G.R. No.
175949, January 30, 2017 Court of Cagayan De Oro City (RTC of CDO) and was
UNITED ALLOY PHILIPPINES CORPORATION, SPOUSES
DAVID C. CHUA AND LUTEN CHUA, Petitioners, v. UNITED
COCONUT PLANTERS BANK, Respondent.
DECISION
PERALTA, J.:
Before the Court is a petition for review on certiorari seeking
the reversal and setting aside of the Decision1 and Resolution2
of the Court of Appeals (CA), dated September 21, 2006 and
December 11, 2006, respectively, in CA-G.R. CV No. 81079.
The assailed Decision affirmed the Decision of the Regional
Trial Court (RTC) of Makati City, Branch 135, in Civil Case No.
01-1332, while the questioned Resolution denied petitioners'
Motion for Reconsideration.
The pertinent factual and procedural antecedents of the case
are as follows:chanRoblesvirtualLawlibrary
On December 18, 2000, herein petitioner corporation, United
Alloy Philippines Corporation (UNIALLOY) applied for and was
granted a credit accommodation by herein respondent United
Coconut Planters Bank (UCPB) in the amount of
PhP50,000,000.00, as evidenced by a Credit Agreement.3 Part
of UNIALLOY's obligation under the Credit Agreement was
secured by a Surety Agreement,4 dated December 18, 2000,
executed by UNIALLOY Chairman, Jakob Van Der Sluis (Van
Der Sluis), UNIALLOY President, David Chua and his spouse,
Luten Chua (Spouses Chua), and one Yang Kim Eng (Yang).
Six (6) Promissory Notes,5 were later executed by UNIALLOY
in UCPB's favor, to wit:chanRoblesvirtualLawlibrary
1) #8111-00-20031-1, executed on December 18, 2000, in the
amount of US$110,000.00;
2) #8111-00-00110-6, executed on December 18, 2000, in the
amount of PhP6,000,000.00;
3) #8111-00-00112-2, executed on December 27, 2000, in the
amount of PhP3,900,000.00;
4) #8111-01-20005-6, executed on February 7, 2001, in the
amount of US$320,000.00;
5) #8111-01-00009-0, executed on February 26, 2001, in the
amount of PhP1,600,000.00;
6) #8111-01-00030-8, executed on April 30, 2001, in the
amount of PhP16,029,320.88.
In addition, as part of the consideration for the credit
accommodation, UNIALLOY and UCPB also entered into a
"lease-purchase" contract wherein the former assured the latter
that it will purchase several real properties which UCPB co-
owns with the Development Bank of the Philippines.
Subsequently, UNIALLOY failed to pay its loan obligations. As
a result, UCPB filed against UNIALLOY, the spouses Chua,
Yang and Van Der Sluis an action for Sum of Money with
Prayer for Preliminary Attachment6 on August 27, 2001. The
collection case was filed with the Regional Trial Court of Makati
City (RTC of Makati) and docketed as Civil Case No. 01-1332.
Consequently, UCPB also unilaterally rescinded its lease-
purchase contract with UNIALLOY.
On the other hand, on even date, UNIALLOY filed against
UCPB, UCPB Vice-President Robert Chua and Van Der Sluis a
complaint for Annulment and/or Reformation of Contract with
Damages, with Prayer for a Writ of Preliminary Injunction or
Temporary Restraining Order.7 Claiming that it holds office and
conducts its business operations in Tagoloan, Misamis
Oriental, UNIALLOY filed the case with the Regional Trial
docketed as Civil Case No. 2001-219. UNIALLOY contended
that Van Der Sluis, in cahoots with UCPB Vice-President
Robert Chua, committed fraud, manipulation and
misrepresentation to obtain the subject loan for their own
benefit. UNIALLOY prayed, among others, that three (3) of the
six (6) Promissory Notes it executed be annulled or reformed
or that it be released from liability thereon.
On September 12, 2001, UNIALLOY filed an Urgent Motion to
Dismiss8 the collection case (Civil Case No. 01-1332) filed by
UCPB on the ground of litis pendentia and forum shopping.
UNIALLOY contended that its complaint for annulment of
contract (Civil Case No. 2001-219) and the collection case filed
by UCPB involves the same parties and causes of action. On
October 31, 2001, the RTC of Makati issued an Order9
denying UNIALLOY's motion to dismiss.
In the meantime, UCPB and its co-defendants also filed a
Motion to Dismiss UNIALLOY's complaint for annulment of
contract on the grounds of improper venue, forum shopping,
litis pendentia, and harassment or nuisance suit. On
September 13, 2001, the RTC of CDO issued an Order10
dismissing UNIALLOY's complaint for annulment of contract.
The dispositive portion of the Order reads,
thus:chanRoblesvirtualLawlibrary
ACCORDINGLY, finding meritorious that the venue is
improperly laid and the complain[ant] engaged in forum-
shopping and harassment of defendant Jakob Van Der Sluis,
this case is hereby DISMISSED rendering the prayer for
issuance of a writ of preliminary injunction moot and academic,
and ordering plaintiff to turn over possession of the subject
premises of the properties in question at Barangay Gracia,
Tagoloan, Misamis Oriental to defendant United Coconut
Planters Bank.
SO ORDERED.11
Thereafter, on motion, the RTC of CDO issued an Order of
Execution, dated September 14, 2001, directing UNIALLOY to
tum over to UCPB the property subject of their lease-purchase
agreement.
UNIALLOY then filed a petition for certiorari and mandamus
with the CA questioning the September 13 and September 14,
2001 Orders of the RTC of CDO. UNIALLOY also prayed for
the issuance of a writ of preliminary injunction. The case was
docketed as CA G.R. SP. No. 67079.
On February 18, 2002, the CA promulgated a Resolution12
granting UNIALLOY's prayer for the issuance of a writ of
preliminary injunction. UCPB questioned the above CA
Resolution by filing a petition for certiorari with this Court,
which was docketed as G.R. No. 152238. On March 18, 2002,
this Court issued a Resolution which restrained the CA from
enforcing its February 18, 2002 Resolution.
On January 28, 2005, this Court, rendered its Decision in G.R.
No. 152238 denying UCPB's petition for certiorari and affirming
the CA Resolution granting the writ of preliminary injunction.
Thereafter, on August 17, 2007, the CA promulgated a
Decision dismissing UNIALLOY's certiorari petition and
affirming the September 13 and September 14, 2001 Orders of
the RTC of CDO. UNIALLOY then filed a petition for review on
certiorari challenging the above CA Decision. The case was
docketed as G.R. No. 179257.
On November 23, 2015, this Court promulgated a Decision in
G.R. No. 179257 denying UNIALLOY's petition. This Court
held that the CA did not err in affirming the dismissal of
UNIALLOY's complaint on the grounds of improper venue,
forum shopping and for being a harassment suit. This Court
also ruled that the August 17, 2007 Decision of the CA neither
violated this Court's January 28, 2005 Decision in G.R. No.
152238 nor contradicted the CA's February 18, 2002
Resolution granting the preliminary injunction prayed for by
UNIALLOY because the dismissal of UNIALLOY's main action
carried with it the dissolution of any ancillary relief previously
granted in the said case, such as the abovementioned
preliminary injunction. Subsequently, this Court's Decision in
G.R. No. 179257 became final and executory per Entry of
Judgment dated January 20, 2016.
Meanwhile, on March 15, 2002, UNIALLOY filed with the RTC
of Makati an omnibus motion praying for the suspension of the
proceedings of the collection case in the said court on the
ground of pendency of the certiorari petition it filed with this
Court.13 However, the RTC denied UNIALLOY's motion in its
Order14 dated August 19, 2002.
Subsequently, on June 17, 2003, the RTC of Makati rendered
Judgment in the collection case in favor of UCPB. The
dispositive portion of the RTC Decision reads,
thus:chanRoblesvirtualLawlibrary
WHEREFORE, premises considered, judgment is hereby
rendered in favor of plaintiff. Defendants are hereby ordered to
pay plaintiff the following:chanRoblesvirtualLawlibrary
a. The sum of US DOLLARS: (US$435,494.44) with interest
and penalty charges from August 1, 2001 until fully paid.
b. The sum of P26,940,950.80 with interest and penalty
charges from August 1, 2001 until fully paid.
c. Attorney's fees in the amount of P1,000,000.00.
d. Costs of suit.
SO ORDERED.15
UNIALLOY appealed the above RTC Decision with the CA.
On September 21, 2006, the CA rendered its assailed
judgment denying UNIALLOY's appeal and affirming the
questioned RTC Decision.
Hence, the instant petition raising the following
issues:chanRoblesvirtualLawlibrary
5.01 THE HONORABLE COURT OF APPEALS COMMITTED
A SERIOUS, REVERSIBLE ERROR, IF NOT GRAVE ABUSE
OF DISCRETION, IN REFUSING TO RESOLVE AS TO –
I have filed its complaint before the RTC of Makati City, and not
WHETHER OR NOT THE TRIAL COURT ERRED IN
DENYING PETITIONERS' URGENT MOTION TO DISMISS
II
WHETHER OR NOT THE TRIAL COURT ERRED IN
DENYING PETITIONERS' OMNIBUS MOTION TO SUSPEND
PROCEEDINGS AND TO LIFT WRIT OF PRELIMINARY
ATTACHMENT
III
WHETHER OR NOT THE TRIAL COURT ERRED AND/OR
COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING
TO LACK OR IN EXCESS OF JURISDICTION IN
RENDERING THE ASSAILED QUESTIONED DECISION
WHEN THERE IS A PENDING CIVIL ACTION BEFORE THE
REGIONAL TRIAL COURT OF CAGAYAN DE ORO, BRANCH
40, INVOLVING THE SAME PARTIES AND SUBJECT
MATTER WHICH CASE, IS NOW PENDING AND ASSAILED
BY THE PLAINTIFF-APPELLEE VIA PETITION BEFORE THE
HONORABLE SUPREME COURT.
5.02 THE HONORABLE COURT OF APPEALS COMMITTED
A SERIOUS, REVERSIBLE ERROR IF NOT GRAVE ABUSE
OF DISCRETION, IN DENYING PETITIONERS' URGENT
MOTION FOR RECONSIDERATION WITHOUT STATING
CLEARLY AND DISTINCTLY THE FACTUAL AND LEGAL
BASIS THEREOF.16
Petitioners' basic argument is that the resolution of the instant
petition basically hinges on the outcome of the petition filed
under G.R. No. 179257. Considering that the promissory notes
subject of G.R. No. 179257 are among the promissory notes
which are also involved in the present case, petitioner
contends that a judgment by this Court in G.R. No. 179257 that
reverses the Decision of the RTC of Cagayan de Oro City,
which in effect would declare the nullity of the subject
promissory notes, may conflict with the Decision of this Court in
the present petition, which involves the collection of the sum
being represented in the same promissory notes. Thus,
petitioner prays for the dismissal of the collection case (Civil
Case No. 01-1332) filed by UCPB or the suspension of
proceedings therein pending resolution of its petition in G.R.
No. 179257.
However, as mentioned above, on November 23, 2015, the
2nd Division of this Court already came up with a Decision in
G.R. No. 179257 which affirmed the RTC's dismissal of
UNIALLOY's complaint. Pertinent portions of the said Decision
read as follows:chanRoblesvirtualLawlibrary
CA CDO did not err in affirming the
dismissal of UniAiloy's Complaint on the
grounds of improper venue, forum shopping
and for being a harassment suit
The RTC was correct in dismissing UniAlloy's Complaint on the
ground of improper venue. In general, personal actions must
be commenced and tried (i) where the plaintiff or any of the
principal plaintiffs resides, (ii) where the defendant or any of
the principal defendants resides, or (III) in the case of a
resident defendant where he may be found, at the election of
the plaintiff. Nevertheless, the parties may agree in writing to
limit the venue of future actions between them to a specified
place.
In the case at bench, paragraph 18 of the LPA expressly
provides that "[a]ny legal action arising out of or in connection
with this Agreement shall be brought exclusively in the proper
courts of Makati City, Metro Manila." Hence, UniAlloy should
with the RTC of Cagayan de Oro City.
But to justify its choice of venue, UniAlloy insists that the
subject matter of its Complaint in Civil Case No. 2001-219 is
not the LPA, but the fictitious loans that purportedly matured on
April 17, 2001.
UniAlloy's insistence lacks merit. Its Complaint unequivocally
sought to declare "as null and void the unilateral rescission
made by defendant UCPB of its subsisting Lease Purchase
Agreement with [UniAlloy]." What UCPB unilaterally rescinded
is the LPA and without it there can be no unilateral rescission
to speak of. Hence, the LPA is the subject matter or at least
one of the subject matters of the Complaint. Moreover, and to
paraphrase the aforecited paragraph 18 of the LPA, as long as
the controversy arises out of or is connected therewith, any
legal action should be filed exclusively before the proper courts
of Makati City. Thus, even assuming that the LPA is not the
main subject matter, considering that what is being sought to
be annulled is an act connected and inseparably related
thereto, the Complaint should have been filed before the
proper courts in Makati City.
With regard forum-shopping, our review of the records of this
case revealed that UniAlloy did not disclose in the
Verification/Certification of the Complaint the pendency of Civil
Case No. 2001-156 entitled "Ernesto Paraiso and United Alloy
Philippines Corporation v. Jakob Van Der Sluis." The trial court
took judicial notice of its pendency as said case is also
assigned and pending before it. Thus, we adopt the following
unrebutted finding of the RTC:chanRoblesvirtualLawlibrary
These two civil cases have identical causes of action or issues
against defendant Jakob Van Der Sluis for having
misrepresented to plaintiff and its stockholders that he can
extend financial assistance in running the operation of the
corporation, such that on April 6, 2001 plaintiff adopted a
Stockholders Resolution making defendant Jakob chairman of
the corporation for having the financial capability to provide the
financial needs of plaintiff and willing to finance the operational
needs thereof; that a Memorandum of Agreement was
subsequently entered between the parties whereby defendant
Jakob obligated to provide sufficient financial loan to plaintiff to
make it profitable; that Jakob maliciously and willfiilly reneged
[on] his financial commitments to plaintiff prompting the
stockholders to call his attention and warned him of avoiding
the said agreement; that defendant who had then complete
control of plaintiffs bank account with defendant UCPB,
through fraudulent machinations and manipulations, was able
to maliciously convince David C. Chua to pre-sign several
checks; that defendant Jakob facilitated several huge loans
purportedly obtained by plaintiff which defendant himself could
not even account and did not even pay the debts of the
corporation but instead abused and maliciously manipulated
plaintiffs account.
Forum-shopping indeed exists in this case, for both actions
involve the same transactions and same essential facts and
circumstances as well as identical causes of action, subject
matter and issues, x x x
As mentioned above, this Court's Decision m the above case
has become final and executory on January 20, 2016.
Thus, contrary to petitioners' position, there is no longer any
possibility that the Decision of the RTC of CDO may conflict
with the disposition of the present case because UNIALLOY's
complaint for annulment of contract has already been
dismissed with finality. This Court will, thus, proceed to resolve
the merits of the instant case.
The fundamental issue here is whether or not herein
petitioners, together with their co-defendants Van Der Sluis
and Yang, are liable to pay respondent the amounts awarded
by the RTC of Makati City in its June 17, 2003 Decision.17
The Court rules in the affirmative.
As ruled upon by both the RTC and the CA, UNIALLOY failed
to pay its obligations under the above promissory notes and
that herein petitioner Spouses Chua, together with their co-
defendants Van Der Sluis and Yang freely executed a Surety
Agreement whereby they bound themselves jointly and
severally with UNIALLOY, to pay the latter's loan obligations
with UCPB. Pertinent portions of the said Surety Agreement
are reproduced hereunder, to wit:chanRoblesvirtualLawlibrary
xxxx
ARTICLE I
LIABILITIES OF SURETIES
Section 1.01. The SURETIES, jointly and severally with the
PRINCIPAL, hereby unconditionally and irrevocably guarantee
the full and complete payment when due, whether at stated
maturity, by acceleration or otherwise, of all sums payable by
the PRINCIPAL under the Credit Agreement, the Note/s and
other related documents or instruments referred to therein
(hereinafter referred to collectively as the "Loan Documents")
the terms and conditions of which are hereby deemed
incorporated by reference.
The liability of the SURETIES shall not be limited to the
aggregate principal amount of FIFTY MILLION PESOS
(P50,000,000.00), Philippine Currency, or its foreign currency
equivalent, but shall include such interest, fees, penalties and
other charges due thereon, as well as any and all renewals,
extensions, restructurings or conversions of the
Accommodation or any portion thereof, as may appear in the
books and records of account of the BANK.
Such extension/s, renewal/s, restructuring/s, or conversion/s of
the Accommodation or any portion thereof, including any
increase in the principal amount thereof, or the imposable
interest rates and other bank charges, shall be binding upon
the SURETIES under the terms of this SURETY
AGREEMENT, without need of any further notice to or consent
or conformity of the SURETIES, all of which are hereby
expressly waived.
Section 1.02. This SURETY AGREEMENT is a guarantee of
payment and not merely of collection and is intended to be a
perfect and continuing indemnity in favor of the BANK for the
amounts and to the extent stated above. For this purpose, the
SURETIES hereby commit that for as long as this SURETY
AGREEMENT is in effect, the SURETIES shall not sell, lease,
transfer, assign or encumber any of its present and future
properties without the written consent of the BANK, which
consent will not be unreasonably withheld.
The liability of the SURETIES shall be absolute, irrevocable,
unconditional, direct, immediate and not contingent upon the
pursuit by the BANK of whatever remedies it may have against
the PRINCIPAL or the other sureties for the Accommodation,
and shall be performed by the SURETIES strictly in
accordance with the terms hereof and under any and all
circumstances, including the existence of any claim, set-off,
defense or other rights which the SURETIES or any person or
entity may have at any time against the BANK for any reason
whatsoever, whether or not related to this SURETY
AGREEMENT, the Loan Documents or under such other
documents executed in relation thereto, or contemplated
hereunder.
ARTICLE II
TERM
Section 2.01. This SURETY AGREEMENT shall remain in full
force and effect until payment in full of all amount for which the
PRINCIPAL is or may be liable as set forth in ARTICLE I
hereof, regardless of the absence of any further or other assent
or conformity of, or notice to the SURETIES, or any
circumstance, or provision of law which might otherwise
constitute a defense or discharge of the SURETIES, all of
which are hereby expressly waived.
ARTICLE III
DEFAULT
Section 3.01. If the BANK shall declare the obligation of the
PRINCIPAL to be due and payable because of the happening
of any of the event of default as defined in the Credit
Agreement, the SURETIES, upon receipt of written notice from
the BANK, shall forthwith pay to the BANK the full amount of
the said obligations, without need of demand, protest or notice
of any kind, other than the notice provided herein, all of which
are likewise expressly waived by the SURETIES.
In this connection, the BANK is hereby given full power and
authority to apply whatever moneys or things of value
belonging to the SURETIES which may be in the possession or
control of the BANK in payment of the obligations mentioned
above.
ARTICLE IV
BINDING EFFECT
Section 4.01. This SURETY AGREEMENT shall except upon
the other SURETIES, if any whose liability(ies) is/are
extinguished by way of compromise or otherwise be binding
upon the SURETIES, their heirs and successors in interest and
shall inure to the benefit of and be enforceable by the BANK,
its assigns and successors in interest. For this purpose, the
SURETIES have agreed, as they hereby agree, that an
extinguishment of liability(ies) of any of the SURETIES shall
not be an obstacle to the BANK from demanding payment from
the other SURETIES, if any, so long as the Accommodation
has not been fully collected.
x x x x18
Petitioners do not deny their liability under the abovequoted
Surety Agreement.
As correctly held by both the RTC and the CA, Article 1159 of
the Civil Code expressly provides that "[o]bligations arising
from contracts have the force of law between the contracting
parties and should be complied with in good faith." The RTC as
well as the CA found nothing which would justify or excuse
petitioners from non-compliance with their obligations under
the contract they have entered into. Thus, it becomes apparent
that petitioners are merely attempting to evade or, at least,
delay the inevitable performance of their obligation to pay
under the Surety Agreement and the subject promissory notes
which were executed in respondent's favor.
The Court notes, however, that the interest rates imposed on
the subject promissory notes were made subject to review and
adjustment at the sole discretion and under the exclusive will of
UCPB. Moreover, aside from the Consolidated Statement of
Account attached to the demand letters addressed to petitioner
spouses Chua and their co-defendants,19 no other competent
evidence was shown to prove the total amount of interest due
on the above promissory notes. In fact, based on the attached
Consolidated Statement of Account, UCPB has already
imposed a 24% interest rate on the total amount due on
respondents' peso obligation for a short period of six months.
Settled is the rule that any contract which appears to be heavily
weighed in favor of one of the parties so as to lead to an
unconscionable result is void.19 Any stipulation regarding the
validity or compliance of the contract which is left solely to the
will of one of the parties, is likewise, invalid.20
Moreover, courts have the authority to strike down or to modify
provisions in promissory notes that grant the lenders
unrestrained power to increase interest rates, penalties and
other charges at the latter's sole discretion and without giving
prior notice to and securing the consent of the borrowers.21
This unilateral authority is anathema to the mutuality of
contracts and enable lenders to take undue advantage of
borrowers.22 Although the Usury Law has been effectively
repealed, courts may still reduce iniquitous or unconscionable
rates charged for the use of money.23 Furthermore, excessive
interests, penalties and other charges not revealed in
disclosure statements issued by banks, even if stipulated in the
promissory notes, cannot be given effect under the Truth in
Lending Act.24
The Court, thus, finds it proper to modify the interest rates
imposed on respondents' obligation. Pursuant to the ruling in
Nacar v. Gallery Frames, et. al.,25 the sums of US$435,494.44
and PhP26,940,950.80 due to UCPB shall earn interest at the
rate of 12% per annum from the date of default, on August, 1,
2001, until June 30, 2013 and thereafter, at the rate of 6% per
annum, from July 1, 2013 until finality of this Decision. The total
amount owing to UCPB as set forth in this Decision shall
further earn legal interest at the rate of 6% per annum from its
finality until full payment thereof, this interim period being
deemed to be by then an equivalent to a forbearance of credit.
Finally, pursuant to the parties' Credit Agreement as well as
the subject Promissory Notes, respondents are also liable to
pay a penalty charge at the rate of 1% per month or 12% per
annum.
WHEREFORE, the instant petition is DENIED. The Decision
and Resolution of the Court of Appeals, dated September 21,
2006 and December 11, 2006, respectively, in CA-G.R. CV No.
81079, are AFFIRMED with MODIFICATION by directing
petitioners and their co-defendants to pay respondent UCPB
the following:chanRoblesvirtualLawlibrary
(1) the principal amounts of US$435,494.44 and
PhP26,940,950.80;chanrobleslaw
(2) legal interest of 12% per annum on the above principal
amounts reckoned from August 1, 2001 until June 30,
2013;chanrobleslaw
(3) penalty charge of 12% per annum from August 1, 2001 until
fully paid; and
(4) an interest of 6% from July 1, 2013 until fully paid.
SO ORDERED.
G.R. No. 189316 June 1, 2013
PHILIPPINE NATIONAL BANK, Petitioner,
vs.
SPOUSES BERNARD and CRESENCIA MARANON,
Respondents.
RESOLUTION
REYES, J.:
This is a petition for review on certiorari1 under Rule 45 of the
Rules of Court, assailing the Decision2 dated June 18, 2008
and Resolution3 dated August 10, 2009 of the Court of
Appeals (CA) in CA-G.R. SP No. 02513, which affirmed in toto
the Orders dated September 8, 20064 and December 6, 20065
of the Regional Trial Court (RTC) of Bacolod City, Branch 54,
directing petitioner Philippine National Bank (PNB) to release in
favor of Spouses Bernard and Cresencia Marafion (Spouses
Marafion) the rental fees it received amounting to Thirty
Thousand Pesos (₱30,000.00).
The Facts
The controversy at bar involves a 152-square meter parcel of
land located at Cuadra-Smith Streets, Downtown, Bacolod
(subject lot) erected with a building leased by various tenants.
The subject lot was among the properties mortgaged by
Spouses Rodolfo and Emilie Montealegre (Spouses
Montealegre) to PNB as a security for a loan. In their
transactions with PNB, Spouses Montealegre used Transfer
Certificate of Title (TCT) No. T-156512 over the subject lot
purportedly registered in the name of Emilie Montealegre
(Emilie).6
When Spouses Montealegre failed to pay the loan, PNB
initiated foreclosure proceedings on the mortgaged properties,
including the subject lot. In the auction sale held on August 16,
1991, PNB emerged as the highest bidder. It was issued the
corresponding Certificate of Sale dated December 17, 19917
which was subsequently registered on February 4, 1992.8
Before the expiration of the redemption period or on July 29,
1992, Spouses Marañon filed before the RTC a complaint for
Annulment of Title, Reconveyance and Damages9 against
Spouses Montealegre, PNB, the Register of Deeds of Bacolod
City and the Ex-Officio Provincial Sheriff of Negros Occidental.
The complaint, docketed as Civil Case No. 7213, alleged that
Spouses Marañon are the true registered owners of the subject
lot by virtue of TCT No. T-129577 which was illegally cancelled
by TCT No. T-156512 under the name of Emilie who used a
falsified Deed of Sale bearing the forged signatures of Spouse
Marañon10 to effect the transfer of title to the property in her
name.
In its Answer,11 PNB averred that it is a mortgagee in good
faith and for value and that its mortgage lien on the property
was registered thus valid and binding against the whole world.
As reflected in the Pre-trial Order12 dated March 12, 1996, the
parties stipulated, among others, that the period for legal
redemption of the subject lot has already expired.
While the trial proceedings were ongoing, Paterio Tolete
(Tolete), one of the tenants of the building erected on the
subject lot deposited his rental payments with the Clerk of
Court of Bacolod City which, as of October 24, 2002, amounted
to ₱144,000.00.
On June 2, 2006, the RTC rendered its Decision13 in favor of
the respondents after finding, based on the expert testimony of
Colonel Rodolfo Castillo, Head of the Forensic Technology
Section of Bacolod City Philippine National Police, that the
signatures of Spouses Marañon in the Deed of Sale presented
by Spouses Montealegre before the Register of Deeds to
cause the cancellation of TCT No. T-129577 were forged.
Hence, the RTC concluded the sale to be null and void and as
such it did not transfer any right or title in law. PNB was
adjudged to be a mortgagee in good faith whose lien on the
subject lot must be respected. Accordingly, the Decision
disposed as follows:
WHEREFORE, judgment is hereby rendered in favor of the
plaintiffs herein respondents:
1. The cancellation of TCT No. 129577 over Lot 177-A-1
Bacolod Cadastre in the name of Bernard Marañon and the
issuance of new TCT No. 156512 in the name of defendant
Emilie Montealegre are hereby declared null and void;
2. The defendant Emilie Montealegre is ordered to reconvey
the title over Lot No. 177-A-1, Bacolod Cadastre back to the
plaintiffs Marañon herein respondents;
3. The Real Estate Mortgage lien of the Philippine National
Bank registered on the title of Lot No. 177-A-1 Bacolod
Cadastre shall stay and be respected; and
4. The defendants - Emilie Montealegre and spouse are
ordered to pay attorney’s fees in the sum of Php50,000.00, and
to pay the costs of the suit.
SO ORDERED.14
Neither of the parties sought a reconsideration of the above
decision or any portion thereof nor did they elevate the same
for appellate review.
What precipitated the controversy at hand were the
subsequent motions filed by Spouses Marañon for release of
the rental payments deposited with the Clerk of Court and paid
to PNB by Tolete.
On June 13, 2006, Spouses Marañon filed an Urgent Motion
for the Withdrawal of Deposited Rentals15 praying that the
₱144,000.00 rental fees deposited by Tolete with the Clerk of
Court be released in their favor for having been adjudged as
the real owner of the subject lot. The RTC granted the motion
in its Order16 dated June 28, 2006.
On September 5, 2006, Spouses Marañon again filed with the
RTC an Urgent Ex-Parte Motion for Withdrawal of Deposited
Rentals17 praying that the ₱30,000.00 rental fees paid to PNB
by Tolete on December 12, 1999 be released in their favor.
The said lease payments were for the five (5)-month period
from August 1999 to December 1999 at the monthly lease rate
of ₱6,000.00.
The RTC granted the motion in its Order18 dated September 8,
2006 reasoning that pursuant to its Decision dated June 2,
2006 declaring Spouses Marañon to be the true registered
owners of the subject lot, they are entitled to its fruits.
The PNB differed with the RTC’s ruling and moved for
reconsideration averring that as declared by the RTC in its
Decision dated June 2, 2006, its mortgage lien should be
carried over to the new title reconveying the lot to Spouses
Marañon. PNB further argued that with the expiration of the
redemption period on February 4, 1993, or one (1) year from
the registration of the certificate of sale, PNB is now the owner
of the subject lot hence, entitled to its fruits. PNB prayed that
(1) the Order dated September 8, 2006 be set aside, and (2)
an order be issued directing Spouses Marañon to turn over to
PNB the amount of ₱144,000.00 released in their favor by the
Clerk of Court.19
On November 20, 2006, the RTC issued an Order again
directing PNB to release to Spouses Marañon the ₱30,000.00
rental payments considering that they were adjudged to have
retained ownership over the property.20
On December 6, 2006, the RTC issued another Order denying
PNB’s motion for reconsideration and reiterating the directives
in its Order dated September 8, 2006.21
Aggrieved, PNB sought recourse with the CA via a petition for
certiorari and mandamus22 claiming that as the lawful owner of
the subject lot per the RTC’s judgment dated June 2, 2006, it is
entitled to the fruits of the same such as rentals paid by tenants
hence, the ruling that "the real estate mortgage lien of the PNB
registered on the title of Lot No. 177-A-1 Bacolod Cadastre
shall stay and be respected." PNB also contended that it is an
innocent mortgagee.
In its Decision23 dated June 18, 2008, the CA denied the
petition and affirmed the RTC’s judgment ratiocinating that not
being parties to the mortgage transaction between PNB and
Spouses Montealegre, Spouses Marañon cannot be deprived
of the fruits of the subject lot as the same will amount to
deprivation of property without due process of law. The RTC
further held that PNB is not a mortgagee in good faith because
as a financial institution imbued with public interest, it should
have looked beyond the certificate of title presented by
Spouses Montealegre and conducted an inspection on the
circumstances surrounding the transfer to Spouses
Montealegre. The decretal portion of the Decision thus read:
WHEREFORE, in view of the foregoing, the petition is hereby
DISMISSED. The Orders dated September 8, 2006 and
December 6, 2006, rendered by the respondent Presiding
Judge of the Regional Trial Court, Branch 54, Bacolod City, in
Civil Case NO. 7213 directing the release of the deposited
rental in the amount of THIRTY THOUSAND PESOS
([P]30,000.00) to private respondents are hereby AFFIRMED.
SO ORDERED.24
PNB moved for reconsideration25 but the motion was denied in
the CA Resolution dated August 10, 2009.26 Hence, the
present recourse whereby PNB argues that the RTC Decision
dated June 2, 2006 lapsed into finality when it was not
appealed or submitted for reconsideration. As such, all
conclusions therein are immutable and can no longer be
modified by any court even by the RTC that rendered the
same. The CA however erroneously altered the RTC Decision
by reversing the pronouncement that PNB is a mortgagee-in-
good-faith.
PNB further asseverates that its mortgage lien was carried
over to the new title issued to Spouses Marañon and thus it
retained the right to foreclose the subject lot upon non-payment
of the secured debt. PNB asserts that it is entitled to the rent
because it became the subject lot’s new owner when the
redemption period expired without the property being
redeemed.
Ruling of the Court
We deny the petition.
It is readily apparent from the facts at hand that the status of
PNB’s lien on the subject lot has already been settled by the
RTC in its Decision dated June 2, 2006 where it was adjudged
as a mortgagee in good faith whose lien shall subsist and be
respected. The decision lapsed into finality when neither of the
parties moved for its reconsideration or appealed.
Being a final judgment, the dispositions and conclusions
therein have become immutable and unalterable not only as
against the parties but even the courts. This is known as the
doctrine of immutability of judgments which espouses that a
judgment that has acquired finality becomes immutable and
unalterable, and may no longer be modified in any respect
even if the modification is meant to correct erroneous
conclusions of fact or law and whether it will be made by the
court that rendered it or by the highest court of the land.27 The
significance of this rule was emphasized in Apo Fruits
Corporation v. Court of Appeals,28 to wit:
The reason for the rule is that if, on the application of one
party, the court could change its judgment to the prejudice of
the other, it could thereafter, on application of the latter, again
change the judgment and continue this practice indefinitely.
The equity of a particular case must yield to the overmastering
need of certainty and unalterability of judicial pronouncements.
The doctrine of immutability and inalterability of a final
judgment has a two-fold purpose: (1) to avoid delay in the
administration of justice and thus, procedurally, to make orderly
the discharge of judicial business and (2) to put an end to
judicial controversies, at the risk of occasional errors, which is
precisely why courts exist. Controversies cannot drag on
indefinitely. The rights and obligations of every litigant must not
hang in suspense for an indefinite period of time. The doctrine
is not a mere technicality to be easily brushed aside, but a
matter of public policy as well as a time-honored principle of
procedural law.29 (Citations omitted)
Hence, as correctly argued by PNB, the issue on its status as a
mortgagee in good faith have been adjudged with finality and it
was error for the CA to still delve into and, worse, overturn, the
same. The CA had no other recourse but to uphold the status
of PNB as a mortgagee in good faith regardless of its defects
for the sake of maintaining stability of judicial pronouncements.
"The main role of the courts of justice is to assist in the
enforcement of the law and in the maintenance of peace and
order by putting an end to judiciable controversies with finality.
Nothing better serves this role than the long established
doctrine of immutability of judgments."30
Further, it must be remembered that what reached the CA on
certiorari were RTC resolutions issued long after the finality of
the Decision dated June 2, 2006. The RTC Orders dated
September 8, 2006 and December 6, 2006 were implements of
the pronouncement that Spouses Marañon are still the rightful
owners of the subject lot, a matter that has been settled with
finality as well. This notwithstanding, the Court agrees with the
ultimate outcome of the CA’s assailed resolutions.
Rent is a civil fruit31 that belongs to the owner of the
property32 producing it by right of accession33.34 The rightful
recipient of the disputed rent in this case should thus be the
owner of the subject lot at the time the rent accrued. It is
beyond question that Spouses Marañon never lost ownership
over the subject lot. This is the precise consequence of the
final and executory judgment in Civil Case No. 7213 rendered
by the RTC on June 3, 2006 whereby the title to the subject lot
was reconveyed to them and the cloud thereon consisting of
Emilie’s fraudulently obtained title was removed. Ideally, the
present dispute can be simply resolved on the basis of such
pronouncement. However, the application of related legal
principles ought to be clarified in order to settle the intervening
right of PNB as a mortgagee in good faith.
The protection afforded to PNB as a mortgagee in good faith
refers to the right to have its mortgage lien carried over and
annotated on the new certificate of title issued to Spouses
Marañon35 as so adjudged by the RTC. Thereafter, to enforce
such lien thru foreclosure proceedings in case of non-payment
of the secured debt,36 as PNB did so pursue. The principle,
however, is not the singular rule that governs real estate
mortgages and foreclosures attended by fraudulent transfers to
the mortgagor.
Rent, as an accessory follow the principal.37 In fact, when the
principal property is mortgaged, the mortgage shall include all
natural or civil fruits and improvements found thereon when the
secured obligation becomes due as provided in Article 2127 of
the Civil Code, viz:
Art. 2127. The mortgage extends to the natural accessions, to
the improvements, growing fruits, and the rents or income not
yet received when the obligation becomes due, and to the
amount of the indemnity granted or owing to the proprietor from
the insurers of the property mortgaged, or in virtue of
expropriation for public use, with the declarations,
amplifications and limitations established by law, whether the
estate remains in the possession of the mortgagor, or it passes
into the hands of a third person.
Consequently, in case of non-payment of the secured debt,
foreclosure proceedings shall cover not only the hypothecated
property but all its accessions and accessories as well. This
was illustrated in the early case of Cu Unjieng e Hijos v.
Mabalacat Sugar Co.38 where the Court held:
That a mortgage constituted on a sugar central includes not
only the land on which it is built but also the buildings,
machinery, and accessories installed at the time the mortgage
was constituted as well as the buildings, machinery and
accessories belonging to the mortgagor, installed after the
constitution thereof x x x .39
Applying such pronouncement in the subsequent case of
Spouses Paderes v. Court of Appeals,40 the Court declared
that the improvements constructed by the mortgagor on the
subject lot are covered by the real estate mortgage contract
with the mortgagee bank and thus included in the foreclosure
proceedings instituted by the latter.41
However, the rule is not without qualifications. In Castro, Jr. v.
CA42 the Court explained that Article 2127 is predicated on the
presumption that the ownership of accessions and accessories
also belongs to the mortgagor as the owner of the principal.
After all, it is an indispensable requisite of a valid real estate
mortgage that the mortgagor be the absolute owner of the
encumbered property, thus:
All improvements subsequently introduced or owned by the
mortgagor on the encumbered property are deemed to form
part of the mortgage. That the improvements are to be
considered so incorporated only if so owned by the mortgagor
is a rule that can hardly be debated since a contract of security,
whether, real or personal, needs as an indispensable element
thereof the ownership by the pledgor or mortgagor of the
property pledged or mortgaged. x x x.43 (Citation omitted)
Otherwise stated, absent an adverse claimant or any evidence
to the contrary, all accessories and accessions accruing or
attached to the mortgaged property are included in the
mortgage contract and may thus also be foreclosed together
with the principal property in case of non-payment of the debt
secured.
Corollary, any evidence sufficiently overthrowing the
presumption that the mortgagor owns the mortgaged property
precludes the application of Article 2127. Otherwise stated, the
provision is irrelevant and inapplicable to mortgages and their
resultant foreclosures if the mortgagor is later on found or
declared to be not the true owner of the property, as in the
instant case.1âwphi1
It is beyond question that PNB’s mortgagors, Spouses
Montealegre, are not the true owners of the subject lot much
less of the building which produced the disputed rent. The
foreclosure proceedings on August 16, 1991 caused by PNB
could not have, thus, included the building found on the subject
lot and the rent it yields. PNB’s lien as a mortgagee in good
faith pertains to the subject lot alone because the rule that
improvements shall follow the principal in a mortgage under
Article 2127 of the Civil Code does not apply under the
premises. Accordingly, since the building was not foreclosed, it
remains a property of Spouses Marañon; it is not affected by
non-redemption and is excluded from any consolidation of title
made by PNB over the subject lot. Thus, PNB’s claim for the
rent paid by Tolete has no basis.
It must be remembered that there is technically no juridical tie
created by a valid mortgage contract that binds PNB to the
subject lot because its mortgagor was not the true owner. But
by virtue of the mortgagee in good faith principle, the law
allows PNB to enforce its lien. We cannot, however, extend
such principle so as to create a juridical tie between PNB and
the improvements attached to the subject lot despite clear and
undeniable evidence showing that no such juridical tie exists.
Lastly, it is worthy to note that the effects of the foreclosure of
the subject lot is in fact still contentious considering that as a
purchaser in the public sale, PNB was only substituted to and
acquired the right, title, interest and claim of the mortgagor to
the property as of the time of the levy.44 There being already a
final judgment reconveying the subject lot to Spouses Marañon
and declaring as null and void Emilie's purported claim of
ownership, the legal consequences of the foreclosure sale,
expiration of the redemption period and even the consolidation
of the subject lot's title in PNB's name shall be subjected to
such final judgment. This is the clear import of the ruling in
Unionbank of the Philippines v. Court of Appeals:45
This is because as purchaser at a public auction, UNIONBANK
is only substituted to and acquires the right, title, interest and
claim of the judgment debtors or mortgagors to the property at
the time of levy. Perforce, the judgment in the main action for
reconveyance will not be rendered ineffectual by the
consolidation of ownership and the issuance of title in the
name of UNIONBANK.46 (Citation omitted)
Nonetheless, since the present recourse stemmed from a mere
motion claiming ownership of rent and not from a main action
for annulment of the foreclosure sale or of its succeeding
incidents, the Court cannot proceed to make a ruling on the
bearing of the CA's Decision dated June 18, 2008 to PNB's
standing as a purchaser in the public auction. Such matter will
have to be threshed out in the proper forum.
All told, albeit the dispositive portions of the assailed CA
decision and resolution are differently premised, they ought to
be upheld as they convey the similar conclusion that Spouses
Marañon are the rightful owners of the rent earned by the
building on the subject lot.
WHEREFORE, foregoing considered, the petition is hereby
DENIED. The Decision dated June 18, 2008 and Resolution
dated August 10, 2009 of the Court of Appeals in CA-G.R. SP
No. 02513 are AFFIRMED.
SO ORDERED.
G.R. No. 187013, April 22, 2015
SPOUSES MAGDALINO AND CLEOFE BADILLA,
Petitioners, v. FE BRAGAT, Respondent.
DECISION
PERALTA, J.:
This is a petition for review on certiorari, under Rule 45 of the
Rules of Court, assailing the Decision dated October 9, 2008
and Resolution dated February 12, 2009 of the Court of
Appeals rendered in CA-G.R. CV No. 70423-MIN.
The case involves the issue of ownership of the subject real
property.
The facts follow.
Azur Pastrano and his wife Profitiza Ebaning (Spouses
Pastrano) were the original owners of Lot No. 19986 (subject
property), located at Tablon, Cagayan de Oro City. Its Original
Certificate of Title (OCT) No. P-2035, consisting of 1,015 sq.
m. was issued on November 18, 1980.1 The OCT was in the
name of Azur Pastrano.2redarclaw
Before the issuance of the OCT, however, the Spouses
Pastrano, on November 18, 1968, sold the lot to Eustaquio P.
Ledesma, Jr. (Ledesma), as evidenced by a Deed of Definite
Sale of Unregistered Coconut and Residential Land.3redarclaw
The petitioners, the spouses Magdalino and Cleofe Badilla
(Spouses Badilla) claimed that in 1970, Ledesma sold to them,
"on installment" basis, a portion amounting to 200 sq. m. of Lot
No. 19986 (subject property). The sale was not reduced in
writing, however, possession of the portion sold was
transferred to the Badillas, which portion the Badillas claim was
designated as Lot No. 19986-B.4redarclaw
On April 18, 1978, the spouses Florito Bragat and Fe Bragat
(Spouses Bragat) bought 991 sq. m. of the property from
Ledesma and his wife, via a Deed of Absolute Sale of a
Residential Lot.5 Two (2) tax declarations were allegedly
issued as a result of the sale: one designated a lot as Lot No.
19986-A with an area of 642 sq. m.,6 while another designated
the other lot as Lot No. 19986-B with an area of 349 sq.
m.7redarclaw
On May 5, 1984, the Spouses Pastrano executed another
Deed of Absolute Sale of Registered Land in favor of herein
petitioner Fe Bragat (Bragat), covered by OCT No. P-2035 and
with an area of 1,015 sq. m.8 On the same date, Azur Pastrano
executed an Affidavit of Loss reporting the loss of the owner's
duplicate copy of OCT No. P-2035.9redarclaw
It was Bragat, however, who petitioned the court for the
issuance of a new owner's duplicate copy of OCT No. P-2035.
Thus, on July 24, 1987, the RTC ordered the issuance of a
new owner's copy of OCT No. P-2035.10redarclaw
On October 2, 1987, the Spouses Pastrano executed yet
another Deed of Sale of Registered Land in favor of Bragat,
which land is again covered by OCT No. P-2035 with an area
of 1,015 sq. m.11 As a result, OCT No. P-2035 was canceled
and TCT No. T-47759 was issued in the name of
Bragat.12redarclaw
On March 7, 1991, Bragat, through her counsel, made a written
demand to vacate against the Spouses Badilla. In response,
the Spouses Badilla, also through their counsel's letter, refused
the demand and raised the earlier sale made by the Spouses
Pastrano to Ledesma and the subsequent sale by Ledesma to
the Badillas.13redarclaw
Hence, the parties filed their respective complaints within days
of each other.
Bragat filed her Complaint for Recovery of Posession and
Damages against the spouses Magdalino and Cleofe Badilla
on June 5, 1992, alleging therein that she is the absolute
owner of Lot No. 19986, covered by TCT No. T-47759. She
claimed to have purchased the property, first, from Eustaquio
Ledesma, Jr., but later, when she found out that Ledesma was
"unauthorized" to sell, she again allegedly made another
purchase of the same property from Azur Pastrano, on May 5,
1984. This led to the cancellation of Pastrano's OCT No. P-
2035 and the issuance of Bragat's TCT No. T-47759. Thus,
she prays for the Spouses Badilla to be ordered to vacate the
around 149-square-meter portion that they occupy in the
property.14redarclaw
Just six days later, on June 11, 1992, the Spouses Badilla filed
their own Complaint for Quieting of Title, Declaration of Nullity
of TCT No. T-47759 and Damages against Bragat, claiming
that the Spouses Badilla are the lawful owners and possessors
of Lot No. 19986-B (a portion of Lot No. 19986), having
acquired it in 1970 from Ledesma. The latter, on his part,
allegedly bought the bigger Lot No. 19986 from Pastrano
earlier on November 18, 1968. The Spouses Badilla alleged
that they took possession of and built a house on the property
upon their purchase thereof from Ledesma and has since
remained in possession. However, they claimed that Pastrano
was subsequently able to obtain a free patent and a title, OCT
No. P-2035, over Lot No. 19986. According to the Badillas,
Pastrano made a sale to Bragat on October 2, 1987, but such
sale is not valid since Pastrano was no longer the owner of the
property on that date. Consequently, the Spouses Badilla
prayed that TCT No. T-47759 issued to Bragat pursuant to that
sale be declared null and void.15redarclaw
After Answers were filed for both complaints, the two cases
were consolidated and heard by one court, Branch 25 of the
RTC of Cagayan de Oro City, as they involved exactly the
same parties and subject lot.
After trial, the RTC found for Bragat, noting that the sketch map
shows the 152-square-meter portion occupied by the Spouses
.Badilla is within the titled property of Bragat.16 It also found
Bragat's title as valid for what it saw as the result of a purchase
in good faith and. for value.17 In contrast, the trial court
observed a lack of evidence of the Spouses Badilla. The latter
allegedly presented handwritten and typewritten receipts which
were purportedly signed by Ledesma, dated March 5, 1989,
March 1, 1991 and March 23, 1991 acknowledging Ledesma's
receipt of certain amounts, but the court claimed that it found
no evidence of (Ledesma's) absolute ownership on these
dates. The court noted that Ledesma had sold previously to the
Spouses Bragat via a Deed of Absolute Sale of Residential
Land dated April 18, 1978. Hence, in the trial court's view, on
March 5, 1989, March 1, 1991 and March 23, 1991, Ledesma
no longer owned the land and transferred nothing to the
Badillas.18 The dispositive portion of the RTC decision
states:LawlibraryofCRAlaw
IN THE LIGHT OF THE FOREGOING, by preponderance of
evidence, judgment is hereby rendered in favor of Spouses Fe
Bragat and Florito Bragat and against Spouses Magdalino and
Cleofe Badilla and dismissing Civil Case No. 92-287 for failure
of Spouses Magdalino and Cleofe Badilla to substantiate their
complaint and for lack of merit and ordering defendants Cleofe
Badilla and Magdalino Badilla in Civil Case No. 92-
273:LawlibraryofCRAlaw
a)
to vacate immediately the 152-square-meter property they are
occupying as shown in Exh. N-2-A, P;
b)
to pay Twenty Thousand Pesos (P20,000.00) by way of moral
damages;
c)
to pay a reasonable rental of One Hundred Pesos (P100.00) a
month from March 1, 1991 at 6% legal interest until they vacate
the premises;
d)
to reimburse Ten Thousand Pesos (P10,000.00) attorney's
fees and Five Thousand Pesos (P5,000.00) as expenses for
litigation as part of consequential damages; and
e)
pay the costs.
SO ORDERED.19
Upon appeal to the CA, the appellate court affirmed the RTC's
decision but modified the same on a finding that Ledesma sold
only 991 sq. of the property to Bragat in 1978; hence, it held
that the remaining 24 sq. of the 1,015-sq.-m. property was
validly sold to the Badillas in 1991 and, therefore, must be
reconveyed to the latter.20 It also removed the award of
damages. The dispositive portion of the CA's decision is as
follows:LawlibraryofCRAlaw
WHEREFORE, the instant appeal is PARTIALLY GRANTED.
The January 14, 2001 Judgment (of the RTC) is MODIFIED in
that:LawlibraryofCRAlaw
a)
appellants are ordered to VACATE 128 square meters of the
disputed lot and appellee is ordered to RECONVEY 24 square
meters of the disputed lot to appellants, and
b)
the reimbursement of attorney's fees and expenses of litigation
and the payment of costs are DELETED.
This case is REMANDED to the court of origin for the purpose
of determining the 24-square-meter lot to be reconveyed to
appellants.
SO ORDERED.21
Hence, this petition.
Petitioners Spouses Badijla contend that ownership of the 200-
sq.-m. portion was transferred to them when they purchased
the same and possession was delivered to them by Ledesma
in 1970.22 They also contend that when OCT No. P-2035 was
actually issued in 1980, it was first delivered by Pastrano to
Ledesma and, the latter delivered the same to them (the
Badillas).23 Thus, Bragat allegedly falsely claimed the "loss" of
the title when she petitioned the court for a new duplicate
original, because such title was not lost but had been with the
Badillas all along.24 Another fraud that Bragat allegedly
committed was the Deed of Sale dated October 2, 1987, in
which Profitiza Pastrano signed (in marital consent) although
she had been dead since March 30, 1985.25redarclaw
In her Comment, Bragat claims that the sale of October 2,
1987 was only a "re-execution" of the sale of May 5, 1984, in
order to avoid tax surcharges.26 Further, she alleges that the
Badillas1 documentary evidence were all executed only after
she had the property titled to her name.27redarclaw
The Court resolves to GRANT the petition.
The issue is one of ownership of the subject property.
This Court notes that the arguments raised call for a re-
examination of the factual findings of the trial court and the
appellate court. It must be stressed that it is a time-honored
rule that in a petition for review on certiorari under Rule 45,
only questions of law may be raised.28 Certainly, it is equally
observed that factual findings of the Court of Appeals, affirming
those of the trial court, are binding on this Court.29redarclaw
However, these rules admit of certain exceptions, such as
when the judgment of the Court of Appeals is premised on a
misapprehension of facts, or is belied by the evidence on
record, or fails to notice certain relevant facts which, if properly
considered, will justify a different conclusion.30 After a
thorough examination of the findings of the trial court and Court
of Appeals, this Court concludes that the case falls under these
exceptional situations. Such findings must be reversed.
The error of the courts below is in misapprehending the fact
that ownership' passed to the Spouses Badilla upon their
purchase of the subject property from Eustaquio Ledesma.
It is not disputed that the spouses Azur and Profitiza Pastrano
had previously sold on November 18, 1968, via a Deed of
Definite Sale of Unregistered Coconut and Residential Land,
the property to Eustaquio Ledesma.31 Therefore, as early as
such date, it is established that the Pastranos no longer had
ownership over the property.
Then, as Ledesma subsequently sold, in 1970, a portion of the
property to the petitioner Spouses Badilla, who immediately
took delivery and possession, ownership of this portion had
also been transferred to the said spouses. Although that sale
appears to be merely verbal, and payment therefor was to be
made on installment, it is a partially consummated sale, with
the Badillas paying the initial purchase price and Ledesma
surrendering possession.32 That the parties intended for
ownership to be transferred may be inferred from their lack of
any agreement stipulating that ownership of the property is
reserved by the seller and shall not pass to the buyer until the
latter has fully paid the purchase price.33 The fact is, Ledesma
even delivered to the Badillas the owner's duplicate copy of
OCT No. P-2035.34 The Civil Code states that ownership of
the thing sold is transferred to the vendee upon the actual or
constructive delivery of the same.35 And the thing is
understood as delivered when it is placed in the control and
possession of the vendee.36 Payment of the purchase price is
not essential to the transfer of ownership as long as the
property sold has been delivered; and such delivery (traditio)
operated to divest the vendor of title to the property which may
not be regained or recovered until and unless the contract is
resolved or rescinded in accordance with law.37redarclaw
The same is true even if the sale is a verbal one, because it is
held that when a verbal contract has been completed,
executed or partially consummated, its enforceability will not be
barred by the Statute of Frauds, which applies only to an
executory agreement.38 Thus, where a party has performed
his obligation, oral evidence will be admitted to prove the
agreement. And, where it was proven that one party had
delivered the thing sold to another, then the contract was
partially executed and the Statute of Frauds does not
apply.39redarclaw
Therefore, with the Spouses Bad ilia owning and occupying the
said 152-square-meter portion since 1970, it may be concluded
that TCT No. T-47759 (which canceled OCT No. P-2035)
covering the said portion has been wrongfully
issued.40redarclaw
In addition, TCT No. T-47759 was issued to Fe Bragat on the
strength of a Deed of Sale of Registered Land dated October
2, 1987.41 This deed of sale, however, is void for being
simulated, since both the vendor (Pastrano) and the vendee
(Bragat) knew at the time of its execution of the vendor's lack
of ownership over Lot No. 19986, the property being sold. At
that time, it was not Pastrano but Ledesma who was absolute
owner of the property by virtue of the latter's earlier purchase
of Lot No. 19986 from the Spouses Pastrano on November 18,
1968, via a Deed of Definite Sale of Unregistered Coconut and
Residential Land.42 Bragat herself knew this, as she and her CA-G.R. CV No. 70423 -MM are hereby REVERSED and SET
husband themselves first bought the property from Ledesma ASIDE. Transfer Certificate of Title No. T-47759 is DECLARED
through a Deed of Absolute Sale of Residential Land dated VOID, and, in its place, two (2) new transfer certificates of titles
April 18, 1978.43redarclaw are ORDERED ISSUED, namely: (1) in the name of the
Spouses Magdalino and Cleofe Badilla, covering the 152 sq.
In fact, it is from this sale in 1978 that Fe Bragat derives title on m. that they are occupying, and (2) in the name of Fe Bragat,
the property and not from tjhe Deeds of Sale dated May 5, covering the remaining 863 sq. m. of the property, of which
1984 and October 2, 1987 executed between her as vendee measurements are to be based on Exhibits "N"51 and Exhibit
and Pastrano as vendor. Pastrano could no longer sell any part "N-2".52redarclaw
of the property to Bragat on such later dates since he had
already sold the same as early as November 18, 1968 to SO ORDERED
Ledesma. Well-settled is the rule that no one can give what
one does not have - nemodat quod non habet - and,
accordingly, one can sell only what one owns or is authorized
to sell, and the buyer acquires no better title than the seller.44
Thus, the sales made on the dates May 5, 1984 and October 2,
1987 are void for being [simulated and for lack of a subject
matter. On these sales, Bragat cannot clajim good faith as she
herself knew of Pastrano's lack of ownership.

It needs emphasis, however, that Bragat's property bought

from Ledesma in 1978 does not include the 152-sq.-m. portion
that was already bought by the Badillas.

Therefore, Fe Bragat is entitled to a new transfer certificate of

title issued in her name, but on the basis of the Deed of
Absolute Sale dated April 18, 1978, and excluding the 152 sq.
m. in area that the Spouses Badilla have already bought and
have been occupying since 1970, but which are currently
covered by Bragat's existing title, TCT No. T-47759. Hence,
Bragat's TCT No. T-47759 (which canceled OCT No. P-2035),
covering 1,015 sq. m., should be declared void and cancelled
and, in its place, two (2) new ones should be issued: (1) in the
name of the spouses Magdalino and Cleofe Badilla, covering
the 152 sq. m. that they are occupying, and (2) in the name of
Fe Bragat, covering [the remaining 863 sq. m. The metes and
bounds of these two lots are to be based on the survey plans
already submitted by appointed commissioners to the lower
court during trial, which are: the Commissioner's Relocation
Survey Report (Exhibit "N")45 signed by Engr. Benigno B.
Manlangiti et al., as well as the accompanying Relocation
Sketch Plan (Exhibit "N-2")46 prepared by the same
commissioner.

This ruling is compelled by the involvement in this case of not

just one instance of double sales but a series of such sales
made by two different vendors. First, it is admitted that
Pastrano sold the property to Ledesma in 1968; then, Pastrano
sold it again to Bragat in 1984 and 1987. But Ledesma, too,
sold part of the property to the Spouses Badilla in 1970 and
then the entire lot to the Spouses; Bragat in 1978. In such a
situation of multiple sales, Article 1544 of the Civil Code relates
that ownership shall belong to the person acquiring the
property who, in good faith, first recorded such acquisition.47
Presently, however, it cannot be said that Bragat's recording of
her 1987 purchase was in good faith because that sale was
simulated and Bragat was aware of other persons who have an
interest on the property. That the 1987 sale is void is further
revealed by evidence to show that one of its signatories,
Profitiza Pastrano was already dead when it was executed.48
Bragat herself also admitted that she knew of the Spouses
Badillas' occupation prior to her purchase.49 In that case, the
same Article 1544 of the Civil Code provides that when neither
buyer registered, in good faith, the sale of the properties with
the register of deeds, the one who took prior possession of the
properties shall be the lawful owner thereof.50 Such prior
possessors, at least with respect to the 152-sq.-m. portion, are
indisputably the Spouses Badilla.

WHEREFORE, premises considered, the petition is

GRANTED. The assailed Decision dated October 9, 2008 and
Resolution dated February 12, 2009 of the Court of Appeals in
G.R. No. 214587, February 26, 2018
JOSEPHINE P. DELOS REYES AND JULIUS C. PERALTA,
REPRESENTED BY THEIR ATTORNEY-IN-FACT, J.F.
JAVIER D. PERALTA, Petitioners, v. MUNICIPALITY OF
KALIBO, AKLAN, ITS SANGGUNIANG BAYAN AND
MAYOR RAYMAR A. REBALDO, Respondents.
DECISION
PERALTA, J.:
This is a petition for review seeking to annul and set aside the
Decision1 of the Court of Appeals (CA) Cebu, Nineteenth
(19th) Division, dated September 28, 2012, and its Resolution2
dated August 28, 2014 in CA-G.R. CEB-CV No. 00700 which
reversed and set aside the Decision3 of the Regional Trial
Court (RTC), Branch 6 of Kalibo, Aklan on February 22, 2005
in Civil Case No. 5440, thereby declaring the subject properties
as part of public land.
The factual and procedural antecedents, as evidenced by the
records of the case, are the following:
Lot No. 2076 of the Kalibo Cadastre, with a total area of
101,897 square meters (sq.m.), was covered by Original
Certificate of Title (OCT) No. 24435 RO-831, and registered in
the name of Ana O. Peralta. Upon her demise, her property
passed on to her brother, Jose Peralta, who caused
registration of the same in his name under Transfer Certificate
of Title (TCT) No. T-5547, issued on January 13, 1975. Jose
later had the property divided into Lots 2076-A and 2076-B,
and sold the latter portion. Lot 2076-A, on the other hand,
remained in Jose's name and was registered under TCT No.
6166 on November 17, 1975.
In the meantime, allegedly through accretion, land was added
to Lot No. 2076. Said area was first occupied by and declared
for taxation purposes (Tax Declaration No. 6466) in the name
of Ambrocio Ignacio in 1945. He was the Peraltas' tenant, but
he later executed a Quitclaim of Real Property in Jose's favor
for the amount of P70.44 on March 14, 1955. When Jose died,
Lot 2076-A, together with the supposed area of accretion, was
transferred to his son, Juanito Peralta. While TCT T-13140 was
issued for Lot 2076-A on September 1, 1983, the area of
accretion was apportioned and registered under Tax
Declaration Nos. 21162-A, 21163-A, 21164-A, and 21165-A in
the names of siblings Juanito, Javier Peralta, Josephine delos
Reyes, and Julius Peralta. Subsequently, Juanito likewise died.
On the other hand, the Municipality of Kalibo, through its then
Mayor Diego Luces and the members of its Sangguniang
Bayan, sought to convert more or less four (4) hectares of said
area of accretion into a garbage dumpsite. On November 10,
1992, Juanito, in his capacity as his siblings' representative,
opposed said project in a letter. For failure to get a favorable
response from the mayor's office, he wrote a formal protest to
the Secretary of the Department of Environment and Natural
Resources (DENR) on October 2, 1997.
Despite the Peraltas' opposition, the Municipality of Kalibo
continued the project under the justification that the contested
property is actually part of the public domain. Moreover, the
DENR's Environmental Compliance Certificate (ECC) showed
that the project would not harm the dumpsite's neighboring
areas, including the water systems. Thus, the municipality built
a retaining wall on the property facing the Aklan river in 1996.
More of the structures were built on the area from 1997 to
1998. Later, the area was enclosed with a perimeter fence.
On January 26, 1998, the Peraltas filed a Complaint4 for
quieting of title over the two (2) portions of accretion declared
in their names for taxation purposes.
The Peraltas' prayer for an injunctive writ against the
construction of the dumpsite was denied, but on February 22,
2005, the RTC of Kalibo, ruled in their favor, thus:
WHEREFORE, in view of the foregoing considerations,
judgment is hereby rendered in favor of the plaintiffs and
against the defendants declaring the aforedescribed parcels of
land as an accretion and not a public land. Defendants are also
ordered to cease and desist from occupying that portion of the
garbage dumpsite with an area of 31,320 square meters,
indicated in Parcels I, II and III of Annex A of the
Commissioner's Report (Exh. "13") which are within Lots 3 and
4 of plaintiffs' property.
No award for damages and attorney's fees for want of
evidence to support the same.
Costs against the defendants.
SO ORDERED.5
Undaunted, the Municipality of Kalibo brought the matter to the
CA Cebu. On September 28, 2012, the CA granted its appeal
and reversed the assailed RTC ruling, hence:
IN LIGHT OF THE FOREGOING, the appeal is GRANTED.
The assailed February 22, 2005 Decision of the Regional Trial
Court, Branch 6 of Kalibo, Aklan in Civil Case No. 5440 is
hereby REVERSED and SET ASIDE.
SO ORDERED.6
The Peraltas then filed a Motion for Reconsideration, but the
same was denied in a Resolution dated August 28, 2014.
Hence, the instant petition.
The main issue in this case is whether or not the CA committed
an error when it reversed the RTC, which declared the subject
parcels of land as accretion and not part of the public domain.
The Court rules in the negative.
In order that an action for quieting of title may prosper, the
plaintiff must have legal or equitable title to, or interest in, the
property which is the subject matter of the action. While legal
title denotes registered ownership, 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.7
Likewise, the plaintiff must show that the deed, claim,
encumbrance, or proceeding that purportedly casts a cloud on
their title is in fact invalid or inoperative despite its prima facie
appearance of validity or legal efficacy.8
It must be noted that the Peraltas, the petitioners in the instant
case, are not even registered owners of the area adjacent to
the increment claimed, much less of the subject parcels of
land. Only the late Juanito became the registered owner of Lot
2076-A, the lot next to the supposed accretion. Assuming that
the petitioners are Juanito's rightful successors, they still did
not register the subject increment under their names. It is
settled that an accretion does not automatically become
registered land just because the lot that receives such
accretion is covered by a Torrens Title. Ownership of a piece of
land is one thing; registration under the Torrens system of that
ownership is another. Ownership over the accretion received
by the land adjoining a river is governed by the Civil Code;
imprescriptibility of registered land is provided in the
registration law. Registration under the Land Registration and
Cadastral Act does not vest or give title to the land, but merely
confirms and, thereafter, protects the title already possessed
by the owner, making it imprescriptible by occupation of third
parties. But to obtain this protection, the land must be placed
under the operation of the registration laws, wherein certain
judicial procedures have been provided.9
If at all, whatever rights the Peraltas derived from their
predecessors-in-interest respecting the area in question came
only from the quitclaim of real property executed by Ignacio in
Jose's favor in 1955. There is no concrete evidence showing
any right of title on Ignacio's part for him to be able to legally
and validly cede the property to Jose. What the quitclaim
merely proves is that Ignacio had forfeited any claim or interest
over the accretion in Jose's favor. It is settled that equitable
title is defined as a title derived through a valid contract or
relation, and based on recognized equitable principles, or the
right in the party, to whom it belongs, to have the legal title
transferred to him. In order that a plaintiff may draw to himself
an equitable title, he must show that the one from whom he
derives his right had himself a right to transfer.10 Considering
the aforementioned facts, the plaintiffs have neither legal nor
equitable title over the contested property.
Moreover, even the character of the land subject of the
quitclaim is highly questionable. Ignacio, who was purportedly
the first occupant of the area in 1945 and who was also in the
best position to describe the lot, stated that "the said parcel of
swampy land is an integral expansion or continuity of the said
Cadastral Lot No. 2076, formed by a change of the shoreline of
the Visayan Sea, which shoreline has receded towards the
North, thus, leaving the swampy or parcel of land described in
the immediately preceding paragraph which accrues to the
owner of said right of said Cadastral Lot No. 2076 (Torrens
Title No. 24435), Jose O. Peralta by right of lawful accretion or
accession."11
Article 457 of the Civil Code of the Philippines, under which the
Peraltas claim ownership over the disputed parcels of land,
provides:
Art. 457. To the owners of lands adjoining the banks of rivers
belong the accretion which they gradually receive from the
effects of the current of the waters.
Accretion is the process whereby the soil is deposited along
the banks of rivers. The deposit of soil, to be considered
accretion, must be: (a) gradual and imperceptible; (b) made
through the effects of the current of the water; and (c) taking
place on land adjacent to the banks of rivers.12
Here, Ignacio characterized the land in question as swampy
and its increase in size as the effect of the change of the
shoreline of the Visayan Sea, and not through the gradual
deposits of soil coming from the river or the sea. Also, Baltazar
Gerardo, the Officer-in-Charge of the Community Environment
and Natural Resources Office of the Bureau of Lands, found
upon inspection in 1987 that the subject area was
predominantly composed of sand rather than soil.13 One of the
plaintiffs, Javier, also testified that in 1974 or 1976, the Visayan
Sea was around one (1) kilometer from the land in question,
and in 2003, the distance already became around three (3)
kilometers, giving the impression that the increment was
actually the result of additional area of sand deposits left by the
sea when it had receded, and not by gradual deposits of soil or
sediment caused by the action of water. In addition, the DENR
has remained firm and consistent in classifying the area as
land of the public domain for being part of either the Visayan
Sea of the Sooc Riverbed and is reached by tide water.
Further, the Sheriffs Report dated July 13, 1998 shows that
when he conducted an ocular inspection of the area, part of it
was reached by the tide. At around 11:30 a.m., he was able to
measure the deepest portion of the high tide at around
nineteen (19) inches, and its wideness at five (5) meters near
the concrete wall.14
Indeed, by reason of their special knowledge and expertise
over matters falling under their jurisdiction, administrative
agencies, like the DENR, are in a better position to pass
judgment on the same, and their findings of fact are generally
accorded great respect, if not finality, by the courts. Such
findings must be respected as long as they are supported by
substantial evidence, even if such evidence is not
overwhelming or even preponderant.15 Hence, the
questionable character of the land, which could most probably
be part of the public domain, indeed bars Jose from validly
transferring the increment to any of his successors.
Indubitably, the plaintiffs are merely successors who derived
their alleged right of ownership from tax declarations. But
neither can they validly rely on said tax declarations and the
supposed actual, open, continuous, exclusive, and notorious
possession of the property by their predecessors-in-interest.
Any person who claims ownership by virtue of tax declarations
must also prove that he has been in actual possession of the
property. Thus, proof that the property involved had been
declared for taxation purposes for a certain period of time,
does not constitute proof of possession, nor is it proof of
ownership, in the absence of the claimant's actual possession
of said property.16 In the case at bar, the Peraltas failed to
adequately prove their possession and that of their
predecessors-in-interest.
Verily, in civil cases, the party having the burden of proof must
do so with a preponderance of evidence, with plaintiff having to
rely on the strength of his own evidence and not upon the
defendant's weakness. 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 evidence" or "greater weight of credible
evidence." Succinctly put, it only requires that evidence be
greater or more convincing than the opposing evidence.17
Since the Peraltas must first establish their legal or equitable
title to or interest in the property in order for their action for
quieting of title may prosper, failure to do so would mean lack
of cause of action on their part to pursue said remedy.
WHEREFORE, PREMISES CONSIDERED, the Court DENIES
the petition, and AFFIRMS the Decision of the Court of
Appeals Cebu, Nineteenth (19th) Division, dated September
28, 2012, and Resolution dated August 28, 2014 in CA-G.R.
CEB-CV No. 00700.
SO ORDERED.