression that no offsetting took place and that SSS was
merely in physical possession thereof. 58
In our January 31, 2018 Resolution, We required SSS to file its Comment on the petition within a non-extendible
period of 10 days. But as of this date, the SSS has yet to file said Comment. In view of the fact that the previous pleadings of
the SSS sufficiently allow Us to decide the instant dispute, We resolve to dispense with the SSS' Comment and decide the
case based on the records.

Our Ruling

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 We resolve to deny the petition.
Article 476 of the Civil Code provides:
Art. 476. Whenever there is a cloud on title to real property or any interest therein, by reason of
any instrument, record, claim, encumbrance or proceeding which is apparently valid or effective but is in
truth and in fact invalid, ineffective, voidable, or unenforceable, and may be prejudicial to said title, an
action may be brought to remove such cloud or to quiet the title.
An action may also be brought to prevent a cloud from being cast upon title to real property or
any interest therein.
For an action to quiet title to prosper, two indispensable requisites must concur, namely: (1) the plaintiff or
complainant has a legal or an equitable title to or interest in the real property subject of the action; and (2) the deed, claim,
encumbrance, or proceeding claimed to be casting cloud on his title must be shown to be in fact invalid or inoperative
despite its prima facie appearance of validity or legal efficacy. 59
Here, the presence or absence of these two requisites is hinged on the question of whether or not the
proposed dacion en pago was indeed perfected, thereby vesting unto SSS a legitimate title and interest over the properties
in question. In other words, if it can be proved that the proposed dación was perfected, or even consummated, then SSS'
claim which allegedly casts a cloud on DDII's title is valid and operative, and consequently, the action for quieting of title filed
by DDII will not prosper.
Dación en pago

Among other modes, an obligation is extinguished by payment or performance. 60 There is payment when there is
delivery of money or performance of an obligation. 61 Corollary thereto, Article 1245 of the Civil Code provides for a special
mode of payment called dation in payment (dación en pago).
In dación en pago, property is alienated to the creditor in satisfaction of a debt in money. 62 The debtor delivers
and transmits to the creditor the former's ownership over a thing as an accepted equivalent of the payment or performance
of an outstanding debt. 63 In such cases, Article 1245 provides that the law on sales shall apply, since the undertaking really
partakes — in one sense — of the nature of sale; that is, the creditor is really buying the thing or property of the debtor, the
payment for which is to be charged against the debtor's obligation. 64
As a mode of payment, dación en pago extinguishes the obligation to the extent of the value of the thing delivered,
either as agreed upon by the parties or as may be proved, unless the parties by agreement — express or implied, or by their
silence — consider the thing as equivalent to the obligation, in which case the obligation is totally extinguished. 65 It
requires delivery and transmission of ownership of a thing owned by the debtor to the creditor as an accepted equivalent of
the performance of the obligation. There is no dation in payment when there is no transfer of ownership in the creditor's
favor, as when the possession of the thing is merely given to the creditor by way of security. 66
In the case at hand, in order to determine whether or not there was indeed a perfected, or even consummated,
dation in payment, it is necessary to review and assess the evidence and events that transpired and see whether these
correspond to the three stages of a contract of sale. This is so since, as previously mentioned, dación en pago agreements
are governed, among others, by the law on sales.
Stages of a contract of sale

Briefly, the stages of a contract of sale are: (1) negotiation, covering the period from the time the prospective
contracting parties indicate interest in the contract to the time the contract is perfected; (2) perfection, which takes place
upon the concurrence of the essential elements of the sale, which is the meeting of the minds of the parties as to the object
of the contract and upon the price; and (3) consummation, which begins when the parties perform their respective
undertakings under the contract of sale, culminating in the extinguishment thereof. 67 Each shall hereinafter be discussed in
seriatim.
First Stage: Negotiation
Offer validly reduced
To recall, the negotiation stage covers the period from the time the prospective contracting parties indicate interest
in the contract to the time the contract is perfected. This then includes the making of an offer by one party to another and
ends when both parties agree on the object and the price.
In the instant case, the late Desiderio Dalisay, on March 11, 1977, offered to SSS that they partially settle their
obligations to the latter via dación. Dalisay offered several properties for P3,500,000 in favor of SSS to partially extinguish
petitioner's obligation which amounted to P4,421,321.62. 68

99
 Then, years later or on May 27, 1982, the SSS' Committee met with the corporation, represented by Atty.
Cabarroguis. During said meeting, Atty. Cabarroguis explained that he has "the authority to offer [the properties] in the
amount of 2 million pesos." 69 He also gave them an assurance that that they will turn the properties over to SSS free of
liens and encumbrances, 70 and that his clients are ready to vacate the premises and you can have it occupied anytime. 71
In this respect, petitioner argues that Atty. Cabarroguis did not have the requisite authority to make said
representations and thereby bind the corporation. DDII thus maintains that the offer to SSS remained at P3,500,000. We beg
to disagree.
While petitioner is correct that there is no evidence of Atty. Cabarroguis' authority to represent the company in said
meeting, this however is outweighed by the fact that no one questioned Atty. Cabarroguis' representations and authority
after the conclusion of the negotiations; and that a few days after the said meeting, the company immediately arranged for
the property's turnover through Dalisay-Tirol, Acting President and General Manager, and eventually delivered possession
thereof to SSS.
What makes matters worse for petitioner is that it was well aware of what transpired during the meeting and the
agreements reached. In fact, after the SSC issued Resolution No. 849-s. 82 where it accepted DDII's proposed dacion en
pago at P2,000,000, 72 it sent a Letter dated June 17, 1982, communicating that:
We are pleased to inform you that pursuant to Resolution No. 849 dated June 9, 1982, the Social
Security Commission approved and confirmed the acceptance of the offer of your client, the Dalisay Group
of Companies, that they be allowed to offset their outstanding liabilities with the SSS with their property
(lot and building), as described in the offer, at Davao City valued at P2 million, subject to the following
terms and conditions:
1. The P2 million consideration in this transaction shall be applied first to the premium contribution
in arrears which amounts to P1.5 million, more or less, and whatever amount in excess of
the P2 million after premium contribution shall then be applied to the payment of
penalties.
2. Part of the P2 million shall also be applied to its outstanding education/salary loan
obligations. cSEDTC
3. The criminal cases against the Dalisay Group of Companies shall not be withdrawn as the
penalties have not as yet been valid (sic) in full and it is up to them to make the necessary
representations with the Fiscal's Office.
May we invite you, therefore, to sit down with us for the preparation of the documents
preparatory to the final transfer of the titles of the properties to the SSS. 73
We emphasize that it is only now, in this action for quieting of title filed decades after the conclusion of the 1982
Meeting, that DDII questioned Atty. Cabarroguis' authority to represent the corporation. If it were true that Atty. Cabarroguis
did not possess the requisite authority to represent the company in said Meeting, then it could have opposed such,
contested his presence thereat, or even deny that the corporation is reducing its offer to P2,000,000. Unfortunately for
petitioner, despite knowledge thereof, there is no evidence manifesting any opposition thereto.
This acquiescence to Atty. Cabarroguis' representations and authority to do so is strengthened by the fact that a few
days after the conclusion of the meeting, the company's Vice-President at that time, Dalisay-Tirol, sent a Letter dated July 8,
1982, informing the SSS that they will be vacating the premises offered and will turn over the possession thereof to SSS,
consistent with what was agreed upon during said meeting. Thus:
We are pleased to advise you that by August 15, 1982, we will already transfer to the next
building. Desidal Building will already be available for you to prepare for your own transfer. The delay is
caused by the preparation we have to make for the transfer of our office equipment and records.
Kindly, send somebody on August 15th, so we can effect the proper turnover of the building to
you. 74
Without an iota of evidence of any opposition to the offered P2,000,000 price coming from the company when it
could have communicated such to the SSS after the conclusion of the 1982 Meeting, plus the fact that its Vice-President
even informed SSS that they will be turning over the property to the latter, We are sufficiently convinced that, contrary to
petitioner's claim, Atty. Cabarroguis acted within the scope of the authority given him, which includes offering the properties
at P2,000,000.
It may be argued that the absence of the written document embodying Atty. Cabarroguis' authority prevents the
courts from unearthing what indeed the extent of said authority is. Nevertheless, We are of the view that the
aforementioned events that transpired thereafter and the absence of opposition coming from the company are sufficient

100
proof that they tacitly ratified Atty. Cabarroguis' acts during the meeting, assuming he went beyond his authority in so doing.
Thus, Article 1910 of the Civil Code provides:
Art. 1910. The principal must comply with all the obligations which the agent may have
contracted within the scope of his authority.
As for any obligation wherein the agent has exceeded his power, the principal is not bound
except when he ratifies it expressly or tacitly. (emphasis ours)
These, plus the absence of any allegation or proof that the SSS relied upon Atty. Cabarroguis' actions in bad faith,
convince Us that the corporation bound itself to said representations and agreements reached during the meeting via
implied ratification. 75
Accordingly, We conclude that DDII's offer was validly reduced from P3,500,000 to P2,000,000.
We shall now discuss whether SSS' acceptance of the new offer perfects the agreement on dation.
Second Stage: Perfection
Acceptance absolute and unqualified
As regards the question whether the parties were able to perfect the agreement on dación en pago, the RTC ruled
that they did not. According to the trial court, SSS' "acceptance" was qualified which is tantamount to a counter-offer, and
not an absolute acceptance which perfects the contract. Thus, said the RTC, there being no evidence to show that petitioner
accepted SSS' counter-offer, there was no dation to speak of.
The CA was of a different view. According to the CA, SSC Resolution No. 849-s. 82 constitutes an absolute and
unequivocal acceptance which perfected the offered dación. Thus, when possession of the subject property was delivered to
SSS, this signified a transfer of ownership thereon, consistent with the supposedly perfected agreement.
We agree with the CA that there was perfected dation in payment.
Article 1319 of the New Civil Code reads:
Art. 1319. Consent is manifested by the meeting of the offer and the acceptance upon the thing
and the cause which are to constitute the contract. The offer must be certain and the acceptance absolute.
A qualified acceptance constitutes a counter-offer.
Acceptance made by letter or telegram does not bind the offeror except from the time it came to
his knowledge. The contract, in such a case, is presumed to have been entered into in the place where the
offer was made.
Relevant thereto are the following principles, as summarized by the Court in Traders Royal Bank v. Cuison Lumber
Co., Inc., 76 thus:
Under the law, a contract is perfected by mere consent, that is, from the moment that there is a
meeting of the offer and the acceptance upon the thing and the cause that constitutes the contract. The
law requires that the offer must be certain and the acceptance absolute and unqualified. An acceptance of
an offer may be express and implied; a qualified offer (sic) constitutes a counter-offer. Case law holds that
an offer, to be considered certain, must be definite, while an acceptance is considered absolute and
unqualified when it is identical in all respects with that of the offer so as to produce consent or a meeting
of the minds. We have also previously held that the ascertainment of whether there is a meeting of minds
on the offer and acceptance depends on the circumstances surrounding the case.
The offer must be certain and definite with respect to the cause or consideration and object of
the proposed contract, while the acceptance of this offer — express or implied — must be unmistakable,
unqualified, and identical in all respects to the offer. x x x (Italics supplied)
Also, in Manila Metal Container Corporation v. Philippine National Bank, 77 the Court ruled:
A qualified acceptance or one that involves a new proposal constitutes a counter-offer and a
rejection of the original offer. A counter-offer is considered in law, a rejection of the original offer and an
attempt to end the negotiation between the parties on a different basis. Consequently, when something is
desired which is not exactly what is proposed in the offer, such acceptance is not sufficient to guarantee
consent because any modification or variation from the terms of the offer annuls the offer. The acceptance
must be identical in all respects with that of the offer so as to produce consent or meeting of the minds.
(Italics supplied)
Within the purview of the law on sales, a contract of sale is perfected by mere consent, upon a meeting of the
minds on the offer and the acceptance thereof based on subject matter, price and terms of payment. 78 It is perfected at the
moment there is a meeting of the minds upon the thing which is the object of the contract and upon the price. 79 SDAaTC
101
 Applying said principles to the case at bar convinces us that SSS' acceptance of the offer at P2,000,000 resulted in a
perfected dation. As discussed earlier, the offer was validly reduced from P3,500,000 to P2,000,000. Consequently, SSS'
agreement to the P2,000,000 offer was not a counter-offer as petitioner would have it, but an acceptance of the new
reduced offer communicated by the company's representative, Atty. Cabarroguis, which acceptance perfected the proposed
dation in payment. DDII has the onus of proving that the P2,000,000 offer made to SSS was invalid which would result in SSS'
acceptance at said amount to be different from the price offered. Petitioner, however, failed to discharge said burden.
As regards petitioner's contention that the following conditions set forth in the SSS' Letter dated June 17,
1982 80 make its acceptance a qualified one, We find otherwise. To recall, said conditions are as follows:
We are pleased to inform you that pursuant to Resolution No. 849 dated June 9, 1982, the Social
Security Commission approved and confirmed the acceptance of the offer of your client, the Dalisay Group
of Companies, that they be allowed to offset their outstanding liabilities with the SSS with their property
(lot and building), as described in the offer, at Davao City valued at P2 million, subject to the following
terms and conditions:
1. The P2 million consideration in this transaction shall be applied first to the premium contribution
in arrears which amounts to P1.5 million, more or less, and whatever amount in excess of
the P2 million after premium contribution shall then be applied to the payment of
penalties.
2. Part of the P2 million shall also be applied to its outstanding education/salary loan obligations.
3. The criminal cases against the Dalisay Group of Companies shall not be withdrawn as the
penalties have not as yet been valid (sic) in full and it is up to them to make the necessary
representations with the Fiscal's Office.
May we invite you, therefore, to sit down with us for the preparation of the documents
preparatory to the final transfer of the titles of the properties to the SSS. 81
A reading of the transcript of the 1982 Meeting reveals that the procedure in applying the proceeds of the dación
en pago actually came from the company, through Atty. Cabarroguis, and not from SSS. Thus:
Atty. Cabarroguis: We only pray that in order that the penalties will not continue to run, on the unpaid
remittance premiums, we only request that the amount of 2 million be applied first to the premiums,
unremitted premiums, the excess would be part of the penalty so that what will remain will be the
penalties themselves. 82
This to Us clearly shows that the SSS simply agreed to said proposal when it included such in its Resolution. It is not
a new condition imposed by the SSS as petitioner argues.
Having settled that the parties were in agreement as to the price and that the acceptance by SSS was, in fact,
unqualified, We are convinced that the parties indeed have a perfected contract. We shall now determine whether said
contract was consummated, thereby solidifying SSS' title, interest, and claim over the properties.
Third Stage: Consummation
Transfer of possession
to SSS tantamount to
"delivery"
Agreeing with SSS, the CA held that the agreement on dación en pago was consummated by DDII's delivery of the
property to SSS. 83 We agree.
The third stage of a contract of sale is consummation which begins when the parties perform their respective
undertakings under the contract of sale, culminating in the extinguishment thereof. 84
While a contract of sale is perfected by mere consent, ownership of the thing sold is acquired only upon its delivery
to the buyer. Upon the perfection of the sale, the seller assumes the obligation to transfer ownership and to deliver the
thing sold, but the real right of ownership is transferred only "by tradition" or delivery thereof to the buyer. 85
In this regard, reference must be made to Article 1496 of the Civil Code, which reads:
ARTICLE 1496. The ownership of the thing sold is acquired by the vendee from the moment it is
delivered to him in any of the ways specified in Articles 1497 to 1501, or in any other manner signifying an
agreement that the possession is transferred from the vendor to the vendee. (n)
Material to the case at bar is tradition by real or actual delivery contemplated Article 1497 of the same Code. Thus:
ARTICLE 1497. The thing sold shall be understood as delivered, when it is placed in the control
and possession of the vendee. (1462a)
102
 In Cebu Winland Development Corporation v. Ong Siao Hua, We explained that:
Under the Civil Code, ownership does not pass by mere stipulation but only by delivery. Manresa
explains, "the delivery of the thing . . . signifies that title has passed from the seller to the buyer ."
According to Tolentino, the purpose of delivery is not only for the enjoyment of the thing but also a mode
of acquiring dominion and determines the transmission of ownership, the birth of the real right. The
delivery under any of the forms provided by Articles 1497 to 1505 of the Civil Code signifies that the
transmission of ownership from vendor to vendee has taken place. 86 (Citations omitted)
Here, petitioner DDII insists that its delivery of the property to SSS was only to show its goodwill in the negotiations.
The records, however, reveal otherwise.
It is well to emphasize that nowhere in their communications or during the discussions at the meeting is it stated
that the company will turn over possession of the property to SSS to show its goodwill while the negotiations were
pending.
Too, consider the following turn of events:
1. During the 1982 Meeting, the following discussions took place:
Atty. Cabarroguis: Yes. Now it is the earnest desire of Mr. Dalisay somehow, to be able to
compensate for the benefits of the employees, that's why he is offering this. And if this would be
considered seriously by the System, Mrs. Tirol made arrangements with the Philippine National
Bank that this property be released because x x x if a portion of the obligation will be paid to the
PNB, then it will release this particular property, so we will be turning this over to you clear of any
liens or encumbrances. Thank you very much. 87
xxx xxx xxx
Atty. Cabarroguis: The Legal Department of the SSS can prepare the Deed of Sale or whatever
documents that have to be prepared. My clients are ready to vacate the premises and you can have
it occupied anytime. 88 x x x
2. Thereafter, or on July 8, 1982, DDII, through Dalisay-Tirol, informed SSS that the company is preparing the subject
property, especially the building, for its turnover on August 15, 1982. 89 Guilty of reiteration, the said
Letter reads, thusly:
We are pleased to advise you that by August 15, 1982, we will already transfer to the next building.
Desidal Building will already be available for you to prepare for your own transfer. The delay is
caused by the preparation we have to make for the transfer of our office equipment and records.
Kindly, send somebody on August 15th, so we can effect the proper turnover of the building to
you. 90
3. Then, on January 4, 1983, the corporation arranged for the release or replacement of the properties subject of
the dación from its mortgage with the PNB. Thus:
DESIDERIO DALISAY INVESTMENTS, INC.
Desidal Building, Agdao, Davao City
January 4, 1983
Mr. Julius L. Campo
Asst. Vice-President & Manager
Philippine National Bank
Davao Branch, Davao City
RE: DESIDAL INVESTMENTS
COLLATERAL
Dear Mr. Campo:
This is to formally inform your good office that Desidal Investments, Inc. and the Estate of Regina
L. Dalisay would like to request for substitution of collaterals or properties encumbered with your
bank. acEHCD
xxx xxx xxx
This request for substitution of collaterals had been made primarily because Social Security
System, Regional Office of Davao, is very much interested to purchase our Desidal office building.
(emphasis ours)
xxx xxx xxx
Truly yours,

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 (SGD)
DESIDERIO DALISAY
President
Desidal Investments, Inc. 91
4. As regards the obligation to deliver to SSS the certificates of title over the properties, DDII failed to do so even
after the PNB has already executed a Deed of Confirmatory Sale in favor of DDII for properties that it
reacquired, including the property subject of the present dispute. This prompted Jara to execute an
Affidavit of Adverse Claim 92 over the properties.
5. Jara then sent a letter to Dalisay-Tirol, formally demanding the certificates of title over the properties subject of
the dación, stating that "[t]he mortgage with PNB has already been settled by Desiderio Dalisay
Investments, Inc. last January 20, 1994, but the titles were not delivered to the SSS in violation of the
express terms in the dation in payment that the Dalisay group should deliver the titles after the release of
the mortgage with the PNB." 93
6. In her reply, Dalisay-Tirol, now President of DDII, stated that the corporation could not at that time give due
course and act on the matter because of several issues that need to be resolved first.
The aforementioned events that transpired convince Us that contrary to petitioner's claim, the turnover of the
properties to SSS was tantamount to delivery or "tradition" which effectively transferred the real right of ownership over the
properties from DDII to SSS. 94 Even after a review of the records of the case, this Court is unable to find any indication
that when they turned over the properties to SSS, the company reserved its ownership over the property and only
transferred the jus possidendi thereon to SSS.
Too, if it indeed turned over the possession of the property to simply show goodwill in the negotiations, then there
would be no need for it to give SSS possession of the subject property free from all liens and encumbrances.
Thus, contrary to petitioner's arguments, We are of the view that the turnover was in fact tantamount
to tradition and was not done simply to show goodwill on the part of the company. What was only left to be done was for
the corporation to surrender the certificates of title over the properties, free from all liens and encumbrances as promised
during the 1982 meeting, so as to facilitate its transfer in SSS' name.
Indeed, as expounded by this Court in Equatorial Realty Development, Inc. v. Mayfair Theater, Inc.: 95
Delivery has been described as a composite act, a thing in which both parties must join and the
minds of both parties concur. It is an act by which one party parts with the title to and the possession of
the property, and the other acquires the right to and the possession of the same. In its natural sense,
delivery means something in addition to the delivery of property or title; it means transfer of
possession. In the Law on Sales, delivery may be either actual or constructive, but both forms of delivery
contemplate "the absolute giving up of the control and custody of the property on the part of the
vendor, and the assumption of the same by the vendee."
This being the case, We find that SSS has validly and in good faith acquired title to the property subject of the
dispute, making the action to quiet title filed by DDII improper.
Additionally, it is well to emphasize that in order that an action for quieting of title may prosper, it is essential that
the plaintiff must have legal or equitable title to, or interest in, the property which is the subject-matter of the
action. 96 Legal title denotes registered ownership, while equitable title means beneficial ownership. In the absence of such
legal or equitable title, or interest, there is no cloud to be prevented or removed. 97
Here, DDII having divested itself of any claim over the property in favor of SSS by means of sale via dación en pago,
petitioner has lost its title over the property which would give it legal personality to file said action.
Thus, the CA did not err in dismissing the complaint for lack of merit.
A necessary consequence of this ruling is the recomputation of DDII's obligations to SSS as a result of the
application of the P2,000,000 amount agreed upon in the dación. Thus, SSS shall recompute said outstanding obligations by
deducting from the total obligations as of June 17, 1982 the amount of P2,000,000, following the terms and conditions
agreed upon. Said date refers to SSS communication of its acceptance of the offer, resulting in the perfection of the
contract. 98
At this point, it is well to remind DDII that it cannot escape its liability from SSS by giving the latter possession over
the property with the representation that it is doing so as partial settlement of its unremitted SSS premiums and penalties
due only to take the property back decades thereafter, seek condonation of its obligations, and to make matters worse, claim
payment of back rentals from SSS. While it is true that the value of the property has definitely significantly increased over
the years compared to the P2,000,000 amount for which it was offered to SSS, still, such is not sufficient justification for DDII

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 to turn its back on its obligations under the dación en pago agreement. In fact, the turn of events convinces Us that DDII's
actions are tainted with bad faith.
If We were to grant the reliefs prayed for by DDII, an injustice will definitely be caused to SSS, which in good faith
relied upon the company's representations. Too, We find it proper to remind DDII that it would not have lost ownership over
the property if, in the first place, it diligently paid the SSS premiums due.
With these, We need not belabor the other assigned errors.
WHEREFORE, the instant petition is DENIED. The assailed August 12, 2016 Decision and March 10, 2017 Resolution
of the Court of Appeals in CA-G.R. CV No. 03233-MIN are hereby AFFIRMED. The complaint for quieting of title, recovery of
possession and damages, docketed as Civil Case No. 29,353-02, is DISMISSED for lack of merit.
Petitioner Desiderio Dalisay Investments, Inc. is hereby ordered to:
1. Execute the Deed of Sale over the properties in favor of respondent Social Security System, consistent with the
terms and conditions of the dación en pago agreed upon by the parties as embodied in SSC Resolution No.
849-s. 82 within ten (10) days from finality of this Decision; and
2. Surrender the Owner's Duplicate of Transfer Certificate of Title Nos. T-18203, T-18204, T-255986, and T-255985,
as well as the Tax Declarations over said properties to respondent Social Security System within ten (10)
days from finality of this Decision.
Should petitioner Desiderio Dalisay Investments, Inc. refuse to execute said Deed of Sale, the Clerk of Court shall
execute such in favor of respondent Social Security System.
The Register of Deeds of Davao City is directed to cancel the subject titles and issue new ones in the name of
respondent Social Security System.
Respondent Social Security System is ordered to re-compute petitioner's obligations accordingly, reckoned from
June 17, 1982, the date when respondent communicated its acceptance of the offer. SDHTEC
SO ORDERED.
Bersamin, Leonen, Martires and Gesmundo, JJ., concur.
||| (Desiderio Dalisay Investments, Inc. v. Social Security System, G.R. No. 231053, [April 4, 2018])

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