eptember 16, 2015

G.R. No. 173186

ANICETO UY, Petitioner,
vs.
COURT OF APPEALS, MINDANAO STATION, CAGAYAN DE ORO CITY, CARMENCITA
NAVAL-SAI, REP. BY HER ATTORNEY-INFACT RODOLFO FLORENTINO, Respondents.

DECISION

JARDELEZA, J.:

This is a Petition for Review on Certiorari  under Rule 45 of the Revised Rules of Court
1

assailing the Decision  dated January 26, 2006 of the Court of Appeals, Mindanao Station,
2

Cagayan de Oro City in CA-G.R. CV No. 70648, and its Resolution  dated May 18, 2006
3

denying petitioner's motion for reconsideration.

The Facts

In 1979, private respondent Carmencita Naval-Sai (Naval-Sai) acquired ownership of a

parcel of land described as Lot No. 54-B (LRC) Psd 39172 and covered by Transfer
Certificate of Title (TCT) No. T-19586 from herbrother. The land was later subdivided, with
the corresponding titles issued in Naval-Sai's name in the Register of Deeds of North
Cotabato.  Two of these subdivided lots, Lots No. 54-B-8 (LRC) Psd 173106 and No. 54-B-9
4

(LRC) Psd 173106, covered by TCTs No. T-58334 and No. T-58335,  respectively, are the
5

subject of this case.

Subsequently, Naval-Sai sold Lot No. 54-B-7 (LRC) Psd 173106 to a certain Bobby Adil on
6

installment, onthe condition that the absolute deed of sale will be executed only upon full
payment. Adil failed to pay the amortization, forcing him to sell his unfinished building on the
property to spouses Francisco and Louella Omandac. 7

Meanwhile, Naval-Sai borrowed money from a certain Grace Ng. As security, Naval-Sai
delivered to Ng TCTs No. T-58334 and No.T-58335 covering Lots No. 54-B-8 and No. 54-B-
9, respectively. Ng, on the other hand, borrowed money from petitioner and also delivered to
the latter the two titles to guarantee payment of the loan. 8

Sometime thereafter, Naval-Sai learned that petitioner filed a case for recovery of
possession (Civil Case No. 1007) against Francisco Omandac. Branch 17 of the Regional
Trial Court (RTC) in Kidapawan City ruled in favor of petitioner.  Naval-Sai filed a motion for
9

new trial before the Court of Appeals, arguing that her signature in the purported deed of
sale presented in the case between her and petitioner was a forgery. Civil Case No. 1007,
however, became final and executory in 2001.  The spouses Omandac were ejected from
10

the property and petitioner gained possession of the same. 11

In July 1999, Naval-Sai filed a Complaint for Annulment of Deed with Damages  before the 12

same Branch 17 of the RTC in Kidapawan City against petitioner. The subject of the
complaint was the deed of sale allegedly executed between Naval-Sai and petitioner
involving Lots No. 54-B-8 and No. 54-B-9. Naval-Sai prayed that the deed of sale be
declared null and void ab initiobecause the alleged sale between her and petitioner was a
forgery. Naval-Sai argued that she never sold the lots and that her signature in the purported
deed of sale is spurious.

Naval-Sai filed an Amended Complaint  dated July 29, 1999. She asserted that the subject
13

TCTs were already cancelled by virtue of the deed of sale. TCT No. T-62446 was issued in
lieu of TCT No. T-58334 and TCT No. T-62447 replaced TCT No. T-58335. Hence, the
Amended Complaint added as a relief the declaration of TCTs No. T-62446 and No.T-62447,
which were registered in the name of petitioner, as null and void abinitio.Unlike the original
complaint, however, the Amended Complaint was not signed by Naval-Sai, but by her
counsel.
In his Answer with Counterclaim  dated October 4, 1999, petitioner specifically denied that
14

the two TCTs were delivered to him by Ng as a guaranty for payment of her loan. Petitioner
claimed that he and Naval-Sai entered into a valid contract of sale in 1981 and that the lots
were sold for value. The corresponding TCTs were issued in his name shortly thereafter and
since then, he had been in complete control of the properties. When Francisco Omandac
constructed a house in one of the properties, petitioner filed Civil Case No. 1007.

Petitioner also raised special and affirmative defenses of, among others, non-compliance
with the requisite certification of non-forum shopping and prescription. He asserted that
jurisdiction has never been acquired over the parties and the subject matter because the
certification against forum shopping in the Amended Complaint was defective, for having
been merely signed by Naval-Sai's counsel. He further claimed that the action for annulment
of deed of sale is already barred by the statute of limitations and that Naval-Sai is guilty of
estoppel and laches.

The RTC dismissed the complaint on the grounds of prescription and a defective certification
against forum shopping. The dispositive portion of its order reads:

WHEREFORE, finding the defendant’s defense meritorious, this Court hereby orders the
dismissal of the instant complaint without prejudice to the prosecution in the same action of
the counterclaim pleaded in the answer pursuant to Section 6 Rule 16 of the Rules of Court.

Let the hearing on the counterclaim be set on March 30, 2001.

SO ORDERED. 15

The RTC found the action for annulment of deed of sale to be a collateral attack on the titles,
which is prohibited by law under the principle of indefeasibility of title after the lapse of one
year from registration. The RTC explained that Naval-Sai’s complaint was not only for the
annulment of deed of sale but, ultimately, for the cancellation of the titles in the name of
petitioner, thus:

It is true that an action to set aside a contract which is void [abinitio] does not prescribe.
However, a closer glance on the substance of the plaintiff’s claim would reveal that its
ultimate thrust is to have the Transfer Certificate of Title Nos. T-62446 and T-62447
cancelled. This is evidenced by the plaintiff’s prayer asking for the declaration of TCT Nos. T-
62446 and TCT No. 62447 registered in the name of the defendant as null and void [ab initio]
in addition to her prayer for the declaration of nullity of the subject deed of sale. x xx

Under the Land Registration Act, a title is valid and effective until annulled or reviewed in a
direct proceeding and not in a collateral one, which review must be made within one year
from the issuance of the title. After the lapse of such period, the title would be conclusive
against the whole world including the government. In other words, the title, after the lapse of
one year from registration become[s] indefeasible. 16

On the issue of non-compliance with the required certification on non-forum shopping, the
RTC noted that Naval-Sai did not explain why she failed to comply with the Rules. The RTC
cited the case of Five Star Bus Company, Inc. v. Court of Appeals where we, faced with the
17

similar issue of whether or not to dismiss a petition on the ground that the certification was
signed by counsel, ruled that there was non-compliance with the Supreme Court Revised
Circular No. 28-91  and that substantial compliance cannot be applied.
18 19

The Court of Appeals set aside the order of the RTC in the now assailed Decision dated 20

January 26, 2006.The Court of Appeals ruled that there was substantial compliance with the
requirement of verification and certification of non-forum shopping. It noted that the original
complaint has a proper verification and certification of non-forum shopping signed by Naval-
Sai herself. What was signed by Naval-Sai’s counsel was the amended complaint dated July
29, 1999. Its verification and certification carries the statement "x xxthat this [a]mended
[c]omplaint should be taken and read together with the original complaint; x xx"  which the
21

Court of Appeals found to be a "cautionary move" tantamount to substantial compliance. The 22

Court of Appeals further explained that the rule on certification against forum shopping was
complied with in the original complaint because although an amended complaint supersedes
the pleading that it amends, it is not an initiatory pleading contemplated under the Rules of
Court.23

On the issue of whether the action is a collateral attack in relation to prescription, the Court
of Appeals ruled that it is neither a direct nor a collateral attack. According to the Court of
Appeals, the action is a direct attack when the object of an action is to annul or set aside the
judgment in the registration proceeding. On the other hand, a collateral attack is when, in an
action to obtain a different relief, an attack on the judgment or registration proceeding is
nevertheless made as an incident thereof.

Here, however, Naval-Sai is seeking a relief for an annulment of the deed of sale, which is
not an attack on the judgment or registration proceeding pursuant to which the titles were
decreed. It does not seek to set aside the judgment of registration of titles nor does it seek to
nullify the title by challenging the judgment or proceeding that decreed its issuance. The
action is in reality one for reconveyance, which is imprescriptible when based on a void
contract. Thus:

A perusal of the records of the case shows that the caption of appellant’s Complaint before
the RTC is annulment of deed. However considering that the ultimate relief sought is for the
appellee to "return" the subject property to him, it is in reality an action for reconveyance. In
De Guzman [v.] Court of Appeals, the Court held that, "the essence of an action for
reconveyance is that the decree of registration is respected as incontrovertible but what is
sought instead is the transfer of the property which has been wrongfully or erroneously
registered in another person’s name, to its rightful owner or to one with a better right."

xxx

An action for reconveyance on the ground that the certificate of title was obtained by means
of a fictitious or forged deed of sale is virtually an action for the declaration of the nullity of
the forged deed, hence, it does not prescribe. x xx 24

However, the Court of Appeals emphasized that despite its discussion on the prescriptibility
of the action, it has not made a finding that the deed of sale is indeed fictitious or forged
because it is for the RTC to rule on after evidence has been presented and evaluated. Thus,
the relevant dispositive portion of the Court of Appeals' decision reads:

WHEREFORE, premises considered, the petition is GRANTED. The assailed Order of

dismissal dated 30 March 2001 is hereby SET ASIDE and deemed of no effect.

Let this case be remanded to the lower court for further proceedings.

SO ORDERED. 25

Petitioner filed a Motion for Reconsideration  onMarch 3, 2006, which was denied by the
26

Court of Appeals in its Resolution  dated May 18, 2006.

27

Hence, this petition, which raises the following issues:

I.

THE COURT OF APPEALS ERRED WHEN IT RULED THAT THERE WAS SUBSTANTIAL
COMPLIANCE WITH THE REQUIREMENTS ON CERTIFICATION FOR NON-FORUM
SHOPPING.

II.

THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE ACTION HAS
PRESCRIBED AND/OR THE PRIVATE RESPONDENT IS GUILTY OF INACTION, LACHES
OR ESTOPPEL.

Our Ruling
 There was substantial compliance with the requirements on certification against
forum shopping.

A certification against forum shopping is a peculiar and personal responsibility of the party,
an assurance given to the court or other tribunal that there are no other pending cases
involving basically the same parties, issues and causes of action.  It must be executed by
28

the party-pleader, not by his counsel. If, however, for reasonable or justifiable reasons, the
party-pleader is unable to sign, he must execute a Special Power of Attorney (SPA)
designating his counsel of record to sign on his behalf. 29

Here, the original complaint contained a proper verification and certification against forum
shopping duly signed by Naval-Sai as plaintiff. The verification and certification in the
amended complaint, on the other hand, was only signed by her counsel, Atty. Norberto L.
Ela. Atty. Ela was not authorized to sign on behalf of Naval-Sai, as in fact, she assigned one
Rodolfo Florentino as agent.  The Court of Appeals pointed out that in the certification in the
30

amended complaint, Atty. Ela specified that it should be taken and read together with the
original complaint. The Court of Appeals took this as a cautionary move on the part of Naval-
Sai, justifying the relaxation of the rules on the ground of substantial compliance. We find,
however, that this cautionary move is ineffectual because under the Rules of Civil Procedure,
an amended complaint supersedes the original complaint.  For all intents and purposes,
31

therefore, the original complaint and its verification and certification ceased to exist. This,
notwithstanding, we find there was still substantial compliance with the Rules.

In the case of Far Eastern Shipping Company v. Court of Appeals,  while we said that,
32

strictly, a certification against forum shopping by counsel is a defective certification, the

verification, signed by petitioner’s counsel in said case, is substantial compliance because it
served the purpose of the Rules of informing the Court of the pendency of another action or
proceeding involving the same issues. We then explained that procedural rules are
instruments in the speedy and efficient administration of justice which should be used to
achieve such end and not to derail it. 33

We also find that the prima facie merits of the case serve as a special circumstance or a
compelling reason to relax the rules on certification against forum shopping.

In Sy Chin v. Court of Appeals,  we recognized the flaw in the certification against forum
34

shopping which was signed only by the counsel, and not by the party. In LDP Marketing, Inc.
v. Monter,  there was initially no proof that the one who signed the certification was
35

authorized to do so in behalf of the corporation. In these two cases, we nonetheless chose to

overlook the procedural lapses in the interest of substantial justice and the existence of
prima facie merit in the petitions.

We have ruled that the general rule is that non-compliance or a defect in the certification is
not curable by its subsequent submission or correction. However, there are cases where we
exercised leniency and relaxed the rules on the ground of substantial compliance, the
presence of special circumstances or compelling reasons.  The rules on forum-shopping are
36

designed to promote and facilitate the orderly administration of justice and "should not be
interpreted with such absolute literalness as to subvert its own ultimate and legitimate
objective or the goal of all rules of procedure— which is to achieve substantial justice as
expeditiously as possible."37

The nature of Naval-Sai’s

action is an action for
reconveyance based on a void
contract, which does not
prescribe.

Petitioner argues that Naval-Sai’s action has already prescribed because her action should
have been filed within one year from the time of the registration of the titles. He asserts that
even if the action is in reality one for reconveyance as found by the Court of Appeals, the
same is still barred by prescription based on judicial pronouncements that an action for
reconveyance of registered land based on implied trust prescribes in ten (10) years.
Petitioner also accuses Naval-Sai guilty of laches and estoppel for her failure to assert her
right over the two lots for more than eighteen (18) years.
In order to arrive at a conclusion on whether the action has prescribed, we have to determine
the nature of the action.

We agree with the Court of Appeals that the action of Naval-Sai is one for reconveyance.
Although the designation of the complaint is annulment of deed, and does not include
reconveyance, the facts alleged and reliefs sought show that reconveyance is the end goal.
What determines the nature of the action are the allegations in the complaint. The cause of
action in a complaint is not determined by the designation given by the complaint, but by
what the allegations in the body of the complaint define or describe, as well as the character
38

of the relief sought.

39

An action for reconveyance is a legal and equitable remedy granted to the rightful owner of
land which has been wrongfully or erroneously registered in the name of another for the
purpose of compelling the latter to transfer or reconvey the land to him.  In an action for
40

reconveyance, the decree of registration is respected as incontrovertible. What is sought

instead is the transfer of the property, which has been wrongfully or erroneously registered in
another person’s name, to its rightful and legal owner, or to one with a better right. However,
41

such recourse cannot be availed of once the property has passed to an innocent purchaser
for value. For an action for reconveyance to prosper, the property should not have passed
into the hands of an innocent purchaser for value. 42

Here, Naval-Sai does not only seek to annul the purported deed of sale but also to cancel
TCTs No. T-62446 and No. 62447 in the name of petitioner. If the reliefs are granted and the
TCTs are cancelled, the titles to

the lots will revert to Naval-Sai as she was the previously registered owner. Thus, a ruling in
favor of Naval-Sai would be equal to what an action for reconveyance seeks to accomplish.

An action for reconveyanceis basedon Section 53, paragraph 3 of Presidential Decree (PD)
No. 1529,  which provides:
43

In all cases of registration procured by fraud, the owner may pursue all his legal and
equitable remedies against the parties to such fraud without prejudice, however, to the rights
of any innocent holder for valueof a certificate of title. x x x

In Caro v. Court of Appeals,  we said that this provision should be read in conjunction with
44

Article 1456 of the Civil Code, which provides:

Article 1456. If property is acquired through mistake or fraud, the person obtaining it is, by
force of law, considered a trustee of an implied trust for the benefit of the person from whom
the property comes.

The law creates the obligation of the trustee to reconvey the property and its title in favor of
the true owner. Correlating Section 53, paragraph 3 of PD No. 1529 and Article 1456 of the
Civil Code with Article 1144 (2) of the Civil Code,  the prescriptive period for the
45

reconveyance of fraudulently registered real property is ten (10) years reckoned from the
date of the issuance of the certificate of title.  This ten-year prescriptive period begins to run
46

from the date the adverse party repudiates the implied trust, which repudiation takes place
when the adverse party registers the land.  An exception to this rule is when the party
47

seeking reconveyance based on implied or constructive trust is in actual, continuous and

peaceful possession of the property involved.  Prescription does not commence to run
48

against him because the action would be in the nature of a suit for quieting of title, an action
that is imprescriptible. 49

The foregoing cases on the prescriptibility of actions for reconveyanceapply when the action
is based on fraud, or when the contract used as basis for the action is voidable. Under Article
1390 of the Civil Code, a contract is voidable when the consent of one of the contracting
parties is vitiated by mistake, violence, intimidation, undue influence or fraud. When the
consent is totally absent and not merely vitiated, the contract is void. An action for
50

reconveyance may also be based on a void contract. When the action for reconveyance is
51

based on a void contract, as when there was no consent on the part of the alleged vendor,
the action is imprescriptible. The property may be reconveyed to the true owner,
52

notwithstanding the TCTs already issued in another’s name. The issuance of a certificate of
title in the latter’s favor could not vest upon him or her ownership of the property; neither
could it validate the purchase thereof which is null and void. Registration does not vest title; it
is merely the evidence of such title. Our land registration laws do not give the holder any
better title than what he actually has. Being null and void, the sale produces no legal effects
whatsoever. 53

Whether an action for reconveyance prescribes or not is therefore determined by the nature
of the action, that is, whether it is founded on a claim of the existence of an implied or
constructive trust, or one based on the existence of a void or inexistent contract.This is
evident in several of our past decisions. In Casipit v. Court of Appeals,  we rejected the claim
54

of imprescriptibility and applied the 10-year prescription where the action filed was based on
fraud:

There is no dispute that an action for reconveyance based on a void contract is

imprescriptible (Castillo, et al. v. Madrigal, et al., G.R. No. 62650, June 27, 1991; Baranda, et
al. v. Baranda, et al., G.R. No. 73275, May 20, 1987, 150 SCRA 59). However, We simply
cannot apply this principle to the present case because the action filed by petitioner before
the trial court was 1) for reconveyance based on fraud since the ownership of private
respondents over the questioned property was allegedly established on "false assertions,
misrepresentations and deceptive allegations" (p. 182, Records); and 2) for rescission of the
"Kasulatan ng Pagmamana at Paghahati" (pp. 173, 187, Records). x xx 55

On the other hand, in Daclag v. Macahilig, we rejected the claim of petitioners that
56

prescription is applicable because the action was based on fraud. We ruled that the action
was not subject to prescription because it was, in fact, based on a deed of sale that was null
and void. Thus:

However, a review of the factual antecedents of the case shows that respondents' action for
reconveyance was not even subject to prescription.

The deed of sale executed by Maxima in favor of petitioners was null and void, since Maxima
was not the owner of the land she sold to petitioners, and the one-half northern portion of
such land was owned by respondents.

Being an absolute nullity, the deed is subject to attack anytime, in accordance with Article
1410 of the Civil Code that an action to declare the inexistence of a void contract does not
prescribe. x xxAn action for reconveyance based on a void contract is imprescriptible. As
long as the land wrongfully registered under the Torrens system is still in the name of the
person who caused such registration, an action in personam will lie to compel him to
reconvey the property to the real owner.  (Citations omitted)
57

In Santos v. Heirs of DomingaLustre,  the complaint alleged that the deed of sale was
58

simulated by forging the signature of the original registered owner. We ruled in favor of
imprescribility applying the doctrine that the action for reconveyance on the ground that the
certificate of title was obtained by means of a fictitious deed of sale is virtually an action for
the declaration of its nullity, which does not prescribe.

Also, and more illustrative of the discussion above, in Castillo v. Heirs of Vicente Madrigal,  it
59

was alleged by the plaintiffs that they never signed any document. We ruled as follows:

Petitioners allege that a reading of paragraphs 9 and 10 of their complaint reveals that they
impugn the existence and validity of the alleged deed of sale. As contained therein,
petitioners never entered into any transaction with any person conveying the subject
property. They did not sign any document in favor of [anyone] neither did they give
[anyone]authorization for that purpose. Therefore, consent and cause did not exist in the
execution of the deed of sale, invoking Articles 1318, 1352 and 1409(3),of the Civil Code.
And, pursuant to Article 1410 of the Civil Code, an action for the declaration of the
inexistence of a contract does not prescribe.

In dismissing petitioners' complaint on the ground of prescription, the trial court opined (p.
123, Rollo):
"x xx, any action for annulment of the deed and TCT 72066 should have been instituted
within ten (10) years from the accrual of the cause of action, that, (sic) is, ten years from
1943 when the deed was executed at the earliest, or ten years from 1944 at the latest. This
action was filed on December 17, 1979, or after more than 30 years from 1943 and 1944.
The action, therefore, has long prescribed. xxx."

The Court of Appeals expressed the same opinion (p. 51, Rollo):

"xxx, even as We consider that there was fraud in the registration and the issuance of title in
favor of defendant Madrigal creating thereby a constructive trust in favor of the plaintiffs, the
remedy of the plaintiffs is an action for reconveyance within ten (10) years from the
registration of the property in the name of defendant Madrigal (Alzona v. Capunitan, 4 SCRA
450; Gonzales v. Jimenez 13 SCRA, 80). Again, the filing of the complaint was way beyond
the ten-year period of limitation."

Both courts ruled incorrectly. It is evident in paragraphs 9, 10 and 12 of the complaint, supra,
that petitioners sought the declaration of the inexistence of the deed of sale because of the
absence of their consent. Thus, following the provision of Article 1410 of the Civil Code, this
kind of action is imprescriptible. The action for reconveyance is likewise imprescriptible
because its basis is the alleged void contract of sale. x xx 60

(Citations omitted)

We conclude that, contrary to the claim of petitioner, the action for reconveyance is based
neither on an implied or constructive trust nor fraud.  Naval-Sai alleged that the purported
1âwphi1

deed of sale, which became the basis to transfer the titles in petitioner’s name, was an
absolute forgery because she never sold the two lots to any person.  Naval-Sai also alleged
61

that her signature and that of her husband’s, in the deed of sale are forgeries. These
62

allegations make the action one based on a void or inexistent contract for lack of consent on
the part of the alleged vendor, Naval-Sai. Based on the complaint, Naval-Sai only consented
to use the titles of the two lots as security to a loan she obtained from Ng. 63

Resolution of the issue of prescription hinges on whether the deed of sale was indeed forged
and, thus, void. Unfortunately, both the RTC and the Court of Appeals did not make actual
findings on the alleged forgery.

No full-blown trial occurred in the RTC to prove that the deed of sale was indeed simulated
and that the signatures were forgeries. The case was dismissed based on the pleadings of
the parties. The Court of Appeals also resolved to decide the case on available records and
pleadings, in order to avoid further delay, due to several resettings and motions for
postponement filed by the parties one after another. The lack of factual findings on the
alleged forgery from the lower courts prevents us from ruling on the issue of prescription.

Since it is apparent that the complaint on its face does not show that the action has already
prescribed, the RTC erred in dismissing it. We emphasize once more that a summary or
outright dismissal of an action is not proper where there are factual matters in dispute, which
require presentation and appreciation of evidence. 64

Applying the foregoing cases and without prejudging the issue of forgery,the action for
reconveyance will not be subject to prescription if the trial court finds that the deed of sale is
indeed forged, because the action would now be based on a fictitious and void contract. If
the trial court finds otherwise, then the issue of prescription would not matter as the sale
would stand and remain binding between Naval-Sai and petitioner.

Similarly, the elements of laches must be proven positively. Laches is evidentiary in nature, a
fact that cannot be established by mere allegations in the pleadings.  Therefore, at this
65

stage, the dismissal on the ground of laches would be premature. The issues must be
resolved in the trial on the merits.

Moreover, laches is a doctrine in equity, and applied only in the absence of, and never
against, statutory law.  The positive mandate of Article 1410 of the Civil Code conferring
66

imprescriptibility to actions or defense for the declaration of the inexistence of a contract

should pre-empt and prevail over all abstract arguments based only on equity. 67
WHEREFORE, the petition is DENIED. Let the records of this case be remanded for further
proceedings to the Regional Trial Court of Kidapawan City, Branch 17, which is hereby
ORDERED to try and decide the case with dispatch.

SO ORDERED.

FRANCIS H. JARDELEZA
Associate Justice

WE CONCUR:

PREBITERO J. VELASCO, JR.

Associate Justice
Chairperson

DIOSDAO M. PERALTA MARTIN S. VILLARAMA, JR.

Associate Justice Associate Justice

JOSE PORTUGAL PEREZ*

Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in consultation before
the case was assigned to the writer of the opinion of the Court's Division.

PREBITERO J. VELASCO, JR.

Associate Justice
Chairperson, Third Division

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairperson's
attestation, it is hereby certified that the conclusions in the above Decision had been reached
in consultation before the case was assigned to the writer of the opinion of the Court's
Division.

MARIA LOURDES P. A. SERENO

Chief Justice

Footnotes

* Designated as Acting Member in view of the leave of absence of Hon. Bienvenido

L. Reyes, per Special Order No. 2084 dated June 29, 2015.

1
 Rollo, pp. 15-27.

 CA-G.R. CV No. 70648, penned by Associate Justice Teresita Dy-Liacco Flores and
2

concurred in by Associate Justice Rodrigo F. Lim, Jr. and Associate Justice Ramon
R. Garcia of the Twenty-First Division, rollo, ~1-64.

3
 Id. at 77.

4
 RTC records, pp. 1-2.

5
 Id. at 6.
 It appears from the records that there is a mistake as to the number of the lot Naval-
6

Sai sold to Adil. Following the turn of events, this lot could only be either Lot No. 54-
B-8 or 54-B-9.

7
 RTC records, p. 2.

8
 Id.

9
 Id. at 6.

10
 CA rollo, p. 47.

11
 Memorandum of petitioner dated November 15, 2007, rollo, p. 144.

12
 Rollo, pp. 28-35.

13
 Id. at 36-43.

14
 Id. at 44-49.

15
 RTC records, p. 99.

16
 Rollo, pp. 50-51.

17
 G.R. No. 127064, August 31, 1999, 313 SCRA 367.

 Additional Requisites for Petitions Filed with the Supreme Court and the Court of
18

Appeals to Prevent Forum Shopping or Appeals to Prevent Forum Shopping or

Multiple Filing of Petitions and Complaints, February 8, 1994.

19
 Rollo, p. 52.

20
 Id. at 53-64.

21
 Id. at 43.

22
 Id. at 62.

23
 Id. at 63.

24
 Id. at 61.

25
 Id. at 63.

26
 CA rollo, pp. 145-154.

27
 Rollo, p. 79.

 Negros Merchants Enterprises, Inc. v. China Banking Corporation, G.R. No.

28

150918, August 17, 2007, 530 SCRA 478, 485.

 Ingles v. Estrada, G.R. Nos. 141809, 147186 and 173641, April 8, 2013, 695 SCRA
29

285, 317-319, citing Altres v. Empleo, G.R. No. 180986, December 10, 2008, 573
SCRA 583, 597-598.

30
 RTC records, p. 9.

31
 RULES OF CIVIL PROCEDURE, Rule 10, Sec. 8.

32
 G.R. No. 130068, October 1, 1998, 297 SCRA 30, 53.
  Ty-De Zuzuarregui v. Villarosa, G.R. No. 183788, April 5, 2010, 617 SCRA 377,
33

385.

 G.R. No. 136233, November 23, 2000, 345 SCRA 673, 684.
34

 G.R. No. 159653, January 25, 2006, 480 SCRA 137.

35

 Shipside Incorporated v. Court of Appeals, G.R. No. 143377, February 20, 2001,
36

352 SCRA 334, 346.

 Dar v. Alonzo-Legasto, G.R. No. 143016, August 30, 2000, 339 SCRA 306,
37

309citing Gabionza v. Court of Appeals, G.R. No. 112547, July 18, 1994, 234 SCRA
192, 198.

 Hernudd v. Lofgren, G.R. No. 140337, September 27, 2007, 534 SCRA 205, 213.
38

 Cañiza v. Court of Appeals, G.R. No. 110427, February 24, 1997, 268 SCRA 640,
39

647-648.

 Hi-Tone Marketing Corporation v. Baikal Realty Corporation, G.R. No. 149992,

40

August 20, 2004, 437 SCRA 121, 143.

 Id., citing Walstrom v. Mapa, Jr., G.R. No. 38387, January 29, 1990, 181 SCRA
41

431, 442.

 Philippine Economic Zone Authority v. Fernandez, G.R. No. 138971, June 6, 2001,
42

358 SCRA 489, 499.

 Otherwise known as the Property Registration Decree.

43

 G.R. No. 76148, December 20, 1989, 180 SCRA 401, 407.
44

 ART. 1144. The following actions must be brought within ten years from the time
45

the right of action accrues:

(1) Upon a written contract;

(2) Upon an obligation created by law;

(3) Upon a judgment.

 Id.
46

 Crisostomo v. Garcia, Jr., G.R. No. 164787, January 31, 2006, 481 SCRA 402;
47

Salvatierra v. Court of Appeals, G.R. No. 107797, August 26, 1996, 261 SCRA 45;
Amerol v. Bagumbaran, G.R. No. L-33261, September 30, 1987, 154 SCRA 396.

 Vda.de Gualberto v. Go, G.R. No. 139843, July 21, 2005, 463 SCRA 671, 681.
48

 Brito, Sr. v. Dianala, G.R. No. 171717, December 15, 2010, 638 SCRA 529, 538.
49

 ART.1318. There is no contract unless the following requisites concur:

50

(1) Consent of the contracting parties;

(2) Object certain which is the subject matter of the contract;

(3) Cause of the obligation which is established.

 Amado D. Aquino, Land Registration and Related Proceedings, p. 133, 4th Ed.,
51

2007.
  Id. at 136.
52

 Macababbad, Jr. v. Masirag,G.R. No. 161237, January 14, 2009, 576 SCRA 70,
53

86.

 G.R. No. 96829, December 9, 1991, 204 SCRA 684, 693.

54

 Id.
55

 G.R. No. 159578, February 18, 2009, 579 SCRA 556.

56

 Id. at 559-560; See also Philippine National Bank v. Heirs of Estanislao Militar and
57

Deogracias Militar, G.R. Nos. 164801 and 165165, August 18, 2005, 467 SCRA 377;
and Santos v. Santos, G.R. No. 133895, October 2, 2001, 366 SCRA 395.

 G.R. No. 151016, August 6, 2008, 561 SCRA 120, 133.

58

 G.R. No. 62650, June 27, 1991, 198 SCRA 556.

59

 Id. at 560-561.
60

 Rollo, pp. 29-30.

61

 Id. at 32.
62

 Id. at 29.
63

 Sanchez v. Sanchez, G.R. No. 187661, December 4, 2013, 711 SCRA 541, 547.
64

 Id.
65

 Santos v. Heirs of Dominga Lustre, supra note 58 at133-134.

66

 Philippine National Bank v. Heirs of Estanislao Militar and Deogracias Militar, supra
67

note 57 at 389.

[G.R. NO. 164801 : August 18, 2005]

PHILIPPINE NATIONAL BANK,  Petitioners, v. HEIRS OF ESTANISLAO MILITAR AND DEOGRACIAS

MILITAR, represented by TRANQUILINA MILITAR, Respondent.

[G.R. NO. 165165]

SPOUSES JOHNNY LUCERO AND NONA ARIETE, Petitioners, v. HEIRS OF ESTANISLAO MILITAR,

DEOGRACIAS MILITAR, and TRANQUILINA MILITAR (deceased), now represented by AZUCENA
MILITAR, FREDDIE MILITAR, EDUARDO MILITAR, ROMEO L. MILITAR, NELLY LY BOLANIO,
LETICIA LY and DELIA LY SI ASOYCO, Respondent.

DECISION

YNARES-SANTIAGO, J.:

These consolidated petitions for review under Rule 45 of the Revised Rules of Civil Procedure
assail the June 4, 2004 decision1 of the Court of Appeals in CA-G.R. CV No. 54831, which
reversed the decision of the Regional Trial Court of Iloilo City, Branch 38, in Civil Case No. 18836,
and its August 4, 2004 resolution denying reconsideration thereof.

The facts are as follows:

Deogracias, Glicerio, Tomas and Caridad, all surnamed Militar, were heirs of Estanislao Militar
and the registered co-owners of Lot Nos. 3011 and 3017 covered by OCT No. T-8238-A (0-16879)
and OCT No. 94 - (0-16878).
On August 16, 1941, Deogracias sold his undivided share in Lot No. 3011 to Pedro Golez, and in
Lot No. 3017 to spouses Sofronio and Lourdes Lumagbas. Golez annotated the sale at the back
of the title thereof while spouses Lumagbas caused the subdivision of Lot No. 3017 into Lot No.
3017-A and Lot No. 3017-B, with Lot No. 3017-A registered in their names under TCT No. 8239.

Notwithstanding the sale, Deogracias continued to occupy a portion of Lot No. 3011 and Lot No.
3017-B until his death on March 17, 1964. Glicerio died on March 22, 1939, Tomas on August 20,
1959 and Caridad on April 29, 1957. Glicerio and Caridad died without issue. Deogracias was
survived by Teodorico and Remedios, while Tomas was survived by Wenceslao and Ladislao.

However, in a Deed of Absolute Sale dated April 24, 1975, Deogracias, Glicerio, Tomas and
Caridad purportedly sold Lot No. 3011 to spouses Rodolfo and Nilda Jalbuna. In another Deed of
Sale dated April 25, 1975, Glicerio, Tomas and Caridad purportedly sold Lot No. 3017-B to the
same spouses. Consequently, titles to Lot Nos. 3011 and 3017-B were cancelled and new titles,
TCT Nos. 39083 and 39082, respectively, were issued to spouses Jalbuna.

Subsequently, Lot No. 3011 was subdivided into Lot No. 3011-A and Lot No. 3011-B, with Lot No.
3011-A registered in the name of spouses Jalbuna and Lot No. 3011-B in the name of Golez.

On June 5, 1975, spouses Jalbuna mortgaged Lot No. 3017-B to Philippine National Bank (PNB)
as security for a loan. When they defaulted, PNB extrajudicially foreclosed the mortgage and
sold Lot No. 3017-B at public auction, with PNB as the highest bidder. Title thereto was
consolidated in the name of PNB and was issued TCT No. T-61465.

Thereafter, PNB sold the lot to spouses Johnny and Nona Lucero, who were issued TCT No.
76938. As the new owners of Lot No. 3017-B, they filed an ejectment case against Tranquilina,
Azucena, Freddie and Eduardo, all surnamed Militar, the actual occupants therein.

On October 2, 1989, Tranquilina, Azucena, Freddie and Eduardo as surviving heirs of Teodorico
and Deogracias Militar, filed a complaint against spouses Jalbuna, PNB, and spouses Lucero for
Reconveyance of Title, Annulment of Sale, Cancellation of Titles and Damages. Other heirs of
Deogracias on the side of Remedios filed a complaint-in-intervention to join the plaintiffs. They
prayed for: 1) the declaration of nullity of the two (2) deeds of sale dated April 24, 1975 and
April 25, 1975 covering Lot No. 3011 and Lot No. 3017-B, respectively; 2) the cancellation of title
covering Lot No. 3017-B in the name of spouses Lucero; 3) the cancellation of title covering Lot
No. 3011-A in the name of spouses Jalbuna; 4) the reconveyance of Lot 3011-A and Lot No.
3017-B to the heirs of Deogracias Militar; and 5) actual, exemplary and moral damages.2

Spouses Jalbuna invoked prescription, non-inclusion of indispensable parties and lack of cause of
action since their predecessor, Deogracias, no longer had interest over the properties having
sold them to third parties.

PNB claimed that it was a mortgaee in good faith and for value; that the title of spouses Jalbuna
was free from all liens and encumbrances when they secured the loan; and that it conducted
verification and inspection of the property before granting the loan.

Spouses Lucero alleged that the complaint was commenced without the real party in interest;
that the cause of action has prescribed; and that they were innocent purchasers in good faith
and for value.

The trial court rendered a decision3 dated October 18, 1995, dismissing the complaint,
complaint-in-intevention, as well as the cross claim of PNB. It held that the case was not brought
in the name of all indispensable parties and although the two (2) deeds of sale were void for
being simulated or fictitious, their nullity cannot be invoked against PNB and spouses Lucero
because they were buyers in good faith. It found that the action for reconveyance had
prescribed as it was filed more than fourteen (14) years from the execution of the Deeds of Sale
covering the disputed properties. An action for reconveyance prescribes after ten (10) years
from the issuance of title, which operates as a constructive notice.
On appeal, the Court of Appeals reversed the decision of the trial court. It held that ultimate
issue is the propriety of reconveyance and not the shares of the respective heirs which is proper
in a case for partition. Thus, a final determination of the case can be had despite non-inclusion
of other heirs because their interests may be severed and proceeded with separately. Further, it
held that PNB and spouses Lucero were not buyers in good faith; and that the action for
reconveyance based on implied trust does not prescribe. The dispositive portion reads as
follows:

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

SO ORDERED.4

Hence, the instant consolidated petitions, the resolution of which hinges on three pivotal
questions: 1) whether or not the case was brought by all indispensable parties; 2) whether or
not petitioners PNB and spouses Lucero were mortgagee and purchasers in good faith,
respectively; and 3) whether or not action for reconveyance has prescribed or is barred by
laches.

We are not persuaded by PNB's claim that the case was not brought by all indispensable parties
as other heirs of Glicerio, Tomas and Caridad have not been named as parties therein.

An indispensable party is one whose interest will be affected by the court's action in the
litigation, and without whom no final determination of the case can be had. The party's interest
in the subject matter of the suit and in the relief sought are so inextricably intertwined with the
other parties' that his legal presence as a party to the proceeding is an absolute necessity. In his
absence there cannot be a resolution of the dispute of the parties before the court which is
effective, complete, or equitable.5

Conversely, a party is not indispensable to the suit if his interest in the controversy or subject
matter is distinct and divisible from the interest of the other parties and will not necessarily be
prejudiced by a judgment which does complete justice to the parties in court. He is not
indispensable if his presence would merely permit complete relief between him and those
already parties to the action or will simply avoid multiple litigation.6

There are two essential tests of an indispensable party: (1) can relief be afforded the plaintiff
without the presence of the other party?; and, (2) can the case be decided on the merits
without prejudicing the rights of the other party? There is, however, no fixed formula for
determining who is an indispensable party; this can only be determined in the context and by
the facts of the particular suit or litigation.7

In the case at bar, the ultimate relief sought by the action is the reconveyance of titles to their
rightful owners. The records reveal that prior to the forgery, the disputed properties were
registered in the names of the co-owners, Glicerio, Tomas and Caridad, whose interests
remained undivided. Thus, if reconveyance of the titles is granted, the titles will revert back to
the estates of the deceased co-owners and not to their individual heirs, whose interests are
divisible and may properly be ventilated in another proceeding. Therefore, a co-heir may bring
such action without necessarily joining all the other co-heirs as co-plaintiffs because the suit is
deemed to be instituted for the benefit of all. As correctly held by the Court of Appeals:

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

PNB next argues that since Deogracias sold his shares in the disputed lots, his heirs, herein
respondents, do not have a cause of action against it, spouses Jalbuna and spouses Lucero.

This argument is proper had Deogracias died ahead of the other co-owners. However, records
show that Glicerio, Tomas and Caridad predeceased Deogracias. Glicerio died on March 22,
1939, Tomas on August 20, 1959, Caridad on April 29, 1957, while Deogracias died on March 17,
1964.

Article 1003 of the Civil Code provides:

Art. 1003. If there are no descendants, ascendants, illegitimate children, or a surviving spouse,
the collateral relatives shall succeed to the entire estate of the deceased in accordance with the
following articles.

Clearly, when Glicerio and Caridad died intestate and without issue, their shares in the disputed
properties were inherited by Deogracias and Tomas. It is this portion that respondents, as heirs
of Deogracias, have an interest on and which vested them with personality to institute the
present case.

PNB and spouses Lucero claim to be mortgagee and buyers in good faith, respectively, since title
to Lot No. 3017-B appeared to be free from any encumbrance. They argue that a person dealing
with a registered land may rely on the correctness of the certificate of title and is not required to
go beyond it to determine the condition of the property.

Whether petitioners are innocent mortgagee or purchasers in good faith and for value, is a
factual matter, which cannot be raised in a Petition for Review on Certiorari under Rule
45.9 Settled is the rule that this Court is not a trier of facts and does not normally embark on a
re-examination of the evidence adduced by the parties during trial.10 In Heirs of the Late Spouses
Aurelio and Esperanza Balite v. Lim,11 we held that factual findings of the Court of Appeals are
binding and conclusive upon us. These findings may be reviewed only under exceptional
circumstances such as when the inference is manifestly mistaken; the judgment is based on a
misapprehension of facts; findings of the trial court contradict those of the appellate court; or
the latter manifestly overlooked relevant and undisputed facts that, if properly considered,
would justify a different conclusion.

The Court of Appeals reversed the decision of the trial court based on its findings of facts which
are in accord with the documents on record. Thus, we affirm the Court of Appeals' finding that
petitioners were not mortgagee or buyers in good faith.

Moreover, the burden of proving the status of a purchaser in good faith and for value lies upon
him who asserts that status.12 In discharging the burden, it is not enough to invoke the ordinary
presumption of good faith.13 The rule is settled that a buyer of real property in possession of
persons other than the seller must be wary and should investigate the rights of those in
possession. Without such inquiry, the buyer can hardly be regarded as buyer in good faith and
cannot have any right over the property.14
PNB claims that it conducted the necessary inquiry and investigation on the subject lot and was
convinced that Nilda Jalbuna, as one of the heirs of Estanislao Militar, had every right to
mortgage the same, even if she was not in actual possession thereof.

However, considering that the land was in the possession of persons other than the mortgagors,
PNB should have inquired whether the possessors knew that the lot is being mortgaged, and the
circumstances surrounding the acquisition of the lot by the mortgagors. Indeed, while PNB is not
expected to conduct an exhaustive investigation on the history of the mortgagor's title, it cannot
be excused from the duty of exercising the due diligence required of a banking institution.
In Tomas v. Tomas,15 we noted that it is standard practice for banks, before approving a loan, to
send representatives to the property offered as collateral to assess its actual condition and to
investigate who are the real owners thereof. We held that banks are expected to exercise more
care and prudence than private individuals in their dealings, even those involving registered
lands, for their business is affected with public interest. Verily, PNB was remiss in the exercise of
due diligence required of a banking institution, hence it cannot be considered as mortgagee in
good faith.

Neither could spouses Lucero be considered buyers in good faith. As respondents' neighbors,
they could have verified the status of the property they were buying by inquiring from the
possessors thereof. This, they failed to do; hence they cannot be considered buyers in good
faith.

As to whether the action for reconveyance has prescribed, we held in Santos v.

Santos,16 citing Lacsamana v. CA,17 that the right to file an action for reconveyance on the
ground that the certificate of title was obtained by means of a fictitious deed of sale is virtually
an action for the declaration of its nullity, which does not prescribe.

In the case at bar, the complaint filed was for the reconveyance of the properties in question to
the estates of Deogracias, Glicerio, Tomas and Caridad, considering that the deeds of sale were
simulated and fictitious. The complaint thus amounts to an action for declaration of nullity of a
void contract, which does not prescribe.

Neither could laches be successfully invoked. Laches is a doctrine in equity which has been aptly
described as "justice outside legality", and applied only in the absence of, and never against,
statutory law. Aequetas nunguam contravenit legis. The positive mandate of Art. 1410 of the
Civil Code conferring imprescriptibility to actions or defense for the declaration of the
inexistence of a contract should pre-empt and prevail over all abstract arguments based only on
equity. Certainly, laches cannot be set up to resist the enforcement of an imprescriptible legal
right; thus, respondents can validly vindicate their inheritance despite the lapse of time.18

Finally, while certificates of title are indefeasible, unassailable and binding against the whole
world, they merely confirm or record title already existing and vested. They cannot be used to
protect a usurper from the true owner, nor can they be used for the perpetration of fraud;
neither do they permit one to enrich himself at the expense of others.19

WHEREFORE, the petitions are DENIED. The decision of the Court of Appeals dated June 4, 2004
in CA-G.R. CV No. 54831 and its resolution dated August 4, 2004, are hereby AFFIRMED in toto.

SO ORDERED.

Davide, Jr., C.J., (Chairman), Quisumbing, Carpio, and Azcuna, JJ., concur.

Endnotes:

1
 Rollo in G.R. No. 164801, pp. 35-47. Penned by Associate Justice Mercedes Gozo-Dadole and
concurred in by Associate Justices Monina Arevalo Zenarosa and Vicente L. Yap.
2
 Rollo in G.R. No. 165165, pp. 93-94.
3
 Rollo in G.R. No. 164801, pp. 51-61. Penned by Presiding Judge David A. Alfeche, Jr.
4
 Id. at 47.
5
 Bank of the Philippine Islands v. Court of Appeals, 450 Phil. 532, 541 (2003).
6
 Id.
7
 Republic v. Sandiganbayan, G.R. No. 152154, 15 July 2003, 406 SCRA 190, 269-270.
8
 Rollo in G.R. No. 164801, pp. 43-44; citations omitted.
9
 Sps. Uy v. Court of Appeals, 411 Phil. 788, 798 (2001).
10
 Sampayan v. Court of Appeals, G.R. No. 156360, 14 January 2005.
11
 G.R. No. 152168, 10 December 2004, 446 SCRA 56, 72-73.
12
 Spouses Rayos v. Reyes, 446 Phil. 32, 50-51 (2003).
13
 Potenciano v. Reynoso, 449 Phil. 396, 410 (2003).
14
 Occeña v. Esponilla, G.R. No. 156973, 4 June 2004, 431 SCRA 116, 124-125.
15
 G.R. No. L-36897, 25 June 1980, 98 SCRA 280, cited in Cavite Development Bank v. Spouses
Lim, 381 Phil. 355, 368-369 (2000).
16
 418 Phil. 681, 691 (2001).
17
 351 Phil. 526, 533 (1998).
18
 Heirs of Ingjug-Tiro v. Spouses Casals, 415 Phil. 665, 673-674 (2001).
19
 Consolidated Rural Bank (Cagayan Valley), Inc. v. Court of Appeals, G.R. No. 132161, 17
January 2005.